REPORT ON THE ACCOUNTS AND MANAGEMENT FOR THE FINANCIAL YEAR 1994 OF THE EUROPEAN CENTRE FOR THE DEVELOPMENT OF VOCATIONAL TRAINING (CEDEFOP - BERLIN), ACCOMPANIED BY THE REPLY OF THE CENTRE

(95/C 354/01)

TABLE OF CONTENTS

Paragraph reference

Page

INTRODUCTION

1.1 - 1.5

2

Background

1.1

2

Scope of the audit

1.2

2

Transfer of the Centre to Thessaloniki

1.3 - 1.5

2

GENERAL OBSERVATIONS AND OBSERVATIONS CONCERNING BUDGETARY IMPLEMENTATION

2.1 - 2.8

2

Financial data

2.1

2

Separation of duties

2.2

2

Imprest account

2.3

2

Transfers of appropriations

2.4 - 2.5

2

Carry-overs and cancellations of appropriations

2.6 - 2.8

3

OBSERVATIONS CONCERNING THE REVENUE AND EXPENDITURE ACCOUNT AND THE BALANCE SHEET

3.1 - 3.9

3

Revenue

3.1

3

Expenditure

3.2 - 3.6

3

Balance sheet

3.7 - 3.9

4

CONCLUSION

4.1 - 4.3

4

ANNEX

5

Reply of the Centre's management board

6

1. INTRODUCTION

Background

1.1. The European Centre for the Development of Vocational Training (Cedefop) was established by Council Regulation (EEC) No 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. In 1994 the Court carried out a financial audit of the 1993 accounts and examined sound financial management over the period 1987 to 1993. In 1995 the scope of the Court's work was limited to a financial audit of the 1994 accounts.

Transfer of the Centre to Thessaloniki

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 (Council Decision 93/C 323/01 of 29 October 1993 (OJ No C 323, 30. 11. 1993, p. 1)).

1.4. The transfer to Thessaloniki is foreseen for September 1995. The permanent headquarters for Cedefop are not yet constructed, but the Greek authorities have made a building available on a temporary basis up to 1997/98 for a monthly rent of ECU 22 000. The one-off cost of the transfer to Thessaloniki is estimated at approximately ECU 4 000 000. Half of this amount is included in the 1995 budget.

1.5. At the time of the audit (May 1995) and according to information gathered by the Court 28 persons were willing to relocate to Thessaloniki, 16 persons had not yet decided and 18 persons had already decided that they were unwilling to leave Berlin. As 14 members of staff have already left Cedefop, many new members of staff will have to be recruited during 1995/96. This is likely to have a substantial impact on the operations of Cedefop in 1995 and 1996.

2. GENERAL OBSERVATIONS AND OBSERVATIONS CONCERNING BUDGETARY IMPLEMENTATION

Financial data

2.1. Available appropriations for the financial year 1994 amounted to ECU 11,10 million. Commitments entered into gave rise to ECU 8,08 million in payments and ECU 2,45 million in carry-overs to the financial year 1995, the balance of ECU 0,57 million having been cancelled. Appropriations carried over from the previous financial year gave rise to ECU 2,65 million in payments and ECU 0,37 million in cancellations. Annex 1 to this report gives an analysis of the utilization of the appropriations for the financial year in question as well as of those carried over from 1993.

Separation of duties

2.2. At the beginning of 1994 a part-time assistant accounting officer and a part-time assistant imprest-holder were recruited. The observation (2) made by the Court in previous reports have been complied with.

Imprest account

2.3. Payments carried out through the imprest account procedure and therefore without the prior authorization of the Financial Controller accounted for 57,8 % of final appropriations for 1994. A slightly higher proportion than the 55,1 % recorded in 1993. Nearly 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.

Transfers of appropriations

2.4. The total of transfers of appropriations between different budget lines (titles, chapters, articles and items) carried out in 1994 amounted to ECU 1 211 000, or 10,9 % of the initial budget, as against 8,4 % in 1993 and 6,7 % in 1992. Within title 1 (Staff), 4,9 % of appropriations were transferred (ECU 542 000); within titles 2 and 3 the proportion of appropriations transferred was ECU 194 000 (1,8 %) and ECU 475 000 (4,3 %) respectively. A third of the total amounts transferred (ECU 399 000) was transferred in the last two months of 1994 as compared with 83 % in 1993. The extent of transfer activities indicates that the work programme was not executed as planned.

2.5. The Council Regulation (3) does not provide for transfers between titles. However, the Management Board proposed and the Commission approved 10 transfers with a total amount of ECU 282 000 from one title to another.

Carry-overs and cancellations of appropriations

2.6. The practice of carrying over high values of appropriations, already observed in previous years, has continued in 1994. Nearly 73 % of final appropriations for 1994 were paid out in 1994 as compared with 69 % in 1993. The percentage of commitments made and carried over to 1995 was 23 % (25 % in 1993). The percentage of cancellations was 5 % as opposed to 6 % in 1993. Table 1 shows the carry-overs from the 1994 initial budget by title and their subsequent use in 1995.

>TABLE>

2.7. Thirty-six percent of administrative expenditure was carried over to 1995 from the 1994 budget as compared with 19 % in the previous year. While this increase is partly due to the postponement of expenditure in view of the imminent move to Thessaloniki, it raises questions about the realism with which expenditure is planned.

2.8. Carry-overs for operating expenditure amounted to 40 % of initial appropriations, as against the 1993 figure of 47 %. Since 3 % of appropriations for operating expenditure were cancelled, this means that the Centre paid out only 57 % of its operational budget in 1994. At the end of the first quarter of 1995, only 44 % of the 1994 title 3 carry-overs had been paid out.

3. OBSERVATIONS CONCERNING THE REVENUE AND EXPENDITURE ACCOUNT AND THE BALANCE SHEET

Revenue

3.1. The Commission paid out the subsidy due from the general budget of the Communities for the financial year 1994 in three tranches: ECU 2 500 000 was paid out on 23 March 1994, ECU 2 600 000 on 5 May 1994 and ECU 5 900 000 on 9 September 1994. The Court repeats the observation it made in its previous reports (4), namely that this mode of payment does not comply with Article 26 of the financial provisions applicable to the Centre, which require payment to be made by the 15th day of each quarter and in accordance with actual requirements.

Expenditure

3.2. There were significant increases of commitments on several budget lines (see Table 2):

>TABLE>

3.3. There were significant decreases in commitments in the operational budget (title 3), notably on the five budget lines shown in Table 3:

>TABLE>

3.4. Not all of these increases and decreases are explained by the lower activity during 1994 due to the forthcoming removal to Thessaloniki.

3.5. An official was paid an installation allowance equal to two months' basic salary, on the basis of Article 20 of the Staff Regulations. This was done without evidence of his removal from Thessaloniki.

3.6. Article 46 of Council Regulation (EEC) No 1948/93 amending Council Regulation (EEC) No 1416/76 stipulates that contracts may be made by direct agreement where the contract involves an amount not exceeding the limit of ECU 10 000. On several occasions, contracts over that limit were made without following the tendering procedure as described in Article 45 of the abovementioned Regulation.

Balance sheet

3.7. Fixed assets of ECU 1,3 million as recorded in the balance sheet represent the value of materials and furnishings at historic cost. The realizable value is unlikely to correspond with the value shown in the balance sheet, if these assets are sold due to the move to Thessaloniki.

3.8. The entry under amounts due from the previous financial year on the balance sheet includes an outstanding debt relating to an invoice issued in 1991. Unless Cedefop has reason to expect that this amount will be recovered, it should be written off. The management should consider whether Cedefop's procedures for reviewing amounts due and following-up outstanding debts need to be reviewed.

3.9. At the year end cash balances held by the Centre were ECU 3,3 million, the Centre having received its last payment of ECU 5,9 million from the Commission at 9 September. The Centre thus takes the responsibility for managing large cash balances, a responsibility for which it has little of the necessary expertise. This situation should be avoided and the Centre should make its quarterly drawings from the Commission more closely in line with its actual cash needs.

4. CONCLUSION

4.1. Imprest accounts are increasingly being used.

4.2. The Council Regulation does not provide for transfers between titles. However, the Management Board proposed and the Commission has approved them.

4.3. The Court repeats the observation made in its previous reports, namely that payments from the Commission to the Centre do not comply with the financial provisions applicable. As a result the Centre often holds large cash balances. This situation could be avoided by making quarterly drawings from the Commission more closely reflect actual cash requirements.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 30 November 1995.

For the Court of Auditors

André J. MIDDELHOEK

President

(1) Council Regulation (EEC) No 337/75 published on 10 February 1975 (OJ No L 39, p. 1).

(2) Annual Reports of the Court for 1991, 1992 and 1993.

(3) Council Regulation (EEC) No 1416/76 of 1 June 1976, as amended by Regulation (EEC) No 1948/93 of 30 June 1993.

(4) Annual Reports of the Court for 1990, 1991 and 1992.

ANNEX

>TABLE>

REPLY OF THE CENTRE'S MANAGEMENT BOARD

In 1995 the scope of the Court's work was limited to a financial audit of the 1994 accounts. The Board can therefore react briefly and would respond as follows.

1.3. The information in this paragraph might be completed with the formal decision of the Council of Ministers (15 May 1994) that the seat of the Centre as from 1 September 1995 is Thessaloniki. The Council, encouraged by the European Parliament and the Economic and Social Committee, asked for adequate social accompanying measures.

At the proposal of the Commission, the Council decided to give the permanent staff of Cedefop the opportunity to become officials (CE 251/95). The Management Board of the Centre accepted the framework agreement with social measures concluded between the Director and the staff and decided on 27 January 1995 that as from 1 September 1995 Cedefop will be de facto in Thessaloniki.

1.5. At the time of the transfer 35 persons engaged by the Centre relocated with the Centre to Thessaloniki, together with two translators from the Economic and Social Committee, with which the Centre had made a 'practical exchange', three officials were appointed to run Cedefop's office in Brussels and assure optimal cooperation with the European Commission and the Centre's other partners there.

For five officials the lieu d'affectation was changed to Brussels, for four to Luxembourg in order to give them the opportunity to be integrated in the Commission services (seeking mobility) and still work on the Centre's Work Programme. Two further officials moved to Turin and Paris. Seventeen persons remained in Berlin for personal and/or social reasons and favour the measures of the framework agreement. The Commission has outlined an early retirement scheme for which 17 persons are eligible. The application of these social measures will be very helpful in solving some difficult cases definitively.

2.1. The Management Board invited the Director to take the necessary steps to avert this situation in the coming years.

2.3. Extended use of the imprest account was made at the request of Financial Control for reasons relating to the cost/benefit ratio. The earlier system entailed substantial courier costs and resulted in delays. It also meant that Financial Control had to step in more frequently.

The application of the imprest account for all expenditure which may give rise to provisional commitments limited the costs of management and shortened delays.

2.4. The Management Board agrees that the volume of transfers of appropriations was too large. The plans for the transfer to Thessaloniki and the arrival of the new Director and a new Deputy Director were main causes for the transfers. Decisions on major investments in new technology are also responsible to a great extent.

2.7. The Management Board undertakes to plan expenditure more realistically and to execute the work programme more in line with the budget. For 1996 a control of the parallel execution of the budget and work programme will be set up. This will be linked to an advanced management information system. The Management Board reaffirms again the Court's view and has taken the appropriate steps to ensure a regular flow of information on all budget-related matters.

3.1. The Commission acknowledges that it was not in a position in 1994 to comply with the provision concerning transfer of the grant by quarterly instalments during the first two weeks of the quarter. It has taken the necessary steps to conform in future with this provision. Except for the transfer of the first instalment (payment registered by the Commission on 30 January), for which it is necessary to secure the commitment on the subsidy, in 1995 the Commission ordered payment to Cedefop so that the funds arrived at the Centre in the first two weeks of the quarter (registration of payment for the second quarter on 10 April, for the third quarter on 21 June and for the fourth quarter on 27 September).

3.5. Although the Centre executed the payments in conformity with Staff Regulations, it will investigate the question.

3.7. This question will be taken into account in relation to the transfer to Thessaloniki.

3.8. The Management Board concurs with the Court.

3.9. The Management Board invited the Director to take the necessary measures within his competences to circumvent the situation in the coming years.