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

C 372/32

EN

Official Journal of the European Communities

22.12.1999

on the financial statements of the European Training Foundation (ETF(cid:151)Turin) for the financial
year ended 31 December 1998, together with the Foundation(cid:146)s replies

REPORT

(1999/C 372/06)

CONTENTS

Paragraph
reference

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

1 to 4

MAIN OBSERVATIONS ON THE BUDGETARY IMPLEMENTATION OF THE EUROPEAN
TRAINING FOUNDATION FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1998. . . . . . . . . . . 5 to 14

Phare, Tacis and MEDA subsidies not included in the budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 to 7

General (SI X) and budgetary accounts (SI 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 to 11

Appropriations carried over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 to 14

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

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

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Official Journal of the European Communities

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THE COURT(cid:146)S OPINION

1. This report is addressed to the Governing Board of the
European Training Foundation in conformity with Article 11(4),
of Council Regulation (EEC) No 1360/90 (1).

2. The Court has examined the financial statements of the
European Training Foundation for the financial year ended 31
December 1998. In accordance with Article 11(1), of Council
Regulation (EEC) No 1360/90, the budget was implemented under
the responsibility of the Director. This responsibility included the
drawing-up and presentation of the financial statements (2) in
accordance with the internal financial provisions, as provided for
in Article 12 of Council Regulation (EEC) No 1360/90. The Court
of Auditors is required under Article 248 of the Treaty establish-
ing the European Community to examine these accounts.

3. The Court performed its audit in accordance with its auditing
policies and standards. These have been adapted from generally
accepted international auditing standards to reflect the specific
characteristics of the Community context. Accordingly, the Court
carried out such tests of the accounting records and other audit-
ing 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 which
ended on 31 December 1998 are reliable and that the underlying
transactions, taken as a whole, are legal and regular.

1997 (3). Moreover, the balance (ECU 35,8 million as of 31 Decem-
ber 1998) of around 30 bank accounts available to the Founda-
tion for the management of these programmes was not shown in
the Foundation(cid:146)s financial statements. After discussions with the
Court and the Commission, the Foundation agreed to include this
information in an annex to its budget as of 1999.

6. The Foundation did not publish its budget and its organisa-
tion chart in the Official Journal of the European Communites as
required under Article 13 of its Financial Regulation.

7. The Foundation(cid:146)s regulation was amended in July 1998 to
include the MEDA programme (Mediterranean actions).

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

8. Overall, the introduction of the SI 2 budgetary system has
improved the internal control procedures.

9. During the evaluation phase of the SI 2 system, it was found
that it had been introduced before all tests had been completed
((cid:145)program and system testing and data validation(cid:146)). Consequently,
several problems had to be resolved during the year and the IT
department was obliged to intervene several times and make
manual corrections to the programs and database.

10. Moreover, the (cid:145)service level agreement(cid:146) with the Commission
should be signed so as to establish the respective responsibilities
and degree of responsibility of the parties involved.

MAIN OBSERVATIONS ON THE BUDGETARY IMPLEMENTA-
TION OF THE EUROPEAN TRAINING FOUNDATION FOR THE
YEAR ENDED 31 DECEMBER 1998

11. The SI 2 system is to include the general accounts as of the
financial year 1999.

Phare, Tacis and MEDA subsidies not included in the budget

Appropriations carried forward

5. The Foundation manages funds made available by the Com-
mission in the context of the Phare and Tacis funds allocated to
the Tempus programme. The corresponding amounts (around
ECU 395 million in 1998) were not recorded in the Foundation(cid:146)s
budget, but in separate accounts (see specific annual report

12. Appropriations amounting to ECU 3,5 million were carried
forward from 1998 to 1999 (22,3 % of the Foundation(cid:146)s budget).
They mainly concern Title III (ECU 2,6 million). The majority of
the carry-overs concerned national observatories and professional
training.

(1) OJ L 131, 23.5.1990, p. 1.
(2) As required under Article 11(3) of Council Regulation (EEC) No
1360/90, the detailed accounts for all the Foundation(cid:146)s revenue and
expenditure for the financial year 1998 were drawn up on 31 March
1999 and forwarded to the Foundation(cid:146)s Governing Board, the Com-
mission and the Court of Auditors. These accounts were received by
the Court on 6 April 1998. A summarised version of these financial
statements is presented in the tables attached to this report.

13. A significant number of carry-overs concerned 28 contracts
(overall value: ECU 0,8 million) which entered into force or were
signed during the months of November and December 1998.

(3) OJ C 406, 28.12.1998, p. 38.

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Official Journal of the European Communities

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Given that a total of 67 service contracts (in receipt of financing
totalling ECU 1,6 million from the Foundation(cid:146)s budget) were
signed during 1998, this phenomenon reveals a certain lack of
balance in the organisation and planning of the Foundation(cid:146)s
activities.

14. A detailed audit of the appropriations carried over from 1998
to 1999 on commitments under the budgetary item (cid:145)national

focal points(cid:146) shows that seven commitments, amounting to ECU
0,22 million, or 48,7 % of the carry-overs under this item, exclu-
sively concerned expenditure to be carried out during the finan-
cial year 1999. A similar observation can be made with regard to
an additional sample of four carry-overs totalling ECU 0,06 mil-
lion and involving other items under Title III of the Foundation(cid:146)s
budget. It follows that the principle of annuality was not com-
plied with. All the amounts unduly carried over should have been
cancelled on 31 December 1998.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 7 October 1999.

For the Court of Auditors

Jan O. KARLSSON

President

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Table 1

Balance sheet for the financial years 1998 and 1997

Assets

1998

1997

Liabilities

1998

1997

(ECU 1 000)

Fixed assets
Equipment and furniture

Supplies

Current assets
Commission subsidy
Sundry accounts receivable

Cash accounts
Banks (cid:151) demand accounts
Imprest account

1 756

1 892

Fixed capital
Own capital
Out-turn to be carried over

10

3 708
252

Subtotal

3 960

13

0
10

10

1 616
588

4 459
1 860

Short-term liabilities
Commission
Non-automatic carry-overs
Automatic carry-overs of appropriations
Sundry accounts payable
Deductions from salaries
Accounting officers(cid:146) allowances
Revenue allocated

1 766
(cid:150) 1 417

Subtotal

349

3 708
0
3 513
13
110
0
16

7 360

Subtotal

1 905
2 212

4 117

0
10
2 727
391
311
4
16

3 459

Subtotal

2 204

6 319

Suspense accounts
Payments in progress

221

658

Total assets

7 930

8 234

Total liabilities

7 930

8 234

Source: Prepared by the Court of Auditors on the basis of the Foundation(cid:146)s data.

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Official Journal of the European Communities

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Revenue and expenditure account for the financial years 1998 and 1997

Table 2

(ECU 1 000)

1998

1997

Revenue

Subsidy received from the Commission
Bank interest
Sundry revenue
Exchange profits

Expenditure

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

11 686
245
1
162

Total revenue

12 094

15 303
391
3
262

15 959

9 231
303

1 928
552

1 383
1 872
128

9 149
344

749
611

1 760
2 557
19

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

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

Total expenditure

15 189

15 397

Out-turn for the financial year

Out-turn carried over from the previous year
Commission repayments
1995 subsidy cancelled
Appropriations carried over from the previous year and cancelled

(cid:150) 3 095

2 212
(cid:150) 840

306

Out-turn to be carried over

(cid:150) 1 417

562

1 794
0
(cid:150) 543
399

2 212

Source: Prepared by the Court of Auditors on the basis of the Foundation(cid:146)s data.

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FOUNDATION(cid:146)S REPLIES

(cid:145)Hors budget(cid:146)subventions - Phare, Tacis, Tempus and MEDA

It is confirmed that the Foundation, following an exchange of
views with the Court of Auditors and the Commission, is now
including all funds received through Conventions with the Com-
mission in an Annex to the budget. This enhances transparency
and allows a complete overview regarding the monies handled by
the Foundation.

The Foundation has published its 1998 budget in full on the Inter-
net. In addition, it has published in the Official Journal of the Euro-
pean Communites the information that the full budget can be seen
on the Internet. The Commission and the European Parliament
encouraged this measure, because it maintains and even broadens
publicity and equal access for all European citizens to the budget,
as is clearly the objective of Article 13 of the Financial Regula-
tion. At the same time this has led to a significant cost saving for
the Foundation, which is very important bearing in mind the
increasing budgetary constraints.

General Accounting (SI 2X) and Budgetary Accounting (SI 2)

We agree that globally speaking SI 2 has improved budgetary
accounting and control. It is also correct to state that the previ-
ous system, based on Excel, had been kept until the end of the
year. The Court of Auditors itself mentions the various deficien-
cies still existing in the SI 2 system at that time. The experience
gained at year-end together with the continuing efforts of the

development experts will lead to a better result this year and will
avoid manual interventions of the kind mentioned by the Court
of Auditors. So there is and will be good progress.

A service-level agreement with DG XIX (the systems supplier) has
been prepared and negotiated. It is expected to be signed soon,
not only with the Foundation but also with the other agencies
participating in the SI 2 common support service.

All efforts are being undertaken to extend SI 2 to general account-
ing and, despite the very short timescale, to ensure its operational
start in January 2000.

Carry overs

The comments of the Court of Auditors concerning the annuality
of the budget are well understood. While the explanations for the
difficulties to comply with this principle are manifold (late approval
of the budget (this year in March only), complex procedures,
lengthy procurement cycles), the Foundation is firmly committed
to respecting the principle of annuality of the budget. In any
event, the planning and execution process will be optimised in
order to reduce the number of activities starting late in the year.
It should be noted that the principle concerns activities under the
Foundation(cid:146)s core budget, while many activities under (cid:145)conven-
tions(cid:146) have a multiannual perspective, which is much more appro-
priate for the kind of activities we are involved in.