REPORT on the financial statements and management for the financial year 1996 of the European Foundation for the Improvement of Living and Working Conditions (Dublin Foundation), accompanied by the replies of the Foundation (97/C 393/02)

CONTENTS

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The financial statements of the European Foundation for the Improvement of Living and Working Conditions for the financial year 1996 1 - 4 11

AUDIT OBSERVATIONS 5 - 22 11

Introduction 5 - 7 11

Background 5 11

Scope of the audit 6 11

Financial data 7 11

Follow up of previous observations 8 - 12 11

Separation of duties 8 11

Imprest account 9 11

Transfers of appropriations between titles 10 11

Mission expenses 11 11

Study contracts 12 12

Budgetary implementation and the revenue and expenditure account 13 - 15 12

Transfer of appropriations 13 12

Carry-overs and cancellations of appropriations 14 12

Revenue 15 12

Management of health and safety 16 - 18 12

Coordination with the Bilbao Agency 16 - 17 12

Cooperation of the Foundation with DG V/F 18 12

CONCLUSION 19 - 22 12

ANNEX - Tables 1-4 14

Replies of the Foundation 17

THE FINANCIAL STATEMENTS OF THE EUROPEAN FOUNDATION FOR THE IMPROVEMENT OF LIVING AND WORKING CONDITIONS FOR THE FINANCIAL YEAR 1996

1. This report is addressed to the Council and the European Parliament in conformity with Article 16 of Council Regulation (EEC) No 1365/75 (1) as amended by Article 1 (4) of Regulation (EEC) No 1947/93 (2).

2. The Court has examined the financial statements of the European Foundation for the Improvement of Living and Working Conditions for the financial year ended 31 December 1996. In accordance with Article 1 (16) of Council Regulation (EEC) No 1949/93 (3) amending Regulation (EEC) No 1417/76 (4), the budget was implemented under the responsibility of the Administrative Board. This responsibility included the drawing up and presentation of the financial statements in accordance with the financial provisions as provided for pursuant to Article 1 (52), (54) and (55) of Council Regulation (EEC) No 1949/93 (5) amending Regulation (EEC) No 1417/76 (6). The Court of Auditors is required within the meaning of Article 188c of the Treaty establishing the European Community to examine these financial statements.

3. The Court undertook its audit in accordance with generally accepted international auditing standards, in so far as they are applicable in the Community context and, accordingly, carried out such tests of the accounting records and such other procedures as the Court deemed necessary in the circumstances.

4. In the opinion of the Court the financial statements for the financial year ended 31 December 1996 are reliable and the underlying transactions are, taken as a whole, legal and regular.

AUDIT OBSERVATIONS

Introduction

Background

5. The European Foundation for the Improvement in Living and Working Conditions (Dublin Foundation) was established by Council Regulation (EEC) No 1365/75 (7) as a satellite body of the European Community with the task of contributing 'to the planning and establishment of better living and working conditions through action designed to increase and disseminate knowledge likely to assist this development`. The Dublin Foundation commenced operations in 1976.

Scope of the audit

6. The Court of Auditors has examined the accounts and financial management of the Dublin Foundation for the financial year 1996 in accordance with the provisions of the relevant regulations (8). A review of the cooperation with the European Agency for Health and Safety at Work in Bilbao and Directorate-General V of the Commission in the area of health and safety was also carried out.

Financial data

7. Tables 1 and 2 summarize the financial statements of the Foundation. Available appropriations for the financial year 1996 amounted to ECU 13,8 million. Commitments entered into gave rise to ECU 10,5 million in payments and ECU 3,1 million in carry-overs to the financial year 1997, the balance of ECU 0,2 million having been cancelled. Appropriations carried over from the previous year gave rise to ECU 2,9 million in payments and ECU 0,1 million in cancellations. Table 3 attached to this report gives an analysis by title of the utilization of the appropriations for the year and for those carried over from 1995.

Follow up of previous observations

Separation of duties

8. There is still an inadequate separation of duties between the authorizing officer and the accounting officer (9), contravening Article 1 (15) of Council Regulation (EEC) No 1949/93 amending Regulation (EEC) No 1417/76.

Imprest account

9. Last year the Court recommended that the use of the imprest account be limited to ongoing or small expenses, where the risk of irregularities is comparatively low. At the time of the audit in April 1997 a written definition of ongoing and small expenses still had not been established by the Foundation in consultation with the Financial Controller.

Transfers of appropriations between titles

10. The Court welcomes the fact that no transfers of appropriations between titles were made during 1996. The Court has criticized such transfers in previous years (10).

Mission Expenses

11. Some improvements have been made to strengthen the controls and monitoring of the results of missions. The Foundation should continue its efforts so as to ensure that:

- for all missions a report stating the times of meetings, persons met and the results of the meeting is prepared. The report should be reviewed by a senior member of staff and filed centrally,

- wherever possible, more than one meeting should be arranged during a mission to Brussels in order to avoid the same staff member going to Brussels on successive weeks,

- other means of communication, including teleconferencing, should be seriously considered, especially when communicating with persons in Brussels already well known.

Study contracts

12. The audit team of the Court followed up last year's observation regarding delays in the submission of work by contractors. The minutes of the programme management meetings did not contain any evidence of a review of report deadlines. A summary of the information supplied by the Foundation during the audit is shown in Table 4 and demonstrates the need for a formalization of follow-up procedures.

Budgetary implementation and the revenue and expenditure account

Transfer of appropriations

13. The value of transfers of appropriations between different budget lines in 1996 was ECU 1 366 000 (9,9 % of appropriations entered into the budget), down from ECU 1 494 000 (11,9 %) in 1995.

Carry-overs and cancellations of appropriations

14. Table 3 shows that the payment rate is 76 % for the account as a whole, but only 55 % for Title 3 'operating expenditure`. This is in line with previous years and is due to the fact that studies are usually paid in three instalments over the period foreseen in their contracts.

Revenue

15. The EU subsidy for the Foundation for 1996 was ECU 13,4 million. The amount actually requested and received was ECU 12 895 632. The funds were requested as required by the Council Regulations and in line with a cash flow forecast, as previously recommended by the Court.

Management of health and safety

Coordination with the Bilbao Agency

16. The European Agency for Health and Safety at Work in Bilbao commenced its activities in September 1996. 'Health and safety` was in the Foundation's programme of work for 1996, but was replaced in the programme of work for 1997 with 'Health and well-being`. There is an urgent need for a clear and detailed Memorandum of Understanding (currently being negotiated) to be agreed on by both satellite agencies. This should maximize cooperation and exclude any overlap in activities.

17. Formal contacts already exist at administrative level, notably through both directors attending the other's Administrative Board meetings as an observer. Links need to be extended to the research manager level in order to ensure full coordination.

Cooperation of the Foundation with DG V/F

18. Directorate F of DG V, 'Public Health and Safety at Work`, makes use of some of the Foundation's research within this specialized field. Whilst maintaining the present independence of the Foundation's Administrative Board, there is a need to make more effort to ensure that its output is as useful as possible to DG V/F in terms of content and timing. DG V/F is unable to attend all meetings concerning specific study contracts. It would therefore be useful to hold periodic meetings at which the whole range of studies which may concern DG V/F can be discussed.

Conclusion

19. There is an inadequate separation of duties between accounting officer and authorizing officer (see paragraph 8).

20. The use of the imprest account should be regularized (see paragraph 9).

21. Controls over mission expenditure and the monitoring of study contracts should be tightened (see paragraphs 11 and 12).

22. Cooperation and communication with the Bilbao Agency and DG V/F in the fields of 'Health and safety at work` and 'Health and well-being` should be strengthened (see paragraphs 16 to 18).

This report was adopted by the Court of Auditors in Luxembourg at the Court's meeting of 12 and 13 November 1997.

For the European Court of Auditors

Bernhard FRIEDMANN

President

(1) OJ L 139, 30. 5. 75, p. 1.

(2) OJ L 181, 23. 7. 93, p. 13.

(3) OJ L 181, 23. 7. 93, p. 26.

(4) OJ L 164, 24. 6. 76, p. 16.

(5) Council Regulation (EEC) No 1365/75 of 26 May 1975 published on 30 May 1975 (OJ L 139, 30. 5. 1975).

(6) Council Regulation (EEC) No 1365/75 of 26 May 1975 (OJ L 139, 30. 5. 1975) on the creation of the Foundation, as amended by Council Regulation (EEC) No 1947/93 of 30 June 1993 (OJ L 181, 23. 7. 1993).Council Regulation (EEC) No 1417/76 of 1 June 1976 (OJ L 164, 24. 6. 1976) on the financial provisions applying to the Foundation, as amended by Council Regulation (EEC) No 1949/93 of 30 June 1993 (OJ L 181, 23. 7. 1993).

(7) Dublin Foundation annual report 1995, paragraph 8.

(8) Dublin Foundation annual report 1995, paragraph 10 and Dublin Foundation annual report 1994, paragraph 3.2.

ANNEX

TABLE 1 BALANCE SHEET AT 31 DECEMBER 1996

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Source: Prepared by the Court on the basis of data provided by the Dublin Foundation.

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REPLIES OF THE EUROPEAN FOUNDATION FOR THE IMPROVEMENT OF LIVING AND WORKING CONDITIONS

Separation of duties

8. The Foundation would ask the Court to note that the two functions of authorizing and accounting officers are carried out separately by different individuals: a residual problem of separation of duties is limited to data input to the accounting system. This problem will be resolved when the Foundation obtains delivery of a new system. The Foundation is in contact with the Commission services with regard to the feasibility of the application of the Commission's Sincom 2 system to the Foundation's accounting requirements.

Imprest account

9. During 1996 the Foundation's use of the imprest account was, in practice, in accordance with the recommendation of the Court, limited to ongoing or small expenses. The Foundation, in June 1997 in consultation with the Financial Controller, established a written definition with regard to these expenses.

Mission expenses

11. In 1996, the Foundation further developed existing procedures with regard to mission reports. This process will continue and will incorporate the suggestions of the Court. The Foundation continually seeks to accommodate the optimum number of meetings during a particular mission. The Court's comments regarding missions to Brussels are, however, noted.

Following the successful completion of a pilot scheme during 1996 the Foundation has now installed a tele-conferencing facility. It is intended to review the utilization of this facility at the end of a trial period at which time further decisions will be taken, based on a cost analysis, regarding the value of acquiring more extensive and sophisticated video-conferencing equipment.

Study contracts

12. Although the minutes of the programme management meetings have not recorded the situation on specific contract deadlines, such discussions on each contract take place at every meeting and appropriate action is taken. With regard to such recording the Foundation is now establishing an improved system for formalization of follow-up procedures in order to present a more realistic picture of the situation.

Coordination with the Bilbao Agency

16. The memorandum of Understanding currently under consideration is regarded as a priority item by the Foundation. The establishment of links at research-manager level has also commenced. These will be intensified in line with any increase in activities undertaken by the Bilbao Agency.

Cooperation of the Foundation with DG V/F

18. The Foundation is very cognisant of the need for its output to be relevant to the work of DG V. The Commission is represented on the Foundation's Administrative Board by the Deputy-Director-General of DG V. Various forms of working relations have been established with the Directorates of DG V, including mutual participation in working groups as appropriate. Specifically through the office of the Director of DG V/F the Foundation has regular contacts with officials in the various units within DG V/F. Presentation of aspects of the Foundation's work to DG V officials is provided for within the Foundation's operational activities. The Advisory Committee on Safety and Health at Work in Luxembourg is also kept informed of the Foundation's programme and its results. More generally there is a flow of relevant documentation from the Foundation to DG V in relation to the results of the work programmes. The Court's acknowledgement that DG V/F is frequently unable to attend meetings relating to specific study contracts is noted. The Foundation is fully open to alternative proposals from DG V/F with regard to utilization of the Foundation's output.