Revenue and expenditure account and balance sheet

relating to operations under the 1999 budget

(Articles 78 and 81 of the Financial Regulation of 21 December 1977)

Volume IV

Consolidated revenue and expenditure account and balance sheet

(Rectified version)

(2000/C 343/01)

CONTENTS

>TABLE>

FOREWORD

STRUCTURE

1. The revenue and expenditure account and the balance sheet of the Institutions of the European Communities are drawn up in accordance with Articles 78, 80 and 81 of the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities, as last amended by Council Regulation No 2673/99 of 13 December 1999.

2.

>TABLE>

3. Volume I set out the salient features of budget implementation in the year.

Volumes II and III set out the implementation of revenue and expenditure in each of the institutions, following the budgetary nomenclature, and contain tables showing the capital operations of borrowing and lending.

This volume (IV) contains the consolidated revenue and expenditure account and balance sheet of the European Communities, accompanied by explanatory notes. The consolidated revenue and expenditure account and balance sheet give the corresponding figures for the previous year.

1. ACCOUNTING PRINCIPLES

1.1. According to international standards the aims of a financial statement must be to describe the nature and range of an institution's activities, explain how it is financed and supply definitive information on its operations(1).

These are certainly the objectives of the consolidated revenue and expenditure account and balance sheet produced annually by the European Commission. The manner in which financial operations were conducted in the course of the financial year are described in Volume I, Part 2 (Analysis of financial management).

If they are to present a true and fair picture, financial statements must not only supply relevant information, but do so in a clear and comprehensible manner which allows comparisons between financial years. It is with these goals in mind that the present document has been drawn up.

1.2. The accounting system of the European institutions comprises general accounts and budget accounts. These accounts are kept by calendar year in Euro.

1.2.1. Using the "double-entry method" the general accounts show all expenditure and revenue over the financial year and are designed to establish the financial position of the institutions in the form of a balance sheet of assets and liabilities at 31 December the previous year.

The general accounts are based on the following principles:

- the going concern principle;

- the principle of prudence, whereby assets are not overstated and liabilities are not understated;

- the principle of consistent accounting methods;

- the principle of no-netting between assets and liabilities;

- the principle that the opening balance sheet must not be altered.

For the future the Commission is studying the possibility of presenting a broader accounting result to ensure that balance sheet entries are transferred from one year to the next via the revenue and expenditure account. The chart of accounts will maintain the distinction between the revenue and expenditure accounts and the balance sheet. To do so it must contain:

(a) the revenue and expenditure accounts, subdivided as follows:

- the budgetary revenue and expenditure accounts, providing an overall view of budget implementation, and accounts showing exchange-rate differences; these accounts will serve to determine the year's balance;

- the non-budgetary revenue and expenditure accounts which supplement the budgetary accounts and allow a broader accounting result;

(b) the balance-sheet accounts, which can be used to establish the institution's financial position, and will show the estimated effect of liabilities and entitlements.

1.2.2. The budget accounts give a detailed picture of the implementation of the budget. They are designed to establish:

- the consolidated revenue and expenditure account referred to in Title VI of the Financial Regulation,

- the figures showing the implementation of the budget referred to in Article 34 of the Financial Regulation.

2. ACCOUNTING RULES AND METHODS

2.1. The accounts are kept in accordance with the Financial Regulation of 21 December 1977, as last amended by Council Regulation No 2673/1999 of 13 December 1999 and supplemented by a Regulation laying down certain implementing rules.

2.2. Conversion into euro

2.2.1. Accounts are kept in euros.

2.2.2. The euro conversion rates used to prepare the balance sheet were the rates applying on 30 December 1999(2), except for the following:

- tangible and intangible assets, which retain their value in euros at the accounting rate that applied when they were purchased;

- appropriations carried over, some of which are to cover commitments in national currencies converted into euros at the monthly accounting rates for December; the total amount in euros of appropriations carried over cannot be subsequently revalued;

- advances paid under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund, which are converted at the exchange rates applying on the 10th day of the month following the month in which they are granted;

- the transitional accounts which retain their value in euros at the accounting rate that applied at the time of the accounting operation.

2.2.3. Monetary items other than those listed above are revalued at the closing euro rate on the date the accounts are closed. The revalued figure is treated as follows:

- cash assets: the contra-entry for the positive and negative exchange differences relating to cash assets is recorded in the profit and loss accounts;

- monetary items other than cash assets: when, overall, the negative exchange differences on assets and commitments expressed in a specific currency exceed the positive differences noted on assets and commitments expressed in the same currency, the surplus is recorded in the profit and loss accounts. Otherwise, the surplus is recorded in the transitional liability accounts.

2.3. Revenue

2.3.1. The amounts of own resources and financial contributions entered in the accounts are those credited in the course of the year to the accounts opened in the Commission's name by the governments of the Member States.

The difference between the amount of VAT own resources, GNP-based resources and financial contributions entered in the budget and the amount actually due is calculated by 1 July of the following year and entered in an amending budget for that year.

2.3.2. The other revenue entered in the accounts is the amount actually received in the course of the year.

2.4. Expenditure

2.4.1. For the purposes of calculating the balance for the year, expenditure covers payments made against the year's appropriations for payments plus any of those same appropriations that are carried over.

2.4.2. Payments made against the year's appropriations for payments means payments for which authorisation reaches the Financial Controller by 31 December and which are paid by the accounting officer by 15 January of the following year.

In the case of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund, the payments are those effected by the Member States between 16 October 1998 and 15 October 1999, provided that the accounting officer was notified of the commitment and authorisation by 31 January 2000.

2.4.3. Appropriations for payments may be carried over to the following financial year only. The procedure is as follows:

- non-differentiated appropriations: carryover is generally automatic if it is to cover outstanding commitments; otherwise the budgetary authority has to give prior authorisation;

- differentiated appropriations: unused payment appropriations usually lapse; however, the Commission may decide to carry them over if the payment appropriations for the following year are not sufficient to meet previous commitments or commitments made against commitment appropriations which have themselves been carried over.

2.5. Balance for the year

The balance for the year consists of two components (the result of the European Union and the result of the involvement of the EFTA countries belonging to the EEA) It represents the difference between:

- total revenue received for that year;

- total payments made against that year's appropriations plus the total amount of that year's appropriations carried over(3).

The following are added to or deducted from the resulting figure:

- the net balance of lapsing carryovers from previous years and any payments which, because of fluctuations in the euro rate, exceed non-differentiated appropriations carried over from the previous year;

- the balance of exchange-rate gains and losses recorded during the year.

2.6. Rules on valuation

Except where indicated in the explanatory notes to the balance sheet, the various headings are valued as follows:

2.6.1. Tangible and intangible fixed assets are valued at their historic value converted into euros at the rate applying when they were purchased. The Commission's fixed assets must also be subject to depreciation for each full year, according to the linear method (Section 8 of the Commission's Inventory Regulation).

2.6.2. Stocks are valued at the price of the last supplies received, converted at the euro rate applying on 30 December.

2.6.3. Financial assets are valued at their purchase price. If denominated in foreign currency, they are converted at the euro rate applying on 30 December. In line with the principle of prudence, an adjustment must be made where there is a probable loss.

2.6.4. Entitlements are entered in the accounts at their face value, converted at the euro rate applying on 30 December, with the exception of entitlements denominated at a fixed rate. When a value adjustment is entered in the accounts, a special indication is given in the notes on the balance sheet.

2.6.5. Cash investments and disposable assets are valued at their face value converted into euros at the rate applying on 30 December. For the sake of prudence, an adjustment must be made where there is a probable loss.

2.6.6. Debts are valued at their face value in euros at the rate applying on 30 December if they are denominated in the foreign currency.

2.7. Payments of advances and payments on account

Payments on account for operational purposes are included in the year's expenditure and do not appear as assets in the balance sheet.

Advances to public or private intermediaries which have not been received by the final beneficiary at 31 December 1999 and which are included in the year's budget expenditure are entered in the assets section of the balance sheet as short-term assets.

2.8. EFTA involvement in the 1999 general budget

The figures in the accompanying tables include the appropriations entered to cover the involvement in the Community budget of the EFTA countries belonging to the European Economic Area.

2.9. Consolidation

The consolidated accounts cover the accounts of the European Parliament (including the Ombudsman), the Council, the Commission (including the Publications Office and the Joint Research Centre), the Court of Justice, the Court of Auditors, the Economic and Social Committee and the Committee of the Regions.

The method used is that of full consolidation.

CHAPTER I

BASIC DATA ON THE EXECUTION OF THE BUDGET OF THE EUROPEAN COMMUNITIES FOR 1999

1999 BUDGET OUTTURN

The 1999 budget outturn, European Communities, is shown under heading I.B of the liabilities section of the consolidated balance sheet.

>TABLE>

CONSOLIDATED SUMMARY OF 1999 BUDGET IMPLEMENTATION

>TABLE>

UTILISATION OF APPROPRIATIONS AVAILABLE

>TABLE>

CLEARANCE OF COMMITMENTS

>TABLE>

CHAPTER 2

CONSOLIDATED REVENUE AND EXPENDITURE ACCOUNT OF THE EUROPEAN COMMUNITIES FOR 1999

Table 1

BALANCE FOR 1999

>TABLE>

Table 2

REVENUE FOR 1999

>TABLE>

Table 3

EXPENDITURE

>TABLE>

Table 4

APPROPRIATIONS FOR PAYMENTS CARRIED OVER FROM 1998

Not including additional appropriations (third countries, earmarked revenue)

>TABLE>

Table 5

APPROPRIATIONS FOR COMMITMENTS FOR 1999

>TABLE>

Table 6

APPROPRIATIONS FOR PAYMENTS FOR 1999

>TABLE>

Table 7

COMMITMENTS FROM DIFFERENTIATED APPROPRIATIONS OUTSTANDING AT 31 DECEMBER 1999

CLASSIFICATION BY HEADING IN FINANCIAL PERSPECTIVE

>TABLE>

Table 8

COMMITMENTS FROM DIFFERENTIATED APPROPRIATIONS OUTSTANDING AT 31 DECEMBER 1999

PAYMENTS SINCE INITIAL COMMITMENT

>TABLE>

Table 9

COMMITMENTS FROM DIFFERENTIATED APPROPRIATIONS CLEARED IN THE COURSE OF 1999

>TABLE>

Table 10

COMMITMENTS OUTSTANDING AT 31 DECEMBER 1999

MOVEMENTS SINCE INITIAL COMMITMENT

(including commitments cleared in 1999)

EAGGF-GUIDANCE (B2-10)

>TABLE>

FIFG-FISHERIES (B2-11)

>TABLE>

ERDF (B2-12)

>TABLE>

ESF (B2-13)

>TABLE>

COMMUNITY INITIATIVES (B2-14)

>TABLE>

TRANSITIONAL MEASURES, INNOVATION SCHEMES AND ACTION AGAINST FRAUD (B2-15, B2-16 AND B2-18)

>TABLE>

COHESION FUND (B2-3)

>TABLE>

RESEARCH AND TECHNOLOGICAL DEVELOPMENT (B6)

>TABLE>

OTHER AGRICULTURAL OPERATIONS (B2-5)

>TABLE>

OTHER REGIONAL OPERATIONS (B2-6)

>TABLE>

TRANSPORT (B2-7)

>TABLE>

FISHERIES AND THE SEA (B2-9)

>TABLE>

EDUCATION, VOCATIONAL TRAINING AND YOUTH (B3-1)

>TABLE>

CULTURE AND AUDIOVISUAL (B3-2)

>TABLE>

INFORMATION AND COMMUNICATION (B3-3)

>TABLE>

OTHER SOCIAL OPERATIONS (B3-4)

>TABLE>

ENERGY (B4-1)

>TABLE>

EURATOM NUCLEAR SAFEGUARDS (B4-2)

>TABLE>

ENVIRONMENT (B4-3)

>TABLE>

CONSUMER PROTECTION (B5-1)

>TABLE>

AID FOR RECONSTRUCTION (B5-2)

>TABLE>

INTERNAL MARKET (B5-3)

>TABLE>

INDUSTRY (B5-4)

>TABLE>

LABOUR MARKET AND TECHNOLOGICAL INNOVATION (B5-5)

>TABLE>

STATISTICAL INFORMATION (B5-6)

>TABLE>

TRANS-EUROPEAN NETWORKS (B5-7)

>TABLE>

COOPERATION IN THE FIELDS OF JUSTICE AND HOME AFFAIRS (B5-8)

>TABLE>

MEASURES TO COMBAT FRAUD AND SUPPORT EXPENDITURE (B5-9)

>TABLE>

FOOD AID (B7-20)

>TABLE>

HUMANITARIAN AID (B7-21)

>TABLE>

COOPERATION WITH ASIAN DEVELOPING COUNTRIES (B7-30)

>TABLE>

COOPERATION WITH LATIN AMERICAN DEVELOPING COUNTRIES (B7-31)

>TABLE>

COOPERATION WITH THE COUNTRIES OF SOUTHERN AFRICA AND SOUTH AFRICA (B7-32)

>TABLE>

COOPERATION WITH MEDITERRANEAN THIRD COUNTRIES (B7-4)

>TABLE>

COOPERATION WITH CENTRAL AND EASTERN EUROPEAN COUNTRIES (B7-50)

>TABLE>

EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT (B7-51)

>TABLE>

COOPERATION WITH THE NEW INDEPENDENT STATES (B7-52)

>TABLE>

AID FOR ARMENIA, GEORGIA AND TAJIKISTAN (B7-53)

>TABLE>

COOPERATION WITH FORMER YUGOSLAVIA (B7-54)

>TABLE>

OTHER COOPERATION MEASURES (B7-6)

>TABLE>

INITIATIVE FOR DEMOCRACY AND HUMAN RIGHTS (B7-7)

>TABLE>

INTERNATIONAL FISHERIES AGREEMENTS (B7-80)

>TABLE>

EXTERNAL ASPECTS OF CERTAIN POLICIES (B7-81 TO B7-87)

>TABLE>

SUPPORT EXPENDITURE EXTERNAL POLICIES (B7-95)

>TABLE>

COMMON FOREIGN AND SECURITY POLICY (B8-0)

>TABLE>

COMMENTS ON THE 1999 REVENUE AND EXPENDITURE ACCOUNT

1. Advances, payments on account and final payments

Since 1994 a report on the breakdown of differentiated payment appropriations by type has been produced in response to an initial request by the Court of Auditors for the system of accounts to distinguish payments on account from payments which are final or to settle a "balance".

Experience has shown this field to be far more complex than originally thought. This applies both to concepts and the definition of the information required and to the possibility of uniform implementation in the various areas concerned(4); particularly in the case of the Structural Funds. The Court has commented on these aspects.

As regards the information required, because of the way in which the Structural Funds operate there is a difference in the 1994-1999 programming period between accounting data in the strict sense and data which the national or regional authorities may supply or possess. The Court notes: "The payments which appear in the Community accounts correspond to the various payments of instalments or refunds of final payments made by the Commission to the national or regional authorities responsible for implementing the programmes. By their very nature, these payments cannot reflect the actual state of implementation of the programmes and should not be thought to correspond to payments made to the final beneficiaries"(5). During implementation of a programme, a distinction must therefore be made between the dealings the Commission has with the national and regional authorities and these authorities' dealings with the final beneficiary. The Commission has information on its dealings with the authorities concerned. Apart from the certified declarations of expenditure, these authorities are not usually obliged to provide information on payments to the final beneficiary, especially in the case of the ERDF, since they are directly responsible for management under the principle of subsidiarity. The report on the breakdown of payments implicitly allows a programme to be monitored assuming that it is linked directly to a commitment. For programmes leading to consecutive annual commitments, the question was raised of whether the closure of the accounting commitments or that of the programmes should be monitored (usually at the end of the period), though this did not necessarily lead to a uniform interpretation. It must also be borne in mind that there is no temporal link between accounting commitments and annual tranches because of the reprogramming of the financial plan.

For the Structural Funds - the most important sector in terms of the amounts paid on account - the Commission has examined alternative approaches based on data from outside the accounts to provide relevant information for 1999 although it has not really reached a satisfactory solution.

To sum up, rather than presenting information of limited value, the Commission has preferred not to publish it, but to direct its efforts towards a new type of approach, redefinition of the information required and analysis of the possibilities of actual implementation. This approach includes clarifying concepts as regards types of payment as part of the recasting of the Financial Regulation and takes account of the new legislative framework for the 2000-2006 programming period for the Structural Funds which provides for more transparent management. The Commission has already conducted an initial examination to reach rapid definition, in agreement with the Court of Auditors, of the information needed for the new programming period for the Structural Funds (2000-2006). A similar approach will be initiated for internal policies and external action.

2. Appropriations relating to contributions by third parties

Appropriations carried over from the previous financial year in respect of contributions by third parties, which by definition never lapse, are now included with the additional appropriations for the financial year. This explains the difference between carryovers in the 1999 revenue and expenditure account and those in the 1998 revenue and expenditure account.

3. Commitments outstanding

Commitments outstanding from appropriations for re-use carried over are no longer cancelled but are included with total commitments outstanding. This explains the increase of EUR 11,362 million at the start of the year.

CHAPTER 3

CONSOLIDATED BALANCE SHEET OF THE EUROPEAN COMMUNITIES AT 31 DECEMBER 1999

Unless otherwise stated, the amounts are expressed in euros

ASSETS

>TABLE>

LIABILITIES

>TABLE>

COMMENTS ON THE BALANCE SHEET AT 31.12.1999

1. This balance sheet takes account of the rules laid down in the Regulation on Inventories and Management of the property of the European Commission, which came into effect on 1 January 1997. The costs of purchasing tangible and intangible fixed assets are included in budget expenditure for the year of purchase. They continue to appear in the balance sheet until they are no longer the property of the Commission. The contra-entry in the liabilities section of the balance sheet comes under the own capital heading and under debts for assets purchased under rental contracts but not yet paid.

2. Tangible and intangible fixed assets include all property with a purchase value of at least EUR 400, in accordance with Article 130 of Commission Regulation No 3418/93 laying down detailed rules for implementing the Financial Regulation.

3. In accordance with Section 8 of the Inventory Regulation(6), the Commission must allow for the depreciation of every asset except land. Depreciation is calculated for each full year (not pro rata temporis), using the linear method. The annual depreciation rates applicable from 1 January 1997 are given in Annex 6 to the Inventory Regulation.

Depreciation on tangible and intangible fixed assets has been entered in the accounts for the first time(7), except in the case of the Commission(8), the Court of Auditors and the Ombudsman. To avoid too abrupt a change in the 1998 balance sheet given that the Ombudsman and some Commission departments had not calculated depreciation at 31 December 1998, last year's figures have not been adjusted.

EXPLANATORY NOTES TO THE CONSOLIDATED BALANCE SHEET

ASSETS

II. INTANGIBLE FIXED ASSETS

Intangible fixed assets are identifiable non-monetary assets without physical substance such as computer software packages. These assets must constitute a resource controlled by the institution and generate future economic benefits.

This year all the institutions have entered these assets in the accounts(9).

>TABLE>

>TABLE>

III. TANGIBLE FIXED ASSETS

A. Land and buildings

The value of the land and buildings of the JRC at Ispra and Geel is based on an evaluation conducted by independent experts in the course of 1998.

Land and buildings at delegation sites have been revalued and the depreciation calculated(10). Changes in value compared with 1998 are recorded in the heading for other adjustments during the financial year.

In May 1998 Parliament invoked its purchase option in respect of a complex in Brussels for which the final investment cost (not including land) comes to EUR 1097 million. In two memoranda of understanding with Parliament, the Kingdom of Belgium made a contribution to the purchase of the land and the development costs. One clause in the memorandum stipulates that, if Parliament moves to other premises, the land will be returned to the Belgian State for BEF 1 or for its market value. An adjustment has therefore been made for the value of the land, which is now entered in the balance sheet at BEF 1.

C. + D. Furniture, vehicle fleet and computer equipment

The inventory of these assets in the delegations has been partially checked. Changes in value compared with 31 December 1998 are recorded in the heading for other adjustments (Table III below).

The data for the Ispra research centre are based on the physical inventory which has been carried out. However, the final data of the physical inventory of assets in other research centres will not be available until the close of the 2000 financial year.

E. Leasing, financing and similar entitlements

In accordance with Article 7 of the Commission's Inventory Regulation, leasing, long-term rental operations and property held under a long lease conferring a right in rem are entered in the inventory if the following three conditions are met:

- the risks and advantages are transferred to the lessee;

- the rental is terminable only on payment by the lessee of an indemnity of a deterrent amount;

- the rental enables the lessor to recover the cost of the investment plus remuneration.

If one of the above conditions is not met, the assets are entered in the off-balance-sheet commitments.

G. Fixed assets under construction and advances in respect of tangible fixed assets

The buildings for some Commission offices or delegations which were originally financed by the ECSC have been included under this heading in the balance sheet. Although the ECSC had been repaid in full for them at the end of 1995, they are still included in the ECSC's balance sheet since the deeds of transfer have not been signed.

As ownership rights on the Council building were not transferred until 1999, the payments are entered under this heading.

>TABLE>

>TABLE>

IV. INVESTMENTS

This heading covers, first, capital investments made with a view to establishing permanent links and which are seen as supporting the activities of the European Community, and, second, investments made to help beneficiaries develop their business activities.

It also includes permanent guarantees and advances granted and the net assets of the Guarantee Fund. A distinction should be made between guarantees granted by the European Community to third parties and the Guarantee Fund, which is designed to cover risks associated with loans granted to non-member countries.

A. Investments in related organisations

A.1. Participations

EBRD subscription

The European Bank for Reconstruction and Development was given initial capital of EUR 10 billion, of which the Community subscribed 3 %. The proportion of this capital called up - 30 % - has been paid in full.

On 15 April 1996, at their annual meeting, the Bank's governors decided to double the amount of authorised capital. Under this decision, the Community has subscribed for 30000 additional shares with a face value of EUR 10000 each. This operation involves paid-in shares and callable shares in the following proportions: 22,5 % of the subscribed shares represent a full number of paid-in shares and the remainder will be callable shares.

This item covers the full amount of the Commission's subscription to the EBRD's capital which has been called up and paid. Payments outstanding on the proportion of capital called up - EUR 57712500 - are recorded under short-term liabilities (EUR 6,4 million) and long-term liabilities (EUR 51,3 million). Payments outstanding on non-called up capital, amounting to EUR 442,5 million, are included in the off-balance-sheet commitments.

European Investment Fund subscription

Under the Council Decision of 6 June 1994 the European Community, represented by the Commission, is to subscribe a total of EUR 600 million to the EIF's capital. This represents 30 % of the EIF's capital. The Commission has paid all the called-up capital, which amounts to 20 %.

As with the EBRD subscription, payments outstanding on non-called up capital (80 %), amounting to EUR 480,00 million, are included in the off-balance-sheet commitments.

B. Other investments:

B.1. Participations

This heading includes subscriptions and participations purchased to help beneficiaries develop their business activities.

ECIP programme equity

This heading covers Community participation in the provision of equity and subordinated loan capital for joint ventures set up under the European Community Investment Partners Programme (ECIP).

Eurotech capital, Venture consort and JOP

The purpose of the Eurotech capital instrument is to encourage the private funding of transnational high-technology projects developed by small and medium-sized undertakings through a network of risk-capital investors. It covers payments since 1990 in the form of advances repayable in certain circumstances when contracts run out.

The purpose of the Venture consort instrument is to promote the transnational syndication of risk-capital operators in small and medium-sized undertakings. It covers contributions since 1985 for investments in small and medium-sized enterprises (SMEs) engaging in innovatory projects.

The purpose of the Joint Venture programme Phare-Tacis (JOP) is to foster the creation and development of joint ventures in the countries of central and eastern Europe and the new independent States.

Since all three are risk capital operations, it is very difficult to assess the real present value of the contributions. In line with the principle of prudence, a 100 % adjustment has been made for the value of these contributions, which are therefore entered in the balance sheet at zero.

>TABLE>

B.3. Guarantees and advances granted

This heading incorporates fixed assets not included under tangible assets, such as deposits and guarantees paid, permanent advances for building charges, the operating funds advanced to third parties and the Guarantee Fund.

Guarantee Fund

This Fund is designed to cover the risks associated with loans and loan guarantees for non-member countries or projects carried out in those countries.

It was set up by Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994.

The Fund is endowed by payments from the Community budget, the proceeds from interest on investments made from the Fund's assets, and sums recovered from defaulting debtors for whom the Fund has had to activate its guarantee. The first payments to the Fund from the Community budget were made in December 1994. The European Investment Bank (EIB) under a mandate from the Community manages the Fund.

The entry on the assets side of the Commission's balance sheet represents the Fund's net assets at 31 December 1999.

Since the Fund may be called on to cover defaulting debtors at any time, a provision has been created for risks and liabilities in line with the principle of prudence. This provision (EUR 1205231971,16) corresponds to the target amount(11) for the Guarantee Fund calculated on the basis of the amount outstanding at 31 December 1999. The Guarantee Fund surplus to be repaid to the Community budget during the first quarter of 2000 (EUR 107900000) is entered as own capital.

>TABLE>

V. LONG-TERM ASSETS

This heading includes amounts owed to the European Communities by Member States, non-member countries and third parties on loans granted for more than one year, either from borrowed funds or from budget appropriations. It also includes amounts owed by third parties under the MEDIA programme.

A. Loans granted from the budget

This item principally covers risk capital loans on special terms granted as part of cooperation with non-member countries. It also covers loans granted under the ECIP programme to promote the setting-up of investment joint ventures in Asia, Latin America, the Mediterranean region and South Africa.

In 1991 Turkey was granted a loan of EUR 175 million as part of the effort to assist the countries most directly affected by the Gulf crisis.

Amounts owed under the MEDIA II programme are also included under this heading as the Commission concluded the contracts directly with the recipients. As the contracts stipulate that loan repayments depend on the always-uncertain success of the projects, an adjustment has been made for the loans, which have been definitively converted, into grants.

The item also includes other, much smaller loans granted from the budget: loans for migrant workers and building loans for Community officials.

Detailed tables on these loans appear in Volume II.

B. Loans granted from borrowed funds

Under the Treaty, the Council, acting unanimously, has the power to adopt guarantee or borrowing programmes if it considers this necessary to attain the objectives of the Community. Community borrowings are direct commitments by the European Communities itself and not by any individual Member State.

As these loans are financial assets covered by borrowings, in order to give a true and fair view of the Union's assets and liabilities, financial position and results, all the operations are now set out in the form of a balance sheet and revenue and expenditure account.

The balance sheets of these financial operations have been incorporated in the combined balance sheet by means of full consolidation.

The balance sheets, revenue and expenditure accounts and changes in the volume of loans relating to financial activities under this heading are shown in detailed tables contained in Volume II.

For the borrowing and lending operations, the yield on loans and costs of borrowings in 1999 are as follows:

>TABLE>

Under an agreement with the EIB, the latter bears the risks of the NCI treasury instrument. Consequently, the surplus of loan proceeds over borrowing costs is charged to the EIB.

Changes in volume of loans granted by the European Communities:

>TABLE>

The amounts outstanding on ECIP loans and loans granted from borrowed funds at 31 December 1999 are entered under long-term assets for the part of loans due in more than a year and under short-term assets for the part of loans due in less than one year. As the duration of the MEDIA II loans is uncertain, the amount outstanding at 31 December 1999 is included under long-term assets.

No such distinction could be made at 31 December for other loans granted from the budget. They are therefore included under long-term assets.

>TABLE>

C. Other long-term receivables

Loans granted under the MEDIA I programme to promote the development of the audiovisual industry in Europe are included under this item. Since they are not concluded directly between the Commission and the final recipients, these loans are not entered under the heading for loans granted from the budget. Similarly, repayment of loans under the MEDIA II programme depends on the financial success of the projects. An adjustment of ECU 14,6 million has therefore been made for the loans which have been converted into grants.

This heading also includes the financial contribution of EUR 176 million from the Kingdom of Belgium (see note III.A) which is to be paid for a minimum of ten years ending in 2008.

VI. STOCKS

This item covers the stocks of office supplies and consumables at 31 December 1999, valued at the price of the last supplies received and converted to euros at the closing rate, in line with the interinstitutional method for valuing stocks.

The heading also covers the scientific and technical equipment of the Joint Research Centre. In line with the principle of prudence, the stocks of heavy water, fissile material and samples for industrial and scientific use are valued every year and entered in the balance sheet at their commercial value, which is less than the real historic cost(12).

It also includes the stocks of publications held by the Publications Office, valued according to special valuation rules(13).

>TABLE>

VII. SHORT-TERM ASSETS

A. Long-term receivables due in less than one year

This heading contains the amounts owed in respect of long-term loans which are due in less than one year.

B. Current assets

B.2. Amounts owed by Member States

- EAGGF GUARANTEE: This item includes amounts payable by the Member States in relation to the clearance of EAGGF Guarantee Section (EUR 3516848,84).

It also comprises, for the first time, amounts due to the EAGGF Guarantee Section, which have been declared by the Member States and entered in the debtor's ledger at the end of the year. This amount - EUR 1041928526,4 - partly consists of entitlements which are very unlikely to be recovered. In accordance with the principle of prudence, the European Communities must set aside a provision for part of this amount. However, the Commission is unable to make a precise calculation of the impact of this overestimate since there are no rules allowing it to obtain the information necessary(14). For this reason, and in order not to overstate entitlements, a 100 % value adjustment has been entered in respect of bad debts.

From 2000 onwards, Member States have to submit a half-yearly statement of these data under Regulation (EC) No 2761/99. This statement must include entitlements for which the probability of collection is virtually nil even though the recovery procedures have not yet been legally abandoned. A more precise estimate of these entitlements will then be possible.

- VAT paid by institutions and recoverable from the Member States: this item covers the amounts due in respect of taxes paid by the institutions and recoverable from the Member States.

- Other receivables: The figure of EUR 163 million represents claims on Member States which have been quantified and duly established. Estimates of amounts receivable have been recorded in the Commission's accounts for other entitlements which have not yet been identified as certain, of a fixed amount and due. They are shown in Table 3.

This item comprises amounts due to the Communities from the Member States: EUR 25,6 million as a result of supplementary and amending budget No 5/99, which was repaid on 1 January 2000, and EUR 73 million called up for the reserve for loans and loan guarantees.

It also includes own resources - this year totalling EUR 1951876314,39 - which, under Article 6(2)(b) of Regulation No 1552/89, are established by the Member States but not made available to the Communities as they have not yet been recovered or guaranteed or, if they have been recovered or guaranteed, have been challenged.

This figure overestimates the Communities' actual entitlements since the separate account for traditional own resources largely consists of amounts where actual recovery is very doubtful.

In accordance with the principle of prudence, the European Community must set aside a provision for part of this amount. However, the Commission is unable to make a precise calculation of the impact of this overestimate since there are no rules allowing it to obtain the information necessary. This would require detailed analysis of information which is available only at local level in the Member States. To prevent entitlements from being overstated, a 100 % value adjustment has been made for the first time in respect of doubtful entitlements and entered in the assets section of the balance sheet, reducing the figure for amounts owed by the Member States.

To improve valuation of these entitlements, the Commission has presented a proposal for the amendment of Regulation (EEC, Euratom) No 1552/89 to tighten up the procedure for the Member States to write off irrecoverable entitlements.

>TABLE>

Table 1

A. ACCOUNTS: OWN RESOURCES ESTABLISHED AND STILL TO BE RECOVERED AT END-1999

>TABLE>

Table 2

SEPARATE ACCOUNTS: OWN RESOURCES ESTABLISHED AND STILL TO BE RECOVERED AT END-1999

>TABLE>

Table 3

ESTIMATES OF AMOUNTS RECEIVABLE AT END-1999

>TABLE>

B.3. Amounts owed by Community institutions and bodies

This heading contains various amounts owed to the European Communities by Community bodies not covered by the scope of consolidation, for which the institutions pay certain expenditure, which will subsequently be repaid.

B.4. Sundry debtors

This item covers amounts owed as a result of the activities of the European Communities, including:

1. The recovery orders entered in the revenue accounts at 31 December 1999 as established entitlements outstanding.

The item also contains amounts recoverable in respect of fines for infringements against competition rules which have been suspended and for which a bank guarantee has been lodged. The volume of bank guarantees received to cover fines comes to EUR 724,6 million. In the case of outstanding fines, EUR 1067 million has been disregarded following an appeal against the Commission decision. In addition, EUR 154,3 million has been collected provisionally.

2. All debtors owing sums resulting from loans paid from borrowed funds.

3. All amounts owed as a result of Guarantee Fund operations. These amounts break down as follows:

>TABLE>

In view of the risk of non-recovery and in accordance with the principle of prudence, a 100 % adjustment was entered in the accounts for all Guarantee Fund operations which had not been repaid by debtors at 31 December 1999. This was deducted from the value of these entitlements on the assets side of the balance sheet.

4. Advance payments from the budget to public or private intermediaries selected by the Commission to carry out the management or forward these payments to the final beneficiaries, either because of provisions contained in the regulations or as a result of contractual provisions. This amount - EUR 622,4 million (including bank interest of EUR 10,8 million) - thus corresponds to the funds held by the intermediaries at 31 December 1999.

C. Sundry receivables

Basically, this item covers amounts owed to the institutions by its staff, in particular advances on salary and other sums to be recovered.

VIII. CASH INVESTMENTS

>TABLE>

IX. DISPOSABLE ASSETS

>TABLE>

This heading covers all the funds which the institutions keep in their accounts in each Member State and EFTA country (Treasury or central bank), in current accounts and imprest accounts, petty cash and the proceeds of loans made from borrowed funds and loans granted to improve housing conditions for migrant workers.

Funds totalling EUR 1,38 million kept in current accounts with two banks outside the Community which have gone bankrupt will probably prove irrecoverable. As a result, and in accordance with the principle of prudence, an adjustment has been made for these accounts and entered on the assets side (reducing the value of the "Imprest accounts" heading).

>TABLE>

X. TRANSITIONAL ACCOUNTS:

>TABLE>

This heading includes interest receivable, mainly accrued interest on loans, investments and swaps; prepaid expenses and miscellaneous expenditure still to be booked, i.e. expenditure which could not be finally booked before the close date.

LIABILITIES

I. OWN CAPITAL

A. Net capital resulting from economic adjustments

>TABLE>

B. Balance for the year

>TABLE>

C. Surpluses of loan proceeds over borrowing/lending costs

This heading covers outturns carried over and the outturn for the year of loans granted from borrowed funds.

>TABLE>

In 1998 some of the profits from borrowing and lending activities were entered in the budget (EUR 77,2 million).

II. PROVISIONS FOR LIABILITIES AND CHARGES

>TABLE>

In view of the risks involved in lending to third countries, a provision for risks and liabilities has been set up for the net assets of the Guarantee Fund, not including the surplus funds to be repaid to the general budget in the first quarter of 2000 (see note IV.B.3 on the assets side).

III. LONG-TERM LIABILITIES

This heading includes liabilities due in more than one year.

>TABLE>

Detailed tables on borrowing are to be found in Volume II.

Staff funds: This budget item covers the unemployment fund for temporary staff at all the institutions (EUR 9,3 million) and the welfare fund for Commission local staff in non-member countries (EUR 9,6 million).

Deposits and guarantees received: These are sums deducted as guarantees for the payment of construction work and the guarantee accounts for accounting officers, delegate accounting officers and imprest administrators.

Leasing: This budget item contains leasing debts due in more than one year.

EBRD subscriptions: the part of the subscription called in (see note Part IV.A.1 - Assets).

Other: As it has invoked its purchase option, Parliament must repay the cost of investment (see note III.A - Assets).

>TABLE>

The amounts outstanding on borrowings at 31 December 1999 are entered under long-term liabilities in the case of loans due in more than a year and under short-term liabilities in the case of loans due in less than one year.

>TABLE>

IV. SHORT-TERM LIABILITIES

A. Long-term liabilities falling due in less than one year

This heading includes borrowings which fall due for payment in less than one year's time, long-term leasing debts falling due within the year, subscriptions to EBRD capital and the purchase of Parliament's building complex (see table below).

B. Other financial liabilities

>TABLE>

C. Current liabilities

C.1. Member States and EFTA countries

This budget item covers amounts owed to EFTA countries belonging to the EEA. It also includes the 1999 balance of contributions from these countries (EUR 10789056,50)(15) and the balance from 1998 - EUR 866729,14 which has not yet been regularised.

C.2. Community bodies

This item covers amount owed by the institutions to certain Community bodies.

This item also contains deductions and repayments in respect of building loans granted to Community officials which were financed by the ECSC and have to be repaid to the ECSC.

C.3. Appropriations to be carried over

>TABLE>

C.4. Sundry creditors

This item covers debts arising from the activities of the European Communities.

D. Other liabilities

These are mainly amounts owed to staff and revenue to be transferred to various organisations or other third parties.

V. TRANSITIONAL ACCOUNTS

>TABLE>

This item comprises revenue not booked, i.e. revenue, which could not be definitively booked to the budget before the close of the year, and revenue available for re-use. It also includes accrued interest on borrowings and swaps.

Revenue from fines for infringements of the competition rules (EUR 154289546) is entered in an unbooked revenue account if an appeal is made to the Court of Justice by a third party. If the Court finds in favour of the appellant, the sum in question has to be refunded at once. Until the Court has given judgment, such revenue cannot be booked to the budget when it is received.

This item also covers conversion gains on currency items, not including cash assets.

CHAPTER 4

COMMITMENTS NOT INCLUDED IN THE BALANCE SHEET

POTENTIAL LIABILITIES AND ASSETS OF THE EUROPEAN COMMUNITIES AT 31 DECEMBER 1999

POTENTIAL LIABILITIES AT 31 DECEMBER 1999

>TABLE>

POTENTIAL ASSETS AT 31.12.1999

>TABLE>

EXPLANATORY NOTES

OFF-BALANCE-SHEET COMMITMENTS - POTENTIAL LIABILITIES AND ASSETS

1. Commitments against differentiated appropriations still outstanding at 31 December 1999 totalled EUR 70931479082,22 of which EUR 4442806119,380 is covered by carryovers of payment appropriations from 1999 to 2000.

It should be stressed that there were commitments relating to structural expenditure estimated at EUR 435 million still outstanding owing to ongoing legal proceedings. The Commission cannot cancel such amounts even if previous experience suggests that many of these commitments will not give rise to any payment.

2. Some aid remained uncommitted because the Commission decided to enter into commitments in respect of amounts that were not covered by commitment appropriations in the budget.

2.1 + 2.2. The Commission regards the overall budget allocation agreed at Edinburgh as a spending commitment by the Community vis-à-vis the Member States. The 1999 budget was established in such a way that this overall allocation was respected. As a consequence, the amount of aid earmarked but not committed under the Structural Funds and the Cohesion Fund is calculated by subtracting the budget commitments made for the period 1994-1999 from the Edinburgh allocation. The difference represents total commitments vis-à-vis the Member States after 31 December 1999 for Community Support Frameworks, Community Initiatives and the Cohesion Fund (except appropriations for combating fraud, evaluating the environment and transitional and innovatory measures) for the programming period 1994-1999. In accordance with the principle of prudence, it reflects the maximum potential liabilities for these two Funds.

The commitment appropriations covering the programming period 2000-2006, adopted at the Berlin European Council, come to EUR 195010 million for the Structural Funds and EUR 18000 million for the Cohesion Funds respectively (1999 prices).

2.3-2.5. Some aid remains uncommitted because the Commission decided to enter into commitments in respect of amounts that were not covered by commitment appropriations in the budget.

3. EAGGF Guarantee

3.1. The payments taken into account for the Guarantee Section of the European Agricultural Guidance and Guarantee Fund are those made by the Member States between 16 October and 15 October of the following year, provided that the Accounting Officer was notified of the commitment and authorisation by the following 31 January. Payments made by Member States between 16 October and 31 December 1999 are included in the off-balance-sheet commitments.

3.2. Potential liabilities towards the Member States connected with the clearance procedures. The determination of the final amount of the liability and the year in which it will be charged to the budget will depend on the length of the procedure before the Court of Justice.

4.1. As formulated, the guarantee legally covers the loans signed by the EIB at 31 December 1999 (including loans granted to three Member States before accession). However, it should be noted that these loans have not been fully paid out. At 31 December 1999 the amount paid out totalled EUR 10253 million (EUR 10184 million when the countries which have become Member States are excluded) and this, therefore, is the amount of the risk incurred by the Union. Of the EUR 13884 million paid out up to 31 December 1999, EUR 3631 million has already been repaid.

The following table shows the annual forecasts of amounts outstanding on these EIB loans guaranteed under the general budget (with the exception of those for third countries, which have joined the Community) on the basis of the amounts paid out at 31 December 1999.

>TABLE>

For the loans granted by the EIB covered by the Community budget guarantee (EUR 15624 million), the third-country guarantees break down as follows:

- 82,9 % sovereign guarantees or similar;

- 0,9 % guarantees by public institutions;

- 5,7 % guarantees by private financial institutions;

- 8,8 % guarantees by a consortium of financial institutions;

- 1,7 % guarantees by other institutions.

4.2. The Communities have received guarantees from third-party guarantors in respect of guarantees it has granted on loans under its borrowing and lending activities. The guarantees received may be classified as follows:

>TABLE>

The Community has not received third-party guarantees for loans granted under the financial assistance scheme or food aid. However, these loans, totalling EUR 1665,4 million, are guaranteed by the Guarantee Fund.

4.3. At 31 December 1999 the EIF had signed guarantees totalling EUR 2782 million; as 89,95 % of EIF capital has been subscribed, this represents a maximum potential risk of EUR 927,8 million for the European Communities. As the Communities contributes a total of EUR 600 million to the capital of the EIF, the latter might, in the worst possible scenario, repay EUR 327,8 million. The proportion of the capital subscribed by the European Communities, which have not been called up (80 %, amounting to EUR 480 million), is also included in the off-balance-sheet commitments as a potential liability (point 9).

5.1. Leasing, financing and similar entitlements

This item also covers buildings occupied under a leasing contract with purchase option.

5.1.1. European Parliament

In March 1994 Parliament signed a long-term leasing contract with a purchase option for a complex in Strasbourg for which the estimated provisional investment cost (figure updated in December 1998) is EUR 454 million, of which EUR 10 million - 40 % of the cost of the land - has been covered by the French authorities. The cost to Parliament is therefore estimated at around EUR 444 million. When the balance sheet was drawn up, three rental payments totalling EUR 43 million had been made.

Parliament has also concluded contracts to hire computer equipment under which it is committed to pay around EUR 0,4 million and tenancy agreements under which it is committed to pay around EUR 18 million.

5.1.2. Court of Justice

On 15 November 1994 the Court signed a lease-purchase contract with the Luxembourg Government for Annexes A, B and C of the Palais building with a total surface area of 26635 m2, 24505 m2 and 14809 m2 respectively.

The Court will rent the buildings for the whole term of the agreement and will not be able to exercise the purchase option until the selling price has been paid in full (Article 8(4)); at the latest this will be on 31 December 2015. Under supplementary agreement No 1 to the main agreement, the annual charge payable by the Court was reduced to LUF 405 million from 1 January 1997.

An independent expert agreed upon by both parties (Article 9) determines the selling price. The consultancy KPMG has been appointed.

The figures reached by the expert are set out below:

Selling price at 31.12.1998

>TABLE>

Selling price at 31.12.1999 (estimate)

>TABLE>

If the budgetary authority had decided to pay the balance due at 31 December 1999 instead of the annual charge laid down in the contract, the payment would thus have been LUF 2,62 billion (EUR 65,06 million).

5.2 Long-term rental-lease

This heading covers buildings occupied under a long-term leasing contract (with an initial term of more than five years) without any purchase option. These contracts may take various forms such as a rental contract or long-term lease. The amounts indicated correspond to commitments still to be paid during the term of the contract, except for the Court of Justice's Palais building, which is occupied under an indefinite lease; here, the amounts correspond to the annual rent.

Commission

5.2.1 2.29 ha of land held in Luxembourg under a 29-year lease.

5.2.2. This heading covers buildings occupied by the Commission under a long-term rental or leasing contract which do not meet the three conditions laid down in Article 7 of the Inventory Regulation (see point III.E of the explanatory notes to the balance sheet). The amounts entered correspond to the rents still to be paid in accordance with the conditions of the contract, plus tax on immovable property. The total amount breaks down as follows:

>TABLE>

5.2.3. Buildings occupied by the Commission in Luxembourg under leasing contracts.

5.3 Operational leasing

As these amounts come from outside the accounts, the figures shown for this item are not exhaustive. This heading covers buildings occupied under a long-term operational leasing contract (more than five years). The amounts entered correspond to the rents still to be paid in accordance with the conditions of the contract.

8. Commitments in respect of pensions

The rules governing the Community pension scheme are laid down in the Staff Regulations of Officials of the European Communities, in particular Chapter 3 (Pensions) of Title V (Emoluments and social security benefits of officials) and Annex VIII (Pension scheme). They are directly applicable in all the Member States.

The scheme covers different types of pension (retirement, invalidity, and survivor's) and the payment of family benefits.

Under Article 83 of the Staff Regulations, benefits paid under the pension scheme are charged to the budget of the Communities (Chapter A-19 (Pensions and severance grants) covering all the institutions). Member States jointly guarantee payment of such benefits in accordance with the scale laid down for financing such expenditure (first subparagraph of paragraph 1).

Officials contribute one third of the long-term cost of financing the scheme by means of a compulsory levy set at 8,25 % of the basic salary (second subparagraph of Article 83(1)).

Thus the scheme is covered both by the budget (it is booked to the Commission budget) and by contributions, while the payments are guaranteed collectively by the Member States.

The calculation of the estimate of total pensions liabilities (in line with the financing provided for in Article 83 of the Staff Regulation) is consistent with standard IAS19, an international accounting standard which requires the employer to determine his actuarial commitment on a going concern basis, reflecting service-prorated benefits and taking into account foreseeable salary increases. The actuarial valuation method used to calculate this liability is known as the projected unit credit method (or accumulated entitlements method).

The estimate of total pension liabilities is based on an actuarial study based on the figures at 31 December 1997, but adjusted to 31 December 1999 in line with the additional entitlements acquired in 1998 and 1999.

The liabilities cover the pension rights of the following persons:

1. Staff in active employment at 31 December 1999 in all the institutions and agencies covered by the Community pensions scheme;

2. Persons receiving a retirement pension;

3. Persons receiving a survivor's pension;

4. Orphans;

5. Persons receiving an invalidity pension.

6. Members and former Members of the Commission.

The actuarial calculation is based on standard IAS 19 and, in particular, the following parameters:

1. Updated mortality tables;

2. Calculation interest in accordance with standard IAS 19: 3,85 % compound;

3. Closed-group model (participants at 31.12.1999);

4. Application of the principle of married staff in active employment, without taking orphans' pensions into account;

5. The marital situation of persons no longer at work, taking orphans' pensions into account;

6. Elimination of the effect of the weighting, inflation or general revaluation of salaries/pensions;

7. Average salary progression of around 2 %;

8. A pensionable age of 60;

9. The statistics on early retirement and invalidity are based on current data.

The calculations of gross pensions and family allowances are based on the provisions of the Staff Regulations.

In accordance with accounting standard IAS19, the amount to be entered at 31 December 1999 is EUR 12,59 billion. This figure is lower as the interest rate to be used in the updating is higher. If last year's rate of 2,5 % had been used, the figure would have been EUR 15,99 million.

9. Potential debts due to contributions to related organisations

This sum represents payments outstanding on non-called-up capital subscribed by the Commission to the EBRD and the EIF:

>TABLE>

>TABLE>

10. In 1993 the Brussels Capital Region introduced a tax on office workers. The Commission asked the regional authorities about its exemption under the Protocol on privileges and immunities. The initial reply given was favourable.

However, this position was reversed as a result of legal procedures brought by the owners of some of the buildings occupied by the Commission. The Commission might therefore have to pay this tax.

The difference between the figures for 1998 (EUR 14,5 Million) and 1999 is due to the adjustments which the Commission has made since 1999 in line with a more detailed method for calculating potential liabilities.

Following the Court of Cassation's judgment of 11 February 1999 - at present the only final judgment in this case - and on the basis of the documents from the tax authorities submitted by the owners of the buildings occupied (for reimbursement), the Commission has been able to determine the exact amount of the tax due on each building and calculate the default interest in line with the payment deadline shown on each tax demand.

11. The following table, classified by year of Commission decision, shows all the cases involving fines for infringement of the rules of competition, which were still pending at 31 December 1999. It does not show cases completely settled by that date.

In view of the complicated nature of these cases, the number of companies involved and the possible options, this table cannot reflect historical developments over a number of years. It therefore merely gives the situation at 31 December 1999 for each case pending in relation to the Commission's initial decision. (A more detailed table is contained in Volume II).

>TABLE>

12. The two tables are based on the formal reports submitted by the Member States in accordance with Regulations (EEC) No 595/91(16) and No 1681/94(17), with amounts being broken down by Member State. The tables show the difference between amounts identified by the Member States as still to be recovered (calculated on the basis of established entitlements or estimates) and amounts already recovered or declared irrecoverable.

The figures given in this table represent a theoretical maximum rather than the amounts which will actually be made available to the Community budget, for the following reasons:

- The Member States do not always report the results of their recovery operations (and certainly not promptly).

- Although Member States must inform the Commission of the likelihood of recovery, it is impossible to determine exactly what proportion of the amounts still to be recovered will actually be recovered. National laws sometimes provide for a 30-year limitation period, which may well make the national authorities think twice about formally writing off recovery even if the chances of success are only theoretical. Nevertheless, the Commission regularly asks the Member States to revise the list of cases which have been pending for a number of years in order to exclude amounts that should be written off as irrecoverable.

- A large proportion of the total for EAGGF Guarantee is, for objective reasons, irrecoverable for no fault of the Member State concerned.

- If, for objective reasons, recovery proves impossible in a particular case, the Commission must decide whether the irrecoverable amount should be charged to the Community budget or to the Member State which failed to fulfil its obligations. This decision may be taken after several years have elapsed (in the case of EAGGF Guarantee Section expenditure, as part of the clearance of accounts procedure).

- Even if the Member State concerned launches recovery proceedings in time, a positive outcome is not guaranteed. This is particularly true where recovery orders are contested in the courts.

- In the field of structural operations, individual projects are cofinanced as part of multiannual programmes. As long as a multiannual programme has not been closed, it is impossible to put an exact figure on the amounts to be recovered because the sums involved in irregularities may, in certain circumstances, be reallocated to other, legitimate projects and because payment by instalments, in particular final payments, can sometimes be used as a means of adjusting expenditure.

The figures in these tables are provisional figures based on the reports received and processed up to the end of March 2000. These figures may therefore be changed in line with further reports arriving late.

The prospects of recovery in individual cases cannot be assessed with sufficient accuracy from the information forwarded by the Member States. Experience in recent years shows that the actual rate of recovery scarcely exceeds 20 %.

POTENTIAL ASSETS LINKED TO FRAUD AND IRREGULARITIES

reported under Regulation No 595/91 (EAGGF-G)

>TABLE>

POTENTIAL ASSETS LINKED TO FRAUD AND IRREGULARITIES

reported under Regulations Nos 1681/94 and 1831/94 (structural operations)

>TABLE>

On the date when the revenue and expenditure account was drawn up, the annual report on the fight against fraud for 1999 had not yet been adopted. Now that the OLAF has become autonomous, the procedure for adopting this report will have to be changed.

13.1. At 30 September 1999, with potential liabilities of EUR 26,1 million and potential gains of EUR 130,9 million, there was a net potential gain of EUR 104,8 million for the disposal of agricultural stocks - a far lower figure than in the previous year (EUR 307,9 million).

13.2. Virtually all (EUR 110 million) the total potential gain is accounted for by cereals. At the time when the figures were adopted for the depreciation of cereal-based products, the market situation for these products was not favourable. The amounts were set at a relatively low level in view of the prospects which were then expected. However, the substantial improvement in the market situation which followed led to a considerable rise in the foreseeable value of sales and, consequently, an increase in potential gains. The other item for which a gain is expected (EUR 10 million) is rice.

>TABLE>

VOLUME, BOOK VALUE AND EXPECTED SALES VALUE OF STOCKS AND POTENTIAL LOSSES/GAINS

AT 30.9.1999

>TABLE>

15.1. The decommissioning of the Joint Research Centre's nuclear installations and waste disposal are estimated at EUR 450 million.

15.2. The Commission recognises that these estimates include a margin of error of about 20 %. The experience acquired in various countries around the world proves that the costs involved in decommissioning nuclear installations and in nuclear waste disposal are frequently underestimated, often dramatically.

(1) International Organisation of Supreme Audit Institutions (INTOSAI) Accounting Standard Framework - September 1995.

(2) The ECB was closed on 31 December 1999.

(3) In the case of the EFTA-EEA countries, the volume of appropriations carried over from year n to year n+1 is known after the accounts have been closed. As a result the calculation of the balance includes carryovers of appropriations from year n-1 to year n.

(4) Structural Funds, internal policies, external action.

(5) 1998 Annual Report, point 38.

(6) Document E/96/280/, adopted on 22 January 1997.

(7) Cumulative depreciation at 31.12.1999, calculated from date of acquisition.

(8) As there is no satisfactory computer software, it has not been possible to calculate depreciation for furniture in the delegations, fixed assets in the information offices (except for buildings) or fixed assets at the Petten and Karlsruhe research centres (except for buildings).

(9) At 31.12.1998 only the Court of Justice and the Commission had entered these assets in the accounts.

(10) In some developing countries the value of the land cannot be distinguished from the value of the building.

(11) The target amount corresponds to 10 % of the amount outstanding.

(12) Except for the Karlsruhe research centre where the valuation is at the historic cost.

(13) See the rules on the valuation of the Publications Office's stocks of publications.

(14) Up to now there has been no legal obligation on the Member States to provide this information.

(15) This figure is understated by EUR 747,89. The corection will be made to the 2000 figure.

(16) EAGGF Guarantee.

(17) Structural operations.