Report on the annual accounts of the European Monitoring Centre for Drugs and Drug Addiction for the financial year 2012, together with the Centre’s replies
Date: 2013-07-15
Institutions: European Court of Auditors
Subjects: European Monitoring Centre for Drugs and Drug Addiction, administration of the Institutions, auditing, budgetary control, financial control, powers of the institutions (EU)








C_2013365EN.01015801.xml










13.12.2013   


EN


Official Journal of the European Union


C 365/158






REPORT

on the annual accounts of the European Monitoring Centre for Drugs and Drug Addiction for the financial year 2012, together with the Centre’s replies
2013/C 365/22

INTRODUCTION







1.


The European Monitoring Centre for Drugs and Drug Addiction (hereinafter ‘the Centre’, aka ‘EMCDDA’), which is located in Lisbon, was established by Council Regulation (EEC) No 302/93 (1). Its main task is to collect, analyse and disseminate information as regards drugs and drug addiction in order to prepare and publish information at European level that is objective, reliable and comparable. The information is intended to provide a basis for analysing the demand for drugs and ways of reducing it, as well as, in general, phenomena associated with the drug market (2).





INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE







2.


The audit approach taken by the Court comprises analytical audit procedures, direct testing of transactions and an assessment of key controls of the Centre’s supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations.





STATEMENT OF ASSURANCE







3.


Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:






(a)


the annual accounts of the Centre, which comprise the financial statements (3) and the reports on the implementation of the budget (4) for the financial year ended 31 December 2012, and










(b)


the legality and regularity of the transactions underlying those accounts.









The management’s responsibility







4.


In accordance with Articles 33 and 43 of Commission Regulation (EC, Euratom) No 2343/2002 (5), the management is responsible for the preparation and fair presentation of the annual accounts of the Centre and the legality and regularity of the underlying transactions:






(a)


The management’s responsibilities in respect of the Centre's annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (6); making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Centre after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Centre in all material respects.










(b)


The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used.









The auditor’s responsibility







5.


The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (7) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Centre are free from material misstatement and the transactions underlying them are legal and regular.










6.


The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts.










7.


The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance.






Opinion on the reliability of the accounts








8.


In the Court’s opinion, the Centre’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2012 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation and the accounting rules adopted by the Commission’s accounting officer.






Opinion on the legality and regularity of the transactions underlying the accounts








9.


In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2012 are legal and regular in all material respects.










10.


The comments which follow do not call the Court’s opinions into question.





COMMENTS ON INTERNAL CONTROLS







11.


In 2012, the Centre gave grants to Member States’ national drug monitoring centres (beneficiaries) in order to support cooperation under the REITOX network (8). Total grant expenditure in 2012 was 2,6 million euro, representing 16 % of total operating expenditure. The Centre’s ex ante verifications before reimbursement of costs claimed by beneficiaries consist of a desk analysis of cost claims and of audit certificates issued by external auditors contracted by the beneficiaries. The Centre does not usually obtain from beneficiaries any documents to substantiate the eligibility and accuracy of the costs claimed. Ex post on-the-spot verifications of costs at beneficiary level are rare (9). Existing controls therefore provide only limited assurance to the Centre’s management as to the eligibility and accuracy of the costs claimed by beneficiaries. For the transactions audited by the Court supporting documentation was obtained by the Centre on the Court’s behalf which provided reasonable assurance as to their legality and regularity. A random verification of supporting documents and a higher coverage of beneficiaries by on-the-spot verifications could considerably increase assurance.










12.


No ex post verifications were carried out for any transactions made after 2008, except for grants (see paragraph 11).










13.


The Centre had not yet adopted Business Continuity or Disaster Recovery Plans.





OTHER COMMENTS







14.


The Centre currently bears the annual cost of about 200 000 euro for unused office space in its former building and in the new Headquarters. The Centre should continue, in cooperation with the Commission and National Authorities, to seek adequate solutions for this unused office space.





FOLLOW-UP OF PREVIOUS YEAR'S COMMENTS







15.


An overview of the corrective actions taken in response to the Court's previous year's comments is provided in Annex I.





This Report was adopted by Chamber IV, headed by Dr Louis GALEA, Member of the Court of Auditors, in Luxembourg at its meeting of 15 July 2013.


For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA


President





(1)  OJ L 36, 12.2.1993, p. 1. This Regulation and its amendments were repealed by Regulation (EC) No 1920/2006 of the European Parliament and of the Council (OJ L 376, 27.12.2006, p. 1).

(2)  Annex II summarises the Centre’s competences and activities. It is presented for information purposes.

(3)  These include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in net assets and a summary of the significant accounting policies and other explanatory notes.

(4)  These comprise the budgetary outturn account and the annex to the budgetary outturn account.

(5)  OJ L 357, 31.12.2002, p. 72.

(6)  The accounting rules adopted by the Commission’s accounting officer are derived from the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, where relevant, the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

(7)  Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (OJ L 248, 16.9.2002, p. 1.).

(8)  Under the European Information Network on Drugs and Drug Addiction (REITOX) the Centre collects country data on drugs from national drug monitoring centres.

(9)  In 2011, two ex post verifications were carried out in two Member States. No such verifications took place in 2012.


ANNEX I

Follow-up of previous year’s comments








Year


Court’s comment


Status of corrective action
(Completed / Ongoing / Outstanding / N/A)




2011


The Court identified 51 cases with a total value of 90 053 euro in which appropriations carried over to 2012 were not related to existing legal commitments and should have been decommitted and paid back to the Commission. However, the Centre initiated the process too late. As a consequence, due to restrictions imposed by the IT system, the funds will be blocked for one year and will only be decommitted and paid back at the end of 2012.


Completed




2011


The Centre currently bears the annual cost of about 275 000 euro for unused office space in its former building and in the new Headquarters. The Centre should continue, in cooperation with the European Commission and National Authorities, to seek adequate solutions for the unused office space.


Outstanding




2011


The Centre has not yet adopted and implemented a treasury policy to minimise and spread financial risk while aiming at adequate returns.


Completed




2011


The Centre has not yet adopted a comprehensive policy on exceptions and deviations from established processes and procedures (1).


Completed




2011


There is room to further improve the recruitment procedures. The questions for oral and written tests were not set before the applications were examined by the selection board.


Completed




2011


The Centre’s procurement files were not always complete and adequately organised (2).


Ongoing






(1)  Internal Control Standards No 8.

(2)  Several relevant documents such as the estimation of contract values and letters to unsuccessful tenders were missing.



ANNEX II

European Monitoring Centre for Drugs and Drug Addiction (Lisbon)


Competences and activities








Areas of Union competence deriving from the Treaty


(Articles 168 and 114 of the Treaty on the Functioning of the European Union)



The Union shall complement the Member States’ action in reducing drugs-related health damage, including information and prevention.





Competences of the Centre


(Regulation (EC) No 1920/2006 of the Parliament and of the Council)




Objectives

To provide the Union and its Member States with factual, objective, reliable and comparable information at Union level concerning drugs, drug addiction and their consequences.






(1)


The Monitoring Centre is to focus on the following priority areas: monitoring the state of the drugs problem, and emerging trends, in particular those involving multi-drug use;










(2)


monitoring the solutions and providing information on best practices;










(3)


assessing the risks of new psychoactive substances and maintaining a rapid information system;










(4)


developing tools and instruments to help Member States to monitor and evaluate their national policies and the Commission to monitor and evaluate Union policies.





Tasks







—


To collect and analyse data;










—


to improve data-comparison methods;










—


to disseminate data;










—


to cooperate with European and international bodies and organisations and with countries outside the Union; to identify new developments and changing trends.









Governance




Management Board

Comprises one representative from each Member State, two representatives from the Commission and two independent experts, designated by the European Parliament, who are particularly knowledgeable in the field of drugs.
To adopt the work programme, the general activities report and the budget. To give an opinion on the final accounts.

Executive Committee


Composition

Chairperson of the Management Board.
Vice-Chairperson of the Management Board.
Two other elected members from the Management Board representing the Member States.
Two representatives from the Commission.

Director

Appointed by the Management Board at the Commission’s proposal.

Scientific Committee

Delivers opinions. It consists of, at most, 15 well-known scientists appointed in view of their excellence by the Management Board following a call for expressions of interest. The Management Board may also appoint a panel of experts to the extended Scientific Committee for the risk assessment of new psychoactive substances.

External audit

European Court of Auditors.

Internal audit

European Commission’s Internal Audit Service (IAS).

Discharge authority

European Parliament, acting on a recommendation from the Council.





Resources made available to the Centre in 2012 (2011)





Budget

16,32 (16,27) million euro. Union subsidy: 95,30 % (94,63 %).

Staff at 31 December 2012

Number of posts in establishment plan: 84 (84)

Posts occupied: 79 (77) + 25 (27) other staff (seconded national experts, contract staff and temporary replacements). Total staff: 104 (104)

Allocated to:






—


operational: 64,5 (64)











—


administrative and IT support: 29 (28,5)











—


mixed: 10,5 (11,5)










Products and services 2012 (2011)





Network

The Centre runs a computerised network for the collection and exchange of information called the ‘ ‘European Information Network on Drugs and Drug Addiction’ ’ (Reitox); this network connects national drug information networks, specialist centres in the Member States and the information systems of international organisations working with the Centre.

Publications







—


Annual report on the state of the drug problem in Europe; 22 (22) language versions, publication and interactive website).










—


Selected issues 2 (3), EN.










—


Statistical bulletin and interactive website containing over 350 (350) tables and 100 (100) graphs.










—


General report of activities – annual, EN.










—


Drugnet Europe newsletter – 4 issues, EN (4).










—


Drugs in focus (policy briefings) – 1 (2) issues. Centre Scientific Monograph – 0 (0), EN.










—


Centre Insights – 3 (0), EN.










—


Manuals – 2 (1), EN.










—


Centre thematic papers – 8 (1).










—


Joint publications – 2: EN (1st); BG, ES, CS, DA, DE, ET, EL, EN, FR, IT, LV, LT, HU, NL, PL, PT, RO, SK, SL, FI, SV, TR, NO, HR (2nd), (3).










—


Outputs linked to the implementation of the Council Decision on new psychoactive substances (2005/387/JHA) – 2 (2), EN.










—


Drug profiles – 0 new (1) and 0 updated (18), DE, EN, FR.










—


Technical and scientific studies, including Articles and scientific summaries 13 (39).










—


Ad-hoc publications – 3, EN.










—


Brochures – 1, EN, RU.










—


Scientific posters: 2 (2).










—


Data collection, validation, storage and retrieval system (Fonte).





Other websites

Reorganisation/updating/content development of public Centre website including:






—


Country overviews.










—


Drug treatment overviews, prevention profiles.










—


European legal database on drugs.










—


Evaluation instruments bank.










—


Best practice portal (exchange on drug demand reduction action, harm reduction and treatment modules).










—


Topic pages.










—


Publications database.





Promotional material

Conference materials 2 EN (1).
Media products: 13 (13) news releases (3 in 23 languages) and 10 (7) fact sheets, EN; 1 Power Point presentation, EN (1).

Participation in international conferences, technical and scientific meetings 266 (245).







Source: Information supplied by the Centre.







THE CENTRE’S REPLIES






11.


EMCDDA has put in place and implemented several processes to ensure adequate ex ante and ex post verifications taking into account the risks at stake. In this context, grant beneficiaries are requested to send a full overview of their expenses (statement of expenses) as well as final financial and activity reports which allow EMCDDA to check the eligibility and accuracy of the costs claimed. On this basis, EMCDDA draws up bilateral feedback reports which identify possible problems relating to the administrative management of the Reitox grants and analyses them with the National Focal Points (NFPs).
In order to further improve the system in place, EMCDDA has taken the following measures, in line with the suggestions of the Court:






—


increased the number of annual on-site checks in NFPs;










—


made available an audit methodology and improved model for the external audit report, to facilitate, as much as possible, the application of a common and consistent methodology for external auditors’ verification;










—


organised in May 2013 a Reitox Academy on Grant Management for all NFPs.














12.


Pursuant to the assessment of possible risks involved, EMCDDA has revised its decision concerning ex post verifications to link the latter to the result of risk assessment.










13.


Further to the measures taken to ensure business continuity and disaster recovery for some critical ICT-based processes, the foundations for a comprehensive Business Continuity Plan (BCP) have already been laid down in a proposal, expected to be approved by the end of the first semester of 2013.










14.


EMCDDA continues actively to look for an adequate solution to sell or lease the premises concerned. Meanwhile, EMCDDA has further rationalised and reduced the maintenance costs for the Mascarenhas building, namely by revising the security settings and some patterns for consumption of utilities.