Report

on the financial statements of the European Monitoring Centre on Racism and Xenophobia for the financial year 2001, together with the Centre's replies

(2002/C 326/10)

CONTENTS

>TABLE>

THE COURT'S OPINION

1. This report is addressed to the Management Board of the European Monitoring Centre on Racism and Xenophobia (hereinafter called "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 2001. In accordance with Article 12(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 adopted pursuant to 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 carried out the 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 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 allowed the Court to obtain reasonale assurance that the annual accounts for the finacial year ended 31 December 2001 are reliable and that the underlying transactioins, taken as a whole, are legal and regular.

5. Without calling into question the audit opinion expressed in paragraph 4, the Court would like, however, to draw attention to the situations described in paragraph 8 and from paragraph 18 onwards.

MAIN OBSERVATIONS

Budgetary implementation

6. Table 1(3) shows the implementation of the budget for the financial year 2001 and the appropriations carried over from the previous financial year.

7. Final appropriations for the financial year totalled 5,3 million euro, 5,1 million euro of which were committed. Operating appropriations (Title III) amounted to 2,2 million euro, almost all of which was committed. Payments in respect of the appropriations of the financial year amounted to 3,8 million; 1,4 million were carried over to the following financial year and 0,1 million had to be cancelled. Approximately 50 % of payments in respect of operating appropriations were made during the last three months of the year.

8. Appropriations carried over to 2002 amounted to 1,2 million euro (twice the previous year's figure) and mainly concerned operating appropriations. The volume of appropriations carried over was due to the late approval of the work programme by the Centre's Management Board and to the slowness in implementing the RAXEN Network(4), which is the main reason for the Centre's creation. It shows the need for the Centre to increase the quality and monitoring of the planning of its operational activities.

9. The appropriations carried over from the financial year 2000 to 2001 amounted to 0,8 million euro; they were almost all disbursed. Over 40 % of the payments in respect of operating appropriations were made, however, during the last three months of 2001, which indicates that there was inadequate monitoring of the projects financed during the previous financial year.

Financial statements

10. The revenue and expenditure account and balance sheet published by the Centre in its activity report for the financial year 2001 are presented in summary form in Tables 2 and 3.

11. The Centre does not depreciate its fixed assets. It should apply the valuation and depreciation rules adopted by the Commission(5) so that the book values faithfully reflect the real value of the goods which form part of its assets.

Application of the financial provisions

12. The Centre did not publish its budget for the financial year 2001 in the Official Journal, which is contrary to Article 13 of its Financial Regulation.

13. In its 1999 and 2000 Annual Reports on the Centre(6), 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 of the European Communities. This has not yet been done.

14. In the aftermath of 11 September 2001, the Centre made fifteen addenda to the various contracts linking the Centre with the national centres making up the Raxen network for which a specific budgetary heading is provided. To finance these addenda, a commitment was made and charged to another budgetary heading in violation of the principle of specificity. The Centre should have made a transfer in due and proper form to cover the shortage of appropriations.

15. This provisional commitment was booked on 8 October 2001 and the contracts were concluded on 21 October 2001. The presentation date for the first reports was fixed at 19 October 2001, i.e. before the date on which the contract was signed.

16. While the annex to the commitment specified that the contracts expired at the end of 2001, only 16 % of the corresponding payments had been made at 31 December 2001.

17. At the end of 2001, a considerable number of payments, totalling 297546 euro, were suspended, in accordance with Article 40 of the Centre's Financial Regulation, on account of the absence of sufficient supporting documents concerning the services actually rendered or the contracting parties' VAT arrangements.

18. These suspended payments included a payment of 70961 euro concerning a contribution of 100000 euro for a project jointly financed with the Council of Europe. This financing in fact constitutes a subsidy intended mainly to reimburse work carried out beforehand by experts. The Authorising Officer responsible was able neither to give a precise description of the project nor to produce documentary evidence in support of the payment requested. The production of supporting documents is required at all stages of expenditure (Articles 32, 35 and 39 of the Centre's Financial Regulation).

19. From the point of view of sound financial management, it is not wise to grant retroactive financing which, precisely because it is retroactive, does not give any added value to the actions undertaken by the Centre.

20. The Centre's Director should consider applying Article 61 of the Financial Regulation concerning the responsibility of Authorising Officers. Given that the payment was suspended pursuant to Article 40 of the Centre's Financial Regulation, the commitment in question should be cancelled. In accordance with the provisions of Article 41 of this same Regulation, the Centre's Management Board may, however, ask, in writing and on its own responsibility, for the suspended payment to be made.

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 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 for the financial year 2001 were drawn up on 6 February 2002 and forwarded to the Centre's Management Board, the Commission and the Court of Auditors. These accounts were received by the Court on 8 February 2002. A summarised version of these financial statements is presented in the tables annexed to this report.

(3) All the tables in this Report were drawn up on the basis of the most exact values possible for the data used. For presentation purposes, the figures were rounded up or down, which may produce minor differences in the totals. A dash indicates a non-existent or nil value and 0,0 indicates a value below the rounding threshold.

(4) The European Racism and Xenophobia Information Network.

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

(6) OJ C 373, 27.12.2000, paragraph 7 and OJ C 372, 28.12.2001, paragraph 16.

Table 1

Implementation of the budget for the financial year 2001NB:

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

Source:

Centre data. These tables summarise the data supplied by the Centre in its own financial statements.

>TABLE>

>TABLE>

Table 2

Revenue and expenditure account for the financial years 2001and 2000

>TABLE>

NB:

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

Source:

European Monitoring Centre on Racism and Xenophobia.

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:

European Monitoring Centre on Racism and Xenophobia. These tables summarise the data supplied by the Centre in its own financial statements.

>TABLE>

>TABLE>

The Centre's replies

4. The Centre welcomes the Court's statement that the accounts for 2001 are reliable.

8 and 9. The Centre has already implemented a number of procedures to improve its planning system and the follow up to operational activities, to ensure a sound implementation of its budget. In 2002 the draft work programme for 2003 was finalised from April and was discussed by the Management Board at its meeting of 19 June 2002.

11. In the first half of 2002, the Centre added to its current financial accounting package "EXACT" the module "Fixed asset". The tests have been completed and respect the rules laid down in Commission Regulation (EC) No 2909/2000(1). From now on, a physical control is operated by a person responsible for the fixed assets of the Centre (by sampling). An internal procedure has been put in place regarding the treatment of this point.

12. The Centre published its budget for 2002 in Official Journal of the European Communities L 178 of 9 July 2002.

13. From 4 July 2001, the Centre had been preparing a draft proposal with a view to updating its Financial Regulation. The exercise was delayed in order not to introduce different provisions than those to be introduced with the new recast Financial Regulation to come into force on 1 January 2003.

Concerning the VAT regime applicable to the expenditure of the Centre, it has been decided to anticipate from 1 January 2002 the new provisions implementing the procedure in the internal rules.

14. Following the events of 11 September 2001, the Centre had to develop at very short notice a rapid response system to collect urgently data to meet the expectations of the Communities and the Member States. The Centre agrees that a separate contract should have been prepared. The only reason this did not happen was the urgency for the Centre to react to the very special situation.

15. The urgency the Centre had to face to implement the procedures did not permit changing the date of presentation of the reports which was mentioned in the draft contract. One result was that there was some confusion over the deadlines.

16. The Centre can agree that there was some absence of consistency in the deadlines for commitments and payments.

18 to 20. In order to avoid difficulties, the Centre has decided to follow the recommendation of the Court and to cancel the commitment relating to the common project with the Council of Europe.

The Centre would like also to underline that this initiative was based on the general agreement for cooperation between the Centre and the Council of Europe mentioned in Council Regulation (EC) No 1035/97.

The Centre is willing to improve permanently the budget management of operational activities. After the current evaluation of the situation, it is intended to introduce the necessary corrections in the internal rules and to complement it with special training sessions.

(1) OJ L 336, 30.12.2000, p. 75.