Report on the accounts and management for the financial year 1995 of the European Centre for the Development of Vocational Training (Cedefop - Thessaloniki)
Date: 1996-11-21
Institutions: European Court of Auditors
Subjects: Cedefop, Macedonia, closing of accounts, financial management, report













EUR-Lex - 31997Y0313(01) - EN






Avis juridique important




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31997Y0313(01)

Report on the accounts and management for the financial year 1995 of the European Centre for the Development of Vocational Training (Cedefop - Thessaloniki)  


Official Journal C 081 , 13/03/1997 P. 0001 - 0017 





REPORT on the accounts and management for the financial year 1995 of the European Centre for the Development of Vocational Training (Cedefop - Thessaloniki) (97/C 81/01) (Observations pursuant to Article 188c (4) second indent of the EC Treaty)CONTENTS Paragraph Page THE FINANCIAL STATEMENTS OF CEDEFOP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1995 . 1 - 5 2 AUDIT OBSERVATIONS . 6 - 71 2 General . 6 - 14 2 Background . 6 - 11 2 Scope of the audit . 12 3 Discharge of the 1994 budget . 13 3 Financial data . 14 3 Observations concerning budgetary implementation . 15 - 21 3 Separation of duties . 15 3 Imprest account . 16 3 Transfers of appropriations . 17 - 18 3 Carryovers and cancellations of appropriations . 19 - 21 4 Observations concerning the revenue and expenditure account and the balance sheet . 22 - 30 4 Revenue (subsidy paid by the Commission) . 22 4 Expenditure . 23 - 27 4 Balance sheet . 28 - 30 5 Transfer of the Centre to Thessaloniki . 31 - 66 5 General . 31 - 33 5 Temporary premises . 34 - 37 5 Permanent premises . 38 - 41 5 Staff: general . 42 - 45 6 Staff: change in status . 46 - 66 6 Summary . 67 - 70 8 Conclusion . 71 9 ANNEXES 1 - 3 . 10 TABLE 1 . 11 Replies of the Cedefop Management Board . 12 THE FINANCIAL STATEMENTS OF CEDEFOP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1995 1. This report is addressed to the Council and the European Parliament in conformity with Article 12 of Council Regulation (EEC) No 337/75 (OJ No L 39, 13. 2. 1975, p. 1), as amended by Council Regulation (EEC) No 1946/93 (OJ No L 181, 23. 7. 1993, p. 11).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 1995. In accordance with Article 18 (1) of Council Regulation (EEC) No 1416/76 (OJ No L 164, 24. 6. 1976, p. 1), as amended by Council Regulation (EEC) No 1948/93 (OJ No L 181, 23. 7. 1993, p. 15), the budget was implemented under the responsibility of the Management Board. This responsibility included the drawing up and presentation of the financial statements in accordance with the financial provisions as provided for pursuant to Articles 65, 67 and 68 of Council Regulation (EEC) No 1416/76 as amended by Council Regulation (EEC) No 1948/93. The Court of Auditors is required pursuant to Article 188c of the Treaty establishing the European Community to examine these financial statements.3. The Court undertook its audit in accordance with generally accepted auditing standards, in so far as they are applicable in the Community context, and, accordingly, carried out such tests of the accounting records and such other auditing procedures as the Court deemed necessary in the circumstances.4. At the European Council meeting of 29 October 1993, it was decided to change Cedefop's seat from Berlin to Thessaloniki. In order to facilitate this move certain changes were made in the conditions of employment of the staff, some of which were inconsistent with the applicable Regulations. The circumstances are further explained in paragraphs 46 to 66. A number of other instances were identified where payments were not fully in accordance with all the applicable Regulations.5. The audit examination enabled the Court to obtain reasonable assurance that the financial statements for the financial year ended 31 December 1995 are reliable, in that they reflect correctly the receipts and expenditure during 1995 and the financial situation at the end of the year. With the important exception of the expenditure mentioned in the preceding paragraph, the underlying transactions are as a whole legal and regular.AUDIT OBSERVATIONS GeneralBackground6. The European Centre for the Development of Vocational Training (Cedefop) was established by Council Regulation (EEC) No 337/75 (1) as a satellite body of the European Community with the task of promoting vocational training at Community level. Cedefop commenced operations in Berlin in 1976 and moved to Thessaloniki in 1995.7. The same Regulation defines its role as that of assisting 'the Commission in encouraging, at Community level, the promotion and development of vocational and in-service training`, of contributing 'to the implementation of a common vocational training policy` and especially encouraging 'the exchange of information and the comparison of expertise`. Its main tasks in the field of vocational training are 'to compile documentation, to contribute to the development and coordination of research, to disseminate useful documentation and information, to encourage and support initiatives likely to facilitate a coordinated approach (specifically in respect of the approximation of standards and the mutual recognition of certificates) and to provide a forum for all those concerned`.8. Cedefop is governed by a 48 member Management Board (at a cost of ECU 334 000 in 1995) made up of representatives of the Commission (three), employers' organizations (15), employees' organizations (15) and one representative from each EU Member State Government. The Management Board elects its chairman and three vice-chairmen from among its members, to serve for a period of one year. At the time of the audit (May 1996) the Director-General of DG XXII - Education, Training and Youth was the chairman of the Management Board. The Director of the Centre is appointed by the Commission from a list of candidates submitted by the Management Board for a period of five years.9. While the Basic Regulation makes the Director responsible for the day-to-day administration of the Centre, overall responsibility falls to the Management Board. The latter takes decisions, adopts the work programme and the annual report, and draws up the statement of revenue and expenditure for the previous year and the estimate of revenue and expenditure for the following year.10. The role of the Commission, laid down in the Basic Regulation and executed by the DG XXII representatives is not only to represent the interests of the Commission on the Management Board, but also to agree the work programme, to examine the annual report and statement of revenue and expenditure and to present the estimate of revenue and expenditure to the Council and the European Parliament.11. A second point of contact with the Commission exists through DG XX's function of financial control of Cedefop's expenditure. According to Article 23 of Council Regulation (EEC) No 1416/76 of 1 June 1976, as amended by Council Regulation (EEC) No 1948/93 of 30 June 1993, all commitments and payments made by Cedefop should be checked and signed by the Financial Controller prior to the actual payment, except for imprest account payments (see paragraph 48). Documents necessary for this process are posted to DG XX in Brussels with the remainder controlled during two annual visits by DG XX to Cedefop.Scope of the audit12. The Court carried out a financial audit of the 1995 accounts and examined sound financial management in respect of the transfer of the Centre from Berlin to Thessaloniki.Discharge of the 1994 budget13. The European Parliament decided on 17 April 1996 to delay giving discharge for the execution of the 1994 budget until the management strategies, working conditions and activities of the Centre are such as to ensure:(a) value for money for the budgetary expenditure used to support Cedefop,(b) efficient use of human and other resources,(c) products of quality which respond to the needs of Cedefop's clients,(d) a clear and coherent role within the policies of the European Community on vocational training.Financial data14. Available appropriations for the financial year 1995 amounted to ECU 16,50 million. Commitments entered into gave rise to ECU 10,11 million in payments and ECU 4,67 million in carryovers to the financial year 1996, the balance of ECU 1,72 million having been cancelled. Appropriations carried over from the previous financial year gave rise to ECU 2,16 million in payments and ECU 0,29 million in cancellations. Annex 1 to this report gives an analysis of the utilization of the appropriations for the financial year in question as well as of those carried over from 1994. Annex 2 gives an overview of the revenue and expenditure account for the financial year 1995 and the balance sheet as at 31 December 1995.Observations concerning budgetary implementationSeparation of duties15. The Centre, following the move to Thessaloniki, had at the time of the audit (May 1996) yet to put in place adequate procedures relating to the separation of duties of authorizing officer, accounting officer and imprest holder. For example, it was observed that the accounting officer also assisted and carried out work for the imprest holder.Imprest account16. A high proportion (in 1995 60 %, excluding salaries) of payments continue to be made prior to approval by the Financial Controller. The extent of the use of the imprest account is not in the spirit of the financial provisions. A more acceptable practice would be to limit the use of the imprest account to ongoing or small expenses, where the risk of irregularities is comparatively low.Transfers of appropriations17. The total of transfers of appropriations between different budget lines carried out in 1995 amounted to ECU 922 000, or 5,6 % of the initial budget, as against 10,9 % in 1994. Nearly 62 % of the transfers (ECU 570 000) were made in the last two months of 1995 as compared with 33 % in 1994.18. The Centre did not make transfers of appropriations between titles in 1995. The Court's observation last year (2) has been taken into account.Carryovers and cancellations of appropriations19. The practice of carrying over high values of appropriations, already observed in previous years (3), has increased in 1995. Only 61 % of final appropriations for 1995 were paid out in 1995 as compared with 73 % in 1994. The percentage of commitments made and carried over to 1996 was 28 % (23 % in 1994). The percentage of cancellations was 10 % compared to 5 % in 1994. Table 1 shows the carryovers from the 1995 initial budget by title and their subsequent use.20. Carryovers for operational expenditure amounted to 53 % of initial appropriations, compared to 40 % in 1994. Since 8 % of appropriations for operating expenditure were cancelled, the Centre paid only 39 % of its operational budget in 1995. At the end of the first quarter of 1996, only 34 % of the 1995 title 3 carryovers had been paid.21. The large amount of transfers and cancellations, together with the high volume of carryovers, indicates that the work programme was not executed as planned and that the principles of good budgetary practice have been compromised. These facts, combined with the lack of staff (see paragraphs 42 to 45), will have serious implications for the execution of the 1996 budget.Observations concerning the revenue and expenditure account and the balance sheetRevenue (subsidy paid by the Commission)22. The Commission paid out the subsidy due from the general budget of the Communities for the financial year 1995 in several tranches: ECU 2 300 000 was paid out on 6 February 1995, ECU 2 400 000 on 20 April 1995, ECU 2 500 000 on 28 June 1995, ECU 2 800 000 on 5 October 1995, ECU 5 875 000 on 22 November 1995 and ECU 525 000 on 1 December 1995. As in previous years (4) this pattern of funding is not consistent with Article 26 of the financial provisions applicable to the Centre, which requires payment to be made by the 15th day of each quarter and in accordance with actual requirements.Expenditure23. In 1994, after it was decided to transfer the Centre to Thessaloniki, Cedefop appointed a new deputy director who at that time lived and worked in Thessaloniki. This person moved to Berlin and was paid an installation allowance equal to two months' basic salary. Less than a year later following the Centre's move to Thessaloniki, the same official again received an installation allowance equal to two months' basic salary. Because the transfer was executed speedily, his stay in Berlin was short (11 months) and as part of that time was spent in Thessaloniki during which time he also received the full daily allowances (including for the weekends), the Court considers that these decisions are not in line with sound financial management and in the interest of Cedefop.24. The contract of another deputy director, who had already moved from Berlin back to Madrid in July 1995, was terminated by the Management Board with effect from 31 December 1995 in view of his unwillingness to relocate to Thessaloniki. Following this, he was paid ECU 71 030. The Court considers this decision by the Management Board to be contrary to the principles of sound financial management.25. Article 46 of Council Regulation (EEC) No 1416/76 of 1 June 1976, as amended by Council Regulation (EEC) No 1948/93 of 30 June 1993, stipulates that contracts may be made by direct agreement where the contract involves an amount not exceeding the limit of ECU 12 000. On at least 12 occasions, contracts over that limit were made without following the tendering procedure as described in Article 45 of the abovementioned Regulation.26. Nearly 40 % of the 1995 commitments on budget line 'Pilot studies and projects` (ECU 300 000) were made in the last two months of 1995. On budget line 'Exchange of officials and experts` ECU 150 572 was committed for an expert starting at Cedefop on 1 February 1996 and for an expert for whom the contract was signed on 22 December 1995. These commitments were made in haste and in order to avoid the funds being cancelled.27. The rent of the temporary premises for January 1996 (ECU 22 750) was already recorded in the 1995 accounts. As this expenditure is related to the 1996 budgetary year, it should have been recorded then.Balance sheet28. Because of a lack of a complete inventory list identifying each item, it was not possible to make any checks. The Court urgently requests the Centre to make as soon as possible an up-to-date inventory list as foreseen in Article 52 of Council Regulation (EEC) No 1416/76 of 1 June 1976, as amended by Council Regulation (EEC) No 1948/93 of 30 June 1993.29. The entry under amounts due from the previous financial year on the balance sheet includes an outstanding debt of ECU 3 134 relating to an invoice issued in 1991. The Court's observation last year (5) has not been followed in spite of the Centre's positive reply. The Court recommends the Centre to write this amount off, unless there is reason to expect that it will be recovered.30. At the year end cash balances held by the Centre were ECU 5,9 million. The Centre thus takes the responsibility for managing large cash balances, a responsibility for which it has little of the necessary expertise. The Court repeats the comment (6) made last year that this situation should be avoided and that the Centre should make its quarterly drawings from the Commission more closely in line with its actual cash needs. The Commission should at the same time make sure that they receive a realistic cash flow forecast from the Centre before the payments are made.Transfer of the Centre to ThessalonikiGeneral31. At the European Council meeting of 29 October 1993, it was decided to change Cedefop's seat from Berlin to Thessaloniki in Greece (7).32. The actual transfer to Thessaloniki took place in August 1995 and the Centre started activities in Greece in September 1995. According to calculations made by the Court, approximately ECU 3 300 000 of expenditure relating to the move is included in the 1995 accounts.33. From 1 September 1995 Cedefop has been located in a building of the Agricultural and Industrial Institute of Thessaloniki. From 1 September 1999 at the latest, a permanent building will be made available to Cedefop by the Greek State. Cedefop has signed four agreements regarding the rent of the temporary premises and the construction of the permanent building. The basic agreement between Cedefop and the Greek State was signed in Thessaloniki on 22 June 1995. The three other agreements, including one between the Greek State and the organization which is responsible for the entire construction, form part of the basic agreement.Temporary premises34. The annual rent of the temporary building is ECU 273 000 directly payable to the owner.35. Article 1 of the agreement between the Greek State and Cedefop stipulates that: 'The Greek State shall place at the disposal of Cedefop, as from 1 September 1995, the building of the temporary premises and the installations belonging to it, in their entirety` and in Article 2 it is stipulated that: '. . . both the buildings shall be made available to Cedefop ready for use. The Greek authorities shall be responsible for the electrical and electronic cables and telephone connections`.36. At the time of the handover of the building, the Centre did not make any written objections. However, during the first four months of Cedefop's stay in Thessaloniki (September until December 1995), it had to invest ECU 120 000 to fit out the premises to make the temporary building functional. Among other things electrical and electronic cables and telephone connections had still to be installed.37. These investments were fully paid by Cedefop and the expenditure was charged to the 1995 accounts. The agreements are unclear as to who is liable to pay these investments.Permanent premises38. The Greek State is committed to make a permanent building available to Cedefop on 1 September 1999 at the latest. For the construction of the building Cedefop will pay to the Greek State ECU 6 879 750 in four equal instalments of ECU 1 719 937. The dates for payment of the first three instalments are set at 1 September 1995, 1 September 1996 and 1 September 1997. The last instalment will be paid when the building is handed over.39. Cedefop has not secured that these payments are related to the actual state of advancement of the construction. The Centre will pay ECU 5 159 811 more than two years before they will be handed over the building.40. The Court recommends Cedefop to make sure that the interest of the first instalment will be to the benefit of the project.41. The Centre should make sure that the Employee Accommodation Organization (OEK), which is responsible for the execution of the entire work, shall take care of Cedefop's interests.Staff: general42. In 1995, the staff complement table authorises 79 posts, of which: 24 A, 11 LA, 15 B, 26 C and 3 D. At the time of the audit (May 1996), 37 persons (14 A, 7 B, 14 C and 2 D) were actually working for Cedefop, 11 persons had been transferred to other EU institutions, 14 members of staff left Cedefop before the transfer to Thessaloniki and 17 persons had decided not to leave Berlin. Many new members of staff had and will have to be recruited during 1995 and 1996.43. The 17 persons who stayed in Berlin are free to work for public, private or other EU institutions but are being paid their salary for up to 18 months, depending on their seniority at Cedefop (one month per year of service with a minimum of six months). After this period the persons concerned can either move to Thessaloniki or find other solutions. A consequence of this situation is that Cedefop is not able to use these 17 posts (May 1996) because they are blocked in the budget and they have to be kept free in case a person eventually later decides to move to Thessaloniki.44. It is not clear what will happen to those of the 17 persons who do not want to move to Thessaloniki after their agreed stay in Berlin. According to Article 20 of the Staff Regulations, 'an official shall reside either in the place where he is employed or at no greater distance therefrom as is compatible with the proper performance of his duties`. Nevertheless, three cases have already been brought before the Court of Justice of the EU by employees who did not want to move to Thessaloniki.45. This situation where 17 key staff are blocking posts authorized in the budget without working for Cedefop had already in 1995 and will have in 1996 and 1997 a substantial impact on the operations of Cedefop.Staff: change in status46. Article 13 of Council Regulation (EEC) No 337/75 of 10 February 1975 was amended by Council Regulation No 251/95 of 6 February 1995 to include '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 Centre shall exercise, in respect of its staff, the powers devolved to the appointing authority. The Management Board shall, in agreement with the Commission, adopt the appropriate implementing rules`. Council Regulation (EC) No 251/95 repeals at the same time Council Regulation (ECSC, EEC, Euratom) No 1859/76 of 29 June 1976 laying down the conditions of employment of the staff of Cedefop. The amendment was necessary to ensure there was 'consistency at Community level in the management of the staff of the different decentralized bodies` (8). However, the Cedefop staff was made official, whereas the other decentralized bodies were allocated temporary staff.47. The Court has examined the changes made to the Staff Regulations and other agreements made between the Management Board and staff, and detected a number of irregularities, of which those explained in paragraphs 49 to 66 are considered the most serious.48. The Management Board has not sent these agreements to the Financial Controller for approval. However, all commitments resulting from these agreements were paid through the imprest account and subsequently received the approval of the Financial Controller.Regularization of staff49. Cedefop did the following to 'regularize` the positions of its employees following the move to Thessaloniki:- firstly, from 1 March 1995 it employed all of its staff as temporary officials (Article 2b of the Regulations and Rules applicable to other servants of the European Communities) at the same grade and step as when they had been employees under contract,- secondly, from 1 April 1995 it recruited these people as EU officials following an internal competition that had been 'arranged` on the basis of qualifications alone.Infringement of the Staff Regulations with regard to the step at which the former employees contracted to Cedefop were initially classified as temporary officials50. When the employees were classified as temporary officials on 1 March 1995, the highest step at which any member of the Cedefop staff could be recruited was 3 (or 4 in the case of Grades A 1 to A 4, L/A 3 and L/A 4 only) (Article 32 of the Staff Regulations, made applicable to temporary officials by Article 15 of the Regulations and Rules applicable to other servants of the European Communities).51. However, 33 of the 59 members of the Cedefop staff that had been taken on as temporary officials were graded at a higher step than 3, which is irregular.Misuse of powers during the organization of the internal competition to appoint employees formerly contracted to Cedefop as officials52. Cedefop issued 15 joint notices of vacancy and internal competition on 1 March 1995. Following these competitions, all of the staff previously employed by Cedefop were appointed as officials.53. Pursuant to the Staff Regulations, the purpose of a competition is to allow a number of candidates to compete so that the person most qualified to fill a vacancy can be selected (Article 27 (1) of the Staff Regulations). Consequently, the risk of failure and the fact of competing are, by definition, all part of sitting a competition.54. In contrast to this, the purpose of the 15 competitions held by Cedefop was entirely different in that it was intended to regularize the position of its staff following the move to Thessaloniki, and it was known in advance from that moment on which people were going to pass. This is substantiated by:- the 'confidential` note annexed to the aforementioned notices of vacancy and competition which had the name(s) of the person(s) who was(were) to pass each competition marked alongside,- each member of the staff had been given a prior 'written guarantee` of his/her appointment as an EU official by the Centre (paragraph 4.1, indent 4 of the 'Framework Agreement`, indent 2 of the letter dated 7 February 1995, and the actual letter of guarantee). There was, therefore, no risk of failure. On the contrary, each candidate was already certain of passing the competition before it had been held.55. The Court of Justice of the EU ruled that when any authority uses its power for any purpose other than that stipulated in whatever Regulation concerned, it is guilty of a misuse of power (9). The Court of Justice brought in this ruling in the field of the EU civil service specifically with a competition procedure (10) in mind. The consequence of this is that appointment decisions taken following a competition procedure that is affected by misuse of power are illegal (11).56. The Commission's Legal Service also arrived at the same conclusion, as confirmed by paragraph (c) of its note dated 4 January 1995 (12).57. Since the purpose of the competition in question differed from that laid down in the Staff Regulations, it follows that the competition procedure applied by Cedefop was affected by misuse of power, and is therefore illegal.Infringement of the Staff Regulations in the grading as officials of employees formerly contracted to Cedefop58. Pursuant to Article 31 of the Staff Regulations, each member of the Cedefop staff should have been appointed on 1 April 1995 as follows:- officials in Category A or the Language Service (L/A):to the starting grade of their category (i.e., A 7 or L/A 7) (Article 31 (1)),- officials in other categories:to the starting grade of their career-bracket (i.e., B 1, B 3 or B 5; C 1, C 3 or C 5, D 1, D 3 or D 4) (Article 31 (2)),- exceptionally, staff could be appointed at the next higher grade within the limits of up to half of the posts (Article 31 (2) (b)), by groups of six.59. In breach of the Staff Regulations, 32 officials out of 43 were appointed at a grade higher than the starting grade of their category or career-bracket (13).Breach of the obligations concerning the probationary period60. A probationary period must be successfully completed before an official can be appointed to a permanent post (Article 34 of the Staff Regulations). The probationary period therefore requires an objective a posteriori assessment to be made of the probationer.61. Contrary to the Staff Regulations, each probationary official was informed that he/she would definitely be appointed and the probationary period was clearly declared in advance to be a necessary 'legal formality`, with no probationary value (paragraph 4.1 of the Framework Agreement); letter of 7 February 1995 to each probationer, sub-paragraph 2 and paragraph 1 (f) of the Annex): 'the probationary period is a legal formality and will be completed as such by each probationer`).Illegality of seconding officials during the probationary period62. Article 38 of the Staff Regulations allows only an established official to be seconded, i.e. an official who has successfully completed the probationary period. Contrary to this provision, 11 officials recruited by means of the aforementioned competitions were seconded to various EU institutions during the probationary period.Illegality of the arrangements made especially for Cedefop officials for the transfer of part of their salaries abroad63. Community officials are allowed to transfer a maximum of 16 % of their salaries (or up to 35 % if they provide documents indicating actual expenditure). New Cedefop officials may transfer as much as 50 % of their salaries in another currency. However, this treatment could be justified only:- on a quite exceptional basis,- in duly substantiated cases.64. These conditions have not been satisfied in the case in point. The fact is that:- Cedefop considers the difference in the cost of living between Berlin and Thessaloniki and the difference in the weighting between these two places to be exceptional. However, the fixing of a weighting by the Council is a legal decision to which no exceptions can be made. The aim of the weighting is precisely to resolve differences in the cost of living with a view to guaranteeing all officials identical purchasing power whatever their place of employment,- Cedefop officials are not required to submit sufficient supporting documents to benefit from these exceptional favourable arrangements.65. It follows that a system was created for transferring up to 50 % of officials' remuneration in a currency which is subject to a weighting (Germany 111,4 %) that is higher than the weighting for Thessaloniki (Greece 80,2 %), with considerable adverse consequences for the Community budget and corresponding benefits (at least one month extra salary per year) for the staff concerned.Inequality of treatment as compared with other officials when special mobility arrangements were introduced66. Cedefop obtained from the Commission a commitment to establish specific Regulations governing mobility. Such Regulations are contrary to the principle of equality of treatment for all officials. Article 13 of Council Regulation (EC) No 251/95 of 6 February 1995 makes the Staff Regulations and the Regulations and Rules applicable to other servants of the European Communities clearly applicable to the staff of Cedefop. As a result, all of the provisions concerned are applied to these latter, including Article 29 (1) (c), which provides for the possibility of transfer between institutions. Consequently, there can be no justification for special treatment as regards mobility.Summary67. The Court's audit has shown that the work programme has, due to the serious lack of staff, not been carried out as planned. This resulted in a large amount of transfers and cancellations of appropriations. The audit has also revealed that administrative and accounting procedures are not yet in place.68. Allowances equal to four months' basic salary paid to two deputy directors and a payment of ECU 71 030 to one of the deputy directors are not in line with sound financial management and in the interest of Cedefop.69. At the time of the Court's audit only 37 persons out of 79 authorized posts were actually working at Cedefop. In all 17 staff members were made EU officials although they did not want to move to Thessaloniki and did not transfer to another EU institution.70. The Court has detected serious irregularities on examination of the changes made to the Staff Regulations.Conclusion71. In the context of the move to Thessaloniki, it is understandable that efforts were made to assist the staff in order to retain them within the EU institutions and to ease the difficult problems of the transfer. The problem remains that the framework of Regulations within which the move had to be implemented, even after the changes had been made to the applicable Staff Regulation, was incompatible with the proper treatment of long-serving staff and at the same time the successful translation of Cedefop as a going concern.This report was adopted by the Court of Auditors in Luxembourg at the Court's meeting of 21 November 1996.For the Court of AuditorsBernhard FRIEDMANPresident(1) Council Regulation (EEC) No 337/75 (OJ L 39, 13. 2. 1975, p. 1).(2) Annual report of the Court for 1994.(3) Annual reports of the Court for 1992, 1993 and 1994.(4) Annual reports of the Court for 1990, 1991, 1992 and 1994.(5) Annual report of the Court for 1994.(6) Annual report of the Court for 1994.(7) Council decision of 20 October 1993 (OJ No C 323, 30. 11. 1993, p. 1).(8) Council Regulation (EC) No 251/95 of 6. 2. 1995 amending Regulation (EEC) No 337/75 establishing Cedefop, fourth recital.(9) See, inter alia, the CFI Judgment of 16. 12. 1993, case. T-80/90, Turner/Commission, Rec. p. II-1465, and the Judgment of 14. 2. 1990, case. T-38/89, Hochbaum/Commission, Rec. p. II-43.(10) Judgment of 29. 9. 1976, case 105/75, Giuffrida/Council, Rec. p. 1395.(11) Giuffrida Judgment, op.cit.(12) 'A competition procedure is, by definition, subject to an element of risk of failure and there are obvious legal reasons for not removing this margin of risk`.(13) Out of 17 category A officials 13 (Staff Regulations limit of six) were appointed at a grade higher than A7;five L/A officials out of five (none allowed under Staff Regulations) were appointed at a grade higher than L/A7;12 category C officials out of 18 (Staff Regulations limit of six) were appointed at a grade other than the starting grade for their career-bracket;two category D officials out of three (none allowed under the Staff Regulations) were appointed at a grade other than the starting grade for their career-bracket.ANNEX 1 >TABLE>ANNEX 2 >TABLE>>TABLE>ANNEX 3 >TABLE>>TABLE>REPLIES OF THE CEDEFOP MANAGEMENT BOARD The nature of the observations of the Court of Auditors obliges the Management Board of the Centre to react in a similarly extensive way. The Board will follow the structure of the Court's observations and conclusions. The numbering of the annotated paragraphs corresponds to that used in the Court's report.3. The Board has the legitimate expectation that all institutions and decentralized agencies are treated in a similar manner and on the basis of the same professional standards and procedures which guarantee equal treatment.4. The Management Board is of the opinion that this introductory presentation of the problems fails to mention essential facts which might be summarized as follows:- the decision at the European Council of 29 October 1993 was taken without any prior assessment of the implications of such relocation. Nevertheless, the Board respected fully the political decision and implemented the transfer from Berlin to Thessaloniki, with the valuable support of the European Commission,- the Commission made proposals to amend the existing Regulation (modification of Article 13 of Regulation (EEC) No 337/75) and the Council accepted these amendments in the context of its decisions of 16 and 17 May 1994 in which Thessaloniki was formally fixed as seat of the Centre as from 1 September 1994. In the statements recorded in the Council's minutes (see Annex to Doc. 6653/94 SOC 110) the Council and the Commission laid down important conditions for the transfer. 'The Council and the Commission undertake to consider as soon as possible the appropriate measures, in particular as regards staff conditions of employment, to accompany the transfer of Cedefop from Berlin to Thessaloniki`.In this statement the Council also calls on the Commission and the Management Board to find suitable solutions for accompanying measures,- following that request of the Council of Ministers, on several occasions all interested parties looked for adequate solutions which would also be in line with the opinions of the European Parliament and the Economic and Social Committee. On his arrival (1 October 1994) the new director was instructed to treat the transfer as a matter of absolute priority. In his first contact with the staff he made a firm commitment to carry out the move on 1 September 1995, a schedule which Cedefop met, despite the problems inherent to the relocation of the Centre,- the Chairman of the Management Board addressed a letter to the responsible Commissioners, Mr van Miert and Mr Ruberti. On 18 November 1994 the chairman and the vice chairpersons of the Management Board of Cedefop were received by the Commissioners. The chairman made an urgent appeal to the Commission for social measures, especially for the staff who were unable to leave Berlin. In view of the existing Regulations the Commissioners stated that they were prepared to examine the specific problems of the staff in a positive and pragmatic spirit. They also expected the same from other Community institutions (European Parliament, Council, etc.),- the Management Board at its meeting on 8 and 9 December 1994 was not able formally to decide on the date of the transfer because it did not appear acceptable simply to dismiss staff unable to relocate to Thessaloniki without a modern social plan. At the same meeting the Management Board instructed the director to complete the preparatory work for a decision of the Board (to be taken at an extraordinary meeting on 27 January 1995) to transfer the Centre in a socially acceptable way on 1 September 1995,- in the second half of December 1994 the Council started to examine the Commission proposal amending Article 13 of the Cedefop Regulation and designed to ensure that the staff are covered by the rules applicable to other Community officials and other servants of the European Communities. The Director took this amendment as a basis for formulating the Framework Agreement of the social measures in connection with the transfer of Cedefop to Thessaloniki. This Framework Agreement was signed on 23 January 1995 with the staff. The preparations were made in close collaboration with the European Commission which was very helpful during the whole transition process (1994 to 1996),- the Management Board took the decision to accept the Framework Agreement and to transfer the Centre to Thessaloniki on 1 September 1995. The Cedefop Management Board also authorized the Director to approach national, international and Community bodies and services to ensure secondment or measures having similar effects for staff of the Centre who could prove they were not in a position to relocate to Thessaloniki. In line with the Framework Agreement, staff not in a position to leave Berlin chose to be put at the disposal either of EU institutions or of public/private organizations and receive salary payment from the Centre for a period of not less than six months and corresponding to one month per year or part of year of service with the Centre. The principle of one month for every year of service more or less corresponds to social plans and usual procedures in Germany and neighbouring countries,- early retirement measures were anticipated during 1995 for 17 members of staff (aged over 55 and having 10 years of service or aged over 50 and having 15 years of service). Such measures did not form part of the Framework Agreement and ultimately were not proposed by the Commission because of the decisions of the Council of Ministers on 17 November 1995 to accept the 'dégagement` in relation to enlargement only for staff of the European Parliament.The Management Board will answer in greater detail, later, reactions to paragraphs 46 to 66. As a general statement it is very important to take the political aspects seriously into account and to avoid criticism following the event. Indeed, the transfer of a whole agency within the restrictive context of a large number of different Regulations and faced with a host of social and individual problems is quite unique in Community history.5. The Board will come back later on this reply to the exception mentioned in the last sentence.8. The cost of the Management Board meetings in 1995 is due to the fact that two additional meetings (January and June) had to be held in relation to the transfer. Furthermore, the meeting in December 1995 was more costly on account of the official start to activities in Greece. Only two meetings are planned in 1996.13. The Management Board regrets the absence of reaction from the Court of Auditors to the decision of the European Parliament to postpone discharge for the 1994 budget. This raises serious questions since:- the discharge for 1994 should be considered in relation to the 1994 report of the Court of Auditors and the recommendations of the Council of Ministers concerning the discharge and should be based on the rules and practices currently in force,- the European Parliament assessment of the 1995 financial year without a report of the Court of Auditors for the 1995 year, to which the Management Board could have the opportunity to react, leads to an amalgamation of very different situations,- during 1995 the Centre transferred to Greece. This transfer took place without disruption and under acceptable conditions. This transfer, on account of the disturbances staff were subjected to, requires a period of transition which can only end in 1997.15. There is marked improvement in this respect. The limited assistance provided was intended to help to present proposals for commitments or payments, and did not concern decisions on budgetary execution. In the pioneering phase in Thessaloniki, staff helped each other in carrying out the work.16. As indicated already last year, extended use was made of the imprest account at the request of Financial Control for reasons relating to the cost/benefit ratio. The earlier system entailed substantial courier costs and resulted in delays. It also meant that Financial Control had to intervene more frequently. The application of the imprest account for all expenditure which may give rise to provisional commitments limited the costs of management and shortened delays. This situation is aggravated by payment procedures in Greece (the majority of payments are in cash or by cheque). Bills indicating a bank account number are rare; suppliers collect the money themselves. The geographical distance from Financial Control and the lack of reliability of the postal service must be considered. In addition, on account of the costs (Bfrs 3 000/delivery) express courier deliveries are limited to one per week.A modification of the decision creating the imprest account will shortly be submitted to the Management Board in order to better take into account the wishes of the Court of Auditors.17. The transfers of appropriations in the last two months are accounted for by the need to make optimal use of the budget (of which ECU 2 000 000 in reserve was released just prior to the transfer of the centre to Thessaloniki) and the decision of the Board (7 and 8 December 1995) to recruit national seconded experts along the lines followed by the Commission (also to contribute to the progress in the work of the Centre).19. The Management Board was aware of the fact that 1995 and 1996 would be years of transition and renewal. A certain loss of production is inherent to this international transfer which was in the Board's opinion carried out in an acceptable, non-disrupting manner. The Centre is still facing the problems linked to the transitional period.20. As the transfer of the Centre took place with a considerably reduced number of staff, the operations of the administration and all the other services slowed down. For this reason a non-automatic carryover of appropriations was requested and approved.22. The Management Board notes that the Commission makes every effort to respect the provisions contained in Article 26 of the financial provisions relating to the Centre and to transfer the subsidy quarterly in the first two weeks of the quarter, in line with real needs. There has been an improvement in this in 1995 as compared with 1994. However, on account of the lengthy nature of internal procedures (involving the authorizing body, Financial Control and the accountant) and the length of the bank procedure, the overall delay in processing (on average 12 days in 1995) cannot be entirely overcome. In spite of this, in 1995 three payments all but respected the provisions contained in Article 26, arriving at the Centre less than four days after the first two weeks of the quarter. If, for all the payments, the processing period (between 9 and 22 working days) had been the average period of 12 days, all three would have conformed to Article 26 of the provisions. The first payment did not comply with the provisions but for this payment scheduling must be preceded by the commitment of appropriations which requires a certain amount of time.23. The deputy director who moved from Thessaloniki to Berlin did so on account of the uncertainty surrounding the actual date of the Centre's transfer. At the time of his appointment (1 October 1994) no decision had been taken on the date of the move (which could have been delayed for a further period). It was hoped that his stay would be short, but its duration was unknown at that time. For the usual family reasons he moved to Berlin under the conditions of the Staff Regulations.His daily allowances for missions were processed in the same way as for other staff. As far as the second installation allowance is concerned the deputy director repaid this sum to the Centre after the audit visit, although he may well have been fully entitled to it.24. The Management Board at its meeting in June 1995 terminated his contract as from 31 December 1995 and instructed the director to execute his decision and to settle statutory payments. The Management Board was pleased that the deputy director was prepared to help in executing the 1995 work programme and to contribute to the new start of the Centre in Thessaloniki. The compensation (the payment of one third of basic salary for the period between the date when his duties ended and the date when his contract expired) was in conformity with his contract.25. Given the difficulties linked to the start-up period and the multitude of new contracts, the Centre was prevented from applying the normal tendering procedures to each and every case. This situation which was exceptional is gradually returning to normal. For the longer-term contracts tendering procedures are in the mean time carried out or foreseen for 1996.In addition, in order to ensure a better balance of budgetary execution throughout the year, the Management Board will anticipate approval of the 1997 work programme so that the services have the necessary time to call for tenders and make commitments for spending and the subsequent contracts can be signed during the first months of the budgetary year.26. The 40 % commitments on budget line 'Pilot studies and projects` (ECU 300 000) were made in the last months of the year due to the late release of the reserve on the 1995 budget by the Budgetary Authority and the transfer of the Centre to Thessaloniki. The Centre had to act logically and consistently and could simply not do otherwise because it had first to honour its Title I and II financial obligations and could therefore only make further Title III commitments after the release of the reserve.The possibility of seconding national experts was given by the Management Board at its December 1995 meeting and was financially based on the reserve budget. The Director had to act quickly to avoid funds (which became available very late) being cancelled. The application of the (Austrian) expert (supported formally by the government) was already forwarded in early 1995.27. The reason for recording the January 1996 rent in 1995 was purely practical in nature. According to the contract the rent has to be paid in two instalments on 1 January and 1 July in advance. As the initial payment was only made in October 1995 it would have been difficult to pay almost immediately again on 1 January 1996, the first payment was made covering five months including January 1996.28. The update of the inventory list is in progress.29. This will be followed up.30. The Centre ensures that it forwards a realistic cash-flow forecast to the Commission. This is to avoid managing excessively large cash balances, in conformity with the demands of the Court.The last payment of the year should be expected to be the largest because it has to cover also the first months of the following year when normally major payments have to be made.31. See the comments concerning paragraph 4.32. The administration of the Centre is preparing an assessment of the costs of the transfer and estimations of developments in order to give a comprehensible picture of the costs and benefits of the transfer to Greece.36-37. The Centre was expected to be operational immediately on its arrival, some additional investments and changes were necessary. As stated, the agreements are unclear as regards liability for these payments. Some of the investments were due to the fact that the Centre needed extra electric power and stronger computer cables than the standard cable provided. Other investments relate to additional security needs and to communications facilities for example. Europe by satellite in order to be able to follow transmissions on the institutions simultaneously. The Centre has nevertheless put questions related to the provisional building on the agenda of the Steering Committee which deals with the new and (if necessary) provisional building.38-41. The Management Board is aware of the fact that the content of the agreement on the new building placed great responsibilities on the Greek Government, which is, however, honouring the agreement.There are two main concerns:- ensuring a high-quality building at a reasonable price,- ensuring that the building is delivered for use in time (if possible before 1 September 1998).The fact that large payments are made in advance (half of the building now having been paid for although construction has not yet started) may also have positive aspects because actual construction (after the selection of the plan and the construction company in October/November 1996) might progress rapidly because funds are available. Generally, the Board understands fully the concerns of the Court which were also expressed by European Parliament members, Mr Kellet-Bowman and Mr Tappin who visited the Centre on 1 and 2, and 14 and 15 May 1996 respectively. The Board is prepared to act on this issue along the lines recommended by the Court.42. Keeping in mind the various social measures, the staff situation was quite complex (and has improved ever since) but persons on the payroll of Cedefop who were not placed at the disposal of organizations or seconded in Berlin were working for Cedefop and its work programme.43. The Management Board took the decision on social measures in relation to the transfer (Framework Agreement) in order to 'find, as soon as possible, adequate solutions for accompanying measures` (see statements contained in the minutes of the Council). The evaluation of the measures were to take the political context into consideration.The Centre is in Thessaloniki and the Board and the director decided on how the work is organized. It is evident that some posts are blocked as long as the social measures are in force. By the end of 1996 almost all measures will have been concluded and Cedefop will be functioning to full capacity on the basis of the mid-term priorities (to be decided by the Management Board in November 1996) and the work programme 1997 which is likewise based on these priorities. Cedefop will therefore adopt, as from 1997, a revitalized and fresh approach to the future.44. The persons who for social and/or personal reasons could not leave Berlin when their agreed period of stay in Berlin ended have three alternatives. In this respect the President of the Court of First Instance handed down three orders rejecting applications for interim procedures. Staff must relocate, leave the service of the Centre or find other solutions in conformity with the Staff Regulations.45. The impact in 1996 is of course considerable but after the first months of 1997 it will be minimal. The transfer had its impact and costs. But if compared to a similar national transfer, for example that of CEREQ (Centre d'études et de récherches sur les qualifications) from Paris to Marseilles (where only 21 of 120 staff followed the Centre), Cedefop did quite well without an exaggerated negative impact for an international transfer of nearly 2 000 km. Prudent estimations of the costs indicate that by the year 2000 the costs will be neutral and afterwards operations will be more cost effective (mainly because of the lower labour costs in Greece).44-66. The points raised merit a number of preliminary general comments:(a) As the Court points out in its conclusion (72), it is understandable that efforts were made to assist the staff in order to retain them within the EU institutions and to ease the difficult problems of the transfer.(b) It is not, however, the fault of the Management Board that 'the framework of Regulations within which the move had to be implemented . . . was incompatible with the proper treatment of long-serving staff and at the same time the successful translation of Cedefop as a going concern`.(c) Following the decision of the Board on 27 January 1995, the Council modified on 6 February 1995 (Regulation No 251/95) Article 13 of Regulation (EEC) No 337/75 to the effect 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`. Even in the absence of transitional provisions, as was the case when Council Regulation (EEC, Euratom, ECSC) No 259/68 was adopted (see Article 102 of the Staff Regulations for officials of the European Communities and Article 99 of the Conditions of employment of other servants of the European Communities), it had to be taken into account that Cedefop staff could be considered 'servants of the European Communities` although this was governed by an ad-hoc Council Regulation.(d) As Community legislation did not provide for any transitional measures, the Management Board had not other choice than to act on its own responsibility to safeguard the rights and interests of Cedefop staff.(e) It should be borne in mind that Regulation (EC) No 251/95, moving Cedefop's seat from Berlin to Thessaloniki, constitutes a sudden change of the staff's place of employment as evidence by the contracts of employment. For 20 years Berlin was the only seat of Cedefop and at no time since 10 February 1975 has there been any indication that this location might be changed, let alone moved to another distant Member State. Cedefop's staff accepted employment and took their personal decisions (employment of spouse, education of children, etc.) on this basis.(f) Given these circumstances, it was the Management Board's duty:- to give staff a high level of security as regards their employment (establishment as officials),- to ensure the maintenance of their category, grade and step, and- to assist staff who so requested in finding alternative employment.(g) The Management Board would also point out that the posts granted to Cedefop by the Budgetary Authority were permanent posts. Bearing in mind Articles 2 and 8 of the Conditions of Employment of other servants of the European Communities, these posts can only be given either to officials or to temporary staff engaged for not more than two years, their contracts being renewable not more than once for a maximum period of one year.(h) Furthermore, the wording of Regulation (EC) No 251/95 ('The staff of the Centre shall be subject to the Regulations and Rules applicable to the officials and other servants of the European Communities`) clearly foresees the employment of officials and other servants. Considering the permanent nature of the staff's employment, the choice of establishment as officials instead of temporary contracts was appropriate and justified.The Management Board would comment on the points of detail raised by the Court as follows:46. (last sentence) The Management Board had the choice of the establishment of staff as officials or of offering them two-year contracts (see comment (g)). It was not deemed acceptable to ask persons to move from Berlin to Thessaloniki on a two-year contract.48. Whereas it its correct that the Management Board did not formally send the agreement reached with staff to the Financial Controller for approval, the latter was informed of the decisions taken. At the time the agreement was signed, it was not clear what the exact financial consequences would be because of the lack of clarity on individual staff decisions. It was a framework which provided the basis for individual decisions which received the full approval of the Financial Controller during his visit to Berlin.50-51. Bearing in mind the point made under (e), the decision taken (see comment, second indent) was the only one possible. It was also in conformity with the clear statement of the Commission (see last sentence of the annexed statement for the Council minutes) 'that there is no worsening in Cedefop staff's conditions of employment`. The considerations of the Legal Service of the Commission quoted only partly in paragraph 56 of the Court's report leave scope for taking such a decision.52-54. The Management Board reiterates that Article 29 of the Staff Regulations foresees that in order to fill vacant posts in an institution, the appointing authority can organize internal competitions (point 1 (b)). The competitions were organized pursuant to Annex III of the Staff Regulations.55. The Management Board's aim and duty was to ensure that the largest possible number of staff serving with Cedefop accepted the move to Thessaloniki. It must be borne in mind that Regulation (EC) No 251/95 changed the rules applicable to staff with effect from 1 March 1995 and that the move to Thessaloniki took place in August of the same year.The Management Board's conduct was based on the following considerations:- it was unthinkable to ask staff to move to Thessaloniki on a two-year contract (comment (g) and point 46),- there was no time to organize and complete the open competitions as suggested by the Court before the move to Thessaloniki and, here again, it would not have been realistic to expect persons to move without a firm offer of further employment.56-59. The Management Board has already pointed out (comment (e)) that the move to Thessaloniki constitutes a sudden change in the staff's place of employment which inevitably causes social problems and hinders productivity for a period of time. Requesting staff to move at a lower grade or step would have added insult to injury. The note of the Legal Service of the Commission mentioned in paragraph 56 gives in point (d) sufficient consideration to justify the stance adopted by the Centre.60-61. All staff applying for establishment as officials underwent the probationary period indicated in Article 34 of the Staff Regulations.62. In line with comment (f), third indent above, the Management Board considered it to be its duty to assist staff in a way which was acceptable. This was also the view of the Legal Service of the Commission.65. The provisions governing the procedures for transfer of part of salary allows for raising this percentage from 35 % to 50 % in individual cases, on presentation of documented evidence pursuant to Article 4 of that Regulation. The Framework Agreement made a higher transfer ( > 35 % provided by the Staff Regulations but