# C_2013365EN.01018401.xml

| 13.12.2013 | EN | Official Journal of the European Union | C 365/184 |
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13.12.2013

EN

Official Journal of the European Union

C 365/184

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REPORT

REPORT

on the annual accounts of the European Railway Agency for the financial year 2012, together with the Agency’s replies

2013/C 365/26

INTRODUCTION

INTRODUCTION

| 1. | The European Railway Agency (hereinafter ‘the Agency’, aka ‘ERA’), which is located in Lille and Valenciennes, was created by Regulation (EC) No 881/2004 of the European Parliament and of the Council (1). The Agency's task is to enhance the level of interoperability of railway systems and to develop a common approach to safety in order to contribute to creating a more competitive European railway sector with a high level of safety (2). |
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1.

The European Railway Agency (hereinafter ‘the Agency’, aka ‘ERA’), which is located in Lille and Valenciennes, was created by Regulation (EC) No 881/2004 of the European Parliament and of the Council (1). The Agency's task is to enhance the level of interoperability of railway systems and to develop a common approach to safety in order to contribute to creating a more competitive European railway sector with a high level of safety (2).

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INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

| 2. | The audit approach taken by the Court comprises analytical audit procedures, direct testing of transactions and an assessment of key controls of the Agency’s supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations. |
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2.

The audit approach taken by the Court comprises analytical audit procedures, direct testing of transactions and an assessment of key controls of the Agency’s supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations.

STATEMENT OF ASSURANCE

STATEMENT OF ASSURANCE

| 3. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:






  (a) | the annual accounts of the Agency, which comprise the financial statements (3) and the reports on the implementation of the budget (4) for the financial year ended 31 December 2012, and |
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3.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:

(a)

the annual accounts of the Agency, which comprise the financial statements (3) and the reports on the implementation of the budget (4) for the financial year ended 31 December 2012, and

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| (b) | the legality and regularity of the transactions underlying those accounts. |
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(b)

the legality and regularity of the transactions underlying those accounts.

The management’s responsibility

The management’s responsibility

| 4. | In accordance with Articles 33 and 43 of Commission Regulation (EC, Euratom) No 2343/2002 (5), the management is responsible for the preparation and fair presentation of the annual accounts of the Agency and the legality and regularity of the underlying transactions:






  (a) | The management’s responsibilities in respect of the Agency's annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (6); making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Agency after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Agency in all material respects. |
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4.

In accordance with Articles 33 and 43 of Commission Regulation (EC, Euratom) No 2343/2002 (5), the management is responsible for the preparation and fair presentation of the annual accounts of the Agency and the legality and regularity of the underlying transactions:

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(a)

The management’s responsibilities in respect of the Agency's annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (6); making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Agency after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Agency in all material respects.

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| (b) | The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. |
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(b)

The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used.

The auditor’s responsibility

The auditor’s responsibility

| 5. | The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (7) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Agency are free from material misstatement and the transactions underlying them are legal and regular. |
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5.

The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (7) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Agency are free from material misstatement and the transactions underlying them are legal and regular.

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| 6. | The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. |
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6.

The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts.

| 7. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance. |
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7.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance.

Opinion on the reliability of the accounts

Opinion on the reliability of the accounts

| 8. | In the Court’s opinion, the Agency’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2012 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation and the accounting rules adopted by the Commission’s accounting officer. |
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8.

In the Court’s opinion, the Agency’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2012 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation and the accounting rules adopted by the Commission’s accounting officer.

Opinion on the legality and regularity of the transactions underlying the accounts

Opinion on the legality and regularity of the transactions underlying the accounts

| 9. | In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2012 are legal and regular in all material respects. |
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9.

In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2012 are legal and regular in all material respects.

| 10. | The comments which follow do not call the Court’s opinions into question. |
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10.

The comments which follow do not call the Court’s opinions into question.

COMMENTS ON INTERNAL CONTROLS

COMMENTS ON INTERNAL CONTROLS

| 11. | The Agency has suppressed the Internal Audit Capability and has replaced it with an Internal Control Coordinator (ICC). The internal auditor left the Agency and there are uncertainties on how the internal auditing function provided for in the Agency’s financial regulation will be carried out under the new structure. |
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11.

The Agency has suppressed the Internal Audit Capability and has replaced it with an Internal Control Coordinator (ICC). The internal auditor left the Agency and there are uncertainties on how the internal auditing function provided for in the Agency’s financial regulation will be carried out under the new structure.

| 12. | The Agency should reinforce the controls in place to ensure that family allowances are correctly calculated and paid on the basis of complete and up to date information. |
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12.

The Agency should reinforce the controls in place to ensure that family allowances are correctly calculated and paid on the basis of complete and up to date information.

| 13. | The Agency does not comply with its Internal Control Standard regarding business continuity; there are no approved IT Business Continuity and Disaster Recovery plans. |
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13.

The Agency does not comply with its Internal Control Standard regarding business continuity; there are no approved IT Business Continuity and Disaster Recovery plans.

FOLLOW-UP OF PREVIOUS YEAR’S COMMENTS

FOLLOW-UP OF PREVIOUS YEAR’S COMMENTS

| 14. | An overview of the corrective actions taken in response to the Court’s previous year’s comments is provided in Annex I. |
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14.

An overview of the corrective actions taken in response to the Court’s previous year’s comments is provided in Annex I.

This Report was adopted by Chamber IV, headed by Dr Louis GALEA, Member of the Court of Auditors, in Luxembourg at its meeting of 9 July 2013.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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(1)  OJ L 220, 21.6.2004, p. 3.

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(2)  Annex II summarises the Agency's competences and activities. It is presented for information purposes.

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Annex II

(3)  These include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in net assets and a summary of the significant accounting policies and other explanatory notes.

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(4)  These comprise the budgetary outturn account and the annex to the budgetary outturn account.

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(5)  OJ L 357, 31.12.2002, p. 72.

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(6)  The accounting rules adopted by the Commission’s accounting officer are derived from the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, where relevant, the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

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(7)  Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (OJ L 248, 16.9.2002, p. 1).

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ANNEX I

Follow-up of previous year’s comments

| Year | Court’s comment | Status of corrective action
  (Completed / Ongoing / Outstanding / N/A) |
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| 2011 | The level of payments against budget appropriations improved for all titles, but remained low for title III (operational expenditure) at 47 % (39 % in 2010). This situation is at odds with the budgetary principle of annuality. | Ongoing |
| 2011 | The Agency’s Founding Regulation sets maximum employment periods for temporary staff recruited by the Agency from the professionals of the railways sector. According to these provisions, the Agency will have to replace half of its operational staff in the period 2013-2015, which may cause major disruptions in the Agency’s operational activities (1). | Ongoing |
| 2011 | There is room to improve the Agency’s recruitment procedures in order to fully ensure transparency and equal treatment of candidates. As an example, vacancy notices did not provide information on the required minimum number of years of post-secondary or university studies which however was used as a selection criterion. The pass marks for interviews and reserve lists, the scoring of selection criteria, the questions for oral and written tests and the weightings between written and oral tests were not set before applications were examined. | Ongoing |

Year

Court’s comment

Status of corrective action

(Completed / Ongoing / Outstanding / N/A)

2011

The level of payments against budget appropriations improved for all titles, but remained low for title III (operational expenditure) at 47 % (39 % in 2010). This situation is at odds with the budgetary principle of annuality.

Ongoing

2011

The Agency’s Founding Regulation sets maximum employment periods for temporary staff recruited by the Agency from the professionals of the railways sector. According to these provisions, the Agency will have to replace half of its operational staff in the period 2013-2015, which may cause major disruptions in the Agency’s operational activities (1).

Ongoing

2011

There is room to improve the Agency’s recruitment procedures in order to fully ensure transparency and equal treatment of candidates. As an example, vacancy notices did not provide information on the required minimum number of years of post-secondary or university studies which however was used as a selection criterion. The pass marks for interviews and reserve lists, the scoring of selection criteria, the questions for oral and written tests and the weightings between written and oral tests were not set before applications were examined.

Ongoing

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(1)  Regulation (EC) No 881/2004, Article 24.

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ANNEX II

European Railway Agency (Lille/Valenciennes)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Article 91(1) of the Treaty on the Functioning of the European Union) | ‘For the purpose of implementing Article 90, and taking into account the distinctive features of transport, the European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee and the Committee of the Regions, lay down:






  (a) | common rules applicable to international transport to or from the territory of a Member State or passing across the territory of one or more Member States, |
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Areas of Union competence deriving from the Treaty

(Article 91(1) of the Treaty on the Functioning of the European Union)

‘For the purpose of implementing Article 90, and taking into account the distinctive features of transport, the European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee and the Committee of the Regions, lay down:

(a)

common rules applicable to international transport to or from the territory of a Member State or passing across the territory of one or more Member States,

| (b) | the conditions under which non-resident carriers may operate transport services within a Member State, |
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(b)

the conditions under which non-resident carriers may operate transport services within a Member State,

| (c) | measures to improve transport safety, |
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(c)

measures to improve transport safety,

| (d) | any other appropriate provisions.’ |
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(d)

any other appropriate provisions.’

Competences of the Agency

(Regulation (EC) No 881/2004 of the European Parliament and of the Council)

Objectives

To contribute, on technical matters, to the implementation of the Union legislation aimed at:

| — | improving the competitive position of the railway systems, |
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—

improving the competitive position of the railway systems,

| — | developing a common approach to safety on the European railway system, |
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—

developing a common approach to safety on the European railway system,

in order to contribute to creating a European railway area without frontiers and guaranteeing a high level of safety.

Tasks

| 1. | To address recommendations to the Commission on:






  — | the common safety methods (CMS) and common safety targets (CSTs) provided in the Railway Safety Directive (2004/49/EC), |
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1.

To address recommendations to the Commission on:

—

the common safety methods (CMS) and common safety targets (CSTs) provided in the Railway Safety Directive (2004/49/EC),

| — | safety certificates and measures in the field of safety, |
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—

safety certificates and measures in the field of safety,

| — | development of technical specifications for interoperability, |
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—

development of technical specifications for interoperability,

| — | vocational competencies, |
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—

vocational competencies,

| — | registration of rolling stock. |
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—

registration of rolling stock.

| 2. | To issue opinions on:






  — | national safety rules, |
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2.

To issue opinions on:

—

national safety rules,

| — | monitoring the quality of the work of notified bodies, |
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—

monitoring the quality of the work of notified bodies,

| — | interoperability of the trans-European network. |
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—

interoperability of the trans-European network.

| 3. | To coordinate national bodies:
  Coordination of national safety authorities and national investigation bodies (as described in Directive 2004/49/EC, Articles 17 and 21). |
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3.

To coordinate national bodies:

Coordination of national safety authorities and national investigation bodies (as described in Directive 2004/49/EC, Articles 17 and 21).

| 4. | Publications and databases:






  — | report on safety performance (every two years), |
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4.

Publications and databases:

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report on safety performance (every two years),

| — | report on progress with interoperability (every two years), |
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report on progress with interoperability (every two years),

| — | public database of safety documents, |
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public database of safety documents,

| — | public register of documents on interoperability. |
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—

public register of documents on interoperability.

Governance

Administrative Board

Comprises one representative from each Member State, four representatives from the Commission and six representatives, without the right to vote, from the professional sectors concerned.

Director

Appointed by the Administrative Board on a proposal from the Commission.

External audit

European Court of Auditors.

Discharge authority

European Parliament, following a recommendation from the Council.

Resources made available to the Agency in 2012 (2011)

Budget

25,8 (26) million euro

Staff at 31 December 2012

Posts listed in the establishment plan: 144 (144)

Posts occupied on 31.12.2012: 139 (140)

Other staff: 14 (14)

Total staff: 153 (154), of which assigned to:

| — | operational tasks: 119 (107) |
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operational tasks: 119 (107)

| — | administrative tasks: 34 (47) |
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—

administrative tasks: 34 (47)

Products and services in 2012 (2011)

Recommendations on Safety Certification, including the migration to a single EU safety certificate.

Follow-up activities regarding the certification of entities in charge of maintenance.

Recommendations on safety regulation, including evaluating the way national safety rules are made available, and examination of the transposition of the Railway Safety Directive in the Member States.

Recommendations on Safety Reporting, including Common Safety Indicators, coordination of safety authorities’ and investigation bodies and reporting on safety performance in the Member States.

Recommendations on safety assessment, including Common Safety Methods.

Recommendations on Technical Specifications for Interoperability and their Revision; evaluation of extension of scope and error correction.

Reports on common approaches with regard to vocational competencies and assessment of railway staff involved in operation and maintenance.

Definition and compilation of the Reference Document of national rules for vehicle authorisation and classification of their equivalence for cross acceptance.

Technical Opinions on national rules and monitoring of the work of Notified Bodies.

Reports on railway Safety and Interoperability.

Setting up and maintaining a series of registers for Safety and Interoperability.

Acting as the System Authority and Change Control Manager for ERTMS (European Railway Traffic Management System); issuing the ETCS Baseline 3 specification; assisting the Commission in evaluating ERTMS projects.

Accompanying all recommendations with an impact assessment.

Source: Information supplied by the Agency.

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THE AGENCY’S REPLIES

| 11. | The Agency is planning to recruit an ICC before autumn 2013. This will be a separate function and as such the independence of the person exercising this role will be ensured. In addition, the independence of the internal audit function in the Agency is fully guaranteed. In line with the ERA financial regulation, article 71§2: ‘... the Commission's internal auditor shall exercise, the same powers with respect to the Agency as with respect to Commission departments’. The Commission Internal audit Service (IAS) continues to be the Internal auditor of the Agency today and also for the future. It performs regularly internal audits within the Agency. |
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11.

The Agency is planning to recruit an ICC before autumn 2013. This will be a separate function and as such the independence of the person exercising this role will be ensured. In addition, the independence of the internal audit function in the Agency is fully guaranteed. In line with the ERA financial regulation, article 71§2: ‘... the Commission's internal auditor shall exercise, the same powers with respect to the Agency as with respect to Commission departments’. The Commission Internal audit Service (IAS) continues to be the Internal auditor of the Agency today and also for the future. It performs regularly internal audits within the Agency.

| 12. | The Court’s observation is based upon one specific and very complex individual case for which the Agency will seek advice from the Commission’s services to check how to deal with this. In addition the Agency will revise and reinforce, where necessary, his existing controls in place to ensure that family allowances are correctly calculated and paid on the basis of complete and up to date information. |
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12.

The Court’s observation is based upon one specific and very complex individual case for which the Agency will seek advice from the Commission’s services to check how to deal with this. In addition the Agency will revise and reinforce, where necessary, his existing controls in place to ensure that family allowances are correctly calculated and paid on the basis of complete and up to date information.

| 13. | The Agency has, as a priority, decided to implement adequate measures in order to assure the continuity of the IT services and systems that are horizontal to the Agency business. In this respect it is foreseen to have the related actions implemented in the course of 2013 and to have an approved Business Continuity Plan and Disaster Recovery Procedure by the end of 2013. |
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13.

The Agency has, as a priority, decided to implement adequate measures in order to assure the continuity of the IT services and systems that are horizontal to the Agency business. In this respect it is foreseen to have the related actions implemented in the course of 2013 and to have an approved Business Continuity Plan and Disaster Recovery Procedure by the end of 2013.

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