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 1999 together with the Foundation's replies
Date: 2000-09-27
Institutions: European Court of Auditors
Subjects: Eurofound, financial control, financial year, management audit, report

27.12.2000

EN

Official Journal of the European Communities

C 373/39

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
1999 together with the Foundation’s replies

REPORT

(2000/C 373/07)

CONTENTS

Paragraph

THE COURT’S OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-4

MAIN OBSERVATIONS CONCERNING THE IMPLEMENTATION OF THE BUDGET OF THE
EUROPEAN FOUNDATION FOR THE IMPROVEMENT OF LIVING AND WORKING CONDI-
TIONS (DUBLIN FOUNDATION) FOR THE FINANCIAL YEAR 1999 . . . . . . . . . . . . . . . . . . . . .

Implementation of the budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary and general accounting systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Imprest account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Charging of VAT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5-12

5-8

9-10

11

12

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

The Foundation’s replies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

40

40

40

40

40

41

42

44

C 373/40

EN

Official Journal of the European Communities

27.12.2000

THE COURT’S OPINION

1. This report is addressed to the Council and the European Par-
liament, 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).

Council

amending

2. The Court has examined the financial statements of the Euro-
pean Foundation for the Improvement of Living and Working
Conditions for the financial year ended 31 December 1999. In
accordance with Article 1(16) of Council Regulation (EEC)
No 1949/93 (3)
(EEC)
No 1417/76 (4), the budget was implemented under the responsi-
bility of the Administrative Board of the Foundation. This respon-
sibility includes the drawing-up and presentation of the financial
statements (5), in accordance with the internal financial provisions
provided for under Article 1(52), (54) and (55) of Council Regula-
tion (EEC) No 1949/93 amending Council Regulation (EEC)
No 1417/76. The Court of Auditors is required under Article 248
of the Treaty establishing the European Community to examine
these accounts.

Regulation

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 proce-
dures as it deemed necessary in the circumstances. Through this
audit, the Court obtained a reasonable basis for the opinion
expressed below.

4. Subject to the reservations mentioned in paragraph 6, this
examination has allowed the Court to obtain reasonable assur-
ance that the accounts for the financial year ended 31 Decem-
ber 1999 are reliable and that the underlying operations are, taken
as a whole, legal and regular.

MAIN OBSERVATIONS CONCERNING THE IMPLEMENTATION
OF THE BUDGET OF THE FOUNDATION FOR THE IMPROVE-
MENT OF LIVING AND WORKING CONDITIONS (DUBLIN FOUN-
DATION) FOR THE FINANCIAL YEAR 1999

Implementation of the Budget

total, 14,5 million euro was committed, 3,6 million euro was car-
ried over to the financial year 2000 and 0,3 million euro was can-
celled.

6. Almost all of the commitments carried over, totalling 3,4 mil-
lion euro, or 94 % of carry-overs, relate to Title III, which groups
together the Foundation’s operational activities. Nevertheless, in
the case of three commitments, the total of 0,5 million euro to be
carried over was determined on the basis of the appropriations
available, rather than on the basis of the real value of the purchase
orders actually issued up to 31 December 1999. This is not con-
sistent with the Financial Regulation.

7. The late implementation of the procedures for drawing up the
contracts and the difficulties experienced in completing the cor-
responding activities on time meant that the Foundation could
not manage the appropriations available with the discipline
required. As a result the amount carried over rose by more than
12 % compared with the previous year. In the case of operational
expenditure, the appropriations carried over were significantly in
excess of the payments for the financial year.

8. The scale and persistence of this under-implementation of the
appropriations for the year show the shortcomings in the Foun-
dation’s monitoring of its annual programme. The Foundation
should improve its monitoring arrangements in order to min-
imise carry-overs of appropriations and adhere more closely to
the principle of annuality.

Budgetary and general accounting systems

9. At the end of the first quarter of 2000 the Foundation had
still to take the measures needed to render the SI2 budgetary
accounting system operational.

10. The general accounting system previously used by the Foun-
dation was taken out of service in February 2000. Since then, the
accounts have been kept manually, with all the awkwardness and
risk that that entails. At the end of March 2000, the Foundation
had not yet done anything to rectify this situation.

5. The budget for 1999 amounted to 14,8 million euro as against
14 million euro in 1998, representing an increase of 6 %. Of this

Imprest account

(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 for all the Foundation’s revenue and expenditure for the
financial year 1999 were drawn up on 28 March 2000 and forwarded
to the Foundation’s Management Board, the Commission and the
Court of Auditors. These accounts were received by the Court on
3 April 2000. A summarised version of the financial statements is
presented in the tables attached to this report.

11. The amounts paid via the imprest account represented 20 %
of payments made in 1999, 1,2 million euro of which was expen-
diture on staff, 0,6 million euro was administrative expenditure
and 1,1 million euro was operational expenditure. The Court must
point out that this mode of payment, because of the intrinsic risks
of managing it, should, according to the Financial Regulation, be
the exception rather than the rule. It must therefore call upon the
Foundation once again to reduce its use of the imprest account to
a minimum and to stick to the normal modes of payment.

27.12.2000

EN

Official Journal of the European Communities

C 373/41

Charging of VAT

12. Until December 1998 the general Financial Regulation
required expenditure to be charged inclusive of VAT, since VAT,

once it had been refunded, could be used again. Since that date (1),
the general Financial Regulation has required expenditure to be
charged net of VAT. The Court calls upon the Foundation to
incorporate this new procedure into its own internal rules.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 27 September 2000.

For the Court of Auditors

Jan. O. KARLSSON

President

(1) See Article 27(2a) of the Financial Regulation applicable to the gen-
eral budget of the European Communities as amended by Council
Regulation (EC, ECSC, Euratom) No 2548/98 of 23 November 1998,
OJ L 320, 28.11.1998, p. 1.

C 373/42

EN

Official Journal of the European Communities

27.12.2000

Table 1

Balance Sheet as at 31 December 1999 and 1998

(1 000 EUR)

Assets

1999

1998

Liabilities

1999

1998

Fixed Assets
Buildings
Equipment and furniture

Stocks

Current Assets
Amounts recoverable from EU bodies
Miscellaneous advances (guarantees)
Recoverable VAT
Sundry accounts receivable

Cash Accounts
Bank — demand accounts
Imprest account

7 106
1 879

8 985

29

1 880
8
242
21

2 151

3 349
68

3 417

Subtotal

Subtotal

Subtotal

7 106
1 777

8 883

44

2 155
5
276
37

2 473

2 353
12

2 365

Suspense accounts
Sundry expenditure to be charged

57

39

Fixed Capital
Own Capital
Balance for the financial year

9 014
– 1 859

8 927
– 2 148

Subtotal

7 155

6 779

Current Liabilities
Automatic carry-overs of appropriations
EU bodies account
Social liabilities
VAT
Sundry accounts payable
Payments in progress

3 640
1 880
185
242
21
1 101

7 069

3 220
2 155
0
276
37
1 098

6 786

Subtotal

Suspense account
Sums to be reused

Subtotal

415

415

239

239

Total assets

14 639

13 804

Total liabilities

14 639

13 804

Source: Prepared by the Court of Auditors on the basis of data from the Foundation.

27.12.2000

EN

Official Journal of the European Communities

C 373/43

Revenue and expenditure account for the financial years 1999 and 1998

Table 2

(1 000 EUR)

1999

1998

14 500
107
14

Total revenue

14 621

Revenue
Subsidy received from the Commission in 1999 (1)
Miscellaneous revenue
Revenue from services rendered against payment

Expenditure

Staff expenditure — Title I of the budget
Payments of the year
Appropriations carried over

6 934
56

1 195
180

2 748
3 405

Buildings, equipment and miscellaneous administrative expenditure — Title II of the budget
Payments
Appropriations carried over

Operating Expenditure — Title III of the budget
Payments for the year
Appropriations carried over

Total expenditure

14 518

Outturn for the financial year
Balance carried over from previous financial years
Amount received from the Commission for 1999 (1)
Appropriations carried over from the previous financial year which lapse
Exchange-rate differences

103
– 2 148

202
– 16

Balance for the financial year

– 1 859

11 262
156
30

11 448

6 676
78

797
223

2 893
2 919

13 586

– 2 138
– 2 352
2 352
60
– 70

– 2 148

(1) Including the repayment by the Commission of EUR 2,148 Mio according to the cash basis concept — Article 15 of Council Regulation

1552/89.

Source: Prepared by the Court of Auditors on the basis of data from the Foundation.

C 373/44

EN

Official Journal of the European Communities

27.12.2000

THE FOUNDATION’S REPLIES

6. Following an examination of relevant documents, it is clear
that the carry-overs in question were based on orders despatched
by the Foundation before the end of the financial year in relation
to specific requirements of the Foundation for goods and services
in the implementation of its Work Programme. For the three
commitments mentioned, the orders carried over were provi-
sional. The Foundation will examine the problem and seek to pre-
vent a recurrence.

7. As indicated by the Court, only 6 % of carry overs related to
Title I (Staff) and Title II (Administration), i.e. 236 000 euro. The
level of appropriations carried over in relation to Title III
(3 404 000 euro) 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, tendering, detailed project design and implementation).
Appropriations are in general 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.

8. Following completion of a reorganisation programme and an
examination of planning and control procedures, the Foundation
would hope to effect an improvement in the timing of the utilisa-
tion of available credits with a corresponding reduction in the
level of carry-overs.

10. The interim general ledger system employed by the Founda-
tion in 1999 and at the time of the Court’s audit was based on the
usage of an Excel computer programme. The Foundation is cur-
rently examining the feasibility of the installation of a fully com-
puterised general ledger system (‘Sage’). It is intended to customise
this package to meet the specifications necessary for Irish elec-
tronic fund transfer operations.

11.
In recent years, the Foundation has sought to improve its
administrative practices in order to reduce usage of the Imprest
Account. According to Foundation records, usage of the Imprest
Account has decreased as follows:

— 1997: Imprest Account expenditure was 40 % of total expen-

diture, excluding salaries

— 1998: Imprest Account expenditure was 37 % of total expen-

diture, excluding salaries

— 1999: Imprest Account expenditure was 21 % of total expen-

diture, excluding salaries.

In accordance with the Court’s suggestion, the Foundation will
seek to reduce usage to the minimal level possible.

9. The Foundation can report that, subsequent to the provision
of necessary expertise by the Commission’s technical services, the
SI2 budget ledger system is now operational in the year 2000. To
date the system has operated satisfactorily.

12. The Foundation will draw this matter to the attention of the
appropriate Commission service in order that, if necessary, con-
sideration can be given to effecting an appropriate amendment to
the Foundation’s Financial Regulation.