Report on the financial statements of the Translation Centre for the bodies of the European Union (TCBEU - Luxembourg) for the financial year ended 31 December 1999 together with the Centre's replies
Date: 2000-10-12
Institutions: European Court of Auditors
Subjects: Community body, financial control, financial year, management audit, report, translation

C 373/20

EN

Official Journal of the European Communities

27.12.2000

on the financial statements of the Translation Centre for the bodies of the European Union
(TCBEU — Luxembourg) for the financial year ended 31 December 1999 together with the
Centre’s replies

REPORT

(2000/C 373/04)

CONTENTS

Paragraph

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

1-4

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE
TRANSLATION CENTRE FOR THE BODIES OF THE EUROPEAN UNION (TCBEU —
LUXEMBOURG) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1999 . . . . . . . . . . . . . . .

Analysis of the implementation of the budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Analytical accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5-15

5-8

9-10

11

Awarding of contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12-14

Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

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

The Centre’s replies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

21

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23

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THE COURT’S OPINION

1. This report is addressed to the Management Board of the
Translation Centre for the bodies of the European Union in con-
formity with Article 14(4) of Council Regulation (EC)
No 2965/94 (1).

ended 31 December 1999.

2. The Court has examined the financial statements of the Trans-
lation Centre for the bodies of the European Union for the finan-
cial year
In accordance with
Article 14(1), of Council Regulation (EC) No 2965/94, the budget
was implemented on the responsibility 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 15 of Regulation (EC)
No 2965/94. The Court of Auditors
required under
Article 248 of the Treaty establishing the European Community
to audit these accounts.

is

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 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 TRANSLATION CENTRE FOR THE BODIES OF
THE EUROPEAN UNION (TCBEU — LUXEMBOURG) FOR THE
FINANCIAL YEAR ENDED 31 DECEMBER 1999

In accordance with the principle of budgetary equilibrium,
6.
the revenue for the financial year authorised commitments up to
the amount of 17,3 million euro, of which 14,1 million euro, i.e.
82 %, was actually committed, the remainder being cancelled. Of
the commitments made in 1999 against the appropriations for
1999, 3,1 million euro, i.e. 22 %, had to be carried over to the fol-
lowing financial year.

7. The extent to which revenue increased and the relative scale
of the carry-overs and cancellations of appropriations demon-
strate how necessary it is for the Centre to refine its estimates
relating to the filling of posts, to adopt more realistic invoicing
rates (see paragraph 9 below) and to develop even further its con-
sultation with those Community institutions and bodies which
are its clients.

8. As far as the commitments carried over from the previous
financial year are concerned, i.e. 2,5 million euro, 1,9 million euro
was used, i.e. 76 %, and the balance lapsed.

Analytical accounts

In its report concerning the financial year 1998 (3), the Court
9.
noted a considerable difference between the estimated cost of a
page of translation and the real cost. As a result, large amounts
had to be reimbursed. This situation was repeated in 1999, dur-
ing which year pages of translation were invoiced at 74 euro per
page, i.e. an amount 15,5 % greater than the last available cost
estimate, which was 64 euro per page.

10. More precise and more realistic estimates would allow reim-
bursements to the Community bodies which are the Centre’s cli-
ents to be reduced and would facilitate the management of their
accounts with the Centre. Consequently, the Court reiterates its
previous recommendations (4) that the Centre should set up ana-
lytical accounts in order to be able to establish, by body and by
type of work, the real cost of the services that it provides.

Analysis of the implementation of the budget

Inventory

5. The growth in demand for translations during the financial
year resulted in a considerable increase in the revenue entered in
the budget, which rose from an initial estimate of 13,6 million
euro to 17,3 million euro, i.e. an increase of 27 %. The estimated
revenue was established as due and collected, almost in its entirety,
i.e. 14 million euro.

(1) OJ L 314, 7.12.1994, p. 1.
(2) As required under Article 14(3) of Council Regulation (EC)
No 2965/94, the accounts for all the Centre’s revenue and expendi-
ture for the financial year 1999 were drawn up on 2 March 2000 and
forwarded to the Centre’s Management Board, the Commission and
the Court of Auditors. These accounts were received by the Court on
3 March 2000. A summarised version of these financial statements is
presented in the tables attached to this report.

11. The inventory exhibits anomalies in the numbering of the
items. In addition, the value of some of the equipment recorded
in the inventory ledger has not been included in the balance sheet.
Moreover, the Centre was not in a position to reconcile the bal-
ance sheet and the inventory ledger at the close of the financial
year. Although these anomalies do not affect the reliability of the
accounts, the Court urges the Centre to be more meticulous in the
keeping of its inventory records and to conduct an exhaustive rec-
onciliation of its accounts with its inventory ledger at least once a
year.

(3) OJ C 372, 22.12.1999, paragraph 7, p. 20.
(4) OJ C 393, 29.12.1997, paragraph 1.6, p. 47 and OJ C 406, 28.12.1998,

paragraph 1.6, p. 33.

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Awarding of contracts

12. According to the documentation contained in the ACPC files,
a report submitted to the latter in the context of the evaluation of
a bid for translation work expressed the opinion that equal weight
had been given to the price factor and the quality factor. An
examination of the method of calculation used to rank the vari-
ous bids reveals that the quality factor was actually given consid-
erably more importance.

13. Within the framework of this same call for tenders, which
gave rise to 38 offers, the prices contained in the evaluation sheet
in respect of three tenderers were different from those mentioned
in their bids and this led to errors in the ranking. The most scru-
pulous attention should be paid to the evaluation procedures in
order to avoid the evaluation being falsified by errors.

14. At the beginning of 1998, after consulting the ACPC, the
Centre awarded an initial contract for 68 245 euro, for a com-
puter project concerning the management of freelance transla-
tors. To extend the project the Centre awarded an additional con-
tract for 146 375 euro in December 1998, which was to be

implemented, in the main, in 1999. The Centre based the terms
of the second contract, as in the case of the first, on a framework
contract used by the Commission. In addition, this second con-
tract was awarded by private treaty without obtaining the opinion
of the ACPC. Furthermore, as no examination of the extension of
the contract was conducted by the ACPC, it is not possible to
verify whether the additional costs were justified in relation to the
objectives of this extension.

Premises

15. There was no change during 1999 in the situation observed
by the Court in 1997 (1) and in 1998 (2): the Centre is still occupy-
ing premises made available by the Luxembourg authorities, but
no agreement has been made between the parties on the tenancy
conditions (amount of any possible rent, surface area and facili-
ties rented, duration of the lease, etc.). An agreement should be
concluded in due form in order to clarify the situation, in par-
ticular with regard to the Centre’s financial statements.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 11 and 12 October 2000.

For the Court of Auditors

Jan O. KARLSSON

President

(1) OJ C 406, 28.12.1998, paragraph 1.13, p. 33.
(2) OJ C 372, 22.12.1999, paragraph 18, p. 20.

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Table 1

Balance sheet as at 31 December 1999 and 1998

Assets

1999

1998

Liabilities

1999

1998

(1 000 EUR)

Fixed assets
Equipment and furniture
Computer equipment
Intangible assets

Current assets
Amounts to be recovered (1)
Sundry accounts receivable

Cash accounts
Bank — demand accounts
Cash

Subtotal

Subtotal

108
429
39

576

4 133
479

4 612

5 299

Subtotal

5 299

95
220
46

361

977
10

987

10 711
2

10 713

Fixed capital
Own capital
Balance for the financial year

Current liabilities
Automatic carry-overs of appropriations
Advances received (2)
Amounts to be collected (1)
Sundry accounts payable

Suspense accounts
Sums to be reused

Subtotal

Subtotal

576
1 854

2 430

3 053
836
4 133
23

8 045

361
5 062

5 423

2 461
2 843
977
344

6 625

12

13

Total assets

10 487

12 061

Total liabilities

10 487

12 061

(1) To be collected from clients.
(2) Advances received from clients for translation services.
Source: Table prepared by the Court of Auditors on the basis of data provided by the Centre.

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Revenue and expenditure accounts for the financial years 1999 and 1998

Table 2

(1 000 EUR)

1999

1998

Revenue
Contribution from the general budget
Own revenue
Bank interest
Miscellaneous revenue

Expenditure

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

—
13 760
212
38

Total revenue

14 010

10 363
871

727
2 182

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

Total expenditure

14 143

Outturn for the financial year
Balance carried over from the previous financial year
Repayment of the excess received under previous financial years (1)
Appropriations carried over from the previous financial year, which lapsed
Exchange-rate differences

– 133
5 062
– 3 632
566
– 9

Balance for the financial year

1 854

(1) Net repayment to clients after final closure of the financial years 1995, 1996 and 1997. The profit and loss accounts for these financial

years remained open until 31 December 1999.

Source: Table prepared by the Court of Auditors on the basis of data provided by the Centre.

—
14 743
245
3

14 991

9 702
1 079

675
1 382

12 838

2 153
2 666
– 653
880
16

5 062

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THE CENTRE’S REPLIES

Analysis of budget implementation

Point 10

Points 5, 6, 7 and 8

Since 1997, the Centre has drawn up in the course of each finan-
cial year Supplementary and Amending Budgets (SABs) in order
to adjust its budget to the growing volume of work.

Since 1 January 2000, the Centre has adopted a system of analyti-
cal codes for all budget transactions entered into the accounts
using the S12 program and it is currently drawing up analytical
reports which exploit this data to best effect. At the end of 2000,
the Centre had analytical data and statistics at its disposal which
enabled it to make more accurate estimates.

In 1999, the SAB allowed the budget to be adjusted to take account
of the unexpected increase in work requests, but also, as set out
in the general introduction, to reduce the provisional price per
page, which fell from EUR 79 to EUR 74, i.e. a reduction of 6,5 %.

Inventory

Point 11

As stated in the Centre’s reply to the observations of the Court of
Auditors concerning the financial year 1998, the Centre set up a
system for consulting customer institutions and bodies in order
to draw up forecasts which reflect reality as much as possible.
Since this is the case, account should be taken of the fact that a
large part of the Translation Centre’s work is linked to changes in
business activity in the private sector, which is difficult even for
our clients to predict.

The Director therefore proposed, in the framework of a possible
review of the Centre’s operating procedures, the adoption of more
flexible tools allowing the budget to be managed in such a way
that it can react efficiently to variations in the workload.

Until the end of 1999, the Centre used a spreadsheet to keep its
inventory. This system was shown to have limitations and proved
ineffective. The Centre also installed the ELS system (SIC — Inven-
tory) used and developed by the Commission. This data base uses
a system of bar codes.

The changeover to the new system took place in January 2000
and is nearing completion.

At the time of the visit by the European Court of Auditors, the
system was in the process of being installed, and the reporting
software was not yet operational. This is why certain inconsisten-
cies were reported. Thanks to this new system, the Centre will be
in a position to manage its inventory more effectively.

Analytical accounts

Point 9

Awarding of contracts

Point 12

Calculation by the Centre of the provisional budget figure was
based partly on the volume of work predicted by its customers,
and partly on the basis of the forecastable expenditure required
to deal with this workload.

The contracts in question were awarded on the basis of the tender
which is the most advantageous in terms of price, in accordance
with the award criteria listed in the General Terms and Condi-
tions.

Prices had been revised at the time of the adoption of the Supple-
mentary and Amending Budget for 1999. This is why the pages
translated were invoiced at EUR 74 instead of EUR 79, backdated
to 1 January 1999.

In reponse to the recommendation of the Court of Auditors in its
report on the financial year 1997, the Centre decided to review its
Financial Regulation and to insert Article 26a which makes it pos-
sible for any positive or negative balance for each financial year
to be carried over to the subsequent financial year. This change
means that reimbursement of the difference between prices
invoiced and the true cost recorded at the end of the financial year
is avoided.

At its 12th meeting on 12 August 1999, the Centre’s ACPC exam-
ined the matter concerned and gave a favourable opinion, although
it recommended that, ‘the evaluation of tenders should be based
on a more transparent system centred on the price/quality com-
parison. A more detailed comparative table of the tenders should
be drawn up’.

Point 13

During the preparation of these contracts, the competent section
noted that the prices offered by the two tenderers chosen to carry

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out the translation of texts from English into Greek and used to
calculate the ranking of the tenderers had been inverted on the
spreadsheet. This mistake was corrected prior to conclusion of
the contract.

ACPC, and files are monitored more closely. To avoid excessive
recourse to the framework contracts of other institutions, since
the second half of 1998, the Centre, and, in particular, the Com-
puter Department, has launched several calls for expressions of
interest in order to draw up lists of suppliers.

Currently, the Centre is studying the possibility of reorganising
these departments in order, among others, to improve the admin-
istration of calls for tender.

Point 14

Premises

Point 15

This matter was dealt with during the 3rd meeting of the ACPC
on 29 January 1998; the ACPC declared itself in favour of the use
of Commission framework contract DI/0041700 and of the first
specific agreement.

The second contract is based on the same Commission frame-
work contract, and its use was approved by the Centre’s ACPC.
Consequently, given that the framework contract was drawn up
in response to an interinstitutional call for tenders, it cannot really
be deemed a contract concluded by private treaty.

Since 1998, when this matter was originally brought up, improve-
ments have been made both to the Centre’s departments and

This matter had been addressed in all the meetings of the Manage-
ment Board in 1999 and 2000, and the growing concern of cus-
tomers and the Management Board in the light of the lack of
progress made had been communicated, in writing and orally, on
several occasions by the Director and the Chairman of the Man-
agement Board to the Luxembourg authorities. However, no defini-
tive solution had been proposed by the Luxembourg authorities.

As pointed out in the observations of the Court of Auditors in
1997 and 1998, the Centre had submitted draft tenancy agree-
ments, as well as the draft agreement on the seat and the draft
agreement on security, but despite the numerous reminders sent
to the Luxembourg authorities, no response has been forthcom-
ing.