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27.12.

2002 EN Official Journal of the European Communities C 326/17

REPORT
on the financial statements of the European Environment Agency for the financial year 2001,
together with the Agency’s replies
(2002/C 326/03)

TABLE OF CONTENTS
Paragraph Page

THE COURT’S OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5 18

MAIN OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-31 18

Implementation of the budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-11 18

Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12-18 18

Revenue and expenditure account and balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12-14 18

Management of cash-flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15-18 19

Implementation of financial provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19-21 19

Purchasing of goods and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-31 19

System for estimating requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-23 19

Cooperation with the Institutions and other Community bodies . . . . . . . . . . . . . . . . . . . . 24-25 19

Choice of procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 20

Evaluation of bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27-29 20

Framework contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30-31 20

Tables 1 to 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

The Agency’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24


C 326/18 EN Official Journal of the European Communities 27.12.2002

THE COURT’S OPINION 7. Final appropriations for the financial year totalled 21,7
million euro, 20,9 million (96 %) of which were committed.
10,3 million euro (i.e. 97 %) of the 10,6 million euro of operating
1. This report is addressed to the Management Board of the appropriations (Title III) were committed. Payments in respect of
European Environment Agency in accordance with Article 13(4) appropriations for the financial year totalled 13,2 million euro,
of Council Regulation (EEC) No 1210/90 (1). i.e. 63 % of the amounts committed. A sum of 8,1 million euro
had to be carried over to the following financial year and 0,4 mil-
lion had to be cancelled.
2. The Court has examined the financial statements of the
European Environment Agency for the financial year ended
31 December 2001. In accordance with Article 14 of Council
Regulation (EEC) No 1210/90, the budget was implemented on 8. The appropriations carried over to 2002 essentially con-
the responsibility of the Director. This responsibility included the cern operating appropriations, which account for 6,9 million
drawing-up and presentation of the financial statements (2) in euro. The increase when compared with the previous financial
accordance with the internal financial provisions adopted in com- year is 2,5 million euro. This increase shows that the Agency
pliance with Article 14 of Council Regulation (EEC) No 1210/90. needs to improve the quality and monitoring of the planning of
The Court is required under Article 248 of the Treaty establish- its activities.
ing the European Community to audit these accounts.

3. The Court performed its audit in accordance with its audit- 9. The appropriations carried over from the financial year
ing policies and standards. These have been adapted from gener- 2000 to 2001 totalled 5,4 million euro, 4,4 million euro of which
ally accepted international auditing standards to reflect the spe- were settled. One million euro therefore had to be cancelled. In
cific characteristics of the Community context. The Court carried view of these cancellations, which represent an increase when
out such tests of the accounting records and applied such other compared with the previous financial year in terms of both abso-
audit procedures as it deemed necessary in the circumstances. By lute and relative value, the Agency should be more rigorous in
means of this audit the Court obtained a reasonable basis for the evaluating the validity of the amounts which it carries over.
opinion expressed below.

4. This examination has enabled the Court to obtain reason- 10. All the appropriations for the financial year for transla-
able assurance that the annual accounts for the financial year tion and terminology services (337 000 euro) were committed in
ended 31 December 2001 are reliable and that the underlying a single operation in December 2001 and no payment was made.
transactions, taken as a whole, are legal and regular. The corresponding worksheets (order forms for the work entrusted
to the Translation Centre) totalled 18 408 euro. The balance of
318 592 euro was carried over without justification, contrary to
5. Without calling into question the audit opinion expressed Article 6 of the Financial Regulation applicable to the Agency,
in paragraph 4, the Court nevertheless draws attention to the situ- and should have been cancelled.
ation described in paragraphs 8 and 9 of this report.

11. In its Report concerning the financial year 2000 (4), the
Court emphasised the unjustified carry-over of appropriations
MAIN OBSERVATIONS from 2000 for translations to be done in 2001. The checks car-
ried out show that the payments in 2001 using appropriations
carried over from 2000 should have been made using appropria-
Implementation of the budget tions for the financial year 2001.

6. The implementation of the appropriations for the financial


year 2001 and of the appropriations carried over from the previ-
ous financial year is shown in Table 1 (3).
Financial statements

(1) OJ L 120, 11.5.1990, p. 4.


(2) As required under Article 13(3) of Council Regulation (EEC) Revenue and expenditure account and balance sheet
No 1210/90, the accounts for all the Agency’s revenue and expendi-
ture for the financial year 2001 were drawn up on 15 March 2002
and were sent to the Agency’s Management Board, the Commission
and the Court of Auditors. These accounts were received by the Court 12. The revenue and expenditure account and the balance
on 2 April 2002. A summary version of these financial statements is sheet published by the Agency in its activity report for the finan-
presented in the tables annexed to this report. cial year 2001 are presented in summary form in Tables 2 and 3.
3
( ) All the tables in this report have been drawn up on the basis of the
most exact values possible of the data used. For presentation pur-
poses, the figures have been rounded up or down, which may give
rise to minor differences in the totals. A dash indicates a non-existent
or nil value and 0,0 indicates a value below the rounding threshold. (4) OJ C 372, 28.12.2001.
27.12.2002 EN Official Journal of the European Communities C 326/19

13. As regards the balance sheet, in 2001 the Agency took Implementation of financial provisions
account, pursuant to Commission Regulation (EC)
No 2909/2000 of 29 December 2000 (1), of the depreciation of
its fixed assets. The gross value of its fixed assets was 19. Commitments to finance expenditure resulting from meet-
3 523 000 euro as at 31 December 2001. In view of depreciation ings of experts totalled 390 000 euro. An initial commitment of
charges for the financial year 2001 and for the previous financial 265 000 euro was made at the beginning of the financial year by
years (i.e. 2 536 000 euro), the net value of the Agency’s fixed the appropriate authorising officer. However, two additional com-
assets was 987 000 euro. mitments (for 100 000 and 25 000 euro respectively) were signed
by staff to whom the necessary powers had not been delegated in
respect of this budget heading.
14. In its 2000 Annual Report on the Agency (2), the Court
highlighted weaknesses in the inventory system. In 2001, the 20. These irregular commitments were made possible when
Agency applied the evaluation and depreciation rules adopted by the member of staff responsible for the security of the comput-
the Commission in December 2000 (3), and a computerised erised accounting system made a mistake in allocating the elec-
inventory-management system was introduced. The Agency’s tronic certificate for authorising appropriations. The lists of people
efforts to date should be continued with a view to ensuring that whom the computerised system recognises as having been autho-
discrepancies do not arise between the value of goods when rised to sign official documents should be compared on a regular
recorded in the inventory and their value when purchases are basis.
entered in the accounts. Greater coordination between the depart-
ment responsible for keeping the inventory and the accounts
department is needed so as to ensure that the depreciation rates 21. In its 1999 and 2000 Annual Reports concerning the
laid down in the regulations are correctly applied. Agency (5), the Court highlighted weaknesses in the management
of contracts, in particular when payment requests were being
handled. An examination of the files on the payments made in
2001 showed once again that the financial files do not always
Management of cash-flow contain supporting documents but only a certificate of the authen-
ticity and compliance of the work carried out.

15. The Agency has four bank accounts. There are significant
delays (4) in entering banking transactions in the general accounts,
which makes it difficult to compare bank balances and the account Purchasing of goods and services
balances recorded in the general accounts.

System for estimating requirements


16. In order to strengthen internal control procedures, bank
accounts should be reconciled with the general accounts at the 22. The volume of purchases is linked to the content of the
end of each month and forwarded for approval to the relevant Agency’s annual work programme, which defines the work needed
official in the administration department. Transactions which to achieve the objectives set in the context of the multiannual
have not been reconciled for two consecutive months should be programme.
subject to particular scrutiny.

23. The efforts made so far by the Agency to improve its sys-
17. The Agency’s payments are generally made through bank tem for planning purchases and for setting it within a multiannual
accounts. However, three ‘petty cash’ sub-accounts are used to context should be pursued and extended. Greater formalisation
make cash payments. The accounts are kept by the Agency’s would enable comparisons to be made between estimates and
accounting officer. actual outcomes with a view to improving the accuracy of sub-
sequent estimates.

18. In order to ensure that accounts and cash-flow are kept


separate the Agency’s accounting officer should submit for Cooperation with the Institutions and other Community
approval to the Director a draft decision concerning the creation bodies
of and operating arrangements for these accounts. This decision
should indicate the maximum amount and type of expenditure
which may be disbursed from these accounts and the person 24. The Agency does not participate in the Interinstitutional
authorised to manage them. Group for the Harmonisation of Purchasing Procedures and, for
this reason, it does not take part in interinstitutional invitations
to tender or in exchanges of information about the purchasing of
goods and services. For everyday purchases, it tries to develop
(1) OJ L 336, 30.12.2000, p. 75. forms of cooperation with the branch offices of the Community
(2) OJ C 372, 28.12.2001. bodies in Copenhagen.
(3) Commission Regulation (EC) No 2909/2000 of 29 December 2000
(OJ L 336, 30.12.2000, p. 75).
(4) In November 2001, the delay ranged from one-and-a-half to four
months. (5) OJ C 373, 27.12.2000 and OJ C 372, 28.12.2001.
C 326/20 EN Official Journal of the European Communities 27.12.2002

25. In order to implement projects which require the com- documents submitted by the tenderers. The modus operandi of the
pilation of specific sets of data, the Agency endeavours to cooper- evaluation committees should be subject to specific instructions
ate with the Statistical Office of the European Communities or so as to guarantee the independence of the assessors.
with the Joint Research Centre in Ispra. A consultant (1) was
recruited for a period of a year to guarantee the availability and
quality of the socio-economic statistics needed to draw up basic 29. In order to provide better guarantees as to the quality of
indicators. The problem of updating these data in subsequent evaluations, the format of the replies to be provided by tenderers
years has not been resolved. should be improved so as to make their content more precise and
easier to compare.

Choice of procedure
Framework contracts
26. In general, the Agency tends to favour invitations to ten-
der. In one case (2), the restricted procedure was used even though
the nature and value of the contract required publication in the 30. For everyday purchases, the Agency employs three-year
Official Journal. framework contracts which may be renewed for two years in suc-
cession. These framework contracts include a clause allowing for
prices to be adjusted in line with market prices for the goods pro-
vided.
Evaluation of bids

27. The criteria for evaluating bids are defined in general 31. Framework contracts often specify a maximum total value
terms, which makes quantitative evaluation difficult. for the purchases to be made. Thought needs to be given to
whether there is any point in having such a clause in a framework
contract, when the specific aim of the latter is to offer a degree of
28. The bids are assessed by an evaluation committee made flexibility and to ensure that purchasing procedures are not
up of three members which gives its opinion on the basis of the repeated (3).

This report was adopted by the Court of Auditors in Luxembourg at its meeting held on 25 and 26 September
2002.

For the Court of Auditors


Juan Manuel FABRA VALLÉS
President

(1) Commitment EEA.50995 totalling 118 000 euro.


(2) Project EEA-ACPC-00-0026.
(3) For the last year of the contract to supply paper and office equipment,
an increase in the number of staff which was unexpected when the
contract was signed led to an increase in requirements of more than
70 000 euro and the contract had to be re-examined by the ACPC.
The administrative procedure involved was correspondingly cumber-
some.
27.12.2002
EN
Table 1
Implementation of the budget for the financial year 2001
(Mio EUR)

Revenue Expenditure

Official Journal of the European Communities


Appropriations in the final budget Appropriations carried over from the Available appropriations
Revenue entered previous financial year (2001 budget and financial year 2000)
in the final Revenue Allocation of
Source of revenue expenditure
budget for the received
financial year commit- carried outstanding appro- commit- carried
entered paid cancelled paid cancelled paid cancelled
ted over commitments priations ted over

Community Title I
subsidies 19,4 18,3 Staff 9,1 8,7 8,1 0,7 0,3 0,5 0,2 0,3 9,6 9,2 8,3 0,7 0,6

Title II
Other subsidies 2,0 1,4 Administration 2,0 1,9 1,4 0,5 0,1 0,5 0,3 0,2 2,5 2,4 1,7 0,5 0,3

Title III
Operating
Other revenue 0,3 0,4 activities 10,6 10,3 3,7 6,9 4,4 3,9 0,5 15,0 14,7 7,6 6,9 0,5

Total 21,7 20,1 Total 21,7 20,9 13,2 8,1 0,4 5,4 4,4 1,0 27,1 26,3 17,6 8,1 1,4

NB: Any discrepancies in totals are due to the effects of rounding.


Source: Data compiled by the Agency — These tables summarise the data provided by the Agency in its own financial statements.

C 326/21
C 326/22 EN Official Journal of the European Communities 27.12.2002

Table 2
Revenue and expenditure account for the financial years 2001 and 2000
(1 000 EUR)
2001 2000

Revenue received during the financial year


Commission subsidies 18 342 17 816
Miscellaneous revenue 1 493 67
Financial revenue 369 423

Total revenue (a) 20 204 18 306

Budgetary expenditure for the financial year


Staff — Title I of the budget
Payments 8 126 7 137
Appropriations carried over 735 456

Administration — Title II of the budget


Payments 1 423 1 570
Appropriations carried over 521 517

Operating activities — Title III of the budget


Payments 3 738 4 505
Appropriations carried over 6 856 4 432

Total expenditure (b) 21 399 18 617

Outturn for the financial year (a-b) (1) – 1 195 – 310

Balance carried over from the previous financial year – 3 117 – 3 517
Appropriations carried over from the previous financial year which lapse 939 628
Re-used revenue from the previous financial year which lapses 86 84
Exchange-rate differences 13 –2

Balance for the financial year – 3 274 – 3 117

(1) The negative balance of the outturn and own capital does not constitute a loss of capital. It arises from the application of the Financial Regulation in respect of revenue (only
revenue received) and expenditure (payments plus appropriations carried over).
NB: Any discrepancies in totals are due to the effects of rounding.
Source: Data compiled by the Agency — These tables summarise the data provided by the Agency in its own financial statements.
27.12.2002 EN Official Journal of the European Communities C 326/23

Table 3
Balance sheet as at 31 December 2001 and 31 December 2000
(1 000 EUR)

Assets 2001 2000 Liabilities 2001 2000

1
Fixed assets ( ) Fixed capital
Buildings 314 306 Own capital (2) 1 009 3 794
Equipment and furniture 407 1 913 Balance for the financial year – 3 274 – 3 117
Computer equipment 266 1 562
Subtotal – 2 265 677
Subtotal 987 3 781
Current liabilities
Stocks 22 13 Commission 9 975 9 324
Other contributors 590 185
Current assets
Non-automatic carry-overs of approps. 821
Commission (3) 9 975 9 324
Other subsidies to be received 590 185 Automatic carry-overs of appropriations 7 291 5 405
Recoverable VAT 376 130 Sundry accounts payable 153 117
Recovery orders 153 117 Payroll deductions 88 153
Sundry accounts receivable 93 105 VAT/Other taxes 79 130
Subtotal 11 187 9 861 Subtotal 18 997 15 314

Cash accounts Suspense accounts


Banks 6 120 3 484 Sums to be re-used 541 764
Cash 2 Deferred payments 1 043 386
Subtotal 6 120 3 486 Subtotal 1 584 1 150

Total 18 316 17 141 Total 18 316 17 141


1
( ) Net fixed assets — In 2001, the Agency took account of the depreciation of its fixed assets (see paragraph 14). As at 31 December 2001, gross fixed assets totalled 3 523 000
euro, from which the sum of 2 536 000 euro (corresponding to depreciation) was deducted.
(2) The negative balance of the outturn and own capital does not constitute a loss of capital. It arises from the application of the Financial Regulation in respect of revenue (only
revenue received) and expenditure (payments plus appropriations carried over).
(3) This amount represents the cumulative total of the annual balances of subsidies not yet paid by the Commission; the corresponding sum shown on the assets side represents
the amounts of financing which the Agency still needs to implement in order to achieve all its objectives.
NB: Any discrepancies in totals are due to the effects of rounding.
Source: Data compiled by the Agency — These tables summarise the data provided by the Agency in its own financial statements.
C 326/24 EN Official Journal of the European Communities 27.12.2002

THE AGENCY’S REPLIES

Implementation of the budget facilitate the monthly reconciliations as they are currently done.
A link with direct banking is also being implemented, which will
facilitate and speed up the reconciliation of the bank statements.

8. The Agency recognises an increase in carry-forward appro-


priations and is fostering a tighter planning of its activities. It An internal auditor has been recruited and will assess the effec-
should be noted however that the Agency is in a growth phase, tiveness of the accounting system and specifically on the recon-
with an increasing budget, and also that part of the appropria- ciliation processes.
tions that were carried forward to 2002 relate to earmarked mul-
tiannual budget funds.
17 and 18. The three petty cash accounts are closed and cash
is currently managed by an imprest administrator. The decision
9. The Agency, during the year 2001, put specific emphasis by the Executive Director to appoint an imprest administrator
on assuring annuality for its administrative titles and hence be also defines the operating principles.
more rigorous in evaluating the validity of amounts carried over.
In doing so it was decided not to use some of the carry-forward
appropriations for outstanding payments, and to provide a better
implementation basis for the budgetary management for the Implementation of financial provisions
coming years.

19 and 20. The Agency recognises the discrepancy between


10. The Agency foresees its translation requirements as part the delegations signed off by the Executive Director and the SI2
of the annual publication planning, which is conducted in paral- implementation. The procedure for assuring the consistency has
lel to the development of its work programme. The Translation been sharpened and the task of security officer has been taken up
Centre invoices its services on an annual basis, so even if some explicitly as a task for the finance group coordinator.
advance payment may be made during the year, the total work
carried out by the Centre for the Agency during the year can only
be determined after the end of the year. As a consequence, the
bulk of the payments corresponding to the work entrusted to the 21. The Agency is developing an electronic document reposi-
Translation Centre during the period 1 January 2001 to 31 Decem- tory that is integrated with the financial SI2 system. This system
ber 2001 was finally paid in March 2002, thanks to the appro- will include links and references to relevant documents, includ-
ing main deliverables. The maintenance of this repository will be
priations that had been carried over for this purpose from 2001
part of the role of the Agency’s programmes, where programme
to 2002.
managers have delegated responsibilities as authorising officers.

11. The Agency will in the future, and at the end of each year,
consolidate the outstanding translation requests that have been System for estimating requirements
put forward to the Translation Centre and hence need to be car-
ried forward to the following year.
22 and 23. The Agency agrees with the comment made by
the Court of Auditors and will be ensuring that the accuracy of
estimates is improved.
Financial statement

14. The Agency inventory system is now in place as acknowl- Procurement; cooperation with other institutions and other
edged by the Court. The synchronisation between the accounts bodies
and the inventory, specifically on depreciation and exchange rates,
will be further developed through regular reconciliations and a
yearly inventory stock taking.
25. The Agency has established a Memorandum of Under-
standing both with Eurostat and with the Joint Research Centre
and it also has to be noted that an extensive annual consultation
takes place on the mutual work programmes. It is however rec-
Management of cash flow ognised that the Agency must continue to foster further integra-
tion and cooperation with other Community bodies and institu-
tions in order to share resources and capacities. With regard to
15 and 16. A new general ledger system (BOB) was installed the referred consultancy work, it was deemed necessary by the
during the month of April 2002 and includes a link to the SI2 Agency that the work was outsourced, since neither internal
budget management system. This link will enable a synchronisa- Agency nor Eurostat staff resources were available to allow to
tion between the budget system and the general ledger and will implement the specific part of the work programme.
27.12.2002 EN Official Journal of the European Communities C 326/25

Evaluation of bids Framework contracts

27. to 29. The Agency recognises the need to develop more


specific guidelines to enable more quantitative evaluation by ten- 30 and 31. The Agency agrees that the price ceilings as
der evaluation Committees and expects to have such guidelines in defined in some framework contracts are of internal nature and
place by the autumn 2002. should not be part of the agreements with contractors.