Report on the financial statements of the European Training Foundation for the financial year ended 31 December 2000, together with the Foundation's replies
Date: 2001-10-10
Institutions: European Court of Auditors
Subjects: European Training Foundation, activity report, financial control, financial year

28.12.2001

EN

Official Journal of the European Communities

C 372/45

on the financial statements of the European Training Foundation for the financial year ended
31 December 2000, together with the Foundation’s replies

REPORT

(2001/C 372/06)

CONTENTS

Paragraph

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

1-4

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN
TRAINING FOUNDATION (TURIN) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2000

Budgetary implementation and accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial statements and accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internal controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Staffing policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recruitment and promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in the Foundation’s staff and activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

5-29

5-8

9-11

12

13-29

13-14

15

16-26

27-29

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

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

Page

46

46

46

46

46

46

46

47

47

48

49

52

C 372/46

EN

Official Journal of the European Communities

28.12.2001

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 2000. In accordance with Article 11(1) of Council Regulation
No 1360/90, the budget was implemented under the responsibil-
ity of the Director. This responsibility included the drawing-up
and presentation of the financial statements (2) in accordance with
the internal financial provisions 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 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. The Court carried out
such tests of the accounting records and applied such 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 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 TRAINING FOUNDATION
(TURIN) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER
2000

Budgetary implementation and accounts

6. The Foundation committed nearly all the appropriations allo-
cated to it for 2000 (16,2 million euro); of these, 13,4 million
euro (83 %) were paid over the year and 2,7 million euro (16 %)
were carried over to the next year, practically the same amount
as last year.

7. The 2,7 million euro carryover to the next financial year con-
cerned the heading ‘Priority actions’ (1,4 million euro) under Title
III (operating expenditure). The main reason for this important
carryover was the late decision-taking by the Governing Board
concerning the annual work programme. The Foundation should
take steps to adopt its annual programme in due time, in order to
implement its budget in conformity with the annuality principle.

8. The appropriations carried forward automatically from 1999
amounted to 2,9 million euro; of this amount, only 0,2 million
euro were not used during 2000 and were therefore cancelled.
The non-automatic carryovers (Title III) amounted to 0,2 million
euro and concerned the cooperation with other agencies on the
SI2 project.

Financial statements and accounting

9. Tables 2 and 3 show, respectively, the revenue and expenditure
account for the financial year 2000 and the balance sheet as at
31 December 2000.

10. The Foundation uses separate accounting systems to keep its
budgetary and general accounts. Moreover, the documents (com-
mitment and payment orders) relevant to the transactions are not
cross-referenced, and for certain transactions (i.e. revenue) no spe-
cific format has even been provided. This increases the adminis-
trative burden and makes it difficult to follow the audit trail.

11. During the first seven months of the year, the general ledger
accounts were run in parallel with a new system, SI2x. In addi-
tion, in September, the Foundation abandoned efforts to integrate
SI2 and SI2x due to a lack of human resources. The Foundation
continues to use its old system and should, without delay, find a
solution to the problem of integrating its budgetary and general
accounts.

5. The implementation of the budget for the year 2000 can be
found in Table 1 (3).

Internal controls

(1) OJ L 131, 23.5.1990, p. 4.
(2) As required under Article 11(3) of Council Regulation (EEC)
No 1360/90, the accounts for all the Foundation’s revenue and expen-
diture for the financial year 2000 were drawn up on 9 April 2001
and forwarded to the Foundation’s Governing Board, the Commis-
sion and the Court of Auditors. These accounts were received by the
Court on 17 April 2001. A summarised version of these accounts is
presented in the tables annexed to this report.

(3) The calculations in all the tables in this report were based on the most
exact values possible of the data used. For the presentation of the fig-
ures, the latter were rounded up or down, which may give the impres-
sion of arithmetical errors. A dash indicates a non-existent or nil
value and 0,0 indicates a value lower than the rounding-off threshold.

12. The Foundation should reinforce its system of internal con-
trol in order to obtain the approval of the Financial Controller
and to restrict the powers given to the accountant so as to better
respect the principle of the separation of duties.

Management of human resources

Staffing policy

13. The Foundation was established by Regulation No (EEC)
1360/90, as last amended by Regulation No (EC) No 1572/98 of

28.12.2001

EN

Official Journal of the European Communities

C 372/47

17 July 1998 (1). The Foundation’s staff are subject to the rules
and regulations applicable to officials and other servants of the
European Union. The Foundation adopts the necessary imple-
menting rules in agreement with the Commission. The Director
is in charge of all questions related to personnel.

20. Table 5, which analyses the way recruitment has developed
by type of procedure, shows that, in 71 % of the cases, staff were
recruited via external competition procedures as defined in the
Staff Regulations. However, these procedures were not always
applied as strictly as they should have been (see paragraph 15).

14. The personnel policy of the Foundation has not yet been
formalised in a single document. Various decisions exist on some
particular aspects of the personnel management. Up to 1999, per-
sonnel management took place in collaboration with the services
of the Commission. Since 2000 the personnel department of the
Foundation has full responsibility for personnel management.

21. Staff departures have led to an average annual turnover rate
(TS, AS and LS) of 14 %, half of which was due to the expiry of
contracts and the remainder to the contracts being terminated
before they had expired (mostly, by the staff themselves).

Recruitment and promotion

15. From the Court’s examination of 31 personnel files, it may
be concluded that there have been problems with the publication
of vacancies, the evaluation of applications and the final recruit-
ment procedures. In the future, the Foundation should improve
the correctness and the transparency of its recruitment methods.

Changes in the Foundation’s staff and activities

22. For the purposes of the audit, staff were placed in two cat-
egories:

— staff responsible for support activities (support staff), i.e. activi-
ties which ensure that the Foundation can continue to oper-
ate (e.g. administrative, accounting and secretarial services),

— other, so-called operational, staff, who contribute directly to

achieving the Foundation’s objectives.

16. The Foundation’s establishment plan only provides for tem-
porary staff (TS). The number of posts to be occupied is autho-
rised by the budgetary authority each year at the same time as the
budget. The budget may also grant appropriations for the recruit-
ment of auxiliary staff (AS) and local staff (LS).

23. On average, 70 % of A grade staff may be regarded as opera-
tional. Taking all categories together, 60 % of the Foundation’s
staff may be regarded as operational.

17. Table 4 shows the changes over the years in the Foundation’s
staff and the categories to which they belong. On average, 90 %
of the posts provided for in the establishment plan have been
filled. The remaining posts were filled via the recruitment of aux-
iliaries and, above all, local staff.

24. Table 6 shows the growth in staff-related costs and adminis-
trative expenditure. On average, salary costs over the period 1997
to 2000 increased by 9,7 % per person, whereas staff numbers
decreased by 2,7 %. The contrast between these rates can partly
be attributed to the upward drift of remuneration-related expen-
diture due to cost of living adjustments, length of service incre-
ments, etc.

18. Since the Foundation was set up, 243 people have been taken
on and 115 have left. 65 % were employed as temporary staff and
35 % as auxiliaries or local staff. At the end of 2000, 90 % of the
staff were temporaries. On average, since 1995, recruitment
expenses have amounted to 2 600 euro per person recruited.

19. Due to changes in the work programme of the Foundation,
the Governing Board, at the meeting of 14 April 2000, agreed
that the Foundation and the Commission should decide upon the
use of resources in the medium term (2000 to 2004): some staff
will have to be reallocated and some made redundant. As a result,
a net reduction of the temporary staff is planned for the next four
years, from 115 persons at the end of 2000 to 99 persons at the
end of 2003.

(1) OJ L 206, 23.7.1998, p.1.

25.
In order to grasp the relationship between the Foundation’s
activities and the increase in its staff and the related costs, the lat-
ter was compared to the growth in the amount of operating
appropriations (Title III) that were actually disbursed (appropria-
tions for the financial year and appropriations carried over) dur-
ing the course of the year.

26. This comparison suggests that the Foundation’s productiv-
ity has increased since 1997. This is confirmed by the fact that
expenditure under Title III, which includes all the expenditure
relating to the achievement of the Foundation’s objectives, has
grown faster than expenditure falling under Titles I and II, (Staff
and administrative expenditure).

C 372/48

EN

Official Journal of the European Communities

28.12.2001

Conclusion

27. Even though, since its inception, the Foundation has not
been able to take on all the regular staff provided for by its budget
in its establishment plan, it has been able to remedy this situation
by recruiting auxiliaries, local staff and agency staff.

In order to recruit its temporary staff, in the majority of
28.
cases the Agency employs an external recruitment system similar

to the model advocated by the Community institutions, but this
should be applied more strictly (see paragraph 15).

29.
In terms of its staff’s overall productivity, the Foundation’s
situation is fairly satisfactory. For posts involving support and
operational activities which require qualifications of an adminis-
trative nature, it might be preferable for the Foundation to join
forces with the Community institutions and the other decentra-
lised bodies with a view to recruiting staff on the broadest pos-
in general terms the Office should
sible basis. Furthermore,
improve its staff management and information system.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 10 October 2000.

For the Court of Auditors

Jan O. KARLSSON

President

28.12.2001

EN

Official Journal of the European Communities

C 372/49

TABLES 1 TO 6

Table 1

Implementation of the budget

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

Total

Appropria-
tions

Commitments

Payments

%

Carryovers

Cancellations

%

(Mio EUR)

(a)

10,3
0,2

10,4

1,4
0,5

1,8

4,6
2,3

6,8

16,2
2,9

19,1

(b)

10,3
0,2

10,4

1,4
0,5

1,8

4,5
2,3

6,8

16,2
2,9

19,1

Table 2

(c)

10,0
0,1

10,1

0,9
0,4

1,3

2,6
2,1

4,7

13,4
2,7

16,1

(d=c/b)

97 %
92 %

97 %

65 %
92 %

72 %

57 %
92 %

69 %

83 %
92 %

84 %

(f)

0,3

0,5

1,9

2,7

2,7

(g=a-c-f)

(h=g/a)

0,1
0,0

0,3

0,0
0,0

0,5

0,0
0,2

2,1

0,1
0,2

0,3

1 %
8 %

3 %

1 %
8 %

28 %

1 %
8 %

31 %

1 %
8 %

2 %

Revenue and expenditure account for the financial years 2000 and 1999

(1 000 EUR)

2000

1999

16 200
221
19
2

19 898
139
2

Total revenue

16 442

20 039

Revenue
Subsidy received from the Commission
Bank interest
Miscellaneous revenue
Exchange-rate gains

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

9 952
258

10 210

890
472

1 362

2 608
1 920

4 528

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

Subtotal

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

Subtotal

Subtotal

Total expenditure

16 100

Outturn for the financial year
Balance carried over from the previous financial year
Appropriations carried over from the previous financial year and cancelled
Exchange-rate losses

Source: Table prepared by the Court of Auditors on the basis of data compiled by the Foundation.

Balance for the financial year

342
2 812
227
– 29

3 352

10 026
157

10 183

897
451

1 348

2 333
2 273

4 606

16 137

3 902
– 1 417
388
– 61

2 812

C 372/50

EN

Official Journal of the European Communities

28.12.2001

Balance sheet as at 31 December 2000 and 31 December 1999

Table 3

Assets

2000

1999

Liabilities

2000

1999

(1 000 EUR)

Fixed assets
Equipment and furniture

Stock

1 989

1 976

21

12

Fixed capital
Own capital
Balance for the financial year

Short-term accounts receivable
Sundry debtors

Cash accounts
Banks — Demand accounts
Imprest account

Subtotal

2 010

1 988

Subtotal

215

215

6 054
105

Subtotal

6 159

Total assets

8 384

140

140

5 738
543

6 281

8 409

Short-term accounts due
Carryovers on allocated revenue
Automatic carryovers of approps
Sundry accounts due
Deductions on salaries
Recovery orders in course
Allocated revenue

Suspense accounts
Payments pending

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

Table 4

Changes in staff numbers

Establishment
plan

Posts filled

Other staff

TS

60
130
130
130
130
130
130

1994
1995
1996
1997
1998
1999
2000

TS: Temporary staff.
AS: Auxiliary staff.
LS: Local staff.

TS

40
95
126
122
113
121
115

AS

0
15
6
0
0
3
2

LS

0
0
12
9
12
12
11

Table 5

Analysis of the variation in staff numbers

2 010
3 352

Subtotal

5 362

2 704
6
130
61
10

Subtotal

2 911

Subtotal

111

111

1 988
2 812

4 800

57
2 881
66
205
26
248

3 483

126

126

Total liabilities

8 384

8 409

Total

0
15
18
9
12
15
13

Total

40
110
144
131
125
136
128

Increase

Competition

Other

Total

Expiry of contract

1994
1995
1996
1997
1998
1999
2000

34
39
30
11
18
27
13

Total

172

6
38
14
7
3
2
1

71

40
77
44
18
21
29
14

243

0
4
6
19
13
5
10

57

Decrease

Termination
of contract

0
1
6
11
14
14
12

58

Total

0
5
12
30
27
19
22

115

Net change

Turnover
(%)

40
72
32
– 12
– 6
10
– 8

—

0 %
5 %
8 %
23 %
22 %
14 %
17 %

14 %

.

2
8
1
2
2
0
0
1

.

Table 6

Changes in staff and relates costs

Salary costs

Total staff

Direct (1)

Indirect (2)

Total

1994

1995

1996

1997

1998

1999

2000

40

110

144

131

125

136

128

256,6

4 496,2

6 613,5

7 901,8

7 796,4

8 316,4

8 426,1

10,9

218,0

456,2

471,3

453,7

461,3

466,1

267,5

4 714,2

7 069,7

8 373,2

8 250,1

8 777,7

8 892,2

Other
salary-
related
costs (3)

34,2

11,6

264,1

279,6

217,2

153,8

141,4

Overall
total (4)

301,6

4 725,9

7 333,8

8 652,8

8 467,3

8 931,5

9 033,6

Salary costs/head

Other staffing costs

Operating expenditure

Direct

Indirect

Total

PT (5)

PT/head

6,4

40,9

45,9

60,3

62,4

61,1

65,8

0,3

2,0

3,2

3,6

3,6

3,4

3,6

6,7

42,9

49,1

63,9

66,0

64,5

69,5

0,0

15,3

27,8

71,4

93,4

97,5

28,0

0,0

0,1

0,2

0,5

0,8

0,7

0,2

Recruitment
and
installation

Total

Of which
IT (6)

Total/head

IT/head

179 529,7

23 381,2

3 925,0

584,5

98,1

727,2

488,4

3 995,0

2 281,6

1 072,0

2 593,0

323,0

431,0

329,2

1 276,1

1 062,8

1 306,2

271,3

440,9

488,1

301,2

316,5

384,8

36,3

15,8

19,8

10,2

7,8

10,2

2,5

3,1

3,7

2,4

2,3

3,0

(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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5
1

C 372/52

EN

Official Journal of the European Communities

28.12.2001

THE FOUNDATION’S REPLIES

Budgetary implementation and accounts

7. The Foundation’s Governing Board was able to convene and
approve the work programme and budget for 2000 only on
15 February 2000, a fact that delayed the conclusion of many
contracts until late in the year. In order to make gains in produc-
tivity, and in accordance with the advice of the Court, the Gov-
erning Board was convened for an exceptional third time in
November 2000 in order to approve the work programme and
budget for 2001 before the beginning of the financial year. This
practice has had a beneficial effect on the execution of the budget
in 2001, and will be followed in the future.

8. The non-automatic carryovers from 2000 mentioned under
point 8 do not concern funds under Title III, but rather funds
under Title IV ‘Earmarked expenditure’, and were occasioned by
the transfer to EFILWC in Dublin of the chairmanship and the
financial and technical administration of the SI2 common sup-
port service (CSS).

Financial statements and accounting

10 and 11. Due to the lack of human resources, the Foundation
decided to abandon the development of the general ledger system,
and was consequently forced to continue with the ‘old’ general
ledger system CUBIC until a viable replacement could be found.

The Foundation has now adopted a project plan to replace CUBIC
with an off-the-shelf system known as BOB, which can fully inte-
grate the budgetary and general accounts through a software
bridge with SI2, and provide a link with the banking software.
This system has already been implemented successfully by two
other members of the CSS.

Internal controls

In line with its human resource development plan, the Foun-
12.
dation intends to recruit an internal Financial Controller during
the financial year 2002. In order to ensure the internal Financial
Controller’s independence, he/she will be separated from the

Finance and Legal Unit and will be accountable only to the Direc-
tor. This measure will enable the Foundation to comply with the
Court’s requirements to both reinforce the Foundation’s internal
control system and to restrict the accountant’s power.

Staffing policy

14. Since its establishment in 1994, the Foundation has man-
aged its own personnel, the Commission having provided assis-
tance and supervision especially for the initial recruitment round,
which took place in Brussels. Over the years a complete and con-
sistent set of decisions and rules has been established, in consulta-
tion with the relevant Commission services and the Foundation’s
Staff Committee, covering the whole field of personnel manage-
ment for the categories engaged in the Foundation. They are
updated regularly, applied in a correct way, and published on our
internal network for all staff, so the need for them to be ‘forma-
lised into a unique document’ has never arisen.

15. The way recruitment procedures are followed is fully in line
with the CEOS and the Foundation’s own rules. The Foundation
will certainly continue to improve where possible and necessary,
and for that reason in 2001 the personnel function of the Foun-
dation has been reinforced with the appointment of an agent spe-
cifically in charge of the administrative management of recruit-
ment procedures. A comparison with the recruitment practices
for permanent officials within the institutions such as the Com-
mission is questionable for an Agency that has no permanent offi-
cials (point 28).

Conclusion

29.
In the past, the lack of an integrated computer information
system for personnel management has increased the margin of
error in the implementation of personnel procedures. The Foun-
dation has therefore decided to adopt the SIC personnel database,
which is the standard software adopted by the Commission for its
personnel data, including the management of missions and leave.
The deployment of SIC will also entail the shift from the present
paper-based system to a new electronic workflow for missions
(‘SIC-mission’ operational by the end of 2001) and leave, includ-
ing sickness (‘SIC Congés’ operational early 2002), which will fur-
ther increase efficiency in personnel management.