12. 12. 88 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 
17 November 1988, adopted its 
ANNUAL REPORT 
concerning the financial year 1987 
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 19-88 
Marcel MART 
(President) 
Aldo ANGIOI 
Pierre LELONG 
Andre J. MIDDELHOEK 
Keld BRIXTOFTE 
Lothar HAASE 
Stergios VALLAS 
John CAREY 
Josep SUBIRATS 
Carlos MORENO 
Richie RYAN 
Fernand HEBETTE 
2 COfticial journal of the European communities 12.12.^ 
^3^^3^ 
1. Thefootnotesindicatedin the text of each chapterarelistedattheendofthechapterin 
question. 
2. The key to the abbreviations and symbols used in this report is given on the second 
page of Annex NL 
3. The institutions'replies are set outafterthe annexes to this report and are marked with 
agrey strip along the edge. 
1^1^^ C^fticiallournal of the European Communities ^ 
P^Bm^^P^Or^P^r^PS 
Annn^ report of the ^enrt of Andtter^eencerntn^ 
Rage 
Introduction ^ 
Creneral budget of the European Communities ^ 
Chapter l^Ceneral matters ^ 
Chapter ^ — Implementation of the budget ^1 
Chapter ^ — Revenue ^ 
Chapter ^ ^^ European AgriculturaloluidanceandoluaranteeFund^Cruarantee 
section ^EACCEC^uarantee^ o^ 
Chapter eo — European Agricultural guidance and guarantee Fund^ guidance 
section t^EACCFDCuidance^ ^7 
Chapter o — Lhe European Regional development Fund ^ERIOF^ ^7 
Chapter 7 — European social Fund lu^ 
Chapter ^^Research 11^ 
Chapter ^ — Financial and technical cooperation ^vithnon^member states 1^ 
Chapters — ^taff and operating expenditure 1^ 
Chapterll^Loans^ borrowings and interestrate subsidies loeo 
European lOevelopment Funds 17^ 
A^^E^E^ 
Annex I ^^ Allocation of responsibilities amongthe Members of the Court of Auditors 
at the time this report ^vas adopted 1^1 
Annex II — Reports and opinions adopted by the Court of Auditors over the last live 
years 1^ 
Annex III — Financial information relating to thegeneral budget of the European 
Communities and to the European development Funds t^l^7^ ^1 
4 C^fncial journal of the European Communities 1^. 1^. ^ 
Ine institutions'replies 
to the Court of Auditors'observations on the iinanciai year 1987 
r^rtl Rage 
General budget of the European Communities ^ 
Chapter 1—General matters ^3^ 
Chapter ^ — Implementation of the budget and accounting matters ^41 
Chapter 3^R.e^enue ^0 
Chapter 4 — European AgriculturalGuidanceandGuaranteeFund,Guarantee 
section t^EAGGFGuarantee^ ^7 
Chapter ^ — European Agricultural Guidance and Guarantee Fund, Guidance 
section tBAGGFGuidance^ ^oeo 
Chapter (^— r^he European regional Loe^elopment Fund ^E^LoF^ ^71 
Chapter 7 — European Social Fund ^ 
Chapter ^^R.e^earch ^ 
Chapter ^ — Financial and technical cooperation ^ithnonmemher Stated ^7 
Chapter lO^Staff and operating expenditure ^^ 
Chapterll — Loan^,borro^ing^ and interest-rate ^uh^idie^ 30t^ 
European POe^elopmentFund^ ^3 
12. 12. 88 Official Journal of the European Communities 5 
Annual report of the Court of Auditors 
concerning the financial year 1987 
INTRODUCTION 
THE PROCEDURE FOR THE ANNUAL CONTENT OF THE ANNUAL REPORT 
REPORT CONCERNING THE FINANCIAL YEAR 
1987 
1. This is the eleventh annual report of the Court of 
Auditors of the European Communities and it concerns 
the accounts for the financial year 1987 (l). 
2. 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 Community, 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. All the comments which it considers 
suitable for inclusion in its annual report are sent by the 
Court to the Commission by 15 July 1988, and those 
observations that relate to the other institutions are 
likewise sent to the respective recipients. The Financial 
Regulation stipulates that each institution must send its 
reply to the Court by 31 October at the latest and that the 
Court must draw up its annual report by 30 Novem­
ber (4). 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 which have been made 
available to the Court on an informal basis. The aim of 
this procedure is, where appropriate, to modify both the 
comments and the replies, so that the points of view 
expressed are presented to the reader as objectively as 
possible. The Court has not found it necessary to express 
its own position on the definitive replies received from the 
institutions after the bilateral discussion procedure. This 
attitude does not, however, imply that the Court 
necessarily agrees with the content of all the replies. 
3. In the light of the Court's report in particular, 
Parliament, acting on a recommendation from the 
Council, gives its opinion on the discharge to be given to 
the Commission in respect of the implementation of the 
budget by 30 April of the following year. 
(•) The footnotes are listed together at the end of the 
introduction. 4. This annual report consists of two parts and three 
annexes and is accompanied by the institutions' replies. 
5. In Part I of the report, Chapter 1 sets out the Court's 
overall message concerning the Communities' financial 
situation. 
6. Chapter 2 contains all the Court's observations on 
the results of a horizontal audit of the implementation of 
the budget and an examination of the legality and 
regularity of operations during the year, irrespective of 
budgetary sector. This chapter also contains all the 
Court's findings with regard to accounting matters. 
7. Chapters 3 to 11 deal more specifically with the 
Court's findings with regard to sound financial manage­
ment in selected areas. The observations in these chapters 
are potentially very wide in scope, and, unlike the 
observations in Chapter 2, they may in some cases go 
beyond the 1987 annual accounts. 
8. 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. 
9. Annex I to 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 
6 Official Journal of the European Communities 12. 12. 88 
relating to the general budget of the Communities and to 
the European Development Funds. 
SPECIFIC ANNUAL REPORTS 
10. The Court has sent separate reports to the relevant 
discharge authorities on the 1987 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), the Euratom Supply 
Agency and the European Schools. The Court has also 
drawn up a separate annual report on those accounting 
transactions that relate to the operational activities of the 
ECSC and on the Commission's financial management of 
these transactions, as required by Article 78f(5) of the 
ECSC Treaty. 
SPECIAL REPORTS 
11. Furthermore, since its last annual report, the Court 
has adopted the following special reports, on: 
(a) the management of counterpart funds in respect of 
food aid (5); 
(b) national and Community systems and procedures 
relating to the management of the European Social 
Fund(6); 
(c) the integrated approach to Community financing of 
structural measures (7); 
(d) the common organization of the market in fishery 
products in Spain and Portugal (8); 
(e) regional cooperation financed under the Lome 
Conventions (9); 
(f) management and control of public storage (10). 
12. In this connection, the Court would like to point out 
to the discharge authority and to readers of its annual 
report that the special reports are complementary to this 
annual report, in particular in that they supply additional 
information. OPINIONS 
13. Since the adoption of its last annual report, the 
Court has also adopted opinions on: 
(a) proposals for a Council Regulation (ECSC, EEC, 
Euratom) amending the Financial Regulation of 21 
December 1977 applicable to the general budget (n); 
(b) a proposal for a Council Regulation amending 
Council Regulation (EEC) No 1883/78 laying down 
general rules for the financing of interventions by the 
EAGGF, Guarantee Section (depreciation) (12); 
(c) a proposal for a Council Regulation amending 
Regulation (EEC) No 729/70 on the financing of the 
common agricultural policy, as last amended by 
Regulation (EEC) No 3183/87 of 19 October 1987 
introducing special rules for the financing of the 
common agricultural policy (13); 
(d) a proposal for an amendment to the Financial 
Regulation applicable to the budget of the Joint 
European Torus (JET), Joint Undertaking (14); 
(e) a proposal for a Council Regulation (ECSC, EEC, 
Euratom) on the definitive uniform arrangements for 
the collection of own resources accruing from 
VAT(15); 
(f) a proposal for the amendment of Article 12 of 
Regulation (EEC) No 2891/77 implementing the 
Decision of 21 April 1970 on the replacement of 
financial contributions from Member States by the 
Communities' own resources (16); 
(g) a draft Financial Regulation of the European 
Schools (17); 
(h) a proposal for a Council Regulation (ECSC, EEC, 
Euratom) implementing the Decision of 24 June 1988 
on the Communities' system of own resources (18). 
12. 12. 88 Official Journal of the European Communities 7 
COURT BUDGET AND STAFF AUDIT OF THE COURT'S ACCOUNTS 
14. The Court's expenditure in 1987 (payments against 
appropriations for 1987 plus payments against carry­
overs from 1986) was 24,5 Mio ECU. 
15. The budgets for 1986 and 1987 provided for the 
following numbers of posts: 
Category 
Category A 
Category LA 
Category B 
Category C 
Category D 
Total 1986 
124 
44 
70 
82 
25 132 
46 
74 
86 
28 
345 1987 
366 (19) 16. Under the Treaties, the Court is required to examine 
the accounts of all revenue and expenditure for all the 
institutions, including itself. The arrangements which the 
Court introduced in 1983 for the audit of its own accounts 
provide that the audit of a given topic in the other 
institutions shall also include an examination of the use 
made of the corresponding appropriations in the Court's 
budget. Any observations arising from this examination 
are included in the relevant chapter of the Court's annual 
report. Furthermore, the Court has engaged a private 
auditing firm to audit its accounts for the financial year 
1987. 
(') 
(2) 
(3) 
(4) 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 83 of the Financial Regulation of 21 December 1977, 
OJ L 356, 31.12.1977, and with 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; 
(iii) Council Decision 81/215/EEC, OJ L 101, 11.4.1981; 
(iv) Council Decision 86/548/EEC, OJ L 325, 20.11.1986. 
ECSC Treaty, Article 78d; 
EEC Treaty, Article 205a; 
EAEC Treaty, Article 179a. 
Article 77. 
Articles 83 and 84 of the Financial Regulation. 5) Special report No 7/87, OJ C 31, 4.2.1988. 
6) Special report No 1/88, OJ C 126, 16.5.1988. 
') Special report No 2/88, OJ C 188, 18.7.1988. 
8) Special report No 3/88, OJ C 188, 18.7.1988. 
9) Special report No 4/88, OJ C 188, 18.7.1988. 
10) Special report No 5/88, OJ C 274, 24.10.1988. 
") Opinion No 6/87, OJ C 337, 16.12.1987. 
Opinion No 7/87, OJ C 339, 17.12.1987. 
Opinion No 8/87, OJ C 339, 17.12.1987. 
Opinion No 1/88, OJ C 166, 25.6.1988. 
(12) Opinion No 2/88, OJ C 166, 25.6.1988. 
(13) Opinion No 3/88, OJ C 166, 25.6.1988. 
(14) Opinion No 4/88, not published. 
(15) Opinion No 5/88, OJ C 191, 20.7.1988. 
(16) Opinion No 6/88, OJ C 212, 12.8.1988. 
(17) Opinion No 7/88, not published. 
(18) Opinion No 8/88, OJ C 313, 8.12.1988. 
(19) Including 310 permanent posts and 56 temporary posts. 
12. 12. Official Journal of the European Communities 
PART ONE 
General budget of the European Communities 
CHAPTER 1 
General matters 
1.0. TABLE OF CONTENTS 
Main budgetary data resulting from the accounts for the financial year 1987 
Introduction 
The accounting surplus and the actual deficit 
Monitoring the implementation of the budget 
Future expenditure 
Revision of the Financial Regulation 
The implications of shared management 
The principle of shared management and control 
Problems connected with the sharing of responsibilities in the main areas of 
Community activity 
Problems connected with the agency role assigned to the EIB 
Final observation on shared management Paragraph 
reference 
1.1 
1.1 
1.2 
1.11 
1.16 
1.24 
1.26 
1.26 
1.28 
1.38 
1.46 — 1.25 
— 1.10 
— 1.15 
— 1.23 
— 1.25 
— 1.46 
— 1.27 
— 1.37 
— 1.45 
MAIN BUDGETARY DATA RESULTING 
FROM THE ACCOUNTS FOR THE 
FINANCIAL YEAR 1987 payment. On 17 July 1987, supplementary and amending 
budget No 1/87 (2) increased these amounts to 
37 452,8 Mio ECU and 36 168,4 Mio ECU respectively. 
Introduction 
1.1. After a period at the beginning of the financial year 
during which the system of provisional twelfths was 
applied, the general budget of the European Com­
munities for the financial year 1987 (') was adopted on 19 
February 1987 and consisted of a total of 37 414,9 Mio 
ECU of appropriations for commmitment and a total of 
36 313,4 Mio ECU of revenue and appropriations for 
(!) The footnotes are listed together at the end of the chapter. The accounting surplus and the actual deficit 
1.2. The revenue and expenditure account of the 
European Communities for the financial year 1987 shows 
that revenue was 521 Mio ECU in excess of the payments 
made. Although the account was established by the 
Commission in accordance with the legislation in force on 
31 December 1987, this out-turn,which is positive only in 
book-keeping terms, should not be allowed to obscure the 
fact that payments amounting to 6 775 Mio ECU, that is, 
more than 18 % of the final budget for the financial year, 
were not charged to the 1987 budget, notwithstanding 
that they corresponded to items of expenditure which 
10 Official Journal of the European Communities 12. 12. 88 
were effectively incurred during 1987. If these sums are 
included, there is a deficit for the financial year, 
amounting to 6 254 Mio ECU, which the Court has 
calculated in the following way: 
(a) accounting surplus for 1987 
(b) Charging to Members States of 
two months of agricultural 
expenditure months of agricul­
tural expenditure due in 1987 
(c) debts resulting from the special 
programme for butter disposal 
(Council Regulation (EEC) 
No 801/87 of 16 March 
1987 (3)) which was carried out 
in 1987 on the basis of pre­
financing by the Member 
States but for which refunds 
will not begin until 1989 
(d) carry-over to 1988 of refunds 
due to the Member States: 
— sums due in return for the 
collection of own resour­
ces (4) 
— refundable advances gran­
ted by the Memver States 
to the Communities in 
1984 (5) 
Total deficit: + 521,0 Mio ECU 
4 546,6 Mio ECU 
1 534,8 Mio ECU 
442,7 Mio ECU 
250,9 Mio ECU 
6 254 Mio ECU Table 1.1 — EAGGF-Guarantee negative expenditure in 1987 
(Mio ECU) 
Field 
(A) 
Cereals and rice 
Oil seeds 
Milk 
Monetary 
compensation 
amounts 
(MCAs) 
Miscellaneous Article/Item 
1030: 
1306: 
207 
2802. 
2804 
1029, Co-responsibility 
levies 
Intervention storage 
Financial contri­
bution by milk pro­
ducers 
MCAs on imports 
levied by importing 
Member States 
MCAs on exports 
levied by exporting 
Member States 
184; 2060 
Subtotal (A) 
(B) 
Clearances 290 Clearance of previous 
years' accounts 
Grand total Sum 
378,7 
0,4 
601,3 
121,8 
542,2 
0,1 
1 644,5 
208,1 
1 852,6 
1.3. Moreover, again according to the revenue and 
expenditureaccount, expenditure under the guarantee 
section of the European Agricultural Guidance and 
Guarantee Fund (EAGGF) increased during 1987 by 
3,8 %, from 22 133,9 Mio ECU to 22 967,0 Mio ECU, 
but this way of presenting the figures does not give a true 
picture of how EAGGF Guarantee Section expenditure 
increased. The fact is that these sums need to be adjusted, 
firstly by attributing agricultural spending carried 
forward to subsequent financial years to the actual 
financial years under which it would normally have been 
entered in the accounts, which is especially important in 
the case of the financial year 1987 (+ 6 081,4 Mio ECU, 
see paragraph 1.2(b) and (c), and — 692,7 Mio ECU of 
1986 expenditure charged to 1987) and then by taking 
account of all so-called 'negative' items of agricultural 
expenditure (see Table 1.1). 
1.4. Once the adjustments mentioned in paragraph 1.3 
are made, EAGGF Guarantee Section expenditure 
increases from 19 225,6 Mio ECU in 1984 to 
20 567,7 Mio ECU (+ 7 %) in 1985, 24 132,3 Mio ECU 
( + 17,3%) in 1986 and 30 208,3 Mio ECU (+ 25,2%) in 
1987, that is, an increase that is distinctly higher than that 
of the own resources base, which agricultural spending 
ought not to have exceeded, according to the conclusions 
reached at the European Council meeting in Fontaine-
bleau in 1984. In fact, the own resources base increased by 
5,9 % in 1985, 4,3 % in 1986 and 5,6 % in 1987. 1.5. Again, on the evidence of the revenue and 
expenditure account, the relative share of EAGGF 
Guarantee Section expenditure in total Community 
expenditure would appear to amount to 65 % in 1987, 
which, as a percentage, is comparable to the correspond­
ing figure for 1986. Once again, though, this figure needs 
to be generously adjusted in an upward direction so as to 
take account of the corrections mentioned in the previous 
paragraph, in which case it would go up to 71,0 % in 1987 
as compared with 66,7 % in 1986 (see Table 1.2). 
1.6. In its previous annual reports, the Court drew the 
discharge authorities' attention to various worrying signs 
that had appeared in previous financial years. These same 
worrying signs were still to be seen during the financial 
year 1987. They were the budgetary authority's inability 
to adopt the budget within the time limits necessary to 
ensure normal management for the financial year, the 
continuing budgetary imbalance and, finally, the delay in 
the revision of the Financial Regulation of 21 December 
1977 applicable to the general budget of the European 
Communities (6). In order to be able to cope with this 
disorder in their financial and regulatory situation, the 
Communities have adopted, since the financial year 1983, 
various expedients which have already been discussed in 
detail by the Court in previous annual reports and which 
have mainly had the effect of seriously undermining the 
principle of the annual nature of the budget. 
12. 12. 88 Official Journal of the European Communities 11 
% A 
80— 
70-
60' Table 1.2 — Relative share of annual EAGGF-Guarantee expenditure in total annual budgetary expenditure (') 
(1973-87) 
Annual budgetary expenditure = 100 % 
79,3 77,5 
75,2 
73,6 
72,6 '70,9 72,6 * 
.69,4 % Annual budgetary expenditure 
EAGGF-Guarantee 
71,1 
70,2 71,0 
66,6 V, 66,7 
65,0 
64,7 
61,6 60,6 
>-
1973 74 75 76 77 T 
78 79 80 II 82 83 84 85 86 87 
(0 Annual expenditure = payments against appropriations for the financial year plus payments against carry-overs from the previous financial year. 
Note: For the financial years 1985, 1986 and 1987, the relative shares of 70,2 %, 64,7 % and 65,0 % were calculated from the figures in the revenue and 
expenditure account. The relative shares of 71,1 %,66,7 % and 71,0 % (dotted lines) were calculated by the Court for the EAGGF-Guarantee bearing 
in mind the corrections mentioned in paragraph 1.5. 
1.7. During the financial year 1987, as indicated in 
paragraphs 1.8 and 1.9, the Communities amended the 
length of the Guarantee Section's financial year and the 
accounting methods used to set out the results of the 
management of this section of the Fund. budget. Finally, Regulation (EEC) No 2048/88 of 24 June 
1988 (9), which was adopted notwithstanding the negative 
opinion expressed by the Court (10), has had the effect of 
reducing the duration of the financial year 1988 to IIV2 
months. 
1.8. Although Article 5 of the Financial Regulation 
provides for the financial year to run from 1 January to 31 
December, EAGGF Guarantee Section expenditure, 
which accounts for more than two-thirds of the budget, 
now follows a financial year beginning on 16 October and 
ending on 15 October of the following year, with that part 
arising from public storage following a financial year 
beginning on 16 September and ending on the following 
15 September. The first manipulation of the length of the 
agricultural financial year occurred late in 1983, when 
Commission Regulation (EEC) No 3184/83 of 31 
October 1983 (7) shortened the accounting year for public 
storage expenditure by one month, thereby postponing 
about 150 Mio ECU to the following financial year. In 
1987, the length of the financial year 1987 was reduced to 
approximately 10 months, as a result of Council 
Regulation (EEC) No 3183/87 of 17 October 1987 (8), 
which enabled the Commission to defer charging almost 
two months of EAGGF Guarantee Section expenditure 
belonging to the financial year 1987 to the Community 1.9. By successively adjusting the timing of the agricul­
tural financial year so as to fit the appropriations 
available, or by carrying over other items of expenditure 
to subsequent financial years, the Community has 
managed to maintain the semblance of a balanced budget. 
But such expedients have serious consequences for 
budgetary control. The fact is that the political objectives 
set out in the European Council decision taken at the 1984 
meeting in Fontainebleau, which said that agricultural 
spending should not increase at a faster rate than the 
Community's own resources, or the superficially more 
binding objectives regarding budgetary discipline in­
cluded in the conclusions of the 1988 Brussels meeting of 
the European Council, lose all meaning and effectiveness 
if the principle of the continuity of accounting procedures 
from one financial year to the other is not strictly 
observed. The accounts that have been submitted by the 
Commission in recent years do not display an acceptable 
degree of consistency and the section entitled 'Summary 
of main accounting principles' in the 1987 accounts does 
not even show the substantial amendments to the 
regulations that have occurred. 
12 Official Journal of the European Communities 12. 12. 88 
1.10. It is not easy to argue that these changes were 
made purely because of their merits from the point of view 
of theory; on the contrary, the Court is obliged to 
conclude that the changes were made with the intention of 
artificially restricting the rate of increase of agricultural 
guarantee spending so as to keep it within the limits of 
available own resources, in accordance with the bud­
getary discipline guidelines laid down by the European 
Council at its Fontainebleau meeting, and thus to give the 
appearance that the facts were in agreement with the 
legislation. 
Monitoring the implementation of the budget 
1.11. Including the appropriations carried over from 
the financial year 1986, the final appropriations for 
commitment and payment available in 1987 amounted to, 
respectively, 39 801,5 Mio ECU and 37 575,8 Mio ECU. 
All in all, 96,7 % of the available appropriations for 
commitment were used (93,9 % in 1985 and 95 % in 1986) 
and 94,0 % of the available appropriations for payment 
(95,2 % in 1985 and 94,3 % in 1986). 
1.12. Disregarding EAGGF-Guarantee payments, it 
can be seen that, as regards 'compulsory expenditure' 
(CE) (! J), the overall rate of utilization of the available 
appropriations for payment fell to 79,7 % (83,1 % in 
1986). As regards 'non-compulsory expenditure' (NCE), 
8 878,2 Mio ECU of appropriations for payment were 
used up and 1 349,1 Mio ECU remained unused. The 
overall rate of utilization of NCE appropriations was 
therefore 86,4 % in 1987, which was equivalent to the 
figure for 1986 (see Table 1.3). 
1.13. In previous annual reports, the Court has pointed 
out that, in accordance with the rules concerning the 
annual nature of the budget, appropriations should only 
be requested and, a fortiori, sanctioned by the budgetary 
authority, if there is a very strong likelihood that they will 
be used, so as not to mobilize Community budgetary 
resources without good cause. A series of findings by the 
Court highlighted the limited utilization of the appropri­
ations allocated to numerous budget headings and called 
into question the reliability of the Commission's es­
timates, both when the preliminary draft budget was 
drawn up and when the latter was examined by the 
budgetary authority. 
1.14. In accordance with the Court's suggestions, the 
Council, in its comments annexed to the Parliament's 
recommendation on the discharge to be given to the 
Commission for the implementation of the 1986 
budget (12), encouraged the Commission to take its 
analysis of the causes of under-utilization of appropri­
ations further and to make the figures resulting from its 
analysis available. 
1.15. As the Commission did not comply with this 
recommendation, the Court attempted to supply the 
missing figures itself. The analysis it carried out revealed that the main explanations for the limited use made of 
some categories of appropriations (see paragraphs 2.11 
— 2.14 for the details) may be broken down as follows: 
(a) structural delays, relating to the somewhat unrealistic 
nature of certain programmes and the sluggishness 
with which they are implemented; 
(b) the unwieldiness and, in some cases, the complexity of 
the procedures and mechanisms by which bene­
ficiaries gain access to Community funds; 
(c) the absence of a legal basis; 
(d) problems connected with the winding up of measures 
which have been concluded, the launching of new 
programmes or the implementation of new regu­
lations; 
(e) the rather unsatisfactory nature, in some cases, of the 
Commission's management. 
Future expenditure 
1.16. The accounts submitted by the Commission show 
that the definite or highly probable liabilities outstanding 
at the end of 1987 which will have to be honoured over the 
next few years amount to 26 484,5 Mio ECU (compared 
with 22 855,1 Mio ECU in 1986) (see Tables 1.4 and 1.5). 
1.17. In addition, the Commission calculates that there 
are also various expenditure commitments and claims on 
the Community, which it describes as being of doubtful 
validity, as having been estimated at random and as being 
scheduled on the basis of unpredictable factors, amount­
ing to about 14 600 Mio ECU (compared with 8 400 ECU 
in 1986). These items of potential expenditure and claims, 
for which the Commission does, however, provide precise 
figures, are also broken down as shown in Table 1.4. 
1.18. The liabilities and potential expenditure men­
tioned in the previous two paragraphs represent a total of 
about 41 000 Mio ECU compared with 31 200 Mio ECU 
in 1986. The Court must repeat, however, that the final 
amount and the dates on which these claims will fall due 
may vary considerably, and the totals have only been 
calculated by way of illustration and so as to give some 
idea of the magnitude of these future liabilities, in 
particular for the purpose of drafting a schedule of 
forecast disbursements. 
1.19. The Court, whilst expressing its satisfaction at the 
inclusion in the statement of the financial situation as at 
31 December 1987 of certain items omitted by the 
Commission in 1986, nevertheless considers that account 
12. 12. Official Journal of the European Communities 13 
S 
e 
© 
sC « 
"E. 
o 1 
1 
o H 
a, o £< r-
o H 
1 
M ° 
1 
(2 
c I 
+ 
^* 
s 
S 
S 
s 
8 O^ Tt Tf 
in fN 00 
©^ <» <~i 
OS OO OO 
O O 
fN fN 
•<* rN sq^ 
"* Os" os" 
0\ 00 oo 
eN r^ o^ 
W W 13 
Z H 
c ^ 
•B § 
|'| 
< w Os" 
w 
OS 
fN 
fN 
^fr" 
SO 
OS 
fN 
CTs_ 
fN 
s£^ 
fN 
3 
Os" 
w 
SO^ 
as" <* 
OS 
fN 
o" so 
Os 
fN 
fN 
w u 
c 
3 
0 
a a < t-; Os^ SJD 
fN SO OO 
-*" r-" ~ 
•>* oq_ o 
(N •* so^ 
t-" fN Os' 
SO M M 
Os" CN —<" 
2--| 
•<* ^ ©" 
ir> (N 00 
w W 13 
Z H 
3 
|3 
ob 
< "* "t cc 
fN fN ^t 
— fN 
R^R 
•* ©^ •<* 
©" fN fN 
—"' fN —T 
r- TJ- fN 
-VOf-
WW « 
Z H q 
fN 
OS 
SO 
fN 
fN 
fN 
OS 
fN 
O 
fN 
SO 
fN 
fN 
SO^ 
fN 
OS 
OS 
Os" 
fN 
Os" 
SO 
fN 
w u z 
>> 
"o a 
a o '5b 
<2 SO^ 
w 
fN 
fN 
"*" 
Os 
fN 
Os 
Os" 
fN 
<3 
so" 
Os 
SO 
fN 
w u z 
>> 
"o 
D. 
is 
o r/3 
so o o 
OS 
O 
so" 
fN 
OS 
fN 
fN 
O 
SO 
OS 
w 
U z 
00 
G 
(2 o" 
o 
^o" 
Os 
OS 
fN 
O o" o 
fN 
Os" 
fN 
q 
Os" 
SO 
fN 
w u 
ei 2 •* "* °° 
111 
os" o" as" 
o" —> ~ 
^L WW 
Os" fN —" 
5- •* M 
© "^ © 
M, 
1 1 1 
,,, 
^t ©^ •* ©^ fN fN 
Os" oo" t~~" oo" —" os" 
SO fN OS O © 
_ os © — — 
W tu 13 
^ o 
c o 
.2 oo 
o « 
U T3 
Os W W 13 
Z H 
•a e 
03 
c 
— 2 
e .2 
.- o > 
o a « 
OH S3 C 
© 
26 446,2 (96,7) 
8 878,2 (86,8) 
35 324,4 (94,0) 
in rn oo 
00 t-^ V) 
•tt r* t> 
i^ © r» 
90 f*^^ 
oo irT so" 
N (S Tf 
oo vf rn 
SO 3 i-i 
f) 00 fS 
-* ©" vT 
•<r os •* 
»qn so" t-^-<* 
© © © 
oo rn ** t- n i-N 
© © -H 
t-;0\ so^ 
rn so"© ro w f-
9\ r< i-i 
SO OS SO 
W W 13 
Z H 
13 
© ©C 
os 
CM 
00 
© 
oT 
© so" SO 
5 
00 
•<* 
00 
Os^ 
r» 
Os 
u 
s 
R 
S 
a o o 
« = 
H 2 
14 Official Journal of the European Communities 12. 12. 88 
must also be taken of a sum of the order of 1 458 Mio 
ECU, made up of the following components: 
(a) estimated expenditure connected with the implemen­
tation, over a period of eight financial years, of 
Council Regulation (EEC) No 776/87 of 16 March 
1987 (13) establishing an indemnity for the cessation 
of milk production: 1287,4 Mio ECU (compared 
with 905,6 Mio ECU in 1986); (b) liabilities, at present under examination, connected 
with requests for refunds submitted by certain 
Member States under the Guidance Section of the 
EAGGF: 95,6 Mio ECU (compared with the 
107,9 Mio ECU that the Commission mentions in the 
annex to Volume V of the 1986 revenue and 
expenditure account and which it did not update in 
1987); 
Table 1.4 — Position of potential liabilities and expenditure as at 31 December 1987 
(Mio ECU) 
Position at 
31.12.1987 
A — Liabilities 
(1) 'Legally binding' obligations: 
(a) liabilities entered in the Communities' consolidated balance sheet and resulting from the 
imbalance between revenue and expenditure: 
(i) refundable advances paid in 1984 and 1985 by the Member States in order to cover part 
of the deficits for 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 1988 
(c) liabilities arising from legally binding commitments which do not, however, appear as 
accounting commitments in the Community's accounts: 
(i) EAGGF-Guarantee expenditure postponed in the absence of available appropriations 
(ii) liabilities relating to requests for reimbursement by certain Member States of EAGGF-
Guidance expenditure 
(iii) sums owing to Member States under the clearance of the EAGGF-Guarantee accounts 
(iv) 1987 expenditure on flat-rate reimbursements to Member States of expenses incurred in 
the collection of own resources 
(v) debts resulting from the special butter disposal programme already implemented in 
1987 
Subtotal (c) 
Subtotal (1) 
(2) Estimate of potential expenditure related to the disposal of agricultural stocks bought into 
intervention under EAGGF-Guarantee regulations 
Total (A) 750,9 
13 435,8 
4 546,6 
40,7 
442,7 
1 534,8 
6 564,8 
20 751,5 
5 733,0c1) 
26 484,5 
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 Mediterranenan programmes (specific budgetary effort) 
(5) Obligations in respect of Member States and non-member countries arising from multiannual 
programmes in the area of Title 7 of the budget (research, energy, etc.): programme decisions 
taken 
(6) Development aid provided for within the framework of the first and second protocols with the 
Mediterranean countries 
Total (B) 3 700,0 
678,0 
3 243,0 
1 397,0 
5 121,0 
466,0 
14 605,0 
(') Public storage (excluding the volume of butter included in the special butter disposal programme and still to be disposed of in 1988) -
'mixed' alcohol — 430,9 Mio ECU; debts resulting from the special butter disposal programme — (1988) 1 643,0 Mio ECU. 3 659,1 Mio ECU; 
12. 12. 88 Official Journal of the European Communities 15 
Table 1.5 — Accumulation of outstanding commitments (differentiated appropriations) 
(Mio ECU) 
Movement of 
appropriations 
Accumulated -outstanding commit­
ments at the beginning of the finan­
cial year 
Cancellations and revaluations of 
commitments from previous years 
Payments against 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 against commitments for 
the financial year 
Accumulated commitments outstan­
ding at the end of the financial year 
Break-down of accumulated commit­
ments 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) 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%) 
1259.8 ( + 7,7%) 
187,3 ( + 48,9%) 
6 049,0 (+13,4%) 
2 071,0 (-27,4%) 
1278,1 (+19,8%) 
1612.9 ( + 28,4%) 1987 
12 458,1 
- 1 259,3 
-3 871,5 
7 327,3 
+ 10 866,1 
-3 962,6 
14 230,8 (+14,2%)(!) 
1253,8 ( + 0,5%) 
255,3 ( + 36,3%) 
6 982,2 (+15,4%) 
2 182,7 ( + 5,4%) 
1649,1 ( + 29,0%) 
1907,7 (+18,3%) 
(') The figures in parentheses show the rate of increase as compared with the previous financial year. 
(c) food aid liabilities relating to the implementation of 
the 1986 and previous programmes, estimated at 
75 Mio ECU (compared with 131 Mio ECU in 1986). 
1.20. For several years now the revenue and expenditure 
account has contained a timetable, broken down by 
budget heading, showing when the payment of outstand­
ing commitments is due. The payments contained in this 
timetable, not including payment appropriations carried 
over from 1987 to 1988, represented a total of 
13 435,8 Mio ECU at the end of 1987. As regards other 
liabilities and potential expenditure, the Court invited the 
Commission in its annual reports on the financial years 
1985 and 1986 (14) 'to try to draw up a timetable to show 
when they are payable'. In the comments it annexed to its 
recommendation on the discharge for the financial year 
1986, the Council fully supported this request. The Court 
notes that this timetable has not so far been drawn up, or 
even envisaged, by the Commission. The budgetary 
authority is thus unable to assess, even provisionally, 
when these liabilities will be due over the next few 
financial years. The Court continues to take the view that 
this falls seriously short of the objectives of forward 
management and budgetary discipline called for at the 
last two European Council meetings, held in Brussels and 
Fontainebleau. 1.21. But, even with respect to outstanding commit­
ments, it can be seen from Table 1.6 that the calculations 
the Commission made when it came to draw up the 
schedules of payment forecasts were inaccurate and even 
slapdash. The payments actually made as at 31 December 
1987 amounted to only 77,6 % of total forecasts, which 
were made, for the 1987 financial year, in around April or 
May 1987, in other words just seven or eight months 
earlier. Furthermore, there are even bigger discrepancies 
in the implementation of certain policies. For example, in 
1987, the rate of execution of payments against outstand­
ing commitments (1987 instalment) amounted to no more 
than 47 % for development cooperation policy and 65 % 
for social policy. The Commission has yet to determine 
whether the low utilization rate of payment appropri­
ations is due to inaccurate forecasts or whether it is due, 
for example, to the stricter management of commitments. 
1.22. In its annual report on the financial year 1986 (15), 
the Court emphasized that, as regards outstanding 
commitments, 'very considerable amounts remain com­
mitted for long periods of time and sometimes for more 
than 10 years', and pointed to an earlier observation in 
which it had deplored 'the fact that, at times, the 
monitoring of outstanding commitments is sometimes 
16 Official Journal of the European Communities 12. 12. 88 
inefficient in respect of the fisheries sector, the European 
Regional Development Fund (ERDF), and the European 
Social Fund (ESF)'. The Court can only repeat that the 
Commission needs to pay due heed (as it has since 1986 
regarding the Social Fund) to the Court's recommend­ation 'that the improvements called for in the monitoring 
of outstanding commitments be carried out' (16) (see 
Table 1.7). Whilst on the same topic, the Court must also 
draw attention to the delay of several years in the 
clearance of the food aid accounts (see paragraph 2.65). 
Table 1.6 — Outstanding commitments as at 31 December 1986: comparison between payments provided for in 1987 and payments made in 
1987 
(Mio ECU) 
Sector 
3. Agricultural structures 
4. Fisheries 
5. Regional policy 
6. Social policy 
7. Research, energy, etc. 
9. Development cooperation 
Total Payments 
provided 
for in 1987 (') 
(1) 
287,9 
66,4 
1 613,2 
1 510,6 
543,7 
969,6 
4 991,4 Payments made in 1987 
Against 
1987 
approp­
riations 
(2) 
250,0 
45,8 
1 503,2 
773,8 
442,7 
225,4 
3 241,0 Against 
carry-overs 
from 1986 
(3) 
29,5 
2,5 
108,1 
208,1 
52,4 
230,0 
630,5 Total 
(4) = (2)+ (3) 
279,5 
48,3 
1 611,3 
981,9 
495,1 
455,4 
3 871,5 made as 
percentage 
(5) = (4)/(l) 
97,1 
72,7 
99,9 
65,0 
91,1 
47,0 
77,6 
(') See 1986 revenue and expenditure account, Volume V, p. 30 (doc. COM(87) 191). 
Table 1.7 — Commitments compared with differentiated appropriations outstanding on 31 December 1987(1)(2) 
(Mio ECU) 
Sector 
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 
Total 1977 
(2,2) 
2,1 
(9,5) 
2,6 
(3,8) 
2,4 
(15,5) 
7,1 Financial years during 
1978 1979 
(1,8) (9,7) 
1,0 6,3 
(0,2) 
(15,8) (50,8) 
12,3 41,4 
(3,1) (1,1) 
(1,3) 
0,9 
(5,1) (26,6) 
4,3 15,9 
(25,8) (89,7) 
17,6 64,5 1980 
(17,5) 
13,4 
(0,02) 
(114,3) 
81,1 
(5,8) 
0,02 
(11,1) 
8,2 
(40,6) 
25,9 
(189,3) 
128,6 1981 
(44,5) 
32,7 
(0,8) 
0,5 
(254,7) 
213,6 
(23,8) 
1,9 
(8,4) 
5,6 
(81,8) 
60,3 
(414,0) 
314,6 which the commitments were entered into 
1982 
(73,1) 
43,2 
(2,7) 
2,2 
(319,7) 
274,9 
(62,3) 
0,9 
(21,2) 
14,4 
(84,8) 
61,0 
(563,8) 
396,6 1983 
(139,1) 
74,1 
(4,7) 
3,5 
(451,0) 
336,6 
(169,4) 
16,7 
(64,4) 
26,4 
(105,6) 
89,0 
(934,2) 
546,3 1984 
(199,6) 
138,8 
(23,3) 
14,6 
(927,1) 
693,5 
(135,5) 
27,2 
(135,4) 
66,0 
(225,3) 
183,0 
(1 646,2) 
1 123,1 1985 
(369,1) 
268,7 
(40,9) 
23,7 
(1 367,2) 
1 024,2 
(379,9) 
54,7 
(348,2) 
168,5 
(263,2) 
201,6 
(2 768,5) 
1 741,4 1986 
(403,2) 
312,3 
(114,7) 
87,9 
(2 538,9) 
1 452,3 
(1 290,1) 
278,1 
(688,1) 
398,5 
(776,1) 
434,5 
(5 811,1) 
2 963,6 1987 
361,1 
122,9 
2 849,7 
1 803,2 
960,6 
829,9 
6 927,4 (1 259,8) 
1 253,7 
(187,3) 
255,3 
(6 049,0) 
6 982,2 
(2 071,0) 
2 182,7 
(1 278,1) 
1 649,1 
(1 612,9) 
1 907,8 
(12 458,1) 
14 230,8 
(') Source: Volume V of the 1986 and 1987 revenue and expenditure accounts. 
(2) The position on 31 December 1986 is given in parentheses. 
12. 12. 88 Official Journal of the European Communities 17 
1.23. In addition, the Court notes that all outstanding 
commitments are, as a rule, considered to be virtually 
equivalent to legal commitments and therefore practically 
unavoidable. In fact, however, this is far from always 
being the case, given the large degree of discretion allowed 
the Commission concerning the definition of a commit­
ment. For example, concerning capacity adjustments in 
the fisheries sector, a global sum of 26,3 Mio ECU was 
committed on 29 December 1987 on the sole basis of a 
Commission decision establishing the maximum amount 
of the Member States' eligible expenditure. Similarly, in 
the field of shared-cost contracts for energy projects, the 
sums are committed as soon as a decision is taken by the 
Commission or the Council, generally several months 
before the contracts are signed, whereas in other fields the 
appropriations are not committed by the Commission 
until the contracts are ready to be signed. The Court must 
ask the Commission to distinguish in future between 
commitments that correspond to legal obligations 
towards third parties and commitments that merely 
correspond to decisions or general estimates that it has 
made. 
Revision of the Financial Regulation 
1.24. The Court must point out here that the revision of 
the Financial Regulation, which has been in abeyance 
since 1981, was the subject during the financial year 1987 
of a sudden proliferation of proposals for piecemeal, 
often mutually contradictory, amendments whilst at the 
same time, however, the work of overall clarification of 
this fundamental piece of Community legislation could 
still not be completed. In particular, when drafting its 
Opinions Nos 4/87, 5/87, 6/87 and 7/87 (17), the Court 
had occasion to express its formal and fundamental 
objections to such a legislative approach, which is bound 
to lead to a weakening of the very structure of the edifice 
of Community law. 
1.25. In its 'preliminary observation' preceding the 
comments accompanying its discharge recommendation 
for the financial year 1986 (12), the Council stressed that 
the revision of the Financial Regulation, together with 
examination of the proposals concerning the commmon 
agricultural policy, the structural Funds, bringing 
revenue into line with expenditure and budgetary 
discipline, constituted one of those factors that were in 
accord with the observations that the Court had been 
making for several financial years and which concerned 
difficulties that called into question the budget's role as a 
forecasting and management tool. The Court takes the 
view that,if the Commission intends to fulfil its re­
sponsibilities concerning the implementation of the 
budget correctly, it must come back to the basic 
budgetary principles set out in the Treaties and take the 
requisite steps to improve its ability to control and 
manage the general budget. THE IMPLICATIONS OF SHARED 
MANAGEMENT 
The principle of shared management and 
control 
1.26. Most Community budgetary expenditure is 
managed either by entrusting management responsibi­
lities to authorities or economic agents in the Member 
States (for example, agricultural guarantee spending or 
the collection of own resources) or is managed jointly 
with the Member States (e.g. in the case of structural 
policies). The consequences of sharing management 
responsibilities in this way are felt when the time comes to 
audit them. The checks are carried out by and in the 
Member States, acting in association with the Commis­
sion. Although different in nature, these management 
procedures have this much in common, that they 
presuppose, in accordance with Article 5 of the EEC 
Treaty, active cooperation between the Commission and 
the Member State authorities concerned, particularly as 
regards monitoring, exchanges of information, coordi­
nation and the follow-up to any results thus obtained. As 
part of its audit work on the financial year 1987, the Court 
took a special interest in the way these mechanisms 
worked, at both Community and national level. 
1.27. The audits carried out by the Court in 1987 have 
yielded certain conclusions which, in the Court's view, 
will be highly pertinent to the success of the budgetary 
discipline policy. The Court believes that better bud­
getary discipline should result not only in capping 
spending in certain areas, but also, and above all, in an 
improvement in the quality of the objectives of budgetary 
expenditure and in the management of Community 
funds. The observations which follow are therefore 
concerned with the financial management aspect no less 
than with considerations of the legality and regularity of 
the operations audited. 
Problems connected with the sharing of 
responsibilities in the main areas of 
Community activity 
1.28. Whilst again pointing to the failure of some 
Member States to cooperate with the Commission in 
certain fields (see paragraphs 3.33, 3.34, 3.82, 4.91, 5.37 
and 5.42), the Court must emphasize that the Commis­
sion has not always been sufficiently active in the matter 
of coordination and supervision, in particular as regards 
the question of ensuring that national controls are carried 
out on an integrated basis from the Community point of 
18 Official Journal of the European Communities 12. 12. 88 
view (see paragraph 4.85(a)). Serious shortcomings in this 
area lead not only to a yawning gap between the 
intentions of the legislator and the practical application of 
the measures at local level (see paragraph 4.133(a)), but 
may also have by no means negligible consequences for 
the Community's finances. 
1.29. Among the many and various national authorities 
involved in the management and safeguarding of 
Community funds, the customs services are of central 
importance in the agricultural guarantee sector. It is they 
who carry out the key controls on export refunds and 
some MCA payments. In the own resources sector, 
moreover, they are responsible for the collection of 
customs duties, agricultural levies and even VAT in some 
Member States. 
1.30. Having examined the work of national customs 
authorities in all these areas, the Court is obliged to voice 
serious doubts about the efficiency of the collection of 
Community revenue and the regularity of some items of 
expenditure. The Court draws particular attention, in this 
context, to its findings with regard to the Community 
Transit system (see paragraphs 3.32 — 3.35) and export 
refunds (see paragraphs 4.20 — 4.59). In the Court's view, 
the performance of national customs authorities in the 
safeguarding and management of Community funds 
sometimes falls short of the minimum level required 
under existing rules and is inadequate for achieving the 
objectives laid down in the Treaties, whilst the Commis­
sion has not always even kept itself sufficiently informed 
concerning the control systems used by the national 
administrations (see paragraphs 3.8,3.32 and 4.76 — 4.85 
(e))-
1.31. Furthermore, the Commission still does not have 
complete, up-to-date information on the management 
and control systems in the Member States for interven­
tion storage (see paragraph 4.78), and the implementation 
of Council Directive 77/435/EEC of 27 June 1977 (18) 
concerning the control by the Member States of 
operations under the EAGGF Guarantee Section finan­
cing system (see paragraph 4.81(a)). Furthermore, the 
clearance procedure still does not enable it to make an 
assessment of the reliability of the Member States' 
accounts (see paragraph 4.85). In the absence of a clear 
picture of the national systems used, the Commission is 
still unable to assess the real extent and nature of frauds 
perpetrated against the EAGGF Guarantee Section, or 
how they are broken down between the various agricul­
tural market support mechanisms. 
1.32. In the case of the Guidance Section of the 
EAGGF, it has been observed that numerous program­
mes submitted by the Member States in the cereals 
storage sector are based on an increase in production 
without any account being taken of prospects for 
stabilizing or reducing Community surpluses, which would alleviate the burden on the Guarantee Section (see 
paragraph 5.11(a)). The Commission, for its part, does 
not give this problem the attention it deserves when 
approving these programmes, nor does it, in general, 
make sufficient efforts to secure the information or means 
of analysis which are vital for the realization of an 
efficient structural policy through rational investments 
(see paragraph 5.38). Finally, when it does have reports at 
hand on the projects that have been implemented, the 
Commission does not always study or exploit them (see 
paragraph 5.26). This inadequacy of information and 
analysis, by both the Commission and the Member 
States, in respect of the results of completed measures 
makes it impossible to establish whether the Community 
aims have been achieved (see paragraph 5.42). 
1.33. Moreover, and still apropos the Guidance Section 
of the EAGGF, there is a contrast, in the implementation 
of Community aid to speed up agricultural development 
in Greece, between the excess of Community regulations 
on the one hand and the limited follow-up to these 
regulations on the other (see paragraph 5.45). The 
numerous Community measures undertaken are, 
moreover, evidence of an absence of an overall view of the 
matter. For measures on this kind of scale, the necessary 
monitoring and control procedures ought to be provided 
for from the beginning, and the question of the eligibility 
of expenditure should call for a continuous effort by the 
Commission to provide information and assistance so as 
to emphasize the objectives of Community action and 
achieve the most effective use possible of the aid (see 
paragraphs 5.48 — 5.50). 
1.34. As far as the financing of integrated structural 
measures is concerned, the procedures for managing the 
various financial instruments have not been modified on a 
Community-wide basis so as to take account of the 
imperatives and the objectives of the integrated approach 
(see paragraph 6.78). In addition, the absence of a suitable 
accounting framework makes it impossible to establish 
the actual content and mode of implementation of the 
initiatives that are financed. In the case of various 
integrated measures, the Commission, for lack of overall 
accounting documents and implementation reports, does 
not carry out any follow-up examination and does not 
assess the results achieved (see paragraph 6.80). 
1.35. With regard to the ERDF, in particular, analysis 
of the reports to be sent by the Member States on the 
implementation of the regional development program­
mes and the utilization of the main completed infrastruc­
ture works ought to lead to the development of a system 
for measuring and assessing the impact of financial 
investments. An instrument of this kind is indispensable 
for the purpose of obtaining information on and 
evaluating the impact of the projects on regional 
development, and, indirectly, it should also make it 
possible to improve the procedures used for appraising 
aid applications, so as more sharply to focus decisions to 
be taken in the future and increase their effectiveness (see 
paragraph 6.75). 
12. 12. 88 Official Journal of the European Communities 19 
1.36. The European Social Fund could become a more 
effective financial instrument, which would be easier to 
monitor, if, in particular, the criteria for eligibility and 
priority were defined in clear and precise terms, if explicit 
instructions on the information to be supplied and the 
types of control which should accompany the national 
certification procedures were transmitted to the Member 
States and, finally, if the Commission's powers of control 
were fully and systematically utilized and backed by 
effective sanctions (see paragraph 7.9). 
Moreover, the Commission has not drawn from the 
experience acquired all the necessary lessons for the 
continuation and development of the operations in the 
experimental area of the ESF, both with regard to the 
definition of the experimental field and the financial 
management or the evaluation of the results (see 
paragraph 7.55). 
1.37. The lack of adequate relevant information thus 
not only limits the Commission's action (and, con­
sequently, that of the Court and the budgetary authority) 
in its role as supervisor of the sound use of Community 
funds, but also hinders the vital ex post facto assessment 
work which should improve, if not optimize, the use of the 
funds allocated subsequently to new measures of the same 
kind. 
Problems connected with the agency role 
assigned to the EIB 
1.38. The Court has never attempted in any way to audit 
operations carried out by the European Investment Bank 
(EIB) from its own resources. The Court has nevertheless 
been obliged to observe that greater and greater obstacles 
have been put in the way of the exercise of its audit 
prerogatives, as defined in the Treaties, over the 
Community resources used under the Commission's 
responsibility to finance operations in which the EIB is, in 
one way or another, involved (EIB management of funds 
as the Commission's agent, interest subsidies, co-
financing, etc.). 
1.39. The most substantial, in terms of volume, of the 
resources that are managed by the EIB are borrowed on 
the financial markets by the Commission and re­
distributed by it, with the help of the EIB. In its annual 
report on the financial year 1986 (19), the Court noted that 
when it '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'. These repeated 
observations have led the Court to be especially vigilant 
as regards the way in which the Commission fulfils its 
obligations as manager of the funds in question and, 
consequently, the procedure by which it exercises its own 
powers of control. 1.40. In a letter to the President of the Court of Auditors 
dated 29 April 1988, the President of the Commission was 
concerned to reaffirm that 'the Commission has in no way 
changed its position of principle regarding the Court of 
Auditors' powers over operations managed by the EIB' 
and said that the Commission considered that the 
wording of Article 10 of Decision 87/182/EEC concerning 
NCI IV 'could not be interpreted as limiting the rights 
vested in the Court by the Treaties'. In this letter, as in 
past replies to the Court's observations on the financial 
years 1985 (20) and 1986 (21), the Commission gave reason 
for the Court to assume that the specific procedures 
permitting it to exercise its right of audit would finally be 
adopted shortly by the parties involved. 
1.41. The Court must reiterate that, as its right to audit 
cannot be challenged on legal grounds and is not in fact 
challenged by the institutions concerned, its intentions 
were purely constructive when it suggested that a 
concerted effort be made to find procedures for exercising 
its prerogatives, particularly as regards on-the-spot visits, 
to take account, on the one hand, of the overlap between 
the Commission's and the EIB's interventions and, on the 
other, of the EIB's concern not to appear to the outside 
world to be subject, as such, to the Court's audit. The 
procedures referred to by the Court in the previous 
paragraph are inspired by the agreement reached with the 
Commission on the audits carried out in the field of ECSC 
lending and borrowing activities, according to which the 
Court may accompany the Commission when the latter 
carries out autonomous on-the-spot visits. 
1.42. The fact, however, is that the Court was obliged to 
observe during audit visits in October and November 
1987 that the EIB had approached beneficiaries of NCI 
loans managed by the Bank on behalf of the Community 
in order to prevent the Court from exercising its audit 
prerogatives on the spot. The argument put forward was 
that, as the funds in question were being managed by the 
EIB as the Commission's agent, the beneficiaries could 
not permit an audit visit from the Court without having 
received prior 'audit authority' from the Bank (see 
paragraphs 11.7 to 11.19). 
1.43. The budget appropriations under Chapter 96, 
'Cooperation with Mediterranean countries', constitute 
another category of Community resources managed in 
part by the EIB. Here again, the Court's right to carry out 
on-the-spot audits was unexpectedly stymied in 1987. In 
fact, the Cypriot national authorities — referring 
explicitly to EIB pressure — refused to allow the Court to 
make an on-the-spot audit of the share of the projects 
financed by budgetary appropriations. The Commission, 
for its part, failed to inform this recipient of Community 
funds of its obligations as regards auditing under the 
agreements reached with the Community. It would 
appear that the reason for this refusal is the fact that the 
EIB co-finances a proportion of the projects concerned 
from its own resources (see paragraph 9.6). 
20 Official Journal of the European Communities 12. 12. 88 
1.44. Arguments such as these, when used to oppose the 
Court's right to carry out an audit, are all the more 
unacceptable as they could, by extension, lead to large 
areas of the Community budget being excluded from any 
audit by the Court and could, thus, seriously call into 
question the powers conferred by the Treaties on the 
discharge authority. In addition, the Court must stress 
that the EIB's attitude in the specific cases that have just 
been mentioned is all the more incomprehensible as no 
difficulty of this kind has ever been put in the way of the 
Court's carrying out audits of operations co-financed and 
managed by international financial institutions. 
1.45. The preceding factors adequately highlight the 
responsibility which the Commission bears by making it 
more and more difficult, as it has been doing for several 
years, for the budgetary and political authorities to obtain 
the results of audits which would allow them to assess, in 
full knowledge of the facts, the use made of the very large 
sums which they authorize each year. Final observation on shared management 
1.46. The Court observes that, in significant areas of 
Community activity, the Commission — either because it 
offers no resistance or because the legislation obliges it — 
is being led increasingly to depart from or even abandon 
its responsibilities without this being adequately com­
pensated for, until now, by the creation of a central 
Community system of supervision and control. With 
regard to operations financed from Community resources 
in which the EIB is involved to varying extents, the Court 
is justified in fearing that, due to a lack of watchful action 
on the part of the Commission, its task as higher external 
audit authority will gradually become meaningless, if not 
impossible. 
(') OJ L 86, 30.3.1987. 
(2) OJL 211, 3.8.1987. 
(3) OJ L 79, 21.3.1987. 
(4) OJL 211, 3.8.1987, p. 58. 
(5) Intergovernmental agreement of 2 and 3 October 1984. 
(6) OJL 356, 31.12.1977. 
(7) OJL 320, 17.11.1983, p. 1. 
(8) OJ L 304, 27.10.1987. 
(9) OJL 185, 15.7.1988, p.l. 
(10) Opinion No 3/88, OJ C 166, 25.6.1988, p. 7. 
(n) According to the classification adopted by the Commission 
for the purpose of distinguishing compulsory expenditure 
from non-compulsory expenditure in the revenue and 
expenditure account; see also Article 203(9) of the EEC 
Treaty. (12) Council Doc. 4581/1/88. 
(!3) OJ L78, 20.3.1987, p. 9. 
(14) — OJ C 321, 15.12.1986, paragraph 1.6. 
— OJ C 336, 15.12.1987, paragraph 1.13. 
(15) OJ C 336, 15.12.1987, paragraph 2.55. 
(16) OJ C 336, 15.12.1987, paragraph 2.57. 
(17) — Opinion No 4/87, OJ C 337, 16.12.1987, p. 6. 
— Opinion No 5/87, OJ C 337, 16.12.1987, p. 8. 
— Opinion No 6/87, OJ C 337, 16.12.1987, p. 10. 
— Opinion No 7/87, OJ C 339, 17.12.1987, p. 16. 
(18) OJL 172, 12.7.1977, p. 17. 
(19) OJ C 336, 15.12.1987, paragraph 14.26. 
(20) OJ C 321, 15.12.1986, reply to paragraphs 73 — 74. 
(21) OJ C 336, 15.12.1987, reply to paragraphs 14.27 — 14.30. 
12. 12. 88 Official Journal of the European Communities 21 
CHAPTER 2 
Implementation of the budget and accounting matters 
2.0. TABLE OF CONTENTS 
Analysis of the implementation of the 1987 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 utilization of appropriations 
System of provisional twelfths 
Observance of the Financial Regulation 
Observations arising from the audit of salaries at the Council, the Court of 
Justice and the Economic and Social Committee 
Checks carried out by the Financial Controller 
Segregation of duties 
Absence of internal rules for the implementation of the budget 
Procedures applicable to commitments and payments 
Parliament 
Council 
Commission 
Economic and Social Committee 
Budget allocation 
Supporting documents 
Recovery of payments on account relating to operating expenditure 
Procedures for identifying recoveries and entering payments made on 
account in the accounts 
Using recoveries of payments on account to finance new expenditure 
Presentation in the annual accounts of recoveries of payments on account 
and their re-use to finance new expenditure 
Recovery procedures 
Final observation on the recovery of payments on account 
The Community general accounts and balance sheet 
Cash deficit at the Parliament 
Revenue to be recovered 
Recoverable taxes and duties 
Advances to staff 
Reliability and completeness of the EAGGF-Guarantee accounts 
Clearance of food-aid accounts 
Monitoring of bank accounts 
Miscellaneous revenue to be credited 
Loans granted to Mediterranean countries 
Exchange-rate differences Paragraph 
reference 
2.1 
2.1 
2.2 
2.2 
2.6 
2.7 
2.11 
2.15 — 2.16 
— 2.16 
— 2.5 
— 2.10 
— 2.14 
— 2.16 
2.17 —2.39 
2.18 
2.19 
2.27 
2.30 
2.31 
2.31 
2.34 
2.35 
2.36 
2.38 
2.39 2.30 
2.26 
2.29 
2.37 
2.33 
— 2.37 
2.40 — 2.54 
2.41 
2.44 
2.47 
2.50 
2.52 
2.55 
2.55 
2.56 
2.57 
2.60 
2.61 
2.65 
2.66 
2.69 
2.70 
2.71 2.43 
2.46 
2.49 
2.51 
2.54 
2.71 
2.59 
2.64 
2.68 
22 Official Journal of the European Communities 12. 12. 88 
ANALYSIS OF THE IMPLEMENTATION OF 
THE 1987 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 (l), 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 1987 (2). Tables 2.1 
and 2.2 show, respectively, the evolution and utilization 
in 1987 of the available appropriations, broken down by 
main areas of Community activity. For a more detailed 
picture of the year-on-year changes and of the use that 
was made of these appropriations, reference should be 
made to Annex III, Tables 6, 7 and 14, of this report. 
Other financial information regarding the guarantee 
section of the European Agricultural Guidance and 
Guarantee Fund (EAGGF-Guarantee) appears in Table 
2.3, which gives a breakdown of expenditure by 
budgetary chapter and economic nature, and in Table 2.4, 
which provides a breakdown of the utilization of 
appropriations in 1987, including the use of transfers 
between and within chapters of the budget. Table 2.5 
summarizes, by type, the revenue collected during the 
financial year and indicates how the balance for the year 
was calculated by the Commission. 
Budgetary estimates and management of the 
appropriations 
General assessment of the utilization of the 
appropriations 
2.2. The appropriations for commitment available in 
1987 and still unexpended as at 31 December 1987 
amounted to 1 312,0 Mio ECU (1 918,9 Mio ECU in 
1986), of which 876,8 Mio ECU were cancelled and 
435,2 Mio ECU remained available for 1988. These 
unutilized appropriations for commitment may be 
broken down as follows: 
(a) 815,4 Mio ECU relating to compulsory expenditure 
(CE) (3), i.e. 3,0 % of the corresponding appropri­
ations; and 
(b) 496,6 Mio ECU relating to non-compulsory expendi­
ture (NCE) (3), i.e. 3,9 % of the corresponding 
appropriations. 
2.3. The appropriations for payment available in 1987 
and still unexpended as at 31 December 1987 amounted to 
(') The footnotes are listed together at the end of the chapter. 2 251,4 Mio ECU (compared with 2 074,9 Mio ECU in 
1986), of which 890,9 Mio ECU were cancelled and 
1360,5 Mio ECU (consisting of 817,4 Mio ECU of 
payment appropriations and 543,1 Mio ECU of non-
differentiated appropriations) were carried forward to 
1988. These unutilized appropriations for payment may 
be broken down as follows: 
(a) 2 059,6 Mio ECU of appropriations for payment 
provided for the financial year 1987, of which: 
(i) 855,7 Mio ECU relating to CE, i.e. 3,2 % of the 
corresponding appropriations; and 
(ii) 1 203,9 Mio ECU relating to NCE, i.e. 13,0 % of 
the corresponding appropriations; 
(b) 191,8 Mio ECU of appropriations for payment 
carried over from 1986 to 1987, of which: 
(i) 46,6 Mio ECU relating to CE, i.e. 12,7% of 
appropriations carried over as CE appropri­
ations; and 
(ii) 145,2 Mio ECU relating to NCE, i.e. 17,2 % of 
appropriations carried over as NCE appropri­
ations. 
2.4. The unexpended amounts were reduced by 
181,1 Mio ECU of appropriations for commitment and 
88,9 Mio ECU of appropriations for payment due to the 
need to transfer appropriations to absorb the 'negative 
reserve' included in Chapter 100 of the general budget. In 
effect, this system means that the budgetary authority is 
creating expenditure authorizations for a total amount 
which is in excess of the revenue actually available, and is 
thus speculating, in practice, on the under-utilization of 
appropriations. In its Opinion (4) of 19 May 1988 on a 
Commission proposal to amend the Financial Regu­
lation, the Court reaffirmed its fundamental objections to 
the creation of a negative reserve, which it still considers 
to be formally incompatible with the Communities' 
principles of budgetary orthodoxy. On that occasion, the 
Court invited the budgetary authority to adopt the 
budget on the basis of realistic and restrictive forecasts 
which would make the use of such an instrument 
unnecessary. 
2.5. It should also be pointed out that, in the case of a 
number of the appropriations granted following amend­
ments made to the budget by the European Parliament 
(which amounted to 421,4 Mio ECU of appropriations 
for commitment for 116 budget headings, and to 
405,3 Mio ECU of appropriations for payment for 119 
budget headings), the amount of the appropriations 
remaining unexpended at the end of the year was higher 
than the amount of the amendment. Table 2.6 shows that 
six budget headings involving an amount of 23,8 Mio 
ECU of appropriations for commitment and 22 budget 
headings involving an amount of 165,3 Mio ECU of 
appropriations for payment are concerned. The amount 
of the amendment was greater than 1,0 Mio ECU for all 
these budget headings. 
12. 12. 88 Official Journal of the European Communities 23 
& 
s o w 
a 
g 
5 
«s 
•R 
e 
W 5s 
o 
^ 
1 
s 
i g» 
a 
.2 
•c 
a 
a. 
<c 
c 
1 
| 
o 
a 
o 
a. 
o 
a, a 
< 
otal 
pps. 
tilabl. 
1987 
H ca g_g 
T5 
1 .. 
«2 J3 
3 §> 
Is •a js 
c ~ 
1 
< 3 
H 
— .£«„ 
DHT3-0 60™ 
dfi CO O 
3 us <D 3 17 Initia 
apps. f 
the 
financi 
year 
1987 
« u t, 3 NO 
<; m o^S 
Total 
apps. 
availabl 
in 198' 
3 g> 
is 
6 
< s 
~ J?s_ 
O.T3T3 60 
W 1 tiitial 
ps. fc 
the 
ancia 
year 
1987 
« s s 
<i|° 
.s£ 
ftC — 
C^.2 3 
< s i 
u 
00 —.+ o 
II 
^ 
21-
^+6 
II 
S 
^ 
S 
^ u-> 
OO 
CN 
+ 
NO 
CN 
ON 
ON 
r"~ 
CN 
+ 
, 
oo 
t~~ 
1 
G 'g 
•B § 
-O =3 
< s2-m 
Tf 
NO 
ON 
CN 
CN 
O 
NO 
ON 
CN 
CN 
00 
o NO 
ON 
CN 
(N 
| 
00 
O 
NO 
ON 
CN 
CN 
1 
1 
g 
G 
3 
o 
0 
O 
< w 
CN ON 
ON 
CI 
1 
O 
1 
CN 
NO 
ON 
O 
00 
NO 
O 
© 
1 
| 
^r 
NO 
ON 
NO 
Tf 
<o 
•* 
3 
3 
13 
3 
< rf 
NO" 
CN 
1 
©^ 
©" 
CN 
1 
r— ON 
-* 
CN 
•* 
m 
ON 
CN 
t-
© 
NO 
+ 
© 
1 
NO 
ON 
CN 
ON 
J3 
E 
•>* CN 
CN 
ON 
CN 
r-
1 
CN 
CN 
NO 
CN 
TT 
CN 
rf 
ON 
•* 
ON 
1 
1 
(N 
>0 
NO 
CO 
>o 
Tt 
© 
oo 
CN 
.2 
O 
a 
o a 
03 
-a 
G 03 
G 
O 
'5b 
£ ** 
ON 
CN 
t~-
+ 
NO 
NO 
ON 
CN 
m 
CN 
1 
| 
^ 
CN 
NO 
© 
•* 
^ 
>. 
o 
t/5 
NO •«* 
r-© 
•t 
+ 
Tt 
ON 
CN 
00 
rf 
•«* 
•* 
rf 
CN 
+ 
| 
^r 
ON 
ON 
•* 
•* 
•g 
60 
G 
J3 
05 
(S oo 
NO 
ON 
ON 
<N 
°\ (N 
+ 
NO 
00 
r-(N 
©^ 
ON 
NO 
<N 
°\ fN 
+ 
NO 
CN 
• 
a 
& 
u 
g 1 o 
G 
1 
3 
X) 
S 
(2 ON 
Tt 
r-~ 
1 
© 
<N 
°\ ON" 
CN 
<N 
ON 
rN 
t~-" 
© 
>* 
r^ 
1 
, 
t--
t-~ 
© 
o 
NO 
© 
ON" 
fN 
00 
G 'a o 
> 
xi 
'1 
G 
do 
ON fN 
ON 
© 
•* 
© 
1 
NO 
ON 
(N 
°\ (N 
NO 
CN 
1 
, 
CO 
1 
>^ 
G 
00 
_G 
G 
O 
G 
OH 
13 
G 
O 
|| 
©' 00 
vf t-
Vi 
w 
rf 
+ 
«fT 
T 
Tf 
c*T 
«rT e •^r 
"l 
o 00 
ON 
<r> 
<M 
f? 
+ 
°V t^ 
<*) + 
ON 
rf 
5? 
c> 
r-
* 
ON 
00^ 
NCT 
ON 
w 
^ 
o 
X) 
a « a *-« •<* 
ON 00 
CN 
ON CN 
1 + 
ON © 
+ v 
-^ © 
CN —« 
CN 
rt ON 
00 r-
oo !C 
CN « 
°1^, 
1 + 
°^ 1 
+ 
00 ON 
CN 
f^ 
** ON 
1 00 
• so" 
ON 
— 
o 
ei O ing: 
ifferenti 
mtiated 
"§•? s 
HoiS .5 G -o Q^ 
3-C 
3 
a 
s y Tl 
T5 
3 
^ 
3 " 
^2 « g >. > 
2 «> 
S.S 
O fc 
60 g. 
24 Official Journal of the European Communities 
S E 
o 
a o •-c 
•c 
ex o K> 
>*3 
§ 
a 
1 a, 
o 
•c 
ft 
ft 
< 
a 
I 
o 
a 
o 
•c 
ft 
^ s U-T3 
S 2 
a, 
ur 
3"^ 
J$ ft 
> D, 
< ft OS 
s"S 
Is 
ft 
3^ 
•3 & 
< ft 
c2 
1^ 
o c 
u u 
3 ft i3 o 
'3 ft 
< * 
I2 
g.s 6 a 
Is 
5 e u u 
u 
3 cL 
^ ft < « 2S 
<© 
^ 
w 
W3 ^ 
N» 
•* 
"* 
"1 
,-v 
N= 
r-„ 
CM" 
rt 
^ 2* 
l"^ 
ON" 
ON 
ON" 
y-v 
v» 
NO" 
H=fr 
©^ 
—1 
•B § 
2 '5 
< w N» 
ON 
ON 
ON 
00 
fN 
^1 
•*t 
ON 
<N 
CM 
^ 
N» 
°\ Os 
Os 
©^ 
©" 
fN 
CN 
•<* 
CN 
fN 
^ 
N» 
ON" 
o" 
ON 
fN 
CN 
©" 
NO 
fN 
(N 
^ N° 
Os 
ON" 
fN 
©^ 
fN 
g 
S3 
03 
03 
=) 
0 
tin 
0 
O 
< 
w 
fN N» 
"* 
ON 
vq_ 
Oy 
ON 
^ 
N= 
^ ON 
NO" 
NO" 
^-s 
N= 
t-^ 
ON 
fN 
ON" 
ON 
r-" 
NO 
o 
^-v 
N= 
fN 
" 
O 
ON 
"* 
jjjj 
3 
*e3 
3 
60 
< 
rr> NO 
ON 
fN 
r-
00 
r-" 
•* 
NO" 
fN 
^ N° 
©^ 
NO 
£" 
fN 
^ £ 
t-^ 
fN 
fN 
£ 
ON 
fN 
^-v 
O^ 
£" 
Tf" 
O 
fN 
fN 
J3 
E 
Tl-N° 
O 
fN 
ON 
CN 
r-" 
NO 
fN 
—^ fN 
fN 
Os 
fN 
^ so 
CO 
ON 
IO" 
fN 
ON" 
NO 
fN 
^ s» 
Tf 
ON 
°\ 
Os 
m 
ON" 
^f 
^ ^ 
°1 
O 
o" 
•* 
ON 
CO 
.<8 
O 
Cu 
O 
a 
OS 
X) 
S3 
o3 
"c3 
c 
o 
'5b 
£ 
U-l N» 
NO 
ON 
^ 
fN 
fN 
*-H 
"* ON 
fN 
N° 
rf 
CN 
ON" 
"* CN 
ND^ 
ON" 
ON 
CM 
^ £ 
oo" 
w 
CN 
1"" 
ON 
NO 
m 
-
^^ £ 
°\ 
CN 
•* 
NO 
CM 
</-> 
o" 
CM 
m 
o 
~o a 
!s 
o xn 
NO 5N 
ro 
o" o ON 
•* 
r-o 
"-1 
^-^ 
N= 
"T, 
•<t 
o" 
Os 
^^ 
o^ 
CN 
CM" 
ON 
CM 
NO" 
% 
^r Tf 
^-^ N? 
NO" 
o" 
o" o 
—. 
w 
c 
J3 
c3 
(2 
^ O 
1 
3 ^ 
•* 
o" 
°\ 
o •* 
00 
NO" 
ON 
Os 
CM 
o? 
O 
o" 
CM" 
Os 
CM 
Tf" 
o 
x= 
q 
ON 
o" 
CM 
ON" 
NO 
CM 
^ 
N= 
*« 
ON 
Tf 
ON 
o 
ON" 
ON 
fN 
ro 
B 
1 
£S 
oo N» 
°\ 
Os 
—^ ON" 
•"* 
rt 
N» 
O^ 
•* 
m 
ON 
^ 
°1 ON" 
•* 
NO 
CM 
—" 
CN 
O 
"t 
o^ 
o" 
°\ 
fN 
fN 
~ 
60 
c 'a 
> 
e 
2 .a 
o a 
n § 
NJ O 
ON T3 
c3 
O 
13 c o 
•> 
o 
CU 
o 1 
1 
CN 
ON" 
O 
, 
| 
. 1 
| 
fN 
, 
| 
4> 
>, 
c 
60 
o x» 
o 
•^r a^ 
•* 
TT 
«N 
m *r> 
tr> 
00^ 
vT 
IT) 
;£ 
en 
00 
NO 
fN 
C^ 
^ 
t-^ 
"1 
•* 
oc 
"l 
X 
ON 
m 
^ 
O 
s_^ 
m 
NO 
fN 
X 
fi 
1 a» 
•o ^3 
O .£ ^^ 
o^ o^ 
ro ~ 
fN 
— r-^ 
fN 
^ o^ 
OO^ON^ 
r^ -H 
o — 
fN 
fN 
^ ^ 
r^"°" 
Tf —^ 
r~ O 
fN —i 
"^ 
fN —i 
o^ ^? 
H"^" 
WW 
" CN 
CM —« 
CN 
O^ CM^ 
r- o 
CM — 
a o 
a a 
03 o 
"S OH « OH 
S o 
e# o fe c -a 
12. 12. 88 Official Journal of the European Communities 25 
& 
O 
O 
< 5" 
1 a 
d 
U W) 
d c — o 
O.U 
t3 3 
•u w d 
o 8 
00 
d 
1 _d 
i o 
V 
UH o 
d 
| 
3 o 
u 
o 
J 
dll 
£ d H. 
•S ^ d i>-y « H«& 
H 
-C O 
OH to 
32 o u S 
a § *•§ 
o 
o 
"2 £ 
£ 
I T3 
1 
t2 
O 
H 
o 
1/3 
u _d 
§ 
d 
3 II + + 
;?—CN?O 
~ 
— 
0£,+ 
w 
SS 
^ 
+ 2 
w+ II J. 
8 
^ CN 
•«t 
ON 
©, 
"° 
rf 
CN 
^ 
CN 
00 
CN 
OS 
CN 
| 
CN 
SO 
© 
1 
SO 
© 
O 
co 
so 
t— 
•<* 
"3 1 ^ ^1 "^ 
1 CN" —<" ©" 
SO | 
1 C— t— ^—i 
1 o oo o 
1 
1 —< as CN 
CN | 
1 O OO o 
CN | 
O CN OO 00 
—< CN 
1 •* 1 
1 vo* ! ' SO 
-3-
1 1 1 1 
O 00 CN I 
"* O r- i 
•* 
| 1 so oo 
r- CN 
CN 
O OO CN O 
IT) l/-> CO •"* 
as r-1 CN so 
O so CN •<* 
as >o os r-Os co co oo 
O — so 
CN — CN ce 
gar 
ive oil 
1 seeds i | 1 ©^ 
I 1 1 r--" so" 
CN 
1 1 1 Tf —" 
1 1 I ^- so 
CN •<* co os © 
r- so o CN •* oo o © r- m i/"> co os r- t-~ 
1 1 UO CN 1 
1 1 1 1 1 
•* *-< 
CN «* "* ©_ 
r-" so" CN ' Tt 00 O CN co 
1 1 o •<* 1 
1 ' 00 OS ' 
1 OOTfrt 
SO CN •* 
CN -^f ~— co so 
t-» so r- o co 00 o so o o io co os oo oo 
w 
O otein plants 
xtile plants and silk 
uit and vegetables 
ine 
•bacco 
US^OO^^H 
o co Tf >/~> so r-1 " °„ 
1 Os" '* 
Os Os 
1 CN — 
1 o —< 
^- r-~ >/-> r-
1 CN — 
CN 
—- CN 
wn o oo 
5 CO oo 
1 O CO 
O SO 
1 o <0 
1 —" Os" 
CN 
CN 
io co o 
rt- r- o 
1 
I Os Os 
i i— t— 
CN 
"1 °„ ^ 
-* — ri-o — 
v> her sectors 
ilk and milk produc 
ef and veal 
O 2 a • 
00 
o 
1 
^ 
t— 
1 
00 
"3 
1 
cd 
O 
60 
T3 
c 
"es 
1 
a 
4) C/3 
CN 
CN | 
n-
r-•<* 
| 
>o 
SO 
E 
60 
CN | 
| 
, 
| 
O 
CN 
©^ 
CN" 
1 >> 
o 
a 
•a 
a 
60 >> 
£> 
a 
o 
o c 
3 
T3 | 
, 
. 
| 
CN 
© 
Os 
CN 
©" 
Os 
X 
ou t. >-
w 0_ < 
CN CN 1 
Os 
CN 
Tf 
, 
| 
Os 
CN 
•* 
©,_ 
r-" CN 
CN 
Os 
rf 
so 
< 
u S 
CN 
r-" 
CN | 
-* 
© 
| 
Os 
•"* 
•* 
£ 
E 
© r4 
sf OS 
CN 
SO 
90 00 00 
CN 
t^" 
fO 
«n 
•* 
X o *T) 
OS 
SO 
SO 
00 o 
SO^ 
oT •^, 
r~ 
*r> 
o 
Os 
m 
o 
•rr 
t-
s©" 
00 
Os 
00 
00 
CN o 
•"» 
vT 
OS 
•« 
so" 
OS 
CN 
CN 
"a 
H •<* 
Os 
CN 
CN 
3 
+3 c 
G, X 
O 
Os CN «-
•<* 
r-tr> 
Os 
1-^ 
r^ so OS 
CN 
CN 
IS 
o 
•a c 
a ft,'c 
E 
u. 0 0 
UJ 
ai 
^ ij 
o 
s 
3 
a 1 
26 Official Journal of the European Communities 12. 12. 88 
P. « 
•S 
a 
A 
S 
I 
1 
© 
1 a 
8. 
(2 
a 
£ c «*, .2 
°-a «8 in% 
initi; 
propri 
a 
-D 
SU 
6.2 
.2D 
•i-aa Fii 
prop 
Mio 
a*—-
y 
o H 
o. 
A 
a •£ 
$ 
a. 
Xi 
a 
% 
1 » 
c in % of 
initial 
ropriati 
OH 
a a 
ts^ 
ll 
a o in % of 
initial 
propriati 
o. 
ts^ SU 
oW 
S 2 
<-t 
« in % of 
initial 
ropriatioi 
ex nt 
•a^ 
§H gw 
S o ^"t 
Or-v 
•2p "3 SH S'CW Ini 
prop 
Mio 
aw 
a, 
u S ii 
£ 
& 
+ 
T 
^ 
<o 
II 
S 
^ 
T 
"" 
w 
§ 
II 
S r^ — oo««o«-<^oor~«oooo'ttvooo 
^C « OHO Tf - f1«iflOMXH0O<NO5\(N 
v0W10\'<t>C^OM'<tWMm»NO00V0« 
rfO-MmftOOM © -H u-> — >—i >n \o 
rt <N —< f> >T> CN 
t^vomc^o\<Nm'ciot~-r~-oovoom^^ONTt 
«^ai*0>Qmr>ifnxmooNOi»voN mmcor^o^oooin — •^•r~-m«oc?\-^r<-iin (No«(Nm»oooo o -< vi --^ <— */"> vo 
•st «N *-* m inn 
oovo-^-o 1 m 1 >*a\ ff\<ri-H l vo -•* ION 1 
(Nines— '•* ' ^«rt«^t ' <N >/"> ' m ' m<Nr-<m— r-H— es ON 
T)- ON >0 00 1 ON 1 © © ON © OO | 0\« |m 1 
MNt> 'r~~ ' (S-HOIOM ' — © ' 00 ' 
ON <N •<$• ON m *—• o\ ON <N mm «N —-i'-h -•i *f1 VO 
"i1*.*.00. 1 N. 1 *,**"> 1 1 °° 1 n vo r-f ts n 1 ^ ' —H" «H\O ' 1 •* ' ' r»" ' 
r; w >c - h qqaq 1 °V 1 1 "^ 1 
00 •* •* ON CO i-+ ON ON CN —i 
ir> — —i NO m m 
(•^•-HfNrNmOTtas |©m—'CNoo^^Nor-^ 
^nNhmOMN ' i/">o\-<to)r--->orNNor-~ ^-i CN i CN co m. .-HI ro w~> ON r--
t^^ot^t^ — Mi^rf | comooTt©mONONTj-
NOrNmocoor--''* ' N>-NIA-HOO\M(N QOONO^ I^fN OOCNCNC^ — CO — — 00 
NO m • r-» — ^i oo CN | | n « 1 1 1 1 1 
OOOOOOOOOOOOOOOOO00 
©cowoTtor^oooocN — © —•^•-HOoo't't cox->Nor~NONOr~<N>/">©r->/->coT)-v©m<Nm *OvO-V)TtONMOO 0\miO(N«ifl m CN 
m — —< <s —i >/-> <N 
© — (NcOTfu-iNOt^-oOO — CNcOTfrior^OOON ON 
a" 
T 
© 
IT) 
©\ 
oo 
(S 
«s 
r^ 
oT 
00 
IT) 
+ 
ve \o 
© ©* 
+ 1 
« VC 
3 3 
3 a TT 3 
+ 1 
o © 
©\ ©C 
+ 1 
fS <s 
r-^r^ 8$ 
+ 1 
w 
CM 
3 o H 
12. 12. 88 Official Journal of the European Communities 27 
Table 2.5 — Revenue and balance for the year in 1986 and 1987 
(Mio ECU) 
Type of revenue 
Customs duties 
Agricultural levies 
Sugar and isoglucose levies 
VAT own resources 
Financial contributions 
Adjustments to VAT own resources and financial contributions for 
prior years 
Miscellaneous revenue 
Previous year's surplus 
Total revenue 
Adjustments: 
Cancellation of the balance of appropriations for payments carried 
over from previous year 
Exchange-rate differences 
Total adjusted revenue 
Expenditure charged to the financial year 
Balance for the year 1986 
Actual 
revenue 
(1) 
8 172,9 
1 175,5 
1 111,5 
22 223,4 
210,1 
377,3 
342,6 
53,9 
33 667,2 
355,6 
20,5 
34 043,3 
34 863,2 
-819,9 1987 
Budget 
(2) 
8 396,7 
1 763,9 
1 438,6 
23 433,0 
211,6 
p.m. 
624,6 
35 868,4 
300,0 
36 168,4 
36 168,40) 
— Actual 
revenue 
(3) 
8 936,5 
1 626,1 
1 471,7 
23 463,5 
210,6 
-359,3 
434,2 
35 783,3 
189,5 
17,9 
35 990,7 
35 469,2(1) 
521,5 
(') Including the deficit for the financial year 1986 (819,9 Mio ECU) which was charged to the 1987 budget. 
Transfers of appropriations Payment appropriations carried over 
2.6. In its annual report on the financial year 1986 (5) 
the Court commented on the high volume of transfers 
made by the Commission in 1986, a sign that the 
budgetary estimates were based on excessively uncertain 
forecasts of needs. The 1987 accounts show an even 
higher volume of transfers: 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 in the current financial 
year and/or preceding financial years'. 
(a) 2 851,8 Mio ECU of appropriations for commitment, 
including 2 067,2 Mio ECU under the EAGGF 
Guarantee Section, were transferred from chapter to 
chapter; 
(b) 2 556,0 Mio ECU of appropriations for payment, 
including 2 067,2 Mio ECU for the EAGGF Guaran­
tee Section, were transferred from chapter to chapter. 2.8. In its annual reports on the financial years 1985 (6) 
and 1986 (7), the Court criticized the practice of using, 
contrary to the provisions of Article 1(3) of the Financial 
Regulation, payment appropriations carried over from 
the previous year to settle new commitments entered into 
in the current year. During the discharge procedure for 
the financial years 1985 and 1986, the Council took the 
same line as the Court. 
The volume of transfers between EAGGF Guarantee 
Section chapters, which in principle correspond to the 
various agricultural markets, reached a new high of 
2 067,2 Mio ECU in 1987, i.e. 9% of the initial 
Guarantee Section budget (see Table 2.4). 2.9. Table 2.7 shows how the payment appropriations 
carried over from the previous financial year in 1986 and 
1987 respectively were used. It is apparent from this table 
that an amount of 189,6 Mio ECU was used in 1987 for 
payments against commitments for the current financial 
year, compared with only 65,4 Mio ECU in 1986. 
28 Official Journal of the European Communities 12. 12. 88 
Table 2.6 — Appropriations which were entered following a Parliamentary amendment on budget headings for which the amount of the 
appropriations remaining unutilized at the end of the year exceeded the amount of the amendments 
(Mio ECU) 
Sector 
Part A 
Special functions 
Part B 
Fisheries 
Regional and 
transport policies 
Social policy 
Research, 
energy, etc. 
Cooperation with 
developing countries Budget 
heading 
3300 
351 
460 
552 
610 
631 
7301 
7352 
7356 
750 
7750 
7758 
7760 
923 
924 
925 
9280 
929 
930 
931 
933 
958 
990 Heading 
Expenditure on information, publicity and participation in 
public events 
Statistical surveys and analyses, processing and dissemination 
of statistical data 
EAGGF (Guidance Section) — Common measures to restruc­
ture, modernize and develop the fishing industry and to develop 
aquaculture 
Integrated Mediterranean programmes — Technical assistance 
European Social Fund — Specific measures 
Cooperation between universities and industry: training in new 
technologies (Comett) 
Horizontal actions — Strengthening the scientific and technical 
potential of the Community — Research workers' Europe 
Industrial technologies — Basic technological research and 
applications of new technologies (Brite) 
Biotechnology 
Community projects in the field of information technology 
Completing the internal market 
Financial aid to the IDIS project 
Promotion of Community exports to Japan 
Food aid in vegetable oil / olive oil 
Food aid (other commodities) 
Food aid transport costs 
Exceptional reserve 
Food projects in place of food aid 
Financial and technical cooperation with Latin American and 
Asian developing countries 
Promotion of trade relations with Latin American and Asian 
developing countries 
Cooperation with Latin American and Asian developing 
countries on energy 
Special programme to combat hunger in the world 
Operations under Commercial and Economic Cooperation 
Agreements with non-member countries 
Total Appropriations entered following 
a Parliamentary amendment 
for 
commitment 
2,9 
3,0 
2,0 
2,5 
3,4 
10,0 
23,8 for 
payment 
2,9 
3,0 
4,2 
2,0 
2,1 
1,0 
5,0 
10,8 
1,0 
1,0 
1,5 
2,0 
14,9 
14,5 
3,4 
40,0 
1,9 
44,0 
2,0 
1,4 
3,7 
3,0 
165,3 
2.10. However, the Court notes that, out of the 
817,4 Mio ECU of payment appropriations which were 
carried over as at 31 December 1987, 795,0 Mio ECU, or 
97,3 %, corresponded to outstanding commitments 
against the budget headings concerned. The Court also 
welcomes the more rigorous procedure for carrying over 
payment appropriations which has been put forward by 
the Commission in its proposal (8), dated 18 March 1988, 
for the amendment of Article 6(2) of the Financial 
Regulation. Analysis of the utilization of appropriations 
2.11. Of the six areas which constitute the operating 
sectors of the budget other than the EAGGF Guarantee 
Section, three show — whether for CE or NCE — overall 
rates of utilization of appropriations for payment which 
are each below 90 %. The areas concerned are fisheries: 
72,9% (of which CE: 73,7% and NCE:71,2%); 
12. 12. 88 Official Journal of the European Communities 29 
Table 2.7 — Utilization of payment appropriations carried over from the previous financial year in 1986 and 1987 
(Mio ECU) 
Utilization of appropriations 
(1) Appropriations carried over from the previous financial year 
(2) Payments 
including: payments against commitments outstanding at the end 
of the previous financial year 
payments against commitments specific to the financial 
year 
(3) Appropriations carried over to the next financial year 
(4) Cancellations ((1) - (2) - (3)) 1986 
749,8 
534,9 
469,5 
65,4 
4,0 
210,9 1987 
949,9 
820,1 
630,5 
189,6 
2,3 
127,5 1988 
817,4 
research, energy, etc.: 83,5 % (NCE only) and cooper­
ation with developing countries: 53,3 % (of which CE: 
60,2 % and NCE 51,3 %) — (see Tables 1.3 and 2.2). The 
Court has made a list (see Table 2.8) of the budget 
headings, within the six areas concerned, which were 
allocated more than 5 Mio ECU of appropriations 
initially made available in 1987 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 were amended by the Parliament. The Court 
notes in particular that: 
(a) in the case of 24 budget headings which had been 
allocated more than 5 Mio ECU of appropriations 
for commitment, the rate of utilization was below 
75 %. These budget headings represent a cumulative 
total of 1 150,1 Mio ECU, of which 547,9 Mio ECU 
were not utilized as initially intended, being either 
transferred, cancelled or carried over: 2.13. The categories of causes of under-utilization are 
described below, together with illustrative examples: 
(a) structural delays, related to the unrealistic nature of 
certain programmes and the slowness with which they 
were being implemented, continued to be a major 
cause of under-utilization. This is especially true for 
the utilization of payment appropriations. In many 
cases there is a relatively high rate of utilization of 
commitment appropriations compared with payment 
appropriations. The problem can be illustrated by 
referring to budget heading 510 (European Regional 
Development Fund (ERDF) — Specific Community 
measures) where 71,6 Mio ECU of payment ap­
propriations had to be carried over to 1988 because of 
the delay in the approval of the related programmes; 
(b) in the case of 62 budget headings which had been 
allocated more than 5 Mio ECU of appropriations 
for payment, the rate of utilization was below 75 %. 
These budget headings represent a cumulative total of 
3 492,4 Mio ECU, of which 1 971,6 Mio ECU were 
also not utilized as initially intended. 
2.12. On the basis of the explanations given in Volume I 
of the revenue and expenditure account ('Analysis of the 
financial management'), and of information gathered in 
the course of its audit work, the Court has attempted to 
identify the major causes of under-utilization for the 
budget headings listed. The categories of causes which 
have been identified are summarized in Table 2.9. This 
table indicates the amounts concerned for each category 
of cause. In the case of multiple causes, the cause which is 
the major explanation for the under-utilization of a 
particular budget heading has been selected. (b) the unwieldiness and, in some cases, the complexity of 
the procedures and machinery which enable the 
recipients to gain access to Community funds also 
continued to be a cause of under-utilization. Ex­
amples for this cause of under-utilization can be 
found in the operations under Chapter 93 (Cooper­
ation with Latin American and Asian developing 
countries), where the delay in execution is due, as the 
Commission mentions in its analysis of the financial 
management, to administrative difficulties encoun­
tered in the beneficiary countries, but also, as the 
Court underlines in paragraphs 9.56 — 9.65 of this 
report, to significant deficiencies in the procedures 
instituted by the Commission itself for payments to 
beneficiaries. These factors cause considerable delays 
in the implementation of projects and, as a result, 
some 145,6 Mio ECU of payment appropriations had 
to be carried over to 1988; 
30 Official Journal of the European Communities 12. 12. 88 
Table 2.8 — 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 the financial year 1987 (initial appropriations and appropriations 
outstanding or carried over from 1986) was lower than 75 % 
(Mio ECU) 
Sector 
Agricultural 
structures 
Fisheries 
Regional 
transport 
policies 
Social 
policy 
Research, 
energy, etc. Budget 
heading 
300 
321 
322 
324 
380 
(NDA) 
381 
(NDA) 
382 
(NDA) 
385 
(NDA) 
401 
(NDA) 
450 
451 
500 
510 
5411 
5412 
5420 
5421 
550 
551 
607 
608 
610 
630 
(NDA) 
631 
(NDA) 
6330 
(NDA) 
634 
(NDA) 
7301 
7326 
7342 
7352 
7382 
750 
7702 
7717 Heading 
EAGGF (Guidance) — Projects for the improvement of agricultural 
structures provided for under Art. 13 of Reg. No 17/64/EEC 
EAGGF (Guidance) — Improvement of the infrastructure in certain 
Mediterranean regions 
EAGGF (Guidance) — Regional measures introduced before 1985 
EAGGF (Guidance) — Specific development programme for 
agriculture in Portugal 
Specific veterinary measures 
Disease eradication programmes in the Community 
Inspection in agriculture 
Restructuring of agricultural survey systems 
Intervention for fishery products 
Adjustment of capacity in the fisheries sector 
Redeployment of capacity in the fisheries sector 
European Regional Development Fund — Operations under the 
revised ERDF Regulation of 1979 
European Regional Development Fund — Specific Community 
measures 
Community measures in the framework of integrated operations 
Experimental projects in the context of integrated operations 
Construction, fitting-out and equipment of vocational training centres 
Construction, fitting-out and equipment of centres for the treatment 
and medical, vocational and social rehabilitation of the mentally 
disabled 
Mediterranean programmes — Preparation of integrated program-
Integrated Mediterranean programmes — Additional contribution 
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 
Education 
Cooperation between universities and industry: training in new 
technologies (Comett) 
Programme of exchanges of young workers 
Vocational training and guidance activities 
Horizontal actions — Strengthening the scientific and technical 
potential of the Community — Research workers' Europe 
Health and safety — Biology and health protection; Radiation 
protection 
Advanced communications technologies in Europe (RACE) 
Industrial technologies — Basic technological research and appli­
cations of new technologies (Brite) 
Services performed at the request of outside bodies and individuals 
Community projects in the field of information technology 
Community operations for the development of data processing 
Standardization in information technologies 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) 
6,3 
19,7 
29,6 
171,7 
142,5 
37,8 
103,0 
6,8 
6,0 
12,3 
12,3 
28,7 
20,0 
17,0 
8,4 
27,7 
27,7 
23,2 
40,0 
7,2 
8,5 
442,8 
4,7 
172,1 
162,5 
13,4 
3,3 
6,3 
22,7 
18,9 
18,7 
11,7 
14,0 
9,7 
278,1 
397,8 
267,0 
329,9 
84,4 
157,6 
12,0 
8,6 
13,7 
13,0 
6,3 
4,5 
15,6 
8,8 
23,4 
19,8 
16,9 
15,8 
5,5 
1,4 
32,6 
43,2 
5,9 
4,3 
8,3 
6,9 
8,7 
1,3 
5,7 
6,8 of which 
apps. enterec 
following a 
Parliamen-
amendment 
0,1 
2,0 
5,0 
2,1 
2,4 
0,1 
0,1 
1,0 
1,0 
5,0 
6,0 
10,8 
12,0 
1,0 
2,0 Rate of 
utili­
zation 
of these 
17 
96 
34 
62 
49 
61 
22 
12 
13 
0 
53 
31 
77 
33 
25 
63 
63 
37 
22 
51 
18 
68 
21 
53 
79 
49 
36 
29 
8 
34 
8 
51 
87 
70 
37 
47 
3 
19 
62 
62 
51 
97 
37 
100 
66 
100 
69 
98 
60 
100 
63 
89 
68 
100 
57 
100 
66 
51 
69 
100 
71 
100 
32 
100 Major 
cause of 
utiliza­
tion (3) 
(b) 
(a) 
(a) 
(a) 
(a) 
(a) 
(0 (0 
(e) 
(e) 
(e) 
(a) 
(a) 
(e) 
(e) 
(d) 
(d) 
(d) 
(d) 
(d) 
(a) 
(a) 
(a) 
(a) 
(a) 
(a) 
(a) 
(a) 
(a) 
(a) 
(d) 
(d) 
(d) 
(d) 
(e) 
(b) 
(e) 
(e) 
(0 
(e) 
(c) 
(c) 
(0 
(0 
(0 
(d) 
12. 12. 88 Official Journal of the European Communities 31 
(Continued) 
Sector 
. 
Cooperation with 
developing countries Budget 
heading 
774 
(NDA) 
7750 
7760 
777 
9200 
9201 
9202 
9210 
9211 
923 
924 
925 
(NDA) 
9280 
(NDA) 
9281 
(NDA) 
929 
(NDA) 
930 
931 
933 
934 
943 
950 
(NDA) 
951 
958 
9601 
9602 
9605 
961 
9630 
9632 
964 
9650 
9651 
990 
(NDA) Heading 
Monitoring the application of certain steel industry measures 
Completing the internal market 
Promotion of Community exports to Japan 
Measures to assist small and medium-sized enterprises 
Food aid in cereals other than rice 
Food aid in rice 
Additional food aid in cereals 
Food aid in milk powder 
Food aid in butteroil 
Food aid in vegetable oil / olive oil 
Food aid (other commodities) 
Food aid transport costs 
Exceptional reserve 
Community participation in storage programmes and warning 
systems 
Food projects in place of food aid 
Financial and technical cooperation with Latin American and Asian 
developing countries 
Promotion of trade relations with Latin American and Asian 
developing countries 
Cooperation with Latin American and Asian developing countries on 
energy 
Training operations and visits for nationals of Latin American and 
Asian developing countries 
Community cofinancing of projects with the International Fund for 
Agricultural Development (I FAD) 
Aid to disaster victims in developing and other non-member countries 
Contribution to financing the purchase of food products by non­
governmental and international organizations 
Special programme to combat hunger in the world 
Aid to prepare for the accession of Portugal 
Specific aid to improve agricultural structures in Portugal 
Specific aid for the adjustment of fishing capacity in Spain 
Financial cooperation with Malta 
Third Financial Protocol with Turkey 
Special aid for Turkey 
Financial cooperation with Cyprus 
First and Second Financial Protocols with the southern and eastern 
Mediterranean countries 
Third Financial Protocol with the southern and eastern Mediter­
ranean countries 
Operations under Commercial and Economic Cooperation Agree­
ments with non-member countries 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 initially 
available 
(2) 
26,9 
14,8 
11,2 
9,8 
5,2 
8,0 
6,9 
6,5 
95,9 
79,3 
34,0 
21,8 
59,8 
49,9 
122,9 
85,4 
79,6 
43,3 
33,1 
24,0 
47,0 
30,0 
189,9 
139,1 
45,8 
40,0 
10,0 
10,0 
6,9 
5,4 
288,7 
361,5 
12,8 
15,3 
6,6 
6,6 
5,6 
8,8 
15,0 
20,0 
32,3 
31,2 
6,0 
5,5 
15,1 
27,4 
19,2 
14,5 
3,0 
9,0 
33,8 
12,7 
29,0 
8,1 
5,8 
89,4 
76,7 
3,0 
50,0 
10,9 
8,1 of which 
apps. entered 
following a 
Parliamen-
amendment 
1,5 
2,2 
1,7 
2,5 
0,5 
0,5 
14,9 
12,0 
14,5 
11,3 
3,4 
3,4 
40,0 
40,0 
10,0 
10,0 
1,9 
1,9 
44,0 
10,0 
2,0 
6,0 
1,4 
2,0 
2,1 
4,7 
10,0 
20,0 
3,0 
5,5 
3,7 
3,0 
3,0 Rate of 
utili-
of these 
40 
61 
38 
90 
69 
43 
55 
100 
67 
100 
29 
100 
36 
100 
70 
100 
48 
100 
10 
100 
27 
100 
29 
80 
7 
100 
6 
99 
52 
100 
53 
95 
47 
95 
36 
67 
54 
86 
67 
50 
47 
71 
60 
71 
48 
56 
66 
0 
0 
33 
33 
32 
34 
52 
0 
65 
93 
0 
0 
37 
89 (Mio ECU) 
Major 
cause of 
utiliza­
tion (3) 
(e) 
(e) 
(e) 
(0(0 
(e) 
(a) 
(a) 
(a) 
(a) 
(a) 
(a) 
(a) 
(e) 
(a) 
(a) 
(a) 
(b) 
(b) 
(b) 
(b) 
(b) 
(0(0 
(e) 
(e) 
(0(0 
(d) 
(a) 
(a) 
(c) 
(a) 
(e) 
(c) 
(c) 
(a) 
(a) 
(a) 
(c) 
(0-
0) NDA = Non-differentiated appropriations. 
(2) Initial budget appropriations, plus the appropriations carried over / outstanding as at 31 December 1986. 
(3) Indicates the category of cause (as described in paragraph 2.13 and Table 2.9), which is the major explanation for under-utilization of the appropriations 
for the budget heading concerned. 
32 Official Journal of the European Communities 12. 12. 88 
Table 2.9 — Analysis of main causes of under-utilization of appropriations 
for commitment and payment in 1987 
(Mio ECU) 
Category of causes of 
under-utilization 
(a) Structural delays related to the unrealistic 
nature of certain programmes and the 
slowness with which they are implemented 
(b) The unwieldiness and, in some cases, the 
extremely complex nature of the procedures 
and machinery which condition the re­
cipients' access to Community funds 
(c) Absence of a legal basis 
(d) Problems related to the winding-up of 
actions which were terminated, the starting-
up of new programmes or the implemen­
tation of new regulations 
(e) Unsatisfactory management in certain cases 
by Commission departments 
(f) Miscellaneous or unidentified 
Total Type of 
appropriations 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC Number 
of budget 
headings 
22 
11 
6 
1 
4 
2 
8 
3 
13 
4 
9 
4 
62 
25 Appropriations 
initially made 
available 
1 410,6 
742,7 
333,7 
6,6 
65,3 
79,0 
1 175,3 
206,1 
420,5 
86,0 
90,2 
39,5 
3 495,6 
1 159,9 Unutilized 
appropriations 
737,3 
325,7 
161,8 
38,9 
69,0 
730,7 
98,0 
261,7 
31,0 
38,4 
21,4 
1 968,8 
545,1 
(c) the absence of a legal basis, or the late approval of 
such a basis, was in several cases the main reason for 
the low rate of utilization. Annex 1 to Volume I of the 
accounts lists the cases of under-utilization which are 
due, according to the Commission, to the absence of a 
legal basis. The Court has identified a number of 
other cases which do not appear in the Commission's 
annex. In this respect the case of budget item 9651 
(Third Financial Protocol with the southern and 
eastern Mediterranean countries) is of significance. 
Commitment appropriations amounting to 50 Mio 
ECU and 3,0 Mio ECU of payment appropriations 
remained unused because the Protocol was only 
concluded on 21 December 1987; 
(d) problems related to the winding-up of measures 
which had been terminated, the starting-up of new 
programmes or the implementation of new regu­
lations were a significant cause of under-utilization. 
An illustration of this cause can be found in the 
winding-up of the old Social Fund, for which 
outstanding commitments did not in the end lead to 
payments because of reductions in the amounts due 
on completed projects. The initial payment appropri­
ations under budget items 607 and 608, which 
amounted to 194,3 and 280,0 Mio ECU respectively, 
were used only to the extent of 8,2 and 61,5 Mio ECU 
respectively. As a result, transfers of 185,0 and 
215,6 Mio ECU respectively were made from these budget items to others within the same chapter which 
concern the new Social Fund (1984 Regulations); 
(e) the rather unsatisfactory nature of the management 
which the Commission is able, in some cases, to 
provide was another important cause of under-
utilization of appropriations. For instance, concern­
ing Article 401 (Intervention for fishery products), the 
Court notes that 10,3 Mio ECU of appropriations 
were cancelled by the Commission, although expendi­
ture chargeable to the last two months of the financial 
year 1987 had not yet been charged to the budget. 
Similarly, the Commission cancelled 10,5 Mio ECU 
of appropriations under Titles 1 and 2 of Part B of the 
general budget. This situation, which results from an 
incorrect application of Council Regulation (EEC) n° 
3183/87 of 19 October 1987 (9) introducing special 
rules for the financing of the common agricultural 
policy (CAP), led to the charging to the 1988 budget 
of expenditure which could justifiably have been 
postponed only if the appropriations available in 
1987 were exhausted. Of the total cancellations of 
EAGGF Guarantee Section appropriations amount­
ing to 20,8 Mio ECU, some 18,5 Mio ECU were 
cancelled because Member States had cash in hand 
when the revised rules for the financing of the 
guarantee section were introduced in November 
1987. An example of inadequate management can 
also be found in the case of the non-differentiated 
appropriations for which commitments were made 
12. 12. 88 Official Journal of the European Communities 33 
too late to enable the corresponding payments to be 
executed during the year. Thus, for Article 382 
(Inspection in agriculture), most of the 15,4 Mio 
ECU of commitments were entered into during 
December 1987, and as a result appropriations for 
payment amounting to 14,2 Mio ECU were carried 
forward to 1988: 
(f) in some cases miscellaneous or unidentified causes 
were responsible for the under-utilization of ap­
propriations. representing a cumulative total of 46,6 Mio ECU of 
appropriations for commitment, of which 29,9 Mio ECU 
were unexpended, and seven other cases representing a 
cumulative total of 142,3 Mio ECU of appropriations for 
payment, of which 61,3 Mio ECU were unexpended. A 
notable example is the new measure under budget item 
4702 (Modernization and development), where payment 
appropriations of 9,5 Mio ECU (3,3 Mio ECU intro­
duced by a Parliamentary amendment and 6,2 Mio ECU 
resulting from transfers) were not used in 1987. 
2.14. For many of the budget items listed in Table 2.8, 
the amount of final appropriations available in 1987 was 
lower, due to transfers, than the amount initially made 
available. However, the Court has identified several 
additional cases (see Table 2.10) where the final 
appropriations were higher than the appropriations 
initially made available, and for which the utilization of 
the final appropriations, which exceeded 5,0 Mio ECU, 
was less than 75 %. This situation usually resulted from 
transfers of appropriations for some of which, at least, 
there was apparently no need. These include two cases System of provisional twelfths 
2.15. As has been pointed out in paragraph 1.1, the 
management of the financial year 1987 was marked by the 
fact that budgetary implementation took place under the 
Table 2.10 — 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) 
finally made available for the financial year 1987 was lower than 75 % 
(Mio ECU) 
Budget 
heading 
(') 
420 
(NDA) 
4702 
632 
(NDA) 
6609 
7325 
7330 
778 
(NDA) Description 
Expenditure in connection with ag­
reements on fishing rights 
Modernization and development 
Cooperation between European un­
iversities and mobility of university 
students and teachers (Erasmus) 
Community action for the protection 
of forests against fire and acid rain 
Health and safety — Medical re­
search 
Research linked to development — 
Science and technology for develop­
ment 
Studies concerning industry and the 
internal market Type of 
appropria­
tions 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC 
AFP 
AFC Appropria­
tions 
initially 
made 
available 
(2) 
(1) 
64,2 
44,1 
3,3 
47,3 
1,2 
1,2 
2,0 
3,5 
2,6 
1,1 
11,4 
1,9 
2,3 
2,0 of which 
Par­
liament 
amend­
ments 
(2) 
3,3 
47,3 
0,3 
0,3 Trans­
fers, 
etc. 
(3) 
11,0 
11,0 
6,2 
51,2 
24,2 
24,2 
3,5 
5,5 
5,0 
15,0 
2,5 
19,3 
2,9 
2,9 Final 
appropria­
tions 
(4) = (l) + (3) 
75,2 
55,1 
9,5 
98,5 
25,4 
25,4 
5,5 
9,0 
7,6 
16,1 
13,9 
21,2 
5,2 
4,9 Amount 
remaining 
unutilized 
(5) 
20,8 
0 
9,5 
15,2 
14,2 
4,3 
3,2 
4,9 
15,7 
3,4 Rate of 
utiliza­
tion 
of final 
appro­
priations 
(6) 
72 
100 
0 
96 
40 
44 
21 
90 
58 
76 
65 
25 
35 
100 
(') NDA 
(2) Initial = Non-differentiated appropriations. 
budget appropriations and the appropriations carried over/outstanding as at 31 December 1986. 
34 Official Journal of the European Communities 12. 12. 88 
system of provisional twelfths. In its analysis of the 
financial management, however, the Commission has not 
given any account of the constraints that this system 
imposed on it, or of how it conformed to the system's 
restrictions. The Court has had occasion in the past (10) to 
emphasize that the objective of this system requires a 
restrictive interpretation of the legislation and, also, that 
the vagueness or the lacunae in the legislation on 
provisional twelfths should be clarified or remedied as 
part of the revision of the Financial Regulation. 
2.16. Without going once again into the nature of these 
cases of legislative vagueness or lacunae, or into the 
variety of practices which the Institutions have devised in 
an attempt to remedy them, the Court considers that, in 
the case of the EAGGF Guarantee Section, the Commis­
sion has not observed the imperative need for rigorous 
and far-sighted management that the provisional twelfths 
system imposes on it. In particular, the funds made 
available to the Member States by way of advances under 
the Guarantee Section were already 1 321,7 Mio ECU in 
excess of the limits imposed by the provisional twelfths 
system as early as the second month of the financial year. 
That prompted the Commission to call up the own 
resources normally made available to it more rapidly than 
usual, at the rate of one twelfth per month. 
OBSERVANCE OF THE FINANCIAL 
REGULATION 
2.17. The principal breaches of the Financial Regu­
lation, besides those already referred to in paragraphs 
2.15 — 2.16, which the Court observed in 1987 are 
described, though not exhaustively, in the following 
paragraphs. 
Observations arising from the audit of salaries 
at the Council, the Court of Justice and the 
Economic and Social Committee 
2.18. The Court of Auditors' audit of the salaries paid 
by the Council, the Court of Justice and the Economic 
and Social Committee (ESC) (see paragraphs 10.4 — 
10.23) gave rise to observations concerning the appli­
cation of the provisions of the Financial Regulation in 
those three institutions. 
Checks carried out by the Financial Controller 
2.19. Following the Court's observation in its Report 
concerning the financial year 1982 (n), the Council's Financial Controller has improved his verification, on the 
basis of personal files and other supporting documents, of 
all the entitlements determined by the staff management 
department and communicated to the salaries depart­
ment by means of notes or forms for entry into the salaries 
data-processing package. 
2.20. This improvement in the situation cannot, 
however, be seen as wholly satisfactory. The Financial 
Controller is not asked, for example, as part of the 
recruitment procedure, to approve appointment deci­
sions by verifying, as required by Article 34 of the 
Financial Regulation, the availability of appropriations 
and the existence of vacant posts, as well as the aptness of 
the grades proposed. 
2.21. At the Council the Authorizing Officer does not 
draw up a proposal for commitment, even a provisional 
one, as required under Article 32 of the Financial 
Regulation, for any expenditure which comprises re­
muneration. This practice not only contravenes the 
Financial Regulation but also prevents the Financial 
Controller from carrying out the checks prescribed at the 
level of both commitment of expenditure and author­
ization of payments, and, furthermore, prevents the 
Accounting Officer from making the accounting entries 
provided for in Articles 29 and 30 of the detailed rules for 
the implementation of the Financial Regulation (12). 
2.22. Moreover, when salaries are paid, and despite the 
provisions of Article 43 of the Financial Regulation 
which stipulate that the accuracy of the sums to be paid 
must be verified, the Council's Financial Controller: 
(a) approves the payment orders to which the global 
salary statements are attached without making any 
checks against personal files, and merely ascertains 
that the appropriations are available; he considers 
the monthly reconciliation of total salaries prepared 
by the salaries department with the previous month's 
total a sufficient basis for the granting of his 
approval; 
(b) does not check the inputs into the salaries data-
processing package, the data contained in the 
computer files, or any corrections required as a result 
of the periodic comparisons between various staff 
management and salary computer files; 
(c) does" not make selective checks during the year on 
clearly defined components of staff remuneration. 
2.23. When approving the payment orders to which the 
global statements of salaries are attached, the Court of 
Justice's Financial Controller does not make checks 
against personal files. Moreover, he does not carry out 
selective checks over the year on clearly defined 
12 12 88 COfficial journal of the European communities 3^ 
components of staff remuneration. Asmthe case of the 
C^ouncd^theC^ourtconsidersthatthesechec^sare^italif 
the obligations arising from Article ^3 of the Financial 
regulation are to be fully observed. 
2.2^. The C^ourt of justice has not appointed an 
Assistant Financial controller to assist its Financial 
C^ontroller,apossibility pro^idedfor under Article 19of 
theFinancialR-egulation. TheFmancialC^ontroller is 
therefore obliged,whene^er he expects to be absent, to 
delegate authority to someone ^ho is not entitled to 
receive suchadelegation. 
2.2eo. The Financial controller at the FSC^ does not, as 
required by Article 3^oftheFinancialR.egulation,aspart 
of the recruitment procedure, approve decisions of the 
Appointing Authority, and appointment decisions in 
particular, by^enfying the availability of appropriations 
and posts and the suitability of the grades adopted In 
addition, he approves the payment order to^hichthe 
globalstatementsofsalanesareattached without making 
any checksagainstpersonalfiles, checks neithermputs to 
the salaries package nor the data contained in the 
computer files and does not carryout selective checks 
during the year on clearly-defined components of 
remuneration. This, in the C^ourfsopmion, falls short of 
the obligations incumbent upon him under Article ^3 of 
the Financial regulation. 
2B2o. The FSoeBs FinancialC^ontroller is required to 
appro^ethepersonalinformationsheetsdetailing the 
administrative status of staff, the pecuniary rights 
documents, detailing the granting, ^ithdra^al and 
modificationof financialentitlements, and the global 
statementof salaries. Supporting documents areattached 
toneither thepersonalinformation sheets nor to the 
pecuniary rights documents ^hen they are sent for 
appro^al,anddecisions on recruitmentsand appoints 
ments are not appended to the global statement 
Accordingly,appro^al is granted without the possibility 
of carrying outareal check. 
Se^re^t^o^duh^ 
2.27. AttheC^ouncil,theheadofthedi^ision^hich 
includes the accounts department is an Authorising 
Officer, and the head of the salaries unit within the 
salaries and data-processing department is the Assistant 
Accounting COfficer.This situation contravenes the prin 
ciple of the segregation of duties, as laid do^n in Article 
17 ofthe Financial regulation. 
2.28. Initsannualreport on the financial year 198o(^P 
the C^ourt has already observed, in the case of the F^, 
that Authorizing COfficersha^epo^ersofsignaturem 
respect ofbank accounts, thus contravening the principle of segregation of duties As of 31 May 1988, tnBe 
Authorising Officers ^ere entitled to sign documents 
relating to the F^sbank accounts 
229 The CAourt also noted that t^o Authorising 
Officers at the council, and t^o at the C^ourt of justice, 
^ere empowered to sign documents relating to bank 
accounts 
A^enc^of^ntern^trute^fortb^^^n^^nta^onoft^e 
budget 
23t^ Article^of the C^ommissionR^egulation laying 
do^ndetaded rulesfor theimplementationofcertam 
provisions of the Financial regulation imposes on each 
institutionan obligation todra^up its o^nmrernalrules, 
outlining the main responsibilities of Authorising 
Officers and managmgdepartments in the implemen 
tationofthe statement ofexpenditure and the statement 
of revenue This document is supposed to be made 
available to all the departments in^ol^ed in the manage 
mentofthe budget, butasof31Mayl988nodocumentof 
this l^ind had been dra^n up by either the council or the 
F^oe 
^art^ament 
231 With regard to operating expenditure (Title2of 
the budgets 21 decisions to overrule the Financial 
C^ontrollePsrefusal to gi^Be his approval ^ere taken by the 
superior Authority at the parliament during the financial 
year 1987 These decisions to overrule the Financial 
C^ontrollerconcerned total expenditureofl,OeoMioFC^C^ 
An analysis of the irregularities uncovered by the 
Financial controller sho^s that his mam reason for 
refusing his approval ^as the fact that expenditure had 
been committed ^hich did not comply ^ith Article 32 of 
the Financial regulation and the fundamental principle 
of the annual nature of the budget. The expenditure in 
question concerned everyday aspects of FarhamenCs 
administrative management such as the payment of 
professional fees, costs oforgam^mg meetings, telephone 
bills etc COthercases,^hich^ere more important from 
the financial point of ^ie^, concerned alterations to 
premises and the renting ofastorehouse in Belgium. 
232 In its decision to overrule the Financial con­
troller, the superior Authority, ^hile recognising the 
validity of the Financial C^ontrollePsobser^ations,dre^ 
particular attentionrotheutilityof the expenditure in 
question, v^hich had been mcurred^ith a ^ie^ to an 
overall saving of money,and,finally,to the fact that rhe 
parliament ^as in any case obligedto respect financial 
obligations towards third parties. 
36 Official Journal of the European Communities 12. 12. 88 
2.33. The Court must call upon the Parliament's 
administration to look carefully into the causes behind 
the development of this type of infringement over the last 
two financial years and to take the appropriate steps. 
Council 
2.34. With regard to items of expenditure other than 
remuneration, the Court has observed that in 18 cases, 
involving a total of 2,6 Mio ECU, the relevant commit­
ment proposals were — in contravention of Article 32 of 
the Financial Regulation — both drawn up by the 
Authorizing Officers and approved by the Financial 
Controller ex post facto. 
Commission 
2.35. Examination of the expenditure incurred under 
Title 9 of the budget uncovered a certain number of 
shortcomings, in particular: 
(a) six errors (3,0 Mio ECU) in allocating payment 
orders to the budget involving a total of 50,4 Mio 
ECU, in the food aid sector; 
(b) 23 payments, amounting to 35,8 Mio ECU, which 
were charged to Article 930 of the budget, in 
implementation of a financing agreement which was 
expected to expire at the end of the financial year 
1986; 
(c) three payments, totalling 0,3 Mio ECU, which were 
made to non-governmental organizations, although 
the Commission was not in possession of the final 
report required in this instance under the general 
conditions of contract. 
Economic and Social Committee 
2.36. As the Court pointed out in its annual report on 
the financial year 1986 (14), the ESC's Accounting Officer 
keeps the payment accounts and the accounts for extra-
budgetary operations, commitments being recorded by 
the Financial Controller only. This procedure is in 
contravention of Article 29 of the detailed rules for the 
implementation of the Financial Regulation, which states 
that commitment proposals are to be recorded by the 
institution's accounts department, and of Article 30, 
under which the accounts must be organized in such a way as to guarantee that the Financial Controller is able to 
check that commitments and payments have been 
accurately recorded. 
2.37. An examination by the Court of a sample 
representing some 66 % by value of expenditure under 
Title 2 of the ESC budget revealed that, in 36 cases 
amounting to 0,6 Mio ECU, the expenditure commit­
ments were drawn up after the supplier's invoice had been 
received and/or after the services commissioned had been 
rendered. This practice is an infringement of the 
provisions of the Financial Regulation, particularly 
Article 32 thereof, which stipulates that all measures 
which give rise to expenditure must be preceded by a 
proposal for commitment. 
Budget allocation 
2.38. At the end of 1987, the Commission discovered 
46,7 Mio ECU of excess payments allocated to food aid 
expenditure. Those relating to the contingency reserve 
(item B 9280) had, in the main, been charged against the 
appropriations carried over from 1986. During the 
additional period, the Authorizing Officer again charged 
the adjustments to the appropriations for the financial 
year. Since they had been but little utilized in 1987, the 
adjustment of 3,9 Mio ECU resulted in net negative 
expenditure of 2,6 Mio ECU in the 1987 revenue and 
expenditure account. The adjustment should have been 
made to the same class of appropriations as that of the 
initial error, especially given that the very concept of 
negative expenditure is quite alien to the budgetary 
principles enshrined in the Financial Regulation. This 
procedure, furthermore, led to the carrying-over of 
44,0 Mio ECU of appropriations at the end of 1987, even 
though the budgetary authorizations only amounted to 
41,4 Mio ECU. 
Supporting documents 
2.39. The Court's audit revealed various problems 
concerning the supporting documents for budgetary 
expenditure operations for the financial year 1987: 
(a) many supporting documents were sent to the Court 
late; for instance, certain documents concerning the 
fourth quarter of 1987 did not arrive at the Court 
until the beginning of June 1988, i.e. too late to be 
examined under conditions complying with the 15 
July deadline laid down in Article 83 of the Financial 
Regulation. The supporting documents concerning 
the additional period for food aid are a case in point; 
12. 12. 88 Official Journal of the European Communities 37 
(b) on several occasions, the supporting documents were 
missing or incomplete. Thus, for example, the 
supporting documents sent to the Court do not 
always indicate whether the 'negative payments' 
recorded for Chapters 92 and 93 are merely an 
accounting adjustment or whether they correspond to 
actual cash receipts (recoveries of payments on 
account, for example). In particular, the reasons 
behind the cancellations are not apparent from the 
supporting documents sent to the Court with regard 
to four cancellations of payment orders totalling 
2,2 Mio ECU under Chapter 92 and four similar 
cancellations totalling 0,9 Mio ECU under Chapter 
93. the full amount originally estimated for the purposes 
intended and has complied with all relevant conditions. If 
the beneficiary is unable to supply the necessary evidence 
to the Commission, for instance when projects are 
discontinued or broken off, the Commission is entitled to 
recover the payment on account, in whole or in part, 
depending on the circumstances. The amounts of such 
recoveries of payments on account in 1987 are indicated 
in Table 2.11. 
Procedures for identifying recoveries and 
entering payments made on account in the 
accounts 
RECOVERY OF PAYMENTS ON ACCOUNT 
RELATING TO OPERATING 
EXPENDITURE 
2.40. A large proportion of the expenditure reported in 
the annual accounts consists of payments on account, 
which represent a percentage (varying between 40 % and 
90 %) of the estimated Community contribution to the 
total cost of a particular project or programme. This is the 
case with a considerable proportion of expenditure under 
the structural Funds, in the energy, research and new 
technology fields, and in the context of cooperation with 
developing countries (budget Titles B3 to B7 and B9). 
Such expenditure becomes definitive only when the 
Commission is satisfied that the beneficiary has expended 2.41. During 1987 the Commission adopted internal 
rules relating to the collection of certain debts, including 
those arising from recoveries of payments on account. 
These rules reiterate the principle that any measure 
generating, establishing or amending a debt must be 
covered by a recovery order, the establishment of which is 
the responsibility of the Authorizing Officer for the 
budget headings concerned, and they also define the 
procedures to be followed subsequently. However, these 
rules do not provide any guidance on the steps to be taken 
by Authorizing Officers to ensure that payments on 
account which should be recovered are first of all 
identified promptly, in particular by means of a regular 
and systematic scrutiny of outstanding commitments. But 
above all, under the present accounting system, the 
Table 2.11 — Recoveries of payments on account in 1987 
(Mio ECU) 
Field of expenditure 
EAGGF-Guidance: 
Direct measures 
Indirect measures 
Fisheries 
Regional Fund 
Social Fund 
Social measures 
Energy 
Research - (indirect action) 
Innovation, industry, etc. 
Food aid 
Cooperation with develop, countries Budget 
headings 
B30 
B33 
B 42-46 
B 50-51 
B 60-61 
B 63-67 
B 70-71 
B73 
B 75&77 
B92 
B 93-99 Recovery 
orders 
established 
in 1987 
1,7 
169,4 
5,9 
1,8 
Total Amounts recovered in 1987 
Recorded in 
Receipts 
accounts 
— 
— 
— 
— 
111,9 
3,3 
115,2 Re-use 
accounts 
0,1 
___ 
0,2 
— 
1,2 
2,7 
2,2 
1,5 
0,9 
4,9 
13,7 Deducted 
expenditure 
— 
1,0 
±50,0 
±51,0 Total 
0,1 
1,0 
0,2 
±50,0 
111,9 
1,2 
6,0 
2,2 
1,5 
0,9 
4,9 
±179,9 
38 Official Journal of the European Communities 12. 12. 88 
Commission does not distinguish between payments 
according to their legal nature (final payments, advances, 
instalments paid in settlement, provisional and interim 
payments made to persons other than the final bene­
ficiary, etc.). It is therefore impossible to estimate the 
overall value of non-final payments, and all that is known 
is that they represent a considerable proportion of 
operational expenditure (see paragraph 2.40). It is 
likewise impossible to identify individually operations 
financed on a non-definitive basis, which ought to be 
monitored systematically by the Commission. 
2.42. The inadequacy of the current rules, as described 
in the preceding paragraph, is illustrated by the following 
case uncovered by the Court. A project that was being 
financed from resources under Article 941 of the budget 
had to be broken off suddenly, at the request of the 
authorities of the developing country concerned. Al­
though 240 000 ECU had been paid on account and 
recorded as budgetary expenditure, the Authorizing 
Officer, six months after the work had been discontinued, 
was not able to specify what proportion of the payment 
on account had been used. No recovery order, not even a 
provisional one, had been drawn up to permit the case to 
be monitored in the accounts. 
2.43. Furthermore, despite the concern expressed by the 
Financial Controller in his 13th report on the recovery of 
debts (15), and regular reminders by the Commission 
department responsible for recoveries (DG XIX), the 
problem of amounts being paid in to the Commission for 
which no recovery order has been issued persists. Some 
10,1 Mio ECU of revenue (including 2,7 Mio ECU which 
had already been received in 1986) which were awaiting 
posting to revenue accounts, because they could not be 
linked to established recovery orders, were thus included 
in the consolidated balance sheet at 31 December 1987 
(compared to 27,0 Mio ECU at 31 December 1986). This 
problem is particularly acute in the case of the Social 
Fund, apparently due to difficulties in handling the 
increasing volume of recoveries. 
Using recoveries of payments on account to 
finance new expenditure 
2.44. Article 3 of the Financial Regulation lays down 
the principle that revenue and expenditure 'shall be 
entered in full in the budget and in the accounts without 
any adjustment against each other'. However, by way of 
derogation from this article, Article 22 provides for the 
possibility that certain revenue may be deducted from 
expenditure or 're-used' to finance other payments in the 
same field of expenditure. Furthermore, Article 6(6) 
provides that EAGGF Guidance Section appropriations 
may be used, by way of exception, to finance projects for 
which they were not initially committed, under the conditions laid down in Council Regulation (EEC) No 
3171/75 of 3 December 1975 (16). This provision has been 
applied by analogy to subsequent EAGGF Guidance 
Section regulations. Although not referred to in the 
Financial Regulation, similar provisions are laid down in 
Council Regulation (EEC) No 1787/84 of 19 June 1984 
relating to the ERDF (17). 
2.45. The Commission has been inconsistent in its 
application of these re-use provisions. For instance, large 
sums representing payments on account which have been 
recovered in the Social Fund field in the last few years 
have been treated as budgetary revenue, without any 
recourse to re-use. As a result, considerable amounts of 
appropriations were not ultimately used as originally 
intended by the budgetary authorities. In the research 
field, re-use has been the general rule, whereas in the 
energy field this was never the case prior to 1987. 
2.46. The Commission has not yet established criteria 
for the re-use of payments on account which have been 
recovered. Such criteria, which ought to be included in the 
Financial Regulation, should clearly indicate, in par­
ticular, whether payments on account which were 
completely valid on the basis of the known circumstances, 
and which years later turn out to be wholly or partly 
recoverable, really constitute 'amounts paid in error', 
within the meaning of Article 22 of the Financial 
Regulation. 
Presentation in the annual accounts of 
recoveries of payments on account and their 
re-use to finance new expenditure 
2.47. Recoveries paid in to the Commission and not 
intended for re-use are immediately credited to the 
budgetary accounts for miscellaneous revenue. These 
accounts are presented separately from the accounts 
showing budgetary expenditure, but do not indicate the 
amounts related to each field of expenditure concerned. 
Some 115,2 Mio ECU were entered in this way in 1987 
(see Table 2.11). 
2.48. Where the recoveries are intended for re-use the 
revenue is recorded under a special extra-budgetary 
account (13,7 Mio ECU in 1987). A schedule showing the 
extent to which this revenue was re-used during the year is 
presented by the Commission as an annex to Volume II of 
the annual accounts. When new commitments and 
payments are entered, so that the funds corresponding to 
the amounts received can be re-used, they are recorded 
separately from normal budgetary operations and are not 
included in the tables in Volume II of the annual accounts 
which show the total budgetary expenditure. If the 
12. 12. 88 Official Journal of the European Communities 39 
amounts recovered have not been re-used within two 
financial years, they are transferred to a revenue account 
and entered as such in the annual accounts. 
2.49. In fields of expenditure, such as the ERDF and 
indirect EAGGF Guidance Section measures, recoveries 
of payments on account relating to certain projects are 
made by deducting them from payments in respect of 
other projects (some 51,0 Mio ECU in 1987). The 
amounts recovered are deducted from expenditure and 
recorded as 'negative payments' in the detailed accounts 
of budgetary expenditure, reducing the total payments for 
the budget headings concerned and thereby in effect 
releasing appropriations for payment to be used to 
finance other projects. The annual accounts of budgetary 
expenditure reflect only the net amounts recorded, 
thereby understating the total expenditure for the year. 
Furthermore, there is no accounting control over 
amounts which are awaiting recovery by deduction from 
payments yet to be made. 
Recovery procedures 
2.50. Once recovery orders have been established by the 
Authorizing Officer and entered in the accounting 
system, the task of ensuring that the recoveries are 
effected by the pre-determined due date is the respons­
ibility of a specific section at DG XIX. The work of this 
section is carried out in close consultation with the 
Authorizing Officers whenever deadlines are not met, and 
in particular when legal action is being considered. 
2.51. Whilst recognizing the complex nature of the debt 
collection task, there are grounds for considering that the 
system as a whole is not yet operating wholly satisfac­
torily, as the following examples show: 
(a) the recovery orders outstanding at 31 December 1987 
for recoveries of monies transferred in the Social 
Fund field (139,5 Mio ECU) included a significant 
proportion (±30 %) which had been overdue for 
more than 12 months; 
(b) the recovery orders outstanding at 31 December 1987 
for the EAGGF-Guidance sector (15 cases amount­
ing to some 2,7 Mio ECU) included four cases 
totalling 0,9 Mio ECU which can be considered 
irrecoverable. In one of these cases, involving 188 690 
ECU, the debtor had gone into liquidation and the 
receiver did not recognize the Commission's claim 
because its declaration arrived too late. In two other 
cases, involving 709 000 ECU, the Commission was 
still sending out recovery orders at a time when the 
debtor was already in liquidation. For one of these, the recovery order had been established in 1985, 
although the debtor in question had been in 
liquidation since 1978. 
Final observation on the recovery of payments 
on account 
2.52. Recovering payments on account is an important 
feature of the Commission's management of contri­
butions to multiannual projects and programmes. The 
number and value of recoveries will increase in direct 
proportion to the strictness with which the Commission 
monitors outstanding commitments and related pay­
ments on account, as has been demonstrated in recent 
years in the Social Fund field. 
2.53. The Court urges the Commission to adapt its 
system and accounting procedures so that it will be able: 
(a) to grasp immediately the legal nature of the payments 
made, so that it is possible at any time to distinguish 
between final and non-final payments, whether on an 
individual or block basis; 
(b) to identify recoverable payments on account prom­
ptly, and to establish and record recovery orders 
immediately; 
(c) to re-use amounts recovered to finance new oper­
ations in the same field of expenditure in accordance 
with clearly defined criteria; 
(d) to present in the annual accounts all amounts 
recovered and the use thereof to finance new 
expenditure, accurately reflecting the aggregate 
amounts of revenue, reconstituted appropriations 
and expenditure; 
(e) to effect recovery within the specified time limits; 
(f) to have access to adequate information concerning 
debtors whose financial situation is precarious. 
2.54. The Court wishes to point out that its recommend­
ation in paragraph 2.53(d) above confirms its 
Opinion (18) of 27 May 1981 on the Commission's 
proposal for an amendment to the Financial Regulation. 
40 Official Journal of the European Communities 12. 12. 88 
The Commission's proposal, which was subsequently 
amended and presented in 1984 (19), does not reflect the 
Court's view on this point and has not yet been the subject 
of a Council decision. Furthermore, the Court wishes to 
emphasize that this recommendation could be put into 
practice, without necessarily modifying the Financial 
Regulation, by adopting mutatis mutandis the presen­
tation customarily used in the budgetary expenditure 
accounts to reflect commitment appropriations made 
available by the cancellation of commitments from 
previous years. 
THE COMMUNITY GENERAL ACCOUNTS 
AND BALANCE SHEET 
Cash deficit at the Parliament 
2.55. The amount of 4,1 Mio BFR (±0,1 Mio ECU), 
which was already included in the Parliament's balance 
sheet at 31 December 1982 as deferred expenditure under 
the heading 'Cash deficit' (20), is still to be seen on the 
assets side of the balance sheet at 31 December 1987. In 
this connection, the Court of Auditors must refer the 
reader to its reports on previous financial years (21). 
Revenue to be recovered 
2.56. The outstanding revenue to be recovered, which 
amounted to 126,5 Mio ECU at 31 December 1987 (as 
against 96,2 Mio at the end of 1986), can be broken down 
as follows: 
(Mio ECU) 
Maturity 
1982 
1983 
1984 
1985 
Subtotal A 
1986 
Subtotal B 
first half of 1987 
3rd quarter of 1987 
October 
November 
December 
Subtotal C 
Total Amount of claims 
31.12.1987 31.12.1986 
0,1 0,1 
0,1 3,3 
0,3 0,6 
2,1 3,5 
2,6 7,5 
37,3 88,7 
37,3 88,7 
31,0 
32,2 
5,1 
7,6 
10,7 
86,6 — 
126,5 96,2 To these amounts in the balance sheet must be added 
claims deriving from fines imposed by the Commission 
(72,1 Mio ECU at 31 December 1987, as against 70,9 Mio 
at the end of 1986, the degree of dueness of which depends 
on decisions yet to be taken by the Court of Justice) (22) 
and claims concerning own resources and the related 
interest on payment defaults (15,7 Mio ECU at 31 
December 1987 — of which 7,9 Mio relating to 1984 — as 
against 70,1 Mio at the end of 1986). The Court must 
therefore ask the Commission to redouble its efforts to 
recover claims which have fallen due. 
Recoverable taxes and duties 
2.57. In its annual report on the financial year 1984 (23), 
the Court observed that the invoicing of value-added tax 
(VAT) to the Communities was governed by rules that 
varied from Member State to Member State. The Court 
recommended that the Commission should negotiate 
with the Member States with a view to harmonizing and 
simplifying the procedures in respect of exemption from 
VAT, the ideal being to arrive at a situation where all the 
Member States accepted invoicing net of VAT, as is the 
case for three of them (Belgium, Italy, Luxembourg). In 
its replies to the annual reports on the financial years 1985 
and 1986, the Commission stated (24) that in June 1986 it 
had written to the Member States which did not operate 
the direct system of VAT exemption to request that talks 
be started to obtain an amendment to the implementing 
provisions for Article 3 of the Protocol on the Privileges 
and Immunities of the European Communities (25). The 
Commission is still obliged to make ex post facto 
repayment requests for seven Member States. Further­
more, the approaches made to the two new Member 
States (Spain and Portugal) have not so far enabled 
detailed rules for the application of the Protocol to be 
agreed. 
2.58. Following the observations made by the Court in 
its annual reports since 1983, the Commission under­
took (26) to set up an accounting procedure for re­
coverable VAT. A new procedure was in fact set up in 
1987. This new procedure still does not seem to be 
satisfactory, since: 
(a) at the end of May 1988 the repayment requests 
relating to 1987 had been drawn up for only four 
Member States (i.e. 1,8 Mio ECU out of 2,7 Mio 
ECU); 
(b) the amount of 3,2 Mio ECU of 'Recoverable taxes 
and duties' shown in the balance sheet at 31 
December 1987 does not reflect the true amount of 
the Commission's claim on the Member States 
because the recoverable taxes for 1986 for Spain and 
Portugal are still not known. 
12. 12. 88 Official Journal of the European Communities 41 
2.59. In conclusion, the Commission, despite its 
undoubted efforts, is still not able to establish VAT claims 
at the end of the financial year in a reliable manner. The 
Court therefore once again urges the Commission to 
introduce a proper accounting procedure for these 
recoverable taxes and duties. 
Advances to staff 
2.60. At 31 December 1987, advances to members of 
staff totalled 5,4 Mio ECU (including 2,5 Mio ECU of 
advances against salaries included in 'Expenditure to be 
charged'), as against 4,5 Mio ECU at the end of 1986. In 
its last three reports (on the financial years 1984, 1985 and 
1986) (27), the Court criticized the fact that the computer 
print-outs supporting these accounts still showed a high 
number of creditor items, apparently corresponding to 
sums owed by the institution to staff, whereas staff 
advances are sums owed by the staff to the Commission. 
The situation had not improved very much by 31 
December 1987, because on that date, solely for advances 
against travel and subsistence expenses, there were 255 
creditor balances as against 150 on this same item at the 
end of 1986. The Court must therefore once again 
strongly urge the Commission to make the necessary 
checks of these print-outs and review the procedures for 
recording and monitoring these accounts. 
Reliability and completeness of the EAGGF-
Guarantee accounts 
2.61. Apart from the omission, mentioned in paragraph 
1.2, of expenditure corresponding to two months, i.e. a 
total of 4 546,6 Mio ECU, the accounts submitted to the 
discharge authority are incomplete in another respect. 
These accounts are based entirely on the Member States' 
monthly declarations, so that the revenue and expendi­
ture figures they contain are checked by neither the 
national audit bodies nor the Commission and are likely 
to be substantially amended at a later stage: firstly, when 
the Member States submit their revised annual accounts 
for the expenditure of the financial year for clearance and, 
secondly, after the clearance procedure proper. Ac­
cording to current procedures, these adjustments must be 
shown in the subsequent accounts. This practice means 
that at the end of the year there are items of assets and 
liabilities which are perhaps sizeable and which are not 
included in the Community balance sheet. 
2.62. The volume of these adjustments cannot be 
assessed beforehand, but the Court notes that the net 
balance in 1987 of items of this kind arising from previous 
financial years amounted to some 208,2 Mio ECU. The Court of Auditors considers that a note to the effect that 
adjustments of this kind will probably be made should be 
entered in the financial statements. Moreover, the 
adjustments ought to be entered in the accounts as soon as 
they are notified. The adjustments that result from the 
presentation by the Member States of the rectified 
EAGGF-Guarantee accounts — which are generally 
known prior to the discharge decision relating to the 
accounts in question — fall in particular into this 
category. 
2.63. In 1987, as in 1986, there were considerable delays 
before the Commission entered the EAGGF-Guarantee 
operations in the budgetary accounts, and no monthly 
expenditure was booked within the two months specified 
by Article 97 of the Financial Regulation. In addition, in 
order to cope with the problem of the shortage of 
appropriations, frequent use was made in 1987 of the 
suspense account system, to such an extent that by the end 
of October a sum of 3 862,0 Mio ECU was entered on 
such accounts, pending transfers of appropriations 
enabling this amount to be charged to the budget. As in 
previous years, this situation was corrected by means of a 
batch transfer after the end of the financial year, which 
the budgetary authorities could only treat as a formality. 
2.64. The Commission is unable to reconcile the 
EAGGF-Guarantee balances declared as held by three 
Member States at November 1987 with its own records 
(one Member State shows a balance 47 000 ECU higher 
than in the Commission's records and the two other 
Member States show balances totalling 212 000 ECU less 
than in the Commission's records). 
Clearance of food-aid accounts 
2.65. In the case of food-aid expenditure disbursed on 
its behalf by the Member States, the Commission makes 
monthly payments of advances to the Member States, and 
subsequently takes clearance decisions concerning the 
annual accounts. The most recent decisions taken by the 
Commission relate to the financial year 1979. Con­
sequently, unlike in the case of the Guarantee Section of 
the EAGGF, the Commission has not taken steps to catch 
up on the delays in the closure of these accounts. This 
situation conflicts with Commission Regulation (EEC) 
No 249/77 of 2 February 1977 (28), Article 8 of which 
stipulates that the clearance of the accounts must be 
decided on, in principle, before the end of the following 
year. Failure to comply with this provision has resulted in 
about 3 000 Mio ECU of food-aid expenditure being 
provisionally charged to the Commission's accounts for 
the financial years 1980 to 1986. The delays of several 
years in the clearance of the accounts, carried out on the 
basis of expenditure effected in national currencies by the 
42 Official Journal of the European Communities 1^1^^ 
member States, entail the risk of tinancial consequences 
for thegeneralbudget of theCommunities, whichis 
expressed in T^CU,because of the eflect of changes in the 
exchange rates, as shown by the case of the expenditure 
effected byt0enmarkinl^7^. An amount of^^^viio 
P^CL^ of food aid was not accepted by the Commission 
when theaccountswerecleared in 1^^.in the meantime, 
Denmark had deducted this sum from its declared 
expenditurefor the tinancial year 1^^, and the Commis^ 
sion decided to enter this amount in the balance sheet, 
pending the clearance of the food^aid accounts for the 
financial year 1^. In the absence of any clearance 
decisions, either ofageneralnatureorspecitic to thiscase, 
the amount still appears on the balance sheet at ^1 
Loecember launder theheading^xpendituretobe 
chargede If this amount had been charged on, for 
example,^ll0ecemberl^^7,it would have resultedinan 
extra cost to the general budget ofl^^OOOLCU,because 
ofchanges in the tOanishkrone^CL^ exchange rate since 
1^^^. The Court considers that these very lengthy delays 
in the clearance of the accounts should be eliminated as 
soon as possible. 
^.oo. For thepurposes of administering Communny 
funds, theCommissionhasrequiredits banks to make the 
transfers between its various bank accounts with ^same^ 
day value dating^, i.e. the date on which the amount is 
credited to the account at the transferee bank must be the 
sameas the date on which the amount is debited from the 
account at the transferor bank.Ptowever,atest carried 
out on eo7 interbank transfers made in Poecemberl^7 
with an average value ofl^lviioFCL^ revealed that inlo 
cases the operations had not been carried out with ^same 
day valued and that this had resulted inatotal loss of^ 
days of value. This test, which was restricted to one 
month, shows that the Commission should provide itself 
with the resources necessary to carry out suchacheck, 
which would very soon prove profitable. 
^.o7. Following requests made by the Court for 
contirmationof theCommission^s bankbalances, rhe 
banks^ replies ^or confirmations^ were sent simul 
taneouslytolOCr^l^ at the Commission andtothe 
Court, nevertheless, some replies fromthe banks were 
incomplete or contained errors, especially as regards 
authorized signatories. The Commission should have 
madesurethatalltheincorrectreplieswererectilledbyits 
banks. 
^.^. The Commission has openedavery large number 
of bank accounts, for use by foC^^l^^whichheldll^ 
bankaccountsat^ltOecemberl^^^andalsolOC^Vltl 
^credit and investments^. In addition to these accounts, 
there are the bank accounts used by the Commissions 
researchcentres^atispra, Creel, ^arlsruheandRetten^, by 
the external delegations and by the information oftlces, 
the accounts used by one PoirectorateC^eneral or another 
foraparticularprogramme,theaccountsheldbythestaff shops and restaurants,and,lastly,Lhebanks accounts 
opened by the other institutions. There is no constantly 
updated list of all these accounts.Pool ^l^,whichhas the 
task of coordinating the management of all Community 
funds, should draw up suchalist.The institutions would 
thus beabletoformamoreaccuratepictureofthe volume 
of business handled by each bank and curb the 
proliferation of bank accounts, which the Court has 
already criticized^. This would facilitate the sound 
management of Community funds. 
A^^^^^^^^^^^^^^e^^^ 
2.69. The item 'Miscellaneous revenue to be credited' 
amounted to 14,1 Mio ECU at 31 December 1987, as 
against 27 Mio ECU at the end of 1986. In fact, this item 
should amount to no more than 10,1 Mio ECU, the 
disparity being due to two booking errors. Lastly, of this 
10,1 Mio ECU, 2,7 Mio ECU corresponds to established 
revenue for 1986. The monitoring of operations carried 
out on this account should therefore be improved. 
Loans granted to Mediterranean countries 
2.70. The loans granted to Mediterranean countries are 
shown in a table in Volume II of the revenue and 
expenditure account (30). This table has many errors of 
presentation (omission of some signed, and even some 
disbursed, loans, inclusion of an operation which had not 
been concluded, etc.). The net result of the errors is that 
the total volume of loans signed, which, according to the 
Commission's table, amounts to 494,6 Mio ECU, is only 
472,1 Mio ECU, whilst the total volume of loans 
disbursed, which, according to the same table, amounts to 
392,1 Mio ECU, ought to be shown as only 388,7 Mio 
ECU. The Commission could have made the information 
presented more reliable and more consistent, in particular 
by reconciling it with the data regularly received from the 
EIB, which would, for example, have avoided the over-
estimation by 10,8 Mio ECU of the amount outstanding 
on the loans granted to Turkey. 
Exchange-rate differences 
2.71. During the financial year 1987, the Court carried 
out an audit enquiry into the origins of, and the controls 
and accounting methods applicable to, exchange-rate 
differences in all the Community institutions (144,8 Mio 
ECU of exchange-rate gains and 126,9 Mio ECU of 
exchange-rate losses for the financial year, i.e. 17,9 Mio 
ECU of net exchange-rate profit for the consolidated 
balance sheet of the institutions at 31 December 1987). It 
12. 12. 88 Official Journal of the European Communities 43 
transpired that efforts need to be made to harmonize 
practices in all the institutions so as to cut down the 
reasons for and the disparities in the origin and handling 
of these differences. A detailed check by the Financial 
Controller of these differences was also seen to be necessary. The conclusions of this enquiry have been sent 
to the institutions concerned. Two of them have already 
replied by sending their comments to the Court, and the 
Commission has held an exchange of views for Account­
ing Officers on this subject. 
) OJL 356, 31.12.1977. 
•) Doc. COM(88)212 — 216. 
3) According to the classification adopted by the Commission 
to distinguish between 'compulsory' and 'non-compulsory' 
expenditure in the revenue and expenditure account. 
4) Opinion No 1/88, OJ C 166, 25.6.1988, p. 3. 
5) OJ C 336, 15.12.1987, paragraph 2.5. 
6) OJ C 321, 15.12.1986, paragraph 7.10(b). 
7) OJ C 336, 15.12.1987, paragraphs 2.7 — 2.10. 
8) Doc. COM(88) 148 final of 18.3.1988. 
9) OJL 304, 27.10.1987, p. 1. 
10) Annual report on the financial year 1985, OJ C 321, 
15.12.1986, paragraphs 1.30 — 1.35. 
n) OJC 357, 31.12.1983, paragraphs 11.37— 11.38. 
12) OJ L 360, 19.12.1986. 
13) OJ C 336, 15.12.1987, paragraph 2.47. 
14) OJ C 336, 15.12.1987, paragraph 2.33. 
15) Thirteenth report (dated 20 July 1987) of the Financial 
Controller to the Commission — Article 24(3) of the 
Financial Regulation of 21 December 1977. 
16) OJL 315, 5.12.1975. 
17) OJ L 169, 28.6.1984. 
18) OJC 232, 11.9.1981. 
!9) Doc. COM(84) 123 final of 9.3.1984. 
20) Annual report on the financial year 1982, OJ C 357, 
31.12.1983, paragraph 2.9. 
(21) — Special report on the Members' cash office of 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. 
— Annual report on the financial year 1986, OJ C 336, 
15.12.1987, paragraph 3.2. (22) Annual report on the financial year 1986, OJ C 336, 
15.12.1987, paragraph 3.4. 
(23) OJ C 326, 16.12.1985, paragraph 2.4. 
(24) — OJ C 321, 15.12.1986, replies, paragraph 2.10. 
— OJ C 336, 15.12.1987, replies, paragraph 3.5. 
(25) Treaties establishing the European Communities, 1978 
edition, Vol. I, p. 856. 
(26) — Annual report on the financial year 1983, OJ C 348, 
31.12.1984, replies, paragraphs 2.18 — 2.19. 
— Annual report on the financial year 1984, OJ C 326, 
16.12.1985, replies, paragraphs 2.3 — 2.4. 
— Annual report on the financial year 1985, OJ C 321, 
15.12.1986, replies, paragraph 2.9. 
(27) -- OJ C 326, 16.12.1985, paragraphs 2.8 — 2.9. 
— OJ C 321, 15.12.1986, paragraph 2.12. 
— OJ C 336, 15.12.1987, paragraph 3.6. 
(28) OJ L 34, 5.2.1977, p. 21. 
(29) Annual report on the financial year 1984, OJ C 326, 
16.12.1985, paragraph 2.39. 
(30) Doc. COM(88) 213 EN final. 
44 Official Journal of the European Communities 12.12.^ 
CerHAPl^R3 
r^evense 
30 LABLECOEC^CO^LE^LS 
general introduction 
LheC^ommunityfransit System— road 
Introduction 
Impact of the system on community ov^n resources 
Observations arisingfrom audit ofthe system as operated inMember States 
R.ole of the committee on the Movement of C^oods 
conclusion 
Systemforimposing and bringing to account of anti-dumping duties 
Introduction 
Lhe community procedures relating to anti-dumping duties 
CObservations arising from audit ofsystem for imposing and bringing to 
account of antidumping duties 
Imposition of provisional anti-dumping duties and monitoring of 
undertakings by the commission 
conclusions 
Agricultural levies on imported cereals 
Introduction 
Extermination of the levy — ^vorldcif price 
Eoeterminationofthelevy — threshold price 
Lhe advance fixing system 
Evolution of trade developmentsincereals and cereal substitutes 
Clonclusion 
Making available of customs duties by Spain and Portugal 
Exemptionfromcustomsdutiesapplied unilaterally by MemberStateson goods 
of military nature 
general conclusion 3.1 
3.3 -
3.3 
18 
3.11 
130 
132 
136 
136 
3.40 — 3.2 
— 3.35 
— 3.7 
— 3.10 
— 3.29 
— 3.31 
— 3.35 
— 3.62 
— 3.39 
— 3.44 
145 
157 
160 
163 
163 
166 
169 
3.71 
175 
177 156 
159 
162 
177 
165 
168 
170 
174 
3.76 
3.78 — 3.80 
181 
185 3.84 
12. 12. 88 Official Journal of the European Communities 45 
GENERAL INTRODUCTION 
3.1. The revenue under consideration in this chapter is 
part of the own resources allocated to the Communities 
by Council Decision 85/257/EEC, Euratom of 7 May 
1985 (!)• 
3.2. Trade and related customs operations have an 
important bearing on Community own resources. 
Because of the current pressures to liberalize trade both 
within the Community and internationally the Court of 
Auditors considered it desirable to examine certain 
Community revenue systems affected by trade. It chose 
three distinct areas for this purpose — the Community 
transit system (road), the system for imposing and 
bringing to account of anti-dumping duties and the area 
of agricultural levies on cereals imports which are the 
most important agricultural levies in terms of revenue. 
The Court also refers to the non-establishment of customs 
duties in Spain and Portugal in January and February 
1986 and to certain unilateral exemptions from customs 
duties by Member States. 
THE COMMUNITY TRANSIT SYSTEM 
ROAD 
Introduction 
3.3. The Community Transit System (CTS) is the means 
whereby a high proportion of the Community's external 
trade physically enters and traverses its territory with 
minimal customs formalities at internal frontiers prior to 
entry to a customs regime at destination — usually, entry 
to free circulation on payment of any import charges due. 
Consequently, a considerable part of Community own 
resources accruing from customs duties and agricultural 
levies (the total of which amounted to 10 500 Mio ECU 
approximately, in 1987) is at stake in movements 
performed under the system. The CTS is also the means 
whereby Community goods can be moved in intra-
Community trade and on exportation to third countries. 
(*) The footnotes are listed together at the end of the chapter. 3.4. Two versions of the standard transit procedure are 
used, the 'external' and the 'internal'. An external ('Tl') 
transit procedure is defined as that applying to goods not 
in free circulation in the Community and to agricultural 
goods which, although in free circulation, are intended 
for exportation to third countries with the benefit of 
export refunds. An internal ('T2') transit procedure is 
defined as that applying to Community goods. A transit 
declaration is presented and registered at the office where 
the movement commences (office of departure). In 
practice, these offices are customs offices or offices under 
the control of the customs authorities. The standard 
declaration comprises the following copies of prescribed 
transit forms: 
(a) Copy No 1 — for retention by the office of departure; 
(b) Copy No 2 — for retention by the office of 
destination; 
(c) Copy No 3 — for return as a receipt for the goods by 
the office of destination to the office of departure; 
(d) Copy No 4 — statistical copy. 
Following the entry into force of the single administrative 
document from 1 January 1988, the corresponding copies 
to be used in CTS are new copies Nos 1,4,5 and 7. 
3.5. Copies Nos 2, 3 and 4 (from 1 January 1988, copies 
Nos 4, 5, and 7) accompany the goods to the office of 
destination where the transit movement ends. Security is 
required to be given to cover the duties and taxes at risk, 
although since 1 July 1988 this requirement has been 
waived for Community goods under certain conditions. 
On arrival of the goods at the office of destination, they 
are normally entered to a customs regime and any duties 
and other import charges are accounted for. The 
movement is discharged when the office of departure 
obtains a satisfactory receipt for the goods from the office 
of destination. 
3.6. In its annual report for the financial year 1979 (2), 
the Court commented on the operation of the CTS. In 
view of its importance for the control of traditional own 
resources, the deficiencies found during the 1979 audit 
and developments in customs procedures since then, the 
Court decided to re-examine its operation. Moreover, in 
the light of the plan to achieve completion of the internal 
market by the year 1992, it was considered an opportune 
46 Official Journal of the European Communities 12. 12. 88 
time to re-evaluate the functioning of the system at a time 
when clearer distinctions in the transit treatment of 
Community and non-Community goods are becoming 
increasingly necessary. The purpose of the audit was to 
assess the impact of the system's application on the 
security and proper collection of traditional own 
resources. During the present audit, discussions were held 
with the Commission and visits were made to four 
Member States — the FR of Germany, Italy, the 
Netherlands and the United Kingdom. References to 'the 
Committee' are to be taken as references to the 
'Committee on the Movement of Goods' (see paragraph 
3.30). 
3.7. The basic Community legislation is contained in 
Council Regulation (EEC) No 222/77 of 13 December 
1976 (3) with implementing and simplifying provisions 
contained in Commission Regulation (EEC) No 1062/87 
of 27 March 1987 (4). 
Impact of the system on Community own 
resources 
3.8. The impact of the system on own resources is 
centred on two key features: 
(a) following the introduction of goods into the Com­
munity's territory, the system provides the basis for 
revenue security and control within the Community's 
external frontier until the goods are entered to a 
customs regime and the import charges are accounted 
for; 
(b) the system provides documentary means of readily 
indicating the status of goods both during the transit 
movement and when the customs entry declaration is 
subsequently presented. This status is signalled by use 
of a 'Tl' endorsement on transit declarations for 
external movements and 'T2' on declarations for 
internal movements. It follows that the irregular or 
incorrect use of 'T2' transit documentation for goods 
not in free circulation in the Community and for 
Community agricultural products declared for export 
under EAGGF export refund schemes would have 
serious consequences for own resources or export 
refund expenditure. 
3.9. In its previous comments, the Court pointed to the 
'dilemma' inherent in the CTS in performing its twin functions of trade facilitation and revenue security. The 
findings of the present audit indicate that, following the 
ever-increasing demands to liberalize trade and simplify 
procedures, the solution of this dilemma appears to 
favour trade facilitation at the expense of revenue 
security. 
3.10. The Court recognizes the central role played by 
the CTS in removing intra-Community trade barriers. 
However, the Court is also concerned that due attention 
should be given to the other considerations of revenue 
security and control. As the internal transit procedure, 
involving national revenues only, becomes increasingly 
liberalized, it is necessary to ensure that the external 
procedure (covering Tl goods) is properly distinguished 
as regards control treatment from the former in order to 
maintain a sound system of protection for Community 
own resources. The present findings indicate that there is 
considerable room for improvement before this level of 
protection can be considered satisfactory. 
Observations arising from audit of the system 
as operated in Member States 
Security of transit documentation 
3.11. In its 1979 annual report, the Court criticized the 
use of a common form of transit documentation for 
external (Tl) and internal (T2) operations. The Commis­
sion defended such usage, referring to the demands of 
document-printing techniques and international trading 
practices. In re-examining this question, it is clear that a 
return to separate documentation is not now feasible, 
particularly with the introduction of the Single Adminis­
trative Document. Nevertheless, the present practice 
whereby declarants simply enter the 'Tl' or 'T2' 
designation on transit declarations contains no safeguard 
against subsequent irregular alteration of 'Tl' declar­
ations, particularly in the case of copy No 2 of the transit 
declaration (from 1 January 1988, copy No 4). This copy 
of the transit declaration used at the office of destination 
to indicate the Community or non-Community status of 
the goods on their entry for free circulation (or home use) 
is normally filed with the import declaration. In the 
absence of suspicion, no ex post facto verification check 
on its validity is performed. Therefore, security against 
the simple alteration of a 'Tl' to a 'T2' declaration is 
seriously deficient. Appropriate measures are urgently 
needed to remedy this situation. 
12. 12. 88 Official Journal of the European Communities 47 
3.12. Although the CTS is a well established system, 
instances were found in Italy and the Netherlands of the 
inappropriate use of CT documentation for the purposes 
of facilitating national schemes and procedures (e.g. the 
use of Tl documentation to cover exportation of certain 
non-agricultural Community goods). These practices had 
the effect of delaying discharge of movements and of 
creating the risk of confusion between Tl and T2 
movements in inquiry procedures. 
Sealing of means of transportation on departure 
3.13. Article 18( 1) of the basic Regulation stipulates, as 
a first principle, that identification of goods shall be 
ensured by sealing. Article 18(4), however, provides that 
sealing may be dispensed with if the goods are sufficiently 
described on the declaration so as to make them 'readily 
identifiable'. The rules of the Committee provide that, 'in 
principle', certain listed goods of a tax-sensitive nature 
(mainly, exciseable goods) and agricultural products 
subject to import levies or export refunds must be sealed. 
Therefore, most non-Community goods subject to 
customs duties are, unless insufficiently described, not 
required to be sealed. This standard of description for 
identification purposes is, in practice, rarely taken into 
consideration in customs offices and containers are 
normally sealed by customs only on traders' request or 
because of the exceptional sensitivity of the goods or the 
route to be used (e.g. via Austria/Switzerland). Moreover, 
the extent of sealing was found to vary greatly between 
Member States, depending on the importance attached to 
it by the customs administrations. 
3.14. This is one aspect of the CTS where a clear 
distinction should be made between Tl and T2 goods. 
Sealing the means of transport should provide a level of 
security appropriate to moving Tl goods within Com­
munity territory, particularly in combating illegal 
abstraction and substitution of goods en route. Regard 
must be had to the risks for own resources inherent in 
present working practices. Attention is drawn to the rule, 
adopted by the Committee, whereby the office of 
destination 'must only carry out a detailed examination in 
case of doubt'. In the absence of sealing, it is difficult to 
see how this rule can be safely and sensibly applied. Save 
in circumstances of exceptional practical difficulties, all Tl goods moved by road under the CTS should be sealed 
where the means of transport is suitable for sealing. 
Control of goods at offices of destination 
3.15. Essentially, the role of the office of destination is 
to verify that the goods have arrived intact, to record this 
fact on a copy of the transit declaration (i.e. the 
'satisfactory' certificate) and to return it as a receipt for 
the goods to the office of departure. The Court found that 
destination controls performed at the customs offices on 
the road frontiers visited were reasonably satisfactory. On 
the other hand, customs controls performed at the 
seaports visited were indirect and not as effective. In the 
ports of Rotterdam and Felixstowe undue reliance was 
found to be placed on documents issued by shipping and 
stevedoring companies as proof of arrival of containers 
under transit control. In addition, the Court has observed 
that, in a high proportion of certificates given by customs 
on the receipt copy referred to, the name of the certifying 
official was illegible. It is considered that a suitable means 
of identifying the official concerned (i.e. by use of a 
special stamp) should be introduced on a Community-
wide basis to support official signatures on transit 
documentation. 
Treatment of irregularities discovered at office of 
destination 
3.16. If irregularities are discovered on arrival of the 
goods at the office of destination, that office notifies the 
office of departure by means of an endorsement on the 
receipt copy. The Court found this notification system 
unsatisfactory since it simply indicated the difference 
between the advised and received quantities but did not 
inform the office of departure as to what action (if any) 
was required and what action the office of destination 
was, or intended, pursuing. Many cases were inspected 
where this lack of coordination had resulted in mis­
directed and unnecessary inquiries. It is noted that the 
revised arrangements of the Committee, effective from 1 
January 1988, do provide for more useful and com­
prehensive information to be given by offices of 
destination in such cases. 
48 Official Journal of the European Communities 12. 12. 88 
Delays in discharging transit operations 
3.17. A transit operation is discharged when the office 
of departure, after receiving a satisfactory certificate of 
receipt for the operation on the receipt copy returned by 
the office of destination, compares this copy with the copy 
it has retained (copy No 1) and, if in agreement, 
discharges the operation. No formal notice of discharge is 
sent to the principal or guarantor; only non-discharged 
cases are required to be notified. One of the essential 
requirements of the system, therefore, is the prompt 
return of the receipt copy of the transit declaration by the 
office of destination. The Committee have interpreted 
this standard, for practical purposes, as a 10-day 
maximum delay following production of the consign­
ment. The Court found that frequently the return of this 
receipt is unreasonably delayed. It has seen many cases 
where receipt copies have been dispatched from offices of 
destination as late as 3-4 months following the time of 
receipt of the documents and the goods. This initial delay 
in dispatch is considerably lengthened by the further 
delays occurring in routing the papers through central 
transit offices. The enlargement of the Community 
Transit 'territory' with the addition of new participating 
countries in recent years has added to the practical 
difficulties in communication between offices. However, 
most delays stem from poor performance in customs 
offices in failing to observe the need for the prompt return 
of the receipt. As a result, offices of departure are often 
involved in needless inquiries with principals and other 
parties in efforts to trace consignments. It has also been 
observed that offices of departure have ceased to observe 
the time-limit for initiating an inquiry procedure for non-
discharged operations, precisely because they are aware 
of the usual time-lags experienced in obtaining receipts 
from certain destinations (Greece being a notable 
example). Thus, laxity in observing reasonable standards 
in one area of CTS control has affected performance in 
another. This has led to a deterioration in overall control 
standards. 
Inquiry procedures 
3.18. In cases where the office of departure does not 
obtain a receipt for the transaction, it is obliged to initiate 
and pursue an inquiry procedure within certain time-
limits adopted by the Committee. The Court found that, 
in almost all offices of departure visited, the time-limits 
for issuing and pursuing inquiries were, to varying 
degrees, not being respected. While in all non-discharged 
files examined an inquiry had been initiated, the most serious aspect of these cases lay in the considerable time-
lags that characterized the procedure beyond the early 
stages. Serious problems have developed in this area, due 
to: 
(a) the failure of offices to reply reasonably promptly to 
inquiry correspondence; 
(b) the increasing number of 'non-reply' cases where 
offices of destination (mainly) fail to send any 
response to inquiries or to reminders; 
(c) the inexperience and junior ranking of the customs 
staff dealing directly with inquiries — in many offices 
visited, these officials were found to be isolated from 
customs management; 
(d) the failure to distinguish between cases as far as 
revenue materiality and risks are concerned — in 
general, all non-discharged cases are given equal 
treatment; 
(e) the poor standard of record-keeping and filing in 
inquiry offices; 
(f) the absence of proper management supervision and 
guidance — this has led to the backlog of cases that 
has arisen in many offices due, notably, to a lack of 
decision-making in assessing cases and to the failure 
to report cases promptly to the competent authorities 
where necessary; 
(g) delays resulting from the need to have documents 
translated. 
3.19. Another feature of the inquiry procedure noted 
was the absence of confirmation in offices of departure 
that appropriate action for the recovery of revenues was 
being taken by the responsible authorities. Many 
instances were found where offices of departure had 
notified the competent authorities to proceed to recover 
charges under the relevant legal provision (Article 36 of 
the basic Regulation) but where, after a lengthy interval, 
it had received no further communication. In some offices 
visited, it was noted that the office of departure had sent 
the inquiry documents directly to the office of destination 
and not to the competent authorities (central adminis­
tration) as required under the Committee's Rules. 
Moreover, operations were treated as discharged in 
offices of departure on receipt of an advice from other 
offices to the effect that recovery action was being 
undertaken by them. The discharge of operations, 
without confirmation of the actual recovery of the 
charges due, is not a secure method of discharging transit 
operations. The Committee needs to give clear directions 
to the customs administrations on the responsibility 
which lies solely with the office of departure to discharge 
12. 12. 88 Official Journal of the European Communities 49 
transit operations and on the dangers of releasing 
guarantees before confirmation of recovery of charges 
has been received. 
3.20. These defects in pursuing inquiries also create 
risks for recovery of charges under the comprehensive 
form of guarantee designed to cover all transit move­
ments carried out by a principal over a certain period. 
According to the terms of the guarantor's undertaking, a 
guarantor can limit his liability to the amount of the 
guarantee limit in cases where successive claims may be 
made against it for movements commencing within 30 
days following a first claim and may even cancel his 
guarantee under such circumstances on expiry of this 30-
day period. The practice of continuing to accept a 
guarantee for current operations, where potential 
liabilities still stand for earlier non-discharged operations, 
may not provide adequate security for the revenues at 
risk. 
Recovery of own resources in non-discharged cases 
3.21. The CTS provides that the Member State in which 
an offence or irregularity has occurred is responsible for 
collection of all charges. If a transit movement remains 
unaccounted for, a prescribed procedure ensues with the 
objective of identifying the Member State responsible for 
recovery. This is done with the aid of the 'Transit Advice 
Notes' handed over at offices of transit located at internal 
frontier crossings and as indicated on the transit 
declaration. In the case of irregularities, these 'Notes' 
serve to identify the Member State which the goods or 
means of transport entered but from which they did not 
depart. The procedure is supervised by the office of 
departure. The necessity for this procedure stems from 
the fact that Member States represent the only competent 
authorities for the collection of the revenues involved. In 
addition, national taxes may be levied on importation in 
trade between Member States. Considering the delays 
occurring in the pursuit of inquiries, the Court is not 
satisfied that the present recovery procedure serves the 
Communities' own resources well. As Community 
revenue, customs duties and levies are charged on a 
uniform basis on imports, regardless of the place within 
the Community's customs territory where the goods are 
entered for free circulation or the customs debt arises. 
There is a good case, therefore, for having a more direct 
and prompt method of recovering own resources, 
particularly since the basic Regulation provides for a 
'principal' who is responsible for observance of the CTS 
rules. The Commission have stated that to institute a 
separate recovery procedure for own resources would 
lead to complications, particularly where guarantors are concerned. However, the Court considers that there is still 
an urgent need to improve procedures in order to provide 
an efficient method for the recovery of overdue own 
resources. 
3.22. The significance of the number of movements 
remaining non-discharged in relation to total registered 
movements has not been possible to gauge in quantitative 
terms. The records maintained in the offices visited did 
not give this data in an accessible form and on-the-spot 
analysis of this ratio could not be performed. Neverthe­
less, the Court is able to make the general observation 
that the number of operations remaining undischarged 
after about six months from the date of registration forms 
a low percentage of total operations but that the number 
of these cases can be considerable in absolute terms. In the 
important offices visited, hundreds of operations were 
found to be long-outstanding. For instance, the Nether­
lands authorities stated that, as on 31 December 1986, 
recovery proceedings were in course against 1 093 
principals, 39 guarantors and 18 other parties with own 
resources of 3 Mio ECU (approximately) involved. The 
Italian authorities estimate that, on the basis of incom­
plete data, 4 456 irregularities involving actual loss of 
revenue had been detected in that State since 1 January 
1984. As on 31 May 1987, 645 recovery claims remained 
unresolved in Italy involving own resources conserva­
tively estimated at 2,4 Mio ECU. 
Post-clearance verification procedures 
3.23. With a view to detecting and preventing fraud, 
provision has been made for verifying the authenticity 
and correctness of endorsements made by customs on 
transit documentation. Verification requests are required 
to be sent from offices of departure to offices of 
destination and vice versa in respect of documents 
selected both for specific reasons and on a random 
sampling basis. In all offices of departure visited, it was 
found that this scheme had fallen seriously into disuse. In 
practice, virtually the only requests issued were found to 
relate to documents on which the transit stamp or the 
official's signature were missing and which would have 
had to be returned in any event. In addition, in most of the 
offices visited, no proper records were maintained of the 
cases selected or the outcome of the check. As operated, 
the scheme goes little way towards fulfilling its intended 
objective. 
50 Official Journal of the European Communities 12. 12. 88 
Maintenance of transit registers and other records Central Transit offices 
3.24. The standard of transit registers maintained in the 
offices visited was generally very poor. A real lack of 
attention was evident in record-keeping for all transit 
purposes — departures, arrivals and inquiries. In many 
instances, registers which had been originally printed and 
designed for local purposes had been crudely adapted as a 
transit record, leading to unsatisfactory results. In 
addition, many informal insecure practices had de­
veloped as a substitute for proper record-keeping. The 
recording of cases remaining non-discharged was par­
ticularly neglected — in most offices of departure visited, 
no separate register for inquiry cases was maintained and 
reference to individual files was necessary to obtain 
details of progress in the inquiry procedure. In offices of 
destination visited, the separate registration of incoming 
inquiry notices was not usually performed resulting in 
severe difficulties in assessing the overall office situation 
as regards outstanding items. For example in the Italian 
offices visited, incoming inquiries are recorded in the 
general office 'protocol' (correspondence register) from 
which it is not possible to obtain an overview of either the 
volume or progress of inquiries received. In the United 
Kingdom offices of departure registers were found to be 
particularly poor both as regards format and maintain-
ance. In other offices, operations were shown as 
'cancelled' in the departure register with a line simply 
drawn through the items concerned — no authenticating 
signature or certificate indicating the reason for cancel­
lation was recorded. There exists a clear and urgent need 
to improve standards in this area. 
Management control 3.26. These offices are provided for in Article 11 of 
Regulation (EEC) No 1062/87. The responsibility for 
establishing and operating these offices lies with Member 
States. The Committee promoted the concept of central 
offices in Member States as a means of speeding up the 
transmission of transit documentation and, generally, of 
improving procedures. National administrations are in 
favour of their development for the added reason of 
reducing postal costs. The volume of documents passing 
through the busier offices visited is extremely heavy and 
continues to increase. In Arnhem (Netherlands), 4,5 
million copies No 3 (receipt copies) and almost 220 000 
Control Copies T No 5 (5) were handled in the year 1986. 
In Hamm (FR of Germany) a daily average of 47 595 
copies No 3 was handled in 1986, with postal dispatches 
to 883 offices. In Southend (United Kingdom), about 
11 000 copies No 3 are handled daily. 
3.27. The standard of packaging transit documents for 
return to central offices is unacceptably low, impairing 
the security of the system. Urgent steps need to be taken 
to improve standards in this area. 
3.28. Central offices are intended to overcome the chaos 
that would inevitably result from the transmission of 
documents via individual offices of departure and 
destination. However, with the increase in volume of 
documentation, the larger central offices have come 
under increasing pressure to cope with the volume of 
receipts and to avoid backlogs. The Court is of the view 
that, in certain circumstances, the transmission of 
documents via central offices should be used more 
selectively. It has noted that delays can occur in 
discharging transit operations where documents involv­
ing a large volume of regular transit traffic between busy 
offices on major routes are returned via central offices. 
These delays could be avoided if direct office-to-office 
transmission was introduced in these circumstances. 
3.25. The Court is reasonably satisfied that the 
operational deficiencies in the system can be attributed in 
large measure to the absence of sound management 
control and supervision. Mention has been made of the 
low standards found in office records that, with proper 
management, would not have been tolerated. In many 
offices visited, it was clear that the managers interviewed 
were not sufficiently aware of the practical difficulties and 
shortcomings existing in the offices. In particular, the 
absence of management direction was very evident in the 
office sections responsible for handling transit inquiries 
and recovering charges. The Court is of the view that 
customs management needs to afford higher priority to 
the Community transit aspect of their responsibilities and 
to bring a greater awareness of the revenue risks involved 
in operating the system to bear on their approach to 
control and supervision. Accounting for transit operations by means of 
computer-based techniques 
3.29. The only satisfactory solution to the problems 
caused by the volume of documents moving between 
central offices is to develop a 'paperless' system 
substituting on-line EDP links between offices for the 
physical transmission of documents. This would also 
improve the security of the system. In 1981, the 
Community Transit Committee set up a 'Pilot Study 
Group' to deal with the question of computerizing transit 
12. 12. 88 Official Journal of the European Communities 51 
procedures. The Group produced detailed proposals on a 
basic feasible network. However, other computer projects 
in the 'Customs Union' field have taken priority over this 
transit project. Considering the present unsatisfactory 
situation regarding the discharge of transit operations 
and the clear opportunity for systems improvement 
offered by EDP techniques, it is essential for the reform of 
the CTS that a computerized network be introduced with 
the least possible delay particularly having regard to the 
completion of the internal market in 1992. 
Role of the Committee on the Movement of 
Goods 
3.30. Originally, the 'Committee on Community Tran­
sit', set up under Article 55 of the basic Regulation, was 
responsible for the examination of questions and the 
delivery of opinions relating to the application of that 
Regulation. From 1 January 1988, these responsibilities 
were transferred to the 'Committee on the Movement of 
Goods' set up under Council Regulation (EEC) No 
678/85 of 18 February 1985 governing the simplification 
of formalities in trade in goods within the Community (6). 
It consists of representatives of the Member States with a 
representative of the Commission as chairman. 
3.31. The Committee adopts opinions on draft meas­
ures for the application of the basic Regulation. It also 
adopts numerous 'administrative' arrangements, conclu­
sions and interpretations, concerning technical and 
practical aspects of the operation of the CTS. These 
administrative arrangements should constitute a code of 
common rules and guidelines for implementation by the 
competent national authorities. Thus, they are of 
considerable importance in advancing uniform appli­
cation of CTS provisions and in protecting the system 
against abuse. The Court found that serious delays have 
arisen in having proposals for administrative arrange­
ments adopted by the Committee and concludes that an 
urgent need exists to improve the Committee's decision­
making procedures in this area. 
Conclusion 
3.32. The Court's findings during the present exami­
nation of the Community Transit System confirm the 
criticisms contained in its 1979 annual report. With the 
addition of three new Member States and the six EFTA 
countries (from 1 January 1988), the lines of communi­
cation and control become longer and more difficult to manage. The CTS is now a very liberal and facilitative 
system from trade and transportation viewpoints. 
Whereas this may be an appropriate objective in relation 
to Community goods moved under the system, stricter 
control criteria are necessary for revenue considerations 
where goods, not in free circulation and subject to tariff 
measures, are concerned. There is a continuing failure to 
differentiate adequately between the control treatment of 
internal and external transit operations. This results in 
unacceptably high risks and, possibly, losses being borne 
by the own resources of the Community. 
3.33. Major problems for the security of the regime are 
being created by the non-observance of the operational 
rulesby Member States. A generally low standard exists in 
customs offices in implementing simple rules, particularly 
as regards the return of T-documents and responding to 
transit inquiries and other communications. There is an 
urgent need to have these defects remedied. The delays 
and difficulties being experienced in operating the inquiry 
and recovery procedures give rise to serious concern 
about the ability of the system to protect customs duties 
and levies constituting Community own resources. In this 
context, the Court draws attention to the obligation on 
Member States to provide an adequate standard of 
service in return for the reimbursement of 10 % of the 
duties and levies collected. 
3.34. Important central offices visited were found to be 
experiencing severe difficulties in coping with the volume 
of T-documents under transmission. With the extension 
of the CTS into all EFTA countries and the consequent 
increase in CT traffic, the number of CT documents in 
circulation will, almost certainly, remain at a high level 
even though a decrease in internal transit movements is 
expected after 1992. There is an immediate need for 
national administrations to devote more resources to the 
operation of central offices. In the longer term, however, 
the only satisfactory solution to the problem of account­
ing for, and discharging, transit movements lies in 
designing a computer-based network between offices and 
removing the need for the physical transmission of 
documents. 
3.35. The role of the Committee is crucial to the 
achievement of an effective uniform system. It is at 
Committee level that the commitment to improve 
performance must first be found and action initiated. 
Given the many weaknesses noted by the Court during its 
audit, it is clear that the Committee needs to address itself 
with urgency to the many problems which require to be 
resolved. 
52 Official Journal of the European Communities 12. 12. 88 
SYSTEM FOR IMPOSING AND BRINGING 
TO ACCOUNT OF ANTI-DUMPING 
DUTIES 
Introduction 
3.36. The anti-dumping law of the European Com­
munity which is laid down in Council Regulation (EEC) 
No 2176/84 of 23 July 1984(7) provides for the imposition 
of anti-dumping duties as one of the instruments for 
combating dumped and subsidized imports, which have 
shown a strong growth in the 1980s. 
3.37. Anti-dumping duties increase the price level of 
dumped or subsidized goods upon importation into the 
Community to the normal price of the goods in question 
which is often the price of the goods on the domestic 
market of the country of exportation. These duties also 
constitute own resources as mentioned in Article 2 of 
Decision 85/257/EEC, Euratom. 
3.38. The amount of Community revenue involved in 
anti-dumping duties is not known as there is no 
requirement for anti-dumping duties to be mentioned 
separately in the monthly statements of traditional own 
resources furnished to the Commission by the Member 
States. It is considered by the Commission to be of 
marginal financial importance. The significance of anti­
dumping duties for the Communities' own resources can 
only be illustrated, therefore, by referring to cases where 
either the Commission or the Member States have carried 
out investigations to determine values of trade flows or 
total amounts of anti-dumping duties involved in 
importations of specific goods. The Court was told by the 
Commission for example, that the total value of 
photocopiers imported into the Community during the 
reference period of the anti-dumping investigation was 
1 000 Mio ECU, the reference period being January to 
July 1985 inclusive. The Commission also informed the 
Court that the amount of anti-dumping duties evaded in a 
case of importation of Kraftliner paper into the 
Community was reported by France, the FR of Germany 
and the United Kingdom to be approximately 8,5 Mio 
ECU. 
3.39. The Court has examined the Community system 
for imposing and bringing to account anti-dumping 
duties with particular emphasis on: 
(a) the immediate, harmonious and universal implemen­
tation of provisional and definitive duties regu­
lations ; (b) the prompt establishment and making available of 
own resources accruing from anti-dumping duties; 
(c) clarity in national and Community accounts so that 
the revenue return from anti-dumping duties may be 
known and recorded. 
The Court also examined the system with a view to 
assessing whether any deficiencies existed in the system 
which would have a negative impact on expected revenue 
from this source. For this purpose, on-the-spot missions 
were carried out in Belgium, Greece, Spain and the 
United Kingdom and discussions were held with the 
Commission's services. 
The Community procedures relating to anti­
dumping duties 
The anti-dumping procedure 
3.40. The imposition of anti-dumping duties is the 
ultimate phase of an anti-dumping procedure which starts 
with the submission to the Commission of a written 
complaint by the Community industry affected by the 
imports allegedly dumped. Throughout the anti-dumping 
procedure, consultation with the Member States takes 
place, within an advisory committee. Such consultations 
can be initiated either by a Member State or the 
Commission. 
The anti-dumping investigation 
3.41. If the complaint is considered to contain sufficient 
evidence to justify an investigation the Commission 
decides to initiate a formal proceeding which is published 
in the Official Journal. The anti-dumping investigation is 
carried out by the Commission and covers the evidence of 
dumping and the injury resulting therefrom. Once the 
extent to which dumping has occurred has been es­
tablished as well as the injury caused to the Community 
industry, and, if the interests of the Community call for 
the imposition of definitive duties, they are imposed by a 
Council Regulation on a proposal from the Commission 
unless undertakings (see paragraph 3.43) have been 
offered by the exporter(s) in question and have been 
accepted. The duties apply for five years from the date on 
which they entered into force, or were last modified or 
confirmed. They apply throughout the entire Community 
12. 12. 88 Official Journal of the European Communities 53 
and are collected by Member States at the moment the 
goods in question are entered into free circulation in the 
Community. 
Provisional anti-dumping duties 
3.42. Provisional anti-dumping duties can be imposed 
before the anti-dumping investigation is concluded where 
preliminary examination shows that dumping exists and 
that there is sufficient evidence of injury caused and the 
interests of the Community call for intervention to 
prevent further injury. They are imposed by Commission 
Regulation for a maximum period of four months which 
may be extended for a further period of two months by 
the Council on a proposal from the Commission. In such 
cases, instead of the duty having to be paid, release of the 
products concerned into free circulation in the Com­
munity is conditional upon the provision of a security for 
the amount of the provisional duty. The Council 
subsequently decides on the definitive collection or 
release of provisional anti-dumping duties. 
Undertakings 
3.43. Undertakings constitute an alternative to the 
imposition of anti-dumping duties. They are formal 
commitments by an exporter to abstain from dumping or 
to ensure that exports to the Community do not injure 
Community producers of the product concerned. They 
may be accepted during the course of an investigation on 
the basis of a formal decision of the Commission. 
Community provisions in respect of the collection of 
anti-dumping duties 
3.44. The main provisions in Community legislation 
concerning the application and the subsequent establish­
ment as own resources of anti-dumping duties are 
contained in Regulation (EEC) No 2176/84 and Council 
Regulation (EEC, Euratom, ECSC) No 2891/77 of 19 
December 1977(8). In addition the imposition of anti­
dumping duties is provided for by means of specific 
regulations. Observations arising from audit of system for 
imposing and bringing to account of anti­
dumping duties 
Anti-dumping duties in the Community accounts 
3.45. Only Spain accounts separately for anti-dumping 
duties. In all other Member States the anti-dumping 
duties collected are not accounted for separately (see 
paragraph 3.38) and are included in the amount under the 
revenue heading 'customs duties' in the monthly state­
ments of traditional own resources furnished by Member 
States to the Commission. 
3.46. Consequently, there is no clarity in the national 
accounts or the Community accounts in respect of own 
resources which have accrued from anti-dumping duties. 
The lack of clear accounting data also means that the 
financial consequences of the Community's anti-dump­
ing policy cannot be identified. The Court recommends 
that anti-dumping duties should be separately accounted 
for by all Member States. 
Dissemination of decisions to impose provisional 
anti-dumping duties 
3.47. Provisional anti-dumping duties are imposed by 
Commission Regulation and published in the Official 
Journal. They enter into force normally the day following 
publication. The time taken for the distribution of 
Official Journals to the customs offices in Member States 
can be significant. Consequently, once the date of 
publication of the Regulation is known the Commission 
sends a telex to the Member States containing the full text 
of the Regulations to enable them to initiate prompt 
action prior to the receipt of the relevant Official Journal. 
3.48. In Belgium, Greece and Spain the Court noted 
that either no use at all was made of this telex or the 
information contained therein was transmitted to and 
subsequently received by Customs in charge of the 
collection of the duties, after delays of from two to four 
weeks. In Spain duties are not applied until the Official 
Journal is received at customs houses. This generally 
takes at least two weeks from the date of publication. In 
Greece copies of the telexes were received at the local 
customs offices visited three or four weeks after the date 
of entry into force of the duties. These different practices 
54 Official Journal of the European Communities 12. 12. 88 
between Member States do not assure the prompt 
application of these duties and, even, create the risk of 
non-application. 
Establishment as own resources of provisional anti­
dumping duties 
3.49. Provisional anti-dumping duties are secured by 
cash deposits or bankers guarantees pending the duties 
having become definitively due on the basis of a Council 
Decision. Meanwhile, the goods will have been released 
for free circulation and the basic rule, that establishment 
should take place within at most 14 days after the goods in 
question are released for free circulation (Article 3(2) of 
Council Directive 78/453/EEC of 22 May 1978 (9) 
concerning deferred payment) cannot be applied. 
3.50. In regard to provisional anti-dumping duties there 
is no Community law which specifies the time-limit for the 
establishment as own resources of such duties once made 
definitive. In Belgium, Greece and the United Kingdom 
delays in establishment and hence in the making available 
of provisional duties made definitive, varied from three 
months up to one year and were exceptionally in the case 
of Belgium and the United Kingdom more than one year. 
3.51. The Commission should initiate action to ensure 
the prompt establishment and making available of own 
resources accruing from provisional anti-dumping duties 
once they have been made definitive. 
Effectiveness of systems for monitoring declarations 
with provisional anti-dumping duties 
3.52. Where goods are subject to provisional anti­
dumping duties they are released for free circulation when 
a security for the amount of the duties has been provided. 
Pending the decision to collect the duties involved 
definitively the import declarations should be registered 
or filed in order to enable their prompt identification 
when provisional duties become due definitively. 
3.53. In none of the Member States visited was the 
system found to be effective in identifying promptly all 
declarations with provisional anti-dumping duties. For 
instance in two Member States (Greece and the United 
Kingdom) several declarations had to be retrieved from 
the Central Filing System where they were filed without provisional anti-dumping duties being brought to 
account. Furthermore, in none of the Member States 
visited were provisional anti-dumping duties, once they 
were definitive, brought to account promptly (see 
paragraph 3.50). 
Customs controls on imports of goods which are 
potentially liable to anti-dumping duties 
3.54. The duty liability for goods which are potentially 
liable to anti-dumping duties depends on three criteria: 
the Common Customs Tariff heading, the country of 
origin of the goods and the exporter/manufacturer of the 
goods. This combination of criteria, the occasionally high 
duty rates and the complexity of the duty calculation 
make the goods in question vulnerable to misdeclaration 
e.g. by stating false Common Customs Tariff headings, 
false country of origin, false name of exporter/manu­
facturer of goods and by overstating the declared customs 
value of the goods. The following examples of this were 
noted during on the spot inspections or brought to the 
attention of the Court by Member States: 
(a) importation of Kraftliner paper in the United 
Kingdom with evasion of anti-dumping duties due to 
overstating the customs value (see also paragraph 
3.38); 
(b) importations of typewriters and photocopiers in the 
United Kingdom with evasion of anti-dumping duties 
of approximately 1,3 Mio ECU due to irregular 
origin declarations; 
(c) importation of photocopiers in Spain with evasion of 
anti-dumping duties of approximately 90 000 ECU 
due to irregular declaration of exporter/manufacturer 
identity; 
(d) relatively significant number of declarations where 
anti-dumping duties were wrongly calculated in the 
United Kingdom. 
3.55. Traditional customs controls aimed at verifying 
that imported goods actually conform to the description 
and specifications necessary for applying anti-dumping 
duties do not essentially vary from those applicable to 
imported goods in general. An examination of Member 
States' instructions on the subject, shows that only in 
Belgium and the United Kingdom do certain specific 
control parameters exist in the framework of the 
computerized clearance procedure. 
12. 12. 88 Official Journal of the European Communities 55 
3.56. Having regard to the risk of misdeclarations in the 
case of goods which are liable to anti-dumping duties, the 
Court recommends the adoption of control measures 
which provide for a higher frequency and wider scope of 
both documentary and physical inspections in respect of 
these goods. 
Imposition of provisional anti-dumping duties 
and monitoring of undertakings by the 
Commission 
Provisional anti-dumping duties 
3.57. Provisional anti-dumping duties are introduced to 
prevent injury being caused to the Community industry 
during the period of time required for an in-depth 
examination to determine the appropriate level of anti­
dumping duty to be definitively imposed. The period of 
time between the initiation of an investigation and the 
imposition of a provisional duty however has increased 
from 5.7 months in 1983 to 7.0 months in 1984 and to 8.0 
in 1985. The situation has stabilized since then, with the 
average period in 1986 and 1987 being 7.6 and 7.7 months 
respectively (10). The prolongation of the period of 
investigation affords a great opportunity to importers to 
avoid anti-dumping duties or restrictive undertakings by 
accelerating importation of the goods under examination. 
The acceptance and monitoring of undertakings 
3.58. As already indicated above the Commission can in 
the course of an investigation accept undertakings. The 
basic anti-dumping legislation of the Community pro­
vides for a number of possibilities to check that 
undertakings are being complied with. However, the 
Court notes that there has been no systematic monitoring 
by the Commission to verify that price undertakings are 
being complied with. For instance, it has found that for 
eight undertakings out of 12 accepted during 1986 the 
exporters did not fulfill the reporting requirements agreed 
upon. The latter constitutes a violation of an undertaking 
and may lead to the imposition of provisional anti­
dumping duties. In two of the cases the Commission in 
fact imposed such duties. 
3.59. An affected Community industry may request a 
review of a decision to accept an undertaking on the 
grounds that there are good reasons for believing that the undertaking is being violated. However, the contents of 
undertakings are not published and are known only to the 
parties involved, including the Commission. This under­
lines the need for the Commission itself to monitor 
undertakings and to initiate appropriate action where 
necessary. A review should not have to await complaint 
by an affected industry. 
Conclusions 
3.60. In the Court's opinion, the system for imposing 
and bringing to account of anti-dumping duties as laid 
down in Community legislation and as implemented in 
Member States, does not ensure: 
(a) the immediate and uniform implementation of 
regulations imposing provisional anti-dumping 
duties (see paragraphs 3.47 — 3.48); 
(b) the prompt establishment and paying over to the 
Communities of own resources accruing from provi­
sional anti-dumping duties once made definitive (see 
paragraphs 3.49 — 3.51); 
(c) clarity in national and Community accounts in 
respect of own resources which have accrued from 
anti-dumping duties (see paragraphs 3.45 — 3.46). 
3.61. In the Court's view the scope and quality of 
traditional customs controls in respect of goods poten­
tially liable to anti-dumping duties should be expanded in 
the light of the greater vulnerability of such goods to 
misdeclarations upon importation. 
3.62. The Court recommends the Commission to take 
measures to shorten the time period required for the 
imposition of provisional anti-dumping duties. It further 
recommends improvement in the monitoring of under­
takings. 
56 Official Journal of the European Communities 12. 12. 88 
AGRICULTURAL LEVIES ON IMPORTED 
CEREALS Importance of cereals in revenue yield from levies 
Introduction 3.65. The revenue from agricultural levies accrues to the 
general budget of the Community as part of own 
resources and is used without distinction or assignment to 
finance all expenditure entered in the budget. Separate 
out-turn figures for the levy amounts relating to the 
different market sectors are not available in the Commis­
sion. In the absence of such data, the Commission 
estimates that approximately two thirds of levies are 
accounted for by cereals. On the basis of this estimate, the 
yield from the levies on cereals for the years 1978-87 is as 
shown in Table 3.1. 
3.63. In its annual report on the financial year 
1982 (H)>the Court commented on the inadequacy of the 
Commission's procedures for calculating the levies on 
cereals and cereal products. The Court has carried out an 
examination in the 1987 financial year which reviews 
these procedures in the light of its previous comments but 
also encompasses other important aspects of the determi­
nation of cereal levies and factors influencing the 
Community's own resources. Determination of the levy — world cif price 
3.66. The detailed rules which the Commission must 
follow in determining the world cif price are set out in 
Commission Regulation (EEC) No 156/67 of 23 June 
1967 (13). These may be summarized as follows: 
Description of the levy mechanism (a) account must be taken of all offers on which the 
Commission has information from Member States, 
its own sources and the main international grain 
exchanges; 
(b) the price determination is based on the most 
favourable purchasing opportunities, ignoring for­
ward offers; 
3.64. Under the market organization of products 
covered by the common agricultural policy, levies are 
imposed on agricultural products imported in trade with 
third countries. Essentially, the purpose of the levy is to 
prevent price fluctuations on the world market from 
affecting prices ruling within the Community. The market 
organization for cereals, set up on 1 July 1967, is governed 
by the regulatory provisions contained in basic Council 
Regulation (EEC) No 2727/75 of 29 October 1975 (12). 
Cereal levies are structured on the basis of a sliding-scale 
tariff designed to offset differences between the Com­
munity threshold price for Rotterdam (derived from the 
target price) and the world cif (cost, insurance and freight) 
price calculated on a Rotterdam delivery basis. In order 
to adjust world prices for quality differences compared 
with the standard quality used in fixing the threshold 
price, coefficients of equivalence for cereals are also 
provided for. In common with the intervention and target 
prices, the threshold price for cereals is subject to a system 
of monthly increases, phased over part of the marketing 
year, designed to compensate for storage costs and to 
adapt supply, which is heavily seasonal, to a relatively 
stable demand pattern. Table 3.1 — Estimate of the levy yield from cereals: 1978-87 
Budget year 
1978 
1979 
1980 
1981 
1982 
1983 
1984 
1985 
1986 (EUR 12) 
1987 Agricultural 
levies 
(actual 
out-turn) 
(Mio ECU) 
1 872,7 
1 678,6 
1 535,4 
1 264,9 
1 522,0 
1 347,1 
1 260,0 
1 121,7 
1 175,5 
1 626,1 Estimated levies 
from cereals 
Amount 
(Mio ECU) 
1 248,5 
1 119,1 
1 023,6 
843,3 
1 014,7 
898,1 
840,0 
747,8 
783,6 
1 084,1 As % of 
traditional 
own 
resources 
18,7 
15,3 
12,9 
10,4 
11,2 
9,7 
8,1 
7,1 
7,5 
9,0 
12. 12. 88 Official Journal of the European Communities 57 
(c) appropriate price adjustments are to be made where 
delivery is to a port other than Rotterdam; 
(d) coefficients of equivalence are to be applied to offset 
quality differences between the imported and Com­
munity product; 
(e) price offers may be excluded if they are considered not 
of fair average quality or unrepresentative of the true 
trend of the market or unrepresentative as regards the 
small quantities available; 
(f) exceptionally, an offer price may be maintained for a 
limited period in order to avoid a sudden and 
considerable variation in the cif price or to maintain 
the true market trend; 
(g) alteration of the existing levy rate only when the 
amount by which it is to be increased or reduced 
exceeds a certain tolerance range (currently, 0,73 
ECU/t). 
3.67. The Court's findings are as follows: 
(a) in cases where the lowest world cif prices had been 
rejected in the price-determining exercise, the reasons 
for such rejection were generally not adequately or 
clearly recorded. Considering the importance of this 
discretionary decision for the final adoption of the cif 
price, there is a need to have the reasons reached for 
such decisions precisely recorded on the relevant 
documentation; 
(b) it frequently occurs that offer prices are not quoted on 
a cif basis, in which case the 'cost, insurance and 
freight' elements must be determined and added. The 
freight rates used in this exercise were not supported 
by updated or representative tariffs. In the case of 
transhipment charges, the rates of the sole agency 
used (a Rotterdam company) have been unchanged 
since 1983. The insurance charges were based on rates 
applied by a single company. In general, these charges 
need to be based on updated, representative and 
verified data; 
(c) the manner in which price information is supplied by 
Member States to the Commission is unsystematic 
and generally unsatisfactory. In the case of certain 
Member States (e.g. Ireland and United Kingdom) 
the information furnished is regarded by the Com­
mission's services as totally unrepresentative, but the 
exact basis on which they collect their data is not known. Article 24 of Regulation (EEC) No 2727/75 
provides for the communication and distribution of 
information between Member States and the Com­
mission in accordance with rules to be adopted by the 
Commission having regard to the opinion of the 
Management Committee for Cereals. No such rules 
have yet been adopted. Considering the importance 
for the levy system of the ability of the Commission's 
services to be able to make valid comparisons 
between price offers and sources, the failure to adopt 
the necessary rules providing for the transmission of 
price information on a systematic and accurate basis 
is a serious weakness; 
(d) more attention needs to be given to the internal 
supervision of procedures and to the checking of 
calculations affecting the determination of the cif 
price and the levy. 
3.68. World market prices in cereals are subject to 
considerable fluctuation. Even with the stability intro­
duced into the price-determination system by the rules, 
referred to in paragraph 3.66, the adopted cif price and 
derived levy rate change almost daily. Because the levy 
rate is determined centrally, great reliance must be placed 
on the methods and judgement used in such determi­
nation by the Commission's services. The relevant 
legislative rules attempt to serve the aims of both accuracy 
and stability. Therefore, considerable care and judgement 
are needed to ensure that a proper balance is struck in 
fixing the price and levy. From an own resources 
viewpoint, the concern is that the cif price finally adopted 
is based on all the available reliable information, that low 
price offers are not unreasonably rejected and that cif 
prices are not unjustifiably maintained at too high a level. 
Therefore, it is important that the Commission takes the 
necessary steps to improve the accuracy and reliability of 
its procedures in this area. 
Determination of the levy — threshold price 
3.69. The other levy determinant, the threshold price, is 
derived from the target price which, in turn, is derived 
from the intervention price. The intervention price is 
fixedfor each product at the same level for all intervention 
centres in the Community. The target price for cereals is 
reached by adding to the intervention price: 
(a) a market component; and 
58 Official Journal of the European Communities 12. 12. 88 
(b) transport costs from the region of greatest surplus 
(deemed to be Ormes in France) to the region of 
greatest deficit (deemed to be Duisburg in the FR of 
Germany). 
To arrive at the threshold price at Rotterdam, the 
following elements must be deducted from the target 
price: 
(a) transport cost, Duisburg-Rotterdam; 
(b) trading margin; 
(c) transhipment costs at Rotterdam. 
3.70. During the present audit the Court carried out a 
preliminary examination of the data and methodology 
used by the Commission to determine these prices. 
However, because the target price and the threshold price 
are central elements in the organization of the cereals 
market, the effect of which extends beyond levies, the 
Court cannot draw any conclusions at this stage. Further 
aspects will need to be studied. 
The advance fixing system 
Advance fixing provisions 
3.71. Advance fixing is a facilitative regime applicable 
to import levies and to export refunds across agricultural 
market sectors in trade with third countries. As regards 
cereal levies, the legal provision (Article 15(2) of the basic 
Regulation) states that, at the request of the applicant, the 
levy to be charged shall be that applicable on the date the 
application for the import licence is lodged, adjusted on 
the basis of the threshold price in force during the month 
of importation. A premium may also be added to the 
advance fixed levy. The purpose of advance fixing is to 
allow importers to ascertain the levy charge in advance of 
importation thereby facilitating the determination of 
their final 'customs-paid' prices and the execution of 
purchase and supply contracts. Regarding the proportion 
of cereals imported under advance fixing, the Court 
found that the data supplied by Member States to the 
Commission was unreliable. However, the Court es­
timates that about 75 % of total cereal imports are 
advance fixed. Consequences of advance fixing for the levy yield 
3.72. The Court has examined the pattern of advance 
fixing of the levy over the three marketing years, 1984/85 
to 1986/87 for the major cereal grains using quantitative 
data supplied by the Commission. It notes the pro­
nounced incidence of advance fixing towards the end of 
each marketing year. Advance fixing at this time allows 
the imports concerned to obtain full advantage of the fall 
in the threshold price due on commencement of the new 
marketing year (for which the advance fixed levy will be 
adjusted downwards), while protecting them against any 
levy increase from a fall in the world cif price. The 
advance fixing facility provides importers with con­
siderable scope for exploiting its use for speculative 
purposes, thereby granting them additional and unin­
tended financial benefits.The Commission says, and the 
Court's findings confirm, that 'applications for licences 
are concentrated on the lowest rates, particularly in the 
case of maize' (14.) and that 'the levy actually charged is 5-
10 % less than what should in theory have been applied 
on the day of import' (15). Bearing in mind the relative 
inelasticity of demand for cereals imports, the Court 
estimates the negative impact of advance fixing on levy 
receipts to be between 40 and 45 Mio ECU per annum for 
the years 1984-86. 
Evaluation of the advance fixing system 
3.73. The clear objective of the levy system is to ensure 
that imported cereals are not sold on the Community 
market at less than the threshold price. The other rules 
governing trade with third countries should be consistent 
with this objective. However, there is a serious incon­
sistency in designing a system in which great care is taken 
to ensure that the levy is sufficiently responsive, on a day-
to-day basis, to the need to protect the threshold price and 
then to insert into this system an advance fixing regime 
which has the potential to seriously weaken this 
responsiveness. Over the years, the Commission has 
taken different measures in attempts to remedy and 
counterbalance the negative consequences of advance 
fixing. However, taking into consideration the evolution 
of trade developments in cereals and, in particular, the 
decrease in Community cereal imports (see paragraph 
3.75), it does not seem realistic to continue to maintain as 
such the present complex advance fixing system. 
3.74. The Court considers that this system merits a re-
evaluation which takes full account of its consequences 
12. 12. 88 Official Journal of the European Communities 59 
for Community revenue and of developments in the 
cereals trade. 
Evolution of trade developments in 
cereals and cereal substitutes imported cereals from the Community market, the rise in 
imported substitutes has resulted in a reduction in own 
resources from cereals-based levies. An estimate of the 
effect of imported substitutes on the levy yield, obtained 
by using the hypothesis that every 4 tonnes of imported 
substitutes displaces 1 tonne of imported cereals, 
indicates a potential levy reduction for the year 1987 of 
724 Mio ECU. 
3.75. There have been fundamental changes in the 
composition of the Community's trade in cereals since 
1973. Between the years 1973/74 and 1986/87, Com­
munity imports of total cereals fell from 24,3 Mio/t to 
6,3 Mio/t, while exports rose from 9,3 Mio/t to 20,7 Mio/ 
t. Whereas in 1973, Community imports represented 
17,9 % and exports 6,9 % of world cereals trade, by 1984, 
these flows were 4,2 % and 11,4 % respectively. Between 
1973/74 and 1983/84, the Community's self-sufficiency in 
total cereals increased from 91 % to 116 %. Of particular 
significance has been the increase in self-sufficiency in 
maize (from 55 % to 84 %) and in total wheat (from 
104 % to 134 %). 
3.76. The decrease in the quantities of cereals imported 
has been due mainly to their displacement in the 
Community market by home-grown cereals and by 
imported cereal substitutes. Table 3.2 clearly shows the 
contrasting trend in the quantities of cereals and cereal 
substitutes imported over a 10-year period. Cereal 
substitutes are energy-rich products competing directly 
with cereals, mainly in the animal feed sector. In contrast 
with the cereals levy, which in 1987 stood at a weighted 
average rate of 191 ECU/t, these products are imported at 
zero or very low tariffs. Due to their displacement of Conclusion 
3.77. Following its examination of the levy system as 
applied to cereals, the Court is concerned at the 
continuing lack of Commission records of reasons for 
decisions, unsatisfactory collection of information and 
inadequate supervision of calculation procedures. The 
Court stresses the need for due attention to be given to the 
impact on Community own resources of decisions taken 
within the global market regime in cereals. The levy is seen 
as performing a specific price-adjusting function within 
this regime and although it cannot be considered as a 
fiscal instrument independently of market consider­
ations, there exists a responsibility on the Commission to 
ensure that Community revenue, in the form of agricul­
tural levies, is not reduced from its potential level without 
compelling reasons. 
Table 3.2 — Quantities of cereal grains and cereal substitutes imported into the Community for livestock feeding during selected years 
(1 000 t) 
Product 
Cereal substitutes: 
Manioc 
Corn gluten feed 
Citrus peels 
Maize germ cake 
Molasses 
Cereal grains imported for livestock feeding 1976 
2 984 
1 147 
646 
629 
2 199 
27 800 1985 
(EUR 10) 
6 336 
3 542 
1 467 
958 
2 920 
5 600 1986 
(EUR 12) 
5 822 
4 097 
1 237 
1 430 
3 507 
5 824 1987(0 
(EUR 12) 
6 289 
4 244 
1 463 
2 089 
3 161 
4 496 
Source: Eurostat/Comext. 
(') Figures for 1987 are based on the first 11 months of the year. 
60 Official journal of the European Communities 1^.1^.^ 
lvIA^I^C3AVAILABL^^PCLlSP01vlS 
L^LlTI^SBYSPAI^A^IoPtDRPlUClAL 
^.7^. In its annual report for 19^6^^ the Court dre^ 
attention to the fact that customs duties ^ere established 
by Spain and Portugal only fromllviarch 19^6 and not 
from the date of accession^lianuary 19^6.The tinancial 
provisions of the Act of Accession provided for rhe 
establishment of these duties from the date of accession. 
Commission departments estimated the amount involved 
to be between ^0 and 60 MioECH.The Commission 
issuedaformalrequestfor payment and it ^as pursuing 
the matter further at the time the 19^6 report ^as 
published. 
179. Since then^ following long discussions ^ith Spain 
and Portugal^ the Commission has changed its position. 
These Member States ha^e not established and paid the 
duties as requested.E^enso^bydecisionof6Ianuary 
19^the Commission decided not to initiate infringed 
mentproceedings under Articlel69oftheEECTreaty.In 
additions it decided not to pursue the matter further. 
1^0. Thisraisesthequestionasto^hetheradecisionby 
the Commission alone to renounce Community o^n 
resources is within its legal powers. 
E^ElvIPTI^^FRC^^CLlSTCllvIS^LlTIIeS 
APPLIED Ll^ILAT^RALLYBV^^lvIB^R 
STATES ^^ClCl^L^SC^PlvIILITARV 
MATURE 
l^L In its annual report concerning the tinancial year 
19^^^^ the Court referred to the practice adopted by 
Belgium^ fOenmark^ olreece^ Italy^ Lu^embourg^ the 
Netherlands and the Llnited kingdom— first noted in 
1977 — of exempting from customs duties imports of 
goods of an exclusively military nature and goods ^hich 
could equally be used for civilian purposes. Such 
e^emptions^based by thoseMember States on Article 
^^lb^ of the EEC Treaty^ ^ere censured by the 
Commission and ga^e rise to the initiation of infringe 
ment procedures under Article 169 of the EECTreaty in 
respect ofimports from third countries of military goods 
^hichcouldequallybeusedforci^ilianpurposes. As 
regards materials of an exclusively military nature v^hich 
ha^e not been included in this infringement procedures 
the Commission was contident that the outcome of Lhe infringement procedure ^illcontirm its position on the 
applicability of theCommonCustomsTaritf to military 
equipmentin general^ therebymakingfurtherrecourse to 
infringement proceedings superfluous. 
^.^. The Commission has informed the Court about 
the present situation regarding progress on these 
infringement procedures. 
^ InIulyl9^areasoned opinion ^assent to Belgium^ 
lOenmark^ltaly^Lu^embourg^ the Netherlands and 
theL^nitedK^ingdominrespectofthenon^application 
of the Common CustomsTarifft^CCT^ to imports 
from third countries ofmaterials^hich could be used 
for either ci^ilianor military purposes. InCOctober 
19^andAprill9^6aformalrequestforpaymentof 
the import duties hivohBed ^as sent to Belgium^ 
tOenmark^ olreece^ Italy^ the^ietherlandsand the 
united kingdom. Eour Member Statesm^Belgium^ 
Italy^the^etherlandsandtheL^nited^ingdom^h^c 
made the possible paying o^er of any o^n resources 
due conditional on the outcome of the infringement 
procedure. In the case of lOenmark and dreece^ 
replies are still outstandings 
^the Commission repeats that it is the Member States 
^hich calculate the amounts of customs duties to be 
made available to the Community and that since 
Member States do not make available the duties in 
question they do not calculate the amounts in^ol^ed 
either.ltfurtherstatesthatitisnotinaposition under 
the existing Community provisions to ask Member 
States to calculate the amounts of duties in 
dependently of these being made available. 
^-P To regularise the situation for the future the 
Commission proposedadraft regulation to the Council 
on^9September!9^^^10yearsaftertheCourtfirst 
commenLed on this matter. Asaresult of the situation 
described in paragraphs -P^l and ^.^ considerable 
amountsofcustomsdutiesrelatingto the importations in 
question ha^e not yet been made available to the 
Commission, ^ot only is there an urgent need to 
introducedetiniti^eCommunitypro^isionsgo^erningthe 
importation andentry for free circulation of military 
equipment but alsoto recover the Community revenue 
not yet made available. 
1^. Concerningthecalculationand notification of the 
amounts of duties in^ol^ed^see paragraph ^.^b^P the 
Court is of the ^ie^ that the Commission has the 
competence to request to be supplied ^ith this informs 
ationbytheMember States concernedonthe basis of 
Article 1^ of Council regulation t^EEC^Euratom^ 
ECSC^o ^91^77 andtheinterpretationofthisArticle^s 
scope contained in the ruling by the European Court of 
lustice in the Como butter case tg^. 
12. 12. 88 Official Journal of the European Communities 61 
GENERAL CONCLUSION 
3.85. All of the commentaries on the five subjects dealt 
with in this chapter illustrate the vulnerability of the 
Community's own resources. Constant vigilance at 
Commission level and at Member State level is needed if 
own resources are to be adequately protected. The 
payment by the Community of 10 % of traditional own resources to cover their cost of collection imposes an 
obligation on the Member States to give value for money 
in this respect and it also obliges the Commission to 
ensure that a high standard of service is received. The 
protection of the Community's own resources becomes 
all the more necessary in an environment where trade 
is generally being liberalized with a tendency to down 
grade customs controls. The prospect of a single 
European market in 1992 adds a new urgency to ensuring 
that all necessary measures are taken in good time. 
(!) OJL 128, 14.5.1985, p. 15. 
(2) OJ C 342, 31.12.1980, paragraphs 3.48 — 3.61. 
(3) OJL 38, 9.2.1977, p. 1. 
(4) OJL 107, 22.4.1987, p. 1. 
(5) The Control Copy T No 5 is a document supplementing, if 
necessary, the normal transit declaration and is used to 
furnish proof that the goods for which it was issued have 
reached the destination or been put to the use provided for in 
the specific Community provisions under which it is 
required. For example, it is used to certify that goods 
declared for exportation under export refund conditions 
have left the geographical territory of the Community. 
(6) OJ L79, 21.3.1985, p. 1. (7) OJL 201, 30.7.1984, p. 1. 
(8) OJL 336, 27.12.1977, p. 1. 
(9) OJ L 146, 2.6.1978, p. 19. 
(10) Annual reports of the Commission to the European 
Parliament on the Community's anti-dumping activities. 
(n) OJ C 357, 31.12.1983, paragraphs 3.20 — 3.23. 
(12) OJL 281, 1.11.1975, p. 1. 
(13) OJ 128, 27.6.1967, p. 2533. 
(14) Doc. COM(86) 200-EN, 13.6.1986, Volume 7/2, p. B/417. 
(15) Doc. COM(87) 150-EN, 15.6.1987, Volume 0/3, p. 363. 
(16) OJ C 336, 15.12.1987, paragraphs 4.12 — 4.13. 
(17) OJ C 326, 16.12.1985, paragraphs 3.29 — 3.33. 
C8) OJ C 265, 12.10.1988, p. 9. 
(19) Case No 267/78. 
62 Official Journal of the European Communities 12. 12. 88 
CHAPTER 4 
European Agricultural Guidance and Guarantee Fund, 
Guarantee Section (EAGGF-Guarantee) 
4.0 TABLE OF CONTENTS Paragraph 
reference 
General introduction 4.1 —4.3 
The situation of stocks at the end of 1987 
National controls over EAGGF-Guarantee expenditure 
Control of expenditure on intervention storage 
Control over quantities 
Control over quality 
Storage conditions 
Member States' declarations of expenditure 
Concluding remarks on intervention storage 
Control of expenditure on export refunds 
Introduction 
Scope of the Court's examination 
Findings of the Court's examination 
Controls over the export of beefmeat 
Controls over the export of live bovine animals 
Controls over the export of meat from male bovine animals 
Verification of evidence of export 
Controls over goods exported via the Community Transit System 
Evidence of arrival at final destination 
Controls over beefmeat taken into customs control under 
prefinancing arrangements 
Concluding remarks on export refunds 
Market measures 
Directive 77/435/EEC 
Introduction 
The Court's observations on the implementation of the Directive in 
the Member States 
Directive checks of undertakings claiming export refunds 
The Commission supervisory arrangements 
Introduction 
Commission's monitoring of the Member States' systems for the day to 
day management and control of EAGGF-Guarantee measures 
Commission's monitoring of the implementation of Directive 77/435/ 
EEC 4.4 
4.5 
4.6 
4.8 
4.10 
4.13 
4.14 
4.17 
4.20 
4.20 
4.29 
4.31 
4.31 
4.35 
4.40 
4.43 
4.44 
4.45 
4.49 
4.55 
4.60 
4.62 
4.62 
4.64 
4.72 
4.76 
4.76 
4.77 
4.80 — 4.75 
— 4.19 
— 4.9 
— 4.12 
— 4.16 
— 4.19 
— 4.59 
— 4.28 
— 4.30 
— 4.54 
— 4.34 
— 4.39 
— 4.42 
— 4.48 
— 4.54 
— 4.59 
— 4.61 
— 4.75 
— 4.63 
— 4.71 
— 4.75 
— 4.85 
— 4.79 
— 4.82 
12. 12. 88 Official Journal of the European Communities 63 
Commission's clearance of accounts 4.83 
Audit of individual markets 4.86 
Audit of the table wine market: private storage contracts and 
Community aids for the utilization of grape must 4.88 
Private storage of table wine and of grape must 4.89 
Audit findings 4.91 
Community aids for the utilization of grape must 4.100 
Audit findings 4.102 
Main changes introduced by the Commission since the publication of the 
Court's Special Reports 4.107 
Olive oil production aid 4.107 
Wine distillation measures 4.110 
Administrative arrangements adopted by Spain 
Features of olive oil production and consumption 
Features of wine production and consumption 
Administrative arrangements 
Audit observations 
General conclusions 4.115 
4.115 
4.117 
4.120 
4.122 4.85 
4.106 
4.106 
4.99 
4.99 
4.106 
4.106 
4.114 
4.109 
4.114 
4.131 
4.116 
4.119 
4.121 
4.131 
4.132 —4.133 
GENERAL INTRODUCTION the global sums involved simply indicates that the 
advances are covered by available appropriations; 
4.1. Subject to the modification mentioned in para­
graph 4.3 below, the management of the European 
Agricultural Guidance and Guarantee Fund, Guarantee 
Section (EAGGF-Guarantee) continued to be governed 
in 1987 by Council Regulation (EEC) No 729/70 of 21 
April 1970 (l) which, together with the provisions of the 
Financial Regulations, in particular Title VIII, forms a 
legislative framework distinct from the rules of the 
general budget. 
4.2. The essential features of the EAGGF-Guarantee 
financing arrangements provided by these regulations are 
as follows: (c) the consolidated accounts of these monthly declar­
ations eventually constitute the EAGGF-Guarantee 
income and expenditure account for the year in 
question; 
(d) at a later date the Member States present annual 
accounts of their EAGGF-Guarantee expenditure to 
the Commission; these accounts are subject to 
selective audit by the Commission under the pro­
cedure known as clearance of accounts and any 
necessary financial adjustments are effected between 
the Commission and the Member States and entered 
in the accounts at this stage. 
(a) while the Commission retains ultimate responsibility 
for managing the budget, day to day implementation 
of the policies and measures giving rise to expenditure 
is firmly assigned to Member States; 
(b) Member States receive monthly advances from the 
Commission based on simple declarations of their 
incurred and forecast expenditure; by their nature 
these advances are not susceptible to the detailed 
approval of the Financial Controller whose visa on 
(') The footnotes are listed together at the end of the chapter. 4.3. In October 1987, Council Regulation (EEC) No 
3183/87 of 19 October 1987 (2) introduced on a temporary 
basis revised rules for the financing of the common 
agricultural policy (CAP). The primary purpose of this 
regulation was to deal with a shortfall in appropriations 
available to the Guarantee Section of the EAGGF in 
1987. It provided, therefore, that when the 1987 
appropriations had been used up, which happened in 
practice in November 1987, the resources needed to 
finance the common agricultural policy for the rest of the 
year would be provided in the first instance by the 
Member States. This result was achieved by a two 
64 Official Journal of the European Communities 12. 12. 88 
months' postponement of the date at which the 'advances' 
referred to in paragraph 4.2 (b) above are paid to Member 
States and charged to the budget. This system will 
continue in force in 1988. The control characteristics of 
the system, which are the subject of certain observations 
later in this chapter, rest unchanged, however, except that 
payments are now based on Member States' declarations 
of expenditure incurred rather than on their forecast 
financial needs. 
THE SITUATION OF STOCKS AT THE END 
OF 1987 
4.4. Tables 4.1 and 4.2 show the quantities and book 
values of stocks in public storage at the end of 1987 
compared with the levels of previous years. Generally the 
figures show some significant improvements over the 
position a year earlier. They indicate a reduction in 
quantity of 9 % and in value of 18%. These improve­
ments are reflected in a substantial reduction in the 
potential losses attributed to stocks in public storage at 31 
December 1987. Compared with the Court's estimate of 
8 501,7Mio ECU for the potential losses on public 
intervention stocks at the end of 1986, the Commission 
assesses the potential losses at the end of 1987 as 
3 659,1 Mio ECU (Table 1 of Annex B to the con­
solidated revenue and expenditure accounts). The 
Commission's figure calls for the following comments 
from the Court: 
(a) following adverse comment from the Court in its 
report for the financial year 1986 (3) (paragraph 5.14) 
the Commission has now abandoned its notion of 
normal intervention stocks which are somehow 
immune from depreciation and its estimate of the 
potential losses at the end of 1987 takes account of 
total stocks at that date; 
(b) in actual fact, the total future Community loss in 
respect of public storage amounted to 5 302,1 Mio 
ECU at the end of 1987. The figure of 3 659,1 Mio 
ECU mentioned above should in fact be increased by 
1 643 Mio ECU (Annex A 1 (b) to the revenue and 
expenditure account), which represents the Com­
munity's debt towards the Member States for the 
storage of butter (530 000 tonnes) (4), disposal of 
which was initiated from the financial point of view 
during 1987, though the stocks themselves were still 
physically available at the end of the year. NATIONAL CONTROLS OVER EAGGF-
GUARANTEE EXPENDITURE 
4.5. A consequence of the arrangements described in 
paragraph 4.2 above is that the legality and regularity of 
EAGGF-Guarantee income and expenditure depends 
initially and to a large extent subsequently on the controls 
exercised by Member States. In 1987 the Court examined 
Member States' controls over several important areas of 
EAGGF-Guarantee expenditure, and the relationship 
between these controls and those exercised centrally by 
the Commission. Some of the examinations are extensive 
and are still in progress. This part of the annual report 
summarizes present findings and, on this basis, draws 
conclusions about the adequacy of the decentralized 
control arrangements; and the reliability of some of the 
figures in the 1987 financial statements. 
Control of expenditure on intervention storage 
4.6. The Court has recently completed a study of the 
Community arrangements for the management and 
control of public storage of agricultural produce. The 
study concentrated on three markets (cereals, milk 
products and beefmeat) and six Member States (D, F, I, 
IRL, NL and UK), a combination which accounts for 
about 95 % of Community expenditure on public 
storage. The expenditure charged to the 1987 budget in 
respect of the operations described in the report is about 
2 800 Mio ECU. 
4.7. While the Commission carries out the central 
functions (market management, budgeting, financing, 
etc.) Member States are responsible for the day to day 
execution of the administrative tasks related to public 
storage as they occur on the local level. The Court paid 
particular attention to the latter aspects in its audit and 
found that the performance of Member States in the 
discharge of their responsibilities for public storage was 
not always satisfactory. 
Control over quantities 
4.8. Physical stocktaking is a basic safeguard in relation 
to the quantity of products held in storage and the 
Commission has issued an aide-memoire to all Member 
States specifying that physical stocktaking of intervention 
stocks is to be carried out at the end of the year concerned. 
But the strength of this position is greatly diluted in that 
the Commission will accept, if full stocktaking is not 
practicable, stock statements submitted by the store-
12. 12. 88 Official Journal of the European Communities 
CNCNTtNOmt^CNOO 
C\ (N - 00 ^ N (N 
en (~~. _i in r-~ © 
CN —< TJ- en <N r- CN oo "* ON 
y—> •* OO ON CN ON ON o 
(N CN f-
NOOO-^frCNmNONOcnONONONOOON"* — oONOr^en h inrn^-oo - f- m -H io CN •* — 't ^ o ^ ^t « C\ t~- rn in mm 'too 
(N ^t VO (N O NO ~-
—« NO 
CN CN •>* in NO C~-
*r\ NO CN ON 
— — ^ 
—H O -H NO OO ON •— 
-H rt (N t^ m r^ ^- I 00 f- CN NO I ON ON 00 I — Tf <N >o I 00 OO NO NO 
•* Tt NO NO O 
.2-*' 'to,*rnviml'im r- oo in r- un CN OO 
•* o v> r- — o —• 
N^oocn-'H enNOenOOOONNOOOinom 
ON—'00 (N m\Oinhm O 
NO CN NO oo en ON en Tt 
NO o •* CN 
—i CN NO 
v-> ir> o en oo m O 
t-» 00 NO ON rt CN ON 
TJ- © un r- —. o — 
N « oo m - -r^NOrOONOONNOfN-* — in 
n — oo CN en NO NO t-~ en o 
i—• CN NO oo en ON en NO 
"* NO 
CN ON —< r-
n CN NO 
o r-~ r- in en o —> 
CN ON CN ON en CN CN 
en en r- en ^ - (N Tt NO — 
O ON 
CN •* NO c-- m NO oo 
oo iri Tf en 
— NO 
oo <—< O en NO r-» ON 
NO CN ON tt en CM en -Oinoo I CN CN en rt NO O I en en t Tf CM CN O CN 
NO NO — — 
.2-*, n CN m ^t ON NO 
m i—i TT **• —< oo ON O ON CN —i ON CN i— •* ON •* 
ON 
s-t; O CN CN — OO NO 
ON i-i o «n O oo 
00 O ON NO n ON —, o — — O CN 
00 —» ON -St ON -i 
CN m r- o —H NO 
CN CN Tt Tt iri 
i 0O ON 0O VD VI 
r- ^t i—' —< oo ON 
NO CN ON t NO NO 
-i NO I— Tf 
oo in m NO n 
•>* •— NO en •<*• 
TT O Tf NO •* 
•* CN NO —' 
c3 
X5 
£ 
00 
3 "S 
If cS "O 
« UH JC 
£ 
o s E o 
d 
o 
3 
c*> a 
a* T3 
O — 
" o 
XJ 
O o 
ex 
M 
S 
P 
S 
N^ 
C/J ,2 S3 
X> nj 
•O T3 . 
o u J; 
O OS 
« « 3 u u-° 
3 3 O m 03 H .*= ii "o id « o 
tJ «j 55 i! w ii X) 
o fi in t« .. 
™ (U ON U <U 
a 4> -i O -T! 
_; u en «> «g — 
o <o o '-H — — a> 
H£ 
D5 shCQZ C • 
CO — O O o 
Hhft. ^ caw <u Kt 
co-2 «•-
3 O u Xi ^ 
cu.5 g a c 
"SI'S ^ 
d u c ut; o,^ ox: 3 
66 Official Journal of the European Communities 12. 12. 88 
Table 4.2 — EAGGF-Guarantee 1987: value of stocks 
at end of year 
compared with earlier years 
(Mio ECU) 
Product 
Breadmaking wheat 
Feedwheat 
Sub-total common wheat 
Barley 
Rye 
Durum wheat 
Maize 
Sorghum 
Total cereals 
Sugar 
Olive oil 
Colza 
Sunflower 
Total oil seeds 
Tobacco 
Alcohol 
Skimmed-milk powder 
Butter 
Total milk products 
Beef carcasses 
Boneless beef 
Total beef 
Pork 
Grand total 1985 
(Value as 
at 30.11) 
776,7 
1 613,6 
2 390,3 
940,5 
225,7 
264,2 
— 
— 
3 820,7 
— 
115,6 
— 
— 
— 
14,6 
47,3 
866,7 
3 415,7 
4 282,4 
1 508,7 
761,5 
2 270,2 
28,9 
10 579,7 1986 
(Value as 
at 30.11) 
541,2 
1 135,4 
1 676,6 
728,8 
248.3 
287,7 
34,9 
0,7 
2 977,0 
9,7 
421,1 
0,1 
13,9 
14,0 
30,4 
64,8 
1 621,6 
4 284,7 
5 906,3 
1 211,9 
783,6 
1 995,5 
— 
11 418,8 1987 
526,3 
332,4 
858,7 
706,4 
165,3 
577,8 
4,1 
1,6 
2 313,9 
— 
487,7 
— 
8,5 
8,5 
40,7 
160,4 
1 136,7 
2 941,7 
4 078,4 
1 475,5 
805,4 
2 280,9 
— 
9 370,5 
keepers themselves. Whatever the administrative con­
venience of this procedure it can not, in the Court's view, 
provide the necessary independent verification. A 
programme of independent continuous stocktaking 
would better meet the aims of administrative convenience 
and adequate verification. 
4.9. The Court found that, in practice, the extent to 
which Member States conduct physical stocktaking of 
intervention stocks was at best inadequate and at worst 
non-existent. In three of the Member States visited (D, 
IRL and UK) there was a measure of independent 
stocktaking but this did not extend to all products. In 
other cases (F and NL) complete reliance was placed on 
storekeepers' stock statements, sometimes with an 
element of surveillance by independent technical staff. In 
one Member State (I) there was neither independent 
physical stocktaking nor stock statements from store­
keepers to support the quantities recorded as in public 
storage at the end of the year. Control over quality 
4.10. The Commission has not issued detailed guidance 
to Member States on the quality control procedures to be 
applied before products are accepted into public storage, 
and accordingly the practice in the Member States varies 
widely. In some cases (D, IRL and NL) staff of the 
intervention agency are present on the premises and 
initiate independent verification of the products entering 
public storage; in others (F and UK) this verification is 
left to the storekeeper acting in conjunction with the 
offerer of the product, or to the storekeeper alone. 
4.11. During the period when the products are in store, 
it is very rare that tests are carried out by or on behalf of 
the intervention agencies to verify the state of preserv­
ation of the products concerned. Some storekeepers carry 
out such tests in their own interest as they are personally 
liable for the state of preservation of products in their 
stores and the intervention agencies may or may not have 
access to the results of these tests. For the rest, quality 
control is at best postponed until the products are 
released from intervention. 
4.12. Quality control of products leaving intervention 
relies largely on the supposed opposition of interest 
between buyer and storekeeper, but in the Court's view 
this may sometimes be more apparent than real, for 
example, in those cases where the buyer and the 
storekeeper are in a business relationship. What is 
indisputable is that the intervention agencies themselves 
only very rarely sample and analyse goods released from 
public storage to confirm that there has been no undue 
deterioration in their condition or substitution while in 
store. Even if intervention agencies were disposed to carry 
out these tests on a systematic basis they would not be 
able to make direct comparisons between qualities on 
entry and on release as the stock records do not provide 
the necessary reconciliation information. As storekeepers 
are liable for the financial consequences of undue 
deterioration of products in their keeping, it is perhaps 
revealing that in the history of the CAP there is only one 
known area (cereals in France) where financial sanctions 
have been imposed on storekeepers of intervention 
products for undue deterioration in the quality of the 
products stored. 
Storage conditions 
4.13. The arrangements for the inspection of public 
stores by intervention agency staff vary widely. In Ireland 
intervention agency staff are permanently present on the 
12. 12. 88 Official Journal of the European Communities 67 
premises; in other Member States they visit intervention 
stores only infrequently, for example when suspicion of a 
particular problem has arisen. There is the same variation 
in the quality of the formal instructions on storage 
conditions given to storekeepers by the intervention 
agencies. In the circumstances it is not surprising that the 
Court found that storage conditions for some products in 
certain Member States (e.g. cereals in F) were far from 
ideal. This finding reinforces the view that adequate 
independent physical stocktaking and quality control are 
essential for the safe custody of intervention stocks. 
Member States' declarations of expenditure 
4.14. In common with all the other measures financed 
by the EAGGF-Guarantee, Member States' expenditure 
on public storage is charged to the Community budget on 
the basis of monthly declarations. For the purpose of 
assessing monthly expenditure, stocks are valued on a 
cumulative average cost basis, that is, the unit value at 
which stock is brought forward at the beginning of each 
month is averaged with the cost of stock acquired during 
each succeeding month: and the resulting book value 
gives the basis for calculating losses on sales. This 
procedure has three consequences: 
(a) stock values, losses on sales, etc. have to be calculated 
by ad hoc procedures not subject to the normal 
controls operating within standard accounting sys­
tems ; 
(b) declarations of expenditure can only be provisional 
and subject to later correction, which engenders a 
certain laxness with regard to the reliability of the 
declarations; 
(c) profits or losses on sales cannot be attributed to 
individual transactions. 
4.15. In practice the Court found that, for these and 
other reasons to do with the Member States' adminis­
trative arrangements, the monthly declarations submitted 
by Member States bear only a tenuous relationship to the 
actual level of the underlying expenditure. Its analyses 
showed, for example, that the average rate of error for 
quantities declared as having entered public storage was 
of the order of 25 % and that the average error rate of 
quantities declared as having left public storage, which 
determine the losses on sales from intervention to be 
made good by the Community, was as high as 45 %. 4.16. These figures are a measure of the accuracy of the 
individual monthly declarations as initially presented by 
the different Member States, and are based on subsequent 
corrections to these declarations introduced by the 
Member States themselves in the light of later inform­
ation. Since the errors can be in either direction, the 
figures do not necessarily indicate serious under- or over-
funding of the total expenditure chargeable to the 
EAGGF. Nevertheless, in the Court's view the systematic 
tendency for the monthly statements to be inaccurate calls 
in question the reliability of Member States' end-year 
declarations which are the basis for determining the final 
amount to be charged to the financial year. 
Concluding remarks on intervention storage 
4.17. In the absence, taken overall, of adequate 
independent physical stocktaking and quality control 
arrangements in the Member States, in the Court's 
opinion no reliance can be placed on published figures for 
the quantities and values of products held in intervention 
storage at the end of the financial year nor on the related 
expenditure in the year. 
4.18. The monthly advance system gives Member States 
quasi-automatic access to Community funds and can be 
justified, in the Court's view, only if two conditions are 
met: firstly, that Member States' monthly declarations 
are reasonably accurate and, secondly, that there are 
effective arrangements for a posteriori verification. The 
first of these conditions is demonstrably not satisfied in 
relation to public storage expenditure. The system is 
error-prone and may well have consequences for the 
budgetary management that is carried out during the year 
in respect of public storage expenditure. 
4.19. As to the second condition, the observations in 
paragraphs 4.83 to 4.85 below confirm the doubts 
expressed in the Court's report for the financial year 
1986 (3) (paragraphs 5.26 to 5.44) about the effectivenesss 
of work done by the Commission's EAGGF auditors in 
the context of the clearance of the Member States' annual 
accounts. 
68 Official Journal of the European Communities 12. 12. 88 
Control over expenditure on export refunds 
Introduction 
4.20. Export refunds are subsidies paid to Community 
exporters of certain agricultural products to enable them 
to compete in third-country markets where prevailing 
prices are generally lower than Community prices. In 
1987 export refunds charged to the Community budget 
amounted to 9 375 Mio ECU or about 41 % of the total 
expenditure on the EAGGF-Guarantee. The sectors 
mainly concerned were: cereals (3 070,6 Mio ECU), 
beefmeat (877,9 Mio ECU) and milk products 
(2 257,9 Mio ECU). 
4.21. Rates of refund for produce exported vary 
according to the precise classification of the goods 
concerned. For example, chilled beef attracts a higher rate 
than frozen beef, hindquarters a higher rate than 
forequarters, beef from male animals a higher rate than 
beef from female animals, live pure bred animals if male, a 
higher rate than other animals. The complexity of all this 
can be judged from the fact that the nomenclature for 
export refunds contains more than 1 200 separate 
classifications for agricultural produce, including almost 
400 for milk products and about 80 for beef. 
4.22. Rates of export refund can also vary according to 
the country of final destination. For example, for exports 
of beefmeat the world is divided into 11 zones, with 
significantly different rates of refund for each zone. By 
way of illustration, the rate at 31 December 1987 for an 
export to South Africa of chilled hindquarters from adult 
male animals was 223 ECU/100 kg, but zero for the 
neighbouring countries of Zimbabwe and Botswana. 
4.23. An additional complication is that export refunds 
can be pre-financed. That is, the payment of the refund 
can be made to the trader, against lodgement of a security, 
when the goods concerned are placed under customs 
control. Generally this takes place on the traders' 
premises, usually many months before the actual export 
takes place. 
4.24. In these circumstances, tight controls are required 
to ensure: that what is being exported is in exact 
agreement (as regards classification, condition and 
weight) with what the trader has declared as exported for refund claims' purposes; that produce exported enters for 
home consumption in the country of declared final 
destination; and that goods for which export refunds 
have been pre-financed have actually been exported in 
accordance with the regulations. 
4.25. The need for tight controls becomes even more 
apparent when one considers the importance of the 
refund element in the total export transaction. For 
example, an exporter of live bovine animals in trade with 
a North African country would receive export refund at 
the rate of 80,0 ECU/100kg on produce valued on the 
world market at 81,6 ECU/100kg (figures as at 31 
December 1987). 
4.26. Under the general arrangements for the manage­
ment of EAGGF-Guarantee expenditure described in 
paragraph 4.2 above, the primary responsibility for 
examining the goods exported and for vetting the refund 
claims lies with the Member States. The Community has, 
however, defined some of the essential central require­
ments. Commission Regulation (EEC) No 3665/87 of 27 
November 1987 (5) consolidates common detailed rules 
for the application of the system of export refunds on 
agricultural products, including rules for: the supporting 
documents needed to substantiate a claim; the required 
evidence of export and of arrival for home consumption 
in the country of final destination; the calculation of the 
rates of refund; and the special arrangements for the pre­
financing of refunds. And Council Directive 77/435/EEC 
of 27 June 1977 (6) requires Member States to carry out a 
posteriori checks of the commercial documents of 
undertakings receiving payments from the EAGGF, 
including payments of export refunds. 
4.27. These rules still leave the Member States great 
freedom, however, to decide on the frequency and, more 
importantly, the quality of controls, to be exercised over 
expenditure on export refunds particularly in the key 
customs area. The Commission is seeking to repair this, at 
least to some extent, by proposing to the Council a 
regulation (7) which would require Member States to 
carry out a minimum level of physical inspections of 
exports attracting Community refunds. 
4.28. In August 1985 the Court issued a special 
report (8) which drew attention to general weaknesses in 
the controls over Community expenditure on export 
refunds. 
12. 12. 88 Official Journal of the European Communities 69 
Scope of the Court's examination meat may or may not be subject to further customs 
examination depending on national practice. 
4.29. It was against this background that the Court 
decided to examine in 1987 the effectiveness of controls, 
particularly at the national level, over payments of export 
refunds. 4.33. The principal conclusion of the Court's audit of 
the frequency and quality of these controls is that they are 
defective in several respects: 
4.30. The examination was centred on payments of 
export refunds in the beef sector as, in the Court's 
opinion, this sector displays most of the factors which 
make export refunds such a difficult area to control. Most 
of the findings are specific, therefore, to the beef sector 
but the Court believes that many of them are applicable to 
export refunds as a whole. Having selected the beef sector 
as the primary target, the Court carried out missions to 
the four Member States (D, F, IRL and UK) who 
together account for 80 % of the expenditure in this 
sector. Member States have not been identified in relation 
to the specific observations in paragraphs 4.31 to 4.59 
below in order to protect the confidential nature of some 
of the information concerned and to reduce the risk of the 
Court's findings being exploited by fraudulent operators. 
The findings have, however, been brought to the notice of 
the responsible authorities of the relevant Member States, 
and the Court has asked for their comments. (a) the frequency of physical examinations is not 
determined by risk analysis based on criteria such as 
trader reliability or amounts involved, for example 
MCA transactions which involve much smaller sums 
are given the same scale of examination as export 
refunds; 
(b) even where arbitrary national scales of examination 
have been set, they are not always adhered to by the 
customs services. Some customs stations had re­
corded examination rates as low as 1 % without any 
apparent justification (fsee the minimum rate of 5 % 
proposed by the Commission in the draft regulation 
referred to in paragraph 4.27 above); 
Findings of the Court's examination 
Controls over the export of beef meat (c) the extent of the examination is not always set in 
accordance with pre-determined criteria concerning 
the timing of the examination and the number of 
cartons to be inspected. This resulted in instances of 
superficial examinations of a few cartons during 
packings which were not necessarily representative of 
the complete consignment; 
4.31. In all Member States visited, responsibility for 
certifying the classification, condition and weight of the 
exported produce rests with the national customs service. 
In the case of beefmeat, the relevant controls are carried 
out primarily at the traders premises at the point of 
packing for export. 
4.32. In all Member States the trader is normally 
required to give prior notice of intention to pack for 
export to the local customs office. National instructions 
provide that a percentage of all export packings must be 
attended by the local customs officer; and that he must 
verify the details of quantity, description and export 
classification by check weighing and physical exami­
nation, including the opening of cartons, of a representat­
ive sample of the consignment. The arrangements for the 
transport of the meat under customs control from the 
traders premises to the port vary from Member State to 
Member State, but most beefmeat is transported either 
under a customs or health seal. At the port of export the (d) in 3 Member States, unless a trader is under specific 
investigation for fraud, meat taken into prefinancing 
control (see paragraphs 4.49 — 4.54 below) in a 
chilled state, then frozen before export, is never 
subjected to defrosting at export packings as a check 
against substitution. In the fourth Member State, a 
special excercise carried out in 1985, involving 
defrosting, revealed irregularities in 30 % of the 
cases. 
(e) except where there are good grounds for suspecting 
fraud, examinations at ports never go beyond 
verifying that whatever seals have been applied are 
intact. Moreover, instances were observed where 
meat had been exported through ports not approved 
for meat examination and ports where facilities for 
examination and weighing were inadequate, there 
being no weighbridge facilities and no scales in the 
cold stores; 
70 Official Journal of the European Communities 12. 12. 88 
(f) statistics concerning examinations and results are 
non-existent or inadequate at the regional and central 
levels thereby negating effective management control. 
4.34. The importance of physical controls is underlined 
by the following cases: 
(a) of the statistically chosen sample of 95 export 
consignments examined by the Court in one Member 
State, only one had been subject to random exami­
nation (by the national customs authorities of a 
Member State other than those covered by this audit) 
at the port of final export from the Community — 
and the examination revealed an irregular description 
of the goods concerned; 
(b) in another Member State examination of cartons 
being taken into prefinancing control at a trader's 
premises during the Court's audit revealed that 
trimmings not eligible for refunds had been hidden 
inside rolled boned beefmeat cuts. Extension of the 
examination at the Court's request to the full 
consignment revealed an irregularity rate of about 
7%; 
(c) for two years, a trader imported to the EEC prime 
beefmeat from South America described as offal in 
order to evade import levies and exported offal 
declared as prime quality beef in order to obtain 
export refunds; the irregular transactions involved 
were in the region of 16 Mio ECU; 
(d) the Commission's investigations into an irregularity 
concerning the country of destination for a series of 
beefmeat exports also revealed irregularities in the 
declared weights and description of some of the 
consignments concerned. The total sum at stake was 
of the order of 5 Mio ECU; 
(e) refunds were paid by one Member State on exports 
declared to be beefmeat. National controls had failed 
to detect that the consignments were in fact chicken 
scraps and the exporters concerned received irregular 
export refunds totalling about 1,4 Mio ECU. Controls over the export of live bovine animals 
4.35. In three of the Member States visited, live animals 
are subject to what is known as the direct export 
procedure under which an export declaration is presented 
at the point of exit from the Member State's territory and 
the goods are taken into customs control at this point. 
The goods should then be subject to selective examination 
to verify declared weights, descriptions and export refund 
nomenclatures. 
4.36. From its examination of this procedure the Court 
acknowledges that control over the weights of live 
animals attracting export refunds presents practical 
difficulties. None of the ports visited provided facilities 
for the weighing of individual animals which meant that a 
full check of the weight had to be made by means of a 
weighbridge and lairage facilities. The Court noted that 
certain ports did not have these facilities and had to use 
facilities located some distance from the area of customs 
control, with the obvious danger of diversion to home use 
of animals on which export refunds were paid. 
4.37. A well-publicized fraud in a Member State has 
shown that this risk is more than theoretical. Over a 
period of two years or so an exporter systematically 
diverted to home use live animals on which export refunds 
had been claimed and paid. The total cost of the fraud was 
about 4 Mio ECU. 
4.38. The Court also found that in one Member State 
the weight taken into account for export refund purposes 
on all exports of live cattle was not that at the time of 
taking the animals into customs control but the weight 
established at the inland collecting centre. The weight loss 
between the inland centre and the port allowed in the 
calculation of the export refunds varied between 10 % 
and 15 %. This nationally approved procedure is 
contrary to Article 3(4) of Regulation (EEC) No 
3665/87 (5) which states that the weight for export refund 
purposes is established on the day when the goods are 
taken into customs control. This irregular procedure has 
led to a considerable overpayment of export refunds 
dating back to at least 1982. 
4.39. The same Member State also allowed refunds on 
live cattle exports at the rate of pure bred breeding 
animals when it was clear that the cattle exported were not 
pure bred. This is also, in the Court's opinion, a clear 
12. 12. 88 Official Journal of the European Communities 71 
breach of Regulation (EEC) No 1544/79 of 24 July 
1979 (9) and Council Directive 77/504/EEC of 25 July 
1977 (10). (c) at the same trader the identification of the quarters as 
adult male was supposed to be evidenced by an 
intervention agency seal. At the time of the Courts' 
audit, no evidence was found that these seals were 
applied; 
Controls over the export of meat from male bovine 
animals 
4.40. Because of the high rate of refund which it attracts 
meat from adult male bovine animals is subject to special 
controls under the general responsibility of the interven­
tion agencies. Article 3 of Regulation (EEC) No 32/82 of 
7 January 1982 (n) provides that Member States shall lay 
down the conditions for certifying products attracting 
these special export refunds and shall take the necessary 
measures to ensure that no substitution takes place 
between the time they are checked and the time they leave 
the Community's geographical territory. It further states 
that the measures shall include identification of each 
product by means of indelible marks or an individual seal 
on each quarter. In the case of deboned beefmeat 
qualifying for special export refunds, Article 8 of 
Regulation (EEC) No 1964/82 of 20 July 1982 (12) 
provides that no other meat with the exception of pigmeat 
may be present in the boning room when the meat 
qualifying for special export refunds is being boned, 
trimmed or packaged. It further states that the bags, 
cartons or other packaging material in which the boned 
cuts are placed shall be officially sealed by the competent 
authorities. In the Member States visited these controls 
were exercised by means of physical supervision of the 
complete process from arrival of the live animal to the 
placing of the packed deboned cuts of beefmeat in 
customs control accompanied by an identification 
certificate. The precise nature of the controls varied from 
Member State to Member State but all had the objective 
of avoiding substitution by other beefmeat attracting 
lower refunds. (d) in another Member State the labels identifying the 
individual cuts of meat as of male origin were left in 
the possession of the trader as were the paper seals, 
thereby again negating independent control; 
(e) in the same Member State evidence was also found 
that paper seals were incorrectly applied, not joining 
the top and bottom of the cartons, allowing easy 
substitution. 
4.42. These are not just theoretical weaknesses. The 
trader referred to in paragraph 4.41 (a) to (c) above had 
consistently increased the quantities of meat stated to be 
from adult males by including cuts from other animals at 
the packing stage. The irregularity was eventually 
revealed by a credibility check on numbers of live male 
animals arriving at the slaughterhouse and the yield in 
terms of individual cuts. 
Verification of evidence of export 
4.41. But the Court observed that: 
(a) at one trader's premises other beefmeat attracting 
lower refunds was allowed in the boning and cutting 
room at the same time as beefmeat from adult male 
animals. The two processing lines merged at the point 
of packing with the obvious risk of substitution; 
(b) at the same trader the sealing of the cartons with 
official seals was left at times to the trader's personnel 
thereby negating independent control; 4.43. Controls against the introduction of fictitious 
customs certificates of export into the paying agencies' 
payment systems for export refunds varied between 
Member States. In one Member State where the check of 
the authenticity of export declarations was dependent 
upon computerized reconciliations of the data held by 
customs and by the paying agency, these did not extend to 
comparisons of the export refund nomenclature nor was 
there a satisfactory system for follow up of discrepancies 
noted in quantities and export dates. In another Member 
State where the approved procedure requires the paying 
agency to send a percentage of all certificates back to 
customs for confirmation of authenticity, the Court 
found evidence that the procedure had fallen into disuse. 
None of the customs offices visited by the Court had ever 
received back any certificates for validation, and the 
paying agency had no records of having sent any out. 
72 Official Journal of the European Communities 12. 12. 88 
Controls over goods exported via the Community 
Transit System 
4.44. Where agricultural produce attracting export 
refunds moves from one Member State across the 
territory of another before finally leaving the Com­
munity, the Community Transit System in Council 
Regulation (EEC) No 222/77 of 13 December 1976 (13) 
prescribes that seals shall be applied to the containers or 
vehicles concerned to protect the consignment against 
irregular diversion to Community use (see also para­
graphs 13 and 14 of Chapter 3 of this report). At an 
important customs post on a land boundary between a 
Member State and a third country the Court found that 
20 % of vehicles and containers conveying such produce 
under the Community Transit System had not been sealed 
in the Member State of departure. Despite this, the 
customs service at the point of final exit from the 
Community cleared them as presented without further 
physical examination and provided the exporter with a 
certificate to substantiate the refund claim. In the Court's 
opinion the weakness of these controls entails a high risk 
that export refunds are being paid on goods which never 
leave the Community. 
Evidence of arrival at final destination 
4.45. Export refund rates for the major expenditure 
products such as milk, cereals and beef are differentiated 
according to country of final destination. The exporter 
must therefore provide proof of arrival at final desti­
nation in support of the export refund claim, and this 
control is of particular importance for the destinations for 
which high rates of refund are payable (see paragraph 
4.22 above). Under current legislation (5) proof of arrival 
can be in the form of: 
(a) a primary customs entry document from the import­
ing third country or an officially certified copy of it; 
(b) the common form of customs entry certificate 
established according to annex II of Regulation 
(EEC) No 2730/79 (14) (or Regulation (EEC) No 
3665/87 (5) after the 1st January 1988) and stamped 
by the customs service of the importing country 
(Annex II documents); 
(c) any other document endorsed by the customs service 
of the importing country which identifies the 
products and demonstrates that they have been 
imported for consumption in that country. If owing to circumstances beyond the control of the 
exporter none of these documents can be produced the 
regulation provides for substitute or secondary proofs. 
The proof of arrival except in cases of'force majeure' has 
to be presented within twelve months of the date of 
export. 
4.46. Although Annex II documents are specifically 
approved under Community regulations (see paragraph 
4.45 above), in the Court's opinion they do not in 
themselves furnish conclusive proof of the arrival of the 
goods concerned for home consumption in the third 
country. These documents are not accountable docu­
ments of the importing country (the document itself is 
annotated in one Member State to the effect that 
completion of the form is required solely for use within 
the EEC). They are as a general rule completed by the 
exporter and at best the only evidence of arrival they bear 
is a signature and stamp alleged to be of the customs 
service of the importing country. 
4.47. Furthermore the Court's examination of beef 
export refunds showed that paying agencies in the 
Member States had accepted as primary proof of arrival 
at final destination and without further enquiry: 
(a) documents purporting to be customs entries or Annex 
II documents without customs signatures and 
stamps; 
(b) secondary proofs of dubious authenticity, for ex­
ample : 
(i) a certificate of importation to Libya with a letter 
heading 'Foreign Office, Bucharest'; 
(ii) certificates of importation dated prior to the 
arrival of the goods concerned; 
(iii) certificates provided by a commercial super­
intendents company with apparently no presence 
in the country concerned nor expertise in the 
commodity traded, and sometimes long after the 
arrival of the goods concerned; 
(iv) bank certificates showing that the invoices for the 
goods had been settled but which gave no 
evidence as to the source of the funds; 
(c) documents accompanied by uncertified translations 
12. 12. 88 Official Journal of the European Communities 73 
or translations which indicated that customs 
stamps, signatures and comments were illegible. 
4.48. The Court's doubts about the adequacy of this 
system of proofs of arrival at final destination are backed 
up by cases of irregularity which have recently come to the 
notice of the Commission: 
(a) it was discovered that two major export refund 
traders in different Member States owned complete 
sets of customs stamps of the main countries with 
which they traded. This illustrates the danger of 
accepting as conclusive proof of arrival Annex II 
documents bearing no more evidence than a customs 
stamp; 
(b) beefmeat exported to a third country in a zone with 
the highest rates of refund was diverted while at sea to 
a country with a zero rate of refund. Forged 
certificates of entry were used as proof of arrival in the 
first country. Irregular payments of export refund 
amounted to some 20 Mio ECU; 
(c) beefmeat exported from the Community to North 
America with the aid of export refunds was sub­
sequently rejected by the veterinary services of the 
recipient countries. Nevertheless the exporters con­
cerned used the partly completed import documents 
to substantiate arrival for consumption in the third 
country and irregular payments of export refund 
totalling about 3 Mio ECU were made on the basis of 
this documentation. Only a part of the subsequent 
rejections were notified to the paying agencies. 
Controls over beefmeat taken into customs control under 
prefinancing arrangements 
4.49. Regulation (EEC) No 565/80 (15) lays down 
general rules permitting the advance payment of export 
refunds on products warehoused under customs control 
on condition that they are exported within specified time 
limits. The advance payment is made subject to a security 
being lodged by the exporter for 120 % of the amount of 
the export refund involved. Title 2, chapter 3 of Regu­
lation (EEC) No 3665/87 (5) lays down the detailed rules. 
This procedure is generally known as prefinancing, and in 
the case of beefmeat is significant as the Court estimates that the majority of beef exports have been financed in 
this way. 
4.50. Beefmeat which is subject to prefinancing is 
normally warehoused under customs control at the 
exporter's premises. The exporter must give the customs 
authorities prior notice of intention to place meat under 
customs control; and also make an export declaration 
giving details of the consignment, including quantity, 
description, export refund nomenclature and zone of 
intended export. This declaration must be available to the 
customs authorities should one of their officers exercise 
the right to attend the transfer of the consignment to the 
prefinancing warehouse. 
4.51. Besides the duty to carry out unannounced test 
examinations of meat entering a prefinancing warehouse, 
customs authorities are also responsible for certifying the 
date of entry, which, except when the rate has been pre­
fixed, dictates the date for determination of the refund 
rate. 
4.52. The physical examination at this point is par­
ticularly important for beefmeat since the meat is placed 
in customs control in a chilled state, then frozen before 
export. It is evident that once meat is frozen it becomes 
almost impossible to say precisely what it is unless it is 
defrosted. 
4.53. Controls over the time limits for warehousing 
before export are exercised by either the customs 
authorities or the paying agencies depending on the 
Member State involved. In most Member States paying 
agencies are responsible for the management and control 
of securities lodged in support of claims for prefinancing. 
4.54. The Court makes the following observations 
resulting from its audit of prefinancing controls over 
beefmeat: 
(a) arrangements for prior notification of placing the 
meat under customs control were inadequate in one 
Member State as they did not allow the customs 
officer sufficient time to carry out an examination 
should he have wished to do so. In these circum­
stances it is not surprising that a major exporter 
visited by the Court had never been subject to such an 
examination; 
(b) in another Member State, an exporter visited by the 
Court was always allowed to wait until after the 
deadline for customs attendance before filling in the 
74 Official Journal of the European Communities 12. 12. 88 
export declaration, a practice which defeats com­
pletely the purpose of selective, unannounced cus­
toms checks; 
(c) examination of control records relating to presen­
tation of proofs of arrival at final destination revealed 
that there were many instances of securities ap­
parently outstanding long after the final date for 
presentation of proofs. In some cases the securities 
should clearly have been forfeited yet no action had 
been taken. By way of example one trader had 
outstanding securities of about 4,7 Mio ECU (some 
dating back to 1984) for which the time limits for the 
presentation of proofs had expired, but the national 
authorities had taken no steps to claim forfeiture of 
the securities. In another Member State, where the 
control of securities in respect of prefinancing is 
shared between customs and the paying agency, the 
securities outstanding according to customs amoun­
ted to 1,4 Mio ECU for one trader, whilst the paying 
agency records for the same trader indicated a nil 
balance. The authorities concerned had made no 
attempt to reconcile the two sets of figures; 
(d) in certain Member States examination of the same 
records revealed many instances of lack of control 
over the eventual export and arrival at final desti­
nation of quantities of prefinanced beefmeat and over 
the time limits for withdrawal from warehouse, final 
export and presentation of proofs; 
(e) the Court notes with concern that one trader, already 
under investigation for export refund fraud in 1985 in 
one Member State, was paid some 12 Mio ECU in 
1986 in another Member State, without any special 
attention being paid to individual claims, without an 
investigation of his export refund activities and 
without a Directive 77/435/EEC control. The ques­
tion thus arises of establishing whether the Commis­
sion has at present any system providing it with 
information on cases of this kind and allowing it to 
monitor the Member States' mutual information-
supplying activities and react promptly where neces­
sary. In this connection, the Court must refer the 
reader to its previous observations on this topic (see 
the annual report for the financial year 1986 (3), 
paragraph 6.10), which emphasized that the task of 
fraud prevention would be substantially facilitated if 
the names of persons or companies which had 
committed a fraud and/or an irregularity were known 
• at Community level. Concluding remarks on export refunds 
4.55. The Court's examination has concentrated on the 
control objectives summarized in paragraph 4.24 above. 
The results have been unsatisfactory in every case. In the 
Court's opinion the scope and quality of national controls 
over the payment of export refunds, particularly in the 
beef sector, do not give reasonable assurance that the 
expenditure concerned was legally and regularly incurred. 
4.56. In particular the Court sees a clear need to 
improve physical controls over exports. As the Court has 
said in a recent opinion (16), adoption of the proposed 
Council Regulation (see paragraph 4.27 above) would be 
a step in the right direction. But to be fully effective the 
implementing measures would need to: 
(a) define the nature and extent of physical checks; 
(b) make clear that the minimum number of physical 
checks to be carried out at the time of the completion 
of customs formalities should be based on the value of 
export refunds and not on the number of declar­
ations; 
(c) define criteria for risk identification to ensure that 
physical checks and sample-taking with a view to 
analysis are directed towards high risk areas; 
(d) ensure that physical checks and analyses are made on 
the basis of representative samples of the consign­
ments selected for examination; 
(e) require Member States to maintain records of 
transactions subjected to physical checks, of the 
number and nature of checks carried out and the 
results thereof, and to submit summaries of these 
records annually to the Commission. 
4.57. The Court's examination of the national controls 
over the management of securities in respect of pre­
financed transactions gives no assurance that all sums due 
to the Community under the forfeiture rules are promptly 
and fully brought to account. The Court recommends 
that the Commission's clearance auditors should pay 
particular attention to the operation of these controls 
during visits to Member States. 
12. 12. 88 Official Journal of the European Communities 75 
4.58. While differentiated rates of refund apply, the 
Court has difficulty in envisaging any system of controls 
over proof of arrival which would provide sufficient 
safeguard against a determined attempt at fraudulent 
declaration. 
4.59. More generally, the Court wishes to stress the 
importance in this context of the level of Community 
suppport prices, since it is the differential between 
Community and world prices which determines the level 
of export refunds. As long as rates of refund continue at 
the sort of levels currently in force (cf paragraph 4.25) the 
administration of export refunds will continue to entail a 
significant risk of fraud, as well as substantial budgetary 
cost. 
Market measures 
4.60. Since its inception the Court has carried out audits 
of the individual agricultural markets, the results of which 
are, for the most part, contained in special reports. The 
heterogeneity of these measures makes it difficult to draw 
general conclusions. However, almost all of the measures 
examined by the Court to date gave rise to control 
difficulties in at least some of the Member States. 
4.61. The results of certain audits of this nature, which 
were carried out in 1987, are set out later in this chapter 
(see paragraphs 4.86 — 4.131). 
Directive 77/4351 EEC (6) 
Introduction 
4.62. This Directive seeks to improve the protection of 
EAGGF funds by requiring Member States to carry out 
systematic a posteriori checks or scrutinies of the 
commercial documents of undertakings receiving pay­
ments from or making payments to the Fund. These 
checks should be complementary to any imposed before 
completion of the transactions concerned and should be 
designed to establish, from an examination of all relevant 
commercial documents, that transactions have actually 
been carried out and have been executed in accordance 
with the governing Community regulations. The 
Directive lays down the minimum number of undertak­
ings to be scrutinized each year but leaves Member States 
free to decide the scope and frequency of the checks to be applied. Member States are required to report annually to 
the Commission on the implementation of the Directive. 
4.63. In December 1984 the Court, in a special 
report (17) based on studies carried out between 1981 and 
1983, drew attention to weaknesses in the implementation 
of this Directive. In its 1987 examination, which was 
based on replies to questionnaires from all Member States 
and visits to selected Member States (D, F, GR, I, IRL 
and UK), the Court found that while some progress has 
been made there are still serious weaknesses in many 
Member States. 
The Court's observations on the implementation of the 
Directive in the Member States 
4.64. The number of undertakings to be scrutinized in 
each Member State each year shall be not less than half of 
the number of undertakings whose annual transactions 
with the EAGGF exceed 100 000 units of account. The 
Court found that, in recent years, two Member States 
(GR, I) had failed to achieve this minimum number of 
scrutinies, achieving only 50 % of the target number and 
70 % respectively. 
4.65. Member States must ensure that the selection of 
undertakings for scrutiny is representative of undertak­
ings according to their financial importance vis-a-vis the 
EAGGF. The Court found that not all Member States 
respected this need for representativeness. For example 
some Member States (GR, I) excluded from scrutiny 
altogether undertakings below the 100 000 units of 
account threshold notwithstanding that, for some 
measures, these undertakings account for the bulk of the 
transactions with the Fund; while most Member States 
did not carry out any Directive checks of public storage 
transactions nor of transactions concerned with the 
collection of co-responsibility levies. 
4.66. As mentioned above Member States should 
submit annual reports to the Commission on the 
application of the Directive. The Court's enquiries 
showed that at 31 December 1987, that is some nine 
months after the reports for 1986 should have been 
received, the position was that one Member State (I) had 
still not sent in reports for the years 1984 to 1986. 
4.67. There are wide differences between the Member 
States in the planning and performance of Directive 
work. In the best cases the work was well-coordinated 
(e.g. export refunds in F), selection of undertakings was 
done on a rational basis making use of factors such as risk 
76 Official Journal of the European Communities 12. 12. 88 
analyses (e.g. export refunds in D) and there were good 
instructions, checklists, etc. for the carrying out of the 
scrutinies (e.g. UK). At the other extreme Directive work 
was unplanned, the choice of undertaking haphazard and 
the methods of carrying out the checks left entirely to the 
discretion of the individual scrutineer (GR). In some cases 
the checks included — most importantly in the Court's 
opinion — analytical reviews of the activities of the 
undertaking over a period of time and reconciliations of 
purchases, sales and stock figures; in others, and more 
commonly, the checks simply sought to establish the 
validity of a particular transaction by reference to the 
undertaking's books of account. In only one Member 
State (F) did the checks extend to carrying out physical 
inspections and sampling of the produce concerned. 
4.68. In some Member States reports of scrutinies 
carried out were comprehensive as to the type of checks 
applied and the particular transactions tested (D, UK), 
whereas in one Member State (GR) no such information 
was included in the scrutiny reports which rendered them 
useless as a tool for monitoring the implementation of the 
Directive. Two Member States (IRL, UK) refused to 
allow the Court access to scrutiny reports notwithstand­
ing that these checks are required to be carried out under 
Community law. 
4.69. The number of staff allocated by Member States 
to Directive work as a function of expenditure to be 
controlled also varied widely, ranging from 1 controller 
per 3 Mio ECU of expenditure at one extreme (DK) to 1 
controller per 140 Mio ECU at the other (GR). In some 
Member States staff employed on Directive work receive 
formal training in the examination and interpretation of 
company accounts (D, UK); in another no formal 
training at all (GR). 
4.70. In certain Member States (GR, I) there could be 
conflicts of interest in the application of the Directive in 
that staff allocated to this work were also responsible for 
the pre-payment checks of the transactions concerned. 
4.71. Not surprisingly given the position described 
above, the Court's enquiries revealed wide differences in 
the number and financial importance of irregularities 
discovered by Member States as a result of Directive 
checks. At one extreme a Member State (I) informed the 
Court that for a particular year it had unearthed 
irregularities at 80 undertakings (more than a quarter of 
those visited) affecting payments totalling almost 40 Mio 
ECU. At the other, the checks in certain Member States (DK, GR), for the same year, revealed no or only 
insignificant irregularities. 
Directive checks of undertakings claiming export refunds 
4.72. As part of the examination referred to in 
paragraphs 4.20 to 4.59 above, the Court reviewed the 
implementation of the Directive in respect of the coverage 
and quality of the tests applied to payments of beef export 
refunds. 
4.73. A main finding was that two of the four Member 
States concerned (IRL, UK) had no statistics showing the 
population of undertakings claiming refunds, the date of 
the last scrutiny under the Directive and its results. At the 
Court's request one Member State (UK) did some 
research and provided the figures. These showed that 
two-thirds of all beef export undertakings had never been 
inspected and, more disturbingly, that one-fifth of such 
undertakings in receipt of refunds totalling more than 
100 000 units of account a year had never been checked. 
4.74. The Court accompanied scrutineers on Directive 
visits in two Member States (IRL, UK). It found that the 
quality of the tests applied was not high. There was no 
attempt to make analytical reviews of the activities of the 
undertakings over a period of time, e.g. reconciliations of 
purchases, sales and stocks. Checks were limited to 
proving particular transactions in the books of account 
by reference to basic documents such as bills of lading, 
invoices, packing notes, etc. As a general rule they did not 
extend to examination of secondary evidence, for 
example contracts, insurance documents and haulage 
fees. It was not always possible to prove the source of 
settlement of invoices. In the circumstances, the approach 
adopted afforded little additional assurance of the 
authenticity of transactions than could be obtained from 
an examination of the documents submitted with the 
export refund claim. 
4.75. The Court's concern over the quality of these 
checks is underlined by the fact that, in a particular 
Member State (IRL) which has experienced a number of 
substantial frauds perpetrated over long periods of time 
in the beef exports' sector, Directive visits to the 
undertakings concerned had failed to give warning of 
malpractices. 
12. 12. 88 Official Journal of the European Communities 77 
THE COMMISSION'S SUPERVISORY > Commission's monitoring of the 
ARRANGEMENTS implementation of Council Directive 77/435 
Introduction 
4.76. These arrangements should operate to ensure: 
that Member States' systems for the day to day 
management and control of EAGGF-Guarantee meas­
ures are adequate; that Directive 77/435/EEC (6) is 
satisfactorily implemented in all Member States; and that 
there is a full and timely clearance or audit of the annual 
EAGGF accounts submitted by Member States. The 
Court's enquiries showed that the operation of these 
arrangements is not always satisfactory. 
Commission's monitoring of the Member 
States' systems for the day to day 
management and control of EAGGF-
Guarantee measures 
4.11. In paragraph 5.71 of its report for the financial 
year 1986 (3) the Court concluded that the Commission's 
supervision of the implementation o'f EAGGF-Guaran­
tee measures at the national level was inadequate. The 
Court's work in 1987 has served to reinforce this opinion. 
4.78. The Court's examination of the Community 
arrangements for the management and control of 
intervention storage revealed that the Commission does 
not have full and up-to-date information on the national 
regulations and systems in force for this important area of 
EAGGF-Guarantee expenditure, and is therefore unable 
to check that national systems are in conformity with 
Community legislation. 
4.79. For export refunds the Court's enquiries showed 
that the Commission has some, but far from complete, 
knowledge of the control systems in force at the national 
paying agencies. But it has virtually no detailed inform­
ation on the systems of the national customs services 
which perform key controls over this large and high-risk 
area of expenditure. Where the Commission has gone on 
the spot and documented national systems the value of its 
work has on occasions been spoiled through failure to 
identify and deal with key control weaknesses. 4.80. In the first years following its introduction, the 
Commission used a number of means of influencing and 
monitoring the application of the Directive (6), including 
seminars for exchanging experiences, meetings of special­
ists, reviews of Member States systems, etc. But by 1984, 
as noted in the Court's special report of December 
1984 (17), this type of activity had come almost to a stop 
and the Commission was doing little more than reacting 
passively to information supplied by the Member States. 
The Court's recent review of the Commission's work in 
the area of the Directive showed that this position 
persisted in 1987. Despite good intentions, the Commis­
sion was unable to find the resources to re-activate its 
monitoring role in the year, having transferred the staff 
concerned to the investigation of suspected frauds. Thus 
the following events planned for 1987 all had to be 
cancelled: a meeting between the Commission and the 
Member States to discuss ways of improving the 
application of the Directive, including the proposals 
contained in the Court's special report; visits to certain 
Member States to improve the Commission's knowledge 
of the practical implementation of the Directive; and the 
issuing of guidelines to Member States aimed at securing 
a more uniform application of the Directive. 
4.81. The Commission's monitoring of the application 
of the Directive has also been less than satisfactory in the 
following respects: 
(a) it still does not have complete and up-to-date records 
of the procedures in force in the Member States for 
the implementation of the Directive; 
(b) in the specific cases of Spain and Portugal it has no 
information at all on record of the procedures 
introduced for implementing the Directive not­
withstanding that it is now supposed to be fully 
operational in these two Member States; 
(c) there have been no seminars or other meetings with 
Member States to provide a forum for an exchange of 
views on the implementation of the Directive since 
1983; 
(d) the Commission has not always replied promptly to 
requests for advice from the Member States on the 
correct interpretation of the Directive or on other 
78 Official Journal of the European Communities 12. 12. 88 
problems associated with its practical implemen­
tation; 
(e) the Commission has taken no steps to improve the 
very sparse information submitted by Member States 
in their annual reports on the Directive; 
(0 the Commission makes no systematic analyses of 
these reports to draw conclusions regarding the 
effective and uniform implementation of the 
Directive, and its cost/benefit; 
(g) the ability to perform such analyses is not helped by 
the fact that it is not possible as things stand to use 
'Irene', the computerized system for recording frauds 
and irregularities, to identify frauds and irregularities 
brought to light as a result of Directive 77/435/EEC 
checks. 
4.82. The Commission did write to all Member States in 
June 1986 drawing attention to the main recommend­
ations of the Court's special report of December 1984 (17). 
However, the meeting of experts to discuss these 
recommendations originally planned for the last half of 
1986 has never taken place. There have been no reactions 
from the Member States to the Commission's letter and 
the Commission itself has taken no further action in the 
matter. 
Commission's clearance of accounts 
4.83. Contrary to the position on the clearance of food 
aid accounts (see Chapter 2), the Commission has made 
considerable progress in recent years in reducing the 
delays, which had been as long as five years, in clearing 
the Member States annual accounts of EAGGF-
Guarantee expenditure. Thus in 1987 the Commission 
reached decisions regarding the clearance of the Member 
States' accounts for the financial years 1983 to 1985. 
4.84. While acknowledging the Commission's achie­
vement in reducing the backlog, the Court has to point 
out that the Commission was still unable to meet the 
deadline of 31 December 1987 set by the regulations for 
the clearance of the 1986 accounts. If the Commission 
cannot meet these deadlines the European Parliament will 
continue to be faced with the difficult problem of having 
to reach discharge decisions on accounts which have not 
been cleared by the Commission. On this subject the 
Court refers the reader to the Opinion (18) which it gave 
on the Commission's proposed modification of the 
Financial Regulation. 4.85. Progress has not been so rapid in dealing with the 
more difficult problem of raising the level of the clearance 
process to the point where it enables the Commission to 
reach a judgement about the reliability of Member States' 
accounts. The Court analysed this problem at some 
length in its last annual report (3) (paragraphs 5.26 to 
5.44). Since then, the Commission has made further 
progress in introducing the procedures of the audit 
manual referred to in paragraph 5.31 of the above report, 
including the extension of its use of systems-based audit. 
Nevertheless there are still some important aspects of 
clearance work which are unsatisfactory and where little 
progress was made in 1987: 
(a) there is a lack of coordination and consultation 
between the clearance service and the market services 
in the Commission. Moreover there is little co­
ordination of efforts to bring national controls under 
an integrated approach and to render the control 
measures and activities of the different parts of the 
control pyramid as efficient and effective as possible; 
(b) the number of staff allocated to this work by the 
Commission remains inadequate; no additional staff 
were made available in the year and no action taken 
to carry out the staff inspection recommended by the 
Court (paragraph 5.35 of its report for the financial 
year 1986 (3)) to establish the number of staff required 
in the long term to carry out this vital work to a 
satisfactory standard; 
(c) in the Court's view the level of expertise available to 
the Commission as regards computer and systems 
audit is still not high enough and no steps were taken 
to raise it in 1987; 
(d) the Commission is still not allocating sufficient 
resources to the preventive role, that is to the role 
which seeks to ensure that Member States' systems 
for the management and control of EAGGF-
Guarantee measures are adequate and so to reduce 
the risk of problems at the clearance stage; 
(e) in the important area of export refunds (see para­
graphs 4.20 — 4.59 above) the Commission's 
clearance work still does not include audit of the key 
customs controls over exports. 
Finally, the Court has to conclude that the scope of the 
clearance methods remains such that the Commission is 
12. 12. 88 Official Journal of the European Communities 79 
in no position to make a judgement as to the correctness 
of the Member States' EAGGF-Guarantee accounts. 
AUDIT OF INDIVIDUAL MARKETS 
4.86. The regulations governing the individual market 
organizations provide for a great variety of grants, 
subsidies and other measures designed to regulate the 
markets. These measures, which vary considerably in 
terms of their financial importance, are administered by 
the Member States through the intermediary of a variety 
of intervention agencies and a complex network of central 
and local authorities is charged with controlling specific 
aspects of their implementation. Futhermore, each 
measure has its own specific criteria and control 
requirements. 
4.87. During the year the Court examined certain 
specific measures relating to individual agricultural 
markets. The examination included aspects relating not 
only to the legality and regularity of control and payment 
procedures but also to the appropriateness of the 
measures that regulate the markets concerned. In 
particular, the following areas were examined: 
(a) Community measures for the private storage of table 
wine and of grape must and measures for the 
utilization of grape must; 
(b) measures adopted since the publication of the Court's 
special reports on olive oil (19) and on Community 
wine distillation measures (20); 
(c) the administrative arrangements adopted by Spain to 
control Community expenditure in the olive oil and 
wine markets. For both products Spain is among the 
world's leading producers. 
Audit of the table wine market: private 
storage contracts and Community aids for 
the utilization of grape must 
4.88. The Court's audit of these measures was carried 
out in the FR of Germany, Greece, Spain, France, Italy 
and Luxembourg. Private storage of table wine and of grape must 
4.89. Current Community measures in this area com­
prise : 
(a) aid for the long-term storage of table wine or grape 
must: this measure is available early in the marketing 
year (21) and is intended to remove surplus table wine 
or grape must from the market for a given period and 
thereby support the market price. The producer 
contracts to store a given quantity of table wine for a 
period of nine calendar months, or, in the case of 
grape must, until the following 15 September. As well 
as the storage aid the producer is also guaranteed a 
special distillation price which is considerably in 
excess of the market price for the stored wine at the 
end of the contract period. This special distillation 
price is limited to a maximum of 18 % of a producer's 
table wine production; 
(b) supplementary storage contracts: the producer may 
opt at the end of the long-term storage, to continue to 
store his wine (or that part of it which he has not 
submitted for distillation as described at (a)) for a 
further period of four months; 
(c) re-storage contracts: if it appears likely that the 
storage tanks used for wine under long-term storage 
contracts will be required to store the new harvest 
then the re-storage of the wine may be authorized. 
4.90. Annual expenditure on Community aids for the 
private storage of wine has averaged 105,9 Mio ECU in 
the period 1981-86 inclusive. This figure includes 
expenditure on short-term private storage aid up to 1984 
when the measure was discontinued as a Community 
aid (22). Expenditure on the long-term storage measure 
amounted to 70,5 Mio ECU in 1986 and 45,9 Mio ECU 
for 1987. Restorage aid averaged 8,0 Mio ECU during the 
period 1981-86 inclusive and for 1987 an amount of 
7,6 Mio ECU was charged to the accounts. 
Audit findings 
4.91. The Court concluded that controls over long-term 
private storage contracts for table wine and grape must 
were less than satisfactory in that: 
80 Official Journal of the European Communities 12. 12. 88 
(a) documentary controls were hampered by inadequate 
stock records; 
(b) physical controls were unsatisfactory because of 
infrequent on-the-spot visits during the storage 
period combined with the fact that in only a very 
limited number of cases was the wine stored in sealed 
containers; 
(c) there was inadequate official surveillance of the 
quality characteristics of the table wine under storage 
to ensure that the minimum characteristics were 
respected. 
4.92. With regard to the stock records it was found in all 
the Member States visited with the exception of the FR of 
Germany, that, although the tanks in which wine or grape 
must was initially stored were indicated to the control 
bodies, no detailed stock records were available per tank 
number showing movements between tanks. Neither did 
the available records make it possible to clearly identify 
the wine under a storage contract within the total stocks 
of the winery at any given moment, thereby inhibiting the 
transparence of documentary controls. These inad­
equacies in the stock records can be attributed to 
weaknesses in Community regulations. 
4.93. With regard to physical controls the Court found, 
particularly in France and Italy, that the available staff 
resources were extremely limited and did not allow for on-
the-spot visits to be made with sufficient frequency to 
ensure that the wine remained in stock during the 
contracted storage period. 
4.94. The sealing of storage tanks containing wine 
under long-term storage contracts would help to ensure 
that the wine remained in storage throughout the contract 
period. Such a procedure is not stipulated by Community 
regulations. Yet, it was found that the sealing procedure is 
the normal practice in the Province of Padova in Italy and 
it is accepted without demur by the producers. Also, it 
was found that, in Greece, the procedure is implemented 
when banks advance funds to wineries against the wine as 
security. The Court recommends that the possibilities be 
examined of extending the present limited application of 
the sealing procedure. 
4.95. As an illustration of the dangers for the Com­
munity budget arising from the general weaknesses 
highlighted above the Court noted, in one case examined 
in France, that Community aid had been paid for the 
long-term storage of concentrated must although the contract had been interrupted some days before the end of 
the contract period. In addition the concentrated must, 
which was used for the enrichment of wine, benefited 
from a further Community aid for the latter purpose. 
4.96. Although the regulations contain a general 
provision that obliges producers to inform the interven­
tion agency if, during the period of validity of a storage 
contract, there is any appreciable change in the quality of 
the product stored there is no specific provision requiring 
the control authorities to verify the quality characteristics 
during or at the end of the contract period. The Court's 
audit did not reveal any evidence that such checks were 
carried out. 
4.97. With regard to the aid for the re-storage of wine, 
the Court's audit revealed that there was insufficient 
justification of the need for such re-storage in many 
instances. In one case examined in Italy it was found that 
wine had been re-stored, with Community aid, three 
working days before the end of the storage contract 
period. The wine was re-stored close to a distillery where 
it was later distilled under a price support guarantee 
distillation contract. In addition the re-storage was 
carried out in late October, when the new harvest would 
normally have been completed. 
4.98. Given the combination of weaknesses listed above 
the only obligation on producers in many instances is to 
present wine of similar colour, quality and alcoholic 
strength at the end of the contract period and, in certain 
instances not even the respect of these basic requirements 
is verified. In the circumstances, therefore, the Court 
considers that there are not sufficient safeguards to ensure 
that the long-term private storage contracts for table wine 
achieve the desired objective of keeping specified 
quantities of table wine off the market. 
4.99. The Court questions the economics of the present 
system of long-term private storage because there is 
ample evidence to indicate that many producers par­
ticipate in the measure essentially to take advantage of the 
very attractive prices offered by price support guarantee 
distillation. Given the very strong likelihood of this wine 
being eventually distilled, the Court, while maintaining its 
reservations as to the appropriateness of Community 
wine distillation measures in general (see special 
report (20)), considers that it would be less costly for the 
Community budget to have the wine distilled im­
mediately, rather than paying for its storage during a 
nine-month period in the first instance. 
12. 12. 88 Official Journal of the European Communities 81 
Community aids for the utilization of grape must 
4.100. The Court's audit involved the two main types of 
Community aid in this area. These are: 
(a) aid for the use of grape must for the enrichment of 
wines: the aid is payable to producers of concentrated 
grape must and rectified concentrated grape must 
used to increase the alcoholic strengths of grape must, 
table wines, wine suitable for yielding table wine as 
well as certain sparkling wine. The aid is fixed in ECU 
per % volume potential alcoholic strength and per 
hectolitre to allow for the difference in cost between 
enriching with musts and with sucrose, the utilization 
of the latter product being prohibited in Southern 
wine-growing regions. Its use has, however, been 
authorized in the FR of Germany and in Luxem­
bourg until 1990 when the Council will re-examine the 
matter; 
(b) aid for the use of must for the manufacture of grape 
juice: this aid was introduced on September 1, 1982. 
A portion of the aid (35 %) is retained by the 
Commission to be used to promote the consumption 
of the product. 
4.101. Community expenditure averaged 68,7 Mio 
ECU for enrichment aid and 7,6 Mio ECU for grape juice 
aid during the period 1981-85 inclusive. Enrichment aid 
peaked at 140,8 Mio ECU in 1984 due mainly to the 
characteristics of the 1983 harvest. Expenditure has since 
fallen back to 75 Mio ECU in 1986 but rose again to 
105,8 Mio ECU in 1987. Expenditure on aid for grape 
juice manufacture has shown a steady pattern over the 
period and stood at a level of 6,7 Mio ECU in 1987. 
Audit findings 
4.102. As in the case of private storage contracts it was 
found that the services responsible for controlling wine 
enrichment measures and the manufacture of grape juice 
were frequently not in a position to carry out physical 
controls although Community regulations stipulate that 
they be informed in advance when the aided operations 
will commence. This was particularly so in Italy and in 
France where the bulk of Community expenditure on this 
measure takes place. The Court considers that a sufficient 
level of physical controls are essential to verify key data, 
namely: (a) that the grape must to be enriched has the minimum 
potential alcoholic strength required; 
(b) that the increases in terms of volume and of alcoholic 
strength do not surpass the limits laid down; 
(c) that no unauthorized substances are used for 
enrichment. 
4.103. It was found in certain cases examined that the 
registers were not of a standard format and were badly 
maintained. Essential data, such as the origin of the 
concentrated must, was not indicated, in some instances. 
In others the procedures for informing the authorities in 
advance of the commencement of operations were 
unsatisfactory. 
4.104. As to the retention of a large percentage of the 
aid (see paragraph 4.100(b)) the Court noted that the 
procedures for accounting at Commission level for the 
resulting credits were unsatisfactory in that the amounts 
retained were recorded in memorandum accounts which 
did not form part of the budgetary accounts. 
4.105. Community regulations envisaged the author­
ization of wine enrichment as an exceptional measure 
where weather conditions made it necessary. However, 
the Court is concerned that the measure is authorized too 
freely. For instance, it was found that in Southern wine­
growing regions of the Community where, prima facie the 
need for enrichment should be limited, the measure has 
been authorized on the most widespread basis possible 
each year since it was introduced. The consequences of 
such a liberal enrichment policy could be to incite 
producers to significantly increase their yields per hectare 
in the full knowledge that any loss in alcoholic strength 
which might result could be made good using the 
attractive enrichment aid on offer. 
4.106. Where enriched wines are later sent for distil­
lation a deduction is made from the relevant distillation 
aid if the alcoholic strength is increased beyond a certain 
limit. The Court's audit yielded ample evidence of 
producers who enriched their wines close to the limits 
allowed and yet stayed within the limits set for the 
payment of full distillation aid. Indeed it appears likely 
that any producer who strove for higher yields per 
hectare, normally resulting in wines of lower alcoholic 
strength, was able to enrich his wine to the maximum 
allowed without incurring a reduction in distillation aid. 
82 Official Journal of the European Communities 12. 12. 88 
MAIN CHANGES INTRODUCED BY THE Wine distillation measures 
COMMISSION SINCE THE PUBLICATION 
OF THE COURT'S SPECIAL REPORTS 
Olive oil production aid 
4.107. Since the publication of the Court's special 
report (19) in 1985 the main activity concerning the 
control of Community expenditure has centred on the 
establishment of the olive oil control agencies in Italy and 
in Greece. After initial delays, due mainly to legal 
difficulties in finding an appropriate structure for the 
agencies, they became operational in Italy during June 
1986 and in Greece during the period October-December 
1987. Control agencies have recently been established in 
Spain and Portugal but are not, as yet, operational. 
4.108. The Court has not, as yet, examined the activities 
of the control agencies in detail. It noted, however, that 
the Commission service responsible for monitoring these 
activities received regular progress reports and indicated 
that it is satisfied with the results achieved in Italy to date. 
The Court considers that the results, in terms of action 
taken, imply a serious approach to controls by the Italian 
agency. The Commission recently stated that 'in the first 
year of operation of the olive oil register some Member 
States found aid claims dropping by up to 30 %' (23). It is, 
as yet, too early to evaluate the controls effected by the 
Greek, Spanish and Portuguese agencies. 
4.109. The special report was particularly critical of 
controls carried out by producer organizations. The 
Court notes the recent Council Regulation (24) which 
removes from these organizations the obligation to carry 
out on-the-spot controls on the percentage of their 
members' crop declarations. One of the reasons given for 
the modification is that 'the progressive establishment of 
the olive cultivation registers removes the need for these 
checks, which, because of their complexity, have not 
always been carried out correctly'. Part of the reasoning 
for the change was also the fact that the olive oil control 
agencies are considered by the Commission to have 
become operational to a satisfactory degree (25). 4.110. In its special report on Community wine 
distillation measures the Court was critical of the 
arrangements whereby producers subjected to com­
pulsory distillation of table wine could escape the 
financial effects of the measures by transferring their 
obligations to other producers. The Court welcomes, 
therefore, recent restrictions introduced by the Commis­
sion for the 1987/88 marketing year. The new measures 
do not, however, fully eliminate transfers although they 
restrict these transfers to producers in the same Member 
State. 
4.111. The Court also notes the Commission's continu­
ation of its stated policy to restrict the price support 
guarantee distillation. For the 1987/88 marketing year the 
measure is restricted to 10 % (as against 13 % in the 
previous year) of total wine production of the holder of a 
long-term storage contract during the previous marketing 
year. However, the Court reiterates its observation (26) 
that the price offered for this distillation measure is too 
high, given the present structural surplus and recom­
mends that arrangements for reducing and eventually 
cancelling the measures should be stepped up. 
4.112. In addition the Commission has recently pro­
posed (27) to strengthen certain aspects of the general 
rules relative to the distillation of wine and of the by­
products of winemaking. The proposal attaches par­
ticular importance to the following: 
(a) additional measures facilitating the identification of 
wine to be distilled by means of improved sample 
taking procedures when the wine enters the dis­
tilleries ; 
(b) sanctions imposed by the Commission in cases of 
non-respect of obligatory distillation measures. 
The Commission considers that these measures, if 
adopted, would eliminate certain important weaknesses 
indicated by the Court in its special report. 
4.113. Recently the Commission has also proposed (23) 
a Council Regulation laying down general rules on 
controls in the wine sector in which provision is made for: 
(a) the improvement of controls at national level inter 
alia by better coordination between the competent 
control services; 
12. 12. 88 Official Journal of the European Communities 83 
(b) the establishment within the Commission of a body of 
specialized officials for controls in the wine sector; 
(c) better cooperation between the competent authorities 
responsible for controls in the different Member 
States. 
4.114. The Commission expects significant savings to 
result from the application of these proposed measures. 
ADMINISTRATIVE ARRANGEMENTS 
ADOPTED BY SPAIN 
Features of olive oil production and 
consumption 
4.115. Spain accounts for about 30 % of world olive oil 
production — the same as Italy. Average production of 
virgin oil is approximately 500 000 tonnes plus some 
40 000 tonnes of olive residue oil. 
4.116. Annual consumption of olive oil in Spain 
amounts to approximately 370 000 tonnes or 75 % of 
production. As the Spanish market is protected from 
lower-priced imported oilseeds, there is, as yet, no 
Community consumption aid payable in Spain. 
Features of wine production and consumption 
4.117. Total annual wine production in Spain normally 
fluctuates between 34 and 37 Mio hectolitres of which 9 to 
10 Mio hectolitres are of quality wines. Average yields per 
hectare are very low (approximately 23 hectolitres/ 
hectare). 
4.118. Consumption of wine in Spain, at approximately 
55 litres per capita is significantly lower than in other 
producing Member States, notably Italy and France. 
However, it is stable or rising slightly in contrast to the 
downward trend in other producing Member States. 4.119. Community distillation measures are attractive 
to Spanish producers. For the 1986/87 marketing year a 
total of 12,5 Mio hectolitres was distilled under these 
measures. This represents slightly more than 50 % of 
table wine production in Spain during the period. For the 
1987/88 marketing year Spain has been allocated a 
quantity of 10,6 Mio hectolitres to be distilled under the 
measure for obligatory distillation of table wine. 
Administrative arrangements 
4.120. For both products Senpa (28) has been de­
signated as the intervention agency. Overall responsibility 
for paying Community aid rests with the financial 
directorate in Madrid. Responsibility for verifying 
entitlement to aid rests with the peripheral services, 
namely the provincial offices and the territorial inspec­
torates. Certain responsibilities have been delegated to 
specialized control services, as follows: 
(a) responsibility for controlling the movements of wine 
rests with the service for the prevention of frauds of 
the ministry of agriculture; 
(b) the control of wine distillation operations is the 
responsibility of the customs service; 
(c) responsibility for the physical operations involving 
the intervention storage of olive oil rests with an 
interprofessional organization called Patrimonio 
Comunal Olivarero — a semi-public body. 
4.121. In addition, the authorities of the autonomous 
regions were given primary responsibility for approving 
the demands for production aid for olive oil. To that end 
they also receive copies of the crop declarations and 
demands for aid and, from time to time, submit lists of 
demands approved to the relevant provincial office of 
Senpa. The present system is a temporary one, however, 
and the olive oil control agency will, when established, 
assume overall responsibility for verifying the correctness 
of demands for aid. The establishment of the agency is 
already underway and it is expected that it will be 
operational for the marketing year 1988/89. 
84 Official Journal of the European Communities 12. 12. 88 
Audit observations 
4.122. Notwithstanding the relatively low levels of 
Community aid paid in Spain to date the Court considers 
that, given the importance of the markets under review 
for Spanish agriculture, it is opportune to highlight 
certain weaknesses which the audit revealed so that 
corrective action can be taken. 
4.123. The main areas of weakness can in the Court's 
opinion be summarized as follows: 
(a) there is a general tendency by the control services to 
rely unduly on declarations made by producers and 
other interested bodies (e.g. oil millers and wine 
distillers) without adequate independent verification 
that these declarations are correct; 
(b) there is a need for greater coordination between the 
different services responsible for carrying out con­
trols, both in terms of clearly defining each service's 
duties and responsibilities and in increasing the 
exchange of information between the services. Such 
measures would avoid the risk of duplication and 
would allow for an increase in the level and extent of 
controls; 
(c) it was noted that the staffing levels of certain control 
services, relative to the numbers of demands for aid, 
unduly restrict both the quantity and quality of 
verification in some instances. Certain cases were 
noted where the levels of tolerance allowed, even 
when anomalies were discovered, are considered by 
the Court to have been too generous. 
4.124. The Court considers that greater emphasis 
should be placed on verifying: 
(a) producers' crop declarations and millers' crushing 
declarations, in the case of olive oil; and 
(b) harvest, production and stock declarations as well as 
delivery documents drawn up by the distillers in the 
case of wine. 
4.125. The importance of such verification can be 
judged from the use made of the above-mentioned 
declarations. Those in use for olive oil form the basis of 
paying Community production aid over a number of 
years. Declarations made by wine producers serve to 
establish their right to participate in Community 
voluntary distillation measures and also to establish their compulsory distillation obligations. The delivery docu­
ments drawn up by the distillers are used to verify the 
fulfilment either of a voluntary distillation contract or of 
a compulsory distillation obligation. In view of the 
importance of these latter documents for control 
purposes the Court recommends that they should be 
authenticated by a public body at the time of their 
establishment. 
4.126. The need for a better coordination between the 
control authorities was particularly observed in the case 
of controls exercised over olive oil production aid both by 
the staff of the autonomous regions and by those of the 
provincial services of Senpa. It appears that, as of now, 
neither service has a detailed knowledge of the control 
checks carried out by the other and organizes its controls 
independently. Such a system can lead to considerable 
inefficiencies. A more coordinated approach between the 
services would allow each service to complement the 
controls already effected by the other rather than, as may 
happen at present, repeating controls already made. A 
lack of coordination was also evident in the controls over 
wine distillation measures where the certificates furnished 
by the customs service were found to be insufficiently 
detailed to allow for a reconciliation between the wine 
delivered for distillation and the alcohol produced. The 
provincial offices of Senpa had to rely, therefore, on 
summaries prepared by the distillers but, as these 
summaries were not authenticated by the responsible 
control services, their value for control purposes was 
greatly diminished. 
4.127. Again in the domain of olive oil production aid a 
need for the tightening-up of criteria used for the in-depth 
verification of claims for aid was noted. In the region 
visited during the audit it was observed, for instance, that, 
in examining the small percentage of declarations chosen 
for on-the-spot verification, declarations were accepted 
without further investigation even where preliminary 
checks showed discrepancies of up to: 
(a) 20 % between the area declared and that shown in the 
land .register; 
(b) 50 % between the density of trees declared for the plot 
and the average density per hectare shown for the 
municipality in question in the land register. 
12. 12. 88 Official Journal of the European Communities 85 
4.128. The Court considers that given the obligation 
imposed by Community regulations to verify a minimum 
number of applications by means of on-the-spot visits, no 
tolerance levels should be allowed in the application of 
such checks. 
4.129. The present Community system provides for an 
important role to be played by recognized olive oil 
producer organizations in checking the declarations of 
their members (a role which was criticized by the Court in 
its special report (29)). In Spain, however, such organiza­
tions did not exist and special provisions were applied in 
the first two marketing years after Accession to enable the 
production aid nevertheless to be paid on the basis of 
actual oil production and not, on the flat rate basis. With 
the encouragement of the Commission, producer organi­
zations were formed in Spain during 1987 and they are 
faced with the difficult task of carrying out checks on their 
members. The timing of these arrangements is regarded 
by the Court as unfortunate in view of the recent adoption 
by the Council, at the Commission's proposal, of the 
measures (referred to at paragraph 4.109 above) to 
diminish the role of these organizations in the control 
procedures. 
4.130. As to controls over olive oil intervention storage 
operations the Court found that, while the administrative 
arrangements were generally found to be satisfactory it 
was observed that a rapid deterioration in the quality of 
oil occurs during the storage period. Precise figures are 
not yet available but preliminary indications suggest that 
significant declassifications may be necessary. The Court 
recommends that the services of the Commission 
investigate the situation with a view to establishing to 
what extent the cause may be attributed to: 
(a) unsuitable storage facilities; 
(b) incorrect classification of oil when purchased into 
intervention. 
4.131. It was also observed that sales out of intervention 
have largely been unsuccessful to date. Of a total quantity 
offered for sale of 55 000 tonnes only 23 600 tonnes was 
actually sold. The Court reiterates the criticisms con­
tained in its special report concerning the lack of 
flexibility in the present sales arrangements (30). GENERAL CONCLUSIONS 
4.132. In addition to the audit of selected market 
arrangements, the Court's work in 1987 has included in-
depth examinations of two of the most important 
horizontal instruments of market management, namely 
public storage and export refunds. The result in both 
cases has been to call seriously in question the reliability 
of the accounts, because of doubts principally as to their 
accuracy in the former case and the regularity of the 
underlying transactions in the latter. Both in the present 
chapter (e.g. in paragraphs 4.56 and 4.57) and in its 
special report on the management and control of public 
storage (31) the Court has recommended a number of 
practical remedies for the weaknesses identified. 
4.133. In addition the Court wishes to draw attention to 
certain other conclusions which it believes can legiti­
mately be drawn form its 1987 audit of Community 
agricultural expenditure: 
(a) as explained in paragraph 4.2 the administration of 
the EAGGF-Guarantee has since earliest years been 
de-centralized from the Commission to Member 
States. In the Court's view an essential corollary of 
this decentralized tradition is that the Commission 
should make the most vigorous possible use of its 
powers of central supervision and control, in order to 
ensure consistent and correct implementation of 
EAGGF-Guarantee measures at national level. 
Otherwise the gap between the intentions of the 
legislators and the practical implementation of 
measures at the local level will remain unacceptably 
wide; 
(b) in order to fulfil this enhanced role the Commission 
will need to bring its influence to bear more actively 
on Member States at two levels: firstly, through the 
various horizontal instruments of coordination and 
control; secondly, through more systematic monitor­
ing of and participation in Member States' adminis­
tration of specific market measures; 
(c) the Commission's knowledge of Member States' 
systems is too low at present because of inadequate 
surveillance and this largely accounts for weaknesses 
in Member States' control procedures. An example of 
86 Official Journal of the European Communities 12. 12. 88 
inadequate surveillance by the Commission is pro­
vided by the situation whereby the Spanish author­
ities were allowed to implement a fundamental 
change in their control procedures for olive oil production aid while the Commission was simul­
taneously proposing a change in the relevant Com­
munity regulations in the direction of the original 
Spanish procedures (see paragraph 4.129 above). 
(!) OJL 94, 28.4.1970. 
(2) OJL 304, 27.10.1987. 
(3) OJ C 336, 15.12.1987. 
(4) OJL 79, 21.3.1987. 
(5) OJ L 351, 14.12.1987. 
(6) OJ L 172, 12.7.1977. 
(7) Doc. COM(87) 9 final, 16.1.1987. 
(8) OJ C 215, 26.8.1985. 
(9) OJL 187,25.7.1979. 
(W) OJ L 206, 12.8.1977. 
(») OJL 4, 8.1.1982. 
("2) OJL 212, 21.7.1982. 
(") OJ L 38, 9.2.1977. 
(14) OJL 317, 12.12.1979. 
(J5) OJ L 62, 7.3.1980. 
(16) OJC 147, 5.6.1987. 
(J7) OJC 336, 17.12.1984. 
(18) Opinion No 1/88, adopted 19.5.1988, not yet published. (19) OJ C 134, 3.6.1985, p. 1. 
(20) OJC 297, 6.11.1987, p. 14. 
(21) The wine marketing year begins on 1 September. Long-term 
storage contracts may be approved from 16 December to 15 
February if the provisional balance sheet indicates the need 
for this measure. 
(22) France, Greece and Italy have been authorized to continue 
this measure as a national aid. 
(23) Doc. COM(87)694 final, 13.1.1988. 
(24) Council Regulation (EEC) No 892/88 of 29.3.1988, OJ L 89, 
6.4.1988, p. 1. 
(25) Doc. COM(87)718 final, 21.12.1987. 
(26) OJ C 297, 6.11.1987, p. 14 (paragraph 7.3(d)). 
(27) Doc. COM(86)398 final, 28.7.1986. 
(28) Servicio Nacional de Productos Agrarios. 
(29) OJ C 134, 3.6.1985, p. 1 (paragraphs 4.76 and 8.6). 
(30) OJ C 134, 3.6.1985, p. 1 (paragraphs 6.62 and 8.15(c)). 
(31) Special Report No 5/88, OJ C 274, 24.10.1988. 
12. 12. 88 Official Journal of the European Communities 87 
CHAPTER 5 
European Agricultural Guidance and Guarantee Fund, Guidance 
Section — (EAGGF-Guidance) 
5.0. TABLE OF CONTENTS Paragraph 
reference 
Introduction 5.1 
Application of measures to improve the conditions under which cereals are 
stored and marketed (Council Regulation (EEC) No 355/77) 5.2 — 5.43 
Purpose of the investigation 5.2 —5.5 
Problems relating to specific programmes and their objectives 5.6 —5.16 
Objectives and approval of specific programmes 5.9 — 5.11 
Monitoring of the implementation of the programmes and their effects 5.12 
Duration of the programmes 5.13 
Low rate of programme completion 5.14 — 5.16 
Problems connected with projects financed by the Commission 5.17 — 5.27 
Capacities used for intervention 5.18 — 5.20 
Observance of project selection criteria 5.21 —5.23 
Limited technical performance of certain storage projects 5.24 
Use made of the financial reports provided for under Regulation (EEC) 
No 355/77 5.25 — 5.26 
Shortcomings in the accounts and other irregularities 5.27 
Special problems relating to port silos 5.28 — 5.36 
Introduction 5.28 — 5.32 
Observations 5.33 — 5.36 
Lack of coordination in the adoption of port silo projects 5.33 
Limited results of programmes 5.34 — 5.35 
Lack of systematic inspections 5.36 
Conclusions and recommendations 5.37 — 5.43 
Observations resulting from the special report on Community aid for the 
acceleration of agricultural development in Greece 5.44 — 5.50 
INTRODUCTION 
5.1. Policy in respect of agricultural structures includes 
amongst its most important measures those introduced 
by Council Regulation (EEC) No 355/77 of 15 February 1977 (i), Council Directive 75/268/EEC of 28 April 1975 
(hill farming and farming in certain less favoured 
areas) (2) and Council Regulation (EEC) No 797/85 of 12 
March 1985 (3). During 1987, the Court concentrated its 
investigations on the implementation of measures to 
improve the conditions under which cereals are stored 
(') The footnotes are listed together at the end of the chapter. 
88 Official Journal of the European Communities 12. 12. 88 
and marketed (Regulation (EEC) No 355/77). The Court 
also adopted a report on Community aid for the 
acceleration of agricultural development in Greece, the 
conclusions of which are summarized at the end of this 
chapter. 
APPLICATION OF MEASURES TO 
IMPROVE THE CONDITIONS UNDER 
WHICH CEREALS ARE STORED AND 
MARKETED (COUNCIL REGULATION 
(EEC) NO 355/77) 
Purpose of the investigation 
5.2. Council Regulation (EEC) No 355/77, as amended 
on several occasions and adapted on the accession of 
Spain and Portugal, established a system of common 
measures to improve the conditions under which 
agricultural products are processed and marketed. The 
guidance section of the European Agricultural Guidance 
and Guarantee Fund (EAGGF-Guidance) plays a part in 
this by contributing towards the financing of investment 
projects, which must be included in specific programmes. 
The maximum amount of Fund aid allowed is set at 25 % 
of the eligible cost. However, for a limited number of 
regions this amount is increased to 35 % and for certain 
others to 50 %. The average proportion of Fund aid to 
these programmes in the 1978-87 period was 26 % of the 
total cost. 
5.3 Some 6 268 projects were financed under this 
regulation in the 1978-87 period and a total of 
2 251,4 Mio EUA/ECU was granted. Measures concern­
ing cereal storage accounted for 697 of the projects (i.e. 
11,1 % of the total) and 218,7 Mio ECU (i.e. 9,7 % of the 
total amount of aid granted) (see Table 5.1). 
5.4. The Court's investigation of the cereals sector was 
directed mainly at specific programmes and projects 
linked to the rationalization or development of storage in 
this sector. Its main purpose was to pinpoint particular 
problems concerning the drawing-up of programmes by 
the Member States, their implementation and the 
monitoring of their execution. Table 5.2 shows changes in 
storage capacity, by Member State, using as a basis the 
quantities available according to the national program­
mes and adding the extra capacity achieved under 
Regulation (EEC) No 355/77. Finally, Table 5.3 shows 
cereals production and the areas harvested in 1986 as 
compared with the situation in 1980. 
5.5. The Court's observations on cereals storage are the 
result of the auditing, on the basis of records or on the spot, of a number of projects included in specific 
programmes financed by the Commission during the 
1980-87 period. Since 1981, the general rule has been that 
each project must be included in a programme, and since 
as early as 1 January 1979 priority has been given to 
projects which are included in approved programmes 
(Article 12 of Regulation (EEC) No 355/77). In the 1980-
87 period, 604 projects were financed by the Commission. 
After examining the files of those which had been 
concluded, the Court inspected a significant number of 
projects on the spot during independent audit visits in 
seven Member States, namely, Belgium, the FR of 
Germany, Greece, France, Ireland, Italy and the United 
Kingdom, i.e. those countries which received most aid in 
the cereals sector during the period under review. 
Problems relating to specific programmes and 
their objectives 
5.6. Of the main provisions concerning specific pro­
grammes, the following stand out: 
(a) the specific programmes are drawn up by the Member 
States and are designed to develop or rationalize the 
treatment, processing or marketing of (...) agricul­
tural products in part or all of the Community 
(Article 2 of the Regulation); 
(b) the Commission may grant Fund aid for projects 
which are included in specific programmes (Article 
H3)); 
(c) the programmes must show that they contribute 
towards achieving the objectives of the common 
agricultural policy (CAP) and, in particular, towards 
the proper functioning of the markets in agricultural 
and fish products (Article 3(1)); 
(d) the estimated time required for the execution of the 
programme should not in principle be more than 
three to five years (Article 3(lg)); 
5.7. The aim of Regulation (EEC) No 355/77 is 
essentially structural and it is concerned with the 
development or rationalization of firms engaged in the 
treatment, processing or marketing of agricultural 
products. Consequently, although the Regulation does 
not specifically rule out the financing of plant likely to be 
used for intervention purposes, the Commission made it 
clear in its decisions during the approval procedures for 
certain programmes that it would not participate in the 
funding of such plant. 
12. 12. 88 Official Journal of the European Communities 89 
T5 
00 
xs r-
•a a 
!! o 
<u 'E 
05 a -o •= 
IE 
a in 
— m 
42 © J3 
J3 
£ 
O 
O 
< *o 
a 
-a 
< 
Cfl 
8 
a, 
-a 
c 
•a 
< 
« 
'g1 
£ o? 
p u w o 
S 
S5 
b 
g 3 
z 
^ 
p 
u w 
is 
5? 
1 1 — <N ©_ ^ ©^ ©_ <N (N -H 1 lO v© 
of © ff rn rt irT m" vo O ' —<* —<" 
r-^-Tr-^-r-oo—'<^-i m ^t 
TfOOOOOO-^t~-ONO ' f> >o 
(N u~> — r- <N 
OO^^O^t-^-^r^ 1 <N t--
u-> — © co oo m m f-> © ' <N vo 
irir-'OiriVO'^-OOTttN | vi \o 
m •— CN >o «N f-i ^o | ™ _« 
tN — —' 
r--r<-ioor--oor~-w-)rN)—<^^ooro 
(NfNONmTtior--oomtNr-
•^•r-~C?\r^oom(N<^ONOOrrii^ 
© — 0\hOO(<1000(NO\NK1 
vo>/">—'©ou->r--r»- so^ovo 
(N m >— m -H *© i-* 
r» r-^ ^H oo rn r-^ TT ©_ ro tN ©^ OO^ 
Tt -3-" vo" "* t*~ oo' so r-~ ©~ •*" rn tN 
r--ooc-^oosotN''3-r<"»sososo</~) 
asas©cy<i/-)r^©so*-<soac© 
fN(NO<Nrt—<TtO tN —H 00 
— .— r-« 
>> s 
fl o * "^ E ST? .g Belgium 
Denmark 
FR of Ge 
Greece 
Spain 
France 
Ireland 
Italy 
Luxemboi 
Netherlan 
Portugal 
United K: o 
s 
r-
00 
*s 
o 
'-1 
t-
o\ so 
o 
© e 
•^ 
m «s ri 
o 
1 
5§ 
fS 
so 
"eS 
© H 
90 Official Journal of the European Communities 12. 12. 88 
Table 5.2 — Cereals: Storage capacity constructed in the Member States pursuant to Regulation (EEC) No 355/77 since 1980 
(in 1 000 t) 
Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom Capacities 
available 
according to 
national 
programme data 
2 591 
— 
6 000 
1 337 
25 200 
1 821 
1 700 
70 
— 
1 005 
15 000 Planned new 
capacity 
in the 
programme 
158 
— 
495 
1 000 
450 
130 
1 000 
10 
— 
110 
1 000 in the 
addendum 
300 
.__ 
330 
1 000 
5 080 
70 
— 
_ 
_ 
— 
350 Capacity 
constructed 
under 
R. 355/77 
351(1) 
— 
415 
700 
245 
212 
92 
_ 
— 
— 
640 
(') Explanatory notes for each Member State: 
— Belgium: Primary storage (after harvest) and port storage, 250 000 t of which are accounted for by port storage; 
— Denmark: No cereals programme. The projects referred to in Table 5.1 are confined to colza; 
— Germany: Primary storage; 
— Greece: Primary storage; 
— Spain: No data available; 
— France: Primary and port storage, 195 000 t of which are accounted for by port storage; 
— Ireland: Primary storage; 
— Italy: The national programme examined dealt in general with the storage of durum wheat; 
— Luxembourg: The Luxembourg programme was approved on 30 June 1987; 
— Netherlands: No cereals programme; 
— Portugal: Figures based on the draft programme for 1988-90; 
— United Kingdom: Primary and port storage. 
Table 5.3 — Cereals (excluding rice) 
Belgium 
Denmark 
Germany 
Greece 
Spain 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
United Kingdom 
EUR 12 Production harvested 
in 1 000 t 
1980 
1 894 
7 070 
23 087 
5 097 
12 746 0) 
47 870 
2 064 
16 927 
121 
1 276 
1 148 0) 
19 474 
138 774 1986 
2 258 
7 968 
25 590 
5 164(2) 
15 795(2) 
50 502 
1 954 
17 350(2) 
125 
1 265 (2) 
1 470 0) 
24 486 (2) 
153 926(2) Area harvested 
in 1 000 ha 
1980 
391 
1 816 
5 210 
1 567 
7 385 0) 
9 889 
444 
4 935 
40 
224 
1 037 0) 
3 938 
36 876 1986 
350 
1 588 
4 812 
1 446 (2) 
7 592 (2) 
9 487 
380 
4 642 
34 
171(2) 
973 (2) 
4 025 (2) 
35 499 (2) 
Source: Eurostat. 
(0 1982. 
(2) Estimation. 
12. 12. 88 Official Journal of the European Communities 91 
5.8. An examination of the specific programmes in the 
cereals sector has brought to light certain shortcomings 
concerning the objectives of the programmes, the analysis 
carried out during the approval procedure, the monitor­
ing of programme implementation, their duration and the 
extent to which they were completed. 
Objectives and approval of specific programmes 
5.9. In its annual report on the financial year 1986 (4), 
the Court emphasized the fact that, when establishing 
their programmes, the Member States were interested 
more in satisfying the formal conditions of the regulations 
than in guaranteeing that the operations would have 
maximum impact. Moreover, the programmes made no 
mention of the expected effects on production or farm 
incomes. 
5.10. The inquiry into cereals confirmed these observ­
ations. It also revealed that the very structure of the 
programmes sometimes led to a lack of consistency. This 
is mainly due to the fact that the programmes for each 
sector of agriculture, in this instance, cereals, are 
established by each Member State in a purely national 
context, without taking into account the objectives of the 
CAP. Furthermore, the need to increase storage capa­
cities is not ascertained on the basis of an objective 
analysis of requirements. 
5.11. Two types of situation are open to particular 
criticism: 
(a) almost all the programmes examined provided for an 
increase in cereals production and none of the 
measures was based on the idea of a stabilization or 
reduction of Community surpluses, so as to lighten 
the burden on the EAGGF's Guarantee Section. For 
instance, the last programme drawn up by the Land of 
Baden-Wurttemberg (approved by the Commission 
on 10 December 1986 as the second addendum to an 
initial programme dating back to 1980) is based on 
the assumption that production will increase until 
1995. Similarly, the addendum to the French 
programme estimates storage capacity requirements 
on the basis of future increases in cereals production. 
The Commission approved the programmes without 
taking into account their compatibility with the 
contrary policy which it itself advocates in the field of 
market management; 
(b) the validity of the information provided, the object­
ives proposed and the reliability of the methods 
applied by the national bodies to estimate existing 
capacity are all factors that do not appear to have 
been adequately examined by the Commission, which 
should have done so, in the light, among other things, 
of items of common knowledge, such as the level and 
development of intervention stocks. The Court found 
this to be the case as regards the programme submitted by Italy for the storage of durum wheat, 
which was approved by a Commission decision on 23 
June 1986. According to the programme, existing 
storage capacity for durum wheat amounted to 
1,7 Mio t and a further 1 Mio t of capacity were 
required. However, at the end of 1987, that is, one 
year later, the amount of cereals in intervention 
storage alone was of the order of 1,9 Mio t, yet the 
projects which had in the meantime been completed 
represented only about 65 0001. Clearly, if the figures 
given in the programme had been a true reflection of 
the situation, there would have been insufficient 
storage space for such large surpluses. In Apulia, an 
inspection carried out by the regional authorities in 
1987 revealed that durum wheat storage capacity 
stood at approximately 1 Mio t, although, according 
to the above-mentioned programme, there were only 
565 000 t of capacity in 1985. The facts of the case 
suggest that this last figure does not accurately reflect 
the real situation. 
Monitoring of the implementation of the programmes 
and their effects 
5.12. In order to provide a sounder basis for future 
decisions, strict monitoring of each programme and 
analysis of the results obtained should be the constant 
concern of all parties involved. However, the Court 
discovered no such monitoring, either at the Commission 
or on its visits to the Member States. Although Member 
States generally possess figures on the number of projects 
financed and completed in the framework of each 
programme, they are unable to provide information on 
the results obtained as regards the objectives of the basic 
Regulation (profitability of projects, contribution to the 
economic effect of the structural improvement aimed at 
by the programmes, economic advantages for the 
producers, etc.). 
Duration of the programmes 
5.13. Regulation (EEC) No 355/77 allows, in principle, 
for a period of three to five years for the completion of a 
programme (see paragraph 5.6(d) above). However, by 
submitting addenda to the initial programmes to the 
Commission, the Member States manage to extend the 
duration of the programmes to eight years and in some 
cases longer. If this practice continues, the result could be 
a continuous string of joint measures, which is incom­
patible with the Regulation's objectives concerning 
planning. 
Low rate of programme completion 
5.14. The low rate of programme completion in two of 
the Member States visited (France and Greece) indicates 
92 Official Journal of the European Communities 12. 12. 88 
that the programmes planned did not correspond to the 
countries' real needs, or at least not for the entire duration 
of the programmes. Considerable discrepancies between 
programme targets and what was actually carried out 
testify to a lack of planning, which is contrary to the spirit 
of Regulation (EEC) No 355/77. 
5.15. The level of implementation of the French 
programme,spanning the 1981-85 period, amounted to 
33 % for primary storage (50 000 t as opposed to the 
150 000 t planned) and 65 % for port silos (195 000 t 
compared with the 300 000 t planned). On average, the 
implementation rate was no more than 55 %. Neverthe­
less, the Commission approved an addendum to the 
previous programme for the construction of 5 Mio t of 
primary storage capacity and 80 000 t of port storage 
capacity during the 1986-90 period. 
5.16. In the case of Greece, its initial programme 
covering the 1981-84 period was implemented to an extent 
of about 70 % as regards storage capacity (700 000 t 
completed, compared with the target of 1 Mio t). As 
regards drying, the programme was 100 % implemented. 
On the other hand, the addendum approved by the 
Commission in 1984, which covered the 1985-88 period, 
was only very partially carried out. It had consisted of the 
construction of new storage facilities with a total capacity 
of 1 Mio t and 23 driers. 
Problems connected with projects financed by 
the Commission 
5.17. The following observations are the result of 
findings made during audits carried out by the Court on 
the basis of records and on the spot. 
Capacities used for intervention 
5.18. In 1986, the Italian Ministry of Agriculture 
financed, using appropriations from the national budget, 
a project concerning 25 000 t of storage capacity in 
Altamura, in the region of Apulia, despite the un­
favourable opinion of the regional authorities. The 
recipient, which had also obtained Community aid, was a 
multi-national cereals holding company with operations 
in seven countries. When the project was submitted, the 
company already possessed, through a subsidiary, 
225 000 t of storage capacity in Apulia, all of which had 
been approved for intervention purposes. By the end of 
1987, the company in question had increased its durum 
wheat storage capacity, independently of the EAGGF 
project, to 335 000 t, 320 000 of which were approved for 
use as intervention warehouses. It had in storage 285 4331 
of intervention stocks, which made it the biggest holder of 
intervention stocks in Apulia and the second largest in Italy. In the case of another project in Italy, this time in 
Lucania, it was found that of the 13 800 t of capacity 
constructed, 10 000 t were used to store intervention 
stocks. The recipient, who was being paid a profitable 
rent by the intervention agency, felt it was acceptable to 
use the capacities in this way. 
5.19. In the FR of Germany, the Court found that in the 
Land of Schleswig-Holstein the recipients of aid for four 
projects were companies which were approved for 
intervention storage and that two of them used Fund-
aided silos for intervention purposes. 
5.20. These examples confirm the comments the Court 
has made in previous reports concerning other products 
and its observations (5) on the financing of investments 
whose profitability depends at least partly on the extent to 
which they are used for intervention purposes, and 
Regulation (EEC) No 355/77 is aimed at making a lasting 
improvement to structures by means of the creation or 
consolidation of economic activities which offer guaran­
teed profitability. If profitability is dependent on market 
support measures, it is clear that the structures set up or 
strengthened in this way will be fragile. Indeed, the 
restrictions which should result from Community market 
management policy could affect not only the profitability, 
but, in certain cases, the very survival of such companies. 
Observance of project selection criteria 
5.21. According to the Commission's criteria for 
eligibility, which have been in force since 1979 (6), 
projects involving the milling and malting industries (with 
the exception of those concerning the storage of barley) 
are not eligible for Community financing. 
5.22. According to the wording of the criteria, although 
an exception is made for the storage of barley by malt-
houses, no exception is made for cereals stored by the 
milling industry. 
5.23. It was found during on-the-spot inspections that 
these criteria have not always been observed. For 
example: 
(a) in Belgium, a very big project, whose aim, at the time 
of appraisal of the dossier at the Commission, was to 
modernize a storage and transshipment company at 
Antwerp, was finally used to a large extent for the 
storage of malt for malt-houses; 
(b) in the FR of Germany, two projects for the extension 
of storage and processing capacity for quality cereals 
12. 12. 88 Official Journal of the European Communities 93 
concerned the needs of mills; 
(c) in Apulia, the Commission financed the construction, 
at a mill, of silos of a total capacity of 20 0001 for the 
storage of wheat for milling and the beneficiary of this 
intervention was a very large company. The decision 
to grant aid contains no mention of the reasons why 
the Commission did not apply its own project 
selection criteria. 
Limited technical performance of certain storage 
projects 
5.24. The projects undertaken by cooperatives in 
Apulia and Lucania consist of the construction of a group 
of barely equipped silos. This limited type of equipment is 
unsuited for the processing of homogenous consignments 
of durum wheat, which would considerably increase the 
value of the goods on offer. As a result, new projects with 
a higher performance level may have to be financed in the 
near future to replace plant constructed relatively 
recently. 
Use made of the financial reports provided for under 
Regulation (EEC) No 355/77 
5.25. Article 20, paragraph 1, of Regulation (EEC) No 
355/77 lays down that for each project which has received 
aid from the Fund the beneficiary shall forward to the 
Commission a report on the financial results of the 
project. This report is to be submitted two years after full 
payment of the aid (7). 
5.26. The reports have only recently been put to use, 
when the Commission prepared a first draft of a report on 
the progress of the projects financed under Regulation 
(EEC) No 355/77. 
Shortcomings in the accounts and other irregularities 
5.27. On-the-spot audits revealed various shortcomings 
in the management of projects. The most important were 
as follows: 
(a) in Belgium, the recipient of aid for a project, a big 
cereals exporter, was unable to submit his file on the 
invitations to tender issued for the execution of his project, and his explanation was that the procedure 
had been carried out four years previously by 
individuals who had since been obliged to leave the 
company. Furthermore, as regards the invoices issued 
by the various construction companies and sub­
contractors, those in charge were unable to provide 
documentary proof of the payment of each invoice. 
The basic document sent to the Commission when 
applying for aid was in the form of a summary 
statement: on one side appeared the invoices issued 
and on the other various payments, the total of which 
corresponded to that of the invoices. However, there 
was no proof that the payments were made only for 
work concerning the project; 
(b) in Greece, the body managing the projects financed 
by the Fund, which is also the recipient of the aid, has 
employed various construction firms, using the 
tendering procedure. These construction firms 
submit statements of account as work progresses, 
each time together with the corresponding invoices. A 
detailed description of the work in question is not 
given on each invoice issued. As a result, the break­
down of the costs between the Commission's im­
plementing Regulation (EEC) No 1685/78 of 11 July 
1978 (8), is based not on the invoices issued but on a 
calculation made by the recipient on the basis of his 
inspection of the work. Consequently, the invoices 
cannot be used as a basis for the detailed auditing of 
Community aid payment documents. Furthermore, 
in the statement of costs sent to the Commission, the 
date of the invoice is also taken to be the date of 
payment, although there is always a certain delay 
before invoices are paid and it would be good 
accounting practice to indicate the actual date of 
payment on each statement; 
(c) on-the-spot inspections revealed that checks by the 
Member States to ensure that projects covered by 
Regulation (EEC) No 355/77 are being properly 
executed are not carried out in a uniform manner. 
Each Member State has its own pecularities, as do 
some regions. The task of inspection would be greatly 
simplified if a system of standardized checks was 
introduced and observed in each Member State (e.g. 
inspection of the recipient's bank statements, corre­
lation between invoices, work performed and pay­
ment of invoices etc.). 
Special problems relating to port silos 
Introduction 
5.28. Port silos are different in certain respects from 
other cereal storage investments. First, unlike most of the 
94 Official Journal of the European Communities 12. 12. 88 
projects funded, port silo projects do not concern primary 
storage, but are intended for the storage of cereals at ports 
with a view to their exportation to Member States or non-
member States. They therefore have a direct bearing on a 
fairly critical area of foreign trade in the countries 
concerned. Secondly, in terms of financial value and 
volume per recipient, these investments are without any 
doubt of far greater importance than primary storage 
projects. Another feature is that the recipients are private 
firms, especially in France, or cooperative associations, 
whereas for primary storage projects, as a general rule, 
they are cooperatives. 
5.29. According to Regulation (EEC) No 355/77, 
projects which receive aid should benefit farmers. 
However, port silo projects have only a secondary impact 
on producers, who derive only modest benefit from them. 
Indeed, producers and the operators of port silos are at 
opposite ends of the marketing process and, as a result, 
this type of project has only a reduced impact on the 
farmer. In fact, these investments are motivated more by 
concern for foreign trade than the direct interests of 
farmers, contrary to the intentions expressed in the 
regulation. Three countries in particular are involved in 
this area of economic activity, namely France, Belgium 
and the United Kingdom. 
5.30. In France, the Community's biggest cereals 
producer, (accounting for approximately 38 % to 40 % 
of total production) the port programme for the 1981 — 
1985 period provided for the construction of 300 000 t of 
storage capacity, 195 000 t of which were finally 
constructed. The French authorities therefore submitted 
an addendum to the previous programme, for the 
construction, among other things, of 80 000 t of port 
storage capacity in the 1986-90 period. It should, 
however, be noted that in the 1981-85 period, additional 
storage capacity of about 210 000 t was constructed in 
France independently of Regulation (EEC) No 355/77. 
5.31. Although Belgium is only a small cereals pro­
ducer, (accounting for about 1,5% of Community 
production) and it is not self-sufficient, it is nevertheless 
the Community's third biggest cereals exporter after 
France and the FR of Germany. On average, 96 % of the 
cereals Belgium exported between 1982 and 1987 
originated in Community countries (41 % from France, 
27 % from the FR of Germany and 23 % from the United 
Kingdom) and 4 % originated in non-member States. 
Applications for aid were submitted for six projects 
included in the special programme for Belgian port silos, 
two of which were accepted. One involved the construc­
tion of a 250 000 t horizontal silo in Ghent and the 
purchase of equipment to increase the handling capacity 
of a 45 000 t silo in Antwerp. The programme, which was 
submitted for Commission approval as an amendment to 
the 1981 programme on the primary storage of cereals 
and the production of compound feedings tuffs, covers the 1983-85 period. In this period, cereal storage capacity in 
the port of Ghent rose by 360 0001,250 0001 of which had 
received Community aid. Between 1983 and 1986, 
therefore, total port silo capacity in Belgium increased 
from 797 000 t to 1 166 000 t, 905 000 t of which was in 
Ghent. 
5.32. The United Kingdom followed the same trend as 
France and Belgium, and increased its storage capacity at 
the ports of England and Wales. This increase has enabled 
it to cope with the rise in British cereal exports (barley and 
wheat), which rose from about 4,7 Mio t in 1982/83 to 
about 10 Mio t in 1986/87. In fact, some of the cereals for 
export to non-member States (notably barley), which 
used to pass in transit through Belgian ports in particular, 
are now exported directly from British ports. 
Observations 
Lack of coordination in the adoption of port silo 
projects 
5.33. The statistical data available and the information 
gathered during visits to the various Member States show 
that some of the investments which were partly financed 
by the Commission have created excess capacity. This was 
particularly the case as regards the port silos at Ghent 
which received aid. Their main use was connected with 
the transit of cereals for export to non-member States. 
However, cereals in transit from northern France 
increasingly pass via the silos at Dunkirk. This is also true 
for British barley, which, since the completion of the 
programme in the United Kingdom, no longer passes in 
transit through Ghent. This gives rise to doubts 
concerning the reasons behind the acceptance of some 
programmes, given that some Member States, when 
bringing the matter before the Standing Committee on 
Agricultural Structures, put forward certain reservations 
because of the uncertainty surrounding the future 
development of trade flows and, in particular, the origin 
of the quantities presented for storage. 
Limited results of the programmes 
5.34. Although the storage capacity involved in port 
programmes is clearly defined, given the small number of 
regions and countries concerned, considerable dis­
crepancies were discovered between forecasts and actual 
achievements. 
5.35. In addition, port silos funded under Regulation 
(EEC) No 355/77 are usually part of a much broader 
investment plan on the part of the beneficiary. The aid 
12. 12. 88 Official Journal of the European Communities 95 
therefore has only alimited role, since the projects for 
which it has been granted constitutes only a small part of 
more ambitious plans. 
Lack of systematic inspections 
5.36. Although the Commission clearly cannot carry 
out on-the-spot inspections of all the projects funded 
under Regulation (EEC) No 355/77, the Court is of the 
opinion that technically complex, high-cost projects 
should be systematically visited by competent officials 
from Brussels. Port silo projects which are of financial, 
technical and economic importance fall into this ca­
tegory. However, such inspections had not been carried 
out in the case of most of the projects the Court visited. 
Conclusions and recommendations 
5.37. The above observations reveal certain shortcom­
ings in the management of programmes and projects. It is 
at programme level that most of the weaknesses lie. They 
appear in the drawing-up of the specific programmes by 
the Member States, the evaluation carried out by the 
Commission during the approval procedure, the analysis 
of the programmes' effects as regards the attainment of 
the objectives laid down in the basic Regulation and the 
CAP, the monitoring of their execution and the assess­
ment made on their completion. 
5.38. As regards prior examination of the programmes, 
it was discovered that the Commission did not possess, 
for all the Member States, the information and analytical 
tools essential for achieving an efficient structural policy 
by means of rational investments. In such cases, the 
Commission's approval is given without precise know­
ledge of the storage capacities available in the Com­
munity and in each region. 
5.39. The specific programmes are in reality presented 
as a mere formality, although they are supposed to be an 
instrument for effective planning aimed at improving 
agricultural structures. In addition, the fact that the 
programmes are drawn up in a purely national, or even 
regional, context means that there is no consistency as 
regards their objectives at Community level. Such 
consistency can be achieved only if all the programmes 
are coordinated. 
5.40. As regards the question of port silos more 
particularly, coordination is of greater importance when 
the silos are constructed in neighbouring regions. Furthermore, the Court questions the priority given to 
the funding of these projects. The fact is that these 
investments are of greater benefit to cereals exporting 
firms than to farmers. Moreover, port silo projects 
financed by the Community generally represent only a 
small part of the total investments carried out by the 
recipients in this field. 
5.41. As regards the execution of the actual program­
mes, that is, the implementation of the projects planned, 
the Commission possesses no information on the progress 
of each specific programme or on the actual use made of 
the investments. This is a particularly serious shortcom­
ing insofar as storage facilities constructed in some 
Member States are, as the Court discovered on its visits, 
used in part or entirely for intervention purposes. Now, 
the Fund's contribution towards the financing of storage 
capacities calls for comment in two respects. First, it 
entails Community expenditure twice over for the same 
economic activity, i.e. the funding of capacities and the 
payment of storage costs. Secondly, it can encourage 
recipients to engage in an activity whose profitability is 
linked to intervention mechanisms and whose viability 
would be compromised if those mechanisms later became 
subject to restrictions. 
5.42. Finally, the inadequacy of information and the 
lack of assessment both by the Commission and by the 
Member States regarding the results of the programmes 
undertaken makes it impossible to ascertain whether the 
Community objectives have been achieved. 
5.43. If the Commission wishes to introduce an 
efficient, rational system of supervision in the context of 
the Regulation in question, it must make the system more 
effective, more consistent and more compatible with 
Community objectives. It should also be regularly 
monitored to enable the Commission to control the 
development of cereal storage capacities, with a view to 
adjusting them to the new direction the CAP is taking. 
OBSERVATIONS RESULTING FROM THE 
SPECIAL REPORT ON COMMUNITY AID 
FOR THE ACCELERATION OF 
AGRICULTURAL DEVELOPMENT IN 
GREECE 
5.44. On 7 October 1987, the Court adopted a special 
report on Community aid for the acceleration of 
agricultural development in Greece (9). This aid is 
provided for under various Council regulations which 
were adopted specifically to benefit Greece in 1982, 1983 
and 1984. 
96 Official Journal of the European Communities 12. 12. 88 
5.45. In its special report, the Court observed that the 
implementation of Community aid for the acceleration of 
agricultural development in Greece showed a lack of 
balance between the excessive amount of Community 
regulations and the limited monitoring of the application 
of these regulations at Community, national, regional 
and local level. 5.48. Various concrete examples cited in the report 
show that the question of the eligibility of expenditure 
requires a continuous effort to be made in the field of 
information and assistance, so as to emphasize the 
objectives of the Community measures and prevent the 
aid being used for less effective expenditure. 
5.46. This lack of balance is itself a consequence of an 
attitude which gives priority to the financial transfer 
aspects of the measure, to the detriment of the expected 
results in terms of economic development and the 
improvement of structures. 
5.47. A programme should not be just a combination of 
various operations. It should be principally an instrument 
for choosing measures whose impact one wants to 
increase in order to achieve certain results. This condition 
is not fulfilled if the contents of the programme are 
considered to be mainly indicative and if even the 
eligibility period is subject to differing interpretations. 5.49. Sufficient importance should also be given to 
inspection needs. Measures on the scale of those 
concerning Community aid for the acceleration of 
agricultural development in Greece cannot be undertaken 
properly unless the measures necessary for monitoring 
and inspection have been provided for at the outset. 
5.50. The numerous measures undertaken in the area of 
agriculture in Greece show that the aim is to achieve 
significant results with regard to structural development. 
However, they also demonstrate a lack of overall 
planning, which jeopardizes the attainment of the 
objectives. This situation should be especially emphasized 
since the same difficulties might well arise in the 
implementation of the integrated Mediterranean pro­
grammes. 
(') 
(2) 
(3) 
(4) 
(5) OJ L 51,23.2.1977, p. 1; regulation last amended by Council 
Regulation (EEC) No 1760/87 of 15.6.1987 (OJ L 167, 
26.6.1987, p. 1). 
OJ L 128, 19.5.1975, p. 1. 
OJ L93, 30.3.1985, p. 1. 
OJ C 336, 15.12.1987, paragraph 7.15 — 7.16. 
Annual report concerning the financial year 1985, para­
graph 5.20(e). (OJ C 321,15.12.1986) and annual report 
concerning the financial year 1986, paragraph 7.46 (OJ C 
336, 15.12.1987). (6) 
(7) 
(8) 
(9) The criteria have appeared in published form since 1980. 
Article 1 of Council Regulation (EEC) No 1932/84 of 
19.6.1984(OJL 180, 7.7.1984, p. 1). Previously the deadline 
was determined by the Commission in its decision to grant 
aid. 
OJ L 197, 22.7.1978, p. 1. 
Mention was made of this report in OJ C 326, 5.12.1987. It is 
available on request from the Secretariat of the Court. 
12. 12. 88 Official Journal of the European Communities 97 
CHAPTER 6 
The European Regional Development Fund (ERDF) 
6.0. TABLE OF CONTENTS 
Introduction 
Method used for analysing the utilization of subsidized infrastructures 
Results in terms of the utilization of infrastructures 
Roads 
Gross utilization 
Net utilization 
Ports and inland waterways 
Gross utilization 
Net utilization 
Inland waterways 
Water supply and sewerage infrastructures 
Gross utilization 
Net utilization 
Energy sector 
Gross utilization 
Net utilization 
Industrial estates and advance factories 
Gross utilization 
Net utilization 
Telecommunications Paragraph 
reference 
6.1 
6.5 
6.13 
6.13 
6.13 
6.18 
6.23 
6.23 
6.27 
6.32 
6.33 
6.33 
6.38 
6.43 
6.43 
6.46 
6.50 
6.50 
6.55 
6.57 6.4 
6.12 
6.58 
6.22 
6.17 
6.22 
6.32 
6.26 
6.31 
6.42 
6.37 
6.42 
6.49 
6.45 
6.49 
6.56 
6.54 
6.56 
6.58 
Effects on prices and ways of managing infrastructures 6.59 — 6.67 
Conclusions and recommendations 6.68 — 6.75 
Special report on the integrated approach to Community financing of structural 
measures 6.76 — 6.84 
INTRODUCTION 
6.1. The European Regional Development Fund 
(ERDF) was created by Council Regulation (EEC) No 
724/75 of 18 March 1975 ('), which was amended by 
Council Regulation (EEC) No 214/79 of 6 February 
(•) The footnotes are listed together at the end of .the chapter. 1979 (2) and superseded by Council Regulation (EEC) No 
1787/84 of 19 June 1984 (3), which entered into force on 1 
January 1985. Its aim is to help to correct the principal 
regional imbalances within the Community through 
financial participation in the development and structural 
adaptation of less developed regions and in the conver­
sion of industrial regions which are in decline. The Fund 
bears a proportion of the expenditure incurred by the 
98 Official Journal of the European Communities 12. 12. 88 
Member States in the execution of Community program­
mes, national programmes of Community interest, 
projects and studies. 
6.2. Between 1975 and 1986, 98 % of ERDF aid was 
allocated to projects, with infrastructures receiving the 
lion's share. Indeed, over the same period, aid for 
infrastructure projects amounted to 14 032 Mio ECU, 
which represents 81 % of ERDF commitments, and 
24 832 projects were involved, i.e. 74 % of the total 
number of projects aided. 
6.3. Under Council Regulation (EEC) No 724/75, the 
financing of infrastructures was permitted only insofar as 
they constituted an immediate or prior condition for 
directly productive investments. In 1979, the criteria for 
eligibility were broadened: as a result, the ERDF was 
allowed to assist projects concerning 'infrastructures 
which contribute to the development of the region or area 
in which they are situated, provided that this is justified by 
the regional development programmes'. The regulation 
also laid down that the share of assistance granted for 
financing infrastructure investments could not exceed 
70 % of the total over a period of three years. Since this 
ceiling was persistently exceeded, provision was made 
under a Council Decision of 29 November 1983 (4) for the 
limit to be exceeded during the 1981-83 period. 
6.4. Council Regulation (EEC) No 1787/84 maintains 
the principle of reference to the regional development 
programme and lists the categories of infrastructure 
which the Fund maynot assist. Furthermore, as regards 
the allocation of Fund aid, it lays down that the Member 
States and the Commission should endeavour to ensure 
that an appropriate proportion (if possible, 30 %) of the 
Fund's resources is allocated to investments in industry. 
In practice, this proportion has never been achieved, 
owing to the shortage of applications for aid for industrial 
projects; on the other hand, the proportion of resources 
committed to infrastructure projects was 78 % in 1985, 
84 % in 1986 and 91 % in 1987. 
METHOD USED FOR ANALYSING THE 
UTILIZATION OF SUBSIDIZED 
INFRASTRUCTURES 
6.5. In view of the large amount of ERDF aid that has 
been allocated to infrastructures, and bearing in mind the 
role played by infrastructures in regional development 
policies, the Court of Auditors has endeavoured to 
examine and assess the impact on regional development 
of infrastructures subsidized by the Community. 
6.6. The approach adopted by the Court consisted of 
examining to what extent the facilities created with ERDF aid in order to benefit the less favoured regions in 
which they were located were being used. The fact is that if 
no use at all is made of a new infrastructure, its effect on 
regional development will be similarly nil. On the other 
hand, if full use is made of the project, its contribution to 
the development of the region will be maximized. There is, 
therefore, a relationship between the rate of utilization of 
infrastructures and their impact on development; this 
relationship has both direct and indirect effects, the 
indirect effect generally becoming apparent only after a 
certain period of time. 
6.7. However, the gross utilization rate of an infrastruc­
ture is not in itself an adequate yardstick by which to 
measure its contribution to regional development. The 
impact of a new project on the regional economy depends 
less on the general use made of it (gross utilization) than 
on the use made by economic agents in the regions (net 
utilization). To arrive at the net utilization rate, therefore, 
account has to be taken of cases where utilization has 
nothing to do with regional economic agents or where it 
does not represent an increase in the utilization of the new 
infrastructures compared with the situation beforehand. 
In other words, account must be taken of the effects of 
diversion, substitution, exportation and normal demand. 
In the case of the extension of a plant or its replacement 
and extension, the analysis should, of course, be confined 
to the net increase in capacity. 
6.8. Diversion has the effect of causing activity to be 
transferred to the new infrastructure from other infra­
structures in the same region. Substitution has the same 
effect as diversion, but in this case the transfer of activity 
to the new infrastructure is from similar facilities outside 
the region. The new infrastructure alters the supply 
conditions in the region, without, however, increasing the 
level of economic activity. Exportation covers cases 
where the new infrastructure is used by economic agents 
from outside the region. Finally, for the net utilization 
rate to reflect the regional impact as accurately as 
possible, the increase in utilization caused by normal 
increases in regional demand between the date when the 
new plant is commissioned and the date on which its 
utilization is measured (i.e. the effect of normal demand) 
also has to be deducted from the gross utilization rate. 
'Normal increases in demand' are increases which would 
have taken place regardless of the creation of the new 
infrastructure. 
6.9. It is worth noting that, as a general rule, invest­
ments not only increase the quantity of services available 
to the consumer but also improve their quality. Qualitat­
ive improvements can take various forms (e.g. an 
improvement in safety in the case of roads, a reduction in 
stop-over time at ports, an increase in the security of 
supply in the case of energy, better transmission quality in 
the field of telecommunications, etc.). However, if these 
qualitative improvements are to play a part in the process 
of regional development, they must, in the long run, result 
in the stimulation of economic activity and, in normal 
12. 12. 88 Official Journal of the European Communities 99 
circumstances, in an increase in the utilization rate of the 
infrastructures. 
6.10. In its interpretation of the results it obtained 
concerning the utilization of infrastructures, the Court 
took into account the problem of indivisibility, i.e. the 
fact that, for techno-economic reasons, new capacities 
have to be greater than short-term demand. Initially, 
therefore, a degree of under-utilization must be regarded 
as acceptable; all that matters is that it should tend to 
diminish afterwards. 
6.11. The method outlined above was applied on the 
basis of information provided by the national authorities 
in answer to questionnaires on the utilization of 
infrastructures over recent years. 
6.12. It should be emphasized that the Court's exami­
nations did not include any cost-benefit analyses or 
studies of alternative projects. The projects examined 
were in the form decided on by the national authorities 
and chosen by the ERDF. Effects connected with the 
construction period were not taken into account either, 
since they are, by nature, temporary. The method 
followed was therefore geared mainly to determining the 
utilization rate of infrastructures which had received 
financial assistance, so that the impact of these infrastruc­
tures on regional development could be assessed. 
RESULTS IN TERMS OF THE 
UTILIZATION OF INFRASTRUCTURES 
Roads 
Gross utilization 
6.13. The Court gathered information on the utilization 
of over 50 sections of road, each of which had received 
one or more allocations of ERDF aid for its construction. 
In general, it was found that, in over 60 % of the cases, the 
capacity utilization rate of the new road facilities was 
under 50 %. 
6.14. In a quarter of the cases, the pre-existing 
infrastructure could have coped with the increase in 
traffic which subsequently occurred; the new infrastruc­ture had therefore contributed little to development. This 
was found to be the case with various sections of road in 
France on the RN 106 (Languedoc-Roussillon), the RN 
21 (Aquitaine) and the RN 11 (Poitou-Charentes). 
Similar cases were also observed during visits to Ireland 
(West), Italy, (Apulia), the Netherlands (Limburg) and 
the United Kingdom (North-West). 
6.15. In other instances, the roads were little used 
because the development plans for the areas they served 
had proved unrealistic and targets had barely been met. In 
Scotland, for example, the East Fife regional road had 
been planned because of the expected expansion of the 
new town of Glenrothes, which never happened. There 
was a similar situation in the Netherlands concerning the 
road leading to the port of Eemshaven, which was 
constructed in the 1970s with ERDF aid but whose 
development fell very far short of expectations. 
6.16. Another situation of this kind was observed in 
Luxembourg, in the case of the container terminal at 
Bettembourg. It was designed to handle 12 000 containers 
a year, but in practice functions at less than 15 % of its 
capacity. The number of jobs connected with operating 
the project (five) is significantly lower than that forecast 
(10). Furthermore, competing terminals were already in 
existence in neighbouring regions and these were also 
eligible for ERDF aid (Athus in Belgium and Garolor in 
the Metz region in France). 
6.17. Sometimes little use is made of a project because it 
is just one element in an incomplete network. This is the 
case with the access road to Moss Side in the North-West 
of the United Kingdom, which will not be fully utilized 
until the road network in the area has been completed. 
Net utilization 
6.18. An examination of net utilization rates shows that 
in over 85 % of cases they amount to less than 50 %, with 
almost 45 % of projects even having a net utilization rate 
of less than 20 %. This difference between net and gross 
utilization is mainly explicable in terms of the con­
siderable diversion effects. 
6.19. For some roads, often those on the outskirts of 
towns, the gross utilization rate can be considered 
satisfactory. However, more detailed analysis shows that 
a large amount of the traffic on these roads is diverted 
from competing routes. This is quite clearly the situation 
in the cases of the N 1 in Ireland, a project concerning the 
Calder Valley road in the North-West of the United 
Kingdom, and in France, in particular in projects on the 
RN 106 (the Nimes diversion and the Ales by-pass). 
lOtl C^fticial journal ot the European communities 12 12 ^ 
o20 ^omeoftheroadpro^ectssubmittedtotheER.lOF 
were not designed to promote an increase in road traffic 
related tothe objectives of economic development,hut 
rather to improve road traftic conditions Although these 
projects ma^elifeeasierforthe inhabitants of the regions 
in question,ithas to be said that such an objective maybe 
rather farDremoved from that of correcting economic 
imbalances LheERLOF has thus assistedvanous road 
improvement pro^ectsr^e^ li^htm^,roadsafetyimprove^ 
mentsetc^ontheRatras^onnthmotorwaymdreeceln 
France,worsen the R.^21nearBer^erac and on the R-^ 
lOo near Florae were not somuchmtended to increase the 
capacityof the roads mquestion as to improve traftic 
conditions Lhese qualitative improvements have so far 
failed to lead toasi^mticant increase in the use of these 
infrastructures 
(^21 in ttaly,aid was granted toanumber of projects 
which consisted of improving country roads linl^in^ 
various farms lnthecasesite^ammedmlvlolise,the 
Courtfoundthatvery little use was made of the roadsand 
that the investments had had no si^niticanteflect on the 
economicdevelopmentoftheregion lvloreover,owm^to 
lacl^ of resources, the administrative authorities were 
unable to maintain the roads adequately Lhe main 
purpose of the projects was, in fact, to maintain 
agricultural and rural life and as such they could have 
received aid from the EACiC^F guidance Section 
council Regulation ^EE^^ol7o0^of2^^uly 1^7^ 
^ Fhey were not part of a strategy to correct 
imbalances in economic development 
(^22 It can be concluded,in general,that even though 
the road projects underral^en can in some cases be 
^ustitied by the existence of traftic bottlenecks, they were 
designed mainly to cope with normal increases in traffic 
and will have onlyaverylon^term effect on regional 
economic development In fact, theseoperationsform 
part of ordinary policy on thedevelopmentand extension 
of the road network rather than re^ionaldevelopment 
policy 
^^^^^^^^UB^^^^^ 
C^ro^uhhz^tron 
(^ inthetieldofportpro^ects, theER^FoFhasgranted 
aid to operations designed in some cases to increase port reception capacity and in others to adapt port facilities to 
the increasingly widespread use of larger ships Inmost 
cases, it is evident that the ^ross utilization rate of the 
facilities is^^oor higher 
(^24 Fhe absence ofacoherent, coordinated system of 
planning and management can hamper the optimum and 
efticient use of the installations receiving aid For 
instance, the ERPOF provided aidfor the construction of 
new quays for the port ofFermoli in Italy, wnhout there 
bem^ an overall operating programme covering the 
development of the various ports in the ^outh Adriatic 
which could ensure specialization in the various types of 
traftic and reasonable utilisation prospects for the 
installations A similar situation in Scotland was also 
referred to by the CAourt in its annual report on the 
financial year l^t^ 
^2eo ^ome additional investment is required to enable 
use ofthe new port installations and, in some cases, this is 
not available For e^ample,amultiDpurpose breakwater 
wasconstructed in theport of Faranto, Italy, which, 
althou^hcompletedseveralyearsa^o,isusedonlym 
emergencies because theequipmentnecessaryfonts use is 
not available 
(^2^ in other cases, the techno^economic content of the 
pro^ecthasbecomeout^datedandtheutilizationforecasts 
have become unrealistic For example, the port of 
CA^dian in Sardinia was designed at a time when 
contamertrafticwas still e^pandm^ Following delaysm 
the execution of the worl^,rhe port is still not operational 
and it is estimated that its capacity utilization rate will be 
only ^0^, while the port installations already in 
existence in Sardinia are far from bem^ fully utilized 
^tuht^ho^ 
^27 ^et utilizationof thepro^ects waslowin two 
thirds of the projects examined Fhey therefore had little 
impact on the development of shipping to and from the 
region in question and their contribution to regional 
development was small however, the existence and 
operating of port infrastructures which received aid can, 
in some cases,create employmentm the port in question 
^2^ Anew port was constructed on the island of ^uist 
mtheFR. of dermanyto replace and double the capacity 
ofanother,olderporrwhichwassufferm^fromsiltin^up 
and accessibility problems Although this situation may 
have ^ustitied the decision to replace the e^istin^ 
infrastructure, the fact remains that the increase in 
capacity wasnottranslatedmLoanmcreaseintraftic, 
which remained stable 
12. 12. 88 Official Journal of the European Communities 101 
6.29. Other port projects have enabled the concen­
tration of particular types of traffic on certain instal­
lations. For example, a specialized jetty for the handling 
of steel products was constructed in the port of Taranto in 
Italy. In France, a new quay for handling timber was 
constructed in the port of La Rochelle. Although these 
two installations are being used at virtually full capacity, 
their main effect has been to concentrate traffic pre­
viously divided among a number of installations on the 
new installations, without having a real effect on the total 
volume of traffic in the ports in question. The large degree 
of diversion revealed in the Court's examination con­
siderably reduces the impact of these projects on regional 
development. 
6.30. In other instances, the installations constructed 
were being used mainly for the benefit of regions other 
than the one in which they were located. This was the case 
with the Cagliari port mentioned above, which is expected 
to serve as a pivot for container traffic in the Mediter­
ranean, an activity which involves very little added value. 
A similar exportation effect is to be seen in the case of the 
port of Sete (France). The impact of the considerable 
operations undertaken on the development of the region 
itself has been drastically reduced because the region is 
neither the origin nor the destination of over 65 % of 
traffic through the port. Furthermore, 40 % of the traffic 
was diverted from competing ports, in particular 
Bordeaux, which is also in an area eligible for ERDF aid 
and has itself received such aid. 
6.31. To conclude, although satisfactory use of port 
installations constructed with ERDF aid is often 
apparently being made (gross utilization), their impact on 
regional development (net utilization) remains small. 
Inland waterways 
6.32. Two inland waterway projects have received 
ERDF aid in Languedoc-Roussillon. The first involves 
work on a section of the Rhone canal connecting the port 
of Sete to the Rhone with a view to making it accessible to 
larger ships. The impact of this investment will be felt only 
in the very long term, insofar as it can only really be used 
when the other sections of the canal have been increased 
to the same width. In the second case, seven locks were 
replaced by a new system for raising boats as part of the 
Canal du Midi modernization project. However, the 
project was abandoned by the French authorities, mainly 
because of the virtual disappearance of water transport, 
which could not compete with road and rail services on 
the same route. Furthermore, the project was terminated 
before the new elevation system was properly oper­
ational. ERDF aid has thus been granted to an 
investment which will scarcely be used and the impact of the project on regional development will be virtually non­
existent. 
Water supply and sewerage infrastructures 
Gross utilization 
6.33. The Court examined almost 40 projects in the 
hydraulic sector. Half of these projects involved water 
production and supply and the other half were concerned 
with the collection and treatment of sewage. As a general 
rule, the object was to improve and increase the capacity 
of existing installations. 
6.34. In more than 60 % of cases the gross utilization 
rate of the projects may be regarded as satisfactory, and 
five installations were even being utilized at full capacity 
in the years following their commissioning. 
6.35. As regards the projects which were less utilized, 
this situation had arisen because the growth forecasts for 
population and economic activity in the regions served 
had proved to be rather unreliable. This type of situation 
was found in the case of water-supply projects like the 
Megget scheme in Scotland or the Castlebar scheme in 
Ireland, and sewage-treatment projects like those at 
Shanganagh in Ireland or Garnock in Scotland. 
6.36. In other cases the projects are not being utilized, or 
are not being utilized very efficiently, because they lack 
the equipment necessary for full utilization. For example, 
two water-supply projects situated in the Alghero area of 
Sardinia continue to be unused because the structures 
which would make it possible to operate them have still 
not been built, due to lack of finance. In its annual report 
concerning the financial year 1984 (7) the Court observed 
that various water-supply networks in Sicily were still not 
operational because the funds needed to complete them 
were not available. 
6.37. In Apulia, in Italy, the ERDF provided substan­
tial financing to facilitate the distribution of water stored 
behind a dam on the River Sinni. More than two thirds of 
the water-distribution equipment installed remain unused 
and the dam supplies only 9m3/second, instead of the 
38m3/second forecast, because the equipment needed for 
normal operation is not there. In the same area, there has 
been substantial water engineering work on the Locone. 
Although the dam which is the key to the entire project 
was completed in 1986, it is not yet operational and the 
date when it will be is still not known because the 
associated water supply structures have not been built. 
Instead of dissipating effort on programmes which 
10^ Official iournal of the Furopean communities 1^.1^.^ 
continue to be underutilized, it would be better to 
proceed step by step, and to ensure that optimum use is 
made of the installations already completed. 
^etutuu^hon 
o.-^. intwothirdsofthecasesstudiedthenetutili^ation 
rate ofthe projects was found to be less than ^0^. it is 
often higher in rural areas thanit is in urban or industrial 
regions,where the projects are often intended to replace 
and improve existing infrastructure. This is true of the 
^orth^Vest of the United ^ingdom,where the l^ynd 
burnValley sewer and the Iviartholme treatment works 
are heavily utilised, due to the simple fact that they are 
replacements and improvements of older installations 
which are no longer used. Similarly, in Ireland, the 
R.ingsend treatment plant and the collection network in 
the Dublin area collect part of the water previously 
treated by other plants. 
e^. AsimilarexamplewasfoundatLeixlip,likewisein 
the TOublinarea,where^und assistance was granted to 
another treatment plant, which collects water from older 
installations and new estates. The treatment capacity of 
thenewplantislessthanthequantityofsewagecollected, 
so that at certain times the sewage remains untreated and 
is discharged directly, thus jeopardizing the projects 
effectiveness.Betterprogrammingofthe work couldhave 
prevented the inconveniences ofasituation of this sort. 
^0. in some cases the work has no related economic 
development objective. For example, a new sewage 
collection network and treatment plant have been built at 
Termoli in Italy. The use of these plants does not reflect 
any increase in production activity, because of the 
essentially residential nature of the areas served. 
o.^P Themajorityoftheprojectsinthehydraulicsector 
have been designed to remedythe general problems posed 
by the normal growth of demandinthe water treatment 
or production sectors, rather than to make any contri 
bution to regional development. 
(^. C^ne barrage tinanced,ontheR-iverArdeche in 
France, is also proving to beaproject, which, although it 
is utilised, does not make any contributionto regional 
development. Its purpose is, essentially,to alleviate the 
damage caused by the water discharged asaresult of the 
operation ofthelviontpezathydroelectricplant.Thedam 
wasalso intended to makeitpossible to improve thewater 
supply and to permit the development of tourist facilities 
on the banks of the Ardeche. As regards these aspects, whichcouldhavemadeagenuinecontributiontothe 
regional development plan, nothinghas yet been started. 
^^^^^^ 
^ro^u^tiz^uo^ 
oBPP In most of the energyDrelated projects the gross 
rate of utilisation is more than ^0^ and is clearly 
satisfactory.l^evertheless, in certain cases, even though 
the gross utilisation rate is relatively high, the capacity 
which has been installed will not be fully utilized fora 
period of^to ^30 years. 
o.^. Arather low utilization rate was recorded in the 
case of a proposed very high voltage power line in 
Aquitaine,which duplicates an existing installation, and 
the amount ofenergy transmitted does not reflect any 
significant increase in regional demand. 
o4^ In Scotland, inthe Shetland lsles,theF^L^F 
granted aidforanewthermal power station at Lerwick to 
supplement an old plant, it wasfound that the combined 
output was lower than that of the original power station, 
which shows that the new plant was not justified by the 
development of new activities. 
^t^nt^uio^ 
o.^o. From the net utilization angle, these projects, 
particularly those involving electricity production, show 
very low rates. This phenomenon is due to the fact that, 
because of the interconnection of the supply grid at 
national level, itis very easyforproduction to beexported 
fromoneregion toanother, so that only a very low 
proportion is consumed within the producer region. 
o.^7. In Crreece the FR^lOF contributed towards the 
financing of three very large electric power stations 
^Assomata,^tikia and Amyndeo^.The production from 
these plants is essentially exported,via the national grid, 
to other regions and only eo^of the energy produced is 
consumed within the regions where the plants are 
situated, whichretlectsanormalincreasein demand.This 
leads to the conclusion, therefore, that the impact of the 
new plants on the development of regional activities will, 
in themain, be confined to thejobsrequired for the 
12. 12. 88 Official Journal of the European Communities 103 
extraction of the lignite used by the Amyndeo plant only, 
and furthermore there are significant delays in the 
creation of these jobs. 
6.48. The ERDF has granted aid for a hydroelectric 
station as part of the Villerest barrage in France. In 
practice, the energy produced will be used to increase 
exports to other areas, so that the project has no 
multiplier effect as far as regional economic activity is 
concerned. 
6.49. In conclusion, the low regional impact of the 
electricity-related projects is due to the fact that the 
policies applied are essentially sectoral and national in 
nature, leaving little room for regional concerns. 
Industrial estates and advance factories 
Gross utilization 
6.50. In the field of industrial estates and advance 
factories, almost 40 projects were examined by the Court. 
In some cases they supplement the installations available 
within the estate, in others they involve the extension or 
creation of the area available for industrial use. It was 
found that in 40 % of these cases the occupation level of 
these industrial estates or factory units was less than 
50 %. 
6.51. In Ireland there have been many grants of aid for 
the construction of advance factories in the five counties 
the Court visited, although it is estimated, on the basis of 
information supplied by the local authorities, that over 
the country as a whole only 60 % of the available space is 
occupied. Of 15 installations of this type examined by the 
Court, it was found that only seven were fully utilized. 
Four others were totally unused, two of them for five 
years or more, and in other cases occupation was only 
partial, even though the installations had been complete 
for several years. These findings are akin to the 
observations which the Court has already made with 
regard to Ireland, in its annual report on the financial year 
1983 (8). 
6.52. In Luxembourg, the industrial estate at Bas-
charage continues to be substantially under-occupied, 
even though within a radius of less than 30 km there is 
another estate under construction and another which is 
more than 50 % under-occupied. 
6.53. In Greece, the ERDF granted aid to more than 
double the area of the Patras industrial estate. The 
extension is virtually unoccupied and the level of 
occupation in the initial estate itself is less than 50 %. 
Similar situations were also observed in the case of an industrial estate at Papenburg in the FR of Germany and 
another in Livingston New Town in Scotland. 
6.54. As a general rule, no predictions are made as to the 
effect on employment of projects involving industrial 
estates or similar installations. In Italy, where forecasts 
do exist, the Court found that they had not been met in 
the nine estates under review. On the contrary, in two 
thirds of cases the number of jobs has actually decreased 
between the date of the aid application and the present 
time. 
Net utilization 
6.55. It should be noted that there is a considerable 
diversion effect, insofar as occupation of the industrial 
estates and buildings, and the associated employment, 
may simply result in the transfer of undertakings which 
are already established in the region, thus creating a 
corresponding reduction in their regional development 
impact. This type of situation was observed in Ireland, 
where all the undertakings established in the new 
workshops at Ballina come from the area, and of the 45 
jobs provided in the complex 30 are simply the result of a 
transfer. Similar situations were found in the case of 
advance factories at Sligo and Westport. In the Nether­
lands, the occupation rate in the Leeuwarden complex is 
35 %, but only 4 % of that represents activities which 
have been established or newly created in the region. A 
similar situation has also arisen in the FR of Germany in 
the case of the Osthafen industrial zone at Oldenburg, 
occupation of which is mainly due to the fact that 
enterprises have transferred from neighbouring areas. 
6.56. Although in many cases the occupation levels of 
industrial estates or similar installations may be con­
sidered to be satisfactory, the management authorities 
should ensure that they are focal points for the creation of 
new activities in the region, rather than a simple 
regrouping of existing activities on certain sites. These are 
the only terms on which such installations will be able to 
make an effective contribution towards reducing un­
employment. 
Telecommunications 
6.57. The review of utilization rates for telecommuni­
cations projects covered capital projects in Greece, 
France and Ireland. They may be divided into two broad 
categories: the provision of transmission lines, and 
switching installations. The projects in the first category 
cover works carried out in response to the normal 
evolution of demand and the gross utilization rates for 
104 Official Journal of the European Communities 12. 12. 88 
them are satisfactory. Capacity in the second category, on 
the other hand, is relatively under-utilized. 
6.58. Although capital investment in telecommuni­
cations does make the regions concerned more attractive 
and is necessary for regional development, the investment 
programmes are usually prepared at national level with 
the aim of meeting the normal growth in demand. ERDF 
aid for the projects examined in the three countries 
concerned has practically no incentive effect as far as the 
regional investment programmes drawn up by the 
competent national organizations are concerned. 
EFFECTS ON PRICES AND WAYS OF 
MANAGING INFRASTRUCTURES 
6.59. During its enquiries the Court was concerned to 
discover whether the ERDF aid was reflected in the cost 
of the services provided by the new infrastructures. A 
reduction in such costs may in fact alleviate the handicaps 
experienced by the less-developed areas and, by stimulat­
ing demand, may increase the rate of utilization of the 
infrastructures. 
6.60. ERDF-aided infrastructures, particularly in the 
transport sector, are normally made available free of 
charge to users, who thereby benefit from the advantages 
which they provide without having to pay for them. For 
example, a new road saves time and allows more 
economic use of vehicles, new port installations may 
make it possible to reduce turn-around time, etc. These 
influences may stimulate regional economic develop­
ment, but the Court's examination of the effects of the 
works on net utilization rates did not produce any 
conclusions as to whether this was what had happened. 
6.61. Other forms of infrastructure are managed on a 
commercial-type basis by public or quasi-public bodies, 
so that the costs normally have to be covered by the 
revenue from the services provided (9). In this case, the aid 
makes it possible to reduce the cost of financing the 
installations and may be reflected in the prices charged, 
thus having an incentive effect on the trend of demand. In 
fact it is rare for the grant of ERDF aid to have any direct 
influence on prices. 
6.62. The fact that there is no effect on prices may be 
explained by the absence of a policy of regional price 
variations. In the case of telecommunications and energy, 
price policies are decided at national level, in accordance 
with the profitability criteria applied by the management 
organizations, and are applied on a more or less uniform basis throughout the national territory. This was the 
situation found in Greece, France and Ireland. Under 
these conditions the prices charged do not have any kind 
of incentive effect which might stimulate regional 
demand. The question arises as to whether the ERDF 
ought not to require beneficiaries to pass on the benefits 
of the aid via price reductions in the regions. 
6.63. In other cases prices are established in terms of 
extra-economic considerations, virtually independently 
of any economic calculation. For example, in the south of 
Italy the consumer price of water is approximately 50 % 
of cost, which obviously eliminates any prospect of 
profitability. It must even be asked whether the Com­
munity aid is not serving as an encouragement to put off 
corrective measures which will prove to be inevitable. 
6.64. In the areas of ports and industrial estates, 
financial management is most often the concern of 
autonomous public authorities. In certain of these cases, 
pricing policy is based on considerations of inter-regional 
competition. This was the case with several industrial 
estates in the Netherlands. 
6.65. Sometimes aid is granted for projects which are 
broadly certain to be profitable. In a situation like this, 
the ERDF contribution becomes an additional gain, 
without any great impact either on prices or project 
utilization. For example, Manchester Airport, which was 
developed with ERDF aid, distributes dividends to the 
various organizations which combined to create it. It 
might be asked whether there was any justification for 
granting a Community subsidy to this project, where a 
loan would probably have been more suitable. 
6.66. The Court found that there is an effect on prices 
only where the aid is received by the management 
organization and replaces more expensive forms of 
finance, thus making it possible to reduce the capital costs 
and thereby attain the objectives of financial profitability 
more easily. Rare situations like this were recorded in the 
case of the organization responsible for water manage­
ment in north-western England, or for energy production 
in Scotland. 
6.67. In conclusion, in the case of forms of infrastruc­
ture which are managed according to commercial criteria, 
it was found that generally ERDF aid has only a very 
indirect and very small effect when prices are set. In order 
to facilitate optimum allocation of Community resources, 
criteria should be laid down to define the most suitable 
forms of aid in terms of regional development imperat­
ives: either capital assistance from the ERDF or loans 
from other Community financial instruments (10). 
12. 12. 88 Official Journal of the European Communities 105 
CONCLUSIONS AND 
RECOMMENDATIONS 
6.68. The considerations set out above show that a 
significant proportion of the ERDF-aided infrastructure 
investment is not optimally utilized. This observation 
confirms a similar finding made in a study (n) on 
infrastructure commissioned by the Commission. 
6.69. As regards its impact on regional development, as 
reflected in the net utilization rates, it appears that in the 
majority of cases these rates are less than 50 %, and often 
remain very low, even after the initial period following the 
commissioning of the infrastructure. 
6.70. This situation demonstrates that although the 
presence of infrastructure is a necessary and essential 
condition of regional development in itself, it is far from 
being enough. 
6.71. The under-utilization and the low regional impact 
can often be explained by the absence of any real regional 
development programme to associate projects with 
precise objectives. The lack of forecasts on which to base 
investment decisions and the inadequacies of physical and 
financial programming in carrying out the works also 
play a considerable role. Moreover, too little attention is 
given to the incentive effect of Fund operations on 
economic activities in the regions themselves, the only 
effect which can effectively reduce disparities in regional 
development. This applies equally to programmed 
financings, which must form part of more general 
programming if they are to have optimum effect. 
6.72. One of the consequences of this situation is that 
the funds employed in carrying out the projects show a 
very low rate of return compared with the cost of the 
financial resources committed. This lost profit amounts 
to an implicit increase, which may be extremely large, in 
the cost of the investment. 
6.73. The need for optimum appraisal of the regional 
impact of infrastructures requires the development of a 
method of project selection which takes into account the 
prospect of utilization, which in turn ought to be 
evaluated in terms of the incentive effect on the 
exploitation of the economic potential of the regions in 
question. The Commission's method of appraisal ought 
to define more precisely and investigate more thoroughly 
the factors required for analysis of the expected 
utilization rates of projects. 6.74. As regards commercial-type infrastructure, care 
must be taken to ensure that ERDF aid is reflected in 
prices in the regions in a way which improves the 
competitiveness of those regions. Furthermore, with a 
view to the optimum allocation of resources, there should 
be increased coordination between the ERDF and other 
Community financial instruments, so that Community 
intervention in the form of a loan or subsidy is then best 
suited to the real needs of project financing. 
6.75. In conclusion, in view of the fact that infrastruc­
ture projects are the Fund's main item of expenditure, 
they must be given maximum attention, so that Com­
munity action to reduce disparities in regional develop­
ment is effective and has the optimum effect. In this 
respect, the Commission should ensure that the Member 
States forward to it within the statutory time limits the 
reports and other communications required for im­
plementation of the regional development programmes 
and the utilization of the principal completed infrastruc­
ture works. The forwarding of these documents should be 
the occasion for developing a method of measuring and 
evaluating investment utilization with a view to assessing 
its impact on regional development. The information to 
be obtained by an analysis of this kind should also make it 
possible to improve methods of examining aid appli­
cations and provide improved guidance for future 
decisions in order to increase their efficiency. 
SPECIAL REPORT ON THE INTEGRATED 
APPROACH TO COMMUNITY FINANCING 
OF STRUCTURAL MEASURES 
6.76. On 19 May 1988, the Court adopted a special 
report on the integrated approach to Community 
financing of structural measures (12). The report takes 
stock of all the initiatives which had been taken on the 
basis of an integrated approach (the Naples operation, 
the Belfast operation, integrated development program­
mes and preparatory pilot measures) prior to the funding 
of the integrated Mediterranean programmes. 
6.77. The Court found that, even taking into account 
their experimental nature, the operations involving an 
integrated approach which were examined in the special 
report on the whole led to disappointing conclusions. The 
integrated aspect of the ventures was confined to a few 
references or formal methods of presentation which 
It^ COfticialiournal of the European communities L^ L^ ^ 
appeared in the tinancing decision and ^vere usually lost 
fromsightat the implementation stage, in administrative 
practice^managementoftheintegratedmeasuresisinfact 
reduced to management of supplementary appropriD 
ationsallocatedforthat purpose by specialregulations or 
particular decisions. 
o57D5 Atoeommunity level, theproceduresformanaging 
the various financial instruments have not been adapted 
toaccommodatetheneedsandobiectivesofanintegrated 
approach, in practice, the schemes tananced are contined 
to the one aspect ^regional, agricultural, supplementary 
appropriations under Article ^eoO^ in ^vhose context they 
arose^at best, in the absence of any appropriateform of 
organization and documentation, they simply aim to 
grouptogether,onageographicalbasis,theaidsallocated 
by the various Funds. 
oP7^. Atlocallevel,theadministrativeauthorities^vhich 
are more specifically intended to bring about integration 
play onlyamarginalrole,^vithout any real influence on 
the useoftheappropriations,asituation^vhich obviously 
limits ^vhat the commission can do. 
^0. Lhe absence ofasuitable accounting frame^vorlo 
means that information on the real content and precise 
state of progress of the initiatives financed is lacking, in 
the case of the Naples operation, and in viev^ of the large 
amounts of community aid involved, there is a perD 
manent administrative system^vhichprovidesperiodic 
summary documents. FtovBever, these statements lacl^ 
precision and any interpretation of them is open to 
question^at best, theymerely group together data on the 
sources of finance on a geographical basis, without 
establishinginany^vaythe consistency of the schemes or 
the coordinated use of resources. As regards the various 
other integrated operations, there is a laclo of comD 
prehensive accounting documents and this is also true of 
the progress reports and,^^^^, the monitoring of the 
schemes and evaluation of their results. Lhe same 
deticiencies exist at community level,^vhich is even less 
acceptable, as theC^ommissionoughtto be inaposition to present summary accounts for all the tinancial transact 
tions relating to each integrated scheme. 
o.Dd. l^or is it possible, on the basis of the partial data 
available, to detect any acceleration in the progress of the 
worker any improvement in the rate of utilization of the 
appropriations.C^nthispoint,thestateoftheinvestments 
examined ^vas entirely comparable tothat of the other 
pro^ectsusuallytinanced bythe Funds. COnthequalitative 
side,the decisions andprogrammes provide verylittle 
concreteindicationastotheexpectedimprovementinthe 
impact of intervention and any spin-off ^vhich might be 
expected. Lhe observations made in various sections of 
the special report sho^v that greater attention should be 
paid to the impact of intervention. 
o.^. Arecent report by the European Parliaments 
on budgetary control of theeffectivenessofthestructural 
Funds, emphasized that, in the case of integrated 
measures, it ^vas not yet possible to speak of unity at the 
legal and operational levels, ^vhich meant that the 
decisionmaking procedures ^ere extremely confused and 
resulted in the adoption of simple^declarationsofintenC, 
the implementation of v^hich^vas linked to compliance 
v^ith the provisions governing each of the instruments. 
^.^. Lhe oeourt is of the vie^v that the integrated 
measures label and the tinancingthat goes titbit cannot 
be awarded indiscriminately. At the very least, they 
require the scheme in question to be the object of proper, 
comprehensive programming and to be implemented in 
accordance ^vithaprecise set of procedures covering the 
full content of the operation. 
o.^. if the administrative action is tobe effective, it 
needsaform of organization ^vhichisinharmony^vith the 
objectives pursued.Suchaform of organization has been 
largely wanting as far as the measures looked at in the 
report are concerned, in the preparations for the 
integrated mediterranean programmes, the commission 
has defined and set upaseries of procedures ^hich are 
intended to solve some of the difficulties encountered in 
the past. All the same, care must be taken to ensure that 
12. 12. 88 Official Journal of the European Communities 107 
these procedures are actually implemented, so as to avoid structural Funds which is at present under way should 
any repetition of the above-mentioned shortcomings, also make it possible to improve the conditions for 
especially as regards the coordinated management of Community intervention in this field and increase its 
Community aid and its follow-up. The reform of the effectiveness. 
C1) OJ L 73, 21.3.1975, p. 1. (10) See also paragraph 9.7 of the Court of Auditor's annual 
(2) OJ L 35, 9.2.1979, p. 1. report concerning the financial year 1986, OJ C 336, 
(3) OJ L 169, 28.6.1984, p. 1. 15.12.1987. 
(4) OJ L 340, 6.12.1983, p. 24. (n) The impact of infrastructure on regional development. Final 
(5) OJ L 204, 28.7.1978, p. 1. revised report; Infrastructure Study Group; Commission of 
(6) OJ C 348, 31.12.1984, paragraphs 7.27 — 7.29. the European Communities; 1986, p. 404. 
(7) OJ C 326, 16.12.1985, paragraphs 7.16 — 7.23. (*2) OJ C 188, 18.7.1988, p. 1. 
(8) OJ C 348, 31.12.1984, paragraph 7.36. (13) Doc A2-159/87 and the Resolution published in OJ C 318, 
(9) See also paragraphs 9.10 and 9.11 of the Court of Auditors' 30.11.1987, p. 126. 
annual report concerning the financial year 1986, OJ C 336, 
15.12.1987. 
108 Official Journal of the European Communities 12. 12. 88 
CHAPTER 7 
European Social Fund 
7.0. TABLE OF CONTENTS 
Introduction 
National and Community systems and procedures relating to the management 
of the European Social Fund 
Main weaknesses noted 
Possibilities for improvement 
Preparatory studies and pilot schemes 
Rate of utilization of payment appropriations 
Selection 
Eligibility 
Priority 
Decision 
Implementation of the decision 
Contract 
Interim report 
Final report 
The Court's findings 
Financial statements 
Closure of files 
Expenditure not accounted for 
Ineligible expenditure 
Expenditure not borne by the contractor 
Excess funding 
Circulation of final reports and results 
Conclusions 
Outstanding commitments Paragraph 
reference 
7.1 
7.4 
7.5 
7.9 
7.10 
7.14 
7.15 
7.15 
7.16 
7.20 
7.23 
7.23 
7.26 
7.29 
7.31 
7.32 
7.34 
7.36 
7.38 
7.39 
7.42 
7.45 
7.55 7.3 
7.9 
7.8 
7.55 
7.19 
7.19 
7.22 
7.30 
7.25 
7.28 
7.30 
7.54 
7.33 
7.35 
7.37 
7.41 
7.44 
7.54 
7.56 — 7.62 
INTRODUCTION 
7.1. On 10 December 1987 the Court of Auditors 
examined a special report on the national and Com­
munity systems and procedures relating to the manage­
ment of the European Social Fund (ESF). This report was 
then adopted on 10 March 1988 and was published in the Official Journal of the European Communities on 16 May 
1988 (O- The conclusions of this report are set out in 
paragraphs 7.4 to 7.9. 
7.2. In addition, the Court looked at one particular 
aspect of the social field, concerning preparatory studies 
and pilot schemes (see paragraphs 7.10 — 7.55). 1987 was 
(') The footnotes are listed together at the end of the chapter. 
12. 12. 88 Official Journal of the European Communities 109 
in fact the year during which the last measures of this type 
came to an end; that being the case, it is clearly a useful 
and necessary exercise, on the one hand to identify, in all 
these schemes, the most striking aspects of the manage­
ment of the funds and, on the other hand, to summarize 
those features that were of greatest significance and likely 
to clarify the development, at operational level, of the new 
types of assistance set up by the ESF. 
7.3. Furthermore, paragraphs 7.56 — 7.62 deal with the 
'burden of the past' as far as the ESF is concerned. These 
observations result from an audit of the accounts and 
from the findings made when inspecting a representative 
sample of files. 
NATIONAL AND COMMUNITY SYSTEMS 
AND PROCEDURES RELATING TO THE 
MANAGEMENT OF THE EUROPEAN 
SOCIAL FUND 
7.4. The following paragraphs set out the conclusions of 
the special report referred to in paragraph 7.1 of this 
chapter. 
Main weaknesses noted 
7.5. There is still some considerable ground to be 
covered before the Fund becomes an effective financial 
instrument, enjoying dynamic management and control. 
7.6. As regards the preparation procedures concerning 
regulations, decisions and guidelines for the management 
of the ESF, the following shortcomings were found: 
(a) the choices made when the decisions relating to the 
intervention of the Fund in favour of various social 
groups were taken, or when the present Fund was 
adopted, were not based on cost-benefit analyses of 
the current policy alternatives or on an analysis of the 
projects implemented within the context of the policy 
laid down; 
(b) the choice of multiple objectives — either permanent 
or short-term — in view of the reduced volume of 
ESF appropriations ('4 % of the total public expendi­
ture of the Member States on all aspects of aid or 
social assistance') can only result in a thin sprinkling 
of financial resources over the whole range of 
objectives, which is not very effective; 
(c) recruitment, or the suitability of professional training 
for the employment market, are not always the main 
criteria for selecting measures; (d) the Community carries out hardly any activities of its 
own and only participates by granting financial aid to 
professional training and recruitment measures set up 
in the Member States and subsidized by the public 
authorities to an extent which is at least equal to the 
Community's financial contributions. These meas­
ures have thus usually already been taken care of by 
the national systems; 
(e) the system set up involves the processing of too many 
files, so much so that it becomes almost impossible to 
manage them properly. 
7.7. The following weaknesses in the management at 
Community level should also be mentioned: 
(a) the excessively imprecise nature of the criteria 
governing admissibility, eligibility and priority 
contained in the implementing rules; 
(b) the absence of a common approach for a series of 
concepts in the area of employment; 
(c) the excessive formality of the processing procedure 
adopted by the ESF departments for applications for 
assistance and payment; 
(d) the absence of any systematic assessment of the 
projects co-financed by the ESF; 
(e) the inadequacy of the system of on-the-spot checking 
carried out by the Commission departments, which 
instead rely on certification by the Member States. 
7.8. On account of such deficiencies in the Com­
mission's management, whatever its policy, it is im­
possible to root out certain weaknesses in the Member 
States' operations. Thus the following shortcomings, in 
particular, were noted at national level: 
(a) absence of a specific department in each Member 
State, specifically responsible for monitoring the 
expenditure incurred under the projects approved by 
the Fund; 
(b) differing interpretations by the Member States of 
certain Community rules, which are, moreover, not 
very explicit; 
(c) the national certification procedures are heteroge­
neous, opaque and unreliable. Possibilities for 
improvement. 
110 Official Journal of the European Communities 12. 12. 88 
Possibilities for improvement 
7.9. Without prejudice to the provisions which may be 
adopted with regard to the tasks assigned to the structural 
Funds and the coordination of their activities, it would be 
possible, in the short term, to turn the ESF into a more 
effective financial instrument which would be easier to 
monitor if: 
(a) the Commission, within the framework of the 
guidelines for the management of the Fund, realigned 
its objectives, so as to finance a distinctly smaller 
number of operations whilst keeping the volume of 
aid at its present level; 
(b) the admissibility of the applications was subject to 
rules which made it possible to reject any application 
that was insufficiently justified; 
(c) the criteria for eligibility and priority were made clear 
and precise and were strictly applied; 
(d) precise instructions on the information to be supplied 
on the composition of each amount of expenditure 
were sent to the Member States; 
(e) the Commission's powers of control were fully and 
systematically used and provided with sanctions 
which were effectively imposed; 
(f) penalties were applied to organizations which, with 
the aim of obtaining cash facilities by means of the 
payment of an advance, blatantly overstated their 
estimated expenditure; 
(g) the types of control which should accompany the 
national certification procedure were stipulated. 
PREPARATORY STUDIES AND PILOT 
SCHEMES 
7.10. Preparatory studies and pilot schemes are defined 
by Article 7 of Council Regulation (EEC) No 2396/71 of 
8 November 1971 (2), which was amended by Council 
Regulation (EEC) No 2893/77 of 20 December 1977 (3). 
The reason for carrying out preparatory studies and pilot 
schemes is to enable the Member States and those 
responsible for operations to choose the most effective 
form of aid and to organize the implementation of it to the best effect. They are also intended to guide the Council 
and Commission in their choice of future areas of 
intervention and to promote a more effective use of the 
existing forms of ESF aid. Preparatory studies and pilot 
schemes constitute a special part of the area covered by 
the ESF, whilst providing at the same time a paradigm of 
the functioning of the Fund as a whole. All promoters, 
both private and public, have access to Community 
financing. National public financing is not necessary: all 
that is required is the authorization of the Member State 
on whose territory the project is to be carried out. The 
ESF's financial contribution may not exceed 50 % of the 
actual cost and is not linked to any category constraints 
or to any geographical restrictions. The aims to be 
attained are couched in general terms, so that the widest 
possible variety of approaches may be adopted in order to 
achieve them. 
7.11. The sphere of application of the preparatory 
studies and pilot schemes is virtually identical with that of 
the ESF as awhole, but they differ from the other ESF 
measures by virtue of the contract linking the body 
responsible for carrying out the measure with the 
Commission. This contract establishes a direct link 
between the Commission and the body responsible for 
carrying out the measure and makes it possible to define 
more precisely the content of the measure, the manner in 
which it is to be carried out and its objectives. 
7.12. Since 1984, preparatory studies and pilot schemes 
have been replaced in the new ESF by specific measures 
which have received a 25-fold increase in the volume of 
(differentiated) appropriations allocated to them. These 
specific measures are an extension of the preparatory 
studies and pilot schemes and are 'carried out with the 
aim of furthering the implementation of projects of an 
innovatory nature'. They are different from the common 
arrangements in that they can last for as long as three 
years rather than just one year. 
7.13. The Court has carried out a systematic inspection 
of the files for all preparatory studies and pilot schemes 
which have been the subject of a Commission decision 
since 1980 and which have been closed at intervals up 
until 1987. 
Rate of utilization of payment appropriations 
7.14. 43,9% of the annual payment appropriations 
granted for preparatory studies and pilot schemes during 
the period 1980-87 (14,37 Mio ECU) were utilized. On 1 
February 1987,32 pilot schemes still had to be concluded, 
i.e. roughly one tenth of the total of about 340 
preparatory studies and pilot schemes which have been 
granted Community aid since 1971. During 1987, final 
payments were made in respect of 14 files and 17 files were 
closed by decommitting the whole amount or the balance 
of the available appropriations committed and by issuing 
a recovery order. One final pilot scheme should be 
completed in 1988 when the final payment is made. Some 
of the files (seven of them) could have been closed in 1985 
12. 12. 88 Official Journal of the European Communities 111 
or 1986 with a final payment and others (four files) have 
been pending since 1982 or 1983. 
Selection ' 
Eligibility 
7.15. The eligibility of aid applications is subject to the 
rules governing the ESF. There is, in addition, a quantity 
criterion. Article 7 of Regulation (EEC) No 2396/71 (2) 
stipulates that the number of jobs involved may not 
exceed 30. This number had been exceeded in one fifth of 
the projects audited. In many cases, the Commission was 
aware of this situation at the time the application for aid 
was made. 
Priority 
7.16. The guidelines for the management of the ESF lay 
down the priority criteria for the classification of files. 
The criteria are that the operations should be innovatory 
in character, create jobs, improve the quality of training 
and, in particular, make it multi-skill, and be potentially 
applicable to other parts of the Community, and priority 
is given to operations that satisfy the largest number of 
these criteria. 
7.17. The Commission added certain criteria for 1983, 
which was the last year of application of the old ESF, by 
granting priority to files relating to the following aims: 
youth unemployment, the creation of small craft 
undertakings, the creation of jobs for women in 
occupations where they are under-represented, training 
to acquire new skills corresponding to technological 
changes, training of instructors and operations which 
have already been accorded priority in different areas of 
Fund intervention. 
7.18. In view of the fact that the appropriations 
available were usually more than enough to satisfy the 
needs expressed in the applications, these criteria have not 
played a truly selective role. Thus, the prospects for job 
creation are often not even mentioned in aid applications. 
7.19. This also explains why the content of the criteria is 
not precisely defined. For example, the expression 
'innovatory character', the first criterion of priority for 
pilot schemes, which has become the criterion of 
eligibility for specific measures in the new Fund, has not 
been formally defined. Decision 
7.20. The decision to grant aid is usually taken during 
the three months following a meeting of the Committee, 
according to the same procedure as for other ESF aid 
measures. 
7.21. The terms of the decision have not been updated 
and contain factual elements which in some cases date 
back several years. In one in six cases, making amend­
ments to decisions constitutes additional work which 
could be avoided. The series of decisions taken in respect 
of one project were taken in order: 
(a) to correct a material error; 
(b) to amend the description of the promoters; 
(c) to change the dates of execution, after the event. 
7.22. It is not always clear that Community funding has 
been used to help in initiating a project. In two fifths of the 
files, execution of the project had started before the 
Commission decision was taken. It has even been known 
for a scheme to have already been completed when the 
Commission decided to grant it assistance. 
Implementation of the decision 
Contract 
7.23. Contracts implementing Commission decisions 
are signed on average five months (between two weeks 
and 15 months) after the decision has been made. In 90 % 
of cases, the contract is signed after the pilot scheme has 
begun. In one case, the contract was signed three months 
after the pilot scheme had ended. It is clear from such 
examples that the contracts have become a merely formal 
requirement. 
7.24. Additional clauses are rarely added to contracts, 
even when the Commission's decision is amended. In the 
case of one pilot scheme, the Commission took a decision 
— 27 months after the contract had ended — which 
amended not only the dates of commencement and 
termination of the contract but also its duration, without 
any additional clause being added to the contract. 
112 Official Journal of the European Communities 12. 12. 88 
7.25. The contracts and their annexes are, in most cases, 
unclear as regards the actual content of the preparatory 
studies and pilot schemes. For example: 
(a) the place where they are to be carried out is not always 
stated; 
(b) the objectives determined by the priorities are not 
always clearly indicated: target figures for job 
creation are rarely given, even though job creation 
appears in the guidelines as the second criterion for 
the selection of projects; 
(c) quantification of training in terms of time and cost is 
the exception rather than the rule; 
(d) the work schedule refers in most cases simply to the 
dates for the submission of reports to the Commission 
and only rarely to the expected completion dates of 
the various stages; 
(e) the objectives set out in the description of the projects 
are usually defined in vague, general terms, without 
concrete references; 
(f) in most cases, only a very brief description of the 
budget is provided, with no direct reference to the 
various stages of the scheme and no mention of 
accounts; 
(g) the standard contract never requires the contractor to 
submit an interim statement of expenditure, no 
matter what the duration of the pilot scheme may be 
and even in cases where an interim report is to be 
provided. In the case of one of the projects audited, 
which lasted two years and for which half-yearly 
reports were to be submitted, the Commission even 
requested the contractor to stop annexing a financial 
report as it was considered to be 'unnecessary', 
whereas, if it had taken the trouble to read the first 
interim report, the Commission would have dis­
covered that the contractor was including in the costs 
of the project the wages of trainees who had not yet 
been selected. 
Interim report 
7.26. For projects lasting more than one year, the 
contract usually provides for the submission of an interim 
report, which is the pre-condition for the disbursement of 
an interim payment usually amounting to around 30 % to 
40 % of the initial commitment. The interim report, 
which also serves as a progress report, is not subject to any 
rules regarding either its content or its size. It is left 
entirely to the discretion of the contractor. In practice, it varies from two to 100 pages. It is supposed to be read by 
the managing department, which sends a note to the 
Authorizing Officer stating that the interim report has 
been approved and that the second instalment provided 
for in the contract should be paid. 
7.27. There is no approval procedure, either for interim 
reports or, moreover, for final reports. In none of the files 
on the projects audited, for which interim reports were to 
be submitted, is there mention of any comment what­
soever having been addressed to the contractors. 
However, the managing department should have used the 
examination of these reports as an opportunity to ask the 
contractor various questions, in particular when it 
appeared, for example, that the number of beneficiaries 
was higher than the maximum eligible or that the 
objectives pursued had been changed. 
7.28. The Court has observed that often the sole 
purpose of the interim report is to extract a payment. In 
cases where the contractor failed to submit an interim 
report, the management department rarely insisted on 
having one, or sometimes did so only after a year's delay. 
Final report 
7.29. On termination of the project, the contractor 
sends the Commission first a draft and then the final 
version of a report on the execution of the project, a 
summary and a financial statement. The deadline by 
which they must be submitted is laid down in the contract, 
but it is rarely observed: there is always a delay, which can 
range from one month to several years. The reports and 
summary notes have to be translated into one or two 
languages other than that of the contractor, and 
translating these documents further delays submission of 
the final report. Furthermore, the cost of translating, 
printing and dispatching the report (50 or 75 copies, 
depending on the number of languages into which it has 
been translated) absorbs a significant part of the ESF aid. 
7.30. The contents of the completion reports, which 
vary from 20 to 400 pages, are not particularly 
homogeneous and in general provide very few concrete 
details as to how the schemes were carried out and even 
less idea of their practical results. The most frequent 
conclusion is that the scheme should be continued and 
further funding provided. 
The Court's findings 
7.31. On-the-spot checks by Court officials brought to 
light serious deficiencies in most of the preparatory 
12 12 ^ Official journal of the European Communities 113 
studies andpilot schemes Cowing totheirbrevity^the 
financial statements sent by the contractors and accepted 
hy the Commission do not in general enable these 
deficiencies to be pinpointed 
Fh^c^t^ten^nt^ 
732 Lhe financial statement is left to the initiative of 
the contractor He is simply recommended to follow the 
same presentation as that of the budget attached to the 
contract and to explain any differences Cnven the brevity 
of the presentation of the budget ^for examples the 
budgets for pilot schemes lasting for three years can 
consist of five lines^itfollows that the financial report is 
also^ more often than nop brief and it is not possible to 
distinguish which items of proposed expenditure are 
eligible furthermore^ the financial report only occasion 
ally contamsastatement of revenue and funding 
733 fhe Commission does not require any certifi 
cation of financial reports It does not even require the 
stampandcertificationof themternalauditor whois 
generally responsibleforthecontractmgbody^saccounts 
Cto^reo^^t^ 
73^ Lhe absence ofcontractual constraints does not 
encourage the closure of files no sanction is providedfor 
inthecaseof delays nonperformance or only partial 
performanceofacontract If contractors fail to providea 
schedule for the schemes for which assistance is granted^ 
they are sent onlyabelated reminder of their contractual 
obligations ^ome files remain open for several years 
before being closed 
73eo Lhelacleoffollowupin financial management 
results in commnments being l^ept artificially alive which 
are then completely cancelled aftertwo^three^four or five 
years Likewise^ contractors who had obtained advance 
payments and didnotstarttheprogramme envisaged 
were able to keep the fundsforanumber of years without 
being called upon either to accountfor them or to repay 
them Incaseswherecontractorswereasked to repay 
funds advanced to therm no thought was given to 
chargmginterest on these funds^ which were thus granted 
free of charge Late requests for the repayment of funds 
have sometimes not beenhonoured because the contract 
ing bodies hadmn the meantime^ disappeared F^^d^ure^ot^ccou^edtor 
73o infour fifths of the cases audited^ the contractor 
had not kept separate accounts for the expenditure 
involved in the pilot scheme Consequently there is great 
difficulty in identifying this expenditure and in particular 
inpinpointmg those fixed costs that are likely to be 
charged as direct costs of the execution of the project 
7 37 A number of the contractors inspected were 
unable to provide supportingdocuments ^Vhere they 
were supplied^the Court noted that in many cases 
ta^ the date^ the nature of the services^ the person 
providing the services and the connection withthe 
pilot schemes were not stated^ 
^ the invoices were not receipted^ 
^ some documents were issued by the contractor 
himself or by his partners 
h^h^it^^^nd^ur^ 
73^ ln7eo^oof the projects audited^ some ineligible 
expenditure was submitted to the Commission as part of 
the actual cost of the project in the maim this involved 
^ expenditurepnor to or after thepenodinwhich^ 
according to the contracp the project was to be 
carried out^ 
^expenditure relating to the use of equipment ^ince 
the notion of reaching equipments is not clearly 
defined^ contractors tend to include under this 
heading the most diverse kinds of purchasesr^sound 
equipments cameras^ videocassetterecorders^ etc^ 
and charge the total cost to the pilotscheme^ whereas 
they are in fact investments^ for which only the 
element of depreciation should be takeninto account 
Furthermore^ someofthesemvestmentsweremadeat 
the end ofthe period of contracts 
^ expenditure whose connection wnh the preparatory 
studies and pilot schemes is not clearly esMblished^ 
such as the purchase of curtains or commemorative 
medals or the cost of repairing cars involved in 
accidents sometimes the link with the pilot scheme is 
onlysuperficialEorexample^onecontractorcharged 
agamstapilot scheme the wage costsofhis secretariat 
^3^^ofthepro^ectexpenditure^onthepretextthat 
11^ COfticial journal of the European Communities 1^1^^ 
he hadhadtoemploytemporarysecretaries to replace 
secretaries who had gone on trainingcourses. COn 
closer examination, it emergedthat the contractor 
had been usingateam of temporary secretaries long 
before thepilotscheme had begun, andhe was unable 
toprovethat new temporary secretarieshadbeen 
taken on for the pilot schemed 
^over-estimated expenditure, in particular as regards 
depreciations in onepilot scheme, depreciation of 
buildings was calculated on the basis oflO^of the 
construction cost, although the ceiling was ti^ed 
undernational legislation at^^.^Vhat is more, only 
asmall part of the building space was used for the 
purposes of the pilot scheme. 
^^c^id^r^ not t^orne^ytne contractor 
7.3^. Expenditure which the contractor did not have to 
bearisalso frequently submitted asacostand accepted as 
such by the Commission. l^ore^ample,one contractor 
requested permission from the Commission to depreciate 
not only the equipment purchased during the pilot 
scheme but also the stock of equipment already in 
existence at thestart of the scheme.LheCommission gave 
its assent without carrying out anyformofinvestigation. 
However, the CourCsaudit revealed that the accounts of 
the contractor inquestion contained no details ofany 
depreciations the equipment in question was not the 
contractor's property and he had played no part in its 
purchase. Ithad been placed at his disposal freeof charge 
by the public authorities, with whom, moreover,hehada 
contract to supply training services. 
7.^0. Similarly, inanumber of cases thecontractor 
included among the costs of the pilot scheme the wage 
costs ofthebeneticiariesand^ortheirinstructors, without 
mentioning that the sums received by these persons had 
been disbursed in the form of unemployment benetit or 
had been paid by the employers^ the ESP aid was 
collected by the promoter, who kept it instead of passing 
it on tothe companies which had actually borne these 
costs.For e^ample,one contractor charged against the 
pilotscheme the wagecosts of overl^trainees, although 
they were in fact paidby the companies^ not only did 
thesecompaniesnotreceive any E^F assistance, but they 
hadtopayatinancialcontributiontothe contractor, 
which the Commission did not take into account when 
closing the tile. 
7BU. ^omecontractors have also beenknown to submit 
real costs inclusive of all ta^es, even though they 
afterwardsobtainaVALrefund.LheCommissionhasno 
special provisionfor such casesMhe contract contains no reference to the special tiscal status contractors or their 
subcontractors may en^oy. 
E^cc^tund^ 
7.^. Lhe contract usually containsaprovision stating 
that ^und assistance may not exceed ^O^Bo of actual 
expenditure and that the remainder should be borne by 
the contractor. However, contractors rarely submit their 
tinance plans. ^Vhen they submit them with their initial 
applications for aid,theyareusually still at thefund^ 
seeking stage.Lhe granting ofESt^ aid tends to open the 
door to other sources of funding and, consequently, 
external funding frequently arrives after the decision to 
grant aid. depending on who is supplying the funds, the 
sumsgrantedhaveto comply withdifferent allocation 
criteria and different conditions, in particular regarding 
objectives, duration, dates of commencement and 
termination, the number of recipients and costs. Lhe 
contractor therefore has to keep various special files 
simultaneously,which he does not communicate to the 
other partners, ^ince the contract signed by the Commis^ 
sion lays down no obligation to submit details concerning 
other sources of finance, it is left to the contractor's 
discretion.^hen,however,these other funds are taken 
into consideration, it becomes apparent Lhat the E^ has 
contributed too much. 
7.^. Lhis situation of excess tinance,which applies to 
half of the preparatory studies and pilot projects audited 
on the spot by the Court, also occurs in cases where the 
returnsand revenue generated by the pilot scheme are not 
taken into account when E^E aid is paid. Lhis applies to 
the following in particulars 
^ the returns generated by pilot schemes which aim to 
promote economic activity^ 
^ the tinancial contributions paid to the contractor by 
trainees. 
7.^. C^ne member ^tate did indeed make enquiriesin 
orderto establish which partner had provided tinancefor 
an operation over and above the costs involved and was 
entitled to recover all or part of its contribution. In this 
case, it is evident that the Commission did not consider 
other revenue and sources oftinance.^imilarly,it has not 
informed theCourt of theactiontakenfollowingLhe 
observations communicated to it after onthespot audits 
which made it possibletoidentify these e^cesstinance 
situations which should have resulted in action to recover 
the sums paid out for which there was no ^ustitacation. 
12. 12. 88 Official Journal of the European Communities 115 
Circulation of final reports and results 
7.45. The 50 or 75 copies (depending on whether 
translations into two or three languages are required) of 
the report on each preparatory study or pilot scheme 
which the Commission receives from the contractors are 
essentially intended to be sent to the press and inform­
ation offices set up in the Member States, where they can 
be consulted by potential contractors. The Court was 
unable to find any trace that these reports had been 
circulated. They cannot even be found in the Commission 
library in Brussels; one study, of which the Commission 
financed a run of 1 000 copies, is similarly missing. None 
of the contractors whom Court officials met during audit 
visits had consulted the reports on previous pilot schemes 
and none of them knew that these reports were available, 
or where it would have been possible to consult them. The 
contractors said that they had not been informed of 
related or parallel preparatory studies or pilot schemes by 
the Commission. 
7.46. A circular setting out the main elements of the 
summary reports on several preparatory studies and pilot 
schemes was prepared and sent to potential users, such as 
ministries, training organizations and promoters. It was 
last known to have been circulated in mid-1981. 
7.47. This method of dissemination was abandoned in 
favour of a method intended to reach a wider public, in 
the form of the new periodical, Europe sociale (4), which, 
to judge by the few issues which have appeared, gave a 
very brief outline (on half a page) of a few pilot schemes. 
The presentation adopted in this periodical fails to give 
readers real information on the actual cases dealt with 
and makes no reference to more detailed sources of 
information. 
7.48. Each year the ESF annual report presents the 
preparatory studies and pilot schemes to which the 
Commission has decided to give assistance, both in global 
financial terms and with details of the topics dealt with. A 
one or two line summary is given for each pilot scheme. 
There is no comment, however brief, on the results 
obtained from the completed preparatory studies and 
pilot schemes. During the period under review there was 
no report, communication or proposal to either the 
Commission or the Council regarding the results of 
preparatory studies and pilot schemes. 
7.49. Seminars have been organized by the Commission 
in order to assess the impact of the ESF and to promote 
exchanges of know-how. The last seminar to deal with 
preparatory studies and pilot schemes was held in 
Mulhouse in October 1981. Three pilot schemes, as well 
as other ESF-financed projects, were subjected to analysis 
during the seminar. The effect of these seminars is limited 
on the one hand by the very small number of schemes 
discussed, and on the other by the very restricted nature of 
the selection in terms of the numbers and origins of participants, as well as by the fact that the results are not 
distributed. 
7.50. Despite a range of studies on the development of 
methods of evaluating ESF-financed projects, no method 
for evaluating the results of preparatory studies and pilot 
schemes has been developed so far. 
7.51. The on-the-spot audits gave rise to the following 
observations: 
(a) more than one third of the projects inspected were not 
innovatory, either because the measure covered by 
the pilot scheme had already been effected by the 
same promoter before the pilot scheme started, or 
because it already existed in the promoter's im­
mediate (geographical or vocational) environment, or 
the training was quite simply sub-contracted to an 
agent whose normal programme included such 
training; 
(b) the level of job creation is very modest: according to 
the contractors, approximately 12 % of the trainees 
were employed in new jobs. Moreover, there was no 
check on whether the jobs really had been created. 
7.52. In the opinion of the managing department at the 
Commission, the best way of giving concrete form to the 
results of a preliminary study or pilot scheme is to 
continue to finance the operation which has been started, 
or to duplicate it with the assistance of the ESF. Out of all 
the contractors monitored, 12 % were carrying out a 
second pilot scheme or had submitted new applications 
for assistance for pilot schemes and one quarter obtained 
subsequent ESF financing, either because the operation 
which had been initiated with the pilot scheme had been 
renewed with aid from the Fund, or because the Fund had 
intervened to supplement the financing for the pilot 
scheme. 
7.53. The projects which received continued ESF 
funding were characterized by the following: 
(a) the pilot schemes were concerned with specific 
training; 
(b) the promoter had a stable infrastructure and ad­
equate own resources in terms of premises, staff and 
training resources; 
(c) the promoter had a thorough knowledge of the sector 
concerned and of the environment in which he was 
operating. 
116 Official Journal of the European Communities 12. 12. 88 
7.54. In some cases the continuation of the measures 
initiated by the pilot scheme is more limited, given that, 
for example, it involves the promoter in providing 
training for the staff which he recruits. In that case, the 
measure comes to an end once the recruitment stage is 
concluded. 
Finally, some projects which were financed as pilot 
schemes benefited from an adaptation of the terms of 
eligibility where one of the conditions for the award of 
ESF assistance had not been satisfied. 
Conclusions 
7.55. In the opinion of the Court, the Commission has 
not drawn from the experience acquired in the conduct 
and management of preparatory studies and pilot 
schemes all the necessary lessons for the continuation and 
development of measures in the experimental area of the 
ESF, especially as regards: 
(a) the definition of the experimental field: 
(i) the lack of a precise definition of the concept of an 
innovatory project leads to a proliferation and 
scattering of projects, with no consistency 
between them; 
(ii) the total absence of a Community programme on 
common lines of research on social matters, 
which would have made it possible to arrive at 
solutions to a number of training problems which 
are common to all the Member States; 
(b) financial management: it should be pointed out that: 
(i) the mobilization of the available appropriations 
continues to be arbitrary and inadequate and 
does not allow any serious forecasting; 
(ii) the absence of any physical and financial moni­
toring of project progress (no text makes any 
provision for monitoring measures which may 
take three years to carry out); this absence of 
monitoring also results in the continuation of the 
practice of freezing funds on projects which will 
not be carried out or only partially carried out; 
(iii) the absence of any possibility of either appraising 
or checking the eligibility of the expenditure 
submitted in the request for final payment other 
than on the spot; 
(iv) the lack of any systematic review of other sources 
of finance; (c) the results: attention should be drawn to the absence 
of: 
(i) any method for evaluating the results of pre­
paratory studies and pilot schemes and, therefore, 
of specific measures; 
(ii) coordination of projects, as there are no Com­
munity programmes and there is a shortage of 
coordination among those carrying out the 
projects, before, during and after execution of 
similar experimental measures financed with the 
assistance of the ESF; 
(iii) adequate circulation of results; 
(iv) effective exploitation of these results, both at the 
level of measures to be initiated in the social field 
proper and at the level of drawing up rules and 
priorities specifying ESF intervention. 
OUTSTANDING COMMITMENTS 
7.56. Since 1986 the Commission has cleared committed 
appropriations more quickly, thus following the recom­
mendations made by the Court in its annual reports on 
the financial years 1981 (5), 1985 (6) and 1986 Q. 
7.57. Whilst the total for commitments outstanding at 
1 January 1986(8) was 2 832,lMio ECU (including 
1 022,3 Mio ECU for the old Fund), during 1986 the 
Commission: 
(a) paid against this total 1067,5 Mio ECU, i.e. 
321,8 Mio ECU for the old Fund and 745,7 Mio ECU 
for the present Fund; 
(b) released 411,8 Mio ECU for re-use against the 
commitments for the financial year 1985; 
(c) released for cancellation — against the commitments 
for financial years prior to 1985 — 477,3 Mio ECU 
(i.e. 410,8 Mio ECU for the old Fund and 66,5 Mio 
ECU for the present Fund). 
7.58. Against the total of 2 038,0 Mio ECU (264,0 Mio 
ECU for the old Fund and 1 774,0 Mio ECU for the 
12. 12. 88 Official Journal of the European Communities 117 
c3 
c 
c 
IS 
a 
'2 
a? 
x> 
£ 
c 
•3 
c 
3 O 
I 
1 
6 o 
o 
o 
a 
s 
U 5 .ts S <u ~ a £ 
zigs'sa* 
e c iJ <u »» 
111,2 I ^ 
w 
£ S-g'G £ 
z'ls§£ 
6<"<s o ° 
ll«lls 
«i M 
J3.2, 
«2.i«li.2 gl 
^^sIS^Is 
|8 jp«gs£'e 
£8 §£» c 
£g | M| 
Sg|1«2§'§ 
P2 U ° J3 
1 
OH Commitments 
outstanding 
at the 
beginning of 
the financial 
year 
3 
j^ 
c 
c 
E ON 
<N 
°° 
<N 
©^ 
<N 
IT) 
OO © OO 
00 Tfr TT 
VOVOO 
r^oo^ 
r- O NO 
r-- —i NO 
•* TJ-
•* •* 
NO <N -st 
OO O OO 
"3 
2 § 
o c 
43 
2 
£ 
o NO 
ON Tt" 
•^ 
^ 
•* t--
vo 
U1 
OO CN NO 
v© —< •<* 
— NO Tf 
<N —< 
o" o" 
NO NO 
"* •* 
NO O NO 
©^ ©^ ©^ 
oo" Tf ^t 
o <N r--
"3 
o -a 2 
2 £ 
"o c 
J3 
IS 
& 
o 
ON — — CN <N 
"3 
tL, ^ 
2 « 
"o c 
J3 
IS 
£ 
o 
ON 
118 Official Journal of the European Communities 12. 12. 88 
present Fund) of commitments outstanding at 1 January 
1987 (9), the Commission during the financial year 1987: 
(a) paid 966,5 Mio ECU, i.e. 70,0 Mio for the old Fund 
and 896,5 Mio ECU for the present Fund; 
(b) released 460,1 Mio ECU for re-use against the 
commitments for 1986; 7.61. The Court very much welcomes the fact that the 
files have been closed more quickly, thus giving greater 
transparency and reality to the commitments still 
outstanding. It notes, however, that in some cases the 
commitments should have been released for cancellation 
a long time ago. Furthermore, other files could have been 
closed sooner had the Commission fixed a deadline by 
which beneficiary organizations were to send the 
additional information requested. 
(c) released for cancellation — against the commitments 
for financial years prior to 1986 — 214,7 Mio ECU 
(168,5 Mio ECU of which was for the old Fund and 
42,2 Mio ECU for the present Fund). 
7.59. At 31 December 1987,2 137,7 Mio ECU remained 
to be paid, i.e. 18,2 for the old Fund and 2 119,5 for the 
present Fund, as shown in Table 7.1. 
7.60. It thus appears that the winding-up of the old 
Fund was virtually finished as at 31 December 1987. 7.62. Assessment of the 400 or so files from the old 
Fund, which were closed following payments and 
cancellations of commitments effected in 1987, shows 
that the majority are measures which were the subject of 
approval decisions in 1982 or 1983. Examination of a 
sample of these files revealed that the consideration given 
to individual applications for final payments did not 
diverge from the customary procedure (10). The survey 
also showed that the cancellations of commitments were 
justified, either because the commitments did not cover 
eligible or priority measures, or because the beneficiary 
organizations did not comply with procedures established 
by the Commission as regards applications for final 
payments. 
(') Special report on national and Community systems and 
procedures relating to the management of the European 
Social Fund, OJ C 126, 16.5.1988. 
(2) Council Regulation (EEC) No 2396/71 of 8 November 1971, 
OJL249, 10.11.1971, p. 54. 
(3) Council Regulation (EEC) No 2893/77 of 20 December 
1977, OJL 337, 27.12.1977, p. 1. 
(4) Journal of the Directorate-General for Employment, Social 
Affairs and Education, which has been published three times 
a year since 1984 and has a circulation of 7 000: 1 300 copies 
in German, 3 000 in English and 2 700 in French. 5) Annual report of the Court of Auditors on the financial year 
1981, OJ C 344, 31.12.1982, paragraphs 6.8 — 6.11. 
6) Annual report of the Court of Auditors on the financial year 
1985, OJ C 321, 15.12.1986, paragraphs 8.19 — 8.26. 
7) Annual report of the Court of Auditors on the financial year 
1986, OJ C 336, 15.12.1987, paragraphs 2.55 — 2.58. 
8) Includes exchange-rate adjustments amounting to 
106,7 Mio ECU. 
9) Includes exchange-rate adjustments amounting to 20 Mio 
ECU. 
10) Paragraphs 3.22 — 3.27 of the special report referred to in 
footnote ('). 
12. 12. 88 Official Journal of the European Communities 119 
CHAPTER 8 
Research 
8.0. TABLE OF CONTENTS 
Introduction 
The structure of Community research 
Evaluation by the Commission 
The approach adopted by the Court 
Formulation and evaluation of the implementation of the Community 
framework programme 1984-87 
Formulation and structure of the framework programme 
Evaluation of the implementation of the framework programme 
Definition of specific programmes 
Form of preparatory documents 
Efficiency of consultation procedures 
Unwieldy nature of consultation procedures 
Limited results of consultation procedures 
Consequences for the programme adoption date 
Definition of the scientific content of programmes 
Objectives or fields of research 
Selection of proposals for shared-cost projects 
Introduction 
Acceptable themes for research 
Criteria for evaluation of proposals 
Publicity 
The criterion of the socio-economic impact of the proposals 
Extent of the work of proposal appraisal 
Concentration of selection work in a small space of time 
Value of consultation activity 
Consultation of DG XI 
Consultation of the CGC 
Calls for proposals or calls for tenders? 
Monitoring and internal evaluation of specific programmes and projects 
Role of the advisory committees 
Monitoring of projects and programmes by the Commission 
Direct action 
Indirect action 
Internal evaluation Paragraph 
reference 
8.1 -
8.3 
8.4 
8.5 -
8.8 -
8.8 -
8.13 -
8.16 -
8.16 -
8.19 -
8.19 -
8.21 -
8.24 
8.25 -
8.27 -
8.34 -
8.34 
8.35 • 
8.37 • 
8.44 • 
8.46 
8.47 • 
8.49 
8.51 
8.51 
8.52 
8.56 
8.59 
8.59 
8.62 
8.62 
8.64 
8.67 -8.7 
-8.7 
-8.15 
-8.12 
— 8.15 
-8.33 
-8.18 
— 8.24 
— 8.20 
— 8.23 
-8.26 
— 8.33 
— 8.58 
— 8.36 
— 8.43 
— 8.45 
— 8.48 
— 8.50 
— 8.55 
— 8.55 
— 8.58 
— 8.70 
— 8.61 
— 8.66 
— 8.63 
— 8.66 
— 8.70 
External evaluation of specific programmes 8.71 8.84 
120 Official Journal of the European Communities 12. 12. 88 
Development of Commission methods 
Mid-term evaluation of the JRC multiannual programme 
Organization and timing of evaluation exercises 
Content of evaluation exercises 
Consultation of potential users 
Composition of external evaluation panels 
Follow-up of the evaluation panels' recommendations 
General conclusions ,71 
,72 • 
.75 -
79 
,81 
82 -
84 — 8.74 
— 8.78 
— 8.80 
— 8.83 
.85 —8. 
INTRODUCTION (b) indirect action (research carried out by means of 
shared-cost contracts with organizations situated in 
the Member States); 
8.1. This chapter is concerned with the procedures for 
evaluating the Community scientific and technical 
research programmes. For the first time, the Court has 
devoted particular attention to the Commission's pro­
cedures for evaluating research programmes and ensuring 
that the evaluations are properly exploited, so as to 
produce a steady improvement in research as an ever 
more effective instrument in the attainment of the 
Community's economic and social objectives. (c) concerted action (research carried out and financed 
by national organizations but coordinated by the 
Commission). 
Evaluation by the Commission 
8.2. In so doing, the Court's intention was not to 
provide an assessment of the essential utility of either the 
research or the specific programmes. Furthermore, the 
Court's review did not cover either the Commission's 
internal management structures (e.g. the Joint Research 
Centre) or its procedures for ensuring that the research 
results are published and utilized effectively. 
The structure of Community research 8.4. Until 1978 the evaluation of Community research 
programmes was mainly carried out by the Commission 
itself and by a series of Advisory Committees for 
Programme Management (ACPMs), made up of national 
experts. In 1979, however, the Commission started to 
submit proposals for the setting-up of a system to 
evaluate the results of research programmes. This led, in 
1983, to the publication of a Community plan of 
action (3) for evaluation which was intended to play a key 
role in the 1984-87 framework programme {v). As a result 
of this action plan, the Commission's evaluation activities 
have developed in the following manner: 
8.3. Community research is carried out through a 
framework programme for research and technological 
development activities. The first and second framework 
programmes covered the periods 1984-87 (') and 1987-
91 (2). Each Community framework programme in­
corporates all the specific research programmes for the 
period under consideration. The specific programmes, in 
their turn, are sub-divided, sometimes into sub-program­
mes and always into a larger number of individual 
projects. The specific programmes are carried out by 
various means, but principally by: 
(a) direct action (research carried out within the four 
Joint Research Centre (JRC) establishments); (a) internal evaluation methods have been reorganized, 
primarily by the replacement of the ACPMs (4) by a 
smaller number of Management and Coordination 
Advisory Committees (CGCs) (5) and, in the case of 
the Joint Research Centre, by the creation of a Board 
of Governors and a Scientific Council (6); 
(b) in 1986, the Commission submitted an internal 
evaluation of the implementation of its research 
programmes during the period 1983-85 (7) to the 
Parliament and the Council; 
(') The footnotes are listed together at the end of the chapter. (c) a system of external, retrospective (ex-post) evalu­
ation of specific research programmes by panels of 
12. 12. 88 Official Journal of the European Communities 121 
experts was established under the coordination of a 
specialist division within the Commission which was 
independent of the programme managers. Thus, 
despite the shortage of budgetary resources, 27 
evaluation reports covering most areas of research 
had been published, or were in the course of 
publication, by the end of 1987; 
(d) in 1987, the Commission communicated to the 
Council a second Community plan of action (8), 
relating to the evaluation of research for the period of 
the new framework programme (1987-91) (2). This 
plan, like the actual framework programme, en­
visages that all future specific research programmes 
(usually lasting four or five years) will be subject to an 
external independent evaluation and, in addition, 
that the Commission itself will promote research into 
the methodology of evaluation by means of a special 
programme. 
The approach adopted by the Court 
8.5. In order to assess the Commission's procedures, the 
Court selected four areas of research administered by the 
Directorate-General for Science, Research and Develop­
ment (DG XII) which had been the subject of ex post 
evaluation reports by groups of external experts between 
1985 and 1987. The evaluations were selected from the 
latest exercises for which reports were available. As at the 
end of 1987, no evaluation exercises had been completed 
under the new evaluation plan (8). The four areas 
concerned were as follows: 
(a) raw materials (two indirect action programmes, 
covering 1978-85); 
(b) environmental research (five direct, indirect (9) and 
concerted action programmes, covering 1976-87); 
(c) non-nuclear energy (four direct and indirect action 
programmes (10), covering 1979-87); 
(d) safeguards and fissile materials management (two 
direct action programmes, covering 1980-87). 
8.6. The total allocation approved by the Council for 
these 13 programmes is 707,4 Mio ECU, of which 
176,4 Mio ECU (appropriations for commitment) were 
available for the financial year 1987 only (i.e. 21,5 % of 
Chapter B 73). 8.7. The Court's examination of the Commission's 
procedures and of the above specific research program­
mes covered the following separate, but complementary, 
phases of the evaluation process, each phase containing 
both an ex post and an ex ante element: 
(a) formulation and evaluation of the 1984-87 Com­
munity framework programme (') (paragraphs 8.8 to 
8.15); 
(b) definition of specific programmes (paragraphs 8.16 to 
8.33); 
(c) selection of proposals for cost-sharing projects 
(paragraphs 8.34 to 8.58); 
(d) monitoring and internal evaluation of specific 
programmes and projects (paragraphs 8.59 to 8.70); 
(e) external evaluation of specific programmes (para­
graphs 8.71 to 8.84). 
FORMULATION AND EVALUATION OF 
THE IMPLEMENTATION OF THE 
COMMUNITY FRAMEWORK 
PROGRAMME 1984-87 
Formulation and structure of the framework 
programme 
8.8. The first framework programme for research, 
development and demonstration activities covered the 
period 1984-87 (l). It laid down eight broad scientific and 
technical objectives which were to be achieved by 
combining various specific programmes. Each specific 
programme was to contribute to the pursuit of one or 
more scientific or technical objectives. In 1983 the 
Commission's intention was to group specific research 
programmes together within research action programmes 
(RAP), which, together, were to provide the means of 
implementing the framework programme. The objective 
of this new structure, which was to create an intermediate 
programming level between the framework programme 
and the specific programmes, was to increase the 
efficiency of evaluation exercises, by providing a precise 
definition, not only of the programme objectives against 
which the results would be measured, but also of the 
socio-economic priorities from which the programmes 
derive. It was also envisaged that the Council would 
adopt research programmes at RAP level and not as 
specific programmes. 
122 Official Journal of the European Communities 12. 12. 88 
8.9. Originally, the RAP were supposed to group 
research projects in the same field together under single 
management, irrespective of the methods of implemen­
tation. The attempt was abandoned for various reasons, 
such as timetabling differences, the overlapping of certain 
programmes and the fact that the departments of the 
Directorate-General for Science, Research and Develop­
ment (DG XII) continued to be broadly structured in 
terms of separate management for each specific pro­
gramme. By introducing the RAP, the Commission was 
claiming the right to initiate a function without creating 
the corresponding managerial bodies. The institution of a 
coordinating officer for each RAP was superimposed on a 
departmental structure which remained unchanged. The 
RAP were therefore inevitably unwieldy from the point of 
view of management and bound to remain more of an 
idea than a reality. They were therefore never adopted as 
such by the Council, and the adoption of specific 
programmes thus continued on an individual basis. 
8.10. As a result, coordination of the JRC programmes 
and the corresponding indirect action programmes 
continues to be a problem. The scheduling is different, as 
is the duration, so that, inevitably, they have to be 
formulated separately. Although the Commission has 
tried to ensure that there is at least one integrated ex post 
evaluation of the various programmes — both direct and 
indirect action programmes — within the same field, it is 
difficult to find any point at which this exercise could 
conveniently be carried out simultaneously for the 
various programmes, as they are not synchronous (see 
paragraph 8.77 below). The Commission proposes in 
future to use various advisory committees to improve the 
coordination between direct and indirect action program­
mes. It must be emphasized that an approach of this kind, 
however necessary it may be, is not enough. Without 
going back to the RAP, the Commission itself must 
ensure that the different ways in which the framework 
programme objectives are implemented are complemen­
tary and coordinated. 
8.11. Furthermore, the Commission should continue to 
try to achieve a significant reduction in the number of 
programmes to be submitted to the Council (in 1987, 32 
specific programmes which had been approved by the 
Council were in progress), as this would eliminate the 
congestion at the preparatory body stage and facilitate 
the desired aim of coordination. 
8.12. In this way, the Commission would also make it 
easier to evaluate results within a single field, despite the 
varieties of methods used. Evaluation of the implementation of the 
framework programme 
8.13. The first Community plan of action for the 
evaluation of Community research and development 
programmes (1983-86) (3) essentially envisaged an evalu­
ation of each of the specific programmes. It did, however, 
refer to combined evaluation, especially at RAP level. As 
the management structures for the latter were purely a 
matter of form (see paragraph 8.9), the period 1984-87 
was marked by the absence of any organized procedure 
for evaluating results at the level of broad framework 
programme objectives. 
8.14. In 1986, however, the Commission produced a 
report (7) on the state of progress of the 1984-87 
framework programme, with the aim of providing 
support for a proposed new 1987-91 framework pro­
gramme. The report includes an examination of the eight 
broad objectives of the first framework programme and a 
brief appraisal of the main weaknesses found during that 
period. The Court noted the following omissions in this 
progress report: 
(a) the report was drawn up by an administrator in one of 
the managing departments, and not by a panel of 
independent experts. The report is seldom backed up 
by independent evaluations of specific programmes. 
Even where such evaluations did take place, it does 
not always set out the main recommendations and 
conclusions contained in them; 
(b) only exceptionally (the fusion programme) is it 
possible, on the basis of the figures given, to assess the 
extent, quality or effects of the results obtained. There 
are rarely any comparisons between the initial 
position, the objectives and the results, whether from 
the scientific or the economic angle; 
(c) greater emphasis should be given to the lessons learnt 
from past experience. There are no explanations as to 
why programmes have been abandoned, which makes 
it difficult to perceive the pattern of development; 
(d) too often there is no mention of the value of actual or 
expected results from the Community point of view, 
and the distribution and, most important, the use 
made of them, are also ignored. 
8.15. The framework programmes constitute the key 
instrument for the medium-term planning of scientific 
objectives and financial aspects. It is essential for the 
Commission to pay more attention to improving its 
assessment of the implementation and current validity of 
12. 12. 88 Official Journal of the European Communities 123 
the 1987-91 framework programme, as the Council 
Decision concerning this framework programme (2) 
requires it to do during the third year of execution. In the 
Court's opinion the evaluation of the framework 
programme should cover the influence which it may have 
had on the preparation and adoption of specific 
programmes, compliance with both scientific and finan­
cial guidelines and actual or expected results of all the 
component specific programmes. 
DEFINITION OF SPECIFIC PROGRAMMES 
Form of preparatory documents 
8.16. For the Commission, the ultimate aim of the 
preparatory work is to submit a programme proposal to 
the Council for a decision. In order to facilitate that 
decision, the proposal is given the precise textual form of 
a decision, with citations and recitals and with the 
provisions broken down into articles and a scientific 
annex. It is published in this form in the Official Journal, 
C series, so that there is, therefore, formal consistency 
between the programme proposal and the programme 
decision. Only the explanatory memorandum which 
accompanies the proposal is omitted in the final decision. 
In order to keep this ultimate aim in view, it would be 
sound practice for the Commission to round off the draft 
proposal at a very early stage with a text in a strict legal 
form, and the entire document could be produced in a 
series of different versions with all the necessary 
developments. 
8.17. The progress of the preparatory texts is par­
ticularly difficult to follow in the case of the 1985-88 
shared-cost research programme in the field of non-
nuclear energy (n). There was a succession of several 
documents, of varying length, content and plan, during 
1982. None of these was in the form of a decision, not even 
that of December 1982, although it was described as a 
'preliminary draft proposal' and provided the basis for 
the Directorate-General for Research's consultation of 10 
or so other directorates-general at the Commission in 
May 1983. 
8.18. The progress of the work on the formulation of the 
1986-90 shared cost research sub-programme in the field 
of environmental protection (12) shows — in part — that 
it is possible to proceed differently. As soon as the first 
structured preparatory document had been drawn up by 
DG XII during the last quarter of 1984, i.e. before the first 
consultations, ideas on the subject of the sub-programme had been given concrete form as an annex headed 
'Scientific content of the programme', which was very 
close in form (and substance) to the scientific annex 
contained in the decision. 
Efficiency of consultation procedures 
Unwieldy nature of consultation procedures 
8.19. The Commission holds numerous consultations. 
As from the draft proposal stage of the indirect action 
programme in the field of the environment (last quarter of 
1984), the Directorate-General for Research consulted 
the JRC, the legal service, nine directorates-general at the 
Commission and the CGC. In the case of the non-nuclear 
energy indirect action programme, 10 directorates-
general were consulted. At the proposal stage these same 
programmes gave rise to official consultation of the 
Scientific and Technical Research Committee (Crest), the 
Economic and Social Committee and the Parliament. In 
the case of the environment programme, the Parliament 
delivered its opinion after obtaining the opinions of three 
of its committees (on the environment, industrial policy 
and research). The Council called on the work of its 
research group and Crest, which has already been 
mentioned. The JRC programmes, in their turn, give rise 
to consultation of the Scientific Council of the JRC, the 
competent CGC, the JRC Board of Directors, the 
Scientific and Technical Committee (CST) or Crest, the 
Economic and Social Committee and the Parliament. 
8.20. These consultations take up a considerable 
amount of time. The consultative procedure took up 
about eight months at the draft stage in the case of the 
environment programme and six months in the case of 
non-nuclear energy. The consultations on the proposal 
took a further 10 months, in the case of the environment, 
and 16 months in the case of non-nuclear energy. The 
consultation procedures more than doubled the time 
required for preparation of the decision. 
Limited results of consultation procedures 
8.21. It seems that the institutions which were consulted 
had little to say regarding the actual object of the 
programme, confining their comments to the financial 
aspects. In the case of the sub-programme in the field of 
environmental protection (12), the amendments intro-
124 Official Journal of the European Communities 12. 12. 88 
duced by the various consultation procedures were 
relatively minor, apart from the cutback in the overall 
budget which was imposed by the Council. They are 
minor not only in relation to the official proposal of July 
1985, but even in relation to the first draft proposal dating 
from the last quarter of 1984. Of the 20 research topics, 16 
were formulated in the decision in the same terms as they 
were in the draft proposal. Only 12 % of the sub-themes 
were introduced or amended at one stage or other of the 
procedure. Often the amendments were minimal, on 
points of form rather than of substance. Only the strictly 
political institutions (Parliament and the Council), which, 
incidentally, put their wishes into concrete form by means 
of written amendments, succeeded in getting their way. 
8.22. Apart from the addition of a hydrocarbon sub-
programme, the scientific annex to the non-nuclear 
energy shared-cost action programme did not undergo 
any amendment between the proposal and the deci­
sion (n) stages, despite all the consultations. 
8.23. In 1982 the competent ACPM (4) delivered a 
detailed opinion on the JRC draft programme in the field 
of non-nuclear energy for the period 1984-87. Following 
the cancellation of the major 'Super Sara' project in 
particular, the Commission submitted to the Council a 
very different proposal, which diverged from the opinion 
given by the ACPM in 1982 on several important points. 
There was, however, no preliminary consultation of the 
ACPM by the Commission on what was a substantially 
new proposal. 
Consequences for the programme adoption date 
8.24. For all the above-mentioned reasons, radical 
simplification of the consultation procedures is necessary. 
In addition to the delay factors which are specific to the 
Council, the unwieldy nature of the consultation 
procedures slows down the adoption of programmes. The 
fourth environment research programme (indirect 
action) (12) was adopted on 10 June 1986, whereas it was 
to have commenced on 1 January 1986. The Council 
decision adopting the non-nuclear energy research 
programme 1985-88 (indirect action) (H) is dated 12 
March 1985, whilst the previous programme (13) ended 
officially on 30 June 1983. Admittedly, the Commission 
did publish a proposal on 16 June 1983 and the 
subsequent delays were largely due to budgetary causes 
which had nothing to do with the programme formu­
lation procedure. Nevertheless, 16 June was really too 
late. To the visible delay, reckoned from the end of the 
previous programme, must be added the period of 
programme launch, which is irreducible, between the 
adoption of the programme and the signing of the first 
contracts (eight months in the case of the environmental 
protection sub-programme). In the Court's opinion, 
programme decisions should, for this reason, be adopted 
a good six months in advance of the period covered. Definition of the scientific content of 
programmes 
8.25. The scientific content of the Council decisions 
adopting programmes appears to be fairly detailed and 
precise, but the precision is partly illusory. In reality, 
although the themes mentioned constitute a framework 
which is not to be exceeded, there is on the other hand 
nothing to prevent the Commission from initiating any 
action relating to certain themes, deliberately or in the 
absence of satisfactory proposals. For example, mention 
of the research sub-themes in the environmental protec­
tion sub-programme for the period 1986-90 (12) is 'of an 
indicative nature', which authorizes the Commission 
both to add some and to abandon others. 
8.26. This freedom of manoeuvre for the Commission is 
even greater in that the main themes themselves are 
expressed in very broad terms — for example, 'air 
quality', 'solar energy' — and more especially because the 
Council allocates the overall budget only in a few large 
blocks — in the case of non-nuclear energy between nine 
broad topics, in the case of the environment, between the 
three sub-programmes. The detailed allocation between 
the sub-themes is therefore left open. In view of all these 
forms of flexibility, one might ask how much of the idea of 
medium-term programming of research by the Council 
actually remains. 
Objectives or fields of research 
8.27. In their research-related documents, the Commis­
sion and Council frequently use the word 'objectives'. In 
accordance with the Single European Act (Article 130 I), 
the intention of the 1987-91 framework programme (2) is 
to lay down 'the scientific and technical objectives of its 
[the Community's] activities' (seventh recital of the 
Council Decision of 28 September 1987 concerning the 
framework programme). In the specific programmes the 
headings in the scientific annex are sometimes called 
objectives — for example in the 1985-88 indirect action 
programme in the field of non-nuclear energy (H) — 
sometimes 'themes' or 'topics' for research — as in the 
1986-90 indirect action programme in the field of the 
environment (12) — or 'areas' of research — as in the 
1986-89 materials programme (14). 
8.28. In the present state of definition of the specific 
programmes, the term 'objectives' is a misnomer. An 
objective is a verifiable result which is to be achieved 
within a specified time limit. There is nothing of this kind 
in the programmes, however, only areas of research, with 
no real objectives set and no mention of any means of 
measuring the results. 
12. 12. 88 Official Journal of the European Communities 125 
8.29. Although in 1984 and 1985 the Joint Research 
Centre did make a substantial effort to establish detailed 
objectives and to initiate proper planning of research as 
part of its 1984-87 programme (15), as far as the specific 
programme for non-nuclear energy was concerned it did 
not lead to identification of the results to be achieved, nor 
to the definition of quantitative and qualitative indicators 
by which to assess those results. 
8.30. This uncertainty as to the objectives to be attained 
results in uncertainty as to the financial resources needed. 
The overall budget for the 1986-89 materials pro­
gramme (14) was reduced from 110 to 75 Mio ECU 
between the initial proposal and the final decision, 
without any corresponding reduction in the list of themes 
— on the contrary Parliament extended the latter. The 
Council similarly cut back the overall budget for the 1986-
90 environment programme (12) from the 115 Mio ECU 
proposed by the Commission to 75 Mio ECU, without 
any reduction in the content of the programme other than 
the major technological hazards. The same comment 
applies in the case of the 1985-88 indirect action 
programme in the field of non-nuclear energy (n), where 
the scientific definition has remained unchanged despite a 
drastic reduction in the resources granted, from 379 Mio 
ECU in the proposal to only 175 Mio ECU in the 
decision. 
8.31. Nevertheless it is very desirable for programmes to 
be defined in terms of objectives. Firstly, the program­
ming would, in fact, have far more concrete significance, 
giving a more precise circumscription to the measures to 
be undertaken, and would be more binding on the teams 
of researchers responsible for implementing them. 
Secondly, it would then be possible to establish a more 
significant relationship between the measures defined and 
the resources fixed. Finally, the existence of objectives 
would allow better control over the execution of the work 
and permit proper evaluation of results by reference to the 
objectives set. 
8.32. Although the fixing of objectives is desirable in 
itself, would it be impractical in reality? The Court is 
aware that there is a risk that imprudent attempts to 
quantify the unquantifiable and to demand verifiable 
results in fields where this logic is difficult to apply may 
have negative effects in the form of an over-simplistic 
definition of objectives and may be an artificial exercise in 
reducing the complexity of the field to be explored. In 
addition, the further one moves from applied research in 
the direction of fundamental research the more difficult it 
is to envisage the nature of the results. Whilst being well 
aware of all these obstacles, the Court recommends that 
the Commission should step up its efforts to define 
Community research programmes in terms of real 
objectives. 
8.33. Examination of the programme of direct action in 
the field of non-nuclear energy shows that it is possible to 
identify and quantify the results achieved in this area of research. To a large extent, the conclusions of the report 
on the nature and quality of research out-puts at the Ispra 
establishment, which was published in March 1987 by the 
Prospective Studies Division of the Ispra establishment, 
could be extended to all the JRC's activities. The JRC 
should therefore adapt its programme formulation and 
definition procedures accordingly. The same guideline is 
applicable mutatis mutandis to the indirect action 
programmes and at the very least to the projects which 
comprise them. 
SELECTION OF PROPOSALS FOR 
SHARED-COST PROJECTS 
Introduction 
8.34. In order to prevent any misunderstanding in 
relations between the Community and researchers, the 
fields of research to be covered and the selection criteria 
must be clear, public and stable. Once the proposals have 
been received, a second condition of their success is that 
the work of selection should be carried out well and 
efficiently. The observations which follow will examine 
whether these conditions are being satisfied at the 
moment. 
Acceptable themes for research 
8.35. The list of research themes adopted does not 
remain constant throughout the procedure. When the 
Council cuts back the overall budget allocated to a 
programme or sub-programme, sometimes drastically so, 
it may leave the scientific annex intact. But the 
Commission is then obliged to curb its scientific 
ambitions. Some fields of research for which provision 
has been made in the programmes are omitted from the 
calls for proposals or from the detailed notices sent to 
applicants. After five calls for proposals spread over the 
period between March 1985 and August 1987 (16), no 
action was taken on four of the 37 themes in the non-
nuclear energy programme and there were heavy 
cutbacks on others. The call for proposals in respect of the 
climatology sub-programme (17) ignored two of the 
themes in that sub-programme; the detailed notice which 
was sent to applicants concerning the environmental 
protection sub-programme (18) ignored six themes and 
explicitly excluded two. Themes omitted from calls for 
proposals but negotiated privately have not been included 
in the above survey. 
126 Official Journal of the European Communities 12. 12. 88 
8.36. The wording of certain research themes or sub-
themes changes from one document to another. For 
example, in the French version of the calls for proposals 
'Production etgestion des gisements' becomes 'L'amenage-
ment et la gestion des reservoirs', 'L'economie de Venergie 
dans le secteur des bailments' becomes "Economies de 
Venergie dans I 'habitat', etc. The computer-coded list of 
main research themes for the environmental protection 
programme differs somewhat from that contained in the 
call for proposals. Strict programming depends on 
consistency of headings and wording. 
Criteria for evaluation of proposals 
8.37. The formulation of the selection criteria is 
similarly sometimes ambiguous or inconsistent. The 
criteria are found: 
(a) in the Commission's internal rules for programme 
management (August 1986) (19); 
(b) in a Commission decision dated 19 November 1986 
(file document without reference); 
(c) in the call for research proposals; 
(d) in the explanatory notes included in the files sent to 
applicants. 
8.38. In order to implement these criteria the Commis­
sion uses proposal evaluation forms, in which there are 
traces of these criteria. These various documents do not 
tally very satisfactorily. 
8.39. The criteria adopted in the evaluation forms 
relating to non-nuclear energy do not include the 
scientific status of the applicant (which is, however, 
referred to in the call for proposals), the cost-benefit ratio 
of the proposal, or possible industrial applications. 
8.40. In order to prevent administrative costs from 
soaring as the result of an excessive number of small 
projects, the internal rules (August 1986) provided that 
the Director-General for Research was to set a (limited) 
percentage threshold for projects which would receive an 
annual Community subsidy of less than 80 000 ECU. The 
decision of 19 November 1986 raised this threshold to 
100 000 ECU, and narrowly defined the exceptional 
circumstances under which the subsidy could be lower. In reality, the optimum size for projects does, in fact, vary 
greatly from one field to another, so that it is difficult to 
make it the subject of a generalized decision. It would be 
better for DG XII to retain the principle of a subsidy 
threshold, but to adjust it in terms of the specific 
programme concerned. 
8.41. The evaluation form for proposals relating to 
environmental protection does not faithfully reflect the 
criteria applicable. The form does not mention the 80 000 
ECU criterion, nor that of feasibility, nor that of 
international collaboration. 
8.42. Research proposals in the field of environmental 
protection are classified according, to three different 
scales. The competent departments of DG XII used four 
levels of classification (high priority; could be financed if 
possible; could be considered after renegotiation; to be 
rejected). DG XII consulted the Directorate-General for 
the Environment, Consumer Protection and Nuclear 
Safety (DG XI) on the basis of a simplified form 
containing only three assessments, with quite different 
wording from that found on the form used by DG XII. 
And the CGC (5) was required to classify the proposals on 
yet another scale with five degrees with different wording 
and a different classification. Disparities of this kind are 
not conducive to uniform classification of proposals. 
8.43. In the environment, non-nuclear energy and 
materials programmes there is no kind of chart or 
procedure to indicate how the transition is to be made 
from analytical appraisal, criterion by criterion, to global 
assessment, with proposals classified into three or four 
categories. It is therefore difficult to judge how the criteria 
were applied or how they were weighted. 
Publicity 
8.44. The Commission publishes its calls for proposals 
only in the Official Journal of the European Com­
munities. It could with advantage take the initiative of 
publicizing them more widely in the main technical and 
specialist periodicals. 
8.45. Moreover the selection criteria are not published 
in full. For example, in the calls for proposals in 
connection with the non-nuclear energy programme there 
is no mention of the criteria of cost/benefit and time/ 
benefit ratios. The calls for proposals and the explanatory 
notes' relating to the environment programme are 
similarly silent as regards the criterion of feasibility of 
proposals and, with the exception of the environmental 
protection sub-programme, the criterion of the scientific 
status of the proposer and the quality, originality and 
utility of the proposal. 
12. 12. 88 Official Journal of the European Communities 127 
The criterion of the socio-economic impact of 
the proposals 
8.46. The research proposals rarely indicate who the 
users of the results will be and when they are expected to 
be implemented. They are circumspect as to the expected 
socio-economic impact of the proposed work. If the 
Commission were to require applicants to draw up 
proposals which were better documented in this respect, 
or even to provide evidence of a business sector's interest 
in their proposal in the form of industrial sponsorship, it 
would simplify the evaluators' task. 
Extent of the work of proposal appraisal 
8.47. The Commission received no less than 1 700 
scientific proposals in connection with the 1986-90 
environmental protection sub-programme. The re­
sponsible department at the Commission comprised 
seven evaluators, who divided the proposals between 
them, and even called in consultants for some themes. In 
spite of this, it took about a year (from October 1986 to 
October 1987) to complete this considerable task. The 
competent CGC gave its opinion on these 1 700 proposals 
in eight meetings of, sometimes one, sometimes two days. 
During any one of these sessions the CGC might have to 
examine several hundred proposals (almost 600 on 5 and 
6 May 1987), some of which would have to be re­
examined during several subsequent meetings. In the case 
of approximately 85 % of the proposals the CGC opinion 
was given without discussion. 
8.48. The ACPM responsible for the 1982-85 materials 
programme (20) examined the 325 proposals relating to 
the programme in a period of five days. Working 
conditions of this kind cannot be regarded as healthy. 
Concentration of selection work in a small 
space of time 
8.49. The work of assessing the proposals under the 
sub-programme on environmental protection was there­
fore concentrated into a period of one year, for a 
programme spread over five years. This excessive 
concentration is due not only to the scheduling of 
programmes, but to a whole series of causes. Firstly, the 
environmental protection sub-programme was essentially 
the subject of a single call for proposals, with only two 
final dates, very close together, for the submission of 
proposals. The first contract was not signed until March 
1987, 14 months after the theoretical start of a pro­
gramme which itself was adopted by the Council almost six months late. Furthermore, in order to offset the 
reduction in appropriations imposed during the concili­
ation procedure with the Parliament, the Council agreed 
— and the President of the Commission gave a written 
promise to that effect to Parliament — that the entire 
programme would be committed in two years (1987 and 
1988). These various factors meant that the programme 
was launched under excessively severe time pressure. 
8.50. In order to remedy this, it is essential that 
programmes should be approved well in advance of 
launch, each programme being broken down into several 
calls for proposals spread over a period of time, as was 
done in the case of the non-nuclear energy programme, 
and even, for certain programmes, that the threshold for 
the minimum financial contribution to projects should be 
raised slightly in order to reduce the numbers. 
Value of consultation activity 
Consultation of DG XI 
8.51. However justified consultation of Directorate-
General XI (environment) on the draft environment 
programme may appear to be, since that programme is to 
provide the scientific bases for the Community's environ­
mental policy, it is debatable whether it should be 
consulted on the value of proposals. It was consulted on 
the basis of reduced proposal files and the assessment 
form which it had to fill in was greatly simplified. 
Moreover, it gave a reply on only a low percentage 
(approximately 20 %) of proposals. In the Court's 
opinion, consultation does not have any meaningful 
contribution to make under these conditions. 
Consultation of the CGC 
8.52. Although the internal rules for programme 
management (19) (paragraph 252) require the Com­
mission's opinions on the proposals to be communicated 
to the CGC (5), this is not advisable, as it encourages the 
CGC to model its opinions on those of the Commission. 
In the case of the non-nuclear energy programme, the 
Commission communicated its views on the proposals to 
the CGC in writing beforehand. In the case of the 
environment programme, on the other hand, the com­
petent department of the Commission was afraid that the 
CGC would endorse all its assessments without sufficient 
critical appraisal and decided that it would only 
communicate them orally during the meeting. This is a 
significant advance, but the Commission should envisage 
going further and totally refraining from communicating 
128 Official Journal of the European Communities 12. 12. 88 
its opinion, confining itself to providing the CGC with 
any necessary technical assistance. It is the Commission 
which requests the opinion of the CGC and not the 
reverse. 
8.53. The minutes of the CGC meetings show that the 
latter only assess the scientific value per se of proposals, 
without relating it to their cost. Clearly, where there is a 
limited budget the Commission itself must pay more 
attention to the cost/benefit ratio of proposals. 
8.54. The environment CGC cannot have applied the 
selection criteria rigorously in view of the fact that its 
'generosity' resulted in the formulation of opinions in 
favour of financing to an amount representing ap­
proximately three times the available resources. Out of a 
total of some 1 700 proposals, the CGC had delivered 
favourable opinions on approximately 600 by the end of 
1987, and, of these, 200 proposals will in fact be funded. If 
selecting means eliminating, it is clear that the main part 
of the work of discrimination is less in the transition from 
1 700 to 600 proposals than in the transition from 600 to 
200 proposals. The latter selection is made by the 
Commission alone. This tendency towards excessive 
'indulgence' was noted also in the case of the non-nuclear 
energy CGC. 
8.55. The primarily national motivations of each of the 
CGC delegations conflict with the scientific concerns 
which they all share, at the risk of obscuring the criteria 
which govern their choices in practice. 
Calls for proposals or calls for tenders ? 
8.56. The expression 'call for tenders' is justified only if 
tenders are actually requested in respect of specific 
projects, as is customary in industry and civil engineering. 
More often than not this is not the case with research, 
where the tenderers themselves are required to define their 
proposals in their own terms, in the context of each field 
of research, taking into account only a few fairly general 
standards. The Commission is therefore right to use the 
different term 'call for proposals'. 
8.57. This freedom to make proposals was a dominant 
feature of the environment programme with the exception 
of noise nuisance and the effect of pollutants on health. In 
the case of non-nuclear energy, on the other hand, the 
number of real 'projects' was greater ('Building 2 000', 
prototypes for large wind turbines, pilot installations for 
biomass conversion, solar map of Africa, etc.). 
8.58. Just as, at the level of programme headings, the 
question arises of whether to define real 'objectives' or 
simply 'fields of research', so with calls for proposals it is 
possible to specify precise 'projects' or to allow complete freedom of proposal. The same reasons which are 
advanced in support of real objectives may also be used in 
favour of'projects'. It is clear that from the point of view 
of evaluation the better approach, where possible, is to 
make genuine calls for tenders on specific projects. 
MONITORING AND INTERNAL 
EVALUATION OF SPECIFIC 
PROGRAMMES AND PROJECTS 
Role of the advisory committees 
8.59. In a survey of its evaluation activities over the 
period 1983-85 (7), the Commission states that the 
internal evaluation of research activities has been 
strengthened by the creation of the CGCs (5) and the JRC 
Scientific Council. The Court considers that this result 
has not really been achieved: 
(a) the last solar energy ACPM (4) meeting was held in 
December 1983 and the first meeting of the non-
nuclear CGC (5) which succeeded it was held in 
January 1985. There was therefore no advisory 
committee monitoring of direct action in this area of 
research during 1984. There is no evidence that the 
non-nuclear energies CGC has examined the ac­
tivities of the JRC in this area in detail since 1985. 
More particularly, in November 1985 a JRC proposal 
for a new programme, for the period 1987-90, (which 
was not taken up by the Commission) was agreed by 
the CGC in question, but there is no record of any 
comment or discussion in the minutes. As regards the 
new framework programme (1987-91), in 1986 
several of the delegations to this CGC expressed their 
regret that the Commission had not consulted it 
during preparation of the draft; 
(b) during programme execution a substantial number of 
cost-sharing contracts are sometimes substantially 
modified as to scope, duration and the amount of 
funding. However, examination of the minutes of the 
raw materials CGC between October 1982 and 
December 1986 showed that it had devoted little 
attention to the monitoring of the current programme 
and had not received adequate information on the 
modifications made to some projects. If these 
committees are to perform their role properly, it is 
essential that they be provided with full and up-to-
12. 12. 88 Official Journal of the European Communities 129 
date information on the state of programme exe­
cution and major project modifications. 
8.60. In its plan of action for evaluation of research 
activity for the years 1987 to 1991 (8), the Commission 
refers to the key role of the JRC Scientific Council in the 
internal evaluation procedure. However, in its October 
1987 document entitled 'A new outlook for the JRC (21), 
the Commission proposes the abolition of the Scientific 
Council and envisages the creation of an advisory 
committee for each scientific institute within a proposed 
new structure for the JRC. 
8.61. The nature and value of the advisory committees' 
contributions to the monitoring and internal evaluation 
of research programmes have varied greatly between 1983 
and 1987. Consequently, the Court considers that the 
future role of all the advisory committees needs to be 
examined carefully, particularly in the light of the 
reorganization of the JRC and the Commission's own 
plan for evaluation between 1987 and 1991 (8). 
Monitoring of projects and programmes by 
the Commission 
Direct action 
8.62. It was proposed that there should be a systematic 
plan for monitoring the JRC 1984-87 programme (15). In 
fact, the JRC and its Scientific Council decided that the 
proposed system was too ambitious, and so it was never 
fully implemented. For example: 
(a) a detailed planning document, issued in October 
1984, which was intended to be updated annually as a 
basis for monitoring projects, was revised and re­
issued only once, in May 1985; 
(b) six-monthly progress reports on the non-nuclear 
energies programme were issued only until December 
1985 and the intention of replacing them with annual 
reports was never fulfilled; 
(c) within the same programme, six-monthly reporting of 
non-nuclear achievements against planned mile­
stones in tabular form for each project and activity 
took place only for the first six months of 1984 and thereafter was discontinued. 
8.63. In accordance with the Council decision adopting 
the JRC 1984-87 programme (15), the Commission has 
produced annual progress reports, which, for example, 
devote two to three pages to the non-nuclear energies 
programme. However, the Court considers that these 
summaries, which are adapted for the Parliament and the 
Council, are insufficient as a basis for the Commission's 
monitoring of projects against initial objectives. The 
monitoring system initially planned by the JRC would, 
however, have provided such a basis, but no adequate 
substitute has been found since its abandonment. 
Indirect action 
8.64. In April 1986 DG XII issued internal rules 
covering the preparation and financial/administrative 
management of its research programmes (19). However, 
these rules do not deal with the scientific management of 
either projects or programmes. As a result, monitoring 
procedures vary considerably between scientific direct­
orates, and even between managers within the same 
directorate. This lack of coordination and harmonized 
procedures undermines the coherent assessment of 
programme execution. The audit revealed particular 
weaknesses in the areas described below. 
8.65. The contractual obligations concerning the dif­
ferent types of scientific reports on their projects which 
have to be submitted by contractors are ambiguous and 
are not supplemented by detailed instructions from the 
Commission. In particular, the nature, form and 
minimum content of the periodic, final and summary 
reports and of the abstracts are not clearly defined and the 
objects tend to overlap. In the context of the raw materials 
and environmental research programmes, a plethora of 
scientific documentation is thus received from contrac­
tors, much of which is in arrears, and project managers 
cannot hope to monitor, analyse and assess it in any 
satisfactory manner. The Commission should rationalize 
the system of periodic scientific reporting by contractors 
and should require the reports to provide the information 
which is essential for internal and external evaluations, 
i.e. not only scientific and technical results, but other 
information as well, for example: the potential users of 
those results, the prospects for Community and inter­
national cooperation and development. 
8.66. The feasibility of monitoring and evaluation is 
also dependent on the completeness of the official files 
kept at the Commission. The audit of the environmental 
research programme revealed that, in most cases, the DG 
130 Official Journal of the European Communities 12. 12. 88 
XII archive files are based on documents relating to the 
financial and administrative execution of contracts with 
little or no evidence of input from the scientific 
departments responsible for project monitoring in the 
form of scientific reports, evaluation documents, etc. 
There is little documentary evidence that visits to 
projects, whether by scientific or administrative staff of 
the Commission, are used as a means of monitoring 
progress. The archives should contain all the key items of 
information, whether administrative or scientific, in the 
life of each project. 
Internal evaluation 
8.67. The Commission's 1983 and 1987 plans of 
action (3) (8) deal briefly with the need for continuous 
internal evaluation of research as a basis for subsequent 
external evaluation. These declarations of intent have not 
been followed up by precise instructions or by the 
development of a methodology. In practice, these 
questions have been left up to individual programme and 
project managers. In these circumstances, some indirect 
action programme managers have organized semi-
external evaluations without coordinating with the 
formal external evaluations organized by the specialist 
division of DG XII. 
8.68. Although programme evaluation, particularly at 
external level, must be based on some form of evaluation 
of individual component projects, DG XII does not 
appear to have established any overall plan or criteria for 
such project assessment. In particular, an internal 
evaluation sheet ought to be produced for each project. 
8.69. For direct action, the JRC Ispra Prospective 
Studies Division produced, in March 1987, an in-depth 
and wide-ranging internal evaluation study on the nature 
and quality of research outputs. This is certainly a very 
useful contribution to the methodology of evaluation but, 
as yet, it is unclear how it is to be used in the DG XII plan 
for external evaluation exercises. 
8.70. It is therefore felt that the Commission should 
establish the methodology, criteria and calendar to ensure 
that internal evaluation takes place for all projects, 
including both direct and indirect action, as the basis for 
the external evaluation exercises which are arranged by 
the specialist division of DG XII and provided for in the 
Commission's plan for future years. EXTERNAL EVALUATION OF SPECIFIC 
PROGRAMMES 
Development of Commission methods 
8.71. The key area of external evaluation of specific 
programmes is where the Commission, since 1983, has 
made the greatest effort to develop a credible form of 
objective assessment of its research results. Only the 
specific programmes underwent external evaluation. The 
first plan of action (3) relating to evaluation applied the 
method of peer evaluation by independent panels of 
experts for each of the specific programmes. The 
objectives, approach and criteria of each evaluation 
exercise were determined in a flexible manner to take into 
account the nature of each programme and the needs of 
users. The Commission has endeavoured to use the 
experience thus acquired as the basis for improving its 
approach by means of the new evaluation plan (8). The 
Court's observations on the Commission's achievements 
in this area are intended as a positive contribution to the 
future development of this approach. 
Mid-term evaluation of the JRC multiannual 
programme 
8.72. Article 8 of the Council Decision adopting the 
1984-87 JRC programme (17) laid down that 'before the 
next proposal for a multiannual programme, the 
Commission shall submit to the Council and to the 
European Parliament a critical analysis carried out by 
independent experts of the programmes launched by the 
Joint Research Centre. This analysis shall contain a 
quantitative and qualitative assessment of the results of 
the research'. The JRC Scientific Council was asked to 
undertake this task. 
8.73. In addition to its own work, the JRC Scientific 
Council used the conclusions of eight sectoral evaluation 
panels selected by the specialist unit within DG XII. 
Although, in general, each panel selected by DG XII 
covered one RAP (22) within the overall Community 
framework programme (i.e. both direct and indirect 
action research in a given field), the remit of the Scientific 
Council itself only included direct action. The Scientific 
Council evaluation report was submitted in February 
1986 (23). 
8.74. In its October 1987 proposal, 'A new outlook for 
the JRC (21), the Commission proposes, on the one hand, 
the abolition of the JRC Scientific Council and, on the 
other, a series of formal mid-term evaluations for the 
12. 12. 88 Official Journal of the European Communities 131 
specific programmes envisaged for 1988-91. It is unclear 
from the proposal whether this involves a global review of 
the JRC programmes, as was done in 1986, or a series of 
separate evaluations. If the Commission intends to carry 
out a global review, it is not clear from the proposal how 
this will be coordinated and produced in the absence of 
the JRC Scientific Council. 
Organization and timing of evaluation 
exercises 
8.75. In its opinion on the proposal for the 1985-89 
commodities and materials indirect action programme 
dated 11 October 1985, the Scientific and Technical 
Research Committee (Crest) emphasized that it was 
necessary, for the future, to have an evaluation of the 
results of the previous programmes in sufficient time for it 
to be possible to give an opinion on the new proposals in 
full knowledge of the facts. The Commission's plan of 
action shows, however, that it is not possible to have a full 
and definitive evaluation of a programme in time for the 
preparation of the subsequent one and that a time lag — 
evaluation of programme (P-l) ready only before drafting 
of programme (P+ 1) — is inevitable. Mid-term evalu­
ation of programme P is possible, however. Moreover, 
experience shows that even this timetabling has not been 
rigorously adhered to and for various reasons evaluations 
were not always available when the programmes were in 
preparation. 
8.76. An important part of the difficulties created by the 
evaluation of the primary raw materials programme 
1978-81 (24), which also covered the first phase of the 
1982-85 programme, is due to the timetable chosen for it. 
Whereas the programme ended in 1981, the experts were 
not appointed until summer 1984 and their report was 
only published in 1986 (25), even though it was available 
at the end of April 1985. The delay in their appointment 
meant that they were faced with a situation of fait 
accompli and were substantially dependent on the 
scientific divisions of the Commission for the project 
appraisals. Their review in fact only covered a limited 
number of projects. In addition to holding discussions 
with contractors, they also sent out a questionnaire, 
which produced a very low response in certain areas. If 
they had been appointed significantly earlier, the experts 
would have been better able to prepare standards against 
which to measure the programme objectives as part of a 
global review, rather than in purely general, qualitative 
terms. Moreover, their report would have been available 
at a more propitious time in the preparation of the 1986-
89 programme, which was completed in draft form in 
April 1985, precisely when the preliminary version of the 
evaluation report was being published. 8.77. The Commission's timing of the non-nuclear 
energies evaluation exercise (1985/86) was dictated not 
only by the need for a mid-term assessment of the JRC 
1984-87 programme (15), but also by a desire to syn­
chronize the evaluation of the direct and indirect action 
programmes covered by a single RAP (22). In fact, the 
indirect action programme was evaluated after a new 
(1985-88) programme (u) had been approved by the 
Council. The results were as follows: 
(a) the evaluation was too late to contribute to Commis­
sion consideration of the immediate re-orientation of 
its indirect action programme. The panel itself 
remarked on this; 
(b) there was therefore less incentive for the indirect 
action programme managers to contribute actively to 
the evaluation process. 
8.78. The Court considers that there should be no 
attempt in future to create an artificial link between the 
timing of direct and indirect programme evaluations if 
this means undermining the utility of the whole exercise. 
In order to avoid forfeiting most of the utility of 
programme evaluations, the decision to proceed with 
them should be taken in good time, in advance of the 
deadline laid down in the actual programme decisions. 
Content of evaluation exercises 
8.79. The evaluation report on the primary and mineral 
raw materials programme 1978-81 (25) is mainly an 
appraisal of the scientific and technical interest of the 
work and an assessment of the Commission's manage­
ment procedures. On the other hand, it is not sufficiently 
precise on several essential aspects, such as the definition 
of objectives, the practical utility of the results, the socio­
economic consequences in the short and medium terms 
and the desirability of continuing the work in each of the 
programme fields. 
8.80. In October 1985 Crest said that it wanted to be 
able to give its opinion on a new programme proposal, 
after having evaluated the results of previous program­
mes, as well as the use made of them and their economic 
impact. If the panels are to be able to assemble this kind of 
information in future, the Commission should set out its 
requirements accordingly when drafting the panels' terms 
of reference. 
132 Official Journal of the European Communities 12. 12. 88 
Consultation of potential users Follow-up of the evaluation panels' 
recommendations 
8.81. The non-nuclear energies evaluation report (26) 
comments in general terms on the industrial impact and 
relevance of the research carried out. However, there is no 
evidence that a specific attempt was made by the panel to 
consult potential users outside the circle in the Commis­
sion and Member States (administrators, scientists and 
contractors) who were directly involved in the manage­
ment, monitoring or execution of the direct and indirect 
programmes in this area. The Commission should adopt a 
procedure for the consultation of potential users for all 
future external evaluations. 8.84. An examination of the JRC non-nuclear energies 
programme and other research programmes shows that 
the Commission gives only an implicit indication of its 
position on the evaluation panels' conclusions through its 
proposals for new programmes which include, reject, or 
adapt the recommendations of the external evaluation 
reports. At most, the Commission makes a summary 
statement to the effect that it has taken the conclusions of 
the evaluation into account. By indicating in the 
explanatory memorandum to its programme proposals 
which recommendations it has followed, which others it 
has rejected and why, the Commission would make it 
possible for the parties which have been asked to give a 
decision or opinion to express their views in full 
knowledge of the facts. 
Composition of external evaluation panels 
8.82. Examination of the evaluation report on the non-
nuclear energies programme (26) revealed the absence of a 
global approach on the part of the panel, particularly as 
regards the place of non-nuclear energies in the JRC's 
overall remit and, more generally, amongst the priorities 
and global strategy of Community research. This finding 
raises the question of the composition of the panel. The 
majority of members of the non-nuclear energies 
evaluation panel were associated with this area of 
research as either non-industrial or scientific users. As 
such they were clearly able to give an expert view of the 
intrinsic scientific quality of the research, but may not 
have been in a position to assess the utility of the 
programme in a wider context. In addition to non-nuclear 
energy specialists, a more balanced panel could have 
included, for example, socio-economic experts, specialists 
from other research fields, potential industrial users or 
non-Community experts. GENERAL CONCLUSIONS 
8.85. The Court welcomes the adoption of an ambitious 
programme for the evaluation of Community research, 
which was first sketched out in 1983 (3) and was then 
taken up and extended in 1987 (8). It is necessary, 
however, to examine what has actually been achieved, 
other than declarations of intent. In this regard the Court 
wishes to acknowledge the work done by the Commission 
in recent years in gradually establishing the system of 
evaluation mentioned in those declarations. 
8.86. The Commission itself is, however, certainly 
aware that there is still a long way to go before the system 
is perfect. In this regard the Court's criticisms may be 
grouped under the following five headings: 
8.83. As regards the 1985-86 evaluation of non-nuclear 
energies research (26), there is no evidence that the 
Commission really tried to obtain a more balanced 
composition of panel members, or to issue the type of 
guidelines which would produce a broader-based ap­
praisal including the socio-economic impact of results 
and their relationship to the objectives of 1987-91 
framework programme (2). The Court considers that this 
call for a wider view is essential and should have direct 
repercussions on the composition of future panels. The 
Court notes, however, that the Commission's new plan of 
action relating to evaluation (8) provides that the 
composition of panels will be more balanced and more 
widely-based in future. (a) there is felt to be a need for uniform guidelines 
(paragraphs 8.64, 8.65, 8.67, 8.68, 8.70, 8.74, 8.78, 
8.80) and for increased coordination of programmes 
and programme evaluations (paragraphs 8.9, 8.10, 
8.75 to 8.78), so as to establish strict management 
procedures (paragraphs 8.16, 8.17, 8.25, 8.26, 8.35 to 
8.43, 8.62, 8.63, 8.66) and to incorporate particular 
suggestions or inititiatives from the various depart­
ments (paragraphs 8.64, 8.67); 
(b) wherever possible, researchers must be given precise 
objectives (paragraphs 8.14, 8.27 to 8.33, 8.58); 
12. 12. 88 Official Journal of the European Communities 133 
(c) the consultation procedures must be specified in 
greater detail (paragraphs 8.52, 8.59 to 8.61, 8.81) 
and, above all, simplified (paragraphs 8.19,8.20,8.24, 
8.51); 
(d) all phases of the procedure, from programme 
formulation to ex post evaluation, must be governed 
by the desire to achieve optimum socio-economic 
impact for the research, whether in the short or the 
long term. As far as possible, evaluations must be 
concerned with this effect rather than with the 
intrinsic scientific quality of the research work 
(paragraphs 8.14, 8.46, 8.79, 8.80). For this reason, 
the composition of the evaluation panels must be 
widened, so that they take more account of this aspect 
of the research and of the extent to which it satisfies Community needs and objectives (paragraphs 8.82 
and 8.83); 
(e) the system of evaluation established by the Commis­
sion is based on a series of assessments of specific 
programmes. The Commission should supplement 
this approach with global reviews of the framework 
programme system per se. The Commission has 
already employed a similar global approach in 
evaluating the role, procedures and achievements of 
the JRC. This type of evaluation of a framework 
programme would, therefore, not simply be a 
compendium of evaluations of the scientific results 
achieved at the level of specific programmes, but 
would also include a critical examination of the 
implementing procedures (paragraphs 8.13 and 8.14). 
0) 
(2) 
(3) 
(4) 
(5) 
(6) 
(7) 
(8) 
(9) Programme Management OJC208, 4.8.1983, p. 1. 
OJL302, 24.10.1987, p. 1. 
OJC213, 9.8.1983, p. 1. 
Advisory Committee for 
(ACPM). 
Management and Coordination Advisory Committee 
(CGC). The CGCs were set up under the Council Decision 
of 29.6.1984 (OJ L 177, 4.7.1984, p. 25). 
Commission Decision of 24.5.1984 (OJ L 177, 4.7.1984, p. 
29). 
Doc. COM(86) 15 final of 7.3.1986. 
OJC 14, 20.1.1987, p. 5. 
In the case of some aspects of the indirect action 
environment programme 1986-90, only the environmental 
protection sub-programme was examined. 
(10) In the case of some aspects of the indirect action non-nuclear 
energy programme 1985-88, only the 'solar energy', 'energy 
from biomass'and 'wind energy' sub-programmes were 
examined. 
(u) Council Decision of 12.3.1985 (OJ L 83, 25.3.1985, p. 16). 
(12) Council Decision of 10.6.1986 (OJ L 159, 14.6.1986, p. 31). 
(13) Council Decision of 11.9.1979 (OJ L 231, 13.9.1979, p. 30). 
04) Council Decision of 10.6.1986 (OJ L 159, 14.6.1986, p. 36). (15) Council Decision of 22.12.1983 (OJ L 3, 5.1.1984, p. 21). 
(16) OJC69,16.3.1985,p.3;OJC146,13.6.1986, p. 2;OJC 319, 
12.12.1986, p. 5; OJ S 47, 7.3.1987, p. 38 and OJ C 205, 
1.8.1987, p. 4. 
(17) OJ S 116, 19.6.1986, p. 49. 
(18) OJ S 116, 19.6.1986, p. 48. 
(19) Internal rules for the preparation and management of DG 
XII/JRC research and development programmes to be 
carried out by contract. Versions of April 1986 and August 
1986. 
(20) Council Decision of 17.5.1982, (OJ L 174, 21.6.1982, p. 23) 
amended by Council Decision of 12.12.1983 (OJ L 357, 
21.12.1983, p. 33). 
(21) Doc. COM(87) 491 final, 26.10.1987. 
(22) Research action programme. See paragraphs 8.8 and 8.9 
above. 
(23) Doc.COM(86) 145 final/Annex, 14.3.1986. 
(24) Council Decision of 6.3.1978 (OJ L 72, 14.3.1978, p. 9). 
(25) Evaluation of the Community's primary mineral raw 
materials programme. Report No 16, EUR 10191. 
(26) Evaluation of the Community cost-shared research pro­
gramme on solar, wind and biomass energy and of the Joint 
Research Centre's programme on non-nuclear energies 
(1979-85). Report No 22, EUR 10875. 
134 Official Journal of the European Communities 12. 12. 88 
CHAPTER 9 
Financial and technical cooperation with non-member States 
9.0. TABLE OF CONTENTS 
Introduction Paragraph 
reference 
Financial and technical cooperation with Mediterranean countries 
The financial instruments used 
External control of budgetary appropriations 
Financial and technical aid to Latin American and Asian countries (Ecuador, 
Peru and Bolivia) 
The system of financing and management 
The EEC's own resources 
The recipient countries' contribution 
The international development banks 
Joint financing with the Member States 
Permanent Community technical assistance throughout the project 
The choice and implementation of the projects 
The agri-foodstuffs context 
The regional projects 
The delays in carrying out the projects 
Dealing with monetary problems 
Final observation concerning the three Andean countries 9.1 
9.2 
9.2 
9.3 
9.9 
9.11 
9.11 
9.15 
9.28 
9.31 
9.35 
9.43 
9.43 
9.50 
9.56 
9.66 
9.70 9.8 
9.8 
9.77 
9.42 
9.14 
9.27 
9.30 
9.34 
9.42 
9.69 
9.49 
9.55 
9.65 
9.69 
9.77 
INTRODUCTION FINANCIAL AND TECHNICAL 
COOPERATION WITH MEDITERRANEAN 
COUNTRIES 
The financial instruments used 
9.1. Apart from the signatory countries to the Lome 
Conventions, which receive EDF aid, many non-member 
States receive financial and technical support which is 
directly financed from Community budget appropri­
ations. Chapter 93 is intended to finance measures to 
assist Latin American and Asian developing countries, 
whilst Chapter 96 is concerned with Mediterranean 
countries. 9.2. The Community uses a number of financial 
instruments for the purposes of its financial and technical 
cooperation with the countries of the Mediterranean 
basin: 
(a) the European Investment Bank (EIB) draws upon its 
own resources to finance investment projects which 
are usually required to show a sufficiently high degree 
L^Ll^ Official iournal of the European Communities 1^ 
ofeconomicprotitability toguarantee subsequent 
repayments external control, the Court did not include this type of 
operation in its audit. 
^inparallelwiththisformoftinancing, which drawson 
funds raised on the tinancial markets, the Commis­
sion makes use of four financial instruments which 
are funded from budgetary resources entered in 
Chanter ^o^flidle^ 
^ subsidies in thestrictsense of the word, which are 
non-repayablegrants used to tinancede^elop-
ment measures that are not in themselves 
tinanciallyprotitable^ 
especial loans, which are grants^repayableaftera 
moratorium ofl^yearso^eraperiodof^years 
ataninterestrateofl^madewiththeob^ectof 
tinancingde^elopmentmeasures whichha^ea 
^erylowrateoftinancialnrotitability^ 
disinterest-rate subsidies, which aregranted auto­
matically onatlat-rate basis under the l^iediter-
raneantlnancial protocols and which enable the 
P^IB, to which they are paid, to reduce theinterest 
rates on the loans it grants from its own 
resources^ 
^the Community guarantee, which is shown in the 
budgetasatokenentryandpro^idestheElBwith 
the assurance that, in the e^ent that any of the 
loans financed from its own resources should 
pro^e to be irrecoverable, thecapital and accrued 
interest will be immediately repaid. Lhisguaran-
teegi^esl^O^eo^erforeachindi^idualloanand 
is limited overall to 7^^o of the total sum 
outstanding on loans granted by the l^lB.^ince 
the total sum duetotheElB at anyonetime 
seldom exceeds7^^of the amounts outstand-
ing,andsinceitis^eryunlikelythatthe borrowers 
would default on all these amounts at the same 
time, all the risks maybeconsidered to be^^c^ 
cohered by the Community.Lhe guarantee was 
in^okedforthetirsttimeinl^7,withregardtoa 
loan granted to Lebanon, whichresultedin^^iio 
ECL^ being disbursed from budgetary resources 
to the EIB ^Chapter ^o, heading ^o^. 
^^^^^^^c^^^^^^^^^^^ 
^. Ihe Court of Auditors carried outaprogramme of 
audit enquiries, which were performed on records at the 
Commission and on the spot in the recipientcountries, in 
order to assess the entire system of financing aid to 
^tediterraneancountriesfrombudgetaryresources.^ince 
the EIB^s management ofoperations financed from its 
own resources is subject toaspeciticallydetanedform of ^BP Lhe audit based on records of operations financed 
from budgetary appropriations rapidly repealed two 
points^ 
^ theimmediatebeneticiary of theinterest-ratesub-
sidies and the budgetary guarantee is the LIB, to the 
account ofwhichthe corresponding payments are 
made^ 
^as regards the implementation of special loans,the 
Commission is partly or entirely relieved of its 
managerial and supervisory responsibilities. By 
agreement with the Council, it authorises the E1B to 
act as its agentfor the purpose of either distributing 
and recovering the loans abroad mandated or 
recovering them only ^restricted mandated. 
^.eo. Lhe audit enquiries carried out on the spot in 
Egypt, Jordan and ^ialta in l^oand 1^7pro^ided 
material with which to assess, with regard to these 
countries, the different waysinwhichthe Chapters 
appropriations can be implemented on the ground, 
whether they are disbursed in the form of subsidies, 
interest-rate rebates or e^en special loans managed by the 
LIB on behalfofthe Commission. I^he Court was able to 
make these analyses without needing to enquire into the 
operations which the LIB tinancesin thesecountries from 
its own resources. 
^.o. InCyprus,the national authorities refused to allow 
theCourtof Auditors to carry outanon-the-spotaudit of 
two projects financed from Community budgetary 
appropriations. Lhe reason gi^en was the opposition of 
the E1B, and the Cypriot authorities explicitly said that 
the Bank had been subjecting them to pressure. Lhe 
underlying reason seems to be that the financing of each 
of the two projects in question in^ol^ed loans from E1B 
resources alongsideacontribution from the EEC budget. 
Lheproblemthusappears to be the fact that tinance from 
the ElB^sown resources is mixed with EEC aid,whereas 
the Court of Auditors^right to make on-the-spot audit 
visits concerning special loanslinancedfromtheEEC 
budget is not challenged. 
^.7. Lhe Court has not been able to obtain from the 
Commission a clear statement of its position on this 
matter, ore^enasimplecontirmationoftheanalysis 
gi^enabo^e.LoespitetheCourCsaskingittodoso,the 
Commission has not approached theCypriot authorities 
to inform them that they are obliged to allowtheCourtof 
Auditors to audit the operations by virtue of two 
convergent provisions' 
^ Article ^^ of the financial regulation provides that 
^the granting of aid to bodies outside the institutions 
shall be subject to the agreement by the recipients to 
an audit being carried out by the Court of Auditors^. 
LheCommission,whichne^erfails to make provision 
fortheCourCsrightofauditinitsrelationswith 
13o Cofticial journal of the Euronean communities 1^1^^ 
recipients of development aid^ even when it entrusts 
the aid administrationto agents such as the^Vorld 
Bank^ the Asian tOevelopmentBanl^or any other 
similar body^ has not been able to obtain an 
agreement from the P1B that it will insertasimilar 
clause in its contractsfor special loans financed from 
thebud^et^ 
^thetinancial protocols signed by the recipient ^tate 
stipulate that ahe community shall make sure that 
this financial aid is expended in accordance with the 
agreed allocations and to the best economic ad 
vantage Lhe commission could therefore have 
approached the C^ypriot authorities in order to ask 
them to observe this provision and allow the C^ourt of 
Auditors to carry out an audit. 
9.^5 Thesituation whichhas thus arisen^ and thiscasein 
particulars shows how difficult it generally is for the 
commission to draw all theconsequences from theforms 
of shared mana^ementto which itismoreandmore 
frequently obliged to resort not only in the development 
fields but also in many other spheres^ including the 
common agricultural policy.Rroper sharing of manage 
ment in fact presupposesasound system of supervision 
operated by the central mana^in^body and the accepts 
ance by all those concerned of a minimum level of 
external control.LheC^ourfsrecenttindin^ssu^estthap 
at least in the sphere oflviediterraneantinancin^ neither 
of these conditions has been met. 
LAPI^Alvt^Rl^EA^A^OASlA^ 
C^^L1^TRIES(E^^A^^^PER^A^^ 
BOLIVIA) 
9.9. C^f the Latin American countries receiving C^om^ 
munity aid^three countries^ situated in thefoothills of the 
Andes — Pcuadon ^cru and Bolivia — receive a 
substantial amount of aid from the European C^omD 
munity. Between 197^ and 19^these three countries 
receivedsubsidiestotallin^anestimated^^lvlioLC^e^. 
^^^showsindetailthe different types of C^om 
munity aid ^iven^tinancialandtechnical assistances 
each of the three countries or to regional or^ani^ations^ 
food aid^various subsidies to nongovernmental or^ani 
zations^CrC^s^trade^promotionpro^rammesm^inin^ 
^rants^ cooperationmeasures in theener^y sectonetcd.lt 
also shows this expenditure in relation to budgetary 
expenditure of the same type disbursed ro assist the 
developing countries asawhole. 9.10. Lhis section deals in turn with^ 
ta^ the system of financing and managements 
^ the choice and implementation of the main projects. 
^^^^^^c^^^^^^^^^^^^^^^^ 
9.11. ^everalC^ommissiondepartments are concerned 
here. Lhe administrative channels vary depending upon 
the management operations ^selection of pro^ects^ 
preparation of linancin^ decisions and agreements with 
the recipients or ^oint financiers^ technical opinions^ 
monitoring of project completions internal control and 
payment of sums due^ and involve the geographical 
departments of the tOirectorateC^eneral for Paternal 
R.elations^loC^l^ the technicalandtinancialdepartments 
of the OirectorateC^eneralfor development ^CrVlN^ 
the tinancial control body ^ol^^ and the paying and 
accounting departments of theLoirectorateC^eneral for 
Bud^ets^C^^i^ ^11 ofwhichreceive^ where necessary^ 
the support of the delegation of the commission of the 
LuropeanC^ommunitiesforLatin America^situatedat 
C^aracas^thecostofwhose two staff members^ alon^with 
their logistic e^pensesms met out of Lhe appropriations 
under Article 930 of the budget financial and technical 
cooperations 
9.1^. C^fall these departments^the one most directly 
responsible for mana^in^ aid is the geographical depart 
mentatfoCilresponsible for aid to Latin American and 
Asian developing countries^where two members of staff 
share the monhorin^ofaid to Pcuadon Remand Bolivia. 
Lachofthesemembersof staff alsohas^eo^raphical 
responsibilityfor several other Latin American countries. 
9.13. Lhelar^e number of the countries falling under 
the dele^ation^sresponsibility and the fact that they are 
widely dispersed make it extremely difficult for the 
delegation to supervise all the financing operations 
carried out under Article 930. Lhe two members of staff 
responsiblearealso required to monitor anumber of 
other operationsimplementedusin^Litle 9approprP 
ationsmnparticulan emer^encyfood aid.Lheir distance 
from the projects and measures and the communication 
problems within each country further increase this 
handicap.All in allmtis^ustasdifticult in physical terms 
to monitorapro^ectbein^ carried out on the Peruvian or 
Bolivian hi^h plateaus from Caracas as it is from 
Brussels, in view of this situation and in the absence of 
any Andean delegations the Brussels geographical 
department has to make numerous and lengthy on^the^ 
spot visits. Lhis situation inevitably leads to duplication 
of wor^ poor circulation of information and sometimes 
even situations ofconflict 
12. 12. 88 Official Journal of the European Communities 137 
Table 9.1 — EEC aid to the Andean countries financed under Title IX of the general budget (indicative figures from 1976 to 1987) 
(Mio ECU) 
Recipient 
country 
or body 
Bolivia 
Ecuador 
Peru Year 
1976 
1977 
1978 
1979 
1980 
1981 
1982 
1983 
1984 
1985 
1986 
1987 
1978 
1979 
1980 
1981 
1982 
1983 
1984 
1985 
1986 
1987 
1978 
1979 
1980 
1981 
1982 
1983 
1984 
1985 
1986 
1987 Article 930 (Financial and technical assistance) 
Financing agreement reference 
76/5 Rural development (BISA) 
NA 77/15 Ulla-Ulla (IBRD joint fin.) 
NA 78/23 Chaco dev. 
(IDB joint fin.) 
NA 79/24 Cochabamba irrigation 
(FR of GER. joint fin.) 
NA 79/23 Agricultural census 
NA 83/7 RMPP I Oruro-Potosi 
NA 84/5 Cesarsama reconstruction 
NA 84/8 RMPP II Cordepaz 
NA 85/10 Santa Cruz reconstruction 
NA 79/23 Agricultural census 
ALA/86/17 Rural self-dev. project 
Subtotal 
NA 79/25 Chambo irrigation 
NA 81/9 'Foderuma' rural micro-project 
NA 83/03 Bridge reconstruction 
ALA 87/1 Chambo 11 — dev. of irr. agric. (Italy joint fin.) 
Subtotal 
NA 79/26 Cajamarca afforestation 
NA 80/35 Ancash micro-dams 
NA 83/21 Cuzco rural investments 
NA 83/10 Majes irr. (Italy joint fin.) 
ALA 86/1 Agro-pastoral micro-projects prog. (Pampa/ 
Puno) 
ALA 86/3 Recons. prev. Lake Titicaca 
Subtotal 
Total Bolivia/Ecuador/Peru 
Junac 
OLADE 1977-87 
1978-87 
Total Junac/OLADE 
Total Andean countries & reg. bodies in question 
Total Latin America 
Total Latin America and Asian developing countries Approp­
riation 
committed 
by way 
of EEC 
subsidy 
2,0 
1,8 
2,3 
2,0 
1,0 
28,0 
4,0 
12,5 
9,0 
0,2 
20,0 
82,8 
2,9 
3,0 
2,8 
9,0 
77,7 
2,0 
1,5 
6,0 
5,6 
16,0 
5,0 
36,1 
136,7 
34,6 
2,4 
37,0 
173,7 
490,6 
1 724,7 Article 
920 
0,3 
0,4 
0,2 
2,8 
4,4 
6,2 
6,1 
7,0 
6,1 
33,5 
0,3 
1,0 
0,9 
2,7 
0,8 
0,7 
0,8 
0,2 
0,3 
7,7 
1,1 3,1 
4,3 
5,2 
4,4 
4,2 
3,3 
3,3 
3,1 
32,0 
73,2 
73,2 
358,0(2) 
5 249,1 Other 
Community 
subsidies 
(') 
0,1 
0,3 
0,3 
0,1 
1,2 
0,8 
0,7 
0,3 
1,4 
2,4 
7,6 
0,3 
0,5 
0,7 
0,6 
0,9 
1,5 
0,2 
1,0 
0,5 
1,5 
7,7 
0,2 
0,6 
0,8 
1,3 
1,8 
2,1 
1,1 
2,2 
2,2 
0,9 
13,2 
28,5 
2,3 
2,3 
30,8 
128,0(2) 
1 047,3 Total 
8,2 
1,6 
0,7 
0,3 
4,0 
33,2 
11,0 
12,5 
15,4 
8,6 
28,5 
124,0 
0,3 
3,7 
1,7 
4,5 
3,6 
5,1 
0,9 
1,8 
0,7 
10,8 
33,1 
0,2 
3,7 
5,4 
5,6 
7,0 
18,1 
5,3 
5,5 
21,5 
9,0 
81,3 
238,4 
36,9 
2,4 
39,3 
277,7 
976,6(2) 
8 021,1 
0) Emergency aid, trade promotion, training, NGOs. 
(2) Estimate. 
L^ COfticial journal of the Luropean Communities 1^ ^ ^ 
^1^ I^hus, the Brussels geographical department has 
had its workload increased Atthesametime,certam 
purely administrative duties normally devolving upon it 
are neglected, in particular, the keeping of project tiles, 
checking that the Community^omt tinanciers or the 
beneficiaries observe their obligations, the signing of 
documents to enable payments to be made to recipients, 
etc 
^he recent countne^co^tr^ut^ 
^leo The recipient countries faceadifferenttype of 
problem For many years they experienced chronic 
politicalmstability and theiradmimstrativeand technical 
infrastructures are still madequate,especially at grass 
roots level Inhere v^erema^or monetary and budgetary 
difficulties throughout the penodunder consideration, 
and this aftected the results of the Community tanancmg 
operations Certain factors ^vill be pointed out in 
particular 
^l^o Lhe financing agreements between the Commis 
sion and the recipient country ^vhich are entered into for 
each project usually stipulate, as is normal, that a 
contribution ^financial or in kmd^, often called a 
^counterpart, should be provided by the recipient 
country l^his contribution is coupled ^vith the recipient 
country^scommitment to supervise the ^vork,foragiven 
cost and within specified timedimits ^Vith regard to the 
amount of the tinancial contribution or its equivalent in 
kind nuchas services rendered by farmersmthe rural 
communities concerned or technical and administrative 
assistance to the project supplied by the recipient 
country^ authorities^, the Court noted a marked 
tendency towards madequacy,not without some e^cep 
tions^see paragraphs'^— ^^1 rural micro^pro^ects^ 
andacceptablee^planations^seeparagraphs^^O^^^eo 
delays caused by administrative and banking circuits^ 
^17 ihe most blatant shortcoming concerns the 
Chambo irrigation pro^ect^A7^^mFcuador^olvlio 
ECU,^of which are financed by the F^C^,^vhere the 
nationaMauthonties^ failure to make available the funds 
and technical resources stipulated ^,llvlio LCU^ 
resulted inthet^vomam^vatersupplytunnels,^vhich 
these authorities had undertaken to construct, not being 
completed,thus rendering meftectiveovereoO^oof the 
^vork effected do^vnstream,^vhich^vastinancedby the 
^C and implemented ^vith the aid of its technical 
assistance In 1^7,theChambo 11 project t^ALA^l^ 
^IvlioEC^ took over, in the name of the Ecuadoran 
contribution, thet^votunnels^vhichshouldhavebeen 
completed under Chambo 1, and a ne^v Community 
subsidy^lviio^CL^^vas granted 
^1^ In the case of the pilot project l^A 7^o 
concerning afforestation in Ca^amarca, the Peruvian contribution, estimated at some eo^^OO^CL^,appeared 
very small in relation to the Belgian contribution of 
l^lvlio^CL^ and rhe Community contribution of^lviio 
LCL^ It is true, however, that the tinancing agreement 
contined itself to stipulating the principle ofaPeruvian 
contnbution^vithout determining the amount inthis 
specitic case, the small financial commitment by the 
recipient country gives groundsfor doubting whether the 
project ^villbeproperlycontmued^vhenthe^uropean 
tinancmg stops r^this fear is srrengthened by the observe 
ationmademparagraph^^ 
^1^ Lhe Community subsidy towards the Ancash 
project ^A^O^eo^,^vhichprovidedfor the construction 
of nO micro^dams, ^vas l,^^viio LCU Lhe Peruvian 
contnbution,^vhich^vas initially ti^edatasimilar level, 
^vas reduced, ^vith the Commissions agreement, to 
1^0 OOOf^CU, provided in the form of services in kind 
^management and supervisions Lhe objective had to be 
narrowed dov^n to theconstructionof^Odamslnreality, 
after the Community subsidy had been used up, only 10 
dams v^ere completed 
^^0 In thecaseofthePhicabpro^ectrelatingto rainfall 
measurementsmtheLnnidadand^antaAnaregion^part 
of tinancmg agreement ^A ^0^, Bolivia, ^vhichis 
financially responsiblefor the running of the project, did 
not appear tobeabletofultilthis obligation and has 
already asked for the Community to cover the cost of 
rentmgasatellite^vhichv^ould normally be chargeable to 
thebeneticiary^tate 
^^1 Lhe problems relating to the recipient country^ 
contribution are notsolelyofatinancial and quantitative 
nature Lhey also concern the procedures for the 
implementation ofthe projects, in particular^vhenaform 
of^omt management has developed ^Vhenthe^f^C^s 
technical assistance extends over the ^vhole period of the 
pro^ecCsimplementation^see paragraphs'^ — ^l^or 
^vhenathird^ointtinanciensmvolved,madditiontothe 
Commumtyandtherecipientcountry^see paragraphs 
^l^,^^and^^,it becomes necessary to setups 
^c^ an operational unit ^vnh some managerial indepen^ 
dence Lhe Court noted that although ingeneralthis 
foreign presence v^as essential ifthe^vorkv^as to progress 
satisfactorily, thepoliticaPadministrahve fabncof the 
recipientcountryfoundithardtoaccept,afact^vhichhad 
created difticulhesmt^vo cases 
^^ Lhis^vasthecase of the Ivla^es project ^A ^10^ 
inPeru^l7^ioLC^,^of^vhichare borne bythe^EC 
and^byltaly^,^vhich aimed to develop intensive milk 
production by irngatmg^OOO ha out of the potentially 
irrigable (^0 000 ha by means of ^vatersupply pipes ^eo 
m^second^ already constructed but not utilised since the 
secondary net^vorkof pipes had not been laid, nor the 
plots of land to be farmed prepared Lhe gradual 
completion of the irrigated plots, in the region of^ha per 
family concerned ^currently eoOO^, has not met ^vith any 
ma^or technical difticulties Lhe production potential in 
12. 12. 88 Official Journal of the European Communities 139 
fodder crops per hectare is very high, but, as a result of the 
poor selection by the farmers settled there, the extensive 
fodder production techniques which they continue to use 
as a matter of routine and because they refuse to pay heed 
to the Italian technical assistance, the unsuitable choice of 
livestock, etc., the results are nowhere near those 
anticipated by the initial programme. The farmers refuse 
to pay the small water bills requested of them. The farm 
mechanization cooperative, set up in accordance with the 
programme, is underutilized and its prices therefore too 
high, which are, in turn, an additional reason for this 
underutilization of equipment. All these discrepancies are 
caused by just one factor, however: the refusal by the 
authority responsible for exploiting all of the 60 000 ha of 
Majes plain to allow a sufficiently independent Italian/ 
Peruvian team to be set up in order to implement a pilot 
project of 3 000 ha or to allocate sufficient resources to it. 
9.23. In the administrative region of La Paz (Bolivia), a 
team of Dutch technical assistants which assumed 
responsibility for implementing the programme 
(19,5 Mio ECU, 12,5 Mio ECU of which is borne by the 
EEC) of rural micro-investments for the whole area 
(project NA 84/08) has met with the same type of reaction 
by the local 'development corporation' (Cordepaz), to 
such an extent that, here again, the success of the project is 
in jeopardy. On the other hand, still in Bolivia, the two 
other teams of technical assistants working on similar 
projects (see paragraphs 9.38 and 9.39) have not 
experienced problems of this kind. 
9.24. Project NA 83/21 concerning rural investment in 
the Cuzco region in Peru (8,7 Mio ECU, 6 Mio ECU of 
which is borne by the EEC and 1,25 Mio ECU by the 
Netherlands) is typical of the problems inevitably 
experienced, even when cooperation with the local 
authorities is sound. The fact is that the technicians and 
workers made available to the project by the local 
Peruvian administrations are paid directly by the latter, 
on the basis of their own salary scales, but excluding 
certain ancillary benefits. There is thus a rapid turnover of 
staff,which is detrimental to the project's effectiveness, 
and pressing claims for salary top-ups have been made to 
the project's directors which can only be met by reducing 
that part of the investments which is supposed to be 
financed from the EEC contribution. 
9.25. Lastly, a problem regarding the taking-over of 
projects may arise. This is the case in respect of the 
Foderuma project (NA 81/9)(see paragraph 9.48) in 
Ecuador, where the partner (Central Bank of Ecuador) 
responsible for carrying out the recipient country's 
project takes the form of a 'mission' administration, 
which has ultimately to pass on the permanent manage­
ment to the administrations which are normally re­
sponsible : the Department of civil engineering, agricul­
tural engineering, national education, etc. In this case, the 
Court considers that the lack of this transfer of responsibilities undermines the ultimate effectiveness of 
the project, even when it has been carried out properly 
(see also observations under paragraphs 9.18 and 9.49, 
project NA 79/26). 
9.26. The Court feels that the time has come for the 
Commission, when drawing up the financing agreements, 
to endeavour, with the recipient country, to go into more 
detail in specifying the conditions under which the teams 
specifically responsible for the projects which they finance 
should be formed and operate. The sincere cooperative 
spirit of the political and administrative staff responsible 
at central level in the recipient countries would allow this. 
Any friction at local level will be avoided, especially since 
a framework will have been specified in advance. 
9.27. Project financing and management very often 
entail calls on third parties, in addition to close relations 
between the Commission and the recipient country. These 
calls can satisfy various requirements. In some cases the 
dominant factor is the need for additional finance; in 
others the principal motivation is the necessity of 
ensuring that the project management is of a satisfactory 
standard. In many cases both factors are involved. 
The international development banks 
9.28. The aim of project NA 77/15, which was 
implemented in the Ulla-Ulla region of Bolivia by the 
World Bank, was to develop the production of wool from 
llamas and vicunas, to process this wool (production 
plant) and market it. It was supposed to cost 21,5 Mio 
ECU, mainly provided by loans from the World Bank. As 
part of this overall financing, 1,8 Mio ECU was paid in 
the form of subsidies by the Community in order to 
finance the necessary public back-up facilities: roads, 
schools, etc. Once these Community funds had been used 
up, it became apparent that the part of the project which 
was supposed to be productive could not be carried out, 
even though the machinery had been purchased. The 
prospects for wool production in the end turned out to be 
very poor, in terms of both quantity and quality, and the 
commercial outlets proved to be inadequate to ensure the 
project's profitability. In January 1987, the World Bank 
finally decided to waive repayment of its loan and to 
abandon the project, which has been a total failure. 
9.29. Project NA 78/23, implemented by the Inter-
American Development Bank (IDB) in Bolivia and 
concerning the irrigation and development of a sparsely 
populated part of the Chaco region, aimed to transfer 300 
families to this area and thus lay the foundations for 
subsequent larger-scale development of it. Initially 
estimated at 14,2 Mio ECU, 1,9 Mio ECU of which was 
to be borne by the Community and the remainder by 
140 Official Journal of the European Communities 12. 12. 88 
Bolivia and the IDB, the project only achieved a limited 
percentage of its objectives (80 families settled into the 
area). Completion of the project will cost at least 2 Mio 
ECU more than anticipated. 
9.30. In these two cases the Community joined forces 
with a development bank because it did not have 
adequate administrative resources to manage the projects 
directly. The outcome has been disappointing. Com­
munity funds were made available to the development 
banks and managed according to these bodies' own rules 
and criteria. The Community is therefore confronted with 
'fait accompli' situations — as, for example, in the Ulla-
Ulla project (NA 77/15), the suspension of payments to 
Bolivia in 1983, or, more recently, the abandonment of 
the project — over which it has no physical control. This 
lack of management control is particularly regrettable 
when the project deteriorates, since there is no way in 
which the Community can help regain control of the 
situation, while the disappointed recipient country 
considers the Commission to be jointly responsible for the 
project's failure. 
Joint financing with the Member States 
9.31. Member State contribution to the financing and 
management of Community projects is not a mere 
stopgap measure to make good the inadequacy of the 
Commission's or the recipient countries' own resources. 
It is an approach recommended by the Council and 
considered as desirable in itself. The Commission has 
made extensive use of this facility in the three Andean 
countries, since co-financing operations with a Member 
State represent 95 % of the financing operations im­
plemented in Peru, 25 % in Bolivia and 35 % in Ecuador. 
On the whole, the results noted were quite favourable. 
The Court nevertheless observed some anomalies which 
could be rectified. 
9.32. First of all, the partner Member State, having 
received the Community subsidy, sometimes tends to see 
itself as the only party involved in the project. The 
Community's financial contribution is thus, to some 
extent, forgotten. Nothing is done to remind the recipient 
bodies that this contribution exists. The Commission is 
not even kept abreast of the project's progress or of any 
review of the objectives which may prove necessary. 
Despite three months' notice having been given, the 
arrival on the spot of a Court of Auditors' audit team 
comes as a surprise, to such an extent that it is impossible 
for the team to obtain any financial or technical report 
whatsoever on the implementation of the project, either 
on the spot or in the recipient State's capital city. This was the case with the irrigation project (NA 79/24) near to 
Cochabamba in Bolivia (9 Mio ECU), which was 
financed by a subsidy from the EEC (2 Mio ECU), by 
loans (80 %) and subsidies (20 %) from the Kreditanstalt 
fur Wiederaufbau (KfW) (6 Mio ECU) and, for the 
remainder (1 Mio ECU), by services in kind by Bolivia. 
The delays are considerable, as are the extra costs. There 
are a number of reasons for this: some are external to the 
project, like inflation, or the temporary suspension of 
finance payments by the KfW; some are linked to the 
project, such as the inadequacy of the Bolivian contri­
bution, or the discovery of errors in the original technical 
design. As regards these problems, no progress report has 
been sent to the Commission, and no consultations have 
taken place, despite the undertakings made at the outset. 
The Commission, for its part, has failed to remind the 
joint financier of its obligations. In the end, the Court had 
to go to Frankfurt, to the very headquarters of the KfW, 
in order to carry out the necessary audit enquiries and to 
obtain explanations, as a result of which it drew the 
conclusion that, by and large, despite difficulties and 
delays, the KfW is managing this project efficiently and 
with due concern for the EEC's interests. 
9.33. A second observation, also of general import, is 
illustrated by the project (NA 83/21) relating to rural 
micro-projects in the region of Cuzco in Peru, which is 
being jointly financed with the Netherlands. In addition 
to the staffing difficulties this project is experiencing 
(already pointed out in paragraph 9.24), the Dutch 
contribution, although in line with what was promised, 
has proved to be inadequate because the financing costs 
were higher than expected, owing to the fact that the 
works have been delayed. Quite a substantial part of the 
European contribution, earmarked for financing the 
investments, will therefore have to go towards paying the 
Dutch technical assistants. At the outset, the legal 
instruments laying down the rights and obligations of 
each of the parties were not precise enough, and, above 
all, were not coordinated. On the contrary, they were 
drawn up according to circumstances, each separate one 
from another, to such an extent that the agreement 
between the Netherlands and Peru was concluded 
unbeknown to the Commission! As for the two agree­
ments concluded by the Commission — one with the 
recipient State to grant it the Community subsidy and the 
other with the Netherlands to confirm that this subsidy 
would be paid and to obtain that country's agreement to 
administer the subsidy — they were drawn up one year 
apart and do not dovetail perfectly. This type of situation 
is likely to recur in most of the projects jointly financed 
with a Member State. 
9.34. The fact remains, however, that, as a rule, jointly 
financed projects are managed by the Member State 
concerned with all the efficiency that comes from having 
competent technical assistance permanently on the spot 
12. 12. 88 Official Journal of the European Communities 141 
and showing due concern that Community funds should 
be properly used. Thus, for example, for the afforestation 
project in Cajamarca (NA 79/26) (see paragraph 9.49), 
Belgium transferred the funds made available to it under 
the best possible conditions (transfer in local currency of 
the bare minimum, selection of the best conditions of 
exchange offered by the local regulations). Consequently, 
it was possible to preserve the purchasing power of the 
original subsidy, an exceptionally favourable outcome, 
compared with what was found in most of the other 
projects (see paragraphs 9.66 — 9.69). 
Permanent Community technical assistance throughout 
the project 
9.35. A supplementary means of management is the use 
of technical assistants paid for by the Commission and 
entrusted throughout the project with monitoring its 
implementation. The Court's findings during its audit 
visit show that the results obtained are, in this respect, 
conflicting. 
9.36. The Chambo project (NA 79/25) in Ecuador has 
not proved to be a success, owing to both Ecuadoran 
weaknesses (see paragraph 9.17) and a flaw in the 
project's design which is in part attributable to the 
technical assistance, the total cost of which, wholly 
charged to the Community subsidy, represented an 
abnormally high proportion of the latter (0,8 Mio ECU 
out of 2,9 Mio ECU, i.e. almost 30 % of the Community 
contribution). The entire task of providing technical 
assistance was entrusted to the firm which carried out the 
preliminary feasibility study. Obviously, this study failed 
to highlight sufficiently the project's lack of financial 
profitability, which a later expert's report, commissioned 
by the Commission, clearly brought out. In the irrigation 
area to which the Community subsidy applies, all the 
factors contribute to making the return on the investment 
very low (extremely hilly area, poor quality of the soil, 
farm holdings too small, lack of technical and commercial 
back-up). 
9.37. Conversely, the recently implemented rural 
investment programmes in Bolivia (NA 83/7 and 84/8) 
show that, provided certain precautions are taken, 
permanent recourse to technical assistance financed by 
the EEC may provide an excellent solution. For these 
programmes, the Community financing amounted to 
42,5 Mio ECU, the Community having, moreover, 
committed itself to some 20 Mio ECU extra, with the 
Bolivian authorities, for their part, promising the 
equivalent. Each programme involves setting up an 
organization bringing together local staff and the 
technical assistants from the EEC, jointly led by a representative of the local development corporation and 
by the head of the Community team. This organization, 
which is allocated considerable material and financial 
resources, is responsible for many small-scale agricultural 
development measures: it has not only to carry them out 
but also to design and select them, with a view to 
obtaining the maximum benefit for the region in question, 
which covers a large area and is densely populated. 
9.38. The programmes, which started on different dates, 
have achieved varying degrees of progress, depending on 
the areas concerned. The first to have become properly 
operational was the Potosi programme, which at the 
outset experienced considerable difficulties connected 
with monetary conditions during 1983-84 (exchange 
losses, loss of capital from the revolving fund intended to 
finance loans to farmers) but enabled interesting technical 
constructions to be made, which were numerous, varied 
and provided a great many lessons in the field of 
development (see paragraph 9.41). 
9.39. The Oruro programme, which did not become 
operational so quickly, also experienced heavy initial 
exchange losses, but avoided the decapitalization of its 
revolving fund by learning from the experience of the 
Potosi programme. Despite deficiencies in the financial 
and accounting management, it has to its credit achie­
vements which are similar to those of Potosi and just as 
promising, thanks, among other things, to good cooper­
ation with the regional development corporation. 
9.40. The third programme, for the region of La Paz, 
which was launched in 1985, is experiencing financing 
difficulties (slow Community payments, incomplete 
Bolivian contribution) and is suffering above all from a 
serious conflict with the regional authorities, which is 
likely to undermine its management autonomy (see 
paragraph 9.23). 
9.41. This type of financing, involving the participation 
of European technical assistants, towards which the 
Community is now moving, represents over 50 % of the 
funds committed since 1977. The results are promising, 
given that this type of financing involves combining, over 
huge regions, the factors which are indispensable to 
effective development operations: a large contribution in 
Community currencies in order to acquire the goods and 
equipment necessary for carrying out the investments; the 
involvement of European technical assistants who are 
able to ensure a true transfer of technology; the active 
participation of the recipients, in the form of contri­
butions in kind — local public finance, making available 
of local administrative and technical resources, labour 
supplied free of charge by the recipient farmers — all of 
which is fundamental for ensuring that the choices made 
correspond to local needs and for paving the way for the 
142 Official Journal of the European Communities 12. 12. 88 
programme to be continued independently when Com­
munity cooperation is withdrawn. 
9.42. But the Court must draw attention to the need to 
observe the following conditions for the proper im­
plementation of these programmes: 
(a) the local authorities must fulfil their commitments 
properly, in terms of paying their contributions in 
full, not only to the local farmers, but above all to the 
local administrations; 
(b) the European technical assistants, who have to stay 
involved throughout the implementation of the 
project, must show considerable psychological apti­
tude for joining forces with their local partners; 
(c) the financial and accounting systems set up must be 
safe and informative, especially as regards analysing 
the cost of each micro-project, in order to permit, on 
the spot, a rational choice of micro-investments and, 
in Brussels (so long as no EEC delegation is opened in 
La Paz or Lima), a form of constant supervision 
which is rapid in its reactions. 
The choice and implementation of the projects 
The agri-foodstuffs context 
9.43. The projects financed by the EEC are, as Council 
Regulation (EEC) No 442/81 of 17 February 1981 Q) on 
financial and technical aid to non-associated developing 
countries itself stipulates, basically devoted to rural 
development and to the development of agricultural 
production. The agri-foodstuffs context cannot therefore 
fail to be of importance and the three Andean countries 
concerned depend heavily on imports from the world 
market, which cover over half their food needs, taking all 
the products together. The guidelines given in Regulation 
(EEC) No 442/81 are therefore justified. 
9.44. In addition to the projects financed from Chapter 
93 of the EEC budget, the three countries receive 
deliveries of food aid financed from Chapter 92. In 
Ecuador and Bolivia, this aid is intended for distribution 
free of charge. In Peru, it is sold in order to provide 
counterpart funds enabling investment projects in the 
agricultural field to be financed. In view of these 
countries' per capita GNPs (Peru: 908 USD; Ecuador: 
(*) The footnotes are listed together at the end of the chapter. 995 USD), this aid can be justified, for these two 
countries, only by the substantial food imports needed 
and the no less substantial deficits on their balances of 
payments. In Bolivia, on the other hand, GNP per 
inhabitant is only 525 USD. A Court audit team has 
investigated, on records and on the spot, the way these 
deliveries are made, in the light of the unavoidable 
requirements as regards quality at the time of unloading, 
storage, and, in the case of free aid, distribution to target 
groups of the population via the recipient State or via the 
NGOs. 
9.45. As regards aid distributed free of charge, the only 
points to be noted concern Bolivia: firstly, some milk 
powder donated via Licross deteriorated, leading to a loss 
of about 30 000 ECU because of this organization's 
failure to claim compensation for the damage from the 
insurance company; secondly, the storage methods used 
by the Bolivian authorities turned out to be inadequate. 
With regard, lastly, to the Peruvian system of counterpart 
funds, the Court found that it was managed correctly, but 
that products donated by the EEC were put on sale on the 
domestic market at prices close to those on the world 
market, i.e. very much lower than the production costs of 
local agriculture. 
9.46. Here lies the real problem, which concerns not 
only food aid, but also all import policies in the agri-
foodstuffs sector. Although aware of the danger of 
discouraging local producers, who are already handicap­
ped by often unfavourable natural factors and high 
transport costs, the governments of the three countries in 
question nevertheless import the products they lack and 
make them available to the inhabitants at international 
market prices. The aim is to curb inflation by providing 
cheap goods for the urban areas. This has led to an 
acceleration of the drift away from the land and has 
further swollen the populations of the large cities (Lima: 7 
million inhabitants; La Paz: 2; Guayaquil: 3). The 
possibilities of making profitable investments in agricul­
ture are thus being constantly reduced; also, the area in 
which the EEC policy of granting rural investment aid can 
be effective is getting smaller and smaller. 
9.47 The Majes project (NA 83/10) in Peru is already 
suffering from a number of handicaps (see paragraph 
9.22), despite having been well planned, technically, from 
the outset. But it is likely to be dealt the 'coup de grace' by 
the government policy of buying supplies of milk powder 
at low prices on the world market, which has led the 
private company purchasing the milk production of the 
farmers located in Majes to suspend its purchases from 
August 1985 to August 1986, in order to avoid operating 
at a loss. 
12. 12. 88 Official Journal of the European Communities 143 
9.48. The marginal rural development fund (Foderuma) 
(project NA 81/9) in Ecuador (see paragraph 9.25), 
without having experienced any such dramatic events, is 
another example of the difficulty which the Community 
sometimes faces in finding rural development projects to 
finance which have a real future. This project (NA 81/9) 
involves making a financial contribution of 3 Mio ECU 
to a programme planned and implemented by the Central 
Bank of Ecuador. The Foderuma, by paying out subsidies 
and making loans, supports numerous small measures for 
improving the infrastructure, the soil and the conditions 
of agricultural production, with the aim of encouraging 
the local people, who are attracted by the large urban 
centres, to stay on the land. In one region — Chimborazo 
— where the living conditions are extremely difficult 
(altitudes in places of more than 4 000 metres, very steeply 
sloping hills, cold and wet climate, lack of means of 
communication), the measures, carried out in accordance 
with the programme, are useful: electrification, construc­
tion of schools and clinics, rural roads, etc. The success of 
the projects has been shown by the local people's 
increasing use of rural banking facilities, an indicator of 
renewed confidence in local agricultural production, even 
if the latter is proving to be vulnerable as a result, among 
other things, of heavy soil erosion. Nevertheless, this is 
purely a humanitarian measure, likely to slow down an 
unavoidable trend and ease the transitional stages, but 
not to provide a profitable basis for the rural and 
agricultural development of the region subsidized. 
9.49. Another operation of the same kind is the 
Cajamarca project (NA 79/26), jointly financed in Peru 
with Belgium and managed by this Member State. The 
idea is to show, by means of a pilot project, the 
profitability of afforestation in the area in question. The 
project, estimated at just over 3,4 Mio ECU, of which 
2 Mio ECU is borne by the Community and the rest by 
Belgium and Peru, has been somewhat delayed. Further­
more, the original aims will not be achieved within the 
limit of the planned appropriations. And, above all, a 
forest fund, which is indispensable to the financial 
continuation of the project and is being sustained by sales 
of trees, can be effective only after 15 years at the earliest, 
when the first trees can be sold. The duration of the 
project, however, is only five years. For 10 years, at least, 
the planting work will therefore most probably be 
suspended, which is contrary to the aim of the operation. 
The regional projects 
The 'Junac' 
9.50. The Andean Pact has brought together, since 
1969, under the Commission of the Cartagena Agreement ('Junac'), Peru, Ecuador, Bolivia, Colombia and, since 
1978, Venezuela. Its headquarters are in Lima and it has a 
staff of about 100 people. Its operating budget is financed 
by the Member States of the Andean Pact. 
9.51. For 10 years, the European Community has been 
subsidizing a part of the operating budget by contributing 
a total of 34,6 Mio ECU to the financing of about 15 
programmes to which the Member States of the 'Junac' 
contribute, for their part, by making available civil 
servants, teachers or other technical means. The pro­
grammes aided by the Community are mainly divided 
between three sectors: agri-foodstuffs (17,6 Mio ECU); 
the wood sector (8,6 Mio ECU); industry and energy 
(8,4 Mio ECU). 
9.52. An examination of the accounts and files points to 
a favourable judgment on the Junac's financial and 
administrative management of Community funds. The 
Member States of the Andean Pact provide their 
contributions in kind, as agreed. The oldest programmes 
have been carried out in full and the programmes that are 
still under way seem to have made satisfactory progress. 
The EEC subsidies have been paid out gradually, as and 
when needed, and they are managed by the recipient in 
such a way that exchange losses have been avoided (see 
paragraph 9.68). 
9.53. The effectiveness of the programmes themselves 
is, of course, more difficult to assess. They consist of 
studies, pilot projects and training schemes. The overall 
idea is to analyse the characteristics of the different 
economies, to identify the divergences and to investigate 
the bases on which measures could be introduced making 
it possible, by contrast, to encourage the emergence of a 
regional market in each of the sectors concerned. An 
examination of the conditions under which these projects 
were carried out and used has shown that in general they 
are specific, consistent and serious. 
The OLADE 
9.54. The OLADE (Latin-American Energy Organiza­
tion), which was set up in 1973, covers 25 countries and 
has its headquarters in Quito. Its objective is the 
integration, conservation, rational use, marketing and 
protection of the energy resources of Latin America. 
Contributions to its resources come from the Member 
States and external donors, mainly OPEC, the USA and 
the EEC. 
9.55. The OLADE has received Community subsidies 
charged to headings 930 (about 2 Mio ECU), 933 (about 
144 Official Journal of the European Communities 12. 12. 88 
0,6 Mio ECU) and 706 — 'energy policy' (about 0,6 Mio 
ECU) — of the Community budget, for financing studies 
and research. A Court audit team was totally unable, 
despite an on-the-spot visit announced a long time in 
advance, to obtain any information at all on which to 
assess how these funds were being used. This total failure 
is not a result of uncooperativeness, but simply of the 
absence of files and of any organized form of accounting 
management. This situation is due to the very rapid 
turnover in the OLADE's administrative and technical 
management staff, which is systematically renewed every 
two years, with a few exceptions. This factor, linked to the 
obvious lack of internal organization, makes the OLADE 
unable to give even the most elementary account of how 
the funds received have been used, let alone of how useful 
they have proved, or to produce the studies financed, or to 
indicate the results of these studies or say what has 
happened to them. For the future, the Court must 
therefore warn against continuing this collaboration. 
The delays in carrying out the projects 
9.56. The main delays in executing the projects found at 
the time of the audit visit are as follows: 
(a) project NA 84/5 concerning the repair of the 
Cesarsama bridge and flood protection for the towns 
of Trinidad and Santa Ana in Bolivia, has been 
considerably delayed because of the slowness of the 
financial systems downstream of Brussels and the 
difficulties experienced in drafting the invitations to 
tender within the context of the setting up of the 
alarm system for these two towns; 
(b) the same is true for project NA 83/03 concerning the 
reconstruction of bridges near Guayaquil in Ecuador. 
Although this reconstruction programme was urgent, 
and this feet was recorded in the financing agreement, 
and although it was supposed to be finished by the 
end of 1986, only three of the 11 bridges planned had 
been finished by January 1987, the others still being at 
the stage of the preparatory work; 
(c) the completion date for the work on project NA 
80/35, concerning the construction of micro-dams 
with a view to putting new life into the areas stricken 
by drought in the region of Ancash in Peru, was 
initially set for December 1984. Three years later, 
only half of the 20 dams planned had been finished; 
(d) project NA 79/23 concerning the national agricul­
tural census in Bolivia has already taken twice as long 
as the three and a half years which were set at the outset. In the meantime, not even half of the planned 
work has been carried out; 
(e) project NA 83/21 relating to a rural investment 
programme in the region of Cuzco in Peru has also 
experienced a considerable delay (eight months). The 
project could only be started with the aid of a loan 
raised on the financial market. 
9.57. The over-running of the completion deadlines is 
often accompanied by a modification of the aims which 
were laid down at the outset in the project financing 
agreement. This applies to the bridge reconstruction 
project near to Guayaquil (NA 83/03), which consisted in 
making 2,8 Mio ECU available to the Ecuadoran 
authorities in order to rebuild bridges destroyed by 
floods. Of the 11 bridges planned, only three have been 
finished. A fourth was stopped in mid-construction 
because of legal problems. Work on three others will soon 
start. Of the rest, still at the stage of the preparatory work, 
two are new structures not provided for by the financing 
agreement. The Commission was not aware of this de 
facto situation. There is no doubt about the the usefulness 
of the programme thus modified, although the profit­
ability of the two entirely new works is questionable. 
9.58. Similarly, there is project NA 84/5, with an 
estimated total cost of 3,8 Mio ECU, of which 3,4 Mio 
ECU are borne by the Community and the rest by the 
Bolivian authorities, which was originally supposed to 
make it possible, with the aid of Italian technical 
assistance, to rebuild a bridge over the Cesarsama river 
and to combat floods in Trinidad, and Santa Ana 
(construction of dykes, drainage networks, alarm sys­
tems, etc.). The reconstruction of the bridge, however, has 
been replaced by the purchase of a machine which should 
make it possible subsequently to reconstruct several 
bridges, and the Community has had to increase its 
contribution to just over 4 Mio ECU. 
Delays due to Community decisions 
9.59. There are many causes for these delays. Mention 
should first be made of those which can be attributed 
directly to decisions by the Community's political 
authorities: 
(a) first of all, there is the question of the shortage of 
appropriations, which arises when the volume of 
payment appropriations authorized by the budgetary 
authority is not consistent with the volume of 
commitment appropriations allocated previously. In 
this context, project NA 83/21 was held up (see 
paragraph 9.56(e)) because there were not sufficient 
payment appropriations available at the end of 1985, 
as the Court has already pointed out in its annual 
report on the financial year 1985 (2). While author-
12. 12. 88 Official Journal of the European Communities 145 
izing the project managers to borrow 300 000 USD 
the Commission undertook to finance expenditure in 
the following financial year, outside the cases 
expressly envisaged in the Financial Regulation. In 
addition, the cost of this borrowing (in interest and 
exchange losses) proved to be abnormally high 
(79 292 USD for 90 days) and had the same 
disadvantage as the suspension of payment, in that it 
placed a heavy burden on the Community contri­
bution and thus reduced its purchasing power by the 
same amount; 
(b) secondly, there are the delays which are due to 
reasons arising from the political climate, resulting in 
a stoppage of payment of the subsidies provided for in 
the financing agreements, such as can be seen, mainly 
in the case of Bolivia, for the years 1981 to 1983. 
Payments were suspended, usually at the instigation 
of the joint financiers with which the Commission was 
associated, but always with the Commission's 
agreement. This unilateral breach of a contractual 
obligation subsequently serves as an encouragement 
to the beneficiary State, in its turn, not to respect its 
obligations, even if the Community payments are 
resumed. Moreover, in a period of high inflation any 
delay in payment is translated into a loss in the 
purchasing power of the outstanding subsidy, which 
is unchanged in terms of its nominal value. The final 
volume of the finished project is correspondingly 
reduced, so that the failure of the project is then 
frequently inevitable. For example, only 60 % of the 
agricultural census in Bolivia (project NA 79/23) — 
which is nevertheless urgent and essential — has been 
completed, after almost 10 years of effort and despite 
a Community contribution of 1 Mio ECU. Owing to 
the delay, the total cost of the project in real terms will 
ultimately be 3,5 times higher than the initial 
forecasts. This also applies in the case of the Ulla-Ulla 
(NA 77/15) and Cochabamba irrigation (NA 79/24) 
projects mentioned in paragraphs 9.28 and 9.32 
above. 
Delays attributable to administrative and banking 
circuits 
9.60. Analysis of the delays in payment which are of 
purely administrative or bank origin shows that the 
payments made from Brussels in the course of a project 
are of two kinds. The first are indirect payments to the 
beneficiary State or to the authority with responsibility 
for the project, which are generally used to settle expenses 
in local currency. The others are direct payments for 
imports of equipment, services or technical assistance, 
which must be effected mainly or entirely in foreign 
currency. The Commission then makes these payments 
direct to the economic agent who provided the service to 
which they relate. 9.61. In the case of the three Andean countries, the 
Court audit team found a number of instances in which 
the economic agent in question was an enterprise 
established in the beneficiary State which had experienced 
delays in receiving payments owed to it by the Commis­
sion. This applied particularly in the case of project NA 
84/5 (see paragraph 9.56(a)), which involved bridge 
repairs in the province of Cochabamba and flood 
protection work in the towns of Trinidad and Santa Ana, 
for which the main contractor was paid more than six 
months after submitting his application for reimburse­
ment. 
9.62. In Bolivia, the second transfer to an account in La 
Paz in respect of the investment project in the La Paz 
region (NA 84/08) was received only six months after the 
relevant application. In connection with project NA 
83/03 for bridge reconstruction in Ecuador, an appli­
cation for reimbursement which was sent to Brussels at 
the time of the Court's audit visit was settled over nine 
months later. 
9.63. The very complexity of the administrative systems 
makes them slow. From the request for funds up until the 
final payment, these systems comprise a dozen oper­
ations (3), a good half of which are carried out by 
Community departments. At this stage, the delays (see 
Table 9.2) apparently occur in the accounting and paying 
departments, but these are not necessarily, however, the 
departments which are truly at fault. The delays are in fact 
often due to errors upstream: for example, at the 
authorizing stage, insufficient supporting documents, 
details of the beneficiary and of his bank account not 
sufficiently precise, etc. 
Table 9.2 — Average processing time for payment documents 
relating to Chapter 93 expenditure (all the payments made from 
10.1.1986 to 31.3.1987 for expenditure committed in 1986, 
i.e. 222 operations) 
Administrative processing 
of the payment file 
Opinion of geographical and tech­
nical departments 
Validation and authorization 
Entering expenditure 
Approval by Financial Controller 
Payment (choice of a banking 
circuit for transferring funds to the 
beneficiary's account, and transfer 
to the account of the first insti­
tution in that circuit) 
Total average duration Working 
days 
15 
10 
24 
5 
6 
60 Calen­
dar 
days (') 
24 
16 
40 
8 
8 
96 
(') Taking into account an average number of non-working days 
(weekends and public holidays). 
146 Official Journal of the European Communities 12. 12. 88 
9.64. But the most lengthy delays are above all due to 
the banking circuits, whether imposed by the beneficiary 
State or selected by the recipient of the payment. The 
analysis made by the Court in conjunction with the 
competent Commission departments shows that two 
measures would form the pre-condition to any significant 
improvement: 
(a) the recipient should open an account at a European 
bank or, failing that, at a bank which has a 
correspondent bank holding an account in Europe; 
(b) payments in ECU should become the norm; this form 
of payment, however, will meet with reluctance on the 
part of some European firms tendering for works or 
supply contracts. 
9.65. These two measures have to be taken if the errors 
referred to in paragraph 9.63 are really to be eliminated. 
Furthermore, this would also enable the paying depart­
ment to notify each recipient of the dispatch of any 
payment which concerned him and to clearly identify the 
reason for the payment. A system of receipt notes and 
notification of all the departments concerned would thus 
provide the necessary transparency in order for the 
Commission and the recipient to be able to appraise the 
performance of the banking intermediaries selected and 
to draw conclusions. 
Dealing with monetary problems 
9.66. The high rates of inflation experienced in varying 
degrees by the three Andean countries have often given 
rise to the introduction of managed exchange systems, 
involving several more or less favourable rates for 
changing convertible currencies into local currency. In the 
course of its enquiries the Court found that this 
phenomenon often led to the loss of part of the 
Community subsidy. Apart from the slowness with which 
it is disbursed, the value of a subsidy can also be affected 
by the choice of payment systems and procedures. 
9.67. Generally speaking, subsidies are made available 
in a series of tranches, the first of which is usually in the 
form of an advance, topped up with further tranches as 
evidence is provided, by means of supporting documents, 
that project expenditure has been effected. By changing 
Community ECUs into dollars too quickly, at a time 
when the dollar was depreciating, and then converting the 
dollars into 'sucres', 'intis' or 'pesos', the local currencies 
concerned, at a time when these currencies were 
themselves falling against the dollar, all at sometimes very 
adverse exchange rates, the project managers allowed the 
subsidies made available to them to decline in value. 
Moreover, by holding the sums in question in local 
currency in accounts which yielded little return, and not 
utilizing them quickly, the managers allowed the subsidies 
received to decline in value a second time, particularly 
when internal inflation reached the highest levels in the world — more than 1 000 % annually in Bolivia in 
1982-84. 
9.68. Overall the value of some ECUs was reduced by 
more than 80 %. Losses of this kind were recorded in 
Bolivia, particularly in the case of the initial payments to 
the regional rural investment programmes (NA 83/7 and 
84/8). Similarly, in the case of the Foderuma rural micro-
projects programme (NA 81/9) in Ecuador, the initial 
payments were effected at an adverse controlled rate of 
exchange. An identical process explains the rapid 
exhaustion of the subsidy allocated to the Ancash project 
(NA 80/35) in Peru (see paragraph 9.19). Proper 
management could have prevented these losses, as 
evidenced by the contrary results obtained with Belgian 
technical assistance in the Cajamarca project. In the latter 
case, only the amounts which were strictly necessary were 
converted into dollars, and only essential sums for 
immediate payments were converted into intis. In 
addition, the most favourable controlled rates of 
exchange were obtained from the banks, contrary to what 
the Court found in its examination of the two projects 
mentioned previously. 
9.69. The attention of the Commission was rapidly 
drawn to the combined effects of the above factors. It then 
requested the beneficiary States to hold the Community 
advances in foreign currency accounts and/or to apply the 
least adverse controlled rates in the case of Community 
transfers. The response was not always immediately 
favourable [Foderuma (Ecuador NA 81/9), Ancash (Peru 
NA 80/35), RMPP II Cordepaz (Bolivia NA 84/8)]. In 
future, financing agreements should be required to 
include an undertaking by the beneficiary State that, 
where there are several exchange rates, Community 
subsidies will be converted at the most favourable rate. 
Final observation concerning the three Andean 
countries 
9.70. Despite the criticisms made above, the results of 
the financial and technical cooperation undertaken by the 
EEC and the three Andean countries over the last 10 years 
have, on the whole, been positive. Unlike what is 
happening in some other Asian and Latin American 
LDCs, where the Community provides assistance in kind 
in the form of goods, with which the beneficiary uses its 
own funds to finance projects which are Community 
projects in name only (see the Court's Special Report No 
4/86 on financial and technical cooperation with 
India) (4), the EEC aid is applied to projects which are 
really financed and carried out jointly by the Community 
and the beneficiary State. Case by case, support is given, 
12. 12. 88 Official Journal of the European Communities 147 
as necessary, for expenditure in local currency, plant and/ 
or technical assistance of European origin and services at 
every technical and administrative level provided by the 
beneficiary State. Because of this, a fruitful dialogue 
ensues, to the mutual benefit of both parties. 
9.71. The Caracas delegation, which is responsible in 
theory, is in fact much too far away to be able to monitor 
projects in practice. Inevitably Brussels has to monitor 
them itself, which results in difficulties of all kinds. 
Opening a Community delegation in at least one of the 
three Andean countries which receives aid from it is a 
measure which could provide a significant improvement 
to a fair number of the difficulties pointed out in this 
report. 
9.72. The choice of projects aided, which is conditioned 
by the extreme paucity of management resources, has 
improved as the Commission has gained experience. For 
several years the use of permanent teams staffed by 
European technical assistants has made it possible to 
widen the range of possible projects and to initiate on a 
wide scale the financing of systems of rural micro-
projects, which are integrated into the local socio­
economic framework and managed on a local scale and 
produce an economic return higher than that of many 
more centralized projects. 
9.73. But the fact that the Andean countries feed their 
urban populations at low cost by importing extensively at 
world prices is ruining their prospects of agricultural 
development and rendering the opportunities for pro­
fitable investment increasingly rare. 
(1) OJL 48, 21.2.1981. 
(2) OJC321, 15.12.1986. 
(3) Request for funds by the public works department; 
forwarded by the Ministry of Foreign Affairs; forwarded by 
the Community's Permanent Representative; opinion from 
the Commission's technical staff; opinion from the 
geographical sections of the Commission; examination, 
validation and authorization by the Commission's financial 
departments; approval by the Financial Controller; entry 
by the accounts department; payment by the funds 9.74. The use of international development banks as 
managers and joint financiers has, in this case, proved 
very disappointing. 
9.75. In the case of joint financings by the Community 
and a Member State, care should be taken to ensure that 
in both temporal and substantive terms there is con­
sistency between the financing agreement concluded 
between the Commission and the beneficiary State, the 
management agreement concluded between the Commis­
sion and the joint financier and the agreement concluded 
between the latter and the beneficiary State. For each of 
the parties involved, there should be total transparency of 
these three documents. The best solution would in fact be 
to draw up a single reference document in the form of a 
tripartite agreement. 
9.76. As regards the teams responsible for implement­
ing the projects on the spot, their degree of autonomy and 
the terms on which the local technicians are made 
available to them should be clearly defined. 
9.77. Finally, continuous attention must be given to the 
question of financial circuits in order to reduce the time 
required for payments between the Commission and the 
immediate beneficiaries on the spot and to find satisfac­
tory solutions concerning exchange rates and cash-fund 
mechanisms. 
department and passage through an international banking 
circuit selected afresh each time by the same department 
according to the account which the beneficiary State has 
designated to receive the funds; transfer to one of the 
beneficiary State's accounts; monitoring of the beneficiary 
State's budgetary and accounting procedures to provide 
lines of credit in the Ministry concerned; payment to the 
various beneficiaries. 
(4) OJ C 75, 23.3.1987. 
148 Official Journal of the European Communities 12. 12. 88 
CHAPTER 10 
Staff and operating expenditure 
10.0 TABLE OF CONTENTS 
Introduction 
Staff expenditure 
Management of staff salaries 
Council 
Court of Justice 
Economic and Social Committee 
Observation applicable to a number of institutions 
Invalidity pensions in the institutions 
Operating expenditure 
Expenditure by the institutions on office accommodation 
Observations concerning expenditure on formal and other meetings 
Council 
Commission 
Court of Justice 
Economic and Social Committee 
Financial contribution from the Commission to a television channel 
European Schools 10.1 
10.4 
10.4 
10.4 
10.11 
10.15 
10.23 
10.24 
10.41 
10.41 
10.78 
10.81 
10.85 
10.91 
10.94 
10.102 — 10.3 
— 10.40 
— 10.23 
— 10.10 
— 10.14 
— 10.22 
— 10.40 
— 10.106 
— 10.77 
— 10.101 
— 10.84 
— 10.90 
— 10.93 
— 10.101 
— 10.106 
10.107 10.121 
INTRODUCTION 
10.1. This chapter examines the management of the 
Community institutions (staff and operating expendi­
ture). The management of the institutions calls for certain 
observations which, depending on the case, concern 
general matters relating to all or some of the institutions, 
or questions particular to just one institution. Council, the Court of Justice and the Economic and 
Social Committee. Observations concerning the Commis­
sion, the Parliament and the Court of Auditors appeared 
in the Annual Report on the financial year 1986 (1). This 
report also deals with invalidity pensions charged to the 
budget. 
10.3. As regards operating expenditure, the observ­
ations concern, amongst other things, general subjects, 
i.e. expenditure by the institutions on office accommod­
ation and on formal and other meetings. 
10.2. As regards staff expenditure, this year the Court of 
Auditors audited the management of staff salaries at the (') The footnotes are listed together at the end of the chapter. 
12. 12. 88 Official Journal of the European Communities 149 
STAFF EXPENDITURE 
Management of staff salaries at the Council, 
the Court of Justice and the Economic and 
Social Committee. 
COUNCIL 
Overtime payments 
10.4. Since the Court's investigations in 1982 (2) and 
1984 (3), the system governing the working and payment 
of overtime has not changed, despite certain undertakings 
by the Council regarding employees in categories A, LA 
and B, who are being treated in a manner which is 
contrary to the provisions of Article 56 of the Staff 
Regulations. 
10.5. Since then, the number of hours of overtime 
worked has constantly increased, rising from 42 000 
hours in the first half of 1982 for employees in categories 
C and D (which corresponded to 67 000 hours to be taken 
as compensatory leave or paid as overtime) to 70 000 
hours in the first half of 1987 (which corresponded to 
82 600 hours to be taken as compensatory leave or paid as 
overtime), i.e. an increase of about 66 %. 
10.6. In practice, a system for storing up the days 
granted in compensation for overtime has also been set 
up, with the result that, at the end of the financial year 
1987, Council officials and employees of all categories 
had accumulated claims to a significant number of days' 
leave. 
10.7. As a result, since the establishment at the end of 
1981 of the Council's internal rules on overtime, a total of 
50 466 days of compensatory leave has been granted to 
the Council's staff as a whole, 21 176 of which had still not 
been taken as at 31 December 1987. At that time, there 
also existed a reserve for category C and D employees of 
74 055 hours in compensation for hours worked as 
overtime in accordance with Article 56 of the Staff 
Regulations, i.e. about 9 874 days, which, added to the 
21 176 days of compensatory leave, represented a total of 
31 050 days, i.e. about 150 man/years. 
10.8. At the end of the financial year 1987, out of a total 
staff of 1 920 employees, 1 630, from all grades and 
categories, had days of compensatory or physical 
recovery leave due to them, although Article I of Annex VI of the Staff Regulations lays down that compensatory 
leave is to be taken during the month following that 
during which the overtime was worked (failing which an 
overtime payment must be made) and the Council's 
internal rules state that, save in exceptional circum­
stances, time off for health reasons must be taken the day 
after the overtime has been worked. In fact, 755 
employees had built up a reserve of between 10 and 50 
days, 117 were entitled to between 51 and 100 days and 28 
to more than 100 days, 293 days being the maximum 
anyone had accumulated. 
10.9. These statistics show that the system set up by the 
Council generates additional expenditure. When em­
ployees who have accumulated a large number of days' 
leave decide to take them, they have to be replaced by 
other employees, or their work has to be done in the form 
of more overtime. When leave is stored up until the time 
when an employee leaves the institution, the payments 
then due, calculated in accordance with the salary 
received by the employee at that time, can add up to the 
equivalent of several months' remuneration. In any event, 
the objective of a period of rest immediately following a 
prolonged effort is not being achieved. Moreover, the 
practice of storing up leave has the effect of carrying over 
costs and is therefore open to criticism with respect to the 
financial rules. 
Three-quarters-time work 
10.10. In Staff Notice No 44/87 on part-time employ­
ment, the Secretary-General informed the Council's staff 
of the possibilities open to them, in particular as regards 
three-quarters working-time. This option may be granted 
for the same reasons as half-time employment, i.e. for the 
raising of young children, vocational training, or for 
reasons of age or health. Nevertheless, it does not comply 
with the Staff Regulations, which provide only for full-
time and half-time employment. Any other modifications 
of working time and the ensuing financial and social 
consequences can be introduced only if the Staff 
Regulations are amended. 
COURT OF JUSTICE 
Division of responsibilities 
10.11. The Finance Division manages the data-proces­
sing package used for salary payments. It therefore deals 
with the input of data and the calculation of remuner­
ations. Employees in this Division also draw up the 
collective statement, check it and prepare the annexes 
attached to it. The payment order is then submitted for 
150 Official Journal of the European Communities 12. 12. 88 
signature to the Authorizing Officer, who is the head of 
the Personnel Division. 
10.12. This division of labour means that: 
(a) the Authorizing Officer has no direct control over the 
validation and calculation of remunerations; 
(b) Article 38 of the Financial Regulation, which 
prescribes that the collective statements must be 
drawn up by the department in charge of personnel, is 
not observed; 
(c) the principle of the separation of duties is not fully 
observed since the Head of the Finance Division is 
also the Accounting Officer, which means that he 
cannot take on responsibility in the calculation of 
remunerations and the drawing up of the payment 
order. 
Preparation of salary payments 
10.13. The Personnel Division does not carry out 
systematic and exhaustive checks to ensure that all the 
decisions of the Appointing Authority, and only those 
decisions, have been correctly entered into the 'Salary' 
data files. Such checks are particularly important as there 
is no management file on computer in the Personnel 
Division which could be compared with the 'Salary' files 
to find out whether there are any discrepancies. 
10.14. The Personnel Division does not even receive the 
two documents detailing modifications made during the 
month, i.e. the identification forms and the list of 
differences in the figures. Furthermore, it does not have 
on-line access to the data contained in the 'Salary' 
package. There is no documentation relating to checks 
which may have been carried out, other than that 
concerning the verification of family allowances. 
ECONOMIC AND SOCIAL COMMITTEE 
Preparation of salary payments 
10.15. Data is fed into the 'Salary' files by direct input. 
The official responsible for this is also responsible for 
checking the entries afterwards by comparing the list of 
differences with the document setting out pecuniary 
rights, whereas such checks should be carried out, within the administrative unit responsible for input, by a second 
person. 
10.16. Furthermore, the direct transfer of data from the 
'Management' file to the 'Salary' package is on program 
and is general practice. Information concerning new 
employees (recruitment) is thus systematically transferred 
directly to the 'Salary' files. But, since the two systems are 
designed for different purposes (staff management and 
the calculation of remunerations), they should be kept 
completely separate. Provided that information is entered 
into each file separately, it is possible to carry out 
periodical comparisons between the files, which thus 
become an effective way of checking the data on each file. 
This is of particular relevance since such a program exists 
at the Council, whereas the Economic and Social 
Committee has no system of checking. 
10.17. The Authorizing Officer's Department does not 
carry out any month-by-month comparisons of salary 
payments, including the effects of any modifications, with 
a view to verifying the regularity of the payment made in 
the most recent month. The 'Salary' package, however, 
produces, together with the calculation of the monthly 
remuneration, an expenditure and revenue balance 
broken down by budget heading. A comparison between 
the balances for successive months (the final balance for 
month n-1, plus new entitlements granted and less 
benefits withdrawn, must correspond to the final balance 
for month n) would reveal whether all the modifications 
had been correctly taken into account in the input and 
pinpoint any mistakes. In failing to do this, the 
Authorizing Officer's Department is overlooking a simple 
and efficient means of verification, which would be of 
particular value given that no checks are carried out at the 
validation stage. 
Payment procedure 
10.18. During the financial year 1987, all payments (13 
collective statements of an average 1,6 Mio ECU of 
monthly remunerations and arrears) were made to 
employees without the competent Authorizing Officer 
first drawing up a proposal for commitment of expendi­
ture and a payment order. As soon as the salary payments 
had been calculated by computer, the employee re­
sponsible for these operations took the magnetic tapes 
and the instructions to pay to the bank, and the transfers 
were made. The payment orders were not drawn up until 
much later (two to five months after payment), yet the 
Financial Controller still approved them. The sums were 
debited in the accounts when the payment orders were 
produced, i.e. after the payments had been made. 
10.19. Such conduct is a flagrant breach of the rules laid 
down in Articles 36 to 46 of the Financial Regulation and 
12. 12. 88 Official Journal of the European Communities 151 
calls the respective roles of the Authorizing Officer, the 
Financial Controller and the Accounting Officer into 
question, since the latter is required to suspend payment 
in the event of non-compliance with the procedure 
provided for in the Financial Regulation. As a result, on 
two occasions in particular (6 and 14 July 1987), the 
Financial Controller had to point out that there were no 
funds available against item 1190 (Weighting) and that a 
transfer would have to be made. The corresponding 
payments had, nevertheless, already been made, in the 
months of January and February of the same year. 
Absence of reciprocal information 
10.20. The Authorizing Officer, the Financial Con­
troller and the Accounting Officer are not able to consult 
each other's files directly from a computer terminal, even 
though the information these files contain is vital for the 
procedures of commitment, validation, authorization 
and execution of expenditure. This situation results from 
the use of three incompatible types of software at the 
Economic and Social Committee. This lack of direct 
access to each other's data means that each time one 
department requires information from another a print­
out has to be made. Use of the same software by all three 
departments would be a quicker and far more effective 
solution to the problem. 
Advances to staff 
10.21. The Secretary-General of the Committee grants 
advances, to be repaid by deduction from employees' 
salaries, in accordance with Article 76 of the Staff 
Regulations. However, in the case of some of these 
advances, the conditions laid down in the Staff Regu­
lations were not fulfilled. 
10.22. The Director of Administration also grants 
advance payments on salaries in situations not covered by 
Article 76. This practice is irregular. Article 42 of the 
Financial Regulation lays down that the Authorizing 
Officer may grant advances to members of staff only if the 
Staff Regulations or the provision of some other 
regulation specifically provide for them, and Article 76 of 
the Staff Regulations is the only legislative provision 
which authorizes the granting of advances. 
OBSERVATION APPLICABLE TO A 
NUMBER OF INSTITUTIONS 
10.23. As regards the taxation of paid overtime, the 
Council, the Court of Justice and the Economic and Social Committee do not correctly apply Regulation No 
260/68, which lays down the conditions and procedure for 
applying the European Communities' income tax. 
Although Article 6 of the Regulation provides that sums 
paid as compensation for overtime should be assessed for 
the purposes of the tax at the rate which was applied to the 
highest taxable amount of the official's remuneration 
during the month preceding that of payment, all three 
institutions apply the rate applied during the month in 
which the overtime was worked. 
Invalidity pensions in the institutions 
10.24. Expenditure relating to invalidity pensions 
charged to item 1201 of Section III, Title A-I, of the 
budget amounted to 39,3 Mio ECU in 1987, an increase 
of 25,3 % compared with 1986 and 137,8 % compared 
with 1983. By comparison, expenditure relating to 
retirement pensions amounted to 49,3 Mio ECU in 1987, 
an increase of 18,2 % compared with 1986 and 110,7 % 
compared with 1983. 
10.25. Invalidity pensions paid by the European 
institutions have been analysed on two levels. First, the 
statistics were looked at: those of the institutions 
themselves and then, for comparison, those of other 
international organizations which, like the institutions, 
employ an international staff, and those of the French 
banking sector, whose pension scales are representative of 
the usual scales for office staff; the regulatory side is then 
analysed, that of the institutions and again, for com­
parison, that of the coordinated organizations i.e. the 
Council of Europe, the WEU, NATO, the OECD and the 
ESA (4). This comparison proved interesting because the 
organizations have a common pension scheme very 
similar to that of the European institutions, on which it 
was modelled. 
Statistics on invalidity pensions paid by the European 
institutions 
10.26. On 31 December 1987, 1 428 former Community 
employees were in receipt of invalidity pensions, (Parlia­
ment 122, Council 72, Commission 1 196, Court of 
Justice 15, Court of Auditors 8, Economic and Social 
Committee 15). The number of pensions had increased by 
13,4 % compared with 1986 and 77,8 % compared with 
1983. In comparison, 1 541 employees were in receipt of a 
retirement pension as at 31 December 198 7, an increase of 
9,6 % compared with 1986 and 44 % compared with 
1983. The recipients of these two types of pension as at 31 
December 1987 were distributed between the various 
career brackets as shown in Table 10.1. 
152 Official Journal of the European Communities 12. 12. 88 
Table 10.1 — Breakdown of invalidity and retirement pensions 
paid as at 31 December 1987 
Career bracket 
A 1 
A2 
A3 
A/LA 5/4 
A/LA 7/6 
A/LA 8 
Total A 
B 1 
B3/2 
B5/4 
Total B 
C 1 
C3/2 
C 5/4 
Total C 
D 1 
D3/2 
D4 
Total D 
Grand total Retirement 
pensions 
72 
137 
229 
380 
33 
851 
214 
139 
13 
366 
156 
35 
4 
195 
13 
116 
129 
1 541 Invalidity 
pensions(') 
3 
7 
47 
191 
32 
280 
125 
131 
41 
297 
251 
330 
45 
626 
123 
74 
3 
200 
1 403(2) Invalidity 
pensions 
paid to 
employees 
aged 65 
and over 
2 
4 
10 
43 
4 
63 
42 
28 
9 
79 
62 
57 
8 
127 
40 
10 
50 
319 
(') Including the figures given in the column headed 'Invalidity pensions 
paid to employees aged 65 and over'. 
(2) Excluding 25 employees paid in the form of an advance, pending 
calculation of their pensions. 
10.27. As can be seen from the table, categories A and B 
account for the major part of retirement pensions, with 
79 %, while categories C and D account for only 21 %. 
On the other hand, categories C and D receive 58,9 % of 
all invalidity pensions, whereas categories A and B 
account for 41,1 %. Although, for category A, invalidity 
pensions represent only about a third of retirement 
pensions, for category B they are almost equal and for 
categories C and D they are much higher, so that nine out 
of 10 employees retiring in career bracket C3/2 do so on 
grounds of invalidity and all employees in career bracket 
D3/2 retire on such grounds. 
10.28. A relatively large number of employees receiving 
invalidity pensions are in the grades which, in practice, 
correspond to career ends, i.e. grades A5/4 and A3 in 
category A, grades B3/2 and Bl in category B, grades 
C3/2 and CI in category C, and D3/2 and Dl in category 
D. 10.29. Pensions paid in accordance with the regulations, 
which set a minimum level for invalidity pensions (see 
paragraph 10.34), represent 36 % of total invalidity 
pensions. Only about 4 % of such pensions are paid to 
category A and B employees, whereas 57 % are paid to 
category C employees and 39 % to those in category D. 
As regards the latter categories, it should be noted that the 
minimum invalidity pension is always higher than the 
retirement pension, at a maximum rate of 70 %, to which 
employees in categories D, C (up to grade C2 step 2) and 
grades B5 and B4 up to step 2 are entitled. It is in these 
grades in particular that a relatively high number of 
invalidity pensions is to be found compared with the 
number of retirement pensions. Furthermore, the grant­
ing of the minimum invalidity pension is independent of 
the employee's actual or potential number of years' 
service within the institutions, just as no account is taken 
of any professional experience prior to the moment the 
employee took up his duties within the institution or, 
where such activity did exist, of whether pension rights 
previously acquired have been transferred to the Com­
munity scheme. 
Comparative statistics 
10.30. If a statistical comparison is made between the 
application of the Community scheme and that of the 
coordinated organizations, it emerges that, in the 
Community institutions, invalidity pensions represent 
35,7 % of the total number of pensions (retirement, 
invalidity and survivors' pensions), whereas in the 
coordinated organizations they account for only 10 %. 
Moreover, the annual increase in the number of invalidity 
pensions as a proportion of the number of officials and 
temporary staff working amounted to 8,2 %o in 1984, 
7,2 % in 1985, 8,6 %o in 1986 and 8,7 %o in 1987 in the 
institutions. In comparison, in the coordinated organiza­
tions, the average annual increase in invalidities was only 
2 %o. 
10.31. In a report on the pension scheme drawn up at 
the request of the Council, the standardized percentage of 
people retiring on grounds of invalidity (5) is given for the 
Community institutions and for the French banking 
sector, the latter being representative of the normal 
percentages for office staff. The percentages for the 
institutions are distinctly higher than those for the banks, 
with a very big increase in the 60-64 age bracket. To cite 
just two examples, in the Community institutions, for 
men, the figure stands at 17,7 %o at the age of 60 and 
34,0 %o at 64 (25,8 %o and 38,3 %, respectively for 
women), whereas in French banks, the figures stand at 
only 1,9 %o at the age of 60 and 3,0 %o at the age of 64 
(10,0 %o and 13,5 %o respectively for women). 
12. 12. 88 Official Journal of the European Communities 153 
The pension schemes of the European institutions and of 
the coordinated organizations 
10.32. The European institutions' pension scheme, 
which also covers invalidity, is governed by the Staff 
Regulations of officials and/or the conditions of employ­
ment applicable to other servants of the European 
Communities. The regulations lay down that an official 
or a temporary member of staff is entitled to an invalidity 
pension if he is 'suffering from total permanent invalidity 
preventing him from performing the duties correspond­
ing to a post in his career bracket'. The scheme does not 
provide for partial invalidity. At the medical level, an 
Invalidity Committee, consisting of three doctors, decides 
whether an employee is in fact an invalid within the 
meaning of the provisions of the Regulations. If they 
decide that he is, the employee is automatically retired 
and receives an invalidity pension by decision of the 
competent appointing authority of the institution in 
question. The procedure is opened either at the initiative 
of the institution, in which case the employee must have 
taken a total of over 12 months' sick leave over a period of 
three years, or, where appropriate, on the advice of the 
medical officer, or at the request of the person concerned. 
The same procedure is followed in the coordinated 
organizations. 
10.33. Throughout the 12 months during the three-year 
period prior to the opening of an invalidity retirement 
procedure, which may be termed a period of temporary 
inability to work and which is therefore not covered by 
the pension scheme, the European Communities pay the 
person in question the whole of his salary. As regards the 
coordinated organizations, the Council of Europe, the 
OECD and the WEA pay the salary for six months. When 
that period expires, it is the national social security system 
of the host country of the organization and the insurance 
companies to which the organization is affiliated which 
cover the salary costs and medical expenses of the 
employees of these organizations. The results of all the 
medical examinations are included in the medical file of 
the person concerned, which is submitted to the Invalidity 
Committee should an invalidity procedure be initiated. 
10.34. In the European institutions, as in the coordi­
nated organizations, employees acquire entitlement to an 
invalidity pension the day they take up their duties and 
there are no requirements involving a minimum period of 
contribution to the scheme. The invalidity pension is the 
equivalent of the retirement pension to which the 
employee would have been entitled at the age of 65. 
However, it may not be lower than 120 % of the 
minimum subsistence level, i.e. 67 528 BFR gross 
(approx. 1 565,3 ECU), at a weighting of 100 and with 
effect as of 1 July 1987, in the European institutions, or 
49 500 BFR (approx. 1 147,4 ECU) in the coordinated 
organizations. An invalidity pension is not replaced at the 
statutory age limit of 65 years by a retirement pension, 
which is in all cases calculated on the basis of the number 
of years of service during which contributions to the 
schemes were paid. 10.35. Although the Community regulations prohibit 
the concurrent payment of an invalidity pension and a 
retirement pension, they do allow concurrent payment of 
an invalidity pension with a private invalidity pension 
where the reason for the payment is the same. There is no 
provision governing the possibility of an employee being 
in receipt of an invalidity pension at the same time as he is 
gainfully employed elsewhere. In the coordinated organi­
zations the rules are stricter. They cover not only the 
retirement pension but also income resulting from gainful 
employment, which beneficiaries are obliged to declare, 
and the pension may be reduced in accordance with the 
level of income. There are also limits applying to the 
concurrent payment of an invalidity pension with that of 
a private invalidity pension when both benefits are paid 
for the same reason. 
10.36. Under the provisions laid down in the Com­
munities' Staff Regulations, the institution can require an 
employee in receipt of an invalidity pension to undergo a 
periodical medical examination, until he has reached the 
age of 60. If it is found that the employee no longer 
satisfies the conditions for payment of the pension, he 
must be reinstated by the institution where he was 
previously employed. The employee must be made two 
offers of employment and in the event of his declining 
them both he can be required to resign, in which case he 
loses his entitlement to the pension which he had until 
then been paid. The conditions for the termination of the 
payment of an invalidity pension are clearly stricter in the 
coordinated organizations, since they terminate the 
pension of any employee who has not reached the 
statutory age for retirement (65 years) and has ceased to 
satisfy the requirements for receipt of an invalidity 
pension. If the person concerned is not reinstated, either 
he receives a severance allowance, which takes into 
account the number of years' service and invalidity, if the 
total is less than 10 years, or he receives a deferred or early 
pension. 
General comments 
10.37. The percentage of invalidity pensions is clearly 
much higher in the European institutions than in the 
coordinated organizations and French banks, although 
the nature of the work is very similar and employment in 
the coordinated organizations, like that in the insti­
tutions, involves the additional pressures of expatriation. 
10.38. As regards the rules and their application, the 
number of invalidity pensions and their structure give rise 
to concern that the system may be being abused, for 
instance, that attempts are being made, in general and 
particularly in the institutions, to acquire a minimum 
pension of a substantial amount after a short period of 
activity (real or potential), that invalidity pensions are 
being used as a substitute for retirement pensions which 
would be lower, and that attempts are being made to 
obtain an early retirement pension, under the guise of an 
invalidity pension, at the rate which would have been 
received at the age of 65. 
154 Official Journal of the European Communities 12. 12. 88 
10.39. In its annual report on the financial year 1982 (6), 
the Court noted that, except at the Economic and Social 
Committee (the Court of Auditors was not involved at the 
time), medical examinations were not carried out after an 
invalidity pension had been granted (see paragraph 10.36) 
and recommended that this situation should be remedied. 
Despite a recommendation by the heads of adminis­
tration that these examinations should be carried out 
every two years, unless the Invalidity Committee had 
stated that there was no reason to do so in view of the type 
of invalidity, the Parliament and the Council do not avail 
themselves of this possibility. 
10.40. To conclude, although the purpose here is not to 
call into question individual cases dealt with by a 
particular Invalidity Committee, the general results of the 
implementation of the pension scheme do appear 
questionable. Given that the scheme is clearly not 
particularly restrictive and is predominantly social in 
nature, it is particularly necessary for the institutions to 
interpret the rules very restrictively in order to ensure that 
the scheme is not used to serve purposes other than those 
for which it was set up. 
OPERATING EXPENDITURE 
Expenditure by the institutions on office 
accommodation 
Introduction 
10.41. Expenditure on office accommodation by the 
institutions has already been the subject of a special 
report by the Court of Auditors, in 1979 (7). 
10.42. In 1982, the Parliament, noting the 'substantial 
and growing' cost to the Community budget of renting 
buildings, adopted a resolution on the accommodation 
policy of the Community institutions (8) which referred to 
the implementation of a policy that 'minimizes cost to the 
Community budget and enables the Community insti­
tutions to work most effectively' (indent 10 of the 
Resolution). 
Development of the institutions' accommodation policy 
10.43. Since the Court's 1979 report, office space 
occupied by the institutions has risen from a total of 
788 000 m2 to 1 348 500 m2 at the end of 1987. It should be noted that at present the institutions occupy about 150 
buildings, which result in total expenditure on rent of the 
order of 100 Mio ECU a year (20 % of the total operating 
expenditure of the institutions). 
10.44. These developments are not the result of an 
accommodation 'policy' as such on the part of the 
Communities. They are, in actual fact, the consequence of 
individual decisions by the institutions, each acting 
independently, in the three working places and in other 
countries. In Brussels, the premises used have been 
centred around the 'Rond-point Schuman' as regards the 
Commission and the Council and around rue Belliard for 
the Parliament, although this concentration in a 'Euro­
pean quarter' has not taken the form of a joint complex. 
In Luxembourg, the various institutions on the Kirchberg 
plateau, a newly-developed part of the city, again 
requested the Government, unilaterally, to place build­
ings at their disposal. In Strasbourg, the city authorities 
took on the responsibililty of accommodating the 
Parliament, with the Council of Europe letting out its 
chamber for Parliamentary sessions. 
10.45. In general, the institutions have continued to rent 
buildings, despite the fact that it is clearly the most 
expensive way of accommodating their staff, as the Court 
mentioned in its special report of 1979. 
10.46. In a few instances, the institutions have in fact 
built their own buildings. Although this is a better 
solution in financial terms and from the point of view of 
efficiency, it has been based on a multi-annual forecast in 
such a way that the commitments entered into vis-a-vis 
third parties over a long period were initially covered by 
the budget based on the system of annual appropriations. 
10.47. The way in which this expenditure is dealt with at 
the budgetary level, i.e. the fact that availability of 
appropriations is decided annually, makes renting the 
most attractive option; this is very expensive and no 
consideration is taken of the economies which could be 
made in the long term by other alternative solutions, such 
as constructing or purchasing buildings. 
10.48. Figures for the cost of renting buildings for each 
institution and in each working place (Brussels, Luxem­
bourg, Strasbourg and other places) are shown in Tables 
10.2 and 10.3. 
10.49. Table 10.3 gives, in particular, an idea of the 
prices paid per m2 to rent the Communities' premises in 
1978 and 1987. Although the prices shown are gross 
averages relating to rents which were determined on 
different dates, it is clear that the cost of renting 
accommodation is rising. It should also be noted that 
there has been a steady increase in rents paid by the 
institutions over the last 20 to 25 years. For example, the 
12. 12. 88 Official Journal of the European Communities 155 
Table 10.2 — Rent increases in the various working places 
Working place 
Brussels 
Luxembourg 
Strasbourg 
Other places 
Total 1978 
Total 
surface area 
(1 000 m2) 
497,1 
230,8 
34,7 
25,4 
788,0 Annual 
rent 
(Mio ECU) 
25,9 
13,4 
0,3 
1,3 
40,9 Price 
per m2 
(ECU/m2) 
52,1 
58,1 
8,7 
51,2 
51,9 1987 
Total 
surface area 
(1 000 m2) 
816,7 
381,1 
98,6 
52,1 
1 348,5 Annual 
rent 
(Mio ECU) 
63,8 
24,8 
4,7 
6,9 
100,2 Price 
per m2 
(ECU/m2) 
78,1 
65,1 
47,7 
132,4 
74,3 
Table 10.3 — Rent increases by institution 
Institution 
Parliament 
Council 
Commission 
(of which the OOPEC) 
Court of Justice 
Court of Auditors 
Economic and 
Social Committee 
Total 1978 
Total 
surface area 
(1 000 m2) 
115,7 
78,8 
546,7 
(17,1) 
24,7 
9,2 
12,9 
788,0 Annual 
rent 
(Mio ECU) 
4,7 
5,0 
28,8 
(0,9) 
1,3 
0,5 
0,6 
40,9 Price 
per m2 
(ECU/m2) 
40,6 
63,4 
52,7 
(52,6) 
52,6 
54,3 
46,5 
51,9 1987 
Total 
surface area 
(1 000 m2) 
312,0 
111,9 
851,9 
(29,1) 
35,9 
14,3 
22,5 
1 348,5 Annual 
rent 
(Mio ECU) 
19,3 
10,5 
65,2 
(2,2) 
2,5 
1,1 
1,6 
100,2 Price 
per m2 
(ECU/m2) 
61,9 
93,8 
76,5 
(75,6) 
69,6 
76,9 
71,1 
74,3 
buildings rented in Brussels cost 920 BFR per m2 in 1962 
(JECL building), 1 975 BFR per m2 in 1976 (Char­
lemagne building) and by 1987 rents had reached 5 500 
BFR per m2 (extension of the building situated at 113 rue 
Belliard) — a six-fold increase compared with 1962 (the 
price index having increased four times over the same 
period). In Luxembourg too there has been a large 
increase in rents. In 1987, rents of 4 950 BFR per m2 were 
accepted (for the BAK III building) while in 1973, the 
Court of Justice building was rented at 1 376 BFR per m2 
(i.e. rents were 3,6 times greater after a period of 14 years). 
Terms of leases 
10.50. The terms of the leases accepted by the insti­
tutions are those in force on the property markets in the 
three working places. A coordinated approach by the 
institutions to the owners of the buildings in existence or 
under construction in Brussels or to the government 
authorities in Luxembourg would have made it possible 
to obtain more appropriate lease conditions. It should be 
borne in mind, in this respect, that in Brussels the institutions occupy 816 700 m2 of office space, which 
gives them indisputable leverage in any negotiations. 
However, in practice, each institution has negotiated 
separately with the owners/lessors, thus losing all the 
advantages of coordinated action. 
10.51. In its special report, the Court pointed out that 
long-term renting of buildings constructed for the 
institutions should be accompanied by the benefit of a 
reduced rent after depreciation of the investment. There 
has not, however, been any change to the situation 
observed by the Court. With certain exceptions (e.g. the 
A. Borschette conference centre in Brussels), there is no 
precise indication that this aspect has played a role in the 
negotiation of contracts. 
Indexation of rents 
10.52. The Court of Auditors also recommended that 
the institutions should examine whether the terms for the 
156 Official Journal of the European Communities 12. 12. 88 
indexation of rents were economically justifiable and, 
more generally, that they should pay particular attention 
to this aspect in the case of premises constructed to meet 
the specific needs of the institutions. 
10.53. In such situations, where the funding of the 
building work usually takes the form of a long-term, 
fixed-rate mortgage already covering financial depreci­
ation in the period in question, indexation of the rent, if 
accepted, represents an additional advantage for the 
developer. To ensure that the prices requested are at an 
appropriate level, the financing contract should therefore 
be referred to. The institutions should always insist on the 
cost of rents being justified by precise reference to the cost 
of financing. 
10.54. In this respect, it was noted that, as a result of 
rent indexation, returns on the investment costs of some 
buildings constructed for the Communities had practi­
cally doubled compared with initial returns. 
10.55. Some institutions (namely the Parliament and 
the Court of Auditors) have provided for the possibility of 
renegotiation within a certain period rather than the 
application of automatic indexation. This example 
should be followed by the other institutions when leases 
are negotiated or renewed. 
Payment of national taxes 
10.56. The institutions based in Brussels have signed 
contracts which commit them to paying national taxes on 
rented premises (property tax) in the place of the owners. 
Despite previous observations by the Court (7) and a 
Parliamentary Resolution (8), the problem has not been 
solved. 
10.57. Each year this unjustified expenditure steadily 
increases. Table 10.4 gives an estimate of the sums paid by 
the institutions in the form of property tax on buildings in 
Brussels. 
10.58. The institutions should raise the matter with the 
Belgian Government. On a practical level, the institutions 
ought in any event to avoid paying taxes to the Belgian 
Treasury which are the obligation of the owners of the 
buildings. It was noted in this respect that some 
diplomatic missions in Brussels systematically refuse to 
pay property tax, even when their contracts include this 
stipulation. The institutions should, at the very least, 
adopt a similar attitude in the future. Table 10.4 — Property tax (precompte immobilier) 
(ECU) 
Institution 
Parliament 
Council 
Commission 
Court of Auditors 
Economic and 
Social Committee 
Total Sums 
committed 
in 1978 
39 415 
383 918 
837 361 
44 913 
1 305 607 Sums 
committed 
in 1987 
213 994 
941 329 
3 671 037 
4 708 
121 124 
4 952 192 
Utilization of appropriations for the payment of rents 
(Article 200 of the budget) 
10.59. Expenditure on rents (Article 200 of the operat­
ing budget of the institutions) could also be better audited 
if management of forecasts and budgetary implemen­
tation was stricter. 
10.60. A detailed analysis of expenditure by the 
institutions on rent (Article 200, Rent) for the period from 
1984 to 1986 reveals a number of facts in this respect. 
10.61. In particular, this form of expenditure calls for 
the following comments: 
(a) The appropriations that have been made available in 
recent budgets for Article 200 (Rent) have usually 
been over-estimated, when compared with actual 
requirements, and in fact considerable sums are 
regularly transferred from this article in order to 
consolidate other budget headings (about 5 Mio 
ECU/year). 
(b) Some rent payments also cover payment for the 
fitting-out of buildings, which should be charged 
against Article 204 (Fitting-out of premises) and not 
Article 200 (Rent) (level of annual payments for work 
charged against Article 200: about 18 Mio ECU). 
12. 12. 88 Official Journal of the European Communities 157 
Purchases 
Council Decision of 14 December 1981 
10.62. In 1981 the Council of Ministers approved a 
basic guideline on accommodation policy. The Decision 
adopted on 14 December 1981 states, in particular, that 
'The Council has no objection in principle to the 
institutions, in their proposals for meeting accommod­
ation needs in the places of work assigned to them by 
decision of the Member State governments, considering 
the various possible legal and financial solutions and 
highlighting that solution which seems to them to be the 
most appropriate, including purchasing. The institutions' 
proposals concerning accommodation policy must never­
theless be examined individually within the Council, 
without prejudice to the issue of where the institutions are 
based.' 
10.63. This Decision, which is important because of the 
possibility it offers the institutions of acquiring premises, 
did not have the desired results, due, in particular to the 
Council's own refusal, as Budgetary Authority, to 
provide the necessary financial resources. 
10.64. Thus, the requests by the Court of Justice and the 
Court of Auditors to be allowed to build their own 
premises, although justified in terms of the potential 
savings, met, in 1982, with a negative response from the 
Council, which was seemingly anxious to limit any 
immediate increase in the operating budget whilst 
ignoring the potential savings in the medium term. 
10.65. The various initiatives which the Commission 
has managed to take have been undertaken without any 
advance guarantee that the funds would be available. In 
addition, during the construction of the new office block 
on the rue de la Loi in Brussels, around 10 % of the 
payments had to be made in advance, in contravention of 
the provisions of the Financial Regulation, so as to 
prevent the annual appropriations being cancelled. 
10.66. The Council, for its part, opted, on the contrary, 
to declare the building of its new Brussels offices at the 
'Rond-Point Schuman' a compulsory item of expenditure 
(Article 297 of the budget). 
Purchases of premises 
10.67. In contrast to the situation in the various places 
of work in 1978, the Commission has purchased the 
following premises: (a) a building in Brussels (120, rue de la Loi) which is 
intended to form part of an administrative block 
which is still under construction (cost: 4,4 Mio 
ECU); 
(b) a building of 55 500 m2 (the 'Breydel' building) in 
Brussels paid for in 20 equal annual instalments (cost 
of the operation: 6 140 Mio BFR i.e. ± 142,1 Mio 
ECU). 
10.68. These purchases are obviously economically 
advantageous, when compared with the alternative of 
renting the same buildings. For example, the Commis­
sion, in 1986, estimated that the cost of purchasing the 
'Breydel' building in 20 annual instalments would be 
6 140 Mio BFR (± 142,1 Mio ECU), whereas renting the 
building over a period of 20 years would have cost 
9 091 Mio BFR(± 210,4 Mio ECU). 
10.69. It must also be noted that the 'turn-key' purchase 
of these premises by the institution spares it the problems 
involved in building the premises as the client. 
10.70. As regards the premises rented by the Court of 
Auditors in Luxembourg, the possibility of an eventual 
purchase has been envisaged and a clause has been 
inserted into the contract allowing for the purchase of the 
building and the deduction from the purchase price of the 
rent paid. 
Conclusions 
Coordination 
10.71. The institutions' accommodation situation, 
which in the past has been distinguished by an absence of 
coordination, is continuing to evolve without a common 
approach. Many aspects of the accommodation 'policy' 
none the less require coordination and rationalization, 
such as the establishment of common five-year forecasts, 
the shared use of premises, the definition of common 
technical standards, etc. 
10.72. To this end, an inter-institutional committee 
capable of bringing the institutions closer together was set 
up, following the publication of the Court's first report. 
This inter-institutional committee on accommodation 
policy (known as 'GIPI'), which was set up in 1980, did 
some useful work for a time, but these first efforts were 
not followed up since the committee ceased to function 
1^8 COfticialiournal of the European Communities 1^.1^.88 
after 198^1. Lhis specialized body should be reconstituted 
and granted advisory powers over the ma^or issues 
concerning the siting and management of premises. 
T^^^^^^^^^^^^^ 
It).71 Until now,each institution has adheredtoits 
own technical standards or to those ofthe host country. 
Bearinginmind the variety of experiences in thisarea, the 
Court has already drawn attention to the need for 
coordinationaimedat rationalizingandstandardizing 
the institutions^ requirements intermsofstaffaccom 
modation. 
10.7^. Lhe institutions should draw up, with the 
assistanceofexpertsor specializedbodies, a technical 
documentsetting out common standards applicable to all 
ofthem.Lhis would not be to the exclusion of the specitic 
standards which are called for in special cases. 
lt^.7eo. Lhe various leases which exist at present, should, 
in future, he replaced by standardized documents which 
meet the requirements of both sound management 
^appropriate rent indexation, acceptable service charges, 
refusal to pay local taxes, etc.) and of the Einancial 
regulation ^payments to be made as they fall due, award 
of contracts after invitations to tender, etc.). 
^^^c^^^^^^^^^^^^^ 
ltm7o. renting is the most costly solution to the 
accommodation problem. Except where rent is on a 
short-term basis, the total amount of rent paid for any 
givenbuilding is far higher than itsbuilding cost plus 
depreciation. All alternatives to rentingmust therefore be 
studied, and new instances of renting must be ^ustitied as 
being more desirable than the other possible solutions. 
^^^^^^^cA 
1^.77. Lhe purely annual approach to accommodation 
costs adopted until now by the budgetary authority no 
longer fulfils therequirementsofsoundmanagement, 
with annual costs of lOOlviio ECU and contractual 
commitments of up to ^ or ^Bo years. Faced with 
constantly rising expenditure, the institutions are in 
practicepreventedfromdrawingupaninvestmentpolicy, 
which alone would allow for substantial savingstobe 
made.Lhisbeingso, theBudgetary Authorityshould 
providefor thecreationof amultPannualinvestment budget to promote,where possible, the purchasing and 
construction of premises. I^hiswouldalsoenable leases or 
long-term loan contracts to be signed in compliance with 
the linancial provisions governing this type of commits 
ment. 
t^e^er^t 
10.78. Expenditure incurred by the institutions on 
meetings, which is charged to Chapter ^^ of the budget, 
wassub^ectedtoahorizontalaudit. COnly those instP 
tutions which called for comment are mentioned below. 
Lhere are substantial differences between the various 
systemsfor reimbursing expenses and paying allowances 
topersonsattendingmeetings.lntheabsenceofasuitable 
systemfortheinstitutionsasawhole,eachinstitutionhas 
determined independently the rules to be applied to 
persons attending meetings, fhe system applying to the 
membersof theEconomicandSocialCommittee was 
decided on by the Council. 
10.79. Persons attending meetings convened by the 
European institutions are, in principle, entitled to a 
refund of expenses.Il^us, nongovernmental experts are 
normally granted travel and subsistence expenses, 
different rules existfor government experts.LheCouncil 
does not grant subsistence allowances tonational civil 
servants.At the Commission,various systems exist side 
by side. Government experts who attendmeetings of 
committees receive, in most cases, only travel expenses, 
however, there are sti!118committees where subsistence 
allowances are also paid, members of the Economic and 
Social Committee receive daily subsistence allowances as 
well as travel expenses. 
10.80. ^^^.^ outlines the number and cost of the 
meetings held during the linancial year 1987 by the three 
institutions which convene members or experts most 
frequently. 
oEe^euVoEA^ 
1081 Article ^0 of the CounciPs budget ^9,8 ^io 
ECU in 1987)covers, in particular, the reimbursement of 
12. 12. 88 Official Journal of the European Communities 159 
Table 10.5 — Number and cost of meetings 
Institution 
Council 
Commission 
Economic and 
Social Committee 
Total Number 
of 
meetings 
2 123 
2 279 
410 
4 812 Number 
of 
meetings 
attended 
(') 
25 346 
33 914 
11 000 
70 260 Expenses 
reimbursed 
(Mio ECU) 
9,4 
17,0 
4,6 
31,0 
(') Some experts attended several meetings. 
travel expenses incurred by the President and his staff and 
by the delegations at Council sessions and meetings. 
10.82. Travel expenses are reimbursed either on the 
basis of forms filled in by the participants at the time of 
the meeting or on the basis of written applications 
submitted to the General Secretariat some days after the 
meeting by the Permanent Representatives or by the 
Member States directly. 
10.83. Disregarding applications submitted by the 
participants themselves at the time of the meetings, 
expenses are sometimes refunded without the supporting 
documents being checked, in other words, without proof 
that the delegates have actually made the journey. In 
particular, there are no lists showing which delegates 
attended each meeting. The system for verifying costs 
incurred by the meetings would seem to require reinfor­
cing. 
10.84. It has furthermore been observed that around 
40 % of delegates attending Council meetings also attend 
the meetings of the various Commission committees. This 
being the case, a system of inter-institutional control of 
travel expenses should be set up. 
COMMISSION 
Committees and working parties 
10.85. A large number of working parties and commit­
tees have been set up by Community acts and at the 
Commission's initiative. For verification purposes, a list 
of the committees coming under Article 251 (Committee 
meetings) is annexed to the budget (9). In practice, this list, which is updated by Directorate-General XIX 
(Budgets) during the preparation of the budget (very early 
in comparison to the reference financial year), is not 
always updated when it is published. The Secretariat 
General, for its part, draws up an annual list of all the 
groups and committees meeting within the Commission 
(863 in total). In fact, the lists published in the budget do 
not necessarily coincide with those drawn up by the 
Secretariat General. 
10.86. As mentioned above (see paragraph 10.79) there 
are various reimbursement systems. There are, further­
more, some committees, such as the Scientific Committee 
for Food and the Scientific Committee on Cosmetology, 
and their sub-committees, where the subsistence allow­
ance rate is twice as high (145 ECU). Occasionally, the 
same members take part in other committees, where their 
participation is reimbursed at the normal rate (72,5 
ECU). An effort should be made to lay down new 
provisions aimed at aligning the various scales, which 
currently depend too heavily on discretionary assessment 
of the professional status of the experts consulted. 
'APEX' data-processing package 
10.87. 'APEX', a data program for the management of 
meeting expenses, came into operation in 1986. This 
system collates all the data relating to experts participat­
ing at meetings (22 000) and all the places from which they 
travel (3 000), with their respective distances from 
Brussels and Luxembourg. 
10.88. This data-processing package, which is aimed at 
controlling the management of meeting expenses, never­
theless needs to be improved. Amongst other things, there 
is insufficient program documentation. There are no spot 
checks on the accuracy of data inputs (relating to distance 
and maximum travel expenses, for example). 
Reimbursement of expenses 
10.89. There seems to be a need to revise the criteria 
followed, such as considering distance as a determining 
factor in the granting of specific travel expenses and 
allowances for travelling time, while: 
(a) taking into account present developments in com­
munications, particularly with regard to the allow­
ances for travelling time, which are acceptable only in 
cases of long and tiring journeys; 
160 Official Journal of the European Communities 12. 12. 88 
(b) taking into account the deregulation of air fares and 
possible reductions in travel costs, with a view to 
laying down maximum refundable fare rates; 
(c) requiring more accurate proof of expenses from the 
experts (tickets to be submitted for all forms of 
transport, including rail, proof of subsistence ex­
penses to be supplied on the spot, etc.). 
10.90. As regards the validation of refundable expenses, 
the Commission should also reinforce the internal 
procedures currently in force, which do not provide all the 
required guarantees of accuracy. With this in view: 
(a) guidelines should be laid down for the secretaries of 
meetings, specifying their duties in respect of the 
contents of the expenses forms; 
(b) additional checking should be organized within each 
Directorate-General, comparing attendance lists and 
lists of reimbursements, which should be verified by a 
member of staff other than the secretaries who take 
the minutes; 
(c) photocopies of tickets submitted should be appended 
to the payment of expenses files. 
COURT OF JUSTICE 
10.91. The appropriations under Chapter 25 ('Expendi­
ture on formal and other meetings') of the Court of 
Justice's budget are mainly reserved for training courses 
for members of the judiciary (Article 250) and meetings 
with high-ranking legal officials in the Member States 
(Article 255). In 1987, the appropriations available under 
Chapter 25 came to 0,24 Mio ECU. 
10.92. Part (83 300 ECU) of the appropriations avail­
able under Article 255 (150 000 ECU) is allocated to 
'visits' by individuals or groups of legal officials from the 
Member States, organized by the Judges' private office 
staff. It should be noted that the reimbursements made in 
respect of these visits vary according to the Member State 
and that the amount paid is often calculated at a flat rate. 
In two cases, payment was made in advance in order to 
enable the visitors to buy their tickets. Furthermore, in 23 
cases, the commitments for the relevant expenditure were 
made after the event, in contravention of the provisions of 
Article 32 of the Financial Regulation, the private offices having failed to inform the administration in time of the 
visits organized. 
10.93. In order to promote greater transparency in the 
management of appropriations, in line with the provi­
sions of the Financial Regulation, there should be 
common rules stipulating the amount of reimbursements 
permissible and the administrative procedure to be 
followed. 
ECONOMIC AND SOCIAL COMMITTEE 
10.94. The members of the Economic and Social 
Committee (189 people), their alternates and the experts 
duly appointed to participate in the Committee's work 
are all entitled to have their expenses reimbursed. Travel 
expenses and subsistence expenses, both for days spent 
travelling and for those spent attending the meeting (total 
cost in 1987: 4,6 Mio ECU) are eligible for reimburse­
ment. 
Verification of attendance at meetings 
10.95. Checks on the attendance of persons invited to 
meetings would not appear to be thorough. Indeed, 
(a) the minutes of meetings, containing the names of the 
participants and absentees, are drawn up ap­
proximately 20 days after the date of the meeting; 
(b) finance department staff do not possess attendance 
lists for the purpose of making their own checks; 
(c) examination of a sample of 17 meetings showed that, 
in nine cases, people (14 in all) had been reimbursed, 
when, according to the minutes of the meeting, they 
were not present. 
Payment of expenses for days spent travelling and 
attending meetings 
10.96. Daily subsistence allowances for 1987 were set at 
4 000 BFR (± 93 ECU) for members and at 2 600 BFR 
(± 60 ECU) for alternates and experts. The method used 
for calculating the sums to be reimbursed is based on the 
assumption that expenses will be paid both for days spent 
travelling and those spent attending meetings, even where 
these coincide. Thus, for a return journey of more than 
1 000 km, lasting 12 to 36 hours, members are granted a 
flat-rate sum equivalent to three days' allowance. 
L^ L188 Official Journal of the Luropean communities lol 
10.97, This practice does not comply ^iththeregu^ 
lationsadoptedbythe Bureau of rhe^conomicand^ocial 
committee itself, ^hich stipulates that it is not perD 
missible to dra^ concurrently for one day both the 
allowance granted for days spent travelling and that 
granted for each day^sattendance at the meeting. 
^^^^r^^^^^^^^^ 
10.98. l^epenses are reimbursed to those persons 
qualifyingforthemonthebasisofstandardformstilledin 
byeachparticipantfore^erydayofameeting.Lheforms 
are transmitted to the relevant department ^hich, 
according to the information provided by the recipient, 
pays o^er the expenses, either in cash on the day of the 
meeting ^approximately 90^o of cases^ or by banl^ 
transfer atalater date. 
10.99. Lhe procedure for the payment of expenses calls 
for the following comments^ 
^ payment of the bulkof the expenses ^sums paid in 
cash^ismadebeforethepayment order hasbeen 
dra^n up and before the expenses ha^ebeenformally 
authorized and the financial controller has gi^en his 
approval, Lhis procedure is an infringement of the 
Financial regulation ^Articles ^^8^ 
^Article ^8 of the financial regulation stipulates that 
the payments should, in principle, be made througha 
bank or oliro account. By systematically paying 
expenses in cash, the committee has made the 
exception the rule. 
10,100, ln^ie^oftheFinancialR.egulationand the 
risks in^ol^ed in cash payments, especially ^here large 
sums are in^ol^ed, it is ^ital that this system should be 
changed. 
^^^^^^^^o^^^^^^^^cc^^^^ 
10,101, Lhe payment order made out by the accounts 
department for each meeting includes sums already 
disbursed, those to bepaid by bank transferandthosestill 
tobepaidtotherecipients.Lhecostofthemeetingisthus 
entered in the accounts and charged to the budget before 
total payment has actually been made. 10.10^. In October 198o the commission granted a 
subsidy of IMio LC^C^ to a television channel. Lhe 
channel in question had been set up byaconsortium of 
fhBe Luropean national television companies ^ith the 
aim, amongst other things, of carrying out research and 
experimenting ^ith multilingual programmes and 
employing multinational ne^sDgathering teamsin the 
making of ne^s bulletins. 
10.103. Lheagreement^assignedonl^Octoberl98^ 
and an initial amount of 800 OOOLC^C^^as paid onleo 
October 198o 
10.10^. Lhe consortium subsequently ran into tinancial 
difticultiesandthechannel ceased broadcastingprogram 
mes at the end of ^o^ember 198o. A first report, 
scheduled inthe agreement forr^ebruary 1987,onthe 
progress of the research and experiments was submitted 
in March 1987. Once it had submitted this reporpthe 
consortium considered that it had acquitted itselfof its 
obligations towards the commission. 
lO.lOeo, I^he commission invoked the termination 
clause in the agreementandinJuly 1987 it terminated the 
agreement and asked the consortium partners to repay 
the tinancial contribution, plus legal interest of 8^o. 
negotiations between the commission and the conD 
sortiumha^e not yet resulted inthe repayment of this 
sum. 
10.10^. Lhe granting of this contribution calls for the 
following remarks^ 
^ the commission did not verify — as it should ha^e 
done, at the latest at the time it signed the agreement 
— thattherecipienCsnnancial situation ^assound.it 
is hard to believe that the problems encountered si^ 
^eeks after the agreement ^assigned could not ha^e 
been foreseen^ 
^the consortium did not submitadetailedbudgetfor 
the various stages of the ^ork programmed in 
addition,the programme ^as drafted in excessively 
^agueterms^ 
^ the agreement provided for the setting-up ofa^oint 
forking group to examine the progress of the ^ork 
and deal ^ith any common problems^this group did 
notmateriali^e.Asaconsequence,the commission 
had no intluenceo^er the ^ork, contrary to ^hat had 
been agreed^ 
^ the commission paid 80^oin advance after signing 
the agreement. It should ha^e insisted on payment of 
162 Official Journal of the European Communities 12. 12. 88 
further instalments being linked to the progress of the 
work; for example, 30 % on signing the agreement, 
30 % following an interim report and 40 % once a 
final report and accounts had been submitted. At 
present, the potential loss amounts to 800 000 ECU; 
(e) the Commission should have acted with more caution 
and considered the possibility of demanding a 
security. 
EUROPEAN SCHOOLS 
10.107. Initially, the European Schools' Board of 
Governors decided that the Commission's subsidy to the 
European Schools' budgets for 1987 should amount to 
2 574,8 Mio BFR, (± 58,2 Mio ECU), that is, 67,5 % of 
total appropriations. Later, when the two supplementary 
and amending budgets were approved in April and 
December 1987, it increased the amount to 2 584 Mio 
BFR(± 58,4 Mio ECU). 
10.108. In the general budget of the European Com­
munities, however, this subsidy was limited to 57,7 Mio 
ECU. The instalments paid by the Commission total 
57,3 Mio ECU (2 533,3 Mio BFR), which covers 69,6 % 
of the Schools' expenditure. 
10.109. Considering that the agreement in 19 5 7 between 
the Community of Six and the Board of Governors placed 
a ceiling on the Community's subsidy of 45 % of the 
School's budget and that, at the present time, the 
Commission is having to bear 69,6 % of the costs while 
having only one representative out of 13 on the Board of 
Governors, there is no denying that the figures resulting 
from the above comparison are indicative of a serious 
inconsistency in the distribution of budgetary powers and 
responsibilities. The fact is that the Schools retain full 
control over the level of their expenditure, just as the 
greater part of their revenue continues to depend upon 
decisions taken by Member States and is governed by the 
financial agreements concluded by the Board of 
Governors with external bodies, while the Commission 
makes up the difference. 
10.110. In the short term, the relationship between the 
Community institutions and the Board of Governors 
ought to be formalized in order to bring this situation 
under control, and the Commission, to this end, ought to 
enter into an agreement mainly concerning the following 
issues: (b) the re-establishment of a fair division of the costs 
between the contracting parties, in the spirit of the 
Statute of 12 April 1957 and the Agreement of 11 
December 1957; 
(c) the adoption of a timetable for the transmission of the 
Schools' draft budget and revenue and expenditure 
account to the Community authorities, including the 
Court of Auditors, so as to usefully incorporate these 
facts into the Community budgetary and discharge 
procedure; 
(d) definition of the responsibilities and the scope of the 
powers attributed to the Commission and the 
Schools' supervisory authorities; 
(e) determination of the method for paying the Com­
munity's subsidy instalments during the financial 
year, bearing in mind the possible implications of 
supplementary budgets and/or management by 
provisional twelfths; 
(f) elimination of the Commission's current practice of 
dividing up its contributions by groups of Schools 
according to the host country; instead, the granting 
of an individual allocation, entered separately into 
the general budget, would increase transparency; 
(g) the attempt to find a solution to the use of the special 
levy on teachers' pay, particularly that of the Munich 
School, such as would comply with the first recital of 
Council Regulation (EEC) No 3821/81 of 15 De­
cember 1981. 
10.111. In the longer term, the financial administration 
of the European Schools should be re-structured so as to 
achieve greater openness. This openness should be well-
considered and carefully thought-out and either based on 
national contributions in proportion to the number of 
children per host country or else aimed at direct inclusion 
in the Community budget. 
10.112. Under the agreement of 7 November 1977, the 
European Patent Office (EPO) contributes to the costs of 
the European School in Munich by an amount which is 
equal to the difference between the total budget and the 
sum of the School's other revenue, particularly: 
(a) school fees; 
(b) interest on bank deposits; 
(a) the unambiguous distribution of budgetary powers 
between the two authorities concerned; (c) miscellaneous revenue; and 
12. 12. 88 Official Journal of the European Communities 163 
(d) revenue accruing from other financial agreements. 
These last items of revenue include the contribution 
requested of the Commission for children of Com­
munity staff, or children considered as such, who 
have been admitted to the school. 
10.113. For the purpose of calculating the Com­
mission's contribution to the Munich School, the Board 
of Governors devised a formula which is based on the 
education costs per pupil. However, instead of taking the 
average cost of all the children attending the School, it 
confined itself merely to comparing the children of 
Community employees, and those assimilated to such 
children, with the children of EPO employees. On the 
basis of this formula, the School entered a Community 
contribution of 566 000 BFR(± 12 795 ECU) per child in 
its 1987 budget, whereas the EPO contribution stipulated 
was limited to 507 000 BFR (± 11 461 ECU) and the 
average cost for all the children to 294 000 BFR (± 6 646 
ECU). 
10.114. Although the Commission did not accept this 
demand (it only paid 76 %), it is still true that this method 
of calculation involves a constant risk that the Com­
munity budget will be forced to contribute a dis­
proportionate amount, particularly since, unlike the 
EPO, the Commission is not entitled, at the end of the 
financial year, to repayment of any sums which it may 
have overpaid. 
10.115. As in the past, the Munich School still considers 
the special levy on teachers' pay to be revenue within the 
meaning of the agreement mentioned in paragraph 
10.112., and thus credits it to the EPO. In 1987, this levy 
was 7,1 Mio BFR (± 0,16 Mio ECU). 
10.116. With regard to this attitude, it must be pointed 
out that, in the absence of any provision to the contrary in 
the Board of Governors' Decision, the objectives of the 
levy applied to teachers' pay are the same as those 
applying to the crisis levy affecting the salaries of 
European Community officials, as stipulated in EEC 
Regulation No 3821/81: it is intended to help overcome 
the specific difficulties of the general economic and social 
situation in Europe. 
10.117. It follows that, even if, from the budgetary point 
of view, the School regards the levy as revenue, it may not 
be used for any purpose other than that defined by the 
Community legislation, and it is hard to accept that it 
should be used to reduce the contribution of a specific 
organization. Furthermore, the Munich School, in 
implementing the Board of Governors' Decision es­tablishing the levy, only acts as an executive body, and as 
such may not alter the spirit of the rule it is called upon to 
implement. 
10.118. In the light of the foregoing observations, the 
Commission is invited to press for a revision of the 
method used to calculate its contribution to the Munich 
School and to confer with the Board of Governors in 
order to find a use for the special levy affecting teachers' 
pay which is in line with the objectives of this levy. 
10.119. Under the Belgian Royal Decree of 24 October 
1986, salaries paid to Belgian teachers seconded to the 
European Schools 'may not exceed 50 % of the remuner­
ation of the previous employment'. The consequences of 
this measure for the European Schools are threefold: 
(a) their revenue for 1987 suffered a global loss estimated 
at 78 Mio BFR (±1,76 Mio ECU); 
(b) given that the national salaries are frozen at 50 % of 
their value before secondment, subsequent increases 
no longer affect them. Community increases, on the 
other hand, widen the difference between the Belgian 
salary and the European salary, and thus the amount 
to be paid by the School becomes ever greater; 
(c) the method used to calculate the severance grant 
allocated under the Regulations to teachers on 
leaving the European Schools takes into account the 
difference between the basic Community salary and 
the basic national salary. The limiting of the latter to a 
fixed amount which may not be increased means that 
the difference between the two salaries can only 
increase, thus imposing an additional burden on the 
Schools' budget, each time the Community salaries 
are increased. This decision by the Belgian authorities 
is an infringement of the Statute of 12 April 1957 and 
the Protocol of 13 April 1962 which set up the 
European Schools. It also amounts to an attempt by a 
Member State to evade a financial obligation at the 
expense of the Community budget. 
10.120. Although some changes have been made, the 
legal framework of the European Schools, their financial 
administration and their administrative structure still lag 
behind the latest developments in Community law and in 
the structure of the Community, with which they have 
close ties of interdependence. In addition, the Schools' 
decision-making process is still very slow. This has meant 
that important changes, such as the revision of the 
Financial Regulation and the Regulations for Members 
of the Teaching Staff, which have been under consider­
ation for years, have still not been carried out. 
164 Official Journal of the European Communities 12. 12. 88 
10.121. Considering that the Commission participates 
in the running of the Schools at all levels of responsibility, 
it would certainly be to its advantage to draw on its immense experience in order to activate the reforms which 
are necessary, particularly in the organization of 
budgetary policy, control and management of staff rights. 
0) 
(2) 
(3) 
(4) 
(5) OJ C 336, 15.12.1987, pp. 103-109; OJ C 357, 31.12.1983, 
p. 108. 
OJ C 357, 31.12.1983, pp. 107-108. 
OJC326, 16.12.1985, pp. 90-91. 
WEU: Western European Union; 
NATO: North Atlantic Treaty Organization; 
OECD: Organization for Economic Cooperation and 
Development; 
ESA: European Space Agency. 
Report on the actuarial assessment of the pension scheme 
for officials and other servants of the European Com­
munities at 1 January 1985. Council Doc. No 9919/1986 
STAT 42 FIN 434 of 27.10.1986. (6) OJ C 357, 31.12.1983, pp. 104-105. 
(7) OJC 221, 3.9.1979. 
(8) OJC 125, 17.5.1982, p. 51. 
(9) Annex I, Part A, Section III of the budget. 
Standardized percentage of people retiring on grounds of invalidity 
(%o) 
Age Data concerning 
the Communities 
1975-84 French banks 
1973-78 
20 
30 
40 
50 
60 
64 Men 
0,04 
0,17 
0,80 
3,60 
17,70 
34,00 0,04 
0,06 
0,15 
1,40 
1,90 
3,00 
20 
30 
40 
50 
60 
64 Women 
0,07 
0,40 
2,10 
8,10 
25,80 
38,30 0,10 
0,40 
1,20 
3,10 
10,00 
13,50 
12. 12. 88 Official Journal of the European Communities 165 
CHAPTER 11 
Loans, borrowings and interest-rate subsidies 
11.0. 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 
Agreement regarding the auditing of NCI loans in the Member States 
Observations on legality and sound financial management 
NCI Treasury 
European Investment Bank management commissions Paragraph 
reference 
11.1 
11.5 
11.6 
11.7 
11.20 
11.20 
11.32 — 11.4 
— 11.19 
— 11.32 
— 11.31 
INTRODUCTION and medium-sized undertakings (SMUs) and interest 
subsidies relating to cooperation with Mediterranean 
countries are set out in Chapters 77 and 96 respectively. 
11.1. This chapter deals with New Community Instru­
ment (NCI) loans and interest subsidies, 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. 
11.2. As part of the annual budget procedure, the 
budgetary authority includes the sum of interest subsidies 
in the general budget and decides whether to include the 
budgetary guarantee for borrowing transactions in the 
form of token entries. 
11.3. Community loans and borrowings are set out in 
the balance sheet of Community assets and liabilities. 
Interest subsidies relating to NCI loans, along with 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 
subsidies relating to a pilot project for Portuguese small 11.4. The Commission has a direct legal obligation to 
service and repay borrowings contracted by it on behalf of 
the Community. For this purpose the following Articles, 
which represent the budgetary guarantee for the above-
mentioned Community borrowing mechanisms, are 
included in the budget as a precaution against any 
possible default by beneficiaries of the primary loans and 
guarantees: 
(a) Article 830, 'EEC guarantee for Community loans 
raised for balance of payments support'; 
(b) Article 831, 'EEC guarantee for Euratom loans 
raised'; 
(c) Article 832, 'EEC guarantee for loans raised to 
promote investment in the Community'. 
In addition, Article 969 of the budget includes a guarantee 
for loans granted by the EIB to non-member States. 
166 Official Journal of the European Communities 12. 12. 88 
SUMMARY OF FINANCIAL 
INFORMATION reach agreement with the Commission on the formulation 
of procedures for the conduct of similar audit visits in the 
future. 
11.5. Tables 11.1 and 11.2 give a summary of the various 
borrowing and lending mechanisms and the evolution of 
loans and borrowings during the financial year 1987 (!). 
OBSERVATIONS ON THE BALANCE 
SHEETS AND REVENUE AND 
EXPENDITURE ACCOUNTS OF THE NEW 
COMMUNITY INSTRUMENT AND 
EURATOM MECHANISMS 
11.6. The Court examined the NCI and Euratom 
balance sheets as at 31 December 1987, as well as the 
statements of revenue and expenditure relating to the two 
mechanisms for the financial year 1987. The management 
of the accounting did not call for any specific observ­
ations. 
AGREEMENT REGARDING THE 
AUDITING OF NCI LOANS IN THE 
MEMBER STATES 
11.7. Since 1984 discussions have been taking place 
between the Court of Auditors and the Commission with 
a view to settling the question of the procedures to be 
followed by the Court in on-the-spot audits relating to 
NCI loans. 11.10. As the Commission was unable to produce a 
satisfactory solution in the course of the year, and since 
the Court cannot continue indefinitely to forgo its 
indisputable right to carry out audits in important areas 
such as the European Communities' lending and borrow­
ing operations and is obliged to fulfil its audit obligations 
with regard to the budgetary authority, the Court decided 
to carry out some further independent audits as part of its 
work programme for the second half of 1987. For this 
purpose, undertakings were selected in two Member 
States which had received both ECSC and NCI funds 
from the European Communities. Notice of these visits, 
which took place in October and November 1987, was 
given via the Commission as part of the ECSC procedure. 
11.11. As is customary under the ECSC procedure, the 
audit team from the Court included a representative of 
the Commission, and in neither case was the team allowed 
access to the NCI files, as the companies had not received 
authority from the EIB for an audit team from the 
European Court of Auditors to carry out an audit. The 
undertakings said that they particularly regretted having 
to make this response, which had been agreed beforehand 
with the EIB, especially as no audit restrictions were 
imposed in connection with lending operations in the 
ECSC sector, where the situation was, to all practical 
purposes, the same, except that the EIB was not the 
Commission's banking agent. 
11.8. In 1985 and 1986, having first informed the 
Commission and the EIB of its intentions, the Court 
made independent audit visits to Italy and Greece to 
investigate measures carried out by government agencies 
and financed by NCI earthquake loans (2). It found that 
the EIB had approached the recipients of the loans under 
the provisions of the clause in the contracts concerning 
the audit of projects; the result was that the beneficiaries 
initially refused to accept an audit by the Court. After the 
Court's officials had explained that the interest subsidies 
were provided from the EC general budget, that there was 
also a budgetary guarantee for the Community loans and 
that the Court was responsible for the audit of these items 
under Articles 206(a) and 206(b) of the EEC Treaty, 
permission was finally obtained for audits to be carried 
out in both these Member States. 
11.9. After completing the audits in Greece and Italy, 
the Court refrained from carrying out any further 
independent on-the-spot audits for a full year so as to 
avoid a repetition of the situation described above in 
another Member State, endeavouring in the meantime to 
0) The footnotes are listed together at the end of the chapter. 11.12. As the Court of Auditors observed in its annual 
report on the financial year 1986 (3), following the NCI 
IV Decision of 9 March 1987 (4) the Commission, in 
response to the Court's intervention, once again stated 
that it had not in any way changed its view that the 
resources managed by the EIB under the terms of a 
mandate conferred on it by the Commission were subject 
to external audit by the Court of Auditors in accordance 
with Articles 206(a) and 206(b) of the EEC Treaty and 
with the Financial Regulation. The Court called upon the 
Commission to enforce this viewpoint in its relations with 
its agent, the EIB. 
11.13. Although from a purely legal standpoint it is 
ultimately the Court alone which decides how to carry out 
its on-the-spot audits, the Court did put forward 
compromise proposals based on the agreement between 
the Commission and itself concerning on-the-spot audits 
in the ECSC sector, which has worked for many years to 
the satisfaction of all the institutions involved. The key 
passage in the proposal says: 'The Court examines the 
documents which the Commission forwards to it 
12. 12. 88 Official Journal of the European Communities 167 
Table 11.1 — Principal characteristics of the systems employed in connection with NCI, 
Euratom, balance of payments, ECSC and EIB loans as at 31 December 1987 
System 
NCI 
NCI 
earthquake 
EIB 
earth-quake 
Euratom 
Balance 
of 
payments 
EIB 
ECSC a 
EEC Treaty, 
Article 235; 
Council 
Decisions; 
EEC budget 
EEC Treaty, 
Article 235; 
Council 
Decisions; 
EEC budget 
EEC Treaty, 
Article 130; 
EIB Statute 
Council 
Decisions; 
budget 
EAEC Treaty, 
Article 172; 
Council 
Decisions; 
EEC budget 
EEC Treaty, 
Article 235; 
Council 
Regulation; 
EEC budget 
EEC Treaty, 
Articles 129 
and 130; 
EIB Statute 
EEC Treaty, 
Article 235; 
Council 
Decision: 
EEC budget 
ECSC Treaty, 
Articles 54 
and 56 Source of 
Community 
borrowings 
contracted by 
the Commission 
on the financial 
market 
Commission 
budgetary 
appropriations 
Commission 
budgetary 
appropriations 
Community 
borrowings 
contracted by 
the Commission 
on the financial 
market 
Commission 
budgetary 
appropriations 
Commission 
budgetary 
appropriations 
EIB own 
resources 
Commission 
budgetary 
appropriations 
Community 
borrowings 
contracted by 
the Commission 
on the financial 
market 
Commission 
budgetary 
appropriations 
Community 
borrowings 
contracted by 
the Commission 
on the financial 
market 
Commission 
budgetary 
appropriations 
EIB own 
resources 
Commission 
budgetary 
appropriations 
Community 
borrowings 
contracted by 
the Commission 
on the financial 
market 
ECSC operating 
budget intervention 
Loan 
Budgetary 
guarantee 
Subsidies 
in the form of 
interest 
subsidies 
Loan 
Budgetary 
guarantee 
Subsidies in 
the form of 
interest subsidies 
Loan 
Subsidy in 
the form of 
interest 
subsidy 
Loan 
Budgetary 
guarantee 
Loan 
Budgetary 
guarantee 
Loan 
Subsidies in 
the form of 
interest 
subsidies 
Loan 
Subsidy in the form of 
interest subsidy Method of management 
The Commission decides 
whether projects qualify; 
loans are granted and man­
aged by the EIB as the agent 
of the Commission ana at 
the latter's risk 
Granted by the Commission 
paid via the EIB 
The Commission decides 
whether projects qualify; 
loans are granted and man­
aged by the EIB as the agent 
of the Commission and at 
the latter's risk 
Granted as part of the Com­
mission decision on elig­
ibility, paid via the EIB 
Commission opinion; 
EIB autonomy 
Granted by the Commission 
by way of an opinion; paid 
via EIB 
Loans are granted by the 
Commission and managed 
by the EIB under an agency 
agreement with the Commis­
sion 
Loans are granted by the 
Council and the EMCF 
takes the necessary steps to 
see they are managed 
Commission opinion 
EIB autonomy 
Granted by the Commission 
paid via the EIB 
Granted and managed by 
the Commission 
Granted and managed by 
the Commission Financial 
volume 
(Mio ECU) 
5 650 0 
p.m. 
1 000 (2) 
1 000 0 
80 0 
100 0 
p.m. 
170 
1 000 0 
80(3) 
100 0 
100 
3 000(0 
p.m. 
8 000 0 
p.m. 
36 456 0 
1 000 0 
6 768 0 
170 
p.a. Audit 
arrangements 
Court audit on the spot and 
on the basis of documents 
(Articles 206a and 206b EEC 
Treaty; Financial Regu­
lation) 
Court audit on the spot and 
on the basis of documents 
(Articles 206a and 206b EEC 
Treaty; Financial Regu­
lation) 
No Court audit 
Court audit on the basis of 
documents and on the spot 
(Articles 206a and 206b EEC 
Treaty; Financial Regu­
lation) 
Court audit on the spot and 
on the basis of documents 
(Article 172 EAEC) 
Court audit on the spot and 
on the basis of documents 
(Articles 206a and 206b EEC 
Treaty) 
No Court audit 
Court audit on the basis of 
documents and on the spot 
(Articles 206a and 206b EEC 
Treaty; Financial Regu­
lation) 
Court audit on the basis of 
documents and on the spot 
(Article 78f ECSC) 
0 Ceiling set by the Council. 
0 Interest subsidy on NCI and EIB loans for projects in Ireland and Italy, maximum 1 000 Mio ECU. 
0 Ceiling set by the Council and applicable to NCI and EIB loans. 
0 Commission proposal of 23.12.1987, doc. COM(87) 727 final. 
0 Including 750 Mio ECU of own resources within the framework of NCI IV. 
0 Loans outstanding. 
168 Official Journal of the European Communities 12. 12. 88 
Table 11.2 — Borrowing and lending operations in the financial year 1987 
(Mio ECU) 
System 
Loans: 
— NCI 
— Euratom 
— BP 
— ECSC (2) 
Total loans 
Borrowings: 
— NCI 
— Euratom 
— BP 
— ECSC (2) 
Total borrowings Claims in respect of loans 
and borrowing commitments 
outstanding as at 31.12.1986 
At the ECU 
exchange rate 
of 
31.12.1986 
(1) At the ECU 
exchange rate 
of 
31.12.1987 
(2) 
4 993,5 4 898,6 
2 398,2 2 385,9 
1 890,0 1 715,3 
7 001,6 6 885,7 
16 283,3 15 885,5 
5 202,2 5 062,7 
2 412,3 2 171,2 
1 890,0 1 715,3 
6 761,3 6 532,2 
16 265,8 15 481,4 Operations carried out in 1987(>) 
New loans or 
borrowings 
(3) Repayment or 
amortization 
(4) 
303.2 331,9 
313,7 326,6 
859,9 348,5 
969.3 1 086,9 
2 446,1 2 093,9 
611,3(3) 444,5 
853,4(4) 524,7 
859,9 348,5 
1 487,0(5) 1 330,4 
3 811,6 2 648,1 Claims in 
respect of 
loans and 
borrowing 
commitments 
outstanding as 
at 31.12.1987 
(') 
(5) = (2)+ (3)-(4) 
4 869,9 
2 373,0 
2 226,7 
6 768,1 
16 237,7 
5 229,5 
2 499,9 
2 226,7 
6 688,8 
16 644,9 
(0 At the ECU exchange rate of 31.12.1987. 
(2) See separate annual report by the Court. 
(3) Of which 211,2 Mio ECU for refinancing. 
(4) Of which 307,9 Mio ECU for refinancing. 
(5) Of which 342,6 Mio ECU for refinancing. 
(including the EIB documents forwarded to it by the 
Commission). It informs the Commission of the projects 
which it wishes to be audited on the spot. The 
Commission requests the EIB audit committee to carry 
out these on-the-spot audits and the EIB audit committee 
carries them out. A representative of the Court of 
Auditors may participate in the audits at the request of 
the Court and the Commission is required to forward the 
observations of the audit committee to the Court.' 
11.14. Contrary to the Court of Auditors' expectations, 
the Commission has not, so far, succeeded in implement­
ing this very broad compromise proposal in its relations 
with its banking agent, the EIB. of up to 100 Mio ECU — less any loans from own 
resources by the EIB — for the purpose of granting 
subsidized loans for reconstruction work in areas of 
Greece devastated by earthquakes in September 1986. 
11.16. Control of the conduct of operations proposed 
within the framework of the Decision, including control 
of the proposed subsidized loans, is subject to the 
provisions of Article 10 of Decision 87/182/EEC (4), 
which was not amended and which reads as follows: '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 
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.' 
11.15. On 23 December 1987 the Commission submit­
ted a proposal for a Council Decision amending Articles 1 
and 2 of Council Decision 87/182/EEC of 9 March 
1987 (5) granting the Commission exceptional authority, 
within the framework of the NCI, to borrow an amount 11.17. Having regard to the legal position, which has 
not been challenged in the interim, the Commission again 
confirmed, on 25 April 1988, as it did following the NCI 
IV Decision of 9 March 1987 (4), that the wording of 
Article 10 of the decision could not be construed as 
limiting the Court's powers of audit. 
12. 12. 88 Official Journal of the European Communities 169 
11.18. In the Court's opinion it is now imperative that a 
solution be found which takes account of the provisions 
of the EC Treaties. As it is undeniably the Commission 
that is responsible for safeguarding the application of the 
EC Treaties in this very important area of the Com­
munities' lending and borrowing operations, the Court 
calls upon the Commission to take the necessary steps, 
particularly where its agent, the EIB, is concerned. 
11.19. In this context, the Court noted with interest the 
call to the Commission by the EIB Board of Governors 
asking the Commission to put forward proposals for a 
solution on the basis of the existing legal sitation. The EIB 
is thus signifying its intention of collaborating construct­
ively. In its recommendation of 7 March 1988 concerning 
the discharge for the financial year 1986, the Council of 
Ministers refers specifically to this matter. There is no 
need at this point to stress once again that this is a 
question in which the European Parliament has an 
interest. 
OBSERVATIONS ON LEGALITY AND 
SOUND FINANCIAL MANAGEMENT 
NCI Treasury 
11.20. It appears appropriate at this point to give a brief 
outline of the operation of the NCI Treasury. Originally, 
all lending and borrowing operations under the NCI 
mechanism were back-to-back operations. Borrowings 
were only contracted in the light of the loan applications 
received. This meant that for a given borrowing there was 
only one corresponding loan, or a small number of loans, 
in the same currency, and the terms regarding interest 
rates and maturities were such that a situation of zero 
balances was achieved in the end. 
11.21. The widening of the circle of potential borrowers 
to include SMUs led to the Commission's abandoning 
back-to-back operations in 1982, in order to be able to 
respond more flexibly to loan applications. This require­
ment led to the introduction of a reserve-financing 
system, the so-called 'NCI Treasury'. In accordance with 
the Council Decisions and on the basis of estimates of 
demand agreed between the Commission and the EIB, the 
Commission contracts borrowings and places them at the 
disposal of the EIB; the latter then passes them to the recipients, by agreement with the Commission and 
according to the demand for loans. Under the NCI 
Treasury mechanism, one borrowing operation may 
correspond to many lending operations and, conversely, a 
single loan may be financed in one currency or in a mix of 
currencies from portions of various borrowings. 
11.22. The rules relating to the operation of the NCI 
Treasury and the mutual obligations of the two parties 
have been laid down in cooperation agreements between 
the Commission and the EIB since the mechanism was 
introduced. All the financial flows associated with 
lending and borrowing operations as part of the 
maintenance of NCI liquidity pass through accounts held 
with the EIB in the name of the Commission, the so-called 
'transaction accounts'. Up till the conclusion of the most 
recent cooperation agreement, which entered into force 
on 1 April 1987, the EIB paid interest on credit balances, 
whilst the Commission paid the EIB interest on any debit 
balances. The Commission alone was responsible for the 
results obtained from lending and borrowing activities 
under the NCI Treasury. 
11.23. In its annual reports on the financial years 1983 
and 1984 the Court of Auditors warned the Commission 
of the risks associated with this system (6): 
(a) the rates of interest paid by the EIB on what were, 
generally, credit balances on the transaction accounts 
were lower than the interest rates which the Commis­
sion had to pay on the borrowings which it 
contracted. These differences in interest rates resulted 
in a charge on the Commission' resources which has 
been reduced in recent years in response to the 
observations made by the Court (7); 
(b) it appears from the information supplied by the EIB 
that the loans are made at interest rates identical to 
those prevailing on the capital markets on the date 
they are granted. These rates may differ from the rates 
on the borrowings contracted by the Commission if 
market conditions have changed in the period 
between the two operations; 
(c) the terms and currencies of the loans rarely cor­
respond to the terms and currencies of the relevant 
borrowings. 
11.24. Since it is potentially possible for a combination 
of these factors to result in profits and/or losses, the 
financial flows of lendings and borrowings should, in the 
Court's opinion, be subject to regular scrutiny, so that it is 
possible at any moment to evaluate whether the overall 
balance of the operations is zero (8). 
170 COfticialiournal of the European communities 1^1^^ 
11^. following the observations made by the C^ourt^ 
the commission and the ^1B have come to a new 
arrangement, which took effect on 1 April l^DBE 
producing considerable changes in the rights and 
obligationsoftheC^ommissionandtheElBintheconte^t 
of the ^C^IPreasury.As before^ the l^lBeflects lending 
operations in the name^ on behalf and at the risk of the 
C^ommunity.As regards the results of the I^lB^smanage^ 
meat of the cash resources associated with the tinancial 
tlowsresultingfrom the lending and borrowing activities^ 
however the I^lBs responsibility exceeds the normal 
responsibilitiesofamere agent. Article^of thenew 
cooperation agreement provides that the Bank is to 
assume responsibility for the management of the 
treasury mechanisms^ having regard to the fundamental 
decisionsms to bearthepotentialprotitsand losses arising 
fromitsmanagementand undertakes to providecoverfor 
any mismatch between the maturity dates ofborrowings 
andlendings. 
11.^. I^he new agreementstatesthatin this waythe net 
result on the transactionaccountsforeachborrowingand 
theusemadeofitoughttoshowa^erobalance^with 
neitheragainnoralossfor the community budget 
e^ceptintheevent of default on the loan and thesecurities 
forit. Lentil such time as the tinal balance isavailable^ the 
commission enters the annual tlgures for all activities 
underthe^oelLreasurymechanismonthecreditordebit 
side ofoneofits equalisation accounts. 
11.^7. Even if the new agreement does thus take 
account of the wish expressed by the C^ourt in previous 
annual reports concerning the needto exclude the risk 
that the commission might have to bear losses resulting 
from ^C^IPreasury operations'^ it nevertheless gives 
rise to several observations. 
11,^, thirst of all itmust beemphasized that even 
thoughunder the new arrangement the^lBis indeed 
responsible for management of the l^C^lLreasury^this 
does not by anymeans signify that the Bank has assumed 
the same risks as were previously borne by the C^ommis^ 
sion under the old arrangement. Lhe risks borne by the 
commission were in fact inherent in the mechanism in its 
previousform.^henewtermsaremn contrasts completely 
different. The f^IB will beentitled to administerthe^C^l 
Treasury resources as part of the overall management of 
its own resources^inaccordancewiththe practice and 
principles of sound financial management followedby 
anybank^anditstaskwillmnfactbesimplitiedfurtherby 
theC^ommission^smakingavailable the fundsfor lending, 
Sincethe^lB^smanagementofthe^oelLreasuryisnot 
subject to the samepressures and limitations as were 
previouslyimposed on theC^ommissionmfit discharges its 
responsibilities correctly the risks it runs are not likely to 
be in any way similar to those previously borne by the 
commission. 11,^. LhenewarrangementprovidesthattheElBisto 
manage the transaction accounts in suchaway that they 
linally balance. At the same time^ however^ it also 
provides that there is to be no interest paid on any credit 
or debit balance which may be shown against the 
accounts,If the calculationof the tinal balance onthe 
accounts is to be of any significancemt ought to include 
the interest received by the E1B on its investment of the 
residue of borrowings made available to it by the 
commission during periods when the funds have not yet 
been allocated to loans, it is possible that the effort to 
achieveabalanceonthetransaction accounts without 
taking account of this revenue could lead to the interest 
rates on the lendings being li^ed at an unnecessarily high 
level. 
11,^0, Lhe new agreement limits the commissions 
freedom to repayborrowingsearlybymakingitsubiect to 
prior approval by the LIB, Lhis limitation should not^ 
howeven be allowed to deprive the tinal recipients of the 
loans of the possible advantages of repayment of 
borrowings before maturity^when^ because offavourable 
trends in financial markets^ it results in a gradual 
reduction ofthe interest rates on the amount of the loans 
granted to them. 
11,^1, Although the responsibilityfor the management 
andresults of thel^C^lLreasury mechanism hasbeen 
transferred to the LIBmbe commission continues to do 
the administrative work associated with the contracting 
and management of borrowings, Lhe commissions 
responsibilityfortheadministrativework associated with 
the borrowings continues to grow in the content of the 
new agreement^which states that the end result ofl^C^l 
Lreasury operations is the responsibility of the LIB. Lhe 
LlBandtheC^ommissionshouldtakethisfactorinto 
account and envisaged by way of compensations a 
reduction ofthemanagementcharges levied bythe LIB in 
connection withits management ofthe^C^l and Luratom 
loans^with the exception ofl^C^lLreasury loans. 
11.^. in its annual report on the financial year 
l^^^theC^ourt recommended that the commission 
should requiretheBanktomakeavailableanannual 
account of costsandincomerelatingto^C^l and Luratom 
loans^toenable the C^ourt to ascertain thee^tent to which 
the level of LIB management commissions is consistent 
with thecosts which the Bankactually incurs, inits 
annual report on the tinancial year 1^(^^^ the C^ourt 
12. 12. 88 Official Journal of the European Communities 171 
criticized the level of the management commissions levied 
by the EIB in respect of NCI and Euratom loans. Further 
consideration should be given to the introduction of a 
differential system of commissions, to take account of the 
administrative effort required by the various types of 
loan. In view of the unambiguous opinion expressed by 
the European Parliament (12) and that expressed by the 
Council of Ministers on 7 March 1988 in the course of the discharge procedure for the 1986 financial year, the Court 
wishes to raise this mattter yet again and calls on the 
Commission to provide it with detailed figures, so that it 
can assess the validity of the management costs charged to 
the Commission's account by the EIB. This is all the more 
necessary, as the Commission in its role of principal 
should already have taken the requisite steps itself. The 
Commission has not as yet complied with this request. 
0) 
(2) 
(3) 
(4) 
(5) 
(6) See also the Court's separate annual report on the ECSC. 
Annual report of the Court of Auditors on the financial year 
1985, OJ C 321, 15.12.1986, paragraph 12.14 and annual 
report on the financial year 1986, OJ C 336, 15.12.1987, 
paragraph 14.31. 
OJ C 336, 15.12.1987, paragraph 14.29. 
Council Decision 87/182/EEC of 9.3.1987, OJ L 71, 
14.3.1987. 
Doc. COM(87) 727 final, OJ C 20, 26.1.1988. 
Annual report on the financial year 1983, OJ C 348, 
31.12.1984, paragraphs 14.18 — 14.25 and annual report on 
the financial year 1984, OJ C 326, 16.12.1985, paragraphs 
14.15— 14.19. (7) Annual report on the financial year 1983, paragraph 
14.23(a) and (b), paragraphs 14.15. — 14.16 of the annual 
report on the financial year 1984 and paragraph 12.15 of the 
annual report on the financial year 1985. 
(8) Annual report on the financial year 1983, paragraphs 14.24 
— 14.25. 
(9) Annual report on the financial year 1984, paragraph 14.19. 
(10) Annual report on the financial year 1984, paragraph 14.23. 
(u) Annual report on the financial year 1986, paragraph 14.24. 
(12) Decision of the European Parliament of 18.4.1986, OJ L 
150,4.6.1986. 
12. 12. 88 Official Journal of the European Communities 173 
Jt x\.JWk X JLJL 
European Development Funds 
TABLE OF CONTENTS 
Introduction 
Observations on the financial management 
Financial implementation of the projects 
Special conditions of works contracts 
Commitments and payments 
Accounts 
Cash management 
Calls for contributions 
Treasury accounts 
Bank accounts in Europe 
Stabilization of export earnings 
Observations on the micro-projects 
Legal basis and implementing directives 
General framework and scope of the micro-projects 
Selection criteria for the micro-projects 
The role of the Commission delegate 
Appraisal of the micro-projects 
Devolution of the procedure for approving projects 
The existence of a real priority need at local level 
Guarantee of the active participation of the local community 
Viability of the micro-projects 
Implementation and follow-up of the micro-projects 
Role of the national authorities 
Cost of technical assistance and complementarity of the micro-projects 
Financial execution of the micro-projects 
Evaluation and monitoring of the micro-projects 
Final observations 
Observations on emergency aid 
Appraisal of the aid 
Implementation of the aid 
Implementation time-limits 
Extent to which objectives are achieved 
Coordination between the various parties involved 
Control and monitoring of the aid 
Control and monitoring of the management 
Control of payments 
Closure of project accounts and utilization of remaining appropriations 
Third Lome Convention 
Final observation Paragraph 
reference 
1 —2 
3—21 
5—13 
6 —9 
10— 12 
13 
14— 19 
15 
16 
17— 19 
20—21 
22—75 
25—32 
25—26 
27—30 
31 — 32 
33—55 
33—37 
38 — 42 
43 — 46 
47—55 
56—71 
56—58 
59—64 
65—66 
67—71 
72—75 
76 
81 
87 112 
86 
98 
87—92 
93—95 
96—98 
99— 110 
99— 105 
106— 107 
108— 110 
111 
112 
174 Official Journal of the European Communities 12. 12. 88 
INTRODUCTION the detailed situation of the latter two Funds is presented 
in the second part of Annex III to this report. 
1. The European Development Funds (EDFs) con­
stitute the main instrument of the European Economic 
Community's (EEC's) policy of cooperation with 66 
developing 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. The implementation of each EDF is governed by 
a specific financial regulation. Financial implementation of the projects 
5. The Court's examination of works contracts, other 
commitments, payments and the EDF accounts in 1987 
disclosed certain deficiencies in the Commission's 
supervision of the financial implementation of projects, in 
particular those mentioned in the following paragraphs. 
2. The following paragraphs are concerned, first of all, 
with observations on the financial management of the 
EDFs. This is followed by a critical analysis of micro-
projects and emergency aid. 
OBSERVATIONS ON THE FINANCIAL 
MANAGEMENT Special conditions of works contracts 
6. The Commission agrees to finance works contracts 
which include special conditions concerning the currency 
of payment and allowing for compensation for price 
fluctuations. These special conditions could enable 
contractors to make windfall profits when the contractual 
currency is devalued in terms of the ECU (see the Court's 
annual report on the financial year 1986, Part II, 
paragraph 21). 
3. During 1987, the third EDF was finally wound up 
and the last remaining balances transferred to the fifth 
EDF. 
4. The situation of the third, fourth, fifth and sixth 
EDFs at 31 December 1987 is summarized in Table 1: 1. The Court examined 24 works contracts for which 
invitations to tender were issued in 1986 and 1987, 
totalling approximately 130 Mio ECU. Eleven of these, 
totalling 100 Mio ECU, contained provisions which 
could lead to excessive sums being charged to the EDF in 
Table 1 — Utilization of the third, fourth, fifth and sixth EDFs at 31 December 1987 
(Mio ECU) 
Resources and utilization 
Disbursements: 
— prior to 1987 
— during 1987 
Total amounts disbursed 
Not yet disbursed: 
— committed 
— not committed 
Amount allotted 
Sundry revenue: 
— prior to 1987 
— collected in 1987 
Total resources available 3rd EDF 
Yaounde II 
(Expiry: 
1976) 
885,1 
2,2 
887,3 
— 
887,3 
— 
887,3 4th EDF 
Lome I 
(Expiry: 
1980) 
2 890,4 
70,2 
2 960,6 
229,9 
173,3 
56,6 
3 190,5 
6,1 
3 196,6 5th EDF 
Lome II 
(Expiry: 
1986) 
2 658,9 
412,9 
3 071,8 
1 653,0 
1 382,9 
270,1 
4 724,8 
189,7 
15,2 
4 929,7 6th EDF 
Lome III 
(Expiry: 
1990) 
116,7 
352,6 
469,3 
7 030,7 
1 798,2 
5 232,5 
7 500,0 
11,7 
7 511,7 
12. 12. 88 Official Journal of the European Communities 175 
compensation for price movements arising from devalu­
ations. As a large proportion of each works contract is 
denominated in a European currency or in ECU at a rate 
fixed on a date previous to that of the offer, only that 
proportion of the contract denominated in local currency 
should be subject to revision. 
8. Furthermore, the contracts differed widely as regards 
the price fluctuation percentage below which no com­
pensation could be claimed, ranging from a minimum 
10 % to the complete omission of such a threshold. 
Similarly, the basis on which compensation was calcu­
lated varied considerably from one contract to another, 
from the application of arbitrary formulae based on local 
price indices to the reimbursement of all increased costs 
actually incurred by the contractor, for which supporting 
documents were required. 
9. As all ACP currencies except those linked to the 
French franc are depreciating, often very rapidly, the 
financial consequences of the deficiencies mentioned in 
the previous paragraphs are considerable, and there is an 
urgent need to adopt directives setting out the sort of 
terms for financing contracts which will be acceptable to 
the Community. 
Commitments and payments 
10. The Commission finances the contracts and ex­
ecutes the payments largely on the basis of supporting 
documents submitted by its delegations in the countries in 
question. The department responsible for authorizing the 
payments and the Financial Controller at the Commis­
sion do not systematically avail themselves of the means 
to verify that the Financial Regulation has been observed, 
in particular that the amount of the expenditure is correct 
and that the principles of sound financial management 
have been adhered to. For example, the Court was 
unable, despite its best endeavours, to trace the special 
conditions governing eight out of 32 works contracts for 
which international invitations to tender had been issued, 
which implies that payments concerning these contracts 
were cleared without any reference being made to the 
contractual conditions. In some cases, official instruc­
tions amending contract prices were not on file, nor was 
the proof of origin of supplies or copies of bank 
guarantees. Payments totalling 0,3 Mio ECU on one 
works contract examined were authorized without any 
indication of how the interim payments had been 
calculated, and for another payment, of 0,2 Mio ECU, 
supporting documents were missing entirely. 
11. The need for rigorous checks by the authorizing 
departments is demonstrated by a number of transactions 
examined by the Court which were not fully in accord 
with the principles of legality, regularity and sound 
financial management. Illustrative examples are the 
payment of an advance greater than the commitment 
entered into on the basis of the estimate, the disbursement 
of part-payments which exceeded those contractually due and the crediting of sums to imprest accounts without the 
estimates making any mention of the procedures to be 
followed for checking these imprests. One supply contract 
was authorized despite being denominated in a currency 
other than that of the bid, at an additional cost of 71 000 
ECU to the EDF. Furthermore, one service contract was 
financed 10 months after work had started. 
12. Amongst various other measures, the Commission 
ought to draw up project files containing complete 
supporting documentation for all decisions to award 
contracts, together with all contractual documents of 
financial consequence. It should also insist on full 
supporting documents being submitted for all payments. 
Instructions should be issued to authorizing staff which 
define their responsibility for ensuring that the support­
ing documents submitted are sufficient and correct. 
Accounts 
13. The Court noted that a number of shortcomings in 
the accounts further weaken the Commission's control 
over the financial implementation of the EDF: 
(a) many transactions which the authorizing depart­
ments have not been able to settle have simply 
remained on suspenseaccounts, some for over five 
years; 
(b) the accounting for outstanding recovery orders 
during the financial year is not sufficiently trans­
parent, in particular the revenue still to be recovered 
is not precisely identified, even though Article 16 of 
the Financial Regulation applicable to the sixth EDF 
requires the accounting officer to do all in his power 
to ensure that EDF resources are recovered and to 
inform the authorizing officer of any delays; 
(c) bank transactions are recorded by the Commission 
only after long delays, the composition of the 
balances on the accounts 'Cash in transit' and 
'Unsettled items' had still not been identified three 
months after the end of the financial year and cash 
balances cannot be readily checked against bank 
statements; 
(d) the division of duties within the accounting officer's 
department is still not adequate for the purpose of 
ensuring the security of the EDF assets; 
(e) the EDF accounts show 2,8 Mio ECU in excess 
commitments concerning some risk-capital projects 
for which the EIB has reduced the finance initially 
granted. 
176 Official Journal of the European Communities 12. 12. 88 
Cash management 
14. The internal agreements and financial regulations 
require the Commission to make an annual estimate of 
cash requirements for each EDF and to call these sums up 
from the Member States, which credit them to special 
accounts in the name of the Commission at the national 
Treasury. In 1987, the Commission continued to call up 
the remaining fifth EDF contributions and used them in 
part to finance disbursements under the fourth and sixth 
EDFs. During 1987, cash balances varied between 150 
and 320 Mio ECU, and payments totalled 837,9 Mio 
ECU. 
Calls for contributions 
15. The amounts of the quarterly contributions for the 
financial year 1987 were notified in December 1986. 
Seven of these contributions were paid late and for 13 of 
them the amount paid was incorrect. These errors could 
have been avoided had the amount of each quarterly 
contribution been calculated for each Member State by 
the Commission as soon as the applicable rate of 
exchange had been established. 
Treasury accounts 
16. Under Article 4 of the Financial Regulation 
applicable to the fifth EDF, the Commission is required 
to keep its cash balances in national currencies in the 
proportion in which each Member State's currency enters 
into the composition of the ECU. The sums credited to 
the Treasury accounts were not withdrawn in a systematic 
manner, with the result that large imbalances occurred in 
the distribution of the funds. For example, during the 
second quarter of 1987, only 40 % of the Federal 
Republic of Germany's contribution was withdrawn, 
compared with 70 % of that of France and the United 
Kingdom, and almost 100 % of the Italian contribution. 
The drawings on the Irish Treasury account were 
particularly irregular and two of that country's contri­
butions remained untouched during the second quarter of 
1987. 
Bank accounts in Europe 
17. The Commission maintains an unnecessarily large 
number of bank accounts in Europe, which makes its cash 
management cumbersome. There is no evident justifi­
cation for keeping a second bank account in each of six 
Member States. Two of these accounts have remained unused for several years, and the other four are very little 
used. A minimum total balance of 20 Mio ECU was kept 
on these six accounts in 1987. 
18. Conversely, no separate bank account is kept for 
contributions for Stabex transfers, as required by Article 
55 of the sixth EDF Financial Regulation, and the large 
and unpredictable sums involved in Stabex transfers 
continue to be the main obstacle to an orderly drawing-
down of contributions. 
19. Different rates of interest are paid on bank accounts 
denominated in ECU. The Commission should negotiate 
a uniform rate, based for example on the daily Libor 
values, or reconsider the desirability of maintaining 
accounts at banks which do not offer competitive 
remuneration. 
Stabilization of export earnings 
20. Under Article 160 of the Third Lome Convention, 
beneficiary States are entitled to receive transfers equal to 
their loss of earnings in ECU on exports to the EEC or, 
for certain States, to the world market. However, if the 
local currency depreciates by more than 10 % from the 
average of its value over the previous four years, the 
amount of thetransfer is reduced by the application of 
paragraph 4 of this Article, which provides that 
fluctuations greater than 10 % shall not be taken into 
account when establishing the exchange rate of the local 
currency in terms of the ECU. Malawi, which suffered a 
loss of 14,2 Mio ECU in its export earnings, received a 
transfer of only 2,4 Mio ECU for the sole reason that it 
had been steadily devaluing its currency. Reductions of 
similar proportions have been suffered by Gambia, 
Western Samoa and Sudan, and certain countries have 
forfeited all right to a transfer. As a result of the way this 
Article has been applied, the objective of the system of 
stabilization of export earnings, which is to help 
safeguard the purchasing power of the countries con­
cerned, has been very imperfectly achieved. 
21. The very sketchy reports submitted to the Commis­
sion on the use of Stabex transfers by the beneficiary 
countries continue to constitute the major exception to 
the requirement for detailed supporting documentation 
which is applicable to all other aspects of financial 
cooperation. The Commission should extend its practice, 
accepted in 1987 by Sao Tome, of paying the transfer 
directly to the suppliers in the name and on behalf of the 
beneficiary country, and should encourage strict appli­
cation of the agreement, confirmed in many indicative 
programmes signed under the Third Lome Convention, 
to use counterpart funds to supplement other EDF 
finance. 
12. 12. 88 Official Journal of the European Communities 177 
OBSERVATIONS ON THE MICRO-
PROJECTS the Third Lome Convention has only just got under way, 
it is not possible, given the facts available, to assess the 
situation at this stage (*)• 
22. The early years of Community development aid 
were marked by the clear priority that was given to large-
scale projects which mainly benefited urban centres. In 
order to meet the specific needs of local communities, the 
Lome Conventions have introduced a new instrument of 
cooperation between the ACP States and the Com­
munity, namely micro-projects, consisting of small-scale 
projects which are more fully integrated into the 
economic and social fabric and are intended to create the 
conditions, at local level, under which the populations of 
these countries can develop in a more autonomous and 
self-reliant way. 
23. The EDF financed 71 annual micro-project pro­
grammes (around 2 000 projects submitted by 35 ACP 
States) under the First Lome Convention, and more than 
100 under the Second Lome Convention (around 8 000 
projects submitted by 42 ACP States). The share of micro-
projects in the EDF allocation has also increased, 
illustrating the greater role they have to play in the 
development process. Tables 2 and 3 indicate the amounts 
allocated to the micro-projects under the first two Lome 
Conventions and summarize the financial implemen­
tation of the programmes as at 30 September 1987. Legal basis and implementing directives 
General framework and scope of the micro-projects 
25. The First Lome Convention provided for a contri­
bution by the EDF, on an experimental basis and with an 
upper limit of 20 Mio ECU, to the financing of micro-
projects. The Second Lome Convention fully sanctioned 
this type of activity which since then has been part of the 
Community's proven financial and technical cooperation 
procedures and is therefore no longer limited by a global 
ceiling. The share of micro-projects in each beneficiary 
State's indicative programme is now governed only by its 
capacity to absorb this form of aid, its needs and its 
priorities. Moreover, the Fund's contribution to each 
micro-project, which was limited to 75 000 ECU under 
the First Lome Convention, was increased to 150 000 
ECU under the Second (2). 
24. The following observations review the micro-
project programmes and micro-projects under the First 
and Second Lome Conventions. As the implementation 
of the micro-project programmes approved to date under 26. The Lome Conventions firmly established the rural 
vocation of the micro-projects, with a view to opening up 
(•) The footnotes are listed together at the end of Part II. 
Table 2 — Micro-projects financed under Lome I and Lome II as at 30 September 1987 
Conven­
tions 
Lome I 
Lome II Headings 
Indicative programme total, 
of which: 
Micro-projects 
— ACP 
— OCT 
— Total 
Indicative programme total, 
of which: 
Micro-projects 
— ACP 
— OCT ' 
— Total Financing 
agreements (') 
(1) 
1 000 ECU 
3 137 056 
18 519 
1 735 
20 254 
4 360 915 
65 992 
1 980 
67 972 Payments 
(2) 
1 000 ECU (3 = 2/1) 
% 
2 934 503 94 
17 531 95 
1 461 84 
18 992 94 
2 963 787 68 
47 530 72 
1 245 63 
48 775 72 
(') With certain exceptions, these sums were alLcommitted globally, by beneficiary State. 
178 Official Journal of the European Communities 12. 12. 88 
Table 3 — Micro-projects financed under Lome I and Lome II, by beneficiary State, as at 30 September 1987 
(1 000 ECU) 
Country 
Benin 
Burkina Faso 
Burundi 
Cape Verde 
Central African Rep. 
Dominica 
Ethiopia 
Gambia 
Guinea 
Guinea-Bissau 
Grenada 
Lesotho 
Malawi 
Mali 
Mauritania 
Niger 
Rwanda 
Saint Lucia 
Seychelles 
Sierra Leone 
Sudan 
Swaziland 
Tanzania 
Chad 
Togo 
Tuvalu 
Uganda 
Western Samoa 
Comoros 
Cameroon 
Cote d'lvoire 
Fiji 
Ghana 
Guyana 
Equatorial Guinea 
Jamaica 
Kenya 
Kiribati 
Liberia 
Madagascar 
Mauritius 
Papua New Guinea 
Senegal 
Suriname 
Trinidad and Tobago 
Zaire 
Zambia 
Zimbabwe 
Vanuatu 
Djibouti 
Netherlands Antilles 
New Caledonia 
French Polynesia 
Solomon Islands 
Wallis and Futuna 
Total 4th EDF 
Commitments 
1 125 
1 161 
56 
130 
858 
44 
821 
243 
280 
893 
65 
380 
740 
426 
75 
380 
375 
201 
660 
403 
300 
995 
855 
166 
298 
2 407 
300 
2 060 
515 
340 
452 
265 
470 
315 
150 
500 
550 
20 254 Payments 
1 125 
1 140 
56 
82 
808 
44 
716 
225 
253 
893 
65 
380 
621 
312 
64 
353 
283 
201 
660 
403 
270 
995 
850 
166 
298 
2 407 
298 
2 060 
515 
316 
243 
265 
426 
228 
150 
500 
320 
18 992 5th EDF 
Commitments 
1 450 
3 055 
1 677 
246 
406 
189 
214 
2 017 
1 300 
2 121 
500 
108 
1 500 
1 800 
11 
582 
2 210 
1 400 
818 
1 500 
1 000 
1 935 
148 
1 100 
50 
300 
457 
5 040 
3 735 
500 
145 
6 808 
173 
2 000 
4 730 
2 141 
2 900 
148 
483 
2 120 
6 555 
420 
530 
1 350 
100 
67 972 Payments 
1 438 
2 283 
1 043 
213 
358 
155 
214 
1 511 
892 
1 318 
240 
104 
1 450 
1 702 
11 
423 
798 
1 131 
523 
856 
395 
1 560 
148 
298 
50 
59 
355 
4 581 
2 882 
477 
131 
5 436 
142 
1 546 
3 678 
1 769 
2 443 
148 
483 
316 
3 617 
354 
505 
660 
79 
48 775 
12. 12. 88 Official Journal of the European Communities 179 
and developing the countryside, while at the same time 
also allowing this instrument to be used in an urban 
context. 
Selection criteria for the micro-projects 
27. In accordance with the specific eligibility criteria set 
out in Article 15(1) of Protocol No 2 to the First Lome 
Convention, and again in Article 146, paragraph 1(c), of 
the Second Lome Convention, micro-projects must: 
(a) meet a real, priority need at local level (this condition 
being fulfilled primarily by an initiative taken by the 
local community, as required by Articles 16 and 
147(1) of the above texts); 
(b) ensure the active participation of the local com­
munity. 
28. The forms this participation is required to take are 
defined by Article 16 of Protocol No 2 to the First Lome 
Convention, and Article 147 of the Second Lome 
Convention: in order to guarantee the viability of a 
project, these provisions specify that the financing of 
micro-projects shall be tripartite in structure and shall 
stem from: 
(a) the beneficiary community (in the form of a 
contribution in money or kind according to its 
means); 
(b) the ACP State (in the form of a financial contribution 
or the use of public equipment) (3); 
(c) the Fund. 
The Second Lome Convention confirms certain rules of 
application defined by the implementing directives under 
the First Lome Convention and requires that the three 
participants' contributions be mobilized at the same time, 
as soon as a project has been approved, and that the total 
contribution by the ACP State and the local community 
concerned must normally be at least equal to the grant 
requested from the Fund (4). 
29. The viability of a micro-project also depends upon 
its being suited to the local economic and social structures 
and, in particular, to the available work-force's level of 
training. The project must be readily assimilable by its future users in order to facilitate the dissemination of 
knowledge and know-how. 
30. The local community undertakes to play its part in 
maintaining and running the project, in conjunction with 
the national authorities if necessary. 
The role of the Commission delegate 
31. The overall financing decision is taken by the chief 
authorizing officer of the EDF, at the suggestion of the 
delegate, at the conclusion of the appraisal phase of the 
annual micro-project programme. The Commission then 
proceeds immediately with the commitment for the total 
allocation of the annual programme. 
32. The financing agreement is merely an outline 
estimate of future requests from the local communities 
which will be subject to specific financing decisions. The 
latter are taken by the ACP State concerned 'with the 
agreement of the Commission', according to the terms of 
the First Lome Convention. The Second Lome Conven­
tion confers full responsibility for approving the projects 
on the delegate. 
Appraisal of the micro-projects 
Devolution of responsibility for approving projects 
33. Under the First Lome Convention, the preparation 
of the financing proposal is the responsibility of the 
delegate, whilst approval of the specific financing 
decision comes under the competence of the Commission. 
The devolution of responsibility for approving projects to 
the delegate by the Second Lome Convention is intended 
to expedite the procedures and reduce the periods within 
which the initiatives of the local communities are acted 
upon, a major innovation in the Second Convention 
which had already been adumbrated by former practice. 
An examination revealed that the Commission deleg­
ations and departments had not always respected this 
redistribution of their tasks. 
34. Although the intervention of the delegate ought to 
be sufficient, the delegations do not systematically 
exercise their responsibility with regard to financing 
decisions and transmit the micro-projects to the Commis­
sion for approval as and when the requests for financing 
arrive from the ACP State concerned. 
1^ C^flicial journal of the European communities l^.l^.D^ 
3eo. Lhis procedure does not comply ^ith the instruct 
tions concerning implementationof the aid for micro 
projects — characterised in particular hy the devolution 
ofthedecisionmakingpo^er — to the extent that,in the 
first instance, it saddles the departments in Brussels, 
^hich are occupied ^ith the linancially most important 
projects, ^ith analysing projects for ^hich they ha^e 
neither all the information nor the time required. Lhus, 
the Senegal delegation submitted to Brusselsforappro^al 
a project for an initial sum of 137^,^ EC^L^and the 
Gambia delegationdidthesameforpro^ectstotalling 
^^oE^^and^070oEC^^ respectively 
3o. Secondly,for^arding measures or estimates to the 
C^ommissionfor approval prolongs the decisionmaking 
process, ^hich is regrettable in the case of annual 
programmes. 
37. Similarly, the question of direct assessment of 
micro^pro^ects by the commission is sometimes raised at 
the programming stage. In certain cases,the optionof 
submitting more than one programme per year has been 
abused.Lhus,S^a^iland submitted se^enmicro^pro^ect 
programmesint^o years, each ^ithatotal appropriation 
of an average 3^000EC^C^. Such small sums could ha^e 
beengroupedeachyear under onesingleprogramme, 
enabling the projects to be approved subsequently by the 
delegate and avoiding unnecessary delays occasioned by 
multiple programming. 
^h^^^t^c^of^r^t^or^yn^d^ttoc^tt^^t 
3D. ^Vhen an AC^R State submits a request for the 
financing ofamicro^pro^ecpthedelegateiscalled upon to 
identify and assess the needthe project is supposedto 
respond to. C^nly the existence of a priority need 
originating from the local community ^hich is to receive 
the benetit^ustities the implementation ofamicropro^ect 
rather than any other aid instrument. Lhe CAourt, 
ho^e^er, noted cases ^here the delegates had not always 
checked a pro^ecCs conformity ^ith this criterion as 
carefully and as rigorously as they ^ere required to. 
3^. in thecase of se^eralmicro^pro^ect programmes 
audited during C^ourt visits to Madagascar in 1^^ and 
the C^oted^oireinl^7, the commission delegations 
^ere not a^are of the national authorities selection 
criteriafor the projects, whence the difticulty of checking 
whether there had been any deviations from the rules or 
abuses, though these latter cannot be detinitely ruled out. In Madagascar, certain investments financed under the 
microproject heading did not, by their ^ery nature, 
correspondto the description ofapriority need onthe 
part of the local communities.C^ases in point areacar, 
assigned toago^ernmentdepartment,^hose use for the 
purposes of the micro^pro^ects could not be ascertained, 
and equipment destined for the regional University 
centre. 
^. Lhe initiative is supposed to be taken by the local 
community ^hich^illbenetit from the project, but, out 
ofasampleof^micro^pro^ect programmes monitored 
by the commission, only one third of the schemes 
stemmed from an initiative taken by the community 
concerned, in halfof the cases e^amined,the initiative 
actually came from the administration, rhe other sources 
of initiative being local ^(EC^s or the ELoE departs 
ments^. 
^1. Lhe risk offailure in the case ofschemes that do not 
stemfromaninitiati^e on the partoflocal communities is 
considerable, insofar as the requirement for a real, 
priority need on the part of the latter cannot be satistied 
^hen an initiative by national authorities is substituted 
foroneby thelocalcommunity.Lhis^asthecasein 
Logo, Madagascar and^eenya,^herese^eralpro^ects 
^ere abandoned aftercompletion, and otherse^en before 
their implementation, as they did not correspond to the 
needs of the people ^ho^ere supposed to benetit from 
them. 
^. C^n the other hand, the intervention of the central 
management organi^ationis^ustitiedparticularlyin cases 
^here the population is not able to identify and e^pressa 
real, priority need in precise and appropriate terms, 
because of the ^erynature,for example, of the proposed 
project, ^ith ^hich the local community may be 
unfamiliar. Lhe national authorities^ task is to determine 
the e^act nature of the problem and the type of scheme 
likely to resolve it, and to reformulate the request. Eor 
e^ample,inone particular rural ^one, the population, 
faced ^ith health problems, in some cases asked 
spontaneously for a community clinic to be set up, 
whereas, in the case in point, the origin ofthe diseases lay 
in the consumption of contaminated ^ater.Lhe national 
authorities therefore asked for ne^^ater points tobe 
installed^such as ^ells and drillholes^,thus reformulate 
ingtherequest.Ahealth education operation, aimed at 
making the population concerned a^are of the best 
possible ^ay to adapt ^ater point installations to their 
needs,therefore proved necessary. 
^3. Lhelocalcommunity^scontributioncantakethe 
form ofacontribution in cash orin kind, or the supply of 
services, in several of the microDpro^ects audited, no 
evidence of local community participation ^as to be 
12. 12. 88 Official Journal of the European Communities 181 
found. It was discovered, particularly in Senegal, that 
certain projects are financed 100 % by the Fund with no 
contribution, in any form whatsoever, from the local 
population. Thus, the Dahra and Mbeuleucke water 
supply systems, which were completed in 1986, were 
entirely carried out by the Soda-TP company, the State 
and the beneficiaries having failed to participate, 
financially or otherwise. 
44. The local community is required to participate 
actively in the execution of each micro-project. Their 
contribution should not be assessed globally, by com­
parison with the annual micro-project programme as a 
whole. Thus, the 100 % financing by the Fund of eight 
projects in Madagascar as part of the first programme 
under the Second Lome Convention does not meet the 
eligibility requirements for micro-projects. This observ­
ation is in no way affected by the absence of EDF 
assistance in the financing of 26 other schemes included in 
the programme, thus bringing EDF aid to 50 % of the 
programme's total allocation. This argument was, 
however, advanced by the Commission right from the 
programming stage, as is revealed by certain proposals 
made in Brussels, particularly in February 1985, regard­
ing the allocation of appropriations. The delegate should, 
in any case, have checked that the local community was 
actively involved in each micro-project. 
45. Contribution in kind or supplies of services by the 
local community or State must amount to a real, effective 
and active contribution. Making technical advisors, 
recruited under other water-supply projects financed by 
the Fund, available, as the Central African Republic did 
for the first micro-project programme under the Second 
Lome Convention, does not satisfy the criteria for micro-
projects. 
46. Verification by the delegate of the active particip­
ation of the local community is all the more important 
since it constitutes a reliable indication of the project's 
suitability with regard to the population's needs. In 
addition, involving the population not only in the 
planning but also in the execution of micro-projects: 
(a) makes the beneficiaries feel more responsible; 
(b) helps the villagers to look upon the projects as their 
own; 
(c) increases the likelihood of the projects being main­
tained ; Viability of the micro-projects 
Mobilization of the contributions 
47. Before endorsing the financing of each individual 
project, the delegate should have proof that the various 
contributions in cash, goods, equipment and services by 
the three participants can be mobilized at the same time 
and are immediately available. On examination, it 
appears that this has not always been the case, notably in 
Burkina Faso, where the audits carried out by the Court 
have revealed that there have been difficulties in 
mobilizing the villagers' financial contribution, with 
resultant delays in the execution of the micro-projects. 
48. The same failings affect the participation of the ACP 
States. Thus, in Fiji, a shipbuilding project was still not 
finished four years after it had started, because of the 
State's failure to provide its contribution. In Malawi, a 
number of micro-projects, such as building work on 
schools, houses and post offices under the sixth pro­
gramme, financed by the fifth EDF, were also delayed for 
months owing to the lack of State contribution. The 
construction of an educational centre, under the same 
annual programme, was seriously delayed because the 
land on which the centre was to be built was not available 
when work was due to begin. Financial or budgetary 
constraints, administrative difficulties and lack of 
coordination between authorities or ministries with 
parallel powers are often cited as reasons for the State's 
failure to fulfil its obligations. However, the ACP State's 
capacity to meet its obligations is one of the factors which 
the delegate must take into account when assessing a 
project's viability. 
Assimilation of the micro-projects by the users 
49. If the expected results are to be attained rapidly, the 
micro-projects should be able to be easily and rapidly 
assimilated by their future users. The fact that a project is 
unsuited to the capacities of its potential users may lead to 
its being completely abandoned, as happened in Madag­
ascar, where the 1982 annual programme provided for the 
financing of equipment for a fishing cooperative. 
According to a report drawn up in April 1983, the 
cooperative never became operational and the boats 
rotted at the quayside owing to the lack of financial 
resources with which to train the fishermen. On a more 
general level, in order to prevent the under-utilization of 
the equipment supplied, it is therefore necessary to: 
(d) constitutes a way of training and educating the 
beneficiaries. (a) use simple techniques for the micro-projects; 
182 Official Journal of the European Communities 12. 12. 88 
(b) provide for a training section in each micro-project; 
(c) ensure that the micro-projects, by virtue of their 
technical conception, are able to be operated 
autonomously within a short period of time; 
(d) identify the economic constraints on the users. 
50. The prospect that the project can be easily 
assimilated is an important element in its viability and 
should be taken into account by the delegate. In practice, 
this condition is linked to providing the local community 
with the necessary equipment. The Court in fact 
observed, during an audit visit to Sierra Leone in 1984, 
that the community clinics built under the fourth EDF 
were rarely or never used because the Government had 
supplied neither furniture nor medical equipment, 
although it had committed itself to doing so in the 
financing agreement signed in 1977. Similarly, the 
Tengrela community centre for women in Burkina Faso, 
which had been designed to operate both as a maternity 
and a community centre, was not able to serve the first 
function for lack of the necessary equipment. 
51. The project's operational autonomy and its assimi­
lation by the population may also be jeopardized by 
recurrent costs which are too heavy for the local 
community to bear, as the Court observed during the 
audit it carried out in 1986 in Niger, where the local 
communities were unable to meet the costs of most of the 
schemes. More generally, it is important to assess 
beforehand the economic and financial constraints on the 
beneficiaries which affect the success of the projects. 
Social aspects of the micro-projects 
52. Another essential feature of a project's viability lies 
in its suitability to be integrated into the existing social 
and cultural structures. 
53. Projects can more easily be integrated if the recipient 
community is a cohesive one. Open or latent conflicts 
within the same village, or between several villages, make 
it difficult to carry out a project effectively. The prior 
existence of some form of village organization (for festive, 
cultural, sports or religious purposes, etc.), which helps to 
eliminate this type of drawback, constitutes a guarantee 
that the population will be motivated and prepared to 
collaborate in the future. 
54. It is also important to consider the socio-economic 
relations within a given community when assessing the 
viability of a project. Thus, in Niger, wells were sunk in private plots of ground, each well being designed to serve 
the landowners as well as three further families. Only 
when the work was finished did the promoters realize that 
collaboration of this kind between landowners and their 
tenants was unheard of in that community. 
55. Furthermore, it has frequently been demonstrated 
that projects, particularly economic ones, destined for a 
community where pronounced inequalities exist, em­
phasize the latter, with perverse results. Thus, in Rwanda, 
according to a study carried out in 1985 at the 
Commission's request and entitled 'An assessment of 
small development projects', only the most prosperous 
villagers, who were able to pay the charges, benefited 
from the water-supply project. In the Cote d'lvoire, a 
scheme financed by the Fund consisted of making a 
tractor and farming equipment available to a group of 
four peasant farmers. During its visit in 1987, the Court 
observed that their crops had been burned by the other 
farmers in reaction to the inequality thus created. 
Implementation and follow-up of the micro-
projects 
Role of the national authorities 
56. The beneficiary communities are not always able, 
for want of adequate management capacity, to supervise 
the implementation of projects by themselves. It is 
therefore beneficial, especially in the absence of any local 
administrative structures, to make use of a central, 
independent department entrusted not only with prepar­
ing annual programmes, but also with assisting the local 
communities in formulating their requests and in 
implementing the projects, and checking the execution 
and, ex post, the correct utilization of the projects carried 
out. 
57. The checks carried out suggest, however, that the 
authorities entrusted with the central coordination of 
micro-projects do not always enjoy the requisite auto­
nomy and powers. 
58. Thus, in Malawi, a study carried out in 1983 
highlighted the fact that frequent changes in the State 
administrative system during the three preceding years 
had had a particularly adverse effect on the department 
responsible for the management of the micro-project 
programmes. In 1987, the delegate confirmed that this 
problem and the ensuing delays were persisting. As early 
as 1981, the Court, following an audit visit to Malawi, 
pointed out that it would be very useful for the delegation 
to recruit a local employee who could be made available 
to the recipient State. More generally, in view of the scale 
of the financing granted to certain countries for the 
micro-project programmes, greater use ought to be made 
12. 12. 88 Official Journal of the European Communities 183 
of local consultants or, in special circumstances, com­
petent technical assistants, with the aim of backing up 
weak central management bodies and preventing the 
drawbacks of piecemeal management. 
Cost of technical assistance and complementarity of the 
micro-projects 
59. The growth in the size of the micro-project 
programmes under the fifth EDF has, in fact, encouraged 
recourse to technical assistance so as to help the bodies 
coordinating and managing the programmes or, in the 
absence of such bodies, performing similar functions. 
60. Contrary to the situation in the case of conventional 
projects, committing funds for the financing of technical 
assistance under a micro-project programme does not 
require an ad hoc proposal for the allocation of 
appropriations. It is thus impossible to check amounts 
allocated for this purpose by the micro-project program­
mes on the basis of the accounts. The delegations' reports 
contain no breakdown of the amounts devoted to 
technical assistance. 
61. The Commission considers, in any case, that the cost 
of technical assistance should not exceed 10 % of the 
Funds' contribution. Cases of this ceiling having been 
exceeded have nevertheless been found amongst the very 
few commitments which have given rise to an estimate. In 
Tanzania, for example, technical assistance represents 
15 % of the allocation for the fifth EDF's second 
programme, without any apparent justification. 
62. In Niger, a Court audit visit in 1986 found that some 
of the State administration's operating costs for coordi­
nating the micro-projects were being charged to the EDF, 
so that the aid became akin to a subsidy to the national 
budget. 
63. When evaluating the cost of technical assistance, 
account should be taken of the specific nature of the 
micro-projects, which are small-scale, numerous and 
geographically dispersed and which without technical 
assistance would in many cases be doomed to failure. 
Expenditure relating to technical assistance can, however, 
be kept within reasonable limits, in particular by linking 
micro-projects, as far as possible, to other development 
projects. This step makes it possible, on the one hand, to 
complete the development projects by setting up small 
social infrastructures and, on the other, to give the micro-
projects the benefit of the means of transport and 
technical assistance implemented for these operations. 
Apart from the logistical support which it allows, this 
solution makes it easier to monitor the micro-projects. 64. This idea of complementarity, which is intended to 
give rise to a synergy of all the measures undertaken, has 
not always been made use of. In practice, difficulties 
regarding transport, supplies of fuel and other goods have 
considerably delayed the micro-projects in Sierra Leone, 
as revealed in a delegation report. In Malawi, had 
technical assistance been available in the vicinity of the 
micro-projects, the use of unsuitable equipment and 
techniques in many projects could have been avoided. 
Financial execution of the micro-projects 
65. The rate at which appropriations committed for 
micro-projects are used is roughly identical to the 
corresponding rate for the indicative programmes as a 
whole, as shown in Table 2. By 30 September 1987, of the 
amounts granted for financing decisions under the fourth 
EDF, 95 % of the funds allocated to micro-projects had 
been disbursed and 94 % of those allocated to indicative 
programmes had been disbursed. As regards the fifth 
EDF, the rate of disbursement was 72 % for the micro-
projects and 68 % for the indicative programmes, even 
though the agreement expired on 28 February 1986. 
These figures show that so far the micro-projects have not 
really been carried out any faster than the other 
instruments provided for by the Lome Conventions, 
which is contrary to the aim of carrying out a project 
rapidly to meet the priority need of local communities. 
66. The need for more speedy implementation of micro-
projects does not mean that advances should be made 
available to national authorities without strict selection of 
projects. In Kenya, however, the delegation paid 80 % of 
the total sum for each annual programme into an imprest 
account as soon as the overall financing agreements were 
signed, thus reversing the order of the appraisal and 
implementation procedures. Some measures, moreover, 
have never been started, the preparatory study having 
concluded subsequently that they were not viable. A 
Court audit visit at the end of 1985 found, furthermore, 
that 20 % of the projects financed under the fifth EDF's 
second annual programme had been abandoned. The ease 
with which the Commission financed projects whose full 
details had not yet been finalized during the appraisal 
phase undoubtedly helped to encourage the Kenyan State 
to increase the number of requests for approval of annual 
programmes, even before the previous ones had been 
completed. In 1982, five annual programmes fitted into 
this category. The national authorities thus had in their 
hands funds which were immediately available and which 
could be used for other purposes. When it came to 
starting up a large number of the measures, there were 
therefore great difficulties in mobilizing the financial 
resources granted beforehand by the Community, hence 
the delays, which could be measured in years and which 
should have led the delegation to exercise greater 
vigilance. 
184 Official Journal of the European Communities 12. 12. 88 
Evaluation and monitoring of the micro-projects 
67. The evaluation of a project, from its conception, via 
its implementation, to the conditions on which it is 
exploited by the recipient community, forms part of the 
project's life cycle; it continually supplies new inform­
ation on the successful or unsuccessful aspects of a 
measure, with a view to rapidly turning to good account 
the lessons learned from the first experiences with micro-
projects. 
68. The task of regular monitoring falls in the first 
instance to the Commission, which is responsible for 
drawing up, and checking on the application of, the 
guidelines for implementing the annual programmes by 
country. But, as regards micro-projects, the major part of 
the task of monitoring and assessing the projects lies with 
the delegations. The delegate is required to ensure, 
throughout the process, that the norms and directives 
concerning execution are observed, and, more generally, 
that the project's financial management is sound. He also 
makes sure that a final assessment of the project has been 
made and its chances of survival evaluated. 
69. In practice, the Commission staff and the deleg­
ations, who are involved with the larger-scale projects, 
devote little time to monitoring and assessing micro-
projects. This situation is made all the worse by the fact 
that the amount of attention they are able to give is 
reduced when new micro-project programmes are 
committed, contrary to the Commission's guidelines, 
before the implementation of previous programmes has 
been finished. Thus, for over half the micro-project 
programmes financed under the fifth EDF, no six-
monthly execution reports have been written by the 
delegates. Where such documents do exist, there are 
major gaps in them concerning in particular the 
observance of the project selection criteria, the final 
(actual or estimated) cost of the measures financed and 
the participation of the State and recipients. The same is 
true of the implementation reports which, under Article 
149 of the Second Lome Convention, are supposed to be 
sent to the Commission by ACP States after consultation 
with the Commission delegates. 
70. These shortcomings in the information cannot be 
totally compensated for by more general assessment 
documents — mentioned in this report — since they are 
no substitute for regular monitoring, which alone enables 
decisions to be made at the right time and allows 
deviations in the implementation of the execution 
guidelines to be corrected. 
71. Very often, analyses of obstacles encountered in the 
management of micro-projects — which are included in 
the reports — are sloppy and inaccurate. Thus, the final 
report on the third programme of micro-projects under 
the fifth EDF, in Malawi, cites as one of the main 
constraints the fact that 'the Communities seemed not to have been well informed about the project'. Furthermore, 
the delegations, often for want of reliable evaluation, are 
not able to test the validity of assumptions made at the 
appraisal stage, nor can they check up on the effectiveness 
of the management by the bodies responsible. Major 
difficulties are experienced when the objectives pursued 
have not been sufficiently accurately quantified and 
formulated at the outset for a serious analysis to be 
carried out subsequently. 
Final observations 
72. The micro-projects as an instrument are able to meet 
the essential needs of the poorest people. They do indeed 
constitute an important complement to other Com­
munity development aid instruments. 
73. Whilst there has been some improvement in recent 
years at all levels of the management of the micro-
projects, the fact remains that two main points deserve the 
full attention of the authorities responsible for planning 
and managing them, with a view to optimum utilization 
of this instrument to assist the recipient communities. 
74. Firstly, rigorous selection of the projects, following 
an in-depth appraisal, requires great vigilance on the part 
of the delegate, who, under the Second Lome Conven­
tion, is responsible for approving the project. The extent 
to which the micro-project meets the eligibility and 
viability criteria — set out above — determines the 
recipient community's motivation and subsequent inter­
est in the project, and, consequently, the benefit which the 
local people can derive from it. The delegate should 
therefore ascertain in particular that: 
(a) the project meets a real priority need of the local 
people; 
(b) the local people are involved in the conception and 
contribute to the implementation of the project; 
(c) the project is adapted to existing social and economic 
structures. 
75. Secondly, as for any investment project, each micro-
project can only be successful if the planning, appraisal, 
implementation and operation are closely monitored, all 
the more so since the recipients are most usually 
inexperienced. It would be a good idea in the case of very 
complex micro-project programmes if the Commission 
increased its technical assistance with a view to ensuring 
local coordination of the projects. This would not only 
facilitate the delegate's apprehension of the socio-cultural 
12. 12. 88 Official Journal of the European Communities 185 
structures of the community and create the premises for 
more effective monitoring, but would also complete the 
work of the central body managing the programmes, 
compensating, where necessary, for its absence or its 
deficiencies and leading to a marked increase in the 
success rate of the micro-projects. aid which may be financed under the sixth EDF. The most 
important new points are the setting aside, within the 
planned total amount, of a sum intended for aid to 
refugees and persons who have been repatriated, and the 
possibility of financing projects which form part of the 
national indicative programmes, or work which aims to 
bring back into operation, and ensure the minimum 
viability of, damaged structures or equipment. 
OBSERVATIONS ON EMERGENCY AID 79. The provisions of both these Conventions have been 
supplemented by implementing rules; those contained in 
the delegates' instruction handbook relating to the Third 
Lome Convention are very precise in this respect. 
76. Article 137 of the Second Lome Convention (fifth 
EDF) lays down rules concerning the aid that may be 
granted to ACP States which are faced with serious 
economic and social difficulties of an exceptional nature, 
resulting from natural disasters or extraordinary circum­
stances with comparable effects. 
77. The provisions of Article 137 are very tersely 
drafted; they are confined to defining the nature of the 
aid, to fixing the maximum amount of funds to be 
granted, to evaluating the degree of urgency during both 
the appraisal phase and the implementation phase, and to 
paying back into the special allocation all sums remaining 
unspent from the various projects once the stipulated six-
month implementation period has expired. Great flex­
ibility is allowed for in adopting the detailed rules and 
means for implementing the aid measures, since they are 
determined on a case-by-case basis in order to obtain the 
most effective results for each emergency situation. 
78. Articles 203 to 205 of the Third Lome Convention 
(sixth EDF) lay down a similar set of rules for emergency 80. The financial situation regarding emergency aid as 
at 30 September 1987 is summarized in Table 4. The audit 
carried out by the Court of Auditors was mainly devoted 
to examining aid granted under the fifth EDF. This aid 
amounted to 200 Mio ECU, of which 194 Mio ECU had 
been committed and 177 Mio ECU paid on 30 September 
1987. Thus, 144 projects, not yet all closed (see paragraph 
108) and divided up between 52 recipient countries, were 
financed. As regards financing under the sixth EDF, 
reference is made to this in paragraph 111. 
Appraisal of the aid 
81. Aid files are appraised within a few days of the 
receipt of the request. The Commission sends a telex 
stating its decision to grant aid and the implementing 
conditions, which the body making the request accepts by 
the same means. Implementation of the aid measures 
concerned must begin within seven days. 
Table 4 — Emergency aid financed under Lome I and Lome II, as at 30 September 1987 
Conven­
tions 
Lome I 
Lome II Headings 
Indicative programme total, 
of which: 
Emergency aid 
— ACP 
— OCT 
— Total 
Indicative programme total, 
of which: 
Emergency aid 
— ACP 
— OCT 
— Total Financing 
agreements (') 
(1) 
1 000 ECU 
3 137 056 
137 398 
— 
137 398 
4 360 915 
193 617 
914 
194 531 Payments 
(2) 
1 000 ECU 
2 934 503 
137 211 
— 
137 211 
2 963 787 
176 031 
914 
176 945 (3 = 2/1) 
% 
94 
100 
100 
68 
91 
100 
91 
(') With certain exceptions, these sums were all committed globally, by beneficiary State. 
186 Official Journal of the European Communities 12. 12. 88 
82. Given the urgent nature of this type of aid measure, 
speedy appraisal must be a priority. Nevertheless, 
examination of the aid which had been selected for 
checking revealed some shortcomings which could have 
been avoided if more precise information had been called 
for on the assessment of damage, and if it had been 
possible to confirm this information by estimates from 
other international bodies or from the delegations. The 
standard form drawn up by the Commission for use in 
making all requests for emergency aid has, on the whole, 
been ignored by the applicants. The latter have in almost 
all cases confined themselves to sending letters or 
telegrams containing a negligible amount of information 
compared with that which is required on the form. 
83. In many cases, requirements were over-estimated to 
an extent which exceeds tolerable limits. To mention but a 
few examples: 
(a) the aid granted to Zaire to accommodate Ugandan 
refugees in six camps situated 70 kilometres from the 
border was calculated on the basis of 75 000 persons, 
whereas there have never been more than 40 000 of 
them; 
(b) the cost of transporting food aid to Senegal, which 
was provided for under emergency aid, was no more 
than 60 % of the sum set aside and the quantities to be 
transported did not exceed 70 % of what had been 
calculated initially; 
(c) within the framework of aid to assist famine victims in 
Mauritania, the fact that 24 % of the appropriations 
granted remained unspent illustrates the initial over-
estimation of needs. 
84. Reports from the delegations during the appraisal 
stage would be invaluable, insofar as the latter are 
acquainted with both the emergency situation and the 
different organizations which are operating in the country 
in question. Their opinion on these points, apart from 
providing justification for the request, would act as a 
guarantee prior to the decision to grant aid. For many 
projects, the delegations did not involve themselves in the 
appraisal and, in several cases, they confined themselves 
in their reports to copying out the figures — which 
subsequently proved to be inaccurate — given by the 
body making the request. 
8 5. The Commission should also reflect on the merits of 
financing, as emergency aid, complex operations which 
presuppose a large volume of resources. Whilst such 
operations may well be regarded as emergency aid by 
virtue of their content and their aims, it is hard to see them 
as compatible with rapid appraisal. Selection of very 
specific operations or operations applied to limited 
geographical areas always enables better evaluation of 
needs and more effective implementation. For example, 
under the Dublin Plan, 35 Mio ECU were granted in 1984 to Ethiopia for drought victims, even though the extent of 
the disaster was still unknown and neither the country nor 
the international organizations present were capable of 
managing this amount of funds within such short time-
limits. If the emergency aid had been divided up to finance 
several small operations which were based on more 
specific proposals, were more easily manageable and had 
been presented in order of priority, its effectiveness would 
have been far greater. 
86. In general, most of the shortcomings observed by 
the Court concerned aid in excess of 3 Mio ECU, whereas 
implementation was found to be better in the case of small 
projects. One of the reasons for this situation is the need 
for speedy appraisal, which is ill-suited to large-scale 
operations with a minimum degree of complexity. 
Implementation of the aid 
Implementation time-limits 
87. Article 137 of the Second Lome Convention restricts 
the time-limit for implementation to a maximum of six 
months, unless otherwise stipulated by the implementing 
arrangements and provided that it has not been agreed, 
by common accord, during the implementation period to 
extend that time-limit owing to extraordinary circum­
stances. In many cases, this limit has not been respected, 
both by the Commission and by the managing bodies. 
88. For example, implementation of a small part of an 
aid measure worth 1,5 Mio ECU to assist drought victims 
in Mali took 18 months, whereas the original forecast had 
been six months. 
89. Despite the dramatic nature of the situation, the aid 
to assist famine victims in Sudan was implemented 
excessively slowly, being dragged out over more than two 
years. The constant delays in supplying and distributing 
food are incontradiction with the speed which the 
situation called for. 
90. For the 'aid to famine and drought victims in 
Mauritania' operation, the implementation time-limits 
were likewise exceeded. For example, the operation to 
purchase and transport 813 tonnes of seeds, which was 
supposed to be completed on 21 June 1985, was not in fact 
completed until January 1986, resulting in a danger that 
the seed deliveries would be out of step with the sowing 
12. 12. 88 Official Journal of the European Communities 187 
time, that land might remain uncultivated during this 
time, etc. 
91. During the drought which struck Ethiopia in 1984, 
most of the aid operations did not begin in the field until 
over three months after the date of the decisions 
(December 1984) because of the tricky problem of 
assessing the measures that were needed. Several of them 
were not completed until 1986, namely: 
(a) the financing of the operating expenses for the fleet of 
United Nations lorries (1,5 Mio ECU), which con­
tinued until August 1986; 
(b) the costs of land transport (0,8 Mio ECU), which 
were financed from May to October 1986. 
92. The purchase and distribution of biscuits and soya 
oil were financed (0,85 Mio ECU) under another 
emergency aid package granted to Ethiopia in February 
1986 (6 Mio ECU). Apart from the many safety problems 
which hampered part of the distribution, the late delivery 
of some supplies, which arrived at the end of 1986, i.e. 
after the harvests, meant that they were not distributed 
until after the period of urgent need. Thus, the greater 
part of 400 tonnes of biscuits delivered was not 
distributed until the months of March to May 1987. 
Extent to which objectives are achieved 
93. The progress of the various measures provided for 
by the agreements relating to the granting of aid has not 
always been adequate. In too many cases, the objectives 
laid down have been only partially achieved. 
94. A significant example of this is the project, entrusted 
to the UNHCR, to integrate Ugandan refugees into 
Zaire, in which the appraisal was lax and the implemen­
tation inadequately coordinated. A report dated 5 June 
1982 by the adviser to the Kinshasa delegation highlights 
the following facts: as regards the cultivation of the land, 
only 8 % had been cultivated by June 1982 instead of the 
20% planned for February 1982; the prefabricated 
buildings chosen, apart from costing more, did not bring 
the expected results; the installations in the schools were 
not operational; the clinics and health centres, according 
to the 'Medecins sans frontieres' team responsible for the 
health aspect, were chronically inadequate; the food 
stores were neither in conformity with nor suitable for 
their intended purpose and there was a blatant lack of 
coordination between the various parties involved. (To 
mention but one example, the landscape-design expert 
arrived on site when the laying-out and building works 
were virtually finished.) 95. The lack of logistical organization of the transport 
had serious consequences with regard to the objectives 
aimed at: 
(a) in Senegal, the distribution of food began with places 
accessible by asphalt road, and so the places served by 
dirt tracks were not able to receive the food intended 
for them because of an early rainy season, which had 
made the access roads impassable; 
(b) in Sudan, the least accessible parts of the country 
received the aid after a considerable delay, and the 
fact that they received it at all was purely due to an 
airfield being brought into operation as a matter of 
urgency in order to allow access to military aircraft 
from certain Member States. 
Coordination between the various parties involved 
96. As far as the fifth EDF is concerned, there is a lack 
of precise rules governing the coordination of the various 
operators. In several cases, operations have been divided 
up at local level between various organizations which 
have carried out their tasks separately, with varying 
degrees of success; in such cases, it is very difficult to 
make a general assessment of the overall effectiveness of 
the aid granted. 
97. The delegation, which, as the Commission's on-the-
spot representative, seems to be the body most suited to 
carrying out this coordinating function, has played no 
part in many aid measures financed by the EDF and 
carried out by major international bodies (such as the Red 
Cross and the Office of the United Nations High 
Commissioner for Refugees). 
98. As regards large-scale aid measures, there has often 
been found to be a lack of coordination between the 
various suppliers of funds and the local authorities 
themselves; closer collaboration would undoubtedly 
have made for improved effectiveness in the management 
of the aid (Senegal, Sudan, etc.). The poor coordination 
of aid granted to Ethiopia during the great drought in 
1984 is particularly worthy of note. Although con­
siderable effort was made on the spot to coordinate the 
aid granted by the various donors, several organizations 
found that the operations they were carrying out were 
being duplicated by others in the same area. In respect of 
the food distribution operations in particular, many 
problems cropped up between the government organiza­
tion (responsible for the distribution of EDF food aid) 
and the NGOs (responsible for distributing food aid from 
other donors): the fact that in one and the same region the 
NGOs were distributing more generous rations to the 
local people than the government organization gave rise 
188 Official Journal of the European Communities 12. 12. 88 
to considerable friction between these people and the 
government organization. 
Control and monitoring of the aid 
Control and monitoring of the management 
99. The control and monitoring of the management of 
the aid granted under the Second Lome Convention have 
been carried out either by the delegations (in the majority 
of cases), or by the emergency aid department of the 
Directorate-General for Development (DG VIII), and 
have been based on the periodic reports and the final 
financial and descriptive reports relating to the im­
plementation of the aid. 
100. In view of the remoteness of the area of interven­
tion and the fact that circumstances require rapid 
implementation, it is still up to the delegation to ensure 
effective control and monitoring of aid measures in 
circumstances where, very often, success or failure 
depends on quick decision-making. On several occasions, 
it has, unfortunately, been noted that the delegation has 
not played any role. 
101. The periodic reports, which, in every case, must be 
submitted as part of the obligations which the managers 
have undertaken to fulfil, have not always been produced 
within the time-limits and in the form required. For 
example: 
(a) as regards the payment of partial amounts, the 
conditions stipulated, which imply the prior submis­
sion of an implementation report, have — in the case 
of several files — not been complied with; 
(b) the content of these reports does not, on the whole, 
enable a reasonable assessment to be made of the 
implementation of the aid and of the extent to which 
the objectives have been attained. The Commission's 
reaction to the inadequacy or lack of these reports has 
often been slow and belated, as have been the 
complaints it has made to the various people 
responsible. 
102. The slowness and delays in receiving final reports 
have been even more serious. In many cases, they had still 
not been received several months after the time-limit laid 
down for the implementation of the aid had expired. 
Furthermore, in the case of Community aid worth 
10 650 000 ECU and intended to combat famine in Mali, 
which was implemented by various international organi­
zations coordinated by the delegation, it was not possible 
to supply any final comprehensive report on the entire aid 
measure, since this obligation was not specified in the 
implementing rules. 103. The weakness of the control and monitoring of the 
management has made it possible for aid measures to 
continue which, at the outset, bearing in mind the rapidity 
of the appraisal, seemed to meet the criteria for 
emergency aid, but which, as time went by, were seen to 
have been implemented by means of an unsuitable 
financial instrument. This situation has occurred in three 
cases: 
(a) the series of aid measures to help drought victims in 
Senegal includes a complex operation for the 
production of cowpeas which involves buying 450 
tonnes of seed in California, the out-of-season 
propagation of local varieties and the sowing of seeds 
supplied by the EEC, the FAO and the Usaid at a 
total cost of 265 Mio CFA F. The supplementary 
measures concerning technical assistance and making 
plant-health products available, which cost a total of 
450 Mio CFA F and were financed by the sale of food 
aid products, have had the effect of turning this 
operation into a full-blown agricultural project; 
furthermore, the objective of the operation (namely, 
progressing from a secondary crop for own consump­
tion to a main cash crop) clearly has certain 
characteristics, notably the duration and final 
purpose, which exclude such a project from receiving 
financing under Article 137 of the Second Lome 
Convention; 
(b) the operation to supply water to the town of Atar, to 
assist drought victims in Mauritania, also shows some 
implementation features which do not seem to be 
applicable to emergency aid operations; at the very 
least, it seems that this measure might not have been a 
priority one as compared with other aid measures in 
the country. In connection with this water-supply 
project, the government had already submitted two 
requests for finance during the two previous years 
under the indicative programme; furthermore, when 
this emergency aid was granted, another subsidy was 
given for the purpose of developing two wells, under 
the heading of financing for micro-projects. The 
operation as a whole could therefore have been 
included in the programmable aid. Moreover, the 
Commission gave its agreement to fixing a price of 
200 ouguiyas per m3, provided that this amount was 
entered in the accounts separately and that it was 
intended for immediate emergency measures. To this 
day, these funds have not been used, which is 
therefore an indirect extension of the implementation 
period for the aid, so that this aid measure merits the 
description 'emergency aid' even less; 
(c) a sum of 1 Mio ECU was granted to finance part of a 
Unicef water-supply project in Ethiopia. This project 
was carried out over a number of years, so that it 
should be described as a 'medium-term water-supply 
programme in a rural area', rather than 'emergency 
aid'. 
12. 12. 88 Official Journal of the European Communities 189 
104. Furthermore, the examples given below of sub­
sidies being allocated to finance operations and measures 
which were not provided for at the outset, should 
encourage the monitoring to be improved: 
(a) 76 234 ECU from the aid programme to assist 
Ethiopian refugees in Somalia was allocated to 
transport costs, which were not originally meant to be 
covered; this was done without prior permission from 
the Commission, and the money was deducted from 
the sum intended to be spent on supplying essential 
goods; 
(b) in the same country, an amount of 450 000 ECU 
granted in 1981 to assist refugees and intended to be 
spent on water supplies, was used to finance the 
development of two agricultural plots of 100 ha. 
105. On 26 November 1987, the Court of Auditors sent 
eight delegations a request, via DG VIII, for additional 
documents and information. Since no replies were 
received in due time, it was not possible to take the 
information requested into account. 
Control of payments 
106. During the audit visits which the Court made to 
ACP countries, it found that in the delegations one person 
alone was responsible for the implementation, monitor­
ing and payment of aid. The internal accounts are 
generally well kept, but, nevertheless, the internal control 
of payments at delegation level and in the departments of 
DG VIII has proved unsatisfactory: 
(a) there is no reconciliation between the ledger cards 
kept by the departments responsible for emergency 
aid in DG VIII and the delegations' accounting 
records; 
(b) because of delays in recording operations on these 
ledger cards, the latter are not up to date and contain 
incomplete information; 
(c) control of payment orders sent by the delegations is 
carried out by the emergency-aid departments in DG 
VIII, and solely from a formal point of view 
(calculations and balance of amounts granted as aid). 107. As a result of this lack of regular reconciliation and 
the weakness of the controls, an examination of DG 
VIIFs accounts and of figures from the internal accounts 
or financial reports issued by the delegations (or other 
bodies) reveals many discrepancies, notably: 
(a) as regards the delegation in Ethiopia, which managed 
various projects simultaneously, the accounts showed 
charging errors for many entries, some of which, 
corresponding to EDF projects, have been confused 
with others relating to budgetary aid under the 
Dublin Plan, without DG VIII having noticed these 
mistakes; 
(b) similarly, in Mauritania, an operation to purchase 
and transport seeds was recorded at the delegation as 
involving 500 000 ECU, whereas it was entered in the 
Commission accounts in Brussels for only 455 632,53 
ECU. 
Closure of project accounts and utilization of remaining 
appropriations 
108. On 30 September 1987, accounts relating to 116 of 
the 144 projects corresponding to the fifth EDF (i.e. 
about 80 % of them, representing 96 % of the total 
expenditure) had not yet been closed. For all these 
projects, the six-month time-limit stipulated under Article 
137(8) of the Second Lome Convention had been 
exceeded. These various projects were committed in the 
following years: 23 in 1981, 17 in 1982, 16 in 1983, 36 in 
1984, 11 in 1985 and 13 in 1986. The reasons why the 
accounts are still open have mainly to do with the long 
delays before entries are made in the accounts and to the 
lack of reconciliations (40 of them go back more than five 
years). 
109. In order to close a project, the final balance has to 
be established and fixed, after checking all the accounting 
entries. The Commission should make every effort to give 
this task all the importance it deserves, because it has 
proved to be essential when evidence of the sound 
management of the aid measures undertaken has to be 
shown. 
110. Paragraph 8(c) of Article 137 has thus remained a 
dead letter, since, the accounts not having been closed, it 
has not been possible to establish in time the amount of 
unexpended appropriations which should have been 
reallocated to the special appropriation. 
190 Official Journal of the European Communities 12. 12. 88 
Third Lome Convention Consequently, unspent funds may well not be reallocated 
to the special appropriation. 
111. The instructions to delegates for the implemen­
tation of the sixth EDF contain, for the first time, a long 
detailed chapter devoted to emergency aid. But, since on 
30 September 1987 the level of implementation of the 
sixth EDF was only 12 % for amounts committed and 
6 % for payments, it is not yet possible to make a 
meaningful assessment of how it has been managed. 
Nevertheless, a first analysis of the files for emergency aid 
already granted under the sixth EDF justifies some 
doubts as to whether the management has been improved. 
Although five aid measures were granted in the first 
quarter of 1986 and 18 in the second quarter of that year, 
none of these 23 operations has yet been closed. Final observation 
112. Whatever the merits of emergency aid, it has been 
found that the management of these aid measures has 
revealed weaknesses of which the Commission was aware 
and which it has sought to remedy, under the sixth EDF, 
by laying the foundations for future improvements 
through a precise and suitable set of rules. Even so, these 
instructions have still to be applied. 
(!) On 18.3.1988, 16 programmes corresponding to a total (4) 
amount of 30 Mio ECU had been approved in 15 ACP 
States. 
(2) The Third Lome Convention raised this ceiling to 250 000 (5) 
ECU. 
(3) This contribution became optional under the Third Lome 
Convention. The Third Lome Convention extended the maximum EDF 
contribution to the financing of a micro-project to two 
thirds of its total cost. 
Report on the 'Comparative assessments of projects jointly 
financed with NGOs and micro-projects'. 
12. 12. 88 Official Journal of the European Communities 191 
ANNEX I 
Allocation of responsibilities among the Members of the 
Court of Auditors (') at the time this report was adopted 
Secretariat, legal service, staff and administration and external relations Marcel MART, 
President 
Audit Group I (') 
Own resources: Richie RYAN 
customs duties and agricultural revenue, VAT resources, GNP resources, 
balancing of the budget and sundry revenue 
EAGGF — 1: John 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 
(') Extract from the Court's Rules of Procedure and Court Decision No 85-17 of 17 December 1985 creating three Audit Groups: 
— 'The Court shall assign to its Members particular sectors of activity within which they shall be specially responsible for the 
preparation and implementation of the decisions of the Court.' 
— 'Before being submitted to the Court, draft comments for inclusion in the annual report shall be examined by the competent Audit 
Groups, at the instance of the Member responsible for the sector.' 
— 'The powers vested in these Groups shall be exclusively preparatory as regards draft reports and opinions, proposed work 
programmes and all other auditing topics to be submitted for the Court's approval.' 
— The Court shall approve those comments which it considers suitable for inclusion in the annual report and shall adopt the final text 
of the annual report.' 
192 Official Journal of the European Communities 12. 12. 88 
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 III 
General auditing matters, coordination of financial and computerized auditing, publishing and 
follow-up of reports and opinions, work programmes and working methods and professional 
training Marcel MART 
Loans and borrowings 
European Coal and Steel Community 
General accounts 
Accounting principles Lothar HAASE 
Staff and operating expenditure of the institutions 
Office for Official Publications 
Press and information offices 
European Schools Stergios VALLAS 
Research, technology and new policies Carlos MORENO 
Subsidies 
12. 12. 88 Official Journal of the European Communities 193 
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 (') 
Sixth annual report, concerning the financial year 1982 24 November 1983 OJ C 357, 
31. 12. 1983 
Report (Annex to the 1982 ECSC annual report) on the accounting and 7 December 1983 
financial management of the ECSC Not published in OJ 
Special report 6/83 on the European Social Fund Computer System 15 December 1983 Not published in OJ 
Opinion 2/83 on the proposal for a Council Regulation on interest subsidies 12 January 1984 OJ C 55, 
for certain loans granted under the European Monetary System 28. 2. 198 
Report on the accounts of the European Schools for 1982 23 February 1984 Not published 
Opinion 4/83 on the second amendment to the proposal for a Council 14 March 1984 
Regulation amending Regulation (EEC, Euratom, ECSC) No 2891/77 
implementing the Decision of 21 April 1970 on the replacement of financial 
contributions from Member States by the Communities' own resources OJC 163, 
23.6. 1984 
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 
Commission to help finance innovation within the Community OJC 163, 
23. 6. 1984 
(') Requests concerning the availability of documents not published in the OJ may be sent to the Court's Documentation Department. 
194 Official Journal of the European Communities 12. 12. 88 
Title Date of 
adoption Publication (') 
Special report 2/84 on the management of Community development aid funds 10 May 1984 
by the European Investment Bank Not published in OJ 
Opinion 1/84 on the proposal for a Council Regulation introducing measures 7 June 1984 
to cover budgetary requirements in 1984 given the exhaustion of own 
resources OJ C 228, 
30. 8. 1984 
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 in OJ 
Not published in OJ 
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 in OJ 
Not published in OJ 
OJ C 348, 
31. 12. 1984 
Not published in OJ 
OJC91, 
12.4. 1985 
OJC134, 
3.6. 1985 
Opinion 1/85 on a proposal for a Council Regulation (EEC) on the application 2 May 1985 
of the agreement in the form of an exchange of letters between the EEC and the 
Portuguese Republic concerning the implementation of specific financial aid 
for improving agricultural and fisheries structures in Portugal OJC 138, 
6.6. 1985 
Opinion 2/85 on a proposal for a Council Regulation (EEC, Euratom, ECSC) 26 June 1985 
extending the terms of validity of Council Regulation (EEC, Euratom, ECSC) 
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 OJC 261, 
12. 10. 1985 
(') Requests concerning the availability of documents not published in the OJ may be sent to the Court's Documentation Department. 
12. 12. Official Journal of the European Communities 195 
Title Date of 
adoption Publication (') 
Report on the financial statements of the European Coal and Steel 26 June 1985 
Community for the financial year 1984 OJ C 360, 
31. 12. 1985 
Special report 2/85 on the system for the payment of refunds on agricultural 26 June 1985 
exports (Audit of the export of agricultural products) OJC215, 
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 
Opinion on the treatment of irregularities in the context of the discharge 
procedure 
Opinion on the cash deficit at the Members' Cash Office 
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) 
Reflections on perspectives for the common agricultural policy (Commission 
Green Paper) 
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 12 July 1985 
17 July 1985 
17 July 1985 
17 July 1985 
10 October 1985 
10 October 1985 
17 October 1985 
17 October 1985 
30 October 1985 
19 November 1985 
19 November 1985 
28 November 1985 Not published in OJ 
Not published in OJ 
Not published in OJ 
Not published in OJ 
Not published in OJ 
Not published in OJ 
Not published in OJ 
Not published in OJ 
Not published in OJ 
Not published in OJ 
OJ C 326, 
16. 12. 1985 
OJ C 339, 
31.12.1985 
Special report 5/85 on the Community contribution towards schemes 12 December 1985 
concerning developing countries carried out by non-governmental organiza­
tions Not published in OJ 
Opinion 3/85 on the draft amendments to certain articles of the draft 12 December 1985 
Commission Regulation laying down detailed rules for the implementation of 
certain provisions of the Financial Regulation of 21 December 1977 (not 
translated into English) Not published in OJ 
Opinion 4/85 on the proposal for a Council Regulation (EEC) amending 12 December 1985 OJ C 357, 
Regulation (EEC) No 2681/74 on Community financing of expenditure 31. 12. 1985 
incurred in respect of the supply of agricultural products as food aid 
Opinion 5/85 on the draft Financial Regulation applicable to the Sixth 12 December 1985 OJC361, 
European Development Fund 31. 12. 1985 
(!) Requests concerning the availability of documents not published in the OJ may be sent to the Court's Documentation Department. 
196 Official Journal of the European Communities 12. 12. 88 
Title Date of 
adoption Publication (') 
Special report 1/86 on the contract measures for the expansion of markets for 20 February 1986 OJ C 127, 
milk and milk products financed by proceeds of the co-responsibility levy 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 
Report on the 1985 accounts of the Euratom Supply Agency 29 May 1986 Not published in OJ 
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 ERDF's 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 Not published in OJ 
Report on the accounts of the European Schools for the financial year 1984 25 September 1986 Not published in OJ 
Report on the 1985 accounts of the European Centre for the Development of 23 October 1986 Not published in OJ 
Vocational Training (Berlin) 
Report on the 1985 accounts of the European Foundation for the 11 November 1986 Not published in OJ 
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 in OJ 
Report (Annex to the 1985 ECSC annual report) on the accounting and 19 November 1986 Not published in OJ 
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 
(') Requests concerning the availability of documents not published in the OJ may be sent to the Court's Documentation Department. 
12. 12. 88 Official Journal of the European Communities 197 
Title Date of 
adoption Publication (') 
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, 
Regulation (EEC) No 729/70 on the financing of the common agricultural 3. 7. 1987 
policy with regard to the system of advances in the Guarantee Section of the 
European Agricultural Guidance and Guarantee Fund 
Report on the financial statements of the European Coal and Steel 
Community at 31 December 1986 
Report on the 1986 accounts of the Euratom Supply Agency 
Special report No 2/87 on the quota/additional levy system in the milk sector 
Special report No 3/87 on the common organization of the market in raw 
tobacco 
Special report No 4/87 on Community wine distillation measures 
Special report No 5/87 on Community aid for the acceleration of agricultural 
development in Greece 
Special report No 6/87 on food aid supplied to India between 1978 and 1985 
(Flood II operation) 25 June 1987 
25 June 1987 
15 July 1987 
15 July 1987 
17 September 1987 
7 October 1987 
29 October 1987 OJ C 228, 
26. 8. 1987 
Not published in OJ 
OJ C 266, 
5. 10. 1987 
OJ C 297, 
6. 11. 1987 
OJ C 297, 
6. 11. 1987 
Not published in OJ 
OJC31, 
4. 2. 1988 
Opinion No 4/87 on a proposal for a Council Regulation (Euratom, ECSC, 29 October 1987 OJ C 337, 
EEC) derogating temporarily from Regulation (EEC) No 2891 /77 implement- 16.12.1987 
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 29 October 1987 
4/5 November 1987 
4/5 November 1987 
4/5 November 1987 
10/11 November 1987 OJ C 337, 
16. 12. 1987 
Not published in OJ 
Not published in OJ 
Not published in OJ 
Not published in OJ 
(') Requests concerning the availability of documents not published in the OJ may be sent to the Court's Documentation Department. 
198 Official Journal of the European Communities 12. 12. 88 
Title Date of 
adoption Publication (') 
Tenth annual report concerning the financial year 1986 10/11 November 1987 OJ C 336, 
15. 12. 1987 
Opinion 6/87 on a proposal for a Council (Euratom, ECSC, EEC) Regulation 19 November 1987 OJ C 337, 
provisionally amending the Financial Regulation of 21 December 1977 16. 12. 1987 
applicable to the general budget of the European Communities 
Opinion 7/87 on a second amendment of the proposal for a Council (Euratom, 26 November 1987 OJ C 339, 
ECSC, EEC) Regulation amending the Financial Regulation of 21 December 17. 12. 1987 
1977 appplicable to the general budget of the European Communities 
Opinion 8/87 on a third amendment of the proposal for a Council (Euratom, 27 November 1987 OJ C 339, 
ECSC, EEC) Regulation amending the Financial Regulation of 21 December 17. 12. 1987 
1977 applicable to the general budget of the European Communities 
Special report 7/87 on the management of counterpart funds in respect of food 
aid 
Report on the 1986 JET financial statements 
Special report 1/88 on national and Community systems and procedures 
relating to the management of the European Social Fund 
Special report 2/88 on the integrated approach to Community financing of 
structural measures 
Special report 3/88 on the common organization of the market in fishery 
products in Spain and Portugal 
Special report 4/88 on regional cooperation financed under the Lome 
Conventions 27 November 1987 
10 March 1988 
10 March 1988 
18 May 1988 
18 May 1988 
18 May 1988 OJ C31, 
4. 2. 1988 
Not published in OJ 
OJ C 126, 
16.5. 1988 
OJ C 188, 
18.7. 1988 
OJ C 188, 
18.7. 1988 
OJ C 188, 
18.7. 1988 
Opinion 1 /88 on a proposal for a Council Regulation (ECSC, EEC, Euratom) 19 May 1988 OJ C 166, 
amending the Financial Regulation of 21 December 1977 applicable to the 25. 6. 1988 
general budget of the European Communities 
Opinion 2/88 on a proposal for a Council Regulation amending Council 19 May 1988 OJ C 166, 
Regulation (EEC) No 1883/78 laying down general rules for the financing of 25. 6. 1988 
interventions by the European Agricultural Guidance and Guarantee Fund, 
Guarantee Section 
Opinion 3/88 on a proposal for a Council Regulation amending Regulation 1 June 1988 OJ C 166, 
(EEC) No 729/70 on the financing of the common agricultural policy, as last 25. 6. 1988 
amended by Regulation (EEC) No 3183/87 of 19 October 1987 introducing 
special rules for the financing of the common agricultural policy 
Opinion 4/88 on a proposal to amend the Financial Regulation applicable to 1 June 1988 Not published in OJ 
the budget of the Joint European Torus (JET), Joint Undertaking 
(') Requests concerning the availability of documents not published in the OJ may be sent to the Court's Documentation Department. 
12. 12. 88 Official Journal of the European Communities 199 
Title Date of 
adoption Publication (') 
Report on the 1987 accounts of the Euratom Supply Agency 15 June 1988 Not published in OJ 
Replies delivered by the Court of Auditors, pursuant to Articles 206(a) § 4 and 16 June 1988 Not published in OJ 
209 of the EEC Treaty, to the Council's requests for an opinion on a proposal and 22 June 1988 
for a decision concerning budgetary discipline 
Opinion 5/88 on a proposal for a Council Regulation (ECSC, EEC, Euratom) 16 June 1988 OJ C 191, 
on the definitive uniform arrangements for the collection of own resources 20. 7. 1988 
accruing from value-added tax (VAT) 
Report on the financial statements of the European Coal and Steel 22 June 1988 OJ C 217, 
Community at 31 December 1987 19. 8. 1988 
Opinion 6/88 on a proposal for the amendment of Article 12 of Regulation 14 July 1988 OJ C 212, 
(EEC) No 2891/77 implementing the Decision of 21 April 1970 on the 12. 8. 1988 
replacement of financial contributions from Member States by the 
Communities' own resources 
Special report 5/88 on management and control of public storage 
Opinion 7/88 on a draft Financial Regulation of the European Schools 
Report on the 1987 accounts of the European Centre for the Development of 
Vocational Training (Berlin) 
Report on the 1987 accounts of the European Foundation for the 
Improvement of Living and Working Conditions (Dublin) 
Report (Annex to the 1987 ECSC annual report) on the accounting and 
financial management of the ECSC 
Opinion 8/88 on a proposal for a Council Regulation (ECSC, EEC, Euratom) 
implementing the Decision of 24 June 1988 on the Communities' system of 
own resources 
Report on the 1987 JET financial statements 
Eleventh annual report concerning the financial year 1987 8 September 1988 
22 September 1988 
9 November 1988 
9 November 1988 
9 November 1988 
17 November 1988 
17 November 1988 
17 November 1988 OJ C 274, 
24. 10. 1988 
Not published in OJ 
Not published in OJ 
Not published in OJ 
Not published in OJ 
OJ C 313 
8. 12. 1988 
Not published in OJ 
In this 
edition 
(') Requests concerning the availability of documents not published in the OJ may be sent to the Court's Documentation Department. 
12. 12. 88 Official Journal of the European Communities 201 
ANNEX III 
Financial information relating 
to the general budget of the European Communities 
and 
to the European Development Funds 
(1987) 
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 1987: revenue and expenditure account and balance sheet of assets and liabilities relating to operations under the 
1987 budget (Doc. COM{88) 212 - 216). 
202 Official Journal of the European Communities 12. 12. 88 
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 
12. 12. 88 Official Journal of the European Communities 203 
Contents 
Part I: General budget of the European Communities Page 
§ 1. Background information on the general budget 204 
General budget for the year 1987 and implementation of the budget during 1987 
§ 2. General budget 1987: estimated revenue 208 
§ 3. General budget 1987: estimated expenditure — appropriations for payment 209 
§ 4. General budget 1987: appropriations for commitment 210 
§ 5. Estimated and actual revenue in 1987 211 
§ 6. Appropriations for commitment available in 1987 and their utilization — by sector and by institution 212 
§ 7. Appropriations for payment available in 1987 and their utilization — by sector and by institution 213 
§ 8. Actual own resources in 1987 214 
§ 9. Rate of utilization of appropriations available in 1987 — by sector 215 
§ 10. The consolidated revenue and expenditure account and the balance of the financial year 1987 216 
§ 11. Payments made in 1987 — by sector and by recipient Member State 217 
§ 12. EAGGF-Guarantee: payments made in 1987 — by market and by recipient Member State 218 
§ 13. The structural Funds: commitments entered into and payments made in 1987 — by recipient Member State 219 
Historical data relating to the implementation of the general budget (1983-1987) 
§ 14. Evolution and utilization of the appropriations for payment for the period 1983-1987 — by sector 220 
§ 15. Utilization rates of the appropriations for payment from 1983 to 1987 — by sector 221 
§ 16. Annual payments during the period 1983-1987 — by sector and by institution 222 
§ 17. Evolution of the ratio of 'annual payments by sector' to 'total of annual budgetary payments' (1983-1987) . 223 
§ 18. Annual payments to the Member States (1983-1987) 224 
§ 19. Actual own resources — by Member State (1983-1987) 225 
Part II: The European Development Funds (EDFs) (position at 31 December 1987) 
§ 20. General information on the EDFs 226 
§ 21. The 5th and 6th EDFs: allocation, financing, distribution of aid, total utilization 227 
§ 22. The 5th EDF: aid by type and by recipient country 228 
§ 23. The 5th EDF: aid by economic sector and by recipient country 229 
§ 24. The 6th EDF: aid by type and by recipient country 230 
§ 25. The 6th EDF: aid by economic sector and by recipient country 231 
§ 26. The 5th and 6th EDFs: financing and payment decisions by recipient country 232 
§ 27. The 5th and 6th EDFs: utilization of aid by economic sector 233 
§ 28. The six EDFs: evolution of annual payments (1960-1987) 234 
204 Official Journal of the European Communities 12. 12. 88 
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 Treaty 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 g gold (= 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 + 109LIT + 
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 1984-1987 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 1987 between the ECU and the national currencies were as follows: 1 ECU = 
43,1539 BFR = 7,94457 DKR = 2,06034 DM = 164,483 DRA = 169,467 ESC = 6,98335 FF = 2,31762 HFL = 0,777888 IRL = 
43,1539 LFR = 1521,66 LIT = 140,566 PTA = 0,696793 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 isoglucose levies and VAT up to a maximum of 1,4 % of a uniform EC assessment basis (10)(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 and 1987 all the Member States paid VAT 
own resources with the exception of Portugal, which paid a financial contribution based on its GNP. 
(1) Merger Treaty (8 April 1965): Treaty establishing a Single Council and Single Commission of the European Communities. 
(2) 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). 
(6) 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). 
(7) Treaty of Accession (22 January 1972): Act concerning the Conditions of Accession and the Adjustments to the Treaties. 
(8) Treaty of Brussels (22 July 1975): Treaty amending certain financial provisions of the Treaties establishing the European Communities and of the Merger 
Treaty. 
(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. 
12. 12. 88 Official Journal of the European Communities 205 
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) 
the total of appropriations for payment (AFP) (1) non-differentiated appropriations (NDA) 
+ commitment appropriations (CA) (1); 
= 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 lor commitment: Amounts allo­
cated in the budgets of years 1, 2, 3 for 
commitments in those years. 
Key: 
priations 
for 
commitment 
(AFC) Commitment 
appropriations 
(CA) 
Non-differentiated 
appropriations 
(NDA) 
year 1: AFC: 150 
year 2: AFC: 180 
year 3: AFC: 215 .CA: 50. 
. NDA:100. 
JCA: 60. 
NDA:120. 
_CA: 65. 
NDA:150. Commitment 
appropriations 
(CA) 
of prior years 
Summary of all types of appropriations: 
\ ° ° 
\ H °-
DO \ 
year 1 
year 2 
year 3 < 
si 
*= a. 
O Q. 
(1) 
100 
120 
150 Differentiated 
appropriations 
(DA) 
it 
S&& 
(2) 
50 
60 
65 cl 
E2„ 
a. rat 
(3) 
27 
38 
75 o 
< 
,° E 
•SI g-E 
Q.° 
£° 
(1) + (2) 
150 
180 
215 6T 
.2 | 
Q.°-
<° 
(D + (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 Amounts financed in: 
year 2 year 3 
I 
D I 
-TBTT 
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. 
Appropriations for payment: 
year 1 year 2 year 3 
Key: 
priations 
for 
payment 
(AFP) Payment appropriations 
m (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. 
206 Official Journal of the European Communities 12. 12. 88 
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) 4- 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). 
12. 12. 88 Official Journal of the European Communities 207 
— 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. 
(7) 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. 
(u) 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. 
208 Official Journal of the European Communities 12. 12. 88 
2. General budget 1987: Estimated revenue 
(after supplementary and amending budget No. 1; 
for more detailed information: see § 5) 
(Mio ECU and %) 
Other revenue: 624,6 
Surplus available from 
technical cancellations: 300,0 (0,8 %) 
Note: It should be noted that the Member States, acting on behalf 
of the Communities, are responsible for the collection of 
the amounts due in respect of customs duties, agricultural 
levies and sugar and isoglucose levies. 
VAT own resources 
and financial contributions: 23 644,6 (65,4 %) 
Key: 
Total own resources (by Member State) 
Agricultural levies 
Sugar and isoglucose levies 
Customs duties Customs duties 
8 396,7 (23,2 % 
] VAT own resources and financial contributions 
j Surplus available from technical cancellations 
| | Other revenue Sugar and isoglucose 
levies: 1 438,6 (4,0% 
Agricultural levies: 
1 763,9 (4,9%) 
12. 12. 88 Official Journal of the European Communities 209 
§ 3. General budget 1987: estimated expenditure — appropriations for payment 
(after supplementary and amending budget No. 1; 
ECU and %) for more detailed information: see § 7, column 3) 
-*- 10. Provisional appropriations and contingency reserve: 119,6 (0,3 %) (incl. NDA: 43,2) 
-+~ 9. Cooperation with developing countries: 1 104,9 (3,1 %) (incl. NDA: 317,9) 
-*- 8. Repayments to Member States: 2 869,0 (7,9 %) 
->- 7. Research, energy, etc.: 911,4 (2,5 %) (incl. NDA: 30,2) 
6. Social policy: 2 686,1 (7,4%) (incl. NDA: 115,6) 
*- 5. Regional policy and transport: 2 738,2 (7,6 %) (incl. NDA: 9,5) 
*- 4. Fisheries: 177,4 (0,5 %) (incl. NDA: 98,8) 
3. Agricultural structures: 843,2 (2,3 %) (incl. NDA: 46,9) 
2.11. Other expenditure: 234,8 (0,7 %) 
*- 2.10. Agri-monetary measures: 362,0 (1,0 %) 
*- 2.9. Various markets: 1 072,0 (3,0 %) 
2.8. Meat, eggs, poultry: 3 296,0 (9,1 %) 
*- 2.7. Milk products: 5 901,0 (16,3 %) 
*- 2.6. Tobacco: 828,0 (2,3 %) 
*- 2.5. Wine: 1 278,0 (3,5%) 
»~ 2.4. Fruit and vegetables: 967,0 (2,7 %) 
2.3. Fats and protein plants: 3 739,0 (10,3 %) 
2.2. Sugar: 1 653,0 (4,6%) 
*- 2.1. Cereals and rice: 3 630,0 (10,0 %) 
Key: 
Non-differentiated appropriations (NDA) 
Sectors with differentiated appropriations: 
payment appropriations (PA) 
Appropriations available to the Commission 
Appropriations available to the other 
institutions 
210 Official Journal of the European Communities 12. 12. 88 
§ 4. General budget 1987: Appropriations for commitment 
(after supplementary and amending budget No. 1; for more detailed information: see § 6, column 3) 
(Mio ECU and %) 
>- 10. Provisional appropriations and contingency reserve: 378,1 (1,0 %) (incl. NDA: 43,2) 
>- 9. Cooperation with developing countries: 1 087,7 (2,9 %) (incl. NDA: 317,9) 
>~ 8. Repayments to Member States: 2 869,0 (7,7 %) 
*~ 7. Research, energy, etc.: 933,4 (2,5 %) (incl. NDA: 30,2) 
6. Social policy: 2 745,8 (7,3 %) (incl. NDA; 115,6) 
*- 5. Regional policy and transport: 3 565,2 (9,5 %) (incl. NDA: 9,5) 
*- 4. Fisheries: 178,6 (0,5) (incl. NDA: 98,8) 
—*- 3. Agricultural structures: 976,4 (2,6 %) (incl. NDA: 46,9) 
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 1987 as the commitment appropri­
ations also include amounts to be financed by budgetary 
revenue of subsequent years (see § 1 (1.7)). 
2. EAGGF-Guarantee: 22 960,8 (61,3 %) 
(for the breakdown of these appropriations 
by market, see § 3) 
1. Administration (all institutions): 1 757,8 (4,7 %) 
(for the breakdown of these appropriations 
by institution, see § 3) 
Key: 
Non-differentiated appropriations (NDA) 
Sectors with differentiated appropriations: 
commitment appropriations (CA) 
12. 12. 88 Official Journal of the European Communities 211 
§ 5. Estimated and actual revenue in 1987 
A. Estimated and actual revenue in 1987: 
Type of revenue 
(the Titles (T) or Chapters (Ch) 
corresponding to the budgetary 
nomenclature for 1987 are given in brackets) 
1. Own resources: 
— agricultural levies (Ch 10) 
— sugar and isoglucose levies (Ch 11) 
— customs duties (Ch 12) 
— VAT own resources (Ch 13) 
— financial contribution (GNP) Portugal (Ch 20) 
— balances and adjustments prior to 1987 of VAT own 
resources and financial contributions (Ch 31) 
Total own resources 
2. Surplus available from the preceding financial year (Ch 30) 
Surplus available from technical cancellations (Ch 32) 
3. Other revenue (T 4-9) 
Total revenue Revenue as estimated 
in the 1987 budget (after 
supplementary & amending budget No. 1) 
Mio ECU % 
1 763,9 4,9 
1 438,6 4,0 
8 396,7 23,2 
23 433,0 64,8 
211,6 0,6 
p.m. — 
35 243,8 97,5 
p.m. — 
300,0 0,8 
624,6 1,7 
36168,4 100 Actual revenue in 1987 
(revenue collected 
during the financial year) 
Mio ECU % 
1 626,1 4,5 
1 471,7 4,1 
8 936,5 25,0 
23 463,5 65,6 
210,6 0,6 
-359,3 -1,0 
35 349,1 98,8 
434,2 1,2 
35 783,3 100 
B. Estimated and actual own resources in 1987 by Member State: 
Note: It should be noted that the Member States, acting on behalf of the Communities, are responsible for the collection of the amounts due 
in respect of customs duties, agricultural levies and sugar and isoglucose levies. 
(Mio ECU) 
Type of resource 
Agricultural levies: 
— estimated 
— actual 
Sugar and isoglucose levies: 
— estimated 
— actual 
Customs duties: 
— estimated 
— actual 
VAT own resources/financial 
contributions (1) (2): 
— estimated 
— actual 
Total own resources: 
— estimated 
— actual B 
253,0 
284,8 
103,0 
106,2 
490,0 
529,0 
762,9 
782,6 
1 608,9 
1 702,6 DK 
16,9 
15,4 
56,5 
59,0 
214,7 
194,0 
533,7 
576,3 
821,8 
844,7 D 
229,3 
155,3 
385,9 
394,0 
2 467,1 
2 617,8 
6 451,1 
6 217,5 
9 533,4 
9 384,6 GR 
19,3 
19,1 
14,3 
12,5 
90,5 
92,3 
344,0 
216,5 
468,1 
340,4 E 
284,0 
77,5 
58,1 
53,4 
366,4 
382,7 
1 814,4 
1 195,1 
2 522,9 
1 708,7 F 
156,2 
108,3 
449,7 
452,6 
1 129,8 
1 212,6 
5 300,9 
5 556,5 
7 036,6 
7 330,0 IRL 
14,9 
5,8 
11,8 
12,0 
111,5 
112,0 
217,1 
207,7 
355,3 
337,5 I 
342,8 
411,3 
157,4 
166,6 
782,2 
875,7 
3 639,3 
3 738,0 
4 921,7 
5 191,6 L 
0,4 
0,2 
— 
6,5 
7,3 
62,2 
66,0 
69,1 
73,5 NL 
166,4 
96,8 
119,2 
125,8 
775,2 
817,6 
1 203,2 
1 326,0 
2 264,0 
2 366,2 P 
43,8 
41,5 
0,4 
0,2 
80,8 
93,9 
211,6 
206,2 
336,6 
341,8 UK 
236,9 
410,1 
82,3 
89,4 
1 882,0 
2 001,6 
3 104,2 
3 226,4 
5 305,4 
5 727,5 EUR 12 
1 763,9 
1 626,1 
1 438,6 
1 471,7 
8 396,7 
8 936,5 
23 644,6 
23 314,8 
35 243,8 
35 349,1 
(1) Portugal paid a financial contribution based on its GNP. 
(2) Including balances and adjustments prior to 1987. 
212 Official Journal of the European Communities 12. 12. 88 
§ 6. Appropriations for commitment available in 1987 and their utilization -
by sector and by institution 
(Mio ECU) 
Sector and institution 
(the Sections (S), Titles (T) and Chapters (Ch) 
corresponding to the 1987 budgetary nomen­
clature are shown in brackets) 
1. Administration (all institutions) 
1.1. Commission (S III, Part A) 
1.2. Other institutions (SI, II, IV, V) 
m 
Q. 
c 
.2 
E 
E 
o 
—* 
c 
1 
2 
ft 
CO 
2 
Q. 
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 30-33) 
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 41-42, 44-47) 
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 54-57) 
6. Social policy (T 6) 
(of which: non-differentiated appropriations) 
6.1. Social Fund (Ch 60-61) 
6.2. Other measures (Ch 63-67, 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, 75-76, 78-79) 
8. Repayments to Member States (T 8) 
8.1. Costs incurred in collect, own resources (Ch 80) 
8.2. Other repayments (Ch 83-87) 
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 C < Q. 
.2 Q o 
oS"SSa. 
Q..2 2 CO 
1 ® ? E < 
* 3= £.£ <-> 
°7 2 | </) 
Q. O Q. O .o 
h- , i 
(D 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA + CA 
(NDA) 
CA 
NDA + CA 
NDA + CA 
(NDA) 
NDA 
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 
2 
•o 
^ 
™ 
— 
(2) 
1 757,8 
1 137,1 
620,7 
22 960,8 
3 630,0 
1 653,0 
3 739,0 
967,0 
1 278,0 
828,0 
5 901,0 
3 296,0 
1 072,0 
362,0 
234,8 
976,4 
(46,9) 
917,2 
59,2 
193,6 
(113,8) 
42,7 
150,9 
3 565,2 
(9,5) 
3 341,9 
3,2 
220,1 
2 745,8 
(115,6) 
2 602,5 
143,3 
933,4 
(30,2) 
117,7 
716,1 
78,0 
21,6 
2 816,1 
1 305,9 
1 510,2 
1 087,7 
(317,9) 
511,5 
576,2 
378,1 
(43,2) 
35 657,1 
(26 454,0) 
37 414,9 
28 211,8 
9 203,1 ^ 
00 £ 
Z 1 c P 
!>£?° 
- <5 c => U-.2.C0.Q 
(3) 
1 757,8 
1 137,1 
620,7 
22 960,8 
3 630,0 
1 653,0 
3 739,0 
967,0 
1 278,0 
828,0 
5 901,0 
3 296,0 
1 072,0 
362,0 
234,8 
976,4 
(46,9) 
917,2 
59,2 
178,6 
(98,8) 
27,7 
150,9 
3 565,2 
(9,5) 
3 341,9 
3,2 
220,1 
2 745,8 
(115,6) 
2 602,5 
143,3 
933,4 
(30,2) 
117,7 
716,1 
78,0 
21,6 
2 869,0 
759,9 
2 109,1 
1 087,7 
(317,9) 
511,5 
576,2 
378,1 
(43,2) 
35 695,0 
(26 491,9) 
37 452,8 
28 249,7 
9 203,1 — 
<oc£ 
•jo — 
Q.S 
2 Q.H 
£ CL> 
(4) 
1 759,9 
1 139,2 
620,7 
22 960,8 
4 236,7 
2 035,6 
4 413,9 
967,2 
800,3 
803,6 
5 013,7 
3 033,2 
949,2 
655,0 
52,4 
1 067,8 
(29,6) 
1 024,6 
43,2 
295,3 
(109,8) 
27,7 
267,6 
4 119,4 
(8,8) 
3 668,0 
56,2 
395,2 
3 758,1 
(148,9) 
3 565,8 
192,3 
1 448,8 
(27,6) 
159,5 
1 162,8 
98,9 
27,6 
2 869,0 
759,9 
2 109,1 
1 407,2 
(317,4) 
604,1 
803,1 
115,2 
(4,0) 
38 041,6 
(26 475,9) 
39 801,5 
28 235,8 
11 565,7 Utilization of appropriations 
commitments 
entered into 
in 1987 
Amount 
(5) 
1 719,0 
1 120,0 
599,0 
22 950,3 
4 236,6 
2 035,6 
4 413,8 
967,1 
800,3 
803,6 
5 013,0 
3 033,1 
941,1 
654,9 
51,2 
979,2 
(25,1) 
940,5 
38,7 
232,4 
(99,3) 
17,4 
215,0 
3 931,9 
(8,4) 
3 662,1 
56,1 
213,7 
3 694,2 
(130,3) 
3 523,6 
170,6 
1 336,2 
(27,0) 
153,0 
1 067,2 
90,4 
25,6 
2 380,9 
759,9 
1 621,0 
1 265,4 
(283,1) 
572,0 
693,4 
— 
(-) 
36 770,5 
(25 904,4) 
38 489,5 
27 623,4 
10 866,1 Rate 
(%) 
(5a) = 
(5/4) 
(97,7) 
(98,3) 
(96,5) 
(99,9) 
(99,9) 
(100) 
(99,9) 
(99,9) 
(100) 
(100) 
(99,9) 
(99,9) 
(99,1) 
(99,9) 
(97,7) 
(91,7) 
(84,8) 
(91,8) 
(89,6) 
(78,7) 
(90,4) 
(62,8) 
(80,3) 
(95,4) 
(95,5) 
(99,8) 
(99,8) 
(54,1) 
(98,3) 
(87,5) 
(98,8) 
(88,7) 
(92,2) 
(97,8) 
(95,9) 
(91,8) 
(91,4) 
(92,8) 
(83,0) 
(100) 
(76,9) 
(89,9) 
(89,2) 
(94,7) 
(86,3) 
(-) 
(-) 
(96,7) 
(97,8) 
(96,7) 
(97,8) 
(94,0) Appropriations 
remaining 
available for 1988 
•2 oo 
E ai1-
3 O ** 
S-9 
Z o£ 
(6) 
— 
— 
— 
— 
— — 
— 
— — 
— 
— 
— 
— 
— 
— 
— 
(-) 
— — 
— 
(—) 
— 
— 
— 
(-) 
— 
— 
— 
16,7 
(16,7) 
— 16,7 
— 
(-) 
— 
— — 
— 
— 
— — 
— 
(-) 
— 
— 
— 
(~) 
16,7 
(16,7) 
16,7 
16,7 
— o> 
•E-5 
E* 
<!<§ 
O CO T-
(7) 
— 
— 
— 
— 
— — 
— 
— — 
— 
— 
— 
— 
— 
— 
59,0 
(-) 
59,0 
0,0 
6,5 
(—) 
— 
6,5 
149,7 
(-) 
3,3 
— 
146,4 
2,1 
(-) 
0,0 
2,1 
103,1 
(-) 
— 
95,1 
6,1 
1,9 
— 
— — 
98,1 
(-) 
— 
98,1 
— 
(-) 
418,5 
(-) 
418,5 
— 
418,5 « 
o 
CO 
O 
(8) = 
(4-5-
6-7) 
40,9 
19,2 
21,7 
10,5 
0,1 
0,0 
0,1 
0,1 
0,0 
0,0 
0,7 
0,1 
8,1 
0,1 
1,2 
29,6 
(4,5) 
25,1 
4,5 
56,4 
(10,5) 
10,3 
46,1 
37,8 
(0,4) 
2,6 
0,1 
35,1 
45,1 
(1,9) 
42,2 
2,9 
9,5 
(0,6) 
6,5 
0,5 
2,4 
0,1 
488,1 
— 
488,1 
43,7 
(34,3) 
32,1 
11,6 
115,2 
(4,0) 
835,9 
(554,8) 
876,8 
595,7 
281,1 
r 
O 
3 
00 
£ Parliament (S I) 
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 349,5 
199,6 
(35,7) 
36 794,2 
(27 591,1) 
45,8 
25,8 
37 414,9 349,5 
199,6 
(35,7) 
36 832,1 
(27 629,0) 
45,8 
25,8 
37 452,8 349,5 
199,6 
(35,7) 
39 180,8 
(27 615,1) 
45,8 
25,8 
39 801,5 337,7 (96,6) 
192,1 (96,2) 
(35,2) (98,6) 
37 890,5 (96,7) 
(27 024,4) (97,9) 
44,0 (96,1) 
25,2 (97,7) 
38 489,5 (96,7) — 
(-) 
16,7 
(16,7) 
— 
— 
16,7 — 
(-) 
418,5 
(-) 
— 
— 
418,5 11,8 
7,5 
(0,5) 
855,1 
(574,0) 
1,8 
0,6 
876,8 
(1) Budget appropriations amended after taking account of commitment appropriations remaining from 1986 appropriations corresponding to receipts for services performed on behalf of 
outside bodies and transfers between budget headings; not including non-automatic carry-overs from 1986. 
12. 12. 88 Official Journal of the European Communities 213 
§ 7. Appropriations for payment available in 1987 and their utilization 
by sector and by institution 
(Mio ECU) 
Sector and institution 
(for the corresponding 
terms and budget 
headings see $ 6) 
1. Administration 
1.1. Commission 
1.2. Other institutions 
CD 
r 
a. 
CO 
E 
E 
o 
CO 
O 
o 
m 
m 
CD 
fi 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 CL 
.2 Q « 
eg CDS-Q. 
a.S £ s 
2 c ,2a Type of apt 
- non-differ( 
approprial 
- payment s 
(1) 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA 
NDA + PA 
(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 A. Appropriations of the financial year 1987 
Evolution ol 
appropriations 
•o 
I? 
(2) 
1 757,8 
1 137,1 
620,7 
22 960,8 
3 630,0 
1 653,0 
3 739,0 
967,0 
1 278,0 
828,0 
5 901,0 
3 296,0 
1 072,0 
362,0 
234,8 
896,2 
(46,9) 
840,1 
56,1 
197,3 
(113,8) 
42,7 
154,6 
2 738,2 
(9,5) 
2 497,3 
27,1 
213,8 
2 686,1 
(115,6) 
2 542,3 
143,8 
911,4 
(30,2) 
81,6 
731,8 
73,7 
24,3 
2 816,1 
1 305,9 
1 510,2 
1 229,9 
(317,9) 
597,6 
632,3 
119,6 
(43,2) 
34 555,6 
(26 454,0) 
36 313,4 
28 211,8 
8 101,6 So = c 
CD <5=o 
r c c T Final budge 
(after suppi 
ary and am 
budget No. 
(3) 
1 757,8 
1 137,1 
620,7 
22 960,8 
3 630,0 
1 653,0 
3 739,0 
967,0 
1 278,0 
828,0 
5 901,0 
3 296,0 
1 072,0 
362,0 
234,8 
843,2 
(46,9) 
787,1 
56,1 
177,4 
(98,8) 
27,7 
149,7 
2 738,2 
(9,5) 
2 497,3 
27,1 
213,8 
2 686,1 
(115,6) 
2 542,3 
143,8 
911,4 
(30,2) 
81,6 
731,8 
73,7 
24,3 
2 869,0 
759,9 
2 109,1 
1 104,9 
(317,9) 
572,6 
532,3 
119,6 
(43,2) 
34 410,6 
(26 491,9) 
36 168,4 
28 249,7 
7 918,7 
Final appro 
priations 
1987 (1) 
(4) 
1 759,9 
1 139,2 
620,7 
22 960,8 
4 236,7 
2 035,6 
4 413,9 
967,2 
800,3 
803,6 
5 013,7 
3 033,2 
949,2 
655,0 
52,4 
830,1 
(29,6) 
790,3 
39,8 
174,0 
(109,8) 
27,7 
146,3 
2 679,5 
(8,8) 
2 562,3 
27,1 
90,1 
2 724,8 
(148,9) 
2 542,3 
182,5 
965,9 
(27,6) 
89,6 
775,4 
71,1 
29,8 
2 869,0 
759,9 
2 109,1 
1 097,4 
(317,4) 
572,6 
524,8 
109,2 
(4,0) 
34 410,7 
(26 475,9) 
36 170,6 
28 235,8 
7 934,8 Utilization 
of appropriations Payments 
made 
in 1987 
(5) 
1 577,0 
1 032,4 
544,6 
22 949,6 
4 236,6 
2 035,6 
4 413,5 
967,1 
800,3 
803,6 
5 013,0 
3 033,1 
940,7 
654,9 
51,2 
799,0 
(1,6) 
788,1 
10,9 
124,6 
(78,5) 
17,4 
107,2 
2 479,9 
(0,3) 
2 447,1 
22,6 
10,2 
2 615,4 
(81,4) 
2 509,9 
105,5 
803,1 
(6,3) 
88,6 
657,9 
34,9 
21,7 
2 281,1 
660,1 
1 621,0 
481,3 o3^ 
? 00 
(6) 
142,0 
87,6 
54,4 
0,7 
— — 0,3 
— — — — — 0,4 
— — 
26,6 
(23,5) 
2,2 
24,4 
38,9 
(20,8) 
— 38,9 
199,2 
(8,1) 
115,2 
4,4 
79,6 
107,5 
(65,6) 
32,4 
75,1 
161,7 
(20,7) 
1,0 
117,0 
35,7 
8,0 
99,8 
99,8 
— 
581,8 
(121,2) (161,9) 
179,6 
301,7 
— 
(-) 360,8 
221,0 
— 
(-) 
32 534,0 1 216,2 o 
13 
«5 
CO 
O 
(7) = 
(4-5 
-6) 
40,9 
19,2 
21,7 
10,5 
0,1 
0,0 
0,1 
0,1 
0,0 
0,0 
0,7 
0,1 
8,1 
0,1 
1,2 
4,5 
(4,5) 
— 4,5 
10,5 
(10,5) 
10,3 
0,2 
0,4 
(0,4) 
— 0,1 
0,3 
1,9 
(1,9) 
— 1,9 
1,1 
(0,6) 
0,0 
0,5 
0,5 
0,1 
488,1 
— 488,1 
34,3 
(34,3) 
32,2 
2,1 
109,2 
(4,0) 
660,5 
(25 520,0) (401,1) (554,8) 
34 111,0 1358,2 
27 097,0 
7 014,0 543,1 
815,1 701,4 
595,7 
105,7 B. Carry-overs 
CO w 
§. <5 Appropriati 
carried ove 
from 1986 
(after trans 
(8) 
123,6 
75,0 
48,6 
3,5 
— — 0,2 
— — — — — 3,3 
— — 
101,8 
(18,5) 
81,8 
20,0 
42,4 
(21,4) 
— 42,4 
242,6 
(3,2) 
94,2 
1,9 
146,5 
259,3 
(37,4) 
211,5 
47,8 
112,5 
(31,4) 
1,6 
65,0 
38,3 
7,6 
127,8 
127,8 
— 
391,7 
(88,5) 
161,1 
230,6 
— 
(-) 
1 281,6 
(331,7) 
1 405,2 
455,3 
949,9 from 1986 
Utilization 
of appropriations Payments 
made 
in 1987 
(9) 
106,4 
66,1 
40,3 
2,2 
— — 0,2 
— — — — — 2,0 
— — 
89,6 
(14,5) 
75,1 
14,5 
33,2 
(20,9) 
— 33,2 
207,4 
(1,8) 
87,9 
1,7 
117,8 
237,1 
(28,6) 
205,4 
31,7 
97,2 
(26,2) 
1,1 
62,3 
28,9 
4,9 
127,8 
127,8 
— 
312,5 
(64,9) 
125,6 
186,9 
— 
(-) 
1107,0 
(286,9) 
1 213,4 
393,3 
820,1 ?co 
O O 
(10) 
— — 
— — — — — — — — — — — 
— 
(-) — — 
— 
(-) — — 
— 
(-) — — — 
— 
(-) — — 
2,3 
(-) — 2,3 
— — 
— 
— — 
— 
(-) — — 
— 
(-) 
2,3 
(-) 
2,3 
— 2,3 o 
15 
CO 
O 
(11) = 
(8-9 
-10) 
17,2 
8,9 
8,3 
1,3 
— — 0,0 
— — — — — 1,3 
— — 
12,2 
(4,0) 
6,7 
5,5 
9,2 
(0,5) 
— 9,2 
35,2 
(1,4) 
6,3 
0,2 
28,7 
22,2 
(8,8) 
6,1 
16,1 
13,0 
(5,2) 
0,5 
0,4 
9,4 
2,7 
— 
— — 
79,2 
(23,6) 
35,5 
43,7 
— 
(-) 
172,3 
(44,8) 
189,5 
62,0 
127,5 C. Total appropriations 
available and payments 
in 1987 
^ 
(flCD Total 
appropriati 
available in 
(12) = 
(4 + 8) 
1 883,5 
1 214,2 
669,3 
22 964,3 
4 236,7 
2 035,6 
4 414,1 
967,2 
800,3 
803,6 
5 013,7 
3 033,2 
952,5 
655,0 
52,4 
931,9 
(48,1) 
872,1 
59,8 
216,4 
(131,2) 
27,7 
188,7 
2 922,1 
(12,0) 
2 656,5 
29,0 
236,6 
2 984,1 
(186,3) 
2 753,8 
230,3 
1 078,4 
(59,0) 
91,2 
840,4 
109,4 
37,4 
2 996,8 
887,7 
2 109,1 
1 489,1 
(405,9) 
733,7 
755,4 
109,2 
(4,0) 
35 692,3 
(26 807,6) 
37 575,8 
28 691,1 
8 884,7 Total 
payments 
made in 
Amount 
(13) = 
(5 + 9) 
1 683,4 
1 098,5 
584,9 
22 951,8 
4 236,6 
2 035,6 
4 413,7 
967,1 
800,3 
803,6 
5 013,0 
3 033,1 
942,7 
654,9 
51,2 
888,6 
(16,1) 
863,2 
25,4 
157,8 
(99,4) 
17,4 
140,4 
2 687,3 
(2,1) 
2 535,0 
24,3 
128,0 
2 852,5 
(110,0) 
2 715,3 
137,2 
900,3 
(32,5) 
89,7 
720,2 
63,8 
26,6 
2 408,9 
787,9 
1 621,0 
793,8 
(186,1) 
305,2 
488,6 
— 
— 
33 641,0 
(25 806,9) 
35 324,4 
27 490,3 
7 834,1 1987 
Rate I 
(%) 
(13a) = 
(13/12) 
(89,4) 
(90,5) 
(87,4) 
(99,9) 
(99,9) 
(100) 
(99,9) 
(99,9) 
(100) 
(100) 
(99,9) 
(99,9) 
(99,0) 
(99,9) 
(97,7) 
(95,4) 
(33,5) 
(99,0) 
(42,5) 
(72,9) 
(75,8) 
(62,8) 
(74,4) 
(92,0) 
(17,5) 
(95,4) 
(83,8) 
(54,1) 
(95,6) 
(59,0) 
(98,6) 
(59,6) 
(83,5) 
(55,1) 
(98,4) 
(85,7) 
58,3 
71,1 
80,4 
88,8 
76,9 
53,3 
(45,8) 
41,6 
64,7 
— 
— 
(94,3) 
(96,3) 
(94,0) 
(95,8) 
(88,2) 
c 
.y 
In 
i Parliament 
Council 
(of which: ESC) 
Commission 
(of which: NDA) 
Court of Justice 
Court of Auditors 
Grand total NDA 
NDA 
(NDA) 
NDA + PA 
(NDA) 
NDA 
NDA 
NDA + PA 349,5 
199,6 
(35,7) 
35 692,7 
(27 591,1) 
45,8 
25,8 
36 313,4 349,5 349,5 
199,6 199,6 
(35,7) (35,7) 
35 547,7 35 549,9 
(27 629,0) (27 615,1) 
45,8 45,8 
25,8 25,8 
36 168,4 36 170,6 302,1 35,6 11,8 
177,0 15,1 7,5 
(34,4) (0,8) (0,5) 
33 566,4 1 303,8 679,7 
(26 552,4) (488,7) (574,0) 
41,7 2,3 1,8 
23,8 1,4 0,6 
34 111,0 1358,2 701,4 23,7 
21,4 
(1,0) 
1 356,6 
(406,7) 
2,6 
0,9 
1 405,2 20,2 — 3,5 
17,2 — 4,2 
(0,9) (—) (0,1) 
1173,1 2,3 181,2 
(353,0) (—) (53,7) 
2,2 — 0,4 
0,7 — 0,2 
1213,4 2,3 189,5 373,2 
221,0 
(36,7) 
36 906,5 
(28 021,8) 
48,4 
26,7 
37 575,8 322,3 (86,4) 
194,2 (87,9) 
(35,3) (96,2) 
34 739,5 (94,1) 
(26 905,4) (96,0) 
43,9 (90,7) 
24,5 (91,8) 
35 324,4 (94,0) 
(1) 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. 
214 Official Journal of the European Communities 12. 12. 88 
8. Actual own resources in 1987 
(for basic figures, see § 5) 
~ 2 
2 o 
.2 E 
•a -o 
o o 
|| 
< c A. Actual own resources 
in 1987, by type 
(Mio ECU and %): 
J 
Total: 35 349,1 Mio ECU m B. Actual own resources in 1987, by Member State and by type 
(Mio ECU and %): 
9 
B DK I 
^sm 
GR n JM 
E F IRL I L 
Total: 35 349,1 Mio ECU fl 
NL UK 
C. Types of own resources, by Member State: 
29,3 
3,4 2,5 26,7 VAT own resources 
and financial contributions (%) 
0,9 5,1 23,8 
0,9 16,0 
0,3 5,7 13.8 
0,9 Customs duties (%) 
B DK D GR E F IRL I L NL P UK B DK D GR E F IRL I L NL P UK 
Agricultural levies (%) 
17,5 
9,5 
0,9 1,2 4,8 6,7 
0,4 25,3 
0,0 5,9 
2,6 25,2 
B DK D GR E F IRL I L NL P UK 30,8 
Sugar and isoglucose 
levies (%) 
B DK D GR E F IRL I L NL P UK 
12. 12. 88 Official Journal of the European Communities 215 
§ 9. Rate of utilization of appropriations available in 1987, by sector 
Final appropriations 
commitment in 1987 
(for basic figures, see § 6 
columns 4 to 8) for Final 1987 appropriations 
for payment 
(for basic figures see § 7, 
columns 4 to 7) 
Id Total : 
39 801,5 Mio ECU 
a 
O) 
lO 
18 
F 
< r V 
§5 
4 -j 
CM O 
CU 00 II 
Of-
CO in 
CM 
-\ 
I 
* * 
II 
<i) r 
m -
2 
o CO 
^ 3 
e 
S 
co B oc m 
^ 2$ 
rr'n 
II 
OC .2 
CO § 
ll 
u ,S 
S) g. 
O-D 
a> ^~ 
_1 
?, 
>- 0) 
m en 
Pi 
0. o 
°. Total: 
36 170,6 Mio ECU 
do u 
• 
• 
• 
Q Key: 
— Non-differentiated 
appropriations 
— Commitment 
appropriations 
— Payment appropriations 
— Rate of commitment 
— Rate of payment 
— Rate of unused 
appropriations 
remaining available for 
1988 (appropriations 
remaining and/or 
carried over) 
— Cancellations 
III. Appropriations for pay­
ment carried over from 
1986 
(for basic figures, see § 7 
columns 8 to 11) 
Total: 1 405,2 Mio ECU 
S3 5 
i—I 
1 
F 
< i-Si 
< = LUCi) 
CM w\ 
II 
< to 
CO ^ 
y 
1 
u_ 
-* o , ok i! 
©I 
m fr f 
to 
CD % 
2 
1 
a) a DC @ 
N b vm 
% 
M »|W II 
cc a 
CO *8 
% r 
c R 
1^ 
O Q) 
OT3 
O) 
1,9% 
3,8 % / 86,3 % \ Mv-«- 13,5% 
0,2 % 
216 Official Journal of the European Communities 12. 12. 88 
10. The consolidated revenue and expenditure account and the balance of the financial year 1987 
(Application of Article 15 of Council Regulation (EEC, Euratom, ECSC) No 2891/77) 
Revenue: 
Funds actually available for 
the financial year 1987 
Total: 
35 990,7 Mio ECU Expenditure: 
Use made of funds available 
for the financial year 1987 
Total: 
35 990,7 Mio ECU 
(Mio ECU) 
(4) Exchange 
rate advantages 
in 1987 17,9 521,5 
(7) Balance (surplus) 
for the 
financial year 
1987 
(3)Cancellations of carry­
overs from 1986 
(see § 7, column 11) 
189,5 
(2) Other actual 
revenue in 1987 
(see § 5) 434,2 7 
r 
(1) Total actual own re­
sources in 1987 
(see §5): 35 349,1 VAT own 
resources 
and financial 
contributions: 
23 314,8 
(including 
balances 
and adjustments 
before 1987) i< 
V (6) 1987 appropriations 
for payment carried 
over to 1988 
(see § 7, column 6) 
34111,0 (5) Payments made in 
1987 against appro­
priations of the 
1987 budget 
(see § 7, column 5) 
Note: The result for the financial year 1987, defined as (1) + (2) - (5) - (6), is +314,1 Mio ECU. 
12. 12. 88 Official Journal of the European Communities 217 
§ 11. Payments made in 1987, by sector and by recipient Member State 
Note: Payments made in 1987 = payments against 1987 appropriations plus payments against carry-overs from 1986. 
A. Payments by sector (Mio ECU and %) 
(see also § 7, column 13, and § 16) 
2. EAGGF-Guarantee: 22 951,8 
1. Administration: 1 683,4 
9. Cooperation with 
developing countries: 793,8 
8. Repayments 
to Member States 2 408,9 
7. Research, energy, etc.: 900,3 
B. Payments to Member States (Mio ECU and %): 
(see also § 12, § 13 and § 18) 
Note: This table shows the payments 
made in 1987 to Member States 
under the principal sectors 
(87,2 % of the total payments in 1987) >- 3. Agricultural structures: 888,6 
4. Fisheries: 157,8 
>- 5. Regional policy 
and transport: 2 687,3 
>- 6. Social policy: 2 852,5 
^ 
i| j^-— • i|||j||l jjjir— <t 
£J\ V 
' 
MEL ? Costs incurred in 
collecting own 
resources 
EAGGF-Guidance 
Fisheries 
Regional Fund 
Social Fund 
EAGGF-Guarantee 
££3L (Mio ECU) 
IRL NL Allocation 
available EUR 12 
EAGGF-Guarantee (T1 -2)(1) 
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 86) 821,3 
18,7 
2,9 
23,0 
56,5 
63,0 1 057,4 
15,7 
4,9 
16,6 
31,7 
17,9 3992,7 
128,3 
4,3 
73,4 
131,6 
211,5 1340,5 
78,0 
3,5 
293,9 
151,9 
8,7 
0,4 601,6 
21,2 
5,6 
345,3 
311,5 
29,2 
670,4 5 657,0 
237,2 
15,8 
311,2 
406,1 
117,0 954,9 
87,0 
5,7 
134,7 
247,4 
8,3 3899,7 
146,3 
13,0 
563,5 
539,2 
94,5 1,5 
4,5 
3,8 
1,7 
0,5 2 727,8 
17,1 
4,8 
19,6 
52,1 
68,8 146,6 
28,3 
4,6 
222,7 
190,5 
8,5 
130,2 1 747,2 
80,9 
11,6 
526,7 
595,1 
160,0 3,6 
81,1 
0,6 22951,8 
863,2 
157,8 
2 535,0 
2 715,3 
787,9 
801,0 
Total 985,4 
(3,2%) 1 144,2 
(3,7%) 4 541,8 
(14,7%) 1 876,9 
(6,1%) 1 984,8 
(6,4%) 6 744,3 
(21,9%) 1 438,0 
(4,7%) 5 256,2 
(17,1%) 12,0 
(0,0%) 2 890,2 
(9,4%) 731,4 
(2,4%) 3121,5 
(10,1%) 85,3 
(0,3%) 30 812,0 
(100%) 
(1) For the EAGGF-Guarantee these figures include adjusted monetary compensatory amounts (see § 12 D, footnote (1)). 
218 Official Journal of the European Communities 12. 12. 88 
§ 12. EAGGF-Guarantee: payments made in 1987, by market and by recipient Member State 
A. Payments made in 1987, 
by market (Mio ECU and %): 
ZZ7\ 
Total: 22 951,8 Mio ECU B. B. Payments made in 1987, by recipient Member State 
(Mio ECU and %): 
Key: 
-for the colour 
corresponding 
to each market, 
see A 
Total: 22 951,8 Mio ECU 
C. Distribution by recipient Member State of payments made in 1987 for the principal markets (%): 
33,3 
Milk products (%) 
22,8 20,5 28,9 
8,4 
2,7 0,1 0,4 6,4 
2,2 0,0 7,5 
0,1 Fats and prote 
plants (%) 
18, 
4,9 2,8 in 
5 17,8 
5,1 
i,e 
0,0 1 
0,0 7,3 
2,2 6,5 
0,0 
B DK D GR E F IRL I L NL P UK 
Meat, eggs, 
poultry (%) B DK D GR E F IRL I L NL P UK 
Sugar (%) MM38 3 
26,2 
B DK D GR E F IRL I L NL P UK B DK D GR E F IRL I L NL P UK Cereals and 
rice (%) 
3'42,5 
n-17,2 
1,6 o,8 V 41,4 
12,6 
0,4 I 5,0 15,0 
B DK D GR E F IRL I L NL P UK 
62,1 Fruit and vegetables 
(%) 
23,8 W 
0,4 0,3 0,9 7,5 
2,5 
0,0 0,7 1,4 0,4 
B DK D GR E F IRL I L NL P UK 
D. Record of payments made in 1987, 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 
144,4 
169,5 
215,0 
4,3 
— 7,1 
136,1 
56,7 
35,5 
23,9 
28,8 
821,3 DK 
105,7 
100,3 
124,8 
2,6 
— — 419,0 
190,8 
60,1 
70,2 
-16,1 
1 057,4 D 
733,0 
433,9 
815,2 
8,9 
5,7 
57,2 
1 143,0 
454,4 
95,4 
143,8 
102,2 
3992,7 GR 
68,5 
5,4 
224,9 
230,4 
12,0 
251,9 
2,5 
103,0 
220,9 
230,7 
-9,7 
1 340,5 E 
34,6 
113,7 
68,1 
24,4 
95,2 
20,0 
19,3 
123,1 
72,4 
25,4 
5,4 
601,6 F 
1 752,4 
778,5 
786,7 
72,1 
263,5 
78,4 
1 028,0 
794,7 
78,2 
-0,2 
24,7 
5657,0 IRL 
15,1 
11,0 
1,6 
0,1 
— — 321,7 
445,8 
42,1 
105,2 
12,3 
954,9 I 
533,0 
71,8 
1471,2 
600,1 
423,6 
382,7 
112,8 
275,5 
79,3 
-9,2 
-41,1 
3 899,7 L 
-0,3 
— 
0,0 
— — — 0,8 
0,0 
0,2 
0,0 
0,8 
1,5 NL 
212,2 
272,1 
323,6 
7,2 
— 0,8 
1451,0 
173,1 
139,3 
156,0 
-7,5 
2727,8 P 
6,1 
95,4 
13,6 
— 5,5 
2,4 
10,9 
0,2 
12,5 
— 
146,6 UK 
638,0 
73,3 
285,8 
3,4 
0,3 
— 376,3 
405,1 
117,0 
-103,4 
-48,6 
1 747,2 (Mio ECU) 
Alloca­
tion 
not 
avail­
able 
— 
1,4 
— — — — — 2,2 
— 
3,6 EUR 12 
4236,6 
2035,6 
4413,7 
967,1 
800,3 
803,6 
5012,9 
3033,1 
942,8 
654,9 
51,2 
22951,8 
(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. 
12. 12. 88 Official Journal of the European Communities 219 
§13. The structural Funds: commitments entered into and payments made ^ 
in 1987, by recipient Member State /J 
Notes: 
The structural Funds (EAGGF-Guidance, Regional Fund, 
Social Fund) are provided with differentiated appropri­
ations, which comprise both commitment appropriations 
and payment appropriations with different financial inci­
dence (see §1(1.7)). The commitments entered into in 1987 
relate to multiannual projects which are financed in 1987 
and in subsequent years; the payments made in 1987 relate 
to commitments entered into in 1987 and in previous years. /A 
(a) Commitments 
(b) Payments 
EAGGF-Guidance: 
(a) Commitments 
(b) Payments 21,1 
18,7 11,6 
15,7 121,6 
128,3 Social 
Fund 
105,1 
78,0 79,4 
21,2 243,8 
237,2 96,6 
87,0 96,5 
146,3 3,9 
4,5 13,8 
17,1 62,2 
28,3 84,7 
80,9 940,5 
863,2 
Regional Fund: 
(a) Commitments 
(b) Payments 23,6 
23,0 15,1 
16,6 133,9 
73,4 307,3 
293,9 660,7 
345,3 319,1 
311,2 163,5 
134,7 992,1 
563,5 3,3 
3,8 20,4 
19,6 388,9 
222,7 634,1 
526,7 0,1 
0,6 3662,1 
2535,0 
Social Fund: 
(a) Commitments 
(b) Payments 58,6 
56,5 37,2 
31,7 176,* 
131,6 199,9 
151,9 511,2 
311,5 421,7 
406,1 254,1 
247,4 699,6 
539,2 1,9 
1,7 77,2 
52,1 372,1 
190,5 713,3 
595,1 3523,6 
2715,3 
Total: 
(a) Commitments 
(b) Payments 103,3 
98,2 63,9 
64,0 432,5 
333,3 612,3 
523,8 1251,3 
678,0 984,6 
954,5 514,2 
469,1 1 788,2 
1 249,0 9,1 
10,0 111,4 
88,8 823,2 
441,5 1 432,1 
1 202,7 0,1 
0,6 8126,2 
6113,5 
220 Official Journal of the European Communities 12. 12. 88 
§ 14. Evolution and utilization of the appropriations for payment 
for the period 1983-1987 - 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) 
1. Administration 1983 
(all 1984 
institutions) 1985 
1986 
1987 
2. EAGGF- 1983 
Guarantee 1984 
1985 
1986 
1987 
3. Agricultural 1983 
structures 1984 
1985 
1986 
1987 
4. Fisheries 1983 
1984 
1985 
1986 
1987 
5. Regional 1983 
policy and 1984 
transport 1985 
1986 
1987 
6. Social policy 1983 
1984 
1985 
1986 
1987 
7. Research, 1983 
energy, etc. 1984 
1985 
1986 
1987 
8. Repayments 1983 
to Member 1984 
States 1985 
1986 
1987 
9. Cooperation 1983 
with 1984 
developing 1985 
countries 1986 
1987 
10. Provisional 1983 
appropriations 1984 
and contin- 1985 
gency reserve 1986 
(Commission) 1987 A. Appropriations for payment for the financial year 
Evolution of appropriations 
budget 
(1) budget (1) 
(2) appropri­
ations!2) 
(3) 
1 153,4 1 161,6 1 162,9 
1 229,1 1 236,6 1 245,6 
1 332,5 1 332,5 1 336,0 
1 604,4 1 604,4 1 611,0 
1 757,8 1 757,8 1 759,9 
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 
22 960,8 22 960,8 22 960,8 
651,2 653,4 668,5 
655.6 660,1 666,9 
687.7 687,7 747,7 
790,2 790,2 800,2 
896,2 843,2 830,1 
70,1 70,1 45,7 
101,4 112,4 87,4 
105,4 105,4 107,4 
164,1 164,1 151,1 
197,3 177,4 174,0 
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 
2 738,2 2 738,2 2 679,5 
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 
2 686,1 2 686,1 2 724,8 
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 
911.4 911,4 965,9 
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 
2 816,1 2 869,0 2 869,0 
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 
1 229,9 1 104,9 1 097,4 
122,3 106,3 87,0 
1 760,2 1 690,8 — 
23,2 23,2 11,3 
95,0 95,0 31,1 
119,6 119,6 109,2 Utilization of appropriations 
Pay­
ments 
(4) overs to 
the follow­
ing financial 
(5) Cancella­
ted (3-
4-5) 
1 019,2 100,5 43,2 
1 127,2 96,4 22,0 
1 210,3 104,1 21,6 
1 427,5 123,7 59,8 
1 577,0 142,0 40,9 
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 
22 949,6 0,7 10,5 
513.7 131,5 23,3 
611,1 55,2 0,6 
690.8 56,5 0,4 
720,8 76,8 2,6 
799,0 26,6 4,5 
31,9 12,5 1,3 
46,6 38,4 2,4 
72,6 21,7 13,1 
108,3 42,4 0,4 
124,6 38,9 10,5 
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 
2 479,9 199,2 0,4 
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 
2 615,4 107,5 1,9 
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 
803.1 161,7 1,1 
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 
2 281,1 99,8 488,1 
517,8 463,1 3,7 
767,0 264,6 0,6 
855.2 236,6 0,9 
744,8 416,7 0,1 
481.3 581,8 34,3 
— — 87,0 
— — 11,3 
— — 31,1 
— — 109,2 B. Carry-overs from the previous 
financial year 
overs (3) 
(7) 
106,7 
100,6 
96,4 
104,1 
123,6 
2,6 
0,1 
2,6 
4,4 
3,5 
397,3 
131,2 
55,2 
56,5 
101,8 
30,4 
12,5 
38,4 
21,7 
42,4 
175,5 
126,9 
232,6 
195,1 
242,6 
226,8 
617,7 
125,9 
247,1 
259,3 
120,4 
162,5 
269,5 
220,2 
112,5 
116,0 
99,5 
8,7 
4,7 
127,8 
345,3 
445,6 
264,6 
236,7 
391,7 
— Utilization of appropriations 
Pay­
ments 
(8) Carry­
overs to 
the follow­
ing financial 
(9) Cancella­
tion (7-
8-9) 
91,2 — 15,5 
88,9 — 11,7 
85,7 — 10,7 
94,5 — 9,6 
106,4 — 17,2 
2,5 — 0,1 
0,1 — 0,0 
2,2 — 0,4 
4.1 — 0,3 
2.2 — 1,3 
236,0 — 161,3 
91.7 — 39,5 
47.8 — 7,4 
45,7 — 10,8 
89,6 — 12,2 
22,9 — 7,5 
10,5 — 2,0 
9,2 — 29,2 
7,5 — 14,2 
33,2 — 9,2 
141,4 — 34,1 
80,4 — 46,5 
223,6 — 9,0 
162,9 — 32,2 
207,4 — 35,2 
219,9 — 6,9 
526,9 — 90,8 
117,6 — 8,3 
116.0 — 131,1 
237.1 — 22,2 
90,4 7,5 22,5 
122,9 4,8 34,8 
237,9 4,4 27,2 
186,8 4,0 29,4 
97,2 2,3 13,0 
114,1 — 1,9 
99,4 — 0,1 
8,7 — — 
4,7 — 0,0 
127,8 — — 
293,0 — 52,3 
383,6 — 62,0 
229.5 — 35,1 
108.6 — 128,1 
312,5 — 79,2 
— — — C. Payment 
Indicators 
Share of 
payments 
In the total 
effected 
(payments 
and cancel­
lations) (4) 
(11) = 
(4+8) 
(4 + 6 + 8+16) Share of 
payments 
in 1st year 
(5) 
(12) = 
(4) 
(4 + 8) 
95,0 *91,8 
97,3 * 92,7 
97,6 * 93,4 
95.6 * 93,8 
96.7 * 93,7 
99.8 99,9 
99.9 99,9 
99,3 99,9 
99,9 99,9 
99,9 99,9 
" 80,2 "* 68,5 
* 94,6 " 87,0 
99,0 * 93,5 
98,3 * 94,0 
98,2 ** 89,9 
" 86,2 "* 58,2 
*92,8 "81,6 
*" 65,9 ** 88,8 
" 88,8 * 93,5 
** 88,9 "* 79,0 
98,5 *94,1 
97,4 95,6 
99,4 " 87,0 
98,8 * 93,7 
98,7 * 92,3 
98,2 *** 78,5 
95,6 *"74,1 
99,0 * 92,1 
* 94,9 95,2 
99,2 *91,7 
97,4 * 93,1 
96,4 ** 88,2 
95.4 "* 66,4 
96,6 "* 77,7 
98.5 "89,2 
96,3 " 89,3 
99,9 *91,5 
98,2 99,3 
* 93,6 99,8 
" 83,2 * 94,7 
* 93,5 *" 63,9 
* 94,8 *" 66,7 
96,8 "* 78,8 
" 86,9 " 87,3 
" 87,5 *" 60,6 
— — 
General 
budget 
- total 1983 
1984 
1985 
1986 
1987 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 
36 313,4 36 168,4 36 170,6 23 101,6 
26 119,2 
27 136,5 
33 462,0 
34 111,0 1 706,8 
1 090,1 
1 086,1 
1 401,2 
1 358,2 260,4 
61,4 
214,5 
314,0 
701,4 1 521,0 
1 696,6 
1 093,9 
1 090,5 
1 405,2 1 211,4 
1 404,4 
962,2 
730,8 
1 213,4 7,5 
4,8 
4,4 
4,0 
2,3 302,1 
287,4 
127,3 
355,7 
189,5 97,7 
98,7 
98,8 
98,1 
97,5 95,0 
*94,9 
96,6 
97,9 
96,6 
(1) 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 appropriations 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 against the 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 % ("*). 
12. 12. 88 Official Journal of the European Communities 221 
§ 15. Utilization rates of the appropriations for payment from 1983 to 1987, by sector 
Key: £ Payment 
rate (%) Rate of 
carry-over to 
the following 
year (%) Cancellation 
rate 
(%) 
H »-. - • 1983 
1. Admmi-
stration iys4 
(all institu- 1985 
tions) 1986 
1987 Appropriations for the financial year 
For basic figures, see § 14, columns 3-6 
Final appropriations (col. 3) = 100 % 
87,6 
90,5 
90,6 
88,6 (%) B. Carry-overs from the previous financial year 
For basic figures, see § 14, columns 7-10 
Appropriations carried over (col. 7) = 100 % 
(%) 
85,5 • 
88,4 ;HI1 
88,9 ;•;] 
90,8 ' .;•;:; 
86,1 1 n 14,5 
11,6 
11,1 
9,2 
1983 
. ....„„.. 1984 
2. EAGGF-
Guarantee 1985 
1986 
1987 
1983 
3. Agricul- 1984 
tural 1985 
structures ^86 
1987 99,8 
99,8 
99,3 
99,9 
99,9 6,0-
0,0 -» 
0,0-
0,0 -* 
0,0 -* 
91,6 
90,1 
96,3 H 
3,2 B 0,7 
0,1 
0,1 
3,5 93,2 
62,9 
59,4 
69,9 
80,9 
1983 
1984 
4. Fisheries 1985 
1986 
1987 
r o • , 1983 
5. Regional 1984 rs -
transport 1 
1987 
6. Social 
policy 
1983 
7. Research, 1984 
energy, 1935 
etc. 75,1 
75,6 
88,3 
84,8 
86,4 6,2 | 
'-'••••'„ '3,0; 
^m H,8l 
2.0H 18,7 
21,4 
10,1 
13,4 
11,6 
o r, 1983 
8. Repay-
ments to 1984 
Member 1985 
States 1986 
1987 HIM 
99,1 : 
97,8' 
89,9 
79,5 3,5 | 0,8-J 
0A-M 
3,9 •• •i 3,6 
0,1 
6,2 
17,0 98,4 •; ^1 
99,9 
100 .:;.'::: h<V:[Wh 
100 :;";P;=';:;i:;! 
100 ;';:;•:'.:;" j:1 1,6 
0,1 
0,0 
« « 1983 
S.Coopera-
tion with iaB4 
developing 1985 
countries 1986 
1987 
General 
budget 
— total 1983 
1984 
1985 
1986 
1987 92,2 : 
95,8: 
95,4 ; 
95,1 
94,3 6,8 H 
4J1 
• • ' 3,81 ml 
3,?i 1,0 
0,2 
0,8 
0,9 
1,9 79,6 
82.8 
88,0 
67,0 
86,3 
222 Official Journal of the European Communities 12. 12. 88 
§ 16. Annual payments during the period 1983-1987 — 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) 
1. Administration (all institutions) 
1.1. Commission 
1.2. Other institutions 
c 
E E o 
o 
<o 
o 
<D 
to 
CD 
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 198C 
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 %(1) 
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 %(1) 
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 1987 
Mio ECU 
1 683,4 
1 098,5 
584,9 
22 951,8 
4 236,6 
2 035,6 
4 413,7 
967,1 
800,3 
803,6 
5 013,0 
3 033,1 
942,7 
654,9 
51,2 
888,6 
863,2 
25,4 
157,8 
17,4 
140,4 
2 687,3 
2 535,0 
24,3 
128,0 
2 852,5 
2 715,3 
137,2 
900,3 
89,7 
720,2 
63,8 
26,6 
2 408,9 
787,9 
1 621,0 
793,8 
305,2 
488,6 
33 641,0 
35 324,4 % (1) 
4,8 
3,1 
1,7 
65,0 
12,0 
5,8 
12,5 
2,7 
2,3 
2,3 
14,2 
8,6 
2,7 
1,8 
0,1 
2,5 
2,4 
0,1 
0,4 
0,0 
0,4 
7,6 
7,1 
0,1 
0,4 
8,1 
7,7 
0,4 
2,6 
0,3 
2,0 
0,2 
0,1 
6,8 
2,2 
4,6 
2,2 
0,9 
1,3 
95,2 
100 
CO 
o 
.tr 
1 Parliament 
Council 
(of which: Economic and Social Committee) 
Commission 
Court of Justice 
Court of Auditors 
Grand total 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 
177,4 
(31,3) 
33 669,4 
37,1 
21,6 
34 192,8 0,8 
0,5 
(0,1) 
98,5 
0,1 
0,1 
100 322,3 
194,2 
(35,3) 
34 739,5 
43,9 
24,5 
35 324,4 0,9 
0,5 
(0,1) 
98,4 
0,1 
0,1 
100 
(1) Percentage in relation to the total of annual budgetary payments. 
12. 12. 88 Official Journal of the European Communities 223 
§ 17. Evolution of the ratio of 'annual payments by sector' 
to 'total of annual budgetary payments' (1983-1987) 
(for detailed figures see § 16) 
A. General budget (all sectors): 
Total of annual budgetary payments = 100 % Log 
100 % 
50 % -
10% 
5% -
1 % 
0,5 % -
0,1 % 2. EAGGF-Guarantee 
j^- 6. Social policy 
-*- 5. Regional policy and transport 
"*"" 8. Repayments to Member States 
•*- 1. Administration 
;>- 7. Research, energy, etc. 
""*" 3. Agricultural structures 
9. Cooperation with developing 
countries 
4. Fisheries 
1983 1984 1985 1986 1987 
B. EAGGF-Guarantee (all markets): 
Total of annual budgetary payments = 100 % 
100 % 
50% 
10 % 
5 % -_ 
1 % 
0,5 % -
0,1 % 
1983 Log 
2.7. Milk products 
2.3. Fats and protein plants 
2.1. Cereals and rice 
2.8. Meat, eggs and poultry 
2.2. Sugar 
2.4. Fruit and vegetables 
2.9. Various markets 
2.6. Tobacco 
2.5. Wine 
("2.10. Agri-monetary measures 
12.11. Other expenditure 
1984 1985 1986 1987 
224 Official Journal of the European Communities 12. 12. 88 
§ 18. Annual payments to the Member States (1983-1987) 
Notes: 
1. This table summarizes the annual payments to the Member States under the principal sectors. For the period under consideration 
these payments represent 88,1 % 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 
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 B 
611,9 
18,1 
0,2 
7,0 
20,6 
77,7 
735,5 
(3,4 %) DK 
680,7 
20,5 
3,6 
16,7 
14,7 
20,3 
756,5 
(3,5 %) D 
3 075,8 
107,7 
2,8 
45,0 
81,5 
241,8 
270,7 
3 825,3 
(17,7 %) GR 
1 007,4 
21,9 
0,1 
214,6 
20,4 
16,6 
70,4 
1 351,4 
(6,2 %) E 
— 
— F 
3 566,6 
182,0 
3,9 
219,3 
140,5 
142,5 
4 254,8 
(19,6 %) IRL 
619,4 
84,1 
21,6 
94,5 
134,2 
11,6 
60,8 
1 026,2 
(4,7 %) I 
2 820,5 
103,0 
5,1 
344,5 
221,2 
105,9 
174,8 
3 775,0 
(17,4%) L 
4,2 
0,6 
0,0 
0,3 
0,5 
5,6 
(0,0 %) NL 
1 707,8 
32,2 
6,4 
18,1 
12,6 
83,4 
1 860,5 
(8,6 %) P 
— 
— UK 
1 691,0 
149,6 
8,4 
296,2 
244,9 
221,6 
1 471,9 
4 083,6 
(18,9 %) Allo­
cation 
2,9 
2,7 
5,6 
(0,0 %) EUR 
10/12 
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 
2 122,6 
(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 %) 3 410,9 
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 - 34) 
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 %) 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 
(1,6%) 1 983,0 
79,1 
21,7 
506,7 
596,2 
200,1 
3 386,8 
(11,1 %) 6,5 
36,3 
0,4 
43,2 
(0,2 %) 22 120,0 
727,1 
115,8 
2 483,8 
2 321,3 
920,4 
1 801,2 
30 489,6 
(100 %) 
1987: 
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 86) 
Total 821,3 
18,7 
2,9 
23,0 
56,5 
63,0 
985,4 
(3,2 %) 1 057,4 
15,7 
4,9 
16,6 
31,7 
17,9 
1 144,2 
(3,7 %) 3 992,7 
128,3 
4,3 
73,4 
131,6 
211,5 
4 541,8 
(14,7 %) 1 340,5 
78,0 
3,5 
293,9 
151,9 
8,7 
0,4 
1 876,9 
(6,1 %) 601,6 
21,2 
5,6 
345,3 
311,5 
29,2 
670,4 
1 984,8 
(6,4 %) 5 657,0 
237,2 
15,8 
311,2 
406,1 
117,0 
6 744,3 
(21,9%) 954,9 
87,0 
5,7 
134,7 
247,4 
8,3 
1 438,0 
(4,7 %) 3 899,7 
146,3 
13,0 
563,5 
539,2 
94,5 
5 256,2 
(17,1 %) 1,5 
4,5 
3,8 
1,7 
0,5 
12,0 
(0,0 %) 2 727,8 
17,1 
4,8 
19,6 
52,1 
68,8 
2 890,2 
(9,4 %) 146,6 
28,3 
4,6 
222,7 
190,5 
8,5 
130,2 
731,4 
(2,4 %) 1 747,2 
80,9 
11,6 
526,7 
595,1 
160,0 
3121,5 
(10,1 %) 3,6 
81,1 
0,6 
85,3 
(0,3 %) 22 951,8 
863,2 
157,8 
2 535,0 
2 715,3 
787,9 
801,0 
30 812,0 
(100 %) 
12. 12. 88 Official Journal of the European Communities 225 
§19. Actual own resources — by Member State (1983-1987) 
Notes: 
1. Actual own resources = own resources recovered during the financial year. 
2. It should be noted that the Member States, acting on behalf of the Communities, are responsible for the collection of the amounts due in 
respect of customs duties, agricultural levies and sugar and isoglucose levies. 
(Mio ECU) 
Financial year/Type of resource 
1983: 
Agricultural levies 
Sugar and isoglucose levies 
Customs duties 
VAT own resources (1) (2) 
Total B 
293,9 
65,8 
423,8 
432,4 
1 215,9 
(5,3 %) DK 
6,9 
38,9 
159,8 
274,3 
479,9 
(2,1 %) D 
143,0 
270,5 
2 019,8 
4 038,8 
6 472,1 
(28,1 %) GR 
38,0 
16,7 
107,4 
215,6 
377,7 
(1,6%) E 
— 
— F 
78,9 
293,7 
1 051,8 
3 082,1 
4 506,5 
(19,6 %) IRL 
7,0 
11,6 
100,4 
150,6 
269,6 
(1,2%) I 
323,2 
95,0 
657,1 
1 923,4 
2 998,7 
(13,0 %) L 
0,1 
4,6 
39,2 
43,9 
(0,2 %) NL 
135,8 
82,2 
633,2 
713,7 
1 564,9 
(6,8 %) P 
— 
— UK 
320,3 
73,6 
1 830,8 
2 859,7 
5 084,4 
(22,1 %) EUR 
10/12 
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%) 
1987: 
Agricultural levies 
Sugar and isoglucose levies 
Customs duties 
VAT own resources (1) (3) 
Total 284,8 
106,2 
529,0 
782,6 
1 702,6 
(4,8 %) 15,4 
59,0 
194,0 
576,3 
844,7 
(2,4 %) 155,3 
394,0 
2 617,8 
6 217,5 
9 384,6 
(26,5 %) 19,1 
12,5 
92,3 
216,5 
340,4 
(1,0%) 77,5 
53,4 
382,7 
1 195,1 
1 708,7 
(4,8 %) 108,3 
452,6 
1 212,6 
5 556,5 
7 330,0 
(20,7 %) 5,8 
12,0 
112,0 
207,7 
337,5 
(1,0%) 411,3 
166,6 
875,7 
3 738,0 
5 191,6 
(14,7 %) 0,2 
7,3 
66,0 
73,5 
(0,2 %) 96,8 
125,8 
817,6 
1 326,0 
2 366,2 
(6,7 %) 41,5 
0,2 
93,9 
206,2 
341,8 
(1,0%) 410,1 
89,4 
2 001,6 
3 226,4 
5 727,5 
(16,2 %) 1 626,1 
1 471,7 
8 936,5 
23 314,8 
35 349,1 
(100 %) 
(1) 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. 
226 Official Journal of the European Communities 12. 12. 88 
Part II: The European Development Funds (EDFs) 
(position at 31 December 1987) 
§ 20. General information on the EDFs 
THE FIRST FOUR EDFs 
20.1 General information and detailed financial information on the first three EDFs, has most recently been given in the 
annual report of the Court of Auditors on the financial year 1980. Information concerning the 4th EDF has been given in the 
annual report on the financial year 1986. Only a few small amounts still remain to be paid under the 4th EDF. 
A summary of the payments made under the first four EDFs is given in § 28. 
THE 5th AND 6th EDFs 
20.2. Legal provisions 
a) Legal basis in respect of ACP States: 
— 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: 
— 5th EDF: Council Decision 80/1186/EEC of 16 December 1980, 
— 6th EDF: Council Decision 86/283/EEC of 30 June 1986. 
c) Establishment of the EDFs: 
— 5th EDF: internal agreement of 20 November 1979, 
— 6th EDF: internal agreement of 19 February 1985. 
d) Financial Regulations: 
— 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: 
— 5th EDF: 4 929,7 Mio ECU, 
— 6th EDF: 7 511,7 Mio ECU. 
The EDFs are financed by the EC Member States in proportions laid down in the internal agreements (see also § 21). 
The above-mentioned internal agreements provide for distribution of the allocations of the EDFs between the ACP States 
and the OCT and between grants, special loans, risk capital, Stabex (2) and Sysmin (3). 
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 
— 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. 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 EDFs (in accordance with the Treaty). 
20.8. Authority giving discharge 
The European Parliament gives discharge of the financial management of the EDFs, 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). 
12. 12. 88 Official Journal of the European Communities 227 
§ 21. The 5th and 6th EDFs: allocation, financing, distribution of aid, overall utilization 
Allocation and financing Distribution of aid (Mio ECU) Utilization at 31.12.1987 
(Mio ECU & %) 
5th EOF: Allocation: 
4 929,7 Mio ECU 
Financing 
by: 
DK: 2,47%-
GR: 1,34% 
IRL: 0,59 % 
L: 0,20% Programming 
of aid: Mature 
Special 
loans: 
545,0 
Grants: 
3 069,9 
.g. 
3 <N 
^^ 
«1 2« $ 
-1-&&^ U % 3 
a§: % /hich 
nten 
19,5 
o 
— i 
mm 
##W:2@W \ 
Programmable 
> aid: 
/ 3 201,0 
Sysmin: | 
No 282 
t ml ocat ID 
O.S— 
Urn 
«=»< 0) eg 
ECM 
£« 2$ 
O>(0 
^s 
Ss 
%5 \ 
o iz =2s 
OCT: 53,6 ACP 
States: 
3 147,4 
of which: 
regional projects: 
631.5 
Non-
pro­
grammed 
aid: 
1 728,7 Utilization: 
-Not yet 
utilized 
Financing 
/ decisions: 
2 906,6 (90,8%) 
Not yet 
utilized 
Financing 
^ decisions: 
1 548,1 (89,6%) 
6th EOF: 
Allocation: 
7 511,7 Mio ECU 
Financing by: 
IRL: 
0,55 
L: 
0,19 
P: 
0,88 % 
% 
% Programming 
of aid: 
Nature of aid: 
Special loans: 
625,0 
Grants: 
4 915,0 
8 
-I" 
III 
Is !|ls 
Risk capital: 
615,0 Programmable 
> aid: 
5 036,0 
^\ 
OCT: 73,5 ^ ACP States: 
4 962,5 
of which: 
regional projects 
and reserve: 
996,3 Utilization: 
Sysmin: 417,5 
jndry revenue: 11,7 Mio ECU Non-
programmed 
aid: 
2475,7 
228 Official Journal of the European Communities 12. 12. 88 
§ 22. The 5th EDF: aid by type and by recipient country 
(financial implementation: situation at 31 December 1987) 
(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 
C6te d'lvoire 
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 
Administrative costs 
Total ACP (I + II) 
III. OCT 
Total 5th EDF A. Non-programmed aid Interest 
subsidies 
(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 F 
— 
CO 
ir 
(3) 
248,1 
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 
6,2 
2,0 
13,6 
1,8 
4,5 
5,1 
7,0 
0,5 
2,8 
6,0 
3,8 
5,0 
4,2 
0,5 
4,0 
0,0 
13,8 
6,3 
2,5 
0,2 
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 
274,0 
5,7 
279,7 nancing 
^'« 
II 
UJ CD 
(4) 
221,3 
51,7 
0,5 
4,9 
38,6 
5,3 
15,2 
2,4 
5,2 
16,5 
0,5 
0,4 
1,1 
18,6 
2,1 
2,0 
0,2 
1,6 
14,8 
3,8 
1,3 
1,5 
0,8 
0,6 
0,6 
7,7 
0,2 
0,1 
0,1 
3,2 
3,5 
0,1 
0,1 
0,1 
4,7 
5,0 
0,1 
2,2 
0,4 
0,3 
0,5 
0,4 
0,2 
0,2 
0,1 
0,3 
1,4 
0,2 
(6,3) 
41,4 
262,7 
0,9 
263,6 decisions 
CD 
35 
(5) 
659,1 
11,3 
20,9 
40,7 
10,7 
44,9 
10,0 
1,0 
4,9 
3,6 
90,6 
9,3 
13,8 
29,6 
6,6 
85,5 
4,6 
93,4 
5,2 
28,8 
14,3 
1,3 
3,6 
4,3 
8,2 
18,2 
50,7 
2,9 
4,2 
— 
0,5 
6,6 
3,5 
4,0 
1,6 
7,6 
1,6 
6,5 
4,0 
0,1 
— 
(36,0) 
— 
659,1 
9,8 
668,9 E 
CO 
(6) 
219,1 
81,0 
2,8 
83,0 
49,3 
3,0 
— 
— 
(—) 
— 
219,1 
219,1 <£ 
+ 
« + 
(7) 
1 458,6 
76,0 
31,1 
104,1 
89,5 
15,3 
29,3 
57,3 
36,4 
20,1 
8,5 
21,5 
4,9 
31,8 
102,5 
14,8 
20,2 
52,1 
23,4 
102,9 
94,6 
10,6 
104,0 
10,9 
30,9 
14,7 
14,5 
5,8 
52,6 
7,4 
7,4 
10,1 
9,5 
7,7 
1,3 
7,0 
10,4 
18,3 
65,9 
20,7 
9,7 
4,4 
5,1 
17,1 
0,1 
1,9 
0,9 
4,5 
7,2 
2,5 
5,0 
6,2 
2,0 
1,8 
8,0 
2,8 
3,2 
9,9 
4,3 
7,7 
5,2 
0,2 
2,9 
(76,3) 
68,6 
1 527,2 
20,9 
1 548,1 CD 
E 
CD 
E 
n) 
Q. 
(8) 
1 239,3 
61,3 
31,0 
56,5 
80,9 
15,2 
25,2 
55,4 
30,8 
15,9 
6,6 
18,5 
4,4 
29,5 
100,7 
11,5 
19,9 
49,0 
17,5 
95,8 
86,9 
6,1 
98,0 
10,9 
30,9 
8,8 
14,5 
5,8 
1,8 
4,1 
6,6 
10,1 
6,7 
2,1 
0,6 
5,6 
10,4 
18,2 
63,7 
19,2 
9,0 
4,3 
3,8 
15,3 
0,1 
1,7 
0,9 
4,1 
7,2 
2,5 
5,0 
6,1 
0,6 
1,8 
8,0 
2,8 
2,3 
9,9 
3,6 
7,7 
4,9 
0,2 
0,9 
(70,3) 
15,3 
1 254,6 
18,9 
1 273,5 B. Programmable aid (indicative 
programmes ACP and other aid) 
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 dec 
O 
(10) 
1 932,1 
109,6 
108,9 
72,4 
88,1 
83,9 
66,3 
56,3 
62,9 
71,9 
71,7 
61,7 
67,9 
70,6 
38,3 
61,6 
59,9 
29,7 
60,3 
53,0 
37,8 
39,2 
29,2 
43,2 
31,7 
32,3 
36,8 
19,1 
23,8 
20,2 
21,7 
16,9 
17,2 
8,4 
12,8 
14,5 
13,7 
11,9 
12,3 
11,3 
8,0 
11,6 
33,7 
29,6 
1,7 
2,0 
3,7 
0,4 
15,9 
12,9 
5,5 
3,4 
3,4 
8,3 
4,0 
4,0 
1,7 
3,7 
3,4 
6,3 
3,6 
3,0 
7,8 
1,1 
4,4 
(100,2) 
460,8 
7,5 
2 400,4 
21,9 
2 422,3 CO 
C.C0 
CO ° 
(11) 
400,5 
31,0 
11,6 
26,7 
17,8 
26,3 
9,8 
8,0 
7,0 
11,8 
12,0 
20,1 
15,4 
11,7 
17,9 
7,0 
19,8 
6,4 
22,3 
4,7 
6,9 
8,7 
8,4 
12,0 
4,7 
8,8 
9,0 
5,8 
2,7 
7,7 
4,7 
8,2 
5,1 
19,0 
1,0 
0,5 
— 
(1.5) 
77,8 
478,3 
6,0 
484,3 sions 
+ co ^ 
l-~ 
(12) 
2 332,6 
140,6 
120,5 
99,1 
88,1 
83,9 
84,1 
82,6 
72,7 
79,9 
78,7 
73,5 
79,9 
70,6 
58,4 
77,0 
71,6 
47,6 
60,3 
60,0 
57,6 
45,6 
51,5 
47,9 
38,6 
41,0 
45,2 
31,1 
28,5 
29,0 
21,7 
25,9 
23,0 
11,1 
20,5 
14,5 
18,4 
11,9 
20,5 
11,3 
13,1 
11,6 
33,7 
48,6 
2,7 
2,0 
3,7 
0,4 
15,9 
12,9 
5,5 
3,4 
3,4 
8,3 
4,0 
4,0 
2,2 
3,7 
3,4 
6,3 
3,6 
3,0 
7,8 
1,1 
4,4 
(101,7) 
538,6 
7,5 
2 878,7 
27,9 
2 906,6 CO 
E 
E 
Q. 
(13) 
1 433,8 
114,0 
78,4 
62,0 
75,8 
47,5 
48,3 
45,4 
47,3 
54,0 
58,5 
36,3 
46,6 
32,7 
39,4 
61,0 
31,2 
33,7 
43,9 
27,0 
15,5 
24,1 
30,3 
36,5 
31,5 
28,1 
14,8 
29,2 
13,1 
18,9 
16,2 
10,5 
10,7 
2,3 
13,4 
11,5 
9,7 
7,6 
8,4 
8,1 
12,2 
4,4 
8,7 
17,4 
0,0 
1,1 
2,0 
0,1 
11,5 
7,2 
3,5 
2,9 
2,8 
5,8 
0,9 
3,5 
1,3 
3,1 
3,0 
6,2 
3,0 
2,6 
2,7 
0,9 
3,6 
(67,7) 
341,2 
6,9 
1 781,9 
16,4 
1 798,3 Total 
(A + B) Financing 
decisions 
(7) +(12) 
(14) 
3 791,2 
216,6 
151,6 
203,2 
177,6 
99,2 
113,4 
139,9 
109,1 
100,0 
87,2 
95,0 
84,8 
102,4 
160,9 
91,8 
91,8 
99,7 
83,7 
162,9 
152,2 
56,2 
155,5 
58,8 
69,5 
55,7 
59,7 
36,9 
81,1 
36,4 
29,1 
36,0 
32,5 
18,8 
21,8 
21,5 
28,8 
30,2 
86,4 
32,0 
22,8 
16,0 
38,8 
65,7 
2,8 
2,0 
5,6 
1,3 
20,4 
20,1 
8,0 
8,4 
9,6 
10,3 
5,8 
12,0 
2,2 
6,5 
6,6 
16,2 
7,9 
10,7 
13,0 
1,3 
7,3 
(178,0) 
607,2 
7,5 
4 405,9 
48,8 
4 454,7 £ 
CD "-' 
E + 
Is 
(15) 
2 673,1 
175,3 
109,4 
118,5 
156,7 
62,7 
73,5 
100,8 
78,1 
69,9 
65,1 
54,8 
51,0 
62,2 
140,1 
72,5 
51,1 
82,7 
61,4 
122,8 
102,4 
30,2 
128,3 
47,4 
62,4 
36,9 
29,3 
35,0 
14,9 
23,0 
22,8 
20,6 
17,4 
4,4 
14,0 
17,1 
20,1 
25,8 
72,1 
27,3 
21,2 
8,7 
12,5 
32,7 
0,1 
1,1 
3,7 
1,0 
15,6 
14,4 
6,0 
7,9 
8,9 
6,4 
2,7 
11,5 
1,3 
5,9 
5,3 
16,1 
6,6 
10,3 
7,6 
1,1 
4,5 
(138,0) 
356,5 
6,9 
3 036,5 
35,3 
3 071,8 
12. 12. 88 Official Journal of the European Communities 229 
§ 23. The 5th EDF: aid by economic sector and by recipient country 
(situation at 31 December 1987) 
(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 
C6te d'lvoire 
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 
CD 
H 
(2) 
24,0 
0,4 
0,1 
1,2 
3,2 
0,7 
0,1 
0,8 
0,7 
0,3 
2,0 
1,0 
0,5 
0,5 
1,0 
0,3 
1,6 
0,5 
1,6 
0,4 
0,3 
0,2 
1,7 
0,1 
0,4 
0,0 
1,6 
0,3 
0,5 
0,1 
0,5 
0,9 
0,2 
0,1 
0,2 
— 
(1.9) 
32,7 
56,7 
0,5 
57,2 
idustrialization, 
nergy and 
lining 
.!= (D fc 
(3) 
795,5 
55,6 
16,6 
109,7 
12,4 
19,0 
20,7 
7,5 
33,9 
3,7 
17,3 
18,3 
31,9 
10,1 
9,2 
8,3 
19,5 
14,4 
2,0 
18,2 
117,1 
8,6 
6,4 
5,3 
0,4 
8,5 
2,7 
5,2 
53,3 
13,8 
9,7 
10,7 
4,2 
6,3 
11,5 
2,1 
0,7 
16,2 
11,3 
13,0 
0,1 
6,5 
10,2 
0,9 
0,9 
3,8 
0,5 
2,3 
1,0 
2,3 
4,9 
0,0 
0,6 
1,0 
2,9 
9,5 
4,1 
2,0 
3,5 
0,5 
2,7 
(43,4) 
101,8 
897,3 
17,5 
914,8 o 
or o. 
(4) 
943,3 
30,2 
51,5 
17,9 
66,3 
33,4 
33,3 
35,6 
28,3 
28,1 
24,6 
26,8 
24,8 
21,0 
36,2 
29,4 
37,7 
30,3 
28,4 
35,0 
21,4 
9,8 
47,8 
21,2 
10,9 
26,9 
17,8 
0,0 
10,3 
1,2 
10,5 
11,5 
10,1 
8,5 
5,5 
5,8 
4,9 
2,1 
1,6 
4,7 
9,1 
2,7 
12,8 
30,6 
1,9 
1,1 
2,8 
1,9 
5,9 
2,4 
0,9 
0,3 
2,5 
3,1 
2,7 
2,1 
0,1 
0,1 
0,7 
4,2 
0,2 
3,9 
(36,8) 
135,8 
1 079,1 
4,9 
1 084,0 •a g 
r| M 
si H O 
(5) 
605,1 
5,8 
36,4 
47,8 
18,8 
26,3 
9,6 
32,0 
21,1 
27,1 
17,0 
31,3 
0,1 
28,6 
6,0 
23,2 
10,1 
22,6 
11,9 
24,9 
0,1 
19,1 
20,2 
19,6 
7,0 
13,4 
27,3 
9,8 
14,3 
7,3 
1,3 
6,1 
5,5 
0,9 
3,4 
17,7 
5,8 
0,0 
0,9 
2,7 
0,8 
1,0 
6,3 
1,2 
2,4 
2,0 
1,3 
0,7 
1,0 
1,3 
0,1 
0,3 
3,3 
0,1 
0,3 
(22,1) 
195,5 
800,6 
4,4 
805,0 CO 
Jo, 
CO c 
1-5 
UJ iz 
(6) 
216,3 
5,4 
1,3 
14,1 
3,0 
4,5 
7,0 
9,1 
4,2 
1,8 
5,1 
5,1 
5,8 
8,8 
5,2 
9,2 
10,3 
0,4 
8,2 
2,3 
3,7 
2,9 
0,1 
3,4 
4,0 
2,5 
7,1 
1,4 
2,2 
4,6 
0,6 
5,3 
3,5 
1,1 
1,3 
9,0 
2,4 
3,3 
2,1 
0,6 
1,8 
19,5 
10,3 
0,2 
0,3 
0,1 
0,9 
0,7 
0,4 
0,2 
0,9 
1,3 
0,4 
0,0 
0,8 
0,3 
0,3 
0,1 
0,4 
5,3 
0,2 
(12,8) 
60,2 
276,5 
3,2 
279,7 CO 
CD 
I 
(7) 
89,9 
1,5 
4,0 
1,6 
3,5 
2,6 
2,2 
5,5 
4,5 
1,3 
3,8 
9,6 
4,0 
5,8 
0,6 
0,1 
10,8 
2,0 
0,2 
2,6 
2,8 
1,5 
2,5 
0,2 
1,9 
5,0 
3,2 
— 
0,2 
0,3 
0,8 
2,9 
2,4 
— 
(6,6) 
8,2 
98,1 
— 
98,1 
ydraulics and 
rban 
evelopment 
I3TJ 
(8) 
251,1 
55,3 
20,0 
8,3 
6,0 
10,8 
9,0 
4,4 
9,7 
19,6 
0,9 
11,2 
5,3 
7,1 
9,3 
0,1 
3,0 
1,3 
5,8 
4,6 
12,0 
0,2 
3,3 
0,2 
2,8 
2,5 
2,7 
1,4 
2,1 
2,0 
2,6 
3,7 
5,8 
0,0 
6,4 
3,9 
4,2 
1,8 
0,1 
0,5 
0,8 
0,4 
— 
(11,7) 
0,5 
251,6 
4,7 
256,3 
rade 
romotion, 
>urism 
h- O.H 
(9) 
35,4 
0,6 
0,6 
0,1 
0,0 
0,4 
1,1 
0,4 
8,5 
2,9 
0,7 
3,5 
0,1 
0,1 
1,0 
0,1 
0,8 
3,5 
2,7 
0,4 
0,1 
0,1 
0,1 
0,8 
2,1 
1,2 
0,0 
0,1 
0,0 
0,3 
0,1 
0,8 
0,5 
0,1 
0,4 
0,6 
0,4 
0,0 
0,1 
0,0 
0,1 
0,0 
— 
(1,2) 
38,1 
73,5 
2,9 
76,4 o 
CD 
8? UJ CO 
(10) 
211,0 
51,7 
0,5 
2,8 
38,6 
5,3 
15,2 
2,4 
2,1 
16,5 
0,5 
0,4 
1,1 
18,5 
2,1 
2,0 
0,2 
1,6 
13,5 
3,8 
1,3 
1,5 
0,8 
0,5 
0,5 
7,7 
0,2 
0,1 
0,1 
3,2 
0,1 
0,1 
0,0 
4,7 
5,0 
0,1 
2,2 
0,4 
0,3 
0,5 
0,4 
0,2 
0,2 
0,2 
0,3 
1,4 
0,2 
(6,4) 
41,9 
252,9 
0,9 
253,8 If 
2 « CO £: 
(11) 
619,6 
11,1 
20,7 
38,3 
10,6 
40,3 
9,2 
1,0 
4,8 
3,4 
84,8 
9,2 
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 
— 
(35,1) 
619,6 
9,8 
629,4 + 
3 + 
°SJ. 
(12) 
3 791,2 
216,6 
151,6 
203,2 
177,6 
99,2 
113,4 
139,9 
109,1 
100,0 
87,2 
95,0 
84,8 
102,4 
160,9 
91,8 
91,8 
99,7 
83,7 
162,9 
152,2 
56,2 
155,5 
58,8 
69,5 
55,7 
59,7 
36,9 
81,1 
36,4 
29,1 
36,0 
32,5 
18,8 
21,8 
21,5 
28,8 
30,2 
86,4 
32,0 
22,8 
16,0 
38,8 
65,7 
2,8 
2,0 
5,6 
1,3 
20,4 
20,1 
8,0 
8,4 
9,6 
10,3 
5,8 
12,0 
2,2 
6,5 
6,6 
16,2 
7,9 
10,7 
13,0 
1,3 
7,3 
(178,0) 
614,7 
4 405,9 
48,8 
4 454,7 CD 
|| 
h- Q. 
(13) 
2 673,1 
175,3 
109,4 
118,5 
156,7 
62,7 
73,5 
100,8 
78,1 
69,9 
65,1 
54,8 
51,0 
62,2 
140,1 
72,5 
51,1 
82,7 
61,4 
122,8 
102,4 
30,2 
128,3 
47,4 
62,4 
36,9 
29,3 
35,0 
14,9 
23,0 
22,8 
20,6 
17,4 
4,4 
14,0 
17,1 
20,1 
25,8 
72,1 
27,3 
21,2 
8,7 
12,5 
32,7 
0,1 
1,1 
3,7 
1,0 
15,6 
14,4 
6,0 
7,9 
8,9 
6,4 
2,7 
11,5 
1,3 
5,9 
5,3 
16,1 
6,6 
10,3 
7,6 
1,1 
4,5 
(138,0) 
363,4 
3 036,5 
35,3 
3 071,8 
(1) The differences compared with § 22, column 4 may be explained by the different analysis of projects for some countries. 
(2) The differences compared with § 22, column 5 may be explained by the different analysis of Stabex projects for some countries. 
230 Official Journal of the European Communities 12. 12. 88 
§ 24. The 6th EDF: aid by type and by recipient country 
(financial implementation: situation at 31 December 1987) 
(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 
Cote d'lvoire 
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 
Angola 
Mozambique 
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 
Total ACP (I + II) 
III. OCT 
Total 6th EDF A. Non-programmed aid Interest 
subsidie 
(grants) 
(2) 
39,1 
7,8 
0,9 
1,1 
3,2 
6,8 
2,2 
1,7 
2,1 
3,1 
0,5 
3,7 
3,4 
— 
1,8 
0,3 
0,5 
— 
(2,6) 
— 
39,1 
39,1 F 
a; 
c0 
£ 
(3) 
249,1 
21,0 
18,0 
9,0 
5,5 
24,1 
14,3 
4,0 
13,0 
25,5 
3,0 
2,2 
7,0 
10,5 
6,5 
15,0 
7,0 
10,0 
3,5 
5,0 
6,5 
3,0 
3,5 
1,0 
4,0 
3,0 
1,0 
2,0 
3,8 
1,8 
4,0 
2,1 
1,5 
2,0 
1,8 
2,5 
1,5 
— 
(24,0) 
29,0 
278,1 
1,0 
279,1 nancing 
^ « 
c o •2| 
If 
LU d> 
(4) 
44,8 
8,5 
1,1 
5,7 
0,8 
0,3 
1,1 
0,4 
2,1 
1,1 
0,9 
0,2 
0,2 
3,2 
1,3 
0,5 
0,2 
0,3 
0,1 
0,1 
0,6 
0,9 
0,3 
0,0 
0,7 
0,2 
0,3 
0,5 
1,1 
3,2 
5,9 
0,5 
0,2 
0,1 
2,2 
(3,0) 
1,9 
46,7 
46,7 decisions 
CD 
B co 
(5) E 
CO 
(6) § 
+ 
(7) 
367,4 — 700,4 
34,4 — 63,9 
8,9 — 26,9 
— — 7,8 
60,1 — 70,2 
— — 5,7 
14,2 — 15,0 
— — 6,4 
— — 24,4 
5,9 — 21,3 
— — 0,4 
2,4 — 9,6 
— — 14,1 
82,1 — 108,5 
3,4 — 3,4 
— — 3,2 
— — 0,2 
12,8 — 18,2 
— — 10,2 
— — 11,8 
3,5 — 10,5 
13,5 — 20,5 
1,7 — 1,7 
9,3 — 9,3 
— — 15,3 
— — 7,1 
— — 10,0 
— — 3,5 
0,4 — 0,5 
— — 2,8 
— — 7,6 
— — 0,3 
2,9 — 11,5 
— — 0,0 
— — 3,7 
9,4 — 9,6 
46,4 — 53,0 
0,3 — 2,1 
19,0 — 19,5 
— — 4,8 
— — 3,4 
— — 7,2 
8,9 — 17,8 
— — 1,8 
— — 1,3 
5,0 — 7,0 
— — 0,5 
— — 3,8 
0,4 — 2,2 
1,1 — 5,1 
1,6 — 1,6 
1,6 — 3,9 
— — 1,5 
— — 2,5 
— — 1,9 
4,8 — 7,3 
1,9 — 3,4 
0,1 — 0,1 
11,4 — 13,6 
(27,9) (—) (57,5) 
— — 30,9 
367,4 — 731,3 
— — 1,0 
367,4 — 732,3 0> 
to 
E 
CD 
E 
(0 
Q. 
(8) 
400,6 
37,6 
8,9 
63,4 
0,8 
14,7 
2,9 
6,3 
0,3 
5,0 
0,4 
85,4 
3,4 
0,1 
14,4 
0,2 
3,7 
15,8 
1,7 
9,3 
0,5 
0,1 
0,6 
0,5 
0,4 
0,3 
4,4 
0,0 
9,6 
46,4 
0,6 
19,4 
1,0 
13,0 
5,5 
0,1 
0,4 
1,1 
1,6 
1,1 
0,4 
0,0 
4,7 
2,6 
0,1 
11,9 
(29,5) 
1,5 
402,1 
402,1 B. Programmable aid (indicative 
programmes ACP and other aid) 
en 
CO 
< 
(9) 
3 966,2 
230,0 
169,0 
147,0 
145,0 
125,0 
136,0 
122,0 
110,0 
120,0 
115,0 
114,0 
114,0 
113,0 
97,0 
111,0 
108,0 
96,0 
89,0 
86,0 
81,0 
80,0 
75,0 
70,0 
61,0 
61,0 
69,0 
44,0 
44,0 
41,0 
35,0 
39,0 
32,0 
23,0 
29,0 
20,5 
26,0 
20,0 
32,5 
19,0 
23,0 
17,5 
200,0 
73,0 
95,0 
145,0 
4,0 
3,0 
5,0 
8,0 
23,0 
21,0 
8,0 
5,5 
5,0 
12,0 
6,0 
6,0 
3,0 
5,5 
5,5 
9,0 
5,2 
6,0 
15,0 
1,5 
6,5 
(163,7) 
996,3 
4 962,5 
73,5 
5 036,0 Financing decisions 
O 
(10) 
1 231,9 
29,4 
103,6 
72,9 
29,1 
58,5 
20,8 
25,4 
37,0 
36,6 
1,6 
64,8 
72,7 
2,3 
87,0 
51,2 
37,5 
27,8 
47,9 
26,0 
23,4 
28,8 
0,6 
36,1 
2,9 
15,7 
17,5 
0,1 
22,4 
8,9 
26,8 
7,6 
6,2 
0,0 
8,4 
2,1 
10,0 
5,6 
3,3 
0,0 
13,2 
6,4 
0,1 
15,2 
36,5 
79,5 
0,1 
0,3 
0,5 
0,7 
0,1 
0,9 
4,9 
3,7 
0,0 
0,5 
4,2 
0,0 
1,5 
2,2 
0,1 
1,5 
0,2 
0,0 
0,8 
0,3 
(22,5) 
165,9 
1 397,8 
0,7 
1 398,5 CO 
Q. CO 
CO ° 
(11) 
136,7 
2,0 
23,5 
2,5 
10,0 
10,0 
10,0 
10,0 
15,0 
20,8 
2,5 
5,0 
9,5 
7,1 
5,0 
3,8 
— 
— 
(—) 
— 
136,7 
136,7 + CO _ 
(12) 
1 368,6 
31,4 
103,6 
96,4 
29,1 
58,5 
23,3 
35,4 
47,0 
36,6 
1,6 
74,8 
72,7 
2,3 
97,0 
51,2 
37,5 
27,8 
47,9 
26,0 
38,4 
28,8 
21,4 
36,1 
2,9 
15,7 
20,0 
0,1 
27,4 
18,4 
26,8 
14,7 
6,2 
0,0 
13,4 
2,1 
10,0 
5,6 
3,3 
0,0 
17,0 
6,4 
0,1 
15,2 
36,5 
79,5 
0,1 
0,3 
0,5 
0,7 
0,1 
0,9 
4,9 
3,7 
0,0 
0,5 
4,2 
0,0 
1,5 
2,2 
0,1 
1,5 
0,2 
0,0 
0,8 
0,3 
(22,5) 
165,9 
1 534,5 
0,7 
1 535,2 CO 
E 
E 
Q. 
(13) 
46,1 
0,1 
1,9 
0,6 
1,2 
11,2 
0,1 
0,1 
0,5 
0,0 
8,3 
0,0 
0,1 
0,0 
0,0 
0,2 
0,0 
0,1 
0,1 
0,0 
3,2 
0,0 
0,0 
0,0 
0,0 
1,8 
0,4 
0,6 
0,2 
0,0 
0,5 
0,5 
1,3 
0,3 
0,0 
0,4 
0,2 
9,1 
0,0 
0,1 
1,8 
0,5 
0,4 
0,1 
0,2 
0,0 
(3,1) 
21,0 
67,1 
0,1 
67,2 Total 
(A + B) Financin 
decision 
(7) +(12 
(14) 
2 069,0 
95,3 
130,5 
104,2 
99,3 
64,2 
38,3 
41,8 
71,4 
57,9 
2,0 
84,4 
72,7 
16,4 
205,5 
54,6 
40,7 
28,0 
66,1 
36,2 
50,2 
39,3 
41,9 
37,8 
12,2 
31,0 
27,1 
10,1 
27,4 
21,9 
27,3 
17,5 
13,8 
0,3 
24,9 
2,1 
13,7 
15,2 
56,3 
2,1 
17,0 
25,9 
4,9 
18,6 
43,7 
97,3 
1,9 
0,3 
1,8 
0,7 
7,1 
1,4 
8,7 
5,9 
5,1 
2,1 
8,1 
1,5 
4,0 
4,1 
7,4 
1,5 
3,6 
0,0 
0,9 
13,9 
(80,0) 
196,8 
2 265,8 
1,7 
2 267,5 E 
j2 co 
E + 
(15) 
446,7 
37,7 
10,8 
0,6 
64,6 
12,0 
14,8 
0,1 
3,4 
6,3 
0,3 
13,3 
0,0 
0,5 
85,4 
3,4 
0,0 
0,3 
14,4 
0,1 
0,3 
3,7 
19,0 
1,7 
9,3 
0,5 
0,1 
0,0 
2,4 
0,9 
1,0 
0,3 
4,6 
0,0 
0,5 
10,1 
46,4 
0,6 
1,3 
19,7 
1,0 
0,4 
0,2 
22,1 
0,0 
0,1 
5,5 
0,1 
1,8 
0,9 
1,1 
1,6 
1,5 
0,4 
0,1 
4,7 
0,2 
2,6 
0,1 
11,9 
(32,6) 
22,5 
469,2 
0,1 
469,3 
12. 12. 88 Official Journal of the European Communities 231 
§ 25. The 6th EDF: aid by economic sector and by recipient country 
(situation at 31 December 1987) 
(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 
Cote d'lvoire 
Central African Republic 
Togo 
Mauritania 
Sierra Leone 
Congo 
Lesotho 
Guinea-Bissau 
Jamaica 
Botswana 
Suriname 
Mauritius 
Guyana 
Swaziland 
Gambia 
Papua New Guinea 
Fiji 
Gabon 
Solomon Islands 
Nigeria 
Zimbabwe 
Angola 
Mozambique 
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 
Total ACP (I + II) 
III. OCT 
Total 6th EDF Financing decisions 
o 
5 
(2) 
48,4 
0,2 
0,1 
0,0 
0,0 
0,2 
0,5 
0,4 
2,0 
2,5 
0,3 
0,3 
0,6 
0,5 
40,5 
0,0 
0,0 
0,3 
0,0 
— 
(0,3) 
12,0 
60,4 
0,2 
60,6 co >> idustriali 
on, enen 
nd minin 
i=s a 
(3) 
295,2 
21,0 
22,0 
7,8 
9,0 
5,5 
24,1 
14,3 
4,1 
14,6 
13,5 
3,0 
11,4 
28,7 
5,1 
15,0 
7,0 
0,4 
13,0 
1,5 
6,7 
18,6 
3,3 
6,6 
1,5 
3,7 
0,9 
4,0 
3,0 
0,1 
1,0 
2,0 
3,8 
1,8 
4,0 
2,1 
1,5 
2,5 
1,8 
2,6 
1,2 
1,5 
— 
(25,9) 
25,4 
320,6 
1,0 
321,6 o 
3 2 
CC O. 
(4) 
856,2 
24,0 
94,6 
44,4 
27,8 
15,8 
23,0 
20,1 
20,9 
21,6 
1,5 
37,7 
72,1 
0,0 
97,0 
51,0 
35,6 
27,6 
17,0 
2,4 
12,3 
21,4 
35,0 
0,2 
27,0 
8,4 
23,8 
0,2 
3,7 
3,4 
3,1 
4,1 
3,0 
16,7 
5,8 
0,1 
9,5 
35,1 
1,7 
0,3 
0,1 
0,2 
4,1 
1,4 
0,1 
0,3 
0,8 
0,3 
(7,6) 
15,1 
871,3 
— 
871,3 T> o 
§1 I- o 
(5) 
333,4 
0,1 
5,0 
47,1 
0,4 
24,0 
15,4 
16,8 
15,0 
25,5 
0,5 
12,0 
0,5 
0,2 
20,9 
21,8 
0,7 
28,1 
1,7 
0,6 
15,0 
20,0 
0,1 
0,0 
15,2 
2,0 
1,2 
0,0 
0,0 
0,4 
35,0 
0,2 
0,1 
4.3 
3,5 
0,1 
— 
(8,2) 
128,6 
462,0 
0,1 
462,1 co 
Jo> co c 
|| 
LU iz 
(6) 
41,4 
7,3 
0,7 
0,3 
8,3 
0,7 
4,2 
0,0 
0,1 
0,3 
0,0 
0,2 
0,6 
7,8 
0,5 
2,4 
0,2 
0,5 
3,4 
0,1 
0,9 
0,1 
2,3 
0,4 
0,1 
— 
(0,5) 
5,7 
47,1 
0,2 
47,3 CO 
I 
(7) 
26,5 
0,1 
0,0 
0,2 
9,7 
0,7 
0,0 
12,0 
0,0 
0,1 
0,0 
0,3 
0,4 
0,1 
1,1 
0,0 
1,8 
— 
(2,9) 
— 
26,5 
— 
26,5 « c ydraulic; 
rban 
evelopm 
I 3-d 
(8) 
39,4 
4,0 
1,0 
0,1 
5,1 
3,2 
0,0 
1,4 
2,2 
6,6 
10,0 
0,5 
0,0 
0,2 
2,5 
— 
1,8 
0,4 
0,2 
0,2 
— 
(2,6) 
— 
39,4 
— 
39,4 o 
1.1 
Q-3 
co ^2 
K CO 
(9) 
27,0 
0,0 
15,0 
0,6 
0,0 
0,5 
0,3 
3,0 
0,1 
1,4 
4,5 
0,0 
0,0 
0,3 
0,3 
0,6 
0,1 
0,3 
— 
(1.6) 
8,1 
35,1 
0,2 
35,3 
xception 
mergenc 
id p) 
UJ Q) CO 
(10) 
34,1 
8,5 
0,6 
1,1 
0,8 
0,3 
1,1 
0,4 
1,8 
0,3 
0,9 
0,2 
0,2 
1,2 
0,7 
0,4 
0,2 
0,3 
0,1 
0,1 
0,6 
0,4 
0,3 
0,0 
0,2 
0,3 
0,5 
1,1 
3,2 
5,8 
0,2 
0,1 
2,2 
(2,5) 
1,9 
36,0 
— 
36,0 2 co 
CO £: 
(11) 
367,4 
34,4 
8,9 
60,1 
14,2 
5,9 
2,4 
82,1 
3,4 
12,8 
3,5 
13,5 
1,7 
9,3 
0,4 
2,9 
9,4 
46,4 
0,3 
19,0 
8,9 
5,0 
0,4 
1,1 
1,6 
1,6 
4,8 
1,9 
0,1 
11,4 
27,9) 
— 
367,4 
— 
367,4 -
+ 
l-£L 
(12) 
2 069,0 
95,3 
130,5 
104,2 
99,3 
64,2 
38,3 
41,8 
71,4 
57,9 
2,0 
84,4 
72,7 
16,4 
205,5 
54,6 
40,7 
28,0 
66,1 
36,2 
50,2 
39,3 
41,9 
37,8 
12,2 
31,0 
27,1 
10,1 
27,4 
21,9 
27,3 
17,5 
13,8 
0,3 
24,9 
2,1 
13,7 
15,2 
56,3 
2,1 
17,0 
25,9 
4,9 
18,6 
43,7 
97,3 
1,9 
0,3 
1,8 
0,7 
7,1 
1,4 
8,7 
5,9 
5,1 
2,1 
8,1 
1,5 
4,0 
4,1 
7,4 
1,5 
3,6 
0,0 
0,9 
13,9 
(80,0) 
196,8 
2 265,8 
1,7 
2 267,5 CO 
ll I- Q. 
(13) 
446,7 
37,7 
10,8 
0,6 
64,6 
12,0 
14,8 
0,1 
3,4 
6,3 
0,3 
13,3 
0,0 
0,5 
85,4 
3,4 
0,0 
0,3 
14,4 
0,1 
0,3 
3,7 
19,0 
1,7 
9,3 
0,5 
0,1 
0,0 
2,4 
0,9 
1,0 
0,3 
4,6 
0,0 
0,5 
10,1 
46,4 
0,6 
1,3 
19,7 
1,0 
0,4 
0,2 
22,1 
0,0 
0,1 
5,5 
0,1 
1,8 
0,9 
1,1 
1,6 
1,5 
0,4 
0,1 
4,7 
0,2 
2,6 
0,1 
11,9 
(32,6) 
22,5 
469,2 
0,1 
469,3 
(1) The differences compared with § 24, column 4 may be explained by the different analysis of projects under certain headings. 
232 Official Journal of the European Communities 12. 12. 88 
§ 26. The 5th and 6th EDFs: Financing and payment decisions by recipient country (31.12.1987) 
(for detailed information see § 22 - § 25) 
Mio ECU 5th EDF 
H 1 1 1 1-6th EDF 
Mio ECU 
200 200 100 Recipient country 100 
Ethiopia 
Tanzania 
Zaire 
Sudan 
Uganda 
Madagascar 
Burkina Faso 
Malawi 
Guinea 
Somalia 
Senegal 
Rwanda 
Burundi 
Cameroon 
Cdte d'lvoire 
Sierra Leone 
Guinea-Bissau Central African 
Solomon Islands 
Nigeria Key: 
Financing 
decisions 
Payments 
Zimbabwe 
Angola 
Mozambique 
Other ACP States 
Regional projects 
and administrative costs 
OCT 
12. 12. 88 Official Journal of the European Communities 233 
§ 27. The 5th and 6th EDFs: utilization of aid by economic sector (situation at 31 December 1987) 
Allocation and utilization 
5th EDF: 
Allocation: 
4 929,7 Mio ECU (100%) 
Financing 
decisions (Mio ECU) Total: 
4 454,7 Financing decisions and payments by economic sector 
O 
E 
to 
a> 
a> 
2 Ifi H 
Wk • 1 • 
m 11 11 1 21 
M 
CO «= 
O 
tpn 
*Hll ^> 
^pp ^ipp 
By economic sector: 
57,2 914,8 1 084,0 805,0 279,7 98,1 256,3 76,4 253,8 629,4 
Payments (Mio ECU) 3 071,8 38,6 602,9 631,8 527,6 160,7 56,2 179,6 53,7 191,3 629,4 
6th EDF: 
Allocation: 
7 511,7 Mio ECU (100%) IO 
Financing 
decisions: 
2 267,5 (30,2%) 
Payments: 
469,3 (6,2 %) 
til 0 = i 
(0 t 
Oi 
Financing 
decisions (Mio ECU) Total: 
2 267,5 By economic sector: 
60,6 321,6 871,3 h>.*d 
462,1 ©0 
47,3 26,5 39,4 35,3 36,0 367,4 
Payments (Mio ECU) 469,3 5,2 26,6 16,4 20,5 0,6 0,6 1,3 13,3 18,1 366,7 
234 Official Journal of the European Communities 12. 12. 88 
§ 28. The six EDFs: evolution of annual payments (1960-1987) 
1960 61 62 63 64 65 66 67 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 
1st EDF 
2nd EDF 
3rd EDF 
4th EDF 
5th EDF 
6th EDF 3,4 53,3 84,8 
21,9 76,7 
31,6 61,7 
42,9 38,6 
67,9 11,4 
120,5 
22,5 10,1 
78,6 
42,8 9,9 
49,4 
98,5 5,5 
25,9 
140,6 2,4 
23,3 
182,7 2,9 
17,2 
131,0 
97,5 0,6 
16,3 
79,8 
148,0 0,8 
7,9 
66,0 
326 0,4 
4,1 
37,4 
,4 3423 0,3 
2,5 
19,8 
459,3 0,4 
0,9 
20,7 
445,8 
195,9 0,4 
11,2 
305,5 
330,1 0,1 
14,3 
285,2 
419,2 0,1 
8,2 
185,2 
509,5 6,0 
105,7 
586,3 3,6 
108,5 
617,9 
116,7 2,2 
70,2 
412,9 
352,6 569,4 
730,4 
887,3 
2 960,6 
3 071,8 
469,3 
15,8 53,3 83,4106,7108,3 104,6106,5 115,0145,6154,4 131,5 157,8172,0 208,4 248,6 244,7 401,0465,3 481,9 663,7 647,2 718,8 703,0 698,0 846,7 837,9 8 688,8 
12. 12. 88 Official Journal of the European Communities 235 
Replies of the institutions to the observations of the 
Court of Auditors concerning the financial year 1987 
PARTI 
General budget of the European Communities 
CHAPTER 1 
General matters 
REPLIES OF THE COMMISSION 
In Chapter 1 of its annual report for 1987 the Court 
makes a number of general observations on: 
— the main budgetary data resulting from the accounts 
for the financial year 1987 and 
— the implications of shared management, 
Before replying to these observations the Commission 
would like briefly to recall the reform proposals which it 
presented in 1987, culminating in 1988 in a series of 
decisions — on agricultural policy, the structural Funds, 
budgetary discipline, the own resources system and the 
financial regulations — which are of key importance for 
the future development of the Community. 
The Commission believes that in the proposals it 
presented (those listed above being the most representat­
ive) and the decisions it took, it made full use of the power 
of initiative conferred on it by the Treaty. It would also draw attention to the close collaboration 
which developed between the institutions with due respect 
for each other's areas of responsibility. Such collabor­
ation is essential if the objectives are to be achieved. The 
high point was reached with the conclusion of the inter-
institutional agreement on budgetary discipline between 
Parliament, the Council and the Commission, the 
political importance of which was highlighted by the 
Hanover European Council. 
The Commission is now equipped to press ahead with 
implementation of its proposed reforms and with the 
constant task of enhancing the effectiveness of Com­
munity policies. This naturally implies closer cooperation 
with national authorities. 
As regards the discharge procedure — for which the 
Court's report, together with the Commission's replies, 
constitutes the basis — the Commission agrees with 
Parliament that it represents a step forward in the effort to 
enhance sound financial management and to further the 
Community's development. 
236 Official Journal of the European Communities 12. 12. 88 
It has done everything it can to see that positive follow-up 
action is taken in response to the observations made by 
the supervisory authorities (Parliament in its resolutions 
accompanying the discharge decisions; and the Court in 
its annual and special reports) and will continue to do so. 
MAIN BUDGETARY DATA RESULTING 
FROM THE ACCOUNTS 
FOR THE FINANCIAL YEAR 1987 
The accounting surplus and the actual deficit 
1.2 -1.3. With regard to the Court's analysis of the 
balance for 1987, the Commission would like to see a 
distinction made between the assessment of the accuracy 
of the accounts, which — under the existing rules — 
showed a surplus of 521,5 Mio ECU, and the con­
sequences of the decisions taken by the budgetary 
authority. The decision to defer to 1988 expenditure 
totalling 693,6 Mio ECU in respect of refunds to the 
Member States, for instance, was taken on 17 July 1987 
when the supplementary and amending budget was 
adopted. The Commission mentioned this fact in its 
comments on the balance for the financial year. 
However, it did not signal the failure to meet two months 
of EAGGF expenditure (4 546 Mio ECU) or the debts 
resulting from the implementation of part of the special 
butter disposal programme in 1987 (1 534,8 Mio ECU) 
for the following reasons: 
To give effect to the conclusions of the European Council, 
the Regulations adopted by the Council on 19 October 
1987 and 24 June 1988 limited the budget year de facto to 
10 months in 1987. But this did not have the effect of 
shifting additional expenditure on to the 1988 budget; 
instead, with the second of these two Regulations a 
permanent two-and-a-half-month time-lag was intro­
duced between the financing of EAGGF-Guarantee 
expenditure by the Member States and its being charged 
to the Community budget. 
The Commission was also careful to give the budgetary 
authority a true picture of the situation when it clearly 
stated on page 61 of the 'Analysis of financial man­
agement' that: 'the 1987 financial year covered only some 
10 months, distorting comparisons with the previous financial year, which covered 12 months. This must be 
taken into consideration when reading the comments on 
the trend of expenditure in each sector.' 
As regards the cost of the special butter disposal 
programme, the Regulation adopted by the Council on 16 
March 1987 in the light of the deliberations of the 
European Council provides for it to be charged to the 
budget over four years beginning in 1989. This cost is 
included as a financial obligation in the annex to the 
consolidated revenue and expenditure account, where — 
for the sake of transparency — a distinction is made 
between: 
— financial obligations already contracted (commit­
ments actually made in 1987 for disposal of butter), 
and 
— potential future cost (disposal after 1987). 
The Commission can only reaffirm that the accounts are 
drawn up in strict compliance with the regulations and 
that, like the Court, it wishes to ensure that revenue and 
expenditure for the financial year are in balance. It is 
convinced that the decisions taken by the Council in 1988 
on the basis of its proposals, in particular on budgetary 
discipline and the Financial Regulation, will help towards 
this end. 
1.4 - 1.5. Bearing in mind its reply to paragraphs 1.2 — 
1.3 , the Commission would urge caution when compar­
ing EAGGF-Guarantee expenditure for 1987 with 
previous years. Not only is it impossible to compare 
expenditure in a 10-month financial year with expendi­
ture in a 12-month year, but it is also difficult to compare 
the 1987 financial year — when an exceptionally large 
quantity of butter was disposed of using a special 
financing mechanism — with previous years. 
As regards the comparison between the rate of increase in 
agricultural expenditure and the growth of the own 
resources base, using the parameters agreed by the 
Fontainebleau European Council for enforcing bud­
getary discipline, the Commission would point out that 
the renegotiation of the budgetary discipline arrange­
ments in 1988 clearly brought out the inadequacy of the 
parameters chosen in 1984 (flaws in the basis for the 
calculation and under-estimate of the impact of fluctu­
ations in the rate of the dollar). 
The fact that the accounts presented by the Commission 
are held to be inconsistent from one year to the next is not 
of the Commission's making. It can only see that they 
comply with the regulations. 
12. 12. 88 Official Journal of the European Communities 237 
1.7 -1.9. In the absence of political agreement within 
the Council to allocate sufficient resources to the 
Community, there was no alternative — since budget 
execution must nevertheless be balanced — but to close 
the financial year for the EAGGF Guarantee Section 
early. 
In the Commission's view this was a temporary technical 
measure pending the adoption of a new own resources 
system. At all events the financial year will revert to the 
normal 12 months in 1989. 
As regards the consequences for control of adjusting the 
length of the financial year and the reference to the 
political objectives set by the Fontainebleau European 
Council, the Commission would refer the Court to its 
reply to paragraph 1.4. 
Monitoring the implementation of the budget 
1.12. The Treaty requires that the distinction between 
compulsory and non-compulsory expenditure be made 
when the budget is being prepared, since it reflects and 
determines the division of powers between the Council 
and Parliament. However, this distinction has no major 
significance for the way in which such expenditure is 
actually effected. 
1.13. The Commission has always based its preliminary 
draft budget on the most rigorous possible analysis of the 
likelihood of actual execution, taking account of the 
multiannual policy guidelines which that preliminary 
draft must reflect. 
It believes that the reasoned explanations which it 
presents each year for the appropriations requested for 
each sector and budget heading are ample proof of the 
effort made to ensure that the estimates are as reliable as 
possible. 
It has also always endeavoured — subject to the data 
available within the strict deadlines imposed — to alert 
the budgetary authority in the course of the budgetary 
procedure to the likelihood of implementation when 
amendments are made and, of course, to any danger of 
inadequate funding. 
1.14-1.15. The Commission welcomes the Court's 
very interesting analysis of the causes of under-utilization 
of appropriations. Apart from a few reservations which 
will be explained in detail in Chapter 2, it agrees with the 
Court's conclusions. The data which it supplies to the budgetary authority and 
the control authorities throughout the budget process — 
from the estimates through to actual implementation — 
are designed to provide them with as clear a picture as 
possible and the documentation which it produces is 
much more detailed and frequent than required by the 
regulations. 
Nevertheless, the Commission is prepared to make a 
further effort, but it would point out that budget 
execution must be assessed in terms of each Community 
operation identified in the budget nomenclature. As a rule 
those administering these operations know why execution 
falls short and do everything within their power to put 
matters right. 
Future expenditure 
1.16-1.19. The Commission would stress that much 
progress has been made in recent years as regards the 
analysis and presentation of items of future Community 
expenditure, in particular in Volume V of the revenue and 
expenditure account. 
Nevertheless it agrees with the Court that this analysis 
must be taken even further in order to arrive at an 
objective presentation acceptable to all the institutions 
concerned. In particular a clear distinction needs to be 
made between: 
— genuine 'future expenditure' in the narrow sense, in 
other words expenditure flowing from legal oblig­
ations (in particular outstanding commitments, 
disposal of agricultural stocks, international agree­
ments, etc.); and 
— the financial consequences forecast in the multi-
annual programmes or the perspective. This second 
category does not, strictly speaking, come under the 
heading of'future expenditure' for the purposes of the 
balance sheet, since it is simply a forecast — whether 
incorporated in a Council programme decision or not 
— of the expenditure considered necessary in the near 
future for the development of Community policies. 
The Commission will very soon be taking steps to come to 
an agreement with the institutions concerned on the most 
appropriate way of presenting these data. 
^ C^ftlcial journal of the European Communities 1^1^^ 
L^O. A schedule of potential e^penditureinrespect of 
public stocks ofagricultural products does e^ist^ it was 
adopted by the European Council and included by the 
Commissionintheanne^ to the revenue and expenditure 
account.fhe relevant appropriations will be enteredin 
each annual budget. 
As regards the other schedules,the Commission would 
first point out that the purpose of the revenue and 
expenditure account is not to produce such schedules, it 
wouldalsoreferto the interinstitutional agreement.Atall 
events, such schedules ha^e to tie in with the multiannual 
programming 
L^L ^Vhen the accounts for 19^ were closed, the 
Commission estimated that payments to be madein!9^7 
in respect of commitments from differentiated appropri 
ations still outstanding at^lEoecember 19^ would come 
to4991,41^ho ECU.Actual payments made inrespect of 
these commitments in 19^7 amounted to only 
^^71,^^hoECU,or77o^oftheforecast,astheCourt 
points out. 
LheCommissionacknowledgesthatsomeofthecausesof 
under^utili^ation noted by the Court in Chapter ^ 
^Budget implementations also hampered payments in 
19^7 ofcommitments from previous financial years. But 
it would add that 1^9,^lVtio ECUincommitments 
outstanding at^ll0ecemberl9^ were cancelled in the 
course of 19^7, thus reducing the amount of debts 
incurred in previous years from 1^4eo^,ltolll9^1Vho 
ECU 
L^. ^ith regard to the fact that some of the 
commitments from differentiated appropriations still 
outstanding at^llOecember 19^7 were made long before, 
the Commission acknowledges the problembut would 
point out that 49^of the amount outstanding at theend 
of!9^7 was accountedfor by commitments made during 
the year,while commitments more than three years old 
^ee.datingfroml9^andearlier^amountedtoonlyl0^ 
of the total. 
As to the problem itself, the Court notes that appreciable 
progress has now been made in the case of the European 
^ocialEundmhe Commission shares the CourCsconcern 
about the other areas and intends to continue its effort to 
improve themonitoring of outstandingcommitments. 
C^nemo^e in this direction was the proposed amendmem 
to the Einancial regulation of^lPOecember 1977 which 
was adopted on ^4 ^une 19^, adding the following 
provision toArticlel^Lhe legal commitments entered 
intoformeasures extending evermore than one tlnancial 
year shall containatimedimitfor implementation which 
must be specified to the recipientindueform when theaid 
isgrantedB L^. As the Commission has stated in the past in reply 
toasimilarobser^ationbytheCourt,thereisnoone 
formula for commitmentst^e.g. the signing of contracts^ 
that could possibly be applied uniformly to implement 
tation of the budget asawhole. 
The policies reflected in the budget are necessarily many 
and varied and this inevitably entails differencesinthe 
way they are implemented. Article^oftheEinancial 
regulation recognises this fact when it refers to 
^provisional commitments, Commission decisions apD 
proving projects under the Eunds, and the global 
commitments provided for in Article 9ee 
it is important to note that current policy developments 
— especially in the area of the structuralEunds — tend to 
favour the^programme^approach for technical,econ^ 
omic and political reasons. This development has to be 
borne in mind, since it has implications for commitment 
procedures,although it is not likely tounderminethe 
technical and accounting signiticance of commitments as 
such. 
^^c^c^^^^^ 
L^4. The Commission must stress that it presenteda 
proposal for an overall revision of the Financial 
regulation in 19^0. This proposal was amended in 19^4 
inthe light of the opinions delivered by the Court ^in 
19^ and parliament t^in 19^ Unfortunately the 
Council was unable to act promptly. 
^ince the situation had changed meanwhile, and in 
particular inthelightof the ob^ecti^essetoutinthe 
Meiers packaged for reforming the Community^ tinan^ 
cing system and reorganizingbudgetmanagement,the 
Commission had to present a number of piecemeal 
proposals for amendments, notably as regards the 
principleof annuality and the termsunder whichthe 
EAC^olEC^uarantee section is financed. These specitlc 
proposals were designed to deal with changes in the 
general content and to meet the new requirements. 
IVtoreo^er, theblamecanhardly belaidat theComD 
mission^sdoor, since it was because of the Councils 
failure to act that the general revision proposal — which 
wasquiteconsistentwhenoriginallypresented^cameto 
nothing. The Commission, at the request of all the 
institutions concerned, iscurrently drawingupanew 
proposal forageneralre^isionoftheEinancialR-eguD 
12. 12. 88 Official Journal of the European Communities 239 
lation with a view to resuming the revision process in line 
with the conclusions of the European Council of 11 to 13 
February. 
THE IMPLICATIONS OF SHARED 
MANAGEMENT 
The principle of shared management 
and control 
1.26 - 1.37. To begin with, the Commission must say 
that the term 'shared management' calls for some further 
explanation. 
It needs only to be borne in mind that the common 
agricultural policy has necessitated the setting-up of a 
large number of paying agencies employing thousands of 
staff in the 12 Member States to realize that management 
is not 'shared' but, because of the nature of things, has 
had to be decentralized to each Member State. Another 
example of this is customs duties. 
In the Commission's view, the emphasis should be on the 
fact that the decentralization, which dates back to the 
1960s but is still perfectly justified now, means that 
primary responsibility for the day-to-day management of 
Community affairs lies with the national authorities. 
Consequently supervision by the executive is essential, 
especially in the areas singled out by the Court in 
paragraphs 1.29 to 1.31. Improvements have to be sought 
by means of closer cooperation between the Commission 
and the relevant authorities in the Member States as 
regards monitoring, information and follow-up. 
Some improvements have already been made or are 
provided for in horizontal regulations. 
In the area of EAGGF-Guarantee operations the 
Commission, following the recommendations of Parlia­
ment and the Court, has introduced the systems-based 
audit method, starting with the clearance of the 1986 
accounts. This involves checking whether national 
management and control systems are correct and reliable, in place of the impossible task of verifying hundreds of 
thousands of individual financial operations. 
This method has been introduced gradually, with priority 
being given to the intervention agencies, but it now 
applies to all products which come under a common 
market organization. 
As regards the structural Funds, the framework regu­
lation recently adopted on a proposal from the Commis­
sion is based on the principle that the best way of ensuring 
that Community measures are effective in terms of 
achieving their intended objectives is to establish a system 
for regularly monitoring the results attained and, if 
necessary, adjusting the operations under way in the light 
of the actual progress of the programmes. Here too, then, 
the principle of decentralization has been confirmed and 
even strengthened through the partnership between the 
Commission and the relevant authorities in the Member 
States. Thanks to this decentralization and the simplifi­
cation of procedures, monitoring and evaluation will be 
enhanced. 
In the research field, evaluation and monitoring policy 
has developed in several stages, the latest being the 
decision taken by the Council when it approved the 1987-
91 framework programme. In particular this requires the 
inclusion in each specific programme of an article 
explicitly relating to evaluation. It should also be noted 
that a specific programme on the methodology of 
evaluating Community research programmes (Spear) has 
been proposed. 
Lastly on the question of combating fraud, the Commis­
sion would recall that the anti-fraud coordination unit 
has been set up, that its working programme has been 
established and that it will be presented to Parliament, as 
the Commission promised. 
With regard to the section 'Problems connected with the 
sharing of responsibilities in the main areas of Community 
activity' (paragraphs 1.28—1.37), which summarizes 
some of the detailed observations set out elsewhere in the 
report, the Commission would refer to its specific replies 
under the relevant chapter headings. 
Problems connected with 
the agency role assigned to the EIB 
1.38 - 1.45. The problem of safeguarding the Court's 
powers in respect of Community resources used to 
finance operations where the EIB acts as agent remains 
one of the Commission's major concerns in establishing 
240 Official Journal of the European Communities 12. 12. 88 
the inter-institutional cooperation that is essential in 
every field of Community activity. practical arrangement to reconcile the powers of the 
Court with the concerns of the Bank. 
The Commission has intensified its search for a solution 
that satisfies all the parties involved. Following the 
undertaking given by the President of the Commission in 
a letter to the President of the Court on 30 April 1987, the 
Commission has made numerous efforts to find some The latest proposals which the Commission sent to the 
Bank on 16 June 1988, modelled on the arrangements 
agreed in the ECSC field, will shortly be considered in 
detail by a working party comprising representatives 
from the Bank and the Commission, which is expected to 
complete its work by the end of 1988. 
12. 12. 88 Official Journal of the European Communities 241 
CHAPTER 2 
Implementation of the budget and accounting matters 
REPLIES OF THE PARLIAMENT 
OBSERVANCE OF THE FINANCIAL THE GENERAL ACCOUNTS AND THE 
REGULATION COMMUNITY BALANCE SHEET 
Procedures applicable to commitments and Cash deficit at the Parliament 
payments 
2.31 - 2.33. The number of decisions to overrule the 
Financial Controller's refusal to give his approval is 
evidence of the rigorous internal control carried out to 
ensure that the complex provisions of the Financial 
Regulation and the relevant implementing provisions are 
strictly applied. Authorizing Officers within the EP have 
been reminded repeatedly of the need to ensure that these 
rules are adhered to scrupulously. Administrative 
measures have also been taken in the sectors concerned to 
prevent as far as possible situations arising in which the 
Financial Controller is obliged to withhold his approval. 
OBSERVANCE OF THE FINANCIAL 
REGULATION 
Observations arising from the audit of salaries 
at the Council 
Checks carried out by the Financial Controller 
2.19-2.22. Formerly the Financial Controller com­
piled the entire collective statement manually. This total 
was identical to the overall collective statement as such. 
However, the monthly difference in relation to the total 2.55. By decison of 18 January 1988, the Appointing 
Authority took disciplinary action against Parliament's 
former Accounting Officer. A decision on the financial 
implications will be taken within the framework of the 
procedure for granting a discharge to the Accounting 
Officer for the 1982 financial year, which has been 
delayed owing to the action (Case No 44/88) (!) brought 
by the official concerned in the Court of Justice of the 
European Communities and challenging the decision of 
18 January 1988 referred to above. 
(') The footnotes are listed together at the end of the chapter. 
previous collective statement is specified on each occasion 
(i.e. every month). 
Under the Financial Regulation, the Financial Controller 
does not have to have a hand systematically in the various 
stages and operations of the departments responsible for 
drawing up collective statements or for the keeping of 
files. 
Segregation of duties 
2.27. The principle of the segregation of duties of the 
Authorizing Officer, the Financial Controller and the 
Accounting Officer, provided for in Article 17 of the 
Financial Regulation, is observed. REPLIES OF THE COUNCIL 
242 Official Journal of the European Communities 12. 12. 88 
1. The head of the division responsible for accounts is 
the Authorizing Officer; on the other hand, he does 
not in any way perform the duties of Accounting 
Officer. 
2. As part of the reorganization of departments in 
progress, the General Secretariat of the Council will 
bring its organization into line with the constraints of 
the Financial Regulation. 
2.29. The practice followed at the Council is the result of 
the needs arising from the existing de facto situation. 
Absence of internal rules for the implementation of the 
budget 
2.30. The Authorizing Officers implement the Council 
budget on the basis of the following provisions: the 
Council's rules of procedure, the Financial Regulation, 
ANALYSIS OF THE IMPLEMENTATION OF 
THE 1987 GENERAL BUDGET 
Budget estimates and management of the 
appropriations 
General assessment of the utilization of the 
appropriations 
2.2-2.3. See the reply in Chapter 1 (paragraph 1.12). 
2.4. The Commission obviously agrees with the Court 
that the budget adopted by the budgetary authority 
should, by definition, be a positive forecasting and 
authorizing instrument and that a 'negative reserve' is not 
compatible with this. 
The Commission would point out, however, that formal 
recognition of the principle of a 'negative reserve' should 
be seen in the light of pragmatic considerations, based on 
experience, and that it cannot necessarily be assumed that 
budget orthodoxy is being abandoned. the procedures for implementing the Financial Regu­
lation and the Secretary-General's decision appointing 
Authorizing Officers and Deputy Authorizing Officers 
and defining their powers in the area of expenditure and 
revenue. 
Procedures applicable to commitments and 
payments 
2.34. Given that it is impossible to assers the exact 
monthly amount of certain costs (including photocopies, 
telephone and telex, interpreters, Official Journal), the 
General Secretariat of the Council draws up proposals for 
commitment per instalment on the basis of preceding 
expenditure. As a result certain commitment proposals 
have been under-assessed and additional amounts have 
had to be committed after the event. 
The General Secretariat will try its best to avoid any 
repetition of this situation. 
As the Commission indicated in COM(88) 148 final of 18 
March 1988, recourse to a negative reserve can be justified 
in the particular context of the Community budget for 
both procedural reasons (bringing the budgetary pro­
cedure to a close) and financial reasons (absorption at the 
end of the year of unavoidable discrepancies between 
authorizations and out-turn). Since the budgetary 
authority itself has had recourse in the recent past to a 
'negative reserve' the Commission considered it pre­
ferable to make provision for the limited use of this device 
in a regulation (2). 
2.5. As the Commission noted in its reply to paragraph 
2.4 of the Court's report for 1986, it does its utmost to use 
these appropriations. But it does not always succeed, as 
the Court itself recognizes, either because Parliament's 
amendments produce an 'over-allocation' or because the 
necessary legal basis is not adopted in time. 
Transfers of appropriations 
2.6. It is true that the volume of appropriations 
transferred within the EAGGF Guarantee Section in 
1987 was very high. REPLIES OF THE COMMISSION 
12. 12. 88 Official Journal of the European Communities 243 
Transfers of appropriations are unavoidable because of 
the difficulties inherent in making agricultural forecasts. 
But these difficulties were compounded in 1987 by two 
extraneous factors which had nothing to do with the 
Commission's forecasting and management function. 
The first factor was the package of decisions taken by the 
Council at its meeting from 8 to 16 December 1986 on 
reform of the market organizations for milk products and 
beef/veal. The bulk of the unutilized appropriations in the 
transfer referred to by the Court were for the milk 
products sector (887,3 Mio ECU). This was largely a 
consequence of the Council's decisions to reduce milk 
quotas and to spread the cost of the 1987-88 butter 
disposal programme over the years 1989 to 1992. These 
decisions, on which political agreement was reached in 
December 1986, were not finalized in legal form until 
March 1987, in other words, after final adoption of the 
1987 budget on 19 February. Had the timing of the 
budgetary procedure made it possible to present a letter of 
amendment to the preliminary draft budget for 1987, 
making the adjustments the Commission knew in 
December 1986 would be needed, the transfer ultimately 
made could have been reduced by at least 40 %. 
The second factor was the reduction of the budgetary year 
to 10 months. Given the seasonal nature of expenditure 
varying from one chapter to another, a budget prepared 
for 12 months cannot be executed with the same 
breakdown of appropriations between chapters in 
10 months. 
In any event, thanks to the increased importance now 
attached to forecasting and management of expenditure 
by chapter, the Commission will be reducing transfers to a 
far lower level beginning in 1988 
Payment appropriations carried over 
2.8. In 1986 the Commission explained why it con­
sidered the Court's interpretation to be incompatible with 
the letter and the spirit of the Financial Regulation as 
regards differentiated appropriations. The new provi­
sions of the Financial Regulation on carryovers introduce 
arrangements which differ from those outlined by the 
Court. 
Analysis of the utilization of appropriations 
2.11 - 2.14. The Commission is aware of the difficulties 
encountered in using certain appropriations. It has taken 
careful note of the analysis of the principal causes of under-utilization identified by the Court. It would point 
out, however, that some of these can have accumulative 
effect and that any conclusions drawn must therefore be 
qualified. Moreover, in addition to the reports it is 
required to present under Articles 29 and 75 of the 
Financial Regulation (quarterly reports and the analysis 
of financial management which accompanies the revenue 
and expenditure account), its monthly reports keep the 
budgetary and control authorities permanently briefed on 
execution of the budget. 
The Commission would stress that, as a general rule, 
departments managing appropriations are well aware of 
the reasons for under- and over-utilization of the 
appropriations for which they are responsible and do 
everything they can to remedy the situation where this lies 
within the Commission's powers. 
In this context the problems discussed by the Court in 
subparagraphs (a), (b), (c) and (d) of paragraph 2.13. 
could be eased by the far-reaching reforms proposed by 
the Commission in 1987 which should lead to a budgetary 
policy based on stricter principles of sound financial 
management. 
As to the reference to rather unsatisfactory management 
by Commission departments, and in particular the 
appropriations which lapsed in Titles 1 and 2 of the 
budget (EAGGF Guarantee Section), the Commission 
would make the following points: 
For the EAGGF Guarantee Section (including Chapter 
40 (Fisheries)), the appropriations which lapsed cor­
respond to advances not used by the Member States (see 
also Article 100 of the Financial Regulation of 21 
December 1977). 
As to the figure of 18,5 Mio ECU in 1987, the channels 
through which Community advances to the Member 
States are distributed to paying agencies are so com­
plicated that should redistribution within a single country 
prove necessary, it is rarely possible. It is therefore quite 
normal that while some paying agencies may have 
exhausted the funds placed at their disposal others may 
have a slight surplus in hand. 
This was the situation in November 1987 when the 
changeover from Community prefinancing to national 
prefinancing should have taken place, the precise moment 
being defined by Regulation (EEC) No 3183/87 as 'after 
the appropriations allocated to the EAGGF Guarantee 
Section for the financial year 1987 have been used up'. 
Most disbursing authorities made the changeover from 
one financing system to the other at a point when 
Community funds available to them were no longer 
sufficient to wind up the operation in progress, either in 
244 Official Journal of the European Communities 12. 12. 88 
terms of settling individual dossiers or feeding an item of 
expenditure into a computer. 
Surpluses in hand which could have been used by other 
paying agencies could not always be transferred in time. 
Some agencies switched from the Community prefinan­
cing system at the end of November, although a balance 
of advances was available, to avoid excessive overlap 
between the two systems. In the Commission's opinion, 
this approach was consistent with the terms of Regulation 
No 3183/87. 
2.14. The reason for the under-utilization of Item 4702 
(Modernization and development) is that 1987 was the 
first year of application of a new operation. 
System of provisional twelfths 
2.15. The Commission's proposal for revision of the 
Financial Regulation includes a number of provisions to 
clarify implementation of the provisional twelfths system 
and rule out the possibility of differing interpretations. 
2.16. The different positions held by the Commission 
and the Court as regards application of the regulations 
relating to provisional twelfths for the EAGGF Guaran­
tee Section are well known. The Commission would argue 
that it has observed the 'imperative need for rigorous and 
far-sighted management' in applying the system. It is true 
that the Commission has to assess the reliability of 
Member States' forecasts in making advances for 
EAGGF Guarantee Section expenditure. But it cannot 
grant advances which are well below those applied for 
unless it has serious, well-founded doubts about these 
forecasts. 
Even if advances were to be treated as payments rather 
than provisional commitments, the Commission would 
have had no option, in the case in point, but to ask for an 
additional twelfth for February 1987. Either way, the 
effect on the calling-up of own resources would have been 
the same. OBSERVANCE OF THE FINANCIAL 
REGULATION 
Procedures applicable to commitments and 
payments 
2.35. (a) The Commission would make the point that 
the monthly charging of payments relating to food aid 
involves a large number of accounting operations. There 
was no improper payment in the case mentioned by the 
Court. 
(b) The deadlines in the agreement with India are 
indicative only. 
(c) As regards the payments of 0.3 Mio ECU to non­
governmental organizations, the Commission would say 
that the utmost care is taken to adhere to the general 
conditions, but the possibility of exceptions cannot be 
ruled out entirely. 
Supporting documents 
2.39. The Commission is well aware of the importance 
of providing complete supporting documents and 
adhering to the deadlines laid down in the Financial 
Regulation for the transmission of such documents to the 
Court. It regrets the delays, some of them due to the 
steady increase in the volume of documents to be dealt 
with, which occurred during 1987. In future it will see to it 
that the Court receives all the documents it needs for its 
audit. 
RECOVERY OF PAYMENTS ON ACCOUNT 
RELATING TO OPERATIONAL 
EXPENDITURE 
Procedures for identifying recoveries and 
entering payments made on account in the 
accounts 
2.41 and 2.53. (a) The Commission is fully aware of the 
importance of monitoring outstanding commitments. 
Periodical reviews are conducted, one purpose being to 
assess the situation with regard to recovery. 
12,12.^ COfticial journal of the European Communities 2^ 
^owever^ because the legal nature of the financial 
operations managed by Commission departments is so 
diverse^ Authorizing COfticers are in the best position to 
monitor dossiers. 
The Commission recognizes in principle the value of 
diversifying central accounting data, it will keep the 
CourCscommentsinmindforfnrther development ofthe 
new Sincom system. 
2.41and2.53.^and^ Considerable efforts have 
beenmadeinrecentyears^notably by expanding the 
internalrulesandissuingappropriateinstructions^ to 
ensure that Authorizing Cofticers keep as close an eye as 
possible on the execution ofe^penditure. This implies the 
issuing ofrecoveryorderswherepaymentsonaccountare 
identified as recoverable. 
^iore generally it can be said that where results are not 
entirely satisfactory^ the fault lies not so much with 
inadequateinternalarrangementsbutratherwithalegacy 
from the past which is being dealt with gradually^ 
— in the past^asageneralrule^ there was no systematic 
timedimit for the execution of multiannual commits 
ments.L^iscipline should be stricter in future under 
the new Article l^a^ofthe Financial regulations 
— abetter match willbesought between themeans 
^including staff) made available to Authorizing 
COfticersto^ ensure e^ecutionof the budget and the 
need for outgoing detailed monitoring of individual 
dossiers. Appropriate steps will have to be taken in 
futureinrelation to the practices of Authorizing 
C^fticers and the means at their disposal to improve 
the situation. 
Thecurrentrevisionofthebasicregulation^andmeasures 
to be takento implement it^ should clarify the mecha^ 
nisms triggering recovery operations^ notably as regards 
the interpretation and identitication of those truly 
responsible where problems of this kind arise. 
2.4L See the reply to paragraphs 2.41 and 2.^ta^. 
2.42. A^^^c^^^^^^Belgium^^FB^^C^C^ 
222^^B, The Commission would draw attention to the 
following points^ — on!2^ayl^71viSFDBsuppliedaninterimreporton 
expenditures l^t^and aprovisional budgetfor 
1^ 
on!4Iulyl^7^1vi^FBreportedthatdifficultieshad 
arisen and that the project had been temporarily 
suspended following intervention by the military 
governor of the regions 
^ on^Februaryl^^FDB reported that it had had 
to leave the region and that the project would have to 
be abandoned. C^iven the political nature of the 
difticulties encountered by Ivi^^B the Commission 
decided to postpone closure of the pro^ect^ 
on 1^ August 1^^ the Commission wrote to ^vl^B 
askingit to supplythe additional informationneeded 
forrecoveryoftheunusedcontribution^.^eo4LC^ 
plus any bank interest. 
It is often necessary to awaitaprogress report or indeed 
to conduct an audita to establish the sum to he recovered 
as a preliminary to the issuing of a recovery order 
allowing the Accounting COfticer to proceed with re 
covery. 
2.43. in the vast majority of cases revenue is placed ina 
suspense account because there is no reference which 
would make it possible to link it toarecoveryorder.The 
Commission tries to get hold of these references as 
quickly as possible. C^n the ^ocialFund^ the Commission 
would refer to the replies in Chapter7below. 
2.45. The most recent amendment to the financial 
Regulations combined with reform of the structural 
Funds^ should leadto improved harmonizationof the 
procedures for recuse. 
2.4^ and 2.53.^ Itis true that the Commission has no 
criteriafor the reuse of paymentsonaccountwhich have 
been recovered, ^ince application of the provisions 
allowing the reuse of sums improperly paid is optional^ 
some departments had recourse to them whereas others 
entered the sums in question as revenue. 
246 Official Journal of the European Communities 12. 12. 88 
In its proposal for a general revision of the Financial 
Regulation the Commission intends to include an entirely 
new provision which would result in sums thus recovered 
being treated in the same way as amounts released from 
commitments. This would ensure uniformity in the 
reconstitution of commitments, the re-utilization of 
certain means of payment, and the practices of Author­
izing Officers. 
Presentation in the annual accounts of 
recoveries of payments on account and their 
re-use to finance new expenditure 
2.48, 2.49 and 2.53. (d) The Commission recognizes 
that at present the annual accounts do not identify sums 
recovered and re-used to finance new expenditure. This is 
because of the way some recoveries are handled and the 
relevant computer programs. Whether they are entered in 
the accounts as revenue or as negative expenditure, 
recoveries are not distinguished from other transactions 
for the purpose of presenting revenue and expenditure in 
the revenue and expenditure account. On the other hand, 
recoveries re-used are shown separately, broken down by 
budget heading, in the annual accounts. The Commission 
is examining the possibility of improving the presentation 
of recoveries in the context of its general review of this 
question. 
Recovery procedures 
2.51. Although procedures are a problem in certain 
cases, the system as a whole cannot be challenged. 
Enormous progress has been made, improving the 
situation considerably. 
Recovery is conditioned (a) by the basic or sectoral 
regulations and (b) by the way in which certain dossiers 
are administered. The Court itself considered this 
problem in its Special report No 1/88 on national and 
Community systems and procedures relating to the 
management of the European Social Fund (OJ C 126, 
16.5.1988). 
It found that the regulations themselves were not always 
consistent and that this alone made effective monitoring 
of recovery procedures very difficult. 
The examples cited by the Court in paragraph 2.51(b) 
demonstrate that the Commission does pursue recovery. Wherever possible it initiates recovery procedures even in 
cases of rehabilitation by the courts. It has introduced a 
system to speed up debt collection procedures and to close 
dossiers relating to monies which are considered to be 
irrecoverable. This is the only way to recover at least a 
proportion of the monies in question when the debtor 
goes into definitive liquidation or when he resumes 
activity. 
(a) and (b) These factors are being considered in the 
context of revision of the Financial Regulation. 
Final observation on the recovery of payments 
on account 
2.52 - 2.53. The Commission would refer to its replies 
to the previous paragraph. 
2.53. (f) Losses resulting from bankruptcies are small 
and the cost of recovery in such cases is out of all 
proportion to the possibility of success. The Commission 
is considering the possibility of introducing arrangements 
that would give it more scope for action, but without 
losing sight of the need for cost-effectiveness. 
2.54. This matter is being considered in the context of 
revision of the Financial Regulation. 
THE GENERAL ACCOUNTS AND THE 
COMMUNITY BALANCE SHEET 
Revenue to be recovered 
2.56. The Commission is well aware of the importance 
of rapid, efficient debt recovery. In the interests of sound 
management, it has concentrated its efforts on clearing up 
cases of debts which fell due between 1980 and 1986. 
Although the amounts involved are relatively modest in 
comparison with debts for the current year, they do 
represent virtually the same number of cases as for 
amounts which became due in 1987. A large proportion 
(83 %) of debts for 1986 and 1987 relate to the Social 
Fund and reflect the volume of commitments cancelled in 
1986 and 1987. 
12. 12. 88 Official Journal of the European Communities 247 
This is why the Commission has concentrated on Social 
Fund cases and debts which fell due prior to 1987. In its 
opinion with this approach, plus improvements to the 
computerized file management system, the situation as 
regards debts outstanding should stabilize in the course of 
1988. 
Recoverable taxes and duties 
2.57-2.59. Following the letters sent in June 1986 to 
Member States which do not operate the direct system of 
VAT exemption, discussions took place between the 
Commission and all the Member States concerned except 
Greece. The seven countries rejected the Commission's 
request to replace ex post repayment of VAT by direct 
exemption because of the control problems direct 
exemption would cause them. They would have to 
introduce procedures to eliminate the possibility of 
irregularities where individuals subject to VAT are 
authorized to invoice net of VAT in certain circum­
stances. Ex post repayment raises no problem of this 
kind: the Member States merely check the repayment 
request on the basis of supporting documents presented 
by the Commission. 
As far as the two new Member States are concerned, 
detailed rules for applying the protocol are being 
discussed with Portugal and a letter of formal notice has 
been sent to Spain. 
2.58-2.59. The Commission did experience some 
problems in 1987, the first year of application of the new 
accounting procedure, but it is endeavouring to solve 
these. It is true that at the end of May 1988 only four 
repayment requests had been issued, but by the end of 
July all the repayment requests had been sent to the 
Member States. 
As regards the figures shown in the balance sheet, it 
should be remembered that detailed rules for applying the 
protocol are not yet known for Spain and Portugal. 
Advances to staff 
2.60. In reply to a comment made by the Court in its 
1986 report, the Commission indicated that it had 
introduced a new computer system (Sincom) for its 
general accounts on 1 January 1987 and that this 
combined with other improvements should facilitate 
monitoring of advances to staff. When the accounts were closed at the end of 1986, balances were fed into this new 
system. In mid-1987 the Commission's accounting 
departments embarked on a detailed analysis of balances 
from past years using Sincom facilities. 
The Commission admits that the situation at the end of 
1987 was not entirely satisfactory but it is pressing ahead 
with its work in this area. In the case of advances on 
mission expenses, 60 of the creditor balances detected by 
the Court during its audit had been cleared by the end of 
June. 
Furthermore, the Commission's accounting depart­
ments, in association with the managing departments, are 
endeavouring to devise procedures which would elim­
inate charging errors (development of interfaces between 
the computer systems of the accounting and management 
departments) or allow of their early detection (closer 
cooperation between accounting and managing depart­
ments to ensure regular checks on accounts throughout 
the year). 
Reliability and completeness of the EAGGF-
Guarantee accounts 
2.61. Member States' declarations can only be checked 
on the basis of final accounts during the clearance 
procedure. 
The Commission is merely applying Article 99 of 
Financial Regulation, differences between expenditure 
charged to the accounts for one financial year and 
expenditure established by the Commission during the 
clearance procedure being charged to the year which 
clearance takes place. 
2.62. As regards adjustments, the Commission is 
prepared to consider possible solutions along the lines 
indicated by the Court, perhaps by an appropriate entry 
in the Annex to the revenue and expenditure account and 
the consolidated balance sheet. 
2.63. The Commission is endeavouring to reduce delays 
in entering EAGGF Guarantee Section expenditure in 
the budgetary accounts by improving the relevant 
computer applications. 
It has accordingly decided to replace the computer system 
used by authorizing departments by a more modern tool. 
As a transitional arrangement it has transferred existing 
programmes to more efficient equipment making it 
possible to decentralize and speed up the input of data. 
248 Official Journal of the European Communities 12. 12. 88 
The transmission of data from authorizing departments 
to accounting departments has been speeded up too: since 
August 1988 information has been transferred by an 
automatic interface made possible by changing the 
computer equipment in authorizing departments. 
2.64. Differences between the Commission's EAGGF 
Guarantee Section balances and those of certain Member 
States are due to the fact that the Member States had not 
incorporated all the corrections notified to them by the 
Commission. 
During 1988 these balances, as recorded in the Com­
mission's balance sheet were deducted from sums due to 
the Member States. Since there have been no objections, it 
can be assumed that the Member States' balances were 
incorrect. 
Clearance of food aid accounts 
2.65. The Commission is aware of the problems that can 
arise from the late clearance of accounts. It agrees with 
the Court that steps need to be taken to eliminate the 
existing backlog. A decision clearing the accounts for 
1980, 1981, 1982 and 1983 for five Member States will be 
taken shortly. 
As regards the effect of exchange-rate fluctuations, it 
should be noted that the effects ought to be assessed for all 
the Member States. Since some Member States' cur­
rencies have appreciated against the unit of account while 
others have depreciated, movements will have cancelled 
each other out to some extent. 
In any event the Commission will pursue its efforts to 
clear accounts with a view to removing the backlog as 
quickly as possible. 
Monitoring of bank accounts 
2.66 - 2.68. The Commission has been endeavouring to 
solve these problems for some years now. It is constantly 
negotiating new terms with its banks. 
It must be said that monitoring of banking terms presents 
real difficulties. Gradual implementation of the Sincom 
system should make it possible to introduce automatic 
monitoring. 2.66. The Commission has invited the bank responsible 
for 80 % of the errors noted by the Court to adhere to the 
agreed terms. 
2.67. The Commission will see to it that the incorrect 
information supplied by certain banks is rectified. 
2.68. The Commission's Accounting Officer meets his 
opposite numbers in the other institutions at regular 
intervals to coordinate procedures as far as possible. 
Various items of revenue to be credited 
2.69. The situation of this heading improved during 
1987, bringing the balance on this account from 27,1 Mio 
ECU on 31 December 1986 to 10,1 Mio ECU on 31 
December 1987. The Commission intends to pursue its 
efforts in this area despite the difficulties it is encounter­
ing (increase in the number of revenue items, difficulty of 
identifying repayments made by many debtors). The 
Commission has taken note of the charging errors 
detected by the Court and corrected them in the accounts 
for 1988. 
Loans granted to Mediterranean countries 
2.70. The amounts entered as 'Loans on special terms in 
the context of cooperation with third countries' rep­
resents budgetary expenditure charged to successive 
financial years. They appear in the Community's balance 
sheet as an asset (an identical sum being shown under 
'own capital' on the liabilities side) following a review at 
the end of the year of loans granted in successive financial 
years which have not been reimbursed. The Commission 
regrets that the list of loans compiled at 31 December 
1987 contains anomalies and will tighten its controls to 
ensure that mistakes of this kind do not recur. 
Exchange-rate differences 
2.71. As mentioned by the Court, the Commission has 
initiated discussions between the various institutions with 
a view to harmonizing the way exchange-rate differences 
are presented in the accounts and how they are dealt with 
for audit purposes. 
12. 12. 88 Official Journal of the European Communities 249 
REPLIES OF THE COURT OF JUSTICE 
OBSERVANCE OF THE FINANCIAL 
REGULATION 
Observations resulting from the salaries audit 
Control exercised by the Financial Controller 
2.23-2.24. The Financial Controller of the Court of 
Justice inspects all the personal files of officials and other 
servants between the stage at which rights are fixed or 
modified and the stage at which salaries are validated and 
calculated. He will perform checks during the year on the 
various salary components as soon as his present 
OBSERVANCE OF THE FINANCIAL 
REGULATION 
Comments arising out of the salaries audit 
Separation of functions 
2.28. The ESC was of the view that the Financial 
Regulation did not prevent persons other than Account­
ing Officers having powers of signature in respect of bank 
accounts. In its opinion it was desirable that one of the 
two signatures should always be that of an Accounting 
Officer, the other being a person with separate re­
sponsibilities. The fact that in the ESC these other persons 
are Authorizing Officers stems solely from the small 
number of officials able to assume such a responsibility. 
Insofar as possible, the ESC will gradually delegate the 
power of signature in respect of bank accounts to persons 
other than Authorizing Officers. workload permits having regard to the staff at his 
disposal. 
The Court of Justice is examining the possibility of 
appointing an assistant Financial Controller. 
Separation of functions 
2.29. Since at the Court of Justice three persons who are 
not Authorizing Officers have been appointed signatories 
to the bank accounts the Court will henceforth as a 
general rule have recourse to the signature of those 
persons and not to that of an Authorizing Officer. 
Lack of internal rules for the implementation of the 
budget 
2.30. Although formal provisions, as provided for in 
Article 4 of the Commission Regulation of 11 December 
1986, have still not been drawn up by the ESC, a division 
of responsibilities between Authorizing Officers and 
managing departments has been adopted. 
Procedures applicable to commitments and 
payments 
2.36. Since 1 January 1988 a new accounting system has 
been introduced at the ESC based on the programme used 
by the Council and recording both commitments and 
payments. 
2.37. It is true that, because of staff shortages, 
expenditure commitments have in some cases been drawn 
up after the receipt of invoices. Considerable efforts have 
been made over recent months to avoid such infringe­
ments. REPLIES OF THE ECONOMIC AND SOCIAL COMMITTEE 
(') OJ C 89, 6.4.1988, p. 11. 
(2) OJL 185, 15.7.1988. 
250 Official Journal of the European Communities 12. 12. 88 
CHAPTER 3 
Revenue 
REPLIES OF THE COMMISSION 
THE COMMUNITY TRANSIT SYSTEM 
ROAD 
Introduction 
3.3 - 3.35. The Commission shares the Court's concern 
as regards the difficulties in applying this system. 
When conducting its inspections of own resources the 
Commission will check that the competent national 
authorities apply the Community rules correctly in line 
with the Court's comments. 
The practical problems connected with application of this 
system, in particular those described by the Court in its 
report, will be discussed within the Committee on the 
Movement of Goods. 
Impact of the system on Community own 
resources 
3.9. With staff and material resources for inspections 
being limited, trade facilitation — if applied rationally 
(for instance, depending on the mode of transport or the 
reliability of the operation) — need not rule out the 
possibility of concentrating inspections on those fields 
which appear most problematical. The inspection 
methods would thus be employed to better effect. 3.10. The rules on Community transit have always 
made a distinction between the procedures applicable to 
internal transit (T2) and those applicable to external 
transit (Tl), with greater flexibility being gradually 
introduced in the internal Community transit system. 
There is a growing divide between internal transit and 
external transit. The latter is treated with all the strictness 
required in view of its basic role of safeguarding own 
resources. In this respect, the Commission shares the 
Court's opinion that the Member States must be 
particularly vigilant when applying the external Com­
munity transit system. 
Observations arising from audit of the system 
as operated in Member States 
Security of transit documentation 
3.11. The transit document is completed with the 
dispatch note or export declaration and the No 1 copy is 
kept by the office of departure. When copy No 5 is 
returned, the office of departure compares the two copies 
and is therefore able to see whether the Tl entry has been 
altered in transit. 
The case of the Tl mark being falsified on copy No 2 
alone (now copy No 4) after the transit operation has 
been completed should not occur, since this copy is kept 
by the office of destination. The customs authorities will 
be specifically reminded of this rule. 
12. 12. 88 Official Journal of the European Communities 251 
3.12. The practice of using a Tl document for 
Community goods observed by the Court is not likely to 
jeopardize the collection of own resources. 
Sealing of means of transportation on departure 
3.13 - 3.14. In principle, loads must be sealed; this rule 
has been confirmed in the case of particularly sensitive 
goods by means of administrative arrangements. 
However, Community transit has always been intended 
as a system accessible to all operators and the rules on 
sealing were therefore less rigid than under the TIR 
system. In particular, the simplified procedure which 
some operators are allowed to apply also gives greater 
concessions as regards sealing. 
Even with the prospects of the free movement of goods 
with Community status from 1992 there is none the less a 
tendency at present towards a certain flexibility in the use 
of sealing for this type of goods. On the other hand, it has 
been formally stipulated that loads being carried to or 
through Switzerland or Austria must be sealed. 
The problem of sealing goods from non-member 
countries will be reviewed with the Member States in due 
course on the basis of the Court's report. 
Control of goods at offices of destination 
3.15. The Commission has taken note of the Court's 
observations. As regards the controls at ports, the 
suggestion that the signature of customs officials should 
be accompanied by a special individual stamp will be 
examined with the Member States. 
Treatment of irregularities discovered at office of 
destination 
3.16. The unsatisfactory flow of information between 
the office of destination and the office of departure should 
be remedied by the arrangement of 1 January 1988 which the Court mentions at the end of the paragraph and which 
is designed to ensure that the office of departure is given 
the fullest information possible when irregularities are 
established. 
Delays in discharging transit operations 
3.17. The Commission is constantly taking both general 
and specific measures to ensure that transit documents 
are returned as quickly as possible. It will use the Court's 
report as an opportunity to draw the attention of the 
authorities once again to the need to comply with the 
deadlines. 
Inquiry procedures 
3.18. It is true that one of the major problems facing the 
authorities in their search procedures is the absence of a 
reply to a search notice despite repeated reminders 
An administrative arrangement introducing a harmo­
nized procedure for cases of this type was adopted by the 
Committee on the Movement of Goods on 21 March 1988 
and entered into force on 1 July 1988. 
3.19. The Commission has taken note of the comments 
on the feedback to the office of departure concerning the 
conduct and outcome of the measures taken by the 
Member State responsible for the recovery of the charges 
due in order to prevent any improper discharge of 
operations or any unwarranted delay in this discharge. 
3.20. The situation described doubtless exists but it is 
inherent in the nature of the comprehensive guarantee as 
the Community legislator intended. This guarantee may 
cover successive or simultaneous transit operations from 
any Member State or EFTA country where it is valid 
without it being legally or materially possible to challenge 
it when the principal has received agreement in advance in 
the form of a valid guarantee certificate. 
252 Official Journal of the European Communities 12. 12. 88 
Recovery of own resources in non-discharged cases Central transit offices 
3.21. The Commission would confirm that it does not 
consider it appropriate to make a distinction between the 
recovery of customs duties and the recovery of taxes. 3.27. The Commission shares the Court's concern and 
has already drawn the attention of the Member States to 
the need for using suitable packages for the dispatch of 
documents; it will not fail to take stronger action in an 
attempt to solve this problem. 
3.22. The Commission is also aware that the search 
procedure may take a fairly long time and that a relatively 
large number of cases may therefore remain pending. 
However, experience shows that the search procedure 
which, it is assumed, is initiated in the event of 
irregularities, usually encounters several obstacles which 
inevitably cause delays. Despite this, the Commission and 
the Committee on the Movement of Goods are always at 
pains to ensure that the search procedure operates 
smoothly. For instance, in addition to the arrangement 
referred to at 3.18, the Commission is now examining the 
proposal for a new model search notice designed to 
expand the possibilities of use and thus eliminate the 
correspondence which often causes delay. 3.28. The suggestion that documents covering regular 
large trade flows between the same customs offices should 
not pass through the central offices may appear to be a 
solution which would partly speed up the return of 
documents, but in practice there is a risk that this will be a 
source of error and delay in the return of documents. 
Accounting for transit operations by means of computer-
based techniques 
3.29. The pilot project mentioned by the Court has been 
abandoned since it was incorporated in a broader project 
(the CD project) which aims to computerize all customs 
procedures. 
Post-clearance verification procedures 
3.23. As a result of the Court's observations, the 
Commission will remind the authorities concerned of the 
administrative arrangements for the retrospective inspec­
tion of Community transit documents and, in particular, 
the rule which states that, in addition to cases where an 
error or inaccuracy is suspected, one in every thousand 
transit documents returned must be inspected at random 
with a minimum of two documents a month from each 
office of departure. Role of the Committee on the Movement of 
Goods 
3.31. The Commission agrees with the Court about the 
need to improve and speed up the procedure for the 
adoption of administrative arrangements and will 
examine the means of progressing in this direction, in 
particular in the adoption procedure. 
Conclusion 
Maintenance of transit registers and other records and 
management control 
3.24 - 3.25. The methods for the management of transit 
operations and cases of dispute are the responsibility of 
the authorities, as is the way in which their departments 
apply these methods. It is a matter of internal manage­
ment in the customs authorities of the Member States, 
although this does not rule out measures at Community 
level to end or remedy any deviations from the norm 
which are detected and might compromise own resources. 3.32. In addition to the progress already achieved, the 
Commission will examine the possibility of tougher 
administrative measures for implementing the external 
Community transit system without, however, losing sight 
of the main point of the system — facilitating the 
movement of goods. 
3.33 The Commission has noted the problems of 
applying the rules on Community transit observed by the 
Court in the customs offices of the Member States and 
will continue its activities or, where applicable, prepare 
new measures so that these procedures will operate as 
effectively as possible. 
12. 12. 88 Official Journal of the European Communities 253 
3.34. An improvement in the operation of the central 
offices is to be desired. In particular, their duties, which 
are on the whole those of a sorting centre, could be 
extended to inspection. 
However, as the Court states, only progress in developing 
computerized procedures is likely to lead to substantial 
improvements in dealing with the problems involved in 
the discharge of Community transit operations in terms 
of both time-saving and reliability. 
3.35. The Commission intends to make the Committee 
assume all its responsibilities as regards application of the 
Community transit system and will make a point of 
submitting to the Committee proposals to improve 
application based on actual well-defined situations. 
SYSTEM FOR IMPOSING AND BRINGING 
TO ACCOUNT OF ANTI-DUMPING 
DUTIES 
Observations arising from audit of system for 
imposing and bringing to account of anti­
dumping duties 
Anti-dumping duties in the Community accounts 
3.46. Article 2 (2) of the proposal for a Council 
Regulation on the entry in the accounts and terms of 
payment of the amounts of the import duties or export 
duties resulting from a customs debt (COM(84) 739 final 
of 7 January 1985) states that it is for the Member States 
to determine the practical procedures for the entry in the 
accounts of the amounts of duty. 
However, the Commission would welcome the separate 
accounting of anti-dumping duties by all Member States, 
though it has to be remembered that anti-dumping duties 
are not regarded by the Community or its major trading 
partners as being primarily revenue-raising measures. Dissemination of decisions to impose provisional anti­
dumping duties 
3.47 - 3.48. The Commission is aware of the problem 
arising from immediate application of an anti-dumping 
duty or any other rule involving the collection of taxes. 
The development of computerized transmission methods 
should lead to an improvement. 
In the longer term, when the Taric interface is oper­
ational, the Member States will receive direct all the 
information needed for their tariff records. This is likely 
to lead to a substantial improvement in the application of 
the rules. 
Establishment as own resources of provisional anti­
dumping duties 
3.51. The problem should resolve itself once the new 
Commission proposal for a Council Regulation im­
plementing the Decision of 24 June 1988 on the system of 
the Communities' (') own resources is adopted and 
implemented. 
When a provisional anti-dumping duty becomes definit­
ive, the obligation to provide a guarantee in accordance 
with the second sentence of Article 11 (1) of Council 
Regulation No 2176/84 of 23 July 1984 becomes an 
obligation to pay the duty in question. The customs 
authorities must notify the importer of this new situation. 
If the importer does not pay the duty, the guarantee is 
surrendered. Irrespective of this recovery procedure, 
under Article 2 of the abovementioned proposal the 
amount due from the importer is established as soon as he 
is notified and is then entered in the accounts (Article 
6 (2)(a) and made available to the Commission (Article 
9(1))-
Customs controls on imports of goods which are 
potentially liable to anti-dumping duties 
3.56. It is the authorities of the Member States which 
are responsible for applying all Community rules 
governing trade between the Community and non-
member countries. As a result of the Court's question 
concerning anti-dumping duties, the Commission will 
conduct a more general examination of the application 
(') The footnotes are listed together at the end of the chapter. 
254 Official Journal of the European Communities 12. 12. 88 
and organization of controls, particularly for sensitive 
products. 
Imposition of provisional anti-dumping duties 
and monitoring of undertakings by the 
Commission 
Provisional anti-dumping duties 
3.57. The Commission is naturally aware of the 
possibility of forestalling an anti-dumping duty by 
increasing imports of the dumped product while the 
investigation is in progress. This is one of the reasons why 
every effort has been made to reduce the time between the 
initiation of the investigation and the imposition of 
provisional duties in recent years, in spite of the increase 
in the number of complicated investigations. Further 
reductions in this time period could only be achieved by 
an increase in resources, since Articles 7 and 11 of the 
Community's anti-dumping regulations and Articles 5 
and 10 of the GATT Anti-dumping Code distinguish 
between the prima facie evidence required for the opening 
of an investigation, and the provisional affirmative 
finding required before provisional duties may be 
imposed, resulting from the examination of the facts. 
The acceptance and monitoring of undertakings 
3.58 - 3.59. The Commission readily agrees on the need 
to monitor undertakings effectively once they have been 
accepted, and recognizes that in the past this monitoring 
has not been as comprehensive as it would have wished. 
This was due solely to staffing limitations which meant 
that effort had to be concentrated mainly in problem 
areas where information supplied by Community pro­
ducers and other traders had led to the suspicion that the 
undertakings were not being respected. Although this 
monitoring was not fully comprehensive it was not 
ineffective and, in addition to the cases mentioned by the 
Court where provisional duties were imposed, the 
monitoring led to the opening of reviews on two other 
products. Moreover, it is the practice of the Commission, 
as a matter of equity, to give the exporter a chance to 
explain his actions before a provisional duty is imposed. 
The Commission fully recognizes the need to dispel any 
doubts of the effectiveness of the monitoring applied in 
this area, however, and following discussions during the 
Court's examination referred to in paragraph 3.39, a more systematic and comprehensive method of monitor­
ing has now been adopted. 
AGRICULTURAL LEVIES ON IMPORTED 
CEREALS 
Determination of the levy — world cif price 
3.67. (a) A file note is drawn up for the determination 
of cif prices. The Commission admits that the reasons for 
rejecting the lowest cif price were not always sufficiently 
explained. It now ensures that the reasons are mentioned 
more explicitly. 
(b) The Commission's calculations take the following 
factors into account: 
— Freight rates do not vary from day to day and thus 
remain valid for a certain period which may be as 
much as two or three months; 
— Freight rates differ according to the size of the vessel 
which, for journeys from the United States for 
example, may range between 15 000 and 75 000 
tonnes or more. The freight rate used must therefore 
be the matter of some interpretation. The Commis­
sion plans to continue monitoring transport costs 
even more closely in future. 
Information on trans-shipment charges at Rotterdam 
does indeed come from one source (GEM Rotterdam) 
which has a monopoly on rates, but this company is 
controlled by the Dutch authorities and is considered 
reliable and representative. The amount has remained the 
same for several years because of the low level of inflation 
and the freeze on rates in the Netherlands. 
The insurance charges have also been supplied by one 
source, the German intervention agency, BALM; how­
ever, this institution is recognized for its reliability. 
(c) It is true that the official cif price information 
supplied by some of the Member States is unsystematic 
12. 12. 88 Official Journal of the European Communities 255 
and unsatisfactory. However, this is not the case with the 
real importers such as the Netherlands, Germany, 
Belgium or Italy. If they are to be used, the cif prices must 
be cif Rotterdam and in US dollars. The British and Irish 
prices are quoted in national currency and for British or 
Irish ports which are not comparable with Rotterdam. It 
is therefore understandable that the Commission faces 
some difficulty in expressing these prices in terms of a 
single cif Rotterdam base since the corrective elements in 
this small geographical area of intensive trading are 
extremely -varied and fluctuate considerably (large 
number of ports, large range of tonnage, effect of export 
flows on rates since large volumes of cereals from the 
United Kingdom are trans-shipped at Ghent, Antwerp or 
Rotterdam for export). 
The question of a specific regulation institutionalizing the 
exchange of information on cif prices between the 
Member States and the Commission has frequently been 
discussed at national expert level, but no common ground 
has ever been found because the real use of such binding 
provisions has not been obvious nor have they been 
considered essential. However, the Commission will 
again discuss these matters with the Member States. 
(d) Over the past year or so improvements have been 
made in the tasks of supervising procedures and checking 
calculations as a result of computerization, which has 
restricted the risk of error, allowed cross-checking and 
offset the shortage of staff available for these duties. 
3.68. The Commission will continue its efforts to 
achieve the highest degree of detail and reliability possible 
in fixing the levy on the basis of all the information 
available without unduly rejecting the lowest offer. 
The advance fixing system 
Consequences of advance fixing for the levy yield 
3.72. As a result of its own production and imports of 
substitute products, the Community runs a surplus on 
cereals and, overall, there is no longer any real need to 
import except: — for certain Community regions at certain times of the 
year (e.g. at the end of the common wheat marketing 
year in the United Kingdom). 
The other imports are purely speculative. The drastic fall 
in imports over the years should be interpreted as a 
reassuring sign, proving that the possibility of speculation 
is extremely limited. 
The advance fixing of the levy at the end of the marketing 
year does not give the operator a systematic advantage. 
The reduction in the levy as a result of the price break 
between two marketing years reflects the corresponding 
reduction in the threshold price and the internal price at 
which the operator will be able to resell the imported 
cereals. In addition, because forward world prices for the 
new harvest are taken into account when the levy is fixed 
operators do not benefit unduly from a reduction in 
prices. The Commission may suspend the advance fixing 
of the levy in uncertain periods when there is a risk of 
considerable fluctuations in world prices, as was the case 
in summer 1988 (drought in the United States and 
Canada, sudden price movements). 
The Commission cannot judge the estimated potential 
loss in revenue caused by advance fixing, which the Court 
puts at between 40 and 45 million ECU a year. 
Evaluation of the advance fixing system 
3.73 - 3.74. As regards the contradiction noted by the 
Court between observance of the threshold prices and the 
advance fixing of levies, it should be noted that the 
advance fixing of export refunds and import levies is an 
important aspect of market organization. If it were to be 
permanently abolished, Community operators would be 
unable to work in conditions which are considered 
normal or even indispensable in world trade 
The Commission has already taken the following 
measures to ensure that threshold prices are observed as 
closely as possible and to prevent abnormal speculation 
while allowing the normal play of commercial oper­
ations: 
— The validity of import licences has been reduced from 
three months to 45 days. 
— for specific technical requirements which vary from 
year to year; Higher securities are now required (16 ECU/t). 
256 Official Journal of the European Communities 12. 12. 88 
— Daily exchange rates are taken into account (rather 
than the weekly average) following the disruptive 
fluctuations of the US dollar. 
Advance fixing is suspended for limited periods in 
critical situations. 
— The range of information which can be used has been 
extended, i.e. it is no longer limited to information 
supplied by the Member States alone but may include 
information obtained direct by the Commission. 
Evolution of trade developments in cereals and 
cereal substitutes 
3.76. The Commission agrees with the Court's analysis 
but would point out that the situation is due to 
international agreements concluded by the Community. 
Conclusions 
3.77. Explanations have already been given in the 
previous paragraphs about the more explicit file notes to 
substantiate decisions, the collection of information and 
the checking of calculations, which have already been 
improved. 
The aim of the levy is to ensure that goods cannot be 
imported below the threshold price. In its day-to-day decisions on the fixing of rates, the Commission will 
continue its policy of calculating the amount strictly 
necessary to achieve this in accordance with the rules. 
MAKING AVAILABLE OF CUSTOMS 
DUTIES BY SPAIN AND PORTUGAL 
3.78 - 3.80. After examining this question in the light of 
all the information available concerning the negotiations, 
the Commission decided not to pursue the infringement 
procedures against Spain and Portugal. 
The Commission acted within its powers in taking this 
decision. 
EXEMPTION FROM CUSTOMS DUTIES 
APPLIED UNILATERALLY BY MEMBER 
STATES ON GOODS OF MILITARY 
NATURE 
3.81 - 3.84. The Commission agrees with the Court that 
special Community arrangements should be introduced 
for imports of military equipment. On 29 September 1988 
it sent the Council a proposal for a regulation dealing with 
this matter (2). 
(') OJC 255, 1.10.1988, p. 5. 
(2) OJ C265, 12.10.1988, p. 9. 
12. 12. 88 Official Journal of the European Communities 257 
CHAPTER 4 
European Agricultural Guidance and Guarantee Fund, 
Guarantee Section (EAGGF-Guarantee) 
REPLIES OF THE COMMISSION 
NATIONAL CONTROL OVER EAGGF-
GUARANTEE EXPENDITURE 
Control of expenditure on intervention storage Like the Court, the Commission is aware of the 
shortcomings in management and control by national 
authorities. It will submit the abovementioned special 
report by the Court on these matters to the Member 
States for discussion in an appropriate working party and 
will consider with their representatives what improve­
ments can be made. 
4.6 - 4.19. On these points the Commission would also 
refer to its replies to the Court's special report on the 
management and control of public storage. 
4.6-4.7. As regards Community control of public 
storage operations, the Commission would recall that the 
management and financing system was adopted after 
long negotiations in the Council, which opted for a system 
in which the practical management arrangements are 
handled by the Member States' authorities. Financing is 
provided by the Community on the basis of a flat-rate 
arrangement in view of the differences between Member 
States' storage and administration practices. Control over quantities, quality and storage conditions 
4.8 - 4.13. The organization of the control and super­
vision of stocks is a matter for Member States in view of 
their responsibility for the practical management of 
public storage arrangements. The methods applied 
correspond to the administrative structure in each 
Member State, since imposing uniform Community 
methods might cause some Member States objective 
difficulties from the point of view of the organization of 
their departments and would inevitably mean rules 
general enough to be acceptable to all and hence lacking 
in any structure. 
In this Community system the Member States are 
responsible in the national context for the control and 
supervision of products bought in and stored and for their 
proper preservation (Article 2 of Regulation (EEC) No 
3247/81). 
In the procedure for the clearance of accounts, the 
Commission not only closes the accounts but also checks 
to see that the Community rules have been properly 
applied at national level. With the introduction of 
systems-based audits, a gradual improvement in manage­
ment of this area can be expected. Member States' declarations of expenditure and 
concluding remarks on intervention storage 
4.14-4.19. Community financing of public storage 
expenditure is based on presentation of a document 
equivalent to an invoice, as is the case with any other 
operation financed by the EAGGF Guarantee Section. 
This invoice must be backed by the supporting documents 
required by Community rules. Some figures are taken 
from the books of the intervention agency and others are 
additional calculations to determine the cost of the 
physical operations to be invoiced. 
258 Official Journal of the European Communities 12. 12. 88 
In addition, the nature of the physical operations which 
give rise to financing is such that the quantities of 
products bought in and sold (and hence stored) are 
provisional, based, for instance, on provisional accept­
ances pending the results of a quality control. On the 
other hand, the accounts, which are the basis for the 
arrangements, are those of the Member States and satisfy 
the appropriate national rules; they may not therefore be 
provisional. 
Moreover, with the system of Community advance 
financing — either with advances proper or advances 
against amounts booked to the accounts — it has proved 
necessary to introduce a method for covering this 
expenditure in monthly instalments without in any way 
detracting from the annual nature of public storage 
expenditure. Consequently, the rules are not concerned 
with the final determination of expenditure for a given 
month but a calculation which makes it possible to enter 
in the accounts each month the public storage expendi­
ture to be financed by the EAGGF. 
These two observations lead to various conclusions, 
including the following: 
— any 'laxness' in accounting practices cannot be dealt 
with by the Community arrangements but is a matter 
for the national authorities, which are automatically 
penalized in financial terms if quantities bought in 
and sold are recorded late; 
— as regards paragraph 4.15, where the Court mentions 
risks of error, the Commission feels that the financial 
consequences, for which the Court gives no figure, 
would be minimal, over a full year, in relation to total 
expenditure. 
The Commission would also point out that since 
Regulations (EEC) No 3183/87 and No 2048/88 intro­
duced the system of advances against amounts booked to 
the accounts, these advances are now determined on the 
basis of declarations of actual expenditure sent in by the 
Member States. 
Control over expenditure on export refunds 
Preliminary remark 
The Commission notes that most of the Court's 
comments relate to how national control procedures are 
carried out in practice. It has itself observed certain 
shortcomings in the refunds arrangements, in particular 
as regards the application of the procedures operated by 
the Member States. At the beginning of 1987 it sent the 
Council a proposal for a regulation on the monitoring of 
the payment of amounts granted on export of agricultural products (COM(87) 9 final), a proposal which it 
subsequently amended (COM(87) 390 final). A regulation 
laying down detailed implementing measures will be 
produced as soon as the Council has adopted the first 
regulation. These matters have also been discussed with 
Member States' representatives. 
Introduction 
4.21. The nomenclature for refunds has to be detailed to 
ensure that refunds are not granted on products for which 
the level of aid does not require large amounts or on 
certain qualities of product. With the detail in the 
nomenclature it is possible to pay the refund in 
proportion to the basic products exported and not for 
flat-rate quantities. The nomenclature has therefore been 
made more and more specific over time as and when 
shortcomings were detected. 
4.22. The amount of refund is identical for all countries 
in Africa with the exception of Botswana, Kenya, 
Madagascar, Swaziland and Zimbabwe. Zimbabwe and 
Botswana, which are neighbours of South Africa, are beef 
exporters enjoying preferential conditions. They regu­
larly export to the Community under the EEC-ACP 
Agreements. Exports to these producer countries do not 
therefore qualify for refunds. 
4.28. See the 'preliminary remark'. 
Findings of the Court's examination 
Controls over the export of beefmeat 
4.33. See the 'preliminary remark'. 
(d) Most beef for export is frozen at the time of export 
since this facilitates transport. However, veterinary and 
customs checks of frozen meat are very difficult; it is 
therefore almost essential that the meat should be 
controlled when it is fresh before the freezing has started. 
Technically speaking, it is possible to thaw part of the 
meat at the frontier for control purposes. However, this 
meat is lost, because for health reasons it cannot be 
refrozen after control. The thawed goods cannot be 
12. 12. 88 Official Journal of the European Communities 259 
exported and the question of compensation for the 
commercial loss then arises. The Commission has taken 
note of the Court's findings and may discuss them with 
the Member States. 
4.34. (b) - (e) These cases constitute fraud and the 
Member State should take appropriate action. 
Controls over the export of live bovine animals 
4.37. The Commission is aware of this case and is taking 
appropriate action. 
4.38 - 4.39. The national procedures are being checked 
under the systems-based audit introduced for refunds 
since the 1982 accounts were cleared (see paragraph 4.85). 
Where it is found that Community rules have not been 
applied, corrections are made when the accounts are 
cleared. 
Controls over the export of meat from male bovine 
animals 
4.41 -4.42. See the reply to paragraphs 4.38-4.39. 
These cases constitute fraud, which must be dealt with 
under the appropriate procedures. 
Verification of evidence of export 
4.43. Where a document provided for at Community 
level (T5 control copy) is used as evidence that goods have 
left the Community customs territory, a retrospective 
control procedure exists under an administrative arrange­
ment with the Member States (Chapter IX of the 
collection of arrangements, conclusions and interpre­
tations concerning transit). The Commission feels that 
where national documents are used to provide this 
evidence a similar control procedure should be set up 
under the responsibility of the Member States. The 
Commission will bear in mind the Court's remarks when 
conducting its controls. Controls over goods exported via the Community transit 
procedures 
4.44. Under the Community rules in force containers or 
vehicles loaded with agricultural products subject in the 
Community to levies or equivalent charges on import or 
export, or enjoying financial advantages (refunds, 
premiums, etc.) must be sealed. 
Member States have just recently been reminded that all 
such means of transport must in all circumstances be 
sealed. The Commission will use the opportunity offered 
by this report by the Court to make Member States aware 
of how absolutely vital it is that they see that these 
provisions are strictly applied. 
Evidence of arrival at final destination 
4.46. The purpose of Annex II to Regulation (EEC) No 
3665/87 is to deal with cases where there is no import 
customs document in non-member countries. There is not 
always a customs document to satisfy the Community's 
requirements. Annex II is therefore an alternative which 
is preferable to presentation of any unspecified docu­
ment. It must be signed and stamped by the importing 
customs authorities. Moreover the model is imposed by 
the Community and accepted in all Member States. 
However, as a result of enquiries recently made by the 
Commission into matters including this document, the 
procedure may be reviewed. 
4.47. The cases mentioned ought to be checked by the 
Member States before refunds are paid. Any such cases 
detected by the Commission during its controls are not 
accepted for Community financing. 
(b) (iii) Superintendance companies of the type men­
tioned have been discussed within the Management 
Committee on Trade Mechanisms, and a working paper 
has been produced. Member States may approve such 
companies if they satisfy a number of conditions specified 
in the working paper; the list of approved companies 
must be published. 
4.48. (a) Cases of false stamps being used to discharge 
transit movements or to forge customs documents are not 
infrequent. Article 5 of Regulation (EEC) No 3665/87 
deals specifically with cases where fraud may be possible, 
and additional evidence must be demanded where doubts 
exist about the true destination of the product or about 
the import customs documents in non-member countries. 
Whenever the Commission learns that customs pro­
cedures in non-member countries are not reliable, it 
260 Official Journal of the European Communities 12. 12. 88 
informs the Member States by telex to ask them to 
demand the additional evidence referred to in Article 5 of 
the abovementioned regulation. 
Controls over beefmeat taken into customs control under 
prefinancing arrangements 
4.54. (a) Customs must check that declarations are 
true. If there is not enough time to carry out this check or 
if the customs officer is not convinced that the particulars 
in the declaration are true, he is entitled to refuse to sign 
the customs document. 
(b) That is contrary to the procedure for export 
declarations. 
(c) In this case the Community rules (Article 29 of 
Regulation (EEC) No 2220/85) have not been respected. 
(d) The Commission has detected such problems during 
some of its controls and has made appropriate corrections 
when clearing the accounts. 
(e) The Commission is aware of the shortcomings 
which may exist in the mutual assistance arrangements 
between Member States. It will see, with the Member 
States, how the necessary improvements can be made. As 
it stated in reply to the comment by Parliament in its 
resolution on the discharge in respect of the 1986 budget, 
the Commission feels 'that maximum publicity must be 
given to cases of fraud where the offenders have been 
convicted by national courts in order to prevent 
recurrences and to deter would-be imitators. However, 
the production of an official list of natural or legal 
persons convincted of fraud is a measure covered by 
criminal law, for which the Member States are re­
sponsible'. 
Concluding remarks on export refunds 
4.56. See the 'preliminary remark'. 
4.57. The Commission is aware of the importance of 
this matter and has produced a working document on the 
assignment of forfeited securities; this document has been 
discussed in the EAGGF Committee. Directive 77/435/EEC 
4.62-4.75. The Commission attaches particular im­
portance to the application of Directive 77/435/EEC. It 
will consider the possibility of stepping up action in this 
area as one of its priority tasks. 
THE COMMISSION'S SUPERVISORY 
ARRANGEMENTS 
Commission's monitoring of the 
Member State's systems for the day-to-day 
management and control of EAGGF-
Guarantee measures 
4.77-4.79. The EAGGF departments, working with 
the departments responsible for market management, 
monitor the application of the various measures at 
national level. The introduction of systems-based audits 
is designed to bring about an improvement in the 
situation. Because of the large amounts of expenditure 
involved in export refunds, the Commission chose this as 
the first sector for introducing systems audits. 
Commission's monitoring of the 
implementation of Council 
Directive 77/435/EEC 
4.80 - 4.82. The Commission would refer to its reply to 
paragraphs 4.62 — 4.75. 
4.81. (b) There have been bilateral contacts with Spain 
and Portugal on the implementation of the Directive. The 
Commission will remind the two Member States to 
submit the necessary documentation. 
(d) The Commission has had contacts with Member 
States when a problem has been raised. 
(e) The Commission has contacted the Member States 
concerned where information in the annual report was 
not sufficient. 
12. 12. 88 Official Journal of the European Communities 261 
(g) The Commission would point out that the Irene 
data bank is still being developed. All information 
supplied by Member States is systematically fed into the 
system and processed by it. 
Commission's clearance of accounts 
4.83 - 4.84. With the clearance of accounts procedures 
applied under Community legislation, it is not possible at 
the present time to meet the deadlines set by the rules. The 
Council provided in Regulation No 2049/88 that the 
deadline for clearance of accounts should be inserted in 
Regulation No 729/70, to satisfy the request made by the 
European Council in Brussels on 11 and 12 February 
1988. 
4.85. The Commission will continue its efforts to 
improve the situation in this area, as it stated in its reply to 
paragraphs 5.26 — 5.44 in the Court's annual report for 
1986. 
The Commission would stress that it has now taken its 
decision on the clearance of the 1986 accounts and that 
this clearance exercise was carried out for the first time by 
means of the systems-based audit method for all 
products. As it is being introduced in stages, the 
Commission has given priority to the paying agencies; 
consequently it is possible that not all measures are 
audited. 
AUDIT OF INDIVIDUAL MARKETS 
Audit of the table wine market: private 
storage contracts and Community aids for the 
utilization of grape must 
Private storage of table wine and of grape must 
4.89. In exercising its powers, the Commission has, 
since the 1985/86 wine year, systematically reduced access 
to the price support guarantee distillation arrangements: 
— 1985/86: 15 % of table wine production — 1986/87: 13% 
1987/88: 10% 
The Commission's plan is to gradually reduce the volume 
of wine qualifying for these arrangements, which it can 
then eliminate in stages. The percentage for the 1988/89 
marketing year is 7 %. 
(c) The Commission made no further use of the 
restorage aid arrangements for the 1987/88 wine year. 
4.90. As regards the cost to the budget, the amount of 
aid for storage of wine has not increased since the 1984/85 
wine year. 
The table below shows that the arrangements for private 
storage and price support guarantee distillation are being 
phased out: 
Wine year 
1984/85 
1985/86 
1986/87 
1987/88 Storage 
million hi 
17,4 
14,6 
18,7(1) 
15,4(1) Distillation 
million hi 
11,8 
9,5 
7,4 
7,2(1) 
(') Including Spain with around 3.5 million hi for storage and 1.1 million 
hi for distillation. This means that for the Ten the quantities have 
been regularly falling. 
Audit findings 
4.91 - 4.92. Commission Regulation (EEC) No 1059/83 
on long-term storage contracts stipulates as one of the 
conditions for the conclusion of a contract that par­
ticulars must be presented to enable the container to be 
identified. In addition an analyst's report must be 
supplied for each container. The producer must inform 
the intervention agency in advance of any change in the 
place of storage or in the manner in which the product is 
put up. These provisions are designed to make it possible 
to identify the product covered by a long-term storage 
contract at any time. Moreover, the Regulation states 
specifically that Member States 'shall take all measures to 
ensure that the necessary checks are made. In particular, 
they shall verify the identity ...'. 
As the Commission had doubts about the effectiveness of 
the checks carried out by the Member States, in 1987 it 
began an investigation, which is still going on, asking the 
Member States to take samples of wine covered by long-
term storage contracts. 
262 Official Journal of the European Communities 12. 12. 88 
4.93. As regards France and Italy, EAGGF controls 
conducted in connection with the clearance of the annual 
accounts have shown that systematic checks have to be 
carried out at the beginning and at the end of the period of 
storage. The samples taken are analysed by an approved 
laboratory and as a rule make it possible to verify the 
identity and the volume of table wine stored. In addition, 
relatively frequent, unannounced checks are made during 
the period of storage to identify the wine stored and to 
ensure that there has been no appreciable change in 
quality, that the wine is in fact still in store and that the 
conditions in which the wine is preserved and put up are 
satisfactory. 
In France these checks are made mainly by the 
decentralized departments of the Director-General for 
Taxes. In Italy they are carried out by the Provincial 
Inspectorate of Agriculture, the Anti-fraud department 
and the Nucleo Anti-Sotisficazione (NAS). The Commis­
sion feels that coordination between the national 
departments involved might well be improved. 
4.94. Such a procedure would, of course, have un­
deniable advantages. However, the product stored is not 
stable and it can deteriorate if certain processes, e.g. 
filtration, are not performed at the right time. The seals 
would therefore have to be removed regularly and then 
put back. This means that additional staff would have to 
be assigned to these sealing operations. 
4.96. Regulation (EEC) No 1059/83 does indeed 
provide that if 'there is an appreciable change in the 
quality of the product' the producer must inform the 
intervention agency without delay. However, under the 
second paragraph of the same article the intervention 
agency or any other inspecting agency is responsible for 
checking the quality of the product (and that there has 
been no appreciable change). In practice, such checks are 
made at the beginning, during and at the end of the 
storage period (see the reply to paragraph 4.93). 
4.97. See the reply to paragraph 4.89(c). 
4.98. The regulations adopted each year to allow the 
price support guarantee distillation arrangements to 
operate always specify that wine offered for this 
distillation must be the same wine that has been covered 
by long-term storage contracts. To be sure that this is the 
case, Member States must check the identity of the wine 
sent for distillation on the basis of the analyst's report 
drawn up when the storage contract is concluded. This 
check is difficult to carry out because of the charac­
teristics of the product and the changes which can occur. 
4.99. See the reply to paragraph 4.89. Community aids for the utilization of grape must 
4.100-4.106. In the Commission's view, aid for 
enrichment should be stopped. But this will not be 
possible until the economic discrimination between a 
producer not authorized to use sucrose and one who can 
use it has been brought to an end. The matter is now being 
studied as provided for in Article 20 of Regulation (EEC) 
No 822/87. 
Audit findings 
4.103. As regards aid for the utilization of must to be 
processed into grape juice, the controls conducted in 
France by the EAGGF departments in connection with 
the clearance of the annual accounts have revealed a great 
many anomalies in the management of this measure, in 
particular: 
incomplete or inconsistent processing declarations; 
— in some cases quantities actually processed far below 
the quantities given in the processing declarations; 
— inadequate national controls at all stages of the 
processing. 
As a result of these irregularities the Commission 
disallowed the corresponding Community expenditure, 
amounting to around 13 Mio ECU (FF 93 million) 
between 1982 and 1985. As regards Italy, the system in 
force is considered generally satisfactory, but some 
isolated corrections have nevertheless been made. 
4.104. The principles of accounting for EAGGF 
expenditure are that the Member State declare to the 
Commission only the amounts really disbursed or 
received and the budgetary accounts are drawn up on the 
same basis. Sub-accounts are used only where absolutely 
necessary and do not form part of the budgetary 
accounts. In this case, the statistical records maintained 
are quite adequate for the purpose. 
4.106. Since the 1987/88 wine year the Commission has 
amended the arrangements for reducing the purchase 
price. The purchase price for wine sent for distillation is 
now reduced when the wine is enriched by the producer, 
without any reference to a maximum alcoholic strength. 
12. 12. 88 Official Journal of the European Communities 263 
MAIN CHANGES INTRODUCED BY THE 
COMMISSION SINCE THE PUBLICATION 
OF THE COURT'S SPECIAL REPORTS 
Wine distillation measures 
4.110. The Commission would refer to its reply to 
paragraph 5.52(c) of the Court's annual report for 1986. 
4.111-4.114. In addition to the measures mentioned 
by the Court, it should be noted that the Council has 
recently decided, as a related measure in the 1988/89 
agricultural prices package, to reduce substantially the 
price for all compulsory distillation referred to in Articles 
35, 36 and 39 of Regulation (EEC) No 822/87. 
ADMINISTRATIVE ARRANGEMENTS 
ADOPTED BY SPAIN 
Audit observations 
4.122 - 4.131. During the audit of the olive oil sector in 
Spain, the Court's observations regarding production aid 
for olive oil and olive oil intervention storage will 
certainly be taken into consideration. 
As regards the wine-growing sector in Spain the various 
investigations undertaken by EAGGF-Guarantee de­
partments in analysing systems in force have revealed that 
Spain has made major adjustment efforts to come into 
line with the Community rules applying in the wine­
growing sector. 
4.123. (a) The Commission recently found that the 
production declarations made by table wine producers 
are systematically checked by the official of the Jeffatura 
Provincial who is responsible for the area concerned. He also carries out unannounced, on-the-spot inspections at 
the biggest cellars or at the producers about whom doubts 
may exist. 
The next stage of control is handled by the territorial 
inspectorate, which is concerned especially with quan­
tities of wine declared, and the anti-fraud department, 
which is required to check all cellars each year. 
(b) The investigations of the EAGGF-Guarantee 
departments in the wine sector have highlighted the 
coherence of the system for managing and controlling the 
various Community measures, subject to certain im­
provements which can be made notably in the coordi­
nation of the various administrative departments in­
volved. On this point the Spanish authorities have 
undertaken to change the system in line with the 
recommendations made by the EAGGF departments. 
4.124. (a) The comparison of the information provided 
by the crop declarations and by the milling declarations 
will be easier once the computerized files of olive 
cultivation data provided for by Regulation (EEC) No 
3061/84 are operational. 
(b) See the reply to paragraph 4.123(a). 
4.125. See the reply to paragraph 4.123(a). 
4.126. Once the control agency provided for by 
Regulation (EEC) No 2262/84 is operational, the 
problem of the coordination of controls in the olive oil 
sector should be resolved. Meantime the Commission will 
urge Spain to improve the coordination of controls. See 
also the reply to paragraph 4.123(b). 
4.129. As producers' organizations were set up only 
gradually, in 1987 the controls were still carried out by the 
central authorities. 
4.130. The Commission will act on the Court's com­
ments. 
4.131. The prospects for sales at a price in excess of the 
intervention price which seemed likely in April 1987 did 
not materialize in the subsequent months because of the 
arrival of a record harvest at the end of 1987. 
^ COftlciallournal of the European Communities 1^1^.88 
dPe^ERALCC^CLHSICl^S As regards export refunds, the Commission made 
proposals to the Council at the beginning of!987 which 
would tighten up controls considerable 
^.L^D^.^. As regards public storage, the CommisD 
sion would refer to theundertakingit gave initsreplies to 
the CourCs recent special report, to put the CourCs 
observations to an ^M^c workingpartvin order to 
analvse with the Member states how to make the 
improvements which it too considers highlvnecessarv. ^Vith the means at its disposal, the Commission enD 
deavours to supervise operations which Member States 
are responsible for managing. Svstems^based audits will, 
for instance, make for improvements in this tleld. 
12. 12. 88 Official Journal of the European Communities 265 
CHAPTER 5 
European Agricultural Guidance and Guarantee Fund, Guidance 
Section — (EAGGF-Guidance) 
REPLIES OF THE COMMISSION 
APPLICATION OF MEASURES TO 
IMPROVE THE CONDITIONS UNDER 
WHICH CEREALS ARE STORED AND 
MARKETED (REGULATION (EEC) No 
355/77) 
General 
(a) The Commission is aware that some programmes 
have not quite achieved the expected results. 
Although the Commission shares the Court's concern 
and admits that the operation has not been without its 
imperfections — especially in the first phase, which ended 
in 1984 — it cannot agree with the way in which the 
Court, in its analysis, interprets Regulation (EEC) No 
355/77, especially with respect to programmes. 
The type of programming envisaged by the Regulation is 
not to do with strict 'planning' but rather setting 
guidelines and a framework for investments. Operators, 
whether cooperatives or individuals, are therefore at 
liberty to follow or to ignore these indicative program­
mes, though they can only receive assistance if their 
investments fit in with the programmes' objectives. 
Clearly, in a free market economy, Member States cannot 
force the programmes on operators, and this makes it 
difficult to speak in terms of their 'execution'. The idea of 
'execution' must refer to eligible projects identified within 
the programmes. The financial resources of the EAGGF Guidance Section 
for assistance under Regulation (EEC) No 355/77 are 
determined each year in the budget and are insufficient to 
cover all projects which have been submitted. Hence the 
investments which qualify under the programmes (over 
15 000 Mio ECU), obviously far outstrip the financing 
possibilities and so it will always be the case that only 
some of the investments provided for in the programmes 
can receive Community aid. 
As far as the content of the programmes is concerned, the 
Court is critical of the fact that the Commission approved 
certain programmes even though they are designed to 
increase production. In the Commission's opinion, the 
purpose of the programmes is not primarily to set 
production targets or to prohibit certain developments in 
terms of production, but to provide an accurate analysis 
and forecast of production levels and of the need to adapt 
marketing resources to market requirements on the basis 
of the data available when the programmes are being 
prepared. The Commission also takes account of the 
market situation when deciding on the selection criteria 
for the projects to be funded. 
(b) The Commission is, however, aware that the rules 
need to be geared more closely to present requirements as 
regards planning and coordination of structural oper­
ations. It has presented new proposals to the Council and 
Parliament as part of the reform of the structural 
Funds. (*) It will heed the Court's remarks when 
submitting proposals or adopting provisions in this field. 
(') The footnotes are listed together at the end of the chapter. 
266 Official Journal of the European Communities 12. 12. 88 
Purpose of the investigation 
5.3. The Commission would point out that cereals 
account for around 14 % of total final agricultural 
output. 
Problems relating to specific programmes and 
their objectives 
Objectives and approval of specific programmes 
5.11. (a) In the Commission's opinion, the programmes 
in question could, in 1986 and 1987, merely reflect the 
upward trend in production, even if this was an 
undesirable trend. Moreover, in the French and German 
programmes, which the Court quotes in its observations, 
the increases envisaged are slight (e.g. France 1984/85: 
57,8 Miot; 1990: 58 Mio t, or approximately 0.3% 
spread over five years) and the case in support of planned 
investments is based not so much on this increase but on 
the need to adopt marketing resources to market 
requirements. 
(b) The Commission is constantly asking the Member 
States to supply more detailed information, but it must 
admit that the information provided is often un­
satisfactory. 
Monitoring of the implementation of the programmes 
and their effects 
5.12. The Commision undertakes the programme 
monitoring necessary to check whether applications for 
assistance fit into the programmes. Statistics on the 
investments approved by the Commission are available 
for this purpose. 
Implementation of funded projects is monitored more 
closely by the Commission and the responsible national 
authorities together. For the purpose of vetting sub­
sequent programmes, the Commission insists on being 
given adequate information on the execution of com­
pleted programmes. The reports which must be submitted for all projects two 
years after the last payment are another noteworthy 
source of information about the results produced by 
funded projects. 
Duration of the programmes 
5.13. It should be noted that the Regulation also 
specifies that the Member State, at the end of the initially 
stipulated period, can submit an addendum or a new 
programme, which may entail an additional period. The 
real object of the 'three to five years' rule is not to limit the 
duration of programmes for some obscure reason, but to 
ensure that a review of the situation in the sector is carried 
out, three to five years on, to take account of any changes 
that have occurred in relation to the situation on which 
the programme was originally based. The addenda 
submitted by the Member States ensure that this is done. 
Low rate of programme completion 
5.14. As stated in the 'General' section, it is difficult to 
talk in terms of'execution' of programmes. Moreover, a 
great many investments are undertaken outside the 
programmes or without any financial contribution from 
the Community. 
5.15. For instance, the 50 000 t of storage capacity 
created in France over the 1981-85 period refers only to 
what was financed by the EAGGF; the overall total 
constructed there in that period was 5 Mio t. 
5.16. The addendum to the Greek programme for 1985-
88 is still being implemented. At 31 December 1987 
12 projects had been funded for a total capacity of 54 000 
t. Then on 30 April 1988 the Greek Government 
submitted other projects for a total capacity of 95 000 t. 
Problems connected with projects financed by 
the Commission 
Capacities used for intervention 
5.18. The project in question was submitted to the 
Commission with a favourable opinion from the re-
12. 12. 88 Official Journal of the European Communities 267 
sponsible Italian authorities. The Commission was 
unaware of the opposition of the regional authorities, and 
it did not receive any unfavourable opinion. Following 
the Court's comments, the Commission has asked for 
further information from the Italian authorities. 
As regards the facts of the matter, it would seem 
reasonable to support private individuals as well as 
cooperatives if, at the proposed location, local produc­
tion levels are such that storage capacity is required. The 
fact that the recipient possesses other warehouses with 
intervention stocks is of no relevance to the assessment of 
the need to create new storage capacity. It should be 
added that intervention is a Community instrument 
which is partially dependent on the use of private 
warehouses. 
With respect to the principle of Community-assisted 
capacities being used for intervention storage, the 
Commission shares to some extent the Court's reserv­
ations. In fact an appropriate restrictive clause has been 
applied in cases involving regions where it was feared such 
a situation could arise. 
In reality, however, these are complex situations because: 
the creation of capacities which may be used for 
intervention is not in itself an encouragement to send 
cereals for intervention, the decisive factors being 
market conditions and the policy of the cereals 
market organization, 
— the existence of additional capacities makes for a 
healthier market situation, which ought to reduce 
pressure on operators to offer goods for intervention. 
5.19. In Schleswig-Holstein, a region where production 
exceeds regional consumption, the aim was to improve 
conditions for marketing cereals and thus to reduce the 
scale of intervention. However, intervention warehouses 
are still required and it is true that the recipients referred 
to (who have other warehouses which were not assisted by 
the EAGGF Guidance Section) are recognized as storage 
centres and carry out intervention operations if they have 
capacity available. 
The main point, however, is that the assisted installations 
should be available to store quality cereals at harvest 
time, and the German authorities have stated that this is 
the case. The German authorities had given exceptional 
authorization to one of the firms to use the new warehouse to store cereals from the 1984 harvest which 
could not be disposed of because of the market situation 
and which therefore had to be taken into intervention on 
the express condition that for the contract products, 
capacities be released for the harvest period. 
As a general rule, however, the intervention authorities in 
Germany (BALM), in agreement with the Land, have 
prohibited the use of assisted centres for intervention 
purposes. 
5.20. The storage capacities financed by the Com­
munity were designed to meet regional structural 
requirements which will continue to exist in the fore­
seeable future. 
Observance of project selection criteria 
5.23. (a) The Antwerp project is indeed mainly for the 
storage of cereals (barley). However, malt is also stored, 
this not being formally ruled out by the criteria. It should 
be added that the assistance granted to this project was 
well below the maximum permitted by the Regulation to 
take account of the fact that the investments are not used 
exclusively for what the Commission considers to be 
priority aims. 
(b) and (c) It is true that from 1979 to 1983, when the 
criteria were first applied, the interpretation had been 
more flexible in that only processing plants themselves 
were excluded, but not the storage of cereals for the 
plants. It was during this period that funding was given to 
the three projects referred to by the Court which 
concerned storage installations for cereals for milling. 
Since 1983, however, the Commission has been applying 
the stricter interpretation advocated by the Court. 
Limited technical performance of certain storage 
projects 
5.24. It is true that the silos in Apulia and Basilicata are 
relatively basic investments. However, they are able to 
take the cereals produced by the members of cooperatives 
in question and provide primary storage. The products 
can then be marketed in an orderly manner, something 
which was impossible previously. The investment is 
therefore very useful. 
Plants 'with a higher performance level' are more 
expensive and some cooperatives therefore restrict 
themselves to these preliminary installations in order not 
268 Official Journal of the European Communities 12. 12. 88 
to have to assume the heavier financial burdens. 
Moreover, even with just these basic plants, the cooperat­
ives obtain higher prices than they would if they had to 
sell their produce themselves at harvest time. Producers' 
costs would also be higher without these installations 
because of long journeys to the points of sale. 
Furthermore, in certain situations involving structural 
difficulties, it is not a good idea to try and resolve all the 
problems at once, and the Commission feels that it would 
be unfair to refuse these regions assistance for the 
proposed improvements and thus do nothing about the 
existing structural deficiencies. 
Use made of the financial reports provided for under 
Regulation (EEC) No 355/77 
5.26. The Commission would point out that not only 
are these reports systematically analysed, they are also 
available to the rapporteurs for the countries concerned 
who are kept regularly informed about them. 
Shortcomings in the accounts and other irregularities 
5.27. The Court's observations concerning payments 
are partly justified, although the shortcomings referred to 
cannot be defined as irregularities, since they so not 
compromise the proper execution of the projects. 
(a) As far as the Belgian project is concerned, it should 
be noted that the rules do not require a file of invitations 
to tender to be included among the supporting docu­
ments. The recipient of the aid was therefore under no 
obligation to keep one or to submit it to the Community 
authorities. 
According to the Commission's findings, the accounts 
conform to the rules. The information required by the 
Court can be found by analysing the 'trade accounts 
payable'. 
Some problems arose because the main supplier went 
bankrupt. However, all the supporting evidence was 
finally provided. 
(b) The practice, which exists not only in Greece, of 
paying by instalments as the work progresses, especially if 
a single contractor is responsible for all the work, does 
not, in the Commission's opinion, present any drawbacks 
if it can be ultimately established that the work carried out 
corresponds to the work described in the estimate. It should also be noted that the cereal storage projects are 
not very complex investments for which more detailed 
invoices might be needed to check that the work has in 
fact been done as planned. 
As far as the dates of invoicing and payment are 
concerned, the Greek authorities have already issued an 
instruction to see that the practice detected by the Court is 
stopped. 
(c) The Commission has found that the differences 
between national accounting practices impose limits on 
the degree of standardization which can be attained. 
Special problems relating to port silos 
Introduction 
5.29. The purpose of the investments is to improve the 
structure of the cereals market by making access to the 
world market easier for those producing regions which do 
not have adequate infrastructure. During the period of 
expansion in export outlets for cereals, the construction 
of port silos contributed indirectly to supporting prices in 
the regions concerned, thus benefiting farmers and 
reducing the amounts of produce sent into intervention. 
Furthermore, silo operators are often associations of 
farming cooperatives. 
Observations 
Lack of coordination in the adoption of port silo 
projects 
5.33. According to the Commission's information, the 
investments financed under the Belgian programme for 
port silos (the only programme mentioned by the Court) 
do not pose any problems as regards capacity utilization. 
Trade flows have indeed changed over the years, but this 
has not always been away from the Belgian ports. 
In approving the Belgian programme, the Commission 
took a decision based on Community criteria which do 
12. 12. 88 Official Journal of the European Communities 269 
not require that a Member State's products be necessarily 
exported through its own ports when ports in other 
Member States are more easily accessible from the areas 
of production or are better equipped. The Commission 
does not think that the results achieved can cast any 
doubts on the wisdom of its decision. 
Limited results of programmes 
5.34. See the 'General' section. 
5.35. The observation that the incentive effect is less 
obvious if the investment forms part of a larger whole is 
valild in theory, but there is no reason to conclude from 
this that financing should be refused in sectors where 
appropriations available from the EAGGF Guidance 
Section are insufficient to assist all the investments. It is 
possible to influence trends in the sector even with 
financing of isolated projects. 
Lack of systematic inspections 
5.36. In 1987 the EAGGF Guidance Section received 
1.578 requests for payment for direct-action operations 
(project financing), and disbursed 285 Mio ECU. 
It is clearly impossible to carry out systematic on-the-spot 
inspections with the staff available. This would neces­
sitate not only a substantial increase in staff numbers, but 
would also be contrary to the principle of decentralization 
of responsibilities laid down by the rules. Under the 
Regulation responsibility for inspections lies primarily 
with the authorities designated for this purpose by the 
Member States. 
Direct inspections conducted by the Commission are 
essentially concerned with the systems applied by the 
Member States, and they involve a number of exami­
nations of individual cases. On-the-spot inspections are 
carried out when a request for payment brings to light 
specific problems or irregularities which make an 
inspection essential. 
Conclusions and recommendations 
5.37. The Commission appreciates some of the com­
ments made by the Court. However, it feels that some 
decisions, especially those concerning port silos, were 
taken in circumstances far different from the present 
situation. The selection criteria applied by the Commis­sion now exclude port silos connected with international 
trading except in specific, duly substantiated cases of silos 
which are essentially intended for the export of Com­
munity cereals. 
5.38. See the reply to paragraph 5.11(b). 
5.39. See the 'General' section. 
5.40. See the replies to paragraphs 5.29 and 5.33. 
5.41. As far as the execution of programmes is 
concerned, it should be noted that each rapporteur is 
povided with lists of approved projects which can be used 
to check whether programme aims are being observed. 
With respect to the observation that assisting capacities 
which are subsequently used for intervention purposes 
'entails Community expenditure twice over', the Com­
mission's policy has never been to finance capacities 
which would depend on intervention storage for their 
viability. The Commission would stress that the storage 
capacities created are not normally used for intervention 
purposes (see also the replies to paragraphs 5.18 and 
5.19). 
5.42-5.43. As part of the reform of the structural 
Funds, it is planned that provisions concerning the 
monitoring and evaluation of implemented measures will 
be greatly reinforced. 
OBSERVATIONS RESULTING FROM THE 
SPECIAL REPORT ON COMMUNITY AID 
FOR THE ACCELERATION OF 
AGRICULTURAL DEVELOPMENT IN 
GREECE 
5.44 - 5.50. Although the Court's general comments are 
largely founded, emphasis needs to be laid on the context 
in which EAGGF Guidance Section operations in Greece 
took place. 
When Greece joined the Community in 1981, the 
Commission was able to see how far development was 
lagging behind, particularly in the least favoured 
agricultural areas. At the beginning of 1982 it therefore 
proposed a wider-ranging package of measures to deal 
with the problem. The programme was an innovation 
both for the Community and for Greece. The only 
comparable operation was the agricultural development 
programme in the less favoured regions of the west of 
270 Official Journal of the European Communities 12. 12. 88 
Ireland provided for in Regulation (EEC) No 1820/80. (2) 
However, implementation of that programme had barely 
begun and so it could not serve as a useful guide. There is therefore reason for hoping that the greater 
flexibility provided by this framewwork and by the 
provisions for technical assistance and monitoring, will 
dispel some of the Court's misgivings. 
Since then, the Commission has proposed and the 
Council has adopted the legal framework for the 
implementation of the integrated Mediterranean pro­
grammes. This framework will replace the traditional-
type measures which this report is concerned with, as and 
when they expire. Moves in the direction recommended by the Court should 
then continue with the reform of the structural Funds. 
Following this reform, the Commission intends to 
establish genuine partnership with the national and 
regional authorities for devising and executing measures 
of this type. 
(') COM(88) ('Vertical' EAGGF Guidance Section Regu­
lation). 
(2) OJ L 180, 14.7.1980, p. 1. 
12. 12. 88 Official Journal of the European Communities 271 
CHAPTER 6 
The European Regional Development Fund 
REPLIES OF THE COMMISSION 
EVALUATION OF THE IMPACT OF 
INFRASTRUCTURES 
Introduction 
The Court's attempt to evaluate the impact of ERDF 
assisted infrastructures on regional development is an 
appreciable contribution to the preparation of an ex post 
evaluation methodology that the Commission is en­
deavouring to develop in connection with the reform of 
the structural Funds currently being examined within the 
Council and Parliament. 
To evaluate this impact the Court has sought, by means of 
questionnaires and on-the-spot investigations, to de­
termine, on the basis of gross utilization rates of 
infrastructures, the 'net' utilization rate in order to 
measure the net effect for the regions concerned. It has 
tried to apply this method systematically to different 
categories of infrastructure and within each category to a 
sample of ERDF-assisted investments. 
The Court's work is an enormous and valuable contri­
bution to thinking on this matter about which the 
Commission is similarly concerned. 
METHOD USED FOR ANALYSING THE 
UTILIZATION OF SUBSIDIZED 
INFRASTRUCTURES 
6.5 - 6.12. (a) The Commission is aware of the 
importance of ex ante and ex post evaluation of the operations of the structural Funds in their role of 
strengthening economic and social cohesion which, in 
addition to the completion of the internal market, is one 
of the objectives for the Community set by the Single 
European Act. 
It is clear that ex post evaluation of the effectiveness of 
structural operations carried out by the Commission 
becomes feasible only if there is effective ex ante 
assessment. One of the Commission's proposals to the 
Council for the reform of the structural Funds, made in 
response to its new obligations, was for greater attention 
to be paid to ex ante and ex post evaluation of structural 
Fund operations in order to enhance their effectiveness in 
promoting economic development. 
(b) As regards ex ante assessment, it should be 
remembered that it is only since the 1984 revision of the 
ERDF Regulation that applications for assistance 
relating to infrastructure investments of 15 Mio ECU or 
more must include the results of a suitable socio­
economic cost benefit analysis. 
While it is true that this requirement has helped — for 
major projects at least — to improve the quality of the 
information on which an assessment can be based, ex ante 
assessment will be strengthened by the reform of the 
structural Funds with the establishment, by means of 
genuine partnership at local, regional, national and 
Community level, of Community support frameworks 
which should produce plans setting out in advance the 
development strategy for the regions or areas concerned. 
These plans will ensure that there is overall consistency — 
notably as regards the objectives to be attained — 
between all operations eligible for ERDF assistance, 
whether they be in the form of programmes of operations, 
aid schemes, major industrial or infrastructure projects or 
operations for local development initiatives. The aim is to 
ensure in advance that ERDF operations will be a success 
272 C^fticialiournal of the European Communities 12 12 ^ 
and hence that effective use v^ill he made of the resources 
provided by theERLoF in its role as an instrument of 
economic development. 
Lhis strengthening of the programming approach ^vhich^ 
hydetinitionm^^n^^^^^aspectand^vhichtheCourthas 
looked at as a ^vay of improving the effectiveness of 
infrastructures^ should result not only in clearer object 
ives being setfor infrastructures but alsoabetter balance 
being established between infrastructures — ^vhicharea 
^ vital but nop by themselves^ suflicient condition for 
regional development — and the development of 
productive investments and indigenous potential. 
^ Clear^^^ evaluation arrangements have been set 
oupforthelirsttimemntheproposalsforregulationssent 
to the Council in connection ^vith the reform of the 
structural Funds. 
LheCommissionis^vorl^ingonmethodsforapplyingthis 
^o^ ^^ evaluation at three levels^ macroDeconomic 
impacp notably in strengtheningeconomic and social 
cohesions impact of the action in each Community 
support frame^orl^ and microeconomic impact of 
operations such as programmes and projects. 
^ The CourCs analysis is undoubtedly a ma^or 
contribution to thinking on this matter. 
The Court states in paragraph 6.12 that the method of 
evaluation used vBas geared solely to determining die 
utilisation rate of LR.10T assisted infrastructures so that 
their impact on regional development could be assessed^ 
and stressesthat no costbenefit analyses or studies of 
alternative projects ^vere made. 
^Vhile the utilisation rate is an important reference factor 
for measuring theimpact of an infrastructure on the 
development ofaregiomitmust be borne inmind that the 
establishment ofabasic infrastructure netv^orl^isalong^ 
term process andadegree of under^utili^ation cam at the 
outsep be considered acceptable^ as theCourt infact 
states ^paragraph 6.10P The Commission feels that 
infrastructuresmuste^ist before thedevelopment process 
canbeginand economic activities be attracted to the 
regions but thattheutili^adon rate ^infrequently be very lov^ to start v^ith and that marked under^utilization may 
continue forarelatively long initial period. 
Thisisespeciallytrueforma^orstructuressuchasabridge 
oradam^^vhichfor technical reasons cannot be divided 
up and cannot therefore be carried out belov^aminimum 
threshold.But evenfor structures ^vhich^fromatechnical 
angles can be divided up — forinstancearoad^v^hichcan 
subsequently be widened as the volume of traffic 
gradually increases — the costdoenetit analysis should 
tal^e into account the possible advantages of not 
producing an infrastructure belo^vaminimum size and of 
providingaroad^vithacapacitytocope^vithforeseeable 
increases in traffic in the long term. 
In theevaluationoftheimpactofinfrastructures^ account 
should alsobetaleen of the l^noc^on effects — ^vhich 
admittedly are hard to measure — for overall economic 
activity in the region. 
^Vhile there isagoodcasemn an impact of evaluatiomfor 
endeavouring to calculate the net eftect for the regions 
allowance should also be made — even v^hen there is no 
increaseinutili^ation— for theimprovementsin the 
quality ofthe public service supplied to all users^i.e. 
both present users and future users^ such improvements 
being measured in therms of productivity gains and hence 
in the greater competitiveness of the region. 
For instances an evaluation of the impact ofanew urban 
byDpass giving access toaport should take into account 
not only the net utilization rate^ but also the knock^on 
effect for port activity resulting from easier access^ and 
the benetits of the ne^v road in terms of time^ and hence 
money^and in terms of road safety for ordinary traftic 
using both the ne^v road and the decongested old road. In 
other^vordsmf^tagiven time the ^neC utilization ratefor 
the ne^vroadis2eo^it is ^vrongtoconclude immediately 
that the impact ofthenev^infrastructure is notsigniticant. 
At most this rate could be compared — ^ith due 
allowance for any other specific features — ^vith the 
utilisation rate for infrastructures of the same type. 
^ In the economic development effort to ^vhich the 
ERL^F has to contributed infrastructures ^vill no doubt 
continue to predominate in vie^ of Lhevitalroletheyplay 
in this development. 
The value of the v^ork done by the Court v^nhavie^v to 
improving effectiveness can best be appreciated against 
the background of theseconsiderations.TheCommission 
shares the CourCsinterest in this matter. The method of 
infrastructure evaluation used by rhe Court is v^orth 
12. 12. 88 Official Journal of the European Communities 273 
pursuing further. The Commission hopes to derive 
maximum benefit from the Court's method when it comes 
to consider the establishment of an ex post evaluation 
methodology currently being prepared. 
RESULTS IN TERMS OF THE 
UTILIZATION OF INFRASTRUCTURES 
6.13-6.58. In the light of the above, the Commission 
feels that the best way of replying to the Court's remarks 
on the many individual cases mentioned is to group 
together its replies by type of problem rather than by 
category of infrastructure. It is no problem for the 
Commission to supply, where appropriate, all the 
information which prompted it, when granting ERDF 
assistance in individual cases, to make a positive 
assessment of the expected impact of the infrastructures 
financed. 
As regards the link between utilization rates observed or 
certain infrastructures and the quality of programming, 
the Commission is quite prepared to acknowledge that in 
a number of cases financed by the ERDF, the present 
utilization rate — which is only one of the factors 
involved in what must be a comprehensive evaluation of 
the impact of an infrastructure on the development of a 
region — is low. It feels that the new approach following 
the reform of the Funds — namely more highly developed 
programming — will mean that more consideration can 
be given to the development of the economic context of 
the infrastructures receiving Community assistance. 
It should thus be easier to spot cases of competition 
between the infrastructure to be built and similar 
installations already existing in the surrounding area, as 
for instance in the case of the Bettembourg container 
terminal in Luxembourg (paragraph 6.16); it should also 
be possible to make allowance for competition from other 
modes of transport as in the case of the canal du Midi in 
France (paragraph 6.32), the use of which is affected by 
road and rail transport. 
If economic forecasts in the sector concerned are properly 
taken into account, it is certainly much easier to select 
infrastructures which are more likely to increase econ­omic development. However, predictions can sometimes 
be difficult. For instance, a number of investments 
mentioned by the Court were affected by the backwash 
from the oil shocks, which could not have been foreseen. 
This was the case with the road to the port of Eemshaven 
in the Netherlands (paragraph 6.15) and the roads in 
Limburg. Moreover, in view of the economic context of 
the period in which most of the infrastructures in question 
were programmed, the average utilization rates found by 
the Court for certain infrastructures (e.g. ports, inland 
waterways and hydraulic infrastructures) can be con­
sidered acceptable. 
A coherent management framework also helps to ensure 
that resources are properly used. However, in practice, it 
is very difficult to determine in advance an infrastructure 
specialization system, especially in regions where these 
infrastructures are inadequate, as is the case with the 
small Adriatic ports (case of Termoli, paragraph 6.24). 
It is true that the priority aim of ERDF assistance is to 
support investments which will speed up the growth of the 
regions receiving aid. However, the Commission feels that 
in striving for this objective account must also be taken of 
the socio-economic characteristics of the regions. It is 
essential, for instance, to give preference to investments 
(generally low-cost) designed to provide access to an 
isolated region and to prevent depopulation. This must be 
borne in mind in any assessment of the country roads in 
Molise (paragraph 6.21). The same applies to exami­
nation of any cases in which the investment is designed to 
achieve better utilization rather than greater utilization. 
An example is the Ales by-pass in France (paragraph 
6.19), which was designed to improve the flow of transit 
traffic and to reduce congestion in the town centre. The 
Commission also feels that improvements in the quality 
of infrastructures and the construction of installations to 
improve security of supply are essential, because in the 
long term these investments help to speed up the 
development process and play a vital role in halting the 
deterioration in the economic situation; this was the case, 
for instance, with the power station in the Shetland Isles 
(paragraph 6.45). 
The utilization rate for certain infrastructures is 
frequently low because of financial difficulties which 
force the public authorities to sub-divide an infrastruc­
ture project into a number of lots to match the funds 
available. Examples of this are the construction of certain 
port installations (paragraph 6.24) and to a large extent 
274 Official Journal of the European Communities 12. 12. 88 
the major delays in completing the hydraulic complexes in 
Sicily (paragraph 6.36). 
Institutional and political changes can also be the source 
of partial completion and hence of unsatisfactory 
utilization of infrastructures: the Sinni and Locone 
hydraulic complexes in the Mezzogiorno in Italy have for 
years, like a large number of other infrastructure projects 
in the same area, been held up by the closedown of the 
Cassa per il Mezzogiorno and the difficulties in applying 
the new law (64/86) on which Italian regional policy in the 
Mezzogiorno has been based since 1986. 
As regards the remarks on the link between certain water 
collection and treatment plants and economic activity, it 
must be pointed out that water supply difficulties and the 
problem of sewage pollution are major obstacles to the 
economic development of the Mediterranean regions. 
This undoubtedly applies in the cases in the Mezzogiorno 
mentioned by the Court. The Commission also agrees with the Court that in future 
criteria should be established for modulating the form 
and intensity of Community financial assistance. This has 
in fact been catered for in the reform of the Funds, with 
provision being made for a combination of EIB loans and 
ERDF aid for certain types of infrastructure and also for 
modulation of aid rates. 
SPECIAL REPORT ON THE INTEGRATED 
APPROACH TO COMMUNITY FINANCING 
OF STRUCTURAL MEASURES 
6.76 - 6.84. The Commission would refer to the replies 
to the abovementioned special report. In particular: 
As regards the impact of ERDF assistance on the 
construction of telecommunications infrastructures, it 
should be noted that ERDF aid has had a very important 
support function for such investment in certain countries, 
notably Ireland and Greece, and in others it has been used 
by the Commission as an incentive for investors to bring 
forward their infrastructure investment plans. This was 
the case with the SIP which carried out additional 
investments in the Mezzogiorno not initially included in 
the group's investment plans. without denying the difficulties of this approach, the 
Commission has always seen integration as a means 
of improving the effectiveness of the Community's 
structural action; 
the problems found by the Court are in reality 
attributable essentially to the fact that the operations 
examined were experimental and that Community 
structural action is very complex; 
EFFECTS ON PRICES AND WAYS OF 
MANAGING INFRASTRUCTURES 
6.59-6.67. As regards the effect of regional aid on 
prices, the Commission agrees with the Court that a 
reduction in prices can stimulate demand and increase the 
utilization rate. It feels, however, that in the less-
developed areas the major obstacle to demand is a lack of 
service rather than an unduly high price. 
The Commission is also of the opinion that a dif­
ferentiated pricing policy as an incentive to demand may 
lead to the price of services being set with virtually no 
reference to any economic calculation, which would be 
equally negative. analysis of the integrated approaches introduced 
more recently would show that: 
the 'historical' experiments with the integrated 
approach have been beneficial for launching 
IDOs and IMPs: the 20 or so IMPs launched in 
the last two years and the 10 or so IDOs would be 
considered satisfactory on most of the counts 
criticized by the Court; 
the reform of the structural Funds, once applied, 
should be beneficial for the integrated approach: 
not only will the broad lines of this reform 
facilitate the operation of the various structural 
instruments, but in addition the horizontal 
coordinating regulation will remove certain 
obstacles currently hampering the application of 
integrated programmes. 
12. 12. 88 Official Journal of the European Communities 275 
CHAPTER 7 
European Social Fund 
REPLIES OF THE COMMISSION 
INTRODUCTION 
7.1-7.3. In its replies to special report No 1/88 on 
national and Community management systems and 
procedures (l) the Commission acknowledged that in 
many instances the Court's comments were justified. In 
the introduction to its replies it set out some of the 
measures already taken — for example, increased 
resources for departments responsible for management, 
accounting and controls — and some of the results 
already achieved in the field of financial and budgetary 
management of the Fund, such as a significant reduction 
in the 'burden of the past1 and a considerable improve­
ment in the implementation of the budget since 1986. It 
was also pointed out that a fundamental change in the 
effectiveness of the Fund's operations could not be 
expected until after the reform of the structural Funds 
had been carried out in accordance with Article 130d of 
the EEC Treaty. 
Subject to these reservations and without repeating 
replies already given, information further clarifying the 
Commission's position in the light of the progress made in 
the reform of the structural Funds is given below. 
NATIONAL AND COMMUNITY SYSTEMS 
AND PROCEDURES RELATING TO THE 
MANAGEMENT OF THE EUROPEAN 
SOCIAL FUND 
Main weaknesses noted and possibilities for 
improvement 
7.5 - 7.6. On a proposal from the Commission and after 
obtaining the opinion of Parliament and the Economic 
(J) The footnotes are listed together at the end of the chapter. and Social Committee, on 24 June 1988 the Council 
adopted Regulation (EEC) No 2052/88 on the tasks of the 
structural Funds and their effectiveness and on coordi­
nation of their activities between themselves and with the 
operations of the EIB and the other existing financial 
instruments. In accordance with Articles 130a and 130c of 
the EEC Treaty this Regulation defines or clarifies a 
number of concepts. With regard to the points raised by 
the Court, particularly in its conclusions to special report 
No 1/88, the concepts defined in this Regulation mainly 
relate to the following: 
— the priority objectives which the ESF must help to 
attain; 
— the type of operations the fund can support; 
the categories of persons eligible for ESF assistance; 
a five-year projection of the overall resources needed 
for the contributions from the structural Funds and 
their concentration; 
the principles of complementarity and partnership, 
plus, where necessary, appropriate technical assist­
ance operations carried out in agreement and in close 
cooperation with the Member State(s) concerned; 
part-financing, supplemented by differentiated rates 
of assistance depending on criteria which do not rule 
out Community financing for operations normally 
covered under national systems; 
276 Official Journal of the European Communities 12. 12. 88 
— forms of financial assistance, with specific provision 
for financing of programmes rather than individual 
projects (which should lead to a reduction in the 
number of files to be dealt with each year by the 
Commission, despite the increase in resources and 
hence in operations); 
— evaluation systems designed to gauge the effective­
ness of Community operations in relation to the 
objectives pursued; this will be done in macro-
economic terms incorporating data on labour market 
developments (with particular reference to pro­
gramme management). 
The Commission therefore notes with satisfaction that 
many of the issues raised by the Court in its annual and 
special reports have been dealt with in the legal 
instruments and solutions that have since been adopted. 
7.7 - 7.9. As regards the Court's comments on manage­
ment at Community and Member State level, the 
Commission would refer to all the replies already given in 
special report No 1/88 on national and Community 
systems for the management of the Fund. It should be 
recalled that the process of reforming the structural 
Funds did not end with the adoption of Council 
Regulation (EEC) No 2052/88 and that it is continuing 
with the examination of two other draft Regulations, one 
'horizontal' and the other laying down specific provisions 
for the European Social Fund (2). 
The Commission shares the Court's concern about 
management and it pays very close attention to verifi­
cation aspects. In this connection, the Commission 
decided in September 1987 to set up an anti-fraud 
coordination unit. A team with the same function will be 
constituted as soon as possible in the Directorate-General 
for Employment, Social Affairs and Education. 
PREPARATORY STUDIES AND PILOT 
SCHEMES 
7.10-7.13. The Court's comments refer to a system 
which was largely revised in the 1984 Regulation because 
of its operational shortcomings, even though subsequent 
commitments have had to be taken into account until 
1988. In financial terms this sector accounted for only 
0.3 % of the Fund's total budget, which the Commission 
had to bear in mind when allocating the funds earmarked 
for these schemes. Many of the difficulties encountered were due to the 
sharp increase in the number of projects submitted to the 
Social Fund, which compromised the monitoring and 
management of individual projects. 
In the case of the pilot schemes the situation was further 
complicated because the Member States' responsibilities 
were not clearly defined and some small private 
beneficiaries had great difficulty in bringing their projects 
to a successful conclusion. 
Many of these problems have been settled by the 
amendments brought in since 1984. Despite the system's 
imperfections, it seems both from general reactions and 
from discussions in the Social Fund Committee that the 
pilot schemes have produced positive results at a very 
modest cost. 
Rate of utilization of payment appropriations 
7.14 In July 1988 10 pilot schemes (3 % of the total 
approved) had still not been concluded. These are all 
cases where recovery orders have been issued but the 
promoters have not yet made the repayments. 
Selection 
Eligibility 
7.15. It has always been the Commission's practice to 
limit the number of jobs to 30, in accordance with 
Regulation (EEC) No 2396/71. 
Priority 
7.16-7.18. When there were more appropriations 
available than eligible applications, as was the case in 
1983, the priority criteria automatically became redund­
ant. When, however, there were more eligible applications 
than appropriations available, the priority criteria were 
applied. 
7.19. The Commission has always considered that the 
expression 'innovatory character' should be interpreted 
12. 12. 88 Official Journal of the European Communities 277 
pragmatically and that to attempt to devise a precise 
definition was neither necessary nor desirable. The lack of 
a definition has caused no practical difficulties. 
Decision and implementation 
Contract 
7.20-7.25. It is true that some promoters began 
operations without awaiting the Commission decision, in 
the knowledge that their project was included in the draft 
decision presented to the Committee. 
Furthermore, it was quite customary as with other Social 
Fund projects for amendments to be made to the 
Commission decision when significant changes were 
requested. With the pilot schemes, the amendments were 
normally included in the contract and in general the 
contracts gave a basic outline of the projects. None the 
less, the contracts system was abandoned, as the Court 
states, at the time of the 1984 review. 
The Commission is aware of the difficulties encountered 
and has therefore decided to drop individual project 
management in favour of programme management. 
Interim report 
7.26 - 7.28. The main purpose of the interim report was 
to provide proof that the project was under way. 
Whenever the content of an interim report raised 
questions of substance, the Commission did not fail to 
carry out the necessary inquiries. 
Final report 
7.29-7.30. The Commission found that the only 
practical method of making the promoter fulfil his 
obligations within the deadline was to make final 
payment subject to production and approval of the final 
report. If the final report was not considered satisfactory, 
payment was suspended until any shortcomings were 
corrected. The Court's findings 
7.31. See the replies to paragraphs 7.39 — 7.44 and 7.55. 
Financial statements 
7.32-7.33. In practice, payments have been made as 
follows: the promoter was required to present an itemized 
statement of expenditure for which reimbursement was 
requested; if there were any doubts, further information 
was requested; in addition sample, on-the-spot checks 
were conducted by the Commission. 
In any event, it was made quite clear to the promoters that 
revenue from the operation must be deducted in the 
calculation of the amount eligible for assistance from the 
Fund. 
Closure of files 
7.34-7.35. These difficulties were inevitable in a 
system in which the Member States' joint responsibility 
was not clearly established. So far the Council has 
rejected the Commission's attempts to draw up provi­
sions concerning the interest that could be charged on 
undue payments. 
Expenditure not borne by the contractor and excess 
funding 
7.39 - 7.44. The Commission has re-examined the cases 
referred to by the Court. In the vast majority of them, the 
expenditure proved to be justified. As a result of 
information provided by the Court in a management 
letter the Commission has already recovered one payment 
and will open repayment procedures in another case cited 
by the Court (paragraph 7.41). 
278 Official Journal of the European Communities 12. 12. 88 
Circulation of final reports and results 
7.45. The initial idea of circulating reports on pilot 
schemes soon proved unworkable because of the total 
number of projects. None the less, the reports are 
available to applicants at the Commission. Promoters 
have always been informed of earlier experimental 
schemes along the same lines. 
7.47. Because of the length of the reports, summary 
records in the Fund's annual report and in the magazine 
'Social Europe' highlight the most significant schemes. 
Organizations interested in the follow-up to these 
operations have ready access to this documentation. 
7.50. It is true that so far the Commission has not 
developed a method for evaluating the results of 
preparatory studies and pilot schemes. However, under 
the new Regulation a system of evaluation and monitor­
ing will be implemented. 
7.51 - 7.52. See the reply to paragraph 7.19. 
Furthermore, the innovatory character is not a condition 
of eligibility in the system in question. Job creation was 
not the only criterion for judging pilot schemes and since 
the purpose of the exercise was to experiment with new 
approaches, failures could not be ruled out. 
Conclusions 
7.55. The Commission was aware that this type of 
operation was less than perfect. The decision to make 
changes was taken in October 1983. Projects approved under the old system have to be considered in the light of 
arrangements in force at the time of their approval. 
The proposals that the Commission put forward for the 
new system which came into force in 1984 took account of 
what had been learned from the pilot schemes under the 
old Regulation. 
The Social Fund does not have sole responsibility for 
Community research into vocational training. 
The Commission would recall the relative size of the 
budget assigned to these operations (0.3 %) because of 
the existence of other priorities. 
The Court maintains that eligibility can be checked only 
by on-the-spot visits. Although more information can be 
gleaned from such visits, promoters ought to be capable 
of explaining the gist of their projects in written 
documents. However, because of the wide range of the 
Fund's tasks and the need for sound management, only a 
sample can be submitted to on-the-spot checks with 
account being taken of the costs involved. As regards the 
observations in paragraph 7.55(c)(ii),(iii) and (iv), the 
Commission would point out that the appropriate 
conclusions have been drawn. 
OUTSTANDING COMMITMENTS 
7.56-7.62. The Commission agrees with the Court's 
analysis of the efforts made since 1986 to settle 
outstanding commitments. 
0) OJC 126, 16.5.1988. 
(2) COM(88) 500 final. 
12. 12. 88 Official Journal of the European Communities 279 
CHAPTER 8 
Research 
REPLIES OF THE COMMISSION 
PRELIMINARY COMMENTS 
8.1. Over the years there have been four stages in the 
Community's evaluation policy: 
(a) the period before the 1983 Council Resolution; There is therefore no real difference of opinion between 
the Commission and the Court on the objectives to be 
pursued; the Commission's statements of intent as 
regards evaluation, which the Court has considered in its 
report for 1987, have since been followed up by the 
proposal for the specific Monitor programme sent to the 
Council and Parliament at the end of July, as stated 
above. This means that the specific RTD programmes 
under the 1987-91 framework programme will be 
evaluated in accordance with methods determined by the 
Council in collaboration with Parliament under the 
Monitor programme. 
(b) implementation of the 1983 Council Resolution; 
(c) the evaluation action plan of January 1987 (following 
a new Council Decision in June 1986); 
(d) the decisions taken by the Council when it approved 
the research and technological development (RTD) 
framework programme (1987-91) on 28 September 
1987 incorporating in each specific programme an 
article explicitly referring to evaluation. Finally, if the aim of evaluation is 'to produce a steady 
improvement in research', it must first and foremost 
contribute to achieving the scientific and technical 
objectives assigned to the RTD programmes while at the 
same time ensuring 'attainment of the Community's 
economic and social objectives'. It should be borne in 
mind that Community RTD programmes are either 
fundamental R&D or applied R&D or a mixture of the 
two and that the evaluation procedures must be designed 
accordingly; for instance, it is far more difficult to guage 
the socio-economic impact of a fundamental R&D 
programme than that of a pre-competitive RTD pro­
gramme. 
In addition there is the proposal for the specific Spear 
programme (forming part of the Monitor pro­
gramme) on the methodology of community evalu­
ation of research programmes. 8.2. The Commission would also point to the political 
and budgetary circumstances in which these programmes 
were renewed: 
The Commission has been a driving force in evaluation at 
Community level (the RTD framework programme 
approved on 28 September 1987 provides for the 
evaluation of each Community programme; the proposal 
for the Monitor programme sent to Parliament and the 
Council at the end of July provides for the introduction of 
a T2 + 1' evaluation network to be coordinated by DG 
XII). — An 18-month hiatus between the non-nuclear energy 
programme which ended on 30 June 1983 and the one 
which began in early 1985: the main reason for this 
was that, after agreeing on the scientific and technical 
objectives of a number of RTD programmes in late 
1983, the Council (Research) was hamstrung by the 
Community's financial crisis which followed the 
deadlock at the Athens European Council in De-
280 Official Journal of the European Communities 12. 12. 88 
cember 1983. To enable the Council to approve the 
Esprit programme in February 1984 and not subject it 
to further delay, the Commission was therefore 
obliged to block some of the appropriations for seven 
RTD programmes — including non-nuclear energy 
— until 19 December 1984 when the Research 
Ministers were able to agree on how to reconcile the 
scientific and technical objectives with the budgetary 
constraints. In the case of energy, presentation of the 
new programme was deferred to prevent any logjam 
within the Council; the Council then felt it had to 
consider this programme and the fusion programme 
together, since it felt that budgetary expenditure in 
the energy sector had to be assessed in relation to the 
other scientific and technical objectives of RTD 
(Stimulation, Brite, Biotechnology, etc.) and, within 
the energy sector, draw a comparison between fusion 
and non-nuclear energy. 
— The conciliation procedure between Parliament, the 
Council and the Commission on the environment and 
materials programmes: completion of this procedure 
led to a delay of six months. 
The structure of Community research 
8.3. The first and second RTD framework programmes 
did not use the same methods and criteria: 
— The second framework programme (1987-91) ab­
andoned the matrix structure adopted in 1983. 
— It no longer contains demonstration projects. 
— Finally, the second framework programme comes 
under the new — binding — provisions of the Single 
Act while the first framework programme was based 
simply on a 1983 Council Resolution. 
Evaluation by the Commission 
8.4. (c) • Although the shortage of budgetary resources 
did not prevent 27 evaluation reports from being 
produced, it is obvious that, in terms of quality, it did not allow the completion, coordination and further exami­
nation of procedures as the Commission would have 
wished. 
This problem should now have been resolved since the 
Council adopted a position on the evaluation procedures 
for the specific programmes when it approved the RTD 
framework programme (1987-91) on 28 September 1987. 
(d) Parliament itself agrees, as was stated during 
discussion of Mrs Scrivener's own-initiative report in 
February 1987, that it is essential first to reach agreement 
on the methods to be applied for evaluating the specific 
programmes before adopting homogeneous or at least 
coordinated procedures. 
The Commission had accordingly already started work in 
1987 on a proposal for the specific Spear programme 
based on the study of the organization of the evaluation 
of research at the Commission. 
The approach adopted by the Court 
8.5 - 8.7. The Court's examination relates to the 
management of the raw materials, environment and non-
nuclear energy programmes which was partly based on 
management methods predating the rules of procedure 
approved by the Director-General of DG XII/JRC in 
April 1985. 
These rules and the criteria of the first framework 
programme (several partners and an international 
dimension) have been gradually applied as a matter of 
priority to RTD programmes corresponding to the 
Community's new RTD measures (Brite, Stimulation, 
Biotechnology, etc.). 
FORMULATION AND EVALUATION OF 
THE IMPLEMENTATION OF THE 
COMMUNITY FRAMEWORK 
PROGRAMME 1984-87 
Formulation and structure of the framework 
programme 
8.10. As regards the future, it should be noted that the 
Commission proposed arrangements for coordinating 
12. 12. 88 Official Journal of the European Communities 281 
with the advisory committees in COM(87) 491 of October 
1987 (A new outlook for the JRC). In particular, the 
appropriate advisory management and coordination 
committees will be periodically consulted to ensure that, 
where the case arises, shared-cost activities will be 
coordinated with national activities in the same sector. 
8.11-8.12. As recommended by the Court, the Com­
mission intends to pursue its efforts to restrict the number 
of specific programmes by preparing more 'integrated' 
programmes. However, the specific nature of research 
means that each case must be examined individually and 
rules out generalized solutions. 
Furthermore, the growing role of research and tech­
nological development within the Community frame­
work, resulting in a larger budget and a wider range of 
subjects, inevitably increases the number of specific RTD 
programmes. 
Evaluation of the implementation of the 
framework programme 
8.13-8.15. The Court rightly views the framework 
programme as a key instrument for the medium-term 
planning of scientific objectives and financial aspects. 
Being a planning instrument, the framework programme 
does not lend itself to evaluation exercises similar to those 
intended for the specific RTD programmes. 
Although the Commission agrees with the Court's 
recommendations about the need to assess the influence 
which the scientific and financial guidelines of the 
framework programmes may have had on the prepar­
ation and adoption of the specific programmes, it cannot 
accept the principle of evaluating the framework 
programme in terms of the results obtained (RTD, socio­
economic impact, etc.). This type of evaluation can be 
applied only to the specific programmes. In the case of the 
framework programme, it is the planning instrument that 
must be assessed. DEFINITION OF SPECIFIC PROGRAMMES 
Form of preparatory documents 
8.16 - 8.18. The Commission can see that the Court is 
right in recommending that the draft proposal be rounded 
off at a very early stage with a text in a strict legal form 
and it will endeavour to do so in future. It has indeed 
drawn up a standardized legal text for the specific 
programmes. 
Efficiency of consultation procedures 
8.19-8.24. The Commission is of the opinion that a 
clear distinction should be made between the legislative 
procedure proper and the internal and external consul­
tation procedures for the preparation of programmes. 
Since the legislative procedure concerns the Com­
mission's formal proposal and is governed by binding 
procedures, the Commission can influence only the 
external and internal consultation phase during the 
preparation of the proposal. The Commission is continu­
ing its efforts to reduce the time needed for consultations 
at this preparatory stage. However, in view of the time 
needed for the legislative procedure and the preparation 
of a proposal, there appears to be no possibility of 
speeding up the decisions on these programmes to any 
significant extent. 
8.23. When the decision was taken to cancel the Super 
Sara project in March 1983 the Council also fixed the 
overall level of resources to be allocated to the JRC for the 
next multiannual programme. The Commission therefore 
sent the Council a proposal for the 1984-87 programme 
which respected this level and which unfortunately could 
not cover all the proposals made by the ACPM in 1982. 
282 Official Journal of the European Communities 12. 12. 88 
Definition of the scientific content of 
programmes 
8.25 - 8.26. The first framework programme (1984-87) 
defined the objectives of research and technological 
development. 
The scientific content of the programmes is not given 
solely in the programme decision, which inevitably has to 
limit itself to defining the context. 
With particular reference to the programmes mentioned 
in the report, it should be pointed out that, although the 
objectives of the environment programme have to be kept 
general, the research themes were clearly specified and a 
narrower definition was given in all the calls for 
proposals. 
The general and specific objectives of the non-nuclear 
energy programme were described in detail in the 
documents drawn up in consultation with the ACPMs. 
The research themes were specified in the calls for 
proposals. 
The Commission also feels that the freedom of manoeuvre 
it is allowed is a good thing, since in managing 
multiannual programmes it must enjoy some flexibility to 
take account of technological developments or un­
foreseeable events (such as Chernobyl) in the fields 
covered by the RTD programmes. It should be noted that 
the Commission does not make use of this freedom of 
manoeuvre without first consulting the management and 
coordination committees. 
Objectives or fields of research 
8.27-8.33. The Commission recognizes the import­
ance of defining objectives and in point 1 of its plan of 
action relating to evaluation (OJ C 14, 20.1.1987, p. 5) 
stipulated that they should be laid down for every 
programme, if possible in a quantitative and verifiable 
form. 
The research envisaged in the proposal for the Spear 
programme in the field of quantitative and qualitative 
indicators and the methodology of evaluation will also 
help in the definition and verification of these objectives. 
Finally, as the Court notes, there can be no standard 
evaluation of the Community's RTD programmes since 
the procedures must take into account whether the 
programmes involve fundamental research, applied research or a combination of the two in varying 
proportions. 
8.29. From the report drawn up in May 1985 on the 
evaluation of the JRC non-nuclear energy programme 
between 1979 and 1985 the evaluation team was able to 
give a favourable assessment of the impulses which the 
programme had given to European industry while 
remaining consistent with the objectives of Community 
policy in the field of research and development. 
8.30. While it is true that there was no formal 
amendment of the programme decision to take account of 
the outcome of the conciliation procedure referred to in 
the reply to paragraphs 8.5-8.7 (which ended in June 
1986), it must be borne in mind that the successive 
budgetary restrictions have led to reductions in the 
scientific content of the non-nuclear energy programme; 
the Council's Working Party on Research was informed 
of these reductions as the records of its meetings show. 
SELECTION OF PROPOSALS FOR 
SHARED-COST PROJECTS 
Acceptable themes for research 
8.35. Whenever themes were omitted from the calls for 
proposals, the management and coordination committees 
had been consulted and had given a favourable opinion. 
8.36. When various texts have to be translated in 
succession, it can happen that some themes are given 
incorrect titles, thereby leading to misunderstandings. 
Criteria for evaluation of proposals 
8.37 - 8.41. The evaluation forms were for internal use 
only and did not cover all the selection criteria. The rules 
adopted by the Commission on 19 November 1986 — one 
object of which was to harmonize these criteria — were 
not applicable when the call for proposals was made. 
12. 12. 88 Official Journal of the European Communities 283 
The Commission shares the Court's view that the subsidy 
threshold should be adjusted in line with the nature of 
each research programme. 
8.42. The Directorate-General for the Environment 
considered proposals in the light of only some of the 
criteria since duplication of effort is to be avoided. 
8.43. The selection is made by a panel which produces 
its verdict not only on the basis of criteria (to which each 
expert may attach different weightings) but also in line 
with the personal assessment of its experts. 
Publicity 
8.44 - 8.45. Considerable efforts are devoted to inform­
ation and assistance with the preparation of the proposals 
to ensure that all potential participants are reached: 
— information documents; 
declarations of interest; 
— network of contact persons; 
— information meetings, etc. 
The information campaign starts when the proposals are 
sent to the Council and does not wait for the Council to 
take its decision. 
To avoid a high rate of refusals, the information and the 
call for proposals specify the priority themes contained in 
the technical section of the Council decision. 
The criterion of the socio-economic impact of 
the proposals 
8.46. The Commission agrees with the Court that the 
socio-economic impact of the proposed work should be 
indicated where possible and it will endeavour to see that 
this is done in practice. Extent of the work of proposal appraisal 
8.47-8.48. The Environment Management and Co­
ordination Committee was able to give its opinion 
without discussion on 85 % of the 1 700 environment 
proposals, which the Commission and its experts had 
spent almost a year assessing, thus making the Commit­
tee's work easier. 
Concentration of selection work in a small 
space of time 
8.49. The hurried implementation of the two program­
mes mentioned was the result of undertakings which the 
Commission had to give during the conciliation pro­
cedure with the Council and Parliament. 
8.50. See the reply to paragraphs 8.19-8.24. 
Value of consultation activity 
Consultation of DG XI 
8.51. DG XI was consulted mainly on the relevance of 
the proposals for the Community's environment policy, 
which explains why a simplified form was used. 
Calls for proposals or calls for tenders ? 
8.56 - 8.58. Although the freedom to make proposals 
was dominant in the case of the environment programme, 
the Commission endeavoured to add specifications 
wherever possible (e.g. the Building 2000 projects under 
the non-nuclear energy programme); however, it is 
obvious that these specifications cannot be included in 
calls for proposals for, say, the development of a new 
method for the evaluation of the toxicity of a chemical 
product. 
284 Official Journal of the European Communities 12. 12. 88 
MONITORING AND INTERNAL 
EVALUATION OF SPECIFIC 
PROGRAMMES AND PRODUCTS 
Role of the advisory committees 
8.59. Although the Management and Coordination 
Committee gave an opinion on the proposal for the 1987-
90 (or 1987-91) programme, the Commission did not 
continue its preparations for this draft programme after 
its discussions with the Council in April 1986 on the 
future guidelines for the JRC (COM(86) 145). 
Monitoring of projects and programmes by 
the Commission 
Direct action 
8.62. In its evaluation (COM(86) 145, Annex page 21) 
the JRC Scientific Council recommended that the 
planning document be replaced by a more flexible system 
also with long-term forecasts. The Council's discussions 
on the future of the JRC in April 1986 showed that the 
Member States wanted drastic changes. As a result it was 
not possible at that stage to establish a planning system 
involving long-term forecasts and the Commission had to 
use the existing planning system for the implementation 
of programmes for the remainder of the period 1984-87 
while introducing the flexibility recommended by the 
Scientific Council. 
8.63. The Council and Parliament had no criticism to 
make of the amount of detail given in the annual reports 
on the 1984-87 programme sent to them in accordance 
with the Council decision. The Commission will, 
however, make an effort to improve presentation. 
Indirect action 
8.64-8.66. Unlike the administrative and financial 
procedures which have been coordinated, the scientific 
and technical monitoring procedures vary from one 
programme to another. Within each programme there is a 
constant process of internal evaluation of individual projects or groups of projects. There should be laboratory 
visits, meetings of contractors or regular scientific reports 
during the research. All the information produced by 
these various types of measure is made available to the 
external evaluation teams. 
Internal evaluation 
8.67. See the reply given in the preliminary comments. 
8.68. There is continuous internal evaluation in the 
form of contractors' meetings or visits to the contractors 
by members of the programme management team. The 
findings are sent regularly to the appropriate manage­
ment and coordination committee. 
8.69 - 8.70. The Commission's proposal for the Spear 
programme provides for evaluation guidelines to be laid 
down which will supply the methodological approach and 
the criteria desired by the Court. However, the meth­
odology and evaluation criteria will have to remain 
flexible and adapt to the specific features of each 
programme to be assessed. 
EXTERNAL EVALUATION OF SPECIFIC 
PROGRAMMES 
Mid-term evaluation of the JRC multiannual 
programme 
8.72-8.74. The Commission intends to propose an 
overall mid-term evaluation of the current programme 
and the JRC Board of Governors must give an opinion on 
how this evaluation is to be organized (COM(87) 491, 
Annex II). 
Organization and timing of evaluation 
exercises 
8.75. As regards the timetable, the Commission has 
drawn up an evaluation plan for future years based on the 
criteria set out in the action plan on evaluation and in the 
12. 12. 88 Official Journal of the European Communities 285 
study referred to at the end of the reply to paragraph 8.4 
and on the key dates of the framework programme. 
8.76. As regards the external evaluation of the primary 
raw materials programme, full use was made of the expert 
report for 1978-84 when the 1986-89 programme was 
prepared. In particular, the panel's recommendations 
were fully taken into account. 
The decision on the evaluation dates is the result of a 
difficult compromise: if too early, there are not enough 
results to evaluate; if too late, the evaluation has no effect 
on the establishment of the future programme. Since the 
primary raw materials programme covered the period 
1982-85, evaluation took place between July 1984 and 
May 1985 so that recommendations could be made for the 
preparation of the new stage of the programme (the 
conclusions of the evaluation team were already available 
in May 1985). In such an evaluation it is normal for only 
partial results to be available for the programme under 
way (1982-85) while the evaluation panel can conduct a 
more detailed analysis of the results of the previous 
programme (1978-81). 
8.77 - 8.78. The evaluation of the non-nuclear energy 
programme was undertaken in 1985 prior to the 
establishment of the JRC programme and was at first 
mainly concentrated on the JRC's activities. However, in 
order to provide a full picture of Community research in 
this field, shared-cost action was also analysed although, 
as the Court points out, evaluation was inappropriate in 
view of the timetable. The problems encountered during 
this evaluation once again showed that the evaluation 
schedule should be linked to the timetable for the 
programme, as stressed by the study referred to at the end 
of the reply to paragraph 8.4. Only those measures for 
which a proposal is to be made to the Council are now 
being evaluated. Measures in similar fields with a 
different timetable are taken into account to place the 
programme in question in its proper context, but they are 
not evaluated. 
Content of evaluation exercises 
8.79 - 8.80. Since the plan of action on evaluation for 
the period 1987-91 was presented to the Council, the 
terms of reference of the evaluation teams have referred 
specifically to point 3.4 of this action plan. Some of the 
shortcomings noted by the Court in these terms of 
reference have now been remedied. Consultation of potential users 
8.81. In stepping up its evaluation activities, the 
Commission has recently made a considerable effort to 
obtain the opinion of the users of research programmes. 
One example is provided by the evaluation of the 
biotechnology programme for which the panel visited a 
large number of potential users. Tests conducted by 
means of questionnaires showed, however, that direct 
interviews are essential (the reply rate from potential 
users who have not received contracts is very low). A call 
for tenders recently made by the Commission for 
interviews with the industrial users of research program­
mes shows that the average cost of such an analysis is over 
1 000 ECU for each interview. Systematic use of this type 
of consultation could therefore prove too expensive and 
each case will have to be carefully assessed to determine 
whether this expenditure is worthwhile. 
The Commission is continuing its search for a positive 
and satisfactory solution to these problems. 
Composition of external evaluation panels 
8.82. As a result of experience gained since 1985 the 
Commission has been able to improve the composition of 
evaluation panels. The composition of the panel recently 
appointed to assess the non-nuclear energy programme 
was consistent with the Court's wishes. 
GENERAL CONCLUSIONS 
8.86. (a) The Commission fully agrees with the Court's 
comments about the need to perfect the system on which 
it is already working; it is pleased to note broad 
agreement with the Court on the objectives to be achieved 
in this field. 
However, no progress can be made until the Council 
adopts the specific Spear programme (which forms part 
of the proposal for the Monitor programme) in cooper­
ation with Parliament. 
Since 1983 the Commission has been trying to bring this 
problem to the attention of the Member States (manage­
ment and coordination committees) and Parliament 
^o COflicial journal of the Luropean Communities 1^.1^.88 
t^mainly through the organization of seminars and 
gradually to develop and imposeamethodology in this 
tield at Community le^el.Lhe methodological approach 
of e^aluationmusttirstbedelined before thecoordinated 
procedures suggested by the Court can be adopted; as 
soon as the ^pear programme has been approved by the 
relevant institutions^ the Commission will not fail to 
adopt measuresingood time to ensure thenecessary 
coordination oftheCommunity^se^aluation procedures. 
^ Lhe Commission shares the CourCsopinion on the 
importance ofdetiningob^ecti^es;howe^en due allows 
ance must be made for the specific features of the 
programmes. 
Inpoint 1 ofitsactionplanone^aluation^C 14^ 
^0.1.198^p.^the Commission has proposed that the 
ob^ecti^esforeachprogramme be specitied^ preferably in 
a quantitative and ^eriliable form. 
Lheadoptionof the specitic^pear programme should 
also help to produce indicators andamethodology for 
evaluation which would be of valuable assistanceinthe 
detinition and verification of ob^ecti^es. 
^ In 1983 the Council failed to adopt all the 
amendments to this effect proposed by the Commission. Lhedecision^making and consultation process was laid 
downbytheCouncilatthattimeandwasstrengthenedby 
the provisions in the Single Actforin^ol^ing parliament 
moreclosely through the cooperationprocedure. Lhe 
Commissionmustnowad^ustitsmanagementinstrument 
to the new procedures^ this will be done step by step. 
^ Lhe Commission agrees with this general comment 
and will do whatit can to see that the Court is in practice 
gi^en satisfactions with due allowance beingmadefor the 
specific features of each programme. 
^ V^hileitis true that the framework programmemust 
be the subject ofpermanentassessmentmt should also be 
borne inmind that from the outset the implementation of 
the first framework programme came up against the 
budgetary constraints resulting from the tlnancial crisis 
which the Community was having to contend with at the 
time.E^eryyearthis led toadelayinappro^aloftheR.^10 
programmesby the Council, in 198^ the Commission 
already drew the necessary conclusions from the imD 
plementation of the tirst framework programme in 1984 
and early 198^ to proposeanew approach to the Iviilan 
European Council^l98^^ which was tirst reflected in the 
provisions of the single Act d^te 198^ and then 
incorporated in the decision on the second RuMU 
framework programme^l98791^on ^8 September 1987. 
12. 12. 88 Official Journal of the European Communities 287 
CHAPTER 9 
Financial and technical cooperation with non-member States 
REPLIES OF THE COMMISSION 
FINANCIAL AND TECHNICAL 
COOPERATION WITH MEDITERRANEAN 
COUNTRIES 
9.2 - 9.8. As the Court states, operations financed from 
the EIB's own resources are outside the Court's audit 
powers, whereas the Court enjoys full rights over 
operations financed from the Community budget. The 
Commission will urge partner countries in cooperation or 
association agreements to accept practical arrangements 
that allow the Court to exercise this right to make on-the-
spot audit visits. Furthermore, as the Court knows, the 
Commission is continuing its efforts to reach an 
agreement with the EIB on the matter. 
The Commission would also refer to its replies to 
paragraphs 1.38—1.45. 
FINANCIAL AND TECHNICAL AID TO 
LATIN AMERICA AND ASIAN 
COUNTRIES (ECUADOR, PERU AND 
BOLIVIA) 
9.13 and 9.71. The Commission agrees with the Court 
that it is difficult for the Caracas delegation to supervise 
Community aid to Ecuador, Peru and Bolivia because of 
the distances involved and the small staff. A recent 
communication from the Commission to the Council 
proposed that Commission offices be opened in the 
Andean area. 
The system of financing and management 
The EEC's own resources 
9.14. The Commission is aware that the department 
responsible for managing aid to Latin America and Asian developing countries is short-staffed. Measures have been 
taken to remedy the situation gradually. 
The recipient countries' contribution 
9.21 and 9.23. It is true that there are difficulties with 
the Majes projects in Peru and the rural micro-project 
programmes in Bolivia but the issues are complex. 
In most cases technical assistance is readily accepted by 
the political/administrative fabric of the recipient 
country. Even in the two cases referred to by the Court the 
difficulties encountered cannot be blamed entirely on the 
technical assistance. In both cases the technical assistance 
teams did their best to overcome these problems. 
9.22. The Commission accepts the Court's criticism. In 
conjunction with the Peruvian Government it has taken 
the necessary steps to remedy the situation. 
9.23. The institutional problem with the programme 
carried out in the administrative region of La Paz, 
Bolivia, has been settled by the government, which has 
placed the corporation under the supervision of the 
Planning Ministry for the execution of this programme. 
9.26. Financing agreements and the relevant technical 
assistance contracts specify the tasks and responsibilities 
of the technical assistance teams and the operational 
mechanisms and organizational structures. The Commis­
sion none the less intends to provide more details of these 
aspects of cooperation in the framework agreements that 
it is planning to negotiate progressively with the main 
recipient countries or organizations. 
288 Official Journal of the European Communities 12. 12. 88 
The international development banks Delays due to Community decisions 
9.30. Responsibility for the failure of the Ulla-Ulla 
project lies mainly with the World Bank, the major co-
financer (90 % of total external financing) and also the 
'administrator' of the Community's financial contri­
bution. The recipient country, like the World Bank itself, 
is aware of this responsibility. 9.59. The Commission agrees with the Court's analysis 
of the technical situation and difficulties described. It 
would, however, point out that the decision to suspend 
aid to Bolivia was taken for political reasons. 
Delays attributable to administrative and banking 
circuits 
Joint financing with the Member States 
9.32. In many cases, and particularly during the first 
years of this type of aid, the Community financed 
operations or projects with majority co-financing par­
tners who assumed responsibility for managing the 
Community's financial contribution (administration 
agreements). In the case referred to by the Court (KfW), 
the partner is a Member State. Although the Commission 
should have monitored the situation more closely and 
although it did not receive progress reports as regularly as 
expected, the joint fmancer, as the Court itself states has 
managed the project efficiently and with due concern for 
the Community's interests. 9.60-9.65. The Commission set up an interdepart­
mental working party which, in the light of the Court's 
comments and other information, examined in depth 
ways of improving the execution of development 
operations. The working party has put forward concrete 
proposals designed to: 
simplify the organizational and management struc­
ture of projects; 
improve payment arrangements for contracts; 
speed up procedures in banking circuits; 
promote the use of the ECU wherever possible; 
The choice and implementation of the projects ensure that procedures regarding internal and 
external payment circuits are as efficient as possible, 
with both recipients and managing departments being 
kept informed at all stages. 
The delays in carrying out the projects Dealing with monetary problems 
9.57. As regards the two new structures, which did not 
alter the total amount provided under the financing 
agreement, it should be borne in mind that the spirit of the 
Commission's decision was to contribute to the rebuild­
ing of communications infrastructure following a natural 
disaster (flooding). 9.67 - 9.69. The loss of value of Community subsidies is 
a complex and tricky issue. The Commission takes great 
pains to deal with this type of difficulty. Although the 
financial mechanisms are negotiated — and re-negotiated 
if the situation changes — in the case of exchange rates, it 
must be stressed that the countries themselves are 
powerless against runaway inflation, as was the case in 
Bolivia, and it is precisely then that they most need 
Community support. 
9.58. The changes to the financing agreement were 
accepted because they were a positive attempt to match 
aid to the real needs of the recipient country. It had been 
found that the Community, without overstepping the 
amount originally planned (the contingency reserve 
included), could best help Bolivia by financing special 
machinery which could be used to rebuild several bridges, 
rather than by financing the reconstruction of a single 
bridge as initially planned (the bridge has in fact been 
rebuilt with Bolivian funds). Final observation concerning the three Andean 
countries 
9.70. The Commission takes note of the Court's 
comments and is glad that its overall assessment of the 
results of financial and technical cooperation with the 
Andean countries is positive. 
12. 12. 88 Official Journal of the European Communities 289 
CHAPTER 10 
Staff and operational expenditure 
REPLIES OF THE PARLIAMENT 
STAFF EXPENDITURE 
Invalidity pensions in the institutions 
General comments 
10.39 Parliament shares the Court's analysis of the 
causes of the phenomenon described in paragraphs 10.24 
to 10.36 although the figures for Parliament are 
considerably better than for the institutions as a whole. 
At the end of 1987 the Medical Service introduced a 
system of systematic examinations every two years of 
officials retired from the service on the grounds of 
invalidity to check whether their retirement was still 
justified on medical grounds. 
In order to remedy the various anomalies noted by the 
Court of Auditors in this area, the European Parliament 
has applied the following measures: 
(a) closer monitoring by the Medical Service of absentee­
ism on medical grounds, 
(b) more flexible procedures for reassigning or reclassify­
ing officials or other members of staff when their state 
of health so requires. Parliament is prepared to participate, within the frame­
work of interinstitutional cooperation, in a detailed study 
of the need for changes in the existing system. 
OPERATIONAL EXPENDITURE 
Expenditure on office accommodation by the 
institutions 
Development of the institutions' accommodation policy 
10.43 - 10.49. For obvious political and legal reasons 
linked to the Member States' failure to decide on a single 
seat for the European Parliament, the EP's accommod­
ation policy in its three places of work is to rent premises 
despite the fact that Parliament would, in principle, be in 
favour of buying buildings. 
The location of the premises occupied in Brussels is 
determined by the urban planning policy of the local 
authorities over which the institutions have no control. In 
Luxembourg, there is a policy of interinstitutional 
cooperation and negotiations with the Luxembourg 
Government to harmonize leases. 
The comparison between the rents of the Court of Justice 
building in 1973 and the BAK III building in 1987 should 
be expressed in constant rather than in current terms; if 
290 Official Journal of the European Communities 12. 12. 88 
monetary erosion (Official index of the Luxembourg 
department of statistics and economic studies and the 
variation in the ECU/LFR exchange rate) is taken into 
account the two figures for the reference period (1973-87) 
are very close. 
Terms of leases 
10.50-10.51. In Brussels, a coordinated approach by 
the institutions to the owners/lessors would be no 
advantage unless the latter negotiated as a single body. 
However this is not the case, for example all the buildings 
occupied by the European Parliament in Brussels have 
different owners (Belliard, Eastman, Remard, Re-
morqueur, Ardenne). 
In Luxembourg, interinstitutional cooperation has been 
set in motion at the initiative of the European Parliament 
with a view to the renegotiation of leases. The European 
Parliament regrets the lack of progress made by the two 
working parties (composed of representatives of the EP 
and the Luxembourg authorities) responsible for looking 
into matters relating to the European Parliament's 
buildings in Luxembourg. 
Indexing of rents 
10.52 -10.55. The European Parliament shares the 
Court's view that any periodic adjustment in rent should 
be negotiated and that automatic indexation should be 
avoided. 
EXPENDITURE ON STAFF 
Management of staff salaries 
Overtime payments 
10.4 -10.9. The pace of activities at the General 
Secretariat of the Council is such that it is virtually Payments of national taxes 
10.56 - 10.58. In the past, coordinated action has not 
resulted in non-payment of property tax. Parliament will 
continue its efforts to persuade the institutions to adopt 
the approach suggested. 
Utilization of appropriations for the payment of rents 
(Article 200 of the budget) 
10.59-10.61. The observations made in paragraphs 
10.59- 10.61 are not relevant to the European Parlia­
ment. 
Conclusions 
Coordination 
10.71 - 10.72. The European Parliament recognizes the 
need for greater interinstitutional coordination and has 
embarked upon such an approach in Luxembourg (see 
answer to paragraphs 10.50- 10.51 above). 
Budgetary approach 
10.77. The European Parliament fully endorses the 
arguments put forward by the Court. 
impossible to make equally rapid use of entitlement to 
compensation obtained as a result of overtime, a situation 
which has resulted in a high number of compensation 
claims in the form of payments and a high number of 
accumulated compensation entitlements. 
In order to cope with the situation referred to by the 
Court of Auditors, systems have been set up at individual 
level to check whether any thresholds are being exceeded. 
This has already borne fruit. Thus, a system of strict 
checks on any overruns of the statutory limit of 150 hours 
of overtime over a period of six months has been 
successfully introduced. REPLIES OF THE COUNCIL 
12. 12. 88 Official Journal of the European Communities 291 
The particularly high individual figures of stored-up 
compensatory leave claims referred to in the Court of 
Auditors' report are being given special attention by the 
administration, which is endeavouring to reduce the 
impact of this situation. 
Under the internal rules, 'time off for health reasons' 
should obviously be taken the day after overtime except in 
exceptional circumstances. In practice, it may happen 
that 'time off for health reasons' cannot be taken 
immediately after particularly busy Council sessions or 
during European Summits and that use of this right may 
have to be postponed. 
In view of the pace of work in the Council's subsidiary 
bodies, the General Secretariat of the Council has not 
deemed it necessary to amend existing internal rules. 
Three-quarters-time work 
10.10. In line with other institutions, the General 
Secretariat of the Council considered it to be compatible 
with the interests of the service to introduce arrangements 
for three-quarters-time work for those of its staff who 
have family commitments. Experience shows that all 
those who take advantage of these arrangements have 
young children. 
Taxation of overtime payments 
10.23. In line with practice at the other institutions (e.g. 
the Commission) the Council considered it advisable to 
adapt the procedure for calculating tax in the same 
manner, i.e. by applying to overtime payments the rate 
applied during the month in which the overtime was 
worked. 
Invalidity pensions in the institutions 
10.24 - 10.40. The General Secretariat of the Council, 
with the other institutions, is looking into the problem of 
invalidity pensions. OPERATIONAL EXPENDITURE 
Expenditure on office accommodation by the 
institutions (points 10.41-10.77) 
10.49. The average price per m2 indicated by the Court 
was arrived at by dividing the total expenditure recorded 
in Article 200 of the budget by the number of m2 
occupied. It should be noted, however, that over and 
above rent proper the appropriations in this Article cover 
further expenditure, such as property tax, annual 
payments for fitting-out, and rental by the day of meeting 
rooms and other accommodation. 
Taking as a basis the amounts paid in 1987 for rental of 
office space (111.900 m2) and basic rent (8,6 Mio ECU) 
alone, the rent paid for the buildings occupied by the 
Council is 77,0 ECU/m2. 
10.50. As regards coordination by the institutions on 
lease policy, it should be noted that, in the case of the 
General Secretariat of the Council, obtaining an addi­
tional building constitutes an isolated action ('Char­
lemagne' 1972, 'Joseph IF 1975, 'Nerviens' 1981, 'Orban' 
1986). 
In the case of the above accommodation, the General 
Secretariat of the Council each time contacted the other 
Brussels-based institutions to seek information on the 
market situation and to avoid overbidding on property 
for which there were several takers. 
10.56 - 10.58. For its buildings in Brussels, the Council 
does indeed refund to owners the property tax which they 
owe to the Belgion State. However, it should be noted that 
these owners are private companies which, under Belgian 
law, cannot be exempted from property tax, even if their 
buildings are intended for the exclusive use of institutions 
of the European Community. 
If the Secretariat, when negotiating the lease for any one 
of its buildings, had asked for the property tax not to be 
charged to the lessee, the owner would certainly have 
increased the normal rent by an equivalent amount. 
It is known that the matter of property tax has already 
been raised on various occasions with the Belgian 
authorities, both by the Council individually and by 
means of the coordinated action of all the Brussels-based 
institutions. 
292 Official Journal of the European Communities 12. 12. 88 
10.61. (a) As regards the over-estimation of rents, it 
should be noted that the appreciable drop in inflation 
over recent years in Belgium has resulted in the 
appropriations requested being higher than the actual 
requirements. As for the Council, the transfer of 
appropriations made in 1987 from Article 200 rep­
resented only 4 % of the original appropriation. 
(b) As far as the Council is concerned, when it is decided 
to increase the appropriations in Article 200 in order to 
enable an additional building to be rented, it is not at that 
point possible to estimate the cost of the fitting-out 
necessary to make a building suitable for the institution's 
requirements. 
Thus, as regards the General Secretariat, the work on 
fitting out a building forms part of the overall negoti­
ations on the terms for the rental of the building. 
These negotiations usually lead to a compromise whereby 
the owner covers part of the cost of fitting out while a 
form of reimbursement is negotiated for the remainder of 
the investments. 
It should be noted that the duration of these reimburse­
ments never exceeds the term of the lease. 
REPLIES OF THE 
EXPENDITURE ON STAFF 
Invalidity pensions in the institutions 
Statistics on invalidity pensions paid by the European 
institutions 
10.24 - 10.26 and 10.28. Like the Court, the Commis­
sion is conscious of the recent increase in the number of 
staff invalided out. Hence its intention to introduce a 
stricter monitoring system to ensure that both adminis­
trative and medical departments keep a closer watch on Observations concerning expenditure on 
meetings (points 10.78- 10.84) 
10.83. Article VII of the rules in force at the Council 
stipulates that the statements submitted by Governments 
concerning the reimbursement of the travel expenses of 
their officials need not be accompanied by the usual 
supporting documents (wagon-lit or TEE supplements 
and airline tickets). 
This requirement would entail the General Secretariat of 
the Council's keeping a check on national civil servants 
responsible for submitting requests. 
10.84. Double refunds should be ruled out for the 
following reasons: 
— the Council pays the refunds of the travel expenses 
incurred by the bulk of Member States' delegates into 
the accounts of the various ministries concerned; if all 
the institutions were to apply this system, the risk of a 
double refund would be nil; 
— delegates visiting the Council sign 'on their honour' a 
form stating that they have not applied to another 
authority or any institution or body of the European 
Communities for a refund of their travel expenses. 
The General Secretariat of the Council is prepared, 
however, to consider this issue afresh. 
COMMISSION 
all cases which might end in decisions to retire the persons 
concerned on grounds of invalidity. 
The general increase observed by the Court in the number 
of staff invalided out and in the corresponding expendi­
ture since 1983 is partly the result of the ageing and 
deterioration in health of certain officials who took up 
employment with the institutions 30 years ago and are 
consequently approaching the end of their career. 
10.27. The much higher number of retirements on 
grounds of invalidity in categories C and D is due to the 
fact that these two categories include staff whose 
12. 12. 88 Official Journal of the European Communities 293 
pathology is partly the result of their physical activity 
(laboratory technicians, laboratory attendants, certain 
drivers, transport and handling staff, and certain 
shorthand typists). 
10.29. The institutions apply the procedural rules laid 
down in the Staff Regulations and no invalidity decision 
is taken without the Invalidity Committee being con­
sulted. It should be remembered that different doctors sit 
on the Committee for every case, as each institution and 
each place of employment has its own representative, 
while the second doctor is chosen by the official 
concerned and the third one is appointed by agreement 
between the first two. The resulting objectivity guarantees 
that the procedure works properly. 
Comparative statistics 
10.30. It is difficult to compare the European insti­
tutions and the coordinated organizations, mainly 
because the conditions of employment are very different: 
the Community staff is made up virtually entirely of 
established officials whereas the other organizations, 
such as OECD, NATO and WEU, employ only a small 
core of established officials and a very high number of 
contract staff. 
10.31. Comparison with the private sector is also 
difficult because the working environment of European 
civil servants is totally different from that of private sector 
employees engaged in a specific occupation; European 
civil servants are also subject to specific constraints which 
do not affect national civil servants. 
The pension schemes of the European institutions and of 
the coordinated organizations 
10.32 -10.33. As the pension scheme and the joint 
sickness insurance scheme of the European institutions 
operate independently from those of the Member States it 
is difficult to imagine other social security organizations 
providing financial or medical support for Community 
officials during the period of sickness termed by the Court 
' a period of temporary inability to work'. 
However, since each case has to be examined in a special 
and quite specific context, it would seem unwise to be 
bound by a minimum invalidity percentage as defined by 
certain national schemes as their rigidity does not always make it possible to achieve the aim laid down by the Staff 
Regulations, namely establishing that total permanent 
invalidity exists. 
10.35. The Commission is familiar with the restrictions 
imposed by other organizations on recipients of an 
invalidity pension who are engaged in gainful employ­
ment elsewhere. It is planning to conduct a comprehen­
sive study of this issue together with the other institutions. 
10.36. Checks on whether beneficiaries continue to 
satisfy the requirements for payment of the invalidity 
pension are carried out by the Commission. 
OPERATIONAL EXPENDITURE 
Expenditure on office accommodation by the 
institutions 
Development of the institutions' accommodation policy 
10.43. The comment made by the Court is totally 
relevant in the case of the Commission, where the annual 
increase in staff numbers, combined with the large 
number of experts, national civil servants on secondment 
and contract staff, has produced a sharp increase in 
requirements. 
10.45. The Commission would point out that it has been 
operating a building policy for some time now: 120 Loi 
has been completed, the Breydel building is under 
construction (the Commission owns both) and pre­
paratory work has started on the Orban complex with a 
view to purchase with payment by instalments and/or a 
long lease. 
10.46 -10.47. The Commission would point to the 
proposal it made to the Council in 1982, during the 
discussions on the 120 Loi building, to create a 
multiannual investment budget; the Council failed to 
take up this proposal and earmarked an overall allocation 
for the 120 Loi project instead. 
The Commission consequently proposed special finan­
cing arrangements, which the budgetary authority 
adopted. 
294 Official Journal of the European Communities 12. 12. 88 
Terms of leases Payment of national taxes 
10.50. It must be pointed out that surface area is only 
one of the factors involved when it comes to fixing rent; 
other factors, such as a shortage of the type of 
accommodation required and the need for office concen­
tration, also have to be taken into account. 10.56 - 10.58 and 10.75. Property tax is a direct tax 
payable by the property owner. It may by agreement be 
passed on to the tenant but it should be pointd out that 
where the owner passes on the property tax to the 
Commission, either by incorporation in the rent, or by a 
specific clause in the lease, the Commission is not eligible 
for tax exemption. This is because only the owner has any 
liability vis-a-vis the tax authorities and, once the 
payment in question is transferred to the tenant, in 
whatever form, it is no longer a tax. 
10.51. The Court's comment has been acted on in that, 
where building alterations are carried out and paid for by 
the owner, the Commission works out a financial 
package, which is financed separately, usually at an 
annual rate, with equal annual repayments, which are not 
indexed. By contrast, the Commission as owner does qualify for 
exemption. 
In any event, the fact that it will have to pay property tax 
is taken into account by the Commission when it 
negotiates rents. 
As for the buildings themselves and the return on the 
investment, the Court's argument is valid only where the 
building being invested in is specifically for Commission 
use, as in the case of the Borschette Conference Centre. 
The value of property investments also depends on other 
factors including the market situation, the versatility of 
the building, the technical facilities offered, and location. 
When leases come up for renewal, the Commission 
attempts to obtain either reductions in rent or large-scale 
investment in the form of renovation. Utilization of appropriations for the payment of rents 
(Article 200 of the budget) 
10.59. The Commission would point out that staff 
increases necessitated by the latest enlargement and by 
the new policies resulting from recent European summits 
have had a major impact on the budget heading in 
question (Article 200 of the administrative budget) and 
make it difficult to produce more accurate forecasts. 
Indexing can also play havoc with forecasts. 
Indexation of rents 10.61. (a) The Commission would point out that, as far 
as it is concerned, the transfers referred to by the Court 
amounted to 3,4 Mio ECU in 1985 and 2,9 Mio ECU in 
1986 and that in 1987 Article 200 in fact needed an 
additional 219 000 ECU. 
10.52-10.53. There are rules governing the indexing of 
rents. Moreover, where an investment — in the form of 
improvements, purchase, etc. — is financed via the rent, 
no indexation is applied. Indexing would in fact amount 
to applying another interest rate (see paragraph 10.51). (b) When a building is first rented, it is normal practice 
to charge the initial fitting-out, designed to make it 
habitable, to Article 200 (Rents). Article 204 is for routine 
work only. 
Purchases 
10.55. Leases are usually concluded for a period of 
three, six or nine years, which means that rents can be 
readjusted every three years. This restriction in the 
duration of leases provides an opportunity to renegotiate, 
but constraints such as the situation on the property 
market and the administrative cost of removals have to be 
taken into account. Council Decision of 14 December 1981 
10.62 - 10.66. Producing an accommodation plan for a 
period of at least five years for all the institutions, to be 
covered by a multiannual budget, could be an efficient 
way of resolving the problems highlighted by the Court. 
12. 12. 88 Official Journal of the European Communities 295 
The Commission would make it clear that the advance 
payments connected with the construction of the 120 Loi 
building referred to by the Court in paragraph 10.65 were 
to cover preliminary studies carried out by subcontrac­
tors. 
Conclusions 
Coordination and technical and legal standards 
10.71 -10.75. The Interinstitutional Committee on 
Accommodation Policy produced valuable reports for 
Parliament. 
As the accommodation situation varies from one 
institution to another, standardized management would 
not necessarily be in the best interests of the Community. 
However, it would be worthwhile reactivating interinsti­
tutional cooperation, particularly to deal with standards, 
market research and preparatory budget work. 
In the case of Luxembourg, the institutions have decided 
to make a concerted approach to the authorities in an 
attempt to rationalize accommodation policy. The lead 
role is taken by Parliament's Secretary-General, who is 
striving to introduce: 
— a standard model lease; and 
— an average rent per m2, reflecting various factors 
including depreciation and indexation. 
It has been agreed that, as soon as the preliminary 
conclusions are available, Parliament's Secretary-Gen­
eral will contact his colleagues in Luxembourg to enable 
each of the institutions to assess the implications for itself. 
Justification of expenditure on rent 
10.76. See the reply to paragraph 10.45. 
Budgetary approach 
10.77. The Commission would refer back to its reply to 
paragraph 10.46 and 10.47 where it recalled its 1982 proposal to the Council for the creation of a multiannual 
investment budget, a proposal which the Council has 
failed to take up. 
Observations concerning expenditure on 
meetings 
Committees and working parties 
10.85 - 10.86. An interdepartmental working party has 
been set up to examine the problems associated with 
committees. 
One of the decisions taken has been not to set up any more 
committees of officials eligible for daily subsistence 
allowance. Derogations are systematically refused, except 
in exceptional circumstance. 
'APEX' data-processing package 
10.87 - 10.88. This package represents a significant step 
forward in payments management. 
In response to the comment on insufficient program 
documentation, the Commission would stress that 
'APEX' has been developed in a third-generation 
language, which is easy to understand and to modify. 
Each function in the system is documented. A guide, 
which is in the process of preparation, will include a 
program flow chart and a description of how the system 
operates. 
All the data recorded by 'APEX' are verified. Distances 
and maximum travel expenses are checked manually. 
There are no plans to make the input system more 
cumbersome by introducing additional checks as the data 
concerned do not constitute bases for calculation but 
simply indicative values. 
Reimbursement of expenses 
10.89 - 10.90. On the question of the reimbursement of 
expenses, the rule for calculating travel time incorporates 
three objective criteria: distance, method of transport 
used, and duration of journey. As regards air fares and 
supporting documents, new rules are being studied. 
Proposed amendments include lowering maximum rates 
and encouraging the use of reduced fare offers. 
296 Official Journal of the European Communities 12. 12. 88 
A guide to internal procedures currently being produced 
will specify the duties of meetings' secretaries and provide 
them with useful information on their work in relation 
both to their Directorate-General and to the adminis­
tration. 
Financial contribution by the Commission to a 
television channel 
10.106. (a) Although the Pan European Consortium 
does not have legal status, the Commission felt that the 
broadcasting organizations concerned offered maximum 
guarantees regarding their financial situation (l). How­
ever, the Europa-TV project was experimental in nature 
and depended for its survival on the determination of the 
Consortium's members to commit themselves to an 
initiative whose financial implications could not be 
accurately estimated 
The real reason for the suspension of Europa-TV s 
activities was the failure by the other members of the 
Consortium to agree to cover the expenditure on 
programme production incurred by the Dutch channel 
(NOS), which provided the operational infrastructure for 
Europa-TV. Afraid that it might have to bear the 
financial costs of the project on its own, NOS withdrew 
from the operation. 
It was consequently the operating flaws in the Con­
sortium's internal machinery which resulted in the 
suspension of the Europa-TV service. The Commission 
for its part could not have foreseen that such an obstacle 
would arise. 
(b) The absence of a detailed budget and a detailed 
programme criticized by the Court reflects the experi­
mental nature of the operation, which did not slot into the 
normal works or supply contract framework. 
(c) The obligations referred to by the Court could not 
be imposed as the operation had been suspended. 
(d) The contribution was for 1986 only (see Article 1 of 
the Agreement). However, payment was not made to the 
Consortium until late October of that year. The delay in 
signing the Agreement meant that the initial percentage 
paid by the Commission was higher than normal. 
0) The footnotes are listed together at the end of the chapter. In future the Commission will look into whether it should 
demand a security when it concludes agreements of this 
kind, still bearing in mind the special nature of such 
operations. As stated above the Commission has taken 
steps to recover the payments made; part of the amount 
involved is in the process of being recovered. 
EUROPEAN SCHOOLS 
10.109. The Commission is aware of the fact that its 
powers in respect of the European Schools are not 
commensurate with its budgetary liabilities. It is looking 
into ways of remedying this by modifying the intergovern­
mental system which has governed the Schools since 1957. 
10.110. The new Financial Regulation for the European 
Schools, which was adopted on 18 October 1988, provides 
a solution to points (c), (d), (e) and (f) along the lines 
wanted by the Court. The Commission will look into the 
use being made by the Munich School of the special levy 
referred to in point 10.110(g). 
10.111. The Commission has taken note of the Court's 
suggestion on the longer-term reform of the financial 
administration of the European Schools. 
10.113 - 10.114. The Commission plans to start negoti­
ations with the European Patent Office and the Board of 
Governors on the question of its contribution to the 
financing of the Munich School. 
10.116 - 10.118. See the reply to paragraph 10.110(g). 
10.119. The Commission has never accepted the 
unilateral decision by Belgium incorporated in the 
Belgian Royal Decree of 24 October 1986. On 4 January 
1988, after an unsuccessful attempt to persuade the 
Belgian authorities to retract, the Commission issued a 
letter of formal notice under Article 169 of the Treaty; 
this was followed on 7 July by a reasoned opinion. The 
Board of Governors has since decided that any severance 
grants payable to Belgian teachers are to be calculated on 
the basis of a full national salary. 
10.120. The amendments to the Statute of the European 
Schools currently being examined by the Commission 
include changes to the decision-making process designed 
to make it more efficient. 
10.121. Drawing on its experience the Commission 
makes every effort to use its presence on the various 
School committees to promote the necessary reforms 
along the lines wanted by the Court. 
12. 12. 88 Official Journal of the European Communities 297 
REPLIES OF THE COURT OF JUSTICE 
STAFF EXPENDITURE 
Management of staff salaries 
Division of responsibilities 
10.11-10.12. At the Court of Justice the person 
responsible for the Finance Division, who is at the same 
time the institution's Accounting Officer, is in no case an 
Authorizing Officer. 
The Court of Justice considers that the present division of 
responsibilities between the Personnel Division and the 
Finance Division complies with the principle of separ­
ation of functions between the Accounting Officer and 
the Authorizing Officer and constitutes at present the 
most efficient way of organizing the work of the 
departments concerned having regard to the constraints 
imposed by the modest size of the Court's administrative 
structure. However, depending on the results which are 
obtained following the planned computerization of the 
management of personal files, the Court might envisage a 
review of the division of responsibilities. 
Preparation of pay 
10.13-10.14. In view of its limited staff the Court's 
Personnel Division can at present only carry out each 
month an effective sample check on inputs into the 
salaries files. However, preparations are being made in 
cooperation with other Community institutions for the 
computerized management of personal files. This should 
allow a solution to be found to problems concerning the 
systematic control of inputs into the salaries files and 
access of the Personnel Division to data by means of a 
terminal. 
Tax on overtime payments 
10.23. The Court uses the Council's computer program 
for the calculation of salaries including tax on overtime payments. The Court will adopt any amendments which 
are made to that program in order to give effect to the 
observations of the Court of Auditors. 
OPERATING EXPENDITURE 
Expenditure of the institutions on immovable 
property and rental of buildings 
10.41 - 10.77. The Court of Justice is participating in 
the interinstitutional cooperation in Luxembourg in the 
matter of harmonization of tenancies and policy on 
immovable property. It will endeavour in the framework 
of its rent negotiations to ensure that account is taken of 
the cost of the investment and its amortization. 
Observations concerning expenditure on 
meetings 
10.91 - 10.92. The appropriations in Articles 250 and 
255 are intended to promote the spread of knowledge of 
Community law, in particular the Court's case-law and 
the functioning of the preliminary ruling procedure, 
which is an essential instrument for the effective 
implementation of Community rules in the national legal 
orders. This is achieved firstly by means of study visits 
and meetings organized at regular intervals in co­
operation with the Ministers for Justice of the Member 
States and secondly by means of individual visits or visits 
of groups of judges of all levels. In the latter case it is 
difficult to harmonize completely the practice followed 
with regard to the reimbursement of expenses, having 
regard to the considerable differences in the situation and 
origin of the persons invited. However, the Court is 
endeavouring to harmonize as far as possible its practice 
in this area. It will, where practically possible, arrange for 
tickets to be made available directly rather than pay 
advances. Moreover, the necessary measures will be 
adopted to ensure observance of Article 32 of the 
Financial Regulation. 
298 Official Journal of the European Communities 12. 12. 88 
REPLIES OF THE ECONOMIC AND SOCIAL COMMITTEE 
STAFF EXPENDITURE Taxation of overtime 
Administration of staff remuneration 
Preparation of payment 
10.16. The ESC has two separate programs, one for 
salaries and the other for personnel management. These 
two programs do not automatically communicate, but the 
'salary' operator has access to 'management' data and can 
incorporate them in his program; in practice, however, 
this option is no longer used. 
10.17. The checking procedure proposed by the Court is 
not used at the ESC because of a lack of staff. As soon as 
staff are available, the ESC will ensure that this procedure 
is applied. 
Procedure for payments 
10.18 - 10.19. For the 1988 financial year commitment 
orders were drawn up before salaries were paid. 
Lack of a two-way flow of information 
10.20. The new computerized accounting system will 
give the Authorizing Officers, the Financial Controller 
and the Accounting Officer direct access to all accounting 
data. 
Advances to staff 
10.21. Advances under Article 76 of the Staff Regu­
lations are now paid in accordance with the conditions 
laid down in the Staff Regulations. 10.23. The ESC has now begun to calculate tax on 
overtime payments at the rate which was applied to the 
slice of the official's remuneration that attracted the 
highest rate of tax during the month preceding that of 
payment. 
OPERATING EXPENDITURE 
Immovable property 
10.41 - 10.77. The Committee acknowledges the need 
to coordinate policy on office accommodation between 
the various institutions. Given the expansion of its 
activities and, consequently of its staff, the Committee is 
currently assessing the possibilities for adapting its 
premises. The Committee will of course take account of 
the conclusions contained in the Court's report. 
Comments on the expenditure on formal and 
other meetings 
Verification of participation in meetings 
10.95. The Committee is currently examining the 
possibility of requiring members and experts to sign 
attendance sheets similar to those used by other 
assemblies, inter alia, the European Parliament. 
Allowances for travelling time and meeting days 
10.22. The advance payments on salaries were granted 
in certain cases of force majeure. 10.96 - 10.97. This is a matter of interpretation of the 
'Rules for the refund of transport expenses and the 
12. 12. 88 Official Journal of the European Communities 299 
payment of allowances for attending meetings and for 
travelling time', and in particular of Article 4 (g) thereof. 
Travelling-time allowances, paid in addition to meeting 
day allowances, are not based on the number of days 
actually required for the journey, but solely on the 
distance between the point of departure and the meeting 
venue (Article 4 (a)). with the current rules, but its administration is compelled 
to apply these arrangements by the specific requirements 
of a European Consultative Assembly. The problem 
referred to under 10.99 (a) could be solved by introducing 
imprest account arrangements. However, the Committee 
does not have enough staff for this. 
System for the payment of expenses 
10.98 -10.100. The Committee recognizes that ar­
rangements for paying allowances are not strictly in line As regards payment methods and the concern expressed 
in respect of Article 48 of the Financial Regulation, the 
Committee will pursue its efforts to persuade members 
not to insist on payment in cash. 
(') Article 7 of the Consortium's Articles of Association states 
that 'The income of the Consortium shall consist of 
member's direct financial contribution as well as other 
revenue from sources such as advertising, sponsorship, 
programme sales, etc.'. 
300 Official Journal of the European Communities 12. 12. 88 
CHAPTER 11 
Loans, borrowings and interest-rate subsidies 
REPLIES OF THE COMMISSION 
AGREEMENT REGARDING THE 
AUDITING 
OF NCI LOANS IN THE MEMBER STATES 
11.7 - 11.19. The Commission would refer the Court to 
the very detailed replies which it has already given 
concerning the informal 1985 agreement and the general 
question of on-the-spot audits of NCI loans (see the 
Commission's replies to the annual report for 1986, 
paragraphs 14.25- 14.30). 
Following the undertaking given by the President of the 
Commission in a letter to the President of the Court in 
April 1987, the Commission has made numerous efforts 
to find some practical arrangement to reconcile the 
powers of the Court with the concerns of the Bank. 
The Commission's latest proposals on this subject will 
shortly be considered by a working party comprising 
representatives from the Bank and the Commission, 
which is expected to complete the task by the end of 1988. OBSERVATIONS ON LEGALITY 
AND SOUND FINANCIAL MANAGEMENT 
NCI Treasury 
11.27. The Commission welcomes the Court's broadly 
favourable assessment of the new cooperation agreement 
with the EIB regarding the NCI Treasury. As regards the 
more specific observations, the Commission's replies are 
set out below. It has taken note of the Court's suggestions 
and will consider them in consultation with the Bank. 
11.28. The only risk borne by the Commission under the 
new agreement (which applies retroactively to the 
commencement of NCI Treasury operations) is that a 
debtor may default. However, given the status of the 
borrowers and their guarantors, the risk can be con­
sidered practically nil. 
As regards the overall economy of operations, combining 
NCI funds with the Bank's existing treasury provided an 
opportunity to achieve management economies for the 
funds as a whole. However, the relative size of the two 
components means that the advantage gained is substan­
tially greater for the management of EIB funds (which 
constitute the major part of the resources in question) 
than for the management of NCI funds. 
11.29. The Court's fear that interest rates on loans 
might be fixed at an unnecessarily high level must, the 
Commission believes, be viewed in the light of the rule 
12. 12. 88 Official Journal of the European Communities 301 
requiring that the rate for NCI loans is the same as for 
loans granted by the Bank from its own resources. 
11.30. Although the terms of the new agreement are 
more restrictive, in practice the Commission has con­
tinued to make refinancing arrangements for earlier, 
more costly operations, in full cooperation with the Bank. 
The Bank gives its prior approval, as provided for under 
the agreement, in view of the fact that it has taken over 
responsibility for the Treasury and often has to advance 
commissions or redemption premiums not necessarily 
covered by the new financing in exchange for the benefit 
of the cut in the cost of the funds. 
11.31. The Commission can see no need to undertake a 
detailed analysis of its administrative costs for each financial instrument. This would be costly and seems 
unnecessary since the Commission does not perform any 
operations under mandate. 
European Investment Bank management 
commissions 
11.32. In its replies to last year's report the Commission 
promised to raise the Court's request with the Bank again. 
The reply was that the documentation requested remains 
restricted to the Bank's Board of Directors; this does, 
however, include a member, and his alternate, appointed 
by the Commission. The Bank also confirmed that it will 
continue to set its management commissions at a level 
designed simply to cover its costs. 
12. 12. 88 Official Journal of the European Communities 303 
PART II 
European Development Funds 
REPLIES OF THE COMMISSION 
OBSERVATIONS ON THE FINANCIAL 
MANAGEMENT 
Financial implementation of the projects In order to ensure that the price revision will be an 
accurate reflection of real developments, the Commission 
therefore recommends that more than one revision 
formula should be used and that only those parameters 
which have a definite impact on the cost of the works 
should be included; the contractor should also be left to 
bear part of the risk. 
Similarly, the Commission recommends that the recipient 
government should be very careful in its choice of the 
indices on which revisions are based. 
Special conditions of works contracts 
6. The Commission is very much aware of the problems 
concerning the currency of payment of contracts and the 
effects of price fluctuations on contracts during exe­
cution. If there is no indexing arrangement in an ACP country or 
if the country from which the product in question is to be 
imported is not known, the contractor is requested to 
propose a reference price in his tender and provide the 
relevant supporting documents. 
As regards the currency, in which contracts are drawn up 
and paid, Article 48 of the Financial Regulation of the 
Sixth EDF — which has also been applied to contracts 
financed under the fourth and fifth EDFs — lays down 
special provisions for each type of contract in order to 
prevent contractors from making real financial losses or 
gains. It is clear, however, particularly for long-term 
contracts, that price variations during execution can 
upset the balance of the contract, thereby causing gains or 
losses for one or other of the contracting parties. 
Since 1972 the Commission has therefore included price 
revision clauses in its General Conditions for works and 
supply contracts financed by the EDF. 
Detailed comments and updatings on this complex issue 
are contained in the compendium of instructions. The 
Commission's constant concern, as revealed by these 
instructions, is that the application of the price revision 
clauses should not produce windfall profits. 7-9. As regards the 11 contracts which the Court 
claims allow excessive compensation for price revisions 
arising from devaluation, the Commission would stress 
that to date in most of the cases mentioned the 
contractors have not made windfall profits. It cannot 
therefore be said that the Community has suffered 
financially. 
In two cases the price revision formula has not yet been 
applied in respect of work now in progress. For other 
projects, the price revision is applied primarily to the cost 
of local labour and materials purchased locally. 
However, in order to prevent the anomalies highlighted 
by the Court from arising wherever possible, the 
Commission will add a new instruction to delegates that 
when they are handling tender dossiers they must ensure 
that the price revision formulas are based on European 
market prices for the part payable in European currency 
and on local market prices for the part payable in local 
currency. 
304 Official Journal of the European Communities 12. 12. 88 
Commitments and payments 
10. The Commission has the following comments on the 
Court's remarks about compliance with the Financial 
Regulation: 
The instructions for headquarters and delegations 
describe in detail the payment arrangements for contracts 
of all types in order to facilitate the work of clearing and 
authorizing payments. 
In general the Commission has found that procedures are 
applied correctly and that the supporting documents 
submitted with payment applications are reliable (orig­
inals or certified true copies). 
Delegates must keep a register of bank guarantees for 
works contracts and for supply or service contracts so 
that they can monitor them and release them when 
appropriate. 
The Commission can also confirm that although the 
Court's auditors for some reason or other were unable to 
trace the special conditions governing the various 
contracts referred to, they were accessible to the officials 
responsible for commitment and authorization of 
payment. 
It is true that in the case of Burkina Faso out of all the 
many supporting documents for cofinanced projects, 
three provisional statements of account for approxi­
mately 300 000 ECU were missing from the relevant 
payment orders. These documents were at the delegation, 
which had checked them before sending the payment 
orders to the Commission. These payments were there­
fore verified, as were previous payments, by the adviser in 
charge of the project and by the delegate. The supporting 
documents have since been transmitted to the Commis­
sion and may be consulted by the Court. 
As for the payment of 0.2 Mio ECU, the Commission has 
asked the Swaziland delegation for an additional set of 
supporting documents and these too can be consulted by 
the Court. 
11. This paragraph refers to the following cases: 
— Part-payments in excess of those contractually due 
Two of the three cases (Guinea-Bissau and Chad) 
involved part-payments greater than provided for in 
the general conditions. The two contracts in question, one for a study and the other for technical assistance, 
stipulated an initial payment of 50 % on notification 
of the contract, without a bank guarantee. It was not 
therefore an advance of no more than 20 % as laid 
down in the general conditions, but a part-payment 
calculated in light of the fact that when it was paid the 
work would already be well under way. 
In the third case mentioned (regional project in the 
Central African Republic) it is true that a part-
payment higher than contractually due was initially 
paid. The excess amount was, however, deducted 
from the following payment. 
— Crediting imprest accounts (Sudan) 
The arrangements for operating and checking imprest 
accounts are clearly set out in the instructions (1988 
edition) and are sent to the administrators of these 
accounts for application. 
— Contract denominated in a currency other than that 
of the bid (Djiboutan-Ethiopian railway) 
The cost of the contract in ECU does not differ 
appreciably from that established for the adjudi­
cation of tenders. 
— Service contract financed ten months after work had 
started (Guinea) This was the time it took the 
National Authorizing Officer to sign the contract. 
12. While acknowledging the merits of having one 
department keep all the documents relating to a project, 
the Commission would point out that practical dif­
ficulties this would entail for the Commission and the 
delegations. 
The supporting documents are checked to see if they are 
right and correct at the various stages of the procedure — 
clearance, authorization, financial control, payment — in 
accordance with the successive EDF Financial Regu­
lations and with the general and special clauses of the 
contracts, as indicated in the compendium of instruc­
tions, a new edition of which was distributed in the first 
half of 1988. In order to allay the Court's misgivings, the 
Commission will add to its instructions to officials 
responsible for clearance and authorization of payment, 
details of what supporting documents are required. 
12. 12. 88 Official Journal of the European Communities 305 
Accounts 
13. (a) The reason why transactions remain on 
suspense accounts is usually that they cannot be identified 
and related to a project for lack of information. 
At 31 December 1987, four transactions dating from 1982 
were still on suspense accounts, out of several thousand 
entries recorded annually. Two were eventually settled in 
June 1988, the other two are still pending. 
(b) At 31 December 1987 approximately 25 % of the 
amounts outstanding involved VAT to be recovered from 
the Member States. On this point the EDF accounts 
department applies the procedures in force between the 
Commission and the Member States. 
At the end of 1987, 61 % of the total amount to be 
recovered was due from a single firm which went 
bankrupt in 1985. The bank which stood surety refused to 
reimburse the sum paid and the Commission has brought 
an action on behalf of the government of the ACP 
country in question. The case is proceeding. 
The Commission is continuing its efforts to recover the 
other outstanding sums due. 
(c) At the end of 1987, apart from a very limited 
number of contested cases, only a reasonable number of 
entries remained on 'cash in transit' and 'unidentified 
items' accounts, which were virtually all cleared in the 
next four months. 
Bank statements, which are filed regularly and in orderly 
sequence, can be consulted by the Court. 
(d) The Commission will endeavour to improve the 
division of duties within the accountant's department, 
although this will be difficult because the department's 
staff is small. Cash management 
Calls for contributions 
15. In December 1986 notification letters calling for 
1987 contributions were sent to the relevant ministers in 
each Member State. The letters stipulated the due dates 
and the conversion rates for the ECU against national 
currencies. An error in the conversion rate, which was in 
fact pointed out later, was probably the cause of the 
incorrect payments observed by the Court. 
The late payments referred to by the Court occurred 
despite the Commission's repeated reminders to the 
offices of the permanent representatives of the Member 
States in question. 
Treasury accounts 
16. Article 4 of the Financial Regulation applicable to 
the fifth EDF states that the Commission must 'as far as 
possible' distribute its assets amongst the various 
currencies corresponding to the proportion in which the 
currencies of the Member States make up the ECU. The 
corresponding Article 5 of the Financial Regulation 
applicable to the sixth EDF no longer refers to the ECU 
and provides for a distribution of its assets corresponding 
to the proportion in which the Member States contribute 
to the EDF, a requirement which the Commission 
endeavours to comply with. 
In drawing on the Treasury accounts the Commission 
must allow for other constraints, such as the need to pay 
large amounts at very short notice in certain countries. 
The Member States have therefore agreed that the 
proportionality rule should be applied to periods of 
longer than three months to avoid unduly disrupting the 
flow of payments. Consequently, drawings on Treasury 
accounts during 1987 as a whole are Treasury accounts 
during 1987 as a whole are almost identical with the scale 
of contributions. 
Bank accounts in Europe 
(e) The figure of 2 800 000 ECU referred to by the 
Court concerns projects concluded or cancelled during 
1988. 17. The EDF has an ECU account in each Member 
State in order to promote the use of the Community 
currency and to protect itself against the risk of 
306 Official Journal of the European Communities 12. 12. 88 
devaluation. It has an additional account in Belgium and 
Italy for special local reasons and in order to obtain the 
best terms on the money market. 
In France and the United Kingdom the EDF also holds 
national currency accounts which are used to speed up 
contributions to the 36 paying agents' accounts kept in 
French francs and pounds sterling. In the Netherlands 
and the Federal Republic of Germany there were two 
additional accounts in national currency at the end of 
1987. One was closed at the beginning of 1988 and the 
other will be closed in the near future. 
18. The procedure for applying Article 153 of Lome III 
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. 
19. The Commission has conducted a survey among the 
various paying agents in the Community to find out the 
interest rates paid on its bank accounts. The survey 
showed that the rates applied in the Member States vary. 
Subsequently the paying agents have managed to obtain 
the best rates available in each Member State. Since then, 
the Commission ensures that competitive remuneration is 
offered by each bank. 
Stabilization of export earnings 
20. Under Stabex, loss of export earnings is calculated 
on the basis of ACP export values in ECU, in accordance 
with Article 160 of Lome III. 
In 1987 the result of applying the calculation method 
provided for in this Article was to reduce, or even 
eliminate altogether, transfers to all the ACP States, with 
the notable exception of the franc area countries. This 
can, of course, be put down to the depreciation of the 
dollar (the method was adopted precisely because some 
ACP countries wanted a hedge against the dollar's 
appreciation) but also, and above all, to the fact that 
many ACP countries have devalued and still devalue their 
currencies radically. 
21. The rules on the use of Stabex transfers are much 
stricter under Lome III than in the past and the 
Commission tends to interpret them to the letter. The options open to the ACP States include: 
— the use of Stabex transfers as contributions by the 
ACP States to development projects financed by the 
Commission and/or other donors; 
transfers to bodies such as marketing boards which 
are designed to guarantee purchase prices (and 
incomes) for producers; 
participation by the Commission, through the 
delegations, in defining ad hoc measures. This 
participation can range from prior consultations to 
regular monitoring of expenditure, primarily through 
special accounts to which the delegations have one of 
the 'keys'. 
One of the special solutions adopted was to pay the 
transfer direct to the suppliers, as in the case of Sao Tome. 
This practice cannot, however, be made the norm, since, 
contrary to the Court's opinion it does not offer any 
major advantages over other solutions and it entails 
administrative complications. 
OBSERVATIONS ON THE MICRO-
PROJECTS 
Legal basis and implementing directives 
The role of the Commission delegate 
31. Programmes were initially subject to a normal prior 
consultation procedure by the EDF Committee. Since 
1978 they have been approved by accelerated procedure 
by the Chief Authorizing Officer of the EDF with the 
opinion of the Commission delegate and at the request of 
the recipient State, after approval by the Commission of 
an overall commitment authorization already endorsed 
by the Committee. 
When a programme has already been approved in 
Brussels, the delegate is authorized to reach agreement 
with the local authorities direct on each project to be 
financed. 
12. 12. 88 Official Journal of the European Communities 307 
Appraisal of the micro-projects 
Devolution of the procedure for approving projects 
33-37. Lome III provides even greater scope for 
devolution and decentralization of procedures, since after 
approval by the Chief Authorizing Officer it is the ACP 
State which, as it receives projects from the local 
authorities, takes the corresponding individual financing 
decisions and submits them to the Commission delegate 
for agreement. Departmental instructions are very clear 
on this score and only in cases of doubt should 
clarification need to be sought from DG VIII in Brussels. 
The wording of Lome III with regard to micro-projects is 
more general and felxible precisely in an attempt to 
increase adaptibility to any situation. Programmes need 
no longer be annual and can thus span a longer period. 
Two- three- and four-year programmes have been 
approved under the sixth EDF (see paragraph 37). 
34-36. The Court's comments concern special situ­
ations which the delegates thought should be referred to 
Brussels. 
37. The remarks refer to the previous occasional 
practice in Swaziland (under Lome II) of submitting 
single micro-projects on a piecemeal basis for commit­
ment. This procedure created additional administrative 
work. However, the Commission accepted this extra 
burden only on a temporary basis, pending the establish­
ment of a proper multiannual programme. Such a 
programme has now been established under Lome III 
(3 Mio ECU), including a technical assistance component 
to ensure smooth implementation (over four years), 
training and guidance of the local administration. 
The existence of a real priority need at local level 
38. The Court's comment refers to examples which are 
dealt with in the following paragraphs. 
39. The Cote d'lvoire micro-project programme finan­
ced under the fourth EDF was primarily a social 
programme. The programmes financed under the fifth 
EDF mainly involved local communities in the produc­
tion sectors. The micro-projects to be financed under the sixth EDF will have to comply with the guidelines of the 
indicative programme. The Court's comment therefore 
no longer applies to present practices. 
Since 1983 the delegation in Madagascar has taken great 
pains to get the government to present dossiers for each 
individual project, which it now does. 
40 - 42 and 56. An essential factor in approving and of 
course assessing the suitability of a micro-project is 
whether the initiative was taken by the local community. 
This depends largely on how well informed the local 
people are and on their ability to identify their needs and 
to formulate the request to the government of the 
recipient ACP State. The NGOs which work on the spot 
also play an important role in this area. Furthermore, two 
of the main tasks of the independent central management 
department which the Commission wants to set up in each 
country to promote, coordinate and make use of micro-
projects, are to inform the local community of the 
possibilities offered by the programme and to provide 
assistance in drawing up requests. 
If micro-projects are to work, it is vital that the recipient 
communities be well-organized, their representatives be 
trained and assistance be provided during implemen­
tation. These are therefore also some of the tasks to be 
carried out by the central management department. 
41. It is true that in Togo some of the operations under 
the fifth EDF micro-project programme did not really 
correspond to the needs of the recipient population — for 
example some of the food warehouses. The Togolese 
Government has, however, decided by common accord 
with the Commission to lay particular emphasis on the 
'response to a priority need on the part of the local 
communities' aspect in drawing up the Lome III micro-
project programme. 
Guarantee of the active participation of the local 
community 
43-46. The contracting parties to the Third Lome 
Convention also recognized that flexibility was needed as 
regards the EDF contribution to each project. Accord­
ingly, Article 202 (2) of Lome III states that in exceptional 
cases the Community contribution may exceed two thirds 
of the cost. Once again the formal stringency of Lome I 
and II has been replaced by a flexibility more conducive to 
attaining development objectives at local level. Particip­
ation by the recipient States has become optional and the 
local community's contribution can be, for example, to 
cover maintenance costs. 
308 Official Journal of the European Communities 12. 12. 88 
43. The local community palyed an active part in almost 
all the projects in Senegal. Some projects were none the 
less financed entirely by the EDF, but with a contribution 
in kind (materials) or in the form of supply of services 
(days of work) from the recipient communities. 
44. The delegation in Madagascar has always ensured 
that local people have actually requested projects and 
been involved in planning them. It is possible that during 
implementation the degree of local involvement may not 
have been entirely satisfactory. 
45. Using staff from other EDF projects to assist on 
micro-projects is the proof of efforts to link up operations 
in the field, which is a sensible way of making the most of 
limited resources. Lome III, after all, provides for the 
financing of technical advisers. 
Viability of the micro-projects 
Mobilization of the contributions 
48. In order to avoid the difficulties and delays referred 
to by the Court, the Commission and the ACP States have 
decided to alter the provisions of Lome III to make the 
ACP State's financial contribution to micro-project 
programmes optional. 
Assimilation of the micro-projects by the users 
50. The situation described in Sierra Leone has now 
improved. 
51. A great deal of the work in the Niger project 
involves sinking wells for market gardens for which the 
only recurrent costs are dredging, which is usually carried 
out by the villagers themselves. In the Badeguicheri 
project, for example, the Court will have seen on its visit 
that the wells which date from 1975 are not silted up and 
are operational. Moreover, the subregional authorities 
pay for the volunteer's rent. In the final analysis these 
projects are appreciated by the local people, even though they are sometimes unable to participate as much as 
hoped because of their workload. 
Social aspects of the micro-projects 
54 - 55. Socio-economic relations within a community 
are studied and taken into account when micro-projects 
are planned and implemented, since these projects must 
make a real contribution to the development needs of the 
local communities. 
It is possible, however, that of the many micro-projects 
carried out to date, some may not have come up to 
expectations for reasons which are difficult to appreciate 
at the beginning of a programme, especially if they are 
connected with a group's unexpected reactions to a new 
situation. Despite a few inevitable failures, the micro-
project programmes on the whole are generally con­
sidered a success by the beneficiaries. 
Implementation and follow-up of the 
micro-projects 
Role of the national authorities 
56. See the reply to paragraphs 40-42. 
57-63. Technical assistance was hardly used under 
Lome I, a little more under the fifth EDF and it is now the 
norm for programmes approved under Lome III. 
Technical assistants are primarily intended to provide 
back-up for the central coordination body or to fulfil that 
body's function if one does not exist. Technical assistants 
also help the local communities in setting up adminis­
trative structures enabling them to manage the micro-
projects themselves. 
When a micro-project programme is small-scale the high 
cost of conventional technical assistance can eat up too 
much of the EDF contribution. For this reason volun­
teers or NGOs are often asked' to assist. 
58,. 64 and 71. The delegation has long been aware of 
the problem raised by the Court in relation to Malawi and 
has taken appropriate measures which include the 
12. 12. 88 Official Journal of the European Communities 309 
recruitment, two years ago, of two VSOs (self-help 
personnel constantly operating in the field) to supervise 
implementation of the micro-projects. This has already 
had a positive effect on the programme management. 
Future increases in their effectiveness combined with the 
dissemination of an instruction manual for micro-
projects, will permit further improvement in the situation 
and enable the delegation to control operations more 
effectively. 
Cost of technical assistance and complementarity of the 
micro-projects 
60. The Commission has taken note of the Court's 
comments on technical assistance financed under micro-
projects. It is currently studying the whole issue, 
particularly with regard to technical assistance in large-
scale programmes. 
61. This ceiling is not a hard and fast rule. In the case of 
Tanzania a technical assistant was vital for the pro­
gramme to be a scuccess — which it was. 
62. The micro-project programme was coordinated 
better and implemented faster because the EDF bore 
some of the operating costs of the follow-up unit, which is 
part of the Ministry of Planning's Directorate for 
Regional Development and Micro-projects. 
64. The Commission has constantly endeavoured to 
ensure that micro-projects complement other develop­
ment operations, and this is particularly true under Lome 
III. Although the Convention does not restrict micro-
projects to the scope of Article 187, most of the 
programmes approved under the sixth EDF have a link 
with the focal sector(s) of Community aid. 
The pace of micro-projects implementation in Sierra 
Leone continues to be slow, owing to shortages of 
supplies (fuel, cement, etc.) and to administrative 
weaknesses. Effectively there is no Government agency or 
local administrative unit with the capacity to implement 
these projects, so that the National Authorizing Office 
(NAO) has taken responsibility for the task, although it 
too lacks administrative and transport resources. The 
NAO has recently requested that two volunteers be 
provided to assist in micro-project supervision and 
management, and this proposal has been accepted in 
principle. The delegation is now making arrangements for their recruitment from NGOs represented in Sierra 
Leone. 
Financial execution of the micro-projects 
66. The situation as regards micro-projects in Kenya 
has improved markedly since 1985. The advance paid 
when the financing agreement is signed has been reduced 
to 50 % and the balance is not paid until the work (mostly 
schools or water supplies is completed). Furthermore, the 
rule now is that not more than two micro-project 
programmes can be financed at the same time. As regards 
the appraisal stage, the quality of the preparatory studies 
carried out by the relevant ministry has improved 
significantly thanks to the technical assistance of one of 
the Member States. 
Evaluation and monitoring of the micro-projects 
67 - 70. The Commission now evaluates micro-projects 
on the basis of the delegate's annual reports, his final 
reports drawn up in conjunction with the recipient 
government after each programme is completed and more 
general assessment reports from independent experts. 
The tecnhical assistant and the coordination unit, and of 
course the Commission delegate, are responsible for 
monitoring the project. 
Final observations 
72-75. As regards Lome I and Lome II micro-
projects, which are the subject of the Court's report, the 
Commission has concluded a contract with a team of 
independent experts which is currently completing a 
lengthy and exhaustive evaluation report. This will help 
the Commission to further improve various aspects of the 
micro-projects programmes. 
Without awaiting the conclusions of the report, the 
Commission had already identified the difficulties 
sometimes encountered in implementing micro-projects 
and had learnt from its experiences of the first two Lome 
Conventions. With the agreement of its ACP partners, it 
has therefore adapted the provisions of Lome III and 
drawn up new instructions for the relevant departments 
and the delegations. 
310 Official Journal of the European Communities 12. 12. 88 
On a general level, since thousands of small operations 
are involved, these provisions should help to prevent past 
problems even though it will always be difficult to apply 
the same identification, approval and monitoring criteria 
as for conventional projects. 
OBSERVATIONS ON EMERGENCY AID 
General replies 
The essential question as regards emergency aid is 
whether it has achieved its objective, namely whether it 
has been provided as soon as possible after the agreement 
of the countries concerned and whether it has saved the 
lives of disaster victims or relieved their suffering. 
Consequently the Commission is expected to act prom­
ptly and effectively, taking into account the objectives to 
be attained and the fact that emergency situations can 
change so rapidly that implementing arrangements must 
be as flexible as possible. 
Appraisal of the aid 
82 and 84. More thorough appriasal of requests could 
well hold up implementation of the aid measures. The 
Commission is fully aware that speedy appraisal can lead 
to errors but it is willing to take that risk when lives are in 
danger. 
83. (a) The Commission decision in April 1981 
(1 500 000 ECU) was in response to a request from WFP/ 
UNHCR, which had estimated the number of refugees in 
need to be 80 000. 
The Government of Zaire had estimated the Ugandan 
refugee population at 200 000 in January 1981. 
UNHCR continued to use this figure of 80 000 refugees 
and actually increased the estimate of the number of 
refugees to some 125 000 in late August 1981. The statement by the Court that refugee numbers never 
passed 40 000 is based on a survey undertaken in April 
1982, one year after the Commission made its decision. 
The results of this survey may not be valid for the 
situation in April 1981, when the Commission took its 
decision, and in the light of the massive return of 
Ugandan refugees from Zaire in early 1982. 
(b) The requirements calculated on the basis of 
information received from the Senegalese Government 
turned out to be overestimated primarily because of a 
better harvest than initially expected. The resulting 
surplus (800 000 ECU) was used to finance another 
operation in a vital sector, namely the supply of maize 
seed (146 000 ECU) and cowpeas (654 000 ECU). 
Although it is true that the operation was complex 
(paragraph 103(a)), it was none the less a more suitable 
and economic operation than simply distributing seeds in 
the usual way. 
(c) The 24 % (490 000 ECU) constituted a reserve to 
meet requirements arising from requests which had not 
yet been formulated in detail. The sum was allocated as 
follows: 
Unicef 40 000 ECU (nutritional programme) 
Government 64 000 ECU (purchase of seeds) 
NGO 386 000 ECU (additional transport costs) 
85 - 86. The report raises doubts about the justification 
of financing, as emergency aid, complex operations which 
presuppose a large volume of resources. The scale of 
disasters can vary widely and in some cases millions of 
lives are at risk, which clearly involves large amounts of 
emergency aid. In this case Commission decisions can be 
seen as framework decisions within which concrete 
measures requiring very flexible implementation are 
financed, as and when specific requests are received. A 
distinction must therefore be made between appraisal of 
cases with a view to framework decisions and appraisal of 
concrete requests for measures. 
Implementation of the aid 
Implementation time-limits 
87. It should be pointed out that on the question of the 
extension of operations beyond the period stipulated 
(usually six months), when measures are implemented in 
the field they often come up against unforeseen dif-
12. 12. 88 Official Journal of the European Communities 311 
Acuities which are hard for the Commission's partners in 
the operations (Governments, UNHCR, NGOs, Red 
Cross, etc.) to overcome. Moreover Lome II offers the 
possibility of extending the implementation time-limit, 
whereas Lome III no longer includes any binding 
provision on time-limits except for the commitment of 
appropriations (six months). 
88. The 1.5 Mio ECU of aid was disbursed within four 
to six months. Only the 175 000 ECU used to purchase 75 
tonnes of sugar and to transport other aid (programme 
implemented by Licross) was granted an additional time-
limit by the Commission for this exemplary operation 
because of the difficulties met by the Red Cross, such as 
lack of basic foodstuffs, documents required for clearing 
accounts not produced by the authorities and/or persons 
providing services. 
89 and 95. (b) Delays in receiving the necessary govern­
ment approval led to a late start-up of this operation. In 
addition, the very magnitude of the food and relief needs 
and the inadequate logistical transport and port facilities 
resulted in certain delays in transport of food. The serious 
food needs in remote areas of Western Sudan were 
identified by a Commission mission in April 1985 and one 
month later the Commission set up a Community 
airbridge, with the active participation of the Member 
States, which at the height of the operation had 11 aircraft 
operating. This airbridge won international acclaim and 
during the rainy season was the only way of transporting 
food to the West, when this region was totally inaccessible 
to land transport. 
The constantly changing situation in Sudan, which lasted 
well into 1986, meant that certain programmes were 
necessarily extended, while others were modified or 
stopped in the light of changing requirements and the 
unutilized funds were reallocated to other urgent actions. 
90. Completion of this operation (64 000 ECU: pur­
chase of 813 tonnes of seeds) was delayed for lack of 
available seeds in the area. The Mauritanian Government 
had to purchase the seeds piecemeal from villagers. 
91. This concerns the Dublin Plan, under which 
Ethiopia was allocated (from Lome and the Community 
budget) a total of 55 300 000 ECU as emergency aid. 
While allocations under this framework decision were 
made on a case-by-case basis, the priority actions and the 
major part in financial terms were decided and under way 
in the first weeks following Council adoption of the 
Dublin Plan. 
The project at 91 (a) was financed from a balance which 
reverted to the Commission, following only partial 
utilization by the Ethiopian authorities of an allocation 
for the purchase of seeds. When the size of the unutilized 
balance — due to the difficulty of finding suitable seed in 
time for the planting season — became known, the Commission moved quickly to reallocate the unspent 
balance at end June 1985 for, inter alia, the United 
Nations transport project. 
In this respect, there was a delay by the UN in utilization 
of the final tranche (500 000 ECU) of this allocation by 
UN/World Food Programme (WFP), which was for the 
supply of vehicle spare parts. The UN attributed this 
delay to the need to postpone precise identification of 
spare parts requirements and their specifications, pending 
the arrival of additional trucks and trailers which were in 
the course of delivery. 
92. The project proposal appended to the contract for 
this operation had envisaged that the biscuits (715 000 
ECU) would be distributed over a 10-month period from 
September 1986 to June 1987. In the event, all biscuits 
were distributed by May 1987. 
Extent to which objectives are achieved 
94. The deficiencies noted by the delegation, which were 
deficiencies in the UNHCR programme as a whole and 
not specifically the Community-financed part of it, were 
brought formally to the attention of UNHCR, which 
undertook to take corrective action to remedy them. 
95. (a) During the 1984 drought, most of the donors 
providing emergency aid in Senegal refused to include 
transport because of the difficulties involved. 
To ensure maximum effectiveness, the Commission, 
despite the cost, covered the cost of distributing its aid 
and part of the aid from other donors. Despite the fact 
that 'the places served by dirt tracks were not able to 
receive the food intended to them because of an early 
rainy season', overall results were positive. 
(b) See paragraph 89. 
312 Official Journal of the European Communities 12. 12. 88 
Coordination between the various parties involved 
96 - 97. It should be noted that when the Dublin Plan 
was implemented, an unprecedented effort was made in 
Brussels and on the spot to coordinate action at 
Community level with the Member States (for example in 
Sudan, where a coordinated operation with the Member 
States provided an airlift using 11 large transport aircraft 
from the Member States with logistic and financial 
support from the Community. Operations were similarly 
coordinated with the NGOs with the setting up of ECEP 
(European Communities emergency programmes) 
(Sudan, Mali, etc.) to divide up operations on a functional 
and/or geographical basis. 
98. At international level the degree of coordination 
varied from country to country but it was in Ethiopia that 
most efforts were made to coordinate aid, particularly 
because of the presence of a representative of the UN 
Secretary General. 
It is true, however, that coordination between NGOs was 
not satisfactory in that country. But with the delegation's 
encouragement the situation has improved significantly, 
to the extent that the system of coordination there is now 
a model of its type. 
Control and monitoring of the aid 
Control and monitoring of the management 
102. Only the report from Licross is missing (120 000 
ECU) for the 10 Mio ECU project, although Licross has 
sent in its general report on the situation in Mali. 
103. (a) See point 83(b). 
(b) The operation to supply water to the town of Atar 
(395 000 ECU), for which previous requests for finance 
had been made under the indicative programme, had 
become vital for its inhabitants during the drought of 
1984-85. Although the wells were developed with 
financing for micro-projects, the question of transporting 
the water — just as necessary, if not more so, than the 
transport of other aid — was not resolved. In February 
1986 the Mauritanian Government sent the delegation a 
statement of the contribution to transport costs by the 
least needy section of the population. At the time it was decided to administer these funds in the same way as the 
other counterpart funds, since emergency aid was no 
longer justified. 
(c) In the case of the Unicef water supply project (1 Mio 
ECU), since procurement of supplies and equipment 
would need some time, and so as to speed up the 
implementation process, it was decided that the project 
would be implemented using Unicef stocks already in 
Ethiopia and that the Community contribution would be 
subsequently used to replace these stocks. 
104. (a) The only payment made for this operation was 
when the Commission accepted a final report from 
UNHCR, including acceptance of the change in use of 
these funds, after which the project was immediately 
closed. 
The Commission recognizes the need for flexibility in 
implementation of emergency aid in view of changing 
requirements and priorities, but does stipulate that any 
change be subject to its prior agreement. The question of 
the change in utilization of Community funds, without 
prior Community agreement, was raised with UNHCR in 
the context of this project, which undertook to take all 
measures to prevent such shortcomings in the future. In 
this particular case, given that other donors would have 
also been financing this refugee programme via UNHCR, 
it is likely that the essential relief items were supplied in 
cash or in kind from other sources and that accordingly 
the Commission was requested to finance the transport 
expenses which were not covered. 
(b) Following the Commission decision, the Somali 
National Refugee Commission asked for modifications in 
the Commission's intervention. Subsequently an agree­
ment was made between the Somali Government, 
UNHCR and Comite europeen d'aide aux refugies 
(CEAR) (Community's implementing partner) changing 
the nature of this operation (450 000 ECU) which was 
acceptable to the Commission. 
105. The six replies received in the meantime were sent 
to the Court in July 1988 and at the same time a reminder 
was sent for the two missing replies. 
Control of payments 
106. (a) Payments of emergency aid are sometimes 
made in local currency in the ACP States and sometimes 
12. 12. 88 Official Journal of the European Communities 313 
in Brussels in foreign currency. Once an operation is 
entered in the accounts, a copy of the new accounting 
situation with the ECU equivalent is sent to the 
delegation in question. 
(b) It is true that until receipt of the accounting card 
recording an operation, the ECU equivalent is only 
provisional and approximate. 
(c) Brussels pays out at the request of the delegations in 
order to speed up payment of emergency aid. The 
delegations keep the supporting documents which can 
therefore be verified on the spot. 
107. (a) The Commission is looking into the dis­
crepancies observed by the Court. 
(b) There is only one valid figure for payments 
corresponding to the operation in Mauritania referred to 
by the Court, namely 455 632,53 ECU, since the 
delegation's entries are only provisional. Closure of project accounts and utilization of remaining 
appropriations 
108-110. The Commission is well aware of the 
importance of closing accounts. In the vast majority of 
cases observed by the Court, although accounts had not 
yet been formally closed, appropriations had been 
expended, in full so that there was no oustanding balance 
to be reallocated to the special appropriation. Moreover, 
there has never been a shortfall in the special appropri­
ation, since at the end of Lome II 9 Mio ECU remained. 
Third Lome Convention 
111. Unspent appropriations will be reallocated to the 
special appropriation in due course. The special appropri­
ation was still at 175 Mio ECU at the end of 1987, out of 
the 210 Mio ECU provided for in Article 205 of Lome III.