Report on the financial statements of the European Environment Agency (EEA - Copenhagen) for the financial year ended 31 December 1998 together with the Agency's replies
22. 12. 1999 EN Official Journal of the European Communities C 372/7 on the financial statements of the European Environment Agency (EEA - Copenhagen) for the financial year ended 31 December 1998 together with the Agencyís replies REPORT (1999/C 372/02) CONTENTS Paragraph reference Page THE COURT S OPINION. 1 to 4 MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN ENVIRONMENT AGENCY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1998. 5 to 9 General (SI X) and budget (SI 2) accounts. 5 to 6 Advisory Committee on Procurement and Contracts (ACPC). Contracts with the Topic Centres. Publication. 7 8 9 Tables 1 and 2. The Agencyís replies. 8 8 8 8 8 8 10 12 C 372/8 EN Official Journal of the European Communities 22. 12. 1999 THE COURT S OPINION in order to put new mechanisms in place, disbursed sums of the order of ECU 110 000 which could possibly have been shared between several agencies in the event that the common support agreement had been introduced before January 1999. 1. This report is addressed to the Management Board of the European Environment Agency in accordance with Article 13(4) of Council Regulation (EEC) No 1210/90 (1). 2. The Court has examined the financial statements of the Euro- pean Environment Agency for the financial year ended 31 Decem- ber 1998. In accordance with Article 14(1) of Council Regulation (EEC) No 1210/90 the budget was implemented at the responsi- bility of the Executive Director. This responsibility included the drawing-up and presentation of the financial statements (2) in accordance with the internal financial provisions provided for in Article 14 of Council Regulation (EEC) No 1210/90. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to audit those accounts. 3. The Court performed its audit in accordance with its audit policies and standards. These have been adapted from generally accepted international auditing standards to reflect the specific characteristics of the Community context. The Court carried out such tests of the accounting records and applied such 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. 4. This examination has enabled the Court to obtain reasonable assurance that the annual accounts for the financial year ended 31 December 1998 are reliable and that the underlying transactions, taken as a whole, are legal and regular. 6. During the evaluation procedure it was noted that the system had been put in place before all the requisite preliminary tests had been finally completed. This can be partially explained by the inadequacies of the Commissionís software. Several manual adjust- ments and corrections were made. A service level agreement with the Commission is essential. Advisory Committee on Procurement and Contracts (ACPC) 7. As regards the ACPC procedures for the introduction of SI 2, there was found to have been an unexplained delay of five months after the evaluation of the restricted call for tenders. Furthermore, the time needed to carry out the work was badly estimated. In addition the procedures followed in selecting the contractor were not entirely justified. Contracts with the Topic Centres MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN ENVIRONMENT AGENCY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1998 General (SI X) and budget (SI 2) accounts 8. In connection with the supporting documents for these con- tracts, and the analytical expenses in particular, the Court found that in the cases which it examined there had been no internal control, although it was required under Article 8 of the contrac- tual clauses relating to the subsidies for the Topic Centres. 5. Throughout the various phases of SI 2 (new version) the Agency was not only overdependent on outside experts, but also, Publication (1) OJ L 120, 11. 5. 1990, p. 1. (2) Pursuant to Article 13(3) of Council Regulation (EEC) No 1210/90 the accounts for all the Agencyís revenue and expenditure for the finan- cial year 1998 were drawn up on 20 April 1999 and were sent to the Agencyís Management Board, the Commission and the Court of Auditors and the latter received them on 26 April 1999. The sum- mary form of those financial statements is published in the tables annexed to this report. 9. The Agency published neither its budget nor the table of its posts in the Official Journal of the European Communities although it is required to do so under Article 13 on its Financial Regula- tion. 22. 12. 1999 EN Official Journal of the European Communities C 372/9 This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 24 and 25 November 1999. For the Court of Auditors Jan O. KARLSSON President C 372/10 EN Official Journal of the European Communities 22. 12. 1999 Table 1 Balance sheet as at 31 December 1998 and 1997 Assets 1998 1997 Liabilities 1998 1997 (ECU 1 000) Fixed assets Equipment and furniture Computer equipment Stocks Current assets Subsidy from the Commission Sundry accounts receivable Recoverable VAT Recovery orders Translation Centre Subtotal 168 2 925 3 093 9 8 568 2 140 4 6 153 2 501 2 654 15 9 177 1 164 210 Fixed capital Own capital Balance for the financial year 3 102 - 4 386 2 669 - 5 500 Subtotal - 1 284 - 2 831 Current liabilities Commission Automatic carry-overs of appropriations Recovery orders Social liabilities VAT Sundry accounts receivable Translation Centre 8 568 5 755 4 10 140 6 6 9 177 6 767 22 8 164 0 0 Subtotal 8 720 9 552 Subtotal 14 489 16 138 Cash accounts Bank accounts - demand accounts 4 544 3 181 Suspense accounts VAT reuse accounts Other reuse accounts Payments pending 308 81 2 772 3 161 348 1 747 2 095 Subtotal Source: Prepared by the Court of Auditors on the basis of data compiled by the Agency. Total assets 16 366 15 402 Total liabilities 16 366 15 402 22. 12. 1999 EN Official Journal of the European Communities C 372/11 Revenue and expenditure account for financial years 1998 and 1997 Table 2 (ECU 1 000) 1998 1997 17 421 96 Total revenue 17 517 Revenue Subsidy received from the Commission Miscellaneous revenue Expenditure Staff expenditure - Title I of budget Payments Appropriations carried over 5 908 177 1 999 1 001 3 194 4 577 Buildings, equipment and miscellaneous administrative expenditure - Title II of budget Payments Appropriations carried over Operating expenditure - Title III of budget Payments Appropriations carried over Total expenditure 16 856 Out-turn for the financial year Balance carried over from previous financial year Adjustment of entries as at 31 December 1996 1997 amount for reuse not used Appropriations carried over from previous year which lapse Exchange rate differences 661 - 5 500 46 392 15 Source: Prepared by the Court of Auditors on the basis of data compiled by the Agency. Total for the year - 4 386 14 012 126 14 138 5 179 131 2 145 552 2 712 6 084 16 803 - 2 665 - 3 387 30 64 481 - 23 - 5 500 C 372/12 EN Official Journal of the European Communities 22. 12. 1999 EUROPEAN ENVIRONMENT AGENCY S REPLIES General (SI X) and budget (SI 2) accounts systems To point 5: While it is correct that the common support agreement became operational only at the beginning of 1999 (seven Agencies involved), it has to be recorded: - the joint development in this area between Agencies began as early as 1995 with a joint call for tender, with the European Commission Servicesí (DG XX) participation, and has contin- ued since, - that this Agency has actively sought and used this joint devel- opment as the Courtís visiting team knows, so that both the extent of additional or specific expertise and of related finan- cial resources have been kept to the minimum possible. To point 6: While those observations are correct, they seem to imply a criti- cism of what has been we think up to now a good operational way of proceeding (and maybe the only way left under the exist- ing circumstances) since it has included: - a parallel testing of S I2 during 1998 until it became the EEA budget system in January 1999 (and it performed well and was stable). Manual interventions (or adjustments) were required due to the limitations and errors of the software, however they did not modify existing or introduce new com- mitments or payments, and - a service level agreement will soon be reached between the Commission and the European Training Foundation in Turin on behalf of seven Agencies, including this Agency, which joined in a common support agreement. Advisory Committee on Procurement and Contracts (ACPC) To point 7: It is our understanding that the whole process has developed respecting the procedures and following the best practices: - the estimate of the required work was made in 1997 based on the limited information available and with the support of the European Commission Services. Due to unforeseen reasons, a consolidated updated estimate was submitted to ACPC with a delay, - a call for expression of interest was published in the Official Journal of the European Communities. A restricted call for tender was addressed to 38 companies, and the published awarding criteria were used for the selection. The Agency will try to improve future evaluation procedures concerning the final selection of the successful candidate and meanwhile has intro- duced more differentiated gradings for evaluations. Contracts with the Topic Centres To point 8: The control was made but not recorded in the dossiers. While the documents justifying the expenses under contracts with the Euro- pean Topic Centres (ETCs) were reviewed and checked continu- ously throughout the year (and some payments were not made because the appropriate work was not delivered), no trail was kept in the dossiers. Projects Managers have now specific instruc- tions to establish the internal control trail. Publication of the EEAís budget To point 9: - The Agency published its 1998 budget only on its homepage on the Internet (approximately five million hits per year and 360 000 users per year). It followed the views expressed in 1998 by the European Parliament Budget Committee at a meeting with Agencies Directors, indicating that the second generation of Agenciesí budget should not necessarily be pub- lished in the Official Journal of the European Communities; pub- lishing on the Internet would be more efficient (cheaper and higher dissemination). - In 1999, the EEA published its budget on the Internet again. Following the Court of Auditorsí statement and to respect to the letter its Financial Regulation, the EEA will also publish its 1999 budget in the Official Journal of the European Communities together with the other six Agencies (to lower the cost). 22. 12. 1999 EN Official Journal of the European Communities C 372/13 However, considering also the European Parliamentís views and the Agencyís experiences, the following must be assessed: EEAís homepage where the full budget and establishment plan is available, - the most cost-effective alternative for making the budget information accessible and disseminated to the public. It could include publishing in the Official Journal of the Euro- pean Communities a summary and the reference to the - the proper way to reflect it in the EEA financial regula- tion clauses, by adapting it in a cost effective manner to the possibilities of information technology