Report on the financial statements of the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA - Lisbon) for the financial year ended 31 December 1999, together with the Centre's replies
Date: 2000-10-26
Institutions: European Court of Auditors
Subjects: European Monitoring Centre for Drugs and Drug Addiction, financial control, financial year, management audit, report

27.12.2000

EN

Official Journal of the European Communities

C 373/45

on the financial statements of the European Monitoring Centre for Drugs and Drug Addiction
(EMCDDA — Lisbon) for the financial year ended 31 December 1999, together with the Centre’s
replies

REPORT

(2000/C 373/08)

CONTENTS

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

1-5

Paragraph

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN
MONITORING CENTRE FOR DRUGS AND DRUG ADDICTION (EMCDDA — LISBON) FOR
THE FINANCIAL YEAR ENDED 31 DECEMBER 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Analysis of the budgetary implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary accounting system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Booking of VAT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Acquisition of goods and services in the field of data processing. . . . . . . . . . . . . . . . . . . . . .

Management of the contracts with the national centres . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contractual provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nature and checking of the national co-financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Activities financed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6-21

6-7

8

9

10

11

12

13-21

13-14

15-16

17-18

19-21

Tables 1 to 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Page

46

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46

46

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52

C 373/46

EN

Official Journal of the European Communities

27.12.2000

THE COURT’S OPINION

1. This report is addressed to the Management Board of the
European Monitoring Centre for Drugs and Drug Addiction, in
accordance with Article 11(11) of Council Regulation (EEC)
No 302/93 (1).

2. The Court has examined the financial statements of the Euro-
pean Monitoring Centre for Drugs and Drug Addiction for the
financial year ended 31 December 1999. In accordance with
Article 11(8) of Council Regulation (EEC) No 302/93, the budget
was implemented on 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 stipulated in Article 11(12) of Council Regulation (EEC)
No 302/93, as amended by Article 1 of Council Regulation (EC)
No 3294/94 (3). The Court of Auditors is required under
Article 248 of the Treaty establishing 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 ended
31 December 1999 are reliable and that the underlying transac-
tions, taken as a whole, are legal and regular.

5. Without calling into question the audit opinion expressed in
paragraph 4, the Court would, however, like to draw attention to
the situations described in paragraph 9.

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE
BUDGET OF THE EUROPEAN MONITORING CENTRE FOR
DRUGS AND DRUG ADDICTION (EMCDDA — LISBON) FOR THE
FINANCIAL YEAR ENDED 31 DECEMBER 1999

Analysis of the budgetary implementation

6. The amount of final appropriations granted to the Centre for
the financial year 1999 was 8,2 million euro, as against 7,6 mil-

(1) OJ L 36, 12.2.1993, p. 6.
(2) As required under Article 11(10) of Council Regulation (EEC)
No 302/93, the accounts for all the Monitoring Centre’s revenue and
expenditure for the financial year 1999 were drawn up on 13 March
2000 and forwarded to the Centre’s Management Board, the Com-
mission and the Court of Auditors. These accounts were received by
the Court on 16 March 2000. A summarised version of these accounts
is presented in the tables annexed to this report.

(3) OJ L 341, 30.12.1994, p. 7.

lion euro in 1998, i.e. an 8 % increase. Commitments against these
appropriations totalled 7,8 million euro; of this amount, 5,6 mil-
lion euro (71 %) were paid and 2,2 million euro (27 %) were car-
ried over to the following financial year. The bulk of the carry-
overs, 1,8 million euro, concerned the Centre’s operational
expenditure (Title III of the budget — see also paragraphs 13 and
14 below).

7. Of the 2,4 million euro in commitments carried over from
1998, 2,1 million euro (87 %) were used.

Budgetary accounting system

8.
In 1999, the Centre introduced the SI2 system but continued
to use its former system, based on a spreadsheet, on account of
the problems encountered with the implementation of S12. The
EMCDDA should continue its efforts to make the S12 system
completely operational so that it has a single, integrated system
for keeping its accounts.

General accounts

9. A debit balance of 149 321,60 euro dating back to the finan-
cial years 1996, 1997 and 1998 was regularised by charging it to
the outturn. The origin of these balances and the corresponding
banking movements could be traced back in the accounts. The
transactions were not, however, always backed up by the support-
ing documents which would have enabled the underlying transac-
tions to be identified. This was the case for approximately
32 000 euro. The Centre’s procedures and internal control system
should be strengthened to prevent similar situations from recur-
ring.

Booking of VAT

10. Until December 1998, the general Financial Regulation stipu-
lated that expenditure was to be booked inclusive of VAT, as the
latter, once refunded, could be reused. Since then (4), the general
Financial Regulation has laid down that expenditure must be
charged exclusive of VAT. The Court invites the Centre to incor-
porate these new provisions into its own rules.

(4) 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).

27.12.2000

EN

Official Journal of the European Communities

C 373/47

Imprest account

arrangements. In view of the nature of some of the work, sub-
contracting may offer an effective solution, but its use should be
subject to the prior authorisation of the Centre.

11.
In 1999, 1,4 million euro in payments were made via the
imprest account, which represents 26 % of the total payments for
the financial year. This method of payment should be cut to a
minimum, given the risks involved in its management.

Acquisition of goods and services in the field of data processing

12. An examination of the contracts for the supply of goods and
services in the field of data processing has revealed certain short-
comings: products were purchased without consulting the infor-
matics department and they did not meet the required specifica-
tions. Data-processing projects should not proceed, and the
corresponding purchase decisions should not be approved, until
the informatics department has been consulted and all the projects
should be run by a person who is suitably qualified.

Management of the contracts with the national centres

Financial implementation

13.
In order to help achieve the Centre’s aims, virtually half of
the operational expenditure is devoted to financing national cen-
tres (one per Member State). In 1999, the Centre agreed contracts
with these centres worth 1,8 million euro, with 1,5 million euro
going to direct support contracts (100 000 euro per centre) and
0,3 million euro to supplementary contracts. The basic contracts
were made at the beginning of the year and payments of at least
1,2 million euro (i.e. 80 %) ought to have been made for them by
the end of the year. In practice, only 0,95 million euro, i.e. 63 %,
had been paid out under these contracts by the year-end. Of the
other contracts, involving a sum of 0,3 million euro, 17 % of the
total value was paid. Overall, the Centre had to carry over 0,8 mil-
lion euro of the 1,8 million euro committed for the national cen-
tres.

14. Underutilisation of appropriations on this scale points to
shortcomings in the Centre’s monitoring of its annual work pro-
gramme. The Centre, in conjunction with the national centres,
ought to improve the way it monitors the measures which are
financed so as to minimise carry-overs of appropriations and thus
ensure stricter adhesion to the principle of annuality.

16. When determining certain costs, it may be useful to apply
standard ratios in order to make the cost evaluation easier for the
contractors. In such cases, the Centre should ask the contractors
for details in order to ascertain whether the rates applied are plau-
sible and should, if need be, set maximum limits.

Nature and checking of the national co-financing

17. The basic contracts and certain supplementary contracts
provide for co-financing by the Member State in which the centre
is situated. In principle, the national co-financing should at least
be equivalent to the financing granted by the EMCDDA. However,
it is not stipulated to what extent the national and Community
financing provided for under the contracts should result in an
increase in the budget of the centre concerned.

18.
In practice, co-financing is certified by declarations issued by
the centres themselves. Furthermore, an examination of the finan-
cial tables annexed to the contracts has revealed disparities in the
implementation of the national and Community funding: in some
cases, the national co-financing is applied at a global level, in
other cases it takes account of the way in which the Community
financing is divided up between the various aims pursued by the
contracts.

Activities financed

19. The basic contracts agreed in 1999 make provision for four
activities. Disparities are apparent in the way in which the national
and Community funding is divided up between the planned tasks
(see Table 3).

20. There are also disparities in the manner in which the aid
granted by the Centre is used (see Table 3).

Contractual provisions

15. The contracts agreed by the Centre make no provision for
subcontracting, and yet one of the national centres has used such

21. Whilst disparities in the distribution of the funding can
doubtless be partly justified by special circumstances, these dis-
parities do nevertheless seem to be excessive. In particular, it is
unusual that one centre takes no action whatsoever with regard
to data on reducing the demand for drugs, despite the fact that
this is one of the Centre’s specific objectives.

C 373/48

EN

Official Journal of the European Communities

27.12.2000

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 26 October 2000.

For the Court of Auditors

Jan O. KARLSSON

President

27.12.2000

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Official Journal of the European Communities

C 373/49

Table 1

Balance sheet for the financial years 1999 and 1998

Assets

1999

1998

Liabilities

1999

1998

(1 000 EUR)

Fixed assets
Fixed assets

Stocks
Office supplies

Readily convertible assets
Commission subsidy
Balance sundry debtors
Payments against allocated revenue
VAT to be recovered
Allocated subsidies

Cash accounts
Bank
Imprest account
Transfers in progress
Cash accounts

3 603

Subtotal

3 603

3 518

3 518

Fixed capital
Own capital (1)
Balance for the financial year

3 620
1 617

Subtotal

5 237

Current liabilities
Automatic carry-overs of appropriations
Non-automatic carry-overs of appropriations
Balance sundry accounts due
Counterpart VAT to be recovered
VAT reuse accounts
Counterpart Commission subsidy
Allocated subsidies

2 133
280
150
3
163
0
265

Subtotal

2 994

Subtotal

Subtotal

17

17

0
37
1
3
265

306

4 276
49
– 20
0

Subtotal

4 305

29

29

570
403
10
4
0

987

3 230
527
– 47
0

3 710

3 547
1 287

4 834

2 112
280
405
4
39
570
0

3 410

Total assets

8 231

8 244

Total liabilities

8 231

8 244

(1) The amount corresponding to that of fixed assets and stocks excluding the refurbishing of the building (about 1 Mio EUR).
Source: Table drawn up by the Court of Auditors on the basis of the Monitoring Centre’s data.

C 373/50

EN

Official Journal of the European Communities

27.12.2000

Table 2

Balance for the financial years 1999 and 1998.

Total revenue

Revenue
Commission subsidy
Miscellaneous revenue
Bank interest

Expenditure

I — Staff in active employment
Payments
Appropriations carried forward

II — Operation, equipment, buildings
Payments
Appropriations carried forward

III — Operations to implement objectives
Payments
Automatic carry-overs of appropriations
Non-automatic carry-overs of appropriations

Total expenditure

Outturn for the financial year
Outturn carried forward from the previous year
Cancelled carry-overs + reuse + cancellation of revenue
Exchange-rate differences/special charges

Source: Table drawn up by the Court of Auditors on the basis of the Monitoring Centre’s data.

Balance for the financial year

1999

8 156
0
0

8 156

3 367
59

637
240

1 569
1 833
280

7 985

171
1287
380
– 221

1 617

(1 000 EUR)

1998

9 695
154
123

9 972

2 751
138

805
430

1 305
1 544
280

7 253

2 719
– 1 569
137
0

1 287

27.12.2000

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Official Journal of the European Communities

C 373/51

Table 3

Use of financing granted to the centres by task

Use of financing (1) by the centres
Updating national report
Information on reducing demand
New measures synthetic drugs
Epidemiological indicators

Use by the centres of financing granted by the Monitoring Centre
Updating national report
Information on reducing demand
New measures synthetic drugs
Epidemiological indicators

(1) Financing granted by the Monitoring Centre and national co-financing.
Source: Table drawn up by the Court of Auditors on the basis of the Monitoring Centre’s data.

Minima

Maxima

Average
(15 centres)

2 %
0 %
2 %
12 %

4 %
0 %
4 %
7 %

73 %
28 %
41 %
93 %

79 %
28 %
40 %
80 %

24 %
11 %
15 %
50 %

32 %
15 %
15 %
38 %

C 373/52

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Official Journal of the European Communities

27.12.2000

THE CENTRE’S REPLIES

1 to 7. The EMCDDA welcomes the Court of Auditors’ observa-
tion that the financial statements for the financial year ended
31 December 1999 are reliable and that the underlying transac-
tions, taken as a whole, are legal and regular.

11. The EMCDDA has gradually reduced the payments made via
the imprest account and will continue to keep them to a mini-
mum in accordance with the Court’s observation.

8.
In view of the difficulties experienced in adapting the SI2 soft-
ware to the needs of the Agencies’ accounting systems since its
introduction at the beginning of 1999, and because this software
relies on external technical support, the Excel spreadsheet has
been provisionally maintained in parallel for security reasons, in
case the SI2 system crashes and in order to produce certain neces-
sary reports.

9. The EMCDDA confirms the Court’s observations and has
already taken the necessary measures to prevent this situation
arising in the future.

In terms of principles, the EMCDDA shares the Court’s point
10.
of view and would also like to see the principles of the Financial
Regulation governing the European Union’s General Budget trans-
posed to its Financial Regulation. However, taking into account
the constraints imposed by the procedures used by the Portuguese
tax authorities for reimbursing VAT, it will examine the advan-
tages and disadvantages of such a transposition before reaching a
final conclusion.

12 to 21. The EMCDDA used appropriations well and was suc-
cessful at concluding contracts under the given circumstances.
The contracts concluded in 1999 by the EMCDDA with the
National Focal Points in the Reitox network were of a foreseeable
duration and were set to expire automatically in the year 2000.
The EMCDDA’s follow-up of these contracts was satisfactory and
the carry-over of appropriations is due to the time frame estab-
lished. In the future, the EMCDDA will endeavour as far as pos-
sible to make the duration of the contracts correspond to the cal-
endar year, although it acknowledges the fact that due to the
nature of the activities concerned, there will always be appropria-
tions to be carried over automatically, in accordance with the
applicable regulations.

The EMCDDA will analyse the Court’s observations and examine
the possibilities for introducing new measures to improve the
monitoring and effectiveness of its activities. In this respect, it
points out that, following the decision taken by its Management
Board, an ad hoc working group has been set up to improve the
operation of the Reitox National Focal Points network.