Financial Statement of the EFTA Surveillance Authority 2007

Transcription

1 Brussels, 3 March 2009 Case No: Event No: Financial Statement of the EFTA Surveillance Authority 2007 This document includes the following: 1. Decision 3/08 of the Committee of Representatives of the Contracting Parties To The Agreement Between the EFTA States on the Establishment of a Surveillance Authority and Court ( ESA/Court Committee ) 2. Letter and Certificate from EFTA Board of Auditors 3. Auditor s Report Authority comments on financial audit 5. Compliance Audit Report Authority comments on compliance audit Rue Belliard 35, B-1040 Brussels, tel: (+32)(0) , fax: (+32)(0) ,

2 DECISION OF THE ESA/COURT COMMITTEE No 3/2008 of 11 December 2008 on the Approval of the Financial Statements for the EFTA Surveillance Authority for the financial year 2007 THE ESA/COURT COMMITTEE, Having regard to the provisions of the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice; Having regard to Regulation 26 of the Authority s Financial Regulations, according to which the ESA/Court Committee, after examining all pertinent documentation, shall approve the Financial Statements and discharge the Authority of its responsibilities for the fiancial period in question, Whereas, on 31 March 2007, the EFTA Surveillance Authority issued a note concerning the Financial Statements for the Financial Year 2006, in accordance with Regulation 13 of its Financial Regulations, Noting the audits, including the compliance audit, and certificate of the Board of Auditors relating to the financial year 2007, HAS DECIDED AS FOLLOWS: Article 1 The ESA/Court Committee hereby approves the Financial Statements of the EFTA Surveillance Authority for the period 1 January to 31 December 2007 and discharges the Authority of its responsibilities for the same period. Done at Brussels, 11 December For the ESA/Court Committee The Chairman Rue Belliard 35, B-1040 Brussels, tel: (+32)(0) , fax: (+32)(0) ,

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18 Case handler: Erik J. Eidem Tel: (+32)(0\ Brussels, 24 September 2008 Case No: EventNo: Dear Sir. Subject: Financial audit 2007 Reference is made to the EFTA Board of Auditor's letter dated l0 June addressed to the Chair of the ESA/Court Committee represented by the Ambassador of Norway to the European Union, concerning the audit of the 2007 accounts. Reference is also made to the Authority's letter dated l0 July 2008, addressed to the EFTA Board of Auditors, conceming the parallel compliance audit for same financial year. [t is recalled that the ESA/Court committee has been provided with a copy of that letter. As a result, the Authority will not address the issues raised therein again in this letter. As regards the observations submitted by EBOA conceming the 2007 accounts, the Authority will comment on them in the same order as in the latter dated l0 June 2008: l. For the financial year 2007, the Authority's total expenditures were 12% (not l5%o as indicated by EBOA) lower than budget, or I,420,724 Euros. The Authority takes note of EBOA's concern and will take this into account for future budget proposals, starting with the budget proposal for However, it would like to point out that the largest savings ("under-spending") relates to the manning table costs, which, inter alia, are calculated on basis of obligations arising from the Staff Regulations. The annual budget proposal will, therefore, include figures for payments of allowances and benefits that do not always materialise. 2. Concerning the use of IFRS, the Authority would like to reiterate its comments from previous years that it presents its accounts in accordance with the requirements of the Financial Regulations. However, the Authority is committed to address the issue of compliance with IFRS when it reviews its Financial Regulations and Rules in the near future. 3. The Authority takes note of EBOA's invitation to expand its statement of accounts and is prepared to discuss the matter with the ESA/Court Committee. Mission of the Principality of Liechtenstein to the European Union Place du Congres, I 1000 Brussels Ruc Bef liard 35, B-1040 Brussels, tel:(+32)(0)2tl6 l8 ll, fbx: (+32)(0)2286 ltl 00,

19 4. Regarding EBOA's call for publication of the audit report on the internet, the Authority is prepared to do so once the ESA/Court Committee has processed the auditor's report and associated comments. However, it would like to point out that the basis for a publication cannot be the need "(...) to maintain harmonised procedures and avoid inconsistence between the three institutions" as neither the institutions nor the EEA EFTA States have called for such procedures. Cc: Mission of Norway to the European Union Mission of lceland to the European Union

20 EUROPEAN FREE TRADE ASSOCIATION The Chairman BOARD OF AUDITORS Your Excellency, Ref / July 2008 We would hereby like to forward to you the report on the Compliance Audit which was carried out of the EFTA Surveillance Authority in March Please note that the EFTA Surveillance Authority has had the opportunity to forward their comments to the draft reports on two occasions. Some comments from the institution which have a direct bearing on the conclusions drawn are included in the report. We would very much welcome the comments and conclusions of the ESA/Court Committee regarding the findings and recommendations in the report. We would be pleased to answer any questions the ESA/Court Committee might have pertaining to the compliance audit reports, and would be prepared to participate in the meeting were the reports is to be discussed if this is deemed desirable. Yours sincerely, [signed] Per A. Engeseth Chairman of the EFTA Board of Auditors H.S.H Nikolaus von und zu Liechtenstein, Chairman of the ESA/Court Committee Liechtenstein Mission to the EU 1 Place du Congrès 1000 Brussels Belgium cc: Members of the ESA/Court Committee President Sanderud, EFTA Surveillance Authority

21 COMPLIANCE AUDIT OF THE EFTA SURVEILLANCE AUTHORITY (ESA) FINAL REPORT EFTA BOARD OF AUDITORS July 2008

22 Table of Contents 1 INTRODUCTION EFTA SURVEILLANCE AUTHORITY Administrative arrangements Remuneration Hours of work and outside activities Performance evaluations and salary increases Procurements GENERAL RECOMMENDATIONS Rent allowance Working hours, overtime and holidays Recruitment of staff from non EFTA countries Procurements Representation Removals Daily Subsistence Allowance (DSA) EBOA Resource Group 2

23 1 Introduction On November 1st 2007 Mr. Per Engeseth, chairman of EFTA Board of Auditors (EBOA), informed the ESA/Court Committee that EBOA would perform compliance audits of the EFTA Surveillance Authority (ESA) and that the compliance audits would form part of the annual financial audits for the financial year Compliance audit is defined by the International Organisation of Supreme Audit Institutions (INTOSAI) as the assessment of whether activities, financial transactions and information reflected in the financial statements are in accordance with the authorities which govern them. From December 18th to 21st 2007 the auditing team, Mr. Einar Johan Gørrissen and Mr. Pétur Vilhjálmsson, representing the EBOA Resource Group (ERG), visited the three EFTA institutions and the Financial Mechanism Office (FMO) for introductory meetings and to give and gather information necessary for the forthcoming audits. The focus of the compliance audits was on the following issues for each of the institutions: 1. Administrative arrangements. 2. Remuneration. 3. Hours of work and outside activities. 4. Performance evaluations and salary increases. 5. Procurements. In addition, a comparison was planned for selected parts of the Staff Regulations and Rules and Financial Regulations and Rules pertaining to the EFTA institutions. The field work took place at the EFTA Surveillance Authority from March 10th to 13th The team would like to acknowledge the assistance and cooperation rendered to us by the staff at ESA, which meant that the audits were carried out effectively and in a spirit of cooperation. At the end of the field visits, an exit meeting was carried out to inform ESA of the preliminary findings. The report on the compliance audit includes two parts. The first part sums up the main conclusions relating to ESA, while part two focuses on the comparison of rules and regulations pertaining to all the EFTA institutions regarding certain areas. Part two of the report is thus identical for each of the EFTA institutions. EBOA Resource Group 3

24 2 EFTA Surveillance Authority 2.1 Administrative arrangements Organisational chart An organisational chart is in place for ESA. It is depicted below. 3.1 ESA, Organisational Chart COLLEGE Assistants Competition and State Aid Directorate - Competition Unit - State Aid Unit Legal and Executive Affairs - Library - Press and Information Administration - Financial Management and Control - Human Resource Management Internal Market Affairs Directorate - General Internal Market Unit - Transport Unit - Infrastructure and Logistical Support - Food Safety Unit - Information Management - External Affairs Job descriptions ESA has no fully fledged job descriptions in place for any of its staff members. We were informed however that ESA is planning to develop job descriptions. Even though there is no requirement in current regulations and rules pertaining to job descriptions, the auditors would recommend the development of job descriptions for all staff members as a tool for evaluating performance, rationalisation of salaries, recruitment, and division of tasks and responsibilities as well as for reporting purposes. Reply from ESA: Regarding performance evaluations, job descriptions and promotions, the Authority had already initiated the work of establishing guidelines and job descriptions at the time the audit was carried out in March In respect of job descriptions, it has been important to the Authority to increase transparency about the organisation's expectations towards staff, while retaining flexibility to reassign staff to new or different tasks in light of its priorities. Draft guidelines and job descriptions were circulated for consultations with departments and the Staff Association, in accordance with Staff Regulation 45, in May 2008, and are expected to be adopted by College during summer EBOA Resource Group 4

25 Reporting ESA reports formally to, and maintains informal contacts with, the ESA/Court Committee. A budget proposal is formulated and approved by the Committee and the management is also relieved of duties for the accounts of a financial year by the Committee. When it comes to reporting on activities, the ESA/Court Agreement article 21 makes it clear that ESA is required to issue an annual report. The article does not however require anyone to approve the annual report. The report is usually ready in the first quarter of each year and made public as well as being distributed to the EFTA states etc. The auditors concluded that ESA fulfilled the requirements regarding reporting in Remuneration Travel The ESA Staff Regulations and Rules, rule 36.2, states that official travel is to be preapproved by head of division or a Member of the College. Members of College preapprove travels of the President. If more than one person is making the same trip the President must pre-approve the travel. Ten samples were taken for the year All had necessary authorisation. The same samples were tested for documentation and calculations. The auditors found no indication of non-compliance with the regulations and rules regarding travel. Dependency benefits The ESA Staff Regulations and Rules, regulation 30, covers dependency benefits. Dependants are defined in regulation 2. Two tests were carried out regarding dependency benefits. Firstly the calculations of benefits were tested. A sample of four members of staff was taken. The allowances were calculated in accordance to the rules in all cases tested. The second test was on rule 30.3 which states that each year every staff members claiming benefits shall complete a special form and hand it in before the 1st of January. Ten staff members were tested with regard to this. Only one had handed the form in within the deadline. Forms for three members of staff were handed in the first week of January. The rest were handed in later than the required time limit. The auditors have been informed that ESA Administration does not, however, authorise payments of benefits if the required form is not handed in. It acknowledges that payments have been made with retroactive effect, when a staff member qualifies for the benefit, if the form has been handed in late. The auditors would recommend that ESA takes the necessary steps to ensure that forms are handed in annually before 1st January for all staff members that claim benefits. EBOA Resource Group 5

26 Reply from ESA: Regarding applications for dependency benefits, the Authority will actively remind staff that it must submit the relevant forms within prescribed time limits. Rent allowance The ESA Staff Regulations and Rules, regulation 25, governs the procedures pertaining to rent allowance for members of staff. Rule 25.4 outlines the calculations of allowances. Three staff members were selected for testing of rent allowances. The first test was on was on entitlement to rent allowance. According to the regulation a staff member who pays rent exceeding 20% of his/her salary shall be entitled to rent allowance. All staff tested paid rent exceeding 20% of their salary. The second test checked that staff members claiming rent allowance had handed in satisfactory evidence of the actual rent paid. Satisfactory in this respect would imply a copy of the rental contract. The auditors found that copies of the rental contracts were in place for all staff claiming rent allowance. Calculations of rent allowances paid were also tested, and were found to be in compliance with the regulations and rules for the samples. 2.3 Hours of work and outside activities Hours of work The ESA Staff Regulations and Rules, regulation 38, stipulates staff members at ESA are supposed to work 40 hours a week. Day-to-day working hours are however not registered systematically. That kind of registration could be useful in terms of planning of activities and creating awareness of how time is used on different tasks. The auditors would recommend that ESA considers if it would be useful to introduce an ICT based time registration system in order to carry out time registration on a regular basis. Outside activities Article 7 of the ESA/Court Agreement states that College Members shall not engage in any occupational activity outside ESA, whether gainful or not. All Members of the College have signed special declarations stating they hold no other positions. In the event of any breach of this the EFTA Court may rule that the member concerned be, according to the circumstances, either compulsorily retired or deprived of rights to a pension or other benefits in its stead. Regulations 6 and 7 of the ESA Staff Regulations and Rules outline that all staff members must be independent in the conduct of their duties and avoid engaging in any activity or refrain from any action, in particular any public procurement, incompatible with the proper discharge of his duties or with his status as servant of the Authority. Regulation 10 makes it clear that no staff member shall accept any honour, decoration, favour, gift or remuneration from any government or from any source external to the Authority, without first obtaining the approval of the Authority. EBOA Resource Group 6

27 The Director of Administration informed the auditors that he was not aware of any members of staff undertaking outside activities. From time to time, ESA receives invitations to give lectures, correct exam papers or produce articles related to their activities. They look positively on such requests, but they are rare and pre approved by ESA. He also informed the auditors that ESA is currently working on developing guidelines on ethics, hereunder issues related to declarations of other remuneration. 2.4 Performance evaluations and salary increases Performance evaluations The ESA Staff Regulations and Rules, regulation 21 covers issues related to salaries. Rule 21.1 is specifically on performance evaluations and states that ESA shall establish guidelines for the evaluation of staff performance. Such guidelines, from 1997, are in place but are not being utilised across the organisation when it comes to performance evaluations. The auditors were however informed that they are currently being reviewed with the assistance of an outside consultant. The first test on performance evaluations focused on the timely completion of the staff performance evaluations. Evaluations are to be completed every 12 months prior to awarding step increases, and new staff shall be evaluated after 6 months of their initial employment. The auditors found that evaluations had not been done for two staff members who were at the top of the salary scale for their position (and who thus did not receive step increases). Also, when looking at three recently recruited staff members only one had been evaluated within the 6 month period (and a different format from the one approved was used). The auditors would recommend that all staff members at ESA are evaluated within the time limits established in the ESA Staff Regulations and Rules. The second test on performance evaluations focused on whether the actual evaluations were carried out in compliance with the guidelines (e.g. that correct forms and scales were used etc.). ESA has adopted a format for staff evaluations that measures six broad categories. For each category one is supposed to use the following scales: excellent, very good, good, not good. Instances of excellent and not good are to be explained in more detail. The auditors found that there was non-compliance with the guidelines for performance evaluations. These included the use of different formats and categories for evaluations across the organisation and the failure to explain the scores given. The auditors recommend that ESA reviews its practice for staff evaluations and introduces and enforces a standardised system across the organisation. The evaluation system should be closely linked to new job descriptions. Reply from ESA: See reply regarding job descriptions (above) EBOA Resource Group 7

28 Promotions Promotions seem to be more widespread in ESA than EFTA and FMO. In 2007 a total of 10 staff members received promotions or change of grade. Promotions are currently not linked adequately to staff evaluations, as the staff evaluation forms used are not uniform across the organisation. This might lead to unwarranted promotions in terms of performance. The auditors would thus recommend that ESA develops internal criteria for promotions and link them to the staff performance evaluation system. Reply from ESA: See reply regarding job descriptions (above) Special step increase For outstanding performance staff members may be granted special salary increases that shall not affect eligibility for the traditional one step a year. In 2007 salary increases were as follows. 3.2 ESA, salary increases in 2007 Step increase Number of staff Percentage 2 steps (special step increase) 3 8% 1 step 34 85% No increase 3 8% Total % A total of 40 staff members were eligible for a salary increase in were granted double steps, 34 got one step and 3 got no increase. In the view of the auditors, special step increases are used moderately in ESA. The auditors found that there are variations between the EFTA institutions concerning the volume and use of special step increases. It is thus recommended that the EFTA institutions enter into discussions on how to apply special step increases in EFTA with the view of securing a uniform application. Due to the nature of the current performance evaluations it is impossible to analyse the link between the performance evaluations and the use of special step increases. With a non-coherent evaluation system which is not utilised uniformly across the organisation, there is a real risk that the award of special steps may be based on subjective and nontransparent criteria rather than performance. The auditors therefore see a reason to stress the recommendation of ESA introducing and enforcing a uniform staff evaluation system across the organisation which serves as the main basis for the award of special step increases. The auditors also tested that all special step increases were approved by the Responsible Member in accordance with the ESA Staff Regulations and Rules, rule The conclusion of that test was that all increases in 2007 had the necessary approval from the Responsible Member. EBOA Resource Group 8

29 Withholding of step increases Rule 21.4 states that an adverse performance may lead to a withholding of step increases. In 2007 there were no adverse performance evaluations, and consequently no withholding of annual single step increases. Three members of staff did not receive an annual step increase in 2007, but this was due to the fact that they had reached the top of their salary scale. 2.5 Procurements Guidelines Unlike the Secretariat and the EFTA Court, ESA has developed a specific procurement procedure document in addition to their Financial Regulations and Rules. The document was last updated in August ESA operates with different procedures for procurements within three different thresholds: Below 32,000, between 32,000 and 130,000 and above 130,000. Procurements in ESA During 2007 no contracts were entered into above 130,000 while two contracts were entered into in the middle bracket. In both cases sufficient number of tenders was sourced and the lowest bids selected. Evaluations were documented in internal documentation and approved by the responsible Member. EBOA Resource Group 9

30 3 General Recommendations One of the focuses of the compliance audit was to compare regulations, rules and practices at all three EFTA institutions within selected areas. This part of the report is identical to all the three EFTA institutions. 3.1 Rent allowance Rent allowances are understandably different between countries and cities. For example the maximum monthly rent allowance in Luxembourg is around 20% higher than in Brussels. However, when looking into rent allowances it became evident that the maximum monthly allowance in Brussels is 1.7% higher in ESA than in the EFTA Secretariat. The reason for the difference lies in different methods of indexation. Although the difference is minor, there is no logical reason for any discrepancy in the amounts received by EFTA staff members residing in Brussels. The auditors would thus recommend that the two set of allowances are established at parity and also that rates are indexed the same way in all cities where EFTA staff members reside. Furthermore, the auditors would recommend that average rental costs for Brussels and Luxembourg are compared at regular intervals to ensure that staff at different locations receives similar benefits. 3.2 Working hours, overtime and holidays There are variations in the rules and regulations pertaining to working hours and public holidays. Fluctuations due to geographical location (i.e. between the EFTA Court which is based in Luxembourg and ESA and EFTA which is based in Brussels) are natural with regards to public holidays. It is more difficult to find any rationale for differing rules and procedures pertaining to public holidays for staff situated in the same country and city. The auditors would recommend that the EFTA institutions considers the rationale for differences pertaining to the use of public holidays and considers if/how these could be harmonised. There are also differences between the EFTA institutions in terms of the core working hours for staff (i.e. when they have to be present). The auditors would again recommend that the EFTA institutions considers the rationale for differences pertaining to core working hours and considers if/how core working hours could be harmonised. The rules for the Secretariat, ESA and the Court are identical when it comes to definition of overtime and compensation for it. 3.3 Recruitment of staff from non EFTA countries While ESA, the EFTA Court and the EFTA Secretariat normally are supposed to recruit staff members from the EFTA states, there are differences. In ESA and the EFTA Court, staff recruited from non-efta states can freely be recruited to both the A and B staff EBOA Resource Group 10

31 part of the organisation (in its capacity as an international organisation). In the EFTA Secretariat however any person from a non-efta country needs the approval of the Council for recruitment to the A category of staff. The auditors would like to ask for information on the rationale for the different procedures regarding recruitment of non- EFTA nationals in the EFTA institutions. 3.4 Procurements The rules regarding the three EFTA institutions are currently not harmonised regarding the use of procurement committees and thresholds related to the use of competitive bidding. The auditors would recommend that the EFTA institutions considers the rationale for differences pertaining to procurement procedures and considers if/how these procedures could be harmonised. 3.5 Representation Not all the EFTA institutions have developed written rules and guidelines regarding the use of representational expenses (including home entertainment, external representation, internal representation, gifts etc), and representation is not used or regulated uniformly across the EFTA institutions. The auditors would recommend that the EFTA institutions considers the rationale for differences pertaining to representation and considers if/how these procedures could be harmonised. 3.6 Removals While the rules outlined in the Staff Regulations and Rules of the various EFTA institutions are identical with regards to removal expenses, the auditors would recommend that the EFTA institutions consider increasing the number of minimum tenders for removal services from two to three. This is to ensure sufficient competition in tendering for removal services. 3.7 Daily Subsistence Allowance (DSA) The auditors found that the amounts for DSA were on parity for staff in the three EFTA institutions. It was however noted that there was a difference in the level of DSA between members of staff on the one hand, and the Secretary General and Deputy Secretaries- General, the Members of the College and the EFTA Court Judges. The auditors would recommend that the EFTA institutions considers the rationale for the differences pertaining to DSA and considers whether the DSA rates should be harmonised. EBOA Resource Group 11

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