Report on the financial statements of the European Agency for the Evaluation of Medicinal Products concerning the financial year 2002, together with the Agency's replies
Date: 2003-10-16
Institutions: European Court of Auditors
Subjects: European Medicines Agency, financial control, financial year, report

C 319/22

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Official Journal of the European Union

30.12.2003

on the financial statements of the European Agency for the Evaluation of Medicinal Products
concerning the financial year 2002, together with the Agency’s replies

REPORT

(2003/C 319/04)

CONTENTS

Paragraph

Page

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

OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

Legality and regularity of the underlying transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-4

5-12

5

6-7

8-11

12

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

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

23

23

23

23

23

24

25

28

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Official Journal of the European Union

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THE COURT’S OPINION

This report is addressed to the European Parliament and to
1.
the Council, by virtue of Article 185(2) of Council Regulation (EC,
Euratom) No 1605/2002 (1).

2.
The Court has examined the financial statements of the
European Agency for the Evaluation of Medicinal Products for the
financial year ended 31 December 2002. In accordance with
Article 57(7) of Council Regulation (EEC) No 2309/93, the bud-
get was implemented on the responsibility of the Director. This
responsibility includes the drawing-up and presentation of the
financial statements (2) in accordance with the internal financial
provisions adopted on the basis of Article 57(11) of Council
Regulation (EEC) No 2309/93. The Court of Auditors is required
under Article 248 of the Treaty establishing the European Com-
munity to examine these accounts.

supervision of medicinal products for human or veterinary use.
Its opinions are drawn up by three committees, on the basis of
reports prepared by national experts whose remuneration, along
with the expenses incurred in connection with committee meet-
ings, makes up an important part of its operating expenditure.
The Agency also dedicates a significant part of its budget to the
financing of pharmaceutical supervision systems.

Implementation of the budget

6.
The implementation of the appropriations for the financial
year 2002 and of the appropriations carried over from the previ-
ous year is set out in Table 1 (4).

3.
The Court carried out the audit in accordance with its
auditing 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 pro-
cedures as it deemed necessary in the circumstances. Through this
audit the Court obtained a reasonable basis for the opinion
expressed below.

7.
As soon as the scientific committees decide to carry out an
inspection of a medicinal product, a proposal for a commitment
is issued in respect of the fee to be paid to the national agency
responsible for carrying out the inspection. This procedure does
not allow the principle of annuality to be respected, since delays
in carrying out the work mean that the expenditure will be settled
during a later financial year. In addition, it increases administra-
tive expenditure as a result of cancellations and new commit-
ments.

4.
This examination has enabled the Court to obtain reason-
able assurance that the annual accounts for the financial year
ended 31 December 2002 are reliable and that the underlying
transactions, taken as a whole, are legal and regular.

Financial statements

OBSERVATIONS

Introduction

8.
Tables 2 and 3 set out in summary form the revenue and
expenditure account and the balance sheet published by the
Agency in its activity report for the financial year 2002.

5.
The Agency was created by Council Regulation (EEC)
No 2309/93 of 22 July 1993 (3). The Agency operates through a
network and coordinates the scientific resources made available
by the national authorities in order to ensure the evaluation and

Applying the principles of accruals accounting, contrary
9.
to the current regulations (5) which provide for cash-based account-
ing, the Agency included in its revenue 5,2 million euro due in
respect of the financial year 2002 (in 2001, 10,7 million euro had
been included in the revenue).

(1) OJ L 248, 16.9.2002, p. 1.
(2) As required under Article 57(9) of Council Regulation (EEC) No 2309/
93, the accounts for all the Agency’s revenue and expenditure for the
financial year 2002 were drawn up on 28 March 2003 and forwarded
to the Court of Auditors. The Court received these accounts on 4 April
2003. A summarised version of these financial statements is pre-
sented in the tables attached to this report.

(3) OJ L 214, 24.8.1993, p. 18.

(4) All the tables in this report have been drawn up on the basis of the
most exact values possible for the data used. For presentation pur-
poses, the figures were rounded up or down, which may produce
minor differences in the totals. A dash indicates a non-existent or nil
value and 0,0 indicates a value below the rounding threshold.
(5) Article 5 of the Financial Regulation of the Agency provides that rev-
enue shall be entered in the accounts for the financial year in which it
is collected.

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The Agency frequently receives lump-sum advances for
10.
examinations which the users of its services are considering
requesting. It is difficult to reconcile the amounts customers have
paid and the fees actually due. The delays affecting the processing
of files partly explain the 75 % increase in the amount of advances
not allocated at the end of 2002 as compared to the end of
2001 (1), that is, 9,3 and 5,3 million euro respectively.

Legality and regularity of underlying transactions

Fixed-asset management is made difficult by the use of
11.
two databases that are organised and operate on different prin-
ciples and have different administrators. Moreover, the provisions
relating to the depreciation of software and of components which
form part of a whole are not being applied.

12.
Invoices are paid after the authorising officer, who certi-
fies that the service has been performed or the goods delivered,
has given his approval. This is issued without any systematic pro-
vision of supporting documents. The absence of such informa-
tion, which is necessary in order to carry out efficient internal
control, creates uncertainty and must be remedied.

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 15 and 16 October
2003.

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

(1) Balance sheet item: ‘deferred fees’.

European Agency for the Evaluation of Medicinal Products — Implemetation of the budget for the financial year 2002

Table 1

Revenue
collected

Expenditure
allocation

Appropriations in the final budget

Appropriations carried over from the
previous financial year

Available appropriations
(2002 budget and financial year 2001)

entered

commit-
ted

paid

carried
over

cancelled

outstanding
committments

paid

cancelled

appro-
priations

commit-
ted

paid

carried
over

cancelled

Expenditure

(million EUR)

Title I
Staff

Title II
Administration

Title III
Operating
expenditure

21,6

—

41,1

62,7

27,6

26,2

25,8

0,4

1,4

11,4

10,7

8,8

1,9

0,7

22,3

21,5

17,0

Total

61,3

58,4

51,6

4,5

6,8

0,8

2,9

0,5

4,9

8,1

13,5

0,4

0,1

28,1

26,6

26,2

0,4

4,6

0,3

16,3

15,6

13,4

1,9

7,2

12,2

0,9

1,3

30,4

29,6

24,2

74,8

71,8

63,8

4,5

6,8

1,5

1,0

1,7

4,2

Revenue

Revenue
entered
in the
final budget
for the
financial year

20,3

—

41,0

61,3

Source of revenue

Community
subsidies (1)

Other
subsidies

Other
revenue

Total

(1) Includes subsidies received from the European Economic Area.
NB: Discrepancies in totals are due to the effects of rounding.
Source: The Agency’s data. These tables summarise the data provided by the Agency in its own financial statements.

.

3
0
1
2
2
0
0
3

.

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
U
n
o
n

i

C
3
1
9
/
2
5

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Official Journal of the European Union

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European Agency for the Evaluation of Medicinal Products — Revenue and expenditure account for the financial years 2002 and 2001

Table 2

2002

2001

(1 000 EUR)

Revenue (1)
Commission subsidy
Community subsidy for orphan medicines
Fees
EEA contribution
Sundry revenue

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

Administration — Title II of the budget
Payments
Appropriations carried over

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

Total revenue (a)

Outturn for the financial year (a-b) (2)

Balance carried over from the previous financial year
Reimbursement to the Commission
Sums carried over from the previous financial year and cancelled
Exchange-rate differences
Other adjustments

Total expenditure (b)

Balance for the financial year

14 534
2 407
38 372
313
1 750

57 376

25 793
424

8 807
1 910

16 990
4 477

58 401

- 1 025

4 040
- 4 040
1 377
- 141
- 211

0

14 000
1 300
42 708
288
4 504

62 800

22 437
538

8 143
4 851

17 687
8 113

61 769

1 031

1 926
0
1 258
345
- 520

4 040

(1) This amount includes 5,2 million euro of revenue due in respect of the financial year 2002 (10,7 million euro in 2001).
(2) Calculation based on the principles of Article 15 of Council Regulation (EC EURATOM) No 1150/2000 of 22 May 2000 (OJ L 130, 31.5.2000, p. 8).
NB: The totals may contain discrepancies due to the effects of rounding.
Source: The Agency’s data. These tables summarise the data provided by the Agency in its own financial statement.

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Official Journal of the European Union

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European Agency for the Evaluation of Medicinal Products — Balance sheet as at 31 December 2002 and 31 December 2001

Table 3

(1 000 EUR)

Assets

2002

2001

Liabilities

2002

2001

Fixed assets
Equipment and furniture
Depreciation

6 248
- 3 564

Subtotal

2 684

Current assets
Commission subsidy receivable
Sundry accounts receivable and advances
VAT to be recovered

3 744
2 854
571

4 397
—

4 397

8 162
3 719
363

Fixed capital
Own capital
Balance for the financial year

2 684
0

Subtotal

2 684

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

444
0
6 811
69
0

4 397
4 040

8 437

0
3 788
9 714
311
363

Subtotal

7 169

12 244

Subtotal

7 324

14 176

Cash accounts
Banks — sight accounts
Imprest accounts

9 973
9

12 711
17

Suspense accounts
Sums to be reused
Deferred fees

Subtotal

9 982

12 728

Total

19 835

29 369

534
9 293

Subtotal

9 827

1 460
5 296

6 756

Total

19 835

29 369

NB 1: The totals may contain discrepancies, due to the effects of rounding.
NB 2: The balance sheet does not show a sum of 1,43 million euro relating to an agreement signed with the Commission in November 2002 concerning assigned revenue to be

collected in 2003 and 2004.

Source: The Agency’s data. These tables summarise the data provided by the Agency in its own financial statements.

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THE AGENCY’S REPLIES

At the beginning of 2003, the Agency put in place a revised
7.
procedure to bring the processing of inspection fees in line with
the principle of annuality. Following this procedure, a recovery
order to the marketing authorisation holder and a commitment
for the rapporteur costs are issued once the inspection date is
confirmed. Consequently all payments to inspection rapporteurs
should be processed within n + 1 at the latest.

The Agency takes note of the observation of the Court.
9.
This problem will be solved by the implementation in 2003 of the
new Financial Regulation. In 2001, the amount of EUR 10,7 mil-
lion includes EUR 8,1 million due from the Commission. For
2002, this issue was resolved through instalment payments of the
Commission contribution reducing the amount to be carried for-
ward to EUR 0,7 million, EUR 3,0 million being in transit in the

banking system at the year-end. Under the new Financial Regula-
tion, budgetary income will be recorded on the basis of cash
received.

The Agency will study the possibilities to make clearer

10.
the link between the customer deposits and their uses.

11.
The Agency takes note of the observation of the Court.
The Agency is implementing software to manage comprehen-
sively the inventory including its depreciation. It is expected this
tool will be operational for 1 January 2004.

12.
As required by the new Financial Regulation, the Agency
is implementing improved internal control procedures for verifi-
cation of invoices, including checklists and intensified training of
staff on financial procedures and controls.