# C_2008311EN.01006401.xml

| 5.12.2008 | EN | Official Journal of the European Union | C 311/64 |
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5.12.2008

EN

Official Journal of the European Union

C 311/64

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REPORT

REPORT

on the annual accounts of the European Environment Agency for the financial year 2007 together with the Agency's replies

(2008/C 311/10)

CONTENTS

| 1-2 | INTRODUCTION |
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1-2

| 3-6 | STATEMENT OF ASSURANCE |
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3-6

| 7-10 | OBSERVATIONS |
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7-10

Tables 1 to 4

The Agency's replies

The Agency's replies

INTRODUCTION

| 1. | The European Environment Agency (hereinafter called the Agency) was established by Council Regulation (EEC) No 1210/90 of 7 May 1990 (1). It is responsible for setting up an observation network that provides the Commission, the Parliament, the Member States and, more generally, the public with reliable information on the state of the environment. This information should, in particular, enable the European Union and the Member States to take action to safeguard the environment and assess the effectiveness of such action. |
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1.

The European Environment Agency (hereinafter called the Agency) was established by Council Regulation (EEC) No 1210/90 of 7 May 1990 (1). It is responsible for setting up an observation network that provides the Commission, the Parliament, the Member States and, more generally, the public with reliable information on the state of the environment. This information should, in particular, enable the European Union and the Member States to take action to safeguard the environment and assess the effectiveness of such action.

1

| 2. | Table 1 summarises the Agency's competences and activities. Key data taken from the financial statements drawn up by the Agency for the financial year 2007 are presented in Tables 2, 3 and 4 for information purposes. |
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2.

Table 1 summarises the Agency's competences and activities. Key data taken from the financial statements drawn up by the Agency for the financial year 2007 are presented in Tables 2, 3 and 4 for information purposes.

Table 1

Tables 2, 3 and 4

STATEMENT OF ASSURANCE

| 3. | This statement is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (2); it was drawn up following an examination of the Agency's accounts, as required by Article 248 of the Treaty establishing the European Community. |
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3.

This statement is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (2); it was drawn up following an examination of the Agency's accounts, as required by Article 248 of the Treaty establishing the European Community.

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| 4. | The Agency's accounts for the financial year ended 31 December 2007 (3) were drawn up by its Executive Director, pursuant to Article 13 of Regulation (EEC) No 1210/90, and sent to the Court, which is required to give a statement of assurance on their reliability and on the legality and regularity of the underlying transactions. |
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4.

The Agency's accounts for the financial year ended 31 December 2007 (3) were drawn up by its Executive Director, pursuant to Article 13 of Regulation (EEC) No 1210/90, and sent to the Court, which is required to give a statement of assurance on their reliability and on the legality and regularity of the underlying transactions.

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| 5. | The Court conducted its audit in accordance with the IFAC and ISSAI (4) International Auditing Standards and Codes of Ethics, insofar as these are applicable in the European Community context. The audit was planned and performed to obtain reasonable assurance that the accounts are reliable and that the underlying transactions are legal and regular. |
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5.

The Court conducted its audit in accordance with the IFAC and ISSAI (4) International Auditing Standards and Codes of Ethics, insofar as these are applicable in the European Community context. The audit was planned and performed to obtain reasonable assurance that the accounts are reliable and that the underlying transactions are legal and regular.

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| 6. | The Court has thus obtained a reasonable basis for the statement set out below:

  Reliability of the accountsThe Agency's accounts for the financial year ended 31 December 2007 are, in all material respects, reliable.Legality and regularity of the underlying transactionsThe transactions underlying the Agency's annual accounts, taken as a whole, are legal and regular.The observations which follow do not call the Court's statement into question. |
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6.

The Court has thus obtained a reasonable basis for the statement set out below:

Reliability of the accountsThe Agency's accounts for the financial year ended 31 December 2007 are, in all material respects, reliable.Legality and regularity of the underlying transactionsThe transactions underlying the Agency's annual accounts, taken as a whole, are legal and regular.The observations which follow do not call the Court's statement into question.

Reliability of the accountsThe Agency's accounts for the financial year ended 31 December 2007 are, in all material respects, reliable.Legality and regularity of the underlying transactionsThe transactions underlying the Agency's annual accounts, taken as a whole, are legal and regular.The observations which follow do not call the Court's statement into question.

OBSERVATIONS

| 7. | The audit of two recruitment procedures showed weaknesses: candidates not fulfilling selection criteria were considered for further evaluation and criteria for identifying the best candidates to be invited for interview were not documented. These situations did not ensure transparent and non-discriminatory procedures. |
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7.

The audit of two recruitment procedures showed weaknesses: candidates not fulfilling selection criteria were considered for further evaluation and criteria for identifying the best candidates to be invited for interview were not documented. These situations did not ensure transparent and non-discriminatory procedures.

| 8. | With regard to tendering procedures, the following irregularities were observed in three cases: direct award of services without respecting the requirements of the Financial Regulation (5), award of a specific contract for services not in line with the framework contract terms (6). These weaknesses called into question the transparency of the procedures. |
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8.

With regard to tendering procedures, the following irregularities were observed in three cases: direct award of services without respecting the requirements of the Financial Regulation (5), award of a specific contract for services not in line with the framework contract terms (6). These weaknesses called into question the transparency of the procedures.

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6

| 9. | Following a call for proposals, the Agency signed grant agreements with consortia of institutions (called European Topic Centres) to annually perform tasks on specific environmental topics (7). The interim and final payments made by the Agency to these Centres are based on declarations of actual costs. The main item of expenditure is personnel costs. The Agency's checks were limited to reviews of the documentation provided by the Centres without adequate procedures in place to ensure the eligibility of the amounts declared. |
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9.

Following a call for proposals, the Agency signed grant agreements with consortia of institutions (called European Topic Centres) to annually perform tasks on specific environmental topics (7). The interim and final payments made by the Agency to these Centres are based on declarations of actual costs. The main item of expenditure is personnel costs. The Agency's checks were limited to reviews of the documentation provided by the Centres without adequate procedures in place to ensure the eligibility of the amounts declared.

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| 10. | These grant agreements with the Centres also provide for a flat rate of 20 % of direct expenditure for their indirect costs (overheads), whereas the Implementing Rules of the general Financial Regulation limit this rate to 7 %. According to the rules this ceiling can be exceeded only following a reasoned decision; no such decision was taken by the Agency. If the 7 % rate had been applied the amount paid in 2007 would have been 0,3 million euro less. |
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10.

These grant agreements with the Centres also provide for a flat rate of 20 % of direct expenditure for their indirect costs (overheads), whereas the Implementing Rules of the general Financial Regulation limit this rate to 7 %. According to the rules this ceiling can be exceeded only following a reasoned decision; no such decision was taken by the Agency. If the 7 % rate had been applied the amount paid in 2007 would have been 0,3 million euro less.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 18 September 2008.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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(1)  OJ L 120, 11.5.1990

1

(2)  OJ L 248, 16.9.2002, p. 1.

2

(3)  These accounts were drawn up on 22 May 2008 and received by the Court on 30 June 2008.

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(4)  International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

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(5)  Two cases with an approximate total value of 26 000 euro.

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(6)  One case with an approximate value of 215 000 euro.

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(7)  There are five European Topic Centres and the related commitment appropriations for 2007 were 6 million euro in total.

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Table 1

European Environment Agency (Copenhagen)

| Areas of Community competence deriving from the Treaty | Competences of the Agency as defined in Council Regulation (EEC) No 1210/90 | Governance | Resources made available to the Agency in 2007

  (Data for 2006) | Main products and services supplied in 2007 |
| --- | --- | --- | --- | --- |
| Environment policy

  Community policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Community. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay. (...) In preparing its policy (...), the Community shall take account of available scientific and technical data (...).

  (Article 174 of the Treaty) | Objectives

  To set up a European environment information and observation network to provide the Community and the MemberStates with objective, reliable and comparable information at European level enabling them to:






  (a) | take the requisite measures to protect the environment; |

Areas of Community competence deriving from the Treaty

Competences of the Agency as defined in Council Regulation (EEC) No 1210/90

Governance

Resources made available to the Agency in 2007

(Data for 2006)

Main products and services supplied in 2007

Environment policy

Community policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Community. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay. (...) In preparing its policy (...), the Community shall take account of available scientific and technical data (...).

(Article 174 of the Treaty)

Objectives

To set up a European environment information and observation network to provide the Community and the MemberStates with objective, reliable and comparable information at European level enabling them to:

(a)

take the requisite measures to protect the environment;

| (b) | assess the results of such measures; |
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(b)

assess the results of such measures;

| (c) | ensure that the public is properly informed about the state of the environment. |
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(c)

ensure that the public is properly informed about the state of the environment.

Tasks

| — | To provide the Community and the Member States with the objective information necessary for framing and implementing sound and effective environmental policies. |
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—

To provide the Community and the Member States with the objective information necessary for framing and implementing sound and effective environmental policies.

| — | To record, collate and assess data on the state of the environment and to report on the quality of and pressures on the environment within the territory of the Community. |
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—

To record, collate and assess data on the state of the environment and to report on the quality of and pressures on the environment within the territory of the Community.

| — | To help ensure that environmental data at European level are comparable and, if necessary, to encourage by appropriate means improved harmonisation of methods of measurement. |
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—

To help ensure that environmental data at European level are comparable and, if necessary, to encourage by appropriate means improved harmonisation of methods of measurement.

| — | To promote the incorporation of European environmental data into international programmes. |
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—

To promote the incorporation of European environmental data into international programmes.

| — | To publish a report on the state of, trends in and prospects for the environment every five years. |
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—

To publish a report on the state of, trends in and prospects for the environment every five years.

| — | To stimulate the development of environmental forecasting techniques, methods of assessing the cost of damage to the environment and the exchange of information on damage-prevention technology. |
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—

To stimulate the development of environmental forecasting techniques, methods of assessing the cost of damage to the environment and the exchange of information on damage-prevention technology.

| — | To stimulate the development of methods of assessing the cost of damage to the environment and the costs of environmental preventive, protection and restoration policies. |
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—

To stimulate the development of methods of assessing the cost of damage to the environment and the costs of environmental preventive, protection and restoration policies.

1.   Management Board

Consisting of:

| — | One representative per MemberState; |
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—

One representative per MemberState;

| — | two representatives of the Commission; |
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—

two representatives of the Commission;

| — | two scientists appointed by the European Parliament. |
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—

two scientists appointed by the European Parliament.

Tasks

To adopt the work programme and ensure it is implemented.

2.   Executive Director

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

3.   Advisory Forum

Consisting of one representative per MemberState, it advises the Executive Director.

4.   Scientific Committee

Consisting of qualified figures in the field of the environment.

5.   External audit

Court of Auditors.

6.   Discharge authority

Parliament acting on a recommendation by the Council.

Final budget:

35,1 million euro (37,1 million euro)

Community subsidy:

82 % (75 %)

Staff numbers at 31 December 2007:

Number of posts in the establishment plan:

116 (115)

Posts occupied: 111 (110) plus 55 (47) other posts

(contract agents and seconded national experts)

Total staff numbers: 116 (115)

assigned to the following tasks:

operational: 73 (72)

administrative: 42 (42)

mixed: 1 (1)

| — | Launch of report on ‘Europe's environment: the fourth assessment’ at Pan-European Environment Ministers Conference. |
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Launch of report on ‘Europe's environment: the fourth assessment’ at Pan-European Environment Ministers Conference.

| — | Launch of Environmental Technology Atlas. |
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—

Launch of Environmental Technology Atlas.

| — | Launch of Water Information System for Europe (WISE). |
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—

Launch of Water Information System for Europe (WISE).

| — | Launch of ‘Our Arctic Challenge’ film. |
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—

Launch of ‘Our Arctic Challenge’ film.

| — | Publication of reports on, inter alia, climate change costs, greenhouse gas emission trends and projections, air quality, air emissions, sustainable consumption and production, biodiversity indicators, waste management. |
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—

Publication of reports on, inter alia, climate change costs, greenhouse gas emission trends and projections, air quality, air emissions, sustainable consumption and production, biodiversity indicators, waste management.

| — | Launch of new Topic Centres on Water, Land use and spatial information, and air and climate change. |
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—

Launch of new Topic Centres on Water, Land use and spatial information, and air and climate change.

| — | Participation in conferences on ‘Beyond GDP’ and Tax reform. |
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—

Participation in conferences on ‘Beyond GDP’ and Tax reform.

Source: Information supplied by the Agency.

Table 2

European Environment Agency (Copenhagen) — Implementation of the budget for the financial year 2007

| (1000 euro) |
| --- |
| Revenue | Expenditure |
| Source of revenue | Revenue entered in the final budget for the financial year | Revenue collected | Allocation of expenditure | Final budget appropriations | Appropriations carried over from previous financial year(s) |
| entered | committed | paid | carried over | cancelled | available | committed | paid | carried over | cancelled |
| Community subsidy | 28 950 | 28 950 | Title I
  Staff | 18 050 | 18 022 | 17 814 | 169 | 67 | 308 | 308 | 187 | 0 | 121 |
| Other subsidies | 4 857 | 5 007 | Title II
  Administration | 2 820 | 2 806 | 2 466 | 338 | 15 | 283 | 283 | 265 | 0 | 18 |
| Other revenue | 1 327 | 3 822 | Title III
  Operating activities | 12 974 | 12 963 | 8 572 | 4 387 | 16 | 5 290 | 5 290 | 4 881 | 0 | 409 |
| Other assigned revenue | p.m | 348 | Assigned revenue | 1 290 | 935 | 303 | 987 | 0 | 4 965 | 3 958 | 1 838 | 2 678 | 449 |
| Total | 35 134 | 38 127 | Total | 35 134 | 34 726 | 29 155 | 5 881 | 98 | 10 846 | 9 839 | 7 171 | 2 678 | 997 |
| Source: Data supplied by the Agency — This table summarises the data provided by the Agency in its annual accounts. Revenue collected and payments are estimated on a cash basis. |

(1000 euro)

Revenue

Expenditure

Source of revenue

Revenue entered in the final budget for the financial year

Revenue collected

Allocation of expenditure

Final budget appropriations

Appropriations carried over from previous financial year(s)

entered

committed

paid

carried over

cancelled

available

committed

paid

carried over

cancelled

Community subsidy

28 950

28 950

Title I

Staff

18 050

18 022

17 814

169

67

308

308

187

0

121

Other subsidies

4 857

5 007

Title II

Administration

2 820

2 806

2 466

338

15

283

283

265

0

18

Other revenue

1 327

3 822

Title III

Operating activities

12 974

12 963

8 572

4 387

16

5 290

5 290

4 881

0

409

Other assigned revenue

p.m

348

Assigned revenue

1 290

935

303

987

0

4 965

3 958

1 838

2 678

449

Total

35 134

38 127

Total

35 134

34 726

29 155

5 881

98

10 846

9 839

7 171

2 678

997

Source: Data supplied by the Agency — This table summarises the data provided by the Agency in its annual accounts. Revenue collected and payments are estimated on a cash basis.

Table 3

European Environment Agency (Copenhagen) — Economic outturn account for the financial years 2007 and 2006

| (1000 euro) |
| --- |
| | 2007 | 2006 |
| Operating revenue |
| Community subsidy | 28 950 | 27 650 |
| Other subsidies and revenue | 7 753 | 7 951 |
| Total (a) | 36 073 | 35 601 |
| Operating expenditure |
| Staff expenditure | 16 483 | 14 500 |
| Fixed-asset-related expenditure | 866 | 795 |
| Other administrative expenditure | 4 940 | 4 843 |
| Operational expenditure | 13 446 | 15 000 |
| Total (b) | 35 735 | 35 138 |
| Surplus/deficit from operating activities (c = a – b) | 338 | 462 |
| Financial operations income (e) | 46 | 72 |
| Financial operations expenditure (f) | –7 | –7 |
| Surplus/(deficit) from non-operating activities (g = e – f) | 39 | 66 |
| Economic result for the year (h = c + g) | 377 | 528 |
| Source: Data supplied by the Agency — This table summarises the data provided by the Agency in its annual accounts: these accounts are drawn up on an accrual basis. |

(1000 euro)

2007

2006

Operating revenue

Community subsidy

28 950

27 650

Other subsidies and revenue

7 753

7 951

Total (a)

36 073

35 601

Operating expenditure

Staff expenditure

16 483

14 500

Fixed-asset-related expenditure

866

795

Other administrative expenditure

4 940

4 843

Operational expenditure

13 446

15 000

Total (b)

35 735

35 138

Surplus/deficit from operating activities (c = a – b)

338

462

Financial operations income (e)

46

72

Financial operations expenditure (f)

–7

–7

Surplus/(deficit) from non-operating activities (g = e – f)

39

66

Economic result for the year (h = c + g)

377

528

Source: Data supplied by the Agency — This table summarises the data provided by the Agency in its annual accounts: these accounts are drawn up on an accrual basis.

Table 4

European Environment Agency (Copenhagen) — Balance sheet at 31 December 2007 and 2006

| (1000 euro) |
| --- |
| | 2007 | 2006 |
| Non-current assets |
| Intangible fixed assets | 330 | 330 |
| Tangible fixed assets | 1 555 | 1 866 |
| Long-term receivables | 500 | 494 |
| Current assets |
| Short-term pre-financing | 217 | 1 151 |
| Short-term receivables | 2 180 | 2 611 |
| Cash and cash equivalents | 7 799 | 6 097 |
| Total assets | 12 581 | 12 548 |
| Current liabilities |
| Accounts payable | 7 434 | 7 779 |
| Total liabilities | 7 434 | 7 779 |
| Net assets | 5 147 | 4 770 |
| Reserve |
| Accumulated surplus/deficit | 4 770 | 4 242 |
| Economic result for the year | 377 | 528 |
| Net capital | 5 147 | 4 770 |
| Source: Data supplied by the Agency — This table summarises the data provided by the Agency in its annual accounts: these accounts are drawn up on an accrual basis. |

(1000 euro)

2007

2006

Non-current assets

Intangible fixed assets

330

330

Tangible fixed assets

1 555

1 866

Long-term receivables

500

494

Current assets

Short-term pre-financing

217

1 151

Short-term receivables

2 180

2 611

Cash and cash equivalents

7 799

6 097

Total assets

12 581

12 548

Current liabilities

Accounts payable

7 434

7 779

Total liabilities

7 434

7 779

Net assets

5 147

4 770

Reserve

Accumulated surplus/deficit

4 770

4 242

Economic result for the year

377

528

Net capital

5 147

4 770

Source: Data supplied by the Agency — This table summarises the data provided by the Agency in its annual accounts: these accounts are drawn up on an accrual basis.

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THE AGENCY'S REPLIES

| 7. | In order to have more candidates in the competition, the Selection Committee chose to also include the candidates that came closest to the criteria in the vacancy notice. The Agency will in the future re-publish the post when a similar situation occurs.
  The candidates invited for interview fulfilled the selection criteria set out in the notice of competition. The Agency will in future recruitments better document the selection of the short-Iisted candidates. |
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7.

In order to have more candidates in the competition, the Selection Committee chose to also include the candidates that came closest to the criteria in the vacancy notice. The Agency will in the future re-publish the post when a similar situation occurs.

The candidates invited for interview fulfilled the selection criteria set out in the notice of competition. The Agency will in future recruitments better document the selection of the short-Iisted candidates.

| 8. | In relation to the direct awards of services: the Authorising Officer approved them due to the significant benefits to be accrued to the Agency. It is considered that there was sufficient documentation of the unique nature of the course on the file to explain the approach taken. The Agency will manage future similar cases fully in line with the Financial Regulation.
  In relation to the award of a specific contract: it became necessary to further increase the storage and server capacity of the system, for the purpose of good financial management this was done by extending the original order. At the next upgrade of the EEA storage and server system in 2008, the market was consulted again. The Agency will do so for each substantial IT purchase in the future. |
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8.

In relation to the direct awards of services: the Authorising Officer approved them due to the significant benefits to be accrued to the Agency. It is considered that there was sufficient documentation of the unique nature of the course on the file to explain the approach taken. The Agency will manage future similar cases fully in line with the Financial Regulation.

In relation to the award of a specific contract: it became necessary to further increase the storage and server capacity of the system, for the purpose of good financial management this was done by extending the original order. At the next upgrade of the EEA storage and server system in 2008, the market was consulted again. The Agency will do so for each substantial IT purchase in the future.

| 9. | The Agency has already introduced new procedures for new topic centres in line with the Financial Regulation. Taking note of the Court's observations, these procedures include verification visits to ETC lead organisations and selected partners as well as other detailed checks prior to final payments. Verification visits were made to three lead organisations and one partner in early 2008 in relation to the 2007 subsidies. These new procedures are part of the Agency's continuing efforts to ensure and improve the adequacy and effectiveness of existing controls. |
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9.

The Agency has already introduced new procedures for new topic centres in line with the Financial Regulation. Taking note of the Court's observations, these procedures include verification visits to ETC lead organisations and selected partners as well as other detailed checks prior to final payments. Verification visits were made to three lead organisations and one partner in early 2008 in relation to the 2007 subsidies. These new procedures are part of the Agency's continuing efforts to ensure and improve the adequacy and effectiveness of existing controls.

| 10. | The overhead rate was given extended consideration before adoption and was explicitly considered by the Agency in preparing the terms of reference. The Agency considers 20 % to be a reasonable overhead rate. Nevertheless, it is recognised that no ‘reasoned decision’ is in place and one will be put in place through the management board for future calls. |
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10.

The overhead rate was given extended consideration before adoption and was explicitly considered by the Agency in preparing the terms of reference. The Agency considers 20 % to be a reasonable overhead rate. Nevertheless, it is recognised that no ‘reasoned decision’ is in place and one will be put in place through the management board for future calls.

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