# C_2006110EN.01004601.xml

| 9.5.2006 | EN | Official Journal of the European Union | C 110/46 |
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9.5.2006

EN

Official Journal of the European Union

C 110/46

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Opinion of the European Economic and Social Committee on the Draft Commission Regulation (EC, Euratom) amending Regulation (EC, Euratom) No 2342/2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities

(SEC(2005) 1240 final)

(2006/C 110/09)

On 12 October 2005 the European Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned Draft Commission Regulation.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 24 February 2006. The rapporteur was Mr Burani.

At its 425th plenary session, held on 15-16 March 2006 (meeting of 15 March), the European Economic and Social Committee adopted the following opinion by 146 votes to one with one abstention.

1.   Conclusions

| 1.1 | The EESC congratulates the Commission on its complex, meticulous work on simplifying administrative procedures; however, it notes a certain discrepancy between the statement made at the beginning of the Explanatory Memorandum (‘the following draft ... deals with technical amendments which can be introduced under the current Financial Regulation’) and the actual scope of many of the amendments. |
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1.1

The EESC congratulates the Commission on its complex, meticulous work on simplifying administrative procedures; however, it notes a certain discrepancy between the statement made at the beginning of the Explanatory Memorandum (‘the following draft ... deals with technical amendments which can be introduced under the current Financial Regulation’) and the actual scope of many of the amendments.

discrepancy between the statement

technical

and the actual scope of many of the amendments

| 1.1.1 | Many of the ‘technical’ amendments concerning relations with businesses and the public are ‘political’ in nature and scope: greater transparency, streamlining procedures, faster responses and greater confidence in the social partners are signs of welcome progress in public governance. |
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1.1.1

Many of the ‘technical’ amendments concerning relations with businesses and the public are ‘political’ in nature and scope: greater transparency, streamlining procedures, faster responses and greater confidence in the social partners are signs of welcome progress in public governance.

| 1.2 | At the same time the EESC stresses the need for caution: the desire to benefit the social partners must take into account the fact that there must be a limit to flexibility for treasury administrators — i.e. potential losses must be set against actual savings in that difficult but necessary exercise known as risk assessment. This exercise may be very unpopular with administrators but it is the only sensible path to take. |
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1.2

At the same time the EESC stresses the need for caution: the desire to benefit the social partners must take into account the fact that there must be a limit to flexibility for treasury administrators — i.e. potential losses must be set against actual savings in that difficult but necessary exercise known as risk assessment. This exercise may be very unpopular with administrators but it is the only sensible path to take.

need for caution

potential losses

actual savings

risk assessment

2.   Background

| 2.1 | The proposal lays down implementing rules for Financial Regulation No 1605/2002, which is currently in force. In order to shorten implementation times, it also takes into account a number of technical amendments made by the new Proposal for a Council Regulation on the Financial Regulation (1) which is in the process of being adopted. The EESC has already issued an opinion on the latter document (2). |
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2.1

The proposal lays down implementing rules for Financial Regulation No 1605/2002, which is currently in force. In order to shorten implementation times, it also takes into account a number of technical amendments made by the new Proposal for a Council Regulation on the Financial Regulation (1) which is in the process of being adopted. The EESC has already issued an opinion on the latter document (2).

implementing rules

1

2

| 2.2 | As in its earlier opinion, the EESC refrains from commenting on strictly technical accounting aspects, which can be addressed more effectively by technically qualified EU bodies with direct experience in the matter. Instead, as in its earlier opinion, it focuses on rules which could affect third parties (civil society organisations) which enjoy relations with the European institutions. |
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2.2

As in its earlier opinion, the EESC refrains from commenting on strictly technical accounting aspects, which can be addressed more effectively by technically qualified EU bodies with direct experience in the matter. Instead, as in its earlier opinion, it focuses on rules which could affect third parties (civil society organisations) which enjoy relations with the European institutions.

| 2.3 | Three of the technical accounting principles — unity, annuality, unit of account — remain essentially unchanged and are just slightly amended or clarified. As regards the fourth principle — sound financial management — the proposal is based on existing criteria but clarifies the content of an ex ante evaluation and provides clearer guidelines on the scope of ex ante, interim and ex post evaluations, taking into account the proportionality principle. The EESC is very pleased to note the Commission's intention to ‘redirect’ the priorities of the evaluation, ‘in order to focus on proposals with a real impact on business and citizens’. |
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2.3

Three of the technical accounting principles — unity, annuality, unit of account — remain essentially unchanged and are just slightly amended or clarified. As regards the fourth principle — sound financial management — the proposal is based on existing criteria but clarifies the content of an ex ante evaluation and provides clearer guidelines on the scope of ex ante, interim and ex post evaluations, taking into account the proportionality principle. The EESC is very pleased to note the Commission's intention to ‘redirect’ the priorities of the evaluation, ‘in order to focus on proposals with a real impact on business and citizens’.

sound financial management

ex ante

ex ante

ex post

proportionality

a real impact on business and citizens

| 2.4 | Again mindful of the expectations of business and the public, and concerned to ensure that public funds are used sensibly, the Commission stresses that pilot projects and preparatory actions should be subject to an evaluation if they are to be continued as a programme. However, in order to simplify procedures, where projects or actions have already been evaluated, as in the case of joint actions undertaken by the Commission and the Member States, such evaluation should not be duplicated. |
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2.4

Again mindful of the expectations of business and the public, and concerned to ensure that public funds are used sensibly, the Commission stresses that pilot projects and preparatory actions should be subject to an evaluation if they are to be continued as a programme. However, in order to simplify procedures, where projects or actions have already been evaluated, as in the case of joint actions undertaken by the Commission and the Member States, such evaluation should not be duplicated.

evaluation

3.   General comments

| 3.1 | Of course, the comments made by the EESC in its above-mentioned opinion on the Proposal for a Regulation apply to the implementing rules as well. Although the simplified procedures and more flexible criteria for applying the rules are to be welcomed, it would not be acceptable if it were to become the norm to consider every sum below a pre-established threshold as negligible. In other words, the EESC agrees that the thresholds below which simplified procedures are to be used should be raised, but that does not mean that a more relaxed attitude can be adopted or that the level of control of expenditure can drop under the pretext that any material damage would not, in practice, affect the budget as a whole. |
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3.1

Of course, the comments made by the EESC in its above-mentioned opinion on the Proposal for a Regulation apply to the implementing rules as well. Although the simplified procedures and more flexible criteria for applying the rules are to be welcomed, it would not be acceptable if it were to become the norm to consider every sum below a pre-established threshold as negligible. In other words, the EESC agrees that the thresholds below which simplified procedures are to be used should be raised, but that does not mean that a more relaxed attitude can be adopted or that the level of control of expenditure can drop under the pretext that any material damage would not, in practice, affect the budget as a whole.

| 3.2 | Without wishing to refer to the abused and over-invoked principles of public morality, the EESC points out the danger of adopting a less vigilant attitude towards the legality of expenditure transactions concerning amounts considered to be ‘low’, particularly in the case of calls for tender and grants. The public must not receive the impression that, because procedures are being streamlined, it will be possible to find unlawful ways of obtaining funds from public authorities: a perception of this kind would be a blow to Europe's image. |
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3.2

Without wishing to refer to the abused and over-invoked principles of public morality, the EESC points out the danger of adopting a less vigilant attitude towards the legality of expenditure transactions concerning amounts considered to be ‘low’, particularly in the case of calls for tender and grants. The public must not receive the impression that, because procedures are being streamlined, it will be possible to find unlawful ways of obtaining funds from public authorities: a perception of this kind would be a blow to Europe's image.

| 3.3 | The EESC believes that careful scrutiny of OLAF reports by the Commission's accounting authorities would reveal whether existing and forthcoming simplifications are sound and where any weak points are: the information on exposed fraud cases could provide useful pointers. |
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3.3

The EESC believes that careful scrutiny of OLAF reports by the Commission's accounting authorities would reveal whether existing and forthcoming simplifications are sound and where any weak points are: the information on exposed fraud cases could provide useful pointers.

4.   Specific comments

| 4.1 | The new Article 85(a) concerns appeals by third parties against a Commission decision imposing a fine, constraint or penalty: to protect the Community's interests the accounting officer has to require the petitioner to provisionally lodge the amounts concerned or else provide a financial guarantee (in technical terms, surety). The guarantee must stipulate that — should the appeal be turned down — the guarantor will pay the amount requested by the authority immediately, unconditionally and without the need for prior prosecution of the debtor. Technically, this is surety which must be redeemed at the first request, along the lines of the estoppel principle used by many tax authorities and customary in calls for tender. |
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4.1

The new Article 85(a) concerns appeals by third parties against a Commission decision imposing a fine, constraint or penalty: to protect the Community's interests the accounting officer has to require the petitioner to provisionally lodge the amounts concerned or else provide a financial guarantee (in technical terms, surety). The guarantee must stipulate that — should the appeal be turned down — the guarantor will pay the amount requested by the authority immediately, unconditionally and without the need for prior prosecution of the debtor. Technically, this is surety which must be redeemed at the first request, along the lines of the estoppel principle used by many tax authorities and customary in calls for tender.

appeals by third parties against a Commission decision

financial guarantee

| 4.1.1 | The EESC has no particular objections to this kind of guarantee. It merely notes that surety which is to be redeemed at the first request is more burdensome than normal surety and that commissions are proportionate to the length of validity of the guarantee. In view of the burden incumbent on the petitioner, the procedures for examining appeals should be made moderately more expeditious than they are at present. Although it does not directly concern the Financial Regulation or its implementing rules, this aspect, which is regretted by certain social partners, warrants close analysis in the context of administrative authorities' relations with third parties. |
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4.1.1

The EESC has no particular objections to this kind of guarantee. It merely notes that surety which is to be redeemed at the first request is more burdensome than normal surety and that commissions are proportionate to the length of validity of the guarantee. In view of the burden incumbent on the petitioner, the procedures for examining appeals should be made moderately more expeditious than they are at present. Although it does not directly concern the Financial Regulation or its implementing rules, this aspect, which is regretted by certain social partners, warrants close analysis in the context of administrative authorities' relations with third parties.

procedures for examining appeals

| 4.2 | The new Article 90 lays down, inter alia, that where procurement and grants linked to sectoral programmes are concerned, adoption of the annual work programme is considered as the financing decision necessary for the expenditure to be included in the Community budget. Although this is an internal accounting measure, it may well speed up the procedures for allocating funds and the EESC therefore believes it could benefit creditors or beneficiaries. |
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4.2

The new Article 90 lays down, inter alia, that where procurement and grants linked to sectoral programmes are concerned, adoption of the annual work programme is considered as the financing decision necessary for the expenditure to be included in the Community budget. Although this is an internal accounting measure, it may well speed up the procedures for allocating funds and the EESC therefore believes it could benefit creditors or beneficiaries.

inter alia

procurement

grants linked to sectoral programmes

financing decision

| 4.3 | Article 129 is designed to simplify the management of contracts with a value below specified thresholds. Hence, where the amounts concerned are relatively small, the authority is authorised to use a ‘negotiated procedure’ (or, to be more accurate, private treaty), after consulting a number of candidates, specifically:






  — | for contracts with a value less than or equal to EUR 60 000: five candidates; |
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4.3

Article 129 is designed to simplify the management of contracts with a value below specified thresholds. Hence, where the amounts concerned are relatively small, the authority is authorised to use a ‘negotiated procedure’ (or, to be more accurate, private treaty), after consulting a number of candidates, specifically:

management of contracts

‘negotiated procedure’

—

for contracts with a value less than or equal to EUR 60 000: five candidates;

| — | for contracts with a value less than or equal to EUR 25 000: three candidates; |
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—

for contracts with a value less than or equal to EUR 25 000: three candidates;

| — | contracts with a value less than or equal to EUR 3 500 may be awarded on the basis of a single tender. |
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—

contracts with a value less than or equal to EUR 3 500 may be awarded on the basis of a single tender.

In practice, the new provision does not introduce any new elements but merely raises the thresholds laid down by the previous rules.

| 4.3.1 | Articles 130 and 134 also introduce a number of simplifications. Article 130 states that, for contracts with a value below EUR 60 000, the contracting authority may limit the documents relating to the invitation to tender ‘to what is strictly necessary’ (on the basis of its own criteria and under its own responsibility, of course). Article 134 provides that the documentary evidence of eligibility to take part in the call for tenders may be replaced by a declaration on the candidate's or tenderer's honour, without prejudice to the authority's right to request the evidence supporting that initial declaration at a later date. |
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4.3.1

Articles 130 and 134 also introduce a number of simplifications. Article 130 states that, for contracts with a value below EUR 60 000, the contracting authority may limit the documents relating to the invitation to tender ‘to what is strictly necessary’ (on the basis of its own criteria and under its own responsibility, of course). Article 134 provides that the documentary evidence of eligibility to take part in the call for tenders may be replaced by a declaration on the candidate's or tenderer's honour, without prejudice to the authority's right to request the evidence supporting that initial declaration at a later date.

a number of simplifications

limit the documents relating to the invitation to tender ‘to what is strictly necessary’

declaration on the candidate's or tenderer's honour

| 4.3.2 | Another simplification introduced by Article 134 is the waiver of the obligation to submit documentary evidence if such evidence has already been submitted to that or another contracting authority for another purpose no earlier than six months previously. In this case, too, the documentary evidence is replaced by a declaration on the candidate's or tenderer's honour. |
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4.3.2

Another simplification introduced by Article 134 is the waiver of the obligation to submit documentary evidence if such evidence has already been submitted to that or another contracting authority for another purpose no earlier than six months previously. In this case, too, the documentary evidence is replaced by a declaration on the candidate's or tenderer's honour.

waiver of the obligation to submit documentary evidence

| 4.3.3 | Article 135 also makes concessions concerning the documentary proof of candidates' or tenderers' financial, economic, technical and professional capacity. The article stipulates that the authority may, on the basis of their assessment of the risks, decide not to require this proof. The facility is, however, limited to contracts with a value equal to or less than EUR 60 000 where the beneficiary of the contract is the authority itself or to contracts with various different values (depending on the case) where the beneficiary is a third party. Another restriction is the stipulation that, where it is decided not to require proof, no pre-financing or interim payment may be made: this is a guarantee for the authority but an important consideration for the other party, who may decide to submit the documentary proof anyway to avoid what could be a considerable expense. |
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4.3.3

Article 135 also makes concessions concerning the documentary proof of candidates' or tenderers' financial, economic, technical and professional capacity. The article stipulates that the authority may, on the basis of their assessment of the risks, decide not to require this proof. The facility is, however, limited to contracts with a value equal to or less than EUR 60 000 where the beneficiary of the contract is the authority itself or to contracts with various different values (depending on the case) where the beneficiary is a third party. Another restriction is the stipulation that, where it is decided not to require proof, no pre-financing or interim payment may be made: this is a guarantee for the authority but an important consideration for the other party, who may decide to submit the documentary proof anyway to avoid what could be a considerable expense.

financial, economic, technical and professional capacity

not to require this proof

| 4.3.4 | The EESC endorses all these provisions making the procurement process — which is costly for both candidates and the authority — less burdensome where relatively modest amounts are concerned. However, it points out the need for great care to be taken to prevent any abuse: the more flexible the procedures, the greater the temptation to abuse them. |
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4.3.4

The EESC endorses all these provisions making the procurement process — which is costly for both candidates and the authority — less burdensome where relatively modest amounts are concerned. However, it points out the need for great care to be taken to prevent any abuse: the more flexible the procedures, the greater the temptation to abuse them.

relatively

| 4.4 | The implementing rules regarding grants appear to be sympathetic to the concerns of the social partners, taking into account — as far as can be inferred from the provisions as a whole — the specific nature of beneficiaries. As an initial measure, Article 164 provides that, for grants with a value of less than or equal to EUR 25 000, the authorising officer may require greatly simplified documentary evidence: the EESC endorses this procedure although it notes both the heavy responsibilities incumbent upon the authorising officer and the danger that, in certain cases, the benefit of simpler rules will be cancelled out by an — understandable — reluctance to take these responsibilities on. |
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4.4

The implementing rules regarding grants appear to be sympathetic to the concerns of the social partners, taking into account — as far as can be inferred from the provisions as a whole — the specific nature of beneficiaries. As an initial measure, Article 164 provides that, for grants with a value of less than or equal to EUR 25 000, the authorising officer may require greatly simplified documentary evidence: the EESC endorses this procedure although it notes both the heavy responsibilities incumbent upon the authorising officer and the danger that, in certain cases, the benefit of simpler rules will be cancelled out by an — understandable — reluctance to take these responsibilities on.

grants

greatly simplified documentary evidence

heavy responsibilities

| 4.5 | Various other provisions facilitate or provide access to Community funds for various types of institutions. To this end, where bodies with a de jure or de facto monopoly are concerned, Article 168 merely requires an informal investigation, to be recorded in the form of a reasoned declaration by the authorising officer. Article 162, which provided for operating grants — which do not decrease with renewal — for bodies pursuing an aim of general European interest, extends the list of possible beneficiaries to bodies involved in research, innovation or the promotion of citizenship. Article 172 enables authorising officers to accept co-financing in kind (such as voluntary work) as contributions from the institutions receiving funding. |
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4.5

Various other provisions facilitate or provide access to Community funds for various types of institutions. To this end, where bodies with a de jure or de facto monopoly are concerned, Article 168 merely requires an informal investigation, to be recorded in the form of a reasoned declaration by the authorising officer. Article 162, which provided for operating grants — which do not decrease with renewal — for bodies pursuing an aim of general European interest, extends the list of possible beneficiaries to bodies involved in research, innovation or the promotion of citizenship. Article 172 enables authorising officers to accept co-financing in kind (such as voluntary work) as contributions from the institutions receiving funding.

facilitate or provide access to Community funds

bodies with a de jure or de facto monopoly

aim of general European interest

co-financing in kind

| 4.5.1 | The EESC welcomes all of these provisions but points out once again that more flexible rules will bring greater risks for the Community budget and more responsibilities for authorising officers, and require tighter controls. |
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4.5.1

The EESC welcomes all of these provisions but points out once again that more flexible rules will bring greater risks for the Community budget and more responsibilities for authorising officers, and require tighter controls.

| 4.6 | There are number of other provisions simplifying procedures. All educational establishments will now be exempt from the verification of financial capacity (Article 176), whereas in the past only secondary schools and higher education establishments benefited from this provision. For grants with a value of less than or equal to EUR 25 000, the authorising officer may draw up a less detailed grant agreement (Article 164). Moreover, under Article 173, the obligation to submit proof of an external audit will not apply to grant agreements with a value of less than EUR 750 000, agreements for an action with value of less than EUR 100 000 and agreements with a number of beneficiaries who have signed a document accepting joint and several liability. |
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4.6

There are number of other provisions simplifying procedures. All educational establishments will now be exempt from the verification of financial capacity (Article 176), whereas in the past only secondary schools and higher education establishments benefited from this provision. For grants with a value of less than or equal to EUR 25 000, the authorising officer may draw up a less detailed grant agreement (Article 164). Moreover, under Article 173, the obligation to submit proof of an external audit will not apply to grant agreements with a value of less than EUR 750 000, agreements for an action with value of less than EUR 100 000 and agreements with a number of beneficiaries who have signed a document accepting joint and several liability.

simplifying procedures

verification of financial capacity

obligation to submit proof of an external audit

| 4.6.1 | The EESC understands why the Commission wants to simplify procedures as much as possible and, in principle, agrees with it. However, it fears that it may be going too far. It is one thing to exempt parties from submitting costly and sometimes unnecessary documentation, but it is quite another to waive the obligation for grant recipients to declare the state of their finances, when the thresholds set — particularly for the cases covered by Article 173 — are far too high. The aim should always be to strike the right balance between the expected benefits (savings in time and money for both the Commission and the public) and the potential costs (loss of public money, calculated in terms of the probability and size of the risk). |
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4.6.1

The EESC understands why the Commission wants to simplify procedures as much as possible and, in principle, agrees with it. However, it fears that it may be going too far. It is one thing to exempt parties from submitting costly and sometimes unnecessary documentation, but it is quite another to waive the obligation for grant recipients to declare the state of their finances, when the thresholds set — particularly for the cases covered by Article 173 — are far too high. The aim should always be to strike the right balance between the expected benefits (savings in time and money for both the Commission and the public) and the potential costs (loss of public money, calculated in terms of the probability and size of the risk).

right balance between the expected benefits

the potential costs

| 4.7 | The criterion of caution and risk assessment mentioned in point 4.6.1 above has, moreover, already been adopted with regard to pre-financing: a guarantee (surety or other form of guarantee) is required as a general rule for all pre-financing with a value equal to the grant, and for any pre-financing exceeding 80 % of the amount of the grant and above EUR 60 000. |
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4.7

The criterion of caution and risk assessment mentioned in point 4.6.1 above has, moreover, already been adopted with regard to pre-financing: a guarantee (surety or other form of guarantee) is required as a general rule for all pre-financing with a value equal to the grant, and for any pre-financing exceeding 80 % of the amount of the grant and above EUR 60 000.

caution and risk assessment

pre-financing

guarantee

required

all

value equal

exceeding 80 % of the amount of the grant and above EUR 60 000

| 4.7.1 | The EESC believes that the above provision is based on the sound principle of caution as referred to in point 4.6.1, but wonders whether these criteria might not also have been applied to genuine grants (e.g. the cases cited in point 4.6), given that,
  in terms of actual risk

  , the difference between pre-financing and grant is very often — with a few, sometimes significant exceptions — more administrative than real. |
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4.7.1

The EESC believes that the above provision is based on the sound principle of caution as referred to in point 4.6.1, but wonders whether these criteria might not also have been applied to genuine grants (e.g. the cases cited in point 4.6), given that,
  in terms of actual risk

  , the difference between pre-financing and grant is very often — with a few, sometimes significant exceptions — more administrative than real.

in terms of actual risk

, the difference between pre-financing and grant

| 4.8 | Article 165 introduces a criterion which is entirely acceptable but has not always been applied in the past: where the recipients of grants are bodies which pursue an aim of general European interest, the Commission is entitled to recover the percentage of the annual profit corresponding to the Community contribution to the budget of the bodies concerned. This provision only applies in cases where the rest of the body's budget is financed by Member States' authorities which are themselves required to recover their share of the profits. |
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4.8

Article 165 introduces a criterion which is entirely acceptable but has not always been applied in the past: where the recipients of grants are bodies which pursue an aim of general European interest, the Commission is entitled to recover the percentage of the annual profit corresponding to the Community contribution to the budget of the bodies concerned. This provision only applies in cases where the rest of the body's budget is financed by Member States' authorities which are themselves required to recover their share of the profits.

bodies which pursue an aim of general European interest

entitled to recover the percentage of the annual profit

financed by Member States' authorities

| 4.8.1 | The EESC fully endorses this provision but finds it difficult to believe that the text as it stands can be intended to imply that the Commission should not also be entitled to recover profits in cases in which the rest of the budget is financed not by public authorities but by private entities. |
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4.8.1

The EESC fully endorses this provision but finds it difficult to believe that the text as it stands can be intended to imply that the Commission should not also be entitled to recover profits in cases in which the rest of the budget is financed not by public authorities but by private entities.

Brussels, 15 March 2006.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

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(1)  COM(2005) 181 final.

1

(2)  OJ C 28 of 3.2.2006, p.83.

2

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