# C_2007309EN.01004001.xml

| 19.12.2007 | EN | Official Journal of the European Union | C 309/40 |
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19.12.2007

EN

Official Journal of the European Union

C 309/40

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REPORT

REPORT

on the annual accounts of the European Agency for Reconstruction for the financial year 2006 together with the Agency's replies

(2007/C 309/08)

CONTENTS

| 1-2 | INTRODUCTION |
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1-2

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

| 7-8 | OBSERVATIONS |
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7-8

Tables 1 to 4

The Agency's replies

The Agency's replies

INTRODUCTION

| 1. | The European Agency for Reconstruction (hereinafter ‘the Agency’) was established by Council Regulation (EC) No 1628/96 (1), as last amended by Council Regulation (EC) No 756/2006 of 28 November 2006 (2). When it was set up in 2000, the Agency was responsible for managing the EU's aid programmes in Kosovo. Its mandate was later extended to Serbia and Montenegro and the former Yugoslav Republic of Macedonia. The Agency's head office is in Thessaloniki and it has operational centres in Belgrade, Podgorica, Pristina and Skopje. It implements programmes to foster institution-building and good governance, to promote the development of a market economy and essential infrastructure and to consolidate civil society. Its mandate is scheduled to end on 31 December 2008. |
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1.

The European Agency for Reconstruction (hereinafter ‘the Agency’) was established by Council Regulation (EC) No 1628/96 (1), as last amended by Council Regulation (EC) No 756/2006 of 28 November 2006 (2). When it was set up in 2000, the Agency was responsible for managing the EU's aid programmes in Kosovo. Its mandate was later extended to Serbia and Montenegro and the former Yugoslav Republic of Macedonia. The Agency's head office is in Thessaloniki and it has operational centres in Belgrade, Podgorica, Pristina and Skopje. It implements programmes to foster institution-building and good governance, to promote the development of a market economy and essential infrastructure and to consolidate civil society. Its mandate is scheduled to end on 31 December 2008.

1

2

| 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 2006 is presented inTables 2, 3 and 4 for 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 2006 is presented inTables 2, 3 and 4 for information purposes.

Table 1

Tables 2, 3 and 4

STATEMENT OF ASSURANCE

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

3

| 4. | The Agency's accounts for the financial year ended 31 December 2006 (4) were drawn up by its Director, pursuant to Article 8(2) of Council Regulation (EC) No 2667/2000 (5), and sent to the Court, which is required to give its opinion 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 2006 (4) were drawn up by its Director, pursuant to Article 8(2) of Council Regulation (EC) No 2667/2000 (5), and sent to the Court, which is required to give its opinion on their reliability and on the legality and regularity of the underlying transactions.

4

5

| 5. | The Court conducted its audit in accordance with the IFAC and INTOSAI 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 INTOSAI 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.

| 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 2006 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 2006 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 2006 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 rate of implementation of the budget was satisfactory. The Agency's attention is however drawn to the level of appropriations yet to be committed, which will require particular monitoring of its programmes given that its mandate expires at the end of 2008. |
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7.

The rate of implementation of the budget was satisfactory. The Agency's attention is however drawn to the level of appropriations yet to be committed, which will require particular monitoring of its programmes given that its mandate expires at the end of 2008.

| 8. | The Court noted that the accounting system and the internal control system had improved in comparison with the preceding years, in particular regarding the monitoring of the funds managed by external bodies and the implementation of procurement procedures. The audit of the Court does not call for observations of a significant nature in those fields. |
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8.

The Court noted that the accounting system and the internal control system had improved in comparison with the preceding years, in particular regarding the monitoring of the funds managed by external bodies and the implementation of procurement procedures. The audit of the Court does not call for observations of a significant nature in those fields.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 27 September 2007.

For the Court of Auditors

Hubert WEBER

President

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(1)  OJ L 204, 14.8.1996, p. 1.

1

(2)  OJ L 332, 30.11.2006, p. 18.

2

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

3

(4)  These accounts were drawn up on 13 June 2007 and received by the Court on 6 July 2007.

4

(5)  OJ L 306, 7.12.2000, p. 7.

5

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Table 1

European Agency for Reconstruction (Thessaloniki)

| Areas of Community competence deriving from the Treaty | The Agency's powers as defined in Council Regulation (EC) No 2667/2000 | Governance | Resources made available to the Agency

  (data for2005 in brackets) | Activities and services provided in 2006 |
| --- | --- | --- | --- | --- |
| The Community shall carry out, within its spheres of competence, economic, financial and technical cooperation measures with third countries. Such measures shall be complementary to those carried out by the Member States and consistent with the Development Policy of the Community.

  (Article 181a) | Objectives

  To provide EU assistance:






  (i) | For reconstruction, the return of refugees and displaced persons; |

Areas of Community competence deriving from the Treaty

The Agency's powers as defined in Council Regulation (EC) No 2667/2000

Governance

Resources made available to the Agency

(data for2005 in brackets)

Activities and services provided in 2006

The Community shall carry out, within its spheres of competence, economic, financial and technical cooperation measures with third countries. Such measures shall be complementary to those carried out by the Member States and consistent with the Development Policy of the Community.

(Article 181a)

Objectives

To provide EU assistance:

(i)

For reconstruction, the return of refugees and displaced persons;

| (ii) | To promote sound administration, stronger institutions and the rule of law; |
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(ii)

To promote sound administration, stronger institutions and the rule of law;

| (iii) | To support the development of a market economy and investment in essential physical infrastructure and environmental measures; |
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(iii)

To support the development of a market economy and investment in essential physical infrastructure and environmental measures;

| (iv) | To support social development and consolidate civil society. |
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(iv)

To support social development and consolidate civil society.

Application

The agency manages the principal aid programmes in Serbia and Montenegro (Republic of Serbia, Kosovo, and Republic of Montenegro) and in the Former Yugoslav Republic of Macedonia (FYROM). Beneficiaries may include States, bodies under UN administration, federated regional and local bodies, public and semi-public bodies, both sides of industry, business support organisations, cooperatives, mutual companies, charities, foundations and NGOs.

Tasks:

| — | To advise the Commission on priority needs; |
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—

To advise the Commission on priority needs;

| — | to devise programmes for reconstruction and the return of refugees and displaced persons; |
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—

to devise programmes for reconstruction and the return of refugees and displaced persons;

| — | to take every possible step to implement EU assistance. |
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—

to take every possible step to implement EU assistance.

Governing Board:

Comprises one representative from each Member State, two representatives from the Commission and an observer from the European Investment Bank.

Director:

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

Operational Centres in Belgrade, Pristina, Podgorica and Skopje with a high level of management autonomy.

External control:

European Court of Auditors.

Discharge Authority:

The Parliament following a recommendation from the Council.

Final budget:

268,8 million euro (318,9 million euro) including an EU grant

Staff at 31 December 2006:

108 (114) TA posts listed in the establishment plan

TA posts occupied: 90 (88)

Other posts:

Local staff: 164 (170) posts Posts occupied: 157 (162)

Contract staff: 29 (28) posts Posts occupied: 26 (26)

Total staff: 273 (276)

Responsible for

Operational tasks: 171 (169)

Administrative tasks: 102 (107)

By operational centre (main developments):

KOSOVO: a) Start-up grants, loans, training and business advice to small businesses of minorities and returnees; b) Support to privatisation; c) Rehabilitation of district heating (in north) and waste and water utility buildings in (south) Mitrovica; d) Improving border/boundary management; e) Setting up a new system for public investment programming; f) Expert advice and training to the Kosovo Assembly; g) Support to Justice and Internal Affairs ministries and Statistical Office; h) Environmental upgrades, including construction of Pristina regional landfill; i) Support to drafting of Kosovo Rural Development Plan.

SERBIA: a) Draft laws in public administration reform; b) Supply of equipment to border police; c) Completion of state-of-the-art DNA laboratory; d) Rehabilitation and supply of equipment to courts; e) Rehabilitation programme for hospitals; f) New jobs created due to loans from the Revolving Credit Fund; g) Training support to enterprises; h) Regional training centres for adults; i) Economic development programmes for poorest municipalities; j) Handover of new border crossings with Hungary and Croatia; k) Renovation of municipal infrastructure; l) Reform of the statistics office; m) Support to Foreign Direct Investment management; n) Support to vulnerable groups including refugees and displaced persons; o) Completion of power plant rehabilitation projects; p) Air filter installed at Kostolac power plant.

MONTENEGRO: a) Construction of Podgorica international airport and refurbishment of Tivat airport; b) Central IT database of the Ministry of the Interior; c) Support for Human Resources Management Agency; d) New Roads Directorate and transport laws; e) Electricity utility unbundling/restructuring, energy efficiency strategy; f) Establishing an Environmental Protection Agency; g) Providing management expertise to companies; h) Supporting Judicial Training Centre; i) Prison reform; j) Support to drafting of strategy for agriculture and rural development

FORMER YUGOSLAV REPUBLIC OF MACEDONIA: a) Assistance in strengthening and creating new institutions in the public administration (e.g. State Statistical Office, Civil Society Unit in the General Secretariat; Public Procurement Bureau); b) Support to development of electronic communications market; c) Support to police reform including refurbishment of Police Academy; d) Support to money laundering prevention and refurbishment of Skopje Basic Court; e) Opening of new state phytosanitary laboratory; f) Construction of National Border Management Coordination Centre; g) Assistance to municipalities in decentralisation; h) Upgrading of municipal infrastructure; i) Training of civil servants from non-majority communities; k) Management training for SMEs.

Source: Information submitted by the Agency.

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 2

European Agency for Reconstruction (Thessaloniki) — Implementation of the budget for the financial year 2006

| (1000 euro) |
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| Revenue | Expenditure |
| Source of revenue | Revenue entered in the final budget for the financial year | Revenue received | Allocation of expenditure | Final budget appropriations | Appropriations carried over from the previous financial years | Appropriations available
  (from financial year plus previous years) |
| entered | committed | paid | carried over | cancelled | available | committed | paid | carried over | cancelled | entered | committed | paid | carried over | cancelled |
| Community subsidies | 24 795 | 20 200 | Title I
  Staff | 18 540 | 17 304 | 17 117 | 187 | 1 236 | 495 | | 385 | | 109 | 19 035 | 17 304 | 17 502 | 187 | 1 345 |
| Other revenue | p.m. | 877 | Title II
  Administration | 6 255 | 4 705 | 4 198 | 507 | 1 550 | 500 | | 453 | | 47 | 6 755 | 4 705 | 4 651 | 507 | 1 597 |
| Earmarked revenue | 244 000 | 256 008 | Title III
  Operating activities | 244 000 | 32 760 | 4 007 | 239 992 | 0 | 701 681 | 153 923 | 249 952 | 438 814 | 12 915 | 945 681 | 186 683 | 253 959 | 678 806 | 12 915 |
| Total | 268 795 | 277 085 | Total | 268 795 | 54 769 | 25 322 | 240 686 | 2 786 | 702 676 | 153 923 | 250 790 | 438 814 | 13 071 | 971 471 | 208 692 | 276 112 | 679 500 | 15 857 |
| NB: The amount available for commitment at the end of the year is 746 922 euro (of which 211 240 euro from 2006 appropriations and 535 682 euro from previous years).

  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 received

Allocation of expenditure

Final budget appropriations

Appropriations carried over from the previous financial years

Appropriations available

(from financial year plus previous years)

entered

committed

paid

carried over

cancelled

available

committed

paid

carried over

cancelled

entered

committed

paid

carried over

cancelled

Community subsidies

24 795

20 200

Title I

Staff

18 540

17 304

17 117

187

1 236

495

385

109

19 035

17 304

17 502

187

1 345

Other revenue

p.m.

877

Title II

Administration

6 255

4 705

4 198

507

1 550

500

453

47

6 755

4 705

4 651

507

1 597

Earmarked revenue

244 000

256 008

Title III

Operating activities

244 000

32 760

4 007

239 992

0

701 681

153 923

249 952

438 814

12 915

945 681

186 683

253 959

678 806

12 915

Total

268 795

277 085

Total

268 795

54 769

25 322

240 686

2 786

702 676

153 923

250 790

438 814

13 071

971 471

208 692

276 112

679 500

15 857

NB: The amount available for commitment at the end of the year is 746 922 euro (of which 211 240 euro from 2006 appropriations and 535 682 euro from previous years).

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 Agency for Reconstruction (Thessaloniki) — Economic outturn account for the financial years 2006 and 2005

| (1000 euro) |
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| | 2006 | 2005 |
| Operating revenue |
| Community subsidies | 273 192 | 261 009 |
| Other revenue | 239 | 1 832 |
| Total (a) | 273 432 | 262 841 |
| Operating expenses |
| Staff expenses | 16 164 | 15 727 |
| Fixed asset related expenses | 581 | 703 |
| Other administrative expenses | 5 510 | 6 509 |
| Operational expenses | 247 509 | 243 442 |
| Total (b) | 269 764 | 266 381 |
| Surplus/(deficit) from operating activities (c = a – b) | 3 668 | 3 540 |
| Financial operations revenue (e) | — | — |
| Financial operations expenses (f) | 25 | — |
| Surplus/(deficit) from non-operating activities (g = e – f) | –25 | — |
| Economic result for the year (h = c + g) | 3 643 | –3 540 |

(1000 euro)

2006

2005

Operating revenue

Community subsidies

273 192

261 009

Other revenue

239

1 832

Total (a)

273 432

262 841

Operating expenses

Staff expenses

16 164

15 727

Fixed asset related expenses

581

703

Other administrative expenses

5 510

6 509

Operational expenses

247 509

243 442

Total (b)

269 764

266 381

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

3 668

3 540

Financial operations revenue (e)

—

—

Financial operations expenses (f)

25

—

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

–25

—

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

3 643

–3 540

Table 4

European Agency for Reconstruction (Thessaloniki) — Balance sheet at 31 December 2006 and 2005

| (1000 euro) |
| --- |
| | 2006 | 2005 |
| Non-current assets |
| Intangible fixed assets | 70 | 84 |
| Tangible fixed assets | 743 | 1 192 |
| Long-term receivables | 10 175 | 40 002 |
| Current assets |
| Short-term pre-financing | 166 885 | 135 285 |
| Short-term receivables | 24 562 | 29 574 |
| Cash and cash equivalents | 51 991 | 57 917 |
| Total assets | 254 425 | 264 055 |
| Current liabilities |
| Provisions for risks and charges | 1 986 | 2 100 |
| Accounts payable | 85 496 | 98 655 |
| Total liabilities | 87 482 | 100 755 |
| Net assets |
| Accumulated surplus/deficit | 163 300 | 166 840 |
| Economic result for the year | 3 643 | –3 540 |
| Total net assets | 166 943 | 163 300 |
| Total liabilities and net assets | 254 425 | 264 055 |

(1000 euro)

2006

2005

Non-current assets

Intangible fixed assets

70

84

Tangible fixed assets

743

1 192

Long-term receivables

10 175

40 002

Current assets

Short-term pre-financing

166 885

135 285

Short-term receivables

24 562

29 574

Cash and cash equivalents

51 991

57 917

Total assets

254 425

264 055

Current liabilities

Provisions for risks and charges

1 986

2 100

Accounts payable

85 496

98 655

Total liabilities

87 482

100 755

Net assets

Accumulated surplus/deficit

163 300

166 840

Economic result for the year

3 643

–3 540

Total net assets

166 943

163 300

Total liabilities and net assets

254 425

264 055

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THE EUROPEAN AGENCY FOR RECONSTRUCTION REPLIES

| 7. | The Agency has a very fast track implementing assistance programmes. The last allocation to the Agency for assistance amounted to €250 million in 2006 to be contracted over three years, hence until 2009. In the first six months of 2007 the Agency contracted € 185 million which represents 74 % of an annual allocation. Therefore, at the end of its mandate, the residual amount to be contracted is likely to be small. |
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7.

The Agency has a very fast track implementing assistance programmes. The last allocation to the Agency for assistance amounted to €250 million in 2006 to be contracted over three years, hence until 2009. In the first six months of 2007 the Agency contracted € 185 million which represents 74 % of an annual allocation. Therefore, at the end of its mandate, the residual amount to be contracted is likely to be small.

| 8. | The Agency acknowledges the Court's comments. |
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8.

The Agency acknowledges the Court's comments.

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