Report

on the financial statements of the European Training Foundation (ETF - Turin) for the financial year ended 31 December 1999 together with the Foundation's replies

(2000/C 373/06)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Governing Board of the European Training Foundation, in accordance with Article 11(4) of Council Regulation (EEC) No 1360/90(1).

2. The Court has examined the financial statements of the European Training Foundation for the financial year ended 31 December 1999. In accordance with Article 11(1) of Council Regulation (EEC) No 1360/90, the budget was implemented on the responsibility of the Director. This responsibility includes the drawing-up and presentation of the financial statements(2) in accordance with the internal financial provisions, as provided for in Article 12 of Council Regulation (EEC) No 1360/90. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to examine these accounts.

3. The Court carried out its audit in accordance with its auditing policies and standards. These have been adapted from generally accepted international auditing standards to reflect the specific characteristics of the Community context. Accordingly, the Court carried out such tests of the accounting records and 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 TRAINING FOUNDATION (ETF - TURIN) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1999

Implementation of the budget

5. Of the total final appropriations of 16,2 million euro for the financial year 2000, the Foundation utilised 13,3 million euro (82 %) during the year, 2,9 million euro (18 %) was automatically carried over to the financial year 2000 and 0,06 million euro (0,4 %) was cancelled at 31 December 1999.

6. The bulk of the expenditure for the financial year consisted of staff expenditure (10,2 million euro) and administrative expenditure (0,9 million euro). Carry-overs to the next financial year related primarily to the Foundation's operating appropriations: these stood at 2,3 million euro, or almost 50 % of the allocation for the corresponding title (see also paragraph 8 below).

7. Almost all the appropriations that were automatically carried over from 1998 to 1999, totalling 3,5 million euro, were utilised as regards Titles 1 and 2 of the budget (staff expenditure and administrative expenditure) and, to a lesser extent, as regards operating appropriations, in respect of which 0,3 million euro of the 2,2 million euro carried over was cancelled on 31 December 1999.

Financial regulation

Budgetary procedure

8. Article 10(4) of the Regulation establishing the Foundation(3) lays down that "the governing board, after receiving the advice of the Commission, shall adopt the budget of the Foundation at the beginning of each financial year, adjusting it to the several contributions granted to the Foundation and to its other resources." In practice, the implementation of this provision means that the budget for each financial year is formally adopted, at the earliest, in the middle of the first quarter of the financial year in question. Since the work programme has to be adopted at the same time, launches of projects financed from operating appropriations are delayed and, given the time it takes to conclude contracts (search for partners, preliminary studies, referral to the advisory committee on procurements and contracts, etc.), many are not signed until the very last weeks or, even, the very last days of the financial year, purely in order to commit appropriations which would otherwise lapse on 31 December.

9. This is a persistent problem, on which the Court has already commented in its previous annual report concerning the Foundation(4), and to which a procedural or regulatory solution must swiftly be found, so that the Foundation can implement its work programme from 1 January of each financial year.

Presentation of the financial statements

10. As was the case in 1998(5), the Foundation did not publish its budget and organisation chart in the Official Journal of the European Communities and, at its own initiative, chose to make available certain items of information relating to the budget on its Internet site instead. The Court considers that this arrangement is not in accordance with Article 13 of the Financial Regulation applicable to the Foundation.

11. In its 1996(6), 1997(7) and 1998(8) annual reports concerning the Foundation, the Court drew attention to the management of Phare, Tacis and Tempus subsidies which the Foundation managed outside its budget, and which totalled approximately 330 million euro for the financial year 1999. The balance of 80,5 million euro at 31 December 1999, held in around sixty bank accounts and available to the Foundation for managing these subsidies, does not appear in the Foundation's financial statements.

Personnel management

12. Staff financial entitlements are rarely established by way of formal and reasoned decisions taken by the Authority empowered to draw up employment contracts.

13. Individual documents do not always contain the information essential for establishing or calculating entitlements, which are, moreover, not systematically reviewed by the administrative departments. As a result certain benefits may be paid without having been justified.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 27 September 2000.

For the Court of Auditors

Jan O. Karlsson

President

(1) Council Regulation (EC) No 1572/98 amending Regulation (EEC) No 1360/90, OJ L 206, 23.7.1998, p. 1.

(2) As required by Article 11(3) of Council Regulation (EEC) No 1360/90, the detailed accounts for all the Foundation's revenue and expenditure for the financial year 1999 were drawn up on 19 May 2000 and forwarded to the Foundation's Governing Board, the Commission and the Court of Auditors. These accounts were received by the Court on 29 May 2000. A summarised version of these financial statements is presented in the tables attached to this report.

(3) OJ L 131, 23.5.1990, p. 4.

(4) OJ C 372, 22.12.1999, paragraphs 13 - 14, pp. 33 - 34.

(5) OJ C 372, 22.12.1999, paragraph 6, p. 33.

(6) OJ C 393, 29.12.1997, paragraph 1.11, pp. 41 - 42.

(7) OJ C 406, 28.12.1998, paragraph 1.5, p. 38.

(8) OJ C 372, 22.12.1999, paragraph 5, p. 33.

Table 1

Balance sheet at 31 December 1999 and 31 December 1998

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Table 2

Revenue and expenditure account for the financial years 1999 and 1998

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The foundation's replies

Approval of the Work Programme and the Budget by the Governing Board in the first trimester (Points 8 and 9)

We agree that the approval of the Foundation's Work Programme and related budget only in the middle of the first trimester results in many contracts only being signed at the end of the year. The Foundation agrees that this situation should be corrected urgently. The Foundation has agreed, therefore, with the European Commission (which chairs the Governing Board) that in future the annual Work Programme and related budget will be presented for adoption in the autumn meeting of the Governing Board preceding the year in question. The 2001 Work Programme and 2001 budget will be presented to the Governing Board for adoption in November 2000.

Publication budget on Internet instead of the Official Journal (Point 10)

Since 1998 the Foundation has published its budget in full on the Internet with the full support of the European Commission and the European Parliament. The Foundation believes that publication on the Internet reaches a wider public than publication in the Official Journal and that this has led to increase access and transparency for the European citizen. This action is clearly in the spirit of Article 13 of the Financial Regulations. Bearing in mind the continuing budgetary constraints, publication of the budget in full on the Internet only guarantees a significant saving for the Foundation.

Phare, Tacis and Tempus subventions (Point 11)

With regard to the balance of EUR 80,5 million, the Foundation has to keep separate from the general subsidy the monies it handles on behalf of the Commission. Individual financial reports are kept for all conventions with related bank balances for each.

Personnel Management (Points 12 and 13)

Although financial rights of ETF staff are correctly calculated and certified by supporting documents, in the past entitlement was checked by the Personnel Unit. The Foundation agrees that a more formal procedure should be introduced. In future the Foundation will do this by means of a Determination of Financial Rights Form, which will be signed by the Authority entitled to conclude employment contracts (in this case the Director).

Individual files contain all the necessary information for the determination or calculation of rights granted, except the Contract of Employment and any Amending Clauses, the latter having been filed in a different archive. The transfer of the Contracts to the individual files is ongoing and will be completed by the end of July 2000. Furthermore, the Determination of Financial Rights Form mentioned above will be used to review systematically, on a yearly basis, the permanence of the justifications for the financial rights granted.