Proposal for a Council Regulation (EC) amending Annex II to Regulation (EC) No 1164/94 establishing a Cohesion Fund (98/C 159/06) COM(1998) 130 final - 98/0118(CNS)

(Submitted by the Commission on 19 March 1998)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 1164/94 of 16 May 1994 establishing a Cohesion Fund (1), and in particular Article K of Annex II thereto,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Whereas, in order to make the Fund more effective, the concepts of 'project`, 'groups of projects` and 'stages of a project` and the criteria for grouping projects should be defined;

Whereas the system of financial management should be simplified while retaining its link with the actual implementation of operations;

Whereas, during the transitional period (1 January 1999 to 31 December 2001), all references to the euro should normally also be read as references to the euro as a monetary unit, as provided for in the second sentence of Article 2 of Council Regulation No . . ./98;

Whereas that simplification should be accompanied by improved checks that expenditure has actually been incurred and greater responsibility by the Member State for ensuring sound financial management;

Whereas the Commission and the Member State should improve their cooperation on checking projects and this cooperation should be made systematic;

Whereas, where irregularities are detected, there should be a system of financial corrections to protect the financial interests of the Community;

Whereas Annex II to Regulation (EC) No 1164/94 should be amended accordingly;

HAS ADOPTED THIS REGULATION:

Article 1

Annex II to Regulation (EC) No 1164/94 is amended as follows:

1. Article A is replaced by the following:

'Article A

Designation of projects, of stages or groups of projects

1. The Commission may, in agreement with the beneficiary Member State, group projects together and designate technically and financially separate stages of a project for the purpose of granting assistance.

2. For the purposes of this Regulation, the following definitions shall apply:

(a) a "project" is an economically indivisible series of works fulfilling a precise technical function and with clearly identified aims from which to judge whether the project complies with the criterion laid down in the first indent of Article 10(5);

(b) a "technically and financially independent stage" is one which can be identified as operational in its own right.

3. A stage may also cover preliminary, feasibility and technical studies needed for carrying out a project.

4. To comply with the criterion in the third indent of Article 1(3), projects meeting the following three conditions may be grouped:

(a) they must be located in the same area or situated along the same transport corridor;

(b) they must be carried out under an overall plan for the area or corridor with clearly identified goals, as provided for in Article 1(3);

(c) they must be supervised by a body responsible for coordinating and monitoring the group of projects in cases where the projects are carried out by different competent authorities.`

2. In Article B(2), the second sentence is replaced by the following:

'2. The beneficiary Member States shall provide all necessary information, as set out in Article 10(4), including the results of feasibility studies and ex ante appraisals, the results of the environmental impact assessment and their consistency with a general environmental strategy at administrative unit or sector level, an indication of the alternatives that were not chosen and in appropriate cases the links between projects of common interest located along the same transport corridor, to make this appraisal as effective as possible.`

3. Article C is amended as follows:

(a) Paragraph 2 is amended as follows:

(i) In the second subparagraph of point (a), the second sentence is replaced by the following:

'Commitments in respect of subsequent annual instalments shall be based on the initial or revised financing plan for the project and shall normally be made at the beginning of each budget year and no later than 1 March of the current year, based on the expenditure forecasts for the project for that year.`

(ii) Point (b) is replaced by the following:

'(b) for projects to be carried out over a period of less than two years or where Community assistance is less than EUR 50 million, an initial commitment of 80 % of assistance may be made when the Commission adopts the decision to grant Community assistance.

The balance shall be committed according to the implementation of the project.`

(b) The following paragraph 5 is added:

'5. Except in duly justified cases, the assistance granted to a project, group of projects or project stage on which work has not begun within two years of the date of its expected start, as indicated in the decision granting assistance, shall be cancelled.`

4. Article D is amended as follows:

(a) In paragraph 1, the second sentence is replaced by the following:

'Payments may take the form either of advances or in intermediate payments or payments of balances in respect of expenditure certified and actually paid.`

(b) Paragraphs 2 and 3 are replaced by the following:

'2. Payments shall be made as follows:

(a) a single advance of up to 10 % of the Fund assistance as initially decided shall be paid when the decision granting Community assistance is adopted and, except where duly justified, after signature of the contracts relating to public procurement.

All or part of the advance shall be reimbursed by the designated authority or body referred to in paragraph 1 if no payment application is submitted to the Commission within 12 months from the date on which the advance is paid.

(b) intermediate payments may be paid provided that the project is progressing satisfactorily towards completion and shall be made to refund the expenditure certified and actually paid, subject to the following conditions:

- The Member State has submitted an application describing the progress of the project in terms of its physical and financial indicators and its conformity with the decision to grant assistance, including where appropriate any specific conditions attached to the assistance;

- the observations and recommendations of the national and/or Community inspection authorities have been acted upon, in particular as regards the correction of any observed or presumed irregularities;

- the main technical, financial and legal problems that have arisen and the measures taken to correct them have been indicated;

- any departures from the original financing plan have been analysed;

- the steps taken to publicise the project have been described.

(c) the total amount of the payments made under (a) and (b) may not exceed 80 % of the total assistance granted. This percentage may be increased to 90 % for important projects committed in annual instalments and in justified cases.

(d) the balance of Community assistance calculated on the basis of expenditure certified and actually paid shall be paid provided that:

- the project, stage of the project, or group of projects, has been carried out according to its objectives;

- the designated authority or body referred to in paragraph 1 submits an application for payment to the Commission within six months of the deadline for completion of the work and for expenditure laid down in the decision granting assistance to the project, stage of project or group of projects;

- the final report referred to in Article F(4) is submitted to the Commission;

- the Member State certifies to the Commission that the information given in the application for payment and in the report is correct;

- the Member State has sent the Commission the declaration referred to in Article G;

- all the information and publicity measures drawn up by the Commission under Article 14(3) have been implemented.

3. If the final report referred to in paragraph 2 is not sent to the Commission within 12 months of the final date for completion of the works and payments as given in the decision granting assistance, that part of the assistance representing the remaining balance for the project shall be cancelled.`

(c) In paragraph 4, the words 'and in paragraph 3 point d)` are deleted.

(d) The following paragraph 4a is inserted:

'4a The Member States shall ensure that applications for payment are submitted to the Commission as a general rule twice a year, by 1 March and 1 October at the latest.`

(e) In paragraph 5, after the words 'for payment`, the following is added:

'provided budget funds are available.`

(f) The following paragraph 7 is added:

'7. The Commission shall lay down common rules on the eligibility of expenditure.`

5. Article E is amended as follows:

(a) In the title and in paragraphs 1 to 4, 'ecu(s)` is replaced by 'euro(s)`, where required.

(b) In paragraphs 1 and 3, the words 'or in national currency` are deleted.

(c) The following paragraph 5 is added:

'5. For Member States not participating in the euro, the conversion rate shall be the Commission's financial accounting rate.`

6. Article F is amended as follows:

(a) The following second subparagraph is added to paragraph 4:

'This report shall include:

(a) a description of the work carried out, accompanied by the physical indicators, the expenditure by category of work and any measures taken under specific clauses in the decision granting assistance;

(b) information on all publicity measures;

(c) certification that the work conforms to the decision granting assistance;

(d) an initial assessment as to whether the anticipated results as indicated in Article 13(4) are likely to be achieved, including in particular:

- the actual starting date of the project;

- the way in which it will be managed once finished;

- confirmation, if appropriate, of the financial forecasts, especially as regards the operating costs and expected revenue;

- confirmation of the socio-economic forecasts, in particular the expected costs and benefits;

- an indication of the environmental protection measures taken, and their cost, including compliance with the polluter-pays principle.`

(b) The following second subparagraph is added to paragraph 5:

'The decision granting assistance shall include appropriate arrangements for making the modifications differentiating between them on the basis of their nature and importance.`

7. Article G is replaced by the following:

'Article G

Checks

1. As part of their responsibilities, the Member States shall:

(a) ensure that projects are managed in accordance with all the applicable Community rules;

(b) guarantee that the declarations of expenditure are accurate and result from accounting systems based on verifiable supporting documents;

(c) present to the Commission, at the winding-up of each project, a declaration drawn up by a person or department having a function independent of the designated managing authority. This declaration shall summarise the conclusions of the checks carried out and shall assess the validity of the application for payment of the final balance and the legality and correctness of the expenditure covered by the certificated declaration. The Member States shall attach their opinion to this declaration if they consider it necessary.

2. Before carrying out an on-the-spot check, the Commission shall give notice to the Member State concerned with a view to obtaining all the assistance necessary. The Commission may carry out on-the-spot checks without notice. Officials or agents of the Member State concerned may take part in checks.

The Commission may require the Member State concerned to carry out an on-the-spot check to verify the correctness of payment applications. Officials or agents of the Commission may take part in such checks.

The Commission and the Member States shall cooperate to coordinate programmes and methods relating to checks so as to maximise the usefulness of those carried out. The Member State concerned and the Commission shall immediately exchange any relevant information concerning the results of the checks carried out.

3. The Commission and the Member States shall cooperate to examine and evaluate at least once a year:

(a) the results of the checks carried out by the Member State and the Commission;

(b) any comments made by the other national or Community supervisory bodies or institutions;

(c) the financial impact of the irregularities identified, the steps already taken or still required to correct them and, where necessary, adjustments to the management and control systems.

Following this examination and without prejudice to the measures to be taken immediately by the Member State under Article H, the Commission shall draw up conclusions, particularly regarding the financial impact of any irregularities identified. These conclusions shall be addressed to the Member State and the managing authorities of the assistance concerned. They shall be accompanied, where necessary, by recommendations or requests for corrective measures to remedy the management shortcomings found and correct those irregularities detected which have not already been corrected.

The Member State and managing authorities concerned shall immediately take the necessary measures to comply with the Commission's recommendations or requests.

4. The responsible body and authorities shall keep available for the Commission all the supporting documents regarding expenditure on any project for a period of three years following the last payment in respect of a project.

That period shall be suspended in the event of legal proceedings or at the reasoned request of the Commission.`

8. Article H is amended as follows:

(a) The title is replaced by:

'Financial corrections`.

(b) Paragraph 2 is amended as follows:

(i) The words 'an improper combination of funds` are inserted after 'irregularity`.

(ii) The second subparagraph is replaced by:

'Any reduction or cancellation of the assistance shall give rise to recovery of the sums paid.`

(c) The following paragraph 2a is inserted:

'2a Where the Commission considers that an irregularity has not been corrected or that all or part of an operation does not justify either all or part of the assistance granted to it, the Commission shall conduct a suitable examination of the case and request the Member State to submit its comments within a specified period.

After the examination, if no corrective measures have been undertaken by the Member State, the Commission may:

(a) reduce or cancel the advance referred to in Article D(2); or

(b) cancel all or part of the assistance granted to the measure.

The Commission shall determine the size of a correction taking into account the nature of the irregularity and the extent of any failures in the management and control systems.`

(d) In paragraph 3, the second sentence is replaced by the following:

'To such sum shall be added interest on account of late repayment in accordance with arrangements to be adopted by the Commission.`

(e) The following paragraph 4 is added:

'4. The Commission shall lay down the detailed rules for implementing paragraphs 1 to 3 and shall inform the European Parliament thereof.`

9. Annex II is amended as follows:

(a) Point 2 is replaced by

'2. the economic and social impact of the Fund in the Member States and on economic and social cohesion in the Union, including the impact on employment;`

(b) In point 4, '(1) and (2)` are deleted.

Article 2

This Regulation shall enter into force on the third day following that of its publication in the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

(1) OJ L 130, 25.5.1994, p. 1.