Report on the annual accounts of the European Training Foundation for the financial year 2005 together with the Foundation's replies
Date: 2006-09-28
Institutions: European Court of Auditors
Subjects: European Court of Auditors, European Training Foundation, administration of the Institutions, financial control, interinstitutional relations (EU), report

19.12.2006

EN

Official Journal of the European Union

C 312/73

REPORT

on the annual accounts of the European Training Foundation for the
financial year 2005 together with the Foundation’s replies

(2006/C 312/13)

CONTENTS

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

STATEMENT OF ASSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

1-2

3-6

7-11

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

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

74

74

74

76

79

Paragraph

Page

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Official Journal of the European Union

19.12.2006

INTRODUCTION

Reliability of the accounts

The European Training Foundation (hereinafter called the
1.
Foundation) was
created by Council Regulation (EEC)
No 1360/90 of 7 May 1990 (1). The Foundation’s purpose is to
support the reform of vocational training in the European Union’s
partner countries. As such, it assists the Commission in the imple-
mentation of various programmes (PHARE, TACIS, CARDS
and MEDA).

2.
Table 1 summarises the competences and activities of the
Foundation. Key information, taken from the financial statements
drawn up by the Foundation for the financial year 2005, is pre-
sented in Tables 2, 3 and 4.

The Foundation’s accounts for the financial year ended
31 December 2005 are, in all material respects, reliable.

Legality and regularity of the underlying transactions

transactions underlying the Foundation’s

The
accounts, taken as a whole, are legal and regular.

annual

The observations which follow do not call the Court’s state-
ment into question.

STATEMENT OF ASSURANCE

OBSERVATIONS

3.
This Statement of Assurance is addressed to the European
Parliament and the Council in accordance with Article 185(2) of
Council Regulation (EC, Euratom) No 1605/2002 (2);
it was
drawn up following an examination of the Foundation’s accounts,
as required by Article 248 of the Treaty establishing the European
Community.

7.
Although the commitment rate for the appropriations for
the financial year is high (practically 100 % for the Foundation’s
own activities), the Foundation’s attention is drawn to the high
rate (over 40 %) of carry-overs of commitments for operating
activities (Title III). A similar situation prevails for the implemen-
tation of MEDA and Tempus activities. The Foundation should
ensure that it programmes its activities better.

4.
The Foundation’s accounts for the financial year ended
31 December 2005 (3) were drawn up by its Executive Director,
pursuant to Article 11 of Regulation (EEC) No 1360/90, and sent
to the Court, which is required to deliver a Statement of Assur-
ance on the reliability and on the legality and regularity of the
underlying transactions.

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.

8.
As in previous years, and in infringement of its financial
regulation, the Foundation only published a summary of its bud-
get in the Official Journal. The budget nomenclature lacks bal-
ance: two items contain amounts that represent nearly 10 % of its
budget. Moreover, most of the budget headings for operating
expenditure (Title III) are broken down in a detailed manner at
item level according to the destination principle. The level of
detail is such as to require numerous transfers. Furthermore, a
lack of coordination between the financial unit and the opera-
tional units leads to additional transfers.

The final accounts have been characterised by delays and

9.
difficulties to establish them in compliance with existing rules.

The Court has obtained a reasonable basis for the opinion

6.
expressed below.

(1) OJ L 131, 23.5.1990.
(2) OJ L 248, 16.9.2002, p. 1.
(3) These accounts were drawn up on 30 August 2006 and received by

the Court on 14 September 2006.

The Foundation has still not finished introducing its
10.
system of internal control. There is no complete description
of the systems of internal control or even a formal account
of the procedures used. There is no analysis of operational
risks and the ex-post checks have still not been set up.
accounting officer has not yet validated
Moreover,

the

19.12.2006

EN

Official Journal of the European Union

C 312/75

the accounts information and inventory systems. Generally speak-
ing, the supervision and control of operations and financial and
budgetary reports are inadequate. Given the risks associated
with this situation, the Foundation should make it a priority to
resolve it.

Shortcomings in the field of documentation were found
11.
in two staff selection procedures: the rejection of applicants with-
out justification in the files (4) and the lack of information on the
criteria used for selecting the candidates in the pre-selection
phase.

This report was adopted by the Court of Auditors in Luxembourg at
of 28 September 2006.

its meeting

For the Court of Auditors
Hubert WEBER
President

(1) No documentation was found in the files on the reasons for which

candidates were not invited for interviews.

Areas of Community
competence deriving
from the Treaty

‘The Community shall
carry out, within its
spheres
compe-
of
tence,
economic,
financial and technical
cooperation measures
with third countries.
Such measures shall be
complementary
to
those carried out by
States
the Member
and consistent with the
development policy of
the Community’.

(Article 181 A)

Table 1

European Training Foundation (Turin)

Competences of the Foundation
Council Regulation (EEC) No 1360/90 of 7 May 1990

Governance

Resources made available
to the Foundation
(2004 data)

Products and services supplied

Objectives:

Tasks:

1. Governing Board

Final budget for 2005

Activities

— to contribute to the devel-
opment of
the profes-
sional training systems of
Eastern
and
Central
Europe and the indepen-
dent states of the former
Soviet Union benefiting
from the programme to
assist economic reform
and recovery in the New
Independent States and
Mongolia and of non-
Member Mediterranean
countries benefiting from
and technical
financial
accompanying measures
for the reform of their
economic
social
structures,

and

— to promote the coordina-
tion of
assistance
the
given to eligible countries.

in accordance with the gen-
eral guidelines laid down by
the Community,
the ETF
operates in the field of train-
ing, covering, professional,
initial and lifelong training
and the retraining of young
people and adults via the fol-
lowing tasks:

— assistance

defining
in
training needs and priori-
ties via the implementa-
technical assis-
tion of
in the
tance measures
training field and via
the
cooperation with
designated
appropriate
bodies
eligible
countries,

in the

— acts as a clearing house to
provide the Community,
its Member States and the
non-Member States con-
cerned information on
current
and
future needs in the train-
ing field and provides a
framework for channel-
ling offers of assistance

initiatives

— one representative of each

Member State,

— three representatives of

the Commission,

— chaired by the Commis-

sion.

2. Director

— appointed by the Govern-
ing Board on a proposal
from the Commission.

3. Advisory Forum

— appointed by the Govern-

ing Board,

— two experts from each

Member State,

— two experts from each eli-

gible country,

— two experts

from the
social partners at Euro-
pean level.

4. External audit

Court of Auditors.

5. Internal audit

Commission’s internal audit
department.

6. Discharge

European Parliament on a rec-
ommendation
from the
Council.

26,3 (18,5) million euro
divided up into 18,5 (17,6)
million euro funded by a
subsidy
Commission
and 7,45 (0,9) million euro
funded by other bodies as
assigned revenue.

Staff numbers as at
31 December 2005

— 104 (104) posts in the
establishment plan, of
which 97 (99) posts occu-
pied,

— 22 (17) other staff (auxil-
iaries, local staff, contract
staff) employed to carry
out the tasks of tempo-
rary staff being recruited
or cope with exceptional
workloads.

— Total staff: 119 (116)

assigned to the following
duties:

— operational tasks: 68

(67),

— administrative tasks:

33 (32),

— mixed tasks: 18 (17).

The assistance supplied by the Foundation covers a large
range of technical fields including: initial vocational train-
ing, lifelong learning, continuing (adult) education, human
resource development in companies, employment policies,
training of unemployed people, poverty alleviation and
social inclusion and training to encourage local develop-
ment.

Support for the commission:

In 2005, 127 new requests for support were received from
the Commission. The majority came from the delegations
(35 %), followed by AIDCO (21 %), DG EAC (16 %), DG
ELARG (9 %) and DG RELEX (7 %). This included 18 analy-
ses of the situation in the ENPI countries. The Commission’s
rate of satisfaction with the ETF’s response was 97 %.

The most frequent applications were those in the field of
programming, followed by policies and contributions in the
preparation of European Neighbourhood Instruments, the
identification of projects and follow-up.

Information and analysis:

Country sector studies, statistics on education, policy advice
to countries.
Innovation and development support projects. As a centre
of expertise, the ETF contributes towards the setting up of
development projects in order to test innovatory approaches
allowing partner countries to carry out reforms of their edu-
cation and vocational training systems.
Technical assistance to DG EAC for the implementation of
the Tempus programme.
Assistance Conventions with CARDS, MEDA and Tacis for
the Tempus programme: this assistance covers the whole
cycle of the project. It includes the selection, management
and follow-up of contracts and information and communi-
cation, including general administrative support. IT tools
such as online applications and report forms have greatly
facilitated the administrative management of the various
project cycles.

Source:

Information provided by the Foundation.

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EUROPEAN TRAINING FOUNDATION

Budgetary implementation for the financial year 2005

Table 2

Revenue

Revenue entered in
the final budget for
the financial year

Origin of Revenue

Community
subsidies

Own resources

18 500

759

Other revenue

0

Expenditure

(1 000 euro)

Revenue collected

Allocation of expenditure

Appropriations under the final budget

Appropriations carried over from the
previous financial year

Appropriations for the financial year and the
previous financial year

entered

commit-
ted

paid

carried
over

cancelled available

paid

carried
over

cancelled available

commit-
ted

paid

carried
over

cancelled

18 500

Title I
Staff

0

34

Title II
Administration

Title III
Operating activities

11 942 11 787 11 310

478

154

123

110

1 568

1 559

1 232

326

10

247

227

4 990

4 744

2 818 1 925

247

1 168

813

0

0

0

13

12 065 11 910 11 420

478

167

20

1 815

1 806

1 459

326

30

355

6 158

5 912

3 631 1 925

602

Italian authorities
— earmarked
revenue

MEDA-ETE —
earmarked rev-
enue

TEMPUS — ear-
marked revenue

1 131

479

Title IV
Italian Ministry

479

357

123

356

5 000

1 323

2 500

1 739

23 252

Title V
MEDA-ETE Conventions

Title VI
TEMPUS Conventions

5 000

2 604

135 4 865

2 363

1 327

677 1 686

0

0

0

651

342

309

0

0

0

0

0

0

0

0

0

1 130

1 008

465

665

5 000

2 604

135 4 865

2 363

1 327

677 1 686

0

0

0

Total

26 713

Total 26 342 22 378 16 295 9 636

411

2 189

1 492

309

388

28 531 24 567 17 787 9 945

799

.

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C 312/78

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Official Journal of the European Union

19.12.2006

EUROPEAN TRAINING FOUNDATION

Table 3
Economic outturn account for the financial year 2005 (1)

Operating revenue

Community subsidies

Other subsidies/revenue

Operating expenditure

Staff

Administration

Operations

(1 000 euro)

2005

18 484

7 842

26 326

11 785

2 091

12 237

26 113

213

Total (a)

Total (b)

Outturn on operations (c = a – b)

(1) The data for the financial year 2004 are not shown because they are not comparable with those for 2005 due to a change in accounting

methods.

Table 4

Balance sheet at 31 December 2005 and 2004 (1)

Assets

Fixed assets

Stocks

Receivables

Cash

Liabilities

Accumulated surplus/deficit

Economic result for the year

Long term liabilities

Current liabilities

(1 000 euro)

2005

2004

3 426

37

1 440

23 665

28 568

3 458

213

205

24 692

28 568

Total

Total

3 630

76

1 697

23 170

28 573

3 458

205

24 910

28 573

(1) The data for 2004 have been adapted to make them comparable to those for the financial year 2005.

Source:

Information supplied by the Foundation — These tables summarise the data provided by the Foundation in its annual accounts.

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Official Journal of the European Union

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THE AGENCY’S REPLIES

Most of the amount carried forward (i.e. 83 %) is related
7.
to commitments corresponding to activities completed in 2005
for which requests for payments have not been received in due
time. As far as the Tempus and the MEDA activities are con-
cerned, the rate on carry over is adversely affected since the cor-
responding conventions are not annual and do not coincide with
the financial year.

8.
Following preceding Court’s remarks, the 2006 budget has
been published in the Official Journal of the European Union (OJ L
67, 8.3.2006) in full detail including the establishment plan. ETF
intends to review, within the regulatory requirements, its budget
structure at the occasion of the 2007 budget procedure to address
some of the identified weaknesses.

For the future, ETF will take appropriate measures to rem-

9.
edy to the situation described by the Court.

10.
ETF is aware that the Accounting Officer needs to validate
the accounts information and inventory systems. In the mean-
time, ETF accounting officer will work on the validation of sys-
tems on the basis of the methodology used in the Commission.

Since 2004, ETF has introduced a comprehensive format
11.
for the selection board reports which makes information such as
individual notes taken by individual panel members — redun-
dant. ETF will study the possibility to give more information on
the selection phase.