Report

on the financial statements of the European Agency for the Evaluation of Medicinal Products for the financial year ended 31 December 2000, together with the Agency's replies

(2001/C 372/03)

CONTENTS

>TABLE>

THE COURT'S OPINION

1. This report is addressed to the Management Board of the European Agency for the Evaluation of Medicinal Products in conformity with Article 57(10) of Council Regulation (EEC) No 2309/93(1).

2. The Court has examined the financial statements of the European Agency for the Evaluation of Medicinal Products for the financial year ended 31 December 2000. In accordance with Article 57(7) of Council Regulation (EEC) No 2309/93, 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 57(11) of Council Regulation (EEC) No 2309/93. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to examine these accounts.

3. The Court performed its audit in accordance with its audit policies and standards, which have been adapted from generally accepted international auditing standards to reflect the specific nature 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. 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 2000 are reliable and that the underlying transactions, taken as a whole, are legal and regular.

MAIN OBSERVATIONS CONCERNING THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN AGENCY FOR THE EVALUATION OF MEDICINAL PRODUCTS (LONDON) FOR THE FINANCIAL YEAR 2000

Implementation of the budget and budgetary accounts

5. The implementation of the appropriations for the financial year 2000 and of the appropriations carried over from the previous year is set out in Table 1(3).

6. Final appropriations for the financial year totalled 55,3 million euro, 51,8 million euro (94 %) of which was committed. Operating appropriations (Title III) amounted to 22,3 million euro, 93 % (20,7 million euro) of which were committed.

7. Of the appropriations carried over from 1999 (9 million euro), 1,6 million euro, i.e. 18 % of the total appropriations carried over, was cancelled at the end of 2000.

8. In 2000, there was an increase of 32 % in the carryovers, which amounted to 11,8 million euro. Of this amount, 5,9 million euro concerned the evaluation of medicinal products, which is a lengthy procedure necessitating the carryover of funds, and 2,5 million euro the extension of meeting rooms and their refurbishment in order to accommodate extra capacity for the evaluation of orphan and other drugs. Notwithstanding this, the Agency should seek to limit the level of carryovers through closer monitoring of its activities.

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 Agency included in its revenue accounts for 2000 amounts due but not actually received (55 million euro), despite its Financial Regulation, which clearly states that it should only post revenue actually received (45,5 million euro). This problem of presentation does not affect the reliability of the accounts.

Management of human resources

Personnel policy

11. The EMEA was established by Council Regulation (EEC) No 2309/93 of 22 July 1993. The Agency's staff are subject to the Regulations and Rules applicable to officials and other servants of the European Union (CEOS). According to Article 62 of Council Regulation (EEC) No 2309/93, the Management Board, in agreement with the Commission, is required to adopt the necessary implementing provisions.

12. The personnel policy of the Agency has not yet been formalised in a single document, although the director has already made decisions on some particular aspects.

13. Only the first recruitments were made by the Commission, which advertised the posts and followed the recruitment procedures. Since then, normal recruitment and staff management have been the responsibility of the Agency's personnel department.

Changes in the Agency's staff and activities

14. The staff of the Agency is made up entirely of temporary employees (TEs) and the number of posts is authorised by the budgetary authority each year when the budget is adopted. Furthermore, the budget may allocate appropriations for the recruitment of auxiliary employees (AEs), whose contracts of employment are limited to a maximum of one year, and seconded national experts (SNEs).

15. Table 4 shows the changes in the number of people employed by the Agency, broken down by type of post. The increase in the number of staff has tended to level off in recent years. In parallel, the proportion of auxiliary staff is tending to decline. At the end of 2000, virtually all staff were temporary employees.

16. Table 5 shows changes in recruitment according to the procedure applied and reveals that 141 of the 288 employees (49 %) had been recruited as temporary staff by procedures akin to external competitions. Slightly more than half of the employees (51 %) were initially recruited as auxiliary staff (very often after an employment agency contract in the case of the lowest grades), subsequently attaining temporary status as a result of what are essentially internal procedures. These findings are corroborated by an examination of a random sample of 25 employees who can be considered to be representative of the Agency's staff. On average, recruitment costs amounted to 2290 euro per person recruited. Staff departures resulted in an average annual staff turnover rate (permanent staff, TEs, AEs and SNEs) of 11 %.

17. 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 continuity of the Agency's operations (e.g. administration, accounts, secretarial services, etc.),

- other, "operational", staff, who contribute directly to the realisation of the Agency's objectives.

18. On average, 86 % of A grade staff may be regarded as operational. When all categories are taken together, 72 % of the Agency's staff could be considered operational members of staff.

19. Table 6 illustrates the changes in staff-related costs and in administrative expenditure over the period 1995 to 2000. The increase in salary costs was slower than the increase in staff numbers. This situation may be attributed to the Agency's recruitment policy, which, because staff progress from auxiliary status (often after an employment agency contract), delays entry into the formal career structure and therefore slows down the increase in salary costs.

20. In order to understand the relationship between the Agency's activities and the change in its staff and related costs, the latter was compared with the growth in its total revenue over a year. This comparison suggests that the management of the Agency is sound in so far as, on average, the use of human resources and the associated costs are rising less rapidly than the Agency's workload. This is corroborated by the fact that, on average, support expenditure (Titles I and II) is increasing less rapidly than operating expenditure.

Conclusion

21. Generally, it would appear that, even though, since its creation, the Agency has not been able to take on all the staff provided for in its budget's establishment plan, it has been able to make up for this by recruiting auxiliary staff and seconded national experts.

22. In the majority of cases, the Agency uses a recruitment system similar to the one used by the institutions to recruit temporary staff externally. The Agency applies an internal procedure to convert its auxiliary employees into temporary staff.

23. In view of the expected expansion of the Agency's activities, and therefore of its staff, it might be preferable for the Agency, in the case of posts involving support and operational activities which require qualifications of an administrative nature, 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 Agency should improve its staff management and information system.

This Report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 25 October 2001.

For the Court of Auditors

Jan O. Karlsson

President

(1) OJ L 214, 24.8.1993, p. 18.

(2) As required under Article 57(9) of Council Regulation (EEC) No 2309/93, the accounts for all the Agency's revenue and expenditure for the financial year 2000 were drawn up on 29 March 2001 and then forwarded to the Agency's Management Board, the Commission and the Court of Auditors. The Court received these accounts on 10 April 2001. A summarised version of these financial statements is presented in the tables attached to this report.

(3) The calculations in all tables in this report are based on the most accurate data available. As regards the presentation of figures, the figures have been rounded, which may give the appearance of arithmetical errors. A dash indicates an unavailable or zero value and 0,0 indicates a value lower than the rounding threshold.

TABLES 1 TO 6

Table 1

Implementation of the budget

>TABLE>

Table 2

Revenue and expenditure accounts for the financial years 2000 and 1999

>TABLE>

NB:There may be disparities in the totals, due to rounding.

Source:Presentation prepared by the Court of Auditors on the basis of data compiled by the Agency.

Table 3

Balance sheet as at 31 December 2000 and 31 December 1999

NB:There may be disparities in the totals, due to rounding.

Source:Presentation prepared by the Court of Auditors on the basis of data compiled by the Agency.

>TABLE>

>TABLE>

Table 4

Changes in staffing

>TABLE>

TE: Temporary employees.

AE: Auxiliary employees.

SNE: Seconded national experts.

Table 5

Analysis of the change in the number of staff

>TABLE>

Table 6

Increase in staff and related costs

>TABLE>

The Agency's replies

10. The issue of when the EMEA should recognise the EC subsidy, as revenue, was first addressed on preparation of the 1998 accounts. In that year the European Commission, on the basis of Article 28 of the Agency's Financial Regulation, did not transfer the full subsidy to the EMEA. Article 28 indicates that the subsidy should be paid in line with actual cash needs.

In 1998 the Agency decided that in order for the financial statements to show a fair view of the financial and budgetary situation it was appropriate to show the subsidy voted for each year as revenue for that year as the one year budgetary cycle does not coincide with the cash flow cycle. In addition, the Agency is required to present a balanced budget. During the current year the Agency and the Commission are seeking a solution whereby the full subsidy can be paid before the close of the budgetary year.

The whole issue of accounting for revenue by the Agency will be reviewed in the context of the recasting of the Financial Regulation. However, at present the Agency's management believes the accounting policies used correctly reflect the financial results of the Agency. Supplementary information on cash collected and payments made is given in great detail in the statement of revenue and expenditure in accordance with the Financial Regulation.

13. The EMEA applies the provisions of the Staff Rules and Regulations applicable to officials and other servants of the European Communities, which is a comprehensive document on contractual terms and conditions as well as other aspects of personnel policy such as professional conduct, training or performance evaluation. Where implementing rules are foreseen by the Staff Regulations the Management Board has adopted these and together they provide the body of documents that set out personnel policy at the Agency.

24. The establishment of an interinstitutional recruitment office will be an opportunity for community institutions and bodies to achieve economies of scale in certain common areas of recruitment. The EMEA will be following the establishment of the new office and will be exploring the possible services from this new body that could be of benefit to it.

The Agency selected a new personnel database system in the course of 2000 through an open tender procedure. Work to implement the chosen system started in December 2000 and good progress has been made. The system is operational for staff in Administration and Financial Control and shortly the Intranet functions will be made available to the staff of the whole Agency.