European Commission to implement new accrual accounting system by 2005, December 2002

The modernisation of the European Commission's accounting system came another step closer on 17 December 2002 when the European Commission adopted further measures that need to be implemented to ensure that the internal accounting framework and the information systems underpinning it are brought up to date.

The package of measures are part of the Financial Regulation, which was proposed by the European Commission in 2000 and adopted unanimously by the Council of the European Union in June 2002. The aim of the Regulation is to establish a new legal framework for the sound management of the EU Budget. Welcoming the adoption of the plan, Michaele Schreyer, European Commissioner for the Budget, said:

'Today's action plan is the latest step in this long term strategy of modernisation: it maps the Commission's progress towards the wholesale implementation of the most up-to-date public sector accounting standards by 2005, taking into account all the constraints and necessary detailed changes. With these measures the Commission will be once again far ahead of most national administrations in the world'.

Described by the European Commission as 'ambitious', the plan outlines a number of measures focused on achieving four key goals:

• Devising the new accounting framework by establishing new accounting standards, setting up an Accounting Standards Committee, adapting the chart of accounts, extending the scope of consolidation and bringing the financial statements into line with the International Federation of Accountants (IFAC) accrual accounting recommendations.

• Integrating the accounting data by linking the budget accounts with the general accounts via economic, organic and functional codes; integrating contingent assets and liabilities, as well as pre-financing, and linking the Central Invoice Register with the general accounts.

• Organising the internal control of accounting data by expanding the present internal controls in the DGs to include accounting aspects, supporting evidence for balance sheet balances through inventories, certification of local systems and producing accounting reports by DG.

• Increased awareness of the people involved through more training to ensure that all personnel are able to reap the full benefits of the transition to accrual accounting and understand the new accounting rules and policies.

In addition to the planned changes to the accounting framework, the European Commission is also considering how best to change the information technology system which underpins it. Two systems are currently up for consideration but no decision will me made until a feasibility study of both systems has been undertaken although the European Commission is believed to favour an integrated system where the two systems would be used in the overall system architecture.

The adoption of the latest measures has reignited criticism of the European Commission for sacking its chief accountant, Marta Andreasen, in May 2002 after she refused to sign off the EU's 2001 accounts and openly criticised the European Commission's accounting system. The A2 grade official alleged that the computers used by the European Commission were not secure enough and called for the Sincom2 IT system to be replaced by the widely used Standard Accounting Package (SAP) system. In the latest proposals, the SAP system is viewed as the preferable option in any future changes, apparently vindicating Marta Andreasen. Members of the European Parliament, who have staunchly supported the Argentine-born accountant, once again questioned Michaele Schreyer on 17 December 2002 about the Commission's sacking of the accountant. 'Where is the bit where you apologise to Andreasen? It was she who told you about those needed reforms', questioned MEP Chris Heaton-Harris, and Conservative MEP Gabriele Stauner asked 'Why did you dismiss the chief accountant when she drew attention to all those shortcomings?'

The European Commissioner for the Budget refused to answer these questions, saying 'it is not enough to repeat criticism, but it is to take responsibility for the reforms'. Meanwhile, the reforms of the accounting system will be overseen by Brian Gray, a member of the Institute of Chartered Accountants of England and Wales, who will take on the role of accounting officer of the European Commission from 1 January 2003.

Links:
European Commission:
	17.12.02:	Press Release: Commission adopts ambitious action plan to implement full accrual accounting by 2005 [IP/02/1904]
	17.12.02:	Press Release: New financial management in force from 1 January 2003 [IP/02/1903]
	DG Budget: Management of the Union's Budget
European Sources Online: In Focus
	European Commission: Internal Accounting Controls
	European Court of Auditors presents annual report for the 2001 EU budget, November 2002
European Sources Online: Topic Guides
	The budget of the European Union

Helen Bower
Compiled: Friday, 20 December 2002

The modernisation of the European Commission's accounting system came another step closer on 17 December 2002 when the European Commission adopted further measures that need to be implemented to ensure that the internal accounting framework and the information systems underpinning it are brought up to date.