RESOLUTION OF THE EUROPEAN PARLIAMENT

of 10 May 2012

with observations forming an integral part of its Decision on discharge in respect of the implementation of the budget of the European Chemicals Agency for the financial year 2010

THE EUROPEAN PARLIAMENT,

—	having regard to the final annual accounts of the European Chemicals Agency for the financial year 2010,

—	having regard to the Court of Auditors’ report on the annual accounts of the European Chemicals Agency for the financial year 2010, together with the Agency’s replies (1),

—	having regard to the Council’s recommendation of 21 February 2012 (06083/2012 – C7-0051/2012),

—	having regard to Article 319 of the Treaty on the Functioning of the European Union,

—	having regard to Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (2), and in particular Article 185 thereof,

—	having regard to Regulation (EC) No 1907/2006 of the European Parliament and of the Council (3) establishing a European Chemicals Agency, and in particular Article 97 thereof,

—

having regard to Commission Regulation (EC, Euratom) No 2343/2002 of 19 November 2002 on the framework Financial Regulation for the bodies referred to in Article 185 of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities (4), and in particular Article 94 thereof,

—	having regard to Rule 77 of, and Annex VI to, its Rules of Procedure,

—	having regard to the report of the Committee on Budgetary Control and the opinion of the Committee on the Environment, Public Health and Food Safety (A7-0126/2012),

A.	whereas the Court of Auditors stated that it has obtained reasonable assurances that the annual accounts of the European Chemicals Agency (‘the Agency’) for the financial year 2010 are reliable and that the underlying transactions are legal and regular,

whereas on 10 May 2011 Parliament granted the Executive Director of the Agency discharge for implementation of its budget for the financial year 2009 (5), and in its resolution accompanying the discharge decision, inter alia:

—	called on the Agency to inform the discharge authority of the steps taken to improve its control system by strengthening its financial circuits, workflows, action plans and risk assessments,

—

encouraged the Agency to effectively ensure that:

—	all components for financing decisions are in place,

—	the information necessary at each level within the organisation is properly defined and addressed,

—	the Annual Work Programme (AWP) shows all the resources made available through the budget,

—	the documentation of financial procedures and checklists is finalised and updated,

—	called on the Agency to further develop the planning and monitoring of its procurement and budget execution so as to reduce the proportion of carry-forward appropriations,

C.	whereas the overall budget of the Agency for the financial year 2010 was EUR 75 500 000 compared with EUR 70 400 000 in 2009, which represents an increase of 7,24 %,

D.	whereas the Agency received a temporary contribution of EUR 36 000 000 from the Union and EFTA,

Budget and financial management

Notes that the Court of Auditors reported that the Agency’s 2010 budget amounted to EUR 75 000 000 while the Agency reported a budget of EUR 75 500 000 for the financial year 2010;

Acknowledges from the Agency that the Agency is financed through fees paid by industry for registrations of chemical substances and by a potential Union contribution;

Recalls that the initial Union contribution to the Agency for 2010 amounted to EUR 25 305 000; notes however that EUR 8 700 000, coming from the recovery of surplus, was added to that amount which, as a result, makes a total Union contribution of EUR 34 005 000 for 2010 (6); acknowledges moreover that, since usually the revenue from fees is only credited to the Agency towards the end of the year, the Union contribution was deemed necessary to allow for the payment of the running costs until October 2010;

Notes that the Agency refers to a temporary contribution from the Union of EUR 36 000 000 for 2010 although that amount includes EFTA’s contribution;

Ascertains from its Report on Budgetary and Financial Management (RBFM) that the Agency committed to entirely reimburse the Union’s temporary contribution to the Commission upon receipt of the corresponding debit note; acknowledges from the Agency that the reimbursement of the temporary contribution occurred in March 2011 and that interest was paid to the Commission;

Acknowledges from its RBFM that the initial budget of the Agency for 2010 amounted EUR 86 481 700; notes, however, that during the year the Management Board adopted two amending budgets reducing the budget expenditure by EUR 11 000 000 (12,75 %) in total;

Notes from the RBFM that the budget for Title I in 2010, EUR 47 214 285, was amended downwards by 8 %, i.e. by EUR 3 787 650,18; acknowledges the Agency’s comment that the main reason for the decrease was a slower recruitment rate compared with the initial plans; notes also that the total execution rate for Title I reached 97,2 %;

Observes also from the RBFM that the expenditure under Title II represented 92,4 % of the amended budget (EUR 10 739 727,92 vs. EUR 11 624 281,05), which is the result of cancellation of several IT consultancy projects which will be implemented under the future outsourcing contract in 2011;

Establishes from its Annual Activity Report (AAR) that the Agency managed to process close to 23 000 incoming fee payments, which resulted in cashed fee income of EUR 349 700 000;

10.

Notes from the Court of Auditors that in 2010 the Agency became fully self-financing but that there is scope for its Financial Regulation to be revised to include a mechanism for retaining surplus from the Agency’s revenue to finance its future activities;

11.

Takes note of the Agency’s reply which states that it will include a proposal for a mechanism to manage surplus revenue in the upcoming review of its Financial Regulation; understands from the Agency’s AAR that an arrangement with an external, highly-rated custodian was set up and a second arrangement is being prepared to ensure the safe-keeping and risk diversification of the accumulated cash reserves that should be the principal source of finance for the Agency until the Financial Framework 2014-2020 is in place; acknowledges from the Agency that cash reserves have been placed for asset management at the European Investment Bank and the Central Bank of Finland;

Carry-over of appropriations

12.

Establishes from the Agency’s RBFM that the carry-overs commitment and payment appropriations, EUR 12 254 740,59, mainly relate to IT costs for support to operations (EUR 5 747 560,42), as well as general administration (EUR 1 555 943,82);

13.

Establishes also from the RBFM that the total amount of EUR 2 533 156,09 was cancelled from the commitment and payment appropriations carried forward from the budget in 2009; notes in particular that this mainly concerns Title II;

14.

Regrets that the Court of Auditors does not mention the Agency’s appropriations carried forward and cancelled in its report on the annual accounts of the Agency for the financial year 2010;

15.

Welcomes the Agency’s efforts in improving the planning and the monitoring of resources and introducing guidelines to foster the principle of annuality; acknowledges in particular from the Agency that it managed to reduce the carry-over rate from 29,7 % in 2009 to 16,3 % in 2010;

16.

Underlines also that as the Agency works with non-dissociated credits in all its Titles, it is unrealistic to expect that all operations budgeted for one calendar year could both be committed and paid up within the same budgetary year, especially for project-type operational expenditure (e.g. IT systems developments);

Procurement procedure

17.

Notes also from the Agency’s AAR that 350 procurements were carried out in 2010, including the multiannual framework contracts for IT, security, quality and management consulting services, for different communication-related matters and for language training;

18.

Acknowledges in particular that a high volume of contracting was carried out under existing framework contracts in the field of IT consulting services, as well as for scientific, technical, environmental and socioeconomic questions relating to REACH;

Human resources (HR) management

19.

Notes from its AAR that in 2010 the Agency recruited more than 120 new staff; acknowledges in particular that a strong focus was placed on recruiting expert staff to enhance the scientific capacity of the Agency; further notes that the recruitment of middle and senior management was also prioritised in order to ensure the implementation of the new organisational structure from January 2011;

20.

Calls on the Agency to improve the planning of its HR activities and projects at the time of establishing its AWP; observes in particular from its AAR that due to the high rate and impact on HR services of the registration deadlines, training activities were de-prioritised and several HR projects were postponed or managed at a lower level than initially foreseen;

Conflict of interests

21.

Noting that the Agency is involved in decisions of high importance for consumers, and taking into account its exposure due to its importance to industry, is looking forward to receiving and discussing the findings and recommendations of the Special Report of the Court of Auditors on conflict of interest situations to be released before the end of June 2012;

22.

Considers that, after the initial build-up phase with a focus on procedures, the Agency needs to ensure that its budget and staff are allocated in a way that allows it to deliver fully on substance, in particular regarding evaluation, restrictions and authorisation;

Internal audit

23.

Considers that the Agency has improved its administrative processes (including financial circuits) and its operational workflow by developing an Integrated Quality Management System (ISO 9001); welcomes in addition the fact that the Agency has integrated risk assessments into its priority setting for audits and its AWP, and, where appropriate, as a basis for decision making; considers this to be a best practice to be followed by the other agencies;

24.

Acknowledges from the Agency that the Internal Audit Service performed an advisory engagement on ‘preparedness for registration’ which was issued and transmitted to the Executive Director on 14 April 2010; underlines that this audit has the objective of assessing the preparedness of the Agency to cope with future registration deadlines;

25.

Welcomes in this respect the establishment by the Agency of a separate registration and submission unit as well as a contingency task force; calls nevertheless on the Agency to improve consistency in the treatment of files; notes that this is a prerequisite for registration activities and that the Agency should increase its efforts in this respect by establishing a standard process for updates of registration rules, and a sufficient information trail and documentation of decisions taken for rules updates;

26.

Calls also on the Agency to prepare its registration unit staff for an increased workload, from today’s level, by training them (and in particular the unit’s middle management) and by establishing back-up arrangements for key staff; underlines that the task of the registration unit should be focused on core activities for which specific knowledge of registration is needed;

27.

Calls on the Agency to respect a stringent top down/bottom up methodology for reporting and clear guiding principles in order to define the relevant indicators and tools to be used;

28.

Acknowledges from the Agency that the Internal Audit Capability performed two assurance internal audits in 2010: one on ‘Staff back-up Process’ and the other one on ‘Fee Invoicing Process’;

Performance

29.

Notes that around the end of 2010, two important deadlines for REACH and the Classification, Labelling and Packaging Regulation passed; welcomes, therefore, the fact that the Agency successfully managed to handle the reception and processing of 25 000 registration dossiers on 4 300 chemical substances that are either commonly used in Europe or are the most hazardous and of over 3 million notifications for over 100 000 substances that are classified and have to be labelled to protect the user;

30.

Welcomes the Agency’s initiatives for enhancing its customer focus and feedback procedures; is particularly pleased that the Agency paid special attention to its communication activities such as stakeholders’ days, publications or helpdesk assistance;

31.

Is satisfied with the successful operation of the Agency in implementing the Union’s chemicals’ legislation;

32.

Considers the developments in the context of IT contracts as a result of the significant costs thereof and the delays witnessed over the build-up phase;

Role of coordinator of the network of agencies

33.

Commends the Agency on its effective work as coordinator of the network of agencies during the 2010 discharge procedure;

34.

Draws attention to its recommendations from previous discharge reports, as set out in the Annex to this resolution;

35.

Refers, in respect of the other observations accompanying its Decision on discharge, which are of a horizontal nature, to its resolution of 10 May 2012 (7) on the performance, financial management and control of the agencies.

(1) OJ C 366, 15.12.2011, p. 33.

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

(3) OJ L 396, 30.12.2006, p. 1.

(4) OJ L 357, 31.12.2002, p. 72.

(5) OJ L 250, 27.9.2011, p. 150.

(6) OJ L 64, 12.3.2010, p. 447.

(7) Texts adopted, P7_TA(2012)0164 (see page 388 of this Official Journal).

ANNEX

EUROPEAN PARLIAMENT RECOMMENDATIONS OVER PAST YEARS

European Chemicals Agency

2008

2009

Performance

The Agency would benefit from developing feedback procedures and from developing a stronger customer focus

Requests that the Court of Auditors undertake performance audits of the Agency

Budgetary and financial management

—	Calls on the Agency to take steps to improve the planning and the monitoring of its resources and appropriations (41 % of the commitment appropriations for operational activities were carried over and 37,5 % were cancelled)

—	Calls on the Commission to examine ways of ensuring that the principle of needs-based management is implemented in full (Cash Reserves in 2008: EUR 18 747 210,75 )

Calls on the Agency to further develop the planning and monitoring of its procurement and budget execution so as to reduce the proportion of carry-forward appropriations; notes, in fact, that the Court of Auditors registered a carry-forward of EUR 20 000 000 (29 % of the appropriations) to the budgetary year 2010, approximately 88 % of which corresponds to activities not yet implemented (or, in some cases, goods not received) at the year-end; remarks, furthermore, that 5 % of the appropriations (EUR 3 000 000 ) were cancelled

Human resources

—	Calls on the Agency to take care of the implementation of the recruitment procedure

—	Transparency issues: in 14 recruitment procedures the independence of the members of the selection board was not guaranteed, owing to the fact that the Director himself chaired the Board

—	Commends the Agency for deciding that the Director will no longer take part in the deliberations of selection boards

—	Calls on the Agency to put in place well-defined handover procedures

Important for the Agency to keep monitoring the implementation of its budget and recruitment plan

Internal audit

The audit of three procedures showed weaknesses in the documentation summarising the work of the selection boards (lack of justification)

—	Calls on the Executive Director of the Agency to inform the discharge authority of the content of its audit plan

—	Calls on the Agency to inform the discharge authority of the steps taken to improve its control system by strengthening its financial circuits, workflows, audits, action plans and risk assessments

—

Encourages the Agency to effectively ensure that:

—	all components for financing decisions are in place,

—	the information necessary at each level within the organisation is properly defined and addressed,

—	the work programme shows all resources made available through the budget,

—	the documentation of financial procedures and checklists is finalised and updated