Decision of the European Parliament

of 10 April 2002

on the discharge to the Commission in respect of the implementation of the budget of the sixth, seventh and eighth European Development Funds for the 2000 financial year

(2002/446/EC)

THE EUROPEAN PARLIAMENT,

- Having regard to the balance sheets and accounts of the sixth, seventh and eighth European Development Funds for the financial year 2000 (COM(2001) 233 - C5-0209/2001),

- Having regard to the annual report of the Court of Auditors on the activities of the sixth, seventh and eighth European Development Funds for 2000 together with the institutions' replies (C5-0618/2001)(1),

- Having regard to the Court of Auditors' Statement of Assurance on the European Development Funds (C5-0618/2001),

- Having regard to the Council's recommendations of 5 February 2001 concerning the discharge to be given to the Commission in respect of the implementation of the operations of the European Development Funds for the financial year 2000 (5787/2002 - C5-0118/2002, 5788/2002 - C5-0119/2002, 5789/2002 - C5-0120/2002),

- Having regard to Article 33 of the Internal Agreement between the representatives of the Governments of the Member States, meeting within the Council, on the financing and administration of the Community aid under the Second Financial Protocol to the fourth ACP-EC Convention(2),

- Having regard to Article 276 of the EC Treaty,

- Having regard to Article 74 of the Financial Regulation of 16 June 1998 applicable to development finance cooperation under the fourth ACP-EC Convention(3),

- Having regard to Rule 93 and Annex V of its Rules of Procedure,

- Having regard to the report of the Committee on Budgetary Control and the opinion of the Committee on Development and Cooperation (A5-0088/2002),

A. Whereas, in its Statement of Assurance on the European Development Funds, the Court of Auditors concludes that, with certain exceptions, the accounts for the financial year 2000 reliably reflect the revenue and expenditure for the financial year and the financial situation at the end of the year;

B. Whereas the Court of Auditors has examined the underlying transactions on the basis of the documentation available but did not carry out any on-the-spot audits to ACP States in order to verify the reality of the works, supplies or services underlying the documentation;

C. Whereas the Court of Auditors finds that with certain exceptions these transactions underlying the financial statements are, taken as a whole, legal and regular,

1. Gives discharge to the Commission in respect of the implementation of the budget of the sixth, seventh and eighth European Development Funds for the financial year 2000;

2. Presents its comments in the attached resolution;

3. Instructs its President to forward this decision, and the resolution which forms an integral part of this decision, to the Council, the Commission, the Court of Justice, the Court of Auditors and the European Investment Bank and to have it published in the Official Journal (L series).

The Secretary-General

Julian Priestley

The President

Pat Cox

(1) OJ C 359, 15.12.2001, p. 417.

(2) OJ L 156, 29.5.1998, p. 108.

(3) OJ L 191, 7.7.1998, p. 53.

Resolution

of the European Parliament containing the comments which form part of the decision giving discharge to the Commission in respect of the implementation of the budget of the sixth, seventh and eighth European Development Funds for the financial year 2000

THE EUROPEAN PARLIAMENT,

- Having regard to the balance sheets and accounts of the sixth, seventh and eighth European Development Funds for the financial year 2000 (COM(2001) 233 - C5-0209/2001),

- Having regard to the annual report of the Court of Auditors on the activities of the sixth, seventh and eighth European Development Funds for 2000 together with the institutions' replies (C5-0618/2001)(1),

- Having regard to the Court of Auditors' Statement of Assurance on the European Development Funds (C5-0618/2001),

- Having regard to the Council's recommendations of 5 February 2001 concerning the discharge to be given to the Commission in respect of the implementation of the operations of the European Development Funds for the financial year 2000 (5787/2002 - C5-0118/2002, 5788/2002 - C5-0119/2002, 5789/2002 - C5-0120/2002),

- Having regard to Article 33 of the Internal Agreement between the representatives of the Governments of the Member States, meeting within the Council, on the financing and administration of the Community aid under the Second Financial Protocol to the fourth ACP-EC Convention(2),

- Having regard to Article 74 of the Financial Regulation of 16 June 1998 applicable to development finance cooperation under the fourth ACP-EC Convention(3),

- Having regard to Rule 93 and Annex V of its Rules of Procedure,

- Having regard to the report of the Committee on Budgetary Control and the opinion of the Committee on Development and Cooperation (A5-0088/2002),

A. Whereas, pursuant to Article 74 of the Financial Regulation of 16 June 1998, the Commission is required to take all appropriate steps to act on the observations appearing in the discharge decisions;

B. Whereas EC development cooperation has poverty reduction as its central objective;

C. Whereas, with the conclusion of the Cotonou Agreement on 23 June 2000(4), the partnership between the ACP States and the EU has been put on a new footing, which should also entail reform of financial cooperation;

D. Whereas aid will more and more shift towards sectoral budget support programmes instead of aid earmarked for specific projects;

E. Whereas information is still imprecise; trusts that, in future budgetary procedures, the figures provided will be totally reliable and asks, in particular, for the terms and results of the application of social conditionality in relation to structural adjustment aid to be clarified;

F. Whereas aid will more and more focus on key sectors and heavy investment in a limited number of programmes;

G. Whereas the Commission has taken tangible steps within the framework of an action plan (creation of EuropeAid, strengthening of Commission delegations, simplification of procedures) to satisfy the demands the Parliament made in its resolution of 6 July 2000 containing its comments accompanying the European Parliament decision giving discharge to the Commission in respect of the sixth, seventh and eighth European Development Funds for the financial year 1998(5);

H. Whereas it is still too early to assess the effectiveness of these measures, which were to improve the performance of Commission services and delegations;

I. Whereas the budget 2000 had been the first to be implemented under the sole responsibility of the present Commission which took office in September 1999,

Budget and Budgetary Implementation in 2000

1. Regrets that, according to the Commission's preliminary estimates for 2000, the funds set aside for infrastructure and social services are unacceptably low; recalls the results of the budgetary procedure for 2002, through which the Commission has undertaken to amend this situation in line with the objectives set;

2. Notes that in 2000 both the level of commitments and the level of payments were markedly higher than in the previous year:

(a) in 2000 commitments amounted to EUR 3758 million, compared with 2692 million in 1999;

(b) in 2000 payments totalled EUR 1548 million, compared with 1275 million in 1999;

3. Notes that in 2001 there was a further and significant increase in payments;

4. Welcomes this trend but believes that it is too early to predict whether the fundamental problem of delays in implementing the EDF will be definitively solved in the coming years;

Monitoring of aid

5. Stresses that a transparent information system which complies with Development Assistance Committee (DAC) standards is a first step towards an approach more closely geared to results, and stresses that indicators showing development results in relation to the objectives must be a priority for the Commission; calls for Parliament to be comprehensively informed and consulted on this process;

6. Reaffirms its view(6) that the granting of further aid should be made conditional upon the submission and effective implementation of reform programmes to improve the quality of public financial management in the beneficiary countries; highlights again the importance of the following points:

(a) ongoing assessment of implementation of the measures designed to reform the public administration;

(b) monitoring of the progress achieved in key sectors (health and education) with the aid of meaningful indicators (e.g. increase in the number of teachers or doctors);

(c) annual audit of accounting and sound management of resources on the basis of samples;

(d) clearly defined sanctions (reduction or suspension of payments) in cases where the agreed reform measures are not complied with;

7. Stresses that the Commission has to increase and improve its audit capacities in a very substantial manner in order to meet these requirements;

8. Welcomes the reply delivered on 15 March 2002 on points of concern regarding the number and nature of audits carried out by the Commission in 2000; is pleased with the thorough, systemic explanation on how the Commission's audit activities are supposed to work; regrets however that the Commission is not able to supply any additional information on the list of audits carried out in 2000 as DG-AIDCO "keeps a rather simple inventory of decentralised audits" (see Commission reply dated 13 March 2002);

9. Asks the Commission if, on the basis of the system in place, it is able to give a declaration of assurance that all EDF funds have been spent legally and regularly and in accordance with the principles of sound and efficient management especially as regards:

(a) internationally recognised audit standards applied in all terms of reference for private audit firms as well as Commission audits;

(b) audits foreseen in all financing agreements;

10. Asks the Commission to explain how the current control system will ensure that EDF money is spent legally and regularly with the increased use of direct budget support;

11. Calls on the Commission to transmit to Parliament its indicative programme of audits of expenditure under the EDF for 2002 by its central services or under their close supervision, it being understood that these on-the-spot audits shall assess the implementation of measures designed to improve public administration in the ACP States and shall verify the reality of works, supplies or services financed from the EDF;

12. Deplores that the follow-up of audit results by the Commission services has not yet improved; agrees with the Court that the follow-up audits carried out on the instructions of the Commission itself or of the EDF authorising officers must be given a special place;

13. Calls on the Commission to provide a more persuasive explanation as to why the cases of ineligible expenditure amounting to some EUR 14 million identified in a Court of Auditors study(7), have not yet been brought to a satisfactory conclusion;

14. Asks the Commission to suspend payments to Senegal until a verdict from the Senegalese Court has been enforced regarding the misappropriation of around EUR 6 million of funds from the seventh EDF uncovered by an audit in 1995(8);

15. Notes the continuing tendency for traditional cooperation in the form of projects to be replaced by a system whereby a growing proportion of funds known as rapid disbursement instruments, chiefly aid for structural adjustment, is allocated to direct support for budgets; believes that the Commission and Parliament must undertake a detailed analysis of the advantages and disadvantages of this approach and urges the Commission to submit a communication on this subject;

16. Asks to be fully informed by OLAF of all enquiries started, conducted or finished in 2000; notes that OLAF is currently providing assistance to Kenya in connection with a criminal investigation into serious allegations concerning a tendering procedure; asks to be updated on this case;

17. Notes that no disciplinary proceedings have been launched so far following the administrative enquiry into the effectiveness of monitoring and control arrangements on the use of counterpart funds in Ivory Coast, Tanzania and Togo; recalls(9) that there had been obvious fraud with, amongst other things, overpriced medical equipment in the Ivory Coast totalling about EUR 28 million; expects to be informed of possible future cases as soon as they occur;

18. Takes the view that complementarity with Member State development policies and coordination with other donors are a key element in achieving the above objectives; calls, in this context, for the Commission to provide Parliament, in future discharge procedures, with specific information on actions carried out jointly with other donors, and on their results;

19. Notes the delays in the implementation of projects co-financed with NGOs; asks the Commission to provide information on the simplification and harmonisation of procedures;

Centre for Development of Enterprise (CDE)

20. Notes that the EDF contribution for the CDE in 2000 was EUR 18738; deplores that there have been serious problems with the management of the Centre including lack of monitoring of contracts, high representation expenses and costly travel arrangements during the period 1997 to 1999; regrets that the report on the audit of the 1999 financial year by the auditors appointed by the ACP-EC Committee of Ambassadors revealed that overall there was no improvement in the financial management of the Centre in 1999; welcomes the fact that the Commission has initiated an additional audit for the period 1997 to 1999; looks forward to receiving a copy when finalised; informs the Commission that it will come back to the matter in the framework of the 2001 discharge;

ACP Secretariat

21. Disapproves that the Commission signed on 9 March 2000 an EUR 18 million financing agreement for 2000 to 2004 for the benefit of the Brussels-based ACP Secretariat representing a 50 % increase per annum compared with the previous funding period,

(a) without linking this fixed-rate funding to workload or expected results;

(b) without making transparent to what extent ad hoc projects financed from the EDF continue to contribute to the running costs of the ACP Secretariat;

(c) without insisting that the ACP Secretariat finally comply with judgements of the Belgian courts since 1995 requiring it to pay compensation to a former employee;

22. Asks the Commission to inform the ACP Secretariat that it must, in all cases, respect the final rulings of the Belgian Courts on matters still pending;

23. Asks the Commission to comply with the recommendation of the Court of Auditors(10)and to request from the ACP Secretariat not only annual financial accounts and external audit reports but also activity reports, incorporating performance indicators in order to monitor progress towards results and to support claims for funding;

Parliament's budgetary and legislative powers with regard to the EDF

24. Reaffirms its view(11) that the present situation, in which the European Parliament is called upon to take an annual discharge decision in respect of the EDF without having corresponding budgetary and legislative powers, is an anomaly; calls once again for EDF resources to be included in the development cooperation section of the general budget of the European Union;

Statement of Assurance

25. Notes that the Court gives a positive Statement of Assurance, but that the Court states that in the case of payments made in the ACP countries the financial audits show that ineligible transactions can be charged to the EDFs (see legality and regularity of the underlying transactions); notes that no on-the-spot audits were carried out by the Court in the ACP States; questions therefore the utility of the Statement of Assurance;

Decentralisation

26. Calls on the Commission to report to Parliament in full on the launching of the deconcentration process as regards delegations in developing countries, and on the results for the management of aid by the delegations;

27. Insists that Parliament must be fully involved in evaluating the pilot delegations selected for the deconcentration process, and that it must be informed of the assessment of the delegations' performance, which will be a crucial element in future staffing decisions;

Access to documents

28. Notes that the EDF 2000 discharge exercise has once again shown that the rules in the existing Framework Agreement concerning access to confidential documents are unsatisfactory for Parliament as discharge authority; the rules,

- are unclear concerning different levels of confidentiality;

- are open to very broad interpretation, in particular as to whether a document is deemed confidential;

- cause undue delays in handing-over of confidential information;

29. Asserts that Parliament needs to have access to complete original documents without prior alterations or obliterated text;

30. Instructs its President to open negotiations without delay on the revision of the Framework Agreement and to ensure that the new agreement is in accordance with the principles adopted by Parliament in its resolution of 4 April 2001 on the discharge for 1999(12);

31. Warns the Council not to adopt new financial regulations limiting Parliament's untrammelled right of access to the information necessary for the exercise of its tasks related to discharge;

32. Instructs its President to bring an action before the Court of Justice if the Council should adopt financial regulations limiting Parliament's budgetary control powers;

33. Asks the Commission to report on steps taken to act on the observations in this resolution by 31 May 2002; asks its Committee on Budgetary Control to analyse this information and draw up a follow-up report to the discharge resolution 2000.

(1) OJ C 359, 15.12.2001, p. 417.

(2) OJ L 156, 29.5.1998, p. 108.

(3) OJ L 191, 7.7.1998, p. 53.

(4) OJ L 317, 15.12.2000, p. 3.

(5) OJ L 234, 16.9.2000, p. 37.

(6) See paragraphs 20 and 21 of the European Parliament resolution of 24 October 2001 on EDF discharge for 1999 (OJ L 321, 6.12.2001, p. 25).

(7) See paragraph 58 of the Court of Auditors' annual report 2000.

(8) See paragraph 60 of the Court of Auditors' annual report 2000.

(9) See Commission press release No JP/00/64 of 20.1.2000.

(10) See paragraph 51 of the Court of Auditors' annual report 2000.

(11) See paragraph 30 of the European Parliament resolution of 24 October 2001.

(12) OJ L 160, 15.6.2001, p. 2.