# C_2008311EN.01009201.xml

| 5.12.2008 | EN | Official Journal of the European Union | C 311/92 |
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5.12.2008

EN

Official Journal of the European Union

C 311/92

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REPORT

REPORT

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

(2008/C 311/14)

CONTENTS

| 1-2 | INTRODUCTION |
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1-2

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

| 7-11 | OBSERVATIONS |
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7-11

Tables 1 to 4

The Agency's replies

The Agency's replies

INTRODUCTION

| 1. | The European Railway Agency (hereinafter referred to as the Agency) was created by Regulation (EC) No 881/2004 of the European Parliament and of the Council of 29 April 2004 (1). The Agency's aim 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. |
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1.

The European Railway Agency (hereinafter referred to as the Agency) was created by Regulation (EC) No 881/2004 of the European Parliament and of the Council of 29 April 2004 (1). The Agency's aim 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.

1

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

Table 1 summarises the Agency's competences and activities. Key data summarised from the financial statements drawn up by the Agency for the financial year 2007 are presented in Tables 2, 3 and 4for 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 of 25 June 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 of 25 June 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.

2

| 4. | The Agency's accounts for the financial year ended 31 December 2007 (3) were drawn up by its Executive Director, pursuant to Article 39 of Regulation (EC) No 881/2004, 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 39 of Regulation (EC) No 881/2004, 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.

3

| 5. | The Court conducted its audit in accordance with the IFAC and ISSAI (4) International Auditing Standards and Codes of Ethics, in so far 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, in so far 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.

4

| 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.Without qualifying the above statements the Court draw attention to the observations in paragraphs 7 and 8. |
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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.Without qualifying the above statements the Court draw attention to the observations in paragraphs 7 and 8.

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.Without qualifying the above statements the Court draw attention to the observations in paragraphs 7 and 8.

OBSERVATIONS

| 7. | The Agency's final budget for 2007 amounted to 16,6 million euro (including a reserve of 1,9 million euro), as compared with 14,4 million euro for 2006. Appropriations cancelled at the end of 2007 amounted to 3,4 million euro, including the 1,9 million euro reserve which had remained unused. In addition to the cancelled appropriations, 2,7 million euro were carried over to 2008. This means that more than 35 % of the final 2007 appropriations had not been used during the year. This situation shows that the Agency's programming and budgeting procedures were affected by serious weaknesses. |
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7.

The Agency's final budget for 2007 amounted to 16,6 million euro (including a reserve of 1,9 million euro), as compared with 14,4 million euro for 2006. Appropriations cancelled at the end of 2007 amounted to 3,4 million euro, including the 1,9 million euro reserve which had remained unused. In addition to the cancelled appropriations, 2,7 million euro were carried over to 2008. This means that more than 35 % of the final 2007 appropriations had not been used during the year. This situation shows that the Agency's programming and budgeting procedures were affected by serious weaknesses.

| 8. | Despite this significant level of unused appropriations, in 2007 the Agency had requested extra cash equivalent to the sum of its whole budget. The fact that such large amounts were left unused shows that the Agency's cash forecasts had not been prepared rigorously, which was at odds with the principle of sound financial management. |
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8.

Despite this significant level of unused appropriations, in 2007 the Agency had requested extra cash equivalent to the sum of its whole budget. The fact that such large amounts were left unused shows that the Agency's cash forecasts had not been prepared rigorously, which was at odds with the principle of sound financial management.

| 9. | The Agency has not yet carried out a physical inventory of its fixed assets. Checks of a sample of items purchased during the year showed that some of the items tested were not labelled and had therefore not been properly recorded in the inventory. |
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9.

The Agency has not yet carried out a physical inventory of its fixed assets. Checks of a sample of items purchased during the year showed that some of the items tested were not labelled and had therefore not been properly recorded in the inventory.

| 10. | For four selection procedures audited, some members of the Selection Board neither belonged to the group of functions for the post offered nor were in a grade at least equal to that of the post to be filled, as required by the Staff Regulations. In addition, the Agency had not yet finalised its recruitment procedures. |
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10.

For four selection procedures audited, some members of the Selection Board neither belonged to the group of functions for the post offered nor were in a grade at least equal to that of the post to be filled, as required by the Staff Regulations. In addition, the Agency had not yet finalised its recruitment procedures.

| 11. | Weaknesses were identified in the area of procurement. In one case (5) the use of a negotiated procedure was not justified. In another case, the Agency did not apply consistent and clear selection criteria, with the result that the evaluation of the financial and technical capacity lacked objectivity (6). Another contract was extended twice although only one extension was allowed (7). In one case, the negotiated procedure followed did not comply with the requirements of the applicable regulations and rules (8) for public procurement. |
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11.

Weaknesses were identified in the area of procurement. In one case (5) the use of a negotiated procedure was not justified. In another case, the Agency did not apply consistent and clear selection criteria, with the result that the evaluation of the financial and technical capacity lacked objectivity (6). Another contract was extended twice although only one extension was allowed (7). In one case, the negotiated procedure followed did not comply with the requirements of the applicable regulations and rules (8) for public procurement.

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6

7

8

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 220, 21.6.2004, p. 3.

1

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

2

(3)  These accounts were drawn up on 27 June 2008 and received by the Court on 1 July 2008.

3

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

4

(5)  Telecommunication and Internet services contract (70 272 euro).

5

(6)  Study contract for the setting up of a database for serious train accidents (158 380 euro).

6

(7)  Extension of a consultancy contract (30 000 euro).

7

(8)  Contract services for the redesign of the web site of the Agency (24 980 euro).

8

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Table 1

European Railway Agency (Lille/Valenciennes)

| Areas of Community competence deriving from the Treaty | Competences of the Agency as defined in Regulation (EC) No 881/2004 of the European Parliament and of the Council | Governance | Resources available to the Agency in 2007 | Products and services provided in 2007 |
| --- | --- | --- | --- | --- |
| Common Transport Policy

  For the purpose of implementing Article 70, and taking into account the distinctive features of transport, the Council shall, acting in accordance with the procedure referred to in Article 251 and after consulting the Economic and Social Committee and the the Committee of the Regions, lay down:






  (a) | common rules applicable to international transport to or from the territory of a MemberState or passing across the territory of one or more Member States; |

Areas of Community competence deriving from the Treaty

Competences of the Agency as defined in Regulation (EC) No 881/2004 of the European Parliament and of the Council

Governance

Resources available to the Agency in 2007

Products and services provided in 2007

Common Transport Policy

For the purpose of implementing Article 70, and taking into account the distinctive features of transport, the Council shall, acting in accordance with the procedure referred to in Article 251 and after consulting the Economic and Social Committee and the the Committee of the Regions, lay down:

(a)

common rules applicable to international transport to or from the territory of a MemberState 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 MemberState; |
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(b)

the conditions under which non-resident carriers may operate transport services within a MemberState;

| (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.

(Article 71 of the Treaty)

Objectives

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

| — | improving the competitive position of the railway sector; |
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—

improving the competitive position of the railway sector;

| — | 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. |
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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.   Address recommendations to the Commission on

| — | the common safety methods (CSMs) and common safety targets (CSTs) provided for in the Railway Safety Directive (2004/49/EC); |
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—

the common safety methods (CSMs) and common safety targets (CSTs) provided for 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;

| — | the development, implementation and monitoring of rail interoperability; |
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—

the development, implementation and monitoring of rail interoperability;

| — | monitoring interoperability; |
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—

monitoring interoperability;

| — | the certification of maintenance workshops; |
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—

the certification of maintenance workshops;

| — | vocational competences; |
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—

vocational competences;

| — | the registration of rolling stock. |
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—

the registration of rolling stock.

2.   Issue opinions on

| — | national safety rules; |
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—

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;

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

the interoperability of the trans-European network.

3.   Coordination of 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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—

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.

1.   Administrative Board

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

2.   Executive Director

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

3.   External audit

Court of Auditors.

4.   Discharge authority

Parliament acting on recommendation of the Council.

Final Budget:

16,6 million euro

Staff at 31 December 2007:

posts listed in the establishment plan: 116

post occupied: 95

other staff: 4

Total staff: 99

Responsible for:

operational tasks: 66

administrative tasks: 33

Safety

| — | creation and bringing into service of the Safety Database; |
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—

creation and bringing into service of the Safety Database;

| — | completion and submission of the first set of Common Safety Methods to the Commission; |
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—

completion and submission of the first set of Common Safety Methods to the Commission;

| — | a draft recommendation on the methodology for setting common safety targets; |
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—

a draft recommendation on the methodology for setting common safety targets;

| — | setting up a task force on peer review to facilitate mutual recognition of safety certificate; |
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—

setting up a task force on peer review to facilitate mutual recognition of safety certificate;

| — | development of a common approach to safety reporting. |
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—

development of a common approach to safety reporting.

Interoperability — Technical Specifications for Interoperability (TSI)

| — | completion of the preliminary draft of the TSI infrastructure and TSI Energy; |
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—

completion of the preliminary draft of the TSI infrastructure and TSI Energy;

| — | intermediate report on TSI Rolling Stock; |
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—

intermediate report on TSI Rolling Stock;

| — | work on Revisions of the TSI Operations and TSI Freight wagons; |
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—

work on Revisions of the TSI Operations and TSI Freight wagons;

| — | work on TSI Telematics for Passengers; |
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—

work on TSI Telematics for Passengers;

| — | report on the certification of maintenance workshops; |
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—

report on the certification of maintenance workshops;

| — | study on the relationship between the 1 435mm and 1 520mm railway systems; |
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—

study on the relationship between the 1 435mm and 1 520mm railway systems;

| — | development of registration of Rolling Stock. |
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—

development of registration of Rolling Stock.

European Rail Traffic Management System (ERTMS)

| — | established as System Authority for ERTMS; |
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—

established as System Authority for ERTMS;

| — | database for ERTMS change requests; |
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—

database for ERTMS change requests;

| — | recommendation for updating version 2.3.0 of the ERTMS baseline; |
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—

recommendation for updating version 2.3.0 of the ERTMS baseline;

| — | study on Safety Approval of ERTMS systems. |
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—

study on Safety Approval of ERTMS systems.

Economic evaluation

| — | implementation of the methodology to create ‘applied methodology’ documents for each recommendation; |
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—

implementation of the methodology to create ‘applied methodology’ documents for each recommendation;

| — | launch of the DREAM database initiative (Database for Rail Economic Analysis Monitoring); |
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—

launch of the DREAM database initiative (Database for Rail Economic Analysis Monitoring);

| — | provision of support to European Commission. |
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—

provision of support to European Commission.

Source: Information supplied by the Agency.

Table 2

European Railway Agency (Lille/Valenciennes) — Implementation of the budget for the financial year 2007

| (1000 euro) |
| --- |
| Revenue | Expenditure |
| Origin 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 year(s) |
| entered | committed | paid | carried over | cancelled | committed | paid | cancelled |
| Community subsidies | 14 744 | 17 025 | Title I
  Staff | 9 499 | 8 831 | 8 677 | 154 | 668 | 129 | 95 | 34 |
| Other revenue | p.m. | 9 | Title II
  Administration | 1 798 | 1 731 | 969 | 762 | 66 | 426 | 328 | 97 |
| Reserve | 1 901 | | Title III
  Operating activities | 3 448 | 2 699 | 920 | 1 779 | 749 | 2 165 | 1 570 | 595 |
| | | | Title IX
  Reserves | 1 901 | 0 | 0 | 0 | 1 901 | — | — | — |
| Total | 16 645 | 17 033 | Total | 16 645 | 13 261 | 10 566 | 2 695 | 3 384 | 2 719 | 1 993 | 726 |
| 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

Origin 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 year(s)

entered

committed

paid

carried over

cancelled

committed

paid

cancelled

Community subsidies

14 744

17 025

Title I

Staff

9 499

8 831

8 677

154

668

129

95

34

Other revenue

p.m.

9

Title II

Administration

1 798

1 731

969

762

66

426

328

97

Reserve

1 901

Title III

Operating activities

3 448

2 699

920

1 779

749

2 165

1 570

595

Title IX

Reserves

1 901

0

0

0

1 901

—

—

—

Total

16 645

17 033

Total

16 645

13 261

10 566

2 695

3 384

2 719

1 993

726

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 Railway Agency (Lille/Valenciennes) — Economic outturn account for the financial year 2007 and 2006

| (1000 euro) |
| --- |
| | 2007 | 2006 |
| Operating revenue |
| Community subsidies | 12 576 | 11 920 |
| Other subsidies | 166 | 363 |
| Total (a) | 12 742 | 12 284 |
| Operating expenses |
| Staff expenses | 8 896 | 6 694 |
| Fixed asset related expenses | 269 | 168 |
| Other administrative expenses | 1 253 | 1 322 |
| Operational expenses | 2 697 | 1 330 |
| Total (b) | 13 115 | 9 514 |
| Surplus/(deficit) from operating activities (c = a – b) | – 373 | 2 770 |
| Financial operations revenue (e) | 1 | 3 |
| Financial operations expenses (f) | 11 | –2 |
| Surplus/(deficit) from non-operating activities (g = e – f) | –10 | 1 |
| Exceptional gains (h) | — | — |
| Exceptional losses (i) | 37 | — |
| Surplus/(deficit) from exceptional items (j = h – i) | –37 | — |
| Economic result for the year (k = c + g + j) | – 421 | 2 771 |
| 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 a accrual basis. |

(1000 euro)

2007

2006

Operating revenue

Community subsidies

12 576

11 920

Other subsidies

166

363

Total (a)

12 742

12 284

Operating expenses

Staff expenses

8 896

6 694

Fixed asset related expenses

269

168

Other administrative expenses

1 253

1 322

Operational expenses

2 697

1 330

Total (b)

13 115

9 514

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

– 373

2 770

Financial operations revenue (e)

1

3

Financial operations expenses (f)

11

–2

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

–10

1

Exceptional gains (h)

—

—

Exceptional losses (i)

37

—

Surplus/(deficit) from exceptional items (j = h – i)

–37

—

Economic result for the year (k = c + g + j)

– 421

2 771

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 a accrual basis.

Table 4

European Railway Agency (Lille/Valenciennes) — Balance sheet at 31 December 2007 and 2006

| (1000 euro) |
| --- |
| | 2007 | 2006 |
| Non-current assets | 823 | 884 |
| Intangible fixed assets | 450 | 505 |
| Tangible fixed assets | 373 | 378 |
| Current assets | 7 594 | 3 505 |
| Short-term pre-financing | 0 | 18 |
| Short-term receivables | 186 | 188 |
| Cash and cash equivalents | 7 408 | 3 299 |
| Total assets | 8 417 | 4 389 |
| Current liabilities |
| Provisions for risks and charges | 100 | 90 |
| Accounts payable | 5 966 | 1 528 |
| Total liabilities | 6 066 | 1 618 |
| Net assets | 2 351 | 2 771 |
| Reserve |
| Accumulated surplus/deficit | 2 771 | |
| Economic result for the year | – 421 | 2 771 |
| Net capital | 2 351 | 2 771 |
| 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 a accrual basis. |

(1000 euro)

2007

2006

Non-current assets

823

884

Intangible fixed assets

450

505

Tangible fixed assets

373

378

Current assets

7 594

3 505

Short-term pre-financing

0

18

Short-term receivables

186

188

Cash and cash equivalents

7 408

3 299

Total assets

8 417

4 389

Current liabilities

Provisions for risks and charges

100

90

Accounts payable

5 966

1 528

Total liabilities

6 066

1 618

Net assets

2 351

2 771

Reserve

Accumulated surplus/deficit

2 771

Economic result for the year

– 421

2 771

Net capital

2 351

2 771

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 a accrual basis.

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THE AGENCY'S REPLIES

| 7. | The 2007 budget was prepared when the Agency had only just become financial independent which means that there was no past experience to base estimations on, in particular for operational expenditure. Furthermore, the uncertainty as to if and when the reserve would be released, made it necessary for the Agency to plan its activities without taking the reserve into account. |
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7.

The 2007 budget was prepared when the Agency had only just become financial independent which means that there was no past experience to base estimations on, in particular for operational expenditure. Furthermore, the uncertainty as to if and when the reserve would be released, made it necessary for the Agency to plan its activities without taking the reserve into account.

| 8. | The amount to be requested from the Commission was decided upon after close consultation with the Commission. |
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8.

The amount to be requested from the Commission was decided upon after close consultation with the Commission.

| 9. | A physical inventory has been carried out in June 2008 and all the fixed assets are now labelled and will be recorded in the inventory. |
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9.

A physical inventory has been carried out in June 2008 and all the fixed assets are now labelled and will be recorded in the inventory.

| 10. | Due to the limited staff and the workload, it is not always possible to invite members with the same group of function or the same grade. The implementing rules on Temporary Agents governing, among other things, selection and recruitment procedures for temporary servants, were adopted on 21 May 2008. A full description of the procedures to be followed will be finalised at the latest during the first quarter of 2009. |
| --- | --- |

10.

Due to the limited staff and the workload, it is not always possible to invite members with the same group of function or the same grade. The implementing rules on Temporary Agents governing, among other things, selection and recruitment procedures for temporary servants, were adopted on 21 May 2008. A full description of the procedures to be followed will be finalised at the latest during the first quarter of 2009.

| 11. | The Agency has already initiated significant corrective measures in the procurement field in 2007 but acknowledges that some improvements are still needed. The Agency is preparing a procurement manual in order to standardise its procedures to be finalised before the end of 2008. |
| --- | --- |

11.

The Agency has already initiated significant corrective measures in the procurement field in 2007 but acknowledges that some improvements are still needed. The Agency is preparing a procurement manual in order to standardise its procedures to be finalised before the end of 2008.

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