EN Official Journal of the European Union C 23/3

OPINION No 9/2007

on the proposal for a Council Regulation on a Financial Regulation applicable to the 10th European Development Fund

(pursuant to Article 248(4) second subparagraph, EC)

(2008/C 23/02)

TABLE OF CONTENTS

1 INTRODUCTION

2-11 MAIN OBSERVATIONS

2 Alignment with the General Financial Regulation

3 Simplification

4 Need for a single Financial Regulation applicable to all EDFs

5-6 Breakdown of responsibilities for the implementation of the EDF and discharge

7-9 Paying managers

10 Deadline for the conclusion of individual contracts and agreements

11 Provisional accounts

12-33 OTHER OBSERVATIONS

12 Table of contents

13-14 Resources and Member States contributions

15-20 Implementation of EDF resources

21 Procurement

22 Titles VII and VI

23-24 Grants

25-27 Presentation of the accounts and accounting

28-30 External audit and discharge

31-33 Specific conditions governing EDF resources managed by the EIB

THE COURT OF AUDITORS OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular Article 248(4) thereof,

Having regard to the Partnership Agreement between the ACP States and the European Community and its Member States, signed at Cotonou (Benin) on 23 June 2000, hereinafter referred to as ‘the ACP-EC Agreement’ (1), as revised by the Agreement signed in Luxembourg on 25 June 2005 (2),

Having regard to Council Decision 2001/822/EC of 27 November 2001 on the association of the overseas countries and territories with the European Community, hereinafter referred to as ‘the Overseas Association Decision’ (3), amended by Council Decision 2007/249/EC of 19 March 2007 (4),

Having regard to Decision No 1/2006 of the ACP-EC Council of Ministers of 2 June 2006 specifying the multiannual financial framework for the period 2008 to 2013 and modifying the revised ACP-EC Partnership Agreement (5),

Having regard to the Court's Opinion No 2/2002 on an amended proposal for a Council Regulation on the Financial Regulation applicable to the general budget of the European Communities (6), hereafter referred to as the ‘General Financial Regulation’,

Having regard to the Court's Opinion No 12/2002 on the proposal for a Council Regulation on a Financial Regulation applicable to the ninth European Development Fund under the ACP-EC Partnership Agreement signed at Cotonou on 23 June 2000 (7),

Having regard to the Court's Opinion No 10/2005 on the draft Council Regulation amending Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (8),

Having regard to the Court's Opinion No 4/2006 on the draft Council Regulation amending Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (9),

Having regard to the Court's Opinion No 2/2007 on the draft Council Regulation amending the Financial Regulation applicable to the ninth European Development Fund (10),

Having regard to the Internal Agreement between the Representatives of the Governments of the Member States, meeting within the Council, on the financing of Community aid under the multiannual financial framework for the period 2008 to 2013 in accordance with the ACP-EC Partnership Agreement and the allocation of financial assistance for the overseas countries and territories to which Part Four of the EC Treaty applies (hereinafter called the Internal Agreement), and in particular Article 10(2) thereof, which provides for consultation of the Court of Auditors (11),

Having regard to the Commission's proposal for a Council regulation on the Financial Regulation applicable to the 10th European Development Fund (12),

Having regard to the Council's request for an Opinion on that proposal, sent to the Court on 27 July 2007,

HAS ADOPTED THE FOLLOWING OPINION:

INTRODUCTION

1. The Court notes that the time allowed for producing this Opinion was very short. In fact, the Financial Regulation applicable to the 10th EDF must be adopted before the end of 2007, so that it can be implemented at the beginning of 2008. The Council has already reached an advanced stage in the legislative procedures for the adoption of this Regulation. Therefore, this Opinion focuses on essential matters of substance, without necessarily combining them with proposals for an alternative text.

MAIN OBSERVATIONS

Alignment with the General Financial Regulation

2. The Court notes that the draft Financial Regulation successfully includes the changes made during the recasting of the Financial Regulation applicable to the general budget that could be applied in the EDF context. The Court welcomes the fact that the timetable for the Court's Statement of Assurance and Annual Report is aligned with the corresponding dates in the General Financial Regulation.

Simplification

3. The Court welcomes the fact that, as recommended in its Opinion No 12/2002, the draft Financial Regulation provides clear and straightforward legislation concentrating on the provisions that are essential and necessary for the implementation of the EDF, without unnecessarily repeating provisions laid down in Annex IV to the ACP-EC Partnership Agreement, the Internal Agreement or the detailed rules for the implementation of the General Financial Regulation.

Need for a single Financial Regulation applicable to all EDFs

4. The Court regrets that, despite the suggestion made in its Opinions Nos 12/2002 and 2/2007, the draft Financial Regulation does not take the opportunity to introduce a single Financial Regulation applicable to all present and future EDFs, which, like the General Financial Regulation, could be amended whenever there was felt to be a need. A measure of this type would ensure continuity of approach, without the risk of interrupting the implementation of the EDFs, and would greatly simplify management.

Breakdown of responsibilities for the implementation of the EDF and discharge

5. Following Article 11 of the Internal Agreement, Articles 2 and 3 of the draft Financial Regulation provide for a breakdown of the main responsibilities for the implementation of the EDF between the Commission and the European Investment Bank (EIB) by creating two separate areas of management, one for each of the two bodies. This maintains a category of expenditure which, whilst being subject to audit by the Court (under the EIB-Court-Commission tripartite agreement provided for in Article 134 of the draft Financial Regulation), is not subject to discharge by the competent authorities.

6. The Articles relating to the discharge, and Article 143(1) in particular, exclude the management of the Investment Facility by the EIB from the scope of the Parliament's discharge. The Court regrets that, under the Internal Agreement (Article 11(8) and (9)), the operations managed by the EIB are not subject to a discharge procedure involving the Council and Parliament, even though the operations are conducted by the EIB on behalf of and at the risk of the Community (Article 11(2) of the Internal Agreement), using EDF resources. The Court notes that these funds are contributed by European taxpayers, not by the financial market.

Paying managers

7. Articles 48 to 50 create a new financial actor, the paying manager, responsible for executing payments in the national currencies of the ACP States or in the local currencies of the OCTs from the paying agent accounts. The recitals of the draft Financial Regulation do not explain why it is felt necessary to create this new financial actor, and the draft provisions are unclear as to the determination of his/her responsibilities and obligations, notably vis-à-vis the authorising officer and the accounting officer. The Court is particularly concerned by the fact that, as provided in Article 49(1), the decision by the accounting officer to appoint the paying manager would be done on the basis of a proposal from the authorising officer responsible and that this decision would set out the respective responsibilities and obligations of the paying manager and the authorising officer. Furthermore, as the paying manager is not mentioned in Article 31, it is unclear whether the principle of segregation of duties is assured.

8. The Court observes that, for the implementation of the ninth EDF, such payments may be effected by an accounting officer by sub-delegation (Article 66(1) of the Financial Regulation applicable to the ninth EDF) and sees, therefore, no reason why similar provisions are not proposed in the draft Financial Regulation. The Court notes also that the paying manager has no equivalent in the General Financial Regulation, which, in addition to the authorising and accounting officers, provides only for an imprest administrator. Imprest administrators are endowed by the accounting officer alone, without any involvement of the authorising officer (Article 63).

9. Therefore, the Court suggests that all references to the paying manager in the draft Financial Regulation should be deleted.

Deadline for the conclusion of individual contracts and agreements

10. Article 74(2) and Article 79(a) provide that riders to existing contracts may be concluded later than three years following the date of conclusion of the financing agreement. This departs from the corresponding provisions of the General Financial Regulation (Article 166(2)), which allows this possibility only for the conclusion of contracts and agreements relating to audit and evaluation. In any case, the extension of this derogation for the conclusion of riders would render meaningless the general rule whereby individual contracts and agreements can be concluded no later than three years following the date of conclusion of the financing agreement.

Provisional accounts

11. As regards Articles 124 and 125, the Court draws attention to its Opinion No 2/2002 (paragraphs 20 and 21), which suggested that all references to ‘provisional’ accounts should be deleted. The accounts to be presented for audit on 31 March should be complete, properly drawn up accounts approved by the Commission. There must be no confusion in the Financial Regulation about the roles of the auditee and the auditor with regard to the preparation of the accounts. The Court's task cannot in any circumstances involve helping the Commission to prepare the accounts. This responsibility, which is of an administrative and accounting nature, lies solely with the Commission and is incompatible with the Court's external control responsibility.

OTHER OBSERVATIONS

Table of contents

12. It would be useful if a table of contents were added, as is the case for the General Financial Regulation.

Resources and Member States contributions

13. Title III of Part One of the draft Financial Regulation contains only one chapter dealing with the composition of EDF resources. A further chapter, laying down the provisions regarding the establishment of the annual contributions of Member States, is needed.

14. Article 16 is unclear as to whether the financial contributions from the Member States, other donor countries or international organisations to certain projects or programmes that the Commission will manage on their behalf will be EDF resources stricto sensu and will be managed according to the rules applying to the EDF.

Implementation of EDF resources

15. Article 26 stipulates that, in the case of indirect centralised management, the Commission may accept from the entities to which it entrusts the implementation, that their audit, accounting, procurement and grant-awarded systems ‘are equivalent to its own, with due account for internationally accepted standards’ (when it has first obtained evidence of their existence and proper operation). As the Court noted in its Opinion No 4/2006 (paragraph 9), the entities to which the Commission entrusts implementation in such instances are not bound by the provisions of the Financial Regulation. Furthermore, as there are no internationally accepted standards for procurement systems nor for compliance audit, the stipulation to take due account of internationally accepted standards is meaningless. The same applies for grant-awarded systems.

16. For the sake of completeness, Article 35 should also mention cases of joint management with international organisations as a derogation from this rule.

17. Article 36 transposes the first subparagraph of Article 23 of the Financial Regulation applicable to the ninth EDF, but omits the second subparagraph. In the Court's view, it is necessary to maintain this provision in order to state clearly that any measure taken by the authorising officer by delegation pursuant to this Article shall be taken in the name of and on behalf of the national or regional authorising officer concerned.

18. If, despite the Court's comments in paragraphs 7 to 9, the concept of paying manager is maintained, Article 52(2) should also provide that paying managers shall be liable to disciplinary action and the payment of compensation as laid down in the Staff Regulations.

19. As regards Articles 76 and 80, the Court reiterates the suggestion made in its Opinion No 12/2002 (paragraph 15(f)) that these provisions should be reviewed, in order to preserve the idea that the accounting must remain open as long as a transaction has not been finally cleared, but without introducing the idea that decommitment may be deferred even though there is available information that makes it possible to adjust (often, by reducing) the level of the corresponding Community obligation. It is important to avoid blocking funds unnecessarily when they could be used on other programmes or projects.

20. Article 78(1) uses the term ‘appropriations’, which is incorrect in the context of non-budgetary funds.

Procurement

21. Article 92(2) should also refer to grant decisions. Furthermore, as the Court suggested in its Opinion No 12/2002 (paragraph 17), it might be advisable to include a chapter on ‘Guarantees and control’, as provided in Article 103 of the General Financial Regulation.

Titles VII and VI

22. In the English language version, Title VII Direct labour and Indirect decentralised operations and Title VI Grants are incorrectly numbered.

Grants

23. As regards Articles 105 and 107, the Court wishes to draw attention to its Opinions Nos 10/2005 (paragraphs 41 to 48) and 4/2006 (paragraphs 14 to 16), which indicate that some of the exceptions and derogations to the non-profit and non-cumulation principles are not really justified because: (a) they could entail additional risks and complicate management; (b) verification might be problematic in some cases; (c) simpler solutions could have been found.

24. As is the case for the General Financial Regulation (Article 120(2)), Article 116(2) should specify that, for the purpose of point (c), the maximum amount of financial support that can be paid to a third party by a beneficiary shall be determined by the detailed rules for the implementation of the General Financial Regulation.

Presentation of the accounts and accounting

25. To ensure consistency with the Financial Regulation applicable to the ninth EDF (Article 97) and the General Financial Regulation (Article 123), in Article 119 of the English language version, ‘shall’ should be replaced by ‘must’.

26. In Article 124, there is a difference of one month between the date for sending the report on financial management and that for sending the provisional accounts which the report is supposed to accompany under Article 118(2). As the Court suggested in its Opinion No 12/2002 (paragraph 21(a)), in order to be aligned with the corresponding provisions of the General Financial Regulation (Article 128), the report should be sent with the accounts on 31 March.

27. In Article 129(2), it would be useful for the chart of accounts sent to the Court of Auditors to be accompanied by the applicable rules and methods provided for in paragraph 1.

External audit and discharge

28. In Article 135(1), the phrase ‘as soon as possible’ should be replaced by ‘within not more than 15 working days’.

29. In Article 136(1), the phrase ‘the Treaty establishing the European Community’ should be inserted before ‘the ACP-EC Agreement’. As the Court indicated in its Opinion No 12/2002 (paragraph 22 (a)), the Treaty is, in fact, the legal base for the Overseas Association Decision, as well as for the Financial Regulations applicable to the EDF itself (13). It might also be advisable to mention the Internal Agreement, which also constitutes the legal base for the Financial Regulation for the 10th EDF (14).

30. Article 136(2) incorrectly refers to ‘paragraph 6’. The correct reference is ‘Article 138(4) and (5)’.

Specific conditions governing EDF resources managed by the EIB

31. Article 149(1) provides that the EIB shall draw up the relevant accounting rules and methods according to international standards and inform the Commission and the Member States accordingly. It differs from the corresponding provisions of the Financial Regulation applicable to the ninth EDF (Article 125(1)), which provide that the EIB and the Commission shall draw up these accounting rules and methods by common agreement. As indicated in paragraphs 5 and 6, the Court regrets the creation of two separate areas of management, which limits the scope of the Parliament's discharge.

32. In Article 149(2), there is a difference of one month between the date for sending the report on the implementation of operations financed from EDF resources managed by the EIB and that for sending the accounts. As the Court suggested in its Opinion No 12/2002 (paragraph 21(b)), the report should be sent with the accounts not later than 28 February.

33. Article 150 should state that ‘the EIB's own rules’ for contracts should comply with the general rules governing the management of the EDF, and in particular the ACP-EC Partnership Agreement, the Internal Agreement and the Financial Regulation (15).

This Opinion was adopted by the Court of Auditors in Luxembourg at its meeting of 6 December 2007. For the Court of Auditors Hubert WEBER President

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

(2) OJ L 287, 28.10.2005.

(3) OJ L 314, 30.11.2001, p. 1 and OJ L 324, 7.12.2001.

(4) OJ L 109, 26.4.2007, p. 33.

(5) OJ L 247, 9.9.2006, p. 22.

(6) OJ C 92, 17.4.2002, p. 1.

(7) OJ C 12, 17.1.2003, p. 19.

(8) OJ C 13, 18.1.2006, p. 1.

(9) OJ C 273, 9.11.2006, p. 2.

(10) OJ C 101, 4.5.2007, p. 1.

(11) OJ L 247, 9.9.2006, p. 32.

(12) COM(2007) 410 final of 16 July 2007.

(13) See the first citation of the proposal to which this Opinion relates.

(14) See the fifth citation of the proposal to which this Opinion relates.

(15) As provided in Article 11(2) of the Internal Agreement.