Report on the financial statements of the European Environment Agency for the financial year 2001, together with the Agency's replies
Date: 2002-09-26
Institutions: European Court of Auditors
Subjects: European Environment Agency, financial control, financial year, report

27.12.2002

EN

Official Journal of the European Communities

C 326/17

on the financial statements of the European Environment Agency for the financial year 2001,
together with the Agency’s replies

REPORT

(2002/C 326/03)

TABLE OF CONTENTS

Paragraph

Page

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

MAIN OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementation of the budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Revenue and expenditure account and balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management of cash-flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementation of financial provisions

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purchasing of goods and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

System for estimating requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cooperation with the Institutions and other Community bodies . . . . . . . . . . . . . . . . . . . .

Choice of procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Evaluation of bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Framework contracts

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-5

6-31

6-11

12-18

12-14

15-18

19-21

22-31

22-23

24-25

26

27-29

30-31

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

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

18

18

18

18

18

19

19

19

19

19

20

20

20

21

24

C 326/18

EN

Official Journal of the European Communities

27.12.2002

THE COURT’S OPINION

1.
This report is addressed to the Management Board of the
European Environment Agency in accordance with Article 13(4)
of Council Regulation (EEC) No 1210/90 (1).

2.
The Court has examined the financial statements of the
European Environment Agency for the financial year ended
31 December 2001. In accordance with Article 14 of Council
Regulation (EEC) No 1210/90, 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 adopted in com-
pliance with Article 14 of Council Regulation (EEC) No 1210/90.
The Court is required under Article 248 of the Treaty establish-
ing the European Community to audit these accounts.

Final appropriations for the financial year totalled 21,7
7.
million euro, 20,9 million (96 %) of which were committed.
10,3 million euro (i.e. 97 %) of the 10,6 million euro of operating
appropriations (Title III) were committed. Payments in respect of
appropriations for the financial year totalled 13,2 million euro,
i.e. 63 % of the amounts committed. A sum of 8,1 million euro
had to be carried over to the following financial year and 0,4 mil-
lion had to be cancelled.

8.
The appropriations carried over to 2002 essentially con-
cern operating appropriations, which account for 6,9 million
euro. The increase when compared with the previous financial
year is 2,5 million euro. This increase shows that the Agency
needs to improve the quality and monitoring of the planning of
its activities.

3.
The Court performed its audit in accordance with its audit-
ing policies and standards. These have been adapted from gener-
ally accepted international auditing standards to reflect the spe-
cific 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.

9.
The appropriations carried over from the financial year
2000 to 2001 totalled 5,4 million euro, 4,4 million euro of which
were settled. One million euro therefore had to be cancelled. In
view of these cancellations, which represent an increase when
compared with the previous financial year in terms of both abso-
lute and relative value, the Agency should be more rigorous in
evaluating the validity of the amounts which it carries over.

4.
This examination has enabled the Court to obtain reason-
able assurance that the annual accounts for the financial year
ended 31 December 2001 are reliable and that the underlying
transactions, taken as a whole, are legal and regular.

5.
Without calling into question the audit opinion expressed
in paragraph 4, the Court nevertheless draws attention to the situ-
ation described in paragraphs 8 and 9 of this report.

10.
All the appropriations for the financial year for transla-
tion and terminology services (337 000 euro) were committed in
a single operation in December 2001 and no payment was made.
The corresponding worksheets (order forms for the work entrusted
to the Translation Centre) totalled 18 408 euro. The balance of
318 592 euro was carried over without justification, contrary to
Article 6 of the Financial Regulation applicable to the Agency,
and should have been cancelled.

MAIN OBSERVATIONS

Implementation of the budget

11.
In its Report concerning the financial year 2000 (4), the
Court emphasised the unjustified carry-over of appropriations
from 2000 for translations to be done in 2001. The checks car-
ried out show that the payments in 2001 using appropriations
carried over from 2000 should have been made using appropria-
tions for the financial year 2001.

6.
The implementation of the appropriations for the financial
year 2001 and of the appropriations carried over from the previ-
ous financial year is shown in Table 1 (3).

Financial statements

(1) OJ L 120, 11.5.1990, p. 4.
(2) As required under Article 13(3) of Council Regulation (EEC)
No 1210/90, the accounts for all the Agency’s revenue and expendi-
ture for the financial year 2001 were drawn up on 15 March 2002
and were sent to the Agency’s Management Board, the Commission
and the Court of Auditors. These accounts were received by the Court
on 2 April 2002. A summary version of these financial statements is
presented in the tables annexed to this report.

(3) All the tables in this report have been drawn up on the basis of the
most exact values possible of the data used. For presentation pur-
poses, the figures have been rounded up or down, which may give
rise to minor differences in the totals. A dash indicates a non-existent
or nil value and 0,0 indicates a value below the rounding threshold.

Revenue and expenditure account and balance sheet

12.
The revenue and expenditure account and the balance
sheet published by the Agency in its activity report for the finan-
cial year 2001 are presented in summary form in Tables 2 and 3.

(4) OJ C 372, 28.12.2001.

27.12.2002

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Official Journal of the European Communities

C 326/19

to

pursuant

As regards the balance sheet, in 2001 the Agency took
13.
account,
(EC)
Commission
No 2909/2000 of 29 December 2000 (1), of the depreciation of
its fixed assets. The gross value of
its fixed assets was
3 523 000 euro as at 31 December 2001. In view of depreciation
charges for the financial year 2001 and for the previous financial
years (i.e. 2 536 000 euro), the net value of the Agency’s fixed
assets was 987 000 euro.

Regulation

14.
In its 2000 Annual Report on the Agency (2), the Court
highlighted weaknesses in the inventory system. In 2001, the
Agency applied the evaluation and depreciation rules adopted by
the Commission in December 2000 (3), and a computerised
inventory-management system was introduced. The Agency’s
efforts to date should be continued with a view to ensuring that
discrepancies do not arise between the value of goods when
recorded in the inventory and their value when purchases are
entered in the accounts. Greater coordination between the depart-
ment responsible for keeping the inventory and the accounts
department is needed so as to ensure that the depreciation rates
laid down in the regulations are correctly applied.

Management of cash-flow

15.
The Agency has four bank accounts. There are significant
delays (4) in entering banking transactions in the general accounts,
which makes it difficult to compare bank balances and the account
balances recorded in the general accounts.

16.
In order to strengthen internal control procedures, bank
accounts should be reconciled with the general accounts at the
end of each month and forwarded for approval to the relevant
official in the administration department. Transactions which
have not been reconciled for two consecutive months should be
subject to particular scrutiny.

17.
The Agency’s payments are generally made through bank
accounts. However, three ‘petty cash’ sub-accounts are used to
make cash payments. The accounts are kept by the Agency’s
accounting officer.

Implementation of financial provisions

19.
Commitments to finance expenditure resulting from meet-
ings of experts totalled 390 000 euro. An initial commitment of
265 000 euro was made at the beginning of the financial year by
the appropriate authorising officer. However, two additional com-
mitments (for 100 000 and 25 000 euro respectively) were signed
by staff to whom the necessary powers had not been delegated in
respect of this budget heading.

20.
These irregular commitments were made possible when
the member of staff responsible for the security of the comput-
erised accounting system made a mistake in allocating the elec-
tronic certificate for authorising appropriations. The lists of people
whom the computerised system recognises as having been autho-
rised to sign official documents should be compared on a regular
basis.

21.
In its 1999 and 2000 Annual Reports concerning the
Agency (5), the Court highlighted weaknesses in the management
of contracts, in particular when payment requests were being
handled. An examination of the files on the payments made in
2001 showed once again that the financial files do not always
contain supporting documents but only a certificate of the authen-
ticity and compliance of the work carried out.

Purchasing of goods and services

System for estimating requirements

22.
The volume of purchases is linked to the content of the
Agency’s annual work programme, which defines the work needed
to achieve the objectives set in the context of the multiannual
programme.

23.
The efforts made so far by the Agency to improve its sys-
tem for planning purchases and for setting it within a multiannual
context should be pursued and extended. Greater formalisation
would enable comparisons to be made between estimates and
actual outcomes with a view to improving the accuracy of sub-
sequent estimates.

18.
In order to ensure that accounts and cash-flow are kept
separate the Agency’s accounting officer should submit for
approval to the Director a draft decision concerning the creation
of and operating arrangements for these accounts. This decision
should indicate the maximum amount and type of expenditure
which may be disbursed from these accounts and the person
authorised to manage them.

(1) OJ L 336, 30.12.2000, p. 75.
(2) OJ C 372, 28.12.2001.
(3) Commission Regulation (EC) No 2909/2000 of 29 December 2000

(4)

(OJ L 336, 30.12.2000, p. 75).
In November 2001, the delay ranged from one-and-a-half to four
months.

Cooperation with the Institutions and other Community
bodies

24.
The Agency does not participate in the Interinstitutional
Group for the Harmonisation of Purchasing Procedures and, for
this reason, it does not take part in interinstitutional invitations
to tender or in exchanges of information about the purchasing of
goods and services. For everyday purchases, it tries to develop
forms of cooperation with the branch offices of the Community
bodies in Copenhagen.

(5) OJ C 373, 27.12.2000 and OJ C 372, 28.12.2001.

C 326/20

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Official Journal of the European Communities

27.12.2002

In order to implement projects which require the com-
25.
pilation of specific sets of data, the Agency endeavours to cooper-
ate with the Statistical Office of the European Communities or
with the Joint Research Centre in Ispra. A consultant (1) was
recruited for a period of a year to guarantee the availability and
quality of the socio-economic statistics needed to draw up basic
indicators. The problem of updating these data in subsequent
years has not been resolved.

documents submitted by the tenderers. The modus operandi of the
evaluation committees should be subject to specific instructions
so as to guarantee the independence of the assessors.

In order to provide better guarantees as to the quality of
29.
evaluations, the format of the replies to be provided by tenderers
should be improved so as to make their content more precise and
easier to compare.

Choice of procedure

26.
In general, the Agency tends to favour invitations to ten-
der. In one case (2), the restricted procedure was used even though
the nature and value of the contract required publication in the
Official Journal.

Evaluation of bids

Framework contracts

30.
For everyday purchases, the Agency employs three-year
framework contracts which may be renewed for two years in suc-
cession. These framework contracts include a clause allowing for
prices to be adjusted in line with market prices for the goods pro-
vided.

The criteria for evaluating bids are defined in general

27.
terms, which makes quantitative evaluation difficult.

28.
The bids are assessed by an evaluation committee made
up of three members which gives its opinion on the basis of the

31.
Framework contracts often specify a maximum total value
for the purchases to be made. Thought needs to be given to
whether there is any point in having such a clause in a framework
contract, when the specific aim of the latter is to offer a degree of
flexibility and to ensure that purchasing procedures are not
repeated (3).

This report was adopted by the Court of Auditors in Luxembourg at its meeting held on 25 and 26 September
2002.

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

(1) Commitment EEA.50995 totalling 118 000 euro.
(2) Project EEA-ACPC-00-0026.
(3) For the last year of the contract to supply paper and office equipment,
an increase in the number of staff which was unexpected when the
contract was signed led to an increase in requirements of more than
70 000 euro and the contract had to be re-examined by the ACPC.
The administrative procedure involved was correspondingly cumber-
some.

.

.

2
7
1
2
2
0
0
2

Implementation of the budget for the financial year 2001

Table 1

Expenditure

(Mio EUR)

Revenue
received

Allocation of
expenditure

Appropriations in the final budget

Appropriations carried over from the
previous financial year

Available appropriations
(2001 budget and financial year 2000)

entered

commit-
ted

paid

carried
over

cancelled

outstanding
commitments

paid

cancelled

appro-
priations

commit-
ted

paid

carried
over

cancelled

18,3

1,4

0,4

20,1

Title I
Staff

Title II
Administration

9,1

8,7

8,1

0,7

0,3

2,0

1,9

1,4

0,5

0,1

Title III
Operating
activities

10,6

Total

21,7

10,3

20,9

3,7

13,2

6,9

8,1

0,4

0,5

0,5

4,4

5,4

0,2

0,3

9,6

9,2

8,3

0,7

0,3

0,2

2,5

2,4

1,7

0,5

3,9

4,4

0,5

1,0

15,0

27,1

14,7

26,3

7,6

17,6

6,9

8,1

0,6

0,3

0,5

1,4

Revenue

Revenue entered
in the final
budget for the
financial year

Source of revenue

Community
subsidies

19,4

Other subsidies

2,0

Other revenue

Total

0,3

21,7

NB: Any discrepancies in totals are due to the effects of rounding.
Source: Data compiled by the Agency — These tables summarise the data provided by the Agency in its own financial statements.

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C 326/22

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Official Journal of the European Communities

27.12.2002

Revenue and expenditure account for the financial years 2001 and 2000

Table 2

2001

2000

(1 000 EUR)

Revenue received during the financial year
Commission subsidies
Miscellaneous revenue
Financial revenue

Budgetary expenditure for the financial year
Staff — Title I of the budget
Payments
Appropriations carried over

Administration — Title II of the budget
Payments
Appropriations carried over

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

Total revenue (a)

Total expenditure (b)

Outturn for the financial year (a-b) (1)

Balance carried over from the previous financial year
Appropriations carried over from the previous financial year which lapse
Re-used revenue from the previous financial year which lapses
Exchange-rate differences

Balance for the financial year

18 342
1 493
369

20 204

8 126
735

1 423
521

3 738
6 856

21 399

– 1 195

– 3 117
939
86
13

– 3 274

17 816
67
423

18 306

7 137
456

1 570
517

4 505
4 432

18 617

– 310

– 3 517
628
84
– 2

– 3 117

(1) The negative balance of the outturn and own capital does not constitute a loss of capital. It arises from the application of the Financial Regulation in respect of revenue (only

revenue received) and expenditure (payments plus appropriations carried over).

NB: Any discrepancies in totals are due to the effects of rounding.
Source: Data compiled by the Agency — These tables summarise the data provided by the Agency in its own financial statements.

27.12.2002

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Official Journal of the European Communities

C 326/23

Balance sheet as at 31 December 2001 and 31 December 2000

Table 3

Assets

2001

2000

Liabilities

2001

2000

(1 000 EUR)

Fixed assets (1)
Buildings
Equipment and furniture
Computer equipment

Stocks

Current assets
Commission (3)
Other subsidies to be received
Recoverable VAT
Recovery orders
Sundry accounts receivable

Cash accounts
Banks
Cash

Subtotal

314
407
266

987

22

9 975
590
376
153
93

Subtotal

11 187

6 120

Subtotal

6 120

306
1 913
1 562

3 781

Fixed capital
Own capital (2)
Balance for the financial year

Current liabilities

13

Commission

Other contributors

1 009

– 3 274

3 794

– 3 117

Subtotal

– 2 265

677

9 975

590

821

9 324

185

9 324
185
130
117
105

9 861

3 484
2

3 486

Non-automatic carry-overs of approps.

Automatic carry-overs of appropriations

7 291

5 405

Sundry accounts payable

Payroll deductions

VAT/Other taxes

Suspense accounts
Sums to be re-used
Deferred payments

153

88

79

117

153

130

Subtotal

18 997

15 314

541
1 043

1 584

764
386

1 150

Subtotal

Total

18 316

17 141

Total

18 316

17 141

(1) Net fixed assets — In 2001, the Agency took account of the depreciation of its fixed assets (see paragraph 14). As at 31 December 2001, gross fixed assets totalled 3 523 000

euro, from which the sum of 2 536 000 euro (corresponding to depreciation) was deducted.

(2) The negative balance of the outturn and own capital does not constitute a loss of capital. It arises from the application of the Financial Regulation in respect of revenue (only

revenue received) and expenditure (payments plus appropriations carried over).

(3) This amount represents the cumulative total of the annual balances of subsidies not yet paid by the Commission; the corresponding sum shown on the assets side represents

the amounts of financing which the Agency still needs to implement in order to achieve all its objectives.

NB: Any discrepancies in totals are due to the effects of rounding.
Source: Data compiled by the Agency — These tables summarise the data provided by the Agency in its own financial statements.

C 326/24

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Official Journal of the European Communities

27.12.2002

THE AGENCY’S REPLIES

Implementation of the budget

8.
The Agency recognises an increase in carry-forward appro-
priations and is fostering a tighter planning of its activities. It
should be noted however that the Agency is in a growth phase,
with an increasing budget, and also that part of the appropria-
tions that were carried forward to 2002 relate to earmarked mul-
tiannual budget funds.

9.
The Agency, during the year 2001, put specific emphasis
on assuring annuality for its administrative titles and hence be
more rigorous in evaluating the validity of amounts carried over.
In doing so it was decided not to use some of the carry-forward
appropriations for outstanding payments, and to provide a better
implementation basis for the budgetary management for the
coming years.

10.
The Agency foresees its translation requirements as part
of the annual publication planning, which is conducted in paral-
lel to the development of its work programme. The Translation
Centre invoices its services on an annual basis, so even if some
advance payment may be made during the year, the total work
carried out by the Centre for the Agency during the year can only
be determined after the end of the year. As a consequence, the
bulk of the payments corresponding to the work entrusted to the
Translation Centre during the period 1 January 2001 to 31 Decem-
ber 2001 was finally paid in March 2002, thanks to the appro-
priations that had been carried over for this purpose from 2001
to 2002.

facilitate the monthly reconciliations as they are currently done.
A link with direct banking is also being implemented, which will
facilitate and speed up the reconciliation of the bank statements.

An internal auditor has been recruited and will assess the effec-
tiveness of the accounting system and specifically on the recon-
ciliation processes.

17 and 18.
The three petty cash accounts are closed and cash
is currently managed by an imprest administrator. The decision
by the Executive Director to appoint an imprest administrator
also defines the operating principles.

Implementation of financial provisions

19 and 20.
The Agency recognises the discrepancy between
the delegations signed off by the Executive Director and the SI2
implementation. The procedure for assuring the consistency has
been sharpened and the task of security officer has been taken up
explicitly as a task for the finance group coordinator.

The Agency is developing an electronic document reposi-
21.
tory that is integrated with the financial SI2 system. This system
will include links and references to relevant documents, includ-
ing main deliverables. The maintenance of this repository will be
part of the role of the Agency’s programmes, where programme
managers have delegated responsibilities as authorising officers.

11.
The Agency will in the future, and at the end of each year,
consolidate the outstanding translation requests that have been
put forward to the Translation Centre and hence need to be car-
ried forward to the following year.

System for estimating requirements

Financial statement

The Agency inventory system is now in place as acknowl-
14.
edged by the Court. The synchronisation between the accounts
and the inventory, specifically on depreciation and exchange rates,
will be further developed through regular reconciliations and a
yearly inventory stock taking.

Management of cash flow

15 and 16.
A new general ledger system (BOB) was installed
during the month of April 2002 and includes a link to the SI2
budget management system. This link will enable a synchronisa-
tion between the budget system and the general ledger and will

22 and 23.
The Agency agrees with the comment made by
the Court of Auditors and will be ensuring that the accuracy of
estimates is improved.

Procurement; cooperation with other institutions and other
bodies

The Agency has established a Memorandum of Under-
25.
standing both with Eurostat and with the Joint Research Centre
and it also has to be noted that an extensive annual consultation
takes place on the mutual work programmes. It is however rec-
ognised that the Agency must continue to foster further integra-
tion and cooperation with other Community bodies and institu-
tions in order to share resources and capacities. With regard to
the referred consultancy work, it was deemed necessary by the
Agency that the work was outsourced, since neither internal
Agency nor Eurostat staff resources were available to allow to
implement the specific part of the work programme.

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C 326/25

Evaluation of bids

Framework contracts

27.
to 29. The Agency recognises the need to develop more
specific guidelines to enable more quantitative evaluation by ten-
der evaluation Committees and expects to have such guidelines in
place by the autumn 2002.

30 and 31.
The Agency agrees that the price ceilings as
defined in some framework contracts are of internal nature and
should not be part of the agreements with contractors.