Report on the annual accounts of the European Railway 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 Union Agency for Railways, administration of the Institutions, financial control, implementation of the budget, powers of the institutions (EU), report

C 311/92

EN

Official Journal of the European Union

5.12.2008

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

REPORT

(2008/C 311/14)

CONTENTS

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

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

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

1-2

3-6

7-11

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

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

93

93

93

95

99

Paragraph

Page

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Official Journal of the European Union

C 311/93

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). 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 sec-
tor 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 2007 are presented in
Tables 2, 3 and 4for 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.

Without qualifying the above statements the Court draw
attention to the observations in paragraphs 7 and 8.

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.

The Agency’s accounts for the financial year ended
4.
31 December 2007 (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.

7.
The Agency’s final budget for 2007 amounted to 16,6 mil-
lion euro (including a reserve of 1,9 million euro), as compared
with 14,4 million euro for 2006. Appropriations cancelled at the
end of 2007 amounted to 3,4 million euro, including the 1,9 mil-
lion euro reserve which had remained unused. In addition to the
cancelled appropriations, 2,7 million euro were carried over
to 2008. This means that more than 35 % of the final 2007
appropriations had not been used during the year. This situation
shows that the Agency’s programming and budgeting procedures
were affected by serious weaknesses.

5.
The Court conducted its audit in accordance with the IFAC
and ISSAI (4) International Auditing Standards and Codes of Eth-
ics, in so far 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.

Despite this significant level of unused appropriations, in
8.
2007 the Agency had requested extra cash equivalent to the sum
of its whole budget. The fact that such large amounts were left
unused shows that the Agency’s cash forecasts had not been pre-
pared rigorously, which was at odds with the principle of sound
financial management.

(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 27 June 2008 and received by the

Court on 1 July 2008.

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

dards of Supreme Audit Institutions (ISSAI).

9.
The Agency has not yet carried out a physical inventory of
its fixed assets. Checks of a sample of items purchased during the
year showed that some of the items tested were not labelled and
had therefore not been properly recorded in the inventory.

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Official Journal of the European Union

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For four selection procedures audited, some members of
10.
the Selection Board neither belonged to the group of functions for
the post offered nor were in a grade at least equal to that of the
post to be filled, as required by the Staff Regulations. In addition,
the Agency had not yet finalised its recruitment procedures.

11.
Weaknesses were identified in the area of procurement.
In one case (1) the use of a negotiated procedure was not

justified. In another case, the Agency did not apply consistent and
clear selection criteria, with the result that the evaluation of the
financial and technical capacity lacked objectivity (2). Another
contract was extended twice although only one extension was
allowed (3). In one case, the negotiated procedure followed did
not comply with the requirements of the applicable regulations
and rules (4) for public procurement.

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

(1) Telecommunication and Internet services contract (70 272 euro).

(24 980 euro).

(2) Study contract for the setting up of a database for serious train acci-

dents (158 380 euro).

(3) Extension of a consultancy contract (30 000 euro).
(4) Contract services for the redesign of the web site of the Agency

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 of the
European Parliament and of the Council

Governance

Resources available to the Agency
in 2007

Products and services provided in 2007

Common Transport Policy

Objectives

Tasks

1. Administrative Board

Final Budget:

Safety

.

.

5
1
2
2
0
0
8

To contribute, on technical
matters, to the implementa-
tion of the Community legis-
lation aimed at:

— improving the competi-
tive position of the rail-
way sector;

— developing a common
approach to safety on
the European railway
system, in order to con-
tribute to creating a
European railway area
frontiers and
without
guaranteeing
high
a
level of safety.

For the purpose of implement-
ing Article 70, and taking into
account the distinctive features
of transport, the Council shall,
acting in accordance with the
procedure
in
Article 251 and after consult-
ing the Economic and Social
Committee and the the Com-
mittee of
lay
down:

the Regions,

referred

to

(a)

(b)

common rules applicable
to international transport
to or from the territory of
a MemberState or passing
across the territory of one
or more Member States;

conditions

the
under
which non-resident carri-
ers may operate transport
services within a Member-
State;

(c) measures

to

improve

transport safety;

(d)

any other
provisions.

appropriate

(Article 71 of the Treaty)

1. Address recommendations to
the Commission on

— the common safety methods
(CSMs) and common safety tar-
gets (CSTs) provided for in the
Railway
Directive
Safety
(2004/49/EC);

— safety certificates and measures

in the field of safety;

— the development,

tion and monitoring of
interoperability;

implementa-
rail

Comprises one representative
from each MemberState, four
representatives
from the
Commission and six repre-
sentatives, without the right
to vote, from the professional
sectors concerned.

2. Executive Director

Appointed by the Adminis-
trative Board on a proposal
from the Commission.

3. External audit

Court of Auditors.

— monitoring interoperability;

4. Discharge authority

Parliament acting on recom-
mendation of the Council.

— the

certification of mainte-

nance workshops;

— 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.

16,6 million euro

— creation and bringing into service of

Staff at 31 December 2007:

the Safety Database;

posts listed in the establishment
plan: 116

post occupied: 95

other staff: 4

Total staff: 99

Responsible for:

— completion and submission of the
first set of Common Safety Methods
to the Commission;

— a draft

recommendation on the
methodology for setting common
safety targets;

operational tasks: 66

administrative tasks: 33

— setting up a task force on peer review
to facilitate mutual recognition of
safety certificate;

— development

of

a

common

approach to safety reporting.

Interoperability — Technical Specifi-
cations for Interoperability (TSI)

— completion of the preliminary draft
infrastructure and TSI

of the TSI
Energy;

— intermediate report on TSI Rolling

Stock;

— work on Revisions of the TSI Opera-
tions and TSI Freight wagons;

— work on TSI Telematics for Passen-

gers;

— report on the certification of mainte-

nance workshops;

— study on the relationship between
the 1 435mm and 1 520mm railway
systems;

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Areas of Community competence
deriving from the Treaty

Competences of the Agency as defined in Regulation (EC) No 881/2004 of the
European Parliament and of the Council

Governance

Resources available to the Agency
in 2007

Products and services provided in 2007

3. Coordination
bodies

of

national

of

national

coordination
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 interop-
erability (every two years);

— public database of safety docu-

ments;

— public register of documents on

interoperability.

Source:

Information supplied by the Agency.

— development of registration of Roll-

ing Stock.

European Rail Traffic Management
System (ERTMS)

— established as System Authority for

ERTMS;

— database for ERTMS change requests;

— recommendation for updating ver-

sion 2.3.0 of the ERTMS baseline;

— study on Safety Approval of ERTMS

systems.

Economic evaluation

— implementation of the methodology
to create
‘applied methodology’
documents for each recommenda-
tion;

— launch of the DREAM database ini-
tiative (Database for Rail Economic
Analysis Monitoring);

— provision of support to European

Commission.

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European Railway Agency (Lille/Valenciennes) — Implementation of the budget for the financial year 2007

Table 2

Origin of revenue

Revenue

Revenue entered in the
final budget for the
financial year

Revenue collected

Allocation of expenditure

Community subsidies

14 744

17 025

Title I
Staff

Other revenue

Reserve

p.m.

1 901

9

Title II
Administration

Title III
Operating activities

Title IX
Reserves

Expenditure

Final budget appropriations

(1 000 euro)

Appropriations carried over from
previous year(s)

entered

committed

paid

carried over

cancelled

committed

paid

cancelled

9 499

8 831

8 677

154

668

1 798

1 731

969

762

66

129

426

95

328

34

97

3 448

2 699

920

1 779

749

2 165

1 570

595

1 901

0

0

0

1 901

3 384

—

—

2 719

1 993

—

726

Total

16 645

17 033

Total

16 645

13 261

10 566

2 695

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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European Railway Agency (Lille/Valenciennes) — Economic outturn account for the financial year 2007
and 2006

Table 3

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)

Exceptional gains (h)

Exceptional losses (i)

Surplus/(deficit) from exceptional items (j = h – i)

(1 000 euro)

2007

2006

12 576

166

12 742

8 896

269

1 253

2 697

13 115

– 373

1

11

– 10

—

37

– 37

11 920

363

12 284

6 694

168

1 322

1 330

9 514

2 770

3

– 2

1

—

—

—

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.

Economic result for the year (k = c + g + j)

– 421

2 771

European Railway Agency (Lille/Valenciennes) — Balance sheet at 31 December 2007 and 2006

Table 4

Non-current assets

Intangible fixed assets

Tangible fixed assets

Current assets

Short-term pre-financing

Short-term receivables

Cash and cash equivalents

Current liabilities

Provisions for risks and charges

Accounts payable

Reserve

Accumulated surplus/deficit

Economic result for the year

2007

823

450

373

7 594

0

186

7 408

8 417

100

5 966

6 066

2 351

2 771

– 421

2 351

Total assets

Total liabilities

Net assets

Net capital

(1 000 euro)

2006

884

505

378

3 505

18

188

3 299

4 389

90

1 528

1 618

2 771

2 771

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.

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THE AGENCY’S REPLIES

The 2007 budget was prepared when the Agency had only just become financial independent which
7.
means that there was no past experience to base estimations on, in particular for operational expenditure. Fur-
thermore, the uncertainty as to if and when the reserve would be released, made it necessary for the Agency to
plan its activities without taking the reserve into account.

The amount to be requested from the Commission was decided upon after close consultation with the

8.
Commission.

A physical inventory has been carried out in June 2008 and all the fixed assets are now labelled and

9.
will be recorded in the inventory.

10.
Due to the limited staff and the workload, it is not always possible to invite members with the same
group of function or the same grade. The implementing rules on Temporary Agents governing, among other
things, selection and recruitment procedures for temporary servants, were adopted on 21 May 2008. A full
description of the procedures to be followed will be finalised at the latest during the first quarter of 2009.

11.
The Agency has already initiated significant corrective measures in the procurement field in 2007 but
acknowledges that some improvements are still needed. The Agency is preparing a procurement manual in
order to standardise its procedures to be finalised before the end of 2008.