Report

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

(2001/C 372/08)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Management Board of the European Monitoring Centre for Drugs and Drug Addiction, in accordance with Article 11(11) of Council Regulation (EEC) No 302/93(1).

2. The Court has examined the financial statements of the European Monitoring Centre for Drugs and Drug Addiction for the financial year ended 31 December 2000. In accordance with Article 11(8) of Council Regulation (EEC) No 302/93, 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 provided for under Article 11(12) of Council Regulation (EEC) No 302/93, as amended by Article 1 of Council Regulation (EC) No 3294/94(3). The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to audit these accounts.

3. The Court performed 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 auditing 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 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 FOR DRUGS AND DRUG ADDICTION (LISBON) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2000

Implementation of the budget and the budgetary accounts

5. The implementation of the appropriations for the financial year 2000 and of the appropriations carried over from the previous financial year is shown in Table 1(4).

6. Final appropriations for the financial year amounted to 8,3 million euro, 8 million euro of which were committed (97 %).

7. The significant under-utilisation of payment appropriations under Title III (less than 50 %) concerned the implementation of contracts signed with the national centres that collaborate with the Centre (the national "focal points") and lasting more than a year after the signing of the contract. The Court's analysis of the payments under Title III showed that 44 % of the payments had been effected during the last quarter of the year. If these contracts were signed at the beginning of the year it would make for a more rational management of resources.

8. Appropriations carried over to 2001 amounted to 2,2 million euro (27 % of commitments) and mainly concerned operating appropriations, 1,6 million euro of which were carried over (54 % of commitments). 0,2 million euro (around 9 %) of all the appropriations carried over from 1999 were cancelled at the end of 2000.

9. The SI2 budgetary accounts system does not yet include a module allowing the recording of amounts that are to be recovered and should be completed accordingly.

Financial statements and keeping of the accounts

Keeping of the accounts

10. 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 system

11. The Centre has no system for establishing the real overall cost of its activities. However, a tool of this sort is indispensable if the management is to be improved.

Accounting management of fixed assets and inventory

12. Items are recorded on the balance sheet at their purchase value and depreciation is not taken into account. In December 2000, a Commission Regulation(5) laid down accounting rules for tangible and intangible assets. The Centre should include these provisions in its rules in order, inter alia, to avoid problems with the evaluation of inventory items.

13. Under its Financial Regulation (Article 52), the Centre is required to keep a permanent inventory of all the movable and immovable property that constitutes its assets. During the year 2000, following an internal reorganisation, the responsibility for keeping the inventory was not reallocated and no inventory was kept.

Follow-up to the Court's previous observations

14. In the Court's Report concerning the financial year 1999(6), it was found that cofinancing by the Member States of permanent tasks carried out by the focal points was certified by declarations issued by the focal points themselves and that the Centre was not in a position to verify their validity. No progress was recorded on this point.

15. As regards VAT, the Centre, unlike other decentralised bodies, has not yet brought its Financial Regulation into line with the provisions of the general Financial Regulation.

Management of human resources

Staff policy

16. The Centre's staff are subject to the "Rules and Regulations applicable to Officials and other Servants of the Communities". As provided for in Article 15(3) of Regulation (EEC) No 302/93 of 8 February 1993, the Management Board, in agreement with the Commission, is responsible for adopting the appropriate implementing rules. Up to the year 2000, staff management was based on the Commission's general implementing provisions or, in certain areas, on specific decisions. Following a global review, the Centre drew up a plan for internal reform. In this connection, a general paper on staff policy was drafted in 2000.

Recruitment procedures and staff classification

17. A paper outlining recruitment procedures was approved by the Management Board in 1995. For its temporary staff, the Centre generally carries out an external recruitment procedure and competition notices are advertised widely at the other agencies and the Institutions, in the Official Journal and on the Centre's website.

Assessment of staff performance

18. The Centre first carried out a general staff reporting procedure in the year 2000, even though Article 43 of the Staff Regulations requires that regular reports should be drawn up on each official's competence, performance and conduct in the service at least once every two years.

Job descriptions

19. In accordance with Article 44 of the Centre's Financial Regulation(7), the Centre set up a job identification file containing job descriptions for each post. This file will be updated in 2001 as part of the Centre's internal reform.

20. This description should be easily accessible to staff and should be included in their personal files. None of the 12 staff files examined contained a job description.

Keeping of staff files

21. An examination of 12 files showed that, in certain cases, the files were not complete and the career sheet had not been regularly updated. All the files should be reviewed to ensure that all essential components have been included.

Growth in the Centre's staff and activities

22. Regular staff employed under the Staff Regulations include both permanent and temporary staff (PS and TS respectively). The number of posts to be occupied by these employees is authorised by the budgetary authority each year when the budget is adopted. The budget may also allocate appropriations for the recruitment of auxiliary staff (AS), who may be employed for a maximum of one year, local staff (LS) and seconded national experts (SNEs).

23. Table 4 shows the growth in the Centre's staff and the categories to which they belong. The growth in staff numbers has tended to level off over recent years. Overall, there have always been more staff (permanent, temporary and others) than those provided for in the establishment plan.

24. Table 5, which analyses the development of recruitment by type of procedure, shows that, in 57 % of the cases, recruitment was carried out via an open competition procedure within the meaning of the Staff Regulations. On average, recruitment costs amounted to around 2780 euro per person recruited.

25. Staff departures led to an average yearly staff turnover rate of 7 % (PS, TS, AS and LS), which was largely due to the expiry of the contracts of the staff concerned.

26. For the purposes of the audit, employees were broken down into two categories:

- staff responsible for support activities (support staff), i.e. activities necessary for the running of the Centre (e.g. administration, accounts, secretariat, etc.);

- other, "operational" staff, who directly help to achieve the Agency's objectives.

27. On average, 83 % of A staff, or 35 % of all staff, may be classified as operational. All the others may be classified as support staff.

28. Table 6 shows the growth of staff-related costs and administrative expenditure. Salary-related expenditure grew markedly more quickly than staff numbers. This difference was due to changes of status from auxiliary to temporary.

29. Among other staff-related costs, the Court's analysis looked more specifically at expenditure on professional training and administrative expenditure, in particular in the IT field. Professional training expenditure grew more quickly than staff numbers. Administrative expenditure, including expenditure on IT, grew slightly but, once the initial investments had been made, markedly less than staff numbers.

30. In order to obtain a better understanding of the relationship between the Centre's activities and the increase in its staff and related costs, the latter were compared with the fluctuations in the total operating appropriations (Title III) actually spent in the course of the year (appropriations for the year and appropriations carried over). This comparison suggests that staff numbers and staff-related costs at the Centre have increased more rapidly than the volume of its activities. This is corroborated by the fact that, on average, support expenditure (Titles I and II) has grown faster than operating expenditure (Title III). This situation ought to prompt the Centre to look into ways of improving the productivity of its human and physical resources.

31. These observations must be qualified by the fact that the Centre is not yet fully operational and that, because of its small size, it cannot benefit from substantial economies of scale for its physical and administrative infrastructure. In this context, the ratio between the rate of increase in its staff and in its volume of expenditure has recently been following a satisfactory trend.

Conclusion

32. Although, since its creation, the Centre has not been able to take on all the staff provided for by its budget in the establishment plan, it has been able to make up for this, and more, by recruiting auxiliary staff and, above all, local staff.

33. For staff recruitment purposes, the Centre tends to make increasing use of an external recruitment system similar to the one used by the Institutions. Given the expected growth in its activities, and therefore its staff, it might be desirable for the Centre to join forces with the other decentralised bodies for the purpose of recruiting administrative staff, so as to be able to recruit from as large a pool as possible.

34. The Centre should monitor the growth of its staff and their costs very carefully and continue its efforts to improve the productivity of its human and physical resources. Generally speaking, it should improve its system of management and information in the personnel field.

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 36, 12.2.1993, p. 6.

(2) As required under Article 11(10) of Council Regulation (EEC) No 302/93, the accounts for all the Monitoring Centre's revenue and expenditure for 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 9 April 2001. A summarised version of these accounts is presented in the tables annexed to this Report.

(3) OJ L 341, 30.12.1994, p. 7.

(4) All the tables in this Report were based on the most exact values possible of the data used. For the presentation of the figures, the latter were rounded up or down, which may give the impression that there are mistakes in the calculations. A dash indicates a non-existent or nil value and 0,0 indicates a value lower than the rounding-off threshold.

(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 18).

(7) Regulation adopted by the Centre's Management Board on 29 June 1995.

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

Table 3

Balance sheet as at 31 December 2000 and 31 December 1999

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

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Table 4

Changes in staff numbers

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AS: Auxiliary staff.

LS: Local staff.

PS: Permanent staff.

TS: Temporary staff.

SNE: Seconded national experts.

Table 5

Analysis of changes in staff numbers

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Table 6

Changes in staff numbers and staff-related costs

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The centre's replies

1 to 4. The European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) welcomes the Court of Auditors' observation that the financial statements for the financial year ended 31 December 2000 are reliable and that the underlying transactions, taken as a whole, legal and regular.

7. The EMCDDA is doing its best to ensure that the duration of Reitox (European Information Network on Drugs and Drug Addiction) contracts coincides with the calendar year in order better to respect the principle of annual budget payments, whilst at the same time taking account of deadlines for the approval of the budget and the annual work programmes. It must also take into account the national procedures for assuring the co-funding of the national focal points.

9. The particular module for monitoring revenue is still under development at the Commission and should shortly be installed in each of the decentralised agencies.

Recovery orders issued are registered electronically in SI2, and the sums to be recovered are charged to the suspense accounts of the General Accounts (using Cubic) to monitor the revenue received and to be collected.

11. The EMCDDA well aware that this tool has become indispensable for improving the analytic management of the Office. With this in mind, for the financial year 2001, the EMCDDA has initiated a codification of projects, using the SI2 system which will enable it to establish the real cost of each activity in the context of the new, activity-based approach to budgeting.

12. The EMCDDA has taken note of the Court of Auditors' comment and intends to incorporate the accounting provisions of the Commission's new inventory regulation into its own regulations.

13. In the year 2000, the EMCDDA decided to install ELS inventory management software to replace the old RAI system. The ELS system was not operational during the financial year 2000 because of delays in the delivery and installation by the supplier. The EMCDDA has accounted for and reconciled all goods acquired during the year 2000 using the old RAI system.

14. The certificate of co-funding for each Member State (Annex 2 of the Reitox contract) is signed by an authorised representative of the Member State. In the majority of cases, this person is the Member State's representative on the EMCDDA's Management Board.

15. Broadly speaking, the EMCDDA shares the Court's point of view and would also like to see the principles of the Financial Regulation governing the European Union's General Budget transposed to its own Financial Regulation by including the recent amendments concerning the entry of VAT into the accounts.

The EMCDDA however, taking into account the constraints imposed by the procedures used by the host nation's tax authorities will examine the advantages and disadvantages of such a transposition before reaching a final conclusion.

16 and 17. The EMCDDA confirms the Court's observations.

18. All staff recruited by the EMCDDA are systematically subject to an appraisal at the conclusion of their probationary period. The EMCDDA has established a procedure for preparing regular reports with a view to moving towards the continual appraisal of each member of staff at the Agency. This regular appraisal system was in operation as regards the entire complement of staff during the year 2000.

19 and 20. The EMCDDA has taken note of the Court's observations and shall henceforth include a job description for each post in the personal file of the member of staff in the position concerned.

21. The EMCDDA has taken note of the Court's comments concerning certain incomplete files and has taken the necessary measures to complete them.

22 to 31. The EMCDDA has taken good note of the Court's analysis of the staffing establishment, but would like to emphasise that the situation described therein no longer corresponds to reality following the Internal Reform Plan decided upon in March 2001. This Reform enabled a redefinition of human resource policy to take place and the reassignment to operational tasks of those staff who previously fulfilled administrative functions. In accordance with the option of henceforth developing its own internal capacity, the Reform also entails a redeployment towards Titles I and II (persons working with the Office, buildings, equipment and miscellaneous operating expenditure) of financial resources previously directed under Title III towards financing external activities (studies).

32 to 35. The EMCDDA has taken note of the Court's observations.