Report on the annual accounts of the European Agency for the Management of Operational Cooperation at the External Borders of the Member States for the financial year 2007 together with the Agency's replies
Date: 2008-09-25
Institutions: European Court of Auditors
Subjects: EU office or agency, European Court of Auditors, administration of the Institutions, cooperation policy, external border of the EU, financial control, implementation of the budget, powers of the institutions (EU), report

C 311/34

EN

Official Journal of the European Union

5.12.2008

REPORT

on the annual accounts of the European Agency for the Management of
Operational Cooperation at the External Borders of the Member States
for the financial year 2007 together with the Agency’s replies

(2008/C 311/06)

CONTENTS

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

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

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

1-2

3-6

7-12

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

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

35

35

35

37

41

Paragraph

Page

5.12.2008

EN

Official Journal of the European Union

C 311/35

INTRODUCTION

1.
The European Agency for the Management of Operational
Cooperation at the External Borders of the Members States (here-
inafter referred to as the Agency) was created by Regulation (EC)
No 2007/2004 of the Council of 26 October 2004 (1). The Agen-
cy’s main task is to coordinate Member States’ activities in the
field of management of external borders (support for operational
cooperation, technical and operational assistance, risk analysis).

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 draws
attention to the observation in paragraph 8.

2.
Table 1 summarises the Agency’s competences and activi-
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.

OBSERVATIONS

STATEMENT OF ASSURANCE

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 2007 (3) were drawn up by its Executive Director,
pursuant to Article 30 of Regulation (EC) No 2007/2004, and
sent to the Court, which is required to give a Statement of Assur-
ance on their reliability and on the legality and regularity of the
underlying transactions.

The Court conducted its audit in accordance with the IFAC
5.
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.

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 2007 are, in all material respects, reliable.

(1) OJ L 349, 25.11.2004, p. 1.
(2) OJ L 248, 16.9.2002, p. 1.
(3) These accounts were drawn up on 13 June 2008 and received by the

Court on 27 June 2008.

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

dards of Supreme Audit Institutions (ISSAI).

7.
Frontex’s 2007 budget amounted to 42,1 million euro, as
compared with 19,2 million euro for the previous year. This large
increase was the result of 19,9 million euro being added to the
initial budget of 22,2 million euro by the budget authorities in
August 2007. The main expenses for operating activities con-
cerned the coordination of joint operations regarding land, sea
and air borders, risk assessments and training. The Agency’s bud-
get is mainly financed by subsidies from the Commission.
38,4 million euro of the 2007 commitment appropriations were
consumed,
including 13,3 million euro that were paid out
and 22,4 million euro that were carried over. Non-automatic
carry-overs amounted to 0,3 million euro. Unused appropriations
of 6,4 million euro were cancelled. The appropriations carried
over from the preceding year amounted to 11,8 million euro
and 4,7 million euro of these were cancelled. Overall, nearly 70 %
of the appropriations available for 2007 were not spent. This
high level of carry-overs and cancellations indicates significant
weaknesses in the programming and monitoring of the Agency’s
activities.

8.
Commitments carried over to 2008 pertaining to grant
agreements linked to operational activities (Title III) amounted
to 18,4 million euro. A substantial part of these commitments
were made on the basis of excessive costs estimations (5). As a
consequence, it is likely that the budgetary surplus to be reim-
bursed to the Commission disclosed in the balance-sheet at the
end of the year is understated. The financial impact, however,
cannot be quantified with sufficient precision until the grant
agreements concerned are closed.

9.
Other reasons for the increase in carry-overs were that the
partner countries were often very late in sending their final
requests for reimbursement and that the Agency encountered dif-
ficulties in meeting payment deadlines.

(5) For 11 grant agreements closed in 2007, the Court estimated that the
costs were overestimated by 30 % in average. The commitments car-
ried over to 2008 could therefore be overestimated by an amount of
approximately 5,5 million euro.

C 311/36

EN

Official Journal of the European Union

5.12.2008

The high amount of cash detained by the Agency stays
10.
unused on excessively low interest bearing bank accounts (1) as
no treasury management policy exists.

with the partner countries were signed for actions already started
or even closed (33 exceptions for a total amount of 8,6 million
euro).

An analysis of the Register of exceptions (2) clearly shows
11.
recurrent problems in the Agency’s commitment system. Budget-
ary commitments were made after legal commitments (25 cases
with a total amount of 1,5 million euro) and grant agreements

12.
The rules applied for the implementing measures to the
Staff Regulations concerning the minimum number of years of
experience required for a given position differ from those agreed
between the Agencies and the European Commission (3). This
was at odds with the principle of equal treatment.

This report was adopted by the Court of Auditors in Luxembourg at
24 and 25 September 2008.

its meeting of

For the Court of Auditors
Vítor Manuel da SILVA CALDEIRA
President

(1) The funds are not only unused but also largely unproductive as they

are placed on an account bearing only 0,7 % interest.

(2) The Agency introduced the Register of Exceptions on 1 April 2007.
The first entry was made on 30 May 2007. At 31 December 2007, the
Register contains 64 exceptions linked to the operational activities.

(3) As laid down in Article 110 of the Staff Regulations. For example, only
8 years of experience is required by the Agency for an AD 10 post
whilst in all other Agencies 12 years is the norm.

Areas of Community
competence deriving
from the Treaty

The Community policy in
this area aims at developing
common standards and pro-
cedures with regard to carry-
ing out checks on persons
crossing the external borders
of the Member States; fur-
thermore measures should
be taken to ensure coopera-
tion between the relevant
departments of the adminis-
trations of
the Member
States in the areas covered by
this title, as well as between
the Member States and the
Commission.

(Articles 62(2)(a) and 66 of the
Treaty)

The European Agency for the Management of Operational Cooperation at the External Borders — Frontex (Warsaw)

Table 1

Competences of the Agency as defined in Council Regulation (EC)
No 2007/2004

Governance

Resources made available to the Agency
in 2007
(2006)

Products and services supplied in 2007

Objectives

Main tasks:

1. Management Board

Final budget for 2007

Risk analysis:

Composed of:

42,2 (19,2) million euro

2 General/Annual Assessments were pro-
duced;

— One representative from
each Member State;

Community contribution:

to coordinate opera-
tional
cooperation
between Member States
in the field of manage-
ment of external bor-
ders;

to assist Member States
on training of national
border guards and estab-
lish common training
standards;

— Two representatives from

the Commission;

— One

representative per
Schengen associated coun-
try (Norway, Iceland) with
a limited right to vote.

to carry out risk analy-
sis;

2. Executive Director

to follow up on the
development of research
in control and surveil-
lance;

to assist Member States
in circumstances requir-
ing increased technical
and operational assis-
tance;

to
provide Member
States with the necessary
in organising
support
joint return operations.

Appointed, on a proposal by
the Commission, by the Man-
agement Board.

3. External audit

European Court of Auditors.

4. Discharge authority

Parliament acting on recom-
mendation from the Council.

(1)

(2)

(3)

(4)

(5)

(6)

Frontex was established with
a view to improving the inte-
grated management of
the
external borders of the Mem-
ber States of the EU.

Frontex must:

(a)

(b)

(c)

facilitate
render
and
more effective the appli-
cation of existing and
future Community mea-
sures
relating to the
management of external
borders.

ensure the coordination
of Member
States’
actions in the imple-
mentation of those mea-
sures,
thereby
contributing to an effi-
cient, high and uniform
level of control on per-
sons and surveillance of
the external borders of
the Member States.

provide the Commis-
sion and the Member
States with the necessary
technical support and
expertise in the manage-
ment of
the external
borders and promote
between
solidarity
Member States.

40,1 million
(18,9 million euro or 98,8 %)

euro

or

21 Tailored Assessments were finalised or are
due to be finalised by end Q1 2008;

97,2 %

Contribution from the UK & IE:

40 Analytical ex-ante assessments of Frontex
Joint Operations were issued;

0,8 million euro or 1,9 % (0,2 mil-
lion euro or 1,2 %)

2 Law Enforcement and 3 public bulletins
were produced.

Contribution from SAC:

0,9 million euro or 2,1 %

Staff numbers at 31 Decem-
ber 2007

In the Establishment Plan: 49 (28)

Temporary staff 48 (25)

Total staff number: 132 (72)

The system for regular exchange of informa-
tion (Incident Reporting System-IRS, Monthly
Analytical Reports and Monthly Statistical
reports) within Frontex Risk Analysis Network
was launched.

Operational cooperation:

25 Frontex coordinated joint operations were
held; 7 Pilot projects were launched.

Assistance to the MS’:

+ 84 (47) other staff
(seconded
national experts, contract staff, aux-
iliaries).

Frontex assisted Member States in 10 of their
return operations on their request and coordi-
nated and co-financed 9 return operations of
Member States.

Assigned to the following tasks:

Assistance return operations:

— operational: 103 (43)

— administrative: 29 (29)

Frontex coordinated and co-financed 9 return
operations of Member States.

Training:

Within the framework of 13 projects 39 meet-
ings were held or co-financed. During 38
training sessions of different durations, 600
border guards of different level were trained.

.

.

5
1
2
2
0
0
8

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
U
n
o
n

i

C
3
1
1
/
3
7

Areas of Community
competence deriving
from the Treaty

Competences of the Agency as defined in Council Regulation (EC)
No 2007/2004

Governance

Resources made available to the Agency
in 2007
(2006)

Products and services supplied in 2007

Research & development:

8 reports and bulletins were published;

5 workshops on R&D issues were held;

9 projects were initiated; some of them are
still ongoing;

18 meeting, conferences, or seminars were
attended.

Cooperation with non-EU partner coun-
tries:

The Management Board mandated Frontex to
negotiate working arrangements with 5 coun-
tries (the former Yugoslav Republic of Mace-
donia, Cape Verde, Egypt, Moldavia, Georgia);

Working arrangement with Ukraine was
signed;

Involvement of Russia and Ukraine in 2 IBM
seminars;

Ukraine was involved in 5 Frontex pilot
projects.

Cooperation with Europol’s and other rel-
evant organisations:

Frontex contributed to Europol’s ‘Organised
Crime Threat Assessment’ (‘OCTA’).

The established working level cooperation
IOM,
with numerous organisations
UNHCR, OLAF, Eurojust) was further main-
tained and utilized.

(e.g.

C
3
1
1
/
3
8

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
U
n
o
n

i

Source:

Information submitted by the Agency.

.

.

5
1
2
2
0
0
8

.

.

5
1
2
2
0
0
8

Frontex- European Agency for the Management of Operational Cooperation at the External Borders (Warsaw) — 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

Expenditure

Final budget appropriations

(1 000 euro)

Appropriations carried over from the
previous financial year

final

committed

paid

carried
over

cancelled

available

paid

cancelled

Community subsidies

40 980

40 991

Other subsidies

Other revenue

Total

1 170

p.m.

42 150

820

9

41 820

Title I
Staff

Title II
Administration

Title III
Operating activities

9 387

7 767

6 332

1 435

1 620

1 065

417

5 267

4 018

1 765

2 593 (1)

909 (1)

931

726

27 496

26 599

5 214

18 399

Total

42 150

38 384

13 312

22 426

3 884

6 413

9 778

11 774

5 942

7 085

648

205

3 836

4 689

Includes non-automatic carry-overs of 340 000 euro.

(1)
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.

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
U
n
o
n

i

C
3
1
1
/
3
9

C 311/40

EN

Official Journal of the European Union

5.12.2008

The European Agency for the Management of Operational Cooperation at the External Borders (Warsaw) —
Economic outturn account for the financial year 2007 and 2006

Table 3

(1 000 euro)

2007

2006

30 439

1 738

127

15 129

226

26

Total (a)

32 304

15 381

Operating revenue

Community subsidies

Contribution from countries

Miscellanous

Operating expenditure

Staff expenditure

Fixed asset-related expenditure

Other administrative expenditure

Operational expenditure

4 090

78

4 931

20 887

29 986

2 318

1

– 1

860

7

613

4 349

5 829

9 552

5

– 5

9 547

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

Total (b)

Financial operations expenditure (d)

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

Economic result for the year (f = c + e)

2 317

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.

The European Agency for the Management of Operational Cooperation at the External Borders (Warsaw) —
Balance sheet at 31 December 2007 and 2006

Table 4

(1 000 euro)

2007

2006

Non-current assets

Intangible fixed assets

Tangible fixed assets

Current assets

Short-term prefinancing

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

103

588

40

1 457

32 637

34 825

75

22 886

22 961

11 864

9 547

2 317

Total assets

Total liabilities

Net assets

Net capital

11 864

0

31

0

75

14 236

14 342

84

4 711

4 795

9 547

0

9 547

9 547

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.

5.12.2008

EN

Official Journal of the European Union

C 311/41

THE AGENCY’S REPLIES

7.

The 19,9 million euro increase of the budget is based on two amendments:

(1) 12,8 million euro of the initial budget were frozen by the Budget Authority and were effectively
made available in June 2007 only; and thus commitments were only possible in the second half of
2007.

(2) 7 million euro were made available by the Commission in June 2007 in order to be used especially
for Sea Border operations. As these operations require the availability of vessels and aircrafts from
Member States and, due to their complexity, oblige to an important and time consuming effort of
coordination, commitments could only be made late in 2007.

This situation affected the volume of payments in 2007 and led to significant carry-overs.

However, the Agency underlines that the monitoring of the expenditure has improved significantly in 2007.
Monthly budget implementation reports have been prepared and are distributed to the management.

8.
The estimation of costs is a complex issue and a stricter budget management is going to be implemented
to solve this problem. Frontex started to build up the centralised record for technical equipment (CRATE). This
record lists equipment from Member States that can be used during joint operations and is linked to a com-
mon cost calculation method (REM). The REM concept will be used and assessed during 2008/2009 and shall
lead to a more efficient use of the budgetary allocation. In addition Frontex started to introduce phases into its
long term operations, aiming to ease the budget management.

9.
Frontex and Member States have agreed in the Framework Partnership Agreement (FPA) that the Mem-
ber State will send in claims for reimbursement within 45 days after the action has ended. However, given the
difficulties of Member States to collect all invoices in due time, the Agency does not refuse payment in case a
claim is received later than 45 days. The Executive Director made the members of the Management Board
repeatedly aware of this problem during their meetings.

Since early 2008, reminders are sent systematically to participating Member States.

Starting mid 2008 Frontex will distribute to all Member States on a monthly basis an overview of all the
payments.

In addition, Frontex units/sectors are informed on a monthly basis on pending invoices.

The Agency will try to re-negotiate with its bank the conditions and examine if other banks may offer

10.
better conditions.

11.
As the development until the end of June 2008 showed no improvements in absolute numbers of
exceptions reported, an action plan was developed; this action plan is aiming at improving the situation by
e.g. setting deadlines to Member States for forwarding to the agency budget estimation on their co-financing
to establish the final amount for grants in order to avoid ex-post signatures. Other measures envisaged are the
setting up of a commitment monitoring system for Project managers and eventually the use of an IT sup-
ported tool.

12.
The Agency applied the principles in analogy with Article 31, paragraph 2 of the Staff Regulations
which stipulates that in order to address specific needs of the Institutions, labor market conditions prevailing
in the Community may also be taken into account when recruiting.

The Agency must attract highly qualified specialists in various fields and particular in law enforcement and
therefore needs to offer an attractive grading and salary for the posts in question taking into account the nega-
tive impact of the correction coefficient for salaries applied for Poland.