REPORT on the financial statements of the European Training Foundation (ETF - Turin) for the financial year ended 31 December 1997, together with the Foundation's reply (98/C 406/07)

1.1. This report is addressed to the Governing Board of the European Training Foundation in conformity with Article 11(4), of Council Regulation (EEC) No 1360/90 (1).

1.2. The Court has examined the financial statements of the European Training Foundation for the financial year ended 31 December 1997. In accordance with Article 11(1), of Council Regulation (EEC) No 1360/90, the budget was implemented on the responsibility of the Director. This responsibility included the drawing-up and presentation of the financial statements (2) in accordance with the internal financial provisions, as provided for in Article 12 of Council Regulation (EEC) No 1360/90. The Court of Auditors is required under Article 188c of the Treaty establishing the European Community to examine these accounts.

1.3. The Court performed its audit in accordance with its auditing policies and standards. These have been adapted from generally accepted international auditing standards to reflect the specific characteristics of the Community context. Accordingly, the Court carried out such tests of the accounting records and 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.

1.4. This examination has enabled the Court to obtain reasonable assurance that the annual accounts for the financial year which ended on 31 December 1997 are reliable and that the underlying transactions, taken as a whole, are legal and regular.

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN TRAINING FOUNDATION FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1997

PHARE, TACIS and TEMPUS subsidies not included in the budget

1.5. In the context of the PHARE and TACIS programmes and for TEMPUS, the Foundation manages the funds made available to it by the Commission. Subsidies amounting to a significant sum (around ECU 380 million in 1997) are not recorded in the Foundation's budget, but in separate accounts. Moreover, the total balance (ECU 56,6 million as at 31 December 1997) of the thirty-odd bank accounts used by the Foundation to manage these transactions is not shown in the financial statements of the Foundation.

The Court would once again ask the Foundation (3) to include the transactions relating to the management of these funds in its own accounts.

New system for the procedures for implementing payments

1.6. The use of the new SI 2 computer system has improved the speed and efficiency of all the entries for commitments and payment orders.

1.7. Nevertheless, it would be desirable for SI 2, which currently only covers budgetary management, to be extended to include the general accounts as soon as possible.

Inventory

1.8. During its verification of the physical existence of the goods shown in the inventory, the Court found that obsolete computer equipment (PCs, printers, etc.) with an inventory value of around ECU 0,3 million was stored on the Foundation's premises. The Agency should sell or scrap the obsolete equipment.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 5 November 1998.

For the Court of Auditors

Bernhard FRIEDMANN

President

Table 1 Balance sheet for the financial year 1997

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Source: Prepared by the Court of Auditors on the basis of the Foundation's data.

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(1) OJ L 131, 23.5.1990, p. 4.

(2) As required under Article 11(3) of Council Regulation (EEC) No 1360/90, the detailed accounts for all the Foundation's revenue and expenditure for the financial year 1997 were drawn up on 31 March 1998 and forwarded to the Foundation's Governing Board, the Commission and the Court of Auditors. These accounts were received by the Court on 17 April 1998. A summarised version of these financial statements is presented in the tables attached to this report.

(3) OJ C 393, 29.12.1997, p. 41.

FOUNDATION'S REPLY

PHARE, TACIS and TEMPUS subsidies not included in the budget

The Court renewed its request previously included in its report on the 1996 accounts that all funds transferred by the Commission to the Foundation be incorporated into the Foundation's own accounts.

On 27 October 1998 a meeting between the Court of Auditors, the Commission (DG XX, DG XXII) and the Foundation took place. Agreement was reached on the inclusion of all monies handled by the Foundation in the accounts. All amounts that are integrated in the accounts of the Foundation will also be shown in the annual report. It was furthermore agreed that all amounts should be visible in the budget document. While the subsidy to the Foundation will be subject to the approval of the Governing Board, all further amounts, namely those in context with technical assistance and conventions agreed with the Commission, will be shown in an Annex to the budget document for information and thus enhance visibility and transparency for all those who are involved in the management, control and audit of the Foundation.

New system for the procedures for implementing payments

The Court refers to the improvements brought about by the introduction of SI 2, the new budgetary system, and suggests that it be extended to all general accounting issues. The Foundation welcomes the positive views of the Court and agrees with the Court's recommendations. My staff have already started working towards this goal. A project plan and specifications have already been drawn up and the computer development work is underway. Data transfer from the ledger data will be accessible. It is planned that the new system will be in place by early 1999.

Inventory

The Court addressed the question of obsolete computer and other equipment. A procedure was agreed between the Foundation and Financial Control. In compliance with this a non-profit making organisation was selected to re-employ the equipment. The equipment will be handed over to the Organisation in the first week of November and consequently the inventory will be adjusted at that time.