European Court of Auditors 1977-2017 40 Years of Public Auditing
© European Union, 2017 This publication has been produced to mark the 40th anniversary Reproduction is authorised provided the of the European Court of Auditors in October 2017. It has been source is acknowledged prepared by Rosmarie Carotti, the former editor-in-chief of the ECA Journal, and follows up on the reflections published for the The contents of the interviews and the articles 35th anniversary of the Institution. Based on internal documents are the sole responsibility of the interviewees and interviews given to the editor, this publication summarises, and authors and do not necessarily reflect the without being exhaustive, the main developments in the ECA opinion of the European Court of Auditors since its establishment and brings them to life with interviews and new testimonials. Layout: Nicolas Toulas, Directorate of the Presidency, ECA This anniversary publication has been published for information European Court of Auditors purposes only and must not be taken as an official interpretation 12, rue Alcide De Gasperi of the role assigned to the European Court of Auditors. 1615 Luxembourg, LUXEMBOURG Special thanks to all those who have contributed to this book by sharing their professional insight and experience.
eca.europa.eu
@EUAuditors
EUAuditorsECA
Rosmarie Carotti former editor-in-chief of the ECA Journal European Court of Auditors 1977-2017 40 Years of Public Auditing
FOREWORD
KLAUS-HEINER LEHNE, ECA President
On 13 September 2016 the ECA Members elected Klaus-Heiner Lehne, the German Member, to serve as President for a three-year term. He took up his post on 1 October 2016.
As the European Court of Auditors celebrates four decades of existence, it is important to look back at those whose shoulders we are standing on – the former Members and staff of the Court who each contributed their part to make our Institution what it is today.
What were their challenges and how did they overcome them? Are the solutions which they found at the time applicable to us in today’s context? As a relatively young and small institution, is the “founding spirit” of the Court still with us? How has the role of an auditor, and the expectations that citizens may have of one, changed in the last forty years, and have we successfully adapted? In other words, our vocation may be to hear (audire) but can we also listen? Have we found the right balance between financial and performance audit? How persuasive is the Court in making its recommendations a reality on the ground? Or to put it more grandly, is it possible to discern what impact the Court, as a “soft power”, has had over the years on the Union’s overall direction of travel?
Answering these questions and learning from our past will also be an opportunity to chart a trajectory for the future.
The EU is beset by challenges on all sides – be it a loss of trust and the perception among many citizens that it is somehow the Trojan horse of globalisation and its perils, the negotiations over the withdrawal of a Member State, the aftermath of a severe economic and financial crisis, and Klaus-Heiner Lehne, the threats posed by foreign powers intent on proving that the European model of peaceful ECA President integration, liberal democracy and human rights including freedom of expression is a failure.
For many Europeans of my generation who were born in the years after the Second World War, the uniting of Europe meant first and foremost the promise of peace. However, such a promise of peace does not speak in the same way to a thirty year-old who became unemployed during the economic crisis or to an eighteen year-old who will have the right to vote at the next European Parliament election. We should of course never forget the Union’s fundamental premise, and the
7 FOREWORD Klaus-Heiner Lehne, ECA President
lack of precedent elsewhere in the world or indeed in history for building such a transnational democracy. But the Court of Auditors should also help to build, together with the other institutions and the Member States, a contemporary narrative for Europe – what kind of Europe we want for our children, rather than what the Union helps us to avoid.
At the very moment when political rhetoric is at times reaching its shrillest level worldwide, where the arts of blockage, misinformation and manipulation have become almost ubiquitous in the public mind and especially on the internet, our citizens expect governments which work cooperatively and effective institutions which deliver concrete results rather than hot air. And this is where the Court of Auditors has a clear role to play, as a guardian of citizens’ interests, as an independent voice capable of meting out praise where things work, but also highlighting uncomfortable truths where things are not working properly.
Although the EU’s budget is comparatively small in comparison to public expenditure in the Member States, citizens rightly expect every euro spent at EU level to bring added value in comparison to spending that same euro at national level. Just as subsidiarity should be our watchword when making legislation, so it should also be when deciding how to spend our common budget.
What is more, the high-level crisis management that took place in the last ten years in different fields, for instance on shoring up Member States’ finances during the crisis, on dealing with refugees and migrants, or on supporting certain third countries, took on a distinctly intergovernmental flavour. This has made the Court’s role even more challenging, with the emergence of a variety of funds and financial instruments – some would say a 'Galaxy of Budgets' – not all of which are subject to the same rules and accountability, be it by parliamentarians or by auditors. As President of the Court of Auditors, I stand for the 'Community Method' – not only because it is legislatively more efficient, not only because it ensures legal certainty and judicial redress, but also because it guarantees our citizens full audit powers, without any gaps.
As the Court of Auditors’ eleventh president, I would like share four reflections with you on how the Court could better address today’s challenges.
Firstly, we should be in a position to issue the right product at the right time. This means deciding on our work programme in a strategic manner, publishing our work at the best moment, for example when legislation or programmes are being revised. It also means adapting our Annual Report to today’s challenges, and I am optimistic that we are now on the right track to see this happen.
8 FOREWORD Klaus-Heiner Lehne, ECA President
Secondly, we need closer cooperation with all our stakeholders, starting with the EP, Council, Commission and the national Supreme Audit Institutions, with social partners, with civil society and with our partners around the world. Being independent should not mean operating in a vacuum, like the faceless grey-cloaked phantoms imagined by Terry Pratchett.
Thirdly, the Court should better communicate its work in the media and make itself more understandable to citizens. The Court of Auditors should be a distinctive, recognised and respected voice in the public debate, not only in the institutional “bubble” but also in the Member States, in national Parliaments and in the academic world.
Fourthly, this can only be possible with a solid and effective internal organisation, with a highly qualified and motivated workforce who benefit from continuous training.
I trust that this publication, with its many thought-provoking contributions and testimonies, can help us answer some of the questions I raised above and chart our future with as much wisdom as possible. I wish you a pleasant read!
Klaus-Heiner Lehne
9 FOREWORD
EDUARDO RUIZ GARCÍA, ECA Secretary-General
“Our staff are our main asset…”
Asset : “Advantage, aid, benefit, blessing, boon, help, resource, service… valuables, wealth”. Paperback Thesaurus. Collins, 1986). “…knowledge, technique, know-how, skill… personnel.” Roget’s Thesaurus of English words and phrases (ref 629). Penguin Editions, 1987.
“Our staff are our main asset…” This is a very common thing for CEOs or high ranking managers to say, but to what extent is this statement sincere and to what extent is it true that our staff are our most valuable asset? I will try to reply to this question from the perspective of the 40th anniversary of the European Court of Auditors (ECA).
On the 1st of January 1978 there were 47 people working at the ECA. This figure included Members, the staff of their private offices, auditors, translators, administrative and clerical staff and drivers. At the beginning of 2017, the ECA employed around 1000 people, including Members, officials, contract staff, seconded national experts and trainees. In this 40-year journey, more than 2700 people have worked for the institution and have contributed towards achieving Eduardo Ruiz García, its mission and objectives. ECA Secretary-General
Staff numbers have increased, but “numbers” is not the only parameter for assessing the value of an asset, and it is not even the most relevant.
Overall, our staff have become more diversified. In 1978, there were nine nationalities; now there are 28 EU nationalities, plus people coming from other countries like the former Yugoslav Republic of Macedonia, Turkey and Serbia. Every day, in the corridors, we pass colleagues who are not only of European origin, but who may also be of African, Asian, Caribbean and American backgrounds. In the early years, most of our auditors were lawyers or accounting experts;
10 FOREWORD Eduardo Ruiz García, ECA Secretary-General
now – although the bulk of them still have legal and accounting backgrounds – many others have academic degrees in economics, or in engineering, political science or business administration.
The age profile of the ECA’s staff shows that the institution is “young”; at the end of 2016, over 50% of staff members were aged 44 or less. “Youth” has been a characteristic of our staff from the very beginning; it is the result of both increasing in size and regular transfers to and from other institutions. The ECA is a recognized “auditor-nursery”, feeding the needs of the European Commission, Parliament and other institutions.
Gender balance is of utmost importance in ensuring that the organisation is able to face problems from different perspectives; it allows a broader variety of management styles and helps us devise alternative solutions. Gender balance has improved during these 40 years; especially in the last 10 years, more women have joined the ECA at higher levels of responsibility. In 2006, only 33% of women were employed as administrators; in 2016 the figure was close to 42%. Nevertheless, further progress is still needed at the level of audit managers, since the proportion of women is unsatisfactory.
Diversity is built from different nationalities, backgrounds, ages and the gender balance. Diversity is enriched by individual characters and qualities: creativity, rigour, prudence, curiosity, pragmatism, courage, self-criticism, self-confidence, assertiveness and diplomacy… the ECA’s staff is blessed with all these qualities. The result is a higher capacity to work together and to make it possible to do things in many different ways, because there is very rarely only one single way of doing things.
Any organisation has an intangible value linked to its assets which are immaterial and non-physical, like its buildings or equipment. The organisation’s intangible value would be equal to its total value minus the value of its physical assets. It is very hard to calculate it and it is even harder for a public sector institution. Often the intangible assets are not disclosed in the financial statements and are not measured. Nevertheless, there is a broad agreement among experts that intangible assets are long term resources which include, inter-alia, reputation, brand recognition, knowledge and know-how. Let us quickly explore some of these features.
Over the last 40 years, the ECA has gained a strong reputation and it is recognised by peers and other institutions as an independent and professional audit body. There is no a single formula to create reputation, it needs many different ingredients mixed in multiple complex doses. But there is always one ingredient that is necessary in massive quantities: the reputation of each individual who makes up
11 FOREWORD Eduardo Ruiz García, ECA Secretary-General
the organisation. The ECA has set up a framework to facilitate the ethical and professional behaviour of its staff, including awareness, training, advice and monitoring. But at the end of the day, their behaviour will depend on the values of the individuals concerned and the decisions that they might take.
Today, we refer to the ECA as a “knowledge-organisation”; in so doing, we are adhering to a new management approach that considers knowledge as a driving factor for achieving strategic objectives. Whatever knowledge-management policy we adopt, knowledge is always generated and used by human beings; knowledge is captured, disseminated and shared for human beings. A “knowledge- organisation” places STAFF at its core. STAFF is in capital letters because it includes not only the skills and work capacity of employees, but also their individual knowledge and their collective know-how. To be successful, an organisation must design its governance, structure, policies, methodology and technology in relation to its STAFF.
Over four decades, the ECA has developed audit methodologies, translation and administrative processes, a management culture, IT infrastructure and tools… These are also very valuable intangible assets and all of them have been created by our STAFF. Behind any development there are individual ideas, intelligence and effort; there is also a lot of working together, because team-work and collegiality are among the main strengths of the organisation.
To sum up, the value of the ECA is mainly determined by its intangible assets: reputation, ethical behaviour, professionalism, knowledge, know-how, methodologies and management processes. The value of these assets is highly dependent on the quality of its STAFF and on their capacity to work together and generate relevant audit products.
In these 40 years, the Court has gained value by increasing the quality, size and diversity of its STAFF. This greater value has been translated into concrete benefits for the European Union.
In 1978, the Court published its first Annual Report and its first Special Report (at that time known as “observations”) on the functioning of the European Association for Cooperation (E.A.C.), a pioneer body for managing external policy which disappeared years ago. For 20 years, the number of products remained stable and the Court issued fewer than ten Special Reports per year. In 1998, its production went up to 25 Special Reports. Since then the number of products has continued to grow, not only because of the number of Special Reports produced, but also because of the greater number of Specific Annual Reports related to the European Agencies and Bodies. In recent years, the Court’s output has
12 FOREWORD Eduardo Ruiz García, ECA Secretary-General
become more diversified, and new types of product have emerged, like the landscape reviews, the Annual Activity Report and ‘Audit in Brief’. In 2016, the Court produced 95 different products: two Annual Reports, 52 Specific Annual Reports, 36 Special Reports and five opinions and others. The most recent Special Report published referred to an assessment of the arrangements for the closure of the 2007-2013 cohesion and rural development programmes.
None of these products, not a single observation or recommendation, would have been possible without the individual members of our staff. Everything is the result of cooperation among auditors, translators, assistants, administrators, managers and staff in logistics, human resources, finance, protocol, communication and security, as well as the Members and the staff in their Private Offices.
Yes, “our STAFF are our main asset” (again in capital letters). Good and professional STAFF are our most important asset; they are the master ingredient which contributes towards improving EU financial management, promoting accountability and transparency, and enabling the Court to act as the independent guardian of the financial interests of the citizens of the Union.
In order to continue being a relevant institution and add more value for EU citizens, the ECA must preserve and increase the value of its STAFF. It must grow in diversity and gender balance; it must further develop its current skills and recruit new ones; it needs to manage and enhance its knowledge and open it up to the outside world. The ECA must preserve the professional and ethical behaviour of its STAFF and secure a management culture and working environment that facilitates working together and focusing on results. This is both a realistic and ambitious programme for the next 40 years.
Eduardo Ruiz García
13 CONTENTS
FOREWORD Klaus-Heiner LEHNE, ECA President 07 Eduardo RUIZ GARCÍA, ECA Secretary-General 10 1. INTRODUCTION An important step in building the European Union 19 Rosmarie Carotti Testimonial The Lima Declaration and the European Court of Auditors 20 Giorgio Clemente, former ECA Member and deputy President of the Corte dei conti A Court of Auditors for the Community? 23 Rosmarie Carotti The ECA Presidents 25 Rosmarie Carotti 2. AUDIT DEVELOPMENT AT THE ECA The model chosen for the ECA 31 Rosmarie Carotti
Testimonial I was the man who wholeheartedly advocated the systems-based audit and sound financial management 36 André J. Middelhoek, former ECA Member and President Interview by Rosmarie Carotti The ECA as the external auditor 41 Rosmarie Carotti Testimonial The European integration process 42 "Court of Auditors should be acknowledged as the external auditor" André J. Middelhoek, former ECA Member and President Interview by Rosmarie Carotti
14 CONTENTS
Independence, collegiality and continuity 44 Jan O. Karlsson, former ECA Member and President Interview by Rosmarie Carotti Audit bodies also need to give good advice 47 Bernhard Friedmann, former ECA Member and President Interview by Rosmarie Carotti The Court of Auditors and the European Union’s legal order 50 ECA Legal Service The 2004 enlargement of the European Union and other changes for the ECA 52 Rosmarie Carotti Testimonial Poland, Europe’ s young tiger 53 Jacek Uczkiewicz, Supreme Chamber of Control of Poland (NIK) and former ECA Member Interview by Rosmarie Carotti New public management 2011 55 Rosmarie Carotti Accountability 56 Rosmarie Carotti 3. AUDITING EUROPE The added value of the work of the ECA 59 Rosmarie Carotti Testimonial Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits 63 Jacek Mazur, Advisor to the President of the Polish Supreme Audit Office (NIK) The European Court of Auditors and its relations with the Corte dei conti in the European context 78 Pietro Russo, ECA Member New audit rights after the financial crisis 85 Rosmarie Carotti
15 CONTENTS
Testimonial Auditing financial assistance programmes 87 Kamila Lepkowska, Auditor - Regulation of markets and competitive economy How to perform audits of the European Banking Union 92 Matthias Blaas, Auditor - Regulation of markets and competitive economy 4. THE ECA SEEN FROM THE INSIDE Testimonial A look back 101 Vítor Manuel Caldeira, former ECA Member and President Testimonial Forward looking: a young auditor’s perspective 103 Olivier Prigent, ECA Auditor The ECA as vice-chair of the INTOSAI Professional Standards Committee 107 PSC ECA team The Translation and Language Services Directorate: 40 years at the service of the European Court of Auditors 109 Gailė Dagilienė, ECA Director 40 years of IT at the ECA 113 Magdalena Cordero, ECA Director 5. THE ECA SEEN FROM THE OUTSIDE Testimonial 40 years of history: dates, people, partnership 123 Dr Arūnas Dulkys, Auditor General of the Republic of Lithuania Working together to develop and improve the International Standards of Supreme Audit Institutions 127 Lone Strøm, Auditor General, Denmark UK National Audit Office 131 Sir Amyas Morse, NAO Auditor General, UK
16 CONTENTS
The Court of Auditors of the Grand Duchy of Luxembourg – cooperation and friendship 132 Isabelle Nicolay, Liaison Officer of the Luxembourg Court of Auditors The development of the European Court of Auditors seen by Alumni working in the IAS 134 ECA Alumni working in the Commission IAS ACCA’s presence in Europe 142 Maggie McGhee, Director Professional Insights, ACCA 6. THE WAY FORWARD Testimonial Continuity and change among the institutions 147 Dr Ingeborg Gräßle, Chair of the Committee on Budgetary Control, MEP 40th ECA anniversary of the European Court of Auditors 148 Martina Dlabajová, Vice-chair of the CONT Committee, MEP The next years of the annual report 150 Lazaros S. Lazarou, ECA Member The ECA strategy for 2018-2020 : Fostering trust through independent audit 154 Gaston Moonen and Andreas Bolkart, Directorate of the Presidency, ECA Table: The Members of the European Court of Auditors since 1977 158
ECA College as of 7 September 2017 159
17 1. INTRODUCTION
The Court’s first premises at 29, rue Aldringen, in the Luxembourg old town. © ECA
18 AN IMPORTANT STEP IN BUILDING ROSMARIE CAROTTI THE EUROPEAN UNION
An important step in building the European Union was the creation of new institutions and bodies able to contribute in their own specific way to the construction of a solid European foundation.
One of the first obstacles encountered on the road towards this new concept of Europe was the improvised nature of the legal framework. For example, the Treaty establishing the European Coal and Steel Community, the precursor to today’s European institutions, only provided for an accounts commissioner. Later, an audit board for the European Communities was established.
Until 1970, there were only the Member States‘ financial contributions to the Communities and no own resources. The audit therefore only concerned expenditure and ultimately fell under the Council’s responsibility. The creation of own resources and the granting of budgetary powers to the European Parliament meant a redistribution of responsibilities in the audit field too. The idea of creating a Court of Auditors was brought up in the Parliament.
The Lima Declaration of the International Organisation of Supreme Audit Institutions (1975) laid down the main pillars of an independent audit institution. The Treaty of 1975, and the General Financial Regulation of the Communities, laid down the responsibilities and powers of the ECA.
The road was arduous and full of obstacles. The first direct universal elections to the European Parliament were held in September 1976. It was also important to create a European Court of Auditors to reinforce the European Parliament’s role. The European Court of Auditors came into being in 1977.
Keeping the Parliament informed remains one of the European Court of Auditors’ main tasks. However, over the years the Court has extended and consolidated its role as the external auditor of the European Union. It has become a stimulus to real European cooperation, as sharing EU responsibilities with national bodies also helps to strengthen the Union.
In 2017, the European Court of Auditors celebrates its 40th anniversary. A lot has happened in those 40 years. As in a human life, developments have come about both expectedly and without warning. Sometimes, they have been influenced by external events; at other times, they have happened without any outside help. It is not always easy to give an objective judgement about these developments in hindsight, even to those who witnessed them. To aid understanding, let us try to revive the spirit of that time.
19 TESTIMONIAL GIORGIO CLEMENTE, FORMER MEMBER OF THE EUROPEAN COURT OF AUDITORS
The Lima Declaration and the European Court of Auditors
A systematic compilation of the fundamentals of the audit of public finances, valid for an indeterminate period of time and within any State system, was explicitly considered for the first time at the occasion of the meeting of the Contact Committee of the Supreme Audit Institutions carrying out the external audit of the European Communities’ Member States, held in Italy (in Palermo) in March 1974, during the debate on the agenda concerning an "exchange of views on the VIII INTOSAI Congress" (Madrid).
Theme 4 of this Congress particularly concerned the fundamentals of the audit of public finances, with special regard to the recommendations adopted in the previous INTOSAI Congresses, and this choice was based on the circumstance that, since 1953 onwards, those Congresses had been dealing with financial audit issues, some of which concern “matters of principle”. It was therefore the right time to try an in-depth analysis of the resolutions adopted, and verify their validity.
The work of the VIII INTOSAI Congress took place in Madrid in May 1974. In the context of the fourth theme on the Agenda, a specific Italian motion was presented to charge the General Secretariat to draw up, and then submit to the following Congress’ approval (in Lima), a “Chart” or "Declaration" on the fundamental principles of the public resources audit, using for this purpose the recommendations and resolutions of the previous INTOSAI Congresses.
The Italian motion was accepted by the Congress, considering that the Secretariat would have the Giorgio Clemente, former ECA cooperation of the German and the Italian SAIs*. Member and deputy President of the Corte dei conti Consequently, the Corte dei conti took the initiative, shared with the German SAI, of hosting a special Working Group in Rome, composed of representatives of the two Institutions and the INTOSAI General Secretariat.
During 1975, the aforementioned Working Group carried out its work, facing in primis the problem of delimiting the sources from which to draw the fundamental principles to be included in the draft "Declaration": it approved the basic criterion of recognizing only the resolutions and recommendations from the previous eight INTOSAI Congresses as compulsory sources, which would guarantee a sound and accurate analysis by the SAIs.
The “Declaration”, drafted by the above-mentioned Working Group, was transmitted, during 1976, to the INTOSAI members, which sent their comments in time for the discussion in Lima (1977), where it was approved, after a wide debate, in its original version.
The Declaration consists of a preamble, seven titles and twenty-five paragraphs.
* SAIs: Supreme Audit Institutions; national audit institutions in the Member States. 20 TESTIMONIAL The Lima Declaration and the European Court of Auditors
• The first title includes four paragraphs and concerns the fundamental principles of audit;
• the second one concerns the independence of the SAIs (three paragraphs);
• the third one concerns relations with Parliament, Government and the Administration (two paragraphs);
• the fourth point focuses on the powers of Supreme Audit Institutions (in three paragraphs);
• the fifth one deals with audit methods and procedures, the staff assigned to audit and international exchanges of experiences (three paragraphs);
• the sixth one concerns reports to Parliament (two paragraphs);
• the seventh, finally, analyzes the audit competences of the Supreme Audit Institutions.
The fundamental principle stated in the Lima Declaration concerning the audit of public resources management is:
“the specific objectives of the audit on public finances pursue the proper and effective use of public resources; the development of a sound financial management; the regularity of the administrative action and the communication between public authorities and the citizens through the publication of impartial reports.”
This definition adequately summarises the proper role of the audit, that is to analyse the activity of the managers of public resources to improve results as well as to be accountable towards the taxpayer for the use of public resources by the responsible authority.
Essentially, the background of the Lima Declaration drafting can be found, as already said, in Europe between 1974 and 1975, and it had an impact in the European Union context.
The Lima Declaration principles led to the consideration that public finances management, particularly where it involves large amounts of money, needs a mandatory and appropriate external audit. The existence of the European Union budget, separate from Member States' budgets, and the autonomous responsibility management conferred on the European institutions, represented the two reasons to establish a specific external audit body for Community revenues and expenditures.
Moreover, the foundation of the European Court of Auditors coincided with two particularly important facts: the extension of the European Parliament’s powers on budget control issues, as well as the full financing of the European Union’s budget through its own resources.
21 TESTIMONIAL The Lima Declaration and the European Court of Auditors
On the first point, it should be noted that with the same Treaty establishing the European Court of Auditors, the European Parliament became the authority with the power to grant discharge to the Commission for the budget execution for which it was responsible.
As regards the “own resources”, to the existing revenues (customs duties and agricultural levies) was added the “VAT own resource”, based on the establishment of a uniform rate applied to VAT revenues bases in the Member States. The VAT resource, scheduled for 1975, was implemented only a few years later and was followed by a fourth own resource based on Gross Domestic Product.
In parallel with the expansion of own resources and the attribution to the European Parliament of the power to grant discharge for the budget execution, it became necessary to achieve a quality leap in respect of the external audit of the latter, which had been carried out until then by an Audit Commission (for the general budget) and an Auditor (for the European Coal and Steel Community – ECSC - financial statements).
In terms of functioning and structure, it was necessary to establish a body with adequate tools. This was propounded by the President of the Budget Control Commission, Heinrich Aigner, who, since 1973, had strongly supported the need for an audit body at Community level. The European Court of Auditors was established under the Treaty of Brussels of 22 July 1975.
Coming into operation on 25 October 1977, the European Court of Auditors was elevated to the rank of Institution on 1st November 1993, with the entry into force of the Maastricht Treaty.
In terms of auditing powers, it was given the competence to independently organize its audits and extend them to include sound financial management (even in advance compared to some national audit institutions).
All this was to guarantee that the Community’s increasing resources would be subject to an audit at least equivalent to the audit carried out by national audit institutions on national budgets.
Finally, it can certainly be said that the foundation of the European Court of Auditors was the answer to the need to have a financial conscience, as it was defined, when it began its work in October 1977, by the President of the Court of Justice, Hans Kutscher.
22 A COURT OF AUDITORS FOR THE COMMUNITY? ROSMARIE CAROTTI
This is the title of an article published in the Luxemburger Wort on 26 June 19731. The report continues: “Claude Cheysson, Member of the Commission of the European Communities, presented proposals to the budgetary committee in Brussels, chaired by Mr Georges Spenale (French, Socialist Group), for strengthening the budgetary powers of the European Parliament.”
“The Commission of the European Communities believes that the control of the use of public funds by the Community institutions is insufficient, and needs to be strengthened. It is therefore proposed to replace the current control committee with a body called the Court of Auditors.”
From 1973 onwards, Dr H. Aigner, a chairman of the Committee on Budgetary Control and a member of the European Parliament, argued strongly in favour of a control body being set up at Community level.
Dr Aigner belonged to the generation who had personally experienced the Second World War. As a German soldier, he had been stationed in a trench at Montecassino. When he left the trench for a moment to smoke, it was hit by a shell. When he came back, all his comrades were dead. This experience had strongly affected him and deepened his faith. To him, the reconciliation process was the real adventure of Europe, although he was aware that Europe, whose countries had been developing in different ways for centuries, could not be welded together in a few years to make a homogeneous unit2.
23 A COURT OF AUDITORS FOR THE COMMUNITY?
The establishment of the ECA was linked to the provision of the 1975 Treaty investing Parliament with the sole right to discharge the Commission of its responsibility as regards the accounts of the Communities. It was felt that this transfer of responsibility from the Council to Parliament should be accompanied by an intensification of control and audit and this could be best achieved by the creation of a new instrument, the Court of Auditors (ECA). The idea of creating a European audit institution was raised in Parliament.
Jacques Santer, President of the European Commission, made the following remarks on the occasion of the Court’s 20th anniversary. “The Court of Auditors was created at a time when two particular important factors were taking effect, namely, the European Parliament’s budgetary powers were extended and this same European Community budget was being financed entirely from own resources. Moreover, it grew continually as expenditure under the common agricultural policy rose and other policies, such as those connected with research and the Structural Funds, were being developed3”.
The institution starts its work
On 10 October 1977, the Luxemburger Wort wrote the following. “The newly created Court of Auditors of the European Community will be able to start its work in Luxembourg in the coming months when the last obstacle, namely the approval of the European Parliament, has been obtained. The President of the European Parliament, Emilio Colombo, has tabled a motion for resolution inviting the Parliament to approve the Council of Ministers’ list of candidates at its meeting on the Kirchberg this week.
“The Court of Auditors will have nine Members: one from each Member State. They will be appointed by a unanimous vote by the Council, after consultation with the European Parliament, for a mandate of six years”.
Newly constituted, on 25 October 1977, the ECA began work at its office at 29, rue Aldringen, in Luxembourg. The building was rented from the Luxembourg authorities. At that time it was not yet certain whether all the Court’s activities would be conducted from Luxembourg. Consideration was also given to opening an office in Brussels.
Endnotes
1 "Luxemburger Wort": Tuesday 26 June 1973, page 5. 2 Interview given to the editor in 1986. 3 Speech by Mr Jacques Santer, to celebrate the ECA's 20th anniversary.
24 THE ECA PRESIDENTS ROSMARIE CAROTTI
Sir Norman PRICE was among the founder Members of the ECA; he arrived in Luxembourg Sir Norman Price, United Kingdom in October 1977 with the eight other new Members. Sir Norman had spent his entire (18.10.1977 - 10.11.1977) professional career at the Inland Revenue, the UK’s tax office. Given his background. Sir Norman initially took on the portfolio for the audit of Own Resources.
As he was the eldest among the founder Members of the ECA, he acted as the very first President of the Court for a couple of weeks, until they had organised the election for the first President.
The first elected President was Michael N. MURPHY. Everything had to be put in place from Michael N. Murphy, Ireland scratch, including the establishment of the administrative structure as well as the recruitment (11.11.1977 - 17.10.1981) of staff.
Michael N. Murphy was instrumental in negotiating and putting into place a modus operandi with the Commission which has endured to this day. The exchange of letters between himself and Christopher Tugendhat, the then Commissioner responsible for relations with the Court, paved the way for the "contradictory procedure".
Pierre LELONG, Member of the Court from 1977 to 1989, was elected President in 1981. Pierre Lelong, France Based on the structure of the French Cour des Comptes, the Members of the Court were (18.10.1981 - 17.10.1984) divided among three “audit groups”. One of the groups focused on agricultural expenditure, the second on the structural funds and aid to developing countries, and the third on all other transactions by the Commission and its satellite bodies. In 1999, Pierre Lelong was part of the “Committee of the Wise Men” whose work led to the resignation of the Santer Commission.
Marcel MART was a Luxembourg politician, jurist and businessman. Mart served in Marcel Mart, the government under Pierre Werner and Gaston Thorn. In 1977, he was appointed Luxembourg (18.10.1984 - 20.12.1989) Luxembourg's representative at the European Court of Auditors, in which he sat for two six- year terms. He also served as President from 1984 to1989.
The single European market was created during his term of office. Spain and Portugal acceded to the European Communities on1 January 1986.
Aldo ANGIOI, who was appointed as the Italian Member of the Court in September 1977, Aldo Angioi, Italy was President from 9 January 1990 to 21 December 1992. (21.12.1989 - 31.12.1992) Aldo Angioi was a magistrate at the Italian Corte dei conti. From 1 August 1974 to 31 July 1975, he was Chairman of the NATO Board of auditors. He joined the ECA in 1977. In 1995 he became “Cavaliere dell' Ordine al Merito della Repubblica Italiana”. THE ECA PRESIDENTS
Mr Angioi attended the Constitutive Conference of EUROSAI, the European Organisation of Supreme Audit Institutions. The ECA contributed actively to the establishment of the final version of EUROSAI statutes.
André MIDDELHOEK became an ECA Member in 1977 and was President from 12 January 1993 André J. Middelhoek, Netherlands to 20 December 1995. (1.1.1993 - 31.12.1995) During the term of office of André Middelhoek, under the Treaty of Maastricht, the Court became an institution in its own right. This led to a greater level of balance between auditor and auditee.
The Court of Auditors’ duties now included an obligation to provide the budgetary authority with a statement of assurance on the reliability of the accounts, as well as the regularity and legality of the underlying transactions.
In January 1996, Professor Bernhard FRIEDMANN began his term of office as President of the Bernhard Friedmann, Germany European Court of Auditors. During his term of office, which lasted until early 1999, monetary (1.1.1996 - 17.1.1999) union and the move from the ECU to the euro were on everyone’s lips.
When the Treaty of Amsterdam was being negotiated in 1995, Professor Friedmann argued against giving the Court of Auditors the power to impose sanctions. If it had such powers, he argued, auditors would find doors being slammed in their face.
More and more, the European Court of Auditors was being asked by other institutions to provide opinions on proposed measures which would affect the budget.
On 14 January 1999, Jan O. KARLSSON, a Swede, was elected President. He had been a Jan O. Karlsson, Sweden Member of the Court of Auditors since 1995. He set great store by the principles of collegiality, (18.1.1999 - 31.12.2001) independence and continuity. With regard to the countries which were preparing to join the EU, he argued that their national audit institutions should play a larger role.
For budgetary management within the EU, 1999 was a momentous year. A crisis of confidence in the Commission’s leaders came to a head with the issuing of two reports by the Committee of Independent Experts. This led to the resignation of the entire Commission. A new Commission, which started work in September 1999, immediately introduced a reform programme.
The enlargement of the EU to include more Member States, up to 28 of them, gave cause for worry. Legal certainty was an issue, and the debate about a new European constitution aimed to resolve it. The creation of European criminal law, and of a European public prosecutor to watch over the whole system, was discussed.
26 THE ECA PRESIDENTS
In 2001, the European Parliament ratified a decision on the reform of the budgetary procedure and the budgetary bodies (the Morgan report). The new activity based budgetary structure had a number of repercussions for the European Court of Auditors.
Juan Manuel VALLÉS was appointed to the Court of Auditors in the year 2000 and left in Juan Manuel Fabra Vallés, Spain 2006. He died in Madrid in 2012. (1.1.2002 - 16.1.2005) Juan Manuel Fabra Vallés had been an Member of Parliament in the Spanish Congress from 1982 to 1994, Member of European Parliament from 1994 to 2000 and a key member of the Committee on Budgetary Control.
His initial area of responsibility at the European Court of Auditors was auditing the European Development Funds (EDF) and he drew up several reports on EU development aid programmes.
In January 2002, he became the first Spanish Member to be elected ECA President. In 2004, during his term of office, 10 new countries joined the Union.
In 2005, at the end of his mandate as President, he was appointed dean of the Court’s chamber responsible for auditing EU external action.
Of all his many wise words on how to understand the European project, we will remember these in particular: “given the advantages enjoyed by all of its members, if the European Union only costs 1.24 % of the wealth produced by its Member States, it is a magnificent invention”.
Hubert WEBER, an Austrian, became President of the European Court of Auditors in Hubert Weber, Austria 2005 having worked at the European Court of Auditors since 1995, and previously in the (17.1.2005 - 15.1.2008) Austrian Court of Auditors for 25 years. After 16 years in office, Dr Weber left the Court on 30 March 2011.
Hubert Weber witnessed first hand the Lima Declaration of Guidelines on Auditing Precepts, which is often known as the Magna Carta of financial auditing. Hubert Weber said in an interview in 2011: “ As can be seen from the Court's records, there was a lively exchange of views and correspondence between Luxembourg and Vienna at that time, in other words with the General Secretariat of INTOSAI, located at the Austrian Court of Audit. It gave me a sense of satisfaction to find my name in the documents when I took up my appointment at the Court in 1995, but also made it easier for me to start work. The auditing style was developed rather quickly”. THE ECA PRESIDENTS
Vítor Manuel da SILVA CALDEIRA, from Portugal, was first elected as the President in 2008. Vítor Manuel da Silva Caldeira, Portugal After a second term, he was re-elected for a third three-year term on 23 January 2014. Today, (16.1.2008 - 30.9.2016) he is the President of the Portuguese Supreme Audit Institution.
From the start of the crisis - and particularly in relation to the creation of the response mechanisms - the European Court of Auditors repeatedly drew attention to the key principles to be respected whenever public funds were at stake. This started with a letter to Mr Van Rompuy in November 2010 and continued with a Position Paper of the European Court of Auditors in May 2011. In October of the same year, the Supreme Audit Institutions of the Member States, alongside the ECA, jointly reiterated and further developed these principles in a Contact Committee Statement.
President Caldeira put forward ten initiatives addressing different aspects like the Statement of Assurance (DAS), the responsibilities of those working in the audit field, and streamlining audit and reporting processes.
In this connection, two key initiatives were to produce a Landscape Review on risks for financial management and a Landscape Review on accountability and audit. They were designed to help the Court demonstrate to the Parliament and the Commission that it recognised their needs.
The aim was to address these recommendations in the context of the Court’s 2013-2017 strategy.
Klaus-Heiner LEHNE, a German national, took over from Vítor Caldeira. Born in Düsseldorf, Klaus-Heiner LEHNE Germany Germany, in 1957, Klaus-Heiner Lehne has served as a Member of the German Parliament (1/10/2016 - ) (Bundestag) and the European Parliament and became a Member of the Court in 2014. He has been responsible for audits in the area of external action.
The years 2018-2020 will be crucial years for the European Union. The ECA will need to address new challenges and seize new opportunities. In the 2018-2020 period, the Statement of Assurance audit approach will be adapted to benefit from the improved EU financial management. This will allow the ECA to refocus attention and resources on audits of high- risk areas of EU financial management and on assessing whether the EU is delivering results for its citizens. In addition, in the years to come, the ECA will exploit technology better for innovation in audit work.
28
2. AUDIT DEVELOPMENT AT THE ECA
The K1, the ECA first building in the Kirchberg district (opened 1988) Architect: Paul Noël
30 THE MODEL CHOSEN FOR THE ECA ROSMARIE CAROTTI
In a complex system like the EU’s, budgetary powers are extremely important: revenue must be collected, expenditure approved, the budget drawn up and its implementation audited. As from the entry into force of the Treaty establishing the common Council and Commission, we can refer to a single budget. Until 1970 there were only the Member States’ financial contributions to the Communities and no own resources. The audit therefore only concerned expenditure and ultimately fell under the Council’s responsibility. The creation of own resources and the granting of budgetary powers to the European Parliament meant a redistribution of responsibilities in the audit field too. The Parliamentary Assembly’s intention was to go beyond its advisory role and thus be able to participate in the decision-making system governing the common policies and budget policy, all on an equal footing with the other institutions. At the Council, however, reservations emerged about there being too great a transfer of power, and eventually the solutions being contemplated focused on auditing. Thus, a more developed - and above all permanent - external audit system was envisaged, with many already advocating the establishment of a Court of Auditors. In accordance with the provisions of the Treaty of 1975, the ECA replaced the former audit bodies of the Communities: the Audit Board and the office of the European Steel and Coal Community (ECSC) Auditor. The Treaty of 1975 and the General Financial Regulation of the Communities laid down the responsibilities and powers of the ECA, which enjoyed quasi-institutional status and was entitled to carry out on-the spot audits in Member States on its own initiative. It could make observations at any time on specific questions of its own choosing and give opinions on legislation with an impact on financial management at the request of any of the institutions. The first direct elections to the European Parliament took place in 1977 and the creation of the ECA was considered an important factor to strengthen the Parliament’s powers. On the occasion of the ECA’s 30th anniversary, former ECA President Juan Manuel Fabra Vallés recalled that: “In 1977, after long discussions within the European Parliament, with the other European Institutions as well as the National Audit Offices, the European Court of Auditors was established, following the model of what existed in the different Member States and which was often called “the fourth power of the State. The new institution would be independent and professional, would exercise its control ex post, and would be responsible for the external financial control of all the revenue and expenditure and its efficient financial management. It would annually inform the budgetary authorities, providing the best information the Council and Parliament could get, enabling the latter to deliver its discharge on the accounts, approving (or not) the Commission’s management of the budget, converting itself into the best guidance instrument for the preparation of the budget of the following year.1” As early as the Court’s meeting of 26, 27 and 28 October 19772, there was a discussion on the meaning of the expression “sound financial management” as used in the 1975 Treaty. It was generally agreed that ex ante checks and a “value for money” approach would be important ingredients of the Court’s future work.
31 THE MODEL CHOSEN FOR THE ECA
Questions of Community policy were not the ECA’s concern, although its opinion could be sought by Parliament on such matters. The major aim of the ECA should be to encourage accounting practices which were designed to prevent fraud or to make its commission more easily apparent.” Agreement was reached as to how the ECA was to operate: it would act as a collegiate body, taking decisions jointly. In its corporate capacity, the Court was a new Community institution, and it was important to emphasise this in relations with other institutions. In 1978, the ECA took the initiative of setting up a “liaison” system with the national Supreme Audit Institutions (SAIs). It was generally agreed that, at the working level, the most satisfactory method of conducting audits was by forming teams. Each of these teams would be headed by a Court Member and it would be his or her responsibility to present a report to the full Court on the results of the audit performed. There was a unanimous agreement on a systems-based audit of the accounts and the legality and regularity of revenue and expenditure. On the other hand, there were differences of opinion regarding sound financial management auditing, in particular where the national authorities were responsible for the use of Community funds. In the Member States there were still uncertainties as to the follow-up that the Court intended to give to its audits in the Member States. The ECA decided to grant all auditees the right to reply to observations made on the basis of its audits. It decided that the Supreme Audit Institutions (SAIs) should be notified of any relevant observations, following on-the-spot checks and before the presentation of its Annual Report. Together with the “contradictory procedure” with the Commission, the application of this decision was meant to ensure that there was appropriate communication in critical cases. The question arose as to whether the Annual Report should only include observations on the accounts of the year concerned, with the presentation of opinions on specific topics being set out in the special reports. It could be assumed that the institutions, above all the Commission and the Parliament, expected all important topics to be taken up in the Annual Reports, because it was the basis on which the Parliament granted discharge to the Commission, although the discharge authority was not specifically denied the possibility of taking special reports into account. In its early days, the ECA mainly criticised Community legislation in its special reports. Its observations were mainly directed at the institutions and bodies of the Community and not to the public. Often, the special reports on the application of regulations did not contain recommendations as such, but rather an analysis and description of the management of a programme directed at the Community as a whole. Member States, however, were individually named when inadequacies were detected. It is not surprising that the Common Agricultural Policy (CAP) soon accounted for the lion’s share of special reports. Although the CAP was very successful in meeting its objective of moving the European Community towards self-sufficiency, by the 1980s it had to contend with almost permanent surpluses of
32 THE MODEL CHOSEN FOR THE ECA
the major farm commodities, some of which were exported (with the help of subsidies) while others had to be stored or disposed of within the EU. These measures had a high budgetary cost, distorted some world markets, did not always serve the best interests of farmers and became unpopular with consumers and taxpayers. This was also very much felt by Dr Heinrich Aigner. As a Member of the European Parliament (MEP) he used to go back regularly to his constituency where he had to explain Europe to citizens who could not understand, for example, the wasteful butter mountains. He put a lot of hope into the ECA and recalled in 1986: “….I must say that the Court’s development in this short time has been fantastic. Naturally, I appreciate that it is not yet quite what we imagine it should be, but our parliamentary controls are not yet what I would like them to be, either. Of course, these things take time, but I must say one thing: this parliamentary control in close cooperation with the Court of Auditors - and we cooperate very well - has already saved the European taxpayer hundreds of millions, if not thousands of millions. That’s a real success story. But the most important thing, which is the real reason why I am in favour of controls, is that we apply Community law uniformly, everywhere. That is actually the main problem3.” A systems-based approach and sound financial management The newly constituted Court immediately judged the examination of all revenue and expenditure to be impracticable. In order to solve this problem, at a fairly early stage (end of 1978) the ECA adopted the ‘systems approach’ as the most appropriate for its needs. The solution, proposed by the then Dutch Member, André Middelhoek, who was responsible for developing working methods, was to examine systems and procedures and assess how they worked in practice through compliance and substantive testing. At its first meeting in October 1977, the ECA interpreted sound financial management (SFM) as incorporating opinions on alternative and more economical ways of implementing policies through an analysis of costs and benefits, and also assessing whether funds were used efficiently. A statement of assurance Joe Carey, ECA Member, put forward the idea of a statement of assurance (also known by its French acronym DAS) in the following terms: “Although it could be argued that the Treaty terms of reference imply a duty for the Court to arrive at some sort of opinion or statement of assurance on the accounts, that is not how the Court has interpreted its role hitherto. The reader of the Court's Annual Report therefore has no guarantee that the Court has examined the accounts of "all revenue and expenditure", and the Commission's accounts are presented without any independent certificate as to their accuracy and reliability4”. On 27 February 1991, the United Kingdom delegation submitted to the Intergovernmental Conference a very comprehensive proposal containing the “draft Treaty amendments on financial management and accountability”. Amendment 3 was headed as follows: “ECA: Statement of assurance”. The new article was
33 THE MODEL CHOSEN FOR THE ECA
drafted using its current wording: "The Court of Auditors shall provide the Council and the European Parliament with a statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions." The SoA was finally introduced in the Treaty signed in Maastricht in 1992.
The Court defines its “doctrine” (1994 – 1999)5 In 1995, the ECA published its first statement of assurance on the reliability of the 1994 accounts. During the following years the Court stressed the need to undertake a far-reaching reform. Firstly, a basic accounting framework needed to be defined that was suitable for the public sector and complied with the standards issued by INTOSAI (International Organisation of Supreme Audit Institutions). Secondly, the accounting principles for preparing financial statements needed to be adopted. Lastly, detailed standards and accounting methods needed to be laid down for recording transactions in accordance with the accounting framework and principles. Towards an accruals-based accounting system (2000 – 2002)5 The ECA’s insistence on the need for an accounting framework started to bear fruit in 2000. The modernisation of the accounting framework started to take shape at the Commission in 2000, coinciding with the publication of the White Paper (COM (2000) 200 final, 1.3.2000). The Court critically monitored the entire implementation phase of the modernisation plan, giving a detailed account in its annual reports.
Towards an unqualified opinion (2002 – 2011)5 2005 was the first year with the submission of the accounts prepared in accordance with the new accounting framework and principles based on international standards. The Court’s unqualified and favourable opinion as to the reliability of the 2011 accounts marked the successful culmination of the account modernisation process launched by the European Commission in 2002. The Court’s advice and monitoring helped in the drafting and implementation of the plan. Performance audit It was not until 1992 and the Treaty of Maastricht that the requirement for the European Union budget to be implemented “in regard to the principles of sound financial management” was imposed, later defined in the revised Financial Regulation as the “3 e’s” (economy, efficiency, and effectiveness). Shortly after, in 2003-2004, the Court prioritised its development of sound financial management. One important decision taken in the developmental process was the re-naming of the “SFM audit” as “performance audit”. The focus of the audits slowly shifted from a systems-orientated approach to one which also examined the delivery of results.
34 THE MODEL CHOSEN FOR THE ECA
Value added The ECA’s reform programme, which took full effect in 2016, has transformed the ECA into a task-based organisation with a re-focusing from process to products. Through performance auditing the ECA sought to continue to add value by identifying good practices and recommend improvements to management systems. Chronology of significant events in the period 1977 Establishment of the ECA 1992 Treaty of Maastricht: the ECA becomes an institution; ECA responsible for preparing the annual statement of assurance (SOA); Art. 205 introduces the principle of sound financial management. 1999 European Commission resigns and new Commission introduces a reform programme including activity-based management and activity based budgeting 2004 Enlargement of the EU to 25 Member States 2006 Publication of the Court’s Performance Audit Manual 2007 The Lisbon Treaty (the TFEU came into force in 2009) recognised the responsibility of Member States for implementing the budget under shared management arrangements 2008 Peer review of the ECA by the SAIs of Austria, Canada, Norway and Portugal 2014 Peer Review of the ECA by the SAIs of France, Germany and Sweden 2016 Court’s Reform programme. Now the ECA is organised into five chambers, to which Members - and audit staff - are assigned. The Members of each chamber elect a Dean for a renewable term of two years. Each chamber has two areas of responsibility: to adopt special reports, specific annual reports and opinions; and to prepare the annual reports on the EU budget and the European Development Funds, for adoption by the Court as a whole.
Endnotes
1 ECA Journal, November 2007, page 8. 2 ECA internal meeting document (DEC 14/77). 3 The interview given to the editor in 1986. 4 ECA Subject Brief: The origins of the Statement of Assurance, by Gilberto Moggia, ECA. 5 "The role of the Court of Auditors in Modernising the Accounting System of the European Institutions" by Eduardo Ruiz García, ECA Secretary-General. Original title: El papel del Tribunal de Cuentas europeo en la modernización del sistema contable de las instituciones europeas, published in Revista Española de Control Externo, Nº. 44, Vol XV, Mayo 2013.
35 TESTIMONIAL ANDRÉ J. MIDDELHOEK, FORMER ECA MEMBER AND PRESIDENT
I was the man who wholeheartedly advocated the systems-based audit and sound financial management
Interview with André J. Middelhoek, former ECA Member and President 19 January 2017 in Brussels Interview by Rosmarie Carotti
Mr Middelhoek, you are the ECA Member who served the longest term.
André Middelhoek: 18 years and three months. The three months were a present because the Council did not decide on the renewal of my mandates on time.
You left the ECA in 1995. The ECA will celebrate 40 years in October of this year and would like to collect memories of the old days, how the ECA started and developed.
André Middelhoek: The start of the Court was rather difficult because there was no real predecessor. The ECA started with nothing. We had no staff, and the first day after the inauguration we started in an old building in the centre of Luxembourg with nothing but a note-pad, a pencil and an eraser.
The appointment process for Members of the Court was different from what it is now. In September 1977, we were invited by the European Parliament for a meeting in Brussels with MEPs from the budget control committee. As far as I can remember, they were nine and we were nine, and each of us sat next to an MEP. That was in fact the way we were screened even then. This took place – if I remember well – in the Egmont Palace, a building with a very long history in Brussels.
Was your mandate clearly defined from the start?
André J. Middelhoek, former André Middelhoek: The mandate was set out in the Treaty: the audit of legality, regularity and sound ECA Member and President financial management. The audit of legality and regularity was clear but there was a long discussion on the meaning of the expression “sound financial management” because in those days not all national audit institutions were familiar with it. We had to define the interpretation of it and I was charged by the Court with preparing this.
I defended the interpretation of the audit of sound financial management as achieving value for money for the citizens of Europe, starting from the policy objectives as set out in the regulations, which were binding for us. This was accepted by the Court but we could not start the work immediately due to a lack of specialised auditors.
36 TESTIMONIAL I was the man who wholeheartedly advocated the systems-based audit and sound financial management
When did sound financial management audit really start at the ECA?
André Middelhoek: Mr Keemer came from the national audit office of the UK (NAO) as Director at the Court and we created the Audit Development and Audit Reports Department (ADAR) which –among other tasks- was responsible for the development of the audit of sound financial management. We examined what was being done in Europe in this field. Sound financial management audit was done in about half of the Member States. In Italy and Greece the national Court’s work was pure financial audit on legality and regularity and was ex ante.
Mr Keemer and I also went to the US supreme audit institution (GAO) to learn how they carried it out and we also spoke with a number of university professors on sound financial management. The outcome was a book entitled “State audit in Western Europe: a comparative study” by Peter Keemer (ECA call number 01.20 00089/2ex).
I was extremely interested in sound financial management because I had been director general of the budget in the Netherlands. A main part of my concern in that function was that money should be spent the right way.
We had, however, a slow start. We first had to arrange for the appointments in our Cabinets and of audit staff, but the Community procedures for this were quite difficult. The first Annual Report came out in 1978.
In the beginning, aspects of sound financial management were included in the Annual Report; only later did special reports concentrate on sound financial management. A clear separation was made after the Treaty of Maastricht, because of the introduction of the statement of assurance in that Treaty.
In the ECA’s early years, everybody talked about “systems-based audit”.
André Middelhoek: This was the first decision of the Court, to perform a systems-based audit instead of the classic approach of auditing all the individual transactions. This was decided in order to strengthen the Court’s capacity in the field of sound financial management.
The systems-based audit focuses on legality and regularity, although you have to look at whether the internal organisation is logical and clear, amongst other things, with regard to the separation of functions.
37 TESTIMONIAL I was the man who wholeheartedly advocated the systems-based audit and sound financial management
How was the relationship of the Court with the European Parliament and the Commission in the beginning?
André Middelhoek: The relationship with the European Parliament was good from the beginning because the Court was created thanks to the Chair of the Budget control committee, Mr Aigner.
Was the Court an instrument of Parliament, as at that time it was not yet an institution?
André Middelhoek: No, we worked for the Parliament because our reports are sent to the Parliament in its function as discharge authority. Mr Aigner was proud of having contributed to the creation of the Court, but he was also concerned that we should keep our independence from the institutions. Of course, when Parliament saw problems during its own work, we might have been asked to investigate, but I am not aware that Parliament ever tried to influence us in another sense. Once the Court had become an institution, the European Parliament invited the President of the Court to present the Annual Report every year during its plenary session in November in Strasbourg.
How did the relationship with the Commission develop?
André Middelhoek: The relationship with the Commission was reasonable. I cannot say that they were happy to have an external audit. The relations were formal and I found it an advantage that we were in Luxembourg and they were in Brussels although we wasted a lot of time travelling. There were strict, formal rules in terms of how to announce and perform audits. I think that a certain formality is needed in the relationship between auditor and auditee.
And how was the relationship between the Court and the national authorities?
André Middelhoek: That was rather a sensitive point in the beginning, because national audit courts are important institutions in every Member State. They must work in complete independence. Now, our Court had been founded and had to do its work in the Member States and in cooperation with the Member States.
National auditors feared that they would come under the “tutelle” of our Court. This of course was not true as we had clear rules on how to act in the Member States. For me, this was a reason to battle later for the Court to achieve greater independence by becoming a full institution.
I frequently discussed this point with the Dutch Court of audit because they were very cooperative, underlining that it would contribute to make the European Court more effective, because 90% of the Commission’s budget was spent in the Member States. This matter was finally settled in the Treaty of Maastricht. 38 TESTIMONIAL I was the man who wholeheartedly advocated the systems-based audit and sound financial management
As an institution the Court may directly defend its own interests before the European Court of Justice and is no longer dependent on the willingness of the Commission, its main auditee, for this purpose. But we did hope that we would never have to make use of this power. Because “if you don’t have the power, you might need it, but having the power does not mean you need to use it”.
In the early days, expenditure was almost exclusively for agriculture. Then the Structural Funds came.
André Middelhoek: The common agricultural policy was paid for 100% by the Commission but, every year, there was an ex post procedure of the “apurement des comptes agricoles”, an audit by the Commission itself on whether the money had really been spent in the Member States for agriculture in accordance with the regulations. In terms of sound financial management, the problem with the Structural Funds, in particular the Regional Fund, was whether the money was spent on the right projects. This was difficult to audit. The Commission provided the money but the Member State had to make the programme and execute it. There were serious problems. EAGGF and the Structural Funds were a great concern for the Court.
Right from the start it was clear that the ECA, although it was not the police, would also act to prevent fraud and irregularities.
André Middelhoek: That was one of the reasons for the introduction of the systems-based audit: attention for weaknesses in the systems, followed by sampling, particularly when weaknesses were found.
Internally in the Commission there was UCLAF (Unité de coordination de lutte anti-fraude). In my time, UCLAF acted independently of the Court. In the Court’s view avoiding fraud is the primary responsibility of the Executive.
Coming back to you. Of what are you particularly proud?
André Middelhoek: I was the man who wholeheartedly advocated the systems-based audit and sound financial management.
In the Court, I had a special position because I was in fact what later became the ADAR Member and I stayed in that position for a long time.
It is amazing; already in your time you were in favour of a Statement of assurance (DAS) but also of sound financial management. What is the difference with what we now call performance audit? 39 TESTIMONIAL I was the man who wholeheartedly advocated the systems-based audit and sound financial management
André Middelhoek: I do not think there is a difference. Names may change. Performance means an activity and a result. In the Treaty it is called sound financial management or in French “bonne gestion financière”. Financial management also goes in the direction of systems-based audit. You need good management systems to achieve a good result.
Is there something else you wish to add about those old days?
André Middelhoek: Let me say, I found the collegial spirit in the Court very important in particular for the discussions in the Court. I also found the creation of audit groups very useful as a preparatory step to the Court. When I was President I made sure that the Court could work in a quiet but solid way. When Finland, Austria and Sweden joined, I found the increase from 12 to 15 to be a major change and a complication. As President I had to guide the discussions in the Court more strictly than before. I am curious to learn from you how it works today with 28 Members.
An enormous change in our work environment took place in the second half of the eighties when we moved to the new building on the Kirchberg plateau during the Presidency of Marcel Mart. Members and staff owed him a great debt of gratitude for his efforts to implement this big change in our work circumstances.
Your mandate at the ECA expired in 1995 but your name is also linked to the resignation of the Santer Commission in 1999.You were one of the Wise Men, as the Members of the Committee of Independent Experts were called with a remit to investigate the irregularities at the Commission. They published a report which led to the resignation of the Commission led by the former Prime Minister of Luxembourg.
André Middelhoek: Members of the European Parliament had repeatedly raised questions and demonstrated concern about some issues related to the responsibilities of certain Members of the Commission, but had not been satisfied with the replies given.
The European Parliament got irritated and considered the possibility of refusing to grant discharge for the year 1996. On 17 December 1998, the Parliament did refuse to discharge the Commission. A motion of censure on the Commission was discussed on 14 January 1999 at the request of the Socialist Group in the European Parliament. It was rejected by a small majority.
Following this rejection, the European Parliament decided to create a committee of experts from outside the Parliament, in order to examine the “Allegations regarding Fraud, Mismanagement and Nepotism in the European Commission”. And so I became Chair of the Wise Men. Our report was made public on 15 March 1999 and the Commission resigned the same day.
40 THE ECA AS THE EXTERNAL AUDITOR ROSMARIE CAROTTI
In democratic societies, complete, accurate and readily available information on budgetary and policy implementation is essential for effective scrutiny and decision-making. Such information helps promote sound financial management and serves as a basis for accountability. Like its Member States, the EU needs an external auditor which can act as an independent guardian of the financial interests of its citizens.
The ECA’s primary task is to examine the accounts of all revenue and expenditure of the European Union. In doing so, it assists the European Parliament and the Council in exercising their powers of political control over EU budget implementation, particularly during the discharge procedure.
The general budget of the EU is decided annually by the Council and the European Parliament. The ECA’s annual reports on the EU budget and the European Development Funds, together with its specific annual reports on the EU’s agencies, joint undertakings and other decentralised bodies and special reports, provided a basis for the discharge procedure, in which the European Parliament decides whether the Commission has satisfactorily carried out its responsibilities for implementing the budget. The ECA forwards its annual reports to national parliaments at the same time as it sends them to the European Parliament and the Council.
The ECA publications are varied – annual reports, specific annual reports, and special reports – depending on the type of audit: financial audit, compliance audit and performance audit. In addition, it publishes opinions on legislative proposals with an impact on EU financial management, as well as position papers and ad hoc publications on EU public finance issues.
As the EU’s independent external auditor, the ECA provides assurance on the way the money is recorded, spent and accounted for. Its compliance and financial audit focuses on whether things are being done in accordance with legislation, regulations, policies, and procedures. Its performance audit is an independent and objective examination with regard to one or more of the three aspects of economy, efficiency and effectiveness, aiming to lead to improvements in these fields.
The ECA’s independent advice to policy makers and decision-makers, to help them shape and scrutinise new legislative and budgetary proposals, also contributes to accountability and transparency. The ECA does this by providing recommendations in reports, publishing opinions on draft EU legislation, and contributing to the public debate on the use of EU funds. In this way, the ECA has helped shape many initiatives to improve the management of EU funds and the budget reform process.
As Europe faces ever greater challenges and increasing pressure on its public finances, the role of the ECA is of increasing importance. It warns of risks, provides assurance and offers guidance to EU policymakers on how to improve the management of public finances and ensures that Europe’s citizens know how their money is being spent. This is the essence of the ECA’s contribution to strengthening the democratic legitimacy and sustainability of the European Union.
41 TESTIMONIAL ANDRÉ J. MIDDELHOEK, FORMER ECA MEMBER AND PRESIDENT
The European integration process "Court of Auditors should be acknowledged as the external auditor"
Luxemburger Wort - conversation with the outgoing President of the European Court of Auditors, André J. Middelhoek, 9 December 1995 By Rosmarie Carotti
As long as their successors have been appointed, the mandates of some Members of the European Court of Auditors, including its President come to an end the day after tomorrow. As the new mandates only enter into force on 1 January 1996, the current President, André J. Middelhoek assumes that he will automatically stay in office until 31 December. We talked with the outgoing President about his work at the Court of Auditors.
The Court’s 1994 Annual Report contains a graphic showing a geographical breakdown of expenditure charged to Luxembourg, but which does not benefit Luxembourg, or only to a limited extent. This has a caused a great stir and considerable dissatisfaction on the part of Luxembourg. Would the outgoing president like to comment on this?
"All countries are treated equally"
Mr Middelhoek is keen to clarify one point. The Court's report does not provide any information on net contributors or net beneficiaries among the Member States.
It presents data processed by the Commission. These data concern the expenditure incurred by the Commission or the Community in the Member States. André J. Middelhoek, former ECA Member and President There are no payments to governments and all countries are treated equally, he says. The data was examined by the European Court of Auditors and an error was corrected. Apart from this, the information given by the Commission was found to be correct.
According to the President, it is quite a different matter whether the distribution criterion or key used by the Commission for this allocation is sufficiently comprehensive, in the sense that the Commission is not able to make a geographical breakdown for different European institutions.
With regard to his personal legacy at the European Court of Auditors, Mr Middelhoek, not without pride, explained that he had, from the outset, made a decisive contribution to the Court’s decision to opt to use systems-based audit as its working method. This means that the Court does not examine all expenditure, 42 TESTIMONIAL The European integration process “Court of Auditors should be acknowledged as the external auditor”
including the smallest items. It would have to be much larger to do this. Instead, it examines systems and procedures, as well as the conversion of legislation into practical systems, and assesses the risks.
When weaknesses become apparent, the audit focuses on them. This means an efficient application of resources, despite a rather selective method. Therefore, the Court of Auditors is never in a position to give a complete picture in its Annual Report. For the first time this year, in the context of the newly established Statement of Assurance on the legality and regularity of all revenue and expenditure of the Community (the “DAS”), there is a change in this regard, because the Court does make an overall judgment.
"The Court has become an institution"
According to Mr Middelhoek, another personal success is the fact that the Court became an institution under the Treaty of Maastricht, leading to a greater balance between auditor and the auditee. However, there are also things which have not yet been achieved; for example, requests that were put forward at the intergovernmental conference, such as the right of the European Court of Auditors to go to the European Court of Justice to defend its rights and prerogatives when it does not obtain the necessary cooperation from the institutions or authorities in the Member States. This aspect was not adequately regulated in the Treaty of Maastricht, he says; he also wishes to see progress in common foreign policy, internal politics and justice, for example in the case of Europol.
According to the President, the European Court of Auditors wants to be recognized as the external auditor so that it does not need a new decision for each activity. The Court should, in principle, examine all expenditure that goes through the Community. Currently, if the money comes from the Union's budget, it is automatically audited by the Court, but when it comes from the Member States, the Council has to make a decision. This is also the case for Mostar in former Yugoslavia, where an administrator is entrusted with reconstruction, using EC funds and aid from the Member States. This approach could lead to delays and a lack of continuity, he says.
Mr Middelhoek would like to give his successor some advice. "In the Court, it is important to respect collegiality, everyone must be aware that all decisions are made by the panel of 15 Members. Only constructive debate brings good results”, he says.
"Positive experiences in the Grand Duchy"
It is still not known what activity Mr Middelhoek will take up in the economic and financial sector after he leaves the Court. However, one thing that he would like to stress is his very positive personal and human experience in Luxembourg.
43 TESTIMONIAL JAN O. KARLSSON, FORMER ECA MEMBER AND PRESIDENT
Independence, collegiality and continuity
Luxemburger Wort interview with the new President of the European Court of Auditors, Jan O. Karlsson 9 January 1999 Interview by Rosmarie Carotti
Mr Karlsson, we are happy that you have granted the Luxemburger Wort your first interview since becoming President of the European Court of Auditors.
“I have a dream,” said Martin Luther King. Do you have a dream for the EU, for the European Court of Auditors and for Sweden?
Jan O. Karlsson: Yes, I have a dream for Europe. First of all, I want there to be a Europe which all European countries belong to. That is a long way off, of course, but since I come from a country which delayed joining for a long time, it is especially important to me. My second dream is protecting the European Union’s unique character. The Union consists of different Member States which each have their own characteristics. In my dream, as well as a common European homeland, we will all have a homeland with its own language and history which must be preserved.
Let us move on to the Court of Auditors. Its independence is absolutely necessary. Of course, I have been following the debate about the increased roles of institutions with great interest. I find the German Chancellor’s recent remarks on this extremely interesting, and even if we will not be actively participating, I am in favour of discussions taking place on this topic. Back to my wishes for the European Court of Auditors: I want it to be independent in its external relations with the EU. I want us to be as objective and efficient as possible; I want people to think “that’s what the European Court of Auditors said, so that’s how Jan O. Karlsson, former ECA Member and President it is”. We have only been an independent institution since the Treaty of Maastricht was ratified.
Within our institution, I place a great deal of value on reciprocal trust and shared responsibility. As President, I am only the first among equals. In a collegial system, the selection of a new president is not a dramatic event. We are still sitting around the same table, each of us with their own responsibility, sharing out the tasks among ourselves. I am a Swede, and in modern times, Sweden has always used collegial systems.
In spite of this, the end of Bernhard Friedmann’s presidency is the end of an era, as the end of André Middelhoek’s was before it. Under Middelhoek, the European Court of Auditors became an independent institution; under Friedmann, it became well known. Collegiality and independence, then. And the new watchword will be Continuity.
44 TESTIMONIAL Independence, collegiality and continuity
As the new President, will you take over your predecessor’s files and keep working on them? I am thinking particularly about the van Buitenen files, which led to a vote of no confidence against the Commission in the European Parliament. What are your thoughts on the creation of an independent parliamentary investigation committee?
Jan O. Karlsson: Of course we will finish our work on the van Buitenen files. We will continue our work as usual. We decided that among the Members. It seems there have been misunderstandings about the role of the Court of Auditors in the Commission discharge procedure. That is a political process, and we have nothing to do with it. European citizens would often like to see us as a police authority, a prosecutor and a criminal court, but we are none of these. Our job is to find solutions to problems in the interests of citizens, not just of taxpayers. European citizens know that the Treaties require us to examine the entire budget of the EU.
In the van Buitenen case, of course, we have passed on our knowledge to the Council of Ministers and to the European Parliament. We work together with them. As far as the parliamentary investigation committee is concerned, it can only be in the interests of the citizen that we maintain our institutional independence and keep ourselves out of conflicts between other institutions.
Will your election to the presidency change anything with regard to relationships with countries which wish to join the EU?
Jan O. Karlsson: Continuity is important in this connection as well. We will, however, be obliged to involve national audit authorities more closely, because their relationships with the new Member States will also be changing. We have the important task in front of us of auditing EU funds in these countries. The efforts begun under Mr Friedmann to coordinate the national audit authorities’ working methods and the methods of the European Court of Auditors need to be further developed, by steps including the use of common European audit standards. We place a great deal of value on technical cooperation and staff exchanges.
What does the EU mean to Sweden? A culture? A political agreement? The end of Franco-German rivalry? German hegemony by means of the euro?
Jan O. Karlsson: To Sweden, the EU means a far greater change than is generally assumed or agreed. For that reason, I am happy to have Luxembourg as an example to share with my countrymen. I tell them about Luxembourg’s history. In Sweden, we have not known war for 180 years, and we sometimes think that we have earned that peace by being better than everyone else. Once, back home, to amuse my Finnish friends, I said that there were three great world powers: the USA, the Soviet Union, and Sweden. And now that Communism has fallen, only the USA and Sweden remain. What I meant by that was that we see things differently from how the Luxembourgers do. We have never been caught between two powers. We have always kept ourselves out of these things. Unlike in Luxembourg, belonging to 45 TESTIMONIAL Independence, collegiality and continuity
something larger than ourselves has never been an issue in Sweden. Now we have to learn that. As we Swedes say, “we will become members”.
I do not know whether Sweden will be ready to join the currency union by 2002, but I have noticed a positive change in public opinion. I am confident. In Sweden, the euro will come from the east when Finns visiting from Helsinki get off the ferry and start asking, “Do we really have to change our money? Can’t we pay in euros?”
What is the European Court of Auditors’ role in respect of the European Central Bank?
Jan O. Karlsson: Like the other European institutions, the European Central Bank’s administrative expenditure is subject to audits by the European Court of Auditors. Macroeconomic banking activities such as price stability are political goals which are not within our audit remit. Our mandate is set by the EU Treaties. I am convinced that there is sufficient macroeconomic control. The Bank also audits its own capital. We believe that we will also need to audit financial activities arising from the stability pact in the future. Discussions about how current arrangements are appropriate for this purpose are ongoing.
A final question about the form and the content of future reports issued by the European Court of Auditors. In future, will the names of people and companies which have acted fraudulently appear in them?
Jan O. Karlsson: Our reports need to become better, shorter and clearer, since we are no longer waiting until we issue the annual report to provide information to the Council and to the Parliament. Interest in financial auditing in the EU is growing, but that does not mean that we need to bombard the budgetary authority with reports.
We are waiting with interest for a judgment by the European Court of Justice about the publication of the names of people and companies which have acted fraudulently, but I think that doing so should remain an exception.
46 TESTIMONIAL BERNHARD FRIEDMANN, FORMER ECA MEMBER AND PRESIDENT
Audit bodies also need to give good advice
A Luxemburger Wort interview with Bernhard Friedmann at the end of his mandate as President of the European Court of Auditors 3 February 1999 Interview by Rosmarie Carotti
Mr Friedmann, what is your assessment of your term of office as President of the European Court of Auditors, which is now at an end? You are still the German Member of the Court, and you are responsible for the “Cooperation with developing and non-EU countries (general budget of the EU)” sector.
Bernhard Friedmann: The past three years were the first presidential term of office during which the Court was a full EU institution throughout: as you know, that change came about thanks to the Treaty of Maastricht. I have good memories of my three years as President. Of course, I had envisaged a number of goals which I wanted to achieve, but I want to stress in advance that everything which we achieved was an achievement of all the Members.
One of my goals was to create a good working atmosphere and establish good working relations with national audit offices. For that reason, I made a point of visiting all of the national audit offices of the EU Member State, accompanied by the Court Member from that Member State, meeting representatives of each national government at the same time, mostly finance and treasury ministers. I also spoke before various national parliament committees.
My second goal was to establish and continue a good working relationship with the European Union’s budgetary authority. More specifically, I aimed to achieve smooth relations with the European Bernhard Friedmann, former ECA Member and President Parliament’s Budgetary Control Committee and the European Council’s Economic and Financial Affairs Council.
Achieving a constructive working relationship with the Commission was a third objective of mine. Of course, it is not our job to dole out praise: we are here to check how the Commission has implemented the budget. From the beginning, it was also very important to me to have a good, constructive working atmosphere within the Court itself. I achieved all that.
The Commission has been under a barrage of criticism, and the Parliament refused discharge for the 1996 financial year. What do you think about the Court of Auditors’ relationship with the Commission?
47 TESTIMONIAL Audit bodies also need to give good advice
Not everything in EU politics is full of mistakes
Bernhard Friedmann: I can assure you that we carry out our work completely independently. You know, of course, that the Court of Auditors’ job is to check the Commission’s work, if it is relevant to the EU budget. We do that on the Commission’s premises and also on the spot where EU money is actually used, mostly in Member States. Now, there is always a certain tension in the relationship between auditor and auditee – that’s natural. Generally, though, our working relationship is a constructive one. As for the discharge issue you mentioned, if the Commission is not granted discharge, that is certainly related to the reports we have issued. Sometimes, people have asked why the Court itself did not suggest that the Commission be refused discharge. That is not our job. We present the results of our audits, and it is up to the Council and the Parliament to use them in making the political decision whether to grant discharge or not.
Having said that, I really do want to counter the impression that everything in EU politics is full of mistakes. When criticism needs to be made, we do so, but I want to be very clear that there is much more to the EU than the odd irregularity here and there. When our reports are brought up during discussions between the Parliament and the Commission, it is never our aim to criticise the Commission in general terms. We are just doing our job, which is to point out weaknesses.
The Court has issued a special report on the weaknesses of UCLAF, the Commission’s anti-fraud coordination unit. What is the Court’s opinion on setting up a European anti-fraud investigation office?
Bernhard Friedmann: As you know, the Commission already has an anti-fraud unit. We work together with this unit, but we audit it as well.
Increasing the independence of UCLAF
On the basis of that auditing, we issued a report in which we pointed out a number of weaknesses. I gave details of these in my speech to the European Parliament on 17 November. UCLAF’s weakness is that it is only has jurisdiction in matters concerning the Commission, and not other European institutions. It is also problematic that its staff tend to be there for a short period only before returning to their own countries. Added to this, it is not clear who has access to its computers. The Parliament started a discussion, which has since been picked up by the Commission, whether a new institution called OLAF should be created to combat fraud and what powers it should have vis-à-vis the institutions. The Court of Auditors has been asked for its opinion on this, and I do not want to make premature comments about what that opinion might be. What I can say is that we have discussed this often at Court meetings. In line with this, and with the agreement of the Court, I stated in my speech to Parliament and in a seminar about fraud detection held there that the Court believed that UCLAF needed more powers and the ability to audit all EU institutions. Its independence also needs to be reinforced, and its position needs to become similar to that of the Commission’s Financial Controller. 48 TESTIMONIAL Audit bodies also need to give good advice
The van Buitenen files, which incriminated the Commission, were distributed among the Members and sectors of the Court of Auditors. Can we be sure that the information will be handled consistently?
Bernhard Friedmann: Mr van Buitenen provided us with files which he believed contained evidence of irregularities at the Commission. We accept information from any source, whether it is an official of another institution or a private individual. We even investigate anonymous leads. We have specific procedures for doing so. We examined the files, listed them, issued an acknowledgement of receipt and, in accordance with a Court decision, we distributed them among the sectors according to their contents. We have common, consistent working methods: these do not vary among sectors.
We also had two colleagues from UCLAF on the premises. They spent two days examining the files, and we provided them with photocopies of certain documents which they asked for. Many transactions were known to us and the Commission already; others seemed to be new.
What is the European Court of Auditors’ role in relation to the various EU police forces?
Bernhard Friedmann: The European Court of Auditors is not a prosecution service, and nor is it a police service in itself. Its job is to check whether the EU’s budget has been implemented lawfully, correctly and economically. But when we find substantive cases of corruption and fraud, we work together with national law enforcement agencies.
The Europol Treaty, which contains provisions about the establishment of a European police authority, states that the authority’s accounts will be audited by a committee of three auditors nominated by the European Court of Auditors.
Would it not be useful to give the European Court of Auditors the power to impose sanctions?
Bernhard Friedmann: In the run-up to the Amsterdam Treaty we were asked again and again whether the Court of Auditors wanted to acquire the power to impose sanctions. Audit institutions in the EU vary in their responsibilities and in their working methods. There are audit bodies which function to some extent like a court, and have the ability to impose punitive sanctions. Others, such as the Swedish national audit office, can only submit reports to the national government. In Denmark, the national audit office is more or else a part of the parliamentary administration. And there are also audit bodies like the European Court of Auditors. For a long time, I chaired the budget committee in the German parliament. My experience there showed me that it is better if audit bodies do not have the power to impose sanctions, because there is always the danger that we will come up against closed doors. Audit bodies also need to be able to give advice. There needs to be a sensible dialogue between auditor and auditee, and that is far easier and far more effective if there is not always a threat of sanctions in the background.
49 THE COURT OF AUDITORS AND THE EUROPEAN ECA LEGAL SERVICE UNION’S LEGAL ORDER
Binding EU legislation (e.g. in the form of treaties, regulations and directives) takes precedence over national law and can be invoked against it (on the basis of Court of Justice Judgments No 26/62 Van Gend en Loos and No 11/70 Internationale Handelsgesellschaft). The EU’s legal order is founded on two types of legislation:
I. Primary legislation Primary legislation is the highest level of legislation and takes precedence over all other types of EU law. This category includes the Treaty on European Union (TEU), the Treaty on the Functioning of the European Union (TFEU) and their annexes and protocols, as well as international agreements, the Charter of Fundamental Rights and general principles of law. Article 287 TFEU defines the general scope of the Court of Auditors’ audit activity. It envisages a broad remit for the Court as regards examining the accounts of all revenue and expenditure of the Union and of all bodies, offices or agencies set up by the Union insofar as the founding act does not preclude such examination. Furthermore, according to Article 287(3) TFEU, the Court has access to any document or information necessary to carry out its task. Primary legislation also includes fundamental rights, which are part of the general principles of EU law as defined by Article 6(3) TFEU. These include the rights guaranteed by the European Convention on Human Rights and the principles established by the Court of Justice as deriving from the EU’s legal order, while at the same time being based on national legislation, case-law and legal tradition. Moreover, fundamental rights are enshrined in the EU’s Charter of Fundamental Rights, which, according to Article 6 TEU, has the same primary law status as the Treaties. On the basis of general legal principles, the Court of Justice confirmed, inIsmeri Europa v Court of Auditors, C-315/99 P, that, in accordance with the principle of the right to a hearing, auditees must be able “to make observations on those points in such reports which refer to them by name, before those reports are definitively drawn up” (paragraph 29). The Court of Justice thus acknowledged that the adversarial principle applies to the Court of Auditors and that auditees are entitled to have their views heard.
II. Secondary or derived legislation Secondary legislation is the level below the Treaties and includes regulations, directives, decisions, recommendations and opinions. Secondary legislation cannot restrict the Court’s powers under the Treaty. Some secondary legislation, such as the regulations, directives and decisions envisaged by Article 288 TFEU, is legally binding. Other legislation, such as recommendations and opinions, is not, although it may have other effects (see below).
50 THE COURT OF AUDITORS AND THE EUROPEAN UNION’S LEGAL ORDER
a) Regulations are general in scope and binding in their entirety, and do not require special implementing measures. In certain cases, they may also apply directly to individuals. One example is the Financial Regulation No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union. Articles 161et seq. strengthen the scope of the Court of Auditors’ powers, in particular as regards the right of access to information and documents, by providing the Court with all the facilities it needs to carry out its task. b) Directives are binding upon individual Member States as regards a given result to be achieved. In principle, they require the national authorities to incorporate them into their national systems in order to produce the desired legal effect (i.e. a national law, legislative decree etc.). There is no order of precedence between regulations and directives, as each has the same value. c) Decisions are binding in their entirety on those to whom they are addressed (e.g. a State or a company), e.g. in terms of common foreign and security policy (CFSP), the recovery of unlawful State aid, the compatibility of certain mergers with the common market, etc. d) Secondary sources also include acts such as recommendations, opinions or guidelines that do not entail any rights or obligations for those to whom they are addressed. As they have no direct effect and are not binding, they cannot be legally invoked against a regulation or a directive, for example. Although not legally binding, such acts are a form of “soft law” and may have significant political consequences. They may also be used to interpret the provisions of European or national law (Case C-322/88 Grimaldi v Fonds des maladies professionnelles), such as the Commission’s guidelines on State aid. There is no exhaustive list of such “soft law” acts. This category includes programmes, conclusions, resolutions, opinions and any general act stipulating directions or objectives (Joined Cases C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P, the Court of Justice’s judgment in Dansk Rorindustri and Others v Commission). As part of its brief to scrutinise and improve the management of the EU budget, the Court of Auditors issues reports with a legal force equivalent to that of recommendations. Auditees are not legally bound to comply with the recommendations made in the Court’s reports: e.g. the Commission may decide independently to recover sums which the Court regards as having been disbursed in an irregular manner. Although the Court’s reports have no formal legal force, their political value and the Court’s authority ensure that they do have considerable influence over auditees’ actions (see, in this connection, the Court of Justice’s judgment in Case C-539/09, European Commission v Federal Republic of Germany). Furthermore, the Court of Auditors must be consulted on legislative matters, e.g. reviews of financial regulations (Article 322 TFEU), the fight against fraud affecting the EU’s financial interests (Article 325(4) TFEU), or the Staff Regulations (Article 336 TFEU). Although the Court of Auditors must be consulted in these areas, its opinions are not binding on the legislature, i.e. the European Parliament and the Council.
51 THE 2004 ENLARGEMENT OF THE ROSMARIE CAROTTI EUROPEAN UNION AND OTHER CHANGES FOR THE ECA
On 7 June 2004 nine Members of our Court of Auditors were sworn in for a period of six years from 7 May 2004. The Members represented nine of the ten countries which joined the EU on 1 May 2004. The appointment of the tenth Member from Cyprus was expected in autumn 2004.
The swearing in of all Members of the Commission, the Court of Justice and the Court of Auditors traditionally takes place before the Court of Justice. It has also to be remembered that Members of both the Commission and the Court of Auditors can only be compulsorily retired by decision of the Court of Justice that they no longer fulfil the conditions or meet the obligations arising from their office. It is therefore logical that the undertaking to perform those obligations should be given before the Court of Justice as well.
The 2004 enlargement to 25 Member States introduced many challenges for the ECA. A greater sense of responsibility centred on audit tasks replaced the ECA’s previous spirit of “ownership” (one Member in charge of each sector) as the ECA was reorganized into a system of chambers.
In 2004, the ECA became a full member of INTOSAI (the International Organisation of Supreme Audit Institutions). Full membership did not lead to any changes in the attitude adopted by the European Court of Auditors. Its importance is linked rather to the certainty that equal participation with the other members cannot be cast into doubt in future. As a member, the Court also has a say in decision-making within INTOSAI.
On 1 January 2005, the Commission opened up new paths with its reform. Activity-based budgeting (ABB) and Activity-based management (ABM), and a new accounting system also changed the ECA’s work.
From 2006 onwards, performance audit increasingly came into the spotlight at the ECA.
A “revised” DAS approach was presented. It envisaged the formulation of an “assurance model”, and the use of “decision trees” to illustrate the process and a reassessment of the principal sources for the DAS. The “assurance model” was intended to assist the auditors in the determination of the level of confidence to be derived from the two principal sources of the DAS, namely the evaluation of supervisory and control systems and substantive testing.
52 TESTIMONIAL JACEK UCZKIEWICZ, SUPREME CHAMBER OF CONTROL OF POLAND
Poland, Europe’ s young tiger
The European and Polish Supreme Audit Authorities are preparing for Poland to join the EU
Interview with Vice-President Jacek Uczkiewicz from the Supreme Chamber of Control of Poland, Luxemburger Wort, 20 October 1998 Interview by Rosmarie Carotti
Despite a very politically divided situation in the Polish parliament, there is almost complete consensus on accession to the EU, although, of course, there are fears regarding the impending freedom of movement of persons, goods and services. It does, however, involve a historical decision of belonging. Poland has always felt that it was part of Europe in terms of its culture and mentality, albeit only politically since the Second World War. Since the Copenhagen European Council in June 1993, relations between the European Union and the PHARE countries, including Poland, have become part of the overall context of future accession. Economic and political conditions must be met. The latter do not pose any difficulties, although long negotiations will still be necessary, but there are economic problems, mainly with regard to the agricultural and coal and steel sectors, as well as the general standard of living. Poland has democratic institutions, there is a constant growth of seven to eight per cent annually, inflation has fallen from 30% in recent years to around 9.5% this year, and unemployment to an average of about 10%, with big local differences. Unemployment is particularly high in the north of the country, while the east has the biggest industrial infrastructure problems. Poland needs restructuring - in agriculture and particularly in the coal and steel sectors. And this comes at a time when countries like Germany find it hard to explain to the public that the existing coal and steel industries need to be dismantled. For Poland, however, it is a matter of building up an economy and not expanding an industrial sector. Jacek Uczkiewicz, Supreme Chamber of Control of Poland (NIK) and former Support for economic transformation in the countries of Central and Eastern Europe has been, from the ECA Member outset, a declared objective of the EU’s PHARE programmes. This assistance covers various domains, and the development of the private sector is one of the most important of these. The European Councils of Essen (December 1994) and Madrid (December 1995) stressed the key role of PHARE as a financial instrument under the pre-accession strategy. European Agreements have been signed between the European Union and most countries in Central and Eastern Europe. A structured dialogue was launched at both head of government and ministerial levels, and, in May 1995, the Commission presented a White Paper on the "preparation of the associated countries of Central and Eastern Europe for integration into the internal market of the Union". Under Agenda 2000 (15 July 1997), the PHARE programme was to remain the main instrument for preparation for accession, but the support measures were divided into two main areas: institutional support (30% of the funding) and investment funding (70% of the appropriations). 53 TESTIMONIAL Poland, Europe’ s young tiger
To what extent is the Polish public aware of this EU financial aid and these EU programmes? Frankly, the public knows little about them and does not come directly into contact with them. This may be different for some cross-border programmes involving local authorities, or programmes covering only certain regions, but, in general, Polish citizens are not aware of them. We must not forget that EU aid is only 10%, a maximum of 15%, of the programmes and that, in most cases, the money flows into the state budget. How much of the EU's aid reaches the final consumer? As the country’s top audit body, the Polish Supreme Audit Office does not currently have the powers to audit all funds from the PHARE programme. Of course, the funds that flow into the national coffers are subject to audit, but other institutions and private foundations are excluded. Up until today, because two months ago, Parliament amended the Supreme Audit Office’s charter so that, in the future, all EU funds sent to Poland will fall under its remit, since they will be equated with the other budgetary funds. How efficient are EU funds in Poland? We can assume that 60% actually reach the beneficiaries; 10 to 30% are spent on implementing the PHARE programmes. However, these are just estimates – results from samples, as the relevant analyses have just begun. Irregularities amount to between 10 and 12%, although it should be stressed, once again, that financial discipline is high because state funds are involved. How can the European Court of Auditors help the Polish audit body fulfil its tasks in the best possible way? The Presidents of the Supreme Audit Institutions of the Central and Eastern European Countries and the EU are taking the path of increased cooperation with a view to the accession of the new countries from the east. It is necessary to build a solid audit system, to protect the "acquis communautaire", i.e. those obligations and rules that should protect the EU and allow it to prosper. This includes working groups on the audit of VAT in intra-Community trade, on the application of articles of the EC Treaty, on general auditing standards and on transposition into national law. There are international audit standards which, adapted to the European situation, should lead to fresh transparency and harmonization. They are currently under development and should be the basis for future EU co-operation. The new audit standards supported by the European Court of Auditors do not completely correspond to the needs of the countries that are seeking accession. In Poland, for example, the problem is not so much how to audit current computer and information systems as to develop a methodology for auditing the preparation and provision of investment in this area and its outcomes. What is the forecast for Poland over the next five years? Everything will depend on Russia. If it continues to evolve in a democratic way, Poland will have a great future as a European Member State. It is a dynamic country in the making, but it is following the economic problems of its neighbour, Russia, with concern. Whereas, three months ago, 70 shipments per hour were processed at the Polish border, now the figure is 70 per day. The tiger is young and will have to stand many a test yet. 54 NEW PUBLIC MANAGEMENT 20111 ROSMARIE CAROTTI
One important aspect of the ECA's work in connection with its audit of the Commission’s activity is its Statement of Assurance on the implementation of the EU budget, the DAS or SoA.
The reform of the Commission's accounting system was initiated in 2005, since which time, the Commission has completely overhauled the way it keeps its accounts. In concrete terms, it has switched from cash accounting to accruals accounting. Under the new system, all revenue and expenditure is recorded when actually earned or incurred and not, as previously, when payment was made. This gives a far more accurate picture of the EU's financial situation.
Another significant ommissionC reform was the creation of an integrated internal control framework. The Commission also set itself the ambitious goal of obtaining a positive Statement of Assurance from the ECA. However, this aim has not yet been achieved.
The reform of the control framework concerned four main areas: Simplification and common control principles, management declarations and audit assurance, the "single audit" approach2, and the need for improvements in certain EU funding sectors.
Management declarations and audit assurance pointed towards the greater use of audit certificates issued by external auditors or public officials. The idea extended to "national declarations3", which were considered more closely in a 2007 opinion by the ECA. Unlike "annual summaries", national declarations derive from a voluntary initiative by certain Member States. The ECA however stated in an opinion that it considered national declarations to be just one element on which to base its work.
The underlying aim of the concept of the “single audit” was the need to reduce the risk of overlapping audits. Auditors should therefore be able to draw on previous audits at all levels. If applied systematically, this approach also makes it possible to reduce substantially the number of checks on the residual risk of error, thus limiting overall spending on audits. Ultimately, the "owner" of the audits should be the European Union, not the respective audit bodies.
Another need for improvement arose from the fact that certain EU programmes were subject to risks. The Structural Funds in particular were characterised by very high error rates. This sector was managed jointly by the Commission and the Member States and was striking for its many diverse layers, such as a range of paying agencies and implementing bodies. The Member States were therefore called upon to demonstrate the use of these funds to both national and EU auditors.
It was a time of great changes and debates, in particular as regards evaluations of the use of the EU budget that were less focused on inputs and more on outcomes. Following a peer review a few years earlier, the ECA had itself made substantial organisational changes.
1 "New Public Management as seen by the ECA" by Dr Harald Noack, ECA Member, Journal September 2011. 2 ECA opinion 2/2004. 3 ECA opinion 6/2007. 55 ACCOUNTABILITY ROSMARIE CAROTTI
National and EU institutions and bodies are required to justify their actions and, in the case of EU institutions and agencies, are granted discharge for the management of their annual budgets.
Democratic scrutiny and efficient public audit go hand-in-hand. They help governing authorities improve their use of public funds, and provide legitimacy by explaining to citizens what progress is being made towards important EU objectives. They provide legitimacy in the use of EU funds and create confidence and trust in the political and institutional set-up and its instruments. There is also an element of learning and improvement from the results of audits and their recommendations.
The concept of accountability is not static. There is currently a move towards accountability for results and impact at EU level. Art. 318 TFEU requires the Commission to report on the evolution of the EU’s finances based on the results achieved. However, performance aspects go beyond accountability and also impact the budgetary process. The Commission, in fact, aims at developing a performance based budgeting approach, which is still at a very embryonic stage.
It is the ECA’s mission to contribute to improving democratic accountability by putting the right arrangements in place. This depends increasingly on a high degree of coordination between multiple layers of governance and scrutiny.
The EU’s complex governance structures are the source of significant debate in terms of the configuration of democratic institutions needed to provide the necessary oversight and legitimacy. This cascades down to the audit landscape as well. The ECA’s challenge emerges from inconsistent arrangements for parliamentary scrutiny and for public audit. All this requires a transformation of both the democratic scrutiny and the audit landscape and the ECA calls upon the help of the other European institutions and the national audit institutions to achieve this.
On 14 October 2014, the ECA held an “EU Accountability Conference 2014” with key speakers from the European Parliament, the European Commission and the ECA. This was the first conference of its kind, in which the ECA invited an open discussion about the audit and accountability arrangements in place in the EU and how to overcome gaps and overlaps inspired by its landscape review on EU accountability and public audit arrangements1.
In the context of multiple layers of governance, multiple layers of democratic scrutiny, and multiple layers of audit, the complexity inevitably leads to gaps and overlaps in accountability and audit arrangements. The review identified six areas where challenges emerge: coordinated activities, the multispeed nature of the EU, partnerships, the arrangements for EU institutions and bodies, the management of the EU budget, and accountability for the results of non-budgetary instruments.
1 Landscape Review - "Gaps, overlaps and challenges: a landscape review of EU accountability and public audit arrangements", ECA 2014.
56
3. AUDITING EUROPE
The K2, the ECA second building on the Kirchberg (opened 2004) Architect: Jim Clemes (2004)
58 THE ADDED VALUE OF THE WORK OF THE ECA ROSMARIE CAROTTI
The ECA’s role is to provide independent, high quality audit reports and, in accordance with its rights and responsibilities under the Treaty, opinions and other products based on audit experience.
The ECA cannot directly improve financial management. Its role is to provide authoritative material, through its audit reports and other products, which provides the Commission, Parliament and Council with the opportunity to improve financial management.
The role of the ECA is not to provide an alternative set of policy preferences to those chosen by the Union’s political institutions. The ECA’s independent advice to help policy makers and decision-makers shape and scrutinise new legislative and budgetary proposals contributes towards accountability and transparency.
As Europe faces ever greater challenges and increasing pressure on its public finances, the role of the ECA is increasingly important. The ECA, however, should question the feasibility, coherence and added value of EU policies and measures, based on its audit work. The ECA warns of risks, provides assurance and offers guidance to EU policymakers on how to improve the management of public finances and ensures that Europe’s citizens know how their money is being spent. This is the essence of the ECA’s contribution towards strengthening the democratic legitimacy and sustainability of the European Union. Recovering trust in public finance1
Both governments and EU institutions have lost the citizens’ trust in the wake of the financial and economic crisis. A number of accountability and transparency issues are being reflected on by the competent institutions within the European Union, in particular the European Parliament and Council. The ECA and the Member States’ Supreme Audit Institutions (SAIs) can help provide policy makers with important information and advice based on their audit experience, to help ensure that, where public funds are at stake, there are adequate arrangements for transparency, public accountability and public audit.
The EU’s immediate responses, often given at intergovernmental level and outside the Treaty and the EU Budget, often lack adequate public external audit and thus, new efforts towards rectifying this distortion are required by the ECA. The ESM Treaty (European Stability Mechanism), for example, provides a full public audit mandate for a five-person Audit Board, which includes a nominee from the ECA. The ESM is one of those institutions which are, strictly speaking, not fully EU institutions, often established on a case-by-case basis via agreements between Eurozone countries and, because of this, they are not covered by the audit mandate given to the Court by the Treaty, certainly not in a way in which the Treaty covers operations relating to the EU budget. Moreover, some of these new financial mechanisms are established as companies under private law, which makes their audit by a public sector institution more complicated. This creates a public accountability deficit problem which cannot be easily solved.
1 "Fostering trust through independent audit - The European Court of Auditors' Strategy for 2018-2020", ECA 2017. 59 THE ADDED VALUE OF THE WORK OF THE ECA
The policies included in the Strategy for the EU (EUROPE 2020) will have a range of impacts. There is the need to understand the changes in various audit domains, and the complexity of mainstreaming these policies requires cross-cutting audits.
The shift in the stakeholders’ emphasis, from legality towards the economy, efficiency and effectiveness of policies, as well as the shift from budgetary interventions to regulatory, policy co-ordination and leverage interventions, increases the need and importance for performance-type audits.
One major gap the ECA identified was that not enough is known about the results achieved by EU policies and spending programmes. The ECA’s aim is to do more with less and make more efficient use of its resources. It also wants to be more aware of the needs of its partners and stakeholders. Over the 2013 – 2017 period, the ECA has been ensuring that its selected audit tasks and special reports reflect financial management risks, public interest and the ECA’s capacity to add value through audit. The ECA has also been focusing on performance issues, including those related to specific topics of current public interest, high-level EU objectives, and crosscutting policies.
Many initiatives taken by the ECA are now converging. The ECA has been given additional audit responsibilities including, for example, the European Central Bank’s role in the field of prudential supervision of banks and the European Fund for Strategic Investments (EFSI).
Over the past years, the ECA has managed to help the Contact Committee to raise its visibility. The financial crisis has been at the heart of some initiatives taken by the Contact Committee. With other EU SAIs, the ECA has tried to identify the implications for the transparency, accountability and audit of the different measures taken in response to the crisis.
However, the challenge for improving EU accountability is not limited to the domain of economic and financial affairs. There are also public accountability and audit issues in other EU policy areas that need to be addressed. What is the role that the SAIs can play within the audit of the EU funds? This is an area where new ways for working together need to be identified, and then the results must be made available to the national parliaments and the European Parliament.
With the Six-Pack, the Two-Pack etc., the Commission has been provided with a raft of new powers. However, these are not expenditure powers, but monitoring powers in respect of the Member States. The ECA is monitoring how it can audit this new area of powers. Its role could be, firstly, to develop new methods, always with the idea that it is not merely an external auditor, but also the institution which asks administrators to be accountable on how they exercise their administrative power.
Under the “Single audit” concept, the road is open for a more active role for audit institutions. In order to convert this idea into practice, steps are being taken to enhance the sharing and coordination of audit measures among all parties. It is also crucial to undertake a detailed examination of audit costs at all levels.
60 THE ADDED VALUE OF THE WORK OF THE ECA
Feedback systems are the quintessence of democracy and the sound development of the public administration. The ECA is such a system and it supports democratic processes, so the link with parliaments and the Council is extremely important. More challenges
In recent years the EU has had to address global challenges including climate change and sustainable development, whilst dealing with the ongoing effects of the economic and financial crisis which has threatened some of its most important achievements, such as the euro.
Within its mandate, the ECA will carry out audits in relation to new supervisory authorities, assistance mechanisms with an EU budget guarantee and – to the extent possible – the Commission’s activities in the European Semester.
As regards sound financial management, effective accountability for results achieved with the EU budget still looks a long way off. A key priority for the ECA will be to use its work to assist the Commission, Parliament and the Council to introduce an effective tool for scrutinising EU spending over the course of the next financial framework. The ECA will, therefore, continue to carry out its compliance and performance audits with this objective in mind. In particular, it will continue to use its results to make recommendations which help improve the design and implementation of policies.
The pressure on public finances and public administrations at EU and national level has grown, and trust and confidence in EU and national institutions has fallen. It is important to consider developments regarding the EU budget in this context. In particular, it is important to recognise that the EU budget only represents about 1/50th of total EU public expenditure. The new EU arrangements for fiscal and economic coordination cover all public spending in the EU and they include the Europe 2020 targets for the whole EU which are to be met mainly by the collective actions of the governments of the Member States. Overseeing the application of EU law
It is essential that EU law should be put into practice if the EU is to deliver results for its citizens and maintain its credibility. In the run up to the renewal of the legislation for many EU policies after 2020, it is also essential to learn lessons about its application.
Member States have an obligation to apply EU law in their jurisdictions and the European Commission is responsible for overseeing the application of EU law, in accordance with Article 17(1) of the Treaty on the European Union (TEU). It must also take appropriate action to promote and enforce compliance.
The European Parliament requested a Court report on this topic in the discharge resolution on the 2014 general budget. Given the nature of the topic, the task was included as a landscape review in the Court’s 2017 work programme. 61 THE ADDED VALUE OF THE WORK OF THE ECA
This review will cover the EC’s oversight of the application of EU law by Member States and how its oversight activities contribute to promoting and enforcing compliance.
A number of special reports (around 30% in the last three years) have highlighted issues related to the Member States’ application of EU law in particular policy areas. However, the Court has not yet specifically examined the Commission’s oversight function. Fraud
Where there is money, there is fraud. One of the European Court of Auditors’ duties is preventing fraud from affecting EU funds.
Auditing work takes place at the Commission itself, but also on the spot in Member States: everywhere where EU funds are spent. However, the Court of Auditors only publishes the results of its audits in its reports.
In 1996, when the Commission attracted fierce criticism and Parliament refused it discharge, the reports of the European Court of Auditors had drawn attention to the shortcomings of UCLAF, as the anti-fraud unit within the Commission was then known.
However, UCLAF was only a Commission department which had been audited by the European Court of Auditors. UCLAF’s weakness was that it only had powers to investigate within the Commission, not within the other Community institutions.
In 1999 a new body, OLAF, was created. OLAF is an anti-fraud unit with the power to investigate within all institutions. The main difference is that this body, a European office for external and internal investigations, has a greater degree of independence, and is not bound by any instructions from the Commission. However, its mandate does not concern fraud and other unlawful activities in general, but only fraud against the EU budget in particular. The Office is also responsible for internal investigations within the EU institutions and bodies.
The Court has carried out several audits and issued several opinions on the investigative function of OLAF but it also informs OLAF, under its internal procedures for cooperation, of detected or suspected cases of fraud or illegality.
It is also essential to identify the major risks of corruption and fraud at each stage of the process: when legislation is being adopted, when policies are being implemented, and when public funds are being spent. If you do not focus on taking measures to minimise or eradicate the risk of corruption and fraud, then you are always running behind. SAIs can share their experience and develop tools for mapping the major risks, which would help ensure that these risks are addressed.
62 TESTIMONIAL JACEK MAZUR, POLISH SUPREME AUDIT OFFICE
Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
The audit remit of the European Court of Auditors (ECA) partly overlaps with that of the Supreme Audit Institution (SAI1) of an EU Member State, which is to audit the management and utilisation of EU funds. Both institutions partly share stakeholders: the citizens of the European Union. Despite their different positions in the organisation of a given State or the European Union, as well as the many differences in their powers, organisation, procedures and audit methodology, the ECA and SAIs partly conduct the same activity, i.e. systematic and independent examination of the management and utilisation of EU funds. This similarity constitutes a natural precondition for their cooperation.
This article discusses the main areas in which the ECA and SAIs cooperate: 1) participation of SAIs in ECA audit visits to Member States; 2) activities to mitigate the risk of duplicated audits; 3) cooperative audits.
I. Background Overlapping competences
Each audit body has its own distinct sphere of competence. However, the ECA’s mandate and the mandate given to SAIs by the authorities (administration) of a given Member State to audit the Jacek Mazur, Ph.D. management and utilisation of EU funds partly overlap.
Advisor to the President of the Polish SAIs audit national-budget implementation and the activities of the administration in their country, Supreme Audit Office (NIK), including the management and utilisation of EU funds in the context of the national budget. External Auditor of the European University Institute (2016-2020) The ECA mainly audits the Commission. According to Article 317 of the Treaty on the Functioning of the European Union, “The Commission shall implement the budget [...] on its own responsibility [...]”. Although about 80% of expenditure is incurred by the central, regional and local bodies of the individual Member States, it is executed on the basis of shared management, therefore the Commission bears responsibility for the implementation of the entire budget. The audit of the Commission is also regulated by Article 287(1), which stipulates the ECA’s competences.
In compliance with these provisions, the ECA audits the revenue and expenditure of the EU budget and the activity of the EU institutions and other bodies. At the same time (according to Article 287(3)) the audit shall be “if necessary, performed on the spot [ ... ] in the Member States, including on the premises
1 The Supreme Audit Institutions of EU Member States are hereinafter referred to as "SAIs". 63 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
of any natural or legal person in receipt of payments from the budget”. This means that when the ECA audits the implementation of the EU budget, it sometimes audits not only the Commission but also, inter alia, the administrations of the Member States, as well as legal and natural persons in those countries, provided that they manage or use EU funds. In this context, it is from time to time suggested that the ECA also audit the activity of the Member States themselves (for instance when it audits the activity of the national Minister of Finance, who performs tasks related to the management of EU funds, in a given country).
Diversification of the SAIs
Cooperation between the ECA and the SAIs is influenced by the different competences and modus operandi of the SAIs. The legal status of these bodies differs according to, among other things, their organisation (courts of audit and audit offices), operating procedures and mandate (for instance, imposition of binding sentences and/or presentation of audit findings and recommendations to the auditee and parliament)2.
Various roles
The ECA’s main stakeholders are the EU institutions and EU citizens, whereas those of the SAIs are the national ones. When reporting on audits of national entities that manage or utilise EU funds, the ECA reports to the EU institutions, i.e. the European Council and the European Parliament, and not to the bodies of the Member States, whereas a SAI that has audited national entities that manage or utilise EU funds reports to the national parliament (and other national bodies), and not to the EU institutions3. The above impacts the audit approach: when examining EU-related issues, a SAI mainly considers matters of significance to the national budget and, in general, the national interest, taking into account, above all, the needs of the national parliament.
This means that, when auditing EU-related issues, an SAI considers questions such as the following:
• Does the government act to prevent unnecessary duplication of national and EU subsidies (grants, etc.) with similar objectives? • Does the government, while acting within the Council, endeavour to ensure that the rules on the management of EU funds are consistent with national regulations? • Does the government concern itself with proper design of the EU budget? • While acting within the Council, does the government sufficiently seek to improve the EU’s financial-management mechanisms?
2 State Audit in the European Union, National Audit Office, 2nd edition, London 2002.
3 However, the ECA regularly presents its audit results to national parliaments and other national bodies, and the SAIs sometimes present their audit results to the EU institutions. 64 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
• Does the government properly fulfil obligations to the EU and, in particular, does it implement directives fully and in a timely manner so that the country is not subject to penalties or compensation for having failed to do so? • Is the government concerned with rationalisation of expenditure incurred by the national administration (central and local) with regard to the management of EU funds?4 General cooperation principle
Article 4(3) of the Treaty on European Union sets out the principle of sincere cooperation: “[ ... ] the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties. The Member States shall take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union. The Member States shall facilitate the achievement of the Union’s tasks and refrain from any measure which could jeopardise the attainment of the Union’s objectives”. This is a fundamental principle that has to be taken into account by all EU and national bodies.
Furthermore, Article 317 of the Treaty on the Functioning of the European Union defines the cooperation duty as being “to ensure that the appropriations are used in accordance with the principles of sound financial management”, whereas according to Article 325(1) of the Treaty, Member States are obliged to “counter fraud and any other illegal activities affecting the financial interests of the Union”.
Detailed principles of cooperation between the ECA and the SAIs
The main provision of the EU legislation that regulates cooperation between the ECA and the SAIs is Article 287(3) of the Treaty on the Functioning of the European Union: “In the Member States the audit shall be carried out in liaison with national audit bodies or, if these do not have the necessary powers, with the competent national departments. The Court of Auditors and the national audit bodies of the Member States shall cooperate in a spirit of trust while maintaining their independence. These bodies or departments shall inform the Court of Auditors whether they intend to take part in the audit”. And further: “national audit bodies [...] shall forward to the Court of Auditors, at its request, any document or information necessary to carry out its task”.
Three issues require comment: a) the term “national audit body”; b) the case in which the “national audit body does not have the necessary powers”; c) the notion of an audit conducted by the Court “in liaison with national audit bodies”. A “national audit body”, referred to in Article 287(3), is the public body of a State which, however designated, constituted or organised, exercises by virtue of law the highest public auditing function of that State. The “national audit body” is defined by the national legislation and in practice there is no doubt which body functions as the Supreme Audit Institution in any EU Member State.
4 H. von Wedel: The Audit of European Community Funds, EUROSAI Magazine No 4, 1997. 65 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
The SAI is the partner of the ECA while it performs audits in the given State, unless the institution is not sufficiently empowered. In such cases the ECA is partnered by “competent national departments”, e.g. regional audit institutions in a federal state5, ministries or other administrative bodies. The statement that the audit in the Member States is to be conducted “in liaison with national audit bodies” should be interpreted in the context of Article 287(3) as a whole. In legal terms it means mainly what follows from the regulation: the ECA is obliged to inform the SAI that it intends to carry out an audit in the Member State, whereas the SAI has to state whether it is going to participate in the audit. In 1975 the authors of the Treaty’s Article 206a (later Article 188c and Article 248, currently Article 287) used the underspecified formulation “in liaison with”, presumably because they wanted to avoid using a more specific legal term. It is a less juristic definition that was probably used to avoid making any of the parties dependent and, on the contrary, to design the cooperation in such a way that it depended on their common free will6. Cooperation between the ECA and the SAIs is also referred to in Declaration No 18 annexed to the Treaty of Nice of 26 February 2001: “The Conference invites the Court of Auditors and the national audit institutions to improve the framework and conditions for cooperation between them, while maintaining the autonomy of each. To that end, the President of the Court of Auditors may set up a contact committee with the chairmen of the national audit institutions”. The “Declaration” established a basis for the Contact Committee of the Supreme Audit Institutions of the Member States and the European Court of Auditors (Contact Committee), functioning since the 1960s, which was established to facilitate their cooperation7. It is worth mentioning the recent declarations, which emphasise the need to develop audit cooperation between the ECA and SAIs:
• among its objectives the ECA lists the “enhancement of its cooperation activities with respect to the audit of public funds put at stake in the EU and national budgets to meet EU objectives” and “sharing knowledge and expertise with respect to the audit of EU funds”8;
5 For instance, in Germany the majority of funds obtained from the EU budget are managed by the federal states (Länder), which are not subject to audit by the Bundesrechnungshof, but by the audit bodies of those states.
6 Rapport d’information déposé par la Délégation de l’Assemblée Nationale pour l’Union Européenne (1), sur les relations entre la Cour des comptes européenne et les institutions financières nationales, et présenté par M. Pierre Brana, Député; Assemblée Nationale, No 3505, 20 December 2001, pp. 17-18; J. Inghelram: The European Court of Auditors: Current Legal Issues, Common Market Law Review No 37, 2000, pp. 138-139.
7 The Contact Committee considered the mode of cooperation between the SAIs and the ECA several times, and, inter alia, adopted resolutions on improvement of the coordination between the ECA and the national SAIs (CC-R-1998-06), amelioration of the ECA's consultation procedure (CC-R-1998-05), and Guiding Principles (CC-R-2003-02); see http:// www.eca.europa.eu/sites/cc/en/Pages/ccdefault.aspx.
8 ECA Strategy 2013-2017; http://www.eca.europa.eu/Lists/ECADocuments/STRATEGY2013-2017/STRATEGY2013-2017_EN.PDF. 66 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
• the European Parliament called for “closer cooperation between national audit institutions and the European Court of Auditors in connection with the auditing of shared-management arrangements, pursuant to Article 287(3) TFEU”9. II. Participation of SAIs in ECA audit visits to Member States
Let us first take a look at the number of ECA audit visits conducted in some of the Member States in 2015-2016. The table below includes information on the participation of SAI auditors. Even these partial data indicate that practices vary considerably.
2015 2016
Accompanied Accompanied ECA audit visits ECA audit visits by the SAI auditors by the SAI auditors Austria10 12 1 10 2 Bulgaria 6 2 7 6 Cyprus 1 1 1 1 Czech Republic 7 7 14 13 Denmark 1 1 4 4 France11 38 0 37 0 Germany 31 1412 41 1113 Greece 8 1 11 6 Latvia 1 0 2 2 Lithuania 5 3 7 4 Malta 2 2 4 4 Poland 25 10 17 13 Slovak Republic 13 2 5 2 Spain 30 9 45 8 Source: Supreme Audit Institutions14
9 European Parliament resolution of 4 February 2014 on the future role of the Court of Auditors. The procedure on the appointment of Court of Auditors’ Members: European Parliament consultation (2012/2064(INI)); OJ C 93, 24.3.2017, pp. 6–13; paras 17-21. 10 In addition, the Austrian SAI monitors all ECA audits taking place in Austria. 11 The ECA’s audit visits to France are coordinated by the Secrétariat general des affaires européennes, which is an administrative body under the Prime Minister, in charge of coordinating intergovernmental work on EU-related issues. 12 Including 10 audit visits accompanied by the respective Courts of Audit of the federal states (Länder). 13 Including nine audit visits accompanied by the respective Courts of Audit of the federal states (Länder). 14 See also the ECA activity reports for 2009 to 2011 (which include the number of audit visits) and ECA Activity Report 2016 (which includes the number of audit days spent on the spot in particular Member States). 67 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
Cooperation models
The SAIs’ participation in the ECA’s audit visits is optional. According to Article 287(3) of the Treaty on the Functioning of the European Union, an SAI is required to cooperate with ECA audit visits conducted in a given State, but the provision does not specify the manner of such cooperation and neither does any other EU regulation. Therefore, SAI cooperation with the ECA is conducted mainly on the basis of unwritten agreements and customs. Several elements of the cooperation mode have been defined in the resolutions of the Contact Committee, however they are rather general and not binding.
As there are no established legal requirements, the manner of cooperation differs. To generalise the practice in various States over various periods, one may establish four main general models of SAI participation in ECA audit visits:
• no cooperation model – the SAI is not involved in any contact between the ECA and national auditees (rarely the case); • passive model – “mailbox” for contact between the ECA and national auditees; • involved model – accompanying ECA auditors and providing them with information (the most common type); • active model – accompanying ECA auditors, providing them with information, and conducting its own audit of the same subject15; sometimes this is linked to cooperation in planning audit topics (very rarely). Furthermore, in recent years the ECA has more and more often conducted audits in the Members States based exclusively on questionnaires, without any on-the-spot audit visits. In selected cases SAIs also assist the ECA by acquiring documentation for studies being drawn up in survey work, or by verifying information.
Notification of ECA audit visits
Each month the ECA informs SAIs of the audit visits it plans to conduct in a given State in the following four months. This is preliminary information (for instance, abbreviated name of the ECA organisational unit, general audit area, name of the ECA Member supervising the audit, auditors’ names and audit number). Without further contact one cannot identify the audit subject in order to specify which SAI organisational unit will be relevant for a given audit, and therefore which auditor(s) should be assigned to participate. It was therefore proposed that the ECA specify the audit subject, entities to be audited and the region in
15 With regard to previous practice, see W. Wiklicky: Austria in OECD (1997) “Effects of European Union Accession: Part II External Audit”, SIGMA Papers, No 20, OECD Publishing, Paris, pp. 21-22. 68 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
which the audit visit would take place162. This information is included only in the notification letter signed by the ECA Member responsible for a given audit, which is usually submitted several weeks before the ECA auditors arrive, sometimes earlier.
Actions after the ECA notification has been submitted
Having received the notification letter, the SAI responds, in compliance with Article 287(3) of the Treaty, as to whether it intends to participate in the audit visit.
Until recently, after the SAI had received the notification letter, it contacted the national entities subject to the audit (usually not the individuals, such as beneficiary farmers in receipt of aid, but the authorities managing EU funds), informing them of the audit and requesting they prepare specific documents and information. The principle according to which the ECA contacts the national entities via the SAI results indirectly from Article 287(3) of the Treaty.
In 2016-2017, at the ECA’s initiative, the procedure for correspondence between the ECA and national administrations was amended:
• many SAIs have decided not to play a coordinating role in ECA audit visits, therefore the ECA submits documents directly to national authorities, with the SAI being kept informed throughout the process; • some SAIs have decided to continue coordinating ECA audit visits in their Member State, however copies of relevant ECA documents (e.g. clearing letters) are sent simultaneously to the national authorities concerned so that they can immediately begin examining the issues raised. Reasons for SAI participation in ECA audit visits
Some SAIs participate in the majority of the ECA audit visits conducted in their States, particularly in performance audits, but less often in audits aimed at checking the reliability of the EU accounts and the legality and regularity of the transactions underlying them (the so-called DAS audits). This involvement may concern all or several audit activities: sometimes the SAI auditors participate in the entire audit visit and on other occasions only in meetings that are more important to their institution.
SAIs assume that they are partners with the ECA and therefore explain to ECA auditors the details of how the national legal and administrative systems function. In addition, SAI auditors explain to national authorities how the ECA works. The principle of sincere cooperation (Article 4(3) of the Treaty on European Union) stipulates that the SAI should facilitate the conduct of ECA audit visits in a manner that best serves all parties involved.
16 Report prepared by the Working Group „The Relationship between the European Court of Auditors and the Supreme Audit Institutions of the Member States – Co-operation, Working Relations and Procedures” on the meaning for practical co-operation of the provision in art. 188c no. 3 EC treaty regarding the ECA’s mission to be carried out ”in liaison with” the national audit institutions; Bundesrechnungshof, 28 September 1998. 69 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
SAIs also decide to participate in ECA audit visits in order to obtain early access to information on their findings, and to help the ECA auditors better understand the findings in the national context. Several SAIs state that it is their duty to help the national administration so that it does not make mistakes or act in a manner that will result in the Commission decreasing funding to the State or withdrawing previously granted funds.
SAI auditors on ECA audit visits
In order to briefly describe the very diverse practices, one may say that SAI auditors participate in ECA audit visits in several or all of the following ways: 1) before the visit – preliminary contacts with ECA auditors and the representatives of entities that are to be audited; 2) sometimes – monitoring of the preparation by auditees of the documents and information requested by the ECA; 3) participation in the opening meeting; 4) assisting as an observer during the ECA’s audit proceedings; 5) sometimes – consultations with the ECA auditors on matters concerning the subject-matter audited or national legislation; 6) participation in the final meeting and summing-up of the ECA’s preliminary audit results.
The effectiveness of SAI auditors’ participation in the visits depends on many factors, including whether they are familiar with the ECA’s internal documents relating to the audit concerned. The ECA audit visit is just a part of the ECA’s audit proceedings, which are preceded by preparation of the audit on the basis of the documents compiled (including those provided by the national administration and auditees), followed by analysis of the documents obtained in the course of the visit, and also involve contacts with the principal auditee, the Commission, all of which are of great importance. A short audit visit to a given State, which usually lasts just a few days, is intended to enable the ECA auditors to understand the workings of the subject-matter examined, check whether the documents obtained beforehand are correct, examine the accounting records on the basis of statistical sampling, and verify the hypotheses assumed. A person who only possesses knowledge acquired at meetings may find it difficult to understand the issue. Therefore, if an SAI auditor does not become fully familiar with the documents prior to the visit, their participation is rather passive when ECA auditors inspect an auditee.
Mutual benefits
To summarise the involvement of SAI auditors in ECA audit visits, it may be said that the atmosphere of cooperation is usually positive, based on mutual respect and trust. This is cooperation between professionals who understand each other’s needs. Everyone tries to deliver information and explain facts. After the visit has ended, the ECA auditors, as a rule, discuss the shortcomings with the SAI auditors. This information is preliminary and not binding; however it is of importance to the SAI, as it allows it to be informed of the errors of the national administration as perceived by the ECA auditors. This cooperation is beneficial to both parties, because the ECA can make use of the SAI’s knowledge of the public administration in its State. It is also easier to overcome the language barrier and pinpoint key issues. SAIs can also gain a better understanding of the EU programmes and specific projects that should be audited.
70 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
At the same time, the performance of duties resulting from the Treaty, especially that of providing the ECA with documents and information upon request, may sometimes impose a considerable burden on the SAI and require additional work in areas that it does not intend to or cannot audit, which may result in reduced capacity to conduct its own audits.
III. Activities aimed at mitigating the risk of duplicated audits Information on audits
The audit reports of the ECA and SAIs are publicly available, however nowadays we have access to so much data that it is worth providing selected recipients/stakeholders with information oriented towards them.
One of the strategic goals of the Contact Committee, which was first mentioned in its “Mission Statement”, is fostering dialogue and cooperation in audit and related activities. The objective is implemented mainly by the exchange of EU-relevant knowledge and experience, including information on audits of the management and utilisation of EU funds (EU audits), and in particular their approach and results. This contributes to a better mutual understanding and may give rise to new ideas for EU-audit work, particularly at the audit planning and preparation stages (for instance at the risk analysis stage).
Currently information concerning EU audits is conveyed under the following arrangements:
• in 2009 a dedicated mechanism for posting EU audits carried out by SAIs was set up on the Contact Committee intranet portal (CIRCABC – internal, password-protected website); this was replaced in 2015 by the newly established EUROSAI audit database, which is publicly available and user-friendly with a built-in search option, however information on EU audits carried out before 2016 can only be found on CIRCABC;
• usually two to three EU audits carried out by SAIs are presented at each CC meeting; those presentations draw attention to new topics and new auditing approaches;
• the ECA e-mails information on its Annual Report and special reports (with links) directly to many addressees;
• several SAIs publish information about EU audits on their websites by uploading translations of summaries or, sometimes, the complete English version of their EU-audit reports;
• until recently the SAI of the Netherlands prepared an annual “List of EU audits due to be completed by EU SAIs” in a given year (list of audit titles).
71 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
Information on audit programmes
According to the Contact Committee resolution of 1998 “the ECA and each national audit body shall attempt – if the applicable legal provisions so permit – to exchange annually their pluriannual audit programmes (covering the 2-3 following years) as well as their annual audit programmes in so far as they concern EU funds, such programmes giving a clear description of the audit themes and locations”173. This provision is partly implemented: several SAIs submit lists of their audits concerning the management and utilisation of EU funds (until recently they were uploaded to the Contact Committee intranet portal); the ECA provides SAIs with a general description of its annual programme (without information concerning which audits will be carried out in which Member State).
The issue is complicated. Many SAIs publish their annual audit programmes (several also in English), while others do not. SAIs state that it is difficult to specifically identify EU audits. Other SAIs have moved away from an annual work programme to a system in which new audits are programmed every three/four months in order to react to important current developments. Irrespective of these obstacles, it seems possible to develop a practice for notifying annual and multiannual audit programmes, where no legal restrictions are in place. Coordination of audit programmes
The European Parliament formulated the idea that the ECA and SAIs should strive for “the coordination of their resources to evaluate the expenditure and performance of the EU budget, avoiding duplication of control work and sharing control information, identifying risk areas”184 . This is a postulate that is very difficult to apply. Usually the ECA and SAIs commence work on the draft annual audit programme one-and-a-half to two years in advance; all the organisational units of a given audit body are involved and it is demanding and time- consuming work. Adding external participants would make this procedure even more complicated. Moreover, taking into account their positions in the organisation of the European Union or of a given State, it would seem legally impossible to introduce a formal mechanism for agreeing the ECA and SAIs’ audit programmes.
However, consideration could be given to introducing less formal mechanisms based on voluntary cooperation between the ECA and SAIs, such as: a) suggesting audit topics to be included in the audit programme; b) exchanging draft audit programmes for consultation. As suggestions for audit topics and comments on draft audit programmes are not binding, the introduction of such mechanisms will have no impact as regards the legal status of the ECA and SAIs.
17 Resolution on improvement of the coordination between ECA and the national SAIs (CC-R-1998-06).
18 European Parliament resolution of 4 February 2014 on the future role of the Court of Auditors, para. 18. 72 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
Such practices sometimes exist, especially where the Members of the ECA maintain close contacts with their national audit body. This gradually implements the idea of programme coordination, thereby mitigating the risk of duplicated audits.
Submitting ad-hoc audit topics and/or cooperating on an ad-hoc basis
Due to the multiphase, complicated audit-preparation procedure, it is unlikely that an audit topic suggested by one audit body will be included in the annual audit programme of another. It seems more probable that a given audit body will approve a proposal to conduct a particular audit outside the annual programme as an ad-hoc audit. A suggestion could be motivated by the fact that a given body is not entitled to conduct such an audit (but the addressee is) or that it will facilitate the follow-up of previous audits. Of course, the decision as to whether to include the suggestion might not be positive, because it depends on many factors, both substantial and organisational, and above all on the resources available.
For instance, in October 2014 the ECA asked SAIs to participate in an ECA audit and prepare: 1) an analysis and assessment of the coherence between the Europe 2020 Strategy, partnership agreements and operational programmes for 2014-2020; 2) an analysis and assessment of whether proper emphasis was placed on results in partnership agreements and the operational programmes for 2014-2020. At that time only two SAIs (Portuguese and Polish) were able to meet this request, and their information was used in the ECA Annual Report for 201419.5 IV. Cooperative audits Types of cooperative audit
Cooperative audits between two or more SAIs can be divided into parallel/concurrent, coordinated and joint:
• parallel/concurrent audits: a decision is taken to carry out similar audits. The methodology and audit approach could be shared. The audit is conducted more or less simultaneously by two or more autonomous auditing bodies, but with a separate audit team from each body, usually reporting only to its own governing body and only on matters within its own mandate;
• coordinated audits: a coordinated audit is either a joint audit with separate audit reports to the SAIs’ own governing bodies, or a parallel audit with a single audit report, in addition to separate national reports;
• joint audits: key decisions are shared. The audit is conducted by one audit team composed of auditors from two or more autonomous auditing bodies who usually prepare a single joint audit report for presentation to each respective governing body20.6
19 ECA Annual Report on the implementation of the budget in 2014, OJ C 371, 10.11.2015, p. 101, para. 3.38.
20 ISSAI 5800. Guide on Cooperative Audit, 2016; http://www.issai.org/en_us/site-issai/issai-framework/4-auditing- guidelines.htm. 73 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
Attempts to date
The ECA and SAIs have attempted to carry out cooperative audits since the outset of cooperation between them. There is rarely any information available in this regard, which makes it difficult to report on such undertakings, of which only examples may therefore be given: • from 1996 to 1998 the Portuguese Court of Auditors and the ECA carried out joint audits in the fields of agriculture and the Structural Funds21;7 • in 2009 the ECA and the Italian Court of Audit carried out a joint/parallel audit on sound financial management of the Structural Funds (closure of the 2000-2006 programme)228; • between 2010 and 2011 the ECA and the SAIs of the Czech Republic and the Netherlands conducted parallel coordinated audits of expenditure on the Common Agricultural Policy; • in 2014 the ECA and the Polish NIK implemented a cooperative-audit project during the ECA audit mission to Poland (audit task entitled “Animal disease eradication, control and monitoring”)23;9
• in 2016 the ECA, the SAI of Croatia and the Polish NIK carried out a coordinated audit project in
planning and conducting a performance audit of the effectiveness of the Joint Assistance to Support Projects in European Regions (Jaspers) Initiative 24;10 • in addition, from 1994 to 2017 over 20 parallel/coordinated audits were conducted as part of the Contact Committee’s activities2511, however the ECA was usually an observer and did not carry out its own audit. What most of these projects had in common was the limited scope of the cooperation, as they were usually parallel audits where only the general subject and timeframe of the audit were specified. SAIs had limited
21 H. Lopes: Portugal in OECD (1997) “Effects”, etc., pp. 90-91.
22 La coopération entre la Cour des comptes européenne et la Cour des comptes italienne. Examen comparé de la méthodologie des procédés de contrôle, Rome, 27 June 2008.
23 Based on the Memorandum of Understanding between the ECA and NIK signed on 27 October 2014. See also ECA special report No 06/2016: Eradication, control and monitoring programmes to contain animal diseases, page 17, footnote 9.
24 Based on the Memorandum of Understanding between the ECA, the SAI of Croatia and NIK signed on 7 March 2016. See also The highest-value audit in 2016; https://www.nik.gov.pl/en/news/the-highest-value-audit-in-2016.html.
25 E.g. the audit of VAT on intra-Community trade (1994), seven parallel audits of Structural Funds (2000-2017) carried out by the WG, pilot audit of the access of SAIs to the main financial supervisors in EU Member States (2012), coordinated audit of the enforcement of EU waste-shipment legislation (2013). 74 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
influence over the design of audits conducted jointly with the ECA, especially the audit methods26.12The CAP and JASPERS audits were probably the first where SAIs were invited to cooperate at the programming stage. Costs and benefits
Cooperative audits always require additional effort by all parties:
• allocation of resources, detailed timing, planning and programming have to take place far in advance; • identification of topics presupposes a common interest, as well as the discovery of areas where EU and national financing are associated and where a link between EU and national legislation is to be found; • preparation of the audit must include, for example: exchange of information on national and EU regulations; discussion of the Audit Planning Memorandum; the establishment of criteria for the selection of projects to be audited; clear and joint definition of the audit methods to be applied; • working contacts/meetings during the audit; • the elaboration of a joint report is especially difficult, given the different motivations, addressees and possible audit results27.13 Cooperative audits make it possible to examine the issues audited more thoroughly. For instance, in course of the audit of expenditure on the Common Agricultural Policy conducted in 2010 to 2011 by the ECA and the SAI of the Netherlands, both systems and individual operations were examined (the Dutch “system based” approach combined with the DAS methodology). The parties conducted the audit together based on a combination of both approaches. Each used the audit results of the coordinated audit activities to prepare its own report. They exchanged audit documentation, they planned and performed audit activities together, and discussed the findings together which each partner could use to draw their own conclusion and at the same time review audit methods. Participation in this audit was time-consuming for both audit institutions and the ECA had to examine many more operations (control tests) than would have been the case according to the “usual” DAS (sampling) methodology. However, cooperation with the Dutch partner enabled it to understand the audit subject more thoroughly and to formulate additional conclusions and recommendations that would have not been possible if the ECA had conducted the audit on its own.
While performing the audit on the impact of the JASPERS Initiative, the auditors from the ECA and SAIs of Croatia and Poland noted a number of positive effects and added values, such as:
26 The detailed reasons why the SAI of Denmark deemed it impossible to participate jointly with the ECA in the audit were presented in Memorandum to the Danish Public Accounts Committee on the European Court of Auditors' Annual Report for 2008, Rigsrevisionen, December 2009, p. 5, paras 15-17. http://uk.rigsrevisionen.dk/ media/1892706/sekr03_09.pdf.
27 H. Lopes, as above. 75 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
• professional challenge;
• innovative and multi-layered approach to the subject of the audit (by the EU and from a national perspective, i.e. the perspective of the beneficiary);
• exchange of knowledge and experience;
• enriched audit methodologies and approaches;
• comparative approach to the work methods, as well as comparison and verification of results obtained between the two SAIs and between the latter and the ECA. Building trust
For many years the ECA and SAIs have been cautious vis-à-vis proposals for cooperative audits, because of, in particular:
• concern about the correct audit methodology being applied in line with the principle that the work results of other auditors are only used where the audit approach is the same. In practice, although the ECA and SAIs observe the same international standards, their audit methodologies can differ;
• differences in the ECA and the SAIs’ organisation, functioning and detailed audit procedures;
• insufficient trust between the ECA and SAIs: a compromise regarding audit methodology is sometimes seen as an attempt to undermine independence. However, independence cannot be threatened in the event of a sovereign decision on voluntary cooperation with another audit body and mutual harmonisation of the audit methodology.
V. Final remarks
Since the establishment of the ECA in 1977, the ECA and SAIs have undertaken significant, diverse, often time-consuming and demanding actions aimed at establishing and developing cooperation in auditing the management and utilisation of EU funds. A wealth of practice and many close professional contacts have been developed. They vary from country to country and this article presents only limited information on this matter.
However, there is perhaps room for strengthening cooperation and thought might therefore be given to the following in particular:
76 TESTIMONIAL Cooperation between the European Court of Auditors and Supreme Audit Institutions of the Member States in audits
1) Article 287(3) of the Treaty, which concerns performing ECA audits in the Member States “in liaison with national audit bodies”, is applied in a rather narrow sense. The question that arises is whether a different interpretation is possible that will promote cooperation between the ECA and SAIs more intensively?
2) What action should be undertaken to eliminate (or at least mitigate) the risk of duplication of ECA and SAI audits? The organisational solutions applied so far have not prevented a situation in which two audit teams, i.e. from the ECA and the SAI of a Member State, audit the same subject at the same time, possibly in the same national entities, require the same documents, etc., even though under different audit procedures.
Having the opportunity to consult the audit programme and results of the audits carried out by other audit bodies can contribute to a better mutual understanding and may give rise to new ideas for EU- audit work, in particular at the audit planning and preparation stage.
3) Because the mandates of the ECA and SAIs to audit the management and utilisation of EU funds partly overlap, voluntary cooperation, including cooperative audits, is useful. Obviously such cooperation results in additional costs, and initially the benefits can be disproportionately low in relation to the resources employed jointly.
However, the possibility of presenting the audit conclusions on a broader scale, which is not easy for the SAIs and ECA to do separately, is an added value. The SAIs and the ECA have different, but complementary, mandates; if they work together, the audit results provide more comprehensive information. Building mutual trust is also an added value of common actions.
4) Does the existing manner of cooperation between the ECA and SAIs assist them in their audits? Are the ECA and SAIs able to assure EU citizens that the cooperation effort is focused correctly, is organized appropriately and achieves the expected results?
77 TESTIMONIAL PIETRO RUSSO, ECA MEMBER
The European Court of Auditors and its relations with the Corte dei conti in the European context
The role of the institutions responsible for auditing public finances is much more significant than merely auditing the accounts. Indeed, in the development of the legal systems of the western world, this role is historically linked to the strengthening of the role of parliaments as representatives of the people and expressions of democracy.
When absolute regimes come to an end and the legislative power acquires strength, gaining supremacy over the executive, it is logical that it should control and approve both the planning of the management of public funds and its actual performance. The latter, which involves granting the executive a “discharge”, has a strong political significance because a negative outcome implies that it no longer has confidence in the government. This means that Parliament needs to be able to count on an independent ‘technical’ body to audit the executive – i.e. an external audit authority.
This is how the European Supreme Audit Institutions came to be, in a process that systematically occurred once again in 1977, in the case of the European Court of Auditors.
Pietro Russo, ECA Member Indeed, it is no coincidence that the 1975 Brussels Treaty, which, in the financial field, considerably strengthened the role of the European Parliament in relation to the Council by Section president of the Corte dei conti allocating it (together with the Council) the power to grant discharge over the Commission’s and Member of the European Court of management of the budget, also created the European Court of Auditors. Auditors. The opinions expressed are the author’s own. Therefore, at the very moment when the Court of Auditors came into the European system, with its guarantee of independence, it became a privileged instrument in Parliament’s assessment of the Commission’s financial management.
When it was created, the Court of Auditors was not one of the Community institutions. It was the Treaty of Maastricht that granted it this rank by including it in the title dedicated to the Institutions.
Currently, the Court of Auditors is governed by Articles 285, 286 and 287 of the Treaty on the Functioning of the European Union (TFEU). Its task is to audit the finances of the Union, an external audit as opposed to the internal control carried out by each individual institution, and a technical one, as opposed to the political control exercised by the European Parliament (together with the Council), which as we have seen, leads to the granting of discharge to the 78 TESTIMONIAL The European Court of Auditors and its relations with the Corte dei conti in the European context
Commission. The Court is not a court of law, nor does it have powers of enforcement or sanction. Instead, it exercises its supervisory function by issuing reports and opinions.
The number of its Members was established as being the same as the number of Member States and the Treaty of Nice specifically stated that it should be composed of one citizen from each Member State – a criterion that had always been applied in practice beforehand.
The TFEU contains a solemn statement regarding the independence of the Members similar to the one regarding the judges and advocates-general of the Court of Justice.
The Members are appointed by the Council for a renewable term of six years, after consulting the European Parliament, on the basis of proposals from the individual Member States.
The Court is a collegiate body and acts as such. The President is elected by the Members, as a primus inter pares, for a renewable term of three years, with the tasks of calling and chairing Court meetings, overseeing the sound running of the administration and representing the Court to the outside1 world.
The Members are assisted by officials who perform audit or administrative functions. They are headed by the Secretary-General.
Article 287 TFEU describes the Court’s audit powers in detail. They cover both the legality/regularity of the European budget expenditure and sound financial management; they also cover the accounts of all bodies, offices or agencies funded or created by the Union except where this is excluded by their constituent instruments.
The first of these, of course, regards whether or not management acts comply with legal norms, the second concerns the effectiveness, efficiency and economy of the management itself.
The audits, performed both on documents and on the spot, lead to an Annual Report regarding the individual financial years. This report is presented to Parliament and Council in financial year “n+1”, and, in particular, contains a Statement of Assurance - substantially, a certification - in which the Court certifies the reliability of the accounts and the legality and regularity of the underlying transactions, complete with specific assessments concerning the EU’s main sectors of activity.
In addition to the Annual Report, the Court can present special reports on specific subjects at any time. It also has an advisory function via its opinions, which may be either discretionary (at the request of one or more EU Institutions) or mandatory (specifically envisaged, for certain areas, by Articles 322 and 325 TFEU).
1 The Treaty of Nice introduced the possibility that the Court could create Chambers that would be responsible for adopting certain types of act. Five such Chambers were indeed introduced under the Court Decision of 11/3/2010. They have the power to adopt reports and opinions, but not the Annual Report which can only be adopted by the full Court. 79 TESTIMONIAL The European Court of Auditors and its relations with the Corte dei conti in the European context
In nearly all cases, the on-the-spot checks carried out by the Court regard expenditure carried out within the Member States by their respective national authorities.
This is why Article 287 provides that these checks be carried out in cooperation with the National Audit Institutions (NAIs) except where these institutions do not have the necessary powers.
The Treaty of Amsterdam also added the provision allowing the Court and the NAIs to cooperate in a spirit of reciprocal trust, whilst maintaining their own independence. However, when the NAIs wish to participate directly in one of the Court’s on-the-spot checks, they must inform it beforehand.
The NAI’s cooperation in the ECA’s audit activity, as set out in Article 287 TFEU, therefore presupposes specific powers of the NAIs, directly envisaged by the Treaties, albeit in relation to the activities of the European Court.
This system was introduced at the outset when the ECA was created and it is rooted in the very close connection between the management of the structural funds, on which cohesion policy and rural development policy expenditure depend, and that of national funds. This is due to the system of co-financing, which is widely applied in the field (but the role of the national authorities is also fundamental in the field of direct aid for agriculture, which is, together with the other sectors mentioned, the EU budget’s largest expenditure sector).
It is on the basis of this mechanism that the national authorities also manage the resources from the national budgets paid out for the same objectives.
In the case of Italy, the powers of the national supreme audit institution are particularly broad, and also include the management of European funding as well as the national share.
The Italian court has shown great attention to cooperation with the European Court of Auditors. When, in the early 1990s, the tendency emerged to formalise relations with the European Court of Auditors, the Corte dei conti was one of the NAIs that signed a “memorandum of understanding” which envisaged “joint” audits in the field of European funds. In this context, a joint audit was carried out by the European and Italian courts in the field of fisheries and aquaculture.
This category of audit again became topical a decade later, when, in 2008, the Presidents of the two institutions signed a cooperation agreement in Rome. This agreement was then implemented via the performance of an audit on the closure of the 2000-2006 structural fund programming period in Italy.
However, as we have seen, experiences in this field have only been episodic. This can be explained by the considerable difficulties found in implementing them. These difficulties regard the entire audit procedure, from the identification of a subject of common interest, to the procedures for the performance of the audit and the utilisation of the material collected.
80 TESTIMONIAL The European Court of Auditors and its relations with the Corte dei conti in the European context
So far, we have looked, briefly, at the “classic” framework of the relationship between the two courts; however from the 1990s onwards, the progressive, and of late tumultuous (due to the acute economic/ financial crisis), development of what is currently known as “European economic governance” has produced, both directly and indirectly, considerable effects on the powers of both.
Indeed, although both the European and Italian courts have maintained their fundamental function of oversight over the correct and effective management of budgets as provided in their respective basic laws (Article 100 of the Italian constitution and Articles 285-287 TFEU), they have now become responsible for overseeing the general balance of the financial system, at the European and national levels respectively.
The beginning of this development can be found in the Stability and Growth Pact (which consists of a collection of measures designed to guarantee that Member States implement the requirement to avoid excessive public deficits), originally put forward in Regulations Nos 1466/972 and 1476/973.
This set of rules, which was then amended in 2005, was subsequently completed, from the points of view of both preventing and correcting deficits, via Regulations 1175/20114 and 1177/20115, adopted in the context of the “Six Pack” - a “corpus” of legislation (five Regulations and one Directive) aimed at preventing recurrent sovereign debt crises via oversight over the public accounts.
The rules on excessive deficits were again dealt with in the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union of 2 March 2012, which also introduced, in the systems of the Member States, the so-called “golden rule”, requiring a balanced budget.
An ad hoc Treaty had to be used here because the United Kingdom and the Czech Republic did not adhere.
However, the Treaty did specify that its implementation was to take place in the (more) general context of the EU’s legal system.
Over the years, a series of provisions aimed at bolstering the framework of vigilance and the maintenance of the Union’s financial equilibrium were grafted onto this legislative nucleus, including
2 Council Regulation (EC) No 1466/97 of 7 July1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies; OJ L 209 of 2.8.1997, pp. 1-5.
3 Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure; OJ L 209 of 2.8.1997, pp. 6-11.
4 Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies.
5 Council Regulation (EU) No 1177/2011 of 8 November 2011 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure. 81 TESTIMONIAL The European Court of Auditors and its relations with the Corte dei Conti in the European context
the provision for European level interventions if situations occurred that were likely to endanger this equilibrium.
In this context, the European Court of Auditors was given new powers and functions (as was the Italian Court at the same time).
An example of all this can be seen in the reform of the supervisory function of the EU’s banking system6. This system, which has been operational since 2014, functions via a Single Supervisory Mechanism centred on the European Central Bank (ECB) and the national supervisory authorities, with reference, for the time being, to the banking system of the countries belonging to the euro area and the other EU Member States that intend to participate in it.
The aforementioned legislation provides explicitly that the European Court of Auditor’s audit powers in respect of the ECB, as provided in the ECB statutes and focused on its operational efficiency, should (also) be considered to cover the new powers in question.
Another example is supplied by the European Stability Mechanism envisaged by the Brussels Treaty of 2 February 2012 (the ESM Treaty), signed by the Eurozone countries, but open, looking ahead, to countries that take up the single currency in future, in accordance with the provisions of Article 136(2) TFEU, as amended in this connection.
This Mechanism aims to guarantee the necessary financial aid to Member States in difficulty. Its funds do not come from the general budget of the EU, but are partly paid in by the participating Member States, and partly raised on the capital markets. This means that the relevant external audit does not fall to the Court of Auditors, which under Article 285 TFEU, as we have seen, audits the implementation of the general budget and the financial management of the bodies funded by it, or in any case, created by the EU.
This audit is assigned to an “external auditor” chosen by the ESM itself and a five-member “Board of Auditors” appointed by the Mechanism’s Board of Governors, two of whose members are appointed on a rotational basis by the National Audit Institutions of the ESM Member States (including Italy) and one by the European Court of Auditors.
The connection between the national and supranational level is therefore clear, and it brings together the European Court of Auditors and the NAIs in the exercise of new powers.
Finally, still in the framework of bank supervision, Regulation No 806 of 15/7/2014 created the Single Mechanism and the Resolution Fund, with the task of providing for the “resolution” of credit entities in the EU context.
6 Regulation No. 1024/2013 and Regulation No 468/2014. 82 TESTIMONIAL The European Court of Auditors and its relations with the Corte dei Conti in the European context
Here too, the relevant funds come via the national credit institutions rather than from the EU budget. Nevertheless, this Regulation establishes, among other things, that the European Court of Auditors should deliver a special report on the administration of the Fund over a period of 12 months as of 1 April every year.
As is specifically mentioned, this report, which is to be forwarded to the Council, European Parliament and Commission, concerns sound management and must, in particular, establish whether the evaluation of the aid provided by the Fund was efficient and rigorous.
In addition to the aforementioned power, the same Regulation allocates the Court the task of drawing up, in the financial year “n +1”, a Report on the Accounts of the Single Resolution Fund, which must also be sent to the aforementioned institutions. This report is drawn up in the framework of the classic budgetary control provided for in Article 287 TFEU.
It should nevertheless be observed, that in this context, the Court must, in particular, report on (irrespective of the irregularities found in the accounts or the underlying transactions) any “potential liabilities”, in particular of the Council and Commission, deriving from the financial management of the Fund.
With regard more specifically to theCorte dei conti, as mentioned above, it is possible to trace an analogous path from “budgetary controller” to “systems controller”.
The Constitutional Court’s judgment No 29/1995 defining theCorte dei conti as the auditor of the equilibrium of public finance in the broader sense (meaning state and non) is already fundamental in this connection; this was then followed by Judgments Nos 267 of 2006, 179 of 2007, 198 of 2012 and 60 of 2013.
In this connection, there was also Law No 131/2003, which allocated the Corte dei conti financial control over Regions and local bodies, including in relation to the constraints envisaged by the Internal Stability Pact (Law No 448/1998), i.e. the limits of expenditure for these bodies, set out - as of 1999 - in the budget laws, and then the stability laws, aimed at ensuring Italy’s compliance with the Stability and Growth Pact.
I would also mention Law No. 266/2005, which requires the audit bodies of both the local authorities and the National Health Service to send the regional sections of the Corte dei conti reports on both the budget and the accounts, which must, among other things report on compliance with the objectives of the Internal Stability Pact. If the regional sections ascertain infringements in this connection, they deliver a specific judgment and monitor the adoption of corrective measures.
DL No 174/2012, as converted by Law No. 213/2012, modified the unified text governing local authorities (Decree Law No 267 of 18 August 2000) by providing that the Regional Audit Sections of the Corte dei conti should examine the budgets and final accounts of the local authorities in the 83 TESTIMONIAL The European Court of Auditors and its relations with the Corte dei conti in the European context
context of the procedure introduced by Law No 266/2005, for the verification, among other things, of compliance with the annual objectives set by the internal stability Pact.
This systematic supervisory role is also reflected within theCorte dei conti’s internal organisation: the regulation for the organisation of audit functions (adopted in 2000 by decision of the Joint Sections) provides that the Joint Sections, acting in their audit capacity, should draw up an annual “Report on the coordination of public finance”, aimed at verifying the implementation and results of public finance instruments. This report also contains an analytical review of the implementation of the internal stability pact. The same regulation establishes that the Autonomies Section should report to Parliament on the progress of regional and local finance, with reference to its compliance with the framework of the general compatibilities of public finance set by the European Union.
In conclusion, it can be said that we are witnessing a progressive integration of the players in the European and national financial systems at all levels: on the one hand, the European Union and the Member States, on the other hand, with regard particularly to Italy, the State, Regions and local authorities, with all the other bodies concerned by public finance in the broader sense.
This is the natural consequence of an ever-increasing interdependence within the systems themselves, which has recently been increased and accelerated by the acute economic-financial crisis, which has led - and here the circle closes - to the creation of new instruments of European economic governance, some of which are mentioned above.
Against this background - still largely in the making - one of the few certainties that can be glimpsed is the path that inevitably lies before the European Court and the NAIs of the Member States (including the Corte dei conti), leading to an ever greater integration of powers and cooperation in activities: one of the many challenges that lie in wait for the construction of the Europe of tomorrow.
84 NEW AUDIT RIGHTS AFTER THE FINANCIAL CRISIS1 ROSMARIE CAROTTI
The European Financial Stabilisation Mechanism (EFSM) and the Balance of Payment assistance
The EFSM is an emergency funding programme. The EFSM and the Balance of Payment assistance, both operate under the umbrella of the EU Treaty. These instruments are managed and administered by the European Commission and guaranteed by the European Union. The financial flows move through the EU budget and the operations, assets and liabilities are disclosed in the EU’s financial statements. The European Court of Auditors has full audit rights, as well as the obligation for financial audit of these operations within the annual statement of assurance exercise. This has been the case since 2008 when the Balance of Payments assistance was first used. Greek Loan Facility and the European Financial Stability Facility (EFSF)
The second type of instrument from an ECA audit rights perspective consists of the Greek Loan Facility and the EFSF. Here, the ECA’s audit rights do not derive from the EU Treaty – at least not directly – and neither do these instruments implicate the EU budget. As the European Court of Auditors has the responsibility to audit the use of administrative spending of the EU institutions (as well as the operational efficiency of the ECB) it has the possibility to audit the management of these instruments by these Institutions. The European Stability Mechanism (ESM)
The EFSF does not provide any further financial assistance, as this task is now performed solely by the ESM. The ECA does not have the right to audit the ESM as an institution. However, the ECA has the right to nominate one of the five members of the Board of Auditors. The European Fund for Strategic Investments (EFSI)
The European Fund for Strategic Investments is established within the EIB. It brings together an EU Guarantee and EIB own resources to deliver on the Investment Programme for Europe. The existing tripartite agreement between the Commission, the Court of Auditors and the EIB of October 2003 details the rules under which the Court of Auditors is to carry out its audits on the EIB Financing Operations under EU guarantee. Single Resolution Mechanism (SRM) and Single Resolution Board (SRB)
The establishment of the banking union entailed the creation of a Single Supervisory Mechanism (SSM) to guarantee the consistent application of prudential rules across the euro-area countries; and a Single Resolution Mechanism (SRM) to ensure that failing banks are wound up efficiently and at a minimal cost to taxpayers and the real economy, via the participation of private creditors in bank restructuring and resolution. 85 NEW AUDIT RIGHTS AFTER THE FINANCIAL CRISIS
The Single Resolution Mechanism (SRM) is a main pillar of the EU’s banking union complementing its Bank Recovery and Resolution Directive in participating Member States. When banks, which are covered by the SRM, fail or are likely to fail, the mechanism aims to manage their bank resolution effectively through a Single Resolution Board (SRB) and a Single Resolution Fund (SRF), financed by the banking sector.
The SRM Regulation provides that the European Court of Auditors shall, in its report on the SRB’s final accounts, in particular, report on any contingent liabilities (whether for the SRB, the Council, the Commission or otherwise) arising as a result of the performance by the SRB, the Council and the Commission of their tasks under this Regulation.
Concerning the Single Supervisory Mechanism (SSM), the Court has a mandate to examine the operational efficiency of management of the ECB and therefore focused its audit on the way the ECB set up the SSM and has organised its work. European Semester, Excessive deficit procedure (EDP) and Macro-economic imbalance procedure (MIP)
The European Semester provides a framework for the coordination of economic policies across the Union. The 2011 reform of the Stability and Growth Pact SGP (so called “six-pack”) introduced the Macroeconomic Imbalance Procedure (MIP), a new surveillance mechanism to be implemented in the context of the European Semester.
The Treaty on European Union, also known as the Maastricht Treaty, which entered into force on 1 November 1993, established the principles of economic and monetary union (EMU) and led ultimately to the euro as a common currency. The proper functioning of EMU required the introduction of a mechanism to safeguard the soundness of public finances and to reduce the risk of spillover from Member States pursuing unsuitable fiscal policies. This mechanism comprises two arms, one preventive and the other corrective. The corrective arm addresses excessive deficit situations and is known as the excessive deficit procedure (EDP).
A performance audit on the European Semester has been carried out by the ECA in parallel to an audit on the macroeconomic imbalance procedure, focusing on the preventive arm of the SGP and the Europe 2020 strategy for growth and job, while the MIP audit will cover all the medium term structural issues. Therefore the three audits: Excessive Deficit Procedure (EDP), Macroeconomic Imbalance Procedure (MIP) and European Semester complement each other and ensure a comprehensive coverage of the economic governance area.
Endnote 1 Position paper of the European Court of Auditors, ECA Journal, October 2011.
86 TESTIMONIAL KAMILA LEPKOWSKA, ECA AUDITOR
Auditing financial assistance programmes
A Financial and Economic Governance team
In 2013, the ECA set up, under the leadership of Director Zacharias Kolias, the Financial and Economic Governance team as a response to the accountability gaps and risks that had become apparent during the recent financial crisis. The audit topics were consequently centred around three themes:
- Financial assistance programmes managed by the European Commission.
- Macroeconomic management in the EU.
- Financial governance and supervision.
The choice of the broad themes and the specific audit topics was dictated by both the risk analysis and the Court’s audit mandate. The latter limitation also proved to have significant consequences at the stage of designing the detailed audit scope, given the inter-institutional complexities (including non-EU bodies and institutions) of virtually all audits in the field of financial and economic governance. All of the topics were also, to some extent, novel. The Kamila Lepkowska, unusual feature of the financial assistance programmes (see Table), in terms of our audits – all ECA Auditor - Regulation of markets carried out under the supervision of ECA Member Mr Baudilio Tomé Muguruza - is that they and competitive economy do not necessarily imply direct expenditure from the EU budget, unlike in the case of the agricultural or structural funds. Depending on the facility, the loans can be provided from the EU budget (BoP) or bonds are issued on behalf of the EU (EFSM). In these cases the EU budget bears certain risks linked to provision of the loans, although the loans need to be fully re-paid. In the case of the financing facilities used in the Greek programmes (GLF, EFSF, ESM) the loans were provided (or guaranteed) by the Member States of the euro area, so the EU budget was not involved.
87 TESTIMONIAL Auditing financial assistance programmes
Table: Overview of ECA audits on financial assistance programmes
Audit Task Facilities examined Main audit questions
Financial assistance Balance of Payment (BoP) Was the Commission’s management of financial assistance provided to European Financial programmes appropriate? countries in - difficulties Stabilisation Mechanism Were the growing fiscal risks detected in time? (EFSM) (SR 18/2015) - Were processes sufficiently well designed to make a comprehensive input into programme decisions? - Did the Commission borrow at the best possible rates and in accordance with best debt issuance practices? - Did the financial assistance programmes meet their main objectives?
More attention Task Force for Greece (TFGR) Was the EU technical assistance provided to Greece under the to results needed – dedicated team at the coordination of the Task Force for Greece managed effectively to improve European Commission to co- and did it contribute positively to the process of reform in the delivery ordinate and deliver technical Greece? of technical assistance in the Context of - assistance to the Economic Adjustment Did the TFGR have appropriate arrangements for the internal Greece Programmes. organisation, financing and planning of technical assistance? (SR 19/2015) - Did the TFGR deliver technical assistance according to its mandate? - Did the technical assistance make a contribution to the progress of reforms in Greece?
The Commission’s Greek Loan Facility (GLF) Was the Commission’s management of the Adjustment intervention in the – 1st Economic Adjustment Programmes for Greece appropriate? Greek financial Programme for Greece - crisis (expected Did the Commission have appropriate arrangements in place publication: European Financial Stability for managing the programmes? Facility (EFSF) – 2nd Economic end 2017) - Adjustment Programme for Were the policy conditions appropriately designed and Greece effectively implemented? - European Stability Did the adjustment programmes meet their main objectives? Mechanism (ESM) – 3rd Economic Adjustment Programme for Greece
88 TESTIMONIAL Auditing financial assistance programmes
In the Court’s typical performance audits, we usually “follow” the EU money. Audits start at the level of the Commission, by assessing EU strategies and implementation frameworks, and go down to the level of final beneficiaries in order to comprehensively evaluate the added value of EU expenditure. Although in the case of financial support programmes the link to the EU budget is weaker, as EU auditors we should look at them for a number of good reasons.
First, the BoP and EFSM facilities are backed up by the EU budget. The Member States have to fully re-pay them, but some financial risks are still borne by the EU. Second, all support programmes are aimed primarily at correcting economic imbalances in the Member State concerned, but also at safeguarding the stability of the euro area or the EU as a whole and limiting the risk of contagion. The success of the support programmes is therefore vital for the functioning of the EU as a whole. Third, the programmes are managed, on behalf of the lenders, by the European Commission. It means in practice that the European Commission negotiates the policy conditions attached to the programmes with the Member State and assesses its compliance. The decisions to disburse the financial support are then based on the assessment carried out by the Commission. Therefore, for all types of financial facilities, the Commission plays a key role in managing the assistance. Significant human resources at the Commission are devoted to this work and it bears serious reputational risks. Finally, the management of the assistance programmes is closely linked to other EU economic management instruments, i.e. the Macroeconomic Imbalances Procedure and the Excessive Deficit Procedure. They should identify and prevent - respectively - mounting macroeconomic imbalances, but if financial assistance is nonetheless needed, the support programmes should be designed and monitored in co-ordination with these frameworks. The multiple linkages and strong involvement of the Commission demonstrate a clear case for the Court’s engagement in auditing the financial support programmes, based on Article 287 of the Treaty on the Functioning of the European Union, which gives the Court a general mandate to submit observations on specific questions related to the EU’s activities.
The audits of the financial assistance were also novel with regard to their audit scope. The comprehensive assessment of the programmes required an in-depth analysis of, broadly, two main aspects: the internal procedures and processes of the Commission with regard to management of the programmes, as well as their overall design and implementation (see Box).
89 TESTIMONIAL Auditing financial assistance programmes
Box: Key aspects in auditing financial assistance programmes
Internal processes at the Commission Effectiveness of the programmes
• Procedural arrangements for the design • Design of policy conditionality and monitoring of the programmes (justification and analytical background of the measures, appropriateness, specificity • Co-operation with programme partners - and timing); division of responsibilities, communication and co-ordination • Implementation (level of compliance with policy conditionality) • Fundamental economic analyses - preparation of macroeconomic projections • Results (progress of reforms in the specific and funding gap calculations, setting key areas subject to programme conditions) economic assumptions of the programmes • Achievement of the programmes' overall • Borrowing activities of the Commission objectives (typically fiscal, financial and (if relevant) growth-related) • Appropriateness and effectiveness of technical assistance delivered in the context of the assistance programmes (if relevant)
The audits of the financial support programmes examined highly technical processes at the European Commission which also proved very complex from the institutional perspective. They involved interactions not only within the Commission and with programme partners, but also national authorities, stakeholders, other Member States and others. A further challenge in the context of the analysis of the programmes’ effectiveness was their very broad scope. This was the case for the Greek programme in particular, which covered virtually all functions of the Greek State, in some cases requiring deep structural changes, and which has evolved considerably throughout the programmes. Consequently, our analysis – for example in the field of financial and taxation reforms – also had to be carried out at a great level of technical detail. Finally, one should note that the success of the programmes depends not only on their design or implementation. A number of external factors, such as political instability or the international economic environment, strongly impact the performance of the programmes and it remains a challenge to isolate them in the audit process.
90 TESTIMONIAL Auditing financial assistance programmes
Given the complex scope of the audits we applied some new procedures in the audit process to ensure a fair and balanced analysis. For the analysis of programme conditions, we designed the “scorecard”, a detailed check list which enabled us to comprehensively grasp and encode problems in the design, monitoring and implementation of conditions. The scorecards were adapted according to the situation in each Member State and policy field, but they ensured that for each of them we covered similar problems based on the same methodological approach. The audits also involved external experts extensively. This happened at all stages of the audit process. We organised panels of experts: one-day discussions with a group of distinguished practitioners and scientists to scrutinise our audit approach (in the planning phase) and findings (in the reporting phase). In the field-work phase, we contracted external experts to carry out certain technical work, for example, on the accuracy of the macroeconomic projections. Further, our analyses were enhanced by information obtained in numerous information gathering meetings: with stakeholders, national authorities, experts and other international organisations.
Auditing the support programmes was a challenging task, because it required us to adjust the Court’s performance audit approach, which is geared primarily towards assessing the added value of EU expenditure. In view of this we have applied some new auditing methods and co-operated extensively with external experts. As a result we formulated process-oriented recommendations to the Commission which should tangibly improve the management of the support programmes and, in particular, the transparency of this process.
91 TESTIMONIAL MATTHIAS BLAAS, ECA AUDITOR
How to perform audits of the European Banking Union
As the financial crisis evolved into the euro area debt crisis, the EU decided to create the Banking Union. The Banking Union applies to all countries in the euro area. However, other Member States have the option to join. The Banking Union consists of the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). As a further step, the Commission made a proposal for a European Deposit Insurance Scheme (EDIS).
European Banking Union
Single Supervisory Single Resolution European Deposit Mechanism (SSM) Mechanism (SRM) Insurance Scheme (SRM)*
Figure 1: The three pillars of the European Banking Union (*Planned)
The SSM is the first pillar of the Banking Union. Under the SSM, the European Central Bank (ECB) Matthias Blaas, ECA Auditor - Regulation of markets is responsible for the prudential supervision of banks in the euro area. The ECB directly supervises and competitive economy significant banks supported by staff from national authorities, while the national supervisors continue to monitor the remaining banks. To comply with the Meroni doctrine, which limits the powers that can be transferred to agencies, the SSM was established under the ECB. Consequently, the ECB’S Governing Council is the final authorizing body for all decisions taken by the SSM.
The establishment of the Banking Union has created new challenges for the work of European Supreme Audit Institutions (SAIs). National supervisors used to be audited by national SAIs in a number of Member States, in some cases with very broad mandates. Since the establishment of the SSM, the ECA and SAIs are facing difficulties performing the audit tasks, as the ECB interprets the audit rights differently, in particular with regard to the supervision of significant banks. A Task Force Banking Union has been established on EUROSAI level to deal with these challenges, and to perform coordinated audits for the supervision of less significant banks that continue to be monitored by national supervisors. The Court is a member of this task force.
92 TESTIMONIAL How to perform audits of the European Banking Union
As new functions were established at European level, the ECA has been given new tasks. As regards the SSM, audits performed by the Court are an important part of the safeguards for ensuring that the ECB carries out its new supervisory functions in full independence whilst being fully accountable for its actions. Pursuant to Article 20 (7) of Regulation (EU) 1024/2013, we shall also take into account the supervisory tasks conferred on the ECB when examining the operational efficiency of the management of the ECB. As the ECA’s former President Caldeira stated in 2013, the Court considers that its examination encompasses the audit of sound financial management as applied to other bodies held accountable to the European Parliament and Council under the provisions of Article 287 TFEU.
The SRM is the second pillar of the Banking Union. The SRM consists of the Single Resolution Board (SRB) and currently 19 National Resolution Authorities (NRAs) of the Eurozone. The SRB is directly responsible for preparing resolution plans for the most significant and cross-border banks in the Eurozone. It is also responsible for any potential resolution of these entities and the oversight of NRAs.
The European Parliament and the Council decided within Article 92 of the SRM’s founding Regulation (EU) 806/2014 that the ECA has comprehensive audit rights regarding this EU agency. However, the ECA shall not only audit the budget of the SRB and the contingent liabilities of the SRM, but also receive its first performance audit obligation. If the Single Resolution Fund (SRF), which is managed by the SRB, is used, the ECA has to extensively audit the use of the Fund. The audit can also be triggered by any related Fund aid assessment done by the Commission. A report on the ECA’s audit would have to be published within a tight deadline.
The ECA established a dedicated EU Financial and Economic Governance (FEG) Team in 2013. It consists of staff that had the necessary skills and experience. This team is now also responsible for audits of the Banking Union. Resolution planning and in particular resolving banks are very challenging tasks. They require a high degree of expertise. Accordingly, the ECA had to build up an additional degree of internal expertise. Therefore, the ECA hired new staff members with substantive bank resolution experience.
In addition, a bank resolution contingency audit team was established. It contains several auditors from all chambers of the ECA with banking experience. The team was established using the new flexibility of the ECA after its structural reform. Experts from different related areas, such as valuation, bank risk management, bank supervision and resolution are regularly training as a team. In case of any use of the SRF, the team will be immediately available to perform the obligatory audit.
93 TESTIMONIAL How to perform audits of the European Banking Union
For the training of its staff, the ECA agreed cooperation with the European University Institute (EUI), based in Florence, in May 2017. Since then, two training courses with experienced professors from well-known universities have been organised with the EUI at the ECA’s premises. Both focused on bank resolution topics. The ECA plans to develop its cooperation further with the EUI in different areas.
Since the inception of the FEG team, the Court finalized a first audit of the ECB in its supervisory function. Special Report 29/2016 was published in November 2016. The report focussed on the governance structure of the ECB, the set-up of joint supervisory teams and on-site inspections. It received substantial press coverage. However, the first SSM audit was hampered by scope limitations imposed by the ECB which were fully disclosed in the ECA’s report. The ECA is currently performing a second audit on the SSM with focus on its crisis management.
Currently the FEG team is carrying out an audit on the SRB which focuses on resolution planning. The final report is expected in winter 2017/2018. During the audit of the SRB, the team enhanced its expertise on bank resolutions and the related planning.
The first audits of the SSM and the SRB proved to be challenging for the auditors and for the auditees. In fact, the work of the SSM, the SRB and the ECA is similar in many ways. All three bodies request information, analyse it and draw conclusions based on the assessments conducted. While the ECA regularly recommends improvements of the legislative framework and the procedures of EU bodies, the SRB for instance identifies and addresses substantive impediments to resolvability. Therefore, all three bodies often face similar challenges, such as confidentiality arrangements, access to information, data quality and the amount of available data. While substantive differences in their tasks remain, the similar challenges often caused a smile during meetings and ended in an exchange of recommendations on how to deal with them.
94
1 2 3
4 5 6
1. From left to right: Vítor Caldeira, ECA President; Catherine Ashton, High Representative of the European Union for 7 Foreign Affairs and Security Policy and Vice-President of the Commission and Karel Pinxten, ECA Member - 10/1/2013 2. ECA President Klaus-Heiner Lehne welcoming Kersti Kaljulaid, President of Estonia and former ECA Member - 5/10/2016 3. Malta’s Minister for Finance, Hon. Prof. Edward Scicluna and Klaus-Heiner Lehne, ECA President - 29/3/2017 4. Günther H. Oettinger, Commissioner for Budget and Human Resources and Klaus-Heiner Lehne, ECA President - 15/5/2017 5. Eurogroup President Jeroen Dijsselbloem signing the ECA Golden Book in the presence of ECA Member Alex Brenninkmeijer - 10/10/2016 6. ECA Member Mihails Kozlovs with Professor Mario Monti, Chairman of the High Level Group on Own Resources - 1/3/2017 7. Ville Itälä, ECA Member for International Relations (MIR) and Eero Heinäluoma - MP Chair Audit Committee Parliament Finland - 5/4/2016
96 8 9
10
8. 2014 EU Accountability Conference organised by the European Court of Auditors in Brussels -14/10/2014 9. From left to right: Pier Luigi Gilibert, Chief Executive, European Investment Fund; Ingeborg Gräßle, Member of the European Parliament, Chair of the Budgetary Control Committee; Klaus-Heiner Lehne, ECA President; Iliana Ivanova, ECA Member, Dean of Chamber II; Nicholas Martyn, Deputy Director-General for Policy, Compliance and Performance, DG Regional and Urban Policy, European Commission - 15/11/2016 10. 22th INCOSAI meeting 5-11 December 2016 97 10 11
12
13 14 15
10. Delegation of the Economic Community of West African States (ECOWAS) 16 From left to right: Geoffrey Simpson, ECA Director; Dr Muhammad Sani Bello, Financial Controller of ECOWAS; Muhammad Dangana, Assistant of the Financial Controller of ECOWAS; Koffi Sokada Abotchi, Official at the Financial Control of ECOWAS - 25/3/2015 11. Visit of Mr S. Mohammad Mahdi Hussaini, Deputy Auditor General of Afghanistan and Mr Sadeqizada Neli, Member of the National Assembly of Afghanistan - 30/5/2011 12. H.E. Urs Hammer, Swiss Ambassador to Luxembourg and former ECA President Vítor Caldeira - 17/12 /2014 13. H.E. Huang Changqing, Ambassador of the People’s Republic of China to Luxembourg - 6/4/2016 and ECA President Vítor Caldeira 14. From left to right: Baudilio Tomé Muguruza, Phil Wynn Owen, ECA Members; Teruhiko Kawato, President of Board of Audit of Japan; Takami Osaki, the Ambassador’s First Secretary; Vítor Caldeira, ECA President; Alex Brenninkmeijer, ECA Member; Tanino, BoA Japan; Geoffrey Simpson, ECA Director; Koike, BoA Japan - 20/7/2016 15. From left to right: Dr Cha-Bae Yum, President and Dr Gun-Soo Kim, Manager of Audit and Inspection Research Institute of the South Korea - 5/9/2011 16. ECA President Vítor Caldeira and H.E. Manjeev Singh Puri, Ambassador of India to the European Union, Belgium and Luxembourg - 26/2/2015
98 17 19
18
17. ECA President Vitor Caldeira (left) and ECA Member Karel 20 Pinxten welcoming EU Council President Herman Van Rompuy - 12/9/2013 18. European Parliament President Martin Schulz and Vítor Caldeira, ECA President - 1/6/2015 19. From left to right: Vítor Caldeira, ECA President; Jean-Claude Juncker, President of the European Commission and Henri Grethen, ECA Member - 13/4/2015 20. From left to right: Jean-Christophe Laloux, Director General, Deputy Head of Operations; Heike Rüttgers, Head of Division, Portfolio Management and Policy (ACP-IF-PMP); Szabolcs Fazakas, ECA Member of Chamber III; Dr Werner Hoyer, President of the European Investment Bank; Alexandra Constantinescu, advisor to the President Dr Hoyer; Karel Pinxten, ECA Member, Dean of Chamber III; Hans Gustaf Wessberg, ECA Member of Chamber III, Danièle Lamarque, ECA Member of Chamber III, Klaus-Heiner Lehne, ECA Member of Chamber III and Philippe Froidure, Director of Chamber III - 5/2/2015
21 22
21. Victor Caldeira, ECA President and José Manuel Barroso, European Commission President - 11/6/2012 22. From left to right: ECA Member Henri Grethen; Prime Minister of Luxembourg Xavier Bettel; Vítor Caldeira, ECA President and Eduardo Ruiz García, ECA Secretary General - 14/1/2016 99 4. THE ECA SEEN FROM THE INSIDE
Inside the K3 building (opened 2013) Architect: Jim Clemes
100 TESTIMONIAL VÍTOR MANUEL CALDEIRA, FORMER MEMBER AND ECA PRESIDENT
A look back
Vítor Manuel Caldeira served from March 2000 as a Member and from 2008 as the ECA’s 10th President. His mandate was renewed in January 2011 for a second term, and in January 2014 for a third term.
A vision
Vítor Caldeira’s aim was always to help the institution to develop a vision and then adopt the right strategy to achieve that vision. Developing a vision for the ECA was in his view a collective endeavour involving all Members and the staff as well as stakeholders.
During his mandate, the ECA developed the first ECA strategy for the period 2009 to 2012 and then adopted the strategy for 2013 to 2017, which had the goal of maximising the institution’s contribution to making the EU more accountable to citizens and led to a number of important organisational reforms.
The ECA started working more closely with the European Parliament than it used to in order to identify audit topics most relevant to citizens. It also worked more closely with national parliaments and the ECA reports were increasingly drafted with national parliaments in mind.
Auditing EU economic governance became a priority for the ECA after the 2008 financial crisis. The ECA was given new audit responsibilities, for example with respect to the audits of the Single Supervisory Mechanism, the Single Resolution Fund and the Single Resolution Vítor Manuel Caldeira, Board, as well as the new agencies that were set up to regulate the financial sector. The ECA former ECA President also started to do performance audits in this area, including on the new arrangements for coordinating Member States’ macro-economic and fiscal policies.
The audit of EU funds
President Caldeira worked closely with the Supreme Audit Institutions of the Member States in the Contact Committee, to promote cooperation between SAIs in the audit of EU funds and create a good basis on which to develop common audit methods. He also felt that it was essential to identify the major risks of corruption and fraud at
101 TESTIMONIAL A look back
each stage of the process: when legislation was being adopted; when policies were being implemented; and when public funds were being spent. SAIs could share their experience and develop tools for mapping the major risks.
” Ethics” was another area of audit that Vítor Caldeira expected to develop and maybe come to be considered as a new “E” alongside the traditional “3 E’s” of economy, efficiency, effectiveness, as perhaps would “Equity”.
The reform of the ECA
President Caldeira strongly supported ten initiatives aimed at leading to a reform of the ECA. These initiatives addressed key issues like updating the Annual Report, reviewing the roles and responsibilities of those involved in audit, and streamlining audit and reporting processes.
He felt the need to do more with less and pay greater attention to addressing the needs of all the ECA’s partners and stakeholders. Amongst other things, this led to the creation of a new function for a Member for institutional relations and to a new communication and stakeholder relations strategy. In this way, under President Caldeira, the ECA strengthened its relations with the Budgetary Control Committee and the other specialised committees of the European Parliament.
President Caldeira was also instrumental in the development of a new product of the ECA, the landscape review. The first two provided the ECA’s institutional stakeholders with the ECA’s insights on the key financial management and accountability challenges facing the European Union.
102 TESTIMONIAL OLIVIER PRIGENT, ECA AUDITOR
Forward looking: a young auditor’s perspective
After spending more than ten years in the private sector as an engineer and a consultant, I started as an auditor at the Court in 2012. In 2014 and 2015, I had the opportunity to contribute to a major change programme at the Court, which took effect on 1 January 2016. I have been invited to contribute to this publication to present, firstly, the 2016 reform of the Court, called “Forward”, and, secondly, the views of a “young auditor” on the future challenges that the Court will face. Having been born in 1978, I am nearly as old as the Court itself, but I am still below the average age for staff which is 45. 2016 reform of the Court
The 2016 ECA reform project was a broad organisational and procedural change programme aimed at implementing the priorities of the 2013-2017 ECA strategy. The change programme was also a response to the results and recommendations of the 2013 peer review by the supreme audit institutions of Germany, France and Sweden, the 2014 European Parliament report on the future of the ECA and the requirements of the new EU Financial Regulation.
The reform’s objectives were: Olivier Prigent, ECA Auditor • to be more agile in responding to a rapidly changing environment by transforming the ECA into a task-based organisation which directs its resources swiftly and flexibly to the highest-priority tasks; • to ensure timely delivery of our products by streamlining our audit procedures; and • to make sure our products achieve maximum impact by professionalising our communications and stakeholder relations functions.
For staff, the most visible aspect of this change programme was probably the Court’s transformation into a task-based organisation. As of 1 January 2016, our units, formerly consisting of 10 to 25 people have ceased to exist, and staff resources are now managed in directorate pools of between 40 and 100 people. “Heads of unit” have become “principal managers”, who share management tasks under the leadership of their directors. “Heads of task” are in charge of delivering the task output (e.g. a draft audit report) with the resources attributed to that task. This management mode enables us to assign resources more flexibly to urgent and important tasks. It also gives staff the opportunity to get involved in a wider set of tasks and expand their experience and skills.
103 TESTIMONIAL The ECA reform
This new organisational set-up has been in place for a year and a half. As head of task on a landscape review – a new ECA product – I had the opportunity to fully experience the advantages and challenges of this new organisational structure. The main benefit was having access to a far larger pool of resources when I built my team: with the agreement of the directors concerned, I was able to pick team members with the right experience, knowledge and language skills from the Court’s pool of 550 auditors instead of a unit of 12 people. I was also able to beef up my team during a couple of weeks when our workload was at its highest. Finally, I had the opportunity to provide my team members with feedback which will be taken into account in their official appraisals. However, coordinating resources that are managed by four different directors involves more work. And in practice, during the work, this proved to be less flexible than it would have been within a small unit to make staffing adjustments when team members were unexpectedly absent for long periods or when additional work was required. But overall, I find this new organisational structure to be a major improvement: it makes it possible to align the right resources with task requirements, even if it takes more coordination. This should allow us to increase the quality of our products.
Just to put things in perspective: the 2016 Court Reform is only one of several organisational changes the Court has undergone since its creation in 1977. When it was created, the Court was actually a matrix organisation, with each of the nine Members being responsible for one of the nine policy areas and one of nine horizontal competences (work programme, methods, relationships with the Commission, etc.). When new Members arrived in the eighties and nineties, new sectors were created and existing sectors were split. When the number of Members increased from 15 to 25 in 2004, a new structure became necessary: audit groups were created, and Members became collectively responsible for the overall activity of their audit groups. Finally, in 2010, following the first peer review in 2008 and the preparation of the 2009-2012 Strategy, the Court created the audit chambers, which were in charge of adopting special reports on behalf of the Court, thus reducing the time needed for publication. Future challenges that the ECA will face
It is far trickier to predict the future than to bring back some good old memories from the early days of the Court, but I have listed six challenges, some of which we are already facing now: • Restoring the trust of EU citizens; • Increasing the visibility of the Court; • Improving the timeliness of our reports; • Adapting our annual report; • Maintaining the quality of our staff; and • Making the most of future technologies.
104 TESTIMONIAL The ECA reform
In November 2015, an internal survey of staff perceptions of the future of the Court in 2040 was conducted. The most surprising – and somewhat disturbing – outcome of the survey was that 25% of staff thought it rather likely, and 85% saw at least some probability, that the Court would no longer exist in 2040. The current climate of Euroscepticism makes us, as auditors, uncomfortable: while most of us are strong supporters of the EU, we most often have to highlight the weakest aspects in the management of EU funds. And even if our ultimate goal is to promote accountability and transparency and improve EU financial management, our delivery of negative messages feeds this Euroscepticism.
This leads, in my view, to the first, and probably most important, challenge the Court faces: How can we help to restore public trust in the EU by increasing transparency, by showing both what works and what does not? The EU’s citizens need to be convinced that the EU applies the rule of law, spends taxpayer money wisely and, above all, achieves more at a transnational level than Member States could achieve individually.
For our reports to help in restoring public trust, we also need to better connect with citizens. The second challenge the Court faces is that many EU citizens remain unaware of the Court’s activity. We need to adapt the type of products we publish, create tailored derivative products, and improve our cooperation with different types of media and our approach to key stakeholder groups. We also need to focus our communication not only on EU institutions, but also on national or regional governments. In the survey mentioned above, more than 60% of ECA staff believe that the Court should have closer relationships with the EU citizens.
A third challenge, and one that we have already been facing for a while, is the timeliness of our reports. Timeliness is key in order for our publications to be relevant to citizens. However, audits can only happen once projects have been completed. Then, it usually takes more than one year to conduct the audit work in multiple Member States, clear the findings with the auditees, and get the reports approved and translated in 23 languages. But audit results are relevant only if they inform debate before any new legislation is passed. As a result, the window for performing an audit task may be very narrow. The Court has already worked on several aspects to reduce the time taken to complete audits, such as streamlining our audit procedures, enlarging audit teams thanks to a Court-wide staffing pool, using computer- assisted translation tools and developing specific products. Are more drastic changes needed?
The fourth challenge we will face is adapting our flagship product, the annual report, which is still very much focused on the legality and regularity of EU expenditure. Although it has contributed to significant improvements in EU financial management in the past 20 years, EU citizens expect assurance not only that taxpayer money has been spent in accordance with the rules, but also that EU policies are achieving their objectives. And yet, the annual report still consumes about half of the Court’s audit resources. In the 2015 survey, more than half of my colleagues anticipated a massive reduction in financial and compliance audit work. The resources this would free up could help to increase the Court’s focus on the performance aspects of EU action.
105 TESTIMONIAL The ECA reform
The fifth challenge might be staff management. The Court’s staff is one of its key assets. However, staff cuts, slower and longer careers, pay freezes and longer working hours resulting from the latest change of staff regulations in 2014 have already had an impact on staff motivation. Shorter deadlines and higher workloads keep the pressure high. These, combined with the Euroscepticism in several member States, constant criticism towards the EU civil service and Brexit, put a real strain on people. Some of my young colleagues attending training sessions have confessed that they are building their skill-sets in case they have to leave the Court, either because their Member State leaves the EU or our contract conditions become insufficiently attractive. What is clear is that we will never enjoy the same working conditions as the previous generation of officials. Already today, EU institutions are failing to attract applicants from the wealthiest Member States. This might, at first glance, seem to be an internal issue for the EU institutions. However, at a time when the EU no longer represents an attractive vision for a significant share of its population, if the Court starts failing to attract or retain talented multilingual staff who are willing to relocate with their family from across the entire EU – and not only from the less wealthy countries – the quality of our institution’s work might suffer.
The sixth challenge is probably more of an opportunity: technology. Every year at the Court brings new innovations: Wi-Fi everywhere, multiple video-conferencing rooms, mobile devices and new software. The future will probably bring even more new opportunities that we will need to seize. Big and open data, for example, provides alternative possibilities for analyses. Drones could save time on on-the- spot visits, or even allow us to do them remotely. Automated translation could further streamline our publication process. Technology could be fun; but having worked on the 2016 Court reform, I also know how hard it is to change established processes in a professional organisation.
The 2016 Court reform was probably the largest of the past decade. It allowed us to partially address some of the challenges listed above. But to face other upcoming challenges, the pace of changes will probably accelerate. In 2016 and 2017, the Court has already experienced two other significant changes: a fifth Chamber was created mid-2016, and the annual report is being significantly modified. Several of the challenges listed above are also addressed in the European Court of Auditors strategy for 2018-2020. There is no doubt that the Court will need to adapt again in the near future, “going forward” to be able to face both new challenges and opportunities.
106 TESTIMONIAL PSC ECA TEAM
The ECA as vice-chair of the INTOSAI Professional Standards Committee
The European Court of Auditors (ECA) has been involved in international co-operation since its establishment in 1977. The Court’s international relations focus mainly on collaborative work with other Supreme Audit Institutions (SAIs) at the European Union level. However, ECA also co-operates with international audit organizations outside Europe, mainly through the International Organization of Supreme Audit Institutions (INTOSAI).
INTOSAI operates as an umbrella organization for the external government audit community, by providing an institutionalized framework for supreme audit institutions (SAIs) to enhance professional auditing capacities and to promote the development and the transfer of knowledge relevant to public sector audit. As the world-wide organization for SAIs, INTOSAI’s role has been recognized in two resolutions adopted in 2011 and 20141 by the General Assembly of the United Nations.
The ECA has been an active participant in INTOSAI’s activities, such as its three-yearly Congresses. In addition, it has played a significant role in its standard-setting activities, amongst other things as a member of the three main standard-setting subcommittees Neil Usher, Principal Adviser ; Lena Lambert, trainee ; and as chair of a working group established to draw up guidelines on the audit of Harriet Lommer, trainee ; Alan Findlay, Principal Auditor disaster-related aid.
In line with its international cooperation strategy adopted in 2014, and under the leadership of former President Vítor Caldeira, the ECA decided in 2015 to apply for the chairmanship of the INTOSAI Professional Standards Committee (PSC), and was delighted to be appointed as vice-chair to work in partnership with the new chair, the Tribunal de Contas da Uniao (TCU the SAI of Brazil). After a year of preparatory work, the ECA took up this new challenge in December 2016 at the XXII INTOSAI Congress in Abu Dhabi, when the outgoing PSC chair, the SAI of Denmark, formally handed over the baton to the TCU and the ECA.
As the PSC focuses on Strategic Goal 1 of the INTOSAI Strategic Plan 2017-2022, TCU and ECA committed themselves to assume Goal 1’s ambitions to “promote strong, independent and multidisciplinary SAIs and encourage good governance by providing
1 Resolutions A/66/209 and A/69/228 respectively. 107 TESTIMONIAL The ECA as vice-chair of the INTOSAI Professional Standards Committee
and maintaining international standards of supreme audit institutions (ISSAIs) and contributing to the development and adoption of appropriate and effective professional standards”.
One of ECA’s key roles as vice-chair is to ensure the highest possible professional quality of the International Standards of Public Sector Auditing (ISSAIs) and of the processes followed to
develop and maintain them, to the greatest benefit of all INTOSAI members. The PSC Mandate thus concentrates on:
Providing a strong organizational structure to support standard-setting; • Offering strategic guidance on, and overall coordination of, standard-setting; • Consolidating the Standards Framework; • Supporting the capacity development initiatives for the implementation of INTOSAI Standards; and • Monitoring the implementation and adoption of INTOSAI Standards.
Besides these key tasks, the PSC chair team maintains close contact with its subcommittees for Performance Audit (PAS), Financial Audit and Accounting (FAAS), Compliance Audit (CAS) and Internal Control Standards (ICSS), which are the key players in INTOSAI standard-setting activities.
After just half a year as PSC vice-chair, the ECA and its Brazilian colleagues have already achieved a number of successes and are looking forward to new projects, tasks and achievements in 2018 and beyond which will contribute to INTOSAI and world-wide public-sector audit.
108 TESTIMONIAL GAILĖ DAGILIENĖ, ECA DIRECTOR
The Translation and Language Services Directorate: 40 years at the service of the European Court of Auditors
“Translation is not a matter of words only: it is a matter of making intelligible a whole culture.” (Anthony Burgess)
This year, our institution celebrates 40 years of existence. During this time, it has created a true European audit culture, extending across the EU, driven by a group of enthusiastic men and women from all over Europe, including auditors, lawyers, accountants, IT specialists and translators. They have all played a role in shaping the Court into the modern, dynamic and trendsetting audit institution that we know today.
The Court produces a wide range of reports and publications which are the fruit of complex processes involving several phases and different stakeholders. Translators make up the last link in the chain of production.
Translators – shadow heroes of words – have been a part of the Court since it was founded. They are its closest readers, paying careful attention to every nuance of every word. Diligent, perfectionist, meticulous and with a keen interest in quality, translators have always been present, acting as a bridge between the Court and its readership.
For how useful would a text – even an extraordinary one – be if only a handful of people were able to read it? Translation spreads the message, bringing it to the most remote corner of Europe, a channel of communication connecting public institutions with citizens. Through their work, translators cross borders and contribute to popularising institutional knowledge. Gailė Dagilienė, ECA Director - Translation and Language Services In these times of celebration and commemoration, when we look back into the past and project ourselves into the future, there are three important elements that define us as translators: we are a reference point for EU audit terminology, intensive users of modern IT tools, and a dynamic directorate offering a wide range of services tailored to our institution’s needs. Terminology creation
In the beginning, there was just a small group of people translating into what were then the six official languages of the European Communities. Over time, as enlargement followed enlargement, the group gradually got bigger until it became a Directorate.
109 TESTIMONIAL The Translation and Language Services Directorate: 40 years at the service of the European Court of Auditors
Consolidation of the Translation Service also meant producing an EU audit terminology which eventually became a multilingual corpus of terms. This was a very challenging process that involved finding equivalents for concepts that sometimes did not even exist in certain Member States. Just like legal systems, which are country-specific, audit systems may differ from one Member State to another. For example, the very term “audit” raised problems in certain languages and was introduced as a neologism, replacing the term “control”. Other Court-specific terms such as “landscape review” or “single audit” also had to be translated into 23 official languages by finding an equivalent national concept.
The audit terms created, developed and maintained by our translators constitute a multilingual thesaurus whose ownership is a source of pride, as well as entailing responsibility. Our translators have shared their thesaurus with national Supreme Audit Institutions, which have found it particularly useful, especially in those Member States with more than one official language.
Creating terminology is a unique activity that few endeavour to undertake. Unlike translation, which provides satisfaction when productivity is high, the creation of terminology is like jewellery-making: value is measured in terms of the fine quality of each small piece. Terminologists may spend hours or even days crafting the perfect term, polishing meaning and deleting superfluous elements in order to obtain the purest equivalent in the target language.
By undertaking such a meticulous activity year after year, and with the tenacity and determination of bees building a hive, our translators establish the foundations of an EU audit terminology that is now used by other EU and national institutions. Adopting new technologies
In the beginning, the only tools at our disposal were pen and paper. However, technological progress gradually made its way into the public sector and especially into the field of translation, which was particularly well suited to innovation. In our Directorate, translators and assistants alike have now started to use sophisticated IT tools in their work.
Modern translation software was introduced, and had to be tested, adapted, fine-tuned and implemented. Huge translation memories were created, merged, maintained and enriched over time. Several terminological databases were created and hundreds of audit terms pooled into what are now eight million terms contained in the interinstitutional IATE database. All this work was carried out by translators and assistants in addition to their normal daily tasks, proving, once again, how versatile the translation community really is.
The Court’s translators now use translation-memory software, machine translation, terminology- management software, terminology databases, project-management translation software and voice
110 TESTIMONIAL The Translation and Language Services Directorate: 40 years at the service of the European Court of Auditors
recognition. Today, many of them can be seen wearing headphones and a microphone in front of two large screens, dictating a translation that is automatically transcribed by voice-recognition software. Those who use machine translation then post-edit the result, correcting errors and ensuring the text is fit for publication. Translators have taken a major leap forward, transforming themselves into IT-savvy professionals.
Does this mean that we can now rely exclusively on technology for translation purposes? Far from it! Although the prospect is enticing, we should be under no illusions: despite considerable technological progress in the field of translation, human intervention is still absolutely vital. Even for those language combinations that work well, machine translation is considerably inferior to the human variety. Computers may very well be able to beat humans when playing chess or Go, but they cannot (yet) replace the human brain when it comes to translating. Diversification of services
In the beginning, the translator’s job was essentially just to translate. Then, as the Court grew bigger and produced a wider range of products, the Translation Directorate took account of the change by diversifying its services to offer linguistic assistance, drafting assistance, video subtitling and internet translation, to name but a few. This process was accompanied by a streamlining of resources which has led to impressive efficiency gains and an increase in productivity. It has also highlighted the wealth of resources available in the translation community, whose talents were placed at the service of the Court.
The English language team has become instrumental in the drafting process. For several types of document, English translators now cooperate closely with auditors throughout the drafting process, helping them to produce content that is not only grammatically correct, but which also flows naturally and reads clearly.
Linguistic assistance is also one of the most highly appreciated services provided by translators before, during and after audit missions. Translators join the auditors for audit visits in the Member States and ensure that communication runs smoothly between the audit team and auditees. This work requires an excellent command of the languages used, as well as resilience, tact, the ability to understand complex issues and handle difficult situations, and social and communication skills.
Several elements combine to make linguistic assistance a unique service: a sense of belonging (translators become members of the audit team), a climate of trust (translators and auditors are colleagues who know each other by virtue of having already worked together), full availability (translators will work long hours, if necessary without a break), knowledge of the subject matter (translators have a sound knowledge of the audit field) and a common goal (serving the Court).
111 TESTIMONIAL The Translation and Language Services Directorate: 40 years at the service of the European Court of Auditors
In recent years, the Translation Directorate has also been involved in the Court’s Clear Language campaign. Whether through conferences, workshops, communication on the intranet or simply by providing drafting assistance, translators made sure that readers “get the message” on the first reading.
At this time of celebration, when we look proudly at all of the Court’s achievements, we must pay tribute to those without whom nothing would have been possible.
Translators - those people who have worked behind the scenes, who have not always been visible but whose work has been essential to make the machine work at full capacity and speed - have put their heart and soul into serving the Court. Their sole ambition has been to deliver perfect quality; their only weakness, to want to do everything by themselves. Their unique gift is to see beyond the words on the page. Nothing can define them better than the words of the Irish writer Emma Donoghue:
“When I think of this profession I think of priestly, tireless dedication to getting it right.”
112 TESTIMONIAL MAGDALENA CORDERO, ECA DIRECTOR
40 years of IT at the ECA
Introduction
Browsing through forty years of information management at the ECA gives you a good perspective on how the work of an audit institution evolves through time. Not surprisingly, information technology has been one of the key drivers of change. But the opposite is also true: the way IT has evolved has been the result of the pressures created by new auditing priorities and risks, and by revised control frameworks and standards. This contribution aims firstly to provide a broad overview of the key aspects that have contributed to our present IT organisation by identifying the key moments, and detailing them from an organisational point of view. The governance of IT and inter-institutional cooperation have been key elements in this history. It also details the major challenges, together with the major outcomes. And finally, the narrative would not be complete without a mention of current IT trends in connection with evolving business challenges. Key dates
Three very important moments have marked the history of IT at the ECA: the 1987 Court decision to assign dedicated resources to IT, the 2006 report that raised IT to its current level of strategic Magdalena Cordero, importance, and the adoption in 2009 of the IT Plan defining proper governance for IT at the ECA. ECA Director - Information, Workplace and Innovation In 1987 the Court officially recognised the importance of informatics at the ECA and its impact on audit, as well as the need for administrative information systems and the introduction of support tools, such as word processing and electronic mail. The Court understood that adequate resources and specialised personnel were required, and so dedicated IT staff were recruited. This marked the beginnings of IT at the Court, and it evolved over the years until an event of strategic importance took place: a seminar held for the Members of the Court on “Trends in applying IT technologies within the area of financial management”. The seminar addressed the issue of the application of IT audit tools for performance and financial audits, the potential benefits and risks of applying IT technologies and the consequences of not doing so. As a result, a working group was set up and presented its conclusions in 2006. The most relevant ones were: to develop an IT Strategy based on audit needs, covering knowledge management and less-paper office initiatives; to enhance the strategic character of IT by creating an IT Management Committee at Member level;
113 TESTIMONIAL 40 years of IT at the ECA
to establish an IT audit policy to be formulated and reflected in the audit manual and covered by methodological guidelines based on COBIT1. At the end of 2009, an IT Plan for 2010-2012 was adopted by the Court. It set up a framework for governing IT and fixed the principles, goals and objectives for the period. The structure The organisation of IT at the ECA has evolved in parallel with the needs of the organisation, and is characterised by a high degree of decentralisation. The 1987 decision to have dedicated IT staff had consequences: the recruitment of IT experts, and the nomination of one member of staff per sector to specialise in computer audit, to serve the particular needs of the sector. Staff followed training programmes adapted to their personal experience. By 1993 the informatics service was already a division with 12 officials with a mixed profile of IT experts and staff performing computer audit tasks. In 1994 the computer audit responsibilities were transferred from the Informatics Division to one of the audit entities. This decision strongly influenced the future evolution of IT at the ECA: both groups worked at a different pace - not always coordinated - and the strategic relevance of the one or the other varied over time. The distribution of roles and responsibilities has never been clear since. In 1996 the Informatics Division was integrated into the Personnel and Informatics Division, thus diminishing the importance of informatics at the Court in relative terms. This remained the case until the creation of the Directorate for Human Resources and Informatics, when IT again became a division. It should be noted that, independently of the range of the entity, IT at the ECA was led by managers with an audit background, but not necessarily IT professionals. In 2006 the Court Members recommended setting up a dedicated IT audit unit with the following tasks: to carry out IT systems audits, to support the IT-related work of other audit units, and to assist the IT auditors in the use of CAATs2. This confirmed the separation of IT functions created in 1994. Following the 2006 decisions, the first Directorate forInformation Technology and Telecommunications was created on 1 October 2008. In 2010 three Units were created within the directorate, one for information systems, another for infrastructure and user services, and the third one for IT governance. IT professionals were appointed to fill these managerial roles.
1 COBIT (Control Objectives for Information and Related Technologies) is a framework created by the international professional association ISACA for information technology (IT) management and IT governance.
2 Computer Assisted Audit Techniques. 114 TESTIMONIAL 40 years of IT at the ECA
In January 2012 the Library and Archives team joined the directorate which then adopted a new name, Information and Technology Directorate. This was a very beneficial change since it allowed most of the central activities around information and knowledge management to remain under the same umbrella and share the same vision. In 2016 the Buildings and Facilities team was also transferred to the directorate, and the new directorate renamed accordingly as the Directorate of Information, Workplace and Innovation. While this reorganisation has brought added value for the ECA, since the two workplaces - digital and physical - are getting closer and more deeply interrelated every day, it has the drawback of decreasing the relative weight of information technology at the ECA, mainly because managerial capacity has remained unchanged and the existing managers, IT professionals, had no experience and knowledge of the new domain. Governance IT at the ECA was governed, for many years by an advisory committee (CCI3) which was created in 1987 as a permanent body charged with making proposals, identifying needs and following up decisions. This committee, renamed CCII4 in 1993, was composed of representatives from the different audit groups, the administration and the Staff Committee. One member of the Informatics Division would be invited to the meetings but only as an observer. This is an indicator of the very limited importance attached to the potential of IT as a resource for transforming the organisation, instead of merely playing the role of service provider. The division of IT functions between the Informatics Service and IT Audit in 1994 has caused strong dysfunctions in the governance of informatics at the ECA: business users were empowered to take decisions in isolation, without considering the analysis and opinion of the informatics service’s technical experts. Unfortunately, in 2006, the Court confirmed the organisational separation between Information Technology and IT Audit, which remained as part of the audit departments, a separation that is still with us today. In April 2007 the Court adopted a comprehensive IT Strategy that proposed the transformation of the Administrative Committee into the Administrative and IT Committee, which became the strategic body for IT matters. The IT Plan for the years 2010-2013 established a three-level governance structure: listening to the users, setting strategy with the Court Members and deploying it with the directors. Consequently, the Administrative Committee kept its role on information technology matters, and in parallel, the IT Steering Committee (ITSC) was created, composed of directors and chaired by the Director of IT, and the IT Users
3 Comité Consultatif pour l’Informatique.
4 Comité Consultatif pour l’Information et l’Informatique. 115 TESTIMONIAL 40 years of IT at the ECA
Committee (ITUC) replaced the CCII. This structure has proved to be perfectly suited to IT development at the Court: priorities and actions are decided swiftly by consensus and their implementation follows seamlessly.
IT Audit at the ECA
While IT Audit and Informatics worked together in the beginnings of computing at the ECA, as early as 1994 they started to go different and not always parallel ways. Periods of very demanding IT audit activity were followed by others of low activity, and, similarly, Informatics was implementing new services and securing infrastructure, sometimes more slowly and at other times faster than the pace required by the organisation. As early as 1987, strategic documents identified computer audit as an activity to be carried out on all information systems involved in the audit process. For each system, it was to perform an evaluation of the internal controls that would guarantee the reliability of the information produced and determine their effectiveness in delivering adequate information to the users. Furthermore, computer software was to be used to extract and process information as much as possible. This control activity was to be rounded off by a management review of all significant computer installations. While this excellent, and also ambitious, specification of what computer audit could cover is still valid today, the ECA still falls short of applying what was already described 30 years ago. Not all the decisions taken in 2006 have been implemented, and the ECA remains far from enjoying a common methodology and practices for IT Audit. There have been few initiatives on data analysis and a limited number of audits focussed on IT systems governance, and the result has been disappointing production over the past years. This has been mainly due to the reduced size of the computer audit team, which, in addition, was mainly dedicated to supporting information systems for auditors, and, last but not least, to the lack of a proper vision in this domain. Undoubtedly, more integrated and coordinated IT audit and services would have provided the synergies needed to make sufficient progress in this context. Inter-institutional cooperation As a medium-size organisation, the ECA has always searched for synergies with other bodies. The IT function is no different in this respect. The ECA is a very active member of the Inter-institutional IT Committee (CII) that gathers together the CIOs of all European Union institutions. This Committee has sub-committees dealing with specific projects and files in the area of security, contracts, telecommunications, cloud, workplace and architecture. One of the most important areas of this co- operation is procurement. Participation in inter-institutional tenders allows the ECA to benefit from good conditions and allows for substantial savings in respect of the administrative burden.
116 TESTIMONIAL 40 years of IT at the ECA
The institution is also a member of the CERT-EU, the Cyber Emergency Response Team of the European Institutions since it was established in 2012. As a result of this cooperation, which the ECA embraces, the ECA can use numerous inter-institutional information systems, particularly in the areas of administration, human resources, training, finance, and translation. The ECA already began taking over administrative systems from the Commission in the mid- 80s. And in 1997, the Court, the Council and the Court of Justice worked jointly on an inter-institutional project to create a budgetary management and integrated accounting application. This fruitful cooperation has continued until today with the implementation of the SAP system. The ECA participates in EUROSAI’s IT Working Group. In this forum it has become a key contributor to the design and implementation of the IT Self-Assessment (ITSA) methodology and was leader of the project Information Systems to Support the Audit Process (ISSAP) until 2015. Major initiatives The computerisation of the ECA has been a gradual process; equipping all staff with a computer took more than 5 years. And it was not until 1992 that the ECA decided to create the Helpdesk. At that time three quarters of ECA staff had a computer. The capacity to process the data transferred from other institutions was developed at the beginning of the nineties. Data processing was offered by Informatics as a service. With the implementation of a methodology for the Statement of Assurance (known as DAS) in 1994 this activity increased and the first sampling program, MUS (Monetary Unit Sampling), was introduced. The challenge was to determine mathematically the size of the sample as a function of the error rate. The end of the century was marked by the decision to acquire an Audit Support System to fulfil a number of ambitions: knowledge capturing and sharing, improvement and standardisation of audit documentation, increased automation, easier mobility for auditors, quality control management procedures, standardised planning and standardised time recording. Assyst, an application based on the collaborative platform Lotus Notes, was selected and went into production in January 2003. Due to its limited acceptance, in 2010 the ECA decided to develop its own tool and, in 2013, Assyst2, a system developed in-house, was released. Although its use for the SoA (Statement of Assurance) was made mandatory, acceptance for performance audit is limited. It could be that the system does not have the flexibility required by that specific function. Another major ECA achievement is the digitalisation of administrative and audit processes allowing for a more flexible workplace by facilitating remote working and teleworking. Based on the new paradigm anytime, anywhere, any content, an enormous digitalisation exercise for the most important administrative processes was performed during the period 2010-2017. As a result, leave and mission
117 TESTIMONIAL 40 years of IT at the ECA
requests, invoices, payslips … altogether, more than 50 000 paper forms per year were replaced by electronic workflows. With its complementary initiatives,Laptops for everybody and WIFI everywhere, together with a full remote access solution, all available since 2013, the ECA became a leader among the European institutions in facilitating mobility. Furthermore, a new remote access solution to facilitate the BYOD (Bring Your Own Device) paradigm is being developed. This will be a key instrument of the ECA Business Continuity Plan since it will facilitate access to ECA IT key resources from any device (laptop, tablet, telephone) including private devices. All these have been supported by a modern and resilient infrastructure. A new data centre and a new network were implemented following the construction of the K3 building. This was done to continue digitalisation and to transform paper processes, thus fostering mobility and teleworking. The big challenges
The governance principles adopted in 2010 helped IT and audit to collaborate on the implementation of key services. However, as mentioned before, a clear vision of the potential of IT for audit is still missing. The fact that today’s world is more and more digital, that government is transforming into e-government and that “things” will be represented by data is not being taken into account sufficiently. A clear definition of roles and responsibilities shared between audit and the organisation of IT, in which IT plays a more strategic role, remains a challenge. To perform its audit work, the ECA needs to access the auditee’s data, particularly the European Commission’s. The need for a solution to access such data was already stated explicitly in 1987: “Negotiations will be undertaken with the Commission to establish the Court’s unrestricted right to direct enquiry only access to financial and management information held on magnetic files. The information will be processed with suitable software”. The reality is that, still today, negotiations are dealt with on a case-by- case basis. A global solution to the problem of access to the systems has not been reached. As the ECA is a knowledge-based organisation, the creation, capture, sharing, and dissemination of knowledge are basic processes that could radically benefit from digitalisation. Therefore, audit documentation systems, collaborative tools, powerful enterprise search systems, and rich Intranet and Internet capabilities should become essential instruments for auditors. Furthermore, a powerful, user- friendly knowledge portal that brings added value to the audit will be provided. The implementation of an integral Document Management System has been an objective since 1996. However, several attempts have failed, and it is still a challenge to deliver an end-to-end digital and integrated process to cover the full document lifecycle, including electronic signature, electronic authorisation and archiving.
118 TESTIMONIAL 40 years of IT at the ECA
The future: a completely digital audit
The future plans for IT at the ECA must take into consideration the recently published 2018-2020 ECA strategy. The goals are to improve the product range by enhancing the added value of the Statement of Assurance in the context of today’s financial management, to focus on performance aspects of EU actions, and to produce clearer messages for ECA audiences. Inspired by these goals, a new IT plan is now being prepared. The plan should give special importance to the capacity of IT to transform the audit function. It is evident that as the world becomes increasingly digital, so do the audit evidence and controls, and so should the auditing function. It is all about access to data, big data and open data; the same analysis that supports the identification of risk areas will also contribute to the evaluation of policy implementation. Combining a diversity of data sources, including big data, will allow for huge gains of insight into crosscutting issues. Technologies exploring natural language, text mining and machine learning will give freedom to auditors to delegate the “reading function” to machines so that they can concentrate their efforts on planning and interpreting. Generating trust will require communicating with and convincing stakeholders. Here again, data visualisation will allow presentation of enormous amounts of data in single and easy-to-understand charts, facilitating interpretation to permit its use as proof of the observed facts. Powerful IT audit capabilities must guarantee that the data sources are trusted, relevant, and reliable. This can only be achieved by multidisciplinary teams, where IT experts, data scientists and auditors work together during all the steps of the audit process. Sponsorship by senior management and good stakeholder management to involve all actors in the development of the new processes and systems are key success factors. The ECA’s new strategy is the foundation stone for this new reality.
119 7.
5. THE ECA SEEN FROM THE OUTSIDE
The K3 Building (opened 2013) Architect: Jim Clemes
122 TESTIMONIAL DR ARŪNAS DULKYS, AUDITOR GENERAL OF THE REPUBLIC OF LITHUANIA
40 years of history: dates, people, partnership
Years are probably not the best measure of performance or outcomes of an institution. As for humans, anniversaries for institutions are like landmarks, used to reflect the nicest moments of their lives and to wish them all the best for the future. With the years the dates fade – becoming similar and less visible, and we highlight them to give back to each date its own value and achievement, brought about by our aspirations, work and results. People we have met in the past help us to recall the dates, and make our history both human and meaningful.
*** For the National Audit Office of Lithuania (NAOL), official cooperation with Europeanthe Court of Auditors (ECA) dates back to the Luxembourg Declaration signed on 23 October 1996 which defined the objectives of co-operation between the Supreme Audit Institutions of Central and East European Countries and the ECA.
The years of Lithuania’s accession to the EU (we joined the EU in 2004) were marked by an intensive schedule of activities aimed at strengthening the capacities of national institutions to implement the acquis communautaire. The new roles of State institutions required a proper The Auditor General, Dr Arūnas Dulkys (left), meeting the President of the ECA, mandate for the NAOL. Klaus-Heiner Lehne, at the ECA, 2016 Among “first” dates to remember – September 2001 was the first visit of the then President of the European Court of Auditors, Mr Jan O. Karlsson, to the NAOL. The time of the visit coincided with discussion of the new draft Law on the National Audit Office at the Seimas (the Parliament), and we needed strong national and international advocacy and backing to demonstrate the advantage of the new audit concept over the traditional and convenient control. Adopted on 13 December 2001, the Law on the National Audit Office introduced independence for the NAOL, adherence to INTOSAI standards, and gave it a mandate for its first performance audits. The main principles of the law are still valid.
We personally experienced what it means for a national audit institution under development to be supported by another strong professional and independent audit institution such as the ECA. Such assistance is of utmost importance in the period when the first steps are made towards tentatively reading and applying internationally accepted standards, introducing the first performance audits, building self confidence in this type of audit and encouraging trust in
123 TESTIMONIAL 40 years of history: dates, people, partnership
them on the part of auditees and the wider public. Having accumulated this invaluable experience, we now want to exchange it with the other supreme audit institutions that are in a similar situation, to help them make their first difficult steps towards professional audit systems and inevitably lacking experience and knowledge of how to avoid making mistakes, and making their way from control to audit in a more targeted and efficient manner. The support we received from the ECA in creating a professional public audit system is currently being transformed – we ourselves now render assistance in strengthening public audit systems both in Europe and globally.
Ever since the first contacts between the NAOL and the ECA there has been continuous communication and cooperation. The years after the first meetings were marked by a more intensive exchange of heads and auditors of the institutions, especially after joining the EU, when EU- related audit issues became a common objective increasingly requiring professional cooperation. Accession to the EU boosted our entire country and the development of its audit system. The NAOL developed rapidly, it “drank up” all the information, since our determination to become a professional, independent supreme audit institution, with all the benefits this brings, was greater than our fear of mistakes.
The independence of supreme audit institutions and the role of parliamentary control were among issues discussed with Lithuanian parliamentarians during the visit in 2006 of Mr Hubert Weber, President of the ECA and the first Member of the ECA from Lithuania, Ms Irena Petruškevičienė, to the NAOL headed by the Auditor General, Ms Rasa Budbergytė.
An inclusive and active NAOL team made it possible to enact rapid substantial changes in the national legislation and in the entire institutional framework. This led to the successful introduction and direct application of international standards on auditing, as well as the establishment of a methodology and competence basis for performance audits within a short period of time. Today we have clear evidence that the results of these developments are changing the established practice in the country, as well as contributing to more efficient management and use of assets and implementation of the State budget.
The visit in 2014 by an ECA delegation led by its President, Mr Vítor Manuel da Silva Caldeira, to the NAOL, headed at that time by the Auditor General, Ms Giedrė Švedienė, contributed greatly to an exchange of ideas on further development and strengthening of cooperation between the NAOL and the ECA. We consider this visit important, as the NAOL’s audit planning became more focussed on the achievement of Europe 2020 Strategy goals and their transposition into national documents.
A peer review of the NAOL, headed by ECA representatives and conducted in the same year, revealed that the NAOL’s audit practices were compliant with the international standards of public-sector auditing (ISSAIs), its cooperation with the Parliament and communication with stakeholders were appropriate, there were effective quality control and reporting processes in place, while audits were
124 TESTIMONIAL 40 years of history: dates, people, partnership
completed swiftly. We are grateful to the whole peer review team and the ECA in particular for leading this difficult task and allocating some of its best experts to it. Recognizing the long-standing professional experience of the ECA, we look forward to continuing cooperation between our SAIs in the peer review field, as well as involvement of ECA representatives in the next peer review of the NAOL.
While developing our professionalism and building our reputation we have kept on looking at the European Court of Auditors; we have had the possibility to ask questions and take part in professional training organized by the ECA, as well as to communicate and discuss with Lithuanians employed by the ECA. Constant support and cooperation is offered by the Private Office of the Lithuanian ECA Member and by Lithuanian auditors who, while working at the ECA, are always ready to discuss issues relating to the audit profession.
Cooperation with the European Court of Auditors is not limited to high-level meetings, but becoming more down-to-earth, including exchanges of professional knowledge and expert visits. One example of such cooperation was the NAOL’s participation in the annual ECA training day, the Audit Fair which took place in November 2016. NAOL auditors were invited to participate in the event and to share their professional experiences, practical and methodological knowledge, and present the practical use of innovative and effective audit methods.
The professionalism and the mandate of confidence built with the help and determined commitment of ECA experts place an enormous responsibility on the NAOL to serve as a model and to go beyond what is required by the ISSAIs. The NAOL is a unique institution, in that it performs functions not typical of any EU supreme audit institution. Since 2003, the NAOL has fulfilled the functions of an Audit Authority. In 2015, the NAOL was given a mandate to act as an Independent Fiscal Institution. The trust and credibility vested in us by the assignment of those additional functions at national level help us build confidence in ourselves as a supreme audit institution. However, it is also important that supreme audit institutions have trust in each other at EU level as a basis for restoring the trust of EU citizens.
Mutual trust between auditors as a means to achieve greater impact, and the single audit approach were issues discussed inter alia at the latest bilateral meeting between the Auditor General, Arūnas Dulkys, and the President of the European Court of Auditors, Klaus-Heiner Lehne, that took place on 17 November 2016.
The NAOL attaches great importance to the assessment of the implementation of the EU Strategy 2020, and also to its contribution to the UN Sustainable Development Goals, and therefore we are constantly raising the question of how the audit community could and should contribute to these, of how strong we are when acting individually, and whether it would not be appropriate to combine our
125 TESTIMONIAL 40 years of history: dates, people, partnership
efforts, especially as we build our audit results on the same foundations, i.e. the international auditing standards. Insufficient trust in each other in the audit community is very risky. This might lead to a fragmentation of our efforts and to diverting them from essential and systemic issues of EU importance. When carrying out our risk assessments individually we are at risk of finishing at the line where the main problems start. We have our specific reasons for talking about this. The Lithuanian SAI was entrusted at this year’s EUROSAI Congress with the chair of the Task Force on Municipality Audit, which was established at Lithuania's initiative. Preparatory work revealed a number of issues for discussion that already require immediate decisions. We have to ask ourselves if, acting individually, we will obtain true assurance that efficiency and effectiveness have been achieved in the use of each euro of EU funding, and if our risk radars reach from Brussels to the smallest regional unit in the Member States.
We are convinced that only common goals and joint efforts can be turned into powerful weapons for the solution of significant problems at national and international level. We are happy that ECA reports are having a multiplier effect here in Lithuania – the report on the field of energy in the EU and the experience of the European Court of Auditors was presented by the ECA Members Mr Phil Wynn Owen and Mr Rimantas Šadžius at the Parliamentary Conference on the Current Energy Situation in Lithuania on April 28, 2017.
In their 2017 report the OECD noted that the SAI of Lithuania organises conferences to which parliamentarians are invited. These activities create better understanding and encourage agreement on co-operation procedures. Cooperation at international and national level creates better understanding and communication. We will therefore continue to disseminate at national level the ECA audit reports that are important for us and initiate changes, and to talk at international level on the broader issues that are of great concern for us. I believe that our close mutual relationship is very important in this regard, as well as our common striving to create a better future. Knowledge exchange between the specialists of the ECA and the NAOL will be carried out within both bilateral and international formats. I hope that such activities will increase, suggesting new possibilities to be active, innovative and professional.
*** Looking once again at these glimpses of activities – colourful, diverse and individually important – I was trying to find something in common which persists beyond diversity and links colourful elements into an integral whole. Probably this element is partnership, enhanced by trust and confidence, starting with modest initiatives and later – when we know each other better – encouraging us to tackle more complex and sensitive areas. We must develop respect for our partner’s identity – values, behaviour and aspirations. To grow partnership requires time, and understanding that sharing values and achievements does not mean losing identity and independence. The global problems of today will not be solved using an isolated and fragmented response.
126 TESTIMONIAL LONE STRØM, AUDITOR GENERAL, DENMARK
Working together to develop and improve the International Standards of Supreme Audit Institutions
In the past decades, one of the key focus areas of developing public-sector auditing has been developing and improving the framework of international standards of public-sector auditing (ISSAIs).
As chair of INTOSAI’s Professional Standards Committee (PSC) from 2004 to 2016, Rigsrevisionen, the SAI of Denmark, has had a leading role in promoting strong, independent and multidisciplinary SAIs by providing and maintaining the ISSAIs. Getting to this point has, however, been a collective effort, and SAIs from all over the world, including the European Court of Auditors, have been pivotal in the development.
In this article, I will focus on highlights from INTOSAI’s standard-setting journey and explain why the standards are important to SAIs.
Developing standards for public-sector auditing – the journey so far
INTOSAI started working with standards in the early eighties, when it decided to establish the INTOSAI Committee on Auditing Standards. This committee provided the INTOSAI community with its first set of standards on government auditing in 1992. In 2004, INTOSAI took the next Lone Strøm, Auditor General, step and decided to form the Professional Standards Committee, the PSC, which was assigned Denmark with the task of promoting accountability and professional standards in public-sector auditing. Since then, INTOSAI’s standard-setting activities, which initially included only four auditing standards and a code of ethics, expanded, and the organisation now offers its membership access to a full set of standards and guidelines: the ISSAI framework.
INTOSAI’s and the PSC’s experience in the field of standard-setting has been gathered in a long learning process that has included both challenges and successes. Since 1992, when INTOSAI provided the first international standards that could serve as a basis for SAIs’ development of their audits, international standards in private-sector auditing have been through a rapid development. These standards were increasingly recognised by national legislators around the world, and in some countries this development also influenced the expectations to the auditing performed by SAIs. A few years after their adoption, the INTOSAI Auditing Standards were met with criticism from external stakeholders as well as from some of INTOSAI’s members. INTOSAI’s processes were not perceived as being reliable, and the standards developed were not considered to be of a quality that would add the desired credibility to audits. After much
127 TESTIMONIAL Working together to develop and improve the International Standards of Supreme Audit Institutions
discussion, the INTOSAI community therefore decided to engage in a close partnership with IFAC in order to develop better guidelines on financial auditing.
Since 2004, the PSC has been responsible for INTOSAI’s professional standards. It has been the PSC’s strategy to draw on materials from other standard setters to the extent possible, and focus its own efforts on developing standards that would meet the specific needs of SAIs and address the distinctive characteristics of public-sector auditing.
In 2010, the first due process for INTOSAI’s standard setting and the first comprehensive set of International Standards for Supreme Audit Institutions (ISSAI) were launched. However, one could argue, that the ISSAIs at the time lacked the clarity and consistency that could reasonably be expected from a set of professional standards. The ISSAIs appeared as a collection of individual documents rather than as a set of standards that could be used and referred to for auditing purposes.
In 2013, four new documents – ISSAIs 100, 200, 300 and 400 –, the Fundamental Auditing Principles, were endorsed by INTOSAI’s members. The new fundamental auditing principles present INTOSAI’s definition of public-sector auditing and create a common platform for SAIs around the world. The principles include the key auditing concepts that serve as a common language for the INTOSAI community. The new ISSAIs 100, 200, 300 and 400 provide INTOSAI with an improved basis for international cooperation and continued improvement of the ISSAIs. The new ISSAIs also provide the INTOSAI members with a clearer foundation for their individual decisions on how the ISSAIs can best be implemented and used within their respective national context. Put in other words, the Fundamental Auditing Principles represent the common professional basis for SAIs’ audits.
In recent decades, INTOSAI’s membership has encouraged the organisation to take on a new and challenging role; INTOSAI is now emerging as an internationally recognised standard setter for public-sector auditing. With the ISSAI framework, INTOSAI has laid a foundation for its members. In the coming years INTOSAI, the PSC and the new Forum for Professional Pronouncements (FIPP) will develop the current standards and guidelines towards a clearer and more credible set of standards for public-sector auditing. The ISSAIs on financial auditing will continue to draw on the International Standards on Auditing, but standards at the same level on compliance and performance auditing and other key areas of public-sector auditing will also in the future be fully developed by INTOSAI.
128 TESTIMONIAL Working together to develop and improve the International Standards of Supreme Audit Institutions
The past nine years have shown that INTOSAI is a resourceful community that has been able to launch and develop an impressive range of professional standards. INTOSAI and its members are prepared and able to strengthen the standard-setting processes even further, and INTOSAI’s position as an internationally recognised standard setter for public-sector auditing will become stronger in the future.
Standards matter – standards are important
Why all this talk of standards for public-sector auditing? Supreme audit institutions, including the European Court of Auditors, work to promote accountability and transparency of public financial management. The credibility, quality and professionalism of public-sector auditing is essential for the citizens’ trust in their government’s management of public finances. Having access to high-quality, professional standards and guidelines is essential for the public-sector auditing profession and a prerequisite, if we are to meet the expectations set for us by the public.
In the offices of auditors general and courts of audit around the world, it is increasingly realised that SAIs depend on adequate international standards to safeguard their independence, ensure the quality of their work and enhance the credibility and impact of their audit reports. SAIs are held accountable by the media and the wider public for the use of their resources and the accuracy of their audit reports. The constitutional bodies that we serve rightfully expect our audits to live up to applicable professional standards. Today, having inadequate standards can be worse than having no standards.
Through the adoption of a joint declaration - The South Africa Declaration – the members of INTOSAI made a commitment to use the ISSAI framework as a common frame of reference for public-sector auditing, to measure their own performance and auditing guidance against the ISSAIs, and to implement the ISSAIs in accordance with their mandate and national legislation and regulations.
The ISSAI framework gives SAIs a common language that helps them define their work, facilitates more efficient knowledge-sharing and cooperation and adds further credibility to their audit reports. It is worth mentioning also that the ISSAI framework has also increased transparency and made it clear to the users of our reports what they can expect from our audits.
129 TESTIMONIAL Working together to develop and improve the International Standards of Supreme Audit Institutions
Today, the ISSAI framework has developed into a set of high-quality standards and guidelines that offer directions on how to conduct audits in the public sector. Having this set of high-quality standards is, however, worthless if no-one uses them. As a standard setter you must remember who you are developing the standards for and you must never lose sight of the users’ requirements and needs. I am therefore particularly pleased to witness a steadily growing interest in the ISSAIs and a great willingness among SAIs to use the ISSAIs in their daily work. Knowledge of www.issai.org has spread across the world, and INTOSAI’s Development Initiative (IDI) has launched an ISSAI Implementation Initiative (the 3i-Programme), which more than 140 SAIs around the world are currently signed up for. The programme provides the SAIs with an opportunity to discuss the implementation of ISSAIs in their respective institutions, assess their compliance with the ISSAIs and train and facilitate the use of ISSAIs in their audit work.
The European Court of Auditors will have a leading role in developing public-sector auditing standards in the coming years
INTOSAI’s position as a recognised standard setter is founded on the broad and active commitment of its membership. Since 2004, more than 70 SAIs have - with great commitment and dedication – participated in the development of ISSAIs through the PSC. The development of the ISSAI framework and the ISSAIs would not have been possible without the wide support and commitment displayed by the INTOSAI members. The European Court of Auditors has been a very active participant in INTOSAI’s standard- setting activities and has participated in several working groups with technical experts and professional audit staff.
The SAI of Denmark stepped down as chair of the PSC in 2016, leaving the important role as the leader of INTOSAI’s standard-setting activities in the capable hands of the SAI of Brazil and the European Court of Auditors. I am sure that they will take the ISSAI framework and the standard-setting processes that go with it to a whole new level.
130 TESTIMONIAL SIR AMYAS MORSE, NAO AUDITOR GENERAL
UK National Audit Office
We extend our warmest congratulations to colleagues at the ECA on the 40th anniversary of their institution.
Over those years we have established a strong tradition of bilateral cooperation between the United Kingdom National Audit Office and the ECA. The long and fruitful dialogue between our institutions has enriched the professional practice of our organisations, improved our mutual understanding of shared challenges and fostered long and valuable professional relationships.
I have directly experienced the vibrant professional culture that has taken root at the ECA. In April 2015 I was delighted to be invited to the Court to share my experience of leading a transformation programme at the UK National Audit Office. I encountered a lively and committed group of staff and members interested in how we improve the service provided to our parliaments and taxpayers, delivering value in more timely and imaginative ways whilst managing our own costs.
The UK National Audit Office has always taken a keen interest in how colleagues in fellow institutions are breaking new ground. A vivid illustration of this was the excellent landscape reviews published by the ECA on ‘accountability gaps’ and ‘risks to the EU general budget’. The ECA’s accumulated knowledge in these key areas is something that we, and the other Supreme Audit Institutions (SAIs) of the EU, have drawn upon to better understand some of the systemic issues affecting the sound financial Sir Amyas Morse, management of EU funds. The forthcoming landscape review on ‘EU action on energy and climate NAO Auditor General, UK change’ which draws on a collective body of work from EU SAIs should foster a strong dialogue on the challenges and opportunities for us in auditing cross-cutting energy and climate issues.
It is not enough for our audits to end with the audit report. We must maximise the value of all our work. ECA have demonstrated this through annual visits to London to present their insights to senior UK public officials. These events have opened up a valuable dialogue in the UK on how public bodies can better control and manage the taxpayers’ money entrusted to them.
Last but not least our staff have benefited from the close relationship between our institutions. Since 2015, an exchange programme has enabled high calibre staff from our two institutions to experience the culture and approaches adopted by the other. The result has been a better mutual understanding and a broader professional mindset.
We look forward to continuing our professional dialogue over the coming years.
131 TESTIMONIAL ISABELLE NICOLAY, LIAISON OFFICER
The Court of Auditors of the Grand Duchy of Luxembourg – cooperation and friendship
While the ECA celebrates 40 years of existence, the Court of Auditors of the Grand Duchy of Luxembourg only exists since 1999 in its current form. However, the origins of the national Supreme Audit Institution (SAI) date back to 1840, when the Court was known as the “Chambre des comptes”.
The Court is located in a recently renovated historical building on the Place d’Armes, a well- known square in Luxembourg City. Initially, the European Court of Auditors was located just a stone’s throw away from the Place d’Armes in rue Aldringen, the same building which today Isabelle Nicolay, Liaison Officer of the Luxembourg houses the Luxembourgish Ministry of Education. Court of Auditors The model of our national Court presents parallels to that of the ECA, as its organic law has been inspired by that of the ECA to some extent. Similar to the European Court of Auditors, the Court examines, in addition to the legality and regularity of the state revenues and expenses, the sound financial management of public funds. Thus, the Court of Auditors reviews the economy, effectiveness and efficiency of the public expenditure, however without making any judgment on the appropriateness of the expenses. Like the ECA, the national SAI decides on a collegiate basis.
The Court of Auditors of the Grand-Duchy has a long history of cooperation and friendship with the European Court of Auditors, dating back to 1977 when the latter was established in Luxembourg.
In the 1980s, the Luxembourgish Court of Auditors took part in a capacity exchange programme offered by the ECA. In the context of this programme, it was possible for national auditors to be seconded to the ECA in the capacity of “national experts”. This practice was beneficial for both sides, through exchange of information, experience and audit methodologies.
Over the years, auditors from the Luxembourgish SAI have been privileged to participate in a number of professional training programmes offered by the ECA. This process is particularly simple and convenient given the geographical proximity of both Courts. One especially important training course has been the initiation to the European Court’s methodology for newly-hired auditors, which most of our national auditors have been able to complete at the ECA.
132 TESTIMONIAL The Court of Auditors of the Grand Duchy of Luxembourg – cooperation and friendship
It is also worth mentioning that the ECA’s audit methodologies and practices have been, in addition to the ISSAIs, a valuable source of inspiration and improvement to our national audit practices. In fact, several of the Luxembourgish Court’s audit guidelines are derived from those presented in the ECA’s audit manuals.
The location of the ECA in Luxembourg has made informal exchanges between the two institutions frequent and simple. On the occasion of the publication of the ECA’s annual report, it has become a tradition that members of the Luxembourgish parliament and the Court of Auditors are welcomed at the ECA for a personal presentation by the Luxembourgish Member of the ECA.
Cooperation between the two institutions has additionally been strengthened by our common membership in the Contact Committee, an assembly of heads of EU SAIs and the ECA. Through such initiatives, the national SAIs and the ECA contribute to reinforce the spirit of the European Union. The ECA in particular, in its role as coordinator and mediator within the Committee, fosters the union’s core values of community and integration.
The European Court of Auditors has a pivotal role in the institutional landscape of the European Union. As a financial watchdog, it controls the management of the EU budget on behalf of every EU citizen. Through its work, the ECA gives a guarantee to all European citizens that EU funds are spent in a transparent and efficient way. Thus, the ECA reinforces the trust of the public in the European institutions, which is ever more important in times of uncertainty and increasing pressure on public institutions.
133 TESTIMONIAL ECA ALUMNI WORKING IN THE COMMISSION IAS
The development of the European Court of Auditors seen by Alumni working in the IAS
Introduction
It's often said that audit is a small world and, if the experiences of colleagues here in the Commission are anything to go by then there is no better illustration of this than right here in the Internal Audit Service (IAS)! A significant number of former auditors of the European Court of Auditors (the Court) made that journey across the Ardennes to Brussels and in this short paper aimed at celebrating 40 years of the Court from an alumni perspective, some have penned their own personal takes on the trials and tribulations of its relationship with the Commission over the years.
The paper takes us back in time to the days before the DAS (if such a time is possibly imaginable!) and then gives some insights into the thinking that gave rise to the DAS, followed by the turbulent times and events which helped to trigger the downfall of the Santer Commission and the dawn of a new era of Reform. Then it takes us through From left to right: the subsequent years of a slowly maturing Commission and the challenge of trying to Filip Verhoeven, Head of Unit IAS.B3, convince the Court that concrete improvements really were on the way. Further it goes Reinder van der Zee, Director IAS.A, Audit in EU Agencies on to explore the growing sense of DAS "fatigue", but hints at a more positive future by and other autonomous bodies, pointing to a window of opportunity as the Court considers alternative approaches to Manfred Kraff, Director-General of the IAS, Internal Auditor of the Commission, gaining the assurances it needs. Subsequently it takes us into the world of the Special Laura Candeloro, Head of Unit IAS.C1, Reports and the increased focus on performance, illustrating how the institution Jeffrey Mason, Director IAS.B, Audit in Commission and has grown this side of its work as it reaches out to a wider audience and beyond the Executive Agencies I, Christoph Nerlich, Head of Unit IAS.B4, traditional confines of the Annual Report. The paper concludes that the Court's capacity to adapt to the permanently evolving audit environment will ensure that it maintains its excellent reputation in the future. The Alumni working in the IAS close this paper by raising a glass to colleagues and friends, past and present, on the Court's bright future.
The Court´s foundation and the pre-DAS era Edwin Croonen, Head of Unit IAS.C4 The Court was established under the Treaty of Brussels of 22 July 1975 which also gave the European Parliament discharge powers as regards to the Commission´s implementation of the Community budget. The Court replaced the previous audit bodies (i.e. the Audit Board and the Office of the Auditor of the European Coal and Steel Community). Mr Heinrich Aigner, Chairman of the Budgetary Control Committee of the
134 TESTIMONIAL The development of the European Court of Auditors seen by Alumni working in the IAS
European Parliament, was instrumental in founding the Court by strongly arguing for a single strong Community external audit institution.
The original remit of the Court was "to examine whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound". At that stage the Treaty did not contain any requirements concerning the form and content of the Court´s annual report. Furthermore, it did not provide any details on how sound financial management had to be interpreted. The ECA had, therefore, to define its approaches and ways of reporting the results in the areas of financial, compliance and performance audits by developing its own working methods and by drawing on practices and traditions of public audit institutions of Member States and audit bodies of the private sector.
In the first 20 years of its existence, the bulk of the Court´s audits concentrated on performance issues. However, most audits included also compliance and financial audit components. The results were published frequently in chapters of the Annual Report rather than in Special Reports which were relatively few in number in this period. In these early days, the common consensus was that although the pure financial and compliance audits were generally well performed, in practice they were often lacking focus and a clear common audit approach. This only changed after the Court was required to provide an audit opinion on these issues.
The establishment of the DAS
The Treaty on the European Union, signed at Maastricht on 7 February 1992, marked a milestone with major lasting consequences for the Court. This Treaty provided for the Court to become a fully-fledged Institution, on a par with the European Parliament, Council, Commission and Court of Justice. In parallel, the Court received a completely new, key task: it "shall provide the European Parliament and the Council with a statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions". Until then, the Court had issued Annual Reports, Special Reports and Opinions. The Court decided: the new task would be called the "DAS" (Déclaration d'assurance, which is the French translation for Statement of Assurance).
Although obviously a number of questions regarding this new high-profile mandate had already been examined during the Treaty negotiation process, the ECA soon had to address many crucial and very concrete challenges, to be able to deliver.
Starting with the methodology itself, how should the ECA proceed? There were relevant experiences at national level which could be used, but only to a certain extent. Issuing a statement of assurance at European level was a very different challenge because of the complexity and specificity of the systems concerned. A lot of interesting reflections took place on the
135 TESTIMONIAL The development of the European Court of Auditors seen by Alumni working in the IAS
methodology to adopt. For instance, some of the Court's experienced auditors expressed the view that the DAS verifications should be performed solely at Commission level. Yet this approach did not address the main issue and major difficulty which was rooted in the wording of the Treaty: i.e. how to issue a statement of assurance on the legality and regularity of the underlying transactions, wherever they may occur (e.g. in Member States, or in third countries), and whatever actor was responsible in the system for carrying them out.
Eventually, the Court decided to go for a large-scale transaction-testing exercise at Commission, implementing body and beneficiary level. The first DAS exercise was on the 1994 accounts. To cope with the significant challenges ahead, the Court recruited a good number of additional staff, set up the new specific methodology and the accompanying IT tools, and organised the relevant training.
The beginnings were not easy. Then, building on experience, the DAS reached cruising speed. The Court auditors became used to organising their schedules and spreading their efforts between DAS missions that would take them to the most diverse locations, because of the unpredictable results of the random selection.
Random selection also made it possible to audit actions that would not have been selected on a judgmental basis, and therefore to identify errors, weaknesses and risks that possibly would have escaped attention.
The DAS introduced a systematic approach to the Court's financial / legality and regularity audit, which greatly contributed to pushing Commission services to improve controls. Over time the DAS would become the core of the Court's work and probably its most visible product.
The ''van Buitenen-effect''
In March 1999, at a moment when the Court had already delivered four negative DAS and was preparing the fifth one covering the transactions on the year 1998, the European Commission under the presidency of Jacques Santer had to step down. What the results of the Court's annual DAS had not achieved was now brought about by the allegations of fraud and financial mismanagement put forward by Paul van Buitenen, a Commission whistle-blower who had shared his accusations with the European Parliament. In a vote on 17 December 1998, the Parliament refused to grant the discharge to the Commission.
Following negotiations, a Committee of Independent Experts was appointed with a number of high- profile figures among which its chairman André Middelhoek, former president of the Court. The report was produced on 15 March 1999 and concluded that "It was becoming increasingly difficult to find anyone who had the slightest sense of responsibility." In response to the report, in the night of 15 March, Santer announced the resignation of his Commission. The media attention generated by the 136 TESTIMONIAL The development of the European Court of Auditors seen by Alumni working in the IAS
report and a Parliament willing to exercise its powers created an atmosphere in which fundamental changes to the Commission's systems of management and control were necessary.
The following Prodi Commission had to deliver on this and in 2000 Vice President Neil Kinnock presented the White paper on reforming the Commission. Apart from important changes to human resources policy and a revision of the method for setting its priorities and allocating resources to them, this reform also included a complete overhaul of audit, financial management and control which was deemed no longer suited to the activities and the needs of the Commission. Instead of the centralised systems, in particular the ex-ante financial control, a more transparent and decentralised system was put in place in which all managers had to take responsibility for what they do, culminating in the declarations of the authorising officers by delegation (the Directors-General) in the newly-created Annual Activity Reports.
The ex-ante financial control that gave managers a false sense of security, leading to a culture of “de-responsibilisation”, was abandoned and a new internal audit function was created with the Internal Audit Service (IAS) to assist management within the Commission to control risks, monitor compliance, provide an independent opinion about the quality of management and control systems, and make recommendations for improving the efficiency and effectiveness of operations and ensuring that Commission resources were used cost-effectively. Moreover, each DG had to set up a specialised audit capability, reporting directly to the Director-General, to carry out reviews of the internal control system of the DG.
Finally, an Audit Progress Committee was set up to monitor the control processes of the Commission, the implementation of audit recommendations, and the quality of audit work. To implement these changes an action plan with 98 actions was put in place over the period 2000- 2002. In one of its first actions the IAS, set up in 2000 and a real DG as of July 2001, reviewed the progress made by the Commission's services in the change process (action 87). Following this reform, the Commission was equipped with a radically modernised system of financial management, control and audit as witnessed also by the changes in the Financial Regulation. With its key principles of independence, accountability, responsibility, efficiency and transparency, the Commission now had a modern governance framework and was ready to show progress in achieving a positive DAS.
Auditing a Commission which is making real progress – but with limits
Before the fall of the Santer Commission the European Commission seemed barely concerned by the Court's negative DAS and the European Parliament awarded the discharge anyway. Only after the crisis did the negative DAS become an important political issue, which was frequently presented in the press as clear proof that the EU was wasting its funds.
137 TESTIMONIAL The development of the European Court of Auditors seen by Alumni working in the IAS
Therefore, together with the fundamental changes in the Commission's governance and financial control framework, practical steps were taken to enhance control. Although outside of the inner circle of EU institutions it was not always recognised as such, the Commission worked on an action plan towards a positive DAS. Within the Commission DG Budget took the lead. A major step was the ambitious programme of introducing 24 COSO-based internal control standards in all DGs, which aimed at providing the DGs with the framework and tools to set up and monitor their own system of internal control. Other significant initiatives included the development of ex-post control strategies whereby the Commission services organised their own on-the-spot controls to verify the legality and regularity of payments in a way which was often fairly similar to the DAS audits performed by the Court. In the area of shared management the Commission also introduced extensive controls on the management control systems of Member States and applied corrective measures recovering funds which were unduly paid.
The combination of the implementation of the internal control standards, the ex-post controls, the corrective measures, the work of the IAS and the work of the internal audit capabilities enabled the Directors-General to obtain assurance about the functioning of the system of internal control in their own DG and sign the declaration of assurance, with reservations where needed.
From the perspective of the Commission, it was disappointing that, despite the significant changes to the control systems, the Court's approach for the DAS, as well as its conclusions were relatively stable. While the completely substantive testing-based approach at the level of final beneficiaries had been fully understandable at the time when the Commission's internal control system was weak, the Court maintained this audit approach even when the Commission reinforced its controls. As a consequence of the lack of a systems-based audit approach, the Court hardly mentioned the significant investment in the Commission's control systems and procedures in its Annual report.
Some minor modifications to the DAS approach were certainly well thought through from a methodological perspective, but colleagues in the Commission tended only to see these in terms of the negative impact on the error rate. Some even perceived that such a "moving" of the targets indicated that the Court might actually be afraid of having a positive DAS.
Seen from the Commission side, the impact of the Court's DAS audits on the Commission's system of internal control was enormous. Control became stronger and the risk of errors and irregularities decreased. This was also the case for the financial statements which have been based since 2004 on accruals principles and have received a "clean bill of health" from the Court for the last 7 years. These were very positive effects and the Court must have been proud of its achievements, but it was frustrating to see that these improvements have resulted neither in a positive DAS on the legality and regularity of transactions, nor in more positive reports in the press about EU spending1.
1 The negative opinion is often wrongly presented as: "the EU accounts were not signed off". 138 TESTIMONIAL The development of the European Court of Auditors seen by Alumni working in the IAS
Becoming tired of the DAS
Recent years marked a turning point in the perception of the DAS. With some good progress having been made in addressing the root causes of errors and the improved corrective capacity of the systems, the annuality of the exercise was questioned more and more. Is it really reasonable to think that with such a complex task of administering funds across 28 Member States and in Third Countries all errors are either prevented or detected and corrected within a given year? Isn't the Commission clawing back unduly paid funds in the years that follow? Can the management of the EU Budget be reduced to an error rate? Is the 2% threshold against which to benchmark the Commission's management set at the right level? What about all the other audits and controls that are carried out along the way at the various levels where EU funds are managed? Can't we apply a model of 'single audit' as actually promoted by the Court itself in 2001?
These were questions that led to fundamental reflections both in the Commission and the European Court of Auditors. The Commission responded to the DAS in the early 2000s by presenting figures on financial corrections and recoveries that cast doubt on the error rates of the Court. However, at the time, these figures were not yet convincing and included claw backs of various types.
Soon after, the Commission also started an initiative to demonstrate that the threshold of 2% was likely to be too low and could actually lead to controls which cost more than the benefits. This would advocate a threshold that is more in line with the actual risks involved. Is this calling into question the independence of the Court? Is this just applying common sense? Where were the 2% actually derived from? Again fundamental questions were brought to the table, but there appeared to be no real appetite for change.
However these reflections did not go unnoticed within the Court. "Think Tanks" which also included renowned external experts in the field were convened to thoroughly examine the DAS audit methodology. Many aspects were scrutinised, but in the end no drastic changes occurred. While the basis for the DAS was broadened to include the examination of the management and control systems of the Commission and Member States, the work of other auditors and the Annual Activity Reports of the Commission's Directors-General, the only factor that counted in the end remained … the error rate. Certain aspects of the DAS audit methodology were further refined along the way, but essentially the error rate continues to be the indicator that is the determining factor to date.
Is there change ahead? Recently, the Court has again opened up the DAS audit methodology. The questions of annuality, broadened base to draw the conclusions on, the claw backs of unduly paid funds, and the application of the single audit principle still need to be answered. Only time will tell if there is an appetite for change now.
139 TESTIMONIAL The development of the European Court of Auditors seen by Alumni working in the IAS
The power of special reports (performance auditing and political auditing – Lisbon Treaty second pillar of the discharge)
“The Court may also, at any time, submit observations, particularly in the form of special reports, on specific questions...”, states Article 287 of the Treaty on the Functioning of the European Union (TFEU). Clearly, the objectives and scope of the Court’s special reports have not been defined in detail by the Treaty and in practice these have evolved over the years, covering mainly aspects of regulatory compliance and economy, efficiency and effectiveness of EU spending.
Over the years, the Court has carried out a lot of reflections about the role of special reports and on maximising their impact by improving and promoting the special reports as a “product”, next to its Annual Report. As from the middle of the 2000s a lot of new initiatives in this area gained momentum. After long internal discussions, workshops and benchmarking with other Supreme Audit Institutions, the Court developed a dedicated audit manual and internal training courses for performance audit.
About ten years ago, the Court started paying more attention to its communication style. While initially special reports tended to be written in a somewhat traditional and somewhat dry style, they started to become more "punchy", focusing much more on the key messages in plain language. The typical lay-out of the European Union’s Official Journal was replaced by more accessible, colourful, easy-to-read reports. Since a couple of years, the reports have even featured pictures of the audit team, including responsible Members of the Court and their private office. The reports are brought to the attention of the stakeholders through press releases, conferences, presentations to national parliaments, etc.
The Court has also adapted the focus of special reports to the changing environment of the EU and its policies. From the start, the reports focused largely on the big spending areas of the EU budget, with the Common Agricultural Policy as the budget area that received by far the most attention. Over the last decade, the focus of the lion’s share of the reports has been on performance audit. In recent years, growing attention has been paid to politically important areas such as economic governance, which do not necessarily involve a significant share of the EU budget, but have a significant impact on the lives of EU citizens.
The number of special reports issued each year by the Court was rather limited during the first decade and variable during the nineties and the early 2000s, in part because the work on the Court’s annual report was given priority to the detriment of the special reports. This has improved significantly in the last few years, notably since the creation of separate performance audit units some 10 years ago and more recently with the reorganisation of the Court into a task-based 140 TESTIMONIAL The development of the European Court of Auditors seen by Alumni working in the IAS
organisation. We have seen a strong increase in the number of special reports over the last decade, reaching an all-time high of 35 special reports published last year.
Traditionally, the focus of the discharge authorities has been very much on the findings of the Court’s Annual Report and the DAS. Since the Lisbon treaty, special reports have also been taken into account as the second pillar of the discharge procedure. All special reports are discussed in the European Parliament’s Budgetary Control Committee (CONT). The special reports contribute to an increased focus on “performance” aspects in the discharge procedure and have been, for a couple of years, further leveraged by the Annual Report’s chapter on performance, which discusses key cross-cutting issues identified in the ECA’s special reports.
Not only the ECA’s special reports, but also the Commission’s response to these reports, have improved over the years. Adversarial meetings are better prepared than 10 years ago and the use made of the ECA’s recommendations by the Commission has increased significantly. In part, this response was driven by the significant increase in the number of reports and the Court’s more regular follow-up of its previous recommendations.
In conclusion, the Court has a strong focus on improving the impact of special reports, by exploring new audit topics in keeping with the evolution of the EU, developing a robust audit methodology, preparing more easily accessible reports and “selling” these to the different stakeholders. Going forward, the impact of its special reports will depend on the continued relevance of audit topics covered and the quality of the observations, conclusions and recommendations.
Outlook
40 years after the Court was founded, it is a well-established, recognised institution of the EU. It has become a full Member in the International Organisation of Supreme Audit Institutions and contributes actively to the development of international auditing standards. It adapts its structures, procedures, audit approaches and ways of reporting to cope with new challenges resulting from the permanently evolving environment and increasing expectations of stakeholders. This capacity for change will no doubt enable the Court to maintain its reputation and standing in the future.
Let's raise a glass to our colleagues and friends, past and present, in the Grand Duchy, on the Court's and their bright future!
141 TESTIMONIAL MAGGIE MCGHEE, DIRECTOR, PROFESSIONAL INSIGHTS, ACCA
ACCA’s presence in Europe Interview by Rosmarie Carotti 7 June 2017
I know that traditionally the ACCA was an accounting body essentially operating in the UK and Ireland and in recent years you have made great strides in becoming a world body. How would you describe the ACCA’s presence in Europe and more particularly in the public sector, including the European Institutions?
Maggie McGhee: Actually, ACCA has a long history of working globally. While we are headquartered in the UK, we work through a network of 100 offices and centres and more than 7,110 Approved Employers worldwide, who provide high standards of employee learning and development – including of course the ECA.
We’ve had a global presence for a long time, with our first office opening in South Africa in 1913.
Our Singapore and Malaysia offices celebrated their th80 birthdays last year, and in 1965 we opened branches in Hong Kong, Zimbabwe, Trinidad and Tobago, Guyana, Nigeria and Malawi. And we began our work in China in 1988.
In Europe, we opened our Brussels public affairs and media and office in 2009, ACCA is present in Romania, Bulgaria, Moldova, Czech Republic, Slovakia, Hungary, Poland, Spain, Cyprus, Greece, Malta, the Baltic States, Switzerland and, in wider Europe, in, Ukraine, Belarus, Armenia, Georgia, Azerbaijan, Russia and Kazakhstan. Maggie McGhee, Director, Professional Insights, ACCA As you know, the European Court of Auditors has many ACCA quantified accounts working for it. What aspects of ACCA training do you feel are of particular importance for public auditing in Europe?
Maggie McGhee: Technical and ethical skills are at the centre of the ACCA Qualification, and these are very relevant to the work of a public auditor. The role demands excellent technical abilities, a high level of ethics and professional scepticism.
Last year, we launched our Professional Accountants – the Future report1 which explained the seven key attributes for success - intellect, creativity, emotional intelligence, vision, experience, technical skills and a mastery of the digital world, which are all seen as the key skills sought by employers now and in the future.
142 TESTIMONIAL ACCA’s presence in Europe
Our research found that these qualities are just as in demand for the work of a public auditor.
When we looked at the broad areas of audit and assurance, respondents said that technology was driving their work. In response to new and emerging laws, standards, technologies and stakeholder expectations, audit professionals – whether in the public or private sectors – said they are planning to hone their technical knowledge, expand their understanding of emerging technologies and their application in audit, and enhance their interpersonal skills – while maintaining high standards of ethics, independence and scepticism.
And in the public sector, one of the key drivers of change is the need for clarity in financial reporting and the audit function – this came 14th out of 50 in our research report 50 Drivers of Change in the Public Sector2.
What was also clear from this report was the importance to distinguish between the audit function and the financial reporting function as the practice of public sector accounting evolves. Both have a crucial role in providing greater accountability to the citizen: the preparation of the accounts is enhanced by having an independent audit review conducted on them.
R. C.: In 2015, the ECA obtained the status of being an ACCA-approved employer. What advantages does that bring to the Court, to the ACCA or more importantly any of your students who are here working at the Court?
Maggie McGhee: Congratulations on becoming an Approved Employer!
Being an ACCA-Approved employer is a badge of honour and a clear sign to employees, clients and the outside world that as an employer you work with ACCA to train and develop the highest standards of financial talent.
Our programme with employers helps attract the highest standard of employees and then support them all the way through their ACCA journey.
It also means that as an employer, you meet the global benchmark for excellence in training and support. It also means that for your employers, ACCA students or members with an Approved Employer don't have to detail their training evidence or their annual CPD obligations. This leaves more time to focus on their daily role.
143 TESTIMONIAL ACCA’s presence in Europe
R. C.: Over the years, various representatives of the ECA have attended ACCA events, for example, Mr Lazarou the Cypriot Member of the ECA made a presentation at the 3rd International Public Sector Conference in 2011. Are there any events in the pipeline which would be of interest to Court Members or staff?
Maggie McGhee: Yes, we have a number of events coming up, which we are planning at the moment.
I’d really like to be able to list them all here – but because we are at planning stage I would not want to over-promise – but we are very keen to have a public sector global event again this year.
These prove very successful and are a great way to debate the issues and network. We’re also planning on running our flagship Accounting for the Future event in early December 2017 – again, watch this space!
And also very importantly, we are having our first event at the ECA on 26 September, hosted by Lazaros Lazarou, focusing on “Drivers of change for the public sector: Bringing governments closer to citizens and businesses in a digital age through Ethics and trust”.
R. C.: With ACCA qualified staff working at the ECA and other European institutions, the ACCA can gauge sentiment on important topics for Europe. Do you seek the opinions of your members here as a way of keeping abreast of EU developments and how do you think use of this conduit could be improved?
Maggie McGhee: Yes, we do seek their views – not just on issues to do with Europe but also global issues that affect the profession.
Our members' views are essential to gauge opinion and to understand how their work is being impacted by policies here in the UK and in Europe.
They often provide the proof for us to be able to lobby effectively. They also help us form policy positions. We’ve had events to bring members together to discuss Brexit - and we’ve also polled the UK membership with findings explained in this info-graphic3.
This consultation with members and students indicated that they are much more willing to work globally than ever before – we saw a spike in enquiries from British citizens looking to live and work in Australia, New Zealand and Canada in the weeks that followed the Brexit vote.
144 TESTIMONIAL ACCA’s presence in Europe
During this immense time of change, it’s important we keep the dialogue going with our membership – to update them on what we are doing on their behalf and to hear their views – not just here in the UK but across Europe and indeed in other markets too.
R. C.: The ECA has an annual prize for students to present research on topics of relevance to the ECA. Do you think that this would be of interest to ACCA students? Indeed perhaps a deeper understanding of the ECA’s mandate and operation could be of value as an area of study in the ACCA’s core syllabus.
Maggie McGhee: Yes, I believe the competition would be of interest. Our students often enjoy taking part in such things. For updating students on the ECA’s mandate and operation, I think the best approach would be an article in our magazine for students, SA. It would make for an interesting read.
R. C.: Finally, how would you like to see relations between the ECA and the ACCA develop and intensify over the coming years?
Maggie McGhee: This is an important relationship and one we wish to see grow.
Our work in Europe will become all the more important as Brexit negotiations begin. ACCA members and accountants working in Europe will be part of this process, and their expertise will be relied upon.
Much of the issues around Brexit remain unclear, especially passporting rights, tax, compliance and the general impact on business.
However, amongst all this uncertainty it is very clear that accountants have a valuable role to play in advising clients on the tax and financial implications of our EU withdrawal. Transparency in the process and the finances of this will be vital and I believe this is where our work with the ECA will become increasingly important.
Endnotes 1 http://www.accaglobal.com/content/dam/members-beta/images/campaigns/pa-tf/pi-professional- accountants-the-future.pdf 2 http://www.accaglobal.com/content/dam/ACCA_Global/Technical/Future/pi-highlights-drivers-change- public-sector.pdf 3 https://infogr.am/the-impact-of-brexit-what-acca-members-think 145 6. THE WAY FORWARD
Redevelopment project of the green areas outside the ECA buildings, 2017 © ECA 146 TESTIMONIAL Dr INGEBORG GRÄSSLE, CHAIR OF COMMITTEE ON BUDGETARY CONTROL, MEP
Continuity and change among the institutions
The best way to make changes is to take on people with different ideas about tasks and mandates. At the European Parliament, change is always dramatic, because half of the parliamentarians are new after each election – and they always need two or three years to familiarize themselves with the complex questions of the EU and budgetary control. This is why the Court is a sort of guarantor of continuity. But here, too, there are new members - albeit at different times. Change has always existed at the Court - at present, perhaps more than before, because the understanding that we all have to do more with less is now present to all those involved. The European taxpayer must be able to rely on the fact that the Parliament, the Court and the Council all work towards handling public money better. Examples of the added value of the ECA
In addition to the ECA’s standard products - the Annual Report and the special reports - there are Photo: Photo: WijgaertGeert Vanden also "landscape reports" on individual policy areas or basic problems. This is a great thing for new parliamentarians! Reading these reports gives a problem-oriented overview that can save many hours of reading other documents. The standard products are of paramount importance: the Court's Annual Report provides a good overview of the quality of administrative operations at EU level and in the Dr Ingeborg Gräßle, Member States. The ECA’s staff systematically analyzes thousands of pages of Commission documents Chair of the Committee on with a critical eye. The Committee on Budgetary Control evaluates the main points of these documents, Budgetary Control, MEP which is why the Court is an important additional help. The special reports give us a well-understood, systemic overview of programmes and procedures. They are indispensable for our work and the best source of information on the "engine room" of the European Union. If you really want to know how (well) the EU works, you cannot really give your opinion if you have not read the special reports. Vision of future cooperation
In the 13 years that I have been a member of the Budgetary Control Committee, the EU has not only become larger, but also more complex. We have worked a lot on the issue of accountability and achieved a lot with classic tools. Unfortunately, the EU has also acquired new "blank spots", such as trust funds and financial instruments, for which we need more transparency and insight. I hope that the Court will make clear suggestions for new legislation. This could save a lot of trouble, exasperation and waste. The main focus of the audit is changing and it increasingly includes non-monetary aspects
I welcome the change in the focus of the audit, and this also regards EU money. However, I expect the "bread-and-butter business", namely the audit of expenditure and efficiency, to remain the focus of the Court's work. 147 TESTIMONIAL MARTINA DLABAJOVÁ, VICE-CHAIR OF THE CONT COMMITTEE, MEP
40th ECA anniversary of the European Court of Auditors
Forty years is a major milestone for an institution, as it is for an individual. In general, the age of 40 in human life is connected with true wisdom and expertise gained from life experiences. It is also an age when such a person is earning more and more respect and is becoming a sage in the eyes of others. For many years now, the European Court of Auditors has been known as a solid and professional institution promoting effective transparency, public accountability and public audit of EU finances – an institution helping to build a Union capable of showing how Europe works to achieve its aim to promote peace, its values and the well-being of its citizens.
Celebration of an institution is not so much a festivity, but a solemn occasion to pause and look back at this forty-year journey. It is a time to reflect, to take stock of priorities, but also making plans on how the institution can best contribute in the future. At a time of increasing pressure on the public finances it is more important than ever to get the most out of every euro spent. EU institutions need to send a clear signal to EU citizens that EU funds are to be used in a transparent, responsible and accountable manner, respecting the principle of sound financial management.
It is particularly important to improve our collective evaluation of the way the funds are spent. We need a mentality change at all levels – be it institutions or Members States, we need not only to tackle the error rates, but to really assess the added value of our investments: the performance and results of common policies. The overall approach to using the funds from the European Commission's budget should become a strong aspect of European integration. Not only what the budget will be used for Martina Dlabajová, Vice-chair but mainly according to what rules and criteria these expenditures will be spent as such. of the CONT Committee, MEP In order to achieve that and make a real change towards the approach to using EU funds, a stronger direct cooperation between all the EU institutions and relevant stakeholders involved in the budgetary process is needed. The main contribution the Court makes is undoubtedly through its audits and reports which help the auditee to improve the financial management and which assist the Discharge Authority in overseeing the implementation of the EU budget. Not only as a vice-chair of the CONT Committee I have the opportunity to be in regular touch with the Court and its employees. Our mutual good relations standing on strong fundaments of trust, honesty and respect resulted mainly from a good cooperation on the 2014 Commission discharge for which I was appointed an EP rapporteur, as one of the discharge authorities.
Looking back now, it was a milestone year – a springboard for a new audit approach. Until then, a discharge procedure and auditing at EU level in general had placed much more weight on the formal aspect of management, i.e. compliance with rules or error statistics. I decided to change this practice
148 TESTIMONIAL 40th ECA anniversary of the European Court of Auditors
and focused on the previously neglected criteria of the actual performance of the areas supported from the EU budget and their results and impacts on citizen's lives.
Coming up with an ambitious vision, I was extremely happy that the "budget focused on results" logic was equally supported by other EU bodies and stakeholders, particularly by ECA and its new annual report structure putting focus on performance. I always had in mind that not every error revealed in EU budget spending is a fraud, that not every error leads to misspending and therefore I am very grateful to the ECA for complex error detection reporting in its last Annual reports.
I believe this is what the European Union needs. It is time for the Union to deliver and to communicate on its achievement. It is time to find a new balance between compliance and performance approaches. When the Commission spends EU money, uses the EU funds, it is a matter of common sense that the money is used with the view to achieving objectives. Especially now in these turbulent years for Europe, we all have the moral obligation and duty to optimise the use of resources and avoid any potential losses; we owe it to all EU citizens.
On this occasion, I would like to therefore thank the European Court of Auditors for an excellent job when making conclusions based on all relevant data and information collected and likewise for its recommendations proposed. It is mainly thanks to its reports that our work and decisions as policy makers can be based on evidence. Not only we need to find errors to be corrected, we also have to learn to better respond to the future, so that the same mistakes are not repeated. Also, it helps us being able to set realistic and achievable objectives to support a sustainability when allocating the EU budget.
Finally, I would like to take time to thank the European Court of Auditors for the great cooperation and assistance given to me and my colleagues from the European Parliament. The open collaboration and active exchange of information that we share is of great benefit to us and I hope this relationship will be fostered and further nurtured also in the future. I have always appreciated different points of views of the Court and its members and will continue to do my utmost effort to cooperate with the Court and other institution to scrutinise the highest possible performance and added value of the European budget.
For its 40th anniversary, I would like to wish the Court to keep continuing with its excellent job and with gaining more and more respect in order to further improve accountability of the EU and its entities towards its citizens. I believe that only through sharing good practices and learning lessons from past mistakes within all Member States we can build on the European added value of staying “united in diversity”.
149 TESTIMONIAL LAZAROS S. LAZAROU, ECA MEMBER FOR THE ANNUAL REPORT
The next years of the annual report
”Det er vanskeligt at spaa, især naar det gælder fremtiden”1 In our commemoration of ECA’s first 35 years, Giorgio Clemente (ECA Member, 1993-2006, from Italy) led us through the first ten years of ECA’s statement of assurance2. For our 40th anniversary I would like to take you through some views for the future of our annual report, even though it is difficult to make predictions, especially about the futurei. This article includes personal views and it is not (necessarily) a description of (future) ECA policy. By applying standards and being exemplary, we provide a good basis for … As a college and as staff we truly unite diverse backgrounds in law, accounting, audit, language and culture. Together we are the EU’s independent auditors, providing assurance to EU citizens on EU’s finances. To ensure that our work adds value, we need to put it into a context that is generally accepted and well understood. By applying international audit standards, by referring to them in our audit opinion3, we provide this relevant context. We need to show that we are exemplary, that the basis for our work is up to standard. In this way we can, as our 2018-2020 strategy indicates, ‘through independent audit help EU citizens decide if they can trust EU 4 Lazaros S. Lazarou, institutions to deliver for them.’ In our audit we will make use of the work of others as a source ECA Member of audit evidence, wherever this is possible and cost-efficient. We have applied international audit standards and we will continue to do so. With the ECA holding the vice-chair of INTOSAI’s Professional Standards Committee5 we will further contribute to the development of standards and the gathering and disseminating of good practices. … getting our message across … Having an exemplary basis for our work is a pre-condition for getting our message across. Our annual report is drafted by reporting Members6 assisted by our policy/audit experts and used by specialised committees in Council and Parliament. Our annual report gets wide coverage in the European press. ECA Members present and discuss our annual report and special reports in national parliaments and this enhances the coverage further. But we should not be satisfied with what we have achieved up to now. We need to step up our efforts. Our reports should be clear and concise, presenting the picture as it is in a balanced way. Our working process is still document-oriented; we write with a view to publishing reports as documents. Our annual report with over 50 000 words7 and our EU audit in brief (15 000 words/60 pages)8 do not fit easily on webpage or tablet screen9. We need to explore other means of getting our message across. For example, by making our messages more visual, providing easy access to summarised overviews and guidance to our observations and recommendations. 150 TESTIMONIAL Lazaros S. Lazarou, ECA Member for the Annual Report
2015 annual report Future annual report 2015 EU audit in brief (Official Journal) tablet version?
The number of ECA special reports is increasing … with more emphasis on performance … Our statement of assurance (our audit opinion) has traditionally been the basis for our annual report. This statement presents our opinion on the reliability of the accounts (financial audit) and on the regularity of revenue and payments (compliance audit). While good financial reporting and compliance with rules is still relevant, knowing whether money spent achieved policy objectives is becoming more and more the focus of attention. ECA has taken up the process of emphasising performance, as is (also) shown in the increase in the number of ECA special reports (graph) in the last ten years. The annual report developed along with this. Our chapter on performance has become more prominent and since 2014 our shared management chapters have included a section on performance. We will need to expand this to other parts of the annual report, providing our users with a broader picture of EU Source: 2016 annual report – chapter 3 spending.
151 TESTIMONIAL Lazaros S. Lazarou, ECA Member for the Annual Report
… and providing further insight on EU action in Member States and regions A further development in this light is the wish to have greater insight into EU actions in Member States and regions. With the take-up of 2014-2020 programmes and spending, the expected improvements in management control systems should allow us to assess the Commission oversight and provide insight into EU action in Member States and regions. We will need to build up experience to prepare robust and relevant analyses. Also the relative performance of the Commission, compared to good practices, has found its way into our reports. Examples include the analysis in the special report on governance at the Commission and 2016 annual report chapter 3 on the Commission’s performance and its framework. In our governance special report we recommended that the Commission move towards an integrated report bringing together elements already presented in other reports and broadening its scope of annual reporting to include non- Country by country information in Special Report financial reporting, information on activities during the year and achievement of policy 04/2017 - Protecting the EU budget from irregular objectives. Such a Commission accountability document should be presented for audit of spending: The Commission made increasing use the accounts, so that the auditor can check that other information is consistent with the of preventive measures and financial corrections accounts. in Cohesion during the 2007-2013 period. In conclusion, the annual report will continue to evolve, broadening its scope of reporting The annual report will continue to evolve, addressing a broader scope of information. We will keep our work up to standards and we will explore ways to attract wide interest in our findings. The scope of reporting will evolve as well, strengthening our view on performance, presenting insights country by country. We will help the Commission to move towards a more integrated approach to its reporting. At the next ECA anniversary we will assess the progress in making the annual report a more value-added tool for EU citizens.
152 TESTIMONIAL Lazaros S. Lazarou, ECA Member for the Annual Report
Endnotes
1 A quote attributed to an unknown Dane, translated in English meaning: It is difficult to make predictions, especially about the future (source: http://quoteinvestigator.com/2013/10/20/no-predict/, Farvel Og Tak: Minder Og Meninger by K. K. Steincke, (Farvel Og tak: Ogsaa en Tilvaerelse IV (1935-1939)), Quote Page 227, Forlaget Fremad, København. (Publisher Fremad, Copenhagen, Denmark).
2 Reflections/Réflexions, European Court of Auditors, 35 anniversary/Cour des comptes européenne anniversaire 35, p. 24, http://www.eca.europa.eu/Lists/ECADocuments/REFLECTIONS_35TH_ANNIVERSARY/ Reflections_35anniversary.pdf.
3 Our statement of assurance is our audit opinion on the reliability of accounts and regularity of revenue and payments underlying the accounts.
4 Fostering trust through independent audit – European Court of Auditors’ Strategy for 2018-2020, p. 4.
5 http://www.eca.europa.eu/en/Pages/NewsItem.aspx?nid=6289.
6 The annual report is adopted by the Court (Article 11 rules of procedure of the Court of Auditors of the European Union and article 64(a) of the Court decision No 38-2016 laying down the rules for implementing the rules of procedure of the Court of Auditors).
7 Our 2015 annual report on the implementation of the budget contained around 50 000 words excluding footnotes and Commission replies. Our 2015 annual report on the activities funded by the 8th, 9th, 10th and 11th European development funds (EDFs) included 5 200 words without footnotes and Commission replies. The Official Journal publication of these reports (http://www.eca.europa.eu/Lists/ECADocuments/ annualreports-2015/annualreports-2015-EN.pdf) including footnotes and Commission replies was around 110 000 words over the 320-page document.
8 Our EU audit in brief was first published alongside the 2012 annual report. It summarises and explains the main findings in our annual reports on the implementation of the EU budget and the European Development Funds. An ‘information note’ accompanied the annual reports before 2012.
9 The 2015 EU audit in brief is available as HTML version: http://eca-publications.eu/audit-in-brief/2015- annual-reports/ in all EU official languages.
153 TESTIMONIAL GASTON MOONEN AND ANDREAS BOLKART, DIRECTORATE OF THE PRESIDENCY, ECA
The ECA strategy for 2018-2020 : Fostering trust through independent audit
Strategy development: a participatory process
As the EU’s external auditor, the ECA’s mission is to contribute to improving EU financial management, to promote accountability and transparency and to act as the independent guardian of the financial interests of the citizens of the Union. The ECA warns of risks, provides assurance, indicates shortcomings and successes, and offers guidance to EU policymakers and legislators on how to improve the management of EU policies and programmes and ensure that Europe’s citizens know how their money is being spent.
To implement its mission, achieve strategic change and provide broad orientation, the ECA has been using multi-annual strategies since 2008. The 2008-2012 strategy was followed by the 2013- 2017 strategy and the 2018-2020 strategy was adopted by the Members of the ECA and shortly after published in July 2017.
The strategy development was led by a working group consisting of the ECA Members President Klaus-Heiner Lehne, Danièle Lamarque and Alex Brenninkmeijer (chair) as well as Secretary- Gaston Moonen and Andreas Bolkart, General Eduardo Ruiz García. The group was supported by Andreas Bolkart and Gaston Moonen. Directorate of the Presidency, ECA We used the INTOSAI Development Initiative’s strategic planning handbook
The preparatory work for the new strategy started with a forward looking analysis of our environment. This included current and expected future major EU policy trends, developments in EU financial management as well as the developments in our professional environment, such as new audit methods and technology.
The strategy development process relied heavily on consultation, both internal and external. Externally the Court reached out to Members of the European Parliament, EU Member State representatives, the European Commission, sister organisations and non-institutional stakeholders such as academics, think-tanks, NGO’s and also the private audit field. Issues stemming from our regular contacts with stakeholders, such as in the context of the annual discharge of the European Commission, or the annual audit planning exercise, were also considered.
The strategy was discussed among ECA Members – including at the Members’ 2016 annual seminar - and during three rounds of focus group discussions with ECA staff. The participation in these groups was open to everybody and advertised internally. Additionally, there was an internal exposure period of the draft strategy document. 154 TESTIMONIAL Gaston Moonen and Andreas Bolkart, Directorate of the Presidency, ECA
“Trust“ as a focal point
In its new strategy the ECA identifies 2018-2020 to be a crucial period for the European Union with pivotal decisions to be taken. The aftermath of the financial crisis, migratory pressure on EU borders, the international security situation and the challenges of climate change have an impact on the way the EU is governed at regional, national, intergovernmental and supranational level. Developments in overall EU policy, its funding - also in view of Brexit -, EU financial management and the ECA’s professional environment pose formidable challenges but also opportunities for the ECA.
Successfully addressing the challenges of the Union will require clear, reliable and accessible information for the EU citizen on what has been achieved with EU money and other interventions. People need to be able to see that the EU acts with integrity, applies the rule of law, spends taxpayers’ money carefully, is clear about its objectives and achieves the results it has promised. Failure to demonstrate to EU citizens that common challenges are met and positive results are achieved with EU money and EU action causes a risk that the trust of citizens in the EU may be diminished.
The ECA believes it is well placed to help address these challenges and opportunities of EU governance and appropriate spending of EU funds. Through its independent audits the ECA can provide insight into what works and what does not work in EU spending and EU action, help EU citizens decide if EU institutions deliver results for them and thereby contribute to fostering trust in the EU. To do so, ECA audits also need to relate to the concerns of its ultimate stakeholder, the European citizen. Ultimately the EU is not about figures, but about people.
ECA strategic goals for 2018-2020
To seize new opportunities and enhance its service to EU citizens the ECA has identified four strategic objectives:
Goal 1: Improve the added value of the Statement of Assurance in the context of today’s EU financial management. Positive developments in the management and control systems give the ECA the opportunity to take a fresh look at the Statement of Assurance (SoA). The ECA annually provides an opinion on the reliability of the EU accounts and the legality and regularity of the underlying transactions. For the 2018-2020 SoA approach the ECA will, while remaining in full accordance with international public-sector audit standards, assess the options of using the legality and regularity information provided by auditees, including the corrective action they have taken. This would lead to a reduction in the ECA’s own direct testing of payments and increase the cost-effectiveness of its SoA work. In this context the ECA will consider a wider renewal of its Annual Report. 155 TESTIMONIAL Gaston Moonen and Andreas Bolkart, Directorate of the Presidency, ECA
Goal 2: Increase the focus on the performance aspects of EU action. Besides assurance on compliance another major question for most EU citizens is whether EU spending and action led to tangible results and whether impact was achieved in an efficient way. In assessing performance the ECA will focus for example on: the added value of action at EU level compared, where feasible, with action at other levels; providing rapid answers to pressing and targeted questions on EU action; promoting good examples and practices of the way EU funds and policies are implemented, providing insight into geographical differences to promote mutual learning; assessing the quality of prevention and detection systems against fraud and corruption with EU funds.
Goal 3: Get clear ECA messages across to the audiences of the ECA. The ECA can only manage to contribute to trust in the EU through its products if it reaches its stakeholders, ranging from political oversight authorities like the European Parliament, to EU citizens directly. Specific actions foreseen for better reaching out are: formulate consistent key messages and identify horizontal issues based on findings in many areas and streamline them into the entire ECA product range; increase efforts to create a compelling narrative, with a clear structure and avoidance of jargon, with the audit evidence gathered and data analysed; communicate better on planned and ongoing work and create briefing products to maximise impact of ECA work.
Goal 4: Gear the ECA organisation to ECA products. Following its recent reorganisation making the ECA more flexible and more focused on audit, the ECA aims to use its renewed organisation to achieve the above-mentioned three goals. This means for example: better benefit from its staff’s knowledge by improving links and exchanges between staff but also with expert communities outside the ECA; exploit the opportunities offered by technology for innovation in audit work, like optimizing the use of big data and mass text analysis; when planning audit work, be more responsive and flexible to developments in the European Union, while taking into account the five broad priority policy areas the ECA has established for 2018-2020.
What is next?
At the ECA, the implementation of the 2018-2020 strategy has already started. A technical working group chaired by the Secretary General is currently working on a specific proposal to implement goal 1 concerning the SoA. The ECA College will discuss this proposal in the autumn of 2017 and, if adopted, the revised approach will be implemented starting with the work for the 2018 SoA.
156 TESTIMONIAL Gaston Moonen and Andreas Bolkart, Directorate of the Presidency, ECA
Regarding all four strategic goals, the ECA has adopted an action plan that identified specific activities and assigns responsibilities to all parts of the organisation. Work on these activities has already started or is scheduled for the next year. Furthermore the ECA will use its annual work programming cycle to plan, execute and monitor the implementation of its strategy.
The 2018-2020 strategy also serves to influence the mind-set of the people at the ECA to consider how each individual can contribute to achieve the strategic objectives. It will depend on each and every one’s contribution to transform the strategy into a tangible reality.
Helping the EU perform better
2017 marks the 40th anniversary of the ECA. Through its SoA, its reports on performance of EU programmes, its opinions on proposed legislation and its attention for possible risks the ECA has contributed to significant improvements in EU financial management over the past decades. As the EU’s external auditor it applies and promotes accountability, transparency, professionalism, integrity, impartiality and responsiveness. This has enabled the ECA to play a key role in the EU accountability process and stimulate a learning government. To continue to do so the ECA has recalibrated its strategic objectives to provide insight and understanding in complex EU processes. By revealing what works and what does not work in EU spending and EU action the ECA helps to improve the way the EU functions and is understood. This in turn will contribute to fostering trust in the EU’s ability to address current and future challenges. With the implementation of its new strategy the ECA aims to enhance its added-value for policy-decision makers and EU citizens.
See for the text of 2018-2020 Strategy: http://www.eca.europa.eu/Lists/ECADocuments/STRATEGY2018-2020/STRATEGY2018-2020_ EN.PDF.pdf
157 158 ECA College as of 7 September 2017
Fourth row: Juhan PARTS - Leo BRINCAT - Mihails KOZLOVS - Jan GREGOR - Rimantas ŠADŽIUS - João FIGUEIREDO - Ildikó GÁLL-PELCZ Third row: Janusz WOJCIECHOWSKI - Oskar HERICS - Nikolaos MILIONIS - Danièle LAMARQUE - Phil WYNN OWEN - Bettina JAKOBSEN - Samo JEREB Second row: Neven MATES - Iliana IVANOVA - Kevin CARDIFF - Ville ITÄLÄ - Baudilio TOMÉ MUGURUZA - George PUFAN - Alex BRENNINKMEIJER First row: Hans Gustaf WESSBERG - Ladislav BALKO - Karel PINXTEN - Klaus-Heiner LEHNE (President) - Henri GRETHEN - Lazaros S. LAZAROU - Pietro RUSSO
159
ISBN - 978-92-872-4358-4 DOI -10.2865/160233 QJ-04-17-691-EN-C