Report

on the financial statements of the European Foundation for the Improvement of Living and Working Conditions for the financial year 2002, together with the Foundation's replies

(2003/C 319/09)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the European Parliament and to the Council, in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002(1).

2. The Court has examined the financial statements of the European Foundation for the Improvement of Living and Working Conditions for the financial year ended 31 December 2002. In accordance with Article 18 of Council Regulation (EEC) No 1417/76(2), as amended by Article 1(16) of Council Regulation (EEC) No 1949/93(3), the Foundation's budget was implemented under the responsibility of its Administrative Board. This responsibility includes the drawing-up and presentation of the financial statements(4), in accordance with the internal financial provisions provided for by Articles 65 to 68 of Council Regulation (EEC) No 1417/76, as amended by Article 1(52) to (55) of Council Regulation (EEC) No 1949/93. The Court of Auditors is required pursuant to Article 248 of the Treaty establishing the European Community to examine these accounts.

3. The Court undertook its audit in accordance with its audit 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 accounts for the financial year ended 31 December 2002 are reliable and that the underlying operations are, taken as a whole, legal and regular.

OBSERVATIONS

Introduction

5. The Foundation was set up in 1975 to contribute towards the planning and establishment of better living and working conditions throughout the European Union(5). It has started extending its field of activity to the candidate countries. The Foundation has a network of experts throughout Europe, to which it delegates research work, including, for example, producing assessments of the current situation in the individual countries, drawing up case studies and national reports and carrying out surveys.

Implementation of the budget

6. The implementation of the appropriations for the financial year 2002 and of the appropriations carried over from the previous financial year is shown in Table 1.

7. The appropriations committed for the financial year 2002 amounted to 17,3 million euro, of which 13,3 million resulted in payments and 4 million were carried over. The carryovers represented nearly 50 % of the year's commitments for operational activities (Title III). The large amount of carryovers relating to operational activities shows that the Foundation needs to monitor and programme them better.

Financial statements

8. The revenue and expenditure account and the balance sheet published by the Foundation in its activity report for the financial year 2002 are presented in summary form in Tables 2 and 3.

9. The Foundation's accounting system is characterised by a great heterogeneity in the tools it uses. This means the data has to be re-entered and reprocessed many times, which is a potential source of error. The Foundation does not have an integrated system for monitoring fixed assets and calculating depreciation. It uses two separate databases, which are managed by two different departments.

Underlying transactions

10. Article 46(c) of the Foundation's Financial Regulation provides for the possibility of concluding contracts with suppliers by private treaty where the tender procedure is unsuccessful. Thus, in a call for tenders, the price range envisaged for two bid packages was between 25000 and 35000 euro. As the call for tenders produced no results, they were allocated by private treaty for 53500 and 86000 euro respectively. The Court suggests that the Foundation should improve the transparency of its procedures by specifying more clearly the conditions on the basis of which it makes use of the tender procedure.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 15 and 16 October 2003.

For the Court of Auditors

Juan Manuel Fabra Vallés

President

(1) OJ L 248, 16.9.2002, p. 1.

(2) OJ L 164, 24.6.1976, p. 16.

(3) OJ L 181, 23.7.1993, p. 26.

(4) As required pursuant to Article 16 of Council Regulation (EEC) No 1365/75, as amended by Regulation (EEC) No 1947/93, the accounts for all the Foundation's revenue and expenditure for the financial year 2002 were drawn up on 23 September 2003 and forwarded to the Court of Auditors. These accounts were received by the Court on 29 September 2003. A summarised version of the financial statements is presented in the tables annexed to this report.

(5) Council Regulation (EEC) No 1365/75 of 26 May 1975.

Table 1

European Foundation for the Improvement of Living and Working Conditions - Implementation of the budget for the financial year 2002NB:

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

Source:

Data compiled by the Foundation - These tables summarise the data provided by the Foundation in its own financial statements.

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Table 2

European Foundation for the Improvement of Living and Working Conditions - Revenue and expenditure account for the financial years 2002 and 2001

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NB:

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

Source:

Data compiled by the Foundation - These tables summarise the data supplied by the Foundation in its own financial statements.

Table 3

European Foundation for the Improvement of Living and Working Conditions - Balance sheet at 31 December 2002 and 31 December 2001((The balance sheet does not show an amount of one million euro relating to a convention signed with the Commission on 15 December 2002 and referring to allocated revenue receivable in 2003 and 2004.))NB:

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

Source:

Data compiled by the Foundation - These tables summarise the data supplied by the Foundation in its own financial statements.

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The Foundation's Replies

7. For the cases where contracts are repetitive in nature, the timing of contracting procedures has, where possible, been brought forward. In the other cases, where the nature of the actions is more innovative and complex, the Foundation will continue to explore possibilities to expedite their implementation, from their initiation to their contractual execution. Those efforts as well as the application of the new Financial Regulation are expected to reduce the volume of carryovers.

9. The Foundation is currently implementing measures to improve the integration of its accounting systems. Computerised systems for asset control are also currently being assessed.

10. The circumstances in which the Foundation found itself in this case were exceptional and the Foundation did raise the issue with the Board before proceeding to contract. It is the clear intention of the Foundation to ensure that, if such cases arise in the future, the limits applied to the original call for tenders will normally apply to the negotiated procedure ("private treaty"). In cases where the foreseen funding is found to be inadequate, the option of holding a new call with revised funding will be considered. Any deviation from this procedure in the future will only be implemented with the express approval of the authorising officer.