Report

on the financial statements of the European Centre for the Development of Professional Training for the financial year ended 31 December 2000, together with the Centre's replies

(2001/C 372/05)

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 12 of Council Regulation (EEC) No 337/75(1), as amended by Council Regulation (EEC) No 1946/93(2).

2. The Court has examined the financial statements of the European Centre for the Development of Vocational Training for the financial year ended 31 December 2000. In accordance with Article 18(1) of Council Regulation (EEC) No 1416/76(3), as amended by Council Regulation (EEC) No 1948/93(4), the budget was implemented on the responsibility of the management board. This responsibility includes the drawing up and presentation of the financial statements(5), in accordance with the internal financial provisions provided for in Articles 65, 67 and 68 of Regulation (EEC) No 1948/93 amending Regulation (EEC) No 1416/76. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to audit those accounts.

3. The Court performed its audit in accordance with its auditing standards and policies. 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. 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 1999 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 CENTRE FOR THE DEVELOPMENT OF VOCATIONAL TRAINING (THESSALONIKI) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2000

Implementation of the budget and budgetary accounts

5. The figures for the implementation of the appropriations for the financial year 2000 and the appropriations carried forward from the previous financial year are set out in Table 1(6).

6. Definitive appropriations for the financial year amounted to 13,3 million euro. Almost all of these appropriations were committed, and 10,5 million euro (80 %) was paid.

7. Carryovers of appropriations to 2001 amounted to 2,7 million euro (20,5 %). Of this total, 2,2 million euro (78 %) related to operating appropriations under Title III. The carryovers of appropriations from Title III mainly related to the headings "Dissemination of information" and "Pilot studies and projects". Appropriations totalling 3,7 million euro were carried over from 1999 to 2000. Of this amount, 3,1 million euro (83 %) was paid and 0,6 million euro (17 %) was cancelled.

8. As a result of the application of the rules in force, the Centre was authorised, in late May 2000, to make a non-automatic carryover of appropriations from 1999 for an amount of 0,5 million euro. Of these appropriations, 0,2 million euro was cancelled. This amount does not appear in either the balance sheet or the revenue and expenditure account because the cancellation was made after closure of the accounts. The level of cancellations in some of the headings concerned indicates that there was no real justification for these carryovers. The Centre should consider changing the time limits stipulated in its Financial Regulation so that all carryovers are effected before the final closure of its accounts, and ensure that these carryovers are justified.

Financial statements and keeping of the accounts

9. 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.

10. The Greek State took the decision to transfer ownership of the building and land to Cedefop on 16 May 2001.

Follow-up to previous observations

11. Cedefop has not been fully receptive to the observations made by the Court in its report concerning the financial year 1999, or honoured the undertakings given(7) concerning the procedures which the Centre itself decided to apply to the awarding of contracts, not least in the field of informatics.

Management of human resources

Staff policy

12. By virtue of Council Regulation (EC) No 1131/94 of 16 May 1994, the Centre's head office was transferred from Berlin to Thessaloniki. Regulation (EEC) No 251/95, which was adopted for the purposes of transferring the Centre and to this effect amends Council Regulation (EEC) No 337/75(8), provides that "the staff of the Centre shall be subject to the regulations and rules applicable to the officials and other servants of the European Communities. The Management Board shall, in agreement with the Commission, adopt the appropriate implementing rules".

13. The Centre's new staff policy was formalised in a single document which was adopted by the Management Board in 1998. Decisions on the individual and financial rights of the members of staff, including those concerning initial grading, are referred to the relevant Commission departments for an opinion or approval.

14. Leaving aside an ad hoc procedure for the establishment of the staff employed in Berlin, which was implemented in 1995 at the time of its relocation, the Centre has not organised a competition for the establishment of its staff or for their transition from one category to another. For subsequent recruitment, it has made use of the results of competitions organised by the Community institutions in which members of its staff or candidates for posts at the Centre have participated.

15. The keeping of staff files should be improved, not least to ensure that the information on members of staff and their entitlements is comprehensive and regularly updated.

Changes in the Centre's establishment and activities

16. The establishment at the Centre is made up of persons subject to the Staff Regulations who are either permanent employees (PE) or temporary employees (TE). The number of posts that can be filled by such persons is authorised by the budgetary authority each year at the same time as the budget is adopted. In addition, appropriations may be allocated under the budget for the recruitment of auxiliary employees (AE), whose contracts are limited to a maximum of one year, local staff (LS) and seconded national experts (SNE).

17. Those members of staff who were transferred from Berlin to Thessaloniki numbered 66. As a result of the agreements reached they were granted the status of permanent employees. As at 1 January 2000, 24 of these members of staff had obtained a transfer to one of the institutions or to another satellite agency, six had left the Centre (resignation or leave on personal grounds), 11 were in receipt of an invalidity pension and one was receiving a retirement pension. Altogether, 42 of the 66 members of staff transferred had left the Centre.

18. In order to compensate for these departures, the Centre was obliged to recruit new staff in urgent circumstances which did little to foster compliance with the rules in force. In addition, under the agreements reached with the staff, each member of staff was allowed to remain in Berlin for a period of one month for every year of service before relocating to Thessaloniki. This meant that auxiliary employees and local staff had to be recruited who were gradually made permanent or temporary employees at the Centre too, on the basis of the same principles that had been applied when the Centre relocated from Berlin to Thessaloniki.

19. An examination of the recruitment files for a sample of 36 members of staff, relating to the period that followed the relocation from Berlin to Thessaloniki, which is to say 1995 to 1998, revealed a number of shortcomings: absence of appropriate notification of vacant posts (14 cases), absence of any pre-established selection criteria (14 cases), insufficiently justified selection decisions (28 cases), etc.

20. In short, the approach taken to resolving the problems posed by the relocation from Berlin to Thessaloniki may have enabled certain social issues to be solved, but also resulted in a major renewal of staff at the Centre that was carried out under conditions that were far from satisfactory.

21. Table 4 traces the changes in the Centre's staff and the breakdown by type of post. Since 1997, the total number of staff (PE, TE and others) has consistently been higher than the number of staff provided for in the establishment plan annexed to the budget.

22. Of the 30 members of staff in a random sample that may be considered representative of the Centre's staff as it stood in 2000, one had been recruited as a permanent employee, 20 as temporary employees, four as auxiliary employees, three as local staff and two as seconded national experts. Of these 30 members of staff, two had remained local staff, seven temporary employees had become permanent employees and seven other employees had become temporary employees (one LS, two SNE and four AE) by 31 December 2000.

23. The information provided by the sample was corroborated by a global analysis of internal staff movements. As an annual weighted average, no fewer than 20 % of the staff at the Centre changed status each year (transition from auxiliary to temporary status or from temporary to permanent status).

24. Since 1995, the Centre has recruited 118 new members of staff. In 2 % of cases their status was that of PE, in 45 % of cases TE and in 55 % of cases AE, LS or SNE. At 31 December 2000, 30 % of the staff were permanent employees and 46 % temporary employees. Table 5, which shows the progression of recruitment by the Centre according to the type of procedure applied, shows that 47 % of the staff were recruited by way of external competition procedures within the meaning of the Staff Regulations, not all of which were rigidly adhered to (see paragraph 19). On average, recruitment costs amounted to 1420 euro per member of staff recruited.

25. Departures of members of staff have resulted in an average annual staff turnover rate (for PE, TE, AE, LS and SNE) of 14 %. In one third of the cases this rate was ascribable to expiry of the members of staff's contract and in the other cases it was due to breach of contract, in most cases on the part of the members of staff concerned.

26. For the purposes of the audit, members of staff were grouped into two categories:

- members of staff responsible for support activities (support staff), which is to say activities which ensure the continuity of the Office's operation (e.g. administrative, accounting and secretarial services, etc.),

- the other, so-called "operational", members of staff, who contribute directly to achieving the Office's objectives.

27. On average, 63 % of the category A staff may be considered operational employees. When all categories are taken together, 30 % of the Centre's staff may be considered directly operational members of staff.

28. Table 6 illustrates the changes in staff-related costs and in administrative expenditure over the period 1995 to 2000 and shows that expenditure on salaries has evolved in line with changes in staff numbers. Among the other staff-related costs, the examination focused particularly on administrative expenditure, which increased by slightly more than staff numbers, rising by 1,6 % per head over the year.

29. In order to grasp the relationship between the Centre's activities and changes in its staff numbers and staff-related costs, the latter was compared with the growth in the operating appropriations (Title III) actually disbursed (appropriations for the year and appropriations carried over) during the year. This comparison suggests that the management of the Centre is sound in so far as, on average, the volume of human resources is rising less rapidly than the Centre's workload.

30. A comparison of the rates of increase in expenditure under Title III, which brings together expenditure connected with the realisation of the Centre's objectives and expenditure under Titles I and II (staff expenditure and administrative expenditure), which support the implementation of operating expenditure, shows that these are evolving in parallel. However, the Centre should continue to pursue its efforts to improve its overall productivity.

Conclusion

31. Generally speaking, it appears that, since 1996, the Centre has been able to employ the staff it has requested during the budgetary procedure. It has managed to recruit auxiliary employees, local staff and seconded national experts to bolster its staff numbers with the result that actual total staff numbers tend to exceed the authorised total.

32. When employing staff, the Centre has used an essentially internal recruitment model, even if it has also turned to procedures of an external type.

33. Given the upwards trend in the number of permanent posts at the Centre, it would perhaps be desirable, in the case of posts concerning support activities and operational activities that require qualifications of an administrative nature, for it to join forces with the institutions and the other satellite agencies in order to recruit staff on the broadest possible basis. Furthermore, generally speaking, the Centre should 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 39, 13.2.1975, p. 1.

(2) OJ L 181, 23.7.1993, p. 11.

(3) OJ L 164, 24.6.1976, p. 1.

(4) OJ L 181, 23.7.1993, p. 15.

(5) Pursuant to Article 1 of Council Regulation (EEC) No 1948/93 amending Council Regulation (EEC) No 1416/76, the accounts for all the Centre's revenue and expenditure for the financial year 2000 were drawn up on 30 March 2001 and forwarded to the Commission and the Court of Auditors. They were received by the Court on 18 June 2001. A summarised version of these financial statements is published in the tables annexed to this report.

(6) All the tables in this report have been calculated on the basis of the most precise values possible for the data used. These have been rounded up in the presentation of the figures, which may give the impression that calculation errors have been made. A dash is used to indicate that a value is non-existent or nil, and 0,0 indicates a value below the rounding-up threshold.

(7) OJ C 373, 27.12.2000, paragraphs 13 and 14 and the corresponding replies, p. 29. The Court had drawn attention to various weaknesses relating to the awarding of contracts, and in its reply Cedefop promised to continue to strengthen its procedures, and in particular to have all contracts systematically examined by the Contracts Management Unit.

(8) OJ L 39, 13.12.1975, p. 1.

TABLES 1 TO 6

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 prepared by the Court on the basis of data compiled by the Centre.

Table 3

Balance sheet as at 31 December 2000 and 31 December 1999

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

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Table 4

Changes in staff numbers

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AE: Auxiliary employees.

LS: Local staff.

PE: Permanent employees.

TE: Temporary employees.

SNE: Seconded national experts.

Table 5

Analysis of the change in staff numbers

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Table 6

Changes in staff numbers and in staff-related costs

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The Centre's replies

8. The Centre understands the criticism of the Court and will ensure that in the future such demands will be introduced only when well founded and also within the same financial year. The Centre takes note of the wish of the Court to have the financial provisions of the Centre amended in this respect.

11. A Contract Management and Technical Services Section was set up at the Centre, effective as of 1 January 2000. This Section has formal responsibility for the contract administration of all contracts, except those concerning Cedefop staff governed by the Staff Regulations; contracts in the field of IT are also currently dealt with by this Section. The resulting changes in internal procedures meant that it took a few months for this Section to get up to speed at the beginning of 2000.

15. Following the introduction of the "Staff Info" component into our budgetary and accounting system Fibus since June 2000, all staff-related data are systematically stored and updated. When applying for allowances and other rights under the Staff Regulations, members of staff must submit the requisite supporting documents. Nevertheless, procedures will be further developed to facilitate regular updating.

16. The maximum duration of auxiliary contracts is limited by the Staff Regulations. However, under certain conditions administrative practice allows some flexibility in application, of which the Centre has taken advantage.

18. Cedefop has complied with the Staff Regulations and the Conditions of employment of other servants of the European Communities in all its recruitment under the Staff Regulations. It is understandable and normal that suitably qualified and competent persons who contributed under various contractual arrangements to the Cedefop start-up in Thessaloniki were sometimes (but not always) recruited to posts provided for under the Staff Regulations in accordance with the applicable rules.

19 to 25. The Centre considers that the analysis of the findings cannot take place in isolation and without taking into account the realities of the situation or the reduced administrative structure available to the Centre at the time following the transfer from Berlin to Thessaloniki.

Stabilisation took place progressively after the said move and the move to the new building in summer 1999. The staff policy decided in 1998 also helped reinforce this stability.

26 and 27. The Centre does not share the criteria used for grouping staff within the categories cited, and considers that the resulting percentages do not correspond to the real situation in Cedefop. For example, it is not appropriate in our case to include all secretaries in the "non-operational" part of our work. Our analysis shows that 66,5 % of our staff (35,7 % in research, reporting and analysis of data, etc. and 30,8 % in activities related to dissemination, information, communication and relations with stakeholders and clients) work in the directly operational sphere.

30. More and more products and services are developed internally and are of increasingly higher quality (please refer to the results of our recent external evaluation); a simple comparison between Title 1 and Title III, without analysing the results of the work performed, might lead to false conclusions being drawn.

The Centre will, however, increase its efforts to further strengthen productivity and efficiency. Work organisation and work flow will also be reviewed in order to adapt to new demands from stakeholders and clients and to use ICT in an optimal manner. Strong investment in advanced ICT is helping to further increase our efficiency and to cope with the increasing demands on Cedefop as European reference centre for vocational education and training.

31. The table of posts sets the limits for staff governed by the Staff Regulations, and such recruitment takes place in accordance with correct (inter)institutional procedures. Other staff are present under the relevant approved rules. All staff has been recruited to fulfil Cedefop's missions in the most cost-effective way.