Report on the financial statements of the European Monitoring Centre for Drugs and Drug Addiction for the financial year 2001, together with the Centre's replies
Date: 2002-09-26
Institutions: European Court of Auditors
Subjects: European Monitoring Centre for Drugs and Drug Addiction, financial control, financial year, report

C 326/64

EN

Official Journal of the European Communities

27.12.2002

on the financial statements of the European Monitoring Centre for Drugs and Drug Addiction for
the financial year 2001, together with the Centre’s replies

REPORT

(2002/C 326/09)

CONTENTS

Paragraph

Page

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

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

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

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Purchases of goods and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

System for forecasting requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Market research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Evaluation of tenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-5

6-25

6-8

9-11

12-17

18-25

18-19

20

21-22

23-25

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

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

65

65

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65

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71

27.12.2002

EN

Official Journal of the European Communities

C 326/65

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
European Monitoring Centre for Drugs and Drug Addiction for
the financial year ended 31 December 2001. In accordance with
Article 11(8) of Council Regulation (EEC) No 302/93, the budget
was implemented under 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 11(12) of Council
Regulation (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 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. Accordingly, the
Court carried out such tests of the accounting records and other
auditing 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 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.

Without calling into question the audit opinion expressed
5.
in paragraph 4, the Court nevertheless draws attention to the situ-
ations described in paragraphs 22 to 24 of this report.

MAIN OBSERVATIONS

Implementation of the budget

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 (4).

(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 2001 were drawn up on
26 March 2002 and forwarded to the Centre’s Management Board,
the Commission and the Court of Auditors. These accounts were
received by the Court on 8 April 2002. 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 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.

Final appropriations for the financial year totalled 9,2 mil-
7.
lion euro, 8,8 million of which were committed. Of the operat-
ing appropriations (Title III), which totalled 3,3 million euro, 3,2
million were committed. Payments in respect of the appropria-
tions for the financial year totalled 6,5 million; 2,5 million were
carried over to the following financial year and a total of 0,3 mil-
lion had to be cancelled. Only 59 % of the operational appropria-
tions committed were disbursed in the course of the financial
year.

8.
Appropriations carried over to 2002 totalled 2,4 million
euro (27 % of commitments). These were mainly operational
appropriations, a total of 1,4 million euro of which were carried
over (44 % of commitments). The significant extent of these
carry-overs demonstrates the need for the Centre to improve the
quality and the monitoring of its programming of activities.

Financial statements

9.
The revenue and expenditure account and balance sheet
published by the Centre in its activity report for the financial year
2001 are presented in summary form in Tables 2 and 3. In 2001,
the Centre reimbursed an amount to the Commission which was
equivalent to the cancelled balance of the preceding financial
years.

As regards the balance sheet, the Centre took account in
10.
2001,
in compliance with Commission Regulation (EC)
No 2909/2000 of 29 December 2000, of the depreciation of its
fixed assets. The depreciation charges for the financial year 2001
and for the previous financial years amounted to 557 194 euro
and the net value of the Centre’s fixed assets was 3 229 480 euro.

11.
In view of the high level of the balances on the accounts,
the Centre should negotiate with the banks to see if it is possible
to obtain more advantageous conditions. The accounting officer
should carry out regular monitoring of the rates offered on the
financial markets in order to ensure that interest yielded by the
funds is satisfactory.

Application of the financial provisions

12.
An examination of supporting documents relating to the
expenditure being charged to the imprest accounts revealed that
expenditure of the same type was charged to separate budget
headings. This is contrary to the principle of specification. The
Centre’s accounting officer should carry out regular unannounced
checks on the use of the funds allocated to the imprest accounts
and on the keeping of the accounts. Moreover, the list of pay-
ments made should be submitted to the accounting officer and
the financial controller at the end of every month, as laid down
in Article 6 of the decision creating the imprest accounts.

C 326/66

EN

Official Journal of the European Communities

27.12.2002

In its annual reports on the Centre (1) for 1999 and 2000,
13.
the Court called on the Centre to incorporate in its financial regu-
lation the amendments made to the Financial Regulation appli-
cable to the general budget concerning VAT. This has still not
been done.

budget appropriations. After the internal reform of the Centre, it
began implementation of a three-year programming system. The
main activities of the Centre are subjected to an analysis which
allows evaluation of the human and financial resources required
to carry them out.

14.
The Centre signed a contract with the Commission for
the purpose of preparing the countries which are candidates for
accession for participation in the Centre’s activities. A separate
budget of 1 056 139 euro was allocated to this project. This bud-
get provided for the recruitment of three auxiliary members of
staff to implement the contract. For six months (2) the costs of the
salaries of these three members of staff, totalling 81 439 euro,
were wrongly charged to the Centre’s budget. This situation was
not regularised until October 2001, whereas the total amount for
the project had been paid by the Commission on 14 March 2001.

15.
The proposals for commitments of the appropriations (3)
relating to this project are not always accompanied by support-
ing documents which would allow an assessment of the justifica-
tion for committing these amounts.

16.
A contract for a duration of two years and involving an
amount of 20 000 euro was awarded to an expert who was to
manage a website for the Centre. In fact, this was an extension of
a previous contract. Examination of the file revealed that, although
the date of expiry of the previous contract was known, no steps
were taken in good time to launch an invitation to tender. More-
over, the new contract allocates implementation of the ancillary
tasks it entails to the Centre on the grounds that this work should
be internalised. This type of internalisation prevents the Centre
from acquiring expertise in the area managed by the consultant.
In addition, the terms of the contract do not contain any perfor-
mance criteria to enable the attainment of these objectives to be
measured.

A contract (4) awarded at the end of August 2001 pro-
17.
vided for the payment by the Centre of an advance of 30 % on
conclusion of the contract. The advance had still not been paid at
the beginning of December of the same year, although by that
date the contract had been almost entirely fulfilled. The manag-
ing departments should carry out regular monitoring of the files
in order to ensure compliance with the terms of the contract.

Purchases of goods and services

System for forecasting requirements

18.
Until 2000, acquisitions of goods and services depended
on the decisions concerning the annual work programme and on

(1) OJ C 373, 27.12.2000, and OJ C 372, 28.12.2001.
(2) March to August 2001.
(3) Totalling 60 000 euro (Budget Heading 3311 — Missions).
(4) EMC 1288, for an amount of 43 790 euro.

19.
The Centre should elaborate a monitoring system with a
formal and well-documented structure, which would enable it to
analyse the discrepancies between forecasts and actual require-
ments.

Market research

20.
The Centre does not ensure systematic monitoring of the
markets for the goods and services it intends to acquire. For its
everyday purchases it turns to its usual suppliers.

Choice of procedure

21.
One argument put forward by the Centre to justify its
recourse to direct agreements to renew or extend contracts is the
quality of the services rendered and its concern to ensure their
continuity. This reasoning disregards the aim of the rules govern-
ing purchases, which is to stimulate competition by having recourse
to the market.

22.
One restricted invitation to tender launched with a view
to acquiring office computers for an amount of around
80 000 euro (5) included a condition that the tenderers should
already have supplied the Centre with similar equipment. A restric-
tion of this kind, which has no base whatsoever in law, is entirely
unjustified.

Evaluation of tenders

23.
The criteria for evaluation of the tenders are drawn up by
the member of staff in charge of the project. The very general
definition of the criteria makes a quantified evaluation of the ten-
ders by the evaluation committee very difficult.

24.
The tenders are assessed by an evaluation committee con-
sisting of three members, which gives an opinion on the basis of
documents submitted by the tenderers. The format in which the
tenderers’ replies are to be provided should be elaborated and
clearly defined in order to make their content comparable.

25.
The working methods of the evaluation committees and
the definition of the evaluation criteria should be the subject of
specific instructions in order to guarantee equality of treatment
for the tenderers.

(5) See file No ACPC/2/2001.

27.12.2002

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Official Journal of the European Communities

C 326/67

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

Implementation of the budget for the financial year 2001

Table 1

Revenue

Revenue entered
in the final
budget for the
financial year

Revenue
received

Allocation of
expenditure

Expenditure

(Mio EUR)

Appropriations in the final budget

Appropriations carried over from the
previous financial year

Available appropriations
(2001 budget 2001 and financial year 2000)

entered

commit-
ted

paid

carried
over

cancelled

outstanding
commitments

paid

cancelled

appro-
priations

commit-
ted

paid

carried
over

cancelled

8,8

1,5

p.m

10,2

8,8

1,6

0,1

10,4

Title I
Staff

Title II
Administration

4,7

4,5

4,0

0,4

0,2

1,2

1,2

0,6

0,6

0,0

Title III
Operating
activities

3,3

9,2

3,2

8,9

1,9

6,5

1,4

2,4

0,0

0,2

Total

0,2

0,3

1,7

2,2

0,0

0,2

4,9

4,7

4,0

0,4

0,3

0,0

1,5

1,5

0,9

0,6

1,6

1,9

0,1

0,3

5,0

11,4

4,9

11,1

3,5

8,4

1,4

2,4

0,4

0,0

0,1

0,5

Origin of revenue

Commission
subsidies

Other subsidies

Financial
revenue

Total

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

C
3
2
6
/
6
8

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

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Official Journal of the European Communities

C 326/69

Revenue and expenditure accounts for the financial years 2001 and 2000

Table 2

(1 000 EUR)

Revenue received during the financial year
Commission subsidy
Norwegian subsidy
Other subsidies
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
Payments in respect of appropriations assigned
Carry-overs of appropriations assigned

2001

8 750
399
1 153
99

Total revenue (a)

10 401

4 027
428

560
596

1 883
1 432
469
684

Total expenditure (b)

10 079

Out-turn for the financial year (1) (a-b)

Balance carried over from the previous financial year
Appropriations carried over which lapse and appropriations for re-use
Reimbursement of balance to the Commission
Depreciation
Exchange differences

Balance for the financial year

322

2 076
319
– 2 076
– 557
– 2

82

(1) Calculated in accordance with the principles laid down in Article 15 of Council Regulation (EC, Euratom) No 1150/2000 (OJ L 130, 31.5.2000, p. 8)
NB: Any discrepancies in totals are due to the effect of rounding.
Source: Monitoring Centre data. These tables summarise the data provided by the Monitoring Centre in its own financial statements.

2000

8 214

232

8 446

3 876
189

682
354

1 498
1 651

8 250

196

1 617
269

– 6

2 076

C 326/70

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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
Computer equipment
Transportation equipment
Depreciation

Stocks

Current assets
Commission subsidies
Subsidies assigned
Recoverable VAT
Other accounts receivable
Payments on revenue assigned

Cash accounts
Banks
Imprest accounts

2 950
151
634
51
– 557

Subtotal

3 229

10

36
39
28
38
2

Subtotal

143

3 925
0

Subtotal

3 925

2 950
330
503
45
0

3 828

12

36
101
3
43
1

184

4 372
4

4 376

Fixed capital
Own capital
Balance for the financial year

3 792
82

Subtotal

3 874

Current liabilities
Automatic carry-overs of appropriations
Non-automatic carry-overs
Subsidies
Sundry accounts payable
VAT
Re-used appropriations

2 185
270
75
774
28
101

Subtotal

3 433

3 840
2 076

5 916

1 960
234
137
38
3
112

2 484

NB: Any discrepancies in totals are due to the effect of rounding.
Source: Monitoring Centre data. These tables summarise the data provided by the Monitoring Centre in its own financial statements.

Total

7 307

8 400

Total

7 307

8 400

27.12.2002

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Official Journal of the European Communities

C 326/71

THE CENTRE’S REPLIES

The Centre is pleased to note the Court of Auditors’
4.
acknowledgement 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.
The Centre considers that the observations in question do
not merit special attention and should come under the part of the
report in which the Court gives its opinion.

8.
In the event that differentiated appropriations are not
available, a large volume of automatic carryovers is always required
to execute the anticipated commitments in accordance with the
work programme.

11.

The Centre takes careful note of the Court’s suggestion.

As a general rule, the list of imprest payments is submit-
12.
ted on a monthly basis to the accounting officer and financial
controller. Exceptionally, the lists for the months of July, August
and September were presented together. The Centre will take steps
to ensure that these presentations are carried out regularly on a
monthly basis and takes note of the Court’s suggestions relating
to the carrying-out of unannounced checks in addition to the
usual monthly checks.

Following the recasting of the Financial Regulation appli-
13.
cable to the general budget of the European Communities, at the
time of the next review of its Financial Regulation, the Centre will
study how to implement the Court’s suggestions, also taking into
account the specific nature of VAT reimbursements in Portugal.

14.
The three auxiliary members of staff recruited under the
Phare-European Monitoring Centre for Drugs and Drug Addic-
tion programme were paid by means of the same administrative
and accounting system as the rest of the staff and, therefore, their
salaries were initially charged to the Centre’s budget pending the
implementation of an ad hoc administrative and financial struc-
ture.

15.
Appropriations for missions are subject to provisional
commitments taking account of the estimates given in the work

programme. The Centre, in accordance with the Court’s observa-
tion, will submit these proposals for commitments in conjunc-
tion with the supporting programming instruments.

16.
A direct contract was used owing to the specific nature of
the work to be undertaken, in accordance with the provisions of
the Financial Regulation.

17.
As part of the review of its internal procedures, the Cen-
tre is in the process of improving coordination between its opera-
tional and accounting departments in order to grant the authoris-
ing officers more responsibility in following up the transactions
that they have to perform.

As regards the implementation of its internal reform plan,
19.
the Centre is in the process of setting up formal procedures (in
accordance with the principles of its new work organisation on a
project-by-project basis) to follow up and evaluate the implemen-
tation of its work programme.

The Centre does not always have the necessary resources

20.
to undertake the systematic monitoring of the markets.

It

is

that

correct

in certain cases of

21.
contract
renewal/extension, the Centre wished to give priority to ensuring
the continuity and maintaining the quality of the service pro-
vided. In the future, the Centre will make an effort to stimulate
competition while retaining these aspects which it deems to be
important.

22.
The Centre accepts the Court’s comment and has already
eliminated this condition for invitations to tender launched in
2002.

23.
As regards its procedures for implementing the work
programme and the budget, the Centre has already made the vari-
ous project managers aware of the need for the criteria for the
award of contracts to be defined in a sufficiently specific way and
is monitoring the implementation of these directives.

The Centre has adopted the internal coordination
24 and 25.
procedures aimed at ensuring the appropriate composition of the
committees evaluating the tenders. Subsequently, steps will be
taken to promote further the application of these mechanisms.