Report on the financial statements of the European Monitoring Centre for Drugs and Drug Addiction for the financial year 2002, together with the Monitoring Centre's replies
Date: 2003-10-23
Institutions: European Court of Auditors
Subjects: European Monitoring Centre for Drugs and Drug Addiction, financial control, financial year, report

C 319/62

EN

Official Journal of the European Union

30.12.2003

on the financial statements of the European Monitoring Centre for Drugs and Drug Addiction for
the financial year 2002, together with the Monitoring Centre’s replies

REPORT

(2003/C 319/10)

CONTENTS

Paragraph

Page

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

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

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

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

1-5

6-13

6

7-9

The financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10-11

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

Personnel management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

13

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

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

63

63

63

63

63

64

64

65

68

30.12.2003

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Official Journal of the European Union

C 319/63

THE COURT’S OPINION

OBSERVATIONS

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).

2.
The Court has examined the financial statements of the
Monitoring Centre for the financial year ended 31 December 2002.
In accordance with Article 11(8) of Council Regulation (EEC)
No 302/93 (2), the budget was implemented under the responsi-
bility of the executive director. This responsibility included the
drawing-up and presentation of the financial statements (3) in
accordance with the internal financial provisions adopted pursu-
ant to Article 11(12) of Council Regulation (EEC) No 302/93, as
amended by Article 1 of Council Regulation (EC) No 3294/94 (4).
The Court of Auditors is required pursuant to Article 248 of the
Treaty establishing the European Community 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. The Court carried
out such tests of the accounting records and applied such other
auditing procedures as it deemed necessary in the circumstances.
By means of this audit, the Court obtained an adequate basis for
the opinion expressed below.

Introduction

6.
The European Monitoring Centre for Drugs and Drug
Addiction was established by Council Regulation (EEC) No 302/93
of 8 February 1993. Its main objective is to collect and publish
objective, reliable and comparable information concerning drugs
and drug addiction in Europe. It has set up a network of national
centres for that purpose. It also cooperates with various interna-
tional organisations working in the same field.

Implementation of the budget

7.
The implementation of the appropriations for the financial
year 2002 and of the appropriations carried over from the previ-
ous financial year is shown in Table 1 (5).

8.
The Monitoring Centre has not taken account of the provi-
sions of the Financial Regulation that apply to carryovers of
appropriations (6). Justification for the commitment proposals
totalling 308 300 euro issued in December 2001 was only pro-
vided in the course of the following year.

9.
As regards the non-automatic carryovers amounting to
212 400 euro, the decision taken by the Management Board at
the end of the financial year is irregular (7). These carryovers
related to Titles I and II appropriations that had not been com-
mitted and were unduly transferred to Title III with a view to their
being carried over to the next financial year (8).

This examination has enabled the Court to obtain reason-
4.
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.

The financial statements

5.
Without prejudice to the opinion expressed above, the
Court wishes nevertheless to draw to the attention of the dis-
charge authority the situations described in paragraphs 8, 9, 12
and, in particular, 13.

(1) OJ L 248, 16.9.2002, p. 1.
(2) OJ L 36, 12.2.1993.
(3) As required pursuant to Article 82 of Commission Regulation (EC)
No 2343/2002 the final accounts for all the Monitoring Centre’s rev-
enue and expenditure for the financial year 2002 were drawn up on
15 September 2003 and forwarded to the Court of Auditors. These
accounts were received by the Court on 19 September 2003. A sum-
marised version of these financial statements is presented in the tables
annexed to this report.
(4) OJ L 341, 30.12.1994, p. 7.

10.
The short-form revenue and expenditure account and
balance sheet published by the Monitoring Centre for the finan-
cial year 2002 are presented in Tables 2 and 3.

11.
The inventory should be more strictly maintained. There
has been no physical inventory in recent years. The goods listed
in the inventory (which is not complete) are not identified and
their location is not specified. Furthermore, obsolete items have
not been decommissioned.

(5) Figures have been rounded, which may give rise to minor differences

in totals.

(6) Article 6(1)(a) of the Monitoring Centre’s financial regulation.
(7) Article 6(2) of the Monitoring Centre’s financial regulation.
(8) Article 21 of the Monitoring Centre’s financial regulation only autho-

rises transfers from one chapter to another.

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Official Journal of the European Union

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Legality and regularity of the underlying transactions

12.
Pursuant to a decision dated 18 April 2002 the executive
director authorised three authorising officers responsible for the
Phare project to sign cheques and bank transfer orders. This type
of authorisation, delegating accounting officer powers to autho-
rising officers, is incompatible with the principle of segregation
of duties (1).

Personnel management

13.
The Court has already had occasion to draw to the Moni-
toring Centre’s attention the necessity of making its personnel

management system more rigorous (2). The audits carried out in
2002 revealed persistent shortcomings such as files without essen-
tial documents that made it impossible to assess the justification
for the financial entitlements attributed to the members of staff
concerned. Similar findings applied to the selection procedures,
including: notice imprecise, selection committees’ minutes incom-
plete, criteria for assessing candidates not defined in advance. For
example, the organisation and holding of an internal competition
in order to give various members of the Centre’s staff the status
of permanent officials were tainted by various irregularities relat-
ing, in particular, to certain candidates’ admissibility and the com-
position of the selection board. The seriousness of the anomalies
that it detected led the Commission to lodge objections with the
Centre about various aspects of the procedures that had been
applied.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 23 October 2003.

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

(1) Article 16 of the Monitoring Centre’s financial regulation.

(2) See paragraphs 16 to 34 of the annual report for the financial year

2000 (OJ C 372, 28.12.2001, p. 64).

.

3
0
1
2
2
0
0
3

.

European Monitoring Centre for Drugs and Drug Addiction — Implementation of the budget for the financial year 2002

Table 1

Revenue

Revenue entered
in the
final budget
for the
financial year

Revenue
received

Allocation of
expenditure

Expenditure

(EUR million)

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

entered

paid

cancelled

appro-
priations

commit-
ted

paid

carried
over

cancelled

9,0

1,4

p.m

10,4

9,0

1,2

0,1

10,3

Title I
Staff

Title II
Administration

5,1

5,0

5,0

0,1

0,0

1,2

1,0

0,6

0,5

0,0

Title III
Operating
activities

4,1

Total

10,4

3,4

9,5

2,5

8,1

1,0

1,6

0,6

0,7

0,5

0,6

2,0

3,2

0,2

0,2

5,6

5,5

5,2

0,1

0,5

0,1

1,8

1,7

1,2

0,5

2,0

2,8

0,2

0,4

6,1

5,5

4,6

13,5

12,7

10,9

1,0

1,6

0,2

0,1

0,8

1,0

Origin of revenue

Community
subsidies

Other
subsidies

Miscellaneous
revenue

Total

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

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
/
6
5

C 319/66

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Official Journal of the European Union

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European Monitoring Centre for Drugs and Drug Addiction — Revenue and expenditure account for the financial years 2002 and 2001 (1)

(EUR 1 000)

Table 2

Revenue
Subsidies received from the Commission
Subsidies received from Norway
Other subsidies
Other 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)

Balance carried over from the previous financial year (2)
Appropriations carried over and cancelled
Unused sums for re-use from the previous financial year
Amount refunded to the Commission
Exchange-rate differences

2002

9 000
413
735
133

Total revenue (a)

10 280

Total expenditure (b)

4 951
80

632
509

2 525
1 001

9 698

582

639
392
9
0
3

Balance for the financial year (3)

1 625

2001

8 750
399
1 153
99

10 401

4 174
490

620
624

2 146
2 026

10 079

322

2 076
301
18
- 2 076
- 2

639

(1) In its accounts, the Monitoring Centre included under revenue and expenditure the use of earmarked revenue not used in 2001.
(2) The balance for the financial year 2001 is to be refunded to the Commission and is equivalent to the total of the outturn for the financial year plus depreciation (82 000

+ 557 000 euro).

(3) Calculated in accordance with the principles laid down in 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 Monitoring Centre.

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Official Journal of the European Union

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European Monitoring Centre for Drugs and Drug Addiction — Balance sheet at
31 December 2002 and 31 December 2001

Table 3

Assets

2002

2001

Liabilities

2002

2001

(EUR 1 000)

Fixed assets
Buildings
Equipment and furniture
Computer equipment (1)
Transportation equipment
Intangible assets
Depreciation (2)

Stocks
Current assets
Subsidy from the Commission
Subsidies assigned
Recoverable VAT
Sundry accounts receivable

3 559
152
785
74
66
- 1 867

2 950
151
634
51
0
- 557

Subtotal

2 768

3 229

28

0
0
84
18

10

36
39
28
40

Fixed capital
Own capital
Balance for the financial year (3)

2 797
1 626

Subtotal

4 423

Current liabilities
Automatic carryovers of appropriations
Non-automatic carryovers
Subsidies
Sundry accounts payable (4)
VAT (and other taxes)
Recovery orders (5)

1 377
212
0
18

101

3 792
82

3 874

2 185
270
75
774
28

Subtotal

101

143

Subtotal

1 709

3 332

Cash accounts
Bank accounts
Imprest account

3 474
4

3 925
0

Suspense accounts
Sums to be reused
Deferred revenue

Suspense accounts

24

0

Subtotal

3 478

3 925

Subtotal

265
4

269

101
0

101

Total

6 400

7 307

Total

6 400

7 307

(1) In 2001, computer software was included with computer equipment.
(2) In 2001, buildings were shown in the balance sheet without depreciation.
(3) In 2001, the balance of 82 000 euro was a balance after depreciation, whereas the 2002 balance is a balance before depreciation, the latter being included under own capital.
(4) In 2001, this item included the provisional balance of the Phare programme, which was not then due to the Commission as the programme had not ended. In 2002 the final

balance for the programme was included under the balance for the financial year heading.

(5) Recovery orders issued but not yet collected have not yet resulted in the opening of appropriations for reuse.
NB: Any discrepancies in totals are due to the effect of rounding.
Source: Data compiled by the Monitoring Centre — The tables summarise the data supplied by the Monitoring Centre in its own financial statements.

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THE MONITORING CENTRE’S REPLIES

The Monitoring Centre recognises the need to keep auto-
8.
matic carryovers to a minimum, in line with the principle of
annuality. As a result of efforts undertaken in this regard, the
Monitoring Centre reduced automatic carryovers at the end of
2002 from the previous year’s level.

9.
The aim of the Management Board’s decision was to satisfy
the need — which became apparent at the end of the financial
year — to finance temporary working premises pending approval
of a more permanent solution.

11.
Considerable efforts have already been made to improve
the inventory system. Since 2003, the inventory management
system ELS has been able to calculate the value of fixed assets in
the Monitoring Centre’s balance sheet. There will be further efforts
to improve the system in the future. A physical inventory will be
carried out by the end of 2003.

On 12 May 2003, the Monitoring Centre decided to decommis-
sion obsolete computer equipment with a total value (purchase
price) of EUR 226 959.

This system was adopted exceptionally for this particular

12.
project. Measures have been taken to rectify the situation.

13.
Specific problems identified by the Court will be subject
to a detailed examination by the Monitoring Centre. Where neces-
sary, appropriate measures will be taken to ensure each matter is
resolved. As regards the recruitment of temporary staff, the Moni-
toring Centre’s selection procedures are in line with the provi-
sions of Annex III to the Staff Regulations (‘Competitions’). With
regard to competitions for permanent posts, given the complex
nature of the relevant procedures and the shortage of specialised
staff in an organisation as small as the Monitoring Centre, short-
comings have been identified, despite the precautions taken,
thanks mainly to the involvement of representatives of the Com-
mission in establishing and implementing the procedure. The
Monitoring Centre wishes to underline the fact that, ultimately,
once detailed checks were carried out by, among others, the spe-
cialised services of the Commission, the shortcomings identified
did not undermine the validity of the procedure or its outcome.
The Monitoring Centre will continue its efforts to make recruit-
ment procedures even more stringent, while at the same time call-
ing on the services of the European Personnel Selection Office
(EPSO) as consistently as possible.