Report

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

(2001/C 372/06)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Governing Board of the European Training Foundation in accordance with Article 11(4) of Council Regulation (EEC) No 1360/90(1).

2. The Court has examined the financial statements of the European Training Foundation for the financial year ended 31 December 2000. In accordance with Article 11(1) of Council Regulation No 1360/90, the budget was implemented under the responsibility of the Director. This responsibility included the drawing-up and presentation of the financial statements(2) in accordance with the internal financial provisions provided for in Article 12 of Council Regulation (EEC) No 1360/90. 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. 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 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 TRAINING FOUNDATION (TURIN) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2000

Budgetary implementation and accounts

5. The implementation of the budget for the year 2000 can be found in Table 1(3).

6. The Foundation committed nearly all the appropriations allocated to it for 2000 (16,2 million euro); of these, 13,4 million euro (83 %) were paid over the year and 2,7 million euro (16 %) were carried over to the next year, practically the same amount as last year.

7. The 2,7 million euro carryover to the next financial year concerned the heading "Priority actions" (1,4 million euro) under Title III (operating expenditure). The main reason for this important carryover was the late decision-taking by the Governing Board concerning the annual work programme. The Foundation should take steps to adopt its annual programme in due time, in order to implement its budget in conformity with the annuality principle.

8. The appropriations carried forward automatically from 1999 amounted to 2,9 million euro; of this amount, only 0,2 million euro were not used during 2000 and were therefore cancelled. The non-automatic carryovers (Title III) amounted to 0,2 million euro and concerned the cooperation with other agencies on the SI2 project.

Financial statements and accounting

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 Foundation uses separate accounting systems to keep its budgetary and general accounts. Moreover, the documents (commitment and payment orders) relevant to the transactions are not cross-referenced, and for certain transactions (i.e. revenue) no specific format has even been provided. This increases the administrative burden and makes it difficult to follow the audit trail.

11. During the first seven months of the year, the general ledger accounts were run in parallel with a new system, SI2x. In addition, in September, the Foundation abandoned efforts to integrate SI2 and SI2x due to a lack of human resources. The Foundation continues to use its old system and should, without delay, find a solution to the problem of integrating its budgetary and general accounts.

Internal controls

12. The Foundation should reinforce its system of internal control in order to obtain the approval of the Financial Controller and to restrict the powers given to the accountant so as to better respect the principle of the separation of duties.

Management of human resources

Staffing policy

13. The Foundation was established by Regulation No (EEC) 1360/90, as last amended by Regulation No (EC) No 1572/98 of 17 July 1998(4). The Foundation's staff are subject to the rules and regulations applicable to officials and other servants of the European Union. The Foundation adopts the necessary implementing rules in agreement with the Commission. The Director is in charge of all questions related to personnel.

14. The personnel policy of the Foundation has not yet been formalised in a single document. Various decisions exist on some particular aspects of the personnel management. Up to 1999, personnel management took place in collaboration with the services of the Commission. Since 2000 the personnel department of the Foundation has full responsibility for personnel management.

Recruitment and promotion

15. From the Court's examination of 31 personnel files, it may be concluded that there have been problems with the publication of vacancies, the evaluation of applications and the final recruitment procedures. In the future, the Foundation should improve the correctness and the transparency of its recruitment methods.

Changes in the Foundation's staff and activities

16. The Foundation's establishment plan only provides for temporary staff (TS). The number of posts to be occupied is authorised by the budgetary authority each year at the same time as the budget. The budget may also grant appropriations for the recruitment of auxiliary staff (AS) and local staff (LS).

17. Table 4 shows the changes over the years in the Foundation's staff and the categories to which they belong. On average, 90 % of the posts provided for in the establishment plan have been filled. The remaining posts were filled via the recruitment of auxiliaries and, above all, local staff.

18. Since the Foundation was set up, 243 people have been taken on and 115 have left. 65 % were employed as temporary staff and 35 % as auxiliaries or local staff. At the end of 2000, 90 % of the staff were temporaries. On average, since 1995, recruitment expenses have amounted to 2600 euro per person recruited.

19. Due to changes in the work programme of the Foundation, the Governing Board, at the meeting of 14 April 2000, agreed that the Foundation and the Commission should decide upon the use of resources in the medium term (2000 to 2004): some staff will have to be reallocated and some made redundant. As a result, a net reduction of the temporary staff is planned for the next four years, from 115 persons at the end of 2000 to 99 persons at the end of 2003.

20. Table 5, which analyses the way recruitment has developed by type of procedure, shows that, in 71 % of the cases, staff were recruited via external competition procedures as defined in the Staff Regulations. However, these procedures were not always applied as strictly as they should have been (see paragraph 15).

21. Staff departures have led to an average annual turnover rate (TS, AS and LS) of 14 %, half of which was due to the expiry of contracts and the remainder to the contracts being terminated before they had expired (mostly, by the staff themselves).

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

- staff responsible for support activities (support staff), i.e. activities which ensure that the Foundation can continue to operate (e.g. administrative, accounting and secretarial services),

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

23. On average, 70 % of A grade staff may be regarded as operational. Taking all categories together, 60 % of the Foundation's staff may be regarded as operational.

24. Table 6 shows the growth in staff-related costs and administrative expenditure. On average, salary costs over the period 1997 to 2000 increased by 9,7 % per person, whereas staff numbers decreased by 2,7 %. The contrast between these rates can partly be attributed to the upward drift of remuneration-related expenditure due to cost of living adjustments, length of service increments, etc.

25. In order to grasp the relationship between the Foundation's activities and the increase in its staff and the related costs, the latter was compared to the growth in the amount of operating appropriations (Title III) that were actually disbursed (appropriations for the financial year and appropriations carried over) during the course of the year.

26. This comparison suggests that the Foundation's productivity has increased since 1997. This is confirmed by the fact that expenditure under Title III, which includes all the expenditure relating to the achievement of the Foundation's objectives, has grown faster than expenditure falling under Titles I and II, (Staff and administrative expenditure).

Conclusion

27. Even though, since its inception, the Foundation has not been able to take on all the regular staff provided for by its budget in its establishment plan, it has been able to remedy this situation by recruiting auxiliaries, local staff and agency staff.

28. In order to recruit its temporary staff, in the majority of cases the Agency employs an external recruitment system similar to the model advocated by the Community institutions, but this should be applied more strictly (see paragraph 15).

29. In terms of its staff's overall productivity, the Foundation's situation is fairly satisfactory. For posts involving support and operational activities which require qualifications of an administrative nature, it might be preferable for the Foundation to join forces with the Community institutions and the other decentralised bodies with a view to recruiting staff on the broadest possible basis. Furthermore, in general terms the Office should improve its staff management and information system.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 10 October 2000.

For the Court of Auditors

Jan O. Karlsson

President

(1) OJ L 131, 23.5.1990, p. 4.

(2) As required under Article 11(3) of Council Regulation (EEC) No 1360/90, the accounts for all the Foundation's revenue and expenditure for the financial year 2000 were drawn up on 9 April 2001 and forwarded to the Foundation's Governing Board, the Commission and the Court of Auditors. These accounts were received by the Court on 17 April 2001. A summarised version of these accounts is presented in the tables annexed to this report.

(3) The calculations in 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 of arithmetical errors. A dash indicates a non-existent or nil value and 0,0 indicates a value lower than the rounding-off threshold.

(4) OJ L 206, 23.7.1998, p.1.

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 prepared by the Court of Auditors on the basis of data compiled by the Foundation.

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 Foundation.

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Table 4

Changes in staff numbers

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TS: Temporary staff.

AS: Auxiliary staff.

LS: Local staff.

Table 5

Analysis of the variation in staff numbers

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Table 6

Changes in staff and relates costs

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The foundation's replies

Budgetary implementation and accounts

7. The Foundation's Governing Board was able to convene and approve the work programme and budget for 2000 only on 15 February 2000, a fact that delayed the conclusion of many contracts until late in the year. In order to make gains in productivity, and in accordance with the advice of the Court, the Governing Board was convened for an exceptional third time in November 2000 in order to approve the work programme and budget for 2001 before the beginning of the financial year. This practice has had a beneficial effect on the execution of the budget in 2001, and will be followed in the future.

8. The non-automatic carryovers from 2000 mentioned under point 8 do not concern funds under Title III, but rather funds under Title IV "Earmarked expenditure", and were occasioned by the transfer to EFILWC in Dublin of the chairmanship and the financial and technical administration of the SI2 common support service (CSS).

Financial statements and accounting

10 and 11. Due to the lack of human resources, the Foundation decided to abandon the development of the general ledger system, and was consequently forced to continue with the "old" general ledger system CUBIC until a viable replacement could be found.

The Foundation has now adopted a project plan to replace CUBIC with an off-the-shelf system known as BOB, which can fully integrate the budgetary and general accounts through a software bridge with SI2, and provide a link with the banking software. This system has already been implemented successfully by two other members of the CSS.

Internal controls

12. In line with its human resource development plan, the Foundation intends to recruit an internal Financial Controller during the financial year 2002. In order to ensure the internal Financial Controller's independence, he/she will be separated from the Finance and Legal Unit and will be accountable only to the Director. This measure will enable the Foundation to comply with the Court's requirements to both reinforce the Foundation's internal control system and to restrict the accountant's power.

Staffing policy

14. Since its establishment in 1994, the Foundation has managed its own personnel, the Commission having provided assistance and supervision especially for the initial recruitment round, which took place in Brussels. Over the years a complete and consistent set of decisions and rules has been established, in consultation with the relevant Commission services and the Foundation's Staff Committee, covering the whole field of personnel management for the categories engaged in the Foundation. They are updated regularly, applied in a correct way, and published on our internal network for all staff, so the need for them to be "formalised into a unique document" has never arisen.

15. The way recruitment procedures are followed is fully in line with the CEOS and the Foundation's own rules. The Foundation will certainly continue to improve where possible and necessary, and for that reason in 2001 the personnel function of the Foundation has been reinforced with the appointment of an agent specifically in charge of the administrative management of recruitment procedures. A comparison with the recruitment practices for permanent officials within the institutions such as the Commission is questionable for an Agency that has no permanent officials (point 28).

Conclusion

29. In the past, the lack of an integrated computer information system for personnel management has increased the margin of error in the implementation of personnel procedures. The Foundation has therefore decided to adopt the SIC personnel database, which is the standard software adopted by the Commission for its personnel data, including the management of missions and leave. The deployment of SIC will also entail the shift from the present paper-based system to a new electronic workflow for missions ("SIC-mission" operational by the end of 2001) and leave, including sickness ("SIC Congés" operational early 2002), which will further increase efficiency in personnel management.