REPORT ON THE ACCOUNTS AND MANAGEMENT FOR THE FINANCIAL YEAR 1993 OF THE EUROPEAN CENTRE FOR THE DEVELOPMENT OF VOCATIONAL TRAINING (CEDEFOP - BERLIN) TOGETHER WITH OBSERVATIONS ON SOUND FINANCIAL MANAGEMENT DURING THE PERIOD 1987 TO 1993 ACCOMPANIED BY THE REPLIES OF THE CENTRE (94/C 378/01)

1. INTRODUCTION Background 1.1. Cedefop was established by the Council regulation 337/75 (1) as a satellite body of the European Community with the task of promoting vocational training at Community level. Cedefop, which commenced operations in Berlin in 1976, is dependent both on the Commission and on its Management Board for its operation and administration. Its role has been defined in the same regulation as that of assisting 'the Commission in encouraging, at Community level, the promotion and development of vocational and in-service training', of contributing 'to the implementation of a common vocational training policy' and especially encouraging 'the exchange of information and the comparison of expertise'. Its main tasks in the field of vocational training are to compile documentation, to contribute to the development and coordination of research, to disseminate useful documentation and information, to encourage and support initiatives likely to facilitate a coordinated approach (specifically in respect of the approximation of standards and the mutual recognition of certificates) and to provide a forum for all those concerned.

Scope of the Audit 1.2. The Court has examined the accounts and financial management of the European Centre for the Development of Vocational Training (Cedefop - Berlin) for the financial year 1993 in accordance with the provisions of the relevant regulation (EEC) 1416/76 (2). In addition, the Court has carried out an examination of the soundness of Cedefop's financial management, in accordance with article 72 of the same regulation. The observations arising from the Court's previous financial management audit covered the period up to 1986 and were published with the Court's Annual report on Cedefop's 1986 accounts. This report presents the Court's observations on financial management over the period 1987 to 1993. The observations arise from a selection of interviews and an extensive examination of documents relating to the period under review.

1.3. At the European Council meeting of 29 October 1993, it was decided to change Cedefop's seat from Berlin to Thessaloniki in Greece (3). The Court's present report takes account of the impact of this on Cedefop's operations towards the end of 1993 and considers the likely future changes and new possibilities for improvements.

2. OBSERVATIONS RELATING TO THE COURT'S EXAMINATION OF THE 1993 ACCOUNTS Financial provisions 2.1. The revision of the financial provisions was adopted by the Council on 30 June 1993 (4), but was only applied in part to the drawing up of the Centre's balance sheet and was not applied to the accounting of revenue and expenditure throughout the year. It will be applied in full to the 1994 accounts.

Financial data 2.2. Available appropriations for the financial year 1993 amounted to 11.92 Mio ECU. Commitments entered into gave rise to 8.23 Mio ECU in payments and 3.02 Mio ECU in carry-overs to the financial year 1994, the balance of 0.67 Mio ECU having been cancelled. Appropriations carried over from the previous financial year gave rise to 1.24 Mio ECU in payments and 0.43 Mio ECU in cancellations. Annex 1 to this report gives a title by title analysis of the utilization of the appropriations for the financial year in question as well as of those carried over from 1992.

Separation of duties 2.3. The separation of the duties of authorizing officer and accounting officer, as laid down in the financial regulation, continued to be inadequate until the end of 1993. However, the creation of two new part-time posts of assistant accountant and assistant imprest-holder in 1993 offers the Centre a solution to this problem for future years (5). The officials had already been recruited by the beginning of 1994, but as is the case for all staff-in-post, uncertainty exists in the context of the forthcoming move to Thessaloniki.

Imprest account 2.4. Payments carried out through the imprest account procedure and therefore without the prior authorization of the Financial Controller accounted for 58.4 % of total commitments and payments in 1993. This represents a considerable increase over the previous year, when payments through the imprest account amounted to 30.9 % of the total. This substantial use of the imprest account has been the subject of criticism in the Court's previous Annual reports on Cedefop's accounts (6). In addition, half of the payments through the imprest account were made in the last four months of the year, 16 % of the total being made in December.

2.5. In a mission report dated 10 May 1993, Financial Control proposed that Cedefop should make more extensive use of provisional commitments. Following a meeting on 15 October, Cedefop prepared, at the request of Financial Control, a list of budget lines for which provisional commitments could be used and from which payments could be made through the imprest account. Financial Control first added to and subsequently approved this list and on 10 December 1993, the Management Board doubled the maximum monthly limit to 1 000 000 ECU (7). This was to allow 'all items of expenditure insofar as they ensue from legal obligations covered by commitments approved by the Financial Controller' to be paid through the imprest account (8).

2.6. Article 43 of the financial provisions applying to the Centre make it quite clear that 'for the payment of certain categories of expenditure, imprests may be advanced' (9). The decision by DGXX that virtually all categories of expenditure (including travel, mission and salary costs) apart from study contracts should be the subject of provisional commitments and paid through the imprest account appears to be inconsistent with the financial provisions. The Court acknowledges the reasons for the decision, notably '. . . sound financial management . . . savings in staff, paperwork and postage involved . . .'. However, the financial provisions should be amended accordingly.

Transfers of appropriations 2.7. The total of transfers of appropriations between different Budget lines (articles and items) carried out in 1993 amounted to 1 003 900 ECU, or 8.4 % of the initial budget, as against 6.7 % in 1992. Within Chapter 3, 11.8 % of appropriations were transferred (615 000 ECU). The transfers were all made from three budget lines (10) and 83 % of the transfer activity took place in the last two months of 1993. A further 260 339 ECU were cancelled on the same three budget lines, which indicates the work programme was not executed as planned.

Carry-overs and cancellations of appropriations 2.8. Only 69 % of final appropriations for 1993 were paid out in 1993 (compared to 83 % in 1992). The percentage of commitments made and carried over to 1994 was 25 % as opposed to 15 % in 1992 and also the percentage of cancellations was higher, 6 % as opposed to 4 % in 1992. Table 1 shows the carry-overs from the 1993 initial budget by Title and the subsequent use.

Table 1 - Carry-overs from the 1993 initial budget

"(ECU) """ ID="1">345 807 > ID="2">6 > ID="3">251 897 > ID="4">73 "> ID="1">196 406 > ID="2">19 > ID="3">113 875 > ID="4">58 "> ID="1">2 478 287 > ID="2">47 > ID="3">1 000 696 > ID="4">41 "> ID="1">3 020 500 > ID="2">25 > ID="3">1 366 468 > ID="4">45 ">

2.9. Carry-overs for title 3 operating expenditure amounted to 47 % of initial appropriations, as against the 1992 figure of 30 %. Since 8 % of appropriations on title 3 were cancelled, this means that the Centre paid out only 45 % of its 1993 operational budget in 1993. At the end of the first quarter of 1994, only 45 % of the 1993 carry-overs had been paid out. Carry-over of 1993 commitments relating to the 1993 work programme was especially high on budget line 301, 'Dissemination of information'. By the end of the first quarter of 1994 83 % of these had still not been used. Towards the end of 1993 285 000 ECU was transferred to this budget line from other operational budget lines and commitments totalling 899 601 ECU were then made for carry over to the following year. This represented 90 % of initial appropriations and 70 % of final appropriations. Other significant carry-overs were made on interpretation costs, pilot studies and projects and translation expenses (51 %, 36 % and 72 % respectively of the initial appropriations).

2.10. The Court's observations relating to the high volume of transfers and carry-overs are similar to those made in 1992 (11) and indicate that the principles of good budgetary practice have been compromised.

2.11. Cancellations in 1993 on title 2, administrative expenditure, equalled 17 % of final appropriations in 1993 as opposed to 6 % in 1992 (see annex 1). This increase is in part due to the cancellation of expenditure on equipment purchase, hire and maintenance following the news of the forthcoming move to Thessaloniki and the uncertainty as to whether or not the European Union will continue to occupy the rent-free premises.

Expenditure 2.12. The increase in the operational budget was most notable on three budget lines. The initial budget for pilot studies was 125 % higher than that of the previous year. However, only one-quarter of this was spent in 1993; one third being transferred to other budget lines, one third being carried over to 1994 and the remainder cancelled. This reflects inadequate planning of expenditure and poor budgetary management.

2.13. The increase was also remarkable on the budget line for dissemination of information (printing and publication costs). The initial budget for both together was 71 % higher for 1993 and this was increased to 126 % following transfers of appropriations. Much of the increase was due to the request by the Commission that the Centre translate and publish 12 national reports as part of the Force (12) programme of the Commission. The Court questions whether the Centre's function should extend to the printing and translating of reports produced by a programme funded by the Task Force on Human Resources.

Contingency reserve 2.14. Since 1988, Cedefop has included in its accounts an amount of 10 000 ECU under title 9 as a contingency reserve. Each year this amount has been used in part or in full to fund a Cedefop prize for which one or more meetings are held every year. If the Cedefop prize is to be an annual event it should be considered a part of Cedefop's operational expenditure and should appear under title 3. Associated costs, such as the cost of organizing the prize, holding the meetings, etc. should also be included under the same budget line to give the budgetary authority a better idea of what a Cedefop prize costs.

Total assets on the balance sheet 2.15. The total amounts registered on the balance sheet of assets and liabilities as at 31 December 1993 were 52 % higher than those registered in 1992. The main cause of this increase of the total is an additional 2 million ECU of liquid assets at the end of 1993, mostly held on time deposits at the balance sheet date. This high figure is the direct consequence of the commitments carried forward to 1994. By the end of January 1994 the amounts receivable and payable had been reduced and the liquid assets had been more than halved.

3. EVALUATIONS OF CEDEFOP Follow-up to the Court's Sound Financial Management (SFM) report 3.1. The Court made a number of observations and recommendations in its 1986 report. Many of these have been partly or fully taken up by Cedefop. Outstanding points are dealt with in paragraphs 4.5, 5.4, 6.4, 6.6, 6.7 and 7.4 below.

External Evaluations of Cedefop 3.2. In October 1992, Cedefop's Management Board asked the Centre to commission an external consultant to produce an expert opinion on the implications of Cedefop's proposed 'Action Guidelines' for the coming four years, on its relations with its interlocutors (the Commission, the Member States, Unice (13) and ETUC (14)) and on the working methods of the Centre (15). Mr. Mallet, the consultant who was contracted for this specific task, accordingly made proposals to the Management Board on guidelines for forthcoming work programmes and on the future organization and training of the Centre's staff.

3.3. In giving its discharge on the 1991 accounts, the European Parliament invited Cedefop's Management Board to initiate an additional and more detailed study into 'the extent to which the Centre fulfils its statutory aims and proposing possible improvements to the provisions currently in force, putting emphasis on needs, political efficacy and the cost-benefit of the Centre's various products' (16). The study will need to take particular account of the forthcoming move to Thessaloniki.

4. CEDEFOP, THE EU AND VOCATIONAL TRAINING Financial data over the period 1987 to 1993 4.1. Total final appropriations for 1993 were 11 922 800 ECU, which is 81 % higher than 1987. Graph 1 shows the approved final appropriations over this period by title of expenditure (titles 1 and 2) which rose 76 % and 16 % respectively. Table 2 shows that over the same period operating expenditure increased from 37.8 % to 43.9 % of total final appropriations. This trend of a decreasing ratio of overheads to operational expenditure was reversed when the operational budget fell by a third in 1994. Under present staffing arrangements, staff and administrative costs are largely fixed from year to year. More flexible staffing arrangements should be considered to allow the Centre in future to avoid a situation in which any overall cut in expenditure in principle requires a disproportionate reduction in operational expenditure.

Table 2: Final Appropriations over the period 1986 to 1994

"(1 000 ECU) """ ID="1">2 471 > ID="2">7 388 > ID="3">33,5 "> ID="1">2 486 > ID="2">6 586 > ID="3">37,8 "> ID="1">2 999 > ID="2">7 318 > ID="3">41,0 "> ID="1">3 445 > ID="2">8 409 > ID="3">41,0 "> ID="1">3 854 > ID="2">8 988 > ID="3">42,9 "> ID="1">4 550 > ID="2">10 390 > ID="3">43,8 "> ID="1">4 700 > ID="2">10 838 > ID="3">43,4 "> ID="1">5 233 > ID="2">11 922 > ID="3">43,9 "> ID="1">3 527 > ID="2">11 112 > ID="3">31,7 ">

4.2. Over the period 1987 to 1993, total carry-overs from each year's final appropriations to the following year rose from 19 % to 25 %. For title 3 over the same period carry-overs rose from 37 % to 47 %. The opportunity should be taken in 1994 to end the practice of substantial carry overs into the following year.

4.3. Following a suggestion by the Court, the Centre also includes the percentage of total final appropriations by sector in the introduction to its annual accounts. Table 3 shows the breakdown in 1987 and 1993 and the percentage increase over this period.

Table 3: Percentage of total final appropriations by sector

"" ID="1">Directorate > ID="2">7 > ID="3">7 > ID="4">+ 85 "> ID="1">Administration > ID="2">8 > ID="3">9 > ID="4">+ 71 "> ID="1">Translation and Interpretation > ID="2">25 > ID="3">23 > ID="4">+ 96 "> ID="1">Information, Documentation, Publications > ID="2">22 > ID="3">23 > ID="4">+ 81 "> ID="1">Projects, research, studies > ID="2">38 > ID="3">39 > ID="4">+ 78 "> ID="1">Total > ID="2">100 > ID="3">100">

Over the same period the staff complement rose from 57 to 78, conference activity rose 17 %, the number of pages printed by the publications office increased 28 %, the number of pages printed and revised doubled and receipts from sales of publications quadrupled.

Cedefop's role 4.4. Since the mid-1980's there has been a considerable increase of Community and individual Member State interest in the field of vocational training which has led firstly to the setting up of the Task Force on Human Resources, with an annual budget of approximately 450 million ECU, and secondly to rapidly rising expenditure in the field of vocational training by DGV. Both the Task Force and DGV of the Commission have set up Community programmes and initiatives such as Euroform, Euroqualification (17), etc. and the Community Support Frameworks, which have related and frequently overlapping objectives and undertake similar tasks to those which Cedefop was set up to carry out. Moreover, most of these actions are financed with sums far exceeding Cedefop's annual budgets.

4.5. The Commission does not ask Cedefop to provide technical assistance in the management of these actions (18) and rarely consults Cedefop when vocational training programmes are set up or evaluated. In some cases Cedefop staff work alongside Commission staff on particular aspects of programmes. However, the existence and success of this coordination often depends on personal and informal links between Cedefop and Commission staff. In its 1993 work programme, Cedefop is associated with Petra (19), Eurotecnet (20) and Force, but a specific role for the Centre is not set out in any of these programmes or in the Commission's wider measures to improve training and reduce unemployment. The Court would have wished to see Cedefop more clearly associated with relevant aspects of the Commission's work, and contributing more directly to programmes aimed at encouraging the growth of employment.

4.6. The Court accordingly considers that the respective roles of the different services of the Commission and that of Cedefop should be reassessed in the light of the likely developments in the field of vocational training in the European Union. If the Centre is to become predominantly a technical assistance service to the Commission, then this aspect should be developed. A type of service which the Commission may consider to be of greater use could be the further development and frequent updating of the database on systems of vocational training in the Member States and on the documentation of research already carried out in Member States, thus helping to avoid Commission initiatives giving rise to duplication of existing research.

4.7. At present Cedefop is funded out of a Task Force Budget line and Cedefop's first point of contact with the Commission has always been the Task Force. This is reflected in the fact that the three Commission representatives on the Management Board (see paragraph 5.1 below) come from the Task Force. However, since actions by the Commission in the field of vocational training are not restricted to the Task Force, it would be beneficial for Cedefop to have closer relations with other relevant services of the Commission. This would be encouraged by the replacement of one of the Task Force representatives by a representative from DGV on the Management Board.

5. CEDEFOP'S MANAGEMENT 5.1. Cedefop is governed by a thirty-nine member Management Board made up of representatives of the Commission (three), employers' organizations (twelve), employees' organizations (twelve) and one representative from each EU Member state government. The Bureau of the Management Board has a quadripartite structure, with one representative from each of the four groups. The director of the Centre is appointed by the Commission from a list of candidates submitted by the Management Board for a period of five years. There are also two deputy directors appointed in the same way. The Management Board's policy is that holders of those posts should be restricted to 10 years. Since two of the three members of the directorate began to work at Cedefop on the same date, this may lead to discontinuity in the overall management of the Centre.

5.2. The role of the Commission, laid down in the basic regulation and executed by the Task Force representatives is not only to represent the interests of the Commission, or at least of the Task Force on the Management Board, but also to agree the work programme, to examine the annual report and statement of revenue and expenditure and to present the estimate of revenue and expenditure to the Council. A second point of contact with the Commission exists through DG XX's function of financial control of Cedefop's expenditure. According to article 23 of Council regulation 1416/76, all commitments and payments made by Cedefop should be checked and signed by the Financial Controller. The majority of the documents necessary for this process are mailed to DG XX in Brussels with the remainder controlled during two annual visits by DG XX to Cedefop. This system has been modified from the end of 1993 with the decision of the Financial Controller that greater use should be made of provisional commitments and imprest accounts (see paragraphs to 2.4 to 2.6).

5.3. While the basic regulation makes the Director responsible for the day-to-day administration of the Centre, overall responsibility falls to the Management Board. The latter takes decisions, adopts the work programme, the annual report, the revenue and expenditure accounts for the previous year and the estimate of revenue and expenditure for the following year. However, there are a number of constraints on the effectiveness of this arrangement. The Board is only required by the regulation to meet twice a year (21) although the members of the Bureau meet and come into contact more frequently. This means that when Board members meet, they are asked to take, or ratify, a large number of decisions in a short space of time. It is questionable whether the individual members of a Board of such size can really make a constructive contribution to the work under these circumstances.

5.4. The Commission representatives tend to be better informed than the other Board members and thus more able to take an active part in the decision-making process. The report referred to in paragraph 3.2 points to the importance of 'a thorough analysis of the requests of the partners' and of the need for the Centre to call for 'deliberations requiring both time and resources on the part of the Centre and its partners.' Cedefop's directorate is carrying out an evaluation of the expectations placed upon Cedefop. This type of evaluation should be ongoing and feed into the planning process.

5.5. Cedefop's management and administrative procedures are heavy and tightly controlled. Decisions are taken by the Bureau of the Management Board and then ratified at full Board meetings. Decisions with financial implications are controlled by DG XX of the Commission. The Financial Regulation, most of which applies to Cedefop, is very detailed for a small administration and certain provisions contribute little to sound financial management and operational efficiency. The Commission should reassess Cedefop's regulations in the light of the forthcoming move to Thessaloniki with a view to simplifying procedures and making them more suitable for an organization of Cedefop's size.

6. THE WORK PROGRAMME AND ANNUAL REPORT Annual work programme 6.1. The timetable approved by the Management Board for the preparation and adoption of the work programme commences in the Spring preceding the year in question and ends at the beginning of December of the same year. Within this cycle there is a five-month period during which the Management Board is consulted, following which there is a final coordination stage with the Task Force.

6.2. Unfortunately in recent years this timetable has not been adhered to in practice. The 1993 work programme was finally adopted in April 1993 and the 1994 programme in February 1994. If the timetable the Centre is presently aspiring to work to proves to be too ambitious then the whole process should commence at an earlier date.

6.3. The annual nature of the work programme means that the majority of the projects are scheduled to start at the beginning of the year and to finish in the last quarter of the year. However, the obligation to present annual work programmes does not make this a necessity and the Centre should consider staggering the start-up dates of projects and extending them over more than one year. This would not only allow projects to follow appropriate lifespans but also help to avoid the problems raised by late approval of the work programme. The Centre might also consider initiating the annual planning cycle in January with a request from the directorate that each Member of the Bureau should produce in March a document summarizing the suggestions of his/her interest group. The objective would be to enhance the responsibility of the members of the Board in deciding what Cedefop should do.

Action Guidelines 6.4. The Centre also produces a four-year forward planning document called 'Action Guidelines'. However, this document contains only a number of general statements about developments in vocational training in the European Union and on the direction in which the Centre is moving and gives no more than a very approximate idea of the individual and ongoing tasks that the Centre expects to undertake. The Action Guidelines should be supplemented by a pluriannual work programme which gives fuller details about the projects that the Centre expects to set up, on the short-, medium- and where possible long-term goals of the Centre. An indication of staff time needed, results and output expected and where possible, the relevant dates should also be included. The link between the annual work programmes and the Action Guidelines should be clarified for purposes of monitoring and comparison. This is especially the case for projects which span a number of years.

Estimated costs 6.5. In recent years the Centre has started to include in its annual work programmes approximative costs and an estimation of staff time required during the year for each project. However, the costs shown only indicate that part of the cost incurred from the operational budget and the salary costs of expert staff directly involved. Costs of translating, printing and administrative overheads are not included. Full costs should be included on a regular basis to allow monitoring of the work programme.

Annual report 6.6. The Management Board is obliged by 31 March each year to adopt and submit to the Commission an annual general report on the activities and financial situation of the Centre (22). The annual report must be presented to the Management Board for approval and as such is usually adopted with a minimum amount of discussion (see paragraph above). It is, moreover, difficult to ascertain from the annual report to what extent the work programme has been achieved (23). For 1993, for example, five projects or elements of projects could only be carried out in part and two were not even started. The explanation for the failure to carry out certain planned activities is not adequate and at times (project 7) non-existent.

Pluriannual assessment report 6.7. A four-year internal evaluation of the work of the Centre which is intended to match the Action Guidelines is produced for the Management Board. This contains some useful statistics on titles and numbers of publications and a broad overview of the Centre's activities. However, neither the annual nor the pluriannual report provide adequate details to allow a real assessment of the progress of the work programme to be made. Future reports should include the actual cost and achievements of all projects included in the work programme.

Deadlines 6.8. The Cedefop staff members responsible are required to provide the directorate with estimates of the dates on which they expect to complete the different stages of each project included in the work programme. In the majority of cases these deadlines are not kept and even missed by a number of months. This creates unnecessary bottlenecks of work for translation and publication staff which could be avoided with better planning. There is no evidence that the members of the Management Board question the directorate about the non-appearance, during the course of the year, of projects and publications planned in the work programme.

7. THE BUDGET AND ANNUAL ACCOUNTS The budgetary management 7.1. The Management Board of Cedefop is obliged to send the Commission by the 31 March an estimate of the Centre's revenue and expenditure for the following year. Since the procedure for drawing up the annual work programme is not yet under way at this point, the estimate is based on the (unaudited) revenue and expenditure of the previous year and on the authorized appropriations for the current year rather than on the estimated cost of planned activities. The Centre should consider preparing its annual budget and accounts in accordance with a pluriannual work programme (see paragraph 6.4 above).

7.2. In paragraphs 5.1 to 5.5 of its 1986 report, the Court suggested to Cedefop that it should consider alternative methods of budgetary presentation. Although the Centre agreed that the budgetary structure did not adequately reflect the importance of its operational activities, the structure of the Centre's budget and accounts has remained unchanged. From 1986 the schedule of expenditure broken down into five sectors of activity has been published with the Centre's revenue and expenditure account. However, the Court's suggestion that all expenditure relating to the work programme should be identified separately was not taken up. The Centre should again consider where it would be appropriate to supplement the information from the budget and revenue and expenditure account with additional analytical management information, for example, relating to study contracts and costs of projects.

7.3. In response to the Council's opinion to the Parliament in view of the 1986 discharge, to the 1988 discharge decision by the Parliament and to suggestions made by the Court, Cedefop's head of administration undertook manually a retrospective pilot exercise in analytical accounting by research objective using 1989 and 1990 data. The attempt suffered from a number of weaknesses and was abandoned following the assertion in the 1989 discharge statement by the Parliament that the information should only be made available if there was evidence that use was being made of it. Once these weaknesses have been corrected, a computerized version of analytical accounting should be reintroduced.

7.4. New article 74 to Council regulation No 1416/76 (24), as last modified by Council regulation No 1948/93, gives the European Parliament the responsibility to include in its discharge resolution '. . . an assessment of the responsibility of the Management Board's budgetary management over the past financial year . . .'. The prerequisite of good budgetary management is the availability of accurate and timely management information from which to draw up the budget, monitor the evolution of the budget and to evaluate the outturn against the estimate. In its 1992 discharge report, the Parliament asks the Court of Auditors to include in its annual reports the information necessary for such an assessment to be made. The Court thus proposes that Cedefop should establish a system of budgetary management supported by adequate cost and management information. Such information would need to include the attribution of time spent on each project, which could be supplied through the establishment of an appropriate time-recording system, as well as the allocation of all overheads to operational activities.

Monitoring the budget 7.5. The management of title 3 operational expenditure has been inadequate over the period from 1987 to 1993. The rate of utilization of appropriations relating to each year has tended to be lower for title 3 than for other titles over this period. In addition, the percentage of the commitments carried over has either equalled or been significantly higher in title 3 than in titles 1 and 2. It is further notable that the total value of the transfers made within title 3 in 1992 and 1993 has risen sharply.

7.6. The number of individuals responsible for making commitments and payments out of title 3 is far higher and the completion of the separate elements of the work programme is dependent on a greater number of contingent factors for operating than for other expenditure. The proposed system of control outlined in paragraph 7.4 above should be established at the Centre from the start of operations at Thessaloniki.

7.7. On 15 March 1993, the head of the administration proposed a system of control of the operational budget which would allow '. . . the directorate to follow closely the budgetary execution of the work programme' (25). He proposed the designation of an individual to be responsible for each service and the recruitment of an assistant to the directorate to coordinate and follow overall budgetary execution. During 1993 the flow of information to the directorate improved and an assistant to the directorate was appointed in November of that year. However, the system of budgetary control in operation has not yet proved adequate to avoid the commitment of large amounts of the budget at the year end and the carry over of 47 % of the initial budget for title 3 in 1993 (26). (See Table 1.)

Study contracts 7.8. In its 1992 discharge decision, the European Parliament also expressed an interest in Cedefop's management of study contracts. The choice of external experts effectively falls to individual members of Cedefop's staff and is based on contacts they have in the field. Cedefop study contracts generally fall below the limits of CCAM (27) rules. Nevertheless, the directorate should ensure on each occasion that relevant external experts have an opportunity to bid for work for which they are well qualified, that the choice and performance of those experts is systematically monitored and recorded; and that the results of an evaluation of each contract are documented and taken into consideration as further contracts are let.

7.9. The directorate receives financial information on a regular basis from the administration. This does not prevent a high number of payments outstanding towards the end of the year on contracts relating to the previous year (for example 33 payments outstanding on 1992 contracts at 3. 11. 1993). Furthermore, many of the study contracts are committed throughout and especially at the end of the year but carried over for execution and payment to the following year. Despite reminders from the directorate to the members of staff responsible for the contracts, the situation has deteriorated in recent years and has been exacerbated by the fact that incorrect or inadequate details are sent to the Financial Controller who is then obliged to return certain contracts and payment requests without visa. The task of monitoring Cedefop's study contracts would be facilitated by the establishment of the system outlined in paragraph 7.7 above.

8. STAFF 8.1. Cedefop staff (numbering about 70) are employed on the conditions laid down in Council regulation No 1859/76 (28). Although the rules governing the employment of staff are similar to the Staff Regulations of the European Community, members of staff at Cedefop are not Community officials and as such cannot be transferred or seconded to other institutions. In such a small institution the result has been the virtual elimination of any possibility of mobility among the professional staff. Over the period 1987-1993 only 2 A-grade staff left Cedefop's employment and by the end of 1993 half the A-grade staff were over 50 years of age.

8.2. The forthcoming transfer of Cedefop's base from Berlin to Thessaloniki and the concomitant creation of a number of new Union bodies of similar size and with similar relationships with the Commission provides an opportunity to introduce the greater flexibility into the Centre's staffing which is essential if Cedefop is to receive sufficient infusions of new blood and new ideas. This question was raised in the context of the creation of the European Training Foundation in the report by the European Parliament's Committee on budgets (29). Possible approaches include relying much more on non-renewable fixed term contracts of employment, and providing in the Staff Regulations for mobility between Cedefop and other institutions of the EU, including the new bodies soon to be established.

9. TRANSLATION 9.1. The cost of the inhouse Cedefop translation service is 1 279 600 ECU, excluding administrative overheads. Translators dedicate approximately half of their time to translating and revising documents. They also redraft poorly written documents, work and provide advice on terminology, proof-read incoming documents destined for publication and set up and manage contracts with external translators. The approximate cost per page of inhouse translation or revision according to information provided by the Centre is 71 ECU (see Table 4).

Table 4. Cost of internal and external translation

""" ID="1">2 552 > ID="2">98 > ID="3">2 650 > ID="4">263 000 > ID="5">99 "> ID="1">5 182 > ID="2">3 781 > ID="3">8 963 > ID="4">639 800 (30) > ID="5">71 "> ID="1">14 412 > ID="2">1 131 > ID="3">15 543 > ID="4">404 958 (31) > ID="5">26 "> ID="1">21 557 > ID="2">6 481 > ID="3">28 038 > ID="4">871 854 (32) > ID="5">31 "">

Use of external translators has increased in recent years. The approximate average rate paid to external translators per page of translation and revision, excluding Cedefop's administration costs is 31 ECU.

9.2. The arrival of documents for translation is uneven throughout the year. This is often the result of inappropriate planning and failure to meet deadlines. The system set up by the directorate to monitor the arrival of work for translation should be strengthened and extended to avoid peaks and troughs in translation.

9.3. Cedefop staff sign contracts with external experts who are at times required to produce their reports in one of the main Community languages, whether or not this be their mother tongue. As a consequence, it is often necessary to revise or completely rewrite the original text. Staff should be required to consider the cost implications and efficiency of this practice.

9.4. Consideration should also be given to the possibility of Cedefop making use of the new translation centre to be established in Luxembourg. Care will be needed to ensure that this new service is fully cost-effective.

10. PRODUCTION, DISTRIBUTION AND INCOME FROM PUBLICATIONS 10.1. Cedefop's major publications are produced by the Official Publications Office in Luxembourg. However, smaller, regularly distributed documents are produced in-house ('Flash') or using freelance desktop publishing and outside printers ('Flash Special'). A comparison between the latter two publications shows that the cost per page of the inhouse production is about a quarter of that incurred using outside printers.

10.2. The publications office keeps 55-60 % of sales proceeds to cover the cost of layout and printing. It also distributes approximately four-fifths of the brochures it produces for Cedefop. The cost per page of printing has more than doubled between 1987 and 1993. The improved quality of Cedefop's publications incurs high costs and Cedefop should consider the costs and benefits of high quality publications. For example, Cedefop embarked on a multi-annual task of documenting systems of vocational training in the twelve Member states. The total layout cost alone of the brochure produced for the UK was 21 000 ECU. The cost per copy produced of printing and layout comes to 17 ECU, which is not covered by the selling price of 14 ECU.

10.3. At present, Cedefop's directorate monitors expenditure on printing and distribution on an irregular basis and presents the Management Board with decisions to be taken, for example as to the number of copies to be made in each language. At the end of 1992 and 1993 large transfers were made to the budget line for printing and distribution of information (see Table 5).

Table 5: Dissemination of information

"(ECU) """ ID="1">500 000 > ID="2">242 000 > ID="3">407 053 > ID="4">81 "> ID="1">1 000 000 > ID="2">285 000 > ID="3">899 601 > ID="4">90">

The high percentage of the initial budget that was then carried over to the following year appears to reflect the fact that excess funds on title 3 are transferred at the year end to avoid cancellation and then carried over to be used up on printing. Total expenditure on printing for the year thus appears to be more a function of the availability of funds at the end of the previous year than a true reflection of project planning or cost effectiveness. Decisions on which documents are to be printed, in what form and in what number should be based on an evaluation of the magnitude and type of the estimated demand for the document.

11. CONFERENCE FACILITIES AND MEETING ROOMS 11.1. The present system of recording and analysing costs is not adequate for effective analysis, reporting and follow-up. The meetings which are internal to Cedefop should be identified separately and details of the full costs of interpretation, services and the conference operator, should be made available to management at the year end.

11.2. Article 22 of the financial provisions of the Centre provides for the re-use of receipts for the supply of goods and services. From 1992, the Centre set out a policy of charging for the use of the conference facilities. However, less than one-third of the capacity of Cedefop's six meeting rooms was filled in 1993. 'Europa', Cedefop's largest conference room with seating for 100 and an interpreting facility of 11 languages to 9 was used for a total of only 29 days in 1992.

11.3. In so far as it does not threaten to disrupt the Centre's normal work, Cedefop should seek to make optimum use of conference and meeting room facilities. In the context of the move into a new building in Thessaloniki the need for these facilities should be reassessed and costs minimized.

12. THESSALONIKI 12.1. The decision by the Council on 29 October 1993 to move Cedefop from Berlin to Thessaloniki was taken in the wider context of consideration of the location of a number of new institutions of the EU. No evaluation of the financial implications of the move or of its impact on the output and potential usefulness of the Centre appears to have been made in advance of taking this decision.

12.2. The financial sheet subsequently prepared by Cedefop at the request of the Commission estimates the one off cost of the transfer to Thessaloniki at 4 006 000 ECU. This does not take account of any redundancy, early retirement or severance payments which may need to be made to existing staff or of the once-for-all costs of recruiting and training new staff to replace those who do not move to the new location. The estimated continuing increase in current expenditure (travel costs, etc.) resulting from the move is almost covered by the expected savings of 1 Mio ECU resulting from the lower weighting on staff salaries for Thessaloniki than for Berlin.

13. CONCLUSIONS 13.1. Cedefop has improved certain of its policies and procedures over recent years in response to observations made by the Court, for example, in separating the incompatible roles of imprest-holder and accountant and correcting the budgetary nomenclature. However, a number of weaknesses remain, for example, the high volume of transfers and carry-overs and the failure to pay out up to 75 % of initial appropriations on certain budget lines.

13.2. The Court acknowledges the reasons for the decision to allow virtually all categories of expenditure to be the subject of provisional commitments and paid through the imprest account but recommends that the financial provisions should be amended accordingly. The Centre should also consider more flexible staffing arrangements in future to avoid overall reductions in expenditure resulting in a higher ratio of overhead costs to operating expenditure.

13.3. The respective roles of the different services of the Commission and that of Cedefop should be reassessed as a priority in the light of likely developments in the field of vocational training in the European Union. Particular attention will be needed to ensure that Cedefop's role is clearly distinguished from that of the European Training Foundation to be established in Turin to assist the countries of Eastern Europe and the former Soviet Union. It would be beneficial for Cedefop to develop closer relations with other relevant services of the Commission as well as the Task Force, the overall objective being to identify a distinctive role for Cedefop, which maximizes its contribution to social and economic development in the EU while avoiding duplication of work with the Commission, other EU institutions and institutions in the Member States.

13.4. The Commission should reassess Cedefop's regulations in the light of the forthcoming move to Thessaloniki with a view to simplifying procedures and making them more suitable for an organization of Cedefop's size. Appropriate arrangements will need to be included to provide for staff mobility and flexibility in staff management, taking into account the comparable arrangements made for the staff of the various new institutions soon to be established.

13.5. In improving its planning and monitoring of and reporting on the work programme, the Centre should take account of the Court's suggestions in section 6 of the present report.

13.6. Expenditure planning and budgetary management by the Centre has been inadequate. Cedefop should establish a system of budgetary management supported by adequate cost and management information from the start of operations in Thessaloniki. In its management of study contracts the directorate should apply a systematic policy to ensure that relevant experts have an opportunity to bid for the work for which they are well qualified, that the performance of external experts is monitored and recorded and that the results of an evaluation of each contract are documented and subsequently put to use. Cedefop should also examine existing systems and costs related to translation, printing and conference facilities in advance of the forthcoming move to Thessaloniki (see paragraphs 9.1-9.4, 10.1-10.3 and 11.1-11.3).

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 10 November 1994.

For the Court of Auditors

André J. MIDDELHOEK

President

(1) Council regulation (EEC) No 337/75 published on 10 February 1975. OJ L 39/1.(2) Council regulation (EEC) 1416/76, published on 1 June 1976, OJ L 164/1.(3) Council decision 93/C 323/01 of 29 October 1993, OJ C 323/1 of 30. 11. 1993.(4) Council Regulation (EEC) No 1948/93 of 30 June 1993 amending regulation (EEC) No 1416/76 published in OJ L 181 on 23. 7. 1993.(5) The decision of the Management Board of Cedefop at its meeting on 10. 12. 1993 to modify the decision of 9. 10. 1989 creating an imprest account.(6) Annual reports of the Court for 1991 and 1992.(7) Article 3 of the decision referred to in footnote (5) p. 3.(8) Article 7 of the above decision.(9) Article 43 of Council regulation (EEC) No 1416/76 of 1 June 1976 as last modified by Council regulation No 1948/93 of 30 June 1993.(10) BL 300 establishment of occupational documentation (110 000 ECU);

BL 3021 interpretation expenses (90 000 ECU);

BL 303 pilot studies and projects (415 000 ECU). (OJ L 32 of 8. 2. 1993).(11) The Court's 1992 Cedefop report, paragraph 3.5.(12) Community action programme for the development of continuing vocational training.(13) Union of Industries of the European Community.(14) European Trade Union Confederation.(15) The Mallet report.(16) Notice of invitation to tender for a study on the impact of the European Centre for the Development of Vocational Training. OJ S 238 dated 7. 12. 1993.(17) See Chapter 8 of the Court's Annual Report for 1993.(18) Article 2 of regulation (EEC) No 337/75.(19) Action programme for the vocational training of young people and their preparation for adult and working life.(20) European technical research (Community-wide network of demonstration projects in the field of new information technologies and vocational training).(21) Article 4(4) of regulation (EEC) No 337/75.(22) Article 9 of regulation (EEC) No 337/75.(23) See also paragraphs 7.7 - 7.8 of the Court's 1986 sound financial management report.(24) As last modified by Council regulation 1948/93 of 30 June 1993.(25) Note to the Directorate dated 15. 3. 1993.(26) See paragraph 2.10 of the present report.(27) Comité consultative des Achats et Marchés.(28) OJ L 214, published on 6. 8. 1976.(29) COM(94) 0021 final - C3 - 0115/94 rapporteur Mrs. Diemut Theato.(30) Total cost is 1 279 600 ECU. It is assumed that 50 % of the costs are related to translation.(31) The average of rates paid to external translators is 27 ECU per page translated and 14 ECU per page revised.(32) The average of rates paid to external translators is 35 ECU per page translated and 18 ECU per page revised.

ANNEX

CEDEFOP - FINANCIAL YEAR 1993 - UTILIZATION OF AVAILABLE APPROPRIATIONS

"(1 000 ECU) "" ID="1">1. Staff expenditure > ID="2">5 670 > ID="3">5 240 (92,4 %) > ID="4">346 (6,1 %) > ID="5">85 (1,5 %) > ID="6">87 > ID="7">66 (75,9 %) > ID="8">21 (24,1 %) "> ID="1">2. Administrative expenditure > ID="2">1 009 > ID="3">643 (63,7 %) > ID="4">196 (19,4 %) > ID="5">169 (16,7 %) > ID="6">170 > ID="7">154 (90,6 %) > ID="8">16 (9,4 %) "> ID="1">3. Operational expenditure > ID="2">5 233 > ID="3">2 335 (44,6 %) > ID="4">2 478 (47,4 %) > ID="5">420 (8,0 %) > ID="6">1 414 > ID="7">1 025 (72,5 %) > ID="8">389 (27,5 %) "> ID="1">4. Expenditure not specifically provided for > ID="2">10 > ID="3">10 (100 %) > ID="4">- > ID="5">- > ID="6">- > ID="7">- > ID="8">- "> ID="1">Total > ID="2">11 922 > ID="3">8 227 (69,0 %) > ID="4">3 021 (25,3 %) > ID="5">674 (5,6 %) > ID="6">1 671 > ID="7">1 245 (74,5 %) > ID="8">426 (25,5 %) ">

Response of the Centre's management board to the remarks of the Court of Auditors concerning the accounts and management for the financial year 1993 and sound financial management during the period 1987 to 1993

(The numbering corresponds to that in the Court's report)

The Management Board notes that contrary to the previous years the Court of Auditors report contains a number of far reaching comments. The Board considers these as an orientation for its efforts to restructure the Centre's activities and management but does not intend to enter into a detailed discussion of these comments at this point. The Board would respond as follows:

2.6. Article 43 of Council Regulation No 1416/76 on the financial provisions applying to the Centre states that imprests may be advanced for the payment of certain categories of expenditure. This clause is identical to article 54 of the financial regulation applicable to the general budget of the EC. The implementing rule hereto lays down that certain expenditure may be paid by imprest accounts because of its nature or particular urgency. It would thus appear logical to pay by imprest account expenditure covered by provisional commitments. From a formal point of view the Centre agrees with the Court that the rules applying should be amended accordingly.

2.8, 2.9, 2.10, 2.13. With the exception of the documentation service (covered by budget article 300), the Centre's operational activities consist mainly in studies or in research coordination. The planning and implementation of these activities depend on the availability of external experts and of necessary information; difficulties are compounded when, as in 1993, the Centre's annual work programme is adopted after the beginning of the year. Delays in these fields can lead to a reduction in the activities envisaged (see projects 7 and 11.1) and subsequently retard translation and publication work. It should also be borne in mind that between its conception and its implementation a project is liable to undergo changes affecting the structure of its budget and its time schedule.

All these causes concur in explaining the recurrent transfers, carry-overs and cancellations of appropriations.

2.14. The Management Board is aware that the Centre's publication policy has been questioned. This policy is presently being defined anew. The Board bears in mind the Centre's aim 'to assist the Commission in encouraging, at Community level, the promotion and development of vocational training' (article 2.1 of Council Regulation No 337/75), especially concerning the exchange of information and experiences on matters common to the vocational training systems of the Member States as mentioned in article 127.2 5th indent of the Union Treaty.

2.15. As from 1995, the Centre will include the amount provided for the Cedefop prize in Title 3.

3.2. The guidelines for forthcoming work programmes and on the future organization and training of the Centre's staff were in fact drawn up by the Management Board itself on the basis of the indication of the 'Mallet report'.

4.1. The Management Board is examining all aspects connected with the recourse to work contracts for a definite period for a limited number of posts. Past experience has shown that it is in the interest of both the Centre and the staff member that the latter should have a secure employment elsewhere on leaving the Centre so that he/she can concentrate on the work to be done while at the Centre. The difficulties in finding alternative employment in Berlin (or Thessaloniki) should not be underestimated. This consideration would have to be borne in mind also when the Centre were to envisage a more flexible personnel policy in the event of its budget being reduced.

4.4. The Management Board is aware of the difficulty in defining the present 'position' of the Centre and is examining this point. The regulation establishing the latter dates back to 1975 and defines it as 'a body independent of the departments of the Commission, but which must cooperate with them to the full'. The Centre's uniqueness results from this dependence on the Commission on the one hand and from the role of the quadripartite Management Board administering it on the other. It should also be pointed out that in the reference period the Centre's budget increased by 140 % (from MECU 4.9 in 1985 to MECU 12 in 1993) and that the system provided for under article 8 of Regulation No 337/75 avoids the Centre undertaking tasks similiar to those of the Commission.

4.5. The Management Board would point out that the Council Decisions concerning the programmes FORCE (90/267/EEC), EUROTECNET (89/657/EEC) and PETRA (87/569/EEC, modified by decision 91/387/EEC) require the Commission to avail itself of the Centre's assistance in implementing them, although the external and independent evaluation of the results of these programmes is not part of the Centre's remit. The Centre's annual work programmes include projects relating to some of these aspects, such as the 'study visits' and the 'FORCE surveys'. In fact the Commission's representatives on the Management Board have always maintained the view that the annual work programmes should reflect the point raised by the Court, namely that the Centre be associated to a greater extent with the Commission's activities and in particular with the Community action programmes in the field of vocational training so as to reinforce their complementarity.

4.6. The Management Board shares the Court's view: one of the Centre's tasks is 'to compile selected documentation relating in particular to the present situation, the latest developments and research in the relevant fields, and to matters of vocational training structures' (article 2.2, 1st indent of Regulation No 337/75). A further activity of the Centre consists in the updating of information on the vocational training systems in the Member States; a database is being set up to facilitate this task and to reduce the costs related to the production and dissemination of information.

The explanatory statement accompanying the Commission's proposal for a Council decision establishing the LEONARDO programme (COM(93) 686 final - SYN 494 of 21. 12. 1993) clearly defines the task envisaged for the Centre.

4.7. The Management Board would point out that it is for the Commission to appoint the members who are to represent it on the Board. Furthermore it should be borne in mind that in accomplishing its tasks the Centre has always established the necessary contacts with all the Commission services concerned, i.e. the Secretariat-General, DG V, DG IX, DG X, DG XIX, DG XX, DG XXIII, Task Force HRETY and the Office for Official Publications.

5.2. Recours to the imprest account is an aspect of sound financial management and control takes place when the appropriate documentation is submitted for clearance to the Financial Controller. The latter can furthermore order an inspection whenever necessary.

5.3. The Management Board endorses the Court's view and has taken the appropriate steps to ensure a regular flow of information on all budget-related matters.

5.5. The Management Board concurs with the Court but would point out that article 130 of the Financial Regulation applicable to the general budget of the EC requires that the financial rules of Community bodies having legal personality and receiving subsidies from the general budget shall correspond, as far as possible, to the provisions of the aforesaid Financial Regulation. The Centre is thus restricted in proposing changes deemed appropriate to its financial provisions.

6.2-6.7. The Court's suggestions will be taken into account in the ongoing review of the Centre's working.

6.8. In November 1993 the Centre recruited an assistant whose duties include the control of all deadlines connected with the implementation of the work programme.

7.1. The preparation of the Centre's annual budget in accordance with a pluriannual work programme can be envisaged for on-going activities. For other activities it would be possible only if all parties concerned, i.e. the social partners, the governments of the Member States and the Commission can commit themselves on a medium term basis and are prepared to accept the loss of flexibility this could imply.

7.2-7.3. Following the Court's suggestion of 1987, the Centre has since presented its expenditure broken down into five sectors of activity, in addition to the normal presentation. Additional information could be provided once analytical accounting by research objectives has been computerized.

7.4. Since 1993 the Management Board Members receive extensive budgetary information (see point 5.3 above).

7.6-7.7. The Court's suggestions will be taken into account in the ongoing review of the Centre's working.

7.8. In 1994 the number of competitive tenders has been increased and a notice was published inviting expressions of interest so as to enlarge the number of potential contractors (OJ of the E.C. No C/184 of 6. 7. 1994).

However, the Management Board would also like to stress the importance of continuity in its relations with external contractors in the light of the latters' special qualifications and experience.

7.9. The Centre will further intensify its efforts to ensure that deadlines for study contracts are kept.

8.2. The Management Board endorses the Court's view.

9.2-9.4. The Court's comments and suggestions have been noted.

10.3. Dissemination of information represents the final step of a project. Delays in the preceding phases also contribute to explain the high percentage of appropriations carried forward.

11.1. The distinction between purely internal meetings, meetings related to the implementation of the Centre's work programme and meetings of other organizations held at the Centre has been introduced from the beginning of 1994.

13.2. The Centre will ask the Commission to take the necessary steps with a view to modifying the financial procedures applying to the Centre.

13.3-13.4. The Management Board concurs with the Court.

13.5. Account will be taken of the Court's suggestions in section 6 of the report.

13.6. The appropriate steps are being taken to improve expenditure planning and budgetary management.