Report on the financial statements of the Translation Centre for Bodies of the European Union (TCBEU- Luxembourg) for the financial year ended 31 December 1997 together with the Centre's reply
28. 12. 98 EN Official Journal of the European Communities C 406/33 on the financial statements of the Translation Centre for Bodies of the European Union (TCBEU — Luxembourg) for the financial year ended 31 December 1997 together with the Centre’s reply REPORT (98/C 406/06) 1. 1. This report is addressed to the Management Board of the Translation Centre for Bodies of the European Union in conformity with Article 14(4), of Council Regulation (EC) No 2965/94 (1). MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE TRANSLATION CENTRE FOR BODIES OF THE EUROPEAN UNION FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1997 1. 2. The Court has examined the financial statements of the Translation Centre for Bodies of the European Union for the financial year ended 31 December 1997. In accordance with Article 14(1), of Council Regulation (EC) No 2965/94, the budget was implemented on the responsibility of the Director. This responsibility included the drawing-up and presentation of financial statements (2) in accordance with the internal financial provisions, as provided for in Article 15 of Council Regulation (EC) No 2965/94. The Court of Auditors is required under Article 188c of the Treaty establishing the European Community to examine these accounts. the 1. 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 procedures as it deemed necessary in the circumstances. By means of this audit, the Court obtained a reasonable basis for the opinion expressed below. 1. 4. This examination has enabled the Court to obtain reasonable assurance that the annual accounts for the financial year which ended on 31 December 1997 are reliable and that the underlying transactions, taken as a whole, are legal and regular. (1) OJ L 314, 7. 12. 1994, p. 1. (2) As required under Article 14(3), of Council Regulation (EC) No 2965/94, the accounts for all the Centre’s revenue and expenditure for the financial year 1997 were drawn up on 25 February 1998 and forwarded to the Centre’s Management Board, the Commission and the Court of Auditors. These accounts were received by the Court on 3 March 1998. A summarised version of these financial statements is presented in the tables attached to this report. General and budgetary accounts 1. 5. Although the Centre is in its third financial year (including two full years), its budgetary accounts are still kept by means of a spreadsheet rather than appropriate accounting software. The use of a spreadsheet had already been criticised by the Court in its Report concerning the previous financial years (3). 1. 6. The Centre should set up a system of analytical accounts in order to be able to establish the real cost of the services that it provides to its customers. Agreements with the Commission In 1996 and 1997, the Centre concluded 1. 7. agreements with the Commission for translations that should normally have been carried out by the Centre but were entrusted to the Commission’s translation service. The cost, to the Centre’s budget, of the services provided in this context amounted to ECU 0,4 million for 1996 and ECU 0,2 million for 1997 (this amount includes ECU 0,06 million for work other than translation, such as terminological harmonisation and standardisation). 1. 8. Under the past agreements, invoicing was based on a different criterion from that applied when checking the work carried out (days rather than pages). This prevents the Court from being able to express an opinion on whether the amounts shown are justified. Moreover, it was not possible to explain the differences in cost price between a page translated in 1996 (ECU 36 per page) and a page translated in 1997 (ECU 82 per page). The (3) OJ C 393, 29. 12. 1997, p. 47. C 406/34 EN Official Journal of the European Communities 28. 12. 98 supporting documents for the ECU 0,06 million spent on terminological harmonisation and standardisation are not satisfactory. Budget (ECU 0,89 million) of the 1. 9. Only 58 % appropriations automatically carried over from the financial year 1996 were utilised. The consequently high cancellation rate was due to the fact that ECU 0,65 million of the carry-overs that had been made did not correspond to any specific commitments. 1. 10. For 1997, payments amounted to only 57,1 % of the appropriations for the financial year (i. e. ECU 9,92 appropriations were these million); 30,3 % of automatically carried over to the financial year 1998 and 12,6 % were cancelled. Implementing procedures for the Financial Regulation 1. 12. When the Court carried out its audit (in March 1998), the Centre had still not adopted the procedures for implementing its Financial Regulation, which itself dates back to September 1996. Headquarters 1. 13. Since April 1997, the Centre has occupied offices made available by the Luxembourg Government. There is still no written agreement specifying the conditions for the use of these premises. Balance of the financial year 1. 11. Article 13 of the Centre’s Financial Regulation provides for the budget to be published in the Official Journal of the European Communities. This was not done. 1. 14. Contrary to the provisions of Article 32 of the Financial Regulation applicable to the general budget, the Centre has not entered the balance for each of the previous years in its subsequent budgets. This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 29 October 1998. For the Court of Auditors Bernhard FRIEDMANN President 28. 12. 98 EN Official Journal of the European Communities C 406/35 Table 1 Balance sheet for the financial years 1996 and 1997 Assets 1997 1996 Liabilities 1997 1996 (ECU 1 000) Fixed capital Own capital Net result 275 2 666 2 941 17 464 481 Sub-total Fixed assets Equipment and furniture Computer equipment Intangible fixed assets Current assets Contributions from bodies Sundry accounts receivable 71 156 48 275 693 693 9 8 17 259 7 266 Sub-total Sub-total Cash accounts Bank — demand deposits Imprest account 5 915 2 5 917 1 894 109 2 003 Sub-total Short-term liabilities Automatic carry-overs Sundry accounts payable Net contributions from bodies Appropriations for re-use Sub-total 3 007 241 693 3 3 944 1 543 3 259 1 805 Total assets 6 885 2 286 Total liabilities 6 885 2 286 Source: Prepared by the Court of Auditors on the basis of the Centre’s data. C 406/36 EN Official Journal of the European Communities 28. 12. 98 Table 2 Balance for the financial years 1996 and 1997 Revenue Commission subsidy Sundry revenue Own revenue Expenditure Staff — Title I Payments Appropriations carried forward Buildings, equipment, etc. — Title II Payments Appropriations carried forward (ECU 1 000) 1997 1996 300 118 9 809 Total revenue 10 227 5 217 2 171 441 836 90 2 703 2 793 1 155 905 88 638 Total expenditure 8 665 2 786 Out-turn for the financial year Out-turn carried over from previous financial year Appropriations carried over and cancelled Exchange-rate differences 1 562 464 649 (9) Balance for the financial year 2 666 7 334 133 (10) 464 Source: Prepared by the Court of Auditors on the basis of the Centre’s data. 28. 12. 98 EN Official Journal of the European Communities C 406/37 REPLY OF THE TRANSLATION CENTRE General and budgetary accounts 1. 5. As stated in its reply to the report on the previous financial years, the Translation Centre has always considered the software it uses for its budgetary accounts to be unsuitable for its needs. Together with a number of other agencies, the Centre has drawn up an agreement which provides for a coordination unit responsible for the installation of and support for SI 2. The competent authorities have approved this agreement. With a view to speeding up this project as far as possible, the Centre carried out a study on the introduction of SI 2 in June this year. It expects to have the test version in place in the first week of November. 1. 6. The Centre is fully aware of the overriding importance of having an effective cost-accounting system. It intends to supplement SI 2 by integrating modules for the general and analytical accounts. During 1998, the Centre used Excel for its analytical calculations. Agreements with the Commission 1. 8. The decision to base invoicing on days was the Commission’s, given that the services it provides to the Centre consist not only in the translation of documents but also in terminology work, standardisation assistance, the use of databases, etc. The Centre will try to come to an agreement with the Commission to have more detailed documentation for future amounts corresponding to these services are decreasing (ECU 0,4 million for 1996, ECU 0,2 million for 1997 and a forecast ECU 0,45 million for 1998). accounting, though even the calculate the value of translation orders outstanding at the end of 1997. To resolve this problem the Centre has this year set up a translations follow-up database and begun to introduce SI 2 so that it will have the necessary tools for accurate calculation when the accounts are closed at year-end. 1. 11. The relatively high cost of publishing the budget in the Official Journal of the European Communities has brought the Centre, together with four other agencies, to negotiate an agreement with the Publications Office to publish their budgets jointly. This is currently being negotiated the 1998 budget. The European Parliament, for its part, proposes arranging for the agencies’ budgets to be published on the Internet, with advance notice in the Offical Journal of the European Communities giving details of the respective websites. for Implementing procedures for the Financial Regulation implementing procedures 1. 12. The draft the Financial Regulation have been submitted for opinion to the Financial Controller. If approved, they will be on the agenda of the Management Board meeting, on 26 October 1998, for adoption. for Headquarters 1. 13. The Centre is finalising a draft agreement on its headquarters and security arrangements, which will be submitted to the Luxembourg authorities. Budget Balance of the financial year 1. 9 and 1. 10. In view of the huge volume of work sent limitations of out to freelance translators and the managing the accounts in Excel and the translations follow-up system, it was by no means a simple task to 1. 14. There is no provision in its Financial Regulation for the Centre to enter the balances for the previous years in its subsequent budgets. The Centre will be reviewing its Financial Regulation to address this problem