REPORT on the financial statements of the European Agency for the Evaluation of Medicinal Products (EMEA, London) (Financial year 1996), together with the Agency's replies (97/C 393/03)

1.1. This report is addressed to the Management Board of the European Agency for the Evaluation of Medicinal Products, pursuant to Article 57 (10) of Council Regulation (EEC) No 2309/93 of 22 July 1993 (1).

1.2. The Court of Auditors has examined the financial statements of the European Agency for the Evaluation of Medicinal Products for the financial year 1996. The budget was implemented under the responsibility of the Executive Director in accordance with Article 57 (7) of Regulation (EEC) No 2309/93 (2). His responsibilities include the preparation and presentation of the accounts (3) in accordance with the internal financial provisions provided for in Article 57 (11) of Regulation (EEC) No 2309/93. Article 188c of the Treaty establishing the European Community requires the Court of Auditors to audit these accounts.

1.3. The Court conducted its audit in accordance with generally accepted auditing standards in so far as they are appropriate to the Community context. It examined the account books and records and carried out such additional auditing procedures as it considered necessary. The main observations resulting from the Court's audit are presented in the second part of this report.

1.4. The financial statements concerning the financial year 1996 are reliable and the legality and regularity of the underlying transactions as a whole are guaranteed.

MAIN OBSERVATIONS CONCERNING THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN AGENCY FOR THE EVALUATION OF MEDICINAL PRODUCTS (EMEA, LONDON) FOR THE FINANCIAL YEAR 1996

Budgetary accounts

1.5. The Agency's budgetary accounts do not enable the principle of the inviolability of the accounts to be guaranteed, as a posteriori modifications are possible and undetectable. Furthermore, the accounts do not make it possible to detect cases of spending in excess of available appropriations.

1.6. The current system does not allow the authorizing officer to input accounting data (proposals for commitments and payment orders) to the computer. These data are recorded by the accounting officer in the accounts for the record (temporary freezing) before being approved by the Financial Controller. This practice does not provide accurate information on the accounts in real time. As the Sincom 2 system, which is supposed to replace the present accounting system, is not yet operational, an alternative solution should preferably be sought without delay.

General accounts - analytical

1.7. The general accounts software that is currently used is insufficient for the Agency's needs and is separate from the budgetary accounts system. Furthermore, the Agency has no system of analytical accounts, which is however indispensable if one wishes to establish whether the scale of fees laid down by the Council (4) adequately covers the costs of evaluation.

Use of appropriations

1.8. The appropriations carried forward from 1995 to 1996 totalled ECU 5,9 million. Of this amount, ECU 1,7 million (29 %) was cancelled. ECU 0,9 million of 1995 appropriations made available for reuse but not used in 1996 were also cancelled.

1.9. Only 79,6 % of current appropriations (ECU 22,6 million before the SAB and ECU 17,9 million after a reduction made following the adoption of an amending budget) were implemented and 20,7 % were cancelled (ECU 4,7 million). The main reason for this was the impossibility of recruiting staff in good time (only 65 % of the posts for which provision had been made); a second reason was the reduction in licence applications and in the corresponding studies.

1.10. The appropriations carried forward from 1996 to 1997 totalled ECU 4,8 million. Of this amount, ECU 1,7 million and ECU 2,8 million concerned Titles II (administrative expenditure) and III (operational expenditure). In the case of Title II, ECU 1,1 million concerned purchases of equipment based on new technology. In the case of Title III, ECU 1,3 million concerned fees to be paid to the inspectors during examinations (started in 1996 and finished in 1997) and ECU 0,8 million was for orphan drugs.

Imprest account

1.11. Contrary to accounting principles, a loss of ECU 0,02 million in 1994 was listed under expenditure to be settled in 1995 and 1996.

Revenue; subsidies; own resources

1.12. The total revenue actually collected, i. e. ECU 18,4 million, represents 81 % of the amount for which the budget initially provided.

1.13. The fees collected amounted to ECU 7 million. Only 73 % of the amount initially provided for could be collected and checked. The balance sheet shows ECU 0,9 million of fees due that have not yet been validated and established in accordance with Article 5 (3) of the Agency's Financial Regulation.

1.14. In 1997, the Agency adopted a new computer system for revenue. This system will be examined during the next Court audit.

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 214, 24. 8. 1993, p. 18.

(2) Pursuant to Article 57 (9) of Council Regulation (EEC) No 2309/93 the accounts for all the Agency's revenue and expenditure for the financial year 1996 were drawn up on 26 March 1997, on which date they were signed by the Executive Director of the Agency and forwarded to the Commission, the Management Board and the Court of Auditors. These accounts were received by the Court on 31 March 1997. The short form of these financial statements is presented in the tables annexed to this report.

(3) OJ L 35, 15. 2. 1995.

ANNEX

TABLE 1 BALANCE SHEET FOR THE FINANCIAL YEARS 1995 AND 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 THE EVALUATION OF MEDICINAL PRODUCTS

1.5. In the absence of a commercial computerized system which meets the requirements of the Financial Regulation and until the new SI2 system, developed by the Commission, which the Agencies are in the process of adapting to their needs, is available, the Agency is managing its budget accounts using Excel software. This software ensures that the information required for the sound management of the budget is always available and it provides the Agency's management with information which is relevant and up-to-date. The software verifies budget appropriations, commitments, orders, frozen appropriations and payments. The existing system indicates cases spending in excess of available appropriations.

The supporting document for each entry in the budget system is the document signed by the authorizing officer. It is approved by the Financial Controller and is processed by the accounts department. It is true that the Agency's system is not yet completely computerized and, because it does not retain in its memory changes to entries, it does, in principle, allow changes to be made without any indication thereof appearing in the general accounts. However, it should be noted that all commitments, cancellations, payment orders, etc. are prepared and classified in accordance with the rules, the relevant supporting documents being placed in an annex. In the new system it will not be possible to make ex post facto changes without there being any indication thereof.

1.6. Like most of the Agencies, the EMEA expects that the work on the SI2 project will be completed in 1997 and that the system will be made available. The new system will allow the general accounts to be better integrated with the budget accounts. Together with the other Agencies, the EMEA issued an invitation to tender two years ago for compatible software; the result was disappointing. The EMEA anticipates that the SI2 system, adapted to the needs of the Agency, will be available by the end of 1997.

1.7. On 5 February 1997 the Management Board adopted a report on the cost of operational activities, which was forwarded to the Commission. The Agency is busy structuring its accounts system so as to include analytical accounts. In addition, a pilot programme for the electronic recording of activities has been started.

1.8. The sum of ECU 0,9 million in 1995 appropriations made available for reuse but not used in 1996 relates notably to Article 204 (fitting-out of premises). As these appropriations could not be transferred and as no significant fitting-out work was carried out in 1996, the sum in question was cancelled.

1.11. Article 5 of the Financial Regulation stipulates that expenditure for which authorization reaches the Financial Controller no later than 31 December, and for which the corresponding payments are made no later than the following 15 January, will be entered in the accounts for the financial year which is coming to a close. Following the imprecise interpretation of these provisions in 1994 a sum of ECU 16 915,22 was imputed to the imprest account. Following discussions with the Court's auditors the sum in question was settled in the 1997 accounts.

1.13. Even if, with more experience in the field, the Agency was able to improve its estimates of the volume of dossiers to be received, taking account also of the seasonal nature of their submission, the Agency would still be no more able in the future than it is at present to formulate, one year in advance, exact estimates of the plans of the pharmaceutical industry and therefore of the amount which might be expected from fees.

These uncertainties mean that the Agency is obliged to pursue a cautious policy with regard to expenditure.