15. 12. 87 Official Journal of the European Communities 1 
COURT OF AUDITORS 
In accordance with the provisions of the Treaties (Article 78f(4) ECSC; 
Article 206a(4) EEC; and Article 180a(4) EAEC) and the Financial 
Regulation of 21 December 1977 (Article 83), as well as the corresponding 
provisions relating to the European Development Funds, the Court of 
Auditors of the European Communities, at its meeting on 
10 and 11 November 1987, adopted its 
ANNUAL REPORT 
concerning the financial year 1986 
The report, accompanied by the institutions' replies to the 
Court's observations, was transmitted to the authorities responsible for 
giving discharge and to the other institutions by 30 November 1987 
Marcel MART 
(President) 
Aldo ANGIOI 
Pierre LELONG 
Andre J. MIDDELHOEK 
Keld BRIXTOFTE 
Lothar HAASE 
Stergios VALLAS 
Charles J. CAREY 
Josep SUB1RATS 
Carlos MORENO 
Richie RYAN 
Fernand HEBETTE 
2 Official Journal of the European Communities 15. 12. 87 
FOREWORD 
1. The footnotes indicated in the text of each chapter are listed at the end of the chapter in 
question. 
2. The key to the abbreviations and symbols used in this report is given on the second page 
of Annex III. 
3. The institutions' replies are set out after the annexes to this report and are marked with 
a grey strip along the edge. 
15. 12. 87 Official Journal of the European Communities 3 
TABLE OF CONTENTS 
Annual report of the Court of Auditors concerning 
the financial year 1986 
Page 
Introd uction 5 
Part I 
General budget of the European Communities 7 
Chapter 1 — General matters 7 
Chapter 2 — Implementation of the budget 15 
Chapter 3 — Accounting matters 33 
Chapter 4 — Revenue 37 
Chapter 5 — European Agricultural Guidance and Guarantee Fund, Guarantee 
Section (EAGGF-Guarantee) 44 
Chapter 6 — Frauds and irregularities 62 
Chapter 7 — European Agricultural Guidance and Guarantee Fund, Guidance 
Section (EAGGF-Guidance) 67 
Chapter 8 — Structural measures relating to citrus fruit and fisheries 75 
Chapter 9 — European Regional Development Fund (ERDF) 78 
Chapter 10 — Research 87 
Chapter 11 — Food aid 98 
Chapter 12 — Staff and administration 103 
Chapter 13 — Subsidies 112 
Chapter 14 — Loans, borrowings and interest'rate subsidies 120 
Part II 
European Development Funds 129 
ANNEXES 
Annex I — Allocation of responsibilities among Members of the Court of Auditors at 
the time this report was adopted 145 
Annex II — Reports and opinions adopted by the Court of Auditors during the last five 
years 147 
Annex III — Financial information relating to the general budget of the European 
Communities and to the European Development Funds (1986) 153 
4 Official Journal of the European Communities 15. 12. 87 
The institutions' replies to the observations of the 
Court of Auditors concerning the financial year 1986 
Part I • Page 
General budget of the European Communities 187 
Chapter 1 — General matters 187 
Chapter 2 — Implementation of the budget 192 
Chapter 3 — Accounting matters 200 
Chapter 4 — Revenue 203 
Chapter 5 — European Agricultural Guidance and Guarantee Fund, Gurarantee 
Section (EAGGF-Guarantee) 206 
Chapter 6 — Frauds and irregularities 213 
Chapter 7 — European Agricultural Guidance and Guarantee Fund, Guidance 
Section (EAGGF-Guidance) 216 
Chapter 8 — Structural measures relating to citrus fruit and fisheries 223 
Chapter 9 — European Regional Development Fund (ERDF) 225 
Chapter 10 — Research 230 
Chapter 11 — Food aid 238 
Chapter 12 — Staff and administration 240 
Chapter 13 — Subsidies 247 
Chapter 14 — Loans, borrowings and interest-rate subsidies 251 
Part II 
European Development Funds 253 
15. 12. 87 Official Journal of the European Communities 5 
Annual report of the Court of Auditors 
concerning the financial year 1986 
INTRODUCTION 
1. This is the tenth annual report of the Court of 
Auditors of the European Communities and it concerns 
the accounts for the financial year 1986 (l). The 
Treaties (2) and the Financial Regulation (3) require the 
Commission to draw up, for each financial year, the 
accounts relating to the implementation of the budget and 
a financial statement of the assets and liabilities of the 
Communities, together with a financial analysis of the 
financial year, and to forward these documents to the 
European Parliament, the Council and the Court of 
Auditors by 1 June of the following financial year at the 
latest. After examining these documents and taking into 
consideration any information that it deems necessary to 
carry out its task, the Court then prepares its annual 
report (4), which must be published by 30 November. In 
accordance with the Treaties (5), Parliament, acting on a 
recommendation from the Council, gives discharge to the 
Commission in respect of the implementation of the 
budget by 30 April of the following year. For this 
purpose, the Council and Parliament in turn examine the 
above-mentioned accounts and financial statement and 
the Court's annual report, together with the institutions' 
replies to the Court's observations. 
2. Recent developments in the Court's working meth­
ods are reflected in the present annual report. This year, in 
fact, a new Chapter 2 has been included in the first part, in 
addition to Chapter 1, which, as usual, sets out the 
Court's general observations on the Communities' 
financial situation. special reports, therefore, deciding which subjects to 
examine in this part of the report presupposes a degree of 
selectivity on the Court's part. In this connection, the 
Court would like to point out to the discharge authority 
and to readers of the annual report that the special reports 
are complementary to Chapters 4 to 14 of the present 
report, in particular in that they supply additional 
information to that set out in these sectoral chapters. 
5. Part II of the report is concerned with the European 
Development Funds, which do not constitute an integral 
part of the general budget of the Communities but are 
financed by specific contributions from the Member 
States. 
6. Annex I of the report gives the allocation of 
responsibilities amongst the Members of the Court at the 
time this report was adopted. Annex II lists the reports 
and opinions adopted by the Court over the past five 
years, whilst Annex III contains summary tables and 
various detailed analyses of the financial information 
relating to the general budget of the Communities and the 
European Development Funds. 
3. The new Chapter 2 contains all the Court's observ­
ations on the results of a horizontal audit of the 
implementation of the budget or of an examination of the 
legality and regularity of operations during the year, 
irrespective of budgetary sector. The Court has also 
attempted to ensure that this new chapter is as com­
prehensive as possible. Chapter 3 is substantially 
unchanged and contains the Court's findings with regard 
to accounting matters, whatever the sector concerned. 
4. This approach has made it possible to simplify the 
following Chapters (4 to 14), which thus deal more 
specifically with the Court's findings with regard to sound 
financial management. The observations in these chap­
ters are potentially very wide in scope, and, unlike the 
observations in Chapters 2 and 3, they may in some cases 
go beyond the 1986 annual accounts. As with the Court's 
(') The footnotes appear together at the end of the introduction. 7. The Court is sending separate reports to the relevant 
discharge authorities on the 1986 accounts of JET (the 
Joint European Torus), the European Centre for the 
Development of Vocational Training (Berlin), the 
European Foundation for the Improvement of Living 
and Working Conditions (Dublin) and the Euratom 
Supply Agency, and also on the 1985 and 1986 accounts 
of the European Schools. Comments on the Community 
contribution to the JET are included in Chapter 10 and 
Chapter 13 is mainly concerned with the Commission 
contributions to the budgets of the Schools and subsidies, 
specially those to the Dublin Foundation and the Berlin 
Centre. The Court has also drawn up a separate annual 
report on those accounting transactions that relate to the 
activities of the ECSC and on the Commission's financial 
management in this area, as required by Article 78f(5) of 
the ECSC Treaty. 
6 Official Journal of the European Communities 15. 12. 87 
PRESENTATION OF COMMUNITY 
ACCOUNTS AND ANNUAL REPORT OF 
THE COURT OF AUDITORS budget. Any observations arising from this examination 
are included in the relevant chapter of this report and the 
replies are annexed at the end of the report, in exactly the 
same way as the other institutions1 replies. 
8. The accounts for the financial year 1986 were 
forwarded by the Commission by 1 June 1987. All the 
comments contained in this report were sent to the 
Commission by 15 July 1987 and the relevant extracts of 
Chapters 2, 3 and 12 were also sent to the Parliament, the 
Council, the Court of Justice, the Court of Auditors and 
the Economic and Social Committee. 
9. The Financial Regulation stipulates that each 
institution must send its reply to the Court by 31 October 
at the latest. In practice, the formal replies are preceded by 
bilateral discussions between the institutions and the 
Court. These discussions cover both the Court's com­
ments and the draft replies made available to the Court on 
an informal basis. This procedure has made it possible, in 
several cases, to modify both the comments and the 
replies, so that the points of view expressed are presented 
to the reader as objectively as possible. MEMBERSHIP AND ORGANIZATION OF 
THE COURT 
12. The Court has reorganized the allocation of 
responsibilities amongst its Members, with effect from 18 
October 1987. The responsibilities of the Members are set 
out in Annex I. Furthermore, the Council has appointed 
Mr Fernand Hebette as a Member of the Court in place of 
Mr Paul Gaudy, again with effect from 18 October 1987. 
COURT BUDGET AND STAFF 
10. After receiving the institutions' formal replies, the 
Court adopted its report and, in accordance with the 
provisions of Article 84 of the Financial Regulation, it 
then forwarded it, accompanied by these replies, to the 
institutions so that they would receive it by 30 November 
1987. The Court did not find it necessary this year, after 
the conclusion of the bilateral discussion procedure, to 
add its own comments on the institutions' replies. This 
attitude does not imply that the Court necessarily agrees 
with the content of the replies. 
11. The Court has not made any changes to the 
arrangements introduced in 1983 for the audit of its own 
accounts. The audit of a given topic in the other 
institutions also includes an examination of the use made 
of the corresponding appropriations in the Court's 13. The Court's expenditure in 1986 (payments against 
appropriations for 1986 plus payments against carry­
overs from 1985) was 21,6 Mio ECU. 
14. The budgets for 1985 and 1986 provided for the 
following numbers of posts: 
Category A 
Category LA 
Category B 
Category C 
Category D 
Total 1985 
109 
36 
64 
77 
21 
307 1986 
124 
44 
70 
82 
25 
345 (6) 
(') The annual report is produced in accordance with the: 
ECSC Treaty, Article 78f(4); 
EEC Treaty, Article 206a(4); 
EAEC Treaty, Article 180a(4); 
Article 84 of the Financial Regulation of 21 December 1977, 
OJ L 356 of 31.12.1977, and similar provisions in each of the 
Financial Regulations for the third, fourth, fifth and sixth 
European Development Funds, respectively: 
(i) Council Decision 71/68/EEC, OJ L 31, 8.2.1971; 
(ii) Council Decision 76/647/EEC, OJ L 229, 20.8.1976; 
(Hi) Council Decision 81/215/EEC, OJ L 101, 11.4.1981; 
(iv) Council Decision 86/548/EEC, OJ L 325, 20.11.1986. (2) 
(3) 
(4) 
(5) 
(6) ECSC Treaty, Article 78d; 
EEC Treaty, Article 205a; 
EAEC Treaty, Article 179a. 
Article 77. 
Article 84 of the Financial Regulation. 
ECSC Treaty, Article 78g; 
EEC Treaty, Article 206b; 
EAEC Treaty, Article 180b; 
Article 85 of the Financial Regulation. 
Including 293 permanent posts and 52 temporary posts. 
15. 12. 87 Official Journal of the European Communities 7 
PARTI 
General budget of the European Communities 
CHAPTER 1 
General matters 
1.0. TABLE OF CONTENTS 
Principal budgetary data resulting from the accounts for the financial year 1986 1.1 
The situation of Community finances 
Introduction 
Presentation of the budgetary accounts 
Future expenditure 
Accuracy of budgetary estimates 
Final comment Paragraph 
reference 
1.1 
1.5 
1.5 
1.6 
1.13 
1.21 
1.24 — 1.4 
— 1.27 
— 1.12 
— 1.20 
— 1.23 
— 1.27 
PRINCIPAL BUDGETARY DATA 
RESULTING FROM THE ACCOUNTS FOR 
THE FINANCIAL YEAR 1986 
1.1. The general budget of the European Communities 
for the financial year 1986 (') was filially adopted on 10 
July 1986 and consisted of a total of 36 052,1 Mio ECU of 
appropriations for commitment and a total of 
35 174,1 Mio ECU of revenue and appropriations for 
payment. The accounts for the financial year 1986 show a 
final accounting deficit between revenue and expenditure 
of 819,9 Mio ECU. The real budgetary deficit, however, 
i.e. the difference between available revenue and total 
expenditure chargeable to the financial year, amounts to 
1 512,9 Mio ECU, if account is taken of the 693,0 Mio 
ECU of expenditure incurred under the Guarantee 
section of the European Agricultural Guidance and 
Guarantee Fund, payment of which had to be postponed 
until the financial year 1987 on account of a shortage of 
appropriations in 1986. No supplementary or amending 
budget was adopted during the year, although on 4 
September 1986 the Commission submitted a preliminary 
(') The footnotes appear at the end of each chapter. draft amending budget (2), upon which, on 21 November 
1986, the Council was unable to reach an agreement. 
1.2. Including the appropriations carried over from the 
financial year 1985, the final appropriations for commit­
ment and payment available in 1986 amounted to, 
respectively, 38 298,2 Mio ECU and 36 267,7 Mio ECU. 
All in all, 95,0 % of the available appropriations for 
commitment were used (93,9 % in 1985) and 94,3 % of the 
available appropriations for payment (95,2% in 1985). 
As the Court of Auditors has already pointed out, in its 
annual report concerning the financial year 1985 (3), this 
high overall rate of implementation is primarily due to the 
decisive importance of the EAGGF Guarantee Section 
appropriations, which, because of the specific regulations 
by which they are governed, were entirely used up (see 
paragraphs 1.11 — 1.12 below). 
1.3. Disregarding payments made under the EAGGF 
Guarantee Section it can be seen that, as regards 
'compulsory expenditure'(CE) (4), the overall rate of 
utilization of the available appropriations for payment 
amounted to no more than 83,1 % (see Table LI). As a 
result, the Court noted that the under-utilization of 
appropriations granted as compulsory expenditure in the 
Community's other spheres of activity represented 
Official Journal of the European Communities 15. 12. 87 
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15. 12. 87 Official Journal of the European Communities 9 
796,9 Mio ECU, which is paradoxical, to say the least, 
given that this expenditure was supposedly 'compulsory'. 
1.4. In areas where 'non-compulsory expenditure' 
(NCE) is involved, the overall rate of utilization of 
appropriations for payment amounted to 86,6 % in 1986. 
The Court notes that this percentage encompasses widely 
differing situations, from one sphere of operations to 
another, and that the rate of implementation in respect of 
policy on cooperation with developing countries was, in 
particular, very low, at 72,5 % for payments in respect of 
non-compulsory expenditure in 1986. 
THE SITUATION OF COMMUNITY 
FINANCES 
Introduction 
1.5. For the third year running, the Communities have 
not observed the fundamental principles of their financial 
organization, including, first and foremost, the principle 
laid down in Article 199 of the EEC Treaty, namely that 
the expenditure of each financial year must be covered by 
equivalent annual revenue. In addition, the Court would 
point out that, by not taking account of the expenditure 
actually incurred in respect of the financial year 1986, the 
budgetary authority created the illusion of apparent 
compliance with the maximum limit laid down for the 
Communities' own resources, and in particular the rate of 
1,4 % set for own resources from value-added tax (VAT). 
In the Court's opinion, if the entire real negative balance 
of the financial year 1986, i.e. 1 512,9 Mio ECU, had been 
taken into account, the result, for most of the Member 
States, would have been a Community rate of VAT own 
resources equal to 1,5 %, instead of the 1,39996 % shown 
in the budget. 
Presentation of the budgetary accounts 
1.6. From the time of its adoption and until its closure, 
the 1986 budget did not faithfully reflect the actual 
revenue and expenditure of the financial year (see Table 
1.2). Thus, the Court noted that: 
(a) EAGGF Guarantee Section expenditure, amounting 
to 693,0 Mio ECU in 1986, was not included in the 
budget for the financial year; Table 1.2 — Actual revenue and expenditure and deficit for the 
financial year 1986 
(Mio ECU) 
Data shown in the revenue 
and expenditure account 
To be added 
(a) Netting-out of revenue 
and expenditure: 
(i) negative expendi­
ture 
(ii) non-refundable ad­
vances / balance 
from previous finan­
cial years 
(b) EAGGF Guarantee 
Section expenditure car­
ried over to 1987 
Actual data Revenue 
34 043,3(') 
1 305,7 
678,7 
36 027,7 Expendi­
ture 
34 863,2 
1 305,7 
678,7 
693,0 
37 540,6 Deficit 
819,9 
693,0 
1 512,9 
(') Including cancellation of the balance of appropriations carried over 
from 1985 (355,6 Mio ECU) and the exchange rate differences for the 
financial year (20,5 Mio ECU). 
(b) the deficit for the financial year 1986, i.e. 819,9 Mio 
ECU, was not covered because the Commission failed 
to submit a supplementary budget; 
(c) a netting-out between EAGGF Guarantee Section 
revenue and expenditure amounting to 1 305,7 Mio 
ECU (see paragraph 1.12 below) was made; 
(d) outstanding balances of previous financial years' 
deficits, i.e. 678,7 Mio ECU, and the amount 
corresponding to these balances in the form of non­
refundable advances granted by the Member States, 
were not entered, either as revenue or expenditure, in 
the 1986 budget. 
1.7. The Court must furthermore note that the guide­
lines laid down by the Community at the European 
Summit held in Fontainebleau in 1984, which were based 
on the principle that the annual nature of the budget is 
binding, have not achieved their desired effect. Faced 
with this situation, the budgetary authority has en­
deavoured to provide a partial and ad hoc solution to the 
problem, by defining forms of supplementary financing 
(refundable advances in 1984, non-refundable advances 
in 1985 and carrying over an estimated amount of 
3 200 Mio ECU (5) relating to the special programme for 
the disposal of butter to the financial years 1989-92). 
1.8. By resorting to refundable advances or deferred 
financing procedures, such as those prescribed for the 
butter destocking programme, the Community is mort­
gaging more and more of its future and has, in fact, 
engaged in a form of borrowing. This practice is all the 
more open to censure as it concerns the financing of 
10 Official Journal of the European Communities 15. 12. 87 
current expenditure, although neither the Treaty nor the 
Financial Regulation make provision for such a poss­
ibility and it is not accompanied by the guarantees usual 
for such operations. 1.18 below) and an increase in the burden of past 
liabilities which will continue to have to be borne by 
subsequent Community budgets (see paragraph 1.13 et 
seq.). 
1.9. In 1986, despite the fact that this short-term 
budgetary policy would result in a negative out-turn for 
the year, and despite the increasing gap between available 
own resources and actual expenditure for the financial 
year, neither the Commission nor the budgetary authority 
considered that they should rectify this situation, either 
by laying down a strict procedure for bringing revenue 
and expenditure into balance or by means of a sup­
plementary budget, the contents of which might, at least 
temporarily, have satisfied the requirement for a balanced 
annual budget laid down by Article 199 of the EEC 
Treaty. 
1.10. On the contrary, the Commission confined itself 
to submitting a preliminary draft amending budget on 4 
September 1986, which the Council, moreover, did not 
adopt and which merely took account, as regards 
expenditure, of the net drop in own resources. As a result, 
the management of the 1986 budget was characterized by 
two main phenomena: an absence of any real control of 
agricultural expenditure (see paragraphs 1.11 — 1.12 and 1.11. With regard to agricultural spending, the Court 
notes that, according to the Commission's accounts, the 
relative share of EAGGF Guarantee Section expenditure 
as a percentage of total budgetary expenditure fell in 1986 
to 64,7 %, compared with 70,2 % in 1985 (see Table 1.3), 
after three years of continuous growth. 
1.12. This percentage of 64,7% should however be 
corrected upwards, both to take account of expenditure 
carried over to the financial year 1987 (693,0 Mio ECU) 
and the so-called 'negative' expenditure, which amounted 
to 1 305,7 Mio ECU in 1986. This 'negative expenditure' 
(see Table 1.4), which, in reality, is revenue directly 
deducted from budgetary expenditure proper, is made up 
primarily of sums collected from milk producers or of 
levies on intra-Community agricultural trade through the 
mechanism of the monetary compensatory amounts 
(MCAs). Once all these factors are taken into account, the 
relative share of EAGGF Guarantee Section expenditure 
thus represents 66,6 % of total expenditure for the 
financial year 1986. 
% 
80-Table 1.3 — Relative share of annual EAGGF Guarantee Section expenditure in total annual budgetary expenditure (') 
Annual budgetary expenditure = 100 % 
70 — 
60 — 79,3 77,5 
75,2 Annual budgetary expenditure 
EAGGF Guarantee Section 
72,6 
72,6 70,9 ,69,4 70,2 
64,9. 66,6 
64,7 
61,6 60,6 
->-
1973 74 75 76 77 78 79 80 81 82 83 84 85 86 
(') Annual expenditure = payments against appropriations of the financial year plus payments against carry-overs from the previous financial year. 
15. 12. 87 Official Journal of the European Communities 11 
Table 1.4 — EAGGF Guarantee Section negative expenditure in 
1986 
(Mio ECU) 
Sector 
Cereals and rice 
Olive oil 
Milk 
Monetary 
compensatory 
amounts 
Clearance Arti­
cle 
1030 
1232 
207 
2802 
2804 
290 Item 
Co-responsibility levies 
Other public storage 
costs 
Financial contribution 
by milk producers 
MCAs on imports levied 
by importing Member 
States 
MCAs on exports levied 
by exporting Member 
States 
Clearance of previous 
years' accounts 
Total Amounts 
56,4 
1,2 
717,1 
179,7 
296,0 
55,3 
1 305,7 
Future expenditure 
1.13. In its annual report on the financial year 1985 (6), 
the Court laid particular emphasis on the increasing 
amount of commitments still outstanding, the inevitable 
consequences for subsequent Community budgets that 
would result from the build-up of deficits carried forward 
from one financial year to the next and on the 
presentation of the accounts, which only gave a partial 
and heterogeneous picture of the true situation. The 
Court then drew up a list of the Community's financial 
liabilities according to the certain or potential nature of 
the expenditure involved and invited the Commission to 
make 'a list of all the financial liabilities accumulated by 
the Communities in the past and to try to draw up a 
timetable to show when they are payable'. 
1.14. The Court wishes to express its satisfaction at the 
efforts made by the Commission to present as true a 
picture as possible of the Communities' financial 
situation, particularly in Volume V of the revenue and 
expenditure account for the financial year 1986 (7) (see 
Table IS). This table shows that the liabilities existing at 
the end of 1986 which will have to be honoured over the 
next few years and which may be described as legally 
binding amount to 14 053,4 Mio ECU, 11 681,7 Mio 
ECU of which are accounted for by commitments 
outstanding from previous financial years. To this must 
be added other equally unavoidable expenditure con­
nected with the existence and disposal of agricultural 
surpluses and estimated by the Commission at 
6 810,2 Mio ECU, making a total of 20 863,6 Mio ECU 
of unavoidable expenditure. 1.15. Moreover, for the first time the Commission 
estimates that the expenditure which it classifies as 
potential amounts to some 13 400 Mio ECU and, in 
particular, the following items amount to 11 300 Mio 
ECU: 
(a) EAGGF, Guidance section (five-year financial 
framework): 3 504 Mio ECU; 
(b) integrated Mediterranean programmes (specific 
budgetary effort): 1 600 Mio ECU; 
(c) decisions on specific programmes to be taken on the 
basis of the outline programme for research and 
technological development: 5 396 Mio ECU; 
(d) outline programme for fishery structures — five-year 
provisional target: 800 Mio ECU. 
1.16. The liabilities and potential expenditure thus 
listed by the Commission represent overall a sum of about 
34 000 Mio ECU, of which 20 863,6 Mio ECU are 
binding liabilities (see paragraph 1.14 above) and 
13 400 Mio ECU are accounted for by other potential 
expenditure (see paragraph 1.15 above). In this connec­
tion, the Court must stress that the final amount and the 
dates on which the expenditure in question will fall due 
may vary considerably. 
1.17. There is no doubt that the Commission's more 
detailed presentation has given the budgetary authorities 
a fuller picture of the magnitudes that are to be taken into 
consideration as part of its multiannual financial 
planning. Nevertheless, the Court suggests that, in 
addition to the Commission's calculations, allowance 
should be made for an amount of the order of 3 500 Mio 
ECU, made up of the following items: 
(a) additional assessment for the disposal of agricultural 
stocks bought into intervention: 1 691,5 Mio ECU 
(see paragraph 5.14); 
(b) distillation of wines from private and non-marketable 
stocks (Articles 39 and 40 of Council Regulation 
(EEC) No 337/79 of 5 February 1979 (8)): ap­
proximately 300 Mio ECU (see paragraph 5.15); 
(c) liabilities connected with contracts signed by the 
Commission in respect of measures for the extension 
of markets in the milk and milk products sector and 
financed by a co-responsibility levy (Council Regu­
lation (EEC) No 1079/77 of 17 May 1977 (9)): 
28,1 Mio ECU; 
(d) estimated expenditure connected with the implemen­
tation, for a period of eight financial years, of Council 
Regulation (EEC) No 1336/86 of 6 May 1986 (l0), 
establishing an indemnity for cessation of milk 
production: 905,6 Mio ECU; 
12 Official Journal of the European Communities 15. 12. 87 
Table 1.5 — Position of potential liabilities and expenditure as at 31 December 1986 
(Mio ECU) 
A. Liabilities 
(1) 'Legally binding' obligations 
(a) liabilities entered in the Communities' consolidated balance sheet resulting from 
the imbalance between revenue and expenditure: 
(i) refundable advances paid in 1964 and 1985 by the Member States in order to 
cover in part the deficits of the financial years 1984 and 1985 
(ii) 1986 deficit 
(b) commitments entered in the accounts against differentiated appropriations still 
outstanding and not covered by payment appropriations carried over to the 
financial year 1987 
(c) liabilities arising from legally binding commitments which do not, however, 
appear as accounting commitments in the Community's accounts: 
(i) EAGGF Guarantee Section expenditure postponed in the absence of 
available appropriations 
(ii) liabilities relating to requests for reimbursement by certain Member States of 
EAGGF Guidance expenditure 
(2) Estimate of potential expenditure related to the disposal of agricultural stocks 
bought into intervention under EAGGF Guarantee Section regulations 
Total 
B. Other potential expenditure 
(1) European Agricultural Guidance and Guarantee Fund, Guidance section (five-year 
financial framework) 
(2) Outline programme for fishery structures (five-year provisional target) 
(3) Obligations arising from the programmes adopted by the Commission in the ERDF 
ex quota sector (multiannual appropriations) 
(4) Integrated Mediterranean programmes (specific budgetary effort) 
(5) Obligations in respect of Member States and third countries arising from 
multiannual programmes in the area of Title 7 of the budget (research, energy, etc.) 
(a) programme decisions taken 
(b) specific programme decisions to be taken on the basis of the outline programme 
for research and technological development, approval of which is expected 
shortly 
(6) Development aid provided for within the framework of the first and second 
protocols with the Mediterranean countries 
Total Position at 31.12.1986 
750,9 
819,9 
693,0 
107,9 
1 460,0 
5 396,0 1 570,8 
11 681,7 
800,9 
3 504,0 
800,0 
539,0 
1 600,0 
6 856,0 
93,0 14 053,4 
6 810,2 
20 863,6 
13 392,0 
(e) liabilities towards the Member States arising from 
Community programmes adopted by the Commis­
sion under the ERDF: 434,7 Mio ECU (see para­
graph 9.60); 
(f) food-aid liabilities relating to the implementation of 
the 1986and previous programmes: 131,1 Mio ECU. is mainly due to the almost unlimited amount of 
automatic support for prices that have been fixed at a very 
high level which is inherent in the common agricultural 
policy and which even producers of surplus food products 
continue to benefit from. In this context, a large number 
of Community markets are moving from deficit to surplus 
whilst at the same time the Community budget deficits are 
increasing (see paragraphs 5.5 — 5.21 for further details). 
1.18. The Court would finally like to draw the attention 
of the budgetary authorities to the fact that, contrary to 
the political decisions taken at the European Summit in 
Fontainebleau in 1984, agricultural expenditure has 
grown — and may well continue to grow — at a rate 
which is faster than that of own resources. This situation 1.19. In any case, future budgets will have to absorb the 
effects of the postponement of the depreciation in the 
accounts of stocks existing at the end of 1986. The 
decision that has already been taken regarding the partial 
disposal, in 1987 and 1988, of vast amounts of cut-price 
butter will, by itself and as part of the burden of the past, 
burden the financial years 1989 to 1992 with a total of 
15. 12. 87 Official Journal of the European Communities 13 
3 200 Mio ECU, while no measure of any importance has 
yet been adopted to reduce the surpluses of other 
products, namely beef and veal. For this reason, the 
Court invites the budgetary authority to give careful 
consideration to the Commission's stated intention of 
entering in its preliminary draft budget for 1988 ("), not 
only 'appropriations relating to the disposal of stocks, but 
also a financing package of 1 000 Mio ECU by way of 
depreciation of stocks which have not yet been disposed 
of, especially since the market value of butter stocks for 
disposal, and in particular of salted butter or butter which 
is too old, will show an increasing tendency to fall towards 
zero. 
1.20. Rectification of the Communities' financial 
situation consequently requires the application of 
solutions adapted to the fundamental weaknesses which 
have affected it for several years. During the financial 
year 1986, the Commission attempted to postpone the 
problem at the cost of a massive carry-over to subsequent 
financial years of budgetary deficits and expenditure 
actually incurred, for the sole purpose of appearing to 
stay within the Community rate of 1,4 % for VAT own 
resources (see paragraph 1.5 above). In February 1987, 
the Commission referred a series of proposals to the 
budgetary authority, the objectives of which, according to 
the Commission, were to bring budgetary revenue and 
expenditure back into balance and to lay down new 
priorities for the main categories of budgetary expendi­
ture C2). 
Accuracy of budgetary estimates 
1.21. In accordance with the rules regarding the annual 
nature of the budget, appropriations should only be 
requested, and a fortiori authorized, if there is a very high 
probability that they will be used, so as not to mobilize, 
and therefore not to freeze, the resources of the 
Community budget without good cause. Many of the 
Court's findings reveal a disturbing under-utilization of 
the appropriations allocated to numerous budgetary 
headings and call into question the reliability of the 
estimates made, whether by the Commission when it 
submits the preliminary draft budget or when the budget 
is finalized by the budgetary authority (see paragraphs 2.2 
— 2.13). 
1.22. As of now, it seems useful to point out that an 
examination of these budgetary headings makes it 
possible to assign the main causes for the under-
utilization of appropriations to the following categories: 
(a) structural delays related to the unrealistic nature of 
certain programmes, the time taken to implement 
them and even the slowness with which they are 
appraised; 
(b) the unwieldiness and in some cases the extremely 
complex nature of the procedures and machinery 
which condition the recipients' access to Community 
funds; (c) absence of legal bases; 
(d) unforeseen events. 
1.23. While the last of the above-mentioned causes can 
obviously not be held against the Commission, the same 
cannot be said of the first three, which deserve the 
attention of both the Commission and the budgetary 
authority, especially since it has been established that 
under-utilization of the same budgetary headings is 
becoming an ingrained habit, continuing from year to 
year. 
Final comment 
1.24. From its examination of the Community's 
financial situation, and in particular the implementation 
of the budget relating to the financial year 1986, the Court 
draws two types of conclusion. Firstly, it is significant to 
note that, since the application of many legal provisions 
concerns the implementation of common policies or the 
budget, it has in fact resulted in the development of 
practices which depart considerably from the principles 
and rules of financial orthodoxy, though the latter do 
represent the express wishes of the legislator as enshrined 
in the current version of the Financial Regulation. 
1.25. The Court cannot but note, moreover, that despite 
its previous analyses retracing the comparative evolution 
of actual expenditure and revenue and highlighting the 
structural nature of the imbalance between them, no 
solution, even purely ad hoc, was sketched out during the 
financial year 1986 in order to rectify the situation of 
financial crisis affecting the Communities since 1983. 
1.26. The Court notes that the budgetary discipline 
procedures resulting from the conclusions of the Euro­
pean Summit held in Fontainebleau in 1984 have not 
succeeded in preserving the Community budget from 
successive financial difficulties. These difficulties are 
mainly caused by the imbalance between: 
(a) expenditure incurred, the increase of which is mainly 
due to decisions taken outside the budgetary frame­
work, such as the fixing of agricultural prices for the 
year concerned or to phenomena exogenous to the 
budget, such as changes in currency parities; 
and 
(b) the revenue available (own resources or supplemen­
tary forms of financing) on whose growth an artificial 
ceiling has been placed, without taking into account 
14 Official Journal of the European Communities 15. 12. 87 
the true financing requirements resulting from 
Community mechanisms. 
1.27. Bearing in mind the persistent nature of these 
difficulties, the Court considers that solving thenvcalls for 
an overall reform of the Community legislative system, 
affecting both the definition of the Community's means 
of future financing (and maintaining the independence of 
the latter, which is clearly what the legislator wanted from 1970 onwards) and the introduction of a binding 
procedure for balancing revenue and expenditure and for 
adjusting the relative proportions of these items within 
the budget. The Court must add, in view of the 
information gained from examining budgetary manage­
ment in the past, that such a reform should be 
accompanied by a renewal of the legal framework 
governing the estimation, adoption and implementation 
of the budget, together with a return to strict observance 
of fundamental budgetary principles. 
(») 
(2) 
(3) 
(4) 
(5) 
(6) 
(7) OJ L 214,4.8.1986. 
Doc. COM(86) 475 final. 
OJ C 321, 15.12.1986, paragraph 1.14. 
According to the classification adopted by the Commission 
to distinguish between 'compulsory' expenditure and 'non-
compulsory' expenditure in the revenue and expenditure 
account. 
Council Regulation (EEC) No 801/87 of 16.3.1987, 
OJ L 79, 21.3.1987, p. 14. 
OJ C 321, 15.12.1986, paragraphs 1.2 — 1.6. 
Doc. COM(87) 191, Annex. (8) OJ L54, 5.3.1979, p. 1. 
(9) OJ L 131, 26.5.1977, p. 6. 
(10) OJ L 119, 8.5.1986, p. 21. 
('') Doc. COM(87) 191, Volume V of the revenue and expendi­
ture account, Annex, paragraph 1.13. 
(12) 'Communication by the Commission to the Council and 
European Parliament' (Doc. COM(87) 100 final) and 
'Report by the Commission to the Council and Parliament 
on the financing of the Community budget' (Doc. 
COM(87) 101 final). 
15. 12. 87 Official Journal of the European Communities 15 
CHAPTER 2 
Implementation of the budget 
2.0. TABLE OF CONTENTS 
Analysis of the implementation of the 1986 general budget 
General data 
Budgetary estimates and management of the appropriations 
General assessment of the utilization of the appropriations 
Transfers of appropriations 
Payment appropriations carried over 
Analysis of the under-utilization of appropriations, by main areas of 
Community activity 
Recourse to the negative reserve 
Observance of the Financial Regulation 
Universality of the budget 
Annual nature of the budget 
Procedure applicable to commitments 
Financial control 
Delegation of powers 
Supporting documents 
Miscellaneous comments 
Management of commitments 
Interpretation of the concept of a commitment 
Monitoring of commitments outstanding against differentiated appropri­
ations 
Commitment appropriations made available by the cancellation of 
commitments from previous years 
Recoveries of payments on account resulting from the alteration or 
cancellation of commitments 
Over-estimation of applications for payments on account 
Delays in the calculation of amounts to be recovered 
Interest on recoverable payments on account 
Final observation on the management of commitments Paragraph 
reference 
2.1 
2.1 
2.2 
2.2 
2.5 
2.7 
2.11 
2.13 
2.14 
2.15 
2.22 
2.28 
2.34 
2.38 
2.39 
2.46 
2.49 
2.50 
2.54 
2.59 
2.63 
2.64 
2.65 
2.68 
2.70 — 2.13 
— 2.13 
— 2.4 
— 2.6 
— 2.10 
-- 2.12 
2.48 
2.21 
2.27 
2.33 
2.37 
2.45 
2.48 
2.70 
2.53 
2.58 
2.62 
2.69 
2.67 
2.69 
ANALYSIS OF THE IMPLEMENTATION OF 
THE 1986 GENERAL BUDGET 
General data 
2.1. In accordance with Article 77 of the Financial 
Regulation of 21 December 1977 applicable to the general budget of the European Communities ('), the Court of 
Auditors received from the Commission the revenue and 
expenditure account, the analysis of the financial 
management and the balance sheet of the European 
Communities for the financial year 1986 (2). Tables 2.1 
and 2.2 show, respectively, the evolution and utilization 
in 1986 of the available appropriations, broken down by 
main areas of Community activity. For a more detailed 
picture of the evolution and utilization of these appropri­
ations, reference should be made to Annex III, Tables 6, 7 
and 14, of this report; Table 2.3 summarizes, by type, the 
revenue collected during the financial year. 
(') The footnotes appear at the end of each chapter. 
16 Official Journal of the European Communities 15. 12. 87 
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18 Official Journal of the European Communities 15. 12. 87 
Table 2.3 — Revenue in 1985 and 1986 
(Mio ECU) 
Type of revenue 
Customs duties 
Agricultural levies 
Sugar and isoglucose levies 
VAT own resources 
Financial contributions 
Sub-total 
Adjustments to VAT own resources for 
1985 
1984 
1983 
1982 
1981 
1980 
1979 
Miscellaneous revenue 
Surplus from previous year 
Total revenue available 
Revenue required to cover expenditure for 
the year 
Shortfall in revenue 
Advances collected during year 
Balance for the year 1985 
Actual 
revenue 
(1) 
8 310,1 
1 121,7 
1 057,4 
15 218,9 
260,9 
25 969,0 
62,2 
-26,0 
16,5 
16,7 
12,9 
29,5 
353,6 
26 434,4 
28 109,0 
1 674,6 
1 650,7 
-23,9 1986 
Budget 
(2) 
9 700,5 
1 584,9 
1 113,8 
22 257,2 
211,0 
34 867,4 
p.m. 
p.m. 
p.m. 
p.m. 
p.m. 
p.m. 
p.m. 
257,5 
35 124,9 
35 852,8(0 
727,9 
727,9 
— Actual 
revenue 
(3) 
8 172,9 
1 175,5 
1 111,5(3) 
22 223,4 
210,1 
32 893,4 
216,6 
92,6 
16,5 
18,9 
-0,4 
9,0 
24,1 
342,7(3) 
33 613,4 
35 165,8(2) 
1 552,4 
732,5 
-819,9 Difference 
(4) = (3)-(2) 
(4) 
-1527,6 (-15,7%) 
-409,4 (-25,8%) 
-2,3 (-0,2%) 
-33,8 (-0,2%) 
-0,9 (-0,4%) 
-1974,0 (-5,7%) 
(') Expenditure provided for in the budget, plus the balance outstanding from the previous year's deficits (678,7 Mio ECU). 
(2) Expenditure for the financial year, after deduction of the cancelled balance of the appropriations carried over from the previous financial year (355,6 Mio 
ECU) and profits on foreign exchange (20,5 Mio ECU), on the one hand, and the addition of the balance outstanding from the deficits (678,7 Mio ECU) 
of previous years, on the other hand. 
(3) The revenue (68,3 Mio ECU) accruing from the elimination levy provided for in Regulation (EEC) No 934/86, which is shown under miscellaneous 
revenue in the revenue and expenditure account (Volumes II and V), has been included under the heading 'Sugar and isoglucose levies'. 
Budgetary estimates and management of the 
appropriations amounted to 1918,9 Mio ECU (1 960,4 Mio ECU in 
1985), of which 498,2 were cancelled and 1 420,7 Mio 
ECU remained available for 1987. These unutilized 
appropriations for commitment may be broken down as 
follows: 
General assessment of the utilization of the 
appropriations (a) 403,8 Mio ECU relating to compulsory expenditure 
(CE)(3), i.e. 1,5 % of such appropriations; and 
2.2. The appropriations for commitment available in 
1986 and still unexpended as at 31 December 1986 (b) 1 515,1 Mio ECU relating to non-compulsory ex­
penditure (NCE)(3), i.e. 13,0% of such appropri­
ations. 
15. 12. 87 Official Journal of the European Communities 19 
2.3. The appropriations for payment available in 1986 
and still unexpended as at 31 December 1986 amounted to 
2 074,9 Mio ECU (1 300,6 Mio ECU in 1985), of which 
669,7 Mio ECU were cancelled and 1 405,2 Mio ECU 
were carried forward to 1987. These unutilized appropri­
ations for payment may be broken down as follows: 
(a) 1715,2 Mio ECU of appropriations for payment 
provided for the financial year 1986, of which: 
(i) 674,6 Mio ECU relating to CE, i.e. 2,5 % of CE; 
and 
(ii) 1 040,6 Mio ECU relating to NCE, i.e. 12,2 % of 
NCE; 
(b) 359,7 Mio ECU of appropriations for payment 
carried over from 1985 to 1986, of which: 
(i) 141,7 Mio ECU relating to CE, i.e. 63,1 % of 
appropriations carried over as CE appropri­
ations; and 
(ii) 218,0 Mio ECU relating to NCE, i.e. 25,2% of 
appropriations carried over as NCE appropri­
ations. 
2.4. It should also be pointed out that, in the case of a 
large number of the appropriations granted following 
amendments made to the budget by the European 
Parliament (312,1 Mio ECU of appropriations for 
commitment for 77 budget headings and 103,9 Mio ECU 
of appropriations for payment for 66 budget headings), 
the amount of the appropriations remaining unutilized at 
the end of the year was higher than the amount of the 
amendment. Table 2.4 shows that 19 budget headings 
involving an amount of 217,7 Mio ECU of appropri­
ations for commitment and 13 budget headings involving 
an amount of 34,1 Mio ECU of appropriations for 
payment are concerned. 
Transfers of appropriations 
2.5. The Court's attention was drawn to the volume of 
transfers made by the Commission in 1986, because a high 
volume of transfers is a sure sign that the budgetary 
estimates were based on excessively problematical 
forecasts of needs: 
(a) 2 000 Mio ECU of appropriations for commitment, 
including 1 740 Mio ECU under the EAGGF Guar­
antee Section, were transferred from chapter to 
chapter; 
(b) 1 860 Mio ECU of appropriations for payment, 
including 1 740 Mio ECU for the EAGGF Guarantee 
Section, were transferred from chapter to chapter; (c) in addition, more than 2 000 Mio ECU were transfer­
red within chapters. 
2.6. With regard to the appropriations for commitment, 
the sum of 150,0 Mio ECU had to be mobilized in the 
form of transfers during 1986 to cover the 'negative 
reserve' which was included in the appropriations entered 
under Chapter 100 of the budget (see paragraph 2.13). 
The budget headings for which the commitment ap­
propriations were reduced in this way in 1986 are shown 
in Table 2.5. 
Payment appropriations carried over 
2.7. Article 1.3 of the Financial Regulation lays down 
that 'payment appropriations shall cover, up to the limit 
of the amount entered in the budget, expenditure arising 
from commitments entered into during the current 
financial year and/or the preceding financial years'. 
2.8. In its annual report concerning the financial year 
1985 (4), the Court criticized the utilization, contrary to 
the provisions of Article 1.3 of the Financial Regulation, 
of payment appropriations carried over from 1984 to 
settle new commitments entered into in 1985. During the 
discharge procedure, the Council said that it shared the 
Court's opinion. 
2.9. Table 2.6 shows how the payment appropriations 
carried over from the previous financial year in 1985 and 
1986 respectively were used. It is apparent from this table 
that an amount of only 65,4 Mio ECU was used in 1986 
for payments against commitments entered into during 
the current financial year, compared with 222,1 Mio ECU 
in 1985. A detailed analysis carried out by the Court 
showed that using appropriations specific to the financial 
year in preference to appropriations carried over from 
1985 led to the cancellation in 1986 of an additional 
93,7 Mio ECU of payment appropriations carried over. 
As this amount (included in the 210,9 Mio ECU of 
cancellations given in Table 2.6) had already been entered 
in the accounts as expenditure for the financial year 1985, 
its subsequent cancellation in fact represented revenue for 
the financial year 1986 and therefore reduced the 1986 
accounting deficit. 
2.10. Out of the 945,9 Mio ECU of payment appropri­
ations which were carried over as at 31 December 1986, 
only 776,3 Mio ECU corresponded to outstanding 
commitments. If, as should have been the case under the 
terms of the Financial Regulation, the difference between 
the two amounts (169,6 Mio ECU) had been cancelled, 
the accounting deficit for the 1986 financial year would 
have been correspondingly reduced. 
20 Official Journal of the European Communities 15. 12. 87 
Table 2.4 — Appropriations which were entered following a Parliamentary amendment and remained entirely unspent 
Sector 
Fisheries 
Regional and 
transport policies 
Social policy 
Research, 
energy, etc. 
Cooperation with 
developing countries Budget 
heading 
4400 
4401 
4403 
450 
5412 
5420 
551 
581 
5841 
5842 
6000 
6010 
6611 
6613 
6616 
6706 
671 
7021 
7358 
7720 
7760 
930 
9340 
936 
951 
958 Heading 
Aquaculture and mariculture research programmes 
Research programmes on fishing methods 
Research programmes on fishery resources 
Adjustment of capacity in the fisheries sector 
New integrated operations 
Construction, fitting-out and equipment of vocational training 
centres 
Integrated Mediterranean programmes — Additional contri­
bution 
Financial support for transport infrastructure projects inside 
the Community 
Financial support for trans-Alpine transport infrastructure 
projects to facilitate transit operations through Austria 
Financial support for transport infrastructure projects to 
facilitate transit operations through Yugoslavia 
Less-favoured regions 
Less-favoured regions 
Protection of the natural environment in certain sensitive areas 
of Community interest 
Environmental measures which can help to create new jobs 
Emergency action to safeguard threatened species and to 
combat accidental pollution 
Support for restoration and conservation work on the 
Parthenon and on the Athenian Acropolis 
Promotion of the cultural sector 
Projects for the liquefaction and gasification of solid fuels 
Raw materials — Research and development in the raw 
materials sector 
Interest subsidies for new investment aimed at increasing 
employment 
Community export promotion to Japan 
Financial and technical cooperation with Latin American and 
Asian developing countries 
Visits from experts, further training courses, study awards and 
support for local training centres in favour of Latin and Asian 
developing countries 
Aid towards self-sufficiency for refugees and displaced persons 
Contribution to financing the purchase of food products by 
non-governmental organizations 
Special programme to combat hunger in the world 
Total Appropriations entered following 
a Parliamentary amendment 
for 
commitment 
130 000 
120 000 
180 000 
7 000 000 
1 300 000 
1 800 000 
10 000 000 
35 000 000 
4 000 000 
4 000 000 
77 287 500 
20 554 500 
100 000 
160 000 
9 000 000 
20 500 OOOC) 
10 000 000 
600 000 
16 000 000 
217 732 000 for 
payment 
2 000 000 
1 300 000 
1 800 000 
400 000 
100 000 
600 000 
100 000 
160 000 
4 000 000 
20 000 000(') 
400 000 
250 000 
3 000 000 
34 110 000 
(') Initially entered under Chapter 100 and transferred to the budgetary heading concerned at the beginning of December 1986. 
15. 12. 87 Official Journal of the European Communities 21 
Table 2.5 — Implementation of the negative reserve (') for commitment appropriations in 1986 
(ECU) 
Chapter 
Article 
440 
510 
542 
551 
581 
584 
930 
958 
100(7331) Headings 
Joint fisheries research programmes 
European Regional Development Fund — Specific 
Community measures 
Special financial assistance to Greece in the social field 
Integrated Mediterranean programmes — Additional 
contribution 
Financial support for transport infrastructure projects 
inside the Community 
Financial support for transport infrastructure projects 
to facilitate transit operations through Austria and 
Yugoslavia 
Financial and technical cooperation with Latin Amer­
ican and Asian developing countries 
Special programme to combat hunger in the world 
Provisional appropriations 
Total Deductions made 
Definite absence 
of legal basis 
in 1986 
1 080 000 
27 000 000 
3 000 000 
16 000 000 
7 500 000 
54 580 000 Implementation 
problems enabling 
surplus commitment 
appropriations 
to be anticipated 
immediately 
30 000 000 
5 420 000 
30 000 000 
30 000 000 
95 420 000 
150 000 000 
(') Source: Volume I of the revenue and expenditure account — Doc. COM(87) 186, Section III, p. 66. 
Analysis of the under-utilization of appropriations, by 
main areas of Community activity 
2.11. Out of the six areas, which in fact constitute all the 
operational sectors of the budget, for which the rate of 
utilization of commitment or payment appropriations 
was globally less than 90 %, the Court made a list (see 
Table 2.7) of the budget headings which had been 
allocated more than 5 Mio ECU as appropriations 
initially made available in 1986 and for which the rate of 
utilization was less than 75 %. The Court's list shows, 
where appropriate, the extent to which the headings in 
question had been amended by the Parliament. The Court 
notes in particular that: 
(a) in the case of 33 budget headings which had been 
allocated more than 5 Mio ECU as appropriations 
for commitment, the rate of utilization was below 
75 %. These headings represent a cumulative total of 
2 124,7 Mio ECU, of which 1 293,3 Mio ECU were 
not utilized as initially provided for; Table 2.6 — Utilization of payment appropriations carried over 
from the previous financial year in 1985 and 1986 
(Mio ECU) 
Utilization of appropriations 
(1) Appropriations carried over from 
the previous financial year 
(2) Transfers to appropriations 
specific to the financial year 
(3) Final appropriations ((l) + (2)) 
(4) Payments 
including: 
— payments against commit­
ments outstanding at the end 
of the previous financial year 
— payments against commit­
ments specific to the financial 
year 
(5) Appropriations carried over to 
the next financial year 
(6) Cancellations ((3) - (4) - (5)) 1985 
687,7 
-1,0 
686,7 
581,0 
358,9 
222,1 
4,4 
101,3 1986 
749,8 
749,8 
534,9 
469,5 
65,4 
4,0 
210,9(1) 
(') Including the cancellation of 93,7 Mio ECU of appropriations carried 
over from 1985, on account of the priority given by the Commission to 
the utilization of appropriations specific to the financial year. 
22 Official Journal of the European Communities 15. 12. 87 
Table 2.7 — Budget headings with allocations greater than 5 Mio ECU where the rate of utilization 
of the appropriations for payment (AFP) and/or appropriations for commitment (AFC) initially made available for 
financial year 1986 (initial appropriations and appropriations outstanding or carried over from 1985) was lower than the 
75% 
*-
Agricultural 
structures 
Fisheries 
'A 1 
Regional and 
transport 
policies 
(4) 
policy 
(4) 
(4) Budget 
heading 
(') 
300 
3221 
3222 
3240 
3261 
3290 
3292 
330 
3430 
387 
(NDA) 
3890 
(NDA) 
3891 
(NDA) 
3892 
4010 
(NDA) 
420 
(NDA) 
422 
(NDA) 
450 
451 
510 
5420 
5421 
550 
551 
581 
607 
608 
610 
6300 
(NDA) 
631 
(NDA) 
641 
(NDA) 
6430 
(NDA) 
6460 
650 
(NDA) 
651 
(NDA) Heading 
EAGGF (Guidance) — Projects for the improvement of agricultural 
structures provided for under Art. 13 of Reg. No 17/64/EEC 
EAGGF (Guidance) — Collective irrigation works in the Mez-
zogiorno 
EAGGF (Guidance) — Adaptation and modernization of the 
structure of meat production in Italy 
EAGGF (Guidance) — Drainage operations in Ireland 
EAGGF (Guidance) — Programme to speed up development in the 
less-favoured areas of Northern Ireland 
EAGGF (Guidance) — Acceleration of agricultural development in 
certain regions of Greece 
EAGGF (Guidance) — Launching of an irrigation programme in 
Greece 
EAGGF (Guidance) — Special programme for the development of 
Portuguese agriculture 
EAGGF (Guidance) — Improvements in the citrus fruit sector 
Community supervision of the application of agricultural rules 
Agricultural surveys in Italy 
Special emergency measure to assist stock-breeding in Italy 
Slaughter of pigs and processing of pigmeat in the United Kingdom 
Withdrawal and carry-over premiums 
Expenditure relating to fishing in Mediterranean waters outside 
Community jurisdiction 
Expenditure in connection with agreements on fishing rights 
Adjustment of capacity in the fisheries sector 
Redeployment of capacity in the fisheries sector 
European Regional Development Fund — Specific Community 
measures 
Construction, fitting-out and equipment of vocational training 
centres 
Construction, fitting-out and equipment of centres for the care of the 
mentally disabled 
Mediterranean programmes — Preparation of integrated program-
Integrated Mediterranean programmes — Additional contribution 
Financial support for transport infrastructure projects inside the 
Community 
Financing of measures proposed before the financial year 1984 
(former Chapter 60) 
Financing of measures proposed before the financial year 1984 
(former Chapter 61) 
European Social Fund — Specific measures 
Implementation of the education programme 
Preparation of young people for working life 
European Foundation for the Improvement of Living and Working 
Conditions 
Tasks entrusted to the institution lo promote exchanges of young 
workers 
Specific Community measures to combat poverty 
Contribution to the ECSC for social measures in connection with the 
restructuring of the steel industry 
Restructuring of the Community coal industry Type 
of 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC initially 
available 
(2) 
12 071 599 
26 536 778 
9 781 108 
9 761 108 
7 804 284 
7 803 963 
5 728 204 
5 827 652 
39 621 562 
40 276 298 
5 115 932 
620 000 
20 500 000(5) 
33 000 000(5) 
8 654 194 
9 961 304 
12 409 208 
9000 000 
8 514 200 
3 614 200 
19 250 368 
19 250 368 
5 500 000 
359 974 
39 000 000 
39 000 000 
11 000 000(5) 
11 000 000(5) 
29 149 550(5) 
29 000 000(5) 
38 000 000 
57 000 000 
8 196 100 
11 196 100 
91 000 000 
210 000 000 
21 300 000 
19 067 268 
19 762 789 
15 880 336 
23 266 162 
33 235 357 
118000 000 
360 000 000 
58 000 000 
155 000 000 
263 110 279 
254 039 488 
51 578 252 
117 941 104 
8 214 399 
6 051 125 
11 253 433 
7 920 000 
6 402 000 
5 200 000 
5 121 575 
4 500 000 
7 442 000 
8 014 871 
62 500 000 
62 500 000 
60 000 000 
60 000 000 of which 
apps. entered 
following a 
meniary 
amendment 
614 200 
614 200 
2000 000 
7000 000 
1 800 000 
1 800 000 
10 000 000 
35 000 000 
920 000 
920 000 
1 200 000 
1 200 000 Rate of 
of these 
56 
29 
0,0 
0,0 
31 
31 
19 
19 
49 
48 
35 
0,0 
0,0 
0,0 
0,0 
0,0 
38 
98 
58 
100 
0,0 
0,0 
2 
100 
37 
37 
0,0 
0,0 
31 
100 
37 
14 
3 
8 
98 
68 
27 
31 
18 
80 
42 
71 
6 
4 
76 
58 
69 
55 
64 
79 
62 
97 
41 
95 
73 
100 
65 
99 
71 
93 
0,0 
0,0 
0,0 
0,0 
15. 12. 87 Official Journal of the European Communities 23 
*« 
Research, 
energy, etc. 
(«) 
Cooperation with 
developing countries 
(4) Budgel 
heading 
7021 
7030 
7031 
7301 
7328 
7331 
7350 
7352 
7356 
7358 
7382 
7389 
7390 
7503 
7521 
7703 
7710 • 
7713 
(NDA) 
7717 
7720 
7739 
(NDA) 
9202 
9211 
923 
925 
(NDA) 
930 
931 
950 
(NDA) 
953 
958 
96(3) Heading 
Projects for the liquefaction and gasification of solid fuels 
Projects concerning substitution of hydrocarbons 
Projects concerning new and renewable energy sources 
Horizontal projects — Stimulating scientific and technical cooper­
ation and interchange in Europe 
Environment — Sectoral programme 'Environment' 
Development of endogenous research capacity in developing 
countries 
Industrial technologies — Applied metrology and reference materials 
Industrial technologies — Basic technological research and appli­
cations of new technologies 
Biotechnology 
Raw materials — Research and development in the raw materials 
sector 
Services performed at the request of outside bodies and individuals 
Operation of the HFR reactor 
Completion of joint programmes (1980 to 1983) 
Community activities in the specialized information sector 
Promotion of a supporting infrastructure for innovation and 
technology transfer 
Inter-institutional information system (INSIS) 
Community operations for developing microelectronics technology 
Plan of action for the information technologies 
Standardization in information technologies 
Interest subsidies for new investment aimed at increasing employment 
Monitoring the application of certain steel industry measures 
Addition food aid in cereals 
Food aid in butteroil 
Food aid in vegetable oil/olive oil 
Food aid transport costs 
Financial and technical cooperation with Latin American and Asian 
developing countries 
Promotion of trade relations with Latin American and Asian 
developing countries 
Aid to disaster victims in developing and other non-member countries 
Programme of positive measures regarding South Africa 
Special programme to combat hunger in the world 
Cooperation with Mediterranean countries Type 
of 
apps. 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC initially 
available 
(2) 
6 359 248 
28 237 118 
12 423 880 
18 278 551 
16 619 106 
45 759 639 
13 554 910 
19 039 970 
11 980 877(5) 
27 681 173(5) 
1 000 000(5) 
17 500 000(5) 
7 183 753 
7 212 898 
16 033 385 
60 061 762 
10 489 831 
31 182 438 
14 579 326(5) 
26 868 156(5) 
6 331 082 
6 312 582 
15 304 962 
18 328 249 
13 473 830 
1 541 339 
5 627 500 
6 813 003 
5 684 735(5) 
5 947 961(5) 
5 328 052 
6 523 754 
7 711 661 
816 301 
6 467 360 
4000 000 
3 750 000 
5 360 000 
4000 000 
10 000 000 
18 000 000(5) 
18 000 000(5) 
73 000 000 
78 000 000 
75 300 000 
83 000 000 
9 194 310 
10 000 000 
119 275 637 
102 200 000 
190 931 455(5) 
486 072 242 
6 935 332 
9 393 357 
32 473 372 
18 500 000 
5000 000 
10 000 000 
30 000 000 
44 951 602 
394 844 794(5) 
185 049 680(5) of which 
apps. entered 
following a 
Parlia­
mentary 
amendment 
9000 000 
9 620 000 
1 000 000 
7 500 000 
1 500 000 
20 500 000 
1 000 000 
1 000 000 
4000 000 
10 000 000 
30 000 000 
24 600 000 
20 000 000 
16000 000 Rate of 
utili-
of these 
100 
69 
72 
100 
73 
92 
67 
99 
94 
15 
0,0 
0,0 
53 
100 
44 
99 
74 
96 
82 
13 
51 
63 
91 
73 
38 
1 
72 
80 
51 
84 
63 
85 
53 
69 
73 
100 
33 
71 
0,0 
0,0 
5 
71 
18 
40 
61 
95 
65 
100 
57 
100 
90 
55 
60 
76 
52 
30 
67 
66 
47 
0,0 
27 
73 
(') NDA = Non-differentiated appropriations. 
(2) Initial budget appropriations, plus the appropriations provided for in Chapter 100 and the appropriations carried over/outstanding as at 31 December 
1985. 
(3) In this Chapter, 17 of the 25 items/articles meet the criteria applied in this table. 
(4) Budget headings which, according to the Commission, were implemented belatedly on account of the absence of a legal basis. See Annex 4 to Volume 7 of 
the revenue and expenditure account — Doc. COM(87) 186. 
(5) Including the appropriations provided for in Chapter 100. 
24 Official Journal of the European Communities 15. 12. 87 
(b) in the case of 55 budget headings which had been 
allocated more than 5 Mio ECU as appropriations 
for payment, the rate of utilization was below 75 %. 
These headings represent a cumulative total of 
2 109,8 Mio ECU, of which 1 265,8 Mio ECU were 
not utilized as initially provided for. 
2.12. Volume I of the revenue and expenditure account 
('Analysis of the financial management') gives expla­
nations for the under-utilization in a number of cases. In 
particular, Annex 4 to this volume brings together the 
cases of under-utilization which are due, according to the 
Commission, to the absence of a legal basis. 
Recourse to the negative reserve 
2.13. Faced with the depletion of Community re­
sources, a rate of increase in expenditure in excess of the 
authorized maximum and a reduction in the Parliament's 
margin of manoeuvre, the budgetary authority, noting 
that for years a large number of appropriations had not 
been used during the financial year to which they related, 
introduced a 'negative reserve' in Chapter 100 in 1986 
which reduces the total amount of appropriations 
granted. During the year this negative reserve was offset 
by transfers from budget headings which were found not 
to have been fully needed. In 1986, this reserve only 
involved commitment appropriations and amounted to 
150 Mio ECU. It was extended to include payment 
appropriations in 1987 (88,9 Mio ECU of payment 
appropriations and 181,1 Mio ECU of commitment 
appropriations). This budgetary device is in practice a 
form of speculation on the probable under-utilization of 
certain appropriations. 
OBSERVANCE OF THE FINANCIAL 
REGULATION 
2.14. The principal breaches of the Financial Regu­
lation that the Court observed in 1986 are described in 
detail in the following paragraphs, though this is by no 
means an exhaustive list. 
Universality of the budget 
2.15. Article 3, paragraph 1, of the Financial Regu­
lation refers clearly to the principles of Article 199 of the 
Treaty and, in particular, stipulates that 'all estimated 
revenue and all estimated expenditure shall be entered in full in the budget and in the accounts without any 
adjustment against each other'. Observance of this 
principle is a prerequisite for the transparency of the 
budget and the accounts and, therefore, for the exami­
nation of the latter by the Court and by the budgetary and 
discharge authority. Although the Regulation does 
include some exceptions to this principle, they are strictly 
defined and of relatively limited financial significance. 
However, a number of exceptions have been introduced 
over the past few years. They all represent distortions of 
the principle of the universality of the budget and involve 
sums which are often very large. 
2.16. Within the Guarantee Section of the EAGGF, the 
habit of entering various items of revenue generated by 
the common agricultural policy as 'negative expenditure' 
has led to a reduction, by at least 1 305,7 Mio ECU, in the 
apparent overall volume of operations financed by this 
section of the EAGGF in 1986. This sum should be added 
to the total expenditure and revenue for the financial year 
to give an accurate picture of the overall implementation 
of the 1986 budget (see paragraph 1.12 and Table 1.4). 
2.17. In the case of the EAGGF Guarantee Section 
chapters which include both expenditure — in the strict 
sense of the word — and negative expenditure (revenue), 
the Commission, by resorting to the technique of 
transferring appropriations (which it is empowered to 
decide on without future reference since these are 
transfers within chapters) is effectively allowing an 
increase in gross expenditure up to the amount of the 
increase in negative expenditure (revenue). Thus, in 1986, 
additional gross expenditure of 140 Mio ECU more then 
had been initially authorized was recorded under Chapter 
28, 'Monetary compensatory amounts' (see paragraph 
5.25(b)). The Court notes that this practice, which is 
related to the entry of negative expenditure in the budget, 
does not comply with the obligation to obtain the 
approval of the budgetary authorities before increasing 
the gross expenditure under a given chapter. 
2.18. Furthermore, an inspection of the accounts for the 
financial year 1986 shows that a number of other devices 
enabled an apparent reduction to be made in the volume 
of revenue and expenditure so that the 1986 budget and 
the implementation of the budget appeared to be within 
the limits of budgetary discipline which the Community 
attempts to impose upon itself. The out-turn of the 
previous financial year is thus shown as a surplus of 
49,2 Mio ECU and, as such, is entered as revenue under 
Article 300, whereas this amount actually represents the 
balance of three separate items: 
(a) the amount of non-refundable advances that the 
Member States undertook to pay in 1985 but which 
they did not pay until 1986, i.e. revenue of 727,9 Mio 
ECU; 
(b) the residue (expenditure) of the 1984 deficit carried 
over irregularly to 1986 and representing 654,8 Mio 
ECU; 
(c) and the actual out-turn (expenditure) for the financial 
year 1985, i.e. a deficit of 23,9 Mio ECU. 
15. 12. 87 Official Journal of the European Communities 25 
If each of these items had been entered in the accounts 
without any offsetting adjustments, the overall amount of 
revenue and expenditure for the financial year 1986 would 
have been increased by 678,8 Mio ECU. 
2.19. The European Investment Bank (EIB), which 
manages loans from budgetary funds under the Mediter­
ranean Protocols on behalf of the Commission, receives 
interest from the borrowers which it pays into accounts 
opened in the Commission's name. In return for this 
service, the EIB receives management commissions which 
are debited to these accounts. Although the Commission 
has the relevant information to enable this revenue and 
expenditure to be entered separately, it enters only the 
final balance of these operations in the accounts. This 
practice is irregular and, as a result of it, the accounts do 
not clearly show how much the commission paid to the 
EIB, which is estimated at several Mio ECU, actually 
amounts to. Like the previous practices, this one has the 
practical effect of proportionately reducing both the 
amount of the revenue and that of the expenditure for the 
financial year. 
2.20. In order to cope with an increase in postal rates 
without having to request corresponding additional 
appropriations, the Publications Office — in addition to 
the amount stated (440 000 ECU) in the remarks on the 
budget — made use of part of the proceeds (about 
0,6 Mio ECU) of the sale of Official Journals. 
2.21. In deciding to delay the transfer of revenue 
accruing from the sale of publications from the Office's 
account to its own account, the Commission thus 
prolonged by a year the period during which the amount 
of 494 000 ECU was available for re-use. 
Annual nature of the budget 
2.22. The principle of the annual nature of the budget is 
established in Article 199 of the Treaty and confirmed in 
Article 1 of the Financial Regulation. The Court noted a 
number of infringements of this principle. 
2.23. Postponing the charging of 693,0 Mio ECU of 
expenditure incurred and outstanding in 1986 under the 
EAGGF Guarantee Section until 1987 artificially reduces 
the amount of expenditure, and therefore the deficit, for 
the financial year 1986. 
2.24. As stated above, the Commission continues to use 
carried-over payment appropriations to pay commit­ments for the current financial year; this contravenes the 
provisions of Article 1.3 of the Financial Regulation. 
2.25. Surveillance services (amount recorded by the 
Court: 122 971 ECU) were provided in 1985 for the 
Parliament's building, although the necessary appropri­
ations were not available. These services were charged 
against appropriations for the financial year 1986. The 
same applied to expenditure of 37 400 ECU incurred by 
participants in symposiums and seminars held in 1985. In 
addition, appropriations made available under Item 
2710, 'General publications', were automatically carried 
forward to the financial year 1986 and were used to pay 
for the duplication of documents (146 619 ECU) on the 
basis of orders drawn up after 15 December 1985 and 
mainly during 1986. 
2.26. A number of payments effected by the Commis­
sion (995 143 ECU) did not relate to the financial year for 
which they were entered: 
(a) services and supplies in 1985 paid from appropri­
ations for the financial year 1986 (710 569 ECU); 
(b) day-to-day services in 1986 paid from appropriations 
for the financial year 1985 (17 076 ECU); 
(c) expenditure effected in December 1985 but charged 
against 1986 appropriations (245 148 ECU); 
(d) services in 1987 paid from appropriations for the 
financial year 1985 (22 350 ECU). 
2.27. In the accounts of the Court of Auditors as at 31 
December 1986: 
(a) an amount of 17 949 ECU, representing the sums 
paid as December 1986 salaries to newly recruited 
officials, was not charged to the appropriations of the 
1986 budget but to those of the 1987 budget; 
(b) an amount of 5 315 ECU paid as advances against 
mission expenses was charged to the appropriations 
of the financial year 1986 instead of to those of the 
financial year 1987; this amount is partly offset, 
however, by three underestimates of expenditure of 
the same type effected in 1986 but charged to the 1987 
budget. 
26 Official Journal of the European Communities 15. 12. 87 
Procedure applicable to commitments 
2.28. Considerable delays, of up to five months more 
than the maximum of two months authorized by the 
Financial Regulation, regularly occur before the Com­
mission makes detailed commitments for EAGGF 
Guarantee Section transactions (see paragraph 5.25(e)). 
2.29. In the case of certain costs for the printing of the 
Parliament's minutes (195 557 ECU), the commitments 
were only drawn up by the authorizing officers and 
approved by the Financial Controller retrospectively. 
Furthermore, certain commitments (106 705 ECU), 
relating to the purchase of equipment from the 1986 
appropriations, were drawn up before the final adoption 
of the budget, although such advance use is only possible 
in the case of current administrative expenditure. 
2.30. At the Council, work on the fitting-out of a 
building was carried out in January 1986 and paid for in 
March 1986 (199 477 ECU). The sum in question, 
however, was not committed until March 1986, following 
receipt of the contractor's invoice. 
2.31. At the Commission, commitments in respect of 
expenditure totalling 216 437 ECU were only drawn up 
and approved after the invoices had been received and the 
work or delivery had been carried out. 
2.32. At the Economic and Social Committee, in the 
case of at least 13 budget headings, payments exceeded 
commitments (in total 5,7 Mio ECU); certain items of 
expenditure (rents, interpreters' services, travel and 
subsistence expenses for members of the Committee, etc.) 
were incurred without a prior commitment. The Court 
has already had occasion to criticize this practice, in its 
annual report concerning the financial year 1984 (5). 
2.33. Furthermore, the budget accounts of the Econ­
omic and Social Committee only record payments, 
commitments being monitored by the Financial Con­
troller's department. As a result, accounting documen­
tation is both incomplete and imprecise, since the system 
does not guarantee that commitments and payments are 
recorded accurately. 
Financial control 
2.34. An analysis of the procedure followed in making 
payments revealed that the Economic and Social 
Committee's Financial Controller often approves pay­
ment orders before they have been signed by the 
authorizing officer (92 cases). Payments have also been 
effected without the Financial Controller's approval. 2.35. Article 24, paragraph 3, of the Financial Regu­
lation lays down that 'when the Financial Controller finds 
that a document establishing a debt has not been drawn 
up, or that a sum due has not been recovered, he shall 
inform the institution thereof. No maximum period, 
within which the Financial Controller must inform the 
institution, is specified. The practice that has grown up at 
the Commission is that the Financial Controller files a 
report, once a year. This report is then examined by the 
Commission and on the basis of the information in the 
report the Commission takes whatever corrective meas­
ures are needed at departmental level. 
2.36. In the past, the Court has had occasion to regret 
that the Financial Controller had not mentioned debts 
arising from frauds or irregularities in the EAGGF 
Guarantee Section in his reports. In his twelfth report, 
which was drawn up in June 1985 and was examined by 
the Commission in August 1985, the Financial Controller 
began to remedy this deficiency by mentioning the 
existence of debts related to the EAGGF Guarantee 
Section, but without quantifying them in detail. Apart 
from that, he "drew the Commission's attention in 
particular to a total of 463,9 Mio ECU of revenue not 
received or unrecovered claims. As there was a sum of 
around 100 Mio ECU to be recovered under the EAGGF 
Guarantee Section, there was consequently a shortfall of 
about 560 Mio ECU in the Community budget at the 
time. 
2.37. At the beginning of July 1987, the Court was still 
not aware of any new report submitted by the Financial 
Controller under Article 24, paragraph 3, of the Financial 
Regulation. At a time when Community resources have 
become scarcer and when meeting expenditure is an ever-
present problem, the Court regrets that the Financial 
Controller has been unable to continue to submit his 
report annually, given that, in difficult times such as these, 
consideration could even be given to providing this 
information every six months, or even once a quarter. 
Delegation of powers 
2.38. Ten decisions to overrule the Financial Con­
troller's refusal to give his approval were taken by the 
Secretary-General of the Parliament, although the 
Financial Regulation expressly lays down that this type of 
decision may not be delegated by the institution. 
Supporting documents 
2.39. In 1986, these 10 decisions to overrule the 
Parliament's Financial Controller were not notified to the 
Court of Auditors within the period specified in the 
Financial Regulation. After several reminders, it finally 
received notification on 22 May 1987. 
15. 12. 87 Official Journal of the European Communities 27 
2.40. Under Article 79 of the Financial Regulation, 
each institution is required to forward the documents 
supporting the accounts to the Court, and to do so every 
three months. These documents must be forwarded at the 
latest within the month which follows the end of the 
quarter, and, in the case of the fourth quarter, at the latest 
within the month which follows the close of the financial 
year. 
2.41. The institutions subject to audit by the Court have 
unfortunately not always observed these deadlines, so 
that it has not been able to carry out its task under the best 
conditions. 
2.42. By mid-January 1987, for example, the Court had 
still not received the documents supporting the expendi­
ture incurred under the EAGGF Guarantee Section for 
the period from March to November 1986. As at 30 April 
1987, the documents supporting the Commission's 
commitments for the fourth quarter of 1986 had not been 
forwarded to the Court and neither had the monthly 
EAGGF declarations relating to this same period. By 
mid-May 1987, the Court had not received any docu­
ments supporting the budgetary revenue relating to the 
fourth quarter of the financial year 1986. 
2.43. Furthermore, the Court notes that the files 
forwarded to it by the Commission do not always contain 
all the necessary supporting documents for the validation 
of the expenditure and subsequent payment. This is 
apparent from an inspection of a sample of expenditure in 
Part A of Section HI of the general budget. There was a 
particular absence of order forms, receipt certificates and 
certificates of incorporation into the inventory. 
2.44. Since the new Social Fund entered into force, the 
Commission has introduced a new documentation system 
which makes greater use of data-processing equipment. 
This involves the use of global pro forma payment orders 
for each Member State, the documents in support of 
which consist of lists specifying the individual bene­
ficiaries. The other supporting documents, particularly 
the individual claim forms, are no longer annexed to the 
copies of the payment orders or to the lists in question. 
These lists, each item of which in effect constitutes the 
payment order, are not certified by the relevant officials 
(authorizing officer, Financial Controller, accounting 
officer). 
2.45. The Economic and Social Committee did not 
forward the documents supporting its expenditure for the 
fourth quarter of 1986 until 19 May 1987. Miscellaneous comments 
2.46. Supporting documents relating to purchases of 
equipment by the Parliament were not accompanied by 
certificates to show they had been entered in the inventory 
(value of purchases: 337 902 ECU) and others did not 
bear an endorsement stating the opinion of the Advisory 
Committee on Procurements and Contracts (ACPC). 
2.47. At the Economic and S'ocial Committee, the 
Financial Controller and three authorizing officers, in 
addition to the accounting officer, are all entitled to sign 
cheques, which does not comply with the principle of the 
separation of duties. 
2.48. In 1984, a'Meetings'imprest account was set up to 
reimburse the expenses and allowances of Members of the 
Committee. However, the administrator of the imprest 
account was also appointed, with effect from 1 October 
1986, as accounting officer of the Committee. Further­
more, this imprest account does not have its own, 
independent book-keeping system. 
MANAGEMENT OF COMMITMENTS 
2.49. Commitment appropriations were introduced so 
that an instrument appropriate for the authorization and 
management of multiannual operations would be avail­
able and in order to allow the Communities to enter into 
legal commitments even though the corresponding 
payments might not be made until a much later date. 
Nevertheless, the functioning of this system has given rise 
to various difficulties, some of which have not yet been 
solved satisfactorily. 
Interpretation of the concept of a commitment 
2.50. The Financial Regulation deals with the concept 
of a commitment on two occasions: 
(a) (Article 1): 'Commitment appropriations shall cover, 
for the current financial year, the total cost of the legal 
obligations entered into for activities whose im­
plementation extends over more than one financial 
year'; 
(b) (Article 32): 'All measures which give rise to 
expenditure chargeable to the budget must be 
preceded by a proposal for commitment of expendi­
ture from the relevant authorizing officer' and 'the 
decisions taken by the Commission in accordance 
28 Official Journal of the European Communities 15. 12. 87 
with the provisions authorizing it to grant financial 
aid from the various funds or similar operations shall 
constitute commitments of expenditure'. 
2.51. It appears, from the list of the Community's future 
financial obligations described in paragraphs 1.14 — 1.17 
of this report, that not all the commitments which are 
legally binding for the Community are the subject of 
commitments in the accounts. Furthermore, there are 
other obligations, for which the commitments in the 
accounts only correspond to annual operational tranches 
and therefore do not reflect the total expenditure spread 
out over several financial years (see, for example, 
paragraph 10.41). Conversely, the Court noted cases 
where the Commission proceeded to make commitments 
in the accounts, even though at the end of the financial 
year these commitments did not correspond to any 
commitment which was legally binding for the Com­
munities (see, for example, paragraphs 10.49 — 10.51). 
2.52. In a document dated September 1985 and entitled 
'Considerations on the different procedures for the 
determination of commitments, etc.', the Directorate-
General for Budgets (DG XIX) of the Commission drew 
up a list of the different practices followed in the various 
areas of the budget. This document attempts to explain 
the many different practices followed by: 
(a) the heterogeneity of the various areas of the budget; 
(b) the fact that Articles 32 to 35 of the Financial 
Regulation were mainly devised with operating 
expenditure only in mind; 
(c) compliance with the requirement of Article 32, which 
lays down that when the Community adopts a 
measure likely to give rise to expenditure chargeable 
to the budget, a corresponding commitment must be 
made. 
2.53. In its annual reports concerning the financial years 
1983 and 1985 (6), the Court mentioned the various 
practices followed by the Commission in the area of 
commitments which make budgetary control of financial 
commitments very difficult. The examination undertaken 
by the Court in 1986 confirms that the Commission 
urgently needs to put forward precise rules regarding the 
concept of a commitment and the procedure to be used 
for recording these operations in the accounts. The 
present situation, which is characterized by the use of 
practices which are excessively flexible, seriously under­
mines the usefulness, as a means of controlling expendi­
ture, of allocations of commitment appropriations 
granted by the budget authority. Monitoring of commitments outstanding 
against differentiated appropriations 
2.54. The commitments outstanding in the sectors 
relating to differentiated appropriations amounted to 
12 458,1 Mio ECU at 31 December 1986, which rep­
resents an increase of 5,5 % compared with the cor­
responding amount at 31 December 1985 (see Table 2.8). 
After deduction of 776,3 Mio ECU of payment appropri­
ations carried forward to the financial year 1987, the 
balance of outstanding commitments not covered by 
payment appropriations amounted to 11 681,8 Mio 
ECU. This balance, most of which will have to be 
financed from the Communities' future budgets, is 
included in the contingent liabilities and is mentioned in a 
note to the consolidated balance sheet of the Com­
munities at 31 December 1986. 
2.55. Table 2.9 shows that very considerable amounts 
remain committed for long periods of time and sometimes 
for more than 10 years. In its annual report concerning 
the financial year 1985 (7), the Court deplored the fact 
that, at times, the monitoring of outstanding commit­
ments was inefficient in the fisheries sector, the European 
Regional Development Fund (ERDF) and the European 
Social Fund (ESF). The Court notes that, with the 
exception of the management of Title 6 of the budget 
(intervention appropriations in the social sector), in 
which notable improvements were made in 1986, the 
decision taken by the Commission on 18 November 1985, 
with the aim of implementing stricter procedures for 
monitoring commitments outstanding, has not had the 
expected effects. 
2.56. An examination of a sample of about 700 Mio 
ECU of outstanding commitments in other areas has 
shown that monitoring by the departments responsible at 
the Commission is inadequate. Following the failure to 
cancel, at the appropriate time, balances which were no 
longer required, the commitments outstanding were 
overstated by at least 54,8 Mio ECU at 31 December 1986 
(see Table 2.10). This estimate, which is simply based on 
findings from a limited number of files examined by the 
Court, indicates that the actual number of similar cases 
and the volume of the amounts in question could be 
considerably larger. 
2.57. Consequently, the Court recommends that DG 
XIX should be actively involved in the management 
process, so that the improvements hoped for in the area of 
the monitoring of outstanding commitments take place in 
effect. In particular, Directorates-General XIX and XX 
(financial control) should be in a position to ensure that 
the procedures laid down in the Commission Decision of 
18 November 1985 are rigorously applied by the 
departments invested with the powers of authorizing 
officer for the different spheres of Community activity. 
2.58. The Court considers in this respect that a major 
contributory factor, in connection with the belated 
15. 12. 87 Official Journal of the European Communities 29 
Table 2.8 — Accumulated outstanding commitments (differentiated appropriations) 
(Mio ECU) 
Changes in 
commitments 
Accumulated commitments outstan­
ding at the beginning of the financial 
year 
Cancellations and revaluations of 
commitments from previous years 
Payments made from commitments 
from previous years 
Accumulated commitments from pre­
vious years outstanding at the end of 
the financial year 
Commitments entered into during the 
financial year 
Payments made against commit­
ments specific to the financial year 
Accumulated commitments outstan­
ding at the end of the financial year 
Breakdown of the cumulative total of 
commitments by budget title: 
— Agricultural structures (Title 3) 
— Fisheries (Title 4) 
— Regional and transport policies 
(Title 5) 
— Social policy (Title 6) 
— Research, energy, etc. 
(Title 7) 
— Cooperation with developing 
countries (Title 9) 1984 
8 927,1 
- 507,6 
-2 591,9 
5 827,6 
+ 6 429,8 
-1 911,3 
10 346,1 (+16,3%)(') 
1 151,7 ( + 9,8%) 
89,8 ( + 48,7%) 
4 663,5 ( + 23,6%) 
2 527,0 (+1,1%) 
795,5 (+ 28,3 %) 
1 118,6 ( + 20,7%) 1985 
10 346,1 
- 965,2 
-2 639,1 
6 741,8 
+ 7 663,5 
- 2 600,2 
11 805,1 (+14,1%) 
1 169,3 (+1,5%) 
125,8 ( + 40,1%) 
5 336,2 (+14,4%) 
2 850,5 (+12,8%) 
1066,7 ( + 34,1%) 
1256,6 (+12,3%) 1986 
11 805,1 
- 1 298,0 
-3 860,1 
6 647,0 
+ 9 121,2 
-3 310.1 
12 458,1 ( + 5,5%) 
1 259,8 ( + 7.7%) 
187,3 ( + 48,9%) 
6 049- (+13,4%) 
2 071,0 (-27,3%) 
1 278,1 (+19,8%) 
1612,9 ( + 28,4%) 
(') The figures in brackets show the percentage increase over the previous year. 
Table 2.9 — Commitments relating to differentiated appropriations outstanding as at 31 December 1986(*)(2) 
(Mio ECU) 
Agricultural structures 
(Title 3) 
Fisheries (Title 4) 
Regional and trans­
port policies 
(Title 5) 
Social policy 
(Title 6) 
Research, energy, 
etc. (Title 7) 
Cooperation with 
developing countries 
(Title 9) 
Total Not 
itemized 
(3) 
(647,9) 
(647,9) Financial years during which the commitments were entered into 
1977 1978 
2,2 1,8 
(4,2) (5,0) 
9,5 15,8 
(10,0) (18,9) 
3,1 
(5,1) (4,4) 
3,8 5,1 
(6,6) (7,5) 
15,5 25,8 
(25,9) (35,8) 1979 
9,7 
(16,9) 
0,2 
(0,3) 
50,8 
(61,5) 
1,1 
(7,2) 
1,3 
(3,3) 
26,6 
(42,5) 
89,7 
(131,7) 1980 1981 1982 
17,5 44.5 73,1 
(28,8) (65,9) (122,0) 
0,02 0,8 2,7 
(0,2) - (1,5) (3,7) 
114,3 254,7 319,7 
(142,5) (321,8) (417,9) 
5,8 
(41,0) 
11,1 
(16,1) 
40,6 
(51,7) 
189,3 
(280,3) 23,8 
(57,5) 
8,4 
(11,1) 62,3 
(224,4) 
21,2 
(29,7) 
81.8 84,8 
(126.5) (119,2) 
414,0 
(584,3) 563,8 
(916,9) 1983 
139,1 
(211,4) 
4,7 
(11,1) 
451,0 
(668,8) 
169,4 
(684,6) 
64,4 
(68,7) 
105,6 
(135,1) 
934,2 
(1 779,7) 1984 
199,6 
(262,3) 
23,3 
(38,3) 
927,1 
(1 392,0) 
135,5 
(656,6) 
135,4 
(98,5) 
225,3 
(317,6) 
1 646,2 
(2 765,3) 1985 1986 
369,1 403,2 
(452,8) 
40,9 114,7 
(70,7) 
1 367,2 2 538,9 
(2 302,8) 
379,9 1 290,1 
(1 169,7) 
348,2 688,1 
(191,4) 
263,2 776,1 
(449,9) 
2 768,5 5 811,1 
(4 637,3) 1 259,8 
(1 169,3) 
187,3 
(125,8) 
6 049,0 
(5 336,2) 
2 071,0 
(2 850,5) 
1 278,1 
(1 066,7) 
1 612,9 
(1 256,6) 
12 458,1 
(11 805,1) 
(') Source: Volume V of the 1985 and 1986 revenue and expenditure accounts. 
(2) The situation as at 31 December 1985 is given in brackets. 
(3) The commitments outstanding from Chapter 73 as at 31 December 1985 are not broken down by financial year of origin. 
30 Official Journal of the European Communities 15. 12. 87 
Table 2.10 -
Sector 
Agricultural structures: 
— Chapter 32 
— other chapters 
Fisheries 
Regional and transport policies: 
— 1975-80 
— 1981-83 
Research, energy, etc.: 
— direct research 
— energy 
Cooperation with developing countries 
Total — Summary of results of the review of commitments 
outstanding as at 31 December 1986 
* Sample 
examined 
Number Mio ECU 
22 90,6 
234 25,7 
95 1,1 
93 135,0 
30 286,8 
29 13,2 
24 34,0 
45 97,0 
683,4 Commitments 
to be 
cancelled 
Number Mio ECU 
4 9,4 
148 8,0 
95 1,1 
12 10,5 
2 1,7 
10 8,0 
9 15,9 
2 0,2 
54,8 Commitments 
unlikely to be 
the subject of 
future payments 
Number Mio ECU 
9 1,6 
— — 
— — 
3 7,1 
6 1,1 
closing of the commitments outstanding, lies in the 
absence of a time limit in the regulations beyond which 
suspended commitments would be cancelled automati­
cally. Thus, in several areas, the recipients are required to 
submit various items of information (declarations, 
progress reports, etc.) to the Commission, but the current 
procedures either do not stipulate the time limits for 
complying with such requirements or, if these time limits 
are specified, they do not provide for the automatic 
cancellation of the commitments in the event that the time 
limits are not observed. This inevitably results in a build­
up of commitments which are not closed due to a lack of 
supporting documents. (a) Article 88.3 of the Financial Regulation, concerning 
appropriations for research and investment (cur­
rently Chapter B73), stipulates that 'the commitment 
appropriations shall remain valid until cancelled 
under the budgetary procedure'; 
(b) Article 6.6 of the Financial Regulation stipulates that 
the appropriations for the Guidance Section of the 
EAGGF 'may be used by way of exception to finance 
projects for which they were not initially committed, 
under the conditions laid down in Regulation (EEC) 
No 3171/75' (that is to say, in cases where the aid from 
the Fund is withdrawn or reduced); 
Commitment appropriations made available 
by the cancellation of commitments from 
previous years 
2.59. As indicated in Table 2.1, out of a total of 
10 717,2 Mio ECU of commitment appropriations avail­
able during the financial year 1986, 786,6 Mio ECU were 
made available as a result of the cancellation of 
commitments outstanding at 31 December 1985. 
2.60. The general rule given in Article 6.2(a) of the 
Financial Regulation stipulates that 'commitment ap­
propriations not committed at the end of the financial 
year for which they were entered in the budget shall 
remain available for the following financial year'. 
2.61. The exceptions to this rule are as follows: (c) for the ERDF, Council Regulation (EEC) No 
1787/84 of 19 June 1984 (») stipulates in Article 32(6) 
that if a measure granted assistance has not been 
completed 'the remaining portion of ERDF assist­
ance shall be allocated (...) to another measure 
located in eligible regions of the same Member State' 
which is 'by way of derogation from Article 6(2) of the 
Financial Regulation'; 
(d) in the case of downward adjustments to commitments 
outstanding from previous financial years as a result 
of changes in currency parities, the Commission 
considered, up to 1986, that these adjustments-gave 
rise to the opening of commitment appropriations 
available to be re-used in all areas of the budget 
regardless of the year in which the commitment was 
initially made. However, Article 95 of the new 
Regulation of 11 December 1986 concerning the 
procedures for implementing certain provisions of the 
Financial Regulation of 21 December 1977 (9), 
15. 12. 87 Official Journal of the European Communities 31 
applicable as from 1 January 1987, now sets a time 
limit, whereby the appropriations are only made 
available if the adjustment to the commitments 
concerned occurs within two years of the financial 
.year in which they were originally made. 
In 1986, as a result of these exceptions,, about 200 Mio 
ECU of commitment appropriations were made avail­
able. 
2.62. In certain areas, appropriations which have been 
committed and become available at a later date may, 
according to certain rules, be re-used for new projects. In 
practice, it appears that the relevant departments at the 
Commission sometimes wait for new projects to be 
approved before cancelling the initial commitment and 
reconstituting the corresponding appropriations which 
have once again become available. This results in an 
overstatement of the outstanding commitments and an 
understatement of the available appropriations. The 
Court recommends therefore that the Commission 
should undertake to cancel unused commitments im­
mediately, without waiting to re-allocate the appropri­
ations made available. 
Recoveries of payments on account resulting 
from the alteration or cancellation of 
commitments 
2.63. In the areas covered by differentiated appropri­
ations, it can be seen that payments on account, which can 
represent from 50 to 80 % of the corresponding account­
ing commitments, are very often paid to the recipients of 
Community aid. The way the amount of the payments on 
account is calculated and the procedure for subsequently 
recovering them call for a number of observations by the 
Court, which are set out in the following paragraphs. 
Over-estimation of applications for payments on account 
2.64. Particularly in the case of the Social Fund, for 
which recoveries of about 156,0 Mio ECU were calcu­
lated in 1986, by 31 December 1986, the problem of the 
recovery of payments on account had arisen in respect of 
about 500 of the 3 300 projects approved in 1984 (i.e. 
15,1 %) and in respect for about 280 of the 3 600 projects 
approved in 1985 (i.e. 7,8 %), even though, in the latter 
case, the applications for payment of the balance which 
might well have clarified the actual progress of the 
projects had not yet been examined. The considerable 
number of individual recoveries points to the fact that 
numerous promoters over-estimate the cost of the 
projects when they submit their applications for aid. 
Thus, in certain cases, it turned out that the automatic 
payment on account by the Commission of 50 % of the aid when the application was approved in the end 
represented 100 % of the contribution which was actually 
due. 
Delays in the calculation of amounts to be recovered 
2.65. In its annual report concerning the financial year 
1985 (l0), in relation to the EAGGF Guidance Section, 
the Court noted that the recovery of debts had not been 
systematically followed up, hence the long delays. This 
observation is still valid, not just for the EAGGF 
Guidance Section, but also for the ERDF. 
2.66. From a sample check of the files concerning 
outstanding commitments in connection with the ERDF 
for the period from 1975 to 1980, it turned out that, at 31 
December 1986, recovery orders for a total of 5,4 Mio 
ECU in respect of four cases had not been issued, even 
though letters or other documents from the Member 
States clearly indicated that the projects in question had 
been cancelled. Furthermore, in connection with the 
EAGGF Guidance Section, the Court noted two cases in 
which recovery orders totalling 60 000 ECU had been 
drawn up in 1986 after a delay of at least two years. 
2.67. From the preceding paragraphs, it can be seen that 
the recovery procedures are not always implemented at 
the appropriate time. The Court therefore recommends 
that the recovery orders should be drawn up as soon as the 
Commission is in a position to calculate the amounts to be 
recovered. 
Interest on recoverable payments on account 
2.68. When payments on account have to be recovered 
from projects which are spread over several years, in most 
cases it turns out that Community funds have been made 
available to recipients who have not used them as 
intended by the Community. The Commission, however, 
asks for interest to be paid on wrongly made payments on 
account only in the case of projects financed in the area of 
energy policies (Chapter B70). However, it is interesting 
to note that, in other areas of activity, such as the Social 
Fund, the recipients sometimes reimbursed not only the 
amount of the payment on account asked for by the 
Commission, but also interest earned by these sums. 
2.69. The Court consequently recommends that the 
principle of applying reasonable interest rates to the 
reimbursements should be retained as an obligation 
incumbent on the recipients, especially when Community 
funds are made available to third parties for a long period 
of time and are not used for their intended purpose. 
32 Official Journal of the European Communities 15. 12. 87 
Final observation on the management of 
commitments (a) the carrying forward of outstanding commitments to 
several successive financial years with no time limit 
being set, or even anticipated, for their closure; 
2.70. The Court hopes that in future the concept of 
commitment will be clearly defined, that increased 
attention will be given to monitoring the commitments 
and that suitable improvements will be made in the field 
of rules and procedures so as to remedy without delay the 
shortcomings observed by the Court in respect of: (b) the failure to set a time limit on the re-use of 
appropriations made available by cancellations and 
exchange rate adjustments on outstanding commit­
ments : 
(c) the making available, over long periods of time, of 
very considerable amounts of funds which, at the time 
of recovery — which takes place unevenly and very 
often belatedly — continue not to yield interest. 
(') 
(2) 
(3) 
(4) 
(5) OJ L 356, 31.12.1977. 
Doc. COM(87) 186—191. 
According to the classification adopted by the Commission 
to distinguish between 'compulsory' and 'non-compulsory' 
expenditure in the revenue and expenditure account. 
OJ C 321, 15.12.1986, paragraph 7.10(b). 
OJ C 326, 16.12.1985, paragraph 12.21. (6) 
(7) 
(8) 
(9) OJ C 348, 31.12.1984, paragraphs 9.4 — 9.5. 
OJ C 321, 15.12.1986, paragraphs 1.23, 5.8 — 5.9, 7.17 and 
9.13. 
OJ C 321, 15.12.1986, paragraphs 1.25, 6.14 — 6.15, 7.62 
and 8.35. 
OJ L 169, 28.6.1984. 
OJ L360, 19.12.1986. 
(10) OJ C 321, 15.12.1986, paragraph 5.6. 
15. 12. 87 Official Journal of the European Communities 33 
CHAPTER 3 
Accounting matters 
3.0. TABLE OF CONTENTS 
Introduction 
Observations on the general accounts and the balance sheets 
Parliament 
Cash deficit 
Commission 
Miscellaneous revenue to be credited 
Revenue to be recovered 
Recoverable taxes and duties 
Advances to staff 
Court of Auditors 
Working capital for the Publications Office 
Sums to be recovered 
Economic and Social Committee 
Closure of the financial year 
Accounts in national currencies 
Observations on discounts and payment periods granted to the Commission and 
the Publications Office 
Introduction 
Discounts 
Payment periods 
Conclusion Paragraph 
reference 
3.1 
3.2 
.9 3.11 
3.7 
— 3.7 
— 3.9 
10 —3.11 
10 
11 
12 —3.17 
12 
13 —3.15 
16 
17 
INTRODUCTION OBSERVATIONS ON THE GENERAL 
ACCOUNTS AND THE BALANCE SHEETS 
3.1. In accordance with its work programme, which is 
organized on a multiannual basis, the Court has 
examined the balance sheets of a number of Community 
institutions, as well as the balance sheet of the Com­
munities. In addition, it has continued with the task of 
examining the discounts and payment periods granted by 
their creditors to the Commission and the Publications 
Office. PARLIAMENT 
Cash deficit 
3.2. The amount of 4,1 Mio BFR (±0,1 Mio ECU) 
which was already in the Parliament's balance sheet as at 
31 December 1985 under the heading 'Cash deficit', 
34 Official Journal of the European Communities 15. 12. 87 
amongst the expenditure to be charged, was still there in 
the balance sheet as at 31 December 1986. The Court must 
refer the reader to its previous reports with regard to this 
matter ('). 
COMMISSION Recoverable taxes and duties 
3.5. The Court has said on several occasions, in 
particular in its annual report on the financial year 
1985 (3), that procedures relating to recoverable taxes and 
duties needed to be improved (see also paragraph 
10.43(b)). In its reply to these comments, the Commission 
said that a procedure for monitoring recoverable VAT 
would be set up in 1987. The situation at 31 December 
1986 is still not satisfactory. The fact is that: 
Miscellaneous revenue to be credited 
3.3. In its report on the financial year 1985 (2), the Court 
criticized the increase in the item 'Miscellaneous revenue 
to be credited', which had increased from 0,8 Mio ECU at 
31 December 1984 to 9,7 Mio ECU at 31 December 1985. 
At 31 December 1986, the situation had deteriorated even 
further, since the sum entered under this item amounted 
to 27 Mio ECU. 
Revenue to be recovered (a) unlike last year, the Court has not been able this year 
to put a figure on the amount of VAT which should 
have been included in the balance sheet because of the 
fact that claims for reimbursement had only been 
prepared for three Member States (for the financial 
year 1985, the VAT to be recovered from the other 
Member States amounted to 0,5 Mio ECU); 
(b) the exemption procedures for the two new Member 
States have not yet been agreed upon and the 
authorizing officers have had the payments con­
cerned made net of taxes in some cases and inclusive 
of all taxes in other cases; in addition, the Direct­
orate-General for Budgets, DG XIX, which is 
responsible for the recovery of taxes, has not received 
the supporting documents needed for preparing the 
recovery applications. 
3.4. At 31 December 1985, claims which had fallen due 
(not including non-refundable advances) amounted to 
30,9 Mio ECU. The Court must therefore call upon the 
Commission to redouble its efforts to speed up the 
recovery of claims which have fallen due, because at 31 
December 1986 the item 'Revenue to be recovered' 
amounted to 283,6 Mio ECU, most of which (237,2 Mio 
ECU) was already due: 
Due date 
1982 
1983 
1984 
1985 
First half of 1986 
Third quarter of 1986 
October 1986 
November 1986 
December 1986 Amount of claim 
(Mio ECU) 
0,1 
3,3 
8,5 
6,8 
20,1 
133,1 
4,3 
4,4 
56,6 Advances to staff 
3.6. At 31 December 1986, staff advances amounted to 
4,5 Mio ECU, as compared with 4 Mio ECU at the end of 
1985. In its annual reports on the financial years 1984 (4) 
and 1985 (5), the Court criticized the fact that the data-
processing print-outs supporting these accounts con­
tained a large number of creditor balances, that is to say, 
sums owed by the institution to its own staff. In spite of 
the assurances given by the Commission in its replies to 
these observations, the situation as at 31 December 1986 
was still not satisfactory. 
(a) The Court noted that there were still 503 creditor 
items, accounting for a total of 0,5 Mio ECU, of 
which 229 items (accounting for a total of 0,3 Mio 
ECU) were already to be found in the lists at the end 
of 1985. 
(b) In addition, in the case of some accounts, almost all 
the creditor items at the end of 1985 were still there at 
the end of 1986. 
237,2 
(') The footnotes appear at the end of each chapter. The Court must therefore ask the Commission to carry 
out the necessary examinations of these lists. 
15. 12. 87 Official Journal of the European Communities 35 
3.7. The amount of the 'Advances against salaries' 
account has increased, from 1,1 Mio ECU at 31 
December 1985 to 1,6 Mio ECU at 31 December 1986. 
This amount, which mainly represents salaries of newly 
recruited staff, has not been charged to the budget. The 
Court must repeat that all expenditure must be charged to 
the budget and that in cases where it proves technically 
impossible to charge certain items of expenditure, the 
expenditure in question should be set out in the balance 
sheet under the heading 'Expenditure to be charged'. ECONOMIC AND SOCIAL COMMITTEE 
Closure of the financial year 
3.10. The data relating to the preparation of the revenue 
and expenditure account were incomplete because 
numerous payments concerning 1986 could not be 
entered in the 1986 revenue and expenditure account but 
were recorded in extra-budgetary accounts. 
COURT OF AUDITORS Accounts in national currencies 
Working capital for the Publications Office 3.11. Article 77 of the Regulation of 30 June 1975 (8) 
laying down implementation procedures for certain 
provisions of the Financial Regulation (9) states that 
bank and postal cheque accounts must be kept in ECU or 
in national currencies. The Committee's general ac­
counts, however, are kept in ECU only. The absence of 
accounts in national currencies for financial transactions 
is irregular and makes reconciliation of the bank accounts 
more difficult. 
3.8. In order to provide the Publications Office with the 
working capital it needs to cope with the cost of printing 
the Official Journal, advances are made to it by the 
Community institutions and bodies. In its report on the 
financial year 1983 (6), the Court indicated how these 
advances should be entered in the accounts. During the 
financial year 1986, the various contributions were 
redistributed amongst the institutions and the Court's 
share was reduced by 16 600 ECU. This reduction was 
wrongly entered in the accounts under revenue, whereas it 
was in fact a reimbursement of advances. The revenue and 
asset sections of the Court of Auditors balance sheet are 
therefore overstated by the same amount. OBSERVATIONS ON DISCOUNTS AND 
PAYMENT PERIODS GRANTED TO THE 
COMMISSION AND THE PUBLICATIONS 
OFFICE 
Introduction 
Sums to be recovered 
3.9. The mistaken application, during the financial 
years 1983-85, of the weighting coefficient and an 
exchange rate which had already been adjusted by the 
weighting to the calculation of the transitional allow­
ance (7) resulted in the Court paying out 29 072 ECU 
more than it needed to. The Court should continue in its 
attempts to recover this sum as soon as possible. 3.12. In its report on the financial year 1985 (10), the 
Court carried out a sample survey to check whether its 
own systems were such as to allow it to derive the 
maximum benefit from discounts on bills and payment 
periods granted by suppliers. The fact is that some 
suppliers allow bills to be paid within periods of 30 to 90 
days and in some cases they grant discounts of between 2 
and 3 % for payments made within 8 to 15 days. For the 
financial year 1986, the Court looked at the functioning of 
the accounting system at the Commission and the 
Publications Office on the basis of payments made during 
the first three quarters of 1986 concerning Title 1 
(Expenditure relating to persons working for the 
institution), Title 2 (Buildings, equipment and miscella­
neous operating expenditure) and Title 3 (Expenditure 
resulting from special functions: information and 
publications) and Annex II (Publications Office) of the 
budget (")• 
36 Official Journal of the European Communities 15. 12. 87 
Discounts 
3.13. The only place where an accelerated payment 
procedure has been organized in order to take advantage 
of discounts on bills is in the administrative departments 
of the Commission in Luxembourg. The procedure in 
question functions properly and the Commission has 
been able to benefit from discounts in 73 % of the cases 
where they were granted during the period under 
consideration, as regards Titles 1 and 2 of the budget (")• 
In contrast, as far as Title 3 (Item 3411) is concerned, out 
of the four cases noted, none had given rise to a deduction 
of a discount. 
3.14. On the other hand, the Commission in Brussels 
does not appear to pay any particular attention to 
discounts. 
Thus: 
(a) in the case of Title 1, no deduction was made in any of 
four possible cases; 
(b) in the case of Title 2, out of 116 cases of discounts, 
only 1 had been deducted; 
(c) in the case of Title 3, only 1 deduction had been made 
out of 12 possible cases. 
The appropriations thus wasted over the first three 
quarters amount, for the whole of Part A of the 
budget ("), to approximately 11 300 ECU. This figure 
should not, however, be considered exhaustive, as the 
Court's audit was carried out on the basis of samples. 
(') — Special report on the Members' cash office at the 
European Parliament, OJ C 202, 5.8.1982. 
— Annual report on the financial year 1982, OJ C 357, 
31.12.1983, paragraph 2.9. 
— Annual report on the financial year 1983, OJ C 348, 
31.12.1984, paragraphs 2.5 — 2.7. 
— Annual report on the financial year 1984, OJ C 326, 
16.12.1985, paragraph 2.2. 
— Annual report on the financial year 1985, OJ C 321, 
15.12.1986, paragraphs 2.2 — 2.3. 
(2) Annual report on the financial year 1985, OJ C 321, 
15.12.1986, paragraph 2.14. 
(3) Annual report on the financial year 1985, OJ C 321, 
15.12.1986, paragraphs 2.6 — 2.10. 
(4) Annual report on the financial year 1984, OJ C 326, 
16.12.1985, paragraphs 2.8 — 2.9. 3.15. As far as the Publications Office is concerned, the 
Office does not have its own procedure for accelerated 
payment, as a result of which it also fails to deduct the 
discounts offered in a number of cases. 
Payment periods 
3.16. It is clear that no attention is given to payment 
periods granted by suppliers. Thus, the Court noted 138 
cases of advance payment (between 4 and 54 days, taking 
the date stamped by the cash office of the Directorate-
General for Budgets as the payment date) amounting to 
1,6 Mio ECU: the Commission therefore paid its 
suppliers sooner than it needed to. The fact that payment 
should thus be made ahead of time is even more surprising 
when one bears in mind that it was the institution itself 
which asked for a period in which to pay at the moment it 
made the order. 
Conclusion 
3.17. Although the sums in question are not very large 
as compared with the whole of the budget, the loopholes 
which were thus uncovered by the Court in the 
management of operating budget appropriations need to 
be pointed out. The Commission ought therefore to 
organize a procedure for accelerated payment applicable 
to all the authorizing officers concerned in order to derive 
the maximum benefit from discounts on bills. Conversely, 
payments for which a specific period has been granted 
should not be made unnecessarily precipitately. 
(5) Annual report on the financial year 1985, OJ C 321, 
15.12.1986, paragraph 2.12. 
(6) Annual report on the financial year 1983, OJ C 348, 
31.12.1984, paragraph 2.36. 
(7) Council Regulation (EEC, Euratom, ECSC) No 2290/77 of 
18 October 1977 determining the emoluments of the 
Members of the Court of Auditors, OJ L 268, 20.10.1977. 
(8) Commission Regulation of 30 June 1975 laying down 
implementation procedures for certain provisions of the 
Financial Regulation of 25.4.1973, OJ L 170, 1.7.1975. 
(9) Financial Regulation applicable to the general budget of the 
European Communities, OJ L 356, 31.12.1977. 
(10) Annual report on the financial year 1985, OJ C 321, 
15.12.1986, paragraph 11.39. 
(") General budget of the European Communities for the 
financial year 1986, OJ L 358, 31.12.1985. 
15. 12. 87 Official Journal of the European Communities 37 
CHAPTER 4 
Revenue 
4.0. TABLE OF CONTENTS 
Introduction 
VAT own resources 
Monitoring of the application of the Council's Sixth VAT Directive 
Limitations on audit examination 
Traditional own resources 
Making available of customs duties by Spain and Portugal 
Financial information contained in monthly statements of Member States' 
accounts for traditional own resources 
Frauds and irregularities 
Establishment and making available of customs duties and agricultural 
levies 
Use of import trade data as a means of checking the amounts of customs 
duties established in Member States 
Flat-rate repayment to the Member States of expenses incurred in collecting 
own resources 
Self-financing objectives within the sugar market Paragraph 
reference 
4.1 -
4.3 -
4.9 -
4.11 
4.12 -
4.12 -
4.14 -
4.18 -4.2 
-4.11 
-4.10 
-4.37 
-4.13 
-4.17 
4.19 —4.22 
4.23 
4.26 
4.31 — 4.25 
— 4.30 
— 4.37 
INTRODUCTION 
4.1. This chapter concerns own resources and certain 
miscellaneous items of revenue of the European Com­
munities included under the 'Revenue' heading of the 
general budget. 
4.2. The revenue under consideration consists, for the 
most part, of the own resources allocated to the 
Communities by Council Decision 85/257/EEC, Euratom 
of 7 May 1985 (')• It comprises the traditional own 
resources (Common Customs Tariff duties and agricul­
tural levies, including sugar and isoglucose production 
and storage levies) and own resources from value-added 
tax (VAT). The revenue for 1986 includes, for the first 
time, traditional own resources collected by Spain and 
Portugal. Paragraphs 4.12 and 4.13 of this report refer to 
Community revenue from customs duties in these two 
Member States. The VAT own resources include the 
proportion levied in Spain, which introduced this tax on 1 January 1986. Portugal, which also introduced VAT on 
1 January 1986, paid a financial contribution in lieu of it, 
by virtue of the temporary exemption, valid until 1989, 
which is referred to in Article 378 (Annex XXXII) of the 
Act appended to the Treaty of Accession of Spain and 
Portugal of 12 June 1985. Greece, which did not introduce 
VAT until 1 January 1987, paid a financial contribution 
calculated on the basis of the amount which would have 
been due if VAT had already been introduced. 
(') The footnotes appear at the end of each chapter. VAT OWN RESOURCES 
4.3. The transitional arrangements for determining the 
basis for calculating the amounts of VAT own resources 
due from Member States, which allow them the alternat-
38 Official Journal of the European Communities 15. 12. 87 
ive of paying on the basis of either Method A (returns) or 
Method B (revenue), were extended to 31 December 1988 
by Council Regulation (ECSC, EEC, Euratom) No 
3735/85 of 20 December 1985 (2). On 15 February 1987 
the Commission submitted a communication proposing 
new ways for managing the budget, and has undertaken 
to present a report to the Council by 31 December 1987 
setting out proposals for the purpose of devising a 
uniform method for determining the assessment basis for 
VAT own resources. In consequence, the comments 
which follow relate to the transitional system in operation 
for the financial year 1986. 
4.4. VAT own resources are paid into the Commission's 
accounts on a monthly basis, at the rate of one twelfth of 
the annual total requirement estimated in the budget 
(Article 10(3) of Council Regulation (EEC, Euratom, 
ECSC) No 2891/77 of 19 December 1977 (3)). If no budget 
has been adopted, each monthly payment should be equal 
to one twelfth of the relevant annual sum in the previous 
year's budget (Article 3(6) of Council Decision No 
85/257/EEC, Euratom). 
4.5. The budgetary problems which emerged during the 
first half of the year resulted in certain variations in the 
way these payments were calculated during the months in 
question. Thus, the payments of provisional twelfths by 
way of VAT own resources were made, with the 
agreement of the Commission, on the following bases 
during 1986: 
(a) for January, they were calculated on the basis of the 
draft budget and adjusted in February in the light of 
the budget submitted on 18 December 1985: this 
included VAT own resources and financial contri­
butions of 20 485 Mio ECU for 1986; 
(b) for February and March, they were calculated on the 
basis of the budget submitted on 18 December 1985; 
(c) in accordance with the interim order made by the 
Court of Justice on 17 March 1986, the payments for 
April, May, June and July were based on the draft 
budget approved by the Council on 27 November 
1985 (this included VAT own resources of 19 845 Mio 
ECU for 1986); (d) finally, from August onwards, the calculation was 
made on the basis of the budget adopted on 10 July 
1986 (22 280 Mio ECU), with appropriate increases 
to compensate for the smaller amounts paid in the 
earlier months. 
4.6. The payments made in this way during the year take 
the form of advances. As has been noted in earlier annual 
reports of the Court, these advance payments are subject 
to adjustment in the following year when the Member 
States present their summary accounts on the base of 
assessment, as required by Article 10 of Council 
Regulation (EEC, Euratom, ECSC) No 2892/77 of 19 
December 1977 (4). This may then lead to further 
adjustments in subsequent years, when the Commission 
examines the information provided in these summary 
accounts. 
4.7. The adjustments of VAT own resources that were 
made in the Communities' accounts are shown in Table 
4.1. The long delay that can occur in resolving matters, 
when there is a disagreement between the Commission 
and a Member State concerning the accuracy of the 
figures, has been referred to in previous annual reports, 
namely those for the financial years 1983 and 1984 (5). 
4.8. As far as these delays are concerned, the Court 
notes that 38 disputes remained unsettled at 31 December 
1986, and that the Commission was unable to give the 
Court an evaluation of their financial effect on the 
Communities' own resources. Twelve of these cases went 
back to the summary accounts for 1979. The Commission 
should make an effort to resolve all outstanding cases of 
disagreement as soon as possible. 
Table 4.1 — Adjustments made to VAT own resources and 
financial contributions, broken down by year of correction 
(Mio ECU) 
correction 
1981 
1982 
1983 
1984 
1985 
1986(1) 
Total Year concerned by the correction 
1979 
-13,3 
4,6 
7,3 
15,9 
29,5 
2,4 
46,4 1980 
61,0 
35,6 
12,7 
12,9 
— 
122,2 1981 
26,8 
19,3 
16,7 
— 
62,8 1982 
38,7 
16,5 
— 
55,2 1983 
-26,0 
— 
-26,0 
(') Position as at 30.6.1986. 
15. 12. 87 Official Journal of the European Communities 39 
Monitoring of the application of the Council's 
Sixth VAT Directive. Limitations on audit examination 
4.9. The Commission is required by Council Regulation 
(EEC, Euratom, ECSC) No 2892/77 to check whether 
VAT own resources have been correctly established in 
accordance with the uniform base set out in the Sixth 
VAT Directive. In order to fulfil this obligation, the 
Commission has, inter alia, to monitor national legis­
lation to make sure that it is consistent with the Council's 
Sixth VAT Directive. The Court examined the procedures 
followed by the Commission, and observed that: 4.11. In paragraphs 3.17 — 3.20 of its annual report on 
the financial year 1985, the Court drew the attention of 
the discharge authorities to the fact that certain Member 
States had unilaterally imposed limitations on the audit 
enquiries which the Court considered it necessary to carry 
out in these Member States. The Court has to report that 
the limitations on its audit activities remain as they were 
last year, and that for this reason it is still unable to 
discharge its responsibilities in full as regards the audit of 
VAT own resources paid over by the Member States, 
which amounted to 22 223,4 Mio ECU in 1986. 
(a) review of the national VAT legislation for Denmark, 
Spain and the Netherlands had not been completed, 
mainly for lack of staff with adequate knowledge of 
the languages of these countries; TRADITIONAL OWN RESOURCES 
(b) the Commission did not maintain a complete set of 
documentation in relation to all the Member States, 
partly because there was no obligation on them to 
provide it, and partly because of practical difficulties 
arising from the considerable differences in legislative 
procedures in the various Member States; Making available of customs duties by Spain 
and Portugal 
(c) there was no regular procedure for ensuring that all 
questions arising from an initial review of the national 
legislation were the subject of more detailed exami­
nation, either at the Commission or as part of on-the-
spot inspections by the Commission. 
4.10. The Commission also has responsibility for 
examining the accuracy of the data and calculations 
provided by the Member States in their annual summary 
accounts. For that reason and because of the influence of 
the weighted average rate on the subsequent determi­
nation of the VAT base for own resources purposes, 
Council Regulation (EEC, Euratom, ECSC) No 3625/83 
of 19 December 1983 (6) lays down that the information 
required shall be broken down into five specified 
categories: final consumption; intermediate consump­
tion; gross fixed-capital formation by public adminis­
tration; gross fixed-capital formation by other sectors 
and built-up and building land. Even though the 
Commission emphasized in 1981 (7) that a lack of 
homogeneity in the way Member States provided the 
information was likely to jeopardize the accuracy of the 
calculations, only France, Italy and Luxembourg cur­
rently provide the information in the format required. 4.12. The new Member States, Spain and Portugal, are 
required to establish Community revenue in accordance 
with Decision 85/257/EEC, Euratom, and the financial 
provisions of the Act of Accession (8). These financial 
provisions include a reference to the application of the 
rules for the calculation of own resources from customs 
duties 'from the date of accession' (1 January 1986). The 
Act also provides for the progressive introduction of the 
Common Customs Tariff and other tariff arrangements 
from 1 March 1986. 
4.13. The Court has become aware that the Community 
customs duties were established by the Spanish and 
Portuguese authorities from 1 March 1986 only and not 
from the date of accession. Consequently, own resources 
from customs duties on imports from non-Member States 
into Spain and Portugal during the months of January 
and February 1986 were neither established nor made 
available to the Communities. Since the duties were not 
established on importation, the revenue at issue is not 
precisely known, but the Commission departments 
estimate that it could be between 50 and 60 Mio ECU. On 
27 January 1987 the Commission issued a formal request 
for payment of the customs duties involved by 30 April 
1987, but the Member States did not comply. This 
question continues to be pursued by the Commission. 
40 Official Journal of the European Communities 15. 12. 87 
Financial information contained in monthly 
statements of Member States' accounts for 
traditional own resources Frauds and irregularities 
4.14. Article 7, paragraph 1, of Regulation (EEC) No 
2891/77 requires that Member States maintain accounts 
for own resources 'broken down by type of resources'. 
Paragraph 3 of the same Article requires a monthly 
statement of its accounts to be forwarded by each 
Member State to the Commission. 4.18. The Court reviewed the reporting by Member 
States of frauds and irregularities in respect of customs 
duties and agricultural levies. Its findings are outlined in 
paragraphs 6.3 — 6.6 of this report. 
4.15. In its annual reports for the financial years 1979 (9) 
(paragraph 3.22), 1983 (paragraph 1.17) and 1984 
(paragraph 3.8), the Court referred to the lack of relevant 
and precise financial and management information in the 
accounts being presented to the Commission. This 
deficiency militates against proper financial analysis and 
hampers the Commission in forecasting and revising, if 
necessary, own resources revenue and performing 
effective controls. Establishment and making available of 
customs duties and agricultural levies 
4.19. Regulation (EEC) No 2891/77 (Articles 1, 2, 9, 10 
and 17) provides the legal framework for the establish­
ment and the making available of own resources from 
customs duties and agricultural levies. 
4.16. The Court has carried out an examination of the 
monthly statements of traditional own resources fur­
nished by all Member States. This examination has 
revealed that there has been some improvement in the 
presentation of data for agricultural levies by most 
Member States, but that most of the defects previously 
referred to by the Court still persist. The principal points 
noted by the Court are: 
(a) at a general level, the format of these statements and 
the presentation of the data therein vary considerably 
between Member States; and 4.20. In its annual report on the financial year 
1978 (10)(paragraphs 12.38 — 12.40) the Court referred to 
differences among Member States in the date of 
establishment of own resources and recommended that 
the Commission should consider taking steps to har­
monize the rules applied in the Member States. As these 
differences influence the dates of making available of own 
resources the Court has carried out an examination of the 
current situation in this area and has found that no 
progress has been made since 1978. 
(b) in respect of adjustments to established own resources 
Ireland furnishes full information, including positive 
and negative adjustments. The Federal Republic of 
Germany, Greece, Spain, the Netherlands and 
Portugal do not identify any adjustments to own 
resources previously established. The remaining 
Member States furnish only a net adjustment figure 
without indicating the underlying positive and 
negative adjustments. 4.21. A report by the Commission's Financial Con­
troller (") on the establishment of own resources from 
customs duties and agricultural levies in the Member 
States, adopted by the Commission on 11 March 1983, 
confirmed that Articles 1 and 2 of Regulation (EEC) No 
2891/77 did not guarantee uniform procedures for the 
establishment of customs duties and agricultural levies in 
the Member States. 
4.17. In the Court's view, the revenue information 
contained in the monthly statements sent to the Commis­
sion is of central importance to the forecasting and 
control systems relating to own resources and the clarity 
and quality of this information ought to be considerably 
improved. The Court is aware of the Commission's 
efforts since 1979 to remedy the situation but is concerned 
about the lack of progress in achieving results. The 
improvements sought are now long overdue. 4.22. In view of this gap in the Regulation the 
Commission has made proposals (12) to amend it. The 
Court has given its opinion (13) on two of these proposals. 
No decision has yet been taken by the Council. The Court 
regrets that, although it first drew attention ten years ago 
to the differences among Member States in the date of 
establishment of own resources, the Council has not 
decided on any of the Commission proposals to amend 
Regulation (EEC) No 2891/77, the latest of which was 
transmitted to the Council as far back as August 1984. 
15. 12. 87 Official Journal of the European Communities 41 
Use of import trade data as a means of 
checking the amounts of customs duties 
established in Member States 
4.23. The methods used to establish own resources from 
customs duties and agricultural levies in the Member 
States are characterized by decentralized collection 
systems and divergent national practices. Under Com­
munity legal provisions in this area, Member States have 
retained major responsibilities and powers. Moreover, 
the powers of inspection in the Member States granted to 
the Commission are severely limited. These weaknesses in 
the Commission's powers of supervision and control 
underline the value of an instrument capable of provid­
ing, on a systematic basis, credibility and control checks 
on the global amounts of own resources from import 
duties paid over by the Member States. Therefore, the 
Court considers that the feasibility of strengthening the 
Commission's controls by means of central checks merits 
careful examination. Considering that the import trade 
statistics of the Member States have their source in the 
documentation presented to customs on clearance of 
imports, they could be regarded as a particularly suitable 
basis for performing comparative checks on the amounts 
of import duties established. This possibility has also been 
recognized by the Parliament which, on the occasion of its 
discharge resolution on the 1983 budget, noted the lack of 
correspondence between trade statistics and the Com­
munity's revenue from customs duties. 
4.24. The Court has studied the relationship between 
trade data and customs duties in individual Member 
States. Because of the many different tariff arrangements 
in force applicable to both products and supplying 
countries, it was found that it is not possible to make 
simple, direct comparisons between the customs revenue 
calculated on the basis of import trade statistics and the 
customs revenue established in the Member States in the 
corresponding period and made available to the Commis­
sion. 
4.25. The improvement of trade and revenue inform­
ation and analysis would be useful to highlight the effects 
of divergent establishment and collection practices in the 
Member States. This could also be helpful in identifying 
faulty procedures which could result in revenue losses. Flat-rate repayment to the Member 
States of expenses incurred in collecting own 
resources 
4.26. By Council Decision 70/243/ECSC, EEC, Eur-
atom of 21 April 1970 (14) Member States became entitled 
to a refund of 10 % of the customs duties and agricultural 
levies collected by the Community 'in order to cover 
expenses incurred in collection'. After operating for 
14 years, the scheme was continued in force by Decision 
85/257/EEC, Euratom which superseded the former 
legislation. The essential wording of the original provi­
sion was repeated exactly in the 1985 Decision: 
'The Communities shall refund to each Member State 
10 % of the amounts paid in order to cover expenses 
incurred in collection'. 
In respect of the financial year 1986, 1 045,4 Mio ECU 
were reimbursed under the scheme to Member States. 
4.27. In its report (l5) in response to the conclusions of 
the European Council of 18 June 1983 (Stuttgart) the 
Court pointed out that the 10% rate 'is not based on 
actual costs'. The Council's Decisions to introduce and to 
maintain a 10 % flat-rate repayment scheme do not 
appear to have been taken with due regard to the need to 
ensure that any deviations from true costs would be 
minimal. Neither the minimum standard of service 
required nor the related collection expenses which the 
refund was designed to cover have ever been defined and 
the Court has been unable to discover on what basis the 
10% rate was originally adopted. Proper consideration 
ought to have been given to the fact that the own 
resources system then being introduced would, in the 
main, not involve the administration of new taxation 
structures in Member States, but rather the imposition of 
Community responsibilities in the field of traditional 
import revenue-collection systems. These responsibilities 
would have only marginal cost effects on national revenue 
services. 
4.28. A serious weakness in the scheme was the failure 
to provide a mechanism for the review of the refund rate 
in the light of changes in administrative costs. In the 
course of its audits in Member States the Court has 
observed reductions in manpower and streamlining of 
clearance and collection procedures since 1971. The flat-
rate system is an expenditure mechanism operating 
independently of actual costs and is unable, therefore, to 
take account of alterations in the latter. While Member 
States have the freedom to reduce costs in collecting own 
resources and to obtain the resultant financial benefits, 
the expenditure in the Community budget is not reduced 
accordingly. Since minimum standards of service in 
return for the reimbursements are not laid down, the 
Member States have considerable flexibility in this area. 
These factors tend to introduce an increasing element of 
42 Official Journal of the European Communities 15. 12. 87 
over-compensation for collection costs at the expense of 
the Community budget. 
4.29. Having regard to the substantial Community 
expenditure involved in the reimbursement scheme, the 
failure to provide for a review of the 10 % rate and the 
continuance of this rate in force in the 1985 Council 
Decision highlight the arbitrary nature of the scheme. 
4.30. The Court has noted the misgivings expressed by 
both the Parliament and the Commission regarding the 
scheme and, in particular, the Commission's recent 
proposals (16) regarding the financing of the Community 
budget which include a proposal for abolition of the 
refund scheme. The Court considers that the payment of 
monies by the Community on an arbitrary basis for 
undefined services is inappropriate. There is a need to re­
assess the payment of such compensation to Member 
States in the light of developments since 1970 when the 
refund scheme was launched. 
Self-financing objectives within the sugar 
market 
4.31. As stated in the preamble to Council Regulation 
(EEC) No 1785/81 of 30 June 1981 on the common 
organization of the markets in the sugar sector (17): steps 
should be taken 'to provide the Community with the 
instruments necessary to ensure ... that the producers 
themselves meet in full the cost of disposing of the 
surpluses'. This basic Regulation was amended by 
Council Regulation (EEC) No 934/86 of 24 March 1986 
with effect from 1 July 1986 (l8). The principle of self-
financing was expressly confirmed in the preamble to this 
amending Regulation: '... since the 1981/82 marketing 
year, the common organization of the sugar markets has 
been based on the principle that producers are financially 
liable for all the losses resulting from the disposal of the 
Community's surplus production in relation to domestic 
consumption'. 
4.32. In its annual report concerning the financial year 
1985 (paragraph 3.45) the Court pointed out that, in its 
opinion, 'the self-financing objective could not be 
achieved in the operation of the sugar-production quota 
scheme. The size of the actual deficits resulting from the 
operation of the scheme has increased steadily over the 
marketing years concerned'. At that time the cumulative 
loss on the scheme already amounted to 609,2 Mio ECU 
for the four marketing years 1981/82 to 1984/85. The 
Court's fears that 'the self-financing objective could not be achieved' have been confirmed: in the autumn of 1986 
— i.e. at the end of the first five-year period of the 
application of the rules for the common organization of 
the market in sugar — the cumulative loss had increased 
by another 263,9 Mio ECU, to 873,1 Mio ECU, ac­
cording to the Commission. 
4.33. The existence of a deficit is expressly acknowled­
ged in the above-mentioned Regulation (EEC) No 
934/86: 'Whereas, to enable all actual expenditure 
relating to the export of Community production sur­
pluses in respect of the 1981/82 to 1985/86 marketing 
years to be covered... provision should be made for the 
introduction of an elimination levy in this sector; whereas 
a demonstration of solidarity should be asked of all 
producers concerned so that the deficit recorded follow­
ing the period 1981/82 to 1985/86, amounting in 
budgetary terms to some 400 Mio ECU, may be 
eliminated'. The Council assumed a deficit of only 
400 Mio ECU, as proposed by the Commission, and fixed 
a levy to eliminate that deficit to be spread over the next 
five years and paid in annual instalments of 80 Mio ECU. 
4.34. Consequently there was an uncovered deficit of 
473,1 Mio ECU, remaining from the total deficit of 
873,1 Mio ECU, which was not taken into account in the 
regulation, although the Court had recommended in its 
annual report concerning the financial year 1985 
(paragraph 3.48) that 'future measures towards the 
common organization of the sugar markets (should) 
provide for the full deficit to be recovered'. The 
Commission, in proposing a 400 Mio ECU figure for the 
deficit, had contended that the enlargement of the 
Community to include Portugal would lead to the 
absorption of Community sugar by that country, thereby 
saving 210 Mio ECU in export refunds. The Commission 
now estimates that only 50 Mio ECU was absorbed in this 
manner. The Commission also anticipated new cost-
saving outlets for sugar in the Community's chemical 
industry. The Court has not been able to establish from 
available documentation adequate justification for either 
of the Commission's assumptions. 
4.35. The self-financing objective of the basic regulation 
is not being met. This fact is disguised by confusion in 
budgetary presentation. The Court has drawn the 
Commission's attention to inconsistencies and inac-
15. 12. 87 Official Journal of the European Communities 43 
curacies in the remarks on the revenue and expenditure 
sides of the budget which need to be corrected to give an 
accurate presentation of the actual financial situation in 
the sugar sector. Court's view, the statutory limitation on production 
levies continues, as in the past, to constitute a major 
obstacle to the self-financing objective being met. 
4.36. On 7 August 1985 the Commission proposed the 
renewal of the quota system for sugar production, 
coupled with a substantial tightening-up of the self-
financing mechanism. The proposal which provided for 
an increase in the maximum levy on both 'A' and 'B' 
sugar (19) from 2 % to 2,5 % of the intervention price, and 
on 'B' sugar from 37,5 % to 47 % of the intervention price, 
was rejected by the Council and the maximum levy rates 
of 2 % and 37,5 % respectively remain. However, the 
Council, as previously stated in paragraph 4.33 did agree 
to the introduction of an elimination levy, which will 
eliminate only part of the accumulated deficit. In the 4.37. In view of the repeatedly confirmed self-financing 
objective of the common organization of the sugar 
market the Court stresses the need for immediate 
measures to ensure that the accumulated deficit in this 
sector is rapidly covered by adequate levies, that new 
deficits do not arise and that "the specific financial 
situation is shown clearly in the budget and accounts. The 
appropriations used (579 Mio ECU) to finance the losses 
in the sugar sector would not have been necessary if the 
self-financing principle had been respected and therefore 
the overall deficit of the Community would have been 
correspondingly lower. 
(') OJ L 128, 14.5.1985, p. 15. 
(2) OJ L356, 31.12.1985, p. 1. 
(3) OJ L 336,27.12.1977, p. 1. 
(4) OJ L336, 27.12.1977, p. 8. 
(5) OJ C 348, 31.12.1984, paragraphs 3.19 -
OJ C 326, 16.12.1985, paragraphs 3.14 
(6) OJ L360, 23.12.1983, p. 2. 
(7) Doc XIX/327/81 — Annex V. 
(8) OJ L302, 15.11.1985. 
(9) OJ C 342, 31.12.1980, paragraph 3.22. 
(10) OJ C 326, 31.12.1979, paragraphs 12.38 
(") Doc. COM SG (83) D/8029. 
(•2) OJ C 231, 4.9.1982, p. 15, paragraphs 6 — 7; 
OJ C 146, 4.6.1983, p. 4, paragraph 2; 
OJ C 303, 10.11.1983, p. 19, paragraphs 1—6; 
OJ C 219, 21.8.1984, p. 7, paragraphs 3—11. 3.20; 
3.20. 
2.40. C3) OJ C 133, 20.5.1983, p. 3; OJ C 163, 23.6.1984, p. 8. 
(14) OJ L94, 28.4.1970, p. 19. 
C5) OJ C 287, 24.10.1983, paragraph 1.2.4. 
(16) Report by the Commission to the Council and Parliament 
on the financing of the Community budget (Doc. COM (87) 
101 final of 28.2.1987). 
C7) OJ L 177, 1.7.1981, p. 5. 
('») OJ L87, 2.4.1986, p. 1. 
(19) 'A' sugar means the production quota with the lower levy 
and 'B' sugar the production quota with the higher levy up 
to a fixed quantitative limit (Regulation (EEC) No 1785/81). 
44 Official Journal of the European Communities 15. 12. 87 
CHAPTER 5 
European Agricultural Guidance and Guarantee Fund, 
Guarantee Section (EAGGF-Guarantee) 
5.0. TABLE OF CONTENTS 
Introduction 
Summary of financial information 
Public storage 
The budgetary impact of structural surpluses 
The role of intervention 
Budgetary considerations 
Losses on disposal and depreciation 
Reimbursement of storage costs 
Conclusions 
Management and internal control of the EAGGF Guarantee Section by the 
Commission 
Accounting for Member States' advances and declared expenditure 
Observations arising from the audit 
Clearance of accounts 
Aims and methods 
Working methods 
Provision of staff 
Arrears of work 
The cooperation of Member States 
Preventive consultation 
Concluding observations 
Audit of individual markets 
The quota/additional levy system in the milk sector 
Distillation measures in the wine sector 
Production premiums in the tobacco sector 
Production aid for peas and field beans 
The development of the scheme 
Audit observations 
Production aid for cotton 
Audit observations Paragraph 
reference 
5.1 
5.2 
5.5 
5.5 
5.7 
5.9 
5.11 
5.16 
5.17 
5.22 
5.24 
5.25 
5.26 
5.26 
5.27 
5.35 
5.36 
5.40 
5.42 
5.44 
5.45 
5.47 
5.51 
5.54 
5.56 
5.56 
5.58 
5.60 
5.63 5.4 
5.21 
5.6 
5.8 
5.10 
5.15 
5.21 
5.44 
5.44 
5.34 
5.39 
5.41 
5.43 
5.69 
5.50 
5.53 
5.55 
5.59 
5.57 
5.59 
5.69 
5.69 
General conclusions 5.70 — 5.72 
15. 12. 87 Official Journal of the European Communities 45 
INTRODUCTION SUMMARY OF FINANCIAL 
INFORMATION 
5.1. In 1986, the management of the European Agricul­
tural Guidance and Guarantee Fund, Guarantee Section 
(EAGGF-Guarantee) continued to be governed by 
Council Regulation (EEC) No 729/70 of 21 April 1970 (») 
which, together with the provisions of the Financial 
Regulation, in particular Title VIII, forms a legislative 
framework distinct from the rules of the general budget. 
(') The footnotes appear at the end of each chapter. 5.2. The principal financial data on the management of 
the EAGGF-Guarantee appropriations are given in 
Table 5.1. Appropriations available for the financing of 
expenditure in 1986 amounted to 22 153,3 Mio ECU. The 
Commission made advances totalling 22 150,8 Mio ECU 
to the Member States who declared expenditure of 
22 131,4 Mio ECU. This last amount, plus sums paid 
directly by the Commission amounting to 2,5 Mio ECU, 
has been charged in the accounts as the expenditure for 
Table 5.1 — EAGGF-Guarantee 1986: summary of accounts 
Appropriations 
Automatic carry-overs from 1985: 
Cancellations of appropriations: 
Appropriations used: 
Appropriations from budget (•) 4,4 
0,3 
4,1 
Titles land 2: 22 112,0 
Chapter 40: 41,3 Commitments 
— 
Balance of appropriations available 
in the Member States at 1.1.1986(3): 49,2 
Advances to Member States: 
— paid in one amount: 
— paid in instalments: 
Total advances: 
Exchange difference: 
Expenditure committed directly 
by the Commission: 7 424,4 
14 726,4 
22 150,8 
-4,2 
6,0 (Mio ECU) 
Sums charged to revenue 
and expenditure account 
Payments against automatic carry-over 
from 1985: 4,1 
Sums charged as payments (4): 
— in time: 
— not in time: 
Total: 
Sums paid directly 
by the Commission: I 849,2 
20 282,2 
22 131,4 
2,5 
Total available: 22 153,3 
Cancellations of appropriations (2): 15,9 
Total appropriations used: 22 137,4 Total amount of commitments: 
Decommitment of balance 
available in the Member 
States at 31.12.1986: 
Total commitments: 22 152,6 
15,2 
22 137,4 Total payments: 
Automatic carry-overs to 1987: 
Total: 22 133,9 
3,5 
22 137,4 
(') Budget adopted on 10 July. OJ L 214, 4.8.1986. 
(2) Of which 0,3 Mio ECU for Chapter 40, Fisheries. 
(3) This balance was included in the commitment of the advance for April. 
(4) The sums charged take into account the consequences of the clearance of the 1982 accounts (55,3 Mio ECU). 
46 Official Journal of the European Communities 15. 12. 87 
1986 and represents an increase of 12 % over 1985. This 
increase would have been of the order of 15,5 % if the 
Commission had not postponed payments totalling 
693 Mio ECU to 1987 (see paragraph 5.25(a)). 
5.3. Further financial data are given in Table 5.2 which 
shows the expenditure for the year broken down by 
chapter and by measure; and Table 5.3 which provides an 
analysis of the use of appropriations in 1986 including the 
use of transfers between chapters. Tables 5.4 and 5.5 show 
the quantities and book values respectively of agricultural 
stocks in public storage at the end of 1986, compared with 
the levels of previous years. With the important exception 
of milk products the position in terms of quantity shows 
improvement for some products, though the total book 
value of stocks has continued to rise (to 11 400 Mio 
ECU). 
5.4. The real increase of 15,5 % in agricultural expendi­
ture in 1986 becomes all the more worrying when it is 
borne in mind that in the course of the year the potential 
losses associated with future disposal of intervention 
stocks rose, according to the Court of Auditor's 
calculations, to 8 500 Mio ECU (cf. paragraph 5.14 
below), an increase of 49 % over the comparable figure for 
1985 (5 700 Mio ECU). In view of the continuing 
seriousness of the situation with regard to intervention 
stocks, the Court has set out in paragraphs 5.5 — 5.21 
below a detailed analysis of the evolution of this problem 
and of the Community's response to it. 
PUBLIC STORAGE 
The budgetary impact of structural surpluses 
5.5. The year-by-year increase in the cost of stocks and 
of expenditure relating to their handling, financing and 
disposal, shows clearly that important parts of the 
common agricultural market are in serious imbalance. 
The book value of intervention stocks increased from 
about 2 000 Mio ECU in the years around 1980 to over 
11 000 Mio ECU by the end of 1986. Related expenditure 
charged to the budget increased by a factor of four over 
the same period to 4 700 Mio ECU in 1986. Moreover, 
this does not take account of the potential losses of 
8 500 Mio ECU referred to in paragraph 5.4 above. 
5.6. The most basic indications, however, of the 
situation in the various markets are their respective degrees of self-sufficiency, which for many years have 
been on a rising trend (especially in the 1970s) and in some 
cases have now reached values of well over 100 %. The 
Community budget has had to pay twice for this 
situation. In the first place there is a loss of agricultural 
levy income on imports into the Community reflecting the 
Community's growing self-sufficiency. In the second 
place the combination of ever-increasing intervention 
stocks and a widening gap between EEC and lower world 
prices has led to a huge increase in the budgetary cost of 
the common agricultural policy, the largest element in 
that increase being the actual and potential disposal costs 
of intervention stocks. 
The role of intervention 
5.7. The last decade has seen a fundamental change in 
the role of intervention storage in the organization of the 
main agricultural markets. Intervention buying has a 
valid role as a cyclical instrument in implementing the 
price guarantee policy and thus in pursuing some of the 
objectives of Article 39 of the EEC Treaty in the context 
of an expanding internal market, striving towards a 
reduction of its dependence on imports. It helps to create 
an economic climate of confidence for producers. 
However, when the 100 % self-sufficiency mark is crossed 
and internal production becomes dependent on export 
possibilities in a world market where prices are often 
considerably lower than the internal market price level, 
the public storage scheme turns all too easily into a 
guaranteed outlet for goods for which there is in fact no 
real market, thereby contributing to the creation of 
structural surpluses. 
5.8. Moreover, in its annual report for the financial year 
1985 (2), which included the results of a special enquiry 
into the arrangements for public storage of cereals, the 
Court drew attention to the influence of the quality 
definitions of cereals accepted into intervention. It 
concluded that the low minimum quality criteria, together 
with a price differentiation scheme that failed adequately 
to reward better quality, had encouraged the production 
of excessive quantities of cereals, including inferior 
cereals which would have represented too great an 
economic risk for the producers, had they not had the 
security offered by intervention. The Court came to very 
similar conclusions in its recent special reports (3) on 
Community distillation measures in the wine sector and 
on the common organization of the market in raw 
tobacco. 
15. 12. 87 Official Journal of the European Communities 47 
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15. 12. 87 Official Journal of the European Communities 49 
Tabic 5.4 — F.AGGF-Guarantce: analytical table of the movements of public stocks, 1984-86 
( I 000 I, 
Product 
Breadmaking wheat 
Feedwheat 
Sub-total common wheat 
Barley 
Rye 
Durum wheat 
Corn 
Sorghum 
Total cereals 
Sugar 
Olive oil 
Colza 
Sunflower seed 
Alcohol (2) 
Tobacco 
Skimmed-milk powder 
Butter stored before 1.3.85(3) 
Butter stored after 1.3.85 
Total butter 
Beef carcasses stored 
before 1.3.85(3) 
Beef carcasses stored 
after 1.3.85 
Total beef carcasses 
Boneless beef stored 
before 1.3.85(3) 
Boneless beef stored 
after 1.3.85 
Total boneless beef 
Total beef 
Pork 1984 
Pur­
chases 
2 898 
2 015 
4913 
1 544 
249 
309 
— 
7 015 
— 
131 
•— 
— 
__ 
12 
454 
—-
— 
509 
— 
— 
370 
__ 
— 
89 
459 
— Sales 
5 012 
14 
5 026 
1 270 
119 
204 
__ 
6 619 
— 
87 
— 
— 
— 
28 
695 
— 
— 
222 
— 
— 
190 
— 
— 
42 
232 
— 30.11.1984 
4 448 
2015 
6 463 
1 636 
441 
853 
..... 
_ 
9 383 
— 
162 
— 
— 
--
15 
787 
— 
._-
972 
— 
— 
481 
— 
— 
133 
614 
— 1985 
Pur-
1 671 
6 248 
7919 
4418 
686 
695 
— 
13 718 
— 
12 
— 
_. 
— 
13 
223 
— 
.._._ 
494 
— 
— 
253 
__ 
— 
129 
382 
26 Sales 
2 228 
251 
2 479 
1 404 
19 
561 
— 
__.. 
4 463 
_... 
98 
— 
— 
-— 
13 
496 
— 
...._. 
447 
— 
— 
145 
— 
— 
48 
193 
— Stocks 
30.11.1985 
3 890 
8012 
11 902 
4 651 
1 108 
986 
.._ 
_. 
18 647 
._. 
75 
— 
•— 
501 
15 
514 
— 
— 
1 018 
— 
— 
589 
— 
— 
214 
803 
26 1986 
Initial 
stocks 
3 931 
8 012 
11 943 
5 244 
1 119 
986 
19 292 
247 
_ 
--
501 
15 
514 
689 
329 
1 018 
353 
245 
598 
94 
118 
214 
810 
26 Pur-
1 683 
2 217 
3 900 
2 433 
364 
271 
392 
3 
7 363 
61 
75 
0.2 
31 
165 
40 
508 
632 
632 
--•• 
348 
348 
— 
162 
162 
510 
12 Sales 
3 270 
3 987 
7 257 
3 905 
323 
230 
201 
— 
11 916 
45 
35 
5 
--
16 
247 
315 
26 
341 
285 
206 
491 
68 
87 
155 
646 
38 Stocks 
30.11.1986 
(4) 
2 475 
6 085 
8 560 
3 793 
1 148 
1 023 
190 
3 
14 717 
16 
283 
0,2 
26 
666 
39 
862 
374 
931 
1 305 
67 
386 
453 
26 
193 
219 
672 
— 
(') Spain and Portugal included. 
(2) The quantities of alcohol are expressed in hectolitres of pure alcohol. 
(-1) Commission Regulation (EEC) No 1624/86 establishes a depreciation for these products and foresees their sale before the end of 1986 exercise. 
(4) The differences between the 'theoretical' final stocks (initial stocks + purchases - sales) and the final stock figures that appear in the table are explained 
by two factors: (1) losses and (2) modifications made by Member States but not yet taken into account by the Commission. 
Budgetary considerations 
5.9. In its annual report for the financial year 1983 (4), a 
year which saw a peak in the annual rate of increase of 
public stocks, the Court observed that the increase in 
volume of products placed in intervention more or less 
corresponded to a reduction in planned quantities of 
exports. The Court noted that, in a period of agricultural 
surpluses and budgetary appropriations shortages, taking 
products into public storage rather than disposing of 
them outside the Community has the effect of minimizing 
the immediate financial burden on the Community 
budget; but at the expense of a much heavier final burden 
due to the high costs of prolonged storage and the 
probability of greater financial losses on the eventual 
disposal of the products concerned. The reason for this is 
that intervention purchases, which are carried out by 
national intervention agencies on behalf of the Com­
munity, are financed initially by funds provided by the Member States. Although Member States are reimbursed 
for their interest costs by a flat rate allowance, Com­
munity financing of the value of the product does not 
occur until the time of disposal, when the Member States' 
intervention agencies receive the sales value from the 
buyer, with the difference between purchase and sales 
value, usually a loss, being carried by the Community. 
5.10. This explains the influence of budgetary consider­
ations on sales decisions and disposal policy more 
generally. The last five or six years have been charac­
terized by a combination of budgetary constraints on the 
one hand and high stock levels, disposable only at high 
cost, on the other. Hence the practice of suspending sales 
50 Official Journal of the European Communities 15. 12. 87 
Table 5.5 — EAGGF-Guarantee: accounting value of 
public stocks 1984-86 
(Mio ECU) 
Product 
Common wheat suitable for 
breadmaking 
Common wheat unsuitable for 
breadmaking 
Sub-total common wheat 
Barley 
Rye 
Durum wheat 
Maize 
Sorghum 
Total cereals 
Colza 
Sunflower 
Total oil seeds 
Beef carcasses 
Boneless beef 
Total beef 
Pork 
Skimmed-milk powder 
Butter 
Total milk products 
Sugar 
Olive oil 
Tobacco 
Alcohol 
Grand total 1984 
872,4 
390,8 
1 263,2 
319,7 
91,9 
226,8 
1 901,6 
26,2 
26,2 
1 297,1 
434,8 
1 731,9 
— 
1 242,4 
3 536,8 
4 779,2 
25,7 
272,6 
13,5 
8 750,7 1985 
776,7 
1 613,6 
2 390,3 
940,5 
225,7 
264,2 
3 820,7 
— 
1 508,7 
761,5 
2 270,2 
28,9 
866,7 
3 415,7 
4 282,4 
115,6 
14,6 
47,3 
10 579,7 1?86*(') 
541,2 
1 135,4 
1 676,6 
728,8 
248,3 
287,7 
34,9 
0,7 
2 977,0 
0,1 
13.9 
14,0 
1 211,9 
783,6 
1 995,5 
— 
1 621,6 
4 284,7 
5 906,3 
9,7 
421,1 
30,4 
64,8 
11 418,8 
(') Including Spain and Portugal. 
Source: Financial reports on the EAGGF, Guarantee Section for 1984 to 
1986. 
* Provisional. 
as long as the credits to reimburse Member States' 
intervention agencies are not available in the budget. 
Thus, unrealized losses are accumulated and kept in store 
for the future. In this situation the Community, by storing 
agricultural produce, is also adding to future agricultural 
budget expenditure, since the continued accumulation of 
stocks depresses both market prices and the value of the 
produce, which normally deteriorates with age. This is 
well illustrated in the case of the special disposal 
programme for butter which will be undertaken in 1987 
and 1988. Under this programme one million tonnes of 
old butter, for which it has been impossible to find normal 
market outlets, will be sold off at prices so low as to result 
in losses approaching 100 % of book value. The economic 
advantage of such disposals, in comparison with simple 
destruction, is not clear. The total cost of this disposal 
programme will amount to some 3 200 Mio ECU. In 
order to avoid adding this cost to the budgets for 1987 and 
1988, the Council has decided to spread the cost in equal 
instalments over the four years 1989-92, an arrangement which in the Court's view (5) is inconsistent with the 
principle of annuality laid down by the Treaties. 
Losses on disposal and depreciation 
5.11. A serious defect in the accounting arrangements 
for intervention stocks is that they have never been 
subject to any systematic depreciation. As applied to 
intervention stocks, which are not strictly assets of the 
Community, depreciation consists of writing down the 
book value of certain stocks, accompanied by the 
reimbursement to Member States of the value difference 
and consequently the charging to the Community budget 
of this amount. As a result, the subsequent loss on sale 
will be correspondingly lower, as will be its reimburse­
ment and its charge to the budget on disposal. In effect, 
depreciation here is a method of anticipating future loss. 
It is sound financial practice, therefore, to write down the 
value of stocks to their net realizable value, i.e. their 
actual sales value, whenever that is lower than the cost of 
purchase, and to do so systematically, thereby removing 
the obstacle to an efficient sales policy described in 
paragraph 5.10. If the Court has criticized the Commis­
sion strongly and repeatedly in the past it was precisely 
because the Commission did not apply depreciation on a 
systematic basis. 
5.12. Until 1986 the regulations allowed the writing off 
of the difference between the purchase value of the total 
stock of a certain product and its realizable value, if lower, 
up to a maximum of half of the difference, and only at the 
end of the year. This latter constraint has led to a 
completely fortuitous application of the depreciation 
facility, which was no more than an arbitrary allocation 
of budgetary appropriations that happened to be left over 
at the end of year, to the stocks of the various products. 
The Commission utilized the possibility for partial 
depreciations in using up remaining budget appropri­
ations in 1978, 1980 and 1981. In the succeeding years up 
until 1985 there were no spare appropriations but stocks 
had started to accumulate at an ever-increasing rate. At 
the end of 1985 the Commission applied unused 
appropriations of 439 Mio ECU towards the depreci­
ation of cereals, butter and beefmeat stocks, but this did 
not prevent the potential disposal cost of stocks at this 
date rising to new heights, variously estimated as between 
4 500 and 5 700 Mio ECU. 
5.13. In 1986, the rules in respect of depreciation were 
changed through a modification of the relevant Council 
regulation (6), removing the two main restrictions, i.e. the 
50 % limit and the year-end rule. At the same time, a 
modest element of depreciation (471 Mio ECU) was for 
the first time provided for in the budget and implemented 
in the course of the year. The Court, in its opinion of 6 
March 1986 (7), welcomed these changes as a step in the 
15. 12. 87 Official Journal of the European Communities 51 
right direction, which opened the way for a full 
application of sound financial practices. However, it has 
to be noted that the depreciation arrangement as such has 
retained its optional character, and there is no sign as yet 
that the Commission intends to operate it on a systematic 
basis. The implementation of the partial depreciation of 
butter and beef stocks in 1986 was applied only to the part 
of the stocks concerned which was destined for sale before 
the end of the year. This practice is difficult to reconcile 
with the present wording of the relevant regulation which 
only recognizes a valuation price for the whole stock of 
one product. Since not all the intended sales were 
achieved, the Commission now shows different values in 
its books for the same product of the same age. In effect 
the Commission simply used the funds which the 
budgetary authority had provided for depreciation as a 
supplement to the separate provision in the 1986 budget 
for losses on sales, bringing the total losses on sales 
charged to the 1986 budget to 2 300 Mio ECU. 5.14. After taking account of sales effected in 1986, and 
associated losses, the Court's estimate of potential losses 
on public intervention stocks at end-1986 is 8 500 Mio 
ECU. Details of the calculation are in Table 5.6. The 
explanation of the difference of 1691,5 Mio ECU 
between the Commission's and the Court's calculations is 
that the Commission's calculation excludes potential 
costs on the disposal of what it calls normal stocks. 
Regardless of the precise purpose of these stocks, which is 
not clear, the Court can still see no justification for 
regarding them as immune from the general loss in value 
which has affected other stocks (8). The Court has 
therefore taken so-called normal stocks into its calcu­
lation of potential costs. 
5.15. In addition, the Commission's figure does not take 
account of potential costs to the Community arising from 
the disposal of national stocks of alcohol distilled from 
the by-products of wine-making and from wine other 
Table 5.6 — EAGGF-Guarantee 1986: estimate of potential expenditure which may arise from the disposal of agricultural products in 
intervention storage at the close of the financial year 1986 (30.11.1986) 
Product 
(1) 
Common wheat suitable for 
breadmaking 
Common wheat unsuitable for 
breadmaking 
Barley 
Rye 
Durum wheat 
Maize 
Sorghum 
Olive oil 
Colza 
Sunflower 
Alcohol 
Sugar 
Tobacco 
— leaf 
— processed 
— baled 
Skimmed-milk powder 
Butter 
Beef 
— quarters 
— boneless 
Total Quantities 
in storage 
at the 
close of the 
financial 
year 
(tonnes) 
(2) 
2 475 287 
6 084 585 
3 792 777 
1 148 808 
1 022 -503 
190 417 
3 400 
283 140 
157 
26 014 
666 421(3) 
15 703 
26 893 
6 684 
5 826 
861 888 
1 306 083 
452 485 
219 510 
— Quantities 
in public 
storage 
considered 
as normal 
(tonnes) 
(3) 
1 000 000 
2 000 000 
1 500 000 
200 000 
300 000 
— 
— 
100 000 
— 
— 
— 
— 
— 
— 
— 
200 000 
200 000 
50 000 
50 000 
— Quantities 
in public 
storage 
in excess 
of normal 
storage 
(tonnes) 
(4) = (2)-(3) 
1 475 287 
4 084 585 
2 292 777 
948 808 
722 503 
190 417 
3 400 
183 140 
157 
26 014 
666 421(3) 
26 893 
6 684 
5 826 
661 888 
1 106 083 
402 485 
169 510 
— Weighted 
average 
losses 
on sales 
(ECU/t)(') 
(5) 
118 
118 
118 
118 
195 
118 
118 
— 
— 
— 
95(4) 
— 
293 
345 
1 128 
1 100 
3 080(2) 
2 450 
2 400 
— Potential e 
according 
to the 
Commission(2) 
(Mio ECU) 
(6) = (4)x(5) 
174,1 
482,0 
270,5 
112,0 
140,9 
22,5 
0,4 
— 
— 
— 
63,3 
— 
7,9 
2,3 
6,6 
728,1 
3 406,7 
986,1 
406,8 
6 810,2 xpenditure 
according 
to the Court 
(Mio ECU) 
(7) = (5)x(2) 
292,1 
718,0 
447,5 
135,6 
199,3 
22,5 
0,4 
— 
— 
— 
63,3 
— 
7,9 
2,3 
6,6 
948,2 
4 022,7 
1 108,5 
526,8 
8 501,7 
(') The data are based on the prospects of losses at the close of the financial year 1986, i.e. on the basis of the estimate used for establishing the appropriations 
of the 1987 budget, corrected by adjustment to the market conditions inherent in the 1987/88 price proposals. 
(2) Figure estimated on the basis of special disposal measures which may be foreseen. 
(3) Hectolitres of alcohol at 100 % vol. 
(4) ECU/hl. 
52 Official Journal of the European Communities 15. 12. 87 
than table wine under Articles 39 and 40 of Council 
Regulation (EEC) No 337/79 of 5 February 1979 (9). The 
Court assesses these potential costs at about 285 Mio 
ECU. 
Reimbursement of storage costs 
5.16. In its annual report for the financial year 1985 (2), 
the Court pointed out that the system of flat-rate 
reimbursement of financing and technical costs has the 
consequences, firstly, that there are Member States who 
gain on the reimbursements and there are others who 
lose; and, secondly, that a net element of national 
financing is introduced into the scheme, a fact which 
cannot be reflected in the accounts of Community 
expenditure. The resulting transfer from the Community 
to national budgets was estimated by the Court at 160 Mio 
ECU in 1985 (l0). So far from restoring the balance, the 
Council decided in May 1986 (u) to extend this dis­
crepancy even further, by deciding that technical costs 
would be reimbursed at only 75 % of their representative 
level, and that the interest flat rate would be fixed at a 
level lower than its representative level. In addition, for 
Member States with a lower prevailing rate of interest, a 
downward adjustment would be made. The Commission 
who proposed this adaptation of the reimbursement 
scheme, hoped to make a further 'economy' of at least 
300 Mio ECU. 
Conclusions 
5.17. It is difficult to escape the conclusion that the 
Community's problem with regard to surplus agricultural 
stocks is in large measure self-inflicted. Two factors which 
have in particular combined to exacerbate the problem 
have been the Council's continued refusal to endow the 
budget with adequate revenue, or to effect significant 
economies in spending; and the failure of Community 
legislation to prescribe realistic accounting rules for 
intervention storage. The interaction of these factors has 
led to a situation in which the Council has pursued short-
term economies at the cost of much bigger increases in the 
future expenditure burden. 
5.18. Another important contributory factor has been 
the inadequate policy response by the Community to the 
situation as it has developed, and in particular the failure 
of the institutions to achieve and maintain balance in the 
different agricultural markets. The measures adopted by 
the Council — such as a few percentage points of co-
responsibility levy or a few percentage points of price 
decrease if production exceeded a certain threshold — 
turned out to be too marginal to be effective. Such 
corrections were easily offset by productivity gains at the 
farmers' level and/or by subsequent decisions of the institutions to frustrate their effects, e.g. by monetary 
compensation through the channels of green rate 
diplomacy, or by compensating price revisions (as 
criticized by the Court in its annual report for the 
financial year 1983 (4)). 
5.19. In recent years the Commission has stretched the 
rules of the cash-based accounting system almost to its 
limit, e.g. by longer and longer postponements of various 
payments and reimbursements (principally by failing to 
depreciate stocks in advance of disposal) or by changing 
the dates of the financial year (as was done in 1983 for 
public storage intervention expenditure, thus cutting out 
a month's expenditure (,2)). This not only has the effect of 
distorting the view presented by the annual accounts, and 
the comparison between financial years, but also 
disguises and thereby aggravates the real problems. 
5.20. It is equally pointless to adopt solutions that 
simply transfer the problem to other sectors. An obvious 
example of this can be found in the wine market, where 
the effect of intervention (via the Community distillation 
measures) is to transform surplus table wine at an 
unrealistically high cost into surplus alcohol. 
5.21. Last but not least disposal measures should be 
economically justified. Not only should direct and 
secondary effects be analysed and evaluated, but when (as 
in the recent example of butter disposal) the amount of 
write-off implied by a proposed measure is of the order of 
100 % of book value, the onus should be on the 
Commission to demonstrate that that particular way of 
disposal is economically more attractive than simple 
destruction. 
MANAGEMENT AND INTERNAL 
CONTROL OF THE EAGGF GUARANTEE 
SECTION BY THE COMMISSION 
5.22. In previous annual reports the Court has 
frequentry drawn attention to the special nature of the 
arrangements governing the management and internal 
control of expenditure financed by the EAGGF Guaran­
tee Section. In effect, responsibility for day-to-day 
management of expenditure is wholly devolved to 
Member States. The Member States submit monthly 
forecasts to the Commission of their cash requirements 
and on the basis of these forecasts the Commission 
advances funds month by month. The Commission 
15. 12. 87 Official Journal of the European Communities 53 
subsequently records in its accounts the amounts declared 
by the Member States each month as disbursed against 
these advances. After the end of the year the Member 
States forward to the Commission summary statements 
of all the year's transactions, on the basis of which the 
Commission carries out a verification of the expenditure 
incurred under a procedure known as clearance of the 
accounts. Paragraphs 5.24 — 5.44 below present the 
results of the Court's examination of the operation in 
1986 of these forms of control. 
5.23. In addition to its responsibilities in connection 
with the issue of advances and the clearance of accounts 
— responsibilities which flow directly from its role in 
implementing the budget — the Commission carries out 
checks of Member States' actions to combat fraud and 
irregularities and provides a management information 
and early-warning system based on reported cases. The 
Court's comments on the operation of these procedures in 
1986 are presented in Chapter 6. 
Accounting for Member States' advances and 
declared expenditure 
5.24. In its financial audit of EAGGF expenditure in 
1986 the Court examined the Commission's bookkeeping 
of and accounting arrangements for Member States' 
advances and declared expenditure. The audit did not 
cover the validity of the data supplied to the Commission 
by Member States. 
Observations arising from the audit 
5.25. There are five observations arising from the audit 
which would appear to the Court to be of particular 
significance: 
(a) the Commission postponed payment of advances of 
693 Mio ECU (some 3 % of total expenditure) which 
were properly due for payment in December 1986 
until the 1987 financial year, because it had run out of 
budgetary appropriations. A significant contributory 
factor to this state of affairs was that the co-
responsibility levy for cereals produced receipts of 
only 56,4 Mio ECU in 1986 against the 452 Mio ECU 
estimated; 
(b) within chapters of the budget which include both 
expenditure and income the Commission's practice is 
to allow any increase in income to be used to finance 
an increase in expenditure. In this way extra income of 140 Mio ECU in Chapter 28 (monetary com­
pensatory amounts) in 1986 was used to finance 
expenditure of the same amount in excess of that 
approved by the budgetary authority. The Court does 
not agree with this accounting treatment which 
usurps the power of the budgetary authority to set the 
limit of gross expenditure; 
(c) the volume of transfers of appropriations in 1986, 
both between and within chapters, greatly exceeded 
that of previous years. In 1985 total transfers 
amounted to 7,8 % of the initial budget whereas in 
1986 they amounted to 16,1 % or 3 550 Mio ECU of 
which 1 740 Mio ECU represented transfers between 
chapters (a summary of transfers between chapters is 
included in Table 5.3); 
(d) as in previous years, the Commission carried out in 
1986 only a partial depreciation of intervention stocks 
— butter stocks were written down by 319 Mio ECU 
and beef and veal stocks by 149 Mio ECU. In the 
Court's opinion, the way this partial depreciation was 
applied contravened the relevant regulations and, 
furthermore, had no significant effect in reducing the 
book value, and thus the weight of the past, carried 
forward to 1987 (see paragraph 5.13); 
(e) there have been consistently long delays, up to five 
months, in the Commission's booking of transactions 
to the budget, with more than 90 % of expenditure not 
accounted for within the two months foreseen by 
Article 97 of the Financial Regulation; and with up to 
1 800 Mio ECU accumulated in suspense accounts by 
November 1986 waiting for the necessary transfers of 
appropriations before being carried to the budget. In 
addition to breaching the Financial Regulation this 
state of affairs militates against good control of 
declared expenditure in the course of the year. It also 
leads to the Court not receiving the supporting 
documents for audit until long after the maximum 
periods laid down in Article 79 of the Financial 
Regulation. 
Clearance of accounts 
Aims and methods 
5.26. The purpose of clearance work is to establish the 
amount of each Member State's expenditure which can be 
54 Official Journal of the European Communities 15. 12. 87 
recognized as a charge to the guarantee section of the 
agricultural budget for the year in question. This general 
objective is stated in Commission Regulation (EEC) No 
1723/72 of 26 July 1972 (>3) and in the 1984 revision of the 
Commission's 1984 proposal for amending the Financial 
Regulation (14). But Community legislation has little 
guidance to offer on the practical steps by which the 
Commission is expected to achieve this objective. The 
Commission has therefore had to work out its own 
solutions to such questions as the priority to be given to 
clearance work in the allocation of its staff resources or 
the working methods to be adopted. The Court believes 
that the aim of the Commission's clearance work should 
be to enable the Commission to reach a conclusion as to 
whether Member States' expenditure is in accordance 
with the rules of the Community; and that for this 
purpose the operational objective of the clearance 
procedures should be to provide a reasonable assurance 
as to the accuracy and propriety of all the expenditure 
included in Member States' accounts and charged to the 
general budget of the Community. This interpretation, 
and in particular the emphasis on the need for a positive 
judgement or conclusion on the Commission's part, 
appears to be supported by a recent ruling of the Court of 
Justice (15). 
Working methods 
5.27. In the absence of a well-defined statement of 
working methods, the Commission has experienced 
problems with the standards applied to clearance work. 
The interpretation of the operational objectives in 
practice has been left to individual team leaders with 
varying results. 
5.28. The Commission recognized the need for an 
improvement in the standards applied as long ago as 1978 
and, in the light of a report by external consultants, 
decided to adopt by not later than 1980, internal rules 
setting out audit objectives and standards with the main 
emphasis on systems-based audit (16). 
5.29. In 1984, the Court (17) pointed out that the 
Commission had made only slow progress in introducing 
systems-based audit and that other audit standards 
remained inadequate. Subsequent annual reports from 
the Court have continued to draw attention to these 
aspects. 
5.30. In 1986 the Court examined the Commission's 
clearance work and found that it had still not adopted 
internal rules setting out audit standards. In particular, 
the Court notes that there remains a need for improved 
standards in the same areas of weaknesses as were drawn 
to the attention of the Commission by the consultants in 
1978, namely: (a) audit planning, including strategic planning; 
(b) preparation and approval of audit work programme; 
(c) documentation of audit work; 
(d) review of completed work, including quality control. 
5.31. As part of its continuing efforts to improve the 
effectiveness of the clearance of accounts procedure, the 
Commission took delivery in 1986 of an audit manual 
from a second firm of consultants. The manual proposes 
clearly-defined operational objectives for the clearance 
and lays down standards in respect of planning, 
fieldwork, documentation, reporting and the review of 
completed work. The adoption and implementation of 
the audit standards laid down in this manual would help 
to remedy the deficiencies mentioned above and should be 
given a high priority by the Commission. 
5.32. The Court found also that in the implementation 
of systems-based audit by the Commission, progress has 
been limited. The Court notes that the technique was 
applied to only two areas of expenditure, export refunds 
and MCAs, and that the quality of application could be 
usefully improved. In particular, not all paying agencies 
were examined and there was no examination of customs' 
systems, which are of major importance for this 
expenditure. As regards computer audit, the Com­
mission's capabilities appear to be rather limited. 
5.33. For all other measures, which together account for 
the bulk of EAGGF expenditure, the Commission's 
approach consists for the most part of an examination of 
the annual accounts returned by Member States, their 
reconciliation with national accounting records and a 
scrutiny of certain measures which, in the judgement of 
the Commission's auditors, represent the greatest finan­
cial risk. The number of measures, and aspects, selected 
for detailed scrutiny is difficult to establish as the 
Commission does not keep relevant statistics. But the 
Court's analysis of measures etc., examined in detail in the 
1982 clearance decided on in May 1986 indicates that 
there has been no substantial change from the position 
reported by the Court in its 1983 annual report (17) when 
it found that, while the Commission was attempting to 
check all the measures financed, only a very small number 
of transactions were subject to detailed audit, with 
selection not based on statistical sampling techniques. 
15. 12. 87 Official Journal of the European Communities 55 
5.34. The non-systems-based approach has enabled the 
Commission to target a small percentage of expenditure 
for disallowance (55,3 Mio ECU in respect of the 1982 
clearance out of total expenditure of over 12 000 Mio 
ECU). However, it does not enable the Commission to 
come to a judgment as to the accuracy and propriety of all 
the expenditure included in the Member States' accounts 
and charged to the Community budget. Nor in the 
Court's view does it provide the Financial Controller with 
a sound basis for appending his visa to Commission 
decisions on clearance. 
Provision of staff 
5.35. The absence of a well-defined statement of 
working methods has led to the Commission experiencing 
difficulties regarding the standards to be applied, and, as 
a result, to problems in specifying the personnel needed. 
Without a clear idea of the job to be done, it has proved 
difficult to present to the budgetary authorities a 
reasoned, objective case for a given level of staffing. The 
present professional staff complement of the clearance 
division of 26 is based on recommendations made in 1978 
and has not been subject to any subsequent comprehens­
ive, objective review. It is clear to the Court that, in view 
of the increase since 1978 in the volume of expenditure to 
be cleared, in the number and complexity of measures and 
in the number of Member States involved, the number of 
staff for clearance work should be reviewed without 
further delay, preferably by a staff inspectorate familiar 
with the audit environment. Taking account of the 
methods to be adopted for future clearance work the 
review should also cover the expertise and skills required 
within the division. 
Arrears of work 
5.36. The Commission clearance of Member States' 
accounts is thus under pressure from significant weak­
nesses in the vital areas of standards and staffing. A 
further problem has arisen from the Commission's 
decision in 1985 (18) to eliminate the final backlog of 
clearance work which had built up in respect of previous 
financial years' clearance decisions. 
5.37. The backlog has been criticized frequently by the 
Parliament and the Court principally because it has meant that discharge decisions have had to be based on 
Member States' accounts which were largely unverified 
by the Commission's clearance service. 
5.38. The Court's review of the Commission's clearance 
of accounts work in 1986 showed that progress has been 
made in catching up with this arrears of work. During 
1986 the Commission decided on the 1982 clearance; 
completed work on the clearance of the 1983 accounts on 
which the Commission took a formal decision in January 
1987; and completed the fieldwork for the clearance of 
the 1984 and 1985 accounts for decision in June 1987. For 
the clearance of accounts up to 1985 the progress made 
meets the timetable proposed by the Parliament in April 
1985 in its discharge decision on the 1983 accounts (19). It 
has also enabled the Commission to start on time on the 
clearance of the 1986 accounts. It remains to be seen, 
however, whether the Commission will complete the 
clearance of these accounts, as would be logical and as the 
Parliament has requested, before the budgetary authority 
considers its discharge decision in April 1988. 
5.39. The value of the Commission's achievement in 
overtaking the arrears of clearance work is, moreover, 
diminished by the reduction in the quality and intensity of 
the clearance work which the Commission has chosen to 
make in chasing up the arrears. Typically, during this 
period of catching up, the number of transactions 
examined has been a function of time available (always 
insufficient), not of statistical, thus objective formulae. 
And, as the Commission's replies to the Court's 
observations in its 1985 annual report (2) made clear, the 
acceleration is being achieved at the price of an increase in 
the reserves, including 'disjunctions' (i.e. postponement 
of decisions on particular items of expenditure) with 
which Commission clearance decisions are liable to be 
qualified. 
The cooperation of Member States 
5.40. The key to sound financial management of the 
decentralized EAGGF system is cooperation between 
Member States and the Commission. For the purpose of 
clearance of accounts, Member States are required (by 
Council Regulation (EEC) No 729/70 (') and Commis­
sion Regulation (EEC) No 1723/72 (»3)) to forward 
summary accounts to the Commission within three 
months of the end of the financial year, together with 
supporting documentation. Other relevant obligations 
are the requirement to transmit to the Commission 
reports by national control bodies, and the requirement 
to communicate to the Commission the provisions 
adopted for the implementation of Community measures. 
Member States are also required to take steps to prevent 
irregularities and, where they do occur, to investigate 
56 Official Journal of the European Communities 15. 12. 87 
them, to report them to the Commission and to recover 
amounts improperly paid. 
5.41. In practice, the level of cooperation on the'part of 
Member States has been disappointing: a situation 
repeatedly deplored by the Court (20). Part of the blame 
for this state of affairs undoubtedly lies with the clearance 
process, as hitherto applied, and the system of financial 
corrections associated with it. Member States have little 
interest in assisting the speedy completion of a process 
from which (rightly or wrongly) they foresee only the 
possibility of financial loss. As regards irregular expendi­
ture or incorrect application of Community legislation, 
the risk of what Member States perceive as financial 
sanctions in the clearance process — plus the fact that 
recovery can rarely be made from beneficiaries — makes 
Member States reluctant to report cases of this sort, and 
may even lead them to conclude that their interests would 
best be served by not trying to discover them. More 
generally, the lack of clear, consistent and objective 
standards in the conduct of the clearance work hitherto 
has made it difficult for the Commission to convince 
Member States of the reasonableness of clearance 
decisions in some cases. This has acted as an additional 
disincentive to cooperation on the part of Member States. 
The clearance process therefore has an inbuilt bias against 
cooperation. This has been exacerbated by the arrears 
which have developed in clearance work, but it will 
remain a potentially significant factor even when the 
clearance programme is up-to-date. 
Preventive consultation 
5.42. The Court believes that some of the foregoing 
obstacles to Member States' cooperation could be 
mitigated without jeopardizing the important and 
essential power which the clearance process gives the 
Commission to insist on the recovery of EAGGF funds 
which have been improperly paid. One possible way 
forward would be to build on the Commission's modest 
progress in the direction of prevention. The Court is glad 
to note that where new Community legislation is 
proposed it is now normal practice for the clearance of 
accounts divison of the Commission to be consulted as to 
the inclusion of adequate control procedures and the 
clarity of the drafting; and, as the Court noted in 
paragraph 3.9 of its 1982 special report (2I), the Commis­
sion already responds to Member States requests for 
rulings on interpretations of existing legislation. The aim 
of this form of preventive consultation is to detect systems 
weaknesses or misinterpretations of Community regu­
lations at an early stage. This is an important develop­
ment, the more so because it demonstrates a desire to seek 
a cooperative solution. 5.43. In the Court's opinion this line of development 
should be pursued in the context of a systems-based 
clearance of accounts, of which it is a logical extension. In 
particular the Court recommends that the Commission 
should use the provisions of Regulation (EEC) No 
729/70 (') to the full to ensure that it is quickly and 
sufficiently informed of the systems introduced by 
Member States for the implementation of new Com­
munity measures. In return the Commission should 
undertake to advise Member States as to the adequacy of 
the controls built into their systems. The advantages 
would be twofold: Member States, by having the prospect 
of early confirmation of the acceptability of their systems, 
would have an incentive to transmit the relevant 
information to the Commission; and would be en­
couraged to follow any advice given by the Commission 
by the knowledge that failure to do so might result in 
financial corrections at the clearance stage. 
Concluding observations 
5.44. The Court makes the following final observ­
ations : 
(a) the main reason for the lack of Member States' 
cooperation is their belief that they have nothing to 
gain financially from the clearance process. This will 
always be true as long as 100 % of their expenditure is 
pre-financed by monthly advances or reimbursed 
against uncorroborated statements of expenditure. If 
the percentage of Member States' expenditure 
covered by advances or by reimbursement was 
reduced, e.g. to 90 % or even to 80 %, with the balance 
being payable in the context of the clearance of 
accounts, this would be an important step towards 
solving the problems referred to in paragraph 5.41 
above; 
(b) for the clearance process to become truly effective in 
the post catching-up phase, the Commission will have 
to act quickly to put right the shortcomings identified 
by the Court at the level of working methods and 
resources; 
(c) in advocating a move to systems-based clearance of 
accounts with the emphasis on prevention rather than 
detection, the Court is inviting the Commission to 
embark on a very ambitious programme of change. In 
the Court's opinion, however, the current arrange­
ments are adversarial and inefficient, and preventive 
action by the Commission and Member States at an 
early stage is more likely to bring about an overall 
strengthening of control. 
15. 12. 87 Official Journal of the European Communities 57 
AUDIT OF INDIVIDUAL MARKETS 
5.45. The multiplicity of support measures relating to 
the individual common markets in agricultural products 
are examined by the Court over a multi-annual cycle. The 
Court has completed major audit studies in the last year 
or so in the following areas: 
(a) the quota/additional levy in the milk sector; 
(b) the distillation measures in the wine sector; 
(c) production premiums in the tobacco sector; 
(d) production aid for peas, beans and dried fodder; 
(e) production aid for cotton. 
The audit results relating to (a), (b) and (c) have been 
adopted by the Court as special reports. The principal 
audit findings relating to (d) and (e) are set out in 
paragraphs 5.56 — 5.69 below. 
5.46. The Court considers it useful to draw attention to 
the problems common to individual markets. Accord­
ingly, as far as the quota/additional levy system in the 
milk sector, the wine distillation measures, and the 
production premiums for tobacco are concerned, this 
section includes in summary form only those findings 
which relate to these common problems. For a complete 
picture of the audit results, however, reference should be 
made to the relevant publications (22). 
The quotaladditional levy system in the milk 
sector 
5.47. The overall objective of the quota/additional levy 
system is to re-establish a balance between production 
and consumption of milk and milk products. The 
estimated budgetary cost of disposing of the surplus 
production of milk, which in 1986 was evaluated at 
9,6 Mio tonnes, is at least 2 688 Mio ECU. 
5.48. Although the quota/additional levy system had an 
initial effect in braking the rise in production, there were flaws in its initial conception and it was progressively 
weakened by amendments adopted by the Council during 
the first two years of its operation. As a result, the system 
had no significant impact on the problem of milk 
surpluses. Further, the proceeds from the levy fell far 
short of the level necessary to finance the disposal of the 
continuing surpluses. At the end of 1986 the situation was 
so serious that the Council had to adopt a comprehensive 
package of measures tightening up the quota/levy system, 
restricting the scope of intervention for butter and 
skimmed milk powder, and providing for a special 
disposal programme to sell 1 Mio lonnes of butter at very 
low prices. In its opinion No 1/87 (2V) the Court has 
expressed disagreement with the financing arrangements. 
5.49. While in general Member States adopted arrange­
ments to implement the system which were in accordance 
with the regulations as they existed, there were a number 
of exceptions which directly affected the achievement of 
the system's objectives: 
(a) the absence of implementation progress in Italy; 
(b) the overallocation of quota by the FR of Germany 
and to a lesser extent by the Netherlands and 
Belgium; 
(c) the avoidance of 21,7 Mio ECU in levy liability in 
respect of 1985/86 by France by excluding one day's 
deliveries from the calculation of the levy liability; 
and 
(d) the establishment in Denmark of a single purchaser 
which corresponded neither to the normal definition 
of a purchaser nor to the definition set out in the 
quota regulations. 
5.50. The Commission's supervisory role has been less 
effective than it should have been, notably with regard to: 
(a) the inadequacy of on-the-spot supervision; 
(b) weaknesses in management information and the 
evaluation of the impact of the various proposals and 
options that have been considered; and 
(c) the failure to arrange for officials in the Member 
States to share experiencies and discuss common 
implementation problems. 
58 Official Journal of the European Communities 15. 12. 87 
Distillation measures in the wine sector Production premiums in the tobacco sector 
5.51. The distillation measures are designed to supple­
ment private storage arrangements by permanently 
removing surplus wine from the market. The measures 
have accounted for more than two-thirds of Community 
budgetary expenditure on wine in recent years (1986: 
461,9 Mio ECU). 5.54. An important objective of the production pre­
mium is to encourage the production of Community-
grown tobacco for which there is a real demand. The 
production of tobacco within the Community of Ten 
amounted in 1986 to 352 700 tonnes equivalent to 46 % of 
domestic requirements. The production premiums in­
volved budgetary expenditure of 733,9 Mio ECU. 
5.52. As regards the effectiveness of the regime: 
(a) the complex series of measures in force lack coherence 
and succeed in removing surplus wine from the 
market only by creating unwanted stocks of alcohol 
(approximately 13,4 Mio hectolitres as at 31 August 
1986) at an unrealistically high cost; 
(b) the attractive prices offered by distillation measures 
actually perpetuate the present structural surplus; 
(c) the recently introduced measures for the compulsory 
distillation of table wine, which were designed to 
discourage high yields are unlikely to achieve the 
desired results because of the ease with which 
overproduces may transfer their obligations to other 
producers and thus escape the financial sanctions 
contained in the measures. 
5.53. As regards the administration of the measures: 5.55. In the period under review, the premium regime 
has evolved with insufficient regard to the conditions of 
the international market or to the Community's objective 
as stated above. As a result, after 16 years of Community 
support, only 29 % of the crop is in real demand, that is to 
say, marketable without substantial subsidies. In some 
cases the subsidies exceed the value of the crop. Unless 
varieties which are really in demand can be produced at 
reasonably competitive prices, Community preference 
involving a high level of support is difficult to justify. In 
addition, the Commission has acquiesced, at the national 
level, in standards of control which fall short of the 
requirements of Community Regulations in the areas of 
determining the net weight and the issue of identification 
certificates when the tobacco comes under supervision at 
the processor's premises. 
Production aid for peas and field beans 
(Regulation (EEC) No 1431/82 as 
amended (24) ) 
(a) weaknesses in the regulations and in some of the 
control arrangements leave the system open to a 
serious risk of irregularities or fraud; The development of the scheme 
(b) the greatest risks arise from inadequacies in the 
provisions of sample-taking and analysis of wine 
destined for distillation and in the definition of table 
wine itself. As a result of these inadequacies the Court 
sees a real danger that adulterated wine presented for 
distillation may go undetected; 
(c) payment based solely on the alcohol content of the 
wine is conducive to the fraudulent increase of its 
alcoholic strength; 
(d) there is an over-reliance on documentary controls and 
an inadequate level of physical checks. 5.56. Since the Community's demand for feed protein 
greatly exceeds its production, the Council adopted, on 22 
May 1978, special production aid measures (in the form 
of a deficiency payment system) designed to expand the 
production of peas and field beans for animal feed. The 
aid is paid to the processor provided a minimum price is 
paid to the producer. From 1 August 1982 the aid system 
was extended to cover peas and beans for human 
consumption and also those prepared and packed for 
consumption by pigeons. 
5.57. The production of pulses for feedingstuff in 
1985/86 was of the order of 1,6 Mio tonnes. This 
represented increases of 55 % for peas and 8 % for beans 
when compared with 1984/85. The quantities for human 
15. 12. 87 Official Journal of the European Communities 59 
consumption were of the order of 200 000 tonnes, 
representing an increase of 45 % compared with 1984/85. 
Expenditure totalled 372,4 Mio ECU in 1985 and 
459,4 Mio ECU in 1986. 
Audit observations 
Aid for human consumption 
5.58. The current switch from crops in surplus, for 
instance cereals, to the production of peas and beans for 
feedingstuff is in line with the Commission's 'Perspectives 
for the common agricultural policy' (25). This is not so in 
relation to the production of peas and beans for human 
consumption: other competing dried vegetables do not 
receive aid nor, indeed, do frozen or canned peas and 
beans which are also in competition with the dried 
products. 
Control procedures in the Member States 
5.59. The Court's examination revealed the following 
weaknesses: 
(a) in France and the FR of Germany, the authorities do 
not as a rule carry out physical checks on the weight 
and quality of the peas and beans as they enter the 
processors' premises, nor do they require advance 
notice of arrival; 
(b) although the regulation requires Member States to set 
up a customs or administrative control system to 
prevent Community aid being paid on products 
imported from third countries, the Italian and French 
authorities could provide no evidence to the Court 
that a system existed which ensured that imported 
peas and beans were traced to their ultimate use. A 
possible solution might be the introduction of import 
securities (as in the oil seeds regime), a solution which 
could also replace the rather complex system of 
official certificates applicable at present; 
(c) in the Netherlands it was noted that where the paying 
agency discovered, during the verification of an aid 
application, that the minimum price had not been 
paid, instead of refusing the aid as required by the regulations, the agency allowed an additional pay­
ment to be made by the first buyer to the producer in 
order to meet the minimum price requirements. The 
Netherlands authorities have since informed the 
Court that the practice had been discontinued; 
(d) in France prices paid are not generally adjusted for 
transport costs borne by the farmer for delivery to the 
first buyer. The minimum price criterion may not, 
therefore, always be respected. A clause in the 
contract between producers and first buyers relating 
to transport costs would help to clarify matters; 
(e) except in the United Kingdom, national authorities 
do not make any preliminary checks to ensure that 
first buyers keep and will produce the necessary 
documents. The Court recommends that the Com­
mission should consider the general application in the 
Member States of a system of inspection of first 
buyers prior to their approval under the regulations. 
Production aid for cotton (Regulation (EEC) 
No 2169/81 (26)J 
5.60. Raw cotton produced by farmers is processed at 
plants called 'ginning mills' resulting in two end products, 
'ginned' cotton and cotton seeds. Ginned cotton is then 
further processed usually at other locations to produce 
textile products. Cotton seeds, on the other hand, are a 
type of oil seed and are crushed to produce vegetable oil 
and margarine. Community aid is granted to producers 
via the ginning mills and applies only to raw cotton. 
5.61. Community support for the market takes the form 
of production aid which is based on the difference 
between a guide price fixed annually by the Council and a 
calculated world market price. 
5.62. Production of raw cotton in 1986 was of the order 
of 568 000 tonnes in Greece and 251 000 tonnes in Spain 
(the only two cotton-producing Member States) and 
involved budgetary expenditure of 370,6 Mio ECU and 
161,7 Mio ECU respectively. 
60 Official Journal of the European Communities 15. 12. 87 
Audit observations Stock accounts 
Calculation of world market price 
5.63. Since raw cotton, on which the aid is based, is not a 
product which is traded on the international markets, a 
representative world market price can only be obtained 
by combining the values of its derivative products — 
ginned cotton and cotton seeds — and deducting ginning 
costs. 5.68. The records maintained by the ginning mills 
visited in Greece and Spain did not, for the most part, 
satisfy the requirements of the Regulations. With few 
exceptions, running balances were not maintained nor 
were invoice references noted in the stock records. It is 
considered that the maintenance of a complete set of 
stock records enabling the reconciliation of raw cotton 
used with ginned cotton produced, is a vital instrument of 
control and should be insisted upon by the authorities 
responsible. 
5.64. For ginned cotton the Commission computes a 
daily average of Liverpool Cotton Exchange quotations 
without taking into account the extent to which the cotton 
quoted is traded on the Community market. Given that 
prices can vary by as much as 10-15 % depending on the 
country of origin it is recommended that the possibility of 
computing a weighted average of these prices should be 
considered. 
5.65. In the Court's view the procedures for calculating 
a representative price for cotton seeds are not satisfactory 
due to the sporadic and at times conflicting price 
information available and consequently the excessive 
discretionary element in its computation. Problems in this 
area compounded by difficulties in calculating ginning 
costs have prompted the Commission, in the context of 
the 1987 price proposals, to propose basing the aid on 
ginned cotton, for which world market prices are 
available. Delivery procedures 
5.69. In Spain it is quite common for ginning mills to 
establish a number of collection points in the surrounding 
countryside where farmers can deliver their cotton. Here 
the produce is weighed (without official supervision) and 
subsequently delivered to the mills in larger bulk 
quantities where it is weighed again (this time under 
supervision). An exact reconciliation of the two weighings 
is often not possible because deliveries to the ginning mill 
may contain fractions of lots. As a result, it is impossible 
to verify that payments to producers were based on the 
actual quantity of cotton delivered to the mill. The Court 
considers it essential that the chain of documentation 
should be consistent and capable of reconciliation. 
Maximum level of aid GENERAL CONCLUSIONS 
5.66. A ceiling on the total quantity to be aided is set by 
the Council each year. Following the accession of Spain 
to the Community in 1986 the ceiling was increased. For 
the marketing year 1986/87 Community production is 
expected to reach 950 000 tonnes, i.e. almost 200 000 
tonnes in excess of the ceiling. The result is that all ginning 
mills, whether in Greece or Spain, receive less aid per 
tonne than they would otherwise be entitled to. 
5.67. Cotton grown in the Community is of a high 
quality and is much in demand but the degree of self-
sufficiency is at present only 15 %. The use of a 
production ceiling in this market highlights conflicting 
aims similar to those encountered in the oil seeds market 
— firstly, expenditure should be controlled while, 
secondly, producers should be encouraged to switch from 
surplus crops to those for which there is a market. 5.70. The observations in this chapter indicate serious 
shortcomings, both in the systems which the Community 
has introduced for the organization of the various 
markets and in the control and supervision of EAGGF 
(Guarantee Section) expenditure at Community and 
national level. Of all the problems identified, it is the size 
and continued accumulation of'surplus stocks which 
gives the most serious grounds for concern. Yet it cannot 
be sufficiently emphasized that the problem the common 
agriculture policy is currently faced with is not just a 
problem of excessively high quantities of intervention 
stocks. The real problem is a much wider one and the 
intervention stocks are, as a result of their very physical 
presence, only the most visible symptom of it. The causes 
of today's difficulties lie in the fact that the set of policy 
instruments adopted in the early years of the CAP, 
however valid and effective they may have been in those 
days and under those circumstances, are not adapted to 
the situation of today and have in fact to a large extent 
contributed to creating the present problems. In today's 
15. 12. 87 Official Journal of the European Communities 61 
situation, intervention buying in its old form of quasi-
unlimited intake of excess production has become an 
anachronism because scarcity has ceased to be a problem 
and external outlets are increasingly hard to find. 
5.71. The Court would also draw attention to the 
problems common to individual markets which may need 
to be addressed at a general level. In particular: 
(a) some of the main objectives of the measures examined 
are not being achieved; (b) the Commission's supervision of implementation of 
the measures, both at the central and the national 
level, is inadequate; 
(c) there is a lack of precision in the provisions of the 
governing regulations, especially as regards the 
nature of controls to be carried out by national 
authorities. 
5.72. There is also the challenge evoked in the Court's 
comments on the clearance of accounts (paragraphs 5.26 
— 5.44) for the Commission and Member States to 
recognize their common interest in sound management of 
EAGGF expenditure and to work together towards an 
overall strengthening of controls. 
(') OJ L 94, 28.4.1970. 
(2) OJC321, 15.12.1986. 
(3) OJC 297, 6.11.1987. 
(4) OJ C 348, 31.12.1984, paragaph 4.29. 
(5) OJC 59, 7.3.1987. 
(6) Council Regulation (EEC) No 1883/78 of 2 August 1978, OJ 
L216, 5.8.1978. 
(7) Opinion 1/86 of the Court of 6 March 1986 (OJ C 80, 
9.4.1986). 
(8) See paragraph 4.23(b) of the Court's 1985 annual report and 
the Commission's reply thereto (OJ C 321, 15.12.1986). 
(9) OJ L 54, 5.3.1979 (now replaced by Council Regulation 
(EEC) No 822/87 of 16 March 1987, OJ L 84, 27.3.1987). 
(10) Annual report for the financial year 1985, OJ C 321, 
15.12.1986, paragraph 4.20. 
('') Council Regulation (EEC) No 1334/86 of 6 May 1986, OJ L 
119,8.5.1986. 
C2) OJ C 348, 31.12.1984, paragraph 4.31. 
(»3) OJ L 186, 16.8.1972. 
C4) Doc. COM(84) 123 final of 9.3.1984. 
(15) Judgment of the Court of Justice No 819/79, Reports of 
cases before the Court 1981, p. 34. ('6) Written procedure No E/958/79 of 10.9.1979 (Doc. 
SEC(79)1324). 
(17) OJ C 348 of 31.12.84, paragraph 4.44. 
(18) Commission Decision of 30.7.1985. 
(»') OJ L 132, 21.5.1985, paragraph 38. 
(20) OJ C 321, 15.12.1986, paragraph 4.56. 
(21) OJC 313, 29.11.1982. 
(22) Special report No 2/87 on the quota/additional levy system 
in the milk sector, OJ C 266, 5.10.1987; special report No 
4/87 on Community wine distillation measures and special 
report No 3/87 on the common organization of the market 
in raw tobacco, OJ C 297, 6.11.1987. 
(23) OJC 59, 7.3.1987, p. 5. 
(24) Council Regulation (EEC) No 1431/82 of 21 May 1982 
laying down special measures for peas and beans, OJ L 162, 
12.6.1982. 
(25) Doc. COM(85)333 final of 15.7.1985 'Perspectives for the 
common agricultural policy (Communication of the Com­
mission to the Council and the Parliament)', paragraph 38. 
(26) Council Regulation (EEC) No 2169/81 of 27 July 1981 
laying down the general rules for the system of aid for 
cotton, OJ L2U, 31.7.1981. 
62 Official Journal of the European Communities 15. 12. 87 
CHAPTER 6 
Frauds and irregularities 
6.0. TABLE OF CONTENTS 
Introduction 
Traditional own resources 
EAGGF, Guarantee Section 
Implementation of the notification procedure 
Recovery of amounts unduly paid 
General observations 
Incompleteness of the Community legislation on control 
Consequences of referral back to national law 
Absence of an overall policy at the Commission 
Final comment Paragraph 
reference 
6.1 
6.3 
6.7 
6.8 
6.11 
6.13 
6.13 
6.14 
6.20 — 6.2 
— 6.6 
— 6.12 
— 6.10 
— 6.12 
— 6.20 
— 6.19 
6.21 
INTRODUCTION 
6.1. The task of implementing the objectives laid down 
by the Treaty and expressed by the Community budget is 
governed by the principle of the decentralization of 
management, which leaves the responsibility for im­
plementing Community measures to the Member States, 
in cooperation with the Commission. As regards the 
question of ensuring that these objectives have been 
implemented and, in particular, combating frauds and 
irregularities that affect the Community budget, the 
Community legislation assigns primary responsibility to 
the Member States and precisely defines the powers of on-
the-spot control, whether in the field of traditional own 
resources (Council Regulation (EEC) No 2891/77 of 19 
December 1977 (')) or the implementation of agricultural 
policies (Council Regulation (EEC) No 729/70 of 21 April 
1970 (2)), that are conferred on the staff of the Commis­
sion. 
6.2. In the case of frauds and irregularities affecting own 
resources, the Court must emphasize that, on account of 
the limitations placed upon its audit in respect of value-
added tax (VAT) own resources (see paragraph 4.11), the 
comments that follow are confined to frauds and 
irregularities affecting traditional own resources. In this 
connection, the observations set out by the Court in the following paragraphs specifically concern traditional 
own resources and the Guarantee Section of the 
European Agricultural Guidance and Guarantee Fund 
on the one hand, and general matters on the other. 
TRADITIONAL OWN RESOURCES 
6.3. As a follow-up to the analysis set out in its annual 
report concerning the financial year 1983 (3), the Court 
once again reviewed the information system relating to 
frauds and irregularities concerning traditional own 
resources, as described by Regulation (EEC) No 2891/77 
(Articles 5, 17 and 18) on own resources, Council 
Regulation (EEC) No 1697/79 of 24 July 1979 (Article 
9) (4) on recovery and Council Regulation (EEC) No 
1468/81 of 19 May 1981 on mutual assistance^). 
(') The footnotes appear at the end of each chapter. 6.4. The observations arising from this supplementary 
review are the following: 
15. 12. 87 Official Journal of the European Communities 63 
(a) the information supplied by the Member States is of 
unequal value and is imprecise and inconsistent; 
(b) the Commission continues to be badly informed by 
the Member States, who report only a very limited 
number of cases, and do so in an unsystematic and 
irregular way. The Commission should continue to 
press the Member States to supply complete and 
systematic information; 
(c) the quality of the information has not improved since 
1983. A review of the cases reported showed that the 
fraudulent practices in question were not always 
adequately explained, that mention was rarely made 
of how the irregularities had been discovered, and 
that when it was the descriptions were not very clear. 
Although information on whether the revenue can be 
recovered is of major importance, no such inform­
ation was supplied in the majority of cases reported; 
(d) the information included in the Member States' 
annual and biannual reports to the Commission 
under Articles 5 and 17 of Regulation (EEC) No 
2891/77 is too general and there is so little of it that 
individual cases of fraud cannot be investigated; 
(e) neither the Member States nor the Commission keep 
a complete accounting record containing all potential 
own resources or all cases and showing the date they 
were established as due, the recovery and the making 
available or how many cases of fraud or irregularity 
for which the amounts of own resources to be 
recovered are outstanding are still pending. The 
Court is of the opinion that a proper accounting 
record should be kept, so that complete information 
regarding own resources due and/or outstanding is 
available and can be controlled and followed up at 
regular intervals. The Member States should also give 
more details in their monthly reports; 
(0 the Commission has not carried out investigations 
into frauds in all the Member States in order to check 
whether national systems and fraud-prevention work 
are equal to the task of ensuring that own resources 
are paid and collected. The Commission says that this 
situation has arisen because it is short of staff in this 
field; 
(g) the Member States should make available the own 
resources that have been established as due, even if 
they have not been recovered (Regulation (EEC) No 
2891/77, Article 17). Only Denmark, the Federal 
Republic of Germany and the Netherlands in fact do 
so. It is too early to comment on the situation in 
relation to Spain and Portugal, but the other Member 
States do not make available unrecovered sums which 
have been misappropriated as a result of fraud, despite their obligation to do so. In view of the fact 
that Community legislation states that the Member 
States shall be allowed to retain 10% of customs 
duties and agricultural levies by way of a collection 
fee, the Court considers that the Communities are 
entitled to expect full and swift payment of all 
traditional own resources established as due. 
6.5. The Court is of the opinion that very little has been 
done during the last three years to improve the situation 
in relation to frauds and irregularities affecting tradi­
tional Community own resources. The view of the 
Parliament and the Commission is that an adequate 
assessment of the scale of the problem cannot be made 
until such time as the Commission is fully and systemati­
cally informed by the Member States and carries out 
suitable controls. 
6.6. Between 1979 and 1985 the Commission made six 
proposals to the Council (6) with a view to amending the 
basic Regulation, No 2891/77, in order to strengthen its 
powers of control. None of these proposals has yet been 
adopted. The six proposals made to the Council since 
1979 reflect the degree of interest shown by the 
Commission in the necessary strengthening of its ability 
to guarantee the collection of the Communities' own 
resources and to fight fraud and irregularities in that 
sector. 
EAGGF, GUARANTEE SECTION 
6.7. The Court has reviewed the present information 
system relating to frauds and irregularities affecting the 
Guarantee Section of the EAGGF, as it is organized by 
Article 8 of Regulation (EEC) No 729/70 and by Council 
Regulation (EEC) No 283/72 of 7 February 1972 (7). The 
latter stipulates that the Member States must notify the 
Commission once a quarter of any irregularities affecting 
the EAGGF and of progress made in recovering amounts 
that have been paid without due justification. The 
Commission's role is mainly to monitor, to encourage, to 
coordinate and to reinforce the Member States' efforts in 
this field. 
Implementation of the notification procedure 
6.8. In 1986 the Member States reported 311 cases of 
fraud or irregularity involving a total of 28,7 Mio ECU 
(compared with 230 cases amounting to 11,7 Mio ECU in 
1985). As was the case in previous years, the number of 
notifications differs considerably from Member State to 
Member State. About 35 % of the total number of 
irregularities for 1986 were notified by the Federal 
64 Official Journal of the European Communities 15. 12. 87 
Republic of Germany and no irregularities were notified 
by Greece or Luxembourg. As the Commission points out 
every year in its financial report on the Guarantee Section 
of the EAGGF, there may be many reasons for this 
uneven distribution of notified frauds or irregularities 
amongst Member States. Since 1979, the Commission has 
said that it is studying the problem. The Court must point 
out that, at the end of 1986, the Commission was still not 
in a position to ensure that all the Member States' systems 
for notifying frauds and irregularities were reliable. 
6.9. On the basis of a representative sample of these 311 
cases, the Court analysed the cases notified to the 
Commission in 1986 in terms of their distribution over the 
various measures and markets, and the types of fraud or 
irregularity concerned. The salient points arising from 
this analysis are: 
(a) a good proportion (25 %) of cases reported occurred 
in transactions involving trade within and outside the 
Community (irregular collection of export refunds 
and monetary compensatory amounts (MCAs)), 
consumption and production aids being the next most 
affected category; 
(b) the markets most affected were milk products (about 
43 % of reported cases) and wine (15 %); 
(c) the great majority of cases reported involved well-
known techniques, e.g. inaccurate declarations of 
nomenclature, quantities, weight, etc. and adulter­
ation of products. 
6.10. In addition, the Court found that: 
(a) the period laid down in Regulation (EEC) No 283/72, 
within which the Commission must be notified, is 
seldom kept to by Member States. At the end of 
March 1987, notifications by three Member States, 
Belgium, Denmark and the Netherlands, for the 
fourth quarter of 1986 had still not been received by 
the Commission, and two Member States, Greece and 
Ireland, had submitted no returns at all for the year. 
As only one Member State, namely Luxembourg, 
makes a point of regularly informing the Commission 
when it has no frauds or irregularities to report, the 
fact that the other Member States had not notified the 
Commission is open to a variety of possible interpre­
tations; 
(b) very, often the information that is notified is vague. 
This being the case, the notifications can rarely be 
used as the sole basis for a valid analysis of the circumstances under which the frauds or irregularities 
happened or were detected, or of the possibilities of 
recovery; 
(c) as the name of the beneficiary who committed the 
fraud or irregularity is not given, not even in the form 
of a code number known only to the national 
inspection service, it is not possible to detect frauds or 
irregularities which have been repeated several times 
by one and the same person, so that there is a risk, in 
certain cases, of aid continuing to be wrongly paid to 
the persons in question; 
(d) in one Member State, namely Italy, several of the 
cases of fraud were detected by the tax authorities 
after the beneficiaries had gone bankrupt. 
Recovery of amounts unduly paid 
6.11. Outstanding recoveries totalling 106 Mio ECU 
were carried forward to 1986 from 1985 and earlier years. 
The 28,7 Mio ECU of new cases uncovered in 1986 
should be added to this total. As only 14,8 Mio ECU were 
recovered in 1986, the balance that should be carried 
forward to 1987 is 119,9 Mio ECU. 
6.12. Table 6.1 breaks down the component parts of this 
balance according to the period of time for which they 
have been outstanding. As it is doubtful whether debts of 
this type, which are sometimes more than five years old, 
will ever be recovered, the Commission should systemati­
cally review cases of recoveries which have been pending 
for a long time in order to identify, in cooperation with 
the Member States, any part of the debt which cannot be 
recovered. 
Table 6.1 — EAGGF, Guarantee Section: breakdown of 
outstanding recoveries according to age 
Age 
Up to 2 years 
2-5 years 
More than 5 years 
Total Amount (') 
(Mio ECU) 
36.7 
42,3 
40,9 
119,9 Number (') 
304 • 
203 
315 
822 
(') As of 31.12.1986, data supplied by the Commission. 
15. 12. 87 Official Journal of the European Communities 65 
GENERAL OBSERVATIONS 
Incompleteness of the Community legislation 
on control 
6.13. Pursuant to the Community legislation on con­
trol, the Member States are obliged to make formal 
notification of frauds and irregularities. It should, 
however, be noted that the procedures for, and the scope 
and contents of, the obligation to notify differ according 
to the legislation in question. The latter is, in particular, 
more precise in the case of the EAGGF than in the area of 
own resources where, moreover, the wording of the 
legislation leaves room for differing interpretations. This 
situation prejudices the effectiveness of the Commission's 
central role in the area of control, since it makes it difficult 
in practice for it to record and study all the cases and types 
of fraud that arise. Any attempt to search out and ' 
eliminate gaps in the Community legislation is hampered, j 
particularly in the customs and agricultural sectors. It 
becomes impossible to make an adequate assessment, at 
Community level, of the extent of frauds and irregula­
rities affecting the budget. 
Consequences of referral back to national law 
6.14. The application of the principle according to 
which primary responsibility of dealing with cases of 
fraud and irregularity lies with the Member States leads, 
in the present state of Community law, to referral back to 
the national law of each of the Member States for a 
definition of concepts, procedures for repression and 
penalties in respect of cases of fraud and irregularity 
affecting the Community budget. 
6.15. In 1976 the Commission submitted to the Council 
a proposal, which is still pending, for amending the 
Treaties to provide for a common system of protection by 
penal means of the financial interests of the Community 
and prosecution in the event of infringements of the 
Treaties (8). In the recitals to this proposal, the Commis­
sion explained that national legislation is usually not 
sufficient to guarantee protection of the Communities' 
financial interests and to ensure that legal proceedings are 
initiated against infringements of the Treaties or derived 
legislation and regulations, which is the responsibility of 
the Member States. 
6.16. This proposal was not, in fact, an attempt to alter 
the penal code as regards fraud in the various Member 
States, but it did suggest some common rules for: (a) prosecution for fraud in Member States other than 
the one in which the offence was committed; 
(b) mutual help between Member States in order to 
prevent infringements; 
(c) ensuring that the Communities' financial interests 
will enjoy the same penal protection as national 
finances under existing national legislation. 
In the Court's view, these proposals constituted a 
minimum requirement as regards the establishment of 
harmonized penal measures to protect the Communities' 
interests. 
6.17. In fact, the disparity in the provisions of national 
legislation from Member State to Member State and 
within each national legal system, according to the areas 
concerned (tax, customs, agricultural legislation, etc.), 
has resulted in concepts as basic as those of 'fraud' and 
'irregularity' affecting the Community budget, especially 
in the agricultural sector, not being defined or understood 
in a harmonized way in the various national legal systems. 
For this reason, equivalent penalties in comparable 
situations are not always imposed and the principle of 
equality of all citizens before the law is infringed. 
6.18. No harmonized response by the national control 
systems is therefore forthcoming in respect of the 
phenomenon of fraud, which is no respecter of frontiers. 
The Court was able to establish that notifications of cases 
of fraud sent to the Commission most often do not 
mention the name of the person who committed the 
irregularity, even in coded form, with the result that the 
Commission can neither list those operators who 
repeatedly commit fraud nor systematically utilize the 
statements drawn up by the Member States. 
6.19. In addition, the Court must also point out that the 
Commission, as manager of the budget, has no legal 
instrument allowing it to be involved in the repression of 
fraud in the agricultural sector, especially in cases before 
the national courts. In addition to the exemplary nature 
of such interventions in certain cases, the Court considers 
that such a possibility would increase the Commission's 
ability to monitor certain representative files, either on 
account of the sum of the fraud involved or the fraud 
techniques used. 
66 Official Journal of the European Communities 15. 12. 87 
Absence of an overall policy at the 
Commission FINAL COMMENT 
6.20. According to the information in the Court's 
possession, the Commission did not manage, during the 
financial year 1986, despite the requests made by the 
Court in its Annual Report concerning the financial year 
1983 (9), to implement an effective form of coordination 
of those of its various Directorates-General that are 
concerned by the phenomenon of fraud. Thus, the 
Commission: 6.21. The situation described above calls for the rapid 
introduction of reforms which will eliminate the incon­
sistencies of the present machinery while maintaining the 
principle of a decentralized system, i.e. leaving the 
primary responsibility for fraud prevention to the 
Member States. In this respect, the Court calls for: 
(a) has still not established a system which will allow it to 
assess the degree of efficiency of national controls and 
the exhaustivity of the Member States' notifications 
according to the various sectors of activity con­
cerned; 
(b) does not centralize, or only partly centralizes, the 
information sent to it and does not make, or only 
partly makes, systematic use of it. The Court has 
drawn attention in previous reports to delays in the 
commissioning of the Commission's computerized 
system for recording and analysing the frauds and 
irregularities notified by the Member States (Irene), 
which was originally supposed to become operational 
at the end of 1984. The Court notes that that part of 
the system which concerns the recording of notified 
frauds and irregularities became operational in 
March 1987, but that further work remains to be done 
before the system as a whole can be considered to be 
fully operational; 
(c) for lack of adequate resources, only participates in a 
tiny part of the on-the-spot checks and does not effect 
any increased monitoring. (a) the harmonized definition, in the Member States' law, 
of the notions of fraud and irregularity affecting the 
Community budget and the definition of legal 
instruments which will allow the Commission to act 
in national criminal law as the plaintiff, party 
attached to the plaintiff or 'applicant authority' 
within the meaning of Council Regulation (EEC) No 
1468/81 relating to mutual assistance; 
(b) the setting up at the Commission of a coordination 
and initiative unit responsible for fighting fraud and 
the definition, by sector of activity, of systems for the 
centralization and systematic analysis of the inform­
ation communicated by the Member States; 
(c) the systematic recording, by the Commission, of cases 
of failure by the Member States to fulfil obligations 
laid down by Community law as regards preventing 
and fighting frauds and irregularities (see paragraphs 
6.4 and 6.8-6.10 above) and the implementation of the 
appropriate means to see that these shortcomings are 
eliminated. 
(') OJ L336, 27.12.1977, p. I. 
(2) OJ L94, 28.4.1970, p. 13. 
(3) OJ C 348, 31.12.1984, paragraph 3.11. 
(4) OJ L 197, 3.8.1979. 
(5) OJ L 144, 2.6.1981, p. 1 as last amended by Council 
Regulation (EEC) No 945/87 of 30 March 1987, OJ L 90, 
2.4.1987, p. 3. (6) 
(8) 
(9) OJ C 88, 4.4.1979; OJ C 231, 4.4.1982; OJ C 146, 4.6.1983; 
OJ C 303, 10.11.1983; OJ C 219, 21.8.1984; OJ C 267, 
18.10.1985. 
OJ L36, 10.2.1972. 
OJ C222, 22.9.1976. 
OJ C 348, 31.12.1984, paragraph 4.39. 
15. 12. 87 Official Journal of the European Communities 67 
CHAPTER 7 
European Agricultural Guidance and Guarantee Fund 
Guidance Section 
7.0. TABLE OF CONTENTS 
Introduction Paragraph 
reference 
7.1 7.2 
7.24 
7.9 Structural policy within the framework of the common agricultural policy 7.3 — 7.4 
Difficulties in respect of the implementation of a true Community-wide policy 
for agricultural structures 
As regards the general approach 
General guidelines 
Imprecise expressions 
Unrealistic requirements 
The appropriations available 
As regards the definition of the measures 
As regards the application of the measures 
Direct and indirect measures 
Financing by programmes 
Differentiated appropriations 
The control and monitoring of the measures 
The effects on agricultural policies 
Dispersal of measures and appropriations 
Infrastructure aid badly coordinated with the other types of aid 
Limited impact of measures aiming to control production 
Aid for training and the acquisition of occupational skills largely unused 
Aid to improve the conditions for processing and marketing agricultural 
products badly coordinated 
Final comments 7.5 
7.5 
7.5 
7.6 
7.7 
7.8 
7.10 
7.14 
7.14 
7.15 
7.20 
7.22 
7.25 
7.25 
7.30 
7.34 
7.39 
7.43 
7.47 7.9 
7.13 
7.24 
7.19 
7.21 
7.24 
7.46 
7.29 
7.33 
7.38 
7.42 
7.46 
7.51 
INTRODUCTION 
7.1. Over the past 25 years the structural aspects of the 
common agricultural policy have been mainly financed 
by the 'Guidance' Section of the EAGGF. As at 31 
December 1986, total commitments since 1965 against 
appropriations relating to this section amounted to 
8 896 Mio ECU. 7.2. The policy in respect of agricultural structures is 
based chiefly on general measures introduced by Council 
Regulation (EEC) No 355/77 of 15 February 1977 
(measures for individual projects) ('), Council Directive 
75/268/EEC of 28 April 1975 (hill farming and farming in 
certain less-favoured areas) (2) and Council Regulation 
No 797/85 of 12 March 1985 (replacing all of the socio-
structural directives) (3). A series of specific provisions 
cover special measures relating, in particular, to regional 
(') The footnotes appear at the end of each chapter. 
68 Official Journal of the European Communities 15. 12. 87 
infrastructure, aid to sales outlets, production guidance, 
professional training, etc. The Court considered that it 
would be a useful exercise to make some general 
observations on the difficulties which have hitherto 
attended the drawing-up and implementation of a 
Community-wide policy on agricultural structures and on 
the consequences of those difficulties. 
STRUCTURAL POLICY WITHIN THE 
FRAMEWORK OF THE COMMON 
AGRICULTURAL POLICY 
7.3. The Treaty adopts a general approach to the 
common agricultural policy. This involves the gradual 
establishment of a common agricultural policy aiming in 
particular to guarantee producers an 'equitable standard 
of living'. This aim could only be achieved gradually 
because of the 'structural and natural disparities between 
the various agricultural regions', which required 'ap­
propriate adjustments'. 
7.4. The structural aspect of this policy should therefore 
be looked at as a factor closely linked to the philosophy of 
the Treaty. However, practically a quarter of a century 
after its creation, the 'Guidance' Section of the EAGGF, 
which was supposed to be the financial instrument of the 
Fund, has not come up to expectations. The excessively 
high prices decided upon when the common agricultural 
policy was set up, in order to guarantee an adequate level 
of income to a broad variety of farmers, have helped to 
keep farms which are not economically viable in 
existence. This situation has to a large extent deprived the 
structural measures of their raison d'etre. 
DIFFICULTIES IN RESPECT OF THE 
IMPLEMENTATION OF A TRUE 
COMMUNITY-WIDE POLICY FOR 
AGRICULTURAL STRUCTURES 
As regards the general approach 
General guidelines 
7.5. In spite of the intentions of the Treaty, an attempt 
at a Community structural policy did not emerge until 10 years after the policy on market management. In fact, 
when in 1962 the foundations for the first common 
organization of markets were laid, the Community 
confined itself, as regards structures, to deciding upon the 
principle of coordinating national structural policies 
(Council Decision of 4 December 1962) (4). This initial 
negative attitude towards the introduction of a Com­
munity structural policy appeared to have been overcome 
by Council Regulation (EEC) No 17/64 of 5 February 
1964 (5), which, after creating the Guidance Section of the 
EAGGF, laid down that its operations should be 
incorporated in common programmes, to be adopted by 
the Council on a proposal from the Commission. These 
Community programmes, however, in spite of the 10 or so 
proposals submitted by the Commission, never ma­
terialized and the provisions of Regulation (EEC) No 
17/64 which laid them down were repealed. Subsequently, 
and with the exception of an attempt at a more 
comprehensive approach in the socio-structural Direct­
ives known as the 'Mansholt plan', no other general 
legislation has attempted to define general Community 
guidelines to make it possible to demarcate the activities 
of the EAGGF's Guidance Section. As is apparent from 
paragraph 7.30 et seq. below, the operations of the 
Guidance Section have been characterized by the 
implementation of a series of so-called 'common' 
measures, in accordance with the provisions of Council 
Regulation (EEC) No 729/70 of 21 April 1970 (6), which 
constitute the initial framework of the Fund's activities. 
Imprecise expressions 
7.6. The implementation of the common measures, 
however, has not represented any substantial progress 
towards a genuinely Community-wide structural policy. 
These measures were, in fact, introduced without any 
preliminary and uniform definition of certain expressions 
required to determine the scope of the measures and the 
results to be achieved. The fact that there are no specified 
criteria and concrete methods to be used for the practical 
application of excessively vague expressions such as 
'inhabitants dependent principally on agriculture' (7), 
'public amenities used mainly for agriculture' (7), 'joint 
investment schemes' (8), 'appropriate number of dairy 
cows' (9) and 'farmer practising agriculture as his main 
occupation' (l0) often makes it impossible to carry out an 
effective control to ensure that the conditions required 
have been satisfied and gives rise to differing adminis­
trative practices between the Member States, or even 
between the various regions of a single Member State. 
This being so, it is impossible to pinpoint specifically 
Community operations, to check that the conditions for 
the execution of such operations have been satisfied and 
to obtain a valid overall view of the situation. 
15. 12. 87 Official Journal of the European Communities 69 
Unrealistic requirements 
7.7. The concept of a development plan, which is used in 
particular within the framework of Council Directive 
72/159/EEC of 17 April 1972 (") in order to plan the 
development of farms in a rational way, is a requirement 
that is necessary but which has been interpreted too 
abstractly for most farmers, especially as the investments 
made are often on a small scale. The concepts of 'human 
work unit1, 'comparable income' and 'income from work1 
have been interpreted very broadly. As the Court 
observed on several occasions (l2), the accounts were 
either not kept as required or were managed during the 
period in which the aid was eligible by accounting centres 
which appropriated the aid for themselves. The new 
system of an improvement plan introduced into sub­
sequent legislation has not really removed the defects of 
the previous one. 
The appropriations available 
7.8. Council Regulation (EEC) No 25 of 14 January 
1962 (13) laid down that the proportion of EAGGF 
financing intended to cover the implementation of 
objectives relating to agricultural structures would 
represent, as far as possible, a third of the Fund's 
contribution to other eligible expenditure. In the absence 
of accurate information on actual requirements, this 
distribution has never been effectively achieved. During 
the financial year 1980, the annual allocation was 
replaced by financial assistance over a five-year period 
(Council Regulation (EEC) No 929/79 of 8 May 
1979) (14), which amounted to 3 755 Mio ECU for the 
period 1980-84 and totals 6 350 Mio ECU for the period 
1985-89 for the 12-member Community. This financial 
assistance still constitutes a flat-rate ceiling with no 
precise meaning. Aid from the Guidance Section has, in 
fact, rarely reached 5 % of the annual expenditure of the 
Fund, and in 1986 it was in the region of 4 %. 
7.9. The annual allocation has, moreover, remained 
largely unused, since, from 1969 to 1975, a total amount 
of 531,1 million u.a. of appropriations were put aside, of 
which 398,1 Mio u.a. were used in 1978 and 1979 and the 
balance of 133 Mio u.a. was cancelled. 
As regards the definition of the measures 
7.10. Difficulties are experienced in the implementation 
of the common measures in countries with decentralized 
administrative and political structures. Endless delays in 
drawing up the national and regional provisions were, moreover, observed, particularly in one country which 
needed to make the greatest efforts in the structural field. 
Although this legislation is subject to Commission 
approval, differences in application from one country to 
another were noted. Questions of bureaucratic organiza­
tion make it difficult to achieve the objectives, and, in 
addition, it is more difficult for the Commission to carry 
out checks. 
7.11. The implementing rules drawn up by the Commis­
sion are not precise enough to overcome the above-
mentioned problems. They generally only concern 
procedures relating to requests for aid, repayments and 
the payment of advances, and even in this area they are 
sometimes inappropriate. By way of example, in the case 
of Commission Regulation (EEC) No 2416/80 of 16 
September 1980 (15) relating to the implementing pro­
cedures for decisions to grant aid for forest projects, it is 
impossible to carry out certain work in the forests or 
mountains within the prescribed deadlines on account of 
its seasonal nature or because of unfavourable climatic 
conditions. The Member States, faced with a system 
which is not very efficient and in view of the limited 
number of controls carried out by the Commission (see 
paragraph 7.23 below) tend to go ahead and apply the 
measures and simply ignore those conditions that do not 
suit them. 
7.12. In general, the measures adopted are not suf­
ficiently explicit as regards the areas of eligibility. For 
example, there is no definition of'an area which depends 
mainly on agriculture', or of'afforestation', of'improve­
ment of a deteriorated forest' or of'fire protection', which 
means that varying interpretations can be made. Council 
Regulation (EEC) No 1078/77 of 17 May 1977 ('6) 
relating to the non-marketing of milk required that an 
'appropriate number of dairy cows should be kept, in 
relation to the quantity of milk produced'. This badly-
worded stipulation has made it possible for certain stock 
farmers to sell their quality cattle, which had generated 
the quantity produced, and to send cull cows to slaughter, 
thus making a double profit without attaining the 
measure's objective of reducing milk production (9). 
7.13. Several measures have contradictory consequen­
ces. The aim of Council Directive 75/268/EEC of 28 April 
1975 is the maintenance of agricultural activities as a 
factor contributing to the maintenance of the natural 
environment. Council Directive 72/160/EEC of 17 April 
1972 (l7), on the contrary, encourages farmers to stop 
farming and, in particular, to remove land from 
agricultural use, even in the areas covered by Directive 
75/268/EEC. There is also a contradiction between 
certain types of structural aid for the development of 
farms, drainage and irrigation, which have resulted in an 
increase in production, and the contrary concerns of the 
Guarantee Section to reduce surpluses. 
70 Official Journal of the European Communities 15. 12. 87 
As regards the application of the measures 
Direct and indirect measures 
7.14. There are two categories of intervention by the 
Guidance Section of the EAGGF: direct measures, 
consisting of individual projects approved and financed 
directly by the Commission, and indirect measures 
implemented by the Member States, to whom the 
Commission repays a part of the costs incurred. Indirect 
measures therefore involve delegating a considerable part 
of the implementation to the Member States, since it is the 
latter who ensure that the measures are carried out, the 
Community having been mainly concerned with monitor­
ing the socio-economic results. As the practice of the 
Guidance Section has developed, however, delegating 
responsibility to the Member States has given rise to the 
idea that the indirect measures are mainly implemented 
under their responsibility and that the Community 
dimension is more reduced in the case of this type of 
measure. The more global approach made possible by the 
indirect measures, as compared with the multitude of 
individual decisions required by the direct measures, has 
not been sufficiently exploited and, as will be seen later, 
the results achieved in respect of the socio-economic 
objectives have never been properly investigated. The 
shortcomings in this respect are analysed below (see 
paragraph 7.24). 
Financing by programmes 
7.15. With the exception of the general indirect 
measures, the operations of the Guidance Section are 
currently subject to the Commission's approval of 
programmes which are drawn up by the Member States 
and are intended to provide a better framework for the 
measures. 
7.16. The programmes submitted to the Commission by 
the Member States aim more to satisfy the formal 
conditions of the regulations, rather than to guarantee 
that the operations will have maximum impact. They are 
generally confined to quantifying the physical data of the 
work to be carried out, without considering its effect on 
the farmers' production or income. From the outset, the 
Commission has been happy to approve vague and 
inadequate programmes, since any request for amend­
ment is likely to extend the deadlines and to delay the 
implementation of the measures (18). 
7.17. The Decisions approving the programmes and the 
provisions laying down the implementing procedures for 
the measures stipulate that work completion reports are 
to be submitted by the Member States. These reports 
consist of standard tables which, on the basis of mainly 
financial data, make it possible to see the state of progress achieved with the work and the breakdown of the requests 
for repayment. The information requested by the 
Commission on the economic effects of the measures and 
their impact on the agricultural situation is terse and the 
information sent by the Member States is even more 
imprecise. 
7.18. Moreover, as regards the way the Community 
administration works, the departments responsible for 
approving and monitoring the programmes are separate 
from those responsible for the financial management of 
the aid. This separation, which is not in itself negative, is, 
however, characterized by a certain lack of reciprocal 
information such as would contribute towards achieving 
a common approach and improved follow-up checks on 
the potential of the measures. 
7.19. There is insufficient coordination, both as regards 
the statutory provisions and the implementing pro­
cedures. Real coordination therefore still remains to be 
established in these areas, and in the case of the integrated 
development programmes and the integrated Mediter­
ranean programmes, in particular through the new 
Directorate-General responsible for the coordination of 
financial instruments with structural objectives. 
Differentiated appropriations 
7.20. The system of differentiated appropriations was 
introduced into the budgetary management of the 
Guidance Section as from the financial year 1977. The 
aim, in separating commitment appropriations from 
payment appropriations, was to be able to take better 
account of the periods of time that elapse between the 
award of the aid and payment of it, and it should result in 
more precise estimates of expenditure and thus promote 
genuine financial planning. 
7.21. The way this system has been applied by the 
Commission in the case of indirect measures (simul­
taneous accounting of commitments and payments) is not 
in line with the special requirements of the Guidance 
Section. What is, in fact, needed are estimates which are 
comprehensive and precise enough" as regards the 
financial costs which may arise from programmes that 
have been approved or from requests for repayment that 
have not yet been settled. 
The control and monitoring of the measures 
7.22. The Commission is confronted with attestations 
from the national authorities which are very often of 
unequal value and do not conform with reality. When 
assessing these attestations, it uses expressions such as 
'eligible costs', 'ineligible costs', 'date of commencement 
15. 12. 87 Official Journal of the European Communities 71 
of work', 'permissible increase in costs', 'pro rata 
reduction of aid granted' and 'acceptable amendment of 
the project', which are not defined. The result is lack of 
clarity and strictness in the management of the measures. 
7.23. As a result, the attitudes taken in respect of the 
requests for reimbursement result either in a reduction in 
the aid solely in respect of established errors, a flat-rate 
reduction or an acceptance of the request. The Commis­
sion is not able to carry out a detailed control of all the 
Guidance Section operations. It indulges in a multitude of 
detailed checks of only those files that relate to individual 
projects. In the case of the indirect measures, it is largely 
content to receive from the Member States a sample of 
brief individual index cards which are provided for only 
under the four general measures (Directives 72/159-160-
161/EEC and Regulation (EEC) No 797/85), without 
examining recipients' files in greater depth or intensifying 
on-the-spot inspections. The fact that it is concerned to 
effect reimbursements before the close of the financial 
year also limits its checking possibilities, bearing in mind 
that most of the Member States' requests reach the 
Commission during the second half of the year. 
7.24. Monitoring of the measures and analysis of the 
results is very sketchy and in some cases non-existent. 
Regulation (EEC) No 729/70 merely made provision for 
the submission of an annual financial report on the 
EAGGF management. This report is merely a collection 
of statistics relating to the commitments and payments 
made. Most of the Regulations and Directives do not 
provide for the submission of a report on the analysis of 
the consequences of the measures and, in cases where 
these examinations are stipulated, the documents submit­
ted are confined to general comments of no great interest. 
The most striking example is the absence of any analytical 
report on the results of the 1972 socio-structural 
Directives. 
THE EFFECTS ON AGRICULTURAL 
POLICIES 
Dispersal of measures and appropriations 
7.25. As at 31 December 1986, a total of 77 measures 
had been carried out. This figure is larger, however, if all 
the different provisions contained in some of the 
measures are included. Almost 50 Regulations or 
Directives, relating to regional activities, covering a 
considerably higher number of provisions, have been 
adopted since 1977. These measures are often subdivided into numerous operations: investments in infrastruc­
tures, professional training, soil improvement, diversifi­
cation of lines of production, etc. 
7.26. From 1977 onwards, there was a big increase in 
regional measures, usually applying to a few areas of one 
country and sometimes of several Member States, in 
particular in the forestry, irrigation and drainage sectors 
(see, as an illustration, the special report by the Court of 
Auditors on Community aid to accelerate agricultural 
development in Greece of 7 October 1987). At the same 
time, Council Regulation (EEC) No 355/77 of 15 
February 1977, which is still in force, laid down new 
provisions for the financing of individual investment 
projects relating to the processing and marketing of 
agricultural products. 
7.27. Such a large number of measures runs the risk of 
resources being dispersed and the approval of operations 
being decided upon individually, with no overall view, in 
the case of certain areas or certain types of production. 
The measures adopted are partial and inconsistent, in 
particular as regards the rates applied, and they are 
sometimes in contradiction with one another or with 
other Community operations (see paragraph 7.30 et seq. 
below). The management of the Fund should be based 
more on a global approach and a better balance should be 
achieved between supporting existing arrangements and 
encouraging such changes in structure as may prove 
necessary. 
7.28. The year 1985 saw the entry into force of Council 
Regulation (EEC) No 797/85 of 12 March 1985 which 
concerned the improvement of the effectiveness of 
agricultural structures and replaced the socio-structural 
Directives with regional variations. In practice, this 
Regulation adopts the principal measures from preceding 
legislation and extends them without effecting a true 
revision of them. 
7.29. Approximately 80 % (i.e. ± 7 000 Mio ECU) of 
the appropriations committed under the Guidance 
Section up until the end of 1986 have centred on six 
measures, namely: 
(i) individual projects for improv­
ing production and marketing 
conditions (Regulation (EEC) 
No 17/64): 2 115,1 Mio ECU 
i.e. 23,7 % 
(ii) individual marketing projects 
(Regulation (EEC) No 355/77): 1 946,3 Mio ECU 
i-e. 21,9% 
72 Official Journal of the European Communities 15. 12. 87 
(iii) less-favoured areas (Directive 
75/268/EEC): 1 172,6 Mio ECU 
i.e. 13,2% 
(iv) modernization of farms 
(Directive 72/159/EEC): 848,5 Mio ECU 
i.e. 9,5% • 
(v) non-marketing of milk (Regu­
lations (EEC) Nos 1975/69, 
1353/73, 1078/77): 629,3 Mio ECU 
i.e. 7,1 % 
(vi) forestry measures (Regulation 
(EEC) No 269/79): 286,6 Mio ECU 
i.e. 3,2% 
The remaining appropriations were distributed among 
approximately 70 other measures. 
Infrastructure aid badly coordinated with the 
other types of aid 
7.30. This heading covers measures concerning farm 
roads, the supplying of electricity or water to rural areas 
and more extensive works, mainly in the field of drainage 
or irrigation. About 20 regulations provide for Com­
munity aid for such investments and, in general, the rate 
at which these measures are carried out is very satisfac­
tory, especially in the case of works financed by national 
budgets, in respect of which the Community bears a part 
of the expenditure. 
7.31. Water, electricity and roads may fundamentally 
change the social environment and development possibi­
lities. These public amenities therefore undoubtedly 
contribute to improving the living and working con­
ditions in rural areas. 
7.32. In a number of cases, however, their impact on 
agriculture may be less obvious, since the Fund aid is 
granted even if only 35 % of the community concerned are 
farmers (7). In such cases, it would be normal to use non-
agricultural financing or, at the very least, to charge to the 
EAGGF only that proportion of the aid which cor­
responds to the ratio of farmers to the total population 
benefiting from the project. 
7.33. On the other hand, since insufficient consideration 
is given to the coordination required of the various 
objectives of structural policy, these infrastructures are 
likely to influence mainly the volume of production and 
yield, without contributing to improving the orientation 
of activities and improving the relationship between the 
supply of and the demand for products. This is why land improved by drainage has mainly come to be used as 
pasture for milk production. 
Limited impact of measures aiming to control 
production 
l.ZA. Measures adopted with a view to adapting 
production more closely to market needs mainly cover the 
following operations: 
(a) the reduction of factors of production: grubbing-up 
of fruit trees, vineyards, hops, etc. or cow slaughter, 
including encouraging the non-marketing of milk and 
milk products; 
(b) the improvement of the quality of products to make 
them better suited to consumer demand (wine, citrus 
fruits, certain measures relating to stock-farming, 
etc.); 
(c) the diversification of lines of production, promoting 
the development of farms towards lines of production 
likely to be the easiest to sell. 
7.35. Of all these measures, the one that has been taken 
up to the greatest extent is the one concerning the 
slaughter of cows and the non-marketing of milk and milk 
products, since total payments borne by the EAGGF, 
including a part charged to the Guarantee Section, 
amounted to more than 1 000 Mio ECU from 1969 to 
1985. Even in this case, however, the impact of the 
operation on the reduction of surpluses has been relative, 
since the less productive livestock were slaughtered while 
milk production has continued to increase (9). 
7.36. With regard to milk production, it should 
moreover be noted that most of the development plans 
financed within the framework of the Directive on the 
modernization of farms related to dairy farming, which 
has not facilitated the reduction of surpluses in this sector. 
In addition, an increasing number of farms are entirely or 
partly exempt from the co-responsibility levy on milk 
production, on account of extensions of the designated 
mountain and less-favoured areas. 
7.37. The other measures concerning guidance in 
respect of lines of production have largely remained 
unapplied, even in cases where an improvement in the 
quality of products is obviously necessary. The de­
ficiencies in the application of the 'citrus fruit plan' are an 
example (l0). 
15. 12. 87 Official Journal of the European Communities 73 
7.38. The impact on the market is also marginal in the 
case of the restructuring of vineyards and the abandon­
ment of winegrowing areas. It is difficult for such 
measures to have the effect of reducing production to the 
level of normal consumption as long as market support 
measures provide a sufficient outlet, even for that 
proportion of production for which there are no 
buyers (l9). 10 regulations. This is a long-standing area for assistance, 
which, in financial terms, accounts for the largest 
proportion of total spending and probably constitutes the 
most significant part of the activities of the Guidance 
Section. 
Aid for training and the acquisition of 
occupational skills largely unused 
7.39. The possibility of effective coordination of efforts 
in the spheres of vocational training, research and the 
dissemination of agricultural knowledge, which may 
include joint Financing of projects or institutions, was 
expressly laid down by Article 41 of the EEC Treaty. It 
was not until 1972, however, that the first provisions 
relating to aid for the provision of guidance for and the 
acquisition of occupational skills by farmers were 
adopted. 
7.40. Since then, about a dozen regulations, generally of 
a regional nature, have laid down measures for the 
training of teachers, advisors or advisory officers, the 
organization of courses and training schemes and the 
construction, improvement and even the operation of 
training centres and experimental centres. 
7.41. On the whole, they have been applied to only a 
very limited extent and have therefore produced disap­
pointing results. Despite the aid promised by the 
EAGGF, the Member States concerned have not yet been 
in a position to develop their agricultural advisory 
services. As regards the construction or improvement of 
training centres, either estimates have not been adhered to 
or there have been unreasonable delays in the implemen­
tation of the work. 7.44. Initially laid down by Regulation No 17/64, for 
the same reason as the aid for. the improvement of 
production conditions, these financing operations, as has 
already been seen, were decided upon in the absence of 
Community programmes up until 1977. Since then, they 
have been provided for by Council Regulation (EEC) No 
355/77 of 15 February 1977 and are included within the 
framework of the national programmes approved by the 
Commission. The latter are drawn up by sector. There is 
consequently a multitude of specific programmes which 
reflect the differences in approach between Member 
States and which continue to lack global Community 
objectives. Neither do these programmes, despite their 
specific Community provisions, take into account other 
similar forms of aid granted by the ERDF. It is not 
desirable, however, that the same type of investment 
should be eligible in respect of two Funds, or, at the very 
least, provision should be made for precise coordination 
procedures. 
7.45. The fundamental idea is that, by developing 
markets for agricultural products, improvements in 
processing and marketing will have a positive effect, 
resulting from market conditions, on farmers' incomes. It 
has not been shown, however, that the aid distributed to 
intermediaries usually has this effect on farmers' incomes, 
above all in the longer term. In addition, no serious 
monitoring of operations has been organized with a view 
to establishing that this aid does provide real and lasting 
benefits for farmers. 
7.42. The provision of guidance and the acquisition of 
occupational skills constitute, however, essential aspects 
of any measure in the area of reforming agricultural 
structures and ones on which the majority of other 
measures depend for their success. 
Aid to improve the conditions for processing 
and marketing agricultural products badly 
coordinated 
7.43. Aid to improve the conditions for processing and 
marketing agricultural products are provided for by some 7.46. The investments concerned interact, moreover, 
with the objectives of market policy, and may even be 
designed to make use of the financial support measures 
provided for within the framework of the common 
organization of agricultural markets. Such is the case of 
products which are, at least partly, intended for 
intervention (such as products derived from milk, meat 
carcases, certain canned goods) as well as products and 
even services whose markets are developing within the 
context of the support measures for agricultural prices 
(cattle feed, storage installations, wine distilleries). 
Rather than the long-term guidance of structures, there is 
therefore a danger in these cases, despite some pre­
cautions taken in this respect, that the result will be 
investments created by the benefits of the price-support 
scheme, the profitability of which depends upon this 
scheme and which contribute in a way to its consolid­
ation (20). 
74 Official Journal of the European Communities 15. 12. 87 
FINAL COMMENTS 
7.47. Because of the absence of a clear and consistent 
common agricultural policy, the objectives of the 
structural policies, over the years, have inevitably become 
inconsistent and have concentrated too much on increas­
ing production; they are also sometimes in contradiction 
with the more recent objectives of reducing surplus 
production. The system introduced by the new Regu­
lation (EEC) NO 797/85 does not improve the overall 
effectiveness of the CAP in any way. 
7.48. It is worth stressing that as regards the manage­
ment of the Guidance Section, the interaction of 
economic and social objectives should be better defined 
and monitored. 
7.49. While taking account of regional differences, the 
operations determined by the objectives of the various 
financial instruments should be the subject of a more 
comprehensive approach. There should be greater 
consistency, both between the various measures sub­
sidized by the Guidance Section and between this latter and the Guarantee Section of the EAGGF. Thus a greater 
share of the guidance measures than now should be 
designed with a view to reducing production, while 
retaining their social content. Following this line of 
thought, measures encouraging production in less-
favoured areas, whilst the Community is trying to reduce 
it elsewhere, should also be systematically reviewed. 
7.50. Moreover, any true reform of structures will lose 
most of its interest for farmers and food processors as 
long as an excessively generous price-support scheme 
continues in existence. Under such circumstances, the 
operations financed are likely to be used in order to take 
advantage of the aid offered in the area of price support, 
rather than to contribute towards reducing it. 
7.51. The policy relating to agricultural structures was 
sacrificed from the very moment the common agricultural 
policy came into effect and has only ever resulted in 
fragmentary measures. The problems which it seeks to 
solve, however, are much wider ones and require real 
overall consideration to be given to the basis for the initial 
objectives of the Treaty, transposed into the current 
economic, social and financial context. 
(') OJ L51, 23.2.1977, p. 1. 
(2) OJ L 128, 19.5.1975, p. 1. 
(3) OJ L 93, 30.3.1985, p. 1. The socio-structural Directives, 
also known as the Mansholt plan, were in force for the 
period 1972-84 and related to the modernization of farms 
(Directive 72/159/EEC); the cessation of farming (Directive 
72/160/EEC); socio-economic guidance and the acquisition 
of occupational skills by persons engaged in agriculture 
(Directive 72/161/EEC). 
OJ 136, 17.12.1962. 
OJ 34, 27.2.1964, p. 586. 
OJ L94, 28.4.1970, p. 13. 
Annual report concerning the financial year 1982, OJ C 357, 
31.12.1983, paragraphs 5.17 — 20. 
Annual report concerning the financial year 1984, OJ C 326, 
16.12.1985, paragraph 5.57. 
Special report on the application of Directive 75/268/EEC, 
OJ C 358, 31.12.1980, paragraph 2.3.1. 
Special report on the application of Regulations (EEC) Nos 
1078/77 and 1041/78, OJ C 278, 17.10.1983, paragraphs 2.1 
— 2. 
(10) This annual report, paragraphs 8.4 — 8.5. 
(") OJ L96, 23.4.1972, p. 1. 
(,2) Annual report concerning the financial year 1981, OJ C 344, 
31.12.1982, paragraphs 5.11 — 19. (4) 
(5) 
(6) 
(7) 
(8) 
(9) Report in response to the conclusions of the European 
Council of 18 June 1983, OJ C 287, 24.10.1983, paragraph 
3.2.4. 
Special report on the application of Directive 75/268/EEC, 
OJ C 358, 31.12.1980, paragraphs 2.2.6 and 3.2.2. 
C3) OJ30, 20.4.1962, p. 991. 
(14) OJ L 117, 12.5.1979, p. 4. 
(15) OJ L249, 20.9.1980, p. 5. 
('6) OJ L 131, 26.5.1977, p. 1. 
(,7) OJ L96, 23.4.1972, p. 9. 
(18) Annual report concerning the financial year 1982, OJ C 357, 
31.12.1983, paragraph 5.13. 
Annual report concerning the financial year 1983, OJ C 348, 
31.12.1984, paragraph 5.43. 
Report in response to the conclusions of the European 
Council of 18 June 1983, OJ C 287, 24.10.1983, paragraph 
3.2.2. 
C9) Annual report concerning the financial year 1984, OJ C 326, 
16.12.1985, paragraphs 5.62 — 64. 
(20) Annual report concerning the financial year 1984, OJ C 326, 
16.12.1985, paragraph 5.58. 
Annual report concerning the financial year 1985, OJ C 321, 
15.12.1986, paragraph 5.20. 
15. 12. 87 Official Journal of the European Communities 75 
CHAPTER 8 
Structural measures relating to citrus fruit and fisheries 
8.0. TABLE OF CONTENTS Paragraph 
reference 
Aid to the citrus fruit sector 8.1 — 8.11 
Introduction 8.1 —8.3 
The expression 'a farmer practising agriculture as his main occupation' 8.4 — 8.5 
Coordination of the various measures forming part of the common measure 8.6 — 8.8 
Specific measures provided for in respect of Corsica 8.9 — 8.10 
Aid for the conversion and restructuring of plantations 8.11 
Aid for capacity reductions in the fisheries sector 8.12 — 8.14 
AID TO THE CITRUS FRUIT SECTOR 
Introduction 
8.1. Council Regulation (EEC) No 2511/69 of 9 
December 1969 (') constitutes the legal basis for the 
special measures for improving the production and 
marketing of citrus fruit, organized from 1982 onwards as 
a 'common measure' under the Guidance Section of the 
EAGGF, by Council Regulation (EEC) No 1204/82 of 18 
May 1982 (2). This measure applies to Italy, Greece and 
France (Corsica) and involves aid granted by the Member 
States, a part of which is borne by the Guidance Section 
under the plans approved by the Commission in 1983. 
8.2. Thus the expenditure eligible for part-financing by 
the Guidance Section is that relating to the establishment, 
improvement or enlargement of handling centres, storage 
centres or processing installations, the conversion or 
replacement of existing plantations, land improvement, 
the production of reproductive material and compens­
ation for temporary losses of income experienced by 
citrus fruit growers. 
8.3. Table 8.1. gives a summary of the appropriations 
entered in the budget and payments made under 
(') The footnotes appear at the end of each chapter. Regulation (EEC) No 2511/69 since 1976, the first year of 
Community expenditure in this field. In their original 
form, the special measures were very slow to get off the 
ground and were only partially implemented. The 
provisional cost of the common measure was estimated at 
288,5 Mio ECU, but it too has been slow to be 
implemented. Indeed, total budgetary appropriations for 
the period up to 1986 only amounted to 18,6 Mio ECU 
and the payments made amounted to 6,6 Mio ECU. 
The expression 'a farmer practising 
agriculture as his main occupation' 
8.4. The Community legislation lays down that com­
pensation for temporary loss of income (called additional 
aid) is only to be paid to farmers who practise agriculture 
as their main occupation, on condition that the income 
derived from their holding does not exceed a certain 
reference income, at present the income produced by five 
hectares of citrus fruit. Since 1982 the Commission has 
maintained that the expression 'a farmer practising 
agriculture as his main occupation', as shown in 
Regulation (EEC) No 2511/69, is equivalent to the 
expression used in Directive 72/159/EEC of 17 April 
1972 (3), which contains two conditions: the farmer must 
devote over 50 % of his total working time to his holding 
and derive therefrom at least 50 % of his total income. The 
Italian and Greek authorities, for their part, consider that 
they do not have the means to verify the income and 
occupational time-tables of the applicants for additional 
aid, whose word is accepted as evidence of their status as 
76 Official Journal of the European Communities 15. 12. 87 
Tabic 8.1 — Appropriations entered in the budget and payments 
made pursuant to Regulation (EEC) No 2511/69 during the period 
1976-86 
(1976-77: Mioua) 
1197H-H0: Mio EVA) 
119X1-86: Mio ECU) 
Financial 
year Regulation 
Regulation (EEC) 
No 2511/69 
(original version) 
1976 
1977 
1978 
1979 
1980 
1981 
1982 
1983 
Total 
Common measures 
(Regulation (EEC) 
No 1204/82) 
1984 
1985 
1986 
Total Appropriations for 
payments entered 
in the budget 
7,0 
15,0 
22,3 
p.m. 
10,0 
8,0 
6,0 
3,3 
71,6 
4,7 
5,4 
8,5 
18,6 Payments 
made 
1,8 
2,9 
4,7 
4,9 
6,0 
4,9 
3,9 
2,0 
31,1 
6,6 
6,6 
farmers practising agriculture as a main occupation, 
especially since, in view of their low incomes, they are not 
obliged to keep accounts or pay taxes. 
8.5. This controversy did not arise until six years after 
the initial payment made by the EAGGF. The repayment 
of a total amount of 4 434 Mio LIT (± 3,0 Mio ECU), i.e. 
20,7 % of the repayments requested by Italy for the period 
1981-84, was still suspended in 1986. As a conciliatory 
gesture, the Italian administration proposed that the 
Commission should exclude from repayment an amount 
of 119 Mio LIT (± 82 300 ECU) i.e. 2,7 % of the total 
adopted, corresponding to the sums claimed by a list of 
recipients subsequently considered as not complying with 
the definition of Article 3 of Directive 72/159/EEC. 
Coordination of the various measures forming 
part of the common measure 
8.6. The various measures provided for by the common 
measure need to be permanently coordinated in order to 
be effective. In particular, the rational use of the 
productive capacities of reproduction material is de­
pendent on the development of conversion operations 
whose rate of implementation should be constantly proportionate to the capacities created. In Calabria, 
however, the latest nursery financed (investment of 
approximately 2 000 Mio LIT, ± 1,4 Mio ECU, capacity 
created: 550 000 plantations per year) experienced 
marketing difficulties on account of the unsatisfactory 
rate at which the crop varieties were being converted. 
8.7. Under the common measure, processing establish­
ments receive aid to improve or enlarge handling centres, 
storage centres or processing installations for citrus fruit. 
These establishments use, in particular for the production 
of juice, varieties which are replaced as part of varietal 
conversion operations. This is the case in Sardinia 
regarding the 'biondo comune' variety. In order to 
guarantee security of supply to the processing instal­
lations subsidized by the Community, and thus ensure 
that they show a profit, it should be acknowledged that 
the needs of industry ought to be taken into account when 
replacing existing plantations with new plantations. 
8.8. In order to coordinate the various measures, 
sufficient information needs to be available on the 
implementation of each one. Although the last paragraph 
of Article 2 of Regulation (EEC) No 2511/69 requests the 
Member States concerned to submit an annual progress 
report on their national plan, no report has been provided 
by the Italian authorities since the entry into force of the 
new plan. 
Specific measures provided for in respect of 
Corsica 
8.9. The common measure for improving the produc­
tion and marketing of citrus fruit applies to Corsica, the 
only French region which produces this fruit, only within 
the following limits and special conditions: 
(a) Article 2, paragraph 1, point 2 of Regulation (EEC) 
No 2511/69, as amended by Regulation (EEC) No 
1204/82, allows the granting of aid for varietal 
conversion (oranges, mandarins and lemons) and to 
the storage and handling centres for operations 
undertaken by 31 December 1983 and completed by 
31 December 1986 at the latest; 
(b) supplementary provisions, laid down by Article 2 of 
Regulation (EEC) No 1204/82, make it possible to 
grant aid for re-use of Clementine plantations and for 
restructuring work (new plantations and land im­
provement) in respect of operations undertaken by 31 
December 1983 and completed by 31 December 1986 
at the latest. 
8.10. In order to make it possible to implement the 
whole programme, delayed on account of the harshness 
15. 12. 87 Official Journal of the European Communities 77 
of the 1984/85 winter, Council Regulation (EEC) No 
3130/86 of 13 October 1986, which entered into force on 
20 October 1986 (4), amended the provisions mentioned 
under (a) above, by deleting the deadlines for the 
beginning and end of the work. Article 2 of Regulation 
(EEC) No 1204/82, however, has not been amended: i.e. 
the conversion of plantations of Clementines and the 
restructuring of the citrus fruit sector continue to be 
subject to time limits stipulated by the Regulation. It is 
regrettable that, as a result of such an omission, the 
operations to convert and restructure Clementine plan­
tations, which constitute the main part of the plan for 
Corsican citrus fruit, are no longer allowed, as from 1 
January 1987, to benefit from the aid, despite this being 
an objective of the preamble of the Regulation concerned. 
Aid for the conversion and restructuring of 
plantations 
8.11. In France, the aid for varietal conversion and 
restructuring (new plantations and land improvement) 
was paid on the basis of a uniform and standard overall 
premium per hectare, in Italy, on the basis of the 
application, at each recipient farm, of a system of 
maximum amounts of costs permissible, established at a 
flat rate and, in Greece, on the basis of costs upon which 
ceilings were placed and which were fixed independently 
of actual costs. This latter practice is particularly open to 
criticism, given that Article 5(1) of Regulation (EEC) No 
2511/69 lays down that the aid must cover all the 
expenditure arising from the measures. 
AID FOR CAPACITY REDUCTIONS IN 
THE FISHERIES SECTOR 
8.12. Council Directive 83/515/EEC of 4 October 
1983 (5), applicable between 1983 and 1986, provides for 
the optional institution by the Member States of a system 
of aid for the permanent or temporary reduction of production capacity in the fisheries sector. The Com­
munity reimburses the Member States 50 % of eligible 
expenditure, within the limit of the appropriations 
entered in the budget. The total estimated cost was 
60 Mio ECU for aid towards temporary reduction and 
46 Mio ECU for aid towards permanent reduction, 
following the accession of Spain and Portugal. 
8.13. The first reimbursements were not made by the 
Commission until 1986 because of the delay incurred in 
the implementation by the Member States of their 
national aid systems. The amount of the reimbursements 
was approximately 13,5 Mio ECU. The beneficiaries were 
the United Kingdom (71 %), the Federal Republic of 
Germany (13 %), Belgium (5 %), the Netherlands (5 %), 
Denmark (5 %) and Greece (1 %). The Court of Auditors 
carried out on-the-spot audits on the premises of the 
competent authorities in Belgium, the Federal Republic 
of Germany, Denmark and the United Kingdom. The aid 
for permanent capacity reductions did not give rise to 
substantial observations. The aid for temporary reduc­
tions was only implemented by the Federal Republic of 
Germany and the United Kingdom. It takes the form of a 
daily premium for the laying-up of vessels, calculated on 
the basis of a maximum of 12 % of the purchase cost or of 
the insured value of the vessel for an average annual 
period of fishing of 250 days. 
8.14. For the years 1984 and 1985, the Federal Republic 
of Germany paid the beneficiaries the sum of 7,48 Mio 
DM (± 3,6 Mio ECU) for measures relating to tem­
porary reduction. The Commission reimbursed 50 % of 
this amount, i.e. 3,74 Mio DM (±1,8 Mio ECU) in 1986, 
This reimbursement turns out not to comply with the 
provisions of the Directive as regards deep-sea fishing 
vessels. In fact, the reference period taken into account 
for the calculation of the supplementary days laid up is 
based on the years 1975, 1976 and 1977. However, 
according to Article 3 of the Directive, this reference 
period should have been the three calendar years 
preceding the first application for the granting of the 
premium — i.e., in the cases referred to, the years 1981, 
1982 and 1983 or 1982, 1983 and 1984. The way in which 
the amount of the aid is determined should therefore be 
reviewed and recovery of the excess payments should be 
envisaged. 
(0 
(2) 
(3) OJL318, 18.12.1969, p. 1. 
OJ L 140, 20.5.1982, p. 38. 
OJL96, 23.4.1972, p. 1. (4) OJ L292, 16.10.1986, p. 5. 
(5) OJ L 290, 22.10.1983, p. 15. 
78 Official Journal of the European Communities 15. 12. 87 
CHAPTER 9 
European Regional Development Fund (ERDF) 
9.0. TABLE OF CONTENTS 
Introduction 
General observations 
Objectives of the ERDF 
Size of the ERDF 
Coordination with other financial instruments 
Selectivity of the Fund 
Priorities in allocating funds 
Additionality 
The Commission's project financing system 
Appraisal of aid applications 
Aid applications 
Initial assessment 
Multiple applications relating to the same project or the same recipient 
Consultation of other departments 
Justification of differences in aid levels 
Failure to produce an appraisal report 
Implementation and monitoring of aid decisions 
Basic information available 
Advances and accelerated payments 
Dormant projects 
Procedures used for the monitoring of aid ranges and recoveries 
The closure of decisions 
On-the-spot inspections of the projects by the Commission and 
assessment of the results 
Programme financing and the integrated Mediterranean programmes 
Programme financing 
Integrated Mediterranean programmes Paragraph 
reference 
9.1 
9.3 
9.3 
9.4 
9.5 
9.8 
9.12 
9.17 
9.22 
9.25 
9.25 
9.28 
9.33 
9.35 
9.37 
9.39 
9.41 
9.41 
9.44 
9.47 
9.49 
9.51 9.2 
9.21 
9.7 
9.11 
9.16 
9.21 
9.57 
9.40 
9.27 
9.32 
9.34 
9.36 
9.38 
9.40 
9.57 
9.43 
9.46 
9.48 
9.50 
9.52 
9.53 — 9.57 
9.58 
9.58 
9.62 — 9.65 
— 9.61 
— 9.65 
15. 12. 87 Official Journal of the European Communities 79 
INTRODUCTION 
9.1. The European Regional Development Fund 
(ERDF) was created by Council Regulation (EEC) No 
724/75 of 18 March 1975 ('), which was superseded by 
Council Regulation (EEC) No 1787/84 of 19 June 
1984 (2). Its aim is to help to correct the principal regional 
imbalances within the Community through financial 
participation in the development and structural adjust­
ment of less developed regions and in the conversion of 
industrial regions in decline. The Fund reimburses a 
proportion of the expenditure incurred by the Member 
States in the execution of Community programmes, 
national programmes of Community interest, projects 
and studies. 
9.2. In view of the fact that reform of the structural 
funds is a subject of debate at the present time, in the 
following paragraphs the Court has made some general 
observations on the financing of regional development 
policy and the Community systems relating to the ERDF. 
These observations are the result of an overall exami­
nation of the systems governing the Community's 
regional policies which supplements the examination of 
the national systems in the Member States, the results of 
which were set out in the Court's previous annual 
report (3). The following remarks show that, in spite of 
difficulties connected with the complexity of Community 
intervention and the innovatory nature of certain 
measures, there are many ways of making the aid more 
effective, such as by being more selective in the choice of 
operations both generally and individually, improving 
the coordination of the financial instruments as a whole, 
reinforcing the additional nature of the aid and adopting 
administrative procedures which will take greater ac­
count of the objectives of the measures. The Fund's 
achievements as a Community financial instrument 
depend on the criteria used for the granting of aid, the 
consistency with which they are applied and the extent to 
which they are taken into account by the Member States 
in their own regional development policies. But the 
Fund's impact should not be considered in volume terms 
only: the aim of its activities can and must be to improve 
the objectives of regional aid and the methods used for 
managing it, both at Community and national level, with 
a view to making it more effective. 
GENERAL OBSERVATIONS 
Objectives of the ERDF 
9.3. Regional policies, both at Community level and 
Member State level, aim to reduce the disparities in terms 
(') The footnotes appear at the end of each chapter. of development between the various regions of the 
Community. As can be seen from the Commission's third 
regular report on the situation of the regions (Doc. 
COM(87) 230 final), half of these disparities result from 
comparisons with the other Member States whilst the 
other half are inter-regional differences, within the 
Member States themselves. As a result of the type of 
operations financed (activities defined under regional 
development programmes drawn up by the Member 
States) and the methods of intervention used (mainly aid 
for projects which have been pre-selected by the Member 
States) the ERDF has contributed, during its first 
10 years of existence, more to reducing differences in 
development within each Member State than to reducing 
differences between the various regions of the Com­
munity as a whole. 
Size of the ERDF 
9.4. The ERDF appropriations available for commit­
ment for the financial year 1986 amounted to 3 381,3 Mio 
ECU, 3 328,1 Mio ECU of which were used for 1 253 
decisions relating to projects, 14 relating to programmes 
and 24 relating to studies. The full weight of the 
Community's share in the financing of regional develop­
ment can be seen to be more considerable if we take into 
account other Community aid for expenditure which is 
likely to have an impact on regional development (the 
EIB, the Guidance Section of the EAGGF, the ECSC and 
the NCI). Thus, for example, EIB regional development 
loans amounted to 3 685,1 Mio ECU in 1986, that is, 
more than the total ERDF aid granted during the same 
year. 
Coordination with other financial instruments 
9.5. The number of financial instruments with struc­
tural objectives is tending to increase, and this involves a 
risk of disorganized administration and a lack of 
transparency, both for the authorities which allocate the 
aid and for the recipients. 
9.6. It is essential that all these instruments (and not just 
the structural Funds) should be coordinated effectively, 
especially in order to prevent them from partially 
competing against each other, and the task force which 
was set up for this purpose at the Commission has now 
been replaced by a new Directorate-General. However, if 
this coordination is to be effective from the stage of the 
implementation of the policies right through to the 
selection of the projects, it will be necessary to amend the 
regulations so that it can apply to objectives, criteria, 
procedures and execution. 
80 Official Journal of the European Communities 15. 12. 87 
9.7. Coordination between the Commission and the 
European Investment Bank requires, above all, that their 
respective tasks should be more clearly defined, par­
ticularly so as to establish whether a Community 
contribution allocated in response to a request for aid 
should take the form of a loan or a subsidy. Furthermore, 
at the operational level, in order to identify cases where a 
subsidy and a loan have been granted to the same 
investment, steps could be taken, at the very least, to 
ensure that the existing information was put to greater 
use, since the information currently available at the 
Commission departments responsible for administering 
the aid is incomplete and unsatisfactory. 
Selectivity of the Fund 
9.8. The fact that the Community resources available 
are necessarily limited means that, if the effectiveness of 
the Fund is to be increased, it needs to be more selective in 
the distribution of its aid. 
9.9. This selectivity should involve especially: 
(a) the choice and geographical demarcation of the 
eligible regions; 
(b) the determination of priority areas, for example, on 
grounds of greatest need for aid or potential for 
internally generated development; 
(c) the adoption of projects which will have a real impact 
on the development of the regions in question; 
(d) the choice of infrastructure projects which will be on a 
meaningful scale for the development of a particular 
area or region. Global decisions, in which several 
small projects are grouped together, should be 
avoided because the administrative activities have to 
be spread over a wider area and it becomes very 
difficult in practice to administer the aid efficiently. 
As the Court pointed out in its previous annual 
report (4), the financing of small projects by the 
ERDF, where necessary, could take place within the 
context of national programmes of Community 
interest, since the procedure used for the approval 
and administration of these programmes should give 
access to more appropriate information. 
9.10. Whilst seeking to achieve greater selectivity, it 
should also be borne in mind that about 50 % of ERDF 
expenditure is concerned with infrastructures (telephone, 
energy, water supplies etc.) which are managed on a 
commercial-type basis by a public or equivalent body and 
their costs should normally be covered by the revenue 
from the services themselves. The circumstances which, in 
terms of regional development, justify the granting of aid to these types of 'commerciar infrastructures should 
therefore be very clearly defined. In so far as aid proves to 
be necessary to take account of differences in regional 
development, criteria should exist which would make it 
possible to establish which investments should be assisted 
by capital grants, which investments should be subject to 
loan financing, to be reimbursed from the project's 
subsequent income, and which investments should be 
financed by a combination of subsidies and loans. 
9.11. Normally, as far as these infrastructure projects 
are concerned, investments for the replacement or 
extension of the infrastructure in question will already 
have been planned and financing is provided for, from 
retained profits or loans, as part of the commercial 
management. Consequently, there is a risk that the aid 
from the Fund, which amounts to 50 % of the investment 
cost, will have no impact and instead will merely amount 
to a financial contribution in favour of the organization 
concerned. In other words, there is a risk that the increase 
in the quantity and quality of the goods and services made 
available to the customer will be no greater than might 
normally be expected. In some cases, the Community 
contribution may even have the effect of prolonging an 
inefficient management system by making it easier to put 
off essential reorganization measures until a later date. 
Priorities in allocating funds 
9.12. The Court has made many observations on this 
subject in its previous annual reports. A better choice of 
priorities and greater selectivity could be achieved by 
improving national regional development programmes, 
developing exchanges of information with the Member 
States and expanding the Commission's programme 
examination procedures from the point of view of 
regional and sectoral aspects of the Community. In 1986, 
more than 10 years after the Fund was created, the Court 
has once again discovered a case in which aid was granted 
to operations in a region which was not yet covered by the 
regional development programme. 
9.13. The regional development programmes should 
constitute the general reference framework for interven­
tion by all the financial instruments with structural 
objectives in the eligible regions (EIB, ECSC, the 
Guidance Section of the EAGGF and the NCI). The 
selection criteria for operations financed by the ERDF 
should be coordinated with the criteria used for other 
financial instruments and should be updated as new 
Community guidelines are introduced. The Member 
States should be notified of such criteria and should pay 
more attention to them, by using them as a basis for their 
national operations and their requests for subsidies from 
the Commission. 
15. 12. 87 Official Journal of the European Communities 81 
9.14. The Fund Regulation also provides for pro­
gramme financing, the programmes being drawn up from 
a related group of measures which comply with national 
and Community objectives. Use of this concept is 
increasing, especially in relation to the IMP. In spite of the 
relatively long time taken to prepare the programmes, the 
ones that are submitted are often of modest quality and 
the observations made by the Court in this respect in its 
special report on specific Community 'non-quota' 
measures (5) are still valid (see also paragraph 9.59 
below). 
9.15. The Member States experience undeniable dif­
ficulties in drawing up valid programmes. Furthermore, 
monitoring by the Commission may well be hindered by 
insufficient information from the Member States regard­
ing the progress of the programmes and their results. 
Even greater difficulties are experienced in relation to 
cross-frontier programmes, and in practice they can only 
be resolved if the Commission increases its technical 
assistance. 
9.16. Generally speaking, greater attention should be 
given to the problems of programme financing, since it is a 
form of intervention which is emphasized by the ERDF 
Regulation. Furthermore, programme financing can also 
make it easier to coordinate the various financial 
instruments. 
Additionality 
9.17. Article 36 of the Fund Regulation provides that, in 
accordance with a prior decision of the Member State 
concerned, communicated at the same time as the request 
for assistance, the latter may either supplement aid 
granted to the relevant investment by the public 
authorities (individual additionality) or remain in the 
hands of those authorities as a partial reimbursement of 
such aid (global additionality). 
9.18. The additional character of the ERDF aid in 
relation to national aid, which is the prime objective of 
Community intervention, must result in an increase in 
overall aid for regional development. The regulation 
allows Member States to choose between the different 
types of additionality but does not include an effective 
provision for giving effect to them. 
9.19. The Member States have preferred global addi­
tionality, which is, however, difficult to verify. Even to the 
extent that the additionality requirements are satisfied, it 
is not a foregone conclusion that the additional contri­
bution from the Community subsidy will be used in 
accordance with the priorities of the Community's 
regional policy. In a system of global additionality, the 
impact of the Community subsidy is often neither 
recognized nor perceived, either at regional or local level. 9.20. Furthermore, the regional development pro­
gramme which, as was mentioned previously, constitutes 
the general reference framework for the activities of the 
Fund, is not in itself a guarantee of additionality, since it 
may include investments which would normally be 
carried out even without ERDF aid. To avoid this risk, 
the programme should therefore, on the one hand, 
include a physical and financial schedule of the invest­
ments to be carried out using national and regional funds 
and, on the other hand, it should indicate the type of 
additionality which is to be expected from the ERDF aid, 
either in terms of speeding up the investment or increasing 
the number or volume of projects carried out. 
9.21. Additionality is encouraged when the Community 
aid is passed on in full to the private or public bodies 
which carry out the projects. It is also encouraged by each 
country submitting requests for aid which exceed the 
minimum threshold of aid ranges (6), thus allowing a real 
choice of projects to assist. 
THE COMMISSION'S PROJECT 
FINANCING SYSTEM 
9.22. In 1986, the Court of Auditors made a com­
prehensive examination of the system set up by the 
Commission for the management and inspection of 
ERDF aid, following on from its examination of the 
systems in force in the Member States, which had been 
carried out during previous years. The following para­
graphs contain the main observations arising from checks 
carried out by the Court in relation to project financing. 
In 1986 the Commission granted aid amounting to 
3 066 Mio ECU to this type of operation, i.e. more than 
90 % of the aid allocated. The projects subsidized, which 
can be on greatly varying scales, cost an average of 
2,4 Mio ECU, part of which was covered by the Fund. A 
total of 4 352 projects were subsidized, of which 1 321 
were industrial projects and 3 031 infrastructure projects. 
They were the subject of 1 253 aid decisions, involving all 
the Member States with the exception of Luxembourg. 
9.23. The procedures which govern the financing of 
such a large number of projects, both at the stage of the 
appraisal of applications for aid and at that of the 
monitoring of the aid decisions, are therefore particularly 
important. The role of these procedures is essential for 
ensuring that projects are chosen which will have a 
maximum impact on regional development, and will thus 
comply with ERDF objectives by at the same time 
improving the allocation and management of Com­
munity resources. 
9.24. The following suggestions for improvement can 
only have a positive effect if the general observations set 
82 Official Journal of the European Communities 15. 12. 87 
out in paragraphs 9.3 — 9.19, which aim to concentrate 
Community activities, projects or programmes to a 
greater extent on the real priorities of regional develop­
ment, are fully taken into account. As the Court has 
already emphasized, in its report pursuant to the 
conclusions of the European Council meeting of 18 June 
1983 at Stuttgart (7), the aim of these suggestions is to 
prevent the system of Community aid from 'degenerating 
into partial reimbursement of national budgetary ex­
penditure'. 
Appraisal of aid applications 
Aid applications 
9.25. The information which should be included in the 
aid applications submitted by the Member States is listed 
in the ERDF Regulation. In general, items of information 
required for identification purposes, such as names, 
references and types of work, are correctly supplied. 
However, this is not the case for other items, such as the 
expected contribution to the development of the region, 
coordination with other Community or national oper­
ations with a regional perspective or the expected level of 
return on the investments. 
9.26. The information supplied in relation to these 
points proved to be extremely inconsistent and unclear 
and needs to be considerably improved, since these items 
are essential for assessing the value of the applications 
submitted from the point of view of efficient management 
of the Fund and the maximum attainment of Community 
objectives in the area of regional development. Since 1985 
the Commission has devised a method of assessing the 
value to the Community of the measures envisaged and 
this certainly constitutes an improvement. There is still, 
however, much progress to be made in this area. 
9.27. The definition of what actually constitutes a 
project also needs to be tightened up. In certain cases it is 
used to refer to the investment as a whole; in other cases, 
in contrast, it refers only to the part which is still to be 
completed, or a physical section or, indeed, simply a 
financial instalment. Such definitions reduce the impact 
of the aid, especially in cases where the aid forms an 
insignificant part of total expenditure on the project. 
Initial assessment 
9.28. As regards their appraisal of aid applications, 
significant differences exist between the rapporteurs working in the Commission's departments. These rap­
porteurs do not have any document at their disposal 
describing the methods to apply for the purpose of 
harmonizing examination procedures. Further evidence 
of this failing can be seen from the differences in the 
structure and content of the appraisal files. 
9.29. The efficiency of the rapporteurs' work also 
depends on how well they know, and how thorough an 
evaluation they make of, the national systems which play 
a part in the management of ERDF aid. On the other 
hand, greater recourse to computerized procedures would 
allow the rapporteurs to concentrate more on aspects 
relating to quality, which are insufficiently or poorly 
covered by the procedures currently in force. 
9.30. The ERDF Regulation stipulates that projects 
corresponding to an investment amount greater than or 
equal to 15 Mio ECU must be assessed from the point of 
view of their profitability, especially with regard to the 
results of a socio-economic cost-benefit assessment. 
9.31. Even when the Member States show the profit­
ability rate resulting from these assessments in their aid 
applications, it cannot be used because no rules have been 
laid down as to the maximum and minimum profitability 
rates acceptable for the granting of ERDF aid. By 
specifying an acceptable profitability range for invest­
ments, the choice of projects could be improved. 
Similarly, by specifying common methods to be used for 
calculating profitability and for assessing costs and socio­
economic benefits, it would be easier to compare the 
different projects. 
9.32. The current appraisal procedure does not include 
a technical assessment of the operations to be financed, 
even though the question of whether estimates of costs, 
deadlines and operational efficiency are actually com­
plied with depends to a large extent on whether the 
projects have been soundly designed from the technical 
point of view. Failure to make such an assessment is the 
reason why about half of the projects greatly exceed their 
expected costs and overshoot their completion deadlines, 
thus tying up Community resources needlessly, some­
times for considerable periods of time. 
Multiple applications relating to the same project or the 
same recipient 
9.33. About 6 % of the decisions taken in 1986 indicated 
that they related to projects or recipients which had 
already been the subject of a decision regarding ERDF 
aid. Many of these decisions concerned industrial projects 
in the FR of Germany and infrastructure projects in 
Greece and Italy. 
15. 12. 87 Official Journal of the European Communities 83 
9.34. An assessment which takes account of ERDF 
contributions which have previously been refused or 
granted for the same projects or recipients would 
undoubtedly be useful, and, in accordance with the 
requirements of the Regulation, such an examination 
should be extended to include all Community interven­
tions covering the operations referred to. The files, 
however, do not mention the way in which a previous 
application was taken into account when the project was 
assessed, and at the present time no usable list actually 
exists of recipients who have previously submitted an 
application for Community aid and their projects. 
Consultation of other departments 
9.35. One of the important stages in the appraisal 
procedure is the consultation of other Directorates-
General or specialized departments at the Commission. 
However, in many cases, the departments consulted have 
difficulty in examining the documents sent to them within 
the prescribed time limits, or are even unable to do so, 
either because the necessary information is not available 
or because they have not got the time. Consequently, the 
consultation procedure is likely to be nothing more than a 
formality, and its results will be of little value for making a 
thorough assessment of the value of the investment for the 
Community. 
9.36. The departments consulted should clarify their 
criteria for the assessment of aid proposals and make 
them known to the rapporteurs, so that they can increase 
the efficiency of the appraisal procedure and make a 
better choice of projects. 
Justification of differences in aid levels 
9.37. Big differences exist in the aid levels, especially by 
comparison with the total cost of the investment funded. 
Very low levels limit the incentive value of the aid as a 
means of encouraging development and reduce the 
effectiveness of the Fund. 
9.38. Furthermore, the two criteria which appear to be 
used by the Commission for the granting of higher levels 
of aid, namely, the geographical location and the nature 
of the investment, do not always seem to be applied 
consistently. Sometimes similar projects situated in the 
same region may be granted different aid levels, yet there 
is no explanation in the appraisal files for the disparities 
and there is no means of making sure that the differences 
are justified by economic considerations. Failure to produce an appraisal report 
9.39. The appraisal procedure should be completed by a 
written positive or negative assessment by the rapporteur, 
clearly stating the extent to which the project concerned is 
of value to the Community and, in particular, its 
contribution to regional development. Although, in 1985, 
the Commission drew up and sent to the Member States a 
method for assessing the Community value of invest­
ments, the Court's investigations showed that, even when 
this method was applied, the results were not used to draw 
conclusions as to the Community value of the projects. 
9.40. A final appraisal report should also be such as to 
allow a better comparison to be made between projects, 
and consequently make it easier to introduce a comparat­
ive approach in the decision-making process. It would 
also help to make sure that monitoring was improved, 
particularly by laying down formal reservations or 
conditions which would have to be complied with when 
the operations were carried out. 
Implementation and monitoring of aid 
decisions 
Basic information available 
9.41. The information available to the Commission's 
administrative departments for monitoring the progress 
of the projects is virtually limited to the information 
submitted by the Member States in support of their 
requests for payment and the results of on-the-spot 
inspections, but the latter only relate to a limited number 
of projects and therefore the main part of the adminis­
tration is carried out on the basis of documents submitted 
by the Member States. 
9.42. The requests for payment, set out on a standard 
form drawn up by the Commission, are submitted, for 
each Member State, by a department with responsibility 
in this area, which certifies that the request conforms to 
the work carried out. These requests and certificates are 
essential for the regularity of the aid payment, which in 
turn is dependent on the accuracy of the information. 
However, the information is mainly financial and does 
not reveal how much progress has been achieved with the 
project. The Commission should therefore request more 
comprehensive information. 
9.43. The volume of information to be processed has 
made it necessary to resort more and more frequently to 
the use of computers, and considerable progress has been 
made in this respect during recent financial years. 
84 Official Journal of the European Communities 15. 12. 87 
However, the inputting of precise data arising from 
requests for payment into the management information 
system of the Directorate-General for Regional Policy 
(DG XVI) is not, at the present time, subject to any 
systematic control procedures. Similarly, no exhaustive 
checks are made as to the consistency of this data with the 
financial accounting documents held by the Directorate-
General for Budgets (DG XIX). 
Advances and accelerated payments 
9.44. The current provisions provide for the possibility 
of granting advance payments to the Member States as 
soon as the operations have commenced, in other words, 
without the Member States having yet made any 
payments themselves. Accelerated payments, which can 
amount to 75 % of the aid allocated, are also provided for, 
on condition that at least 30 % of the eligible expenditure 
has been made by the Member State. In practice, 
considerable differences, which are not clearly explained, 
exist between the Member States regarding their recourse 
to these types of payment. 
9.45. The main aim of advances and accelerated 
payments is to make the execution of the investments 
easier and quicker. However, this incentive effect is very 
limited in the case of projects which are already at an 
advanced stage when the aid decision is taken, especially 
bearing in mind that the Member States apply global 
additionality. Furthermore, the use made of the payments 
at Member State level is not usually subject to any control 
by the Commission. 
9.46. It is therefore important that accelerated or 
advance payments should be governed by well-defined 
criteria, with the aim of ensuring that they do indeed 
achieve the intended effect of encouraging the execution 
of investments. Furthermore, distinctions should be made 
between the various types of payment (normal, ac­
celerated, advances) in the Commission's accounts, in the 
interest of greater accounting transparency. 
Dormant projects 
9.47. Decisions relating to projects for which no 
financial transaction has taken place over a certain period 
(four years, according to the new ERDF Regulation) are 
subject to a special monitoring procedure by the 
administration. This consists of sending a list of the 
decisions concerned to the Member States, together with 
a request for justification of the delay and for an 
estimated completion date for the projects in question. 
However, these requests do not always produce results 
because the Member States often fail to reply and the 
four-year time limit, which is too long, should be lowered. 9.48. Furthermore, the Annex to each decision gives an 
indicative date for the completion of the projects. The 
Court considers that when these time limits are exceeded a 
re-examination of the decisions concerned should result 
in the setting of a new time limit, and if this is not 
complied with, the amount of aid should be amended. The 
existence of decisions dating back to the period 1975-76 
and relating to investments which have not yet been 
completed shows that it is necessary to reinforce and 
tighten up the monitoring procedure used for dormant 
files. In September 1986, there were more than 400 
decisions, taken between 1975 and 1980 and including 
more than 600 unfinished projects, for which commit­
ments of about 200 Mio ECU still remained to be settled. 
Procedures used for the monitoring of aid ranges and 
recoveries 
9.49. Article 4 of the ERDF Regulation stipulates that 
the ERDF's resources shall be used for the benefit of the 
various Member States on the basis of ranges, the lower 
and upper limits of which are specified in the legislation. 
These ranges are to apply for periods of three years. The 
procedures drawn up to monitor compliance with these 
ranges are mainly implemented outside the accounting 
framework and the results do not appear in the revenue 
and expenditure account. In the Court's view, measures 
should be taken to ensure that it is possible to calculate, 
from an examination of the revenue and expenditure 
account, exactly how much aid has been granted to each 
Member State, compared with the limits indicated by the 
ranges. Such information should be provided not only at 
the end of the three-year period but also at the end of each 
financial year, since it constitutes an important factor for 
assessing the utilization of appropriations. 
9.50. In cases where the Member States are required to 
reimburse all or part of excess sums paid in error, the 
adjustment is made by offsetting the sums in question 
against one or more subsequent payments to be allocated 
by the Commission to other projects. The recoveries take 
place virtually at the initiative of the Member State, which 
specifies which payments will be offset. Furthermore, the 
amounts to be reimbursed by the Member States are not 
included in a recoveries account, or in an account for 
established entitlements. Nor has a checklist been drawn 
up showing which recoveries have to be made. 
The closure of decisions 
9.51. By way of supporting documents for the closure of 
decisions, the current regulations provide for a final claim 
for payment, certifying that the projects have been carried 
out in accordance with the aid decision. The supporting 
documents and declarations do not usually include an 
assessment of the impact of the investment on regional 
development and no precise instructions have been issued 
in this respect. 
15. 12. 87 Official Journal of the European Communities 85 
9.52. The closure of a decision should be noted in a final 
report by the Commission, including, in particular, a 
conclusive assessment of the differences between the work 
provided for and the work actually carried out. Measures 
should be taken to ensure that, at the same time, an 
assessment is also made of the lasting effects of the 
projects and of their impact on regional development. 
On-the-spot inspections of the projects by the 
Commission and assessment of the results 
9.53. The ERDF Regulation lays down that the 
Commission is entitled, with the agreement of the 
Member States, to ask for on-the-spot inspections or 
enquiries in respect of operations financed by the ERDF 
to be carried out by the competent authorities of the 
Member State, accompanied by Commission officials. 
The on-the-spot inspections take place at the initiative of 
the departments administering the aid and of the 
Financial Controller. 
9.54. The Commission says that, in 1986, its depart­
ments (the administrative and Financial Control depart­
ments) carried out 21 on-the-spot inspections concerning 
146 projects and five special programmes. In the Court's 
view, this is a very small number of inspections, 
considering that about 20 000 projects were being carried 
out in 1986. 
9.55. The findings made by the Commission's adminis­
trative departments at the time of the audits, which are 
recorded in the reports communicated to the Court under 
Article 82 of the Financial Regulation, would have more 
effect if they were set out in greater detail. Moreover, the 
follow-up given by the Commission to these findings does 
not substantially improve the effectiveness of the Fund: it 
concerns solely the aspects of the regularity of the 
commitments and payments relating to the projects 
examined, and no attempt is made to draw consequences 
from such findings from the point of view of the 
improvement of management, in particular by the 
national administrations. 
9.56. The ERDF Regulation lays down that before 1 
July each year, the Member States shall send the 
Commission in respect of each region assisted and for the 
preceding year, quantified information on the results of 
measures carried out in the regions in terms of invest­
ments and jobs and details of the financial means 
employed. 
9.57. Only one Member State, Luxembourg, has sent 
this information for 1985. The latest information sent by 
France concerns 1981 and the latest information sent by 
Belgium and the United Kingdom concerns 1982. 
Furthermore, in general, the information sent does not 
correspond to the requirements of the Regulation and 
cannot be used to make the expected analyses of the 
results. PROGRAMME FINANCING AND THE 
INTEGRATED MEDITERRANEAN 
PROGRAMMES 
Programme financing 
9.58. The ERDF Regulation provides for ERDF 
participation in the financing of Community programmes 
and national programmes of Community interest. Article 
6 states in this respect that 'on a trial basis, each Member 
State whose upper range limit is higher than 1,5 % shall 
ensure that an appropriate number of applications for aid 
are submitted in the form of a programme or program­
mes, so that the Commission may as far as possible 
guarantee that the share of ERDF aid allocated to 
programme financing, including Community program­
mes, is gradually increased to reach at least 20 % of the 
appropriations allocated by the ERDF at the end of the 
third year'. 
9.59. Of the seven Member States (Belgium, Denmark, 
France, Greece, Luxembourg, the Netherlands and the 
United Kingdom) which had been given approval for 
national programmes of Community interest at the end of 
1986, only three (France, Greece and the United 
Kingdom) had an upper range limit which was higher 
than 1,5 %. In the case of the five other countries which 
also exceeded this percentage, no programme had yet 
been approved. It was noted that Luxembourg benefits 
from a national programme of Community interest even 
though it is not covered by a regional development 
programme. The Regulation lays down that the national 
programmes of Community interest should in fact be 
assessed in the light of the regional development 
programme. 
9.60. Article 25 of the Fund Regulation stipulates that 
the budget commitment for the financing of a programme 
shall be effected, within the limits of budget balances, in 
annual instalments. The Court has already criticized this 
procedure, in its special report on non-quota meas­
ures (8). In fact, such measures do not allow either the aid 
agreed or the amounts outstanding to be fully accounted 
for. For the 14 national programmes of Community 
interest agreed in 1986, the aid from the Fund amounts to 
420,3 Mio ECU, of which only 85,2 Mio ECU have been 
entered in the accounts. To this amount should be added 
commitments of 30,2 Mio ECU, which were entered in 
the accounts in 1986 by way of a second annual tranche 
for one of the three programmes which had been 
approved in 1985. The total amount committed was 
therefore 115,4 Mio ECU, compared with 105,2 Mio 
ECU in 1985, corresponding to about 3,5 % of the total 
aid granted by the Fund in 1986. In 1985 the share of 
financing by programme amounted to 4,2 % of the total 
aid from the Fund. 
86 Official Journal of the European Communities 15. 12. 87 
9.61. Article 13(2) of the ERDF Regulation lays down 
that decisions on the granting of ERDF assistance for 
programme financing shall be published in the Official 
Journal of the European Communities. These provisions 
have not yet been acted upon and the necessary measures 
should be adopted so that the decisions in question are 
regularly published without delay, possibly in a sum­
marized form. 
Integrated Mediterranean programmes 
9.62. The integrated Mediterranean programmes (IMP) 
were set up by Council Regulation (EEC) No 2088/85 of 
23 July 1985 (9). Their objective is to improve the socio­
economic structures of the regions concerned in France, 
Greece and Italy, by the integrated use of different 
structural funds and other sources of finance, particularly 
the EIB and the New Community Instrument, supported 
by a specific budget heading which increases the financing 
provided for by the various traditional Funds. 
9.63. Despite the importance attached to the implemen­
tation of these programmes, especially by the Commis­
sion, their progress has been considerably delayed. At the 
end of 1986, only one programme, relating to Crete, had been approved. Nevertheless, a possible contribution 
from the Bank still has to be incorporated into this 
programme. About 30 others relating to all three 
countries had been submitted to the Commission. 
9.64. In order to gain experience of the implementation 
of the IMP, the Commission financed a total of 19 
preparatory pilot measures between 1983 and 1986, on 
the basis of budgetary Article 550. The aim of these 
measures was to test the methods used for implementing 
the programmes. Thirteen measures were agreed at the 
end of 1983 for an initial period of two years. These 
measures were amended in 1985 and the completion date 
for 10 of them was extended by one year. Meanwhile, six 
new pilot measures were decided, and they should be 
completed in August 1987. 
9.65. The decisions lay down that, for each pilot 
measure, the Member States shall submit a report to the 
Commission within three months of the operations being 
completed. The aim of such a document is to allow useful 
lessons to be drawn from the pilot measure for the 
implementation of the programmes. However, at the 
beginning of 1987 the Commission had not received or 
requested any report, even for the three measures which 
had been completed in 1985, which may well make the 
measures in question less useful as a model for the 
preparation of the IMP. 
(») 
(2) 
(3) 
(4) 
(5) 
(6) OJ L73, 21.3.1975, p. 1. 
OJ L 169,28.6.1984, p. 1. 
OJ C 321, 15.12.1986, paragraph 7.32 onwards. 
OJ C 321, 15.12.1986, paragraphs 7.50 — 7.53. 
OJ C 262, 20.10.1986, paragraph 3.6 et seq. 
Article 4 of Regulation (EEC) No 1787/84 stipulates that the 
ERDF's resources shall be used on the basis of ranges, the 
lower and upper limits of which determine the portion of 
ERDF aid which a Member State can receive. (7) OJ C 287, 24.10.1983, paragraph 3.5.2. 
(8) OJ C 262, 20.10.1986, paragraphs 2.11 
(9) OJ L 197, 27.7.1985, p. 1. 2.13. 
15. 12. 87 Official Journal of the European Communities 87 
CHAPTER 10 
Research 
10.0. TABLE OF CONTENTS Paragraph 
reference 
Introduction 10.1 — 10.3 
Planning and development of computerized systems 10.4 — 10.13 
Achievement of objectives 10.7 
Planning and timetable 10.8 
Project management 10.9 
Cost control 10.10 — 10.11 
Commission coordination of data-processing projects 10.12 — 10.13 
Direct action research 10.14 — 10.29 
Specific nature of research appropriations 10.14 — 10.15 
Planning and control 10.16 — 10.19 
Operation of the functional budget 10.20 — 10.25 
Analysis and use of monthly accounts 10.21 
Allocation of expenditure 10.22 —10.25 
Presentation of annual accounts 10.26 — 10.27 
Conclusions 10.28 — 10.29 
Shared-cost research 10.30 — 10.44 
General matters 10.30 — 10.32 
Shared-cost research other than the fusion programme 10.33 — 10.42 
The background to the management of the contracts 10.33 
Control of the management 10.34 — 10.35 
Computerization of the budgetary management 10.36 — 10.39 
Management of programme appropriations 10.40 —10.42 
Fusion programme (non-JET) 10.43 — 10.44 
General matters 10.43 
Eligibility of expenditure 10.44 
JET Joint Undertaking 10.45 10.51 
External control of annual accounts 10.45 
Support agreement with the host organization 10.46 
Presentation of the JET accounts 10.47 
Contingent financial commitments 10.48 
Commitment of the Commission's contribution 10.49 —10.51 
88 Official Journal of the European Communities 15. 12: 87 
INTRODUCTION 
10.1. This chapter is concerned with expenditure on 
research for which appropriations are contained in 
Chapter 73 of Part B of the general budget. The 
appropriations available in 1986 amounted to 997,4 Mio 
ECU for commitment and 767,2 Mio ECU for payment. 
For the financial year 1986 the observations of the Court 
of Auditors deal with certain aspects of the management 
of research appropriations. The aim of these observations 
is not to make an overall assessment of the effectiveness of 
the Community research programmes but to draw 
attention to certain critical methods or procedures which 
could be improved: 
(a) the planning and development of the most important 
computerized financial management systems in the 
field of research (direct and indirect action); 
(b) the planning, identification, control and reporting by 
the Joint Research Centre (JRC) of the real costs of 
direct action research; 
(c) the financial management of cost-sharing contracts 
executed in the Member States and funded partially 
by the European Communities; 
(d) sundry matters of a general character arising from the 
Court's examination of the 1986 accounts of the Joint 
European Torus (JET), which is financed primarily 
by the Commission. 
10.2. In its annual report for 1985 (0 the Court 
observed that Commission procedures for the manage­
ment of both cost-sharing and study contracts should be 
rationalized and harmonized. In particular, it concluded 
that there were unjustified differences between the 
procedures employed by the various Commission depart­
ments responsible for cost-sharing contracts and that 
there was a need for improved coordination and exchange 
of information between these departments. Moreover, as 
part of its discharge resolution for the financial year 1985, 
the European Parliament specifically invited the Commis­
sion to do this (2). 
10.3. The Commission has informed the Court and the 
discharge authorities of the action it has taken to meet 
these observations, in particular the establishment of an 
interdepartmental harmonization group to examine this 
question, leading to Commission decisions on specific 
rationalization and harmonization measures. 
0) The footnotes appear at the end of each chapter. PLANNING AND DEVELOPMENT OF 
COMPUTERIZED SYSTEMS 
10.4. During 1985 and 1986, in order to assess the extent 
to which the planning and development of the Com­
mission's computerized systems needed to be improved, 
the Court examined three key computer projects in the 
area of research which had recently been put into 
operation and the costs of which were estimated at some 
6,2 Mio ECU at the end of 1986; such costs are charged to 
Chapter 73 of part B of the general budget. 
10.5. The projects examined all have the objective of 
providing important information within the Commission 
of a budgetary, accounting or contractual nature. Their 
effectiveness is crucial to the soundness of financial 
management of appropriations for payment which, in 
1986, were 767,2 Mio ECU. They were selected in order to 
cover the three departments responsible for Community 
research and, also, to permit an assessment to be made 
after different stages of development or implementation 
had been achieved, as follows: 
(a) 'systeme d'information budgetaire et comptable 
automatism (Sibeca) of the JRC Ispra, the develop­
ment of which started in 1979 but which only became 
operational in 1987; 
(b) Diodon II of the Directorate-General for Science, 
Research and Development in Brussels (DG XII), 
developed between 1980 and 1984 (a system for 
managing research programme contracts); 
(c) systems for the management of the Esprit programme 
of Directorate-General XIII in Brussels, developed as 
part of the European local area network (ELAN) 
project between 1983 and 1986. 
10.6. The audit has revealed that, despite the specific 
nature of each of the research activities for which the 
Sibeca, Diodon II and ELAN projects were developed, 
certain common basic weaknesses occurred. These 
weaknesses are summarized in paragraphs 10.7— 10.11 
(see also paragraphs 10.36 — 10.39 for the current 
operational weaknesses of the Diodon II system). 
Achievement of objectives 
10.7. In all three projects the basic accounting or 
contractual elements of the packages have been im­
plemented, which has thus played a part in improving the 
daily administrative and financial management of the 
operations. However, certain other objectives have yet to 
15. 12. 87 Official Journal of the European Communities 89 
be achieved, such as the interconnection and use of Sibeca 
by all the JRC establishments, and the provision by 
Sibeca and Diodon II of regular financial management 
information to all technical services as a basis for 
monitoring and controlling activities and for taking 
decisions. These new systems may need to be modified to 
ensure that they are fully exploited. 
Planning and timetable 
10.8. Considerable delays occurred in achieving even 
the basic elements of the program packages. Bearing in 
mind the original justifications for the projects, these 
delays have resulted in the Commission continuing to use 
the old systems. In particular, the Sibeca system, on the 
basis of original planning, should have been operational 
in 1982 instead of the actual date of 1 January 1987. 
Diodon II was planned to be operational in 1983, but the 
transfer of contract administration to the new system was 
not completed until 1985. 
Project management 
10.9. The Court is of the view that the evolution of 
requirements or the newness of the computer equipment 
are not the sole causes of the delays and cost increases 
experienced by the projects. It considers, on the other 
hand, that most of the difficulties encountered are related 
to weaknesses in the management of the projects: 
(a) inadequate examination of the feasibility of the 
projects led to a substantial lack of appreciation of 
their complexity and of the time and resources 
required; 
(b) from the projects' inception, the absence of satisfac­
tory management structures contributed to the failure 
to consult adequately with potential users and 
hampered the coordination of their needs; 
(c) because of a lack of formal progress reporting 
systems, there was insufficient monitoring and 
control of projects, which prevented the anticipation 
of major difficulties; 
(d) in the case of ELAN, the Commission's objective of 
using the project for the development of in-house 
management systems was incompatible with its primary purpose as a test and development facility 
within the Esprit programme; 
(e) in the case of Sibeca, the Commission was effectively 
committed to the project by a series of contracts 
between the JRC and an external firm between 1979 
and 1984. The key decisions by management to enter 
into these contracts were taken without adequate and 
informed consideration of the feasibility of a 
multiannual project of such complexity, duration and 
cost. In addition, there was an absence of any clear 
and conscious authorization for the project by the 
budgetary authority. 
Cost control 
10.10. Major cost overruns occurred on all three 
projects, resulting in a total cost of 6,2 Mio ECU 
compared with 2,5 Mio ECU, had they run as originally 
intended. (In particular, Sibeca, with a final cost of 
4,1 Mio ECU, incurred an estimated overrun of 3 Mio 
ECU.) These overruns were due not only to under­
estimates of the complexity of the projects at the planning 
stage, but also to the superficial nature of the cost 
forecasts and to the total absence of multiannual control 
over the actual costs incurred. 
10.11. Cost control over the projects should have served 
as a means of monitoring progress or difficulties and of 
quantifying the financial consequences of inadequate 
management decisions. However cost/benefit analyses 
were not prepared at the feasibility-study stage and 
separate project records of actual costs incurred were not 
maintained on a continuous basis for comparison with 
estimates. 
Commission coordination of data-processing 
projects 
10.12. The Commission — Directorate-General for 
Personnel and Administration, Informatics Directorate 
(DG IX-F) — issued guidelines for the management of 
data-processing (3) in September 1982. The guidelines 
made detailed recommendations to avoid the type of 
weaknesses listed in paragraph 10.9 but, as far as cost 
control is concerned (paragraph 10.11), did not deal with 
the need to maintain records of actual project costs for 
monitoring against estimates. In this respect they need to 
be completed. 
10.13. The weaknesses noted in the management of the 
ELAN project, which was started in 1983, after the 
90 Official Journal of the European Communities 15. 12. 87 
guidelines were issued, are similar in many respects to 
those identified for Sibeca and Diodon II, which were 
started prior to the guidelines (and also for the Social 
Fund system, contained in a special report adopted by the 
Court on 15 December'1983 (4)). The Court considers 
that the Commission should take steps to ensure that the 
above weaknesses do not recur and should therefore: DIRECT ACTION RESEARCH 
Specific nature of research appropriations 
(a) give its guidelines the status of instructions; 
(b) empower its informatics directorate to check the 
implementation of these instructions by all depart­
ments developing computerized systems; 
(c) authorize its central financial departments to exercise 
effective control over the costs of multiannual 
projects of this nature. 10.14. Direct action research, which is undertaken by 
the Joint Research Centre (JRC), falls within the 
framework of the 1986 general budget under Articles B 
737, B 738 and B 739 (appropriations available in 1986 for 
commitment of 240,5 Mio ECU and for payment of 
228,4 Mio ECU). Unlike other sections of the Com­
munity budget, research appropriations include both 
personnel and administrative costs, together with the 
direct costs of projects. Annex I to the general budget 
analyses the appropriations for direct action in a 'table of 
equivalence' by broad categories of expenditure (see 
Table 10.1 for a summary of 1986 commitments prepared 
in the same form), and also shows the duration of the JRC 
research programme (5) by way of a multiannual schedule 
of commitments and payments. 
Table 10.1 — Direct action research 
Summary of the table of equivalence for commitments for 1986 
(Mio ECU) 
Budget 
Article Item Title Personnel Admini­
strative 
operation Technical operation Investments Contracts Reserve 
for 
person­
nel 
costs Total 
(1) (2) (3) (4) (5) (9) 
737 
7370 
7371 
7372 
7373 
7374 
7376 
738 
7382 
7383 
7389 
739 
7390 Action programmes — Direct 
action 
Industrial technologies 
Thermonuclear fusion 
Nuclear fission 
Non-nuclear energy sources 
Environment 
Pilot projects in the field of aerial 
remote-sensing 
Article 737 — Total 
Other activities — Direct action 
Services performed at the request 
of outside bodies and individuals 
Services performed at the request 
of other Commission depart­
ments 
Operation of the HFR reactor 
Article 738 — Total 
Completion of former programmes 
— Direct action 
Completion of joint programmes 
(1980 to 1983) 
Article 739 — Total 15,5 
9,8 
58,3 
6,8 
18,9 
109,3 
0,1 
3,1 
3,9 
7,1 3,1 
1,3 
10,3 
1,3 
3,0 
19,0 
0,5 
0,7 
1,0 
2,2 4,7 
2,6 
16,2 
1,2 
3,6 
28,3 
2,3 
0,6 
7,9 
10,8 1,8 
8,6 
4,1 
0,4 
1,9 0,3 
0,4 
6,1 
0,4 
1,9 
16,8 
1,1 
0,1 
0,5 
1,7 9,1 
0,1 
0,1 25,4 
22,7 
95,0 
10,1 
29,3 
182,5 
4,0 
4,5 
13,4 
21,9 
Articles 737 to 739 — Total 116,4 21,2 39,1 18,5 9,2 204,4 
15. 12. 87 Official Journal of the European Communities 91 
10.15. The Court, like the panel of industrial experts 
chaired by Dr Harry Beckers (6), considers that the actual 
cost of direct action research is one of the essential 
elements for consideration in deliberations on future 
Community research and on the structure of the JRC. 
Therefore, the Court has examined a selection of JRC 
1986 projects in order to assess whether the real costs of 
research activity are adequately planned, identified, 
monitored and reported. 
Planning and control 
10.16. In accordance with Article 90 of the Financial 
Regulation (7), the figures for direct action appearing in 
Annex I of the general budget are supported by a detailed 
financial plan. However, this does not form part of the 
general budget (and, therefore, is not published). The 
financial plan rather than the budget itself is intended to 
be the key element in the JRC's financial management 
and accounting. 
10.17. The financial plan is primarily used by manage­
ment to allocate budgetary appropriations to themes of 
research programmes and to the functional divisions 
supporting the research effort. Even though the plan has 
no budgetary status, the distribution of appropriations 
contained in it is, like the Community's annual general 
budget, treated as fixed rather than as being open to 
revision without formal authorization. This excessive 
rigidity prolongs the process of authorizing expenditure, 
and reduces its flexibility by necessitating the frequent 
movement of appropriations between sub-divisions of the 
plan to ensure that the limits are not breached. The 
financial plan should be changed into a flexible instru­
ment of management. This should make it easier to draw 
up justified analyses of the origin of movements of 
appropriations and differences in relation to estimates. 
10.18. The basic element used by the JRC for the 
construction of its financial plan and for the control of the 
financial aspects of individual projects is the activity 
sheet, which is produced at the planning, stage and 
outlines the resources required to achieve the key phases 
of the research activity. However, full use is not made of 
the possibilities of this system, as a tool for monitoring the 
execution of projects. The progress reports are confined 
to the technical aspects and make no reference to the 
financial situation, which can be gauged from the activity 
sheet. The system could be improved if the activity sheets 
were used as a basis for more regular comparisons 
between the expenditure of each of the projects and the respective estimates, any substantial discrepancies being 
explained in the progress reports. 
10.19. The financial information system of the JRC is 
based on the recording and reporting of the costs incurred 
in implementing projects. No attention is given to 
obtaining regular estimates of cosis which are likely to be 
incurred to the date of project completion. Without this, it 
is not possible to determine whether financial plans arc 
likely to be exceeded and. if so. whether any overruns 
could be justified by additional benefits which might be 
realized. 
Operation of the functional budget 
10.20. The financial plan analyses appropriations under 
what is called a functional budget system, principally by 
research objectives and support services, but also by types 
of expenditure. Under this accounting system all 
personnel, administrative and direct project costs are 
eventually allocated to research objectives, either directly 
or indirectly, by means of allocation accounts. According 
to the Commission's internal rules (8) governing the 
execution of research appropriations, the objectives of the 
functional budget system are: 
'(a) to adapt the budget to a modern method of 
management; 
(b) to permit a rational choice between the best means for 
the realization of objectives; 
(c) to allow constant monitoring of expenditure by item 
and to determine more easily the real cost of 
programme parts.' 
Although the Court has commented on the system, in its 
annual reports on the financial years 1978 (9), 1979 (10) 
and 1982 ("), it considers that, for the reasons set out in 
paragraphs 10.21 — 10.25, these objectives have not yet 
been achieved. 
Analysis and use of monthly accounts 
10.21. The JRC prepares cumulative accounts on a 
monthly basis using the functional system. However, 
comparison by the JRC's financial departments of these 
figures with the financial plan is superficial because it 
provides no explanation of the differences. In addition, 
92 Official Journal of the European Communities 15. 12. 87 
managers of scientific projects consider the monthly 
accounts to be of little value for their needs. Although 
responsible for the cost-effective execution of projects, 
they have little influence over the level of indirect 
expenditure charged to the projects from the allocation 
accounts, which expenditure is not sufficiently related to 
the true level of scientific activity (see paragraphs* 10.22 — 
10.25). 
Allocation of expenditure 
10.22. The costs of indirect expenditure (i.e. general 
services, overheads, scientific and technical support and 
personnel — 82,3 % of total expenditure in 1986) are 
charged initially to allocation accounts; subsequently, 
they are reallocated to research objectives. In its annual 
report on the financial year 1982 (•l) (paragraph 8.11), the 
Court indicated that there was no JRC document 
describing the criteria to be followed in determining 
whether a particular cost should be charged to an 
allocation account or a research objective. The continuing 
ambiguity of the rules (12) might allow the JRC, in the 
event of a shortage of appropriations for a specific 
research activity, to charge costs which are directly 
related to that activity (such as buildings, equipment, 
maintenance) to an allocation account to be subsequently 
spread over several research activities. Other costs (such 
as staff training, missions, heavy-current electricity) are 
always charged to an allocation account, irrespective of 
the fact that they might be attributable to a specific 
research activity. The Court stresses that the underlying 
principle should always be to allocate costs to the projects 
to which they are directly related. 
10.23. The majority of indirect expenditure is ap­
portioned among the various research activities using the 
theoretical allocation bases rather than real rates of 
activity. Staff expenditure is apportioned on the basis of 
the theoretical allocation and the estimates of staff 
utilization (see paragraph 10.24) whereas the general 
services are allocated on the basis of the fixed scales 
contained in the financial plan. The only ones that 
correspond to the actual utilization of resources are the 
allocations in respect of the scientific and technical 
support systems and the major installation of the HFR 
reactor. These practices have the effect of reducing the 
differences between the estimates and the costs de­
termined. 
10.24. The examination of personnel expenditure 
carried out by the Court (56,9 % of total commitments for 
direct action research — Table 10.1) revealed, in 
particular, that the time actually spent on each activity 
and project is based on estimates which are not supported 
by time-keeping records. Other than a global review by 
the Finance Division and the Projects Directorate, no attempt is made to confirm on a regular basis that the 
estimates are realistic. 
10.25. At the time of the audit, the JRC was unable to 
give an analysis of the effects of using alternative bases for 
the allocation of indirect expenditure. The Court's 
examination has revealed that the use of alternatives can 
give substantially different results, for example, ranging 
from 90 % to 115 % of the expenditure actually allocated 
in the accounts for a selection of 1986 projects. 
Presentation of annual accounts 
10.26. The accounting information on the JRC's 
activities which" is available outside the Commission, 
though conforming to the Financial Regulation (7), is 
inadequately presented from the point of view of 
potential external users, such as parliamentarians, 
industrialists and scientific advisory bodies. For example : 
(a) the way in which the Commission's accounts report 
the execution of direct action research appropriations 
is too fragmented and complex to be of value to those 
without a good knowledge of Community accounting 
presentation. In particular, it is difficult to identify 
from these accounts the real cost of research activities 
as opposed to technical support and administration; 
(b) the accounting principles and policies used by the 
JRC, in preparing its annual accounts in accordance 
with Title VII of the Financial Regulation (7), differ in 
many respects from those used for the rest of the 
Commission's accounts (see paragraph 10.14). These 
differences are not apparent to the users of the 
accounts. 
10.27. The current presentation of accounting inform­
ation for the JRC does not provide a sound basis for a 
proper assessment of all costs relevant to its activities and 
running — for example, within the framework of the 
deliberations of the Budget Authority, and Council 
Decisions on both future Community research and the 
structure of the JRC. The Court considers that, given the 
size, cost and unique character of the JRC, this 
information should be issued as a supplementary and 
separate section of the accounts of the Communities (i.e. 
in addition to the present accounts for the execution of 
research appropriations). The Commission should ex­
amine how this could be integrated into its current 
proposals for revision of the Financial Regulation (7). 
15. 12. 87 Official Journal of the European Communities 93 
Conclusions (a) the methods used to allocate personnel costs and 
other indirect costs to various research activities are 
too theoretical; 
10.28. The Court considers that the JRC has not 
adequately exploited its financial information and 
accounting systems in order to plan and control, in an 
efficient manner, the use of the scarce resources at its 
disposal. In particular: 
(a) the functional budget system is operated as a means of 
redistributing appropriations rather than as a flexible 
tool for controlling expenditure; (b) the methods used to record the working hours of 
research staff are inadequate; 
(c) the presentation of accounting information, both 
within the JRC and externally, is too complex and is 
not sufficiently related to the specific needs of 
potential users and decision-makers. 
(b) comparisons between actual expenditure and fore­
casts at the level of the financial plan and individual 
projects are not subject to any meaningful analysis; 
consequently, deviations from plans are neither 
explained nor justified and cost forecasts are not 
updated. SHARED-COST RESEARCH 
10.29. In addition, the accounting information concern­
ing the real costs of the JRC's research, technical support 
and administrative activities is not presented in a 
sufficiently clear and meaningful manner; consequently, 
the ability of JRC research managers, the Commission, 
the Council and Parliament to make soundly-based 
decisions on the operations or structure of the JRC is 
severely impaired. In particular: General matters 
10.30. Shared-cost research is most usually carried out 
in the Member States and receives partial financial 
support from the Commission. The items of research are 
included, for the most part, in specific programmes 
Table 10.2 — Budgetary execution of cost-sharing research programmes 
(Mio ECU) 
Budgetary articles 
Horizontal action (730) 
Thermonuclear fusion and 
nuclear fission (731) 
Non-nuclear energy, 
health and safety 
and environment (732) 
Research linked to 
development and 
information technologies (733) 
Industrial technologies, 
biotechnology and raw 
materials (735) 
Other activities and 
conclusion of previous 
programmes (736) 
Total Number of 
measures 
8 
4 
4 
2(1) 
6 
3 
27 Appropriations 
for commit­
ments available 
in 1986 
29,0 
225,4 
139,6 
14,9 
130,4 
1,3 
540,6 Commit­
ments entered 
into in 1986 
26,5 
216,8 
103,9 
3,7 
101,0 
0,8 
452,7 Appropria­
tions for 
payment 
available 
in 1986 
22,1 
206,5 
65,9 
15,5 
53,3 
1,5 
364,8 Payments 
made in 
1986 
14,8 
199,3 
52,4 
12,3 
34,5 
1,0 
314,3 
(') Excluding the Esprit and RACE programmes but including the programme of assistance for the development of indigenous research capacities in the 
developing countries of which the 10 Mio ECU remaining from 1984 were cancelled at the end of the financial year 1986. 
94 Official Journal of the European Communities 15. 12. 87 
adopted by the Council, which are themselves entered in 
the framework programme for 1984-87 for Community 
research, development and demonstration activities (13). 
On 31 December 1986, 27 multiannual measures were 
being carried out in the field of shared-cost research. The 
overall financing for the programmes that were being 
carried out at the end of 1986 reached 1 513,3 Mio ECU. 
10.31. The following observations concern shared-cost 
research entered under Articles B 730 — B 736 of the 
general budget for the financial year 1986, with the 
exception of Items 7335, 'Esprit' and 7336. 'RACE' (l4). 
For the financial year 1986, the budgetary appropriations 
are summarized as set out in Table 10.2. 
10.32. The shared-cost research programmes are car­
ried out on the basis of contracts. The Commission uses 
various kinds of contract, according to the measures 
undertaken and the way in which its partners are 
organized. Amongst the main categories of contract are 
the following: contracts of association, cost-sharing 
contracts, marginal-cost contracts, subsidies and expert 
contracts. Management of these contracts is the respons­
ibility of seven scientific directorates, plus an adminis­
trative support directorate. Whether in respect of 
scientific questions or administrative management, the 
controlled thermonuclear fusion programme constitutes 
a particular research unit. 
Shared-cost research other than the fusion 
programme 
The background to the management of the contracts 
10.33. The Commission has recently endeavoured to 
reduce the time taken to select research proposals. The 
implementation of the procedures involved in subsequent 
management stages still takes a long time, however, 
mainly on account of legislative restrictions. Even within 
the Directorate-General for Research, communication 
between the scientific departments and the administrative 
departments continues to be difficult, in spite of the 
efforts made. For these reasons, the Court takes the view 
that a re-examination of the legislation and of the 
respective roles of the Directorate-General for Research's 
departments is desirable. Control of the management 
10.34. An examination of the administrative procedures 
pertaining to shared-cost research reveals that, in spite of 
a degree of specialization in the tasks, the administrators 
concerned frequently operate in isolation of each other 
when dealing with similar matters. Proof of this can be 
found in the delays that arise in the preparation of 
additional clauses for certain contracts, the variable time 
limits established for exchanges of views between the 
scientific departments, the different degrees of reliability 
of the information contained in the data-bases or the 
differences in the quality of the keeping of the manage­
ment files. In practice it can be seen that the centralization 
of the administrative management of the contracts does 
not reinforce management control. 
10.35. These considerations, when combined with the 
effects of the division of administrative and scientific 
responsibilities, argue strongly in favour of a re­
examination of the distribution of duties. Such a re­
examination could be based at once on a decentralization 
of the daily management and on a reinforcement of the 
internal control of management. The role of management 
control should be to solve questions of principle 
concerning the contracts and to advise the scientific 
directorates, as well as to adopt and monitor procedures 
in the various scientific sectors. 
Computerization of the budgetary management 
Diodon II data-base 
10.36. The Diodon II data-base has been developed by 
the Commission with a view to producing an instrument 
for real-time management of research contracts. It has 
gradually been coming into use since 1984, after a 
laborious development period. For various reasons, some 
of which are claimed to be beyond the remit of the 
Directorate-General for Research, the results obtained 
do not meet present requirements, particularly in respect 
of the scientific management of contracts. 
10.37. Since the system suffers from design inad­
equacies at the level of budgetary and accounting 
principles, comparison with the Commission's central­
ized accounting department is not guaranteed. Staff and 
operating expenditure for the specific programmes is not 
included and for this reason it is not possible to obtain a 
complete overall view of the multiannual cost of a given 
programme. Whereas in the central accounting system, 
commitments which have not been settled are revalued in 
ECU, the Diodon system only takes historical values and 
thus precludes any immediate and overall comparison 
with the centralized accounting system. Similarly, the 
15. 12. 87 Official Journal of the European Communities 95 
principles used for the reimbursement of funds by the 
contracting parties are different from those provided for 
in the Financial Regulation. 
10.38. The Diodon system is not used as a permanent 
tool, available for use by the persons who are in charge of 
the programmes. Although initially it was expected that a 
financial management report would be made available to 
the programme heads, along with exception reports 
intended to correct abnormal situations, practice has 
shown that access by scientists to the Diodon system 
continues to be very limited and the management and 
exception reports are produced only rarely. The in­
adequate level of reliability of the system is often 
mentioned as a reason for justifying the limited use made 
of it. 
10.39. For these reasons and in view of a recent 
Commission Decision, the Court considers that the 
Directorate-General for Research should, in future, have 
at its disposal an effective means for monitoring the 
multiannual management of specific programmes, both 
as regards preparation and as regards the implementation 
of the programmes and budgets. Such a system should, of 
necessity, be able to cope with all the deficiencies 
currently encountered. 
Management of programme appropriations 
10.40. During its examination of the transactions for 
the financial year 1986, the Court observed various 
practices which were in contravention of the regulations 
or which were prejudicial to the principles of good 
management. 
Legality of the commitments 
10.41. In the case of several new specific research 
programmes, the Commission decided, as a result of the 
inadequacy of the commitment appropriations made 
available to it by the budgetary authority and for reasons 
of management efficiency, to conclude contracts involv­
ing sums which were well in excess of what was initially 
available in the budget. Although the work entrusted to 
the contractors is not divided into distinct annual stages, 
the contracts include an escape clause to cope with the 
fairly improbable eventuality of the Commission's not 
subsequently obtaining the annual appropriations needed 
for the work to continue. As a result of this practice the 
accounting commitments are then made and executed in 
successive annual tranches, which is clearly contrary to 
the spirit of the provisions of Articles 1(3) and 88(3) of the 
Financial Regulation (7), as well as to the very idea of 
differentiation of appropriations. Out of a sample of 131 
. contracts, the Court discovered 36 cases where commit­
ments relating to final contractual obligations of 
29,5 Mio ECU had thus been limited during the first year 
to 14,7 Mio ECU, representing 'legal commitments' for the Commission. These contracts concerned seven 
specific research programmes. In the Court's view, such a 
procedure is intrinsically outside the bounds of the 
financial legislation and makes administrative duties 
cumbersome. 
Eligibility of certain items of expenditure 
10.42. Some contracts include amongst the eligible 
items of expenditure sums which are intended to cover the 
contractors' overheads. Most usually these sums are 
calculated as a percentage of staff expenditure. The 
percentages used vary considerably from contract to 
contract. Thus, the Court noted rates of up to 200 % of 
staff expenditure. Although the Commission states that it 
checks to ensure that the rates requested by its partners in 
this connection are properly justified, the Court was 
unable to find any trace in the contract management files 
of verification of the bases and methods used by the 
contractors in their requests for payment of overheads. 
As this procedure easily leads to an inflation of the costs, 
it would seem to be desirable that the managers' files 
contain a justification of the eligibility of such expendi­
ture. Out of 131 contracts examined by the Court, 
representing a total of 136 Mio ECU, 61 included 
overheads amounting to a total of at least 12 Mio ECU. 
Fusion programme (non-JET) 
General matters 
10.43. At the Commission's initiative, an association of 
various laboratories in the Member States which are 
engaged in work on controlled thermonuclear fusion has 
been set up. Two non-member States, Sweden and 
Switzerland, also contribute to the work of this associ­
ation, which comes under a series of programmes 
approved by the Council for a period of five years. The 
years 1985 and 1986 are common to the last two 
multiannual programmes (15). The last two financings 
amounted to 1 192 Mio ECU (including JET). 
Eligibility of expenditure 
10.44. The contracts of association provide that the 
quarterly advances paid by the Commission shall be 
settled on an annual basis. There is nothing in these 
96 Official Journal of the European Communities 15. 12. 87 
contracts to specify the form or the content of the annual 
adjustments, so that the Commission finds itself in 
situations in which it is even impossible to carry out a 
reasonability check on expenditure. An on-the-spot 
examination of the associations' accounts is required on 
account of the very large number of supporting docu­
ments. As the Commission does not have' enough 
qualified staff in the fusion field to carry out on-the-spot 
audits on the contracts of association, it entrusts this task 
to private auditing firms. At 31 December 1986, out of a 
total of 15 contracts of association, four had not been 
audited since 1981, two since 1982 and five since 1984. In 
view of the volume of expenditure in question, the Court 
takes the view that this frequency of auditing is 
inadequate and that the contracts of association should 
be audited in detail at least once every two years. 
JET JOINT UNDERTAKING 
External control of annual accounts 
10.45. The Commission is by far the main supplier of 
funds to the JET. The statutes of JET (Article 12) 
stipulate the procedure for auditing its annual accounts. 
With the exception of the period within which the 
accounts must be rendered, the statutes do not specify 
either a timetable or a bilateral discussion procedure in 
connection with the submission of the Court's report. 
These omissions have caused difficulties in recent years. 
For this reason, the Court has submitted a proposal to the 
JET for an agreement such as would make it possible in 
future to follow a precise timetable and a procedure 
similar to those used for the annual report on the general 
budget of the Communities. For the moment, this 
proposal has had no response. In the face of this situation, 
the Court takes the view that the Council should seriously 
consider revising JET's statutes. 
Support agreement with the host organization 
10.46. At the beginning of the construction stage of the 
project, a support agreement was concluded by JET with 
the host organization (UKAEA (16)). Since 1983, the 
construction stage has been completed and a number of 
provisions of this agreement are no longer relevant. In its 
report on the JET accounts for the financial year 1985, the 
Court suggested that a new agreement should be 
negotiated. Although the JET management acknowl­
edged that this was necessary, one of the options that the 
JET might adopt consists in drawing up a simple 
interpretative document which would be enough to 
clarify certain detailed points which, are no longer suited 
to the present situation. The Court is not convinced that 
this approach would be enough to clarify the role and the 
responsibilities of the host organization in the operational stage of the project, and especially for the purpose of 
establishing the principles and guidelines which ought to 
govern the billing of certain overhead expenses incurred 
by JET, not for its own particular needs, but rather as a 
result of the host organization's overhead structure. The 
Court believes that the Commission, which bears 80 % of 
the financial responsibility, ought to take steps to ensure 
that the principles underlying the bills submitted by the 
host organization do not result in the Commission's 
bearing an excessive financial burden. For the moment, 
the Court has not found any evidence to suggest that the 
Commission shares this concern. 
Presentation of the JET accounts 
10.47. For several years, JET has been experiencing 
serious difficulties in the recruitment of staff. In order to 
overcome these staff shortages, it very frequently takes on 
temporary staff from industrial or service enterprises. A 
minimum of 120 persons were thus employed at the end of 
1986. The expenditure incurred in taking on staff in this 
way is, however, assimilated to operating expenditure in 
JET's budget. This has resulted in a misleading presen­
tation of the budgets and accounts for the financial year. 
The JET authorities have acknowledged the truth of this 
situation and envisage the adoption of measures to 
remedy it in part, which the Court considers inadequate. 
In this field, it is the Commission's responsibility to insist 
that the presentation of JET's accounts should reflect the 
reality of the situation. 
Contingent financial commitments 
10.48. JET has asked the Commission to submit to the 
Council a request for a prolongation of the duration of 
the Project by two years. At the present rate of 
expenditure (approximately 100 Mio ECU per annum), 
the extra expenditure that may be expected is likely to be 
at least 200 Mio ECU. This item of information is not 
included in the explanatory notes accompanying JET's 
accounts as at the end of 1986. 
Commitment of the Commission's contribution 
10.49. The Commission pays JET an annual contri­
bution corresponding to 80 % of the payment appropri­
ations in JET's budget. The commitment appropriations 
are not taken into consideration when it comes to 
establishing the level of the Commission's contribution, 
but Article 10(5) of JET's statutes stipulates that its 
budget shall not become effective until the Commission's 
budget has been definitively adopted. 
10.50. Until 1983, the Commission had identical sums 
available in terms of commitment and payment appropri-
15. 12. 87 Official Journal of the European Communities 97 
ations for the purpose of settling its contribution to JET. 
From 1984 onwards, the commitment appropriations 
became slightly greater than the payment appropriations. 
Each year the Commission committed all of its commit­
ment appropriations, whereas they were not necessary for 
the immediate financing of JET. The sums still to be 
settled were then considered to be a reserve intended to 
satisfy JET's long-term commitments. As at 31 December 
1986, the sums thus immobilized amounted to 19,2 Mio 
ECU (outstanding commitments). 10.51. The Commission's contribution to JET's budget 
may be analysed as a cash obligation and the Commission 
does not undertake to effect payments covering more 
than one year, except by way of the multiannual 
programmes established by the Council. For this reason, 
the entry in the Commission's budget of commitment 
appropriations in excess of the payment appropriations is 
not necessary for the purposes of paying the subsidy to 
JET. In the Court's opinion, the 19,2 Mio ECU 
committed and not settled at 31 December 1986 do not 
correspond to any precise objective situation and should 
therefore be considered superfluous. 
0 (2) 
(3) 
(4) 
(5) 
(6) 
(7) 
(8) 
(9) OJ C 321, 15.12.1986, paragraph 9.16. 
DocPE 112 046. 
Data-processing guide of the European institutions, 
section GI 003. 
Available from the Court on request. 
OJ L 3, 5.1.1984. 
Report by the panel of industrial experts sent by the 
Commission to the Council on 5.12.1986. 
OJ L 356, 31.12.1977; JO L 160, 28.6.1979. 
Annex 1 of the 'Internal rules for the implementation of the 
general budget of the European Communities' — 10th 
edition, Section A 1.3, p. 171. 
OJC 326, 31.12.1979. (10) OJC 342, 31.12.1980. 
(n) OJC 357, 31.12.1983. 
(12) OJ L 356, 31.12.1977, Article 90; 
OJ L 160, 28.6.1979, Article 1(3); 
Manual of financial procedures used by the JRC, January 
1986 edition, Chapter 4; 
JRC document PE PB 150/85/D10. 
(13) Council Resolution of 25.7.1983, OJ C 208, 4.8.1983. 
(,4) These two specific programmes were assigned to the 
Commission's Directorate-General for Telecommuni­
cations, Industry, Information and Innovation (DG XIII). 
(15) Council Decision No 85/201/Euratom of 12 March 1985, OJ 
L 83, 25.3.1985, p. 25. 
(16) United Kingdom Atomic Energy Authority. 
98 Official Journal of the European Communities 15. 12. 87 
CHAPTER 11 
Food aid 
11.0. TABLE OF CONTENTS 
Introduction 
Distribution of the aid 
Aid intended to be sold 
Aid distributed free of charge 
Indirect aid 
The economic effects 
Niger 
Burkina Faso 
Egypt 
Conclusions Paragraph 
reference 
11.1 — 
11.4 — 
11.4 — 
11.6 — 
11.8 — 
11.10 — 
11.10 — 
11.16 — 
11.20 — 11.3 
11.9 
11.5 
11.7 
11.9 
11.24 
11.15 
11.19 
11.24 
11.25 11.30 
INTRODUCTION 
11.1. In order to examine how the contribution to the 
balanced economic and social development of the 
recipient countries specified in Council Regulation (EEC) 
No 3331/82 of 3 December 1982 (') was actually being 
made, the Court of Auditors carried out audit visits 
during 1985 and 1986 in three African countries, namely 
Niger, Burkina Faso and Egypt, where expenditure on 
food aid accounted for the sums of approximately 48 Mio 
ECU, 44 Mio ECU, 36 Mio ECU and 37 Mio ECU 
respectively during the years 1983 to 1986 and was mainly 
concerned with deliveries of cereals. 11.3. Specifically, this requirement for balanced econ­
omic and social development means that, in the event that 
the products supplied as aid should be sold by the 
government authorities in the recipient country, the price 
must be high enough to ensure that introducing these 
foodstuffs onto the market will not upset the conditions 
under which comparable local produce is sold, so that 
local farmers are not discouraged from continuing to 
produce food. In the event that the food should be 
distributed free of charge, the social groups who are to 
receive the food aid must be carefully selected, and care 
must be taken to ensure that the distribution networks 
used do not communicate directly with the networks 
which supply foodstuffs to the market on which the needs 
of those who can afford to pay are satisfied. 
11.2. Apart from cases of emergency, which are 
unforeseeable, food aid is granted in situations where the 
food shortage to be made good is reasonably permanent. 
The aid has the twin objectives of'raising the standard of 
nutrition of the recipient peoples' and 'contributing 
towards the balanced economic and social development 
of the recipient countries' (Article 2 of Council Regu­
lation (EEC) No 3331/82 (')). 
(') The footnote may be found at the end of the chapter. DISTRIBUTION OF THE AID 
Aid intended to be sold 
11.4. In Niger and Burkina Faso, responsibility for 
selling cereals lies respectively with the 'Office des 
produits vivriers du Niger' (OPVN) and the 'Office 
15. 12. 87 Official Journal of the European Communities 99 
national des cereales' (Ofnacer), which have good-quality 
warehouses and distribution centres, along with motor 
vehicles for the purpose of distributing the food to the 
smallest and remotest settlements. However, they do not 
possess any rough-terrain vehicles with which to make 
deliveries to places which are not easily accessible. It 
sometimes proves difficult to market products at the 
prices fixed by the government authorities because the 
people for whom the aid is intended cannot afford the 
prices in question, or because of individual cases of 
inadequate quality. In such cases, the authorities are 
obliged to lower their prices or to allocate the produce in 
question to reserve stocks, or even to distribute part of the 
aid free of charge. 
11.5. In Egypt, the delivery agreements stipulate that 
the aid is to be sold mainly by cooperative organizations 
to the poor and needy. However, the procurement of 
foodstuffs — including purchase, storage and sale — is a 
State monopoly and the cooperative organizations 
mentioned in the agreements are, in actual fact, govern­
ment-run stores. In addition, like other types of food 
products, aid supplied by the EEC is made available to 
consumers as a whole, in accordance with a rationing 
system which enables people to purchase food products at 
prices fixed by the government which vary from one social 
category to another. The government's policy is to 
provide massive subsidies for basic foodstuffs, with the 
result that the prices paid by the consumer are very low, 
varying according to the product in question between 
35 % (cooking oil) and 70 °/0 (cereals) of the import prices 
of the same products or of local production costs. 
Aid distributed free of charge 
11.6. In Niger, aid distributed free of charge (which is 
the exception rather than the rule) is also the respons­
ibility of the OPVN. Actual distribution is the respons­
ibility of the army. The prefectures, sub-prefectures, local 
committees and village councils are responsible for 
surveying the population and deciding who is poor and 
needy. A by no means negligible proportion of free aid is 
used for 'food for work' operations and is distributed to 
persons working on the production of out-of-season 
crops. This procedure has worked satisfactorily on the 
whole. 
11.7. In Burkina Faso, aid supplied free of charge is not 
distributed by Ofnacer. It is the responsibility of the 
'Conseil National de Lutte contre les Effets de la 
Secheresse' (CNLS). There is no effective coordination 
between this particular distribution circuit and the 
Ofnacer circuit, which is the one used for aid which is 
intended to be sold. In addition, the lack of motor vehicles 
in the provinces has made it difficult to distribute the aid 
to isolated villages, which is particularly regrettable in the 
case of aid supplied with a view to helping the poor and 
needy. Indirect aid 
11.8. In Niger and Burkina Faso, non-governmental 
organizations or international organizations distribute 
community aid, specifically, via the dioceses, religious 
communities, schools or at the work place (as part of 
'food for work' programmes). The quantities supplied are 
commensurate with the size of the organizations re­
sponsible for distributing them, and the risks of loss or 
faulty distribution appear to be generally smaller than in 
the case of aid which is distributed by the central 
government. From 1983 to 1985 this aid represented 
2,8 Mio ECU for Niger (as against 9,3 Mio ECU in direct 
aid) and 2,4 Mio ECU for Burkina Faso (as against 
6,2 Mio ECU in direct aid). 
11.9. In Egypt, indirect aid, which is distributed by the 
World Food Programme (WFP) and one or two non­
governmental organizations (NGOs), accounts for a 
relatively modest proportion of total food aid (9,4 Mio 
ECU from 1983 to 1985 as against 98,2 Mio ECU in 
direct aid for the same period). Even in the case of this 
form of aid, the involvement of the State has various 
effects on the conditions under which the produce is 
distributed. For example, the Education Ministry 
manages a distribution programme in schools in which 
food aid products are mixed indiscriminately with 
products supplied as direct aid. Except in the case of 
specific agreements with the government, the organiza­
tions have serious difficulties in importing food products 
into Egypt. Some consignments have been embargoed in 
the harbour by the customs for a period of months. In 
order to finance some projects, one NGO wished to sell 
aid which was intended, according to the agreements, to 
be distributed free of charge. This determination to 
commercialize food aid is in line with the new logic of 
Community development policy, which attempts to 
ensure that distribution of aid free of charge does not 
undercut local producers and discourage them from 
continuing in farming. However, in this particular case, 
such a possibility had not been formally provided for in 
the delivery agreement and was approved by the 
Commission under conditions which were too vague, 
particularly as far as the use of the resulting funds was 
concerned. In addition, the NGO was only able to sell the 
aid through the State-monopoly procurement system. 
This explains why the NGO received only a small 
financial return, which, as a result of the government's 
policy of low prices, which were reduced even further by 
deductions for various expenses, was well below the level 
of world prices. 
THE ECONOMIC EFFECTS 
Niger 
11.10. Niger is a producer of millet, sorghum and rice 
and is usually self-sufficient in cereals. In the period 1984-
100 Official Journal of the European Communities 15. 12. 87 
85, however, unfavourable climatic conditions resulted in 
a serious defipit. At the end of 1984, the government 
estimated its import needs for 1985 at some 500 000 t of 
cereals (of which 65 0001 were for its 'emergency stocks'), 
which were to be covered by commercial imports and by 
395 000 t of food aid. 
11.11. One year later, however, in October 1985, when 
the international community had still to supply 20 % of 
the cereals budgeted for as food aid, the public stock of 
cereals amounted, according to the information supplied 
by the OPVN, to 148 5001, this latter organization's total 
storage capacity being only about 200 000 t. To these 
stocks held officially, stocks held by traders and 
producers, which are difficult to estimate in this country, 
should also be added. The cereals balance sheet in Niger, 
for the period between the two harvests of October 1984 
and October 1985, may thus be represented as shown in 
Table ILL 
Table 11.1 — Cereals balance sheet in Niger between 
October 1984 and October 1985 
(1000 I) 
Resources 
- OPVN stocks - October 1984 
- Private stocks - October 1984 
- 1984 production 
- Commercial imports 
- Food aid received 
Total 
Uses 
- Consumption 
- OPVN stocks - October 1985 
- Private stocks - October 1985 
Total 44 
a minimum of 180 
1 090 
100 
285 
1 699 
1 550 
149 
unknown 
1 699 
11.12. These figures were collected during on-the-spot 
visits by the Court or were supplied by the local 
authorities. As regards consumption, the figure of 
1,55 Mio t, which is an estimate made by the local 
authorities on the basis of rationed consumption, seems 
to the Court to be the minimum figure. The level of 
private stocks, which are widely scattered amongst 
producers, individuals and various small traders, is 
unknown. As total final uses are necessarily equal to the 
total of resources, the unavoidable conclusion is that 
private stocks in October 1984 must have been at least 
equal to 180 0001, failing which resources and uses would 
not have balanced out. In actual fact, these private stocks 
were probably well above the level of 180 0001 in October 
1984, because this figure is based on the assumption that 
private stocks were reduced to zero by October 1985, 
which is highly improbable. By way of example, if the 
volume of private stocks held in October 1985 had been 
50 0001, private stocks in October 1984 would have been 
at the level of 230 000 t. 11.13. Now, in October 1984, the Niger authorities had 
estimated these private stocks at only 5 000 t. This 
considerable under-estimation is one example of a 
tendency to paint an exaggeratedly black picture of the 
situation which may be met with in some countries that 
receive food aid. It also supplies an example of the 
extremely unreliable nature of the balance sheets of 
forecast food needs, which are drawn up to act as a basis 
for planning the supply of food aid, and demonstrates the 
need to improve methodology in this field, even if some of 
the statistics continue to be not very reliable. 
11.14. In October 1985, bearing in mind the excellent 
harvest which had just been gathered in, anyone could 
have foreseen, for the 12 months from'October 1985 to 
October 1986, that there was going to be a large cereal 
surplus. It looked as if the means available for public 
storage would be inevitably saturated, even in the absence 
of any new decision to grant food aid and of any 
commercial import. For these reasons, it was not 
surprising — which is what the Court in fact observed — 
that at the same time, once the news of the bumper 
autumn 1985 harvest was revealed, the prices of cereals on 
the markets collapsed. The price of millet fell from 
approximately 1 000 ECU/t in June to 200 ECU/1 in 
September. 
11.15. As a result, farmers' incomes fluctuated widely. 
Having worked extremely hard, and in some cases made 
use of new techniques, they did not always feel that they 
had been properly recompensed, hence, in the medium 
term, a risk that local food production would fall. 
Exporting to neighbouring countries, which were also in 
surplus, was not possible. On the contrary, there was a 
danger that neighbouring countries would attempt to sell 
their own production at rock-bottom prices and thus 
encourage prices to fall even further. The final result was 
that local producers were even further discouraged from 
farming, which could only contribute to a further 
worsening in the country's food equilibrium. 
Burkina Faso 
11.16. Burkina Faso has experienced regular shortages 
of cereals for some years. The 1983-84 deficit was covered 
by 163 0001 of imports, 103 000 of which were supplied as 
food aid. For the period 1984-85, the national authorities 
estimated at the beginning of the agricultural year, in 
October, that the deficit would be 300 0001, which was to 
be met by commercial imports and, as far as possible, by 
food aid: In the cereals balance sheet which they drew up 
in order to justify this estimate (see Table 11.2), private 
stocks at the beginning of the agricultural year were 
entered, on the resources side, as equivalent to 20 000 t, 
whilst public stocks amounted to 22 000 t. 
11.17. In actual fact, food aid supplied only 106 000 t, 
and commercial imports amounted to only 64 000 t. 
15. 12. 87 Official Journal of the European Communities 101 
External supplies to make up the shortfall thus amounted 
to 170 0001, and not 300 0001. And yet the amount held 
in public storage, as observed at the beginning and at the 
end of the agricultural year, increased from 22 000 to 
74 0001. As the amounts of consumption and production 
during the period are both known, and the total of uses 
and ex post resources are by definition equal, the 
unavoidable conclusion is that the actual level of private 
stocks was at least 36 0001 in October 1984, that is to say, 
almost twice as high as the Burkina Faso authorities had 
indicated at the time. These 36 000 t amount to a 
minimum estimate, based, as far as uses are concerned, on 
the highly improbable assumption that private stocks at 
the end of the agricultural year were reduced to zero. By 
way of example, if the volume of private stocks at the end 
of the agricultural year had been of the order of 40 000 t, 
private stocks at the beginning of the agricultural year 
would have been 76 000 t, that is, four times higher than 
' the figures reported by the Burkina Faso authorities. In 
any case, as a result of this underestimation, a dangerous 
situation was created, since, even before the 1985 harvest 
had been gathered in, the Ofnacer silos were almost full, 
this latter organization's storage capacity being 90 000 
tonnes. 
Table 11.2 — Cereals balance sheet of Burkina Faso between 
October 1984 and October 1985 
(10(H)!) 
Resources 
- Ofnacer stocks 
- Private stocks 
- Production 
- Imports 
- Food aid 
Uses 
- Consumption 
- Ofnacer stocks -
- Private stocks - October 1984 
Total 
- October 1985 
Total 22 
a minimum of 36 
1 143 
64 
106 
1 371 
1 297 
74 
unknown 
1 371 
11.18. The autumn 1985 harvest was exceptional: of the 
order of 1,6 Mio t. Food aid during the 1985-86 
agricultural year continued, under its own impetus, to 
provide an additional 65 0001. For this reason, it was only 
possible to arrive at equilibrium between resources and 
uses from October 1985 to October 1986 at the price of an 
increase of about 150 000 t in the quantities held in 
storage, which went well beyond what was normally 
possible with the means of storage available. The EEC 
was finally obliged, in 1986, to finance additional storage 
capacity (5 000 t) and supply aid for the purchase of local 
cereals (1 650 t). 
11.19. Analysis shows that here, as in the case of Niger, 
the problem is the impossibility of establishing at the 
outset a valid balance sheet of forecast food needs, and, 
particularly, in the serious underestimation of private 
stocks in October 1984, which led the authorities to ask 
for, and obtain, more food aid than was necessary. Egypt 
11.20. Although the proportion of agriculture in the 
Egyptian GNP has regularly fallen, from approximately 
29% in 1974 to some 17% in 1985-86, agriculture 
continues to he the main sector of economic activity in 
Egypt, employing approximately 50 % of the working 
population. Only 3,5 Mio ha (3,5 % of the land area), 
distributed along the length of the Nile, are cultivable. A 
community of 50 million people (99 % of the population) 
lives there. Priority was therefore given to the opening up 
of new land (431 000 ha between 1952 and 1982, and a 
programme of 267 000 ha as part of the fifth plan). 
Nevertheless, as a result of its extremely rapid population 
growth and of the flight from the land, Egypt is now in a 
situation where it cannot produce all the food it needs, 
whereas it was almost self-sufficient at the beginning of 
the 1970s. It now needs to import a third of its food needs, 
mainly in the form of cereals. Imported wheat and flour 
cover 50 % of the country's cecal needs. In 19^6, imports 
amounted to 10 Mio t of foodstuffs with a value of 
4 000 Mio USD. The greater part of these imports are 
commercial. If we look in particular at cereals, of which 
the United States is one of Egypt's main suppliers, it can 
be seen that American Law No 480 has in fact allowed 
them to reduce the financial burden for Egypt under such 
conditions (loans for up to 50 years at very low interest 
rates) that it is becoming difficult to distinguish, amongst 
Egypt's import:~. vhieh proportion covers commercial 
transactions a; the vorld market rate and which 
proportion corresponds to those carried out on special 
conditions, involving a proportion of de facto gifts. 
11.21. For 10 years now, with an annual average of 
direct aid amounting to some 135 000 t of produce, the 
Community has K-en Egypt's principal food aid donor in 
the strict sense ol ihe term. 
11.22. The Egyptian government has adopted a policy 
of very low consumer prices for food products distributed 
in urban centres. The levels of these prices are even lower 
than those that would result from the application of world 
prices. Although agricultural producer prices-are then-
selves very low, considerable subsidies from the budget 
are necessary in order to achieve this aim. The official 
objective is gradually to reduce these subsidies until they 
have been entirely removed. But so far the pressure of 
need in the cities, bearing in mind the low level of wages 
and salaries, has meant that it has not been possible to 
achieve any significant results in this area. 
11.23. Food aid supplied by the EEC may thus be seen 
as a form of aid to the budget of the Egyptian State, to the 
extent that -— as the Court itself observed on the spot — 
the sums entered to the credit of counterpart fund 
accounts are distinctly lower than the value on the world 
market of the products they relate to, and also to the 
extent that the accounts are debited very slowly, thus 
constituting a source of liquidity for the Egyptian State. 
102 Official Journal of the European Communities 15. 12. 87 
11.24. At a time when the official policy is one of 
attempting to reconquer agricultural land from the 
desert, the actual situation is that fertile land is gradually 
being abandoned. As regards cereals, the Egyptian 
farmers, the 'fellaheen', discouraged by the very low 
prices imposed by the government, are giving up 
agricultural activity or are turning their attention to the 
production of other more profitable crops. A recent study 
by the World Bank clearly shows that income per hectare 
is higher for some fodder crops than for speculative crops 
such as wheat or rice, which are directly affected by this 
artificial lowering of prices. 
CONCLUSIONS 
11.25. Although the aid is distributed, on the whole, 
under satisfactory conditions, the task of fitting it into the 
economies of the three recipient countries whose 
situations were examined by the Court is encountering 
serious difficulties. Practical conclusions as to what 
improvements to make differ, depending upon whether 
the country concerned is Egypt, Burkina Faso or Niger. 
11.26. In Egypt, food aid combined with commercial 
imports paid for mostly at prices which are below world 
prices, encourages the government to perpetuate a 
system, which is already very longstanding, of massive 
subsidies to basic foodstuffs, of very low consumer prices 
and of farm producer prices which are so low that they 
constitute a disincentive to the local producers, the 
fellaheen. We are thus witnessing a continuing decline of 
the production of cereals in a country which was once one 
of the granaries of the Mediterranean. 
11.27. The Commission is aware of this situation and 
has issued strongly-worded warnings to the Egyptian 
authorities regarding the dangers of a policy of excess­
ively low food prices. For over a year now the delegation 
of the Commission of the European Communities in 
Cairo has, moreover, persisted in its endeavours to ensure 
that the Egyptian administration's commitments relating 
to the management of counterpart funds are carried out 
correctly. If these endeavours were to succeed, European 
food aid would no longer have a pernicious effect on the 
level of local agricultural producer prices. 
11.28. The situation is different in Burkina Faso and 
Niger. There are two sides to the question. On the one 
hand, the Community needs to find a way of resisting the over-alarmist attitudes taken by the governments of these 
countries, which request more food aid than they need, 
and, on the other hand, a way must be found of giving 
them good reasons for thinking that they no longer need 
fear famine so much, in order to encourage them to ring 
the food aid alarm bell less loudly and less precipitately. 
11.29. It is impossible to find a total solution to the first 
question: these countries have not got any reliable 
statistics for either production and agricultural prices, 
food consumption, foreign trade or the private storage of 
foodstuffs. This situation is nowhere near changing. 
However, the method of using food balance sheets allows 
some cross-checks to be made, even on the basis of 
inaccurate statistical data, and the volume of the aid can 
be measured and future trends assessed. Use of this 
method by the Commission in the administration of food 
aid would undoubtedly have revealed the improbability 
of any serious food deficit in Burkina Faso and Niger in 
Autumn 1985 and the much greater probability that the 
massive volume of aid requested by the local governments 
would, once granted, create a surplus that would drive 
down local agricultural producer prices. But would a 
comparison of these different degrees of probability have 
provided the Community with a sufficiently strong basis 
for taking the risk of refusing to accede to the requests 
made by Burkina Faso and Niger? There is no certainty 
that it would have. 
11.30. Primarily, the Community should therefore 
endeavour to give the local governments good reasons for 
requesting food aid only when it is really necessary. In this 
respect, the aim of the strict application of the commit­
ments undertaken by the recipient countries in respect of 
counterpart funds is to prevent the latters' operating 
budgets from profiting from food aid. However, and 
above all, an improvement in the speed and flexibility 
with which food aid reaches the recipients, at the precise 
time when their need is real, would be an extremely 
favourable development. In fact, to an undisputed extent, 
the recipient governments cover themselves against a 
shortage of food resources with excessive caution and 
request exaggeratedly large quantities because they are 
familiar with the unwieldiness of the procedures relating 
to the decisions on the aid requested by them and its 
implementation. This is why the Sahel countries have 
suggested that a stock of cereals should be kept available 
to them in an African port so that they can make use of it, 
judiciously and without delay, when they need it. Other 
solutions may be considered before reaching that 
extreme. Such solutions all involve making the planning 
and implementation procedures in respect of food aid 
more flexible and giving the Commission greater freedom 
of action so that it may retain its control over the 
quantities to be supplied to each recipient for as long as 
possible. The Court's role, however, is not to expand 
upon these solutions in detail. 
(') OJL352, 14.12.1982. This regulation was superseded on 22 
December 1986 by Council Regulation (EEC) No 3972/86, 
published in OJ L 370, 30.12.1986. 
15. 12. 87 Official Journal of the European Communities 10.1 
CHAPTER 12 
Staff and administration 
12.0. TABLE OF CONTENTS 
Management of staff salaries at the Parliament, the Commission and the 
Court of Auditors 
Introduction 
Observations concerning the 'PAIE' data-processing package 
The data files 
The software 
Security of the package 
The products of the package 
Final comment on the data- processing package 
Observations concerning the management systems 
Commission 
Parliament 
Court of Auditors 
Specific observation 
Final comment on the management systems 
Operational expenditure 
Observations concerning expenditure on the maintenance of premises 
Observations concerning expenditure on stationery and office supplies Paragraph 
reference 
12.1 -
12.1 — 
12.3 — 
12.4 — 
12.8 — 
12.10 — 
12.13 — 
12.17 
12.18 — 
12.19 — 
12.29 — 
12.37 — 
12.41 
12.42 — 
12.45 — 
12.45 — 
12.52 — 12.44 
12.2 
12.17 
12.7 
12.9 
12.12 
12.16 
12.44 
12.28 
12.36 
12.40 
12.44 
12.55 
12.51 
12.55 
MANAGEMENT OF STAFF SALARIES 
AT THE PARLIAMENT, THE COMMISSION 
AND THE COURT OF AUDITORS Chapter 11 of Titles 1 (') of the various budget sections. 
In 1986 they amounted to 138,4 Mio ECU (for 3 135 
employees) at the Parliament, to 532,6 Mio ECU (for 
10 675 employees) at the Commission and to 16,0 Mio 
ECU (for 325 employees) at the Court of Auditors. 
Introduction 
12.1. The European institutions all use data-processing 
packages for the purpose of managing salary payments. 
At the Parliament, the Commission and the Court of 
Auditors, with the exception of the joint research centre, a 
single data-processing package, known as 'PAIE', is used. 
The Court of Auditors chose to examine this program 
package as well as the manual management systems 
relating to it. The salary payments made are entered in 12.2. The objectives selected for the audit were to 
investigate whether the basic data used for calculating 
salary payments were accurate, to investigate whether the 
payment of salaries and the charging of the corresponding 
sums to the budget were being carried out correctly and to 
investigate whether internal controls were adequate. The 
execution of this audit programme called for an 
examination, first of all, of the 'PAIE' data-processing 
package, followed by an examination of the management 
systems and tests on the data used at each of the three 
institutions. 
(') The footnotes appear at the end of each chapter. 
104 Official Journal of the European Communities 15. 12. 87 
Observations concerning the 'PAIE' data-
processing package 
12.3. This data-processing package, which is managed 
by the Commission, consists of data files and their related 
software, which means a group of programs and their 
logical structure. It was designed about twenty years ago 
and has been adapted to changing needs through 
successive stages of maintenance without having ever 
been subjected to any overall revision. However, since 
1983, the Commission had been considering implement­
ing an integrated project in the form of a software 
package for calculating individual payments to the staff 
of the institutions of the European Communities. It 
abandoned this plan in July 1986, however, by not 
following up the invitation to tender issued for the 
implementation of this package. 
The data files 
12.4. The information used for calculating salary 
payments is taken from a large variety of data files. These 
files consist of data bases (files with an operating life) and 
working files (files created temporarily for a specific 
purpose). There are three data bases: 
(a) a sequentially ordered personal description file, 
giving descriptions of the employees concerned and 
containing all the data which are indispensible for 
calculating the salaries payable to the institution's 
employees; 
(b) a historical file, indexed and made up in the form of 
documentation of monthly payments; 
(c) a reference table file, consisting of depersonalized 
data and reflecting, in the abstract, pecuniary rights 
as established by the legislation at present in force. 
12.5. These data bases should be brought up to date 
with present-day data-processing techniques: 
(a) the personal description file, which is used for batch 
processing and has been reduced from a technical 
point of view to 68 spaces, has taken the place of a file 
of punched cards with 80 spaces. As it is not possible 
to interrogate the file via a terminal or to update it 
directly, another compacted sequentially ordered file 
with an index has had to be created. For this reason, 
approximately two thirds of the data contained in the 
'monthly movements' file and the two personal 
description files — the one sequentially ordered and 
the other indexed — are redundant. The creation of a 
more advanced file would make possible a pro­
portionate reduction of space needed; (b) within the historical file, there are some data 
redundancies, concerning staff numbers, currency 
codes etc. When back-payments are calculated, the 
initial situation is deleted and the new one is recorded. 
A test showed that the new amount might be paid in 
full to the recipient instead of the difference between 
the new amount and the old amount; 
(c) for the purpose of calculating back-pay, fictitious 
data concerning employees recruited after 1979 have 
been entered in the two files described above. These 
data correspond, for all employees, to the date the 
information was entered in the files (1979) and, for 
some of them, to personalized information and sums 
of money. This practice should be considered open to 
criticism because the recording of fictitious data 
ought to be forbidden, firstly because it is in itself 
unjustified and secondly because it creates a risk of 
confusion for users as well as for auditors. 
12.6. As for the work files, they are not documented. 
The points at which the programs meet, where the data 
are transferred from one program to another or from one 
part of a program to another, are not clearly defined. A 
test showed that for this reason they were open to possible 
manipulation, the inputting of new material or the 
deletion of information during the course of the execution 
of a task, and that there was no program to prevent this. 
12.7. Generally speaking, the file population is not 
precisely defined, although it varies considerably from 
one file to another, for example between data bases and 
working files. This situation constitutes a source of 
confusion, both for the manager and for the auditor. 
The software 
12.8. For the purpose of calculating salary payments, a 
large number of programs, up to 52, is run through 11 
times independently. These 11 runs correspond to the 
various independent populations (target groups) in the 
three institutions (2) for which the salary payments are 
being calculated. This procedure involves an excessive 
amount of work because an entire range of work files have 
to be created for each target group and each has to be run 
through 11 times. If the files were redesigned it would be 
possible to reduce the computing time considerably 
without, however, reducing the range of possible uses. 
15. 12. 87 Official Journal of the European Communities 105 
12.9. None of these programs has any technical used by a person with authorized access to the system may 
documentation, in particular: manipulate it at will. 
(a) the list of variables used and their entry-points into 
the various parts of the program; 
(b) diagrams of data flows to give a systematic overall 
view of the run of the programs; 
(c) a description of the program versions used; The products of the package 
12.13. A vast quantity of information is produced by 
the Computer Centre and transmitted to users. It takes 
the following forms: 
(d) ways of documenting interventions in the program 
runs. (a) traditional printed lists; 
Security of the package (b) microfiche (a large number of data stored in a limited 
space and at low cost); 
12.10. The internal security of a program is its ability to 
detect errors of reasoning (input errors, processing errors 
etc.) and to log them or prevent the processing of the 
salary payment for the person concerned. It may be 
guaranteed by formal prior checking of the content of the 
information fed in, as well as of the probability of this 
information or the logical connection between the various 
items of information (if three school allowances are to be 
paid, there must be three children etc.). It can also be 
achieved by comparing various successive statements of 
the same type or by comparing a given statement with the 
statistical norms. 
12.11- At present no use is made of these possibilities, 
although the program for updating personal data does 
include merely elementary controls, which must be 
considered inadequate. Test checks, in particular, showed 
the absence of any significant checks on the accuracy or 
the plausibility of the data: 
(a) data fields may be supplied with completely ridicu­
lous items of information, and the cases in question 
may not be logged and the computer may not refuse 
to process them (for example, 2 000 hours of overtime 
may be tallied down for a given employee in a single 
month); 
(b) items of information which are mutually incom­
patible may be introduced (for example, the case of a 
Director-General who was being paid a secretarial 
allowance was not mentioned). 
12.12. External security consists of forbidding un­
authorized persons access to the programs and to the 
data. In order to achieve this objective, a security system 
consisting of several stages is necessary. At present there is 
only a simple access system based on a password, with no 
memorizing of cases of access actually obtained. As a 
result, an unauthorized person who knows the password (c) terminal plus screen, with the option of producing 
hard copy. 
12.14. The traditional printed lists may be broken down 
into three categories: 
(a) control lists for new entries or amendments to existing 
data. The data on these lists prove that an amendment 
has actually been carried out. The form of the lists 
ought to be reviewed, to the extent that, on the one 
hand, they do not indicate which amendments have 
been made and, on the other hand, they do not 
provide any information per category of amendment; 
(b) information lists including personal data. 80-85 % of 
the lists come into this category. Thus, each month 
alpha betical and numeric lists are produced. The use 
of these lists could easily be replaced by the use of a 
screen; 
(c) lists with statistical data, which give an overall view 
and are very informative for users. This option is not 
used to the full extent possible in the present state of 
technology. At present, only two lists of statistical 
data are produced. The list giving the number of 
employees paid, by grade and step, is in accord with 
the requirements of a satisfactory presentation of 
statistical data. On the other hand, the list used for 
charging payments to the budget, which only gives the 
total payments for the current month and for 
previous months, is inadequate for the purpose of 
carrying out detailed controls on expenditure. 
12.15. Two types of microfiche are produced at present 
for the Commission and the Parliament and for each 
target-group: one for the calculation of salary payments 
106 Official Journal of the European Communities 15. 12. 87 
(a payslip and, where appropriate, a calculation of total 
payments made so far) and changes in financial rights, 
with an indication of the previous situation and the new 
situation. This instrument is more efficient than printed 
lists but is difficult to use and requires a lot of time. 
12.16. A terminal with a screen constitutes the most 
economical and practical means of access to the three 
data bases mentioned in 12.4. It should be used in 
substitution for lists and also for the purpose of handling 
statistical data. 
Final comment on the data-processing package 
12.17. The results of the survey demonstrate that the 
'PAIE' program package, which was designed some time 
ago, is no longer suited to the present range of possibilities 
offered by data-processing technology and should either 
be reviewed or replaced with a view to achieving the 
following aims: 
(a) a complete revision of the products of the package, by 
reducing the production of lists and developing the 
means of statistical exploitation. This measure would 
be likely, on the one hand, to reduce costs con­
siderably, particularly by substituting the use of a 
screen for lists, and, on the other hand, to create a 
more efficient instrument for auditing expenditure; 
(b) the introduction of an advanced security system 
which would take account of users' needs, par­
ticularly as regards the development of plausibility 
controls by an examination of the intrinsic prob­
ability of the various items of information stored and 
of the logical connection between them. Such a 
system would make it possible to detect a high 
number of errors without any other kind of interven­
tion of an administrative nature; 
(c) improving the quality, availability and relevance of 
the information recorded so as to develop the range of 
possible uses; 
(d) a reduction of the memory space and the computing 
time to a minimum. In this way, savings could be 
made, both as regards operating costs and as regards 
human resources, for the purpose of updating 
programs and data. Similarly, it would be necessary 
to compensate for the lack of documentation on the 
package; 
(e) the incorporation of control measures, which would 
be independent of the user, and which could be used 
both for internal control and for external control 
within the institution. Such measures are well within 
the bounds of present technical possibilities. When new programs come to be prepared in this field, 
account should also be taken of the specific needs of 
the Court of Auditors. 
Observations concerning the management 
systems 
12.18. Upstream and downstream of the processing, in 
the computer sense of the term, of the data examined in 
paragraphs 12.3 — 12.17, there are various other 
procedures which constitute the so-called manual man­
agement of salary payments. This is closely linked to the 
more general management of staff, which is the respons­
ibility of the appointing authority, and is carried out in 
each institution according to a plan which is always more 
or less identical. The management was looked at from 
three different points of view: preparation of pay, 
budgetary management and financial control. Tests were 
carried out according to a data-processing method, by 
selecting in the files all cases corresponding to a given 
configuration (as compared with a rule deriving from the 
Staff Regulations, for example) as well as by comparing 
data. 
Commission 
Preparation of pay 
12.19. For the purpose of preparing pay, information 
concerning the situation of new employees, changes in the 
situation of existing employees or changes in the 
regulations — an average of 12 000 codifications each 
month — is fed into the computer by staff in the 
departments headed by the authorizing officer for staff 
expenditure. This information, which is added to or takes 
the place of the information already recorded, con­
stitutes, cumulatively, the data bases concerning the staff 
as a whole which are used for the purpose of calculating 
salary payments. Some deficiencies have been observed at 
this stage which create corresponding risks of inac­
curacies in the constitution of the files. 
12.20. In spite of an observation in the Court's annual 
report for the financial year 1980 (3), the 'Financial rights' 
departments in Brussels do not ensure that the 'Salaries' 
department takes proper account of their decisions. In 
this way, neither the accuracy nor the validity nor the 
exhaustivity of data entered into the 'PAIE' files are 
guaranteed. In the salaries department, the summary 
banking lists of salary payments may be corrected 
manually. Although the corrections are approved by the 
authorizing officer, it would be preferable to avoid them 
and to abide by an automated correction procedure. 
12.21. The authorizing officer's departments say that 
they carry out systematic controls on payslips which have 
15. 12. 87 Official Journal of the European Communities 107 
been modified during the month and that they check in 
detail approximately 20 payslips selected at random. 
Nevertheless, no trace of these controls or of the results 
has been kept,which makes it impossible to assess their 
quality, even supposing, moreover, that the selection is 
representative. Each month, in principle, a list is 
produced of payslips where the sum to be paid varied by 
5 % as compared with the previous month. This control 
tool, which is easy and useful, was not used in 1986, 
however. Generally speaking, it would be desirable to 
draw up a list of controls to be carried out each month, 
which would be attached to the collective statements 
submitted for the signature of the authorizing officer. 
Budgetary management 
12.22. Amongst the things produced each month by the 
computer are individual payslips and a list of sums 
charged to the budget (known as PRIM). The breakdown 
by budget heading of monthly expenditure on salaries 
charged to Chapter 11 of Title Al is carried out on the 
basis of this list. All the amounts which are calculated by 
computer are given their own special identification code. 
A table of equivalence has been drawn up between these 
codes and the budget headings which does not call for any 
particular comments. The amounts made out in Belgian 
francs are converted manually into ECU for the purpose 
of entering them in the budget by the accountant. It would 
be easy and more reliable to do this by computer. 
Inspections by the Financial Controller 
12.23. The checks carried out by the Financial Con­
troller are mainly intended to ensure that the payments 
made do in fact correspond exactly to the financial rights 
of the members of staff concerned. Thus, when each new 
member of staff takes up his duties, the financial rights 
granted to him are checked on the basis of the proposal 
drawn up by the personnel department and the docu­
ments annexed to it. Each monthly collective statement is 
subject to an inspection concerning, on the one hand, the 
availability of the appropriations and, on the other, the 
accuracy of the payslips. In the case of long-serving 
members of staff, this takes the form of a sample check, 
and in the case of new members of staff, a check on each 
individual. Finally, checks are made on items which recur 
approximately once a year (expatriation allowance, 
household allowance, etc.) from the supporting docu­
ments included in the personal files. 
12.24. In their present form, these various types of 
checks are useful. They are ingeniously designed, since 
they combine a check of all the inputs with detailed 
sample checks according to theme. However, they are not 
sufficient to guarantee the accuracy of the products of the 
salary payment system because it is not possible either to 
certify that the information shown in the computer data 
bases is accurate, true and complete or to detect all 
irregular or risky situations corresponding to all possible 
configurations in relation to the rules in the Staff Regulations. The first objective would require a thorough 
comparison between the 'PAIE' data files and the 'Sysper' 
data files and, in particular, between the former and the 
staffs personal files. The second objective could be 
achieved by setting up a proper and permanent com­
puterized audit programme within the 'PAIE1 system, 
based on various categories of tests, and would presup­
pose that all essential information was available. 
Test results 
12.25. In order to evaluate the accuracy of the data 
recorded in the 'PAIE' files and the extent to which they 
are in accord with the provisions of the Staff Regulations, 
a manual test and data-processing tests were carried out 
on salary payments for the month of July 1986. 
12.26. The manual test related to a sample of 242 
members of staff (that is, 2 % of the total) selected from an 
alphabetical list of the institution's staff. The objective of 
the test consisted in comparing the supporting documents 
in the personal files with the different salary items shown 
on their payslips. This test confirmed that supporting 
documents were missing in 33 of the files checked. 
12.27. The data-processing tests were carried out either 
within the 'PAIE' package or between the data included 
in this package and the data included in 'Sysper' (4). This 
computerized system for staff management involves, in 
principle, identical or complementary information to the 
information contained in the package mentioned above. 
A number of these tests produced positive results, to the 
extent that no case that seemed likely to create- problems 
was listed. Thus, an analysis test of situations that seemed 
abnormal, which was carried out in the three institutions 
concerned, had the aim of identifying cases of employees 
who had been in the 'PAIE' package for more than five 
years without any change in their situation other than 
automatic ones (rising by a step, payments of back-pay 
etc.) or, on the contrary, cases which appeared for periods 
shorter than three months. This test did not reveal any 
irregularities. 
12.28. Results were obtained from other tests in the 
form of lists of members of staff whose situation at first 
sight appeared to be unusual from the point of view of 
certain selected financial rights. Subsequent sample 
checks were made of the personal files of the staff in 
question, which revealed a small number of cases that 
needed to be adjusted or updated; these cases were 
notified to the institution. 
108 Official Journal of the 
Parliament 
Preparation of pay 
12.29. As at the Commission, deficiencies were noted in 
the procedures used for the inputting of data into the 
computer. Data are entered into 'PAIE' — averaging 
more than 4 200 codifications per month — by the 'Salary 
calculations' department, on the basis of a summary 
record of the rights granted, drawn up by the personnel 
division. Each member of staff has sole responsibility for 
both entering the data and checking and correcting them, 
with no intervention by anyone else. The personnel 
division does not check that its decisions, and its decisions 
alone, have been correctly applied by the 'Salary 
calculations' department. 
12.30. There was no evidence that consistency checks 
were made by the authorizing officer; no checks were 
made on the data entered each month in the 'PAIE' data 
files; no comparison was made between the data shown in 
'PAIE' and in 'RAPE', which, like 'Sysper' at the 
Commission, is a computer system for staff management 
that contains identical or additional information to the 
information in the package; the authorizing officer does 
not examine the supporting documents, as he is required 
to do by Article 36 of the Financial Regulation (5). 
12.31. The finance department has direct and general 
access to the 'PAIE' data file, in particular for the purpose 
of making deductions from emoluments or for making 
transfers. This situation, which increases the risk of 
manipulation, is irregular and dangerous. 
Budgetary management 
12.32. The 'PAIE' package is used to supply the same 
services to the Parliament as to other users, namely, 
employees' payslips and the list (PRIM) of sums charged 
to the budget. The distribution of these amounts by 
Chapter 11 budget heading is carried out on the basis of 
this list. The table of equivalence between the computer 
codes and budget headings, however, is not the same as 
the one used by the Commission, on which point the 
Court has some reservations. One item, the 'Double 
dependent child allowance', amounting to 0,6 Mio ECU 
in 1986, is charged to budget heading 1100, 'Basic 
salaries', instead of to heading 1101,' Family allowances'. 
Five items corresponding to foreign exchange losses 
(BHW, banks, etc) and amounting to 13,8 Mio ECU in 
1986 are charged to heading 116, 'Weighting'. This 
amount is then re-charged manually to heading 2321, 
'Exchange losses'. European Communities 15. 12. 87 
12.33. For the purpose of entering commitments and 
payments from the PRIM list in the accounts, the 
Parliament uses a 'Logabax' computer system which, 
because of its outmoded technical aspects, is unreliable 
for accounting purposes. Since 'Logabax' was not 
programmed to be interrogated directly, a sub-system, 
called SIRC, had to be created so that users could have 
access to it by terminal. But the SIRC data is only updated 
every two days and loading of'Logabax' is subject to an 
average of one month's delay. As a result, the Financial 
Controller has set up a card index system, which is 
updated manually, in order to obtain accurate inform­
ation on the use of appropriations. 
Internal inspections carried out by the Financial 
Controller 
12.34. The only real checks on remunerations are 
carried out by the Financial Controller. He examines all 
the individual recruitment files as well as specific 
decisions on the granting of rights. He makes a 
comparison, by grade and by step, between the number of 
staff listed in 'PAIE' and the number shown in 'RAPE'. 
He also checks data acquisition by taking a monthly 
sample and by examining a selection of personal files, and 
he carries out a number of specific sample checks. On the 
other hand, the Court was unable to obtain the 
information required to assess the extent of the sampling 
carried out. Furthermore, there are no thematic checks, 
for example, according to the type of allowance. 
12.35. Thus, the same assessment can be made of the 
work of the Parliament's Financial Controller as was 
made of the Commission's, that is to say that lie 
intervenes during inputting and compares the 'PAIF.' and 
'RAPE' totals but does not make use of the computer for 
the detection of possible irregularities. 
Test results 
12.36. Computerized tests were carried out, either 
internally to the 'PAIE' package, or between 'PAIE' and 
'RAPE', in order to check the accuracy of the records on 
the 'PAIE' data files. As was the case at the Commission, 
the lists resulting from the tests were subjected to sample 
checks. The results revealed some contentious cases which 
were notified to the institution. The existence of these 
cases shows how useful the introduction of computerized 
auditing facilities can be. 
15. 12. 87 Official Journal of the European Communities 109 
Court of Auditors 
Preparation of pay and budgetary management 
12.37. The Court of Auditors has a 'Salaries' depart­
ment which is responsible for maintaining the 'PAIE' 
data files, representing an average of 200 data acquisition 
codifications per month. The acquisition and inspection 
operations are carried out by only one person, which is 
detrimental to the quality. On the other hand, the 
'Financial rights' and 'Salaries' departments are kept 
separate. 
12.38. The general computer tests applied to the Court's 
'PAIE' data files did not reveal any anomalies in the 
calculation of financial rights. Since 'Sysper' was in the 
process of being loaded at the time of the enquiry, it was 
not possible to carry out comparative tests with 'PAIE'. 
12.39. The Court receives the PRIM list of sums 
charged to the budget and uses it for its accounts. The 
method used is the same as the one used by the 
Commission and does not call for any particular 
observations. 
Inspections by the Financial Controller 
12.40. The Financial Controller examines every recruit­
ment file individually, as well as any individual decision 
on the awarding of a financial right. He also carries out a 
maintenance control of the 'PAIE' data files, by making 
sure that the monthly codifications are correctly entered 
on the payslips. Other 'theme-orientated' checks and 
checks to ensure that the 'PAIE' data files correspond to 
the personal files would also be useful. These latter checks 
could be carried out on all files, bearing in mind the small 
numbers of staff involved. 
Specific observation 
12.41. There is no provision in the Staff Regulations 
whereby an official's previous period of service as a 
temporary member of staff in an institution can be taken 
into account later for the purposes of seniority, within the 
meaning of Article 44. On several occasions in 1984, the 
Court of Justice decided that the situation of an employee 
who, after a period of service as a temporary member of 
staff, was then appointed as an official, was, for the 
purposes of classification according to step, subject to 
Article 32, which authorizes maximum additional 
seniority of 48 or 72 months according to grade. This 
article is not heeded by either the Parliament or the Commission, which, in the case of former temporary staff 
later appointed as officials, systematically apply seniority 
of step in excess of the maximum authorized by the Staff 
Regulations. 
Final comment on the management systems 
12.42. From the Court's findings as a whole, it emerges 
that, in spite of obvious differences resulting from the 
organization of the administrative departments or the 
budgetary accounting procedures, in the two large 
institutions — the Parliament and the Commission — the 
administration of remunerations is similar and suffers 
from similar shortcomings. 
12.43. A number of risks were brought to light, both in 
relation to the administrative procedures and the 
computer programming. Whilst they appear to be 
relatively limited, as indicated by the results of computer 
tests, they are nevertheless genuine risks which are 
sufficiently important to require substantial improve­
ments to be made to the procedures in general, and in 
particular to the inspection procedures. Though well 
thought out, the internal inspections, consisting of an 
inspection of the files when a new employee takes up his 
duties and the examination of certain themes, are 
necessarily limited. The use of a computer would make 
them much more effective and would ensure that the 
whole range of situations could be chosen, whenever 
necessary, even for very large numbers of staff. Of course, 
in that case it would be essential to reconsider the 
structure of the computer files, so that all the necessary 
information was available for carrying out really effective 
series of tests. 
12.44. The Court can therefore only recommend that 
the institutions concerned should take this course of 
action, since this is the only method which is sufficiently 
effective to ensure that remunerations correspond exactly 
to the personal situations of staff and are in line with the 
provisions of the Staff Regulations. Considering the 
advantages which would result from the use of a single 
type of computer software, cooperation between the three 
institutions in carrying out this task would be a good idea. 
OPERATIONAL EXPENDITURE 
Observations concerning expenditure on the 
maintenance of premises 
12.45. Expenditure by the institutions on the mainten­
ance of premises, excluding cleaning, in the three working 
110 Official Journal of the European Communities 15. 12. 87 
places — Luxembourg, Brussels and Strasbourg — was 
subjected to a horizontal audit. This expenditure, which is 
entered under Article 203 of the budget, 'Cleaning and 
maintenance of premises', totalled approximately 
10,2 Mio ECU in 1986. 
12.46. It was found that there were variations in practice 
between the institutions at the administrative level 
(contract management, insurance and guarantee clauses, 
stock control, procedure for selecting suppliers), even 
though: 
(a) the maintenance of premises is governed by legislative 
and regulatory provisions which apply to all the 
institutions; 
(b) the obligations of the institutions as tenants of most 
of the premises they occupy are virtually identical 
within any one working place. 
12.47. The audit covered all the Community insti­
tutions : the following paragraphs only refer, however, to 
the institutions in which problems were uncovered. 
Examination of the files for procurements and for work 
carried out in 1986 showed that at the Parliament and at 
the Commission in Brussels, unlike the situation at the 
Council, where the various functions of the responsible 
officers are separate, one single officer is responsible for 
following through all the stages from confirming the need 
for work to be carried out down to certifying the services 
rendered by putting his signature on the invoice to be 
paid. 
12.48. Again, in the case of the Parliament and the 
Commission in Brussels, the procedure followed in 
selecting a supplier or contractor is normally that of a 
restricted invitation for tender, whereby certain selected 
firms are invited to submit bids. In this context, it was 
found in the case of contracts with a value of less than 
18 000 ECU, the figure above which contracts have to be 
submitted to the Advisory Committee on Procurements 
and Contracts (ACPC) for an opinion, that the bids 
submitted were opened separately and before the closing 
date for tenders, which is inimical to any proper form of 
competitive tendering. In order to protect the confidential 
nature of the bids and to ensure respect for the principle of 
healthy competition, the institutions concerned ought to 
observe the prescribed procedures for submitting and 
opening bids for all contracts, in accordance with the 
provisions of the rules for the implementation of the 
Financial Regulation. 
12.49. Parliament, the Council and the Commission in 
Luxembourg are contractually bound to pay the stipu­
lated fees for certain kinds of maintenance work (lifts, 
technical installations etc.) in advance at the beginning of 
the period in question. In the interest of sound financial 
management, the institutions concerned should re­
negotiate the payment procedures in question so that 
payments are effected as they fall due and against 
submission of documents showing that the work has been carried out, which is what the Commission does in 
Brussels. 
12.50. Some leases provide that the institutions shall 
pay for municipal services in the form of instalments, 
which are subject to an end-of-year adjustment in order to 
bring the sums paid into line with the actual costs. The use 
of this adjustment system calls for the following 
observations: 
(a) there is usually a considerable delay in the settlement 
of rating charges in respect of the Hemicycle and 
Tower buildings occupied by the Parliament and the 
Council in Luxembourg. The bill for the financial 
year 1984 (for which the instalments paid by the 
institutions were too high) had still not been settled at 
the end of 1986. The same was true of the financial 
year 1985; 
(b) in the case of the Tower, Wagner and Hemicycle 
buildings in Luxembourg, the sums charged to the 
Parliament and the Council include a fairly large sum 
for persons employed by the lessors and assigned to 
work in the buildings (± 0,5 Mio ECU, of which ± 
0,3 Mio ECU was chargeable to the two institutions 
for the Tower building for the financial year 1984). 
Contrary to what the Council's reply implies, the 
existing documents did not allow checks to be made 
by the institutions, which ought at least to have 
obtained information concerning the number, pres­
ence and remuneration of the staff assigned to the 
buildings in question. This also applies to the 
financial year 1985; 
(c) a large part of the expenses charged to the owners, 
and subsequently passed on pro rata to the two 
institutions, includes VAT, but there are no specific 
details of the amount of tax. As a result, the 
institutions are paying VAT despite the fact that they 
are exempted from paying it. For example, the 
amount of VAT borne by the Parliament on sums 
charged to it for its occupancy of the Tower building 
for 1984 is estimated at 0,7 Mio BFR (± 16 000 
ECU). The institutions must avoid paying this tax in 
future and must find out whether sums already paid 
under this heading can be recovered. This also applies 
to the financial year 1985. 
12.51. In Brussels the Commission rents part of a 
building situated in the Square de Meeus. In accordance 
with the lease, the institution pays the lessor a standard 
fee for a range of services provided by it, which in 1986 
totalled 48,8 Mio BFR (± 1,1 Mio ECU). This agree­
ment calls for the following observations: 
(a) a comparison of the latest available estimates of 
expenses other than rent, by premises, showed that 
the amount paid per m2 for the building in question 
(2 531 BFR) is much higher than the average cost 
15. 12. 87 Official Journal of the European Communities 111 
(1388 BFR) of the other buildings which the 
Commission occupies in Brussels; 
(b) the lessor provides works and services for which the 
Commission already has qualified staff available (e.g. 
technical services, breakdown services, etc.). 12.53. An examination of the level of stocks revealed the 
existence of a surplus in some institutions. In the case of 
the Commission in Brussels and in Luxembourg, 56 % 
and 72 % respectively of the articles recorded were 
available at the beginning of 1986 in quantities in excess of 
the total consumption for the previous year. The same 
stock levels were recorded at the Parliament for the same 
period in the case of 59 % of the articles entered. 
(c) the expensive nature of the works and services 
required of the lessor (the cost of which is equivalent 
to approximately 50 % of the rent) should lead the 
Commission to renegotiate the relevant clauses of the 
contract in order to reduce its overheads on the 
premises. 
Observations concerning expenditure on 
stationery and office supplies 
12.52. Expenditure by all the institutions on purchases 
of stationery and office supplies totalled 9,4 Mio ECU in 
1986, of which-an average of 45 % was for purchases of 
stationery. 12.54. The existence of these surpluses proves that the 
budget estimates of the institutions concerned did not 
take account of their actual needs. 
12.55. As regards cooperation between the institutions 
on procurement of stationery and office supplies, the 
Court of Auditors, in its special report on acquisition and 
control over office supplies and equipment, etc.(6), has 
already recommended that the institutions ought to 
obtain the bulk of their supplies by means of contracts 
which would be negotiated and awarded on a centralized 
basis. At present, only the administrations of the Court of 
Justice, the Court of Auditors and the Economic and 
Social Committee make occasional use of the framework 
contracts concluded by the institutions, whilst cooper­
ation between the Parliament, the Council and the 
Commission is minimal in this area, despite the existence 
of an inter-institutional group for harmonization of 
procurement. 
(0 Section III 'Commission', part A. 
(2) Pensioners; Officials and temporary staff Commission 
(Brussels, Luxembourg), Parliament, Court of Auditors; 
Auxiliary staff Commission (Brussels, Luxembourg), 
Parliament, Court of Auditors; Commissioners; Decom-
mitments. (3.) OJC344, 31.12.1981, paragraph 10.6. 
(4) System of personnel management. 
(5) Financial Regulation of 21.12.1977, OJ L 356, 31.12.1977. 
(6) OJC326, 15.12.1980. 
112 Official Journal of the European Communities 15. 12. 87 
CHAPTER 13 
Subsidies 
13.0 TABLE OF CONTENTS 
Subsidies to the Dublin Foundation and Berlin Centre 
Introduction 
Formal powers of the Commission over the Foundation and Centre 
Commission management of its subsidies 
Coordinated approach 
Exchange of experience between the Foundation and Centre 
Verification carried out by the Financial Controller 
Division of responsibilities for operational questions 
European Schools 
Other subsidies 
Introduction 
Sundry subsidies 
Processing of applications for subsidies 
Coordination between Commission departments 
Youth Forum 
General matters 
Commission subsidy 
Financing by the members of the Forum 
Assessment of the Forum's activities 
European University Institute, Florence 
General 
The Commission's role in the administration of the Institute 
Payment of the subsidy to the Institute 
Utilization of the 'historical archives' appropriations 
Transfer of appropriations for the 'research library' 
Assessment of results Paragraph 
reference 
13.1 — 
13.1 — 
13.4 — 
13.7 — 
13.7 
13.8 — 
13.10 — 
13.12 — 
13.15 — 
13.20 — 
13.20 
13.21 — 
13.21 — 
13.23 — 
13.25 — 
13.25 
13.26 
13.27 
13.28 
13.29 — 
13.29 
13.30 — 
13.32 
13.33 — 
13.35 — 
13.37 13.14 
13.3 
13.6 
13.14 
13.9 
13.11 
13.14 
13.19 
13.37 
13.24 
13.22 
13.24 
13.28 
• 13.37 
13.31 
13.34 
13.36 
15. 12. 87 Official Journal of the European Communities 113 
SUBSIDIES TO THE DUBLIN 
FOUNDATION 
AND BERLIN CENTRE 
Introduction 
13.1. The Commission pays annual subsidies from the 
general budget (Articles B 641 and B 632) to the European 
Foundation for the Improvement of Living and Working 
Conditions (Dublin Foundation) and the European 
Centre for the Development of Vocational Training 
(Berlin Centre). These subsidies, which in 1986 totalled 
12,5 Mio ECU (5,2 Mio ECU to the Dublin Foundation 
and 7,3 Mio ECU to the Berlin Centre), represent 99 % of 
the 1986 budgets of the two bodies. The importance of the 
Community subsidies is reflected in the statutes of the two 
bodies ('), which specify that their draft budgets are to be 
submitted by the Commission to the Community 
budgetary authority. The Administrative Boards then 
adjust their budgets in the light of the subsidies granted by 
the budgetary authority. 
13.2. The Dublin Foundation and the Berlin Centre 
were created in 1975 by Council Regulations (EEC) No 
1367/75 (') and No 337/75 (') as autonomous bodies 
operating within the framework of the European 
Communities. The Foundation was set up with the aim of 
helping to improve living and working conditions; in 
addition, it was also given the tasks of developing ideas 
for medium and long-term improvements and of advising 
Community institutions on foreseeable objectives and 
guidelines. The Centre was founded with the aim of 
assisting the Commission in encouraging the promotion 
and development of vocational training and of contribut­
ing to the implementation of a common policy in that 
regard. 
13.3. As part of its annual audit of the Foundation and 
the Centre, the Court has carried out an examination of 
their financial management, the results of which have 
been communicated to their discharge authorities in the 
form of the Court's separate annual reports on the two 
bodies in relation to the financial year 1986. The status, 
legal bases,structure and resources of the Foundation and 
the Centre are very similar. For this reason, the approach 
adopted by the Court for its assessment of the financial 
management has been the same for the two bodies and, in 
order to identify the most satisfactory practices and 
potential improvements in efficiency and effectiveness, it 
has included a comparison between their procedures, 
taking into account differences in their fields of activity 
and their objectives. This approach is reflected in the 
following observations, which relate particularly to the 
Commission's powers over the two bodies and its 
management of the annual subsidies which it pays to 
them. 
0) The footnotes appear at the end of each chapter. Formal powers of the Commission 
over the Foundation and Centre 
13.4. The overall management and guidance of the 
bodies is in the hands of two 39-member Boards, on each 
of which the Commission has three representatives, and 
two Bureaux, each consisting of four persons and on each 
of which it has one representative. The Commission has 
no formal powers over the decisions and management of 
the Foundation and Centre. It has, however, considerable 
informal influence because: 
(a) the regulations require the Administrative Boards to 
adopt the work programmes in agreement with the 
Commission; 
(b) its Financial Controller is required to check the 
revenue and expenditure (see paragraph 13.10). 
13.5. In January 1986 the Commission submitted to the 
Council of Ministers a proposal (2) for amendments to the 
statutes of the Dublin Foundation. This provided for a 
strengthening of the Commission's role in the manage­
ment of the Foundation; it also aimed to bring the 
Foundation's activities more closely into line with 
Community priorities (see paragraph 13.14). At the same 
time, the Commission indicated that it would consider 
making similar proposals for the Berlin Centre, taking 
into account its experience of the adoption and im­
plementation of the proposals for the Foundation. 
However, as a result of opposition from the trade unions 
and employers and from the Economic and Social 
Committee and the European Parliament, the Commis­
sion subsequently withdrew its proposals. 
13.6. The Court notes that neither the Foundation, nor 
the Centre nor the Commission have examined all 
potential sources for the financing of the activities of the 
two bodies. The Court considers that, whilst preserving 
the autonomy of the two bodies, this should be pursued, 
particularly as the Commission's continuing lack of 
formal powers does not appear to be consistent with the 
total amount of funding that it provides. 
Commission management of its subsidies 
Coordinated approach 
13.7. The Court notes that, although primary respon­
sibility for the management of the subsidies to both 
114 Official Journal of the European Communities 15. 12. 87 
bodies lies with the Directorate General for Employment, 
Social Affairs and Education (DG V), a coordinated 
approach to the management of the subsidies from the 
point of view of sound financial management, par­
ticularly as described in paragraphs 13.8 — 13.14, is 
lacking. 
Exchange of experience between the 
Foundation and Centre 
13.8. The two bodies coordinate their work program­
mes where there is a potential overlap or area of common 
interest (e.g. the impact of new technologies). In addition 
to some liaison between officials of the two organizations, 
their Directors meet on an annual basis. However, the 
Court's comparison of their activities shows clearly that 
this cooperation does not extend to a regular exchange of 
experience, relating to permanent activities and pro­
cedures, in order to identify the most satisfactory 
practices and to improve overall efficiency and effective­
ness. The following are examples of aspects which could 
benefit from such an exchange: 
(a) printing and publication policies (Dublin has an 
internal print-shop whereas Berlin uses external 
printing firms); 
(b) development of computerized management inform­
ation and control systems (Dublin has plans for 
computerization whereas Berlin has already de­
veloped project-costing and translation-monitoring 
systems); 
(c) internal evaluation of projects and quality control of 
the results (Dublin has developed a clear policy and 
system whereas Berlin's activities in this respect are ad 
hoc); 
(d) a policy for the co-financing of individual projects 
with specialist bodies in the Member States (de­
veloped only by Berlin); 
(e) comparisons of the most cost-effective means of 
achieving the same objectives (the cost per page of 
printing at the Dublin Foundation proved to be lower 
than at the Berlin Centre, whereas the cost per page 
for external translations is higher); 
(0 the maintenance of management records (unlike 
Berlin, Dublin has established systematic and struc­tured project files and records of staff meetings held 
to review the progress of its work programme). 
13.9. The Court considers that the responsibility for 
taking the first initiative to ensure that each body benefits 
from the experience of the other lies with the Commission, 
which is in a unique position to compare the activities of 
both bodies. 
Verification carried out by the Financial Controller 
13.10. The staff of the Commission's Financial Con­
troller's department verify (and give their approval to) the 
individual payments and receipts of the Foundation and 
Centre on the basis of accounting vouchers submitted to 
Brussels. Representatives of the Financial Controller also 
attend most of the Board meetings of each body, which 
are held three times a year, and take these opportunities to 
examine in depth a selection of transactions and related 
questions. 
13.11. The Court notes that, although the same 
financial control division is responsible for both Berlin 
and Dublin, there are differences in approach to the on-
the-spot verification of both bodies as far as the drawing-
up of reports on the results is concerned. For the Dublin 
Foundation, a control report is issued after each visit and 
deals not only with legality and regularity but also with 
certain aspects of sound financial management. On the 
other hand, despite regular visits, no such reports were 
issued in 1985/86 by the Financial Controller for the 
Berlin Centre (although there was one case of withholding 
of approval for failing to stay within limits imposed on 
imprest accounts which was subsequently overruled). The 
Court considers that the Financial Controller should 
ensure that his staff adopt a coordinated approach to the 
two bodies and, in particular, take advantage of the 
considerable possibilities for comparison. 
Division of responsibilities for operational questions 
13.12. Although the responsibility for administrative 
and budgetary matters relating to both Dublin and Berlin 
is in the hands of the same Commission officials within 
DG V, operational questions (i.e. work programme) are 
allocated to the appropriate specialist department. For 
the Berlin Centre, this means that all operational 
questions are dealt with by the directorate of DG V which 
is responsible for vocational training, including the 
15. 12. 87 Official Journal of the European Communities 115 
coordination of the Centre's impact on policies managed 
by other DGs (e.g. new technologies). All the Commis­
sion representatives on the Centre's Board are from 
DGV. 
13.13. By way of contrast, not all contacts between the 
Foundation and the Commission on operational ques­
tions are the responsibility of the DG V directorate which 
is specifically responsible for living and working con­
ditions. Environmental and technological matters are 
dealt with separately by the directorates responsible for 
Environment, Consumer Protection and Nuclear Safety 
(DG XI) and for Science, Research and Development 
(DG XII) respectively. The Commission representatives 
on the Foundation's Board are from DGs V, XI and XII. 
(In 1985/86, despite the fact that environment and new 
technologies were key programme themes, representat­
ives of DGs XI and XII did not regularly attend Board 
meetings.) 
13.14. The Court questions whether this lack of 
coordination by the Commission of its contacts with the 
Foundation at an operational level (as opposed to 
administrative coordination) has reduced the Foun­
dation's capacity to carry out effectively the task, laid 
down in its statutes ('), of advising on foreseeable 
objectives and guidelines in the development of Com­
munity policies. In particular, the Court notes that: 
(a) although individual Foundation projects are closely 
linked to certain Community policies (e.g. environ­
ment and biotechnology), its overall role within the 
Community's research policy has not been defined or 
recognized. Specifically, its activities (e.g. the impact 
of new technologies) are not integrated into the 
Commission proposal for a framework programme 
of Community activities in the field of research (3), 
which includes the theme of improving living 
conditions; 
(b) the Commission does not consult the Foundation 
formally prior to its development of communications 
and policies relating to the Foundation's field of 
activities. This is somewhat surprising because the 
Commission does not have an advisory body for 
living and working conditions comparable to that 
which exists for vocational training. For example, the 
Foundation was not formally consulted by the 
Commission when the latter was preparing a proposal 
for a 1987-92 environmental action programmed). 
On the other hand, there is no evidence that the 
Foundation itself, as an independent body, has taken 
the initiative to provide specific advice on the 
development of policies on a regular basis; (c) despite noticeable improvements in the overall 
quality and frequency of its relations with the 
Commission, the Foundation has not yet established 
adequate contacts with DGs VII and XIII (transport, 
telecommunications, information industry and in­
novation) whose areas of research overlap with those 
of the Foundation. 
EUROPEAN SCHOOLS 
13.15. The bulk of the European Schools' financial 
resources derives from the Community subsidy entered in 
the budget of the Commission, amounting to 43,3 Mio 
ECU in 1985 and 49,7 Mio ECU in 1986, that is, about 
69 % of their total budget. This budget is drawn up by the 
Board of Governors of the Schools, pursuant to the 
provisions of Article 13 of the Schools' Statute, and is also 
shown for information purposes in the general budget of 
the Communities. 
13.16. The two documents, however, show different 
amounts for the Commission's subsidy. In 1985, the 
subsidy entered in the Schools' budget was 4,6 Mio ECU 
greater than the amount entered in the Community 
budget. In 1986 it was initially 13,6 Mio ECU greater, but 
this amount was then reduced to 4 Mio ECU after a 
transfer of appropriations of 9,6 Mio ECU from Chapter 
100 was granted in November. The result is that the 
Schools base their administration on a quantity of 
available appropriations which is overstated, even though 
in practice they have to adjust to the income which they 
actually receive. This anomaly should be rectified and the 
Board of Governors should interpret its obligation to 
inform the Commission of its budget as an obligation to 
ensure that the budget is in line with the decision taken in 
this respect by the budgetary authorities of the Com­
munities. 
13.17. Furthermore, the Commission's role on the 
Board of Governors is inadequate as far as budgetary 
matters are concerned, considering the importance of its 
financial contribution. At the least it should act as a 
proper coordinating body and should have access to full 
and regular accounting information, so that it can plan 
and estimate the instalments of the financial contribution 
it pays to the Schools with full knowledge of the facts. 
13.18. In fact, as the Court has already noted in its 
previous annual report, what actually needs to be 
reviewed is the structure of the European Schools, since it 
is based on an out-of-date statute which was drawn up for 
a single school. The main objective of such a review would 
be to ensure that there was a genuine separation of powers 
between the budgetary, statutory and discharge author­
ities, on the one hand, and the management on the other. 
It should also aim at integrating the European Schools 
116 Official Journal of the European Communities 15. 12. 87 
more fully within the European Communities. The 
financial and budgetary management would thereby be 
clarified without reducing the educational autonomy of 
the Schools. 
13.19. Apart from this fundamental issue, the problems 
in 1985 and 1986 were the same, even though there was 
greater awareness by all the parties concerned, and 
especially by the Parliament. The main problems were as 
follows: 
(a) the Schools' openness to all types of pupils should be 
regulated by specific criteria in relation to admissions 
and cost sharing; 
(b) agreements should be concluded with those host 
Member States which have not already done so, and 
value-added tax (VAT) procedures should be harmo­
nized between these States, if possible on the basis of 
the principle of general exemption; 
(c) the teachers' pay system, which is more or less aligned 
with that of European Community officials, should 
be stripped of its various unwarranted features or 
advantages which have no equivalent in the latter 
system; 
(d) the financing agreements with public or private 
bodies which participate in the European Schools' 
system should be seriously renegotiated as regards the 
financial contributions they are asked to pay; 
(e) finally, the arrangements to reorganize the financial 
administration, which were initially undertaken on a 
very modest scale, should be extended and im­
plemented without delay. 
OTHER SUBSIDIES 
Introduction 
13.20. The observations made under this heading relate 
to those subsidies which are administered by the General 
Secretariat of the Commission. The (non-differentiated) 
appropriations for the financial year 1986 amounted to 
4,5 Mio ECU; in addition, appropriations totalling 
0,2 Mio ECU were carried forward from 1985. These 
appropriations cover sundry subsidies (2,35 Mio ECU 
for 162 beneficiaries) and specific subsidies, i.e. the Youth 
Forum (0,63 Mio ECU) and the University Institute in 
Florence (1,71 Mio ECU). Sundry subsidies 
Processing of applications for subsidies 
13.21. A review of the procedure for processing the files 
showed that there was no provision for recording the 
assessments made of applications on a case-by-case basis. 
The work sheets used when applications are being 
appraised are hand-written working documents which 
could not be considered part of the file for processing the 
applications. It would be useful if each file contained a 
card setting out the grounds for granting the subsidy and 
the bases used for determining the amount granted. 
13.22. In an internal document dating from 1980, the 
Commission laid down criteria for choosing between the 
applications it receives for subsidies. However, experience 
shows that, because the wording of these criteria is often 
too general, it is difficult to check subsequently that they 
are being applied. In order to take account of the changes 
that have occurred since 1980 and to ensure greater clarity 
of the procedure, the Court considers that the Commis­
sion should review these criteria and the procedures for 
applying them. 
Coordination between Commission departments 
Coordinating session 
13.23. An examination of the procedures in use at the 
subsidy department revealed that coordinating sessions 
were held with other Commission departments during the 
stage of processing applications for subsidies, and 
particularly during preparation of the written proceed­
ings. These sessions are organized on an informal basis 
and the decisions taken at them are not clearly recorded in 
the working files. The Court has noted the Commission's 
intention of formalizing the coordination procedures to a 
greater extent. 
Central financial aid file 
13.24. A Commission Decision of 19 September 1980 
prescribed the setting-up, by the subsidy department, in 
association with the Directorate-General for Budgets 
(DG XIX), of a central subsidy file which would receive 
inputs from all the Commission departments and be 
accessible to each of them. This Decision was only partly 
implemented. The Court considers that, in its present 
15. 12. 87 Official Journal of the European Communities 117 
form, this file still serves too limited a purpose. The need 
to centralize information on financial aid by means of a 
real central file, so that each Commission department 
may benefit from the experience of other departments, 
must once again be stressed. 
Youth Forum 
General matters 
13.25. The Youth Forum was set up in 1978 in the form 
of an international association governed by Belgian law. 
As at 31 December 1986, 37 youth organizations 
belonged to it. Its statutes lay down its objective as acting 
as a political platform for youth organizations with 
regard to the institutions of the European Communities. 
Commission subsidy 
13.26. Although subsidies paid by the Commission 
rarely exceed a few tens of thousands of ECU, the subsidy 
granted to the Youth Forum amounted to 630 000 ECU 
for 1986. The principle of full financing of the Forum's 
operating costs by the Commission was established in 
1979 through an exchange of letters with the President of 
the Commission. The Commission plays no statutory role 
within the decision-making authorities of the Forum, 
even in budgetary matters. The Forum's draft financial 
regulation dates from 1977 but was not adopted until July 
1987. In order to prevent the situation from drifting any 
further, the Court considers that a formal agreement 
should define the financial relations between the Forum 
and the Commission. 
Financing by the members of the Forum 
13.27. Over the years, the Youth Forum has acquired an 
established right to exist which is tending to convert the 
Commission's subsidy into a form of compulsory 
expenditure. As the members of the Forum do not 
contribute towards financing it, a paradoxical situation 
has arisen, whereby an organization which admits that it 
is a form of lobby is financed by the very body it has been 
set up to influence. Since the Forum is assured of being 
financed in perpetuity, unimpeded by any effective 
control system, the members ought to have a direct 
interest in the sound financial management of the Forum 
by being obliged to contribute towards financing it, even 
on a limited scale. The number of members is sufficiently high for the cost that would have to be borne by each of 
them to be reasonable. Consequently the Court must ask 
the Commission to contact the Forum without delay in 
order to put a stop to a situation in which those who are 
responsible for the management do not have to bear the 
slightest financial consequences of their actions. 
Assessment of the Forum's activities 
13.28. The Forum sends the Commission, the European 
Parliament and the Council its observations on Com­
munity policies affecting young people. The Court is 
struck by the fact that the Commission feels able to 
declare that it refuses to make an assessment of the 
subjects dealt with by the Forum and that it can regard 
occasional evaluations which are not entered in reports 
annexed to the file as sufficient. The Court considers that, 
since the Commission's subsidy is an especially large one, 
it should make a periodical and duly justified assessment 
of the Forum's activities before granting aid. 
European University Institute, Florence 
General 
13.29. The Institute was set up in 1972 under an 
intergovernmental agreement between the countries of 
the Community. It has not yet been signed by Portugal. 
The Institute receives about 200 research students 
studying for doctorates, and comprises four departments: 
(a) history and civilization; 
(b) economics; 
(c) jurisprudence; 
(d) political and social sciences. 
These departments employ about 30 lecturers. The 
administrative and technical departments of the Institute 
employ 70 members of staff paid according to the salary 
scale in the Staff Regulations of officials of the European 
Communities. The Commission contributes 15,4 % of the 
Institute's budget (1,53 Mio ECU in 1986); in addition to 
this contribution, the financing of the historical archives 
of the Community amounted to 0,18 Mio ECU in 1986. 
118 Official Journal of the European Communities 15. 12. 87 
The Commission's role in the administration 
of the Institute Utilization of the 'historical archives' appropriations 
13.30. Although the Commission has been asked to 
increase its financing, it does not have any voting rights 
on the Board of Directors of the Institute. It has never 
called into question Article 6(3) of the Convention setting 
up the Institute, which only assigns it the status of 
observer. This shortcoming in the legislation contradicts 
the active role played by the Commission in supporting 
the Institute and its proclaimed concern to preserve the 
Institute's status as fundamentally a Community body. 13.33. The filing and organization of the historical 
archives of the Community institutions at the Institute 
got off to a slow start, with the result that, although the 
first appropriations were entered in the budget for the 
financial year 1982, the work was not completed until the 
autumn of 1985. At the end of 1986, the sums paid by the 
Commission totalled 615 000 ECU, of which only part 
had been utilized by the Institute, thus creating a reserve 
of available funds approximating 370 000 ECU. 
13.31. The Commission stresses that its participation in 
the activities of the research council enables it to exert a 
significant influence on the choice of the Institute's work. 
The Court considers that there are two aspects to the 
Institute's activities: 
(a) teaching and research programmes; 
(b) financial management. 13.34. The Commission considers that this reserve will 
gradually be absorbed as the management of the archives 
gets into its stride. Nevertheless, as the subsidy actually 
concerns the provision of a service, careful financial 
management would have ensured that no advance 
payments not connected with an actual service were 
made. In this context, the commitment of 180 000 ECU 
corresponding to the subsidy entered under Item 3242 of 
the Commission's budget for 1986 should have been 
deferred, because the Institute was not in a position to use 
these funds in the immediate future. Even if the balance 
outstanding from financial years prior to 1987 is to be 
completely exhausted by expenditure currently fore­
seeable for 1987, it must be stressed that funds have been 
frozen unnecessarily. 
The Commission does not play the role it should in 
financial management, even though this area should be 
given special attention, particularly with regard to the 
length of the list of posts. It is for the Commission to make 
its voice heard at meetings of the Board of Directors on all 
the issues which weigh heavily on the Community's 
budget. For this reason, the Court hopes that the 
Commission will be accorded a position within the Board 
of Directors that is in keeping with the scale of its financial 
responsibilities. 
Payment of the subsidy to the Institute 
13.32. Once accounting commitments have been re­
corded, the Commission immediately pays its entire 
subsidy into the Institute's bank account. In the interests 
of sound financial management, it would be preferable to 
pay the sums due to the Institute in instalments, on the 
basis of actual requirements, and thus to retain a 
minimum amount of control over budgetary manage­
ment. Transfer of appropriations for the 'research library' 
13.35. As in 1985, the Institute was given the Com­
mission's approval in 1986 to transfer appropriations to 
add to Item 3100, 'Research library', in its budget, by 
taking funds from allocated appropriations covered by 
the Commission subsidy. This increase is in fact intended 
to offset the cutbacks made in the part of its budget 
financed by the Member States, under Article 231, 
'Library'. This results in a transfer of costs borne by the 
Member States to the Commission, as there is no 
difference between the research library (Commission) and 
the library (Member States). 
13.36. The Court notes with satisfaction that Article 
231 of the Institute's budget obtained an increase in 
appropriations for 1987, which should avoid the need for 
a further transfer at the expense of the Commission's 
contribution. 
15. 12. 87 Official Journal of the European Communities 119 
Assessment of results 
13.37. With regard to the Institute, the Commission has 
chosen not to concern itself with questions affecting the 
selection of lecturers and students. This attitude is 
commendable, as it guarantees the Institute the indepen­
dence that is indispensable for any university research. However, despite the continued interest in the Institute 
taken by the Commission, an inspection of the Com­
mission's management department files revealed that the 
Commission has not undertaken an in-depth assessment 
of the outcome of the research carried out by the Institute. 
This being the case, it is extremely difficult to ascertain 
whether the budgetary appropriations allocated to the 
Institute have been used judiciously. 
(!) Dublin Foundation: OJ L 139, 30.5.1975; 
Berlin Centre: OJ L 39, 13.2.1975. 
(2) COM(86) 14 final. (3) OJC 275, 31.10.1986. 
(4) COM(86)485 final. 
120 Official Journal of the European Communities 15. 12. 87 
CHAPTER 14 
Loans, borrowings and interest-rate subsidies 
14.0. TABLE OF CONTENTS 
Introduction 
Summary of financial information 
Observations on the balance sheets and revenue and expenditure accounts of 
the New Community Instrument and Euratom mechanisms 
Observations on legality and sound financial management 
EIB management commissions 
Agreement regarding the auditing of NCI loans 
Loans and interest subsidies for areas of Greece devastated by earthquake Paragraph 
reference 
14.1 
14.7 
14.9 14.6 
14.8 
14.10 
14.10 
14.25 
14.31 — 14.35 
— 14.24 
— 14.30 
— 14.35 
INTRODUCTION 
14.1. This chapter deals with New Community Instru­
ment loans (NCI loans), European Atomic Energy 
Community loans (Euratom loans) and Balance of 
Payments loans (BP loans), as well as the borrowings 
contracted by the Communities in order to finance these 
three loan mechanisms. 
14.2. The budgetary authority, as part of the annual 
budget procedure, includes the sum of interest rate 
subsidies in the general budget and decides whether to 
include the budgetary guarantee for borrowing transac­
tions in the form of token entries. 
14.3. Community loans and borrowings are set out in 
the balance sheet of Community assets and liabilities. 
Interest rate subsidies relating to NCI loans and EIB 
loans from the EIB's own resources for reconstruction 
measures in areas of Greece and Italy which have been 
devastated by earthquake are included in Chapter 69 of 
the general budget of the Communities, whilst interest 
rate subsidies relating to cooperation with Mediterranean 
countries are set out in Chapter 96. 
14.4. The Commission has a direct legal obligation in 
respect of the service and the repayment of borrowings contracted by it on behalf of the Community. For this 
purpose the following Articles, which represent the 
budgetary guarantee for the above-mentioned Com­
munity borrowing systems, are included in the budget; 
(a) Article 790, 'European Economic Community guar­
antee for Euratom borrowings'; 
(b) Article 830, 'European Economic Community guar­
antee for Community loans raised for balance of 
payments support'; 
(c) Article 840, 'European Economic Community guar­
antee for loans raised for the purpose of promoting 
investment in the Community'. 
In addition, Article 969 of the budget includes a guarantee 
for loans granted by the EIB to non-Member States. 
14.5. Article 206(b) of the EEC Treaty provides that the 
Parliament, at the recommendation of the Council, acting 
by qualified majority, shall grant discharge to the 
Commission for the implementation of the budget. For 
this purpose, Parliament inspects, in accordance with the 
Council's wishes, the statement of accounts and the 
balance sheet of Community assets and liabilities 
mentioned in Article 205(a), as well as the annual report 
of the Court of Auditors, which also includes the replies 
to the Court's observations by the institutions that the 
Court has audited. 
15. 12. 87 Official Journal of the European Communities 121 
14.6. At the present time, the Council of Ministers has 
not yet reached an agreement with regard to the question 
of whether borrowing and lending activities, as well as the 
corresponding interest subsidies, should come under the 
discharge procedure, although these transactions are 
guaranteed by the Community budget and are either 
entered in the balance sheet of assets and liabilities or are 
granted from budgetary appropriations. The Court 
shares the European Parliament's view that, in accord­
ance with Article 206(b) of the EEC Treaty, these 
Community activities fall within the scope of the annual 
discharge procedure. This is also the Commission's view. from the EIB's own resources) for reconstruction 
measures in areas of Italy and Greece which had been 
devastated by earthquakes, namely Campania and 
Basilicata in Italy, and Attica, Boetia, Corinth, Euboea 
and Phokis in Greece. Of this sum, Italy received 
26,3 Mio ECU and Greece 2,7 Mio ECU. Since 1982, a 
total of 99,3 Mio ECU of interest subsidies have been 
disbursed. If the ceilings fixed by the Council for these 
loans are reached, the interest rate subsidies may be 
estimated at approximately 245 Mio ECU. 
SUMMARY OF FINANCIAL 
INFORMATION 
14.7. Tables 14.1 and 14.2 give a summary of the 
evolution of loans and borrowings during the financial 
year 1986 and also show the extent to which the ceilings 
fixed by the Council had been used as at 31 December 
1986. 
14.8. In 1986,29,0 Mio ECU were disbursed in the form 
of interest rate subsidies on NCI and EIB loans (made OBSERVATIONS ON THE BALANCE 
SHEETS AND REVENUE AND 
EXPENDITURE ACCOUNTS OF THE NEW 
COMMUNITY INSTRUMENT AND 
EURATOM MECHANISMS 
14.9. The Court examined the NCI and Euratom 
balance sheets as at 31 December 1986, as well as the 
statements of revenue and expenditure relating to the two 
mechanisms for the financial year 1986. The management 
of the accounting did not call for any specific observ­
ations. 
Table 14.1 — Evolution of loans and borrowings during 1986 
(Mio ECU) 
Mechanism 
Loans: 
— NCI 
— Euratom 
— Balance of payments 
Total 
Borrowings: 
— NIC 
— Euratom 
— Balance of payments 
Total Claims in respect of 
loans and borrowing 
commitments outstanding 
as at 31.12.1985 
At the ECU 
exchange 
rate of 
31.12.1985 
(1) At the ECU 
exchange 
rate of 
31.12.1986 
(2) 
4 757,9 4 622,8 
2 000,7 2 031,3 
3 235,8 2 709,8 
9 994,4 9 363,9 
4 959,5 4 820,5 
2 012,6 2 045,5 
3 235,8 2 709,8 
10 207,9 9 575,8 Operations carried out in 1986(') 
New loans 
or borrow­
ings 
(3) Effects of 
swap 
trans­
actions 
(4) Repayment 
or 
amortiza­
tion 
(5) 
543,5 — 172,8 
443,2 -4,4 71,9 
861,8 — 1 681,6 
1 848,5 -4,4 1 926,3 
541,3 — 159,6 
732,1(2) — 365,3 
861,8 — 1 681,6 
2 135,2 — 2 206,5 Claims in 
respect of 
loans and 
borrowing 
commitments 
outstanding 
- as at 
31.12.19860) 
(6) 
= (2)+ (3)+ (4) 
"(5) 
4 993,5 
2 398,2 
1 890,0 
9 281,7 
5 202,2 
2 412,3 
1 890,0 
9 504,5 
0) At the ECU exchange rate of 31.12.1986. 
(2) Including 243,9 Mio ECU of appropriations placed in deposit or in 48-hour notice accounts. 
122 Official Journal of the European Communities 15. 12. 87 
Table 14.2 — Main characteristics and ceilings of the various mechanisms at 31 December 1986 
(Mio ECU) 
Mechanism 
NCI* 
Euratom* 
Balance 
of payments Objective 
NCI I: 
Council Decision 78/870/EEC of 16.10.1978 empower­
ing the Commission to contract loans under the New 
Community Instrument for the purpose of promoting 
investment within the Community 
NCI II: 
Council Decision 82/169/EEC of 15.3.1982 empower­
ing the Commission to contract loans under the New 
Community Instrument for the purpose of promoting 
investment within the Community 
NCI III: 
Council Decision 83/200/EEC of 19.4.1983 empower­
ing the Commission to contract loans under the New 
Community Instrument for the purpose of promoting 
investment within the Community 
Council Decision 81/19/EEC of 20.1.1981 on Community 
aid granted by way of exception for the reconstruction of 
the regions affected by the Italian earthquake in November 
1980 
Council Decision 81/1013/EEC of 14.12.1981 on Com­
munity aid granted by way of exception for the reconstruc­
tion of the regions affected by the Greek earthquakes in 
February and March 1981 
Council Decisions 77/270/Euratom of 29.3.1977, 82/170/ 
Euratom of 15.3.1982 and 85/537/Euratom of 5.12.1985 
empowering the Commission to raise Euratom borrowings 
for the purpose of contributing to the financing of nuclear 
power stations 
Council Regulations (EEC) No 397/75 of 17.2.1975, No 
682/81 of 16.3.1981 and No 1131/85 of 30.4.1985 on 
Community borrowings to support the balance of pay­
ments of Member States Borrowing 
ceiling 
(1) 
1 000 
1 000 
3 000(3) 
2 900(3) 
1 000(4) 
80,0(4) 
3 000 
3 000(7) 
Mio USD 
8 000 
Mio ECU Loans granted 
within this limit 
Disbursed 
(2) Un­
disbursed 
(3) 
1 000,0 — 
996,7 — 
2 527,0 189,9(2) 
576,9(5) 16,9(2) 
79,8(5) — 
2 354,0 — 
2 547,8(7) — 
Mio USD 
4 872,2 
Mio ECU — Balance 
available 
(4) = 
(U-(2)-(3) 
3,3 
183,1 
91,3(6) 
0,2 
646,0 
3 127,8 
Mio ECU 
* Source: DG XVIII Commission. 
(') NCI I, II, III and Euratom loans, converted into their equivalent in terms of borrowings, i.e. including the issue costs of the corresponding borrowing 
operations, at the ECU conversion rate at the date on which each borrowing was raised. 
(2) Loans undisbursed but contracted, at the exchange rates ruling on 31.12.1986. 
(3) On 31.12.1986 two tranches (amounting to a total of 2 900 Mio ECU) had been approved. 
(4) Ceiling applicable to the entire loan programme, and relating therefore to the NCI and EIB loans and borrowings. 
(5) At the exchange rate ruling two working days before each disbursement (NCI loan). 
(6) The balance has been calculated taking into account the total amount of the loans disbursed and those contracted but undisbursed from the EIB's own 
resources, i.e. 314,9 Mio ECU. 
(7) Principal and interest. 
(8) Balance not available (measure expired). 
OBSERVATIONS ON LEGALITY AND 
SOUND FINANCIAL MANAGEMENT 
EIB management commissions approved and administered by the EIB, again acting as 
the Commission's agent, at the latter's risk and on the 
condition that the EIB fulfils its obligation. The 
corresponding borrowings for all the previously men­
tioned loans are contracted by the Commission. Interest 
subsidies relating to NCI and EIB earthquake loans are 
granted by the Commission and are financed from the 
general budget of the Communities. 
14.10. Euratom loans are granted by the Commission 
and are administered by the EIB, acting as the Com­
mission's agent. In the case of NCI loans, the Commission 
decides on the eligibility of the projects; the loans are then 14.11. In return for the services it provides in managing 
the NCI and Euratom loans on behalf of the Commission, 
the EIB receives a commission at a rate that was last 
reviewed on 1 April 1984. In 1986, the EIB was thus paid a 
sum of 5,5 Mio ECU in NCI management commissions 
and 2,5 Mio ECU in Euratom management commissions. 
15. 12. 87 Official Journal of the European Communities 123 
14.12. In its annual report on the financial year 
1984 ('), the Court recommended: 
(a) 'that the Commission should require the bank to 
make available an annual account of costs and 
income relating to NCI and Euratom loans'; 
(b) 'that consideration should be given to introducing 
differential scales of commission, to reflect more 
accurately the degree of administrative effort re­
quired by the different types of loan involved'. 
Taking particular account of the opinion expressed by the 
European Parliament in this respect (2), the Court 
reiterated these recommendations in its annual report for 
the financial year 1985. In its reply, the Commission 
pointed out that it had 'held discussions with the bank in 
an attempt to find a satisfactory solution in response to 
the European Parliament's request and the Court of 
Auditors' observations'. 
14.13. Whilst these discussions between the Commis­
sion and the EIB were being held, the Court received from 
the Commission two documents: 
(a) the Commission's interim report on measures taken 
in order to respond to the observations set out in the 
resolution accompanying the discharge decision on 
the implementation of the budget for the financial 
year 1984 (3); 
(b) a note from the EIB entitled 'The EIB budgetary 
system and the calculation of the cost of its activities'. 
14.14. In the first document, the Commission specified: 
(a) that the EIB applied a method for charging adminis­
trative costs which allowed it to calculate the cost of 
the appraisal and the administration of its various 
activities, in particular NCI and Euratom transac­
tions; 
(b) that there were at that time no objective reasons for 
introducing scales of management commission dif­
ferentiated according to the range of administrative 
tasks required for the various types of loan for the 
purpose of reimbursing the administrative costs 
incurred by the bank in its management of the loans; 
(c) that the practice of a single, fixed-rate commission 
had so far made it possible to grant loans from the 
(') The footnotes appear at the end of each chapter. NCI treasury at interest rates which were identical lo 
those applied by the EIB for loans of the same kind 
granted by it from its own resources, and that to do 
otherwise would be discriminatory; 
(d) that the methodology of these calculations and the 
results of them are audited by the bank's own 
auditors, who report to the bank's Board of 
Directors, on which the Commission is represented, 
and that this method had produced at that point a 
cumulative excess in real terms of the costs incurred 
over the income received by the bank in respect of 
NCI and Euratom loans. 
14.15. In the Court's opinion, the management commis­
sion charged by the EIB to the Commission for the 
administration of NCI and Euratom loan transactions 
should not, for objective reasons, be calculated on the 
basis of the average administrative charge calculated by 
the bank for its own transactions. The fact is that some 
loan transactions financed by the EIB from its own 
resources are carried out in distant parts of the world. 
NCI and Euratom loans, in contrast, are normally 
granted only to Member States of the Community. The 
Court found no evidence, in the documents that it was 
sent, that the procedure for calculating the management 
commission charged by the EIB took account of this fact, 
although, in the Court's opinion, the resulting adminis­
trative costs must be different. The cost of loans granted 
directly by the EIB rightly includes the administrative 
costs arising from raising the funds and monitoring the 
sources of financing, mainly the borrowings which the 
EIB contracts for the purpose of granting the correspond­
ing loans. In contrast, the borrowings contracted for the 
purpose of funding NCI and Euratom loans are directly 
raised and managed by the Commission. This difference 
also reinforces the case for the re-charging to the 
Commission of differentiated administrative costs. The 
use of a single administrative charge in these circum­
stances effectively transfers part of the burden of the 
management costs of the EIB's own loans to the 
Commission. There is no reason why accurate billing to 
the Commission of those costs which are directly borne by 
the EIB under the terms of its agreement, with the 
Commission should be necessarily incompatible with 
harmonization of the interest rates applied to NCI and 
Euratom loans on the one hand and EIB loans on the 
other. Such harmonization appears in any case to be 
desirable. 
14.16. The second EIB document is nothing more than 
a simple general description of the traditional system of 
analytical accounts set up by the EIB for the purpose of 
assessing the cost price of its loans. The EIB says that it 
uses the same method for calculating costs it has to bear in 
the management of NCI and Euratom transactions. 
However, the connection between the analytical method 
used for calculating the cost and the commission rate 
which is applied to NCI and Euratom transactions does 
not emerge very clearly at all. 
14.17. The Court, not having received any precise 
figures, has not been in a position this year, any more than 
it was in previous financial years, to establish whether the 
124 Official Journal of the European Communities 15. 12. 87 
management commissions paid by the Commission to the 
EIB correspond to the costs actually incurred. Similarly, 
the Court has not been able to check the Commission 
statement to the effect that NCI and Euratom transac­
tions involve the EIB in costs which are in excess of its 
commission income. In order to check this, it would be 
necessary: 
(a) to examine the EIB's analytical accounts in order to 
establish which administrative expenses are directly 
attributable to the management of NCI and Euratom 
loans; 
(b) to be able to check the validity of such expenses; 
(c) and to compare, throughout the life of the loans, the 
total amount of costs incurred with forecast commis­
sion income. 
It would appear that the EIB has an analytical tool which 
is sophisticated enough to supply information of this 
kind. The Commission, which is represented on the EIB's 
Board of Directors, ought to have insisted, in its capacity 
as the principal in the relationship, on this information 
being supplied, in order to be able to establish whether the 
administrative costs which are billed to it are justifiable, 
and it should make this information available to the 
Court. 
14.18. In spite of the lack of precise figures, the Court 
has made a number of observations on the nature and the 
evolution of the administrative expenses borne by the EIB 
in the course of the services it supplies under the terms of 
its agency agreement which have led the Court to the 
conclusion that the rate of the management commissions 
billed by the EIB could be reviewed. 
14.19. In a large number of cases, NCI and Euratom 
loans are combined with EIB loans. In cases of this kind, 
the EIB has already been obliged to carry out technical 
assessments of the projects, as well as financial analyses of 
the companies applying for the loans, in order to be able 
to grant its own loans, and it is able to make use of the 
same information for the related NCI and Euratom loans. 
Before the maturity date of any NCI and Euratom loan, 
the Commission sends the EIB a statement of the exact 
amount which should be paid back by the borrower in 
question, the amount of the management commission 
which the EIB should keep for itself and the number of the 
Commission bank account to which the net amount paid 
back at maturity should be transferred. Consequently, it 
does not appear that responsibility for managing the NCI 
and Euratom loans involves a large amount of extra work 
for the EIB. On the contrary, it means that the bank's 
administrative costs are covered more completely thanks 
to the fact that the volume of the transactions concerned 
is effectively doubled. This was, moreover, the line of 
reasoning adopted by the EIB when, in 1977 and in 
agreement with the Commission, it fixed the level of its 
management commission. This rate represented half of 
the average of its administrative costs at the time. Now, according to the EIB, the margin intended to cover its 
management costs, which it includes in the total cost of its 
loans, has decreased quite considerably since 1977. If we 
pursue the line of argument adopted in 1977, the EIB's 
commission rate should have been revised downwards to 
the same extent. This revised rate would then be very close 
to the one applied by other financial intermediaries used 
by the Commission in connection with ECSC transac­
tions. By way of illustration, applying a revised commis­
sion rate, as described above, to the Euratom loans 
outstanding as at 31 December 1986, in contrast to the 
rates actually applied at present, would result in a 
reduction in the EIB's bill of more than 5,6 Mio ECU for 
the period from 1986 to the maturity of the loans in 
question. 
14.20. Up to 1982, NCI loans were made up entirely of 
individual loans. Since 1982, a proportion of NCI 
resources has been distributed in the form of global loans. 
These global loans are intended to make available to 
financial institutions in the Member States funds which 
these same institutions then on-lend at their own risk to 
small and medium-sized companies, which use the money 
so provided to finance projects approved by the EIB. In 
the case of global loans, a by no means negligible 
proportion of the administrative tasks connected with the 
management of the loans is carried out by the credit 
institutions in the Member States, which, moreover, 
receive in return for their services an additional commis­
sion, which is added on to the EIB commission and which 
is included in the overall cost of the loan. Table 14.3 gives 
a breakdown of NCI loans into individual and global 
loans for the period from 1979 to 1986. Since the EIB's 
management commission was last renegotiated, which 
was at the beginning of the 1984 financial year, the ever-
increasing share of global loans in the total volume of 
loans ought, in the Court's opinion, to have led to a 
further reduction in the rate. 
14.21. Between 1977 and the end of 1986, 82 Euratom 
loans were disbursed, amounting to a total of ap­
proximately 2 577 Mio ECU. A characteristic feature of 
Euratom loans, therefore, is their relatively high nominal 
value. The loans are made for an average period of 12 
years. Because of the special nature of the field covered by 
Euratom, the loans are concentrated amongst only ten 
borrowers, which are of national or international status. 
Euratom loan contracts are set out in the form of a 
standard contract which was devised and drafted by the 
Commission's legal service, in collaboration with the EIB. 
14.22. In the Court's view, all these characteristics 
ought to limit considerably the burden of administrative 
expenses arising from the granting and managing of 
Euratom loans. However, according to the Court's 
calculations, the EIB will receive in return for managing 
the Euratom loans granted up to 31 December 1986 (for a 
total sum outstanding of 2 577 Mio ECU) a management 
commission which, before recalculation in terms of 
present value, will amount to 25,7 Mio ECU. Only a 
comparative analysis in present value terms between the 
amount of this payment and the costs actually incurred by 
the EIB for the Euratom loans would enable the invoicing 
of the EIB to be assessed. Unfortunately, for reasons 
already referred to in paragraph 14.17, the Court lacks the 
information required for such an analysis. 
15. 12. 87 Official Journal of the European Communities 125 
Table 14.3 — Distribution of NCI loans between individual and global loans 
(Mio ECU) 
Date 
loan 
was 
signed 
(1) 
1979 
1980 
1981 
1982 
1983 
1984 
1985 
1986 
Total Total amount of 
loans granted 
Nominal 
value of 
loans 
(2) Number 
of 
(3) 
234,4 9 
168,9 11 
475,4 19 
723,4 22 
1 114,5 49 
1 137,3 69 
866,3 45 
410,0 20 
5 130,2 244 Individual loans 
Nominal 
value of 
loans 
(4) Percentage 
in relation 
to(2) 
(5) = %(4)/(2) Number 
of 
(6) Percentage 
in relation 
to(3) 
(7) = %(6)/(3) 
234,4 100 9 100 
168,9 100 11 100 
475,4 100 19 100 
493,4 68,2 16 72,7 
617,4 55,4 28 57,1 
363,8 32,0 20 29,0 
243,3 28,1 12 26,7 
142,1 34,7 6 30 
2 738,7 53,4 121 49,6 Global loans 
Nominal 
value 
of loans 
(8) Percentage 
in relation 
to(2) 
(9) = °/(8)/(2) Number 
of 
(10) Percentage 
in relation 
to(J) 
(ll) = "o(l0)/(3) 
230.0 31,8 6 27,3 
497.1 44,6 21 42,9 
773,5 68,0 49 71,0 
623,0 71,9 33 73,3 
267,9 65,3 14 70 
2 391,5 46,6 123 50,4 
Agreement regarding the auditing of NCI 
loans 
14.25. As the Court mentioned in its annual report for 
the financial year 1984 (4), the negotiations into which it 
entered in the autumn of 1984 with the Commission and 
the EIB resulted in the establishment of a working 
framework, as regards the documents and information 
which the Commission was to make available, for 
auditing by the Court for the financial year 1984 of NCI 
loan transactions. 
14.26. When the Court came to carry out its audit of 
NCI loan transactions for the financial year 1985, it 
turned out that the information and documents requested 
from the Commission and supplied by it were not 
adequate for the Court to be able to express an opinion as 
to the extent to which the objectives set out by the Council 
of Ministers in its Decisions had been achieved. 
14.27. The Decision of the Council of Ministers in 
respect of NCI IV (5) states, in its Article 10, that the 
financial control and audit of the Commission's accounts 
shall be carried out in accordance with the Financial 
Regulation applicable to the general budget of the 
European Communities. The lending transactions and 
the management of cash holdings shall be covered by the 
discharge and audit procedures provided for in the Bank's 
Statute in respect of all its operations, and exclusively by 
these procedures. 
14.28. In the Court's view, the execution 'on behalf of 
the European Economic Community' of the operations 
provided for in this Decision is the sole and undivided 
responsibility of the Commission, which furthermore 14.23. The commission which the EIB receives acts as a 
form of interest on the loan. The fact is that the rate is 
applied throughout the life of the loan to the amount of 
outstanding principal. Thus, the later the repayment of 
the principal by the borrower, the higher the EIB's 
remuneration will be. Table 14.4 shows the percentage of 
Euratom loans where principal is mainly repaid at the end 
of the life of the loan. Thus, 51 % of the loans will be paid 
back in one single instalment during the final year. If to 
this we add the proportion of loans which will be repaid 
during the last three or four years of the duration of the 
loan, the percentage in question reaches almost 71 %. 
This situation partly explains the high level of the 
management commissions paid by the Commission to the 
EIB and should be enough to justify revising the way in 
which the bank's remuneration is calculated. 
14.24. The complexity of NCI transactions is such that 
it was not possible for the Court to make the same 
calculations as the ones that it made in the case of 
Euratom loans. Nevertheless, most of the Court's 
observations concerning Euratom loans ought to be 
applicable, mutatis mutandis, to the NCI loans. This is 
why the Court takes the view that the Commission and 
the EIB should reopen negotiations with a view to 
defining precise rules which will ensure that the manage­
ment commission received by the EIB serves solely and 
exclusively the purpose of reimbursing the costs which it 
actually incurs in managing NCI and Euratom loans. The 
Court must repeat the request that it has made during 
previous financial years, namely that the Commission 
should obtain precise figures, such as will make it possible 
for it to judge how far the administrative costs billed to it 
by the EIB are justified, especially in view of the fact that 
the Commission, in its capacity as the principal in this 
relationship, ought already to have taken the necessary 
measures to be able to satisfy itself that the bills it has to 
pay are in fact justified. 
126 Official Journal of the European Communities 15. 12. 87 
Table 14.4 — Proportion of Euratom loans paid back at the end of their life 
(Mio ECU) 
Currency 
(1) 
DM 
BFR 
FF 
LFR 
HFL 
FS 
ECU 
USD 
YEN 
Total Total of loans 
granted 
(2) 
460,8 
466,6 
284,4 
261,3 
280,3 
145,0 
288,0 
216,7 
174,4 
2 577,5 Loans paid 
back in the 
last year 
(3) 
365,6 
300,7 
229,1 
43,9 
64,0 
100,8 
97,7 
116,8 
1 318,6 Percentage 
in relation 
to(2) 
(4) = %(3)/(2) 
79,3 
64,4 
80,6 
16,8 
22,8 
69,6 
33,9 
53,9 
51,1 Loans paid back 
over several 
financial years 
at the end of 
their life 
(5) 
159,6 
83,2 
148,8 
115,9 
507,5 Percentage 
in relation 
to(2) 
(6) = %(5)/(2) 
61,1 
29,7 
51,7 
66,5 
19,7 Aggregate 
percentage 
in relation 
to(2) 
(7) = 
%(3) + (5)/(2) 
79,3 
64,4 
80,6 
77,9 
52,5 
69,6 
85,6 
53,9 
66,5 
70,8 
bears the sole political and legal responsibility for such 
matters, even though it is at liberty to entrust the 
administration of these transactions to the European 
Investment Bank on the basis of a cooperation agreement 
(agency mandate) entered into between itself and the EIB. 
In addition, all of these transactions are subject to a 
guarantee by the general budget of the Communities, and, 
in certain cases, in parallel to the granting of loans 
financed in this way, subsidies are also granted in the form 
of reduced interest rates on loans, the financial cost of 
which is borne by the general budget. These transactions 
are thereby automatically subject to the form of external 
control which derives from Articles 206(a) and 206(b) of 
the EEC Treaty and is codified in the Financial 
Regulation. In its various expressions of opinion, and in 
particular in its reply to the Court's annual report for the 
financial year 1985, the Commission has never challenged 
these facts. 
14.29. Following the NCI IV Decision of 9 March 
1987 (5), and in response to the intervention of the Court 
on 24 March 1987, the Commission stated once again, on 
30 April 1987, that its fundamental attitude with regard to 
the Court's powers in respect of the appropriations 
managed by the EIB under the terms of a mandate 
conferred upon it by the Commission had not changed in 
any way, and that it did not intend to interpret the 
drafting of Article 10 of the Decision in a sense which 
would lead to a limitation of the powers conferred by the 
Treaties on the Court. 
14.30. The Commission has yet to take up the challenge 
of implementing this viewpoint in- its relations with its 
agent, the EIB, in which connection, in the Court's 
opinion, the auditing procedures adopted to the satisfac­
tion of all parties in the field of ECSC audits could serve 
as a model. Loans and interest subsidies for areas of 
Greece devastated by earthquake 
14.31. In the Court's annual report for the financial year 
1985, it is stated (6) that the auditing of the Community 
aid granted in accordance with Council Decision 81/1013/ 
EEC of 14 December 1981 (7) for reconstruction meas­
ures in areas of Greece devastated by earthquake in the 
form of a loan amounting to ± 80 Mio ECU combined 
with an interest subsidy of ± 20 Mio ECU could only be 
carried out on the basis of records; in fact, by agreement 
with the Greek authorities responsible for the adminis­
tration of this aid, an on-the-spot audit visit to Greece did 
not take place until June 1986. The following further 
observations on the administration of this Community 
aid are based on the Court's findings during this audit 
visit. 
Accounting for the loan 
14.32. The agreement between the Commission, the 
EIB and the Greek authorities provided that the loan 
would initially be made to the Bank of Greece and would 
subsequently be disbursed, after certain conditions had 
been satisfied, to ministries, agencies etc. which would 
carry out the actual work. On the basis of the documents 
made available to it by the Ministry of Economics, the 
Court was able to trace the receipt of the loan in various 
15. 12. 87 Official Journal of the European Communities 127 
currencies at the Bank of Greece, the conversion of these 
currencies into drachmas and the release of the resulting 
funds to the various spending organizations. Thereafter, 
however, the funds were absorbed into the Public 
Investment Programme, so that it proved to be impossible 
to distinguish the Community contribution from State 
funds expended on earthquake relief. 
14.33. The Court recommends that, in the case of future 
operations of this kind, separate accounts should be kept, 
as evidence of orderly management of Community funds. 
Auditing of specific projects 
14.34. The Court's examinations were concentrated on 
two specific fields of the amended programme, that is to 
say, on investment in private dwellings and schools. Out 
of these two areas, dwellings erected in Nikaia (± 6,6 Mio 
ECU) and a secondary school in Athens (± 0,6 Mio 
ECU) were selected for a more detailed examination. This 
examination produced, in particular, the following 
findings: 
(a) although in the case of the dwellings erected in Nikaia 
the construction work was completed in December 
1985, the building permit was only granted in May 
1986. As a result, at the time of the Court's inspection, 
that is to say more than five years after the 
earthquake, the final taking-over stage had not been 
completed and not a single dwelling was inhabited; 
(b) the buildings in Nikaia were not included in the 
programme originally approved by the Commission 
as eligible. The inclusion of the construction of these 
buildings together with a series of other projects was 
not proposed to the EIB by the Greek authorities 
until April 1985. The Court must refer back to the 
observation it made in its annual report for the 
(') OJ C 326, 16.12.1985, paragraph 14.23. 
(2) Resolution of the European Parliament of 18.4.1986, OJ L 
150,4.6.1986. 
(3) Document COM(86) 423 final. 
(4) OJ C 326, 16.12.1985, paragraph 14.8. 
(5) Council Decision 87/182/EEC of 9.3.1987, OJ L 71, 
14.3.1987. financial year 1985 (8), according to which the 
Commission was not asked to consider the eligibility 
of these projects subsequently included in the 
programme. The newly erected buildings, in com­
parison with the damaged buildings, have been built 
to a very high modern standard. If the project had 
been carried out more cheaply, the aid which had 
been co-financed by the Community could have been 
distributed amongst broader segments of those parts 
of the population which had been affected by the 
earthquake. In view of the modest financial situation 
of the previous occupants, it is not easy to see how 
they will be able to bear the financial burden arising 
from occupation of buildings built to this standard; 
(c) in the case of the new secondary school in Athens, 
there are doubts as to its eligibility under the 
programme for the reconstruction of buildings 
damaged by the earthquake since the new school was 
built on a different site from the old one and the latter 
continued to be used as a school until 1984, the year 
during which construction of the new school was 
completed. 
Evidence of earthquake damage 
14.35. The Greek authorities were not able to provide 
evidence of the damage caused by the earthquake. Nor, in 
the case of the two specific projects selected for auditing, 
had any exhaustive and quantitative list been drawn up. 
The Court was therefore not in a position to establish 
whether the work carried out under the terms of the 
programme could ultimately be traced back to the effects 
of the earthquake.lt is therefore recommended that in 
future cases of emergency aid a clause should be inserted 
into the financing contract to the effect that approved 
works may only be carried out after submission of 
evidence of damage. 
(6) OJ C 321, 15.12.1986, paragraph 12.18. 
(7) Council Decision 81/1013/EEC of 14.12.1981, OJ L 367, 
23.12.1981. 
(8) OJ C 321, 15.12.1986, paragraph 12.37. 

15. 12. 87 Official Journal of the European Communities 129 
PART II 
European Development Funds 
TABLE OF CONTENTS Paragraph 
reference 
Introduction 1 — 5 
Observations on the financial management 6 — 22 
Third and fourth EDFs 6 
Fifth EDF 7 
Sixth EDF 8 — 9 
Drawing-up of the EDF accounts 10 
Imprest accounts 11 — 20 
Cost of construction work contracts 21 — 22 
Training aid 23 — 56 
Financial implementation of measures in the training sector 25 — 26 
Multiannual training programmes 27 — 50 
Specific schemes not covered by multiannual training programmes 51 — 55 
Final observations 56 
Trade promotion aid 57— 100 
The legal basis for trade promotion measures 58 — 59 
Sources of finance and financial execution of trade promotion programmes 60 — 63 
Trade promotion programmes 64 — 71 
Attendance at trade fairs 72 — 93 
Trade missions 94 — 99 
Final observations 100 
INTRODUCTION 2. The following paragraphs are concerned, first of all, 
with observations on the financial management of the 
third, fourth, fifth and sixth EDFs. This is followed by a 
critical analysis of the conditions governing the award 
and management of aid for training schemes and trade 
promotion. 
1. The European Development Funds (EDF) constitute 
the main instrument of the European Economic Com­
munity's (EEC's) policy of cooperation with 66 develop­
ing countries in Africa, the Caribbean and the Pacific 
(ACP States). Each EDF's allocation is separate from the 
general budget of the European Communities and is 
financed by contributions from the Member States, which 
are fixed according to an ad hoc cost-sharing formula. In 
addition, the implementation of each EDF is governed by 
a specific financial regulation. 3. Twelve countries of the ACP group were visited 
during three audit visits by the Court of Auditors in 1986: 
Guyana, Trinidad and Tobago, Grenada, Dominica, 
Santa Lucia, Barbados, Jamaica, Chad, Cameroon, 
Equatorial Guinea, Niger and Burkina Faso. During 
these audit visits, the Court examined 93 projects and 
numerous micro-projects financed in the context of the 
130 Official Journal of the European Communities 15. 12. 87 
national indicative programmes and regional cooper­
ation, as well as various measures relating to emergency 
aid under the Stabex and Sysmin systems. 
4. These audits, which covered in each of the countries 
concerned a significant part of the aid granted under the 
fourth and fifth EDFs (65 % on average of the amount 
allotted to the indicative programmes), revealed that the 
deficiencies at the project planning, appraisal and 
assessment stages commented upon in the Court's 
previous annual report had not been remedied. The 
justification for most of the observations was not 
challenged by the Commission which, moreover, stipu­
lated that some of the deficiencies would be rectified 
under the third Lome Convention. Since implementation 
of the latter was only in the early stages, the Court did not 
consider it necessary to reconsider these comments in this 
report. 
5. The cumulative utilization of the third, fourth, fifth 
and sixth EDFs at 31 December 1986 is summarized in 
Table 1, as are the total payments and sundry receipts 
recorded in 1986. The allocation of aid by recipient 
country is shown in the second part of Annex III. 31 March 1976, was in the process of being wound up, and 
the Commission started to utilize the unallocated 
resources of the fourth EDF, set up under the first Lome 
Convention, which expired on 31 December 1980. In 
particular, 75,0 Mio ECU, together with 25,0 Mio ECU 
from the fifth EDF, was allocated from the fourth EDF's 
reserves to finance an aid and recovery programme for 
African countries most affected by drought. This 
programme had been almost fully implemented by the 
end of 1986. 
Fifth EDF 
7. The Second Lome Convention, under which the fifth 
EDF was set up, expired on 28 February 1985 but 
continued to be applied under transitional measures until 
the Third Lome Convention entered into force on 1 May 
1986. At 31 December 1986, 45% of the fifth EDF 
remained to be disbursed. 
Sixth EDF 
OBSERVATIONS ON THE FINANCIAL 
MANAGEMENT 
Third and fourth EDFs 
6. During 1986, the third EDF, which had been set up 
under the second Yaounde Convention, which expired on 8. The Third Lome Convention (sixth EDF) was signed 
on 8 December 1984 and came into force on 1 May 1986. 
The considerable time lags made necessary by the 
timetable for the signing of the indicative programmes, 
together with the fact that the financial regulation was not 
adopted by the Council until 11 November 1986, account 
for the fact that, by 31 December 1986, no sums of any 
importance had been paid out against the sixth EDF, 
except for Stabex transfers totalling 105,0 Mio ECU and 
emergency aid totalling 3,9 Mio ECU. 
Table 1 — Utilization of the 3rd, 4th, 5th and 6th EDFs at 31 December 1986 
(Mio ECU) 
Resources and utilization 
Disbursements: 
— prior to 1986 
— during 1986 
Total amounts disbursed 
Not yet disbursed: 
— committed 
— not committed 
Amount allotted 
Sundry revenue: 
— prior to 1986 
— collected in 1986 
Total resources available 3rd EDF 
Yaounde II 
(Expiry: 
1976) 
881,5 
3,6 
885,1 
9,4 
2,3 
896,8 
— 
896,8 4th EDF 
Lome I 
(Expiry: 
1980) 
2 781,9 
108,5 
2 890,4 
243,1 
57,0 
3 190,5 
6,1 
3 196,6 5th EDF 
Lome II 
(Expiry: 
1986) 
2 041,0 
617,9 
2 658,9 
I 497,8 
605,6 
4 762,3 
138,3 
13,8 
4 914,4 6th EDF 
Lome III 
(Expiry: 
1990) 
116,7 
116,7 
196,5 
7 186,8 
7 500,0 
— 
7 500,0 
15. 12. 87 Official Journal of the European Communities 131 
9. At 31 December 1986, the Commission had not yet 
made arrangements to invest part of the Stabex allo­
cation, which may be estimated at 70 Mio ECU, as laid 
down in Article 153, paragraph 2, of the Third Lome 
Convention and Article 55 of the financial regulation 
applicable to the sixth EDF, so no interest has become 
available to supplement Stabex resources, which, under 
the Second Lome Convention, proved insufficient to meet 
approved claims. 
Drawing-up of the EDF accounts 
10. In order to observe the statutory time limit for 
drawing up the accounts and to ensure that appropriate 
accounting controls are maintained over the EDF 
operations, the Commission should ensure that all checks 
and reconciliations are performed regularly during the 
financial year, instead of leaving a long backlog at the end 
of the year. As the Court has pointed out in past annual 
reports, during the period required to draw up the end-of-
year accounts, the Commission is denied access to the 
accounting records of bank transactions — which 
amount to a total of some 200 Mio ECU — or to 
information on the financial implementation of projects, 
which constitutes a serious deficiency in its financial 
management of the EDF. 
Imprest accounts 
11. In accordance with Article 129(e) of the Second 
Lome Convention, the Community arranges its payment 
procedures in such a way that the least developed ACP 
States do not have to bear the prefinancing costs of 
projects and programmes. Article 230 of the Third Lome 
Convention extends this stipulation to all ACP States. 
12. For many years, however, the Commission has 
generalized the granting of advances to all ACP States, 
whether least developed or not, in particular advances to 
cover expenditure to be disbursed by local authorities. 
The Commission's practice, as defined in its instructions 
for delegates, is that the local administration may take the 
initiative in constituting an imprest account for approved 
expenditure to be effected in national currency. Virtually 
all ACP States have made use of this facility, in particular 
for the implementation of development projects in the 
rural sector. The instructions provide that such imprest 
accounts must be set up under conditions which comply 
with the EDF financial regulations, except that the 
responsibility of the administrator of the imprest account 
is not specified and there are no provisions for redress in 
case of loss or for the lodging of guarantees. 13. The advances granted in this way by the Commis­
sion are large, each typically amounting to between 
50 000 ECU and 400 000 ECU. They are intended to 
cover up to six months' disbursements, to be replenished 
quarterly and to be periodically cleared by the submission 
to the delegate of supporting documents. 
Recording advances 
14. The Commission's record of advance funds in the 
EDF accounts has proved to be inadequate and, in a 
number of cases, incorrect. 
15. Sums advanced to ACP states are not recorded as 
assets in the EDF accounts, but are charged directly to the 
project concerned. The sole record of the granting and 
subsequent discharging of advances consists of a single-
entry memorandum account, in local currency, which is 
kept for each commitment. Until recently, the Commis­
sion was unable to provide the Court with a complete list 
of all advances still outstanding in 1986, and no 
evaluation of this considerable balance sheet item appears 
in the EDF balance sheets. 
16. The Court examined 40 memorandum accounts of 
advances totalling 10 Mio ECU in outstanding balances 
and found that 50 % of these contained inaccurate entries, 
either because advances had been recorded as cleared 
expenditure or because supporting documents for cleared 
expenditure had not been fully recorded. In the case of 
25 % of the advances examined, the Court was unable to 
obtain confirmation that the EDF accounts of the 
advance had been reconciled with the delegations' 
records, as the control sheets by means of which the 
delegations declare the periodical replenishments and 
amounts cleared were not kept on file in Brussels. 
Controls over the use of advance funds 
17. The Commission's instructions provide that the 
rules for mobilizing imprest accounts and clearing the 
sums allocated to them shall be fixed in the estimate of 
quantities and costs to be made by the authorities. With a 
few exceptions, the 40 estimates examined by the Court 
132 Official Journal of the European Communities 15. 12. 87 
contained little more than a summary reference to the 
proof of expenditure to be submitted. The result of this 
practice is that the delegate does not insist on the many 
documents specified in the instructions being submitted 
by local administrations, such as, for example, evidence 
that the lowest available bid price has been accepted, or 
that purchase orders have been properly authorized. In 
one important respect the instructions are incomplete, in 
that there is no requirement for the local administration 
to submit its records of stocks and stores, which are 
needed to demonstrate that the use of items such as 
building materials, fuel and vehicle spares financed by the 
EDF has been restricted to approved purposes. 20. The imprest accounts often continue in existence for 
many years, balances being carried over from one annual 
estimate to the next, sometimes over succeeding projects 
and succeeding EDFs. As a result of the lack of regular 
reconciliations, the task of identifying errors and 
differences arising between EDF records and those of the 
national administration becomes drawn out, delaying the 
closure of projects. In one third of the advances examined, 
totalling 3,2 Mio ECU, the clearing of the advance was 
two years or more overdue, including three advances 
dating from 1980 or earlier which totalled 0,6 Mio ECU. 
Receiving orders should be issued to recover the unspent 
or superfluous balances in order to avoid losses to the 
EDF: an advance of 0,1 Mio ECU made in national 
currency in February 1984 has proved superfluous, and, 
following depreciation of the national currency, any 
refund which the Commission obtains will be worth in 
ECU only 27 % of the amount initially advanced. 
Imprest account administrators' bank accounts 
18. The Commission exercises no effective checks aimed 
at ensuring that the unspent balances of advance funds 
correspond to bank balances held by the imprest account 
administrators. In only two of the files of supporting 
documents examined in Brussels by the Court was there a 
statement of the imprest holder's bank balances, and in 
both these cases there were material unexplained 
differences between the Commission's record of the 
remainder of the advance and the bank balance. In three 
of the ACP States visited by the Court during 1986, the 
delegations could furnish no reconciliation which ex­
plained the differences which had accumulated over the 
years between the delegation's record of advances and the 
corresponding bank balances. Until the Commission 
requires delegations to prepare such reconciliations 
regularly, it will not be able to demonstrate that advances 
have been used exclusively for the agreed purposes, and 
are, if necessary, recoverable. 
Effect of the deficiencies noted Cost of construction work contracts 
21. As pointed out in the Court's report on the financial 
year 1984 (•), the Commission does not exercise sufficient 
care when approving the financial conditions of works 
contracts, in particular with regard to the clauses 
concerning compensation for variations in prices. During 
1986, the successful tenderer for certain road works in 
Tanzania received the sum of 1,9 Mio ECU, which the 
Court considers unjustified for the following reasons: 
(a) 1,5 Mio ECU was claimed to compensate for 
increases in the prices of materials and labour which 
were principally due to the substantial devaluation of 
the Tanzanian shilling. However, the contractor was 
already protected against currency devaluation, as 
76 % of the contract, denominated in shillings, was 
paid by the EDF in ECU at an exchange rate fixed at a 
date prior to the tender. Thus no additional compens­
ation by the EDF for variations in prices is justified; 
19. From the records available, the Court estimates that 
advances granted in 1986 totalled almost 80 Mio ECU. 
As a result of the belated production of the complete list 
of advances remaining to be cleared, and because of the 
accounting errors that have remained uncorrected and 
the lack of any reconciliation of delegate records and 
bank balances, the Commission does not have the means 
to monitor the use of advance funds. Its control is 
weakened even further by the fact that all supporting 
documents are kept at the delegations, and that the 
Commission's Directorate-General for Financial Control 
performs no regular verifications of advance funds, 
restricting its formal authorization to payments in EEC 
currency only. (b) 0,4 Mio ECU was claimed to compensate for sales tax 
on fuel, although the contractor's bid had only been 
accepted as being the lowest on the condition that all 
local taxes were included in his tender; in addition, 
for similar contracts in the same country the 
contractor (and hence the EDF) is fully exempted 
from local taxes. 
22. Furthermore, 0,4 Mio ECU was paid to the same 
contractor by way of interest on late payments made by 
the Commission. 
(') The footnotes appear at the end of Part II. 
15. 12. 87 Official Journal of the European Communities 133 
TRAINING AID ACP States therefore allocated, on average, a little more 
than 10% of the appropriations for their indicative 
programmes to the training and education sector. 
23. The association agreements with the countries of the 
ACP group, which followed one after another until the 
First Lome Convention was signed, gradually introduced 
the principle of the financing, from Community funds, of 
educational infrastructures, awards for studies and 
training courses and the organization of specific pro­
grammes for the training of management staff, tech­
nicians and teachers. The Second Lome Convention 
made considerable changes to the approach to training 
projects: in future, they were to be carried out primarily in 
the context of multiannual programmes, and only 
incidentally in the form of specific operations. 26. A breakdown of these totals shows the dominant 
place taken by training schemes proper, which received 
almost 60 % of the sums, whilst the remaining 40 % was 
allocated to educational infrastructures. It should be 
pointed out that training schemes subsidized in the 
context of other development projects are not taken into 
account in the above-mentioned amounts because they 
are not recorded separately in the EDF accounts. 
24. Whilst strictly observing the basic options of each 
Associated State in the field of education, the measures 
financed under the multiannual programmes aim to 
satisfy training requirements generated by the general 
development objectives set out in the indicative program­
mes. The special measures relate to specific operations in 
the fields of vocational training, research and innovation. Multiannual training programmes 
Establishing priority needs 
Financial implementation of measures 
in the training sector 
25. As shown in Table 2, 524,2 Mio ECU were 
committed in the training sector from 1 April 1976 to 31 
December 1986 under the fourth and fifth EDFs. The 27. The Court examined the 20 multiannual training 
programmes involving the largest financial outlay. No 
inventory had been made in any of the countries 
concerned, either by the Commission or by the recipient 
country, in order to identify requirements in terms of 
supervisory staff for each sector of activity and level of 
qualification. This being so, these programmes were 
hardly likely to meet the priority needs arising from the 
objectives of the indicative programmes. Furthermore, it 
Table 2 — Funds earmarked for teaching and training at 31 December 1986 
(Mio ECU) 
Type of project 
Pluriannual training programmes (') 
Infrastructures 
Specific training activities 
Other seminars and conferences 
Total ACP States 
Overseas countries and territories 
Total EDF 
As a percentage of the decisions and payments in 
the context of the indicative programmes Financing decision 
4th 
EDF 
103,5 
117,6 
13,8 
7,3 
242,2 
8,7 
250,9 
10,5% 5th 
EDF 
132,4 
88,0 
36,8 
13,3 
270,5 
3,2 
273,7 
10,1 % Total 
235,9 
205,6 
50,6 
20,6 
512,7 
11,9 
524,6 
10,5% Payments 
4th 
EDF 
94,5 
100,9 
12,0 
7,0 
214,4 
8,3 
222,7 
10,5% 5th 
EDF 
69,4 
38,5 
16,4 
1,6 
125,9 
1,8 
127,7 
8,7% Total 
163,9 
139,4 
28,4 
8,6 
340,3 
10,1 
350,4 
9,3 % 
(') 4th EDF: study grants only. 
134 Official Journal of the European Communities 15. 12. 87 
was particularly difficult for the Commission to ensure 
that the programmes properly complemented national 
training policies. 
Awards for study and training courses 
28. The EDF finances awards for study and training 
courses which may be taken up in the recipient country, 
another ACP State or in a Member State. Applications 
for awards are submitted to the Commission by the 
authorities of the recipient States. Once the Commission 
has agreed to finance them, awards for study in Europe 
are paid out of the EDF advances by managing bodies in 
each Member State of the Community, such as the British 
Council in the United Kingdom, the 'Centre international 
des etudiants et stagiaires' in France and the 'Association 
europeenne pour la cooperation' in Belgium. In the case 
of studies in an ACP State, the Commission delegate in 
the State in question makes the payments out of special 
advances. As for seminars financed in the Member States 
of the Community, they are authorized by the 'Human 
resources' division of the Directorate-General for 
Development (DG VIII). 
29. Awards for study in the Member States can be 
divided into three categories: higher education at 
technical, university or postgraduate level, short courses 
and training courses with companies. The awards 
generally relate to disciplines associated with develop­
ment, but are rarely directly related to projects financed 
by the EDF. 
30. Most of the postgraduate awards, and all of those 
for short courses and training courses, are granted to 
nationals of ACP States employed by their national civil 
service or the public sector. The private sector is most 
often neglected, although paragraph 6 of Article 141 of 
the Second Lome Convention provides for the possibility 
of giving priority to training for management and other 
staff in the private sector in the 42 least-developed ACP 
States. 
31. Furthermore, contrary to the general provisions laid 
down by the Commission with regard to the implemen­
tation of study award and training course programmes, a 
number of awards were granted for non-vocational 
secondary education — in particular, some 20 awards for 
preparatory studies for the international baccalaureate at 
the United World Colleges in the United Kingdom and 
Italy, which cost approximately 10 000 ECU a year for 
each student. The decision to finance this type of study is 
particularly open to criticism in the case of three students 
from Swaziland, who had been sent to study in the United 
Kingdom, because the EDF had in fact financed studies 
at the same level in a Swaziland school at half the cost, 
and had provided technical aid to the same school. Inclusion of training schemes in development projects 
32. With a view to improving the integration of training 
and education schemes into development policies, the 
second paragraph of Article 141 of the Second Lome 
Convention provides for the financing of training for 
middle management and technical staff in direct connec­
tion with various projects financed by the Community. 
This innovation, which was intended to encourage the 
progressive phasing-out of technical assistance and the 
staffing of capital projects with ACP nationals, has not 
achieved the expected results. In fact, with the exception 
of Zimbabwe, Rwanda, Burundi and Malawi, whose 
allocation increased from 2,1 Mio ECU to 2,9 Mio ECU, 
the countries inspected clearly under-utilized their 
appropriations for seminars and short-term on-the-spot 
vocational training, whereas generous use was made of 
the appropriations for study awards, and in some cases 
there was overspending. 
33. Out of the countries examined, Somalia completely 
used up its appropriation of 1,3 Mio ECU on training 
schemes in Europe, but did not use any significant 
amount from its budget of 2,9 Mio ECU for training 
schemes associated with three development projects. The 
appropriation for the Ethiopian programme for training 
abroad increased from 0,5 Mio ECU to 2,0 Mio ECU, at 
the expense of a programme designed to provide in situ 
training for warehousemen, accounting officers and 
technicians in charge of distributing and supervising aid 
to famine victims. Appropriations of the same type for 
Nigeria (3,2 Mio ECU, for the training of staff of 
cooperatives in particular) and four other countries 
(1,8 Mio ECU in total) have to date remained unutilized. 
34. In Swaziland, a sum of 1,0 Mio ECU (46 % of the 
multiannual training programme) allotted to activities 
other than the granting of study awards was entirely used 
to finance the cost of senior technical assistants who only 
incidentally carry out a training function. They are in fact 
responsible for renegotiating a customs union agreement, 
the management of the national bank and the mainten­
ance of the broadcasting station. 
35. The low rate of implementation of on-the-spot 
training schemes is attributable, on the one hand, to the 
greater prestige attached to training schemes organized 
overseas and, on the other hand, to the lack of real 
planning by the ACP States of their own training 
activities, a shortcoming which is aggravated by the small 
number of training experts within the Commission 
delegations. There are in fact, in the Commission 
delegations as a whole, only two training adviser posts. 
Consequently, the training programmes are not given the 
necessary priority. 
15. 12. 87 Official Journal of the European Communities 135 
Selection and placing of applicants 
36. On-the-spot audits revealed that the delegate in an 
ACP State most usually plays only a limited role in the 
preparation of the awards programme and the procedure 
for selecting applicants. Nor is the official at DG VII[ 
with responsibility for the geographical area concerned 
(the desk officer) much more closely involved at this 
stage. The Commission devotes itself primarily to the 
administrative processing of files and is hardly in a 
position to assess the validity of the criteria and the 
procedures for selecting applicants and, hence, to ensure 
that the recipients of awards are in fact the most deserving 
applicants, who best serve the interest of the economies of 
the ACP States. 
37. When it comes to selecting the place to which 
holders of awards are to be sent, the delegation and the 
appropriate authorities in the recipient State do not have 
at their disposal a comprehensive list of all the disciplines 
taught in the establishments of the ACP States and the 
Member States. Under these circumstances, there is no 
guarantee that the most appropriate and least expensive 
solutions will be adopted to determine the place of study. 
38. In two Member States, the departments responsible 
for placing students have stated that they do not have 
enough information to enable them to guarantee that 
each applicant has been registered for the course most 
suitable for him. The Commission application forms are 
too abstract, and the information they provide about the 
applicants' abilities, practical experience and aspirations 
and the type of tasks that will be assigned to them at the 
end of the training period is incomplete. Furthermore, in 
cases where the selection procedure concludes with an 
interview with a candidate short-listed by the national 
administration, assessments are rarely made by the 
delegate, if at all. One student, for example, was enrolled 
for a secondary-level technical course, although his 
qualifications and aspirations suggested that university-
level education would be more suitable. He became most 
embittered and abandoned his studies, which had cost 
27 000 ECU. His application form had not been properly 
filled in and contained no comments by the delegation. 
39. The cost of studies varies considerably, according to 
the host country. The British authorities, for example, 
unlike those of other Member States, charge foreign 
students the entire cost of a course of study. This cost 
amounted to between 7 500 and 13 000 ECU per student 
in 1986, which represented a total of 3 Mio ECU. Some 
short courses in Europe seem excessively expensive. By 
way of example, seven managers from the Niger republic 
were allowed to take a 10-week course at a unit cost of 
10 000 ECU. The fees for these short courses are accepted 
without any prior negotiation or investigation of the 
possibility of organizing a comparable course in ACP 
States at less expense and for the benefit of a larger 
number of participants. Administration of awards for study and training courses 
by organizations in the Member States 
40. The Court carried out on-the-spot audits oi~ three 
managing bodies (in Belgium, France and the United 
Kingdom), which are responsible for administering 85 "„ 
of all EDF grants in the Member States. 
41. In addition to its many functions in the field of 
development aid, the 'Association europeenne pour la 
cooperation" (EAC), a body governed by Belgian private 
law, administers EDF awards in Belgium. This associ­
ation has not eliminated the shortcomings mentioned in 
the Court's annual report for the financial year 1981 (2), 
which pointed out that the central accounts had, over the 
years, become disorganized and contained serious 
lacunae. Certain payments and revenue were not charged 
to the relevant awards, but remained for several years in 
suspense accounts and, in the case of certain items 
totalling 59 238 ECU, have not appeared in the accounts 
since 1982. For more than four years, expenditure 
totalling 140 000 ECU has remained unaccounted for, 
identifiable only as a difference in the EACs advance 
accounts. Since its report for the financial year 1979 (-1), 
the Court has regularly made comments on the lack of 
internal control over advances made from the EDF to the 
EAC but the departments concerned have not drawn 
from them all the necessary conclusions. The persistence 
of these deficiencies is all the more regrettable since the 
Commission, by the presence of its representatives on the 
EACs Administrative Board, has the means to impose 
the requisite corrective measures upon the latter. 
42. Two bodies (in France and the United Kingdom) 
did not draw up full declarations of the VAT included in 
their disbursements, which led to the EDF bearing the 
cost of taxes refundable by the Member States for a 
number of years. 
43. A sum of 1,1 Mio ECU, which was transferred from 
the available EDF funds between 1980 and 1982 by the 
French management body in order to cover the cost of 
awards granted under Community programmes to assist 
countries outside the ACP group, has not yet been 
refunded from the general budget, which has meant a 
corresponding reduction in the interest paid on EDF 
bank balances. 
44. None of the three bodies enters the amount 
corresponding to the decision to grant finance for each 
award into the accounts. This has led to a situation where 
the spending overruns and accounting errors noted by the 
Court, such as a number of unauthorized extensions of 
awards and journeys paid for twice, have not been 
detected at the proper time. Likewise, the Commission 
rarely stipulates the exact date of the end of the courses of 
study in its decisions to grant awards, thus saddling the 
136 Official Journal of the European Communities 15. 12. 87 
EDF with the risk of expenses connected with unwarran­
ted monthly allowances and overheads. 
Monitoring of the implementation of award programmes 
45. The Commission departments and delegations do 
not have the necessary information at their disposal to 
monitor the implementation of the awards granted and, 
in particular, to assess the results of the award program­
mes. The managing bodies estimate that studies are 
completed in 85-90 % of cases, but this estimate is not 
backed up by reliable statistical records. 
46. The Commission monitors the implementation of 
the award programmes with the aid of two data-
processing systems, one containing precise information 
on each award and the other holding the EDF accounts. 
The two systems are not sufficient to check the cost of the 
awards or to provide adequate information on the 
implementation of the programmes. 
47. These systems are not covered by any basic 
protection against the omission of information, such as 
the consecutive numbering of documents entered. The 
codes used to identify awards differ in each system, so that 
almost no comparative checks can be made. The total 
expenditure is entered for each country, rather than for 
each award, which does not really allow for the 
identification of cases in which the cost of awards is 
exceeded, or even where no commitment is made. The 
information made available to the delegations is too short 
on detail to enable them to detect errors. The Court 
identified substantial sums which were paid out for 
awards not covered by any commitment, either because 
the formalities associated with the decision to grant 
finance had not been completed — as was the case for nine 
awards costing 360 000 ECU which were granted to 
Ethiopian students who had been following courses of 
study since 1983 — or because the authorizations did not 
mention the amount of the award, as in two cases 
representing a total of 27 000 ECU. Conversely, duplicate 
records of commitments, totalling 76 000 ECU, were 
detected in the EDF accounts. 
48. Commitments relating to awards which have 
expired are rarely corrected in the light of the actual cost, 
although the latter is generally 10-20 % below the rather 
conservative initial estimate in national currency. The 
real cost in ECU of awards in the United Kingdom in 
1986 even proved to be lower than this percentage of the 
estimate; over the financial year, the British currency 
depreciated by 20 % in relation to the ECU. Substantial 
sums which could usefully be allocated to other awards 
thus remain unnecessarily frozen. It would nevertheless 
be possible for the Commission to record the cost of each award, since the managing bodies transmit the necessary 
information in writing and could, on request, transmit it 
in computerized form. 
49. The Commission's records contain full statistical 
information in a tiny number of cases only. Records of the 
positive or negative outcome of studies are rare, although 
the system is designed to record and set out the 
information that is drawn up regularly by the managing 
bodies. In addition, the information available is set out 
unselectively and in a coded form which makes it difficult 
for users to decipher. 
50. The Commission has no procedures for monitoring 
the professional development of award holders and, 
therefore, no means of checking the effectiveness of the 
award programmes. It would however be desirable for the 
Commission to make enquiries about the conditions 
under which award holders are integrated into their 
national economy, particularly in order to check that the 
work they are doing corresponds to the training they have 
received. 
Specific schemes not covered by multiannual 
training programmes 
51. Certain training schemes initiated outside the 
multiannual programmes, whether as specific operations 
or as part of broader projects, have encountered some 
difficulties. For example, numerous items of equipment 
costing 2,5 Mio ECU, which were supplied to 98 
educational establishments in Cameroon in 1983, were 
not in working order when the Court made its inspection 
in June 1986, either because they had never been installed 
or because they were unusable due to lack of spare parts, 
inadequate maintenance or for considerations of security. 
52. In Equatorial Guinea, a project costing 1,1 Mio 
ECU, described as a training scheme for road mainten­
ance staff, in fact only included the financing of 
equipment and manpower employed in road mainten­
ance; any training scheme was doomed to failure because 
of the unsatisfactory working methods imposed by the 
minister responsible. 
53. In Chad, a programme of priority measures in the 
education sector amounting to 5,2 Mio ECU had still not 
commenced in the 11 apprenticeship centres and the three 
schools scheduled 18 months after the decision to grant 
finance. Only the part of the programme relating to 
awards for study and overseas training courses has been 
carried out. 
15. 12. 87 Official Journal of the European Communities 137 
54. Projects with a training component come mainly 
under the head of the rural development sector. Courses 
designed to satisfy the specific needs of the project 
beneficiaries (farmers, cooperatives) or their staff may be 
highly significant. However, the training component of a 
project in Niger fell through and was abandoned after 
four years because the technical training centres financed 
by the EDF offered training which did not correspond to 
the specific needs of the farmers, or to the other aspects of 
the project. 
55. Many projects inspected by Court delegations still 
do not have anyone assigned to them who is capable of 
guaranteeing the future autonomy of the project. Thus, 
projects in the Cameroons relating to irrigated rice fields, 
fisheries and integrated development continue to depend 
on senior technical assistants for supervisory duties. 
Final observations 
56. Any increase in the socio-economic impact of the 
training schemes financed by the EDF requires adjust­
ments to the procedures for drawing up, implementing 
and monitoring programmes, as follows: 
(a) the implementation of a preliminary survey of 
training requirements in each ACP State concerned. 
This analysis would lead to the establishment of an 
order of priority for the schemes to be carried out; 
(b) increased attention by the delegations to this type of 
scheme and provision of more comprehensive in­
formation to the organizations placing students, in 
order to obtain a choice of schemes adhering as 
closely as possible to the needs of the recipient States 
and a selection of training possibilities taking greater 
account of educational content and the methods 
applied; 
(c) the introduction of a control system to assess the cost 
of training each person with regard to educational 
effectiveness and relevance from the point of view of 
the objectives of the indicative programmes. 
TRADE PROMOTION AID 
57. The first two Lome Conventions include a trade 
cooperation element which emphasizes the need to secure effective benefits for ACP State exporters by improving 
the conditions of access for their products to the 
Community market. It was also considered necessary for 
the market access arrangements to be supplemented by 
direct aid to strengthen the commercial capacities of these 
countries. 
The legal basis for trade promotion measures 
58. In pursuit of this objective, Article 13 of the First 
Lome Convention provides for six types of trade 
promotion measure: the creation and improvement of 
organizations which contribute to the development of the 
foreign trade of ACP States; the training of trade experts; 
participation by the ACP States in fairs and exhibitions; 
improving cooperation between economic operators in 
the Member States and the ACP States; the carrying-out 
of market research and marketing studies; the collection 
and distribution of trade information. 
59. The Second Lome Convention extends the scope of 
trade promotion. Article 21 lists the measures specified in 
the First Convention and adds the following ones: the 
formulation of product policies; the development of 
supportive infrastructure; the launch of advertising 
campaigns; the collection and diffusion of quantitative 
and qualitative trade information; assistance to small and 
medium-sized undertakings. 
Sources of finance and financial execution 
of trade promotion programmes 
60. The First Lome Convention was somewhat vague 
on the question of sources of finance. Article 15 simply 
stipulates that the Community 'shall participate, under 
the conditions laid down in Title IV and in Protocol No 2, 
in financing trade promotion activities for promoting the 
development of exports of ACP States'. This provision 
allowed for the possibility of financing such measures out 
of the appropriations for national indicative program­
mes, as well as from funds allocated for regional 
cooperation. 
61. In this respect the Second Lome Convention is more 
precise, in that it specifies in Article 22 that 'in addition to 
the appropriations which, within the framework of the 
national indicative programmes (...), may be allocated by 
each ACP to the financing of trade promotion activities 
(...), the contribution of the Community to the financing 
138 Official Journal of the European Communities 15. 12. 87 
of this type of activity, on a regional basis, could reach — 
within the framework of the regional development 
cooperation programmes (...) — a sum of 40 million 
European units of account'. Second Lome Convention, which expired in May 1986, 
the disbursement levels were 54 % for the indicative 
programmes and 58 % for the regional cooperation 
funds. 
62. Although trade promotion has for a long'time 
formed part of the aid granted by the EEC, it has never in 
financial terms occupied a position of major importance 
in the hierarchy of needs put forward by the ACP 
countries. Only five countries out of 52 had earmarked 
financial resources for trade promotion as part of their 
indicative programmes at the start of the period during 
which the First Lome Convention was in force. Under the 
Second Lome Convention, half the ACP countries, i.e. 32 
out of 63, allocated funds for trade promotion, represent­
ing 2,3 % of the aid granted in connection with their 
indicative programmes. The modest size of the amounts 
involved immediately imposes very strict limits on the 
extent of any trade promotion measures. 
63. Tables 3 to 7 show that the implementation of trade 
promotion measures has been slow. As at 31 December 
1986, the level of disbursement for the sums allocated by 
financing decisions under the Fourth EDF was 87 % in 
the case of the indicative programmes and 90 % for the 
regional cooperation funds, even though the first Lome 
Convention expired in December 1980. In the case of the Trade promotion programmes 
Composition of the programmes 
64. Table 7 provides an analysis of measures taken 
under the fourth and fifth EDFs. This table highlights the 
significant position occupied by fairs and exhibitions, 
which, although down from the fourth to the fifth EDF, 
continued to be the measures which received the largest 
allocations. The other forms of measure provided for by 
the Lome Conventions have been considerably under­
utilized. Of these latter, technical assistance (a long-term 
stay by an adviser in the country concerned), short-term 
consultancies, trade missions, market surveys and reports 
and the provision of material and equipment should be 
Table 3 — Trade promotion activities financed from indicative programmes under the 4th EDF at 31 December 1986 
Country 
ACP 
OCT Heading 
General 
Trade structures 
Fairs and exhibitions 
Marketing 
Total 
Fairs and exhibitions 
Grand total Commitment 
decisions 
(1) 
(1000 ECU) 
11 448 
1 853 
299 
5 515 
19 115 
60 
19 175 Actual commitments 
(contracts concluded) 
(2) 
(1000 ECU) (3 = 2/1) 
% 
10 699 93 
1 798 97 
299 100 
5 314 96 
18 110 95 
50 83 
18 160 95 Payments 
(4) 
(1000 ECU) (5 = 4/1) 
% 
9 683 85 
1 798 97 
299 100 
4 893 89 
16 673 87 
46 77 
16 719 87 
Table 4 — Trade promotion activities for the ACP countries financed from regional cooperation funds under 
the 4th EDF at 31 December 1986 
Heading 
General 
Trade structures 
Fairs and exhibitions 
Total Commit­
ment 
decisions 
(1) 
(1000 ECU) 
3 216 
141 
9 310 
12 667 Actual commitments 
(contracts 
concluded) 
(2) 
(1000 ECU) (3 = 2/1) 
% 
2 243 70 
141 100 
9 310 100 
11 694 92 Payments 
(4) 
(1000 ECU) 
1 896 
141 
9 309 
11 346 (5 = 4/1) 
% 
59 
100 
100 
90 
15. 12. 87 Official Journal of the European Communities 139 
Table 5 — Trade promotion activities financed from indicative programmes under the 5th LDF at 31 December 1986 
Country 
ACP 
OCT Heading 
General 
Trade structures 
Fairs and exhibitions 
Marketing 
Trade information 
Total 
General 
Grand total Commitment 
decisions 
(1) 
(1000 ECU) 
12 687 
3 191 
1 301 
8 188 * 
35 
25 402 
355 
25 757 Actual commitments 
(contracts concluded) 
(2) 
(1000 ECU) (3 = 2 1) 
"„ 
9 340 74 
3 191 100 
1 135 87 
5 992 73 
35 100 
19 693 78 
355 100 
20 048 78 Payments 
(4) 
(1000 ECU) (5 = 4/1) 
/., 
6 774 53 
2 714 85 
683 52 
3 374 41 
33 94 
13 578 53 
355 100 
13 933 54 
Table 6 — Trade promotion activities financed from regional cooperation funds under the 5th EDF at 31 December 1986 
Country 
ACP 
OCT Heading 
General 
Trade structures 
Fairs and exhibitions 
Commercial training 
Marketing 
Trade information 
Total 
Fairs and exhibitions 
Grand total Commitment 
decisions 
(1) 
(1000 ECU) 
10 036 
116 
9 503 
133 
2 230 
3 687 
25 705 
657 
26 362 Actual commitments 
(contracts concluded) 
(2) 
(1000 ECU) (3 = 2/1) 
% 
8 139 81 
116 100 
8 495 89 
133 100 
2 191 98 
3 148 85 
22 222 86 
567 86 
22 789 86 Payments 
(4) 
(1000 ECU) (5 = 4/1) 
% 
5 140 51 
17 15 
5 576 59 
132 99 
1 955 88 
2 239 61 
15 059 59 
328 50 
15 387 58 
Table 7 — Situation of commitments relating to trade promotion activities at 31 December 1986 for both ACP States and OCT 
Heading 
General 
Trade structures 
Fairs and exhibitions 
Commercial training 
Marketing 
Trade information 
Total 4th EDF 
Indicative 
programmes 
(1000 ECU) Regional 
programmes 
(1000 ECU) 
11 448 3 216 
1 853 141 
359 9 310 
5 515 — 
19 175 12 667 Total 
(1000 ECU) "o 
14 664 46,0 
1 994 6,3 
9 669 30,4 
5 515 17,3 
31 842 100,0 5th EDF 
Indicative 
programmes 
(1000 ECU) Regional 
programmes 
(1000 ECU) 
13 042 10 036 
3 191 116 
1 301 10 160 
— 133 
8 188 2 230 
35 3 687 
25 757 26 362 Total 
(1000 ECU) % 
23 078 44,3 
3 307 6,3 
11 461 22,0 
133 0,2 
10 418 20,1 
3 722 7,1 
52 119 100,0 
140 Official Journal of the European Communities 15. 12. 87 
noted. All these operations are listed together in Tables 3 
to 7 under the heading 'general measures". 
65. Table 7 also shows that the relative importance of 
regional projects increased over the period in question. 
The allocation of 40 Mio ECU, earmarked for trade 
promotion under the Second Lome Convention, as part 
of regional cooperation was not without a contributory 
effect on this development. It should also be noted that to 
a very large extent these sums were allocated to financing 
fairs, particularly under the Fourth EDF. 
Coordination of trade promotion measures 
66. The programmes too often consist of one or more 
isolated measures, conceived independently, without any 
link between them. This approach has severely jeop­
ardized the effectiveness of the measures financed by the 
EDF. 
67. Moreover, many ACP countries' export promotion 
measures frequently receive financial and/or technical 
assistance as a result of bilateral aid, particularly from 
Europe, and from other international organizations. It 
would be to the Community's advantage to ensure that 
the measures which it subsidizes are coordinated with 
those supported by other donors, an approach which was 
not apparent in the Fourth and Fifth EDFs. 
Administrative procedures for the planning and 
implementation of programmes 
68. Responsibility for the shortcomings which were 
found in the internal management of the trade promotion 
programmes, and in the integration of them within the 
economic policies of the ACP countries, is in part the fault 
of the recipient countries themselves. It is in fact the latter 
who are responsible for indicating the needs which 
provide the basis for formulating the financing proposals 
and which therefore constitute the framework of the 
programme. A poor appraisal of the shortcomings in the 
commercial infrastructure at the initial stage frequently 
weakens the impact of the measures subsequently 
adopted, as the countries concerned are not always able to 
make a precise diagnosis of the most pressing needs. At 
the implementation stage, firm, active commitment on the 
part of national authorities, which is essential to the 
success of the programme, has not always been forthcom­
ing. 69. Nevertheless, because of the role which they play in 
the implementation of the programmes, the departments 
responsible for them at the Commission do have a 
decisive influence on their success or failure. Since 1982 
questions of a general nature relating to guidelines and 
strategies for trade promotion in the ACP States have 
been the responsibility of the Commercial Development 
Division (VIII A/4) of the Directorate-General for 
Development. The management of projects and program­
mes, on the other hand, is provided on a country-by-
country basis, mainly by the desk officers in the same 
Directorate-General with responsibility for the geograp­
hical areas in question. 
70. Closer examination reveals that, as far as measures 
other than certain missions and participation in fairs are 
concerned, Division VIII/A/4 is not sufficiently ac­
quainted with what the area divisions are doing by way of 
trade promotion. This state of affairs has numerous 
implications. Firstly, the different treatment accorded to 
fairs and missions, on the one hand, and other types of 
measures, on the other, makes an integrated approach to 
trade promotion programmes impossible. This is espe­
cially so as the circulation of information is particularly 
sluggish between the area sections of DG VIII and 
Division VIII/A/4. As a result, there is no kind of overall 
picture, by country and type of measure, of the operations 
financed by the EDF, which makes ex-post evaluation of 
the programmes which have been implemented par­
ticularly difficult. 
71. Secondly, a substantial part of the trade promotion 
appropriations are managed by the desk officers, who 
very often have neither the time nor the specialist skills 
needed for this task. In fact, in financial terms, trade 
promotion measures represent only a minimal part of the 
indicative programmes managed by the desk officers. The 
latter are preoccupied with financial 'heavyweight' 
projects, and attach only marginal importance to trade 
measures and therefore spend very little time on them. 
Furthermore, theoretical knowledge and know-how in 
this field is essentially concentrated in Division VIII/A/4, 
which is not regularly consulted other than on fairs and 
missions. DG VIII's capabilities in this field could be 
exploited more effectively. 
Attendance at trade fairs 
Selection of fairs and of products exhibited 
72. The EDFs bear the costs of attendance at each fair 
of a regional nature up to an amount of 13 500 ECU per 
ACP State, broken down as follows: hire of site (3 500 
ECU), construction and decoration of stand (6 500 
ECU), transport costs of staff manning stand and 
15. 12. 87 Official Journal of the European Communities 141 
products exhibited (2 500 ECU), contingency reserve 
(1000 ECU). 
73. In the case of fair attendance charged to the national 
indicative programmes, the amount of 13 500 ECU may 
be exceeded when the ACP State so requests and can 
provide evidence to justify its request. In effect, in the light 
of these financing procedures, the EDFs bear the bulk of 
the cost of attendance at fairs. 
74. Attendance at a fair is generally desirable only as the 
culmination of an integrated policy of sales promotion. 
Examination of documents and on-the-spot enquiries 
gives the impression that the relevant departments of the 
Commission have not always ensured that this is the case. 
75. Investigation of a representative sample of atten­
dances at trade events showed, in fact, that approximately 
one third of the States exhibiting had not submitted any 
trade promotion programme for EDF financing. The 
Commission officials did not know whether the main 
conditions relating to the participating institutions, 
infrastructure, products and markets had been satisfied, 
in order to ensure that attendance produced the optimum 
commercial impact. Checks carried out at the events 
themselves highlighted the isolated nature of some 
countries' participation. Apart from attending, they had 
done nothing else to make the products exhibited 
available under the conditions required by the market. 
This kind of view of the purpose of attending a trade fair 
has every chance of producing disappointing results. 
76. When appraising applications, the Commission 
does not pay sufficient attention to whether it is desirable 
for certain countries to participate in a fair, rather than 
adopting other methods of sales promotion. If a country's 
presence at a fair is to yield any benefit, it must have the 
firm support of national export promotion organizations, 
both public and private. This condition had not always 
been satisfied at the events which were visited. Moreover, 
the objectives of some participants seemed questionable. 
For example, at the 'Partner des Fortschritts' fair in 
Berlin, Tanzania, according to its representatives, was 
exhibiting certain products for the first time, without 
knowing whether there was a corresponding demand on 
the German market. This conception of the role of fairs is 
mistaken. There is no point in exhibiting unless a survey 
has been carried out that confirms that there actually is a 
demand for the products concerned in the market which 
the country is seeking to penetrate. The primary objective 
of participation must be to conclude sales contracts and 
to establish a flow of trade. In the case in point, the 
Commission should have guided Tanzania towards more 
appropriate forms of action, such as trade missions, 
market research, etc. 77. Even when the desirability of a particular country's 
attendance at a trade event has been demonstrated, the 
fair must be carefully selected. Unfortunately the 
Commission is not able to take action along these lines. Its 
departments do not forward to the ACP States a full list of 
international fairs with a precise description of their main 
characteristics: type of visitor, which products are to be 
given preference, etc. Information of this type would 
however be invaluable, so that ACP States could choose 
to attend events which provided a suitable framework for 
their marketing strategy. In the absence of this, there is 
frequently no kind of commercial logic in the selection of 
fairs. Several representatives of ACP countries at the fairs 
visited were aware of this shortcoming in the assistance 
provided by the Commission and stated that they were 
unable to select fairs in terms of the markets which offered 
most outlets for their products. 
78. At a more general level, the Commission, despite 
recent efforts to move in the right direction, does not give 
sufficient preference to specialist exhibitions over general 
fairs. At the latter events, third-world countries are 
frequently lost in a multitude of exhibitors and a plethora 
of products, of which only the most competitive succeed 
in attracting the attention of visitors. At specialized 
events, on the other hand, it is easier for the ACP 
countries, which are mainly concentrated in a few sectors 
like agro-foodstuffs, timber, textiles, etc. to exploit the 
special nature, and therefore the attraction, of their 
goods. 
79. Appraisal of an application to attend a fair must be 
such as to ensure that the products which the ACP State 
wishes to exhibit comply with the requirements of the 
market targeted. Before attempting to penetrate a 
market, it is essential to establish whether the products in 
question will be acceptable from the standpoint of 
quality, packaging, price, etc. This type of approach, 
which is commonly adopted as part of trade strategy, was 
rarely used as part of the measures examined. Evidence of 
this can be found in the fact that attendance preceded by 
market research was the exception rather than the rule. 
What is more, some applications received a positive 
response even before the States concerned had announced 
the list of products which they were thinking of 
exhibiting. This was particularly true of Zaire, Guinea 
Bissau, the Comoros, Sudan, Benin, Togo, Burkina Faso, 
Zimbabwe and the Ivory Coast at fairs which received 
finance from the Regional Funds in 1986. 
80. The Commission should be more vigilant regarding 
the products selected by the authorities of the ACP States. 
For example, the representative on the Ivory Coast stand 
at the Trieste fair mentioned how private companies from 
his country had been reluctant to give samples of their 
goods to the body responsible for the stand (in this case 
the Abidjan Chamber of Commerce). The result was that 
the Ivory Coast stand mainly displayed products which 
were not very competitive, whereas the country has 
definite export potential. 
142 Official Journal of the European Communities 15. 12. 87 
81. In addition, a number of applications which were 
accepted contained no information as to the quantities of 
the products accepted available for export by the ACP 
country concerned. The Commission scarcely troubled to 
find out whether the commodities concerned could be 
produced continuously in sufficient quantities to justify 
an export promotion drive. Failure to ensure a regular 
supply of any product would cancel out the benefits 
acquired from successful participation at a trade event. 
82. Finally, a judicious choice of products for exhibition 
calls for an on-the-spot enquiry among competitors and 
firms seeking a place in the market, so as to ensure that the 
marketing strategy formulated is sufficiently finely tuned. 
Most of the ACP country representatives encountered at 
fairs stated that they knew very little about this aspect and 
that they had received no assistance from the Commis­
sion. 
Selection of stand personnel 
83. The efficiency of the staff present on the stands is of 
prime importance for the attainment of the objectives. 
The Commission is aware of this, and asks ACP countries 
who want to attend to give an undertaking that they will 
appoint representatives who have experience of fairs. 
Examination of a representative sample of countries 
which had taken part in fairs in 1986 showed, however, 
that less than 10% of these States had given this 
undertaking by the date when their application was 
approved. This attitude adopted by the Commission 
means that many exhibitors attend with staff who are 
unable to give visitors precise information on products, 
cannot adapt to the various kinds of potential customers 
and have no authorization to transact business. 
84. For example at the Trieste fair, the Ivory Coast 
delegation had no private company representative. The 
staff who were present had no knowledge of prices, 
quantities available or delivery dates of products. Neither 
were they authorized to conclude contracts. Their role 
was reduced to collecting business cards and forwarding 
them to the exporter firms. The Burundi representatives 
had to consult their national authorities before fixing 
selling prices. Moreover, most of the delegates whom this 
country had mentioned in its application did not attend. 
Uganda was exhibiting mainly coffee, but its representat­
ives were not in a position to sell this product direct; they 
were under an obligation to go through their permanent 
agent in Italy, who holds the monopoly for sales of this 
commodity in that country. Similarly, at the 'Partner des 
Fortschritts' fair in Berlin, the Tanzanian and Ethiopian 
stands had hardly any qualified staff or representatives of exporter firms capable of meeting requests for inform­
ation and signing contracts. 
85. Furthermore the representatives of certain ACP 
States do not always have the commercial know-how 
needed to attract the attention of visitors, to identify their 
problems and to help them to resolve them. 
Design and construction of stands 
86. The visits which were made to the three fairs 
mentioned above suggested that the design and construc­
tion of stands did not allow them to exhibit the products 
in the most favourable light, or to create a framework 
conducive to business discussions. 
87. Firstly, several delegations complained that they did 
not have an adequate display area with a sufficient 
number of display cases. This was true of Mali and Niger 
at the 'Salon du cuir' in Paris. They were obliged to pile up 
their products and were unable to present them attract­
ively. At the same exhibition, all the ACP representatives 
said that their work had been hampered by the absence of 
telephones on stands and the shortage of office supplies. 
88. At each of these fairs, the stands consisted of an 
exhibition area with showcases and a small office. On 
several occasions it was noted that this single office was 
not large enough to provide favourable conditions for 
receiving visitors who were seeking information, or even 
wished to conclude a contract. There was no doubt that 
these difficulties were an obstacle to the effectiveness of 
the efforts made by certain delegations. 
89. The location of the stands within the confines of the 
fair also has some influence on the number of visits 
received. Here again, the Commission did not always 
show the necessary vigilance. For example, at the 'Salon 
du cuir' in Paris, the stands of the ACP countries were 
grouped together and confined to a corner of the 
reception hall. Apart from the fact that the ACP States 
were thus enclosed in a kind of ghetto, this meant that the 
stands were sited a long way from the passageways most 
frequented by visitors. The Commission could prevent 
this type of inconvenience by reserving sites sufficiently 
early. It should also ensure that the ACP States 
represented are listed systematically in the fair catalogues, 
which was not the case at the 'Salon du cuir'. 
15. 12. 87 Official Journal of the European Communities 143 
Follow-up to participation in fairs 
90.. The ACP States are required to send a report to the 
Commission at the end of a fair, mainly to give details of 
the number of commercial contacts made in the course of 
the event. In addition, when filing its application, each 
ACP State has to send the Commission a summary in 
figures of the new business obtained as a result of 
attending fairs during the previous year. 
91. In fact, examination of a representative sample of 
participants at fairs in 1986 showed that only 40 % of the 
countries exhibiting had sent the Commission figures for 
the results of their attendance at fairs in 1985. It is 
reasonable to infer from this that the Commission agrees 
to subsidize some countries' presence at certain fairs for 
several years running without being able to make even an 
approximate evaluation of the commercial impact. 
92. Furthermore, it would be advisable for the Com­
mission's local delegations to ensure that the ACP States 
develop contacts made at fairs in suitable ways. The 
delegations could also provide valuable assistance by 
helping the ACP States to weigh up the pros and cons of 
attending a given fair by answering the following 
questions: did this fair provide an adequate framework 
for promotion of our products? Did the design of the 
stand fit in with our requirements? How many contacts 
were made and how many led to actual sales ? By using the 
answers to these questions, it should be possible to avoid 
repetition of many of the errors and shortcomings 
pointed out above. 
93. Finally, the Commission has not really drawn any 
conclusions about the financial consequences of last-
minute withdrawals, which have resulted in stands 
remaining unoccupied during fairs. As an example, eight 
stands were left unoccupied because of the withdrawal of 
an ACP State at fairs financed out of regional cooper­
ation funds between 1983 and 1986: Burundi (Bordeaux) 
in 1983; Mauritania (Paris Internationale) in 1984; 
Madagascar (Berlin ITB) in 1986; Togo (Barcelona) in 
1986; Ghana (Berlin 'Partner des Fortschritts' and 
Trieste) in 1984, and other countries at Trieste and 
Barcelona in 1986. The funds which the EDF invested in 
the hire of sites and the construction of stands have still 
not been recovered. 
Trade missions 
94. Enquiries which were made in the relevant depart­
ments of the Directorate-General for Development 
revealed serious shortcomings in respect of centralization of information and the coordination of measures in the 
field of trade missions. 
95. These departments of DG VIII were in fact unable 
to provide a full list of the missions financed under the 
fourth and fifth EDFs. The absence of this basic 
information, which could only be obtained by a 
systematic search of all the payment files relating to trade 
promotion, made it impossible to obtain any kind of 
overall view of measures of this kind and was hardly 
conducive to a careful and systematic evaluation of their 
impact. 
96. Moreover, if missions are to have an optimum 
chance of success, the preparation for. execution of and 
follow-up to them must comply with certain conditions, 
most of which are set out in an internal document issued 
by Division VIII/A/4. Examination of a sample of 
missions showed that in a number of cases these 
conditions had not been complied with. 
97. For example, the consultation procedures and the 
procedures for approval of missions as set out in the 
memorandum referred to above were only sporadically 
observed. The checks which were made snowed that in 
fact Division VIII/A/4 was kept in ignorance of certain 
missions to distant destinations and that the desk officers 
were not systematically consulted on the question of 
missions to the ACP countries. This lack of uniformity in 
the treatment of missions inevitably has a detrimental 
effect on the overall coherence of the measures adopted. 
98. In principle, missions are preceded by a preliminary 
survey, which is intended to prepare the ground in the 
target countries and to identify groups of products. Final 
approval for the mission ought not to be given until after 
the report on this survey has been received. It was found, 
however, that in the case of some missions the desk officer 
had never seen the report in question. 
99. Contrary to the terms of the memorandum referred 
to above, some missions consist of more than 10 people. 
Furthermore, the maximum number of three product 
groups per mission is frequently exceeded. Finally, not all 
missions are the subject, as they ought to be, of briefings 
beforehand or of closing sessions at which the commercial 
achievements can be evaluated. 
Final observations 
100. By signing the Lome Conventions, the European 
Community provided itself with an appropriate legal 
framework within which to make its contribution to 
increasing the exports of the ACP States. When the first 
144 Official Journal of the European Communities 15. 12. 87 
two Lome Conventions expired, the results which had 
been achieved were not, however, all that might have been 
expected where promotion of exports was concerned. An 
improvement in the effectiveness of this type of operation 
requires in particular: 
(a) a systematic review of the real export opportunities of 
• the countries which submit a trade promotion 
programme for EDF financing; 
(b) more extensive utilization of the different types of 
measure provided by the Lome Conventions (en­quiries and market research, assistance to small and 
medium-sized exporting undertakings, short-term 
consultancies, etc.); 
(c) an integrated approach in respect of trade promotion 
programmes; 
(d) a contribution by recipient countries to the financing 
of fairs and trade missions, in order to encourage 
them to show greater discipline in carrying out these 
measures. 
(1) OJ G 326, 16.12.1985, paragraph 15.39. 
(2) OJ C 344, 31.12.1982, paragraph 9.34. (3) OJ C 342, 31.12.1980, Part 2, paragraph 4.3. 
15. 12. 87 Official Journal of the European Communities 145 
ANNEX I 
Allocation of responsibilities among the Members of the 
Court of Auditors at the time this report was adopted 
Secretariat, staff and administration of the Court, external relations Marcel MART, 
President 
Audit Group I 
Own resources: Richie RYAN 
customs duties and agricultural revenue, VAT resources, 
balancing of the budget, sundry revenue 
EAGGF — 1: Charles J. CAREY 
European Agricultural Guidance and Guarantee Fund, Guarantee Section: 
management and budgetary control procedures and general matters 
EAGGF — 2: Keld BRIXTOFTE 
European Agricultural Guidance and Guarantee Fund, Guarantee Section: 
common market organizations 
EAGGF — 3: Fernand HEBETTE 
European Agricultural Guidance and Guarantee Fund: 
Guidance Section (operations other than regional measures) 
Guarantee Section (sugar) 
Fisheries 
Agricultural expenditure 
146 Official Journal of the European Communities 15. 12. 87 
Audit Group II 
European Development Funds Aldo ANGIOI 
Cooperation with developing countries and other non-member States Pierre LELONG 
European Regional Development Fund 
European Agricultural Guidance and Guarantee Fund, Guidance Section 
(regional measures) Andre J. MIDDELHOEK 
European Social Fund Josep SUBIRATS 
Audit Group HI 
General auditing matters Marcel MART 
Loans and borrowings 
European Coal and Steel Community 
General accounts 
Accounting principles Lothar HAASE 
Staff and operational expenditure of the institutions 
Office for Official Publications 
Press and information offices 
European Schools Stergios VALLAS 
Research, technology and new policies Carlos MORENO 
Subsidies 
15. 12. 87 Official Journal of the European Communities 147 
ANNEX II 
Reports and opinions adopted by the Court of Auditors during the last five years 
The Court of Auditors is required by the terms of the Treaties to 
produce an annual report. It is also required, by the Treaties and 
other regulations, to produce annual reports on certain 
Community bodies and activities. The Treaties further give the Court the power to submit observations on specific questions 
and to deliver opinions at the request of one of the institutions. 
The reports and opinions adopted by the Court during the last 
five years are listed below. 
Date of 
adoption Publication Title Date of 
adoption Publication 
Fifth annual report, concerning the financial year 1981 25 November 1982 OJ C 344, 
31. 12. 1982 
Opinion 4/82 on a draft Commission Regulation concerning financial 9 December 1982 
provisions applicable to the European Agency for Cooperation and provisions 
relating to the Agency's relations with the Commission Not published 
Opinion 5/82 on a proposal for a Council Regulation amending Regulation 16 December 1982 OJ C 160, 
(EEC) No 2744/80 establishing supplementary measures in favour of the 18. 6. 1983 
United Kingdom 
Opinion 6/82 on a proposal for a Council Regulation instituting a special 16 December 1982 
energy development programme OJ C 199, 
26. 7. 1983, 
p. 7 
Opinion 7/82 on a proposal for a Council Regulation amending Regulation 2 February 1983 OJ C 199, 
(EEC) No 2779/78 on the proceo required, by the Treaties and other 26. 7. 1983, 
regulations, to customs sphere p. 8 
Special report 1/83 on the expenditure of the European Parliament in 10 March 1983 
connection with inter-parliamentary conferences Available from the Court 
of Auditors 
Special report 2/83 on the application of Regulations (EEC) No 1078/77 and 14 April 1983 
(EEC) No 1041/78 introducing a system of premiums for the non-marketing of 
milk and milk products and for the conversion of dairy herds OJ C 278, 
17. 10. 1983 
Report on the accounts of the European Schools for 1981 28 April 1983 Not published 
Report on the 1982 JET financial statements 28 April 1983 Not published 
Special report 3/83 on the restaurants, canteens, cafeterias and staff shops 18 May 1983 Not published 
148 Official Journal of the European Communities 15. 12. 87 
Title Date of 
adoption Publication 
Report on the 1982 accounts of the Euratom Supply Agency 26 May 1983 Not published 
Special report 4/83 on the budgetary management of the programme for 9 June 1983 OJ C 278, 
supplying agricultural products and foodstuffs to Poland 17. 10. 1983 
Special report 5/83 on aid to skimmed milk processed into casein and 9 June 1983 OJC41, 
caseinates 15.2.1984 
Report on the financial statements of the European Coal and Steel 22 June 1983 OJ C 339, 
Community for the financial year 1982 (Art. 78 f (5) ECSC) 19. 12. 1984 
Report on the 1982 accounts of the European Foundation for the 14 July 1983 Not published 
Improvement of Living and Working Conditions (Dublin) 
Report on the 1982 accounts of the European Centre for the Development of 14 July 1983 Not published 
Vocational Training (Berlin) 
Opinion 1/83 on a draft Commission Regulation (EEC) relating to the 21 July 1983 Not published 
operation of the system of advances for expenditure financed under the 
Guarantee Section of the European Agricultural Guidance and Guarantee 
Fund (EAGGF) 
Report in response to the conclusions of the European Council of 18 June 1983 
Sixth annual report, concerning the financial year 1982 
Report (Annex to the 1982 ECSC annual report) on the accounting and 
financial management of the ECSC 
Special report 6/83 on the European Social Fund Computer System 
Opinion 2/83 on the proposal for a Council Regulation on interest subsidies 
for certain loans granted under the European Monetary System 
Report on the accounts of the European Schools for 1982 6 October 1983 
24 November 1983 
7 December 1983 
15 December 1983 
12 January 1984 
23 February 1984 OJ C 287, 
24. 10.1983 
OJ C 357, 
31.12.1983 
Not published 
Available from the Court 
of Auditors 
OJ C 55, 
28. 2. 1984 
Not published 
Opinion 4/83 on the second amendment to the proposal for a Council 14 March 1984 OJ C 163, 
Regulation amending Regulation (EEC, Euratom, ECSC) No 2891/77 23.6.1984 
implementing the Decision of 21 April 1970 on the replacement of financial 
contributions from Member States by the Communities' own resources 
Special report 1/84 on the coordination of Community aid to third countries 14 March 1984 OJ C 224, 
25. 8. 1984 
Opinion 3/83 on the proposal for a Council Decision empowering the 5 April 1984 OJC163, 
Commission to help finance innovation within the Community 23. 6. 1984 
15. 12. 87 Official Journal of the European Communities 149 
Title Date of 
adoption Publication 
Special report 2/84 on the management of Community development aid funds 10 May 1984 Available from the Court 
by the European Investment Bank of Auditors 
Opinion 1/84 on the proposal for a Council Regulation introducing measures 7 June 1984 OJ C 228, 
to cover budgetary requirements in 1984 given the exhaustion of own 30. 8. 1984 
resources 
Report on the 1983 accounts of the Euratom Supply Agency 
Report on the 1983 JET financial statements 
Report on the financial statements of the European Coal and Steel 
Community for the financial year 1983 
Special report 3/84 on the operation of the common organization of the 
market in sheepmeat 19 June 1984 
19 June 1984 
26 June 1984 
19 July 1984 Not published 
Not published 
OJ C 350, 
31. 12. 1984 
OJ C 234, 
4. 9. 1984 
Special report 4/84 on the implementation of Directive 77/435/EEC of 27 June 11 October 1984 OJ C 336, 
1977 on scrutiny by the Member States of transactions forming part of the 17. 12. 1984 
system of financing by the EAGGF (Guarantee Section) 
Report on the 1983 accounts of the European Centre for the Development of 
Vocational Training (Berlin) 
Report on the 1983 accounts of the European Foundation for the 
Improvement of Living and Working Conditions (Dublin) 
Seventh annual report concerning the financial year 1983 
Report (Annex to the 1983 ECSC annual report) on the accounting and 
financial management of the ECSC 
Special report 5/84 on the system of aid for liquid skimmed milk used as animal 
feed 
Special report 1/85 on the common organization of the market in olive oil 24 October 1984 
24 October 1984 
22 November 1984 
13 December 1984 
13 December 1984 
25 April 1985 Not published 
Not published 
OJ C 348, 
31.12. 1984 
Not published 
OJC91, 
12.4. 1985 
OJC 134, 
3.6. 1985 
Opinion 1/85 on a proposal for a Council Regulation (EEC) on the application 2 May 1985 OJC 138, 
of the agreement in the form of an exchange of letters between the EEC and the 6. 6. 1985 
Portuguese Republic concerning the implementation of specific financial aid 
for improving agricultural and fisheries structures in Portugal 
Opinion 2/85 on a proposal for a Council Regulation (EEC, Euratom, ECSC) 26 June 1985 OJC 261, 
extending the terms of validity of Council Regulation (EEC, Euratom, ECSC) 12. 10. 1985 
No 2892/77 implementing in respect of own resources accruing from value-
added tax the Decision of 21 April 1970 on the replacement of financial 
contributions from Member States by the Communities' own resources 
150 Official Journal of the European Communities 15. 12. 87 
Title Date of 
adoption Publication 
Report on the financial statements of the European Coal and Steel 26 June 1985 OJ C 360, 
Community for the financial year 1984 31. 12. 1985 
Special report 2/85 on the system for the payment of refunds on agricultural 26 June 1985 OJ C 215, 
exports (Audit of the export of agricultural products) 26. 8. 1985 and 
OJ C 238, 
19.9. 1985 
Special report 3/85 on certain aspects of technical cooperation financed by 
Community development aid 
Report on the accounts of the European Schools for 1983 
Report on the accounts of the Euratom Supply Agency for 1984 
Report on the 1984 JET financial statements 
Report on the 1984 accounts of the European Centre for the Development of 
Vocational Training (Berlin) 
Report on the 1984 accounts of the European Foundation for the 
Improvement of Living and Working Conditions (Dublin) 
Report (Annex to the 1984 ECSC annual report) on the accounting and 
financial management of the ECSC 
Eighth annual report concerning the financial year 1984 
Special report 4/85 on the common organization of the market in fishery 
products 
Special report 5/85 on the Community contribution towards schemes 
concerning developing countries carried out by non-governmental organiza­
tions 12 July 1985 
17 July 1985 
17 July 1985 
17 July 1985 
17 October 1985 
17 October 1985 
19 November 1985 
19 November 1985 
28 November 1985 
12 December 1985 Available from the Court 
of Auditors 
Not published 
Not published 
Not published 
Not published 
Not published 
Not published 
OJ C 326, 
16. 12. 1985 
OJ C 339, 
31. 12.1985 
Available from 
the Court of 
Auditors 
Opinion 3/85 on the draft amendments to certain articles of the draft 12 December 1985 Not published 
Commission Regulation laying down detailed rules for the implementation of 
certain provisions of the Financial Regulation of 21 December 1977 (not 
translated into English) 
Opinion 4/85 on the proposal for a Council Regulation (EEC) amending 
Regulation (EEC) No 2681/74 on Community financing of expenditure 
incurred in respect of the supply of agricultural products as food aid 
Opinion 5/85 on the draft Financial Regulation applicable to the Sixth 
European Development Fund 
Special report 1/86 on the contract measures for the expansion of markets for 
milk and milk products financed by proceeds of the co-responsibility levy 12 December 1985 
12 December 1985 
20 February 1986 OJ C 357, 
31.12.1985 
OJC 361, 
31. 12. 1985 
OJC 127, 
26. 5. 1986 
Opinion 1/86 on the proposal for a Council Regulation amending Regulation 6 March 1986 OJ C 80, 
(EEC) No 1883/78 on the general rules for the financing of interventions by the 9.4. 1986 
European Agricultural Guidance and Guarantee Fund, Guarantee Section 
15. 12. 87 Official Journal of the European Communities 151 
Title Date of 
adoption Publication 
Report on the 1985 accounts of the Euratom Supply Agency 29 May 1986 Not published 
Report on the financial statements of the ECSC at 31 December 1985 17 June 1986 OJ C 208, 
19.8. 1986 
Special report 2/86 on the ERDFs specific Community regional development 10 July 1986 OJ C 262, 
measures (non-quota measures) 20. 10. 1986 
Special report 3/86 on the subsidy system for oilseeds 10 July 1986 Available from 
the Court of 
Auditors 
Report on the accounts of the European Schools for the financialyear 1984 25 September 1986 Not published 
Report on the 1985 accounts of the European Centre for the Development of 23 October 1986 Not published 
Vocational Training (Berlin) 
Report on the 1985 accounts of the European Foundation for the 11 November 1986 Not published 
Improvement of Living and Working Conditions (Dublin) 
Opinion 2/86 on a draft Financial Regulation on the application of the 11 November 1986 OJ C 302, 
Financial Protocols concluded with Algeria, Morocco, Tunisia, Egypt, 27. 11. 1986 
Lebanon, Jordan, Syria, Malta and Cyprus 
Report on the 1985 JET financial statements 19 November 1986 Not published 
Report (Annex to the 1985 ECSC annual report) on the accounting and 19 November 1986 Not published 
financial management of the ECSC 
Ninth annual report concerning the financial year 1985 19 November 1986 OJ C 321, 
15. 12.1986 
Special report No 4/86 on financial and technical cooperation 4 December 1986 OJ C 75, 
23.3.1987 
Opinion No 1/87 on the Council's proposal for a Regulation amending 18 February 1987 OJ C 59, 
Regulation (EEC) No 1883/78 laying down general rules for the financing of 7. 3.1987 
interventions by the European Agricultural Guidance and Guarantee Fund, 
Guarantee Section 
Opinion No 2/87 on the Commission proposal for a Council Regulation 14 May 1987 OJ C 147, 
(EEC) on the monitoring of the payment of the amounts granted on export of 5. 6.1987 
agricultural products 
Special report No 1/87 on the quality of food aid. The extent to which food aid 27 May 1987 OJ C 219, 
products comply with the applicable rules as regards quality, quantity, 17.8.1987 
packaging, time and place 
Opinion No 3/87 on a proposal for a Council Regulation amending 10 June 1987 OJ C 175, 3. 7.1987 
Regulation (EEC) No 729/70 on the financing of the common agricultural 
policy with regard to the system of advances in the Guarantee Section of the 
European Agricultural Guidance and Guarantee Fund 
152 Official Journal of the European Communities 15. 12. 87 
Title Date of 
adoption Publication 
Report on the financial statements of the European Coal and Steel 25 June 1987 OJ C 228, 
Community at 31 December 1986 26. 8. 1987 
Report on the 1986 accounts of the Euratom Supply Agency 25 June 1987 Not published 
Special report No 2/87 on the quota/additional levy system in the milk sector 15 July 1987 OJ C 266, 
5. 10.1987 
Special report No 3/87 on the common organization of the market in raw 15 July 1987 OJ C 297, 
tobacco 6.11.1987 
Special report No 4/87 on Community wine distillation measures 17 September 1987 OJ C 297, 
6. 11. 1987 
Special report No 5/87 on Community aid for the acceleration of agricultural 7 October 1987 Available from the 
development in Greece Court of Auditors 
Special report No 6/87 on food aid supplied to India between 1978 and 1985 29 October 1987 OJ C...(') 
(Flood II operation) 
Opinion No 4/87 on a proposal for a Council Regulation (Euratom, ECSC, 29 October 1987 OJ C ...(l) 
EEC) derogating temporarily from Regulation (EEC) No 2891/77 implement­
ing the Decision of 21 April 1970 on the replacement of financial contributions 
from Member States by the Community's own resources 
Opinion No 5/87 on a proposal for a Council Regulation (Euratom, ECSC, 
EEC) amending the Financial Regulation of 21 December 1977 applicable to 
the general budget of the European Communities 
Report on the 1986 accounts of the European Centre for the Development of 
Vocational Training (Berlin) 
Report on the 1986 accounts of the European Foundation for the 
Improvement of Living and Working Conditions (Dublin) 
Report on the accounts of the European Schools for the financial years 1985 
and 1986 
Report (Annex to the 1986 ECSC annual report) on the accounting and 
financial management of the ECSC 
Tenth annual report concerning the financial year 1986 29 October 1987 
4/5 November 1987 
4/5 November 1987 
4/5 November 1987 
10/11 November 1987 
10/11 November 1987 OJC.O) 
Not published 
Not published 
Not published 
Not published 
In this edition 
(') Publication in preparation. 
15. 12. 87 Official Journal of the European Communities 153 
ANNEX III 
Financial information relating 
to the general budget of the European Communities 
and 
to the European Development Funds 
(1986) 
Preliminary remarks 
1. Source of financial data 
The financial data in this Annex have been drawn from the revenue and expenditure accounts and the balance 
sheets of assets and liabilities of the European Communities (1) and of the European Development Funds and 
from other financial records provided by the Commission. 
2. Monetary unit 
All the financial data are presented in millions of ECU (Mio ECU), rounded to one decimal place. 
3. Change in nomenclature of the general budget 
Changes are sometimes made to the budgetary nomenclature. The Court uses the nomenclature of the current 
financial year for the presentation of the historical data and each time the nomenclature is changed it adapts the 
data of the previous financial years in accordance with the current nomenclature. 
Thus the data given in § 14 to §19 are comparable year by year. 
(1) For the financial year 1986: revenue and expenditure account and balance sheet of assets and liabilities relating to operations under the 
1986 budget (Doc. COM(87) 186, 187, 188, 189, 191). 
154 Official Journal of the European Communities 15. 12. 87 
4. Abbreviations and symbols 
EC 
ECSC 
EEC 
EAEC or Euratom 
EAGGF 
GNP 
VAT 
BFR 
DKR 
DM 
DRA 
ESC 
FF 
HFL 
IRL 
LFR 
LIT 
PTA 
UKL 
u.a. 
EUA 
ECU 
Mio ECU 
DA 
NDA 
CA 
PA 
AFC 
AFP 
B 
DK 
D 
GR 
E 
F 
IRL 
1 
L 
NL 
P 
UK 
EUR 10/12 
EDF 
ACP 
OCT 
FOD 
Stabex 
Sysmin 
FR 
OJ 
S 
T 
Ch 
— 
0,0 
% 
§ European Community(ies) 
European Coal and Steel Community 
European Economic Community 
European Atomic Energy Community 
European Agricultural Guidance and Guarantee Fund 
Gross national product 
Value-added tax 
Belgian franc 
Danish crown 
German mark 
Greek drachma 
Portuguese escudo 
French franc 
Dutch guilder 
Irish pound 
Luxembourg franc 
Italian lira 
Spanish peseta 
Pound sterling 
Unit of account (until 1977) 
European unit of account (from 1978 to 1980) 
European currency unit (as from 1 January 1981) 
Millions of European currency units 
Differentiated appropriations 
Non-differentiated appropriations 
Commitment appropriations 
Payment appropriations 
Appropriations for commitment 
Appropriations for payment 
Belgium 
Denmark 
Federal Republic of Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
The Netherlands 
Portugal 
United Kingdom 
Total of the 10 or 12 Member States of the European Communities 
European Development Fund 
African, Caribbean and Pacific States 
Overseas Countries and Territories 
French Overseas Departments 
Stabilization of export earnings 
System of stabilization of export earnings from mining products 
Financial Regulation of 21 December 1977 
Official Journal of the European Communities 
Budgetary section 
Budgetary title 
Budgetary chapter 
Nil 
Data between zero and 0,05 
Percentage 
Sections referring within this annex to texts, diagrams and tables 
>5- 12.87 Official Journal of the European Communities 155 
Contents 
Part I: General budget of the European Communities page 
§ 1. Background information on the general budget 156 
General budget for the year 1986 and implementation of the budget during 1986 
§ 2. General budget 1986: estimated revenue 160 
§ 3. General budget 1986: estimated expenditure — appropriations for payment 161 
§ 4. General budget 1986: appropriations for commitment 162 
§ 5. Estimated and actual revenue in 1986 163 
§ 6. Appropriations for commitment available in 1986 and their utilization — by sector and by institution 164 
§ 7. Appropriations for payment available in 1986 and their utilization — by sector and by institution 165 
§ 8. Actual own resources in 1986 166 
§ 9. Rate of utilization of appropriations available in 1986 — by sector 167 
§ 10. The consolidated revenue and expenditure account and the balance of the financial year 1986 168 
§ 11. Payments made in 1986 — by sector and by recipient Member State 169 
§ 12. EAGGF-Guarantee: payments made in 1986 — by market and by recipient Member State 170 
§ 13. The structural Funds: commitments entered into and payments made in 1986 — by recipient Member State 171 
Historical data relating to the implementation of the general budget (1982-1986) 
§ 14. Evolution and utilization of the appropriations for payment for the period 1982-1986 — by sector 172 
§ 15. Utilization rates of the appropriations for payment from 1982 to 1986 — by sector 173 
§ 16. Annual payments during the period 1982-1986 — by sector and by institution 174 
§ 17. Evolution of the ratio of 'annual payments by sector' to 'total of annual budgetary payments' (1982-1986) . . 175 
§ 18. Annual payments to the Member States (1982-1986) 176 
§ 19. Actual own resources — by Member State (1982-1986) 177 
Part II: The European Development Funds (EDF) (position at 31 December 1986) 
§ 20. General information on the EDF 178 
§ 21. The 4th and 5th EDF: allocation, financing, distribution of aid, total utilization 179 
§ 22. The 6th EDF: allocation, financing, distribution of aid, total utilization 180 
§ 23. The 4th EDF: aid by economic sector and by recipient country 181 
§ 24. The 5th EDF: aid by type and by recipient country 182 
§ 25. The 5th EDF: aid by economic sector and by recipient country 183 
§ 26. The 4th and 5th EDF: utilization of aid by economic sector 184 
§ 27. The six EDF: distribution of cumulative payments by recipient country (1960-1986) 185 
§ 28. The six EDF: evolution of annual payments (1960-1986) 186 
56 Official Journal of the European Communities 15. 12. 87 
Part I: General budget of the European Communities 
§ 1. Background information on the general budget 
1.1. Origin of the general budget 
The general budget was created by the Merger Treaty (1) (Article 20). It replaced, on 1 January 1968, the three separate EC 
budgets which existed before then: the ECSC administrative budget, the EEC budget and the Euratom operating budget. The 
Euratom research and investment budget was incorporated in the general budget as from 1971 by the Treatv of 
Luxembourg (2) (Article 10). 
1.2. Legal basis 
The general budget is governed by the financial provisions of the Treaties of Paris (3) (Article 78 ECSC) and Rome (4) (5) 
(Articles 199 to 209 EEC and Articles 171 to 183 Euratom) and by amendments resulting from the Merger Treaty (1) the 
Council Decision on own resources (6), the Treaty of Luxembourg (2), the Treaty of Accession (7) and the Treaty of 
Brussels (8). The Financial Regulation (9) governs the procedure for establishing and implementing the budget and for 
presenting and auditing the accounts. The Financial Regulation is supplemented by further specific enactments governing 
the details of budgetary implementation. 
1.3. Main budgetary principles prescribed by the Treaties and the Financial Regulation 
The budget is authorized for one financial year (annuality). The budget presented must be in balance. Budgetary revenue is 
to be used without distinction to finance all expenditure entered in the budget (non-assignment). All items of Community 
revenue and expenditure are to be included in the budget (unity). All items of revenue and expenditure are to be entered in 
full in the budget and in the accounts without any adjustment against each other (universality). There are some exceptions to 
these general principles. 
1.4. Content and structure of the general budget 
The general budget comprises the estimates of administrative expenditure of the ECSC and corresponding revenue of 
revenue and expenditure of the EEC and of revenue and expenditure of Euratom. 
The budget consists of five separate sections subdivided into statements of (estimated) revenue and expenditure: 
(I) Parliament; (II) Council (annexed: Economic and Social Committee); (III) Commission; (IV) Court of Justice: (V) Court of 
Auditors. 
Within each section, revenue and expenditure are classified under budget headings (titles, chapters, articles and items) 
according to their type or the use to which they are to be applied. 
1.5. Monetary unit of the general budget 
Until 1977 the budget was established and implemented in units of account (u.a.): 1 u.a. = 0,88867088 q qold (= 1 US dollar 
between 1934 and 1972). 
From 1978 to 1980 the budget was established and implemented in European units of account (EUA): 1 EUA corresponds to 
the total of the following amounts of the currencies of the EC Member States: 0,828 DM + 0 0885UKL + 1 15FF + 109 LIT + 
0,286 HFL + 3,66 BFR + 0,14 LFR + 0,217 DKR + 0,00759 IRL. 
As from 1981 the budget has been established and implemented in European currency units (ECU). Like the EUA the ECU is 
a unit based on a basket of national currencies. For 1981, 1982 and 1983 the value and composition of the ECU basket is the 
same as that of the EUA (the Greek currency, the drachma, was not included in the ECU basket) For 1984-1986 1 ECU = 
0,719 DM + 0,0878 UKL + 1,31 FF + 140,0 LIT + 0,256 HFL + 3,71 BFR + 0,14 LFR + 0 219 DKR + 0 00871 IRL + 
1,15 DRA. 
The rates of conversion at 31 December 1986 between the ECU and the national currencies were as follows- 1 ECU = 
43,2325 BFR = 7,86192 DKR = 2,07610 DM = 148,526 DRA = 156,382 ESC = 6,87503 FF = 2 34488 HFL = 0 764828 IRL = 
43,2325 LFR = 1446,19 LIT = 141,151 PTA = 0,724942 UKL. 
1.6. Financing of the general budget (budgetary revenue) 
The general budget is mainly financed by the own resources of the Communities (6): customs duties, agricultural levies, 
sugar and tsoglucose levies and VAT up to a maximum of 1,4 % of a uniform EC assessment basis (1°)(11); there are also 
other smaller sources of revenue. 
As from January 1971, pursuant to the Council Decision of 21 April 1970 (6), the system of own resources progressively 
replaced the former system of fixed percentage financial contributions by the Member States. Until it became possible to 
apply the uniform VAT basis, financial contributions continued to be paid by the Member States. As from 1975 these financial 
contributions were calculated on the basis of the gross national product (GNP) shares of Member States In 1979 own 
resources included VAT own resources for the first time. This was paid by Member States other than the Federal Republic of 
Germany, Ireland and Luxembourg, which continued to pay GNP-based financial contributions In 1980 the VAT system was 
applied by all Member States. From 1981 to 1985 all the Member States paid VAT own resources with the exception of 
Greece which paid a financial contribution based on the GNP. In 1986 all the Member States paid VAT own resources with 
the exception of Portugal, which paid a financial contribution based on the GNP. 
(') Merger Treaty (8 April 1965): Treaty establishing a Single Council and Single Commission of the European Communities 
( ) Treaty of Luxembourg (22 April 1970): Treaty amending certain budgetary provisions of the Treaties establishing the European Communities and of the 
Merger Treaty. 
(3) Treaty of Paris (18 April 1951): Treaty establishing the European Coal and Steel Community (ECSC). 
(4) Treaty of Rome (25 March 1957): Treaty establishing the European Economic Community (EEC) 
(5) Treaty of Rome (25 March 1957): Treaty establishing the European Atomic Energy Community (Euratom) 
( ) Council Decision 70/243/ECSC, EEC, Euratom of 21 April 1970 on the replacement of financial contributions from Member States by the Communities' own 
resources (OJ L 94, 28. 4. 1970). 
H Treaty of Accession (22 January 1972): Act concerning the Conditions of Accession and the Adjustments to the Treaties. 
( ) Treaty of Brussels (22 July 1975): Treaty amending certain financial provisions of the Treaties establishing the European Communities and of the Meraer 
Treaty. a 
(9) Financial Regulation of 21 December 1977 (OJ L 356, 31. 12. 1977) 
(10) See Sixth Council Directive of 17 May 1977, common system of VAT: uniform assessment basis (OJ L 145 13 6 1977) 
(11) Maximum VAT rate of uniform assessment basis: 1 % for 1979-1985, 1,4 % from 1986. 
15. 12. 87 Official Journal of the European Communities 157 
1.7. Types of budget appropriations 
To cover estimated expenditure, the following types of budget appropriations are distinguished in the general budget: 
a) Differentiated appropriations (DA) are used to finance multiannual activities in certain sectors. They comprise 
commitment appropriations and payment appropriations: 
— commitment appropriations (CA) cover, for the current financial year, the legal obligations to be entered into for 
activities whose implementation extends over several financial years; 
— payment appropriations (PA) cover expenditure arising from commitments entered into in the financial year and/or 
preceding financial years. 
b) Non-differentiated appropriations (NDA) cover for annual activities both commitments and payments for the same 
financial year. 
Thus it is possible to establish the following two totals for the same financial year: 
— the total of appropriations for commitment (AFC) (1) = non-differentiated appropriations (NDA) 
+ commitment appropriations (CA) (1); 
— the total of appropriations for payment (AFP) f1) = non-differentiated appropriations (NDA) 
+ payment appropriations (PA) (1). 
Revenue raised in the budget is to cover the total appropriations for payment. Commitment appropriations are not financed 
until the corresponding payment appropriations have been entered in the budget. 
The following simplified scheme (with illustrative amounts) shows the impact of these types of appropriations in each 
budget year: 
Appropriations for commitment: Amounts allo­
cated in the budgets of years 1, 2, 3 for 
commitments in those years. 
Key. 
priations 
for 
commitment 
(AFC) . | 1 Commitment 
appropriations 
V ' (CA) 
Non-differentiated 
appropriations 
(NDA) 
AFC: 150 -CA: 50-
-NDA:100-
year 2: AFC: 180 
year 3: AFC: 215 -<A: 60-
-NDA:120-
-CA: 65-
NDA:150-Commitment ) 
appropriations 
(CA) i' 
of prior years J 
Summary of all types of appropriations: 
\ \ °~ 
\ ^°~ 
\ 
f \ m \^ 
year 1 
year 2 
year 3 < 
si 
So. 
£ Q-O Q. 
(D 
100 
120 
150 Differentiated 
appropriations 
(DA) 
J§" 
O w$i 
(2) 
50 
60 
65 £2„ 
a! at 
(3) 
27 
38 
75 o 
< 
g-E 
Q.° 
Z° 
(1) + (2) 
150 
180 
215 ST 
&f 
Q.tt 
2° 
(1) + (3) 
127 
158 
225 Financial schedule: This shows in which year each part of the AFC 
allocated for years 1, 2, 3 is to be financed: NDA are financed in the 
year to which they are allocated; the CA are financed over several 
J 
D 
15 
ol financed in: 
1 
OS • 
18 I 
The vertical totals of this schedule indicate for each year the 
appropriations for payment (AFP) which are necessary to finance the 
legal obligations resulting for this year from the AFC allocated. For 
each year there are: AFP = NDA + payment appropriations (PA), the 
PA of the year being the total of all CA to be financed in that year. 
^ w w 
Appropriations for payment: 
2% 27 2 38 
• 9 
Key: 
priations 
for 
payment 
(AFP) o Payment appropriations 
(PA) 
Non-differentiated 
appropriations (NDA) 
(') Note: It is important to note the differences between appropriations for commitment and commitment appropriations and between appropriations for 
payment and payment appropriations. The two terms commitment appropriations and payment appropriations are used exclusively in the context of 
differentiated appropriations. 
158 Official Journal of the European Communities 15. 12. 87 
1.8. Establishment of the general budget 
Before 1 July of each year each institution draws up estimates of its expenditure for the following financial year (running 
from 1 January to 31 December). The Commission enters these estimates in a preliminary draft budget, and, not later than 1 
September, places this before the Council, which with Parliament constitutes the budgetary authority. The Council 
establishes the draft budget and forwards it to Parliament not later than 5 October of the same year. Parliament can propose 
modifications to the draft budget for compulsory expenditure (1) and make amendments for non-compulsory expenditure; 
these modifications and amendments are submitted to the Council. For compulsory expenditure the Council takes the final 
decision. For non-compulsory expenditure Parliament may, within the limits of a statistical maximum rate of increase, make 
amendments before taking the final decision. The President of Parliament declares that the budget has been finally 
adopted. However, Parliament may reject the draft budget and ask for a new draft to be submitted (2). 
If at the beginning of a financial year the budget has not been voted, particular provisions of the Treaties and the Financial 
Regulation relating to the authorization of expenditure are to be applied (3). 
Amending budgets (which do not alter the total amount of the annual budget) or supplementary budgets (which alter the 
total amount) can be adopted by the budgetary authority (4). 
The budgetary allocation to a specific budget heading can be modified by transfers (5) from other budget headings. 
1.9. Implementation of the general budget 
1.9.1. Responsibility for implementation 
The Commission implements the budget on its own responsibility in accordance with the Financial Regulation and within 
the limits of the appropriations allotted; it also confers upon the other institutions the requisite powers for the 
implementation of the sections of the budget relating to them (6). The Financial Regulation lays down the implementation 
procedures and, in particular, the responsibilities of the authorizing officers, accounting officers, administrators of advance 
funds and financial controllers of the institutions (7). 
1.9.2. Implementation of revenue 
The estimated revenue is entered in the budget subject to change by amending and supplementary budgets (4). 
The budgetary implementation of revenue consists in establishing the entitlements and recovering the revenue due to the 
Communities (own resources and other revenue); it is governed by special provisions (8). 
The actual revenue of a financial year is defined as the sum of recoveries upon entitlements established during the current 
financial year and recoveries upon entitlements still to be recovered from previous financial years. 
1.9.3. Implementation of expenditure 
The estimated expenditure is entered in the budget. According to the nature of the legal obligation involved, it is covered by 
.appropriations for commitment or appropriations for payment. The budgetary implementation of expenditure, i.e. the 
evolution and utilization of appropriations, may be summarized as follows: 
a) Appropriations for commitment 
— Evolution of appropriations: The appropriations for commitment allocated in the initial budget can undergo certain 
modifications until the final appropriations for commitment are obtained: final appropriations for commitment = 
initial budget (NDA and CA) ± amending and supplementary budgets (4) + supplementary receipts (9) ± transfers (5) 
+ commitment appropriations remaining from the preceding financial year (10) + non-automatic carry-overs (11) 
from the preceding financial year (uncommitted NDA) + released commitment appropriations from preceding 
financial years (CA). 
— Utilization of appropriations: The final appropriations for commitment are available in the financial year for use in the 
form of commitments entered into (appropriations for commitment utilized = amount of commitments entered into). 
— Appropriations remaining available for the next financial year: Non-differentiated appropriations which have not 
been committed may be carried over non-automatically to the next financial year after approval by the Council (11). 
Non-utilized commitment appropriations remain available for the next financial year (10). 
— Cancellation of appropriations: The balance is cancelled. 
b) Appropriations for payment of the financial year 
— Evolution of appropriations: Appropriations for payment may also undergo modifications leading to the final 
appropriations for payment: final appropriations for payment = initial budget (NDA and PA) ± amending and 
supplementary budgets (4) + supplementary receipts (9) ± transfers (5). 
— Utilization of appropriations: The final appropriations for payment are available in the financial year for use as 
payments (utilized appropriations for payment of the financial year = amount of payments made from the 
appropriations of the financial year). 
15. 12. 87 Official Journal of the kuiopean Communities \>") 
— Carry-overs of appropriations to the next financial year: Appropriations not paid may be carried over to the next 
financial year in the form of automatic (12) or non-automatic (11) carry-overs. 
— Cancellation of appropriations: The balance is cancelled. 
c) Appropriations for payment carried over from the preceding financial year (automatic and non-automatic carry-overs). 
In each financial year these appropriations (after possible transfers) are also available for use as payments. Carry-overs 
which remain unused during the year are cancelled, except in certain cases where carry-overs can be repeated (13). 
Amounts cancelled in this way are added to the result of the financial year in the consolidated revenue and expenditure 
account (see 1.9.4.). 
With regard to actual expenditure, a distinction is made between: 
— actual expenditure during a financial year = total payments during the financial year = payments against 
appropriations for payment of the financial year plus payments against appropriations for payment carried over from 
the preceding financial year. 
— actual expenditure charged to a financial year = expenditure charged to the consolidated revenue and expenditure 
account (see 1.9.4.) = payments against appropriations for payment of the financial year plus appropriations for 
payment of the financial year carried over to the following financial year. 
1.9.4. The consolidated revenue and expenditure account and the balance of the financial year 
After the closure of each financial year the consolidated revenue and expenditure account is drawn up. The balance of the 
year, which is to be entered in the budget of the next financial year on the occasion of an amending budget, is determined 
therein (14) (see § 10). 
1.10. Presenting the accounts 
Not later than 1 June of the year following the closure of the financial year, the Commission forwards to Parliament, the 
Council and the Court of Auditors the accounts of that year: the accounts comprise a revenue and expenditure account and a 
balance sheet, together with an analysis of the financial management (15). 
1.11. External audit 
As from 1977 the external audit of the general budget has been carried out by the Court of Auditors of the European 
Communities (16). The Court of Auditors examines the accounts of all revenue and expenditure of the general budget, 
whether revenue has been received and expenditure incurred in a lawful and regular manner, and whether the financial 
management has been sound. The audits may be carried out before the closure of the financial year in question. The audits 
are performed on the basis of records and, where necessary, on the spot in the institutions of the Communities and in the 
Member States. The Court of Auditors draws up an annual report for each financial year and may also, at any time, submit 
observations on specific questions and deliver opinions at the request of one of the institutions of the Communities. 
1.12. Discharge and follow-up 
As from 1977 the following provisions are applicable (17): Parliament, on the recommendation of the Council, gives, before 
30 April of the second year following the financial year in question, discharge to the Commission on the implementation of 
the budget. To this end the Council and Parliament in turn examine the accounts presented by the Commission and the 
annual report of the Court of Auditors. The institutions must take appropriate action on the comments appearing in the 
decisions giving discharge and report on the measures taken (18). 
(1) Compulsory expenditure is that resulting necessarily from the Treaties or from acts adopted in accordance with them 
(2) For details concerning the budgetary procedure see Articles 78 ECSC, 203 EEC and 177 Euratom. 
(3) Article 8 of the Financial Regulation. 
(4) Article 1 (5) of the Financial Regulation. 
(5) Article 21 of the Financial Regulation. 
(6) Articles 78d ECSC. 205 EEC. 179 Euratom and Article 18 (2) of the Financial Regulation 
C) Articles 17 to 49 and 68 to 72 of the Financial Regulation. 
(8) Articles 23 to 31 of the Financial Regulation; Council Regulations (EEC, Euratom. ECSC) Nos 2891/77 and 2892/77 of 19 December 1977 (OJ L 336 
27. 12. 1977). 
(9) Article 87 of the Financial Regulation and Article 91 (2) of the modified Financial Regulation. 
(10) Articles 6 (2) (a) and 88 (3) of the Financial Regulation. 
(11) Article 6 (1) (b) of the Financial Regulation. 
(12) Articles 6 (1) (c), 6 (2) (b) and 88 (4) of the Financial Regulation. 
(13) Articles 6 (4) and 108 (3) (a. b) of the Financial Regulation. 
(14) Article 27 of the Financial Regulation and Articles 15 and 16 of Council Regulation (EEC. Euratom, ECSC) No 2891/77 (OJ L 336, 27. 12 1977) 
(15) Articles 73 to 77 of the Financial Regulation. 
(16) Articles 78e, 78f ECSC, 206 and 206a EEC, 180 and 180a Euratom and Articles 78 to 84 of the Financial Regulation 
(17) Articles 78g ECSC, 206b EEC. 180b Euratom. 
(18) Article 85 of the Financial Regulation. 
160 Official Journal of the European Communities 15. 12. 87 
§ 2. General budget 1986: estimated revenue 
(for more detailed information: see § 5) 
Other revenue: 257.5 (0,7 %) 1 
Surplus available from 1985: 49,2 (0,2 %) 
VAT own resources 
and financial contributions: 22 468,2 (63,9 %) 
Customs duties: 
9 700,5 (27,6 %) 
Key: 
Total own resources (by Member State) 
Agricultural levies 
Sugar and isoglucose levies 
Customs duties 
1 VAT own resources and financial contributions 
"1 Surplus available from 1985 and other revenue Sugar and isoglucose 
levies: 
1 113,8(3,1 %) 
Agricultural levies: 
1 584,9 (4,5 %) 
15. 12. 87 Official Journal of the European Communities 161 
§ 3. General budget 1986: estimated expenditure — appropriations for payment 
(for more detailed information: see § 7, column 3) 
ECU and %) 
10. Provisional appropriations and contingency reserve: 95,0 (0,3 %) (incl. NDA: 43,5) 
-*- 9. Cooperation with developing countries: 1 141,5 (3,2 %) (incl. NDA: 233,9) 
8. Repayments to Member States: 3 299,8 (9,4 %) 
-*- 7. Research, energy, etc.: 740,7 (2,1 %) (incl. NDA: 30,4) 
6. Social policy: 2 651,6 (7,5 %) (incl. NDA: 100,1) 
>- 5. Regional policy and transport: 2 574,8 (7,3 %) (incl. NDA: 4,0) 
*- 4. Fisheries: 164,1 (0,5 %) (incl. NDA: 89,6) 
*"" 3. Agricultural structures: 790,2 (2,2 %) (incl. NDA: 60,9) 
\ 2.11. Other expenditure: 6,5 (0,0 %) 
) 2.10. Agri-monetary measures: 466,0 (1,3 %) 
*- 2.9. Various markets: 987,0 (2,8 %) 
*- 2.8. Meat, eggs, poultry: 3 559,0 (10,1 %) 
*- 2.7. Milk products: 6 100,0(17,4%) 
*~ 2.6. Tobacco: 792,0 (2,3 %) 
*- 2.5. Wine: 1 087,0 (3,1 %) 
2.4. Fruit and vegetables: 927,5 (2,6 %) 
*^ 2.3. Fats and protein plants: 3 245,0 (9,2%) 
*- 2.2. Sugar: 1 642,0 (4,7 %) 
*~ 2.1. Cereals and rice: 3 300,0 (9,4 %) 
Key: 
Non-differentiated appropriations (NDA) 
Sectors with differentiated appropriations: 
payment appropriations (PA) 
Appropriations available to the Commission 
Appropriations available to the other 
institutions 
162 Official Journal of the European Communities 15. 12. 87 
§ 4. General budget 1986: appropriations for commitment 
(for more detailed information: see § 6, column 3) 
(Mio ECU and %) 
10. Provisional appropriations and contingency reserve: 78,0 (0,2 %) (incl. NDA: 43,5) 
*~ 9. Cooperation with developing countries: 1 243,2 (3,4 %) (incl. NDA: 233,9) 
8. Repayments to Member States: 3 299,8 (9,2 %) 
*~ 7. Research, energy, etc.: 851,7 (2,4 %) (incl. NDA: 30,4) 
*"" 6. Social policy: 2 412,2 (6,7 %) (incl. NDA: 100,1) 
*- 5. Regional policy and transport: 3 463,1 (9,6 %) (incl. NDA: 4,0) 
*- 4. Fisheries: 156,3 (0,4 %) (incl. NDA: 89,6) 
—*- 3. Agricultural structures: 831,4 (2,3 %) (incl. NDA: 60,9) 
1. Administration (all institutions): 1 604,4 (4,5 %) 
(for the breakdown of these appropriations 
by institution, see § 3) Note: For the sectors to which differentiated appropriations are 
allocated, this diagram shows the amounts of the commitment 
appropriations rather than the payment appropriations shown 
in § 3, the amounts of the non-differentiated appropriations and 
their diagrammatical presentation being the same. 
The total appropriations for commitment are not balanced by 
the budgetary revenue of 1986 as the commitment appropri­
ations also include amounts to be financed by budgetary 
revenue of subsequent years (see § 1 (1.7)). 
2. EAGGF-Guarantee: 22 112,0 (61,3 %) 
(for the breakdown of these appropriations 
by market, see § 3) 
Key: 
Non-differentiated appropriations (NDA) 
Sectors with differentiated appropriations: 
commitment appropriations (CA) 
15. 12. 87 Diario Oficial de las Comunidades Europeas 163 
§ 5. Ingresos previstos y efectivos en 1986 
A. Ingresos previstos y efectivos en 1986 
Tipo de ingresos 
[entre parentesis se indican los titulos (T) 
o los capitulos (Cap), de acuerdo con la 
nomenclatura presupuestaria 1986] 
1. Recursos propios: 
— Exacciones reguladoras agricolas (Cap 10) 
— Cotizaciones de azucar e isoglucosa (Cap 11) 
(Cap 90 COM) 
— Derechos de aduana (Cap 12) 
— Recursos propios IVA (Cap 13) 
— Contribucion financiera (PNB) Portugal (Cap 20) 
— Saldos y ajustes anteriores a 1986 de recursos propios IVA 
y contribuciones financieras (Cap 31) 
Total recursos propios 
2. Excedente disponible del ejercicio precedente (Cap 30) 
3. Otros ingresos (T 4-9, excepto Cap 90 COM) 
Total ingresos Ingresos previstos del 
presupuesto 1986 
Mio ECU % 
1 584,9 4,5 
1 113,8 3,1 
9 700,5 27,6 
22 257,2 63,3 
211,0 0,6 
34 867,4 99,1 
49,2 0,2 
257,5 0,7 
35 174,1 100,0 Ingresos efectivos en 1986 
(cobros del ejercicio) 
Mio ECU % 
1 175,5 3,5 
1 043,2 3,1 
68,3 0,2 
8 172,9 24,3 
22 223,4 66,0 
210,1 0,6 
377,3 1,1 
33 270,7 98,8 
53,9 0,2 
342,6 1,0 
33 667,2 100,0 
B. Recursos propios previstos y efectivos en 1986 por Estado miembro 
Nota: Es preciso senalar que los Estados miembros se encargan de recaudar, por cuenta de la Comunidad, los importes adeudados por 
derechos de aduana, exacciones reguladoras agricolas y cotizaciones de azucar e isoglucosa. Esta nota es valida tambien para todos los 
cuadros similares de los §§ 2, 8 y 19. 
(Mio ECU) 
Tipo de recurso 
Exacciones reguladoras agri­
colas: 
— previstas 
— efectivas 
Cotizaciones de azucar e 
isoglucosa: 
— previstas 
— efectivas (Cap 11 y 90 
COM) 
Derechos de aduana: 
— previstos 
— efectivos 
Recursos propios IVA/ 
contribuciones financie­
ras V) (2): 
— previstos 
— efectivos 
Total recursos propios: 
— previstos 
— efectivos B 
186,0 
132,2 
79,6 
84,7 
536,6 
494,6 
725,9 
736,6 
1 528,1 
1 448,1 DK 
7,0 
9,8 
43,6 
47,6 
239,4 
220,5 
483,3 
512,8 
773,3 
790,7 D 
187,5 
111,9 
286,0 
313,0 
2 600,0 
2 436,1 
6 154,0 
5 869,2 
9 227,5 
8 730,2 GR 
26,0 
22,9 
16,4 
16,9 
130,0 
85,5 
504,0 
507,1 
676,4 
632,4 E 
322,0 
10,1 
67,0 
14,5 
580,0 
191,9 
2 112,5 
2 104,1 
3 081,5 
2 320,6 F 
96,0 
107,6 
356,3 
378,6 
1 256,0 
1 150,4 
5 121,1 
5 248,5 
6 829,4 
6 885,1 IRL 
6,2 
6,4 
15,3 
10,8 
160,8 
113,3 
210,0 
213,3 
392,3 
343,8 I 
313,3 
356,4 
70,6 
73,0 
920,0 
770,1 
3 503,8 
3 518,7 
4 807,7 
4 718,2 L 
0,1 
0,2 
— 
4,7 
6,4 
58,8 
59,2 
63,6 
65,8 NL 
170,0 
114,1 
91,3 
95,9 
835,0 
792,0 
1 143,8 
1 230,0 
2 240,1 
2 232,0 P 
10,8 
18,7 
0,2 
128,0 
49,8 
211,0 
210,1 
350,0 
278,6 UK 
260,0 
285,2 
87,5 
76,5 
2 310,0 
1 862,3 
2 240,0 
2 601,2 
4 897,5 
4 825,2 EUR 12 
1 584,9 
1 175,5 
1 113,8 
1 111,5 
9 700,5 
8 172,9 
22 468,2 
22 810,8 
34 867,4 
33 270,7 
(1) Portugal hizo efectiva una contribuci6n financiera basada en su PNB. 
(2) Incluidos los saldos y ajustes anteriores a 1986. 
164 Official Journal of the European Communities 15. 12. 87 
§ 6. Appropriations for commitment available in 1986 and their utilization - by sector and by institution 
(MioECU) 
Sector and institution 
(the Sections (S), Titles (T) and Chapters (Ch) 
corresponding to the 1986 budgetary nomen­
clature are shown in brackets) 
(1) 
1. Administration (all institutions) 
1.1. Commission (S III, A) 
1.2. Other institutions (SI, II, IV, V) 
— 
QL 
c-o 
E 
E o 
c 
Q. 
O 
ft a 
2! 
a 
O 2. EAGGF-Guarantee (T 1-2) 
2.1. Cereals and rice (Ch 10) 
2.2. Sugar (Ch 11) 
2.3. Fats and protein plants (Ch 12-13) 
2.4. Fruit and vegetables (Ch 15) 
2.5. Wine (Ch 16) 
2.6. Tobacco (Ch 17) 
2.7. Milk products (Ch 20) 
2.8. Meat, eggs, poultry (Ch 21-24) 
2.9. Various markets (Ch 14, 18, 25) 
2.10. Agri-monetary measures (Ch 27-28) 
2.11. Other expenditure (Ch 29) 
3. Agricultural structures (T 3) 
(of which: non-differentiated appropriations) 
3.1. EAGGF-Guidance (Ch 30-34) 
3.2. Specific measures (Ch 38) 
4. Fisheries (T 4) 
(of which: non-differentiated appropriations) 
4.1. Common organization of the market (Ch 40) 
4.2. Other measures (Ch 41-46) 
5. Regional policy and transport (T 5) 
(of which: non-differentiated appropriations) 
5.1. Regional Fund (Ch 50-51) 
5.2. Transport (Ch 58) 
5.3. Other measures (Ch 52-57) 
6. Social policy (T 6) 
(of which: non-differentiated appropriations) 
6.1. Social Fund (Ch 60-61) 
6.2. Other measures (Ch 63-69) 
7. Research, energy, etc. (T 7) 
(of which: non-differentiated appropriations) 
7.1. Energy (Ch 70) 
7.2. Research and investment (Ch 73) 
7.3. Industry and internal market (Ch 77) 
7.4. Other measures (Ch 71-72, 75, 78-79) 
8. Repayments to Member States (T 8) 
8.1. Costs incurred in collect, own resources (Ch 80) 
8.2. Other repayments (Ch 82-87) 
9. Cooperation with developing countries (T 9) 
(of which: non-differentiated appropriations) 
9.1. Food aid (Ch 92) 
9.2. Financial aid (Ch 90-91, 93-99) 
10. Prov. appropriat. a. contingency res. (Ch 100-101) 
(of which: non-differentiated appropriations) 
Total operating appropriations (S III, B) 
(of which: non-differentiated appropriations) 
/ Grand total ; 
' ..« 
o Q o 
'C <3 CO §" 
CO «: £.£ O 
"S"? e E to 
S O Q.O o 
>; c co o •.= I- I I 
(2) 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA + CA 
(NDA) 
NDA + CA 
NDA + CA 
NDA+CA 
(NDA) 
NDA+CA 
NDA + CA 
NDA + CA 
(NDA) 
CA 
NDA + CA 
NDA + CA 
NDA + CA 
(NDA) 
CA 
NDA+CA 
NDA+CA 
(NDA) 
NDA+CA 
CA 
NDA + CA 
NDA+CA 
NDA 
NDA 
NDA 
NDA + CA 
(NDA) 
NDA+CA 
NDA+CA 
NDA + CA 
(NDA) 
NDA + CA 
(NDA) 
NDA + CA 
NDA 
CA Evolution of 
appropriations 
CO 
•o 
m 
(3) 
1 604,4 
1 049,2 
555,2 
22 112,0 
3 300,0 
1 642,0 
3 245,0 
927,5 
1 087,0 
792,0 
6 100,0 
3 559,0 
987,0 
466,0 
6,5 
831,4 
(60,9) 
762,0 
69,4 
156,3 
(89,6) 
41,3 
115,0 
3 463,1 
(4.0) 
3 098,0 
75,8 
289,3 
2 412,2 
(100,1) 
2 290,0 
122,2 
851,7 
(30,4) 
156,4 
608,0 
64,0 
23,3 
3 299,8 
1 239,9 
2 059,9 
1 243,2 
(233,9) 
693,6 
549,6 
78,0 
(43,5) 
34447,7 
(25 974,2) 
36 052,1 
27 578,6 
8 473,5 £; 
<8 co o> 
o c 
a-§ = ill 
U. CO CO 
(4) . 
1 611,0 
1 055,8 
555,2 
22 135,0 
3 485,0 
1 726,0 
3 095,0 
986,5 
632,5 
785,0 
5 409,5 
4 349,5 
1 125,0 
482,5 
58,5 
959,4 
(40,7) 
905,1 
54,3 
271,1 
(75,6) 
18,3 
252,8 
3 915,3 
(4,0) 
3 381,3 
135,9 
398,1 
3 230,5 
(100,3) 
3 096,7 
133,8(1) 
1 300,8 
(42;6) 
188,6 
997,4 
80,0 
34,8 
3 299,8 
1 239,9 
2 059,9 
1 558,2 
(255,9) 
693,6 
864,6 
17,1 
(16,1) 
36 687,2 
(25 970,0) 
38 298,20) 
27 581,0(1) 
10 717,2 Utilization of appropriations 
in LQRfi 
Amount 
(5) 
1 548,4 
1 011,3 
537,1 
22 119,4 
3 484,9 
1 725,5 
3 091,8 
986,0 
630,8 
782,2 
5 405,8 
4 348,2 
1 124,3 
481,7 
58,2 
903,8 
(38,1) 
853,5 
50,3 
204,7 
(74,7) 
18,0 
186,7 
3 480,0 
(3,2) 
3 328,1 
92,7 
59,2 
2 645,2 
(96,4) 
2 523,0 
122,2 
1 130,5 
(40,9) 
166,4 
869,5 
62,2 
32,4 
3 095,4 
1 045,4 
2 050,0 
1 251,9 
(241,6) 
668,6 
583,3 
— 
(—) 
34 830,9 
(25 709,7) 
36 379,3 
27 258,1 
9 121,2 Rate 
(%) 
(5a) = 
(5/4) 
(96,1) 
(95,8) 
(96,7) 
(99,9) 
(99,9) 
(99,9) 
(99,9) 
(99,9) 
(99,7) 
(99,6) 
(99,9) 
(99,9) 
(99,9) 
(99,8) 
(99,5) 
(94,2) 
(93,6) 
(94,3) 
(92,6) 
(75,5) 
(98,8) 
(98.4) 
(73,9) 
(88,9) 
(80,0) 
(98,4) 
(68,2) 
(14,9) 
(81,9) 
(96,1) 
(81,5) 
(91,3) 
(86,9) 
(96,0) 
(88,2) 
(87,2) 
(77,8) 
(93,1) 
(93,8) 
(84,3) 
(99,5) 
(80,3) 
(94,4) 
(96,4) 
(67,5) 
— 
(—) 
(94,9) 
(99,0) 
(95,0) 
(98,8) 
(85,1) Appropriations 
remaining 
available for 1987 
a t*. 
« CO 8 
3 O ~ 
Z o=-
(6) 
2,8 
0,9 
1,9 
— 
— — — — — — — — — — -— 
— 
(—) — — 
0,5 
(0.5) 
— 0,5 
0,8 
(0,8) 
— 0,2 
0,6 
3,9 
(3.9) 
— 3,9 
1,7 
(1.7) 
— — 
1.4 
0,3 
— 
— 
14,2 
(14.2) 
0,4 
13,8 
• — 
(—) 
21,1 
(21.1) 
23,9 
23,9 
— O) 
'? £ M 
CD o 
<"cf O <8i-
(7) 
— 
— — 
— 
.— — — — — — — — —-. — — 
54,5 
(—) 
54,2 
0,3 
53,9 
(—) 
• 
53,9 
328,8 
(-) 
53,2 
43.0 
232,6 
555,5 
(—) 
547,9 
7,6 
145,1 
(—) 
22,2 
104,4 
16,4 
2,1 
— 
— 
259,0 
(—) 
24,6 
234,4 
— 
<—> 
1 396,8 
(—) 
1 396,8 
— 1 396,8 CO 
o 
co 
CO 
o 
(8) = 
(4-5-
6-7) 
59,8 
43,6 
16,2 
15,6 
0,1 
0,5 
3,2 
0,5 
1,7 
2,8 
3.7 
1.3 
0,7 
0,8 
0,3 
1,1 
(2.6) 
-2,6 
3,7 
12,0 
(0,4) 
0,3 
11,7 
105,7 
(0,0) 
— 0,0 
105,7 
25,9 
(0.0) 
25,8 
0,1 
23,5 
(0.0) 
0,0 
23,5 
0,0 
o.O 
204,4 
194,5 
9,9 
33,1 
(0,1) 
— 33,1 
17,1 
(16,1) 
438,4 
(239,2) 
498,2 
299,0 
199,2 
c 
g 
3 
w 
i= Parliament (SI) 
Council (S II) 
(of which: Economic and Social Committee) 
Commission (S III) 
(of which: non-differentiated appropriations) 
Court of Justice (S IV) 
Court of Auditors (S V) 
Grand total NDA 
NDA 
(NDA) 
NDA + CA 
(NDA) 
NDA 
NDA 
NDA + CA 306,1 
185,6 
(32,8) 
35 496,9 
. (27 023,4) 
40,0 
23,5 
36 052,1 306,1 
185,6 
~ (32,8) 
37 743,0(1) 
(27 025,8) 
40,0 
23,5 
38 298,2(1) 296,9 (97,0) 
180,1 (97,0) 
(31,7) (96,6) 
35 842,2 (95,0) 
(26 721,0) (98,9) 
38,2 (95,5) 
21,9 (93,2) 
36 379,3 (95,0) 1.9 — 
(—) (-) 22,0 1 396,8 
(22,0) (-) 
— — 
— y — 
23,9 1 396,8 9,2 
3,6 
d.D 
' 482,0 
(282,8) 
1.8 
1.6 
498,2 
(1) Budget appropriations amended after taking account of commitment appropriations remaining from 1985 appropriations^corresponding to receipts for services performed on behalf 
of outside bodies and transfers between budget headings; not including non-automatic carry-overs from 1985 to Chapter 65 (122,5 Mio ECU). 
15. 12. 87 Official Journal of the European Communities 165 
§ 7. Appropriations for payment available in 1986 and their utilization - by sector and by institution 
(Mio ECU) 
Sector and institution 
(for the corresponding 
terms and budget heading 
see § 6, column 1) 
(1) 
1. Administration 
1.1. Commission 
1.2. Other institutions 
CO 
o. 
E 
E o o 
in 
o 
w 
§" 
m 
O) 
1 
O 2. EAGGF-Guarantee 
2.1. Cereals and rice 
2.2. Sugar 
2.3. Fats... 
2.4. Fruit a. vegetab. 
2.5. Wine 
2.6. Tobacco 
2.7. Milk products 
2.8. Meat... 
2.9. Various markets 
2.10. Agri-monetary... 
2.11. Other expenditure 
3. Agricultural structures 
(of which: NDA) 
3.1. EAGGF-Guidance 
3.2. Specific measures 
4. Fisheries 
(of which: NDA) 
4.1. Com. organ... 
4.2. Other measures 
5. Regional policy... 
(of which: NDA) 
5.1. Regional Fund 
5.2. Transport 
5.3. Other measures 
6. Social policy 
(of which: NDA) 
6.1. Social Fund 
6.2. Other measures 
7. Research, etc. 
(of which: NDA) 
7.1. Energy 
7.2. Research... 
7.3. Industry... 
7.4. Other measures 
8. Repayments... 
8.1. Costs inc. in coll. or 
8.2. Other repayments 
9. Cooperation... 
(of which: NDA) 
9.1. Food aid 
9.2. Financial aid 
10. Prov. approps... 
(of which: NDA) 
Total operating approps. 
(of which: NDA) 
Grand total 
c 
~ d 
V> Parliament 
Council 
(of which: ESC) 
Commission 
(of which: NDA) 
Court of Justice 
Court of Auditors 
Grand total — 
co 5j- .2 
•=. "O z C 
O c o %_ 
Q. J -^ co 
™ ~ S- «> o?°c 
2.o £* 
h- I 1 
(2) 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA + PA 
(NDA) 
NDA + PA 
NDA + PA 
NDA + PA 
(NDA) 
NDA 
NDA + PA 
NDA + PA 
(NDA) 
PA 
NDA + PA 
NDA + PA 
NDA + PA 
(NDA) 
PA 
NDA + PA 
NDA + PA 
(NDA) 
NDA + PA 
PA 
NDA + PA 
NDA + PA 
NDA 
NDA 
NDA 
NDA + PA 
(NDA) 
NDA + PA 
NDA + PA 
NDA + PA 
(NDA) 
NDA + PA 
(NDA) 
NDA + PA 
NDA 
PA 
NDA 
NDA 
(NDA) 
NDA + PA 
(NDA) 
NDA 
NDA 
NDA + PA A. Appropriations of the financial yeai 
approp 
°>CD 
men 
(3) 
1 604,4 
1 049,2 
555,2 
22 112,0 
3 300,0 
1 642,0 
3 245,0 
927,5 
1 087,0 
792,0 
6 100,0 
3 559,0 
987,0 
466,0 
6,5 
790,2 
(60,9) 
721,1 
69,1 
164,1 
(89,6) 
41,3 
122,8 
2 574,8 
(4,0) 
2 373,0 
26,8 
175,0 
2 651,6 
(100,1) 
2 533,0 
118,6 
740,7 
(30,4) 
42,0 
618,8 
54,3 
25,6 
3 299,8 
1 239,9 
2 059,9 
1 141,5 
(233,9) 
548,3 
593,2 
95,0 
(43,5) 
33 569,7 
(25 974,2) 
35 174,1 
27 578,6 
7 595,5 
306,1 
185,6 
(32,8) 
34 618,9 
(27 023,4) 
40,0 
23,5 
35 174,1 ion of 
riations 
6 
££ 
I'SS P >- cn 
(4) 
1 611,0 
1 055,8 
555,2 
22 135,0 
3 485,0 
1 726,0 
3 095,0 
986,5 
632,5 
785,0 
5 409,5 
4 349,5 
1 125,0 
482,5 
58,5 
800,2 
(40,7) 
750,3 
49,9 
151,1 
(75,6) 
18,3 
132,8 
2 574,8 
(4,0) 
2 373,0 
26,8 
175,0 
2 652,5 
(100,3) 
2 533,0 
119,5 
760,1 
(42,6) 
42,0 
625,9 
66,6 
25,6 
3 299,8 
1 239,9 
2 059,9 
1 161,6 
(255,9) 
548,3 
613,3 
31,1 
(16,1) 
33 566,2 
(25 970,0) 
35 177,2 
27 581,0 
7 596,2 
306,1 
185,6 
(32,8) 
34 622,0 
(27 025,8) 
40,0 
23,5 
35 177,2 Utilization 1986 
of appropriations 
•S 
E 
E °° 
ro <-a. £ 
(5) 
1 427,5 
937,1 
490,4 
22 115,9 
3 484,9 
1 725,5 
3 091,6 
986,0 
630,8 
782,2 
5 405,8 
4 348,2 
1 121,0 
481,7 
58,2 
720,8 
(19.7) 
696,1 
24,7 
108,3 
(53,8) 
18,0 
90,3 
2 422,2 
(0,9) 
2 368,8 
24,9 
28,5 
2 303,2 
(62,8) 
2 231,5 
71,7 
651,6 
(11.1) 
40,4 
564,9 
28,3 
18,0 
2 967,7 
917,7 
2 050,0 
744,8 
(167,3) 
387,2 
357,6 
— 
(—) 
32 034,5 
(25 399,2) 
33 462,0 
26 826.7 
6 635,3 
273,2 
160,5 
(30,7) 
32 971,6 
(26 336,3) 
35,7 
21,0 
33 462,0 !2 
?f-
£•8 
* o o 2 
(6) 
123,7 
75,1 
48,6 
3,5 
— — 0.2 
— 
— 
— 
— 
— 3,3 
— 
— 
76,8 
(18,4) 
54,2 
22,6 
42,4 
(21,4) 
— 42,4 
152,6 
(3,1) 
4,2 
1,9 
146,5 
349,3 
(37,5) 
301,5 
47.8 
108,5 
(31.5) 
1,6 
61,0 
38,3 
7,6 
127,7 
127,7 
— 
416,7 
(88,5) 
161,1 
255,6 
(—) 
1 277,5 
(331,6) 
1 401,2 
455,3 
945,9 
23,7 
21,5 
(1.0) 
1 352,6 
(406,7) 
2,5 
0,9 
1 401,2 § 
o 
(7) = 
(4-5 
-6) 
59,8 
43,6 
16,2 
15,6 
0,1 
0,5 
3,2 
0,5 
1,7 
2,8 
3,7 
1,3 
0,7 
0,8 
0,3 
2,6 
(2,6) 
2,6 
0,4 
(0,4) 
0,3 
0,1 
0,0 
(0,0) 
— 0,0 
0,0 
0,0 
(0,0) 
— 0,0 
0,0 
(0,0) 
0,0 
0,0 
0,0 
0,0 
204,4 
194,5 
9,9 
0,1 
(0,1) 
— 0,1 
31,1 
(16,1) 
254,2 
(239,2) 
314,0 
299,0 
15,0 
9,2 
3,6 
(1,1) 
297,8 
(282,8) 
1,8 
1,6 
314,0 B. Carry-overs from 1985 
•£• 
o >- £ 
Q-'E E £ 
<SSi5 
(8) 
104,1 
67,6 
36,5 
4,4 
0,5 
— 3,3 
— 
— 
— 
— 
— 0,6 
— 
— 
56,5 
(11.6) 
38,0 
18,5 
21,7 
(1.2) 
— 21,7 
195,1 
(2,3) 
115,0 
35,1 
45,0 
247,1 
(148,6) 
92,5 
154,6 
220,2 
(24,0) 
40,8 
141,2 
27,9 
10,3 
4,7 
2,7 
2,0 
236,7 
(39,8) 
25,0 
211.7 
(—) 
986,4 
(236,6) 
1 090,5 
340,7 
749,8 
16,1 
18,0 
(0,8) 
1 054,0 
(304,2) 
1,8 
0,6 
1 090,5 Utilization 
of appropriations 
•S 
E 
E °° 
0. .E 
0) <» 
2-8 
10 o o 2 
(10) § 
§ 
o 
(1D = 
(8-9 
-10) 
94,5 — 9,6 
61,5 — 6.1 
33,0 — 3,5 
4,1 — 0,3 
0,5 — 0.0 
— — — 3,0 — 0.3 
— — — 
— — — 
— — — 
— — — 
— — — 0.6 — — 
— — — 
— — — 
45,7 — 10,8 
(10.7) (—) (0.9) 
31,0 — 7.0 
14,7 — 3.8 
7,5 — 14,2 
(1,0) (—) (0,2) 
— — — 7,5 — 14,2 
162,9 — 32,2 
(1,9) (—) (0,4) 
115,0 — 0,0 
21,3 — 13.8 
26,6 — 18.4 
116,0 — 131,1 
(22,0) (—) (126.6) 
89,8 — 2.7 
26,2 — 128.4 
186,8 4,0 29,4 
(21,5) (—) (2,5) 
40,2 — 0,6 
114,8 4,0 22.4 
22,6 — 5,3 
9,2 — 1.1 
4,7 — 0,0 
2,7 — — 
2,0 — 0.0 
108,6 — 128,1 
(35,5) (—) (4,3) 
24.9 — 0,1 
83,7 — 128.0 
(—) (—) (—) 
636,3 4,0 346,1 
(101,4) (—) (135,2) 
730,8 4,0 355,7 
195,9 — 144,8 
534,9 4,0 210.9 
14,1 — 2,0 
16,9 — 1,1 
(0,6) (—) (0.2) 
697,8 4,0 352,2 
(162,9) (—) (141,3) 
1,4 — 0,4 
0,6 — 0.0 
730,8 4,0 355,7 C. Tota appropriations 
available and payments 
in 1986 
col 
.2 <= 
CL-Q 
h- CO CD 
(12) = 
(4 + 8) 
1 715,1 
1 123.4 
591,7 
22 139,4 
3 485.5 
1 726,0 
3 098,3 
986,5 
632,5 
785,0 
5 409,5 
4 349,5 
1 125,6 
482,5 
58,5 
856,7 
(52,3) 
788,3 
68,4 
172,8 
(76,8) 
18,3 
154,5 
2 769,9 
(6,3) 
2 488,0 
61,9 
220,0 
2 899,6 
(248,9) 
2 625,5 
274,1 
980,3 
(66,6) 
82,8 
767,1 
94,5 
35,9 
3 304,5 
1 242,6 
2 061,9 
1 398,3 
(295,7) 
573,3 
825,0 
31,1 
(16,1) 
34 552,6 
(26 206,6) 
36 267,7 
27 921,7 
8 346,0 
322,2 
203,6 
(33,6) 
35 676,0 
(27 330,0) 
41,8 
24,1 
36 267,7 Total 
payments 
made in 1986 
Amount 
(13) = 
(5 + 9) 
1 522,0 
998,6 
523,4 
22 120,0 
3 485,4 
1 725.5 
3 094,6 
986,0 
630,8 
782.2 
5 405.8 
4 348.2 
1 121,6 
481,7 
58,2 
766,5 
(30,4) 
727.1 
39.4 
115,8 
(54,8) 
18,0 
97,8 
2 585,1 
(2,8) 
2 483,8 
46,2 
55,1 
2 419,2 
(84,8) 
2 321,3 
97,9 
838,4 
(32,6) 
80,6 
679,7 
50,9 
27,2 
2 972,4 
920,4 
2 052,0 
853,4 
(202,8) 
412,1 
441,3 
(—) 
32 670,8 
(25 500,6) 
34 192,8 
27 022,6' 
7 170,2 
287,3 
177,4 
(31,3) 
33 669,4 
(26 499,2) 
37,1 
21,6 
34 192,8 Rate 
(%) 
(13a) = 
(13/12) 
(88,7) 
(88,9) 
(88,5) 
(99,9) 
(99,9) 
(99,9) 
(99.9) 
(99,9) 
(99,7) 
(99.6) 
(99.9) 
(99.9) 
(99.6) 
(99,8) 
(99,5) 
(89,5) 
(58,1) 
(92,2) 
(57,6) 
(67,0) 
(71,4) 
(98,4) 
(63,3) 
(93,3) 
(44,4) 
(99,8) 
(74,6) 
(25,0) 
(83,4) 
(34,1) 
(88,4) 
(35,7) 
(85,5) 
(48,9) 
(97,3) 
(88,6) 
(53,9) 
(75,8) 
(90,0) 
(74,1) 
(99,5) 
(61,0) 
(68,6) 
(71.9) 
(53,5) 
(—) (—) 
(94,6) 
(97,3) 
(94,3) 
(96,8) 
(85,9) 
(89,2) 
(87,1) 
(93,2) 
(94,4) 
(97,0) 
(88,8) 
(89,6) 
(94,3) 
(') Budget appropriations amended after taking account of transfers between budget headings and receipts for services performed on behalf of outside bodies. 
(2) Automatic and non-automatic carry-overs. 
166 Official Journal of the European Communities 15. 12. 87 
§ 8. Actual own resources in 1986 
(for basic figures, see § 5) 
*=£* 
fjlll '£/ A. Actual own resources in 
1986, by type 
(Mio ECU and %): 
Total: 33 270,7 Mio ECU B. Actual own resources in 1986, by Member State and by type 
(Mio ECU and %): 
DK 23/ 
D GR E F IRL I 
Total: 33 270,7 Mio ECU i 
NL 1 
UK 
—>-
C. Shares of Member States in each type of own resources (%): 
29,8 
VAT own resources 
25,7 and financial contributions (%) Customs duties (%) 
m 2,3 
*««*" :'!! 
2,3 
>m-: 9,2 23,0 
0,9 15,4 
0,3 5,4 
0,9 11,4 
B DK D GR E F IRL I L NL P UK 
Agricultural levies (%) 30,3 
B DK D GR 
15. 12. 87 Official* Journal of the European Communities 167 
§ 9. Rate of utilization of appropriations available in 1986 — by sector 
I. Final appropriations 
commitment in 1986 
(for basic figures, see § 6, 
columns 4 to 8) for II. Final 1986 appropriations 
for payment 
(for basic figures, see § 7, 
columns 4 to 7) 
0 
JO 
ill 
IS 
•41 
| 
I 
< 1 1 1 
i! 
1? 
(B 
3 a < = 
WO m 
« 
.y t> 
m Total: 
38 298,2 Mio ECU 
5> 
• -J 
1 >, 
o o 
(fl 
m o 
— 
1 I 
i 
a, 
lo 00 
S3 
ISi 
III 
i 
?li 
l« E5 
ra'Q 
DCS •^ 
ijS 
£•-
§8 
S-S 1 • 
om 
It 
-Total: 
35 177,2 Mio ECU 
>.o 
c| 
.2 Q. 
sit* 
= Q.O 
O c 
0c£ 
C3 O EJ • 
H 
H 
s 
Q 
• Key: 
— Non-differentiated 
appropriations 
— Commitment 
appropriations 
— Payment appropriations 
— Rate of commitment 
— Rate of payment 
— Rate of unused 
appropriations 
remaining available for 
1987 (appropriations 
remaining and/or 
carried over) 
— Cancellations 
III. Appropriations for pay­
ment carried over from 
1985 
(for basic figures, see § 7, 
columns 8 to 11) 
Total: 1 090,5 Mio ECU 
mm * 
1 
E 
*~ » 
O M i o 
< in 
n C\] 
| 
•» m 
Is 
§2 
o m 
s 
<o M 
s. 
s LiJ 
«1« 11 
si 
CO c » 
* c 
s§ 2 Q. 
§ > 
o-S Ol 
ill 
||| 
Mi 
•3D.* 
s Up 
II 
tift. 
SI "lit 
N^ 
OJ ;-'"S 
^ 
£ cS 
•*f CO 
s? 
oq 
oo ;«•;•• 
^f. 
co •Si: 
11 
-ssl 
§1 811 
il 
3%B 
P IIP 
SSK 
IIP 
s'oo'. pii 
£•?•' 
CM 
s ? 
i 
""? 
00 1 1 I • 
>5 
a'. s*%^M 1 11 • 
•^ 
8 s 
OJ 1 r 
» 
"|»: 
oo 
3 ?*:* I 1 • 
>5 
8 >5 
3 
0,4 % 32.6 % 
168 Official Journal of the European Communities 15. 12. 87 
§ 10. The consolidated revenue and expenditure account and the balance of the financial year 1986 
(Application of Article 15 of Council Regulation (EEC, Euratom, ECSC) No 2891/77) 
Revenue: 
Funds actually available for. 
the financial year 1986 
Total: 
34 863,2 Mio ECU Expenditure: 
Application of funds available 
for the financial year 1986 
Total: 
34 863,2 Mio ECU 
(Mio ECU) 
(6) Balance (deficit) 
for the financial year 1986 
(5)Exchange 
rate advantages 
(4) Cancellations of carry­
overs from 1985 
(see § 7, column 11) 
(3) 1985 surplus 
available 
(see § 5) 
(2) Other actual 
revenue in 1986 
(see I 5) 20,4 
342,6 
(1) Total actual own re­
sources in 1986 
(see §5): 33 270,7 355,7 +~ (8) 1986 appropriations 
for payment carried 
over to 1987 
(see § 7, column 6) 
(7) Payments made in 
1986 against appro­
priations of the 
1986 budget 
(see § 7, column 5) 
Note: The result of the financial year 1986, defined as (1) + (2) + (3) - (7) - (8), is -1196,0 Mio ECU. 
15. 12. 87 Official Journal of the European Communities 169 
§ 11. Payments made in 1986 — by sector and by recipient Member State 
Note: Payments made in 1986 = payments against 1986 appropriations plus payments against carry-overs from 1985. 
A. Payments by sector (Mio ECU and % 
(see also § 7, column 13, and § 16) 
2. EAGGF-Guarantee: 22 120,0 
1. Administration: 1 522,0 -« 
9. Cooperation with 
developing countries: 853,4 
8. Repayments 
to Member States 2 972,4 
7. Research, energy, etc.: 838 
B. Payments to Member States: (Mio ECU and %) 
(see also §§ 12, 13 and 18) 
Note: This table shows the payments 
made in 1986 to Member States 
under the principal sectors 
(89,2 % of the total payments in 1986) 3. Agricultural structures: 766,5 
*- 4. Fisheries: 115,8 
5. Regional policy 
and transport: 2 585,1 
Social policy: 2 419,2 
Costs incurred in collecting own resources 
EAGGF-Guidance 
Fisheries 
Regional Fund 
Social Fund 
, Allocation UK not EUR 12 
EAGGF-Guarantee (T1 -2) (1) 
EAGGF-Guidance 
(Ch 30-34) 
Fisheries (T4) 
Regional Fund (Ch 50-51) 
Social Fund (Ch 60-61) 
Costs incurred in collecting 
own resources (Ch 80) 
Specific measures 
(Ch86) 978,4 
15,5 
4,5 
29,5 
72,9 
63,4 1 063,2 
13,9 
11,3 
18,9 
80,7 
23,8 4 400,6 
105,1 
6,1 
92,5 
134,6 
249,5 1 386,9 
86,2 
3,4 
309,1 
107,1 
10,4 
2,0 271,4 
0,0 
314,3 
174,9 
19,0 
1 635,9 5 440,3 
176,7 
19,7 
219,0 
328,4 
139,5 1 212,9 
64,2 
2,6 
79,3 
203,1 
11.8 3 067,8 
167,0 
6,9 
712,1 
462,2 
107,3 2,1 
2,3 
0,1 
1,4 
0.6 2 276,5 
17,1 
2,9 
13,1 
50,6 
89,3 30,4 1 983,0 
0,4 
188,8 
109,2 
5,7 
163,3 79,1 
21,7 
506,7 
596,2 
200,1 6,5 
36,3 
0,4 22 120,0 
727,1 
115,8 
2 483,8 
2 321,3 
920,4 
1 801,2 
Total 1164,2 
(3,8%) 1 211,8 
(4,0%) 4 988,4 
(16,4%) 1 905,1 
(6,3%) 2 415,5 
(7,9%) 6 323,6 
(20,7%) 1 573,9 
(5,2%) 4 523,3 
(14,8%) 6,5 
(0,0%) 2 449,5 
(8,0%) 497,8 
(1,6%) 3 386,8 
(11.1%) 43,2 
(0,2%) 30 489,6 
(100%) 
(1) For the EAGGF-Guarantee these figures include adjusted monetary compensatory amounts (see 5 12 D, footnote (1)). 
170 Official Journal of the European Communities 15. 12. 87 
§12. EAGGF-Guarantee: payments made in 1986 — by market and by recipient Member State 
A. Payments made in 1986, 
by market (Mio ECU and %): 
£~7\ 
Total: 22 120,0 Mio ECU B. Payments made in 1986, by recipient Member State 
(Mio ECU and %): 
Key: 
-for the colour 
corresponding 
to each market, 
see A 
-a remaining 
markets 
/^ £ £m 
^ 
E F IRL I L 
Total: 22 120,0 Mio ECU NL UK 
C. Distribution by recipient Member State of payments made in 1986 for the principal markets (%): 
307 Milk products (%) 
20,8 Meat, eggs, 
poultry (%) 27,4 Cereals and 
rice (%) 
20,1 
5,0 r 4,4 
1.7 0,8 35,7 
13,3 
0,3 § 3,8 
•n-14,9 o 
8 
0,0 
B DK D GR E F IRL I L NL P UK 
Fats and 
protein 
plants 
(%) 22,3 B DK D GR E F IRL I L NL P UK 
Sugar(%) 
B DK D GR E F IRL I L NL P UK B DK D GR E F IRL I L NL P UK 0,30,3 0.6M HnnH °-9 0.6 0-4 
B DK D GR E F IRL I L NL P UK 
D. Record of payments made in 1986, by recipient Member State and by market: 
Market 
2.1. Cereals and rice 
2.2. Sugar 
2.3. Fats and 
protein plants 
2.4. Fruit and vegetables 
2.5. Wine 
2.6. Tobacco 
2.7. Milk products 
2.8. Meat, eggs, poultry 
2.9. Various markets 
2.10. Agri-monetary 
measures (1) 
2.11. Other expenditure 
Total B 
175,5 
318,9 
200,0 
2,8 
— 7,0 
118,7 
108,8 
31.7 
12,2 
2,8 
978,4 DK 
152,1 
80,9 
99,1 
2,5 
0,0 
— 402,1 
232,3 
61,1 
38,1 
-5,0 
1063,2 D 
699,3 
313,8 
690,9 
5,8 
6,6 
49,5 
1658,8 
721,4 
79,8 
72,3 
102,4 
4400,6 GR 
60,6 
5,9 
236,3 
192,7 
14,2 
283,9 
4,9 
24,5 
377,1 
211,9 
-25,1 
1 386,9 E 
28,8 
11,2 
44,3 
— 1,5 
13,2 
0,5 
9,9 
161,8 
0.2 
— 
271,4 F 
1 243,9 
703,6 
656,7 
71,2 
295,6 
86,8 
1 124,9 
1193.2 
84,7 
-14,4 
-5,9 
5440,3 IRL 
9.7 
5,9 
1,8 
0,2 
— — 339,2 
760,3 
44,5 
52,0 
—0.7 
1212,9 I 
462,7 
45,5 
695,8 
692,1 
312,7 
335,9 
103,3 
377,7 
48,9 
-13,0 
6,2 
3067,8 L 
-0.0 
— 
0,0 
— — — 1.7 
0.2 
0,2 
0,0 
2,1 NL 
132,0 
137,8 
253.5 
8.6 
— 0,5 
1 242,3 
241,1 
124,4 
139,6 
-3,3 
2276,5 P 
— 
18,4 
5,8 
— 5,4 
— — — 
0,8 
— 
30,4 UK 
520,3 
102,0 
193,6 
4,3 
0,2 
— 409.4 
678,8 
105,6 
-18,0 
-13.2 
1983,0 (Mio ECU) 
Alloca­
tion 
not 
avail­
able 
0,5 
— 
4,2 
— — — — — 1.8 
— — 
6,5 EUR 12 
3485,4 
1 725,5 
3094,6 
986,0 
630,8 
782,2 
5405,8 
4348,2 
1121,6 
481,7 
58,2 
22120,0 
(1) The agri-monetary measures include monetary compensatory amounts (MCAs) adjusted to cancel the effect of the application of Article 2 of Council Regulation (EEC) 
No 974/71, under which exporting Member States themselves pay directly the MCAs due on import into certain importing Member States. The MCA adjustment consists in 
allocating to these importing Member States the amounts which are chargeable to them. 
15. 12. 87 Official Journal of the European Communities 171 
The structural Funds: commitments entered into and payments made in 1986 
by recipient Member State 
Notes: 
The structural Funds (EAGGF-Guidance, Regional Fund, Social Fund) are 
provided with differentiated appropriations, which comprise both commitment 
appropriations and payment appropriations with different financial incidence 
(see § 1 (1.7)). The commitments entered into in 1986 relate to multiannual 
projects which are financed in 1986 and in subsequent years; the payments 
made in 1986 relate to commitments entered into in 1986 and in previous years. 
(a) Commitments 
(b) Payments 
EAGGF-Guidance: 
(a)Commitm. 
(b) Payments 
Regional Fund: 
(a)Commitm. 
(b) Payments 
Social Fund: 
(a)Commitm. 
(b) Payments 
Total: 
(a) Commitm. 
(b) Payments 15,2 
15,5 
32,3 
29,5 
31,5 
72,9 
79,0 
117,9 16,1 
13,9 
11,1 
18,9 
48,1 
80,7 
75,3 
113,5 95,5 
105,1 
82,6 
92,5 
96,4 
134,6 
274,5 
332,2 131,1 
86,2 
316,8 
309,1 
136,5 
107,1 
584,4 
502,4 64,4 
640,9 
314,3 
347,4 
174,9 
1 052,7 
489,2 192,1 
176,7 
309,9 
219,0 
368,1 
328,4 
870,1 
724,1 71,9 
64,2 
126,7 
79,3 
233,4 
203,1 
432,0 
346,6 134,1 
167,0 
833,9 
712,1 
561,6 
462,2 
1 529,6 
1341,3 1,8 
2,3 
3,5 
0,1 
2,4 
1,4 
7,7 
3,8 17,4 
17,1 
29,7 
13,1 
69,7 
50,6 
116,8 
80,8 24,8 
380,8 
188,8 
213,1 
109,2 
618,7 
298,0 89.1 
79,1 
558.7 
506,7 
414,8 
596,2 
1062,6 
1182,0 1,2 
0.4 
1,2 
0,4 853,5 
727,1 
3328,1 
2483,8 
2523,0 
2321,3 
6704,6 
5532,2 
172 Official Journal of the European Communities 15. 12. 87 
§ 14. Evolution and utilization of the appropriations for payment for the period 1982-1986 - by sector 
Note: For the rate of utilization relating to columns (4), (5), (6) and (8), (9), (10), see § 15. (Mio ECU) (%) 
Sector / financial year 
(For the definition 
of sectors, see 
§ 6, column 1) 
1. Administration 1982 
(all 1983 
institutions) 1984 
1985 
1986 
Total 1982-1986 
2. EAGGF- 1982 
Guarantee 1983 
1984 
1985 
1986 
Total 1982-1986 
3. Agricultural 1982 
structures 1983 
1984 
1985 
1986 
Total 1982-1986 
4. Fisheries 1982 
1983 
1984 
1985 
1986 
Total 1982-1986 
5. Regional 1982 
policy and 1983 
transport 1984 
1985 
1986 
Total 1982-1986 
6. Social policy 1982 
1983 
1984 
1985 
1986 
Total 1982-1986 
7. Research, 1982 
energy, etc. 1983 
1984 
1985 
1986 
Total 1982-1986 
8. Repayments to 1982 
Member States1983 
1984 
1985 
1986 
Total 1982-1986 
9. Cooperation 1982 
with 1983 
developing 1984 
countries 1985 
1986 
Total 1982-1986 
10. Provisional 1982 
appropriations 1983 
and contin- 1984 
gency reserve 1985 
(Commission) 1986 A. Appropriations for payment for the financial year 
Evolution of appropriations 
budget 
(D budget (1) 
(2) appropri­
ations^) 
(3) 
1 103,2 1 103,2 1 121,2 
1 153,4 1 161.6 1 162,9 
1 229,1 1 236,6 1 245,6 
1332,5 1332,5 1336,0 
1 604,4 1 604,4 1 611,0 
13 217,3 13 217,3 13 124,3 
14 050,0 15 811,0 15 822,2 
16 150,0 17 983,0 18 358,0 
19 955,0 19 955,0 19 859,0 
22 112,0 22 112,0 22 135,0 
772.1 772,1 763,7 
651.2 653,4 668,5 
655.6 660,1 666,9 
687.7 687,7 747,7 
790,2 790,2 800,2 
75,8 75,8 81,5 
70,1 70,1 45,7 
101,4 112,4 87,4 
105,4 105,4 107,4 
164,1 164,1 151,1 
2 824,5 2 824,5 2 959,3 
1 484,3 2 397,5 2 397,5 
1 488,6 1 488,6 1 967,7 
1 697,8 1 697,8 1 697,8 
2 574,8 2 574,8 2 574,8 
1 022,3 1 022,3 1 130,7 
1 410,6 1 430,6 1 430,7 
1 369,3 1 369,4 1 638,1 
1 625,3 1 625,3 1 626,2 
2 651,6 2 651,6 2 652,5 
408,9 408,9 461,1 
527.2 1 360,4 1 380,7 
610,7 664,4 1 191,6 
700.3 700,3 692,2 
740,7 740,7 760,1 
1 120,9 1 120,9 1 123,8 
1 122,9 1 089,0 1 089,0 
1 103,5 1 150,2 1 083,2 
1 266,8 1 266,8 1 266,8 
3 299,8 3 299,8 3 299,8 
803,3 803,3 945,3 
966,5 981,2 984,6 
893,1 893,1 1 032,2 
1 039,2 1 039,2 1 092,7 
1 141,5 1 141,5 1 161,6 
636,1 636,1 283,4 
122,3 106,3 87,0 
1 760,2 1 690,8 — 
23,2 23,2 11,3 
95,0 95,0 31,1 Utilization of appropriations 
Pay­
ments 
(4) overs to 
the follow­
ing financial 
(5) Cancella­
ted (3-
4-5) 
957,0 106,6 57.6 
1 019,2 100,5 43,2 
1 127,2 96,4 22,0 
1 210,3 104,1 21,6 
1427,5 123,7 59,8 
5 741,2 204,2 
12 257,3 2,7 864,3 
15 785,7 0,1 36,4 
18 328,2 2,6 27,2 
19 723,7 4,4 130,9 
22 115,9 3,5 15,6 
88 210,8 1 074,4 
483,5 277,2 3,0 
513.7 131,5 23,3 
611,1 55,2 0,6 
690.8 56,5 0,4 
720,8 76,8 2,6 
3 019,9 29,9 
50,7 30,4 0,4 
31,9 12,5 1,3 
46,6 38,4 2,4 
72,6 21,7 13;1 
108,3 42,4 0,4 
310,1 17,6 
2 766,2 1,75.5 17,6 
2 268,1 126,9 2,5 
1 733,9 232,6 1,2 
1 501,9 195,1 0,8 
2 422,2 152,6 0,0 
10 692,3 22,1 
910,0 220,0 0,7 
801,0 617,7 12,0 
1 509,4 125,9 2,8 
1 373,1 247,1 6,0 
2 303,2 349,3 0,0 
6 896,7 21,5 
345,3 111,8 4,0 
1 213,6 155.0 12,1 
922,0 265,7 3,9 
469,6 215,9 6,7 
651,6 108,5 0,0 
3 602,1 26,7 
952,2 116,0 55,6 
950,6 99,5 38,9 
1 073,8 8,7 0,7 
1 239,3 4,7 22,8 
2 967.7 127,7 204,4 
7 183,6 322,4 
598.1 345,3 1.9 
517,8 463,1 3,7 
767,0 264,6 0,6 
855.2 236,6 0,9 
744,8 416,7 0,1 
3 482,9 7,2 
— — 283,4 
— — 87,0 
— — 11,3 
— — 31,1 B. Carry-overs from the previous 
financial year 
overs (3) 
(7) 
69,9 
106,7 
100,6 
96,4 
104,1 
162,4 
2,6 
0,1 
2,6 
4,4 
302,7 
397,3 
131,2 
55,2 
56,5 
4,1 
30,4 
12,5 
38,4 
21,7 
243,2 
175,5 
126,9 
232,6 
195,1 
159,4 
226,8 
617,7 
125,9 
247,1 
106,8 
120,4 
162,5 
269,5 
220,2 
97,1 
116,0 
99,5 
8,7 
4,7 
258,5 
345,3 
445,6 
264,6 
236,7 
— Utilization of appropriations 
Pay­
ments 
(8) overs to 
the follow­
ing financial 
(9) Cancella­
tion (7-
8-9) 
53,3 — 16,6 
91,2 — 15,5 
• 88,9 — 11,7 
85,7 — 10,7 
94,5 — 9,6 
413,6 64,1 
112,2 — 50,2 
2,5 — 0,1 
0,1 — 0,0 
2,2 — . 0,4 
4,1 — 0,3 
121,1 51,0 
162,6 120,1 20,0 
236,0 — 161,3 
91.7 — 39,5 
47.8 — 7,4 
45,7 — 10,8 
583,8 239,0 
4.1 — — 
22,9 — 7,5 
10,5 — 2,0 
9.2 — 29,2 
7,5 — 14,2 
54,2 52,9 
243,2 — 0,0 
141.4 — 34,1 
80,4 — 46,5 
223,6 — 9,0 
162,9 — 32,2 
851.5 121,8 
150,6 6,7 2,1 
219,9 — 6,9 
526,9 — 90,8 
117,6 — 8,3 
116,0 — 131,1 
1 131,0 239,2 
91.3 8,6 6,9 
90.4 ' 7,5 22,5 
122;9 4,8 34,8 
237,9 4,4 27,2 
186,8 4,0 29,4 
729,3 120,8 
97,1 — — 
114,1 — 1,9 
99,4 — 0,1 
8,7 — — 
4,7 — 0,0 
324,0 2,0 
188,0 — 70,5 
293,0 — 52,3 
383,6 — 62,0 
229.5 — 35,1 
108.6 — 128,1 
1 202,7 348,0 
— . — '— C. Payment 
indicators 
Share of 
payments 
in the total 
effected 
(payments 
and cancel­
lations) (4) 
(11) = 
(4 + 8) 
(4 + 6 + 8+10) Share of. 
payments 
in 1st year 
(5) 
(12) = 
(4) 
4 + 8 
* 93,2 * 94,7 
95,0 *91,8 
97,3 *92,7 
97,6 * 93,4 
95,6 * 93,8 
95,8 * 93,3 
*93,1 99,1 
99.8 99,9 
99.9 99,9 
99,3 99,9 
99,9 . 99,9 
98,7 99,9 
96,6 "*74,8 
"80,2 "'68,5 
* 94,6 " 87,0 
99,0 * 93,5 
98,3 * 94,0 
* 93,1 "83,8 
99,3 ' 92,5 
" 86,2 "* 58,2 
*92,8 "81,6 
"* 65,9 " 88,8 
" 88,8 * 93,5 
"83,8 "85,1 
99.4 *91,9 
98.5 * 94,1 
97,4 95,6 
99,4 " 87,0 
98,8 * 93,7 
98,8 * 92,6 
99,7 " 85,8 
98,2 *" 78,5 
95,6 *" 74,1 
99,0 *92,1 
* 94,9 95,2 
96,9 ** 85,9 
97,6 "* 79,1 
97,4 *93,1 
96,4 " 88,2 
95,4 *** 66,4 
96.6 *" 77,7 
96.7 "83,2 
95,0 * 90,7 
96,3 " 89,3 
99,9 *91,5 
98,2 99,3 
*93,6 99,8 
95,9 95,7 
*91,6 ***76,1 
* 93,5 *" 63,9 
* 94,8 "* 66,7 
96,8 *** 78,8 
" 86,9 ** 87,3 
* 93,0 *** 74,3 
— — 
General 
budget 
- total 1982 
1983 
1984 
1985 
1986 
Total 1982-1986 21 984,4 21 984,4 21 994,3 
21 558,5 25 061,1 25 068,8 
25 361,5 27 248,6 27 270,7 
28 433,2 28 433,2 28 437,1 
35 174,1 35 174,1 35 177,2 19 320,3 
23 101,6 
26 119,2 
27 136,5 
33 462,0 
129 139,6 1 385,5 
1 706,8 
1 090,1 
1 086,1 
1 401,2 1 288,5 
260,4 
61,4 
214,5 
314,0 
2 138,8 1 404,1 
1 521,0 
1 696,6 
1 093,9 
1 090,5 1 102,4 
1 211,4 
1 404,4 
962,2 
730,8 
5 411,2 135,4 
7,5 
4,8 
4,4 
4,0 166,3 
302,1 
287,4 
127,3 
355,7 
1 238,8 * 93,4 
97,7 
98,7 
98,8 
98,1 
97,6 *94,6 
95,0 
*94,9 
96,6 
97,9 
96,0 
(') After supplementary and amending budgets. 
(2) After supplementary receipts and transfers between budget headings and transfers' from carry-overs from the previous financial year. 
(3) After transfers between budget headings and 'transfers' to the appropriations for the current financial year. 
(4) The indicator (11) expresses the evolution of the share of apprqpriations finally paid during the financial years. The difference in relation to 100 % expresses the share of 
appropriations finally cancelled. Indicators (11) less than 95 % are marked (*), those less than 90 %(") and those less than 80 %(***). 
(5) The indicator (12) expresses the evolution of payments made againstthe appropriations for the financial year as a proportion of the total payments effected during the financial year. 
The difference in relation to 100 % expresses the share of payments effected against carry-overs from the previous financial year. Indicators (12) less than 95 % are marked (*), those 
less than 90 %(") and those less than 80 % (***). 
15. 12. 87 Official Journal of the European Communities 173 
§ 15. Utilization rates of the appropriations for payment from 1982 to 1986 — by sector 
Payment 
rate (%) Rate of 
carry-over to 
the following 
year (%) Cancellation 
rate 
(%) 
A. Appropriations for the financial year 
For basic figures, see § 14, columns 3-6 
Final appropriations (col. 3) = 100 % 
(%) B. Carry-overs from the previous financial year 
For basic figures, see § 14, columns 7-10 
Appropriations carried over (col. 7) = 100 % 
(%] 
1. Admini- 1982 
stration 1£>83 
(all institu- 1984 
tions) 1985 
1986 
1982 
2. EAGGF- 1983 
Guarantee 1984 
1985 
1986 
1982 
3. Agrlcul- 1983 
tural 1984 
structures 1985 
1986 
1982 
1983 
4. Fisheries ig84 
1985 
1986 
5. Regional 
policy 
and 
transport 
6. Social 
policy 
7. Research, 
energy, 
etc. 
8. Repay­
ments to 
Member 
States 
1982 9. Coopera- 1983 
Hon with 1984 
developing 
countries 
1986 1982 
1983 
1984 
1985 
1986 
General 
budget 
— total 
174 Official Journal of the European Communities 15. 12. 87 
§ 16. Annual payments during the period 1982-1986 — by sector and by institution 
Note: Annual payments = payments against appropriations of the financial year plus payments against carry-overs from the previous 
financial year. 
Sector and institution 
(For the definition of sectors, see § 6, column 1) 
1. Administration (all institutions) 
1.1. Commission 
1.2. Other institutions 
c" 
E E o 
o 
CO 
O 
« 
O 2. EAGGF-Guarantee 
2.1. Cereals and rice 
2.2. Sugar 
2.3. Fats and protein plants 
2.4. Fruit and vegetables 
2.5. Wine 
2.6. Tobacco 
2.7. Milk products 
2.8. Meat, eggs and poultry 
2.9. Various markets 
2.10. Agri-monetary measures 
2.11. Other expenditure 
3. Agricultural structures 
3.1. EAGGF-Guidance 
3.2. Specific measures 
4. Fisheries 
4.1. Common organization of the market 
4.2. Other measures 
5. Regional policy and transport 
5.1. Regional Fund 
5.2. Transport 
5.3. Other measures 
6. Social policy 
6.1. Social Fund 
6.2. Other measures 
7. Research, energy, etc. 
7.1. Energy 
7.2. Research and investment 
7.3. Industry 
7.4. Other measures 
8. Repayments to Member States 
8.1. Costs incurred in collecting own resources 
8.2. Other repayments 
9. Cooperation with developing countries 
9.1. Food aid 
9.2. Financial aid 
Total operating sectors 
Grand total 1982 
Mio ECU 
1 010,3 
688,3 
322,0 
12 369,5 
1 874,8 
1 241,8 
1 295,0 
914,3 
570,6 
622,6 
3 327,8 
1 625,9 
583,6 
313,1 
646,1 
638,2 
7,9 
54,8 
34,0 
20,8 
3 009,4 
973,0 
1,1 
2 035,3 
1 060,6 
905,6 
155,0 
436,6 
44,0 
367,6 
15,2 
9,8 
1 049,3 
909,3 
140,0 
786,1 
540,2 
245,9 
19 412,4 
20 422,7 % V) 
5,0 
3,4 
1,6 
60,6 
9,2 
6,1 
6,3 
4,5 
2,8 
3,0 
16,3 
8,0 
2,9 
1,5 
3,2 
3,2 
0,0 
0,3 
0,2 
0,1 
14,7 
4,8 
0,0 
9,9 
5,2 
4,4 
0,8 
2,1 
0,2 
1,8 
0,1 
0,0 
5,1 
4,4 
0,7 
3,8 
2.6 
1,2 
95,0 
100 1983 
Mio ECU 
1 110,4 
736,3 
374,1 
15 788,2 
2 534,1 
1 316,2 
1 764,7 
1 196,1 
659,2 
671,3 
4 396,1 
2 310,3 
559,7 
488,6 
-108,1 
749,7 
719,7 
30,0 
54,8 
25,8 
29,0 
2 409,5 
1 255,9 
3,7 
1 149,9 
1 020,9 
890,9 
130,0 
1 304,0 
828,0 
423,3 
41,0 
11,7 
1 064,7 
921,9 
142,8 
810,8 
388,7 
422,1 
23 202,6 
24 313,0 % V) 
4,6 
3,0 
1,6 
64,9 
10,4 
5,4 
7,2 
4,9 
2,7 
2,8 
18,1 
9,5 
2,3 
2,0 
-0,4 
3,1 
3,0 
0,1 
0,2 
0,1 
0,1 
9,9 
5.2 
0,0 
4,7 
4,2 
3,7 
0,5 
5,4 
3,4 
1,7 
0,2 
0,1 
4,4 
3,8 
0,6 
3,3 
1.6 
1,7 
95,4 
100 1984 
Mio ECU 
1 216,1 
798,4 
417,7 
18 328,3 
1 697,8 
1 631,5 
1 965.6 
1 454,6 
1 222,6 
776,4 
5 441,7 
3 246,1 
541,3 
376,2 
-25,5 
702,8 
646,8 
56,0 
57,1 
15,7 
41,4 
1 814,3 
1 350,6 
430,8 
32,9 
2 036,3 
1 606,3 
430,0 
1 044,9 
545,7 
441,0 
43,9 
14,3 
1 173,2 
1 109,9 
63,3 
1 150,6 
709,2 
441,4 
26 307,5 
27 523,6 %(') 
4,4 
2,9 
1.5 
66,6 
6,2 
5,9 
7,1 
5,3 
4,4 
2,8 
19,8 
11,8 
2,0 
1,4 
-0,1 
2,5 
2,3 
0,2 
0,2 
0,0 
0,2 
6,6 
4,9 
1,6 
0,1 
7,4 
5,8 
1,6 
3,8 
1,9 
1,6 
0,2 
0,1 
4,3 
4,1 
0,2 
4,2 
2,6 
1,6 
95,6 
100 1985 
Mio ECU 
1 296,0 
869,5 
426,5 
19 725,9 
2 359,8 
1 804,5 
2 173,7 
1 230,7 
921,4 
862,9 
5 933,2 
3 476,6 
736.1 
189,8 
37,2 
738,6 
690,1 
48,5 
81,8 
16,1 
65,7 
1 725,5 
1 624,2 
76.0 
25,3 
1 490,7 
1 413,0 
77,7 
707,5 
126,2 
510,6 
49,8 
20,9 
1 248,0 
1 050,9 
197,1 
1 084,7 
543,8 
540,9 
26 802,7 
28 098,7 %(1) 
4,6 
3,1 
1,5 
70,2 
8.4 
6,4 
7,7 
4,4 
3,3 
3,1 
21,1 
12,4 
2,6 
0,7 
0,1 
2,6 
2,4 
0,2 
0,3 
0,1 
0,2 
6,2 
5,8 
0,3 
0,1 
5,3 
5.0 
0,3 
2,5 
0,4 
1,8 
0,2 
0,1 
4,4 
3,7 
0,7 
3,9 
2.0 
1,9 
95,4 
100 1986 
Mio ECU 
1 522,0 
998,6 
523,4 
22 120,0 
3 485,4 
1 725,5 
3 094,6 
986,0 
630,8 
782,2 
5 405,8 
4 348,2 
1 121,6 
481,7 
58,2 
766,5 
727,1 
39,4 
115,8 
18,0 
97,8 
2 585,1 
2 483,8 
46,2 
55,1 
2 419,2 
2 321,3 
97,9 
838,4 
80,6 
679,7 
50,9 
27,2 
2 972,4 
920,4 
2 052,0 
853,4 
412,1 
441,3 
32 670,8 
34 192,8 %(1) 
4,4 
2,9 
1,5 
64,7 
10,2 
5,0 
9,1 
2,9 
1,8 
2,3 
15,8 
12,7 
3,3 
1,4 
0,2 
2,2 
2,1 
0,1 
0,3 
0,0 
0,3 
7,6 
7,3 
0,1 
0,2 
7,1 
6,8 
0,3 
2,5 
0,2 
2,0 
0,2 
0,1 
8,7 
2,7 
6,0 
2,5 
1,2 
1,3 
95,6 
100 
to 
g 
~ ~ 
c Parliament 
Council 
(of which: Economic and Social Committee) 
Commission 
Court of Justice 
Court of Auditors 
Grand total 173,3 
109,7 
(20,6) 
20 100,7 
25,4 
13,6 
20 422,7 0,9 
0,5 
(0.1) 
98,4 
0,1 
0,1 
100 214,8 
116,7 
(22,4) 
23 938,9 
27,2 
15,4 
24 313,0 0,9 
0,5 
(0.1) 
98.4 
0,1 
0,1 
100 245,5 
126,7 
(24.2) 
27 105,9 
28,6 
16,9 
27 523,6 0,9 
0,4 
(0.1) 
98.5 
0.1 
0,1 
100 228,5 
148,4 
(26.4) 
27 672,2 
31,1 
18,5 
28 098,7 0,8 
0,5 
(0.1) 
98,5 
0,1 
0,1 
100 287,3 0 
177,4 0 
(31,3) (0 
33 669,4 98 
37,1 0 
21,6 0 
34 192,8 100 
(1) Percentage in relation to the total of annual budgetary payments. 
15. 12. 87 Official Journal of the European Communities 175 
§ 17. Evolution off the ratio of 'annual payments by sector' 
to 'total of annual budgetary payments' (1982-1986) 
(for detailed figures see § 16) 
A. General budget (all sectors): 
Total of annual budgetary payments = 100 % 
100% T 
50% Log 
10% 
5% 
1 % 
0,5 % -
0,1 % 2. EAGGF-Guarantee 
8. Repayments to Member States 
5. Regional policy and transport 
6. Social policy 
1. Administration 
9. Cooperation with developing countries 
_^_ 7. Research, energy, etc. 
-*- 3. Agricultural structures 
> 4. Fisheries 
1984 1982 1983 
B. EAGGF-Guarantee (all markets): 
Total of annual budgetary payments = 100 % 
100 % 
50 % -1985 1986 
10% 
5% -
1 % 
0,5% -
0,1 % >- 2.7. Milk products 
>~ 2.8. Meat, eggs and poultry 
2.1. Cereals and rice 
2.3. Fats and protein plants 
2.2. Sugar 
2.9. Various markets 
>~ 2.4. Fruit and vegetables 
2.6. Tobacco 
2.5. Wine 
2.10. Agri-monetary measures 
2.11. Other expenditure 
1982 1983 1984 1985 1986 
176 Official Journal of the European Communities 15. 12. 87 
§ 18. Annual payments to the Member States (1982-1986) 
Notes: 
1. This table summarizes the annual payments to the Member States under the principal sectors For the period under consideration 
these payments represent 88,4 % of total budgetary payments (= the aggregate of the totals in § 16). 
2. Annual payments = payments against appropriations for the financial year plus payments against carry-overs from the previous year. 
3. Payments under the EAGGF-Guarantee include adjusted monetary compensatory amounts {see § 12 D, footnote (1)). 
(Mio ECU) 
Financial year/sector 
1982: 
EAGGF-Guarantee (T 1 - 2) 
EAGGF-Guidance (Ch 30 - 33) 
Fisheries (T4) 
Regional Fund (Ch 50-51) 
Social Fund (Ch 60 - 62) 
Costs incurred in collecting 
own resources (Ch 80) 
Specific measures (Ch 52, 53, 
82,86) 
Total B 
535,1 
17,7 
0,6 
10,8 
16,8 
68,3 
649,3 
(3,6 %) DK 
556,7 
20,8 
3,2 
14,6 
17,6 
17,6 
630,5 
(3,5 %) D 
2 027,5 
107,1 
3,7 
61,6 
89,9 
237,0 
2 526,8 
(14,0 %) GR 
684,6 
14,5 
152,3 
23,5 
18,3 
92,7 
985,9 
(5,5 %) ' E 
— 
— F 
2866,2 
167,4 
3,6 
130,0 
119,3 
134,7 
3 421,2 
(19,0%) IRL 
496,5 
84,3 
7,8 
93,5 
115,0 
10,2 
: 72,7 
880,0 
(4,9 %) 1 
. 2 502,6 
125,0 
8,9 
281,8 
235,1 
102,6 
142,6 
3 398,6 
(18,8 %) L 
2,6 
1,6 
0,1 
1,1 
0,4 
5,8 
(0,0 %) NL 
1 416,7 
32,2 
8,3 
3,2 
9,0 
83,9 
1 553,3 
(8,6 %) P 
— 
— UK 
1 278,3 
67,6 
9,8 
225,1 
278.3 
236,3 
1 866,5 
3 961,9 
(22,0 %) Allo­
cation 
not 
avail-
2,7 
8,9 
11,6 
(0,1 %) EUR 
10/12 
12 369,5 
638,2 
54,8 
973,0 
905,6 
909,3 
2 174,5 
18 024,9 
(100 %) 
1983: 
EAGGF-Guarantee (T 1 -2) 
EAGGF-Guidance (Ch 30 - 33) 
Fisheries (T4) 
Regional Fund (Ch 50-51) 
Social Fund (Ch 60 - 62) 
Costs incurred in collecting 
own resources (Ch 80) 
Specific measures (Ch 52, 53, 
82, 86; Article 707) 
Total 611,9 
18,1 
0,2 
7,0 
20,6 
77,7 
735,5 
(3,4 %) 680,7 
20,5 
3,6 
16,7 
14,7 
20,3 
756,5 
(3,5 %) 3 075,8 
107,7 
2,8 
45,0 
81,5 
241,8 
270,7 
3 825,3 
(17,7 %) 1 007,4 
21,9 
0,1 
214,6 
20,4 
16,6 
70,4 
1 351,4 
(6,2 %) — 
— 3 566,6 
182.0 
\ 3,9 
219,3 
140,5 
142,5 
4 254,8 
(19,6 %) 619,4 
84,1 
v 21,6 
94,5 
134,2 
11,6 
60,8 
1 026,2 
(4,7 %) 2 820,5 
103,0 
5,1 
344,5 
221,2 
105,9 
174,8 
3 775,0 
(17,4 %) 4,2 
0,6 
0,0 
0,3 
0,5 
5,6 
(0,0 %) 1 707,8 
32;2 
6,4 
18,1 
12,6 
83,4 
1 860,5 
(8,6 %) — 
— 1 691,0 
149,6 
8,4 
296,2 
244,9 
221,6 
1 471,9 
4 083,6 
(18,9 %) 2.9 
2,7 
5,6 
(0,0 %) 15 788,2 
719,7 
54,8 
1 255,9 
890,9 
921,9 
2 048,6 
21 680,0 
(100 %) 
1984: 
EAGGF-Guarantee (T 1 - 2) 
EAGGF-Guidance (Ch 30 - 33) 
Fisheries (T4) 
Regional Fund (Ch 50-51) 
Social Fund (Ch 60-61) 
Costs incurred in collecting 
own resources (Ch 80) 
Specific measures (Ch 82, 86; 
Articles 707, 783) 
Total 686,4 
12,9 
0,7 
6,0 
52,1 
82,0 
840,1 
(3,5 %) 879,6 
13,9 
3,8 
28.1 
68,7 
26,0 
1 020,1 
(4,2 %) 3 323,0 
89,3 
5,1 
43,9 
63,8 
302,5 
191,7 
4 019,3 
(16,7 %) 961,2 
52,8 
0,6 
216,7 
71,3 
14,8 
46,6 
1 364,0 
(5,7 %) — 
• -— 3 592,0 
143,9 
9,5 
201,7 
225,7 
169,7 
4 342,5 
(18,1 %) 884,4 
64,2 
10,3 
104,1 
131,4 
16,0 
1 210,4 
(5,0%) 3 909.4 
127,8 
4,1 
435,1 
368,5 
117,5 
4 962,4 
(20,7 %) 3,6 
3,9 
2,5 
0,5 
0,7 
11,2 
(0,1 %) 1 964,2 
24,8 
3,6 
14,8 
14,1 
101,1 
2122,6 
(8,8 %) — 
— 2 121.3 
113,3 
9,5 
297,7 
610,2 
279.6 
660,9 
4 092,5 
(17,1 %) 3,2 
9,9 
13,1 
(0,1 %) 18 328,3 
646,8 
57,1 
1 350,6 
1 606,3 
1 109,9 
899,2 
23 998,2 
(100 %) 
1985: 
EAGGF-Guarantee (T 1 - 2) 
EAGGF-Guidance (Ch 30 - 33) 
Fisheries (T4) 
Regional Fund (Ch 50-51) 
Social Fund (Ch 60-61) 
Costs incurred in collecting 
own resources (Ch 80) 
Specific measures (Ch 82, 86; 
Articles 583, 707) 
Total 916,3 
12,4 
3,1 
12,3 
.49,4 
76,5 
1 070,0 
(4,3 %) 829,3 
13,0 
2,9 
7,7 
33,5 
26,1 
912,5 
(3,7 %) 3 625,6 
81,0 
2,3 
61,7 
109,8 
284,5 
20,1 
4 185,0 
(17,0%) 1 192,6 
83,7 
1.7 
309,0 
79,0 
12,2 
24,6 
1 702,8 
(6,9 %) — 
— 4 633,3 
122,3 
12,1 
233,2 
255,6 
159,9 
5 416,4 
(21,9%) 1 166,8 
73,1 
3,2 
118,2 
171.6 
15,8 
1 548,7 
(6,3 %) 3410,9 
175,3 
6,0 
381,1 
383,5 
123,5 
4 480,3 
(18,1 %) 4.8 
1,8 
0,7 
0,6 
0,6 
8,5 
(0,0 %) 2 047,4 
18.1 
2,3 
16,4 
46,0 
101,7 
2 231,9 
(9,0 %) — 
— 1 894.7 
109,4 
12.5 
483.9 
284.0 
250,1 
72,8 
3 107,4 
(12,6 %) 4.2 
35,7 
39,9 
(0,2 %) 19 725,9 
690,1 
81,8 
1 624,2 
1 413,0 
1 050,9 
117,5 
24 703,4 
(100 %) 
1986: 
EAGGF-Guarantee (T 1 - 2) 
EAGGF-Guidance (Ch 30-r34) 
Fisheries (T4) 
Regional Fund (Ch 50-51) 
Social Fund (Ch 60-61) 
Costs incurred in collecting 
own resources (Ch 80) 
Specific measures (Ch 86) 
Total 978,4 
15,5 
4,5 
29,5 
72,9 
63,4 
1 164,2 
(3,8 %) 1 063,2 
13,9 
11,3 
18,9 
80,7 
23,8 
1 211,8 
(4,0 %) 4 400,6 
105,1 
6,1 
92,5 
134,6 
249,5 
4 988,4 
(16,4 %) 1 386,9 
86,2 
3,4 
309,1 
107,1 
10,4 
2,0 
1 905,1 
(6,3*/o) 271,4 
0,0 
314,3 
174,9 
19,0 
1 635,9 
2 415,5 
(7,9 %) 5 440,3 
176,7 
19,7 
219,0 
328,4 
139,5 
6 323,6 
(20,7 %) 1 212,9 
64,2 
2,6 
79,3 
203,1 
11,8 
1 573,9 
(5,2 %) 3 067,8 
167,0 
6,9 
712,1 
462,2 
107,3 
4 523,3 
(14,8 %) 2,1 
2,3 
0,1 
1,4. 
0,6 
6,5 
(0,0 %) 2 276,5 
17,1 
2,9 
13,1 
50,6 
89,3 
2 449,5 
(8,0 %) 30,4 
0,4 
188.8 
109,2 
5,7 
163.3 
497,8 
d.6%) 1 983,0 
79,1 
21,7 
506,7 
596,2 
200,1 
3 386,8 
(11,1 %) 6,5 
v 36,3 
0,4 
43,2 
(0,2 %) 22120,0 
727,1 
115,8 
2483,8 
2 321,3 
920,4 
1 801,2 
30 489,6 
(100 %) 
15. 12. 87 Official Journal of the European Communities 177 
§ 19. Actual own resources — by Member State (1982-1986) 
Note: Actual own resources = own resources recovered during the financial year. 
(Mio ECU) 
Financial year/Type of resource 
1982: 
Agricultural levies 
Sugar and isoglucose levies 
Customs duties 
VAT own resources (1) (2) 
Total B 
238,6 
44,4 
403,7 
461,6 
1 148,3 
(5,4 %) DK 
7,5 
25,3 
142,6 
226,8 
402,2 
(1,9%) D 
201,9 
190,2 
1 966,5 
3 339,9 
5 698,5 
(26,9 %) GR 
63,5 
13,1 
108,7 
196,3 
381,6 
(1,8%) E 
— 
— F 
70,9 
211,0 
1 071,2 
2 872,8 
4 225,9 
(20,0 %) IRL 
6,0 
7,0 
87,8 
107,7 
208,5 
(1,0%) I 
285,1 
83,5 
660,8 
1 457,8 
2 487,2 
(11,8%) L 
0,1 
4,3 
25,7 
30,1 
(0,1 %) NIL 
172,5 
58,9 
585,2 
649,8 
1 466,4 
(6,9 %) P 
— 
— UK 
475,9 
72,4 
1 784,5 
2 782,7 
5 115,5 
(24,2 %) EUR 
10/12 
1 522,0 
705,8 
6 815,3 
12 121,1 
21 164,2 
(100 %) 
1983: 
Agricultural levies 
Sugar and isoglucose levies 
Customs duties 
VAT own resources (1) (2) 
Total 293,9 
65,8 
423,8 
432,4 
1 215,9 
(5,3 %) 6,9 
38,9 
159,8 
274,3 
479,9 
(2,1 %) 143,0 
270,5 
2 019,8 
4 038,8 
6 472,1 
(28,1 %) 38,0 
16,7 
107,4 
215,6 
377,7 
(1,6%) — 
— 78,9 
293,7 
1 051,8 
3 082,1 
4 506,5 
(19,6 %) 7,0 
11,6 
100,4 
150,6 
269,6 
(1,2%) 323,2 
95,0 
657,1 
1 923,4 
2 998,7 
(13,0 %) 0,1 
4,6 
39,2 
43,9 
(0,2 %) 135,8 
82,2 
633,2 
713,7 
1 564,9 
(6,8 %) — 
.— 320,3 
73,6 
1 830.8 
2 859,7 
5 084,4 
(22,1 %) 1 347,1 
948,0 
6 988,7 
13 729,8 
23 013,6 
(100 %) 
1984: 
Agricultural levies 
Sugar and isoglucose levies 
Customs duties 
VAT own resources (1) (2) 
Total 211,0 
83,9 
470,0 
473,4 
1 238,3 
(5,0 %) 8,0 
38,0 
197,3 
289,6 
532,9 
(2,1 %) 158,6 
350,2 
2 309,7 
4 233,9 
7 052,4 
(28,4 %) 19,5 
16,6 
99,4 
220,3 
355,8 
(1,4%) — 
— 94,2 
406,3 
1 100,0 
3 201,8 
4 802,3 
(19,3 %) 6,9 
16,8 
126,7 
135,9 
286,3 
(1,2%) 288,5 
84,1 
750,9 
2 319,9 
3 443,4 
(13,8%) 0.1 
5,9 
45,3 
51,3 
(0,2 %) 131,8 
76,9 
740,8 
738,3 
1 687,8 
(6,8 %) — 
— 341,4 
103,6 
2 160.1 
2 824,4 
5 429,5 
(21,8%) 1 260,0 
1 176,4 
7 960,8 
14 482,8 
24 880,0 
(100 %) 
1985: 
Agricultural levies 
Sugar and isoglucose levies 
Customs duties 
VAT own resources (1) (2) 
Total 197,2 
78,4 
489,3 
527,7 
1 292,6 
(5,0 %) 9,7 
43,5 
208,2 
359,0 
620,4 
(2,4 %) 142,0 
286,3 
2 414,5 
4 661,5 
7 504,3 
(28,8 %) 18,1 
12,0 
95,9 
262,0 
388,0 
(1,5%) — 
— 74,1 
348,0 
1 174,7 
3 722,4 
5 319,2 
(20,4 %) 5,9 
15,0 
137,2 
138,3 
296,4 
(1,1 %) 314,4 
75,8 
820,1 
2 419,2 
3 629,5 
(13,9 %) 0,2 
6,0 
44,5 
50,7 
(0,2 %) 131,7 
104,1 
781,5 
872,1 
1 889,4 
(7,2 %) — 
— 228,4 
94,3 
2 182,7 
2 584.9 
5 090,3 
(19,5 %) 1 121,7 
1 057,4 
8 310,1 
15 591,6 
26 080,8 
(100 %) 
1986: 
Agricultural levies 
Sugar and isoglucose levies 
Customs duties 
VAT own resources (1) (3) 
Total 132,2 
84,7 
494,6 
736,6 
1 448,1 
(4,4 %) 9,8 
47,6 
220,5 
512,8 
790,7 
(2,4 %) 111,9 
313,0 
2 436,1 
5 869,2 
8 730,2 
(26,2 %) 22,9 
16,9 
85,5 
507,1 
632,4 
(1,9%) 10,1 
14,5 
191,9 
2 104,1 
2 320,6 
(7,0 %) 107,6 
378,6 
1 150,4 
5 248,5 
6 885,1 
(20,7 %) 6,4 
10,8 
113,3 
213,3 
343,8 
(1,0%) 356,4 
73,0 
770,1 
3 518,7 
4 718,2 
(14,2 %) 0,2 
6,4 
59,2 
65,8 
(0,2 %) 114,1 
95,9 
792,0 
1 230,0 
2 232,0 
(6,7 %) 18,7 
49,8 
210,1 
278,6 
(0,8 %) 285,2 
76,5 
1 862,3 
2 601,2 
4 825,2 
(14,5 %) 1 175,5 
1 111,5 
8 172,9 
22 810,8 
33 270,7 
(100 %) 
I1) Including the balances and adjustments of previous financial years. 
(2) Greece paid a financial contribution based on its GNP. 
(3) Portugal paid a financial contribution based on its GNP. 
178 Official Journal of the European Communities 15. 12. 87 
Part II: The European Development Funds (EDF) 
(position at 31 December 1986) 
§ 20. General information on the EDF 
THE FIRST THREE EDF 
20.1 General information and detailed financial information on the first three EDF, established under agreements in force 
between 1959 and 1976, has most recently been given in the annual report of the Court of Auditors on the financial year 1980. 
Only a few small amounts still remain to be paid under the 3rd EDF. 
A summary of the payments made under the first three EDF is given in §§ 27 and 28. 
THE 4th, 5th AND 6th EDF 
20.2. Legal provisions 
a) Legal basis in respect of ACP States: v 
— 4th EDF: ACP-EEC Convention signed in Lome on 28 February 1975 (Lome I), 
— 5th EDF: second ACP-EEC Convention signed in Lome on 31 October 1979 (Lome II), 
— 6th EDF: third ACP-EEC Convention signed in Lome on 8 December 1984 (Lome III). 
b) Legal basis in respect of the OCT and FOD: 
— 4th EDF: Council Decision 76/568/EEC of 29 June 1976, 
— 5th EDF: Council Decision 80/1186/EEC of 16 December 1980 (no longer concerns the FOD), 
— 6th EDF: Council Decision 86/283/EEC of 30 June 1986 (no longer concerns the FOD). 
c) Establishment of the EDF: 
— 4th EDF: internal agreement of 11 July 1976, 
— 5th EDF: internal agreement of 20 November 1979, 
— 6th EDF: internal agreement of 19 February 1985. 
d) Financial Regulations: 
— 4th EDF: Financial Regulation 76/647/EEC of 27 July 1976, 
— 5th EDF: Financial Regulation 81/215/EEC of 17 March 1981, 
— 6th EDF: Financial Regulation 86/548/EEC of 11 November 1986. 
20.3. Allocations, financing, distribution and type of aid 
The EDF allocations after changes (1) by the Council are as follows: 
— 4th EDF: 3 196,6 Mio ECU, 
— 5th EDF: 4 914,4 Mio ECU, 
— 6th EDF: 7 500,0 Mio ECU. 
The EDF are financed by the EC Member States in proportions laid down in the internal agreements (see also §§21 and 22). 
The above-mentioned internal agreements provide for distribution of the allocations of the 4th and 5th EDF between the ACP 
States and the OCT/FOD and between grants, special loans, risk capital, Stabex (2) and Sysmin (3) for the 5th and 6th EDF. 
Part of the allocation in the form of grants is reserved for exceptional aid and for interest subsidies on loans granted by the 
European Investment Bank: The rest of the allocation in the form of grants and the allocation in the form of special loans are 
distributed among the recipient countries, with the exception of funds for the regional projects, administrative costs and a 
contingency reserve. The amounts thus allocated to the recipient countries, called indicative programmes in the case of the 
ACP States, are used to finance the projects adopted. 
20.4. Monetary unit 
The EDF amounts are given in ECU; for conversion into ECU of the monetary units previously applied, it has been agreed 
that 1 u.a. = 1 EUA = 1 ECU. 
20.5. Date of entry into force 
— 4th EDF: 1 April 1976. 
— 5th EDF: 1 January 1981. 
— 6th EDF: 1 May 1986. 
20.6. Financial implementation 
The Commission draws up a timetable of requests for contributions, which in principle are to be paid quarterly by the 
Member States of the European Communities (4th EDF: six-monthly). The use of the EDF resources is shown in the accounts 
in three stages: (I) financing decision, (II) signing of contracts against funds allocated to national authorizing officers, (III) 
authorization of payments to contractors. 
20.7. External audit 
The Court of Auditors is responsible for the audit of the EDF (in accordance with the Treaty). 
20.8. Authority giving discharge 
The European Parliament gives discharge of the financial management of the EDF, on the recommendation of the Council 
(in accordance with internal agreements). 
(1) The initial allocations were altered by Council Decisions, and are increased by various receipts such as reconstitution of Stabex transfers and bank 
interest. 
(2) System designed to guarantee the stabilization of earnings from exports by the ACP States to the Community (Lome I, Article 16: Lome II, Article 23: Lome 
III, Article 147). 
(3) System designed to aid ACP States whose economies are largely dependent on the mining sectors and in particular towards helping them cope with a 
decline in their capacity to export mining products to the Community (Lome II, Article 49;Lome III, Article 176). 
15. 12. 87 Official Journal of the European Communities 179 
§ 21. The 4th and 5th EDF: allocation, financing, distribution of aid, overall utilization 
Allocation and financing Distribution of aid (Mio ECU) Utilization at 31.12.1986 
(Mio ECU and %) 
4th EDF: 
DK: 2,40% Allocation: 
3 196,6 Mio ECU 
Financing by: 
IRL:0,60% 
L:0,20% -Programmable 
V aid: -^2 420,4 Programming 
of aid: Utilization: 
<S.o 
CO CD 
°CC 
• • CO 
°- 2 << J 
Eoi 
E "-
' o " 
°-£ 0-2 = >SS° ica 
stri 
2B 
•£2.«n f 
V 
OCT/FOD: 74,0 -ACP 
States: 
2 346,4 
co m 
co *-
£ £ 
.£. 8 So 
Q. --> 
CO CO 
•Sec i 
•f 
b :.•: < 
>' : 
'•: ''.. Not yet 
utilized 
Risk v 
|capitai| 100,8 
|Not allocated: 6,1 
Sundry 
revenue: 6,1 Mio ECU Financing 
decisions: 
2 373,8 (98,1 %) 
Not yet 
utilized 
Financing 
decisions: 
759,7 (97,9 %) 
Sth EDF: 
Allocation: 
4 914,4 Mio ECU 
Financing by: Programming 
of aid: Utilization: 
Nature of aid: 
/JfEt^llJiffSftfeffi 
Special loans: 
Grants: 
3 060,4 
o ional/ 
ency aid 
subsidie 
Q-Pto 
8® £*• 
xton UJ o^S 
$ "\ — -.""""""."" ""*"'• 
I Programmable 
> aid: 
3 201,0 a. 
o < 
2S 
Q.C 
> 3 
o*£ 
=5.2 f 
.ES v 
OCT: 53,6 
*s ACP States: 
3 147,4 
of which: 
regional projects: 
631,5 Financing 
decisions: 
2 710,6 
(84,7 %) 
Not allocated: 
40,9 Financing 
decisions: 
1 446,1 
(84,4 %) 
Official Journal of the European Communities 15. 12. 87 
§ 22. The 6th EDF: allocation, financing, distribution of aid, overall utilization 
Allocation and financing Distribution of aid (Mio ECU) Utilization at 31.12.1986 
(Mio ECU and %) 
Allocation: 
7 500,0 Mio ECU 
Financing by: Nature 
of aid: 
Special 
loans: 625,0 
Grants: 
4 915.0 
c o 
So Programming 
of aid: Utilization: 
-?*••••• Risk •H.-vH. 
/-capital ::'615,0^^; , "" <H 
1% 
Ji< 
(0 ® 
Program- 5? » 
Vmable Q,C 
^aid: ©5 
5 016,0 ££ 
OCT: 56,0, ACP States: 
4 960,0 
of which: 
Regional projects 
and reserve: 993,8 
-<k'--" 
(1) Provisional. 
(2) Approximate. 
Payments: 108,9(4,4%) 
Distribution of programmable aid at 31 December 1986 
(Mio ECU) 
Angola 
Antigua and Barbuda 
Bahamas 
Barbados 
Belize 
Benin 
Botswana 
Burkina-Faso 
Burundi 
Cameroon 
Cape Verde 
Central African Republic 
Comoros 
Congo 
Ivory Coast 
Djibouti 
Dominica 
Ethiopia 
Fiji 
Gabon 
Gambia 
Ghana 
Grenada 
Guinea 
Guinea-Bissau 
Equatorial Guinea 95,0 
4,0 
3,0 
5.0 
8,0 
80,0 
32,0 
115,0 
108,0 
96,0 
23,0 
70,0 
21,0 
44,0 
75,0 
8,0 
5,5 
230,0 
, 19,0 
23,0 
20,0 
86,0 
5,0 
114,0 
35,0 
12,0 Guyana 
Jamaica 
Kenya 
Kiribati 
Lesotho 
Liberia 
Madagascar 
Malawi 
Mali 
Mauritius 
Mauritania 
Mozambique 
Niger 
Nigeria 
Uganda 
Papua New Guinea 
Rwanda 
Saint Christopher and Nevis 
Saint Lucia 
Saint Vincent 
and Grenadines 
Solomon Islands 
Western Samoa 
Sao Tome and Principe 
Senegal 
Seychelles 20,5 
39.0 
122.0 
6.0 
41,0 
44,0 
110,0 
114,0 
136,0 
29,0 
61,0 
145,0 
120,0 
200,0 
125,0 
32,5 
111,0 
3,0 
5,5 
5,5 
17,5 
9,0 
6,0 
97,0 
5,2 Sierra Leone 
Somalia 
Sudan 
Suriname 
Swaziland 
Tanzania 
Chad 
Togo 
Tonga 
Trinidad and Tobago 
Tuvalu 
Vanuatu 
Zaire 
Zambia 
Zimbabwe 
Regional projects 
and reserve 
Total ACP 
OCT 
Total allocations 
from programmable aid 69,0 
113,0 
145,0 
23.0 
26,0 
169.0 
89,0 
61.0 
6.0 
15.0 
1.5 
6,5 
147,0 
81,0 
73,0 
993,8(1) 
4 960.0 
56.0 
5-016,0 
0) 1000 Mio ECU are provided for regional cooperation, to be charged to this allocation and to EIB own resources. 
15. 12. 87 Official Journal of the European Communities 181 
§ 23. The 4th EDF: aid by economic sector and by recipient country 
(situation at 31 December 1986) 
(Mio ECU) 
Recipient country 
d) 
I. ACP States 
including: 
Ethiopia 
Tanzania 
Sudan 
Uganda 
Mali 
Madagascar 
Burkina-Faso 
Malawi 
Guinea 
Somalia 
Senegal 
Rwanda 
Burundi 
Cameroon 
Chad 
Ghana 
Zambia 
Ivory Coast 
Central African Republic 
Togo 
Mauritania 
Sierra Leone 
Congo 
Liberia 
Lesotho 
Guinea-Bissau 
Jamaica 
Botswana 
Suriname 
Mauritius 
Guyana 
Swaziland 
Gambia 
Papua New Guinea 
Fiji 
Gabon 
Solomon Islands 
Nigeria 
Other ACP States: 
Bahamas 
Barbados 
Cape Verde 
Comoros 
Djibouti 
Dominica 
Grenada 
Equatorial Guinea 
Kiribati 
Sao Tome and Principe 
Saint Lucia 
Saint Vincent and Grenadines 
Western Samoa 
Seychelles 
Trinidad and Tobago 
Tuvalu 
(Total other countries) 
II. Regional projects and 
administrative costs 
Total ACP (I + II) 
III. OCT/FOD 
Total 4th EDF Financing decisions 
w 
i 
(2) 
116,3 
1,8 
2,3 
3,4 
3,0 
20,7 
3,3 
2,4 
3,1 
3,3 
3,2 
1,5 
1,7 
2,5 
3,9 
2,3 
2,2 
3,7 
2,9 
2,0 
2,0 
1,8 
3,4 
2,9 
2,3 
2,9 
1,2 
2,2 
2,1 
1,0 
1,7 
1,4 
1,0 
1,4 
0,9 
1,0 
0,6 
1,0 
0,6 
0,4 
1,6 
3,6 
0,4 
0.3 
0,0 
0,4 
0,2 
0,2 
0,1 
6,9 
0,1 
0,2 
0.2 
0,1 
0,1 
0,9 
(10,1) 
34,4 
150,7 
4,7 
155,4 
strialization, 
gy and 
ng Indui 
ener 
mini 
(3) 
379,5 
30,3 
30,7 
7,2 
6,9 
3,9 
29,1 
36,5 
2,7 
1,3 
14,2 
21,6 
37,3 
6,3 
10,8 
27,1 
3,7 
12,5 
14,6 
11,1 
5,4 
3,4 
8,3 
1.4 
3,4 
3,7 
1,1 
0,2 
1,6 
2,2 
0,5 
0,2 
3,5 
2,0 
2,7 
0,3 
6,7 
2,8 
4,0 
0,2 
0,0 
9,8 
— 1,2 
0,3 
0,0 
1,0 
0,0 
0,0 
— 0,2 
2,8 
0,6 
1,8 
0,4 
(8.3) 
42,9 
422,4 
6.9 
429,3 o 
CC Q. 
(4) 
681,7 
33,4 
19,2 
41,6 
34,7 
38,7 
24,2 
36,3 
19,8 
23,3 
20,1 
23,2 
20,3 
16,0 
19,3 
4,2 
29,6 
22,7 
28,0 
19,5 
27,9 
10,5 
18,1 
12,6 
12,5 
19,6 
11,0 
2,8 
12,6 
5,5 
7,0 
10,0 
8,6 
10,0 
0,3 
11,4 
2,6 
2,5 
4,9 
1.7 
2,2 
1,5 
— 
0.7 
1,7 
0,7 
2,7 
0,3 
0,2 
0,2 
0,1 
0,9 
0,9 
1,6 
0,4 
0,1 
1,1 
0,2 
(11.8) 
29,5 
711,2 
16,6 
727,8 "O o 
h 
(5) 
541,9 
22,0 
53,8 
19,9 
33,2 
6,8 
16.1 
25,3 
27,4 
29,6 
13,8 
0,1 
28,6 
14,4 
23,6 
12,5 
20,4 
8.4 
15.8 
4,3 
23,3 
1,3 
16,5 
13,0 
3,7 
10,2 
18,1 
5,6 
8,3 
7,2 
5,0 
0,0 
8,7 
3,6 
1,1 
3,4 
3,0 
7,1 
5,8 
6,0 
— 
— 
3,6 
2,6 
0,3 
0,3 
1,5 
3,2 
0,3 
0,2 
3,0 
— 
(15.0) 
175,9 
717,8 
26,5 
744,3 CO <= 
1-5 
UJ i: 
(6) 
205,7 
6,1 
2,0 
25,2 
20,7 
2,9 
2,3 
2,3 
7,8 
7,4 
2,7 
5,7 
4,3 
3,4 
14,3 
4,6 
7,9 
6,3 
6,7 
2,6 
4,6 
2,9 
3,9 
3,5 
5,4 
3,7 
6,5 
1,0 
4,4 
4,6 
2,0 
4,7 
1.3 
1,3 
0,7 
0,6 
4,5 
4,8 
1,5 
0,2 
1,1 
0,0 
2,7 
0,5 
0,3 
0,1 
0,2 
0,8 
0,0 
0,1 
0,0 
0,1 
0,1 
0,1 
2.3 
— 
(4,6) 
36,5 
242,2 
8,7 
250,9 X 
(7) 
69,2 
10,2 
0,0 
2,3 
4,4 
2,3 
3,9 
3,3 
3,2 
2,2 
7.6 
3,0 
2,5 
0,1 
1,3 
4,4 
1,1 
5,9 
2,2 
2,4 
1,2 
0,5 
1,8 
0,4 
1,7 
— 
— 0,4 
0,2 
0,2 
0,5 
— 
(1.3) 
0,5 
69,7 
1,2 
70,9 
aulics and 
n 
lopment Hydr 
urba 
deve 
(8) 
107,2 
15,6 
4,7 
5,0 
0,0 
0,1 
3,8 
9,7 
4,3 
5,8 
3.5 
5,0 
1,7 
0,8 
5,2 
0,1 
11,7 
1,4 
4,4 
0,1 
5,4 
0.8 
0,4 
0,0 
2,4 
3,1 
0,2 
0,3 
0,9 
1,7 
2,3 
2,8 
0,6 
0,7 
— 
1,8 
0,9 
— 
(6,8) 
1,7 
108,9 
3,2 
112,1 CD 2 1 Trad 
prorr 
touri: 
(9) 
26,4 
0,5 
0,0 
0,1 
0,5 
2,5 
0,5 
1,5 
2,8 
0,1 
0,6 
0,7 
0,8 
1,0 
0,6 
2,6 
0,1 
0,0 
3,0 
0,3 
0,0 
0,2 
2,8 
0,6 
0,5 
0,0 
0,0 
0,1 
2,4 
0,1 
0,0 
0,2 
0,3 
0,2 
0,1 
0,0 
0,7 
— 
(1.3) 
13,2 
39,6 
1,0 
40,6 | 
82 
UJ CO 
(10) 
201,2 
32,7 
0,3 
19.0 
24,9 
3,3 
8,0 
1,3 
1,5 
15,7 
2,6 
3,0 
13,3 
4,6 
5,9 
2,1 
2,3 
8,3 
2,7 
16,4 
0,0 
0.1 
1,0 
5,4 
0.2 
1,1 
0,5 
1,2 
2,7 
4,5 
0,0 
0,7 
3,6 
— 
0,0 
1,4 
2,9 
1,3 
3,9 
0,5 
0,3 
0,3 
1,0 
0,5 
0,2 
— 
(12.3) 
11.2 
212,4 
-
212,4 CO 
1^ co i= 
(11) 
377,5 
14,4 
20,7 
41,8 
20,6 
9.8 
5,7 
22,7 
7,3 
1,9 
65,1 
0.6 
1,5 
4,1 
7,3 
5,2 
20,4 
15,0 
7,8 
3,6 
37,0 
4,0 
7,4 
7,6 
11.3 
13,2 
7,5 
2,1 
6.7 
0,0 
— 
1.2 
0,0 
0,0 
0,0 
2,8 
1,2 
— 
(5.2) 
— 
377,5 
12,3 
389,8 + 
(12) 
2 706,6 
167,0 
133,7 
121,4 
165,7 
99,2 
99,8 
85,4 
81,0 
111,5 
83,0 
75,7 
68,9 
79.6 
141.1 
70.0 
62,8 
72,8 
76,3 
59,9 
67,7 
66,8 
64,4 
48,3 
44,6 
81,9 
36,3 
42,7 
35.4 
24,0 
32,6 
20,3 
25,1 
15,6 
22,6 
16,9 
28,8 
22,5 
13,1 
20,0 
17,7 
9,2 
18,6 
1.9 
4,1 
10,1 
9,5 
4,8 
4.6 
2,6 
7,3 
3,2 
2,2 
2,3 
0,5 
7,5 
3,1 
4,7 
7,7 
0,6 
(76.7) 
345.8 
3 052,4 
81,1 
3 133,5 B 
I- Q. 
(13) 
2 508.2 
146,9 
130,7 
116,7 
140,4 
83.7 
92,0 
83.3 
77,3 
104,4 
75,6 
72,4 
67,9 
72,9 
137,8 
68,5 
59,0 
65,2 
68,9 
59.4 
64,1 
56,6 
57.5 
45,6 
42,2 
78,5 
32,4 
42,3 
29,6 
22,3 
31,4 
16,2 
23,6 
11,0 
19,6 
16,8 
27,9 
22,1 
12,5 
19,5 
17,3 
8,3 
16,9 
1.8 
3.0 
9.8 
9.0 
4,5 
4,6 
2,6 
6.8 
2,9 
2,2 
2,3 
0,5 
7,5 
3,1 
4,7 
5,1 
0,6 
(71.0) 
309,7 
2 817,9 
72,5 
2 890,4 
* 182 Official Journal of the European Communities 15. 12. 87 
§ 24. The 5th EDF: aid by type and by recipient country 
(financial implementation: situation at 31 December 1986) 
(M to ECU) 
Recipient country 
(D. 
1. ACP States 
including: 
Ethiopia 
Tanzania 
Sudan 
Uganda 
Mali 
Madagascar 
Burkina-Faso 
Malawi 
Guinea 
Somalia 
Senegal 
Rwanda 
Burundi 
Cameroon 
Chad 
Ghana 
Zambia 
Ivory Coast 
Central African Republic 
Mauritania 
Sierra Leone 
Congo 
Liberia 
Lesotho 
Guinea-Bissau 
Jamaica 
Botswana 
Suriname 
Mauritius 
Guyana 
Swaziland 
Gambia 
Papua New Guinea 
Fiji 
Gabon 
Solomon Islands 
Nigeria 
Zimbabwe 
Other ACP States: 
Antigua and Barbuda 
Bahamas 
Barbados 
Cape Verde 
Comoros 
Djibouti 
Dominica 
Grenada 
Equatorial Guinea 
Kiribati 
Sao Tome and Principe 
Saint Christopher and Nevis 
Saint Lucia 
Saint Vincent and Grenadines 
Western Samoa 
Seychelles 
Tonga 
Trinidad and Tobago 
Tuvalu 
Vanuatu 
(Total other countries) 
II. Regional projects 
Administrative costs 
Total ACP (1 + 11) 
III. OCT 
Total 5th EDF A. Non-programmed aid 
Financing decisions 
(0 Interest 
subsidii 
(grants) 
(2) 
111,0 
8,6 
3,6 
1,2 
1,1 
5,6 
20,9 ' 
8,5 
9,8 
1,5 
5,3 
0,5 
0,7 
6.3-
0,7 
2,1 
1,4 
6,8 
7,2 
5.1 
6,7 
1,9 
0,3 
5,2 
— 
(7.4) 
1.3 
112,3 
4,5 
116,8 s 
Q. <0 
if 
(3) 
248,6 
13,0 
9,7 
18,2 
10,2 
10,0 
3,4 
1.4 
21,2 
7,0 
15,0 
2,7 
9,6 
4,2 
0,7 
6,5 
2,0 
13,6 
1,8 
4,5 
5,1 
7,0 
0,5 
2.2 
6,0 
3,8 
5,0 
4,2 
0.5 
4,0 
0,0 
13,8 
7,2 
2,5 
0,1 
5,4 
0.6 
1,8 
0,2 
2,2 
1.0 
2,2 
2,0 
0.2 
0.0 
1,0 
3,0 
3,3 
4,0 
2.3 
0,1 
2,7 
(26,6) 
25,9 
274,5 
7,0 
281,5 -. « 
g {jj 
X E 
UJ 0) 
(4) 
206.3 
44,7 
0,5 
3,6 
37,8 
5,3 
13,9 
2,4 
4,2 
13,7 
0,5 
0.4 
1,1 
19,6 
2,1 
2,0 
0,2 
1.6 
13,1 
4,4 
1,6 
1.5 
0,8 
0,5 
0,5 
7,7 
0,3 
0,1 
0,1 
3.2 
0.1 
0.1 
4.7 
7.5 
0,2 
2.2 
0.4 
0,3 
0,5 
0,4 
0,2 
0,2 
0,2 
0,3 
1,4 
0,2 
(6.5) 
18,0 
224,3 
0,9 
225,2 CO 
<0 
55 
(5) 1 >» CO 
(6) £ 
+ 
« + 
(7) 
643,0 169,8 1 378,7 
11,3 — 69,0 
20,9 — 31,1 
— 81,0 102,8 
40,7 — 88,7 
— — 15.3 
10,7 — 28,0 
31,1 — 43,5 
10,0 — 35,4 
— — 17,3 
1,0 — 8,5 
4,9 — 21,5 
— — 4,9 
2,8 — 32,0 
90,6 — 102,5 
7,7 2,8 13,2 
13,8 — 20.5 
29,6 — 52,1 
6,6 — 21,7 
85,5 — 103,5 
— 83,0 94,9 
4,6 — 10,6 
93,4 — 104,0 
5,2 — 10,8 
28,8 — 30,8 
— — 14,7 
14,4 — 14,7 
— — 5,8 
— — 2,7 
1.3 — 7,4 
3,6 — 7,4 
4,3 — 10,1 
— — 9.5 
— — 4,2 
— — 1.3 
— 3.0 7,0 
8,2 — 10.4 
18,2 — 18,2 
50,7 — 65,9 
2,9 — 21,6 
— — 9.7 
4,2 — 4.3 
— • -r 5,1 
— — 19.6 
— — 0.2 
— — 1.9 
— — 0,9 
0,5 — 4,5 
6,6 — 7,2 
• • — — 2,5 
3,5 — 5,0 
4,0 — 6,2 
— — 2,0 
1,6 — 1,8 
7,6 — 8,0 
1,6 — 2.8 
— — 3,2 
6,5 — 10,0 
— — 4,3 
4,0 — 7,7 
— — 5.2 
0,1 — 0,2 
— • — 2,9 
(36,0) (—) (76,5) 
— — 45,2 
~ 
643,0 169,8 1 423.9 
9,8 — 22,2 
652,8 169,8 1 446,1 a> 
<o 
E 
co 
E 
<a 
a. 
(8) 
1 150,5 
51,5 
31,0 
49,8 
70,5 
14,6 
24,7 
43,1 
27,9 
15,0 
3,8 
13,9 
3,3 
29,2 
100,5 
9,7 
19,7 
48,9 
17,1 
92,7 
74,3 
6,1 
97,0 
10,8 
30,8 
6,0 
14,5 
5,7 
1,2 
4,1 
5,1 
7,1 
6.5 
1.0 
0.9 
3,0 
10.4 
18,2 
62,7 
18,9 
9,6 
4.3 
5.1 
14,3 
0,1 
1,7 
0,9 
3.3 
7,2 
2,5 
5,0 
6,1 
1,8 
7,3 
2,7 
0,8 
9,9 
3.0 
7.5 
5,1 
0,2 
0.9 
(66.0) 
14,8 
""' 
1 165,3 
18,9 
1 184,2 B. Programmable aid (indicative 
programmes ACP and other aid) 
_o 
to 
o 
< 
(9) 
2 515,9 
141,0 
120,7 
104,0 
103,0 
87,0 
96,0 
88,0 
78,0 
80,5 
84,5 
80,0 
80,0 
79,3 
69,0 
79,0 
77.0 
69.0 
62.0 
60,0 
58,0 
55,0 
54,0 
49,0 
43,0 
43,0 
48,5 
31,5 
31,0 
29,0 
25,0 
26,4 
23,0 
18.0 
20,5 
14,6 
18,5 
14,0 
23,0 
13.0 
16,0 
12,0 
50,0 
49,0 
2,7 
2,1 
3,7 
5,5 
16,0 
14,5 
5,4 
3,5 
3,5 
8,5 
4,0 
4,0 
2,2 
3,7 
3,7 
6.2 
3,6 
4,1 
10,5 
1.0 
4,5 
(112,9} 
631,5 
3 147,4 
53,6 
3 201,0 Financing decisions 
<o 
<5 
(10) 
1 839,7 
109,6 
96,4 
71,4 
87,2 
78,8 
64,5 
55,3 
61,0 
71,8 
70,6 
61,4 
57,3 
63,5 
37,8 
59,9 
59,7 
29,5 
59,7 
41,2 
33.7 
38,2 
24,9 
42,3 
31,1 
30,8 
32,8 
18,6 
20,5 
19,5 
21,6 
16,4 
17,2 
3,1 
12,7 
14,5 
13,0 
12,0 
12,2 
11.1 
8,0 
11.8 
32,1 
28,1 
1,7 
2,0 
3,7 
0,4 
14,0 
11,3 
5,4 
3,4 
3,4 
8,5 
4,0 
3,9 
1.7 
3,7 
3,7 
6,2 
3,6 
3,1 
7,7 
1,0 
4,5 
(96,9) 
417,7 
7,5 
2 264,9 
20,5 
2 285,4 <d 
o J2 
co .2 
(11) 
346,8 
31,0 
11,6 
16,7 
17,8 
15,2 
9,8 
8,0 
7,0 
11,8 
9,9 
18,9 
15,4 
11.7 
17,9 
7,0 
2,0 
6,4 
22,3 
4,7 
6,9 
8,7 
2,4 
12,0 
4,7 
8,8 
9,1 
5,8 
2,7 
7,7 
4,7 
8,2 
5.1 
13,4 
1,0 
0,5 
— 
(1,5) 
73,8 
420,6 
4,6 
425,2 £ 
+ 
o? 
(12) 
2 186,5 
140,6 
108,0 
88,1 
87,2 
78,8 
82,3 
70.5 
70,8 
79,8 
77,6 
73,2 
67,2 
63,5 
56,7 
75.3 
71,4 
47,4 
59,7 
48.2 
35,7 
44,6 
47,2 
47,0 
38,0 
39,5 
35,2 
30,6 
25,2 
28.3 
21.6 
25.5 
23.0 
5.8 
20.4 
14,5 
17,7 
12,0 
20,4 
11,1 
13,1 
11,8 
32,1 
41,5 
2.7 
2,0 
3,7 
0.4 
14,0 
11,3 
5,4 
3,4 
3,4 
8.5 
4,0 
3,9 
2,2 
3,7 
3,7 
6,2 
3,6 
3,1 
7,7 
1,0 
4,5 
(98.4) 
491.5 
7,5 
2 685,5 
25.1 
2 710,6 •o 
CO 
E 
<D 
E 
co a. 
(13) 
1 185,6 
101,8 
59,6 
54,4 
72,7 
38,2 
40,1 
35.6 
37,2 
42,5 
43,1 
27,8 
36,6 
27,3 
33,4 
52.6 
24.8 
26.6 
32,1 
24,0 
13,0 
' 17.1 
29.6 
33,1 
29,2 
25,7 
11,4 
29,0 
8,6 
16,6 
12,1 
9,0 
7,2 
2,3 
10,4 
8,2 
6.4 
6,1 
5.4 
7,8 
11,3 
2,6 
5.3 
13,5 
0.0 
0,9 
2.0 
0,1 
8.2 
6,0 
2,4 
2.8 
2.6 
2.6 
0,8 
3,2 
0,8 
2,4 
2,8 
6,0 
3,0 
1.3 
2,4 
0,7 
3,3 
• (54,3) 
269,9 
6,4 
1461,9 
12.8 
1 474,7 Total 
(A + B) 
<?.?sr Financi 
decisio 
(7) +(1 
(14) 
3 565.2 
209,6 
139,1 
190,9 
175,9 
94,1 
110,3 
114,0 
106,2 
97,1 
86,1 
94,7 
72,1 
95,5 
159,2 
88,5 
91,9 
99,5 
81.4 
151.7 
130.6 
55,2 
151,2 
57,8 
68.8 
54.2 
49,9 
36,4 
27,9 
35.7 
29.0 
35.6 
32.5 
10.0 
21.7 
21.5 
28,1 
30,2 
86,3 
32.7 
22,8 
16,1 
37,2 
61,1 
2.9 
2.0 
5.6 
1.3 
18.5 
18,5 
7,9 
8.4 
9.6 
10,5 
5,8 
11,9 
2,2 
6,5 
6,9 
16,2 
7,9 
10,8 
12,9 
1,2 
7,4 
(174,9) 
536,7 
7,5 
4 109,4 
47,3 
4156,7 CO 
CO 
E 
Sm 
CO ^ 
E + 
(15) 
2 336,1 
153,3 
90,6 
104,2 
143,2 
52,8 
64.8 
78,7 
65,1 
57,5 
46,9 
41,7 
39,9 
56,5 
133,9 
62,3 
44,5 
75,5 
49,2 
116,7 
87,3 
23,2 
126,6 
43,9 
60,0 
31,7 
25,9 
34,7 
9,8 
20,7 
17,2 
16,1 
13,7 
3.3 
11.3 
11.2 
16,8 
24,3 
68,1 
26,7 
20.9 
6.9 
10,4 
27.8 
0,1 
0,9 
3,7 
1.0 
11,5 
13,2 
4.9 
7,8 
8,7 
2,6 
2.6 
10.5 
0,8 
5,1 
3.6 
15.9 
6,0 
8,8 
7,5 
0,9 
4,2 
(120,3) 
284,7 
6,4 
2 627,2 
31,7 
2 658,9 
15. 12. 87 Official Journal of the European Communities 183 
§ 25. The 5th EDF: aid by economic sector and by recipient country 
(situation at 31 December 1986) 
(Mio ECU) 
Recipient country 
(1) 
I. ACP States 
including: 
Ethiopia 
Tanzania 
Sudan 
Uganda 
Mali 
Madagascar 
Burkina-Faso 
Malawi 
Guinea 
Somalia 
Senegal 
Rwanda 
Burundi 
Cameroon 
Chad 
Ghana 
Zambia 
Ivory Coast 
Central African Republic 
Togo 
Mauritania 
Sierra Leone 
Congo 
Liberia 
Lesotho 
Guinea-Bissau 
Jamaica 
Botswana 
Suriname 
Mauritius 
Guyana 
Swaziland 
Gambia 
Papua New Guinea 
Fiji 
Gabon 
Solomon Islands 
Nigeria 
Zimbabwe 
Other ACP States: 
Antigua and Barbuda 
Bahamas 
Barbados 
Cape Verde 
Comoros 
Djibouti 
Dominica 
Grenada 
Equatorial Guinea 
Kiribati 
Sao Tome and Principe 
Saint Christopher and Nevis 
Saint Lucia 
Saint Vincent and Grenadines 
Western Samoa 
Seychelles 
Trinidad and Tobago 
Tuvalu 
Vanuatu 
(Total other countries) 
II. Regional projects and 
administrative costs 
Total ACP (I + II) 
III. OCT 
Total 5th EDF Financing decisions 
o 
« 
2 
(2) 
22.4 
0,4 
0.1 
1,4 
3.1 
0,7 
0,3 
0,6 
0,5 
0,0 
2,0 
1,0 
0,4 
0,5 
1,0 
0,3 
1.6 
0,3 
1.6 
0,0 
0,3 
0,2 
1,7 
0,1 
0,4 
1,2 
0,3 
0,4 
0,1 
— 0,5 
0.0 
0,9 
0,1 
0,1 
0,3 
— 
(1.9) 
32,1 
54,5 
0,5 
55,0 N ^O) ldustriali 
on, ener 
nd minin 
±~ a 
(3) 
715,6 
55,6 
16,5 
108.3 
12,4 
15,9 
20,7 
7,5 
31,7 
4,1 
17,3 
18,1 
31.8 
10,1 
9,2 
7,8 
19,8 
14,4 
2.0 
18,3 
95,3 
8,4 
6,3 
5,4 
0,3 
8.5 
1.5 
5.2 
3,3 
13.3 
9,8 
10,7 
4,3 
6,3 
11.5 
2,1 
0,6 
16,2 
12,2 
13,0 
6,4 
10,2 
— 
0.9 
0,9 
3.8 
0.6 
2,2 
1,0 
2,3 
4.9 
0,0 
0.6 
1,0 
2.9 
9,5 
4,0 
2,0 
3,6 
0.4 
2,7 
(43,3) 
101,5 
817,1 
16,9 
834,0 D° CC Q. 
(4) 
908.2 
30,2 
51,6 
17,9 
65,3 
33,4 
32,9 
35,6 
27,0 
27,0 
23,6 
26,9 
14,7 
17,5 
35.8 
28,3 
37,6 
30,1 
28,4 
35,1 
21,3 
9,5 
43,5 
21,0 
10,9 
26,9 
21,0 
0,1 
9,9 
1,2 
10,4 
11.6 
10.1 
3,6 
5,4 
5,8 
4,8 
2,4 
1.5 
4,5 
9.1 
2,7 
12,7 
23,6 
1,9 
1,1 
2,8 
1,9 
4,7 
2,4 
0,9 
0,3 
2,5 
3,1 
2,7 
2,1 
0,4 
0,1 
0.7 
4,0 
0,2 
4,0 
(35,8) 
119,5 
1 027,7 
4,6 
1 032,3 •a o 
t- O 
(5) 
543,5 
5.8 
26,5 
37,8 
18,9 
26,1 
9,6 
20,0 
20,6 
26,8 
17,0 
31,3 
0,1 
28,6 
5,0 
23,1 
10,0 
22,6 
11,9 
13,0 
0,1 
19,1 
20,0 
19,6 
7,0 
1,7 
27,3 
9.5 
14,3 
7,3 
1,3 
2,1 
5,5 
0,9 
3,4 
17,7 
5,8 
0,0 
1,2 
2,7 
0,8 
1.0 
6,3 
1.2 
2,4 
2,0 
1.4 
0,8 
1,0 
1,3 
0,1 
0,3 
3,3 
0,1 
0,3 
(22.3) 
166,7 
710,2 
4,5 
714,7 1 
Jo, 
111 i 
(6) 
210,6 
5,4 
1.3 
14,1 
3,0 
4,5 
7.0 
9,1 
4,2 
1.9 
5.1 
5,1 
4,7 
8,7 
5,2 
9,2 
10,3 
0,4 
7,0 
2,2 
3,7 
2,5 
0,2 
3,1 
3,6 
2,6 
7,1 
1,2 
2,2 
4,6 
0,6 
4,8 
3,5 
1,1 
1,3 
9.0 
2,4 
3,3 
2,1 
0,6 
1,8 
18,0 
10.2 
0,0 
0,2 
0,3 
0,1 
0,8 
0,7 
0,4 
0,2 
0,9 
1,3 
0,3 
0,0 
0,8 
0,3 
0,3 
0,1 
0,4 
0,1 
5,3 
0,0 
0,2 
(12.7) 
59,9 
270,5 
3,2 
273,7 w 
X 
(7) 
73,4 
1,5 
1.4 
0,7 
1,5 
1.3 
2,1 
5,5 
4.5 
1.3 
3,8 
8,5 
0,4 
5,9 
0,7 
0,1 
10,1 
2,0 
0,1 
2,5 
1,4 
1,5 
0,0 
1,9 
4,9 
3,2 
— 
— 
0,2 
0,3 
0,8 
2,9 
2,4 
— 
(6.6) 
7,7 
81,1 
4,1 
85,2 « c ydraulic; 
rban 
evelopm 
x 3-0 
(8) 
248,4 
55,3 
20.0 
8,3 
6,0 
10,8 
9,0 
3,9 
10,2 
19,7 
0,9 
11,2 
5,3 
6,8 
9,3 
0,1 
3,0 
1,3 
5,8 
4,6 
12,0 
0,1 
3,3 
0,1 
2,6 
2,5 
2,7 
1,4 
2,1 
2,0 
2,6 
3,5 
5,8 
0,1 
6,4 
— 
2,1 
4,1 
1,8 
0,1 
0,4 
0,8 
0,4 
— 
(9.7) 
0,5 
248,9 
— 
248,9 o E| 
Q-3 
K to 
(9) 
36,2 
0,6 
0,6 
0,1 
0,0 
0,4 
1,1 
1,9 
8,6 
2,9 
0,7 
3,4 
0,1 
0,1 
1,0 
0,1 
0,8 
3,5 
2,7 
0,2 
0,0 
0,1 
0,1 
0,8 
2,1 
1,2 
0,0 
0,1 
0,0 
0,1 
0,1 
0,8 
0,5 
0,1 
0,4 
— 
0,6 
0,1 
0,0 
0,1 
0,0 
0,1 
0,1 
— 
(1.0) 
37.8 
74,0 
2,8 
76,8 x E2 
(10) 
203,5 
44,7 
0,5 
2,8 
37,8 
5,3 
13,9 
2,4 
2,2 
13,7 
0,5 
0,4 
1,1 
19,6 
2,1 
2,0 
0,2 
1,6 
13,1 
4,4 
1.6 
1.5 
0,8 
0,5 
0,5 
7,7 
0,3 
0,1 
0,1 
3.2 
0,1 
0,1 
0,0 
4,7 
0,0 
0,0 
7,5 
0,2 
2,2 
0,4 
0,3 
0,5 
0,4 
0,2 
0,2 
0.2 
0,3 
1,4 
0,2 
(6.5) 
18,5 
222,0 
0,9 
222,9(1) CO .t 
(11) 
603,4 
11,1 
20,7 
38,3 
10,6 
26,5 
9,2 
1,0 
4,8 
2,6 
84,8 
7,6 
13.8 
25,8 
6,6 
78,3 
4,4 
85,7 
4,9 
28,8 
14,1 
1.2 
3.6 
4,3 
8,2 
17,5 
46,8 
2,9 
4,2 
— 
— 
0,5 
6,6 
3,4 
3.9 
1,6 
7,4 
1,6 
6,0 
4,0 
0,1 
0.0 
(35,1) 
0,0 
603,4 
9,8 
613,2(2) ^ 
+ 
°2t 
(12) 
3 565,2 
209.6 
139,1 
190,9 
175,9 
94,1 
110,3 
114,0 
106,2 
97,1 
86,1 
94,7 
72,1 
95,5 
159.2 
88,5 
91,9 
99,5 
81,4 
151,7 
130,6 
55,2 
151,2 
57,8 
68.8 
54,2 
49.9 
36,4 
27,9 
35,7 
29,0 
35,6 
32.5 
10,0 
21,7 
21,5 
28,1 
30,2 
86,3 
32,7 
22,8 
16.1 
37,2 
61,1 
2,9 
2,0 
5,6 
1.3 
18,5 
18,5 
7,9 
8,4 
9,6 
10,5 
5,8 
11.9 
2,2 
6,5 
6,9 
16,2 
7,9 
10,8 
12,9 
1,2 
7,4 
(174,9) 
544,2 
4 109,4 
47,3 
4 156,7 CD 
II 
H Q. 
(13) 
2 336,1 
153,3 
90,6 
104,2 
143,2 
52.8 
64,8 
78,7 
65,1 
57,5 
46,9 
41,7 
39,9 
56,5 
133,9 
62,3 
44,5 
75,5 
49.2 
116,7 
87,3 
23,2 
126,6 
43,9 
60.0 
31,7 
25,9 
34,7 
9.8 
20,7 
17,2 
16,1 
13,7 
3,3 
11,3 
11,2 
16,8 
24,3 
68,1 
26,7 
20,9 
6.9 
10,4 
27,8 
0,1 
0,9 
3,7 
1,0 
11,5 
13.2 
4,9 
7,8 
8,7 
2,6 
2.6 
10,5 
0.8 
5,1 
3.6 
15,9 
6,0 
8.8 
7,5 
0,9 
4.2 
(120.3) 
291,1 
2 627,2 
31,7 
2 658,9 
(1) The differences compared with § 23, column 4 may be explained by the different analysis of projects for some countries. 
(2) The differences compared with § 23, column 5 may be explained by the different analysis of Stabex projects for some countries. 
184 Official Journal of the European Communities 15. 12. 87 
§ 26. The 4th and 5th EDF: utilization of aid by economic sector (situation at 31 December 1986) 
Allocation and utilization Financing decisions and payments by economic sector 
4th EDF: 
« co 
2 E 
Allocation: 
3 196.6 Mio ECU (100 %) iOi 
oi 
Financing 
decisions (Mio ECU) Total: 
3 133,5 iOi 
IB 
nil 
«^p^ 
By economic sector: 
155,4 
149,7 429,3 
408,5 727,8 
650,2 744,3 
705,4 250,9 
222,7 70,9 
59,5 112,1 
102,0 40,6 
36,6 212,4 
166,0 389,8 
Payments (Mio ECU) 2 890,4 389,8 
srOi 
5th EDF: 
Allocation: 
4 914,4 Mio ECU (100%) 
M 
Hi! til in 
Financing 
decisions (Mio ECU) Total: 
4156,7 By economic sector: 
55,0 834,0 1 032.3 714,7 273.7 85,2 248,9 76,8 222,9 613,2 
Payments (Mio ECU) 2 658,9 33,3 521,1 521,1 435,3 127,7 38.6 146,1 43.2 I 179.7 612,8 
15. 12. 87 Official Journal of the European Communities 185 
§ 27. The six EDF: Distribution of cumulative payments by recipient country (1960-1986) 
(Mio ECU) 
Recipient country 
I. ACP States 
including: 
Ethiopia 
Tanzania 
Sudan 
Uganda 
Madagascar 
Burkina-Faso 
Malawi 
Guinea 
Somalia 
Senegal 
Rwanda 
Burundi 
Cameroon 
Chad 
Ghana 
Zambia 
Ivory Coast 
Central African Republic 
Togo 
Mauritania 
Sierra Leone 
Congo 
Liberia 
Lesotho 
Guinea-Bissau 
Jamaica 
Botswana 
Suriname(1) 
Mauritius 
Guyana 
Swaziland 
Gambia 
Papua New Guinea 
Fiji 
Gabon 
Solomon Islands (1) 
Nigeria 
Zimbabwe 
Other ACP States: 
Angola 
Algeria 
Antigua and Barbuda)1) 
Bahamas 
Barbados 
Belize (1) 
Cape Verde 
Comoros (1) 
Djibouti (1) 
Dominica (1) 
Grenada 
Equatorial Guinea 
Irian Jaya 
Kiribati (1) 
Mozambique 
Sao Tome and Principe 
Saint Christopher and Nevis 
Saint Lucia (1) 
Saint Vincent and Grenadines (1) 
Western Samoa 
Seychelles 
Trinidad and Tobago 
Tuvalu (1) 
Vanuatu (1) 
(Total other countries) 
II. Regional projects and 
administrative costs 
Total ACP (I + II) 
III. OCT/FOD 
Total 1st EDF 
500,7 
— 
18,0 
42,3 
56,4 
31.1 
29,5 
9,8 
43,2 
5,1 
5,0 
52,4 
28,4 
20,3 
39,7 
16,7 
15,6 
15,4 
24,6 
— 
— 
17,5 
— 
— 25,6 
4,1 
— 
— 
(29,7) 
2,2 
502,9 
66,5 
569,4 2nd EDF 
659,3 
— 
79,3 
33,9 
68,7 
31,7 
31,0 
27,9 
61,6 
22,4 
21,1 
55,5 
33,1 
23,4 
59,4 
27,7 
20,5 
18,2 
22,9 
— 
— 
21,0 
— 
z 
— 
— 
— 
(—) 
8,4 
667,7 
62,7 
730,4 3rd EDF 
804,6 
— 
83,3 
50,5 
70,3 
47,6 
45,5 
40,7 
67,1 
34,0 
33,7 
61,1 
42,9 
27,6 
59,3 
29,6 
28,0 
27,2 
26,3 
— 
4,6 
— 
— 
25,3 
— 
— 
— 
— 
(—) 
14,5 
819,1 
66,0 
885,1 2 508,2 
146,9 
130,7 
116,7 
140,4 
83,7 
92,0 
83,3 
77,3 
104,4 
75,6 
72.4 
67,9 
72,9 
137,8 
68,5 
59,0 
65,2 
68,9 
59,4 
64,1 
56,6 
57,5 
45,6 
42,2 
78,5 
32,4 
42,3 
29,6 
22,3 
31,4 
16,2 
23,6 
11,0 
19,6 
16,8 
27,9 
22,1 
12,5 
19,5 
17,3 
8,3 
16,9 
1.8 
3,0 
9,8 
9,0 
4,5 
4.6 
2,6 
6,8 
2,9 
2,2 
2,3 
0,5 
7,5 
3,1 
4,7 
5.1 
0,6 
— 
(71,0) 
309,7 
2 817,9 
72,5 
2 890,4 5th EDF 
2 336,1 
153,3 
90,6 
104,2 
143,2 
52,8 
64,8 
78,7 
65,1 
57.5 
46,9 
41,7 
39,9 
56,5 
133,9 
62,3 
44,5 
75,5 
49,2 
116,7 
87,3 
23,2 
126,6 
43,9 
60,0 
31,7 
25,9 
34,7 
9,8 
20,7 
17,2 
16,1 
13,7 
3,3 
11,3 
11,2 
16,8 
24,3 
68,1 
26,7 
20,9 
6,9 
10,4 
27,8 
0,1 
0,9 
3,7 
1.0 
11,5 
13,2 
4,9 
7,8 
8,7 
2,6 
2,6 
10,5 
0,8 
5,1 
3,6 
15,9 
6,0 
8,8 
7,5 
0,9 
4,2 
(120,3) 
291,1 
2 627,2 
31,7 
2 658,9 6th EDF 
112.6 
0,5 
3.5 
0.1 
38,5 
0.2 
0.4 
5.9 
0,2 
3,6 
28,1 
0,1 
0.3 
3.5 
9.3 
0.1 
0,1 
0,5 
0,4 
0,3 
4,8 
— 
0,4 
— 
2,0 
— 
9,1 
0,1 
0,0 
0,6 
— 
(11.8) 
4,1 
116,7 
-
116,7 Total 
Amount 
6 921,5 
300,7 
224,8 
401.6 
322.1 
136.7 
283.9 
162.0 
337,8 
278,2 
228,7 
117,7 
107.8 
207.8 
471,7 
192,3 
163.3 
309,8 
222,8 
176,1 
151,4 
154,6 
342,5 
163.5 
175,6 
171,1 
58,4 
150,8 
39,4 
43,0 
49,1 
32,7 
37,6 
14,3 
35,5 
28,0 
44,7 
51,2 
80,6 
46,2 
102,0 
15,6 
27,3 
27,8 
25,6 
0,1 
2,7 
6,7 
1.0 
21,3 
24,2 
9,4 
12,4 
11.3 
9,4 
4,1 
5,5 
9.1 
12,7 
7^4 
23!5 
9,1 
14,1 
12,6 
1,5 
4,2 
(232,8) 
630,0 
7 551,5 
299,4 
7 850,9 % 
88.2 
3,8 
2,9 
5,1 
4.1 
1.7 
3,6 
2,1 
4,3 
3.5 
2,9 
1,5 
1,4 
2,6 
6,0 
2,5 
2,1 
3,9 
2,8 
2,2 
1,9 
2,0 
4,4 
2,1 
2,2 
2,2 
0,7 
1.9 
0,5 
0,5 
0,6 
0,4 
0,5 
0,2 
0,5 
0,4 
0.6 
0,7 
1.0 
0,6 
1,3 
0,2 
0,4 
0,4 
o!o 
0,0 
0,1 
0,0 
0,3 
0,3 
0,1 
0,2 
0,1 
0,1 
0,0 
0,1 
0,1 
0,2 
0,0 
0,1 
0,1 
0,3 
0,1 
0,2 
0,2 
0,0 
.0,1 
(3,0) 
8,0 
96,2 
3,8 
100,0 
(') These countries also received the allocation for OCT/FOD. 
186 Official Journal of the European Communities 15. 12. 87 
62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 
1st 
2nd 
3rd 
4th 
5th 
6th EDF 
EDF 
EDF 
EDF 
EDF 
EDF 3.4 15,8 
15,8 65,3 83,4 84,8 
21.9 76.7 
31.6 61.7 
42.9 
106,7 108,3 104,6 106,5 115,0 38,6 
67,9 25.6 
89,4 16,1 
129,5 11.4 
120.5 
22.5 
145,6 154,4 131,5 10,1 
78,6 
42,8 9,9 
49,4 
98,5 5.5 
25,9 
140.6 
157,8 172,0 2,4 
23.3 
182,7 2.9 
17.2 
131,0 
97,5 
208,4 248,6 244,7 401,0 0,6 
16,3 
79,8 
148.0 326,31423, 0.8 
7,9 
66,0 0,4 
4,1 
37,4 
4 
465,3 0.3 
2.5 
19.8 
459.3 445,8|305,5|285, 0.4 
0,9 
20.7 0.4 
11,2 
195,9 330.1 
481,9 663,7 647,2 718,8 0,1 
14.3 
,2 
419, 84 85 86 
0,1 
8,2 
185,2 
5 
703,0 6.0 
105,7 
586, 3.6 
108,5 
617.9 
116,7 
0 846,7 569,4 
730,4 
885,1 
2 890,4 
2 658,9 
116,7 
7 850,9 
15. 12. 87 Official Journal of the European Communities 187 
Replies of the institutions to the observations of the 
Court of Auditors concerning the financial year 1986 
PARTI 
General budget of the European Communities 
CHAPTER 1 
General matters 
REPLIES OF THE COMMISSION 
Introduction A. Basic reform proposals 
In Chapter 1 of its annual report for 1986 the Court 
makes a number of general observations on: 
the principal budgetary data resulting from the 
accounts for the financial year 1986; 
the situation of Community finances. 
Before replying to these observations, the Commission 
considers it appropriate to recall in this connection the 
basic proposals for reform which it has presented in 1987. 
These proposals make 1987 a key year in the development 
of the Community with the restoration of a budgetary 
policy based on strict principles of sound financial 
management in all areas of Community activity. In February 1987 the Commission presented its 
communication 'Making a success of the Single Act' 
(COM(87)100), which sets out the initial ideas for a 
large number of proposals on agriculture, the reform 
of the structural Funds, the financing of the 
Community and budgetary discipline to provide a 
comprehensive medium-term solution to the prob­
lems facing the Community. 
The Commission also presented a report on the 
financing of the Community budget (COM(87)101) 
as required by the conclusions of the Fontainebleau 
European Council. This report contains a criticial 
analysis of the reasons for the current situation and a 
number of proposals which should bring about 
radical improvements in preparation for the intro­
duction of a new own resources system. These 
communications envisage the Community in the 
shape it will take following enlargement and the 
adoption of the Single Act. In these two basic texts, 
the Commission sets out the broad outlines of the 
reform of the structural Funds, the common agricul­
tural policy, budgetary discipline and the system of own 
188 Official Journal of the European Communities 15. 12. 87 
resources. The main aspects of these proposals are 
listed below. 
1. In the communications the Commission proposed the 
principles for reforming the structural Funds to give 
measures under these Funds a real economic impact 
through concentration on priority objectives and 
areas, more effective and better coordinated manage­
ment and an increase in the financial resources at their 
disposal. 
In COM(87)376 final/2 the Commission presented a 
comprehensive proposal pursuant to Article 130 D of 
the EEC Treaty. The Treaty provides for the Council 
to act unanimously within one year. The reform 
proposed will subsequently give rise to implementing 
regulations, which the Council will adopt by a 
qualified majority. 
In this comprehensive proposal, the Commission 
supplements and clarifies the objectives already 
outined in its communication 'Making a success of 
the Single Act' and describes the key concepts 
underlying its proposals for reform. 
2. As regards the common agricultural policy, the 
Commission produced a review of action taken to 
control the agricultural markets and outlook for the 
common agricultural policy (COM(87)410) in re­
sponse to a request by the Brussels European Council. 
This document reviews the existing stabilizers and 
proposes new arrangements to keep expenditure 
within the budget allocations provided. 
The Commission followed this up in September with 
proposals for stabilizing mechanisms for sugar, milk, 
sheepmeat, cereals, wine, fruit, vegetables and 
tobacco. 
3. The Commission produced a communication on 
budgetary discipline (COM(87)430 final), a subject 
which was given special prominence in COM(87)100 
and COM(87)101. 
Following up the proposals adopted in February and 
the conclusions of the Brussels European Council, 
this communication: 
— specifies the general principles of budgetary 
discipline with details of its application to both 
agriculture and non-compulsory expenditure; — presents the outlines of an interinstitutional 
agreement. 
On 24 July the Commission also presented a proposal 
for the amendment of the Financial Regulation 
(COM(87)400 final) to provide the necessary tech­
nical support for this new budgetary discipline. It 
focuses essentially on the following three points: 
— improvement in the conditions for establishing 
and executing the budget (greater objectivity to 
avoid any overbudgeting, stricter application of 
the principle of annuality, etc.); 
— replacement of advances by reimbursements in 
the EAGGF Guarantee financing system; 
— closer monitoring of execution (stricter surveil­
lance, elimination of unused commitments, etc.). 
4. Finally, on 30 July, the Commission produced a draft 
own resources decision (COM(87)420 final) in which it 
restates and specifies the general principles and 
detailed arrangements of the new own resources 
system and proposes a Council Decision. 
The Commission's proposals introduce three major 
changes: 
— They set a ceiling on the Community's own 
resources expressed in terms of Community gross 
national product. Besides this ceiling of 1.4 % of 
Community GNP, the new own resources deci­
sion contains a series of annual ceilings on the 
maximum level of resources that can be called in. 
Commitment appropriations must not exceed 
1.4% of GNP in 1992. 
— They change the composition of the Com­
munity's own resources in order to link own 
resources more closely to the Member States' 
relative prosperity and hence ability to pay. 
— They introduce more flexibility into the Com­
munity's own resources system by countering the 
structural erosion which has effected certain 
components of the present resources. The draft 
Decision also provides for the possibility of own 
resources other than those already defined. 
15. 12. 87 Official Journal of the European Communities 189 
The Commission believes that, if the proposals briefly 
described above are adopted, they will not only help 
the Community through its current difficulties but 
will also provide fresh impetus for the objectives laid 
down in the Treaty. With Community finances in 
their present state — as the Court described with 
concern in the report for 1986 and in previous reports 
— where the real financial impact of Community 
policies has to be concealed or deferred, the only 
solution is to make far-reaching changes in certain 
Community policies, to improve a wide range of 
management practices and to provide the Com­
munity with sufficient resources to cover the cost of 
its policies. 
B. The Court's general observations 
The Commission wishes to provide the following 
explanations and clarifications in connection with 
this chapter of the Court's report. 
1. As regards the principal budgetary data resulting from 
the accounts for the financial year 1986, the financial 
analysis attached to the year's accounts in accordance 
with the Financial Regulation provides the expla­
nations needed for the examination of revenue and 
expenditure. 
It is incorrect to state that the under-utilization of 
appropriations granted for compulsory expenditure 
in areas other than EAGGF Guarantee is 'para­
doxical, to say the least, given that this expenditure 
was supposedly compulsory'. 
A distinction must be made between: 
— the classification of expenditure as compulsory, 
which is based on the Joint Declaration of 30 June 
1982 (compulsory expenditure reflecting the 
existence of an 'internal' or 'external' obligation 
binding the budgetary authority and the execu­
tive) and which is therefore legal in nature; 
— and the rate of execution. 
It is therefore quite conceivable and possible that 
some appropriations for compulsory expenditure will 
not be used in full, or not at all, because of the special 
circumstances in any financial year. 
As regards the under-utilization of compulsory 
expenditure in 1986 in areas other than EAGGF 
Guarantee, 411.3 million ECU of the 796.9 million 
ECU not used was carried over automatically to 1987 and 385.6 million ECU lapsed, including 195 million 
ECU in respect of repayments to the Member States 
for the cost of collecting own resources and 121 
million ECU in respect of cooperation with Mediter­
ranean countries where progress was slow in carrying 
out projects. 
As regards the rate of utilization of appropriations for 
non-compulsory expenditure in the development 
cooperation sector, it must be borne in mind that 
despite the progress made, the Commission is still 
very dependent on the administrations of the Member 
States (food aid) and on the countries benefiting from 
financial and technical cooperation. 
2. As regards the situation of Community finances, the 
Commission, like the Court, is convinced of the need 
for the year's expenditure to be covered in full by 
equivalent annual revenue in accordance with Article 
199 of the Treaty. 
The Commission would therefore underline the 
following points: 
(a) Whenever it has felt it necessary, the Commission 
has presented appropriatte proposals to restore 
the balance between revenue and expenditure. 
However, there is no automatic mechanism for 
matching revenue and expenditure during the 
financial year other than by amendments to the 
statement of revenue and/or the statement of 
expenditure by means of a supplementary and/or 
amending budget. 
The 1986 budget was adopted on 10 July 1986. 
Immediately afterwards, the Commission re­
viewed the financial situation and on 4 September 
proposed a preliminary draft amending budget 
which took up the remaining resources still 
available within the limit laid down by the Treaty. 
As the Court notes, the Council did not establish 
a draft budget, thus aggravating the year's 
financial imbalance. 
(b) As regards future liabilities, the Commission 
notes the Court's favourable assessment of the 
improvements made by the Commission to the 
presentation of the accounts. However, it would 
request that certain figures which it supplied as 
information in the 1986 revenue and expenditure 
account at the request of Parliament and the 
Court should not be aggregated. 
A distinction must be made — and is indeed made 
by the Court — between liabilities resulting from 
the execution of previous budgets (see paragraph 
1.14), including the 1986 budget, and the fore-
190 Official Journal of the European Communities 15. 12. 87 
seeable future costs of certain policies which 
cannot be considered legally binding obligations 
even if they are of unquestionable political 
significance (see paragraph 1.15). cerns, and in several areas and independently of the 
reforms referred to at A, it has initiated action or 
taken decisions which should be mentioned — at least 
in part — in this chapter. 
The first category includes commitments con­
tracted and still awaiting payment ('cost of the 
past') representing formal legal obligations 
towards outside bodies and the estimated cost of 
disposing of agricultural stocks. 
The second category comprises a number of 
policy decisions at Community level which have 
still to be transformed into budgetary commit­
ments (see the Court's position on EAGGF 
Guidance in paragraph 7.8). The figures for the 
second category are to do with policy planning 
and the multiannual forecasts. In the case of EAGGF Guarantee, and in 
particular the problem of agricultural stocks, the 
Commission would point out that it has been 
decided to conduct an exceptional butter disposal 
operation for 1987-88. This operation is essential 
if existing stocks are to be reduced. In addition, in 
the preliminary draft budget for 1988, the 
Commission has entered not only appropriations 
for the disposal of stocks but also a substantial 
allocation for stock depreciation. In future, the 
Commission intends to make systematic allow­
ance for depreciation and has included the 
relevant provisions in its proposals on new 
budgetary discipline. 
(c) As regards the common agricultural policy, it is 
true that agricultural expenditure has increased 
faster than own resources, despite the political 
directive issued by the Fontainebleau European 
Council. Document (COM(87)410 mentioned at 
A above indicates the main factors of expenditure 
outside the CAP (monetary factors, deterioration 
on the world market) which are beyond the 
Community's control and, in particular, lists the 
existing stabilizers and proposes other devices to 
keep expenditure within the budgetary allo­
cations. 
As regards the problem of the depreciation of 
agricultural stocks, the Commission welcomes 
the Court's backing for its proposal to enter 
sufficient appropriations in the 1988 budget. 
(d) As regards the Court's comments on the accuracy 
of budgetary estimates and the final conclusions 
in paragraph 1.27, the Commission has, in the 
proposals referred to at A above and, in 
particular, in the general revision of the Financial 
Regulation, proposed the reform of all the 
Community budget rules. This process started in 
February 1987 with the basic documents 
COM(87)100 and COM(87)101. 
C. Monitoring the management of Community policies 
and action taken on the comments of the supervisory 
authorities 
1. The improvement of the management of Community 
policies is one of the Commission's constant con-As regards the clearance of accounts, the clearance 
decision for 1985 was taken in July 1987 in line 
with the undertaking to clear off the backlog as 
both Parliament and the Court have requested. 
As regards food aid, following the adoption of 
Council Regulation (EEC) No 3972/86 of 22 
December 1986, which makes the Commission 
responsible for supplies and lays down pro­
cedures designed more specifically for food aid, 
the Commission adopted a single set of detailed 
rules for mobilizing aid in all sectors on 8 July 
1987 (Regulation (EEC) No 2200/87). 
In the research sector, the Commission has 
continued its policy of systematically evaluating 
RTD programmes and intends to step up this 
activity when the new framework programme for 
1987-91 is put into operation. In its 1987 
programme it also announced a communication 
on a support programme for the evaluation of 
specific programmes. 
As regards the coordination of structural instru­
ments, the Commission has managed with the 
coordination structures already in existence to 
achieve better coherence in its structural oper­
ations. 
The steps taken by the present Commission to 
make the coordination procedure more effective 
have improved the coherence of the Community's 
structural operations, especially in the case of the 
15. 12. 87 Official Journal of the European Communities 191 
various integrated approaches which have been 
devised and launched, in particular the IMPs. 
This quest for better coordination will be 
completed by the reform of the Funds. 
Finally, as regards the improvements to the 
measures for dealing with frauds and irregula­
rities, the Commission, at Parliament's request, 
adopted on 14 October a plan to step up the fight 
against cases of fraud affecting the Community 
budget and will report on this to Parliament and 
the Council. 
As in its replies to the 1985 report, the Commission 
would again stress the importance which it attaches to 
taking follow-up action on the comments of the 
supervisory authorities. It considers it essential that the undertakings given to 
these institutions should be respected. To have an 
overall picture of what action has been taken and to 
make any necessary adjustments, the Commission 
has therefore developed an internal procedure for it to 
be informed every year of the undertakings given to 
the supervisory authorities, the measures which have 
been introduced or which are planned for honouring 
these undertakings and the timetable for carrying 
them out. 
This internal procedure incorporates the statutory 
procedure provided for in Article 85 of the Financial 
Regulation concerning the discharge arrangements. 
192 Official Journal of the European Communities 15. 12. 87 
CHAPTER 2 
Implementation of the budget 
REPLIES OF THE PARLIAMENT 
OBSERVANCE OF THE FINANCIAL Procedure applicable to commitments 
REGULATION 
Annual nature of the budget 
2.25. The sum of 122 971 ECU was charged to the 1986 
budget, although it actually related to surveillance 
services provided in 1985, to avoid the unpleasant 
consequences which might arise as a result of suspending 
payments due under contractual obligations. 
The Financial Controller refused to grant approval for 
the sum of 37 400 ECU, which actually related to the cost 
of seminars held in 1985 being charged tothe 1986 budget, 
although a decision was subsequently taken to overrule 
him in view of the institution's commitments towards 
third parties. The fact that Parliament exceeded the 
appropriations allocated for 1985 was due to the system 
of provisional commitments, which was replaced, as from 
1 January 1986, by the more reliable system of specific 
commitments for each individual seminar. 
In the case of Item 2710, a commitment expenditure of 
300 000 ECU was established on 10 December 1985 to 
cope with the need to subcontract duplication work at the 
part-session in December 1985. This commitment was 
automatically carried forward to the 1986 financial year. 
Since, however, the duplication work done in December 
1985 was not as substantial as had been expected, the 
expenditure commitment was not utilized in full and 
subcontracting work done in 1986 was paid from this 
amount in error. 2.29. As regards the printing costs due for the verbatim 
report of proceedings under multiannual contracts which 
had been properly awarded after obtaining the opinion of 
the Advisory Committee on Procurements and Con­
tracts, the amount varies each month as the exact number 
of pages cannot be determined in advance and the 
commitments of expenditure were not drawn up until the 
invoices were received, so that the exact amount could be 
entered directly on the commitment of expenditure. This 
procedure is no longer applied. 
The authorizing officer and Financial Controller regard 
purchases of dictaphones and typewriters for the Spanish 
and Portuguese language divisions, bleepers, and extra 
trolleys to transport trunks, all covered by the commit­
ments of expenditure in question totalling 106 705 ECU, 
as 'current administrative expenditure', pursuant to 
Article 7 of the Financial Regulation. 
Delegation of power and supporting 
documents 
2.38 and 2.39 - 2.41. The provisions of Article 61 of the 
new Internal Rules for the implementation of the budget 
of the European Parliament adopted by the Bureau on 17 
December 1986 and forwarded to the Court of Auditors 
on 2 February 1987 provided in advance, a solution to the 
points raised by the Court. 
15. 12. 87 Official Journal of the European Communities 193 
Miscellaneous documents 
2.46. The 10 cases listed by the Court are fairly limited 
in comparison with the entries in the inventory for the 
same period which exceeded 5 000. The purchases in 
question have been regularized. The new application 
'BUDG' has been specially designed to provide a direct 
OBSERVANCE OF THE FINANCIAL 
REGULATION 
Procedure applicable to commitments 
2.30. The amount of 199 477 ECU quoted by the Court 
represents only a small part of the total cost of the work in 
question, specifically the conversion of three conference 
rooms on the 15th floor of the Charlemagne Building, for 
which an initial amount of 2 354 422 ECU was committed 
well before the work was commissioned and commenced. 
The General Secretariat will make every effort to avoid 
any repetition of the situation noted by the Court of 
Auditors. 
ANALYSIS OF THE IMPLEMENTATION 
OF THE 1986 GENERAL BUDGET 
Budgetary estimates and management of the 
appropriations 
General assessment of the utilization of the 
appropriations 
2.4. Parliament's amendments add to the appropri­
ations already accepted by the Council. In purely 
mathematical terms, if some of these appropriations are link between the authorization of an item which must be 
entered on the inventory and its actual entry on the 
inventory by the authorizing officer. 
The endorsement stating the opinion of the Advisory 
Committee on Procurements and Contracts appears on 
each proposal for the commitment of expenditure. 
Supporting documents 
2.40 - 2.41. Progress has already been achieved in the 
direction desired by the Court of Auditors. 
Considerable difficulties attend the strict observance of 
the deadlines laid down for the forwarding of supporting 
documents relating to salaries. These documents may 
need to be consulted by the department in charge of 
salaries at any time, and particularly when retroactive 
salary calculations are being made. 
The General Secretariat is, however, taking the necessary 
organizational steps to comply with Article 79 of the 
Financial Regulation. 
not used, those added by Parliament may be considered as 
the part unused. 
There can be no doubt that the Commission does its 
utmost to use the appropriations, but it sometimes fails, 
either because the amendments produce an 'over-
allocation' or because the necessary legal base is not 
adopted in time. In COM(87)100 and COM(87)101 the 
Commission sets out its plans for greater stringency in the 
entry of budget appropriations and asks the budgetary 
authority to join it in its efforts. 
Transfers of appropriations 
2.5. The Commission agrees that everything must be 
done to improve the estimates underlying the entry of REPLIES OF THE COUNCIL 
REPLIES OF THE COMMISSION 
194 Official Journal of the European Communities 15. 12. 87 
appropriations in the budget. For its part, it is doing all it 
possibly can. However, it must again point out the 
following facts: 
— The estimates are produced about nine months before 
the start of the financial year in which the appropri­
ations are-used and cannot therefore be anything but 
approximate. 
— In a great many budgetary sectors the Commission is 
subject to external constraints (implementation 
depends on the progress of work conducted by the 
outside beneficiaries). Adjustments in the course of 
the financial year — in the form of transfers — are 
therefore normal. 
— Finally the Commission would point out that 
EAGGF Guarantee is totally unlike the other sectors 
and must be treated separately. 
It is a plain fact that the estimates of EAGGF 
Guarantee appropriations are structurally unsound. 
Because of the market situation changes and mo­
netary movements inherent in this sector, it is 
inevitable that the appropriations have to be ad­
justed, i.e. transferred, to meet requirements. 
Payment appropriations carried over 
2.8 - 2.10. The Commission would repeat the interpre­
tation it has already given: 
'The third subparagraph of Article 1 (3) of the Financial 
Regulation must be interpreted in conjunction with 
Article 6 (2) (b), which lays down that payment appropri­
ations which have not been used at the end of the financial 
year for which they were entered are carried over 
automatically to the next financial year only. The only 
limiting clause in these provisions is that payment 
appropriations which have not been used may not be 
carried over more than once. The payment appropri­
ations which were carried over from 1985 to 1986 can 
therefore be regarded as an integral part of the payment 
appropriations available for use during the 1986 financial 
year. Although in practice carryovers are used primarily 
for expenditure arising from commitments entered into in 
previous financial years, the Commission is under no legal 
obligation to confine its use of carryovers to such 
expenditure should requirements arising from previous 
commitments prove too low to absorb the entire amount. 
The Commission feels that it has followed the basic rules 
of sound financial management and the wishes of the 
legislature.' (') 
(') The footnotes appear at the end of each chapter. It was therefore quite intentionally that the Council 
included the above provisions in the 1977 Financial 
Regulation. They give a certain versatility to dif­
ferentiated payment appropriations, whether carryovers 
or new appropriations for the financial year. 
Because of the multiannual nature of differentiated 
appropriations and the inevitable timelag before pay­
ments are made, it is important that the payment 
appropriations (for which it is quite impossible to 
estimate accurately the amount to be entered for each 
financial year) can be used to cover both commitments 
from previous financial years and new commitments. The 
legislator was aware of these demands and therefore 
adopted rules which provide a rational way of covering 
requirements. 
On the other hand, the argument that automatic 
carryovers of differentiated appropriations can be used 
only for past commitments has the drawback of making 
differentiated appropriations the same as non-dif­
ferentiated appropriations and ignoring the completely 
different requirements of the system of differentiated 
appropriations. 
Recourse to the negative reserve 
2.13. The Court's explanation of the reasons — largely 
to do with overallocation of appropriations — why the 
budgetary authority had recourse to the negative reserve 
prompts the following clarifications: 
— In this instance the use of the negative reserve was 
basically a procedural expedient to enable the 
budgetary authority to break the deadlock reached in 
the negotiations and come to an agreement (on the 
application of Article 203 (9) of the Treaty setting the 
new rate). This negative reserve can be used because 
some appropriations are always available at the end 
of the year. 
— In its recent proposals (COM(87)100 and 
COM(87)101) the Commission advocated greater 
stringency in the entry of appropriations in the budget 
and it hopes all the institutions concerned will 
support it. 
15. 12. 87 Official Journal of the European Communities 195 
OBSERVANCE OF THE FINANCIAL 
REGULATION 
Universality of the budget 
2.16-2.17. The Court criticizes the 'negative ex­
penditure' arrangement employed in some sectors of 
EAGGF Guarantee, notably as a result of the introduc­
tion of co-responsibility levies. 
The Commission would make the following reply: 
— In legal and formal terms, the Court's comments do 
not concern implementation of the budget but the 
basic rules which the Commission is bound to apply. 
The presentation and implementation of the budget 
are therefore in accordance with the rules in force. 
The legislator deliberately opted for this presentation 
when adopting the basic regulations (see also 
paragraph 5.25(b)). 
— As an informal arrangement to satisfy the Court's 
wishes, the Commission is prepared to discuss with it 
the most suitable form of presentation. 
2.18. The netting-off of the three items is clearly not in 
conformity with the Financial Regulation. However, as 
the budgetary authority, by entering revenue of 49,2 
million ECU in Article 300 indicated that it wanted this to 
be done, the Commission had no choice but to present the 
accounts in the same form as the budget. 
The Commission explained this in its letter of 6 January 
1987 to the Court, the Council and Parliament. It also 
informed these institutions of the reasons in Volume I 
(Section HI — Commission) of the 1986 revenue and 
expenditure account. 
The Commission would refer to its reply to the Court's 
comments on 1985 (paragraphs 3.7 - 3.9). 
The entry of the residue of the 1984 deficit in the 1986 
budget was mentioned during the discussion on the 1985 
preliminary draft, but no action was taken. Moreover, 
some Member States were late in making the non­
repayable advances provided for in the 1985 budget, and 
they were not received until 1986. It was therefore more 
rational to enter in the 1986 budget only the balance for 
these two items, plus — as is quite normal — the 1985 
deficit. 2.19. The Commission has taken note of the Court's 
comment and will examine this problem and its impli­
cations as regards institutional relations, the rules and the 
budget. 
2.20 - 2.21. Following an unexpected increase in postal 
rates in Luxembourg on 1 January 1986, the Publications 
Office was obliged for the first time in 1986 to make use of 
the re-utilization procedure to cover its expenditure on 
postage. It is agreed that the procedure applied in 1986 
(direct transfer from the non-budget item 'proceeds of 
sales' to the budget item 'Postage' instead of going via the 
corresponding budget headings of the various insti­
tutions) was unsatisfactory. The provisions of the 
Financial Regulation have been scrupulously observed 
this year. 
The amount of revenue available for re-use entered in the 
remarks column of the budget is only an estimate. The 
amount actually re-used depends on the operations 
carried out, which determine the amount of revenue 
available and the amount of corresponding expenditure 
to be covered; it may be higher than the amount estimated 
when the budget is adopted. 
Annual nature of the budget 
2.24. See the reply to paragraphs 2.8 - 2.10 above. 
2.26. The Commission will examine the points raised by 
the Court. 
Procedure applicable to commitments 
2.28. These delays were due mainly to difficulties with 
the computer. The Commission will take all the steps 
necessary to ensure that this does not happen again in 
future. 
2.31. Three cases are involved. In one case, essential 
work had to be carried out around Christmas 1985 and 
the end of the year. The firm presented its invoice in 1985, 
but the order form — produced solely for the sake of 
procedures — did not arrive until 1986. 
Another case involved supplies and urgent work for the 
installation of the new Commission. The Commission 
does all it can to ensure that the procedures are complied 
with, even when the work is urgent. 
196 Official Journal of the European Communities 15. 12. 87 
Financial Control 
2.35 - 2.37. As a result of certain administrative and 
staffing difficulties, the Financial Controller's 13th report 
under Article 24 (3) of the Financial Regulation was 
presented to the Commission late. This report has now 
been sent to the Court. 
Financial Control intends to resume the frequency of 
once a year. There appears to be no point in drawing up a 
six-monthly — let alone quarterly — report. While it is 
important to know the amount of outstanding debts, it 
must be borne in mind that developments in this area are 
not rapid and the reasons for delays in recovery which are 
beyond the Commission's control are well known 
(developing countries, collection of fines following cases 
before the Court of Justice). Frequent reports would 
inevitably be repetitive. 
2.36. Following the 12th special report under Article 
24 (3), a special report on the financial impact of fraud 
was drawn up by an interdepartmental working party. 
This document is available to the Court. 
Supporting documents 
2.40-2.42. The supporting documents for commit­
ments were sent to the Court on 7 May and those for 
revenue on 8 May 1987. 
The supporting documents for EAGGF Guarantee 
expenditure are included with supporting documents for 
the quarter in which the expenditure is finally charged. 
Expenditure for March to November 1986 was not 
charged until the final quarter because of the difficulties 
with the computerized management system. 
2.43. Departments have been asked to comply strictly 
with the rules in force in order to eliminate the problems 
reported concerning the presentation of supporting 
documents. 
2.44. The Commission accepts that there could be a 
better arrangement for certifying the computer printouts 
attached to collective payment orders. It was decided in 
1987 that officials in the departments responsible 
(authorizing department and Financial Control) would 
endorse the printout attached to the collective payment 
order sent to the Accounting Officer for payment to the 
effect that it had been drawn up and checked on the basis 
of the original supporting documents (or certified copies) 
and that the amount shown on the collective payment 
order is the sum of the amounts relating to the various 
individual payments. Payment orders relating to the Social Fund are no longer 
accompanied by supporting documents. The Com­
mission's Accounting Officer does not need these 
documents to effect payments which are certified as 
proper by the Financial Controller's approval. 
The practice of not attaching the original supporting 
documents or copies to the (collective) payment orders 
for the Social Fund is intended to speed up payment 
procedures and prevent a large proportion of some 
departments' capacity from being periodically taken up 
with arranging for the transfer and dispatch of an 
enormous volume of documents. 
Everything is done to ensure that the appropriate controls 
can be exercised at the various levels. In the case of the 
Court, for instance, its officials have access to Social 
Fund documents at any time. Since 1987 the Court also 
has direct access to the Social Fund's computer records. 
The Commission readily agreed to the Court's request to 
be allowed this access, since it is a way of substantially 
easing the Court's task. 
Any broad interpretation of the rules in force would lead 
to further congestion of the administrative channels 
which are already overburdened with the several 
thousand applications which have to be handled every 
year and the payments then made. 
MANAGEMENT OF COMMITMENTS 
Interpretation of the concept of a commitment 
2.50-2.53. The Commission is willing to make any 
possible improvements on a case-by-case basis and to 
examine this matter in detail with the Court. 
However, it hardly appears feasible to translate the 
concept of commitment into a set of rules or some other 
form so that it has the same significance for the whole of 
the budget. The budgetary sectors and the basic 
regulations underlying them are so inherently different 
that it does not appear possible to draw up a single 
formula or definition which would be applicable to them 
all. 
15. 12. 87 Official Journal of the European Communities 197 
Monitoring of commitments outstanding 
against differentiated appropriations 
2.54. The 5,5 % increase in commitments outstanding 
against differentiated appropriations in 1986 is not in 
itself evidence of bad management. Because the overall 
volume of appropriations is constantly increasing, the 
amount of commitments outstanding will increase 
automatically. 
2.55 - 2.58. Following the Commission's Decision of 18 
November 1985, various steps have been taken by the 
authorizing offices of the structural Funds to monitor and 
clear old cases. The Court itself remarks on the already 
very notable effects on the Social Fund. Similar steps have 
been taken for the Regional Fund and EAGGF Gui­
dance, but the effects are not so evident for two reasons: 
first, the measures financed by these two Funds extend, by 
their very nature, over a longer period and, second, the 
rules applying to them are less binding. 
The Commission's plans for future action are as follows: 
— In the new amended proposal for the Financial 
Regulation, it proposes that the following provision 
be inserted in Article 1: 
'The legal commitments entered into for measures 
extending over more than one financial year shall 
contain a time-limit for implementation which must 
be specified to the recipient in due form when the aid 
is granted.' 
— A date or deadline for completion will be entered in 
decisions granting aid (under contracts or in other 
forms). 
Commitment appropriations made available 
by the cancellation of commitments from 
previous years 
2.61. The Commission would point out that the four 
cases referred to are different in nature. Cases (a), (b) and 
(c) concern the rules in force. In case (d), as the Court 
indicates, the Commission is complying with Article 95 of 
the implementing rules from 1987 onwards. 
2.62. See the reply to paragraphs 2.55 — 2.58 above. Recoveries of payments on account resulting 
from the alteration or cancellation of 
commitments 
Overestimation of application for payments on account 
2.64. Recovery under the Social Fund is not always due 
to an overestimation of expenditure. Often, the amounts 
that have to be recovered correspond to advances paid for 
projects which are carried out only in part or not at all. 
The Commission has reminded the national authorities 
that the amounts contained in applications for assistance 
should be close to what project organizers are able to use 
and that the estimates of costs should be based on more 
accurate calculations than is often the case at present. As 
regards the latter aspect, Article 5 of Decision 83/673/ 
EEC states that, where an operation for which an 
application for assistance has been submitted or assist­
ance granted cannot be carried out or can be carried out 
only in part, the Member State must notify the 
Commission without delay. If the Commission is notified 
in time, it can suspend payment of advances at the request 
of the Member State concerned (see Article 5 (3) of 
Regulation (EEC) No 2950/83) or alter payments to 
match the revised forecasts concerning the proportion of 
the project likely to be completed. 
Delays in the calculation of the amounts to be recovered 
2.65 - 2.67. The Commission does its utmost to recover 
all debts owing. 
All the departments administering appropriations have 
accordingly been asked to comply strictly with the 
instructions concerning the establishment of recovery 
orders as soon as it is established that a debt is owing (this 
applies in particular to the EAGGF Guidance Section 
mentioned by the Court and to the Regional Fund). 
The Commission has also drawn up 'Internal procedure 
provisions concerning the collection of debts other than 
fines and penalty payments', which contain rules 
governing interest in respect of late payments. 
198 Official Journal of the European Communities 15. 12. 87 
Interest on recoverable payments on account 
2.68 - 2.69. The Commission shares the Court's con­
cern on this point. 
The Commission's proposal for the comprehensive 
revision of the Financial Regulation (COM(84)123 final 
of 9 March 1984) includes the following provision in the 
new Article 47: 
' 1. Interest shall be due on any amount paid to recipients 
of Community aid Furthermore, where Community funds have been 
wrongfully obtained, kept or used, the Commission 
may impose penalties. 
2. The procedure for implementing the above measures 
shall be laid down in an implementing regulation 
adopted by the Council on the basis of Article 209 of 
the EEC Treaty.' 
The Commission hopes that the Council will accept this 
proposal. 
either as an advance 
or under the normal payment procedure Final observation on the management of 
commitments 
2.70. These points are covered by the Commission's 
which gives rise to repayment to the general budget. proposals in COM(87)101. 
REPLY OF THE COURT OF JUSTICE 
OBSERVANCE OF THE FINANCIAL REGULATION 
Supporting documents 
2.41. The departments of the Court of Justice are aware of the importance of the quarterly transmission of documents 
supporting the accounts, as required by Article 79 of the Financial Regulation, to enable the Court of Auditors to carry 
out its duties in the most favourable circumstances. They will endeavour to ensure that in future this information will be 
transmitted regularly and in good time. 
REPLIES OF THE COURT OF AUDITORS 
OBSERVANCE OF THE FINANCIAL REGULATION 
Annual nature of the budget 
2.27. (a) The December 1986 salaries of newly-recruited officials had to be charged to the 1987 budget because of the way 
the computerized payroll system works. 
(b) In order to obviate, in future, any problems of charging expenditure between financial years, all the advances will be 
entered in the accounts for the current financial year, mission expenses being settled out of automatic carryovers of 
appropriations and not, as hitherto, during a supplementary period. 
15. 12. 87 Official Journal of the European Communities 199 
REPLIES OF THE 
OBSERVANCE OF THE FINANCIAL 
REGULATION 
Procedure applicable to commitments 
2.32. Following the Court's comments, the ESC has 
gradually extended the general rule to ensure that 
commitments are systematically drawn up in advance. 
This has been done for Chapter 11 — Remuneration, 
Chapter 20 — Rental of premises, Chapter 25 — Meeting 
expenses and also for the small number of other 
transactions in other chapters which were not yet covered 
by the system. 
2.33. The ESC is preparing to introduce computerized 
general accounting procedures which will allow swifter, 
generalized monitoring of commitments. 
Financial Control 
2.34. Following the Court's comments, the situation 
has improved considerably, the authorizing officer now 
signs before the Financial Controller. Steps have also 
been taken to ensure that the Financial Controller signs 
before payments are made. AND SOCIAL COMMITTEE 
Supporting documents 
2.40. The delays noted by the Court are due to a 
weakness in the entire financial service. There is an 
obvious shortage of staff as a result of the increase in the 
number of transactions which we have had to carry out in 
recent years (Enlargement). 
Miscellaneous comments 
Authorized signatures 
2.47. The Committee is willing to observe the Financial 
Regulation within the limits of its manpower. 
Imprest account — meetings' expenses 
2.48. The imprest account arrangements for meetings 
are no longer in use since the administrator of the imprest 
accounting was appointed Accounting Officer in October 
1986. The ESC therefore no longer has an imprest 
account administrator. 
(') This is a restatement of the reply already given (OJ C 342, 
31.12.1980, p. 277). 
200 Official Journal of the European Communities 
CHAPTER 3 
Accounting matters 
REPLY OF THE PARLIAMENT 
OBSERVATIONS ON THE GENERAL ACCOUNTS AND THE BALANCE SHEETS 
Cash deficit 
3.2. Further disciplinary proceedings were initiated, following the decision of 11 July 1986 on the implementation of the 
budget of the European Parliament (OJ C 227, 8.9.1986, p. 154). 
REPLIES OF THE COMMISSION 
OBSERVATIONS ON THE GENERAL — the time required to close files relating to the 
ACCOUNTS AND THE BALANCE SHEETS repayment of advances and the difficulty which 
Commission departments often have in identifying 
sums transferred by debtors (many of them national 
authorities) who fail to indicate any payment 
references; this, in particular, hinders the processing 
of files and slows down the final booking of the 
Miscellaneous revenue to be credited payments received. 
3.3. The increase at 31 December 1986 in the item 
'Miscellaneous revenue to be credited' is due to a number 
of factors: 
— the large rise in the number of revenue items over the 
past two years, in particular deriving from the 
recovery of unused assistance; The Commission will take special note of the Court's 
comment with a view to finding an appropriate solution 
to the problem as soon as possible. 
15. 12. 87 Official Journal of the European Communities 201 
Revenue to be recovered 
3.4. The figures quoted by the Court prompt a number 
of comments. 
The amount of 237,2 Mio ECU includes some claims 
which are not yet due (notably 70,9 Mio ECU in fines 
imposed by the Commission which are covered by bank 
guarantees pending a ruling by the Court of Justice) and 
70,1 Mio ECU in own resources due and related interest 
on late payment. 
Almost 59 Mio ECU was recovered in 1987 and the 
Commission's accounting departments keep a very close 
watch on this matter. 
Recoverable taxes and duties 
3.5. The procedure for monitoring recoverable VAT 
came into operation on 1 January 1987; all tax paid is 
now analysed and computer printouts are made so that 
the amount of potentially recoverable tax can be entered 
in the balance sheet. 
The Commission has entered into negotiations with all 
the Member States with a view to being allowed 'direct 
exemption' in place of 'ex post refunds', in line with the 
wishes of Parliament and the Court. 
As regards the amount of recoverable VAT for 1986, the 
Commission did not have information for all the old 
Member States when the balance sheet was prepared. In 
the case of the two new Member States, the Commission 
has made various approaches with a view to opening 
negotiations on the application of Articles 3 and 4 of the 
Protocol on the Privileges and Immunities of the 
European Communities, but so far no positive response 
has been forthcoming. 
Advances to staff 
3.6. The Commission's administrative and accounting 
departments continuously monitor the accounts of 
advances to staff. Although the situation is still not 
satisfactory there has been some improvement since 1985. 
On 1 January 1987 the Commission introduced a new 
computerized accounting system (Sincom) for its general 
accounts. This will greatly facilitate the analysis of the accounts through remote processing, on-screen inquiries 
and retrieval, customized printouts and storage of full 
details of movements — representing a major advance 
over the system in use until the end of 1986. 
3.7. The increase in the amount of the account 
'Advances against salaries' is due to the substantial surge 
in recruitment at the end of the year, mainly in connection 
with enlargement. The Commission would point out that 
it is impossible to incorporate the remunerations of new 
staff in the computerized pay system within less than two 
months after they take up their duties 
Entering certain advances to staff under the heading 
'Expenditure to be charged' rather than 'Sundry debtors' 
would not have made any fundamental difference to the 
balance sheet. In this particular case the Commission will 
take the Court's observation into account when it closes 
the accounts at 31 December 1987. 
OBSERVATIONS ON DISCOUNTS AND 
PAYMENT PERIODS GRANTED TO THE 
COMMISSION AND THE PUBLICATIONS 
OFFICE 
Discounts 
3.15. Invoices made out to the Publications Office are 
paid by Commission departments. Where discounts are 
offered, the Publications Office is free to make use of the 
accelerated payment procedure established by the 
Commission departments in Luxembourg (see paragraph 
3.13) in order to obtain the discount. 
Conclusions 
3.17. The Commission has noted the Court's observ­
ations and will endeavour to act on them, in particular in 
the matter of discounts. 
202 Official Journal of the European Communities 15. 12.87 
REPLIES OF THE COURT OF AUDITORS 
OBSERVATIONS ON THE GENERAL ACCOUNTS AND THE BALANCE SHEETS 
Working capital for the Publications Office 
3.8. The observation is justified and a rectification will be made in the accounts for the financial year 1987. 
Amounts to be recovered 
3.9. The Court has already issued two recovery orders, on 4 and 24 August 1987. 
REPLIES OF THE ECONOMIC AND SOCIAL COMMITTEE 
OBSERVATIONS ON THE GENERAL 
ACCOUNTS AND THE BALANCE SHEETS 
Closure of the financial year 
3.10. The 1986 administrative accounts were closed in 
extremely difficult circumstances and, as a result, certain 
payments for 1986 were therefore not entered. Some expenditure was accordingly charged to extra-budgetary 
accounts in the interests of maximum transparency and to 
enable them to be settled up in 1987. 
Accounts in national currencies 
in 3.11. Following the Court's comments, the layout of the 
in financial accounts was amended in 1987 to allow them to 
ne be kept in both ECU and national currencies. 
15. 12. 87 Official Journal of the European Communities 203 
CHAPTER 4 
Revenue 
REPLIES OF THE COMMISSION 
VAT OWN RESOURCES 
4.5. The Commission would point out that the success­
ive calculations of the amount of VAT twelfths during 
1986 were all in accordance with the budgetary rules. 
4.8. Following the controls conducted in 1986, many of 
the disputes between the Commission and the Member 
States were resolved. Of the cases mentioned by the 
Court, 16 are still outstanding; in seven of these the 
infringement procedure under Article 169 of the EEC 
Treaty has been initiated. 
As regards the evaluation of the financial impact of these 
cases, the Commission would point out that it is for the 
Member States to calculate the amounts in question, since 
they alone possess the necessary information; it is only 
then that they are controlled by the Commission. 
Monitoring of the application of the Council's 
Sixth VA T Directive 
4.9. The problems raised by the Court of Auditors are 
now being settled. 
New officials have been recruited as part of departmental 
reorganization. 
4.9. (a) Since 1 July 1987 the national legislation of all 
the Member States without exception has been subject to 
review and systematic monitoring. 4.9. (b) A letter was sent on 6 July 1987 to all the 
national authorities concerned asking them for the 
necessary national documents 
The Member States have already contacted the Commis­
sion in reply to this request. 
4.9. (c) Prime responsibility for reviewing the national 
legislation lies with the official who keeps the file on this 
legislation and monitors any changes. The practice of 
keeping sectoral files will also be extended so that the 
corresponding laws of the different Member States can be 
compared with each other. With this twin mechanism, 
national legislation will be checked both horizontally and 
vertically. 
If there are any doubts about the compatibility of a 
national measure, the official responsible for the legis­
lation will draw up a 'dubious case' file for examination. It 
will then be examined in greater detail with a view to a 
decision on the action to be taken. A computerized system 
for recording these dubious cases is to be set up in order to 
ensure more effective management and tighter control 
over the course of the procedures. It will also make it 
possible to print out lists of dubious cases and to follow 
the various stages in these cases from their origin to any 
judgment made by the Court of Justice. 
The initial examination of legislation is conducted by the 
VAT and Other Turnover Taxes Division. After the 
'dubious case' file is examined, a decision will be taken at 
Directorate level either to close the case or to refer it to the 
division responsible for infringements which will then 
follow it up. 
Coordination between Directorates-General is ensured 
through appropriate procedures. 
204 Official Journal of the European Communities 15. 12. 87 
4.10. The differences still to be found in the presentation 
of the calculation made by certain Member States for 
determining the weighted average rate are now purely 
formal in significance. They do not therefore affect the 
correct calculation of the weighted average rate or 
constitute an obstacle to control by the Commission. 
TRADITIONAL OWN RESOURCES 
Making available of customs duties by Spain 
and Portugal 
4.12— 4.13. As the Court states, the Commission 
issued a formal request to Spain and Portugal to pay the 
duty involved by 30 April 1987. They did not comply and 
the Commission is considering what action to take. 
Financial information contained in monthly 
statements of Member States' accounts for 
traditional own resources 
4.14 — 4.17. The Commission agrees with the Court 
that the contents of the monthly statements of traditional 
own resources sent to the Commission could be im­
proved. It has therefore drafted a model monthly 
statement which it will submit to the Member States in the 
near future. 
Under the Council's common position on the amend­
ments to Regulation (EEC) No 2891/77 still awaiting 
final approval, the Member States have already accepted 
in principle that these monthly statements should be more 
precise. 
The Commission would also point out that some of its 
proposals for the amendment of Regulation (EEC) No 
2891/77 which were sent to the Council from 1982 
onwards and on which a decision has still not been taken 
are designed to produce a substantial improvement in the 
information to be supplied to the Commission on the 
management of traditional own resources by the Member 
States. Establishment and making available of 
customs duties and agricultural levies 
4.20 — 4.22. The Commission shares the Court's 
opinion and would point out that at the conciliation 
meeting with Parliament on 15 June 1987 on the Council's 
common position on a first series of amendments to 
Regulation (EEC) No 2891/77 the Council Presidency 
undertook to complete the revision of this regulation as 
soon as possible, in particular as regards the establish­
ment of own resources. 
Use of import trade data as a means of 
checking the amounts of customs duties 
established in Member States 
4.23 — 4.25. The Commission has taken note of the 
Court's study, which its departments are now examining, 
and agrees with its conclusions on the impossibility of a 
straight comparison between trade statistics and customs 
receipts. It also shares its interest in any method which 
would enhance the effectiveness of its controls. 
Flat-rate repayment to the Member States of 
expense incurred in collecting own resources 
4.26 — 4.30. The rate of repayment provided for by the 
Decision of 20 April 1970 and that of 7 May 1985 is a flat 
rate which was seen at the time as one of the components 
in the balance mechanism for financing the Community. 
The Commission does not therefore possess the inform­
ation which would enable it to evaluate the exact costs 
involved. 
In its new proposals for amending the financial arrange­
ments for the Community budget (COM(87)100 and 
COM(87)101 of 15 and 28 February 1987) the Commis­
sion has proposed that this repayment be discontinued 
altogether. 
Self-financing objectives within the sugar 
market 
4.31 — 4.34. The difference between the revenue arising 
from the production levies paid by producers in the 1982 
to 1986 financial years in respect of the 1981/82 to 1985/86 
15. 12. 87 Official Journal of the European Communities 205 
marketing years and actual budgetary expenditure in 
these five marketing years leaves 400 million ECU in 
expenditure not covered by actual revenue as specified in 
Council Regulation (EEC) No 934/86. 
To make up this deficit, the Regulation provides for an 
elimination levy on producers in respect of all the A and B 
sugar they produce in the 1986/87 to 1990/91 marketing 
years. 
The figure of 873 million ECU quoted by the Court was 
calculated in accordance with Article 28 of Regulation 
(EEC) No 1785/81 which defines the method for 
calculating the loss to be covered by the production levy. 
But for the calculation of losses, these rules refer solely to 
estimates of production, consumption, exportable sur­
pluses, export obligations and the average loss. For 
instance, for the period in question, this calculation 
incorporates exportable quantities which have not been 
exported but stored. Moreover, it does not, for example, 
allow for the fact that revenue has been paid early since 
1984 as the balances of the production levies are now 
collected in the same financial year as the advances. This 
calculation is not comparable with the budget figures 
since the reference periods differ — the marketing year 
straddles two financial years. 
Portuguese refineries are using more raw Community 
sugar, mainly raw cane sugar originating in the French 
overseas departments and raw beet sugar (149 000 tonnes 
in 1987/88 as against 125 000 tonnes in 1986/87). 
However, this is less than forecast since supply of this 
sugar in the Community is down and the demand from 
the Portuguese refineries is largely for sugar from outside 
the Community. 
As regards outlets in the chemical industry, the increase in 
the refund for sugar used in this sector dates from only 1 July 1986. Although it is planned that 550 000 tonnes of 
sugar will eventually be used in this way, it is taking longer 
than expected for the scheme to get off the ground (at 
present some 120 000 tonnes is being used), the chemical 
industries being rather slow in converting from one raw 
material to another. The Commission has made ap­
propriate proposals to avoid any repetition of these 
problems (see reply to paragraph 4.37). 
4.35. In the next budget the Commission will endeavour 
to correct the inconsistencies and imprecisions in the 
remarks on the revenue and expenditure sides of the 
budget noted by the Court. 
However, it would stress that the annual budget, the 
accounts and the documents making up the revenue and 
expenditure account are presented in accordance with the 
budget nomenclature and are not designed to verify or 
illustrate the principle that the sector should be self-
financing. 
The Commission would point out that the EAGGF 
financial report and the revenue and expenditure account 
contain information on the situation of the sugar market. 
4.37. In its 1987/88 price proposals, the Commission 
proposed the introduction of a special elimination levy in 
1987 to cover the deficit for the 1986/87 marketing year. 
The Council accepted this proposal with the adoption of 
Regulation (EEC) No 1914/87 of 2 July 1987 (OJ L 183). 
In COM(87)452 final the Commission presented pro­
posals in September designed essentially to ensure 
financial autonomy for the sugar sector on an annual 
basis in future, whatever the trend of world market prices 
during the period concerned, without having to resort to 
special measures. 
206 Official Journal of the European Communities 15. 12. 87 
CHAPTER 5 
European Agricultural Guidance and Guarantee Fund 
Guarantee Section (EAGGF-Guarantee) 
REPLIES OF THE COMMISSION 
SUMMARY OF FINANCIAL 
INFORMATION 
5.4. The Commission's estimate of the potential cost of 
disposing of the intervention stocks held at 30 November 
1986 is 6 800 Mio ECU, as shown in Volume V of the 
revenue and expenditure account and balance sheet for 
1986 (page 37). The Council and the Commission have embarked on a 
reform of the public storage system designed to restore it 
to its original role. Since 1987 restrictions on intervention 
buying have been imposed in the sectors with the largest 
stocks (milk products, beef/veal, cereals). 
The Commission would also point out that the Com­
munity has a traditional presence on the world agricul­
tural market and that it is not an exporter solely when the 
100 % self-sufficiency mark is passed. The part of 
production traditionally intended for export has always 
been subject to fluctuations of world market prices. 
PUBLIC STORAGE 
The budgetary impact of structural surpluses 5.8. The Commission replied to similar comments by 
the Court on the public storage system for cereals in its 
annual report on the 1985 financial year, when it stated 
that the quality criteria for buying in cereals were made 
much more stringent with effect from 1 July 1986 (')• 
5.5. See the reply to paragraph 5.4. 
The role of intervention Budgetary considerations 
5.7. The Commission recognizes that, as a result of the 
rationalization of farm production and high productivity, 
intervention storage is no longer merely a cyclical 
operation but a permanent one. 
However, public storage is not a specific aim of market 
policy but rather a safety net offering protection from 
changes in the market situation. 5.9. The Commission broadly agrees with the Court's 
analysis. But it should be borne in mind that the fall in 
exports in 1983 was the result of a contraction of outlets 
on the world market, especially for milk products, rather 
than deliberate Commission policy. It would not have 
been possible to boost the volume of exports substan­
tially, even with much higher refunds. 
(!) The footnotes appear at the end of each chapter. 
15. 12. 87 Official Journal of the European Communities 207 
5.10. It is true that when budget funds are not available, 
one option is to suspend sales from intervention stocks. 
As regards the advantage of cheap disposal compared 
with the destruction of products, the Commission would 
refer to its reply to paragraph 5.21. 
The Court claims that deferring the cost of financing the 
special disposal programme for butter conflicts with the 
principle of annuality laid down by the Treaties. The 
Commission replied to this argument in its report to the 
Council on the financial impact on Spain and Portugal of 
the financing arrangements for this disposal pro­
gramme (2): 'Since the Council itself has decided that 
certain items of expenditure will not have to be met by the 
Community until 1989, the principle of annuality of the 
budget laid down in the fifth paragraph of Article 5 of the 
Financial Regulation applicable to the general budget is 
not breached'. 
Losses on disposal and depreciation 
5.11-5.13. The Commission agrees that systematic 
depreciation of agricultural intervention stocks is de­
sirable in order not to impose a burden on future budgets. 
But if the necessary appropriations are not entered in the 
annual budget, it cannot be done. 
The Commission accordingly sought to provide itself 
with the necessary means by putting down an appropri­
ation of 1 240 Mio ECU for depreciation of stocks of 
cereals, milk products and beef/veal in its preliminary 
draft budget for 1988. 
5.13. In 1986 the Commission applied the maximum 
depreciation it could with the appropriations available, 
logically enough giving priority to the oldest stocks. The 
phenomenon referred to by the Court concerned only a 
small quantity of products and was restricted to 1986. 
In future the Commission intends to make depreciation 
systematic. Its proposals on new budgetary discipline 
included a provision that the overall annual allocation for 
agricultural expenditure would also have to cover costs 
connected with the disposal and depreciation of stocks 
(COM(87)101 final, page 15, point (b), fourth para­
graph). 
5.14. See the reply to paragraph 5.4. Reimbursement of storage costs 
5.16. Under a flat-rate system like that used to finance 
storage operations proper, it is inevitable that some 
Member States will gain while others lose, since the flat-
rate reimbursements normally reflect the average of the 
costs of all those involved. 
The reason for the temporary change in the system in 1986 
was the need to 'ensure that the Community budget 
continues to be implemented ... and that the reference 
framework fixed by the Council is complied with' (3). 
Conclusions 
5.17. As regards the depreciation of stocks, the 
Commission would refer to its reply to paragraph 5.13. At 
all events, the present accounting system complies with 
the existing regulations. 
5.18. The Commission is guided in its action by the 
objectives specified in Article 39 of the Treaty. Market 
balance is one of the instruments that can serve to 
stabilize markets, and the Commission identified a return 
to greater balance on the agricultural markets as one of 
the priorities in its communication 'Making a success of 
the Single Act' (COM(87)100). 
5.19. The Commission endorses the Court's views on 
the postponement of payments from one year to the next. 
However, it does not consider that this had the effect of 
disguising the real problems, as it did not prevent the 
Council and the Commission from taking action to cure 
the agricultural market problems. 
The Commission would repeat that the practice of not 
including the full annual requirements for the depreci­
ation of stocks is imposed by constraints connected with 
the budget funds available each year. 
As regards public intervention expenditure, the purpose 
— and the result — of the changes made in 1983 was to 
eliminate all risk of appropriations being exceeded. 
5.21. The Commission has always evaluated the cost to 
the budget of the different disposal options and marginal 
cost analyses were also carried out, especially in the case 
of butter. The Commission's decisions on sales took this 
information into account. But it must be recognized that 
208 Official Journal of the European Communities 15. 12. 87 
some outlets, though attractive in terms of prices, are 
limited in terms of quantity. 
A decision to destroy stocks cannot be taken simply on 
the basis of economic considerations, since political 
factors also have to be taken into account. 
MANAGEMENT AND INTERNAL 
CONTROL OF THE EAGGF GUARANTEE 
SECTION BY THE COMMISSION 
Accounting for Member States' advances and 
declared expenditure 
Observations arising from the audit 
5.25.(a) The Commission had no option but to reduce 
the amount of advances paid, since the appropriations 
had run out. Consequently some 700 Mio ECU was 
declared by the Member States for payment after 1 
January 1987. 
The 452 Mio ECU estimate of the proceeds of the co-
responsibility levy originally entered in the 1986 budget 
was based on the Commission's proposals included in the 
1986/87 farm price package, under which the levy was to 
be charged at the first selling stage, i.e. very early in the 
marketing year for a large proportion of the harvest. The 
fact that the actual proceeds (only 56 Mio ECU) fell short 
of the estimate was mainly due to decisions taken after the 
establishment of the budget and to the inherent un­
certainty of agricultural estimates. 
(b) Where EAGGF-Guarantee operations give rise to the 
entry of negative appropriations, the same rules apply as 
to 'normal' appropriations. If receipts are higher than 
estimated, the Financial Regulation allows the Commis­
sion to increase the appropriations under another 
heading in the same chapter by means of a transfer. The 
decision to enter these receipts as negative appropriations 
has certain automatic implications as regards the 
management of appropriations. (d) As regards budget execution, the Commission used the 
appropriations allocated to these items in accordance 
with Council Regulation (EEC) No 964/86 (see para­
graph 5.13). 
(e) The delays referred to by the Court are mainly due to 
computer problems. The Commission will do everything 
necessary to prevent a recurrence. 
Clearance of accounts 
5.26 - 5.34. In line with the Commission's undertaking 
to bring clearance work up to date in response to the 
wishes of Parliament and the Court, the clearance 
decision in respect of 1985 was adopted in July 1987. The 
Commission managed to achieve this by adopting a 
method of selective audits. While this work was going on 
Commission staff, together with outside consultants, 
have produced an audit manual based on the method of 
systems audits, which will gradually replace selective 
auditing. The manual lays down objectives and stan­
dards, with a detailed description of working methods for 
auditors. 
The absence of a manual during the temporary appli­
cation of selective audits does not, however, mean that 
operational objectives were left solely to the discretion of 
team leaders. For each of the years cleared during this 
period, the audits covered expenditure on a number of 
measures selected on the basis of criteria designed to limit 
the risk of Community rules not being applied. For each 
year under scrutiny the team leaders work according to an 
approved audit programme drawn up in the light of the 
criteria referred to above. 
The summary reports of audit results for the clearance of 
accounts, drawn up for each year cleared, show that 
almost all measures financed were scrutinized at least 
once during the period of selective audits, even if, as the 
Court points out, the number of individual files examined 
was necessarily limited. Not ony did these audits result in 
some substantial financial corrections, but they also had a 
preventive effect, for in many cases the Member States 
took steps to meet their obligations more effectively. 
Now that the backlog has been worked off with the 
clearance of the accounts for 1985, the application of 
systems audits will be extended to cover other expenditure 
15. 12. 87 Official Journal of the European Communities 209 
besides export refunds and MCAs, starting with the audit 
of 1986 expenditure. However, it would be unrealistic to 
expect systems audits to cover all EAGGF-financed 
operations from the very outset; the introduction of the 
system will be phased over several years, with careful 
scheduling of use of the skilled staff involved and the full 
backing of the Member States. 
Provision of staff 
5.35. The Commission shares the view that the number 
of staff needed for clearance work should be adjusted in 
line with the requirements entailed by the introduction of 
systems audits, the increase in the volume of expenditure 
and the number of measures involved. 
Arrears of work 
5.36 - 5.39. With the enlargement of the Community to 
Twelve and the substantial increase in the number of 
measures to be verified, the time currently allowed for 
clearance is, in the Commission's view, too short to 
guarantee the minimum standard for proper verification. 
The proposed revision of the Financial Regulation and 
amendment of Regulation (EEC) No 729/70 therefore 
provided for it to be changed. 
Regarding the Court's comment in paragraph 5.39, it 
should be noted that the clearance decisions adopted in 
1987 for the years 1983 to 1985 are qualified by very few 
reserves, and cases separated out are usually settled 
promptly. 
The cooperation of Member States 
5.40 - 5.41. The rapid completion of clearance work for 
1983 to 1985 is evidence of a more cooperative attitude on 
the part of the Member States. Inevitably there are some 
differences of opinion — as there always will be between a 
supervisor and those under supervision — sometimes 
over specific problems (in particular over cases involving 
financial corrections) and sometimes over matters of 
principle, especially where there is a conflict between 
national and Community interests. Generally speaking, 
however, the Member States are aware that Community 
checks are the best way to avoid discrimination both 
between Member States and between operators. Preventive consultation and concluding observations 
5.42-5.44. The Commission agrees with the Court's 
views both as regards the need for Community controls to 
be carried out sooner after the payment of aid in the 
Member States and as regards the extension and 
intensification of preventive controls. These two aspects 
are an integral part of the effort made in recent years to 
bring clearance work up to date and to introduce systems 
audit. 
As regards paragraph 5.44, the Commission would draw 
the Court's attention to the proposal to replace the system 
of advances by a system of reimbursements and to the 
general introduction of systems audit as from the 
clearance operation for 1986. 
AUDIT OF INDIVIDUAL MARKETS 
5.45-5.55. The Commission's comments on the 
Court's assessment of the operation of the quota system 
in the milk sector, the wine distillation measures and the 
tobacco production premiums have already been given in 
the replies to the detailed reports on these subjects. 
However, the following should be noted: 
The quotafadditional ^v>' system in the milk 
sector 
5.48. The quota system represents a completely new 
policy measure. Starting-up difficulties must be expected 
when establishing a system involving 1,6 million milk 
producers. The quota was initially set too high, but had a 
clear effect on deliveries, which declined by more than 5 % 
or 5 million tonnes in the first quota year compared with 
1983/84. This should be seen against average annual 
increases between 1973 and 1983 of 2,6%. 
No other measure introduced has had such a positive 
effect. The decision by the Council in December to reduce 
deliveries by 9,5 % over a two-year period and in March 
to make it possible to suspend intervention are important 
steps on the way to regaining control over the milk sector. 
210 Official Journal of the European Communities 15. 12. 87 
5.49. The Commission agrees with the Court as regards 
the shortcomings in the application of the system in the 
Member States — shortcomings which it had detected 
itself. Starting in 1985, it initiated the infringement 
procedure in a number of cases, in particular against 
national measures implementing the Community addi­
tional levy scheme. Some of these cases were dropped in 
March 1987 following the Council's approval on 16 
December 1986 of changes to the regulations in this 
sector. However, the infringement procedure is still 
continuing against two Member States. 
The Commission acted swiftly whenever unsatisfactory 
application of the system by the Member States 
jeopardized its objective of bringing milk production 
under control or led to financial loss because of the non-
collection or non-recovery of the levies due. 
5.50. The management committee system, with its 
working groups and bilateral contacts, is considered an 
important factor for the performance of the Com­
mission's role. 
Distillation measures in the wine sector 
5.51. The only distillation measure which currently 
supplements long-term storage measures is that provided 
for in Article 42 of Regulation (EEC) No 822/87. None of 
the other measures are linked with storage measures. 
5.52.(a) Each distillation measure is different, allowing 
the Commission some flexibility in years when the surplus 
is low, so that it can adapt its actions to the market 
situation. Since the measures were introduced, the 
surpluses of table wine have become structural and the 
justification for certain forms of distillation have 
diminished. 
In exercising its powers, the Commission has systemati­
cally reduced high-cost intervention. However, it has to 
act prudently, especially in the light of the joint 
declaration issued by Parliament, the Council and the 
Commission in March 1985 after the conciliation meeting 
on the revision of the wine-market regulations, which 
reiterated the principle that intervention measures 
provided for under the regulations with a view to 
improving market conditions must be applied in a 
balanced manner. 
(b) As the Commission indicated in its replies to the 
Court's special report on distillation measures in the wine 
sector, the average price offered to producers is below the 
market price of all distillation schemes and it will be reduced even further if the Council accepts the proposals 
made by the Commission in COM(87)452 of 28 Sep­
tember 1987: eventual elimination of distillation under 
the special price support guarantee for long-term storage 
and greater degressivity in prices for compulsory 
distillation. It should, incidentally, be borne in mind that 
the current surplus of table wine is due to a steady decline 
in consumption rather than to an increase in production, 
which is, indeed, tending to stabilize or even fall. 
(c) It is unlikely that a producer will be able to escape 
financial sanctions by transferring his distillation oblig­
ations, since one producer will not agree to distill a 
volume of wine corresponding to another's obligation on 
his behalf (transfer) without some financial compens­
ation. 
Consequently it is clear that a producer will not make 
such a transfer unless he is sure of being able to sell his 
own wine on the market at a price high enough to offset 
the financial cost involved. The result is that the dearer 
wine will remain on the market and the financial losses 
incurred by producers under the compulsory distillation 
arrangements (difference between market price and 
distillation price) are likely to be roughly the same for all 
producers. 
5.53.(a) and (b) Under Article 79 of Regulation (EEC) 
No 822/87, the basic wine regulation, the Member States 
are responsible for taking the necessary measures to 
ensure that the Community rules in this sector are 
observed. 
If the Commission finds that the measures they adopt are 
inadequate, it can define in greater detail the measures 
necessary at Community level. It has accordingly put 
forward proposals for: 
— tighter checks on wine delivered for distillation (4); 
— the establishment by the Member States of a 
specialized inspection body (e.g. agency, flying 
squad), its strength to be commensurate with the 
importance of the wine sector in the country 
concerned; 
— the creation of a snlall corps of staff specializing in 
wine inspection, whose responsibility within the 
Commission would be to ensure by all necessary 
means — including participation in inspections 
carried out by the Member States — that Community 
rules are uniformly applied (5). 
However, the discussions on this question are proving to 
be extremely difficult since national competences are 
involved. 
15. 12. 87 Official Journal of the European Communities 21 
As regards the definition of table wine, the Community 
regulations on wine clearly define the criteria which a 
Community wine must meet in terms of: regions whose structural situation makes conversion 
impossible. 
the raw material from which wine is produced (vine 
varieties, place of production); 
the oenological practices and processes authorized; 
the rules on movement and release to the market. The quantities put into intervention have been substan­
tially reduced in recent years. In 1985 the quantities of 
varieties considered problematical — such as Havana, 
Tsebelia and Mavra — that were sent into intervention 
were practically zero. Between 1984 and 1987 the prices 
and premiums for these varieties have been reduced by 
20 %. As regards export refunds, their amount has been 
frozen since 1981. The Commission has checked the 
administrative and control procedures in the Member 
States and found no major irregularities. 
Table wine is defined by all these provisions, and the 
definition in Annex I of the basic Regulation (No 822/87) 
is merely intended to distinguish it from other types of 
wine, in particular quality wines p.s.r. There is no need to 
tighten the definition for the purposes of combating fraud 
since a table wine has to be checked against all the 
provisions referred to above — and not the definition 
alone. Production aid for peas and field beans 
(Regulation (EEC) No 1431/82 as amended) 
Audit observations 
Aid for human consumption 
Production premiums in the tobacco sector 
5.54-5.55. Traditionally, tobacco production in the 
Community countries was for sun-cured and air-cured 
tobacco, demand for which has fallen over recent years 
because of growing demand for new types of cigarettes 
(American blended). In response to these changes, the 
Community introduced differentiated price and premium 
levels to discourage production of varieties that were less 
in demand. In 1982, 1983 and 1984 the different varieties 
were divided into three groups, with increasingly marked 
differences between them in terms of prices and pre­
miums. The degree of differentiation was increased in 
1986 with prices and premiums divided into four groups. 
In its decisions on prices and premiums for the 1987 crop 
the Council, on a proposal from the Commission, 
reclassified the different varieties into five groups in the 
light of market conditions, the quantities put into 
intervention, the nature of the commercial outlets and the 
trend in production. This has taken the differentiation 
between the varieties even further. 5.58. Peas and field beans intended for human con­
sumption are in competition with those intended for 
animal feed, which is the reason why the 1982 scheme was 
extended. 
Control procedures in the Member States 
5.59\(a) The Community rules do not require the 
authorities to carry out physical checks on the weight and 
quality of peas and beans as they enter the processor's 
premises, nor do they require processors to give advance 
notice of arrivals. 
Quality control by sampling is carried out in the Member 
States concerned by officially approved experts and 
analysis is performed by independent laboratories or the 
firm's own laboratories, also officially approved by the 
national authorities. 
As a result 65 % of Community production consists of 
tobacco for which market outlets exist or which match 
demand. As regards the other varieties, it has to be 
remembered that these are concentrated in the less-
favoured regions of the Community with the highest 
proportion of jobs in agriculture and low incomes, (b) The Commission is considering the possibility of 
proposing the introduction of a security on imports. 
(d) The Commission has contacted the Member State in 
question and is examining the arrangements in force to 
see whether they comply with the regulations. 
212 Official Journal of the European Communities 15. 12. 87 
Production aid for cotton (Regulation (EEC) 
No 2169/81) Delivery procedures 
Audit observations 5.69. In the Commission's view, valid checks to ensure 
that the minimum price — on which payment is based — 
is observed can be performed either in the countryside or 
at the ginning mill provided that the quantity and quality 
of the product delivered are determined. 
Calculation of the world market price 
5.64. The Court's suggestion will be given careful 
consideration. However, such an arrangement would be 
very restrictive for the Commission, which has to have 
some margin in evaluating quotations and supply. 
Moreover, when the world price is fixed, the Commission 
is unable to say whether and how much cotton will be 
imported from the various countries of origin. Neverthe­
less, the Commission has taken note of the Court's 
comment and will examine the point raised. 
Stock accounts 
5.68. The Commission has taken note of the Court's 
comments and will examine the points raised. GENERAL CONCLUSIONS 
5.70 - 5.72. The Commission has repeatedly identified 
the shortcomings and weaknesses of certain of the 
common agricultural policy mechanisms and has put 
forward proposals to the Community's decision-makers 
for the necessary reforms, notably in 1983 in 'Common 
agricultural policy — Proposals of the Commission' 
(COM(83)500), subsequently in the Green Paper 
(COM(85)333 final) and more recently in 'Review and 
outlook for the common agricultural policy' 
(COM(87)410 final) and 'Implementation of agricultural 
stabilizers' (COM(87)452 final). 
(•) OJ C 321, 15.12.1986, page 207. 
(2) COM(87)249 final, 10.6.1987: OJ L 119, 8.5.1987, p. 18. 
(3) See the third recital of Council Regulation (EEC) No 
1334/86. (4) COM(86)398 final, 16.7.1986. 
(5) COM(87)l final, 5.3.1987. 
15. 12. 87 Official Journal of the European Communities 213 
CHAPTER 6 
Frauds and irregularities 
REPLIES OF THE COMMISSION 
TRADITIONAL OWN RESOURCES 
6.3 — 6.6. The Commission is as concerned as the 
Court about the quality and reliability of the various 
arrangements under which the national authorities 
transmit to the Commission information concerning the 
operation of the Community own resources system. It 
would point out that it has taken action in a great many 
forms at a number of levels. 
Since 1979 it has sent the Council a number of proposals 
for amending Regulation (EEC) No 2891/77 and has also 
proposed a regulation introducing an information system 
concerning irregularities affecting the Communities' own 
resources. The aims of these proposals include: 
— specifying the conditions in which these own re­
sources are established and made available by the 
Member States, thereby eliminating most of the 
difficulties involved in the application of the current 
rules; 
— setting up an information system covering manage­
ment, control and anti-fraud arrangements in the 
Member States which would completely allay the 
concern expressed by the Court in particular in 
paragraph 6.4(b), (d) and (e). 
Like the Court, the Commission therefore regrets that few 
improvements have been made over the past three years 
and can only deplore yet again that the Council has still 
not acted on these proposals. Despite this, the Commission has not let up in its efforts to 
achieve some significant improvement in the information 
communicated by the Member States under the existing 
rules, either in the six-monthly or annual reports provided 
for by Regulation (EEC) No 2891/77 or in information 
requested on cases of fraud or irregularities brought to its 
attention. 
It would also add that in 1986, as part of the associated 
inspections provided for by Regulation (EEC) No 
2891/77, it has examined the methods applied in all the 
Member States to deal with cases of fraud affecting 
traditional own resources. This was in response to a 
suggestion made by the Court. 
Under Council Regulation (EEC) No 1468/81 on mutual 
assistance between the administrative authorities of the 
Member States and cooperation between the latter and 
the Commission to ensure the correct application of the 
law on customs or agricultural matters, the Member 
States have hitherto been required to send the Commis­
sion only the information they consider useful concerning 
the goods, methods and processes used in fraudulent 
operations and the deficiencies and loopholes in the rules. 
This information was inevitably of a general nature. 
However, the situation should improve considerably with 
the entry into force on 1 July 1987 of Council Regulation 
(EEC) No 945/87 amending this regulation. Under this 
system of administrative cooperation, the Member States 
now have to notify the Commission of all irregular 
operations of particular interest at Community level and 
provide the relevant information. It is important to note 
that this information is not intended to enable the 
Commission to increase its powers of control but to 
coordinate national measures to combat irregularities. 
214 Official Journal of the European Communities 15. 12. 87 
Although it is not intended as an information system on 
irregularities, Council Regulation (EEC) No 1697/79 
does serve to provide an overview of cases in which the 
correction of an error made by the authorities in applying 
the rules could conflict with the principle that the person 
liable should be protected when he has acted in good faith. 
All cases involving amounts of 2 000 ECU or more must 
be referred to the Commission, along with cases involving 
less than this amount when the Member State is unable to 
assess all the aspects of the problem. 
EAGGF GUARANTEE SECTION 
Implementation of the notification procedure 
6.8. The Commission has tried by means of meetings 
with the Member States and working documents to 
obtain a stricter and more uniform application of 
Regulation (EEC) No 283/72. 
It is reasonable to believe that these efforts, made in 
collaboration with the Member States, have now begun to 
take effect. Since 1985, a marked increase in the 
communication of cases of irregularities from the 
majority of Member States has been noted. 
6.10.(a) The Commission, like the Court, regrets that 
Member States do not always respect the time-limits for 
submission of quarterly communications. 
Although Regulation (EEC) No 283/72 does not pre­
scribe that 'nil returns' should be submitted where 
applicable, Member States' delegations in the EAGGF 
Committee have accepted the advantages of such 
communications. 
The Commission has recently reminded the Member 
States concerned of this procedure. 
(b) The Commission agrees that the information con­
tained in the communications is often sparse. With the 
computer system Irene now in operation, it has become 
possible — and also necessary for optimal use of the 
computer system — to exploit the advantages by 
requiring more detailed information than hitherto. The Commission intends to examine with Member States 
how improvements can best be achieved. 
(c) The Commission recalls that Regulation (EEC) No 
283/72 does not require the communication of the names 
of fraudsters; therefore information on names of 
beneficiaries is not normally contained in the quarterly 
communications. Detailed information on beneficiaries 
of particular interest is exchanged when deemed necessary 
under the system of direct contact between Member 
States' bodies responsible for the pursuit of irregularity 
cases. Information may also be exchanged under the 
provisions of Article 4 of Regulation (EEC) No 283/72 
and during meetings of the EAGGF's irregularities 
groups. 
Keeping track of fraudsters likely to be involved in or 
having repeatedly committed irregularities forms an 
essential part of Member States' control systems in 
general. 
(d) Of 50 reported cases, 32 were discovered by the 
Ministry of Finance (GDF) and 18 by the Intervention 
Board for Agricultural Produce (AIMA). In general, 
these irregularities were detected during ex post or other 
routine controls. 
Recovery of amounts unduly paid 
6.12. It should be remembered that, in applying 
national legislation and procedures, proceedings in 
respect of recovery may often last several years and often 
much more than the five years indicated. This is especially 
the case where large sums of money are involved. It 
should be noted in this context that a number of cases 
have arisen in the past where recovery claims have been 
rejected in part or in whole by the courts. As the 
beneficiaries concerned often resist recovery through the 
legal processes up to the higher courts, the Commission 
cannot influence the time necessary for national courts to 
reach a final decision. 
When a case is finally considered irrecoverable by the 
Member State concerned, the case is settled in accordance 
with Article 8 (2) of Regulation (EEC) No 729/70 and in 
the framework of the clearance of accounts procedures. 
With the introduction of the computerized system Irene, 
the Commission is able to exercise a more dynamic 
15. 12. 87 Official Journal of the European Communities 215 
monitoring of the recovery processes, in particular in the 
sense recommended by the Court. 
GENERAL OBSERVATIONS 
6.13 and 6.20. As promised to Parliament's Committee 
on Budgetary Control early in 1987, the Commission has 
conducted a detailed examination into ways of stepping 
up the fight against cases of fraud affecting the 
Community budget. Its ideas — relating to the measures 
to be taken, internal organization and the instruments 
which must be at its disposal — were set out in a report 
adopted on 14 October on measures to step up action to 
combat fraud affecting the Community budget. 
As regards the current situation, the Commission would 
again point out that Community rules provide for a clear 
division of responsibilities between the Member States 
and the Commission for the management and control of a 
large proportion of the Community's finances. The 
Member States are responsible for the permanent control 
of the operations which they administer on a day-to-day 
basis while the Commission checks whether these management and control operations have been con­
ducted in line with Community obligations, if necessary 
by carrying out its own controls where this is provided for 
by the rules as in the EAGGF sector. 
It is therefore logical that the Commission takes part in 
only a small proportion of the on-site checks conducted 
by the Member States. However, it is continuing its efforts 
to make full and effective use of its own resources — rules, 
equipment and staff — available for controls and 
combating fraud. The outcome of the work mentioned 
above will provide fresh stimulus to its anti-fraud 
measures. 
Consequences of referral back to national law 
6.18. See the remarks made at paragraph 6.10 (c). 
6.19. Although national legislation as a rule does not at 
present allow third parties to intervene in criminal 
proceedings, the Commission shares the Court's opinion 
in principle. This does not stop the Commission supplying 
national authorities with useful information when it 
considers this necessary. It has already done so in the past. 
216 Official Journal of the European Communities 15. 12. 87 
CHAPTER 7 
European Agricultural Guidance and Guarantee Fund, 
Guidance Section (EAGGF-Guidance) 
REPLIES OF THE COMMISSION 
General INTRODUCTION 
The Commission has endeavoured to promote a common 
policy on agricultural structures but, in spite of its efforts, 
not all its proposals have been accepted by the Council. 
The Commission is aware that structural and social 
measures are assuming greater importance as the policy 
on agricultural prices and markets becomes increasingly 
restrictive. It therefore believes that, if the renationaliz-
ation of agricultural policy is to be avoided, the structural 
policy must have a broader impact. 
In 1987 the Council has already approved an initial 
reorientation of the horizontal policy on agricultural 
structures which had this aim in view (•). 7.2. The agricultural structures policy has three aspects: 
— general measures; 
regional measures, which have existed since 1978 and 
are based on the belief that certain regions have 
specific needs, particularly as regards the improve­
ment of infrastructure in every sense (communi­
cations, services, advisory services etc.), which must 
be met if they are to benefit from the general 
measures. It should be emphasized that these 
measures are not simply one-off actions since they 
reflect the desire to apply a balanced set of measures 
in every region which has structural problems of this 
nature; 
the aspect linked to agricultural markets, which 
consists of one-off measures required by the market 
situation. 
The Commission has also sent the Council other 
proposals for reform (cessation of activity and income 
support) (2). In accordance with the Single Act, it recently 
sent the Council a further package of reform pro­
posals (3), designed to improve the coherence of structural 
measures. 
(') The footnotes appear at the end of each chapter. It should also be noted that the structures policy has 
another vital aspect which does not involve Community 
finance. This is the framework of rules to govern national 
structural aids as provided for not only in the Treaty, but 
also in Article 14 of Directive 72/159/EEC and in Article 8 
of Regulation (EEC) No 797/85. 
15. 12. 87 Official Journal of the European Communities 217 
STRUCTURAL POLICY WITHIN THE 
FRAMEWORK OF THE COMMON 
AGRICULTURAL POLICY Imprecise expressions 
7.4. In principle the Commission agrees with the Court 
that a price support policy, unlike one aimed at stabilizing 
prices, has unfortunate consequences at the structural 
level. 
However, this view should be seen in context. Since the 
common agricultural policy was introduced, there has 
been a substantial and constant fall in real terms in the 
prices received by farmers. Furthermore, the number of 
persons employed in the primary sector (farming, 
fisheries and forestry) has fallen by about 60 % over that 
period. 7.6. The Court criticizes the absence of precise de­
finitions in the rules of the concepts ('expressions') 
required for implementation of the agricultural structures 
policy. Such concepts are indeed essential to any truly 
Community policy since they enable the Community 
legislator to impose conditions or constraints having an 
equivalent effect in all the Member States. However, they 
have to be defined on the basis of the economic, social and 
legal conditions prevailing in the Member States con­
cerned. Article 39 (2) of the Treaty, which provides the 
basis for the Community policy on agricultural struc­
tures, states that account must be taken of'the particular 
nature of agricultural activity, which results from the 
social structure of agriculture and from structural and 
natural disparities between the various agricultural 
regions.' 
DIFFICULTIES IN RESPECT OF THE 
IMPLEMENTATION OF A TRUE 
COMMUNITY POLICY FOR 
AGRICULTURAL STRUCTURES 
As regards the general approach The wide variety of natural, structural and administrative 
conditions in the agricultural regions of the Community 
and the great diversity of the problems facing those whose 
lives and work involve agriculture have led the Com­
munity to recognize that implementation of a Com­
munity policy on agricultural structures requires con­
siderable decentralization so that the Member States or 
their regions can implement the policy using their own 
legislative, regulatory and administrative instruments. 
General guidelines 
7.5. The Mansholt Plan adopted by the Commission in 
December 1968 (4) based a coherent package of proposals 
concerning structures on a comprehensive analysis of the 
Community's agricultural policy and the national policies 
for agricultural structures. The three socio-structural 
directives adopted in 1972 as a result of this plan provided 
the foundation for Community structural measures on 
agricultural production over the following decade. 
Following enlargement of the Community and in the light 
of socio-economic developments in agriculture, two 
additions were subsequently made to this basic policy: Accordingly, the Community has done no more than lay 
down the basic idea, the objectives to be achieved and the 
financial conditions, while leaving the national or 
regional bodies free to choose the form and means of 
implementation in accordance with Community criteria. 
However, it should be noted that the Community rules 
require the national implementing provisions to be 
approved by the Commission. 
The Commission would stress that the growing diversity 
within a Community of Twelve will certainly demand 
greater flexibility if the structural policy is to continue to 
help achieve the aims of the common agricultural policy. 
This development will be backed by closer monitoring 
(see paragraphs 7.22-7.24). 
in 1975, adoption of Directive 75/268/EEC concern­
ing less-favoured and mountain regions; 
— from 1978, introduction of specific measures at 
regional level. The purpose of the various implementing provisions 
adopted by the Commission has never been to lay down 
criteria or conditions for giving effect to measures. They 
merely deal with the financial details. 
218 Official Journal of the European Communities 15. 12. 87 
Unrealistic requirements Year Utilization (%) 
7.7. Broadly the Commission agrees with the Court 
about the difficulties of applying the development plans 
required by Directive 72/159/EEC. 1969 
1970 
1971 
1972 
1973 
1974 
1975 70 
71 
57 
59 
55 
80 
78 
Regulation (EEC) No 797/85 replaced these by improve­
ment plans, on which the Commission feels that it is still 
too early to make a final judgment. However, it will bear 
the Court's comments in mind when it carries out the 
review required by Article 23 of the Regulation. As regards the definition of the measures 
As to whether the type of accounts required were actually 
kept, the Commission is unable to identify specific cases 
from the indications provided by the Court and so is 
unable to comment. However, the Commission is 
vigilant. For example, it has just carried out an inquiry in 
Ireland, where correct accounts were not kept in certain 
cases, and this will entail a reduction in the reimburse­
ments due to the Member State in question. 
The payment of aid by the Member State to specialist 
centres for the keeping of accounts is, in the Com­
mission's view, a practice which may also be of benefit to 
farmers. 7.10. While the Commission, broadly speaking, agrees 
with the Court that the delays in implementing structural 
measures in the country concerned are regrettable, it must 
point out that there are often good reasons for differences 
in implementation from one country to another, or even 
from one region to another (see the reply to paragraph 
7.6). 
7.11 — 7.12. As it stated in its reply to the comment at 
paragraph 7.6, the Commission regards the lack of really 
precise definitions in the Council instruments to be 
deliberately designed to permit implementation tailored 
to the specific features of the different Community 
regions and countries. Accordingly, wherever possible, 
the Commission avoids laying down uniform conditions 
and definitions in its own implementing rules. In any case, 
the problems referred to by the Court at paragraph 7.11 
concerning the procedures for financing forestry projects 
led to difficulties which were subsequently overcome. 
The appropriations available 
7.8. The indicative breakdown of the EAGGF con­
tained in Regulation No 25 of 14 January 1962 has not 
been adhered to because the Community chose to give 
priority to the common organization of the main 
agricultural markets, even though the coordination of 
policies on agricultural structures was the subject of the 
Council Decision of 17 December 1962 (5). 
The Commission agrees with the Court that the overall 
amounts for the five-year periods 1980-84 and 1985-89 
are ceilings with no precise meaning. The amounts of 
appropriations are determined each year as part of the 
budgetary procedure. Hence the Commission prefers to adopt a position on 
each situation through a specific decision to approve a 
programme, national or regional implementing rules or 
projects. 
On the specific comment on the measure concerning the 
non-marketing of milk, it is clear that, since there was no 
complete register of cows, the existence of cows during the 
period preceding the application for the premium had to 
be checked on the basis of milk delivery figures. This had 
to be couched in flexible terms, however, to take account 
of the large differences in yields between countries, 
regions and herds. The risk referred to by the Court was a 
real one, but when the Commission considered the 
matter, it concluded that there was no alternative solution 
which did not involve greater risks. 
The rates of utilization of annual allocations of appropri­
ations between 1969 and 1975 were as follows: 7.13. The Commission does not see a contradiction 
between the aims of keeping agriculture viable in regions 
15. 12. 87 Official Journal of the European Communities 219 
which are less-favoured as a result of natural handicaps 
and adapting and strengthening agricultural structures 
where the agricultural population is ageing and farms are 
excessively small. 
On the contrary, the improvement of structures and the 
maintenance of agricultural activities in such areas 
requires that both objectives be achieved. 
The withdrawal of land from agricultural use as provided 
for by Directive 72/160/EEC is secondary to the main 
objective of structural improvement. The Directive also 
requires the Member States to submit with their draft 
implementing provisions 'an explanatory memorandum 
showing the relationship at regional level between the 
measure in question and economic and structural 
conditions.' This meant that contradictory effects could 
be avoided by requiring the provisions to be adapted to 
each specific regional situation. 
On the other hand, there is a real danger of conflict 
between the aims of agricultural development (irrigation 
and drainage) pursued by the Guidance Section of the 
EAGGF and the aims of the Guarantee Section. 
However, the Commission considers that, in the case of 
the less-favoured areas of the Community, the possibility 
of pursuing an economic development policy which is not 
entirely subordinated to agricultural market consider­
ations should be kept open. 
As regards the application of the measures 
Direct and indirect measures 
7.14. The Commission believes that both direct and 
indirect measures have a Community dimension. It 
requires the Member States to notify the recipients of the 
Community financial aid which they are receiving. 
Obviously the Member States must take responsibility for 
the implementation of indirect actions: for example, 
Article 32 (1) of Regulation (EEC) No 797/85 requires the 
Member States to 'make provision for effective checks of 
the information used to calculate the aids eligible for 
assistance from the Fund.' Their large financial contri­
bution also incites them to carry out appropriate checks. Financing by programmes 
7.16-7.17. The Commission accepts the comments of 
the Court on the effectiveness of programmes and will 
take them into account when it makes proposals as part of 
the reform of the structural Funds which is currently in 
progress. 
7.19. The reform of the Funds which is now under way 
will be the legal culmination of the campaign for 
improved coordination of the structural Funds which the 
Commission set in motion with its new Directorate-
General for the Coordination of Structural Instruments. 
This will answer the criticisms levelled by the Court by 
achieving greater simplification, harmonization and 
coordination of the operations of all Community 
structural instruments. 
In accordance with Article 130 D of the Single Act, the 
comprehensive proposal has been sent to the Council. 
Pursuant to this comprehensive proposal the Commis­
sion will also send the Council a proposal on the 
mechanisms for coordinating the operational techniques 
of the Funds 
The control and monitoring of the measures 
7.22-7.24. In its communication 'The Single Act: a 
new frontier for Europe', the Commission views monitor­
ing as an important aspect of the reform of the Funds. 
Article 6 of the comprehensive proposal recently adopted 
by the Commission deals precisely with monitoring and 
assessment. It stipulates that: 
— Community operations will be monitored to ensure 
that the commitments given as part of the objectives 
set out in Articles 130 A and 130 C of the Treaty are 
effectively honoured. This monitoring will, where 
necessary, make it possible to adjust operations in line 
with requirements arising during implementation; 
— in order to gauge their effectiveness, Community 
structural operations will be subject to ex post 
assessment to evaluate their economic impact and 
analyse their effect on specific structural problems; 
— the procedures for monitoring and assessing Com­
munity operations are laid down by the provisions 
referred to in Article 3 (4) and (5) and, in the case of 
the European Investment Bank, in the manner 
provided for in its Statute. 
220 Official Journal of the European Communities 15. 12. 87 
All these proposals will apply to the EAGGF Guidance 
Section once they have been adopted by the Council. 
7.22. Systems have been set up to check applications for 
payment or reimbursement. It is true that in its systematic 
examination of documents supplied by the Member 
States, the Commission uses terminology derived from 
the relevant rules. The object of this systematic exami­
nation is to improve clarity and strictness in the 
management of measures. The Commission feels that the 
definition of these terms in specific cases, which is for in-
house use, depends on the interpretation of the regu­
lations. 
7.23. The Commission cannot accept the Court's 
comment that it is unable to carry out detailed control of 
all EAGGF Guidance Section operations. In-depth 
examination of every single case receiving indirect aid 
would entail a disproportionate amount of work. 
However, for indirect actions with general impact, the 
Commission has instituted a system of individual 
information sheets for each measure and each recipient. 
After checking these information sheets, the Commission 
will, where necessary, examine the individual file in its 
entirety. 
Over the last five years, the departments responsible for 
the EAGGF Guidance Section have called for and 
examined over 44 000 individual information sheets (see 
the financial reports, Nos 12-16). If these checks reveal a 
breach of the rules in one specific case, the conclusion 
applies to that case alone but where a more systematic 
shortcoming is revealed, the Member State is asked to 
investigate the problem in respect of all the expenditure 
involved, to amend its system if necessary and to transmit 
a statement of the deductions to be made against the next 
application. This system is supplemented by on-the-spot 
investigations involving detailed examination of a sample 
selection of cases. 
7.24. The financial report is not intended as an analysis 
of the economic or structural results of the policy pursued 
but, as its title suggests, contains financial information, 
i.e. mainly figures on expenditure in the various sectors. 
While it is true that, as a rule, the Commission has not sent 
the Council analytical reports, each year its report on the 
agricultural situation in the Community contains statis­
tical tables and notes on the implementation of measures. THE EFFECTS ON AGRICULTURAL 
POLICIES 
Dispersal of measures and appropriations 
7.28. Regulation (EEC) No 797/85 differs very con­
siderably from the earlier socio-structural directives in the 
following ways: 
— it extends the system of aid for investments in 
agricultural holdings to a much larger number of 
farmers than had previously been the case while 
restricting the purpose of the eligible investment, in 
particular by excluding investments which would 
increase production; 
— it introduces a system of installation aids for young 
farmers; 
— it provides for a system of launching aids for the 
provision of certain cooperative services (replace­
ment, management and mutual aid); 
— it introduces aids for forestry measures on agricul­
tural holdings; 
— it adjusts training aids to meet the needs of young 
farmers; 
— it discontinues aids for the abandonment of agricul­
tural activity and the training of socio-economic 
counsellors. 
Infrastructure aid badly coordinated with the 
other types of aid 
7.32. As the Commission explained in its replies to the 
1982 report in connection with infrastructure measures 
under the EAGGF Guidance Section, if 35 % of a rural 
community is dependent directly on agriculture, at least 
50 % will be dependent either directly or indirectly. This 
means that the condition laid down in Article 2 of 
Regulation (EEC) No 1760/78, that the inhabitants must 
depend mainly on agriculture, is satisfied. 
7.33. For certain infrastructures, no link with the 
volume of production can be established although there is 
15. 12. 87 Official Journal of the European Communities 221 
a certain connection between irrigation and drainage. 
However, these two measures offer some of the most 
deprived farmers in the Community their only hope of 
lasting economic improvement. In practice it has proved 
possible to prevent the use of irrigation in vineyards, 
which was a potential source of abuse. It is, however, 
difficult to control the use of pasture after drainage, 
particularly when various types of animals (sheep, beef 
and dairy cattle) are kept on mixed farms. 
Limited impact of measures aiming to guide 
production 
7.35. The continuing growth of milk production is not a 
valid indicator of the impact of the measure. Obviously, if 
there had been no structural measure, production would 
have grown even more rapidly. However, the Commis­
sion recognizes that, overall, measures to reduce surplus 
production have rarely been as successful as was hoped 
since they have often been insufficiently attractive 
compared with the income that could be derived from the 
product in question. 
7.36. The Commission would point out that some 
limitation on aids granted in the milk sector was provided 
for in 1977 (6) and this was considerably tightened by 
Regulation (EEC) No 1946/81 (7). 
Producers in mountain areas are exempt from the co-
responsibility levy and it is applied at a reduced rate in 
less-favoured areas. It is unlikely that this has any 
significant effect on milk production, which is low in the 
totally exempt mountain areas, while the reduction in the 
levy elsewhere has only a slight economic impact. In any 
case the quota system applies everywhere. 
7.38. The initial indications that can be derived from the 
applications for finance under the new scheme for 
grubbing-up vineyards introduced by Regulation (EEC) 
No 777/85 (8), which accompanied a reform of the wine 
market, are encouraging. 
Aid for training and the acquisition of 
occupational skills largely unused 
7.41 - 7.42. The Commission agrees with the Court on 
the need for training and advisory services to assist the 
adaptation of agricultural structures. It accordingly regrets that certain Member States have been slow in 
introducing measures to develop the advisory services. 
It would point out that Regulation (EEC) No 1760/87 
provides more favourable conditions for financing 
training measures. 
Aid to improve the conditions for processing 
and marketing agricultural products badly 
coordinated 
7.44. The Commission considers that the appropriate 
vehicle for implementing these measures is a sectoral 
programme for each major product. Only a sectoral 
programme can show whether the aims of the measures 
are being met and in particular to what extent the 
measures conform to the objectives of the common 
agricultural policy. 
The Commission can see no major objection to the other 
Community instruments also providing aid in this area. 
Hitherto, it has always ensured that aid has not been 
received from more than one source and that the ERDF 
has followed the same rules as the EAGGF. However, it 
expects the reform of the structural Funds now in 
progress to result in a clearer demarcation of the areas of 
operation of these two Funds. 
7.45. When approving programmes and individual 
projects, the Commission tries to ensure that the 
proposed investments will have a beneficial effect on 
farmers' incomes. The openness of a market economy 
means that the checks it makes cannot be very stringent, 
but the type and existence of the contracts proposed to 
producers, for example, are usually checked. 
Furthermore, firms also have to take account of their 
medium- and long-term interests, which require them to 
remain on good terms with their suppliers of raw 
materials, particularly when these join forces to enhance 
their position in relation to the large firms. In any case, the 
firms in question are often cooperatives which belong to 
the producers. 
7.46. The Court's comment is valid and the risk which it 
mentions is ever-present. However, both the purpose of 
the sectoral programmes and the published criteria which 
the Commission uses to select projects are designed to 
ensure that these measures are consistent with the aims of 
the common agricultural policy. 
222 Official Journal of the European Communities 15. 12. 87 
In the milk sector, for instance, following a period when 
all aids were temporarily prohibited, the selection criteria 
emphasize investments concerning products not subject 
to intervention. In the case of tinned food too, the 
Commission has gradually phased out support for 
tomatoes, pears and peaches. In general, expansion of 
capacity for cattle feed is not supported. abandoned: a balance between all the interests involved 
must be found. 
The amendments to the socio-structural rules introduced 
by Regulation (EEC) No 797/85 concern aids to 
agricultural holdings which are designed in particular to 
direct their development in a way which will not lead to 
further increases in production. That is why priorities 
have been adjusted to reflect more faithfully the present 
guidelines of the common agricultural policy. 
FINAL COMMENTS 
7.47. The objectives of the common agricultural policy 
as defined in Article 39 of the Treaty must be attained in 
the broader context which also includes the budget 
problems. 
The same is true of the policy on agricultural structures. 
This means that the objectives of making structural 
adjustments in respect of products which have moved into 
surplus and of promoting the development of less-
favoured regions mainly devoted to agriculture may 
appear contradictory. However, neither objective can be 7.49 - 7.51. The Commission is mindful of the problems 
raised by the Court and is currently pursuing the reforms 
recommended on two fronts: 
reform of the common agricultural policy; a com­
munication presenting a review of action taken and 
the outlook for the future was sent to the Council in 
COM(87)410 final of 30 July 1987; 
the reform of the structural Funds provided for in 
Article 130 D of the Treaty, the proposal for the first 
stage of which was sent to the Council in 
COM(87)376 final of 24 August 1987. 
(') OJ L 167, 26.6.1987, p. 1. 
(2) COM(87) 166 final/3, 3.6.1987. 
(3) COM(87) 376 final/2, 24.8.1987. 
(4) COM(68) 1000, 18.12.1968. (5) OJ 136, 17.12.1962, p. 2892/62. 
(6) Regulation (EEC) No 1081/77, OJ L 131, 26.5.1977, p. 10. 
(7) OJ L 197, 20.7.1981, p. 32. 
(8) OJ L88, 28.3.1985, p. 8. 
15. 12. 87 Official Journal of the European Communities 223 
CHAPTER 8 
Structural measures relating to citrus fruit and fisheries 
REPLIES OF THE COMMISSION 
AID TO THE CITRUS FRUIT SECTOR 
Introduction 
8.3. The Commission would point out that no conclu­
sions about whether initial estimates will be met can be 
drawn from the appropriations entered and payments 
made up to the end of 1986. Article 1 of Regulation (EEC) 
No 2511/69 states that measures to be financed from the 
EAGGF may be commenced at any time up to 31 
December 1988; this implies that implementation and 
consequent payments will go on well beyond 1989 since 
payments may be spread over a number of years. In 
particular, Article 4 of the Regulation provides for 
additional aid to be paid over a maximum of seven years 
following grubbing-up, so that it may be 1997/98 before 
final reimbursements by the EAGGF are made. This 
means that the final cost of measures will not be known 
until well after 1988. 
As regards utilization of the appropriations for the year 
1984-86, reimbursements could not be made before the 
end of 1986 in respect of many of the applications, either 
because they were submitted late or because further 
information was sought. However, at 30 June 1987, the 
EAGGF had paid 9,2 million ECU in respect of the two 
outstanding cases in Italy and France, and 1,4 million 
ECU will be paid to Greece in the near future. The expression 'a farmer practising 
agriculture as his main occupation' 
8.4. The Commission is aware that the definition of 'a 
farmer practising agriculture as his main occupation' may 
in some cases give rise to problems in carrying out checks. 
In general, the local authorities should be in a good 
position to know if the employment opportunities 
existing outside farming could give cause for doubt about 
whether the majority of citrus farmers have agriculture as 
their main occupation. The formal definition of 'a farmer 
practising agriculture as his main occupation' may be 
regarded as a reference to be used as required for checks 
on individuals. It is, however, inevitable that any 
definition of 'a farmer practising agriculture as his main 
occupation' will depend on income and/or hours of work 
spent farming, which can only be checked by the local 
authorities in a manner which takes account of the 
particular situation of citrus farmers. 
8.5. Since it is bound to apply Community legislation 
correctly, the Commission could not make any re­
imbursements as long as the national authorities had not 
provided satisfactory replies to its requests for more 
information. When this information was received, the 
Commission could determine the final reimbursements 
due for the years in question and paid LIT 4 309 845 719 
to Italy on 26 June 1987. 
Coordination of the various measures forming 
part of the common measure 
8.6. The Commission agrees with the Court on the need 
to coordinate the various phases of conversion. Ideally, 
this coordination should take place when the plan is 
drawn up because the production cycle for reproductive 
material is relatively long and a lack of material would 
224 Official Journal of the European Communities 15. 12. 87 
hinder the conversion operations planned. The plan can 
be only indicative as regards implementation because it is 
up to each citrus farmer to decide whether or not he 
wishes to benefit from the aid scheme available. 
8.8. The Commission agrees with the Court that it is 
essential for Member States to send in progress reports on 
their plans. It is true that Italy has not complied with this 
obligation despite a number of reminders from the 
Commission. 
Specific measures provided for in respect of 
Corsica 
8.10. The Council has approved a correction to 
Regulation (EEC) No 3130/86 extending all measures 
under the second citrus fruit plan until 31 December 
1988 ('). This remedies the shortcoming noted by the 
Court. Aid for the conversion and restructuring of 
plantations 
8.11. Confronted with the enormous difficulties of 
establishing and checking actual expenditure in respect of 
each plantation, the Member States have introduced 
systems which are simple to manage and can be checked 
effectively but still provide a reasonable guarantee that 
actual expenditure has been covered. If it is found in the 
case of Greece that actual costs and ceilings do not 
correspond, the Commission will check the application of 
the measure. 
AID FOR CAPACITY REDUCTIONS IN 
THE FISHERIES SECTOR 
8.12-8.14. Commission staff have found that the 
tables used by the German authorities to calculate the 
number of days laid up do not satisfy the requirements of 
Directive 85/515/EEC. They are currently considering the 
legal aspects of this matter before contacting the national 
authorities with a view, if necessary, to recovering 
amounts wrongly paid. The Court will be kept informed 
of developments. 
C1) OJ L 200, 21.7.1987, p.18. 
15. 12. 87 Official Journal of the European Communities 225 
CHAPTER 9 
European Regional Development Fund (ERDF) 
REPLIES OF THE COMMISSION 
INTRODUCTION GENERAL OBSERVATIONS 
9.1 - 9.2. The Commission notes that the Court's 
general observations with regard to increasing the 
effectiveness of the ERDF (9.3 - 9.21) are to be viewed in 
the light of the planned reform of the structural Funds 
under Article 130 D; which was outlined in the 
Commission communication of 24 August 1987 Q) and 
will be given substance in the proposals for implementing 
regulations currently being drawn up. It further notes that 
the suggestions for specific improvements to the system 
for granting ERDF aid (9.22 - 9.61) are to be seen in the 
context of those general observations. 
The Commission would stress from the outset that it 
agrees with the Court's view that there is scope for 
enhancing the effectiveness of the ERDF as an instrument 
of regional policy. It would, however, recall that the 
ERDF operates on the basis of legislation which 
constitutes a framework, or even constraints, for its 
activities. Some of the features commented on by the 
Court are therefore inherent in the rules currently in force. 
In its communication on the reform of the structural 
Funds (l), in which it expands upon the guidelines set out 
in its earlier communication 'Making a success of the 
Single Act' (2), the Commission also makes the point that, 
while the operation of the structural Funds, including the 
ERDF, has improved constantly in recent years, there are 
still a number of shortcomings which undermine the 
effectiveness and impact of Community aid. 
(!) The footnotes appear at the end of each chapter. 9.3 - 9.21. The changes to the operating rules of the 
structural Funds which the Commission proposed in the 
abovementioned communication and the accompanying 
proposal for a regulation cover the general observations 
made by the Court on the subject of the financing of 
regional development policy and the system for granting 
ERDF aid with regard to the need to concentrate to a 
greater extent on the real priorities in terms of regional 
development. 
Mindful of the fact that the ERDF, in common with the 
other structural Funds, is an instrument for strengthening 
economic and social cohesion in the Community and, like 
them, must cease to be regarded as part of a system of 
financial compensation, the Commission has proposed 
concentrating its activities mainly on helping the less-
developed regions to catch up and on converting the 
declining industrial regions, with this geographical 
concentration of ERDF resources on these priority 
objectives to be enhanced by the choice of tough eligibility 
criteria (9.3, 9.8, 9.9 and 9.12) (3). 
While the concentration of ERDF activities on these 
specific objectives is an essential condition for strengthen­
ing economic and social cohesion, it is not sufficient in 
itself. The Commission has therefore proposed that the 
volume of the structural Funds be doubled in real terms 
between now and 1992, so that the resources deployed will 
be commensurate with the ambitions expressed (9.4) (4). 
So that the structural Funds will have a real economic 
impact, the Commission has proposed improving operat­
ing methods by ensuring that Community assistance 
dovetails better with national initiatives and by making 
more extensive use of programming (5). These measures, 
226 Official Journal of the European Communities 15. 12. 87 
like the concentration of the Fund's activities in well-
defined areas and the stepping-up of resources to an 
adequate level, are part of the reform of the structural 
Funds under Article 130 D of the Treaty. 
The Commission intends to work in close collaboration 
with the Member States in order to ensure a rational 
share-out of tasks between the Community and the 
national authorities, and hopes that this will provide the 
basis for a genuine partnership (9.17 - 9.21) 
In order to improve annual programming with a view to 
gaining a coherent medium-term overview of the 
measures to be taken by all the Community instruments 
in relation to the priority objectives, the Commission has 
proposed that the Member States should submit to it their 
plans for regional development or conversion. These 
should place more emphasis than present regional 
development plans on the operational aspect and will 
ultimately give rise to Community support structures 
which reflect the priority given to the poles of develop­
ment and at the same time provide the framework for 
coordinating activities at Community level (9.12 - 9.13). 
As regards the assistance proper, the Commission's 
proposal is to concentrate on supporting multiannual 
operational programmes, which have already been tried 
out under the present ERDF Regulation, rather than 
managing thousands of dossiers relating to small projects 
in line with the rules currently governing the ERDF. The 
implementation of operational programmes, which it 
should be possible to improve further by means of the 
consultation process with the national authorities 
referred to above, must be accompanied by increased 
monitoring and ex post evaluation (9.9, 9.14-9.16). 
Several Member States are lagging behind in terms of 
infrastructure in certain regions owing to lack of funds. In 
general, the setting-up or extension of public networks is 
not seen from a purely commercial point of view, but in a 
wider context as a prerequisite for economic develop­
ment. The problem referred to by the Court will be 
examined with a view to finding appropriate solutions 
(9.10-9.11). 
Finally, the Commission intends to harmonize and 
simplify the technical and procedural rules governing aid 
applications and to improve coordination between the 
Community instruments (6). While the coordination of 
the structural instruments is nothing new, the reform of 
the structural Funds under Article 130 D of the Treaty 
will complete in legal terms the process of strengthening 
this coordination which has been underway for some 
years. In addition to this, the aim will be to diversify the means of intervention used by the structural Funds and to 
find a combination of loans and subsidies which is both 
rational and economic. In other words, the Fund must 
offer, in conjunction with the EIB and the other lending 
instruments, an entire range of financing measures 
adapted to the natuFe of the operations and projects 
involved (9.5 9.7). 
THE COMMISSION'S PROJECT 
FINANCING SYSTEM 
9.22 - 9.24. The changes proposed by the Commission 
in its communication on the reform of the structural 
Funds (7), which will be expanded upon in the proposals 
for implementing regulations currently being prepared, 
cover the general observations made by the Court with 
regard to improving the effectiveness of the ERDF. It 
goes without saying that the specific improvements 
suggested by the Court to the current system of financing 
by project are also covered by these changes, in so far as 
they relate to the shortcomings of the system inherent in 
the current ERDF rules. The Commission would, 
however, comment on some of the other points raised by 
the Court. 
Appraisal of aid applications 
9.25 - 9.40. The method devised by the Commission for 
assessing the value to the Community of the proposed 
measures is now reflected in the application forms for aid. 
As a result, the Member States give more consideration to 
the Community aspect when preparing their applications 
for ERDF assistance. 
At the same time, it is clear that the emphasis placed on 
the financing of multiannual operational programmes in 
the context of the reform of the structural Funds under 
Article 130 D should eliminate the problems which 
inevitably accompany the system in operation under the 
current ERDF Regulation, whereby thousands of small 
projects are financed. This should apply to the drawing-
up of aid applications as well as to the assessment of their 
value to the Community and the monitoring of the 
sometimes very modest investments involved in these 
small projects. 
15. 12. 87 Official Journal of the European Communities 227 
Consultation of other departments 
9.35-9.36. The Commission would point out to the 
Court that the consultation of other departments, under a 
procedure established by the Commission, is an integral 
part of the appraisal process. The Commission will not 
take a decision to grant aid to any project which has been 
the subject of an unfavourable opinion from the 
departments consulted. In such cases, the appraisal 
procedure is extended. 
Justification of differences in aid levels 
9.37 - 9.38. With regard to the levels of ERDF aid, the 
Commission would stress that it intends, as part of the 
reform of the structural Funds, to make structural 
operations more cost-effective by varying the Com­
munity's share in the financing of projects. For this 
purpose, it proposes that account be taken of such factors 
as the seriousness of the problems to be tackled, the 
financial capacity of the Member State and the value of 
the measures concerned to the Community. 
Failure to produce an appraisal report 
9.39. The large number of small projects submitted 
under the current ERDF rules make it materially 
impossible to draw up an appraisal report on each one as 
proposed by the Court. 
Implementation and monitoring of aid 
decisions 
Basic information available 
9.41 - 9.48. It is true that the information available to 
the Commission's departments for monitoring implemen­
tation of the projects is virtually limited to the inform­
ation submitted by the Member States in support of their 
requests for payment and the results of the sample on-the-
spot checks. This is, in fact, in accordance with the current 
ERDF rules. As indicated above, monitoring of commitments entered 
into will be made easier under the new system to be 
introduced as part of the reform of the structural Funds 
which, in the context of close cooperation with the 
Member States, places the emphasis first on multiannnual 
operational programmes and then on large-scale projects 
which will gradually replace the current smaller ones. In 
the same vein, the Commission is planning to step up its 
checks on the quality of the projects receiving Com­
munity aid, and will carry out effectiveness studies, both 
on a one-off basis and at a more general level, in order to 
satisfy itself that the appropriations available are being 
used as efficiently as possible and that its structural policy 
is making a real contribution to the cohesion process. 
9.43. As a result of the appreciable progress achieved in 
the use of computers — as acknowledged by the Court — 
it will be possible from 1988 onwards to monitor the 
financial implications of the commitments entered into 
and to check all aspects for consistency with the 
Community's accounts. 
Advances and accelerated payments 
9.44-9.46. The Commission would emphasize that 
advances and accelerated payments are made, at the 
request of the Member State itself, in accordance with the 
criteria laid down in Articles 30 and 32 and Article 28 (3) 
of the current ERDF Regulation. They may also be 
granted, in accordance with Article 29 of the same 
regulation, to projects already launched before the aid 
decision was taken. It is planned, however, to simplify 
and harmonize the payment mechanisms as part of the 
reform of the structural Funds. It is none the less true that 
there is scope for greater accounting transparency. 
Dormant projects 
9.47 - 9.48. As the Commission already pointed out in 
its replies to the Court's report on the 1985 financial 
year (8), the current ERDF rules do not contain any 
binding provisions relating to the closure of dormant files. 
The Commission, conscious of the fact that some 
commitments remain outstanding for too long, has 
accordingly given legal shape to the objectives outlined in 
its communication 'Making a success of the Single Act' (9) 
by including in its proposal to amend the Financial 
Regulation (10) a provision whereby legal commitments 
entered into for measures extending over more than one 
228 Official Journal of the European Communities 15. 12. 87 
financial year must contain a time limit for implemen­
tation, as already requested by the Court. 
Procedures used for the monitoring of aid ranges and 
recoveries 
9.49. The Commission will consider what measures 
should be taken to ensure that, at the end of each period of 
application of the ranges referred to in Article 4(4) of the 
ERDF Regulation, i.e. at the end of each three-year 
period, the revenue and expenditure account shows the 
rate of absorption of the commitment appropriations in 
relation to the upper and lower limits of the ranges. 
9.50. As regards the reimbursement by the Member 
States of excess sums paid, the adjustment will be made in 
future by means of a recovery order so that the amounts 
involved will be incorporated in the Community's 
accounts. 
The closure of decisions 
9.51 - 9.52. See replies to paragraphs 9.41 - 9.48 above. 
On-the-spot inspection of the projects by the 
Commission and assessment of the results 
9.55. The Commission will endeavour to report the 
findings of its inspections to the Court in greater detail. In 
addition, the closer monitoring, already initiated with the 
setting-up of monitoring committees dealing more 
specifically with programmes, and the improvements 
planned as part of the reform of the structural Funds, 
should increase the effectiveness of the ERDF along the 
lines suggested by the Court. 
9.56 - 9.57. The Commission has requested those 
Member States which have not yet complied with this 
requirement to do so as soon as possible. PROGRAMME FINANCING AND THE 
INTEGRATED MEDITERRANEAN 
PROGRAMMES 
Programme financing 
9.58 - 9.59. While it is true that at the end of 1986, not 
all the Member States whose upper range limit is higher 
than 1.5% had submitted applications for aid in the form 
of programmes in accordance with Article 6 of the ERDF 
Regulation, the Commission would point out that the 
provisions of Article 6 apply over a period of three years, 
i.e. up to the end of 1987. Furthermore, it is now in a 
position to report that all the Member States, including 
those not obliged to do so, will have submitted 
applications for aid by the end of 1987 in the form of 
Community programmes, national programmes of 
Community interest or IMPs incorporating national 
programmes of Community interest. 
The Court makes the point that Luxembourg benefits 
from a national programme of Community interest even 
though it is not covered by a regional development 
programme. The national programme in question relates 
to measures to create alternative employment in a 
declining industrial region. As it is a sectoral programme 
confined to a small part of the country's territory, which 
ties in with the 'non-quota' programme covering the 
period 1985-89 in the same sector, the Commission felt 
able to accept it. 
9.60. In response to the Court's request, the Commis­
sion carried out a very extensive study of the Com­
munity's potential liabilities in accordance with the 
Court's observations (see 1986 revenue and expenditure 
account). A legal basis would have to be found and 
substantial amounts of financial liabilities entered in the 
accounts. 
9.61. The Commission will endeavour to comply fully 
with this requirement in the future. 
Integrated Mediterranean programmes 
9.62 - 9.63. The IMPs represent the first experiment in 
the use of the integrated approach on a large scale, and it 
was inevitable that there would be some teething 
problems. A great deal of work went into starting them 
up, as new structures were needed, as well as working 
methods which differed considerably from those used to 
15. 12. 87 Official Journal of the European Communities 229 
manage the structural instruments. In addition, the high 
standards required of programmes and the procedures 
specified in the regulation governing the IMPs did 
nothing to speed up appraisal of the programmes. 
Finally, it should be stressed that the Commission does 
not have sole control over the time taken for prepar­
ations, as the exact content of each measure is defined in 
conjunction with the national and regional authorities in 
the Member State concerned, which are responsible for 
coordinating their own activities at all institutional and 
administrative levels. 
As some 10 IMPs (the seven French programmes and 
three Greek ones) will be launched in 1987, it would 
appear that the running-in period is now over. The 
Commission will also endeavour to get the last three 
Greek programmes started in 1987. 
As regards the 17 Italian programmes, which were only 
submitted at the end of 1986, the Commission hopes that 
they will be adopted at the very beginning of 1988. 
The following points should be made with regard to the 
IMP for Crete: the programme, formally approved by the Commis­
sion in July 1986, provided for Community loans 
totalling some 90 million ECU over seven years, 
the EIB is currently engaged in discussions with the 
Greek authorities on the way in which this sum is to 
be utilized. 
9.64 - 9.65. The pilot measures implemented in prep­
aration for the IMPs have served* their purpose. As the 
Commission and the Member States concerned decided 
to extend them by one year (until the end of 1986), it is 
natural that at the beginning of 1987 the Commission had 
not received appraisal reports for work that was not then 
completed. The Commission recently requested that these 
be submitted, and it should be assessing the pilot 
measures before the end of 1987. 
The pilot projects were designed as a testing ground for an 
integrated development strategy, i.e. to try out new 
methods and procedures and study the practical impli­
cations for the future management of the IMPs. They 
have already demonstrated that the integrated approach 
is a useful means of tackling the development problems of 
the Mediterranean region, as well as highlighting a 
number of problems, relating in particular to monitoring 
and to the coordination of the various sources of funds. 
These problems have been taken into consideration in the 
preparation of the IMPs. 
(1) COM(87) 376 final/2 of 24 August 1987. 
(2) COM(87) 100 of 15 February 1987. 
(3) COM(87) 376 final/2, op. cit., point I, pp. 4-7. 
(4) COM(87) 376 final/2, op. cit., point II, pp. 7-13. 
(5) COM(87) 376 final/2, op. cit., point III, pp. 13-16. (6) COM(87) 376 final/2, op. cit., point IV, pp. 16-19. 
(7) COM(87) 100, op. cit. 
(8) OJ C 321, 15.12.1986, p. 221, point 7.18. 
(9) COM(87) 100, op. cit. 
(>°) COM(87) 400 final of 24 July 1987, p. 8. 
230 Official Journal of the European Communities 15. 12. 87 
CHAPTER 10 
Research 
REPLIES OF THE COMMISSION 
INTRODUCTION 
COMMENTS GENERAL resolution on the 1985 discharge and at the DG XII 
research seminar in Genval on 14 and 15 July 1987. 
10.1 - 10.3. The Commission takes the view that the 
management of the research and technological develop­
ment (RTD) programmes should not only comply with 
the rules of sound financial management but should also 
be assessed at regular intervals in the light of the results 
obtained: The Commission therefore intends to take advantage 
of the implementation of the new RTD framework 
programme for 1987-91 to develop evaluation of 
RTD activities; in its 1987 programme it announced a 
communication on a support programme for the 
evaluation of specific programmes. 
The Commission considers that its management 
record on RTD appears even more outstanding when 
it is borne in mind that, for the first time ever, almost 
1 000 million ECU was entered in Chapter 73 in 1986. Like the Court, the Commission is intent at all times on 
improving the management of RTD programmes: 
The fact that not all the appropriations available in 
1986 could be used was attributable to reasons that 
had nothing to do with sound management (delayed 
Council decision, absence of legal base, Council's 
programme of cuts for JRC). A detailed analysis of 
the execution of the 1986 budget shows that the 
Commission largely made up the Council's delay at 
legislative level (decision of 12 March 1985 on seven 
programmes) when implementing these programmes. 
To permit assessment of the RTD programmes, the 
Commission has pursued a policy of systematic 
evaluation alongside a contractual policy based on 
the criteria of the framework programme. Internal level 
On 19 November 1986 the Commission adopted a 
decision concerning the management of activities under 
the 1987-91 framework programme. The aim of this 
decision is to streamline and simplify management of 
RTD activities under the new framework programme as 
soon as possible and, to begin with, improve coordination 
between the two main units administering the program­
mes. 
— External level 
This started at the Commission's initiative. It was 
dealt with in a Council Resolution of 28 June 1983 
and was then backed up by the Council Resolution of 
9 December 1986 which took note of the Com­
mission's five-year action plan for the evaluation of 
Community research and development activities. 
Parliament too has underlined the importance it 
attaches to these activities, in particular in its In 1986-87 an outside body — Arbeitsgemeinschaft 
Planungsforschung Heidelberg — conducted a study for 
the Commission to compare the procedures for the 
allocation of RTD funds by the Commission and by four 
Member States in the shared-cost research sector. This 
study showed that Community research is administered 
'with high intensity'. 
15. 12. 87 Official Journal of the European Communities 231 
The Commission therefore considers that the internal 
rules of management applied by DG XII since 1985 for 
shared-cost and concerted action are an adequate 
response to the objectives of sound financial manage­
ment. 
The Commission will none the less take whatever steps 
may be necessary to allay the Court's concern as 
expressed in its report on 1986; however, while the 
Commission considers that the objectives highlighted by 
the Court should be satisfied in certain cases, it feels that it 
is sometimes possible to do this by other means better 
suited to the management of Community programmes 
and offering satisfactory results in terms of cost-
effectiveness (for example, organizational matters in 
relation to contracts, data-processing development, etc.). 
As regards direct action, a panel of high-level industrial 
experts chaired by Dr Harry Beckers has drawn up an 
overall report on the Joint Research Centre (JRC) in 
response to the request made by the Council in April 
1986. 
When preparing the new programme of JRC activities for 
1988-91, the Commission intends to send the Council and 
Parliament proposals concerning the administrative, 
financial and management aspects which will be prompt­
ed by the concern expressed not only by the Court but also 
by the Council and Parliament. 
The JRC has already informed the budgetary authorities 
that it intends to abandon the matrix-based management 
of the past (i.e. management by project and execution by 
the scientific divisions) and make a distinction between 
the management of programmes and the management of 
resources (requiring a revision of the internal rules of 
management). Moreover the preliminary draft budget for 
1988 already made innovations of the type desired by the 
Court. 
The Commission would point out that its decision of 19 
November 1986 also covers the planning and develop­
ment of computerized systems for research. 
The Commission decision of 19 November 1986 aims for 
better coordination of computer departments and 
systems, to guarantee sound management of shared-cost 
contracts. This decision comes under the Commission's 
policy on computer equipment and coordination which 
Parliament endorsed on the basis of Mrs Scrivener's 
report of 11 December 1985; it is also a response to the 
points raised by Parliament in connection with RTD in 
the 1985 discharge decision. The Commission has asked its departments to speed up 
the computerization of data on the overall management 
of RTD programmes to permit centralization of data at 
the important stages of the management cycle so that they 
are available as early as possible during implementation 
of the new framework programme. This instrument of 
overall management will be backed by local systems 
which will automate certain procedures compatible with 
Sincom, mainly in connection with commitments and 
payments, and the procedures for RTD projects and 
contracts. 
The Commission will not fail to take any other measures 
needed to comply in full with the Court's remarks on this 
matter. 
PLANNING AND DEVELOPMENT OF 
COMPUTERIZED SYSTEMS 
10.4 - 10.13. The Commission would make the follow­
ing points: 
— The time factor is important: two of the three projects 
(Sibeca and Diodon) were launched in 1979 and 1980 
respectively, i.e. at a time when real-time planning 
techniques and the equipment required were not up to 
today's standards. It is evident that following the 
Commission decision of 19 November 1986 its 
departments will now take full account of its 
experience when implementing a pilot scheme like 
Diodon or launching a project like Sibeca; 
— The conclusions to be drawn from the Court's report 
should make allowance for the change in the 
requirements to be satisfied and the novelty of the 
technical resources available. 
Achievement of objectives 
10.7. The problem of the interconnection of the various 
JRC Establishments prompted a test with the Karlsruhe 
Establishment which was successful. 
Full interconnection will be achieved gradually, in order 
not to disrupt overall operation, and subject to available 
resources. 
Sibeca supplies the information required by the depart­
ments concerned. 
232 Official Journal of the European Communities 15. 12. 87 
Planning and timetable 
10.8. Diodon was designed in 1980 and introduced from 
1981 to 1984 to take over the management of the 
contracts for shared-cost and concerted-action projects as 
the number of DG XII's contracts increased substantially 
from 1980. 
The delay in bringing Diodon into operation was largely 
due to the inadequacy of the resources (equipment and 
staff) allocated to DG XII. 
The main objective of Sibeca was to replace the batch-
mode Corig system by a more sophisticated real-time 
computer system. 
The delays did not disrupt DG XII's operations, the 
Diodon system being intended as a contract-management 
aid; as for the JRC, its Corig system maintained regular 
financial management of the activities described. 
Project management 
10.9 - 10.13. As already indicated above, the Commis­
sion considers that, when the Sibeca and Diodon projects 
were launched, DG XII and the JRC faced the same types 
of difficulty as computer experts and users faced at the 
time in operations in both the public and the private 
sector. 
The Commission decision of 19 November 1986 and the 
coordinated development of data-processing operations 
by the Directorate of the Computer Centre since 1982 
should in future forestall the difficulties mentioned by the 
Court; DG XII can provide the Court with any 
information required on the new Ampere project which 
will eventually replace the Diodon system. 
Commission coordination of data-processing 
projects 
10.12-10.13. The Commission is aware that the 
contents of the Data-processing guide could be improved; 
a new version is being prepared. 
The Commission would point out that the guide already 
contains a document entitled 'Cost-benefit analyses of 
data-processing investment' to which departments may 
refer. Since the beginning of 1987 a resource management 
system provides information on the data-processing 
resources planned and used by projects in a multiannual 
framework. 
Guidelines for the development of local applications and 
a reference document on the 'rules and procedures for the 
good management of a project' are also being drawn up. 
These instruments and documents should extend inform­
ation available to managers and provide additional 
possibilities of control on the course of the projects. 
However, there is no reason why the Data-processing 
guide should become a handbook of instructions. Its 
contents will be applied more by conviction and 
awareness and this is the objective the Informatics 
Directorate is aiming for. Progress has in fact been seen in 
the management of projects. 
The Commission would still make the following com­
ments on each of the three projects: 
Sibeca 
The Commission admits that this project has run into 
difficulties and that the cost overrun expected is 
significant. However, it feels that more attention should 
be paid to the fact that the project was launched at a time 
when the Commission had not started to coordinate data-
processing instruments, as it has now decided to do (the 
Data-processing guide came out after the project was 
launched). 
It is true that the Sibeca project has not progressed as 
expected, but this is unfortunately common to this type of 
project; the Commission knows of no data-processing 
project of this scale and, in particular, of this complexity 
which was carried out in the late 1970s in accordance with 
the original plan and budget. At the time data processing 
had not reached maturity and was constantly developing; 
to meet the requirements of a project like Sibeca which 
was and still is unrivalled on the market (representing 
500 000 Cobol lines while most programmes have 
between 10 000 and 100 000 Cobol lines) there were no 
'directions for use' which could guarantee success in 
advance. This is because Sibeca is so closely modelled on 
the Financial Regulation and the structures of budget 
execution that any adaptation of commercial software to 
JRC requirements would have been tricky or impossible. 
15. 12. 87 Official Journal of the European Communities 233 
In addition, the Sibeca software now ranks among the 
most sophisticated on the market because of the 
Community's administrative and financial procedures. 
It is true that the JRC placed what turned out to be 
excessive faith in the company originally selected to carry 
out the project. This was a well-known company whose 
accounting software package had sold very well and is 
today considered a market leader; the JRC thought there 
would be few problems in adapting the software package 
to its specific requirements. It was therefore hard to 
foresee that this company would not be able to complete 
the work. However, once the data-processing depart­
ments of the Ispra Establishment took over the task of 
seeing through the project, they produced the system that 
is now operational: this is a major success which could 
only be achieved when the resources employed were 
sufficient. 
The Commission's aim is to put the final touches to the 
operation of Sibeca and apply it to the whole of the JRC. 
Diodon II 
The Commission would make the following points: 
— The Diodon system has made it possible to improve 
the monitoring of the administrative and scientific 
management of contracts, to speed up the adminis­
trative procedures and to cope with the management 
of a larger number of more complicated contracts 
with a small staff in line with the objectives set in 1980. 
— The cost overrun for Diodon II is the result of the 
large number of new operations (marginal-cost 
contracts, multi-contractor and transnational con­
tracts, for example) added to the objectives laid down 
in the preliminary study of 1981. Programme 
management policy has changed considerably since 
then (for example, four to five contractors for each 
contract, projects which are systematically trans­
national). 
— The Court's report lists a number of principles to be 
applied when implementing data-processing projects 
such as Diodon II (compliance with deadlines, formal 
monitoring, etc.). A pragmatic approach as adopted 
by DG XII, which pioneered the introduction of 
automated management procedures in the Commis­sion, was equally necessary in view of the changing 
and uncertain budgetary and technical circumstances 
which have always surrounded the project. The 
system's achievements should therefore be empha­
sized as much as the imperfections which may be 
attributed to its development. 
Elan 
As regards the applications of management developed 
under the Elan research project, the Commission admits 
that the attempt to combine different objectives (of 
research and immediate use) led to compromises being 
accepted on the infrastructure side (i.e. immediate use) 
which did not permit achievement of the full result 
expected. 
In addition to this inherent difficulty, there is the fact that 
the consortium responsible for carrying out the project 
underestimated the complexity of the task. When this 
became obvious, the Commission set up a project 
management board to remedy it. 
However, the Commission considers that Elan's partial 
and limited lack of success did not have any adverse 
impact on the effectiveness of Esprit management, which 
has often been praised. (}) 
DIRECT ACTION RESEARCH 
General 
10.14-10.29. 1. The Commission considers that the 
Court's observations should be examined in the wider 
context of the reform of the JRC which it intends to carry 
out following a number of recent studies and analyses 
such as the report of the panel of experts chaired by Dr 
Harry Beckers (already mentioned above) and the 
comments of the JRC's Board of Governors on this 
report. 
Apart from pointing to the need for redefining the JRC's 
role, the report contains a number of recommendations 
concerning its operation and effectiveness, the mobility of 
JRC researchers, its availability for outside contracts for 
the Community, the Member States and the industries 
concerned and the diversification of sources of finance. 
(') The footnotes appear at the end of each chapter. 
234 Official Journal of the European Communities 15. 12. 87 
2. When considering the discharge in respect of the 1985 
budget, Parliament's Committee on Budgetary Control 
decided to devote a special report to the JRC which would 
also contain a number of proposals concerning the 
rationalization of structures and the management of the 
JRC. A delegation headed by its chairman, Mr Aigner, 
visited the Ispra Establishment for this purpose from 18 
to 20 May 1987 (see paragraphs 10.1-10.3). 
3. The Commission would point out: 
— that a mid-term review of the 1984-87 JRC pro­
gramme was conducted and the report drawn up by 
independent experts revealed that the results of the 
JRC's scientific activities were of good quality; 
— that the panel of industrial experts recommended 
greater flexibility and autonomy in the JRC's 
management in future. 
Operation of the functional budget 
Allocation of expenditure 
10.20 and 10.22. The Commission takes the view that 
the distribution of indirect expenditure can be shown in 
the accounts in a number of different ways — all equally 
justifiable — and to various degrees of detail. No two 
economic units will choose the same method for breaking 
down expenditure since objectives differ. Expenditure in 
an industrial unit, where the marginal production cost of 
a repetitive assembly-line production activity has to be 
determined, will not be broken down in the same way as in 
a research centre like the JRC, where the benefits of a 
four-year Community programme are to be determined. 
These benefits are calculated more through scientific 
evaluation than by an exact statement of the resources 
employed. 
Although it is important to quantify the resources 
employed, a method giving the results desired at an 
acceptable administrative cost must be chosen for the 
JRC. 
The method chosen by the JRC for the allocation of 
expenditure is recurrent and applies a precise logic which has been approved independently by the Financial 
Controller. Staff expenditure is broken down every 
month — for the previous month — on the basis of 
statements of utilization drawn up by each head of 
division for the staff for which he is responsible. As for 
general services proper (site maintenance, heating, 
lighting, joint administrative expenditure), the Commis­
sion is of the opinion that the simple method it uses is 
satisfactory despite not being codified. 
Presentation of annual accounts 
10.26. Together with the annual revenue and expendi­
ture account, the Commission publishes two volumes on 
research and investment appropriations to expand on the 
information in the annual accounts. Volume III of the 
revenue and expenditure account analyses the out-turn of 
the allocation accounts and the volume on 'Expenditure 
and revenue relating to research activities' analyses the 
cost of research activities for each budget heading in 
terms of technical support, infrastructure and adminis­
trative support. 
SHARED-COST RESEARCH 
General 
10.30 -10.32. The Commission would point out that 
the appropriations for shared-cost and concerted-action 
research in Chapter 73 finance a vast range of activities 
which involve a large number of programmes cor­
responding to well-defined scientific requirements and 
which must be considered by reference to their specific 
features. The problems of management must be tackled 
and assessed differently depending on whether the 
projects are concerted-action or shared-cost research, 
whether the project is large-scale (Brite) or inexpensive 
(CBR), whether RTD projects involve basic research or 
industrial research and development, whether the outside 
partners are laboratories (public or private), universities, 
small businesses — from 12 Community countries — to 
which the Community machinery must adapt, at least in 
part. In addition, the result of applying the criteria of the 
framework programme is that most of DG XII's 
contracts are transnational and thus involve several 
partners (an average of four or five) for each contract in 
the case of major RTD programmes such as Brite, Euram, 
etc. 
15. 12. 87 Official Journal of the European Communities 235 
Shared-cost research other than the fusion 
programme 
The background to the management of the contracts 
10.33. As regards organization of the contracts depart­
ment, the Commission would point out that it adopted a 
new organization chart for DG XII-JRC in January 1987, 
leading to important changes; however, the Research 
Contract Policy and Management Division remained 
unaffected by these changes, since the Commission 
considered that the current system, despite its shortcom­
ings, had shown itself to be the most effective in dealing 
with the large number of constraints, including the 
language aspects. 
Any other organization of the Contracts Division would 
jam operations (it would no longer be possible to cope 
with the peaks in the workload occuring when the various 
RTD programmes are introduced) or would require a 
considerable increase in the number of staff handling 
contracts. 
The Commission has therefore continued with the current 
system and tried to improve it by harmonizing manage­
ment with DG XIII. The teams responsible for negotiat­
ing contracts now regularly include scientists and officials 
(negotiators) from the Contracts Division; the instal­
lation of liaison officers to achieve greater integration 
between scientific and administrative staff has proved 
satisfactory and this organizational set-up, first tried at 
the end of 1985 when new programmes like Brite were 
launched, was strengthened in 1986 and 1987. 
Control of the management 
10.34 -10.35. The Commission maintains that, in the 
case of DG XII, the management controls introduced 
have proved completely satisfactory. 
It is evident that DG XII cannot be properly compared to 
national RTD organizations (see general comments, 
paragraphs 10.1-10.3) except in that it is subject to a twin 
system of control, including control of contract manage­
ment, first by the Contracts Division and then by 
Financial Control. 
An internal report on the management of DG XII drawn 
up in 1985 also states that the internal arrangements 
applied in DG XII ensure that the procedures are 
extremely reliable; steps were taken to further enhance 
this reliability when the seven new RTD programmes 
adopted on 12 March 1985 were launched. Computerization of budget management 
Diodon II data-base 
10.36. The Commission considers that the Diodon II 
data-base has enabled it to cope with the many 
management problems caused by the increase in the 
number of DG XIFs contracts; thanks to the data 
supplied by Diodon II, DG XII was able to achieve a good 
utilization rate for the appropriations available in 1986 
and speed up the implementation of the RTD pro­
grammes to offset the delays that occurred at the approval 
stage. 
10.37. The Diodon pilot project was never intended 
either at the outset or during operation to cover the 
budgetary or accounting aspects of contract implemen­
tation (this being done by DG XIX's central accounts) 
but to ensure real-time management of research con­
tracts. 
The system for managing budgetary and accounting 
implementation is the A.58.P which was specially 
developed by the accounts department for managing 
indirect-action research. 
As required by the specific arrangements for research and 
development set out in Title VII of the Financial 
Regulation, this system covers not only expenditure 
under contracts but also expenditure on staff and on 
administrative and technical operation. 
Since Diodon administers the research contracts in the 
currency in which they are concluded, they can be 
reconciled individually with the accounting system, which 
administers the contracts both in national currency and in 
ECU. 
Any repayment of funds by the contractors is covered by 
this accounting system in accordance with the provisions 
of the Financial Regulation. 
The financial monitoring of contracts and programmes is 
managed by the accounting and budgetary application; 
the purpose of the Diodon system is to monitor the 
administrative and scientific management of contracts, 
speed up administrative procedures and allow a larger 
number of more complicated contracts to be managed by 
a small staff. 
10.38. The situation described is a thing of the past and 
was mainly due to the inadequacy of the data-processing 
resources available to DG XII (which was not given 
priority in the allocation of these resources). 
Monitoring tables showing the complete financial 
situation of programmes are produced for the pro­
gramme managers every month from the information in 
236 Official Journal of the European Communities 15. 12. 87 
the accounts system. The Diodon system also provides 
any specific additional information on the situation of 
research contracts at the request of the programme 
manager. 
This information is now available directly on screen for 
the programme manager if it is recurrent information 
which is already programmed. If not, it will be available as 
a printout on request. 
10.39. On the basis of the Commission decision of 19 
November 1986, DG XII is to replace the Diodon II 
system by an even more efficient local system — Ampere 
— which will be fully compatible with Sincom (see 10.1-
10.3). 
Management of programme appropriations 
Legality of commitments 
10.41. In accordance with Article 1 (3) of the Financial 
Regulation, the commitments entered in the accounts by 
the Commission cover the total cost of the legal 
obligations entered into. 
The problem of the dividing up of contracts was already 
dealt with in a document (2) sent to the Court in 
September 1985 in which it was stated: 
'In some isolated cases, the amount of the Community 
contribution mentioned in the contract may be divided up 
in line with the appropriations available in the budget. 
For this purpose, the contract includes a standard clause. 
This practice of dividing up the amount of the Com­
munity contribution is for reasons of expediency, 
particularly at scientific level, so that, in the event of 
budgetary constraints, a larger number of contracts can 
be concluded in the early years of the programme with a 
view to the rapid implementation of research decisions.' 
The Commission would point out that the practice 
described exists solely because of the tight budgetary 
situation which the Community has experienced for 
several years. This practice — which is well known to the 
budgetary authorities and the programme management 
advisory committees — involves extra work for the 
departments administering the programmes. The Com­
mission hopes that, when its proposals for budgetary 
reform are accepted, it will be possible to alter this 
practice; if this action had not been taken in the current 
budgetary circumstances, the implementation of the 
seven specific RTD programmes adopted on 12 March 
1985 would have been further delayed. Eligibility of certain items of expenditure 
10.42. The following points can be made in the light of 
past experience: 
— The percentage of overheads contained in a contract 
will inevitably vary from one type of organization to 
another, from one Member State to another and also 
in line with the degree of sophistication of the 
accounting systems used by contractors in each 
Member State. The overheads of large industrial 
firms will obviously not be anything like those of a 
university or a small firm. The Commission does not 
therefore consider it possible to harmonize the 
percentage of overheads. 
— The standard contracts used by DG XII give 
extremely clear information about what items can be 
taken into consideration for the calculation of 
overheads (Article 10 of Annex III for shared-cost 
contracts and Article 9 of Annex HI for marginal-cost 
contracts for which the instructions sent to applicants 
limit the rate to a maximum of 40 %). It is therefore on 
this basis that the departments administering the 
contracts and the audit firms must ascertain that the 
rates requested by the partners are justified; in 
addition, DG XII always keeps in reserve the 
possibility of challenging contractors so that it can 
make any necessary adjustments if something abnor­
mal is detected. 
Fusion programme (non-JET) 
Eligibility of expenditure 
10.44. With the statements and forecasts of expenditure 
which are submitted to the management committees and 
which are used as a basis for applying for funds, it is 
possible to keep track of the progress of expenditure in 
relation to the budgets approved and to distinguish the 
various categories of expenditure giving rise to the 
various rates for the Commission's contribution. 
It is at the Commission's express request that the 
supporting documents for the associations' expenditure 
are not presented with the annual accounts. The 
enormoUs volume of these supporting documents would 
make for greater bureacratic control and considerably 
increase costs both for the association and for the 
Commission. 
The Commission has therefore called on the services of 
the international audit firms which carry out on-the-spot 
audits of the associations' accounts. 
15. 12. 87 Official Journal of the European Communities 237 
Although it is true that the associations were not audited 
so frequently in the past, since the end of 1985 the 
Commission's policy has been to audit the associations at 
the end of every contract. Audits of the accounts of the six 
associations mentioned by the Court were either being 
carried out at the end of 1986 or were planned for 1987. 
JET JOINT UNDERTAKING 
External control of annual accounts 
10.45. The Commission does not see its position as the 
main 'supplier of funds' to JET as a reason for departing 
from the principle of legal and financial autonomy which 
JET enjoys as a joint undertaking. It is essential for the 
success of this large-scale scientific and technological 
undertaking that all its members assume their re­
sponsibilities in full in line with the undertaking's statutes. 
The replies to the Court's observations in paragraphs 
10.45 - 10.48 must therefore come from the JET decision­
making bodies within which the Commission fully 
assumes its responsibilities (although it has only 5 votes 
out of 43). 
The Commission does not consider that revision of the 
JET Statutes would be an appropriate means of 
improving cooperation between the Court and JET 
management. The Commission will, however, through its 
membership of the JET Council, continue in its en­
deavours to improve this cooperation. On the particular 
question of a timetable and the contradictory procedure 
for the JET audit, the Commission understands that this 
is currently the subject of discussions between the Court 
and the JET management, which is anxious to reach an 
agreement that is acceptable to both sides. 
(•) Medium-term report, Parliament resolution, point (i), OJ C 
125, 11.5.1987, p. 45. Support agreement with the host organization 
10.46. The Liaison Committee between JET and the 
UKAEA, established under the Host Support Agree­
ment, set up a working party in October 1986 to review 
the operation of the Agreement and to make recommend­
ations. The Commission understands that this working 
party will make its final report before the end of 1987. The 
Commission will take a close interest in the outcome of 
this report. 
Presentation of the JET accounts 
10.47. In March 1987 the JET Council approved a 
reorganization of the project's finance coding so that all 
JET personnel, with effect from 1 January 1987, would be 
charged to the same title of the JET budget. This change, 
which was welcomed by the Commission, will clarify the 
presentation of personnel costs in the future annual 
accounts of JET. 
Contingent financial commitments 
10.48. An estimate of the additional cost of prolonging 
the JET Joint Undertaking has been given in the 
Commission's proposal for a Council Decision on the 
prolongation of JET (COM(87)302). The Commission 
would not consider it necessary for JET to repeat this 
information in the supporting notes to its 1986 accounts. 
Commitment of the Commission's contribution 
10.49—10.51. Following a transfer of both commit­
ment and payment appropriations in the 1987 budget of 
the European Communities (transfer No 17/87 — Item 
7311) the cumulative totals of commitments and pay­
ments are now in line with each other and will remain so in 
future years. 
(2) Considerations concerning the various procedures for 
establishing commitments for the utilization of the operat­
ing appropriations in the general budget of the Community 
(Supplement to the replies to paragraphs 9.16 and 9.17 of the 
Court's annual report for 1984). 
Official Journal of the European Communities 15. 12. 87 
CHAPTER 11 
Food aid 
REPLIES OF THE COMMISSION 
DISTRIBUTION OF THE AID (11.4 - 11.9) THE ECONOMIC EFFECTS (11.10 -11.24) 
Burkina Faso — Niger 
The cereals harvest in the Sahel takes place in October 
and a sufficiently reliable estimate of the volume is 
possible by the end of that month. The next rainy season 
begins in May or June. The Commission has about six 
months, therefore, in which to get Community food aid to 
the recipients. It is virtually impossible to do it in less than 
this, in view of the time needed for consultation and 
decision-making, tendering procedures, transport by sea 
or land and delivery to the recipients. 
The Commission is thus obliged to take decisions at a 
fairly early stage on the basis of the information available. 
It is well aware that the recipient countries, uncertain as to 
how much aid they will eventually receive, tend to paint 
an even gloomier picture than is necessary. The Com­
mission's departments therefore carry out appropriate 
cross-checks and consultations in order to make a realistic 
assessment of food aid requirements. If in doubt, 
however, they must bear in mind that it would be far more 
serious to err on the side of too little than on that of too 
much. 
In addition, the Commission is financing a regional 
programme (entitled 'permanent diagnosis') designed to 
improve knowledge of the variables of the cereals market 
(production, yield, stocks, consumption, etc.). Niger (11.10—11.15) 
In Niger, as a result of uneven and inadequate rainfall, the 
cereals harvest in October 1984 was estimated at 
1 071 000 tonnes, a shortfall of 422 000 tonnes compared 
with the average for previous years. Against a back­
ground of large-scale movements of population, the 
government announced import needs of some 500 000 
tonnes, with 395 000 tonnes to be covered by food aid. 
The Commission amended this assessment to 450 000 
tonnes, with 350 000 tonnes of food aid. The Community 
decisions taken from September 1984 onwards involved 
almost 70 000 tonnes of cereals (20 % of requirements) 
delivered between October 1984 and July 1985. 
This Community aid, the largest amount granted in the 
last 10 years, represented 6,5% of Niger's cereals 
production. Apart from the EEC, the main food aid 
donors were the USA (118 000 tonnes), the WFP (26 000 
tonnes) and Japan (18 000 tonnes). 
Since much of the aid was for distribution free of charge, 
the government gave priority to its distribution, resulting 
in delays in the sale of the Community aid and a swelling 
of OPVN stocks. 
However, this situation did not affect cereals production 
in 1985 and 1986, when the totals were 1 835 000 tonnes 
and 1 819 000 tonnes respectively. 
15. 12. 87 Official Journal of the European Communities 239 
As regards possible adverse effects of food aid on national 
cereals prices, all the studies carried out (Usaid, World 
Bank, etc.) have shown that the cereals markets in these 
countries do not operate in accordance with the classical 
model (supply and demand on integrated markets) and 
that there were virtually no harmful effects. 
The fall in cereals prices observed by the Court is 
adequately explained by the return to normal (or even 
surplus) production. The October 1985 harvest, however, 
could not have been foreseen at the time the Commission 
took its food aid decisions in response to the dramatic 
circumstances. 
Burkina Faso (11.16-11.19) 
1983 and 1984 were exceptionally dry years in Burkina 
Faso. The cereals harvest in October 1984 was estimated 
at 1 100 000 tonnes, the same figure as the previous year. 
The government announced a shortfall of 300 000 tonnes. 
The Commission, for its part, assessed the real shortfall at 
170 000 tonnes, 60 000 tonnes of which could be supplied 
by commercial imports. It accordingly estimated the food 
aid requirement at 110 000 tonnes, and decided as early as 
February 1985 to grant aid in the form of 11 000 tonnes of 
cereals for sale, equivalent to 1 % of the total harvest and 
10 % of food aid requirements. 
If the other contributions made by the Community and 
the Member States (emergency aid, NGOs) are taken into 
account, the total aid granted by them to Burkina Faso 
amounted to 30 150 tonnes of cereals. This figure, when 
related to the shortfall, would not have been sufficient to 
destabilize the cereals market. 
At the time of the Community's consultations and 
decision, the American authorities announced that they 
were not granting any aid to Burkina Faso. In fact, they 
delivered over 60 000 tonnes of rice, flour, maize and 
other cereals during 1985 (i.e. 97 000 tonnes of cereals 
equivalent) for free distribution. Because of this, the 
Ofnacer was unable to dispose of the European aid 
destined for sale. 
The disruption in the organization of food aid caused by 
the United States' unilateral decision did not, however, 
affect local production which, aided by favourable 
rainfall, rose to 1 587 000 tonnes in 1985 and 1 925 000 
tonnes in 1986, an increase of 43 % and 73 % respectively 
on the 1984 figure. Seeing that there was no longer a food shortage, the 
Community did not contribute any of the aid which, as 
the Court observed, continued to arrive in 1985/86. On 
the contrary, the aid it granted in 1986 was a replacement 
project designed not to help with the storage of the 
abundant harvest, but to establish safety reserves in the 
Burkinese Sahel in the north of the country, a region 
which suffers from chronic shortages and is very difficult 
to reach in the rainy season. 
Egypt (11.20-11.24) 
The Commission agrees with the Court's analysis of the 
trends in agricultural production in Egypt and the 
government's policy of subsidies and very low consumer 
prices. It is true that the low price levels have an adverse 
effect on agricultural production, in addition to which 
they represent a considerable burden on the State budget. 
The subsidies policy dates from the Nasser era, and it was 
further expanded in the 1970s, when the 
Egyptian economy was growing by almost 10 % a year in 
real terms, thanks to the rise in the price of oil. 
The Commission, and also the Egyptian authorities, are 
aware of the distortions created by this situation. 
Both the international community and the International 
Monetary Fund, however, recognize that the removal of 
subsidies must be a long-term operation in view of its 
socio-economic implications. 
The impact of Community food aid on this situation is 
only very marginal. For the period from 1983 to 1985, 
Community aid in the form of cereals represented only 
0,7 % of consumption in Egypt, 1,5 % of imports and 
7,6 % of total food aid to Egypt. 
Given the modest proportion accounted for by the 
Community contribution, it is hardly surprising that 
pressure from the Commission to rationalize the Egyp­
tian policy has only a limited impact. 
As the Court itself points out in its report, the efforts of 
the Commission and its Cairo delegation have enabled a 
plan of action to be agreed with the Egyptian authorities 
which should improve the efficiency of aid management. 
240 Official Journal of the European Communities 15. 12. 87 
CHAPTER 12 
Staff and administration 
REPLIES OF THE PARLIAMENT 
MANAGEMENT OF STAFF SALARIES AT 
THE PARLIAMENT, THE COMMISSION 
AND THE COURT OF AUDITORS 
12.1 -12.17. As stated in paragraph 12.3 of the 
observations, the Commission is responsible for data-
processing applications relating to 'PAIE'. It is therefore 
up to the Commission to decide whether changes should 
be made to the programs in line with the Court's 
observations. 
Observations concerning the management 
systems 
Preparation of 'PAIE' 
12.29 -12.31. In future, the data entered in 'PAIE' will 
be checked and corrected in the Pay and Allowances 
Service by a person other than the one responsible for 
inputting the data. 
'RAPE' and 'PAIE' can only be compared manually. The 
institution is currently considering a replacement for the 
existing 'RAPE' system. The new system will include a 
computerized procedure making it possible to check that 
the data entered in 'RAPE' and 'PAIE' tally after 
inputting. 
Payment of remuneration to officials is made on the 
fifteenth day of each month pursuant to Article 16 of 
Annex VII of the Staff Regulations. Between the day the 
Commission's 'PAIE' listings arrive and the day on which the accounting officer gives the requisite instructions to 
the bank in time for remuneration to be paid on the 
fifteenth of the month, the authorization for expenditure 
in respect of remunerations has to be drawn up, signed by 
the authorizing officer, checked and approved by the 
Financial Controller. 
Under these circumstances, the authorizing officer cannot 
check the hundreds of supporting documents submitted 
with the authorization in question. He must rely on the 
accuracy of the work done at the preceding stage by the 
services of the appointing authority. However, the 
authorizing officer will consider how the 'Appropriations 
Management Section', which is responsible for assisting 
the authorizing officer in his duties, could carry out 
checks at that stage. 
The current structure of 'PAIE' does not allow access to 
be limited to certain specific areas which the Treasury 
Section requires. The Court draws attention to this weak 
spot in the 'PAIE' system in paragraph 12.12 of its 
observations. 
Budgetary management 
12.32 -12.33. The table of equivalence between the 
computer codes and budget headings is to be brought into 
line with the Commission's table. Such alignment would 
have prevented the error referred to in the observations, 
i.e. 0,6 Mio ECU being charged to Item 1100 instead of 
1101. 
The budgetary authority has decided that effective 
differences in exchange rates should be clearly indicated 
in the budget. The 'PAIE' program contains no function 
for extrapolating these differences. The fact that they are 
re-charged manually to Item 2321 'Exchange losses' does 
at least have the merit of not concealing these differences, 
which arise from the statutory exchange rates laid down 
by the Council, and therefore complying with the 
budgetary authority's decision. 
15. 12. 87 Official Journal of the European Communities 241 
All accounts documents are registered immediately on 
receipt on the 'Logabax' service. Any delay in registering 
an accounts document is caused by the time needed to 
follow the procedural steps (authorizing officer, Finan­
cial Controller and accounting officer) laid down in the 
Financial Regulation. However, the 'Logabax' system is 
to be replaced as from 1 January 1989 by the new 
computerized application 'BUDG' which is currently 
under preparation. 'BUDG' is an accounts system which 
combines the budgetary, general and analytical aspects of 
accounting. It will also reduce the time needed to 
complete the administrative circuit, thereby ensuring that 
the accounts are accurate and up-to-date. 
Internal inspections carried out by the Financial 
Controller 
12.34 -12.35. In September 1986, the Financial Con­
troller submitted to the authorizing officer a list of 
possible improvements to checks on 'PAIE' listings 
including, in particular, the need for regular comparisons 
between the 'RAPE' and 'PAIE' files. 
The Financial Controller checks 'PAIE' listings although 
this check is, of course, limited to a sample of the actual 
data. The checks carried out in any given month include: 
(a) remuneration paid to officials in a given grade; 
(b) all dependent child allowances paid; 
(c) officials on unpaid leave who should not be in receipt 
of any remuneration; 
(d) accurate inputting into 'PAIE' of individual decisions 
taken in respect of officials and other staff; 
(e) overtime; 
(0 all statutory rights of roughly 50 officials selected at 
random. 
For some months now, the Financial Control Section has 
been itemizing and recording the checks carried out each 
month. Specific observation 
12.41. In the case of temporary staff who subsequently 
become officials, the European Parliament maintains the 
seniority in step acquired under a temporary contract, 
where the staff were recruited as temporary staff on the 
basis of a competition and could not be appointed as an 
official immediately (particularly pending completion of 
the procedure for filling posts). It seems most unfair and 
contrary to the principle of maintaining acquired rights, 
which is covered by case law, to downgrade such staff 
when they finally secure the appointment as officials to 
which they were entitled at the outset on the basis of the 
results of the competition. It is very rare for a temporary 
contract to last long enough for seniority in step to exceed 
the ceilings laid down in Article 32 of the Staff 
Regulations. 
Conclusion on the management systems 
12.42 - 12.44. Parliament is well aware that a substan­
tial share of its annual budget is allocated to staff 
expenditure (roughly 50 %) and is therefore convinced of 
the need to ensure that budget entries under this heading 
are accurate and open for inspection. For more than a 
year now, Parliament has been developing management 
systems, particularly computerized systems, to improve 
the reliability of these checks. This being the case, 
Parliament has a vested interest in the improvement of the 
'PAIE' program from which it benefits. 
OPERATIONAL EXPENDITURE 
Observations concerning expenditure on 
stationery and office supplies 
12.41. Given that this is a very technical field, the 
European Parliament considers it both appropriate and 
desirable for a single qualified official to coordinate all 
aspects of a given project; however, this has to be carried 
out within a framework of financial and administrative 
supervision. 
12.48. Instructions reminding staff of the correct 
procedure to be followed were sent to the services 
concerned on 2 June 1987. 
Generally speaking, all services comply with this 
procedure. However, tenders submitted under double 
242 Official Journal of the European Communities 15. 12. 87 
cover are sometimes open on arrival in the Buildings 
Section when the tenderer has failed to indicate the nature 
of the correspondence. 
12.49. Of the two options available (i.e. a series of 
specific contracts for each job of work done or a 
'comprehensive' annual contract) Parliament chose the 
annual contract as the technical services provided are 
better suited to Parliament's needs for the following 
reasons: 
(a) the contractor undertakes to answer calls for 
assistance promptly; 
(b) the overall flat-rate cost is lower than the cost of a 
series of specific contracts. 
12.50. (a) This delay was caused by the failure of 
relevant services of the Luxembourg authorities to submit 
supporting documents within the specified deadlines, 
despite the efforts made by Parliament. 
(b) The costs for the technical staff assigned to the Tower 
building and adjoining premises by the Luxembourg 
authorities are divided amongst the institutions which 
occupy those buildings on the basis of a pro rata system 
which came into force on 1 September 1980. Parliament 
undertakes to discuss the composition of this unit and the 
methods of financing it with the Luxembourg authorities. 
(c) The European Parliament will be re-submitting the 
point raised by the Court of Auditors to the Luxembourg 
authorities in the spirit of cooperation referred to in 
Article 19 of the Protocol on the Privileges and 
Immunities of the European Communities. Observations concerning expenditure on 
stationery and office supplies 
12.53 - 12.55. The excess stock of stationery and office 
supplies referred to by the Court is of limited value and to 
some extent a temporary phenomenon. Appropriate 
arrangements have been made, on the Secretary-
General's instructions, for these items to be taken out of 
stock and sold under the appropriate procedures. 
A computerized program in operation since 1985 
provides details of the actual consumption of stationery 
and office supplies in each section and this is taken into 
account when budget estimates are drawn up. 
Inter-institutional cooperation has already produced 
some positive results: 
— the formulation of the computer program referred to 
above; 
— combined purchases of diskettes for word-processing 
machines; 
— the negotiation of maintenance contracts for elec­
tronic equipment; 
— the conclusion of a framework contract for the 
purchase of office-automation equipment. 
However, the European Parliament has noticed that its 
own services are occasionally able to negotiate prices 
lower than those set out in an inter-institutional frame­
work contract. 
15. 12. 87 Official Journal of the European Communities 243 
REPLIES OF THE COUNCIL 
OPERATIONAL EXPENDITURE 
Observations concerning expenditure on 
stationery and office supplies 
12.49. In principle, the maintenance contracts con­
cluded by the Council provide for payments to be effected 
as they fall due. In the few cases where, at present, 
payment is to be made in advance, the Council is 
endeavouring wherever possible to introduce a clause 
providing for payment on completion of the work. 
12.50. (a) The delay is due to the fact that itemized 
statements for the financial years in question were late in 
being submitted by the authority managing the complex. 
(b) The observation by the Court of Auditors does not 
reflect the true position with regard to the checks carried 
MANAGEMENT OF STAFF SALARIES AT 
THE PARLIAMENT, THE COMMISSION 
AND THE COURT OF AUDITORS 
Observations concerning the 'PAIE' data-
processing application 
12.3. At the beginning of 1983 the Commission, aware 
of the shortcomings of the application, launched a project 
to develop a new software package. This was prompted 
not by dissatisfaction on the part of the user departments, 
but by a desire to reduce the maintenance work involved 
and eliminate the recognized deficiencies, a number of 
which are referred to in the report. The main stages in the 
project were as follows: 
April 1983: drawing-up of reference document 'progress 
of "PAIE" application' out by the Council departments. On the basis of the 
agreements concluded with the Luxembourg authorities 
an attendance list of the staff concerned is drawn up for 
each session. This list is countersigned on the spot by an 
official of the General Secretariat of the Council on the 
termination of work. 
(c) The General Secretariat of the Council is negotiating 
this issue with the Luxembourg authorities. 
Observations concerning expenditure on 
stationery and office supplies 
12.55. The General Secretariat of the Council par­
ticipates very regularly in the work of the inter-
institutional group for harmonization of procurement 
and is willing to use framework contracts concluded by 
other institutions where they correspond to its own 
requirements. 
February 1984: publication of invitation to tender in 
Official Journal (') for a software package for calculating 
payments to staff 
May 1984: tenders received, studied and selected 
February 1985: in view of the complex nature of the 
problem, decision to test a prototype designed by the firm 
submitting the most advantageous tender 
November 1985: submission of project to Advisory 
Committee on Procurements and Contracts — 
favourable opinion 
November 1985/June 1986: design of prototype 
July 1986: after assessment, the users and computer 
experts decide to abandon the project, mainly for the 
following reasons: 
(') The footnotes appear at the end of each chapter. REPLIES OF THE COMMISSION 
244 Official Journal of the European Communities 15. 12. 87 
— system not sufficiently user-friendly; 
— excessive dependence on supplier, which would have 
made conversion to software necessary for it to run in 
the Commission's environment; 
— negative cost/benefit trade-off; it would have been six 
years before the system began to pay for itself. 
This project having been abandoned, it was decided to 
improve the existing system by eliminating its recognized 
shortcomings ('PAIE improvement' project). 
The data-flies 
12.5.(a) The Commission is aware that there are some 
data redundancies. However, as they exist for a limited 
time only, it feels that the small extra cost in data-
processing resources should be seen against the costs of 
the major updating work required to combine the two 
index sequential files. 
(b) The Commission is unaware of any errors in 
calculating back-pay. A study will be carried out with the 
managing department to try and ensure that the danger 
pointed to by the Court cannot arise. 
(c) The simple practice of fictitious data used in the 
application program has not caused confusion among the 
operators. However, in view of the problems which it 
might cause the auditors, the Commisssion will look into 
possible ways of improving this aspect of the system. 
12.6. For details on documentation, see the reply to 
paragraph 12.9. 
Protection against manipulation is part of the broader 
problem of security (see the reply to paragraphs 12.11 to 
12.13). 
12.7. The improvement already referred to will elim­
inate this difficulty. 
The software package 
12.8. The 'PAIE' application is intended for several 
different user groups. In. order to accommodate all the required combinations, the programs are modular rather 
than monolithic in design and can be run in such a way as 
to suit the needs of the administrative departments in the 
different institutions. 
If harmonization between the institutions were possible, 
the operation would be unified. 
12.9. The quality of the documentation will be im­
proved as suggested (see the reply to paragraph 12.3) with 
the revision of the 'PAIE' application. 
Security of the application 
12.10-12.11. The Commission agrees that improve­
ments are needed, and the project currently in progress 
will introduce them. For instance, the consistency of the 
initial data will be checked when they are being entered 
(first phase of 'PAIE improvement' project). The 
operators carry out checks which ensure a high level of 
internal security. 
12.12. Various measures will be taken to improve 
external security, including the use of up-to-date methods 
for managing passwords which did not exist when the 
application was designed. 
The project set up in 1983 incorporated the suggested 
improvement, but delays were encountered for the 
reasons outlined above (see the reply to paragraph 12.3). 
The products of the application 
12.14. The lists are produced in response to requests 
from the users. Phase 3 of the project will include an 
overall revision taking into account all the requests from 
the interested parties. 
12.15-12.16. The improved system will offer this 
facility to any user who has access to a terminal with 
screen. However, it will still be necessary to memorize the 
data on a fixed medium in order to comply with the rules 
in force, particularly for records of payments made to 
officials and other staff. 
15. 12. 87 Diario Oficial de las Comunidades Europeas 
Conclusion sobre el sistema informatico Gestion presupuestaria 
12.17. La Comision admite que debe efectuarse una 
revision del sistema y mejorar su seguridad. En 1983 la 
Comision decidio buscar el soporte logico mas moderno 
que puediese convenir a las necesidades de las institucio-
nes. 
Se llego a la conclusion de que no existia dicho soporte 
logico y, por lo tanto, se tuvo que renunciar a la 
reconstruction entera del sistema. Por consiguiente, solo 
quedaba mejorarlo; lo que se decidio va en el mismo 
sentido que las sugerencias del Tribunal en los puntos (a), 
(b), (c) y (e). 
El programa que se presenta en el punto 12.3 permite ver 
el motivo por el que todavia no se ha realizado. Mientras 
tanto, no se ha producido ningun suceso importante y la 
seguridad de los resultados esta garantizada por el control 
de los gestores. 12.22. El procedimiento actual se deriva del metodo 
utilizado para la preparacion de la contabilizacion de las 
retribuciones. 
La Comision esta dispuesta a examinar positivamente la 
sugerencia del Tribunal sobre este punto. 
Controles efectuados por el interventor 
12.24. El interventor sigue de cerca las dificultades 
presentadas por el Tribunal. No obstante, senala que los 
trabajos de mejora del programa actualmente en curso de 
realization deberan permitir, a la larga, un control mas 
completo 
Resultados de las pruebas 
En lo que respecta al punto (d), la Comision confirma que 
se mejorara la documentation, pero no piensa que la 
reduction del espacio de memoria y del tiempo de calculo 
deba ser una de las primeras prioridades para construir su 
nuevo sistema 
Observaciones relativas a los sistemas de 
gestion 12.28. Un analisis detallado de los resultados de los 
sondeos efectuados por el Tribunal permitio realizar los 
ajustes y las regularizaciones necesarios. Casos parecidos 
deberian evitarse a partir del momento en que el analisis 
informatico de coherencia, que se esta estudiando 
actualmente, sea operative 
Observaciones especificas 
Preparacion de la nbmina 
12.20. Los servicios interesados adecuaran su metodo 
de trabajo para garantizar que el servicio « retribuciones » 
tenga en cuenta de forma correcta sus decisiones. 
Las correcciones manuales efectuadas por el servicio 
«retribuciones» en los listados bancarios se refieren 
esencialmente a casos de fuerza mayor y son la unica 
solution posible en la situation actual del sistema. Se 
estudiara un metodo de correction informatico de estos 
casos en el marco de la mejora del sistema. 12.41. Con arreglo a la jurisprudencia mas reciente del 
Tribunal de Justicia, la clasificacion de un agente 
temporal nombrado funcionario se examina teniendo en 
cuenta las disposiciones del articulo 32 del Estatuto. No 
obstante, a instancia de otras instituciones, la Comision 
aplica el principio del mantenimiento de la clasificacion 
del interesado en el caso de que la aplicacion del articulo 
32 implique un descenso de categoria. Este procedimiento 
esta basado en las razones evidentes de igualdad con 
respecto a los agentes temporales que hayan pasado 
varios anos al servicio de la Comunidad. La Comision ya 
ha adoptado las iniciativas necesarias para que este 
principio pueda insertarse en el Estatuto por medio de 
una revision apropiada del mismo. 
12.21. Se toma nota de las ventajas de conservar un 
vestigio del control profundo que se efectua cada mes en 
una veintena de casos seleccionados al azar. 
El listado de control que indica las variaciones en un 5 % 
de la remuneration mensual con respecto al mes 
precedente sera objeto de una adaptation para responder 
a las exigencias temporales del control de la production. 
Debido a estas exigencias, el ordenador registra la falta de 
irregularidades senalada por su servicio. Conclusion sobre el sistema de gestion 
12.42- 12.44. La Comision se compromete a tener en 
cuenta la sugerencia del Tribunal de reforzar la coopera­
tion interinstitucional mediante la utilization de instru-
mentos informaticos comunes. Ademas del ahorro de 
recursos que ello representa, se incremental la seguridad 
de los sistemas. El control de coherencia en la introduc­
tion de datos, ya previsto, eliminara un gran numero de 
246 Official Journal of the European Communities 15. 12. 87 
out at input will eliminate many of the risks pointed out 
by the Court; additional ex post checks may be carried 
out if required. 
OPERATIONAL EXPENDITURE 
Observations on expenditure on the 
maintenance of premises 
12.46. The Commission is to start discussions with the 
other institutions in the very near future with a view to 
harmonizing practices in this field. 
12.47 -12.48. The departments concerned have already 
taken steps to adapt existing procedures relating to 
controls at each stage, assessment of needs and search for 
suppliers. 
12.50.(c) The Court will be informed of the outcome of 
the examination in progress relating to the VAT dossier. 
12.51. The lease on the Square de Meeus building was 
drawn up in 1978 according to the procedures in force, 
and is due to expire on 31 December 1987. The 
Commission is endeavouring to secure the best terms 
possible in the present negotiations. Observations concerning expenditure on 
stationery and office supplies 
12.52 - 12.54. The budget estimates of the procurement 
department are based on the requests received from 
departments in the previous 12 months and on the 
updated stock situation. They take account therefore 
both of the requirements of departments, which are 
assessed by each Directorate-General, and of the supplies 
delivered. 
The existence of a surplus of certain articles is generally 
the result of various factors such as a fall in consumption, 
technical progress, etc. 
The situation is monitored closely so that the necessary 
steps can be taken in time to speed up absorption of 
unduly large stocks or eliminate superfluous articles. 
Finally, the Commission would recall that stock manage­
ment of articles used in large quantities, which account 
for most of the budget item, is all too often hampered by 
the chronic inadequacy of the budget allocations, with the 
result that these articles are often in short supply or 
completely out of stock. 
12.55. The aim of the Commission's procurement 
policy is to meet the requirements of its departments, 
subject to limit of the budgetary resources available, by 
concluding wide-ranging multiannual framework con­
tracts which ensure good value for money. These 
framework contracts are automatically open to all the 
institutions. 
For its part the Commission regrets the fact that, on the 
basis of recent experience, the arrangement has not 
always been reciprocal, as the conditions prevailing in the 
other institutions, and the resources available, do not 
always make this possible. 
(i) OJS39, 25.2.1984, p. 32. 
15. 12. 87 Official Journal of the European Communities 247 
CHAPTER 13 
Subsidies 
REPLIES OF THE COMMISSION 
SUBSIDIES TO THE DUBLIN Exchange of experience between the Foundation and 
FOUNDATION AND BERLIN CENTRE Centre 
Formal powers of the Commission over the 
Foundation and Centre 
13.6. The majority of members of the two Boards are 
not in favour of finance from other sources since they 
wish to preserve the independence of the Foundation and 
Centre. The Centre already engages in cofinanced 
projects and the Foundation too intends to develop a 
policy in this field. The Commission will raise the 
question of other sources of finance with the Boards of the 
two bodies. 
Commission management of its subsidies 
Coordinated approach 
13.7. From the administrative point of view both 
subsidies are managed by the Directorate-General for 
Employment, Social Affairs and Education (DG V) in 
exactly the same way. The operation of the Foundation 
and Centre is the responsibility of their respective Boards. 13.8. The two Directors prepare the work of their 
Boards on the basis of information obtained from 
contacts between officials of the two bodies and in the 
light of their personal experience and the particular tasks 
assigned to them. The Boards then take their decisions 
quite independently. All the specific points raised by the 
Court have been or will be the subject of comparisons and 
exchanges of information between the two bodies. 
Wherever the existing procedures can be improved, 
appropriate changes will be introduced. 
13.9. The regulations setting up the two bodies do not 
give the Commission any real say in their management; it 
has only minority representation on their Boards. The 
Commission seeks to exert its influence by means of close 
and regular contacts between the two bodies and the 
various Commission departments which provide tech­
nical skills. 
Verification carried out by the Financial Controller 
13.11. Since 1985 Financial Control has been installing 
the same computerized system in Dublin as exists in 
Berlin so as to ensure uniform management. 
The on-the-spot audits in Berlin gave rise only to minor 
points which were reported orally to the Director of the 
Centre. 
248 Official Journal of the European Communities 15. 12. 87 
The withholding of approval was for a failure to stay 
within the limits on the Berlin imprest account and 
Financial Control found during an on-the-spot check that 
the computer system has now been adjusted to prevent 
this from happening again. 
Since the withholding of approval concerned form rather 
than substance, a report was not considered necessary. 
Division of responsibilities for operational questions 
13.13. The Foundation maintains regular contacts with 
the various Directorates-General concerned. The Com­
mission representatives also put forward the priorities of 
their Directorates-General when the Foundation's work 
programme is being discussed. 
13.14. (a) The work of the Foundation has not, as a 
rule, been taken into account when the Commission has 
been drawing up its common research and technological 
development policy because it has a different purpose. 
The links established between the Foundation and DG 
XIFs FAST programme (Forecasting and assessment in 
science and technology), the leader of which sits on the 
Foundation's Board, have nevertheless meant that the 
work of the Foundation in two specific areas (distance 
working and the implications of biotechnology for 
society) has been used directly by DG XII. 
(b) Although the Commission is not legally obliged to 
consult the Foundation when preparing its communi­
cations, its proposal for an action programme on the 
environment 1987-92 took account of the Foundation's 
work in this area. 
(c) The Commission has taken note of the Court's 
comments and the Foundation will establish suitable 
periodic contacts with DGs VII and XIII and other 
Directorates-General concerned, provided they are 
compatible with implementation of its own programme. EUROPEAN SCHOOLS 
13.16. The discrepancy complained of should be 
remedied by the adoption of the new financial regulation 
for the European Schools, the main outlines of which 
were considered by the Board of Governors in April. The 
new regulation being drawn up should provide for the 
Commission subsidy adopted by the Board of Governors 
to be brought into line with that actually awarded by the 
budgetary authority. In practice, the Commission 
informs the schools of the amount of the subsidy awarded 
by the budgetary authority and they must adjust their 
expenditure to the revenue actually available. 
13.17. The Commission subsidy to the schools is paid in 
instalments over the year on the basis of accounting data 
provided periodically by each school. Hence it has the 
information it needs to keep payments in line with the 
needs of the schools and the funds available in its budget. 
This procedure was tightened up in 1987. 
13.18. The Commission agrees that the structure of the 
schools should be reviewed to bring it into line with the 
political and legal development of the Community. It will 
be presenting proposals which should improve the 
financial and budgetary management of the schools. 
13.19. (a) After a thorough study, in April 1987 the 
Board of Governors agreed to confirm the criteria which 
it adopted in Karlsruhe in 1966 on the admission to the 
schools of children other than those of officials. These 
specify which children must be admitted, which have 
priority and which may be admitted. At the same meeting, 
the Board of Governors also adopted a considerably 
increased scale of fees which will be introduced over five 
years from September 1988. 
(b) Two Member States, Germany and Italy, have not yet 
granted the schools general exemption from VAT. The 
final decision is being taken in Italy and Germany is 
waiting for all the Member States to grant exemption 
before it takes its final decision. 
(c) In April the Administrative and Financial Committee 
sent the Board of Governors a substantial working 
document on the review of teachers' conditions of 
employment. After discussion, the Board of Govdrnors 
asked for more details on two of the models submitted 
and expects to take a decision in December. 
(d) During the first half of the year the Representative of 
the Board of Governors contacted the non-Community 
15. 12. 87 Official Journal of the European Communities 249 
bodies which send children of their staff to the European 
Schools. He reported to the Board of Governors in April 
and was instructed to continue his negotiations and 
present a final report in December. Some progress has 
already been made. 
(e) A centralized computer system to improve financial 
management is being studied. 
OTHER SUBSIDIES 
Various subsidies 
Processing of applications for subsidies 
13.21. When the files concerning applications for 
subsidies reach the appropriate department of the 
Secretariat-General, they are recorded in an 'entry' 
register and listed on assessment tables which summarize 
the information in the files and should enable proposals 
for the granting of a subsidy to be submitted for 
Commission decision. These tables have been altered 
since the Court's visit in order to facilitate appraisal. 
There are two types of table depending on the budget item 
to which the subsidy is to be charged. 
It should be noted that there are a number of standard 
documents in each application file on which is based the 
appraisal concluding in favour of awarding a subsidy. 
Before a decision is taken, the information sheet for the 
Commission is sent to all the departments concerned. Any 
concrete suggestions by the Court on the information it 
should contain will be studied with the greatest attention. Coordination between Commission departments 
Cen tral financial aid file 
13.24. The Commission is currently considering how 
the centralized information on financial aids can best be 
computerized. 
Youth Forum 
Commission subsidy 
13.26. It is not the Commission's normal practice to 
conclude agreements with the recipients of subsidies; this 
enables it to adjust its commitment to them at any time. 
According to its statutes, the Forum is totally in­
dependent and so the Commission has no right to become 
involved in its decision-making processes, even as regards 
the budget. The Commission would point out that it 
carries out regular checks on how the subsidy is spent and 
does not consider that a formal agreement would 
necessarily bring about any improvement. 
Financing by the members of the Forum 
13.27. The Commission agrees with the principle 
behind the Court's view. However, all the organizations 
which are members of the Forum are in financial 
difficulties and the subsidies which they receive, either 
from their national governments, from the Council of 
Europe (the European Youth Centre and the European 
Youth Foundation) or, in some cases, from the Commis­
sion, scarcely cover their administrative costs. 
Assessment of the Forum's activities 
13.22. The Commission is willing to consider any 
appropriate changes to the criteria for granting subsidies. 13.28. The Commission has taken note of the Court's 
comment and will endeavour to take appropriate action. 
250 Official Journal of the European Communities 15. 12. 87 
European University Institute, Florence 
General 
13.29. Portugal is expected to accede in October. 
The Commission's role in the administration of the 
Institute 
13.30 -13.31. The signatories of the Convention setting 
up the European University Institute made no provision 
for accession by the Community. This could be achieved 
only by international negotiation. 
With regard to the Commission's role in the financial 
management of the Institute, and particularly the 
establishment plan, it would point out that, apart from 
the very few posts concerned with the historical archives, 
no post on the Institute's organization chart is financed 
from the Commisison contribution. 
Only non-permanent staff (research assistants and fellows 
and auxiliary staff) are paid from the contribution and the 
Commission's participation in the work of the Research 
Council and the Steering Committee of the European 
Policy Unit enables it to exert considerable influence over 
these posts. 
Payment of the subsidy to the Institute 
13.32. Under an agreement between the Commission 
and the Institute, from January 1988 the Commission's 
financial contribution under Items 3240 and 3241 will be 
paid in two instalments in accordance with the financial 
rules govering the two bodies. The first 7/12ths will be 
paid on 15 January and the remaining 5/12ths on 15 July. 
Utilization of the 'historical archives' appropriations 
13.33 - 13.34. It is true that the filing and organization 
of the historical archives got off to a slower start than planned, with the inevitable result that there was a delay 
in utilization of the appropriations made available to the 
Institute, particularly for the purchase of equipment for 
the storage of documents such as shelving, filing cabinets 
and furniture. 
Now that the management of the historical archives is 
running smoothly, the earlier difficulties should not recur. 
Under Article 7 of the contract between the Commission 
and the Institute, the Commission agreed to make 
available its financial contribution uner Item 3242 to meet 
needs specified in detail by the Institute and to constitute 
a reasonable contingency reserve. 
Transfer of appropriations for the 'research library' 
13.35. The Commission does not agree that the transfer 
of appropriations for the 'research library' constitutes a 
transfer of costs from the Member States to the 
Commission. 
The proposal for a transfer was made in the interests of 
sound financial management. Works acquired by the 
library (journals and monographs) are primarily for 
research purposes, the area for which the Commission's 
contribution is essentially earmarked. For reasons of 
clarity, instead of charging the acquisitions individually 
to the various research projects, a general transfer was 
made to the research library. 
The Commission would stress that the breakdown of its 
subsidy for the various academic activities of the Institute 
is not binding and so may be changed when the budget is 
implemented. 
Assessment of results 
13.37. The decision on the thrust of research to be 
conducted by the Institute is a specific item on the agenda 
of meetings of the Institute's High Council and Research 
Council, on both of which the Commission is represented. 
The Commission has recommended that the Institute 
carry out an assessment of the results of its research work 
in the near future. 
15. 12. 87 Official Journal of the European Communities 251 
CHAPTER 14 
Loans, borrowings and interest-rate subsidies 
REPLIES OF THE COMMISSION 
OBSERVATIONS ON LEGALITY AND 
SOUND FINANCIAL MANAGEMENT 
EIB management commissions The fact that global loans, as noted by the Court, are 
playing an increasing part in NCI operations does not 
automatically entail a reduction in the EIB's adminis­
trative workload (paragraph 14.20 and Table 14.3). 
Even where the financial intermediary decides on the 
sub-loans, the EIB remains responsible for approving 
operations and supervising activities as a whole, in 
particular to ensure that the criteria laid down by the 
Commission are observed in the case of each sub-
loan. 
14.12 - 14.24. The Commission has noted with interest 
the Court's remarks in this section of its report and would 
make the following points: In conclusion the Commission reaffirms its willing­
ness to renew contacts with the EIB in order to obtain 
fuller supporting documents that would allow the 
Court to carry out the checks it wishes. 
Under the new agreement concluded between the 
Commission and the Bank in April 1987, the EIB 
receives the net balance of incoming and outgoing 
funds in the case of operations conducted via the NCI 
treasury. A separate management commission is 
therefore not even necessary and this item has been 
retained for purely formal reasons. 
— As the supporting documents made available to the 
Court show, the EIB director nominated by the 
Commission and his alternate monitor and check the 
relative amounts of costs and commissions relating to 
NCI and Euratom operations (paragraph 14.17). It 
was as a result of this procedure that the management 
commission rates were reduced in 1984. 
No valid comparison can be made between EIB or 
NCI operations on the one hand, and ECSC 
operations on the other, because of the differences in 
their legal, operational and financial terms (para­
graph 14.19). Agreement regarding the auditing of NCI 
loans 
14.25 -14.26. The Commission would stress that the 
documentation specified in the agreement concluded with 
the Court in March 1985 has always been supplied. 
However, if the Court finds that documentation in­
adequate for its requirements, the Commission is 
prepared to reconsider the question. In the meantime it 
has secured the agreement of the EIB to extend the 1985 
agreement indefinitely. 
14.27 -14.30. The Commission can see no point in 
reopening the discussions about the interpretation of 
Article 206a of the EEC Treaty laying down the Court's 
rights of audit, and the Bank's autonomy in respect of 
operations involving its own resources, since these 
matters are clearly dealt with by the existing texts. 
The real difficulty arises when it comes to drawing a 
precise demarcation line between auditing powers in the 
case of operations managed by the EIB on behalf of the 
252 Official Journal of the European Communities 15. 12. 87 
Commission, such as the granting of loans from funds 
raised on the capital market by the Commission, or the 
provision of interest-rate subsidies from the Community 
budget for loans managed by the EIB. 
The Commission's interpretation of the legislator's 
intention therefore tends towards a practical solution 
which will satisfy the legitimate aspirations of the two 
institutions, namely proper auditing of the Commission 
by the Court and sufficient freedom of action to enable 
the EIB to operate properly — the EIB being the banking 
partner imposed on the Commission under the terms of 
the existing legislation ('a mandate shall be given') 
(paragraph 14.28). 
In the meantime practical arrangements will, as the 
President of the Commission wrote to the President of the 
Court on 30 April 1987, have to be found to reconcile the 
powers of the Court with the concerns of the Bank. 
The exact nature of the budget guarantee (paragraph 
14.28) warrants some further explanation. The guarantee 
is in effect the safeguard of last resort. NCI loans go to 
government bodies, semi-public agencies, nationalized 
industries or reputable financial institutions. Moreover, 
primary guarantees would be called in before the 
Community budget had to be drawn upon, and this 
ultimate safety net has in fact never been used. 
Loans and interest subsidies for areas of 
Greece devastated by earthquake 
Accounting for the loan 
14.33. The Commission has taken note of the Court's 
comment regarding the keeping of separate accounts and 
will ensure that such a provision is incorporated in the 
arrangements governing any future operations of this 
kind. Auditing of specific projects 
14.34. (a) and (b) The financing contract explicitly 
provided that the work programme might be modified 
with the agreement of the EIB. A review was conducted at 
the beginning of 1985 in order to incorporate to the initial 
programme the changes that had proved necessary. These 
changes — the buildings in Nikaia being just one — 
actually occurred at many different times and places 
during the implementation of the many schemes covered 
by the programme and this is the reason for the 
programming difficulties referred to by the Court. 
In the Commission's view all the modifications to the 
initial programme, accumulated over more than two 
years and incorporated by the EIB in 1985, comply with 
the programme's objectives in terms of both their final 
purpose and their technical specifications and therefore 
fall under its decision of July 1982 on eligibility. 
The standard of construction of the new buildings cannot 
be considered excessively high. The cost per square metre 
is in line with the current average in Athens, though the 
quality is undoubtedly higher than that of the original 
buildings. 
14.34. (c) The construction of a new, larger school on a 
different site from the old one, which was rented and 
shared with other users, is fully compatible with the 
Council's Decision, which aimed at 'the reconstruction of 
economic and social infrastructures'. The construction of 
a new school building to replace the old one, which was ill-
suited to modern requirements, clearly forms part of a 
post-earthquake reconstruction effort. 
The temporary use made by the Greek authorities of the 
damaged buildings is not covered by the financing 
contract and lies outside the Commission's field of 
responsibility. 
Evidence of earthquake damage 
14.35. The Commission has taken note of the Court's 
comment regarding the importance of photographic or 
documentary evidence of damage and will ensure that 
suitable provisions are included in the arrangements 
governing any future operations of this kind. 
15. 12. 87 Official Journal of the European Communities 253 
PART II 
European Development Funds 
REPLIES OF THE COMMISSION 
OBSERVATIONS ON THE 
FINANCIAL MANAGEMENT 
Third and fourth EDFs 
6. The third EDF could not be wound up at the end of 
1986 because 14 projects involving some 9 million ECU 
had not been concluded. However, during that year 19,7 
million ECU remaining unused from projects which had 
been concluded was transferred from the third to the fifth 
EDF. 
Final winding up is now planned for 31 December 1987. 
Fifth EDF 
7. The accounting situation at 31 December 1986 was as 
follows: 
— allocation: 4 802 317 612 ECU; 
— decisions (primary commitments): 4 156 702 987 
ECU (86%); 
— secondary commitments: 3 368 886 521 ECU (70 %); 
— payments: 2 658 876 555 ECU (55 %). Sixth EDF 
8. The volume of payments under the sixth EDF 
depends on the number of indicative programmes signed 
rather than the date on which its financial regulation was 
adopted. The regulation for the sixth EDF was adopted 
23 months after signature of the relevant convention 
while that for the fifth fund took 17 months. Since a 
number of significant changes were proposed for the 
regulation for the sixth fund (interest on late payments by 
the Member States, general use of the ECU), it was only 
to be expected that discussions in the Council's ACP/FIN 
working party would take longer. This did not, however, 
delay expenditure from the sixth fund, since the financial 
regulation for the fifth fund continued to be applied by 
analogy. 
At 31 December 1986 the expenditure situation for the 
ACP States was as follows: 
— subsidies: 7 689 000 ECU; 
— emergency aid: 3 923 000 ECU; 
— Stabex: 105 029 000 ECU. 
9. The Commission's procedure for applying Article 
153 (2) of the Third Lome Convention is to assign to 
Stabex the proportion of the interest payable at the 
market rate on the EDF accounts corresponding to the 
balance of Stabex resources not yet disbursed. At 31 
December 1986 6,4 million ECU in interest attributable 
to the Stabex system appeared in the EDF accounts as 
'Miscellaneous revenue.' In future the income yielded by 
unused Stabex resources will be shown separately in the 
accounts. 
254 Official Journal of the European Communities 15. 12. 87 
Drawing-up of the EDF accounts 
10. Once again in 1986 the accounts were drawn up by 
the statutory 15 April deadline. The Commission would 
be unable to achieve this if it had not carried out checks 
and reconciliations during the year. 
Between the start of one financial year and the closure of 
the previous one, the accounts are kept only on an annual 
basis and not cumulatively. Bank transactions are 
recorded on a monthly print-out and the data relating to 
the financial implementation of projects are entered daily 
on provisional validation lists. 
Imprest accounts 
Recording advances 
14. The Commission does not agree entirely with the 
Court's view that the record of advance funds in the 
accounts is inadequate 
15. Like advances granted in connection with works, 
supply or service contracts against a bank guarantee, the 
sums advanced, mainly for agricultural and micro-
projects, are not recorded as assets in the EDF accounts. 
The sums are advanced from the local paying agents' 
accounts and are transferred into bank accounts adminis­
tered by officers appointed by the ACP States concerned. 
Once transferred, the local currency becomes the property 
of the ACP State, with an obligation to justify its 
utilization or subsequently refund it. The Commission's 
delegations control the use of the imprest accounts and 
authorize replenishment of the authorized float on the 
basis of duly supported expenditure. 
These advances are charged directly to the project 
concerned in ECU at the rate applicable on the day 
preceding the payment. This is the best management 
method, avoiding the inextricable complications of 
calculating the ECU equivalent of the various disburse­
ments charged to the advances granted. This system of managing the accounts conforms to legal 
requirements and is simple and transparent. 
Each advance granted in respect of a contract or estimate 
is first booked as an actual payment, thereby reducing by 
the same amount the total available for that contract or 
estimate. It is then recorded on the same contract or 
estimate card as an advance to be cleared in the currency 
in which it was granted. 
This means that clearance or, where necessary, recovery 
of the advance is monitored automatically and it should 
not be possible to close a contract or estimate without first 
having discharged the advance granted. 
This system has proved its worth and, from the fourth 
EDF onwards, the procedure has been applied more 
generally than hitherto with the aim of securing a greater 
participation by national resources in the implementation 
of projects. It is also with this aim in view that Article 234 
of the Third Lome Convention authorizes recourse to 
direct labour for emergency aid operations. This arrange­
ment guarantees the speed and efficiency which are of 
prime importance for such operations. 
The complete list of advances not finally discharged has 
recently been produced by the computer department 
which manages the EDF accounts and is available to the 
Court. 
16. The Court appears to be referring to cases recently 
brought to the Commission's notice. The appropriate 
checks have been carried out and the accounts corrected 
as required. 
Controls over the use of advance funds 
17. Because of their special nature, direct labour 
operations involving the granting of advances are subject 
to a special approval procedure laid down in detail in the 
provisional compendium of instructions issued to 
delegates. The procedure was recently revised in the light 
of experience to provide the greatest possible manage­
ment security. Among the aspects covered are the 
preparation of estimates, the rules governing procure­
ment procedures and the management of stocks and staff. 
The instructions provide that a permanent inventory of 
stores, stocks of spare parts and fuel must be kept and that 
15. 12. 87 Official Journal of the European Communities 255 
withdrawals may be made only against a delivery chit 
drawn up and signed by the site foreman. 
Last July the Commission adopted the final version of the 
rules which will apply in future. The updating of the 
instructions to delegates takes account of many of the 
comments made by the Court as a result of its on-the-spot 
findings. 
Imprest account administrators' bank accounts 
18. The new instructions also lay down that, when 
delegations conduct their regular checks, they must 
prepare reconciliations between the bank statements and 
their own records and state that cash balances and bank 
statements have been verified. These documents must 
then be presented when the advances are cleared. The 
discrepancies detected by the Court in three cases should 
be investigated; the Commission would therefore be 
pleased to receive further information about the oper­
ations concerned. 
Effect of the deficiencies noted 
19. Although the instructions do indeed provide for the 
supporting documents relating to imprest accounts to be 
kept at the delegations, this does not mean that the checks 
carried out at headquarters are not effective. 
The delegations are required to send to the Commission 
in Brussels a properly certified summary of expenses 
checked. 
The delegate also files the supporting documents so that 
they can be checked by the Commission or control bodies 
during on-the-spot visits. If there are any suspicions or 
difficulties, headquarters may require these documents to 
be sent to Brussels. 
As pointed out at the end of paragraph 15, a list of 
advances granted but not discharged is available to the 
Court. It should also be noted that authorizing depart­
ments monitor the clearance of advances on the basis of 
cards for each contact or estimate which are continuously 
updated by computer. These accounting documents 
permit any errors to be corrected. 20. Since projects often take a considerable time to 
complete, it is hardly surprising that the advance remains 
available to the imprest account administrator through­
out that period. 
This does not mean, however, that the initial advance is 
not used. Each time an advance is cleared, the initial funds 
are reconstituted by payment of the amount for which 
supporting documents have been received. 
Only when the project is drawing to a close, is this process 
discontinued so that the final clearance can be made. 
If there is any uncleared balance, a receivable order is 
issued against the body responsible for implementation of 
the project and the balance recovered is returned to the 
project fund for other operations or, if the project is being 
wound up, to the reserve for the country. 
The balance is in fact repaid in local currency at the 
current rate with any exchange loss being charged to the 
project. This is a conventional management rule designed 
to provide the most effective monitoring of operations. 
The Commission realizes that transparent management 
requires every advance granted under an estimate to be 
cleared against that estimate and not transferred to a new 
one. However, this rule is not always respected by the 
local authorities. Accordingly the new instructions 
stipulate that advances granted against an estimate must 
be cleared against that estimate and not transferred to 
another one. 
Cost of construction work contracts 
21. The Commission shares the Court's concern over 
compensation for price variations 
(a) The contract with the firm responsible for construc­
tion of the Lusahunga-Bukombe road contained provi­
sions which enabled the contractor to secure an unjusti­
fied profit from price revisions affecting the portion of the 
contract payable in currency. 
As soon as the Commission became aware of this 
situation, it required the contracting parties to amend the 
relevant clauses of the letter of contract. This was done in 
a Memorandum of agreement signed in Brussels on 27 
March 1987 by the co-contractors which includes the 
256 Official Journal of the European Communities 15. 12. 87 
freezing of prices for the part of the contract payable in 
ECU at the 1 March 1987 level until completion of the 
work. 
(b) The bulk of the sales tax on fuel was borne 6y the 
Tanzanian budget, not by the EDF. Only when the 
general revision of costs took place was this item divided 
between the EDF and the Tanzania budget in accordance 
with the scale laid down in the contract. 
TRAINING AID 
Multiannual training programmes 
Establishing priority needs 
27. Apart from the rare cases where it was absolutely 
essential (e.g. Benin and Seychelles), the Commission did 
not finance preliminary studies but wherever possible 
used studies carried out by the government or by 
international bodies such as the World Bank. In the 
Commission's view the launch of a training programme 
does not necessarily require a complete prior study of 
supervisory manpower needs by sector of activity and 
level of qualifications. 
Under Lome III multiannual training programmes were 
in general dropped and replaced by the incorporation of 
training into programmes and projects. Obviously, in 
certain cases an analysis of supervisory manpower needs 
and training requirements will still be necessary. 
To cope with these problems and those raised by the 
Court, in 1986 responsibility for this field was assigned to 
a specialist unit set up within the Directorate-General for 
Development. This unit should obtain a general overview 
of all training measures and so improve the efficiency of 
management. Awards for study and training courses 
29. In the past the multiannual training programmes 
constituted separate projects, but this impeded direct 
coordination with other projects and programmes. 
In some cases, however, the Commission tried to achieve 
such coordination (e.g. in Kenya the Eldoret Polytechnic 
project; the training of staff to provide further training 
using finance from the multiannual training programme). 
It was precisely to integrate the training aspect more fully 
into the projects and programmes that the Commission 
abandoned multiannnual training programmes under 
Lome III. Training should now form part of every project 
or programme. 
30. Under the Lome Conventions, it is for the govern­
ments of the ACP States to select the recipients of awards. 
31. For historical reasons, the Commission used to 
grant awards to enable young people to study at the 
United World Colleges. In 1984 it entered into an 
agreement with the UWC covering up to 15 awards, each 
lasting two years, for the period 1984-85. It did not 
subsequently make any further awards of this type except 
under the normal multiannual training programmes for 
technical studies. 
Inclusion of training schemes in development projects 
32. It is true that in some countries the allocations for 
on-the-spot training linked with programmes and 
projects have not been fully utilized. 
The Commission is aware of this problem and the remedy 
adopted under Lome III will no doubt gradually produce 
improvements. This involves replacing the multiannual 
training programmes based on lists of awards for which 
the need is not always clear by the systematic integration 
of training into programmes and projects wherever 
necessary. These guidelines are clearly set out in 
directives, which should mean that funds earmarked for 
training purposes will not remain unused in future. 
15. 12. 87 Official Journal of the European Communities 257 
However, low-cost training projects will still have to be 
programmed outside the main sectors. An initial overall 
commitment of 10 million ECU has already been made to 
finance them. 
33. The Commission's general policy is to give priority 
to encouraging on-the-spot training programmes, which 
often run into considerable difficulties. If there is no 
training infrastructure, it is cheaper to send students 
abroad than to set this infrastructure up, since its 
subsequent continuing operation would involve con­
siderable costs that would have to be met by the 
government concerned. In the case of Nigeria, these funds 
should be used normally. If appropriations remain 
unused, they are reallocated to finance other measures 
under the indicative programme. 
34. In Swaziland the level of public education is 
particularly low. In an attempt to remedy this, the Lome 
II training programme earmarked finance for a number 
of technical assistants to help in certain institutions. The 
terms of reference of these experts included training, 
which justified the allocation of finance from the training 
programme. The fact that they spent the bulk of their time 
on administrative duties rather than training was because 
of circumstances that could not have been foreseen at the 
outset. 
35. Training in Europe does not necessarily carry more 
prestige, but more information exists concerning its 
availability and so it represents an easier solution. It is 
true, on the other hand, that the programming of training 
needs has not received the priority it deserves in some 
countries. The Commission, however, has to respect the 
choices of the ACP States within the indicative pro­
gramme allocated to them. 
The Commission is aware that its delegations need more 
training advisers; it is trying to provide them within the 
limits of the budget available. 
Selection and placing of applicants 
36. Under the Commission's directives on awards, 
delegations must be involved in the selection of candi­
dates and they do this within the limits of their resources. 
The Commission recognizes that more must be done in 
this matter, but the already heavy workload of the 
delegations cannot be ignored. 37. A preparatory study is being undertaken within the 
Commission to back up the action of the managing 
bodies. It will culminate in a computerized list of all the 
training opportunities in the ACP States, since on-the-
spot training must be given preference over training in 
Europe. 
38. The Commission's application forms were designed 
on the basis of similar forms used by the Member States in 
their bilateral aid programmes. The problem lies in the 
way the forms are filled in. The delegations have been 
asked to pay more attention to this and attach their 
comments where necessary. 
39. It is true that courses in the United Kingdom are 
considerably more expensive than in the other Member 
States, but here the Commission has no choice but to 
comply with the decisions of the national authorities. It 
has, however, drawn the attention of certain delegations, 
in Nigeria for example, to the need to look for less 
expensive courses in Community countries other than the 
United Kingdom, to keep courses as short as possible (by 
limiting the number of long-term awards) and to increase 
the proportion of students taking part in courses on the 
spot. 
In the case of seminars and short courses, the Commission 
realizes that greater efforts should be made to find 
cheaper alternatives. The managing bodies will be 
reminded of the need to secure the best prices in Europe. 
Administration of awards for study and training courses 
by organizations in the Member States 
41. As a result of the Court's comments on the 
management of awards in Belgium by the European 
Association for Cooperation (EAC), the Commission 
departments concerned and the EAC have carried out a 
thorough investigation into the discrepancies between the 
two bodies' accounts. 
The reconciliations were completed in June this year and 
the agreement between the entries in the two sets of 
accounts was approved by the chief authorizing officer. 
The adjustments entailed by this decision are now being 
undertaken and when they are finalized the Court will be 
sent a copy of the file closing the matter. 
258 Official Journal of the European Communities 15. 12. 87 
42. The Commission has asked the two managing 
bodies to send it a complete list of their disbursements, 
including the VAT which should be reimbursed by the 
Member State. The Court will be informed of the result of 
this investigation. 
During this year managing bodies have been specifically 
instructed to show VAT separately so that it can be 
recovered more easily. 
43. It is true that the French Centre International des 
Etudiants et Stagiaires transferred 1,1 million ECU from 
available EDF funds to cover awards to award holders 
from southern and eastern Mediterranean countries 
without informing the Commission. The departments 
responsible have recently instructed the managing body 
to rectify the situation without delay. 
44. The three managing bodies referred to by the Court 
keep accounts of commitments by award holder, which 
should avoid any overrun of appropriations. 
It is true that the Commission rarely gives the exact date 
when studies will finish in its decisions to grant awards. 
This is because it is difficult, if not impossible to 
determine it exactly at that juncture. This ought not to 
prevent the managing bodies from checking that award 
holders are actually present. If this is not done, the 
Commission could well refuse to meet expenditure which 
has been incurred irregularly. 
Monitoring of the implementation of award programmes 
45. It is true that at present the Commission does not 
always have all the information it requires 'to assess the 
results of the award programmes.' Sometimes, however, 
this information is available — hence it was able to carry 
out a survey of what award holders from Somalia and 
Sudan did after their studies. The Commission does not 
have the staff or equipment it would need to carry out a 
systematic post-implementation assessment of award 
programmes, even though ideally it would like to do so. 
Care should be taken not to exaggerate the usefulness of 
these ex post assessments, which usually cover only a 
percentage of award holders. Since this sample is never 
representative, it is usually difficult to draw any useful 
conclusions from such an exercise. When the 'EDF award holders' data-processing system is 
overhauled, everything possible will be done to improve 
statistics on the results of award programmes. These 
assessments should provide information which will help 
guide holders towards the courses which offer them the 
best chances of success. 
46 - 47. The Commission is aware that the two data-
processing systems currently used for the award program­
mes no longer meet requirements and should be adapted if 
they are to accommodate all the management and control 
functions connected with the implementation of the 
programmes. A study is currently being carried out to 
find the most suitable hardware and software. 
When the new system is operational, each award holder 
will be identified in a way which will make it possible to 
maintain an administrative and financial record from the 
beginning to the end of the training; but at the same time 
financial management proper will have to be recorded 
separately — in commitments and payments — in the 
EDF accounts. This will facilitate the preparation of 
reconciliations, both with the managing bodies and with 
the delegations, which receive regular duplicate copies of 
the accounting situation produced at Commission 
headquarters. 
It should, however, be noted that a double numbering 
system would not represent a satisfactory solution to the 
problem of the omission of information. 
Telexes, from which most of the data to be entered is 
taken, cannot be regarded as completely reliable from a 
data-processing point of view. Only data on decisions 
concerned with the monitoring of award holders' studies 
and financial commitments are entered. This would mean 
that, alongside the present archive numbering, those 
telexes containing information of value from a data-
processing point of view would have to be numbered 
separately, which would make the process far more 
cumbersome. 
The overhaul of the data-processing system now being 
undertaken is designed to show on a single screen all the 
stages in the award-holders' training and the various 
amounts committed or released in respect of each award 
holder. This will enable any omission to be detected 
rapidly. 
The cases mentioned by the Court have been identified 
and are being corrected. 
48. The Commission does not agree entirely with the 
Court's comments on the correction of commitments. 
While it is true that, under the existing system, 
15. 12. 87 Official Journal of the European Communities 259 
commitments are not brought into line with the actual 
cost on a case-by-case basis, in view of the amount of 
work which this would involve, the amounts 'unneces­
sarily frozen' should not be exaggerated. 
This is demonstrated by the fact that in the management 
of awards, allowance inevitably has to be made for certain 
unknowns, such as the date of termination of studies (1st 
or 2nd examination session), increases in certain costs 
(travel), currency appreciation or depreciation, the 
indexing of management costs by managing bodies, 
increases in the monthly allowances paid to award 
holders, etc. 
Under the present system, all these factors are covered 
without risk and without extra work by the reserve made 
up of unutilized commitment balances. 
If corrections were made on a case-by-case basis, as the 
Court suggests, with commitments being adjusted to 
every change in actual costs by means of endless 
accounting operations to cancel or supplement commit­
ments, the danger is that no funds would be available to 
extend certain awards at the end of the programme. What 
actually happens is that, if the unused reserve appears 
larger than is needed to cover these contingencies, the 
funds are released and reused, either to finance further 
awards or for other measures under the indicative 
programme. 
49. See the second and third paragraphs of the reply to 
paragraphs 46 and 47 on the overhaul of the com­
puterized accounting system. 
50. Unfortunately, because of the small size of deleg­
ations it is impossible to keep track of the future careers of 
award holders on a systematic basis; the 'tracer studies' 
method is still in its infancy. In a number of countries it 
would be extremely difficult for political reasons to 
monitor ex-award holders. 
Assessment studies, such as the one concerned with all 
Commission measures involving training in statistics, 
constitute an attempt to remedy this situation. 
Specific schemes not covered by 
multiannual training programmes the Cameroons administration for action in October 
1986. Some of the equipment is not being used because it 
has not been connected (e.g. to water or electricity). The 
project still has funds available which can be used for this 
purpose, and the connections should be completed by the 
end of the year. 
52. The project for training road maintenance staff also 
included technical assistance to provide supervisory staff 
and on-the-job training for road technicians. 
Despite the efforts of the technical assistance unit and 
repeated interventions by the Commission Delegation, 
little was achieved in the way of training because of the 
highly disorganized work programme imposed by the 
national authorities, most of which lay outside the 
programme specified in the Financing Agreement. 
53. The part of the programme covering restoration of 
school buildings will be completed by the end of the year, 
so that all the technical assistance (teachers) can then be 
provided. The various supply contracts are being 
executed. 
54-55. The Second Lome Convention incorporated 
training into draft programmes precisely to remedy the 
shortcomings to which the Court draws attention. 
Final observations 
56. (a) Preliminary surveys 'of the training require­
ments in each ACP State concerned' are not, in the 
Commission's view, the only way of conducting training 
projects. In practice, training needs may be identified 
pragmatically and cover, for example, one sector or 
specific training institutes. The Commission is adopting 
this approach more and more, undertaking studies to 
identify needs linked to programmes or projects. 
It is not easy to determine priorities in training projects 
for an ACP State; these are in any case fixed by the State 
itself, not by the Community, which can intervene only in 
accordance with its own internal directives in an 
endeavour to produce a coherent training programme, a 
balanced package. Another constraint on the Community 
in the coherent programming of training operations is 
imposed by other funding bodies, which have their own 
priorities. 
51. The Commission was aware of this problem and had 
an expert conduct an inquiry. The findings were sent to (b) The computerization of ACP training institutes, which 
is currently being studied, will, if introduced, make it 
260 Official Journal of the European Communities 15. 12. 87 
possible to choose the most appropriate form of training. 
In any case, the computerized file cannot include an 
assessment of the quality of teaching but only its nature, 
level, organization and subsequent opportunities offered. 
(c) The Technical Group on Training in the Directorate-
General for Development is currently studying a com­
puterized control system. This will improve monitoring of 
award holders but educational efficiency will still be 
difficult to measure. 
TRADE PROMOTION AID 
Sources of finance and financial execution of 
trade promotion programmes 
62. The actual amounts earmarked for trade promotion 
are not in themselves a guide to the effectiveness of this 
type of aid; they reflect the relative priority accorded to 
the sector by the ACP States. Much can be done in trade 
promotion by using small sums judiciously. 
63. The payments are not particularly slow: com­
parison with Table I shows that for the fourth EDF the 
total expenditure on trade promotion was 88 % compared 
with 90 % in the EDF as a whole; for the fifth EDF the 
figures are 56 % and 54 % respectively. 
Trade promotion programmes 
Composition of programmes 
64 - 65. The process of acquainting the ACP States with 
trade promotion measures began with what appeared to 
be the most effective measure, their participation in trade 
fairs; these normally lead to other types of measures. This 
approach was changed with the fifth EDF, when the Commission attempted to adapt the participation 
programmes to the real needs of the ACP States and at the 
same time encourage new measures, the particular nature 
and usefulness of which were not necessarily immediately 
obvious to the States concerned. 
Coordination of trade promotion measures 
66-67. Ad hoc measures are not necessarily bad in 
themselves but it is true that the tendency to isolate trade 
promotion actions in the fourth and fifth EDFs may have 
gone too far. This is why trade development actions in 
Lome III are seen as a natural extension of other 
economic programmes, e.g. rural development, or as 
major integrated programmes in their own right. 
Commission departments have made considerable efforts 
to ensure coordination with Member States and inter­
national organizations. They have had regular six 
monthly meetings with the Member States throughout 
the period of the Lome Conventions and a further series 
with the GATT/Unctad International Trade Centre 
(ITC) in Geneva as well as ad hoc meetings with national 
organizations, the World Tourist Organization, etc. Joint 
actions have been undertaken with the Member States 
and the ITC. The Commission can coordinate actions 
only if it receives the necessary information from other 
sources. Its own actions are relatively public. 
Administrative procedures for the planning and 
implementation of programmes 
69 - 71. The choice which must be made in organization 
is between having a trade cooperation programme 
effectively managed separately from the other program­
mes financed by the Community or a trade cooperation 
programme integrated into the overall development 
programme of the beneficiary. The nature of the 
problems encountered in developing trade makes the 
latter clearly preferable. In recognition of the particular 
difficulties confronting geographical divisions, the De­
velopment of Trade Division (VIII-A-4) appointed 
liaison officers for eaph geographical region in order to 
ensure better contacts between departments. This system 
has worked well for those regions with a major 
programme interest, e.g. Caribbean, Pacific, southern 
Africa, where this division and the geographical divisions 
have designed programmes jointly. There is nothing in the 
structural organization itself to prevent full and effective 
use of the capacities of the existing departments. The 
phenomenon remarked on by the Court could be 
accounted for in large part by the general pressure of 
work on DG VIII personnel. 
15. 12. 87 Official Journal of the 
Attendance at trade fairs 
Selection of fairs and of products exhibited 
74 - 76. There are occasions when participation may be 
justified otherwise. For example it has to be borne in mind 
that many fairs in which the ACP States participate are 
composed of national stands. This means that the trade is 
invited to identify products and sources of supply by 
nationality. For some ACP countries their first priority is 
to be known as a national entity and potential source of 
supply in order to participate more fully in future years. 
How many European traders would know, without 
explanation, where to find Vanuatu or Burkina Faso? 
There are other such examples of the need to consider ad 
hoc participation albeit on a very limited scale. 
The Commission would agree that some participations in 
trade fairs have been ineffective. However, the Court goes 
too far in its approach. Just as there are a wide variety of 
commercial problems which have to be solved, there are a 
wide variety of means of solving them. A trade fair is not a 
boutique. Whereas the perfect participation might be 
built round some of the comments made there may be 
equally valid justifications for alternative kinds of 
participation in terms of cost/effectiveness. 
In the case of'Partners for progress' the event is as much 
political as commercial — see, for example, the annual 
derogation from Generalized system of preferences (GSP) 
quantitative restrictions for goods bought at the fair. The 
fair not only provides a shop window for participants; it 
permits the participants to see what is being sold by their 
competitors. Although the approach may be less scientific 
than a market study followed by a trade mission, the 
Tanzanian participation at the fair may have provided 
sufficient market information for immediate needs, 
certainly much quicker and at considerably less cost. 
The Commission considers that the value of its pragmatic 
approach may be judged from the results achieved, the 
ultimate evidence of which is the provisional balance 
sheet of participation in fairs in 1986 by the ACP States: 
— total EEC expenditure: 1 780 055 ECU; 
— requests for tenders: 403 842 343 ECU; 
— firm orders: 90 369 012 ECU. European Communities 
Details of these figures are available to the Court. 
77. The Commission considers that production of a full 
list of fairs and specialist exhibitions could be mis­
interpreted. Some ACP States might feel obliged to take 
part in an excessive number of events not corresponding 
to their trade priorities. 
Nevertheless, in future the Commission will provide the 
ACP States with a limited list of the most worthwhile fairs 
and specialist exhibitions. Naturally, however, the States 
alone will be responsible for deciding which they want to 
take part in. It should be noted that this choice is made 
not by the ACP representatives who attend the fairs but 
by their national authorities. 
80 - 82. The Commission is not responsible for choos­
ing what an ACP State wishes to produce or to sell; this is 
a responsibility of ACP governments and their business 
community. Relations between private industry and a 
national government are not a matter for the Commis­
sion. 
As has already been remarked, the choice of products can 
be made only by those responsible for exporting them. 
However, the Commission does assist with fair prepar­
ation where it is justified and requested by the ACP. 
Selection of stand personnel 
83-85. Every year the Commission makes it a con­
dition of participation by the ACP States in fairs that the 
staff present on the stand must be qualified and 
authorized to conduct business. However, it sometimes 
happens that at the last minute a country is unable to 
comply with this condition and sends other people whom 
it is too late to reject. What the Commission can do is to 
draw attention to this fault if the appropriate personnel 
do not arrive and, if necessary, after repeated infringe­
ments refuse participation. 
Design and construction of stands 
86 - 89. The system for managing participation in fairs 
is designed for simplicity and cost effectiveness. As far as 
space is concerned, many Member States offer the space 
free—as in the Leather Fair in Paris. The choice of size of 
stand is made by the ACP with a limit on the maximum 
262 Official Journal of the European Communities 15. 12. 87 
size which the EDF is prepared to finance or for which the 
Member State government is prepared to offer space. The 
choice of design is made as a result of a public open tender 
made centrally for all ACP States participating at each 
fair. There is no further restriction as regards either size or 
equipment on what the ACP may finance itself. 
The Commission cannot indicate to fair organizers any 
earlier than it does the number of participants and the 
space needed. It has already been criticized by the ACP 
States for fixing its closing date for requests for 
participation in fairs in October of the previous year. Fair 
organizers are informed of probable participation when 
the list of participants is initially approved and the list is 
finally agreed before the closing date for booking after 
further confirmation that the ACP State will participate. 
The procedure is aimed at preventing the kind of cases 
listed in paragraph 95. 
Follow-up to participation in fairs 
90 - 92. In general adequate information about results 
is obtained at fairs which the Commission visits and these 
results are normally used in the financing proposals for 
subsequent years. A summary of these results for 1983, 
1984 and 1985 was also published in The Courrier for 
March-April 1986. As far as 1986 results are concerned, 
see the remarks in reply to paragraphs 74 - 76. Continu­
ous efforts are being made to establish follow up reports 
but it is not always easy to identify trade opportunities 
arising out of fairs. Certain specific contracts may be 
measured but indirect effects — contacts, better know­
ledge of markets, contracts made subsequently, etc. — are 
immeasurable. The Court does not mention the results 
from the fairs where they have been measured, or the new 
work in linking participation by the ACP States with 
seminars aimed at exploiting local interest, e.g. Trieste, 
Bari, Berlin, Barcelona. Given the very small amount of 
money involved and the number of staff assigned to this 
work since 1982 the really remarkable phenomenon is 
how well it still works in relation to the total input. 
Trade missions 
94. The number of missions financed by the EDF for 
ACP States is small. Where they do take place they mostly 
form part of integrated national programmes and are usually based on market opportunities identified in 
advance. 
95. Trade missions are a minor part of support available 
from the EDF in the field of trade and services. While 
preparation of a list is possible, its usefulness is 
questionable. For the most part missions are not the most 
appropriate vehicle to meet the trade development needs 
of the ACP States. For this reason few missions have been 
financed. 
96-97. If the Court would provide details of the 
specific cases in question, the Commission is prepared to 
examine them to see if any improvements in procedures 
are necessary. 
98. Validation of market opportunities is an esssential 
prerequisite for the success of missions with the objective 
of achieving immediate sales. Even where missions are 
concerned with less quantifiable objectives, such as 
research, prior analysis is also normally desirable to 
justify expenditure. However, it is possible to support 
missions of this latter kind without a prior report, e.g. 
when the objective is to establish the basis of a preliminary 
report. The absence of justification for missions can result 
in a refusal to support. 
In the light of the above, the Commission is willing to look 
at the specific cases mentioned by the Court. 
99. The rule of 10 members per mission, involving 
normally not more than three product groups and visits to 
not more than three markets is a general rule, the 
application of which is flexible and adaptable to 
particular circumstances. 
Where is is not possible for the Commission services to 
organize information and debriefing meetings, the 
Commission relies on reports by mission leaders, 
consultants or the government authorities responsible^ 
Final observations 
100. The Commission has noted the recommendations 
of the Court, and welcomes in particular its comments at 
paragraph 100(b) and (c). However, the Commission 
would like to point out, first, that the development of 
trade of the ACP States will be affected far more by 
external factors, e.g. level of world economic activity, 
than by trade promotion programmes — however well 
managed (trade promotion can only ever be a small part 
15. 12. 87 Official Journal of the European Communities 263 
of the total effort); second, that the ideal marketing 
advice offered in the report is appropriate for marketing 
semi-finished and finished manufactured products, but 
not for primary products. There are very few ACP States 
which have a sufficiently strong manufacturing sector 
which can gear itself to exports. The bulk of the work 
which still has to be done is in training and ensuring an 
adequate dynamic internal infrastructure (e.g. greater involvement of private sector). In these circumstances 
export promotion activities alone cannot have a major 
impact on the trade performances of the ACP States. 
What is clearly needed is a better integration of trade 
concerns in other programmes, particularly production 
orientated programmes, so the full range of measures 
available in Lome can be utilized in an integrated fashion, 
as recommended by the Court.