Progress in financial management
8. For the 2002 financial year, the Court qualified
its opinion on the reliability of the accounts in four areas.
For the 2003 financial year, the Court noted just one qualification
implying an improvement in the Commission's approach to financial
management. The Court attributed its qualification on the reliability
of the accounts, as it had done in previous years, to weaknesses
in the Commission's accounting system. On 1 January 2005,
the Commission introduced a new accounting system and supporting
IT. The Commission reported, at the end of January 2005, that
the transition to the new system had been successful. As a result,
for the first time in 2005, the Community accounts will be produced
on an accruals rather than a cash basis.
9. The introduction of an accrualsbased accounting
system should, amongst other things, improve the Commission's
control over assets and liabilities and its assessment of the
true cost of each policy area. The Court has launched an audit
of the process so far. The Court will publish its opinion on the
first set of accounts produced under the new accounting system,
for the 2005 financial year, at the end of 2006.
10. Following the Committee's previous visit, it
concluded that there was a lack of clarity about who was accountable
to whom and for what. The Court, in its annual report on the 2003
financial year pointed to other areas where the Commission's accountability
and financial management had progressed. For example, DirectorsGeneral
are required to produce an Annual Activity Report on the performance
and achievements of their DirectorateGeneral. The report's
aim is to increase accountability. It includes a statement of
assurance from the DirectorGeneral that the resources had
been used for the purpose for which they had been intended and
that controls were legal and regular. The Court identified improvements
in the reports, such as the introduction of management indicators;
and the monitoring of progress against recommendations made by
internal and external audit. The Court also identified progress
made by the Commission in the design of a new internal control
framework.
11. In addition to the improvements noted by the
Court, the Commission created an Internal Audit Service as part
of the package of reforms introduced to improve financial management
and accountability following the Commission's resignation in 2000.
The Service is independent and reports to the Audit Progress Committee
which is chaired by the Vice President of the European Union,
who has responsibility for Administrative Affairs, Audit and AntiFraud.
The Committee consists of four Commissioners and two external
members, designed to ensure independence. The Service aims to
help the Commission and the Directorates-General to, amongst other
things, control risks and monitor compliance with the rules. It
also carries out value for money investigations. Since it was
created the Service has completed its first cycle of review which
it believes provides it with a complete picture of risks across
the Directorates-General.
Future developments
12. Despite such developments, the Court reported
the need for further progress if it is to gain assurance in its
audit work from these elements of the Commission's financial management
framework and move towards a positive Statement of Assurance on
the Community accounts. It also commented that the introduction
of a control system for aspects of payments under the Common Agricultural
Policy (known as the Integrated Administration and Control System)
took around ten years to implement successfully.
13. The Barroso Commission has a set, as one of its
strategic priorities for the next five years, the achievement
of a positive Statement of Assurance. In pursuit of this aim,
the Commission has promised to produce, by July 2005, a road map
which aims to reach agreement with the other European Institutions,
including the Court, on the way forward. The road map is based
on the Community Internal Control Framework, recommended by the
Court, which sets out principles to govern internal controls at
all levels of administration within the Institutions of the European
Union and at the level of the Member State.
14. In its report following its visit in 1999, the
Committee noted the need to ensure that the Commission had in
place whistleblowing procedures which protect staff who in good
faith make unauthorised disclosures about misconduct within the
organisation. In October 2004, the Commissioner with responsibility
for Administrative Affairs, Audit and AntiFraud emphasised
the need for guarantees for whistleblowers as part of a system
that was open and transparent. He stressed that the procedures
had changed following some high profile cases.
