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Good practices from and for the EU accountability process

Understand the role of auditors and National Parliaments in the EU accountability process, different audit types, criteria for task selection, and the management framework for the EU budget.

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Good practices from and for the EU accountability process

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  1. Good practices from and for the EU accountability process Irena Petruškevičienė Vilnius, 17 October 2006

  2. What to expect from an auditor? What use can National Parliaments make of reports from the European Court of Auditors?

  3. “ A Parliament without a Court of Auditors is like a knight without a sword.“ (B. Friedmann, former President of ECA)

  4. Two main types of audit • the financial (report) audit and • the special (compliance, performance) audit

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

  6. The responsibility for the financial report lies with the management. The auditor is responsible for his opinion.

  7. An audit of a financial report can providea high, but not an absolute level of assurance.

  8. The concept of materiality is implicit in a financial report audit.

  9. An auditor does not discover or prevent all frauds.

  10. An auditor must be independent – both in fact and in appearance.

  11. Integrity of process • We have to act openly and transparently – subject to the need to respect personal privacy and to the need to observe any other obligations of confidentiality, • We have to ensure procedural integrity by observing the principles of natural justice – including giving anyone affected by our reports an opportunity to comment on a draft version, • We have to ensure that all our findings, opinions, and recommendations are based on established and accurately understood facts, the relevant law, and applicable standards.

  12. Performance audits examine: • matters of compliance with law and statutory obligations • matters of economy and how to avoid waste of money • matters of effectiveness and efficiency • matters of probity and • matters of financial prudence

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

  14. The framework for management and control of the EU budget: • European Commission responsible for executing the budget; • Member States cooperate in accordance with principles of sound financial management; • External audit is the responsibility of the European Court of Auditors; • The European Parliament, based on the Court’s findings and following the Council's recommendation decides on discharge to be given to the Commission.

  15. Article 248 • “The Court of Auditors shall examine the accounts of all revenue and expenditure of the Community. It shall also examine the accounts of all revenue and expenditure of all bodies set up by the Community in so far as the relevant constituent instrument does not preclude such examination.” • “The Court of Auditors 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 which shall be published in the Official Journal of the European Union. This statement may be supplemented by specific assessments for each major area of Community activity.” • “The Court of Auditors shall 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. In doing so, it shall report in particular on any cases of irregularity.”

  16. Article 248 "The audit shall be based on records and, if necessary, performed on the spot (...) on the premises of any body which manages revenue or expenditure on behalf of the Community and in the Member States, including on the premises of any natural or legal person in receipt of payments from the budget. 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."

  17. ECA and Member States • The Court of Auditors shall perform its audits also with the end beneficiaries. • The Court of Auditors shall liaise with the national audit bodies before it starts an audit - there are no surprise audits. • National audit bodies can take part in the audit, but they cannot take over the audit. • Cooperation shall take place in a spirit of mutual trust whilst maintaining independence.

  18. Procedure for reporting results of audits in Member States I • The Court’s auditors write a report on their preliminary findings. • National administrations reply to these findings. Reply copied to the Commission. • Court prepares Annual or Special Report. • Commission prepares replies to Court’s reports taking into account Member States’ replies to preliminary findings.

  19. Procedure for reporting results of audits in Member States II • Report published together with reply given by the Commission. • Commission informs Member States of the details of the Annual Report related to their management. • Member States reply within 60 days. • Commission transmits summary of replies to the Council and the European Parliament.

  20. Activities of Parliamentarian Committes in respect of ECA reports: • Pressure to remedy shortcomings in Member States • Raise issues at EU level through • Government in the Council • Members of the European Parliament • Joint Committee meetings

  21. Conclusions I • Cooperation between national audit institutions and the Court of Auditors shall take place in a spirit of mutual trust. There is no room for giving instructions. • The Treaty entrusts the Court of Auditors with the audit of Community funds. • National audit institutions may help the Court of Auditors to fulfil its duties. • Under their own responsibility national audit institutions could look into matters with which the Court will not deal, for example the national decision making process on allocation of EU funds.

  22. Conclusions II • Supreme audit bodies and parliamentary audit committees are partners. Only together they are strong. • National parliamentary committees have several channels available to influence decision making at EU level with regard to Community funds. • Reports and opinions of the Court of Auditors are tools which national parliamentary committees could use more intensively for that purpose.

  23. Thank you very much for your attention!

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