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

30.12.2003

EN

Official Journal of the European Union

C 319/15

on the financial statements of the European Environment Agency for the financial year 2002,
together with the Agency’s replies

REPORT

(2003/C 319/03)

CONTENTS

Paragraph

Page

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

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

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

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

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

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

Sound financial management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Agency’s tasks and resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-4

5-16

5

6-8

9

10-13

14

15-16

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

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

16

16

16

16

16

16

17

17

18

21

C 319/16

EN

Official Journal of the European Union

30.12.2003

THE COURT’S OPINION

activities are financed by the Agency, and it regularly publishes
reports on the state of the environment.

1.
This report is addressed to the European Parliament and to
the Council in accordance with Article 185(2) of Council Regula-
tion (EC, Euratom) No 1605/2002 (1).

Implementation of the budget

The Court has examined the financial statements of the
2.
European Environment Agency for the financial year ended
31 December 2002. In accordance with Article 14 of Council
Regulation (EEC) No 1210/90, the budget 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 14 of Council Regulation (EEC) No 1210/90. The
Court of Auditors is required under Article 248 of the Treaty
establishing the European Community to examine these accounts.

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 audit
procedures as it deemed necessary in the circumstances. By means
of this audit, the Court obtained a reasonable basis for the opin-
ion expressed below.

4.
Subject to the matters referred to in paragraphs 12 and 13,
this examination has enabled the Court to obtain reasonable
assurance that the annual accounts for the financial year ended
31 December 2002 are reliable and that the underlying transac-
tions, taken as a whole, are legal and regular.

The implementation of the appropriations for the financial
6.
year 2002 and of the appropriations carried over from the previ-
ous financial year is shown in Table 1.

7.
Appropriations for the financial year totalled 25,2 millio-
n euro, of which 24,6 million euro was committed. Payments in
respect of appropriations for the financial year totalled 18 mil-
lion euro. The carryover total, although less than last year, remains
high (7,2 million euro). Of this sum, 5,8 million euro concerns
operating appropriations, which is almost 50 % of the appropria-
tions assigned for that purpose (12,1 million). As the Court empha-
sised in its Report concerning the financial year 2001 (5), the
Agency should continue its efforts to evaluate more rigorously
the justification for carrying sums over.

In January 2002, the Agency decentralised financial mat-
8.
ters to its operating services. The aim of decentralising them was
to strengthen administrative capacity at the level of the operating
services, to reduce delays and to minimise the dispersion of sup-
porting documents. Measures should have been adopted to enable
the financial departments to follow up the Agency’s activities and
programmes, since responsibility for their implementation is often
shared between various departments.

OBSERVATIONS

Introduction

5.
The Agency was established by Council Regulation (EEC)
No 1210/90 of 7 May 1990 (3). Its main purpose is to gather, edit
and disseminate at the proper time focused, relevant and reliable
information on the state of and trends in the environment at
European level in the widest sense. Third countries have taken
part in the activities of the Agency (4) since its creation. It carries
out its tasks by means of a network of thematic centres, whose

(1) OJ L 248, 16.9.2002, p. 1.
(2) As required under Article 13(3) of Council Regulation (EEC) No 1210/
90, the final accounts for all the Agency’s revenue and expenditure for
the financial year 2002 were drawn up on 20 August 2003 and were
sent to the Court of Auditors. These accounts were received by the
Court on 6 October 2003. A summary version of these financial
statements is presented in the tables annexed to this report.

(3) OJ L 120, 11.5.1990, p. 1.
(4)

In 2002, with the exception of Iceland, Norway and Liechtenstein,
almost all the candidate countries took part in the Agency’s activi-
ties.

Financial statements

9.
The revenue and expenditure account and the balance
sheet published by the Agency in its activity report for the finan-
cial year 2002 are presented in summary form in Tables 2 and 3.

Legality and regularity of the underlying transactions

10.
Following a decision taken by the Director on 4 March
2002, an imprest account for the sum of DKK 200 000 was
opened to cover expenditure resulting from missions and meet-
ings organised by the Agency. The rules for the management of
this imprest account ought to be clearly defined and, in accor-
dance with the Financial Regulation, separate accounts should be
kept for it. Measures ought also to be adopted to reduce the costs
and risks associated with this imprest account (transport of sub-
stantial amounts in cash).

(5) OJ C 326, 27.12.2002, p. 18.

30.12.2003

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Official Journal of the European Union

C 319/17

In its Annual Reports for 1999, 2000 and 2001 (1), the
11.
Court drew attention to deficiencies in the documents supplied in
support of requests for payment. An analysis of the payments files
was carried out in 2002 and showed that this situation had not
changed.

12.
On 5 February 2002, the Agency signed a contract with
a United Nations agency for a ‘maximum sum’ of 345 000 euro,
under which 100 % of the sum was to be paid after the contract
was signed. The payment order was not implemented, as the
financial controller withheld his approval on the ground that such
an advance was excessive. The contract was annulled and replaced
by five new contracts which were signed in December 2002 and
under which an advance of 95 % was to be paid after signature.
The procedure adopted by the Agency to deal with the conse-
quences of the financial controller’s refusal to give his approval is
as open to criticism as the practice that he had refused to con-
done.

Sound financial management

14.
The daily expenses paid to consultants are very high. In
2002 the Agency paid a firm of computer consultants a total of
approximately 1,4 million euro, or 116 000 euro per month,
which roughly corresponds to eight or nine full-time consultants.
An analysis of the files showed that some of these consultants
have been working at the Agency for several years and perform
tasks of a permanent nature. In the interest of more economical
management of its resources, the Agency might consider directly
recruiting the experts that it needs on an almost permanent basis.

The Agency’s tasks and resources

15.
The regulation setting up the Agency states that its pur-
pose is to provide the Commission and the Member States with
information on the environment in certain priority areas. To do
this, the Agency must carry out various tasks, of which the most
important are the collection and evaluation of data, the dissemi-
nation of information needed for the preparation and monitor-
ing of measures relating to the environment, as well as the pub-
lication of reports on the state of the environment. Performance
of these tasks is based on a work programme. This programme,
and the general structure of the budget, must be more clearly
linked to the Agency’s objectives and tasks, so as to make its
actions more transparent and to improve its ability to monitor
and evaluate its management efficiency.

13.
In 1997, the Royal Awards Foundation, whose purpose is
to promote action in favour of the environment, was set up by the
Agency and three other bodies. For its operations, the Founda-
tion makes use free of charge of premises and equipment belong-
ing to the Agency. In fact, neither the regulation that set up the
Agency, nor its financial regulation, permitsthe Agency to set up
suchFoundations or to grant them any form of subsidy. The
Agency’s participation may be estimated at approximately
30 000 euro as regards the initial cost of setting up the Founda-
tion and 34 000 euro per year as regards its operating costs.

16.
In this connection, the programmes entrusted to the the-
matic centres are financed by several budget headings that are
managed and monitored by different authorising officers. This,
taken together with the many different ways in which activities
are financed (appropriations for the financial year, appropriations
carried over or reused and assigned revenue), means that neither
the various bodies involved, nor even the financial departments
(see also paragraph 8), have an overall view of the Agency’s activi-
ties. As a result, it is impossible to match the aims of the Agency
and the various programmes financed.

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) OJ C 373, 27.12.2000, p. 7.
OJ C 372, 28.12.2001, p. 9.
OJ C 326, 27.12.2002, p. 17.

European Environment Agency — Implementation of the budget for the financial year 2002

Table 1

Revenue
collected

Expenditure
allocation

Appropriations under the final budget

Appropriations carried over from the previous
financial year

Available appropriations
(2002 budget and financial year 2001)

entered

com-
mitted

paid

carried
over

can-
celled

entered

com-
mitted

paid

carried
over

can-
celled

appro-
priations

com-
mitted

paid

carried
over

can-
celled

Expenditure

(million EUR)

Title I
Staff

Title II
Administration

Title III
Operating
expenditure

18,4

1,5

0,2

20,1

10,8

10,8

9,6

1,2

0,1

2,3

2,3

2,0

0,3

0,0

12,1

11,6

6,4

Total

25,2

24,6

18,0

5,8

7,2

0,0

0,1

0,7

0,5

6,9

8,1

0,7

0,4

0,3

0,1

11,5

11,5

10,0

1,4

0,2

0,5

0,4

0,0

0,1

2,8

2,8

2,4

0,3

0,1

6,8

8,0

6,0

6,8

0,2

0,4

0,7

0,9

19,0

18,4

12,4

33,3

32,6

24,8

5,9

7,6

0,7

1,0

Revenue

Revenue
entered
in the final
budget
for the
financial
year

19,4

5,6

0,2

25,2

Origin of revenue

Community
subsidies

Other
subsidies (1)

Other
revenue

Total

(1) Includes contributions from EFTA and the new Member States, as well as other subsidies.
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 statements.

C
3
1
9
/
1
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
U
n
o
n

i

.

3
0
1
2
2
0
0
3

.

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Official Journal of the European Union

C 319/19

European Environment Agency — Revenue and expenditure account for the financial years 2002 and 2001

Table 2

2002

2001

(1 000 EUR)

Revenue
Own revenue
Commission subsidies
Miscellaneous revenue
Financial revenue

Expenditure
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

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

Balance carried over from the previous financial year
Appropriations carried over and cancelled
Sums for reuse from the previous financial year not used
Amounts refunded to the Commission
Exchange-rate differences

Total revenue (a)

Total expenditure (b)

18 749
1 136
198

20 083

9 714
1 018

2 054
247

6 493
5 611

25 137

- 5 054

- 3 274
888
8

4

(1) Calculated according to 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: Any discrepancies in totals are due to the effects of rounding.
Source: The Agency’s data.

Balance for the financial year

- 7 428

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

C 319/20

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Official Journal of the European Union

30.12.2003

European Environment Agency — Balance sheet as at 31 December 2002 and 31 December 2001

Table 3

Assets

2002

2001

Liabilities

2002

2001

(1 000 EUR)

Fixed assets
Buildings
Equipment and furniture
Transport equipment
Computer equipment
Financial assets (1)
Fixed assets under construction
Depreciation

Stocks
Office supplies

Current assets
Commission subsidy
Other subsidies receivable
Advances to Community agencies
Other advances
Recoverable VAT
Recovery orders
Sundry accounts receivable

Cash accounts
Bank accounts
Imprest account

Suspense accounts

314
1 913

1 562

2 254

1 847
405

- 3 237

- 2 802

Subtotal

1 269

987

Subtotal

26
26

22
22

Fixed capital
Own capital
Reserve
Balance for the financial year

1 295

1 009

Subtotal

- 7 428
- 6 133

- 3 274
- 2 265

Current liabilities
Commission
Other contributors (2)
Non-automatic carryovers of appropriations
Automatic carryovers of appropriations
Sundry accounts payable
Deductions from salaries
VAT/Other taxes
Advances from clients

5 263
2 270

7 591
769
111
0

9 975
590
821 (3)
7 291
1 043 (4)
88
79

Suspense accounts
Sums to be reused
Recovery orders

Subtotal

16 004

19 887

175
225

541
153

Subtotal

400

694

5 263
2 270

9 975
590

266
226
153
8 178

740
40
780

18

376
153
93
11 187

6 120
0
6 120

0

Subtotal

Subtotal

Total

10 271

18 316

Total

10 271

18 316

(1) Rent guarantee.
(2) Subsidies to be received from non-member States of the EU.
(3) In 2002, carryovers of assigned revenue were reclassified and included with the automatic carryovers.
(4) Under the heading ‘Deferred payments’ in 2001.
NB: Any discrepancies in totals are due to the effects of rounding.
Source: Agency data.

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Official Journal of the European Union

C 319/21

THE AGENCY’S REPLIES

The amounts of carry-forward credits, both in absolute
7.
and in relative terms, have declined as compared to the previous
year. The Agency will continue in its efforts to reduce the carry-
over of payment credits to the following year.

The Agency is continuing to tighten documentation and
11.
registration of justifications for invoices and will consider this fur-
ther in the context of the filing, archiving and mail registration
system.

It should be noted that of the EUR 7,2 million carry-forward cred-
its referred to, EUR 2,2 million is related to Agency projects
financed by grant agreements between the Agency and the Com-
mission. The budgetary cycle of these projects is governed by the
terms of the grant agreement, and is in most cases multiannual.

Due to quality assurance procedures, the final payments for ETC
contracts will mostly occur in the year following to the subven-
tion, and thus constitute a motivated carry-forward of payment
appropriations.

12.
The proportion of advance payments will be limited in
the future. Grant agreements with international bodies are being
phased out in the context of the new Financial Regulation.

13.
Since 2003, the Agency has invoiced all costs relating to
this activity. The continued occupation of offices on the Agency’s
premises is currently being reconsidered by the Foundation’s
board.

8.
The Agency is tightening its requirements in the decentra-
lised archiving system, with uniform standards having been intro-
duced. The developments to support this are not yet fully imple-
mented and remain a priority: they will include exceptions, risk
and procurement registers.

14.
Consultants are contracted by the Agency after open ten-
dering and in relation to market prices. The use of consultants
within the Agency is being reviewed, and will take into account
the nature of the work as well as the long-term needs and require-
ments.

10.
Given the enlargement of the Agency since 2002 and a
number of projects including experts from non-EU countries,
there is a need to pay meeting participants from non-EU coun-
tries in advance. Measures have been taken by the Agency to
reduce the risks of advance cash payments, and will be explored
further. Since 1 January 2003, accounting in relation to the
imprest account has been modified to match the Court’s observa-
tions.

15 and 16.
The Agency is aware that the programming struc-
ture, as it has evolved over the years, is no longer entirely appro-
priate. A new work programme and related budget structure will
be brought in place from 1 January 2004 onwards. The new pro-
gramme will focus on clear objective setting and the linking of
these objectives to activity-based budgeting. This exercise will
result in a clearer and more consistent financial framework, both
for the Agency’s corporate activities and for the topic centre work.