Report on the financial statements of the European Monitoring Centre for Drugs and Drug Addiction for the financial year ended 31 December 2000, together with the Centre's replies
Date: 2001-10-10
Institutions: European Court of Auditors
Subjects: European Monitoring Centre for Drugs and Drug Addiction, activity report, financial control, financial year

C 372/62

EN

Official Journal of the European Communities

28.12.2001

on the financial statements of the European Monitoring Centre for Drugs and Drug Addiction for
the financial year ended 31 December 2000, together with the Centre’s replies

REPORT

(2001/C 372/08)

CONTENTS

Paragraph

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

1-4

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN
MONITORING CENTRE FOR DRUGS AND DRUG ADDICTION (LISBON) FOR THE FINAN-
CIAL YEAR ENDED 31 DECEMBER 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementation of the budget and the budgetary accounts . . . . . . . . . . . . . . . . . . . . . . . . . .

5-34

5-9

Financial statements and keeping of the accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10-13

Keeping of the accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting management of fixed assets and inventory . . . . . . . . . . . . . . . . . . . . . . . . . .

Follow-up to the Court’s previous observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management of human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Staff policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recruitment procedures and staff classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assessment of staff performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

11

12-13

14-15

16-34

16

17

18

Job descriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19-20

Keeping of staff files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Growth in the Centre’s staff and activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

22-31

32-34

Tables 1 to 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Page

63

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64

64

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64

64

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65

65

67

70

28.12.2001

EN

Official Journal of the European Communities

C 372/63

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 2000. In accordance with
Article 11(8) of Council Regulation (EEC) No 302/93, the budget
was implemented on the responsibility of the Executive Director.
This responsibility included the drawing-up and presentation of
the financial statements (2) in accordance with the internal finan-
cial provisions provided for under Article 11(12) of Council Regu-
lation (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 Com-
munity to audit 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 2000 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 MONITORING CENTRE FOR
DRUGS AND DRUG ADDICTION (LISBON) FOR THE
FINANCIAL YEAR ENDED 31 DECEMBER 2000

Implementation of the budget and the budgetary accounts

5. The implementation of the appropriations for the financial
year 2000 and of the appropriations carried over from the previ-
ous financial year is shown in Table 1 (4).

6. Final appropriations for the financial year amounted to 8,3
million euro, 8 million euro of which were committed (97 %).

7. The significant under-utilisation of payment appropriations
under Title III (less than 50 %) concerned the implementation of
contracts signed with the national centres that collaborate with
the Centre (the national ‘focal points’) and lasting more than a
year after the signing of the contract. The Court’s analysis of the
payments under Title III showed that 44 % of the payments had
been effected during the last quarter of the year. If these contracts
were signed at the beginning of the year it would make for a more
rational management of resources.

8. Appropriations carried over to 2001 amounted to 2,2 mil-
lion euro (27 % of commitments) and mainly concerned operat-
ing appropriations, 1,6 million euro of which were carried over
(54 % of commitments). 0,2 million euro (around 9 %) of all the
appropriations carried over from 1999 were cancelled at the end
of 2000.

9. The SI2 budgetary accounts system does not yet include a
module allowing the recording of amounts that are to be recov-
ered and should be completed accordingly.

Financial statements and keeping of the accounts

Keeping of the accounts

10. Tables 2 and 3 show, respectively, the revenue and expendi-
ture account for the financial year 2000 and the balance sheet as
at 31 December 2000.

(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 2000 were drawn up on 30 March
2001 and forwarded to the Centre’s Management Board, the Com-
mission and the Court of Auditors. These accounts were received by
the Court on 9 April 2001. A summarised version of these accounts
is presented in the tables annexed to this Report.

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

(4) All the tables in this Report were based on the most exact values pos-
sible of the data used. For the presentation of the figures, the latter
were rounded up or down, which may give the impression that there
are mistakes in the calculations. A dash indicates a non-existent or nil
value and 0,0 indicates a value lower than the rounding-off threshold.

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Official Journal of the European Communities

28.12.2001

Accounting system

11. The Centre has no system for establishing the real overall
cost of its activities. However, a tool of this sort is indispensable
if the management is to be improved.

Commission, is responsible for adopting the appropriate imple-
menting rules. Up to the year 2000, staff management was based
on the Commission’s general implementing provisions or, in cer-
tain areas, on specific decisions. Following a global review, the
Centre drew up a plan for internal reform. In this connection, a
general paper on staff policy was drafted in 2000.

Accounting management of fixed assets and inventory

Recruitment procedures and staff classification

12.
Items are recorded on the balance sheet at their purchase
value and depreciation is not taken into account. In December
2000, a Commission Regulation (1) laid down accounting rules
for tangible and intangible assets. The Centre should include these
provisions in its rules in order, inter alia, to avoid problems with
the evaluation of inventory items.

17. A paper outlining recruitment procedures was approved by
the Management Board in 1995. For its temporary staff, the Cen-
tre generally carries out an external recruitment procedure and
competition notices are advertised widely at the other agencies
and the Institutions, in the Official Journal and on the Centre’s
website.

13. Under its Financial Regulation (Article 52), the Centre is
required to keep a permanent inventory of all the movable and
immovable property that constitutes its assets. During the year
2000, following an internal reorganisation, the responsibility for
keeping the inventory was not reallocated and no inventory was
kept.

Assessment of staff performance

Follow-up to the Court’s previous observations

14.
In the Court’s Report concerning the financial year 1999 (2),
it was found that cofinancing by the Member States of permanent
tasks carried out by the focal points was certified by declarations
issued by the focal points themselves and that the Centre was not
in a position to verify their validity. No progress was recorded on
this point.

15. As regards VAT, the Centre, unlike other decentralised bod-
ies, has not yet brought its Financial Regulation into line with the
provisions of the general Financial Regulation.

18. The Centre first carried out a general staff reporting proce-
dure in the year 2000, even though Article 43 of the Staff Regula-
tions requires that regular reports should be drawn up on each
official’s competence, performance and conduct in the service at
least once every two years.

Job descriptions

19.
In accordance with Article 44 of the Centre’s Financial Regu-
lation (3), the Centre set up a job identification file containing job
descriptions for each post. This file will be updated in 2001 as
part of the Centre’s internal reform.

20. This description should be easily accessible to staff and
should be included in their personal files. None of the 12 staff
files examined contained a job description.

Management of human resources

Staff policy

Keeping of staff files

16. The Centre’s staff are subject to the ‘Rules and Regulations
applicable to Officials and other Servants of the Communities’. As
provided for in Article 15(3) of Regulation (EEC) No 302/93 of
8 February 1993, the Management Board, in agreement with the

21. An examination of 12 files showed that, in certain cases, the
files were not complete and the career sheet had not been regu-
larly updated. All the files should be reviewed to ensure that all
essential components have been included.

(1) Commission Regulation (EC) No 2909/2000 of 29 December 2000

(OJ L 336, 30.12.2000, p. 75).

(2) OJ C 373, 27.12.2000 (paragraph 18).

(3) Regulation adopted by the Centre’s Management Board on 29 June

1995.

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Official Journal of the European Communities

C 372/65

Growth in the Centre’s staff and activities

22. Regular staff employed under the Staff Regulations include
both permanent and temporary staff (PS and TS respectively). The
number of posts to be occupied by these employees is authorised
by the budgetary authority each year when the budget is adopted.
The budget may also allocate appropriations for the recruitment
of auxiliary staff (AS), who may be employed for a maximum of
one year, local staff (LS) and seconded national experts (SNEs).

23. Table 4 shows the growth in the Centre’s staff and the cat-
egories to which they belong. The growth in staff numbers has
tended to level off over recent years. Overall, there have always
been more staff (permanent, temporary and others) than those
provided for in the establishment plan.

24. Table 5, which analyses the development of recruitment by
type of procedure, shows that, in 57 % of the cases, recruitment
was carried out via an open competition procedure within the
meaning of the Staff Regulations. On average, recruitment costs
amounted to around 2 780 euro per person recruited.

25. Staff departures led to an average yearly staff turnover rate
of 7 % (PS, TS, AS and LS), which was largely due to the expiry of
the contracts of the staff concerned.

26. For the purposes of the audit, employees were broken down
into two categories:

— staff responsible for support activities (support staff), i.e. activi-
ties necessary for the running of the Centre (e.g. administra-
tion, accounts, secretariat, etc.);

— other,

‘operational’ staff, who directly help to achieve the

Agency’s objectives.

27. On average, 83 % of A staff, or 35 % of all staff, may be clas-
sified as operational. All the others may be classified as support
staff.

29. Among other staff-related costs, the Court’s analysis looked
more specifically at expenditure on professional training and
administrative expenditure, in particular in the IT field. Profes-
sional training expenditure grew more quickly than staff num-
bers. Administrative expenditure, including expenditure on IT,
grew slightly but, once the initial investments had been made,
markedly less than staff numbers.

30.
In order to obtain a better understanding of the relationship
between the Centre’s activities and the increase in its staff and
related costs, the latter were compared with the fluctuations in
the total operating appropriations (Title III) actually spent in the
course of the year (appropriations for the year and appropriations
carried over). This comparison suggests that staff numbers and
staff-related costs at the Centre have increased more rapidly than
the volume of its activities. This is corroborated by the fact that,
on average, support expenditure (Titles I and II) has grown faster
than operating expenditure (Title III). This situation ought to
prompt the Centre to look into ways of improving the productiv-
ity of its human and physical resources.

31. These observations must be qualified by the fact that the
Centre is not yet fully operational and that, because of its small
size, it cannot benefit from substantial economies of scale for its
physical and administrative infrastructure. In this context, the
ratio between the rate of increase in its staff and in its volume of
expenditure has recently been following a satisfactory trend.

Conclusion

32. Although, since its creation, the Centre has not been able to
take on all the staff provided for by its budget in the establish-
ment plan, it has been able to make up for this, and more, by
recruiting auxiliary staff and, above all, local staff.

33. For staff recruitment purposes, the Centre tends to make
increasing use of an external recruitment system similar to the
one used by the Institutions. Given the expected growth in its
activities, and therefore its staff, it might be desirable for the Cen-
tre to join forces with the other decentralised bodies for the pur-
pose of recruiting administrative staff, so as to be able to recruit
from as large a pool as possible.

28. Table 6 shows the growth of staff-related costs and admin-
istrative expenditure. Salary-related expenditure grew markedly
more quickly than staff numbers. This difference was due to
changes of status from auxiliary to temporary.

34. The Centre should monitor the growth of its staff and their
costs very carefully and continue its efforts to improve the pro-
ductivity of its human and physical resources. Generally speak-
ing, it should improve its system of management and informa-
tion in the personnel field.

C 372/66

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Official Journal of the European Communities

28.12.2001

This Report was adopted by the Court of Auditors in Luxembourg at its meeting of 10 October 2001.

For the Court of Auditors

Jan O. KARLSSON

President

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Official Journal of the European Communities

C 372/67

TABLES 1 TO 6

Table 1

Implementation of the budget

Appropria-
tions

Commitments

Payments

%

Carryovers

Cancellations

%

(1 000 EUR)

Title

I — Staff

Budget 2000
Carryovers 1999

II — Administration

Budget 2000
Carryovers 1999

III — Operations

Budget 2000
Carryovers 1999

Total

Budget 2000
Carryovers 1999

Total

Total

Total

(a)

4 065
59

4 124

1 035
316

1 351

3 150
2 038

5 188

8 250
2 413

(b)

3 988
59

4 048

1 021
316

1 337

3 007
2 038

5 045

8 016
2 413

Total

10 663

10 429

(c)

(d=c/b)

3 876
44

3 920

682
264

946

1 498
1 876

3 374

6 056
2 185

8 241

97 %
75 %

97 %

67 %
84 %

71 %

50 %
92 %

67 %

76 %
91 %

79 %

(f)

189
—

189

353
—

353

1 652
—

1 652

2 194
—

2 194

(g=a-c-f)

(h=g/a)

—
15

15

—
52

52

—
162

162

—
229

229

0 %
25 %

0 %

0 %
16 %

4 %

0 %
8 %

3 %

0 %
9 %

2 %

Revenue and expenditure account for the financial years 2000 and 1999

Table 2

(1 000 EUR)

2000

1999

8 214
232

Total revenue

8 446

Revenue
Subsidy from the Commission
Miscellaneous revenue (bank interest)

Expenditure
Staff expenditure — Title I of the budget
Payments
Appropriations carried over
Non-automatic carryovers of appropriations

Buildings, equipment and miscellaneous administrative expenditure — Title II of the budget
Payments
Appropriations carried over
Non-automatic carryovers of appropriations

Operating expenditure — Title III of the budget
Payments
Appropriations carried over
Non-automatic carryovers of appropriations

Outturn for the financial year
Outturn carried over from the previous financial year
Cancelled carryovers and sums for re-use
Exchange-rate differences/exceptional charges

Total expenditure

Balance for the financial year

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

3 876
112
77

682
340
14

1 498
1 508
143

8 250

196
1 617
269
– 6

2 076

8 156
0

8 156

3 367
59
0

637
240
205

1 569
1 833
75

7 985

171
1 287
380
– 221

1 617

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Official Journal of the European Communities

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Balance sheet as at 31 December 2000 and 31 December 1999

Table 3

Assets

2000

1999

Liabilities

2000

1999

(1 000 EUR)

3 828

Subtotal

3 828

3 603

3 603

Fixed capital
Own capital
Balance for the financial year

3 840
2 076

Subtotal

5 916

Current liabilities
Automatic carryovers of appropriations
Non-automatic carryovers of appropriations
Balance sundry accounts due
VAT to be recovered
Re-use of VAT
Commission subsidy
Allocated subsidies

1 960
234
38
3
112
36
101

Subtotal

2 484

3 620
1 617

5 237

2 133
280
150
3
163
0
265

2 994

Fixed assets
Immovable property

Stocks
Office supplies

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

Cash accounts
Bank
Imprest account
Transfer in progress

12

12

36
101
3
43
1

184

4 372
4
0

4 376

Subtotal

Subtotal

Subtotal

Total assets

8 400

17

17

0
265
3
37
1

306

4 276
49
– 20

4 305

8 231

Total liabilities

8 400

8 231

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

Table 4

Changes in staff numbers

Establishment plan

Posts filled

Other staff

PS

0
0
4
4
4

TS

30
35
35
41
44

Total

30
35
39
45
48

PS

0
0
0
3
3

TS

27
31
38
38
44

Total

AS

27
31
38
41
47

5
1
4
8
4

LS

6
9
11
13
13

SNE

Total

0
0
1
1
1

11
10
16
22
18

1996
1997
1998
1999
2000

Total

38
41
54
63
65

AS: Auxiliary staff.
LS: Local staff.
PS: Permanent staff.
TS: Temporary staff.
SNE: Seconded national experts.

Table 5

Analysis of changes in staff numbers

Increase

Decrease

Competition

Other

Total

Expiry of
contract

Termination of
contract

1996
1997
1998
1999
2000

Total

18
2
9
2
7

38

9
3
6
10
1

29

27
5
15
12
8

67

3
2
1
2
4

12

3
0
1
1
2

7

Total

6
2
2
3
6

19

Net change

Turnover
(%)

21
3
13
9
2

—

16 %
5 %
4 %
5 %
9 %

—

.

2
8
1
2
2
0
0
1

.

Table 6

Changes in staff numbers and staff-related costs

Salary costs

Total staff

Direct (1)

Indirect (2)

Total

1995

1996

1997

1998

1999

2000

17

38

41

54

63

65

424,1

1 121,3

1 977,3

2 294,1

2 922,1

3 346,6

26,5

72,4

107,3

126,8

161,2

183,3

450,6

1 193,7

2 084,6

2 420,9

3 083,2

3 529,9

Other
salary-
related
costs (3)

3,1

9,2

17,0

16,0

8,7

0,0

Overall
total (4)

453,7

1 202,9

2 101,6

2 436,9

3 091,9

3 529,9

Salary costs/head

Other staff-related costs

Administrative expenditure

Direct

Indirect

Total

PT (5)

PT/head

Recruitment
and
installation

Total

Of which
IT (6)

Total/head

IT/head

24,9

29,5

48,2

42,5

46,4

51,5

1,6

1,9

2,6

2,3

2,6

2,8

26,5

31,4

50,8

44,8

48,9

54,3

6,8

38,5

27,8

7,9

2,0

19,5

0,4

1,0

0,7

0,1

0,0

0,3

151,3

156,9

197,4

127,8

50,4

100,0

3 387,8

523,2

0,0

0,0

1 393,9

216,9

822,0

657,7

826,7

32,4

61,1

62,8

199,3

13,8

34,0

15,2

10,4

12,7

0,0

0,0

5,3

0,6

1,0

1,0

(1 000 EUR)

(1) Salaries paid to staff in active employment (all categories taken together).
(2) Social benefits and other salary adjustments.
(3) Overtime and supplementary services.
(4) Expenditure related to salaries under Title I, excluding mission expenses, etc.
(5) PT: Professional training.
(6) IT: Expenditure on informatics.

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6
9

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Official Journal of the European Communities

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THE CENTRE’S REPLIES

1 to 4. The European Monitoring Centre for Drugs and Drug
Addiction (EMCDDA) welcomes the Court of Auditors’ observa-
tion that the financial statements for the financial year ended
31 December 2000 are reliable and that the underlying transac-
tions, taken as a whole, legal and regular.

15. Broadly speaking, the EMCDDA shares the Court’s point 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 own Financial Regulation by including the recent
amendments concerning the entry of VAT into the accounts.

7. The EMCDDA is doing its best to ensure that the duration of
Reitox (European Information Network on Drugs and Drug Addic-
tion) contracts coincides with the calendar year in order better to
respect the principle of annual budget payments, whilst at the
same time taking account of deadlines for the approval of the
budget and the annual work programmes. It must also take into
account the national procedures for assuring the co-funding of
the national focal points.

9. The particular module for monitoring revenue is still under
development at the Commission and should shortly be installed
in each of the decentralised agencies.

Recovery orders issued are registered electronically in SI2, and the
sums to be recovered are charged to the suspense accounts of the
General Accounts (using Cubic) to monitor the revenue received
and to be collected.

11. The EMCDDA well aware that this tool has become indis-
pensable for improving the analytic management of the Office.
With this in mind, for the financial year 2001, the EMCDDA has
initiated a codification of projects, using the SI2 system which
will enable it to establish the real cost of each activity in the con-
text of the new, activity-based approach to budgeting.

12. The EMCDDA has taken note of the Court of Auditors’ com-
ment and intends to incorporate the accounting provisions of the
Commission’s new inventory regulation into its own regulations.

13.
In the year 2000, the EMCDDA decided to install ELS inven-
tory management software to replace the old RAI system. The
ELS system was not operational during the financial year 2000
because of delays in the delivery and installation by the supplier.
The EMCDDA has accounted for and reconciled all goods acquired
during the year 2000 using the old RAI system.

14. The certificate of co-funding for each Member State
(Annex 2 of the Reitox contract) is signed by an authorised rep-
resentative of the Member State. In the majority of cases, this per-
son is the Member State’s representative on the EMCDDA’s Man-
agement Board.

The EMCDDA however, taking into account the constraints
imposed by the procedures used by the host nation’s tax authori-
ties will examine the advantages and disadvantages of such a
transposition before reaching a final conclusion.

16 and 17. The EMCDDA confirms the Court’s observations.

18. All staff recruited by the EMCDDA are systematically subject
to an appraisal at the conclusion of their probationary period.
The EMCDDA has established a procedure for preparing regular
reports with a view to moving towards the continual appraisal of
each member of staff at the Agency. This regular appraisal system
was in operation as regards the entire complement of staff during
the year 2000.

19 and 20. The EMCDDA has taken note of the Court’s observa-
tions and shall henceforth include a job description for each post
in the personal file of the member of staff in the position con-
cerned.

21. The EMCDDA has taken note of the Court’s comments con-
cerning certain incomplete files and has taken the necessary mea-
sures to complete them.

22 to 31. The EMCDDA has taken good note of the Court’s
analysis of the staffing establishment, but would like to emphasise
that the situation described therein no longer corresponds to real-
ity following the Internal Reform Plan decided upon in March
2001. This Reform enabled a redefinition of human resource
policy to take place and the reassignment to operational tasks of
those staff who previously fulfilled administrative functions. In
accordance with the option of henceforth developing its own
internal capacity, the Reform also entails a redeployment towards
Titles I and II (persons working with the Office, buildings, equip-
ment and miscellaneous operating expenditure) of financial
resources previously directed under Title III towards financing
external activities (studies).

32 to 35. The EMCDDA has taken note of the Court’s observa-
tions.