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

30.12.2003

EN

Official Journal of the European Union

C 319/47

on the financial statements of the European Training Foundation for the financial year 2002,
together with the Foundation’s replies

REPORT

(2003/C 319/08)

CONTENTS

Paragraph

Page

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

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

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

Budgetary implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounts and financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

1-4

5-16

5

6-9

10-14

15-16

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

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

48

48

48

48

49

49

51

54

C 319/48

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Official Journal of the European Union

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THE COURT’S OPINION

more than 40 countries and facilitates access to Community
expertise and practice in the general field of human resources
development. As such, it assists the Commission in the imple-
mentation of the MEDA, CARDS, Tacis and Tempus programmes.

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

Budgetary implementation

2.
The Court has examined the financial statements of the
European Training Foundation for the financial year ended
31 December 2002. In accordance with Article 11(1) of Council
Regulation (EEC) No 1360/90 (2), the budget was implemented on
the responsability of the Director. This responsability included the
drawing-up and presentation of the financial statements (3) in
accordance with the internal financial provisions provided for in
Article 12 of Council Regulation (EEC) No 1360/90. The Court of
Auditors is required pursuant to Article 248 of the Treaty estab-
lishing the European Community to audit 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 pro-
cedures as it deemed necessary in the circumstances. Through this
audit, the Court obtained a reasonable basis for the opinion
expressed below.

6.
Table 1 shows the implementation of the appropriations
for the year 2002 and the appropriations carried over from the
previous financial year.

7.
The 2002 appropriations were committed up to the level
of 16,6 million euro; they were disbursed in payments amount-
ing to 13,2 million euro. The balance of the appropriations was
either carried over (3,4 million euro) or cancelled (0,2 million
euro). The volume of carryovers remains high as regards the oper-
ating appropriations where they represent more than 50 % of the
year’s commitments. The extent of these carryovers shows that
the Foundation needs to improve the quality and monitoring of
its work programme with the aim of observing the principle of
annuality more faithfully.

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.

8.
The Foundation has entered into an agreement to set up a
support project for small and medium-sized businesses in Alba-
nia. In 2002 the Foundation managed 0,5 million euro under this
agreement. This activity is not mentioned in the budget and
appears only at balance sheet level.

OBSERVATIONS

Introduction

5.
The European Training Foundation was created by Council
Regulation (EEC) No 1360/90 of 7 May 1990. Its purpose is to
support the reform of vocational training in the European Union’s
partner countries. It supports the reform of vocational training in

(1) OJ L 248, 16.9.2002, p. 1.
(2) OJ L 131, 23.5.1990.
(3) As required pursuant to Article 11(3) of Council Regulation (EEC)
No 1360/90, the detailed accounts of all the Foundation’s revenue
and expenditure for the financial year 2002 were drawn up on
28 March 2003 and forwarded to the Court of Auditors. These
accounts were received by the Court on 31 March 2003. A sum-
marised version of these financial statements is presented in the tables
annexed to this report.

9.
On the basis of agreements concluded with the Commis-
sion, the Foundation manages Phare and Tacis programmes,
including technical assistance for the implementation of the Tem-
pus programme (see paragraph 5). These programmes amount to
a sum total of 244,7 million euro. In 2002, the Foundation made
payments of 31 million euro for these programmes and, on
31 December 2002, the balance of the corresponding bank
accounts amounted to 26,5 million euro. More than 20 of the
123 people (4) employed by the Foundation work full time on
these programmes, which are outside the budget. As the Court
has pointed out in earlier reports (5), no data relating to these
programmes appear in the budgetary implementation statement,
the balance sheet or the budget outturn. Instead, the Foundation
presents the relevant financial information in an annex to its
financial statements. This way of accounting for them raises the
question of whether the principle of budgetary unity is being
observed and, on the accounting level, whether such a procedure

(4) Figure as at 31 December 2002.
(5) Paragraph 8 of the report concerning the financial year 2001
(OJ C 326, 27.12.2002, p. 51); see also paragraph 11 of the report
concerning the financial year 1999 (OJ C 373, 27.12.2000, p. 34).

30.12.2003

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Official Journal of the European Union

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is compatible with the principle of ‘reality over appearance’ (1).
Furthermore, it makes the task of auditing the use of these funds
more complex.

adjusted accordingly. As a result, this sum was recorded under
expenditure twice.

Accounting and financial statements

14.
Certain payment procedures used by the Foundation
ought to be revised or amended with a view to reducing the risks
associated with them, particularly as regards the transfer of funds
to third countries. For the same reason, the amount (40 000 euro)
currently authorised for the ‘petty cash’ subaccount used for cash
payments should be reduced.

10.
The revenue and expenditure account and the balance
sheet published by the Foundation in its annual report for the
financial year 2002 are presented in summary form in Tables 2
and 3.

11.
During the financial year, the Commission only paid the
Foundation 13,2 million euro out of the subsidies of 16,8 million
euro entered in the budget. This situation explains the deficit for
the financial year.

12.
The introduction of a fixed asset inventory procedure,
and of software for fixed asset management, follows the recom-
mendations made by the Court in its report for 2001 (2). Never-
theless, there is still room for improvement as regards the com-
pleteness of the fixed assets item and, in particular, the inclusion
of software, and the possibilities for reconciliation with the finan-
cial statements.

13.
The Translation Centre for the bodies of the European
Union asks its clients to pay it an advance at the beginning of the
financial year. Under this heading, the Foundation paid the Trans-
lation Centre a sum of 150 000 euro. The advance was recorded
as expenditure during the financial year and, at the end of the
year, the appropriations automatically carried forward were not

(1) According to this principle, accounting operations that appear in the
financial statements must be presented on the basis of their economic
nature and not their legal appearance. This principle is laid down in
Article 78 of Commission Regulation (EC, Euratom) No 2343/2002
on the framework Financial Regulation for the bodies referred to in
Article 185 of Council Regulation (EC, Euratom) No 1605/2002 on
the Financial Regulation applicable to the general budget of the Euro-
pean Communities (OJ L 357, 23.12.2002, p. 72).

(2) Paragraphs 9 and 10 of the report concerning the financial year 2001

(OJ C 326, 27.12.2002, p. 51).

Legality and regularity of the underlying transactions

The Director of the Foundation signed an agreement with
15.
the Director of the European Centre for the Development of
Vocational Training which stipulated that a member of the Foun-
dation’s staff would be made available to the Centre in return for
the reimbursement of his salary by the Centre. During the
20 months that this situation lasted, the person in question, a
Greek national, received the foreign residence allowance and the
weighting for Italy, although he was working at the central office
of the Centre in Salonica.

16.
Every month the Commission sends a list of the former
employees of the Foundation who are entitled to the unemploy-
ment allowance. None of them has forwarded the monthly cer-
tificate required (3) in order to receive this allowance and the
Foundation does not carry out any checks in order to verify their
true situation.

(3) Title II, Chapter 6, Article 28a(2) of the Conditions of employment of
other servants of the European Communities (Staff Regulations) states
that in order to be eligible for unemployment allowance, a former
member of the temporary staff shall:
(a)

be registered, at his/her own request, as seeking employment
with the employment authorities of the Member State in which
he/she establishes his/her residence;
fulfil the obligations laid down by the law of that Member State
for persons in receipt of unemployment benefits under that law;
forward every month to the institution to which he/she belonged,
which shall immediately forward it to the Commission, a cer-
tificate issued by the competent national employment authority
stating whether or not he/she has fulfilled the obligations and
conditions referred to in (a) and (b).

(b)

(c)

C 319/50

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Official Journal of the European Union

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

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

European Training Foundation — Implementation of the budget for the financial year 2002

Table 1

Revenue
received

Allocation of
expenditure

Appropriations in the final budget

Appropriations carried over from the
previous financial year

Appropriations available
(2002 budget and financial year 2001)

entered

commit-
ted

paid

carried
over

cancelled

outstanding
commitments

paid

cancelled

appro-
priations

commit-
ted

paid

carried
over

cancelled

Expenditure

(EUR million)

Title I
Staff

Title II
Administration

Title III
Operating
activities

13,2

0,0

0,1

13,3

10,5

10,3

10,1

0,2

0,2

1,4

1,4

0,8

0,6

0,0

4,9

4,9

2,3

Total

16,8

16,6

13,2

2,6

3,4

0,0

0,2

0,4

0,5

2,6

3,5

0,4

0,0

10,9

10,7

10,5

0,2

0,5

0,0

1,9

1,9

1,3

0,6

2,2

3,1

0,4

0,4

7,5

7,5

4,5

20,3

20,1

16,3

2,6

3,4

0,2

0,0

0,4

0,6

Revenue

Revenue
entered
in the
final budget
for the
financial year

16,8

0,0

0,0

16,8

Origin of
revenue

Community
subsidies

Other
subsidies

Other
revenue

Total

NB: Any discrepancies in totals are due to the effects of rounding.
Source: Data compiled by the Foundation — These tables summarise the data supplied by the Foundation 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
/
5
1

C 319/52

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Official Journal of the European Union

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European Training Foundation — Revenue and expenditure account for the financial years 2002 and 2001 (1)

Table 2

2002

2001

(EUR 1 000)

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

Total revenue (a)

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

Balance carried over from the previous financial year
Appropriations carried over and cancelled
Sums for reuse from the 2001 (2000) financial year, not used
Reimbursements to the Commission
Exchange-rate differences

Total expenditure (b)

Balance for the financial year

13 179
23
140

13 342

10 153
215

805
559

2 307
2 591

16 631

- 3 289

4 055
424
0
- 3 352
6

- 2 155

16 800
47
290

17 137

9 746
356

862
541

2 572
2 595

16 672

465

3 352
258
0
0
- 20

4 055

(1) The revenue and expenditure account and balance sheet only take account of the Foundation’s specific activities: they ignore programmes managed on behalf of the Com-

mission or other bodies.

(2) Calculated according to the provisions 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: Data compiled by the Foundation.

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European Training Foundation — Balance sheet at 31 December 2002 and 31 December 2001 (1)

Table 3

Assets

2002

2001

Liabilities

2002

2001

(EUR 1 000)

Fixed assets
Equipment and furniture
Computer equipment
Depreciation

Stocks
Office equipment

Current assets
Commission subsidy receivable
Other advances
Recovery orders
Sundry accounts receivable

Cash accounts
Bank accounts
Imprest account

618
1 235
- 1 521

Subtotal

332

Subtotal

60

60

3 366
2
171
30

Subtotal

3 569

618
1 565
0

2 183

55

55

0
0
154
49

203

1 524
41

8 011
42

Subtotal

1 565

8 053

Total

5 526

10 494

Fixed capital
Own capital
Balance for the financial year

392
- 2 155

2 238
4 055

Subtotal

- 1 763

6 293

Current liabilities
Automatic carryovers of appropriations
Non-automatic carryovers of appropriations
Other contributors
Sundry accounts payable
Deferred revenue

3 366
273
85
28
3 537

Suspense accounts
Sums to be reused
Payments in progress

Subtotal

7 289

0
0

0

Subtotal

3 492
24
502
22
154

4 194

2
5

7

Total

5 526

10 494

(1) The revenue and expenditure account and balance sheet only take account of the Foundation’s specific activities: they ignore programmes managed on behalf of the Com-

mission.

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

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THE FOUNDATION’S REPLIES

Budgetary implementation

7.
The high rate of payments (90 % average over the past four
years) on carried forward amounts demonstrates that behind
commitments there has always been a well-planned activity. As
mentioned in previous Foundation replies, the nature of activi-
ties, the fact that our partners are mostly public sector entities and
that the Foundation adopts a participatory approach, require long
decision times. This situation makes it difficult for the Founda-
tion to decide on its own about the implementation timetables.
The introduction of multiannual payment appropriations, as a
result of the new Financial Regulation, will solve this problem.

The Foundation management constantly reviews the budget imple-
mentation using tailor-made reports and tools, which are expected
to be equally useful in the monitoring of the use of multiannual
appropriations.

To comply with the principle of unity of the budget, start-
8.
ing from the year 2003 the Foundation will include Title IV and
other earmarked funds in the statement of expenditure and bud-
get implementation table, under headings clearly distinct from
those used for the annual subsidy.

9.
To comply with the accounting principle of ‘reality over
appearance’ of the new Financial regulation, the Foundation is
ready to show the convention funds in its financial statements for
the year 2003 as recommended by the Court. In order to ensure
that these convention funds will not be double-accounted in the
final consolidated accounts of the Commission, the Foundation
will need to consult the Commission for the modalities of the pre-
sentation.

Accounting and financial statements

In 2002 the Foundation developed a new in-house soft-
12.
ware for the management of the inventory and fixed assets. The

short time available for testing before the preparation of the
accounts led to some problems with the implementation of the
software. The Foundation is pleased to report that the problems
are now fixed and the system satisfies the needs related to finan-
cial reporting.

13.
The advance (EUR 150 000) paid to the TC was admin-
istrated as expenses. The Foundation agrees that it should have
been treated as an advance, but there was a divergence of opin-
ions on this with the Financial Control.

14.
The Foundation has reduced the endowment of the imprest
account to EUR 2 500 with a decision of 10 April 2003 on a pro-
posal of the accounting officer and concerned authorising offic-
ers.

Legality and regularity of underlying transactions

15.
The secondment of one temporary agent employed by
the Foundation to Cedefop has been the first attempt at mobility
and exchange of staff between the two agencies. The agent was
selected by Cedefop, following an official procedure for the recruit-
ment of a national expert (END). Accordingly, the Foundation
applied the rules for the END’s remuneration.

However, the Foundation agrees with the Court’s observation that
the approach taken was not the most appropriate. The agent’s
contract with the Foundation has now expired and with it also the
secondment arrangement.

16.
The unemployment allowance to former Foundation
agents is paid directly by the Commission, since the Foundation
Director has delegated to DG Admin (now the Paymaster’s Office)
this task. On this basis, the Foundation assumed that the Com-
mission would make regular checks and directly request the nec-
essary proofs before paying any amount.