# EUR-Lex - 52003TA1230(03) - EN

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# 52003TA1230(03)

**Report on the financial statements of the European Environment Agency for the financial year 2002, together with the Agency's replies **

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Official Journal C 319 , 30/12/2003 P. 0015 - 0021 *

Report

on the financial statements of the European Environment Agency for the financial year 2002, together with the Agency's replies

(2003/C 319/03)

CONTENTS

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THE COURT'S OPINION

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

2. The Court has examined the financial statements of the European Environment Agency for the financial year ended 31 December 2002. In accordance with Article 14 of Council Regulation (EEC) No 1210/90, 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 14 of Council Regulation (EEC) No 1210/90. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to 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 audit procedures as it deemed necessary in the circumstances. By means of this audit, the Court obtained a reasonable basis for the opinion expressed below.

4. Subject to the matters referred to in paragraphs 12 and 13, 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 established by Council Regulation (EEC) No 1210/90 of 7 May 1990(3). Its main purpose is to gather, edit and disseminate at the proper time focused, relevant and reliable information on the state of and trends in the environment at European level in the widest sense. Third countries have taken part in the activities of the Agency(4) since its creation. It carries out its tasks by means of a network of thematic centres, whose activities are financed by the Agency, and it regularly publishes reports on the state of the environment.

Implementation of the budget

6. The implementation of the appropriations for the financial year 2002 and of the appropriations carried over from the previous financial year is shown in Table 1.

7. Appropriations for the financial year totalled 25,2 million euro, of which 24,6 million euro was committed. Payments in respect of appropriations for the financial year totalled 18 million euro. The carryover total, although less than last year, remains high (7,2 million euro). Of this sum, 5,8 million euro concerns operating appropriations, which is almost 50 % of the appropriations assigned for that purpose (12,1 million). As the Court emphasised in its Report concerning the financial year 2001(5), the Agency should continue its efforts to evaluate more rigorously the justification for carrying sums over.

8. In January 2002, the Agency decentralised financial matters to its operating services. The aim of decentralising them was to strengthen administrative capacity at the level of the operating services, to reduce delays and to minimise the dispersion of supporting documents. Measures should have been adopted to enable the financial departments to follow up the Agency's activities and programmes, since responsibility for their implementation is often shared between various departments.

Financial statements

9. The revenue and expenditure account and the balance sheet published by the Agency in its activity report for the financial year 2002 are presented in summary form in Tables 2 and 3.

Legality and regularity of the underlying transactions

10. Following a decision taken by the Director on 4 March 2002, an imprest account for the sum of DKK 200000 was opened to cover expenditure resulting from missions and meetings organised by the Agency. The rules for the management of this imprest account ought to be clearly defined and, in accordance with the Financial Regulation, separate accounts should be kept for it. Measures ought also to be adopted to reduce the costs and risks associated with this imprest account (transport of substantial amounts in cash).

11. In its Annual Reports for 1999, 2000 and 2001(6), the Court drew attention to deficiencies in the documents supplied in support of requests for payment. An analysis of the payments files was carried out in 2002 and showed that this situation had not changed.

12. On 5 February 2002, the Agency signed a contract with a United Nations agency for a "maximum sum" of 345000 euro, under which 100 % of the sum was to be paid after the contract was signed. The payment order was not implemented, as the financial controller withheld his approval on the ground that such an advance was excessive. The contract was annulled and replaced by five new contracts which were signed in December 2002 and under which an advance of 95 % was to be paid after signature. The procedure adopted by the Agency to deal with the consequences of the financial controller's refusal to give his approval is as open to criticism as the practice that he had refused to condone.

13. In 1997, the Royal Awards Foundation, whose purpose is to promote action in favour of the environment, was set up by the Agency and three other bodies. For its operations, the Foundation makes use free of charge of premises and equipment belonging to the Agency. In fact, neither the regulation that set up the Agency, nor its financial regulation, permitsthe Agency to set up suchFoundations or to grant them any form of subsidy. The Agency's participation may be estimated at approximately 30000 euro as regards the initial cost of setting up the Foundation and 34000 euro per year as regards its operating costs.

Sound financial management

14. The daily expenses paid to consultants are very high. In 2002 the Agency paid a firm of computer consultants a total of approximately 1,4 million euro, or 116000 euro per month, which roughly corresponds to eight or nine full-time consultants. An analysis of the files showed that some of these consultants have been working at the Agency for several years and perform tasks of a permanent nature. In the interest of more economical management of its resources, the Agency might consider directly recruiting the experts that it needs on an almost permanent basis.

The Agency's tasks and resources

15. The regulation setting up the Agency states that its purpose is to provide the Commission and the Member States with information on the environment in certain priority areas. To do this, the Agency must carry out various tasks, of which the most important are the collection and evaluation of data, the dissemination of information needed for the preparation and monitoring of measures relating to the environment, as well as the publication of reports on the state of the environment. Performance of these tasks is based on a work programme. This programme, and the general structure of the budget, must be more clearly linked to the Agency's objectives and tasks, so as to make its actions more transparent and to improve its ability to monitor and evaluate its management efficiency.

16. In this connection, the programmes entrusted to the thematic centres are financed by several budget headings that are managed and monitored by different authorising officers. This, taken together with the many different ways in which activities are financed (appropriations for the financial year, appropriations carried over or reused and assigned revenue), means that neither the various bodies involved, nor even the financial departments (see also paragraph 8), have an overall view of the Agency's activities. As a result, it is impossible to match the aims of the Agency and the various programmes financed.

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 13(3) of Council Regulation (EEC) No 1210/90, the final accounts for all the Agency's revenue and expenditure for the financial year 2002 were drawn up on 20 August 2003 and were sent to the Court of Auditors. These accounts were received by the Court on 6 October 2003. A summary version of these financial statements is presented in the tables annexed to this report.

(3) OJ L 120, 11.5.1990, p. 1.

(4) In 2002, with the exception of Iceland, Norway and Liechtenstein, almost all the candidate countries took part in the Agency's activities.

(5) OJ C 326, 27.12.2002, p. 18.

(6) OJ C 373, 27.12.2000, p. 7.

OJ C 372, 28.12.2001, p. 9.

OJ C 326, 27.12.2002, p. 17.

Table 1

European Environment Agency - Implementation of the budget for the financial year 2002NB:

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 statements.

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Table 2

European Environment Agency - Revenue and expenditure account for the financial years 2002 and 2001

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NB:

Any discrepancies in totals are due to the effects of rounding.

Source:

The Agency's data.

Table 3

European Environment Agency - Balance sheet as at 31 December 2002 and 31 December 2001NB:

Any discrepancies in totals are due to the effects of rounding.

Source:

Agency data.

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The Agency's replies

7. The amounts of carry-forward credits, both in absolute and in relative terms, have declined as compared to the previous year. The Agency will continue in its efforts to reduce the carryover of payment credits to the following year.

It should be noted that of the EUR 7,2 million carry-forward credits referred to, EUR 2,2 million is related to Agency projects financed by grant agreements between the Agency and the Commission. The budgetary cycle of these projects is governed by the terms of the grant agreement, and is in most cases multiannual.

Due to quality assurance procedures, the final payments for ETC contracts will mostly occur in the year following to the subvention, and thus constitute a motivated carry-forward of payment appropriations.

8. The Agency is tightening its requirements in the decentralised archiving system, with uniform standards having been introduced. The developments to support this are not yet fully implemented and remain a priority: they will include exceptions, risk and procurement registers.

10. Given the enlargement of the Agency since 2002 and a number of projects including experts from non-EU countries, there is a need to pay meeting participants from non-EU countries in advance. Measures have been taken by the Agency to reduce the risks of advance cash payments, and will be explored further. Since 1 January 2003, accounting in relation to the imprest account has been modified to match the Court's observations.

11. The Agency is continuing to tighten documentation and registration of justifications for invoices and will consider this further in the context of the filing, archiving and mail registration system.

12. The proportion of advance payments will be limited in the future. Grant agreements with international bodies are being phased out in the context of the new Financial Regulation.

13. Since 2003, the Agency has invoiced all costs relating to this activity. The continued occupation of offices on the Agency's premises is currently being reconsidered by the Foundation's board.

14. Consultants are contracted by the Agency after open tendering and in relation to market prices. The use of consultants within the Agency is being reviewed, and will take into account the nature of the work as well as the long-term needs and requirements.

15 and 16. The Agency is aware that the programming structure, as it has evolved over the years, is no longer entirely appropriate. A new work programme and related budget structure will be brought in place from 1 January 2004 onwards. The new programme will focus on clear objective setting and the linking of these objectives to activity-based budgeting. This exercise will result in a clearer and more consistent financial framework, both for the Agency's corporate activities and for the topic centre work.