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CM(2010)103 adddendum 2 31 August 20101
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1096 Meeting, 20 October 2010
11 Administration and Logistics


11.3 Financial Statements and Budgetary Management Accounts of the Partial Agreement of the European Support Fund for the
co-production and distribution of creative cinematographic and audiovisual works “Eurimages” for the year ended 31 December 2009 – Follow up to the Report of the External Auditor

Memorandum of the Secretary General

Item to be considered by the GR-PBA at its meeting on 23 September 2010

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The Secretary General is pleased to note that, as for 2007 and 2008, the External Auditor has certified that the financial statements of the "Eurimages" Fund are in full compliance with the requirements of IPSAS (International Public Sector Accounting Standards).

The Secretary General intends to take the following action to follow up the recommendations made in the External Auditor's report.

RECOMMENDATIONS FURTHER TO THE AUDIT OF THE FINANCIAL STATEMENTS

Recommendation 1: We recommend that the financial statements of the “Eurimages” Fund should be presented in a specific document, different from that containing the budgetary management accounts, so as to highlight the specific characteristics of the disclosures made in each of these documents. This should enable the “Eurimages” Fund's Board of Management and subsequently the Committee of Ministers to deliberate on each of these documents.

As the External Auditor rightly pointed out, the financial statements are clearly identified under the current presentation. The Secretary General nonetheless takes note of this recommendation and will in future present the financial statements and the budgetary management accounts in separate documents.

Timeframe: Preparation of the 2010 accounts

Recommendation 2: We recommend that the statement of internal control should be grouped together with the statement by management and adapted to the “Eurimages” Fund's environment and to the specific internal control procedures performed there.

As recommended by the External Auditor, the financial statements include a statement of internal control specific to the Fund. In the budgetary decentralisation context it seems necessary to preserve the distinction between the report by management and the statement of internal control.

Recommendation 3: We recommend that, under the accounting principles presently applied by the Council of Europe for monitoring the activities of the “Eurimages” Fund, calls for funds issued by “Eurimages” should be entered in the Council of Europe's accounting systems, recorded in the year when they are issued, and a provision made for any amount deemed irrecoverable.

and

Recommendation 4: We recommend that the Council of Europe should determine whether advances currently made for film production must be regarded as expenses or financial assets. Depending on the principle adopted in the short or medium term, the necessary accounting entries should be recorded so as to give a true and fair view of this activity.

The current presentation of the “Eurimages” Fund's accounts is consistent with the recommendations of the previous External Auditor, the National Audit Office. The Secretariat will discuss a new presentation with the Cour des Comptes, taking into account its recommendations.

Timeframe: Preparation of the 2010 accounts

Recommendation 5: We recommend that the amount of support for cinemas should be adjusted so as to correspond to actual expenses incurred during the financial year, which could possibly be estimated if the final data are not available at the time of preparation of the accounts.

As proposed by the External Auditor, for the preparation of the accounts, the amount of support for cinemas will be adjusted to reflect either actual expenses, as was the case for the 2009 accounts, or an estimate.

Timeframe: Preparation of the 2010 accounts

Recommendation 6: Given the financial context and the offers available in the term deposit accounts market, which vary considerably from one bank to another while affording the same guarantees as regards the security of the funds, we recommend that the “Eurimages” Fund's treasury management should be optimised so as to foster the earning of interest.

The Secretary General will implement the External Auditor's recommendation by introducing procedures for consulting several banks, while continuing to comply with the principle that the capital must be safeguarded.

Timeframe: First half of 2011

Recommendation 7: We recommend that, despite the difficulties involved, comparative data should be provided to the “Eurimages” Board of Management regarding the average cost of the different expenditure items incurred in producing films according to the countries and the types of films concerned.

and

Recommendation 8: We recommend that the “Eurimages” Fund set up an independent scheme for the certification of the accounts supplied by the co-producers, calling on an accounting firm selected by “Eurimages” under a competitive bidding procedure on the basis of specifications approved by the Board of Management. Failing this, the “Eurimages” Fund's management could determine the minimum due diligence required of accountants appointed by the producers and verify compliance therewith by means of periodic independent audits.

These two recommendations will be submitted to the “Eurimages” Board of Management at its next meeting, to be held in Sweden (Gotland) from 29 September to 1 October 2010. It will be for the Board of Management to decide, in the light of the additional costs and the risks involved, what action should be taken in the two areas mentioned by the External Auditor.

Timeframe: End of 2010

RECOMMENDATIONS FURTHER TO THE AUDIT OF THE BUDGETARY MANAGEMENT ACCOUNTS

Recommendation 1: We recommend: firstly, that the purchasing function should be subject to more frequent controls by line management to remind staff of the rules applicable in such matters; secondly, that further work should be done on the good practice guide so as to clarify it in certain respects and possibly that the Financial Regulations should be amended, notably to add precision to the threshold concept.

The good practice guide will be clarified with regard to the matters raised by the External Auditor, and a reminder will be issued to staff concerning the rules to be followed.

Timeframe: First half of 2011

Recommendation 2: We recommend that more frequent controls by line management should be introduced within the “Eurimages” Fund's departments so as to verify compliance with the principle that that a financial commitment must be made before entering into any legal commitment and, possibly, that use should be made of the purchase request procedure where appropriate.

This recommendation has already been implemented, in particular for the transactions noted by the External Auditor, which are linked to the scenario reading arrangements.

Recommendation 3: We recommend that the Financial Regulations of the Council of Europe and the Financial Regulations of the “Eurimages” Fund, as well as the latter's support rules, should be harmonised.

The “Eurimages£ Financial Regulations will be reviewed, as appropriate, in the light of the updated “guidelines” and “model” administrative arrangements.

Note 1 This document has been classified restricted until examination by the Committee of Ministers.


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