Report

on the financial statements of the European Foundation for the Improvement of Living and Working Conditions for the financial year 2001, together with the Foundation's replies

(2002/C 326/08)

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 16 of Council Regulation (EEC) No 1365/75(1), as amended by Article 1(3) of Council 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 2001. In accordance with Article 18 of Council Regulation (EEC) No 1417/76(3) as amended by Article 1(16) of Council Regulation (EEC) No 1949/93(4), the Foundation's budget was implemented under the responsibility of its Administrative Board. This responsibility includes the drawing up and presentation of the financial statements(5), in accordance with the internal financial provisions provided for under Articles 65 to 68 of Council Regulation (EEC) No 1417/76 as amended by Article 1, paragraphs (52) to (55) of Council Regulation (EEC) No 1949/93. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to examine these accounts.

3. The Court undertook its audit in accordance with its audit 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. Through this audit, the Court obtained a reasonable basis for the opinion expressed below.

4. This examination has allowed the Court to obtain reasonable assurance that the accounts for the financial year ended 31 December 2001 are reliable and that the underlying operations are, taken as a whole, legal and regular.

MAIN OBSERVATIONS

Implementation of the budget

5. The implementation of the appropriations for the financial year 2001 and of the appropriations carried over from the previous financial year is shown in Table 1(6).

6. The appropriations available(7) for the financial year amounted to 18,9 million euro, of which 15,3 million euro had been granted for the financial year 2001 and 3,5 million euro had been carried over from the previous financial year.

7. Of the appropriations for the financial year 2001, 15,2 million euro were committed and disbursed in payments amounting to 11,6 million euro. The balance of the appropriations was either carried over (3,5 million) or cancelled (0,2 million). Of the operating appropriations (Title III), which totalled 6,4 million euro, 6,3 million euro were committed, of which 3,1 million were paid out and 3,1 million had to be carried over to the following financial year. The balance was cancelled. The carry-over rate for operating appropriations remains very high and demonstrates the need for the Foundation to improve the quality and monitoring of its programming of activities. The Foundation should do everything possible to reduce the carry-over rate in respect of its appropriations in order to improve its compliance with the budgetary principle of annuality.

8. The appropriations carried over from the previous financial year totalled 3,5 million euro, 3,2 million of which related to Title III. These appropriations were disbursed in payments amounting to 3,4 million euro, 3,1 million of which related to Title III, and the balance was cancelled.

Financial statements

9. The revenue and expenditure account and the balance sheet published by the Foundation in its activity report for the financial year 2001 are presented in summary form in Tables 2 and 3. The presentation of these financial statements in the Foundation's activity report for 2001 deviates from the norms set out in the regulations(8). Although these problems have no impact on the reliability of the financial statements, the Foundation should make sure it returns to the usual practices.

10. The Foundation makes no attempt to depreciate its fixed assets. It ought to take depreciation into account when evaluating the fixed assets entered in its balance sheet and follow the instructions concerning inventories in the Commission Regulation(9). It should improve its inventory system by developing a system of identification for its assets and defining the particular responsibilities of the departments involved.

Implementation of financial provisions

11. A sample of 34 payments which were received or were to be received by the Foundation during the financial year 2001 was examined. For these payments, which were entered for the financial year 2001, recovery orders were issued in February and March 2002. Only 10 of these orders had been validated by the Financial Controller and eight, including one for 1231286 euro, had still not been carried out by 31 January 2002. This infringes Article 5 of the Foundation's Financial Regulation.

12. In several instances, most notably one concerning the purchase of a vehicle, one and the same person was able to approve the commitments and payments, using the electronic approval system, thus discharging the duties of the manager, the authorising officer, the financial controller and the accounting officer. This practice should be strictly prohibited as it is incompatible with the principle of the separation of duties.

13. The Foundation concluded a contract with a travel agency in November 1997 for a trial period of one year. This contract has been renewed by tacit agreement until now. It would be preferable if market-testing were carried out to see if more favourable conditions could be obtained.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 25 and 26 September 2002.

For the Court of Auditors

Juan Manuel Fabra Vallés

President

(1) OJ L 139, 30.5.1975, p. 1.

(2) OJ L 181, 23.7.1993, p. 13.

(3) OJ L 164, 24.6.1976, p. 16.

(4) OJ L 181, 23.7.1993, p. 26.

(5) As required under Article 16 of Council Regulation (EEC) No 1365/75, as amended by Regulation (EEC) No 1947/93, the accounts for all the Foundation's revenue and expenditure for the financial year 2001 were drawn up on 26 March 2002 and forwarded to the Foundation's Management Board, the Commission and the Court of Auditors. These accounts were received by the Court on 8 April 2002. A summarised version of the financial statements is presented in the annex to this report.

(6) All the tables in this report have been drawn up on the basis of the most exact values possible of the data used. For presentation purposes, the figures have been rounded up or down, which may give rise to minor differences in the totals. A dash indicates a non-existent or nil value and 0,0 indicates a value below the rounding threshold.

(7) Non-differentiated appropriations.

(8) In the financial statements presented by the Foundation in its activity report, an adjustment was made, outside the revenue and expenditure account, in 2001, in respect of the negative balance observed in 2000 (1210000 euro). In addition, the balance sheet published by the Foundation is understated by 26047 euro on account of failure to take into account an advance on a salary and recovery orders.

(9) Commission Regulation (EC) No 2909/2000 of 29 December 2000 (OJ L 336, 30.12.2000, p. 75).

Table 1

Implementation of the budget for the financial year 2001NB:

Any discrepancies in totals are due to the effects of rounding.

Source:

Data compiled by the Foundation - These tables summarise the data provided by the Foundation in its own financial statements.

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Table 2

Revenue and expenditure account for the financial years 2001 and 2000

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NB:

Any discrepancies in totals are due to the effect of rounding.

Source:

Data compiled by the Foundation - These tables summarise the data provided by the Foundation in its own financial statements (see paragraph 9).

Table 3

Balance sheet as at 31 December 2001 and 31 December 2000NB:

Any discrepancies in totals are due to the effects of rounding.

Source:

Data compiled by the Foundation - These tables summarise the data provided by the Foundation in its own financial statements (see paragraph 9).

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The Foundation's replies

7. In general monitoring is carried out in a comprehensive and effective manner, however the recent introduction of an IT-based monitoring system will assist in securing a reduction in the level of carryovers.

With regard to the level of carryovers, it should be noted that:

- the nature of Foundation operational activities is essentially innovative/exploratory and not repetitive. This requires that relatively complex and time-consuming procedures are necessary for thorough preparation prior to the initiation of research on a contractual basis. These procedures are an important factor in the duration of projects, which, in general, spans two years,

- the level of carryovers in Title 3 (Operations) is affected by the relation of the Foundation's annual budgeting cycle to its operational cycle (which involves programme design, programme initiation, outline project design, tendering, detailed project design and implementation).

However, particularly in those cases where contracts are repetitive in nature, the timing of contracting procedures has, where possible, been brought forward. This measure will facilitate a reduction in carryovers.

9. The Foundation takes note of the observation of the Court and will act appropriately in the future.

10. The Foundation has now made arrangements to adapt its inventory procedures to bring them into line with the revised procedures of the Commission as set out in Regulation (EC) No 2909/2000, which provides for depreciation of inventory items. Responsibility will be allocated as appropriate for all inventory items.

11. The Court's point is accepted. The recovery orders concerned had been returned to the Foundation by the Financial Controller without, due to an oversight, the visa stamp being applied. This was drawn to the attention of the Financial Controller, who subsequently rectified the matter.

12. At the time of the introduction of the SI2 system and in order to make possible the speedy transfer of data from the Foundation's old accounting system to SI2, "super user" rights were accorded for in-putting purposes for a limited period only. This is standard practice for the introduction of a new system. All of the documentation concerned had already been the subject of proper authorisations from the relevant authorities, including those of the Financial Controller.

13. The existing contract for travel agency services was renewable on an annual basis and has now been operational for five years. The Foundation has already taken steps in relation to a tender procedure and introduction of a new contract.