# C_2006013EN.01000901.xml

| 18.1.2006 | EN | Official Journal of the European Union | C 13/9 |
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18.1.2006

EN

Official Journal of the European Union

C 13/9

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OPINION No 11/2005

OPINION N

on the draft Commission Regulation 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

(Submitted pursuant to Article 248(4), second subparagraph, of the EC Treaty)

(2006/C 13/02)

CONTENTS

INTRODUCTION

IMPREST ACCOUNTS

GRANTS

OTHER OBSERVATIONS

THE COURT OF AUDITORS OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular Articles 248(4) and 279 thereof,

Having regard to the Treaty establishing the European Atomic Energy Community, and in particular Article 160(C)(4) and 183 thereof,

Having regard to the Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (1), and in particular Article 183 thereof,

1

Having regard to Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 (2), last modified by Commission Regulation (EC, Euratom) No 1261/2005 of 20 July 2005 (3),

2

3

Having regard to the draft Commission Regulation amending Commission Regulation (EC, Euratom) No 2342/2002 (4),

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Having regard to the Commission's request for an opinion on the latter addressed to the Court dated 12 October 2005,

HAS ADOPTED THE FOLLOWING OPINION:

Introduction

| 1. | The proposal makes technical amendments to the implementing rules of the current Financial Regulation aimed at ‘further simplifying the administrative procedures for the institutions, economic operators and beneficiaries of grants, in particular in external actions, while maintaining a high level of protection on the Communities' financial interests in the light of the risks involved.’ The changes largely concern the rules on recovery of debts, public procurement and contracts and grants. Agricultural expenditure and structural measures are therefore mostly not affected. |
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1.

The proposal makes technical amendments to the implementing rules of the current Financial Regulation aimed at ‘further simplifying the administrative procedures for the institutions, economic operators and beneficiaries of grants, in particular in external actions, while maintaining a high level of protection on the Communities' financial interests in the light of the risks involved.’ The changes largely concern the rules on recovery of debts, public procurement and contracts and grants. Agricultural expenditure and structural measures are therefore mostly not affected.

| 2. | The Court based its examination of the Commission's proposal on the following principles:






  — | that the proposed revision complies with the principles of sound financial management, |
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2.

The Court based its examination of the Commission's proposal on the following principles:

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that the proposed revision complies with the principles of sound financial management,

| — | that the proposed revision constitutes simplification without compromising effectiveness or protection of financial interests, |
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that the proposed revision constitutes simplification without compromising effectiveness or protection of financial interests,

| — | that the proposed changes are kept to the minimum necessary, and |
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that the proposed changes are kept to the minimum necessary, and

| — | that the proposed revision provides no exception to the principles and norms contained in the Financial Regulation, except where the Financial Regulation itself provides for such exceptions. |
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that the proposed revision provides no exception to the principles and norms contained in the Financial Regulation, except where the Financial Regulation itself provides for such exceptions.

| 3. | The Court considers that in most cases the proposed amendments meet these conditions. However, for the issues set out in the following paragraphs, this is not the case. |
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3.

The Court considers that in most cases the proposed amendments meet these conditions. However, for the issues set out in the following paragraphs, this is not the case.

Imprest accounts

| 4. | In Article 67(2) second subparagraph, the maximum individual amount that can be paid by an imprest administrator is to be doubled from 30 000 euro to 60 000 euro — considerably in excess of the cumulative effect of inflation since the approval of the current implementing rules — whereas Article 63 of the Financial Regulation limits the payment by imprest accounts to ‘small sums’. |
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4.

In Article 67(2) second subparagraph, the maximum individual amount that can be paid by an imprest administrator is to be doubled from 30 000 euro to 60 000 euro — considerably in excess of the cumulative effect of inflation since the approval of the current implementing rules — whereas Article 63 of the Financial Regulation limits the payment by imprest accounts to ‘small sums’.

Article 67(2) second subparagraph,

Grants

| 5. | The Commission's proposal on Article 172(2) removes the need for cofinancing in kind to be restricted to ‘duly substantiated exceptional cases’. The practice of cofinancing in kind constitutes a high risk of irregularity in view of the difficulties of defining an appropriate valuation and verifying its delivery. The proposed change may encourage its increased use and is therefore contrary to the protection of the Communities' financial interests. |
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5.

The Commission's proposal on Article 172(2) removes the need for cofinancing in kind to be restricted to ‘duly substantiated exceptional cases’. The practice of cofinancing in kind constitutes a high risk of irregularity in view of the difficulties of defining an appropriate valuation and verifying its delivery. The proposed change may encourage its increased use and is therefore contrary to the protection of the Communities' financial interests.

Article 172(2)

| 6. | The modifications proposed to Article 172(3) allows the authorising officer, depending on his risk assessment, to dispense with the requirement for beneficiaries to provide evidence of co-financing in the case of grants of 25 000 euro or less. Given the risk at this level, and the ease with which such evidence can normally be provided, the Court considers the change to be contrary to the protection of the Communities' financial interests. |
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6.

The modifications proposed to Article 172(3) allows the authorising officer, depending on his risk assessment, to dispense with the requirement for beneficiaries to provide evidence of co-financing in the case of grants of 25 000 euro or less. Given the risk at this level, and the ease with which such evidence can normally be provided, the Court considers the change to be contrary to the protection of the Communities' financial interests.

Article 172(3)

| 7. | In the revised Article 173(4) first subparagraph the limits below which an external audit report is not required have been raised from 300 000 euro to 750 000 euro in the case of actions, and from 75 000 euro to 100 000 euro in the case of operating grants. There is therefore a large disparity in the rate of the increase between the two, with the first being considerably in excess of the cumulative effect of inflation since the approval of the current implementing rules, and contrary to the protection of the Communities financial interests. |
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7.

In the revised Article 173(4) first subparagraph the limits below which an external audit report is not required have been raised from 300 000 euro to 750 000 euro in the case of actions, and from 75 000 euro to 100 000 euro in the case of operating grants. There is therefore a large disparity in the rate of the increase between the two, with the first being considerably in excess of the cumulative effect of inflation since the approval of the current implementing rules, and contrary to the protection of the Communities financial interests.

Article 173(4) first subparagraph

| 8. | According to the modification proposed to Article 173(4) sixth subparagraph ‘educational establishments’ no longer need to present an external audit report certifying their accounts. Under the current arrangements, such a derogation was optional, based on an analysis of management risks by the Authorising Officer. |
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8.

According to the modification proposed to Article 173(4) sixth subparagraph ‘educational establishments’ no longer need to present an external audit report certifying their accounts. Under the current arrangements, such a derogation was optional, based on an analysis of management risks by the Authorising Officer.

Article 173(4)

| 9. | The proposed Article 176(4) adds ‘educational establishments’ to the list of (mostly) public bodies whose financial capacity does not need to be verified. However, there are many private sector educational establishments — such as private schools and universities — which pose similar risks to the Communities' financial interests as other commercial organisations. Furthermore, this amendment makes a distinction between educational establishments and other private organisations which provide public sector services which is not justified. |
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9.

The proposed Article 176(4) adds ‘educational establishments’ to the list of (mostly) public bodies whose financial capacity does not need to be verified. However, there are many private sector educational establishments — such as private schools and universities — which pose similar risks to the Communities' financial interests as other commercial organisations. Furthermore, this amendment makes a distinction between educational establishments and other private organisations which provide public sector services which is not justified.

Article 176(4)

Other observations

| 10. | In a number of cases the wording of the changes require clarification:






  — | the additional wording in Article 7(1) gives the impression that the conversion rate specified in contracts or grant agreements is to be used by authorising officers in preference to the official rate, whereas paragraph 3 of point 2.1 of the explanatory memorandum explains that the contractual rate is to be used for conversion by contractors and beneficiaries only, |
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10.

In a number of cases the wording of the changes require clarification:

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the additional wording in Article 7(1) gives the impression that the conversion rate specified in contracts or grant agreements is to be used by authorising officers in preference to the official rate, whereas paragraph 3 of point 2.1 of the explanatory memorandum explains that the contractual rate is to be used for conversion by contractors and beneficiaries only,

Article 7(1)

| — | Article 21(2) is amended to comply with the Financial Regulation requiring interim and/or ex post evaluations for programmes and activities entailing significant spending, without defining how the term ‘significant’ should be applied. Furthermore, the text risks excluding policies of high significance and impact but little budgetary spending (eg, competition, single market) from being evaluated, |
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Article 21(2) is amended to comply with the Financial Regulation requiring interim and/or ex post evaluations for programmes and activities entailing significant spending, without defining how the term ‘significant’ should be applied. Furthermore, the text risks excluding policies of high significance and impact but little budgetary spending (eg, competition, single market) from being evaluated,

Article 21(2)

significant

| — | in Article 66(2) the second sentence implies that the imprest administrator authorises expenditure, whereas in reality he provisionally validates and makes payments only, |
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in Article 66(2) the second sentence implies that the imprest administrator authorises expenditure, whereas in reality he provisionally validates and makes payments only,

Article 66(2)

| — | Articles 130 and 164 (1b) allow, in certain circumstances, for supporting documents to be reduced to what is ‘strictly necessary’ without defining what this should be. Furthermore, in no case should requirements ever be more than strictly necessary, |
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Articles 130 and 164 (1b) allow, in certain circumstances, for supporting documents to be reduced to what is ‘strictly necessary’ without defining what this should be. Furthermore, in no case should requirements ever be more than strictly necessary,

Articles 130

164 (1b)

| — | the changes made to Article 86(1) and Article 106(5), although acceptable to the Court, are not coherent with the Commission's stated objective of waiving interest ‘in the case of obstacles resulting from national legislation in third countries’. |
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the changes made to Article 86(1) and Article 106(5), although acceptable to the Court, are not coherent with the Commission's stated objective of waiving interest ‘in the case of obstacles resulting from national legislation in third countries’.

Article 86(1)

Article 106(5)

| 11. | As stated in its Opinion No 3/2005 the Court considers that:






  — | third country legislation cannot take precedence over specific agreements between the contracting parties (changes proposed to Article 86(1) and Article 106(5)), |
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11.

As stated in its Opinion No 3/2005 the Court considers that:

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third country legislation cannot take precedence over specific agreements between the contracting parties (changes proposed to Article 86(1) and Article 106(5)),

| — | the time limit for tenderers to provide evidence as regards exclusion criteria should be defined as being before the signature of the contract (changes proposed to Article 134(2)), |
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the time limit for tenderers to provide evidence as regards exclusion criteria should be defined as being before the signature of the contract (changes proposed to Article 134(2)),

| — | a mininum level of documentation should always be presented in the selection process to allow the contracting authority to justify the tender selection (changes proposed to Article 135(6)). |
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a mininum level of documentation should always be presented in the selection process to allow the contracting authority to justify the tender selection (changes proposed to Article 135(6)).

This Opinion was adopted by the Court of Auditors in Luxembourg at its meeting of 15 December 2005.

For the Court of Auditors

Hubert WEBER

President

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(1)  OJ L 248, 16.9.2002 (as amended by OJ L 25, 30.1.2003).

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(2)  OJ L 357, 31.12.2002.

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(3)  OJ L 201, 2.8.2005.

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(4)  Commission Document SEC(2005) 1240 final.

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