Report on the financial statements and management of the European Foundation for the Improvement of Living and Working Conditions (Dublin-Foundation) for the financial year ended 31 December 1997, together with the reply of the European Foundation for the Improvement of Living and Working Conditions
Date: 1998-11-26
Institutions: European Court of Auditors
Subjects: Eurofound, financial control, financial year, management audit, report

C  406/12

EN

Official  Journal  of  the  European  Communities

28.12.98

REPORT

on the financial statements and management of the European Foundation for the Improvement
of  Living  and  Working  Conditions  (Dublin-Foundation)  for  the  financial  year  ended  31
December  1997,  together  with  the  reply  of  the  European  Foundation  for  the  Improvement  of
Living  and  Working  Conditions

(98/C  406/02)

TABLE  OF  CONTENTS

Paragraph
reference

Page

THE  FINANCIAL  STATEMENTS  OF  THE  EUROPEAN  FOUNDATION  FOR
THE  IMPROVEMENT  OF  LIVING  AND  WORKING  CONDITIONS  FOR
THE  FINANCIAL  YEAR  1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 — 4

MAIN  OBSERVATIONS  ACCOMPANYING  THE  AUDIT  OPINION . . . . . . .

5 — 19

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 — 7

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope  of  the  audit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

6

7

Follow-up  of  previous  observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 — 9

Separation  of  duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Imprest  account

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

9

Budgetary  execution  and  the  revenue  and  expenditure  account . . . . . . . . . . .

10 — 12

Transfer  of  appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Carry-overs  and  cancellations  of  appropriations . . . . . . . . . . . . . . . . . . . . .

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

11

12

Mission  expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13 — 14

Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost-effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Study  Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

14

15

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16 — 19

Tables  1—3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reply  of  the  European  Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

13

13

13

13

13

13

13

14

14

14

14

14

14

14

14

14

14

16

18

28.12.98

EN

Official  Journal  of  the  European  Communities

C  406/13

THE  FINANCIAL  STATEMENTS  OF  THE  EUROPEAN
FOUNDATION  FOR  THE  IMPROVEMENT  OF  LIVING
AND  WORKING  CONDITIONS  FOR  THE  FINANCIAL
YEAR  1997

MAIN  OBSERVATIONS  ACCOMPANYING  THE  AUDIT
OPINION

1. This  report  is  addressed  to  the  Council  and  the
European  Parliament  in  accordance  with  Article  16  of
Council  Regulation  (EEC)  No  1365/75 (1),  as  amended
by  Article  1(4)  of  Council  Regulation  (EEC)  No
1947/93 (2).

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  1997.  In  accordance  with  Article  1(16)  of
Council  Regulation  (EEC)  No  1949/93 (3)  amending
Regulation  (EEC)  No  1417/76 (4),  the  budget  was
of 
implemented 
the
Administrative  Board.  This 
included
drawing  up  and  presenting  the  financial  statements (5)  in
accordance  with 
financial  provisions
provided  for  in  Article  1(52),  (54)  and  (55)  of  Council
Regulation  (EEC)  No  1949/93  amending  Regulation
(EEC)  No  1417/76.  The  Court  of  Auditors  is  required
under  Article  188c  of  the  Treaty  establishing  the
European  Community  to  examine  these  accounts.

responsibility 

responsibility 

internal 

under 

the 

the 

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 procedures as it deemed
necessary  in  the  circumstances.  Through  the  audit,  the
Court  obtained  sufficient  basis  for  the  opinion  expressed
below.

Introduction

Background

5. The  European  Foundation  for  the  Improvement  of
Living and Working Conditions (Dublin-Foundation) was
established  by  Council  Regulation  (EEC)  No  1365/75 (6)
as  a  satellite  body  of  the  European  Community  with  the
task of contributing ‘to the planning and establishment of
better  living  and  working  conditions  through  action
designed  to  increase  and  disseminate  knowledge  likely  to
assist 
this  development’.  The  Dublin-Foundation
commenced  operations  in  1976.

Scope  of  the  audit

6. The  Court  of  Auditors  has  examined  the  accounts
and  financial  management  of  the  Dublin-Foundation  for
the financial year 1997 in accordance with the provisions
of  the  relevant  regulations (7).

Financial Data

7. Tables  1  and  2  summarise  the  Foundation’s  financial
statements.  Available  appropriations  for  the  financial
year  1997  amounted  to  ECU  14  million.  Commitments
entered  into  gave  rise  to  ECU  10,5  million  in  payments
and  ECU  3,4  million  in  carry-overs  to  the  financial  year
1998,  the  balance  of  ECU  0,1  million  having  been
cancelled.  Appropriations  carried  over  from  the  previous
year  gave  rise  to  ECU  2,9  million  in  payments  and  ECU
0,1  million  in  cancellations.  Table  3  of  this  report  gives
an analysis by title of the utilisation of the appropriations
for  the  year  and  of  those  carried  over  from  1996.

4. This  examination  has  allowed  the  Court  to  obtain
reasonable  assurance  that  the  accounts  for  the  financial
year  ended  31  December  1997  are  reliable  and  that  the
underlying  transactions  are,  taken  as  a  whole,  legal  and
regular.

Follow-up  of  previous  observations

Separation  of  duties

(1)  OJ  L  139,  30.5.1975,  p.  1.
(2)  OJ  L  181,  23.7.1993,  p.  13.
(3)  OJ  L  181,  23.7.1993,  p.  26.
(4)  OJ  L  164,  24.6.1976,  p.  16.
(5)  As  required  under  Article  16  of  Council  Regulation  (EEC)
No  1365/75  as  amended  by  Regulation  (EEC)  No  1947/93,
the  accounts 
revenue  and
expenditure  in  respect  of  a  financial  year  1997  were  drawn
up  and  approved  by  the  Management  Board  on  31  March
1998  and  forwarded  to  the  Commission,  the  Foundation’s
management  board  and  the  Court  of  Auditors.  These
accounts  were  received  by  the  Court  on  31  March  1998,  a
summarised version of these financial statements is presented
in  the  tables  attached  to  this  report.

the  Foundation’s 

for  all 

8. The  introduction  of  SINCOM  2  at  the  Foundation  is
imminent. One of the advantages of this system is that it

(6)  Council Regulation (EEC) No 1365/75 of 26 May 1975, (OJ

L  139,  30.5.1975).

(7)  Council Regulation (EEC) No 1365/75 of 26 May 1975, (OJ
L  139,  30.5.1975),  on  the  creation  of  the  Foundation,  as
amended by Regulation (EEC) No 1947/93 of 30 June 1993
(OJ  L  181,  23,7.1993).  Council  Regulation  (EEC)  No
1417/76  of  1  June  1976  (OJ  L  164,  24.6.1976),  on  the
financial  provisions  applying  to  the  Foundation,  as  amended
by  Council  Regulation  (EEC)  No  1949/93  of  30  June  1993,
(OJ  L  181,  23.7.1993).

C  406/14

EN

Official  Journal  of  the  European  Communities

28.12.98

automatically segregates the duties of the authorising and
accounting officers so that this breach of Article 1(15) of
Council  Regulation 
(EEC)  No  1949/93  amending
Regulation  (EEC)  No  1417/76  at  the  Foundation  will  be
eliminated  (see  paragraph  16).

Mission  expenditure

Procedures

Imprest  account

irregularities 

9.
In  1995  and  1996  the  Court  recommended  that  use
of  the  imprest  account  be  limited  to  covering  ongoing  or
is
minor  expenses,  where  the  risk  of 
comparatively low. Although there existed a paper at the
Foundation, an official written  definition  of ongoing and
minor  expenses  had  not  been  established  in  consultation
with  the  Financial  Controller  at  the  time  of  the  audit  in
April  1998.  It  was  also  noted  that,  in  many  instances,
payments were made through the imprest account two to
three months following receipt of invoices. Delays of this
length  mean  it  would  have  been  possible  to  obtain  prior
approval  from  the  Financial  Controller  and  subsequently
make  the  payments  through  the  main  bank  account  (see
paragraph  17).

Budgetary  execution  and  the  revenue  and  expenditure
account

Transfer  of  appropriations

10. The  value  of  transfers  of  appropriations  made
between different budget lines in 1997 was ECU 979 000
(7,0 %  of  appropriations  entered  in  the  budget),  down
from  ECU  1 366 000  (9,9 %)  in  1996.

Carry-overs  and  cancellations  of  appropriations

11. Table 3 shows that the payment rate is 75 % for the
account as a whole, but only 47 % for Title 3 ‘Operating
expenditure’.  This  is  in  line  with  previous  years  and  is
due  to  the  fact  that  studies  are  usually  paid  in  three
instalments  over  the  period  foreseen  in  the  related
contracts.

Revenue

12. The EU subsidy set aside for the Foundation in 1997
was  ECU  13,8  million.  The  amount  actually  requested
and  received  was  ECU  13 451 540.  The  funds  were
requested  in  accordance  with  the  Council  Regulations
and  were  in  line  with  a  cash-flow  forecast.

13. Weaknesses  were  found  in  the  management  of  the
mission procedures. In several instances the guidelines for
missions  were  not  being  adhered  to,  and  agents  had
received payments for expenses that were either ineligible
or  unjustified  (see  paragraph  18).

Cost-effectiveness

14. One  hundred  and  thirty  missions  carried  out  in
1997, costing approximately ECU 92 000, were reviewed.
Savings  of  up  to  ECU  39 000  (43 %)  could  have  been
achieved  using  more  cost-effective  routes  (see  paragraph
18).

Study  Contracts

shows 

the  1997
15. Table  3 
that  51 %  of 
appropriations  available  under  Title  3 
‘Operating
expenditure’ were carried over to 1998. 21 % of the total
appropriations, 
to
commitments  entered  into  in  December  1997  in  respect
of study contracts. The earliest of these contracts was not
signed  until  February  1998  (see  paragraph  19).

1 313 378, 

or  ECU 

related 

Conclusion

16. SINCOM  2  must  be  installed  at  the  Foundation.  If
this  is  not  done  before  the  end  of  1998,  an  additional
post  will  have  to  be  created  in  the  administration
department  to  ensure  adequate  segregation  of  duties
exists  (see  paragraph  8).

17. Clear  written  procedures  for  the  use  of  the  imprest
account  must  be  introduced.  Outstanding  amounts  must
either  be  paid  promptly  from  the  imprest  account  or,  if
the  credit  period  is  longer,  from  the  main  bank  account
(see  paragraph  9).

18. Steps  must  be  taken  to  economise  in  the  area  of
mission  expenditure  as  further  excesses  cannot  be
tolerated  (see  paragraphs  13  and  14).

It 

is  recommended  that  situations  where 

19.
large
amounts  are  being  committed  in  one  year  in  respect  of
contracts that are not signed until several months into the
next  year  be  avoided.  This  could  be  achieved  by
improving  the  procedures  for  establishing  the  annual
budget  of  the  Foundation  (see  paragraph  15).

28.12.98

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Official  Journal  of  the  European  Communities

C  406/15

This  report  was  adopted  by  the  Court  of  Auditors  in  Luxembourg  at  its  meeting  of
26  November  1998.

For  the  Court  of  Auditors

Bernhard  FRIEDMANN

President

C  406/16

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Official  Journal  of  the  European  Communities

28.12.98

Table  1

Balance  Sheet  as  at  31  December  1997

Assets

1997

1996

Liabilities

1997

1996

(in  ECU  1 000)

Fixed  Assets
1.  Buildings
2.  Furniture

7 106
1 705

7 106
1 551

Fixed  Capital
1.  Own  Capital
2.  Balance  for  the  financial  year
3.  Balance  from  the  previous  year

8 838
− 24
− 2 328

8 695
− 288
− 2 040

Current  Assets
1.  Stocks
2.  Sums  to  be  recovered
3.  Sundry 
charged

Expenditure 

to 

be

4.  Mission advances
5.  Miscellaneous advances
6.  Bank  charges  to  be  charged

Cash  Accounts
Bank  Account
—  ECU
—  Main  (IEP)
—  Imprest  (IEP)

27
331
37

—
1
—

2 393
416
168

38
337
—

3
9
2

440
794
204

Current  Liabilities
Salary deductions

43

24

Revenue  to  be  collected

331

337

Sums  to  be  reused

217

209

Appropriations  carried  over

3 364

3 098

Payments  in  progress

1 743

449

12 184

10 484

12 184

10 484

Source:  1997  Annual  Accounts  of  the  Foundation.

28.12.98

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Official  Journal  of  the  European  Communities

C  406/17

Revenue  and  Expenditure  account  for  the  financial  year  ended  31  December  1997

Table  2

Revenue
1.  Subsidy  received  from  the  Commission
2.  Miscellaneous revenue
3.  Revenue  from  services  rendered  against  payment

Expenditure
Staff  Expenditure
1.  Payments  for  the  year
2.  Appropriations  carried  over

Administrative  Expenditure
1.  Payments  for  the  year
2.  Appropriations  carried  over

Operating Expenditure
1.  Payments  for  the  year
2.  Appropriations  carried  over

(in  ECU  1 000)

1997

1996

13 451
146
49

12 896
171
39

Total  (a)

13 646

13 106

6 617
7

898
145

2 954
3 212

5 877
23

976
178

3 653
2 897

Expenditure  total  (b)

13 833

13 604

Out-turn  for  the  year  (a)  −  (b)
Appropriations  carried  over  from  the  previous  year  which  lapse
Exchange  differences  for  the  year

− 187
159
4

Balance  for  the  year

− 24

− 498
142
68

− 288

Source:  1997  Annual  Accounts  of  the  Foundation.

Table  3

Utilisation  of  available  appropriations  for  the  1997  financial  year

Title

Definitive

Payments

Carry-overs

Cancelled

Available

Payments

Cancelled

1997-Budget

Carry-overs  from  1996

(in  ECU  1 000)

1.  Staff  Expenditure

6 650

2.  Administrative  Expenditure

1 100

3.  Operational  Expenditure

6 250

Total

14 000

6 617
(99,5)

898
(81,6)

2 954
(47,3)

10 469
(74,8)

7
(0,1)

145
(13,2)

3 212
(51,4)

3 364
(24,0)

26
(0,4)

57
(5,2)

84
(1,3)

167
(1,2)

23

178

2 897

3 098

20
(87,0)

177
(99,4)

2 742
(94,6)

2 939
(94,9)

3
(13,0)

1
(0,6)

155
(5,4)

159
(5,1)

The  figures  in  brackets  indicate  the  percentage  of  definitive  or  available  appropriations.

Source:  1997  Annual  Accounts  of  the  Foundation.

C  406/18

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Official  Journal  of  the  European  Communities

28.12.98

REPLY  OF  THE  EUROPEAN  FOUNDATION

The  Foundation  welcomes  the  observations  of  the  Court
and  would  ask  it  to  take  account  of  the  following
comments:

achieving the projected savings, in the light of new routes
and  fare  structures  which  have  come  into  operation  over
the  past  year.

Imprest  Account

Study  contracts

9. The  Court  should  be 
informed  that  a  written
definition  of  on-going  and  minor  expenses  in  relation  to
the  Imprest  Account  had  already  been  established  with
Financial  Control  by  the  time  of  the  audit  on  27  June
1997. This definition limits usage of the Imprest Account
to on-going (recurrent and non capital) or small expenses
and  payments  of  an  urgent  nature.

The  Financial  Regulation  of  the  Foundation  does  not
place a time restriction on usage of the Imprest Account.
It  merely  states  ‘for  the  payment  of  certain  categories  of
expenditure  imprest  accounts  may  be  set  up’.

The  Court  notes  delays  in  relation  to  payment  of
invoices.  These  reflect  the  time  taken  to  fully  process
invoices  for  payment  in  accordance  with  the  Financial
Regulations,  which  can  take  up  to  two  months.  If  the
invoices  had  been  submitted  for  prior  visa  to  Financial
Control  in  Brussels  these  delays  could  have  been  longer.

15. The  level  of  appropriations  carried  over  under  Title
3  is  a  natural  consequence  of  the  relation  of  the
Foundation’s  annual  budgeting  cycle  to  its  operational
cycle  (which  involves  programme  design,  programme
initiation,  outline  project  design,  tender,  detailed  project
design  and  implementation).  Appropriations  are  fully
committed  by  the  end  of  the  financial  year  with  the
relevant project being completed and fully paid for by the
end  of  the  subsequent  financial  year.

A  number  of  end  of  year  contracts  did  not  have  a  final
signature  until  February  because  of  the  time  taken  for
visad  contracts  to  be  returned  from  Brussels  to  the
Foundation  by  the  Financial  Controller,  despatched  to
the  relevant  contractor  and  then  returned  to  the
Foundation  signed  by  the  contractor.

Mission  expenditure  procedures

Conclusion

13. The  Foundation’s  procedures  are  designed  to  ensure
(a)  strict  adherence  to  the  Mission  Rules,  (b)  the
minimisation  of  costs  incurred  commensurate  with  the
needs  of  each  mission.  The  Foundation  has  examined
those instances drawn to its attention by the Court where
it is suggested that incorrect application of the rules may
have  occurred  and,  where  required,  has  taken  corrective
action.

16. The  Court’s  comment  is  noted.

17. See  reply  to  paragraph  9.

18. See  reply  to  paragraphs  13  and  14.

Cost-effectiveness  of  missions

14. The  Foundation  is  evaluating  the  cost  effectiveness
of  arrangements  for  missions  and  the  practicalities  of

19. The  Foundation  would  welcome  discussion  on  the
procedures  for  establishing  the  annual  budget  of  the
Foundation  with  regard  to  the  Foundation’s  programme
planning  cycle  (see  paragraph  15).