Report

on the financial statements of the European Centre for the Development of Vocational Training (Cedefop - Thessaloniki) for the financial year ended 31 December 1999, together with the Centre's replies

(2000/C 373/05)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Council and the European Parliament in accordance with Article 12 of Council Regulation (EEC) No 337/75(1), as amended by Council Regulation (EEC) No 1946/93(2).

2. The Court has examined the financial statements of the European Centre for the Development of Vocational Training for the financial year ended 31 December 1999. In accordance with Article 18(1) of Council Regulation (EEC) No 1416/76(3), as amended by Council Regulation (EEC) No 1948/93(4), the budget was implemented on the responsibility of the management board. This responsibility includes the drawing-up and presentation of the financial statements(5), in accordance with the internal financial provisions provided for in Articles 65, 67 and 68 of Council Regulation (EEC) No 1948/93 amending Council Regulation (EEC) No 1416/76. 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 standards and policies. 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 1999 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 CENTRE FOR THE DEVELOPMENT OF VOCATIONAL TRAINING (CEDEFOP - THESSALONIKI) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1999

Analysis of the implementation of the budget

5. Following the adoption of a supplementary and amending budget of 0,3 million euro in September 1999, definitive appropriations for the year amounted to 15,2 million euro. Of this total, 14,5 million euro (95 %) were committed and 0,7 million euro (5 %) lapsed at 31 December 1999(6).

6. Carry-overs of appropriations stood at 3,7 million euro (some 26 % of commitments) and related mainly to Title III (2,2 million euro) and Title II (1 million euro - financing of the last phase of the new Cedefop building). By way of comparison, appropriations carried over from the financial year 1998 to the financial year 1999 amounted to 3,9 million euro. Of this total, 0,6 million euro (15 %) lapsed, most of them in Title III.

Budget and general accounts

7. The Centre had planned(7) to finalise its new accounting system, FIBUS, by the end of 1999 so that it could be used from the second half of 2000 onwards. Following a specific audit of this project and pending an in-depth evaluation, the Court draws the Centre's attention to the need to test the system's capabilities thoroughly before it is actually brought into service.

Imprest accounts

8. Although far less use was made of imprest accounts than in the previous financial year(8), the Centre continued to make a significant proportion of its payments (2,6 million euro or 23 %) through these accounts in 1999. The Court calls upon the Centre to continue its efforts to make even less use of this method of payment and thus limit the associated risks.

Charging of VAT

9. Until December 1998 the general Financial Regulation required expenditure to be charged inclusive of VAT, since VAT, once it had been refunded, could be used again. Since that date(9), the general Financial Regulation has required expenditure to be charged exclusive of VAT. The Court calls upon the Centre to incorporate this new procedure into its own internal rules.

10. The Centre was not able to perform a thorough reconciliation of its applications for refunding of VAT with its accounts. Moreover, recovery orders should have been drawn up at the same time as the refund applications.

11. Operations concerning the recovery of VAT paid in 1999 began in May 2000. In the interests of sound management, it would be desirable for the preparation of these applications to be planned in such a way as to enable this VAT to be recovered as swiftly as possible.

Buildings

12. The Centre disbursed an amount of 1,2 million euro less than initially foreseen in connection with the construction of its new building due to favourable conditions (exchange rates, terms of contract). It assigned this amount to the development of additional facilities which had not been expressly planned in the agreement with the Greek authorities. Given the scale of this saving in relation to the expenditure initially envisaged for the building (6,8 million euro), the Centre should, in the interests of sound management and transparency in respect of the budgetary authority, have informed not only the Parliament but also the Council of its intentions.

Contracts

13. Two of the additional facilities referred to in paragraph 122, costing 195000 euro and 136000 euro respectively, formed the subject of contracts concluded by private treaty with the authorisation of the executive office of the management board. The nature of the work (fitting-out of a kitchen and additional security work) does not justify recourse to private treaty and the grounds given of urgency should not have been accepted, since the lack of such fittings did not affect the main use of the building. The value of both these contracts, however, exceeds the threshold (46000 euro) above which the Financial Regulation stipulates that an Advisory Committee on Purchases and Contracts must be consulted, regardless of the purchasing procedure envisaged.

14. An examination of the contracts for informatics projects revealed certain weaknesses: lack of consultation with the informatics department, lack of clarity as regards objectives and a failure to follow administrative and financial procedures and procedures for invitations to tender. Besides this, the Court's audit of the implementation of Internet-based projects showed that decisions were taken on the basis of ill-founded or irrelevant assumptions. The Centre is requested to continue its efforts to manage its informatics projects in accordance with the rules and to adapt them to the developments that have taken place since they started.

Staff

15. In 1998(10) the Court noted the absence of formal decisions by the Appointing Authority determining the financial entitlements of members of staff. In 1999 the measures announced by the Centre had not been fully implemented. Moreover, the provisions in the Staff Regulations to the effect that members of staff should be reported on at least once every two years have not been observed in certain cases.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 26 October 2000.

For the Court of Auditors

Jan O. Karlsson

President

(1) OJ L 39, 13.2.1975, p. 1.

(2) OJ L 181, 23.7.1993, p. 11.

(3) OJ L 164, 24.6.1976, p. 1.

(4) OJ L 181, 23.7.1993, p. 15.

(5) Pursuant to Article 1 of Council Regulation (EEC) No 1948/93 amending Council Regulation (EEC) No 1416/76, the accounts for all the Centre's revenue and expenditure for the financial year 1999 were drawn up on 29 March 2000 and forwarded to the Commission and the Court of Auditors. They were received by the Court on 5 April 2000. A summarised version of these financial statements is published in the tables annexed to this report.

(6) In April 2000, however, a non-automatic carry-over of 0,55 million euro was authorised, reducing the amount of 1999 appropriations actually cancelled to only 0,15 million euro.

(7) See reply to paragraph 5 of the report on the financial year 1998 (OJ C 372, 22.12.1999, p. 27).

(8) OJ C 372, 22.12.1999, paragraph 6, p. 27.

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

(10) OJ C 372, 22.12.1999, paragraphs 9 and 10, p. 27.

Table 1

Balance sheet as at 31 December 1999 and 1998

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Table 2

Revenue and expenditure account for the financial years 1999 and 1998

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The centre's replies

Paragraph 8

Following the recommendations of the Court of Auditors, Cedefop has continued its efforts to reduce even further payments from the imprest accounts; during the first nine months of 2000, such payments did not exceed EUR 20000 per month.

Paragraph 9

The Centre will draw up a memorandum on the updates and improvements to be made in its revised general financial provisions. The memorandum will be sent to the Commission so that it can present to the legislative authority any proposals it considers useful.

Paragraph 10 and 11

In 1999 the completion of the new building and the finalisation of the Fibus system created extra work for the Financial Unit, and this fact delayed full treatment of certain matters. In 2000, the necessary steps have been taken to reduce those delays and prevent their reoccurrence.

Paragraph 12

Thanks to the combined efforts of the various parties concerned (Greek Government, Commission and Cedefop), substantial savings were made during the construction of the building as originally envisaged. It was decided by common accord to earmark those sums for additional work that would help to enhance and optimise the functionality and security of the building.

The budgetary authority was kept abreast of those developments. Cedefop would stress that, while there was no formal communication, the Centre's representatives fully informed the Council about the additional work in question and the need for such work during the discussions before the Budgets Committee.

Paragraph 13

The work in question relates to equipment the need for which emerged from information that was not available at the outset. For reasons of economy, but also to make the building as functional as possible as soon as possible, Cedefop took the view that, in the special circumstances, it was preferable to proceed by direct contracting. The Bureau delivered a positive opinion on the two matters, taking the view that, technically, the additional work could not be separated from the main contract.

Moreover, Cedefop would point out that it is the Centre's financial provisions that have vested in its Management Board and Bureau the powers normally vested in advisory committees on procurements and contracts. Cedefop will raise the problems posed by that situation in the memorandum it intends to send to the Commission about revision of its financial provisions (see reply to paragraph 9).

Paragraph 14

It is inevitable that with IT projects on the scale and of the complexity of those undertaken by Cedefop, which extend over several years, teething problems arise and the rapid pace of development in the IT field quickly render the initial assumptions obsolete, which in some cases has led to errors in the management of the projects. Over the years, with the experience it has gained, and following the observations of the Court of Auditors, Cedefop has strengthened the procedures for the management and development of its IT projects and it will continue its efforts in the matter so as to optimise the results already obtained. Cedefop is keen to stress that the creation of a Contracts Management Unit in 1999, which has been systematically examining all contracts since 1 January 2000, will undoubtedly contribute to this improvement.

Paragraph 15

In 1999, Cedefop launched a review of the data relating to the staff's financial entitlements. Once the data have been validated, they will be incorporated in the individual files and the "personnel management" module of the Fibus system. Moreover, since early 2000, procedures have been in place for checking the data annually and updating them if necessary. With regard to staff reports, in 2000 Cedefop took the necessary steps to regularise the files of the staff concerned and to ensure that from the year 2000, reports on staff are made systematically every two years.