16. 12. 85 Official Journal of the European Communities 1 
COURT OF AUDITORS 
In accordance with the provisions of the Treaties (Article 78 f (4) ECSC; 
Article 206 a (4) EEC; and Article 180 a (4) EAEC) and the Financial 
Regulation of 21 December 1977 (Article 83) and the corresponding 
provisions relating to the European Development Funds, the Court of 
Auditors of the European Communities, at its meeting on 
19 November 1985, adopted its 
ANNUAL REPORT 
concerning the financial year 1984 
The report, accompanied by the replies of the institutions to the 
comments of the Court, was transmitted to the authorities responsible for 
giving discharge and to other institutions on 29 November 1985. 
Marcel MART 
(President) 
Michael N. MURPHY 
Paul GAUDY 
Aldo ANGIOI 
Pierre LELONG 
Andr6 MIDDELHOEK 
Keld BRIXTOFTE 
Lothar HAASE 
Stergios VALLAS 
Charles J. CAREY 

16. 12. 85 Official Journal of the European Communities 3 
TABLE OF CONTENTS 
Annual report concerning the financial year 1984 
Page 
Introduction 5 
Part I 
Chapter 1 — General matters 7 
Chapter 2 — Accounting matters 16 
Chapter 3 — Revenue 28 
Chapter 4 — European Agricultural Guidance and Guarantee Fund, 
Guarantee Section 36 
Chapter 5 — European Agricultural Guidance and Guarantee Fund, 
Guidance Section, and specific agricultural measures 50 
Chapter 6 — Common fisheries policy 61 
Chapter 7 — Regional aid expenditure 64 
Chapter 8 — Social sector 70 
Chapter 9 — Research, energy, etc 76 
Chapter 10— Cooperation with developing countries and other non-member states . 80 
Chapter 11 — Staff expenditure 87 
Chapter 12 — Operational expenditure 94 
Chapter 13 — External bodies 98 
Chapter 14 — Loans, borrowings and interest-rate subsidies 100 
Part II 
European Development Funds 107 
ANNEXES 
Annex I — Allocation of responsibilities among Members of the Court of Audi­
tors at 29 November 1985 117 
Annex II — Reports and opinions adopted by the Court of Auditors during the 
five years to 29 November 1985 119 
Annex III — Financial information relating to the general budget of the European 
Communities and to the European Development Funds 125 
4 Official Journal of the European Communities 16. 12. 85 
Replies of the institutions to the observations of the Court concerning the 
financial year 1984 
Part I Page 
Chapter 1 — General matters 159 
Chapter 2 — Accounting matters 165 
Chapter 3 — Revenue 175 
Chapter 4 — European Agricultural Guidance and Guarantee Fund, 
Gurarantee Section 178 
Chapter 5 — European Agricultural Guidance and Guarantee Fund, 
Guidance Section, and specific agricultural measures 184 
Chapter 6 — Common fisheries policy 189 
Chapter 7 — Regional aid expenditure 190 
Chapter 8 — Social sector 192 
Chapter 9 — Research, energy, etc 194 
Chapter 10 — Cooperation with developing countries and other non-member states . 196 
Chapter 11 — Staff expenditure 200 
Chapter 12 — Operational expenditure 203 
Chapter 13 — External bodies 204 
Chapter 14 — Loans, borrowings and interest-rate subsidies 205 
Part II 
European Development Funds 208 
16. 12. 85 Official Journal of the European Communities 5 
Annual report concerning the financial year 1984 
INTRODUCTION 
1. This is the eighth annual report of the European 
Court of Auditors, which relates to the accounts of the 
financial year 1984 (1). The Commission is required, by 
the Treaties (2) and the Financial Regulation (3), to 
draw up a revenue and expenditure account for the 
Communities for each financial year and a balance 
sheet as at the end of that year, and to forward them to 
the Parliament, the Council and the Court of Auditors 
by 1 June of the following year. These financial state­
ments are used by the Court in drawing up its annual 
report. The accounts together with the annual report of 
the Court and the replies of the institutions to the 
Court's observations, are to be examined by the Parlia­
ment and the Council in connection with the discharge 
to be given by the Parliament to the Commission in 
accordance with the Treaties (4). 
2. In Part I of the report, general matters arising from 
the Court's work are covered in Chapter 1. Chapters 2 
to 13 relate to the general budget of the Communities. 
Chapter 14 deals with loans and borrowings operations 
under the EEC and EAEC Treaties and related interest 
subsidies financed by the budget. 
3. Part II is concerned with the European Develop­
ment Funds. These Funds, which provide aid to devel­
oping countries, are managed by the Commission but 
they are financed by specific contributions by the 
Member States and do not form part of the general 
budget of the Communities. 
4. Annex I gives the allocation of responsibilities 
amongst the Members of the Court as at 29 November 
1985 and Annex II is a list of all reports and opinions 
issued by the Court during the five years up to 29 Nov­
ember 1985. 
5. Summaries and some detailed analyses of financial 
information relating to the general budget of the Com­
munities and to the European Development Funds are 
presented in Annex III. 
6. The Court has issued separate reports to the rel­
evant discharge authorities on the 1984 accounts of 
JET (the Joint European Torus), the European Centre for the Development of Vocational Training (Berlin), 
the European Foundation for the Improvement of Liv­
ing and Working Conditions (Dublin) and the Euratom 
Supply Agency, and the 1983 accounts of the European 
Schools. Comments on the Commission contributions 
to the budgets of the Schools are included in Chap­
ter 13. The Court has also drawn up the separate 
annual report on the accounting for the functional 
activities of the ECSC and the financial management 
of the Commission relating thereto, as required by 
Article 78f(5) of the ECSC Treaty. 
PRESENTATION OF COMMUNITY 
ACCOUNTS AND ANNUAL REPORT OF 
COURT OF AUDITORS 
7. The accounts for the financial year 1984 were ren­
dered by the Commission by 1 June 1985. The Court's 
comments were sent to the institutions on 12 July 1985. 
All the comments contained in this report were sent to 
the Commission. Relevant extracts of Chapters 1, 2, 11 
and 12 were also sent to the Parliament, the Council, 
the Court of Justice and the Economic and Social 
Committee. 
8. The Financial Regulation provides for each institu­
tion to address its reply to the Court by 31 October. In 
practice, the formal replies are generally preceded by 
discussions between the institutions and the Court 
which cover both the Court's comments and draft 
replies which are provided on an informal basis. These 
arrangements enable changes to be made, where neces­
sary, in both the comments and the replies, to ensure 
that the issues would be readily understood by the 
reader. This is more likely to be achieved if there is a 
full and confidential exchange of views with the 
audited body before the report is finalized and made 
available with the formal replies. 
9. The formal replies were sent by the institutions by 
31 October and, after studying them, the Court adopted 
the final text of the report on 19 November 1985. The 
report, accompanied by the replies of the institutions, 
was sent to the institutions on 29 November 1985 in 
accordance with Article 84 of the Financial Regulation. 
6 Official Journal of the European Communities 16.12.85 
The Court has not found it necessary this year to add 
remarks in the light of the replies but this does not 
imply that it necessarily agrees with the replies. 
10. The Court regrets that Council, in replying to the 
comments about its own administration, has seen fit to 
raise once again the suggestion that all comments con­
cerning each institution should be presented in separ­
ate parts of the annual report. As in previous years, the 
Court is unable to follow this suggestion — for reasons 
already explained in the past(5). Apart from the fact 
that the Court is free to choose the content and presen­
tation of its annual report which it considers most 
appropriate, the solution recommended by the Council 
would result, in practice, in a totally inadequate presen­
tation. Responsibility for certain activities is shared 
between several Community institutions. It is not 
always practicable, therefore, for the Court to divide, 
institution by institution, the observations relating to 
such activities, especially where it wishes to make a 
comparison of practices. This can apply to observations 
concerning legality and regularity or sound financial 
management (for example, cash management in Chap­
ter 2 of this report). 
11. The Court has continued the arrangements introd­
uced in 1983 for the audit of its own accounts. The 
Member responsible for the examination of a particular 
subject in other institutions also examines the use of 
corresponding appropriations in the Court's budget. 
Any observations arising are included in the relevant 
chapter of this report and the replies are included with 
the replies of the other institutions. 
SPECIAL REPORTS 
12. As mentioned earlier, Annex II is a list of reports 
and opinions adopted by the Court during the past five 
years. The Court would mention that, during its exami­
nation of the 1984 accounts, it has followed up issues 
raised in its report on the sound financial management 
(') Produced in accordance with 
ECSC Treaty, Article 78f(4); 
EEC Treaty, Article 206a(4); 
EAEC Treaty, Article 180a(4); 
Article 83 of Financial Regulation of 21 December 1977, 
OJ L 356, 31.12. 1977, and similar provisions in each of 
the Financial Regulations for the second, third, fourth 
and fifth European Development Funds, respectively 
Council Decision 64/356/EEC, OJ 93,11. 6. 1964; 
Council Decision 71/68/EEC, OJ L 31, 8. 2. 1971; 
Council Decision 76/647/EEC, OJ L 229,20. 8. 1976; 
Council Decision 81/215/EEC, OJ L 101,11.4.1981. of Community activities adopted on 6 October 1983 in 
response to the conclusions of the European Council of 
18 June 1983; the question of budgetary management is 
treated in Chapter 1 and other observations arising 
appear in the relevant chapters of this report. 
MEMBERSHIP AND ORGANIZATION OF 
THE COURT 
13. There have been no changes of Membership of 
the Court since the last annual report was presented. 
Bearing in mind the forthcoming enlargement of the 
Communities, the Court has further developed, during 
1985, the group structure for work of a preparatory 
nature. This provides for three groups of four Mem­
bers; the allocation of responsibilities as at 29 Novem­
ber 1985, which is without prejudice to the decisions to 
be reached following enlargement, is given in Annex I. 
COURT BUDGET AND STAFF 
14. The Court's expenditure in 1983, including carry­
overs to 1984, amounted to some 15,3 Mio ECU, and in 
1984, including carry-overs to 1985, amounted to some 
17,3 Mio ECU. The main element in these amounts is 
for salaries and allowances. 
15. The budgets for 1983 and 1984 provided for the 
following numbers of posts: 
A category staff 
LA category staff 
B category staff 
C category staff 
D category staff 
Total 1983 
107 
36 
63 
78 
19 
303 1984 
107 
36 
63 
78 
19 
303 
(2) ECSC Treaty, Article 78d; 
EEC Treaty, Article 205a; 
EAEC Treaty, Article 179a. 
(3) Articles 73 to 77. 
(4) ECSC Treaty, Article 78g; 
EEC Treaty, Article 206b; 
EAEC Treaty, Article 180b. 
(5) In particular, in paragraph 12 of the introduction to the 
Court's annual report for the financial year 1982, OJ C 
357,31.12. 1983. 
16. 12.85 Official Journal of the European Communities 7 
PART I 
CHAPTER 1 
General matters 
1.0. TABLE OF CONTENTS Paragraph reference 
General budget of the European Communities 
Accounts for the year ended 31 December 1984 
Year of account and balance sheet questions 
The Community budget 
Availability and management of appropriations 
Summary of observations in this report 
Special reports and other documents 
Refusal of approval by Financial Controllers 1.1 
1.1 
1.3 
1.6 
1.23 
1.27 
1.35 
1.37 — 1.26 
— 1.2 
— 1.5 
— 1.22 
— 1.26 
— 1.34 
— 1.36 
GENERAL BUDGET OF THE EUROPEAN 
COMMUNITIES these appropriations by the institutions is shown in 
Table 1.1 and the sources of revenue provided to 
finance them are shown in Table 3.1 of Chapter 3. 
Accounts for the year ended 31 December 
1984 
1.1. The accounts of the general budget of the Euro­
pean Communities for the year ended 31 Decem­
ber 1984 are contained in a five-volume document 
(doc. COM(85) 185 to 189) presented by the Commis­
sion. Volume V (doc. COM(85) 189) of the document 
contains the consolidated revenue and expenditure 
account and balance sheet, together with a summary of 
the principles applied in drawing them up. It also pro­
vides general information about the outturn of the 
budget for each of the institutions. Year of account and balance sheet questions 
1.3. During the audit of the 1984 accounts, various 
questions arose concerning the regularity of transac­
tions and the consequent effect on the amounts shown 
as revenue and expenditure in the accounts which are 
submitted to the discharge authority in accordance with 
the Treaties ('). The amounts involved are shown in 
Table 1.2 and further details are provided in the chap­
ters dealing with the specific areas concerned. 
1.2. The total final appropriations for commitment 
and payment for 1984 amounted to 30 278,0 Mio ECU 
and 28 967,3 Mio ECU respectively. The utilization of 1.4. The Court pointed out in its annual report for the 
financial year 1981 (2) that the present regulations con-
8 Official Journal of the European Communities 16.12. 85 
Table 1.1 — General budget: appropriations available in 1984 and their utilization, by institution 
(Mio ECU) 
Institution 
Operating appropriations (Commis­
sion, part B) 
Administrative appropriations: 
— Parliament 
— Council 
(of which Economic and Social 
Committee) 
— Commission, part A 
— Court of Justice 
— Court of Auditors 
Total Commitments 
' Appropriations for 
commitment available 
in 1984 
29032,5 
1245,5 
239,1 
137,1 
(24,9) 
819,9 
31,3 
18,1 
30 278,0 Commitments entered 
into in 1984 
28101,2 
1223,1 
235,4 
129,6 
(24,6) 
811,2 
29,6 
17,3 
29324,3 Payments 
Appropriations for 
payment available in 
1984(0 
27 621,2 
1346,1 
268,7 
149,5 
(25,4) 
876,2 
33,0 
18,7 
28967,3 Payments made in 1984 
26307,5 
1 216,1 
245,5 
126,7 
(24,2) 
798,4 
28,6 
16,9 
27523,6 
(') Including carry-overs from 1983. 
Note: For further details and analyses see Annex III. 
tain no specific provisions for dealing with amounts 
relating to irregular transactions which are included in 
the Community accounts. The Court considers, how­
ever, that the discharge authority should take account 
of these irregularities in the discharge procedure by 
instructing the Commission, in the resolution accom­
panying discharge, to take the necessary measures to 
regularize the situation. Communities' own resources. The intention was that, 
by 1975, the Communities' budget would be financed 
entirely by these own resources, consisting of Common 
Customs Tariff duties, agricultural (including sugar 
production and storage) levies, and value-added tax 
(VAT) not exceeding 1 % of a uniform Community-
wide basis of assessment. 
1.5. There are a number of other matters, while not 
themselves affecting the regularity of the accounts, 
which the Court considers are of sufficient significance 
to be drawn specifically to the attention of the dis­
charge authority (see paragraphs 4.5 to 4.9, 4.18 to 4.21, 
4.30 to 4.33, 5.5,9.13, 14.15 to 14.19 of this report). 1.8. The basic system was not fully implemented until 
1980, by which time the rate of VAT own resources 
required had already reached 0,73%; and the system 
has since been subject to a series of ad hoc modifica­
tions (4), culminating in a revised Council Decision 
85/257/EEC of 7 May 1985 (5) which provides, inter 
alia, for 
The Community budget 
1.6. The operation of the Community budgetary sys­
tem has given rise, particularly during recent years, to a 
series of problems affecting the accounts on which the 
Court is required to report. (a) the present 1 % ceiling on VAT own resources to be 
raised to 1,4% from 1 January 1986, and possibly 
1,6% in 1988, in order to alleviate the growing 
problem of balancing revenue and expenditure as 
required by the Treaties (6); and, 
(b) an ongoing 'correcting' mechanism designed to 
limit the VAT own resources payable by one Mem­
ber State. 
The own resources system 
1.7. Council Decision 70/243/EEC of 21 April 
1970 (3) provided for the introduction of a system of This decision also provides for the continuation of 
GNP-based financial contributions for VAT own 
resources by those Member States not yet applying the 
uniform basis of assessment for VAT. 
16. 12. 85 Official Journal of the European Communities 9 
Table 1.2 — Adjustments which the Court considers should be made during discharge procedure for the financial year 1984 
(ECU) 
Paragraph 
1.25(d) 
2.2 
2.3 
3.26 
4.34-4.38 
4.39-4.42 
5.8 
5.23 
8.33 
11.18 
12.11(b) Revenue 1984 
Receipts of 
1984 
(1) Carry-overs 
from 1983 can­
celled or pro­
longed 
(2) Exchange rate 
differences 
(3) 
-89 000 
+ 82 000 000 
+ 250 000 Expenditure charged to 1984 
Payments 
against 1984 
appropriations 
(4) 1984 appro­
priations car­
ried over to 
1985 
(5) Earmarked re­
venue to be re­
paid 
(6) 
-2 400 000 
-(') 
-95 100 000 
- 5 388 000 
-160 000 
-35 000 
+ 250 000 Payments 
against carry­
overs from 
1983 
(7) 
+ 89 000 
-250 000 Commitments 
entered into in 
1984 
(8) 
+ 65 000 000 
-2 400 000 
-75 000 000 
-95 100 000 
-44 428 000 
+ 50 000 000 
-35 000 
+ 250000 
Commission 
account figures 26 052 434 892 305 136 486 25 016 688 
26 382 588 066 26 119 177 060 1090095 453 652 970 
27 209 925 483 
Balance 1984 (deficit): 
-827 337 417 1404388 655 29 324291566 
(') Amount cannot be quantified by the Court. 
1.9. As part of the own resources system, Member 
States receive a refund of 10% of customs duties and 
agricultural levies to cover the collection costs. The 
relationship between this percentage and the actual 
costs involved has never been justified. 
Imbalance between revenue and expenditure 
1.10. In 1983 available appropriations were insuffi­
cient to meet all EAGGF, Guarantee Section expendi­
ture — because the limit of own resources had been 
reached — and 825 Mio ECU was deferred to 1984 (7). 
During 1984 it became apparent that revenue would 
again be insufficient to cover expenditure. The Mem­ber States decided, in the circumstances, to make 'reim­
bursable advances' totalling 1 003,4 Mio ECU towards 
meeting the forecast shortfall (see paragraphs 3.4 to 
3.6). 
1.11. Notwithstanding these emergency measures, the 
financing problems have contributed to the difficulties 
in the operation of the EAGGF, Guarantee Section (see 
in particular paragraphs 4.5 to 4.9), and have also been 
cited by the Commission as causing delay in bringing 
Social Fund commitments to account and making 
related payments (see paragraphs 8.6 to 8.10). Further­
more, the Communities' consolidated revenue and 
expenditure account for 1984 shows a deficit of some 
827 Mio ECU, after taking into account 593,5 Mio 
ECU of reimbursable advances received before 
31 December 1984. 
10 Official Journal of the European Communities 16.12.85 
1.12. The problem of matching revenue and expendi­
ture became even more acute in the preparation of the 
budget for 1985. To keep the draft budget in balance, 
having regard to the limits of the own resources 
expected to be available, the provision for total 
expenditure was understated. Parliament was not satis­
fied with a draft budget prepared on this basis and 
rejected it in December 1984 — thereby bringing the 
emergency 'provisional twelfths' system into operation 
for 1985, pending the adoption of a proper budget. 
Factors affecting budgetary control 
1.13. These successive difficulties have highlighted 
weaknesses in the present budgetary procedures. The 
underlying causes of the difficulties have been the lack 
of coherence between the mechanisms for generating 
own resources and those for determining expenditure, 
and the absence of clear responsibility for ensuring that 
revenue and expenditure remain in balance. 
1.14. The biggest item of compulsory expenditure (8), 
agricultural guarantee, has resulted from the fixing of 
prices at the annual review — a process quite distinct 
from the budgetary procedure. For non-compulsory 
expenditure, annual increases are permitted in accord­
ance with a formula laid down in the Treaties (9). But 
in neither case is the consequent level of expenditure 
related to the potential growth in own resources. Table 
1.3 and the accompanying diagram compare the 
development of expenditure during the past seven 
years with the growth in the maximum available 
revenue. Columns 6 and 7 of the table demonstrate the 
marked differences in the rates of growth during the 
past three years. 
1.15. The ceiling of VAT own resources has not in 
itself proved to be an effective instrument for restrain­
ing the growth in the general budget, which is essen­
tially expenditure-determined. The European Council 
meeting at Fontainebleau in June 1984 considered that 
a more rigorous approach to decisions which determine 
the level of Community expenditure was needed. This 
was reflected in the conclusions adopted by the Coun­
cil on 4 December 1984 (10) about improved budgetary 
discipline. 
1.16. A crucial element in these conclusions was the 
statement of intention (based on earlier suggestions of 
the Commission) to hold the rate of growth of EAGGF, 
Guarantee Section expenditure below the rate of growth of the own resources base. In the Court's view, 
this means that, in addition to a realistic approach to 
price-fixing, a considerable effort is needed to increase 
the efficiency and effectiveness of agricultural guaran­
tee expenditure. A similar effort is also needed in other 
fields of Community activity. The Court has pointed 
out in the past (in the 'Stuttgart' report (u), and special 
reports), and does so again in this report (see para­
graphs 5.15, 7.10 to 7.15), that the additional effects of 
Community structural funds expenditure has yet to be 
demonstrated in many areas. 
1.17. The shifting of the financial burden for such 
activities from national budgets to the Community 
budget can only be justified if it is accompanied by an 
increase in the overall effectiveness of the expenditure 
for the benefit of the Community as a whole. Likewise, 
any new initiatives at Community level should only be 
launched if the benefits will be superior to those which 
would result from national programmes of a similar 
total cost. It is also imperative that any decision to 
launch major new Community programmes should be 
subject to the availability of the funds which will be 
needed to ensure their financing over the years. 
Collection of revenue 
1.18. In the case of revenue, all funds to which the 
Community budget is entitled must be fully and 
promptly collected and handed over. In its resolution 
accompanying the discharge for the 1983 financial 
year, Parliament noted inconsistencies between the 
resources made available by the Member States and 
statistical information which might be expected to indi­
cate the shares of revenue among the Member States. 
The inference was drawn that substantial amounts of 
revenue were being lost to the Community budget. This 
problem and other cases of actual or potential loss are 
described in paragraphs 3.11 to 3.33. 
Conclusions 
1.19. The own resources system decided upon in 1970 
was intended to provide the Communities with a 
degree of financial autonomy. But that concept 
becomes meaningless when the limit of available funds 
is constantly under pressure from the demands of a sin­
gle Community policy. There is an obligation on all the 
16. 12. 85 Official Journal of the European Communities 11 
Table 1.3 — Development during 1978-84 of payments compared with maximum available own resources 
(1978-80: MioEUA) 
(1981-84: Mio ECU) 
Year 
1978 
1979 
1980 
1981 
1982 
1983 
1984 Actual own resources 
Customs 
duties and 
levies 
(1) 
6 674,2 
7 332,6 
7 908,1 
8 139,9 
9 043,1 
9 283,8 
10 397,2 Financial contributions and/or VAT 
Financial 
contribu­
tions 
(2) 
5 329,7 
2 302,1 
151,5 
196,3 
215,6 
222,5 VAT (including adjust­
ments for previous 
years) 
(3) 
4 737,7 (0,7444 %)(') 
7 519,5 (0,7322 %)(') 
9 732,6 (0,7868 %)(') 
11 924,8 (0,9248 %) (') 
13 514,2 (0,9980 %)(') 
14 260,3 (1,0000 %)(') Total 
(4) = (2)+ (3) 
5 329,7 
7 039,8 
7 519,5 
9 884,1 
12 121,1 
13 729,8 
14 482,8 Total financial 
contributions 
and VAT on a 
1%(I) basis 
(5)=(4)/VAT 
rate 
5 329,7 
9 457,0 
10 269,7 
12 562,4 
13 106,7 
13 757,3 
14482,8 Maximum available 
own resources 
(6) = (l) + (5) 
12 003,9 
16 789,6 ( + 39,9%) (2) 
18 177,8 (+ 8,3%) (2) 
20 702,3 (+13,9%) (2) 
22 149,8 (+ 7,0 %)0 
23 041,1 (+ 4,0%) (2) 
24 880,0 (+ 8,0%) (2) Payments made in the 
year 
(7) 
11973,1 
14 367,1 ( + 20,0%) (2) 
16 290,4 (+13,4%) (2) 
17 792,8 (+ 9,2%) (2) 
20 422,7 (+14,8%) (2) 
24 313,0 (+19,0%) (2) 
27 523,6 (+13,2%) (2) 
(') VAT own resources rate. 
(2) % increase compared with preceding year. 
Diagram relating to Table 1.3: Comparative development of payments and maximum available own resources 
Mio 
ECU 
35 000 — 
30 000 
25 000 — 
20 000 — 
15 000 — 
10 000 — 
1978 Note: See Table 1.3, columns (6) and (7) for detailed figures 
Maximum available 
own resources 
^<S 
Payments 
79 80 82 83 84 
12 Official Journal of the European Communities 16.12.85 
Table 1.4 — Utilization of appropriations for payment (1979-84) 
(Mio ECU) 
Year 
1979 
1980 
1981 
1982 
1983 
1984 Type of appropria­
tions 
PA = payment ap­
propriations 
NDA = non-differ­
entiated appropria­
tions 
PA 
NDA 
Total 
PA 
NDA 
Total 
PA 
NDA 
Total 
PA 
NDA 
Total 
PA 
NDA 
Total 
PA 
NDA 
Total I. Carry-overs from previous year 
Appropria­
tions car-
ried-over 
(after trans­
fer) 
(1) 
1214,4 
884,5 
2098,9 
1 056,9 
812,9 
1869,8 
611,1 
824,0 
1435,1 
444,9 
959,2 
1404,1 
962,2 
558,8 
1 521,0 
1 122,7 
573,9 
1 696,6 Payments 
(2) 
1 037,0 
404,8 
1441,8 
953,8 
469,9 
1 423,7 
510,5 
570,3 
1 080,8 
349,5 
752,9 
1102,4 
749,0 
462,4 
1211,4 
871,9 
532,5 
1404,4 Carry-overs 
to follow­
ing year (') 
(3) 
457,9 
457,9 
7,5 
321,9 
329,4 
10,9 
220,4 
231,3 
8,6 
126,8 
135,4 
7,5 
— 
7,5 
4,8 
— 
4,8 Cancella­
tions 
(4) = 
(l)-(2) 
-0) 
177,4 
21,8 
199,2 
95,6 
21,1 
116,7 
89,7 
33,3 
123,0 
86,8 
79,5 
166,3 
205,7 
96,4 
302,1 
246,0 
41,4 
287,4 II. Appropriations of current year 
Final ap­
propria­
tions 
(5) 
1 841,3 
12 647,0 
14488,3 
1 991,2 
14 242,1 
16233,3 
2 524,2 
15 917,3 
18441,5 
3 659,4 
18 334,9 
21 994,3 
4 134,4 
20 934,4 
25068,8 
4 317,6 
22 953,1 
27 270,7 Commit­
ments 
(on NDA) 
(6) 
12 543,9 
— 
13 998,6(2) 
— 
14 992,6 
— 
17 393,1(2) 
— 
20 759,0 
— 
22 894,5 
— Payments 
(7) 
726,5 
12 198,8 
12 925,3 
1 384,4 
13 482,3 
14866,7 
2 084,1 
14 627,9 
16 712,0 
2 683,0 
16 637,3 
19320,3 
2 915,6 
20186,0 
23 101,6 
3 631,4 
22 487,8 
26119,2 Carry-overs 
to follow­
ing year 
(8) 
1 095,7 
355,0 
1450,7 
606,3 
502,1 
1108,4 
434,0 
738,8 
1172,8 
953,6 
431,9 
1385,5 
1 133,0 
573,8 
1706,8 
682,9 
407,2 
1090,1 Cancella­
tions 
(9) = 
(5)-(7) 
-(8) 
19,1 
93,2 
112,3 
0,5 
257,7 
258,2 
6,1 
550,6 
556,7 
22,8 
1 265,7 
1288,5 
85,8 
174,6 
260,4 
3,3 
58,1 
61,4 
(') Appropriations for years before 1977 relating to EAGGF, Guidance Section and aid to Friuli (system now lapsed) and carry-overs of 'earmarked 
revenue' in the field of research (system still in force). 
(2) Including commitments on non-automatic carry-overs. 
institutions to ensure the optimum use of Community 
resources as well as compliance with the principles set 
out in the Treaties. As long ago as May 1981, in its opi­
nion (12) on the Commission proposal to amend the 
Financial Regulation, the Court suggested measures to 
strengthen the management of the Communities' finan­
cial affairs — including placing a clear obligation on 
the Commission to monitor the execution of the budget 
and to take action in the event of a deficiency develop­
ing. The Court regrets that, after five years of prepara­
tory work, a revised Financial Regulation and imple­
menting measures have still not been adopted. 
1.20. Furthermore, there appears to be room for consi­
derable improvement in the forecasting of both revenue and expenditure. Subsequent chapters of this report 
show that agricultural levies collected were some 686,5 
Mio ECU (35 %) less than forecast (see paragraph 3.7), 
while appropriations for payment provided for the 
EAGGF, Guidance Section,, the Regional and Social 
Funds, for research and for development aid were 
underspent by some 900 Mio ECU (16%) (see para­
graphs 5.4, 7.6, 8.2, 9.2, 10.2 and 10.17). 
1.21. In this context, the Court drew attention in 1981 
(13) to the need for more detailed pluriannual budgetary 
forecasts. Such forecasts should include projections of 
the expected effect on revenue of raising the VAT own 
16. 12. 85 Official Journal of the European Communities 13 
resources ceiling to 1,4 % or 1,6 %, as well as the growth 
in expenditure which these ceilings would permit. The 
need has become even greater in the light of the out­
standing liabilities of some 14 000 Mio ECU that had 
accrued by the end of 1984 (see paragraphs 1.24 to 1.26 
below), as well as the budgetary deficit likely to occur 
in 1985. 
1.22. The Court regrets that a situation has been 
allowed to arise which contravenes the Treaty require­
ments for a balanced budget (6), and that the institu­
tions have not always exercised the budgetary powers 
conferred on them 'with due regard for the provisions 
of the Treaty... relating to the Communities' own 
resources and to the balance between revenue and 
expenditure' (14). To fulfil these obligations, it is essen­
tial for decisions which in effect determine the levels of 
Community revenue and expenditure to reflect the 
need for budgetary discipline. 
Availability and management of appropriations 
Underutilization of appropriations for payment 
1.23. Table 1.4 shows the amount of appropriations 
for payment remaining unused at the end of 1984. This 
represents revenue made available by the Member 
States in 1984 but not needed during the year for the 
purposes shown in the budget. The amount involved 
(1 094,9 Mio ECU) is lower than in recent years, due 
inter alia to a cut back by the budgetary authority in the 
provision of funds in cases where payment appropria­
tions had been consistently underspent. However, the 
disparity between the funds provided and the real need 
in the areas of expenditure concerned remains signifi­
cant. 
Build-up of outstanding commitments 
1.24. Table 1.5 shows that, in the areas covered by dif­
ferentiated appropriations, there has been a further 
increase to 10 346,1 Mio ECU, in the amount of out­
standing commitments at the end of 1984. After allow­
ing for the corresponding payment appropriations car-Table 1.5 — Build up of outstanding commitments 
(differentiated appropriations) 
(Mio ECU) 
Year 
1977 
1978 
1979 
1980 
1981 
1982 
1983 
1984 Net commit­
ments entered 
into in the 
year(') 
(1) 
1 623,5 
2 797,6 
3 262,0 
3 700,6 
4 554,9 
5 466,1 
5 954,1 Payments 
made in the 
year 
(2) 
918,8 
1 763,5 
2 338,2 
2 594,6 
3 032,5 
3 664,6 
4 503,2 Increase in 
unliquidated 
commitments 
during the 
year 
(3) = (l)-(2) 
704,7 
1 034,1 
923,8 
1 106,0 
1 522,4 
1 801,5 
1 450,9 
Breakdown of 1984 figures by budget titles: 
— Agricultural structures (Title 3) 
— Fisheries (Title 4) 
— Regional policy (Title 5) 
— Social policy (Title 6) 
— Research, energy etc. (Title 7) 
— Cooperation with developing countries 
(Title 9) Cumulative 
outstanding 
commitments 
at the end of 
the year 
(4) 
1 802,7 
2 507,4 
3 541,5 
4465,3 
5 571,3 
7 093,7 
8 895,2 
10 346,1 
1 151,7 
89,8 
4646,3 
2 527,0 
812,7 
1 118,6 
(') Taking account of cancellations of commitments and, for 1978, of 
adjustments of balances due to the EUA variations. 
ried forward (563,8 Mio ECU), a balance of some 9 800 
Mio ECU remained to be financed out of future Com­
munity budgets. The years in which the liabilities are 
expected to mature are shown on page 30 of volume V 
of the Commission accounts. 
Other liabilities and contingent liabilities 
1.25. At 31 December 1984 these were as follows: 
(a) 202,4 Mio ECU of EAGGF, Guarantee Section 
advances normally chargeable to 1984 (see para­
graph 4.8), and a further 330,0 Mio ECU of second 
category EAGGF, Guarantee Section expenditure 
for December 1984 which were deferred to 1985 
(see paragraph 4.31 of the Court's annual report for 
the financial year 1983 (15)); 
14 Official Journal of the European Communities 16.12.85 
(b) a contingent liability of some 2 500 Mio ECU on 
the future disposal of intervention stocks (see para­
graphs 4.18 to 4.20); 
(c) obligations for the reimbursement to a Member 
State of at least 50 Mio ECU of EAGGF, Guid­
ance Section expenditure, for which no commit­
ment was recorded in the accounts (see para­
graph 5.23); 
(d) 65 Mio ECU of legal obligations entered into in 
1984 in connection with food aid expenditure for 
which no commitment was recorded in the 
accounts (see paragraph 2.17(d)); 
(e) the reimbursable advances of 593,5 Mio ECU pro­
vided by certain Member States in 1984 towards 
the deficit forecast in the amending and supple­
mentary budget for 1984; 
(0 the deficit of some 827 Mio ECU shown by the 
Communities' consolidated revenue and expendi­
ture account for 1984. 
Conclusion on management of appropriations 
1.26. The net liabilities at the end of 1984, which will 
have to be financed by Community revenue during the 
immediately following years, total at a conservative 
estimate some 14 000 Mio ECU. This is after taking 
account of the 1 094,9 Mio ECU of unused appropria­
tions for payment mentioned in paragraph 1.23. There 
has been some improvement in the information pre­
sented in the accounts for the financial year 1984, but 
they still do not fully reflect the "financial situation of 
the Communities. The Court considers that the situa­
tion at the end of 1984 underlines the need to review 
the relevant aspects of the Community financial system 
and management, which it identified in paragraph 1.11 
of its annual report for the financial year 1983 (15). 
SUMMARY OF OBSERVATIONS IN THIS 
REPORT 
1.27. The Court has noted that certain subjects dealt 
with in subsequent chapters of this report reflect pro­
blems of a general character, as set out in the following 
paragraphs. Some general problems were drawn to 
attention in paragraphs 1.16 to 1.22 of the annual 
report for the financial year 1983 (15). The aim of a pre­
sentation of this kind is to demonstrate the scope for improvements in the administration of Community 
policies in general — not only in the specific areas giv­
ing rise to observations. 
1.28. In important areas of Community activity, parti­
cularly where a key role is played by government 
departments and agencies of Member States (or devel­
oping countries), there is a need for the Commission to 
take a more active coordinating and monitoring role in 
order to ensure that Community interests are served to 
the maximum (see paragraphs 3.34 to 3.36, 4.27, 5.30, 
7.33 to 7.36). 
1.29. In some areas the degree of cooperation 
received by the Commission from Member States is 
insufficient to enable it properly to carry out its coordi­
nating and monitoring role (see paragraphs 4.43 to 
4.44). 
1.30. Control and supervision by the Commission 
could be strengthened by improving the financial and 
management information which it has available (see 
paragraph 7.33, and paragraph 1.17 of the Court's 
annual report for the financial year 1983 (15)). 
1.31. There is a need to ensure that Community poli­
cies are adequately coordinated and that fundamental 
conflicts are avoided. Particularly in the agriculture 
field, measures designed to improve structures and 
consequently production may not be consistent with 
market conditions or Community pricing policies (see 
paragraph 5.63). 
1.32. In the field of structural funds, the tendency for 
Community aid to degenerate into a partial reimburse­
ment of national budgetary expenditure, due to a lack 
of clear Community objectives and criteria, is notable. 
The implementation during 1984 of a new Social Fund 
regime does not seem to have had a significant positive 
impact in this respect (see paragraphs 7.10 to 7.15, 8.15 
to 8.30). 
1.33. The Court's observations on issues of principle 
concerning financial and budgetary management sug­
gest that the advisory and monitoring responsibilities 
of the Commission's central services should be rein­
forced (see paragraph 9.15). 
1.34. The institutions should devote more attention 
and resources to the management of treasury opera­
tions ; in particular there is a need to improve forecast­
ing procedures, thereby reducing cash needs, and to 
obtain optimum banking terms by exploiting the possi­
bilities of competition (see paragraphs 2.18 to 2.53). 
16. 12.85 Official Journal of the European Communities 15 
SPECIAL REPORTS AND OTHER 
DOCUMENTS its reflections on perspectives for the common agricul­
tural policy (Green Paper of 13 July 1985). 
1.35. Special reports adopted by the Court since its 
last annual report are: 
(a) Special report on the system of aid for liquid 
skimmed milk used as animal feed. 
(b) Special report on the common organization of the 
market in olive oil (requested by Parliament). 
(c) Special report on certain aspects of technical coop­
eration financed by Community development aid. 
(d) Special report on the system for the payment of 
refunds on agricultural exports (Audit of the export 
of agricultural products). 
1.36. On 30 October 1985 the Court adopted a docu­
ment, for the attention of the Commission, containing REFUSAL OF APPROVAL BY FINANCIAL 
CONTROLLERS 
1.37. In accordance with the Financial Regulation the 
Court has been informed that, in relation to 1984, 
refusals of approval by Financial Controllers were 
overruled on 10 occasions by the Commission, on one 
occasion by the Economic and Social Committee and 
on one occasion by the Court of Auditors. Those cases 
which the Court considered to be of sufficient impor­
tance to bring to the attention of the discharge auth­
ority are the subject of observations in paragraphs 2.5, 
4.32 to 4.42, 8.11 to 8.14 and 12.15 to 12.20. The other 
institutions have informed the Court that none of the 
decisions of the Financial Controller was overruled 
during 1984. 
(') 
O 
(3) 
(4) 
(6) 
(7) 
(8) ECSC Treaty, Articles 78d and 78g; 
EAEC Treaty, Articles 179a, 180b; 
EEC Treaty, Articles 205a, 206b. 
OJC344,31. 12. 1982. 
OJL94,28.4. 1970. 
See Chapter 14 of the Court's annual report for the finan­
cial year 1981, see footnote (2) and paragraphs 7.43 to 7.55 
of its annual report for the financial year 1983 (OJ C 348, 
31. 12. 1984). 
OJL128, 14.5. 1985. 
EEC Treaty, Article 199; 
EAEC Treaty, Article 171. 
See paragraph 4.63 of the Court's annual report for the 
financial year 1983 (OJ C 348, 31. 12.1984). 
Compulsory expenditure is that resulting necessarily from 
the Treaties or from acts adopted in accordance with 
them. (9) 
0°) 
(") 
C2) 
03) 
(.4) 
05) EEC Treaty, Article 203(9); 
ECSC Treaty, Article 78(9); 
EAEC Treaty, Article 177(9). 
Council document 11178/84 annex 1. 
Report of the Court in response to the conclusions of the 
European Council of 18. 6. 1983, OJ C 287, 24. 10. 1983. 
OJC232, 11.9. 1981. 
See the Court's opinion on the Commission proposal to 
amend the Financial Regulation, OJ C 232, 11.9. 1981. 
EEC Treaty, Article 203(10); 
ECSC Treaty, Article 78(10); 
EAEC Treaty, Article 177(10). 
OJC348,31. 12. 1984. 
16 Official Journal of the European Communities 16.12.85 
CHAPTER 2 
Accounting matters 
2.0. TABLE OF CONTENTS Paragraph reference 
Introduction 2.1 
Observations on the general accounts and the balance sheets 
Parliament 
Commission 
Economic and Social Committee 
The Community balance sheet 
Observations on cash management in respect of the 
implementation of the general budget 
Aims of Community cash management 
Cash management by the Commission on the basis of estimates 
Cash management by the other institutions on the basis of estimates 2.35 
Resources employed 
Procedures 
Number of bank accounts 
Banking terms 
Internal control 
Centralization of management 
Use of the ECU 
Conclusions 2.2 
2.2 
2.3 
2.13 
2.16 
2.18 
2.21 
2.22 
2.35 
2.37 
2.38 
2.39 
2.40 
2.43 
2.44 
2.49 
2.51 — 2.17 
— 2.12 
— 2.15 
— 2.17 
— 2.53 
— 2.34 
— 2.36 
— 2.42 
— 2.48 
— 2.50 
— 2.53 
INTRODUCTION 
2.1. The observations set out in this chapter concern, 
on the one hand, the general accounts, the balance 
sheets of the institutions and the Communities' balance 
sheet(') and, on the other hand, cash management in 
respect of the implementation of the general budget. OBSERVATIONS 
ON THE GENERAL ACCOUNTS 
AND THE BALANCE SHEETS 
PARLIAMENT 
Cash deficit 
2.2. The amount of 4,1 Mio BFR, included in the bal­
ance sheet at 31 December 1983 as deferred expendi­
ture under the heading 'Cash deficit', also appears in 
16. 12.85 Official Journal of the European Communities 17 
the balance sheet as at 31 December 1984. In the 
absence of new information on this affair, the Court 
must refer the reader to paragraphs 2.5 to 2.7 of its 
annual report for the financial year 1983(2). 
COMMISSION 
Recoverable taxes and duties 
2.3. The system of procedures governing recoverable 
taxes and duties calls for the following observations: 
(a) Expenditure is charged to the budget inclusive of 
all taxes and duties. The amount of recoverable 
duties and taxes is then determined from evidence 
other than accounting evidence, on the basis of 
invoices received by the authorizing departments. 
This system does not provide the means for check­
ing that all recoverable taxes and duties initially 
charged to the budget are in fact covered by a 
request for reimbursement. 
(b) What is more, the amount of recoverable taxes and 
duties is only entered in the accounts once the 
request for reimbursement has been sent to the 
Member State in question. For this reason approxi­
mately 2,4 Mio ECU of recoverable taxes and 
duties for 1984 had not been entered in the balance 
sheet at 31 December 1984. 
(c) There is always some delay in recovering the sums 
due. On 1 May 1985, requests for reimbursement of 
recoverable taxes and duties had been submitted to 
only two Member States, even though sums were 
due to the Commission from other Member States. 
The Court must refer the reader back to its previous 
observations^) on the accounting treatment and reco­
very of taxes and duties. 
2.4. The invoicing of value-added tax (VAT) to the 
Communities is governed by rules that vary from Mem­
ber State to Member State. Three Member States (Bel­
gium, Italy and Luxembourg) authorize invoicing net 
of VAT for all purchases made on behalf of the Com­
munities. In the case of the others a formal application 
for reimbursement has to be made in order to recover 
VAT, and the procedures vary. As a general rule, appli­
cations for reimbursement must be accompanied by the 
original invoices. The United Kingdom asks, in addi­
tion, for written evidence to show that the invoice has 
been paid. The Federal Republic of Germany, on the 
other hand, has simplified its procedures by sending its 
auditors to make on-the-spot visits to the Commission, which obviates the need for any movements of docu­
ments. The Court hopes that the Commission will 
negotiate with the Member States with a view to har­
monizing and simplifying the procedures in respect of 
exemption from VAT, the ideal obviously being to 
arrive at a situation where all the Member States accept 
invoicing net of VAT. 
Principle of consistency of accounting methods 
2.5. In May 1984 the Commission decided to overrule 
the Financial Controller's refusal to approve payments 
(amounting to 0,2 Mio ECU) made in 1983 in excess of 
available appropriations by the press and information 
offices and external delegations. The Commission took 
the view that this amount, which was made up of rents, 
paid in advance on behalf of certain officials but recov­
erable by the Commission, could not be charged to the 
financial year 1983 and should be entered under an 
extra-budgetary 'Advances' account in the balance 
sheet at 31 December 1983. In paragraphs 2.20 to 2.24 
of its annual report concerning the financial year 
1983(2), the Court accepted this line of argument, but 
pointed out nevertheless that changes in accounting 
methods should not be justified by reasons of expe­
diency and should be implemented consistently and" 
permanently. 
2.6. Although the Commission acknowledged the jus­
tice of this observation in 1983, the accounting method 
used for this type of payment was further modified 
during the financial year 1984. As a result, the balance 
sheet as at 31 December 1984 does not include under 
'Advances' the expenditure relating to recoverable 
rents. The fact that the Commission changed its mind 
regarding the change of method which it had advocated 
for the closure of the financial year 1983 would seem to 
indicate that the change of accounting method at the 
end of 1983 was made purely in order to avoid spend­
ing in excess of available appropriations, and not for 
the purpose of improving the presentation of the 
accounts. The Court must repeat that changes in 
accounting methods cannot be justified on grounds of 
expediency. 
Press and information offices and external 
delegations 
2.7. In 1981, the Commission's attention was drawn 
to the excessively long time-lags between the arrival of 
final statements of expenditure from the imprest 
18 Official Journal of the European Communities 16. 12. 85 
accounts of the press and information offices and 
external delegations and their entry in the accounts. 
The Commission replied that it was aware of the prob­
lem and that efforts to improve the situation would be 
continued. At the end of November 1984, however, the 
average delay in entering these statements in the 
accounts had reached four and half months. 
Advances to staff and staff current accounts 
2.8. On 31 December 1984 total advances to staff 
amounted to 2,5 Mio ECU and total balances on staff 
current accounts amounted to 0,1 Mio ECU. These 
sums are supported by computer print-outs which were 
forwarded to the Court in May 1985 and which contain 
various anomalies: 
(a) the total of the amounts on the print-outs does not 
agree with the total for advances set out in the bal­
ance sheet because of mistakes in three of the 
print-outs; 
(b) the debit balance on the printouts does not corre­
spond to the difference between the total of the 
debit balances and the total of the credit balances 
on these same print-outs; 
(c) an advances account normally has a debit balance, 
so that the presence of numerous credit balances 
(amounting to a total of 1,5 Mio ECU) in these 
print-outs is hard to understand; 
(d) the print-outs contain numerous foreign exchange 
differences which should already have been cleared 
(about 0,1 Mio ECU in all); 
(e) the print-outs contain numerous balances going 
back to before 1984, and even to before 1983, 
which constitutes an irregularity, since Article 65 of 
the Financial Regulation(3) provides that, with the 
exception of certain types of clearly defined ad­
vance, all advances must be settled at the latest 
during the financial year following the payment of 
the advance. 
2.9. These anomalies are partly the result of the 
unsuitability of the data-processing systems which the 
Commission has installed and partly the result of 
weaknesses in the administrative organization. For 
example: 
(a) the print-out for advances on mission expenses to 
Brussels-based staff (1 Mio ECU) has not been ver­
ified since June 1983: 
(b) DG IX does not use print-outs but prefers a man­
ual system of auxiliary accounts for the purpose of 
monitoring advances; (c) there is no print-out giving the total amounts ad­
vanced to each person, in chronological order. 
Reconciliation of bank accounts 
2.10. On many occasions the Court has drawn atten­
tion to the need to carry out regular reconciliations 
between the balances of bank accounts as entered in 
the accounts and the bank statements sent by the 
banks. During the financial year 1984 the Commission 
made undeniable efforts in this respect. All the same, 
on 31 December 1984, in the case of the clearing bank 
accounts, there were still some unreconciled amounts 
awaiting reconciliation (totalling about 50 000 ECU) 
which went back to 1981, 1982, 1983 and the first 
six months of 1984. 
A ccounting deadlin es 
2.11. The first general balance of the accounts at 
31 December 1984, before the closing entries, was not 
available until 25 April 1985. The first provisional bal­
ance sheet of the Commission as at 31 December 1984 
was not available till 8 May 1985. The final versions of 
the general balance of accounts and the balance sheet 
of the Commission were not available till 15 May 1985 
and the first Community balance sheet only on 23 May 
1985. These dates are far too late and the Court must 
therefore call upon the Commission to review all its 
internal procedures for the recording and the prepara­
tion of the accounts in order to reduce these abnor­
mally long delays in submitting the accounts. 
Open transfer at the end of the financial year 
2.12. In December 1984, by transfer No 45/84, the 
Commission increased the appropriations available 
under Article 950 by 90 Mio ECU. This transfer was 
financed partly by a transfer of 53 Mio ECU from a 
large number of different budget titles and chapters 
and partly by an 'open transfer' of 37 Mio ECU. This 
latter technique consists of not debiting the transfer to 
any specific chapter or article. The implication, if this 
technique is to succeed, is that some chapters or articles 
must show a surplus at the end of the financial year, 
which means that it is left up to the institution to select 
the chapters or articles from which the transfers in 
question are to be made. The Court must reiterate its 
reservations (c.f. paragraph 1.13 of its annual report on 
the financial year 1980(4)) with regard to this procedure, 
which amounts to having a decision taken by the budg­
etary authority on the basis of conditions which may 
not be achievable. What is more, the Court also 
16. 12. 85 Official Journal of the European Communities 19 
observes that the 90 Mio ECU by which Article 950 was 
increased were not even spent during 1984, but were 
covered by an accounting commitment and were car­
ried forward. 
ECONOMIC AND SOCIAL COMMITTEE 
Imprest accounts 
2.13. By a decision of September 1984 the Committee 
set up an imprest account to handle the reimbursement 
of travel costs and allowances due to the Members of 
the Committee. This imprest account is not in line with 
the provisions of the Financial Regulation(3) and its 
implementation measures(5). For example: 
(a) the decision to set up the imprest account did not 
specify either the maximum advance that could be 
granted, or the maximum amount of each item of 
expenditure that could be paid; 
(b) there are no separate accounts for the imprest 
account: payments made out of it are in practice 
included in the accounts covering payments made 
by the central cash office; 
(c) the administrator of the imprest account, along 
with one of the deputy administrators, also per­
forms the duties of assistant accounting officer; 
these duties should not be performed by the same 
person. 
2.14. Apart from those made out of the imprest 
account, some payments made by the central cash off­
ice do not receive the prior approval of the Financial 
Controller on the payment order. These payments are 
therefore irregular because only an imprest accounts 
office is permitted to make payments without the prior 
approval of the Financial Controller. 
Bank accounts 
2.15. In paragraph 2.30 of its annual report on the 
financial year 1983(2), the Court pointed out that cer­
tain sums placed in deposit accounts had not been 
entered correctly in the accounts (the amounts placed 
in the deposit accounts had been entered in the 
accounts under current accounts). On that occasion the 
Court reminded the Committee that all transactions 
must be entered correctly in the accounts. During 1984 
the Committee once again placed sums in deposit 
accounts without entering them correctly in the 
accounts. The Court must ask the Committee to take 
the necessary steps to ensure that transactions of this 
kind are correctly accounted for. THE COMMUNITY BALANCE SHEET 
2.16. The Community balance sheet and revenue and 
expenditure account are the result of the consolidation 
of the balance sheets and budgetary accounts of the 
Community institutions and bodies('). All the preced­
ing observations therefore have a bearing on the Com­
munity balance sheet. In addition, this balance sheet 
calls for the following observations. 
2.17. Article 76 of the Financial Regulation^) states 
that the balance sheet should show the situation of the 
Communities' assets and liabilities as at 31 December 
of the financial year. If the balance sheet is to give a 
faithful reflection of the Communities' assets and lia­
bilities as at 31 December, that implies that it should 
include all significant claims and obligations where the 
amounts are known, and that cases where the amounts 
are not known should be shown in an annex. The bal­
ance sheet as at 31 December 1984 should thus have 
included: 
(a) claims on the Member States in respect of non-
observance of milk quotas (see paragraph 4.7); 
(b) claims on individuals or on the Member States in 
respect of certain irregularities (see para­
graph 4.25); 
(c) potential claims and debts with regard to the Mem­
ber States in respect of the clearance of the 
accounts (see paragraph 4.30); 
(d) the amounts necessary for mobilizing food aid out­
standing at 31 December 1984 under the Food Aid 
Conventions (chargeable to Title 9 and to the 
EAGGF, Guarantee Section of the Budget). 
OBSERVATIONS ON CASH 
MANAGEMENT IN RESPECT OF THE 
IMPLEMENTATION OF THE GENERAL 
BUDGET 
2.18. The Court has looked into the question of cash 
management in respect of the implementation of the 
general budget of the Communities. The aim of the 
exercise was to look mainly at the systems of cash man­
agement and assess their suitability for making reliable 
forecasts, so as to determine the extent to which they 
satisfy the requirements of sound financial manage­
ment. By way of example, during 1983, as part of the 
20 Official Journal of the European Communities 16. 12. 85 
implementation of the general budget, the institutions 
made payments amounting to a total of 23 102 Mio 
ECU (26 119 Mio ECU in 1984). The Court did not 
look at cash needs arising from extra-budgetary activi­
ties (loans and borrowings, restaurants, staff shops, 
foundations, schools etc.), the European Development 
Funds, the European Coal and Steel Community, etc. 
2.19. Certain items of information and certain docu­
ments (banking terms, scales of interest etc.) were indis­
pensable to the execution of this exercise. None of the 
institutions, however, was able to produce a document 
setting out in detail, for each bank, the conditions 
applying to its accounts or giving in their entirety the 
scales of interest rates paid on those same accounts. In 
order to make good this deficiency, the Court was 
obliged to obtain this information from the banks, 
which considerably delayed the progress of its investi­
gation, since the information relating to 1983 was 
largely unavailable until the end of 1984. It was not 
even possible to obtain all the basic information 
required in the case of the Commission and the Parlia­
ment, as certain banks, including the European Invest­
ment Bank (EIB), did not reply to the Court's question­
naire. 
2.20. What is more, the cooperation of the depart­
ments concerned by this enquiry varied considerably 
from one institution to another. For example, Directo­
rate General XVIII (Credits and investments) at the 
Commission did not supply the Court with any docu­
ment setting out all of its banking conditions, and in 
addition refused to forward to its bankers a question­
naire which had been adapted for this purpose. This 
refusal is all the more regrettable as DG XVIII is often 
likened to a financial institution, so that the banking 
terms which it has obtained could have set a standard 
for the rest. 
Aims of Community cash management 
2.21. In accordance with the constraints imposed by 
the regulations^), the Commission may only draw 
upon the Community's own resources up to the limit of 
its actual needs and those of the other institutions. The 
aim of cash management, therefore, must be to keep 
the balances of bank accounts as low as possible, 
whilst always ensuring that there is enough on hand to 
meet all obligations, which results in the following con­
sequences: 
(a) The notion of profit is considerably diminished, as 
a result of the fact that in theory there should be no 
surpluses. Nevertheless, the constraints imposed by 
the regulations are not meant to prevent the institu­
tions from ensuring sound financial management 
of their cash resources. So any temporary surpluses, 
though contrary to the letter of the regulations and evidence of inaccurate forecasting of needs, oblige 
the institution in question to take steps to invest 
them in such a way as to secure a reasonable 
return. 
(b) The importance of the forecasting systems is vital. 
The fact is that optimum management of the funds 
held in Community bank accounts would consist 
of reducing the balances as far as possible to nil, 
which means arranging perfect synchronization 
between calls for funds made available by the 
Member States and the execution of disbursements 
necessary for the implementation of the budget. 
In addition, the Commission's system of cash manage­
ment should be such as to satisfy the requirements of 
Article 12, Title IV, of Council Regulation No 
(EEC) 2891/77(6). This article states that 'the difference 
between the overall assets and the cash resource 
requirements shall be divided amongst the Member 
States, as far as possible, in proportion to the estimated 
budget revenue from each of them.' 
Cash management by the Commission on the 
basis of estimates 
Description of the system 
2.22. In order to fulfil its responsibilities^), the Com­
mission has set up a system of cash management based 
on estimates. Starting with the actual balances of 
accounts opened in its name with the treasuries and the 
central banks of the various Member States and its own 
estimate of receipts and payments for the period in 
question, the Commission calculates at the beginning 
of each month the forecast balances for each of these 
accounts at the end of the following month. These esti­
mated balances are then compared with the balances 
which ought theoretically to be held by the Member 
States, according to Regulation No 2891/77(6). The dif­
ferences which are thus brought to light normally result 
in the Commission's Treasury department issuing a ser­
ies of transfer orders in order to restore equilibrium 
between the Member States. 
2.23. The system lacks consistency; since for some 
receipts and payments it includes estimates for both the 
month in question and the following month while for 
others it includes only estimates for the month in ques­
tion. The result is that estimates of own resources and 
of expenditure by the EAGGF, Guarantee Section, and 
food-aid expenditure are taken into account for one 
month only. 
16. 12. 85 Official Journal of the European Communities 21 
Origins and reliability of the estimates 
2.24. In preparing estimates the system makes insuffi­
cient use of the authorizing departments, which only 
forward to the Treasury department information con­
cerning receipts and payments relating to the EAGGF, 
Guarantee Section, food aid, Social Fund and the 
ERDF (approximately 80% of total expenditure). 
There is no formal procedure for the forwarding of 
these estimates; the information is usually transmitted 
by telephone. Nor is there any systematic procedure for 
the ex post facto identification of discrepancies between 
the actual results and the estimates, nor for explaining 
such variances. The degree of reliability of the esti­
mates forwarded to the Treasury department varies, 
depending on the authorizing department concerned. 
2.25. Apart from the receipts and payments connected 
with the Funds mentioned in paragraph 2.24, no 
recourse is made to the relevant authorizing depart­
ments in order to calculate the estimated level of other 
financial movements. This relates in particular to the 
other regulations involved in the implementation of the 
budget, supplying the institutions with funds, adminis­
trative expenditure, miscellaneous expenditure etc. The 
method followed by the Treasury department involves 
grouping this whole heterogeneous mass under the 
heading 'cash needs', and the amount is calculated by 
extrapolation from the graph showing the extent to 
which the Commission needs to supply its banks with 
funds. The accuracy of forecasts of this kind is ques­
tionable, and it is a pity that they are not calculated 
more finely, in closer liaison with the Commission's 
authorizing departments and, where appropriate, with 
the other institutions. 
Extent to which calls for funds correspond to needs 
2.26. Payments relating to the Funds mentioned in 
paragraph 2.24 are carried out by direct transfer from 
accounts opened on behalf of the Commission with the 
Treasuries of the Member States to accounts opened on 
behalf of the Member States with their own Treasuries. 
They do not normally go via the commercial banks. 
2.27. Payments other than those mentioned in the 
preceding paragraph (approximately 20 % of the total) 
are made from accounts held with the Commission's 
banks and therefore involve genuine calls for funds. As 
the Commission did not have information available on 
all the scales of interest rates it was not possible to cal­culate the average monthly balance of the Commis­
sion's accounts with the commercial banks (see Table 
2.3); for this very reason, it was also impossible to 
determine with any accuracy whether or not the fore­
casting system had helped the Commission to abide by 
the first obligation arising from the regulations, which 
is not to call for funds in excess of needs. Nevertheless, 
apart from the absence of effective contact with the 
authorizing departments, various other factors affecting 
the calculation of the Commission's cash needs at its 
commercial banks call for comment by the Court. 
2.28. In a traditional cash management system the 
banks which are to be used for each payment are 
selected by the treasurer according to their specific 
characteristics and, in particular, according to the 
degree of availability of the funds deposited with them. 
The Commission's practice differs from this model. 
The choice of bank to be used is made a priori, without 
any attention being paid to the balances of the 
accounts, which are, if necessary, subsequently sup­
plied with the requisite funds. The general rule is to 
have the payment made, as far as possible, by the same 
bank as the beneficiary's bank. Consequently, in order 
to be sure of being able to honour payments whilst 
abiding by this criterion of choice regarding the banks 
to be used, the Treasury department is tempted to 
adopt a 'safety first' policy and to maintain high bal­
ances on the various accounts. 
2.29. The Commission has some degree of obligation 
in respect of centralization, but also, inevitably, it has 
an obligation to supervise all the forecast needs of the 
other institutions which it supplies with funds. In fact, 
since it can only call upon Community funds to cover 
actual needs, the Commission ought to check the valid­
ity of requests for funds emanating from other institu­
tions. In reality advances to the institutions are granted 
by the Commission without any checks being carried 
out, and there is not even a requirement to produce evi­
dence to justify the amount of the advance requested. 
In addition, looked at as a whole, the Commission's 
supply deadlines are on the whole too long (generally 
ten working days on average) and vary from one month 
to another. It is essential that the institutions, on the 
one hand, should accurately state their needs and that 
the Commission, on the other hand, should establish 
fixed and reasonable deadlines which it must then 
abide by. The absence of suitable and reliable forecast­
ing systems, added to supply deadlines which are too 
long and too variable, has the main consequence of 
encouraging the various institutions to maintain, in the 
interests of security, excessively high balances on their 
bank accounts (see paragraph 2.36). 
2.30. The Court's enquiries also revealed that, during 
the financial year 1983, the Commission had overdrafts 
22 Official Journal of the European Communities 16. 12.85 
Table 2.1 — Payments made retroactively from the EIB bank account 
Budget heading 
Article 963 (') 
Article 520 (2) 
Total Article 520 (2) Amount of payment 
(in Mio ECU) 
1,5 
8,2 
21,2 
6,6 
6,9 
10,1 
15,0 
1,3 
1,2 
4,6 
1,4 
6,3 
0,8 
1,9 
12,5 
7,2 
5,9 
0,5 
5,8 
3,2 
7,2 
21,1 
22,6 
7,1 
9,3 
7,4 
1,4 
4,5 
7,0 
200,0 Date of first request for 
payment sent by the 
EIB 
11.10.83 
31.10.84 
7. 2.83 
7. 2.83 
7. 2.83 
11. 2.83 
10. 3.83 
19. 4.83 
18. 4.83 
19. 4.83 
8. 3.83 
9. 3.83 
15. 3.83 
19. 4.83 
25. 3.83 
27. 5.83 
31. 5.83 
16. 6.83 
30. 6.83 
11. 7.83 
5. 8.83 
18. 8.83 
9. 9.83 
25. 10.83 
28. 10. 83 
8.11.83 
16.11.83 
9.11.83 
19.12.83 Date of the 
Commission's 
payment order 
14.12.83 
7.12.84 
7. 3.83 
7. 3.83 
7. 3.83 
7. 3.83 
4. 5.83 
31. 5.83 
31. 5.83 
31. 5.83 
13. 4.83 
7. 4.83 
4. 5.83 
31. 5.83 
27. 5.83 
22. 6.83 
29. 6.83 
12. 7.83 
26. 7.83 
28. 7.83 
31. 8.83 
22. 9.83 
11.10.83 
22.11.83 
22.11.83 
25.11.83 
25.11.83 
25.11.83 
12. 1.84 Value date applied by 
the EIB 
8.11.83 
20.11.84 
2. 2.83 
3. 2.83 
4. 2.83 
11. 2.83 
1. 1.83 
21. 1.83 
21. 1.83 
7. 2.83 
8. 3.83 
9. 3.83 
15. 3.83 
24. 3.83 
25. 3.83 
27. 5.83 
31. 5.83 
16. 6.83 
30. 6.83 
11. 7.83 
5. 8.83 
18. 8.83 
9. 9.83 
26. 10.83 
28. 10.83 
4.11.83 
4.11.83 
9.11.83 
10. 1.84 Retroactivity in days 
36 
17 
30 
32 
31 
24 
123 
130 
130 
113 
36 
29 
50 
68 
63 
26 
29 
26 
26 
17 
26 
35 
32 
27 
25 
21 
21 
16 
2 
(') Payments charged to Budget Article 963 'Financial cooperation with Turkey'. 
(2) Payments charged to Budget Article 520 'Interest-rate subsidies on Community loans to the less prosperous Member States participating in the 
European Monetary System'. 
with several banking institutions of variable size and 
duration and on which it was obliged to pay interest. 
The most important was an overdraft with the EIB, the 
average amount of which was 18,7 Mio ECU for the 
period from 19 January 1983 to 12 April 1983. This 
overdraft reached a maximum of 52 Mio ECU at the 
end of February 1983. The interest which the Commis­
sion was thus obliged to pay to the EIB amounted to 
0,6 Mio ECU. The responsibility for this overdraft and 
its consequences is not directly attributable to the 
Commission's Treasury department. This department 
was obliged to make a series of payments, in some 
cases for large amounts, with value dates which were 
most usually extremely retroactive (up to 130 days, see 
Table 2.1). These anomalies arose mainly because of 
problems of transmission of information between the authorizing departments at the Commission and the 
Treasury department. It may also be noted that, in the 
case of some payments, the EIB informed the Commis­
sion after the repayment date whilst at the same time 
charging it overdraft interest. 
2.31. The Treasury department should have been 
given adequate notice of the payments which were to 
be made so that it could take the necessary steps. In 
addition, the Financial Controller ought not to have 
authorized methods of this kind, which are contrary to 
the principles of sound financial management since 
they result in considerable costs to the Commission. 
The Treasury department's reaction, which is quite 
16. 12.85 Official Journal of the European Communities 23 
understandable, is to leave a high enough balance on 
each account in future to be able to cope with any pay­
ments. Such a practice amounts to making calls for 
funds which are not occasioned solely by the imple­
mentation of the budget, which is contary to the regula­
tions. 
Distribution of surpluses among the Member States 
2.32. The transfers intended to restore equilibrium 
amongst the Member States, which are determined 
according to the system followed by the Commission, 
cannot guarantee that unutilized funds will be equally 
distributed amongst the Member States for the whole 
of the period in question (two months). In fact, as they 
are usually carried out at the beginning of the period, 
these transfers can only try to correct in advance a 
theoretical imbalance which, in the absence of such 
transfers, would appear at the end of the period. It 
must also be admitted that strict and continuous 
observance of this 'regulation obligation' proves in 
reality to be practically impossible. Nevertheless, the 
present result could be improved by reducing the 
length of the period covered by the estimates. 
2.33. The distribution of unused balances amongst 
the Member States, which is mentioned in Regulation 
No 2891/77(6), only concerns balances on accounts 
opened with the national treasuries. The system fol­
lowed by the Commission, however, also includes bal­
ances held with the central banks. Though no Member 
State pays interest on accounts opened by the Commis­
sion with its Treasury, Ireland and the United King­
dom pay interest on accounts opened with their central 
banks. The Commission, whilst abiding by the princi­
ple of equal distribution of surpluses according to the 
Table 2.2 — Discrepancies between the theoretical and the actual distribution of surpluses in 1983 (April to December) 
Month 
July 
August 
September 
October 
November 
December Belgium 
ECU % 
17 2,27 
39 4,65 
69 5,16 
16 1,26 
-11 -1,32 
-13 -1,48 
5 0,54 
-21 -0,73 
-38 -1,44 Denmark 
ECU % 
-11 -1,42 
- 3 -0,32 
-21 -1,58 
-12 -0,98 
- 4 -0,43 
- 3 -0,32 
- 4 -0,46 
-27 -0,96 
-31 -1,15 FRofGer-
ECU % 
-17 -2,22 
88 10,43 
221 16,52 
65 5,15 
43 4,98 
36 4,02 
-45 -4,83 
50 1,76 
-88 -3,31 Greece 
ECU % 
68 8,92 
42 4,96 
11 0,85 
47 3,73 
26 3,07 
13 1,44 
21 2,26 
-16 -0,57 
29 1,08 France 
ECU % 
- 67 - 8,87 
-129 -15,41 
-133 - 9,94 
- 75 - 5,88 
-108 -12,67 
-118 -13,11 
-120 -12,90 
- 76 - 2,65 
37 1,40 Ireland 
ECU % 
15 1,98 
1 0,14 
3 0,22 
17 1,33 
22 2,57 
24 2,68 
13 1,45 
-4 -0,14 
10 0,36 Italy 
ECU %' 
11 1,41 
-13 -1,52 
-39 -2,93 
- 8 -0,64 
44 5,18 
38 4,23 
132 14,17 
106 3,72 
101 3,80 Luxembourg 
ECU % 
2 0,27 
1 0,11 
1 0,06 
1 0,05 
6 0,75 
10 1,10 
10 1,12 
9 0,33 
11 0,43 Netherlands 
ECU % 
-27 -3,52 
- 7 -0,78 
-20 -1,50 
— -0,02 
9 1,06 
-23 -2,55 
-20 -2,17 
-98 -3,45 
-79 -2,95 United 
Kingdom 
ECU 
9 
-19 
-92 
-51 
-27 
36 
8 
77 
48 % 
1,18 
-2,26 
-6,86 
-4,00 
-3,19 
3,99 
0,82 
2,69 
1,78 system which it applies, might therefore be tempted to 
give preference, in the two Member States in question, 
to transfers of funds from the treasuries to the central 
banks. 
2.34. The correct distribution of surpluses amongst 
the Member States depends very closely on the reliabil­
ity of estimates of receipts and payments. An examina­
tion of this distribution may therefore be considered to 
be a valid test of the overall efficiency of the forecast­
ing system used. Using the bank statements for the 
accounts in question, therefore, the Court retraced 
movements of average monthly balances expressed in 
value terms for the last nine months of the financial 
year 1983(7). In accordance with the logic of the Com­
mission's system. The examination also covered 
accounts with national treasuries and central banks. 
Table 2.2 therefore reveals the monthly discrepancies in 
percentage terms between, on the one hand, the pro­
portion of unused funds held at the treasuries and the 
central banks of each Member State, and, on the other 
hand, the requirements of the regulations. The results 
show clearly that the system followed by the Treasury 
department often did not result in a correct distribution 
of surpluses during the nine months in question. These 
discrepancies point up the lack of reliability and accu­
racy in the forecasting system used by the Commis­
sion's Treasury department. 
Cash management by the other institutions on 
the basis of estimates 
2.35. Apart from the Commission, only the Parlia­
ment uses a forecasting system. As is the case at the 
Commission, this system is only partly based (or rather, 
24 Official Journal of the European Communities 16.12.85 
Table 2.3 — Rate of coverage of net needs for the financial year 1983 
(Mio ECU) 
Institution 
Parliament (') 
Council 
Commission (2) 
Court of Justice 
Court of Auditors 
Economic and Social 
Committee Payments from 
appropriations 
carried forward 
(1) 
25,1 
6,6 
1,4 
0,6 
0,7 Payments from 
appropriations 
for the financial 
year 
(2) 
191,3 
87,6 
25,7 
14,8 
21,7 Revenue for the 
financial year 
(3) 
19,1 
10,2 
3,8 
2,0 
2,4 Net needs for the 
financial year 
(4) = (l) + (2)-(3) 
197,3 
84,0 
23,3 
13,4 
20,0 Total of the 12 
average monthly 
balances on bank 
accounts in 1983 
(5) 
246,4 
96,6 
59,5 
16,2 
• 23,5 Rate of coverage 
of net needs (*) 
(6)=%(5)/(4) 
125 % 
115% 
255 % 
121 % 
118% 
(') As the Parliament had no interest-rate scales for the imprest account bank accounts, both the bank balances and the payments made out of the 
imprest accounts have been excluded from these figures. In addition, as interest-rate scales were also unavailable for certain bank accounts held by 
the Treasury Department, the average balance of these bank accounts (equal to 4 % of the total average balance) had to be estimated on the basis of 
the average balances on the 15th and the 31 st of each month. 
(2) In view of the fact that 16% of the interest-rate scales were missing, the idea of reconstituting these amounts for the Commission had to be 
abandoned. 
(3) The rate of coverage represents the surplus of cash over actual needs in percentage terms. A rate of 150 %, for example, would mean that, as an 
average over the year, available assets were equal to one and a half times the cash needs of the institution in question. 
very often, is not based at all) on the authorizing 
department's estimates. With the exception of the 
Council, which does partly make use of estimates, the 
other institutions calculate the level of their monthly 
cash needs without making proper estimates. Some 
details may vary, but as a general rule the procedure 
consists of dividing total forecast needs for the imple­
mentation of the annual budget by 12. cash situation was usually in surplus did not, however, 
prevent the appearance during the financial year of 
periodic overdrafts in the case of the Council, the 
Court of Justice and the Economic and Social Com­
mittee. The scale and the duration of these overdrafts, 
which were usually minimal, varied from one institu­
tion to another. 
2.36. The Court recalculated the average monthly bal­
ance during 1983 of all the bank accounts held by insti­
tutions other than the Commission. Comparison of the 
figures thus obtained with the net financing needs 
provided a basis for calculating for each institution the 
extent to which its needs were covered by its assets. 
Table 2.3 shows clearly how far the results are from the 
ideal of nil balances. The disparity between the quant­
ity of funds supplied to the institutions and their actual 
needs resulted during most of the financial year 1983, 
and also during the financial year 1984, in the accumu­
lation of surpluses which were transferred to deposit 
accounts. The Economic and Social Committee, for 
example, converted its cash surpluses into term depos­
its. Under the terms of present Community regulations, 
this practice of immobilising funds in deposit accounts 
can only be accepted in special, isolated cases, where 
there is a cash surplus. Frequent use of term deposits is 
not at all in line with the objectives of cash manage­
ment in the Communities and only serves to emphasize 
the unsuitability of the forecasting system used by the 
Economic and Social Committee. The fact that the Resources employed 
2.37. The equipment, in particular the data-processing 
equipment used, is very frequently not up to the 
required standard. In numerous cases the situation is 
still unacceptable, in particular in the Commission's 
central treasury departments. In view of the large 
quantities of funds handled, the complexity of the 
Community regulations and the fact that the transac­
tions are carried out in several currencies, the inade­
quacy of the resources employed by the Commission 
and the complete unsuitability of the data-processing 
system — to which attention has already been drawn 
by the Court(8) — are surprising. Thus, the computer 
print-outs giving details of the bank accounts are prod­
uced after such long delays that the treasury depart­
ment has been obliged to keep a parallel, manual set of 
accounts in order to be able to monitor the situation of 
its bank accounts on a day-to-day basis. 
16.12.85 Official Journal of the European Communities 25 
Procedures 
2.38. The absence of any regulation dealing with the 
question of cash management has not been made good 
by precise and complete internal rules. None of the 
institutions has a written document setting out in pre­
cise terms the tasks and responsibilities of the depart­
ment responsible for cash resources and cash manage­
ment. Similarly, there is, in general, no description of 
the way the various back-up systems for cash manage­
ment should operate. Nevertheless, the Court noted 
that efforts had been made by the Commission's cen­
tral treasury departments to define in writing the tasks 
and responsibilities of the officials employed there. 
Number of bank accounts 
2.39. The Court has already criticized the excessive 
number of bank accounts maintained by some institu­
tions^). This criticism may be extended to all institu­
tions, except for the Court of Justice and the Court of 
Auditors, which have concentrated their banking trans­
actions on a limited number of banks (in the case of the 
Court of Auditors, one bank only). For example, the 
number of bank accounts maintained by the Commis­
sion at 31 December 1984 was 57. The number of the 
Parliament's bank accounts is still too high (it fell from 
42 on 31 December 1983 to 39 on 31 December 1984 
and in each case respectively 20 and 19 accounts were 
for the sole use of the General Treasury department); 
there are, for example, still accounts at five different 
banks in Luxembourg, for no apparent reason. Most 
usually this practice may be explained by the institu­
tions' desire to accommodate their various creditors 
(officials, suppliers etc.) by using, as far as possible, an 
account at the same bank as the creditor in order to 
reduce the delay before payment is received. The Court 
also observed that during the financial year 1983 some 
institutions maintained bank accounts where the vol­
ume of business was too low to justify their retention. 
Banking terms 
2.40. At this point the Court would reiterate the fact 
that the institutions were unable to supply it with a 
document setting out all the terms governing their 
banking arrangements. Some institutions are more or 
less accurately informed regarding the interest rates 
paid on their credit balances, whereas their lack of 
knowledge of the other conditions applying to their 
bank accounts, on the other hand, is almost total. 
(a) The institutions do not always use the bank which 
offers the best conditions for carrying out a parti­
cular transaction. For example, during the financial year 1983, the two banks in Luxembourg which 
offer the best conditions for drawing cheques were 
not used for this type of transaction by the Parlia­
ment. 
(b) The checks carried out by the institutions ex post 
facto (for the purpose of checking that the banks 
have correctly applied the terms that they have 
granted) are completely inadequate and the task is 
rendered almost impossible because of the institu­
tions' unawareness of these terms, because of the 
absence of full information on interest scales 
(which constitute an indispensable tool for any 
check on some of the terms), because of the inade­
quacy (Parliament) of certain supporting docu­
ments supplied by some banks and because in one 
case (Commission) such supporting documents are 
not supplied at all. 
2.41. Generally speaking, these terms are not nego­
tiated sufficiently thoroughly by the institutions, in 
spite of the fact that considerable gains may be 
achieved in this field. For example, whilst this study 
was being carried out, the Council renegotiated the 
interest rate which it receives from one of its banks in 
Brussels. Whereas previously the Council had received 
on this particular account an annual interest rate of 
only 0,5 %, it was able to obtain with effect from 1 Jan­
uary 1984 the same interest rate as had been granted by 
the bank concerned to the Commission, which during 
the financial year 1983 was equivalent on average to 
approximately 9,6%. This enormous difference high­
lights the importance for all the institutions of harmon­
ized and, if possible, centralized, negotiations with the 
banks. 
2.42. The fact is that there are considerable differ­
ences between the terms granted by the banks. For 
example, in 1983, for the Commission: 
(a) average interest rates paid on credit balances in 
Belgian francs in accounts held in Belgium varied 
in a ratio of 1:3; 
(b) some banks, with very low volumes of business, 
offered interest rates which were slightly higher 
than those offered by the three banks most fre­
quently used by the Commission; 
(c) average interest rates varied from 2,5 % to 3,4 % in 
the case of DM accounts in the FR of Germany 
and from 11,688% to 15,383 % in the case of lira 
accounts in Italy; 
(d) the interest rate on credit balances on current 
accounts in ECU varied from 6,983 % to 9,625 %. 
Getting the banks to compete with regard to the entire 
range of banking services offered, including value 
dates (for example, it is sometimes more profitable to 
obtain a reduction of one day's value in the case of fre­
quently-repeated transactions rather than a slight 
increase in the interest rate paid on credit balances) is 
26 Official Journal of the European Communities 16. 12. 85 
the only way of securing good terms. So far, however, 
only the Parliament has used the tendering procedure 
as part of the reorganization of its cash management 
system. 
Internal control 
2.43. The Court noted a certain number of weak­
nesses in internal control. 
(a) The organization of, and the rules governing, secur­
ity, in particular for the cash offices, should be 
reviewed (Economic and Social Committee). 
(b) The principle of separation of responsibilities 
between the authorization of an item of expendi­
ture and the transfers of funds connected with the 
payment should be observed (Council). 
Centralization of management 
2.44. Little is said in the regulations about cash man­
agement and they are absolutely silent regarding the 
need for harmonization and centralization of this task. 
But if the regulations are followed to the letter, control 
of cash resources in each institution is the almost exclu­
sive responsibility of the accounting officer. For exam­
ple, the Commission's Treasury department, in spite of 
the fact that it obviously plays a key role in such mat­
ters, has no responsibility, and does not even have any 
rights, regarding the monitoring of the management of 
funds in the other institutions, with unfortunate conse­
quences. 
Overall financial flows 
2.45. The transfer circuits for funds within the Com­
munities are sometimes too long. For example, funds 
intended for the Economic and Social Committee are 
transmitted via the Council. The time taken to transmit 
these funds could be usefully reduced if the Commis­
sion was able to transfer them directly to the Economic 
and Social Committee. 
2.46. In addition, transfers of funds between the insti­
tutions often result in the deduction by the banks of 
days of value, which reduces the amount of interest 
received on credit balances. In most cases this happens 
because the same bank was not used by the two institu­
tions in question, or because same-day value dating 
was not included amongst the terms offered by the bank, or else because the bank did not abide by the 
agreed terms. Highlighting cases of this kind demon­
strates the need for a stricter form of ex post facto con­
trol than that which at present exists in the various 
institutions. 
Powers of negotiation with the banks 
2.47. The fact that the various institutions approach 
the banks singly obviously weakens their overall pow­
ers of negotiation. This is particularly true of the small 
institutions: they could certainly obtain better banking 
terms if they could avail themselves of the same 'Euro­
pean Communities' label and present themselves under 
it. Organized and centralized negotiation with the 
banks ought to make it possible to avoid the considera­
ble discrepancies observed by the Court between con­
ditions obtained by the different institutions. By way of 
example, in the case of one bank with which all the 
institutions, except the Economic and Social Com­
mittee, had an account, the rate of interest paid on 
credit balances varied during the financial year 1983 
from 2,5 % to more than 10 %. 
2.48. Organized negotiations should go beyond the 
question of interest rates and should include other 
terms, including the question of the deduction of days 
of value. Bearing in mind the financial weight of the 
Communities, in particular, the institutions should ins­
ist on obtaining same-day value-dating for transactions 
between institutions, but perhaps also the 'combining' 
of accounts, as well as any condition and service which 
may reasonably be demanded. 
Use of the ECU 
2.49. The Commission's Treasury department 
attempts to make use of the ECU whenever possible, in 
particular for transfers to other institutions and for 
exceptional payments. It is undeniable that increased 
use of the ECU would limit exchange risks and reduce 
transfer operations and would considerably facilitate 
the setting-up of a centralized system for cash manage­
ment. The fact that financial transactions within the 
Community are carried out in an excessively varied 
number of currencies clearly constitutes one of the 
main handicaps to the setting-up and the success of a 
system of this kind. 
2.50. Nevertheless, in spite of the effort that has been 
made, the proportion of payments made in ECU is still 
16. 12.85 Official Journal of the European Communities 27 
low (approximately 6 % of all payments made by the 
Commission in the implementation of the 1983 
budget). This low rate is due to the attitude of certain 
Member States, but also of the Council, which, as an 
institution, refuses to accept the ECU as a payment 
instrument. Consequently the monthly advances of 
funds from the Commission to the Council and then 
from the Council to the Economic and Social Com­
mittee are effected in different national currencies and 
not in ECU, as is the case with all the other institu­
tions. This practice increases both the number of trans­
fer operations and the exchange risks. 
Conclusions 
2.51. In general, the Court's investigation has shown 
that the institutions do not attach enough importance 
to cash management, which explains the inadequacy of 
the resources employed and the lacunae in the existing 
system. 
2.52. In the short term, the Court believes that the 
Community institutions and bodies must: (a) formalize procedures and tasks concerning cash 
management, 
(b) set up (or improve in cases where it exists) a system 
for determining estimated financial needs, using, 
wherever possible, forecasts made by the authoriz­
ing departments, 
(c) drastically reduce the number of bank accounts 
and select, through a process of competitive tender­
ing, a limited number of banks which offer the best 
terms, 
(d) regularly check that the terms granted by the banks 
are being implemented; 
(e) ensure that adequate resources, in terms of equip­
ment and manpower, are available to them; 
(f) standardize as far as possible the use of the ECU as 
a means of payment. 
2.53. In the longer term, the Court recommends that 
thought should be given to the extent to which the pres­
ent Community regulations are designed to achieve 
sound cash management. 
(') Revenue and expenditure account and balance sheet of 
assets and liabilities relating to operations under the 1984 
budget, Volumes IV, Doc. (COM(85)188 FR — Final), 
and V, Doc. (COM(85)189 FR — Final). 
(2) Annual report concerning the financial year 1983, OJ 
C 348, 31. 12. 1984. 
(3) Financial Regulation of 21 December 1977 applicable to 
the general budget of the European Communities, OJ 
L 356, 31. 12. 1977. 
(4) Annual report concerning the financial year 1980, OJ 
C 344, 31. 12. 1981. 
(5) Commission Regulation of 30. 6. 1975 on measures of 
implementation of certain provisions of the Financial 
Regulation of 25. 4. 1973, OJ L 170, 1. 7. 1975. 
(6) _ EEC Treaty, Articles 207 and 208. 
— Regulation No (EEC) 2891/77 of the Council, of 
19. 12. 1977 implementing the Decision of 21. 4. 1970 
on the replacement of financial contributions from 
Member States by the Communities' own resources, 
OJ L 336, 27. 12. 1977, Article 12. — Financial Regulation of 21.12. 1977 applicable to 
the general budget of the European Communities, OJ 
L 356, 31.12. 1977, Articles 20,46,48,49 and 70. 
— Commission Regulation of 30.6. 1975 on measures 
of implementation of certain provisions of the Finan­
cial Regulation of 25.4. 1973, OJ L 170, 1.7. 1975, 
Titles VIII and IX. 
(7) The discrepancies concerning the first three months of the 
financial year 1983 were the subject of observations by 
the Court in its annual report concerning the financial 
year 1982, OJ C 357, 31. 12. 1983, Chapter 9. 
(8) — Annual report concerning the financial year 1980, OJ 
C 344, 31. 12. 1981, paragraphs 2.6 and 2.7. 
— Annual report concerning the financial year 1982, OJ 
C 357,31.12.1983, paragraph 2.29. 
(9) Annual report concerning the financial year 1982, OJ 
C 357,31. 12. 1983, paragraphs 2.11, 2.12, 2.14 and 2.30. 
28 Official Journal of the European Communities 16. 12. 85 
CHAPTER 3 
Revenue 
3.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information 
Financing of the budget 
• Recording and recovering revenue due 
Value-added tax 
Option between transitional Methods A and B 
Inspection and enforcement by national services 
Difficulties in application of VAT own resources 
Agricultural levies: Suspension of levies on beef and veal imports 
Customs duties: Exemptions from customs duties applied unilaterally 
by Member States 
General comment arising on the management of own resources 3.1 — 3.2 
3.3 
3.4 
3.10 
3.11 
3.11 
3.18 
3.19 
3.23 
3.29 
3.34 — 3.9 
— 3.9 
— 3.22 
— 3.17 
— 3.22 
— 3.28 
— 3.33 
— 3.36 
INTRODUCTION 
3.1. This chapter relates to own resources and certain 
miscellaneous revenues of the European Communities 
included in 'Revenue' of the general budget. Revenues 
of the European Coal and Steel Community are con­
sidered in a separate report by the Court, while reven­
ues of the European Development Fund, negative 
expenditures, contributions by certain Member States 
to Euratom research programmes, and pension, tax and 
other deductions from staff remuneration are relevant 
to other chapters of this present report. and value-added tax (VAT) not exceeding 1 % of a uni­
form Community-wide basis of assessment. Exception­
ally, Greece continues to pay a financial contribution 
in lieu of VAT, based on its gross national product, in 
accordance with Article 4(2) of the aforementioned 
decision and pending the introduction in that Member 
State of the common system for this tax. 
SUMMARY OF FINANCIAL 
INFORMATION 
3.2. The revenue under consideration consists, for the 
most part, of the own resources allocated to the Com­
munities by Council Decision 70/243/ECSC, EEC, 
Euratom of 21 April 1970 ('), that is to say, Common 
Customs Tariff duties; agricultural levies, including 
sugar and isoglucose production and storage levies; 3.3. A summary of the general budget revenue of the 
Communities for 1983 and 1984 is set out in Table 3.1. 
This shows the figures estimated in the 1984 original 
budget (2), the figures after amendment by amending 
and supplementary budget No 1 (3), and the actual out­
turn of revenue for the financial year in question (see 
paragraph 3.7 below). 
16.12.85 Official Journal of the European Communities 29 
Table 3.1 — Revenue 1983 and 1984 
(Mio ECU) 
Type of revenue 
Customs duties 
Agricultural levies 
Sugar and isoglucose levies 
VAT own 
resources 
Financial contributions 
Sub-total 
Adjustments to VAT own 
resources 
for 1983 
1982 
1981 
1980 
1979 
Miscellaneous revenue 
Balance from previous year 
Total revenue available 
Revenue required to finance 
expenditure 
Deficit 
To be financed partially by 
repayable advances 
Final balance of year — see 
paragraphs 3.6(b) and 4.6 1983 
Actual 
revenue 
(1) 
6 988,6 
1 347,1 
948,0 
13 699,0 
217,7 
23 200,4 
— 
-256,6 
26,8 
35,6 
7,3 
265,3 
1 486,7 
24 765,5 
24458,4 
+ 307,1 1984 
Original budget 
(2) 
7 623,5 
1 946,7 
1 003,3 
14 565,9 
— 
25139,4 
p.m. 
p.m. 
p.m. 
p.m. 
p.m. 
222,1 
p.m. 
25 361,5 
25 361,5 
— 
— 
— Amending and 
supplementary 
budget 
(3) 
+ 260,0 
— 
+ 222,0 
-188,9 
+ 224,2 
+ 517,3 
- 198,5 
+ 5,2 
7,9 
6,1 
— 
+ 0,7 
+ 307,1 
+ 617,8 
+1 887,2 
1 269,4 
1003,4 
- 266,0 Final budget 
(4) 
7 883,5 
1 946,7 
1 225,3 
14 377,0 
224,2 
25 656,7 
-198,5 
5,2 
- 7,9 
- 6,1 
— 
222,8 
307,1 
25 979,3 
27 248,7 
1 269,4 
1003,4 
-266,0 Actual 
revenue 
(5) 
7 960,8 
1 260,0 
1 176,4 
14 372,1 
222,5 
24991,8 
-198,5 
38,7 
19,4 
12,7 
15,9 
271,8 
307,1 
25458,9 
26 879,7 
1 420,8 
593,5 
-827,3 Variation 
(5)-(4) 
(6) 
+ 77,3 (+ 1,0 %) 
-686,7 (-35,3 %) 
- 48,9 (- 4,0 %) 
- 4,9 (- 0,04%) 
- 1,7 (- 0,8 %) 
-664,9 (- 2,6 %) 
Financing of the budget 
Exhaustion of own resources 
3.4. Article 199 of the EEC Treaty provides that all 
items of revenue and expenditure of the Communities 
shall be included in estimates to be drawn up for each 
financial year and shall be shown in the budget, and 
that the revenue and expenditure shown in the budget 
shall be in balance. The original budget for the finan­
cial year 1984 (4) showed that, after revenue from the 
traditional own resources of customs duties, agricul­tural levies and sugar levies, the amount remaining to 
be financed from own resources accruing from VAT 
necessitated application of a VAT own resources rate 
of 0,9971 %. In March 1984, the Commission con­
cluded that revenue would fall short of expenditure by 
2 726 Mio ECU, and it informed the budgetary auth­
orities in April 1984 that only 43 Mio ECU remained 
available within the 1 % ceiling. The Commission 
therefore proposed the introduction of other measures 
to cover the balance of budgetary requirements in 1984. 
3.5. In its opinion No 1/84 of 7 June 1984 (5), the 
Court took the view that the combined provisions of 
30 Official Journal of the European Communities 16.12.85 
Article 5 of the EEC Treaty (which requires the Mem­
ber States to 'take all appropriate measures... to ensure 
fulfilment of the obligations...resulting from action 
taken by the institutions of the Community') and of 
Article 199 placed upon Member States an obligation 
to make available the balance of funds necessary to 
cover budgetary requirements. 
3.6. The amending and supplementary budget No 1, 
adopted on 25 October 1984, increased the VAT own 
resources rate to the 1 % ceiling. The shortfall was cov­
ered within the budget by two new budget lines. The 
Court considers that these do not comply with normal 
budgeting principles, nor with the requirement of 
Article 199 of the EEC Treaty that annual revenue and 
expenditure of the Communities should be in balance: 
(a) Article 820 — 'amount to be financed by reimburs­
able advances granted by the Member States in 
1984'— 1 003,4 Mio ECU. 
The Court adheres to the view which it expressed 
in its opinion No 1/84, that financing the budget 
by means of reimbursable advances does not fulfil 
the obligations placed on the Member States by the 
EEC Treaty. 
(b) Article 302 — 'expected balance from current year' 
266 Mio ECU. 
The Court considers that the introduction of this 
article into the budget of the current year was sim­
ply a device for disguising the fact that the budg­
eted expenditure exceeded available revenue, that 
is own resources plus the reimbursable advances, 
which is contrary to the provisions of Article 199 of 
the EEC Treaty. 
Outturn of the budget 
3.7. Customs duties, sugar levies and VAT own 
resources were each very close to the revised estimate 
contained in the amending and supplementary budget 
No 1. On the other hand, revenue from agricultural lev­
ies was 686,5 Mio ECU (35%) below the estimate. The 
Commission has explained this as being due to a com­
bination of reduced imports, lower levy Yates on cereals 
and a high exchange rate for the dollar. The Court con­
siders that the effect of these facts should, to a great 
extent, have been taken into account during the adop­
tion of the budget. 
3.8. Neither in the budget nor in the accounts, is the 
figure for agricultural levies own resources analysed by commodity, nor is the income from levies shown gross 
of the EAGGF expenditure on monetary compensatory 
amounts. This global accounting, which was com­
mented on in the Court's annual report on the financial 
year 1979 (6), paragraph 3.22, does not facilitate finan­
cial analysis, and it may be that the introduction of 
more detailed accounting would have assisted more 
precise revision. In any case, the trend in agricultural 
levies over the preceding five years clearly demon­
strates that the estimate of some 1 900 Mio ECU was 
unrealistically high (see Annex III, Table 19). 
3.9. Without prejudice to the comments made in para­
graph 3.6 above, the Court also notes that the outturn 
was affected by the articles mentioned therein. The out­
turn for Article 302 is shown in the accounts as zero. 
For Article 820, only 593,5 Mio ECU of the 1 003,4 Mio 
ECU budgeted for was in fact made available by 
31 December 1984. Some of the consequences on 
expenditure of the budgetary problems are referred to 
in paragraph 4.8 of this report. 
RECORDING AND RECOVERING 
REVENUE DUE 
3.10. In its annual reports on the financial years 
1980 (7) and 1983 (8), the Court commented on the sys­
tem of recording and recovering revenue due. Despite 
some corrective action taken by the Commission, 51 
receivable orders for unquantified amounts were 
recorded as at 31 December 1984. 
VALUE-ADDED TAX 
Option between transitional Methods A and B 
3.11. The Council Decision of 21 April 1970 introd­
uced the concept of financing the Communities' 
budget entirely from own resources, including a VAT 
element on a uniform base for all Member States. 
Council Regulation (EEC, Euratom, ECSC) 
No 2892/77 of 19 December 1977 (9) introduced a tran­
sitional measure giving the Member States the alterna­
tive of paying on the basis of either Method A (returns) 
or B (revenue). 
16.12.85 Official Journal of the European Communities 31 
3.12. These transitional arrangements were intended 
to continue in force pending a uniform definitive sys­
tem, to be decided upon on the basis of proposals to be 
put forward in a report by the Commission, before 
31 December 1984 (as required by Regulation No 
2892/77, as amended by Council Regulation (EEC, 
Euratom, ECSC) No 3625/83 of 19 December 1983 (10)). 
It was the intention that the amounts of VAT own 
resources were to be the same whether determined 
under the Method A or B. 
3.13. The Court considers that the choice between 
Method A and Method B under the present transitional 
arrangements is not neutral. Based on enquiries it has 
made of the Member States, it draws attention to the 
following aspects: 
(a) Each Member State is free to apply whichever 
method it prefers. Only Denmark and Ireland ini­
tially chose to follow Method A, and Denmark 
exercised its right to change to Method B for the 
year 1983, as first presented in summary accounts 
submitted on 1 July 1984. The Court has calculated 
that this changeover has reduced the amount of 
own resources payable by Denmark by some 6 Mio 
ECU (2,2%) for the year 1983. 
(b) Own resources determined under Method B 
depend principally upon the amounts of national 
VAT collected by the Member States, whereas 
Method A relates to the amounts established as 
due. In a questionnaire sent by the Court to each of 
the Member States (excluding Greece), they were 
asked 'under what circumstances, if any, would a 
sum recorded as prima facie due, and still believed 
to be a valid assessment, be altered or cancelled by 
administrative decision, and to evaluate the econo­
mic impact of these administrative decisions'. 
Broadly, the replies indicated that amounts due 
may be written off in whole or in part where the 
national administration decides that the sum is 
irrecoverable, either because of formal insolvency 
or disappearance of the trader, or where enforce­
ment would create indefensible hardship. The 
amounts written off by the five Member States 
from whom data are so far available, expressed as a 
percentage of VAT collected during 1983, varied 
from 0,23% to 2,8%, with a weighted average of 
1,3%. By extending this to the eight Member States 
concerned, the Court estimates that the amount of 
VAT own resources made available under Method 
B is less than that which would be made available under Method A by at least 170 Mio ECU per year 
in this respect. 
(c) The Court also asked the Member States to eval­
uate the national totals of sums recorded as VAT 
outstanding as at 31 December 1982 and 1983. 
According to the limited information available to 
the Court, the accumulated arrears at the end of 
1983 amounted, on average, to 4,8% of VAT col­
lected during that year. This is based on the infor­
mation provided by five Member States, whose 
individual rates of arrears varied from 4,2% to 6,6%. 
Extended to all VAT collected under Method B 
(i.e. excluding Greece and Ireland), and calculating 
with VAT own resources at 1%, this implies that an 
amount of 655 Mio ECU potential own resources 
was outstanding, due for collection, at 31 Decem­
ber 1983. 
(d) In 1984, the Court noted that legislation had been 
enacted in Italy which allowed taxable persons to 
submit supplementary returns during a period in 
1982. These returns could be made only by taxable 
persons whose previous returns were either under 
dispute or had not been properly completed, and 
the amounts due under this form of, in effect, 
'self-assessment' had to be within a fixed percen­
tage of the amounts estimated by the Italian auth­
orities and had to be paid without further delay. 
This measure was intended to bring about settle­
ment in some of the long outstanding cases known 
to the Italian authorities, but at the cost of remis­
sion of a certain percentage of VAT otherwise due. 
It would thus have a direct effect on own resources 
under Method B, but the Court has yet to receive 
data to evaluate this. 
3.14. Invited by the Court to comment on aspects (b) 
to (d) above, the Commission agreed that amounts 
written off did effectively make a difference between 
the two methods, and that arrears would be of interest 
in the context of any modification. However, the Com­
mission repeated its view that these were not matters 
with which it could concern itself because, it argued, 
current Community legislation limited its competence 
under Method B to amounts collected and calculations 
thereafter. 
3.15. The Court, on the other hand, considers that it is 
of relevance to the Communities to ensure the com­
pleteness of own resources, and that this implies moni­
toring that all returns, establishments and collections of 
32 Official Journal of the European Communities 16.12.85 
VAT arising therefrom are properly undertaken, 
whether the own resources are thereafter calculated on 
the basis of returns under Method A or from amounts 
collected under Method B. 
3.16. The Court therefore regrets that the report pre­
sented by the Commission (''), as referred to in para­
graph 3.12 above, does not take any account of the dif­
ferences between the methods as noted above by the 
Court. It considers further that the reference in the 
report to an exercise carried out by the Statistical Off­
ice, which, prima facie, raises certain questions as to 
the completeness of Member States' VAT bases for 
own resources purposes when compared with national 
statistics, should have been developed. Similar ques­
tions also arose during an exercise carried out indepen­
dently by the Court wherein it noted that the data on 
which the weighted average of the national rates of 
VAT was determined led, for some Member States, to a 
higher expectation for VAT collections than those actu­
ally reported in the Annual Summary Accounts. 
3.17. The questions posed by the Court in para­
graphs 3.13 and 3.16 above involve very material 
amounts of potential own resources. The Court there­
fore suggests that the Commission should appoint an 
expert working group to study them in more depth. 
Meantime, the Court considers that, having regard to 
the real differences between the transitional Methods A 
and B, the Commission's recent proposal to maintain 
the status quo disregards the objective of a uniform 
definite assessment basis, as required by Article 4 of the 
Council Decision of 21 April 1970. 
Inspection and enforcement by national 
services 
3.18. Under current Community legislation, the prime 
responsibility for inspection and control of collection 
procedures within the Member States is placed upon 
the national authorities. The Court notes that the incid­
ence of inspections and controls of VAT records 
on-the-spot in taxable persons' premises is uneven. 
Clearly, this is only one of the control measures used, 
but a definite relationship has been noted between the 
efforts allocated by Member States to such activities 
and the additional revenue resulting therefrom; the 
amount of additional own resources resulting from 
some inspections carried out in 1983 by seven Member 
States totalled 216 Mio ECU. The Court asked the 
Commission whether it has formed an opinion as to 
what might be an optimum and a minimum frequency for such controls, but the Commission replied that it 
felt unable to do so, having regard to the different cir­
cumstances applying in each Member State. Neverthe­
less, the Court considers that the Commission should 
monitor the effectiveness of national collection proce­
dures, and controls over them. 
Difficulties in application of VA Town 
resources 
3.19. In paragraphs 3.14 to 3.20 of its annual report 
on the financial year 1983, the Court commented on a 
report made by the Commission on 14 September 1983 
which described several of the fiscal 'difficulties' that 
had been encountered in the application of the Sixth 
Council VAT Directive of May 1977. Twelve of the 
cases concerned led to a loss of VAT own resources, 
and the Court expressed its concern that these matters 
were taking so long to resolve. The Commission agreed 
to put all such cases on record in the accounts (see par­
agraph 3.10 above), but defended the delay in pressing 
these matters to conclusions by the need for the formal 
aspects of judicial proceedings to be scrupulously pre­
pared. 
3.20. The Commission's proposal for a 19th Council 
VAT Directive (12) dated 5 December 1984 included 
amendments designed to eliminate some of these 'diffi­
culties'. The Court notes however, that only one of 
these was to be found amongst the 12 cases which had 
a negative effect on own resources. 
3.21. The Court examined in relation to 1984 two 
other 'difficulties' which it considers should rapidly be 
resolved. The first relates to the practice in Denmark 
whereby a new car is valued for VAT purposes without 
taking into account the registration tax; this tax 
amounts to 105% on the first 2 500 ECU of the value of 
the car and 180% of the value above that level. Taxes 
imposed on new cars by the Irish, Netherlands and 
United Kingdom authorities are included in the valua­
tion for VAT purposes under Article 11 .A (2) (a) of the 
Sixth VAT Directive (13). The Court invites the Commis­
sion to examine this difference of treatment, which 
could have an effect on own resources of some 8 Mio 
ECU. 
3.22. The second difficulty concerns the lack of clar­
ity as to the inclusion or not of hire-purchase or financ­
ing charges in the value for VAT purposes of sales tran­
sactions. This matter is not covered directly by the 
Sixth VAT Directive, and practices vary among the 
16.12.85 Official Journal of the European Communities 33 
Member States. The Court is of the opinion that the 
Commission should continue to insist on uniformity. 
AGRICULTURAL LEVIES: SUSPENSION 
OF LEVIES ON BEEF AND VEAL 
IMPORTS 
3.23. Council Regulation (EEC) No 805/68 of 
27 June 1968 (14), which established a common organi­
sation of the market in beef and veal, provides for a 
system of levies to be applied to imports of these goods 
from third countries. This Regulation, and subsequent 
amendments, introduced provisions whereby these lev­
ies could be totally or partially suspended under certain 
circumstances. The following paragraphs concern the 
scheme for suspension of levies in respect of imported 
frozen beef intended for processing. 
Quota 
3.24. The quantity of meat on which levy may be sus­
pended is to be determined each year by the Council, 
in accordance with Article 14(2) of the Regulation, by 
reference to the amount by which industrial needs are 
expected to exceed Community supplies of meat suita­
ble for industrial use. 
3.25. Import quotas are to be established for this pur­
pose within: 
(a) system A, concerning meat imported for the manu­
facture of preserved food, which does not contain 
characteristic components other than beef and 
jelly, and for which 100% suspension of levies is 
allowed; 
(b) system B, concerning meat imported for the pro­
cessing industry for the manufacture of products 
other than the preserved food mentioned above, for 
which suspension of 55% of levy applies. 
3.26. For the period 1 January to 31 December 1984, 
the needs of the processing industries were estimated to 
stay below the available supplies by 60 000 tonnes. 
Nevertheless, on the basis that import concessions must 
be determined in the light of existing international 
agreements and the reciprocal concessions granted to 
the Community, the Commission proposed, and the 
Council decided to adopt, a quota of 50 000 tonnes (25 000 tonnes to each of systems A and B). This deci­
sion was estimated in the Commission's proposal to 
result in a suspension of possible levy amounting to 
82 Mio ECU, plus a further EAGGF expenditure of 
75 Mio ECU for the compensating export of an equiva­
lent quantity of Community produced beef. In the 
Court's view, this decision was contrary to 
Article 14 (2) of Regulation No 805/68. 
Application within the Member States 
3.27. The Court noted that there were variations and 
weaknesses in the application of this suspension sys­
tem in the three Member States visited. While most of 
these referred to the technical implementation and con­
trol of documentation, in one Member State insuffi­
cient distinction was being made between the system A 
and system B importations, and it appeared that sus­
pension of levy at 100% was being granted in all cases. 
Some cases of fraud have been previously noted where­
in high quality meat, normally attracting a high rate of 
levy, has incorrectly benefited from exemption through 
this scheme. The control of such a quota scheme can 
thus have a real effect on own resources. 
3.28. The Court has drawn the Commission's attention 
to these aspects. The Commission admitted that so far 
it had carried out an on-the-spot inspection of this 
long-existing suspension system in only one Member 
State. The Court therefore welcomes its response, in 
which it stated that, following the Court's initiative, it 
would examine the problems identified with the Mem­
ber States concerned and would undertake its own 
inspection visits in each of the Member States. 
CUSTOMS DUTIES: EXEMPTIONS FROM 
CUSTOMS DUTIES APPLIED 
UNILATERALLY BY MEMBER STATES 
3.29. Article 223 (1) of the EEC Treaty states that 'any 
Member State may take such measures as k considers 
necessary for the protection of the essential interests of 
its security which are connected with the production of 
or trade in arms, munitions or war material; such mea­
sures shall not adversely affect the conditions of com­
petition in the common market regarding products 
which are not intended for specifically military pur­
poses'. 
3.30. Several Member States have unilaterally decided 
that they have the power under this Article to exempt 
34 Official Journal of the European Communities 16. 12. 85 
certain imported goods from customs duties. The Com­
mission does not accept that Article 223 was intended 
to cover exemption of customs duties and has been in 
correspondence with the Member States for several 
years. In this correspondence, the Commission cen­
sured such exemptions made by Member States based 
on Article 223 (1) (b). In so doing, it did not make any 
distinction between material having an exclusively mil­
itary nature and material which could equally be used 
for civilian purposes^ 
3.31. For its part, the Court referred to this problem in 
its annual reports on the financial years 1977 (l5) and 
1979 (paragraphs 12.15 and 3.34 respectively), and, in 
particular, asked the Commission to quantify its effect 
on own resources. In reply, the Commission stated that 
it would continue to search for a solution enabling uni­
form rules to apply throughout the Community in full 
compliance with the provisions of the EEC Treaty 
relating to decisions altering or suspending Common 
Customs Tariff duties. 
3.32. It was not until 1 October 1984, however, that 
the Commission began infringement procedures under 
Article 169 of the EEC Treaty by sending out formal 
notices to seven Member States, which have continued 
to apply exemption. The Commission stated that it 
considered these Member States to be in breach of obli­
gations provided for by Council Regulation (EEC) 
No 950/68 of 28 June 1968 (16) on the Common Cus­
toms Tariff. However, the infringement action did not 
cover materials having a specifically military nature. 
The Commission has reserved the right to return to this 
aspect at a later date. 
3.33. The actions of the Member States would appear 
to be based more on national financial and economic 
factors than on military security. The Court hopes that 
there will be no further delay in resolving the matters 
now subject to the Article 169 procedure, and, regard­
ing other aspects that remain outstanding, has asked 
the Commission: 
(a) when will it decide what action to take regarding 
materials of an intrinsically military nature which 
have not been included in the Article 169 proce­
dure even though the argument that these should 
not be exempted from customs duties appears to be 
equally valid? 
(b) whether it can quantify the customs duties that 
might be charged both for goods usable for either 
civilian or military purposes, and for those of an intrinsically military nature, and what is the total of 
these amounts since the Court's first enquiry in 
1977? 
GENERAL COMMENT ARISING ON THE 
MANAGEMENT OF OWN RESOURCES 
3.34. There appears to be a fundamental difference of 
approach between the Court and the Commission to 
questions arising on own resources, well illustrated by 
the observations raised in paragraphs 3.11 to 3.33 of 
this report, and by many of the observations in pre­
vious years. The Commission feels constrained in its 
role by the terms of Community legislation (much of 
which it drafted) which place the prime responsibility 
for the application and control operations upon the 
Member States. Thus for VAT, it replied to the Court's 
enquiries that, since the legislation defined Method B 
as being related to amounts collected by the Member 
States, questions relating to the waiving of amounts 
otherwise due were outside its competence. Similarly, 
on VAT and the beef suspension of levy system, it has 
taken the view that legislation provides for the Member 
States to set up monitoring and control systems, and it 
'will, depend on the competent authorities' judgement 
as to what controls are necessary'. The Commission 
considers that it 'cannot lay down rules on control'. 
3.35. The Court acknowledges that the Commission 
has in the last few years made several proposals to 
obtain more autonomy in its powers to inspect and 
monitor the systems applying in the Member States, 
though most of these proposals have yet to be enacted. 
It welcomes, too, the recent positive response from the 
Commission to accept that it has a role in this respect, 
as given in relation to the suspension system consid­
ered in paragraphs 3.23 to 3.28 above. 
3.36. The Court will continue to encourage the Com­
mission to undertake a stronger role as part of the auto-
controlling process. It considers that there is a responsi­
bility on all parties to work towards ensuring the com­
pleteness of own resources, particularly having regard 
to the remarks in paragraphs 1.6 to 1.22 of this report. It 
emphasizes the importance of quantifying the effect on 
own resources of all outstanding problems and of 
resolving rapidly the most material of these. In line 
16. 12. 85 Official Journal of the European Communities 35 
with this approach, it is clearly the Commission's res­
ponsibility to take the initiative in examining the moni­
toring and control measures applied by the Member States, to report on their adequacy, and to take steps to 
improve and increase their effectiveness where there is 
suspicion as to incompleteness. 
(') OJL 94, 28. 4.1970, p. 19. 
(2) OJ L 12, 16. 1. 1984. 
(3) OJL 329, 17. 12. 1984. 
(4) OJL 12, 16. 1.1984, p. 65. 
(5) OJ C 228, 30. 8. 1984, p. 5. 
(6) OJC342,31. 12. 1980. 
(7) OJC 344, 31. 12. 1981. 
(8) OJC 348, 31. 12. 1984. (9) OJL 336, 27. 12. 1977, p. 8. 
(10) OJL 360, 23. 12. 1983, p. 1. 
(") Doc. COM(85) 170 final. 
(12) Doc. COM(84) 648 final: OJ C 347, 29. 12. 1984, p. 5. 
(13) OJL 145, 13.6. 1977, p. 1. 
C4) OJ L 148, 28. 6. 1968, p. 24. 
(15) OJC 313, 30. 12. 1978. 
(16) OJL 172, 22. 7. 1968, p. 1. 
36 Official Journal of the European Communities 16.12.85 
CHAPTER 4 
European Agricultural Guidance and Guarantee Fund 
Guarantee Section 
4.0. TABLE OF CONTENTS Paragraph reference 
Introduction 4.1 — 4.2 
Summary of financial information 4.3 
Comments on the implementation of the budget 
Presentation of the accounts 
Volume of expenditure to be audited 
Implementation of the budget in 1984 
Questions of regularity 
Collection of the additional levy in the milk sector 
Final shortfall of appropriations 
Conclusion with regard to the implementation of the budget 
Comments on the financial management 
Public storage 
Evolution of expenditure on storage 
Overall evolution of stocks and problems experienced with 
certain products 
Presentation and closing of the annual accounts 
Entry of potential losses into the accounts 
Conclusion with regard to the financial management 
Observations on the internal controls 
Frauds and irregularities 
Value of statistics 
Inadequate results of the campaign against fraud 
Conclusion with regard to the system of fraud prevention 
Clearance of the accounts 
Financial effect of the clearance decisions 
Refusal of approval and overruling of refusal in connection 
with the 1978 and 1979 clearance operations 
Criticism by the Financial Controller of the reservations 
The case of the Milk Marketing Boards, United Kingdom 
The case of wine distillation, France 
Problems posed by the non-cooperation of the Member 
States 4.4 
4.4 
4.4 
4.5 
4.5 
4.6 
4.8 
4.9 
4.10 
4.10 
4.11 
4.12 
4.16 
4.18 
4.21 
4.22 
4.23 
4.23 
4.26 
4.29 
4.30 
4.30 
4.32 
4.33 
4.34 
4.39 — 4.9 
— 4.9 
— 4.7 
— 4.21 
— 4.21 
— 4.15 
— 4.17 
— 4.20 
— 4.44 
— 4.29 
— 4.25 
— 4.28 
— 4.44 
— 4.31 
— 4.42 
— 4.38 
— 4.42 
4.43 — 4.44 
General conclusions 4.45 
16. 12.85 Official Journal of the European Communities 37 
INTRODUCTION 
4.1. In 1984, the management of the EAGGF, Guar­
antee Section, continued to be governed by Council 
Regulation (EEC) No 729/70 of 21 April 1970 (') 
which, together with the provisions of the Financial 
Regulation, in particular Title VIII, forms a legislative 
framework distinct from the rules of the general budget. 
4.2. The main feature of the system of financing 
introduced by Regulation No 729/70 is that the man­
agement is partly decentralized: 
(a) at central level, within the limits of the total appro­
priations of the EAGGF, Guarantee Section, 
entered under Titles 1 and 2 of the operational part 
of the budget and under Chapter 40, which con­
cerns the common organization of the market in 
fishery products (2), the Commission decides upon 
the advances to be granted each month to the 
Member States in their national currency, sets aside 
the corresponding appropriations in ECU by a 
provisional global commitment and effects the 
payment by transfer to the account opened for this 
purpose at the national treasury or other financial 
institution; 
(b) at local level, the financial resources thus made 
available to the Member States enable them to 
effect, through the paying agencies or bodies which 
they have designated, the expenditure financed by 
the EAGGF, Guarantee Section. The Member 
States send the Commission monthly declarations, 
broken down by type of expenditure, in accordance 
with the budgetary nomenclature. At the end of the 
financial year, the Member States forward to the 
Commission an annual summary account; 
(c) at central level, this expenditure, converted into 
ECU, is dealt with in two ways: 
(i) the expenditure declared each month is com­
mitted by chapter, article or item within two 
months following receipt of the statements and 
is then charged as payments, in general within 
the same period. The section of the, revenue 
and expenditure account relating to the 
EAGGF, Guarantee Section, which is drawn 
up before 1 June, summarizes all the preceding 
information; 
(ii) the annual summaries of accounts drawn up by 
the paying agencies are examined ex post facto 
by the Commission under the procedure for 
clearing the accounts. The clearance decision 
constitutes the final stage of the budgetary 
management procedure relating to a specific 
financial year. Its financial consequences, 
whether positive or negative, are entered into the accounts of the financial year during which 
the clearance decision is taken. 
SUMMARY OF FINANCIAL 
INFORMATION 
4.3. The principal financial data on the management 
of the EAGGF, Guarantee Section, appropriations are 
given in Table 4.1. Total appropriations available for 
the financing of EAGGF, Guarantee Section, expendi­
ture in 1984 were 18 375,9 Mio ECU. The Commission 
made available to the Member States appropriations 
amounting to 18 370,2 Mio ECU. The Member States 
declared 18 340,8 Mio ECU in expenditure, which the 
Commission charged to the accounts of the financial 
year, together with 3,1 Mio ECU for payments made 
directly, i.e. total expenditure entered in the revenue 
and expenditure account amounted to 18 343,9 Mio 
ECU, representing a 16 % increase over 1983. 
COMMENTS ON THE IMPLEMENTATION 
OF THE BUDGET 
Presentation of the accounts 
Volume of expenditure to be audited 
4.4. In so far as the practice of negative expenditure, 
introduced by the agricultural regulations separately 
from the financial regulations, tends to persist despite 
criticisms by the Court and the Parliament, it is neces­
sary at least to show the consequences of the practice 
from the point of view of budgetary transparency. After 
grossing up the net balances of expenditure entered in 
the revenue and expenditure account, the actual 
amounts to be audited for the financial year 1984 are as 
follows: 
(Mio ECU) 
(a) gross expenditure 19 938,4 
(b) negative expenditure (receipts) — 1 594,5 
net expenditure 18 343,9 
In this connection, the 1 594,5 Mio ECU of receipts 
incorporated in the EAGGF fund should be compared 
with the 2 436,4 Mio ECU in agricultural receipts 
entered as own resources. 
38 Official Journal of the European Communities 16. 12. 85 
Table 4.1 — Summary of accounts 1984 
(Mio ECU) 
Appropriations 
Automatic carry-overs from 1983: 0,1 
Cancellations of appropriations": 0,0 
Appropriations used: 0,1 
Appropriations from initial budget 
(Titles 1 and 2, Chapters 40 
and 100): 16 542,9 
Appropriations from amending and 
supplementary budget No 1: 1 833,0 
Total available: 18 375,9 
Cancellations of appropriations: 29,4 
Total appropriations used: 18 346,5 Commitments 
Balance of appropriations available in 
the Member States 
at 1. 1. 1984: 
Advances to Member States: 
Total normal advances: 
Total advances paid in 
instalments: 
Total special advances: 
Total advances: 
Repayment of funds 
(GR): 
Exchange difference: 
Total amount of provisional 
total commitments: 
Expenditure committed di­
rectly by the Commission: 
Total: 
Decommitment of balance 
available in the Member 
States at 31. 12. 1984: 
Total commitments: 35,7(') 
9 468,1 
8 630,1 
234,1 
18 368,0 
2,8 
-0,6 
18 370,2 
5,7 
18 375,9 
29,4 
18 346,5 Sums charged to revenue and expenditure 
account 
Payments against automatic carry-overs 
from 1983: 0,1 
Sums charged as payments (2): 
Total charged as normal 
payments: 1 408,4 
Total charged in instalments 
and/or as late payments: 16 932,4 
Total: 18 340,8 
Sums paid directly by 
the Commission: 3,1 
Total payments: 18 343,9 
Automatic carry-overs to 1985: 2,6 
Total: 18 346,5 
(') This balance was included in the commitment of the advance for April. 
(2) The sum charged for May takes into account the consequences of the clearance of the accounts for 1978/79 ( — 25,5 Mio ECU) and corrections to 
expenditure in Italy totalling 23 Mio ECU. 
16.12.85 Official Journal of the European Communities 39 
Implementation of the budget in 1984 
Questions of regularity 
4.5. The various financial constraints which had 
adversely affected the operation of the EAGGF, Guar­
antee Section, in previous financial years were present 
to an even greater extent in 1984. The inadequacy of 
appropriations in the initial budget plus the problems 
related to the tardy adoption of the supplementary and 
amending budget gave rise to a whole series of prob­
lems which obliged the Commission to make numerous 
departures from the provisions applicable to the 
EAGGF, Guarantee Section, (3). For example: 
(a) granting and paying advances to the Member 
States using procedures which were not in accord­
ance with the regulations; 
(b) delaying detailed commitments and the booking of 
payments, or making them in instalments and con­
sequently deferring the accounting of expenditure 
— procedures not provided for in the regulations. 
Collection of the additional levy in the milk sector 
4.6. In connection with the introduction of a system 
of production quotas to be allocated amongst the milk 
producers of each Member State, Council Regulation 
No 857/84 of 31 March 1984 provided for the collec­
tion of an additional levy of up to 100 % of the target 
price for milk on any excess quantity produced. The 
levy was to be collected provisionally at the end of 
each quarter, then calculated definitively on the basis 
of an annual account at the end of the marketing year. 
However, for the first two quarters of the year 1984/85, 
Commission Regulation No 1371/84 provided for the 
collection of the levy on one occasion only, on 15 Nov­
ember 1984. The revenue entered (as negative expendi­
ture) in the supplementary and amending budget for 
1984 totalled 247 Mio ECU. 
4.7. Under pressure from the Member States, the 
Commission adopted a series of amendments which 
deferred the first payment to 15 December 1984 and 
reduced the amount to be paid to 50 % of the amount 
due. In view of the Member States' continuing reluct­
ance to fulfil their obligations, the Commission then decided, on the basis of its estimate at that time, to 
reduce the December advances by a total of 96,1 Mio 
ECU. The only levy actually collected and entered into 
the accounts for 1984 by the Commission was an 
amount of 49,5 Mio ECU paid by the FR of Germany. 
The amount due from the other Member States as at 
15 December 1984 was estimated at 63 Mio ECU. 
Under regulations then applicable, the situation in res­
pect of the sums owed to the Commission by the Mem­
ber States, and vice versa, should have been shown in 
the balance sheet as at 31 December 1984 (4). 
Final shortfall of appropriations 
4.8. Despite the cancellation of 29,4 Mio ECU, the 
outturn for 1984 resulted in the deferment to the finan­
cial year 1985 of a total of 202,4 Mio ECU of expendi­
ture chargeable to the financial year 1984. This shortfall 
of appropriations was mainly due to the non-receipt of 
expected revenue from the additional levy. It should 
however be added that the budget did not allow for a 
consistent reduction in the financial value of the stocks 
either in 1984 or in 1983. Such a reduction, within the 
limits set by Regulation No 1883/78, Article 8, could 
have applied to half the potential loss of 2 500 Mio 
ECU attributable to these stocks, i.e. 1 250 Mio ECU 
(see paragraph 4.19). 
Conclusion with regard to the implementation of the 
budget 
4.9. In sum, the Commission was obliged to make 
increasingly frequent departures from the provisions of 
Title VIII of the Financial Regulation and from those 
derived from Regulation No 729/70, because of the 
unreasonable demands made on the budgetary man­
agement. Most of these irregularities doubtless resulted 
from the pressure of circumstances over which the 
Commission's management services had very little con­
trol. Nevertheless, the large number of detailed irregu­
larities and the fact that they recur frequently does sug­
gest that a system of regulations which tends to func­
tion only in exceptional cases or when infractions are 
expressly tolerated may not be the most suitable one. 
In this context, a substantial improvement may well 
result from the new system currently being studied at 
the Commission with a view to making direct payments 
to the national paying agencies and centralizing these 
agencies' accounts (5). 
40 Official Journal of the European Communities 16.12.85 
COMMENTS ON THE FINANCIAL 
MANAGEMENT 
Public storage 
4.10. 'Second-category' or public storage expenditure 
is to a large extent unavoidable, since intervention pur­
chases of a given product — financed by the Member 
States at a cost and under conditions fixed by law — 
are compulsory. The volume of expenditure repayable 
by the EAGGF during a particular financial year, how­
ever, depends on how strictly management determines 
the technical and financial costs and, in particular, on 
the disposal policy applied. Generally speaking, any 
long-term retention of stocks will ultimately result in 
increased losses, although the extent will depend on 
the product involved. 
Evolution of expenditure on storage 
4.11. Expenditure on public storage amounted to 
2 700 Mio ECU in 1984, i.e. an increase of 35 % over 
1983 expenditure, which itself represented a doubling 
of the level reached over the previous three years. 
Expenditure in the milk sector increased by 71 % 
between 1983 and 1984 and its relative proportion of 
total expenditure rose from 44% to 55%. There was 
also a large increase in expenditure in respect of beef 
(+ 29 %) and olive oil (+ 446 %). Stocks of milk products 
4.13. In 1984 milk products accounted for 55 % of the 
total value of stocks, but more than 80 % of the poten­
tial loss. The quantities of butter stocks were equivalent 
to almost two years' purchases. After about two years, 
butter may well become unfit for human consumption, 
which obviously affects the sales price and therefore 
the real value of the stock. 
Stocks of common wheat 
4.14. As at 30 November 1983, 99,8 % of the common 
wheat stock was described as suitable for making 
bread'; this percentage had fallen to 68,8 % by 30 Nov­
ember 1984, the balance being made up of wheat 
unsuitable for bread-making. This situation resulted 
from the decision to limit the amount accepted for 
intervention to 3 Mio tonnes per year at the price fixed 
for common wheat suitable for making bread. The fact 
that about a third of the stock was thus replaced by a 
nominally inferior quality, combined with a reduction 
in the intervention price, should logically have led to a 
reduction in the average value per tonne, whereas, on 
the contrary, it has increased from 187,9 to 195,4 
ECU/tonnes. This anomaly — which is due to the 
accounting methods used by the Commission, particu­
larly when fixing the carry-over price — can only leave 
a question mark over the true value of the stock and, 
consequently, the apparent lack of potential loss. 
Beef stocks 
Overall evolution of stocks and problems experienced 
with certain products 4.15. As at 30 November 1984, a third of the Com­
munity stocks of beef carcasses was to be found in 
Italy, where the intervention price scale encourages the 
sending of such stocks into intervention. The disposal 
price is particularly low in Italy, resulting in the grea­
test loss — 42 %, compared with an average of 30 %. 
On the basis of the method referred to in paragraph 
4.18 below, the future loss on beef carcasses in Italy 
may be estimated at 180 Mio ECU. 
4.12. At 30 November 1984, the date prescribed by 
Regulation (EEC) No 3184/83 (6) as the end of the 
accounting year for second-category expenditure, the 
value at purchase costs of products in public storage 
was 8 750 Mio ECU (see Table 4.2). This represents an 
increase of 24% over the level at 30 November 1983 
and a tripling of the value of the stocks compared to 
their average value over the period 1978-82. The posi­
tion of the stocks experiencing the greatest problems is 
examined below (see Tables 4.3 and 4.4). Presentation and closing of the annual accounts 
4.16. In general, the monthly and annual statements 
of account submitted by the Member States in respect 
16. 12. 85 Official Journal of the European Communities 41 
Table 4.2 — Quantity and value of products in public storage 
Product 
Cereals: 
— Common wheat 
— Common wheat unsuitable for 
making bread 
— Barley 
— Rye 
— Durum wheat 
Total cereals 
Sugar 
Fats: 
— Olive oil 
— Colza 
Total fats 
Tobacco: 
— Leaf tobacco 
— Processed tobacco 
— Baled tobacco 
Total tobacco 
Milk products: 
— Skimmed-milk powder 
— Butter 
Total milk products 
Beefmeat: 
— Beef carcasses 
— Boneless beef 
Total beefmeat 
Grand total Position at 30.11.1983 (') 
Quantity 
(1000 tonnes) 
6 806 
14 
1673 
312 
737 
9 542 
— 
121 
— 
121 
4 
11 
15 
30 
957 
686 
1643 
301 
89 
390 
— Value (2) 
(Mio ECU) 
1279 
3 
323 
63 
187 
1855 
— 
175 
— 
175 
3 
9 
19 
31 
1458 
2 475 
3 933 
762 
280 
1042 
7 036 Position at 30.11.1984(0 
Quantity 
(1000 tonnes) 
4 448 
2015 
1636 
441 
853 
9 393 
43 
167 
58 
225 
3 
7 
4 
14 
773 
973 
1746 
468 
127 
595 
— Value (2) 
(Mio ECU) 
872 
391 
320 
92 
227 
1902 
26 
272 
26 
298 
3 
5 
6 
14 
1242 
3 537 
4 779 
1297 
435 
1732 
8 751 
(') According to the provisions of Regulation (EEC) No 3184/83, second-category expenditure effected and chargeable to a financial year is that 
arising from intervention operations carried out during the period from December to November. 
(2) The value in ECU was obtained by applying to the carry-over value in national currencies the budgetary rates valid for the conversion of the 
November expenditure. 
Source: Fourteenth EAGGF Financial Report 1984, doc. COM(85) 492 final. 
of second-category transactions and expenditure are 
very poorly presented: they require numerous correc­
tions which in most cases, due to the system of 
accounting, are not made by the Commission depart­
ments until the end of the year. 
4.17. For 1984, according to the procedure laid down 
in Article 9(7) of Regulation No 3184/83(7), these cor­
rections will be charged to the 1985 budget as negative 
expenditure for May 1985, totalling 9,6 Mio ECU. This 
situation shdws clearly that the Commission's objec­
tive, as set out at the time of the submission of the 
above-mentioned Regulation — i.e. to avoid the need 
to enter unforeseen amounts into the accounts at the 
end of the financial year — has only been achieved by 
having recourse to a regulation, adopted by the Com­mission, which derogates from the general provisions 
of the Treaty and the Financial Regulation as regards 
annuality. 
Entry of potential losses into the accounts 
4.18. Neither in 1984 nor in 1983 was the Commission 
able to make use of the possibility of writing down the 
value of stocks, as provided for in Article 8(2) of Regu­
lation No 1883/78(8). This provision does, however, 
limit the maximum admissible loss in value to half the 
difference between the historical purchase price and 
the foreseeable disposal price. In practice, the Commis­
sion uses as its basis for calculating any loss in value, 
42 Official Journal of the European Communities 16.12.85 
Table 4.3 — Changes in potential losses on public stocks 
Product 
Barley 
Rye 
Olive oil 
Skimmed-milk powder 
Butter 
Tobacco 
Beef carcasses 
Boneless beef 
Total 1983 
Difference (') between 
selling price and pur­
chase price (%) 
83 
64 
87 
18 
6 
— Potential loss (2) 
(Mio ECU) 
1 154,2 
1 493,3 
16,8 
134,9 
16,1 
2 815,3 1984 
Difference (') between 
selling price and pur­
chase price (%) 
4 
7 
8 
66 
40 
87 
30 
15 
— Potential loss (2) 
(Mio ECU) 
12,9 
5,8 
21,9 
739,0 
1310,5 
11,8 
356,5 
61,0 
2 519,4 
(') This figure is calculated as the difference between the average selling prices in the financial year and the average purchase prices as used in the 
accounts, expressed as a % of the average purchase prices. 
(2) Values in green ECU, subject to the effect of the dual rate. 
Table 4.4 — Distribution of stocks by accounting age (') 
Products stored 
Common wheat suitable for making 
bread 
Olive oil 
Skimmed-milk powder 
Butter 
Beef carcasses 
Boneless beef Level of stock 
at 30. 11.1984 
(1 000 tonnes) 
4448 
167 
773 
973 
468 
127 Distribution by accounting age (%) 
Up to 1 year (2) 
64% 
78% 
52 % 
52% 
75% 
69% Between 1 and 2 
years (3) 
22% 
14% 
48% 
48% 
25% 
31% Over 2 years (4) 
14% 
8% 
— 
— 
— 
— 
(') Comparison between the levels of public stocks at 30. 11. 1984 and the volumes of intervention purchases during the periods preceding this date. 
(2) Quantities purchased between 1. 12. 1983 and 30. 11. 1984. 
(3) Quantities purchased between 1. 1. 1983 and 30. 11. 1983. 
(4) Quantities purchased prior to 1. 1. 1983. 
on the one hand, the carry-over prices fixed in accord­
ance with Article 8(1) of Regulation No 1883/78, in the 
case of the historical purchase price, and, on the other 
hand, the weighted average selling prices for the finan­
cial year, in the case of the foreseeable disposal price. 
In present circumstances, this results in an optimistic 
estimate of the realizable value of the stock. 
4.19. If this method is nevertheless applied to the 
products in stock as at 30 November 1984, the potential loss may be estimated at 2 519 Mio ECU (see Table 4.3 
for details); this would have allowed a writing-down of 
1 259 Mio ECU if the above-mentioned rules had been 
compulsory. Bearing in mind, on the one hand, the 
limited opportunities for sales in 1984, whether due to 
the state of the market or budget constraints, and, on 
the other hand, the observations made about the ageing 
of products in stock and the limitations of the method 
applied, it is important to stress that the amount quoted 
above is the very minimum future loss, which is con­
cealed in the book value of the stocks. 
16.12.85 Official Journal of the European Communities 43 
4.20. The Court notes that, after submitting its 
revenue and expenditure account for 1984, the Com­
mission annexed to it a note concerning intervention 
stocks and related potential costs. This step is in line 
with the observations submitted in this connection by 
the Court, which nevertheless reserves the right subse­
quently to check the amounts in question and to eval­
uate the assessment criteria adopted. 
Conclusion with regard to the financial management 
4.21. Since the book value of public stocks increased 
by 24 %, and related expenditure by 35 %, over the 
financial year 1984, it is clear that the Commission can­
not really control this category of expenditure under 
the present circumstances. Although the future cost of 
losses on sales can be estimated at 2 500 Mio ECU — 
according to the method described in paragraphs 4.18 
and 4.19, which is itself open to criticism — the situa­
tion is aggravated by the fact that products in stock 
have been allowed to age more than is normal, giving 
rise to an alarming reduction in their disposal value. 
This qualitative aspect is likely to increase the potential 
cost which will have to be borne by subsequent bud­
gets. 
OBSERVATIONS ON THE INTERNAL 
CONTROLS 
4.22. Community legislation has set up different types 
of controls which normally complement one another. 
(a) The Member States are primarily responsible for 
checking that the operations financed by the 
EAGGF conform to the rules for the organization 
of markets and the decisions on the implementa­
tion of those rules. They are also required to prev­
ent and follow up irregularities and recover the 
amounts paid in error. 
(b) The Commission's task is to manage the informa­
tion and early warning system for irregularities that 
have occurred in the Member States. Within the 
context of its ex post facto checks for the purpose 
of clearing the accounts of the Member States, the 
Commission also has to ensure that these accounts 
are consistent with the underlying operations. The 
Commission's Financial Controller has, among 
other things, to ensure that the central budgetary 
and accounting operations conform to the rules. Frauds and irregularities 
Value of statistics 
4.23. In 1984 the Member States reported 126 cases of 
irregularity which had had financial consequences, 
amounting to 5,8 Mio ECU, nine cases with no finan­
cial consequences, two attempted cases of fraud and 
204 cases relating to premiums for the conversion of 
herds. The breakdown of these figures is given (by type 
of measure, market and Member State) by the Commis­
sion in its 14th financial report on the EAGGF (Doc. 
COM(85) 492 final). Generally speaking, the Court can 
only confirm the doubts it expressed in previous 
annual reports about the value of such statistics. It 
should be noted that, until 1984, cases of overpayments 
which had already been recovered when the corres­
ponding irregularity was reported were recorded as 
'irregularities with no financial consequences'. This 
accounting error considerably reduced the estimated 
financial effects of fraud. 
4.24. There are, of course, grounds for hoping that the 
computerization of information on frauds and irregu­
larities will improve the situation(9). The Commission 
has in fact done considerable research on the types of 
frauds and irregularities which have affected the 
EAGGF, the control methods and techniques used to 
detect them and the means of administering, analysing 
and following up the information at its disposal. It has 
also tried to optimize the information to be redistri­
buted to the national control authorities in order to 
increase their effectiveness. This computerized file is 
not yet however in operation. 
4.25. At the end of 1984, the total to be recovered for 
frauds was 100 Mio ECU; this amount is not shown in 
the balance sheet. 
Inadequate results of the campaign against fraud 
4.26. The Court again noted far too many weaknesses 
in the fraud prevention measures undertaken jointly by 
the Commission and the Member States for the situa­
tion to be considered generally satisfactory. 
44 Official Journal of the European Communities 16. 12. 85 
At Commission level 
4.27. Taking into account the number of staff 
employed on this task, the Commission has in fact 
been able to monitor the most sensitive cases, but a 
number of shortcomings still limit the effectiveness of 
its activities: 
(a) the Commission's use of its powers of investigation 
appears to be over-cautious. Although Article 9(2), 
subparagraphs 1 and 2, of Regulation No 729/70 
confers on officials appointed by the Commission 
particularly far-reaching powers to carry out 
on-the-spot inspections, the Commission usually 
adheres to the procedure set out in Article 6 of 
Regulation No 283/72, which depends on the will­
ing cooperation of the Member States. However, 
goodwill on the part of the Member States is too 
often lacking (cf. paragraph 4.28 below); 
(b) the research activity undertaken by the Commis­
sion often does not result in any really useful con­
clusions because the methods of intervention and 
the penalties are inadequate. The Commission has 
not attempted to be a party to litigation procedures 
at national level in cases where the financial inter­
ests of the Community are at stake. Nor does it 
seem to have contemplated using the legal means 
available to it under the Treaty to compel negligent 
Member States to take action; is a risk of fraud and to direct their subsequent 
inspections accordingly; 
(b) with regard to the implementation of Directive 77/ 
435, it should be noted that two Member States 
have still not achieved the required rate of scrutiny, 
while a third Member State has not reported on the 
inspections made in this context. More generally, 
the scanty information received about the content 
and results of the checks is far from helping the 
Commission to take appropriate action to guide 
the control programmes of the Member States with 
regard to the procedures or systems which are most 
susceptible to fraud; 
(c) finally, the Member States have frequently shown 
little inclination to cooperate with the Commis­
sion's enquiries, particularly when frauds or irregu­
larities within their territory were involved. Some 
even refused to cooperate in carrying out enquiries 
when it appeared that national beneficiaries were 
involved. In another case, a Member State released 
sums lodged as surety despite requests to the con­
trary from the Commission. 
(c) finally, it would be desirable for the Commission 
to learn the lessons arising from the irregularities it 
uncovers even more frequently than hitherto so as 
to amend the regulations that have been violated in 
order to strengthen the control mechanisms or to 
single out those elements that gave rise to the 
fraud. 
In the Member States Conclusion with regard to the system of fraud prevention 
4.29. Altogether, the present system set up by the 
regulation concerning EAGGF irregularities, the direc­
tive on the scrutiny of commercial documents and the 
texts relating to customs cooperation does not allow 
the Commission to carry out properly the prompting 
and coordinating role which it should play. Short of 
substantially expanding the legal and material 
resources needed for direct Commission intervention, 
the effectiveness of the campaign against fraud could 
be improved only by a far closer supervision of the 
Member States' activities and a far more systematic 
questioning of their responsibility. 
4.28. The main thing the Court noted was a certain 
indifference on the part of the Member States to the 
financial interests of the Community and a more or less 
general lack of cooperation in a number of areas: 
Clearance of the accounts 
(a) the Member States generally refrain from reporting 
to the Commission cases of frauds and irregulari­
ties detected prior to payment (cases of attempted 
fraud), although reporting such cases would high­
light the quality and effectiveness of their preven­
tive checks. It would also enable the Commission 
and other Member States to note areas where there Financial effect of the clearance decisions 
4.30. The decisions taken in respect of clearance 
during the financial year 1984 related to the accounts 
16. 12. 85 Official Journal of the European Communities 45 
submitted by the Member States for 1978 and 1979. 
These decisions gave rise to a net recovery of 25,5 Mio 
ECU, bringing to 359,2 Mio ECU the amounts recov­
ered since 1971, the year in which the EAGGF, Guar­
antee Section, financing system was introduced. The 
figure of 25,5 Mio ECU includes, in addition to various 
accounting adjustments, refusal of expenditure totall­
ing 123,6 Mio ECU for the financial years 1978 and 
1979 and acceptance of expenditure totalling 111,5 Mio 
ECU which had previously been refused pending sub­
mission by the Member States of the requisite support­
ing documents. The total amounts financed by the 
EAGGF, Guarantee Section, from the outset (1971-84) 
come to 115 887 Mio ECU and, according to the regu­
lations, 97 442 Mio ECU should have been cleared at 
the end of 1984 (1971-83). However, the amount actu­
ally cleared was 46 057 Mio ECU (1971-79) and the 
failure to deal with the balance of 51 385 Mio ECU 
(1980-83) is due to delays in the clearance procedure. 
Furthermore, the 46 057 Mio ECU cleared cannot be 
considered final because of a number of reservations. 
Following the clearance decisions relating to 1978 and 
1979, these reservations, together with previous reserva­
tions which still apply, can be divided into: 
(a) provisional acceptances of expenditure (positive 
reservations) totalling 1 039 Mio ECU, including 
438 Mio ECU resulting from the 1978 and 1979 
clearance decisions and 601 Mio ECU from pre­
vious decisions for which the reservation has not 
explicitly been withdrawn; 
(b) provisional refusals of expenditure (negative reser­
vations) totalling 46 Mio ECU, including 44 Mio 
ECU under the 1978 and 1979 clearances. 
These amounts are not mentioned in the balance sheet 
of the Communities although they are likely to affect 
future financial years. 
4.31. Overall, there is no assurance as to the definitive 
nature of the clearance decisions taken as a whole, 
since the Commission leaves open the possibility of 
going back on its previous positive reservations without 
setting a deadline for final adoption, by a decision at 
the same level, of the expenditure in question. Refusal of approval and overruling of refusal in 
connection with the 1978 and 1979 clearance operations 
4.32. The verifications which led to the clearance 
decisions mentioned in paragraph 4.30 were analysed 
by the Court. The results of these checks, contained in 
the decisions of 8 February 1984, do not give rise to 
any special comments, with the exception of four cases, 
three of which occasioned a refusal of approval by the 
Financial Controller, followed by a decision by the 
Commission to overrule this refusal. Two of these cases 
relate to conflicts with the United Kingdom and France 
which are of considerable financial significance. They 
are analysed below in paragraphs 4.34 and 4.39. The 
third case relates to the acceptance of questionable 
export refund expenditure by Belgium for powdered 
milk under conditions already criticized by the Court in 
its annual report for 1983 with reference to the 1975 
and 1976 financial years (financial impact not calcu­
lated). 
Criticism by the Financial Controller of the reservations 
4.33. The fourth case, relating to aid to tobacco in 
Belgium, is interesting in so far as it gave the Financial 
Controller the opportunity to reiterate his objection in 
principle to the reservations to which the clearance 
decisions are subject. As the case in point involved a 
negative reservation (provisional refusal of expendi­
ture), he was unable to withhold his approval but could 
only stress the need for a definitive refusal on the 
grounds that the substantial conditions laid down by 
the regulations for placing leaf tobacco under control 
at the time of processing were not fulfilled. This posi­
tion is in any case akin to that adopted by the Court 
itself with regard to the practice of both positive and 
negative reservations. 
The case of the Milk Marketing Boards, United Kingdom 
4.34. The special situation of the Milk Marketing 
Boards (MMBs) with regard to the rules of the Treaty 
and secondary legislation arises from the fact that these 
bodies have a monopoly over the purchase and sale of 
milk. The situation should have been regularized before 
the end of the transitional period following the acces­
sion of the United Kingdom, i.e. by 1 January 1978, but 
no change was made until 20 June 1978, when Council 
Regulations No 1421/78 and No 1422/78(10) were 
adopted: 
46 Official Journal of the European Communities 16. 12. 85 
(a) Council Regulation (EEC) No 1421/78 amended 
the basic Council Regulation (EEC) No 804/68 of 
27 June 1968(n) to make it compatible with the 
existence of the MMBs and with some of their 
practices; 
(b) Council Regulation (EEC) No 1422/78 specified 
the rules which the MMBs should observe in order 
to receive and to retain their authorizations. 
4.35. Among these measures, Article 9 of Regulation 
No 1422/78 laid down the provisions which must 
apply to the selling price of milk to consumers and 
specified that these prices should be communicated 
beforehand to the Commission, which would itself 
notify them to the other Member States. The transi­
tional measures, designed primarily to facilitate the 
changeover to the new arrangements, could not, in the 
case of Article 9, apply for more than a period of four 
months. However, Commission Regulation No 1565/ 
79(12) did not lay down the procedures for implement­
ing Regulation No 1422/78 until 25 July 1979. Neither 
its objective nor its effect could therefore have been to 
extend the transitional period for the application of 
Article 9. Furthermore, Article 6 of Regulation No 
1565/79 was itself intended merely to specify, in rela­
tion to the selling prices, the detailed provisions neces­
sary to ensure their compliance with Article 9 of Regu­
lation No 1422/78. 
4.36. The Commission departments were therefore 
fully entitled to wonder — during the preparation work 
for the decisions on the clearance of the accounts for 
1978 and 1979 in January 1984 — whether the expendi­
ture incurred on milk in the United Kingdom had been 
effected under conditions compatible with the rules of 
the Treaty, particularly the rules on freedom of move­
ment of goods and non-discrimination, and with the 
provisions of the basic regulation as amended in 1978, 
particularly as regards consumer prices. The file which 
the Court has examined shows clearly that: 
(a) the Commission knew for certain in both 1978 and 
1979 that differentiated selling prices were applied 
by the MMBs; 
(b) the terms of the authorization decision contained 
in Article 1 of Regulation No 1565/79 of 25 July 
1979 could not under any circumstances have been 
intended to approve practices contrary to the provi­
sions of Article 9 of Regulation No 1422/78, which 
were directly applicable at the latest from 2 Nov­
ember 1978; 
(c) the Commission was therefore justified in consider­
ing ineligible all or part of the expenditure effected 
by the MMBs during the financial years covered by 
the clearance of the accounts for 1978 and 1979; 
(d) the only fundamental questions related, not to the 
substance of the case, but to the following points: (i) firstly, the date from which the legality of the 
facts of the case could be called into question; 
(ii) secondly, the fact that the Commission, 
although aware of the irregular situation of the 
MMBs, had allowed the British authorities to 
believe that their present system was satisfac­
tory, to the extent of granting them the authori­
zation provided for in Article l(3a) of Regula­
tion No 1422/78 and never making provision 
for withdrawing it, as laid down in (b) of the 
same paragraph; 
(e) the Financial Controller, to whom a draft decision 
was referred, found it impossible to state that 'the 
expenditure had been effected in a proper and law­
ful manner with regard to the provisions appli­
cable' and, 'in the absence of any other proposal 
enabling a more detailed assessment of the sector 
to be made, if appropriate', found himself 'obliged 
to refuse his approval altogether' in the case of the 
respective amounts of 201 Mio UKL (1978) and 
236 Mio UKL (1979) (755 Mio ECU); 
(0 the Commission nevertheless overruled this refusal 
in the decision which it took the same day on the 
grounds 'that the expenditure borne by a Member 
State must be charged to the EAGGF, even if the 
transactions do not comply with the provisions of 
Community law applicable, in so far as the Com­
mission's conduct may have justified an action 
taken by a Member State which did not comply 
with Community law'; 
(g) in addition, the Commission instituted proceedings 
against the United Kingdom on two counts of infr­
ingement: 
(i) infringement A 78/82: proceedings were insti­
tuted by a formal notice on 10 June 1982, 
which led to the case being brought before the 
Court of Justice on 25 January 1984. The main 
charge is that the MMBs applied differentiated 
prices to milk, according to the final use of the 
derived products (for example: butter intended 
for intervention or placed directly on the mar­
ket), giving rise to discrimination between Brit­
ish producers and those of the other Member 
States; 
(ii) infringement A 61/83: legal proceedings were 
initiated on 27 May 1983 and are at present at 
the reasoned opinion stage. The charge is that 
prices were further differentiated according to 
16. 12. 85 Official Journal of the European Communities 47 
their destination in non-Member States and 
that this amounted to an additional refund 
being granted to British exporters and therefore 
further discrimination against exporters in the 
other Community countries. 
4.37. Under these circumstances, and independently 
of the case pending before the Court of Justice, the 
Court of Auditors is obliged to make the following 
observations: 
(a) the Council regulations necessary to rectify a situa­
tion which was contrary to the general principles of 
the Treaty and to the rules of the market organ­
ization were only adopted belatedly in 1978, more 
than five years after accession and in any case sev­
eral months after the end of the transitional period; 
(b) according to the Commission itself, equality of 
treatment between Community operators had still 
not come into effect when, after a four-year delay, 
it had to decide on the clearance of the accounts 
for 1978 and 1979, i.e. on 8 February 1984; 
(c) the first measures designed to secure the applica­
tion of the provisions of the basic regulation, as 
amended in 1978, were not seriously implemented 
until almost four years after it had entered into 
force; 
(d) the time taken for the Commission to react helped 
to prolong an abnormal state of affairs; this finally 
led the Commission to invoke the failures of its 
own management as a reason for regarding as inev­
itable a decision which was contrary to the strict 
budgetary standpoint recommended by its Finan­
cial Controller. 
4.38. Overall, the Commission's action in this matter 
was not consistent with the principles of sound finan­
cial management. 
The case of wine distillation, France 
4.39. Another case involving the overruling of the 
Financial Controller was the acceptance by the Com­
mission in February 1984 of the greater part of the 
expenditure incurred by the French intervention agency 
on aid for wine distillation. Although the clearance 
decisions were for the financial years 1978 and 1979, 
the expenditure related to the five financial years 1975 
to 1979. The total amount accepted was 95,1 Mio ECU. 
Some 13,5 Mio ECU were disallowed, whereas the Financial Controller favoured disallowance of the full 
amount due to serious control weaknesses of long 
standing which had come to light during visits on the 
spot carried out under his aegis in November 1976 and 
June 1977. 
4.40. No serious attempt was made by the relevant 
Commission departments to follow this up by a 
detailed investigation of the situation until 1982. In the 
meantime the Commission decided on the clearance of 
accounts for 1975, 1976 and 1977 but entered a reserva­
tion in relation to the expenditure on wine distillation 
pending the detailed investigation referred to above, 
which was carried out jointly with the French auth­
orities and which formed the basis for the eventual 
acceptance of a substantial part of the expenditure 
involved. 
4.41. Having examined the results of this investiga­
tion, the Court is of the opinion that the Commission's 
decision to accept this expenditure, notwithstanding 
the views of the Financial Controller, was unjustified 
for the following reasons: 
(a) although the regulations(13) left the detailed con­
trols to be decided by the Member States, the aid 
could only be paid for table wine (or in some cases, 
other wine belonging to expressly defined catego­
ries) which was the subject of a distillation contract 
concluded before a certain date between the prod­
ucer and the distiller. The distiller was obliged to 
pay a minimum price for the wine and to complete 
distillation within a certain period. The control sys­
tem operated by the French authorities, though 
suited to the needs of their own fiscal arrange­
ments, paid scant regard to the foregoing require­
ments. Thus, although the detailed investigation 
led the Commission to conclude that all materials 
entering the. distillery were eventually distilled into 
alcohol, the system gave no guarantees regarding 
observance of the other provisions, 
(b) the national authorities concerned were unable, 
even subsequently, to state the number of cases 
which had been handled in accordance with the 
Community's requirements, 
(c) the detailed investigation carried out on a sample 
basis in 1982 revealed, nevertheless, that 87,3 % of 
the cases examined were in fact covered by valid 
distillation contracts and this percentage was used 
as a basis for the final clearance decisions. How­
ever, the statistical reliability of the sample chosen 
for this investigation is open to serious questions. 
Thus: 
48 Official Journal of the European Communities 16.12.85 
(i) almost 50 % of the total of 135 distilleries had 
to be excluded when it was discovered that 
essential supporting documents had been des­
troyed; 
(ii) in view of the very large number of cases 
involved, the sample was limited to distillation 
operations carried out in 1975 at 14 distilleries; 
(iii) no cases were chosen for examination from the 
financial years 1976, 1977, 1978 and 1979, 
which accounted for some 33 % of the total 
expenditure in question; 
(iv) the test results varied greatly as between the 
distilleries actually examined. 
In these circumstances, extrapolation^4) of the test 
results to the totality of the transactions for all the 
years in question is of doubtful validity; 
(d) even in the cases examined, the investigation was 
unsatisfactory in two important respects: 
(i) the status of the wine as 'table wine' was insuf­
ficiently attested. In the complete absence of 
controls on the nature of these deliveries (parti­
cularly as regards the minimum acidity 
required), the favourable presumption made by 
the Commission in this regard, however justi­
fied it might be in normal circumstances, was 
not sufficient to allow the expenditure as a 
charge on the Community budget; 
(ii) there was insufficient evidence to show that the 
time limits for distillation had been respected. 
4.42. Two perplexing aspects of the matter, for which 
no satisfactory explanation can be found in the Com­
mission's files, are: 
(a) why the systems weaknesses were not brought to 
light until 1977; 
(b) why the Commission waited until 1982 to carry out 
a detailed investigation, the necessity for which 
must have been clear as early as 1977. Had the 
investigation taken place then, it would have been 
significantly simpler and the problem of missing 
documentation would have been less acute. Furth­
ermore, three consecutive reservations in the clear­
ance decisions relating to the accounts for 1975, 
1976 and 1977, respectively, could have been 
avoided and the dimensions of the problem largely 
reduced. 
Problems posed by the non-cooperation of the Member 
States 
4.43. In reply to the observations made earlier by the 
Court in its special report(15) and in subsequent annual reports, the Commission said that it was attempting to 
improve its control methods by carrying out audits on 
the basis of systems analysis. This approach, which is 
the one followed by the Court itself, has indisputable 
advantages, in that it fully covers the area of audit and 
uses necessarily limited resources in the best possible 
way in auditing the most important and most sensitive 
operations. However, in order to be fully effective, it 
presupposes certain conditions which have proved par­
ticularly difficult to fulfil where management is decen­
tralized and responsibility is shared with the Member 
States, as in the case of the EAGGF, Guarantee Section. 
4.44. Audit and control at Community level obviously 
requires information not only on the national audit sys­
tems in principle, but also on their actual operation and 
their results. The Commission and its departments res­
ponsible for auditing are far from achieving this. 
Although Article 1 (b) of Regulation No 1723/72 (16) 
imposes an obligation on the Member States to submit 
to the Commission their audit reports in support of the 
annual summaries of accounts used as the basis for 
clearance verifications, these documents are most often 
missing or are of a purely formal nature. Although, 
more generally, Articles 4, 8 and 9 of Regulation 
No 729/70 imply the use in the management of the 
EAGGF of an administrative procedure capable of 
being checked by the Community departments, the lat­
ter most often do not have access to the results of 
national internal audits. Under such circumstances, this 
method is unworkable and the Community auditors 
have no other choice but to carry out more thorough 
audits, in so far as their own limited means permit. 
GENERAL CONCLUSIONS 
4.45. After examining the financial management and 
activities of the Commission with regard to the 
EAGGF, Guarantee Section, in 1984, the Court's main 
findings were as follows: 
(a) the large number and frequent recurrence of 
detailed irregularities in the operation of the proce­
dures for implementing the budget pose the prob­
lem of whether a system of regulations which tends 
to function only in the case of exemptions and der­
ogations is in fact suited to the task; 
(b) because of inadequate control over the level of 
stocks and related expenditure, and a management 
which has not attached proper importance to the 
problem of the ageing of products in stock, future 
16. 12.85 Official Journal of the European Communities 49 
budgets will inevitably be burdened by considera­
ble costs; 
(c) clearance delays, irrespective of whether they are 
aggravated by the accumulation of reservations, 
have delayed the resolution of important manage­
ment disputes, such as those which arose in con­
nection with the Milk Marketing Board in the 
United Kingdom or wine distillation in France. On 
this account, the Commission found itself in a situ­
ation where its own negligence was revealed and it 
had to take decisions based on grounds which were 
open to criticism. This is likely to weaken consider­ably the regulatory effect of the clearance proce­
dure and its value as a deterrent; 
(d) the attitude of the Member States, both with regard 
to the checks for which they are responsible (daily 
management, prevention of fraud) and those to 
which they are subject (clearance), is not calculated 
to aid the Commission in the exercise of its own 
management responsibilities. These checks are, 
however, the necessary counter-balance to the pres­
ent financing system based on advance payments 
of Community funds and on the decentralized 
administration of payments to recipients. 
(') 
O 
(4) 
(5) 
(6) OIL 94, 28. 4. 1970, p. 13. 
The management of the measures financed by means of 
appropriations entered under Chapter 40 forms the sub­
ject of observations in Chapter 6 of this report. 
This point has been discussed in previous annual reports 
(see, for the 1983 financial year, OJ C 348, 31. 12. 1984, 
paragraphs 4.8-4.26) and, for the 1984 financial year, in a 
letter sent to the Commission departments. 
New regulations made after the end of the financial year 
resulted in all payments being carried forward to the end 
of the marketing year, most of the Commission's claims 
being cancelled and reimbursement to the FR of Ger­
many being required. According to generally accepted 
accounting principles, such post-balance-sheet events 
should also be mentioned. 
Cf. annual report for the financial year 1983, paragraph 
4.26. 
Commission Regulation (EEC) No 3184/83 of 31. 10. 
1983, OJL 320, 17. 11. 1983. (7) 
(8) 
(9) 
(10) 
(") 
C2) 
C3) 
(.4) 
(,5) 
C6) Commission Regulation (EEC) No 3184/83 of 31. 10. 
1983, OJL 320, 17. 11.1983. 
Council Regulation (EEC) No 1883/78 of 2. 8. 1978, OJ L 
216, 5. 8. 1978. 
Cf. Commission's reply to paragraph 4.38 (b) of the 
annual report for the financial year 1983. 
OJL 171, 28. 6. 1978, pp. 12, 14. 
OJ L 148,28. 6. 1968, p. 13. 
OJL 188, 26. 7. 1979, p. 29. 
For example: Nos 267/75, 1036/75, 567/76 and 1971/76 
together with the relevant implementing regulations. 
The extrapolation was applied in a modified form for 
transactions occurring after improved arrangements had 
been introduced by the French authorities on 1 September 
1977. These transactions accounted for some 3 % of the 
total allowed. 
Cf. OJ C 313 29.11.1982 
Cf. Commission Regulation (EEC) No 1723/72 of 26. 7. 
1972, OJL 186, 16.8. 1972. 
50 Official Journal of the European Communities 16. 12. 85 
CHAPTER 5 
European Agricultural Guidance and Guarantee Fund, Guidance 
Section, and specific agricultural measures 
5.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information 
Observations on budgetary management 
Application of the Directive on mountain and hill farming and farm­
ing in certain less-favoured areas 
The development of beef cattle production in Ireland and Northern 
Ireland and the stimulation of agricultural development in the less-
favoured areas of Northern Ireland 
Flood protection in the Herault Valley 
Acceleration of agricultural development in certain regions of Greece 
Application of structural measures in the wine-growing sector 5.1 
5.2 
5.5 5.4 
5.12 
5.13 — 5.30 
5.31 
5.40 
5.46 
5.49 — 5.39 
— 5.45 
— 5.48 
— 5.65 
INTRODUCTION 
5.1. The EAGGF, Guidance Section, which was 
created by Council Regulations No 25/62 of 
4 April 1962 (') and No 17/64 of 5 February 1964 (2), 
finances common measures adopted in order to attain 
the objectives set out in Article 39 (1) (a) of the EEC 
Treaty, including the structural modifications required 
for the proper working of the common market. It also 
finances 'project' measures — aid to individual benefi­
ciaries for specific investments — and 'reimbursement' 
measures, whereby Member States can be reimbursed 
part of their expenditure for certain operations comply­
ing with the conditions laid down in the Community 
legislation. These operations are envisaged under 
Title 3 of the Community budget, Chapter 38 of which, 
concerning expenditure in the agricultural sector, is 
not, however, financed by the EAGGF, Guidance Sec­
tion. amount of appropriations available. The appropria­
tions are differentiated, except for those of Chapter 38 
concerning specific agricultural measures, the majority 
of which are non-differentiated. 
5.3. Council Regulation (EEC) No 929/79 of 8 May 
1979 (3) earmarked a sum of 3 600 Mio ECU for 
EAGGF, Guidance Section operations in the 
period 1980-84, which was raised to 3 755 Mio ECU by 
Council Regulation (EEC) No 3509/80 of 22 Decem­
ber 1980 (4) as a result of the accession of Greece to the 
Community. At 31 December 1984, the overall amount 
of Fund commitments came to 3 620,6 Mio ECU. The 
Commission has no documents which provide accurate 
information on the related payments. 
SUMMARY OF FINANCIAL 
INFORMATION 
5.2. The commitments and payments for the financial 
year are summarized in Table 5.1, which also shows the 5.4. Commitments for Title 3 as a whole amounted to 
870,5 Mio ECU in 1984, i.e. 90,7 % of the funds avail-
16. 12.85 Official Journal of the European Communities 51 
Table 5.1 — Expenditure in the agricultural structures sector (Title 3): Appropriations available in 1984 and their utilization 
(Mio ECU) 
Budget chapter 
Chapter 30: 
Projects for the improvement of 
agricultural structures 
Chapter 31: 
General socio-structural measures 
Chapter 32: 
Measures to assist less-favoured areas 
Chapter 33: 
Structural measures connected with the 
common organization of markets 
EAGGF, Guidance Section — Total (') 
Chapter 38: 
Expenditure in the agricultural sector 
Title 3 — Grand total Commitments 
Appropriations for 
commitment available 
in 1984(0 Commitments entered 
into in 1984 
240,8 238,4 
132,6 114,5 
403,2 356,3 
104,2 87,0 
880,8 796,2 
79,0 74,3 
959,8 870,5 Payments 
Appropriations for 
payment available in 
1984(2) Payments made in 1984 
165.3 164,9 
132.4 114,5 
354,6 307,3 
66,9 60,1 
719,2 646,8 
78,9 56,0 
798,1 702,8 
(') Taking into account transfers, decommitments, adjustments and appropriations remaining from 1983. 
(2) Taking into account transfers and carry-overs from 1983. 
(3) Except for Chapter 46 which is included in Chapter 6 of this report (Fisheries). 
cations for aid submitted to it and that these decisions 
shall be taken not later than 30 June and 31 December 
of each year. The Commission found itself with a par­
tial shortfall of appropriations at the time of the deci­
sion on the second 1984 instalment. It therefore 
decided to grant in January 1985 a part of the aid 
included in the second 1984 instalment, thus allocating 
an amount of 19,8 Mio ECU from the appropriations 
for the financial year 1985. The Court considers that 
this procedure does not comply with either Regulation 
No 355/77 or the principle of budgetary annuality. 
5.6. The shortage of appropriations mentioned above 
resulted from a series of transactions carried out by the 
Commission in order to cope with a new situation 
which arose in 1984. Until 1983 old, non-differentiated 
appropriations, originally committed for projects under 
Regulation No 17/64, were retained by making use of 
the option of carrying over appropriations afforded by 
Article 108 (3)(b) of the Financial Regulation. This 
practice, which was, moreover, criticized by the Court 
in its annual report for the financial year J983 (6), was 
abandoned in 1984. As a result, an amount of 55,7 Mio 
ECU still to be paid at 31 December 1983 was can­
celled. able. The corresponding figures for 1983 were 
899,3 Mio ECU and 86,3% respectively. Total pay­
ments made in 1984 amounted to 702,8 Mio ECU, i.e. 
88,1 % of the funds available. The corresponding 
figures for 1983 were 749,6 Mio ECU, representing 
70,3 % of the funds. The amount of commitments 
entered into in 1984 and still to be settled at the close 
of the financial year was 414 Mio ECU. 
OBSERVATIONS ON BUDGETARY 
MANAGEMENT 
Settlement of former commitments in respect of 
Regulation No 17/64 
5.5. Article 13 (2) of Council Regulation (EEC) 
No 355/77 of 15 February 1977 (5) lays down that the 
Commission shall take decisions twice yearly on appli-
52 Official Journal of the European Communities 16.12.85 
5.7. In 1984, in order to fulfil legal obligations still 
existing at the time of the cancellation, the Commis­
sion recommitted appropriations totalling 44,4 Mio 
ECU and spread over budget headings 300 and 301, 
using appropriations intended to finance new projects 
under Regulation No 355/77 for 1984. 
5.8. The Court noted that: 
(a) no satisfactory explanation could be obtained for 
the difference between the amount cancelled 
(55,7 Mio ECU) and the amount recommitted 
(44,4 Mio ECU); 
(b) the use of appropriations intended for new projects 
to refinance old projects is unacceptable: appro­
priate budget estimates should have been made in 
respect of the appropriations required for the 
recommitments; 
(c) most of the recommitments concerned were for 
global amounts. Apart from the fact that this type 
of operation is contrary to Article 33 of the Finan­
cial Regulation (which stipulates that commitments 
should be entered into individually), it also makes 
it impossible to check, on the basis of the accounts, 
whether the projects are consistent with the 
amounts committed. 
Accounting treatment of differentiated 
appropriations under Article 300 
5.9. Up to 1984, the differentiated appropriations 
included under Article 300 of the budget were intended 
to cover the settlement of projects provided for in 
Regulation No 17/64, which have been financed from 
1977 onwards on the basis of differentiated appropria­
tions. The 1983 revenue and expenditure account 
recorded an amount of 53 259 837,83 ECU as outstand­
ing from previous years at 31 December 1983 in respect 
of these appropriations. The 1984 revenue and expend­
iture account should have taken over this amount when 
the accounts were opened. It showed, however, a dif­
ferent sum, i.e. 64 421 477,25 ECU. This difference is 
due to the fact that the Commission entered commit­
ments concerning non-differentiated appropriations 
which had been cancelled in 1984 as commitments still 
be to be paid from differentiated appropriations (see 
also paragraphs 5.6-5.8 above). Auditing the revenue 
and expenditure account and, in particular, operations 
concerning individual projects is made more difficult 
by such operations. 
5.10. The Court found, moreover, that this difference 
of 11 161 639 ECU, less 103 801 ECU for decommit-
ments and fluctuations in the rate of the ECU, had 
been recorded twice in the revenue and expenditure account, since this amount had already been recorded 
as a recommitment charged to the financial year 1984. 
The Commission is requested to correct this double 
entry in 1985. 
Charging of appropriations to Article 388 and 
Item 3892 of the budget 
5.11. With regard to Article 388 (Community action 
relating to protection of forests against fire and acid 
deposits) the Commission decided on 25 July and 
12 December 1984, by written procedure, to authorize 
commitments amounting to 4,5 Mio ECU and 0,5 Mio 
ECU respectively without having determined before­
hand the legal obligations to be entered into for the 
sums committed. These commitments do not comply 
with Article 33 of the Financial Regulation, which 
requires that the purpose of the expenditure, the esti­
mated amount involved and the description of the 
creditor be shown. 
5.12. With regard to Item 3892 (Slaughter of pigs and 
processing of pigmeat in the United Kingdom) the 
Commission departments used, during the financial 
year and without prior transfer, 6 780 178,28 ECU in 
commitment appropriations and 497 281,58 ECU in 
payment appropriations to finance individual projects 
in accordance with Regulation No 355/77. The deci­
sions on expenditure were taken within the overall con­
text of two annual instalments of aid granted for indi­
vidual projects on the basis of Regulation No 355/77. 
These decisions should have involved the charging of 
appropriations to Article 301 of the budget, where 
necessary after transfer, and not to Item 3892. 
APPLICATION OF THE DIRECTIVE ON 
MOUNTAIN AND HILL FARMING AND 
FARMING IN CERTAIN LESS-FAVOURED 
AREAS 
General comments 
5.13. The major objective of Council Directive 75/ 
268/EEC of 28 April 1975 (7) is to ensure the continua­
tion of farming in areas affected by various natural 
handicaps. In 1984 the payments made under this 
Directive amounted to 136 Mio ECU i.e. approxi­
mately 21 % of the payments of the EAGGF, Guidance 
Section. They involved more especially the award of a 
compensatory allowance, which is granted to farmers in 
16. 12. 85 Official Journal of the European Communities 53 
eligible areas in order to compensate for the effects of 
natural handicaps. 
5.14. The checks made in various countries (FR of 
Germany, France, Greece, Ireland, Italy and the 
United Kingdom) during the financial year 1984 con­
firmed the observations that the Court had already 
made in its special report (8) on the implementation of 
the Directive. 
5.15. Neither the Commission nor the Member States 
have established quantified objectives in respect of the 
influence of the operations and very few statistics on 
the effect of the aid are available. The high concentra­
tion of expenditure on compensatory allowances, com­
pared with the other measures provided for by the 
Directive, suggests that its application consists mainly 
in granting farmers an income supplement which does 
not bring about lasting structural changes. Moreover, 
the compensatory allowance is sometimes paid with 
considerable delay and under conditions which can 
only lessen any impact it may have on the beneficiar­
ies' behaviour. 
5.16. The conditions governing the granting of aid are 
complex, as regards both the Directive and the imple­
menting acts adopted by the Member States. The farm­
ers have difficulty in understanding the provisions 
applied to them, which, to a large extent, are not easy 
to audit. The forms to be completed when applying for 
aid are so technical that, in the majority of cases, the 
beneficiary has to consult socio-professional organiza­
tions. The information required for calculating the 
allowance, particularly the areas farmed by type of cul­
tivation, is difficult to determine and check. Sometimes 
even the land registers are not up to date. 
5.17. The demarcation of eligible regions on the basis 
of the criteria set out in the Directives adopted for this 
purpose may produce results which differ considerably. 
When these criteria are applied to relatively large terri­
tories the use of averages may result in the inclusion of 
areas which are not always obviously less-favoured and 
which may also offer less flexibility in the revision of 
area boundaries. 
5.18. The Commission, whose work is centred mainly 
on the budgetary management of the measure and the 
processing of the Member States' applications for reim­bursement, should scrutinize more closely the effects of 
the Directive, as compared with its objectives. This 
finding is borne out by the following remarks. 
The delays in the implementation of the 
measure in Italy 
5.19. Over 10 years after its adoption, the legal instru­
ments required for the application of the Directive in 
Italy were still not all available, although Article 17 had 
stipulated a period of one year for the Member States 
to take the necessary measures to conform to the provi­
sions of the Directive. 
5.20. A national law was enacted on 10 May 1976, but 
at the end of 1984 the Commission had still not 
declared whether the regional legislation complied with 
the Directive. Sicily still had no legislation, Friuli-
Venezia-Giulia had no such legislation for Title II 
(compensatory allowance) while Calabria only had 
such legislation for this Title. The regions of Molise 
and the Marches have had legislation approved by the 
Commission since March and December 1984, six 
years having been necessary to change the legal texts in 
order to bring them into line with Community law. 
5.21. Even though in most cases a start was made on 
implementing the regional legislation without waiting 
for a Commission decision on compliance, the prob­
lems and delays in enacting the legal instruments have 
considerably reduced the Directive's effect. 
5.22. In reality, the beneficiaries receive the allow­
ance late and the Community reimbursement itself may 
only be applied for after long delays. From the end of 
1978-82. Upon receipt of the accounting returns sub-
made available to the regions a sum of approximately 
300 000Mio LIT from the total allocation of 
436 000 Mio LIT for the compensatory allowance and 
the joint investments relating to the five-year period 
1978-82. Upon receipt of the accounting returns sub­
mitted by the regions, the Member State requested and 
obtained the Community reimbursement from the 
EAGGF, Guidance Section, (i.e. 35 % of the expendi­
ture up until 1980 and 50% thereafter), for a total 
which, at 31 December 1984, amounted to 62 600 Mio 
LIT (i.e. approximately 50 Mio ECU). 
5.23. By the end of 1984 a significant part of the 
expenditure covered by the national appropriations of 
436 000 Mio LIT had still therefore to" be accounted for 
54 Official Journal of the European Communities 16. 12. 85 
in returns in order to obtain Community reimburse­
ment. The sums still be to paid by the EAGGF, Guid­
ance Section on that date, which were at least equiva­
lent to the 50 Mio ECU already covered, are not men­
tioned in the balance sheet. 
5.24. In July 1984 the Court noted that in certain 
provinces of Tuscany the payment of five years' allow­
ance had ceased in 1982, while for other provinces the 
operations were still being completed. On the other 
hand, in the Marches the first year's allowance, corres­
ponding to 1978, was paid at the beginning of 1981 and 
since then, two other years, corresponding to 1979 and 
1980, have been paid. This shows the extent of the 
delays with which the aid is paid to the beneficiaries 
and the resulting reduction in its effectiveness. 
Other observations relating to the effectiveness 
of the measure 
5.25. While Directive 75/268 does not specify any 
time limits, Article 1 of the Italian Law of 10 May 1976, 
which was declared by the Commission to be in com­
pliance with the Directive on 7 December 1976 (9), sti­
pulates that the compensatory allowance should be 
granted for a period of five years only. No explanation 
was given to the Court to justify this limitation, which 
reduces the impact of the measure and helps to explain 
the delays in getting it off the ground. There is a risk 
that in some cases these delays may result in the mea­
sure being applied retroactively, thus reducing its effec­
tiveness. Moreover, an extension of national measures 
would require the introduction of new provisions, 
which would probably create fresh delays. 
5.26. Neither at national level nor within the three 
regions examined by the Court was there any provision 
stipulating that checks be made to ensure compliance 
with the undertaking to pursue a farming activity for 
five years (Article 6 of the Directive). Moreover, this 
undertaking is only entered into in the initial applica­
tion form for aid relating to the first year of the allow­
ance and therefore has the same five-year duration in 
the case of a beneficiary who receives the allowance for 
one year only as it has in the case of one who receives 
it several times. Such a situation, also observed in 
Greece, is not likely to increase the effectiveness of the 
aid from the point of view of the continuance of farm­
ing activities. 
5.27. In the region of Emilia-Romagna, the appro­
priations received from the central authorities for the granting of the compensatory allowance for the period 
prior to 1979 were not used for this purpose but were 
utilized to finance agricultural infrastructures, which 
reveals a difference of objectives between the national 
and regional authorities. 
Problems relating to the regularity of 
expenditure 
5.28. In order to prevent the awarding of trivial 
annual amounts, Emilia-Romagna decided that the 
allowance would be biennial and that its minimum 
amount would be 26 ECU for the period examined 
during the Court's audits. Since the operation had 
begun in 1979-80, settlement of the third allowance, 
corresponding to the years 1983-84, was under way 
during the financial year 1984. The solution adopted 
poses a problem of regularity in respect of the annual 
nature of the allowance laid down by the Directive, as 
also in respect of the observance of the minimum rate, 
which the Directive set at 16 ECU per year for the 
period under consideration. 
5.29. In the same region, but in respect of joint invest­
ments (Article 11 of the Directive), the audits carried 
out in certain areas of the lower part of the province of 
Ferrara revealed that the aid available was distributed 
between the communes and granted to farmers on the 
basis of expenditure that they had incurred, which was 
however in no way joint expenditure, and without even 
requiring documentary evidence of the existence of the 
investments. The aid awarded covered 10% to 30% of 
certain costs for work or supplies incurred by the appli­
cants. These cases of expenditure are not in line with 
the provisions of the Directive and should not have 
been charged to the Fund. A decision should be taken 
to recover the refunds granted in these cases. 
Conclusion 
5.30. The Commission should be better acquainted 
with and have a greater influence on the implementa­
tion of the Directive, in order to ensure with greater 
certainty that the objective of the operations is 
attained. The above findings reveal that the procedures 
for the granting of aid have reduced the incentive value 
of such aid for the beneficiaries and have undermined 
its effectiveness. 
16.12.85 Official Journal of the European Communities 55 
THE DEVELOPMENT OF BEEF CATTLE 
PRODUCTION IN IRELAND AND 
NORTHERN IRELAND AND THE 
STIMULATION OF AGRICULTURAL 
DEVELOPMENT IN THE 
LESS-FAVOURED AREAS OF NORTHERN 
IRELAND. 
Council Regulation (EEC) No 1054/81 of 
21 April 1981 (10) 
5.31. With a view to improving the quality of beef cat­
tle production in Ireland and Northern Ireland, the 
Council, in its Regulation No 1054/81, established a 
common measure for a period of two years, the esti­
mated cost of which to the EAGGF, Guidance Section 
was 27,5 Mio ECU. The common measure provides for 
improved initial or final selection of bulls, in order to 
improve beef production, increased use of artificial 
insemination, increased use of lime in order to improve 
meadows and pastures and the production of silage in 
order to improve supplies of winter fodder. 
5.32. It should be noted, first of all, that the only mea­
sures out of those quoted above which are exclusively 
directed towards the production of beef cattle are those 
concerning improved selection of bulls. According to 
Article 4 of Regulation No 1054/81, however, the 
expenditure earmarked for selection represented less 
than 6 % of the total. This figure was later reduced to a 
little over 4% by an amending Regulation adopted in 
1983 ("). Moreover, the expenditure on selection 
reported up to 1984 for Ireland and Northern Ireland 
accounted for 3,8 % and 3,4 % respectively of total 
expenditure declared. 
5.33. In the case of artificial insemination, (50% of 
the expenditure earmarked by the Regulation), the 
Commission took steps to exclude expenditure on 
breeds which are unsuitable for beef production from 
the category of eligible expenditure. However, a signifi­
cant number of artificial insemination cases (46 % in 
Ireland and 42 % in Northern Ireland, according to the 
data available at the time of the audits carried out in 
1984) concern breeds which are more suitable for the 
production of milk. 
5.34. The use of lime and the production of silage 
(36% and 10% respectively of the expenditure ear­
marked by the Regulation) are both subsidized without 
any consideration being given as to whether or not 
such measures favour milk production or beef produc­
tion. 5.35. In conclusion, therefore, the Court is obliged to 
observe that a considerable proportion of operations 
receiving aid from the Fund are likely to encourage the 
whole range of livestock production, rather than meat 
production in particular. Moreover, the implementa­
tion of the measure at farm level has been subject to 
delays which have resulted in an extension of the 
period of application for the measures provided for in 
an initial amending Regulation of 1983 (except that 
concerning the production of silage) and the adoption 
in 1985 of a second Regulation (,2) designed to extend 
the duration of the measure promoting better selection 
of beef bulls. 
Council Regulation (EEC) No 1942/81 of 
30 June 1981 (13) 
5.36. The Court also looked at the implementation of 
Regulation No 1942/81 concerning the stimulation of 
agricultural development in the less-favoured areas of 
Northern Ireland. The common measure established by 
this Regulation is expected to last for ten years and the 
Fund's total contribution is estimated at 48 Mio ECU. 
The measures subsidized concern the improvement of 
farm roads, land improvement and the guidance of 
agricultural production; they are being implemented as 
part of a programme established by the United King­
dom and approved by the Commission on 10 Novem­
ber 1981 (14). 
5.37. An examination of the progress of the imple­
mentation of the various measures provided for by the 
Regulation revealed considerable discrepancies com­
pared with the estimates, which shows that the informa­
tion included in the programme is of little value. The 
amount of 19,5 Mio UKL for the improvement of farm 
roads provided by the programme for a period of ten 
years was entirely used up during the first two years. 
The length of farm roads built or improved is nonethe­
less distinctly less than was forecast, since only 
1 667 km of roads have been completed instead of the 
forecast 2 580 km. Moreover, as regards the guidance of 
agricultural production, which is, after all, of vital 
importance for the success of the measure, expenditure 
during the first two years amounted to only about 12 % 
of the sums available. 
5.38. A by no means negligible proportion of the 
expenditure on land improvement consists solely of the 
cost of supplying and spreading fertilizers, in the 
absence of any other land improvement work, although 
the programme specifies that these operations can only 
be assisted within the context of a land improvement 
scheme. Fifty-nine cases of this kind were observed out 
56 Official Journal of the European Communities 16. 12. 85 
of a total of 300 files examined by the Court in County 
Down, and there were 29 cases out of 82 files examined 
in County Fermanagh. These were, in fact, cases of 
expenditure on normal running costs, which do not fall 
within the scope of the programme (Article 12, adden­
dum) and should not have been charged to the Fund. A 
decision to recover the refunds granted in these cases 
should be taken. 
Conclusion 
5.39. The findings of the Court's audit visits to Ire­
land and Northern Ireland reveal that the wording of 
the measures provided for by Regulation No 1054/81 is 
too imprecise as regards the priorities to be adopted 
and that, in the case of the application of Regulation 
No 1942/81, the implementation of the measures 
departs considerably from the programme estimates. 
FLOOD PROTECTION IN THE HERAULT 
VALLEY 
5.40. Council Directive 79/174/EEC of 6 February 
1979 (15) aims to improve the agricultural situation in 
the lower and middle areas of the Herault Valley 
(France) by means of water-engineering works to prev­
ent flooding. It introduced for this purpose a common 
measure of seven years' duration which, by the con­
struction of a barrage and dams, is designed to prepare 
the conditions necessary for the conversion of vine­
yards to other types of production. 
5.41. The total cost of the measure provided for in the 
Directive was estimated at 23 Mio ECU, and the Com­
munity contribution was estimated at 9 Mio ECU, to 
be used under the programme applying to all the mea­
sures for flood protection in the valley. 
5.42. The programme was submitted by the Member 
State concerned in February 1984, i.e. five years after 
the adoption of the Directive, and it was approved by 
the Commission on 10 May 1984 (,6). The delay in sub­
mission, due to problems in drawing up the programme 
which necessitated a technical readjustment of the pro­
ject, obviously has repercussions on the implementa­
tion of the programme, which, at the moment it was 
examined by the Court in October 1984, was still in a 
preparatory stage. 
5.43. Moreover, instead of protecting the lower and 
middle areas of the valley, the programme covered solely the lower area, i.e. approximately half of the area 
provided for in the Directive, the rest remaining 
exposed to floods. The cost of the work per hectare 
amounted to appproximately 10 000 ECU, i.e. two to 
three times the maximum amounts accepted by the 
EAGGF, Guidance Section for other structural mea­
sures (,7). 
5.44. This is, therefore, a programme which, on the 
most favourable assumptions, will only be achieved 
with several years' delay, will only concern about a half 
of the area in question and will involve a level of 
expenditure per hectare which bears little relation to 
the production forecasts. 
5.45. The above findings provide evidence of delays 
in the drawing-up of the programmes and show that the 
Commission needs to improve its supervision of the 
implementation of the measures provided for by the 
provisions in force. 
ACCELERATION OF AGRICULTURAL 
DEVELOPMENT IN CERTAIN REGIONS 
OF GREECE 
5.46. Council Regulation (EEC) No 1975/82 of 
19 July 1982 introduced a common measure of five 
years' duration aimed at accelerating agricultural 
development in certain less-favoured areas of Greece. 
The Community contribution earmarked for this com­
mon measure is 198,6 Mio ECU. The measure is to be 
implemented within the framework of a programme 
which the Member State submitted on 21 March 1983 
and the Commission approved on 29 July 1983 (18). 
5.47. The nature of the programme is such that the 
administrative regions concerned have the option of 
choosing the projects they wish to carry out without 
reference to the guidelines contained in the pro­
gramme, as a comparison between the final expendi­
ture for 1983 and that estimated in the request for ad­
vance payment for the same year (see Table 5.2) shows. 
Although the total amount of final expenditure, which 
amounted to 1 523 Mio DR (i.e. approximately 
18,6 Mio ECU) corresponds approximately to the level 
of estimated expenditure, the disparities for the differ­
ent types of operation are quite considerable. 
5.48. An examination of the work in respect of which 
requests for advance payment and payment were sub­
mitted revealed various anomalies: in some cases, ad­
vances were requested for work which had not been 
carried out and, in others, payments were requested for 
work in respect of which no application for an advance 
had been made, or which was not provided for in the 
programme. These differences are all the more irregular 
in view of the fact that the request for advance pay-
16. 12. 85 Official Journal of the European Communities 57 
Table 5.2 — Expenditure estimated and incurred for the 
financial year 1983 within the framework of Regulation (EEC) 
No 1975/82 
(Mio DR) 
Type of measure 
Rural infrastructure 
Irrigation 
Land improvement 
Stock-farming 
Forests Expenditure 
estimated on 
request for 
advance payment 
for 1983 
633,5 
40,0 
177,9 
62,8 
685,7 Final expenditure 
declared in 1984 
for the financial 
year 1983 
493,1 
91,8 
119,3 
6,9 
811,5 
ment was submitted in November 1983, at a time when 
the location and the nature of the operations to be 
financed should have been known. 
APPLICATION OF STRUCTURAL 
MEASURES IN THE WINE-GROWING 
SECTOR 
5.49. In order to induce the wine-growing sector to 
limit its production of wines which are not classified as 
'quality wines produced in specific regions' (wines psr), 
the Community instituted a series of structural mea­
sures: 
(a) a common measure provided for by Council Regu­
lation (EEC) No 456/80 of 18 February 1980 (,9) 
aiming to reduce areas under vines less suited to 
wine-growing and comprising a system of prem­
iums granted by the Member States for temporary 
abandonment (until the wine-growing year 1986/87 
between 1813 ECU and 3 022 ECU per hectare) or 
for permanent abandonment (until the wine-grow­
ing year 1994/95, 2 418 ECU per hectare). The 
Member States are reimbursed 40 % of the eligible 
expenditure; 
(b) a system of aid, provided for by Council Regula­
tion (EEC) No 457/80 of 18 February 1980 (20), to 
French and Italian farmers aged between 55 and 70 
who cease farming and for whom wine-growing is a 
major source of income; 
(c) a common measure provided for by Council Regu­
lation (EEC) No 458/80 of 18 February 1980 («) — 
planned for a duration of seven wine-growing years 
as from 1 September 1980 — having the objective 
of improving the basic wine-growing structures by 
means of collective restructuring operations (22) 
involving replanting and, where necessary, the new planting of vines, within the limit of 10 % of the 
replanted and newly-planted area; 
(d) special measures provided for by Directive 78/ 
627/EEC (23) relating to the programme to acceler­
ate the restructuring and conversion of vineyards 
applicable until August 1985 in the Languedoc-
Roussillon region and the departments of Ardeche, 
Bouches-du-Rhone, Var and Vaucluse and in res­
pect of which Regulation 458/80 is now appli­
cable; 
(e) general measures to assist the improvement of the 
conditions under which agricultural products are 
processed and marketed. These measures were laid 
down by Regulation No 355/77 which provides for 
the granting of subsidies to individual projects in 
the wine sector on the basis of the specific pro­
grammes submitted by the Member States. 
5.50. The Court carried out on-the-spot audits of the 
achievements of this legislation in the regions con­
cerned of the FR of Germany, France and Italy. 
The situation in France 
5.51. Regulation No 456/80 providing for the tempor­
ary or permanent abandonment of vine cultivation 
resulted in a 42 000 hectare reduction of the area under 
vines at 31 December 1984. 
5.52. On the other hand, the incentive to cease farm­
ing (Regulation No 457/80) has not resulted in the sub­
mission to the EAGGF of any requests for reimburse­
ment, although the 'Centre National d'Amenagement 
des Structures des Exploitations Agricoles' (CNASEA) 
(National Centre for the Improvement of Farm Struc­
tures) paid 858 872 FF under this measure for land 
clearance. This practically worthless result may be 
explained by the farmers' desire to retain the financial 
benefits attaching to the right of replanting (24). 
5.53. The application of the conversion measures 
provided for in Regulation No 458/80 was effective 
and regular, especially since the country concerned had 
set up beforehand a highly reliable organization involv­
ing a viticultural land register and a system of entitle­
ment to plant vines administered by the Directorate-
General for Taxes. This Regulation, however, introd­
uced the possibility of additional planting (cf. para­
graph 5.49) and is thus in conflict with the objective of 
58 Official Journal of the European'Communities 16.12.85 
the former Council Regulation (EEC) No 1162/76 of 
17 May 1976 (25), which provided for a total ban on 
areas planted within the Community. Its economic 
effect was therefore diminished in France, where this 
ban had been strictly applied. 
5.54. In the case of the regions covered by Directive 
78/627/EEC, the slowness of administrative proce­
dures, in particular in the drawing-up of plans for 
water-engineering works, and similarly the technical 
impossibility of effecting grubbing-up and water-engi­
neering operations simultaneously, would not have 
allowed the Languedoc-Roussillon region to benefit 
fully from the aid provided for within the framework of 
this Directive, which has since expired. Only 1 000 hec­
tares out of the estimated 22 000 for this region, the 
main beneficiary, were affected by the water-engineer­
ing part of this measure: if these operations are to be 
carried out, the plots of land made available need to be 
sufficiently big and should be grouped together in the 
same area. 
5.55. Within the framework of the general measures 
provided for by Regulation No 355/77 to assist indivi­
dual projects: 
(a) out of 12 projects audited in France it was noted 
that where the projects were close to the stage of 
wine production (as in the case of the nine wine 
cooperatives visited by the Court) and the purpose 
of the aid was the gradual adaptation of produc­
tion to the manufacture of quality wine, such pro­
jects complemented the Community objectives of 
restructuring. On the other hand, if commercial 
undertakings which have reached a high level of 
development are financed (as in the case of three 
marketing firms, which received 860 877 FF, 
1 2Q3 393 FF and 6 095 296 FF respectively), the 
complementary effect is practically nil; 
(b) in the case of a certain number of projects exam­
ined in Languedoc-Roussillon, the national sub­
sidy promised at the time approval was given was 
reduced from 15 % to 11 %, which is contrary to the 
commitments entered into under the financing 
plan finally adopted as part of the Commission's 
decision. 
The situation in Italy 
5.56. The cases of abandonment where premiums 
have been granted in accordance with Regulation No 
456/80 are impossible to quantify on account of the 
delay in the payment of the grubbing-up premiums by the national authorities; payment of the Community 
subsidy depends upon the prior payment of the prem­
iums (26). Regulation No 457/80 has not been applied 
in Italy, since its application presupposes the prior 
receipt of a premium for permanent abandonment, as 
provided for by Regulation No 456/80. 
5.57. Three points need to be made in respect of the 
conversion measures set out in Regulation No 458/80: 
(a) the joint aspect is often limited to the submission 
of a project drawn up by one applicant only 
(usually a wine cooperative) bringing together 
wine-growers scattered over a fairly wide area. It is 
doubtful whether such a form of collective opera­
tion, in the absence of any reparcelling of holdings 
or subsequent land improvement, will result in a 
real improvement in the basic structures of these 
vineyards. The spirit of this Regulation is not con­
cerned with financing the replanting of new 
varieties of vine-stock, but with restructuring and, 
where necessary, redividing the areas under vines; 
(b) in addition, the restructuring projects approved at 
regional level also provide for the replacement of 
vine-stocks which are near the end of their vegeta­
tive life with younger, more productive vine-stocks 
of standard quality. Such projects result in an 
increase in the production of wine grapes, which is 
contrary to the Community objectives of reducing 
surpluses of table wine; 
(c) the Community Regulations intended to stop new 
plantations and define replanting conditions are 
not always applied in a uniform manner. The two 
regions visited (Emilia-Romagna and Tuscany) 
adopted very different attitudes as regards the ori­
gin and proof of the right of replanting (24). Thus, 
in Emilia-Romagna only those wine-growers who 
had not yet carried out grubbing-up operations 
were allowed to participate in the restructuring pro­
jects: this means that the right to replant arises at 
the very beginning of the implementation of the 
projects, and observance of the conditions required 
by Community legislation may easily be checked 
by the authorities responsible. In Tuscany, how­
ever, wine-growers who declared that they had 
effected grubbing-up operations prior to the sub­
mission of the projects were allowed to participate 
in the collective restructuring operations. The right 
to replant is based, in this case, on a simple decla­
ration by the parties concerned stating that they 
carried out, after 27 May 1976, grubbing-up oper­
ations on areas of an equivalent surface area to 
those to be replanted. Such grubbing-up operations 
may not be considered as 'duly substantiated and 
certified by the Member State', which, in this case, 
16.12.85 Official Journal of the European Communities 59 
should result in a refusal of aid by the Commis­
sion. 
5.58. The following observations may be made in res­
pect of those projects visited by the Court from among 
the individual projects financed within the framework 
of Regulation No 355/77: 
(a) in one cooperative visited, it does not look as if the 
objective set out in the specific national pro­
gramme of replacing individual wine-making by 
communal wine-making will be easy to achieve, as 
the members of the cooperative prefer to deliver 
only grapes intended for the production of table 
wine to the cooperative, while keeping the better 
grapes for their own production of quality wine; 
(b) moreover, the objective of producing quality wine 
rather than table wine is not always sure to be a 
commercial success in areas which are traditionally 
big producers, and even exporters, of table wine, 
mainly because quality wine can often only be sold 
at a price close to that of table wine. It must be 
added that the price differences do not usually 
afford a sufficient increase in profit margins to 
allow the producers to compensate for the loss of 
revenue resulting from a reduction in the total 
quantities produced; 
(c) a major Italian distillery, which was subject to an 
on-the-spot audit, received assistance from the 
EAGGF on several occasions from 1970 to 1983 
amounting to a total of 3 005 153 829 LIT in order 
to facilitate the setting-up and enlargement of a 
plant for the production of alcohol and concen­
trated must. The prospect of a reduction in the 
level of intervention, which might be necessary on 
account of the seriousness of the present situation 
as regards surpluses, raises questions regarding the 
justification for this type of subsidy. 
The situation in the FR of Germany 
5.59. The German projects financed by the EAGGF 
on the basis of Regulation No 458/80, the only one 
applicable to this country, concern the replanting of 
vineyards within the framework of reparcelling opera­
tions decided upon a long time before the adoption of 
this Regulation and financed on the basis of national 
legislation which was already in force. The EAGGF 
projects thus add nothing new to the existing situation 
and boil down to a partial reimbursement to the Mem­
ber State of expenditure resulting from the application 
of national legislation prior to, and independently of, 
the Community measure. 5.60. With regard to the individual projects that were 
audited and which come within the scope of Regula­
tion No 355/77, it was observed that one of the objec­
tives of the wine-growing programme in the Land of 
Rheinland-Pfalz was for the cooperatives to achieve 
sufficient storage capacity to cover the production of 
two wine-growing years. This capacity should allow the 
cooperatives to regulate the market themselves, without 
having recourse to intervention. It is not certain, how­
ever, that such an effect may be guaranteed in all cases: 
one of the cooperatives visited, which had already 
achieved the storage capacity target, continued to distil 
none the less, the price paid on distillation being suffi­
ciently profitable. 
Conclusions 
5.61. It may be seen from the figures below that the 
main objective of promoting the production of quality 
wine and reducing the quantity of table wine is far 
from being achieved. 
(a) In order to reduce the areas cultivated (Regulation 
No 456/80), an amount of 134,3 Mio ECU was ear­
marked to be charged to the EAGGF at 31 Decem­
ber 1984. On this date the repayments made to the 
Member States amounted to only 61 Mio ECU. 
(b) The aid to assist growers who cease farming (Regu­
lation No 457/80) had not given rise to any Com­
munity expenditure at 31 December 1984, although 
an amount of 11,1 Mio ECU had been earmarked 
to be charged to the EAGGF. 
(c) In the case of Regulation No 458/80, intended to 
promote the restructuring of vines, the total esti­
mated cost at 31 December 1984 was 188,9 Mio 
ECU. At the same date, Community expenditure 
amounted — in commitments — to 60 Mio ECU 
(France: 52 Mio ECU, Italy: 5,4 Mio ECU, FR of 
Germany: 2,6 Mio ECU) and — in payments — to 
4 Mio ECU (France: 3 Mio ECU, Italy: 0,4 Mio 
ECU, FR of Germany: 0,6 Mio ECU). 
(d) With regard to the Directive relating to certain 
regions in the south of France (Directive 78/627/ 
EEC), the estimated cost was 105 Mio ECU; at 
31 December 1984 expenditure amounted to only 
37,4 Mio ECU. 
5.62. The general reduction of areas under vines and 
the selection of better vineyards and better vine 
varieties should contribute to the production of higher 
added-value, guaranteeing the producer a more profita­
ble income per hectare for a smaller quantity. However, 
in France, as in Italy, it appeared that the so-called 
60 Official Journal of the European Communities 16. 12. 85 
'minor' wines psr were selling at prices which were very 
close to those of table wines. A simple calculation is 
enough to see that under such conditions a wine prod­
ucer has an economic interest in producing table wines 
whose quantities are not limited, whereas quantity limi­
tations are laid down in the rules on wines whose 
designation of origin is registered. In extreme cases, the 
producer even has an interest in concentrating solely 
on his income from distillation, which, in the opinion 
of the beneficiaries concerned, is quite profitable. 
5.63. There is a need for greater consistency between 
measures undertaken in the Guidance and Guarantee 
Sections of the EAGGF. Restrictive measures con­
tained in the legislation on agricultural structures are 
not alone in influencing producers' decisions. Price-
relationships also determine how far incentives created 
by legislation on structures are successful. 5.64. In its choice of priorities when it takes decisions 
on the annual instalments for the individual EAGGF-
Guidance projects, the Commission should ensure that 
the projects constitute true measures to accompany a 
wine-growing policy intended to reduce surpluses and 
thereby reduce the support costs charged to the 
EAGGF, Guarantee Section. 
5.65. As regards the requirements of the audit, the 
Court can only reiterate (27) that it is very difficult, if 
not impossible, to verify the existence of replanting 
rights in the absence of documents which specifically 
determine the areas and the nature of the vine varieties 
cultivated and similarly the changes introduced over 
recent years. The observations set out above, for coun­
tries other than France, lend weight to the arguments 
which the Commission considered unfounded in its 
reply to the report referred to above. 
(') 
(2) 
(3) 
(4) 
(5) 
(6) 
(7) 
(8) 
(9) 
(10) 
(") 
(.2) 
C3) (.4) 
C5) 
(.6) 
C7) 
(18) 
(") (20) 
(21) 
n OJ30.20.4. 1962, p. 991. 
OJ 34, 27. 2. 1964, p. 586. 
OJLU7, 12.5. 1979, p. 4. 
OJL 367,31. 12. 1980, p. 87. 
OJL51,23.2. 1977, p. 1. 
OJC348,31.12. 1984, p. 53. 
OJ L 128, 19. 5.1975, p. 1. 
OJ C 358, 31.12. 1980, p. 1. 
OJL364,31.12. 1976, p. 62. 
OJ L 111,23.4. 1981, p. 1. 
Council Regulation (EEC) No 2967/83 of 19 October 
1983, OJ L 293, 25. 10. 1983, p. 3. 
Council Regulation (EEC) No 1980/85 of 16 July 1985, 
OJL 186, 19.7. 1985, p. 6. 
OJL 197, 20. 7. 1981, p. 17. 
OJL 338, 25. 11. 1981, p. 32. 
OJL 38, 14.2. 1979, p. 18. 
OJ L 139, 25. 5. 1984, p. 40. 
3 000 ECU/ha in Council Directive 79/173/EEC of 
6 February 1979 on collective irrigation works in Corsica 
— OJ L 38, 14. 2. 1979, p. 15, 1 500 to 4 800 ECU/ha in 
Council Regulation (EEC) No 1975/82 of 19 July 1982 
on the acceleration of agricultural development in certain 
regions of Greece, OJ L 214,22. 7. 1982, p. 1. 
OJL 222,13.8. 1983, p. 43. 
OJ L 57, 29. 2. 1980, p. 16. 
OJ L 57, 29. 2. 1980, p. 23. 
OJ L 57, 29. 2. 1980, p. 27. 
By collective operation is meant those measures effected 
within the framework of a binding agreement concluded (23) 
(24) 
(25) 
(26) 
(") between growers. This factor should, as indicated in the 
recital of the Regulation, guarantee the effectiveness of 
the restructuring operations. 
OJL 206, 29. 7. 1978, p. 1. 
By the replanting of vines within the meaning of Regula­
tion No 458/80 is meant the exercise of the 'right of 
replanting' as defined by Council Regulation (EEC) 
No 337/79 of 5 February 1979 (Annex IV (a)) (OJ L 54, 
5. 3. 1979, p. 1), i.e. 'the right to plant vines, during the 
eight years following the year in which regularly declared 
grubbing took place, on a pure cultivation area equivalent 
to that in which vines were grubbed'. However, the Com­
munity entitlement grants an exception for the producers 
of Member States whose legislation did not provide for 
the right to replant at 27. 5. 1976. These producers were 
authorized, on a transitional basis, to replant before 27. 5. 
1984 where they had effected since 27. 5. 1976 grubbing 
operations duly substantiated and certified by the Mem­
ber State concerned (Article 30 (a) of Regulation 
No 337/79). 
OJ L 135, 24. 5. 1976, p. 32. 
Cf. annual report of the Court of Auditors for the finan­
cial year 1982, paragraph 5.37, OJ C 357, 31.12. 1983, 
p. 57. 
Cf. annual report of the Court of Auditors for the finan­
cial year 1982, paragraph 5.32, OJ C 357, 31.12. 1983, 
p. 57. 
16. 12.85 Official Journal of the European Communities 61 
CHAPTER 6 
Common fisheries policy 
6.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information 
Observations on the rate of utilization of available appropriations 
Observations on expenditure on biological studies and fishing agree­
ments with certain developing countries 
Biological studies 
Payments under the fishing agreements with certain developing 
countries 6.1 
6.2 
6.3 
6.6 
6.6 — 6.5 
— 6.13 
— 6.9 
6.10 — 6.13 
INTRODUCTION 
6.1. The Community regulations concerning the com­
mon fisheries policy were set out in the introduction to 
Chapter 6 of the Court's annual report for the financial 
year 1983 (•)• 
SUMMARY OF FINANCIAL 
INFORMATION 
6.2. The appropriations are entered under Title 4 of 
the budget. The position regarding commitments and 
payments for the financial year is summarized in 
Table 6.1 and the evolution of appropriations available 
in 1984 is shown in Table 6.2. 
OBSERVATIONS ON THE RATE OF 
UTILIZATION OF AVAILABLE 
APPROPRIATIONS 
6.3. Commitments for the whole of Title 4 amounted 
to 96,1 Mio ECU in 1984, i.e. 62% of the available 
appropriations. The corresponding figures for 1983 
were 87,8 Mio ECU and 83 % respectively. 
6.4. Payments made in 1984 amounted to 57,1 
Mio ECU, i.e. 57 % of the available appropriations. 
The corresponding figures for 1983 were 54,8 Mio ECU 
and 72 % respectively. 6.5. The main reason for the low rate of utilization of 
budget appropriations in 1984 was as follows. Chap­
ter 45, increased by 4,5 Mio ECU following supple­
mentary and amending budget No 1, provided differ­
entiated appropriations totalling 30,5 Mio ECU for 
commitments and payments on two new structural 
measures decided on by the Council in October 1983. 
While the costs of these measures are partly reimbursed 
by the Community, their implementation is primarily 
the responsibility of the Member States, and it takes 
time for measures of this type to become operational. 
In fact, the Commission did not receive any applica­
tions for reimbursement in 1984. Notwithstanding that 
the appropriations in question are differentiated, the 
Commission, having regard to the requirements of the 
EAGGF, Guarantee Section, should have made use of 
the funds involved by effecting transfers of appropria­
tions as it had , done for certain non-differentiated 
appropriations in Articles 400 and 401 (transfers of 
25 Mio ECU). In this case, too, the Commission could 
have increased the transfer with the balance of appro­
priations remaining at the end of the year. 
OBSERVATIONS ON EXPENDITURE ON 
BIOLOGICAL STUDIES AND FISHING 
AGREEMENTS WITH CERTAIN 
DEVELOPING COUNTRIES 
Biological studies 
6.6. The appropriations for biological studies, entered 
in Article 412 of the 1984 budget and amounting to 
62 Official Journal of the European Communities 16.12.85 
Table 6.1 — Fisheries (Title 4): Appropriations available in 1984 and their utilization 
(Mio ECU) 
Budget chapter 
Chapter 40: 
Common organization of the market in 
fishery products 
Chapter 41: 
Specific measures 
Chapter 42: 
Agreements on fishing rights in 
non-Community waters 
Chapter 43: 
Social measures 
Chapter 45: 
Adjustment and redeployment of 
capacity 
Chapter 46: 
Improvement of structures — common 
measures 
Total Commitments 
Appropriations for 
commitment available 
in 1984 (') 
17,9 
4,4 
v 13,0 
0,3 
30,5 
88,0 
154,1 Commitments entered 
into in 1984 
15,6 
3,0 
13,0 
0,3 
— 
64,2 
96,1 Payments 
Appropriations for 
payment available in 
1984 (2) 
17,9 
3,7 
15,4 
0,3 
30,3 
32,3 
99,9 Payments made in 1984 
15,6 
2,8 
9,2 
0,1 
— 
29,4 
57,1 
(') Taking into account transfers, decommitments, adjustments and appropriations remaining from 1983. 
(2) Taking into account transfers and carry-overs from 1983. 
Table 6.2 — Evolution of appropriations available in 1984 
(Mio ECU) 
Type of appropriations 
Initial budget 
Supplementary budget 
Appropriations remaining 
Appropriations carried over 
from 1983 
Transfers 
Total Appropriations 
for 
commitment 
148,1 
11,0 
20,0 
-25,0 
154,1 Appropriations 
for payment 
101,4 
11,0 
12,5 
-25,0 
99,9 
640 000 ECU, are intended to enable the Commission 
to obtain, by means of specialized studies commis­
sioned from external bodies or experts, the scientific 
information needed for the implementation of the 
policy for the conservation and management of 
resources. States. These studies should meet needs identified in 
advance by the Commission and set out in clear and 
precise terms; this has not been the case up until the 
financial year in question. 
6.8. Except where Commission departments are 
directly acquainted with those applying for Community 
finance for carrying out a study, no objective criteria 
exist at present for checking the qualifications and cap­
abilities of candidates for study contracts. This being 
so, the Court considers that the Commission should 
introduce an appropriate system for checking the quali­
fications of contractors. In addition, competitive ten­
dering, as provided for in Article 51, paragraph 2, of the 
Financial Regulation, should be considered for studies 
which consume substantial technical and financial 
resources, so as to ensure that the best price is 
obtained. Decisions to dispense with competitive ten­
dering should be fully justified in each case. 
Publication of the conclusions of studies 
6.7. Up to the end of 1984, contracts for biological 
studies were mainly concluded on the basis of propo­
sals submitted by research institutes in the Member 6.9. Studies financed from the appropriations in 
Article 412 are, by definition, in the interest of the 
Community. They improve the level of scientific know-
16. 12. 85 Official Journal of the European Communities 63 
ledge regarding the available Community fishery 
resources. It is desirable therefore that, in addition to 
using these studies for its own internal requirements, 
the Commission should publish the main conclusions 
at Community level. 
Payments under the fishing agreements with 
certain developing countries 
6.10. The agreements concluded between the Com­
munity and certain developing countries (Senegal, Gui­
nea, Guinea Bissau, Equatorial Guinea, the Seychelles 
and Sao Tome and Principe) provide for the payment 
of compensation in return for fishing rights granted to 
Community vessels. 
6.11. These Fishing Agreements lay down that the 
financial compensation paid by the Community will be 
used to finance the execution of development projects, 
generally in the fisheries sector. The Protocol annexed to the Agreement with Guinea Bissau also states that 
the recipient will inform the Community of the use it 
intends to make of the compensation. 
6.12. The Commission has no information on the way 
in which the recipient developing countries allocate 
sums obtained by way of financial compensation, not 
even in the case of Guinea Bissau. It is therefore in no 
position to ensure that the sums paid are used in 
accordance with the terms of the agreements. 
6.13. Payments of compensation to Senegal, made 
under the agreement on the interim two-month exten­
sion of the Financial Protocol, which expired on 
15 November 1983, were entered into the accounts on 
19 January 1984, the relevant payment orders having 
been issued on 13 January 1984. In a Decision taken 
only on 31 January 1984, the Council approved the 
Agreement and authorized the President of the Council 
'to designate the persons empowered to sign the Agree­
ment in order to bind the Community'. Even though 
the payments had been approved by the Financial 
Controller, they should not have been made at that 
time, before the Agreement had been officially signed. 
(') OJC 348, 31. 12. 1984, p. 61. 
64 Official Journal of the European Communities 16. 12. 85 
CHAPTER 7 
Regional aid expenditure 
7.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information 
Observations on the budgetary management of the ERDF 
The additional nature of the ERDF's aid 
Investments financed in the water-engineering sector in Sicily 
Industrial projects 
Synthesis of observations on the application of Regulation (EEC) 
No 724/75 7.1 
7.4 
7.7 
7.10 
7.16 
7.24 — 7.3 
— 7.6 
— 7.9 
— 7.15 
— 7.23 
— 7.32 
7.33 — 7.36 
INTRODUCTION 
7.1. The objective of the European Regional 
Development Fund (ERDF) is to correct the Com­
munity's principal regional imbalances resulting in 
particular from the preponderance of agriculture, 
industrial change and structural underemployment. SUMMARY OF FINANCIAL 
INFORMATION 
7.4. Table 7.1 traces the utilization of the appropria­
tions in Title V of the budget 'Appropriations for oper­
ations in the regional sector'. 
7.2. The Fund continued to be managed in 1984 
according to the same regulations as in the past ('), 
since the new Regulation on the ERDF, adopted in 
1984 (2), did not come into force until 1 January 1985. 
7.3. On the basis of the provisions applicable in 1984, 
the Fund comprises: 
(a) Community action in support of regional policy 
measures adopted by the Member States, known as 
'quota measures'. The financing of these measures 
accounts for 95 % of the Fund's resources and the 
total is divided between the countries by quota. For 
the most part, these measures consist of financial 
assistance for investments in industrial, craft or ser­
vice activities or for investments in infrastructure 
projects; 
(b) specific Community regional development mea­
sures, called 'non-quota measures', which account 
for the remaining 5% and involve financing the 
implementation of certain special programmes. 7.5. For the quota measures (Chapter 50), 99,8 % of 
the commitment appropriations and 97,4 % of the pay­
ment appropriations were used in 1984. The aid, which 
was divided between industry (14,1 %), infrastructure 
(84,9 %) and study projects (1 %), was granted under 
974 decisions covering 4 394 projects. Thus, since 1975, 
over 4 700 decisions have been taken, 3 000 of which 
still have to be closed, i.e. almost 500 more than in 
1983. The average amount of aid granted per project 
was 529 000 ECU, which is the lowest level recorded in 
recent years. Annex III, § 13 to this report shows the 
distribution of commitments and payments by Member 
State. Commitments still outstanding at 31 December 
1984 amounted to 4 543 Mio ECU, or 41,7 % of the aid 
granted by the Fund since it was first set up. 
7.6. The commitment and payment appropriations 
available for the non-quota section for the financial 
year 1984 amounted to 126,9 Mio ECU and 157,9 Mio 
ECU respectively, of which 61 Mio ECU and 24,6 Mio 
ECU had been used. This shows the continuing unde-
rutilization of the appropriations allocated to this sec­
tion which, since its introduction in 1979, has used only 
16. 12.85 Official Journal of the European Communities 65 
Table 7.1 — Regional aid: appropriations available in 1984 and their utilization 
(Mio ECU) 
Budget chapter 
Chapter 50: 
Quota measures 
Chapter 51: 
Non-quota measures 
Total Chapters 50 and 51 (ERDF) 
Chapter 54: 
Other regional policy operations 
Chapter 55: 
Mediterranean programmes 
Grand total Commitments 
Appropriations for 
commitment available 
in 1984 Commitments entered 
into in 1984 
2 327,1 2 322,2 
126,9 61,0 
2 454,0 2 383,2 
49,5 47,8 
10,0 10,0 
2 513,5 2441,0 Payments 
Appropriations for 
payment available in 
1984 Payments made in 1984 
1 361,9 1 326,0 
157,9 24,6 
1 519,8 1 350,6 
42,4 27,9 
15,8 4,9 
1 578,0 1 383,4 
140 Mio ECU of the commitments and 63,4 Mio ECU 
of the payments, even though it has theoretically been 
granted 5 % of the Fund's resources. 
OBSERVATIONS ON THE BUDGETARY 
MANAGEMENT OF THE ERDF 7.9. Recoveries are effected by deducting appropriate 
amounts from subsequent payments in respect of other 
decisions, but the documents that the Commission has 
sent to the Court contain no precise record of this. The 
overall statement of the amounts to be recovered and 
those already recovered appears in neither the account­
ing nor the non-accounting records. This makes it diffi­
cult to monitor these operations and reduces the scope 
for checking the annual accounts. Steps should be 
taken to ensure that aid recovery operations are moni­
tored in summary statements. 
7.7. Only slow progress is being made with the clo­
sure of old decisions. 14,5 Mio ECU of commitments 
entered into during the period 1975 to 1977 were out­
standing at 31 December 1984. The corresponding 
amount for the period from 1978 to 1980 was 314,1 Mio 
ECU. Also at 31 December 1984, the decisions not yet 
closed for these same periods totalled 69 and 503 res­
pectively, corresponding to about 8 % and 44 % of all 
the decisions taken during the periods in question. THE ADDITIONAL NATURE OF THE 
ERDFS AID 
7.8. The closure operations give rise to decommit-
ments and in some cases reimbursements, which 
explains why they are proceeding slowly. A total of 234 
decisions relating to the financial years 1975 to 1980 
were closed in 1984. Of these 234 closure operations, 
155 gave rise to at least a partial decommitment of the 
aid previously granted and 57 resulted in the recovery 
from the Member State concerned of advances totalling 
15,1 Mio ECU, most of which had been paid out under 
the accelerated payments procedure. This helps to 
explain why national administrations have little incen­
tive to close decisions rapidly. 7.10. The Court has already expressed its concern (3) 
that ERDF assistance may not in fact have met the 
objective of the Community legislation of achieving 
real increases in Member States' own regional develop­
ment efforts. In order to attain this objective, the Regu­
lation nevertheless leaves it up to the Member States 
themselves to decide whether: 
(a) to add ERDF aid for a particular project to 
national aid granted for the same project (indivi­
dual additionality), or 
66 Official Journal of the European Communities 16. 12. 85 
(b) to add the reimbursements paid by the ERDF 
(received for investments assisted by the Com­
munity) to expenditure allocated generally for 
regional development (global additionality). 
7.11. As the Court found during its audit inquiries, 
Member States have opted almost invariably for the 
global additionality procedure. Under this procedure 
the Community subvention is received by the Member 
State and not by the investor. 
7.12. Moreover, in general, global additionality is dif­
ficult to verify. Such information as is available, how­
ever, suggests that this additionality is applied in a 
manner that is far from satisfactory and in any case 
with results that differ quite considerably from one 
Member State to another. Furthermore, inasmuch as 
Community funds are supposed to be added to those 
allocated to regional development policies at national 
level, there is no means of ensuring that they will be 
used in accordance with the priorities set under the 
Community regional policy. 
7.13. In the light of the situation described above, the 
Court examined the extent to which work on assisted 
projects had started before or after the application had 
been lodged and the Commission's aid decision taken. 
This scrutiny was based on a sample of 626 decisions 
covering the period 1975-84 and representing 40% of 
the regions and types of investment in eight Member 
States (representing in all 16% of the total decisions). 
Two main findings resulted from this work: 
(a) In 92 % of the projects examined, work had already 
started by the time the application for Fund aid 
was made and this figure rises to 98 % by the date 
of the decision granting aid; 
(b) The figures were found to vary according to the 
type of project and the Member State concerned. 
Industrial projects account for the greatest number 
of cases of work having already started at the time 
of the aid application. Disparities between the 
Member States are sometimes substantial. Some 
Member States show a high percentage of projects 
not yet begun when the aid application is lodged. 
But for these countries too, the percentages 
decrease when the reference point is the date of the 
Commission's aid decision. 
7.14. It follows from (a) above that in practice there is 
no direct relationship between the execution of a given 
project and the Commission's aid decision. Rather it is the terms attached to the granting of national aid which 
have a determining impact. It should be borne in mind, 
however, that the projects that best satisfy the objec­
tives laid down by the national authorities and that 
also meet the ERDF's formal eligibility criteria, are not 
necessarily the best from the Community's point of 
view. 
7.15. There is therefore an imperative need to increase 
the effectiveness of the Fund as an instrument of the 
Community regional policy by stressing the additional 
nature of the aid granted by the Community, both at 
global level and at the level of individual projects. To 
this end, the Commission should take all the necessary 
steps at the level of its management and bring all its 
influence to bear on the Member States in order to 
achieve genuine additionality. The new Regulation 
which came into force in 1985 should give the Commis­
sion the opportunity to exert increasing influence on 
the Member States' regional policies and help to attain 
the Community's objectives more efficiently. This pos­
sibility does exist, as shown by the differences noted 
between the dates of the commencement of work and 
the dates of ERDF aid being granted. 
INVESTMENTS FINANCED IN THE 
WATER-ENGINEERING SECTOR IN 
SICILY 
7.16. The water-engineering investment projects in 
Sicily are the main operations financed by the ERDF 
in this region. The audit inquiries made by the Court in 
this field dealt in particular with the dam on the Gib-
besi torrent and the complexes at Naro, Furore, San 
Leonardo, Irminio, Olivo and Castello, which were the 
subject of two Fund aid decisions in 1981 for commit­
ments of 13 100 Mio LIT and 162 800 Mio LIT respec­
tively, i. e. a total of approximately 140 Mio ECU on 
the basis of the 1981 exchange rate, and for payments 
of 9 800 Mio LIT and 36 000 Mio LIT respectively. 
7.17. No quantified analysis of either the water 
resources available or the priority needs and the meth­
ods to be employed for satisfying them was made prior 
to the decision, taken in the early 1960s, to carry out 
big investment projects in the water-engineering sector 
in Sicily. In 1984, the Court found that, despite the 
high-priority rating given to the water-power resources 
sector by the three-year Sicily development plan for 
1982-84, the regional plan, provided for by Regional 
Law No 39 of 1977, had still not been drawn up. Furth­
ermore, none of the complexes the Court examined was 
operational, not even those for which the projects 
dated back almost 20 years. 
16. 12. 85 Official Journal of the European Communities 67 
7.18. No overall design plan whatsoever was made, 
before construction work commenced, concerning the 
lay-out of each complex, which comprised a reservoir 
and a supply network; this applied at all levels of the 
lay-out. For example, the 1976-77 preliminary study for 
the Naro complex concerned solely the dam. The over­
all study was not made until 1981, when it was decided 
to construct the supply network. 
7.19. This approach results in the sites and the tech­
nical features of the structures being selected without 
the socio-economic implications of these choices being 
known because, prior to the decision, no analysis has 
been made of the pipeline system and the use which 
will be made of the new resources. Moreover, the var­
ious , structures lie idle until all of them are finished, 
since their lay-out has not been designed in such a way 
as to allow them to come into use step by step as they 
are completed. 
7.20. The lack of planning is most evident in respect 
of the financial cover. The programme drawn up under 
Regional Law No 35 of 1974 provided for 20 structures 
to be built or completed, including the six complexes 
mentioned in paragraph 7.16, without any indication of 
the way the global allocation of 128 800 Mio LIT was 
to be divided up between them. The amount of work 
thus proved to be disproportionate to the correspond­
ing overall budget available. 
7.21. Between 1977 and 1982, various laws authorized 
a total of about 350 000 Mio LIT of additional finance. 
A draft regional law of April 1983 (No 581 of 28 April 
1983), which provided for a new allocation of 350 000 
Mio LIT, estimated the finance still required to com­
plete the six complexes already mentioned to be 
around 1 400 000 Mio LIT. Since the draft law 
remained only a draft, work was suspended for lack of 
finance. During its on-the-spot audit visit in October 
1984, the Court thus found that the investment projects 
were unfinished and unused. 
7.22. Better planning and greater caution in deciding 
to invest would probably have enabled the funds avail­
able to be used better. In particular, it is hard to justify 
the decision to put new complexes in hand in 1976, at a 
time when the necessary finance was not even assured 
for the completion of the structures already under con­
struction. Pending correct utilization of the investments 
financed, Fund aid can therefore be paid only after 
lengthy periods of time and its effect on the region's 
production and development will be markedly reduced. 
7.23. This situation illustrates the need for the Com­
mission in future to define precisely the objectives to be pursued in terms of planning, to find out more 
beforehand about the contribution to regional develop­
ment of the projects it finances and meticulously to fol­
low up the execution of the assisted projects until their 
completion. 
INDUSTRIAL PROJECTS 
The execution of industrial projects in France 
7.24. Audit inquiries made by the Court during the 
financial year 1984 revealed a high proportion of short­
comings in the assisted industrial projects in France. 
Out of 42 projects selected (aid granted: 146 Mio FF) 
in Brittany, Lorraine and Languedoc-Roussillon, repre­
senting almost 10% of the total number of industrial 
projects assisted by the ERDF up to and including 
1983 in the three regions, 12 (aid granted: 12 Mio FF) 
related to undertakings that had ceased or suspended 
trading at the time of the audit and 13 others (aid 
granted: 110 Mio FF) had not achieved the job targets 
set. Of the remaining 17 projects, six (aid granted: 7,4 
Mio FF) had encountered difficulties after completion 
and the firms concerned had in some cases been 
obliged to cut back on the number of staff. 
7.25. There are various reasons, such as the economic 
climate, sectoral difficulties and the nature of the 
schemes assisted, for the high incidence of problems, 
which proved to be similar from one region to another. 
7.26. Such a large number of failures does however 
show that, for the decisions examined, the Commission 
did not satisfactorily apply the provisions of Article 
5 (l)(c) of the Fund Regulation, which lays down that, 
when granting aid, special account must be taken of 
the situation of the economic sector concerned and the 
profitability of the investment. Even when such aid 
decisions do not lead ultimately to expenditure, they 
have the effect of tying up appropriations which could 
have benefited the region's development. 
7.27. About 10 of the projects included in the Court's 
sample related to the agri-foodstuffs sector. Of these, 
seven were financed by the ERDF instead of by the 
EAGGF, Guidance Section, even though they fell 
within the sectors covered by the agricultural sector 
programmes drawn up under Council Regulation 
(EEC) No 355/77 of 15 February 1977 on common 
68 Official Journal of the European Communities 16.12.85 
measures to improve the conditions under which agri­
cultural products are processed and marketed (4). 
7.28. ERDF aid was granted even though, on the 
whole, it had not been proved that the investments in 
question met the criteria of feasibility and Community 
interest laid down by the EAGGF, Guidance Section 
programmes (size, productivity, resources to be 
employed, etc.). In fact, the documents which the 
Member States have to submit with ERDF aid applica­
tions do not make it possible to prove this. 
7.29. Of the seven firms assisted (aid granted: 1 Mio 
FF), three had ceased trading when the Court carried 
out its audit and the solvency of a fourth hung in the 
balance. Through better coordination of the Com­
munity's structural measures it ought to have been pos­
sible to avoid ERDF financing of projects in the agri-
foodstuffs sector which had not been shown to comply 
with the conditions laid down by the EAGGF and 
which thus involved a particularly high risk of failure. 
The skilled nature of jobs in the FR of Germany 
7.30. Continuing with industrial projects, the audit 
inquiries made in 1984 by the Court in the Land of 
Baden-Wurttemberg in the FR of Germany focused on 
the financing of investments intended to create skilled 
jobs. The Member State's provisions relating to the 
improvement of the region's economic structures con­
sidered the creation of skilled jobs to be one of the pri­
mary goals of the aid in question, in particular so as to 
prevent a young, skilled labour force from migrating to 
other areas. 
7.31. However, none of the statistical or other data 
available in the Member State concerning the planning 
and execution of these projects enabled any distinction 
to be drawn between skilled and unskilled jobs. The 
job-creation objectives subscribed to by the aid reci­
pients related to a specific number of jobs, without 
regard to their quality, and certificates of execution 
also failed to mention this aspect. The Commission 
should have ensured that the stated aim of the regional 
development programme was more faithfully reflected 
in the system employed for implementing it, and 
should have drawn the necessary conclusions regarding 
the granting of aid. Conclusion regarding the industrial projects 
7.32. The observations made during the audit of 
industrial projects in France point to the need for better 
coordination with other Community measures and for 
greater effectiveness. The audit of the FR of Germany 
projects reveals a failure to monitor the attainment of 
objectives. These findings highlight the need for even 
more stringency when selecting projects and, as regards 
the management of the Fund, the need for full, per­
iodic information on the progress of the projects subsi­
dized and on their results. 
SYNTHESIS OF OBSERVATIONS ON THE 
APPLICATION OF REGULATION (EEC) 
No 724/75 
7.33. The main findings arising from the 1984 audits 
corroborate certain observations which the Court has 
been making since 1977 on the implementation of 
Regulation No 724/75 establishing the ERDF. These 
observations have highlighted the need to: 
(a) strengthen the procedures for scrutinizing the 
regional development programmes, the statistical 
summaries and the aid applications to ensure that 
Fund aid is allocated to the investments that con­
tribute most to correcting regional imbalances; 
(b) define more precisely the operational criteria to be 
applied in selecting projects so as to improve the 
effectiveness of the appraisal of aid applications; 
(c) set up, if need be with the aid of a suitable compu­
terized system, a more comprehensive monitoring 
scheme that would enable the Commission to make 
a systematic analysis of the Fund's activity. 
7.34. If this action is not taken, it will be difficult to 
increase the effectiveness of the aid with a view to 
achieving better convergence of the Member States' 
economies and it will be hard to obtain a better evalua­
tion of the Commission's measures to help disadvan­
taged regions. 
7.35. The new ERDF Regulation (Regulation 
No 1787/84) tackles some of these areas of concern, in 
particular those regarding documentation of the imple­
mentation of ERDF aid measures. The Commission 
has in addition clarified the implementing criteria cov­
ering the general principles of project selection. 
16. 12.85 Official Journal of the European Communities 69 
7.36. Nevertheless, these new provisions are not in use of the scope offered by the new Regulation to 
themselves sufficient to prevent a recurrence of the ensure, in its role of manager of the Fund, that Corn-
situations pointed out by the Court. It is important in munity aid is more effective in achieving its objectives, 
this connection that the Commission should make full 
(') Council Regulations (EEC) No 724/75 of 18. 3. 1975 (OJ (3) See in this connection paragraph 3.3.3 of the Court's 
L73, 21.3. 1975, p. 1), No 214/79 of 6. 2. 1979 (OJ L 35, report in response to the conclusions of the European 
9. 2. 1979, p. 1) and No 3325/80 of 16. 12. 1980 (OJ L 349, Council of 18. 6. 1983 (OJ C 287, 24. 10. 1983, p. 1). 
23. 12. 1980, p. 10). (4) OJL51,23.2. 1977, p. 1. 
(2) Council Regulation (EEC) No 1787/84 of 19. 6. 1984 (OJ 
L 169, 28. 6. 1984, p. 1). 
70 Official Journal of the European Communities 16.12.85 
CHAPTER 8 
Social sector 
8.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information (European Social Fund) (Chapters 
60 and 61) 
Implementation of the budget 
Observations on regularity and legality 
Entry of commitments and payments in the accounts 
Observations on an overruling of the Financial Controller's 
refusal to grant approval 
Implementation of the new European Social Fund 
Procedures for preparing the approval decisions 
Observations on the procedures for preparing the approval deci­
sions 
Observations on the decisions concerning applications for assist­
ance 
Observations on the application of the weighted reduction on a 
linear basis of applications for assistance 
Conclusions 
Winding up of the old European Social Fund 
Observations on final payments 
Observations on recoveries .5 
.5 
.14 
.10 
.11 — 8.14 
.15 
.15 
.17 
.22 
,27 
.30 
.31 
.31 
.35 — 8.30 
— 8.16 
— 8.21 
— 8.26 
— 8.29 
— 8.37 
— 8.34 
— 8.37 
INTRODUCTION 
8.1. Community expenditure in the social sector 
comes under Title 6 of Part B of Section III 'Commis­
sion' of the general budget. It relates mainly to the 
activities of the European Social Fund (Chapters 60 
and 61) and to other social expenditure shown in 
Chapters 63 to 67 and in Chapter 69 (see Table 8.1). 
SUMMARY OF FINANCIAL 
INFORMATION (EUROPEAN SOCIAL 
FUND) 
(CHAPTERS 60 AND 61) 
Implementation of the budget 
8.2. Tables 8.1 and 8.2 show details of the appropria­
tions available and their utilization. During the finan­cial year 1984, the Commission took three decisions 
approving applications for assistance, on 23 July, 
13 September and 19 December 1984. This last decision 
superseded the two earlier ones. 
8.3. Four countries received more than three quarters 
of the commitments entered into in 1984 (the United 
Kingdom 32 %, Italy 22 %, Ireland and France 11 % 
each). Payments in the form of automatic advances (') 
accounted for 47 % (12 % in 1983) of the total commit­
ments. For the Netherlands, however, this figure was 
only 12 %, as it had agreed, in view of the Community's 
financial difficulties, to have payment of its advances 
deferred until January 1985. 
16. 12. 85 Official Journal of the European Communities 71 
Table 8.1 — Social sector: appropriations available in 1984 and their utilization 
(Mio ECU) 
Budget heading 
Chapter 60: General measures 
including: 
— Young people under 25, 
less-favoured regions (6000) 
— Young people under 25, 
other regions (6001) 
— Persons aged 25 and over, 
less-favoured regions (6010) 
— Persons aged 25 and over, 
other regions (6011) 
Measures proposed before 1984: 
— Former Chapter 60 (607) 
—- Former Chapter 61 (608) 
— Former Chapter 62 (609) 
Chapter 61: Specific measures (610) 
Total Chapters 60 and 61 
(Social Fund) 
Chapter 63: 
Education and vocational training 
Chapter 64: 
Employment, social protection and 
health 
Chapter 65: 
Contribution to the ECSC for social 
measures in connection with the 
restructuring of the steel industry 
Chapter 66: 
Protection of the environment and 
consumers 
Chapter 67: 
Cultural action and the European 
Foundation 
Chapter 69: 
Aid to disaster victims in the 
Community 
Total Chapters 63 to 69 
Total Title 6 
(Social sector) Commitments 
Appropriations for 
commitment available 
in 1984 Commitments entered 
into in 1984 
1939,6 1810,7 
529.7 501,4 
976,3 909,1 
239.8 224,8 
190,8 175,4 
0,7 — 
1,0 — 
1,3 1,0 
85,0 42,5 
2 024,6 1 854,2 
16,8 16,6 
297,0 294,8 
62,5 62,5 
21,2 12,1 
2,2 2,2 
34,1 33,2 
433,8 421,4 
2 458,4 2 275,6 Payments 
Appropriations for 
payment available in 
1984 Payments made in 1984 
1 762,3 1 593,6 
249,0 235,8 
457,5 435,4 
113,9 110,4 
99,0 85,6 
474,8 454,7 
365,8 269,5 
2,3 2,2 
25,5 12,7 
1 787,8 1 606,3 
22,2 15,0 
301,4 290,0 
62,5 62,5 
25,0 9,7 
2,7 2,0 
54,2 50,8 
468,0 430,0 
2 255,8 2036,3 
8.4. Commitments outstanding at the beginning of cancelled (5 % in 1983). The latter amount relates to 
1984 totalled 2 493,8 Mio ECU; 726,1 Mio ECU (29 %) commitments outstanding from financial years prior to 
were paid (36 % in 1983) and 98,5 Mio ECU (4 %) were 1983. 
72 Official Journal of the European Communities 16. 12. 85 
Table 8.2 — Social Fund: evolution of commitment 
appropriations and payment appropriations 
(Mio ECU) 
Type of appropriations 
Initial budget 1984 
Appropriations remaining 
from 1983 
Carry-overs from 1983 
Appropriations arising from 
decommitments of 1983, com­
mitments 
Appropriations arising from 
the revaluation of outstanding 
commitments 
Transfers of appropriations 
Total of final appropriations Commitment 
appropriations 
1 846,0 
71,5 
94,6 
29,2 
-16,7 
2024,6 Payment ap­
propriations 
1 220,0 
575,9 
-8,1 
1 787,8 
8.5. The balance outstanding at 31 December 1984 
was 2 519,5 Mio ECU, of which 34% concerned Italy, 
22 % the United Kingdom and 14 % France. 
OBSERVATIONS ON REGULARITY AND 
LEGALITY 
Entry of commitments and payments in the 
accounts 
8.6. The commitments of appropriations decided on 
23 July (1734,4 Mio ECU) and 13 September (200,3 
Mio ECU) were not entered in the accounts until Octo­
ber, and payment of advances against them did not 
start until November. 
8.7. The Court has failed to obtain any more satisfac­
tory explanation than that given by the Commission 
Member responsible during the European Parliament 
sitting of 12 February 1985 (2): i.e. that due to the 
budgetary situation, the commitments could not be 
entered in the accounts until late October following the 
adoption of the supplementary budget on 25 October 
1984. 
8.8. Notwithstanding this explanation by the Com­
mission, the Court notes that, at the time of the deci­
sion of 23 July, the necessary commitment and pay­
ment appropriations were available. 
8.9. Approval decisions entail the immediate payment 
of 50 % advances to most of the promoting bodies, in accordance with Article 5 of Council Regulation (EEC) 
No 2950/83 of 17 October 1983 (3). 
8.10. The Court considers that the accounts should 
reflect these approval decisions, in accordance with the 
Financial Regulation (Articles 32 and 33) and with the 
measures for its implementation (Article 27). 
Observations on an overruling of the Financial 
Controller's refusal to grant approval 
8.11. The Commission decided at its meeting on 
19 December 1984 to overrule the Financial Control­
ler's refusal to grant approval of 18 December 1984. 
8.12. In his refusal to grant approval, the Financial 
Controller objected to persons wishing to become self-
employed being granted the aid for recruitment referred 
to in Article 1(c) of Council Regulation (EEC) 
No 2950/83 (4) and in paragraph E. 3 of the Commis­
sion guidelines for the management of the European 
Social Fund in the financial years 1984 to 1986 (5), 
which clearly repeat the concept of 'recruitment to 
additional jobs'. 
8.13. The Commission considered that the Financial 
Controller had not taken account of the social and 
economic impact of the aid in question, especially the 
reduction of unemployment which can be achieved by 
creating jobs or by making it easier for unemployed 
persons to become self-employed. 
8.14. The Court considers that in this particular case 
the commitment of appropriations did not in fact com­
ply with the provisions and the refusal to grant 
approval was therefore justified. Insofar as job creation 
in the form of helping unemployed persons to become 
self-employed is in keeping with the true objective of 
the aid, it is the Court's view that in this instance the 
Commission ought to modify the regulations; in so 
doing it would, moreover, put all the Member States on 
an equal footing. 
IMPLEMENTATION OF THE NEW 
EUROPEAN SOCIAL FUND 
Procedures for preparing the approval decisions 
8.15. The conditions of eligibility of the categories of 
persons and the operations are chiefly defined in Arti-
16. 12. 85 Official Journal of the European Communities 73 
cles 1, 2, 3 and 4 of Council Decision 83/516/EEC of 
17 October 1983 on the tasks of the European Social 
Fund (6), whilst the eligible expenditure is specified in 
Article 1 of Regulation No 2950/83 on the implemen­
tation of Decision 83/516/EEC (4). The Commission 
guidelines for the management of the European Social 
Fund in the financial years 1984 to 1986 (5) lay down 
the order of priority of eligible applications and the 
principles and procedure to be followed with regard to 
reductions. 
8.16. Applications for assistance must now be made 
on the form shown in Commission Decision 83/673/ 
EEC of 22 December 1983 on the management of the 
European Social Fund (7). Furthermore, the Commis­
sion has developed its own codification system which 
is designed to standardize the appraisal of these appli­
cations. It has also begun compiling a guide to the 
interpretation of the rules governing the tasks and the 
operation of the European Social Fund. 
Observations on the procedures for preparing 
the approval decisions 
Guidelines 
8.17. The guidelines drawn up in consultation with 
the Member States are too general in that they do not 
make it possible to define the priorities precisely. 
8.18. There is no adequate handbook for appraisal 
and interpretation, drawn up prior to the lodging of aid 
applications. Such a handbook would be an invaluable 
aid for the national authorities responsible for apprais­
ing applications. 
8.19. Notwithstanding some clarifications provided 
by the internal note of 18 July 1984 (8), several concepts 
concerning selection have still not been adequately 
explained. This applies, inter alia, to the following con­
cepts: new technologies, prospects of employment, 
methods of calculation, local initiatives, public need, 
part-time work, socio-occupational integration, prepar­
ation for working life, undertakings not employing 
more than 500 persons and the innovatory element of 
specific operations. 
8.20. Some of the guidelines are not precise enough to 
prevent overlaps, which does not facilitate the exami­
nation of applications. This applies, inter alia, to voca­tional training operations which include an element of 
job-creation, and operations concerning recruitment to 
or employment in additional jobs involving some kind 
of training or apprenticeship. 
Codification 
8.21. The main aim of the codification system devel­
oped by the European Social Fund is to enable Com­
mission staff to appraise applications for assistance in 
a uniform way. Several of the codes used in the exami­
nation of applications for assistance, however, do not 
correspond to adequate definitions of the various cases 
of non-admissibility, non-eligibility and non-priority. 
Observations on the decisions concerning 
applications for assistance 
8.22. Out of some 3 300 applications for assistance 
submitted in 1984, a sample of 480 were examined to 
check whether they were complete and met the require­
ments as to admissibility, eligibility and priority. In 
addition, in several national bodies responsible for sub­
mitting applications for assistance to the European 
Social Fund, an analysis was made of 350 of these 
applications on the basis of official files and/or of 
questionnaires. This scrutiny led to the following obser­
vations. 
8.23. As well as the weaknesses in the documents 
clarifying the guidelines (paragraphs 8.18 to 8.20), the 
Court found that the Commission does not adhere 
strictly enough to the concepts that it itself has devel­
oped. For example, although it has drawn up a form for 
applications for assistance that is designed to supply it 
with much of the information it requires, many of the 
applications fail to provide the relevant data. Similarly, 
it was found that, having laid down selection rules, the 
Commission then quite frequently ignores them with­
out good reason. 
8.24. An audit, whether internal or external, cannot 
function properly in the absence of sufficiently precise 
application criteria. This is particularly so where the 
audit involves analysing decisions relating to the prior­
ity and eligibility of applications for assistance. The 
Commission should, therefore, provide clear explana­
tions for any changes which it makes to the classifica­
tion of applications for assistance submitted by the 
Member States under certain categories of the guide­
lines. It is the overlapping of some categories of the 
guidelines that leads to these changes and that is also 
to blame for serious inconsistencies which can arise 
when classification procedures are changed for some 
applications but not for others of the same kind. 
74 Official Journal of the European Communities 16. 12. 85 
8.25. Some decisions contain mistakes as regards the 
amounts approved. 
8.26. Lastly, attention must be drawn to the lack of 
transparency of the appraisal carried out by the staff 
responsible for the European Social Fund. Apart from 
the imprecision of the codes developed for appraisal 
purposes (paragraph 8.21), there is sometimes no 
explanation of the Commission's position in the files. 
Observations on the application of the weighted 
reduction on a linear basis of applications for 
assistance 
8.27. The Court has examined the results of the appli­
cation of the weighted reduction on a linear basis, a 
procedure which is defined in paragraph 6 of the guide­
lines for the management of the European Social Fund 
and is intended to balance the amount of commitment 
appropriations available with the volume of applica­
tions for assistance. This examination gives rise to the 
following observations. 
8.28. The Commission, as is its right, has not always 
acted in accordance with the Member States' reduction 
proposals. Nevertheless, it is desirable that the choice 
made in this case be clear. 
8.29. In making reductions, the Commission has 
always maintained that it was not its intention to call 
into question the execution of planned operations. Pro­
portional reduction applied without precise proposals 
from a Member State, however, has meant that it has 
not been possible to keep some operations going in 
their entirety. 
Conclusions 
8.30. From analysis of the first year of operation of 
the new Fund, it seems that the problems encountered 
are, on the one hand, the lack of precise rules and, on 
the other, the failure to apply the rules that do exist suf­
ficiently strictly. 
WINDING UP OF THE OLD EUROPEAN 
SOCIAL FUND 
Observations on final payments 
8.31. As part of its audit of final payments effected by 
the Commission in 1984, the Court scrutinized files and made a number of on-the-spot visits. The many obser­
vations arising in consequence relate, as in the past, to 
the certification of accounts, the eligibility of expendi­
ture and the methods of calculating it, the financing of 
projects and the content of files. 
8.32. For example, in four cases the Commission 
made the final payment despite the fact that the Mem­
ber State's certification, stipulated in the Regulation, 
did not even appear on the payment claim. In another 
case, a training centre received aid from the Fund from 
1973 to 1981 even though its expenditure was funded 
entirely by the national administration: as a result, 
there was double cover for the amount financed by the 
Community; this fact was endorsed by the Commission 
staff; at the time of the Court's audit visit, over half the 
amount received (equivalent to some 2,5 Mio ECU) 
was still available. The Court also found that, for sev­
eral projects, the execution reports did not contain 
information essential for assessing the operations, such 
as results in terms of jobs created or maintained, the 
types of courses held and their duration. 
8.33. Furthermore, attention should be drawn to the 
case in which the certifier stated the estimated expendi­
ture in the global breakdown of a grouped final pay­
ment claim instead of the actual expenditure, since the 
breakdown of the latter was not available. Lastly, there 
are the three cases where the amount entered in the cer­
tified global breakdown was higher than the amount 
approved as eligible — subsequently — by the certifier. 
The Court requests the Commission to pursue the 
recovery of the overpayment in the national currency 
(equivalent to some 160 000 ECU). 
8.34. In one region — which was acting as certifier — 
it was not possible to establish the financial data for 
each project in support of the global final payment 
claim. If the Commission cannot obtain these details 
— which would, moreover, make any check impossible 
— it ought to refuse the assistance. 
Observations on recoveries 
8.35. During the financial year 1984, as in 1983 (see in 
substance paragraphs 8.26, 8.28 and 8.29 of the annual 
report for the financial year 1983, page 76, OJ C 348 of 
16. 12. 85 Official Journal of the European Communities 75 
31. 12. 1984), the Court examined the problem raised 
by the 84 recoveries (in particular 27 French recoveries, 
32 Italian and 10 United Kingdom ones) made as a 
result of payments of advances that were too high in 
comparison with the aid actually due. These recoveries 
amounted to 6,2 Mio ECU, of which 1,9 Mio ECU for 
France, 3,5 Mio ECU for Italy and 0,4 Mio ECU for 
the United Kingdom. 
8.36. By analysing these 84 cases in respect of the 
length of time these advances remained in the hands of the recipients prior to their recovery, it was found that 
this period varies between 3 and 61 months, the aver­
age period being over two years, and that the various 
sums amount to nearly 1 Mio ECU. 
8.37. The number of these recoveries, the sums 
involved and the abnormally long period elapsing 
between the excess payment and its recovery make an 
improvement in the management in this field neces­
sary. 
(') In accordance with the provisions of Article 5(1) and (2) (5) 
of Regulation (EEC) No 2950/83, OJ L 289, 22. 10. 1983. 
(2) Report of proceedings, 12. 2. 1985, pp. 31-32. 
(3) OJ L 289, 22. 10. 1983. According to this Article, 'a deci­
sion of approval shall be followed by the payment of an 
advance of 50 % of the assistance approved on the date 
on which the operations are scheduled to begin. Where 
this date precedes the date of the decision of approval, 
payment shall be made immediately after that decision.' 
It was the latter situation that was generally the case in (6) 
1984. (7) 
(4) OJ L289, 22.10. 1983. This Regulation concerns the (8) 
implementation of Council Decision 83/516/EEC on the 
tasks of the European Social Fund. OJ C 5, 10. 1. 1984. These guidelines are adopted before 1 
May of each year and for the three following financial 
years, under Article 6(1) of Council Decision 83/516/ 
EEC on the tasks of the European Social Fund. The 
Commission forwards them to the European Parliament 
and the Council for information. Furthermore, pursuant 
to the same Article, they are drawn up in close consul­
tation with the Member States, taking account of any 
views expressed by the European Parliament. 
OJL289,22. 10. 1983. 
OJL377,31. 12. 1983. 
Memorandum from Mr. I. Richard to the Commission in 
agreement with Mr. A. Giolitti, V/995/84. 
76 Official Journal of the European Communities 16.12.85 
CHAPTER 9 
Research, energy, etc. 
9.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Observations on financial management 
Energy: cost sharing projects 
Indirect action research 
Management procedures 
Use of external audit firms 
Information and telecommunications technologies 
Concluding comments 9.1 
9.2 
9.3 
9.5 
9.5 
9.6 
9.9 
9.15 — 9.4 
— 9.8 
— 9.8 
— 9.14 
INTRODUCTION 
9.1. This chapter is concerned with expenditure on 
energy, research and various allied activities for which 
appropriations for commitment and payment are con­
tained in Chapters 70 to 78 of part B of the Commis­
sion section of the budget. ject of 22 Mio ECU made on 15 January 1985, and 
charged to the 1984 budget. In view of the high 
level of JET's liquidity at the time in question, the 
Commission's acquiesence in JET's decision to call 
for funds was inconsistent with the recommenda­
tion in paragraph 9.32 of the Court's annual report 
for the financial year 1983 (') about the level of 
JET's bank balances; 
OBSERVATIONS ON FINANCIAL 
MANAGEMENT 
9.2. Table 9.1 summarizes the use of appropriations in 
1984. Arising from its audit activities the Court's com­
ments on the utilization of appropriations are as fol­
lows: (c) for Esprit, the low rate of utilization of appropria­
tions for payment is due to delays in procedures 
leading up to the signing of contracts under the 
1984 work plan (see also paragraph 9.13 (a)); 
(d) for transport policy, the low rate of utilization of 
appropriations for both commitment and payment 
arises mainly because Council decisions were not 
taken until December 1984. 
(a) for energy, the rate of utilization of appropriations 
for payment, though it is the highest for five years, 
remains low. This is due partly to technical prob­
lems encountered by contractors but also to the 
time consuming Community procedures; 
(b) for indirect action research, the utilization rate for 
appropriations for payment is inflated by 6 % as a 
result of a payment of contribution to the JET pro-ENERGY: COST SHARING PROJECTS 
9.3. Chapter 70 provides for the Commission's share 
of 'technological development' and 'demonstration' 
projects. An objective of these cost-sharing contracts is 
to help new technology achieve the stage of commer­
cial exploitation, subsidies being normally repayable if 
16. 12. 85 Official Journal of the European Communities 77 
Table 9.1 — Research, energy, etc.: Appropriations available in 1984 and their utilization 
(Mio ECU) 
Expenditure area 
(chapter of budget) 
Energy: 
— Energy policy (70 excluding 707) 
— Specific Community measures (707) 
Research and investment: (73) 
— Direct action research 
— Indirect action research (3) 
— Information technology 
(Esprit) 
Industry and the internal market: (77) 
— Industrial policy 
— Information and telecommunications 
technologies other than 
Esprit 
Transport: 
— Transport policy (78 excluding 783) 
— Special projects (on transport 
infrastructure) (783) 
Other activities: 
— Nuclear safeguards (71) 
— Information market and 
innovation (75) 
— Miscellaneous (72) 
Total 
Note: Comparable figures for JET (4) Commitments 
Appropriations 
for commit­
ment available 
in 1984(0 
216,9 
456,0 
219,3 
386,6 
207,0 
29,0 
45,7 
96,7 
471,0 
3,0 
23,9 
3,7 
2158,8 
114,3 Commitments 
entered into in 
1984 
204,8 
456,0 
189,3 
268,9 
134,4 
26,8 
17,6 
16,7 
471,0 
3,0 
13,6 
3,6 
1805,7 
83,5 Utilization rate 
(%) 
94,4 
100,0 
86,3 
69,5 
64,9 
92,4 
38,5 
17,3 
100,0 
100,0 
56,9 
97,3 
83,6 
73,0 Payments 
Appropriations 
for payment 
available in 
1984 (2) 
206,0 
457,8 
220,0 
307,9 
45,0 
36,4 
50,8 
45,4 
471,0 
4,2 
20,1 
6,0 
1 870,6 
142,2 Payments 
made in 1984 
133,7 
412,0 
189,9(5) 
249,3 («) 
W) 
17,7 
26,3 
6,8 
423,9 
2,5 
8,9 
2,9 
1475,7 
95,2 Utilization rate 
(%) 
64,9 
90,0 
86,3 
80,1 
4,0 
48,6 
51,8 
15,0 
90,0 
59,5 
44,3 
48,3 
78,9 
66,9 
(') Appropriations in the 1984 budget, plus appropriations remaining at the end of 1983, after transfers. 
(2) Appropriations in the 1984 budget, plus carry-overs from 1983, after transfers. 
(3) Including contribution to JET (89 Mio ECU). 
(4) Based on JET's budget (i.e. including Commission contribution). 
(5) Of which 106,2 Mio ECU are shown as research personnel expenditure. 
(6) Of which 18,9 Mio ECU are shown as research personnel expenditure. 
(7) Of which 0,9 Mio ECU are shown as research personnel expenditure. 
such a stage is reached. The proportion agreed as 
recoverable should provide some measure of the suc­
cess of the programme. Table 9.2 shows the position as 
at 31 December 1984. In the light of its examination of 
contracts, it appears to the Court that the status of a 
substantial proportion of projects remains uncertain. 
9.4. The Court recommends that the present systems 
of internal and external technical evaluation should be expanded to provide a clearer assessment of the likeli­
hood of commercial exploitation for each objective 
within a completed project. This assessment could be 
used as a basis for an improved follow-up of projects. 
At present a standard letter is issued to contractors 
which requests a forecast of commercial exploitation 
prospects but this is not followed up. The Commission 
should introduce a system of periodic requests to all 
contractors for information about the state of com­
pleted projects, with follow-up in case of non-reply. 
78 Official Journal of the European Communities 16. 12. 85 
Table 9.2 — Recoverable subsidies at 31 December 1984 (>) 
Kind of project 
Technological de­
velopment projects 
Demonstration 
projects 
Total A. 
Potentially recovera­
ble sums paid on pro­
jects selected between 
1975 and 1979 (2) 
(Mio ECU) 
140,2 
15,9 
156,1 B. 
Sums, the re-
coverability 
of which has 
been nego­
tiated 
(Mio ECU) 
44,5 
1,1 
45,6 B as % 
of A 
31,7 
6,9 
29,2 
(') Based on figures supplied by the Directorate-General responsible 
for Energy. 
(2) Projects which should have been completed by 1984 and in respect 
of which reimbursement of subsidies might be expected. 
INDIRECT ACTION RESEARCH 
Management procedures 
9.5. Once again (2) the Court must stress the need for 
comprehensive instructions covering all financial and 
contract management procedures for indirect action. 
No such manual has yet been issued. The Court wishes 
to emphasize the importance it attaches to this task 
and, in particular, to the need for precise instructions 
on the following points: 
(a) scrutiny of calls for funds to ensure consistency 
between contract payments and contractual terms; 
(b) use of external audit firms; 
(c) monitoring of outstanding commitments; 
(d) use of management information systems; 
(e) procedures of scientific services for selecting con­
tractors and monitoring contracts; 
(f) documentation and filing procedures. 
Use of external audit firms 
9.6. In 1981, following previous criticisms by the 
Court (3) of the Commission's internal control over cost-sharing contracts, the Commission engaged exter­
nal audit firms to conduct on-the-spot financial verifi­
cation of these contracts. This now constitutes its pri­
mary internal control over indirect action expenditure 
(other than JET). 
9.7. The Court welcomes this development. However, 
a review by the Court of the management of these 
audits suggests that the Commission has not yet 
derived full benefit from them. The arrangements could 
be improved in the following ways: 
(a) the selection of all contracts for audit should be 
explicitly justified against agreed criteria in order 
to facilitate better coordination and more efficient 
use of the audit firms; 
(b) the issue of more precise written instructions to the 
audit firms would lead to greater consistency in 
approach and objectives, clearer audit conclusions 
and more thorough verification of certain aspects 
of research contracts; 
(c) the introduction of systematic procedures for the 
prompt follow-up of audit reports would ensure 
that all significant findings are properly raised with 
contractors. 
9.8. The first set of contracts comes to an end in 1985. 
The Court has asked the Commission to take its recom­
mendations into account when evaluating the use of 
this form of internal control and when placing and 
managing any new set of contracts. 
INFORMATION AND 
TELECOMMUNICATIONS TECHNOLOGIES 
9.9. On 28 February 1984 the Council approved (4) a 
Commission proposal for a multiannual European stra­
tegic programme for research and development in 
information technologies (Esprit). In order to manage 
this programme and to link it with other related activi­
ties in the fields of information and telecommunica­
tions technologies the Commission decided (5) on an 
autonomous task force drawn from its own services 
and from outside experts. 
9.10. The Esprit programme consists essentially of 
research work carried out under the terms of shared-
cost contracts; the share of the costs borne by the Com-
16. 12. 85 Official Journal of the European Communities 79 
mission is 50%. Each contract must involve the partici­
pation of at least two independent undertakings (that 
is, companies including small and medium-sized 
undertakings, universities and other bodies established 
in the Community) which may not all be established in 
the same Member State. It also involves coordination 
work. The appropriations necessary for the duration of 
the programme (1984 to 1988) were estimated in the 
Council decision at 750 Mio ECU. The Esprit appro­
priations are classified under Chapter 73 of part B of 
the general budget and the related information and 
telecommunications technologies managed by the task 
force are being funded by Chapter 77. 
9.11. In 1984 most of the administrative and internal 
control systems of the task force, whether manual or 
computerized, were in the process of development. This 
was particularly the case for the management of con­
tract execution which for Esprit started early in 1985. In 
order to deal with the 1984 call for Esprit proposals, 
therefore, procedures were developed for the evalua­
tion and selection of contractors and negotiation of 
contracts; these resulted in commitments of 134 Mio 
ECU against the 1984 budget. 
9.12. The Court has carried out an initial examination 
of the systems of internal control, in particular the 
organization, legal bases, accounting and contract pro­
cedures up to the commitment stage. It has communi­
cated its detailed findings and recommendations to 
date on these areas to management. 
9.13. The following important matters have arisen 
from the examination: 
(a) In paragraphs 9.4 and 9.5 of its report for the finan­
cial year 1983 (') the Court recommended greater 
consistency in the treatment of commitments and 
the Commission agreed to give careful considera­
tion to the question. The audit of 1984 commit­
ments of the Esprit programme has confirmed that 
some differences of treatment remain. For example 
commitments totalling 71 Mio ECU were made in 
December 1984, more than two months before the 
terms of the contracts were finalized. Yet in other 
expenditure areas commitments were only made 
after finalization. 
(b) The Council decision for the Esprit programme 
placed a limit of 4,5 % (i.e. 33,8 Mio ECU) on staff 
(') OJC 348, 31. 12. 1984. 
(2) OJ C 344, 31. 12. 1982, paragraph 8.22, OJ C 357, 31. 12. 
1983, paragraph 8.44. OJ C 348, 31. 12. 1984, paragraph 
9.21. 
O OJ C326, 31.12. 1979, paragraph 6.59 and OJ C 342, expenditure but did not specify how staff expendi­
ture was to be defined in this context. The Com­
mission's present method of calculation appears to 
run the risk of understating the real staff costs in 
that, inter alia, significant expenditure on certain 
personnel on short term contracts has been 
excluded, and no provision has been made for 
including residual staff costs which continue 
beyond the official end of the programme in 1988. 
The Court recommends that the Commission 
adopts a more accurate and consistent basis for the 
calculation of staff expenditure which will permit 
comparison of actual expenditure with the 4,5% 
limit. 
(c) The audit also revealed aspects of the procedures 
used for evaluating the 1984 research proposals 
and for drafting the contracts which require 
improvement. 
9.14. The Court suggests that, in finalizing the task 
force's internal control procedures, the Commission 
should bear in mind the detailed recommendations 
which have been communicated to it on the above 
questions and also those observations made in the pres­
ent and previous annual reports on the management of 
research contracts in other fields. 
CONCLUDING COMMENTS 
9.15. All the observations in this chapter relate to con­
tract expenditure. As such they are of a potential relev­
ance to a wider field than the area of energy, research 
and allied activities. Moreover, several of the observa­
tions raise issues of principle concerning financial or 
budgetary management. In addition to the issue of cen­
tral guidance in those areas where it is evidently and 
urgently needed (cf. paragraph 9.5 above), the Court 
recommends that the Commission should consider 
whether there is now a need for a clearer statement 
(perhaps via the Commission's internal rules on the 
implementation of the Community budget) of the advi­
sory and monitoring responsibilities of the central 
financial services in the budgetary and financial man­
agement field. 
31. 12. 1980, paragraph 8.28 (see also OJ C 344, 31. 12. 
1982, paragraphs 8.28 and 8.29). 
(4) OJL67,9.3. 1984. 
(5) Doc.COM(84)PV731. 
80 Official Journal of the European Communities 16. 12. 85 
CHAPTER 10 
Cooperation with developing countries and other non-member States 
10.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information 
Observations on food aid (Chapter 92) 
Financial management 
Supply of aid 
Quality of aid 
Observations on cooperation with non-associated developing coun­
tries (Chapter 93) 
Financial management 
Projects in Thailand and Indonesia 
Compensation for the cassava agreement 10.1 
10.2 
10.3 — 
10.4 — 
10.9 — 
10.12 — 
10.16 — 
10.16 — 
10.20 — 
10.36 — 10.15 
10.8 
10.11 
10.15 
10.37 
10.19 
10.35 
10.37 
INTRODUCTION 
10.1. The bulk of Title 9 of the general budget con­
sists of appropriations for food aid, cooperation with 
non-associated developing countries and with certain 
Mediterranean countries, cofinancing actions by non­
governmental organizations (NGOs) and some emer­
gency aid. The subsidy for the European Association 
for Cooperation (EAC) and appropriations for the run­
ning of the Commission delegations in the southern 
Mediterranean and the ACP countries are also 
included. tions for payment for Chapters 94 and 95 were more 
than offset by the improved rates for Chapters 92, 93 
and 96. 
OBSERVATIONS ON FOOD AID 
(CHAPTER 92) 
10.3. The quantities mobilized (see Table 10.2) 
increased considerably in 1984, partly catching up with 
the delayed 1983 programme (see paragraph 10.9). 
SUMMARY OF FINANCIAL INFORMATION Financial management 
10.2. Table 10.1 shows how appropriations available 
from the 1984 budget and from previous years were 
used for commitments and payments in 1984. The total 
value of commitments was 13 % higher than in 1983 
and total payments were 42 % higher. The overall rate 
of utilization of available appropriations for commit­
ment improved from 82% in 1983 to 89% in 1984, 
while the overall rate for payments rose from 61 % to 
78 %. Decreases in the rates of utilization of appropria-Unsettled accounts 
10.4. In 1984 the Commission department responsible 
for the clearing of food aid accounts submitted by 
intervention bodies made a considerable effort to 
reduce the backlog. Accounts for the financial years 
16. 12. 85 Official Journal of the European Communities 81 
Table 10.1 —Title 9: Appropriations available in 1984 and their utilization 
(Mio ECU) 
Chapter of the budget 
(1) 
Chapter 92: 
Food aid 
Chapter 93: 
Cooperation with non-asso­
ciated developing countries 
Chapter 94: 
Specific measures for coopera­
tion with developing countries 
Chapter 95: 
Exceptional measures to assist 
developing and other non-
member countries 
Chapter 96: 
Cooperation with Mediterra­
nean countries 
Chapter 98: 
Operation of Commission del­
egations in developing coun­
tries 
Chapter 99: 
Cooperation with non-member 
countries 
Total Commitments 
Appropriations 
for commitment 
available in 1984 
(2) 
505,0 
366,9 
46,6 
209,5 
160,2 
56,0 
2,5 
1346,7 Commitments 
entered into in 
1984 
(3) 
504,9 
270,0 
39,1 
209,0 
117,5 
56,0 
2,5 
1199*0 Utilization rate 
(4) = %(3)/(2) 
100% 
74% 
84% 
100% 
73% 
100% 
100% 
89% Payments 
Appropriations 
for payment 
available in 1984 
(5) 
721,6 
201,2 
56,0 
271,5 
167,7 
56,0 
3,8 
1477,8 Payments made 
in 1984 , 
(6) 
709,2 
153,6 
27,9 
93,7 
107,8 
56,0 
2,4 
1150,6 Utilization rate 
(7) = %(6)/(5) 
98% 
76% 
50% 
35% 
64% 
100% 
63% 
78% 
Table 10.2 — State of implementation of cereals, skimmed-milk powder and butteroil food aid programmes 
(in tonnes) 
State of implementation 
1983 
1984 
1985 Balance 1982 
Programme 1983 
Implemented in 1983 
Balance 1983 
Programme 1984 
Implemented in 1984 
Balance 1984 Cereals 
339 185 
1 043 369 
759 633 
622 921 
1 127 663 
1 384 199 
366 385 Skimmed-milk powder 
65 673 
150 000 
111210 
104 463 
122 500 
165 218 
56 598 Butteroil 
25 092 
36 500 
22 636 
35718 
32 760 
49 442 
18410 
82 Official Journal of the European Communities 16. 12. 85 
1976 to 1979 were cleared on 12 November 1984 and 
clearing 1980 to 1983 was in process at the end of the 
year. 
10.5. For 1979 and subsequent financial years, audit 
visits by the Commission to intervention bodies are 
only made if particular problems have come to light, if 
beneficiaries have complained, or if costs have to be 
checked on the spot. This approach is unsatisfactory. 
Audits on the spot should be more frequent and syste­
matic. 
10.6. Furthermore, significant amounts of indirect aid 
have not been finally cleared, in particular 8,58 Mio 
ECU for operations carried out by the World Food Pro­
gramme (WFP), some of them in 1978, and 1,67 Mio 
ECU of Euronaid claims for 17 indirect aid operations, 
the oldest of which date back to 1980. 
Supervision of counterpart funds 
10.7. In three of the six countries where this matter 
was examined by the Court, it was clear that the auth­
orities were not following the correct procedures with 
regard to the accounting for and use of the counterpart 
funds from the proceeds of the sale of food aid. In 
Ghana, counterpart funds which had been wrongly cal­
culated and inadequately accounted for were then 
withheld from projects agreed with the Commission 
and spent on others. In Indonesia, no procedure had 
been established between the Commission and the 
government, and the authorities were not providing 
annual reports on the use of the funds. In Guinea Con­
akry, counterpart funds should have been operating 
since before 1980. The first report on their use, received 
in 1985, covered only a third of the funds. 
Late payments to UNHCR 
10.8. The EEC has provided finance from Chapter 92 
for the purchase in Thailand by the United Nations 
High Commission for Refugees (UNHCR) of rice 
rations for refugees. The conditions of supply state that 
payments of advances will be made 'as soon as possi­
ble after UNHCR has notified the Community of its 
acceptance of these conditions'. In May 1984, the 
Commission took the allocation decision for the 1984 
programme. On 6 June 1984, UNHCR requested a cash 
advance to purchase, under its 1984 allocation, 10 000 
tonnes of rice in Thailand. However, the Commission 
then suspended the transaction whilst considering, for the first time, whether rice should not be supplied from 
the Community market, although it was clear from the 
beginning that Thailand, as a rice exporting nation, 
would not accept imports. To avoid interruption of rice 
supplies to refugees in the second half of 1984, 
UNHCR spent 1,32 Mio USD of its own reserves. The 
rice was labelled 'gift of the EEC. A decision to pro­
ceed with the Thailand purchase was finally made in 
March 1985. This delay means that expenditure which 
should have been incurred in 1984 has been brought to 
account in 1985. Similar late payments occurred in pre­
vious years. 
Supply of aid 
Shipment times 
10.9. A sample of normal shipments of food aid sent 
in 1984 showed that the mobilization regulation for 
cereals was published, on average, two weeks after the 
mobilization request had been made by the food aid 
department to the Directorate-General for Agriculture. 
The procedure took 11 weeks in the case of milk pow­
der and six weeks in the case of butteroil. The average 
period of time between publication of the regulation 
and shipping of the goods was nine weeks for each of 
the three categories of products. The average time 
taken by sea transport was three weeks for cereals and 
milk powder and four weeks for butteroil. From the 
time of initiating mobilization until the arrival of the 
ships in the port of unloading, allowance had to be 
made for a total of 14 weeks for cereals, 23 weeks for 
milk powder and 19 weeks for butteroil. These delivery 
times are similar to those already observed by the Court 
in the case of 1983 shipments. 
10.10. An analysis of a sample of 'emergency' con­
signments (Chapter 92) showed that these same stages 
of delivery took only slightly less time than normal aid 
shipments. On average, about 5 % less time was taken 
for cereals and 21 % less time for other products. 
Late shipments 
10.11. Amongst the 47 cereals consignments for the 
financial year 1984 examined by the Court were five 
consignments shipped from Italy after the dates fixed 
in the mobilization regulations. Flour was shipped to 
16.12.85 Official Journal of the European Communities 83 
Somalia a month late; consignments of rice for Moz­
ambique and Senegal were delayed by 7 and 14 weeks 
respectively; emergency aid rice for Ghana was 5 weeks 
late and for Senegal 10 weeks. 
Quality of aid 
10.12. The Community regulations should give clear 
specifications of standards for both the products 
delivered and their packaging, as aid is otherwise likely 
to be inadequate. In Ghana, as appropriate precautions 
had not been taken, part of the skimmed milk powder 
supplied was found to be of too low a heat stability for 
the intended reconditioning. Moreover, although an 
attempt has been made at improving the packaging of 
milk products through the adoption of Commission 
Regulation (EEC) No 1354/83, skimmed milk powder 
sent to Ghana from the Federal Republic of Germany, 
Denmark and the Netherlands in badly closed sacks 
suffered water damage and more than 5 % of 5 kg tins 
of butteroil supplied to Burundi leaked, even though 
the cartons in which they were packed had not been 
seriously damaged. Despite complaints from the reci­
pients, the Commission has still not taken adequate 
action in response to this type of problem. (In the case 
of Ghana, see, in particular, Commission Regulation 
(EEC) No 1572/85 of 10 June 1985 with regard to the 
mobilization of skimmed milk powder.) 
10.13. The Indonesian authorities stated that in the 
most recent programmes 1119 tonnes of skimmed milk 
powder, costing 0,75 Mio ECU, had been wasted 
because of unacceptable quality. Breakages of bags and 
excessive humidity were reported, but for one consign­
ment from Germany the main cause was a strong fla­
vour of peanut oil, which had apparently been mixed 
in to give the required vitamin supplement. This spoilt 
skimmed milk powder was sold as cattle feed. 
10.14. Poor quality deliveries of food aid have 
occurred despite the fact that intervention bodies are 
required either to certify product quality or to have 
quality checks carried out. To improve matters, the 
Commission made increased use in 1984 of appropria­
tions for food aid quality control to pay for quality 
checks by an inspection firm. The number of com­
plaints from food aid beneficiaries is diminishing. nea Conakry and Cape Verde. Whilst it is not the Com­
mission delegation's duty to intervene, it would clearly 
be useful if it were to do so to help obtain settlement 
for losses and thus prevent the insurance premium 
being wasted. 
OBSERVATIONS ON COOPERATION 
WITH NON-ASSOCIATED DEVELOPING 
COUNTRIES (CHAPTER 93) 
Financial management 
Use of appropriations 
10.16. Article 930 represents about 90% of total 
appropriations for Chapter 93 for the financing from 
differentiated appropriations of projects and measures 
in non-associated developing countries. 
10.17. The rate of use of commitment appropriations 
in Article 930 continues to be low, as 41 % of the 218 
Mio ECU in the 1984 budget remained available for 
1985. Payments totalled 146 Mio ECU; 79% of avail­
able 1984 appropriations (1984 budget plus carried over 
appropriations) were used, compared with 57 % in 1983 
and 39% in 1982. 
Delays in management of certain projects 
10.18. For eight projects launched between 1977 and 
1982 no payments had been made by 31 December 
1984. The three most important projects involved Bang­
ladesh (13 Mio ECU), Pakistan (12 Mio ECU) and the 
Central American Bank for Economic Integration (2 
Mio ECU, dating from 1977). 
Payments made prior to execution of related operations 
10.15. Insurance claims had not been lodged by bene­
ficiaries for losses from cif shipments to Ghana, Gui-10.19. Analysis of the payments does not indicate the 
actual progress of projects. Many payments which 
84 Official Journal of the European Communities 16. 12.85 
appear as such in the accounts are in fact advances. 
The projects cofinanced with the Asian Development 
Bank (ADB) in Indonesia illustrate this point (see para­
graph 10.29). In many other cases, the Commission 
pays 60 % of the expected cost when supply orders for 
equipment of Community origin are placed and 
finances the initial on-site works before they have even 
been carried out. 
Projects in Thailand and Indonesia 
10.20. In 1984 Court audit teams visited the 24 pro­
jects for which significant expenditure had been 
incurred in Thailand and Indonesia; they represent 
about 13% of commitments (1 110,9 Mio ECU) and 
10 % of payments (500,9 Mio ECU) for Chapter 93 for 
the years 1976 to 1984. Aid to Thailand is partly linked 
to the limitation of cassava imports by the Community 
(see paragraph 10.36 below) and in Indonesia four of 
the eight projects are cofinanced with the ADB, which 
manages EEC grants totalling 26,9 Mio ECU under a 
mandate from the Commission. 
Incomplete files 
10.21. For many projects in Thailand and Indonesia, 
as for the other South-East Asian countries which the 
Court had previously visited, the files in Brussels were 
found to be inadequate. Details of contract awards 
were missing from technical files and the financial files 
contained few contract documents against which pay­
ment requests could be checked. 
Co-financing activities 
10.22. Aid would be easier to manage and more 
clearly identified with the Community if it were con­
centrated on projects with a simple management struc­
ture. The participation of the Community as a minority 
partner in projects involving too large a number of sup­
pliers of finance leads to serious difficulties in various 
respects, as the Court has already noted in Pakistan 
and Sri Lanka. 
10.23. Thus, in Thailand a crop development project 
for the North-East region was only a minor component 
of larger programmes financed by other donors, so that the project lost its Community identity and it was very 
difficult to obtain information on its implementation. 
In contrast, a project with only one implementing 
agency (pilot project on integrated soya and food crops 
production, Ministry of Agriculture) was most success­
ful in the end, despite a very bad start (see paragraph 
10.26 below). 
Inadequate selection of consultants 
10.24. Shortlists should have been drawn up, even 
though this was not a legal requirement in the early 
years, in order to afford the maximum guarantee of an 
objective and serious selection. In two cases in Thai­
land (one for four projects with total fees of 2,1 Mio 
ECU) and in two others in Indonesia, however, firms 
were chosen without shortlists having first been drawn 
up. 
10.25. The poor performance of one of the firms in 
Indonesia was subsequently mentioned in an internal 
Commission report. Three out of the four expatriates 
employed by this firm arrived a year after the start of 
the project, in 1979; two stayed less than a year and 
were then replaced with under-qualified assistants. 
Lack of familiarity with local conditions was the inevit­
able result. 
Poor studies and planning of projects 
10.26. The pilot project on integrated soya and food-
crops production in a transmigration area of Sumatra 
was launched on the basis of a consultant's unrealistic 
initial study for a large soya production estate which 
failed to cover basic agricultural and technical ques­
tions. The financing agreement drafted for this project 
contained no breakdown of costs. EEC finance has 
subsequently been more than quadrupled to 4,7 Mio 
ECU. Only by virtually abandoning the original idea, 
which would have involved the destruction of 1 000 ha 
of primary forest, was the project later transformed into 
a very successful seed multiplication centre, thanks to 
the technical assistance of another consultant, who was 
responsible for follow-up and not for the initial plan­
ning of the project. 
16. 12.85 Official Journal of the European Communities 85 
10.27. Responsibility for the study (1978 programme) 
and the implementation (1980 programme) of the 
Baturraden dairy development project in Central Java 
was entrusted to one of the firms mentioned in para­
graph 10.24. The project was intended to convert a cat­
tle breeding centre, set up by the government in 1952, 
into a 'National Dairy Development Centre', to create 
a dairy farmers' cooperative and to establish a milk 
processing and marketing unit. Almost 1 Mio ECU has 
been spent on technical assistance and 1,5 Mio ECU 
on infrastructure. In mid-1984, when the buildings were 
almost complete and the dairy equipment had reached 
Jakarta, the Indonesian authorities found themselves in 
a difficult situation. The fact is that the project left 
most of the basic local realities out of account. The sole 
market for pasteurized milk is in Jakarta, 10 hours' 
drive away; the packaging alone costs twice as much as 
the milk contained in it; the quality of forage from 
local crop by-products on the very small farms is poor 
and it is uneconomic to provide the cattle with food 
appropriate to their potentially high production, with 
the result that yields per cow are very low. 
Inadequate performance of local partners 
10.28. Local partners, at central or local level, have 
sometimes failed to fulfil their obligations. 
(a) Two financing agreements cover a total EEC con­
tribution of 7,9 Mio ECU to the establishment of 
the National Agricultural Cooperative Training 
Institute of Thailand (NACTI). Neither the govern­
ment nor the cooperative league have provided 
their share of the project financing (3,5 Mio ECU). 
The Institute was operating at the time of the 
Court's visit, but its future seemed in jeopardy as it 
had no legal identity. 
(b) The implementation of the Rubber Smallholdings' 
Yield Improvement project in Thailand has also 
been hindered by the government's failure to make 
its contribution available in accordance with the 
agreed work plan. 
(c) The Indonesian authorities failed to provide the 
Commission with the periodic progress reports sti­
pulated in the financing agreement on the 6,1 Mio 
ECU grant for a drainage project on the Talunga-
gung river and did not respect the special condition which required the submission of an evaluation 
report on the tenders and proposed awards of con­
tracts. 
The intervention of the Asian Development Bank 
10.29. The Bangkok delegation has responsibility for 
Indonesia, Malaysia, the Philippines, Singapore and 
Thailand. Its supervision of aid in Thailand has been 
good. Elsewhere its task is made intrinsically difficult 
by distance. In Indonesia very complex and centralized 
administrative arrangements mean that lack of a dele­
gation on the spot makes efficient preparation and fol­
low up of projects virtually impossible. The Commis­
sion has therefore mandated the ADB to manage cer­
tain Community projects, for which it receives 1 % 
commission on the aid granted. In addition the ADB 
receives money transferred to it by the Commission 
long before (often several years before) the funds are 
needed to reimburse government agencies for their pro­
ject expenditure and credits the projects with interest 
corresponding to any profit made from investing the 
funds. 
10.30. The ADB's reporting to the Commission was 
inadequate on each of the four projects it managed in 
Indonesia and the Commission did not react to the dif­
ficulties and delays in the Lower Citanduy project. 
ADB appraisal of claims for reimbursement from 
government agencies is superficial, as is its on-the-spot 
checking. 
Failure of the Sulawesi transmigration and area 
development project 
10.31. Analysis of the South-East Sulawesi transmi­
gration and area development project in Indonesia pro­
vides further illustration of the weaknesses already 
mentioned. The Community grant (5 Mio ECU from 
the 1977 and 1978 programmes) forms part of a much 
larger operation (originally 60 Mio USD). As a result, 
the Community identity of the aid is lost, to such an 
extent that local management are unaware of it. Ten or 
11 ministries have responsibility and half of the EEC 
grant is spread over 30 contracts for various civil engi­
neering works, some of which will not be completed 
before 1988 at the earliest. The other half is allocated to 
the study of similar future projects. 
86 Official Journal of the European Communities 16. 12. 85 
10.32. The Commission signed the financing agree­
ment before the project had been appraised in suffi­
cient detail by the ADB, which finances an important 
part of it by loans and which was entrusted with the 
administrative management of the whole project. The 
cost of the project was estimated at 60 Mio USD in 
1977 and 67,1 Mio USD (49,0 Mio ECU) in 1979. At 
present no one is able to evaluate the final cost. 
10.33. The project management unit set up by the 
Indonesian authorities on the spot lacks suitable staff, 
and does not have the necessary management or finan­
cial powers: at a distance of 3 000 km from Jakarta, the 
head of the unit has no power to commit or pay funds 
under the appropriations of the 10 ministries con­
cerned, or any hierarchical authority over their local 
representatives. He has no control over contractors. 
10.34. Generally speaking, the progress reports on the 
project which the ADB sent to the Commission were 
completely inadequate. As regards the monitoring of 
the project, which was the ADB's responsibility, the 
Court noticed, for example, that a works contract was 
increased from 1,6 Mio USD to 2,3 Mio USD, without 
the required prior approval of the ADB having been 
obtained, or even sought. 
10.35. Land preparation and the grant of land titles to 
the 'transmigrating' families, although foreseen in the 
original project, were neglected. The Court noted 
during its visit that project works were of poor quality 
and already considerably behind schedule. Compensation for the cassava agreement 
10.36. Total Thai export earnings are about 7 000 Mio 
USD, of which cassava represents about 12,5 %. In res­
ponse to strong European demand, the area under cul­
tivation in Thailand increased from 0,5 Mio ha in 1974 
to 1,3 Mio ha in 1981, most of the increase occurring in 
the poorer North-Eastern region, which is unsuitable 
for other cash crops. The EEC was taking more than 
90 % of production when a 1982 agreement limited cas­
sava exports to the Community for the period 1982 to 
1986. In 1984, they were only 63 % of production. The 
reduction in Thai export earnings as a result of the 
decline in output and, especially, prices is estimated at 
approximately 100 Mio USD per year. In connection 
with this self-limitation, which Thailand has just asked 
to be renegotiated, the Community agreed to provide 
aid of 35 Mio ECU in 1983-1984 to technical assistance 
or on-farm investment projects for crop diversification 
in the North-East. 
10.37. The technical assistance has consisted mainly 
of a series of studies and field research which, although 
4 Mio ECU have been paid, have not so far been of 
benefit to farmers because no viable alternative crops 
have been found. As to farm investment, mainly the 
purchase of fertilizers, the Community has contributed 
20 Mio ECU to a programme, co-financed with the 
ADB, of loans to farmers for crop diversification. It is 
nevertheless important to recognize that such expendi­
ture is by no means the determining factor in resolving 
the problem; only if prices fall far enough will farmers 
be forced to turn to other crops and stop growing cas­
sava. 
16. 12. 85 Official Journal of the European Communities 87 
CHAPTER 11 
Staff expenditure 
11.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information and staff numbers 
Observations on the general management of appropriations and 
staff 
Parliament 
Observations on the budgetary management of item 1004 
Observations on the management of overtime 
Council 
Observations on the budgetary management of overtime 
Observations on the management of travel expenses 
Commission 
Observations on the budgetary management of 'fixed entertain­
ment allowances' 
Observations on the management of travel expenses 11.1 
11.2 — 
11.7 — 
11.11 — 
11.11 
11.12 — 
11.16 — 
11.16 
11.17 — 
11.23 — 
11.23 
11.24 — 11.6 
11.10 
11.15 
11.15 
11.22 
11.22 
11.34 
11.34 
INTRODUCTION 
11.1. In the general budget of the European Commu­
nities the appropriations to cover staff expenditure 
appear under Title 1 of each section and for the Com­
mission (Section III) under Title 1 of Part A and Title 7 
of Part B (research and investment) (>)• This expendi­
ture is effected under the provisions of the Staff Regu­
lations of Officials of the European Communities and 
annexes and the Conditions of Employment of Other 
Servants. 
SUMMARY OF FINANCIAL 
INFORMATION AND STAFF NUMBERS 3.5% was applied by the budgetary authority to the 
remuneration appropriations (Chapter 11) of each sec­
tion of the general budget except for the Parliament. 
11.3. Table 11.1 shows the distribution by budget 
chapter and by institution of the staff appropriations 
and expenditure under Titles 1 of the budget. Payments 
under these titles amounted to 837 Mio ECU. To this 
should be added staff expenditure out of the appropria­
tions for research and investment (Part B, Chapter 73, 
of Section III, 'Commission') which amounted to 124,6 
Mio ECU. Thus total staff expenditure in 1984 was 
961,6 Mio ECU. 
Volume and utilization of appropriations 
11.2. The financial year 1984 was characterized by 
budgetary austerity in respect of staff expenditure. In 
particular, a flat-rate abatement varying between 3 and 11.4. The overall utilization rate of appropriations 
reached the high level of 98%. Cancellations have 
fallen sharply over the last four years: 84,0 Mio ECU in 
1981, 40,4 in 1982, 17,1 in 1983 and 19,7 in 1984. The 
rate of carry-overs of appropriations decreased from 
2,8% in 1983 to 1,2% in 1984. 
88 Official Journal of the European Communities 16.12.85 
Table 11.1 — Utilization of staff appropriations — by budget chapter and institution 
(Mio ECU) 
Budget chapter and institution 
(1) 
A. By budget chapter 
10 Members of the institutions (') 
11 Staff 
12 Allowances and expenses on enter­
ing and leaving the service and on 
transfer 
13 Expenditure relating to missions 
and duty travel 
14 Socio-medical infrastructure 
15 Graduate traineeships and further 
training of staff 
16 Expenditure on social welfare 
Total 
B. By institution 
Parliament 
Council 
Commission (2) 
Court of Justice 
Court of Auditors 
Economic and Social Committee 
Total 1984 budget 
Final ap­
propria­
tions 
(2) 
49,4 
749,9 
17,2 
21,2 
2,3 
4,0 
1,8 
845,8 
160,4 
74,0 
556,4 
23,7 
15,2 
16,1 
845,8 Commit­
ments 
(3) 
48,9 
736,2 
15,2 
21,0 
2,2 
3,9 
1,7 
829,1 
158,7 
67,8 
549,5 
22,4 
14,7 
16,0 
829,1 Payments 
(4) 
47,4 
734,5 
13,5 
16,7 
1,7 
3,3 
1,6 
818,7 
154,4 
67,3 
544,2 
22,3 
14,6 
15,9 
818,7 Carry­
overs to 
1985 
(5) 
1,5 
1,7 
1,7 
4,4 
0,5 
0,6 
— 
10,4 
4,4 
0,6 
5,3 
— 
0,1 
— 
10,4 Cancella­
tions 
(6) 
0,5 
13,7 
2,0 
0,1 
0,1 
0,1 
0,2 
16,7 
1,7 
6,1 
6,9 
1,3 
0,5 
0,2 
16,7 Carry-overs from 1983 
Appropria­
tions car­
ried over 
from 1983 
(7) 
7,0 
3,6 
1,6 
7,6 
0,6 
0,5 
0,4 
21,3 
13,8 
0,4 
6,8 
0,1 
0,1 
0,1 
21,3 Payments 
(8) 
6,7 
3,0 
1,2 
6,2 
0,5 
0,3 
0,4 
18,3 
12,1 
0,3 
5,6 
0,1 
0,1 
0,1 
18,3 Cancella­
tions 
(9) 
0,3 
0,6 
0,4 
1,4 
0,1 
0,2 
— 
3,0 
1,7 
0,1 
1,2 
— 
— 
— 
3,0 
(') Parliament, Commission, Court of Justice, Court of Auditors, Economic and Social Committee. 
(2) Including Office for Official Publications. 
Staff numbers 
11.5. Table 11.2 compares, for each institution, the 
posts authorized in the general budget and the officials 
and temporary staff actually employed at the end of the 
financial year. There has been a slight reduction in the 
difference between these two factors compared with 
1983: it appears, however, that the proportion of vacan­
cies has remained similar to that of the previous year. 
11.6. The distribution by institution as at 31 Decem­
ber 1984 of staff categories not provided for in the list 
of posts, i.e. auxiliary and local staff and special advis­
ers, is given in Table 11.3. OBSERVATIONS ON THE GENERAL 
MANAGEMENT OF APPROPRIATIONS 
AND STAFF 
Trends in budgetary management 
11.7. The budgetary 'profile' laid down when the 
appropriations were approved was not strictly observed 
at the moment the expenditure was actually incurred. 
In all the institutions the tightness of the financial mar­
gins of manoeuvre resulted in many transfers of appro­
priations, affecting 49% to 87% of the budget items and 
3% to 12% of initial appropriations. 
16. 12.85 Official Journal of the European Communities 89 
Table 11.2 — Officials and temporary staff 
Institution 
(1) 
Parliament 
Council 
Commission: 
(a) Administration excluding 
Office for Official Publica­
tions 
(b) Office for Official Publica­
tions 
(c) Research and investment: 
— Direct action 
— Indirect action 
Court of Justice 
Court of Auditors 
Economic and Social Com­
mittee 
Total 1983 
Posts authorized 
(2) 
2 941 
1798 
9 840 
292 
2 279 
500 
478 
303 
391 
18822 Staff at 
31.12.1983 
(3) 
2 790 
1702 
9 357 
254 
2 188 
454 
441 
275 
391 
17 852 Difference 
(2)-(3) 
(4) 
151 
96 
483 
38 
91 
46 
37 
28 
— 
970 1984 
Posts authorized 
(5> 
2 966 
1792 
10 037 
312 
2 222 
629 
480 
303 
398 
19139 Staff at 
31.12.1984 
(6) 
2 826 
1711 
9 587 
287 
2 155 
551 
438 
283 
398 
18 236 Difference 
(5)-(6) 
(7) 
140 
81 
450 
25 
67 
78 
42 
20 
— • 
903 
Table 11.3 — Auxiliary staff, local staff and special advisers 
Institution 
Parliament 
Council 
Commission: 
— Administration 
— Research and investment 
Court of Justice 
Court of Auditors 
Economic and Social Committee 
Total Auxiliary 
staff 
72 
18 
138 
55 
19 
8 
20 
330 31.12 
Local 
staff (i) 
— 
— 
492 
— 
11 
6 
6 
515 .1983 
Special 
advisers 
— 
47 
— 
— 
— 
— 
47 Total 
72 
18 
677 
55 
30 
14 
26 
892 Auxiliary 
staff 
830 
42(3) 
77 
67(4) 
20(5) 
3(«) 
170 
309 31.12 
Local 
staff (') 
— 
498 
— 
10 
5 
— 
513 .1984 
Special 
advisers 
— 
46 
— 
1 
— 
— 
47 Total 
83 
42 
621 
67 
31 
8 
17 
869 
(') This total does not include local staff paid by extra-budgetary bodies (restaurants, creches, etc.). 
(2) 83 at 31. 12. 1984 but 244 during the financial year. 
(3) 42 at 31. 12. 1984 but 52 during the financial year. 
(4) 67 at 31. 12. 1984 but 124 during the financial year. 
(5) 20 at 31. 12. 1984 but 34 during the financial year. 
(6) 3 at 31. 12. 1984 but 12 during the financial year. 
O 17 at 31. 12. 1984 but 49 during the financial year. 
90 Official Journal of the European Communities 16. 12.85 
11.8. These positive and negative transfers were 
effected within Titles I and therefore offset each other, 
except in the case of the Parliament and the Commis­
sion, where net amounts of 3,9 Mio ECU and 13,4 Mio 
ECU respectively were added to the initial allocation 
under these Titles. A further 7,5 Mio ECU was added 
for the Commission by supplementary and amending 
budget No 1. 
Inconsistency between the lists of posts and the 
remuneration appropriations 
11.9. For the financial year 1984 (except at the Parlia­
ment) there was a disparity between the level of initial 
appropriations for staff remuneration, as reduced by 
the flat-rate abatement, and the number of posts 
entered in the lists of approved posts. The latter were 
maintained at their existing levels and, in the case of 
the Commission, were even increased by the granting 
of 2,1% of additional posts. 
11.10. The institutions were therefore faced with a 
twofold restriction, the existence of which raised a 
problem of priorities connected with the very nature of 
the lists of approved posts: should priority be given to 
the need for strict observance of the level of initial 
appropriations, which had been expressly limited, or to 
the filling of approved vacant posts, even though this 
would entail exceeding the approved appropriations by 
effecting budgetary transfers? 
PARLIAMENT 
OBSERVATIONS ON THE BUDGETARY 
MANAGEMENT OF ITEM 1004 
11.11. Automatic carry-overs of appropriations were 
again effected in 1984, for an amount of 1,4 Mio ECU, 
in respect of item 1004 Travel and subsistence allow­
ances; attendance at meetings and associated expendi­
ture' for the Members of the Parliament. As the Court 
has already pointed out in respect of the financial year 
1983 (2), the principle of these carry-overs is contrary to 
Article 6 (1) (a) of the Financial Regulation and Article, 
47 of the internal rules in force at the Parliament. 
OBSERVATIONS ON THE MANAGEMENT 
OF OVERTIME 
11.12. Having established that the initial appropria­
tions to cover overtime (500 000 ECU) had been used up by April 1984 and that no overtime payments had 
then been made for four months, the Court examined 
the system of management in operation at the Parlia­
ment. It proved to be inadequately organized, being 
based, on the one hand, on a highly decentralized 
power to authorize overtime coupled with only cursory 
checks of the work done and, on the other, on purely 
passive financial management. 
11.13. According to internal instructions, the respon­
sibility for deciding whether overtime needs to be 
worked and for subsequently authorizing it is allocated 
to senior staff within the different departments. There 
is no general procedure for checking that overtime 
authorizations are justified, nor for monitoring over­
time as it is being worked or the results achieved. There 
is only a record of overtime kept by the secretariat of 
each department. There are no specific rules concern­
ing overtime worked on mission (e.g. during parliamen­
tary sessions), which is of particular significance for 
this institution. 
11.14. The financial management is effected ex post 
facto, on the basis of data contained in the monthly 
declaration forms, for which adequate supporting 
documentation is sometimes not available. The prior 
agreement of the Appointing Authority, as laid down in 
the Staff Regulations for the payment of overtime, is 
not required by the existing procedure, which prevents 
the Appointing Authority from exercising its power to 
monitor the overtime worked. 
11.15. In the final analysis such a system is designed 
only to record and pay overtime and not to control it. 
The setting of quotas for appropriations for depart­
ments is not in itself sufficient to make any fundamen­
tal improvement to the situation. 
COUNCIL 
OBSERVATIONS ON THE BUDGETARY 
MANAGEMENT OF OVERTIME 
11.16. Overtime is a continual problem at the Coun­
cil. The Court has already observed (3) that the system 
of remuneration for overtime does not comply with cer­
tain provisions of the Staff Regulations. This situation 
remained unchanged in 1984. An examination of the 
implementation of the budget revealed that for the last 
three years payments have been twice the level of the 
initial appropriations and in 1984 a ^transfer of 
16. 12.85 Official Journal of the European Communities 91 
650 000 ECU had to be made. Between 1982 and 1984 
expenditure on overtime rose from 690167 to 
1 164 614 ECU. 
OBSERVATIONS ON THE MANAGEMENT 
OF TRAVEL EXPENSES 
Management of appropriations 
11.17. At the Council the management of travel 
expenses was ill-suited to the constraints of the finan­
cial year. In 1984 the sum of 517 000 ECU (56%) was 
added by transfer to the initial allocation of 
930 000 ECU. The appropriations available were not 
fully utilized for payments, however, and automatic 
carry-overs to the financial year 1985, amounting to 
333 988 ECU (23%), were effected. 
11.18. Moreover, the appropriations carried over are 
not always sufficient to cover the outstanding costs of 
official travel carried out during the previous financial 
year. For example, the sum of 152 994 ECU, which had 
been carried over to 1984 from the financial year 1983, 
fell short by 35 000 ECU of the amount needed to 
reimburse the 945 outstanding claims for reimburse­
ment of travel expenses. In the circumstances, the bal­
ance had to be met from 1984 appropriations. This pro­
cedure is irregular in that it is contrary to the principle 
of annuality laid down in Articles 5 and 32 of the 
Financial Regulation, according to which all measures 
which may give rise to expenditure chargeable to the 
budget must be preceded by a proposal for commit­
ment of expenditure. 
11.19. This situation can arise because official travel 
is financed by advances managed outside the budget 
and without a sufficiently close link with budgetary 
management. 
11.20. The Court noted long delays in the settlement 
of the Council's travel expenses due to its practice of 
granting advances to the staff concerned almost equal 
to the estimated full costs. Non-utilization of reduced fares 
11.21. Considerable price reductions are sometimes 
available, on regular train journeys. For example, there 
are travel cards in France while cards giving 50% reduc­
tions are available in Belgium. In 1984 the saving 
which could have been made on a first-class return 
journey between Brussels and Luxembourg was 
70BFR on the first journey and 720 BFR for sub­
sequent journeys. The travel office at the Council does 
not take advantage of these fare reductions, notwith­
standing the savings that could be expected, as a high 
proportion of official travel at the Council consists of 
train journeys or is reimbursed on the basis of train 
fares. 
11.22. This failure is all the more regrettable as it is 
also evident in the field of air travel, where the possibil­
ities for special fares are not systematically exploited. 
In this connection, the provisions of the Staff Regula­
tions ought to be modified so that they no longer effec­
tively prevent the Council from adapting its practice to 
suit prevailing commercial conditions. 
COMMISSION 
OBSERVATIONS ON THE BUDGETARY 
MANAGEMENT OF 'FIXED 
ENTERTAINMENT ALLOWANCES' 
11.23. The appropriations for item 1143, 'Fixed enter­
tainment allowances', are provided to reimburse certain 
categories of Commission officials for part of their 
regular entertainment expenses. The Court notes that 
for three years the increase of expenditure under this 
item has been substantial, rising from 1 351 388 ECU in 
1982 to 2 404 910 ECU in 1983 and to 2 883 507 ECU 
in 1984. In order to meet these payments a transfer of 
1 423 814 ECU, i.e. 73% of the initial appropriations, 
was effected in 1984. This situation is quite out of line 
with the general trend of budgetary expenditure. 
OBSERVATIONS ON THE MANAGEMENT 
OF TRAVEL EXPENSES 
Appropriations carried over 
11.24. Appropriations relating to travel expenses give 
rise to periodical provisional commitments. The differ-
92 Official Journal of the European Communities 16. 12. 85 
ence between the commitments and payments for the 
financial year, as entered in the accounts up to the fol­
lowing 15 January and approved by the Financial Con­
troller before 31 December, constitutes, according to 
the Commission's practice, an automatic carry-over 
(1 905 311 ECU carried over to 1985). 
11.25. Article 6 (l)(b) of the Financial Regulation 
states that only appropriations in respect of payments 
still outstanding by virtue of commitments entered into 
on a regular basis between 1 January and 31 December 
constitute automatic carry-overs, which are limited to 
the next financial year only. 
11.26. This provision, reiterated in Annex II, 
Article 2 (1) of the internal rules for the implementation 
of the budget, implies that the automatic carry-over 
should be justified by legal commitments, in this case 
travel orders. It is the calculation of these travel orders 
which makes it possible to determine the amount of 
payments outstanding by virtue of commitments 
entered into on a regular basis, and thus the amount of 
appropriations to be carried over automatically. 
11.27. The Commission's practice and the provisions 
of Annex II, Article 2 (2), of the internal rules for the 
implementation of the budget, from which it derives, 
consist in carrying over the entire remaining balance of 
provisional commitments. This practice does not there­
fore comply with the Financial Regulation. 
Weaknesses in internal control 
Absence of tickets 
11.28. As a rule, train tickets are only required to sup­
port the payment of expenses in the case of official 
travel outside the European Community, although 
Article 41 of the Financial Regulation requires that the 
payment order shall be accompanied by supporting 
documents in all cases. The risk of malpractice is all 
the greater as most official travel is within Europe. 
11.29. In certain cases, where staff had been author­
ized to travel first class by plane when they travelled in 
conditions considered to be particularly tiring, the tick­
ets, although issued in the regulation manner, were not 
attached to the mission statements. In order to check the exact conditions under which these tickets were 
actually used, the Court requested the Commission to 
carry out a detailed enquiry. The latter has not yet been 
able to reply. 
Absence of correlation between travel expenses and daily 
subsistence allowances 
11.30. The Staff Regulations lay down (4) that the 
daily subsistence allowance paid to an official on 
recruitment shall be reduced by half during any period 
when the official receives the daily subsistence allow­
ance for officials on mission. In order to apply this 
provision, there should be direct liaison between the 
department which determines entitlement to daily sub­
sistence allowances and the travel office. At present, 
however, there is no formal liaison of this type at the 
Commission, the departments concerned working 
solely within the limits of their own responsibilities. It 
would be advisable therefore to remedy this weakness 
by setting up a procedure for the routine exchange of 
information between the two departments. 
Travel by air taxi 
11.31. In special cases certain officials travel, for all 
or part of the journey involved, in a chartered air taxi 
made available to Commission Members. At present, 
no information on these journeys is sent to the depart­
ment dealing with travel expenses, which accordingly is 
unable to calculate the corresponding expenses taking 
due account of any journeys or parts of journeys which 
have involved the air taxi. 
11.32. It is therefore desirable that: 
(a) the list of passengers who have travelled in an air 
taxi should be sent automatically to the department 
dealing with travel expenses; 
(b) the air taxi firm should issue tickets to be attached 
to every application for reimbursement of travel 
expenses. 
Non-utilization of reduced fares 
11.33. As pointed out in paragraph 11.21 above, regu­
lar train journeys, in particular those between Brussels 
and Luxembourg, afford the opportunity of considera­
ble price reductions (50%). The Commission does not 
take up these opportunities, in spite of the large savings 
16.12.85 Official Journal of the European Communities 93 
that may be made on account of the many journeys by The travel agency instructed by the institution to order 
train and the large number of car journeys reimbursed tickets has not been doing its job properly in this res-
on the basis of the train fare. pect and the travel office, as presently organized, has 
not been able to compensate. The Court must reiterate, 
11.34. As regards air travel, the possibilities for moreover, the observation it made at the end of para-
special fares should be exploited to a greater extent. graph 11.22 above. 
(') Appropriations also appearing under Title 9 of Section B (2) Paragraphs 11.8 to 11.13 of the annual report for the 
(food aid) for certain staff expenditure of the European financial year 1983, OJ C 348, 31. 12.1984. 
Association for Cooperation (EAC) and the Commission (3) Paragraphs 11.33 to 11.36 of the annual report for the 
delegations. They are not taken into account in this chap- financial year 1982, OJ C 357, 31.12.1983. 
ter. (4) Article 10 (3) of Annex VII. 
94 Official Journal of the European Communities 16.12.85 
CHAPTER 12 
Operational expenditure 
12.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information 
Parliament 
Documentation and library expenditure 
Council 
Documentation and library expenditure 
Commission 
Subletting of buildings 
Expenditure relating to data-processing equipment 
Fitting-out of a canteen in Luxembourg 
Air-conditioning at the Computer Centre 
Installation of a telephone system 
Economic and Social Committee 
Application of the Financial Regulation 12.1 
12.2 
12.3 
12.4 
12.5 — 
12.5 — 
12.7 — 
12.12 
12.13 — 
12.15 — 12.20 
12.6 
12.11 
12.14 
12.20 
12.21 
INTRODUCTION 
12.1. Operational expenditure is met from the appro­
priations under Title 2, Part A, of Section III 'Commis­
sion' and under Titles 2 and 3 of the other sections of 
the general budget. 
SUMMARY OF FINANCIAL 
INFORMATION 
12.2. Table 12.1 summarizes, by chapter and by insti­
tution, the appropriations available for operational 
expenditure during the financial year 1984 and the use 
made of them. (a) The institution has not so far carried out any inven­
tory check of the central library stock (115 000 vol­
umes). 
(b) Books that have been declared obsolete are dis­
posed of without any decision being taken by the 
head of the central library. 
(c) In the case of certain current loans, some of which 
date back to 1961, the borrowers referred to in the 
records have since left the service. 
The internal rules (dating back to 1961) should be 
revised. 
PARLIAMENT COUNCIL 
Documentation and library expenditure 
12.3. The expenditure relating to the central library of 
the European Parliament, amounting to 439 145 ECU 
in 1984, calls for the following observations: Documentation and library expenditure 
12.4. The Court carried out an examination of docu­
mentation and library expenditure (approximately 
16. 12. 85 Official Journal of the European Communities 95 
Table 12.1 — Administrative expenditure: utilization of appropriations — by budget chapter and institution 
(Mio ECU) 
Budget chapter and institution 
(1) 
A. By budget chapter 
20 Investments in immovable proper­
ty, rental of buildings and 
associated costs 
21 Expenditure on data-processing 
22 Movable property and associated 
costs 
23 Current administrative expendi­
ture 
24 Entertainment and representation 
expenses 
25 Expenditure on formal and other 
meetings 
26 Expenditure on studies, surveys 
and consultations 
27 Expenditure on publishing and in­
formation 
28 Subsidies for balancing budgets (') 
29 Subsidies and financial contribu­
tions 
37 Expenditure relating to certain in­
stitutions and bodies 
Total 
B. By institution 
Parliament 
Council 
Commission (') 
Court of Justice 
Court of Auditors 
Economic and Social Committee 
Total 1984 budget 
Final ap­
propria­
tions 
(2) Commit­
ments 
(3) Payments 
made 
(4) Carry­
overs to 
1985 
(5) Cancella­
tions 
(6)-(2)-
(4)-(5) 
123,2 121,3 99,1 22,7 1,4 
30.5 30,5 22,0 8,5 0,0 
21.6 21,2 13,0 8,2 0,4 
47.4 46,7 32,7 14,0 0,7 
1.4 1,4 1,1 0,3 0,0 
23.7 22,8 20,1 2,7 0,9 
11,3 11,2 3,2 8,0 0,1 
54.1 53,5 36,3 17,2 0,6 
52.2 51,7 48,6 3,1 0,5 
6.5 6,3 5,4 0,9 0,2 
27.5 27,4 27,1 0,3 0,1 
399,4 394,0 308,6 85,9 4,9 
78,7 76,7 65,7 11,0 2,0 
37,9 37,1 25,1 12,4 0,4 
263,5 261,7 203,4 58,3 1,8 
7,6 7,2 4,8 2,4 ' 0,4 
2,9 2,6 1,8 0,9 0,2 
8,8 8,7 7,8 0,9 0,1 
399,4 394,0 308,6 85,9 4,9 Carry-overs from 1983 
Appropria­
tions car­
ried over 
from 1983 
(7) Payments 
made 
(8) Cancella­
tions 
(9)« 
(7)-(8) 
17,9 15,5 2,4 
7,7 7,3 0,4 
9,1 8,3 0,8 
10.6 9,5 1,1 
0,3 0,3 0,0 
3,0 2,2 0,8 
7,6 7,4 0,2 
20.7 18,1 2,6 
1,0 1,0 0,0 
0,9 0,6 0,3 
0,5 0,4 0,1 
79,3 70,6 8,7 
15,7 13,3 2,4 
11,6 9,8 1,8 
49,5 45,3 4,2 
1,6 1,4 0,2 
0,5 0,4 0,1 
0,4 0,4 0,0 
79,3 70,6 8,7 
(') Including administrative expenditure for the Office for Official Publications. 
buildings in Brussels and Luxembourg. In Brussels the 
premises are utilized by third parties, viz. newspaper 
kiosks, a travel agency and a bookshop, and other 
premises are occupied by the secretariat of the Euro­
pean Schools. In Luxembourg, for example, a newsa­
gent's and two banks occupy premises within the Jean 
Monnet building. 
12.6. The Court noted significant differences between 
contracts as regards conditions, and that the conditions 
were more favourable to the concessionaire in Com­
mission contracts than in contracts with other institu­
tions in comparable circumstances. The revenue 
received by the Commission from one newspaper 
kiosk, for example, was less than 50 % of that received 164 000 ECU in 1984). This examination revealed that 
there was no system of physical stocktaking for the 
library's books and that no checks were made on loans. 
In addition, there was also no proper system of internal 
rules. 
COMMISSION 
Subletting of buildings 
12.5. The Court audited the revenue collected by the 
Commission from the subletting of space within its 
96 Official Journal of the European Communities 16. 12. 85 
by another institution for smaller premises. What is 
more, the Commission contracts had not been preceded 
by competitive tendering and the Court found no 
explanation in the Commission's files for the differ­
ences in the subletting conditions. 
Expenditure relating to data-processing 
equipment 
12.7. Whereas the Computer Centre contains only a 
limited amount of equipment, a good deal of data-pro­
cessing material is held in the various departments of 
the Commission. For the most part, this material is 
financed from the appropriations of Article 211 of the 
budget. 
12.8. Inventory procedures, as described in the Finan­
cial Regulation, apply only to purchased equipment. 
Most of the equipment used by the Commission, how­
ever, is leased and is thus not covered by inventory pro­
cedures. In addition to the official inventory, therefore, 
the Commission keeps a list of leased equipment held 
by the departments which is valued at about 20 Mio 
ECU. 
12.9. An on-the-spot inspection of a representative 
sample of data-processing equipment revealed that cer­
tain purchased or leased items were located in offices 
other than those indicated in the records and that 
others could not be traced immediately. 
12.10. The purchased equipment was, as a rule, 
included in the official inventory in accordance with 
Article 59 of the Financial Regulation. None the less, 
the Court has the following comments to make: 
(a) contrary to Article 59(2) of the Financial Regula­
tion, the Commission has never carried out its own 
inspection to ascertain that entries in the inventory 
correspond to the facts; 
(b) in some cases, purchased equipment with a value 
exceeding 30 ECU and an operational life of over 
one year did not appear in the inventory. 
12.11. Finally, with regard to the procedure for incur­
ring expenditure, it should be noted that: 
(a) the Commission pays part of the hire and day-to­
day maintenance costs of equipment in advance. 
The Commission should review this practice and 
bring it more into line with the requirements of 
Article 41 of the Financial Regulation; (b) several payments (amounting to about 250 000 
ECU) concerning day-to-day services for the year 
1984 (such as, for example, the hire of the equip­
ment) were made against appropriations carried 
over from 1983, in contravention of the principle of 
the annuality of the budget. 
Fitting-out of a canteen in Luxembourg 
12.12. The Commission has extended its canteen 
facilities (self-service restaurant and kitchen) in Lux­
embourg and opened an 'a la carte' restaurant in the 
Jean Monnet building, at a cost of 658 500 ECU. It 
failed to observe the provisions in force relating to the 
award of contracts in this case, in that there was no 
invitation to tender for the work of extending the 
kitchen (443 000 ECU), the contract for which was 
placed by private treaty. 
Air-conditioning at the Computer Centre 
12.13. Since its initial installation the system of air-
conditioning at the Commission Computer Centre in 
Luxembourg has never achieved its expected output. In 
order to limit the risk of the computers overheating and 
thereby ceasing to function, the Commission installed 
two additional cooling units at a cost of some 120 500 
ECU. Again, the contract for this work was placed by 
private treaty and not after an invitation to tender. 
12.14. Despite additional work (inversion of the 
direction of the air flow and increase in output at a 
total cost of approximately 651 500 ECU), the air-con­
ditioning system still only supplies about a half of the 
pressure stipulated in the tender specification. More­
over, given its nature, the work undertaken would 
appear to be the responsibility of the owner of the 
building rather than of the Commission. 
Installation of a telephone system 
12.15. In December 1982 the Commission delegation 
in Washington concluded a contract for the renewal of 
its telephone system for an amount of 183 595 USD. 
The contract covered both the installation of the equip­
ment and its hire over six years. 
12.16. The responsible departments in Brussels were 
incorrectly informed of the real cost of the contract. An 
amount of 35 529 USD was notified by the delegation 
16.12.85 Official Journal of the European Communities 97 
as covering all of the expenditure, whereas this figure 
related solely to the installation of the system, the cost 
of its hire amounting to an additional 148 066 USD. 
12.17. The Commission in turn informed the Advi­
sory Committee on Procurements and Contracts 
(ACPC) of the figure of 35 529 USD as the total cost of 
a six-year leasing agreement. The ACPC, having 
requested other tenders (which ranged from 77 000 
USD to 95 000 USD for a five- or six-year leasing 
agreement), gave a favourable opinion on the offer of 
35 529 USD. At this stage, the Financial Controller 
raised no objection and approved the expenditure. 
12.18. The Washington office realized towards the 
middle of 1983 that the contract concluded involved an 
amount of 183 595 USD, and not 35 529 USD, and 
approached the contractor to seek a solution. An offer 
for the sale of the equipment installed at the delegation 
and at the residence (this work having been added to 
that of the delegation) was received for an amount of 
115 029 USD, in addition to the amount of 35 484 USD 
already paid. 
12.19. When the new proposal was submitted for a 
commitment of expenditure, the Financial Controller 
considered it advisable to refuse his approval, pointing 
out that the principles of sound management had not 
been observed. Since the Commission had been legally 
committed with the contractor since 1982, it could only 
overrule the refusal of approval and, in July 1984, 
approved the offer for the sale of the equipment. 
12.20. It should be noted in this connection that: 
(a) this is a case where various internal control proce­
dures have proved to be inadequate. In fact the 
price of 150 513 USD finally paid is four times higher than that approved by the ACPC and clearly 
higher than the other bids. Considering the differ­
ences in the bids, it is surprising that the error was 
not detected earlier; 
(b) moreover, the regulations in force regarding the 
placing of contracts were not observed. The instal­
lation of the telephone system in the residence was 
not subject to a tendering procedure; 
(c) finally, it should be noted that no study of the 
requirements was made prior to the conclusion of 
this major contract for equipment. 
ECONOMIC AND SOCIAL COMMITTEE 
Application of the Financial Regulation 
12.21. The Financial Regulation (Article 32 onwards) 
lays down that any commitment vis-d-vis a third party 
(conclusion of contracts, orders for the supply of goods 
and services etc.) must be preceded by a proposal for 
commitment of expenditure from the relevant authoriz­
ing officer and approved by the Financial Controller. A 
test audit of the expenditure allocated to nine budget 
headings revealed, however, that the proposals for 
commitment relating to 45 payment orders (for an 
amount of approximately 120 000 ECU) were not 
drawn up by the authorizing officers until after receipt 
of the related invoices. Moreover, as a consequence of 
the fact that the proposals for commitment were drawn 
up ex post facto, the costs of certain supplies and ser­
vices for work carried out during the financial year 
1983 had to be charged to the financial year 1984, as 
the appropriations for 1983 were exhausted. 
98 Official Journal of the European Communities 16. 12. 85 
CHAPTER 13 
Commission subventions to certain external bodies 
13.0. TABLE OF CONTENTS Paragraph reference 
Introduction 13.1 
Observations on Commission subvention to the European Schools 13.2 — 13.7 
INTRODUCTION 
13.1. The Court is responsible for the annual audit of 
the accounts of a number of bodies which, though 
external to the Community institutions, are wholly or 
mainly supported by the Community budget. The 
reports on these are included in the list in Annex II. 
The European Schools and the Office of the Board of 
Governors of the European Schools are among the 
bodies concerned. During 1984 the Court audited the 
schools' 1983 accounts. Total expenditure by the 
schools in that year was 2 666 Mio BFR, towards which 
the Commission contributed 1 833 Mio BFR (equiva­
lent to 39,4 Mio ECU). The Court's report has subse­
quently been forwarded to the Board of Governors as 
the discharge authority. 
OBSERVATIONS ON COMMISSION 
SUBVENTION TO THE EUROPEAN 
SCHOOLS 
13.2. The audit of the schools give rise to a number of 
questions about the Commission's management of its 
subvention to them. For example, although the Euro­
pean Schools submit detailed budgets to the Board of 
Governors, and the Commission participates in the 
budgetary preparation process, they have been allowed 
to build up reserve funds totalling 140 Mio BFR (3 Mio 
ECU), as at 31 December 1983. In addition, the results 
of the Court's audit raise some broader questions about 
the quality of the Commission's financial management 
with regard to this subvention. 
13.3. The European Schools are funded mainly from 
three sources: (a) the Member States, mostly in the form of 'national 
salaries' paid to seconded teachers; 
(b) organizations which enter into special agreements 
with the Board of Governors to provide resources 
in return for the children of their employees having 
rights of access to the schools, and 
(c) the Commission which effectively makes up the 
difference (68% of the income in 1983) between the 
expenditure and income from other sources. 
13.4. As both the principal and the residual source of 
finance for the schools, and the steward of the Com­
munity's financial interest in them, the Commission 
has a responsibility to ensure that all the other parties 
pay their proper shares. During its audit of the 1983 
accounts the Court has found that this was not the 
case: 
(a) The governments of the FR of Germany and the 
United Kingdom have not yet signed agreements 
with the Board of Governors concerning conditions 
under which the schools may operate in these 
countries. As a result the financial responsibilities 
of these host governments towards the schools 
remain unclear and they have not yet exempted the 
schools from the payment of VAT. 
(b) The Belgian Government originally undertook to 
maintain the buildings and furnishings of the Euro­
pean School in Belgium. However, its level of con­
tribution has remained unchanged since 1959, 
despite inflation and the addition of two European 
Schools in Belgium since then. 
(c) The contribution to the cost of Varese School by 
the Italian Government has remained unchanged 
since 1967. The Italian Government has failed, 
16.12.85 Official Journal of the European Communities 99 
throughout this period, to exempt the school from 
the payment of VAT. 
(d) The Dutch Government undertook to contribute to 
the maintenance costs of the European Schools in 
the Netherlands on the same basis as for Dutch 
schools, but no payment has either been sought or 
received. 
(e) The Board of Governors has agreed to suspend a 
financial contribution from the organization 
CEN (•) to the cost of running Mol School. The 
organization Eurochemic has not increased its con­
tribution since 1961. Less than 10% of the pupils at 
Mol are children of Community employees. 
(f) Several governments have agreed to provide con­
tributions towards the cost of splitting classes 
caused by the attendance of children whose parents 
worked for the organizations NATO, Eurocontrol 
and Namsa. Despite the fact that classes have had 
to be split for this reason neither the Board of Gov­
ernors nor the Administrative Boards of the schools 
concerned have sought reimbursement. 
(g) Children of parents who work for the EIB and JET 
are admitted as of right to the Luxembourg and 
Culham Schools respectively. However, neither 
organization contributes to the school budgets. 
(h) In 1983 66 children whose parents worked for the 
Dutch Energy Centre, attended the Bergen School. 
Similarly 54 children of parents from the Kernfor-
schungszentrum attended Karlsruhe. The Board of 
Governors has made no attempt to enter into 
financial agreements with these organizations. 
13.5. The most important factor determining the size 
of the Commission's subvention to the schools is the cost of salaries, which accounted for 93% of the 
expenditure in 1983. In paragraph 13.11 of its last 
annual report (2), in referring to the schools' accounts 
for 1982, the Court expressed its concern about serious 
deficiencies in the complex salary system. This concern 
has been confirmed and reinforced by the audit of the 
1983 accounts. The Court has again urged the Board of 
Governors to carry out an in-depth re-examination of 
the salary system, and has expressed the view that a 
solution can only be found in a new agreement with 
the Member States on the conditions of secondment of 
teachers. 
13.6. Timely and effective action on the matters iden­
tified in 13.4 above would have reduced the Commis­
sion subvention by up to 2 Mio ECU a year. The 
school's Statute (Article 10) requires unanimity for 
financial decisions by the Board of Governors, on 
which the Commission is represented. The Commission 
could therefore have insisted on appropriate action by 
the Board of Governors on the above matters, had it 
wished to do so. As regards paragraph 13.5 above, the 
Commission could also have drawn on its knowledge 
of the schools and the statutory rules governing 
employment in the Community to put forward consid­
ered recommendations of its own to the Board of Gov­
ernors about reform of the salary system. 
13.7. The Commission's Directorate-General of 
Budgets does not appear to have been involved in con­
sideration of the school's annual budget proposals, nor 
has the Financial Controller made any report to the 
Commission about financial management of the 
schools under Article 11 of the Implementing Measures 
of the Financial Regulation. (3) 
(') Centre d'etude de l'energie nucleaire. 
(2) OJC 348 of 31. 12. 1984. 
(3) OJLHOof 1.7. 1975. 
100 Official Journal of the European Communities 16.12.85 
CHAPTER 14 
Loans, borrowings and interest-rate subsidies 
14.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information 
Observations on the balance sheet and revenue and expenditure 
account of the New Community Instrument and Euratom mechanisms 
Observations on legality and sound financial management 
New Community Instrument loans 
EIB management commissions 
New Community Instrument and Euratom borrowings 14.1 
14.4 
14.6 14.3 
14.5 
14.7 
14.8 — 
14.8 — 
14.20 — 
14.24 — 14.30 
14.19 
14.23 
14.30 
INTRODUCTION 
14.1. This chapter deals with New Community Instru­
ment loans (NCI loans), European Atomic Energy 
Community loans (Euratom loans) and Balance of Pay­
ments loans (BP loans) as well as the borrowings con­
tracted by the Communities in order to finance these 
three loan mechanisms. NCI loans towards the cost of 
reconstructing areas devastated by earthquakes in Italy 
and Greece receive interest-rate subsidies. Loans and 
borrowings by the European Coal and Steel Com­
munity (ECSC) are dealt with in a separate report ('), 
which is not published in the Official Journal. Loans 
by the European Development Fund are dealt with in 
the second part of this report. 
14.2. The Community loans and borrowings are 
administered on an extra-budgetary basis. The 'Com­
mission' section of the general budget includes token 
entries which represent the budgetary guarantees for 
Community borrowings contracted through the NCI, 
Euratom and BP mechanisms. Interest-rate subsidies 
are entered under Chapter 69 of the general budget of 
the Communities. The loans and borrowings are set out 
in the Communities' balance sheet. 
14.3. In 1984 the Court's examination paid particular 
attention to Euratom and NCI loans. Euratom loans 
are granted by the Commission and administered by 
the European Investment Bank (EIB) as the Commis­sion's agent. In the case of NCI loans, on the other 
hand, the Commission only decides on the eligibility of 
the project; the loans themselves are approved and 
administered by the EIB, acting under a mandate from 
the Commission. 
SUMMARY OF FINANCIAL 
INFORMATION 
14.4. Tables 14.1 and 14.2 give a summary of the evo­
lution of loans and borrowings during the financial 
year 1984 and also show the extent to which the ceil­
ings fixed by the Council were utilized. Table 14.2 
shows, for NCI earthquake transactions, the figures 
calculated by the Commission on the basis that, as the 
governing legislation lays down identical ceilings for 
both borrowings and loans, it is permitted to take the 
loans ceiling as the determining ceiling. If, on the other 
hand, the determining ceiling for these transactions is 
the borrowings ceiling, as it now is for all other borrow­
ing and loan instruments, following the Court's recom­
mendation in paragraph 14.15 of the last annual report, 
the figures have to be amended as follows: 
(Mio ECU) 
Italian earthquake 
Greek earthquake Loans 
disbursed 
510,4 
80,9 Loans 
undisbursed 
89,7 Balance 
available 
399,9 
-0,9 
16. 12.85 Official Journal of the European Communities 101 
Table 14.1 — Evolution of loans and borrowings during 1984 
(Mio ECU) 
Mechanism 
Loans: 
NCI 
Euratom 
Balance of payments 
Total 
Borrowings: 
NCI 
Euratom 
Balance of payments 
Total Outstanding at 31. 12. 1983 
At the ECU 
exchange rate of 
31.12.1983 
(1) 
2 687,6 
1 668,7 
4 609,9 
8966,2 
3 268,8 
1 679,9 
4 609,9 
9 558,6 At the ECU 
exchange rate of 
31.12.1984 
(2) 
2 866,3 
1 723,7 
5 354,9 
9944,9 
3 484,1 
1 741,6 
5 354,9 
10580,6 Operations carried out in 1984 (') 
New loan or 
borrowing 
(3) 
1 194,0 
186,0 
1 380,0 
966,7 
214,1 
1180,8 Effects of swap 
transactions 
(4) 
4,0 
4,0 
— 
— Repayment or 
amortization 
(5) 
26,2 
32,4 
423,2 
481,8 
19,2 
63,3 
423,2 
505,7 Outstanding at 
31.12.1984 
(') 
(6) 
= (2)+ (3)+ (4) 
-(5) 
4 034,1 
1 881,3 
4931,7 
10847,1 
4431,6 
1 892,4 
4931,7 
11 255,7 
(') At the ECU exchange rate of 31. 12. 1984. 
The Court recommends that the Commission should 
obtain a legal opinion on the correct interpretation of 
the relevant legislation in order to clarify the position. 
14.5. In 1984 24,4 Mio ECU were disbursed as 
interest-rate subsidies on NCI and EIB loans for recon­
struction measures in areas which had been devastated 
by earthquakes. Of this sum, Italy received 21,7 Mio 
ECU and Greece 2,7 Mio ECU. 
OBSERVATIONS ON THE BALANCE 
SHEET AND REVENUE AND 
EXPENDITURE ACCOUNT OF THE NEW 
COMMUNITY INSTRUMENT AND 
EURATOM MECHANISMS 
14.6. Bearing in mind the weaknesses which came to 
light during the audit of the previous financial year, the 
Court carried out an in-depth examination of the bal­
ance sheet (2) as at 31 December 1984 and the revenue 
and expenditure account (2) of the NCI and Euratom 
mechanisms for the financial year 1984 to a searching 
scrutiny. This examination revealed that there were no 
significant irregularities. 
14.7. At 31 December 1984 the cumulative deficit of 
the NCI mechanism for all previous financial years 
amounted to 4,6 Mio ECU. This amount does not, 
however, include the results, where appropriate, of the 
operation of the NCI Treasury, which are dealt with 
more fully in paragraphs 14J5 to 14.19 below. The 
Court is of the opinion that these results should be per­iodically scrutinized and should be mentioned in an 
annex to the financial statement. 
OBSERVATIONS ON LEGALITY AND 
SOUND FINANCIAL MANAGEMENT 
New Community Instrument loans 
Agreement concerning the audit of NCI loans 
14.8. The Court found that the documents available 
at the Commission concerning the approval and 
administration of these loans were not sufficient to 
enable either the Court or the Commission to carry out 
a satisfactory examination. The negotiations entered 
into, subsequently, in Autumn 1984, with the Commis­
sion and the EIB resulted in an agreement regarding 
the documents and information to be made available 
by the EIB in future to the Commission and to the 
Court. This agreement was implemented on a trial basis 
for the audit of the financial year 1984 and will be 
reviewed in the light of experience. 
14.9. In implementation of this agreement, the 
Court's audit of NCI loans in 1984 was restricted to the 
examination of documents. The audit included reviews 
of the implementation of projects financed under 
NCI I and the eligibility of loans approved under 
102 Official Journal of the European Communities 16. 12.85 
Table 14.2 — Main characteristics and ceilings of the various mechanisms at 31 December 1984 
(Mio ECU) 
Mechanism 
NCI* 
Euratom* 
Balance of 
payments Objective 
NCI I: 
Council Decision 78/870/EEC of 16.10.1978 
To promote investment in the infrastructure, 
energy and industrial sectors. 
NCI II: 
Council Decision 82/169/EEC of 15.3.1982 
To finance projects in the fields of energy, in­
frastructure and the development of small and 
medium-sized enterprises. 
NCI III: 
Council Decision 83/200/EEC of 19.4. 1983 
To finance projects in the fields of energy, in­
frastructure and the development of small and 
medium-sized enterprises. 
NCI Italian earthquake: 
Council Decision 81/19/EEC of 20. 1.1981 
To reconstruct the means of production and the 
economic and social infrastructure in the areas 
affected by the 1980 earthquake. 
NCI Greek earthquake: 
Council Decision 81/1013/EEC of 14.12.1981 
To reconstruct the means of production and the 
economic and social infrastructure in the areas 
affected by the 1981 earthquake. 
Council Decisions 77/720/Euratom of 29. 3. 
1977 and 82/170/Euratom of 15. 3.1982 
To promote the production of electricity by 
nuclear power stations. 
Council Regulations Nos (EEC) 397/75 of 
17. 2.1975 and (EEC) 682/81 of 16. 3.1981 
To alleviate balance of payments difficulties in 
the Member States. Borrowing 
ceiling 
(1) 
1000 
1000 
3 000(3) 
2 900(3) 
1 000(4) 
80(4) 
2 000 
3 000 Mio 
USD(6) 
6 000 Mio 
ECU Loans granted i 
Disbursed (') 
(2) 
984,5 
896,3 
1 100,4 
495,8 (5) vithin this limit 
Undisbursed 
(3) 
15,5 (>) 
19,0 (') 
69,6 (2) 
444,9 (2) 
89,7 (2) 
79,8(5) _ 
1783,8 — 
2 547,8 Mio 
USD(6) 
3 997,2 Mio 
ECU Balance 
available 
(4) = 
(l)-(2)-(3) 
15,1 
1 354,7 
414,5(4) 
0,2 
216,2 
- (7) 
2 002,8 Mio 
ECU 
* Sources: DG XVIII, Commission, from information supplied by the EIB. 
(') Loans converted into their equivalent in terms of borrowings, i.e. including the issue costs of the selected borrowing operations, at the ECU con­
version rate at the date on which the loan was signed. 
(2) Loans undisbursed but contracted, at the exchahge rate at 31. 12. 1984. 
(3) On 31. 12. 1984 two tranches (amounting to a total of 2 900 Mio ECU) had been approved. 
(4) Ceiling applicable to NCI and EIB loans and borrowings. At the end of 1984 the EIB had granted loans to Italy amounting to 260 Mio ECU but 
had not granted any to Greece. 
(5) At the exchange rate ruling two working days before each disbursement. 
(6) Principal and interests. 
(7) Balance not available (measure expired). 
16. 12. 85 Official Journal of the European Communities 103 
NCI III. The Court also examined the operation of the 
NCI Treasury and the scale of management commis­
sions received by the European Investment Bank in 
return for administering these loans. 
Review of eligibility of NCI III projects 
14.10. The eligibility criteria laid down by the Council 
for NCI loans are of a general nature. Following the 
Court of Auditors' recommendation in its Special 
Report on Loans and Borrowings (3) and in accordance 
with Article 5 of the cooperation agreement between 
the Commission and the Bank with regard to NCI deci­
sions taken by the Council, the Commission sent the 
EIB detailed guidelines governing the eligibility of pro­
jects for NCI III loans, including the setting of an 
order of priorities for the different fields of application 
established by the Council. The guidelines sent to the 
EIB in June 1983 made the first priority of NCI III 
loans productive investments, particularly in small and 
medium-sized businesses; the second priority was 
investments in the energy sector and the third was 
investments in infrastructure projects. Within these 
broad categories, more specific sub-categories were 
also identified as worthy of support. The Commission's 
guidelines for NCI III also indicated that ways and 
means should be sought to extend the advantages of 
the NCI facility to those Member States which have 
not benefited, or have not benefited to any great extent, 
from previous NCI facilities. The Court has examined 
the loans granted under NCI to assess the extent to 
which these guidelines have been followed in practice. 
14.11. As is evident from Table 14.3, the priorities set 
in the guidelines have been substantially observed, 
with the reservation that fewer loans have been granted 
in the energy sector than in the sector of infrastructure 
projects. 
14.12. The intention of broadening the spread of NCI 
loans was not achieved in 1984. Four Member States 
were not granted any loans under NCI III (nor did they 
receive loans under NCI I or NCI II). Two Member 
States, on the other hand, accounted for about 77 % of 
loans approved under NCI III. 
14.13. The main reason for this uneven geographical 
distribution of NCI loans is that, under the present 
terms for these loans, they are only attractive in those 
Member States where domestic interest rates are high 
and where the national authorities are willing to pro­
vide exchange rate cover for loans contracted in foreign 
currencies. 
14.14. One of the main aims of the NCI is to combat 
unemployment in the Member States, particularly by making available global loans for the assistance of 
small and medium-sized businesses. The Commission 
has informed the Council and the European Parlia­
ment (4) that these loans have led to the creation or 
maintenance of 90 000 jobs. This figure, however, is 
based on estimated employment effects at the moment 
loans are applied for, and not on the actual number of 
jobs created or maintained on completion of the 
assisted projects. The Court's analysis of this figure 
also shows that it is made up of 80 000 jobs which were 
expected to be retained and only 10 000 planned new 
jobs. As global loans are a relatively new facility, it is 
too early to carry out a comprehensive review of 
employment achievements, but experience elsewhere 
indicates that the actual number of jobs created is fre­
quently much smaller than the number estimated at the 
loan application stage. 
NCI 
14.15. In paragraph 14.23 of its annual report for the 
financial year 1983 (5) the Court drew attention to 
losses which can occur, and had occurred, in operating 
the NCI. Following the Court's recommendation, the 
Commission has taken steps to reduce the level of the 
NCI Treasury, or liquidity reserve, and thereby limit 
the corresponding net cost of interest charges. The 
Court notes that the average level of this reserve 
decreased from 625,8 Mio ECU in the first half of 1984 
to 316,8 Mio ECU in the second half of the year and, in 
particular, that the balance at 31 December 1984 was 
321,7 Mio ECU, compared with 546,7 Mio ECU a year 
earlier. As the interest paid by the EIB to the Commis­
sion on credit balances on the NCI Treasury accounts 
is, on average, some 1,7 % lower than the interest paid 
by the Commission on related borrowings, the net 
benefit of the reduction in the level of this reserve will 
amount to approximately 5,3 Mio ECU over a full year. 
14.16. Although, as stated above, good progress has 
been made in reducing the overall balance of the NCI 
Treasury, the position on certain individual borrowings 
still gives cause for concern. For example, 40,0 Mio 
SFR of a 100,0 Mio SFR borrowing contracted in Nov­
ember 1983 remained undisbursed at 31 December 
1984. The net cost of maintaining these undisbursed, 
borrowed funds in the NCI Treasury had already 
reached 2,1 Mio SFR at 31 December 1984. 
14.17. The legislation governing the NCI lays down 
that the lending terms as regards the reimbursement of 
the principal and the rate and payment of interest shall 
be fixed in such a way that, overall, they cover the costs 
and expenses incurred in concluding and performing 
104 Official Journal of the European Communities 16.12.85 
Table 14.3 — Distribution of NCI III loans according to priority sectors and Member States at 31 December 1984 (') 
Member State 
(1) 
Belgium 
Denmark 
FR of Germany 
Greece 
France 
Ireland 
Italy 
Luxembourg 
Netherlands 
United Kingdom 
Total Manufacturing 
Contracts signed 
Mio ECU 
(2) %(2) 
(3) 
— — 
49,2 3,2 
— — 
47,7 3,1 
411,9 26,8 
— — 
613,2 39,9 
— — 
— — 
27,9 1,8 
1149,9 74,8 Energy 
Contracts signed 
Mio ECU 
(4) %(2) 
(5) 
— — 
61,0 4,0 
— — 
— — 
— — 
— — 
56,0 3,6 
— — 
— — 
— — 
117,0 7,6 Infrastructure 
Contracts signed 
Mio ECU 
(6) %(2) 
(7) 
— — 
76,6 5,0 
— — 
37,0 2,4 
43,7 2,8 
18,9 1,2 
61,3 4,0 
— — 
— — 
33,8 2,2 
271,3 17,6 Total 
Contracts signed 
Mio ECU 
(8) %(2) 
(9) 
— — 
186,8 12,2 
— — 
84,7 5,5 
455,6 29,6 
18,9 1,2 
730,5 47,5 
— — 
— — 
61,7 4,0 
1538,2 100,0 
(') At the ECU exchange rate at the date on which the loan was signed. 
(2) As a proportion of the total of 1 538,2 Mio ECU. 
both the borrowing and lending sides of the transac­
tions (6). It is inherent in the characteristics of the NCI 
Treasury system that losses or gains can occur on indi­
vidual transactions, essentially as a result of the follow­
ing factors: 
(a) The borrowings with which NCI loans are funded 
are contracted at prevailing market rates. The pro­
ceeds of these borrowings are passed to the EIB, 
where they may remain for some time before being 
disbursed as loans. As it is the practice of the EIB 
to grant loans at the interest rates prevailing in the 
market at the date when the loans are made, if 
interest rates fall during this interval, loans may be 
made at interest rates which are below the level of 
the corresponding borrowing. 
(b) Under the terms of the Commission's arrangement 
with the EIB, income from disbursed loans is cre­
dited to Commission accounts with the Bank and 
expenditure on servicing Commission borrowings 
is debited to these accounts. The Commission 
receives interest on credit balances and pays 
interest on debit balances on these accounts at 
rates based on bid rates quoted by reference banks. 
These rates, which reflect the cost of short-term 
money, are generally below the rates of the Com­
mission's borrowings, which reflect the cost of 
long-term money. The combination of these factors 
can give rise to losses when the account of a parti­cular borrowing is in credit (conversely, a debit bal­
ance works in favour of the Commission). 
14.18. In order to monitor and, as far as possible, 
minimise the consequences of these factors, the Court 
recommended in paragraph 14.25 of its 1983 annual 
report that regular checks should be made on the pay­
ment flows of these operations. A procedure for such 
checks was introduced by the Commission in 1984 in 
collaboration with the EIB. 
14.19. These checks are, perforce, based on certain 
assumptions and should be seen as indicating trends 
over a period of time rather than an absolute position 
at any point in time. These assumptions are: that 
interest rates paid on the balances on the Commission's 
account with the EIB in force at the end of the refer­
ence period will continue unchanged; similarly that 
currency/ECU exchange rates remain unchanged; and 
that for partly disbursed borrowings undisbursed bal­
ances remain undisbursed. Based on these assump­
tions, the checks showed that at 31 December 1984 
there were potential losses of 40 Mio ECU on borrow­
ings fully disbursed and 25 Mio ECU on borrowings 
only partly disbursed. The Court stresses the potential 
character of these figures; the final outturn will not be 
known until all the borrowings and loans have been 
repaid. 
16.12.85 Official Journal of the European Communities 105 
EIB management commissions 
14.20. The administration of Euratom and NCI loans 
by the EIB involves the following tasks: 
(a) the search for and the selection of potential pro­
jects, borrowers and guarantors; 
(b) the appraisal of loan applications from the tech­
nical and financial standpoint, as well as economic 
analysis; 
(c) the negotiation and drawing up of contracts; 
(d) the monitoring of project implementation; 
(e) supervision of the servicing of loans, including 
monitoring the financial situation of loan benefi­
ciaries. 
The EIB, however, bears no financial risk, as the trans­
actions are carried out on behalf of, for and at the risk 
of the Community. 
14.21. The EIB receives a management commission 
for administering these loans which was reduced on 
1 April 1984. In 1984 the management commissions 
received by the bank for the administration of NCI and 
Euratom loans amounted to 6,2 Mio ECU. This com­
mission is borne by the loan beneficiaries and repre­
sents a not inconsiderable burden for them, particularly 
in the case of global loans, where a further commission 
is levied by the credit institution which administers the 
loan in the Member State in question. 
(a) For example, the Bank's commission on an NCI 
direct loan of 27 Mio ECU with a term of 20 years 
will amount to about 0,43 Mio ECU. 
(b) For a global loan amounting to 36 Mio ECU and 
with a life of 12 years, where the administrative 
costs ought actually to be less, the EIB's commis­
sion will amount to about 0,36 Mio ECU. On top 
of that, there will also be a commission of 2,6 Mio 
ECU charged by the national credit institution to 
the loan beneficiary. 
(c) For a series of Euratom loans for the same project, 
totalling 355 Mio ECU and with an average life of 
12,5 years, the commission received by the EIB will 
amount to some 3 Mio ECU. 
14.22. The Parliament, the Council, the Commission 
and the EIB have always agreed that, as far as manage­
ment commissions are concerned, the object is to strike 
a balance between costs and income relating to opera­
tions carried out under mandate, and not to make a 
profit (7). As it was unable to discover any information 
in the Commission's files concerning the costs incurred 
by the Bank in the administration of these loans, the 
Court has been unable to ascertain to what extent the 
present level of management commission is consistent 
with the costs involved. 
14.23. The Court considers that this situation is unsa­
tisfactory and recommends that the Commission should require the Bank to make available an annual 
account of costs and income relating to NCI and Eura­
tom loans. This should not present the bank with an 
undue burden, as it already has a system of cost-
accounting and computer-assisted management tech­
niques. The Court further recommends that considera­
tion should be given to introducing differential scales 
of commission, to reflect more accurately the degree of 
administrative effort required by the different types of 
loan involved. 
New Community Instrument and Euratom 
borrowings 
Premature redemption of borrowings 
14.24. Certain borrowing contracts contain clauses 
permitting the Community to effect premature redemp­
tion of the borrowings. Where interest rates for current 
borrowings are less than the rates included in existing 
borrowing contracts these clauses open up the possibil­
ity of refinancing existing borrowings at lower costs. 
14.25. In 1984 the Commission refinanced one Eura­
tom borrowing in this way and thereby achieved a sav­
ing over the remaining life of the operation of some 
2,7 Mio ECU. The Court's examination of Euratom 
borrowings outstanding in 1984 revealed three other 
instances where it appeared that refinancing would 
have been advantageous. The Court's calculations 
showed that refinancing these borrowings would have 
reduced their costs by between 3 Mio ECU and 4,5 Mio 
ECU. The Court recommends, therefore, that the rel­
evant procedures should be tightened up in order to 
ensure that future opportunities of this kind are not 
missed. 
14.26. The net benefit of 2,7 Mio ECU arising from 
the refinancing of the Euratom borrowing mentioned 
in paragraph 14.25 was not at the time passed on by the 
Commission to the loan beneficiary. In the Court's opi­
nion, benefits from the refinancing of borrowings 
should be passed on to the corresponding loan benefi­
ciaries, in order to comply with the requirements of the 
relevant Council Decision (8) on Euratom loans. The 
decision in question requires that borrowing transac­
tions and the related lending transactions shall be car­
ried out on the same terms as regards the repayment of 
principal and the repayment of interest. 
Negotiation of borrowing terms 
14.27. The Commission's internal rules for NCI and 
Euratom borrowings require negotiators to seek out, as 
a general rule, the most advantageous terms prevailing 
on the markets for an issuer of the quality of the Com-
106 Official Journal of the European Communities 16. 12. 85 
munities. To this end, maximum advantage is to be 
taken of competition between lenders, to the extent 
allowed by the market situation and the nature of the 
borrowing operation, without, however, compromising 
the security of subsequent transactions and the general 
interest of the Communities. The Court examined 
Commission borrowings contracted during 1984 in 
order to test whether, and with what result, the above-
mentioned Commission internal rules had been com­
plied with. the point of view of the degree of competition involved 
in the negotiations. 
14.29. The examination showed that some borrowings 
had been negotiated with single lenders or with a single 
syndicate of lenders. The Commission's files covering 
the negotiations of these loans did not reveal the rea­
sons for dispensing with competitive bidding, nor did 
they provide adequate justification for the decision in 
favour of the chosen financing instrument. 
14.28. The approach adopted was to compare the 
costs of the Commission's borrowings with indepen­
dent indicators (9). This comparison enabled the1 Court 
to identify those borrowings where the cost (exclusive 
of issuing costs) was above the average cost level 
revealed by the independent indicators, adjusted to 
take account of the approximate nature of the exercise. 
These cases were then examined in greater detail from 14.30. The Court reiterates a view it has expressed in 
the past that, where public funds are concerned, there is 
in principle no substitute for effective competition. It 
recommends that competition should be introduced to 
the maximum practicable extent into the negotiation of 
the Community's borrowings. It also recommends that 
decisions regarding the choice of financing instrument 
should be fully substantiated and should be recorded in 
writing in the borrowings files concerned. 
(')• 
(2) 
(3) 
(4) Report (Annex to the Annual Report ECSC 1984) on the 
accounting and financial management of the European 
Coal and Steel Community. 
Revenue and expenditure account and balance sheet of 
the European Communities in respect of budgetary trans­
actions during the financial year 1984, Volume II. 
OJC319,6. 12. 1982. 
Six-monthly report from the Commission to the Council 
and the Parliament on operations under the New Com­
munity Instrument for borrowing and lending (NCI), 
Doc. COM(84) 387 final. (5) 
(6) 
(7) 
(8) 
o OJC348,31. 12. 1984. 
Council Decision 83/200/EEC, 19.4. 1983, OJ L 112, 
28. 4. 1983. 
Reply by the Commission to the special report of the 
Court of Auditors on the management of Community 
development aid funds by the European Investment Bank 
(available at the Court). 
Council Decision 77/270 Euratom, 29. 3. 1977. 
OECD, Financial Statistics, Part I. 
16. 12. 85 Official Journal of the European Communities 107 
PART II 
European Development Funds 
15.0. TABLE OF CONTENTS Paragraph reference 
Introduction 
Summary of financial information 
Second and third EDF 
Fourth and fifth EDF 
Observations on the financial management 
Preparation and presentation of the accounts 
Advances 
Member States' contributions 
Cash at bank 
Observations on the accounting systems and procedures 
Observations on the granting and management of the aid 
Execution of indicative programmes 
Development projects 
Price-variation clauses 
Financing procedures and special loans 
Stabilization of export earnings (Stabex) 
Regional cooperation 15.1 
15.2 — 
15.2 — 
15.5 — 
15.7 — 
15.7 — 
15.9 — 
15.11 
15.12 — 
15.14 — 
15.22 — 
15.22 — 
15.25 — 
15.39 — 
15.41 — 
15.43 — 
15.50 — 15.6 
15.4 
15.6 
15.13 
15.8 
15.10 
15.13 
15.21 
15.51 
15.24 
15.38 
15.40 
15.42 
15.49 
15.51 
INTRODUCTION 
15.1. The European Development Funds (EDF) con­
stitute the main instrument of the policy of cooperation 
that the EEC has been conducting since 1958 with a 
number of developing countries in Africa, the Carib­
bean and the Pacific (ACP States). Each EDF's alloca­
tion is separate from the general budget of the Euro­
pean Communities and is financed by the Member 
States' contributions, which are fixed according to an 
ad hoc scale of quotas. The implementation of each 
EDF is governed by a specific financial regulation. 
SUMMARY OF FINANCIAL 
INFORMATION governed by the First Yaounde Convention, which 
expired in 1970. 
15.3. Of the 916,6 Mio ECU allocated to the third 
EDF — governed by the Second Yaounde Convention, 
which expired in 1976 —, 41,0 Mio ECU, of which 
15,0 Mio ECU were still not earmarked for any specific 
purpose, remained to be disbursed at 31 December 
1984, as opposed to 48,4 Mio ECU at 31 December 
1983. 
15.4. At 31 December 1984, about 100 projects 
financed out of the third EDF were completed but not 
closed. In the case of a number of them, no financial 
operation had been recorded for several years. 
Second and third EDF Fourth and fifth EDF 
15.2. During 1984, the final disbursements were made 
from the 730,0 Mio ECU allocated to the second EDF, 15.5. Out of an allocation of 3 155,9 Mio ECU, the 
financing decisions adopted by 31 December 1984 for 
108 Official Journal of the European Communities 16. 12. 85 
the fourth EDF — governed by the First Lome Con­
vention, which expired in 1980 — totalled 3 037,0 Mio 
ECU. Payments made in 1984 for this EDF amounted 
to 185,2 Mio ECU. 
15.6. Out of an allocation of 4 802,3 Mio ECU, the 
financing decisions adopted by 31 December 1984 for 
the fifth EDF — governed by the Second Lome Con­
vention, which expired in 1985 — totalled 3 102,1 Mio 
ECU. Payments made in 1984 for this EDF amounted 
to 509,5 Mio ECU. 
OBSERVATIONS ON THE FINANCIAL 
MANAGEMENT 
Preparation and presentation of the accounts 
15.7. The Commission did not officially send the 
Court the balance sheet and the revenue and expendi­
ture account of the EDF until 7 May 1985, despite the 
fact that, according to the financial regulations in force, 
these documents should have been sent by 31 March 
1985 at the latest for the first four EDF and by 15 April 
for the fifth EDF. 
15.8. Certain items in the accounts cannot be properly 
understood without explanation, and the accounting 
principles adopted by the Commission in respect of the 
EDF are not stated in the annual accounts. As the 
Court mentioned in its annual report for the financial 
year 1981('), it would be helpful, and in line with 
generally accepted accounting practice, if the different 
accounting principles employed and the meaning of 
certain data were given in explanatory notes, as has 
been the practice since 1980 in the revenue and 
expenditure account and the balance sheet relating to 
the general budget. 
Advances 
15.9. An advance of 4,5 Mio ECU, the repayment of 
which by an ACP,State is six years overdue, should not 
continue to be shown in the accounts of the third EDF 
as a readily convertible asset. 
15.10. There has been marked progress in the identifi­
cation and correction of the discrepancies between the 
Commission's books and those of the bodies receiving advances from the EDF. As regards scholarships, how­
ever, there continues to be a discrepancy of 6 Mio BFR 
between the Commission's books and those of the 
European Association for Cooperation (EAC). 
Member States' contributions 
15.11. Four Member States consistently fail to meet 
the due dates for payment of their quarterly contribu­
tions. Italy did not pay the three instalments due on 
2 April, 2 July and 1 October until 30 October 1984. 
France, Luxembourg and Ireland paid their contribu­
tions on average 25, 22 and 12 days late respectively. 
Cash at bank 
15.12. In its communication to the Council of 
14 October 1983, the Commission had estimated that 
its cash requirements at the end of the financial year 
1984 would be 130 Mio ECU. Because of the overesti-
mation of the disbursements expected in 1984 (810 Mio 
ECU estimated, but only 703 Mio ECU disbursed), the 
bank balances at 31 December 1984 amounted to 
342 Mio ECU. The contributions paid for 1984 thus 
proved to be 212 Mio ECU in excess of requirements, 
which is equivalent to the total value of the contribu­
tions called in the last quarter of 1984. 
15.13. As the Court mentioned in its annual report for 
the financial year 1982(2), the Commission does not 
record any EDF payments until after it has received the 
statement from the relevant bank certifying that the 
payment has been charged. This practice is incorrect, as 
the delay in the recording of payment orders means 
that it is not possible to monitor the bank balances ade­
quately. As a result, the Commission might make the 
same payment twice over or have overdrawn bank bal­
ances. 
OBSERVATIONS ON THE ACCOUNTING 
SYSTEMS AND PROCEDURES 
15.14. The Commission delayed the closing of the 
EDF accounts for the financial year 1984 for three 
months, until 15 April 1985, so that it could include in 
them a large proportion of the payments that had 
already been made but had not yet been definitively 
entered in the accounts at 31 December 1984. No tran­
sactions executed in 1985 were recorded by the Com-
16.12.85 Official Journal of the European Communities 109 
mission during this time; as a result, for three months it 
was not possible to make any reconciliation on the 
basis of the official accounts with regard to either 
bank-account balances, which nevertheless amount to 
500 Mio ECU, or disbursements, which total 125 Mio 
ECU. 
15.15. Despite the belated closing of the EDF 
accounts, items still under verification on the EDF bal­
ance sheets totalled 49,5 Mio ECU, of which 1,8 Mio 
ECU (78 transactions) remained uncleared for over 
nine months. These transactions included two pay­
ments totalling 0,2 Mio ECU for which no commitment 
had been made. Furthermore, an amount of 0,2 Mio 
ECU, payable as emergency aid, was disbursed three 
times in succession. 
15.16. As is shown in Table 15.1, the time required to 
execute the 76 payments selected by the Court for scru­
tiny in terms of their legality and regularity is excessive 
and shows no improvement over the payment times 
recorded in 1983. The contractors, who were forced to 
wait over three months for settlement of 19% to 23% of 
their claims payable in a European currency, and con­
tractually due within 60 days, will probably seek to 
recoup the extra costs they have incurred through price 
increases. 
15.17. On average, a period of around five months 
elapses after the issue of a claim by a creditor before a 
payment in a recipient country's currency is entered in 
Table 15.1 — Analysis of the time required in 1984 for payment 
from the EDF 
Period of time elapsing 
between the claim (') 
being made and the 
corresponding payment 
being executed 
Up to 30 days 
Between 31 and 60 
days 
Between 61 and 90 
days 
More than 90 days 
Total % of the payment orders according to the 
places of issue and of execution 
Issued and 
executed in 
an ACP 
country Issued in an 
ACP country 
and 
executed in 
Brussels Issued and 
executed in 
Brussels 
27 9 44 
47 45 31 
13 23 6 
13 23 19 
100 100 100 
(') Only claims deemed to be admissible were taken into considera­
tion, i.e. claims accompanied by all the supporting documents 
necessary for their authorization. Moreover, the sample covered 
only those claims that were payable within 60 days. the EDF accounts, to which period is added a delay of 
up to three months before the accounts are physically 
made available to the officials responsible for the man­
agement. 
15.18. Recovery orders have not been issued for a 
number of sums due to the EDF. As a result, the Court 
is unable to put a figure to the debts due to the EDF. 
For instance, 0,2 Mio ECU is still to be reimbursed by 
Madagascar under the third EDF and 0,1 Mio ECU is 
to be recovered from the United Kingdom in respect of 
VAT paid by the Commission on some of its purchases. 
Since the sums have not been recorded, no recovery of 
these claims can be made within the prescribed time-
limits. 
15.19. Some of the supporting documents examined 
by the Court concerning both commitments and pay­
ments recorded in 1984 were unsatisfactory. For 16% of 
the payments examined, the files of the finance depart­
ment of the Directorate General for Development Aid 
were inadequate to support the expenditure, either 
because the payment claim was not presented in suffi­
cient detail, or because the finance department did not 
have all the contract documents against which to check 
the claim. The finance department's files rarely con­
tained the documents necessary for the authorizing 
officer and the Court to ensure that a contract pre­
sented for finance had been awarded to the tenderer 
whose bid had been accepted. 
15.20. As the Court mentioned in its annual report for 
the financial year 1983(3), the Commission does not 
record in the EDF accounts the commitments relating 
to works contracts, supply contracts or technical assist­
ance contracts financed by special loans, whereas it 
does record this information for projects financed by 
grants. The accounts do not therefore show whether the 
total value of the contracts entered into exceeds the 
amount of the loan, or whether the payments in respect 
of the contracts are higher than the amounts stipulated 
in the contracts. 
15.21. As the Court has already pointed out on sev­
eral occasions, the many delays or anomalies noted in 
respect of commitments and payments indicate the 
need to rationalize commitment and payment transac­
tions. At present they involve many unnecessary dupli­
cations of paperwork, without however ensuring that 
documents essential to the work of the officials respon­
sible for authorizing transactions are available to them. 
No manual of procedures or other written accounting 
instructions exist, so that the staff concerned encounter 
difficulties in harmonizing the nature of the work they 
perform. 
110 Official Journal of the European Communities 16. 12. 85 
OBSERVATIONS ON THE GRANTING Feasibility studies 
AND MANAGEMENT OF THE AID 
Execution of indicative programmes 
15.22. At 31 December 1984, 81% (fourth EDF) and 
22,1% (fifth EDF) of the allocations to the ACP coun­
tries for their respective indicative programmes had 
been paid out overall. Each recipient's utilization of its 
overall budget is shown in Table 15.2. 
15.23. Under the fifth EDF, the indicative programme 
of Papua New Guinea was initially adopted for an 
amount of between 22 and 27 Mio ECU. Even though 
this country has proved to be incapable of implement­
ing this programme, its allocation was in the end 
increased from 22 to 23 Mio ECU. This sum has for the 
most part been left sterile for five years. 
15.24. As the Court has already mentioned in its 
annual report for the financial year 1982(2), the Com­
mission does not have any centralized system which, 
simply by comparing the results and the planned objec­
tives, could rapidly warn its responsible officials when 
execution difficulties arose. The management's records 
do not contain any forecasts of rates of implementation 
or of disbursement, and the delegations often omit to 
send regular reports on the progress of the various pro­
jects, despite the fact that such reports are sine qua non 
for the efficient monitoring of these projects' adminis­
trative and physical progress. 
Development projects 
15.25. In 1984, the Court audited 51 projects and var­
ious micro-projects (in the fields of agriculture, the 
agricultural processing industry, road and water-engi­
neering infrastructure, education and health) located in 
eight countries: Rwanda, Zaire, Burundi, Fiji, Samoa, 
Vanuatu, Papua New Guinea and Sierra Leone. In 
each of these countries (except for Zaire, where only 
the tea projects were audited), the proportion in finan­
cial terms of the aid audited as against the total aid 
granted under the fourth and fifth EDF varied between 
51,4% and 93,8%, as shown in Table 15.3. These data 
show clearly that the audits related in each of the coun­
tries visited to a substantial proportion of the aid 
granted and therefore bring out the representative 
nature, for the countries concerned, of the observations 
that arise from them. 15.26. At the appraisal stage of several projects, the 
quantities and cost of the work to be carried out were 
considerably underestimated. For the Sauniatu power 
station in Samoa, for example, the civil engineering 
works cost over 6 Mio ECU, whereas they were esti­
mated at only 2,8 Mio ECU, with the result that the 
Community aid had to be increased from 4,1 Mio ECU 
to 5,6 Mio ECU. In the same country, the Samasoni 
hydro-electric power station, whose cost was initially 
estimated at 3 Mio ECU, in the end cost 3,9 Mio ECU. 
The actual cost of the Hiritano road in Papua New 
Guinea exceeded the initial forecast by 68% whilst the 
cost of supplying this country with two research ships 
was twice as much as forecast in the financing propo­
sal. These erroneous financial forecasts have upset the 
financing plans for the projects and are likely to jeopar­
dize the completion of the projects. Moreover, they 
affect any comparison of the various alternatives, thus 
making it unlikely that the best possible use will be 
made of the resources available. 
15.27. The feasibility study for the rural development 
project for the central area of the Zaire-Nile watershed 
in Rwanda gave hardly any explanation of how the 
project was to be carried out, and on a number of 
points it resembled a preliminary study. That led to 
numerous problems regarding the coordination and 
linking together of the various operations. For example, 
the 'agronomic research' section, which should logi­
cally have preceded the development of food crops, 
was not carried out until after the latter. The develop­
ment of the link between food crops and stock-farming, 
an essential aspect of the project, had not even been 
started at the time of the Court's visit in June 1984. 
Against this background, it seems unlikely that the aim 
of opening up and developing the area in question will 
be achieved. 
15.28. The detailed analysis of the physical and 
human environment of the projects, which is an impor­
tant stage in any feasibility study, does not always 
seem to have been made with the necessary thorough­
ness. The fishing development project in the district of 
Kambia in Sierra Leone illustrates this. The initial 
study, on which the financing proposal was based, 
stated that the region had little wind and no undertows, 
whereas the exact opposite is in fact the case. Accord­
ing to this document, those benefiting from the project 
would be fishermen of slender means, whereas in fact 
they work in a semi-industrial fishing business and 
16. n. 85 Official Journal of the European Communities 111 
their financial situation is not particularly difficult. As 
a result of this ignorance of local conditions, it was 
proposed that catamaran-type boats be imported, wher­
eas the existing local boats, with a few inexpensive 
improvements, are in fact better suited to the natural 
conditions of the area and cost less. 15.29. The feasibility study for the Mukungwa hydro­
electric power-station project in Rwanda, which the 
Commission staff considered to be second-rate, led to a 
lawsuit concerning the civil-engineering lot and an 
increase of approximately 15% in the cost of the invest­
ment. The successful tenderer for the civil-engineering 
Table 15.2 — Fourth and fifth EDF: utilization of the overall budgets by recipient at 31 December 1984 
Recipient country 
(1) 
I. ACP States: 
Ethiopia 
Tanzania 
Zaire 
Sudan 
Uganda 
Mali 
Kenya 
Madagascar 
Niger 
Burkina Faso 
Malawi 
Guinea 
Somalia 
Senegal 
Rwanda 
Burundi 
Cameroon 
Chad 
Ghana 
Zambia 
Benin 
Ivory Coast 
Central African 
Republic 
Togo 
Mauritania 
Sierra Leone 
Congo 
Liberia 
Lesotho 
Guinea-Bissau 
Jamaica 
Botswana 
Suriname 
Mauritius Guyana 
Sub-total to be brought 
forward Fourth EDF 
Overall 
budget 
(Mio ECU) 
(2) 
118,2 
103,4 
96,5 
90,6 
73,6 
73,5 
72,0 
69,2 
68,5 
68,0 
67,9 
64,0 
63,6 
59,0 
58,7 
58,1 
55,3 
51,9 
48,0 
45,1 
44,3 
40,0 
37,3 
35,7 
33,6 
31,1 
30,0 
25,0 
22,0 
20,0 
20,0 
19,0 
18,0 
15,3 
12,8 
1809,2 Rate of 
utilization 
(%) 
(3) 
84,9 
84,0 
81,2 
84,2 
66,2 
88,6 
96,1 
87,1 
89,6 
79,0 
89,5 
96,4 
74,7 
89,2 
95,9 
78,5 
76,5 
90,6 
97,7 
86,3 
71,8 
72,8 
90,9 
88,0 
93,5 
83,0 
97,3 
69,2 
75,0 
88,0 
63,0 
86,3 
45,0 
68,6 
98,4 Fifth EDF 
Overall 
budget 
(Mio ECU) 
(4) 
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 
2 207,5 Rate of 
utilization 
(%) 
(5) 
32,4 
22,1 
22,1 
50,2 
16,3 
23,8 
18,5 
25,0 
26,7 
31,8 
13,1 
21,6 
27,4 
21,9 
30,0 
17,7 
11,0 
21,9 
10,2 
9,3 
12,4 
30,9 
35,7 
48,4 
28,8 
12,2 
36,5 
7,7 
18,3 
19,2 
12,1 
17,8 
10,6 
22,9 
28,1 Recipient country 
(6) 
Sub-total brought for­
ward 
Swaziland 
Gambia 
Papua 
New Guinea 
Fiji 
Gabon 
Solomon Islands 
Nigeria 
Zimbabwe 
Antigua and 
Barbuda 
Bahamas 
Barbados 
Belize 
Cape Verde 
Comoros 
Djibouti 
Dominica 
Grenada 
Equatorial Guinea 
Kiribati 
Sao Tome and 
Principe 
Saint Lucia 
Saint Vincent 
Western Samoa 
Seychelles 
Tonga 
Trinidad & Tobago 
Tuvalu 
Vanuatu 
II. Regional projects 
Administrative costs 
Contingency reserve 
Total ACP (I+ 11) 
III. OCT/FOD 
Total Fourth EDF 
Overall 
budget 
(Mio ECU) 
(7) 
1 809,2 
12,0 
11,3 
10,0 
9,9 
9,5 
9,3 
9,0 
— 
— 
1,8 
2,6 
— 
4,0 
6,3 
3,9 
2,0 
2,0 
7,0 
3,5 
1,8 
3,2 
3,0 
4,6 
2,4 
3,2 
10,3 
0,6 
— 
303,9 
104,0 
47,2 
2 397,5 
67,6 
2465,1 Rate of 
utilization 
(%) 
(8) 
94,2 
88,5 
73,0 
97,0 
91,6 
72,0 
63,3 
— 
— 
61,1 
73,1 
— 
92,5 
82,5 
53,8 
25,0 
95,0 
94,3 
45,7 
94,4 
25,0 
0,0 
93,5 
95,8 
84,4 
27,2 
100,0 
— 
74,2 
95,2 
— 
81,2 
70,9 
81,0 Fifth EDF 
Overall 
budget 
(Mio ECU) 
(9) 
2 207,5 
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 
3,7 
3,7 
6,2 
3,6 
4,1 
10,5 
1,0 
4,5 
631,5 
— 
2,2 
3 147,4 
50,6 
3 198,0 Rate of 
utilization 
(%) 
(10) 
10,3 
22,1 
3,9 
39,2 
40,0 
7,5 
2,2 
15,9 
0,0 
4,8 
27,0 
1,8 
4,4 
9,7 
27,8 
5,7 
5,7 
4,7 
12,5 
52,5 
40,5 
64,9 
72,6 
16,7 
7,3 
10,5 
40,0 
26,7 
20,5 
— 
— 
22,3 
12,6 
22,1 
Table 15.3 — Percentage of the aid audited by the Court, per country visited 
Samoa 
88,6 % Vanuatu • 
92,7 % Fiji 
93,8 % Papua 
New Guinea 
84,3 % Burundi 
51,4% Rwanda 
81,7% Sierra Leone 
55,4 % 
112 Official Journal of the European Communities 16. 12.85 
lot, who, before the start of work, had obtained a guar­
antee of indemnification against any unforeseen geo­
logical conditions, has made frequent use of this 
clause, with the result that there have been many law­
suits between the contracting parties. 
15.30. A Community operation in Sierra Leone was 
intended to open up the district of Koinadugu, where 
the EDF has financed an integrated rural development 
project. For this purpose the road between Makeni and 
Kabala had to be improved and asphalted. These 
works, however, were carried out on the Makeni-
Fadugu section only. The remaining 40 kms, between 
Fadugu and Kabala, are hard to negotiate during the 
rainy season, so that access to the district of Koinadugu 
is still difficult for much of the year. The authorities 
concerned could have opted, at equivalent cost, for a 
road that was less elaborate but that provided a contin­
uous link between Makeni and Kabala. 
Coordination of Community and national aid operations 
15.31. Some projects are financed jointly by the EDF 
and the recipient country. Failure by the latter to meet 
its obligations is likely to delay the operation consider­
ably, and may even jeopardize its completion. In Sierra 
Leone, for example, a training school for ancillary 
medical services which had been built with an EDF 
grant as part of a development programme for the med­
ical sector, remained unused for two years because the 
government had been slow to meet the obligations it 
had undertaken. In fact, the school had not been con­
nected to the water and electricity supply and the Min­
istry of Health had not managed to recruit teachers for 
the school or finalize the syllabuses by the required 
deadline. In the end the EDF paid for the school to be 
connected to the water and electricity supply. 
15.32. A project, financed by the Community, to sup­
ply this same country with medical equipment had still 
not been concluded five years after the stipulated dead­
line. Equipment for the radiology department was 
installed four years late because the Ministry of Health 
had been slow to honour its commitments to construct 
the buildings and ensure that they were connected to 
the electricity supply. Equipment of this kind ought not 
to have been delivered until the buildings and services 
necessary for it to function properly were ready. In 
addition, the technical assistance staff responsible for 
the maintenance of the equipment and staff training 
were unable to carry out their duties because the 
government delayed the purchase of a vehicle in which 
to transport the equipment and did not select in good 
time the staff who were to be trained. 15.33. Still in Sierra Leone, the community clinics 
financed as part of a programme of micro-projects con­
cerned with health matters are either unused or under­
used because the government has not yet supplied the 
furniture and medical equipment needed for them. 
15.34. The difficulties which these three projects have 
come up against provide evidence of a lack of consist­
ency in the Commission's approach, inasmuch as it 
financed the supply of equipment without ensuring 
that the material and human conditions for the proper 
use of the equipment had been satisfied. What is more, 
it appears that the Commission does not always treat 
commitments entered into by certain recipient coun­
tries with the requisite degree of caution. In many cases 
a careful examination of the countries' budgetary situa­
tion would doubtless be enough to anticipate future 
failures to meet obligations. 
Role of technical assistance in the execution of projects 
15.35. In the case of several of the projects examined 
by the Court, the tasks entrusted to technical assistance 
had not been carried out very satisfactorily. For exam­
ple, the siting of the staff houses, offices and official 
buildings for the Zaire-Nile watershed development 
scheme in Rwanda was rather irrational: the fact that 
they were scattered over a very wide area increased the 
cost of the water and electricity supply. 
15.36. During the first stage of the Koinadugu inte­
grated rural development project in Sierra Leone, the 
technical assistance was not very effective. Irrigation 
channels which had been dug too deep, for example, 
made it difficult to regulate the water level in the pad-
dyfields. In spite of the inadequacy of the services it 
had provided, the same consultancy firm was awarded 
the technical assistance contract for the second stage of 
the project. 
Conclusions 
15.37. The failings noted by the Court in several of 
the 51 projects examined in depth in 1984 have already 
been commented Upon by the Court in previous finan­
cial years. These observations concern: 
(a) the quality of the studies; 
(b) the planning of some agro-industrial complexes; 
(c) the role of technical assistance; 
16. 12. 85 Official Journal of the European Communities 113 
(d) the maintenance of the finished projects; 
(e) the operation of the management bodies. 
15.38. The fact that these observations recur time and 
again proves that the Commission has not drawn all 
the conclusions from them as far as its methods of 
granting and managing development aid are con­
cerned. In this respect, the Court can only regret once 
again the lack of any instrument for the systematic cen­
tralization and exploitation of the lessons learnt from 
the implementation of projects of the same type 
financed by the EDF. An instrument of this kind would 
make it easier to profit from the lessons of experience 
and thus to avoid repeating past mistakes. 
Price-variation clauses 
15.39. The Commission approved the financing of 
certain contracts, whose conditions in respect of price 
variations may result in contractors being paid sums 
greater than the extra costs which they have actually 
incurred. Such unwarranted profits occur when the 
price adjustment calculations are based only on the 
price indices in the recipient country, rather than, as is 
normally the case, also on the European indices for the 
part of the contract that is payable in European curren­
cies. 
15.40. By way of example, a contract valued at 
4,6 Mio ECU was awarded in April 1984 for works to 
be carried out in Guinea-Bissau. The contract, which 
was expressed in Guinean pesos, provided that 91,5% 
of the value of the contract and of the sums intended to 
compensate for price fluctuations would be paid in 
French francs at a fixed rate of exchange, established 
before the 50% devaluation of the peso in January 
1984. Whilst for the contractor the cost in French francs 
of the materials and fuel will not be affected by the 
devaluation of the peso, the price-variation clauses 
based on the price indices in force in Bissau will have 
the effect of virtually doubling the payments made to 
him in French francs. 
Financing procedures and special loans 
15.41. A project to set up two beef-cattle ranches at 
Bogia and Rigo in Papua New Guinea received Com­
munity aid in the form of a 0,5 Mio ECU grant and a 
loan of 1,3 Mio ECU, at an interest rate of 1%, repay­able in 40 years, with a 10 year grace period. In accord­
ance with the details of the financing agreement, the 
recipient country then on-lent part of the proceeds of 
the loan, which it had itself contracted, to the farm in 
Bogia. This operation was carried out on the following 
terms: an initial tranche of 140 000 ECU was lent at an 
interest rate of 9% whilst a second tranche of 90 000 
ECU was lent at 7,5%, the two tranches together being 
repayable in 12 years, including the four years' grace 
period. 
15.42. These loan terms, which are very close to those 
imposed by commercial credit institutions, seriously 
jeopardize the Bogia ranch's chances of achieving trad­
ing equilibrium throughout the whole repayment 
period for the loan. In fact, the ranch's current operat­
ing expenditure, not including the cost of technical 
assistance, is probably in the region of 40 000 ECU, 
leaving only 35 000 ECU, taking into account the 
development of its revenue, for investment and the 
annual debt servicing, even though the latter will 
amount to 43 000 ECU in 1987 and 65 000 ECU in 
1992. If cash flow forecasts had been made when the 
financing proposal was being drafted, the unrealistic 
nature of the financing plan proposed would have been 
apparent. 
Stabilization of export earnings (Stabex) 
Analysis of the trend of exports and production 
(Article 39 (3) of the Second Lome Convention) 
15.43. Article 39 (3) states that 'should examination of 
the trend of the requesting ACP State's exports to all 
destinations and of the production of the product in 
question and of demand in the Community reveal sig­
nificant changes, consultations shall take place 
between the Commission and the requesting State to 
determine whether those changes are such as to affect 
the amount of the transfer, and if so to what extent'. 
The example of Western Samoa for the 1982 year of 
application (cocoa beans — transfer of 0,6 Mio ECU) 
raises some questions regarding the criteria used by the 
Commission to implement these provisions. It appears, 
in fact, that during 1982 only 30,6% of the marketed 
production of cocoa beans was exported, as compared 
with 100% during the previous seven years. It might 
therefore have been expected that the right to a transfer 
would be reduced in the same proportion, but in fact 
the Commission applied a reduction of only 62,1%, on 
the assumption that it had not been possible, for the 
first time in seven years, to market the total amount of 
production for December 1982. 
114 Official Journal of the European Communities 16. 12. 85 
Accuracy of the statistics 
15.44. Export statistics supplied by some ACP States 
are, in some cases, lacking in accuracy. For example, as 
regards: 
(a) Western Samoa: 1981 year of application (cocoa 
beans — transfer of 1,2 Mio ECU). 
The data supplied by the recipient State reveal that 
for seven consecutive years (1975-81) exports to all 
destinations exceeded the amount marketed by a 
total of 596 tonnes. This surplus represents 6,6% of 
production. During initial consultations, prior to 
fixing the amount of the reduction to be applied to 
the transfer (amendment of trade flows and reduc­
tion of the proportion of total production 
exported), the Commission referred to this discrep­
ancy as an abuse of statistics but did not take any 
steps to rectify the situation; 
(b) Sierra Leone: no transfer. 
The unreliability of the statistics may be illustrated 
by the fact that, for the 1983 year of application, 
five different sets of statistics for coffee exports 
were forwarded to the Commission by this country. 
Over-compensation for lost export earnings 
15.45. In some of the c#ses examined by the Court, 
shortfalls in export earnings were made good by the 
Commission by amounts which, when added to the 
actual export earnings for the year, provided the reci­
pient State with total earnings in excess of those for the 
reference period. This practice, which it is hard to jus­
tify, is illustrated by the following two examples: 
(a) Papua New Guinea: 1982 year of application (cof­
fee — transfer of 16,3 Mio ECU). 
In respect of coffee, a transfer of 16,3 Mio ECU, 
added to the total export earnings for the year of 
107,9 Mio ECU, provided Papua New Guinea with 
earnings of 124,2 Mio ECU, whereas the average 
total export earnings for the reference period 
amounted to only 118,3 Mio ECU. Export earnings 
were thus overcompensated for by 5,9 Mio ECU; 
(b) Sierra Leone: 1982 year of application (cocoa 
beans — transfer of 2,4 Mio ECU). 
In respect of cocoa beans, Sierra Leone received a 
transfer of 2,4 Mio ECU, which, added to the 
14,9 Mio ECU of export earnings for the year, 
resulted in total earnings of 17,3 Mio ECU, wher­
eas the average of total export earnings for the 
reference period amounted to only 16,9 Mio ECU. 
In this case, the over-compensation amounted to 
0,4 Mio ECU. Utilization of funds transferred (Article 41 (2) and (3) of 
the Second Lome Convention) 
15.46. Requests for aid generally contain some indi­
cation of the probable use to which the transfer will be 
put, as required by Article 41 (2), but such indications 
are often couched in general terms. \ 
15.47. All the same, the ACP States rarely inform the 
Commission within the period stipulated in para­
graph 3 of the same article, which states that 'within the 
12 months following the signing of the transfer agree­
ment the recipient ACP State shall inform the Commis­
sion of the use to which the funds transferred have 
been put'. 
15.48. This observation can be illustrated by two spe­
cific cases: 
(a) Vanuatu: 1981 and 1982 years of application. 
No report was sent to the Commission and a Court 
audit team was able to obtain information on the 
utilization of the funds received only from an 
on-the-spot visit in July 1984. 
(b) Papua New Guinea: 1981 and 1982 years of appli­
cation. 
The equivalent value of the transfers was initially 
entered as revenue in the 1983 and 1984 budgets of 
this State, and it was only after a Court audit visit, 
also in July 1984, that the government of Papua 
New Guinea forwarded a list of projects which had 
supposedly benefited from this source of finance. 
Projects which can be carried out rapidly 
15.49. By a decision of the ACP-EEC Committee of 
Ambassadors dated 5 August 1982, an additional con­
tribution of 40 Mio ECU was distributed amongst var­
ious ACP States in order to finance projects which can 
be carried out rapidly. The process of singling out and 
implementing projects of this type has not been as 
rapid as it might have been. On 31 December 1984, in 
fact, commitments amounted to 35,1 Mio ECU, that is, 
88% of the total, but payments were only 11,2 Mio 
ECU, or 28% of the total sum made available. 
Regional cooperation 
15.50. The allocation for regional cooperation under 
the fourth EDF is 339 Mio ECU and that under the 
fifth EDF 631,5 Mio ECU. The projects financed 
include infrastructure investments, particularly in the 
16. 12. 85 Official Journal of the European Communities 115 
field of transport and communications, which are of 
benefit to a limited number of ACP States, but also 
operations of more general interest, such as sectoral 
studies, trade promotion activities and subsidies to 
joint bodies, such as the Centre for Industrial Develop­
ment and the Technical Centre for Agricultural and 
Rural Cooperation. 
15.51. In the case of regional investment projects, the 
administrative procedures followed are very similar to 
those applied to non-regional projects of this type. In 
contrast, the procedures applied to operations of more 
general interest that are managed in Brussels are not 
clearly established. In two thirds of the 70 regional pro­
jects examined by the Court, no financing request was 
included in the files of the finance department of the Directorate General for Development Aid and the 
Commission committed the appropriations in accord­
ance with accelerated procedures which were not fol­
lowed by financing agreements. It appears that in some 
cases the Commission negotiates and signs contracts 
on the basis of a simple proposal from the ACP Secre­
tariat and no longer goes on to submit the results of its 
negotiations for assessment by the recipient ACP 
States. Nor does it forward any information on the sub­
sequent progress of the project and six contracts it 
awarded did not require the submission of supporting 
documents. Furthermore, some of the contracts offer 
particularly generous terms, for example a monthly 
remuneration of 9 500 ECU, plus reimbursement of 
expenses in the Caribbean region and a daily allow­
ance of 170 ECU in Europe. 
(') OJ C 344, 31. 12. 1982, p. 119, para. 15.11. 
(2) OJC357,31. 12. 1983, p. 134, para. 15.15. 
(3) OJ C 348, 31. 12. 1984, p. 123, para. 15.14. 

16. 12.85 Official Journal of the European Communities 117 
ANNEX I 
Allocation of responsibilities among Members of the Court of Auditors at 29 November 1985 
Secretariat, personnel and administation of the Court, external relations Marcel MART, 
President 
Audit Group I 
European Agricultural Guidance and Guarantee Fund, Guarantee Section Michael N. MURPHY 
Own resources Keld BRIXTOFTE 
Audit Group II 
European Social Fund 
European Agricultural Guidance and Guarantee Fund, Guidance Section (operations 
other than regional measures) 
Fisheries Paul GAUDY 
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 
118 Official Journal of the European Communities 16.12.85 
Audit Group III 
General audit matters Marcel MART 
Loans and borrowings Lothar HAASE 
European Coal and Steel Community 
General accounts 
Accounting principles 
Staff and operational expenditure of institutions Stergios VALLAS 
Research and investment, energy and industry expenditure Charles J. CAREY 
External bodies 
16. 12.85 Official Journal of the European Communities 119 
ANNEX II 
Reports and opinions of the Court of Auditors 
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 institu­
tions. The reports and opinions adopted by the Court in the 
five-year period ending 29 November 1985 are listed below. 
Date of 
adoption Publication Title Date of 
adoption Publication 
Opinion on the proposal for a Council Regulation compensating Greece 9 December 1980 OJC 30, 
for its contribution to the cost of the financial mechanism and the supple- 11. 2. 1981 
mentary measures for the United Kingdom. 
Opinion on the draft financial regulation applicable to the fifth European 
Development Fund. 
Opinion on the proposal for a Council Regulation introducing a tax on 
catches of salmon in the Baltic Sea by Community vessels. 
Special report concerning publishing, printing and reproduction practices 
of the institutions of the European Communities. 9 December 1980 
18 December 1980 
8 January 1981 OJ C 45, 
4.3.1981 
OJ C 358, 
31. 12.1980 
OJC 150, 
19.6. 1981 
Observations on the proposal for a Council Regulation relating to the fi- 19 February 1981 Not published 
nancing by the EAGGF, Guarantee Section of certain intervention mea­
sures, particularly those involving the buying-in, storage and sale of agricul­
tural products by intervention agencies. 
Study on the European Centre for the Development of Vocational Training 
(Berlin). 
Study on the development of the European Foundation for the Improve­
ment of Living and Working Conditions (Dublin). 
Report on the accounts of the European Schools for 1979. 
Report on the 1980 accounts of the Euratom Supply Agency. 
Report on the 1980 JET financial statements. 5 March 1981 
5 March 1981 
9 April 1981 
30 April 1981 
30 April 1981 Not published 
Not published 
Not published 
Not published 
Not published 
Opinion on the proposal for a Financial Regulation on the application of 14 May 1981 v OJC 156, 
the agreement in the form of an exchange of letters between the European 25. 6. 1981, 
Economic Community and the Portuguese Republic concerning the imple- p. 10. 
mentation of pre-accession aid for Portugal. 
120 Official Journal of the European Communities 16.12.85 
Title Date of 
adoption Publication 
Observations on the management of the ECSC for 1979. 21 May 1981 Not published 
Opinion on a proposal for a Council Regulation amending the Financial 21 May 1981 OJC 232, 
Regulation of 21 December 1977 applicable to the general budget of the 11.9. 1981 
European Communities. 
Observations on the farm accountancy network (FADN). 18 June 1981 Available from 
the Court of 
Auditors. 
Special report on the securities, deposits and guarantees furnished in res- 18 June 1981 OJC 249, 
pect of operations that give rise to expenditure from the EAGGF, Guaran- 29. 9.1981 
tee Section. 
Report on the financial statements of the European Coal and Steel Com- 26 June 1981 Not published 
munity for the financial year 1980. 
Report on the 1980 accounts of the European Foundation for the Improve- 26 June 1981 Not published 
ment of Living and Working Conditions (Dublin). 
Report on the 1980 accounts of the European Centre for the Development 26 June 1981 Not published 
of Vocational Training (Berlin). 
Opinion on the proposal for a Council Regulation compensating Greece 10 September 1981 OJ C 282, 
for its contribution to the cost of the financial mechanism and the supple- 5. 11.1981, 
mentary measures for the United Kingdom. p. 15 
Fourth annual report, concerning the financial year 1980. 26 November 1981 OJ C 344, 
31.12.1981 
Study of the financial systems of the European Communities (1981). 26 November 1981 OJ C 342, 
31.12.1981 
Special report on expatriation and foreign residence allowances. 4 February 1982 Available from the Court 
of Auditors 
Opinion on a proposal for a Council Regulation amending the Financial 18 Feburary 1982 OJC 122, 
Regulation of 21 December 1977 applicable to the general budget of the 13. 5.1982 
European Communities. 
Special report on sales of reduced-price butter within the Community. 18 March 1982 OJ C 143, 
7. 6. 1982 
Report on the 1981 accounts of the Euratom Supply Agency. 29 April 1982 Not published 
Report on the 1981 JET financial statements. 29 April 1982 Not published 
Report on the financial statements of the European Coal and Steel Com- 27 May 1982 Not published 
munity for the financial year 1981 (Art. 78 f (5) ECSC). 
Special report (observations) on the members' cash office of the European 6 July 1982 OJ C 202, 
Parliament. 5. 8.1982 
16. 12. 85 Official Journal of the European Communities 121 
Title Date of 
adoption Publication 
Special report on loans and borrowings. 19 July 1982 OJC319, 
6. 12.1982 
Special report on job creation or maintenance in the granting of aid to 30 July 1982 OJC345, 
regional investments. 31. 12. 1982 
Report on the accounts of the European Schools for 1980. 30 July 1982 Not published 
Special report on the Community inward processing system. 16 September 1982 OJ C 88, 
30.3.1983 
Opinion 1/82 on four proposals for Council Regulations amending certain 16 September 1982 OJ C 324, 
provisions concerning the European Centre for the Development of Voca- 10.12.1982 
tional Training and the European Foundation for the Improvement of Liv­
ing and Working Conditions. 
Special report on the 'Como' frauds. 
Special report on the financial management of multiannual programmes of 
the Joint Research Centre. 
Report on the 1981 accounts of the European Foundation for the Improve­
ment of Living and Working Conditions (Dublin). 
Report on the 1981 accounts of the European Centre for the Development 
of Vocational Training (Berlin). 
Report (Annex to the annual report ECSC 1980) on loans — borrowings — 
interest rebates. 
Special report (observations) concerning clearance of the accounts of the 
EAGGF Guarantee Section — the structure and operation of the system. 16 September 1982 
7 October 1982 
7 October 1982 
7 October 1982 
12 October 1982 
12 October 1982 Not published 
Available from the Court 
of Auditors 
Not published 
Not published 
Not published 
OJC313, 
29. 11.1982 
Opinion 2/82 on a proposal for a Council Regulation amending Regulation 16 November 1982 OJ C 133, 
(EEC, Euratom, ECSC) No 2891/77 implementing the Decision of 21 April 20. 5.1983 
1970 on the replacement of financial contributions from Member States by 
the Communities' own resources. 
Opinion 3/82 on a proposal for a Council Regulation amending and ex- 16 November 1982 OJC 151, 
tending the terms of validity of Regulation (EEC, Euratom, ECSC) 9. 6.1983 
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. 
Report (Annex to the annual report ECSC 1981) on loans for housing. 25 November 1982 Not published 
Fifth annual report, concerning the financial year 1981. 25 November 1982 OJ C 344, 
31.12.1982 
Opinion 4/82 on a draft Commission Regulation concerning financial 9 December 1982 Not published 
provisions applicable to the European Agency for Cooperation and provi­
sions relating to the Agency's relations with the Commission. 
122 Official Journal of the European Communities 16. 12.85 
Title Date of 
adoption Publication 
Opinion 5/82 on a proposal for a Council Regulation amending Regulation 16 December 1982 OJ C 160, 
(EEC) No 2744/80 establishing supplementary measures in favour of the 18. 6.1983 
United Kingdom. 
Opinion 6/82 on a proposal for a Council Regulation instituting a special 16 December 1982 
energy development programme. OJ C 199, 
26. 7. 1983, 
p. 7 
Opinion 7/82 on a proposal for a Council Regulation amending Regulation 2 February 1983 
(EEC) No 2779/78 on the procedure for applying the ECU to legal acts 
adopted in the customs sphere. OJ C 199, 
26. 7.1983, 
p. 8 
Special report 1/83 on the expenditure of the European Parliament in con- 10 March 1983 
nection with inter-parliamentary conferences. Available from 
the Court of 
Auditors 
Special report 2/83 on the application of Regulations (EEC) No 1078/77 14 April 1983 
and (EEC) No 1041/78 introducing a system of premiums for the non-mar­
keting of milk and milk products and for the conversion of dairy herds. OJC278, 
17. 10.1983 
Report on the accounts of the European Schools for 1981. 
Report on the 1982 JET financial statements. 
Special report 3/83 on the restaurants, canteens, cafeterias and staff shops. 
Report on the 1982 accounts of the Euratom Supply Agency. 
Special report 4/83 on the budgetary management of the programme for 
supplying agricultural products and foodstuffs to Poland. 
Special report 5/83 on aid to skimmed milk processed into casein and cas­
emates. 
Report on the financial statements of the European Coal and Steel Com­
munity for the financial year 1982 (Art. 78 f (5) ECSC). 
Report on the 1982 accounts of the European Foundation for the Improve­
ment of Living and Working Conditions (Dublin). 
Report on the 1982 accounts of the European Centre for the Development 
of Vocational Training (Berlin). 28 April 1983 
28 April 1983 
18 May 1983 
26 May 1983 
9 June 1983 
9 June 1983 
22 June 1983 
14 July 1983 
14 July 1983 Not published 
Not published 
Not published 
Not published 
OJ C 278, 
17. 10. 1983 
OJC41, 
15.2.1984 
Not published 
Not published 
Not published 
Opinion 1/83 on a draft Commission Regulation (EEC) relating to the op- 21 July 1983 
eration of the system of advances for expenditure financed under the Guar­
antee Section of the European Agricultural Guidance and Guarantee Fund 
(EAGGF). Not published 
Report in response to the conclusions of the European Council of 18 June 6 October 1983 OJ C 287, 
1983. 24.10.1983 
16. 12. 85 Official Journal of the European Communities 123 
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 Annual Report ECSC 1982) on the accounting and 7 December 1983 Not published 
financial management 
Special report 6/83 on the European Social Fund Computer System. 15 December 1983 Available from the Court 
of Auditors 
Opinion 2/83 on the proposal for a Council Regulation on interest subsi- 12 January 1984 OJC 55, 
dies for certain loans granted under the European Monetary System. 28. 2. 1984 
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 OJC 163, 
Regulation amending Regulation (EEC, Euratom, ECSC) No 2891/77 im- 23. 6.1984 
plementing the Decision of 21 April 1970 on the replacement of financial 
contributions from Member States by the Communities' own resources. 
Special report 1/84 on the coordination of Community aid to third coun­
tries. 
Opinion 3/83 on the proposal for a Council Decision empowering the 
Commission to help finance innovation within the Community. 
Special report 2/84 on the management of Community development aid 
funds by the European Investment Bank. 
Opinion 1/84 on the proposal for a Council Regulation introducing mea­
sures to cover budgetary requirements in 1984 given the exhaustion of own 
resources. 
Report on the 1983 accounts of the Euratom Supply Agency. 
Report on the 1983 JET financial statements. 
Report on the financial statements of the European Coal and Steel Com­
munity for the financial year 1983. 
Special report 3/84 on the operation of the common organization of the 
market in sheepmeat. 
Special report 4/84 on the implementation of Directive 77/435 of 27 June 
1977 on scrutiny by the Member states of transactions forming part of the 
system of financing by the EAGGF (Guarantee Section). ' 
Report on the 1983 accounts of the European Centre for the Development 
of Vocational Training (Berlin). 14 March 1984 
5 April 1984 
10 May 1984 
7 June 1984 
19 June 1984 
19 June 1984 
26 June 1984 
19 July 1984 
11 October 1984 
24 October 1984 OJ C 224, 
25. 8.1984 
OJC 163, 
23. 6. 1984 
Available from the Court 
of Auditors 
OJ C 228, 
30. 8. 1984 
Not published 
Not published 
Not published 
OJ C 234 
4. 9.1984 
OJ C 336, 
17.12.1984 
Not published 
Report on the 1983 accounts of the European Foundation for the Improve- 24 October 1984 Not published 
ment of Living and Working Conditions (Dublin). 
124 Official Journal of the European Communities 16.12.85 
Title Date of 
adoption Publication 
Seventh annual report concerning the financial year 1983. 22 November 1984 OJ C 348, 
31.12.1984 
Report (Annex to the Annual Report ECSC 1983) on the accounting and 13 December 1984 Not published 
financial management. 
Special report 5/84 on the system of aid for liquid skimmed milk used as 13 December 1984 OJ C 91, 
animal feed. 12.4.1985 
Special report 1/85 on the common organization of the market in olive oil. 25 April 1985 OJ C 134, 
3. 6.1985 
Opinion 1/85 on a proposal for a Council Regulation (EEC) on the appli- 2 May 1985 OJ C 138, 
cation of the agreement in the form of an exchange of letters between the 6.6.1985 
EEC and the Portuguese Republic concerning the implementation of spe­
cific financial aid for improving agricultural and fisheries structures in Por­
tugal. 
Opinion 2/85 on a proposal for a Council Regulation (EEC, Euratom, 
ECSC) extending the terms of validity of Council Regulation (EEC, Eura­
tom, ECSC) No 2892/77 implementing in respect of own resources accru­
ing from value added tax the Decision of 21 April 1970 on the replacement 
of financial contributions from Member States by the Communities' own 
resources. 
Report on the financial statements of the European Coal and Steel Com- 26 June 1985 Not published 
munity for the financial year 1984. 
Special report 2/85 on the system for the payment of refunds on agricultur- 26 June 1985 OJ C 215, 
al exports (Audit of the export of agricultural products). 26. 8.1985 and 
OJ C 238, 
19.9.1985 
Special report 3/85 on certain aspects of technical cooperation financed by 
Community development aid. 
Report on the accounts of the European Schools for 1983. 
Report on the 1984 accounts of the Euratom Supply Agency. 
Report on the 1984 JET financial statements. 
Report on the 1984 accounts of the European Centre for the Development 
of Vocational Training (Berlin). 
Report on the 1984 accounts of the European Foundation for the Improve­
ment of Living and Working Conditions (Dublin). 
Report (Annex to the Annual Report ECSC 1984) on the accounting and 
financial management of the European Coal and Steel Community. 12 July 1985 
17 July 1985 
17 July 1985 
17 July 1985 
17 October 1985 
17 October 1985 
19 November 1985 Available from the Court 
of Auditors 
Not published 
Not published 
Not published 
Not published 
Not published 
Not published 26 June 1985 OJC261, 
12. 10.1985 
Eighth annual report concerning the financial year 1984. 19 November 1985 This edition 
16. 12.85 Official Journal of the European Communities 125 
ANNEX III 
Financial information relating 
to the general budget of the European Communities 
and 
to the European Development Funds 
(1984) 
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 
For the general budget the financial data are given in the monetary unit in force during the financial years cov­
ered, i.e. for 1980 in European units of account (EUA) and from 1981 in ECU (see § 1 (1.5) for details). 
For the European Development Funds all financial data are given in ECU. 
The financial data are presented in millions (Mio) of monetary units, in Mio EUA or Mio ECU respectively, 
rounded to one decimal place. 
3. Change in nomenclature of the general budget from 1982 
In 1982 a new nomenclature was used for the general budget. 
The Court has therefore used the budgetary nomenclature applicable as from the financial year 1982 for the pre­
sentation of all the historical data in this annual report and has adapted the financial data of the financial years 
1980 and 1981 in accordance with this new budgetary nomenclature. 
Thus the data given in § 14 to § 19 are comparable year by year. 
(1) For the financial year 1984: revenue and expenditure account and balance-sheet of assets and liabilities relating to operations under the 1984 
budget (Doc. COM(85) 185,186, 187, 188,189). 
126 Official Journal of the European Communities 16. 12.85 
4. Abbreviations and symbols 
EC 
ECSC 
EEC 
EAEC or Euratom 
EAGGF 
GNP 
VAT 
BFR 
DKR 
DM 
DR 
FF 
IRL 
LIT 
LFR 
HFL 
UKL 
u.a. 
Mio u.a. 
EUA 
Mio EUA 
ECU 
Mio ECU 
DA 
NDA 
CA 
PA 
AFC 
AFP 
B 
DK 
D 
GR 
F 
IRL 
1 
L 
NL 
UK 
EUR 9/10 
EDF 
ACP 
OCT 
FOD 
Stabex 
Sysmin 
FR 
OJ 
S 
T 
Ch 
0,0 
o/o 
§ 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 
French franc 
Irish pound 
Italian lira 
Luxembourg franc 
Dutch guilder 
Pound sterling 
Unit of account (until 1977) 
Millions of units of account 
European unit of account (from 1978 to 1980) 
Millions of European units of account 
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 
France 
Ireland 
Italy 
Luxembourg 
The Netherlands 
United Kingdom 
Total of the 9 or 10 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 
Section referring within this annex to texts, diagrams and tables 
16. 12.85 Official Journal of the European Communities 127 
Contents 
Part I: General budget of the European Communities 
Page 
§ 1. Background information on the general budget 128 
General budget for the year 1984 and implementation of the budget during 1984 
§ 2. General budget 1984: estimated revenue 132 
§ 3. General budget 1984: estimated expenditure — appropriations for payment 133 
§ 4. General budget 1984: appropriations for commitment 134 
§ 5. Estimated and actual revenue in 1984 135 
§ 6. Appropriations for commitment available in 1984 and their utilization 136 
§ 7. Appropriations for payment available in 1984 and their utilization 137 
§ 8. Actual own resources in 1984 138 
§ 9. Rate of utilization of appropriations available in 1984 139 
§10. The consolidated revenue and expenditure account and the balance of the financial year 1984 140 
§11. Payments made in 1984 — by sector and by recipient Member State 141 
§12. EAGGF-Guarantee: payments made in 1984 — by market and by recipient Member State 142 
§13. The structural Funds: commitments entered into and payments made in 1984 — by recipient Member State 143 
Historical data relating to the implementation of the general budget (1980-1984) 
§14. Evolution and utilization of the appropriations for payment for the period 1980-1984 — by sector 144 
§15. Utilization rates of the appropriations for payment from 1980 to 1984 — by sector 145 
§16. Annual payments during the period 1980-1984 — by sector 146 
§17. Evolution of the ratio of'annual payments by sector'to'total of annual budgetary payments'(1980-1984) .... 147 
§18 Annual payments to the Member States (1980-1984) 148 
§19. Actual own resources — by Member State (1980-1984) 149 
Part II: The European Development Funds (EDF) (position at 31 December 1984) 
§20. General information on the EDF 150 
§21. The 4th and 5th EDF: allocations, financing, distribution of aid, utilization rates 151 
§22. The 4th EDF: aid by type and by recipient country 152 
§23. The 4th EDF: financial implementation of aid by recipient country 153 
§24. The 5th EDF: aid by type and by recipient country 154 
§25. The 5th EDF: financial implementation of aid by recipient country 155 
§26. The 4th and 5th EDF: utilization of aid by economic sector 156 
§27. The five EDF: evolution of annual payments (1960-1984) 157 
128 Official Journal of the European Communities 16. 12.85 
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 Luxem­
bourg (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 (*) (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 Brus­
sels (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) Parlia­
ment; (II) Council (annexed: Economic and Social Committee); (III) Commission; (IV) Court of Justice; (V) Court of Audi­
tors. 
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 + 0,0885 UKL + 1,15 FF + 109 LIT 
+ 0,286 HFL + 3,66 BFR + 0,14 LFR + 0,217 DKR + 0,00759 IRL. 
As from 1981 the budget has been established and implemented in European currency units (ECU). Like the EUA, the ECU 
is a unit based on a basket of national currencies. For 1981, 1982 and 1983 the value and composition of the ECU basket is 
the same as that of the EUA (the Greek currency, the drachma, was not included in the ECU basket). For 1984 1 ECU = 
0.719DM + 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 DR. 
The rates of conversion at 31 December 1984 between the ECU and the national currencies were as follows: 1 ECU = 
2,23176 DM = 0,609846 UKL = 6,83069 FF = 1371,10 LIT = 2,51853 HFL = 44,7168 BFR/LFR = 7,98805 DKR = 
0,715023 IRL = 91,0428 DR. 
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<Vo of a uniform EC assessment basis (1°); there are also other 
smaller sources of revenue. 
As from 1 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 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. In 1981, 1982, 1983 and 1984 all the Member States paid VAT with the exception of Greece which paid a 
financial contribution based on the 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). 
(*) 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). 
(ioj See Sixth Council Directive of 17 May 1977, common system of VAT: uniform assessment basis (OJ L 145, 13. 6. 1977). 
16. 12.85 Official Journal of the European Communities 129 
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 commit­
ment 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 current financial year 
and/or preceding financial years. 
b) Non-differentiated appropriations (NDA) cover for annual activities both commitments and payments for the same finan­
cial year. 
Thus it is possible to establish the following two totals for the same financial year: 
— the total of appropriations for commitment (AFC) (1) = non-differentiated appropriations (NDA) 
-(-commitment appropriations (CA) (1); 
— the total of appropriations for payment (AFP) (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 for commitment: 
Amounts allocated 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) 
yearl: AFC: 150 
year3: AFC: 215 Commitment 
appropriations (CA) 
of prior years 
Summary of all types of appropriations: 
O) 
CQ 
year 1 
year 2 
year 3 ° o 
•*•& 
CO < 
"°Z 
2 <D 
§ ° it II 
(1) 
100 
120 
150 Differentiated 
appropriations 
(DA) 
«- c 
I 2 ~ 
8 9° 
(2) 
50 
60 
65 E 2-
(3) 
27 
38 
75 o 
< 
c § 
° E 
Si 
2 o a" 
t° 
(D + (2) 
150 
180 
215 £< 
2 » 
Q.O-
So 
(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 allo­
cated; the CA are financed over several years. 
j 
I 
100 10 Amounts financed in: 
year 2 year 3 
1 
I T 
1 
20 
I 
30 • 18 
4 
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) m Payment appropriations 
(PA) 
Non-differentiated 
appropriations (NDA) 
(1) Note: It is important to note the differences between appropriations for commitment and commitment appropriations and between appropriations for pay-, 
ment and payment appropriations. The two terms commitment appropriations and payment appropriations are used exclusively in the context of differen­
tiated appropriations. 
130 Official Journal of the European Communities 16.12.85 
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 Sep­
tember, 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 modifica­
tions to the draft budget for compulsory expenditure (1) and make amendments for non-compulsory expenditure; these mod­
ifications 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 evolu­
tion 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) 4-
commitment appropriations remaining from the preceding financial year (1°) + non-automatic carry-overs (11) from the 
preceding financial year (uncommitted NDA) + released commitment appropriations from preceding financial years. 
— 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-util­
ized 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 appropria­
tions 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). 
— Carry-overs of appropriations to the next financial year: Appropriations not paid may be carried over to the next finan­
cial year in the form of automatic (12) or non-automatic (11) carry-overs. 
— Cancellation of appropriations: The balance is cancelled. 
16. 12.85 Official Journal of the European Communities 131 
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 finan­
cial 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 Coun­
cil 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 Com­
munities (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. 
(1°) Articles 6 (2) (a) and 88 (3) of the Financial Regulation. 
(n) 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. 
(n) 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. 
132 Official Journal of the European Communities 16. 12.85 
§ 2. General budget 1984: estimated revenue 
(after amending and supplementary budget No 1: see also § 5) 
Expected balance 1984: 266,0 Mio ECU (1,0 %) 
Balance of the financial year 1983: 307,1 Mio ECU (1,1 %) 
Repayable advances: 1 003,4 Mio ECU (3,7 %) 
Other revenue: 222,8 Mio ECU (0,8 %) 
VAT and financial 
contributions: 
14 393,9 Mio ECU (52,8 o/o) 
(including balances of VAT 
and adjustments of financial 
contributions before 1984) 
Sugar and isoglucose levies: 
1 225,3 Mio ECU (4,5 o/o) -* 
Agricultural levies: 
1 946,6 Mio ECU (7,2 o/o) 
t 
<u / 
I 
! ) 
I ' (ey: 
I 
[DZ3 Total own resources (by Member State) 
Customs duties 
Agricultural levies 
Sugar and isoglucose levies 
VAT/financial contributions 
Other revenue/Repayable advances/ 
Balance of the financial year 1983/Expected balance 1984 Customs duties: 
7 883,5 Mio ECU 
16. 12.85 Official Journal of the European Communities 133 
§ 3. General budget 1984: estimated expenditure — appropriations for payment 
(after amending and supplementary budget No 1: see also § 7, column 4) 
10. Provisional appropriations and contingency reserve: 1 690,8 Mio ECU (6,2 %) (incl. NDA: 1 631,0 Mio ECU) 
9. Cooperation with developing countries: 893,1 Mio ECU (3,3 %) (incl. NDA. 582,6 Mio ECU) 
8. Repayments to Member States: 1 150,2 Mio ECU (4,2 %) 
7. Research, energy, etc.: 698,2 Mio ECU (2,6 o/o) (incl. NDA: 66,1 Mio ECU) 
6. Social policy: 1 369,4 Mio ECU (5,0 o/o) (incl. NDA: 142,7 Mio ECU) 
5. Regional policy: 1 454,8 Mio ECU (5,4 o/o) 
(incl. NDA: 12,7 Mio ECU) 
4. Fisheries: 112,4 Mio ECU (0,4 o/o) (incl. NDA: 57,0 Mio ECU) 
3. Agricultural structures: 660,1 Mio ECU (2,4 o/0) (incl. NDA: 60,0 Mio ECU) 
\2A1. Clearanceof previous years'accounts: -25,0 Mio ECU (-0,1 o/o) 
I 2.10. Agri-monetary measures: 395.0 Mio ECU (1,4 o/o) 
2.9. Other markets: 547,0 Mio ECU (2,0 o/o) 
2.8. Meat, eggs, poultry: 2 658,0 Mio ECU (9,8 o/o) 
2.7. Milk products: 5 761,0 Mio ECU (21,1 o/o) 
>- 2.6. Tobacco: 795,0 Mio ECU (2,9 o/o) 
2.5. Wine: 767,0 Mio ECU (2,8 o/o) 
2.4. Fruit and vegetables: 1 243,0 Mio ECU (4,6 o/o) 
2.3. Fats and protein plants: 1 790,0 Mio ECU (6,6 %) 
2.2. Sugar: 1 572,0 Mio ECU (5,8 o/o) 
2.1. Cereals and rice: 2 480,0 Mio ECU (9,1 o/o) 
Key: 
Non-differentiated appropriations (NDA) 
Sectors with differentiated appropriations: 
payment appropriations 
Appropriations available to the Commission 
Appropriations available to the other 
institutions 
16. 12.85 Official Journal of the European Communities 134 
§ 4. General budget 1984: appropriations for commitment 
(after amending and supplementary budget No 1: see also § 6, column 4) 
10. Provisional appropriations and contingency reserve: 1 799,1 Mio ECU (6,1 %) (incl. NDA: 1 631,0 Mio ECU) 
9. Cooperation with developing countries: 1 018,8 Mio ECU (3,5 %) (incl. NDA: 582,6 Mio ECU) 
-»- 8. Repayments to Member States: 1 150,2 Mio ECU (3,9 %) 
7. Research, energy, etc.: 980,9 Mio ECU (3,4 o/o) (incl. NDA: 66,1 Mio ECU) 
6. Social policy: 1 999,9 Mio ECU (6,8 o/o) (incl. NDA: 142,7 Mio ECU) 
5. Regional policy: 2 185,7 Mio ECU (7,5 o/0) 
(incl. NDA: 12,7 Mio ECU) 
4. Fisheries: 159,1 Mio ECU (0,5 o/o) (incl. NDA: 57,0 Mio ECU) 
3. Agricultural structures: 751,1 Mio ECU (2,6 %) 
(incl. NDA: 60,0 Mio ECU) 
Total 
appropriations 
lor 
commitment: 
29 264,4 
Mio ECU 0 
1) Sum of non-differentiated appropriations 
(22 921,9 Mio ECU) and commitment appro­
priations (6 342,5 Mio ECU) 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 1984 as the commitment appropria­
tions also include amounts to be financed by budgetary revenue 
of subsequent years (see § 1 (1.7)). 
EAGGF-Guarantee: 17 983,0 Mio ECU (61,5 o/o) 
(for the breakdown of these appropriations 
by market, see § 3) 
1. Administration (all institutions): 1 236,6 Mio ECU (4,2 %) 
(for the breakdown of these appropriations by institution, see § 3) 
Key: 
Non-differentiated appropriations (NDA) 
Sectors with differentiated appropriations: 
commitment appropriations 
135 Official Journal of the European Communities 16. 12.85 
§ 5. Estimated and actual revenue in 1984 
A. Estimated and actual revenue in 1984: 
Type of revenue 
1. Own resources: 
— Customs duties 
— Agricultural levies 
— Sugar and isoglucose levies 
— VAT 1984 
— Financial contribution (GNP) 1984 
Greece 
— Balance of VAT and adjustments of 
financial contributions before 1984 
Total own resources 
2. Other revenue 
(ECSC contributions; Member States' con­
tributions to supplementary Euratom pro­
grammes; deductions from staff remunera­
tion; miscellaneous revenue) 
3. Repayable advances 
4. Balance of the financial year 1983 
5. Expected balance 1984 
Total revenue Estimated revenue of the 1984 budget (after amend­
ing and supplementary budget No 1) 
Mio ECU o/o 
7 883,5 28,9 
1 946,6 7,2 
1 225,3 4,5 
14 377,0 52,8 
224,2 0,8 
-207,3 -0,8 
25 449,3 93,4 
222,8 0,8 
1 003,4 3,7 
307,1 1,1 
266,0 1,0 
27 248,6 100 Actual revenue 
in 1984 
Mio ECU o/o 
7 960,8 30,6 
1 260,0 4,8 
1 176,4 4,5 
14 372,1 55,2 
222,5 0,8 
-111,8 -0,4 
24 880,0 95,5 
271,8 1,0 
593,5 2,3 
307,1 1,2 
26 052,4 100 
B. Estimated and actual own resources in 1984 by Member State: 
(Mio ECU) 
Type of resource 
Customs duties. 
— estimated 
— actual 
Agricultural levies: 
— estimated 
— actual 
Sugar and isoglucose levies: 
— estimated 
— actual 
VAT 1984 (1): 
— estimated 
— actual 
Balance of VAT and adjustments 
of financial contributions before 
1984: 
— estimated 
— actual 
Total own resources: 
— estimated 
— actual Belgium 
467,0 
470,0 
311,3 
211,0 
91,7 
83,9 
504,0 
504,4 
-31,0 
-31,0 
1343,0 
1 238,3 Den­
mark 
195,0 
197,3 
10,0 
8,0 
46,7 
38,0 
291,0 
290,8 
-1,2 
-1,2 
541,5 
532,9 FRof 
Ger­
many 
2 285,0 
2 309,7 
281,0 
158,6 
344,8 
350,2 
4 200,0 
4 203,6 
30,3 
30,3 
7141,1 
7 052,4 Greece 
96,0 
99,4 
96,1 
19,5 
21,6 
16,6 
224,2 
222,5 
-2,2 
-2,2 
435,7 
355,8 France 
1 083,0 
1 100,0 
135,0 
94,2 
419,0 
406,3 
3 327,0 
3 330,6 
-128,8 
-128,8 
4 835,2 
4 802,3 Ireland 
124,0 
126,7 
6,0 
6,9 
17,0 
16,8 
126,0 
126,0 
9,9 
9,9 
282,9 
286,3 Italy 
716,0 
750,9 
450,0 
288,5 
86,0 
84,1 
2 238,0 
2 235,0 
-10,6 
84,9 
3 479,4 
3 443,4 Luxem­
bourg 
6,5 
5,9 
0,1 
0,1 
— 
36,0 
36,0 
9,3 
9,3 
51,9 
51,3 Nether­
lands 
737,0 
740,8 
247,1 
131,8 
100,1 
76,9 
728,0 
728,2 
10,1 
10,1 
1 822,3 
1 687,8 United 
King­
dom 
2174,0 
2160,1 
410,0 
341,4 
98,4 
103,6 
2 927,0 
2 917,5 
-93,1 
-93,1 
5 516,3 
5 429,5 EUR 10 
7 883,5 
7 960,8 
1946,6 
1 260,0 
1 225,3 
1 176,4 
14 601,2 
14 594,6 
-207,3 
-111,8 
25 449,3 
24 880,0 
(1) Greece paid a financial contribution based on its GNP. 
136 Official Journal of the European Communities 16. 12.85 
§ 6. Appropriations for commitment available in 1984 and their utilization 
(Mio ECU) 
Sector 
(the Sections (S), Titles (T) and Chapters (Ch) corres­
ponding to the 1984 budgetary nomenclature are shown 
in brackets) 
(1) 
CO 
O 
C 
= 
** 
m 
Q. 
— § 
£ 
CO 
o 
E E 
O 1. Administration 
1.1. Parliament (S I) 
1.2. Council (S II) 
(of which: Economic and Social Committee) 
1.3. Commission (Sill, Part A) (4) 
1.4. Court of Justice (S IV) 
1.5. Court of Auditors (S V) 
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. Other markets (Ch 14,18,19, 25) 
2.10. Agri-monetary measures (Ch 27, 28) 
2.11. Clearance of previous years' accounts (Ch 29) 
3. Agricultural structures (T 3) 
(of which: non-differentiated appropriations) 
3.1. EAGGF-Guidance(Ch30-33) 
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 - 43,45 - 46) 
5. Regional policy (T 5) 
(of which: non-differentiated appropriations) 
5.1. Regional Fund (Ch 50,51) 
5.2. Measures in favour of the United Kingdom 
(Ch 53) 
5.3. Other measures (Ch 52, 54, 55,56) 
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 transport (Ch 77, 78) 
7.4. Other measures (Ch 71,72, 75, 79) 
8. Repayments to Member States (T 8) 
8.1. Costs incurred in collecting 
own resources (Ch 80) 
8.2. Other repayments (Ch 81 - 86) 
9. Cooperation with developing countries (T 9) 
(of which: non-differentiated appropriations) 
9.1. Food aid (Ch 92) 
9.2. Financial aid (Ch 93 - 99) 
10. Provisional appropriations and contingency reserve 
(Ch 100,101) 
(of which: non-differentiated appropriations) 
iations: 
3d 
NDA); 
propriations 
g. 2 co S" 
ail s ™ £ c E 
2? 8 £ Q.C Q.E < 
K C CO O — 
(2) 
NDA 
NDA 
NDA 
(NDA) 
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 
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 
NDA + CA 
NDA + CA 
(NDA) Evolution of appropriations 
>* 
°2 
a5 
O) 
3 
(3) 
1 229,1 
239,1 
137,1 
(24,9) 
803,5 
31,3 
18,1 
16150,0 
2 633,3 
1 386,9 
1 956,0 
1 025,3 
576,4 
727,7 
4 894,1 
2 031,9 
561,7 
356,7 
p.m. 
751,1 
(60,0) 
674,5 
76,6 
148,1 
(50,5) 
42,9 
105,2 
2185,7 
(12,7) 
2 140,0 
p.m. 
45,7 
1 999,8 
(142,6) 
1 846,0 
153,8 
846,4 
(54,0) 
62,7 
656,6 
111,6 
15,5 
1 103,5 
1 057,3 
46,2 
1 018,8 
(582,6) 
502,1 
516,7 
1944,8 
(1 649,8) ~ 
CO 
S) 
"§ 
(4) 
1 236,6 
239,1 
137,1 
(24,9) 
811,0 
31,3 
18,1 
17 983,0 
2 480,0 
1 572,0 
1 790,0 
1 243,0 
767,0 
795,0 
5 761,0 
2 658,0 
547,0 
395,0 
-25,0 
751,1 
(60,0) 
674,5 
76,6 
159,1 
(57,0) 
42,9 
116,2 
2185,7 
(12,7) 
2 140,0 
p.m. 
45,7 
1 999,9 
(142,7) 
1 846,0 
153,9 
980,9 
(66,1) 
64,7 
744,5 
135,2 
36,5 
1 150,2 
1 105,3 
44,9 
1 018,8 
(582,6) 
502,1 
516,7 
1 799,1 
(1631,0) c 
to 
^ o 
a — 
S$ 
(5) 
1 245,6 
239,1 
137,1 
(24,9) 
820,0 
31,3 
18,1 
18 358,0 
1 698,0 
1631,5 
1 968,0 
1 454,6 
1 222,6 
777,3 
5 446,7 
3 259,5 
547,8 
377,0 
-25,0 
959,8 
(51,8) 
880,8 
79,0 
154,1 
(32,2) 
17,9 
136,2 
2 513,4 
(12,7) 
2 454,0 
— 59,4 
2 458,4 
(419,0) 
2 024,7 
433,7 
2158,8 
(1 028,9) 
672,9 
812,8 
642,4 
30,7 
1 083,2 
1 038,3 
44,9 
1346,7 
(721,7) 
505,0 
841,7 
— 
(-) ^ 
*~ 
|f 
'I? E £ 
O CD 
(6) 
1 223,1 
235,4 
129,6 
(24,6) 
811,2 
29,6 
17,3 
18 330,8 
1 697,8 
1631,5 
1 967,5 
1 454,6 
1 222,6 
776,4 
5 441,7 
3 246,1 
541,9 
376,2 
-25,5 
870,5 
(51,2) 
796,3 
74,2 
96,1 
(29,9) 
15,7 
80,4 
2 440,9 
(11,5) 
2 383,2 
— 57,7 
2 275,7 
(416,2) 
1 854,3 
421,4 
1 805,7 
(1 028,2) 
660,8 
592,6 
532,1 
20,2 
1 082,5 
1 038,3 
44,2 
1 199,0 
(721,1) 
504,9 
694,1 
— 
(-) is-
Sen 
co™ 
Ifi a£ 8 « R-ro 
< 
(7) 
0,5 
— 0,5 
(0,1) 
— 
— 
— 
— 
— — 
— 
— — 
— 
— 
— 
— 
— 
— 
88,7 
(—) 
84,5 
4,2 
55,7 
(-) 
— 55,7 
71,3 
(-) 70,8 
— 0,5 
177,9 
(—) 
168,4 
9,5 
342,9 
(—) 
12,1 
210,6 
110,1 
10,1 
— 
— 
— 
147,0 
(-) — 147,0 
— (—) c 
o 
JS 
O 
(8) = 
(5)-(6) 
-(7) 
22,0 
3,7 
7,0 
(0,2) 
8,8 
1,7 
0,8 
27,2 
0,2 
0,0 
0,5 
0,0 
0,0 
0,9 
5,0 
13,4 
5,9 
0,8 
0,5 
0,6 
(0,6) 
0,0 
0,6 
2,3 
(2,3) 
2,2 
0,1 
1,2 
(1,2) 
— 
— 1,2 
4,8 
(2,8) 
2,0 
2,8 
10,2 
(0,7) 
0,0 
9,6 
0,2 
0,4 
0,7 
— 0,7 
0,7 
(0,6) 
0,1 
0,6 
— (—) 
Grand total NDA + CA 
(NDA) 
(CA) 27 377,3 
(21 034,8) 
(6 342,5) 29 264,4 
(22 921,9) 
(6 342,5) 30 278,0 
(22 953,1) 
(7 324,9) 29 324,3 
(22 894,5) 
(6 429,8) 884,0 
(0,5) 
(883,5) 69,7 
(58,1) 
(11,6) 
(') After amending and supplementary budget No 1. 
(2) Budget appropriations amended after taking account of commitment appropriations remaining from 1983, appropriations corresponding to receipts for services performed on behalf of 
outside bodies and transfers between budget headings. 
(3) Non-differentiated appropriations not automatically carried over to 1985 and commitment appropriations remaining at the closure of the 1984 accounts. 
(4) Including amounts corresponding to provisional appropriations and contingency reserve in Section III, Part A. 
16. 12.85 Official Journal of the European Communities 137 
§ 7. Appropriations for payment available in 1984 and their utilization 
(Mio ECU) 
Sector 
(for the corresponding terms and 
budget heading see § 6, 
column 1) 
(1) 
1. Administration 
1.1. Parliament 
1.2. Council 
(of which: ESC) 
1.3. Commission (3) 
1.4. Court of Justice 
1.5. Court of Auditors 
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, poultry 
2.9. Other markets 
2.10. Agri-monetary measures 
2.11. Clear, prev. years' accounts 
3. Agricultural structures 
(of which: NDA) 
3.1. EAGGF-Guidance 
3.2. Specific measures 
4. Fisheries 
(of which: NDA) 
4.1. Common organ, of market 
4.2. Other measures 
5. Regional policy 
(of which: NDA) 
5.1. Regional Fund 
5.2. Measures for the United 
Kingdom 
5.3. Other measures 
6. Social policy 
(of which: NDA) 
6.1. Social Fund 
6.2. Other measures 
7. Research, energy, etc. 
(of which: NDA) 
7.1. Energy 
7.2. Research and investment 
7.3. Industry and transport 
7.4. Other measures 
8. Repayments to Member States 
8.1. Costs incurred in collecting 
own resources 
8.2. Other repayments 
9. Coop, with developing countries 
(of which: NDA) 
9.1. Food aid 
9.2. Financial aid 
10. Provisional appropriations and con­
tingency reserve 
(of which: NDA) 
tions: 
DA); 
ations 
•™ a>z a. 
o*£2 Type of appr 
non differen 
appropriatio 
payment apf 
(PA) 
(2) 
NDA 
NDA 
NDA 
(NDA) 
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 
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 
NDA + PA 
NDA + PA 
(NDA) A. Appropriations of the financial 
Evolution of appropriations 
1? 
(3) 
1229,1 
239,1 
137,1 
(24,9) 
803,5 
31,3 
18,1 
16150,0 
2 633,3 
1 386,9 
1 956,0 
1 025,3 
576,4 
727,7 
4 894,1 
2 031,9 
561,7 
356,7 
p.m. 
655,6 
(60,0) 
583,6 
72,0 
101,4 
(50,5) 
42,9 
58,5 
1454,8 
(12,7) 
1412,5 
p.m. 
42,3 
1369,3 
(142,6) 
1 220,0 
149,3 
644,5 
(54,0) 
74,3 
477,2 
77,0 
16,0 
1103,5 
1 057,3 
46,2 
893,1 
(582,6) 
502,1 
391,0 
1 760,2 
(1 649,8) (4) 
1236,6 
239,1 
137,1 
(24,9) 
811,0 
31,3 
18,1 
17 983,0 
2 480,0 
1 572,0 
1790,0 
1 243,0 
767,0 
795,0 
5 761,0 
2 658,0 
547,0 
395,0 
-25,0 
660,1 
(60,0) 
586,6 
73,5 
112,4 
(57,0) 
42,9 
69,5 
1454,8 
(12,7) 
1412,5 
p.m. 
42,3 
1 369,4 
(142,7) 
1 220,0 
149,4 
698,2 
(66,1) 
75,2 
510,2 
79,7 
33,1 
1150,2 
1 105,3 
44,9 
893,1 
(582,6) 
502,1 
391,0 
1690,8 
(1631,0) 
Final appro­
priations 
1984 (2) 
(5) 
1 245,6 
239,1 
137,1 
(24,9) 
820,0 
31,3 
18,1 
18 358,0 
1 698,0 
1 631,5 
1 968,0 
1 454,6 
1 222,6 
777,3 
5 446,7 
3 259,5 
547,8 
377,0 
-25,0 
666,9 
(51,8) 
595,6 
71,3 
87,4 
(32,2) 
17,9 
69,5 
1462,9 
(12,7) 
1 412,5 
— 50,4 
1 638,1 
(419,0) 
1211,9 
426,2 
1696,4 
(1 028,9) 
592,6 
515,1 
567,9 
20,8 
1083,2 
1 038,3 
44,9 
1 032,2 
(721,7) 
505,0 
527,2 
— (—) m 
ro E 
(6) 
1 127,2 
220,0 
116,1 
(23,7) 
747,6 
27,1 
16,4 
18 328,2 
1 697,8 
1 631,5 
1 965,6 
1454,6 
1 222,6 
776,4 
5 441,7 
3 246,1 
541,2 
376,2 
-25,5 
611,1 
(45,9) 
560,0 
51,1 
46,6 
(23,0) 
15,7 
30,9 
1 309,5 
(0,2) 
1 283,3 
— 26,2 
1509,4 
(391,5) 
1 116,4 
393,0 
1346,4 
(906,1) 
504,3 
390,0 
445,8 
6,3 
1 073,8 
1 033,4 
40,4 
767,0 
(591,9) 
497,5 
269,5 
— (-) year 1984 
LO 
°2 
o 
O 
(7) 
96,4 
15,4 
14,0 
(1,0) 
63,6 
2,5 
0,9 
2,6 
— — 1,9 
— — — — — 0,7 
— — 
55,2 
(5,3) 
35,6 
19,6 
38,4 
(6,9) 
— 38,4 
152,2 
(11,3) 
129,2 
— 23,0 
125,9 
(24,7) 
95,5 
30,4 
346,1 
(122,1) 
88,3 
121,9 
121,8 
14,1 
8,7 
4,9 
3,8 
264,6 
(129,2) 
7,4 
257,2 
— (-) </> 
O 
(8) = 
(5)-(6) 
-(7) 
22,0 
3,7 
7,0 
(0,2) 
8,8 
1,7 
0,8 
27,2 
0,2 
0,0 
0,5 
0,0 
0,0 
0,9 
5,0 
13,4 
5,9 
0,8 
0,5 
0,6 
(0,6) 
— 0,6 
2,4 
(2,3) 
2,2 
0,2 
1,2 
(1,2) 
— 
— 1,2 
2,8 
(2,8) 
— 2,8 
3,9 
(0,7) 
0,0 
3,2 
0,3 
0,4 
0,7 
— 0,7 
0,6 
(0,6) 
0,1 
0,5 
— (-) B. Carry-overs 
>Lco 
"^-^ 
t E £ Appropriatic 
ried over fro 
(after transf 
0) 
100,6 
29,6 
12,4 
(0,5) 
56,3 
1,7 
0,6 
0,1 
— — 0,0 
— — — — — 0,1 
— — 
131,2 
(5,5) 
123,6 
7,6 
12,5 
(2,8) 
— 12,5 
115,2 
(7,9) 
107,3 
— 7,9 
617,7 
(37,7) 
576,0 
41,7 
174,2 
(21,7) 
71,2 
57,8 
35,8 
9,4 
99,5 
76,5 
23,0 
445,6 
(298,1) 
216,6 
229,0 
— (-) a> 
TO E 
(10) 
88,9 
25,5 
10,6 
(0,5) 
50,8 
1,5 
0,5 
0,1 
— — — — — — — — 0,1 
— — 
91,7 
(4,9) 
86,8 
4,9 
10,5 
(2,7) 
— 10,5 
74,0 
(6,7) 
67,3 
— 6,7 
526,9 
(35,7) 
489,9 
37,0 
129,3 
(20,8) 
41,4 
51,0 
28,9 
8,0 
99,4 
76,5 
22,9 
383,6 
(273,3) 
211,7 
171,9 
— (-) from 1983 
m 
£ 
2 
o 
CJ 
(11) 
— — (-) — — — 
— 
— — — — — — — — — — — 
— 
(—) 
— — 
(-) — — 
— 
(-) — 
— _ 
(-) — — 
4,8 
(—) 
— 4,8 
— — 
— 
— — 
— 
(-) — — 
— (—) to 
g 
O 
(12) = 
(9)-(10) 
-(11) 
11,7 
4,1 
1,8 
(0,0) 
5,5 
0,2 
0,1 
0,0 
— — 0,0 
— — — — — 0,0 
— — 
39,5 
(0,6) 
36,8 
2,7 
2,0 
(0,1) 
— 2,0 
41,2 
(1,2) 
40,0 
— 1,2 
90,8 
(2,0) 
86,1 
4,7 
40,1 
(0,9) 
29,8 
2,0 
6,9 
1,4 
0,1 
— 0,1 
62,0 
(24,8) 
4,9 
57,1 
— (—) C. 
Total 
pay­
ments 
made in 
1984 
(13) = 
(6)+ (10) 
1 216,1 
245,5 
126,7 
(24,2) 
798,4 
28,6 
16,9 
18 328,3 
1 697,8 
1631,5 
1 965,6 
1 454,6 
1 222,6 
776,4 
5441,7 
3 246,1 
541,3 
376,2 
-25,5 
702,8 
(50,8) 
646,8 
56,0 
57,1 
(25,7) 
15,7 
41,4 
1 383,5 
(6,9) 
1 350,6 
32,9 
2 036,3 
(427,2) 
1606,3 
430,0 
1 475,7 
(926,9) 
545,7 
441,0 
474,7 
14,3 
1173,2 
1 109,9 
63,3 
1 150,6 
(865,2) 
709,2 
441,4 
— (-) 
Grand total NDA + PA 
(NDA) 
(PA) 25 361,5 
(21034,8) 
(4 326,7) 27 248,6 
(22 921,9) 
(4 326,7) 27 270,7 
(22 953,1) 
(4317,6) 26119,2 
(22 487,8) 
(3 631,4) 1 090,1 
(407,2) 
(682,9) 61,4 
(58,1) 
(3,3) 1 696,6 (4) 
(573,9) 
(1122,7) (4) 1404,4 
(532,5) 
(871,9) 4,8 (-) (4,8) 287,4 
(41,4) 
(246,0) 
(1) After amending and supplementary budget No 1. 
(2) Budget appropriations amended after taking account of transfers between budget headings, receipts for services performed on behalf of outside bodies and 1983 carry-overs transfered 
to the 1984 appropriations. 
(3) Including amounts corresponding to provisional appropriations and contingency reserve in Section III, Part A. 
(4) After transfers of 17,7 Mio ECU to the non-differentiated appropriations of the financial year 1984. 
138 Official Journal of the European Communities 16. 12.85 
§ 8. Actual own resources in 1984 
(for basic figures, see § 5) 
A. Actual own resources in 1984 — by type B. Actual own resources in 1984 — by Member State and by type 
Total: 24 880,0 Mio ECU /FT 7\ w 
3 O UJ 
O 
2 
ai ^ 
1 ^ 5 
co 
/la 
JSSS/ 
F IRL I 
Total: 24 880,0 Mio ECU 
29,2 C. Shares of Member States in each type of own resources 
29,0 
VAT and financial contributions (%) 
22,1 Customs duties (%) 27>1 
3,3 2AJ1§§!_IA 19,5 
16,0 
1,0 0,3 5,1 
B DK D GR F IRL I L NL UK 
27,1 
Agricultural levies (%) 
B DK D GR F IRL I L NL UK 
16. 12.85 Official Journal of the European Communities 139 
§ 9. Rate of utilization of appropriations available in 1984 
I. Final appropriations for 
commitment in 1984 
(see § 6, columns 5 to 8) Final 1984 appropriations 
for payment 
(see § 7, columns 5 to 8) 
Total: 
30 278,0 Mio ECU 
V* Total: 
27 270,7 Mio ECU Key 
C 
s 
n 
[«r 
BHg 
• — Non-differentiated 
appropriations 
— Commitment 
appropriations 
— Payment appropriations 
— Rate of commitment 
— Rate of payment 
— Rate of unused 
appropriations remaining 
available for 1985 
(appropriations remaining 
and/or carried over) 
— Cancellations 
III. Appropriations for payment 
carried over from 1983 
(see § 7, columns 9 to 12) 
Total: 1696,6 Mio ECU 
1 
1 
E 
(-
*-° 
O 
o 
(') 
cvi m? 
1 
= ,„ 
< ^ 
" ^^ w/\ 
g. 
g 
» v//, 1 
S 
-
* I 
« 
^ « 
if 
&§ n > 
oo ^ 
1 
Is 
o * 
UT3 
01 
§ 
U) I 
U) § 
o> UJ f 
o 
00 § 
0> ^ 1 
0> ^ s 8 1 
o> 
CO -
s 1 
s 1 
s O) s 
16,9% 
140 Official Journal of the European Communities 16. 12.85 
§ 10. The consolidated revenue and expenditure account and the balance of the financial year 1984 
(application of Article 15 of Council Regulation (EEC, Euratom, ECSC) No 2891/77) 
Revenue: 
Funds actually available for 
the financial year 1984 
Total: 
27 209,9 Mio ECU Expenditure: 
Application of funds available 
for the financial year 1984 
Total: 
27 209,9 Mio ECU 
(8) Balance (deficit) 
for the financial 
year 1984 
(7) Cancellations of carry­
overs from 1983 
(see § 7, column 12) 
(6) Exchange rate differences 
(5) Carry-overs from 1983 
transferred to the 
appropriations 1984 
(see § 7, note (4)) 
(4) Balance 1983 
(see § 5) 
(3) Repayable advances 
(2) Other actual 
revenue 
(see § 5) 827,3 Mio ECU 
287,4 Mio ECU 0,6 Mio ECU 
(1) Total actual own resour­
ces in 1984: j 
24 880,0 Mio ECU (see § 5) A VAT/floarWaJ 
corrtHbutiirjl: i< (11) Earmarked revenue 
to be repayed 
(10) 1984 appropriations 
for payment carried 
over to 1985 
(see § 7, column 7) 
26 119,2 Mio ECU (9) Payments made in 
1984 against appro­
priations of the 
1984 budget 
(see § 7, column 6) 
Note: The result of the financial year 1984, defined as (1) 4- (2) + (3) + (4) - (9) - (10), is - 1 156,9 Mio ECU. 
16. 12.85 Official Journal of the European Communities 141 
§ 11. Payments made in 1984 — by sector and by recipient Member State 
Note: Payments made in 1984 = payments against 1984 appropriations plus payments against carry-overs from 1983 
A. Payments by sector (Mio ECU): 
(see also § 7, column 13) 
2. EAGGF-Guarantee: 18 328,3 ^ 
1. Administration: 1 216,1 
9. Cooperation 
with developing 
countries: 1 150,6 
8. Repayments 
to Member States: 1 173,2 
7. Research, energy, etc.: 1 475,7 
B. Payments to Member States: 
(for more detailed figures see § 12 and § 13) 3. Agricultural structures: 702,8 
4. Fisheries: 57,1 
5. Regional policy: 1 383,5 
6. Social policy: 2 036,3 
^ 
Ww / 
£za 
• s3? 
:iff | 
7 T mt / 
A Specific measures 
Costs incurred in 
collecting own 
resources 
EAGGF-Guidance 
Social Fund 
Regional Fund 
Fisheries 
EAGGF-Guarantee 
(Mio ECU) 
B DK D GR F IRL NL UK Allocation 
available EUR 10 
EAGGF-Guarantie(T1-2)(1) 
EAGGF-Guidance 
(Ch30-33) 
Social Fund (Ch 60-61) 
Regional Fund (Ch 50-51) 
Fisheries (Ch 40 - 43,45 -
46) 
Costs incurred in collecting 
own resources (Ch 80) 
Specific measures 
(Ch 82, 86; articles 707, 783) 686,4 
12,9 
52,1 
6,0 
0,7 
82,0 879,6 
13,9 
68,7 
28,1 
3,8 
26,0 3 323,0 
89,3 
63,8 
43,9 
5,1 
302,5 
191,7 961,2 
52,8 
71,3 
216,7 
0,6 
14,8 
46,6 3 592,0 
143,9 
225,7 
201,7 
9,5 
169,7 884,4 
64,2 
131,4 
104,1 
10,3 
16,0 3 909,4 
127,8 
368,5 
435,1 
4,1 
117,5 3,6 
3,9 
0,5 
2,5 
0,7 1 964,2 
24,8 
14,1 
14,8 
3,6 
101,1 2121,3 
113,3 
610,2 
297,7 
9,5 
279,6 
660,9 3,2 
9,9 18 328,3 
646,8 
1 606,3 
1 350,6 
57,1 
1 109,9 
899,2 
Total 840,1 
(3,5 o/o) 1 020,1 
(4,2 o/o) 4 019,3 
(16,7 0/o) 1364,0 
(5,7 o/o) 4 342,5 
(18,1 o/o) 1 210,4 
(5,0 o/o) 4 962,4 
(20,7 o/o) 11,2 
(0,1 o/o) 2 122,6 
(8,8 o/o) 4 092,5 
(17,1 o/o) 13,1 
(0,1 o/o) 23 998,2 
(100%) 
(') For the EAGGF-Guarantee these figures include adjusted monetary compensatory amounts (see § 12 D, footnote (1)). 
142 Official Journal of the European Communities 16. 12.85 
§ 12. EAGGF-Guarantee: payments made in 1984 — by market and by recipient Member State 
A. Payments made in 1984, 
by market: 
Total: 18 328,3 Mio ECU B. Payments made in 1984, by recipient Member State: 
Key: 
- for the colour 
corresponding 
to each market, 
see A 
_ r—| _ remaining 
markets 
lis llr-
GR F IRL I L 
Total: 18 328,3 Mio ECU 
C. Distribution by recipient Member State of payments made in 1984 for the principal markets 
28,6 Milk products (%) 54,2 
7,7 
3,1 Meat, eggs, 
poultry (%) 24,6 Fats and ...„ 
protein plants (%) |j| 
18,7 21,5 
0,1 6,4 
0.9 0,1 12,9 
5,6 
0,0 
B DK D GR F IRL I L NL UK 
Cereals 30,2 
and rice (%) 
18,4 B DK D GR F IRL I L NL UK 
Sugar (o/o) BS412 
6,5 
2,8 2,9 21,1 
0,2 12,7 
5,2 
0,0 
B DK D GR F IRL L NL UK B DK D GR F IRL I L NL UK Allocation 
available 
Fruit and vegetables 
(0/0) 
oi o.i o.spmamnnmm 0,4 0.2 
B DK D GR F IRL I L NL UK 
D. Record of payments made in 1984, 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. Other markets 
2.10. Agri-monetary 
measures (1) 
2.11. Clearance of previous 
year's accounts 
Total B 
111,2 
292,0 
50,5 
1,8 
— 6,9 
168,3 
43,5 
22,7 
4,8 
-15,3 
686,4 DK 
47,0 
54,6 
31,1 
1,7 
0,0 
— 421,5 
249,7 
45,5 
26,3 
2,2 
879,6 D 
312,0 
297,6 
255,0 
6,7 
114,9 
63,3 
1 559,0 
522,8 
59,0 
130,8 
1,9 
3 323,0 GR 
49,4 
12,8 
109,9 
363,6 
34,5 
261,7 
4,7 
11,5 
92,0 
21,1 
— 
961,2 F 
513,6 
671,9 
193,4 
88,3 
380,4 
81,6 
1 016,3 
589,8 
59,3 
-84,6 
82,0 
3 592,0 IRL 
3,6 
16,3 
0,4 
0,1 
— — 347,1 
489,4 
33,8 
0,4 
-6,7 
884,4 I 
357,4 
69,8 
1 066,3 
983,4 
692,0 
362,8 
50,6 
373,0 
37,7 
-0,2 
-83,4 
3 909,4 L 
0,1 
0,0 
0,0 
— 0,2 
— 3,1 
0,1 
0,1 
0,0 
0,0 
3,6 NL 
88,7 
85,7 
118,0 
5,5 
— 0,1 
1 171,1 
168,3 
100,8 
223,1 
2,9 
1964,2 UK 
214,8 
130,8 
138,6 
3,5 
0,6 
— 700,0 
798,0 
89,6 
54,5 
-9,1 
2121,3 (Mio ECU) 
Alloca-
not 
avail­
able 
— 2,4 
— — — — — 0,8 
— 
— 
3,2 EUR 
10 
1 697,8 
1631,5 
1965,6 
1454,6 
1222,6 
776,4 
5441,7 
3 246,1 
541,3 
376,2 
-25,5 
18 328,3 
(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. 
16. 12.85 Official Journal of the European Communities 143 
§ 13. The structural Funds: commitments entered into and payments made in 1984 
by recipient Member State 
Note: 
The structural Funds (EAGGF-Guidance, Social Fund, Regional Fund) are prov­
ided with differentiated appropriations, which comprise both commitment appro­
priations and payment appropriations with different financial incidence (see § 1 
(1.7)). The commitments entered into in 1984 relate to multiannual projects 
which are financed in 1984 and in subsequent years; the payments made in 
1984 relate to commitments entered into in 1984 and in previous years. 
Regional 
Fund 
(a) Commitments 
(b) Payments Social Fund 
EAGGF-Guidance: 
(a) Commitments 
(b) Payments 
Social Fund: 
(a) Commitments 
(b) Payments 
Regional Fund: 
(a) Commitments 
(b) Payments 
Total: 
(a) Commitments 
(b) Payments 12,8 
12,9 
90,9 
52,1 
33,2 
6,0 
136,9 
71,0 15,2 
13,9 
95,8 
68,7 
24,5 
28,1 
135,5 
110,7 87,9 
89,3 
86,3 
63,8 
110,1 
43,9 
284,3 
197,0 102,6 
52,8 
93,8 
71,3 
269,9 
216,7 
466,3 
340,8 181,0 
143,9 
215,7 
225,7 
277,8 
201,7 
674,5 
571,3 71,7 
64,2 
219,2 
131,4 
162,8 
104,1 
453,7 
299,7 182,9 
127,8 
412,5 
368,5 
823,5 
435,1 
1 418,9 
931,4 4,3 
3,9 
0,5 
0,5 
4,7 
2,5 
9,5 
6,9 19,8 
24,8 
52,1 
14,1 
35,8 
14,8 
107,7 
53,7 118,1 
113,3 
587,5 
610,2 
640,9 
297,7 
1346,5 
1 021,2 796,3 
646,8 
1854,3 
1 606,3 
2 383,2 
1 350,6 
5 033,8 
3 603,7 
144 Official Journal of the European Communities 16. 12.85 
§14. Evolution and utilization of the appropriations for payment for the period 1980 -1984 — by sector 
(1980: Mio EUA) 
(1981- 1984: Mio ECU) 
Sector and financial year 
General budget 
-total- (s) 1980 
1981 
1982 
1983 
1984 A. Appropriations for payment for the financial year 
Evolution of appropriations 
budget 
(D 
15 683,1 
19 327,6 
21 984,4 
21 558,5 
25 361,5 budget (1) 
(2) 
16 182,5 
18 434,0 
21 984,4 
25 061,1 
27 248,6 appropria­
tions (2) 
(3) 
16 233,3 
18441,5 
21 994,3 
25 068,8 
27 270,7 Payments 
(4) 
14 866,7 
16 712,0 
19 320,3 
23 101,6 
26 119,2 Carry-overs 
to the follow­
ing financial 
(5) 
1 108,4 
1 172,8 
1 385,5 
1 706,8 
1 090,1 Cancella-
(6) = 
(3)-(4)-(5) 
258,2 
556,7 
1 288,5 
260,4 
61,4 B. Carry-overs from the previous financial year 
overs (3) 
(7) 
1 869,8 
1 435,1 
1 404,1 
1521,0 
1 696,6 Payments 
(8) 
1 423,7 
1 080,8 
1 102,4 
1 211,4 
1 404,4 Carry-overs 
to the follow­
ing financial 
(9) 
329,4 
231,3 
135,4 
7,5 
4,8 Cancella­
tions (4) 
(10) = 
(7)-(8)-(9) 
116,7 
123,0 
166,3 
302,1 
287,4 
1. Administration 
(all institutions) 1980 
1981 
1982 
1983 
1984 929,6 
1 007,7 
1 103,2 
1 153,4 
1 229,1 929,6 
1 015,7 
1 103,2 
1 161,6 
1 236,6 896,8 
1 037,7 
1 121,2 
1 162,9 
1 245,6 771,5 
886,1 
957,0 
1 019,2 
1 127,2 66,3 
69,9 
106,6 
100,5 
96,4 59,0 
81,7 
57,6 
43,2 
22,0 56,2 
66,2 
69,9 
106,7 
100,6 48,2 
56,8 
53,3 
91,2 
88,9 — — — — 8,0 
9,4 
16,6 
15,5 
11,7 
2. EAGGF-
Guarantee 1980 
1981 
1982 
1983 
1984 11 485,5 
12 675,0 
13 217,3 
14 050,0 
16150,0 11 485,5 
11 580,0 
13 217,3 
15811,0 
17 983,0 11 482,2 
11 538,0 
13 124,3 
15 822,2 
18 358,0 11283,2 
10 951,5 
12 257,3 
15 785,7 
18 328,2 8,7 
162,4 
2,7 
0,1 
2,6 190,3 
424,1 
864,3 
36,4 
27,2 8,7 
162,4 
2,6 
0,1 8,7 
112,2 
2,5 
0,1 — — — — — 50,2 
0,1 
0,0 
3. Agricultural 
structures 1980 
1981 
1982 
1983 
1984 320,1 
468,9 
772,1 
651,2 
655,6 320,1 
518,9 
772,1 
653,4 
660,1 324,2 
553,0 
763,7 
668,5 
666,9 285,6 
457,0 
483,5 
513,7 
611,1 38,5 
93,3 
277,2 
131,5 
55,2 0,1 
2,7 
3,0 
23,3 
0,6 648,4 
343,7 
302,7 
397,3 
131,2 316,3 
117,7 
162,6 
236,0 
91,7 305,2 
209,4 
120,1 
— — 26,9 
16,6 
20,0 
161,3 
39,5 
4. Fisheries 1980 
1981 
1982 
1983 
1984 50,7 
44,3 
75,8 
70,1 
101,4 50,7 
49,3 
75,8 
70,1 
112,4 58,0 
49,9 
81,5 
45,7 
87,4 29,8 
37,7 
50,7 
31,9 
46,6 28,1 
4,1 
30,4 
12,5 
38,4 0,1 
8,1 
0,4 
1,3 
2,4 17,0 
12,7 
4,1 
30,4 
12,5 13,9 
12,2 
4,1 
22,9 
10,5 0,1 
— — — — 3,0 
0,5 
— 7,5 
2,0 
5. Regional 
policy 1980 
1981 
1982 
1983 
1984 603,5 
1 674,8 
2 823,0 
1 469,8 
1 454,8 723,2 
1 797,9 
2 823,0 
2 383,0 
1 454,8 797,1 
2416,9 
2 957,8 
2 383,0 
1 462,9 722,2 
2 164,6 
2 765,8 
2 265,5 
1 309,5 71,8 
242,5 
174,4 
115,2 
152,2 3,1 
9,8 
17,6 
2,3 
1,2 381,1 
71,8 
242,5 
174,4 
115,2 381,1 
71,8 
242,5 
140,3 
74,0 — — — — 0,0 
— 34,1 
41,2 
6. Social policy 1980 
1981 
1982 
1983 
1984 410,2 
670,6 
1 022,3 
1 410,6 
1 369,3 776,6 
732,6 
1 022,3 
1 430,6 
1 369,4 775,5 
732,7 
1 130,7 
1 430,7 
1 638,1 522,2 
580,9 
910,0 
801,0 
1 509,4 252,8 
148,5 
220,0 
617,7 
125,9 0,5 
3,3 
0,7 
12,0 
2,8 267,8 
269,4 
159,4 
226,8 
617,7 249,6 
255,8 
150,6 
219,9 
526,9 16,6 
10,9 
6,7 
— — 1,6 
2,7 
2,1 
6,9 
90,8 
7. Research, 
energy, etc. 1980 
1981 
1982 
1983 
1984 371,9 
302,0 
410,4 
541,7 
644,5 371,9 
309,0 
410,4 
1 374,9 
698,2 384,9 
318,0 
462,6 
1 395,2 
1 696,4 195,4 
214,3 
345,7 
1 216,2 
1346,4 188,6 
96,5 
112,9 
166,7 
346,1 0,9 
7,2 
4,0 
12,3 
3,9 125,8 
193,5 
107,5 
121,5 
174,2 116,1 
162,9 
92,0 
91,5 
129,3 7,5 
11,0 
8,6 
7,5 
4,8 2,2 
19,6 
6,9 
22,5 
40,1 
8. Repayments to 
Member States 1980 
1981 
1982 
1983 
1984 834,5 
1 506,6 
1 120,9 
1 122,9 
1 103,5 847,8 
1 431,9 
1 120,9 
1 089,0 
1 150,2 847,8 
969,1 
1 123,8 
1 089,0 
1 083,2 761,0 
869,5 
952,2 
950,6 
1 073,8 86,8 
97,1 
116,0 
99,5 
8,7 2,5 
55,6 
38,9 
0,7 85,4 
86,8 
97,1 
116,0 
99,5 85,4 
86,8 
97,1 
114,1 
99,4 — — — — 0,0 
— — 
1,9 
0,1 
9. Cooperation 
with developing 
countries 1980 
1981 
1982 
1983 
1984 620,4 
603,6 
803,3 
966,5 
893,1 620,4 
791,3 
803,3 
981,2 
893,1 666,8 
816,2 
945,3 
984,6 
1 032,2 295,8 
550,4 
598,1 
517,8 
767,0 366,8 
258,5 
345,3 
463,1 
264,6 4,2 
7,3 
1,9 
3,7 
0,6 288,1 
382,3 
258,5 
345,3 
445,6 213,1 
308,1 
188,0 
293,0 
383,6 — — — — 75,0 
74,2 
70,5 
52,3 
62,0 
(1) After amending and supplementary budgets. 
I2) After supplementary receipts and transfers. 
(3) After transfers between budget headings and 'transfers' to the appropriations for the current financial year. 
(4) For certain sectors, including adjustments of balances of commitments due to variations in the EUA and ECU rates. 
(5) For columns (1), (2), (3) and (6), including the amounts appearing in the provisional appropriations and contingency reserve. 
16. 12.85 Official Journal of the European Communities 145 
§ 15. Utilization rates of the appropriations for payment from 1980 to 1984 — by sector 
Payment 
rate (%) Rate of 
carry-over to 
the following 
year (o/o) 
Key: Cancellations 
A. Appropriations for the financial year 
(final appropriations = 100%) B. Carry-overs from the previous financial year 
(appropriations carried over = 100%) 
(for basic figures see § 14) 
2 *« 
I = I "" 
•o to c § 
ul $ 
<2§ 
LU 
M'O 
< ** s 
w 2 
« c E i» CC a 0)*; 1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 91,6 0/o 
90,6 o/o 
87,8 % 
92,2 o/o 
95,8 o/o 
86,0 o/o 
85,4 o/o 
85,4 o/o 
87,6 o/o 
90,5 o/o 
98,3 o/o 
94,9 o/o 6.8 o/o JIB 
6.4 %_||l 
6.3 o/o «1NH 
6.8 °/o MM 
4,0 o/o^B 
7,4 o/o -iJH^H 
6.7 o/o W»^H 
9,5 o/o -HB^| 
8,6 o/oHHIH 
7,7 o/o mm 
0,1 o/o -J 
1.40/0 mt 
93,4 o/o ^M 
99,8 o/o J 
99,8 o/o J 
88,1 o/o 11.8 o/o Ml!iH 
82.6 o/o fflfflfjfBI 
63,3 % BHa^^H|^H 
76,8 o/o HHitiHi 
91,6 0/o 8.3 o/o H|H 
1980 
1981 
1982 
1983 
1984 75,6 o/o 
62,2 O/o 
69,8 o/o 
53,3 o/o 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 90,6 o/o 
89,6 o/o 
93,5 o/o 
95,1 o/o 
89,5 O/o 9,0 o/o jHHH 
10,0 o/o -mga 
5.9 o/olH 
4.8 o/o JH 
10,4 o/o wBsm 
67.3 o/o fl'IT'inFri1tMIT°li:Tlll 
79,3 o/o BMHWUBH 
80,5 o/o •HIHIII 
56,0 o/o HHHHflHIi^ffiHraiisI 
92,1 o/o 710/° HH 
50.8 o/o ^^^^MHI^^KiH 
67,4 o/o HmHHHHH 
74,7 o/o SUlliKllH 
87,2 o/o 11,9 0/0 -MHH 
79,4 o/o ^mHWiitna 
89,8 o/o 
89,7 o/o 
84,7 o/o 
87,3 o/o 
99,1 o/o 10.2 o/o l§§§|| 
10.0 °/oJH| 10.3 0/0 -H§|H| 
9,1 OATH^! 
o!8%^ 1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 
1980 
1981 
1982 
1983 
1984 76.1 o/o JHU^^I 
o/o "Hi^^H o/o n^^^i 
79,6 o/o 
82,8 o/o o/o _^^^^M 
0,3 o/o^^^^H 
o/o ^^^H 
o/o ^^^fl 
o/o H^^^H 
o/o ^^^^1 
o/o ^^^H 
100 o/o 
0/o ^^^^^__ 
96,2 o/o | 
100 o/o 
48.8 o/o 
34.2 o/o HHH 
53,7 o/o 
o/o ^^^^^^^^^^H 
O/o ^^^^^^^^^^| 
81,8 0/o o/n JBHHB 
96,1 o/o | 
100 o/o 
o/o ••^•jjH 
84,0 o/o ^^^^^H 
100 % 
100 o/o 
100 % 
O/o __^_ 
o/o |^Hi^^^^H 
93,2 o/o 
95,0 o/o 
94,5 o/o 6.2 o/o J||| 
4.0 o/o JH 
4.2 o/o -HI 
97,0 o/o • 
o/o HHfl 
92,3 o/o 
84,2 o^ 
85,6 o/o 
75.3 o/o 
74,2 o/o 6,OWoJBa 
O/o fl^^H 
8Qwojm^mm 
p o/o JH^H^H 
o/o Jj^^^^^^l 
100 o/o 
100 o/o 
100 o/o 
98,4 o/o | 
99,9 o/o 
5 § S .2 
o £ «> 3 1980 
1981 
1982 
1983 
1984 74,0 o/o 
72,7 0b 
84,9 0/0 
146 Official Journal of the European Communities 16.12.85 
§ 16. Annual payments during the period 1980-1984, by sector 
Notes: 
1. Annual payments = payments against appropriations of the financial year plus payments against carry-overs from the previous financial 
year. 
2. For the budget headings corresponding to the 1984 budgetary nomenclature, see §6, column (1). 
1. Administration 
1.1. Parliament 
1.2. Council 
(of which: the Economic and 
Social Committee) 
1.3. Commission 
1.4. Court of Justice 
1.5. Court of Auditors 
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. Other markets 
2.10. Agri-monetary measures 
2.11. Clearance of the accounts 
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 
5.1. Regional Fund 
5.2. Measures in favour of the 
United Kingdom 
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 and transport 
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 1980 
Mio EUA 
819,7 
135,1 
94,5 
(16,8) 
560,0 
19,3 
10,8 
11 283,2 
1 719,0 
575,2 
747,8 
687,3 
299,5 
309,3 
4 752,0 
1 617,9 
276,6 
298,6 
— 
601,9 
592,9 
9,0 
43,7 
23,3 
20,4 
1 103,3 
726,7 
174,1 
202,5 
771,8 
735,2 
36,6 
311,5 
40,3 
249,8 
12,0 
9,4 
846,4 
791,2 
55,2 
508,9 
318,8 
190,1 o/o 
5,0 
0,8 
0,6 
(0,1) 
3,4 
0,1 
0,1 
69,3 
10,6 
3,5 
4,6 
4,2 
1,9 
1,9 
29,2 
9,9 
1,7 
1,8 
— 
3,7 
3,6 
0,1 
0,3 
0,2 
0,1 
6,8 
4,5 
1,1 
1,2 
4,7 
4,5 
0,2 
1,9 
0,2 
1,5 
0,1 
0,1 
5,2 
4,9 
0,3 
3,1 
1,9 
1,2 1981 
Mio ECU 
942,9 
168,0 
103,9 
(20,0) 
635,4 
23,1 
12,5 
10 960,2 
1 951,8 
767,5 
1090,7 
641,1 
459,4 
361,8 
3 342,7 
1 867,0 
400,8 
238,4 
-161,0 
574,7 
566,5 
8,2 
49,9 
28,0 
21,9 
2 236,4 
798,7 
1 248,4 
189,3 
836,7 
745,8 
90,9 
377,2 
63,1 
295,6 
8,3 
10,2 
956,3 
807,0 
149,3 
858,5 
601,7 
256,8 o/o 
5,3 
0,9 
0,6 
(0,1) 
3,6 
0,1 
0,1 
61,6 
11,0 
4,3 
6,1 
3,6 
2,6 
2,0 
18,8 
10,5 
2,3 
1,3 
-0,9 
3,2 
3,1 
0,1 
0,3 
0,2 
0,1 
12,6 
4,5 
7,0 
1,1 
4,7 
4,2 
0,5 
2,1 
0,3 
1,6 
0,1 
0,1 
5,4 
4,6 
0,8 
4,8 
3,4 
1,4 1982 
Mio ECU 
1 010,3 
173,3 
109,7 
(20,6) 
688,3 
25,4 
13,6 
12 369,5 
1 874,8 
1241,8 
1 295,0 
914,3 
570,6 
622,6 
3 327,8 
1 625,9 
583,6 
313,1 
— 
646,1 
638,2 
7,9 
54,8 
34,0 
20,8 
3 008,3 
973,0 
1 819,2 
216,1 
1060,6 
905,6 
155,0 
437,7 
44,0 
367,6 
16,3 
9,8 
1049,3 
909,3 
140,0 
786,1 
540,2 
245,9 o/o 
5,0 
0,9 
0,5 
(0,1) 
3,4 
0,1 
0,1 
60,6 
9,2 
6,1 
6,3 
4,5 
2,8 
3,0 
16,3 
8,0 
2,9 
1,5 
— 
3,2 
3,2 
0,0 
0,3 
0,2 
0,1 
14,7 
4,8 
8,9 
1,0 
5,2 
4,4 
0,8 
2,1 
0,2 
1,8 
0,1 
0,0 
5,1 
4,4 
0,7 
3,8 
2,6 
1,2 1983 
Mio ECU 
1 110,4 
214,8 
116,7 
(22,4) 
736,3 
27,2 
15,4 
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 
2 405,8 
1 255,9 
887,6 
262,3 
1 020,9 
890,9 
130,0 
1 307,7 
828,0 
423,3 
44,7 
11,7 
1064,7 
921,9 
142,8 
810,8 
388,7 
422,1 o/o 
4,6 
0,9 
0,5 
(0,1) 
3,0 
0,1 
0,1 
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 
3,7 
1,0 
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 1984 
Mio ECU 
1 216,1 
245,5 
126,7 
(24,2) 
798,4 
28,6 
16,9 
18 328,3 
1 697,8 
1631,5 
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 
1 383,5 
1 350,6 
— 32,9 
2 036,3 
1 606,3 
430,0 
1 475,7 
545,7 
441,0 
474,7 
14,3 
1173,2 
1 109,9 
63,3 
1 150,6 
709,2 
441,4 o/o 
4,4 
0,9 
0,4 
(0,1) 
2,9 
0,1 
0,1 
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 
5,0 
4,9 
— 0,1 
7,4 
5,8 
1,6 
5,4 
2,0 
1,6 
1,7 
0,1 
4,3 
4,1 
0,2 
4,2 
2,6 
1,6 
Grand total 16 290,4 100 17 792,8 100 20 422,7 100 24 313,0 100 27 523,6 100 
16. 12.85 Official Journal of the European Communities 147 
§ 17. Evolution of the ratio of 'annual payments by sector' to 'total of annual budgetary payments' 
(1980-1984) 
(for detailed figures see § 16) 
A. General budget (all sectors): 
Total of annual budgetary payments = 100 o/o 
100 0/0 
50o/o Log 
10 0/0 
5 0/o 
1 o/o 
0,5 o/o 
0,1 o/o 
1980 1981 
B. EAGGF-Guarantee (all markets): 1982 1983 2. EAGGF-Guarantee 
1984 6. Social policy 
7. Research, energy, etc. 
5. Regional policy 
1. Administration 
8. Repayments to Member States 
9. Cooperation with developing countries 
3. Agricultural structures 
4. Fisheries 
Total of annual budgetary payments = 100 o/o 
100 0/0 
50 o/o -
10 0/0 
5 0/o 
1 o/o 
0,5 o/o 
0,1 o/o Log 
2.7. Milk products 
2.8. Meat, eggs, poultry 
2.3. Fats and protein plants 
2.1. Cereals and rice 
2.2. Sugar 
2.4. Fruit and vegetables 
2.5. Wine 
2.6. Tobacco 
2.9. Other markets 
2.10. Agri-monetary measures 
1980 1981 1982 1983 1984 
148 Official Journal of the European Communities 16. 12.85 
§ 18. Annual payments to the Member States (1980-1984) 
Notes: 
1. This table summarizes the annual payments to the Member States under the principal sectors. For the period under consideration these 
payments represent 88,2 % 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)). 
(1980: Mio EUA) 
(1981- 1984: Mio ECU) 
Financial year/sector 
§ EAGGF-Guarantee (T 6 - 7) 
EAGGF-Guidance (Ch 80-83) 
Social Fund (Ch 50-52) 
Regional Fund (Ch 55-56) 
Fisheries (Ch 86 - 89) 
Costs incurred in collecting own 
resources (Ch 40) 
Specific measures (Ch 57, 58) 
Total Belgium 
571,1 
25,2 
12,1 
6,6 
0,7 
61,5 
677,2 
(4,6 o/o) Denmark 
614,5 
24,5 
14,7 
9.4 
1,3 
15,7 
680,1 
(4,7 o/o) FRof 
Germany 
2451,4 
142,1 
80,5 
50,4 
3,1 
212,7 
2 940,2 
(20,1 o/o) Greece 
— 
— France 
2 827,6 
133,0 
195,8 
99,7 
2,5 
113,8 
3 372,4 
(23,1 o/o) Ireland 
563,6 
39,8 
72,5 
69,6 
6,3 
7,6 
67,1 
826,5 
(5,7 o/o) Italy 
1 824,0 
97,0 
194,4 
249,1 
4,6 
106,7 
134,7 
2610,5 
(17,9 0/o) L£% 
11,6 
1,0 
0,4 
1,0 
0,5 
14,5 
(0,1 o/o) Nether-
1 538,8 
26,4 
5,1 
7,7 
6,2 
82,9 
1667,1 
(11,4 0/0) United 
Kingdom 
880,5 
103,9 
159,7 
233,2 
6,7 
189,8 
229,3 
1 803,1 
(12,3 0/o) Allocation 
available 
0,1 
12,3 
12,4 
(0,1 o/o) EUR 
9/10 
11 283,2 
592,9 
735,2 
726,7 
43,7 
791,2 
431,1 
14604,0 
(100 0/o) 
§ EAGGF-Guarantee (T 6 - 7) 
EAGGF-Guidance (Ch 80 - 83) 
Social Fund (Ch 50-52) 
Regional Fund (Ch 55-56) 
Fisheries (Ch 86-89) 
Costs incurred in collecting own 
resources (Ch 40) 
Specific measures (Ch 49, 57, 
58) 
Total 489,1 
21,7 
15,3 
9,2 
0,8 
61,8 
— 
597,9 
(3,9 o/o) 507,8 
20,7 
18,5 
10,7 
1,4 
16,2 
— 
575,3 
(3,7 o/o) 2 031,5 
134,1 
72,3 
36,2 
2,8 
225,4 
— 
2 502,3 
(16,1 o/o) 146,2 
— 6,6 
122,0 
— 
8,9 
111,0 
394,7 
(2,5 o/o) 3 014,2 
120,8 
155,3 
66,8 
4,3 
123,1 
— 
3484,5 
(22,5 o/o) 437,9 
57,6 
60,4 
80,3 
5,4 
8,8 
66,6 
717,0 
(4,6 o/o) 2 092,1 
78,5 
207,1 
211,7 
6,7 
94,9 
122,3 
2 813,3 
(18,1 o/o) 4,1 
2,3 
0,6 
0,9 
— 
0,4 
— 
8,3 
(0,1 o/o) 1 157,2 
21,9 
14,3 
5,7 
8,4 
77,3 
— 
1284,8 
(8,3 o/o) 1 080,1 
108,9 
195,4 
255,2 
8,2 
190,2 
1 286,7 
3124,7 
(20,1 o/o) _ 
— — — 11,9 
— 
11,9 
(0,1 o/o) 10 960,2 
566,5 
745,8 
798,7 
49,9 
807,0 
1586,6 
15 514,7 
(100 0/o) 
EAGGF-Guarantee (T 1 -2) 
EAGGF-Guidance (Ch 30-33) 
Social Fund (Ch 60-62) 
Regional Fund (Ch 50-51) 
Fisheries (Ch 40-42, 46) 
Costs incurred in collecting own 
resources (Ch 80) 
Specific measures 
(Ch 52, 53, 82, 86) 
Total 535,1 
17,7 
16,8 
10,8 
0,6 
68,3 
— 
649,3 
(3,6 o/o) 556,7 
20,8 
17,6 
14,6 
3,2 
17,6 
— 
630,5 
(3,5 o/o) 2 027,5 
107,1 
89,9 
61,6 
3,7 
237,0 
— 
2 526,8 
(14,0 0/o) 684,6 
14,5 
23,5 
152,3 
— 
18,3 
92,7 
985,9 
(5,5 o/o) 2 866,2 
167,4 
119,3 
130,0 
3,6 
134,7 
— 
3 421,2 
(19,0 0/o) 496,5 
84,3 
115,0 
93,5 
7,8 
10,2 
72,7 
880,0 
(4,9 o/o) 2 502,6 
125,0 
235,1 
281,8 
8,9 
102,6 
142,6 
3 398,6 
(18,8 0/o) 2,6 
1,6 
1,1 
0,1 
— 
0,4 
— 
5,8 
(0,0 o/o) 1 416,7 
32,2 
9,0 
3,2 
8,3 
83,9 
— 
1553,3 
(8,6 o/o) 1 278,3 
67,6 
278,3 
225,1 
9,8 
236,3 
1 866,5 
3 961,9 
(22,0 o/o) 2,7 
— — — 8,9 
— 
11,6 
(0,1 o/o) 12 369,5 
638,2 
905,6 
973,0 
54,8 
909,3 
2174,5 
18 024,9 
(100 0/o) 
CO 
2 EAGGF-Guarantee (T 1 -2) 
EAGGF-Guidance (Ch30-33) 
Social Fund (Ch 60-62) 
Regional Fund (Ch 50 - 51) 
Fisheries (Ch 40 - 43,45 - 46) 
Costs incurred in collecting own 
resources (Ch 80) 
Specific measures 
(Ch 52, 53, 82, 86; article 707) 
Total 611,9 
18,1 
20,6 
7,0 
0,2 
77,7 
— 
735,5 
(3,4 o/o) 680,7 
20,5 
14,7 
16,7 
3,6 
20,3 
— 
756,5 
(3,5 o/o) 3 075,8 
107,7 
81,5 
45,0 
2,8 
241,8 
270,7 
3 825,3 
(17,7 0/o) 1007,4 
21,9 
20,4 
214,6 
0,1 
16,6 
70,4 
1 351,4 
(6,2 o/o) 3 566,6 
182,0 
140,5 
219,3 
3,9 
142,5 
— 
4 254,8 
(19,6 0/o) 619,4 
84,1 
134,2 
94,5 
21,6 
11,6 
60,8 
1026,2 
(4,7 o/o) 2 820,5 
103,0 
221,2 
344,5 
5,1 
105,9 
174,8 
3 775,0 
(17,4 0/o) 4,2 
0,6 
0,3 
0,0 
— 
0,5 
— 
5,6 
(0,0 o/o) 1 707,8 
32,2 
12,6 
18,1 
6,4 
83,4 
— 
1860,5 
(8,6 o/o) 1691,0 
149,6 
244,9 
296,2 
8,4 
221,6 
1471,9 
4 083,6 
(18,9 0/o) 2,9 
— — — 2,7 
— 
5,6 
(0,0 o/o) 15788,2 
719,7 
890,9 
1 255,9 
54,8 
921,9 
2 048,6 
21 680,0 
(100 0/0) 
<& EAGGF-Guarantee (T 1 -2) 
EAGGF-Guidance (Ch 30-33) 
Social Fund (Ch 60-61) 
Regional Fund (Ch 50 - 51) 
Fisheries (T4) 
Costs incurred in collecting own 
resources (Ch 80) 
Specific measures 
(Ch 82, 86; articles 707, 783) 
Total 686,4 
12,9 
52,1 
6,0 
0,7 
82,0 
— 
840,1 
(3,5 o/o) 879,6 
13,9 
68,7 
28,1 
3,8 
26,0 
— 
1020,1 
(4,2 o/o) 3 323,0 
89,3 
63,8 
43,9 
5,1 
302,5 
191,7 
4 019,3 
(16,7 0/o) 961,2 
52,8 
71,3 
216,7 
0,6 
14,8 
46,6 
1364,0 
(5,7 o/o) 3 592,0 
143,9 
225,7 
201,7 
9,5 
169,7 
— 
4 342,5 
(18,1 o/o) 884,4 
64,2 
131,4 
104,1 
10,3 
16,0 
— 
1 210,4 
(5,0 o/o) 3 909,4 
127,8 
368,5 
435,1 
4,1 
117,5 
— , 
4 962,4 
(20,7 o/o) 3,6 
3,9 
0,5 
2,5 
— 
0,7 
— 
11,2 
(0,1 o/o) 1964,2 
24,8 
14,1 
14,8 
3,6 
101,1 
— 
2122,6 
(8,8 o/o) 2121,3 
113,3 
610,2 
297,7 
9,5 
279,6 
660,9 
4 092,5 
(17,1 o/o) 3,2 
— — — 9,9 
— 
— 
13,1 
(0,1 o/o) 18 328,3 
646,8 
1606,3 
1350,6 
57,1 
1 109,9 
899,2 
23 998,2 
(100 0/0) 
16. 12.85 Official Journal of the European Communities 149 
§19. Actual own resources — by Member State (1980-1984) 
(1980:MioEUA) 
(1981 - 1984: Mio ECU) 
1 Customs duties 
Agricultural levies 
Sugar and isoglucose levies 
VAT V) 
Total Bel-
392,6 
193,1 
27,2 
337,7 
950,6 
(6,2 o/o) Den-
130,2 
7,5 
19,1 
189,4 
346,2 
(2,2 o/o) FRof 
Germany 
1 799,1 
223,7 
130,7 
2 456,7 
4 610,2 
(29,9 o/o) Greece 
-
— France 
900,0 
91,6 
158,0 
1 842,4 
2 992,0 
(19,4 0/o) Ireland 
67,1 
3,9 
4,6 
63,7 
139,3 
(0,9 o/o) Italy 
636,9 
379,3 
54,4 
858,7 
1929,3 
(12,5 0/o) Luxem-
4,3 
0,1 
15,2 
19,6 
(0,1 o/o) Nether-
535,5 
234,7 
40,8 
461,6 
1 272,6 
(8,3 o/o) United 
Kingdom 
1440,1 
401,5 
32,1 
1 294,1 
3 167,8 
(20,5 o/o) EUR 9/10 
5 905,8 
1535,4 
466,9 
7 519,5 
15 427,6 
(100 0/o) 
1 Customs duties 
Agricultural levies 
Sugar and isoglucose levies 
VAT (') (*) 
Total 408,4 
178,4 
27,8 
375,9 
990,5 
(5,5 o/o) 135,2 
10,1 
19,3 
189,8 
354,4 
(2,0 o/o) 1943,8 
179,9 
126,9 
2 806,5 
5 057,1 
(28,1 o/o) 84,6 
17,4 
1,0 
151,5 
254,5 
(1,4 0/o) 977,3 
103,1 
154,5 
2 256,2 
3491,1 
(19,4 0/o) 81,9 
4,3 
4,6 
68,1 
158,9 
(0,9 o/o) 633,0 
247,6 
62,5 
1 582,9 
2 526,0 
(14,0 0/o) 4,5 
0,1 
22,6 
27,2 
(0,1 o/o) 572,8 
175,4 
39,1 
499,8 
1 287,1 
(7,1 o/o) 1 550,9 
348,6 
46,9 
1 930,8 
3 877,2 
(21,5 0/o) 6 392,4 
1264,9 
482,6 
9 884,1 
18 024,0 
(100 0/o) 
1 Customs duties 
Agricultural levies 
Sugar and isoglucose levies 
VAT (') (2) 
Total 403,7 
238,6 
44,4 
461,6 
1148,3 
(5,4 o/o) 142,6 
7,5 
25,3 
226,8 
402,2 
(1,9 0/o) 1 966,5 
201,9 
190,2 
3 339,9 
5 698,5 
(26,9 o/o) 108,7 
63,5 
13,1 
196,3 
381,6 
(1,8 0/o) 1071,2 
70,9 
211,0 
2 872,8 
4 225,9 
(20,0 o/o) 87,8 
6,0 
7,0 
107,7 
208,5 
(1,0 0/o) 660,8 
285,1 
83,5 
1 457,8 
2 487,2 
(11,8 0/o) 4,3 
0,1 
25,7 
30,1 
(0,1 o/o) 585,2 
172,5 
58,9 
649,8 
1466,4 
(6,9 o/o) 1 784,5 
475,9 
72,4 
2 782,7 
5115,5 
(24,2 o/o) 6 815,3 
1 522,0 
705,8 
12121,1 
21 164,2 
(100 0/o) 
• Customs duties 
Agricultural levies 
Sugar and isoglucose levies 
VAT (') (2) 
Total 423,8 
293,9 
65,8 
432,4 
1 215,9 
(5,3 o/o) 159,8 
6,9 
38,9 
274,3 
479,9 
(2,1 o/o) 2 019,8 
143,0 
270,5 
4 038,8 
6 472,1 
(28,1 o/o) 107,4 
38,0 
16,7 
215,6 
377,7 
(1,6 0/o) 1051,8 
78,9 
293,7 
3 082,1 
4 506,5 
(19,6 0/o) 100,4 
7,0 
11,6 
150,6 
269,6 
(1,2 0/o) 657,1 
323,2 
95,0 
1 923,4 
2 998,7 
(13,0 0/o) 4,6 
0,1 
39,2 
43,9 
(0,2 o/o) 633,2 
135,8 
82,2 
713,7 
1564,9 
(6,8 o/o) 1 830,8 
320,3 
73,6 
2 859,7 
5 084,4 
(22,1 o/o) 6 988,7 
1347,1 
948,0 
13 729,8 
23 013,6 
(100o/o) 
i Customs duties 
Agricultural levies 
Sugar and isoglucose levies 
VAT (') (2) 
Total 470,0 
211,0 
83,9 
473,4 
1238,3 
(5,0 o/o) 197,3 
8,0 
38,0 
289,6 
532,9 
(2,1 o/o) 2 309,7 
158,6 
350,2 
4 233,9 
7 052,4 
(28,4 0/o) 99,4 
19,5 
16,6 
220,3 
355,8 
(1,4 0/0) 1 100,0 
94,2 
406,3 
3 201,8 
4 802,3 
(19,3 0/o) 126,7 
6,9 
16,8 
135,9 
286,3 
(1,2 0/o) 750,9 
288,5 
84,1 
2 319,9 
3 443,4 
(13,8o/o) 5,9 
0,1 
45,3 
51,3 
(0,2 o/o) 740,8 
131,8 
76,9 
738,3 
1 687,8 
(6,8 o/o) 2 160,1 
341,4 
103,6 
2 824,4 
5429,5 
(21,8 0/o) 7 960,8 
1 260,0 
1 176,4 
14 482,8 
24 880,0 
(100 0/o) 
(1) Including the balances and adjustments of previous financial years. 
(2) Greece paid a financial contribution based on its GNP. 
150 Official Journal of the European Communities 16. 12.85 
Part II: The European Development Funds (EDF) 
(position at 31 December 1984) 
§ 20. General information on the EDF 
THE FIRST THREE EDF 
20.1. General information and detailed financial information on the first three EDF, established under agreements in force 
between 1959 and 1976, has most recently been given in the annual report of the Court of Auditors on the financial year 1980. 
Only a few small amounts still remain to be paid under the 2nd and 3rd EDF. 
A summary of the annual payments made under the first three EDF is given in § 27. 
THE 4th AND 5th EDF 
20.2. Legal provisions 
a) Legal basis in respect of ACP States: 
— 4th EDF: ACP-EEC Convention signed in Lome on 28 February 1975 (Lome I), 
— 5th EDF: second ACP-EEC Convention signed in Lome on 31 October 1979 (Lome II). 
b) Legal basis in respect of the OCT and FOD: 
— 4th EDF: Council Decision 76/568/EEC of 29 June 1976, 
— 5th EDF: Council Decision 80/1186/EEC of 16 December 1980 (no longer concerns the FOD). 
c) Establishment of the EDF: 
— 4th EDF: internal agreement of 11 July 1975, 
— 5th EDF: internal agreement of 20 November 1979. 
d) Financial Regulations: 
— 4th EDF: Council Decision 76/647/EEC of 27 July 1976, 
— 5th EDF: Council Decision 81/215/EEC of 17 March 1981. 
20.3. Allocations, financing, distribution and type of aid 
The EDF allocations after changes (1) by the Council are as follows: 
— 4th EDF: 3 155,9 Mio ECU, 
— 5th EDF: 4 802,3 Mio ECU. 
The EDF are financed by the EC Member States (with the exception of Greece for the 4th EDF) in proportions laid down in 
the internal agreements. 
The above-mentioned internal agreements provide for distribution of the allocations of the 4th and 5th EDF between the ACP 
States and the OCT/FOD and between grants, special loans, risk capital, Stabex (2) and Sysmin (3) for the 5th EDF. 
Part of the allocation in the form of grants is reserved for exceptional aid and for interest subsidies on loans granted by the 
European Investment Bank. The rest of the allocation in the form of grants and the allocation in the form of special loans are 
distributed among the recipient countries, with the exception of funds for the regional projects, administrative costs 
(4th EDF) and a contingency reserve. The amounts thus allocated to the recipient countries, called indicative programmes in 
the case of the ACP States, are used to finance the projects adopted. 
20.4. Monetary unit 
The EDF amounts are given in ECU; for conversion into ECU of the monetary units previously applied, it has been agreed that 
1 u.a. = 1 EUA = 1 ECU. 
20.5. Date of entry into force 
— 4th EDF: 1 April 1976, 
— 5th EDF: 1 January 1981. 
20.6. Financial implementation 
The Commission draws up a timetable of requests for contributions, which in principle are to be paid quarterly by the Member 
States of the European Communities (4th EDF: six-monthly). The use of the EDF resources is shown in the accounts in three 
stages: (I) financing decision, (II) signing of contracts against funds allocated to national authorizing officers, (III) authoriza­
tion of payments to contractors. 
20.7. External audit 
The Court of Auditors is responsible for the audit of the EDF (in accordance with the Treaty). 
20.8 Authority giving discharge 
The European Parliament gives discharge of the financial management of the EDF, on the recommendation of the Council (in 
accordance with internal agreements). 
(*) 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 (Lom6 I, Article 16, and Lome II, Article 23). 
(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). 
16. 12.85 Official Journal of the European Communities 151 
§ 21. The 4th and 5th EDF: allocations, financing, distribution of aid, utilization rates 
Allocation and financing Distribution of aid (Mio ECU) Utilization at 31.12.1984 (Mio ECU) 
4th EDF: 
DK: 2,40% Allocation: 
3 155,9 Mio ECU 
Financing by: 
IRL: 0,60 % 
L: 0,20 o/o Nature of aid: 
Programmable 
y aid: 
f 2 465,1 Programming 
of aid: Utilization: 
Risk capital Not yet 
"> utilized 
Financing 
\- decisions: 
' 2 349,7 (95,3 o/o) 
Not yet 
utilized 
Financing 
decisions: 
687,3 (99,5 o/o) 
5th EDF: 
Allocation: 
4 802,3 Mio ECU 
Financing by: Programming of aid: Utilization: 
Nature of aid: 
DK: _, 
2,47 o/o' 
GR: 
1,34 o/o 
IRL: _ 
0,59 o/o 
L: 
0,20 o/o~ i sm^mMAiu^: .;••:., •i 
•o 
CD O) :fPi|a::;:-.r „:••:: 
Grants: 
3 037,0 
E =6 ® » 
o " 
• * c £ UJ — 
1 
o -—» ' 
!. :. ftjj 205,2 1 
178,8 | 
ik capital: 
Jlfli,,,, I QL 
O 
<. 
8 a J Em ^1 
E *t 
Pro- 2 w 
< grammable <? f 
raid: Q-R 
3 198,0 
C T3 
OCT: 50,6. Financing 
v decisions: 
r 2 072,2 
(64,8 o/o) 
Financing 
decisions: 
1 029,9 
(64,2 o/o) 
152 Official Journal of the European Communities 16. 12.85 
§ 22. The 4th EDF: aid by type and by recipient country 
(financial implementation: situation at 31 December 1984) 
(Mio ECU) 
Recipient country 
(D 
I. ACP States 
including: 
Ethiopia 
Tanzania 
Sudan 
Uganda 
Mali 
Madagascar 
Burkina-Faso (Upper-
Volta) 
Malawi 
Guinea 
Somalia 
Senegal 
Rwanda 
Burundi 
Cameroon 
Chad 
Ghana 
Zambia 
Ivory Coast 
Central African Republic 
Togo 
Mauritania 
Sierra Leone 
Congo 
Liberia 
Lesotho 
Guinea-Bissau 
Jamaica 
Botswana 
Suriname 
Mauritius 
Guyana 
Swaziland 
Gambia 
New Guinea 
Fiji 
Gabon 
Solomon Islands 
Nigeria 
Other ACP States: 
Bahamas 
Barbados 
Cape Verde 
Comoros 
Djibouti 
Dominica 
Grenada 
Equatorial Guinea 
Kiribati 
Sao Tome and Principe 
Saint Lucia 
Saint Vincent 
Western Samoa 
Seychelles 
Trinidad and Tobago 
Tuvalu 
Vanuatu 
(Total other countries) 
II. Regional projects 
Administrative costs 
Contingency reserve 
Total ACP (I + II) 
III. OCT/FOD 
Total 4th EDF A. Non-programmed aid 
Financing decisions Interes 
subsidi 
(grants 
(2) 
57,8 
_ 
0,1 
8,5 
0,9 
1,6 
2,3 
0,4 
1,8 
4,2 
1,9 
1,5 
7,1 
0,4 
3,6 
1,2 
1,3 
2,2 
2,0 
1,1 
4,0 
9,0 
1,2 
1,5 
— 
(2,7) 
2,6 
60,4 
1,5 
61,9 rx 
(3) 
90,9 
_ 
7,7 
5,6 
6,5 
0,3 
6,4 
1,2 
2,3 
0,9 
7,6 
1,6 
0,3 
0,2 
7,4 
3,0 
0,5 
5,0 
7,5 
0,2 
3,3 
0,4 
0,9 
3,0 
3,1 
0,4 
0,1 
1,7 
0,0 
3,2 
1,1 
2,4 
1,6 
0,1 
— 
3,6 
0,0 
1,0 
0,2 
0,6 
— 
(5,4) 
6,1 
97,0 
1,1 
98,1 -= — 
c i2 g c 
(4) 
125,8 
4,7 
0,3 
19,0 
4,9 
3,3 
1,0 
1,3 
1,5 
7,7 
2,6 
3,0 
13,3 
4,6 
5,9 
2,1 
2,3 
0,3 
2,7 
16,4 
0,0 
0,1 
1,0 
1,4 
0,2 
1,1 
0,5 
1,2 
2,7 
4,5 
0,0 
0,7 
3,6 
— 
0,1 
1,4 
3,0 
1,3 
3,9 
0,4 
0,3 
0,3 
1,0 
0,2 
— 
(11,9) 
11,2 
137,0 
0,5 
137,5 (5) 
377,5 
14,4 
20,7 
41,8 
20,6 
9,8 
5,7 
22,7 
7,3 
1,9 
65,1 
0,6 
1,5 
4,1 
7,3 
5,2 
20,4 
15,0 
7,8 
3,6 
37,0 
4,0 
7,4 
7,6 
11,3 
13,2 
7,5 
2,1 
6,7 
— 
1,2 
2,8 
1,2 
— 
(5,2) 
377,5 
12,3 
389,8 + 
2. 
~5 + 
(6) 
652,0 
19,1 
28,8 
24,6 
53,2 
24,2 
17,2 
11,0 
9,5 
32,2 
16,5 
6,5 
3,7 
15,4 
78,9 
9,5 
4,1 
15,6 
15,1 
10,0 
21,2 
20,8 
23,1 
8,8 
7,0 
42,0 
4,0 
10,7 
9,2 
1,2 
11,8 
1,2 
5,7 
6,7 
3,2 
16,3 
10,6 
2,7 
9,8 
6,7 
9,0 
1,3 
6,2 
3,0 
2,3 
3,9 
0,4 
0,3 
0,3 
1,2 
2,8 
0,6 
1,4 
1,5 
— 
(25,2) 
19,9 
671,9 
15,4 
687,3 E 
E 
0_ 
(7) 
645,6 
19,1 
28,9 
24,5 
53,1 
24,2 
17,1 
10,8 
9,5 
32,2 
16,5 
6,1 
3,5 
15,5 
78,9 
9,5 
3,9 
15,3 
14,6 
10,0 
21,2 
20,7 
22,8 
8,8 
7,0 
42,0 
4,0 
10,7 
9,1 
1,2 
11,8 
1,1 
5,2 
6,5 
3,2 
15,4 
9,3 
2,7 
9,4 
6,7 
9,0 
0,9 
6,1 
2,9 
2,3 
3,9 
0,5 
0,3 
0,3 
1,2 
2,8 
0,6 
1,4 
1,4 
— 
(24,6) 
19,7 
665,3 
15,3 
680,6 B. Programmable aid (indicative programmes 
ACP and other aid) 
</> 
o 
< 
(8) 
1 942,4 
118,2 
103,4 
96,5 
90,6 
73,6 
73,5 
72,0 
69,2 
68,5 
68,0 
67,9 
64,0 
63,6 
59,0 
58,7 
58,1 
55,3 
51,9 
48,0 
45,1 
44,3 
40,0 
37,3 
35,7 
33,6 
31,1 
30,0 
25,0 
22,0 
20,0 
20,0 
19,0 
18,0 
15,3 
12,8 
12,0 
11,3 
10,0 
9,9 
9,5 
9,3 
9,0 
1,8 
2,6 
4,0 
6,3 
3,9 
2,0 
2,0 
7,0 
3,5 
1,8 
3,2 
3,0 
4,6 
2,4 
3,2 
10,3 
0,6 
— 
(62,2) 
303,9 
104,1 
47,1 
2 397,5 
67,6 
2 465,1 Financing decisions 
O 
(9) 
1 530,1 
118,1 
69,9 
87,7 
74,8 
63,9 
71,8 
34,2 
61,7 
68,4 
60,3 
55,2 
38,1 
57,2 
39,3 
56,0 
52,3 
33,3 
44,3 
28,0 
27,1 
34,8 
16,9 
37,3 
33,3 
33,4 
27,3 
23,2 
20,8 
18,6 
19,1 
9,2 
17,9 
3,4 
4,6 
5,9 
8,4 
11,1 
6,0 
3,1 
2,0 
0,8 
8,8 
0,7 
0,9 
4,0 
6,2 
2,6 
0,5 
2,0 
7,0 
3,2 
1,8 
0,9 
3,7 
2,4 
3,1 
3,0 
0,6 
0,0 
(42,6) 
224,6 
104,1 
1 858,8 
38,2 
1 897,0 0) c 
(10) 
359,3 
32,8 
8,0 
15,0 
9,7 
1,4 
37,8 
6,0 
7,0 
11,7 
25,4 
19,3 
2,6 
5,0 
22,0 
7,6 
20,0 
17,6 
0,3 
22,8 
2,3 
3,8 
6,7 
3,0 
8,6 
0,6 
11,0 
10,6 
6,8 
3,5 
3,5 
6,7 
7,4 
6,8 
— 
1,1 
1,0 
0,9 
0,1 
2,9 
— 
(6,0) 
72,1 
431,4 
21,3 
452,7 s + 
(11) 
1 889,4 
118,1 
102,7 
95,7 
89,8 
73,6 
73,2 
72,0 
67,7 
68,4 
67,3 
66,9 
63,5 
57,2 
58,6 
58,6 
57,3 
55,3 
51,9 
48,0 
44,7 
35,1 
39,7 
37,3 
35,6 
33,4 
31,1 
29,9 
20,8 
21,6 
19,1 
17,8 
18,5 
14,4 
15,2 
12,7 
11,9 
11,1 
9,5 
9,8 
9,4 
7,6 
8,8 
1,8 
1,9 
4,0 
6,2 
2,6 
0,5 
2,0 
7,0 
3,2 
1,8 
0,9 
4,6 
2,4 
3,2 
5,9 
0,6 
0,0 
(48,6) 
296,7 
104,1 
2 290,2 
59,5 
2 349,7 a> 
1 
1 
0_ 
(12) 
1 623,2 
100,3 
86,9 
78,4 
76,3 
48,7 
65,1 
69,2 
60,3 
61,4 
53,7 
60,8 
61,7 
47,5 
52,6 
56,3 
45,6 
42,3 
47,0 
46,9 
38,9 
31,8 
29,1 
33,9 
31,4 
31,4 
25,8 
29,2 
17,3 
16,5 
17,6 
12,6 
16,4 
8,1 
10,5 
12,6 
11,3 
10,0 
7,3 
9,6 
8,7 
6,7 
5,7 
1,1 
1,9 
3,7 
5,2 
2,1 
0,5 
1,9 
6,6 
1,6 
1,7 
0,8 
4,3 
2,3 
2,7 
2,8 
0,6 
0,0 
(39,8) 
225,4 
99,1 
1 947,7 
47,9 
1 995,6 Total (A+ B) 
o.o 
il TJ 
(13) = 
(6) + (11) 
2 541,4 
137,2 
131,5 
120,3 
143,0 
97,8 
90,4 
83,0 
77,2 
100,6 
83,8 
73,4 
67,2 
72,6 
137,5 
68,1 
61,4 
70,9 
67,0 
58,0 
65,9 
55,9 
62,8 
46,1 
42,6 
75,4 
35,1 
40,6 
30,0 
22,8 
30,9 
19,0 
24,2 
14,4 
21,9 
15,9 
28,2 
21,7 
12,2 
19,6 
16,1 
7,6 
17,8 
1,8 
3,2 
10,2 
9,2 
4,9 
4,4 
2,4 
7,3 
3,2 
2,1 
2,1 
7,4 
3,0 
4,6 
7,4 
0,6 
0,0 
(73,8) 
316,6 
104,1 
2 962,1 
74,9 
3 037,0 Q) 
1 
I Q. 
(14) = 
(7)+ (12) 
2 268,8 
119,4 
115,8 
102,9 
129,4 
72,9 
82,2 
80,0 
69,8 
93,6 
70,2 
66,9 
65,2 
63,0 
131,5 
65,8 
49,5 
57,6 
61,6 
56,9 
60,1 
52,5 
51,9 
42,7 
38,4 
73,4 
29,8 
39,9 
26,4 
17,7 
29,4 
13,7 
21,6 
8,1 
17,0 
15,8 
26,7 
19,3 
10,0 
19,0 
15,4 
6,7 
14,7 
1,1 
2,8 
9,8 
8,1 
4,4 
4,4 
2,4 
6,9 
1,6 
2,0 
2,0 
7,1 
2,9 
4,1 
4,2 
0,6 
0,0 
(64,4) 
245,1 
99,1 
— 
2 613,0 
63,2 
2 676,2 
16. 12.85 Official Journal of the European Communities 153 
§ 23. The 4th EDF: financial implementation of aid by recipient country (31 December 1984) 
(for detailed figures see § 22) 
A. Non-programmed aid B. Programmable aid 
(indicative programmes ACP and other aid) 
Mio ECU Mio ECU 
Key: 
Allocations 
TmartclrTg" " 
decisions 
^| 
Payments 
296,7 303,9 
154 Official Journal of the European Communities 16. 12.85 
§ 24. The 5th EDF: aid by type and by recipient country 
(financial implementation: situation at 31 December 1984) 
(Mio ECU) 
Recipient country 
(1) 
I. ACP States 
including: 
Ethiopia 
Tanzania 
Sudan 
Uganda 
Mali 
Madagascar 
Burkina-Faso (Upper-
Volta) 
Malawi 
Guinea 
Somalia 
Senegal 
Rwanda 
Burundi 
Cameroon 
Chad 
Ghana 
Zambia 
Ivory Coast 
Central African Republic 
Togo 
Mauritania 
Sierra Leone 
Congo 
Liberia 
Lesotho 
Guinea-Bissau 
Jamaica 
Botswana 
Suriname 
Mauritius 
Guyana 
Swaziland 
Gambia 
Papua New Guinea 
Fiji 
Gabon 
Solomon Islands 
Nigeria 
Zimbabwe 
Other ACP States: 
Antigua and Barbuda 
Bahamas 
Barbados 
Cape Verde 
Comores 
Djibouti 
Dominica 
Grenada 
Equatorial Guinea 
Kiribati 
Sao Tome and Principe 
Saint Lucia 
Saint Vincent 
Western Samoa 
Seychelles 
Trinidad and Tobago 
Tuvalu 
Vanuatu 
(Total other countries) 
II. Regional projects 
Contingency reserve 
Total ACP (l +II) 
III. OCT 
Total 5th EDF A. Non-programmed aid ' Interest 
subsidie 
(grants) 
(2) 
86,9 
5,1 
3,6 
1,1 
5,6 
16,4 
8,5 
7,0 
1,5 
0,5 
0,5 
4,8 
0.7 
2,1 
1,4 
4,5 
9,4 
5,1 
6,7 
0,9 
0,3 
1,2 
— 
(2,4) 
1,3 
88,2 
1,6 
89,8 F 
_ 
'5. 
if 
(3) 
178,1 
0,5 
11,0 
18,2 
0,2 
10,0 
1,5 
7,2 
6,0 
9,6 
6,3 
0,7 
6,5 
13,6 
1,5 
4,5 
5,1 
3,0 
10,0 
0,5 
0,7 
3,0 
3,8 
5,0 
0,5 
4,0 
1,6 
13,8 
1,8 
0,4 
5,4 
0,6 
6,8 
0,2 
2,3 
1,0 
2,4 
0,2 
1,0 
3,3 
1,0 
2,3 
0,1 
1,0 
(22,2) 
25,4 
203,5 
4,3 
207,8 inancing decisions 
^ t Exceptio 
emergen 
(grants) 
(4) 
160,5 
48,3 
0,5 
2,8 
14,5 
4,4 
10,4 
2,4 
1,8 
11,3 
0,5 
0,4 
1,1 
16,0 
2,1 
2,0 
0,2 
11,8 
4,4 
1,5 
1,3 
0,8 
0,5 
0,5 
4,4 
0,1 
0,2 
0,1 
0,1 
0,1 
2,8 
0,2 
8,0 
0,2 
1,2 
0,4 
0,4 
0,5 
0,1 
0,2 
0,2 
0,2 
0,2 
1,4 
— 
(5,0) 
160,5 
0,8 
161,3 (5) 
463,1 
5,8 
6,9 
32,2 
9,9 
31,1 
6,1 
1,0 
4,7 
2,6 
64,9 
7,7 
11,0 
17,3 
6,1 
62,2 
3,6 
54,5 
4,2 
20,8 
8,4 
1,3 
2,5 
3,3 
8,2 
14,3 
39,2 
2,1 
3,8 
— 
0,2 
2,2 
3,0 
3,0 
1,6 
7,0 
1,4 
4,9 
4,0 
0,1 
— 
(27,4) 
463,1 
9,9 
473,0 1 
(6) 
98,0 
40,0 
55,0 
3,0 
— 
— 
(—) 
— 
98,0 
— 
98,0 2, 
+ £" 5 + 
(7) 
986,6 
54,6 
18,4 
61,0 
46,9 
14,4 
20,3 
40,1 
15,1 
14,9 
1,5 
11,1 
2,2 
28,2 
78,9 
10,4 
17,7 
33,7 
17,9 
80,2 
66,5 
9,4 
62,3 
9,8 
25,8 
4,4 
18,4 
1,0 
1,2 
4,4 
6,3 
8,3 
5,0 
1,3 
7,0 
10,4 
16,0 
54,4 
11,2 
9,4 
4,2 
5,3 
20,1 
0,2 
0,9 
0,9 
8,2 
2,8 
2,7 
4,5 
5,4 
1,8 
7,1 
2,6 
0,2 
8,4 
1,2 
7,7 
1,2 
0,2 
1,0 
(57,0) 
26,7 
1013,3 
16,6 
1029,9 E 
1 a. 
(8) 
727,5 
8,6 
14,4 
41,0 
25,3 
11,8 
13,3 
38,1 
14,1 
6,4 
1,5 
6,9 
2,2 
22,8 
72,3 
9,1 
15,5 
25,4 
11,7 
64,8 
43,2 
4,8 
54,6 
7,3 
22,9 
2,6 
8,2 
0,5 
1,2 
3,8 
2,4 
5,2 
5,0 
0,8 
10,4 
14,3 
51,8 
10,6 
5,8 
3,8 
5,1 
13,5 
0,2 
0,9 
0,3 
2,9 
2,7 
2,4 
4,4 
5,1 
1,7 
3,7 
2,4 
0,2 
7,8 
0,8 
7,1 
1,2 
0,2 
0,5 
(44,5) 
5,3 
732,8 
13,8 
746,6 B. Programmable and (indicative 
programmes ACP and other aid) 
q 
o 
< 
(9) 
2 513,7 
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 
3,7 
3,7 
6,2 
3,6 
4,1 
10,5 
1,0 
4,5 
(110,7) 
631,5 
2,2 
3 147,4 
50,6 
3198,0 Financing decisions 
O 
(10) 
1 414,2 
109,8 
86,6 
60,6 
72,6 
58,4 
47,2 
44,4 
41,0 
53,2 
60,6 
40,3 
43,2 
37,9 
33,9 
42,9 
34,4 
26,3 
36,4 
24,4 
27,4 
25,3 
15,1 
37,9 
29,0 
23,8 
21,6 
18,3 
6,0 
15,8 
15,4 
11,2 
11,1 
2,8 
11,5 
11,1 
12,3 
8,4 
5,7 
9,6 
7,9 
5,8 
28,2 
26,2 
0,2 
1,4 
2,3 
0,1 
11,0 
9,4 
3,2 
3,4 
3,3 
2,6 
1,1 
3,5 
3,7 
3,4 
6,1 
3,3 
2,9 
6,6 
1,0 
4,2 
(72,7) 
289,0 
— 
1 703,2 
17,0 
1 720,2 (11) 
272,8 
28,3 
7,5 
16,7 
13,4 
9,0 
2,6 
8,0 
7,0 
10,0 
6,9 
17,3 
11,9 
11,6 
18,0 
7,0 
2,0 
18,3 
4,7 
5,8 
8,7 
2,4 
10,0 
8,8 
8,6 
0,8 
2,7 
6,3 
4,7 
4,5 
5,1 
4,2 
— 
(—) 
73,3 
346,1 
5,9 
352,0 _ + 
1- — 
(12) 
1 687,0 
138,1 
94,1 
77,3 
72,6 
58,4 
60,6 
53,4 
43,6 
61,2 
67,6 
50,3 
50,1 
37,9 
51,2 
54,8 
46,0 
44,3 
36,4 
31,4 
29,4 
25,3 
33,4 
42,6 
34,8 
32,5 
24,0 
28,3 
6,0 
24,6 
15,4 
19,8 
11,9 
5,5 
17,8 
11,1 
17,0 
8,4 
10,2 
9,6 
13,0 
5,8 
28,2 
30,4 
0,2 
1,4 
2,3 
0,1 
11,0 
9,4 
3,2 
3,4 
3,3 
2,6 
1,1 
3,5 
3,7 
3,4 
6,1 
3,3 
2,9 
6,6 
1,0 
4,2 
(72,7) 
362,3 
— 
2 049,3 
22,9 
2 072,2 E 
1 
(13) 
572,4 
45,7 
26,7 
23,0 
51,7 
14,2 
22,8 
16,3 
19,5 
21,5 
26,9 
10,5 
17,3 
21,7 
15,1 
23,7 
13,6 
7,6 
13,6 
6,1 
5,4 
6,8 
16,7 
17,5 
20,8 
12,4 
5,9 
11,5 
2,4 
5,3 
4,8 
3,2 
4,1 
1,9 
4,7 
4,1 
1,9 
3,1 
0,9 
5,1 
6,4 
0,9 
1,1 
7,8 
0,0 
0,1 
1,0 
0,1 
0,7 
1,4 
1,5 
0,2 
0,2 
0,4 
0,5 
2,1 
1,5 
2,4 
4,5 
0,6 
0,3 
1,1 
0,4 
1,2 
(20,2) 
129,3 
— 
701,7 
6,4 
708,1 Total 
(A + B) 
iZ -o 
(14) = 
7) + (12) 
2 673,6 
192,7 
112,5 
138,3 
119,5 
72,8 
80,9 
93,5 
58,7 
76,1 
69,1 
61,4 
52,3 
66,1 
130,1 
65,2 
63,7 
78,0 
54,3 
111,6 
95,9 
34,7 
95,7 
52,4 
60,6 
36,9 
42,4 
29,3 
7,2 
29,0 
21,7 
28,1 
16,9 
5,5 
19,1 
18,1 
27,4 
24,4 
64,6 
20,8 
22,4 
10,0 
33,5 
50,5 
0,4 
1,4 
3,2 
1,0 
19,2 
12,2 
5,9 
7,9 
8,7 
2,6 
2,9 
10,6 
6,3 
3,6 
14,5 
4,5 
10,6 
7,8 
1,2 
5,2 
(129,7) 
389,0 
— 
3 062,6 
39,5 
3 102,1 •D 
E 
1 a. 
(15) = 
8)+ (13) 
1 299,9 
54,3 
41,1 
64,0 
77,0 
26,0 
36,1 
54,4 
33,6 
27,9 
28,4 
17,4 
19,5 
44,5 
87,4 
32,8 
29,1 
33,0 
25,3 
70,9 
48,6 
11,6 
71,3 
24,8 
43,7 
15,0 
14,1 
12,0 
3,6 
9,1 
7,2 
8,4 
9,1 
1,9 
5,5 
4,1 
12,3 
17,4 
52,7 
15,7 
12,2 
4,7 
6,2 
21,3 
0,2 
0,1 
1,9 
0,4 
3,6 
4,1 
3,9 
4,6 
5,3 
0,4 
2,2 
5,8 
3,9 
2,6 
12,3 
1,4 
7,4 
2,3 
0,6 
1,7 
(64,7) 
134,6 
— 
1434,5 
20,2 
1454,7 
16. 12.85 Official Journal of the European Communities 155 
§ 25. The 5th EDF: financial implementation of aid by recipient country (31 December 1984) 
(for detailed figures see § 24) 
A. Non-programmed aid B. Programmable aid 
(indicative programmes ACP and other aid) 
Mio ECU 100 Mio ECU 
138.1 141 0 iM 
Key: 
Allocations 
Financing 
decisions 
IH 
Payments 
129,3 362,3 631,5 
OCT 
156 Official Journal of the European Communities 16. 12.85 
§ 26. The 4th and 5th EDF: utilization of aid by economic sector (situation at 31 December 1984) 
Allocation and total utilization Financing decisions and payments by economic sector 
4th EDF: 
Allocation: 
3 155,9 Mio ECU (100 o/o) 
1 
; 
5° cuLU 
•a o 
?2 
o° C N. 
V , 
a- , 
«t 
=3 
O 
LU 
^ 
CO 
E 
E 
Q. 
1 , 
' < Q. 
IOI 
lfe«gi 73 B 
Oi 
turn 
Financing 
decisions (Mio ECU) 3 037,0 720,9 
598,0 733,3 
630,3 237,8 
217,6 171,0 
156,9 18,8 
17,4 249,4 
207,9 66,6 
51,5 113,1 
91,4 34,2 
24,0 137,5 
137,2 389,8 
389,8 56,3 108,3 
Payments (Mio ECU) 2 676,2 51,1 103,1 
5th EDF: 
Allocation: 
4 802,3 Mio ECU (100 o/o) 
Financing 
decisions: 
3 102,1 Mio ECU 
(64,6 o/o) 
Payments: 
1 454,7 
Mio ECU 
(30,3 o/o) 
Financing 
decisions (Mio ECU) 3102,1 2 c 
3.2 
•2 3 
rag 
< Q. 
fv>l 
i»»<«!i IO 
IS 
s^ip* fQft 
770,8 
268,5 558,3 
206,2 229,0 
129,4 220,3 
88,9 162,1 
96,3 221,0 
47,0 53,7 
16,3 197,3 41,2 161,3 438,6 48,5 
Payments (Mio ECU) 1 454,7 68,2 12,5 78,4 421,5 21,5 
16. 12. 85 Official Journal of the European Communities 157 
MioECU 
700 
600 
500-
400-
300-
200-
100-§ 27. The five EDF: evolution of annual payments (1960-1984) 
Note: 
This presentation summarizes the annual payments made under all the European 
Development Funds. 
Detailed information on the first three Funds, particularly regarding the break­
down by type of aid and by recipient country, was most recently given in the 
Court's annual report for the financial year 1980. 
Key: 
5th EDF 
4th EDF 
3rd EDF 
2nd EDF 
1st EDF 
(Mio ECU) 
1960 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 Total 
1st EDF 
2nd EDF 
3rd EDF 
4th EDF 
5th EDF 3,4 
3,4 15,8 
15,8 53,3 
53,3 65,3 
65,3 83,4 84,8 
21,9 
106,7 76,7 
31,6 
108,3 61,7 
42,9 38,6 
67,9 25,6 
89,4 
115,0 16,1 
129,5 
145,6 11,4 
120,5 
22,5 
154,4 10,1 
78,6 
42,8 
131,5 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 
326,3 
401,0 0,4 
4,1 
37,4 
423,4 
465,3 0,3 
2,5 
19,8 
459,3 
481,9 0,4 
0,9 
20,7 
445,8 
195,9 
663,7 0,4 
11,2 
305,5 
330,1 
647,2 0,1 
14,3 
285,2 
419,2 
718,8 0,1 
8,2 
185,2 
509,5 
703,0 569,4 
730,4 
875,5 
2 676,2 
1454,7 
6 306,2 

16.12.85 Official Journal of the European Communities 159 
Replies of the institutions to the observations of the 
Court concerning the financial year 1984 
The institution responsible for the replies is indicated either at the beginning of each chapter 
(if appropriate) or before the individual reply or series of replies within each chapter. 
Preliminary comment 
Council 
The Council would reiterate its wish that the comments by the Court of Auditors on each 
Institution should be brought together in separate parts of the Court's report. 
It does wonder why — although it has already expressed this wish several times — the Court 
of Auditors has not yet acted accordingly. 
PART I 
REPLIES OF THE COMMISSION TO 
CHAPTER 1 
General comments 
INTRODUCTION 
In the first chapter of its Annual Report for 1984, the 
Court of Auditors makes a series of general comments 
prompted by its analytical assessment of the execution 
of that year's budget as set out in the chapters that fol­
low (2 to 14). 
As soon as it took office in January, the present Com­
mission made a point of stressing the importance it 
attaches to sound management of the Community's 
financial resources. This has, of course, always been a 
matter of concern to the Commission, but it is clear that in times of budgetary difficulties its responsibili­
ties in this field assume very special importance. It 
accordingly decided to improve the control of Com­
munity revenue and expenditure, thereby unequivo­
cally demonstrating its political will to give a leading 
role to this activity. 
It is against this background that the Commission is 
replying to the Court of Auditiors' general comments. 
The replies in points I to VI below are themselves gen­
eral and set out the Commission's position and 
planned action. Specific replies to individual com­
ments are to be found in the chapters concerned. 
160 Official Journal of the European Communities 16.12.85 
I. IMPLICATIONS OF POSSIBLE 
IRREGULARITIES REPORTED BY THE 
COURT OF AUDITORS 
As early as February, the Commission arranged a work­
ing meeting with the Court of Auditors, followed by 
talks between the Members of the Commission and the 
Members of the Court of Auditors responsible for the 
same areas of activity. These meetings were extremely 
useful, demonstrating the Commission's and the Court 
of Auditors' common desire to eliminate the shortcom­
ings found in the management systems. The Court of 
Auditors' report and the Commission's replies both tes­
tify to this. 
As soon as it was apprised of the comments (dated 
15 July) which the Court of Auditors planned to 
include in the annual report, the Commission held an 
initial discussion on the subject (meeting of 24 July). 
The first conclusion was a commitment to do its utmost 
to rectify the management of its affairs so that the 
Court of Auditors would not have to repeat its criticism 
in future, always assuming that such criticism was justi­
fied. The Commission has taken a positive attitude in 
the preparation of its replies to the comments and has 
given instructions for action to be taken at the same 
time to put right practices subject to criticism. 
The replies below bear witness to the Commission's 
desire to bring about the changes it considers neces­
sary. It will be found that, in many significant cases, 
the Court of Auditors' recommendations have already 
been or will be acted upon. 
II. PROBLEM OF BALANCE BETWEEN 
REVENUE AND EXPENDITURE AND 
LACK OF COHERENCE BETWEEN 
REVENUE-GENERATING 
MECHANISMS AND THOSE 
DETERMINING EXPENDITURE 
The Commission has always shared the concern 
expressed by the Court of Auditors. Suffice it to recall 
the following: 
(1) As regards the problem of equilibrium, it is true 
that the past few years, since 1983 in particular, 
have been marked by an extremely tight budgetary 
situation on the revenue side, which in 1984 made 
it necessary to take special decisions on additional 
finance by means of intergovernmental agree­
ments. However, it should be remembered that the Commission, for its part, had presented appro­
priate proposals in good time, both for revenue 
(proposal for a new own resources decision) and 
for expenditure (improved control of agricultural 
expenditure), which, had they been accepted in 
good time by the competent authority, would 
undoubtedly have prevented and obviated most of 
the problems which finally arose as regards budget­
ary balance. 
Unfortunately, for a number of highly political rea­
sons, the authorities responsible took too long over 
the negotiations and it was May 1985 before they 
took a series of decisions (only partly in line with 
the Commission's proposals); the main decisions 
will only enter into force in conjunction with the 
third enlargement of the Community, once they 
have been ratified by the national parliaments. 
The situation in 1984 was also aggravated by the 
underestimation of revenue by the budgetary 
authority (supplementary and amending budget 
No 1/84). 
(2) As regards the lack of coherence between the 
revenue-generating mechanisms and those deter­
mining expenditure, the Commission generally 
speaking agrees with the Court of Auditors' com­
ment. However, it is quite clear that the conclusion 
reached here does not relate specifically to the 
implementation of the 1984 budget but to the Com­
munities' financial and budgetary system, which is 
rooted in the Treaty itself, in particular in the pro­
visions governing the exercise of legislative powers 
(notably Articles 145 et seq. EEC) and those relat­
ing to budgetary powers (Articles 201 and 203 
EEC). 
With these provisions, and despite the constant 
efforts made wherever possible, especially in recent 
years, to achieve coordination and convergence 
through the various consultation and conciliation 
procedures provided for in basic instruments or 
established over the years, it must be accepted that, 
in the present legal framework, there is indeed a 
division of responsibility such as might lead to a 
lack of coherence, as the Court of Auditors rightly 
states. It need only be pointed out that: 
— Legislative power is vested in the Council. 
Consequently, decisions on basic regulations, 
notably in agriculture — which accounts for 
the bulk of budget expenditure — are taken by 
the Council; 
16.12.85 Official Journal of the European Communities 161 
— in accordance with Article 201 EEC, the Coun­
cil also decides on any increase in own 
resources, although the decision has then to be 
ratified by the Parliaments of the Member 
States; 
— the European Parliament has special responsi­
bility for noncompulsory expenditure. 
Seen objectively, there is a division of responsibility as 
regards the main items generating revenue and expen­
diture such as might lead to certain differences of 
opinion, especially in difficult periods such as the 
Community has just experienced. The system being 
what it is at the present time, the Commission feels that 
the only constructive answer is for each institution con­
cerned to make a constant effort to strive towards the 
highest possible degree of convergence in the exercise 
of its responsibilities. The Commission, for its part, is 
doing its utmost to this end. 
III. IMPROVEMENTS IN FINANCIAL 
MANAGEMENT 
The steps taken by the Commission in this field may be 
grouped under four headings: 
1. Monitoring the implementation of the 
budget 
To help cope with the budget situation created when 
the ceiling on own resources was reached, the Commis­
sion introduced new procedures at the beginning of 
1984 for monitoring and controlling expenditure. This 
mechanism enabled it to implement the budget as effi­
ciently as possible in the light of the constraints 
imposed upon it, which Were at the root of many of the 
Court of Auditors' critiscisms this year. 
2. Tighter control of the implementation of the 
budget 
The first point to note is that the three-year financial 
forecasts were improved in the 1986 preliminary draft 
budget and this process will continue in future years. 
The Commission agrees with the European Parliament 
that excessive concentration on the most immediate aspects of implementation should give way to real 
multiannual financial forecasting. The limited 
resources available make it all the more important for 
the budget to form an integral part of a long-term 
financial strategy, rather than being simply the sum of 
the costs of individual decisions. 
The Commission has also decided to act on the 
requests made by Parliament in the follow-up to the 
1983 discharge for further items of information to be 
included in the revenue and expenditure account and 
balance sheet. Finally it has agreed to improve the 
budgetary authority's means of control in respect of the 
current year by providing figures and notes on the 
implementation of the various Community policies by 
30 September. 
3. Improved management of Community 
policies 
The Commission is always concerned to improve man­
agement of Community policies and to this end it has 
always subjected to constructive analysis the criticisms 
made by the Court of Auditors, whether in its annual 
report or in its special reports 
The Commission would draw attention to recent steps 
it has taken in three areas to explore policy-manage­
ment options. The first was the presentation on 13 July 
of the green paper on the perspectives for the common 
agricultural policy (doc. COM(85)333 final). This will 
provide a basis for analysis, both for the Commission 
and the other political, social and agricultural bodies 
concerned, and will permit the establishment of guide­
lines for the CAP in the coming years which will take 
account of the costs of the policy. Secondly, the Com­
mission has set up a working party to look at ways of 
improving the efficiency of its food aid policy. Finally, 
within its own administrative structure, the Commis­
sion has set up a high-level working party chaired by 
the Secretary-General to look at the use of the Commis­
sion's human resources and the Community's financial 
operations and to make recommendations in various 
areas. 
In addition to the above measures the Commission is 
of course constantly striving, to some extent in res­
ponse to the comments of the Court of Auditors, to 
162 Official Journal of the European Communities 16.12.85 
improve the efficiency of Community policies. In this 
connection the Commission intends to work out inter­
nal procedural arrangements to ensure that the Court of 
Auditors' special reports (see paragraph 1.36. of the 
Court of Auditors' report) are systematically followed 
up in the appropriate manner. 
The Commission would reiterate that it is constantly 
seeking ways of improving the efficiency of the Com­
munity's structural policies and especially of its struc­
tural funds. It would point to a number of recent 
actions: implementation of the guidelines in the Com­
mission's communication to ,the Council of 29 July 
1983 on ways of improving the efficiency of the struc­
tural funds (doc. COM(83)501 final of 29 July 1983), 
recent changes in the regulations governing operation 
of the ERDF and the Social Fund, the launching of the 
integrated Mediterranean programmes and placing the 
Task Force for the Coordination of Financial Structural 
Instruments under the direct authority of the President 
of the Commission. 
4. Improved monitoring of the implementation 
of Community policies (frauds and 
irregularities) 
Monitoring the implementation of Community policies 
managed by the Commission is a complex matter. The 
ways in which it is done vary from case to case and 
depend on a series of political, legal and administrative 
factors: inspections within the Community or in non-
member countries, the degree of delegation permitted 
to the Member States for the administrative and/or 
financial implementation of Community policies, the 
problem of the Commission's staff complement and 
the sharing of tasks with national authorities, and the 
amount and content of information to be handled at 
Community level. 
It is unlikely that progress would be achieved through 
unduly systematic harmonization of the arrangements 
for monitoring the various Community policies 
because they differ too much. Some progress on har­
monization should, however, be possible and would 
produce qualitative improvements in: 
— the definition of the Commission's legal powers to 
carry out controls; 
— relations with national authorities in the Member 
States; 
— the necessary harmonization of the methods 
applied in the various Member States for monitor­
ing any one policy, or similar policies, in order to ensure that such methods are sufficiently and 
equally effective; 
— the information to be obtained and distributed on 
the results of controls. 
The Commission is aware of the need, which has been 
emphasized on a number of occasions by the Court of 
Auditors, to find ways of improving the monitoring of 
the implementation of Community policies, despite the 
various difficulties which this task poses. It is continu­
ing its efforts in this direction. 
IV. FORECASTING APPROPRIATIONS 
AND REVENUE 
The Commission is glad that the Court of Auditors, like 
the other institutions, is concerned that the efforts 
being made to improve forecasts of appropriations 
required, and hence budget revenue too, should con­
tinue. The Court of Auditors draws particular attention 
(paragraph 1.20.) to the need to try and improve fore­
casts both of EAGGF Guarantee Section expenditure 
and of payment appropriations for the structural funds. 
As the Commission has demonstrated over the years, it 
has always striven towards this goal. It will of course 
continue its efforts, despite externally imposed con­
straints, and those arising from political considera­
tions ('), of which the budgetary authority is well 
aware. 
For instance: 
(1) it is well known that any forecasts of EAGGF 
Guarantee Section expenditure are fraught with 
uncertainty; but, since the causes are external fac­
tors largely beyond the Community's control 
(mainly market and monetary movements), it is not 
possible to find any real solution; 
(2) progress has been made on differentiated payment 
appropriations; here too, however, it is impossible 
to achieve perfection, mainly for the reasons 
explained on a number of occasions. These are 
principally: 
(a) The inevitable uncertainty of some forecasts of 
appropriations 
The Commission's departments prepare initial 
estimates of budgetary needs for the prelimi-
16. 12.85 Official Journal of the European Communities 163 
nary draft budget in April and May of year n-1 
(some seven or eight months before the start of 
the financial year, which lasts for twelve 
months). This means that there is a gap of at 
least seven and as much as nineteen months 
between the preparation of estimates and 
actual implementation. It is hardly surprising 
that disparities occur. The budgetary authority 
is, in any case, well aware of this problem, but 
experience has shown that it is unable to make 
any significant improvements to the Commis­
sion's figures in certain areas during the budget 
procedure (which takes place in the second 
half of year n-1). meant that the amount involved was far smaller than 
1983. This policy will be actively pursued. (In 1985 
there will inevitably be some delay in implementation 
as a result of the application of the provisional twelfths 
arrangements during the first half of the year.) 
(b) External factors V. FINANCIAL COMMITMENTS ARISING 
FROM THE PAST 
The Court of Auditors is rightly concerned about two 
sources of expenditure to be effected in coming years 
but originating in the past: commitments entered into 
by the Commission which are still to be settled and 
expenditure on the disposal of agricultural stocks. The 
Commission has taken important initiatives to deal 
with both cases. 
Implementation of the budget, and particularly 
of payment appropriations, is subject to a 
number of external constraints. This is espe­
cially true of the structural funds, development 
aid, and research, energy, technology, etc. /. Commitments outstanding 
The rate of payments in this case depends to a 
decisive extent on progress made, i.e. the speed 
at which various operations are performed by 
outside bodies. Accordingly, neither the Com­
mission nor the budgetary authority can be 
automatically held responsible for shortcom­
ings. 
To conclude on this point, the Commission, while not 
dismissing the Court of Auditors' proposals, would 
point out that: These are estimated by the Commission (and by the 
Court of Auditors) at 10 300 Mio ECU at the end of 
1984 (see p. 30 of Volume V of the revenue and 
expenditure account and balance sheet for 1984). 
It is quite natural for there to be a balance of outstand­
ing commitments; it is the result of the differentiation 
of commitment and payment appropriations in accord­
ance with the Financial Regulation. The 'cost of the 
past' is a consequence of the free choice of the budget­
ary authority, acting on the Commission's proposals, to 
develop all the Community's structural policies and 
new actions. 
in its proposal for revision of the Financial Regula­
tion it asked for greater flexibility in the utilization 
of payment appropriations. If this request is 
accepted, a more global approach will make fore­
casting easier; 
if in certain budget areas some amounts still 
remain unused at the end of the year, they should 
be regarded, as is logically and appropriately prov­
ided by the rules in force (the Treaties and the 
Financial Regulation), as eligible for carryover to 
ensure the most appropriate possible continuity 
and transition from one year to another. 
The Commission strives to keep carryovers within rea­
sonable limits and the greater effort made in 1984 Technically, the Commission has no difficulty in 
explaining the origins and the future consequences of 
these outstanding commitments; in accordance with 
Parliament's request in the 1983 discharge, and as the 
Court of Auditors noted, the Commission gave a break­
down by title and a likely schedule of payments on 
page 30 of Volume V of the revenue and expenditure 
account and balance sheet for 1984. 
The Court of Auditors is right to draw attention to the 
way in which the outstanding commitments have 
grown. In the case of differentiated appropriations, 
since 1978 commitment appropriations have grown 
considerably faster than payment appropriations to 
reach the figure quoted by the Court of Auditors of 
10 300 Mio ECU, including 8 200 Mio ECU for the 
three structural funds alone. If this trend continues and 
164 Official Journal of the European Communities 16. 12.85 
own resources are not increased, the margin available 
to finance new Community policies, which is already 
slim, will be further eroded. In 1986, for instance, it is 
estimated that 4 400 Mio ECU in payment appropria­
tions will be required to meet commitments outstand­
ing (including about 4 000 Mio ECU for non-compul­
sory expenditure). 
In its preliminary draft budget for 1986, the Commis­
sion took steps to provide the payment appropriations 
needed to honour past commitments; at the same time 
the requests for new commitment appropriations 
reflected the need to contain their growth. 
2. Expenditure on the disposal of agricultural 
stocks 
Like the Court of Auditors, the Commission is gravely 
concerned about the size and increasing age of stocks 
and the heavy and growing costs they entail. 
Large stocks, which will have to be disposed of at con­
siderable cost, are the result mainly of market condi­
tions inside and outside the Community and are 
closely linked to the development of structural and 
technical production factors, whose trend is difficult to 
change. Estimates of the likely costs of disposing of 
stocks are themselves largely dependent on market 
developments and cannot be estimated with the same 
precision as outstanding balances arising from earlier 
commitments under the structural funds. 
The existence of large stocks is nevertheless a factor 
which overshadows both the budget and reflections on 
the future of the common agricultural policy (See III.3. 
above). Hence the Commission has decided to facili­
tate discussion by accepting Parliament's request in the 
1983 discharge and to add from 1984 a note to the 
revenue and expenditure account and balance sheet 
giving technical data on the financing by the EAGGF 
Guarantee Section of intervention stocks and the likely 
cost of their disposal. The Commission also entered in 
its 1986 preliminary draft budget appropriations to 
cover the depreciation of stocks in public storage. The 
depreciation of stocks gives the Commission greater 
flexibility in disposing of them under the most favoura­
ble market conditions. VI. ACTIVITIES OF THE COMMISSION'S 
CENTRAL DEPARTMENTS WITH 
RESPONSIBILITIES IN THE 
FINANCIAL FIELD 
At paragraph 1.33. in particular the Court of Auditors 
indicates its desire to see 'the advisory and monitoring 
responsibilities of the Commission's central services in 
the financial field' strengthened in order to standard­
ize budget and treasury management and procedures, 
especially with regard to commitments. 
The following explanatory observations are designed to 
clarify the Court of Auditors' comments and to show 
that the 'central departments' responsible for budget­
ary matters have indeed performed their tasks correctly 
in compliance with the specific sectoral requirements 
of the authorizing officers in their various fields of res­
ponsibility. Nevertheless the Commission will bear the 
Court of Auditors' recommendations in mind in its 
effort to improve financial management (see Sec­
tion III. above). 
The Commission would draw attention to the following 
points: 
— Very strict measures have been taken for monitor­
ing budgetary and treasury operations; instructions 
have been issued to the central budget departments 
to enable the Commission to monitor changes in 
the situation constantly so that it can take any 
necessary management decisions. The budgetary 
authority is informed of such action in the reports 
on the implementation of the budget. Particular 
mention should also be made of the special 
arrangements adopted by the Commission at the 
beginning of 1984 (specifically the freezing of cer­
tain payment appropriations until the last quarter 
of the year). 
As regards horizontal financial regulations — the 
Financial Regulation, the Implementing Rules and 
the Regulation concerning the making available of 
own resources — the Commission has presented a 
number of proposals in recent years designed to 
improve budgetary management. Like the Court of 
Auditors, it regrets that the authorities concerned 
have not yet taken the decisions needed to com­
plete these essential revisions and it recently took 
steps to set matters in motion again. 
As regards internal management arrangements, 
each year the Commission adapts its 'Internal 
16.12.85 Official Journal of the European Communities 165 
Rules' on the implementation of the budget in line 
with requirements. These rules are, so to speak, the 
basic handbook governing the exercise of powers 
at the various levels and lay down the procedures 
for every significant aspect of budgetary life. 
With respect to the differences noted by the Court 
of Auditors in the way that various authorizing 
officers handle commitments, the Commission 
would point out that: 
• the existence of methods specific to individual 
fields, and hence of differences between sectors is 
due to the great diversity of the contents of the gen­eral budget and of the specific regulations. In order 
to illustrate the situation more clearly, the Commis­
sion's departments have carried out a study 
designed to give an overall view and so allow an 
objective judgment to be made; 
• seen in this light, certain purely administrative 
differences — in particular the stage, i.e. the 
moment in time, when a commitment is recorded 
in the accounts — can easily be explained and it 
can be seen that the basic principles of the relevant 
rules have been respected. 
(') It is impossible to ignore, for example, the considerable 
impact of the annual farm price review and related mea­
sures and the dynamic considerations which have led the 
budgetary authority to increase appropriations for the structural Funds, development, etc., sometimes to a grea­
ter extent than the Commission had requested. Because of 
its political repercussions, this important aspect is not dis­
cussed further here. 
REPLIES OF THE INSTITUTIONS TO 
CHAPTER 2 
Accounting matters 
General remark OBSERVATIONS ON THE GENERAL 
ACCOUNTS AND THE BALANCE SHEETS 
Parliament PARLIAMENT 
As far as the Parliament is concerned, it is to be regret­
ted that the Court failed to take into account the impor­
tant improvements already brought about with the 
introduction of the Institution's new banking system 
during the latter part of 1984 and 1985. As the Court 
well knows, the Parliament has already set up a multi­
currency ECU netting system to take care of its consi­
derable banking business outside Luxembourg and will 
be extending the same system to its banking business 
involving transfers of funds within Luxembourg during 
1986. Many of the Court's criticisms have already been 
or are in the process of being eliminated by the introd­
uction of the ECU netting system which is specifically 
designed to reduce the risk of exchange losses to a 
minimum and to achieve the best results possible as 
regards the cash management conducted by the Trea­
sury service of the European Parliament. The com­
ments below refer to some specific points raised by the 
Court. Cash deficit 
2.2. The Court refers to the continuing existence of a 
'cash deficit' in the balance sheet. As the Court itself 
noted in paragraph 2.6 of its annual report for the year 
1983, the official holding the post of accountant during 
the period in question instituted legal proceedings 
before the Court of Justice . 
In a recent judgment, handed down on 20 June 1985, the 
Court struck out — on procedural grounds — the disci­
plinary sanction which had been applied. The appoint­
ing authority is reviewing the implications of this judg­
ment, both with regard to the official concerned and 
the recovery of any cash shortage in accordance with 
article 70 of the Financial Regulation. Q) Similarly, it 
remains for the Committee for Budgetary Control to 
report to Parliament on the matter in the context of the 
discharge for the 1982 financial year. 
166 Official Journal of the European Communities 16.12.85 
COMMISSION 
Recoverable taxes and duties 
2.3 — 2.4. The situation described by the Court of 
Auditors as regards recoverable taxes and duties is 
largely the result of existing procedures (application of 
the Protocol on the Privileges and Immunities of the 
European Communities annexed to the Treaty estab­
lishing a Single Council and a Single Commission of 
the European Communities); it should be possible to 
simplify these procedures and thus make them more 
effective. The Commission is having the matter exam­
ined with a view to achieving this and will then make 
the necessary approaches to the Member States. 
The revision of the Financial Regulation, which is still 
pending, should also clarify certain aspects of the rules 
governing the procedures involved. 
The Commission is also examining the possibility of 
recording the relevant amounts of VAT in its accounts. 
Principle of consistency of accounting methods 
2.5 — 2.6. The Commission shares the Court of Audi­
tors' view that changes in accounting methods should 
not be justified by reasons of expediency. 
As regards the case from 1983 referred to by the Court 
of Auditors, the Commission's decision was accompa­
nied by arrangements to ensure that all measures were 
taken to tighten up control of the expenditure of exter­
nal delegations. These measures involved the introduc­
tion of a method for managing rents paid in advance 
for periods despending on local practice. The method 
adopted from 1984 onwards thus takes account of man­
agement requirements. The new rule is that the extra-
budgetary 'Advances' account may be used only for 
advance payments of the official's share of rents cover­
ing a period of more than twelve months. 
In 1984 there were no payments for rents covering a 
period of more than one year and therefore no entries 
were made in extra-budgetary accounts. 
Press and information offices and external 
delegations 
2.7. The Commission wants the statements of 
expenditure from the imprest accounts to be referred to the accounting departments soon after reaching Brus­
sels. It is therefore having a study conducted to see 
what measures should be taken to achieve this. 
Although the average time taken for the initial entry in 
the accounts was 4,5 months at the end of the first week 
of December, all the imprest account statements had 
been entered in the accounts at 28 March 1985. 
Advances to staff and staff current accounts 
2.8. The need for a computerized system better suited 
to the Commission's accounting requirements is clearly 
shown in studies and other work which the Commis­
sion has undertaken. (2) 
Improvements are being sought for those aspects 
involving administrative management (print-outs for 
auxiliary accounts in order to monitor advances). 
The current difficulties in this field are due: 
— to the extremely limited resources at the Commis­
sion's disposal as regards not only its data-process­
ing systems but also the number of staff in its 
accounting departments. This situation has been 
further aggravated by the fact that a number of 
managerial staff have been on extended sick leave; 
— to the application of ECU rates which change 
every month. The artificial exchange differences 
which arise between the date on which the advance 
is granted and the date on which it is recovered ser­
iously complicate the management of the accounts. 
The Commission would point out that: 
(a) The print-outs sent to the Court of Auditors in May 
1985 have been drawn up before the definitive clo­
sure of the 1984 accounts. The differences noted by 
the Court of Auditors have since been clarified. 
(b) The difference noted by the Court of Auditors was 
caused by a computer programming error which 
has since been rectified. 
(c) The unforeseeable absence of senior staff for 
extended periods, as mentioned above, seriously 
affected the examination of the staff advance 
accounts, which could not therefore be cleared in 
an entirely satisfactory manner. A detailed exami­
nation will explain — and perhaps justify — the 
existence of credit balances and will enable this 
state of affairs to be remedied. 
16.12.85 Official Journal of the European Communities 167 
(d) The exchange differences were cleared in 1985 after 
the Court of Auditor's audit. 
(e) The Commission is endeavouring to improve the 
monitoring of the accounts and the clearance of 
advances. 
2.9 (a) and (b). The computer print-outs are regularly 
sent to the authorizing officers, in particular the print­
out of advances on mission expenses, which dropped 
from 1,52 Mio ECU to 1,01 Mio ECU between 31 
December 1983 and 31 December 1984, clearly indicat­
ing that an effort had been made in 1984 to clear the 
advances. 
2.9(c). A special computer programme would be 
required to produce print-outs showing advances 
granted in chronological order. The matter is being 
studied. 
Reconciliation of bank accounts 
2.10. In addition to the 'undeniable efforts' made in 
1984 (which the Court of Auditors itself mentioned), 
the Commission has decided to computerize the 
records of its bank accounts. This operation is in pro­
gress and will permit permanent reconciliation of the 
accounts. 
Accounting deadlines 
2.11. The Commission would point out that the 
31 May deadline depends on a whole series of other 
intermediate time-limits (in particular, those provided 
for in Articles 74 and 98 of the Financial regulation). 
The whole timetable is therefore extremely tight, as the 
Court of Auditors in fact indicates. 
Open transfer at the end of the financial year 
2.12. The budgetary authority was perfectly aware of 
what is was doing when it authorized the open transfer. 
This exceptional procedure was justified by the tragic 
situation which demanded immediate action (famine in 
the Sahel and Ethiopia). 
The Commission maintains that in this matter it acted 
in full accordance with the provisions of the Treaties 
and proved that it is able to act promptly when the situ­
ation requires, without exceeding the powers vested in 
it. ECONOMIC AND SOCIAL COMMITTEE 
Imprest accounts 
2.13. At the request of the Court of Auditors, the ESC 
set up in 1984 an imprest account office to handle the 
reimbursement of the meeting expenses of members of 
the Committee. The ESC notes the lacunae underlined 
by the Court of Auditors and will endeavour in parti­
cular to change the system so as to specify the maxi­
mum advance and the maximum amount of each item 
of expenditure. 
The ESC also intends to bring about a complete separ­
ation between the imprest account office and the cen­
tral cash office, but in the present circumstances it can­
not ignore the constraints due to the shortage of staff 
and of space or the constraints arising out of the urgent 
nature of members' refunds at meetings. Most of the 
problems should be solved when the entire imprest 
account operations are computerized in 1986. 
2.14. The ESC acknowledges that a number of pay­
ments were effected without the prior approval ot the 
Financial Controller.These were payments in connec­
tion with competitions for the recruitment of staff or 
individual invitations to candidates to present them­
selves, and such payments will in future be covered by 
a special imprest account. 
Bank accounts 
2.15. The ESC has found a solution that takes 
account of the Court of Auditors' comments. 
THE COMMUNITY BALANCE SHEET 
Commission 
2.17. The Commission's position on the matters at 
(a), (b) and (c) is set out in its replies to para­
graphs 4.6, 4.7, 4.25, 4.30 and 4.31. 
The Commission understands the Court of Auditors' 
concern about the issue at (d). Past food aid debts not 
168 Official Journal of the European Communities 16. 12.85 
covered by carryovers of non-differentiated appropria­
tions were one of the reasons why differentiated appro­
priations were introduced in the sector in 1985. Pay­
ment appropriations now cover, without distinction, all 
commitments entered into in the past. 
Food aid debts should therefore be treated no differ­
ently from any other past commitments covered by dif­
ferentiated appropriations. 
Beginning with the revenue and expenditure account 
and balance sheet relating to operations under the 1985 
budget, food aid commitments outstanding (differen­
tiated appropriations) will appear in Volume V together 
with those for the other titles of the budget. 
OBSERVATIONS ON CASH MANAGEMENT 
IN RESPECT OF THE IMPLEMENTATION 
OF THE GENERAL BUDGET 
Commission 
2.19. Interest accruing on bank accounts is covered 
by a receivable order drawn up by the authorizing offi­
cer and duly approved by the Financial Controller. In 
recent years, the Commission has endeavoured to com­
pile comprehensive information on all its bank 
accounts so that the details the Court of Auditors 
deems necessary will be readily available. 
2.20. As the Court of Auditors states in para­
graph 2.18 where it defines the scope of its examina­
tion, it was concerned with cash management in respect 
of the implementation of the general budget of the 
Communities. No account kept by DG XVIII relates to 
these activities. Furthermore, the ECSC's bank 
accounts are different in nature to those used for the 
implementation of the general budget. 
Management by the Commission on the basis 
of estimates 
Description of the system 
2.22 — 2.23. The Commission would point out that 
cash forecasts were made every fortnight in 1984 when it was seen that cash resources were in short supply. 
The Commission was thus better equipped to cope with 
the constraints imposed by the lack of flexibility in the 
cash management aspects of budget implementation. 
Origins and reliability of the estimates 
2.24 — 2.25. Although the Commission considers that 
the simple and informal system so far applied has oper­
ated satisfactorily in practice, it has issued instructions 
for a formal, systematic procedure to be devised, which 
will then be adapted in the light of the results obtained, 
to produce something along the lines suggested by the 
Court of Auditors. 
Extent to which calls for funds correspond to needs 
2.27. Throughout 1984 the Commission had to con­
tend with cash flow difficulties and accordingly had the 
situation monitored carefully every fortnight by senior 
staff. 
In view of the use made of Article 12 of Council Regu­
lation (EEC) No 2891/77 over the year (advance pay­
ment of own resources — overdrawing of accounts), 
the Commission provided the financial counsellors in 
the Offices of the Permanent Representatives (meeting 
within the Council's Budget Committee) with precise 
figures on funds held and foreseeable developments, 
including the minimum balance which is considered 
indispensable on accounts with commercial banks. 
In 1985 this monitoring has continued with the same 
aim, which the Commission shares with the Court of 
Auditors, of covering no more than essential require­
ments; these can only be assessed correctly if account 
is taken of the fact that the Community must be able to 
cover day-to-day payments in the currencies of all the 
Member States and in ECU. 
2.28. The Commission, in its past and present bila­
teral contacts with the banks, has been trying to obtain 
harmonized conditions for its transactions. If this 
objective is attained, there will no longer be any justifi­
cation for the Court of Auditors' criticisms concerning 
the choice of the bank of payment and the level of the 
balances. 
2.29. As far as the Commission is aware, the flexibil­
ity of the procedures employed between the accounting 
16.12.85 Official Journal of the European Communities 169 
officers of the various institutions and bodies has never 
raised any real problems. The Commission would point 
out that it has to respect the powers of each of the insti­
tutions and the organs and that the dates and proce­
dures for supplying them with funds are agreed jointly; 
however, it is prepared to examine any request by the 
institutions on this subject. 
2.30. Apart from the case referred to by the Court of 
Auditors, the Commission would point out that the 
other overdrafts were limited in number and value. 
2.30 — 2.31. and Table 2.1. The Commission has taken 
the necessary measures to avoid any recurrence of the 
situation criticized by the Court in paragraph 2.30 (a 
situation caused by factors largely beyond the control 
of the authorizing departments and accounting officer). 
The Court's comment that the balance of the Commis­
sion's account with the EIB was excessive no longer 
appears valid, since it was gradually reduced to a nor­
mal level once the need for funds to make retroactive 
payments was no longer so urgent. 
As regards the operations for 1983, the retroactive pay­
ments referred to by the Court reflect the new arrange­
ments for calculating and paying interest subsidies 
under the European Monetary System. These new 
arrangements took effect in the final year of the opera­
tions in question, i.e. in 1983. They were laid down in 
an amendment to the cooperation agreement which the 
Commission and the EIB already had in this sector. 
This amendment automatically had the following con­
sequences: 
(1) The budgetary cost of each subsidy was considera­
bly reduced, with the result that a larger volume of 
loans could be subsidized from the fixed amount 
of budget appropriations. 
(2) The principle of retroactive payment is enshrined 
in the new system. The value dates thus coincide 
with the dates on which the loans are actually paid 
out, i.e. the dates from which interest is charged. 
The transmission procedure introduced was an 
interest-bearing account which the Commission 
keeps with the EIB. 
(3) Other procedures styled on these arrangements are 
being introduced, notably in the Financial Regula­
tion of the Sixth EDF. The replacement of an established system which had 
operated for four years led to a large number of the ini­
tial payments under the new method having to be made 
retroactively: the EIB made its first applications two to 
three months after the loans in question had been paid 
out, while the Commission's financial departments 
encountered practical difficulties. However, as 
Table 2.1 shows, retroactive payments quickly returned 
to normal. 
Distribution of surpluses among the Member States 
2.32. At the beginning of 1984 the Commission 
changed to fortnightly estimates, which restored the 
balance required by Article 12 of Regulation No 2891/ 
77 (3). The Court of Auditors' comment does not apply 
to 1984 or 1985 since the Commission itself reduced the 
length of the period covered by the estimates, thus anti­
cipating the Court's concern at the way in which the 
situation was developing. 
2.33. The accounts with the central banks of Ireland 
and the United Kingdom are mainly used for funds 
being transferred to and from the national treasuries. 
The Commission has only some tens of thousands of 
pounds with the Bank of England. The Commission 
has more funds with the Central Bank of Ireland 
which, unlike other central banks, conducts current 
payment operations like commercial banks. 
These explanations show that the Commission does 
not make use of the possibility referred to by the Court 
of Auditors. 
2.34. The discrepancies noted by the Court of Audi­
tors may be attributed as much to the inadequate fre­
quency of the Commission's balancing transfers, coup­
led with variations in the speed with which expenditure 
(and revenue) operations are executed in each Member 
State, as to a lack of reliability and accuracy in the 
financial forecasting system. 
Since balancing transfers are now made more fre­
quently, the discrepancies have been further reduced. It 
is, however, materially impossible to reduce them to 
zero. 
Management by the other institutions on the 
basis of estimates 
Parliament 
2.35. Whilst agreeing with the Court's recommenda­
tion on this matter, the decentralised responsibility of 
170 Official Journal of the European Communities 16. 12. 85 
the accounting officers makes a sophisticated system of 
cash forecasting very difficult to operate. The current 
method, built up over the past three years, has proved 
to be reasonably accurate. In addition, it should be 
pointed out that, with the phased introduction of the 
ECU netting system, both the loss of potential interest 
and the risk of exchange losses are reduced to a mini­
mum, since all funds held by the Institution's Treasury 
service remain in interest-bearing ECU accounts until 
such time as payment is actually made. 
2.36. As stated in the footnote to Table 2.3 which 
shows the rate of coverage of net needs in the financial 
year 1983, all balances concerning the imprest accounts 
are excluded. The Parliament doubts the pertinence of 
the data provided, which omits the Commission, an 
Institution whose administrative appropriations exceed 
the sum of the administrative appropriations of all the 
Community Institutions. In any event, on the basis of 
the Courts' own figures, the European Parliament's rate 
of coverage of net needs is within very acceptable lim­
its. 
Council 
2.35. Requests for funds are submitted monthly by 
the Council to the Commission. They are based on pro­
per estimates in the case of salaries of officials, rents 
and maintenance expenses (cleaning etc.). However, in 
the case of other expenses (mission expenses, dele­
gates' travel expenses, property taxes, telephone and 
postage expenses, etc.), these cannot be forecast accur­
ately; they are estimated each month in the light of 
such expenses in previous financial years. 
The Council would point out that its cover rate for net 
requirements, namely 115% (see Table 2.3) is lower 
than that of any of the other Institutions. It will endea­
vour to reduce that rate by referring even more if possi­
ble to proper estimates. 
2.36. Three cases dating from 1983 are involved. All 
were minimal in scale and duration. 
Court of Auditors 
2.35. The appropriations to cover the Court's recur­
rent and periodic expenditure, which are entered under 
Chapters 10 and 12 and Article 200 of the Court's budget, account for more than 89 % of the budget total. 
The Court is aware of the problem and has adopted a 
simple and reliable system for making estimates which 
is suited to the specific characteristics of its manage­
ment. 
2.36. The Court will endeavour to come closer to the 
ideal situation. 
Economic and Social Committee 
2.35 — 2.36. The ESC can only endorse the Court of 
Auditors' call for optimum cash management. This 
principle involves three requirements: 
— cash balances should be kept to a minimum; 
— expenditure should be adequately covered; 
— the minimum balance resulting from reconciliation 
of the above two requirements should be used in 
an optimum manner. 
The ESC's cash management has always been guided 
by this philosophy. 
Given the size of the ESC's budget, as well as the regu­
lar pattern of its expenditure (salaries and meeting 
expenses, which account for 80% of the appropria­
tions, are generally known in advance with a great 
degree of accuracy), and in the absence of a more ela­
borate system, the system of monthly advances of one 
twelfth has been considered by the ESC to be not too 
inconsistent with its needs. 
Nevertheless, the ESC recognizes the validity of the 
comments, so that on average the cash balances held by 
the ESC in 1984 covered expenditure for a period of 
3-4 weeks. 
Resources employed 
Commission 
2.37. Because of the continuing increase in budgetary 
and financial operations in recent years, combined with 
the major complications caused by the introduction of 
the ECU in the accounts on top of the current utiliza-
16.12.85 Official Journal of the European Communities 171 
tion of national currencies, the Commission has taken 
wide-ranging measures to reorganize the accounts 
department, although the increase in its staff had to be 
limited because of the Commission's general staffing 
problem. A separate directorate now consisting of four 
specialized departments was set up in 1983/84. 
A great deal has already been achieved and work is still 
continuing to adapt data-processing resources to 
increased requirements. The Commission has always 
tried to act on the many demands made by the Court of 
Auditors in its earlier reports; it will do so again in res­
ponse to the comments contained in the current report. 
Apart from the reforms made as regards accounting 
entries, progress has already been made in cash man­
agement, and the situation of bank accounts is now 
published daily. These improvements and those to be 
made in relations with the banks (see paragraph 2.28) 
should satisfy the Court of Auditors' requests. 
Procedures 
Parliament 
2.38. Following the introduction of the ECU netting 
systems for banking transactions outside and within 
Luxembourg, an internal document will be drawn up 
setting out the tasks and responsibilities of the person­
nel attached to the Treasury service. 
Council 
2.38. The tasks and responsibilities of the officials 
responsible for cash management have been the subject 
of replies by the Secretariat to questionnaires from the 
Court of Auditors. A description of tasks and systems 
will be included in the manual or procedure. 
Court of Justice 
2.38. The Court of Justice shares the Court of Audi­
tors' concern and emphasizes that it made considerable 
improvements in 1984. controller, the authorizing officer and the accounting 
officer. This has led to a re-organization of all the 
departments responsible for the implementation of the 
Budget of the Court of Justice and its control. The aim 
of the new rules relating to cash management is to 
define much more clearly and precisely than in the past 
the tasks and responsiblities of the treasury department. 
Economic and Social Committee 
2.38. The ESC will endeavour to progressively estab­
lish rules for the various financial transactions, particu­
larly in the case of the computerized systems that are to 
be developed to assist cash management. 
Number of bank accounts 
Parliament 
2.39. As the Court is aware, the phased introduction 
of the ECU netting system has already contributed to 
the sharp reduction in the number of bank accounts. It 
is the Parliament's intention, once the new systems for 
its banking business within and outside of Luxembourg 
are fully operational and proven, that the Treasury ser­
vice should operate with only two bank accounts (both 
ECU denominated) together with the Compte Cheques 
Postaux account in Luxembourg which will be denomi­
nated in Luxembourg Francs. This target will be met 
during 1986. 
Specific currency accounts in various locations will 
continue to be held for the particular needs of imprest 
accounts. The number of Treasury bank accounts cur­
rently stands at 11. 
Council 
2.39 and 2.52 (c). The Council takes note of the Court 
of Auditors's comments. 
Commission 
The changes which is has introduced are designed to 
ensure a clearer separation of the duties of the financial 2.39. In response to a previous request by the Court 
of Auditors, the Commission has considerably reduced 
172 Official Journal of the European Communities 16. 12.85 
the number of its accounts (from 111 in 1982 to 57 in 
1984). 
Economic and Social Committee 
2.39. In response to the Court of Auditors comments, 
the ESC has carefully examined this matter and 
decided to close two bank accounts. However, enlarge­
ment means that two new accounts will have to be 
opened, bringing the total to thirteen (one in each 
Member State and two in Belgium), which represents 
the minimum essential for the ESC's operations. 
Banking terms 
Parliament 
2.40. (a) The number of cheques issued by the Trea­
sury service of the European Parliament for payment is 
minimal, thus it is not considered necessary to intro­
duce any special treatment. Thanks to the new banking 
system for transactions outside Luxembourg, the rates 
of interest are now clearly established. The most advan­
tageous banking conditions for transactions within 
Luxembourg will be obtaind following the review fore­
seen in the reply under paragraph 2.39 above. 
(b) Specific officials are assigned to control on a 
regular basis the negotiated banking terms for the exist­
ing ECU.netting system. 
Council 
2.40. The Council has noted the Court of Auditors' 
comments. 
2.41 and 2.47. The Council asks banks to grant it the 
same terms as those granted to the Commission. It con­
siders that it is up to the Commission — in view of the 
latter's cash management facilities — to negotiate with 
the banks the best possible terms to be granted to all 
the Institutions. 
Commission 
2.40. Further to the replies given to paragraphs 2.28 
and 2.37, the Commission does indeed consider that the banks are not always used for the terms they offer, 
but sometimes for other criteria such as practical facili­
ties for working relations, speed of business or parti­
cular specialization. 
As regards point (b), the Commission is examining 
what action could usefully be taken in response to the 
Court of Auditors' requests but would also point out 
the major difficulties it faces because of the general 
staffing problem. 
2.41 - 2.42. The Court of Auditors' comments do not 
take account of some aspects inherent in the methods 
for managing bank accounts. 
In the case of current accounts, for instance, banks may 
pay a higher rate of interest on accounts used for only a 
few transactions than on accounts used for a large 
number of operations. 
If it is to be accurate, any assessment of interest must 
take account of the workload involved in the various 
types of operation. 
From the year covered by the report (1984) the Com­
mission has made it standard practice to break down 
costs and interest in line with a suggestion made by the 
Court of Auditors. 
As for paragraph 2.42(d), the negotiations now being 
conducted with the banks referred to in paragraph 2.28. 
will narrow the spread of rates. 
To step up competition among banks and explore the 
problems which may result, the Commission, as desired 
by the Court of Auditors, is planning as a trial to put 
up for tender its future operations in Portugal and 
Spain, after enlargement, in connection with the imple­
mentation of the general budget. 
Economic and Social Committee 
2.40. The ESC considers that its policy of monitoring 
closely the terms offered by banks (which does not 
pose any difficulties) has always given good results. 
The ESC will, however, make an effort to check all 
bank terms in future and will draw up a document to 
this end. 
16. 12.85 Official Journal of the European Communities 173 
Internal control 
Council 
2.43. Separation of responsibilities between the 
authorization and the payment of an item of expendi­
ture: 
The Council Secretariat will look again at the cases 
pointed out by the Court of Auditors, taking particular 
account of the provisions in the Council's rules of pro­
cedure. 
Economic and Social Committee 
2.43. The security arrangements recently introduced 
by the ESC should be to the satisfaction of the Court of 
Auditors. 
Centralization of management 
Overall financial flows 
Parliament 
2.46. The Parliament will in future insist upon same 
day value for tranfers between Community institutions 
where such transfers are made with the same bank. 
Council 
2.45. Transfer of funds from the Council to the 
Economic and Social Committee: 
The practice followed is in accordance with a Council 
Decision and is the result of integration of the Econo­
mic and Social Committee's budget into the Council's 
budget. 
2.46. The Council will examine solutions making pos­
sible a maximum reduction in days of value lost. 
Commission 
2.46. In response to the Court of Auditors' recom­
mendation, the Commission will in future give the banks a copy of its instructions containing a value date. 
A check will then be made that this date is correctly 
applied. 
Powers of negotiation with the banks 
Parliament 
2.47. Although banking requirements within the 
Community vary considerably from Institution to Insti­
tution, as does the volume of payments and receipts, 
the European Parliament is ready to cooperate in any 
inter-institutional initiative in this direction. 
Council 
2.47. See reply to paragraph 2.41. 
Commission 
2.47 — 2.48. The Commission has always acted in the 
way recommended by the Court of Auditors whenever 
the other institutions have asked it to; this subject is to 
be examined at the meetings between the institutions' 
accounting officers. 
Use of the ECU 
Parliament 
2.49. The European Parliament has been endeavour­
ing to extend the use of the ECU, with some success, in 
respect of large contracts, payments of certain rents 
and certain categories of payments to some members. 
Settlements with the Commission have, for a number of 
years, been carried out in ECU and instructions will 
shortly be issued that financial transactions with all 
other Community institutions will be carried out in 
ECU. The Parliament welcomes the extended use of 
the ECU and will continue to promote it wherever and 
whenever possible. 
174 Official Journal of the European Communities 16.12.85 
Council 
2.50. Payments into the bank accounts of the Econo­
mic and Social Committee by the Council involve 12 
accounting operations per annum. 
Commission 
2.49. With the aim of promoting the use of the ECU 
and making its cash management easier, the Commis­
sion, within the limits imposed on it, has, since the 
establishment of the EUA in 1975, which became the 
ECU in 1979, encouraged wider use of this unit of 
account which, partly thanks to the Commission's act­
ion, has now become a means of settlement. In this act­
ion, which affects the Member States and their resi­
dents, the Commission soon encountered difficulties 
which it was not always possible to overcome. This 
explains why progress is achieved on a pragmatic basis, 
with advances being made as and when possible. 
The Commission, which had ECU bank accounts, soon 
asked the other Community institutions with which it 
had bookkeeping relations under the general budget to 
open ECU accounts so that transfers could be made 
direct in ECU. Although the other institutions, includ­
ing the EIB, agreed, the Council has always refused. 
At the level of institutional relations, in October 1976 
the Commission sent the Council a proposal for a 
Regulation relating, in particular, to the role of the 
ECU as an instrument of management and settlement 
(doc. COM(76)513). This document provided for a cen­
tral system for managing and implementing the budget 
in ECU and, by expressing budgetary commitments in 
ECU, transferred the exchange risk from the Commis­
sion to the beneficiaries of its measures. The Council 
did not approve this proposal and, although it was 
completely recast after being discussed almost every 
week for two years, it was never adopted because of the 
election of the European Parliament, which caused the 
conciliation procedure, to which it had to be submitted, 
to be interrupted. Some Member States are still strongly 
opposed to the proposal that they or their residents 
bear the ECU/national currency exchange risk and the 
wish expressed by other delegations in 1980 to revive 
this document was not followed up. 
In a situation ruling out any systematic approach to the 
problem, the Commission has adopted the pragmatic 
(') By letter of 30 July 1985, the Institution approached the 
insurance companies concerned once again on this mat­
ter. and limited approach of expressing and making pay­
ments in ECU wherever possible; contract studies 
(since 1982), the reimbursement of experts' expenses 
(since 1983) and the fees of free-lance interpreters 
(since 1984) are now expressed and paid in ECU. The 
Commission has also taken a large number of impor­
tant steps in connection with ECU loans. The appro­
priate Commission departments will soon begin work 
on having the ECSC levies paid in ECU. Until now, 
despite being expressed in ECU, they have been paid 
in national currency. 
The Court of Auditors' comments on the use of the 
ECU are perfectly justified and the Commission will 
use them as a support for its action. On the strength of 
these comments, the appropriate Commission depart­
ments will in particular again contact the Council's 
treasury department. However, in the absence of a 
regulation, the need for which should be underlined by 
the Court, the proportion of payments made in ECU 
will inevitably remain negligible. 
Economic and Social Committee 
2.49. In order to encourage greater use of the ECU 
the ESC intends to open an ECU subdivision of its 
main bank account. 
Conclusions 
Council 
2.52 (c). See reply to paragraph 2.39. 
Commission 
2.51 - 2.53. While asking that note be taken of the dif­
fering viewpoints evident in the above replies, the 
Commission intends to pursue its present course of act­
ion which clearly corresponds to the recommendations 
made by the Court of Auditors in paragraph 2.52. 
(2) Annual report concerning the financial year 1982, 
OJ C 357, 31. 12. 1983, paragraph 2.39. 
(3) OJ L 336, 27. 12. 1977, p. 1. 
16. 12. 85 Official Journal of the European Communities 175 
REPLIES OF THE COMMISSION TO 
CHAPTER 3 
Revenue 
SUMMARY OF FINANCIAL 
INFORMATION 
Financing of the budget 
Exhaustion of own resources 
3.6 (a). On 6 May 1983, the Commission presented to 
the Council (') a draft decision on new own resources 
which amongst other things provided for an increase in 
the maximum VAT rate that could be set. The Council, 
however, was unable to take the necessary decision in 
time because an increase in the amount of own 
resources available to the Community was linked to a 
number of other problems. 
In order therefore to ensure that Community obliga­
tions could be met and that Community policies could 
continue to be implemented, whilst respecting the 
requirement in Article 199 of the EEC Treaty, that the 
budget be in balance, the Commission made a proposal 
based on Article 235 of the EEC Treaty, for the Mem­
ber States to make supplementary finance available to 
the Community in 1984 which would be repaid when 
new own resources became available. 
The Legal Service of the Council shared the Commis­
sion's opinion that Article 235 was an entirely proper 
basis for the regulation. 
In the event, the Council did not adopt such a regula­
tion. The Member States decided rather to make an 
intergovernmental agreement to provide additional 
finance in 1984. The Commission regrets that this 
agreement was entered into outside the framework of 
the Community treaties. 
3.6 (b). At each year end certain appropriations are 
cancelled. Moreover, in 1984, the Commission had 
undertaken, in the explanatory memorandum to the 
proposal for a Council Regulation (2) introducing mea­
sures to cover budgetary requirements in 1984 given the 
exhaustion of own resources, to endeavour to make 
cuts in payment expenditure of 350 Mio ECU. In the event, the Commission cancelled appropriations at the 
year end totalling 329,31 Mio ECU. Entering the 
expected cancellations in the budget reflected an event 
that was foreseeable. It was in no sense a device for 
disguising the fact that the budgeted expenditure 
exceeded available revenue. On the contrary, the entry 
of the expected cancellations produced a more trans­
parent budget and one that matched expenditure and 
income more accurately. 
It does not conflict with the requirements of Article 199 
of the Treaty. These requirements are in fact confirmed 
by the entry. 
Outturn of the budget 
3.7. In its preliminary draft amending and supple­
mentary budget No 1 the Commission proposed a 
reduction of 498,5 Mio ECU in the estimates of agricul­
tural levies. It listed in the explanatory memorandum 
the factors which led it to make this reduction. 
Neither the Council nor the Parliament included the 
revised figures in the draft or final budget. 
3.8. The estimates for agricultural levies analysed by 
commodity and the figures for monetary compensatory 
amounts are shown in Volume 7 of preliminary draft 
budget for each year. 
Following the installation of the new revenue account­
ing system, agricultural levies are now systematically 
analysed by commodity and the monetary compensa­
tory amounts are separated out for those Member 
States which provide the necessary data. 
RECORDING AND RECOVERING 
REVENUE DUE 
3.10. Most of the receivable orders for unqualified 
amounts refer to disputes with Member States over the 
omission of certain items from their VAT statements. 
Since in the current system only the Member States dis-
176 Official Journal of the European Communities 16. 12. 85 
pose of the information necessary to evaluate the omis­
sions, the Commission is obliged to issue receivable 
orders for unquantified amounts in such cases. The 
actual amounts will only be known when the disputes 
are settled. 
VALUE-ADDED TAX 
Option between transitional Methods A and B 
3.11-3.19. 
I. General 
Quite apart from the specific replies set out hereafter, 
the Commission notes that most of the Court's com­
ments relate to matters that are no more than the cor­
rect application of the current rules deriving from three 
fundamental acts: 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, and Council Regulations 
(EEC) Nos 2891/77 and 2892/77 of 19 December 1977 
implementing that Decision. 
The Commission has sent the Council a number of pro­
posals amending these acts and is continuing its efforts 
to improve them. Although the comments in Chapter 3 
of the Court of Auditors' report are addressed to the 
Commission alone, criticism on this score should in 
fact be aimed at the Council, since the Council has the 
power to enact legislation. Any questions as to the 
substance of the legislation should be dealt with under 
the procedures for revision of Regulations Nos 2891/77 
and 2892/77 initiated by the Commission. 
It is unfortunate that the Court should have quoted 
figures which give the impression that there has been a 
loss of own resources, whereas the situation described 
in fact accords with the current rules. The presentation 
of such figures can only mislead the unsuspecting 
reader. 
II. Technical aspects 
The Commission has the following further comments 
to make on the specific points raised by the Court: (a) Under Article 6 (1) of Regulation No 2892/77 as 
amended, the VAT own resources base is derived 
from the total net VAT revenue collected by a 
Member State for a given year. The sitation des­
cribed at (b) and (c) in paragraph 3.13. of the Court 
of Auditors' report is consistent with the provisions 
of the Regulation. The figures given by the Court 
for revenue lost as a result of applying one method 
give rise to the following remarks: 
(i) Under the Communities' VAT own resources 
system, the call-in rate applied to the VAT base 
is designed to cover that part of the financing 
of the Community budget which is not covered 
by traditional own resources. Hence any reduc­
tions in the base require an increase in the rate 
fixed under the budget procedure. 
(ii) The estimate given by the Court of Auditors is 
only an approximation based on information 
obtained from five Member States (Belgium, 
Denmark, Luxembourg, Netherlands, and 
United Kingdom). 
(iii) The sole consequence of the failure to include 
the amount not collected in a given year in the 
VAT base for that year under method B is to 
put back the time when certain transactions are 
taken into account, since these amounts are 
included in the base for the year in which they 
are actually collected and hence are subject to 
the call-in rate for that year. Apart from this, 
the changes in the amount of arrears from one 
year to the next are more significant than the 
amount of arrears at the end of any one year, 
and even these fluctuations tend to even out 
over a sufficiently long period. 
(b) Under Article 3 of Regulation No 2892/77 each 
Member State may opt for whichever method it 
chooses. The reasons for Denmark's choice are the 
difficulties posed by the application of method A 
and the fact that it has only one VAT rate. The 
reduction in the Danish VAT base for 1983 follow­
ing the change of method (see (a) in para­
graph 3.13.) occurred because amounts written off 
and arrears were not included — as described 
above. It should be added, however, that the 
amount to be recovered at the end of 1984 was 
lower than at the end of 1983, a sign that the phen­
omenon was partly eliminated in the following 
year. 
(c) The type of operation allowed under national legis­
lation of the kind referred to at (d) in para­
graph 3.13. results in the amount actually paid over 
16. 12.85 Official Journal of the European Communities 177 
to the national authorities being included in a later 
VAT base and in part of the amount owed being 
written off. Nevertheless, this type of legislation 
cannot but yield more national and Community 
revenue than would otherwise have been collected. 
(d) The Commission's controls of the Member States' 
VAT bases cover the entire process of centraliza­
tion of revenue, and are designed to check that the 
system operates properly from the moment of 
establishment through to the calculation of the 
Community VAT base. Like the Court of Auditors, 
the Commission wishes to gain a better idea of the 
amounts not included in the base and it therefore 
plans to examine, together with the Member States 
within the Advisory Committee on Own Resources 
(ACOR), whether additional information can be 
obtained, in particular as regards matters under dis­
pute. The Commission would point out that this is 
the essence of its 1979 proposal to the Council for 
a Regulation on measures to be taken in the event 
of irregularities affecting the own resources referred 
to in the Decision of 21 April 1970 and the organ­
ization of an information system for the Commis­
sion in this field. Until the regulation is adopted, as 
the Commission still very much hopes it will be, 
the transmission of information depends on the 
Member States, and under the present rules they 
alone are responsible for control visits to indivi­
dual taxpayers and for decisions on subsequent 
action. In particular the Commission has no power 
at the moment to issue instructions to the Member 
States on the frequency of such control visits. 
III. Comments regarding the report on the 
implementation of Regulations Nos 2891/77 and 
2892/77 
In its report the Court of Auditors refers on several 
occasions to the report on the implementation of Regu­
lations Nos 2891/77 and 2892/77 and the proposal to 
extend the latter, which the Commission presented 
jointly to the Council in April 1985. The Commission 
feels that certain clarifications are called for. 
Firstly the Commission's report describes the problems 
raised by the two methods and, in its view, presents a 
full and balanced picture of the situtation. It is true 
that the Commission's original proposal was only for 
Method A; moreover it has never sought to deny the 
differences between the two methods ultimately 
adopted by the Council and it is also aware of the diffi­
culties of applying Method B; but the Commission now 
finds from its experience of working with Method A that this, too, in its current form, gives rise to many 
problems. 
Secondly the Commission indicated in the report its 
clear preference for a single method for determining 
the VAT base. However, it must emphasize that this 
objective cannot now be considered in isolation from 
the everyday realities of operating the own resources 
system and developments since the adoption of Regu­
lation No 2892/77. That Regulation allows Member 
States to choose, during a transitional period, between 
two methods based on fundamentally different princi­
ples and arrangements; eight of the nine Member 
States paying over VAT own resources have opted for 
Method B. As the time approaches when the additional 
resources made available by the raising of the maxi­
mum VAT call-in rate to 1,4% will all be taken up, the 
Community will once again have to consider the future 
of its financing system; the situation created by the pre­
ference for Method B cannot be regarded as a matter of 
mere secondary inportance. 
Difficulities in application of VA Town 
resources 
3.21. The Commission is still examining the question 
of the registration tax on cars in Denmark. At the 
moment it is primarily concerned with the compatibil­
ity of the tax with the principle of the free movement of 
goods within the Community and on this score has 
decided to initiate the procedure provided for under 
the Treaty. 
3.22. The Commission accepts the Court of Auditors' 
suggestion and will continue to insist on the introduc­
tion of uniform arrangements. 
AGRICULTURAL LEVIES 
3.23 — 3.26. The Commission does not accept the 
Court of Auditors' view that this decision was contrary 
to Article 14(2) of Council Regulation (EEC) 
No 805/68 of 27 June 1968. 
The reason for the Commission's proposal to the Coun­
cil was clearly set out in the memorandum to document 
COM (84) 49, paragraph 4 which states: 'The Commis­
sion considers, however, that the import concessions 
for beef/veal must be adapted in the light of existing 
international agreements and the reciprocal conces­
sions granted to the Community'. 
The possibility of subsequent international agreement 
being made in parallel or interacting with Regulation 
178 Official Journal of the European Communities 16. 12.85 
No 805/68 appears to have been foreseen in Article 17 
of this regulation which states: 'This regulation shall be 
applied with due regard to the obligations under inter­
national agreements by which the Community is 
bound'. 
In the opinion of the Commission, Article 14(2) of Re­
gulation No 805/68 must be read in conjunction with 
Articles 17 and 31, which obliges the Community to 
respect the obligations resulting from international 
trade agreements, and also with the authorization given 
to the Commission by the budgetary authority in the 
1984 budget (remarks relating to Chapter 29/B), and 
clearly covers the circumstances and conditions under 
which the Commission's proposal for 1984 was drawn 
up. 
The quantity of 50 000 tonnes of beef mentioned by the 
Court of Auditors must be seen in this context. Further­
more, this quantity falls within the overall allocation of 
beef imports, reference to which was introduced into 
the remarks column mentioned above. CUSTOMS DUTIES 
Exemptions from customs duties applied 
unilaterally by Member States 
3.29-3.32. 
under way. The infringement procedures are still 
3.33. (a) As regards materials of an intrinsically mili­
tary nature which have not been included in the 
Article 169 procedure, the Commission is confident 
that the outcome of this procedure will confirm its pos­
ition on the applicability of the Common Customs Tar­
iff to military equipment in general, thereby making 
further recourse to infringement proceedings super­
fluous. The Commission will then be better placed to 
develop a policy framework at Community level for 
arms imports taking full account of all the political, 
economic and legal aspects of this matter. 
Application within the Member States (b) The Commission is not in a position to sup­
ply figures on the impact of these infringements on 
own resources. 
3.28. The Commission has already informed the 
Court that an inspection of the special scheme (total or 
partial suspension of levies) for imports of certain types 
of frozen beef for the processing and manufacturing 
industries had been carried out only in the Nether­
lands. It will be proposing checks in the other Member 
States in the context of the joint inspections provided 
for under Regulation No 2891/77 and Council Regula­
tion (EEC) No 165/74 of 21 January 1974. In this regard, it is the responsibilitiy of Member States 
under the Treaty to calculate the amount of customs 
duties to be made available to the Community budget. 
The Member States alone have the details necessary for 
this calculation and the Commission is only able to cal­
culate very approximately and very exceptionally the 
amounts in question. In this case, the problem is rein­
forced by the secret character of national defence 
invoked by Member States. 
(')• OJC145,3.6. 1983, p. 5. (2) Doc. COM(84)250 final of 17 4. 1984. 
REPLIES OF THE COMMISSION TO 
CHAPTER 4 
European Agricultural Guidance and Guarantee Fund, 
Guarantee Section 
COMMENTS ON THE IMPLEMENTATION 
OF THE BUDGET 
Implementation of the budget in 1984 
Questions of regularity 
4.5 and 4.9. The Commission was indeed faced with a 
difficult budgetary situation. In discharging its finan­cial obligations it endeavoured to overcome as many as 
possible of the problems this created and to apply the 
principles of sound financial management. It considers 
claims that it acted other than in accordance with the 
regulations or resorted to minor irregularities as exag­
gerated. 
(a) Decisions on and payments of advances are 
dependent on the availability of resources; the 
Commission cannot pay unless it has the means to 
do so. However, the Commission intends to accept 
16. 12.85 Official Journal of the European Communities 179 
the Court of Auditors' request and initiate the 
necessary procedures. 
(b) The practices followed with regard to the booking 
and commitment of expenditure are the result of a 
shortage of appropriations, either in general or in 
particular budget headings, and were intended to 
reduce to a minimum the problems which this 
caused for the Commission's accounting system, 
while respecting the provisions of the Financial 
Regulation. 
Preparatory work on a new system to replace monthly 
advances is continuing and the Commission hopes to 
take a decision at the end of this year or the beginning 
of 1986. In any case, changes to the present system will 
take quite some time, since they will raise many prob­
lems, involving twelve Member States, each with its 
own administrative and accounting system, and some 
fifty paying agencies. 
Collection of additional co-responsibility levy on milk 
4.6 and 4.7. The Commission would emphasize that 
the purpose of introducing quotas in the milk sector 
was to contain total production. To achieve this, the 
additional levy for exceeding quotas was fixed at the 
deterrent level of 75% for milk producers and 100% for 
dairies. Collection of the levy is a last resort, to be 
employed only if producers or dairies exceed the quo­
tas laid down for them under Community rules as 
implemented by the Member States in one of the ways 
provided for. 
The first payment, due on 15 December 1984, was 
provisional pending a definitive calculation at the end 
of the 1984/85 milk marketing year. On the basis of the 
provisional figures available to it, the Commission, as a 
warning to a number of Member States who had dis­
puted this operation and the amounts due, reduced 
their advances for December. 
The Commission considers that it was not necessary to 
enter debts owed by the Member States to the Commis­
sion in the balance sheet drawn up at 31 December 
1984 for the following reasons: 
— the rules stipulate that the additional levy due in 
each case must be based on a final statement to be 
drawn up after twelve months' production; — because of the time required to introduce the quota 
system, the provisional figures available to the 
Commission were not sufficiently reliable for it to 
produce firm calculations of the amounts due on 
15 December 1984; 
— the trend of milk production and developments in 
Community rules in the early months of 1985 have 
confirmed that only comparatively small payments 
of additional levy are due in respect of production 
in excess of the overall quotas allocated to each 
Member State for 1984/85. 
Final shortfall of appropriations 
4.8. In its supplementary and amending budget for 
1984 the Commission put revenue from the additional 
co-responsibility levy at 247 Mio ECU. This estimate 
was made in the second quarter of the year before 
national implementing procedures were notfied and 
before the reactions of producers were known. This led 
to an overestimate of revenue but the fact that the 
figure arrived at was close to the 202 Mio ECU short­
fall referred to by the Court of Auditors is purely coin­
cidental. 
The Commission notes, with interest, that the Court of 
Auditors favours a reduction in the financial value of 
stocks. Since the original 1984 budget contained no 
specific appropriations for this purpose and since there 
were no surplus appropriations at the end of the year, 
the Commission was unable to carry out such an opera­
tion. It should be noted that, in its preliminary draft 
budget for 1986, the Commission has, for the first time, 
proposed an appropriation of 423 Mio ECU for a 
reduction in the financial value of stocks. 
COMMENTS ON THE FINANCIAL 
MANAGEMENT 
Public storage 
Increase in expenditure on storage 
4.11. Expenditure on public storage increased in 1984 
because of mounting stocks for which it was difficult to 
find an outlet. This is one of the reasons why the Com-
180 Official Journal of the European Communities 16. 12.85 
mission has pursued its efforts to reform the common 
agricultural policy, particularly in relation to the milk 
sector. 
The percentage increase quoted by the Court of Audi­
tors for olive oil (up by 446% on the 1983 figure) should 
be put into perspective in that expenditure rose from 
12,2 Mio ECU to 66,6 Mio ECU in the same period. 
In 1982/83 the olive oil harvest in Italy was particularly 
poor so that little intervention was required and oil had 
to be imported from Greece; which led to gains. In 
1983/84, by contrast, the harvest in Italy was good so 
that more intervention was required and imports from 
Greece declined. 
Overall increase in stocks and problems experienced with 
certain products 
Stocks of milk products 
4.13. There is absolutely no doubt that butter stored 
for more than two years will decline in value. To avoid 
this situation outlets were sought but this proved diffi­
cult. Title II of Commission Regulation (EEC) 
No 2956/84 of 18 October 1984 introduced measures to 
dispose of butter which had been in store for more than 
18 months. 
Stocks of common wheat 
4.14. Each year the Commission fixes prices for the 
carryover to the following year of products in public 
storage on 30 November. These are based on buying-in 
prices paid by the intervention agencies (first paragraph 
of Article 8 of Council Regulation (EEC) No 1883/78 
of 2 August 1978). 
These prices take account of the prices of stocks carried 
over from the previous year and of the cost of new 
interventions in the first nine months of the year. This 
method, applied consistently each year, made no allow­
ance for buying-in prices for October and November, 
which were particularly low that year given an excep­
tional harvest. 
The Commission will reconsider its method of fixing 
carry-over prices to see whether it is possible to deal 
with cases of the kind mentioned by the Court of Audi­
tors and arrive at a more representative price for stocks 
carried over. Stocks of beef and veal 
4.15. Council Regulation (EEC) No 869/84 of 
31 March 1984 provides for the application of a single 
buying-in price throughout the Community for each 
quality of meat from the 1986/87 marketing year. This 
is to be achieved in three equal stages and should lead 
to a reduction of some 10% in buying-in prices in Italy, 
making public intervention there considerably less 
attractive. 
The lower disposal prices noted in Italy are largely due 
to the fact that stocks there are older than elsewhere 
and hence more difficult to sell. This situation should 
improve as older stocks are run down and the reasons 
for the build up of stocks are eliminated. 
Presentation and closing of the annual accounts 
4.16. The accounting system now in force does allow 
accounts to be checked as they are presented by the 
Member States. In fact checks were carried out and cor­
rections made throughout the year. The Commission is 
asking its departments to step up monitoring during the 
year as far as this is administratively possible. 
4.17. The EAGGF-Guarantee accounts are on a cash 
basis which means that expenditure is charged to a 
given year by reference to the date of payment (see in 
particular Article 98 of the Financial Regulation). 
This being so the corrections made to the public storage 
accounts, amounting to approximately 9,6 Mio ECU in 
all, and the Commission's corresponding request to the 
Member States for the payment are in complete accord 
with the Financial Regulation. 
Entry of potential losses into the accounts 
4.18. The Commission's comments on the reduction 
in the financial value of stocks are to be found in para­
graph 4.8. It would emphasize that this facility, granted 
by Regulation No 1883/78, can be used only if appro­
priations are available. Furthermore, the second para­
graph of Article 8 imposes the following criteria: 
(a) depreciation is conditional on the estimated dis­
posal price being substantially below the value of 
the stocks to be carried over; 
16. 12.85 Official Journal of the European Communities 181 
(b) the scale of depreciation is limited by the fact that 
the price which replaces the buying-in prices paid 
by the intervention agencies 'may not be below the 
average of the purchase prices obtained on dis­
posal of intervention stocks.' 
Conclusion with regard to financial management 
4.21. The formation of public stocks is the result 
either of Community rules which give farmers security 
in the form of an intervention price or, in certain sec­
tors, of an imbalance between production and con­
sumption. The failure to control expenditure on public 
storage which the Court of Auditors appears to regret 
cannot therefore be attributed to day-to-day manage­
ment of these stocks by the Commission. 
OBSERVATIONS ON THE INTERNAL 
CONTROLS 
Frauds and irregularities 
Value of statistics 
4.23. The Commission is currently investigating why 
some Member States report considerably more irregu­
larities than others. 
As suggested by the Court of Auditors, the Commission 
departments concerned have agreed to change the sys­
tem of recording irregularities which have no financial 
impact because the amounts involved have been recov­
ered before the irregularity is reported. 
4.25. Basing itself on Article 8 of Council Regulation 
(EEC) No 729/70 of 21 April 1970, which makes the 
Member States responsible for recovering amounts due 
as a result of irregularities and, where appropiate, 
deducting them from expenditure by the national pay­
ing agency, the Commission continues to maintain that 
such amounts do not constitute debts due to the Com­
munity within the meaning of Articles 23 and 24 of the Financial Regulation. It is nevertheless willing to con­
sider this matter further when it receives the depart­
mental report it has asked for by the end of the year. 
It should be noted that the amounts involved in cases 
of fraud and the sums subsequently recovered are pub­
lished each year in the Commissions's annual financial 
report on the EAGGF. 
Inadequate results, at all levels, of the campaign against 
fraud 
4.26. The Commission shares the Court of Auditors' 
view that the deficiencies and shortcomings of the 
fraud prevention campaign need to be remedied. 
At Commission level 
4.27. (a) Availability of resources limits the number of 
investigations which can be carried out. The precise 
type of investigation depends on the specific circum­
stances of the individual case and the powers available 
to the Commission. 
It is true that a large number of 'pre-six' investigations 
(which precede the initiation of formal proceedings 
under Article 6 of Council Regulation (EEC) No 
283/72 of 7 February 1972) are carried out. These 
involve a request to the Member State concerned to fol­
low up certain information and depend on its coopera­
tion. 
If the Commission is not satisfied with the information 
received, it launches an official in-depth investigation. 
This formal phase, based on Article 6 of Regulation 
No 283/72, no longer depends on voluntary coopera­
tion from the Member State which is now obliged to 
undertake an investigation. No formal investigation of 
this kind proved necessary in 1984. 
The number of checks under Article 9 of Regulation 
No 729/70 far exceeds the number of investigations 
under Article 6 of Regulation No 283/72. 
(b) Where national law allows it to act in conjuc-
tion with national authorities, the Commission cannot 
take legal action over and above that decided on by the 
national authorities since its involvement is limited to 
the subsidiary role of intervenor. 
Article 8 (2) of Regulation No 729/70 would only allow 
the Commission to act against Member States who do 
182 Official Journal of the European Communities 16.12.85 
not pursue fraud with sufficient vigour. In the circum­
stances it is difficult to see how the Commission could 
take direct action. 
(c) The Commission does endeavour to learn 
from difficulties encountered in implementing various 
Community provisions on agriculture. Although irregu­
larities are the main problem, there are others. 
On the basis of past experience, the departments con­
cerned consider the most appropriate means of moni­
toring each new provision or amendment to an existing 
provision. 
As far as existing provisions are concerned, the detec­
tion of irregularities or abuses has in fact led to changes 
in the rules. However, the decision on whether or not to 
introduce an amendment sometimes hinges on factors 
such as proof that an irregularity has occurred, the scale 
of the fraud and the amounts involved, and the time 
the measure has still to run. Sometimes detection leads 
to improved monitoring in one or more Member States 
rather than amendments to Community rules. 
In the Member States 
4.28. (a) The Member States recognize no legal obli­
gation to report cases of attempted fraud under Regula­
tion No 283/72, except where the irregularity involves 
a new fraudulent practice or is liable to affect other 
Member States very quickly (Article 4). The Commis­
sion would like to see all Member States making inten­
sive use of this provision. 
Member States occasionally report attempted frauds 
not covered by this provision when they consider that 
the Commission should be informed. 
(b) Eight Member States are now carrying out 
inspections under Directive 77/435/EEC at the 
required rate and providing the Commission with 
details, if not always on time. 
Conclusion with regard to the system of fraud prevention 
4.29. The Commission appreciates the Court of Audi­
tor' comprehensive and balanced survey and accepts its 
conclusions. It would refer the Court of Auditors to point III.4 of its 
general reply to Chapter 1. 
Clearance of the accounts 
Financial effect of the clearance decisions 
4.30—4.31. The Commission agrees with the Court of 
Auditors that, ideally, clearance decisions should be 
definitive. Positive or negative reservations were con­
fined to a limited number of cases either in the interests 
of sound financial management or to avoid referring a 
large number of similar cases to the Court of Justice. In 
any event, positive reservations only affected a fraction 
of the figure of 1 039 Mio ECU mentioned by the 
Court of Auditors. Positive reservations as such cannot 
be entered in the balance sheet. However, the Commis­
sion will consider how it can attach a note to future 
balance sheets to accommodate the Court of Auditors' 
wishes. 
On more general issues the Commission, as indicated 
in paragraphs 34 to 39 of its interim report on measures 
taken following the discharge decision for 1983 ('), has 
set itself the goal of clearing the accounts for 1985 by 
30 June 1987, assuming that it receives Member States' 
statements at least a year before that date. It will ask 
the Member States to do all in their power to meet the 
deadlines laid down in the rules and it will use all the 
means at its disposal to secure the information required 
from the Member States on time. 
The Commission has also taken appropriate internal 
measures not only to meet this goal but also to ensure 
that the backlog for 1982, 1983 and 1984 will be cleared 
no later than 30 June 1987. 
Refusal of approval and overruling of approval in 
connection with the 1978 and 1979 clearance operations 
The case of the Milk Marketing Boards, United Kingdom 
4.34 — 4.38. The Commission would make the follow­
ing comments on the observations of the Court of Aud­
itors : 
16.12.85 Official Journal of the European Communities 183 
(a) The Treaty of Accession allowed the Milk Market­
ing Boards to remain in existence until the end of 
the transition period (end 1977). In December 1977 
the Commission sent the Council proposals for 
regulations allowing the United Kingdom to retain 
the Milk Marketing Boards system in a modified 
form; these were adopted in June 1978. Almost all 
the points which required changes to national rules 
or to the trading practices of the Milk Marketing 
Boards were subsequently settled within a reasona­
ble period of time. The only problem to which a 
satisfactory solution could not be found was price 
differentiations. Given the number and complexity 
of the questions to be settled, the Commission 
regards the charge that is was slow to react as 
unjustified. 
(b) The Commission has never invoked its alleged 
inaction to justify financing in 1978 and 1979. On 
the contrary, the Commission's conclusion is based 
on the simple point that it would have been acting 
inconsistently, had it disallowed part of the 
expenditure for those years while at the same time 
proposing retention of the Milk Marketing Boards 
subject to changes to be made by the United King­
dom within a reasonable time after the adoption of 
Council Regulation (EEC) No 1421/78 of 20 June 
1978, Council Regulation (EEC) No 1422/78 of 20 
June 1978 and Commission Regulation (EEC) 
No 1565/79 of 25 July 1979. It was only in the final phase of the account clearing 
exercise that the French authorities produced evidence 
which, if proved relevant by a detailed enquiry, would 
justify acceptance of part of the expenditure. Had the 
Commission received this information following the 
checks carried out by Financial Control, the detailed 
investigation could obviously have, been carried out 
earlier and in more propitious circumstances. 
Problems posed by the non-cooperation of the Member 
States 
4.43 and 4.44. The Commission agrees that access to 
the results of national audits is particulary important in 
the context of audits based on systems analysis. It is 
making fresh representations to the Member States in 
an effort to improve the general situation. It should be 
noted that the Commission has been given access to 
certain internal audit reports by Member States on 
request. 
GENERAL CONCLUSIONS 
The case of wine distillation, France 4.45. (a) The Commission would emphasize that 
generally speaking the payment of advances depends 
on the availability of resources. It therefore intends to 
accede to the Court of Auditors' request and initiate 
the necessary procedures. 
4.41. It is clear that the control system used in France 
during the period in question left much to be desired. 
Indeed, it has been considerably improved since then. 
Nevertheless, the Commission still maintains that 
Community financing, despite certain shortcomings in 
national controls, was strictly limited to expenditure on 
the distillation of table wine satisfying all the require­
ments for the grant of aid. While the sample analysed 
was of necessity confined to distilleries for which all 
the supporting documents were still available, the 
Commission took care that the choice was unbiased. 
Given the large number of cases examined, the result 
appears reasonably reliable. In any case, this wide-
ranging investigation revealed nothing that would cast 
doubt on the claim that the wine distilled under Com­
munity auspices was table wine as defined by Com­
munity rules. 
4.42. The weaknesses of the national control system 
were brought to light in the course of checks carried out 
by Financial Control. At first these appeared to indi­
cate that all French expenditure should be disallowed. (b) The failure to control expenditure on public 
storage is attributable either to Community rules which 
give farmers security in the form of intervention prices 
or, in certain sectors, to an imbalance between produc­
tion and consumption. 
The Commission, like the Court of Auditors, is aware 
of the problem posed by the aging of products in stor­
age. It is continuing its efforts to dispose of stocks but 
is faced with inadequate outlets, on both the world and 
the Community market. 
(c) The Commission, like the Court of Auditors, 
is aware of the disadvantages of present delays in clear­
ing accounts. In July it took steps to speed up matters 
so as to ensure that the accounts for 1982 to 1985 will 
be cleared no later than 1987 (2). 
The Commission would draw the Court of Auditors' 
attention to its replies to paragraphs 4.34 to 4.38. The 
184 Official Journal of the European Communities 16. 12. 85 
Milk Marketing Boards case involved more than the 
clearance of accounts and the appropriate procedure is 
being pursued. 
(d) The Commission agrees that Member States' 
attitudes are not always calculated to make it easier for the Commission to discharge its responsibilities. It will 
pursue its efforts to step up cooperation with the Mem­
ber States, particulary with regard to checks. 
(') COM(85) 413 final of 2 September 1985. (2) See point 2, Part I and points 34 to 39 to Part II of 
COM(85) 413 final. 
REPLIES OF THE COMMISSION TO 
CHAPTER 5 
European Agricultural Guidance and Guarantee Fund, 
Guidance Section, and specific agricultural measures 
SUMMARY OF FINANCIAL 
INFORMATION 
5.3. The payment figures required by the Court of 
Auditors may be found in the accounts for the years in 
question. The Commission agrees with the Court of 
Auditor's findings concerning commitments entered 
into during the period 1980-1984. Since the 5-year 
financial envelope is expressed in terms of commit­
ment appropriations, the Commission has not felt the 
need, given the complexities of the task, to prepare a 
statement of the corresponding payments. 
OBSERVATIONS ON BUDGETARY 
MANAGEMENT 
Settlement of former commitments in respect of 
Council Regulation No 17/64 of 5 February 
1964 
5.5—5.8. (a) In view of the shortage of budgetary 
appropriations in 1983 and 1984, the Commission 
decided to cancel as many carried-over appropriations 
as possible. In this context it also decided not to 
request the carry-over of non-differentiated appropria­
tions covering the projects referred to by the Court of 
Auditors. After re-examination of the files remaining 
open, it was found that the amount required was 
11,3 Mio ECU lower than the cancelled appropriations. This overall operation was not without its drawbacks, 
including the impossibility of committing on the 1984 
budget the whole of the second 1984 tranche of projects 
agreed on by the Commission in December 1984. 
In the interests of sound financial management, the 
Commission therefore adopted general guidelines for 
the second tranche in December 1984. It took some for­
mal decisions in December 1984 and a number of 
others in January 1985. 
As to the difficulties referred to by the Court of Audi­
tors in paragraph 5.8. (c), the Commission acknow­
ledges that it made a global recommitment of the 
amounts in question for essentially practical reasons, 
since the details of the individual project-by-project 
breakdown were already clear from existing accounting 
data. 
The Commission is fully prepared to take due account 
of the Court of Auditors' comments in the event of 
similar situations arising in future. 
Accounting treatment of differentiated 
appropriations under Article 300 
5.9 and 5.10. The switching of items from non-differ­
entiated to differentiated appropriations inevitably 
entailed various operations and accounting documents 
which, while practical, are difficult to understand. The 
Commission shares the Court of Auditors' concern and 
will ensure that presentation of the 1985 accounts is as 
transparent as possible. 
16. 12.85 Official Journal of the European Communities 185 
Charging of appropriations to Article 388 and 
Item 3892 of the budget 
5.11. The proposal for the commitments in question, 
concerning Community measures for the protection of 
forests against fire and acid rain, specified the esti­
mated amount of the expenditure and specified in 
detail the action to be taken in each Member State. 
Whilst it is true that the recipients of aid were not 
named at that stage, the Commission had to start this 
preparatory work as quickly as possible in view of 
widespread public concern about the issue, as indi­
cated in the European Parliament's resolution of 
23 May 1984. Instead a description of the type of credi­
tors was given and individual contracts with the appro­
priate agencies were drawn up as soon as practicable. 
5.12. While recognizing that the position adopted by 
the Court of Auditors is in accordance with the rules 
governing charging of appropriations to items of the 
budget, the Commission felt that in this case the note 
inserted in amending and supplementary budget 
No 2/83, creating Item 3892, faithfully reflected the 
budgetary authority's intention and constituted a suffi­
ciently valid basis for charging the appropriations to 
this item. 
APPLICATION OF THE DIRECTIVE ON 
MOUNTAIN AND HILL FARMING AND 
FARMING IN CERTAIN LESS-FAVOURED 
AREAS 
General comments 
5.14. The Commission would remind the Court of 
Auditors of its reservations about certain aspects cov­
ered in the special report referred to. (') 
5.15. The primary objective of Council Directive 75/ 
268/EEC of 28 April 1975 is to maintain the agricultur­
ally active population of the less-favoured areas by 
compensating farmers for permanent natural handicaps 
affecting the areas where they farm. 
The objective is qualitative in nature and it is therefore 
not possible to measure the extent to which it has been 
attained. Even if it were to be defined in terms of rural 
population, which is of course measurable, it would be 
impossible to determine the impact of the Directive as 
compared with all the other factors concerned in 
regional demographic changes. As regards delays in payment by Member States, the 
Commission regrets these as does the Court of Audi­
tors. However, it should be pointed out that such 
delays are not typical of this measure. The situation in 
Italy has been affected by the progressive decentraliza­
tion of the administration to the regions. This has 
adversely affected both the adoption of implementing 
legislation and the provision of finance, since both had 
to be carried out during the period when regional 
administrations were being created. 
5.16. In the Commission's view the conditions of the 
Directive and of its application are not excessively 
complex. The sound administration of the scheme and 
the prevention of abuses demand that a certain amount 
of detail be supplied by beneficiaries. This may cause 
difficulties in some parts of the Community but the 
Commission has received no evidence of widespread 
difficulties for beneficiaries nor of particular control 
problems. 
5.17. As a general rule the regions are defined at the 
level of the smallest administrative unit (commune, 
parish, etc.). However, the criteria of selection may 
depend on statistics which are only available over 
wider areas and, whilst the Directive requires that the 
zones be composed of agricultural areas which are 
homogeneous from the point of view of the natural 
conditions affecting production, it is inevitable that 
there is some variation within zones. 
The delays in the implementation of the 
measure in Italy 
5.19 and 5.20. Whilst the Commission shares the 
Court of Auditors' concern about the delays in apply­
ing the Directive in some regions in Italy, all the neces­
sary national legislation does now exist. Most regions 
had adopted legislation between 1976 and 1978 and the 
last to do so was Sicily in 1980. 
Delays in the Commission's decisions on the conform­
ity of regional legislation to the provisions of the Direc­
tive are largely a reflection of the difficulties of dealing 
with a highly decentralized national administration. 
Moreover such delays do not prevent the legislation 
being applied in the meantime, as the Court of Audi­
tors writes in paragraph 5.21. 
5.23. While the sum outstanding was still considera­
ble at the end of 1984, the Commission would point 
out that, according to the latest information, it has now 
received declarations covering 276 000 Mio LIT of the 
300 000 Mio LIT actually distributed to the regions. 
186 Official Journal of the European Communities 16. 12. 85 
The Commission will examine the possibility of insert­
ing an explanatory note in the next balance sheet. 
5.24. The Commission regrets that the Italian auth­
orities, having decided to make use of these optional 
provisions of the Directive, should do so in a way 
which reduces their benefit to the farmers concerned. 
Other observations relating to the effectiveness 
of the measure 
5.26. The Commission considers that the commitment 
to continue in agricultural activity for a period of five 
years does not need to be renewed each year. The Com­
mission has insisted that each beneficiary's claim 
should be checked at least once every five years. This 
check would include the verification that the benefici­
ary was still engaged in agricultural activity. 
Problems relating to the regularity of 
expenditure 
5.28. The Commission has written to the Member 
State to ask for clarification of this matter and is exam­
ining how the scheme may be revised so as to give 
beneficiaries the minimum amount each year. 
5.29. The Commission has asked the Member State to 
supply the complete files on collective investments in 
Bassa Farrarese, so that it be in a position to decide on 
the appropriate action. 
Conclusion 
5.30. Many of the Court of Auditors' remarks stem 
from certain common features of measures financed by 
the EAGGF-Guidance. The Community legislation in 
this and in many other cases lays down a broad outline 
for the measure, leaving the Member States to deter­
mine the precise way in which it should be applied, on 
the basis of particular regional and local conditions. In 
fact the Member State is not obliged to apply the mea­
sures contained in Directive 75/268 at all. Moreover, 
the initial financing is provided entirely by the Member 
State, from national financial resources, the Com­
munity's contribution consisting of a partial reimburse­
ment after payment at the national level. THE DEVELOPMENT OF BEEF CATTLE 
PRODUCTION IN IRELAND AND 
NORTHERN IRELAND AND THE 
STIMULATION OF AGRICULTURAL 
DEVELOPMENT IN THE 
LESS-FAVOURED AREAS OF NORTHERN 
IRELAND 
Council Regulation (EEC) No 1054/81 of 
21 April 1981 
5.33. The primary objective of the measure is to 
improve farm incomes in an area where beef and milk 
production are interdependent. It is inevitable that the 
dairy sector will benefit to some degree even if the 
emphasis of the aids is directed towards beef produc­
tion. The relationship between the two sectors even 
goes beyond the usual situation whereby most beef 
calves are a by-product of the dairy herd. In the areas 
affected by the measure, most farms produce milk and 
rear the surplus calves for sale as store or as fat cattle. 
In these circumstances it would be unrealistic to try to 
convert dual purpose dairy-beef herds to single purpose 
beef herds. The objective of the measure is therefore 
simply to improve the contribution which beef produc­
tion makes to producers' incomes by improving the 
beef qualities of the herd. The Commission has there­
fore ensured that aid goes only to insemination by bulls 
of beef or of dual purpose breeds with the capacity to 
improve the beef potential of the herd. 
5.35. The Court of Auditors' conclusion does not take 
sufficient account of the basic objective of the measure 
which was to improve farm incomes, with an emphasis 
on beef production. In practice this meant that the 
measure would also benefit milk and possibly even 
sheep production. As regard the rate of the uptake by 
farmers, it should be remembered that with this type of 
aid the farmer must also contribute to the cost and his 
decisions are affected by wider economic considera­
tions. 
Council Regulation (EEC) No 1942/81 of 
30 June 1981 
5.37. These aids also depend on contributions by the 
farmer and so are not entirely programmable. Whilst it 
is true that the average cost of farm road improvements 
was higher than forecast, the United Kingdom has con-
16. 12.85 Official Journal of the European Communities 187 
tinued to finance this part of the action from purely 
national resources and by the end of 1984 the total 
length of roads concerned has risen to 2 654 km, 
thereby fulfilling the programme. 
5.38. The Commission has asked the Member State 
for further information on the way in which this aid has 
been implemented, with a view to taking appropriate 
action. 
Conclusion 
5.39. The Commission feels that, in drawing up Regu­
lation No 1054/81, the Council took proper account of 
the socio-economic and agricultural realities of the 
region concerned. 
As regards Regulation No 1942/81, it is too early to 
assess the results of this 10-year programme. 
FLOOD PROTECTION IN THE HERAULT 
VALLEY 
5.43. The works involved in the flood protection mea­
sures provided for in this action are not comparable 
with the irrigation works in the examples cited by the 
Court of Auditors since the objective is much wider 
than in the case of irrigation. 
5.44-5.45. The measure in question benefits only 
one limited area of one Member State, though it should 
also yield benefits to the Community budget in the lon­
ger term if it succeeds in shifting agricultural produc­
tion from wine to other products. In these circum­
stances the measure can only be put into effect with the 
consent and cooperation of the local authorities con­
cerned. 
ACCELERATION OF AGRICULTURAL 
DEVELOPMENT IN CERTAIN REGIONS 
OF GREECE 
5.47. The Court of Auditors criticizes the fact that the 
nature of the programme has left the administrative 
regions concerned the option of choosing the projects 
they wish to carry out without reference to the guide­
lines contained in the programme. In the Commission's 
view this situation corresponds with the intention of 
the Regulation. The measure is intended to accelerate the agricultural development of the chosen regions by 
means of Community financial participation in a range 
of measures. 
Since the programme is a multiannual one, it is prema­
ture to draw conclusions regarding overall implementa­
tion on the basis of one year. 
5.48. As regard the differences shown in Table 5.2., 
these may in many cases be explained by unforeseen 
circumstances. Moreover it is to be expected that a new 
Member State during the first year of application of an 
extensive specific programme, should have some diffi­
culties with its implementation. The flexibility shqwn 
by the Greek authorities, which enabled virtually the 
whole of the advance to be used on measures covered 
by the Regulation, is in keeping with the primary objec­
tive of the action, i.e. to accelerate agricultural develop­
ment in the regions concerned. 
APPLICATION OF STRUCTURAL 
MEASURES IN THE WINE-GROWING 
SECTOR 
5.49. The Commission agrees with much of the Court 
of Auditors' analysis of the difficulties encountered 
with the wine market organization. However, there 
have been substantial reforms of the sector since the 
end of the period covered by the Court of Auditors' 
report. These reforms include: 
— a reduction in the price support given to table 
wines (removal of short-term storage aids, a more 
central role for compulsory distillation and a dras­
tic reduction in the price for such distillation); 
— the extension of the prohibition on new plantings 
to cover all types of wines, including the 
'V.Q.P.R.D.'types; 
— an agreement in principle to introduce a vineyard 
register; this reform, already suggested by the 
Court of Auditors in its report on the 1982 finan­
cial year, requires an implementing Regulation for 
which the Commission is preparing a proposal; 
— the reinforcement of the wine grubbing measures, 
now provided for in Regulation (EEC) No 777/85 
of 26 March 1985; (2) 
— stricter control on the conditions for access to aid 
under Regulation (EEC) No 335/77 of 15 February 
1977; in its new criteria for 1985 the Commission 
announced that aid would no longer be given for 
distilleries nor for wine manufacturing unless for 
rationalization without any increase in capacity. 
188 Official Journal of the European Communities 16. 12. 85 
The replies which follow should be seen in the light of 
these reforms. 
The situation in France 
5.53. The latitude of 10% new planting permitted 
under Regulation (EEC) No 458/80 of 18 February 
1980 is only allowed when such new planting is techni­
cally indispensable to the restructuring. Moreover it 
should only lead to the production of wine of a quality 
which has no difficulty in finding a commercial outlet, 
since Article 3 of the Regulation specifies that the res­
tructuring projects must 
— guarantee an improvement in the quality of the 
wines produced, and 
— offer an adequate guarantee as to their economic 
effectiveness. 
Further comment on this measure is given in reply to 
paragraph 5.57. 
5.55. (a) Whilst it is clearly beneficial to link, where 
possible, the marketing measures to those concerned 
with the structure of production, this should not pre­
clude aid to other projects which meet the principal 
objective of improving the conditions under which the 
product is marketed. In France, for example, the 
national aid to commercial enterprises, the granting of 
which is a condition for aid under Regulation No 355/ 
77, is only given on condition that there is a linked 
export development programme. 
(b) The amended provision adopted in Regula­
tion (EEC) No 1932/84 of 19 June 1984 (4) 
(Article 13(3) of Regulation No 355/77) requires that, 
for projects introduced after 30 April 1986, the national 
aid be formally granted, so guaranteeing its amount to 
the beneficiary. 
The situation in Italy 
5.56. An infringement procedure against Italy for the 
non-payment of aids under Regulation (EEC) 
No 456/80 of 18 February 1980 is currently before the 
Court of Justice. 
5.57. The Commission understands many of the 
Court of Auditors' doubts about the cost-effectiveness 
of the action under Regulation No 458/80 and about the coherence of its objectives with the wine market 
organization in general. Indeed in its report (5) which 
led to the recent reforms of the wine market organ­
ization, the Commission proposed that the measure 
should not be rolled-over when it expires at the end of 
the 1986/87 wine marketing year. 
The Commission would make the following observa­
tions on the specific questions raised by the Court of 
Auditors: 
(a) the Regulation does not require that reparcelling be 
part of the restructuring process. It provides for aid for 
replanting with a view to rationalizing the work on the 
vineyard and to improve the quality of the wine prod­
uced ; 
(c) As regards the proof of previous grubbing, in Tus­
cany, the Commission will pay particular attention to 
this aspect when it has received claims for payment. In 
the meantime, it is examining to what extent a possible 
infringement of Community legislation on replanting 
rights may be involved. 
5.58. (a) A cooperative must build up its volume of 
business gradually. Also producers accustomed to act­
ing independently need time in order to commit them­
selves totally to cooperative action. Further growth in 
cooperation will depend on how successful the cooper­
ative is in marketing their production. It is in any case 
highly desirable that the vinification of table wine 
grapes should also be carried out under the conditions 
which can be provided in a cooperative winery. 
(b) The price of quality wines depends not only 
on the essential characteristics of the products but also 
on the market balance for that particular type of wine. 
It is primarily the duty of producers to ensure that a 
balance is maintained by producing wines for which 
there is a commercial demand. Moreover, it is the Com­
mission's view that the problems cannot simply be 
expressed in terms of table wines and VQPRD wines, 
without reference to the range of quality within each of 
these categories (see reply to paragraph 5.62.). 
(c) The Commission has always been careful 
about aid to distilleries and it has only been given in 
special cases where the need was established under the 
Italian programme. No further aid has been given to 
this sector since 1984. 
The situation in the Federal Republic of 
Germany 
5.60. Wine production in Germany is subject to grea­
ter fluctuations than in other wine producing countries. 
16.12.85 Official Journal of the European Communities 189 
In these circumstances, increased storage capacity is 
indeed capable of better regulating the market. How­
ever, the distillation referred to by the Court of Audi­
tors resulted from two consecutive years with excep­
tionally large harvests (16,1 million HI in 1982/83 and 
13,4 million HI in 1983/84 as compared with an aver­
age production of around 8 million HI). 
Conclusions 
5.62. Whilst agreeing with the Court of Auditors' ana­
lysis suggesting that in general terms the difficulties facing both producers and the market organization 
would be lessened by a move to lower yielding and 
higher quality wines, the Commission does not see this 
simply in terms of table wine versus 'VQPRD' wine. 
It believes that there is a place in the market for table 
wines of a marketable quality and the production of 
better quality table wines can be remunerative for the 
producer as well as improving the overall market bal­
ance. As indicated in the reply to paragraph 5.49., the 
recent reforms to the market organization should facili­
tate such a development. 
(') OJC358, 31. 12. 1980. 
O OJL 88, 28. 3. 1985, p. 8. 
(3) OJ C 78, 26. 3. 1985, p. 7. (4) OJL 180, 7. 7. 1984, p. 1. 
(5) Doc. COM(84) 440 final of 25 7. 1984. 
REPLIES OF THE COMMISSION TO 
CHAPTER 6 
Common fisheries policy 
OBSERVATIONS ON EXPENDITURE ON 
BIOLOGICAL STUDIES AND FISHING 
AGREEMENTS WITH CERTAIN 
DEVELOPING COUNTRIES (LDCs) 
Biological studies Publication of the conclusions of studies 
6.9. The Commission would refer to its reply in the 
interim report on action taken in response to the 1983 
discharge, a copy of which was sent to the Court of 
Auditors on 2 September (doc. COM(85) 413 final, 
pp. 61, 62 and 63). 
6.8. The Commission has decided to introduce a sys­
tem of checking and, as far as possible, competitive 
tendering. The requirements will depend on the 
amounts involved. 
In the fisheries sector, however, the specialized nature 
of the studies to be undertaken plus the geographical 
constraints severely limits the number of research insti­
tutes potentially capable of satisfying the requirements. 
Consequently, the Commission's choice is inevitably 
restricted from the outset. Payments under the fishing agreements with 
certain LDCs 
6.10, 6.11, 6.12. The very nature of the agreements, 
which involve the provision of a financial considera­
tion to these non-member countries for facilities 
offered (fishing rights in exclusive economic zones), 
and the need to respect the sovereignty of the countries 
concerned mean that the Community cannot insist on 
being informed about the use to which the countries 
put the sums involved. 
190 Official Journal of the European Communities 16. 12. 85 
REPLIES OF THE COMMISSION TO 
CHAPTER 7 
Regional aid expenditure 
1. The Commission would begin by emphasizing that 
it is in agreement with the Court of Auditors on the 
objective of the ERDF. It would point out however 
that the ERDF operates within a legislative framework 
which imposes limits, if not constraints, on manage­
ment in the strict sense of the term. Some of the less 
than satisfactory aspects are inherent in the regulations 
in force until the end of 1984. 
The Court of Auditors itself recognizes that the new 
Regulation, which was proposed by the Commission in 
November 1983 and entered into force on 1 January 
1985, will help to make the ERDF more effective. 
2. Opportunities for improving the effectiveness 
of the ERDF offered by the new Regulation 
On the question of objectives pursued, the Commission 
is in fact seeking to increase the effectiveness of the 
ERDF as an instrument of regional policy. The qualita­
tive improvements the Commission proposed to the 
Council were consistent with the principles set out in 
its report on ways of increasing the effectiveness of the 
Community's structural funds (•) and have, for the 
most part, been incorporated into the new ERDF 
Regulation. (2) 
Thus the provisions governing coordination of Com­
munity policies with each other and with national 
regional policies should contribute to the achievement 
of a higher degree of convergence between the econom­
ies of the Member States (paragraph 7.34) and a more 
balanced distribution of economic activity within the 
Community. 
Similarly, the definition of guidelines and priorities for 
Community regional policy — drawn up on the basis 
of a periodic report on socioeconomic changes in the 
regions, an analysis of the regional impact of other pol­
icies and development programmes — should allow 
clarification of the regional development objectives to 
be pursued in terms of planning (paragraph 7.23). The increased weight given to Community programmes 
in ERDF operations should help to improve integra­
tion of the various Community policies and instru­
ments (paragraph 7.32). 
Moreover, the results of profitability assessments and 
socioeconomic cost-benefit assessments which the new 
Regulation requires Member States to submit in sup­
port of aid applications for major investment projects 
in industry and infrastructure should give the Commis­
sion a better idea of their viability and the contribution 
they could make to economic and regional develop­
ment (paragraphs 7.23 and 7.32). 
Moreover, the progress reports Member States are 
required to submit, combined with on-the-spot checks 
and ex post assessment, will clearly make it easier to 
keep a closer eye on attainment of the objectives of the 
programmes (paragraphs 7.23, 7.32 and 7.36). 
The Commission is also aware that, given the number 
of ERDF operations (some 26 000 at the end of 1984), 
progress monitoring and systematic analysis of the 
Fund's activities are no longer possible without the 
help of computers. It is making every effort to complete 
the computerization process and bring it into operation 
as soon as possible. This will also enable it to produce 
lists of operations to recover aid (paragraph 7.8). 
3. Additionality 
The Commission shares the Court of Auditors' concern 
that the ERDF may not have produced a real increase 
in Member States' own regional development efforts 
(paragraph 7.10). The shift from a project financing sys­
tem to programme co-financing system should help to 
increase complementarity and make it more obvious. 
However, it is clearly impossible to make a mathemati­
cal check on global additionality since this would 
necessarily involve comparing actual regional expendi­
ture by the Member State with what it would have 
spent if the ERDF did not exist. The Court of Auditors 
itself admits that global additionality is difficult to 
16. 12.85 Official Journal of the European Communities 191 
verify (paragraph 7.12). The Commission is prepared to 
consider any ideas the Court of Auditors may have as 
to a method for verifying global additionality. 
4. Less than satisfactory aspects inherent in 
the old regulations 
The Court of Auditors rightly wishes to see old deci­
sions being closed more quickly (paragraph 7.7). It 
should be pointed out, however, that the regulations in 
force until 31 December 1984 contained no binding 
provisions in relation to closure or to the completion 
date indicated in the aid application. Consequently, the 
fact that the completion date has passed does not, of 
itself, constitute grounds for decommitment and hence 
automatic closure. 
The Court of Auditors claims that there is no direct 
relationship between the execution of a given project 
and the aid decision. It notes that work on many 
assisted projects, particularly industrial projects, had 
started before the aid decision was taken (para­
graphs 7.13 and 7.14). The fact is however that public 
expenditure incurred from the twelfth month preceding 
lodgement of the aid application is regarded as eligible 
under the ERDF Regulation. Before applying for 
ERDF aid, the Member State decides how much it will 
provide itself, since ERDF assistance is determined by 
reference to national aid. 
Thus ERDF rules themselves are often the root cause 
of the situation noted by the Court of Auditors, the 
situation which led it to question the additionality of 
ERDF operations, notably those relating to productive 
investment. 5. Specific observations made by the Court of 
Auditors 
In support of its observations the Court of Auditors 
analyses a number of specific projects in the regions 
inspected in 1984. It quotes two 1981 decisions grant­
ing aid to Sicily (paragraphs 7.16 to 7.23) to illustrate 
the overall need for more stringent selection of invest­
ment projects and better monitoring of the implemen­
tation of assisted projects. The Commission took the 
view that these projects met a fundamental need in the 
region concerned and were fully justified, even though 
they were later abandoned, in the face of mounting 
costs due to serious inflation in the years before and 
after 1980. The projects were inspected and monitored 
by the Commission, which may well make a decommit­
ment. 
As to the 42 industrial projects inspected in France, 
selected from several hundred projects so far financed 
in the regions concerned (paragraphs 7.24 to 7.26), the 
Court of Auditors notes that 12 related to firms that 
had discontinued or suspended business and goes on 
from this to assert, in general terms, that the Commis­
sion does not take sufficient account of the situation of 
the economic sector concerned or of the profitability of 
the investment when assessing projects. However, it is 
generally recognized, in the present economic climate, 
that there are no guarantees that investment in any 
industry will prove successful. 
Lastly, the claim that the Commission did not ensure 
that certain industrial projects in the FR of Germany 
were consistent with the regional development pro­
gramme and failed to monitor achievement of objec­
tives (paragraphs 7.30 to 7.32) is not entirely justified. 
In fact, only the first generation regional development 
programme had the stated aim of creating skilled jobs. 
This was subsequently broadened to cover job creation 
in general. 
(!) COM(83) 501 final of 28 July 1983. O Council Regulation (EEC) No 1787/84 of 19 June 1984 
on the European Regional Development Fund (OJ L 169, 
28. 6. 1984). 
192 Official Journal of the European Communities 16.12.85 
REPLIES OF THE COMMISSION TO 
CHAPTER 8 
Social sector 
SUMMARY OF FINANCIAL 
INFORMATION (EUROPEAN SOCIAL 
FUND) (CHAPTERS 60 AND 61) 
Implementation of the budget 
8.2. The decision of 19 December 1984 dealt with: 
— a number of applications which had not been cov­
ered by the decision of 23 July 1984; 
— the utilization of appropriations which had become 
available again, which meant that the (weighted 
linear) reductions had to be recalculated: 
Partly because of this second factor, and partly to make 
the position regarding commitments clearer, the deci­
sion of 19 December 1984 replaced the two earlier deci­
sions. 
8.3. The Netherlands agreed to payment of only part 
of its advances before the end of 1984, payment of the 
remainder being deferred until the beginning of 1985. 
OBSERVATIONS ON REGULARITY AND 
LEGALITY 
Entry of commitments and payments in the 
accounts 
8.6—8.10. The information given to Parliament on 
12 February 1985 was full and explicit. Further details 
have been supplied to the Court of Auditors in the 
interval. 
Observations on an overruling of the Financial 
Controiler's refusal to grant approval 
8.14. In response to the Court of Auditors' observa­
tions, the Commission presented a proposal to the 
Council for a Regulation amending Council Regula­tion (EEC) No 2950/83 of 17 October 1983. This would 
allow the self-employed to be treated in the same way 
as employed persons for the purposes of aid for the 
creation of additional jobs. 
IMPLEMENTATION OF THE NEW 
EUROPEAN SOCIAL FUND 
Observations on the procedures for preparing 
the approval decisions 
Guidelines 
8.17. The guidelines for management of the Fund 
from 1984 to 1986 were a transitional arrangement. The 
Commission adopted more specific guidelines for 1986 
to 1988 in Decision 85/261/EEC of 30 April 1985. 
8.18—8.20. A handbook for potential aid recipients is 
being prepared. The departments responsible for the 
Fund also intend to compile a compendium of docu­
ments covering questions of interpretation and matters 
arising in connection with appraisal, based on specific 
cases encountered in everyday practice. This will com­
prise departmental memos on Commission decisions, 
comments by departments, and descriptions of the 
practices and procedures to be followed. 
The Commission will do all it can to solve the prob­
lems referred to in paragraphs 8.19. and 8.20. It must be 
remembered, however, that the 1984 guidelines were 
purely transitional. It follows that in certain cases spe­
cific choices had to be made on the basis of the general 
guidelines. Indeed, given the very varied nature of the 
Fund's operations, some guidelines are bound to be 
rather general. 
Codification 
8.21. The Court of Auditors refers to a checklist of the 
grounds on which aid applications can be refused. This 
16. 12. 85 Official Journal of the European Communities 193 
was drawn up specifically for the first year in which the 
rules and guidelines adopted at the end of 1983 were to 
be applied. In the light of experience gained, a more 
systematic and comprehensive checklist for use in 
appraising the admissibility, eligibility and priority of 
aid applications was drawn up by the Fund's adminis­
tration in 1984. This new checklist will be used for the 
scrutiny of applications relating to 1985 and sub­
sequent years. 
Observations on the decisions approving or 
rejecting applications for assistance 
8.23. Since 1984 was a transitional year, the Commis­
sion decided to adopt a flexible approach in applying 
the guidelines to applications for assistance. However, 
the requirements laid down in Council Decision 83/ 
516/EEC of 17 October 1983, Regulation No 2950/83 
and Commission Decision 83/673/EEC of 22 Decem­
ber 1983 were strictly observed except as regards certain 
formal requirements. 
The Commission has made it clear, both to the Fund 
Committee and to the national authorities, that the 
guidelines will be strictly applied from 1985; this is in 
line with the Court of Auditors' recommendation. 
8.24. The Commission finds it difficult to imagine 
how application criteria could be more precise than 
those already laid down in the rules governing the 
Fund. 
The eligibility of operations is assessed when applica­
tions are examined in the light of Decision 83/516 and 
Regulation No 2950/83. The provisions of those acts 
are sufficiently clear and require no further clarification 
except on certain points of interpretation; these are 
resolved on a case-by-case basis (see reply to para­
graphs 8.18 to 8.20) and may lead to proposals for 
amendments to the rules, as was the case in 1985 when 
assistance for job creation was extended to the self-
employed (see reply to paragraph 8.14.). to the 18 July 1984 document accompanying the draft 
approval decisions submitted to the Commission. 
The Commission appreciates that all rules are capable 
of improvement. It will always welcome specific 
suggestions as to the rules the Court of Auditors feels 
to be in need of further refinement. It could take such 
suggestions into account in drawing up proposals for 
presentation to the Council and revising acts it has 
adopted itself. The Court of Auditors might be inter­
ested to know that Commission departments are cur­
rently preparing a revision of Decision 83/673; the 
amounts of assistance for expenditure on aid for re­
cruitment and employment are reviewed annually 
(Article 2 of Regulation No 2950/83 and Commission 
Decisions 83/621/EEC of 30 November 1983, 84/ 
829/EEC of 27 July 1984 and 85/420/EEC of 30 July 
1985). 
The same considerations apply to the guidelines for 
management of the Fund, which complement the legis­
lative provisions as regards exercise by the Commission 
of its powers of discretion in the selection of projects 
for financing. These guidelines are also reviewed annu­
ally (Article 6 of Decision 83/516) (see also reply to 
paragraph 8.17.). 
Changes were made to the classification of certain 
applications in 1984 because the Member States had 
not had sufficient time to adjust fully to the new guide­
lines. In any event changes were confined to cases 
where it could be deduced from the content of an 
application qualified for under a category other than 
that proposed by the Member State. 
8.25. As to the mistakes referred to by the Court of 
Auditors in respect of certain amounts approved, the 
precise nature of the expenditure and its compatibility 
with Article 1 of Regulation No 2950/83 will be 
assessed when the request for payment of the balance is 
examined. 
8.26. The checklist referred to in paragraph 8.21. of 
the Court of Auditors report (see also reply to that 
paragraph) was used by Commission departments 
when appraising applications. 
The question as to whether an operation has priority or 
not is determined in each case by reference to the man­
agement guidelines. These are in fact implementing cri­
teria designed to make it as clear as possible, in adv­
ance of the lodging of applications, which operations 
are to have priority for assistance among the many that 
are eligible. The grounds for the Commission's decision are to be 
found in the individual files but may require further 
elucidation on occasions. 
Conclusions 
The way in which the rules and guidelines have been 
applied is set out in an explanatory document similar 8.30. The Commission intends to pursue its activities 
in the social sector in line with clearly defined rules, 
194 Official Journal of the European Communities 
with the same strictness it applies to all its financial 
operations. In this spirit it will continue to do all it can 
to act on the constructive comments made by the Court 
of Auditors. 
WINDING UP THE OLD EUROPEAN 
SOCIAL FUND 
Observations on final payments 
8.32. The Commission has ordered a review of these 
cases and will inform the Court of Auditors directly of 
the outcome. 
8.33. The first case referred to by the Court of Audi­
tors involves a body which went bankrupt and was 
consequently unable to submit a final breakdown of 
expenditure in time. Under the circumstances the 
national authorities took the view that submission of a 
claim for payment of the balance was nevertheless jus­
tified since all the operations approved had been car­
ried out and failure to meet the prescribed deadline 
would invalidate the claim. The Commission will for­
ward the missing document to the Court as soon as it is 
received. If it is not forthcoming within a reasonable 
length of time the Commission will ask the Member 
State to repay the sum in question. 
In the other three cases raised by the Court of Auditors 
Commission departments have established the sum 
overpaid and requested repayment. 
OBSERVATIONS ON FINANCIAL 
MANAGEMENT 
Table 9.1. When supplementary and amending 
budget 1/84 was approved most of the appropriations 
remaining in Chapter 100 were transferred to the rel-8.34. During an on-the-spot inspection postdating 
that carried out by the Court of Auditors Commission 
officials managed to obtain the financial data needed 
to establish the final global breakdown. This revealed 
that expenditure actually incurred on the operations 
approved had exceeded the sum taken as the basis for 
determining assistance from the Fund. 
Observations on recoveries 
8.34—8.37. The time taken to effect recovery is deter­
mined by the time limits which operate between pay­
ment of an advance and the point at which it becomes 
possible to establish that overpayment has occurred — 
generally when the final payment claim is submitted. 
In the case of commitments prior to 1984 the Member 
States had to submit a final payment claim within 
18 months of the date of completion of the operation 
(Article 4(1) and (2) of Commission Decision 78/706/ 
EEC of 27 July 1978, as amended by Commission 
Decision 82/540/EEC of 26 July 1982). To this must be 
added the actual duration of the operation itself: this 
precedes the period allowed for the submission of final 
payment claims and may be as long as 36 months in the 
case of pluriannual commitments. 
The Commission is confident that the arrangements 
adopted following the 1983 review, in particular 
Article 4 (approval of general operations for a period 
not td exceed the Community financial year) and 
Article 6 (ten-month time limit for submission of the 
final payment claim after completion of an operation) 
of Decision 83/673, will speed up recovery procedures 
significantly to the Court of Auditors' satisfaction. 
evant headings by the budgetary authority. This was 
done despite a statement by the Commission to the 
effect that these appropriations would not be used by 
31 December 1984, unless programme decisions were 
adopted straight away. In fact no decisions were taken 
until 12 March 1985. It therefore proved impossible to 
use a sizeable volume of Chapter 73 appropriations in 
1984. REPLIES OF THE COMMISSION TO 
CHAPTER 9 
Research, energy, etc. 
16. 12.85 Official Journal of the European Communities 195 
9.2. (a) Although the utilization rate for appropria­
tions for payment for energy cannot be regarded as 
ideal, the Commission would nevertheless point out 
that it went up from 35% in 1983 to approximately 65% 
in 1984. 
The Commission has imposed strict limits on appro­
priations for payment for this sector in the 1986 preli­
minary draft budget with a view to achieving maximum 
utilization. 
(b) The point should be made in relation to 
Table 9.1. that, while the Chapter 73 utilization rate for 
cost sharing and concerted action projects fell short of 
the 90% achieved in 1983, this is solely due to the fact 
that the Commission was unable to use appropriations 
entered in the supplementary and amending budget 
(81 Mio ECU in commitment appropriations and 
28 Mio ECU in payment appropriations) in the 
absence of a Council decision (taken on 12 March 
1985). Were it not for this factor, the utilization rate for 
appropriations for cost sharing/concerted action pro­
jects would be 88% for commitment appropriations and 
89% for payment appropriations. 
As regards the fourth and final contribution to the JET 
budget for 1984, the Commission was obliged to make 
this payment under the terms of JET's Financial Regu­
lation, that is to say, in response to the call for funds 
made by the Projects Director. 
The final payment was made on the last day allowed 
by the Financial Regulation. Once a call for funds has 
been made the use JET makes of its appropriations for 
payment is outside the Commission's control. 
ENERGY: COST SHARING PROJECTS 
9.3 and 9.4. The Commission has taken careful note 
of the Court of Auditors' recommendation at 9.4. 'that 
the present systems of internal and external technical 
evaluation should be expanded to provide a clearer 
assessment of the likelihood of commercial exploita­
tion for each objective within a completed project.' 
The Commission is examining the best ways to introd­
uce a system of periodic requests to all contractors for 
information about the state of completed projects, with 
follow-up in case of non-reply. INDIRECT ACTION RESEARCH 
Management procedures 
9.5. Under the general rules applicable to the institu­
tion, the Directorate-General concerned has always had 
instructions covering financial and contract manage­
ment procedures for indirect action. 
To meet the Court of Auditors' main concerns, the 
Directorate-General concerned began to revise these 
instructions in mid-April 1985 to produce a manual 
which became effective on 1 November 1985. 
Use of external audit firms 
9.7 and 9.8. The Commission confirms its intention of 
making full use of the verifications carried out by audit 
firms. It will pay particular attention to the Court of 
Auditors' recommendations. 
INFORMATION AND 
TELECOMMUNICATIONS 
TECHNOLOGIES 
9.13. (a) The Commission has had a detailed investi­
gation carried out into the treatment of commitments 
as requested by the Court of Auditors and has sent it a 
working paper on this study. 
(b) Commission departments have produced a 
basis for calculating staff exenditure which makes it 
possible to compare actual expenditure with the ceiling 
of 4.5% of total appropriations deemed necessary. 
Steps will be taken to ensure that this percentage is not 
exceeded throughout the life of the programme. 
(c) The Commission has taken careful note of 
the Court of Auditors' comments and is introducing the 
desired improvements as part of the procedure for 
1985. 
9.14. The Commission can assure the Court of Audi­
tors that it will give every consideration to the detailed 
recommendations referred to. 
196 Official Journal of the European Communities 16. 12.85 
REPLIES OF THE COMMISSION TO 
CHAPTER 10 
Cooperation with developing and other non-member countries 
FOOD AID (CHAPTER 92) 
10.3. If current requests for mobilization were 
included, the figures in Table 10.2., would read as fol­
lows: 
— Cereals 1 505 167 t 
— Milk powder 173 0941 
— Butteroil 49 854 t 
Financial management 
Unsettled accounts 
10.5. Systematic audit visits have been made to 
national intervention bodies since 1984 in connection 
with the clearance of food aid accounts. 
10.6. Indirect aid operations are highly complex. 
Apart from the allocation of food products, they 
involve cash contributions to cover the cost of sea and 
land transport plus a contribution to distribution costs. 
These financial operations are staggered over time 
since reimbursement generally depends on presentation 
of a mass of documentation which often reaches the 
Commission late and requires painstaking examina­
tion. 
Supervision of counterpart funds 
10.7. The Commission has analysed the information 
available on counterpart funds. 
The revision of management procedures now under 
way should lead to greater integration of counterpart 
funds into the Community's technical and financial 
cooperation. Late payments to UNHCR 
10.8. The late payment referred to by the Court was 
due to a legal difficulty which arose in 1984 in connec­
tion with the interpretation of the framework food aid 
regulation. This called for a novel solution which took 
some time to devise. 
Supply of aid 
Late shipments 
10.11. Compliance with the loading deadlines laid 
down in the food aid mobilization regulations is a pre­
condition for release of the security guaranteeing deliv­
ery. 
Except in cases of force majeure, the contractor is pen­
alized if he fails to comply. 
Force majeure was invoked by the contractors in con­
nection with the cif deliveries to Somalia, Mozam­
bique, Senegal and Ghana referred to by the Court of 
Auditors. It is for the Member State concerned to 
accept this or not. The grounds for releasing the secur­
ity will be examined when the accounts are cleared. 
Quality of aid 
10.12. The problem which arose in connection with 
supplies of milk powder to Ghana was due to the fact 
that the beneficiary was not specific enough in indicat­
ing the quality required. In the 1985 allocation Ghana 
will receive the type of milk requested and the specifi­
cations will be written into the special mobilization 
regulation. 
It is true that the provisions on packaging were not 
strict enough. Council Regulation (EEC) No 1354/83 
of 17 May 1983 (') was adopted with this in mind. 
16. 12.85 Official Journal of the European Communities 197 
10.13. It was instances of the kind raised by the Court 
that led to the systematic quality controls mentioned in 
paragraph 10.14. These could be supplemented by the 
damage reports referred to in paragraph 10.15. 
As already stated in paragraph 10.12, Regulation No 
1354/83 has been amended as regards the packaging of 
food products. 
Taken together these measures should reduce if not 
rule out cases in which supplies are unacceptable in 
terms of quality. 
10.15. The Commission is well aware of the problem 
raised by the unwillingness of recipient countries to 
lodge insurance claims. 
It therefore proposes to follow up individual represen­
tations with a circular reminding recipient countries 
and bodies of the steps to be taken. It is also examining 
the possibility of financing damage reports from the 
Community budget as a logical extension of the syste­
matic quality controls carried out on loading. 
COOPERATION WITH NON-ASSOCIATED 
DEVELOPING COUNTRIES (CHAPTER 93) 
Financial management 
Low use of appropriations 
10.17. The differentiated appropriations system 
allows the Commission to spread commitments under 
Article 930 over two years. It is over this period that the 
utilization rate of commitment appropriations must be 
assessed. From the outset all commitment appropria­
tions for aid to non-associated developing countries 
have in fact been used up during the period in which 
they were valid. There will be a 100% utilization rate for 
1984 appropriations too. 
As the Court of Auditors has noted, the utilization rate 
for payment appropriations (79% of available appro­
priations in 1984 as against 57% in 1983 and 39% in 
1982) is increasing because of the experience gained by 
the Commission with regard to the pattern of pay­
ments. Seriously delayed projects 
10.18. The projects begun prior to 1982 were delayed 
because, in addition to the difficulties normally 
encountered in recipient countries, there were problems 
with cofinancing partners. However, since the end of 
1984 seven of the eight projects referred to by the Court 
of Auditors have started, the exception being a project 
where amendments had to be made to the agreement 
between the EEC and the cofinancing partner. This 
means that Community funds can now be paid out. 
Payments prior to operations 
10.19. Although cofinancing offers advantages to the 
recipient country it complicates project administration. 
This is why the management of cofinanced projects is 
often entrusted to the cofinancing partner in countries 
where the Commission is not represented. The Com­
mission monitors progress via the periodic reports the 
cofinancing partner is required to submit. 
Projects in Thailand and Indonesia 
Incomplete files 
10.21. The Court of Auditors exaggerates when it 
claims that for many projects the files kept in Brussels 
are inadequate. It is possible, given departmental res­
ponsibilities, that contract documents are filed in dif­
ferent departments. 
Co-financing activities 
10.22. When it first provided aid to non-associated 
developing countries, the Commission had to agree — 
given the limited range of possibilities — to finance 
projects proposed by the government institutions 
receiving aid. 
The Commission recognizes the advantages of a simple 
management structure but application of this principle 
often raises problems. 
198 Official Journal of the European Communities 16. 12. 85 
10.23. The lack of information on implementation of 
a crop development project in the North-East region of 
Thailand is not due to the scale of Community aid but 
rather to poor coordination between the various don­
ors. This would normally be ensured by the Thai auth­
orities, but they are not well represented in this back­
ward region. 
Inadequate selection of consultants 
10.24. Objectively the Court of Auditors comments 
are justified but they refer to a period when a shortlist 
was not compulsory. Selection procedures are now 
strictly applied in accordance with the rules in force. In 
the case in point the Government authorities chose 
another consultant subsequently from a shortlist drawn 
up by the Commission. 
10.25. The frequent switching of technical assistants 
was mainly due to the personal problems of the indivi­
duals concerned. This did undoubtedly have an 
adverse effect on implementation of the project. How­
ever, despite this setback in a province where working 
conditions were difficult, the firm concerned produced 
satisfactory implementation reports for other compo­
nents of the project. 
Poor studies and planning of projects 
10.26. Most of the initial difficulties in project imple­
mentation may be ascribed to the fact that this project 
was the first ever EEC-funded project in South East 
Asia. The Commission was not at that time fully famil­
iar with local conditions and in particular with the very 
intricate national administrative and financial proce­
dures. 
These difficulties were gradually overcome, however, 
and a review mission sent out in 1979 resulted in a 
reshaping of the project allowing for its subsequent 
successful completion, as noted in the report by the 
Court of Auditors. 
10.27. The project is part of a national plan for dairy 
development which was initiated in the late 1970s and 
is designed to fit into the objectives set by the Indone­sian authorities to extend dairy herds among small 
farmers in areas best suited for milk production. The 
association of livestock and agriculture can often be a 
significant factor in the progress of small farmers. A 
large number of cooperatives to collect and distribute 
milk has been organized throughout Java and has been 
in operation for many years. The cooperative and pro­
cessing unit of the Baturraden project will be integrated 
into this network. 
The policy adopted by the Indonesian government is to 
replace some imported products by locally produced 
products. Although powder imports may be available at 
a lower price on the world market, Indonesia, like other 
major developing countries, such as India or Pakistan, 
has decided that a degree of self-sufficiency is neces­
sary for the country's social and economic develop­
ment. Local production is therefore encouraged. 
Marketing prospects in the vicinity of the project are 
reasonable; local demand for milk has been expanding 
in the region, with unorganized producers developing 
production to meet growing demand in Puwokerto and 
Cilacap urban areas. Any additional output can be 
channelled to established market outlets through the 
existing cooperatives system. 
Although modern-style stables do exist, using technol­
ogy unsuitable for small production, most milk produc­
tion in Java comes from peasant production. Java's 
peasant agriculture has been able over the years to 
evolve a remarkable small scale intensive production 
system for dairy cattle compared to conditions prevail­
ing in developing countries. A small number of cows 
are kept in the sheds all year round under controlled 
conditions. The state of hygiene and health of these 
animals, which are often Friesian cows, is quite good, 
with milk production averaging over 81/day, and 
sometimes up to 15 1/day. The fodder used is generally 
obtained from local by-products such as rice bran, 
copra meal and other fodder, which provide adequate 
nutrition and promote good lactation. 
Inadequate performance of local partners 
10.28. (a) It is true that the Thai Government has not 
fulfilled its obligations so far. However it is examining 
various financing options in association with the 
National Agricultural Cooperative Training Institute 
and other bodies. The Commission is taking a keen 
interest in developments. 
16.12.85 Official Journal of the European Communities 199 
(b) Recent information would appear to indi­
cate that the payment problem is being settled. Techni­
cally speaking, the project has achieved its objectives. 
(c) Despite the Court of Auditors' finding that 
the Indonesian authorities had failed to supply the 
reports provided for in the financing agreement, the 
project was a good one which was correctly imple­
mented. 
The intervention of the Asian Development Bank 
10.29. The need to improve and rationalize coopera­
tion procedures has been recognized by the Bank and 
by the Commission for some time. Following detailed 
discussions in 1981 and 1982, a precise agreement on 
cofinancing procedures has been reached. Three dis­
tinct types of cofinancing 'model arrangements' have 
been defined, spelling out procedures and considerably 
improving the implementation of joint projects. 
The Bank has also improved the information it pro­
vides to cofinancing partners on project execution, 
establishing a separate cofinancing unit within the 
Bank's country department to improve contacts. 
As to the role of the Delegation vis-d-vis implementa­
tion of cofinanced projects, the situation has evolved 
since it was first established. Under new arrangements 
with the Asian Development Bank, the Delegation 
does have a more active role to play, particularly under 
the parallel type of cofinancing, which clearly allows 
for their joint supervision, and which has been seen to 
be the preferred form of association in recent years. 
While the Delegation has foremost devoted its limited 
resources to autonomous projects, its staff has partici­
pated in joint missions, and more so in recent years. 
10.30. It is true that the reports sent to the Commis­
sion by the Asian Development Bank (ADB) were 
inadequate, which is why the Commission took steps to 
obtain fuller reports, at least on those projects where 
Community involvement was significant. Furthermore, 
to improve its own monitoring of projects, the Com­
mission has decided to provide additional staff for the 
Bangkok Delegation and open a suboffice in Jakarta. Disastrous result of the Sulawesi transmigration and area 
development project 
10.31. This project should be seen in the general con­
text of the large-scale transmigration programme 
undertaken by the Indonesian Government since the 
beginning of the seventies with financial backing from 
the IBRD and the ADB. Projects of this kind are 
intrinsically complicated, not least because of the prob­
lem of coordinating the large number of authorities and 
administrative departments implementing them in 
inaccessible regions. The Sulawesi project is further 
complicated by the fact that it attempts to counter ear­
lier criticism by maintaining a balance between 
development measures in favour of the local popula­
tion and the migrants. A further point is that the Com­
mission, as a relatively minor donor, does not have the 
same influence as its cofinancing partners (IBRD and 
ADB). For these reasons, the Commission has financed 
no projects of this kind since 1978 and has no intention 
of financing others. 
Half the Community aid was spread among a number 
of projects because, under Indonesian rules and regula­
tions, projects are systematically divided into small or 
medium-sized components, the Commission financing 
local expenditure only. As to the financing of feasibil­
ity studies for similar projects in the future, it would 
appear to be a good idea for the Community to contri­
bute to these projects at the planning stage, even 
though it does not intend to finance implementation, 
given the Government's ambitions and the need to 
improve quality. 
10.32. Since the Commission embarked on this cofi­
nancing project with other major donors (ADB, Islamic 
Development Bank), it had to accept their procedures 
and modus operandi. Following a feasibility study, their 
practice is to submit the project to the decision-makers 
before the precise shape of the project has been defined 
by detailed technical studies. 
10.33. The agency implementing the project was 
manifestly inadequate. It is to be hoped that the 1984 
decision to grant it full ministry status will lead to 
improved coordination of responsibilities in the field. 
(') OJL142, 1.6. 1983. 
200 Official Journal of the European Communities 16.12.85 
REPLIES OF THE INSTITUTIONS TO 
CHAPTER 11 
Staff expenditure 
OBSERVATIONS ON THE GENERAL 
MANAGEMENT OF APPROPRIATIONS 
AND STAFF PARLIAMENT 
OBSERVATIONS ON THE BUDGETARY 
MANAGEMENT OF ITEM 1004 
Inconsistency between the lists of posts and the 
remuneration appropriations 
Council 
11.9-11.10. The Administration is indeed faced with 
a dual limit, constituted on the one hand by the list of 
posts, and on the other by the initial appropriations for 
staff remuneration. 11.11. As it explained in its reply to paragraphs 11.8 
to 11.10 of the Court's report on the 1983 financial year 
(1984 OJ C 348), Parliament does not consider that this 
expenditure, which meets members' costs of travelling 
to and attendance at meetings, to constitute an allow­
ance on payment related to salaries. Article 6 (1) (a) of 
the Financial Regulation does not thus apply. A modi­
fication to Parliament's internal rules, to this effect, will 
be introduced when they are next revised generally. As 
foreseen in that same reply, the budgetary commentary 
to item 1004 for 1986 contains a note to the effect that 
these appropriations shall be entitled to be carried for­
ward automatically. It should also be noted that the 
carry-overs in 1984 were in any case reduced by 80% 
compared with those in 1983. 
Commission 
11.9-11.10. The budgetary authority quite rightly 
increased the initial appropriations for 1984 to allow 
recruitment of officials and other staff to posts entered 
in the list of approved posts. 
Economic and Social Committee 
11.9-11.10. Having the narrowest financial margin 
of all the institutions, the ESC is fully aware of the situ­
ation described by the Court of Auditors — a situation 
the ESC has always criticized. However, for an appre­
ciation of the real extent of the difficulties the institu­
tions are faced with, the expenditure should be com­
pared with the initial budget appropriations. 
It can then be observed that the ESC was obliged to 
spend a sum representing 102% of the appropriations 
granted by the budget authority, an operation made 
possible by the transfer of appropriations. OBSERVATIONS ON THE MANAGEMENT 
OF OVERTIME 
11.12. The trend in annual expenditure since 1980 is 
as follows: 
1980 
1981 
1982 
1983 
1984 760 050 ECU 
910 682 ECU 
807 639 ECU 
816 869 ECU 
696 781 ECU(') 
Taking into account the fact that the hourly cost 
increases in line with salary adjustments, the amount of 
paid overtime has fallen in recent years. 
11.12-11.15. In December 1984 the Secretary Gen­
eral adopted a new system for the management of over­
time: 
(i) at the beginning of the financial year each 
Directorate General is allocated a 'global 
appropriation'; 
16. 12.85 Official Journal of the European Communities 201 
(ii) each Directorate General is required to central­
ize information relating to overtime which is 
compensated by leave; 
(iii) priority must be given to compensation in the 
form of leave; 
(iv) internal instructions on the subject issued on 
22 April 1982 must be strictly applied. 
The internal instructions referred to in (iv) above indi­
cate the authority responsible for requesting the staff 
concerned to work overtime and lay down the proce­
dure for declaring overtime. 
COUNCIL 
OBSERVATIONS ON THE BUDGETARY 
MANAGEMENT OF OVERTIME 
11.16. Regarding the compliance of the system of 
remuneration of overtime with certain provisions of the 
Staff Regulations, it should be pointed out that, in 
accordance with previous replies (see replies to sections 
11.31 and 11.36 of the comments on the 1982 financial 
year), the internal regulations which apply at the Gen­
eral Secretariat of the Council are of an exceptional 
nature and are in response to exceptional situations 
created by the working conditions themselves, which 
have no equivalent in the other Institutions. 
Nevertheless, at the Council's request, in the very near 
future the General Secretariat of the Council will be 
opening negotiations with staff representatives on the 
provisions which currently apply to overtime, in order 
to adjust them better to the Council's requirements and 
working methods. 
OBSERVATIONS ON THE MANAGEMENT 
OF MISSION EXPENSES 
Management of appropriations 
11.17. The increase in appropriations referred to 
(517 000 ECU) was mainly due to the mission to Fiji, 
which was not planned when the Council's estimates 
for 1984 were drawn up. It should be pointed out that the appropriations under 
this item were fully utilized, and that only a balance of 
770 ECU remained unused. 
The high automatic carry-overs (333 988 ECU) were 
justified by the complexity of clearing items of expend­
iture for the Fiji mission. 
In view of the number of participants, and the organ­
izational details of this mission, the expenses had to be 
settled collectively, which necessitated a certain 
amount of time for gathering all the necessary data. 
11.18. In December 1983, that is to say at a time when 
it was no longer possible to obtain an increase in 
appropriations for the item 'mission expenses' from the 
Council, a number of relatively large missions were 
organized, the final cost of which exceeded the esti­
mates which had been made for normal missions 
(Councils in Athens, mission to South America, etc.). 
It was therefore unavoidable that the excess expendi­
ture should be covered by appropriations for the fol­
lowing financial year. 
11.19. Advances are managed outside the budget for 
practical reasons. In any event, they do not exceed the 
amount committed in the budget for the expenditure 
concerned. 
11.20. The advances made to mission staff never 
exceed 90% of estimated mission expenses and are 
granted in accordance with the provisions of Staff Note 
89/83 of 4. 5. 1983 (page 4, section 2). 
A reminder is sent to all those who have still not sent in 
their claims for mission expenses 2 months after the 
mission. 
Non-utilization of reduced fares 
11.21 — 11.22. On the question of train journeys, the 
Council will make a study, based on statistical data, to 
determine whether the systematic use of travel cards for 
Belgian railways would indeed constitute a real saving, 
in view of the fact that it is rare for the same official to 
travel to Luxembourg or Strasbourg more than once in 
the same month, and that it is relatively frequent for 
officials to be replaced at the last minute. 
202 Official Journal of the European Communities 16. 12. 85 
For air travel, the Council uses reduced rates wherever 
possible. However, the various conditions attached to 
these fares (class of travel, length of stay, inability to 
change company and/or date, etc.) and the special 
working conditions obtaining for most missions, mean 
that it is not possible to take systematic advantage of 
them. 
COMMISSION 
OBSERVATIONS ON THE BUDGETARY 
MANAGEMENT OF 'FIXED 
ENTERTAINMENT ALLOWANCES' 
11.23. The increase in expenditure under item A 1143 
was unavoidable for several reasons: the opening of 
two delegations and an increase in the number of staff, 
a marked increase in rents, entry in the accounts of 
advance payments made between 1979/80 and 1983, 
and unfavourable fluctuations of exchange rates 
against the ECU. (2) 
It is partly to take account of this situation that the 
Commission has embarked on a revision of certain 
provisions of the Staff Regulations relating to staff 
working outside the Community. 
OBSERVATIONS ON THE MANAGEMENT 
OF MISSION EXPENSES 
Appropriations carried over 
11.24—11.27. The calculation of commitments and 
automatic carry-over of appropriations for mission 
expenses is subject to objective constraints which the 
Commission must take into account while abiding by 
the Financial Regulation. Essentially, there are two 
constraints: 
(1) The legal commitment cannot be determined 
accurately until the final cost of a mission has been 
calculated. 
(2) Missions can take place at the very end of a finan­
cial year. 
The Commission, anxious to respect the principle of 
the annuality of the budget, insists that a mission which 
takes place in a given financial year should be charged 
to that year and should therefore be the subject of a 
carry-over. Moreover, a check on the carry-over of appropriations 
for previous years will show that utilization has been 
satisfactory. 
With a view to a further improvement in the utilization 
of these appropriations, the Commission intends to set 
specific deadlines for the filing of claims for the reim­
bursement of mission expenses. 
Weaknesses in internal control 
Absence of tickets 
11.28. — Tickets issued by travel agency: 
To rule out the risks referred to by the Court of Audi­
tors, the Commission has circulated a memorandum to 
all staff reminding them that they are required to attach 
all necessary supporting documents to claims for reim­
bursement. This applies in particular to tickets, includ­
ing tickets issued without charge to officials by the 
Commission's travel agency. 
To increase the impact of this measure, the travel 
agency has been attaching a label to rail and air tickets 
since the end of April reminding officials sent on mis­
sion of the obligation referred to above. 
— Tickets paid for by the official: 
Where rail or air tickets are paid for by the official, no 
reimbursement is made unless the used tickets are 
attached to the claim for reimbursement. No distinc­
tion is made in this respect between journeys inside 
and outside Europe. 
11.29. The Commission is pursuing its enquiries. A 
major difficulty here is the fact that airlines have not 
replied in every case with information on tickets issued 
in connection with the missions singled out by the 
Court of Auditors. 
Absence of correlation between mission expenses and 
daily subsistence allowances 
11.30. The procedure for the exchange of information 
between the departments concerned has been 
16. 12. 85 Official Journal of the European Communities 203 
improved. Pending computerization of the manage­
ment of missions, contacts are taking place on a quart­
erly basis. These will be replaced by monthly contacts 
in due course. fares (PEX, APEX, excursion fares, etc.) for missions 
by its staff. The experiment was confirmed in a Com­
mission instruction dated 28 November 1984, which 
was published in the normal way. 
Missions effected by air taxi 
11.31 — 11.32. The Court of Auditors' recommenda­
tions will be borne in mind in future. 
Non-utilization of reduced fares 
11.33. Railways: 
Reduced fares on the railways, in particular for jour­
neys between Brussels and Luxembourg, have been in 
use since September 1985. 
11.34. Airlines: 
Since the beginning of 1984 in particular the Commis­
sion has been actively promoting the use of 'special' Commission departments have become increasingly 
aware of the need to comply with this directive, which 
has led to substantial savings. The results are encourag­
ing, as evidenced by: 
— the virtual disappearance of first class air travel, 
and 
— a saving of over 18 Mio BFR in 1984. 
The campaign is continuing and is updated periodi­
cally at meetings of the interdepartmental working 
party on missions, set up at the end of 1984. 
The travel agency, which is closely associated with the 
campaign, is cooperating with Commission depart­
ments in seeking ways and means of making further 
savings in this area. The new invitation to tender made 
this a contractual obligation. 
(') The financial year 1984 is not entirely comparable with 
the other years because of the European elections which 
brought about a reduction in Parliamentary activity, parti­
cularly in the second quarter of the year. (2) 
USD 
YEN 
FS 
Baht* 
* Thailand January 1983 
0,968876 
225,845 
1,94279 
22,0732 December 1984 
0,715991 
177,781 
1,83952 
18,9219 
REPLIES OF THE INSTITUTIONS TO 
CHAPTER 12 
Operational expenditure 
PARLIAMENT COMMISSION 
Documentation and library expenditure Letting of immovable property 
12.3. Parliament's library will very soon have new 
internal rules which should satisfy the Court of Audi­
tor's concerns regarding the inventory, the disposal of 
obsolete material and loans. 12.5—12.6. The Commission is considering appro­
priate arrangements to give the fullest satisfaction to 
the Court of Auditors' requests in relation to the condi­
tions on which space is sublet, to procedures and to 
competitive tendering. 
204 Official Journal of the European Communities 16. 12.85 
Expenditure relating to data-processing 
equipment 
12.9. The Court of Auditors' inspections have 
prompted the departments concerned to devise ways 
and means of keeping a closer eye on transfers and the 
precise location of equipment. Air-conditioning at the Computer Centre 
12.13. Since this was a problem requiring prompt 
attention, the Commission, after consulting the bodies 
responsible for technical inspection, decided to pro­
ceed by private treaty, in accordance with Article 52(b) 
and (d) and Article 54 of the Financial Regulation. 
12.11. Computers are leased (rental accounts for the 
bulk of the expenditure) and maintained under com­
bined contracts which provide for the possibility of 
advance payments. 
There are separate maintenance contracts for pur­
chased equipment. These are usually of the 'all in' type 
and are therefore analogous to regular servicing. The 
possibility of advance payments is standard practice. 
The Commission will ensure that the rules governing 
the use of appropriations carried over are scrupulously 
adhered to in future. Installation of a telephone system 
12.15-12.20. As the Court of Auditors notes, the 
Commission had to deal with a de facto situation. It 
has taken the necessary steps to ensure that there will 
be no recurrence. In this context the Commission has 
reminded the departments and officials concerned that 
they must comply with existing administrative rules in 
force and has widened the responsibilities of Heads of 
Delegations and Heads of Information Offices. 
Fitting-out of a canteen in Luxembourg 
12.12. The work of extending the kitchen was similar 
to that involved in extending the self-service restaurant 
and fitting out the 'a la carte' restaurant, which had 
been the subject of an invitation to tender. The Com­
mission therefore considered that the conditions for 
awarding a contract by private treaty had been satis­
fied, in accordance with Article 52(d) and (e) and 
Article 54 of the Financial Regulation. 
Nevertheless the Commission has taken careful note of 
the Court of Auditors' observation. ECONOMIC AND SOCIAL COMMITTEE 
Application of the Financial Regulation 
12.21. The Court of Auditors points out that certain 
proposals for commitment were not drawn up until 
after the invoices were received. The invoices in ques­
tion were for work the cost of which it was difficult to 
estimate accurately; nevertheless, the ESC will see to it 
that proposals for commitment are made in all cases. 
REPLIES OF THE COMMISSION TO 
CHAPTER 13 
Commission subventions to certain external bodies 
OBSERVATIONS ON COMMISSION 
SUBVENTION TO THE EUROPEAN 
SCHOOLS 
13.2. The reserve fund proved very useful in 1984 
when large and unforeseeable payments of salary 
arrears to staff had to be met. By the end of 1984 the 
reserve had been reduced to 2 211000 ECU. Appro­
priations in the 1985 budget are 4 067 145 ECU less than the Commission subventions shown in the Euro­
pean Schools budgets as adopted by the Board of 
Governors despite reservations expressed by the Com­
mission. 
13.4. The Commission regrets that agreements 
exempting the European Schools from the payment of 
VAT have not yet been concluded with all govern­
ments. 
16.12.85 Official Journal of the European Communities 205 
In April 1985, the Board of Governors took the precau­
tion of creating a subitem for reimbursement of VAT 
with a token entry on the revenue side of the budgets of 
the European Schools in Karlsruhe, Munich and 
Varese, and keeping complete records of VAT paid by 
these schools. 
The Commission has made repeated calls, without suc­
cess, for the harmonization of the financial conditions 
applying to the various organizations and institutions 
involved in the running of the schools. However, for 
the first time, it has succeeded in securing entry of an 
appropriation of 78 300 ECU to be paid by the Italian 
Government for the admission of children of 
Italian NATO staff. 
OBSERVATIONS ON THE FINANCIAL 
STATEMENT AND REVENUE AND 
EXPENDITURE ACCOUNT OF THE 
NEW COMMUNITY INSTRUMENT AND 
EURATOM MECHANISMS 
14.7. The Commission would point out that during 
the first eight months of 1985 the NCI mechanism 
showed a surplus of 2,6 Mio ECU as a result of the 
measures taken in collaboration with the EIB in the 
first half of 1984. 
In view of the excellent results in the first eight months 
of 1985, the 4,6 Mio ECU deficit will be substantially 
reduced this year. 
The Commission does not share the Court of Auditors' 
view that the potential results of NCI operations 
should be included in an annex to the financial state­
ment. 
The calculations to determine these potential results 
(which are kept under constant review) are based on 
financial projections of a non-accounting nature 
derived from financial market data at a given date, and 
these data are subject to constant substantial fluctua­
tions in both directions. Owing to these very unpredict­
able and variable factors, which are explained in 
greater detail in the reply to paragraphs 14.17 to 14.19, 
the calculations may show either a gain or a loss. The 
Commission therefore considers that inclusion of the 13.5. The Commission has suggested that the Board 
of Governors should employ an outside consultant to 
investigate the problems referred to by the Court of 
Auditors and draw up the necessary guidelines for reor­
ganizing administrative structures, devising a new 
salary scheme and creating an information system. 
Unfortunately, the Board of Governors was not pre­
pared to do this. The Administrative and Financial 
Committee was unable to devise a new salary system. 
13.6. The Commission is continuing to impress upon 
the Board of Governors the need to improve adminis­
trative and financial management. To this end, it has 
offered, in particular, to second an experienced, well-
qualified Community administrator to work with the 
Representative of the Board of Governors. 
results in an annex to the financial statement is not jus­
tified, particularly since they are liable to be misinter­
preted. 
OBSERVATIONS ON LEGALITY AND 
SOUND FINANCIAL MANAGEMENT 
New Community Instrument loans 
Review of eligibility of NCI HI projects 
14.10—14.13. The guidelines laid down by the Com­
mission constitute a scale of priorities which it would 
like to see applied as far as possible. Having said this, 
however, it must be remembered that the operations in 
question are purely banking operations aimed at pri­
vate or public investors and do not involve Community 
subsidies in any form. Thus loans are not 'spread' 
among or 'granted' to either Member States or parti­
cular economic sectors; rather it is a question of indivi­
dual investors deciding whether to undertake a project 
or not, regardless of the country or industry involved. REPLIES OF THE COMMISSION TO 
CHAPTER 14 
Loans, borrowings and interest-rate subsidies 
206 Official Journal of the European Communities 16. 12.85 
Although the factors referred to by the Court of Audi­
tors do affect investors' decisions, other factors are also 
involved — such as the conditions for Community 
loans and in particular their currency breakdown, dura­
tion and interest-free period, repayment and guarantee 
terms and their complementarity with other sources of 
finance. National authorities' policies on foreign cur­
rency debts can also act as a brake — if only temporar­
ily — on the taking-up of Community loans. 
14.14. The priority objectives of NCI III are in the 
fields of energy, infrastructure projects and productive 
investments, primarily in small and medium-sized busi­
nesses. The need to combat unemployment and the 
regional impact of operations are secondary objectives 
adopted by the Council 'inter alia' (Article 1 of Council 
Decision 83/200/EEC). 
The Commission agrees with the Court of Auditors that 
combating unemployment is important and would 
emphasize the effort it has made and the very positive 
results achieved so far. The (estimated) figures given by 
the Commission in its report for the first half of 1984 
(doc. COM(84)387) signal an undeniable success: 
nearly 90 000 jobs created or secured by means of loans 
totalling 430 Mio ECU in 10 months. A year later, at 
30 June 1985, the impact has been boosted substan­
tially by the second tranche of NCI III loans (decision 
of 23 July 1984) and the 1 555 Mio ECU lent to small 
and medium-sized firms. 
As regards the ratio of jobs created to jobs maintained, 
the importance of 'saving' jobs at a time of widespread 
unemployment should not be underestimated, the 
objective of investment being to modernize rather than 
to expand capacity. The Commission feels bound to 
contribute to the maintenance of viable jobs just as 
much as to their creation and considers that the effects 
on employment expected from the NCI III loans 
granted so far are very encouraging. 
The Commission would also like to emphasize the mul­
tiplier effect of sustained growth in investment by small 
and medium-sized firms, which stimulates economic 
growth in general and helps maintain and create 
employment in other enterprises. 
NCI 
14.15. The amount in the NCI Treasury, or liquidity 
reserve, is determined by payments of loans signed and 
to be signed — in other words by contractual obliga­
tions. Clearly this reserve must be managed as rationally as 
possible and the Commission's departments and the 
EIB endeavour to do so with maximum efficiency. 
However, they are also bound to seek the best terms 
obtainable on the capital market for NCI customers. It 
is therefore natural that the reserve should be replen­
ished as funds are taken up. The net cost highlighted by 
the Court of Auditors results from the difference 
between interest rates for short-term investments and 
long-term borrowings and is offset in financial terms by 
the margin allowed for treasury costs, which is included 
in the actual interest rate paid by the borrower, and in 
economic terms by the optimum conditions thus 
obtained for him. In reality the net cost tends to zero as 
interest payments are received on the loans granted. 
The Commission takes note of the Court of Auditors' 
remarks on the substantial reduction in the average 
level of the liquidity reserve during 1984 and the sav­
ings achieved as a result. Throughout the current year it 
has continued its efforts to reduce the balances on the 
NCI Treasury accounts in those currencies where this 
was still possible. 
14.16. One of the results of the continued effort to 
reduce the amount in the NCI Treasury account (see 
paragraph 14.15) was that the undisbursed portion of 
the 100 Mio SFR borrowing fell from 40 Mio SFR at 
31 December 1984 to practically nil at the time of 
writing. 
The net cost will be considerably lower than 2,1 Mio 
SFR because the interest rates charged to the final bor­
rowers include an allowance for treasury costs designed 
to balance out the gains and losses on a large number 
of operations over a long period. 
14.17—14.19. In the Commission's view it is not right 
to use the cash flow analyses now regularly carried out 
by the Commission and the EIB to produce firm 
figures since the results of these analyses are not 
accounting data. They are, in fact, extremely fragile 
and volatile projections, the main purpose of which is 
not to provide reliable absolute figures but to show up, 
by means of a rolling programme of successive projec­
tions, any adverse long-term trend that might ensue 
from the operations already concluded so that this can 
be corrected through the terms under which new opera­
tions are concluded in future. 
The main factors giving rise to uncertainty are as fol­
lows: 
— the projections relate only to borrowings and loans 
already concluded; 
16.12.85 Official Journal of the European Communities 207 
— it is assumed that the portion of loans not dis­
bursed at the time of the projection will never be 
disbursed; 
— the interest rates (debit and credit balances) on 
funds in the liquidity reserve are fixed at the pre­
vailing rates at the time of the projection; 
— the final results in the various currencies used are 
converted into ECU at the conversion rate appli­
cable at the time of the projection. 
The Court of Auditors is thus right to stress — and here 
the Commission agrees — that 'the final outturn will 
not be known until all the borrowings and loans have 
been repaid', that is, until 2004 simply for the opera­
tions already concluded. 
EIB management commissions 
14.20-14.23. Following an analysis of data on 
administrative costs to assess the extent to which they 
were covered by commissions, it was decided on 
1 April 1984 to reduce the commission (as noted by the 
Court in paragraph 14.21). 
The Commission will try to find a way to enable the 
Court to exercise its prerogatives under the Treaty 
while respecting the autonomy of the EIB as guaran­
teed by the legislator. 
New Community Instrument and Euratom 
borrowings 
Premature redemption of borrowings 
14.25. The Commission has a detailed statement of 
all the borrowing contracts (ECSC, NCI, Euratom) 
which provide for premature redemption and it regu­
larly reviews the market conditions for the currency in 
question to see whether refinancing can be obtained on 
better terms and does so where appropriate. A Euratom 
borrowing was refinanced in this way in 1984. The 
three other Euratom borrowings referred to by the 
Court were not refinanced until 1985 as the Commis­
sion considered the rates too high in 1984 for refinanc­
ing to be worthwhile. 14.26. The Commission agrees with the Court of 
Auditors' recommendation and had already adopted 
the principle of passing on the benefits of refinancing 
to the recipients of loans. Implementing instructions 
were issued some time ago for both the 1984 Euratom 
operation and the 1985 Euratom operations. 
Negotiation of borrowing terms 
14.28. In the Commission's view the Court of Audi­
tors' approach, which involved comparing independent 
indicators with the cost of its borrowings, is valid 
merely as a method of selection. 
At all events it feels that it is not a suitable way of 
assessing the borrowing costs themselves. 
14.29. The Court of Auditors' comment relates to four 
operations (two public issues, a bank loan and a pri­
vate placing) for which the Commission dispensed with 
direct competitive bidding for the following reasons: 
— In two cases the Commission followed market 
practice and designated a lead manager, who was, 
however, required to obtain the assistance of two 
other representative houses to make a joint offer 
reflecting the precise state of the market. Parallel 
discussions with other establishments enabled the 
Commission to check that the offer was fair. 
— The two remaining cases were special instances 
covered by the internal rules (in particular for a pri­
vate placing, where the number of lenders is, by 
definition, limited) and the Commission did no 
more than follow those rules. 
In all the other cases the Commission still believes that 
it scrupulously followed the internal rules and nego­
tiated terms that fully accord with its status as one of 
the most respected borrowers in the world. 
14.30. In the Commission's view the Court of Audi­
tors' express recommendation that competition should 
be used to the maximum practicable extent is unnecess­
ary since it already adheres to the internal rules. 
Although there is no agreement or regulation explicitly 
requiring the Commission to include in the files its 
reasons for dispensing with competitive bidding, it is 
prepared to examine with the Court what further infor­
mation might be added to what is already contained in 
the files. 
208 Official Journal of the European Communities 16. 12.85 
PART II 
REPLIES OF THE COMMISSION 
European Development Funds 
SUMMARY OF FINANCIAL 
INFORMATION — The Commission approved these documents 
on 30 April and sent them officially to the Court of 
Auditors, Parliament and the Council on 7 May. 
Second and third EDF 
15.4. In 1984 the Commission was able to close defin­
itively 22 projects under the third European Develop­
ment Fund (EDF) and virtually complete the closure 
operations for 42 other projects. Implementation of the 
third EDF is thus as follows: at 30 June 1985 a total of 
576 projects out of 697 (82,6%) had been closed. A total 
of 121 projects have still to be closed and a reminder 
has been sent to all the ACP delegations concerned so 
that all projects no longer giving rise to disbursements 
can be closed on 31 December 1985. Any unused 
appropriations and those not yet allocated will then be 
transferred to the fourth or fifth EDF. 
However, the definitive closure of operations under 
this fund will not be possible before the end of 1986 
because of the time that closing so many cases will 
inevitably take. 15.8. The Court of Auditors' observation that 'certain 
items in the accounts cannot be properly understood 
without explanation, and the accounting principles 
adopted by the Commission in respect of the EDF are 
not stated in the annual accounts' merely repeats a sim­
ilar comment in its annual report for 1981. In its reply 
to these observations, the Commission explained in 
detail (') why it did not share the Court of Auditors' 
opinion. 
The reasons may be summarized as follows: As regards 
both the statistical information about the state of play 
of projects in relation to the indicative programmes 
and the accounts themselves, where the financial state­
ments adopted at the end of each year faithfully reflect 
the application of the accounting plans, the Commis­
sion considers that it is easy to understand and inter­
pret the various items in the accounts. Neither the 
national authorities of the countries receiving the aid 
nor the delegations responsible for the day-to-day mon­
itoring of projects with the aid of the analytical 
accounts have so far made any major criticism of the 
clarity of the accounts. 
OBSERVATIONS ON THE FINANCIAL 
MANAGEMENT 
Preparation and presentation of the accounts The Commission would again point out that, in view of 
the number of staff currently available, the drafting of 
explanatory notes or comments on certain items in the 
balance sheets and revenue and expenditure accounts 
would not fail to impede and delay the production of 
the year-end documents, without presenting any real 
advantage. 
15.7. — The revenue and expenditure accounts of 
the second and third EDF were sent unofficially to the 
Court of Auditors, at its request, on 18 March 1985. 
— The revenue and expenditure accounts for 
the fourth and fifth EDF and the balance sheets for the 
various funds were also sent unofficially on 12 April 
1985. Advances 
15.9. For several years the Commission has been 
unremitting in its efforts to recover the 4,5 Mio ECU 
advance granted to the Banana National Board in 
Somalia. Despite these efforts, the Somali Government 
has refused to repay its debt to the Commission. The 
Commission accordingly proposed to the Somali 
authorities that this amount be set against the appro-
16.12.85 Official Journal of the European Communities 209 
priations remaining available under the third and 
fourth EDF. Although this solution has been accepted 
in principle, there are still difficulties about the rate of 
exchange to be applied for repayment of the advance. 
The Commission is determined to settle this issue as 
soon as possible, if necessary by taking unilateral mea­
sures. 
15.10. As the Court of Auditors notes, the Commis­
sion had a good record in the year in question in recon­
ciling the accounts of the bodies administering scholar­
ships with its own accounts, despite the difficulties 
encountered with certain bodies in detailing their cash 
positions or standardizing their management and the 
presentation of their accounts. As regards the European 
Association for Cooperation (EAC), the efforts made 
have not yet produced results because of the difficulties 
the Association has encountered in reconstituting the 
exact expenditure and revenue situation in its accounts 
for every year since it was set up. The Commission, for 
its part, has all this information at its disposal and has 
entered it in each year's accounts; the picture produced 
is perfectly clear. It will not take long to reconcile the 
accounts once the EAC is able to communicate its 
definitive situation. 
Member States' contributions 
15.11. The problems with late payment of contribu­
tions which have occurred over the years have led the 
Commission to propose in the Financial Regulation for 
the sixth EDF that penal interest be charged for any 
future delay. As regards 1985 the situation to date has 
improved considerably with only one Member State 
being significantly in arrears. 
Cash at bank 
15.12. The Commission shares the Court of Auditors' 
concern about the excessive levels of bank balances in 
Treasury accounts in past years bearing in mind in 
particular that it is the EDF which bears the exchange 
risk on amounts held in national currencies in those 
accounts. Two sets of measures have recently been 
introduced in an effort to economize on contributions. 
Firstly stricter control has been exercised in respect of 
balances in paying agent accounts with a view to 
reducing them to levels consistent with good manage­
ment of payments. Secondly, provision has been made 
in the Internal Regulation for the sixth EDF whereby 
the Commission shall wholly or partially refrain from 
calling for an instalment of contributions due during a 
financial year when the amounts available are suffi­cient to cover payment requirements until the next due 
date. In anticipation of the application of this provi­
sion, the Commission, in an effort to scale down bank 
balances in 1985 to minimum levels, has already 
reduced its demands for contributions for the third 
quarter with effect from 1 July. 
15.13. The Commission will investigate whether it is 
practicable to account for payments prior to receipts of 
bank statements. However, even if this were to be done 
it would not lead to a reduction in balances. 
OBSERVATIONS ON THE ACCOUNTING 
SYSTEMS AND PROCEDURES 
15.14. Since the accounts for the various EDFs are 
kept on a cumulative basis, there is automatically a 
time lag before the accounts of the new financial year 
are reopened. 
The Commission does all it can to close and reopen the 
accounts as quickly as possible, but there are still a 
number of constraints arising from the need to compile 
accounting data from more than 60 overseas paying 
agents. 
Although no reconciliation is possible with the official 
accounts, the commitment and authorization opera­
tions are still recorded provisionally during the inter­
vening period while the cash balances are monitored 
daily from the bank statements which are received 
regularly. The system thus offers every guarantee of 
security. 
15.15. The figure of 49,5 Mio ECU in the balance 
sheet of the various EDFs at 31 December 1984 as 
items of expenditure still under verification represents 
the monthly average volume of operations carried out 
and payments made in the national currency of the 
ACP countries. Compared with total monthly average 
expenditure of around 60 Mio ECU, this figure may be 
considered normal with the exception of the 78 opera­
tions involving 1,8 Mio ECU which have been awaiting 
clearance for over nine months. As a means of dealing 
with this situation, which arises because some opera­
tions cannot be entered in the accounts immediately in 
the absence of substantiating documents or precise 
identification, the Commission has instructed its dele­
gates in the ACP countries to send to headquarters only 
210 Official Journal of the European Communities 16.12.85 
those documents which have been duly reconciled, i. e. 
matched with a bank's debit advices. 
Thus, in the first case referred to by the Court of Audi­
tors, it is only very recently that the two payments 
totalling 0,2 Mio ECU could be finally identified since 
a mistake had been made locally in the indication of 
the project to which the payments related. 
In the second case referred to by the Court, the first two 
payments, provided as part of an emergency aid mea­
sure, were placed in a special account from which with­
drawals required the joint signature of the authorizing 
officer for the project and the Commission delegate. 
This dual operation did not involve the Commission in 
any losses. The third payment was the transfer of the 
aid to the recipient government. These operations fin­
ally led to an exchange gain of 83 923,97 ECU. 
15.16. If another sample of this type is taken, the 
Commission would like to know the details so that it 
can state its position and take whatever action is appro­
priate. In 1985 the Commission has not repeated the 
survey it conducted in 1984 which enabled it to inform 
the Court of Auditors in its last reply that of the 
3 100 payment orders covered only 17 complaints 
about late payments were justified (0,55% of cases). 
The Commission is able to state that the number of 
complaints has dropped still further, thus raising ser­
ious doubts about the Court of Auditors' allegation 
that 19% to 23% of claims were settled over three 
months late. 
15.17. The average of five months mentioned by the 
Court covers two completely different procedures — 
the making of the payment and the subsequent entry of 
this payment in the accounts. An immediate entry pro­
cedure could of course be devised to reduce considera­
bly the time taken for recording the operations in the 
accounts and making them available to the manage­
ment officials. However, this system would involve two 
additional constraints. Firstly, the delegations would 
have to be connected by computer to the central 
accounting unit in Brussels (which is not realistic at the 
present time); secondly, this arrangement would inevit­
ably lead to a substantial increase in the volume of 
accounting work, since the provisionally recorded oper­
ations would have to be regularized definitively at a 
later date — in accordance with the Financial Regula­
tion — involving a correction in ECU to each account­
ing entry. 
15.18. The Court of Auditors' comments should be 
seen in the light of the following considerations. — The authorizing officer's accounts regularly record 
recovery orders before they are sent to the account­
ing officer. At 31 December 1984 the balance of 
claims to be recovered amounted to 341 630,49 
ECU for the fourth EDF and 1 006 322,42 ECU for 
the fifth EDF. 
— In line with the Commission's guidelines concern­
ing recovery, the EDF's financial departments 
have, since 1 January 1985, also been keeping a 
register of all receivable orders so that the recovery 
procedure can be monitored more closely and 
reconciliation effected with the accounting officer's 
entries. 
In the cases involving Madagascar and the United 
Kingdom referred to by the Court of Auditors, the 
amounts in question were entered in the accounts as 
advances to be cleared. Recovery orders could not 
therefore be issued until the clearance operations had 
been completed. 
15.19. As regards the inadequacy of the supporting 
documents for commitments and payments, analysis of 
the specific cases has shown that the supporting docu­
ments were often filed with the departments concerned 
(technical departments or delegations) when they were 
not included in the files kept by the financial depart­
ments. 
15.20. The accounts management for special loans 
has always been based on a different approach from 
that for subsidies. While the accounts for subsidies are 
kept for each contract forming part of a project, mainly 
because of the Commission's responsibility for the exe­
cution of payments, special loans are different, since it 
is the borrower who pays the contractors from funds 
made available by the Commission upon request in 
line with cash requirements. The arrangements for 
requesting these funds are specified in the financing 
contract, regardless of the number or size of contracts 
concluded under the project. This financing contract, 
signed after the financing agreement, also lays down 
the other details concerning the financial implementa­
tion of the project and is thus essential for the defini­
tive overall commitment of the loan. In the absence of 
such a contract the authorizing department quite rightly 
refuses to give its authorization to requests for funds. 
As can be seen, this management method is basically 
different from that for projects financed through subsi­
dies, on which the Court of Auditors has based its 
observations. It is true that, in view of the difficulties 
encountered by some borrowers in prefinancing their 
operations, the Commission has introduced some flexi­
bility into its procedures since the fifth EDF and 
accepted that the methods of payments applied to sub-
16. 12.85 Official Journal of the European Communities 211 
sidies may be used in certain cases on condition that 
the borrower expressly requests this and obtains the 
agreement of the monetary authorities in his country. 
In these cases, the management of the special loans in 
accordance with the method used for subsidies is 
applied by the Commission's financial departments. 
This system could be extended in future to all special 
loans wherever possible. This possibility is now being 
examined. However, because of the difficulties 
involved in any retrospective change to payment opera­
tions, the original accounting rules will remain 
unchanged for all special loans where payments began 
before this new procedure was put into effect. 
15.21. The Commission does not see any direct link 
between the rational or imperfect nature of commit­
ment and payment operations and the existence of a 
manual of procedures or other written accounting 
instructions. 
The accounting plans drawn up for each EDF have 
been adapted in line with developments and the 
requirements of each association agreement; they have 
never been the target of serious criticism concerning the 
structure of the accounts. Indeed, the Court has recog­
nized the reliability of the accounting arrangements. 
It is true that there is no manual of procedures contain­
ing all the instructions scattered throughout the various 
rules and regulations and implementing documents. 
However, the Manual of Instructions for Commission 
Delegates, which is now being revised, contains many 
administrative, financial and accounting instructions 
applicable to the management of the EDF. 
OBSERVATIONS OF THE GRANTING 
AND MANAGEMENT OF THE AID 
Execution of indicative programmes 
15.23. Papua New Guinea has been accustomed to 
aid from other sources in the form of simple budgetary 
transfers. It has therefore found it difficult to adapt to 
the EDF procedures. The Commission did not consider 
that it should penalize the country for that. 
15.24. The Commission stands by the reply it gave to 
the comment by the Court of Auditors in the annual 
report for 1982 (2) and would add the following. In 
order to compare the outcome with the planned objec­
tives Article 110(4) of the Second Lome Convention 
states that 'a comparative account of commitments and payments shall be drawn up each year by the National 
Authorizing Officer and the Commission Delegate to 
determine the causes of delays recorded in the execu­
tion of the indicative timetable so that the necessary 
remedial measures can be proposed'. Under 
Article 123(7)(b) the delegate is to 'make regular checks 
to see that operations are proceeding in accordance 
with the schedules laid down in the advance timetables 
established under Article 110'. The Third Lome Con­
vention confirmed and even extended these provisions 
in Articles 216(2) (timetable of commitments), 216(4) 
(comparative account of commitments and payments) 
and 220 (advance timetable for technical and financial 
implementation). All these provisions are applied and 
the results are contained in the annual reports drawn 
up by the delegates on all Fund operations in each 
country (Article 123(4)); the Court of Auditors is given 
these reports on all its missions to these countries. 
Feasibility studies 
15.26. — Sauniatu power station, Samoa 
The savings made as a result of a redesign of the pro­
ject, after the call for tender for civil engineering works, 
were to some extent artificial. The essential parts of the 
works were omitted from the contracts and had to be 
added later. In the event the cost of the civil engineer­
ing works contract will in fact reach the level of the 
lowest bid of the initial call for tender! The consultant's 
original estimate is open to valid and serious criticism. 
— Samasoni power station, Samoa 
The civil engineering works contract was, in accord­
ance with the convention, awarded to a local company. 
The difficulties in the implementation of the project are 
centred around that decision. At one stage, civil engi­
neering works had to be retendered. Problems occurred 
with the landowners, with supervision, materials, 
equipment and finance, with serious flooding, with 
shortages in skilled manpower and equipment, with 
changes in design required by the Electric Power Cor­
poration. This reflects the general problem faced by the 
Commission when dealing with local companies. 
— Hiritano road, Papua New Guinea 
Costs in Papua New Guinea are undeniably high. The 
cost of this particular road is not excessive by local 
212 Official Journal of the European Communities 16. 12.85 
standards. The accepted tender was indeed very close 
to the engineers' final estimate. 
— Fishery research ships, Papua New Guinea 
The original financing proposal was based on estimates 
obtained in early 1980 from Australian shipyards, the 
'normal' origin of vessels operating in Papua New Gui­
nea. These estimates proved to be far too low. To make 
matters worse, the ECU/kina exchange rate changed 
dramatically between 1980 and 1982. On average an 
ECU was worth 0,947 kina in 1980; 0,763 kina in 1981 
and 0,724 kina in 1982. Finally, some modifications 
were made to the design of the vessel, as a result of 
Papua New Guinea Government's change of mind as 
to how the vessels were to be used. 
The Delegation has calculated that the difference 
between the estimated cost of 1,26 Mio ECU (first 
financing proposal) and the eventual 2,38 Mio ECU 
can be accounted for approximately as follows: 
Original financing 
proposal 1,26 Mio ECU 
Underestimate of the costs 
of the vessels 0,74 Mio ECU 
Result of exchange rate 
variation plus inflation 0,38 Mio ECU 
2,38 Mio ECU 
With the benefit of hindsight, it is evident that it would 
have been better to call for tenders before submitting 
any financing proposal. 
15.27. The feasibility study clearly reveals the coher­
ence of the development measures corresponding to 
the project's objectives. It contains a precise timetable 
of activities and a detailed estimate of the manpower 
and funds required. It was for the national and expa­
triate officials to determine the stages in greater detail. 
The fact that all the interested parties were aware from 
the beginning that this was a pilot operation provides 
even greater justification. The feasibility study was 
itself preceded by an appraisal study and a pre-feasibil-
ity study. 
If there were 'numerous problems regarding the coordi­
nation and linking together of the various operations', 
this was because of the very nature of the project. 
Furthermore, the consultants sensibly proposed that the 
project should be preceded by three years of agronomic 
research before the first migrants were settled. How­
ever, this would have delayed considerably the imple­
mentation of the indicative programme in the fifth 
EDF. The Rwandese Government and the Commission 
therefore adopted the more pragmatic approach of 
starting with the accompanying research and the open-ing-up and reafforestation of the area, while at the 
same time curbing the number of migrants settled. 
The agricultural and stock-farming aspect has now got 
off to a good start, with particular emphasis on stock-
farming in view of the initial research findings. 
It is indeed regrettable that the start of this research 
was delayed, but this was because of the time required 
by the other aid donor to take the financing decision 
and was in no way the fault of the EDF. 
15.28. The two errors which the Court of Auditors dis­
covered in the initial study were corrected in good time 
and did not lead to a cost overrun or any delay in 
implementation. No boats were imported. Instead, a 
small number of new boats, better adapted to local 
requirements, were built locally under the supervision 
of the technical assistant. 
15.29. As regards geological conditions, any short­
comings in a study are revealed only when the work is 
being carried out and thus after the contracts has been 
awarded. 
15.30. The updated economic study of 1983 con­
cluded that completion of the road using the same 
standard as the section already constructed would yield 
a return varying between -4,3% and + 14,6% depend­
ing upon the assumptions made concerning the 
development benefits which would be derived from the 
road. If lower technical standards were to be consid­
ered the rate of return could be important, but the road 
would undoubtedly be more dangerous and in any case 
more difficult to maintain. 
Coordination of Community and national aid operations 
15.31. Sierra Leone is often prevented from meeting 
its obligations because of the poor state of its public 
finances. That is why the additional investment needed 
for the project to work had to be covered by the EDF, 
as the Court of Auditors notes. 
15.32. The case in question shows that it can be 
necessary to supply goods late because of administra­
tive delays caused by the general difficulties indicated 
at 15.31. 
15.33. The plan now is for the furniture and equip­
ment which the Sierra Leone Government is unable to 
provide to be supplied under a forthcoming EDF 
health project. 
16. 12. 85 Official Journal of the European Communities 213 
15.34. The difficulties caused by recipient countries 
which have difficulty in honouring commitments 
entered into all too easily were one of the main reasons 
for the stricter approach which the Commission will 
endeavour to take under the Third Lome Convention, 
when it will concentrate its support on a small number 
of productive sectors and make it conditional on spe­
cific commitments which the recipient country enters 
into as part of genuine development strategies. 
Role of technical assistance in the execution of projects 
15.35. The sitting of the staff houses, offices and offi­
cial buildings of the Zaire-Nile watershed scheme was 
mainly determined by the geography and topography 
of the area. 
Since the area is mountainous, these buildings could 
not be sited closer together, hence the relatively high 
costs for water and electricity supply. 
15.36. As far as the continuation of the technical 
assistance is concerned, it should be pointed out that 
the terms of reference for the second phase do not 
cover the management of the project but are limited to 
the provision of assistance to the road and livestock 
component of the project. 
Conclusions 
15.37. The Court of Auditors' repeated allegations of 
'failings' is doubtless due, at least in part, to the fact 
that it bases its observations on the reports drawn up 
following visits during which it checks a broadly repre­
sentative sample of projects which, since they were 
sometimes begun in 1959, have been in progress for 
over 25 years. The disadvantage of this is that it proba­
bly does not make sufficient allowance for the efforts 
made by the Commissioner in recent years to remedy 
most of these shortcomings. 
These efforts are described in the replies to the Court of 
Auditors' observations on the various projects. Atten­
tion will continue to be directed at the various points 
raised by the Court of Auditors. 
15.38. In its resolution on the discharge for the 1983 
financial year Parliament recommended that the Com­
mission establish a data base by 30 April 1986 to cen­
tralize information on the positive or negative experi­
ence gained in implementing projects financed by the Fund. The preliminary studies required are now in pro­
gress and, when appropriate, the Commission will 
announce whether it is possible to set up a central data 
base of this type and, if so, when. It should be borne in 
mind that, if a complete data base is to be set up, it will 
have to contain information on several thousand pro­
jects (5.515 at 31 December 1984), some of which were 
completed a long time ago. The amount of work this 
would involve should not be underestimated. 
Price-variation clauses 
15.39 and 15.40. The contractor asked to be paid in 
full in foreign currency since virtually all the materials 
and services were payable in foreign currency (even 
within Guinea-Bissau where the most frequently used 
currency is the CFA franc). The delegation proposed 
that 75% should be paid in foreign currency. However, 
after negotiations in Brussels between the firm, the con­
sultants representing the Guinea Government and the 
Commission's technical departments, it was agreed that 
91,5% of the amount involved in the contract would be 
paid in French francs. 
So far, there has been no price adjustment. If the 
price-variation clause is to be applied, the Commission 
will try to obtain agreement on the following arrange­
ments in order to limit the effects: 
— Cement and steel: to be based on Senegal prices 
since these materials are paid for in foreign cur­
rency (CFA francs). 
— Labour and fuel oil: to be based on prices in Bis­
sau in accordance with the invitation to tender and 
the statement in the letter of contract that fuels and 
lubricants would be assumed to be purchased in 
Guinea-Bissau (however, the contractor purchases 
the fuel in Senegal and pays the full price in for­
eign currency). 
— Spare parts: the procedure contained in memo 
VIII-6 of 4 March 1983, which the Court of Audi­
tors may consult. 
The Court of Auditors can see from these explanations 
that the problems raised in connection with this project 
have not escaped the attention of the Commission, 
which has attempted to strike a reasonable balance 
between the rights and obligations of the contracting 
parties in performing this contract. 
Financing procedures and special loans 
15.41 and 15.42. There is nothing exceptional about 
the financing arrangements. All projects, which have 
214 Official Journal of the European Communities 16. 12. 85 
similar on-lending conditions, whether supported by 
aid donors or not, which are managed by statutory 
authorities such as the Papua New Guinea Develop­
ment Bank (PNGDB) have to be financed on commer­
cial terms. The benefits of soft loans accrue to the State 
which in turn guarantees repayment of the loans. The 
PNG Development Bank (in receipt of Government 
money at 3,5% and on-lending at 9%) regards the 
interest spread as payment for its technical, managerial 
and supervisory contribution to 'their' projects. 
Even if the hypothesis on which the Court of Auditors' 
'cash flow' estimates for Bogia are based (net annual 
income of 35 000 ECU) is accepted, the effect would be 
to extend the loan term by six years for both the 
PNGDB and the National Investors Scheme (NIS) — 
to 1997 and 2000 respectively. This would not be desir­
able but would equally not be an unacceptable result 
for the PNG authorities. 
More appropriate assumptions, in the light of experi­
ence, would be to expect a slower build up of income 
and a lower annual expenditure than in the Court of 
Auditors' estimates. Operating expenditure, less mana­
ger's cost, in 1982 and 1983 was 33 000 K and 35 000 K 
respectively. Projected costs this year are 40 000 K. The 
Bank considers that reasonable assumptions from 1985 
onwards in constant kina would be as follows: 
1985 
1986 
1987 
Subsequent 
years Income 
70 000 
80 000 
100 000 
110 000 Expen­
diture 
50 000 
50 000 
55 000 
55 000 Surplus 
20 000 
30 000 
45 000 
55 000 
If these assumptions proved accurate, PNGDB loan 
repayments would be unchanged and the NIS loan 
repayments extended. 
Stabilization of export earnings (Stabex) 
Analysis of the trend of exports and production 
(Article 39(3) of the Second Lome Convention) 
15.43. The reduction to the transfer made to Western 
Samoa to compensate for losses of revenue from the 
export of cocoa beans in 1982 was calculated in 
accordance with the same principles which the Com­mission always applies in such cases. The reduction 
was thus determined as a percentage reflecting the dif­
ference between the average proportion of marketed 
production that was exported in the reference period 
and the proportion for the year of application. 
When marketed production in 1982 (the year of appli­
cation) was calculated, account was taken of the fact 
that half of December's production could not be pro­
cessed early enough to be exported before the end of 
the year. 
When calculated in relation to this figure for marketed 
production, exports in the year of application came to 
37,9% as against an average 100% in the reference 
period. The reduction to be applied to the transfer 
should thus be 62,1%. 
Accuracy of statistics 
15.44. (a) Western Samoa — Cocoa beans, 1981 
Export volume is often higher than marketed produc­
tion of the same product for the same period, even over 
several consecutive periods. As was established in this 
case, this is usually due to the existence of stocks. In 
cases of this type the reference level should not be low­
ered. Similarly, Article 39(3) does not apply. 
(b) Sierra Leone 
Unreliable statistics are a widespread phenomenon. 
The drafters of the rules on the implementation of the 
Stabex system were well aware of this problem, as 
Article 30(2) of the Second Lome Convention shows. 
The Commission, which is responsible for administer­
ing the system, attempts to find the most appropriate 
solutions to these problems. It has accordingly devel­
oped a certain standard practice designed to achieve 
the highest possible degree of accuracy in each specific 
situation. 
The Commission accepts the ACP statistics if they are 
only marginally different from its own figures. Larger 
differences may be accepted for the individual amounts 
in each year of the period of reference provided that 
they balance each other out and do not therefore affect 
the reference level. 
16. 12. 85 Official Journal of the European Communities 215 
The Commission does not look into the reason for dis­
crepancies between the ACP statistics and the EEC 
figures where they do not affect the examination of a 
transfer request. This is the case when the request is 
withdrawn or when it is considered by reference to the 
figures for losses on exports to all destinations, assum­
ing that this is lower than the loss for exports to the 
Community. 
Under Article 30(3) of the Second Lome Convention, 
the ACP State making the request may choose between 
the two options contained in Article 30(2). However, if 
comparison between the ACP statistics and the Com­
munity figures shows that the ACP statistics are in no 
way acceptable, the Commission insists on application 
of the formula in Article 30(2)(b), according to which 
the volume is determined from EEC statistics. 
Over-compensation for lost export earnings 
15.45. (a) Papua New Guinea 
When it examined Papua New Guinea's request for a 
Stabex transfer in respect of coffee for the 1982 year of 
application, the Commission found that the Com­
munity's share of total exports of this product had 
dropped from an average 50% during the reference 
period to 35,5% during the year of application. This 
change led to application of Article 39(3) of the Second 
Lome Convention, i.e. a reduction of the transfer base 
reflecting this change and calculated as follows: 
1978 
1979 
1980 
1981 
Average over 
reference period 
1982 
Difference Total exports 
(tonnes) 
45 801 
49 586 
51007 
47 212 
48 402 
41 174 
7 228 EEC share 
Tonnes 
22 184 
26 255 
30 395 
18013 
24212 
14 634 
9 578 % 
48,4 
52,9 
59,6 
38,2 
50,0 
35,5 
14,5 
Transfer base 19 116 310 ECU 
14,5 % reduction 2 771 865 ECU 
Final transfer 
(Stabex/18/82/PNG) 16 344 445 ECU 
(b) Sierra Leone destination is now made in the national currency of the 
ACP State instead of in ECU, as was the case until 
1981. 
It is obvious that the results- of the new method are not 
always the same as in the case of the transfer to Sierra 
Leone in respect of cocoa for the 1982 year of applica­
tion. The new method will be to the ACP State's advan­
tage where its national currency has depreciated and to 
its disadvantage where it has appreciated. It may there­
fore also lead to a greater reduction in transfers than 
under the old approach: the new approach has been 
accepted by all the ACP States concerned. 
Utilization of funds transferred (Article 41(2) and (3) of 
the Second Lome Convention) 
15.48. (a) Vanuatu 
The Commission shares the Court's concern at the 
absence of the utilization reports which the Vanuatu 
authorities should have sent within 12 months of the 
transfer agreements being signed. The Vanuatu auth­
orities have been repeatedly reminded of this obliga­
tion, so far without result. Unlike the Third Lome Con­
vention, the Second Lome Convention does not pro­
vide for any specific penalty which the Commission 
can impose for the failure to comply with this obliga­
tion. 
(b) Papua New Guinea 
The utilization report concerning the transfer for the 
1981 year of application was received in July 1984. The 
report concerning the transfer for 1982 should have 
reached the Commission by 18 November 1984. The 
Commission has reminded the Papua New Guinea 
authorities that they are required to submit this utiliza­
tion report. 
Regional cooperation 
15.51. Procedures for operations of more general 
interest and managed from Brussels (e.g. technical 
assistance, studies, training seminars) are, in principle, 
exactly the same as those for operations of the same 
nature outside regional cooperation. 
The Commission has changed the method of calcula­
tion and the comparison between losses according to At any rate no financing agreement is required for such 
operations if they can be approved under accelerated 
216 Official Journal of the European Communities 16. 12. 85 
procedure. Financing requests are, however, required 
and should originate, in principle, from national 
authorizing officers. In a few cases concerning a very 
large number of ACP States and handled by the ACP 
Group in Brussels, exceptions were made in accepting 
requests from this group. 
It should be noted that the Commission, being aware 
of the problems that could arise from dealing directly 
with the ACP Group in Brussels in regard to regional 
cooperation, has come increasingly to adopt a policy 
where any proposals from this group have to be 
endorsed by at least two requests from national author­
izing officers. This policy led directly to the Lome III 
texts which now contain very clear provisions on the 
right to make requests. 
It is not unusual for the financing requests not to be 
contained in the files kept by the Commission's finan­
cial departments. These documents are normally to be found in central archives or in the files of the geograph­
ical directorates responsible for examining them. 
Most contracts concluded with this type of specialist 
organization expressly provide for supporting docu­
ments to be submitted with the statements of expendi­
ture. It is true that in some rare cases supporting docu­
ments have not been demanded because of the close 
and extremely satisfactory relations between the organ­
ization in question and the Commission. This proce­
dure was an exception which was never repeated. 
The level of the fees paid is above the norm but was 
agreed by the national administration and the Commis­
sion given the highly specialized nature of the expertise 
in question and the fact that much of the work at the 
Caribbean Research and Development Centre (CTRC) 
was carried out by European staff. The subsistence 
allowances granted by the contract seem reasonable for 
the Commission given the high cost of hotel accommo­
dation and of all other normal expenses. 
(') OJC 344, 31.12.1982, p. 208. (2) OJ C 357, 31.12.1983, p. 235, paragraph 15.17.