Report on the annual accounts of the European Agency for Reconstruction for the financial year 2006 together with the Agency's replies
Date: 2007-09-27
Institutions: European Court of Auditors
Subjects: European Agency for Reconstruction, European Court of Auditors, administration of the Institutions, financial control, implementation of the budget, powers of the institutions (EU), report

C 309/40

EN

Official Journal of the European Union

19.12.2007

on the annual accounts of the European Agency for Reconstruction for
the financial year 2006 together with the Agency’s replies

REPORT

(2007/C 309/08)

CONTENTS

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

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

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

1-2

3-6

7-8

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

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

41

41

41

42

46

Paragraph

Page

19.12.2007

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Official Journal of the European Union

C 309/41

INTRODUCTION

established

by Council Regulation

The European Agency for Reconstruction (hereinafter ‘the
1.
Agency’) was
(EC)
No 1628/96 (1), as last amended by Council Regulation (EC)
No 756/2006 of 28 November 2006 (2). When it was set up in
2000, the Agency was responsible for managing the EU’s aid pro-
grammes in Kosovo. Its mandate was later extended to Serbia and
Montenegro and the former Yugoslav Republic of Macedonia. The
Agency’s head office is in Thessaloniki and it has operational cen-
tres in Belgrade, Podgorica, Pristina and Skopje. It implements pro-
grammes to foster institution-building and good governance, to
promote the development of a market economy and essential infra-
structure and to consolidate civil society. Its mandate is scheduled
to end on 31 December 2008.

2.
Table 1 summarises the Agency’s competences and activi-
ties. Key data summarised from the financial statements drawn up
by the Agency for the financial year 2006 is presented inTables 2,
3 and 4 for information purposes.

STATEMENT OF ASSURANCE

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 (3). It was
drawn up following an examination of the Agency’s accounts, as
required by Article 248 of the Treaty establishing the European
Community.

4.
The Agency’s accounts for the financial year ended
31 December 2006 (4) were drawn up by its Director, pursuant
to Article 8(2) of Council Regulation (EC) No 2667/2000 (5), and
sent to the Court, which is required to give its opinion on their
reliability and on the legality and regularity of the underlying
transactions.

5.
The Court conducted its audit in accordance with the IFAC
and INTOSAI International Auditing Standards and Codes of Eth-
ics, insofar as these are applicable in the European Community

context. The audit was planned and performed to obtain reason-
able assurance that the accounts are reliable and that the under-
lying transactions are legal and regular.

The Court has thus obtained a reasonable basis for the

6.
Statement set out below.

Reliability of the accounts

The Agency’s accounts for the financial year ended 31 Decem-
ber 2006 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 State-
ment into question.

OBSERVATIONS

The rate of implementation of the budget was satisfactory.
7.
The Agency’s attention is however drawn to the level of appro-
priations yet to be committed, which will require particular moni-
toring of its programmes given that its mandate expires at the end
of 2008.

8.
The Court noted that the accounting system and the inter-
nal control system had improved in comparison with the preced-
ing years, in particular regarding the monitoring of the funds
managed by external bodies and the implementation of procure-
ment procedures. The audit of the Court does not call for obser-
vations of a significant nature in those fields.

This report was adopted by the Court of Auditors in Luxembourg at
27 September 2007.

its meeting of

For the Court of Auditors
Hubert WEBER
President

(1) OJ L 204, 14.8.1996, p. 1.
(2) OJ L 332, 30.11.2006, p. 18.
(3) OJ L 248, 16.9.2002, p. 1.
(4) These accounts were drawn up on 13 June 2007 and received by the

Court on 6 July 2007.
(5) OJ L 306, 7.12.2000, p. 7.

Table 1

European Agency for Reconstruction (Thessaloniki)

Areas of Community
competence deriving from the
Treaty

The Agency’s powers as defined in Council Regulation (EC) No 2667/2000

Governance

Resources made available
to the Agency
(data for 2005 in brackets)

The Community shall carry
out, within its spheres of
economic,
competence,
technical
and
financial
cooperation measures with
third countries. Such mea-
sures shall be complemen-
tary to those carried out by
the Member States and con-
sistent with the Develop-
ment
the
Community.

Policy

of

(Article 181a)

Objectives

Application

Tasks:

Governing Board:

Final budget:

To provide EU assistance:

(i)

For reconstruction, the
return of refugees and
displaced persons;

(ii) To promote

sound
administration, stron-
ger
institutions and
the rule of law;

(iii) To support the devel-
opment of a market
economy and invest-
ment
essential
physical infrastructure
environmental
and
measures;

in

of

The agency manages the
principal aid programmes
in Serbia and Montenegro
(Republic
Serbia,
Kosovo, and Republic of
Montenegro) and in the
Former Yugoslav Repub-
lic
Macedonia
of
(FYROM).
Beneficiaries
may include States, bod-
ies under UN administra-
federated regional
tion,
and local bodies, public
and semi-public bodies,
both sides of
industry,
business support organi-
sations,
cooperatives,
mutual companies, chari-
ties,
and
foundations
NGOs.

— To advise the Com-
mission on priority
needs;

— to

devise
pro-
grammes for recon-
struction and the
return of
refugees
and displaced per-
sons;

— to take every pos-
sible step to imple-
ment EU assistance.

(iv) To

support

social
development and con-
solidate civil society.

Comprises one repre-
from each
sentative
Member State, two rep-
resentatives
from the
Commission and an
observer from the Euro-
pean Investment Bank.

Director:

Appointed by the Gov-
erning Board on a pro-
posal
the
from
Commission.

Operational Centres in
Pristina,
Belgrade,
Podgorica and Skopje
with a high level of
management
autonomy.

External control:

268,8 million
(318,9 million
including an EU grant

euro
euro)

Staff at 31 Decem-
ber 2006:

108 (114) TA posts
listed in the establish-
ment plan

TA posts occupied: 90
(88)

Other posts:

Local staff: 164 (170)
posts Posts occupied:
157 (162)

Contract staff: 29 (28)
posts Posts occupied:
26 (26)

European
Auditors.

Court

of

Total staff: 273 (276)

Discharge Authority:

Responsible for

The Parliament follow-
ing a recommendation
from the Council.

Operational tasks: 171
(169)

Administrative
102 (107)

tasks:

Activities and services provided in 2006

By operational centre (main develop-
ments):

KOSOVO: a) Start-up grants, loans, training
and business advice to small businesses of
minorities and returnees; b) Support to pri-
vatisation; c) Rehabilitation of district heat-
ing (in north) and waste and water utility
buildings in (south) Mitrovica; d) Improving
border/boundary management; e) Setting
up a new system for public investment pro-
gramming; f) Expert advice and training to
the Kosovo Assembly; g) Support to Justice
and Internal Affairs ministries and Statisti-
cal Office; h) Environmental upgrades,
including construction of Pristina regional
landfill; i) Support to drafting of Kosovo
Rural Development Plan.

SERBIA: a) Draft laws in public adminis-
tration reform; b) Supply of equipment to
border police; c) Completion of state-of-
the-art DNA laboratory; d) Rehabilita-
tion and supply of equipment to courts;
e) Rehabilitation programme for hospitals;
f) New jobs created due to loans from the
Revolving Credit Fund; g) Training sup-
port to enterprises; h) Regional training
centres for adults; i) Economic develop-
ment programmes for poorest municipali-
ties; j) Handover of new border crossings
with Hungary and Croatia; k) Renovation
of municipal infrastructure; l) Reform of
the statistics office; m) Support to Foreign
Direct Investment management; n) Sup-
port to vulnerable groups including refu-
gees and displaced persons; o) Completion
of power plant rehabilitation projects; p)
Air filter installed at Kostolac power plant.

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Areas of Community
competence deriving from the
Treaty

The Agency’s powers as defined in Council Regulation (EC) No 2667/2000

Governance

Resources made available
to the Agency
(data for 2005 in brackets)

Activities and services provided in 2006

airport

Construction

a)
international

MONTENEGRO:
of
and
Podgorica
refurbishment of Tivat airport; b) Central IT
database of the Ministry of the Interior;
c) Support for Human Resources Manage-
ment Agency; d) New Roads Directorate
laws; e) Electricity utility
and transport
unbundling/restructuring, energy efficiency
strategy; f) Establishing an Environmental
Protection Agency; g) Providing manage-
ment expertise to companies; h) Supporting
Judicial Training Centre; i) Prison reform;
j) Support to drafting of strategy for agricul-
ture and rural development

FORMER YUGOSLAV REPUBLIC OF
MACEDONIA: a) Assistance in strengthen-
ing and creating new institutions in the
public administration (e.g. State Statistical
Office, Civil Society Unit in the General
Secretariat; Public Procurement Bureau);
b) Support to development of electronic
communications market; c) Support
to
police reform including refurbishment of
Police Academy; d) Support to money laun-
dering prevention and refurbishment of
Skopje Basic Court; e) Opening of new state
phytosanitary laboratory; f) Construction of
National Border Management Coordination
Centre; g) Assistance to municipalities in
decentralisation; h) Upgrading of municipal
infrastructure; i) Training of civil servants
from non-majority communities; k) Man-
agement training for SMEs.

Source:

Information submitted by the Agency.

.

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European Agency for Reconstruction (Thessaloniki) — Implementation of the budget for the financial year 2006

Table 2

Revenue

Revenue
entered in
the final
budget for
the
financial
year

Revenue
received

Allocation of
expenditure

24 795

20 200

Title I
Staff

p.m.

877

Title II
Administration

244 000

256 008

Title III
Operating
activities

Source of
revenue

Community
subsidies

Other rev-
enue

Earmarked
revenue

Expenditure

(1 000 euro)

Final budget appropriations

Appropriations carried over from the previous financial
years

Appropriations available
(from financial year plus previous years)

entered

com-
mitted

paid

carried
over

can-
celled

available

commit-
ted

paid

carried
over

can-
celled

entered

commit-
ted

paid

carried
over

can-
celled

18 540 17 304 17 117

187

1 236

495

6 255

4 705

4 198

507

1 550

500

385

453

109

19 035

17 304

17 502

187

1 345

47

6 755

4 705

4 651

507

1 597

244 000 32 760

4 007 239 992

0 701 681 153 923 249 952 438 814 12 915 945 681 186 683 253 959 678 806

12 915

Total

268 795

277 085

Total 268 795 54 769 25 322 240 686

2 786 702 676 153 923 250 790 438 814 13 071 971 471 208 692 276 112 679 500

15 857

NB: The amount available for commitment at the end of the year is 746 922 euro (of which 211 240 euro from 2006 appropriations and 535 682 euro from previous years).
Source: Data supplied by the Agency. This table summarises the data provided by the Agency in its annual accounts. Revenue collected and payments are estimated on a cash basis.

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19.12.2007

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Official Journal of the European Union

C 309/45

European Agency for Reconstruction (Thessaloniki) — Economic outturn account for the financial years 2006
and 2005

Table 3

(1 000 euro)

2006

2005

Operating revenue

Community subsidies

Other revenue

Operating expenses

Staff expenses

Fixed asset related expenses

Other administrative expenses

Operational expenses

273 192

239

Total (a)

273 432

16 164

581

5 510

247 509

269 764

3 668

—

25

– 25

3 643

261 009

1 832

262 841

15 727

703

6 509

243 442

266 381

3 540

—

—

—

– 3 540

Surplus/(deficit) from operating activities (c = a – b)

Total (b)

Financial operations revenue (e)

Financial operations expenses (f)

Surplus/(deficit) from non-operating activities (g = e – f)

Economic result for the year (h = c + g)

European Agency for Reconstruction (Thessaloniki) — Balance sheet at 31 December 2006 and 2005

Table 4

(1 000 euro)

2006

2005

Non-current assets

Intangible fixed assets

Tangible fixed assets

Long-term receivables

Current assets

Short-term pre-financing

Short-term receivables

Cash and cash equivalents

Current liabilities

Provisions for risks and charges

Accounts payable

Net assets

Accumulated surplus/deficit

Economic result for the year

70

743

10 175

166 885

24 562

51 991

Total assets

254 425

Total liabilities

Total net assets

Total liabilities and net assets

1 986

85 496

87 482

163 300

3 643

166 943

254 425

84

1 192

40 002

135 285

29 574

57 917

264 055

2 100

98 655

100 755

166 840

– 3 540

163 300

264 055

Source: Data supplied by the Agency — This table summarises the data provided by the Agency in its annual accounts: these accounts are

drawn up on an accrual basis.

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Official Journal of the European Union

19.12.2007

THE EUROPEAN AGENCY FOR RECONSTRUCTION REPLIES

The Agency has a very fast track implementing assistance
7.
programmes. The last allocation to the Agency for assistance
amounted to €250 million in 2006 to be contracted over
three years, hence until 2009. In the first six months of 2007 the
Agency contracted € 185 million which represents 74 % of an

annual allocation. Therefore, at the end of its mandate, the
residual amount to be contracted is likely to be small.

8.

The Agency acknowledges the Court’s comments.