REPORT on the financial statements of the European Agency for Health and Safety at Work (EAHS-Bilbao) (Financial year 1996), together with the Agency's replies (97/C 393/10)

1.1. This report is addressed to the Administration Board of the European Agency for Health and Safety at Work, in accordance with Article 14 (4) of Council Regulation (EC) No 2062/94 of 18 July 1994 (1).

1.2. The Court has examined the financial statements of the European Agency for Health and Safety at Work for the financial year 1996. In accordance with Article 14 (1) of Regulation (EC) No 2062/94 (2), the budget was implemented under the Director's responsibility. This included the drawing up and presentation of the accounts (3) in accordance with the Agency's own financial provisions, as laid down in Article 14 (3) of Regulation (EC) No 2062/94. Article 188c of the Treaty establishing the European Community requires the Court of Auditors to audit these accounts and this report constitutes the first such audit of the Agency.

1.3. The Court carried out its audit in accordance with generally accepted auditing standards in so far as these apply in the Community context. It carried out tests on the account books and records and such other audit procedures as were considered necessary in this context. The main observations resulting from the Court's audit are given in the second part of this report.

1.4. The financial statements for the financial year 1996 were reliable and, on the whole, the legality and regularity of the underlying transactions were guaranteed.

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN AGENCY FOR HEALTH AND SAFETY AT WORK (EAHS-BILBAO) FOR THE FINANCIAL YEAR 1996

Budgetary accounts

1.5. The Agency's initial budget for the financial year 1996 did not comply with the regulations, which state that appropriations must be classified by title, chapter and article. This, together with the failure to regularize payments carried out via the imprest account (which was used for almost all the Agency's payments for the financial year 1996) during the financial year, was at the root of the problems encountered when the payments came to be regularized.

1.6. When the accounts were being closed, the initial budget was amended in order to enable the expenditure for the financial year to be charged to the budget. There is no documentary evidence to show that the Agency's Budgetary Authority approved the amendments.

1.7. Moreover, the Agency has no suitable software for keeping its budgetary accounts. The Agency should give priority to both the development of such an accounting system and compliance with the rules for the implementation of the budget.

General accounts

1.8. During the financial year 1996, the Agency had no computerized system for keeping its general accounts (this still applied in 1997). The adoption of an accounts system is of primary importance to ensure the availability of reliable financial information at the appropriate time.

Carry-overs, cancellations, delays

1.9. The Agency carried over ECU 1,2 million to the financial year 1997. This amount represented 39,5 % of its budget for the financial year 1996, which amounted to ECU 3,04 million, after amendments. Appropriations amounting to ECU 0,83 million were cancelled (i. e. 27,3 % of the budget). Following the delay in setting up the Agency, and in agreement with the Agency itself, the Commission paid out only ECU 3 million of the initial subsidy of ECU 4 million. This delay was caused by the late appointment of the Director, itself due to the changes in the membership of the Management Board. There were also delays in the recruitment of the persons who make up the Agency's basic staff. All these delays adversely affected the implementation of the budget for the financial year 1996.

The building

1.10. In December 1996 the Agency signed a lease to rent offices which it has actually occupied since April 1997 (at an annual rent of approximately Pta 48 million). According to the Agency, the local authorities are supposed to bear 75 % of the rent, but the Court was not shown any agreement to this effect. At the time of the audit, the Agency had received no payment from them.

Contracts and the ACPC

1.11. The contracts for the purchase of goods and services that were signed at the end of the year, which represented the majority of the appropriations that were automatically carried forward, were awarded after restricted invitations to tender or by private treaty. Although recourse to such practices may be justified in certain cases, the Court observed some transactions where the rules had not been observed. The Agency must ensure that the rules for awarding contracts are strictly complied with. Moreover, the Agency has no ACPC that is consistent with the applicable regulations. For the time being, the Bureau of the Board of Directors is discharging this function.

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 15 and 16 October 1997.

For the Court of Auditors

Bernhard FRIEDMANN

President

(1) OJ L 216, 20. 8. 1994, p. 5.

(2) In accordance with Article 14 (3) of Council Regulation (EC) No 2062/94, the accounts of all the revenue and expenditure of the Agency for the financial year 1996 were drawn up on 18 April 1997, the date on which the accounts were signed by the Director of the Agency and sent to the Commission, the Administration Board and the Court of Auditors. The accounts were received by the Court on 20 April 1997. An abridged version of these financial statements is shown in the tables attached to the report.

ANNEX

TABLE 1 BALANCE SHEET FOR THE FINANCIAL YEAR 1996

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

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(1) This amount corresponds to the fixed assets.

REPLIES OF THE EUROPEAN AGENCY FOR SAFETY AND HEALTH AT WORK

The Court of Auditors visited the Agency for Safety and Health at Work from 12 to 16 May 1997 and carried out the audit for the financial year 1996.

The Director presented the objectives, programme and activities carried out, under way or planned.

In order to facilitate the work of the Court, the accounts and all relevant supporting documents were made available to the Court. The personnel files and the contracts concluded were also presented.

The Court forwarded its preliminary comments with a view to drawing up the report on the financial statements of the Agency (financial year 1996) in its letter No 001594 of 15 July 1997.

The Agency, which welcomes the conclusions drawn in paragraph 1.4 of the Court of Auditors' draft report, in so far as the Court states that the financial statements for the financial year 1996 were reliable and, on the whole, the legality and regularity of the underlying transactions were guaranteed, would like to comment on the following paragraphs.

Paragraph 1.5.

The breakdown is incomplete because when the budget was being drawn up in 1995 it was not possible to plan in detail the budgetary requirements for the financial year 1996 and to include specific amounts; this was due to the fact that the Agency was in its start-up phase. As a result, 'token entry` was entered in most chapters.

Paragraph 1.6.

It is true that there is no documentary evidence to show that the Administrative Board of the Agency approved the amendments to the initial budget for 1996. In order to avoid a similar situation in the future it was agreed, at the meeting of the Bureau of the Administrative Board on 5 and 6 June 1997, that the minutes of meetings would include, in addition to the account of the discussions at meetings, a document explaining the formal decisions taken, in order to facilitate their retrieval.

Paragraph 1.7.

The Agency does not indeed possess suitable software for its budgetary accounts and it is provisionally using Excel. In order to overcome this, the Agency has joined forces with the other Agencies to analyse the feasibility of an integrated software package such as the prototype of the beta version of SI2 provided by the European Commission. Moreover, the Agency is following with interest the progress of the software being developed by Cedefop in Salonika, which would appear to meet our needs as it comprises a budgetary and accounting management module as well as human resource management modules. The Bilbao Agency will take a decision before the end of the year on the installation of one system or another, depending on the results of tests using both systems and the opinion of the supervisory bodies (Financial Controller and Court of Auditors). The Agency is doing all it can to improve the administration of its imprest account and in September 1997 installed the RAI software with the assistance of the EMCDDA in Lisbon.

Paragraph 1.8.

In order to make good the deficiency described by the Court of Auditors, the Agency acquired Cubic software in June 1997 which, the training of the competent staff having been completed, is already being used to keep the general accounts.

Paragraph 1.9.

It is true that the implementation of the budget for 1996 was adversely affected by the delay in the recruitment of the Director and staff for the administration unit of the Agency. The said staff were only recruited in May 1997, when the head of the unit and two assistants (a computer expert and a financial officer) took up their posts. This means that the gradual introduction of all the systems necessary to ensure sound financial management (staff management, budgetary and accounting management, conclusion of contracts and general services) did not begin until after the said date.

Paragraph 1.10.

At the time of the negotiations on the seat of the Agency the Basque Government and the County of Vizcaya committed themselves to pay 75 % of the cost of the rent of the office building occupied by the Agency. Despite the absence of an agreement signed between the Agency and the Basque authorities to this effect, the Basque Government has, as of September 1997, paid the Agency a subsidy of Pta 20 million and the County of Vizcaya has initiated the necessary procedures for the payment of its subsidy of Pta 10 million.

Paragraph 1.11.

In accordance with the provisions of its Financial Regulation, the Agency is doing all it can to make good the deficiencies pointed out by the Court of Auditors as regards public contracts and has recently submitted a draft Regulation for the creation of an ACPC for the opinion of the Financial Controller at the Commission and to the Court of Auditors for information; the Regulation is based, as far as possible, on the models adopted by the other Agencies. As regards the contracts for the procurement of goods and services concluded by the Agency, notably since the audit conducted by the Court in May 1997, it should be pointed out that invitations to tender have always been issued, even where the value of the estimated expenditure would have allowed private treaty.

The Agency would like to assure the Court that it is doing all it can to acquire, as quickly as possible, all the means necessary to carry out the improvements indicated by the Court of Auditors. It would ask the Court to take account of the difficulties it has had in its start-up phase in respecting in full the rules arising from Financial and other Regulations to which all its activities should be subject.