REPORT on the financial statements of the European Agency for the Evaluation of Medicinal Products (EMEA-London), together with the Agency's replies (97/C 81/03)

(For the period from 1 September 1994 to 31 December 1995)

1.1. This report is addressed to the Management Board of the European Agency for the Evaluation of Medicinal Products in accordance with Article 57 (10) of Council Regulation (EC) No 2309/93 of 22 July 1993 (1).

1.2. The Court of Auditors has examined the financial statements of the European Agency for the Evaluation of Medicinal Products for the financial years 1994 and 1995. The budget was implemented under the responsibility of the Executive Director in accordance with Article 57 (7) of Council Regulation (EC) No 2309/93. His responsibilities include the preparation and presentation of the accounts (2) in accordance with the internal financial provisions set out in Article 57 (11) of Council Regulation (EEC) No 2309/93. Article 188c of the Treaty establishing the European Community requires the Court of Auditors to audit these accounts. This report constitutes the first audit of the Agency.

1.3. The Court conducted its audit in accordance with generally accepted auditing standards in so far as they are applicable in the Community context. The Court carried out checks on the accounts and accounting records and also applied such additional auditing procedures as it considered necessary in this context. The main observations resulting from the Court's audit are presented in the second part of this report.

1.4. The financial statements for the financial years 1994 and 1995 are reliable and the underlying operations were carried out, on the whole, in accordance with the rules concerning legality and regularity.

Main observations concerning the implementation of the budget of the European Agency for the Evaluation of Medicinal Products for the financial years 1994 and 1995

The Commission subsidy

1.5. During the financial year 1995, the Agency collected the Commission's subsidy (ECU 10,1 million) without issuing the corresponding recovery orders.

Budget accounts

1.6. During the financial year, until August 1995, no journal existed to record commitments and payments. At the end of the year the Agency set up an accounting system. The Court found that this system allowed a posteriori changes to entries to be made with no subsequent record of these modifications. This lack of commitment records was responsible for spending exceeding available appropriations (contravention of Articles 29, 35 and 36 of the Agency's Financial Regulation), in spite of the Executive Director's presentation of an amending budget, which was subsequently approved by the Management Board (transfers from chapter to chapter).

Imprest accounts

1.7. Until August 1995, the Agency used an imprest account for all payments. Such use of imprest accounts does not comply with Article 45 of the Agency's Financial Regulation, which only allows this procedure in the case of certain categories of expenditure.

1.8. Furthermore, the Agency did not begin to regularize these items of expenditure until the month of September 1995. On 31 December 1995, the closure date, the sum of ECU 937 000 was awaiting regularization.

General accounts

1.9. As imprest accounts were being used, no entries in the accounts or against the budget were made until September and December 1995. This procedure is not consistent with correct accounting practices.

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 26 September 1996.

For the Court of Auditors

Bernhard FRIEDMANN

President

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(1) OJ No L 214, 24. 8. 1993, p. 1.

(2) As required by Article 57 (9) of Council Regulation (EEC) No 2309/93, the accounts for all the revenue and expenditure of the Agency for the financial year 1995 were prepared on 31 March 1996, the date on which the accounts were signed by the Executive Director of the Agency and forwarded to the Commission, the Management Board and the Court of Auditors. These accounts were received by the Court on 9 April 1996. The abridged version of these financial statements is presented in the tables annexed to this report.

THE AGENCY'S REPLIES

1.6. The commercial accounting systems available on the market do not take into account the peculiarities of the financial regulations of the Community. This is why in 1995 the agencies published a call for tender for a system suited to their needs. While waiting for the new system to be introduced, the Agency has been working with a spreadsheet system.

It is true that this system allows entries to be altered at a later date without any trace of these changes in the budget accounts. These alterations, however, do appear in the general accounts. Moreover, all the commitments, redemptions, payment orders, and so on, are classed according to the rules, with the necessary supporting documents attached as an Annex. Basically, all budget-related operations are documented.

With regard to spending beyond the limits of appropriations, suitable measures have been taken to avoid this kind of error until such time as the new accounting system is installed.

1.7. During the start-up period and before the Financial Controller had been appointed, an imprest accounting system was essential for the Agency to operate smoothly. This procedure has permitted the swift implementation of the Member States' decision to establish the Agency. From the moment the Financial Controller assumed her duties, use of the imprest account became less and less frequent and this was closed at the end of July 1995.

1.8. By 31 December 1995, 75 % of imprest payments had been settled. Even though the amount to be settled in 1996 is still considerable, the Agency has achieved satisfactory results and has done its best in difficult circumstances.