25. 6. 88 Official Journal of the European Communities No C 166/3 
II 
(Preparatory Acts) 
COURT OF AUDITORS 
OPINION No 1/88 
of the Court of Auditors of the European Communities on a proposal for a Council Regulation 
(ECSC, EEC, Euratom) amending the Financial Regulation of 21 December 1977 applicable to 
the general budget of the European Communities 
(88/C 166/03) 
THE COURT OF AUDITORS OF THE EUROPEAN 
COMMUNITIES, 
Having regard to the Treaty establishing the European 
Economic Community, and in particular Article 209 
thereof, 
Having regard to the Financial Regulation of 21 
December 1977 applicable to the general budget of the 
European Communities, and in particular Article 107 (') 
thereof, 
Having regard to Council Regulation (EEC) No 729/70 
of 21 April 1970 on the financing of the common agri­
cultural policy (2), 
Having regard to Council Regulation (EEC) No 
3183/87 of 19 October 1987 introducing special rules for 
the financing of the common agricultural policy (3), 
Having regard to the Commission proposal of 18 March 
1988 (4), 
Having regard to the request, made by the Council on 
21 March 1988 and received by the Court on 6 April 
1988, for the opinion of the Court of Auditors on this 
proposal, 
Whereas, according to its explanatory memorandum, this 
proposal gives effect to the conclusions adopted by the 
European Council, held in Brussels on 11, 12 and 13 
February 1988 (5), which expressed the desire that high 
(') OJ L 356 of 31.12.1977, p. 1, as last amended by Regulation 
(EEC) No 1176/80, OJ L 345 of 20.12.1980, p. 23. 
(2) OJ L 94 of 28.4.1970, p. 13. 
(J) OJ L 304 of 27.10.1987, p. 1. 
(4) Doc. COM(88) 148 final. 
(») Doc. SN/461/1/88 of 19 February 1988. priority be given to the revision of those provisions of 
the Financial Regulation which relate to the strength­
ening of the principle of the annuality of the budget, to 
the conditions for financing the EAGGF Guarantee 
Section and to the recognition of the principle that 
utilization of a negative reserve may be entered when the 
budget is being established; 
Whereas, in putting forward this proposal, the 
Commission is persisting in its practice, previously 
criticized by the Court (4), of seeking to make short-term 
and partial amendments to the Financial Regulation, 
notwithstanding the earlier proposals on which the 
Council has yet to take a decision; whereas the proposal 
is therefore in conflict with the requirements of 
consistency and coherence which are to be expected of 
Community legislation; 
Whereas the proposal seeks primarily to strengthen the 
principle of the annual nature of the budget by intro­
ducing new arrangements for carry-overs of appropri­
ations; 
Whereas, by setting up as a rule, by means of an 
amendment to Articles 1 and 6, paragraph 2, of the 1977 
Financial Regulation, the principle of not carrying over 
appropriations, save in certain cases previously defined 
by precise criteria accompanied by the laying down of 
the principle of priority use of the appropriations of the 
financial year but only as regards payment appropri­
ations and by a procedure whose stages are specifically 
defined in time, the proposal, although having limited 
effects, is a step in the direction of strengthening the 
principle of the annual nature of the budget; 
Whereas the proposal seeks, by an amendment to Article 
88 (3) of the Financial Regulation, to introduce new 
arrangements for carry-overs of research and investment 
appropriations; whereas, in order to do this, the proposal 
somewhat relaxes the constraints imposed by the general 
(') Court Opinion No 5/87, OJ C 337 of 16.12.1987. 
No C 166/4 Official Journal of the European Communities 25. 6. 88 
arrangements for carry-overs by providing that these 
research and investment appropriations may "as a rule" 
be carried over; whereas relaxing the rules in this way 
would be acceptable in order to ensure the continuity of 
the implementation of the budget in this specific area, 
provided that the derogation thus introduced is ac­
companied, as the Court recommended in its Opinion 
No 8/87 (7), by an improved definition of the conditions 
under which carry-overs of research and investment 
appropriations may be decided; 
Whereas the proposal also aims, by an amendment to 
Article 6 (6) of the Financial Regulation, to introduce 
general arrangements for decommitting commitment 
appropriations and making them available again; 
whereas, far from helping to strengthen the principle of 
annuality, the proposed new rules seek to make it 
possible for commitment appropriations to be made 
available again in all the areas of the budget, whereas the 
rules at present in force authorize such a possibility only 
by means of exceptional arrangements limited to specific 
areas (*); whereas in the past ('), the Court has protested 
about exceptional arrangements such as these which 
make available commitment appropriations which, as a 
rule, ought to have been cancelled after decommitment; 
whereas, although it lays down conditions and criteria 
relating to the application of these new general 
arrangements, the proposal does not offer adequate 
guarantees with regard to the strict management of 
commitment appropriations; 
Whereas, although the proposal stipulates that the 
Commission must inform the budgetary authority of the 
carry-over and decommitment decisions thus taken, it 
seems desirable to specify the extent of this duty to 
inform by adding a condition regarding time and the 
obligation to justify individually each of the decisions to 
carry over or to decommit appropriations; 
Whereas the proposal tends to confer excessively broad 
discretionary powers on the Commission, which is not 
consistent with the principle of the annual nature of the 
budget and is likely to undermine budgetary discipline; 
Whereas the proposal seeks, secondly, to recognize, by 
introducing a new Article 15 (4a) into the Financial 
O OJ C 339 of 17.12.1987. 
(*) — Article 6 (6) of the Financial Regulation. 
— Article 32 (6) of Regulation (EEC) No 1787/84, OJ L 
169 of 28.6.1984. 
— Article 95 of the Commission Regulation laying down 
detailed rules for the implementation of certain 
provisions of the Financial Regulation, OJ L 360 of 
19.12.1986. Regulation, the possibility of utilizing a "negative 
reserve" when drawing up the budget; 
Whereas, for the budgetary authority, the so-called 
"negative reserve" system consists in creating expen­
diture authorizations whose total amount exceeds that of 
the revenue actually available and in speculating, in 
practice, on the under-utilization -of appropriations; 
whereas, by its very principle and by reason of the 
conditions under which the negative reserve is absorbed 
at the end of the financial year, this practice is likely to 
prejudice the transparency of the budget and of its 
management; 
Whereas, consequently, the utilization and, a fortiori, the 
creation of a negative reserve are absolutely incompatible 
with the principles of a balanced budget and of classifi­
cation of appropriations, enshrined in Articles 199 (2) 
and 202 (3) of the EEC Treaty, as well as with Article 1 
of the Financial Regulation itself; 
Whereas furthermore, within the framework of the 
Communities' reformed financing arrangements, the 
budgetary authority must aim to draw up a budget based 
on realistic and restrictive forecasts; whereas the 
adoption of the proposal would seriously jeopardize such 
an objective, notwithstanding the restrictive conditions 
which the proposal aims to introduce in order to limit 
the effects of the utilization of such a negative reserve; 
Whereas the proposal seeks, thirdly, by amending Article 
98 of the Financial Regulation, to give effect in the 
Community financial rules to an adjustment of the 
financing arrangements for the EAGGF Guarantee 
Section; whereas the proposed adjustment would mean 
making definitive the temporary adjustment which was 
introduced by Regulation (EEC) No 3183/87 to deal 
with the budget situation in 1987 and 1988, and which 
involved the deferred booking to the accounts of the 
advance payments made to the Member States after the 
latter had mobilized from their own funds the resources 
needed to cover EAGGF Guarantee Section expenditure 
(the so-called "switch" system); 
Whereas this proposal constitutes an infringement of the 
principle of the annual nature of appropriations by 
making definitive the deferment in time of the advances 
paid to the Member States; whereas in its Opinions Nos 
3/87 (,0) and 6/87 ("), the Court expressed strong 
misgivings as regards this adjustment, which, 
O OJ C 175 of 3.7.1987. 
(") OJ C 337 of 16.12.1987. O OJ C 336 of 15.12.1987, p. 30. 
25. 6. 88 Official Journal of the European Communities No C 166/5 
furthermore, offers no improvement to the control of 
expenditure effected by the Member States; whereas, for 
these reasons, the Court, like the Parliament in its 
opinion on the proposal which has since been adopted as 
Regulation No 3183/87, requested that the application 
of these arrangements be strictly limited in time; 
Whereas in this context, the shortening from three 
months to one month of the "additional period" 
provided for in Articles 100 and 101 of the Financial 
Regulation appears to be largely illusory; whereas the 
setting-up of the "switch" system makes it possible to 
shorten this period because of the deferment of the 
payment of advances to the Member States until after 
the latter have made the payments to the recipient 
bodies; whereas it is nevertheless regrettable that the 
proposal does not give effect in full to the envisaged 
shortening of the additional period by also providing for 
an amendment to Article 77 of the Financial Regulation 
to the effect that the revenue and expenditure account 
and the balance sheet should be transmitted at the earlier 
date of 1 March; 
Whereas the proposal seeks, fourthly, by an amendment 
to Article 99 of the Financial Regulation, to set a 
timetable described as "realistic" and "binding" for the 
clearance of EAGGF Guarantee Section accounts; 
whereas the proposal seeks to require the Member States 
to send in, prior to 1 June of the year following the 
financial year in question, the summary accounts 
necessary for the clearance decisions to be taken by, at 
the latest, 15 September of the second year; 
Whereas, by enshrining within the Financial Regulation 
itself provisions relating to the clearance of EAGGF, 
Guarantee Section accounts, the proposal constitutes 
significant progress; whereas, nevertheless, it is 
regrettable that this opportunity has not been used to 
clarify the Commission's objectives and responsibilities 
on this subject, as recommended by the Court in Chapter 
5, paragraphs 5.26 to 5.34 of its annual report on the 
financial year 1986 (12); 
Whereas the proposal also has the effect, by virtue of the 
dates selected, of sanctioning the extension of the time 
limits at present stipulated in Article 5 (2) (b) of Regu­
lation No 729/70 and, consequently, of undermining the 
consistency provided for by the current regulations 
between the time limits stipulated for the clearance of 
accounts procedure and the budgetary timetable; 
whereas, it would thus institutionalize the regrettable 
practice (to which the Court has already stated its 
objections in its above-mentioned Opinions Nos 3/87 
and 7/87) which results in the discharge authority having 
to give its opinion on provisional figures; 
(,2) OJ C 336 of 15.12.1987. Whereas, lastly, by its new wording of Article 99 of the 
Financial Regulation, the proposal appears to sanction 
the idea that the Commission cannot legitimately begin 
operations to clear the EAGGF Guarantee Section 
accounts until the Member States have sent in their 
annual summary accounts; whereas such an idea 
conflicts with strict management of the EAGGF 
Guarantee Section, which implies, in contrast, a reconcili­
ation of the control operations with those relating to 
management, as recommended by the Court in its annual 
report on the financial year 1979 and on numerous 
occasions since (13); whereas, consequently, it is up to the 
Commission to take every step to obtain a significant 
improvement in the content and the accuracy of the 
Member States' monthly declarations in order to restore 
to the procedure for clearing the EAGGF accounts its 
initial significance and original timetable; 
HAS ADOPTED THIS OPINION: 
(a) Whilst approving the definition of a new set of 
arrangements for carry-overs, which is a step in the 
direction of strengthening the principle of the annual 
nature of the budget, the Court considers that the 
proposal, in so far as it aims to lay down general 
arrangements for decommitting commitment appro­
priations and making them available again, is not 
sufficiently mandatory to ensure strict management 
of commitment appropriations, particularly because 
of the considerable possibility thus offered to the 
Commission of making decommitted appropriations 
available again; the Court considers, moreover, that, 
in order fully to satisfy the principles which it laid 
down in paragraph (a) of its Opinion No 7/87, the 
proposal should be supplemented by a definition of 
the scope of the duty to inform the budgetary 
authority which will be imposed on the Commission; 
(b) The Court must reaffirm its fundamental objections 
to the creation of a negative reserve (14), which it 
considers to be incompatible with the Community's 
principles of budgetary orthodoxy; it invites the 
budgetary authority to adopt the budget on the basis 
of realistic and restrictive forecasts which would 
make the use of such an instrument unnecessary; 
(c) The Court cannot agree with the proposal in so far 
as it seeks to incorporate definitively in the Financial 
Regulation the consequences of the system of 
deferred payment of advances to the Member States 
under the EAGGF Guarantee Section; the Court 
(,J) OJ C 342 of 31.12.1980, paragraph 4.54. 
OJC 313 of 29.11.1982. 
H OJ C 336 of 15.12.1987, p. 24. 
No C 166/6 Official Journal of the European Communities 25. 6. 88 
reaffirms its objections of principle to such a system, 
which is in conflict with the principle of the annual 
nature of the budget and offers no improvement to 
the control of expenditure effected by the Member 
States; 
(d) The Court approves the principle of the codification, 
within the Financial Regulation, of proposals relating 
to the clearance of accounts procedure; it never­
theless regrets that the proposal seeks to sanction the 
extension of this procedure's time limits and does not 
seek, on the contrary, to affirm the objective of 
control of the management of the EAGGF 
Guarantee Section on the basis of greater reconcili­
ation of the accounts; (e) The Court invites the legislator to supplement the 
proposal in such a way as to ensure that the revenue 
and expenditure account and the balance sheet are 
transmitted at the earlier date of 1 March. 
This Opinion was adopted by the Court of Auditors at 
its meeting of 19 May 1988. 
For the Court of Auditors 
Marcel MART 
President 
OPINION No 2/88 
of the Court of Auditors of the European Communities on a proposal for a Council Regulation 
amending Council Regulation (EEC) No 1883/78 laying down general rules for the financing of 
interventions by the European Agricultural Guidance and Guarantee Fund, Guarantee Section 
(depreciation) 
(88/C 166/04) 
THE COURT OF AUDITORS OF THE EUROPEAN 
COMMUNITIES, 
Having regard to the Treaty establishing the European 
Economic Community, and in particular Article 206 (a) 
thereof, Whereas in the case of products bought in from 1989 
onwards the proposal envisages the introduction of a 
legal obligation to value the products at the end of the 
financial year at the foreseeable disposal price and, 
accordingly, to introduce a general rule for depreciating 
most of the value (70 %) of these products at the time of 
buying in and the balance at the year end; 
Having regard to Council Regulation (EEC) No 
1883/78 of 2 August 1978 ('), 
Having regard to Council Regulation (EEC) No 
1334/86 of 6 May 1986 (2), 
Having regard to the proposal from the Commission (3), Whereas in its Opinion No 1/86 (5) the Court did not 
put forward any objections regarding the Commission 
proposal to facilitate the financial depreciation of stocks, 
but did reiterate its previous reservations concerning the 
defects inherent in the provisions of Regulation (EEC) 
No 1883/78 on this matter; 
Having regard to the Council's request for the Court's 
opinion (4), 
Whereas the essential object of the proposal is to value 
stocks of agricultural products at the moment they are 
bought in at the foreseeable disposal price and thereby to 
eliminate the "burden of the past", which constitutes a 
charge on future budgets; Whereas in its Annual report concerning the financial 
year 1986 (6) the Court of Auditors repeated its obser­
vation regarding the serious deficiency in the accounting 
system applied under the current arrangements for inter­
vention stocks and called for the introduction of 
obligatory systematic rules for the financial depreciation 
of stocks; 
(•) OJ L 216, 5.8.1978, p. 1. 
O OJ L 119, 8.5.1986, p. 18. 
(J) Doc. COM(88) 195 final of 19.4.1988. 
(4) Letter dated 29.4.1988 (Council decision of 25.4.1988). (*) OJ C 80, 9.4.1986. 
(6) OJ C 336, 15.12.1987, p. 50.