Report

on the financial statements of the European Monitoring Centre on Racism and Xenophobia for the financial year ended 31 December 2000, together with the Centre's replies

(2001/C 372/09)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Management Board of the European Monitoring Centre on Racism and Xenophobia (hereinafter referred to as "the Centre"), in accordance with Article 12(11) of Council Regulation (EC) No 1035/97(1).

2. The Court has examined the financial statements of the Centre for the financial year ended 31 December 2000. In accordance with Article12(8) of Council Regulation (EC) No 1035/97, the budget was implemented on the responsibility of the Executive Director. This responsibility included the drawing-up and presentation of the financial statements(2) in accordance with the internal financial provisions, as laid down in Article 12(12) of Council Regulation (EC) No 1035/97. 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 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. 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 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 ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN MONITORING CENTRE ON RACISM AND XENOPHOBIA (VIENNA) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2000

Implementation of the budget and budgetary accounts

5. The implementation of the appropriations for the financial year 2000 and of the appropriations carried over from the previous year is set out in Table 1 (3).

6. Final appropriations for the financial year totalled 4,9 million euro, 4,6 million euro (94 %) of which were committed. Operating appropriations (Title III) amounted to 1,7 million euro, 88 % (1,5 million euro) of which were committed.

7. The significant under-utilisation of payment appropriations under Title III (59 %) was brought about, in the main, by the delay in setting up the Raxen network(4). The first contracts with partner organisations in seven Member States, the focal points of the Centre's activities, were not signed until November 2000 and no payments had been made by the end of the year. The Court's analysis of the payments under Title III showed that, from the appropriations for the financial year, no payments were made in the first half of the year and that 36 % of the payments were made in the last three months of the year.

8. Appropriations carried over to 2001 amount to 0,8 million euro (18 % of commitments) and mainly concern operating appropriations, 0,6 million euro of which were carried over (42,5 % of commitments). Of all the appropriations that were carried over from 1999, 0,4 million euro (approximately 23 %) were cancelled at the end of 2000. The Centre should continue to endeavour to ensure that the measures financed are implemented and paid for during the year, thus keeping carryovers to a minimum.

9. The Centre drew up only one commitment proposal to commit appropriations under the various budget headings. This commitment proposal, signed and approved by the Financial Controller, did not indicate either the items concerned or the amounts committed. The annex to this proposal, which contained this information, was neither signed nor approved. The Centre should draw up detailed commitments in order to ensure greater transparency.

10. In 2000, as in 1999, the Centre drew up its budgetary accounts using a spreadsheet, with all the risks that this entails. The S12 budgetary accounts system was installed in 2001 but does not yet include a module allowing the recording of amounts to be recovered and this should be added.

Financial statements and keeping of the accounts

Keeping of the accounts

11. 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.

Accounting management of fixed assets

12. The Centre's Financial Regulation contains no provisions concerning the accounting management of fixed assets. Since December 2000 there has been a Commission Regulation(5) laying down provisions for accounting operations relating to tangible and intangible fixed assets. The Centre should incorporate these provisions into its own Regulation so as to avoid, among other things, problems with the evaluation of inventory items.

Inventory

13. According to its Financial Regulation, the Centre is required to keep a permanent inventory of all the movable and immovable property which makes up its assets. During the year 2000 the inventory was not kept in a satisfactory manner and corrections had to be made when the accounts were closed. In April 2001, the Centre installed an inventory system which should enable it to carry out regular monitoring of its fixed assets. Nevertheless, the responsibilities in connection with keeping the inventory should be laid down clearly.

Recovery orders

14. In contravention of its Financial Regulation(6), the Centre does not always draw up a recovery order when a debt has been identified and never draws up debt forecasts. This results in a lack of control as far as recoveries are concerned. As there was no debt forcast as at 31 December 2000, the Austrian authorities' contribution in respect of expenditure on rents for the period from September to December 2000 (58026 euro) was not recorded in the accounts.

15. When the Centre draws up a recovery order, it does not systematically forward a debit note to the debtor with a view to ensuring that the amount owed is collected. Of eleven recovery orders examined, three had not been covered by a debit note, for which reason the debtors had not made any payment.

Follow-up of the Court's previous observations

16. In its 1999 Annual Report on the Centre(7), the Court called on the Centre to incorporate into its own Financial Regulation the amendments concerning VAT made to the Financial Regulation applicable to the general budget. This has not yet been done.

17. In its 1999 Annual Report(8), the Court also pointed out that numerous errors in the accounts had had to be rectified just before they were closed. Progress was noted in 2000 but there is still considerable room for improvement of the internal control system. The Centre should carry out a systematic reconciliation of the data contained in the budgetary accounts and in the general accounts with a view to reducing rectifications at the end of the financial year and, in particular, to ensure better monitoring of its financial management during the year.

The Centre's staff

18. The Centre's staff is made up entirely of temporary employees (TEs). The number of posts is authorised by the budgetary authority each year when the budget is adopted. Furthermore, the budget may allocate appropriations for the recruitment of auxiliary employees (AEs), whose contracts are limited to a maximum of one year, and of seconded national experts (SNEs). Table 4 shows the growth in the Centre's staff, broken down by type of post.

19. Since the Centre was set up, it has recruited its staff by means of vacancy notices distributed mainly to the European Institutions and other bodies. On average, recruitment expenditure amounted to 6610 euro per person recruited. Staff departures, due to the expiry of their contracts, resulted in an average staff turnover rate (TEs, AEs and SNEs) of 6 % per year.

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

- staff responsible for support activities (support staff), i.e. activities necessary for the continuity of the Centre's operations (e.g. administrative, accounting and secretarial services etc.);

- other, so-called operational, staff, who contribute directly to achieving the Centre's objectives.

21. Virtually three quarters of A-grade staff may be regarded as operational. When all categories are taken together, 55 % of the Centre's staff could be considered operational members of staff.

Conclusion

22. In view of the fact that the Centre was set up only recently, it is difficult to come to any final judgement on the growth of the Centre's staff in relation to its workload. Nevertheless, the information available does not reveal any major problems.

23. It might be preferable for the Centre, in the case of posts involving support and operational activities which require qualifications of an administrative nature, to join forces with the Community Institutions and other decentralised bodies to recruit staff on the broadest possible basis.

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

For the Court of Auditors

Jan O. Karlsson

President

(1) OJ L 151, 10.6.1997, p. 6.

(2) As required under Article 12(10) of Council Regulation (EC) No 1035/97, the accounts for all the Centre's revenue and expenditure in respect of the financial year 2000 were drawn up on 30 March 2001 and forwarded to the Centre's Management Board, the Commission and the Court of Auditors. These accounts were received by the Court on 10 May 2001. A summarised version of these accounts is presented in the tables annexed to this report.

(3) The calculations in all tables in this report are based on the most accurate data available. As regards the presentation of figures, they have been rounded off, which may give the appearance of arithmetical errors. A dash indicates a non-existent or zero value and 0,0 indicates a value lower than the rounding-off threshold.

(4) A network for the exchange of information on racist and xenophobic phenomena.

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

(6) Articles 23 and 24 of the Centre's Financial Regulation.

(7) OJ C 373, 27.12.2000, paragraph 7.

(8) OJ C 373, 27.12.2000, paragraph 6.

TABLES 1 TO 4

Table 1

Implementation of the budget

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Table 2

Revenue and expenditure accounts for the financial years 2000 and 1999

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Source:Table drawn up by the Court of Auditors on the basis of data compiled by the Centre.

Table 3

Balance sheet as at 31 December 2000 and at 31 December 1999

Source:Table drawn up by the Court of Auditors on the basis of data compiled by the Centre.

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Table 4

Changes in staff numbers

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Tes: Temporary employees.

Aes: Auxiliary employees.

SNEs: Seconded national experts.

The Centre's replies

4. The Centre welcomes the Court's opinion that annual accounts for year 2000 are reliable and that transactions are legal and regular.

8. Within its planning system, the Centre already introduced a monthly report and co-ordination to ensure carryovers to be reduced to the very minimum.

9. In order to avoid the omission the Court has mentioned, every provisional commitment has been prepared separately per budget line from 2001.

10. In 2001, the recovery order module in SI2 was set up and tested; at present, this module is fully operational within SI2.

12. New rules concerning inventory and asset matters have been included in the new draft financial regulation of the EUMC to be approved by the Management Board. An inventory exists and is operational.

13. In February 2001, the inventory system has been modified. The new draft Financial Regulation of the EUMC and the instructions issued by the Director on 5 June 2001 clarifies the responsibilities of the accounting officer concerning the inventory.

14. The entry into force in May 2001 of the Headquarters' Agreement with Austria contributed to this clarification. After this date, the Centre could benefit of resources other than those of the EU Budget.

15. Debit notes have been designed in order to inform the debtors about the debt due and terms of reimbursement.

16. The VAT regime is included in the new draft Financial Regulation to be approved by the Management Board.

17. For the financial year 2001, bank reconciliation has been done up to June 2001, in August 2001, and transactions will be input in the general ledger on a weekly basis.

22 and 23. The Centre has taken note of the comments of the Court of Auditors.