From: JEF Auditors Committee (Lisa Ditlmann, Benjamin Fievet, Henrik Manner) The financial statements of JEF Europe regarding the financial year 2015,

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1 Report of the Auditors Committee of JEF Europe for the financial year 2015, done on 14 May 2016 To: The Federal Committee (FC) of the Young European Federalists (JEF) Cc: JEF Executive Board (EB), JEF Secretariat From: JEF Auditors Committee (Lisa Ditlmann, Benjamin Fievet, Henrik Manner) I. General Information We, the Auditors Committee, have checked the following: The financial statements of JEF Europe regarding the financial year 2015, The budget for 2015, as adopted by the 2014 autumn FC and revised by the 2015 spring FC, The profit and loss statement of 2015, The history of the analytical accounts of 2015, The books and the cash book and box, Samples of individual receipts, The updated financial guidelines of JEF Europe, as adopted by the 2014 autumn FC, Minutes of statutory meetings, The activity report for 2015, The external auditors report for During the audit, Secretary General Ioan Bucuraş was present at the European Secretariat and the Auditors Committee was represented in person by Benjamin Fievet and Henrik Manner, with Lisa Ditlmann joining in by Skype. Treasurer Simon Devos joined the audit by Skype. At the date of the audit, the financial year 2015 was closed. The Auditors Committee was therefore able to get a comprehensive overview of the financial state of the organisation. Prior to the internal audit, an external audit (as required by Belgian law) had already taken place. The external audit did not identify any irregularities. The Auditors Committee wishes the Federal Committee to note that a member of the Committee, Mr Manner, was Treasurer of the organisation until the European Congress in Zürich on 23 October In this capacity and until the date mentioned, he was responsible for the financial management and oversight of the organisation during the same financial year 1 (5)

2 which is the subject of this audit. During the audit, Mr Manner recused himself from auditing any and all financial decisions taken by him during his mandate. These decisions were audited by other members of the Committee, Ms Ditlmann and Mr Fievet. II. Observations regarding the follow-up of the recommendations noted in the Auditors Committee's Report of 2015 (concerning the financial year 2014) The following points have been satisfactorily examined and/or resolved: 1. The Treasurer continues to present a report on the financial situation and also an update on the execution of the budget at every Federal Committee and clarifies in particular which amounts of funding were applied for and which amounts of funding were accepted or rejected. Also, the Treasurer updates the members of the Board regularly on the status quo of the budget and cash flow. 2. In previous years, the Auditors Committee has criticized that the lack of a diversification of funds makes JEF Europe highly dependent upon the operational grant of the European Commission. In 2015, we note with approval efforts to diversify funding by the means of several funding programmes and a merchandising project, in addition to internal funding. However, the bulk of funding for JEF Europe activities still comes from two sources, the European Commission and the Council of Europe. The auditors recommended last year and renew their recommendation this year on the continuation of working with foundations and other private sector organisations in order to secure a more diverse base of funding for JEF and to lessen the organisation s dependence on the funding programmes of the bodies mentioned. 3. As recommended by the Auditors Committee in previous years, the phone costs of the Secretariat have been reduced. The reduction is due to a decrease in the cost of the mobile phone for the Secretary General and the general phone costs of the Secretariat. However, the internet costs increased by more than 30% (they more than doubled between 2013 and 2015). The following points are still outstanding: 1. The salary of the Secretary General has remained largely unchanged. The auditors continue to believe that the salary is too low in relation to the quality and quantity of the work that the Secretary General is called upon to deliver, even including per diems and other benefits. The salary remains indexed to Belgian minimum salary and adds up to around EUR per month (excluding per diems and end of the year payments). The auditors note that increases of about 1% in a year in the budgeted amount of the salary have been made in previous years but strongly feel that these increases are not sufficient to remedy the issue at hand. 2. In 2015, the auditors recommended the punctual and correct payment of membership fees and reporting thereof in order to ensure fair and equal treatment of JEF members and sections and to prevent unnecessary work in the European Secretariat, while recognising the varying work load in national sections. The auditors note with disappointment that not all sections have been able to meet the statutory requirements, despite the contact efforts made by the Treasurer and the Board. 2 (5)

3 3. In 2014, the auditors noted limited activity within the Taskforce for Finances and Fundraising. The auditors are troubled to hear that this trend has continued in The Taskforce which is open for members of all sections could be used to meaningfully support the financial management of and help to identify additional funding opportunities for JEF Europe as well as funding and financial management needs within and among the member sections. Member sections should encourage their members to take an interest in this taskforce. III. Additional observations 1. The financial year 2015 was closed with a slight surplus of 2083,63 EUR. 2. Furthermore, JEF has had a solid liquidity and solvency situation and is in good financial shape up to now, even when taking into consideration the organisation s dependency on the European Commission s operational grant. Recent success in the application process for the operational grant secured funding for the years , which gives the organisation a firm planning framework. The auditors also noted with approval that other grant applications have been applied for and accepted and that preparations for the application for the Council of Europe for the work plan for 2017 were well underway. 3. The membership fees comprised in 2015 more than EUR of the income in the operating part of the organisation, which amounts close to 20% of all operating income. This illustrates the importance and significance of steadfast organisational work and growth across the organisation in general and in the member sections particular. The membership fees provide valuable support in terms of co-funding of projects, assisting national and local sections and organising statutory meetings. The membership fees have enabled JEF to provide micro-grants and a twinning project to sections and have been instrumental in fostering effectively partnerships within the European sphere. 4. The auditors noted with considerable concern that the accounting system has been out of use in 2016 due to a computer crash and loss of access to the accounting programme in late The Treasurer and the Secretary General have negotiated with the external accountant in order to have the most essential issues done in a timely manner. The auditors were pleased to learn the Treasurer and the Secretary General have been active in exploring new options for accounting tools and that they consider the issue to be somewhat pressing, a sentiment which the auditors fully share. 5. Registration of new mandate holders with the Belgian officials has been cumbersome. As of the date of audit, new mandate holders do not yet have such means at their disposal as they need, most notably access to the bank accounts. The Treasurer and the Secretary General have been in close communication with the Belgian officials and a solution is being sought momentarily. 6. The financial guidelines were adopted in the Federal Committee meeting in Bologna in autumn According to JEF Statutes, the guidelines will lapse in spring 2017 unless they are readopted. 3 (5)

4 7. The auditors noted that JEF incurs high banking costs, especially from high fees when transferring money outside of SEPA. JEF has currently split banking services between BNP Paribas and ING. IV. Recommendations regarding the outstanding points and the additional observations 1. The Auditors Committee strongly recommends timely and correct reporting and payment of membership fees and adherence of all parties to the commonly agreed Statutes of the organisation. This recommendation also aims to ensure that no section is faced with possibility of losing its voting rights in the coming Federal Committee meeting or European Congresses. 2. In order to bring down phone costs even further, especially the costs of the telephone and internet service for the European Secretariat, the Auditors Committee recommends to explore the possibility of using a fixed rate package and to invite tenders from various service providers. 3. Member sections are encouraged to promote Taskforce for Finances and Fundraising among their members. The auditors also suggest the Board and the Federal Committee to come up with new methods in order to have more JEF members take an interest in and develop the functioning of Taskforce on Finances and Fundraising. 4. Keeping in mind that a secure, reliable and accessible accounting system is essential in sound financial management, the Auditors Committee strongly recommends the Treasurer and the EB to explore as soon as possible new accounting tools and software options and invite tenders for them and to make sure that the accounting system is and will continue to be accessible by relevant parties and its data secure. 5. In order to make sure that proper protocols are always in place to safeguard the transparency and accountability of the financial management of JEF Europe, the Auditors Committee recommends that the financial guidelines are revised as needed and adopted at the FC meeting in autumn 2016 or, at the very latest, spring These new guidelines could include rules on what is or is not eligible for reimbursement and introduce a spending cap even if the specific amount is left for the Treasurer and Secretary General to decide according to the situation. 6. The Auditors Committee suggest exploring possibilities to reduce banking costs, such as closing down redundant accounts, negotiating a fixed-fee agreement with the bank(s), and finding alternative ways of transferring money outside of SEPA. JEF could also explore the possibility of consolidating banking services in only one bank and ask for tenders from relevant banking service providers. Willingness to negotiate consolidation of banking services could potentially give a stronger position to negotiate service fees, resulting in savings. In this case, the Auditors Committee stresses that the security of deposits and sustainability and accountability of the use of banking services need to be given careful consideration. V. Additional recommendations 1. The European Secretariat builds strongly on the support of interns. While many interns manage to secure their individual funding, JEF Europe should continue to build on the 4 (5)

5 European Voluntary Service Framework (EVS) which allows for a more general planning and funding framework for interns. 2. The European Secretariat was unfortunately the object of theft in The insurances that JEF Europe has cover damages and liability in the form of accidents for the personnel working in the office. Although security measures for the office have been strengthened, JEF Europe should explore additional insurance coverage in general and insurances for theft, out-of-office accidents or illness of personnel and events insurance in particular. 3. The auditors noticed that the budget for some events was not as accurate as it could be. Some predictable expenditures and income (especially participation fees) were not included in the budget. The Auditors Committee recommends that all expected income and expenditures for an event be included in the budget even if their amount can only be roughly estimated. 4. For the organising of the congress, a Memorandum of understanding is signed, between JEF Europe and the host national section, indicating the responsibilities and duties (including financial ones) of each party. The Auditors Committee recommends that this practice is extended to the organizing of FCs and all other co-organized events. VI. Concluding observations The Auditors Committee did not find major irregularities in the bookkeeping of JEF Europe and is in general satisfied with the financial management of the organisation. This was confirmed already by the external audit for the financial year 2015, conducted in February The reported profit illustrates good financial conditions of JEF Europe and is the result of solid financial management by the Secretary General and the Treasurer, including efforts to cut costs and to tap into additional funding and to diversify the funding sources. The bookkeeping and financial management of JEF Europe is in a good state. This is thanks to among others the outstanding work of the Secretary General and the current Treasurer. The Auditors Committee therefore commends the commitment of Ioan Bucuraş and Simon Devos. Please feel free to contact us directly should you have any further questions or need any clarifications regarding our report. Done in Brussels on 14 May 2016 Benjamin Fievet ben.fievet@gmail.com Lisa Ditlmann lisa.ditlmann@jef.de Henrik Manner henrik.manner@gmail.com 5 (5)