European Commission replies to recommendations
of the House of Lords European Union Committee Report on "Financial
Management and Fraud in the European Union: Perceptions, Facts
and Proposals" (HL Paper 270 published on 13.11.2006)
RECOMMENDATION 161:
DOUBLE ENTRY
BOOKKEEPING AND
THE COMMISSION'S
ACCOUNTING SOFTWARE
In the Commission's view, there are no local
accounting systems for budgetary transactions in the Directorates
General but there are local management systems. There is only
one, central accounting system, based on SAP software, which is
owned and managed by the Directorate General of the Budget. There
is no local accounting system which has to support double entry
accounting because there is no booking made at the level of the
Directorates General. They register invoices in their management
information systems and send the accounting data to the central
"ABAC" accounting system which creates automatically
a double entry bookkeeping in SAP.
Local systems for recording extra-budgetary
operations, for example the commercial operations of the Publications
Office, and the European Development Funds, comply with the standards
required of double-entry bookkeeping.
The remaining local IT systems are designed
to provide the management of the services concerned with data
additional to that held by the central accounting system. They
draw on the central system's accounting records to provide reports
and information to the managers of programmes and projects. Information
relevant to the accounts is sent to the central system as soon
as it is encoded, and the central system is used as a source for
the reports produced by the local systems. Local IT systems are
therefore not accounting systems in their own right, and double-entry
is not relevant to them, though their ability to register all
economic events which have to trigger accounting bookings is relevant.
Local systems were scrutinised by the central
services in 2005 in order to assess their compliance with validation
criteria, in particular their ability to register all economic
events which have to trigger accounting bookings. Having chosen
the services where risk was adjudged to be highest, 13 services
were reviewed in 2005 and a further nine services in 2006, a total
of 22 services, that is more than half of the total of 40 services
in the Commission. In financial terms, the Directorates General
covered represent more than 80 per cent of the total EU budget.
In 2007, the validation team is continuing this work in order
to cover progressively all of the 40 Services. For each investigation,
a full report is prepared.
In addition, a new procedure for the validation
of changes to the local systems has been introduced in June 2006,
to cover developments of an IT or an administrative nature in
local systems. This procedure is now fully operational. All material
changes are notified by the Services to the Accounting Officer
and the validation team assesses these changes and must give its
prior agreement to a change before it is introduced.
All weaknesses identified in the in-depth investigations
are followed up and reported on six-monthly in order to assess
the Directorate Generals' progress. Global and interim reports
are also prepared on a regular basis—at least once a year—and
cover the situation of all the services, and the progress achieved
to date.
RECOMMENDATION IN
§162: INTERNAL AUDIT
AND CONTROL
The Commission understood the concern expressed
under §53 and §162 (as well as under §60 and §61)
of the report as being mainly about the role of the internal auditor
in the accounts' certification. Under its current charter, the
Internal Audit Service (IAS) is not called to play any part in
that annual process. It is up to the external auditor (the European
Court of Auditors) to certify the annual accounts. The IAS has
audited and will continue to audit from time to time the accounting
system, the treasury management, the security of the IT accounting
systems and related matters.
Pursuant to an IAS recommendation and to the
provisions of the Financial Regulation, as recently modified[3],
the Commission's accounts will henceforth be signed-off by the
Accounting Officer.
At the level of Directorates General, the Commission
has systems in place to require that Commission officials take
responsibility for the systems and the accounts in their departments.
The Authorising Officer Delegate, with the Resource Director,
provides a management assurance on the annual activity report
and on the Directorate General's accounts.
RECOMMENDATION IN
§163: DEVOLVED MANAGEMENT
IN THE
COMMISSION
It is not the intention of the Commission to
re-centralise ex-ante controls since the current model has greatly
clarified the responsibility of the authorising officer.
RECOMMENDATION IN
§164: A SYSTEM REQUIRING
COMMISSION OFFICIALS
TO TAKE
RESPONSIBILITY: SIGNING
OFF BY
THE COMMISSION'S
SECRETARY GENERAL
The role of the Secretary General is not conceived
as one which allows her to provide a formal declaration of assurance
concerning all the annual activity reports (AAR) of the Directors
General (DG). She makes an assurance for her own department, the
Secretariat General. A declaration by her on all the annual activity
reports would make the lines of responsibility much less clear.
It would lead both to a potential interference between Commissioners
and their Directors General and to an important increase in administrative
processes.
Such a declaration of assurance on all the AARs
and DGs' declarations would entail:
— A fundamental change in the current
organisation of the Commission and a call for the strengthening
of central control tools, a move which would run against the decentralisation
implemented for several years.
— A serious risk of duplication and
interference by the Secretary General in the vertical political
responsibility between the individual Commissioner and his or
her Director General, as a declaration of assurance from the Secretary
General would have to cover financial and administrative management
as well as policy aspects.
— Such a declaration from the Secretary
General would also add little to the signature of the Directors
General who are best equipped to certify the management of funds
and actions coming under their direct area of competence and responsibility.
The need of a formal signature of the accounts
has already been settled by the Commission, which proposed that
the current financial rules be amended to provide that the Accounting
Officer sign off the final accounts, declaring that they were
prepared in accordance with both the provisions on the presentation
of the accounts and accounting principles, rules and methods.
The legislative authority has accepted this proposal in the revised
Financial Regulation[4].
To be able to exercise this responsibility, the Accounting Officer
will be empowered to make the necessary checks on the information
received from Directorates General.
In line with the decentralisation of management
responsibilities the Directors General are responsible for the
underlying transactions and the reliability of the information
made available to the Accountant. The Directors General will therefore
have to inform adequately and to provide assurance to the Accounting
Officer. This will be done through the declaration of assurance
made in the Annual Activity Reports, certifying that the accounts
for which they are responsible are accurate and exhaustive.
This provides a further clarification of responsibility
and will give the necessary level of accountability, to which
the extra signature of the Secretary General would add no value
but rather, by blurring the responsibilities and inducing unnecessary
duplications, would engender serious confusion and hinder the
common aim of enhanced accountability and clear lines of responsibility.
RECOMMENDATION IN
§165: RISK ASSESSMENT
The Commission welcomes the support for the
risk management methodology which it has developed and will continue
to apply[5].
It will adapt it in line with experience gained. As regards the
accounting system, this can be exploited to provide input to risk
management. This capacity will be increased during 2007 by the
development of a single Data Warehouse which will include accounting
data as well as financial management data from the central systems.
A second phase of the implementation of this Data Warehouse (planned
to be completed in 2009) involves the incorporation of data from
the DGs' own management systems which will further extend the
support given to risk management.
RECOMMENDATION IN
§181: PROBLEMS ESTIMATING
THE RATE
OF FRAUD
With an "architecture" such as the
one that is established by the European Community Treaty it is
difficult to imagine anything which does not rely on the information
provided by the Member States which administer programmes and
whose authorities investigate and prosecute fraud.
RECOMMENDATION IN
§182: OLAF'S POWERS
AND ACTIVITIES
In order to facilitate increased cooperation
with its partners, OLAF will assess the added value of the information
it provides to them. To this end OLAF will carry out a customer
survey in order to obtain an idea of the level of customer satisfaction.
This survey will respond to your request.
As part of the reform of OLAF's legal basis,
the Commission has proposed that Member States should systematically
inform OLAF of the follow-up they give to information transmitted
to them by the Office. This will also ensure feedback on the use
made and allow adjusting the content of the transmission. This
proposal is currently under discussion.
March 2007
3 Council Regulation (EC, EURATOM) No 1995/2006 of
13 December 2006 amending Regulation (EC, Euratom) No 1605/2002
on the Financial Regulation applicable to the general budget of
the European Communities-OJ L 390, 30.12.2006, p 1. Back
4
Council Regulation (EC, EURATOM) No 1995/2006 of 13 December 2006
amending Regulation (EC, Euratom) No 1605/2002 on the Financial
Regulation applicable to the general budget of the European Communities-OJ
L 390, 30.12.2006, p 1. Back
5
Communication to the Commission from Ms Grybauskaite« in
agreement with the President and Vice-President Kallas "Towards
an effective and coherent risk management in the Commission services"
SEC(2005)1327, Communication from the Commission to the Council,
the European Parliament and the European Court of Auditors "On
A Roadmap To An Integrated Internal Control Framework" COM(2005)
252 final, and Communication from the Commission to the Council,
the European Parliament and the European Court of Auditors "Commission
Action Plan Towards An Integrated Internal Control Framework"
COM(2006) 9 final, and Communication to the Commission from Vice-President
Kallas in agreement with the President and Ms Grybauskaite«
"Commission Action Plan towards an Integrated Internal Control
Framework: Gap analysis and action plan for Commission services"
SEC(2006) 49 [final]. Back
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