Report on the financial statements of the European Agency for the Evaluation of Medicinal Products for the financial year ended 31 December 2000, together with the Agency's replies
Date: 2001-10-25
Institutions: European Court of Auditors
Subjects: European Medicines Agency, activity report, financial control, financial year

28.12.2001

EN

Official Journal of the European Communities

C 372/19

on the financial statements of the European Agency for the Evaluation of Medicinal Products for
the financial year ended 31 December 2000, together with the Agency’s replies

REPORT

(2001/C 372/03)

CONTENTS

Paragraph

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

1-4

MAIN OBSERVATIONS CONCERNING THE IMPLEMENTATION OF THE BUDGET OF THE
EUROPEAN AGENCY FOR THE EVALUATION OF MEDICINAL PRODUCTS (LONDON) FOR
THE FINANCIAL YEAR 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

Personnel policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

5-23

5-8

9-10

11-23

11-13

14-20

21-23

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

The Agency’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

20

20

20

20

20

20

21

21

23

26

C 372/20

EN

Official Journal of the European Communities

28.12.2001

THE COURT’S OPINION

1. This report is addressed to the Management Board of the
European Agency for the Evaluation of Medicinal Products in
conformity with Article 57(10) of Council Regulation (EEC)
No 2309/93 (1).

2. The Court has examined the financial statements of the Euro-
pean Agency for the Evaluation of Medicinal Products for the
financial year ended 31 December 2000. In accordance with
Article 57(7) of Council Regulation (EEC) No 2309/93, the bud-
get was implemented on the responsibility of the executive direc-
tor. This responsibility included the drawing up and presentation
of the financial statements (2) in accordance with the internal
financial provisions provided for under Article 57(11) of
Council Regulation (EEC) No 2309/93. The Court of Auditors is
required under Article 248 of the Treaty establishing the Euro-
pean Community to examine these accounts.

3. The Court performed its audit in accordance with its audit
policies and standards, which have been adapted from generally
accepted international auditing standards to reflect the specific
nature of the Community context. The Court carried out such
tests of the accounting records and applied such other audit pro-
cedures as it deemed necessary in the circumstances. Through this
audit the Court obtained a reasonable basis for the opinion
expressed below.

4. This examination has allowed the Court to obtain reasonable
assurance that the accounts for the financial year ended 31 Decem-
ber 2000 are reliable and that the underlying transactions, taken
as a whole, are legal and regular.

MAIN OBSERVATIONS CONCERNING THE IMPLEMENTATION
OF THE BUDGET OF THE EUROPEAN AGENCY FOR THE
EVALUATION OF MEDICINAL PRODUCTS (LONDON) FOR THE
FINANCIAL YEAR 2000

6. Final appropriations for the financial year totalled 55,3 mil-
lion euro, 51,8 million euro (94 %) of which was committed.
Operating appropriations (Title III) amounted to 22,3 million
euro, 93 % (20,7 million euro) of which were committed.

7. Of the appropriations carried over from 1999 (9 million euro),
1,6 million euro, i.e. 18 % of the total appropriations carried over,
was cancelled at the end of 2000.

8.
In 2000, there was an increase of 32 % in the carryovers,
which amounted to 11,8 million euro. Of this amount, 5,9 mil-
lion euro concerned the evaluation of medicinal products, which
is a lengthy procedure necessitating the carryover of funds, and
2,5 million euro the extension of meeting rooms and their refur-
bishment in order to accommodate extra capacity for the evalu-
ation of orphan and other drugs. Notwithstanding this, the Agency
should seek to limit the level of carryovers through closer moni-
toring of its activities.

Financial statements and keeping of the accounts

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 Agency included in its revenue accounts for 2000
amounts due but not actually received (55 million euro), despite
its Financial Regulation, which clearly states that it should only
post revenue actually received (45,5 million euro). This problem
of presentation does not affect the reliability of the accounts.

Implementation of the budget and budgetary accounts

Management of human resources

5. The implementation of the appropriations for the financial
year 2000 and of the appropriations carried over from the previ-
ous year is set out in Table 1 (3).

Personnel policy

(1) OJ L 214, 24.8.1993, p. 18.
(2) As required under Article 57(9) of Council Regulation (EEC)
No 2309/93, the accounts for all the Agency’s revenue and expendi-
ture for the financial year 2000 were drawn up on 29 March 2001
and then forwarded to the Agency’s Management Board, the Com-
mission and the Court of Auditors. The Court received these accounts
on 10 April 2001. A summarised version of these financial state-
ments is presented in the tables attached to this report.

(3) The calculations in all tables in this report are based on the most
accurate data available. As regards the presentation of figures, the fig-
ures have been rounded, which may give the appearance of arithmeti-
cal errors. A dash indicates an unavailable or zero value and 0,0 indi-
cates a value lower than the rounding threshold.

11. The EMEA was established by Council Regulation (EEC)
No 2309/93 of 22 July 1993. The Agency’s staff are subject to the
Regulations and Rules applicable to officials and other servants of
the European Union (CEOS). According to Article 62 of Council
Regulation (EEC) No 2309/93, the Management Board, in agree-
ment with the Commission, is required to adopt the necessary
implementing provisions.

12. The personnel policy of the Agency has not yet been forma-
lised in a single document, although the director has already made
decisions on some particular aspects.

28.12.2001

EN

Official Journal of the European Communities

C 372/21

13. Only the first recruitments were made by the Commission,
which advertised the posts and followed the recruitment proce-
dures. Since then, normal recruitment and staff management have
been the responsibility of the Agency’s personnel department.

18. On average, 86 % of A grade staff may be regarded as opera-
tional. When all categories are taken together, 72 % of the Agen-
cy’s staff could be considered operational members of staff.

Changes in the Agency’s staff and activities

14. The staff of the Agency is made up entirely of temporary
employees (TEs) and the number of posts is authorised by the
budgetary authority each year when the budget is adopted. Fur-
thermore, the budget may allocate appropriations for the recruit-
ment of auxiliary employees (AEs), whose contracts of employ-
ment are limited to a maximum of one year, and seconded national
experts (SNEs).

15. Table 4 shows the changes in the number of people employed
by the Agency, broken down by type of post. The increase in the
number of staff has tended to level off in recent years. In parallel,
the proportion of auxiliary staff is tending to decline. At the end
of 2000, virtually all staff were temporary employees.

19. Table 6 illustrates the changes in staff-related costs and in
administrative expenditure over the period 1995 to 2000. The
increase in salary costs was slower than the increase in staff num-
bers. This situation may be attributed to the Agency’s recruitment
policy, which, because staff progress from auxiliary status (often
after an employment agency contract), delays entry into the for-
mal career structure and therefore slows down the increase in sal-
ary costs.

20.
In order to understand the relationship between the Agen-
cy’s activities and the change in its staff and related costs, the lat-
ter was compared with the growth in its total revenue over a year.
This comparison suggests that the management of the Agency is
sound in so far as, on average, the use of human resources and the
associated costs are rising less rapidly than the Agency’s work-
load. This is corroborated by the fact that, on average, support
expenditure (Titles I and II) is increasing less rapidly than operat-
ing expenditure.

16. Table 5 shows changes in recruitment according to the pro-
cedure applied and reveals that 141 of the 288 employees (49 %)
had been recruited as temporary staff by procedures akin to exter-
nal competitions. Slightly more than half of the employees (51 %)
were initially recruited as auxiliary staff (very often after an
employment agency contract in the case of the lowest grades),
subsequently attaining temporary status as a result of what are
essentially internal procedures. These findings are corroborated
by an examination of a random sample of 25 employees who can
be considered to be representative of the Agency’s staff. On aver-
age, recruitment costs amounted to 2 290 euro per person
recruited. Staff departures resulted in an average annual staff turn-
over rate (permanent staff, TEs, AEs and SNEs) of 11 %.

17. 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 continuity of the Agency’s operations
(e.g. administration, accounts, secretarial services, etc.),

— other, ‘operational’, staff, who contribute directly to the reali-

sation of the Agency’s objectives.

Conclusion

21. Generally, it would appear that, even though, since its cre-
ation, the Agency has not been able to take on all the staff pro-
vided for in its budget’s establishment plan, it has been able to
make up for this by recruiting auxiliary staff and seconded national
experts.

22.
In the majority of cases, the Agency uses a recruitment sys-
tem similar to the one used by the institutions to recruit tempo-
rary staff externally. The Agency applies an internal procedure to
convert its auxiliary employees into temporary staff.

23.
In view of the expected expansion of the Agency’s activities,
and therefore of its staff, it might be preferable for the Agency, in
the case of posts involving support and operational activities
which require qualifications of an administrative nature, to join
forces with the Community institutions and the other decentra-
lised bodies with a view to recruiting staff on the broadest pos-
sible basis. Furthermore, in general terms the Agency should
improve its staff management and information system.

C 372/22

EN

Official Journal of the European Communities

28.12.2001

This Report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 25 October 2001.

For the Court of Auditors

Jan O. KARLSSON

President

28.12.2001

EN

Official Journal of the European Communities

C 372/23

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)

20,9

0,54

21,4

12,1
3,2

15,2

22,3
5,3

27,6

55,3
9,0

64,3

(b)

20,2

0,54

20,8

10,8
3,2

14,0

20,7
5,3

26,0

51,8
9,0

60,8

(c)

(d=c/b)

19,9
0,45

20,4

7,4
2,6

10,0

15,1
4,3

19,4

42,5
7,4

49,9

98 %
84 %

98 %

68 %
83 %

72 %

73 %
82 %

75 %

82 %
82 %

82 %

(f)

0,5

0,5

4,5

4,5

6,8

6,8

11,8

11,8

(g=a-c-f)

(h=g/a)

0,5
0,1

0,6

0,1
0,5

0,6

0,4
1,0

1,4

1,0
1,6

2,6

2 %
16 %

3 %

1 %
17 %

4 %

2 %
18 %

5 %

2 %
18 %

4 %

Revenue and expenditure accounts for the financial years 2000 and 1999

Table 2

(1 000 EUR)

2000

1999

Revenue
Commission subsidy
EC subsidy for orphan drugs
Evaluation fees
EEA contribution
Miscellaneous revenue

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

Total revenue

Total for Title I

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

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

Total for Title II

Total for Title III

Total expenditure

Outturn for the financial year
Balance carried over from the previous financial year
Repayment to/from the Commission
Appropriations carried over from the previous financial year which lapse
Exchange-rate differences
Other adjustments

NB: There may be disparities in the totals, due to rounding.
Source: Presentation prepared by the Court of Auditors on the basis of data compiled by the Agency.

Balance for the financial year

13 200
1 000
39 236
245
1 354

55 035

19 939
474
20 413

7 422
4 538
11 960

15 129
6 810
21 939

54 312

723
3 276
– 3 276
2 082
– 613
– 266

1 926

13 000
0
28 953
800
948

43 701

16 686
535
17 221

3 409
3 152
6 561

12 106
5 295
17 401

41 183

2 518
812
– 812
643
115

3 276

C 372/24

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

4 423

4 423

3 788

3 788

Subtotal

Fixed capital
Own capital
Balance of the year

Current assets
Recoverable VAT
Sundry accounts receivable and prepayments
Subsidy receivable from Commission

653
2 551
8 000

441
2 274
8 000

Subtotal

11 204

10 715

Cash accounts
Banks — deposit accounts
Imprest account

9 169
7

9 176

12 223
27

12 250

Subtotal

4 423
1 926

6 349

2 510
9 313

336
653

Subtotal

Current liabilities
Non-automatic carryovers of appropriations
Automatic carryovers of appropriations
Social liabilities
Sundry accounts payable
VAT

Suspense accounts
Sums to be reused
Deferred revenue fees
Amounts owed to the Commission

Subtotal

12 812

1 210
4 432

3 788
3 276

7 064

2 488
6 494
71
175
441

9 669

1 400
6 956
1 664

Subtotal

5 642

10 020

Total assets

24 803

26 753

Total liabilities

24 803

26 753

NB: There may be disparities in the totals, due to rounding.
Source: Presentation prepared by the Court of Auditors on the basis of data compiled by the Agency.

Table 4

Changes in staffing

Establishment
plan

Posts filled

Other staff

1996
1997
1998
1999
2000

TE

107
160
184
203
210

TE: Temporary employees.
AE: Auxiliary employees.
SNE: Seconded national experts.

TE

68
135
143
176
189

AE

32
8
11
5
5

SNE

3
2
3
3
4

Total

35
10
14
8
9

Total

103
145
157
184
198

Table 5

Analysis of the change in the number of staff

Increase

Decrease

Competition

Other

Total

Expiry of
contract

Termination of
contract

1995
1996
1997
1998
1999
2000

17
44
32
11
21
16

32
36
21
20
23
15

49
80
53
31
44
31

Total

141

147

288

5
20
7
5
4
9

50

7
5
4
14
12
8

50

Total

12
25
11
19
16
17

100

Net change

Turnover
(%)

37
55
42
12
28
14

—

10 %
24 %
8 %
12 %
9 %
9 %

11 %

.

2
8
1
2
2
0
0
1

.

Table 6

Increase in staff and related costs

Salary costs

Total staff

Direct (1)

Indirect (2)

Total

1995

1996

1997

1998

1999

2000

48

103

145

157

184

198

2 159,5

4 780,0

8 639,5

12 335,6

14 433,7

17 381,5

24,9

107,3

155,4

208,3

238,8

303,0

2 184,4

4 887,2

8 794,9

12 544,0

14 672,5

17 684,5

Other
salary-
related
costs (3)

882,7

757,8

762,9

524,8

660,5

583,4

Overall
total (4)

3 067,2

5 645,0

9 557,9

13 068,7

15 333,0

18 267,9

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

45,0

46,4

59,6

78,6

78,4

87,8

0,5

1,0

1,1

1,3

1,3

1,5

45,5

47,4

60,7

79,9

79,7

89,3

22,8

11,3

106,3

181,2

68,3

100,2

0,5

0,1

0,7

1,2

0,4

0,5

378,0

477,2

514,2

313,2

326,6

491,7

5 608,0

1 244,7

116,8

4 107,9

822,6

4 803,2

2 405,6

4 441,9

1 061,0

3 817,2

341,0

10 047,8

1 248,8

39,9

33,1

28,3

20,7

50,7

25,9

8,0

16,6

6,8

1,9

6,3

(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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2
5

C 372/26

EN

Official Journal of the European Communities

28.12.2001

THE AGENCY’S REPLIES

10. The issue of when the EMEA should recognise the EC sub-
sidy, as revenue, was first addressed on preparation of the 1998
accounts. In that year the European Commission, on the basis of
Article 28 of the Agency’s Financial Regulation, did not transfer
the full subsidy to the EMEA. Article 28 indicates that the subsidy
should be paid in line with actual cash needs.

In 1998 the Agency decided that in order for the financial state-
ments to show a fair view of the financial and budgetary situa-
tion it was appropriate to show the subsidy voted for each year as
revenue for that year as the one year budgetary cycle does not
coincide with the cash flow cycle. In addition, the Agency is
required to present a balanced budget. During the current year the
Agency and the Commission are seeking a solution whereby the
full subsidy can be paid before the close of the budgetary year.

The whole issue of accounting for revenue by the Agency will be
reviewed in the context of the recasting of the Financial Regula-
tion. However, at present the Agency’s management believes the
accounting policies used correctly reflect the financial results of
the Agency. Supplementary information on cash collected and
payments made is given in great detail in the statement of revenue
and expenditure in accordance with the Financial Regulation.

13. The EMEA applies the provisions of the Staff Rules and
Regulations applicable to officials and other servants of the Euro-
pean Communities, which is a comprehensive document on con-
tractual terms and conditions as well as other aspects of person-
nel policy such as professional conduct, training or performance
evaluation. Where implementing rules are foreseen by the Staff
Regulations the Management Board has adopted these and together
they provide the body of documents that set out personnel policy
at the Agency.

24. The establishment of an interinstitutional recruitment office
will be an opportunity for community institutions and bodies to
achieve economies of scale in certain common areas of recruit-
ment. The EMEA will be following the establishment of the new
office and will be exploring the possible services from this new
body that could be of benefit to it.

The Agency selected a new personnel database system in the
course of 2000 through an open tender procedure. Work to
implement the chosen system started in December 2000 and good
progress has been made. The system is operational for staff in
Administration and Financial Control and shortly the Intranet
functions will be made available to the staff of the whole Agency.