TABLE OF CONTENTS "" ID="1">Introduction> ID="2">1.1 - 1.3 "> ID="1">General observations> ID="2">2.1 - 2.3 "> ID="1"> Separation of duties> ID="2">2.1 "> ID="1"> Imprest account> ID="2">2.2 - 2.3 "> ID="1">Observations concerning budgetary implementation and the revenue and expenditure account> ID="2">3.1 - 3.13"> ID="1"> Transfers of appropriations> ID="2">3.1 - 3.4 "> ID="1"> Expenditure> ID="2">3.5 - 3.8 "> ID="1"> Revenue> ID="2">3.9 - 3.11"> ID="1"> Subsidy> ID="2">3.12 - 3.13"> ID="1">Observations concerning the general accounts and the balance sheet> ID="2">4.1 - 4.3 "> ID="1"> Fixed assets> ID="2">4.1 - 4.2 "> ID="1"> Currency conversion differences and the balance for the financial year> ID="2">4.3 "> ID="1">Conclusion> ID="2">5.1 - 5.3 " ID="2">Pages" ID="1">Annex: Financial year 1992 - Utilization of available appropriations> ID="2">5"> ID="1">The Centre's replies> ID="2">6">

REPORT on the accounts and management for the financial year 1992 of the European Centre for the development of vocational training (Cedefop - Berlin) together with the Centre's replies (94/C 28/01)

1. INTRODUCTION

1.1. The Court has examined the accounts and financial management of the European Centre for the Development of Vocational Training (CEDEFOP - Berlin) for the financial year 1992 in accordance with the provisions of the relevant regulations(1) ().

1.2. The Commission started on the task of revising the financial provisions - largely based on the Financial Regulation applicable to the general budget of the European Communities of 25 April 1973(2) () - in December 1990(3) (). Following the delivery of Opinions by the Court(4) () and the European Parliament(5) (), modified proposals(6) () were submitted by the Commission on 27 March 1992. The Council adopted the amending regulations on 30 June 1993(7) ().

1.3. Available appropriations for the financial year 1992 amounted to 10,84 Mio ECU. Commitments entered into gave rise to 8,95 Mio ECU in payments and 1,67 Mio ECU in carry-overs to the financial year 1993, the balance of 0,21 Mio ECU having been cancelled. Appropriations carried over from the previous financial year gave rise to 1,82 Mio ECU in payments and 0,25 Mio ECU in cancellations. The table attached to this report gives a chapter by chapter analysis of the utilization of the appropriations for the financial year in question as well as of those carried over from 1991.

2. GENERAL OBSERVATIONS

Separation of duties

2.1. The separation of the duties of authorizing officer and accounting officer, as laid down in the financial regulation, is still inadequate because the Centre's accounting officers are also imprest account administrators. This situation, which the Court drew attention to in its annual report on the 1991 financial year(8) (), continued to obtain during the financial year 1992.

Imprest account

2.2. Payments carried out, by derogation from the usual rules, without the prior authorization of the Financial Controller using the imprest account procedure still accounted for 30,9 % of the total in 1992, - 49,7 % if salaries are excluded - as against, respectively, 35,2 % and 54,6 % in 1991.

2.3. Contrary to what is laid down in the financial regulation applicable to the Centre, and despite the Court's observations(9) (), in 1992 payments carried out by the imprest procedure continued to be entered in the Centre's accounts before the Financial Controller had given his approval.

3. OBSERVATIONS CONCERNING BUDGETARY IMPLEMENTATION AND THE REVENUE AND EXPENDITURE ACCOUNT

Transfers of appropriations

3.1. In its annual report on the financial year 1990, the Court observed that the Centre's statement of revenue and expenditure had not been divided up into Titles and Chapters, as required by Article 15 of the financial regulation applicable to the Centre, and that the notion of a 'Chapter' had been used in the place of that of a 'Title'. Given that the agreement of the Commission is not required for transfers 'within the same chapter', this anomaly, which will not disappear until 1994, has resulted in a wider degree of autonomy for the Centre in the field of transfers of appropriations than was originally intended.

3.2. The number of transfers carried out in 1992 amounted to 718 000 ECU, or 6,7 % of the initial budget, as against 8,2 % in 1991. Article to article transfers within Chapter 1 amounted to 2,6 % of initial appropriations. Within chapters 2 and 3, the proportion of appropriations transferred was 11,4 % and 9,9 % respectively.

3.3. Following the decision of the management board on 4 December 1987, the Director of the Centre may enact transfers up to a ceiling of 6 000 ECU. In spite of this restriction, the Director approved a transfer of 9 000 ECU to budget heading 214 by Decision No 12/92.

3.4. Within chapters 2 and 3, numerous transfers were first authorized and then, towards the end of the year, reversed by subsequent decisions. Nearly half of the 385 000 ECU of transfers that had been approved by the management board were subsequently reversed a few months later. These movements do not appear in the revenue and expenditure account because transfers of appropriations are entered in the accounts in the form of the net result.

Expenditure

3.5. In 1992, the payment rate was higher than in 1991 (83 % as against 76 %) and the rates for carry-overs (15 % as against 20 %) and cancellations (2 % as against 4 %) were lower. Carry-overs for operational expenditure amounted to 30 % of initial appropriations, as against the 1991 figure of 35,5 %. However, of the 467 000 ECU transferred to Articles 301 and 302 for the 'dissemination of information' and 'projects on the development and coordination of research work', 399 765 ECU, or 86 %, were carried over or cancelled.

3.6. Against the two budget headings mentioned above (301 and 302), 349 000 ECU and 361 000 ECU respectively (representing 36 % and 28 % of initial appropriations) were committed on the last day of the financial year. This practice of making commitments right at the end of the financial year may be subversive of the principles of sound financial management.

3.7. An examination of a sample of items of expenditure showed that in December 1992 the Centre had signed a contract for about 20 400 ECU for the implementation of a multilingual textual research system and its adaptation to the needs of the Centre in general and those of two projects in particular. The commitment was entered into under operational expenditure when, in fact, it was a question of administrative expenditure.

3.8. In 1990, the Centre decided to second one of its employees to the Commission's Human Resources Task Force (HRTF) to work on the PHARE programme in Eastern Europe, and in Poland in particular. The official concerned signed a contract with the Commission and received the initial salary payments for this contract whilst continuing to receive his previous salary. It subsequently turned out that a secondment of this type from CEDEFOP to HRTF was not legally possible, so the CEDEFOP employee reimbursed the Commission and the secondment was cancelled. However, he continued his work for the PHARE programme up to the last quarter of 1992. The cost of the project to the Centre, including the official's salary, amounted to more than 350 000 ECU for the whole period, 40 % of which was incurred in 1992. This activity is hard to square with the task conferred on the Centre, which is to assist the Commission with a view to encouraging, at Community level, the promotion and the development of training and to contribute to the implementation of a common policy on vocational training.

Revenue

3.9. The Commission paid out the subsidy due from the general budget of the Communities for the financial year 1992 in four tranches of 2 700 000 ECU each, in March, June, September and December, on dates corresponding roughly to the Centre's requests. The Court is obliged to repeat the observation it made in its previous reports(10) (), namely that this mode of payment does not comply with Article 26 of the financial regulation applicable to the Centre, which requires payment to be made by the fifteenth day of each quarter and in accordance with actual requirements.

3.10. Furthermore, as the Court has pointed out in previous reports(11) (), the Centre establishes and recovers revenue without issuing recovery proposals and orders, and therefore without the Financial Controller's prior authorization. Furthermore, these operations are not entered in accounts specifically earmarked for established entitlements, as a result of all of which the amounts shown in the revenue table under 'Entitlements for the financial year' do not represent all entitlements: some of the outstanding claims entered on the assets side of the balance sheet (and on the liabilities side under 'amounts to be collected') should be entered in such a way as to show the 'residue to be collected' and, in particular, the interest accrued on bank deposits, which, on 31 December 1992, amounted to 15 000 ECU.

3.11. The amount given in the revenue table of the Centre's revenue and expenditure account for sums due by way of the Community subsidy was calculated on the basis of total expenditure commitments, in such a way as to show, under 'Amounts to be repaid in 1993', that the surplus for the financial year was 308 278 ECU. In actual fact, however, the amount to be repaid corresponds to the balance for the financial year, or the 556 815 ECU (subject to paragraph 4.3 below) shown in the balance sheet.

Subsidy

3.12. In March 1992, the Centre's management board decided to accept a subsidy of 370 000 FF (about 53 200 ECU) from the Nord-Pas de Calais (France) regional authority by way of a contribution towards the organization of an international convention in Lille on the subject of 'Advice to entrepreneurs and the managers of small and medium-sized undertakings'. As agreed, a down-payment of 50 % (27 500 ECU) was received by the Centre and paid out to the organizer of the convention in September 1992.

3.13. The receipt and disbursement of this sum by the Centre were recorded in its general accounts, in an account that was opened specifically for that purpose, but not in the budgetary accounts, so that these operations appear neither as revenue nor as expenditure in the revenue and expenditure account. Even though these operations were approved by the Financial Controller, they do not comply with Article 4 of the financial regulation, which states that 'no revenue shall be collected and no expenditure effected unless credited to or charged against an Article in the statement of revenue and expenditure'. The Centre should lay down a procedure to enable it to comply with the financial regulation without creating too many additional administrative difficulties.

4. OBSERVATIONS CONCERNING THE GENERAL ACCOUNTS AND THE BALANCE SHEET

Fixed assets

4.1. Fixed assets are entered in the accounts on the basis of overall data taken from the computerized inventory system, and not on the basis of a systematic recording of the value of purchases and withdrawals. This procedure does not guarantee that book values correspond to actual stock. Thus, at the end of 1992 the amount for fixed assets (and the own capital on the liabilities side of the balance sheet) was under-stated by at least 21 500 ECU.

4.2. The Court must once again point out the need for a permanent book inventory(12) (), so that the physical inventory may be compared with the accounts on an annual basis.

Currency conversion differences and the balance for the financial year

4.3. In 1992, the Centre opened an ECU bank account, but its accounts were kept in DM, so that the fall in the exchange value of the ECU during the year caused a significant difference at the end of the financial year between actual ECU assets and the DM value of these same assets in the Centre's books. This difference was entered on the assets side of the balance sheet under 'Currency conversion differences' for a total of 99 640 ECU. The Centre should however, have adjusted the accounting balances in DM at the exchange rate ruling on 31 December 1992 and entered the discrepancy as an exchange loss. This operation would have reduced the balance of the financial year from the 556 815 ECU given in the revenue and expenditure account and the balance sheet to 457 175 ECU.

5. CONCLUSIONS

5.1. CEDEFOP should continue with the task of introducing administrative procedures that comply with its financial regulation, in particular with regard to the separation of the duties of authorizing officer and accounting officer. The Court must once again call upon the Centre to introduce a system for recording established entitlements of the kind that is laid down in the financial regulation, as it undertook to do in its reply to the Court's report concerning the financial year 1991.

5.2. Late commitments and the relatively high level of carry-overs and cancellations of carry-overs indicate that the increases in the budget (16 % in 1991 and 4 % in 1992) have not been easily absorbed by the Centre.

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 4 November 1993.

For the Court of Auditors André J. MIDDELHOEK President

(1)() - Article 12 (2) of Council Regulation (EEC) No 1365/75 on the creation of the Centre, OJ L 139, 30.5.1975.

- Article 69 of Council Regulation (EEC) No 1417/76 of 1 June 1976 on the financial provisions applying to the Centre, OJ L 164, 24.6.1976.

(2)() Abrogated in 1977 and replaced by the Financial Regulation of 21 December 1977, OJ L 356, 31.12.1977, as last amended by Council Regulation (Euratom, ECSC, EEC) No 610/90 of 13 March 1990, OJ L 70, 16.3.1990.

(3)() Proposals for Council Regulations submitted on 17.12.1990, OJ C 23, 31.1.1991

(4)() Court Opinions Nos 3/91 and 4/91 of 11 April 1991, OJ C 152, 10.6.1991.

(5)() Opinion of the Parliament of 13 December 1991, OJ C 13, 20.1.1992.

(6)() OJ C 130, 21.5.1992.

(7)() - Council Regulation (EEC) No 1946/93 of 30 June 1993 amending Regulation (EEC) No 337/75 establishing a European Centre for the Development of Vocational Training. OJ L 181, 23.7.1993

- Council Regulation (EEC) No 1948/93 of 30 June 1993 amending Regulation (EEC) No 1416/76 on the financial provisions applying to the European Centre for the Development of Vocational Training.

OJ L 181, 23.7.1993.

(8)() Annual Report concerning the financial year 1991 (paragraphs 2.1 and 2.2).

(9)() Annual reports concerning the financial years 1989 (paragraph 2.5) and 1991 (paragraph 2.6)

(10)() Annual reports concerning the financial years 1989 (paragraphs 4.1 and 4.2), 1990 (paragraph 3.8) and 1991 (paragraph 3.7)

(11)() Annual Reports concerning the financial years 1990 (paragraph 3.7) and 1991 (paragraph 2.3).

(12)() Annual Reports concerning the financial years 1990 (paragraph 4.3) and 1991 (paragraph 4.2).

ANNEX

Cedefop - Financial year 1992 - Utilization of available appropriations "(1 000 ECU)">Chapter"> ID="1">5 098> ID="2">4 937 > ID="3">87 > ID="4">74 > ID="5">178> ID="6">153 > ID="7">25 "> ID="2">(96,8 %)> ID="3">(1,7 %)> ID="4">(1,5 %)> ID="6">(86 %)> ID="7">(14 %)"> ID="1">1 030> ID="2">798 > ID="3">169 > ID="4">63 > ID="5">201> ID="6">189 > ID="7">12"> ID="2">(77,5 %)> ID="3">(16,4 %)> ID="4">(6,1 %)> ID="6">(94 %)> ID="7">(6 %)"> ID="1">4 700> ID="2">3 211 > ID="3">1 414 > ID="4">75 > ID="5">1 692> ID="6">1 475 > ID="7">217"> ID="2">(68,3 %)> ID="3">(30,1 %)> ID="4">(1,6 %)> ID="6">(87,2 %)> ID="7">(12,8 %)"> ID="1">10> ID="2">7 > ID="3">-> ID="4">3 > ID="5">-> ID="6">-> ID="7">-"> ID="2">(70 %)> ID="4">(30 %)"> ID="1">10 838> ID="2">8 953 > ID="3">1 670 > ID="4">215 > ID="5">2 071> ID="6">1 817 > ID="7">254 "> ID="2">(82,6 %)> ID="3">(15,4 %)> ID="4">(2 %)> ID="6">(87,7 %)> ID="7">(12,3 %)">

RESPONSE OF THE CENTRE'S MANAGEMENT BOARD TO THE REMARKS OF THE COURT OF JUSTICE CONCERNING THE ACCOUNTS AND MANAGEMENT FOR THE FINANCIAL YEAR 1992

2.1. As the Centre pointed out in its replies to the report of the Court for 1989 (point 2.3), 1990 (point 2.1) and 1991 (point 2.2), the separation of the duties of authorizing and accounting officer required additional accounting staff. As a new post was authorized in 1993, it is planned to separate these duties towards the end of the financial year.

3.2. Transfers within the same chapter were reduced from 15.4 % in 1991 to 11.41 % in 1992 for Chapter 2 but increased from 6.1 % to 9.94 % for Chapter 3.

3.3. The transfer of a total amount of ECU 9 000 from two different items was due to an erroneous interpretation of the provisions in force. The necessary steps have been taken to ensure that this does not occur again.

3.6. The 1992 Work Programme contained a new version of the 'Guide to vocational training systems in the EC'. As preparatory work was completed towards the end of the financial year, only then could funds be engaged for printing the documents.

3.7. Chapter 2 of the items of expenditure does not include a budgetary line where this expenditure could be entered. This will be changed through revision of the budgetary nomenclature in 1994, as requested by the Court.

3.8. At the request of the Commisson, the Centre seconded one of its officials to the Commission at the end of 1989. It was later established that the planned mission was not compatible with the provisions relating to the staff of the Centre and the mission was revoked. In view of the importance of the work to be done in Poland the Management Board decided, again at the request of the Commission, to send the staff member on the long-term mission. The Management Board and the Commission were of the opinion that this activity corresponded to the duty of the Centre to 'lend its support to the Commission'.

3.9. In line with the remarks made by the Court, the Centre requested that the Commisson transfer the subsidy due in such a way as to meet actual needs and to comply with the dates laid down in Article 26 of the financial provisions applicable to the Centre.

3.10. As the Centre stated in its replies to the reports in 1990 (point 3.7) and 1991 (point 2.3), the issue of recovery proposals and orders was linked to changing accounting software, planned for 1992. Since these changes were completed, recovery proposals and orders have been issued since the beginning of 1993.

3.11. This point is closely linked to the preceding one.

3.12 - 3.13. The disbursement and payment of the subsidy by the Conseil regional Nord-Pas de Calais was recorded in the general accounts and not in the budgetary accounts to avoid a corresponding reduction in the EC subsidy. In effect, the budgetary authority recommended on several occasions that the Centre endeavour to increase receipts from sources other than the EC. On account of the merits of the Court's remark, the Centre must input in future any receipt of this nature in a budgetary line.

4.1 - 4.2. Modifications to accounting software, introduced at the beginning of 1993, correspond to the request of the Court.

4.3. The correction of inputting ECU 99 640 will be made in the 1993 report.

5.1. The Centre reiterates its position of 1989, 1990 and 1991 and states that since the conditions have been fulfilled the separation of duties as requested by the Court will take place towards the end of 1993.

5.2. The creation of the post of administrative assistant in the directorate to monitor budgetary execution of the Work Programme aims, in particular, to assure a more balanced commitment of operational expenditure throughout the year.