Proposal for a Council Regulation (Euratom, ECSC, EC) amending the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities (96/C 296/05) COM(96) 351 final - 96/0189(CNS)

(Submitted by the Commission on 29 July 1996) THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Coal and Steel Community, and in particular Article 78h thereof,

Having regard to the Treaty establishing the European Community, and in particular Article 209 thereof,

Having regard to the Treaty establishing the European Atomic Energy Community, and in particular Article 183 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the Court of Auditors,

Having regard to the opinion of the European Parliament,

Whereas the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities (1) ('the Financial Regulation`) must be amended to improve financial management within the institutions;

Whereas the management of commitments is sometimes subject to considerable delays and the control of ongoing commitments must therefore be strengthened;

Whereas there must be strict control of the subdelegation of powers to sign financial documents; whereas staff who exercise powers which are not delegated or subdelegated to them or exercise powers in excess of the limits of the powers expressly conferred on them must be made liable to disciplinary action and, where appropriate, to payment of compensation;

Whereas, if management of Community programmes is subcontracted, this must be governed by appropriate provisions to guarantee the transparency of operations and lay down the procedure for the entry in the accounts of the funds generated and available for use in financing the programmes in question;

Whereas the financial controller is responsible for the internal audit of his institution; whereas, in this respect, he must be consulted about setting up and altering inventory systems and systems of financial management used by the authorizing officers; whereas the analysis of financial management should also be submitted to the financial controller;

Whereas account must be taken of the requirements deriving from the computerized systems of financial management;

Whereas the system of accounts must be improved;

Whereas the Financial Regulation should contain provisions for the entry in the accounts of traditional own resources, which have their own specific features different from the other own resources (VAT and GNP);

Whereas the legal commitments made by the institution and the accounting commitments submitted to Financial Control and recorded in the central accounts must correspond exactly, while leaving a reasonable length of time for the conclusion of the legal commitments in cases where the Commission's decisions of principle count as commitment of expenditure;

Whereas time limits should be set for the procedure for overruling the withholding of approval by the financial controller;

Whereas, with the introduction of the statement of assurance, it is essential that the discipline required with regard to inventories be strengthened by laying down the respective duties of the authorizing officer and the accounting officer;

Whereas the procedure for the authorization of transfers between chapters in the EAGGF Guarantee Section should be adjusted to allow the Commission additional time to present its proposals for transfer;

Whereas Title IX of the Financial Regulation should be amended to bring it into line with the criteria of transparency, publicity and competition contained in the Council directives on the award of contracts and the international agreements to which the European Community is a signatory,

HAS ADOPTED THIS REGULATION:

Article 1

The Financial Regulation is hereby amended as follows:

1. Article 1 is amended as follows:

(a) the first subparagraph of paragraph 7 is replaced by the following:

'7. The legal commitments entered into for measures extending over more than one financial year and the corresponding commitment proposals shall contain a time limit for implementation which must appear on the commitment proposals and must be specified to the recipient in due form. Any commitments not used six months after this date shall be cancelled in accordance with Article 7 (6).`;

(b) a fourth subparagraph is added to paragraph 7 as follows:

'In this case, the date shall be adjusted in accordance with the same procedure as the commitment proposal and shall be notified to the recipient by means of an additional contract or in any other appropriate legal form.`.

2. Article 7 is amended as follows:

(a) in the first inent of point (a) of paragraph 2 'which relate` is replaced by 'relating`, the semi-colon is omitted and 'these amounts must` is replaced by 'must`;

(b) the first subparagraph of paragraph 6 is replaced by the following:

'When commitments in budget headings where there is a distinction between commitment appropriations and payment appropriations are cancelled - as a result of total or partial non-implementation of the projects for which they were earmarked - in any financial year after that in which the commitment appropriations were entered in the budget, the appropriations concerned shall, as a rule, lapse. In addition, any amounts unduly paid shall be recovered.`;

3. Article 22 is amended as follows:

(a) A fourth subparagraph is added to paragraph 4:

'Any member of staff who authorizes commitments or payments without having been delegated or subdelegated the necessary powers or in excess of the limits of the powers expressly conferred upon him shall render himself liable to disciplinary action and, where appropriate, to payment of compensation in accordance with Title V.`;

(b) A new paragraph is inserted:

'4a. When the Commission subcontracts the implementation of certain programmes, the contracts concluded must contain all appropriate provisions for ensuring the transparency of the subcontracted operations in accordance with the implementing rules provided for in Article 139.

If the payments made to the subcontractors generate interest which may be used to finance the programmes in question, the following procedure shall be applied:

- periodically, at intervals of no more than six months, recovery orders shall be issued for the interest generated by these funds, which will then be booked to the statement of revenue;

- at the same time, appropriations for the corresponding amount, in both commitments and payments shall be made available in the heading of the statement of expenditure to which the initial expenditure was charged.`;

4. the fourth and fifth paragraphs of Article 24 are replaced by the following:

'The financial controller must be consulted on the setting up and alteration of the accounting systems and inventory systems of the institution to which he is attached and on the setting up and alteration of the systems of financial management used by authorizing officers. He shall have access to the data of such systems.

Monitoring shall be carried out by that official by means of inspection of the files relating to expenditure and revenue and, if necessary, on the spot. The financial controller shall carry out the internal audit of the institution, in accordance with the implementing rules provided for in Article 139.`;

5. the following paragraph is inserted after the fourth paragraph in Article 25:

'The accounting officer must be consulted on the setting up and alteration of the accounting systems of financial management used by authorizing officers, where such systems are intended to supply data to the central accounts. He shall, at his request, have access to the data of such systems.`;

6. Article 27 is amended as follows:

(a) in paragraph 2, point (f) is deleted and points (g) and (h) become points (f) and (g) respectively;

(b) the following paragraph is inserted after paragraph 2:

'3. Notwithstanding Article 4, where products or services supplied to the Commission incorporate taxes which are refunded by Member States pursuant to the Protocol on Privileges and Immunities, the net price shall be charged to the budget.

The refund of these taxes shall be monitored separately in the accounts.`;

(c) paragraphs 3 and 4 are renumbered 4 and 5 respectively;

(d) in paragraph 5, which is renumbered 6, the letter (g) is replaced by the letter (f) and the letter (h) by the letter (g);

7. the following paragraph is added to Article 28:

'3. Notwithstanding paragraph 1, no forward estimate shall be made for the own resources defined in Article 2 (1) and (2) of Council Decision 94/728/EEC, which are paid at fixed intervals by the Member States, before the Member States make the amounts available directly to the Commission. The authorizing officer responsible shall issue a recovery order for them.

The recovery orders for the revenue referred to at Article 2 (1) (a) and (b) of that Decision shall be based on the monthly statements of entitlements established by the Member States, which they send to the Commission.

The recovery orders shall be sent to the financial controller for approval. After they have received his approval, they shall be registered by the accounting officer in accordance with the implementing rules provided for in Article 139.`;

8. Article 36 is amended as follows:

(a) Does not concern the English language version.

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

'2. Without prejudice to Article 99, the decisions taken by the Commission in accordance with the provisions authorizing it to grant financial aid from the various funds or similar operations shall constitute commitments of expenditure. Unless these decisions stipulate a different time limit for implementation in accordance with the abovementioned provisions, these commitments shall cover the total cost of the corresponding individual legal commitments up to 31 December of year n+1.

During the period of implementation referred to in the first subparagraph, the conclusion of each individual legal commitment shall be registered by the authorizing officer in the central accounts and booked to the commitment referred to in the first subparagraph.

The unused balance shall be released after the time limit laid down.

3. The procedure for implementing paragraphs 1 and 2 shall ensure that an exact account is kept of commitments and authorizations in terms of actual needs and that the specific legal commitments correspond to the overall budget commitment provided for by the Commission decision. The procedure shall be determined by the implementing rules provided for in Article 139.`;

9. in Article 39, the second and third paragraphs are replaced by the following:

'Cases where approval is withheld and the authorizing officer maintains his proposal shall be referred for a decision to the superior authority of the competent institution among those listed in the first two paragraphs of Article 22 within two months of the date of the decision to withhold approval.

Except where the availability of the appropriations is in doubt, the said superior authority may, by a decision stating the full reasons therefor, taken on its sole responsibility, overrule such a refusal. This decision shall be final and binding with effect from the date on which approval was withheld. It must be taken by 15 February of year n+1. It shall be communicated for information to the financial controller. The superior authority of each institution shall inform the Court of Auditors of all such decisions within one month.`.

10. in the third indent of Article 44, the following shall be added after 'national currency`:

'- However, when payment orders are sent to the banks by means of computerized procedures, the amount need not be expressed in words,`;

11. three new paragraphs are added to Article 65 after the second paragraph:

'The inventory system established and administered by the authorizing officer with the technical assistance of the accounting officer and under his technical supervision shall provide the central system of accounts with all the appropriate information needed to draw up the institution's balance sheet.

For this purpose, the inventory and accounting systems shall be organized in such a way as to ensure the concordance of the information they each contain and the possibility that operations can be audited from the time the equipment is acquired and entered in the inventory to the time when it is decommissioned or scrapped.

The institutions shall each adopt, for their own purposes, provisions relating to the keeping of the equipment recorded in their respective balance sheets and shall determine the departments responsible for this task.`;

12. Article 70 is amended as follows:

(a) in the first paragraph, the word 'budgetary` shall be replaced by 'expenditure and revenue`.

(b) in the second paragraph, point (a) is replaced by the following:

'(a) accounts of expenditure and revenue, subdivided into two separate subcategories:

- accounts of budgetary expenditure and revenue, which allow implementation of the budget to be monitored and the balance for the financial year to be determined,

- accounts of non-budgetary expenditure and revenue, which complement the previous accounts and can be used to produce a broader accounting result;` 13. the following article is inserted:

'Article 70a

The rules for the entry in the accounts of the depreciation of assets and the rules for writing down the value of assets and for constituting provisions shall be determined by the implementing rules provided for in Article 139.`;

14. Article 79 is replaced by the following:

'Each institution shall, not later than 1 March, transmit to the Commission, after submitting them to its financial controller, the information required for drawing up the revenue and expenditure account and the balance sheet and a contribution to the analysis of the financial management referred to in Article 80.`;

15. in Article 104 (2), 'one month` is replaced by '21 days`;

16. Article 109 (3) is replaced by the following:

'It shall transmit to the Commission for agreement the results of the examination of the tendering procedure and a proposal for the award of the contract. It shall sign contracts, additions to contracts and estimates and shall notify the Commission thereof. For contracts, additions to contracts, and estimates, the Commission, where appropriate, shall enter into individual commitments in accordance with the procedures laid down in Articles 36 to 39. Individual commitments shall count towards the commitments under the financing agreements provided for in Article 106 (2), in accordance with the second subparagraph of Article 36 (2).`;

17. Article 112 is replaced by the following:

'Notwithstanding Title IV, this section shall apply to cases in which the Commission, in connection with external aid financed from the budget of the European Communities, acts as contracting authority in the award of works, supply or service contracts not covered by the Council directives coordinating the award of public works, supply or service contracts or by the Plurilateral Agreement on Government Procurement concluded within the World Trade Organization.`;

18. Article 113 is replaced by the following:

'The procedure to be followed for the award of works, supply or service contracts financed from the budget of the European Communities for recipients of external aid shall be specified in the financing agreement or the contract, subject to the following principles.`

Article 2

This Regulation shall enter into force on the seventh day following 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 No L 356, 31.12.1977, p. 1. Regulation last amended by Council Regulation (EC, Euratom, ECSC) No 2335/95 of 18 September 1995 (OJ No L 240, 7. 10. 1995, p. 12).