Report on the financial statements of the European Environment Agency (EEA - Copenhagen) for the financial year ended 31 December 1998 together with the Agency's replies
Date: 1999-10-07
Institutions: European Court of Auditors
Subjects: European Environment Agency, financial control, financial year, management audit, report

22.12.1999

EN

Official Journal of the European Communities

C 372/7

on the financial statements of the European Environment Agency (EEA - Copenhagen) for the
financial year ended 31 December 1998 together with the Agency(cid:146)s replies

REPORT

(1999/C 372/02)

CONTENTS

Paragraph
reference

Page

THE COURT(cid:146)S OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 4

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN
ENVIRONMENT AGENCY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1998 . . . . . . . . . . .

5 to 9

General (SI X) and budget (SI 2) accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 to 6

Advisory Committee on Procurement and Contracts (ACPC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contracts with the Topic Centres . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Publication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

8

9

Tables 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Agency(cid:146)s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

8

8

8

8

8

10

12

C 372/8

EN

Official Journal of the European Communities

22.12.1999

THE COURT(cid:146)S OPINION

in order to put new mechanisms in place, disbursed sums of the
order of ECU 110 000 which could possibly have been shared
between several agencies in the event that the common support
agreement had been introduced before January 1999.

1. This report is addressed to the Management Board of the
European Environment Agency in accordance with Article 13(4)
of Council Regulation (EEC) No 1210/90 (1).

2. The Court has examined the financial statements of the Euro-
pean Environment Agency for the financial year ended 31 Decem-
ber 1998. In accordance with Article 14(1) of Council Regulation
(EEC) No 1210/90 the budget was implemented at the responsi-
bility 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 in
Article 14 of Council Regulation (EEC) No 1210/90. The Court of
Auditors is required under Article 248 of the Treaty establishing
the European Community to audit those accounts.

3. The Court performed 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. The Court carried out
such tests of the accounting records and applied such other audit
procedures as it deemed necessary in the circumstances. By means
of this audit the Court obtained a reasonable basis for the opinion
expressed below.

4. This examination has enabled the Court to obtain reasonable
assurance that the annual accounts for the financial year ended 31
December 1998 are reliable and that the underlying transactions,
taken as a whole, are legal and regular.

6. During the evaluation procedure it was noted that the system
had been put in place before all the requisite preliminary tests had
been finally completed. This can be partially explained by the
inadequacies of the Commission(cid:146)s software. Several manual adjust-
ments and corrections were made. A service level agreement with
the Commission is essential.

Advisory Committee on Procurement and Contracts (ACPC)

7. As regards the ACPC procedures for the introduction of SI 2,
there was found to have been an unexplained delay of five months
after the evaluation of the restricted call for tenders. Furthermore,
the time needed to carry out the work was badly estimated. In
addition the procedures followed in selecting the contractor were
not entirely justified.

Contracts with the Topic Centres

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE
BUDGET OF THE EUROPEAN ENVIRONMENT AGENCY FOR THE
FINANCIAL YEAR ENDED 31 DECEMBER 1998

General (SI X) and budget (SI 2) accounts

8.
In connection with the supporting documents for these con-
tracts, and the analytical expenses in particular, the Court found
that in the cases which it examined there had been no internal
control, although it was required under Article 8 of the contrac-
tual clauses relating to the subsidies for the Topic Centres.

5. Throughout the various phases of SI 2 (new version) the
Agency was not only overdependent on outside experts, but also,

Publication

(1) OJ L 120, 11.5.1990, p. 1.
(2) Pursuant to Article 13(3) of Council Regulation (EEC) No 1210/90 the
accounts for all the Agency(cid:146)s revenue and expenditure for the finan-
cial year 1998 were drawn up on 20 April 1999 and were sent to the
Agency(cid:146)s Management Board, the Commission and the Court of
Auditors and the latter received them on 26 April 1999. The sum-
mary form of those financial statements is published in the tables
annexed to this report.

9. The Agency published neither its budget nor the table of its
posts in the Official Journal of the European Communities although
it is required to do so under Article 13 on its Financial Regula-
tion.

22.12.1999

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Official Journal of the European Communities

C 372/9

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 24 and 25
November 1999.

For the Court of Auditors

Jan O. KARLSSON

President

C 372/10

EN

Official Journal of the European Communities

22.12.1999

Table 1

Balance sheet as at 31 December 1998 and 1997

Assets

1998

1997

Liabilities

1998

1997

(ECU 1 000)

Fixed assets
Equipment and furniture
Computer equipment

Stocks

Current assets
Subsidy from the Commission
Sundry accounts receivable
Recoverable VAT
Recovery orders
Translation Centre

Subtotal

168
2 925

3 093

9

8 568
2
140
4
6

153
2 501

2 654

15

9 177
1
164
210

Fixed capital
Own capital
Balance for the financial year

3 102
(cid:150) 4 386

2 669
(cid:150) 5 500

Subtotal

(cid:150) 1 284

(cid:150) 2 831

Current liabilities
Commission
Automatic carry-overs of appropriations
Recovery orders
Social liabilities
VAT
Sundry accounts receivable
Translation Centre

8 568
5 755
4
10
140
6
6

9 177
6 767
22
8
164
0
0

Subtotal

8 720

9 552

Subtotal

14 489

16 138

Cash accounts
Bank accounts (cid:151) demand accounts

4 544

3 181

Suspense accounts
VAT reuse accounts
Other reuse accounts
Payments pending

308
81
2 772

3 161

348

1 747

2 095

Subtotal

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

Total assets

16 366

15 402

Total liabilities

16 366

15 402

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Official Journal of the European Communities

C 372/11

Revenue and expenditure account for financial years 1998 and 1997

Table 2

(ECU 1 000)

1998

1997

17 421
96

Total revenue

17 517

Revenue

Subsidy received from the Commission
Miscellaneous revenue

Expenditure

Staff expenditure (cid:151) Title I of budget
Payments
Appropriations carried over

5 908
177

1 999
1 001

3 194
4 577

Buildings, equipment and miscellaneous administrative expenditure (cid:151) Title II of
budget
Payments
Appropriations carried over

Operating expenditure (cid:151) Title III of budget
Payments
Appropriations carried over

Total expenditure

16 856

Out-turn for the financial year

Balance carried over from previous financial year
Adjustment of entries as at 31 December 1996
1997 amount for reuse not used
Appropriations carried over from previous year which lapse
Exchange rate differences

661

(cid:150) 5 500

46
392
15

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

Total for the year

(cid:150) 4 386

14 012
126

14 138

5 179
131

2 145
552

2 712
6 084

16 803

(cid:150) 2 665

(cid:150) 3 387
30
64
481
(cid:150) 23

(cid:150) 5 500

C 372/12

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Official Journal of the European Communities

22.12.1999

EUROPEAN ENVIRONMENT AGENCY(cid:146)S REPLIES

General (SI X) and budget (SI 2) accounts systems

To point 5:

While it is correct that the common support agreement became
operational only at the beginning of 1999 (seven Agencies
involved), it has to be recorded:

(cid:151) the joint development in this area between Agencies began as
early as 1995 with a joint call for tender, with the European
Commission Services(cid:146) (DG XX) participation, and has contin-
ued since,

(cid:151) that this Agency has actively sought and used this joint devel-
opment as the Court(cid:146)s visiting team knows, so that both the
extent of additional or specific expertise and of related finan-
cial resources have been kept to the minimum possible.

To point 6:

While those observations are correct, they seem to imply a criti-
cism of what has been we think up to now a good operational
way of proceeding (and maybe the only way left under the exist-
ing circumstances) since it has included:

(cid:151) a parallel testing of S I2 during 1998 until it became the EEA
budget system in January 1999 (and it performed well and
was stable). Manual
interventions (or adjustments) were
required due to the limitations and errors of the software,
however they did not modify existing or introduce new com-
mitments or payments, and

(cid:151) a service level agreement will soon be reached between the
Commission and the European Training Foundation in Turin
on behalf of seven Agencies, including this Agency, which
joined in a common support agreement.

Advisory Committee on Procurement and Contracts (ACPC)

To point 7:

It is our understanding that the whole process has developed
respecting the procedures and following the best practices:

(cid:151) the estimate of the required work was made in 1997 based on
the limited information available and with the support of the
European Commission Services. Due to unforeseen reasons, a
consolidated updated estimate was submitted to ACPC with a
delay,

(cid:151) a call for expression of interest was published in the Official
Journal of the European Communities. A restricted call for tender
was addressed to 38 companies, and the published awarding
criteria were used for the selection. The Agency will try to
improve future evaluation procedures concerning the final
selection of the successful candidate and meanwhile has intro-
duced more differentiated gradings for evaluations.

Contracts with the Topic Centres

To point 8:

The control was made but not recorded in the dossiers. While the
documents justifying the expenses under contracts with the Euro-
pean Topic Centres (ETCs) were reviewed and checked continu-
ously throughout the year (and some payments were not made
because the appropriate work was not delivered), no trail was
kept in the dossiers. Projects Managers have now specific instruc-
tions to establish the internal control trail.

Publication of the EEA(cid:146)s budget

To point 9:

(cid:151) The Agency published its 1998 budget only on its homepage
on the Internet (approximately five million hits per year and
360 000 users per year). It followed the views expressed in
1998 by the European Parliament Budget Committee at a
meeting with Agencies (cid:145)Directors, indicating that the second
generation of Agencies(cid:146) budget should not necessarily be pub-
lished in the Official Journal of the European Communities; pub-
lishing on the Internet would be more efficient (cheaper and
higher dissemination).

(cid:151) In 1999, the EEA published its budget on the Internet again.
Following the Court of Auditors(cid:146) statement and to respect to
the letter its Financial Regulation, the EEA will also publish its
1999 budget in the Official Journal of the European Communities
together with the other six Agencies (to lower the cost).

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Official Journal of the European Communities

C 372/13

However, considering also the European Parliament(cid:146)s views
and the Agency(cid:146)s experiences, the following must be assessed:

EEA(cid:146)s homepage where the full budget and establishment
plan is available,

(cid:151) the most cost-effective alternative for making the budget
information accessible and disseminated to the public. It
could include publishing in the Official Journal of the Euro-
pean Communities a summary and the reference to the

(cid:151) the proper way to reflect it in the EEA financial regula-
tion clauses, by adapting it in a cost effective manner to
the possibilities of information technology.