DECISION OF THE EUROPEAN PARLIAMENT of 13 April 1989 granting discharge to the Commission in respect of the financial management of the sixth European Development Fund during the 1987 financial year (89/498/EEC)

THE EUROPEAN PARLIAMENT,

- having regard to the Treaty establishing the European Economic Community,

- having regard to the third ACP-EEC Lomé Convention (1),

- having regard to the balance sheets and accounts of the third, fourth, fifth and sixth European Development Funds for the 1987 financial year (COM(88) 219 final),

- having regard to the report of the Court of Auditors concerning the 1987 financial year accompanied by the institutions' replies (2),

- having regard to the Council recommendation relating to the granting of this discharge,

- having regard to the Treaty of 22 July 1975 which authorizes the European Parliament to grant discharge in respect of the Community's financial activities,

- having regard to the report of the Committee on Budgetary Control and the opinion of the Committee on Development and Cooperation (Doc. A 2-19/89),

1. Grants discharge to the Commission in respect of the financial management of the fifth European Development Fund during the 1987 financial year on the basis of the following amounts:

- revenue: ECU 11 668 742,49,

- payments: ECU 352 536 660,22;

2. Records its observations in the resolution accompanying this Decision;

3. Instructs its President to forward this Decision and the resolution containing its observations to the Commission, the Council, the Court of Auditors and the European Investment Bank and to arrange for their publication in the Official Journal of the European Communities (L series).

Done at Strasbourg, 13 April 1989.

The Secretary-General

Enrico VINCI

The President

Lord PLUMB

(1) OJ No L 86, 31. 3. 1986, p. 1.

(2) OJ No C 316, 12. 12. 1988, p. 1.

(3) See page 12 of this Official Journal. RESOLUTION containing the observations accompanying the Decisions granting discharge in respect of the financial management of the third, fourth, fifth and sixth European Development Funds during the 1987 financial year

THE EUROPEAN PARLIAMENT,

- having regard to the Treaty establishing the European Economic Community and in particular Articles 137 and 206b thereof,

- having regard to the report of the Committee on Budgetary Control and the opinion of the Committee on Development and Cooperation (Doc. A 2-19/89),

A. whereas, pursuant to Articles 67, 70 and 73 respectively of the Financial Regulations applicable to the fourth, fifth and sixth European Development Funds, the Commission is required to take all appropriate steps to act on the observations appearing in the discharge decisions;

B. whereas, pursuant to the abovementioned Articles, the Commission is also required to report, at the request of the European Parliament, on the measures taken in the light of Parliament's observations and, in particular, on the instructions given to those of its departments responsible for the management of the European Development Funds;

C. deciding to present the observations referred to in

the abovementioned Articles 67, 70 and 73 in this resolution, which accompanies each discharge decision relating to the financial management of the European Development Funds for the 1987 financial year;

D. adopting this resolution on the basis also of the powers which are essential if it is to fulfil its control duties, with a view to remedying the shortcomings established during the discharge procedure and to improving the management of the European Development Funds,

Rate of utilization of the EDFs

1. Notes that the third EDF was wound up in 1987 and that the last remaining balances - some ECU 9,5 - were transferred to the fifth EDF;

2. Notes that, as at 31 December 1987, 90,8 % of programmable aid under the fifth EDF had been committed (compared with 84,7 % in 1986), while the payments rate stood at 56,2 % (compared with 46,1 % in 1986);

3. Notes once again the slow rate of implementation of the fifth EDF, this being illustrated inter alia by the fact that, seven years after the Fund's entry into force, an indicative-programme commitment rate of as low as 7 % was recorded for one recipient country (Belize), and reiterates that failure to comply with the principle of proper timetabling as regards allocation of sums to be committed calls into question the Community's ability to programme aid and observe the relevant schedules;

Financial management and accounting shortcomings

4. Repeats its call for the Commission to set out precisely what special conditions apply to works contracts, particularly as regards the currency of payment and price variation, so as to rule out irregularities of the type found by the Court of Auditors;

5. Expresses its concern at the failure, brought to light by the Court, to conduct sufficiently rigorous checks on certain financial transactions, such as the payment of an advance greater than the commitment entered into on the basis of the estimate and the disbursement of part-payments exceeding those contractually due;

6. Draws the Commission's attention to the importance of fully complying with the principles of legality, regularity and sound financial management in all EDF operations; stresses in this connection the need to submit full supporting documentation in respect of all payments and calls upon the Commission to act in accordance with the Court's suggestions;

7. Calls upon the Commission to revamp certain aspects of its accounting procedures in order to ensure that transactions are more transparent and are carried out more thoroughly and more promptly;

8. Calls upon the Commission to make changes as regards the allocation of responsibilities within the accounting officer's department, with a view to more effective monitoring of EDF implementation;

9. Calls upon the Commission to rationalize the management of the EDF treasury accounts by:

(a) reducing the number of bank accounts maintained to a bare minimum;

(b) opening a separate bank account for crediting the annual Stabex resources in accordance with Article 55 of the Financial Regulation applicable to the sixth EDF;

10. Takes the view that the Financial Regulation applicable to the next EDF should take into account the specific requirements deriving from the discharge procedure, in particular by:

(a) improving the content and presentation of the documentation submitted to the discharge authority;

(b) placing at Parliament's disposal the documentation on which the Commission has based all decisions with financial implications;

(c) keeping Parliament abreast of the outcome of the various budgetary-management measures taken;

Stabilization of export earnings

11. Points out the need to ensure that detailed supporting documentation is provided in respect of payments financed by Stabex transfers; points out that the reports submitted to the Commission by the recipient countries are too sketchy to enable checks to be carried out on how transfers are used; notes that under the third Lomé Convention more effective rules were introduced as regards such checks; calls upon the Commission to insist that the recipient countries meticulously abide by the procedures laid down in the Conventions;

12. Takes the view that the monetary instability of certain countries should not diminish their entitlement to Stabex transfers equivalent to loss of export earnings; calls upon the Commission to introduce assessment methods ensuring, as far as possible, that transfer entitlement is not affected by exclusively monetary developments;

Regional cooperation

13. Reaffirms its backing for regional cooperation between the ACP States and underlines the fact that this can buttress efforts to secure economic integration between these countries, provided that such cooperation proceeds on a sound basis; recommends, with a view to enhancing the effectiveness of this approach, action to ensure that:

(a) projects are not diffuse and do not proliferate, enabling measures to be targeted on priority areas of concern to all the states in a given region;

(b)

regional organizations are selected more rigorously;

(c)

projects are geared to the level of financial resources, technological know-how and management skills available in the states in question;

(d)

evaluation is an integral component of every stage in the planning process relating to regional-cooperation measures;

(e)

greater importance is attached to profitability, and in particular to market outlets, at the project selection stage;

Microprojects

14. Takes the view that the devolving of decision-taking powers to delegations in the field is essential in order

to ensure that microprojects proceed smoothly and, in

particular, to verify that projects meet selection criteria, to facilitate processing and to act on local-authority initiatives more promptly, and, lastly, to carry out monitoring and management follow-up work and evaluate projects; regrets the fact that, according to the Court, delegates have submitted six-monthly implementation reviews on less than half of the programmes financed under the fifth EDF; calls upon the Commission to attach particular importance to regular follow-up in connection with this form of aid;

15. Takes the view that technical assistance is essential if very complex microproject programmes are to succeed; calls upon the Commission to arrange for microprojects to be coordinated with other forms of aid, with a view to cutting the average cost of technical assistance and to enhancing the combined effect of complementary aid measures;

16. Points out that, under current arrangements, no ad hoc proposal for the allocation of appropriations is required in order to commit funds for the financing of technical assistance, which rules out checks on the amounts allocated for this purpose under microproject programmes; calls upon the Commission to take the necessary steps to introduce arrangements for entering expenditure on technical assistance separately in the accounts, with a view to verifying the cost thereof in absolute terms and as a proportion of microproject estimates;

17. Draws attention to the ease with which national authorities in recipient countries - Kenya in particular - obtain advances prior to project selection; notes that, according to the Court, a considerable percentage of projects for which anticipatory funding had been provided under the fifth EDF's second annual programme were abandoned after preparatory viability studies; calls upon the Commission to remedy this shortcoming and to arrange for an in-depth evaluation to be carried out, during the appraisal and finalization procedures, before granting the advances agreed;

18. Points out the fact that prior assessment of all economic, financial, social and institutional constraints is a sine qua non for an assessment of the prospects of a microproject; calls on the Commission in this connection to ensure that delegates pay particular attention to project viability and focus on the following factors:

(a) the ability of recipient states to honour their financial commitments;

(b)

the level of recurrent costs to be borne by users;

(c)

use of simple techniques and appropriate technologies;

(d)

ensuring that the effect of a project on local recipient communities would not be contrary to that intended (exacerbated inequalities);

19. Notes that an assessment by a team of consultants of the various aspects of microproject programmes is nearing completion; asks the Commission to inform Parliament of the results of this assessment;

Emergency aid

20. Points out the fact that it is essential for the Commission to continue to manage and provide emergency aid promptly and flexibly, unlike medium and long-term aid to resolve structural problems, and for emergency aid to be supplied on a sufficiently large scale; believes that promptness and flexibility in deciding on implementing arrangements should go hand in hand with action to forecast requirements as accurately as possible, without taking a fastidious approach, since it is speed which counts;

21. Emboldens the Commission to continue the process of making damage assessment more effective by enabling delegations to play a more active role in examining proposals and following up the measures concerned;

22. Emboldens the Commission to continue to insist that emergency-aid managers submit periodic implementation reports and final overviews, thus enabling an assessment to be made of the extent to which objectives have been realized;

23. Highlights the potential risks to disaster victims as a result of delays in implementing emergency-aid measures; is disquieted to note that, on a number of occassions in the past, the six-month time limit laid down in the second Lomé Convention has not been observed; calls upon the Commission to step up efforts to minimize the interval between taking a decision to grant emergency aid and providing it;

24. Expresses concern at the considerable delay in closing accounts representing some 96 % of total emergency-aid

expenditure allocated under the fifth EDF, points out that closure of accounts is an essential procedure, particularly in order to demonstrate that financial management of the measures carried out has been sound and to establish the amount of unexpended appropriations for reallocation to the special appropriation; calls upon the Commission to clear this backlog as soon as possible;

Assessment of development programmes and projects

25. Points out in the light of its budgetary control responsibilities, the need to have at its disposal, whenever it deems this necessary, the findings of independent assessments unconnected with the evaluations which the Commission may have to carry out for management purposes;

26. Believes, more particularly, that its Committee on Development and Cooperation and Committee on Budgetary Control must as far as possible be in a position - through concerted action on the basis of their respective terms of reference - to conduct or commission such assessments;

27. Takes the view that assessments carried out upon project completion or at the end of a main phase are a source of vital information for improving the way in which subsequent aid projects and programmes are fashioned; calls upon the Commission to notify Parliament of the findings of such assessments;

28. Requests the Commission to provide training for recipient-country personnel in assessing aid projects and programmes and in scrutinizing the effectiveness thereof;

29. Asks the Commission to report on the action taken in response to the observations appearing in the discharge decisions.