Report on the annual accounts of the European Environment Agency for the financial year 2004 together with the Agency's replies
Date: 2005-10-05
Institutions: European Court of Auditors
Subjects: European Court of Auditors, European Environment Agency, administration of the Institutions, financial control, interinstitutional relations (EU), report

28.12.2005

EN

Official Journal of the European Union

C 332/37

on the annual accounts of the European Environment Agency for the financial year
2004 together with the Agency’s replies

REPORT

(2005/C 332/06)

CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

1-2

3-6

7-10

Tables 1 to 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

38

38

38

40

44

Paragraph

Page

C 332/38

EN

Official Journal of the European Union

28.12.2005

INTRODUCTION

Reliability of the accounts

The European Environment Agency (hereinafter called the
1.
Agency) was established by Council Regulation (EEC) No 1210/90
of 7 May 1990 (1). It is responsible for setting up an observation
network that provides the Commission, the Member States and,
more generally, the public with reliable information on the state
of the environment. The information should, in particular, enable
the European Union and the Member States to take action to safe-
guard the environment and assess the effectiveness of such action.
Table 1 summarises the Agency’s competences and activities on
the basis of information it has supplied.

The Agency’s accounts for the financial year ended 31 Decem-
ber 2004 are, in all material respects, reliable.

Legality and regularity of the underlying transactions

The transactions underlying the Agency’s annual accounts,
taken as a whole, are legal and regular.

The observations which follow do not call the Court’s opin-
ion into question.

2.
For information, the annual accounts drawn up by the
Agency for the financial year 2004 are summarised in Tables 2, 3
and 4.

OBSERVATIONS

THE COURT’S OPINION

3.
The Court’s opinion is addressed to the European Parlia-
ment and the Council in accordance with Article 185(2) of Coun-
cil Regulation (EC, Euratom) No 1605/2002 (2); it was drawn up
following an examination of the Agency’s accounts, as required
by Article 248 of
the Treaty establishing the European
Community.

At the end of 2004, all the available appropriations in the
7.
budget, i.e. 427 189 euro, were transferred to two budget head-
ings under Title III of the budget (operating expenditure) and on
the date of the transfer were committed for two operations to be
carried out in 2005 (4). Such a practice is not in accordance with
the principle of annuality (5). Furthermore, with regard to the
transfers made from Title I (staff expenditure), they contravene
the provisions which prohibit the carrying over of appropriations
relating to staff expenditure.

4.
The Agency’s accounts for the financial year ended
31 December 2004 (3) were drawn up by its Executive Director,
pursuant to Article 13 of Regulation (EEC) No 1210/90, and sent
to the Court, which is required to give its opinion on their reli-
ability and on the legality and regularity of the underlying
transactions.

The Agency does not conduct a full annual check on the
8.
assets to be entered in its inventory. The audit of fixed assets
brought to light omissions from the inventory, which, in particu-
lar, make it impossible to establish where some assets are located.

5.
The Court conducted an audit in accordance with its poli-
cies and standards, which are based on international auditing
standards that have been adapted to the Community context. The
audit was planned and performed to obtain reasonable assurance
that the accounts are reliable and the underlying transactions are
legal and regular.

9.
The analysis of amendments to various contracts (total
value: 107 000 euro) highlighted several shortcomings: amend-
ments which were not justified for one of the reasons stipulated
in the financial regulation (6), the use of a framework contract no
longer in force (7), and the value provided for by an amendment
was excessive compared with the value stipulated in the initial
contract (8).

The Court has obtained a reasonable basis for the opinion

6.
expressed below.

(1) OJ L 120, 11.5.1990.
(2) OJ L 248, 16.9.2002, p. 1.
(3) These accounts were drawn up on 30 June 2005 and received by the

Court on 28 September 2005.

(4) Commitments EEA 52051 and EEA 52049.
(5) Article 6 of the Agency’s financial regulation.
(6) Contracts Nos 2601/B/2005 (EEA 51948 — 15 195 euro)

and 3473/B/2004 ((EEA 51971 — 29 800 euro).

(7) Contract No 2240/B/2004 (EEA 51995 — 23 301 euro).
(8) Contracts Nos 3473/B/2004 (EEA 51921 — 49 372 euro)

and 3476/B/2004 (EEA 51976 — 38 906 euro).

28.12.2005

EN

Official Journal of the European Union

C 332/39

The agreement on the location of the Agency’s headquar-
10.
ters and the protocol on the privileges and immunities of the
European Communities provide that it shall be exempt from all
national, regional and municipal taxes. In November 2004, the
Agency was obliged to pay approximately 906 000 euro in taxes
for the period from 2000 to 2004. Applying the accounting

principle of prudence (1), the Agency has not recorded this sum
in its balance sheet as recoverable; an explanatory note concern-
ing this payment appears in the revenue and expenditure account.
In this instance, the Court recommends that the Agency should
obtain reimbursement of all unwarranted payments.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 5 October
2005.

For the Court of Auditors
Hubert WEBER
President

(1) Article 78 of the Agency’s financial regulation.

C 332/40

EN

Official Journal of the European Union

28.12.2005

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EN

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C 332/41

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C 332/42

EN

Official Journal of the European Union

28.12.2005

European Environment Agency — Revenue and expenditure account for the financial years 2004 and 2003

Table 3

Revenue

EC subsidy

Other subsidies

Bank interest

Expenditure

Total expenditure for Title I

Payments

Payments — Assigned revenue

Appropriations carried over

Appropriations carried over — Assigned revenue

Total expenditure for Title II

Payments (1)

Appropriations carried over

Total expenditure for Title III

Payments

Payments — Assigned revenue

Appropriations carried over

Appropriations carried over — Assigned revenue

Appropriations carried over and cancelled

Refunds carried over and cancelled

Balance carried over from the previous year

Assigned revenue cancelled

Exchange-rate differences

Regularisation regarding previous years

2004

2003

(1 000 euro)

28 658

1 998

128

30 784

28 723

1 080

89

29 891

Total revenue (A)

12 447

11 123

2

435

66

3 451

394

9 534

14

4 845

2 419

33 606

– 2 822

507

0

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98

3

43

315

2 447

395

5 997

7 008

27 284

2 607

295

36

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322

– 4

– 18

Total expenditure (B)

Net result for the year (A – B)

(1)

Includes 905 823 euro of property taxes paid to the Danish government. The Agency is of the opinion that the amount should be refunded. The issue is currently being
negotiated with the Danish government.

NB: Variations in totals are due to the effects of rounding.
Source:

Information supplied by the Agency — This table summarises the data provided by the Agency in its annual accounts.

Balance carried forward

– 6 360

– 4 190

28.12.2005

EN

Official Journal of the European Union

C 332/43

European Environment Agency — Balance sheet at 31 December 2004 and 31 December 2003

Table 4

Assets

2004

2003

Liabilities

2004

2003

(1 000 euro)

Fixed assets

Buildings (deposit)

Furniture

IT equipment

Fixed capital

Own capital

1 838

1 265

Revenue and Expenditure balance

– 6 360

– 4 190

432

483

891

425

541

266

Subtotal

1 806

1 232

Subtotal

– 4 522

– 2 925

Stock (office supplies)

32

33

Current liabilities

Current assets

Sums to be recovered

Commission

PHARE contribution

Other subsidies to be received

VAT recoverable

Sundry debtors

Recovery orders

Prepayments

Bank accounts and cash

Bank accounts

Imprest accounts

General cash carried forward

New Member countries

Earmarked projects

0

0

0

889

109

42

271

1 856

Automatic carry-overs

1 066

Automatic carry-overs (assigned revenue)

1 269

Carry-over of sums to be reused
(appropriations for the year)

Carry-over of sums to be reused
(appropriations for the previous year)

Social security and payroll

Recovery orders

232

127

65

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0

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5 674

2 708

93

197

142

38

1 856

1 066

1 269

7 717

1 135

212

0

417

65

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1 310

4 614

Subtotal

8 852

13 737

1 142

4 892

39

40

NB: Variations in totals are due to the effects of rounding.
Source:

Information supplied by the Agency — This table summarises the data provided by the Agency in its annual accounts.

Total

4 329

10 811

Total

4 329

10 811

C 332/44

EN

Official Journal of the European Union

28.12.2005

THE AGENCY’S REPLIES

Indeed two commitments were made towards the end of
7.
the year and after a final 2004 budget transfer. The resources
were allocated to projects that had been defined initially in the
2004 management plan, but start of the projects was delayed due
to uncertainties on budget requirements for ongoing recruit-
ments. We are continuing to improve our budget management
and execution and hence to better conform with the principle of
annuality.

The observation is correct and the result of lacking
8.
resources in a period of considerable rebuilding and refurbishing
of the EEA facilities. Annual control will get due attention from
2005 onwards.

We recognise these insufficiencies and will avoid such in
9.
future. We will in particular ensure that, for future contracts, any
amendments are strictly limited to less than 50 % of the initial
contract amount (rather than indicative tender amount) and that
framework contracts are less than four years old before using
them.

10.
The Agency is strenuously pursuing reimbursement of
taxes inappropriately charged by the City of Copenhagen for
2000 to 2004. We are in dialogue with the city and the Danish
Protocol Office and have informed DG Environment and the
Secretary-General. The Commission Legal Services are consider-
ing legal proceedings against Denmark.