15 Financial management
| (25897)
11905/04
COM(04)565
| Commission Report on progress at 30 June 2004 of the modernisation of the accounting system of the European Commission
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| Legal base | — |
| Document originated | 18 August 2004
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| Deposited in Parliament | 25 August 2004
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| Department | HM Treasury |
| Basis of consideration | EM of 7 September 2004
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| Previous Committee Report | None; but see (24144) 15872/02: HC 63-x (2002-03), para 11 (29 January 2003)
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
15.1 In January 2003 we reported on the Commission's plans to
modernise its accounting system, in accordance with its multi-annual
action plan, presented in 2000, especially in relation to the
requirement in the Financial Regulation, 1605/2002 EC, Euratom,
to introduce accrual accounts[30]
by 2005.[31]
The document
15.2 This Commission report summarises progress in introducing
the new system and what remains to be done. Action completed includes:
- accounting rules have been adopted by the Accounting Standards
Committee;
- a harmonised chart of accounts, as required by
the Financial Regulation, has been drafted;
- a draft accounting manual has been finalised;
- all accounting processes required for the new
system have been defined;
- Authorising Officers have a document describing
data quality controls;
- institutions and agencies have completed "readiness
assessments" for their application of the new rules; and
- a first training programme has been completed.
15.3 Matters still being attended to include:
- establishing a means of evaluating
certain year-end provisions;
- testing individual components of the new computer
systems;
- planning for transition to the new system and
for enabling the links to local systems;
- integrating loans and borrowings into the central
accounts (from July 2005)
- modernising the European Development Fund (EDF)
accounts, to be compliant with the requirements of accruals accounting;
- establishing opening accounting balances for
2005; and
- further user training.
15.4 Although the Commission is confident that implementation
will be completed in 2005, it has identified some risks:
- Directorate-Generals are working
on the establishment of the 2005 opening balances, but temporary
staff engaged to carry out this task have only been in place since
June and the rate of file examination will need to be increased;
and
- development of local IT systems is scheduled
for completion by the end 2004, but there is no margin for unforeseen
circumstances and there is a risk that some commitments and payments
could be delayed at the beginning of 2005.
So the Commission is giving priority to gathering
the most essential information, to ensure that the 2005 accounts
will contain all the records required for accrual accounting.
The Government's view
15.5 The (then) Financial Secretary to the Treasury
(Ruth Kelly) tells us:
"The Commission's plans to modernise its accounting
system and procedures by 2005 have been called 'over ambitious'
by the European Court of Auditors, despite the fact that they
welcomed the objectives of the project (which when completed will
improve the level of assurance given annually from the ECA). However,
the evidence of this progress report, along with the assurances
given by the Commission's Chief Accountant, shows that the project
is achievable within the planned timescale. The Commission has
sensibly identified the risks and taken action to minimise them.
"When the project is completed, the Commission
will have a system of full accruals accounting - ahead of most
Member States - which they will have implemented in less time
than it took in the UK. But it will have to operate the system
efficiently if it is to avoid further criticism from the ECA and
it will be important for the Commission to provide assessments
of how the system is working in practice."
Conclusion
15.6 We welcome these signs that the Commission
is making progress in modernising its accounting system, while
noting the Government's comments as to the need for efficient
operation and assessments of the new system. We clear the document.
30 Accrual accounting involves financial statements
in which revenue is entered when it is earned, not when it is
paid and expenditure is entered when the obligation arising from
consumption of a good or service - is incurred, not when it is
paid for. Additionally, where possible, matches of those entries
to actual payments, when made, are recorded. Back
31
See headnote. Back
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