Report by the Court of Auditors on the audit of the operational efficiency of the management of the European Central Bank for the financial year 2000, together with the European Central Bank's replies
Date: 2001-09-26
Institutions: European Court of Auditors
Subjects: European Central Bank, European Court of Auditors, audit, financial year, management accounting, report

4.12.2001

EN

Official Journal of the European Communities

C 341/1

I

(Information)

COURT OF AUDITORS

REPORT BY THE COURT OF AUDITORS

on the audit of the operational efficiency of the management of the European Central Bank for the
financial year 2000, together with the European Central Bank’s replies

(2001/C 341/01)

CONTENTS

Paragraph

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE EFFICIENCY OF THE MANAGEMENT IN 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary management and monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disaster standby site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Eurotheum building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Euro 2002 information campaign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Follow-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rules and procedures for recruitment and for internal promotion . . . . . . . . . . . . . . . . .

Weaknesses of the physical inventory system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-3

4-23

4-7

8-10

11-12

13-21

22-23

22

23

CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24-25

The European Central Bank’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

2

2

3

3

3

4

4

4

4

6

C 341/2

EN

Official Journal of the European Communities

4.12.2001

INTRODUCTION

1. The Court’s mandate with regard to the European Central
Bank (ECB) stipulates ‘an examination of the operational efficiency
of the management of the ECB’ (1). The ECB’s accounts for the
financial year ending 31 December 2000 were approved by the
Governing Council on 13 March 2001 and published in April
2001 (2) after
they had been audited and certified on
14 March 2001 by an external auditor.

2. The ECB is subject to the financial provisions contained in its
Statute, a detailed interpretation of which has been set out in the
decisions of the Governing Council, which is the budgetary author-
ity of the ECB. In 2000, the Council comprised, in accordance
with Article 112 of the Treaty establishing the European Commu-
nity, the six members of the Executive Board and the 11 gover-
nors of the National Central Banks (NCBs) of the Member States
which have adopted the euro (3).

3. The ECB experienced in 2000 its second full year of activity
as a central bank, which had started with the launching of the
euro on 1 January 1999. In accordance with Article 105(2) of the
Treaty, the ECB is in charge of the following basic tasks: defini-
tion and implementation of the monetary policy of the Commu-
nity, conduct of foreign exchange operations, holding and man-

agement of the official reserves of the Member States and promo-
tion and operation of the smooth operation of payment systems.
Dealing with advisory functions, the ECB, under the provisions of
Article 105(4) of the Treaty, submits opinions to the appropriate
Community institutions or bodies or to national authorities on
matters in its fields of competence.

THE EFFICIENCY OF THE MANAGEMENT IN 2000

Budgetary management and monitoring

4. An initial budget of 267 million euro was approved by the
Governing Council at its meeting on 2 December 1999 (see Table).
The initial budget was increased to 289 million euro at the end of
March 2000, following the approval of the project submission
document for the Euro 2002 Information Campaign (see para-
graph 19). But in the light of the predicted overall underspending
showed by the ‘mid-year review — forecast for 2000’ conducted
at the end of June 2000, the Governing Council approved a revised
budget in September 2000. As a consequence the revised budget
from March 2000 was reduced by 62 million euro, bringing the
budget down to 227 million euro. As a part of the revised budget
in September 2000 an amount of 5 million euro as ‘contingency
reserve’ was approved.

Table

ECB’s budget in 1999 and 2000

(Mio EUR)

1999

2000

Budget

Actuals

%

Initial budget

Revised
budget 31
March

Revised
budget
September

Actuals 31
December

% of budget
September

% of initial
budget

162

27

—

190

129

23

—

152

80

83

—

80

190

77

—

267

191

98

—

289

168

54

5

227

163

37

—

200

97

69

—

88

86

48

—

75

Purpose

Business units

Projects

Contingency
reserve

Total

Source: ECB.

(1) Protocol No 18 (ex No 3) on the Statute of the European System of
Central Banks and of the European Central Bank annexed to the EC
Treaty, Article 27(2).
(2) ECB Annual Report 2000.
(3) The Governor of the Bank of Greece attended all the meetings of the
Governing Council of the ECB in the second half of 2000 as a ‘special
invitee’.

4.12.2001

EN

Official Journal of the European Communities

C 341/3

5. The account headings dedicated to business units decreased
by 28 million euro or 15 % from 191 million euro according to
the revised budget as at end of March 2000. The effective utilisa-
tion was 163 million euro. The main reasons were reduced invest-
ments in the business units, a decrease of their ‘other operating
expenditure’ and a slower recruitment than foreseen.

6. Concerning the expenditure for projects, there was an impor-
tant decrease of 40 million euro or 52 % from the initial budget.
The actual utilisation amounted to 37 million euro. The under-
spending is mainly due to delays in four main projects.

7. As in previous years there was an important gap between the
planning of the projects and the effective ability to implement
them. Once again the ECB was apparently too ambitious as regards
its planned projects and the budget only served to a modest extent
as a strategic tool for the effective management and control of
expenditure.

Eurotheum building

In order to accommodate the growing staff numbers, the
11.
ECB decided to rent an additional office site located in the vicin-
ity of the Eurotower as from the middle of 2000.

12. Because of the operation of German tax law, which does not
treat the ECB as a business, the rent paid by the ECB reflects the
lessor’s VAT-inclusive capital costs. In the case of the additional
office accommodation the resulting extra charge amounts to
616 000 euro per year. The same situation has most likely applied
for several years to the rent paid by the ECB for the Eurotower. It
is questionable whether this situation is consistent with the Pro-
tocol on the privileges and immunities of the European Commu-
nities which exempts the Institutions, including the ECB, from the
payment of national taxes. This problem has been raised by the
ECB with the Ministry of Finance of the Federal Republic of Ger-
many.

Disaster standby site

Euro 2002 information campaign

8. The primary objective of the disaster standby site project is to
assure the continuation of ECB critical functions in the wake of a
disaster. Phase 1, which has been already completed, comprised
the implementation of an off-site disaster recovery facility for ‘Tar-
get’, a large-value payment system, and the establishment of a
‘shell’ computer centre as a disaster recovery area. It further
included the detailed analysis of the full ECB business require-
ments for disaster recovery and procedures with the owner of the
site in order to use the facility that has been offered by the latter.
Phase 2 comprises the full implementation of the ECB’s own
disaster recovery centre replacing the arrangements with the
owner of the site, and the formulation and testing of a full recov-
ery plan, including operational procedures.

9. Following a tender procedure, a company was selected in
November 1999 for a common data storage and back-up sub-
system. The decision to implement this sub-system was to await
the conclusion with one of the ECB’s other suppliers of IT services
of an interoperability agreement.

13. The main goals of the Euro 2002 information campaign are

— ‘to gradually prepare the general public for the introduction
of the euro banknotes and coins so that they are favourably
received,’

— ‘to help the general public to recognise the euro banknotes
and coins (information about the security features),’ and

— ‘to show cashiers in shops and banks how to examine the
euro banknotes quickly and efficiently in order to detect pos-
sible counterfeits’.

14.
In February 1999 a notice for a restricted tender was pub-
lished in the Official Journal of the European Communities: ‘Design-
ing a campaign to publicise the euro banknotes. This shall include
coordinating the production and effecting the implementation of
the agreed campaign foreseen for the years 2000, 2001 and 2002.
The target is that the official banknotes shall be recognised by the
citizens of all euro countries and those outside the euro area who
handle the new banknotes on a professional or regular basis.’

10. Although it has not yet been possible to reach such an agree-
ment the ECB recently agreed to approve the conclusion of the
contract with the preferred supplier subject to the negotiation of
penalties to be applied if it fails to meet its obligation. Given the
importance of the data storage system for the operation of the
back-up facility, this decision appears premature.

15. Thirty-nine companies responded to the call for expression
of interest. Following the initial response to tender notice, nine
companies were chosen to ‘make a presentation detailing with
supporting evidence how they could successfully manage the
required campaign.’

C 341/4

EN

Official Journal of the European Communities

4.12.2001

16. Three agencies were chosen to take part in the final stage of
the competition. They were told that ‘...the cost to the ECB for this
project is estimated at between 20 million euro and 30 million
euro. This does not include prime-time television advertising. The
presentation should contain a rough estimate of the costs of the
realisation of the European-wide campaign, including specific
details of all fees and in-house production charges’. In addition to
the written briefings, a separate oral briefing was given to each of
the three candidates. This last element in the procedure carried
with it a risk that the tenderers would not be given identical infor-
mation.

17. There were no significant price differences between the ten-
derers. This reflected the fact that the companies involved at the
final stage had been given two alternative limits to the programme
costs: 50 million euro and 80 million euro.

In October 1999 a jury of 12 members used a ‘comparative
18.
evaluation table’ incorporating criteria different from the tender
notice (e.g. human/personal contact instead of awareness), to rec-
ommend a contractor.

19. On 18 November 1999 the Governing Council decided that
the Euro-campaign should not be included in the draft ECB bud-
get. A supplementary budget for the year 2000 including provi-
sions of 14,5 million euro for the campaigns was however
approved in March 2000.

media campaign in each Member State, which enabled the media-
selection procedure to be started.

Follow–up

Rules and procedures for recruitment and for internal pro-
motion

22. On June 2001 the administrative circulars on rules for recruit-
ment and on promotion and additional salary came into effect.

Weaknesses of the physical inventory system

23. During the previous audits of the Court, the attention of
management has been drawn to the absence of a reliable inven-
tory of tangible assets. Instead of introducing a unique physical
inventory system, some monitoring of the inventory is managed
by different departments. Physical inventories had not been under-
taken before the end of 2000 and are foreseen only every three
years. There is no monitoring of printers or laptops bought by the
EMI/ECB since 1998. An administrative circular delegates the
responsibility for the security of the assets to the individual man-
agers: no overview of the position is available.

CONCLUSIONS

20. The successful tenderer was a ‘société anonyme’ listed on the
Paris stock exchange. However the contract was signed with a
company registered in the Netherlands. The contract does not
mention any reason for the change from the original applicant to
another contractor. No document of the ECB gave details about
the reasons for the change, the ownership-structure of the other
company, the justification regarding the procurement rules and
the consequent approval of the changes by the Executive Board
and Governing Council.

24. The Court noted in its report on the financial year 1999, that
‘budgetary forecasting and management should be much improved,
so that the budget can serve as an effective control and manage-
ment instrument’ (1). While in 1999 the budget reflected a utilisa-
tion of 83 % for the projects and 80 % of the total, in 2000 the
utilisation was only 48 % for the projects compared to the initial
budget and 69 % compared to the budget revised in September.
Total expenditure in 2000 was 200 million euro, i.e. 88 % com-
pared to the revised budget of 227 million euro and 75 % com-
pared to the initial budget of 267 million euro.

21.
It was intended that the Media planning and the buying of
advertising space and time should be carried out during 2000.
The media programme should have been defined and developed
and the negotiations should have been started. Finally in April
2001 the ECB decided how much money would be spent for the

25. The ECB decided in 1999 to mount an information cam-
paign to assist the introduction of the Euro in 2002. The content
and cost of the campaign were not clearly defined, and as a result
there was no satisfactory objective basis on which to choose the
successful contractor.

(1) OJ C 47, 13.2.2001, paragraph 11.

4.12.2001

EN

Official Journal of the European Communities

C 341/5

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 26 September 2001.

For the Court of Auditors

Jan O. KARLSSON

President

C 341/6

EN

Official Journal of the European Communities

4.12.2001

THE EUROPEAN CENTRAL BANK’S REPLIES

The European Central Bank (ECB) welcomes the report of the
European Court of Auditors and takes note of the various points
raised by the Court.

supplementary budget only once the required budgetary needs
had been substantiated. The ECB considers this approach to be
prudent.

7. Whilst agreeing with the comment on the ECB’s unfortunately
limited ability to implement projects in 2000, it needs to be
emphasised that the ECB’s project budget outlining the scope and
size of all intended project undertakings is considered to serve as
an effective management tool for determining precise budget ceil-
ings. There are various layers of control of expenditures, as out-
lined in the ECB’s Annual Report 2000.

9.
It was stated that the decision to proceed with the implemen-
tation of the full production environment would be subject to the
establishment of an acceptable framework for fault handling pro-
cedures in a mixed vendor environment. The optimal solution
would have been for suppliers of IT services and the supplier of
the common data storage system to reach full interoperability
agreements. Although (despite considerable efforts) this was not
possible in one instance, the support framework established was
nonetheless considered acceptable.

basis.

Advertising

competence

20. The successful tenderer is a global enterprise, which has a
structure comprising a mother company (SA), charged with the
development and supervision of all business strategies, and a
number of subsidiaries that can operate either on a country or
specific
public
relations’campaigns of a relevant transnational dimension are the
responsibility of the subsidiary (BV) with which the contract was
established. The subsidiary operates under the supervision of the
mother company. Whilst communications between the ECB and
the tenderer were addressed to or came from the mother com-
pany for logistical reasons, it was clear for the ECB from the very
outset that the subsidiary would be entrusted with the develop-
ment of the public relations and advertising strategies for the
Euro 2002 information campaign.

and

It should be recognised that the contracts were only con-
10.
cluded having taken steps to mitigate all risks, including the con-
duct of work to establish a satisfactory support framework, and
having assessed the residual risks to be acceptable.

21. The media programme could only be agreed once the cre-
ative campaign had been defined and the second wave of qualita-
tive research finalised (in January 2001). Upon advice from agency
experts, media programme negotiations started in February 2001
for the international programme and April 2001 for the national
programme.

16. The three finalist agencies were offered an opportunity to
seek clarification of information contained in the ECB’s brief.
Meetings were held individually, however, a short memo on the
issues which raised most debate was forwarded to all three agen-
cies.

18. There was a clear justification for the criteria used in the
‘comparative evaluation table’ and all of them can be subsumed
under the criteria published in the tender notice.

23. A central record of the holders of individual laptop comput-
ers is currently unavailable. This issue will be addressed with the
individual managers. In parallel, a project to implement an overall
IT asset management system will be proposed for 2002.

19.
In November 1999, the Governing Council of the ECB decided
on an overall project ceiling for an implementation period of
three years. No indication of the corresponding annual portions
was available at that time. Hence, funds relating to financial year
2000 were added to the ECB’s annual budget in the form of a

24. The financial year 2000 project underspending mainly
derived from four large projects (out of a total of 38 projects). The
following should be noted: underspending in projects for the cal-
endar year or the postponement of specific project steps from one
financial year to the other are not an automatic indication on the
progress of the project outside its overall timeframe or on a
potential real overspending/underspending of the overall project
budget.

4.12.2001

EN

Official Journal of the European Communities

C 341/7

In relation to the budget utilisation rates as quoted by the Court,
it should be noted that in the year 2000 the annual ECB budget
was formally revised following the mid-year budget review. Such
formal revision had been suggested by the Court in its report on
the financial year 1999.

25. On the basis of clearly defined objectives (see paragraph 13)
the purpose of the tender process was to find the best content-
cost ratio.