Report on the financial statements of the European Training Foundation (ETF - Turin) for the financial year ended 31 December 1998, together with the Foundation's replies
C 372/32 EN Official Journal of the European Communities 22. 12. 1999 on the financial statements of the European Training Foundation (ETF-Turin) for the financial year ended 31 December 1998, together with the Foundationís replies REPORT (1999/C 372/06) CONTENTS Paragraph reference THE COURT S OPINION. 1 to 4 MAIN OBSERVATIONS ON THE BUDGETARY IMPLEMENTATION OF THE EUROPEAN TRAINING FOUNDATION FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1998. 5 to 14 Phare, Tacis and MEDA subsidies not included in the budget. 5 to 7 General (SI X) and budgetary accounts (SI 2). 8 to 11 Appropriations carried over. 12 to 14 Tables 1 and 2. The Foundationís replies. Page 33 33 33 33 33 35 37 22. 12. 1999 EN Official Journal of the European Communities C 372/33 THE COURT S OPINION 1. This report is addressed to the Governing Board of the European Training Foundation in conformity with Article 11(4), of Council Regulation (EEC) No 1360/90 (1). 2. The Court has examined the financial statements of the European Training Foundation for the financial year ended 31 December 1998. In accordance with Article 11(1), of Council Regulation (EEC) No 1360/90, the budget was implemented under the responsibility of the Director. This responsibility included the drawing-up and presentation of the financial statements (2) in accordance with the internal financial provisions, as provided for in Article 12 of Council Regulation (EEC) No 1360/90. The Court of Auditors is required under Article 248 of the Treaty establish- ing the European Community to examine these accounts. 3. The Court performed its audit in accordance with its auditing policies and standards. These have been adapted from generally accepted international auditing standards to reflect the specific characteristics of the Community context. Accordingly, the Court carried out such tests of the accounting records and other audit- ing procedures as it deemed necessary in the circumstances. By means of this audit, the Court obtained a reasonable basis for the opinion expressed below. 4. This examination has enabled the Court to obtain reasonable assurance that the annual accounts for the financial year which ended on 31 December 1998 are reliable and that the underlying transactions, taken as a whole, are legal and regular. 1997 (3). Moreover, the balance (ECU 35,8 million as of 31 Decem- ber 1998) of around 30 bank accounts available to the Founda- tion for the management of these programmes was not shown in the Foundationís financial statements. After discussions with the Court and the Commission, the Foundation agreed to include this information in an annex to its budget as of 1999. 6. The Foundation did not publish its budget and its organisa- tion chart in the Official Journal of the European Communites as required under Article 13 of its Financial Regulation. 7. The Foundationís regulation was amended in July 1998 to include the MEDA programme (Mediterranean actions). General (SI X) and budgetary accounts (SI 2) 8. Overall, the introduction of the SI 2 budgetary system has improved the internal control procedures. 9. During the evaluation phase of the SI 2 system, it was found that it had been introduced before all tests had been completed (áprogram and system testing and data validationí). Consequently, several problems had to be resolved during the year and the IT department was obliged to intervene several times and make manual corrections to the programs and database. 10. Moreover, the áservice level agreementí with the Commission should be signed so as to establish the respective responsibilities and degree of responsibility of the parties involved. MAIN OBSERVATIONS ON THE BUDGETARY IMPLEMENTA- TION OF THE EUROPEAN TRAINING FOUNDATION FOR THE YEAR ENDED 31 DECEMBER 1998 11. The SI 2 system is to include the general accounts as of the financial year 1999. Phare, Tacis and MEDA subsidies not included in the budget Appropriations carried forward 5. The Foundation manages funds made available by the Com- mission in the context of the Phare and Tacis funds allocated to the Tempus programme. The corresponding amounts (around ECU 395 million in 1998) were not recorded in the Foundationís budget, but in separate accounts (see specific annual report 12. Appropriations amounting to ECU 3,5 million were carried forward from 1998 to 1999 (22,3 % of the Foundationís budget). They mainly concern Title III (ECU 2,6 million). The majority of the carry-overs concerned national observatories and professional training. (1) OJ L 131, 23. 5. 1990, p. 1. (2) As required under Article 11(3) of Council Regulation (EEC) No 1360/90, the detailed accounts for all the Foundationís revenue and expenditure for the financial year 1998 were drawn up on 31 March 1999 and forwarded to the Foundationís Governing Board, the Com- mission and the Court of Auditors. These accounts were received by the Court on 6 April 1998. A summarised version of these financial statements is presented in the tables attached to this report. 13. A significant number of carry-overs concerned 28 contracts (overall value: ECU 0,8 million) which entered into force or were signed during the months of November and December 1998. (3) OJ C 406, 28. 12. 1998, p. 38. C 372/34 EN Official Journal of the European Communities 22. 12. 1999 Given that a total of 67 service contracts (in receipt of financing totalling ECU 1,6 million from the Foundationís budget) were signed during 1998, this phenomenon reveals a certain lack of balance in the organisation and planning of the Foundationís activities. 14. A detailed audit of the appropriations carried over from 1998 to 1999 on commitments under the budgetary item ánational focal pointsí shows that seven commitments, amounting to ECU 0,22 million, or 48,7 % of the carry-overs under this item, exclu- sively concerned expenditure to be carried out during the finan- cial year 1999. A similar observation can be made with regard to an additional sample of four carry-overs totalling ECU 0,06 mil- lion and involving other items under Title III of the Foundationís budget. It follows that the principle of annuality was not com- plied with. All the amounts unduly carried over should have been cancelled on 31 December 1998. This report was adopted by the Court of Auditors in Luxembourg at its meeting of 7 October 1999. For the Court of Auditors Jan O. KARLSSON President 22. 12. 1999 EN Official Journal of the European Communities C 372/35 Table 1 Balance sheet for the financial years 1998 and 1997 Assets 1998 1997 Liabilities 1998 1997 (ECU 1 000) Fixed assets Equipment and furniture Supplies Current assets Commission subsidy Sundry accounts receivable Cash accounts Banks - demand accounts Imprest account 1 756 1 892 Fixed capital Own capital Out-turn to be carried over 10 3 708 252 Subtotal 3 960 13 0 10 10 1 616 588 4 459 1 860 Short-term liabilities Commission Non-automatic carry-overs Automatic carry-overs of appropriations Sundry accounts payable Deductions from salaries Accounting officersí allowances Revenue allocated 1 766 - 1 417 Subtotal 349 3 708 0 3 513 13 110 0 16 7 360 Subtotal 1 905 2 212 4 117 0 10 2 727 391 311 4 16 3 459 Subtotal 2 204 6 319 Suspense accounts Payments in progress 221 658 Total assets 7 930 8 234 Total liabilities 7 930 8 234 Source: Prepared by the Court of Auditors on the basis of the Foundationís data. C 372/36 EN Official Journal of the European Communities 22. 12. 1999 Revenue and expenditure account for the financial years 1998 and 1997 Table 2 (ECU 1 000) 1998 1997 Revenue Subsidy received from the Commission Bank interest Sundry revenue Exchange profits Expenditure Staff expenditure - Title I of the budget Payments Appropriations carried over 11 686 245 1 162 Total revenue 12 094 15 303 391 3 262 15 959 9 231 303 1 928 552 1 383 1 872 128 9 149 344 749 611 1 760 2 557 19 Buildings, equipment and miscellaneous administrative expenditure - Title II of the budget Payments Appropriations carried over Operating expenditure - Title III of the budget Payments Appropriations carried over Exchange losses Total expenditure 15 189 15 397 Out-turn for the financial year Out-turn carried over from the previous year Commission repayments 1995 subsidy cancelled Appropriations carried over from the previous year and cancelled - 3 095 2 212 - 840 306 Out-turn to be carried over - 1 417 562 1 794 0 - 543 399 2 212 Source: Prepared by the Court of Auditors on the basis of the Foundationís data. 22. 12. 1999 EN Official Journal of the European Communities C 372/37 FOUNDATION S REPLIES Hors budgetísubventions - Phare, Tacis, Tempus and MEDA It is confirmed that the Foundation, following an exchange of views with the Court of Auditors and the Commission, is now including all funds received through Conventions with the Com- mission in an Annex to the budget. This enhances transparency and allows a complete overview regarding the monies handled by the Foundation. The Foundation has published its 1998 budget in full on the Inter- net. In addition, it has published in the Official Journal of the Euro- pean Communites the information that the full budget can be seen on the Internet. The Commission and the European Parliament encouraged this measure, because it maintains and even broadens publicity and equal access for all European citizens to the budget, as is clearly the objective of Article 13 of the Financial Regula- tion. At the same time this has led to a significant cost saving for the Foundation, which is very important bearing in mind the increasing budgetary constraints. General Accounting (SI 2X) and Budgetary Accounting (SI 2) We agree that globally speaking SI 2 has improved budgetary accounting and control. It is also correct to state that the previ- ous system, based on Excel, had been kept until the end of the year. The Court of Auditors itself mentions the various deficien- cies still existing in the SI 2 system at that time. The experience gained at year-end together with the continuing efforts of the development experts will lead to a better result this year and will avoid manual interventions of the kind mentioned by the Court of Auditors. So there is and will be good progress. A service-level agreement with DG XIX (the systems supplier) has been prepared and negotiated. It is expected to be signed soon, not only with the Foundation but also with the other agencies participating in the SI 2 common support service. All efforts are being undertaken to extend SI 2 to general account- ing and, despite the very short timescale, to ensure its operational start in January 2000. Carry overs The comments of the Court of Auditors concerning the annuality of the budget are well understood. While the explanations for the difficulties to comply with this principle are manifold (late approval of the budget (this year in March only), complex procedures, lengthy procurement cycles), the Foundation is firmly committed to respecting the principle of annuality of the budget. In any event, the planning and execution process will be optimised in order to reduce the number of activities starting late in the year. It should be noted that the principle concerns activities under the Foundationís core budget, while many activities under áconven- tionsí have a multiannual perspective, which is much more appro- priate for the kind of activities we are involved in