Report on the financial statements of the European Training Foundation (ETF - Turin) for the financial year ended 31 December 1999 together with the Foundation's replies
Date: 2000-09-27
Institutions: European Court of Auditors
Subjects: European Training Foundation, financial control, financial year, management audit, report

27.12.2000

EN

Official Journal of the European Communities

C 373/33

on the financial statements of the European Training Foundation (ETF — Turin) for the financial
year ended 31 December 1999 together with the Foundation’s replies

REPORT

(2000/C 373/06)

CONTENTS

Paragraph

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

1-4

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN
TRAINING FOUNDATION (ETF — TURIN) FOR THE FINANCIAL YEAR ENDED
31 DECEMBER 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Financial regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presentation of the financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Personnel management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5-13

5-7

8-12

8-9

10-11

12-13

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

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

Page

34

34

34

34

34

34

35

36

38

C 373/34

EN

Official Journal of the European Communities

27.12.2000

THE COURT’S OPINION

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

2. The Court has examined the financial statements of the Euro-
pean Training Foundation for the financial year ended 31 Decem-
ber 1999. In accordance with Article 11(1) of Council Regulation
(EEC) No 1360/90, the budget was implemented on the respon-
sibility of the Director. This responsibility includes 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 establishing the Euro-
pean Community to examine these accounts.

3. The Court carried out its audit in accordance with its audit-
ing policies and standards. These have been adapted from gener-
ally accepted international auditing standards to reflect the spe-
cific characteristics of the Community context. Accordingly, the
Court carried out such tests of the accounting records and 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 1999 are reliable and that the underlying transac-
tions, taken as a whole, are legal and regular.

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE
BUDGET OF THE EUROPEAN TRAINING FOUNDATION (ETF —
TURIN) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1999

Implementation of the budget

5. Of the total final appropriations of 16,2 million euro for the
financial year 2000, the Foundation utilised 13,3 million euro
(82 %) during the year, 2,9 million euro (18 %) was automatically
carried over to the financial year 2000 and 0,06 million euro
(0,4 %) was cancelled at 31 December 1999.

6. The bulk of the expenditure for the financial year consisted of
staff expenditure (10,2 million euro) and administrative expendi-
ture (0,9 million euro). Carry-overs to the next financial year
related primarily to the Foundation’s operating appropriations:
these stood at 2,3 million euro, or almost 50 % of the allocation
for the corresponding title (see also paragraph 8 below).

(1) Council Regulation (EC) No 1572/98 amending Regulation (EEC)

No 1360/90, OJ L 206, 23.7.1998, p. 1.

(2) As required by Article 11(3) of Council Regulation (EEC) No 1360/90,
the detailed accounts for all the Foundation’s revenue and expenditure
for the financial year 1999 were drawn up on 19 May 2000 and for-
warded to the Foundation’s Governing Board, the Commission and
the Court of Auditors. These accounts were received by the Court on
29 May 2000. A summarised version of these financial statements is
presented in the tables attached to this report.

7. Almost all the appropriations that were automatically carried
over from 1998 to 1999, totalling 3,5 million euro, were utilised
as regards Titles 1 and 2 of the budget (staff expenditure and
administrative expenditure) and, to a lesser extent, as regards
operating appropriations, in respect of which 0,3 million euro of
the 2,2 million euro carried over was cancelled on 31 Decem-
ber 1999.

Financial regulation

Budgetary procedure

8. Article 10(4) of the Regulation establishing the Foundation (3)
lays down that ‘the governing board, after receiving the advice of
the Commission, shall adopt the budget of the Foundation at the
beginning of each financial year, adjusting it to the several con-
tributions granted to the Foundation and to its other resources.’
In practice, the implementation of this provision means that the
budget for each financial year is formally adopted, at the earliest,
in the middle of the first quarter of the financial year in question.
Since the work programme has to be adopted at the same time,
launches of projects financed from operating appropriations are
delayed and, given the time it takes to conclude contracts (search
for partners, preliminary studies, referral to the advisory commit-
tee on procurements and contracts, etc.), many are not signed
until the very last weeks or, even, the very last days of the finan-
cial year, purely in order to commit appropriations which would
otherwise lapse on 31 December.

9. This is a persistent problem, on which the Court has already
commented in its previous annual report concerning the Founda-
tion (4), and to which a procedural or regulatory solution must
swiftly be found, so that the Foundation can implement its work
programme from 1 January of each financial year.

Presentation of the financial statements

10. As was the case in 1998 (5), the Foundation did not publish
its budget and organisation chart in the Official Journal of the Euro-
pean Communities and, at its own initiative, chose to make avail-
able certain items of information relating to the budget on its
Internet site instead. The Court considers that this arrangement is
not in accordance with Article 13 of the Financial Regulation
applicable to the Foundation.

In its 1996 (6), 1997 (7) and 1998 (8) annual reports concern-
11.
ing the Foundation, the Court drew attention to the management
of Phare, Tacis and Tempus subsidies which the Foundation man-
aged outside its budget, and which totalled approximately 330
million euro for the financial year 1999. The balance of 80,5 mil-
lion euro at 31 December 1999, held in around sixty bank accounts
and available to the Foundation for managing these subsidies,
does not appear in the Foundation’s financial statements.

(3) OJ L 131, 23.5.1990, p. 4.
(4) OJ C 372, 22.12.1999, paragraphs 13-14, pp. 33-34.
(5) OJ C 372, 22.12.1999, paragraph 6, p. 33.
(6) OJ C 393, 29.12.1997, paragraph 1.11, pp. 41-42.
(7) OJ C 406, 28.12.1998, paragraph 1.5, p. 38.
(8) OJ C 372, 22.12.1999, paragraph 5, p. 33.

27.12.2000

EN

Official Journal of the European Communities

C 373/35

Personnel management

12. Staff financial entitlements are rarely established by way of
formal and reasoned decisions taken by the Authority empow-
ered to draw up employment contracts.

Individual documents do not always contain the information
13.
essential for establishing or calculating entitlements, which are,
moreover, not systematically reviewed by the administrative
departments. As a result certain benefits may be paid without
having been justified.

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

C 373/36

EN

Official Journal of the European Communities

27.12.2000

Balance sheet at 31 December 1999 and 31 December 1998

Table 1

Assets

1999

1998

Liabilities

1999

1998

(1 000 EUR)

Fixed assets
Equipment and furniture

1 976

1 756

Fixed capital
Own capital
Balance for the financial year

Stocks

12

10

Current assets
Commission subsidy
Sundry accounts receivable

Cash accounts
Banks — demand accounts
Imprest account

—
140

140

5 738
543

6 281

Subtotal

Subtotal

Total assets

8 409

3 708
252

3 960

1 616
588

2 204

7 930

Source: Table prepared by the Court of Auditors using data provided by the Foundation.

Current liabilities
Commission
Allocated revenue to be carried over
Automatic carry-overs of appropriations
Sundry accounts payable
Deductions from salaries
Current recovery orders
Allocated revenue

1 988
2 812

Subtotal

4 800

—
57
2 881
66
205
26
248

Subtotal

3 483

1 766
– 1 417

349

3 708
—
3 513
13
110
—
16

7 360

Suspense accounts
Payments in progress

126

221

Total liabilities

8 409

7 930

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Official Journal of the European Communities

C 373/37

Revenue and expenditure account for the financial years 1999 and 1998

Table 2

(1 000 EUR)

1999

1998

19 898
139
2

Total revenue

20 039

Revenue
Subsidy received from the Commission
Bank interest
Miscellaneous revenue
Exchange profits

Expenditure

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

10 026
157

897
451

2 333
2 273
61

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

Operating expenditure — Title III of the budget
Payments
Appropriations carried over
Exchange losses

Total expenditure

16 198

Outturn for the financial year
Balance carried over from the previous financial year
Appropriations carried over from the previous financial year which lapse
Amount refunded to the Commission

3 841
– 1 417
388

Outturn to be carried over

2 812

Source : Table prepared by the Court of Auditors using data provided by the Foundation.

11 686
245
1
162

12 094

9 149
344

748
612

1 760
2 557
19

15 189

– 3 095
2 212
306
– 840

– 1 417

C 373/38

EN

Official Journal of the European Communities

27.12.2000

THE FOUNDATION’S REPLIES

Approval of the Work Programme and the Budget by the Gov-
erning Board in the first trimester (Points 8 and 9)

Phare, Tacis and Tempus subventions (Point 11)

We agree that the approval of the Foundation’s Work Programme
and related budget only in the middle of the first trimester results
in many contracts only being signed at the end of the year. The
Foundation agrees that this situation should be corrected urgently.
The Foundation has agreed, therefore, with the European Com-
mission (which chairs the Governing Board) that in future the
annual Work Programme and related budget will be presented for
adoption in the autumn meeting of the Governing Board preced-
ing the year in question. The 2001 Work Programme and 2001
budget will be presented to the Governing Board for adoption in
November 2000.

Publication budget on Internet instead of the Official Journal
(Point 10)

Since 1998 the Foundation has published its budget in full on the
Internet with the full support of the European Commission and
the European Parliament. The Foundation believes that publica-
tion on the Internet reaches a wider public than publication in the
Official Journal and that this has led to increase access and trans-
parency for the European citizen. This action is clearly in the
spirit of Article 13 of the Financial Regulations. Bearing in mind
the continuing budgetary constraints, publication of the budget in
full on the Internet only guarantees a significant saving for the
Foundation.

With regard to the balance of EUR 80,5 million, the Foundation
has to keep separate from the general subsidy the monies it
handles on behalf of the Commission. Individual financial reports
are kept for all conventions with related bank balances for each.

Personnel Management (Points 12 and 13)

Although financial rights of ETF staff are correctly calculated and
certified by supporting documents, in the past entitlement was
checked by the Personnel Unit. The Foundation agrees that a more
formal procedure should be introduced. In future the Foundation
will do this by means of a Determination of Financial Rights
Form, which will be signed by the Authority entitled to conclude
employment contracts (in this case the Director).

Individual files contain all the necessary information for the deter-
mination or calculation of rights granted, except the Contract of
Employment and any Amending Clauses, the latter having been
filed in a different archive. The transfer of the Contracts to the
individual files is ongoing and will be completed by the end of
July 2000. Furthermore, the Determination of Financial Rights
Form mentioned above will be used to review systematically, on
a yearly basis, the permanence of the justifications for the finan-
cial rights granted.