31996Y1101(01)

REPORT BY THE EXTERNAL AUDITOR ON THE COURT OF AUDITORS' ACCOUNTS FOR THE FINANCIAL YEAR 1995 (96/C 328/05)

NOTE TO READERS

Without prejudice to the provisions of Article 188c of the Treaty establishing the European Community, which gave the Court of Auditors responsibility for auditing all of the Community's revenue and expenditure, and the provisions of Article 206 of the Treaty on the granting of the discharge, the Court of Auditors has had its revenue and expenditure accounts audited by an external auditor every year since the close of the financial year 1987.

The reports that the external auditor of the Court of Auditors has drawn up in respect of the Court's accounts for the financial years 1987 to 1991 were sent only to the Chairman of the European Parliament's Budgetary Accounts Committee.

Pursuant to a decision taken by the Members of the Court of Auditors at the Court meeting of 8 July 1993, the external auditor's reports have been published in the Official Journal of the European Communities, starting with the report on the financial year 1992.

The financial statements annexed to the enclosed report are based on the accounting data that the Court of Auditors sent to the Commission so that the revenue and expenditure account and the financial balance sheet of the European Communities could be drawn up for the financial year 1995. These accounting data may be supplied to anyone who submits a written request to the External Relations department of the Court of Auditors.

For the Court of Auditors

Bernhard FRIEDMANN President

Certificate concerning the regularity and fairness of the financial statements closed on 31 December 1995

To the Members of the European Court of Auditors

Following the instructions given to us by the European Court of Auditors, we have audited:

- the accounting data sent by the European Court of Auditors to the Commission for the purpose of drawing up the revenue and expenditure account and the balance sheet of the European Communities for the financial year 1995,

- the financial statements of the European Court of Auditors as at 31 December 1995, which have been drawn up on the basis of the same accounting data and prepared for the purpose of publication in the Official Journal of the European Communities.

The accounting data and the financial statements are the responsibility of the European Court of Auditors. Our responsibility is to express our opinion on the basis of our audit work, on the accounting data and the financial statements.

We have conducted our work in accordance with international auditing standards. These standards require our work to be planned and carried out in such a way as to obtain reasonable assurance that the accounting data and financial statements do not contain any important inconsistencies. An audit task consists in examining, on the basis of sampling, the substantiating documents that give proof of the amounts and information contained in the accounting data and financial statements. It also consists in appraising the accounting principles and methods which are applied and the important estimates made by the European Court of Auditors for making up the accounts, and in reviewing their overall presentation. We consider that our audit work forms a reasonable basis for expressing our opinion.

In our opinion, the accounting data and the financial statements attached hereto, in accordance with the Financial Regulation and its implementing rules and with the applicable accounting principles and internal rules of the European Court of Auditors, give a true and fair view of the assets and the financial situation of the European Court of Auditors as at 31 December 1995, as well as of its revenue and expenditure for the financial year ending on that date.

Luxembourg, 2 July 1996.

Coopers & Lybrand SC

Réviseurs d'entreprises

represented by

Marie-Jeanne CHÈVREMONT Pascal RAKOVSKY

FINANCIAL STATEMENTS AS AT 31 DECEMBER 1995

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Notes to the financial statements as at 31 December 1995

ACCOUNTING PRINCIPLES

1. (a) Accounting rules

The accounts of the European Court of Auditors are kept and the financial statements drawn up in accordance with the provisions of the Financial Regulation of 21 December 1977, as last amended by Council Regulation (EC, Euratom, ECSC) No 2335/95 of 18 September 1995, and with the provisions of Commission Regulation (Euratom, ECSC, EC) No 3418/93 of 9 December 1993 laying down detailed rules for the implementation of certain provisions of the Financial Regulation.

In accordance with Article 136 of the said implementing rules, the financial statements are set out according to generally accepted accounting principles, including, in particular, the principles laid down in Council directives, except where otherwise provided for by a Community regulation.

(b) Own resources of the Court of Auditors

The Court of Auditors' own resources are entered in the accounts on the basis of the amounts actually received during the financial year.

Amounts owing but not yet received by the end of the financial year are entered on the assets side of the balance sheet under the heading 'Sundry accounts receivable` in the item 'Revenue to be collected`. They have a counterpart entry on the liabilities side of the balance sheet in an item with the same title under the heading 'Sundry accounts payable`. These items are reversed once the amounts have been collected.

(c) Expenditure

The expenditure of the financial year, which is shown in the 'Statement of revenue and expenditure`, represents the payments made against the appropriations specific to the financial year and against the appropriations carried over from the previous financial year in accordance with the provisions of the regulations applicable in this field.

In accordance with Article 6 (6) of the Financial Regulation, expenditure for which authorization reached the Financial Controller not later than 31 December and the accounting officer not later than the following 10 January, and for which payment was effected by the accounting officer not later than the following 15 January, is entered in the accounts for this financial year.

(d) Fixed assets

The Court's building and its equipment and furniture are valued at purchase price. Where this is expressed in national currency, it is converted into ecu at the accounting rate in force at the time of purchase. Since the purchase cost is charged in full to the corresponding expenditure account at the time of acquisition, no depreciation is made. The total value of these tangible assets is entered on the assets side for the entire period of their use, with a counterpart entry for an equivalent amount on the liabilities side under the heading 'Own capital`.

For furniture and equipment, only goods of a value of ECU 350 or more are entered in fixed-asset accounts.

(e) Supplies

The supplies comprise a stock of office supplies and other consumable materials, valued at the most recent known price and at their purchase cost respectively, with a counterpart entry, for an equivalent amount, on the liabilities side under the heading 'Own capital`. Where the purchase cost is expressed in national currency, it is converted into ECU at the accounting rate used for drawing up the balance sheet.

REVENUE ACCRUING FROM THE ADMINISTRATIVE OPERATION OF THE INSTITUTION

2. The heading 'Revenue accruing from the administrative operation of the institution` comprises mainly:

- the revenue accruing from the publication of the Court of Auditors' reports and opinions in the Official Journal of the European Communities,

- the payment of actuarial reserves by the national pension bodies and provident societies by way of transfer of officials' pension rights.

OWN CAPITAL

3. The amount of own capital determined according to the principles described in 1 (d) and (e) can be broken down as follows at the year-end:

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SUNDRY ACCOUNTS RECEIVABLE

4. The heading 'Sundry accounts receivable` can be broken down as follows at the year-end:

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The item 'Claims on the staff of the institution` relates mainly to advances paid on mission expenses already incurred.

The item 'Revenue to be collected` comprises amounts owing but not yet collected and has a counterpart entry in the suspense account of the same title under the heading 'Sundry accounts payable`.

The item 'Expenditure to be charged` comprises amounts which were invoiced by the Commission at the year-end and which it was not materially possible to charge to the budget.

SUNDRY ACCOUNTS PAYABLE

5. The heading 'Sundry accounts payable` can be broken down as follows at the year-end:

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The sub-heading 'Sums owing to a credit card organization` covers all the amounts invoiced by the travel agency at the Court of Auditors pending their recovery by the credit institution.

The suspense account 'Revenue available for re-use` corresponds to the counterpart which has not yet been used of the amounts entered on the assets side for refunds of insurance payments, tax refunds or proceeds from the sale of fixed assets. The revenue available for re-use is allocated to new items of expenditure of the same kind and has to be used by the end of the following financial year at the latest.

The sub-heading 'Revenue to be collected` represents the total of all claims on Member States in respect of the transfer of officials' pension rights for which no funds have yet been transferred.

PAYMENTS IN HAND

6. According to the Financial Regulation, payments which are made between 1 and 15 January of the following financial year and which are authorized before the year-end are entered in the accounts as expenditure of the financial year and are shown on the liabilities side of the balance sheet as payments in hand.

BALANCE TO BE CARRIED FORWARD TO THE FOLLOWING FINANCIAL YEAR

7. The balance for the financial year is the difference between the total revenue of the year and the expenditure against appropriations specific to the year and appropriations carried forward from the previous year.

The changes in the balance to be carried forward to the following financial year are as follows:

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IMPLEMENTATION OF THE BUDGET

8. The implementation of the budget for the financial year 1995 can be divided up into the implementation of appropriations brought forward and the implementation of appropriations for the financial year.

(a) Appropriations brought forward represent, on the one hand, all the commitments, chargeable to the Court, which have been entered into but not settled before the year-end, and, on the other hand, appropriations which the budgetary authority has decided to carry forward. Appropriations brought forward from the previous year and not used during the following year are cancelled.

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(b) The implementation of the appropriations for the financial year represents the payments made against appropriations committed. The unpaid balance of the commitments may be carried forward to the following year. Appropriations still uncommitted at the end of the year are generally cancelled:

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Total payments made against appropriations carried forward (ECU 1 381 963) and against appropriations for the financial year (ECU 47 721 940) amount to ECU 49 103 903 and correspond to the total expenditure shown in the statement of revenue and expenditure for the financial year 1995.

Report on the administrative and accounting procedures, the soundness of the financial management and the internal control system

To the Members of the European Court of Auditors As part of our audit of the revenue and expenditure account and the balance sheet of the European Court of Auditors drawn up as at 31 December 1995, we have examined the Court's administrative and accounting procedures and internal control system.

I. OBJECTIVE AND APPROACH

The objective of our examination was to verify whether the rules for internal control, as specified in the relevant regulations and reference texts, were being properly applied in such a way as to enable the Court's various departments to ensure that:

- the control system was both regular and consistent,

- the budgetary procedure was systematically complied with,

- the Court's financial statements were reliable.

These internal control rules result from the express provisions of the relevant regulations and reference texts and also represent the practical application of the general principles on which sound management is based.

The main regulations and reference texts were:

- the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities, as last amended by Regulation (EC, Euratom, ECSC) No 2335/95 of 18 September 1995,

- Commission Regulation (Euratom, ECSC, EC) No 3418/93 of 9 December 1993 laying down detailed rules for the implementation of certain provisions of the Financial Regulation of 21 December 1977,

- the Internal Rules of the Court of Auditors for the implementation of the Court's budget, laid down by Decision No 94/75 of 20 December 1994.

Our audit was therefore based first and foremost on understanding and documenting the Court of Auditors' accounting systems and main administrative procedures and then on analysing and assessing internal control and the relevant EDP controls. It also involved discussions with the various heads of departments and their staff as well as tests on a sample basis of the supporting documents for the transactions recorded in the Court's accounts.

The nature and extent of the tests carried out were determined on the basis of our assessment of the quality of internal control at the Court of Auditors and did not, therefore, necessarily enable us to detect all the weaknesses that might have been present. Nevertheless, we consider that the work undertaken provided reasonable grounds for the conclusions we reached as a result of our examination of the Court of Auditors' system of control and sound financial management.

II. CONCLUSION

Our detailed examination, which was carried out in accordance with the approach described above, enables us to conclude that:

- the reliability of the accounts was of a high standard: this was reflected in the fact that we proposed no corrections or amendments,

- the information systems functioned in compliance with the rules of internal control as we understand them, on the one hand, and as they are laid down in the aforesaid regulatory framework, on the other.

Luxembourg, 2 July 1996.

Coopers & Lybrand SC

Réviseurs d'entreprises

represented by Marie-Jeanne CHÈVREMONT Pascal RAKOVSKY