PURPOSE: to
present the Court of Auditors report on the 2007 accounts of the European GNSS
(Global Navigation Satellite System) Supervisory Authority.
BACKGROUND: the
Supervisory Authority for the European Global Navigation Satellite System
(GNSS) was set up as a Community Agency by Council Regulation (EC)
No 1321/2004 to manage the public interests relating to the European
GNSS programmes and to act as the regulatory authority for the programme
during the deployment and operational phases of the Galileo Programme. The
Authority took over responsibility for its financial operations in September 2006
and 2007 is its first full year of activity.
Council
Regulation (EC) No 1942/2006 extended the mandate of the Authority to
cover the activities of the development phase (first phase of the Galileo
Programme) which the Galileo Joint Undertaking (GJU) had not been able to
finalise before its winding-up on 31 December 2006. In 2007, the Galileo Joint Undertaking transferred EUR 80.5 million to the Authority in
addition to the EUR 70 million already transferred at the end of 2006.
Although the
Authority had been set up to monitor the deployment phase of the Galileo
project, this approach was abandoned due to a dispute on the issue of the
risks relating to the project. In November 2007, the Council decided to
relinquish the concession-contract option and to fund construction
(deployment) from the EU budget. The entire architecture of the project had
thus to be redesigned and the Commission lodged a proposal to amend
Regulation No 1321/2004 on 19 September 2007. This proposal does
not clarify the Authority’s new role and refers, without any further detail,
to delegation agreements to be concluded by the Authority and the ESA
(European Space Agency) regarding the management of the programme’s funds and
the ownership of its assets.
It was in this
fragile legal environment that the Authority’s accounts were prepared at the
end of 2007 and that the Court now establishes its report, with a statement
of assurance presenting a number of reservations. Therefore, while the
transactions underlying the Authority’s annual accounts are, taken as a
whole, legal and regular, the same cannot be said for the reliability of
the accounts.
CONTENT: the
Court of Auditor’s report includes a detailed section on the Authority’s
expenditure and an analysis of the expenditure, as well as the Authority’s
replies:
- Analysis
of the accounts by the Court: in its report,
the Court criticises the Authority in a very large number of areas. The
main criticisms can be summarised as follows: the Authority’s final 2007
budget was EUR 436.5 million. The budget was mainly financed from
Commission subsidies, transfers from the Galileo Joint Undertaking (GJU)
and third countries contributions. The appropriations actually made
available to the Authority (EUR 210 million) were substantially
lower than the EUR 436.5 million initially foreseen due to the
delays incurred by the Galileo programme. Even with a de facto 50%
budget reduction, the Court notes that the consumption level of
commitment and payment appropriations for operational activities was low.
Moreover, there were weaknesses in the management of the budget in
addition to the inconsistent presentation of the budget’s implementation.
The Court also notes problems in managing assets: at the end of 2007,
the process of ownership transfer of the Galileo project’s assets was far
from complete. Despite the signature of transfer agreements between the
interested parties (GJU, ESA and the Authority), no list of the Galileo
project’s assets held by the ESA had been established at the end of 2007,
so the Authority was unable to disclose their existence in its accounts.
Furthermore, the Court notes that there is no up-to-date accurate
inventory of the EGNOS assets and no indication of their value in the
Authority’s accounts. At the same time, the Court notes misjudgements
when taking account of certain amounts in the Authority’s balance sheet:
prefinancing was not included in the Authority’s accounts; certain
liquid assets were only partially taken into account; a manifest error
in the accounts (the recording of a certain number of amounts in the
Authority’s balance sheet presents serious shortcomings). That is why
the Court considers that, in future, the Authority should adopt clear
rules for recording revenue under an accruals accounting system;
- The
Agency’s replies: the Authority offers
several clarifications with regard to these criticisms. It notes that it
is taking the necessary action to improve its performance in respect of
its budget reporting. It attributes the majority of the accounting errors
to the legal uncertainty surrounding the Galileo project and to the lack
of a clear definition of its tasks and functions. The Authority
considers that an inventory of the project’s assets is needed to clarify
the situation. The Authority also clarifies, to a certain extent, the
origin of the prefinancing, but some uncertainties remain as to the role
of the Authority in the Galileo and EGNOS projects and its control over
the corresponding amounts.