Report

on the financial statements of the European Agency for Safety and Health at Work (EASH - Bilbao) for the financial year ended 31 December 1999 together with the Agency's replies

(2000/C 373/01)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Management Board of the European Agency for Safety and Health at Work in conformity with Article 14(4) of Council Regulation (EC) No 2062/94(1).

2. The Court has examined the financial statements of the European Agency for Safety and Health at Work for the financial year ended 31 December 1999. In accordance with Article 14(1) of Council Regulation (EC) No 2062/94, 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 under Article 15 of Council Regulation (EC) No 2062/94. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to examine these accounts.

3. The Court undertook 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 examined the accounting records and applied the audit procedures it deemed necessary in the circumstances. By means of this audit, the Court obtained a reasonable basis for the opinion expressed below.

4. This examination has allowed the Court to obtain reasonable assurance that the annual accounts for the financial year ended 31 December 1999 are reliable and that the underlying transactions are, taken as a whole, legal and regular.

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN AGENCY FOR SAFETY AND HEALTH AT WORK (EASH - BILBAO) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1999

Analysis of the implementation of the budget

5. The definitive appropriations granted for 1999 amounted to 7,6 million euro, 6,7 million euro of which was granted under the initial budget. Of this amount:

- 0,9 million euro (i.e. 12 %) were not utilised,

- 0,9 million euro (i.e. 12 %) were the subject of a non-automatic carry-over, and

- 2,1 million euro (i.e. 28 %) were carried over automatically.

The Agency used a total of only half of the definitive appropriations allocated to it for the financial year 1999.

6. The non-automatic carry-over of 0,9 million euro was due mainly to the late approval, in November 1999, of the supplementary and amending budget. Given the large proportion of 1999 appropriations that was not utilised, there are grounds for questioning the validity, or at least the tardiness, of the decision to increase the resources allocated to the Agency.

7. The automatic carry-overs amounted to 2,1 million euro, a proportion that was almost identical to that of the previous financial year, in which they amounted to 1,9 million euro, i.e. 90 %, of the operating appropriations (Title III). Almost two thirds (63 %) of the carry-overs of operating appropriations related to topic centres, studies and telematics projects.

8. The commitments carried over automatically from the financial year 1998 to 1999 amounted to 1,9 million euro, 0,4 million euro (or 21 %) of which was cancelled at the end of 1999. With regard to budget operating appropriations (Title III), of a total of 1,7 million euro in appropriations carried over, 0,3 million euro (or 18 %) was cancelled, mainly because of inaccurate cost estimates and failure to carry out planned tasks.

9. The extent and persistence of the underutilisation of appropriations demonstrate weaknesses in the Agency's monitoring of its annual programme. The Agency should improve its monitoring system so that carry-overs of appropriations are minimised and the principle of annuality is complied with more fully.

Accounting systems

10. The budgetary accounts were still being kept in a spreadsheet programme (Excel) throughout 1999, while the general accounts continued to be drawn up using a business accounting software package. The Sincom 2 (SI2) system was not installed until January 2000.

11. According to the Financial Regulation and its implementing provisions, bank and budget reconciliations must be effected monthly. These rules are still not being applied, although the Agency undertook to rectify the situation last year(3).

Charging VAT

12. Until December 1998, the general Financial Regulation provided for expenditure to be charged including VAT, as VAT could be reused after it had been refunded. Since then(4), the general Financial Regulation has required expenditure to be charged net of VAT. Consequently, the Court invites the Office to transpose these new procedures into its own internal rules.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 27 September 2000.

For the Court of Auditors

Jan. O. Karlsson

President

(1) OJ L 216, 20.8.1994, p. 5.

(2) Under Article 14(3) of Council Regulation (EC) No 2062/94, the accounts for all the Agency's revenue and expenditure for the financial year 1999 were drawn up on 20 March 2000 and forwarded to the Agency's Management Board, the Commission and the Court of Auditors. The Court received these accounts on 7 April 2000. A summarised version of these financial statements is presented in the tables attached to this report.

(3) See the 1998 Annual Report, paragraph 6, p. 4.

(4) See Article 27(2a) of the Financial Regulation applicable to the general budget of the European Communities, as amended by Council Regulation (EC, ECSC, Euratom) No 2548/98 of 23 November 1998, OJ L 320, 28.11.1998, p. 1.

Table 1

Balance sheet at 31 December 1999 and 1998

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Table 2

Revenue and expenditure account for the financial years 1999 and 1998

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The agency's replies

With reference to the observations of the Court, the Agency would like to comment on the following paragraphs.

General and budgetary accounts

6. The total amount of EUR 900000 which has been carried over is meant to finance the European Week actions to be organised by the Agency through 2000. This event has until now been organised by the European Commission itself.

The decision of the Board to organise this event was taken early in 1999 but on the condition that an additional budget was available as it was not foreseen in the Agency's work programme. The European Parliament agreed to allow this additional budget in June 1999 and the Administrative Board adopted an amending budget for this purpose in November 1999.

The non-automatic carry-over is fully justified as the Agency had already started in 1999 the procedure for the selection of projects to be financed by a call for proposals (subvention exercise) published in the Official Journal on 26 October 1999. Projects have now been selected and and will be implemented by the end of this year.

Without agreement on the non-automatic carry-over, the Agency could not support the European Week expenses, as they were not covered by the Agency's 2000 budget appropriations.

8, 9 and 10. The Agency is aware of the remark from the Court and would like to make the following comments:

(a) Almost 50 % is related to subsidies for Focal Points and Topic Centre contracts, both submitted to a Board's decision taken at its last meeting in November 1999. As the subsequent commitments are approved in December, carry-overs, which are in conformity with Article 6 of the Agency's Financial Regulation, are inevitable.

Nevertheless, the Agency will study the possibility to adapt the decision-making process on this issue to the principle of annuity by committing appropriations in the same financial year that subsidies and contracts are to be implemented and paid.

(b) For the rest, they are related to payments still outstanding at 31 December to which the abovementioned Article normally applies.

(c) Finally, with reference to lapsed appropriations, the Agency fully agrees with the Court's remarks. However cancellations relate to appropriations earmarked for measures which have been cancelled in full agreement with the contracting parties.

11. The Agency notes the remark from the Court. Since 1 January 2000, the implementation of monthly trial balances has been in progress.

12. The Agency has launched the procedures to recover VAT directly from suppliers. To date EUR 86144 have been already recovered.

The Agency will follow the recommendation of the Court of Auditors concerning the amendment of the Agency's Financial Regulation in order to adapt it to the European Communities Financial Regulation 1999 amended provisions on VAT.