Final Annual Accounts. Financial year 2013

Transcription

1 Final Annual Accounts Financial year 2013 These accounts have been drawn up and signed off by the Accounting Officer on 11 June 2014 and adopted by the Director on 12 June The opinion of the Management Board was given on 3 July The present annual accounts, together with the opinion of the Management Board, have been sent to the Commission s Accounting Officer, the Court of Auditors, the European Parliament and the Council on 3 July The accounts will be published on the Community body website:

2 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 Preamble Article 133 of the Financial Regulation states that the Commission s Accounting Officer adopts the accounting rules and methods to be applied by all EU institutions and bodies. These accrual-based accounting policies are derived from International Public Sector Accounting Standards (IPSAS) or, by default, International Financial Reporting Standards (IFRS) as respectively issued by the International Public Sector Accounting Standards Board (IPSASB) and International Accounting Standards Board (IASB). These rules have been adopted by the Commission s Accounting Officer, after receiving the opinion of an Advisory Expert Group for Accounting Standards, which provides professional guidance. The accounting systems of the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) comprise general accounts and budget accounts. These accounts are kept in euros on the basis of the calendar year. The budget accounts give a detailed picture of the implementation of the budget. They are based on the modified cash-accounting principle (which differs from cash-based accounting, due to elements such as carryovers). The general accounts allow for the preparation of financial statements, as they show all charges and income for the financial year and are designed to establish the financial position in the form of a balance sheet on 31 December Article 124 of the Financial Regulation sets out the accounting principles to be applied in drawing up the financial statements: on-going concerns basis; prudence; consistent accounting methods; comparability of information; materiality; no netting; reality over appearance; accrual-based accounting. As part of the move to accrual accounting, one important aspect of the exercise of ensuring that transactions made during the year are recorded in the correct accounting year is a cut-off exercise: transactions must be recognised in the period to which they relate. In accordance with Article 76 of the Financial Regulation applicable to the EMCDDA, the Centre s accounts shall comprise: the financial statements of the EMCDDA and the reports on implementation of the budget of the EMCDDA. The accounts of the EMCDDA shall be accompanied by a report on budgetary and financial management during the year. As a consequence, the present document is organised as follows: 2

3 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 EMCDDA 2013 ACCOUNTS A. EMCDDA financial statements...page 4 A1. Balance sheet A2. Economic outturn account A3. Cashflow table A4. Annexes to the balance sheet B. Report on the implementation of the EMCDDA budget....page 10 Budget outturn account for the financial year 2013 C. Certification letter....page 12 Appendix to the EMCDDA s 2013 accounts Report on budgetary and financial management for the financial year page 13 3

4 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 A. EMCDDA financial statements A1 Balance sheet: Assets ASSETS Variation A. NON CURRENT ASSETS Intangible assets , , ,40 Property, plant and equipment , , ,33 Land and buildings , , ,52 Plant and equipment , , ,70 Computer hardware , , ,82 Furniture and vehicles , , ,69 TOTAL NON CURRENT ASSETS A , , ,73 B. CURRENT ASSETS Short-term pre-financing ,80 0, ,80 Short-term pre-financing ,80 0, ,80 Short-term receivables A , , ,60 Current receivables , , ,95 Other , , ,56 Deferred charges , , ,56 Short-term receivables with consolidated EU entities 798, ,37-538,91 Cash and cash equivalents A , , ,30 TOTAL CURRENT ASSETS , , ,70 TOTAL , , ,97 A1. (continued) Balance sheet: Liabilities Variation LIABILITIES Net Assets , , ,08 Accumulated surplus/deficit , , ,42 Economic outturn for the year - profit+/loss , , ,50 TOTAL NET ASSETS A , , ,08 CURRENT LIABILITIES , , ,89 Provisions for risks and charges A , ,03 Accounts payable , , ,92 Current payables A , , ,34 Other A , , ,98 Accrued charges , , ,49 Deferred income 6 363, , ,51 Deferred income with consolidated EU entities , ,00 Accounts payable with consolidated EU entities A , , ,24 Pre-financing received from consolidated EU entities , , ,31 Other accounts payable against consolidated EU entities , , ,07 TOTAL CURRENT LIABILITIES , , ,89 0,00 TOTAL , , ,97 4

5 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 A2. Economic outturn account Variation Contributions of EFTA countries belonging to the EEA , , ,11 Recovery of expenses , , ,70 Revenues from administrative operations 2 038,01 0, ,01 Other operating revenue , , ,21 TOTAL OPERATING REVENUE , , ,59 Administrative expenses , , ,89 All Staff expenses , , ,50 Fixed asset related expenses , , ,13 Other administrative expenses , , ,52 Operational expenses , , ,79 Other operational expenses , , ,79 TOTAL OPERATING EXPENSES , , ,68 SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES , , ,09 Financial expenses , ,19 528,41 SURPLUS/ (DEFICIT) FROM NON OPERATING ACTIVITIES , ,19 528,41 SURPLUS/(DEFICIT) FROM ORDINARY ACTIVITIES , , ,50 ECONOMIC OUTTURN FOR THE YEAR , , ,50 A3. Cash flow table (indirect method) Cash Flows from ordinary activities Surplus/(deficit) from ordinary activities , ,42 Operating activities Adjustments Amortization (intangible fixed assets) , ,61 Depreciation (tangible fixed assets) , ,74 Increase/(decrease) in Provisions for risks and liabilities , ,97 (Increase)/decrease in Short term Pre-financing , ,20 Increase in Short term Receivables , ,02 (Increase)/decrease in Receivables related to consolidated EU entities 538, ,45 Increase/(decrease) in Accounts payable , ,86 Increase/(decrease) in Liabilities related to consolidated EU entities , ,31 Other non-cash movements ,00 Net cash Flow from operating activities , ,98 Cash Flows from investing activities Increase of tangible and intangible fixed assets (-) , ,96 Proceeds from tangible and intangible fixed assets (+) ,82 Net cash flow from investing activities , ,14 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period , , , , , ,55 5

6 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 A4. Annexes to the balance sheet Assets A4.1 Intangible and tangible fixed assets The value for intangible fixed assets purchased during 2013 was: EUR 5 013,25. The value for tangible fixed assets purchased during 2013 was: EUR ,50. The total value for all fixed assets purchased in 2013 was: EUR ,75. The total amount of depreciation for fixed assets at the year-end was: EUR ,48. The new total of non-current assets at 31 December 2013 was: EUR ,14. Intangible fixed assets Intangible assets 2013 Other Computer Software Total Computer Software Total Gross carrying amounts , , ,48 Additions , , ,25 Gross carrying amounts , , ,73 Accumulated amortisation and impairment , , ,96 Amortization , , ,65 Accumulated amortisation and impairment , , ,61 Net carrying amounts , , ,12 Not capitalised cost Research cost Not capitalised development cost * Cost of the year , ,11 * Including yearly amortisation on the capitalised internally-generated intangible assets Entity's individual threshold for Capitalisation of Internally generated Intangible Assets : ,00 6

7 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 Plan, property and equipment (PPE) 2013 Land Buildings Plant and Equipment Computer hardware Furniture and vehicles Total Gross carrying amounts , , , , , ,98 Additions , , , ,50 Gross carrying amounts , , , , , ,48 Accumulated amortization and impairment , , , , ,63 Depreciation , , , , ,83 Accumulated amortization and impairment 0, , , , , ,46 Net carrying amounts , , , , , ,02 A4.2 Current and sundry receivables Current receivables Receivables from Gross Total Net Value Gross Total Net Value Customers , , , ,18 Member States -1,10-1,10 409,26 409,26 Other current receivables (1) , , , ,75 Total , , , ,69 Gross Total Net Value Gross Total Net Value (1) Please specify "Other Current receivables" STAFF , , , ,41 OTHER 0, , ,16 Total , , , ,75 The total amount of short term receivables was: EUR ,87. An amount of EUR ,77 corresponds to the deferred charges (increase of EUR ,56 vs. 2012). The total amount of current receivables at was EUR (increase EUR vs. 2012). The amount in Customers (EUR ,91) corresponds to all amounts still open as receivables (i.e. the total of recovery orders already established but not yet cashed). An amount of EUR -1,10 which corresponds to an open receivable of VAT with the Portuguese State and a value of EUR ,48, which corresponds to a receivable against EMCDDA staff at plus 2 other receivables against the EMCDDA Staff concerning the correction for Rappel : EUR ,63 ( 2011,2012 impact) + EUR ,68 ( 2013 impact) which give a total of EUR ,83 as other current receivables. The amount of EUR -1,10 in Member States corresponds to an amount that should be deducted from the next VAT reimbursement (credit note) with the Portuguese authorities. 7

8 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 A4.3 Cash and cash equivalents: The total of EUR ,85 can be detailed as follows: + EUR ,95 is the total of all bank current accounts at 31 December 2013; + EUR ,90 is the total of the Imprest account (bank accounts + petty cash + regularisation to be done in 2014). A4.4 Liabilities Statement of changes in net assets Net assets Accumulated Surplus / Deficit Economic result of the year Net assets (total) Balance as of 31 December ,61 0, ,61 Balance as of 1 January ,61 0, ,61 Allocation of the Economic Result of Previous Year 0,00 Economic result of the year , ,08 Balance as of 31 December , , ,69 The total of EUR ,69 can be detailed as follows: The economic result of the year, after having applied all corrections in compliance with the rules of accrual accounting, was: EUR ,08 ( A.2 Economic outturn account : page 5). The 2013 Economic outturn account had a positive result of EUR ,08 (increase of EUR ,50 vs. 2012) explained by the difference between a decrease of EUR 4358,59 in operating revenue and a decrease of EUR ,68 in operating expenses and a decrease of EUR 528,41 in financial expenses (see A.2 Economic outturn account : page 5). The new total of net assets at 31 December 2013 is EUR ,69. A4.5 Provision for risks and charges Description Amount Unused amounts reversed Amount (+) (-) Salary adjustement , ,03 0,00 Total , ,03 0,00 The Provision of EUR ,27 previously booked was removed due to the fact that there is no more payable against staff but a receivable related to the new decision concerning the Rappel ( see A4.2 Current and sundry receivables). 8

9 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 A4.6 Current and sundry payables Current payables Vendors , ,99 Other (1) , ,65 Total 328, ,34 (1) Please specify "Other Current payables": OTHER CURRENT PAYABLES , ,65 Total , ,65 The total of current payables in 2013 was: EUR 328,00 (decrease of EUR ,34). The amount in Vendors of EUR ,10 corresponds to all registered invoices received at the year-end but not yet paid and pending confirmation of eligibility at The amount of EUR 328 corresponds to a payment order that was already booked in expenses in 2013 but not paid at A4.7 Deferrals and accruals The total amount of EUR ,21 is made up of: The amount of EUR ,80 (decrease of EUR ,02 vs. 2012) corresponds to the accrued charges confirmed by each deputy authorising officer concerning all 2013 deliverables from the carryover amount for a total of EUR ,93 (increase of EUR ,14 vs. 2012) and EUR ,40 concerning holidays not taken at (decrease of EUR ,48 vs. 2012). An amount of deferred income of EUR ,20 corresponds to the positive outturn calculated on the 2012 and 2013 Norway grant and two amounts corresponding to two recovery orders emitted against Directorate-General ENLARG of the EC (ENP1: EUR and IPA 4: EUR ). These amounts will be cashed by the EMCDDA in A4.8 Accounts payable with consolidated EC entities The total amount of EUR ,56 is composed by: The amount of EUR ,95 in Pre-financing received from consolidated EC entities corresponds to the budget outturn account for 2013 of EUR ,27 and an open IPA 4 pre-financing with the DG ELARG of the EC of EUR ,68 as well as the Other accounts item payable against consolidated EC entities of bank interest of EUR ,61 (EUR ,38 and EUR 991,23: IPA 4). A4.9 Contingent liabilities and commitments for future funding For the commitments still open at the year-end, the Centre has a carryover of EUR ,93. After deducting EUR ,80 related to the cut-off postings that have already been booked in the Economic outturn account, the remaining net carry forward is EUR ,13. 9

10 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 B. Report on the implementation of the EMCDDA budget Budget outturn account for the financial year REVENUE Balancing Commission subsidy , ,00 Other subsidy from Commission (IPA 4) , ,00 Other income , ,41 TOTAL REVENUE (a) , ,41 EXPENDITURE Title I:Staff Payments , ,38 Appropriations carried over , ,43 Title II: Administrative Expenses Payments , ,51 Appropriations carried over , ,32 Title III: Operating Expenditure Payments , ,46 Appropriations carried over , ,23 TOTAL EXPENDITURE (b) , ,33 OUTTURN FOR THE FINANCIAL YEAR (a-b) , ,92 Cancellation of unused payment appropriations carried over from previous year , ,27 Adjustment for carry-over from the previous year of appropriations available at arising from assigned revenue , ,10 Exchange differences for the year (gain +/loss -) +/ ,50-887,81 Prorata Norway Grant , ,50 BALANCE OF THE OUTTURN ACCOUNT FOR THE FINANCIAL YEAR , ,14 Balance year / , ,04 Positive balance from year 2012 reimbursed in year 2013 to the Commission , ,04 Result used for determining amounts in general accounting Commission subsidy - agency registers accrued revenue and Commission accrued , ,73 Pre-financing remaining open to be reimbursed by agency to Commission in year ,27 Not included in the budget outturn: Interest generated by 31/12/2013 on the Commission balancing subsidy funds , ,13 10

11 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/2014 Reconciliation of the accrual-based result with the budget result amount Economic result (+ for surplus and - for deficit) of the consolidation reporting package including table M ,08 Adjustments for Accrual Cut-off (reversal N-1) ,70 Adjustments for Accrual Cut-off (cut- off N ) ,21 Unpaid invoices at year end but booked in charges (class 6) ,73 Depreciation of intangible and tangible assets ,48 Provisions ,03 Prefinancing received in previous year and cleared in the year ,14 Payments made from carry over of payment appropriations ,11 Deferred Charges ,56 Other *) ,61 Asset acquisitions (less unpaid amounts) ,75 New pre-financing paid in the year 2013 and remaining open as at ,80 New pre-financing received in the year 2013 and remaining open as at ,27 Payment appropriations carried over to ,84 Cancellation of unused carried over payment approppriations from previous year ,62 Adjustment for carry-over from the previous year of appropriations available at arising from assigned revenue ,35 Other **) 965,81 total ,77 Budgetary result (+ for surplus) ,27 Including amount of exchange rate differences ,50 Delta not explained 0,00 11

12 EMCDDA 2013 Final Accounts as signed off by the EMCDDA accountant on 11/06/2014 adopted by the EMCDDA Director on 12/06/

13 . Appendix to the EMCDDA 2013 accounts Report on budgetary and financial management for the financial year 2013 I. Introduction I.1. Legal basis Financial Regulation applicable to the EMCDDA The present budgetary and financial management report is drawn up in accordance with Article 76 of the EMCDDA s Financial Regulation. I.2. Budgetary principles The general budget is governed by a number of basic principles: unity and budget accuracy universality: all expenditure and revenue must be incorporated into a single budget document, must be booked on a budget line and expenditure must not exceed authorised appropriations; universality: this principle comprises two rules: the rule of non-assignment, meaning that budget revenue must not be earmarked for specific items of expenditure (total revenue must cover total expenditure); the gross budget rule, meaning that revenue and expenditure are entered in full into the budget without any adjustment against each other; annuity: the appropriations entered are authorised for a single year and must therefore be used during that year; equilibrium: the revenue and expenditure shown in the budget must be balanced; specification: each appropriation is assigned to a specific purpose and a specific objective; unit of account: the budget is drawn up and implemented in euro and the accounts are presented in euro; sound financial management: budget appropriations are used in accordance with the principle of sound financial management, namely in accordance with the principles of economy, efficiency and effectiveness; transparency: the budget is established and implemented and the accounts presented in compliance with the principle of transparency; the budget and amending budgets are published in the Official Journal of the European Union. 13

14 I.3. Management information systems The budget accounting system was provided by ABAC-SAP. The various budget and financial reports are produced using the data warehouse. This integrated system is now fully operational. It allows gains in productivity and reliability, together with the production of reports, statistics and alerts which make it possible to improve budgetary and financial management. I.4. Nomenclature of appropriations The nomenclature of appropriations is as follows: C1: Current appropriations C8: Automatic carried-over appropriations RO: Assigned revenue external and internal 14

15 I.5. Assessment and improvement of the management and internal control systems Characteristics and nature of EMCDDA management and internal control systems In accordance with the Financial Regulation applicable to the EMCDDA, which transposes integrally the text of the European Commission s Framework Financial Regulation nº2343/2002 ( 1 ), the EMCDDA has set its internal procedures for budget execution and internal control, while defining and implementing a partially decentralised management model. As a consequence, both operational and financial decisions required for the implementation of the EMCDDA s work programme and budget have been delegated to the heads of unit/head of scientific division. The Administration unit provides support to managers for budgetary and financial management and execution, as well as for overall internal planning and monitoring. These procedures have been codified and all of the EMCDDA s deputy authorised officers have received specific training and information on their role, duties and liability, in accordance with the provisions of the financial and staff regulations. The key actors and steps of the EMCDDA procedures for budget execution can be summarised as follows: Project manager: initiative and operational input for administrative and financial operations in relation to project implementation (technical specifications for tendering procedures, cost estimate, certified correct for payments) Financial management team: financial and contractual support officers help prepare the administrative and contracting supporting documents with the input of the project manager concerned Budget planning and monitoring team: checks consistency with work programme and budget allocations Financial management team: ABAC initiating officers carry out operations in the EMCDDA s ABAC electronic management and accounting system, prior to the decision of the authorising officer Directorate: the verifying officer carries-out ex ante checks Head of unit/head of scientific division: gives authorisation of budgetary and legal operations, acting as deputy authorising officer by delegation (from the Director as EMCDDA Authorising Officer) for the execution of the tasks/activities of his/her unit, within the limits of the adopted EMCDDA annual work programme and budget Accountant: makes the required financial transactions. The procedures presented above are consistent with the EMCDDA s project-based working methods aimed at integrating activities and resources management, in accordance with activity-based management/activity-based budgeting principles. In this context, the EMCDDA has established procedures for planning, monitoring and reporting, with a clear indication of the actors involved, their roles and responsibilities. Following the adoption of the new Operating framework for the Reitox system in January 2003, a new grant agreement model has been introduced for the annual co-financing of activities by the Reitox national focal points. This agreement requires that an external audit be carried out each year by an independent body or expert in order to certify that the financial documents submitted to the EMCDDA comply with the financial provisions of the agreement, that the costs declared are the actual costs, and that all receipts have been declared. The EMCDDA is currently subject to the following checks and controls: ( 1 ) As last amended by Commission Regulation (EC, EURATOM) No 652/

16 External audit by the European Court of Auditors (twice a year) External audit for specific projects (IPA4) Discharge by the European Parliament (once a year) Internal audit by the European Commission s Internal Audit Service (once a year) Opinion of the European Commission s services on the agency s staff policy plan (once a year) External periodical evaluation (set as every six years in the EMCDDA s founding regulation) Agreement by the European Commission on implementing rules to staff regulations (for each rule) Consent by the European Commission on possible deviation of the EMCDDA Financial Regulation from the European Commission s Framework Financial Regulation for decentralised agencies The European Data Protection Supervisor for compliance with Regulation 45/2001 (by prior notification and upon complaint) The European Anti-Fraud Office (upon complaint) The Ombudsman (upon complaint) Civil Service Tribunal Court of First Instance European Court of Justice (upon complaint). Assessment and improvement of management and internal control systems Key features of the EMCDDA s partially decentralised management model: Actors/level of operations Decentralised level (operational and technical units) Central level (Directorate and Administration unit) Role/operations Operational initiative/input and operational and financial decisions by delegation in order to implement the work programme (WP) and budget Coordination and management of executive planning, monitoring, reporting and assessment of the implementation of the WP and budget. Administrative and financial support, management and control of implementation 16

17 Key actors and processes for the execution of the EMCDDA work programme and budget Level of operations Actors Role/operations Decentralised level (operational and technical units) Central level (Administration unit) Project manager and head of unit/head of scientific division concerned Budget planning and monitoring officer Human ressources management team Financial management team Initiative and operational input for the operations required to implement projects Checks consistency of operations with adopted WP and budget. Budgetary appropriations to be committed are set aside Defines rights and checks compliance with staff regulations for staff-related management and expenditure Prepares the required administrative and legal supporting documents and controls compliance with applicable regulations. Processes the required ABAC operations Central level (Directorate) Verifying officer ex ante verification Decentralised level Head of unit/deputy (operational and technical authorising officer units) Central level (Administration unit) Accounting officer Authorise budgetary and legal commitments and payments Executes and records payments and recovery orders In 2013, following-up on observations and recommendations expressed by the European Court of Auditors and the EU Budget Authority and audits by the European Commission s Internal Audit Service (IAS), the EMCCDA implemented some measures to improve its management and internal control systems as follows: Measures taken in the light of the observations and comments accompanying the Decision on the discharge for Budget and financial management (Observation No 4 of EP discharge decision) Takes note of the comments made by the Court of Auditors regarding the costs of approximately EUR for unused office space borne by the Centre; takes note of the Centre's reply that it is pursuing and increasing its efforts in this field ; requests to be thoroughly updated on further developments on the issue; requests that this matter be solved with urgency; The EMCDDA continues actively to look for an adequate solution to the problem of selling or leasing the premises concerned, namely by asking agencies specialised in the Lisbon real estate market to promote the building to potential buyers (preferably) or tenants. As a result of these efforts, the EMCDDA consulted the EU Budget Authority twice in 2013 (in April, following the interest expressed by a company to lease the building to install a university, and in July, following the interest of an entrepreneur to buy the building with a view to installing a home for the elderly). In both of these cases, no objections were raised by either branch of the Budget Authority. However, for reasons related to each of the actors/projects behind the offers, neither of these proposals has been concluded to date. Furthermore, the EMCDDA has pursued its contacts with the Portuguese authorities, namely the Government and the Municipality of Lisbon, seeking support in the process of selling/renting the building and thus increasing the chances of finding a suitable solution. 17

18 Meanwhile, the EMCDDA has further rationalised and reduced the maintenance costs for the Mascarenhas building, namely by revising the security settings and reducing energy consumption. This was facilitated by the development of further synergies with EMSA, including the joint procurement of the services in question. 2. Performance (Observation No 6 of EP discharge decision) Acknowledges that the third external evaluation of the Centre was launched by the Commission in 2011 in accordance with Article 23 of Regulation (EC) No 1920/2006 and was due to be completed in 2012; calls on the Centre to inform the discharge authority on the measures implemented in light of the recommendations made by the above-mentioned external evaluation; The third external evaluation of the EMCDDA, launched by the Commission in 2011 in accordance with Article 23 of Regulation (EC) No 1920/2006, was completed in June 2012 when the final report was forwarded to the Centre. This included fifteen recommendations which were made to the EMCDDA as a result of the evaluation exercise. An action plan to follow-up on these recommendations was prepared by the Centre and endorsed by the Management Board in July It defined detailed measures to be taken during the implementation of the new three-year work programme ( ), in line with the objectives of this programme, which was also adopted by the Management Board in July In order to track the progress in implementing the action plan, a specific key performance indicator (KPI) was defined in the EMCDDA 2014 work programme, as adopted by the EMCDDA Management Board in December 2013 (i.e. KPI : Degree of implementation of the follow-up action plan to the 3rd external evaluation of the EMCDDA, adopted by the Management Board in July 2012). The EMCDDA has developed an internal monitoring tool to measure this KPI. It will allow the monitoring of the actions implemented within each annual work programme over the period. The actions prepared and implemented in 2013 are currently being recorded using this tool, to be completed in the context of the preparation of the EMCDDA s General Report of Activities (GRA) for Pursuant to the relevant provisions, this GRA will be submitted for analysis and adoption by the Management Board by mid-may 2014, and forwarded to the European Parliament, the Council, the Commission and the Court of Auditors by 15 June Carryover appropriations (Observation No 7 of EP discharge decision) Is concerned that the Court of Auditors identified 51 cases, with a total value of EUR , in which appropriations carried over to 2012 were not related to existing legal commitments and should have been de-committed and paid back to the Commission by the end of 2011; notes that the Centre initiated the process too late and as a consequence, due to restrictions imposed by the IT system, the funds will be blocked for one year and will only be de-committed and paid back at the end of 2012; calls on the Centre to improve its planning in order to avoid such situations in the future; Following the measures put in place already in 2011 to further reduce the volume of appropriations carried forward, in 2012, the EMCDDA reviewed its internal processes to further ensure that: EMCDDA deputy authorising officers de-commit unnecessary open balances of pending commitments without delay; Outstanding commitments which do not relate to legal obligations are de-committed before the end of the year. The EMCDDA elaborated a written procedure on the carry-forward exercise and internal training was 18

19 delivered to the staff members involved in the process. As a result, according to the final data concerning the 2012 budget execution, the appropriations to be carried forward from 2012 to 2013 amount to EUR , representing a reduction of 16 % compared to the previous exercise, e.g. compared to the amount of appropriations carried forward from 2011 to 2012, as mentioned above (EUR ). Concerning the 2013 exercise, the Centre carried-forward an amount of EUR , Location (Observation No 8 of EP discharge decision)... Acknowledges from the Court of Auditors' report that the Centre currently bears the annual cost of about EUR for unused office space in its former building and in the new headquarters; calls on the Centre to continue, in cooperation with the Commission and national authorities, to seek adequate solutions for the unused office space and to keep the discharge authority informed; See point 1 above 5. Treasury policy (Observation No 9 of EP discharge decision)...is concerned by the Court of Auditors' finding that the Centre has not yet adopted and implemented a treasury policy to minimise and spread financial risk while aiming at adequate returns; notes the Centre's replies announcing action on all those matters; calls on the Centre to take all remedial measures as announced without delay and to inform the discharge authority of the actions taken to address that deficiency; In line with the Court s observation and further to the prudent measures already taken to reduce the risk at stake, namely for the procurement of banking services, the EMCDDA has put in place an appropriate policy aimed at periodically monitoring the possible evolution of this risk. 6. Policy on exceptions (Observation No 10 of EP discharge decision) Is concerned that the Centre has not yet adopted a comprehensive policy on exceptions and deviations from established processes and procedures; notes the Centre's replies announcing action on all those matters; calls on the Centre to take without delay all remedies as announced and to inform the discharge authority of the actions taken to address that deficiency; In line with the observation of the Court and further to the procedures already in place for the management of exceptions, the EMCDDA has revised its policy on exceptions to explicitly cover any exception that reflects a deviation from any rule formally adopted and in force at the EMCDDA. 7. Recruitment procedures (Observation No 11 of EP discharge decision). Acknowledges from the Court of Auditors' report that the Centre could improve the recruitment procedures; calls on the Centre to inform the discharge authority of the taken actions to improve the recruitment procedures; considers that some of the provisions of the Staff Regulations may present a considerable administrative burden; therefore encourages the Commission to 19

20 allow for a certain degree of simplification under Article 110 of the Staff Regulations in regard to the agencies; In line with the Court s relevant observations, the EMCDDA has adjusted its recruitment processes to provide for an earlier definition of the content of written tests and interviews (i.e. before the selection board examines the applications received) by taking into account the relative size of the risks at stake and the actual costs and benefits of such an operation. 8. Internal audit (Observation No 14 of EP discharge decision).. Acknowledges that in 2011, the IAS performed a compliance audit on Annual Activity Report and building blocks of assurance ; notes that based on the results of the abovementioned audit, the IAS raised eight recommendations, two of which rated as very important and six as important ; calls on the Centre to implement the 2011 IAS recommendations, together with those from prior IAS audits which remain open and to keep the discharge authority informed; Both of the very important recommendations have been implemented by the agency and closed by the IAS. Out of the six important recommendations, four have been implemented by the agency and closed by the IAS. Concerning the two remaining important recommendations (relating to the establishment of a performance monitoring system including KPIs and the assignment of responsibilities for the verification of recommendations made in ex post control reports): - The setting up of KPIs is an on-going process, the implementation of which started in 2013 with the definition of KPIs for some of areas of activity; it will be completed by 2015, date when it is deemed to cover all EMCDDA activities. - The verification of the recommendations resulting from ex post controls will be implemented where applicable. Measures taken in light of the observations and recommendations expressed by the Internal Audit Service of the European Commission (IAS) Following the adoption in 2013 of the EMCDDA s Business Continuity Plan, two out the three IAS recommendations relating to the 2008 audit on Preparedness for the move have been recommended for closure by the internal auditor. With regard to the remaining recommendation still outstanding ( precaution against damage from floods ), the main responsibility for implementation belongs to the landlord; the EMCDDA has repeatedly addressed the former, stressing the need to carry out the work needed to increase the premises protection from flooding. Within the remit of its responsibility, the EMCDDA has taken out, as a precautionary measure, a specific insurance to cover the risk for damages resulting from possible floods. As regards implementation of IAS recommendations arising from the 2011 audit on Annual activity reporting and building blocks of assurance, two of the four recommendations still outstanding at the end of 2012 have been closed by the internal auditor. Details on the remaining two outstanding recommendations have been provided in paragraph 8 (internal audit) of the section devoted to decisions on the discharge (see above) and will not be repeated here. In February 2013, the IAS carried out an audit on Budget and monitoring within the EMCDDA in respect of which it issued the following three main recommendations: 1. Procurement procedures for non-administrative activities should be based on financing decisions by indication in the work programmes of the relevant global budgetary envelopes, indicative number and type of contracts and launching timeframes; 2. A comprehensive description of the budget preparation process should be set up and all relevant documentation kept in a central file. Moreover, a sound methodology for the preparation of the Activity-Based Budget (ABB) should be created and duly documented. 20

21 3. Expected outputs and results indicated in the work programmes should always be specific, measurable and better timed by setting priorities. As regards recommendation 1, the EMCDDA will implement it, where applicable. The number of operational contracts to be awarded following a call for tender published in the EU Official Journal has been, and it is expected to remain, very low. As regards recommendation 2, the bulk of the documentation relating to budget preparation procedures already exists. However, the EMCDDA has sought and will seek further improvements in this field, including ABB-related aspects. This should be accomplished in the first half of As regards recommendation 3, it has already been implemented with the adoption of the EMCDDA 2014 annual work programme. Measures taken in order to improve the risk assessment and management system as a whole As in previous years, a comprehensive risk identification and assessment exercise aimed at improving risk management in the EMCDDA was carried out throughout The central risk register as well as the sector risk register set up by the ICT unit have been kept updated. Risk analysis has been a continuous exercise at the EMCDDA, although at the stage of preparation of annual work programmes a more systematic review has been conducted by managers. In early 2013, the preparation of a comprehensive document reviewing and laying down the state of play of implementation of the Centre s Internal Control Standards (ICS) was completed and approved in March. As a result of this review, three main areas where implementation of the EMCDDA ICS ought to be improved were identified, namely (and by order of priority): Business continuity (ICS 10), Governance in IT notably as regards project management (one key feature under ICS 7 Operational Structures) and Monitoring of performance supported by KPI (ICS 5). Mitigating measures continue to be taken across the EMCDDA to deal with the related risks. The main improvement as regards compliance with the EMCDDA ICS has been the approval of a fullyfledged Business Continuity Plan (BCP) for the agency as a whole. Without prejudice to future improvements, the plan already appears to be detailed and comprehensive enough to allow the EMCDDA to swiftly act and operate recoveries in the event of emergency or disaster. Continuing action taken in the IT sector is also worth mentioning, since it covered both governance and technical issues: business continuity was ensured without major incidents, in the framework of sound procurement procedures, adequate licensing and proper testing of applications. In articulation with the IT sector risk register, an adequate risk management plan has been applied that identifies for each area the estimated risk level, the controls to be put in place and the list of the on-going programmes and projects that will contribute to the risk reduction activities. A performance monitoring tool integrating planning and monitoring of activities in the work programmes is being developed. The 2014 annual work programme has targeted the design and testing of a performance monitoring ICT tool. Compliance with this goal hinges on availability of the necessary resources. The continuation of the work performed throughout 2013 by the Coordination group has strengthened risk management procedures to the extent that it enhanced the capacity of heads of unit and other key staff to closely monitor all major issues relating to the implementation of core activities, timely achievement of results and delivery of outputs. In respect of risks associated with operations, the unauthorised use of EMCDDA products by a private firm, witnessed in previous years, has stopped. No other risks associated with operations materialised in

22 Measures taken in the light of the observations and recommendations expressed by the European Court of Auditors. 1. The EMCDDA has put in place and implemented several processes to ensure adequate ex ante and ex post verifications regarding grant management, 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 the EMCDDA to check the eligibility and accuracy of the costs claimed. On this basis, the 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, the EMCDDA has taken the following measures, in line with the suggestions of the Court: - Increased the number of annual on-site checks to 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 213 a Reitox Academy on grant management for all NFPs. 2. Pursuant to the assessment of possible risks involved, the EMCDDA has revised its decision concerning ex post verifications to link the latter to the result of risk assessment. 3. Further to the measures taken to ensure business continuity and disaster recovery for some critical ICTbased processes, the EMCDDA Director validated the BCP on 29 September The document contains disaster recovery plans related to various scenarios and identifies available back-up sites. Due to the upcoming renovation of the German Embassy in Lisbon, the EMCDDA is negotiating with the Embassy the rental of the Palacete Relogio Building at Cais do Sodré for their use for the duration of eight months in No final decision has been made by the Embassy. The EMCDDA has offered the rent of the Mascarenhas Building at Santa Apolónia to the Maritime Analysis and Operations Centre Narcotics (MAOC-N),for a discounted price. MAOC-N appears to be interested and negotiations are underway. Meanwhile, the EMCDDA has further rationalised and reduced the running costs for the Mascarenhas building, namely by revising the security settings (EUR ,89), maintenance services (EUR ,27), cleaning (EUR ,39) and reducing energy consumption (EUR ,51) in comparison to This was facilitated by the reduction of services and development of further synergies with EMSA, including the joint procurement of some the services in question. A total saving for the Mascarenhas Building in 2013 was EUR ,06. 22

23 II. Implementation of the budget The actual revenue entered in the budget for the financial year under review was as follows: II.1. Revenue In 2013, the EMCDDA cashed at 100 % all its revenues published in the EU Official Journal (OJ). - Concerning other revenue: a total amount of EUR ,86 corresponding to an amount cashed in 2013 and entered in the 2013 budget as internal assigned revenue (R0) (not published in the OJ) Revenue entered in the budget-published OJ 2013 Actual revenue European Community subsidy , ,00 Norw ay's contribution , ,83 IPA 4 (assigned revenue) , ,00 Total , , Actual revenue European Community subsidy Norway's contribution 23

24 II.2. Expenditure II.2.1. Non-differentiated appropriations (NDA), titles 1 and 2 (C1) Analysis of the data relating to the budget execution of titles 1 and 2 (NDAs) shows a small decrease compared with the 2012 execution rate, in terms of commitments (0,05) and a small decrease in terms of payments (0,09). The execution rate stands at 99,92 % for commitment appropriations and 97,94 % for payment appropriations, against 99,97 % and 98,03 % for 2012, respectively. Total of current appropriations (NDA), titles 1 and 2 (C1) vs 2012 pp Final budget Committed Paid Comm / Bud.% Paid / Comm % Comm / Bud.% Paid / Comm % Comm / Bud. Paid / Comm Title 1 - STAFF , , ,73 100,00% 99,76% 100,00% 99,69% 0,00 0,07 Title 2 - ADM , , ,08 99,62% 90,78% 99,85% 91,49% -0,23-0,71 Total , , ,81 99,92% 97,94% 99,97% 98,03% -0,05-0,09 100,0% 90,0% 80,0% 70,0% 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% Comm / Bud.% Paid / Comm % Paid / Comm % Comm / Bud.% 24

25 II.2.2. Differentiated appropriations (DA), title 3 (C1) Analysis of the execution of title 3 of the 2013 budget shows a increase in execution rate in the use of commitment appropriations (+0,06) compared with 2012 and decrease of payment appropriation (-2,42). The execution rate stands at 99,24 % for commitment appropriations and at 97,31 % for payment appropriations. Total of current appropriations (DA), title3 (C1) Final budget - Commitment appropriations Committed Comm / Final bud. comm. app.% vs 2012 pp Final budget - Paid Comm / Comm / Paid / Final bud. Paid / Final Paid / Final Payment Final Final paym. app. bud.paym. bud.paym. appropriations bud.comm. bud.comm. app. % app. % app.% app. Title 3 - OPERATIONAL , ,75 99,24% , ,13 97,31% 99,18% 99,73% 0,06-2,42 Total , ,75 99,24% , ,13 97,31% 99,18% 99,73% 0,06-2,42 100,00% 90,00% 80,00% 70,00% 60,00% 50,00% 40,00% 30,00% 20,00% 10,00% 0,00% Comm / Final bud. comm. app.% Paid / Final bud.paym. app. % Title 3 - OPERATIONAL 25