Report

on the financial statements of the European Environment Agency (EEA - Copenhagen) for the financial year ended 31 December 1998 together with the Agency's replies

(1999/C 372/02)

CONTENTS

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The Court's opinion

1. This report is addressed to the Management Board of the European Environment Agency in accordance with Article 13(4) of Council Regulation (EEC) No 1210/90(1).

2. The Court has examined the financial statements of the European Environment Agency for the financial year ended 31 December 1998. In accordance with Article 14(1) of Council Regulation (EEC) No 1210/90 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 provided for in Article 14 of Council Regulation (EEC) No 1210/90. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to audit those accounts.

3. The Court performed 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. The Court carried out such tests of the accounting records and applied such other audit procedures as 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 enabled the Court to obtain reasonable assurance that the annual accounts for the financial year ended 31 December 1998 are reliable and that the underlying transactions, taken as a whole, are legal and regular.

Main observations on the implementation of the budget of the European Environment Agency for the financial year ended 31 December 1998

General (SI X) and budget (SI 2) accounts

5. Throughout the various phases of SI 2 (new version) the Agency was not only overdependent on outside experts, but also, in order to put new mechanisms in place, disbursed sums of the order of ECU 110000 which could possibly have been shared between several agencies in the event that the common support agreement had been introduced before January 1999.

6. During the evaluation procedure it was noted that the system had been put in place before all the requisite preliminary tests had been finally completed. This can be partially explained by the inadequacies of the Commission's software. Several manual adjustments and corrections were made. A service level agreement with the Commission is essential.

Advisory Committee on Procurement and Contracts (ACPC)

7. As regards the ACPC procedures for the introduction of SI 2, there was found to have been an unexplained delay of five months after the evaluation of the restricted call for tenders. Furthermore, the time needed to carry out the work was badly estimated. In addition the procedures followed in selecting the contractor were not entirely justified.

Contracts with the Topic Centres

8. In connection with the supporting documents for these contracts, and the analytical expenses in particular, the Court found that in the cases which it examined there had been no internal control, although it was required under Article 8 of the contractual clauses relating to the subsidies for the Topic Centres.

Publication

9. The Agency published neither its budget nor the table of its posts in the Official Journal of the European Communities although it is required to do so under Article 13 on its Financial Regulation.

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 24 and 25 November 1999.

For the Court of Auditors

Jan O. KARLSSON

President

(1) OJ L 120, 11.5.1990, p. 1.

(2) Pursuant to Article 13(3) of Council Regulation (EEC) No 1210/90 the accounts for all the Agency's revenue and expenditure for the financial year 1998 were drawn up on 20 April 1999 and were sent to the Agency's Management Board, the Commission and the Court of Auditors and the latter received them on 26 April 1999. The summary form of those financial statements is published in the tables annexed to this report.

Table 1

Balance sheet as at 31 December 1998 and 1997

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Table 2

Revenue and expenditure account for financial years 1998 and 1997

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EUROPEAN ENVIRONMENT AGENCY'S REPLIES

General (SI X) and budget (SI 2) accounts systems

To point 5:

While it is correct that the common support agreement became operational only at the beginning of 1999 (seven Agencies involved), it has to be recorded:

- the joint development in this area between Agencies began as early as 1995 with a joint call for tender, with the European Commission Services' (DG XX) participation, and has continued since,

- that this Agency has actively sought and used this joint development as the Court's visiting team knows, so that both the extent of additional or specific expertise and of related financial resources have been kept to the minimum possible.

To point 6:

While those observations are correct, they seem to imply a criticism of what has been we think up to now a good operational way of proceeding (and maybe the only way left under the existing circumstances) since it has included:

- a parallel testing of S I2 during 1998 until it became the EEA budget system in January 1999 (and it performed well and was stable). Manual interventions (or adjustments) were required due to the limitations and errors of the software, however they did not modify existing or introduce new commitments or payments, and

- a service level agreement will soon be reached between the Commission and the European Training Foundation in Turin on behalf of seven Agencies, including this Agency, which joined in a common support agreement.

Advisory Committee on Procurement and Contracts (ACPC)

To point 7:

It is our understanding that the whole process has developed respecting the procedures and following the best practices:

- the estimate of the required work was made in 1997 based on the limited information available and with the support of the European Commission Services. Due to unforeseen reasons, a consolidated updated estimate was submitted to ACPC with a delay,

- a call for expression of interest was published in the Official Journal of the European Communities. A restricted call for tender was addressed to 38 companies, and the published awarding criteria were used for the selection. The Agency will try to improve future evaluation procedures concerning the final selection of the successful candidate and meanwhile has introduced more differentiated gradings for evaluations.

Contracts with the Topic Centres

To point 8:

The control was made but not recorded in the dossiers. While the documents justifying the expenses under contracts with the European Topic Centres (ETCs) were reviewed and checked continuously throughout the year (and some payments were not made because the appropriate work was not delivered), no trail was kept in the dossiers. Projects Managers have now specific instructions to establish the internal control trail.

Publication of the EEA's budget

To point 9:

- The Agency published its 1998 budget only on its homepage on the Internet (approximately five million hits per year and 360000 users per year). It followed the views expressed in 1998 by the European Parliament Budget Committee at a meeting with Agencies "Directors, indicating that the second generation of Agencies" budget should not necessarily be published in the Official Journal of the European Communities; publishing on the Internet would be more efficient (cheaper and higher dissemination).

- In 1999, the EEA published its budget on the Internet again. Following the Court of Auditors' statement and to respect to the letter its Financial Regulation, the EEA will also publish its 1999 budget in the Official Journal of the European Communities together with the other six Agencies (to lower the cost). However, considering also the European Parliament's views and the Agency's experiences, the following must be assessed:

- the most cost-effective alternative for making the budget information accessible and disseminated to the public. It could include publishing in the Official Journal of the European Communities a summary and the reference to the EEA's homepage where the full budget and establishment plan is available,

- the proper way to reflect it in the EEA financial regulation clauses, by adapting it in a cost effective manner to the possibilities of information technology.