Good practices Good practices from and for the from and for the

EU accountability EU accountability processprocess

Irena PetruškevičienėIrena PetruškevičienėVilnius, 17 October 2006 Vilnius, 17 October 2006

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What to expect from an auditor?What to expect from an auditor?

What use can National What use can National Parliaments make of reports from Parliaments make of reports from the European Court of Auditors?the European Court of Auditors?

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“ “ A Parliament without a A Parliament without a Court of Auditors is like Court of Auditors is like

a knight without a a knight without a sword.“sword.“

(B. Friedmann, former President of (B. Friedmann, former President of ECA)ECA)

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Two main types of auditTwo main types of audit

the financial (report) audit the financial (report) audit andand

the special (compliance, the special (compliance, performance) auditperformance) audit

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The auditor provides an The auditor provides an independent opinion on the independent opinion on the status and activities of an status and activities of an

organisationorganisation..

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The responsibility for the The responsibility for the financial report lies with financial report lies with the management.the management.

The auditor is responsible The auditor is responsible for his opinion.for his opinion.

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An audit of a financial An audit of a financial report can providereport can provide a high, a high,

but not an absolute but not an absolute level of assurancelevel of assurance..

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The concept of The concept of materialitymateriality is implicit is implicit

in a financial report in a financial report audit.audit.

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An auditor does not An auditor does not discover or prevent discover or prevent

all frauds.all frauds.

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An auditor must be An auditor must be independent – both in independent – both in

fact and in fact and in appearance.appearance.

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Integrity of processIntegrity of process We have to act openly and transparently – subject to We have to act openly and transparently – subject to the need to respect personal privacy and to the need the need to respect personal privacy and to the need to observe any other obligations of confidentiality,to observe any other obligations of confidentiality,

We have to ensure procedural integrity by observing We have to ensure procedural integrity by observing the principles of natural justice – including giving the principles of natural justice – including giving anyone affected by our reports an opportunity to anyone affected by our reports an opportunity to comment on a draft version,comment on a draft version,

We have to ensure that all our findings, opinions, We have to ensure that all our findings, opinions, and recommendations are based on established and and recommendations are based on established and accurately understood facts, the relevant law, and accurately understood facts, the relevant law, and applicable standards.applicable standards.

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Performance audits Performance audits examine:examine:

matters of compliance with law and statutory matters of compliance with law and statutory obligationsobligations

matters of economy and how to avoid waste of matters of economy and how to avoid waste of moneymoney

matters of effectiveness and efficiencymatters of effectiveness and efficiency

matters of probity andmatters of probity and

matters of financial prudencematters of financial prudence

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Criteria for selecting Criteria for selecting taskstasks

Is there a legal obligation to do certain audits?Is there a legal obligation to do certain audits? If not, is a subject matter within our mandate?If not, is a subject matter within our mandate? Is the matter relevant?Is the matter relevant? Have the concerns about the matter Have the concerns about the matter substance?substance? Other more appropriate forms of Other more appropriate forms of investigation?investigation? Can audit achieve a useful result?Can audit achieve a useful result? Do we have the necessary skills/resources?Do we have the necessary skills/resources? Can the work be fitted into our other Can the work be fitted into our other priorities?priorities?

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The framework for The framework for management and control management and control

of the EU budget:of the EU budget: European Commission responsible for executing European Commission responsible for executing the budget; the budget;

Member States cooperate in accordance with Member States cooperate in accordance with principles of sound financial management;principles of sound financial management;

External audit is the responsibility of the European External audit is the responsibility of the European Court of Auditors;Court of Auditors;

The European Parliament, based on the Court’s The European Parliament, based on the Court’s findings and following the Council's recommendation findings and following the Council's recommendation decides on discharge to be given to the Commission.decides on discharge to be given to the Commission.

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Article 248Article 248

““The Court of Auditors shall examine the accounts of all revenue The Court of Auditors shall examine the accounts of all revenue and expenditure of the Community. It shall also examine the and expenditure of the Community. It shall also examine the accounts of all revenue and expenditure of all bodies set up by the accounts of all revenue and expenditure of all bodies set up by the Community in so far as the relevant constituent instrument does Community in so far as the relevant constituent instrument does not preclude such examination.”not preclude such examination.”

““The Court of Auditors shall provide the European Parliament The Court of Auditors shall provide the European Parliament and the Council with a statement of assurance as to the reliability and the Council with a statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying of the accounts and the legality and regularity of the underlying transactions which shall be published in the Official Journal of the transactions which shall be published in the Official Journal of the European Union. This statement may be supplemented by specific European Union. This statement may be supplemented by specific assessments for each major area of Community activity.”assessments for each major area of Community activity.”

““The Court of Auditors shall examine whether all revenue has The Court of Auditors shall examine whether all revenue has been received and all expenditure incurred in a lawful and regular been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound. In manner and whether the financial management has been sound. In doing so, it shall report in particular on any cases of irregularity.”doing so, it shall report in particular on any cases of irregularity.”

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Article 248Article 248

"The audit shall be based on records and, if necessary, "The audit shall be based on records and, if necessary, performed on the spot (...) on the premises of any body performed on the spot (...) on the premises of any body which manages revenue or expenditure on behalf of which manages revenue or expenditure on behalf of the Community and in the Member States, including on the Community and in the Member States, including on the premises of any natural or legal person in receipt the premises of any natural or legal person in receipt of payments from the budget. In the Member States of payments from the budget. In the Member States the audit shall be carried out in liaison with national the audit shall be carried out in liaison with national audit bodies or, if these do not have the necessary audit bodies or, if these do not have the necessary powers, with the competent national departments. The powers, with the competent national departments. The Court of Auditors and the national audit bodies of the Court of Auditors and the national audit bodies of the Member States shall cooperate in a spirit of trust while Member States shall cooperate in a spirit of trust while maintaining their independence. These bodies or maintaining their independence. These bodies or departments shall inform the Court of Auditors departments shall inform the Court of Auditors whether they intend to take part in the audit."whether they intend to take part in the audit."

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ECA and Member StatesECA and Member States The Court of Auditors shall perform its audits also The Court of Auditors shall perform its audits also with the end beneficiaries. with the end beneficiaries.

The Court of Auditors shall liaise with the national The Court of Auditors shall liaise with the national audit bodies before it starts an audit - there are no audit bodies before it starts an audit - there are no surprise audits. surprise audits.

National audit bodies National audit bodies can take partcan take part in the audit, but in the audit, but they they cannot take overcannot take over the audit. the audit.

Cooperation shall take place in a spirit of mutual trust Cooperation shall take place in a spirit of mutual trust

whilst maintaining independence.whilst maintaining independence.

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Procedure for reporting Procedure for reporting results of audits in results of audits in Member States IMember States I

The Court’s auditors write a report on their The Court’s auditors write a report on their preliminary findings.preliminary findings.

National administrations reply to these findings. National administrations reply to these findings. Reply copied to the Commission.Reply copied to the Commission.

Court prepares Annual or Special Report.Court prepares Annual or Special Report.

Commission prepares replies to Court’s reports Commission prepares replies to Court’s reports taking into account Member States’ replies to taking into account Member States’ replies to preliminary findings.preliminary findings.

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Procedure for reporting Procedure for reporting results of audits in results of audits in Member States IIMember States II

Report published together with reply given by the Report published together with reply given by the Commission.Commission.

Commission informs Member States of the details Commission informs Member States of the details of the Annual Report related to their management.of the Annual Report related to their management.

Member States reply within 60 days.Member States reply within 60 days.

Commission transmits summary of replies to the Commission transmits summary of replies to the Council and the European Parliament.Council and the European Parliament.

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Activities of Parliamentarian Activities of Parliamentarian Committes in respect of ECA Committes in respect of ECA

reports:reports: Pressure to remedy Pressure to remedy shortcomings in Member Statesshortcomings in Member States Raise issues at EU level throughRaise issues at EU level through

Government in the CouncilGovernment in the Council Members of the European Members of the European ParliamentParliament Joint Committee meetingsJoint Committee meetings

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Conclusions IConclusions I

Cooperation between national audit institutions and Cooperation between national audit institutions and the Court of Auditors shall take place in a spirit of the Court of Auditors shall take place in a spirit of mutual trust. There is no room for giving instructions.mutual trust. There is no room for giving instructions.

The Treaty entrusts the Court of Auditors with the The Treaty entrusts the Court of Auditors with the audit of Community funds.audit of Community funds. National audit institutions may help the Court of National audit institutions may help the Court of Auditors to fulfil its duties.Auditors to fulfil its duties.

Under their own responsibility national audit Under their own responsibility national audit institutions could look into matters with which the Court institutions could look into matters with which the Court will not deal, for example the national decision making will not deal, for example the national decision making process on allocation of EU funds. process on allocation of EU funds.

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Conclusions IIConclusions II

Supreme audit bodies and parliamentary audit Supreme audit bodies and parliamentary audit committees are partners. Only together they are committees are partners. Only together they are strong.strong.

National parliamentary committees have several National parliamentary committees have several channels available to influence decision making at channels available to influence decision making at EU level with regard to Community funds.EU level with regard to Community funds.

Reports and opinions of the Court of Auditors are Reports and opinions of the Court of Auditors are tools which national parliamentary committees tools which national parliamentary committees could use more intensively for that purpose.could use more intensively for that purpose.

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Thank you very Thank you very much for your much for your attentionattention!!