FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010

CONTENTS

ANNUAL ACCOUNTS

Independent Auditor’s report

Balance sheet as of 31 December 2010

Economic outturn account for the year ended 31 December 2010

Cash flow statement for the year ended 31 December 2010

Statement of changes in equity for the year ended 31 December 2010

Accounting policies and notes to the financial statements

1.

General

2.	Significant accounting policies and presentation of the financial statements

3.	Notes to the balance sheet

4.	Notes to the economic outturn account

5.	Off balance sheet

Budget information financial year 2010

Independent assurance report

Independent Auditor’s report

To the Management of the

European Court of Auditors

We have audited the accompanying financial statements of the European Court of Auditors, which comprise the balance sheet as at 31 December 2010, the economic outturn account, the statement of changes in equity and the cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes, and which start on page 4 and end on page 15.

Management’s responsibility for the financial statements

The Management is responsible for the preparation and fair presentation of these financial statements in accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002, the Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the said Council Regulation, and the Accounting Rules of the European Union, and for such internal control as the Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Responsibility of the ‘Réviseur d’entreprises agréé’

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the ‘Commission de surveillance du secteur financier’. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the judgment of the ‘Réviseur d’entreprises agréé’ including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the ‘Réviseur d’entreprises agréé’ considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the European Court of Auditors as of 31 December 2010, and of its cash flows for the year then ended in accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002, the Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the said Council Regulation, and the Accounting Rules of the European Union.

Balance sheet as of 31 December 2010

(EUR)
Assets	Note	31 December 2010	31 December 2009
Intangible fixed assets	3.1.	479 144	401 216
Tangible fixed assets	3.2.	37 919 629	36 554 342
Long-term receivables		25	525
Total non-current assets		38 398 798	36 956 083
Short-term receivables	3.3.	531 239	965 208
Cash and cash equivalents	3.4.	55 267 786	1 527 466
Total current assets		55 799 025	2 492 674
Total assets		94 197 823	39 448 757

(EUR)
Liabilities	Note	31 December 2010	31 December 2009
Accumulated deficit		–24 068 815	–22 012 092
Economic result of the year — profit+/loss-		57 113 695	–2 056 723
Capital		33 044 880	–24 068 815
Employee benefits	3.5.	53 317 385	56 663 864
Other long-term liabilities	3.6.	175 000	175 000
Total non-current liabilities		53 492 385	56 838 864
Provisions for risks and charges	3.7.	—	650 000
Accounts payable	3.8.	7 660 558	6 028 708
Total current liabilities		7 660 558	6 678 708
Total liabilities		94 197 823	39 448 757

The accompanying notes on pages 8 to 15 form an integral part of these financial statements.

Economic outturn account for the year ended 31 December 2010

(EUR)
	Note	2010	2009
Funds transferred from the Commission to other institutions	4.1.	164 602 733	104 484 524
Revenues from administrative operations	4.2.	18 583 069	18 622 118
Other operating revenue	4.3.	14 279	164 861
Total operating revenue		183 200 081	123 271 503
Staff expenses	4.5.	– 100 326 863	–92 264 980
Fixed assets related expenses	3.1. - 3.2. & 4.6.	–3 005 731	–3 393 154
Other administrative expenses	4.7.	–23 109 833	–22 890 737
Operational expenses		–29 665	– 102 110
Total operating expenses		– 126 472 092	– 118 650 981
Surplus/(deficit) from operating activities		56 727 989	4 620 522
Financial revenues	4.8.	53 017	59 266
Financial expenses	4.9.	–15 044	–15 125
Movement in pensions (– expense, + revenue)	3.5. & 4.10.	347 733	–6 721 386
Surplus/(deficit) from non-operating activities		385 706	–6 677 245
Economic result of the year		57 113 695	–2 056 723

The accompanying notes on pages 8 to 15 form an integral part of these financial statements.

Cash flow statement for the year ended 31 December 2010

(EUR)
	2010	2009
Economic result of the year	57 113 695	–2 056 723
Operating activities - Adjustments
Amortisation (intangible fixed assets)	215 031	184 798
Depreciation (tangible fixed assets)	2 780 834	3 206 079
Increase/(decrease) in provisions for risks and charges	– 650 000	650 000
Increase/(decrease) in value reduction for doubtful debt	—	–1 790
(Increase)/decrease in long-term receivables	500	—
(Increase)/decrease in short-term receivables	441 676	492 568
(Increase)/decrease in receivables EU entities	–7 707	– 205
Increase/(decrease) in other long-term liabilities	—	—
Increase/(decrease) in accounts payable	1 616 394	–1 629 818
Increase/(decrease) in liabilities related to EU entities	15 456	–88 476
Net cash flow from operating activities	61 525 879	756 433
Cash flows from investing activities
Purchase of tangible and intangible fixed assets (–)	–4 448 946	–4 850 333
Proceeds from tangible and intangible fixed assets (+)	—	—
(Gains)/losses on sale of property, plant and equipment	9 866	2 275
Net cash flow from investing activities	–4 439 080	–4 848 058
Increase/(decrease) in employee benefits	–3 346 479	4 130 466
Net increase/(decrease) in cash and cash equivalents	53 740 320	38 841
Cash and cash equivalents at the beginning of the period	1 527 466	1 488 625
Cash and cash equivalents at the end of the period	55 267 786	1 527 466

The accompanying notes on pages 8 to 15 form an integral part of these financial statements.

Statement of changes in equity for the year ended 31 December 2010

(EUR)
Capital	Accumulated deficit	Economic result of the year	Capital (total)
Balance as of 31 December 2009	–22 012 092	–2 056 723	–24 068 815
Allocation of the economic result of previous year	–2 056 723	2 056 723	—
Economic result of the year		57 113 695	57 113 695
Balance as of 31 December 2010	–24 068 815	57 113 695	33 044 880

The accompanying notes on pages 8 to 15 form an integral part of these financial statements.

Accounting policies and notes to the financial statements

1.    General

The European Court of Auditors (hereafter the ‘Court’) was established by the Treaty of Brussels of 22 July 1975 and started operating as an external Union audit body in October 1977, with its headquarters in Luxembourg.

Mission of the European Court of Auditors

The Court is the EU Institution established by the Treaty to carry out the audit of EU finances. As the EU external auditor it contributes to improving EU financial management and acts as the independent guardian of the financial interests of the citizens of the European Union.

The Court renders audit services through which it assesses the collection and spending of EU funds. It examines whether financial operations have been properly recorded and disclosed, legally and regularly executed and managed so as to ensure economy, efficiency and effectiveness. The Court communicates the results of its audits in clear, relevant and objective reports. It also provides its opinion on financial management issues.

The Court promotes accountability and transparency and assists the European Parliament and Council in overseeing the implementation of the EU budget, particularly during the discharge procedure. The Court is committed to being an efficient organisation at the forefront of developments in public audit and administration.

The financial year of the Court runs from 1 January to 31 December.

2.    Significant accounting policies and presentation of the financial statements

2.1.   Basis of presentation

The accounts of the Court are drawn up in accordance with the provisions of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities and with the Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the said financial Council Regulation.

The financial statements are prepared in accordance with the Accounting Rules of the European Union (EC Accounting Rules), which have been inspired by International Public Sector Accounting Standard (IPSAS). These Accounting Rules are adopted by the Accounting Officer of the Commission after a consultation of the other institutions.

2.2.   Valuation of foreign currency balances and transactions

Foreign currency transactions are translated into EUR using the exchange rate prevailing at the date of the transaction.

Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the economic outturn account.

Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euro on the basis of the exchange rates applying on 31 December.

2.3.   Intangible and tangible fixed assets

The intangible and tangible fixed assets are stated at historical cost less amortisation/depreciation and impairment. Low value items below EUR 420 are accounted as expenses during the year of acquisition. Assets delivered during the accounting year but not paid at year-end are reported as ‘under construction’; assets under construction also include major building projects still in process at year-end.

Depreciation/amortisation is calculated by the straight-line method, starting the month of acquisition and charged over their estimated useful lives, as follows:

Intangible (Licences for computer software)	4 years
Buildings	25 years or expected useful life
Plant, machinery and tools	4, 8 years
Furniture and vehicle fleet	4, 8, 10 years
Computer hardware	4 years
Fittings specific to leased buildings	the duration of the lease
Other fixtures and fittings	4, 6, 8 years

Assets under construction are not depreciated as these assets are not yet available for use.

After implementing the EC Accounting Rules a temporary exception related to EC Accounting Rule 6 and the non-capitalisation of internally developed intangible assets was granted by the Accounting Officer of the Commission. The exception period ends at 31 December 2009. Consequently, internally developed intangible assets have to be capitalised from 1 January 2010 in accordance with International Accounting Standard (IAS) 38 and IPSAS 31. Research cost and not capitalised development cost are calculated at average personnel costs.

2.4.   Employee benefits

Employee benefits represent the future pension rights of the Members of the Court in accordance with Article 19 of Council Regulation (EC, Euratom, ECSC) No 2290/77 of 18 October 1977 determining the emoluments of the Members of the Court of Auditors (OJ L 268, 20.10.1977, p. 1), the benefits provided for in this pension scheme are entered in the budget of the Union and the Member States jointly guarantee their payment.

The liability for these future pension payments is accounted and disclosed in accordance with EC Accounting Rule 12 ‘Employee Benefits’. The methodology to calculate the liability takes account of characteristics of the pension scheme as defined in accounting rule IPSAS 25.

IPSAS 25 requires that the cost of post-employment benefits be assessed in the present (i.e. when the Member acquires his pension rights). The actuarial commitment is determined on an ongoing basis, taking into account both the promised benefits during the active lifetime and foreseeable increase in salaries. The actuarial valuation method used to calculate the liability is ‘the projected unit credit method’.

The liability is reduced by the estimated amount of taxes that will be applied to future pension payments since these taxes revert to the EU budget as revenue.

The pension liability is recomputed every year at reporting date. In the economic outturn account, the pension expense for the year consists of the pensions paid during the year and of the adjustment of the pension liability at year-end, both net of taxes. Actuarial gains and losses are recognised in the economic outturn account.

Regarding potential ‘Plan assets’, the European Union does not currently have any assets devoted to financing pension commitments.

2.5.   Provisions for risks and charges

Provisions for risks and charges are intended to cover losses or debts the nature of which is clearly defined and which, at the date of the balance sheet are either likely to be incurred or certain to be incurred but uncertain as to their amount or as to the date on which they will arise.

2.6.   Recognition of expenses

Transactions and events are recognised in the financial statements in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on the amount of the goods delivered or services rendered.

Conversely, some payments made in the current year relate to subsequent periods and are identified as deferred charges to be included in the subsequent period(s).

The calculation of accrued and deferred expenses at year-end is referred to as the cut-off exercise for which a detailed methodology and practical guidelines have been put in place.

3.    Notes to the balance sheet

3.1.   Intangible fixed assets

The movements in intangible fixed assets during the year 2010 were:

(EUR)
	Gross book value 1 January 2010	Additions	Disposals	Gross book value 31 December 2010	Accumulated amortisation 31 December 2010	Net book value 31 December 2010
Other Computer Software	798 102	292 959	—	1 091 061	– 611 917	479 144
Total	798 102	292 959	—	1 091 061	– 611 917	479 144

In 2010 no internally developed intangible fixed assets had to be recognised.

The following amounts were recognised as expenses:

(EUR)
	2010
Research cost	349 850
Not capitalised development cost	1 985 750

These two amounts are part of ‘other administrative expenses’ and ‘staff expenses’.

3.2.   Tangible fixed assets

The movements in tangible fixed assets during the year 2010 were:

(EUR)
	Gross book value 1 January 2010	Additions	Disposals and reclassifications	Gross book value 31 December 2010	Accumulated depreciation 31 December 2010	Net book value 31 December 2010
Land	776 630	—	—	776 630	—	776 630
Buildings	53 474 631	61 168	4 452 077	57 987 876	–28 275 576	29 712 300
Plant and equipments	196 329	18 378	–1 887	212 820	– 133 326	79 494
Computer hardware	4 694 988	382 255	–1 048 957	4 028 286	–3 138 312	889 974
Furniture and vehicle	2 083 199	152 677	– 165 812	2 070 064	–1 293 963	776 101
Other fixtures and fittings	1 980 516	23 242	– 125 781	1 877 977	–1 761 769	116 208
Assets under construction	6 502 732	3 518 267	–4 452 077	5 568 922	—	5 568 922
Total	69 709 025	4 155 987	–1 342 437	72 522 575	–34 602 946	37 919 629

‘Assets under construction’ are assets partially delivered or delivered but not yet invoiced at year-end; this includes major building projects still in process at year-end. When the delivery is accepted and the invoice is received, the related assets are reclassified to the correct heading.

Assets under construction amount to EUR 5 568 922 as at 31 December 2010, and correspond to constructions for the building K3 which have started in 2010. This year, the health and safety works for the building K1 (EUR 4 452 077) was transferred from the heading ‘Assets under construction’ to the heading ‘Buildings’.

3.3.   Short-term receivables

(EUR)
	31 December 2010	31 December 2009
Current receivables mainly due to the transfer of national pension rights by staff	27 286	398 142
Sundry receivables mainly related to payroll and mission advances	131 388	367 360
Deferred charges for building rentals and IT contracts	288 122	197 446
Accruals with EU entities	74 476	0
Receivable from EU entities	9 967	2 260
Total	531 239	965 208

3.4.   Cash and cash equivalents

(EUR)
	31 December 2010	31 December 2009
Petty cash	1 000	1 000
Bank current account	3 152 174	1 526 466
Fiduciary account	52 114 612	0
Total	55 267 786	1 527 466

A fiduciary account was opened on 27 January 2010 between the European Court of Auditors and the Banque et caisse d’épargne de l’Etat, Luxembourg. This fiduciary account allows the European Court of Auditors to manage the budget granted by the budgetary authority in relation to the K3 building project (see point 5.3).

The fiduciary account is used by the European Court of Auditors only under certain conditions disclosed in the contract with the Banque et caisse d’épargne de l’Etat, Luxembourg.

The exclusive beneficiary of payments made from this fiduciary account is the operational bank account of the consortium acting as project manager. This operational account is used exclusively by the project manager to pay the invoices of the construction companies. The initial transfer to the fiduciary account was EUR 52 107 202,11 and EUR 7 410,25 of interest was received.

3.5.   Employee benefits

The liability for future pension payments obligations is net of the taxes which will be recovered on the future pension payments (see also 2.4).

(EUR)
	31 December 2010	31 December 2009
Gross amount	65 315 919	68 741 798
Tax rate (%)	18,37	17,57
Taxes	11 998 534	12 077 934
Amount net of taxes	53 317 385	56 663 864
Variation of net pension liability	–3 346 479	4 130 466

The pension plan devoted to the members is a defined benefit plan. The defined benefits in this context are:

—	transitional allowance (paid at the end of the mandate for 3 years),

—	retirement pension,

—	invalidity pension and allowance,

—	survivor’s pension (paid after the death of the Member whether this happens during or before retirement).

The categories of beneficiaries, for which the liability needs to be calculated, are:

—	the active members,

—	the non-active members with a transitional allowance,

—	the non-active members after the transition period (deferred pension),

—	the retired members,

—	permanently disabled,

—	temporarily disabled,

—	the surviving spouses,

—	the orphans.

The computation of the liability is performed by Eurostat assisted by a qualified independent expert with regard to the implementation of the methodology and to the definition of the corresponding actuarial assumptions.

The assessment of the pension liability requires the handling of variables related to economic and demographic aspects. Values that are affected to these variables can be based on information collection, estimated, or even fixed arbitrarily.

Amongst the main actuarial assumptions were the estimated nominal discount rate, 4,4 % in December 2010, the expected long-term inflation, 1,9 % in December 2010 and the general salary growth, 0 % in December 2010. The values affected in December 2009 for the same variables were respectively 4,1 %, 2,3 % and 0 %.

The variation of the gross pension liability during 2010 is mainly attributable to a change in the real discount rate (2,5 % in December 2010 and 1,8 % in December 2009), the evolution can be explained as follows:

(EUR)
	2010		2009
Gross Pension liability at the beginning of the financial year		68 741 798		63 730 921
Liability change due to newcomers		1 225 850		0
Liability change linked to the characteristics of the constant population		1 001 771		3 958 178
Service cost of the ‘constant’ population	4 369 423		5 614 685
Interest cost of the ‘constant’ population	2 923 684		2 510 704
Pension paid during the year	–3 520 106		–2 977 454
Actuarial gains and losses from experience	–2 771 230		–1 189 757
Actuarial gains and losses from changes on assumptions		–5 653 500		1 052 699
Interest rate	–5 653 500		3 295 980
Life table	0		0
General salary growth	0		–2 243 281
Other changes on actuarial assumptions	0		0
Actuarial gains and losses from changes on methodology and other changes		0		0
Gross Pension liability at the end of the financial year		65 315 919		68 741 798

‘Service cost’ reflects the actual value of the additional pension rights, acquired by active members and related to the service during the year.

‘Interest cost’ is due to the age increase of non-retired members; members are older and the duration between the new valuation date and the date at which they will receive their future benefits is reduced by 1 year.

‘Pension paid during the year’ relates to the payments during the year and is detailed in Section 4.10.

‘Actuarial gains and losses’ arise from differences between what was expected from the assumption for the following year and what really occurred during the year. The strong movement of the real discount rate (= nominal discount rate of 4,4 % minus expected long-term inflation of 1,9 %) results in a lower gross pension liability in 2010 (EUR 68 741 798 in 2009 compared to EUR 65 315 919 in 2010).

3.6.   Other long-term liabilities

The amount of EUR 175 000 is contractually due at the termination of the rental of the building K9.

3.7.   Provision for risks and charges

Following the successful appeal of the European Commission against the decision of the European Council on EU staff remunerations, the provision of EUR 650 000 as at 31 December 2009 was used for the disbursement in 2010 which resulted as a consequence of the judgment of the Court of Justice.

3.8.   Accounts payable

(EUR)
	31 December 2010	31 December 2009
Current payables	784 111	548 543
Sundry payables related to payroll and staff	469 459	425 994
Accrued charges — non-EU institutions	5 484 673	4 161 463
Accrued charges — EU institutions	888 211	874 060
Accounts payable against consolidated EU entities mainly to the European Council and Parliament	34 104	18 648
Total	7 660 558	6 028 708

4.    Notes to the economic outturn account

4.1.	‘Funds transferred from the Commission to other institutions’: the amount corresponds to the monthly calls for funds made by the Court to the Commission to replenish its bank account. An amount of EUR 55 619 892 has been transferred in 2010 for the construction of the building K3.

4.2.	‘Revenues from administrative operations’: for the most part, this heading is made up of deductions from the salaries of members and staff in respect of tax and social contributions.

4.3.	‘Other operating revenue’ arises among others from exchange rate gains.

4.4.	Revenues were generated from exchange and non-exchange transactions as follows: (EUR)   2010 Revenue from exchange transactions 22 440 Revenue from non-exchange transactions 183 177 641 Total revenue 183 200 081

4.5.	‘Staff expenses’ include the salaries of members, statutory staff, contractual agents and temporary staff. The transitional allowances for previous members and the taxes related to the members’ pensions and transitional allowances are also part of the item ‘Movement in pension’ (see 4.10).

4.6.	The ‘fixed assets related expenses’ consist of the depreciation/amortisation of the tangible and intangible assets.

4.7.	The most significant items of the ‘other administrative expenses’ were: — buildings’ rental and associated charges, — IT and telecommunications, — missions expenses, — cleaning and security services.

4.8.	‘Financial revenues’ consists of bank interest earned on the Court’s current accounts.

4.9.	‘Financial expenses’ are bank charges levied on the Court’s current account.

4.10.

The item ‘Movement in pensions’ includes all expenses linked to the pensions of the Members of the Court. This covers the pensions and transitional allowances paid during the year as well as the adjustment at year-end of the liability for all future pension payments. (EUR)   2010 2009 Variation of members’ net pension liability –3 346 479 4 130 466 Life pension paid 2 146 438 2 020 586 Survivor pensions paid 380 799 356 249 Transitional allowances paid 920 878 542 642 Invalidity pensions paid 71 991 57 977 Sub-total Pension paid during the year 3 520 106 2 977 454 Correction coefficient 153 662 165 722 Taxes deducted from payments – 675 022 – 552 256 Total Movement in pension – 347 733 6 721 386

5.    Off balance sheet items

5.1.   Contingent assets

The following bank guarantees have been given by suppliers following contractual obligations:

(EUR)
	31 December 2010	31 December 2009
Travel agency	50 000	100 000
Renovation building K1	545 951	545 951
Project management building K3	3 424 120	578 000
Car pool leasing	60 000	75 000
Insurance company	—	1 361
Telecommunication	20 000	20 000
Total	4 100 071	1 320 312

5.2.   Commitments for future funding

(EUR)
	31 December 2010	31 December 2009
Operational lease for buildings	7 840 772	11 683 829
Operational lease for IT material, cars and other equipments	884 379	1 001 910
Subtotal	8 725 151	12 685 739
Commitments against appropriations not yet consumed — RAL (Restant à liquider) —, after deduction of accruals for 2010	11 439 075	56 918 665
Total	20 164 226	69 604 404

The RAL is an element of budgetary accounting representing the value of outstanding commitments. This is the difference between commitments entered into and payments, which is due to the time-lag between entering into a commitment and proceeding to the related payment.

The decrease of the RAL compared to last year is due to the amount used with regard to the construction of the new building K3.

5.3.   The Court’s buildings projects

The Court occupied its headquarters building (the ‘K1’ building) in 1988 and purchased it and the land it stands on outright in 1990. In 1999, the Court signed a framework agreement with the Luxembourg State through which it was given the right to use a second parcel of land for 49 years (renewable once) for the construction of an extension (the ‘K2’ building) in return for a payment of one euro. However, for the second extension, the ‘K3’ building, due to different arrangements for carrying out the project it was necessary that the Luxembourg State and the Court concluded a new framework agreement on 22 February 2008.

As regards the two pieces of land relative to the two extensions (‘K2’ and ‘K3’) mentioned above, the State has sold these to the Court for a symbolic one euro. For its part should the Court ever consider ceding one or other of the buildings to a third party other than the Community body or institution, the Court will return the land to the ownership of the State in return for a symbolic one euro, the latter disposing also of an option to buy the building at a price to be determined by an independent expert. In case the State decides not to exercise this option, it would provide a right to use the land to the purchasers of the building.

In Luxembourg, the use of office buildings is authorised for a period of 15 years, after which they must be modernised to bring them into conformity with the prevailing health, safety and environmental standards. These required health and safety works were performed on the K1 building. The work is finalised, the formal final acceptance was confirmed in 2010. The K2 building entered into service in November 2003 and has thus an authorisation (autorisation d’exploitation) valid until 2018.

The works for the construction of the K3 building started in March 2010. The second tranche of financing of 11 million euro (the first tranche in 2009 amounted to 55 million euro) was included in the 2010 budget. An amount of EUR 1 361 544 was paid in 2010 and the difference of EUR 9 638 456 is included in the ‘Restant à liquider’ (see point 5.2). This difference covers contracts with construction companies, signed in 2010 or to be signed in 2011. On 15 June 2009 following an open call for tender, the Court signed a service contract with a consortium to be the project manager for the construction of the K3 building. Amongst other things it is the responsibility of the project manager to procure and sign contracts with the construction companies on behalf of the Court, to monitor the execution of the works and to check the relevant invoices before payment. Once the invoices are verified and authorised for payment by the responsible services of the Court it is the responsibility of the project manager to pay the construction companies. Within the above context, the project manager enters into financial commitments towards the construction companies. As a counter-balance to this, the contract between the Court and the project manager requires the Court to have sufficient funds, within the limits of what is available in the budget, to cover the liabilities of the project manager vis-à-vis the construction companies. To ensure this, the Court has signed a fiduciary contract with a local bank and thus holds the funds made available by the budgetary authority. The financial interest of the Union is at the same time protected by the use of the fiduciary contract.

5.4.   Potential significant liability for litigations

None.

Budget information financial year 2010

A.   Computation of the budget result

The budget result of the year is computed based on the figures of the budgetary implementation. The budget 2010 was approved/authorised on 17 December 2009. The report on the budgetary and financial management for the financial year 2010 has been published in the Official Journal of the European Union C 134 of 4 May 2011.

(EUR)
Payments on appropriations of the year	– 121 673 823
Payments on carried-over appropriations	–60 368 584
Payments on appropriation related to earmarked revenue	– 320 649
Recovery orders of the year, cashed during the year	18 927 934
Recovery orders from previous years, cashed during the year	140 989
Adjustment on recovery orders from previous years	– 288 038
Payment appropriations carried over to next year	–16 665 339
Appropriation carried over from previous years	61 197 589
Adjustment related to the carry-over of earmarked revenue	472 601
Budget result	– 118 577 320

There were no supplement nor reductions between the original and the final budget.

B.   Reconciliation of the economic outturn with the budget result

(EUR)
Economic outturn account of the year	57 113 695
Adjustment for items included in the economic result but not in the budget result	– 155 962 435
Difference between accruals end of previous year and end of current year	374 703
Funds received from the Commission	– 164 602 734
Difference in unpaid invoices at year-end	958 325
Depreciation of intangible and tangible fixed assets	3 005 731
Difference in provisions	–3 996 479
Difference in value reductions	0
Recovery orders from current year not yet cashed	–4 837
Payments on carried-over appropriations	60 368 584
Other	–52 081 747
Exchange rate differences	16 019
Adjustment for items included in the budget result but not in the economic result	–19 728 580
Asset acquisitions (paid during the year)	–4 448 946
Recovery orders from previous years cashed during the year	140 989
Payment appropriations carried over to next year	–16 665 339
Cancellation of unused carried-over payment appropriations from previous year	829 005
Adjustment related to the carry-over of earmarked revenue	472 602
Payments for pensions (they are budgetary payments but booked against provisions)	0
Other	–56 891
Budget result	– 118 577 320

Independent assurance report

To the Management of the

European Court of Auditors

We have examined that the financial resources assigned by the European Commission to the European Court of Auditors (hereafter the ‘Court’) have been used for their intended purposes and that the control procedures put in place by the authorising officers provide the necessary guarantees to ensure the compliance of financial operations with the applicable rules and regulations for the financial resources made available and used for the period from 1 January 2010 to 31 December 2010.

The maintenance of books and records and the establishing and maintaining of appropriate controls are the responsibility of the Management of the Court. Our responsibility is to express our opinion based on our examination.

We conducted our examination in accordance with the International Standard on Assurance Engagements ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ (ISAE 3000) as adopted by the Commission de surveillance du secteur financier. This standard requires that we plan and perform our examination such that misuse of the resources materially affecting the books of the Court are detected with reasonable assurance. Our work consisted primarily of examining on a test and sample basis, evidence supporting the fact that:

—	the resources assigned to the Court have been used for their intended purposes,

—	the control procedures put in place provide the necessary guarantees to ensure the compliance of financial operations with the applicable rules and regulations.

The criteria used for our examination are the following rules and regulations:

—	Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget (hereafter the ‘Budget’) of the European Communities (hereafter the ‘Financial Regulation’),

—

Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (hereafter the ‘Implementing Rules’),

—

Decision No 36/2007 of the European Court of Auditors relating to the Internal Rules for the implementation of its Budget adopted on 12 and 19 July 2007. These provisions form part of the procedures established by the Treaties, or agreements made by virtue thereof, which concern the operational process linked to the implementation of the Budget.

In particular, the following Internal Rules have been used as criteria:

—	Article 7 — Signatures — ‘Each of the parties involved in the drafting, control and registration of operations to establish and recover revenue or to commit sums and make payments shall sign and date their involvement.’,

—	Article 9 — Building projects — ‘Before the Court gives its approval to any contractual undertaking concerning such a project, the service responsible shall submit and explanatory document justifying the compatibility of the project with the financial framework.’,

—	Article 16 — Making payments — ‘The accounting officer shall execute the payment orders defined in Article 80 of the Financial Regulation after he has checked the mandatory details described in Article 103(1) and Article 104 of the Implementing Rules.’,

—	Article 23.1 — Transfers of appropriations — ‘Pursuant to Article 21 of the Financial Regulation, appropriations shall be earmarked for specific purposes by title and chapter; the chapters shall be further subdivided into articles and items.’,

—	Article 23.2 — Transfers of appropriations — ‘All requests for transfer shall explain why the appropriations are insufficient. The request for transfer shall be signed by the responsible director.’,

—

Article 24 — Carry-overs of appropriations — ‘The responsible authorising officer shall prepare a listing showing the available balance of commitments; this balance, shall be adjusted in the budgetary accounts by taking into consideration the appropriations to be cancelled, and shall show the appropriations to be carried forward.’,

—	Article 26 — Property inventories — ‘The inventory of tangible assets shall be kept in a database.’,

—

Article 27 — Minimum management and internal control procedures — ‘The management and internal control procedures are drawn up by the authorising officers in accordance with the minimum internal control standards adopted by the Court. Each budget operation is handled (…) by the person responsible for ex-ante verification. (…) If the person responsible for ex-ante verification establishes that the operation in question satisfies the requirements of Article 47(3) of the Implementing Rules, he validates it and documents this validation.’.

We believe our examination provides a reasonable basis for our opinion.

Based on our work described in this report, nothing has come to our attention that causes us to believe that in all material respects and based on the criteria described above:

(a)	the resources assigned to the Court have not been used for their intended purposes;

(b)	the control procedures in place do not provide the necessary guarantees to ensure the compliance of financial operations with the applicable rules and regulations.

Our report is solely for the purpose set forth in the first paragraph and for your information and is not to be used for any other purpose or to be distributed to any other parties, except for publication purpose in the Official Journal of the European Union.