Report

on the financial statements of the European Agency for the Evaluation of Medicinal Products (EMEA London) for the financial year ended 31 December 1998, together with Agency's replies

(1999/C 372/03)

CONTENTS

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Opinion of the Court

1. This report is addressed to the Management Board of the European Agency for the Evaluation of Medicinal Products in conformity with Article 57(10) of Council Regulation (EEC) No 2309/93(1).

2. The Court has examined the financial statements of the European Agency for the Evaluation of Medicinal Products for the financial year ended 31 December 1998. In accordance with Article 57(7) of Council Regulation (EEC) No 2309/93, the budget was implemented at the responsibility of the Executive 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 57(11) of Council Regulation (EEC) No 2309/93. 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 audit 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. Through the 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 accounts for the financial year ended 31 December 1998 are reliable and that the underlying transactions are, taken as a whole, legal and regular.

Main observations concerning the implementation of the budget of the European Agency for the Evaluation of Medicinal Products (EMEA - London) for the financial year ended 31 December 1998

Analytical accounting

5. The present level of fees is regulated by a Council Regulation from 1998(3) based upon general principles and an overall structure established by Council Regulation (EC) No 297/95(4). Amongst other things, Council Regulation (EC) No 297/95 established that the level of the fees charged by the Agency must be based on the costs of the service provided. However, the fees have not so far been based on real costs since neither the Agency nor the National Authorities have had the analytical tools to measure costs actually incurred. The Agency is now taking steps towards creating a system of analytical accounting. A time management system was introduced in 1998 and the Agency is developing a method to measure other costs. The resulting information should make it possible to identify the staff and other costs of the different activities. The Agency should pursue this initiative so that, when the fee regulation will next be reviewed by the European Parliament in 2001, the proposal can be based on reasonably accurate analytical accounting. In addition, it is important that the competent national authorities also document their costs, so that the payments made by the EMEA to them can be justified.

Tender procedures

6. Some opinions of the Advisory Committee on Procurements and Contracts (ACPC) do not follow the provisions in the Agency's Financial Regulation (FR). For example, procedures invoking urgency were used in situations, where they were not justified.

Quality management system ("QMS")

7. Following a decision by the Agency to install a quality management system a first contract of up to ECU 198000 was made with a consultancy firm without a satisfactory tender procedure. Up to the end of 1998 ECU 295000 was paid to the company concerned. There was no increase in the fee income of the Agency in 1998, but staff expenditure increased by 32 % (see Table 2). Against the background of a static level of activity, the Court questions whether the considerable effort devoted to the QMS, which has not yet resulted in the Agency achieving certification, can be justified.

IT department

8. There is one IT staff member for every nine users. Given the small number of applications developed in house and the limited number of users to support, the number of IT staff at the Agency seems high.

The staffing in the IT department is not tailored to the Agency's needs. There are too many non-specialist principal administrators and too few experienced technicians. For example, the Agency lacks a qualified database administrator.

9. IT security should be improved. There is no written security policy, nor a documented risk analysis. Passwords are not changed at regular intervals. Nobody has been appointed to replace the developer who implemented the specific EMEA features in the SI 2 budgetary system, in the event of his illness or departure.

10. In order to improve the availability and stability of its IT services, the Agency in autumn 1998 employed consultants to make a study of the Agency's computer environment. The cost of ECU 42500 was to cover also the implementation costs of improvements in its server structure. By the end of the audit the actual implementation had not yet started nor were there any plans for the continuation of the project.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 7 October 1999.

For the Court of Auditors

Jan O. KARLSSON

President

(1) OJ L 214, 24.8.1993, p. 1.

(2) As required under Article 57(9) of Council Regulation (EEC) No 2309/93, the accounts for all the Agency's revenue and expenditure for the financial year 1998 were drawn up on 25 March 1999 and forwarded to the Agency's Management Board, the Commission and the Court of Auditors. The Court received these accounts on 6 April 1999. A summarised version of these financial statements is presented in the tables attached to this report.

(3) Council Regulation (EC) No 2743/98 of 14 December 1998 (OJ L 345, 19.12.1998).

(4) OJ L 35, 15.2.1995, p. 1.

Table 1

Balance sheet as at 31 December 1998 and 1997

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Table 2

Revenue and expenditure account for the financial years 1998 and 1997

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Replies of the EMEA

(The numbering of the points corresponds to that used by the Court)

5. Analytical accounting

After having determined its unit costs, and on the basis of the time management system introduced in 1998, the Agency has calculated the cost of each of its activities in the first half of 1999. The method used has been discussed by a working group set up by the Management Board and the results obtained will be submitted to the Board at its meeting of 29 September 1999. Once any necessary adjustments have been made, the Agency will finalise the system and try to implement it in a relevant IT environment.

6. Tender procedures

Following the suggestions made by the Court, the Agency's Advisory Committee on Procurements and Contracts, whilst still endeavouring to contribute to the proper functioning of the EMEA, has adopted a stricter interpretation of the Financial Regulation and other existing rules.

7. Quality management system ("QMS")

When the Agency was set up, only three months lapsed between the arrival of the first staff and the beginning of the operational activities. While in the administrative field the Staff Rules and Regulations and the Financial Regulation constituted the framework to which work had to conform, in the much vaster operational field guidance was obtained only from the experience of the persons involved. The need was soon perceived to draw up procedures and, subsequently, to monitor their implementation. It was felt that a quality management system constituted the most efficient way of involving staff (a quarter of the EMEA staff participated actively in developing the Agency's QMS) in setting up the procedures and, more importantly, creating a feeling of "ownership" of the system. At present, the monitoring of the respect of procedures set up is taking place. Certification was not a prime objective. Staff expenditure increase in 1998 is a direct consequence of a steep increase in work in 1997 and of salary weighting.

8. Staffing of the IT department

Since the Court's inspection, the ratio of IT staff to users (Agency staff and delegates) has decreased and is now one to 14. Recruitment of new staff and retraining aim at better meeting the Agency's requirements. It should be borne in mind that the IT department not only serves the EMEA's staff; it also attends to the delegates of the National Competent Authorities and to the European informatics network for pharmaceutical regulation.

9. IT security

While improvements are always possible, the Agency has a rigorous back-up procedure (e.g., for SI 2 it is the SI 2 team in Brussels), a protection scheme against viruses, an effective firewall protection, password-protected software access (e.g. SI 2, Lloydslink). The frequency of password changes is in line with common practice of organisations using similar systems (Windows NT).

10. Optimisation of the IT server environment

The implementation of the project, which had been delayed initially, is scheduled for completion by the end of September 1999.