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 - 3.9"> ID="1"> Transfers of appropriations> ID="2">3.1 - 3.3"> ID="1"> Expenditure> ID="2">3.4 - 3.5"> ID="1"> Revenue> ID="2">3.6 - 3.7"> ID="1"> Subsidy> ID="2"> 3.8 - 3.9"> 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"> Sums to be recovered> ID="2">4.3 "> ID="1">Conclusion> ID="2">5.1 " ID="2">Pages" ID="1">Annex: Financial year 1992 - Utilization of available appropriations> ID="2">11"> ID="1">The Foundation's replies> ID="2">12">

REPORT on the accounts and management of the European Foundation for the improvement of living and working conditions (Dublin Foundation) for the financial year 1992 together with the Foundation's replies (94/C 28/02)

1. INTRODUCTION

1.1. The Court of Auditors has examined the accounts and financial management of the European Foundation for the Improvement of Living and Working Conditions (Dublin Foundation) for the financial year 1992, in accordance with the provisions of the relevant regulations(1) ().

1.2. The Commission made a start on 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 10,79 Mio ECU. Commitments entered into gave rise to 8,65 Mio ECU in payments and 1,90 Mio ECU in carry-overs to the financial year 1993, the balance of 0,24 Mio ECU having been cancelled. Appropriations carried over from the previous financial year gave rise to 1,96 Mio ECU in payments and 0,10 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 Foundation continued the reform of its administrative procedures during the year under review. However, the separation of the duties of authorizing officer and accounting officer laid down in its financial regulation is still incomplete, in particular as a result of the fact that the administrator of the imprest accounts is responsible for recording payments in the Foundation's accounts. This situation, to which the Court drew attention in its annual report on the financial year 1991(8) (), continued to obtain during the financial year 1992.

Imprest account

2.2. In 1992, payments carried out without the prior authorization of the Financial Controller using the exceptional imprest account procedure accounted for 24 % of the 1992 total, excluding salaries, compared with 29,5 % in 1991.

2.3. Contrary to the provisions of the Centre's financial regulation and despite the Court's repeated observations(9) (), payments carried out by the imprest procedure were still being entered in the Foundation's accounts in 1992 before approval had been given by the Financial Controller.

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 found that the Foundation's statement of revenue and expenditure had not been divided up into Titles and Chapters as laid down in Article 15 of its financial regulation 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 than intended.

3.2. The number of transfers decreased slightly in 1992: transferred appropriations amounted to 1 216 500 ECU (of which 1 032 000 ECU were transferred from one Article to another) or 9,6 % of the initial budget, as against 10,6 % in 1991.

3.3. Transfers which, on the basis of Article 15 of the financial regulation, should have been considered as being from one Chapter to another amounted to 138 000 ECU in 'Chapter' 1 ('Staff expenditure') and 61 800 ECU in 'Chapter' 2 ('Operating expenditure'), or a total of 46,9 % of all the transfers considered to be 'within the same chapter'.

Expenditure

3.4. An examination of a sample of items of expenditure showed that the purchase of a personal computer and the related software for 12 814 ECU had been charged to Article 300, 'Establishment of operational documentation (living conditions)' because it was to be used in this field. This expenditure should have been charged to Article 220, 'Technical installations and office equipment'.

3.5. Moreover, furniture (work stations, filing cabinets and seats) amounting to 31 514 ECU had been charged to Article 204, 'Fitting-out of premises', because it was installed in the context of contracts for constructing and fitting out the new building. This item of expenditure should have been charged to Item 2210, 'New purchases of furniture'.

Revenue

3.6. Following the Foundation's requests, the Commission paid out the subsidy payable from the general budget of the Communities for the financial year 1992 in three tranches of 2 000 000 ECU, 2 091 000 ECU and 6 494 000 ECU, in March, June and October 1992 respectively. It is the Court's duty to repeat the observation made in its previous reports(10) (), namely that this mode of payment does not comply with Article 26 of the financial regulation, which requires payment to be made by the fifteenth day of each quarter and in accordance with actual requirements. Furthermore, contrary to the provisions of the financial regulation, the recovery orders were drawn up after the funds had been received.

3.7. The last tranche of the 1991 subsidy (3 385 000 ECU) to be paid out by the Commission, which was received by the Foundation in January 1992 was, rightly, not included in the revenue for 1991. In 1992, the Foundation immediately offset this amount against the deficit for the financial year 1991 of 3 095 896,65 ECU and only the difference of 289 103,35 ECU was entered as revenue for the financial year 1992. In such cases, Article 5 of the financial regulation, which states that 'the revenue of a financial year shall be entered in the accounts for the financial year in which it is collected', should be applied strictly and the deficit carried over should appear in the calculation of the balance for the financial year.

Subsidy

3.8. The second tranche of 100 000 IRL (130 401,22 ECU) of the Irish government subsidy for the financing of the new building was paid to the Foundation in April 1992. Like the first tranche, which was paid in 1991, this item of revenue was not entered in the revenue and expenditure account but in a special account on the liabilities side of the balance sheet(11) (). During the financial year 1992, expenditure amounting to a net total of 118 420 ECU was also charged to this account. Despite the fact that 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'.

3.9. In order to regularize this situation with regard to the three tranches of the subsidy (1991, 1992 and 1993), in March 1993 the Director of the Foundation proposed to the administrative board that the Commission should be approached with a view to asking the budgetary authority to approve a supplementary and amending budget of 268 000 ECU of revenue and expenditure. This proposal was not, however, adopted by the administrative board. The Foundation ought to adopt a procedure which will allow for observance of the financial regulation without involving too many additional administrative difficulties.

4. OBSERVATIONS CONCERNING THE GENERAL ACCOUNTS AND THE BALANCE SHEET

Fixed assets

4.1. The amounts of fixed assets on the assets side of the balance sheet on 31 December contain the following anomalies:

(a)the value of the furniture purchased in the context of the furnishing of the new building (c.f. paragraph 3.5) is included both in the building inventory and in the furniture inventory; the item 'buildings' is therefore overstated by 31 514 ECU;

(b)the purchase of a computer, which was charged to operational expenditure (c.f. paragraph 3.5) was not inventoried; the item 'Furniture and equipment' is therefore understated by 12 814 ECU.

As a result, the amount of own capital on the liabilities side is overstated by 18 700 ECU.

4.2. During the financial year 1992, ten withdrawals from the inventory were recorded, for a total value of 50 486 ECU. In seven cases, for a total value of 16 576 ECU, these withdrawals were carried out in the absence of a decision taken by the authorizing officer and approved by the Financial Controller, as is laid down in Article 54 of the financial regulation.

Sums to be recovered

4.3. The three items for sums to be recovered ('Member States', 'Miscellaneous debtors' and 'Accruals') on the assets side of the balance sheet on 31 December 1992 contain anomalies as a result of the use of inappropriate conversion rates and an accounting error. As a result, the item 'Revenue to be collected' on the liabilities side of the balance sheet is understated by 4 700 ECU. Although these errors do not cast doubt on the fairness and truth of the financial statements, they do underline weaknesses in the accounting for established entitlements. The Court therefore once again recommends that the manual accounting of revenue be integrated into the computerized accounting system.

5. CONCLUSION

5.1. The introduction by the Foundation of new administrative procedures that comply with its financial regulation continued, especially with regard to the separation of the duties of authorizing officer and accounting officer and the entering of revenue into the accounts. The Court also recommends a review of the procedures for the up-dating of the inventory.

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 16 (2) of Council Regulation (EEC) No 1365/75 on the creation of the Foundation, OJ L 139 of 30.5.1975.

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

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

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

(4)() Court Opinion No 3/91 and 4/91 of 11 April 1991, OJ C 152 of 10.6.1991.

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

(6)() OJ C 130 of 21.5.1992.

(7)() - Council Regulation (EEC) No 1947/93 of 30 June 1993 amending Regulation (EEC) No 1365/75 on the creation of a European Foundation for the Improvement of Living and Working Conditions, OJ L 181, 23.7.1993.

- Council Regulation (EEC) No 1949/93 of 30 June 1993 amending Regulation (EEC) No 1417/76 on the financial provisions applying to the European Foundation for the Improvement of Living and Working Conditions, OJ L 181, 23.7.1993.

(8)() 1991 annual report (paragraph 2.1).

(9)() 1989 (paragraph 2.5) and 1991 (paragraph 2.6) annual reports.

(10)() 1989 (paragraphs 4.1 and 4.2), 1990 (paragraph 3.8) and 1991 (paragraph 3.6) annual reports.

(11)() 'Grant for new building'.

ANNEX

Dublin Foundation - Financial year 1992 - Utilization of available appropriations "(1 000 ECU)">Chapter"> ID="1">4 150> ID="2">3 877> ID="3">68 > ID="4">205> ID="5">63> ID="6">57> ID="7">6"> ID="2">(93,4 %)> ID="3">(1,6 %)> ID="4">(5 %)> ID="6">(90,5 %)> ID="7">(9,5 %)"> ID="1">2 525> ID="2">2 184> ID="3">331> ID="4">10> ID="5">693> ID="6">692> ID="7">1"> ID="2">(86,5 %)> ID="3">(13,1 %)> ID="4">(0,4 %)> ID="6">(99,9 %)> ID="7">(0,1 %)"> ID="1">1 645> ID="2">943> ID="3">689> ID="4">13 > ID="5">641> ID="6">610 > ID="7">31"> ID="2">(57,3 %)> ID="3">(41,9 %)> ID="4">(0,8 %)> ID="6">(95,2 %)> ID="7">(4,8 %)"> ID="1">2 465> ID="2">1 643> ID="3">813> ID="4">9 > ID="5">667> ID="6">601> ID="7">66"> ID="2">(66,7 %)> ID="3">(33 %)> ID="4">(0,3 %)> ID="6">(90,1 %)> ID="7">(9,9 %)"> ID="1">10 785> ID="2">8 647> ID="3">1 901 > ID="4">237> ID="5">2 064> ID="6">1 960> ID="7">104"> ID="2">(80,2 %)> ID="3">(17,6 %)> ID="4">(2,2 %)> ID="6">(95 %)> ID="7">(5 %)">

COMMENTS OF THE FOUNDATION ON THE REPORT OF THE COURT OF AUDITORS ON THE 1992 ACCOUNTS

2.1 and 2.3. As indicated in the response to the Court's Report on the 1991 Accounts a project involving the Foundation's computerised accounting system is in progress. Completion of this project will permit implementation of the Court's recommendations with regard to the functions of the Imprest Holder and the requirement for Visa of Financial Control before entry of Imprest Account payments in the accounting system.

3.1. The Foundation's 1994 budget has been established on the basis of 'titles'. This was the earliest possible juncture at which implementation of the Court's recommendation could have been undertaken.

3.4 and 3.5. The Foundation will contact the Commission regarding procedures in relation to the recording of purchases, the nature of which is covered by headings relating to more than one budgetary item.

It should be noted that the furniture concerned was built-in type furniture and as such was incorporated in the structure of the building. On these grounds it was felt appropriate to record the furniture under item 2040 'fitting out of premises'.

3.6. This matter of timing of subsidy payments will once again be brought to the attention of the Commisson.

3.7. The Foundation's Expenditure and Revenue Account was drawn up in accordance with that of the Commisson. It was prepared generally with regard to the budgetary revenue and budgetary expenditure of the financial year in question. Cognisance was not taken of a deficit recorded in a preceding financial year as this would in any event have been cancelled out by a credit entry to the account recording the balance of revenue and expenditure for the preceding year. The Court's recommendation with regard to article 5 of the Financial Regulations will however be implemented.

3.8. As was pointed out in response to the Court's 1991 Report the Foundation contacted the Commision's services on becoming aware of the decision of the Irish Government to provide a grant for the new building. It was noted at that time that the circumstances surrounding this grant were not clearly covered by Article 4 of the financial provisions in that the grant of the Irish Government was specifically in respect of the new building and was not intended to reduce the subsidy which the Foundation receives through the General Budget.

4.1. The Courts comments are noted. Amendments will be made in the appropriate inventories.