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

19.12.2007

EN

Official Journal of the European Union

C 309/67

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

REPORT

(2007/C 309/12)

CONTENTS

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

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

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

1-2

3-6

7-10

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

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

68

68

68

69

71

Paragraph

Page

C 309/68

EN

Official Journal of the European Union

19.12.2007

INTRODUCTION

The Court has thus obtained a reasonable basis for the

6.
Statement set out below.

1.
The European Railway Agency (hereinafter referred to as
‘the Agency’) was created by Regulation (EC) No 881/2004 of the
European Parliament and of the Council of 29 April 2004 (1). It
became autonomous on 1 January 2006. The Agency’s aim is to
enhance the level of interoperability of railway systems and to
develop a common approach to safety in order to contribute to
creating a more competitive European railway sector with a high
level of safety.

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 in Tables 2,
3 and 4 for information purposes.

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

Except for the cases referred in paragraph 10, the transactions
underlying the Agency’s annual accounts, taken as a whole,
are legal and regular.

STATEMENT OF ASSURANCE

OBSERVATIONS

3.
This Statement is addressed to the European Parliament
and the Council in accordance with Article 185(2) of Council
Regulation (EC, Euratom) No 1605/2002 of 25 June 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.

4.
The Agency’s accounts for the financial year ended
31 December 2006 (3) were drawn up by its Executive Director,
pursuant to Article 39 of Regulation (EC) No 881/2004, and sent
to the Court, which is required to give a statement of assurance
on their reliability and on the legality and regularity of the under-
lying 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.

In its first year of financial autonomy the Agency imple-
7.
mented 72 % of its commitment appropriations. The levels of car-
ryover for administrative expenditure (Title II) and operating
expenditure (Title III) were of 37,5 % and 85 % respectively. Thus,
the budgetary principle of annuality was not strictly observed.

8.
The Agency is located in two cities: its administrative seat
is in Valenciennes whereas its meetings have to be held in Lille.
The Agency has not yet found ways of offsetting the costs result-
ing from its obligation to be located on two sites.

9.
The internal control system showed weaknesses. Subdel-
egations were not granted according to the rules. There were
inconsistencies between delegation decisions and access rights to
the budgetary management system SI2. The Agency did not adopt
implementing rules for its financial regulation.

10.
An examination of the tendering procedures showed
various anomalies: use of expired contracts (4) and irregular exten-
sions of existing contracts (5). Thus the Agency must launch pro-
curement procedures for those areas currently covered by
contracts which had not been the subject of regular procedures.

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 220, 21.6.2004, p. 3.
(2) OJ L 248, 16.9.2002, p. 1.
(3) These accounts were drawn up on 19 June 2007 and received by the

Court on 2 July 2007.

(4) One case identified: 49 000 euro.
(5) Two cases identified: 630 000 euro.

Table 1

European Railway Agency (Lille/Valenciennes)

Areas of Community competence
deriving from the Treaty

Competences of the Agency as defined in Regulation (EC) No 881/2004

Governance

Resources available to the Agency
in 2006

Products and services provided in 2006

Common Transport Policy

Objectives

Tasks:

1. Administrative Board

Final Budget:

Safety:

For the purpose of implementing
Article 70, and taking into account
the distinctive features of trans-
port, the Council shall, acting in
accordance with the procedure
referred to in Article 251 and after
consulting the Economic and
Social Committee and the Com-
mittee of the Regions, lay down:

(a)

(b)

common rules applicable to
international transport to or
from the territory of a Mem-
ber State or passing across
the territory of one or more
Member States;

the conditions under which
non-resident carriers may
operate transport services
within a Member State;

(c) measures to improve trans-

port safety;

(d)

any other appropriate provi-
sions.

(Article 71)

To contribute, on technical mat-
ters, to the implementation of
the
legislation
aimed at:

Community

improving the competitive

1.
position of the railway sector

1.

Address recommendations to the Commis-
sion on:

— the common safety methods (CSMs)
and common safety targets (CSTs) pro-
vided for in the Railway Safety Direc-
tive (2004/49/EC);

developing

2.
common
approach to safety on the Euro-
pean railway system,

a

in order to contribute to creating
a European railway area without
frontiers and guaranteeing a high
level of safety.

— safety certificates and measures in

the field of safety;

— the development, implementation and
monitoring of rail interoperability;

— monitoring interoperability;

— the certification of maintenance work-

shops;

— vocational competences;

— the registration of rolling stock.

2.

Issue opinions on:

— national safety rules;

— monitoring the quality of the work of

notified bodies;

— the

interoperability of

the

trans-

European network.

3.

Coordination of national bodies:

— coordination

of

national

safety
authorities and national investigation
bodies
(as described in Directive
2004/49/EC, Articles 17 and 21).

4.

Publications and databases:

— report on safety performance (every

two years);

— report on progress with interoperabil-

ity (every two years);

— public database of safety documents;

— public

register of documents on

interoperability.

Source:

Information supplied by the Agency.

14,4 million euro

Staff at 31 December 2006:

posts listed in the establishment
plan: 95

posts occupied: 80

Other staff: 5 p.

Total staff: 85

Responsible for:

— operational tasks: 58,5

— administrative tasks: 26,5

Comprises one representative
from each Member State, four
representatives from the Com-
mission and six representatives,
without the right to vote, from
the professional sectors con-
cerned.

2. Executive Director

Appointed by the Administra-
tive Board on a proposal from
the Commission.

3. External audit

Court of Auditors.

4. Discharge Authority

The Parliament following a rec-
ommendation from the Council.

Recommendation to the Commission on har-
monised formats for safety certificates and har-
monised application forms to be used by railway
undertakings and national safety authorities.

Recommendation to the Commission on noti-
fication of national safety rules following a
request from the Commission related to other
measures in the field of safety.

Annual progress reports to the Commission for:

Interoperability:

Recommendation on registration of roll-
ing stock and report on specifications on
the National Vehicle Register.

ERTMS (European Rail Traffic Management Sys-
tem):

Recommendation to the Commission to update
Annex A of the technical specifications for
interoperability, Control Command and Signal-
ling for high speed and conventional rail sys-
tems.

Economic Evaluation:

Methodology Guidelines for impact assessment,
applicable to all Agency Recommendations,
have been supplied to the Commission. Applied
guidelines have been derived for various draft
recommendations.
Impact assessments are
being prepared in parallel with recommenda-
tions.

At the request of the Commission, an impact
assessment for improved cross-acceptance of
rolling stock (locomotives) has been provided.

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European Railway Agency (Lille/Valenciennes) — Implementation of the budget for the financial year 2006

Table 2

Origin of revenue

Revenue

Revenue entered
in the final budget for
the financial year

Revenue collected

Allocation of expenditure

Final budget appropriations

Appropriations carried over from previous year(s)

entered

committed

paid

carried
over

cancelled

entered

committed

paid

cancelled

Expenditure

(1 000 euro)

Community subsidies

14 398

12 385

Title I
Staff

9 649

6 816

6 688

129

2 833

12

4

4

8

1 349

1 062

664

398

287

1 048

347

337

711

Other revenue

20

Title II
Administration

Title III
Operating activities

Total

14 398

12 406

Total

14 398

10 422

7 742

3 400

2 543

390

2 153

2 680

857

3 976

2 245

3 305

1 389

1 741

1 157

1 498

1 089

1 807

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.

Table 3

Table 4

European Railway Agency (Lille/Valenciennes) — Economic outturn account
for the financial year 2006

European Railway Agency (Lille/Valenciennes) — Balance sheet
at 31 December 2006

(1 000 euro)

(1 000 euro)

Operating revenue

Community subsidies

Other subsidies

Operating expenses

Staff expenses

Fixed asset related expenses

Other administrative expenses

Operational expenses

Total (a)

Total (b)

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

Financial operations revenue (e)

Financial operations expenses (f)

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

2006

11 920

364

12 284

6 694

168

1 322

1 330

9 514

2 770

3

2

1

Non-current assets

Intangible fixed assets

Tangible fixed assets

Current assets

Short-term pre-financing

Short-term receivables

Cash and cash equivalents

Current liabilities

Accounts payable

Net assets

Economic result for the year

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

2 771

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 a accrual basis.

2006

506

378

18

188

3 299

4 389

1 618

1 618

2 771

2 771

4 389

Total assets

Total liabilities

Total net assets

Total liabilities and net assets

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19.12.2007

EN

Official Journal of the European Union

C 309/71

THE AGENCY’S REPLIES

During 2006 the programmed activities were not fully
7.
implemented as the Agency was still in its start-up phase. In 2007,
the Agency shall proceed to an in-depth analysis of the program-
ming of its activities, the resources required and the budget to be
allocated together with a plan for calls for tenders.

8.
The Agency is at the moment negotiating with the host
state authorities the possibility of entering into a Seat Agreement.
In this context the host state has agreed to make a substantial
contribution to the rent of the future new building in Valenci-
ennes. This will partly offset the annual costs (estimated at
450 000 euros) that result from the Agency’s double location.

At the beginning of 2007, the Agency has put a security
9.
function in place to check the consistency between delegations
and sub-delegations contained in the budgetary management sys-
tem and the corresponding signed acts. The Agency plans to sub-
mit its implementing rules for adoption by the Administrative
Board before the end of 2007.

10.
The situations described by the Court were as a result of
a shortage of personnel during the Agency’s start-up phase. In
order to prevent this happening in future a procurement function
has been created in June 2007. Its task is to coordinate and super-
vise the procurement procedures.