# EUR-Lex - 52003TA1230(04) - EN

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# 52003TA1230(04)

**Report on the financial statements of the European Agency for the Evaluation of Medicinal Products concerning the financial year 2002, together with the Agency's replies **

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Official Journal C 319 , 30/12/2003 P. 0022 - 0028 *

Report

on the financial statements of the European Agency for the Evaluation of Medicinal Products concerning the financial year 2002, together with the Agency's replies

(2003/C 319/04)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the European Parliament and to the Council, by virtue of Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002(1).

2. The Court has examined the financial statements of the European Agency for the Evaluation of Medicinal Products for the financial year ended 31 December 2002. In accordance with Article 57(7) of Council Regulation (EEC) No 2309/93, the budget was implemented on the responsibility of the Director. This responsibility includes the drawing-up and presentation of the financial statements(2) in accordance with the internal financial provisions adopted on the basis of Article 57(11) of Council Regulation (EEC) No 2309/93. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to examine these accounts.

3. The Court carried out the audit in accordance with its auditing policies and standards, which have been adapted from generally accepted international auditing standards to reflect the specific nature of the Community context. The Court carried out such tests of the accounting records and applied such other procedures as it deemed necessary in the circumstances. Through 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 2002 are reliable and that the underlying transactions, taken as a whole, are legal and regular.

OBSERVATIONS

Introduction

5. The Agency was created by Council Regulation (EEC) No 2309/93 of 22 July 1993(3). The Agency operates through a network and coordinates the scientific resources made available by the national authorities in order to ensure the evaluation and supervision of medicinal products for human or veterinary use. Its opinions are drawn up by three committees, on the basis of reports prepared by national experts whose remuneration, along with the expenses incurred in connection with committee meetings, makes up an important part of its operating expenditure. The Agency also dedicates a significant part of its budget to the financing of pharmaceutical supervision systems.

Implementation of the budget

6. The implementation of the appropriations for the financial year 2002 and of the appropriations carried over from the previous year is set out in Table 1(4).

7. As soon as the scientific committees decide to carry out an inspection of a medicinal product, a proposal for a commitment is issued in respect of the fee to be paid to the national agency responsible for carrying out the inspection. This procedure does not allow the principle of annuality to be respected, since delays in carrying out the work mean that the expenditure will be settled during a later financial year. In addition, it increases administrative expenditure as a result of cancellations and new commitments.

Financial statements

8. Tables 2 and 3 set out in summary form the revenue and expenditure account and the balance sheet published by the Agency in its activity report for the financial year 2002.

9. Applying the principles of accruals accounting, contrary to the current regulations(5) which provide for cash-based accounting, the Agency included in its revenue 5,2 million euro due in respect of the financial year 2002 (in 2001, 10,7 million euro had been included in the revenue).

10. The Agency frequently receives lump-sum advances for examinations which the users of its services are considering requesting. It is difficult to reconcile the amounts customers have paid and the fees actually due. The delays affecting the processing of files partly explain the 75 % increase in the amount of advances not allocated at the end of 2002 as compared to the end of 2001(6), that is, 9,3 and 5,3 million euro respectively.

11. Fixed-asset management is made difficult by the use of two databases that are organised and operate on different principles and have different administrators. Moreover, the provisions relating to the depreciation of software and of components which form part of a whole are not being applied.

Legality and regularity of underlying transactions

12. Invoices are paid after the authorising officer, who certifies that the service has been performed or the goods delivered, has given his approval. This is issued without any systematic provision of supporting documents. The absence of such information, which is necessary in order to carry out efficient internal control, creates uncertainty and must be remedied.

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 15 and 16 October 2003.

For the Court of Auditors

Juan Manuel Fabra Vallés

President

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

(2) As required under Article 57(9) of Council Regulation (EEC) No 2309/93, the accounts for all the Agency's revenue and expenditure for the financial year 2002 were drawn up on 28 March 2003 and forwarded to the Court of Auditors. The Court received these accounts on 4 April 2003. A summarised version of these financial statements is presented in the tables attached to this report.

(3) OJ L 214, 24.8.1993, p. 18.

(4) All the tables in this report have been drawn up on the basis of the most exact values possible for the data used. For presentation purposes, the figures were rounded up or down, which may produce minor differences in the totals. A dash indicates a non-existent or nil value and 0,0 indicates a value below the rounding threshold.

(5) Article 5 of the Financial Regulation of the Agency provides that revenue shall be entered in the accounts for the financial year in which it is collected.

(6) Balance sheet item: "deferred fees".

Table 1

European Agency for the Evaluation of Medicinal Products - Implemetation of the budget for the financial year 2002NB:

Discrepancies in totals are due to the effects of rounding.

Source:

The Agency's data. These tables summarise the data provided by the Agency in its own financial statements.

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Table 2

European Agency for the Evaluation of Medicinal Products - Revenue and expenditure account for the financial years 2002 and 2001

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NB:

The totals may contain discrepancies due to the effects of rounding.

Source:

The Agency's data. These tables summarise the data provided by the Agency in its own financial statement.

Table 3

European Agency for the Evaluation of Medicinal Products - Balance sheet as at 31 December 2002 and 31 December 2001NB 1:

The totals may contain discrepancies, due to the effects of rounding.

NB 2:

The balance sheet does not show a sum of 1,43 million euro relating to an agreement signed with the Commission in November 2002 concerning assigned revenue to be collected in 2003 and 2004.

Source:

The Agency's data. These tables summarise the data provided by the Agency in its own financial statements.

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The Agency's replies

7. At the beginning of 2003, the Agency put in place a revised procedure to bring the processing of inspection fees in line with the principle of annuality. Following this procedure, a recovery order to the marketing authorisation holder and a commitment for the rapporteur costs are issued once the inspection date is confirmed. Consequently all payments to inspection rapporteurs should be processed within n + 1 at the latest.

9. The Agency takes note of the observation of the Court. This problem will be solved by the implementation in 2003 of the new Financial Regulation. In 2001, the amount of EUR 10,7 million includes EUR 8,1 million due from the Commission. For 2002, this issue was resolved through instalment payments of the Commission contribution reducing the amount to be carried forward to EUR 0,7 million, EUR 3,0 million being in transit in the banking system at the year-end. Under the new Financial Regulation, budgetary income will be recorded on the basis of cash received.

10. The Agency will study the possibilities to make clearer the link between the customer deposits and their uses.

11. The Agency takes note of the observation of the Court. The Agency is implementing software to manage comprehensively the inventory including its depreciation. It is expected this tool will be operational for 1 January 2004.

12. As required by the new Financial Regulation, the Agency is implementing improved internal control procedures for verification of invoices, including checklists and intensified training of staff on financial procedures and controls.