52003TA1230(11)

Report

on the financial statements of the European Monitoring Centre on Racism and Xenophobia for the financial year 2002, together with the Centre's replies

(2003/C 319/11)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the European Parliament and to the Council, in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002(1).

2. The Court has examined the financial statements of the Centre for the financial year ended 31 December 2002. In accordance with Article 12(8) of Council Regulation (EC) No 1035/97(2), the budget was implemented on the responsibility of the Executive Director. This responsibility includes the drawing-up and presentation of the financial statements(3), in accordance with the internal financial provisions adopted pursuant to Article 12(12) of Council Regulation (EC) No 1035/97. The Court of Auditors is required pursuant to Article 248 of the Treaty establishing the European Community to examine these accounts.

3. The Court carried out the audit in accordance with its auditing policies and standards. These have been adapted from generally accepted international auditing standards to reflect the specific characteristics of the Community context. The Court carried out such tests of the accounting records and applied such other audit procedures as it deemed necessary in the circumstances. Through this audit the Court obtained a reasonable basis for the opinion expressed below.

4. This examination has enabled the Court to obtain reasonable assurance that the annual accounts for the financial year ended 31 December 2002 are reliable and that the underlying transactions, taken as a whole, are legal and regular.

OBSERVATIONS

Introduction

5. The Centre was established by Council Regulation (EC) No 1035/97. The Centre's task is to collect and analyse objective, reliable and comparable information on racist, xenophobic and anti-Semitic phenomena, so as to enable the European Union to fulfil its obligation to respect fundamental rights when formulating and applying its policies. In order to do this, the Centre is required to set up and coordinate a network of national centres for the collection of information on racism and xenophobia (RAXEN) and to carry out research into these phenomena.

Implementation of the budget

6. Table 1(4) shows the implementation of the appropriations of the financial year 2002 and the appropriations carried over from the previous financial year.

7. The 2002 appropriations committed totalled 6 million euro. Payments made against these commitments amounted to 4,5 million euro. The balance of the appropriations was either carried over (1,5 million euro) or cancelled (0,2 million euro). With regard to the appropriations for operating activities (3,0 million euro), the amount carried over, 1,2 million, i.e. 40 % of the appropriations allocated, remains high. The Centre should continue its efforts to reduce still further the proportion of appropriations carried over, the volume of which hardly changes from one year to the next.

8. Numerous provisional commitments were carried over automatically, contrary to the provisions of Article 6 of the Centre's Financial Regulation.

9. Recovery orders are often drawn up a posteriori, once the funds have been received, which is not in accordance with Article 23 of the Centre's Financial Regulation and makes effective monitoring of revenue to be collected impossible (for example, no recovery order has yet been issued for an amount of 60000 euro owed by the Austrian government for the reimbursement of rent).

Financial statements

10. The revenue and expenditure account and the balance sheet published by the Centre in its activity report for the financial year 2002 are presented in summary form in Tables 2 and 3.

11. In the revenue and expenditure account, the most striking development concerns the balance for the financial year, which has changed from an almost break-even situation to a deficit of 1,6 million euro. Although a subsidy of 6,1 million euro was allocated to the Centre and entered in the Commission's commitment appropriations, the corresponding payment appropriations only came to 4,3 million euro. This situation impedes implementation of the Centre's work programme. In addition, the first instalment of funds requested in March 2002 was not paid until June 2002, which created cash-flow problems. The Centre and the Commission should improve their financial coordination in order to avoid a recurrence of such situations.

Legality and regularity of the underlying transactions

12. A member of staff who had no authorisation signed a contract which was not covered by a commitment approved in due form by the Financial Controller. Problems of the same type have been brought to the Centre's attention by the Court in previous years, in particular in the Court's report concerning the financial year 2001(5). It is a question of a persistent internal control problem, which the Centre has endeavoured to rectify, but as yet to no avail.

Management of contracts

13. The contracts with the RAXEN national focus points (see paragraph 5) were renewed for the year 2002 in April. Commitment appropriations totalling 1,6 million euro were earmarked for this. The renewals were carried out without any evaluation of the results of the contracts for the preceding year and, in one case, even before these results had been provided. In addition, no evaluation procedure has been set up for validating the interim payment requests.

14. With regard to the other types of contract, the way they are managed differs from one unit to another, and this management would benefit from being rationalised so as to make it more efficient and economical. For instance, no fewer than four contracts were concluded with various undertakings, travel agencies and specialist companies in connection with the organisation of meetings and seminars. The Centre uses two different printing companies to print its publications. In some cases no contract was signed with the service provider, which is contrary to the Financial Regulation.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 15 and 16 October 2003.

For the Court of Auditors

Juan Manuel Fabra Vallés

President

(1) OJ L 248, 16.9.2002, p. 1.

(2) OJ L 151, 10.6.1997, p. 6.

(3) As required pursuant to Article 12(10) of Council Regulation (EC) No 1035/97, the accounts for all the Centre's revenue and expenditure for the financial year 2002 were drawn up on 27 February 2003 and then forwarded to the Court of Auditors. These accounts were received by the Court on 3 March 2003. A summarised version of these financial statements is presented in the tables annexed to this report.

(4) All the tables in this report were drawn up on the basis of the most exact values possible for the data used. For presentation purposes, the figures were rounded, which may produce minor differences in the totals. A dash indicates a non-existent or zero value and 0,0 indicates a value below the rounding threshold.

(5) Similar problems were noted before, during the audits carried out in previous years; see, in particular, the Court's previous report concerning the financial year 2001, paragraphs 18 to 20 (OJ C 326, 27.12.2002, p. 74).

Table 1

European Monitoring Centre on Racism and Xenophobia - Implementation of the budget for the financial year 2002NB:

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

Source:

Centre data. These tables summarise the data supplied by the Centre in its own financial statements.

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Table 2

European Monitoring Centre on Racism and Xenophobia - Revenue and expenditure account for the financial years 2002 and 2001

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NB:

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

Source:

Centre data.

Table 3

European Monitoring Centre on Racism and Xenophobia - Balance sheet as at 31 December 2002 and 31 December 2001NB:

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

Source:

Centre data. These tables summarise the data supplied by the Centre in its own financial statements.

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The Centre's Replies

7. (i) A large part of the Centre's operational activities are seasonally biased towards the end of the financial year. The final invoices relating to the RAXEN network, which represents around 50 % of the operational appropriations carried forward (which themselves represent over 80 % of the total appropriations carried forward) are usually received in November and December each year. Before these invoices can be paid, the RAXEN data that is supplied in parallel has to be approved, which can result in these invoices being paid at the beginning of the following year.

(ii) The execution of the budget and the implementation of the work programme in 2002 were affected adversely by the slow payment of the subsidy and the low level of payment appropriations available to the Centre during the year. However, the Centre is continuing its efforts to further improve the implementation of the budget.

8. The Centre agrees with the observations made by the Court. The Centre will take the necessary action to ensure that the respective legal requirements will be adhered to in the future.

9. The Centre agrees with the observations made by the Court and has taken appropriate measures to recover money on a timely basis.

11. The Centre welcomes the comments of the Court in respect of the low level of payment appropriations received and the delayed payment of the subsidy.

The Centre has already taken measures to avoid similar problems in the future by implementing the new formal procedure that was imposed by the Commission in 2003 for receiving payment of the annual subsidy. The subsidy will now be paid to the Centre by the Commission in four instalments, each instalment being paid around six weeks after the submission of a written request by the Centre.

12. With the implementation of the new financial regulation in 2003, the internal control system was adapted to meet the new requirements and to address already known weaknesses and shortcomings.

As part of the implementation of the new financial regulation in 2003, the Centre has provided training to all authorising officers explaining clearly the difference between a delegation for the creation of budgetary commitments and a delegation for the creation of legal commitments.

13. An external evaluation of all the deliverables took place in January and February 2003 and a meeting with the evaluators was held in Vienna. The results were communicated to the NFPs to improve the quality of the reports. To improve further the situation in 2003 the evaluation is being done on a continuous basis.

14. The Centre agrees with the observations made by the Court and has already taken measures to avoid such problems in the future.

For example, in 2003 the Centre joined the Commission's framework contracts for IT supplies and for publications. The Centre is also party to the new framework contract regarding accommodation/travel arrangements that is currently being drawn up by the Commission.