Report on the annual accounts of the European Environment Agency for the financial year 2007 together with the Agency's replies
Date: 2008-09-18
Institutions: European Court of Auditors
Subjects: European Court of Auditors, European Environment Agency, administration of the Institutions, financial control, implementation of the budget, powers of the institutions (EU), report

C 311/64

EN

Official Journal of the European Union

5.12.2008

REPORT

on the annual accounts of the European Environment Agency for the
financial year 2007 together with the Agency’s replies

(2008/C 311/10)

CONTENTS

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

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

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

1-2

3-6

7-10

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

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

65

65

65

67

70

Paragraph

Page

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Official Journal of the European Union

C 311/65

INTRODUCTION

The Court has thus obtained a reasonable basis for the

6.
statement set out below:

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 Parliament, the Mem-
ber States and, more generally, the public with reliable informa-
tion on the state of the environment. This information should, in
particular, enable the European Union and the Member States to
take action to safeguard the environment and assess the effective-
ness of such action.

Table 1 summarises the Agency’s competences and activi-
2.
ties. Key data taken from the financial statements drawn up by the
Agency for the financial year 2007 are 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 2007 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.

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 (2); it was drawn up fol-
lowing an examination of the Agency’s accounts, as required by
Article 248 of the Treaty establishing the European Community.

7.
The audit of two recruitment procedures showed weak-
nesses: candidates not fulfilling selection criteria were considered
for further evaluation and criteria for identifying the best candi-
dates to be invited for interview were not documented. These situ-
ations did not ensure transparent and non-discriminatory
procedures.

4.
The Agency’s accounts for the financial year ended
31 December 2007 (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 a statement of assurance
on their reliability and on the legality and regularity of the under-
lying transactions.

With regard to tendering procedures, the following irregu-
8.
larities were observed in three cases: direct award of services with-
out respecting the requirements of the Financial Regulation (5),
award of a specific contract for services not in line with the frame-
work contract terms (6). These weaknesses called into question
the transparency of the procedures.

5.
The Court conducted its audit in accordance with the IFAC
and ISSAI (4) 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.

(1) OJ L 120, 11.5.1990
(2) OJ L 248, 16.9.2002, p. 1.
(3) These accounts were drawn up on 22 May 2008 and received by the

Court on 30 June 2008.

(4) International Federation of Accountants (IFAC) and International Stan-

dards of Supreme Audit Institutions (ISSAI).

Following a call for proposals, the Agency signed grant
9.
agreements with consortia of institutions (called European Topic
Centres) to annually perform tasks on specific environmental top-
ics (7). The interim and final payments made by the Agency to
these Centres are based on declarations of actual costs. The main
item of expenditure is personnel costs. The Agency’s checks were
limited to reviews of the documentation provided by the Centres
without adequate procedures in place to ensure the eligibility of
the amounts declared.

(5) Two cases with an approximate total value of 26 000 euro.
(6) One case with an approximate value of 215 000 euro.
(7) There are five European Topic Centres and the related commitment

appropriations for 2007 were 6 million euro in total.

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Official Journal of the European Union

5.12.2008

These grant agreements with the Centres also provide for
10.
a flat rate of 20 % of direct expenditure for their indirect costs
(overheads), whereas the Implementing Rules of the general
Financial Regulation limit this rate to 7 %. According to the rules

this ceiling can be exceeded only following a reasoned decision;
no such decision was taken by the Agency. If the 7 % rate had
been applied the amount paid in 2007 would have been 0,3 mil-
lion euro less.

This report was adopted by the Court of Auditors in Luxembourg at
18 September 2008.

its meeting of

For the Court of Auditors
Vítor Manuel da SILVA CALDEIRA
President

Table 1

European Environment Agency (Copenhagen)

Areas of Community
competence deriving from the
Treaty

Competences of the Agency as defined in Council Regulation (EEC) No 1210/90

Governance

Resources made available to
the Agency in 2007
(Data for 2006)

Main products and services supplied in
2007

.

.

5
1
2
2
0
0
8

Environment policy

Objectives

Tasks

1. Management Board

Final budget:

Community policy on the
environment shall aim at a
high level of protection tak-
ing into account the diversity
of situations in the various
regions of the Community. It
shall be based on the precau-
tionary principle and on the
principles
that preventive
action should be taken, that
damage
environmental
should as a priority be recti-
fied at source and that the
polluter should pay. (…) In
preparing its policy (…), the
Community
take
account of available scien-
tific and technical data (…).

shall

(Article 174 of the Treaty)

To set up a European environ-
ment information and observa-
tion network to provide the
Community and the Member-
States with objective, reliable
and comparable information at
European level enabling them
to:

(a)

(b)

(c)

take the requisite measures
to protect
the environ-
ment;

assess the results of such
measures;

ensure that the public is
properly informed about
the state of the environ-
ment.

Source:

Information supplied by the Agency.

— To provide the Community and the
Member States with the objective
information necessary for framing
and implementing sound and effec-
tive environmental policies.

— To record, collate and assess data on
the state of the environment and to
report on the quality of and pressures
on the environment within the terri-
tory of the Community.

— To help ensure that environmental
data at European level are compa-
rable and, if necessary, to encourage
by appropriate means improved har-
monisation of methods of measure-
ment.

— To promote the incorporation of
European environmental data into
international programmes.

— To publish a report on the state of,
trends in and prospects for the envi-
ronment every five years.

forecasting

— To stimulate the development of
tech-
environmental
niques, methods of assessing the cost
of damage to the environment and
the exchange of
information on
damage-prevention technology.

— To stimulate the development of
methods of assessing the cost of dam-
age to the environment and the costs
of environmental preventive, protec-
tion and restoration policies.

Consisting of:

— One representative per Mem-

35,1 million
(37,1 million euro)

euro

berState;

Community subsidy:

— two representatives of

the

82 % (75 %)

Commission;

— two scientists appointed by the

European Parliament.

Tasks

To adopt the work programme and
ensure it is implemented.

2. Executive Director

Appointed by the Management
Board on a proposal from the Com-
mission.

3. Advisory Forum

Consisting of one representative per
MemberState, it advises the Execu-
tive Director.

Staff
31 December 2007:

numbers

at

Number of posts in the
establishment plan:

116 (115)

Posts occupied: 111 (110)
plus 55 (47) other posts

(contract agents and sec-
onded national experts)

staff numbers: 116

Total
(115)

assigned to the following
tasks:

operational: 73 (72)

administrative: 42 (42)

4. Scientific Committee

mixed: 1 (1)

Consisting of qualified figures in the
field of the environment.

5. External audit

Court of Auditors.

6. Discharge authority

Parliament acting on a recommen-
dation by the Council.

— Launch of report on ‘Europe’s
environment:
fourth
assessment’ at Pan-European
Environment Ministers Con-
ference.

the

— Launch

of

Environmental

Technology Atlas.

— Launch of Water Information
System for Europe (WISE).

— Launch of ‘Our Arctic Chal-

lenge’ film.

gas

— Publication of reports on, inter
alia, climate change costs,
greenhouse
emission
trends and projections, air
quality, air emissions, sustain-
able consumption and pro-
duction,
biodiversity
indicators, waste manage-
ment.

— Launch of new Topic Centres
on Water, Land use and spa-
tial information, and air and
climate change.

— Participation in conferences
on ‘Beyond GDP’ and Tax
reform.

E
N

O

f
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i
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i
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n
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o
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t
h
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a
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o
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European Environment Agency (Copenhagen) — Implementation of the budget for the financial year 2007

Table 2

Source 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 financial year(s)

entered

committed

paid

carried
over

cancelled

available

committed

paid

carried
over

cancelled

Expenditure

(1 000 euro)

Community subsidy

28 950

28 950

Other subsidies

Other revenue

Other assigned revenue

4 857

1 327

p.m

Total

35 134

5 007

3 822

348

38 127

Title I
Staff

Title II
Administration

Title III
Operating activities

18 050

18 022

17 814

169

2 820

2 806

2 466

338

12 974

12 963

8 572

4 387

Assigned revenue

1 290

935

303

987

Total

35 134

34 726

29 155

5 881

67

15

16

0

98

308

308

187

283

283

265

5 290

5 290

4 965

3 958

10 846

9 839

4 881

1 838

7 171

0

0

0

2 678

2 678

121

18

409

449

997

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.

C
3
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1
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6
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E
N

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f
f
i
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.

.

5
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2
2
0
0
8

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Official Journal of the European Union

C 311/69

European Environment Agency (Copenhagen) — Economic outturn account for the financial years 2007
and 2006

Table 3

Operating revenue

Community subsidy

Other subsidies and revenue

Operating expenditure

Staff expenditure

Fixed-asset-related expenditure

Other administrative expenditure

Operational expenditure

Total (a)

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

Total (b)

Financial operations income (e)

Financial operations expenditure (f)

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

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

(1 000 euro)

2007

2006

28 950

7 753

36 073

16 483

866

4 940

13 446

35 735

338

46

– 7

39

377

27 650

7 951

35 601

14 500

795

4 843

15 000

35 138

462

72

– 7

66

528

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.

European Environment Agency (Copenhagen) — Balance sheet at 31 December 2007 and 2006

Table 4

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

Accounts payable

Reserve

Accumulated surplus/deficit

Economic result for the year

(1 000 euro)

2007

2006

330

1 555

500

217

2 180

7 799

Total assets

12 581

Total liabilities

Net assets

Net capital

7 434

7 434

5 147

4 770

377

5 147

330

1 866

494

1 151

2 611

6 097

12 548

7 779

7 779

4 770

4 242

528

4 770

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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THE AGENCY’S REPLIES

In order to have more candidates in the competition, the Selection Committee chose to also include the
7.
candidates that came closest to the criteria in the vacancy notice. The Agency will in the future re-publish the
post when a similar situation occurs.

The candidates invited for interview fulfilled the selection criteria set out in the notice of competition. The
Agency will in future recruitments better document the selection of the short-Iisted candidates.

8.
In relation to the direct awards of services: the Authorising Officer approved them due to the signifi-
cant benefits to be accrued to the Agency. It is considered that there was sufficient documentation of the unique
nature of the course on the file to explain the approach taken. The Agency will manage future similar cases
fully in line with the Financial Regulation.

In relation to the award of a specific contract: it became necessary to further increase the storage and server
capacity of the system, for the purpose of good financial management this was done by extending the original
order. At the next upgrade of the EEA storage and server system in 2008, the market was consulted again. The
Agency will do so for each substantial IT purchase in the future.

9.
The Agency has already introduced new procedures for new topic centres in line with the Financial
Regulation. Taking note of the Court’s observations, these procedures include verification visits to ETC lead
organisations and selected partners as well as other detailed checks prior to final payments. Verification visits
were made to three lead organisations and one partner in early 2008 in relation to the 2007 subsidies. These
new procedures are part of the Agency’s continuing efforts to ensure and improve the adequacy and effective-
ness of existing controls.

10.
The overhead rate was given extended consideration before adoption and was explicitly considered by
the Agency in preparing the terms of reference. The Agency considers 20 % to be a reasonable overhead rate.
Nevertheless, it is recognised that no ‘reasoned decision’ is in place and one will be put in place through the
management board for future calls.