Report on the financial statements of the European Foundation for the Improvement of Living and Working Conditions for the financial year 2001, together with the Foundation's replies
Date: 2002-09-26
Institutions: European Court of Auditors
Subjects: Eurofound, financial control, financial year, report

27.12.2002

EN

Official Journal of the European Communities

C 326/57

on the financial statements of the European Foundation for the Improvement of Living and
Working Conditions for the financial year 2001, together with the Foundation’s replies

REPORT

(2002/C 326/08)

CONTENTS

Paragraph

Page

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

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

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

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

1-4

5-13

5-8

9-10

Application of the financial provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11-13

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

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

58

58

58

58

58

60

63

C 326/58

EN

Official Journal of the European Communities

27.12.2002

THE COURT’S OPINION

1.
This report is addressed to the Council and the European
Parliament, in accordance with Article 16 of Council Regulation
(EEC) No 1365/75 (1), as amended by Article 1(3) of Council
Regulation (EEC) No 1947/93 (2).

2.
The Court has examined the financial statements of the
European Foundation for the Improvement of Living and Work-
ing Conditions for the financial year ended 31 December 2001. In
accordance with Article 18 of Council Regulation (EEC)
No 1417/76 (3) as amended by Article 1(16) of Council Regulation
(EEC) No 1949/93 (4), the Foundation’s budget was implemented
under the responsibility of its Administrative Board. This respon-
sibility includes the drawing up and presentation of the financial
statements (5), in accordance with the internal financial provisions
provided for under Articles 65 to 68 of Council Regulation (EEC)
No 1417/76 as amended by Article 1, paragraphs (52) to (55) of
Council Regulation (EEC) No 1949/93. The Court of Auditors is
required under Article 248 of the Treaty establishing the Euro-
pean Community to examine these accounts.

3.
The Court undertook its audit in accordance with its audit
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
procedures 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 reason-
able assurance that the accounts for the financial year ended
31 December 2001 are reliable and that the underlying opera-
tions are, taken as a whole, legal and regular.

MAIN OBSERVATIONS

Implementation of the budget

5.
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 (6).

The appropriations available (7) for the financial year
6.
amounted to 18,9 million euro, of which 15,3 million euro had
been granted for the financial year 2001 and 3,5 million euro had
been carried over from the previous financial year.

7.
Of the appropriations for the financial year 2001, 15,2
million euro were committed and disbursed in payments amount-
ing to 11,6 million euro. The balance of the appropriations was
either carried over (3,5 million) or cancelled (0,2 million). Of the
operating appropriations (Title III), which totalled 6,4 million-
euro, 6,3 million euro were committed, of which 3,1 million
were paid out and 3,1 million had to be carried over to the fol-
lowing financial year. The balance was cancelled. The carry-over
rate for operating appropriations remains very high and demon-
strates the need for the Foundation to improve the quality and
monitoring of its programming of activities. The Foundation
should do everything possible to reduce the carry-over rate in
respect of its appropriations in order to improve its compliance
with the budgetary principle of annuality.

8.
The appropriations carried over from the previous finan-
cial year totalled 3,5 million euro, 3,2 million of which related to
Title III. These appropriations were disbursed in payments amount-
ing to 3,4 million euro, 3,1 million of which related to Title III,
and the balance was cancelled.

Financial statements

9.
The revenue and expenditure account and the balance
sheet published by the Foundation in its activity report for the
financial year 2001 are presented in summary form in
Tables 2 and 3. The presentation of these financial statements in
the Foundation’s activity report for 2001 deviates from the norms
set out in the regulations (8). Although these problems have no
impact on the reliability of the financial statements, the Founda-
tion should make sure it returns to the usual practices.

The Foundation makes no attempt to depreciate its fixed
10.
assets. It ought to take depreciation into account when evaluat-
ing the fixed assets entered in its balance sheet and follow the
instructions concerning inventories in the Commission Regula-
tion (9). It should improve its inventory system by developing a
system of identification for its assets and defining the particular
responsibilities of the departments involved.

(1) OJ L 139, 30.5.1975, p. 1.
(2) OJ L 181, 23.7.1993, p. 13.
(3) OJ L 164, 24.6.1976, p. 16.
(4) OJ L 181, 23.7.1993, p. 26.
(5) As required under Article 16 of Council Regulation (EEC) No 1365/75,
as amended by Regulation (EEC) No 1947/93, the accounts for all the
Foundation’s revenue and expenditure for the financial year 2001
were drawn up on 26 March 2002 and forwarded to the Foundation’s
Management Board, the Commission and the Court of Auditors.
These accounts were received by the Court on 8 April 2002. A sum-
marised version of the financial statements is presented in the annex
to this report.

(6) 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.

Implementation of financial provisions

11.
A sample of 34 payments which were received or were to
be received by the Foundation during the financial year 2001 was

(7) Non-differentiated appropriations.
(8)

In the financial statements presented by the Foundation in its activity
report, an adjustment was made, outside the revenue and expenditure
account, in 2001, in respect of the negative balance observed in 2000
(1 210 000 euro). In addition, the balance sheet published by the
Foundation is understated by 26 047 euro on account of failure to
take into account an advance on a salary and recovery orders.
(9) Commission Regulation (EC) No 2909/2000 of 29 December 2000

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

27.12.2002

EN

Official Journal of the European Communities

C 326/59

examined. For these payments, which were entered for the finan-
cial year 2001, recovery orders were issued in February and March
2002. Only 10 of these orders had been validated by the Financial
Controller and eight, including one for 1 231 286 euro, had still
not been carried out by 31 January 2002. This infringes Article 5
of the Foundation’s Financial Regulation.

12.
In several instances, most notably one concerning the
purchase of a vehicle, one and the same person was able to
approve the commitments and payments, using the electronic

approval system, thus discharging the duties of the manager, the
authorising officer, the financial controller and the accounting
officer. This practice should be strictly prohibited as it is incom-
patible with the principle of the separation of duties.

13.
The Foundation concluded a contract with a travel agency
in November 1997 for a trial period of one year. This contract has
been renewed by tacit agreement until now. It would be prefer-
able if market-testing were carried out to see if more favourable
conditions could be obtained.

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

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

Revenue

Revenue entered
in the final
budget for the
financial year

Origin of revenue

Revenue
received

Allocation of
expenditure

Community
subsidies

15,0

Other subsidies

0,3

13,7

0,1

Title I
Staff

Title II
Administration

Title III
Operating
activities

Implementation of the budget for the financial year 2001

Table 1

Expenditure

(Mio EUR)

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

7,8

7,8

7,6

0,2

0,1

1,1

1,1

0,9

0,2

0,0

0,1

0,2

3,2

3,5

0,1

0,0

8,0

7,9

7,7

0,2

0,2

0,0

1,4

1,3

1,1

0,2

3,1

3,4

0,0

0,1

9,5

9,5

6,3

18,9

18,7

15,1

3,1

3,6

0,1

0,0

0,1

0,2

Total

15,3

13,9

Total

15,3

15,2

11,6

6,4

6,3

3,1

3,1

3,5

0,1

0,2

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

C
3
2
6
/
6
0

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

.

.

2
7
1
2
2
0
0
2

27.12.2002

EN

Official Journal of the European Communities

C 326/61

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)

14 958
16
96

15 070

7 583
190

854
245

3 129
3 148

Total expenditure (b)

15 150

Out-turn 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
Appropriations for re-use from the financial year 2000, not utilised
Exchange differences

– 80

– 1 210
59
24
– 2

Balance for the financial year

– 1 209

14 700
212
29

14 941

7 057
146

1 123
248

2 681
3 183

14 437

504

– 1 859
158
—
– 14

– 1 210

(1) The negative balance of the out-turn and own capital does not constitute capital loss. It results from the application of the financial regulation in respect of revenue (only

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

NB: Any discrepancies in totals are due to the effect of rounding.
Source: Data compiled by the Foundation — These tables summarise the data provided by the Foundation in its own financial statements (see paragraph 9).

C 326/62

EN

Official Journal of the European Communities

27.12.2002

Balance sheet as at 31 December 2001 and 31 December 2000

Table 3

Assets

2001

2000

Liabilities

2001

2000

(1 000 EUR)

Fixed assets
Buildings
Equipment and furniture
Transportation equipment

Stocks

Current assets
Commission subsidy
Other subsidies to be received
Advances on missions
Other advances
Other accounts receivable
Recoverable VAT
Recovery orders

Cash accounts
Banks
Imprest accounts

Subtotal

7 137
1 665
49

8 851

23

0
0
9
5
4
337
1 231

Subtotal

1 586

2 390
145

2 535

Subtotal

7 106
1 546
0

8 652

17

1 051
184
13
5
10
236
0

1 499

2 704
77

2 781

Fixed capital
Own capital
Balance for the financial year

8 865
– 1 209

8 668
– 1 210

Subtotal

7 656

7 458

Current liabilities
Automatic carry-overs of appropriations
Salary deductions
VAT /Other taxes
Sundry accounts payable

Suspense accounts
Sums to be re-used
Deferred payments

Payments in progress

Subtotal

Subtotal

3 583
327
0
4

3 914

195
1 231

1 426

0

3 577
124
236
0

3 937

315
1 236

1 551

4

NB: Any discrepancies in totals are due to the effects of rounding.
Source: Data compiled by the Foundation — These tables summarise the data provided by the Foundation in its own financial statements (see paragraph 9).

Total

12 996

12 950

Total

12 996

12 950

27.12.2002

EN

Official Journal of the European Communities

C 326/63

THE FOUNDATION’S REPLIES

In general monitoring is carried out in a comprehensive
7.
and effective manner, however the recent introduction of an
IT-based monitoring system will assist in securing a reduction in
the level of carryovers.

With regard to the level of carryovers, it should be noted that:

— the nature of Foundation operational activities is essentially
innovative/exploratory and not repetitive. This requires that
relatively complex and time-consuming procedures are nec-
essary for thorough preparation prior to the initiation of
research on a contractual basis. These procedures are an
important factor in the duration of projects, which, in gen-
eral, spans two years,

— the level of carryovers in Title 3 (Operations) is affected by
the relation of the Foundation’s annual budgeting cycle to its
operational cycle (which involves programme design, pro-
gramme initiation, outline project design, tendering, detailed
project design and implementation).

However, particularly in those cases where contracts are repeti-
tive in nature, the timing of contracting procedures has, where
possible, been brought forward. This measure will facilitate a
reduction in carryovers.

The Foundation takes note of the observation of the Court

9.
and will act appropriately in the future.

The Foundation has now made arrangements to adapt its
10.
inventory procedures to bring them into line with the revised pro-
cedures of the Commission as set out in Regulation (EC)
No 2909/2000, which provides for depreciation of inventory
items. Responsibility will be allocated as appropriate for all inven-
tory items.

11.
The Court’s point is accepted. The recovery orders con-
cerned had been returned to the Foundation by the Financial Con-
troller without, due to an oversight, the visa stamp being applied.
This was drawn to the attention of the Financial Controller, who
subsequently rectified the matter.

12.
At the time of the introduction of the SI2 system and in
order to make possible the speedy transfer of data from the Foun-
dation’s old accounting system to SI2, ‘super user’ rights were
accorded for in-putting purposes for a limited period only. This is
standard practice for the introduction of a new system. All of the
documentation concerned had already been the subject of proper
authorisations from the relevant authorities, including those of
the Financial Controller.

13.
The existing contract for travel agency services was renew-
able on an annual basis and has now been operational for five
years. The Foundation has already taken steps in relation to a ten-
der procedure and introduction of a new contract.