Report

on the financial statements of the Translation Centre for the bodies of the European Union for the financial year ended 31 December 2000, together with the Centre's replies

(2001/C 372/04)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Management Board of the Translation Centre for the bodies of the European Union in accordance with Article 14(4) of Council Regulation (EC) No 2965/94(1).

2. The Court of Auditors has examined the financial statements of the Translation Centre for the bodies of the European Union for the financial year ended 31 December 2000. In accordance with Article 14(1) of Council Regulation (EC) No 2965/94, the budget was implemented under 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 provided for in Article 15 of Regulation (EC) No 2965/94. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to examine these accounts.

3. The Court performed 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. The Court carried out such tests of the accounting records and applied such 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 enabled the Court to obtain reasonable assurance that the annual accounts for the financial year ended 31 December 2000 are reliable and that the underlying transactions, taken as a whole, are legal and regular.

MAIN OBSERVATIONS CONCERNING THE IMPLEMENTATION OF THE BUDGET OF THE TRANSLATION CENTRE FOR THE BODIES OF THE EUROPEAN UNION (LUXEMBOURG) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2000

Implementation of the budget and budgetary accounts

5. The implementation of the budget for the financial year 2000 is shown in Table 1(3). It should be noted that almost two thirds of the appropriations committed for administrative expenditure in 2000 (Title II) had to be carried over to the following financial year. The Centre should improve its expenditure estimates, so that carryovers can be reduced.

Financial statements and keeping of the accounts

6. Tables 2 and 3 show, respectively, the revenue and expenditure account for the financial year 2000 and the balance sheet as at 31 December 2000.

7. The Centre does not calculate depreciation in respect of the items of property listed in its inventory. In order to ensure that the balance sheet provides a more realistic picture of the Centre's economic situation and for its production costs to be reflected more faithfully in the charges it applies, the Centre should calculate the depreciation figure in the same manner as the Commission or other agencies.

8. The Centre made considerable efforts during 2000 to improve and update its inventory system, but some deficiencies persist:

- there is currently no provision for identifying software and equipment comprising whole computer units and the Centre should examine possible solutions to this problem,

- the number of items of equipment recorded varies from one financial year to another with no justification.

Financial and regulatory provisions

9. The Centre should precisely define responsibilities within its organisation as regards monitoring IT projects that are to be carried out by contractors. For example, in the case of one project with a value of 1,6 million euro, 1 million euro of which was committed in 1999 and carried over to 2000, the procedures for managing and monitoring this sizeable project were not defined beforehand.

10. A software purchase was committed in February 1999 on the basis of a Commission framework contract to the value of 56945 euro that had been concluded in 1996. It was carried over to 2000, but had not been submitted to the Advisory Committee on Procurements and Contracts (ACPC) for its opinion, as required under Article 48 of the Centre's Financial Regulation. A similar observation was made in the past regarding the financial year 1999(4). Furthermore, the payment order was issued in 2000 on the basis of a subsequent framework contract containing new products and prices.

11. In 2000, a contract to renew an existing service contract for IT products was concluded in the absence of the Financial Controller's prior approval. The latter ultimately approved the commitment a posteriori. A similar case was detected in connection with a commitment entered against 1999 appropriations which had been carried over to 2000.

Management

12. In February 2000, the Centre issued a call for tenders jointly with another institution(5). In the end, in accordance with the opinion of its ACPC, the Centre did not select any of the tenderers owing to differences of opinion between it and the partner institution regarding translation-quality requirements. This situation demonstrates the need for the Centre to agree with its partners beforehand not only the criteria, but also the thresholds for the admission of tenderers.

13. The Centre has no specific contract defining the terms on which its bank accounts are managed (interest rates and bank charges).

Follow-up to previous observations

14. The Court reiterates the wishes it has voiced in the past(6), i.e. to see the Centre set up analytical accounts in order to be able to establish, by body and by type of service, the real cost of the services that it provides.

15. No progress was made in 2000 as regards the situation commented on by the Court in 1997(7), 1998(8) and 1999(9): the Centre continues to occupy the premises made available to it by the Luxembourg authorities, but no formal agreement on the related conditions has been concluded between the parties.

Staff management

Staffing policy

16. The Centre's staff is subject to the Regulations and Rules applicable to officials and other servants of the European Communities. As laid down in Article 17(3) of Regulation No 2965/94, the Management Board, in agreement with the Commission, adopts the necessary implementing provisions. The Centre's staff policy has not been formalised in a single document. Some of the general provisions for giving effect to the Staff Regulations and the Conditions of employment of other servants have been adopted by the Management Board for certain aspects of this policy (staff reports, promotion and professional training).

Recruitment procedures

17. There are generally two stages in the selection of recruits: evaluation on the basis of a candidate's file and then an interview. Thirty-seven selection procedures have been conducted since the Centre was set up. Only one selection based on written examinations was held, in 1998, and it resulted in the recruitment of 22 members of staff.

18. The selection committee should establish its selection criteria and their respective weightings beforehand. For example, it was found that:

- during one selection procedure the total marks required to pass to the next stage had not been decided in advance by the selection committee,

- during another the minimum number of marks required for inclusion onthe reserve list was recorded only in the selection committee's final report, which was drawn up on the same date as the reserve list.

19. Thirteen selection procedures conducted between 1996 and 2000 that had been geared specifically to recruiting IT staff were examined. Twenty of the people on the reserve lists drawn up following these selections were recruited by the Centre, but the selection committees had not established beforehand the minimum marks required to be eligible to pass to the next stage of selection. In five cases the candidates recruited had obtained the lowest marks.

Description of duties

20. Pursuant to Article 44 (1)a of the Centre's Financial Regulation, there must be a job description for each category A or LA post. No such descriptions exist other than for six category B and C staff.

Growth in the Centre's staff and activities

21. The only staff employed under the Staff Regulations at the Centre are temporary staff (TS), for whom the number of posts is authorised by the budgetary authority each year at the same time as the budget. Moreover, appropriations may be granted under the budget for the recruitment of auxiliary employees (AE), who may be employed for a maximum of one year.

22. Table 4 shows the growth in the Centre's staff over the period 1995 to 2000, with a breakdown by category. The increase in staff has tended to tail off over time, as the Centre has gradually approached its fully operational stage. In parallel, the proportion of auxiliary staff is tending to decline.

23. Of the 185 staff recruited by the Centre since it was set up, 106 were recruited as temporaries and 79 as auxiliaries. Taking account of staff who have left, at the end of 2000, out of 130 staff in active employment, 125 were temporary staff and 5 auxiliaries. Most of the temporary staff were taken on following recruitment campaigns conducted by advertising within the institutions and the other satellite bodies, in the press or on the Centre's website. Out of 79 auxiliary staff recruited by the Centre, 40 acquired temporary status, 19 of them following an internal recruitment procedure.

24. Table 5 analyses the trend in recruitment according to the procedure applied and reveals that none of these recruitments was carried out using a standard open competition procedure as per the model advocated for the Community institutions, which offers the broadest guarantees as regards the quality and transparency of the procedures. On average, recruitment costs amounted to some 470 euro per person recruited.

25. Departures have resulted in an average annual staff turnover rate (temporary and auxiliary staff) of 13 % (see Table 5), which is due to de facto termination of contract by the persons concerned in 40 % of cases and to contract expiry in the remainder.

26. The Court's examination of a sample of 14 officials revealed no problems regarding their professional suitability for the duties involved.

27. For the purposes of the audit, staff were placed in two categories:

- those responsible for support activities (support staff), i.e. activities necessary for the continuity of the Centre's operations (e.g. administration, accounts, secretariat, etc.),

- other, "operational", staff, who are directly involved in the achievement of the Centre's objectives.

28. It was found that almost all category A staff may be termed "operational" and that, all categories combined, 60 % of staff are covered by this definition.

29. Table 6 shows the increase in staff-related costs and administrative expenditure. The rise in salary costs over the period 1997 to 2000 outstripped the increase in staff. This discrepancy may be attributed in part to the changeover from auxiliary to temporary status.

30. The Court's analysis of staff-related costs also focused more specifically on expenditure on professional training (PT) and administrative expenditure, especially on IT. Expenditure on professional training increased at a faster rate than staff numbers, due to the Centre's policy in this area. There has also been a rise in actual administrative expenditure, due to the Centre's heavy investment in IT. In 2000, 24 people, including external consultants, i.e. a ratio of one to five for all staff, were working exclusively in the IT sector.

31. In order to obtain a better understanding of the relationship between the Centre's activities and the increase in its staff and the related costs, the increase in staff and related costs was compared with the increase in revenue collected by the Centre over a year. Given that revenue also reflects the increase in charges made by the Centre, the number of pages translated by it was also selected as an activity indicator, since the volume of translations is relatively homogeneous and can therefore be considered representative of the Centre's activities.

32. The comparison between the increase in the Centre's revenue and that in its staff and the related costs suggests that the Centre's management is managing to increase its revenue faster than the rate at which its staff and the costs of employing them are increasing. The comparison of the variations in the Centre's volume of activities and number of staff, as well as the related costs, provides a picture with more light and shade. Overall, there is a parallel between the increase in the workload and that in staff. However, salary costs are tending to rise slightly faster because of automatic salary increases. The Centre should ensure that it continues its efforts to improve its general productivity.

33. A comparison made between the number of pages translated or revised in 2000 and the staff working in the various language sections has revealed variations in these sections' output. The output of four sections in particular(10) was markedly lower than the average output level in quantitative terms. The Centre should monitor this situation and, should it persist, make the necessary adjustments.

Conclusion

34. Generally speaking, it is clear that, even though the Centre has, from the beginning, been unable to recruit all the staff it has requested during the budgetary procedures, this has had no significant effect on the development of its activities. Various possible reasons might explain this situation:

- a degree of inaccuracy in the estimates of requirements,

- a cautious approach, in case there is a slow-down in requests for translations.

35. The Centre's staff recruitment methods are based on advertising of vacant posts on its website and in the press and such advertising is often conducted only within the institutions and the other satellite bodies. Some 20 % of the temporary staff currently employed were originally recruited as auxiliaries. At the moment, the overwhelming majority of staff have temporary status.

36. Given the expected increase in the Centre's activities and its staff, it might be preferable for the Centre to join forces with the institutions and other satellite bodies so that its recruitment is carried out on the broadest and strictest basis possible, especially in the case of posts connected with support activities. Coordination of recruitment is particularly necessary in the light of the Centre's plans to make part of its staff permanent.

37. The Centre should ensure that its overall productivity is improved. In particular, efforts should be made to determine its staff's productivity more accurately and it should continue to ensure that expenditure on training and in the field of IT helps to improve productivity. In general, it should also improve its staff management and information system.

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 10 October 2001.

For the Court of Auditors

Jan O. Karlsson

President

(1) OJ L 314, 7.12.1994, p. 1.

(2) As laid down in Article 14(3) of Council Regulation (EC) No 2965/94, the accounts for all the Centre's revenue and expenditure for the financial year 2000 were drawn up on 30 March 2001 and sent to the Centre's Management Board, the Commission and the Court of Auditors. These accounts were received by the Court on 24 April 2001. A summarised version of these financial statements is presented in the tables attached to this report.

(3) All the tables in this report were calculated using the most accurate values that could be obtained from the data used. The figures presented have been rounded, which may give the impression that calculation errors have been made. A hyphen indicates that no value exists or a zero value, and 0,0 indicates a value below the rounding threshold.

(4) OJ C 373, 27.12.2000, paragraph 14.

(5) The European Parliament.

(6) OJ C 373, 27.12.2000, p.21, paragraph 10; OJ C 393, 29.12.1997, p.47, paragraph 1.6; OJ C 406, 28.12.1998, p.33, paragraph 1.6.

(7) OJ C 406, 28.12.1998, p.33, paragraph 1.13.

(8) OJ C 372, 22.12.1999, p.20, paragraph 18.

(9) OJ C 373, 27.12.2000, p.22, paragraph 15.

(10) The percentages for the German, English, Spanish and Dutch language sections were, respectively, 18 %, 13 %, 9 % and 8 % lower than the average for all eleven sections.

TABLES 1 TO 6

Table 1

Implementation of the budget

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Table 2

Revenue and expenditure account for the financial years 2000 and 1999

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NB:There may be disparities in the totals, due to rounding.

Source:Presentation prepared by the Court of Auditors on the basis of data compiled by the Centre.

Table 3

Balance sheet as at 31 December 2000 and 31 December 1999

NB:Differences in the totals are due to rounding.

Source:Presentation prepared by the Court of Auditors on the basis of data compiled by the Centre.

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Table 4

Increases in staff

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TS: Temporary staff.

AS: Auxiliary staff.

Table 5

Analysis of the change in the number of staff

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Table 6

Increase in staff and related costs

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The Centre's replies

Budgetary implementation and budgetary accounts

5. The amount of the appropriations carried over for Title II corresponds principally to the contracts being implemented at the end of the year relating to the development of the computer systems. The Centre intends to continue its efforts to improve its budgetary estimates and the implementation thereof.

Financial statements and keeping of the accounts

7. The Centre shares the Court's opinion concerning the accounting of depreciation allowances. In accordance with its Founding Regulation, the Centre must become self-financing through passing on all its costs to its customers in return for the services provided.

The Centre will present, with the 2001 accounts, the calculation of depreciation as well as proposals for taking it into account in the calculation of prices.

8. The Centre will continue to improve its inventory system, in particular by defining criteria to assess the computer applications developed by the Centre. Some of the inconsistencies detected by the Court in relation to the previous years were due to errors in the initial encoding which were discovered once the update was carried out.

Financial and regulatory provisions

9. The Centre takes good note of the Court's remarks, and will formalise the definition of responsibilities relating to the follow-up to computer projects for the case in which several departments are concerned.

10. Following the remark by the Court of Auditors in its report concerning the budgetary implementation of the financial year 1999 (OJ C 373 of 27.12.2000), all use of the framework contracts of the other institutions are now submitted for opinion to the ACPC of the Centre, which was not the case in 1999.

11. In the case mentioned by the Court of Auditors, the late formalisation of the commitment was due to reasons known to and accepted by the Centre's Financial Controller, even though approval was given a posteriori, notably in order to await new, more favourable prices. This wait was confirmed in reality.

Management

13. Since its creation, for reasons of efficiency, the Centre has followed the conditions of the Commission's contract for banking services. The Centre envisages the launch of an invitation to tender for financial (banking) services in its work programme for 2001.

Follow-up to previous observations

14. In 2000, the Centre launched the implementation of an analytical accounting system integrated with the SI2 budgetary accounting system. The results obtained will enable the costs of activities to be identified, as requested by our supervisory institution in coordination with the other agencies.

15. On 27 April 2001, the Luxembourg authorities expressed their intention of discussing this subject, as well as the agreement on the seat and security, once the financing project for the permanent premises of the Centre had been drawn up.

Staff management

Recruitment procedures

18. The Centre prefers to put greater emphasis on the suitability between the profile sought and the candidates' knowledge and experience rather than fixing a minimum of points in advance in order to make the candidate eligible for the next stage of the procedure. This is because the fact of establishing such a rule could result in the non-recruitment of valuable candidates, and the need to repeat selection procedures several times over, which runs counter to the principle of good financial management.

19. In the five cases raised by the Court, the candidates demonstrated suitable knowledge for the job proposed throughout the selection procedure, in the opinion of the selection committee.

Growth of the Centre's staff and activities

23. The only selection procedure published internally was also open to external candidates. The exceptional decision to publish this selection procedure in a more restrictive manner was based on the fact that one of the conditions for selection was knowledge of the Translator's Workbench.

24. The recruitment of temporary staff differs from the recruitment of officials in so far as the Staff Regulations do not provide any specific provision governing the recruitment procedure for temporary staff.

Furthermore, pursuant to the Joint Statement by Council and the Commission (Statement 3), annexed to Council Regulation (EC) No 2965/94 of 28 November 1994 setting up a Translation Centre for bodies of the European Union, the Council and the Commission consider that, "in view of its tasks and the structure of its budget, the Translation Centre should make use of staff management procedures that are as flexible as possible without jeopardising the performance of its role".

26. The Centre welcomes the observation made by the Court that the staff recruited had profiles suitable for the duties involved.

30. The Centre is particularly interested in training its staff, because today, as established in Article 24(3) of the Staff Regulations, continuous vocational training is the most recognised way to develop skills.

For 2001, the percentage of the total payroll earmarked for vocational training is 0,74 %. If this figure is compared with the amounts of the other decentralised agencies, it is clear that the Centre's rate is below those of the other agencies, as well as below the 1,4 % recommended by the Commission. The Centre has spent a total of EUR 216 per staff member. This cost represents EUR 0,10 per page translated.

The distribution of tasks and staff between the Computer Department and the Translation Department responds to the Centre's needs in relation to the translation requests of its customers, its work rationalisation strategy and its continuous search for the most advanced translation tools. The staff employed by the Centre in the field of computing meets its needs.

32 to 33. The Centre believes that individual performance must be examined with certain reservations since it is subject to factors that are difficult to foresee (sickness, types of document, terminological difficulties, etc.). For this reason, this criterion is of little use to the overall management of the translation departments, but must rather serve exclusively for the development of the professional career of staff members.

On the other hand, since its creation in 1995, the Centre has produced and published overall productivity statistics in its annual reports, for performance management purposes.

Furthermore, in the benchmarking studies on the translation services of the European Union known to the Centre (e.g. "Translation statistics - Interinstitutional Translation Committee" and "Report on compared productivity of translation services - PriceWaterhouseCoopers 2000"), the analysis is based on the comparability of the overall and average productivity rates of each institution or body. In these studies, even though the calculation methods may vary, the result is always the same: the Centre's productivity compares favourably with that of the other translation services analysed, i.e. those of all the other European institutions.

Conclusion

35. The Centre recruits temporary staff on the broadest and strictest basis possible in order to recruit staff with the highest level of skills, productivity and integrity, in strict compliance with the provisions of Articles 8 to 15 of the CEOS.

37. Since its creation, the Centre has always striven to improve its overall productivity, with satisfactory results up to now for the Management Board and its customers (see the Centre's reply to point 33).