Draft COMMISSION REGULATION (EURATOM, ECSC, EC) amending Commission Regulation No 3418/93 of 9 December 1993 laying down detailed rules for the implementation of certain provisions of the Financial Regulation of 21 December 1977

EXPLANATORY MEMORANDUM

A. Foreword

B. Analysis

I. Amendments arising from adoption of the first, second, third and fifth series of amendments to the Financial Regulation

Contracts

II. Amendments arising from adoption of the seventh series of amendments to the Financial Regulation

1. Evaluation of expenditure

2. Determination of the euro rate

3. Confusion or conflict of interests

4. Subcontracted operations

5. Management by means of integrated computer systems

6, Internal audit

7. Match between legal commitments and budget commitments (Article 36 of the Financial Regulation)

8. Rules for writing down the value of assets and constituting provisions

9. Deletion of the provision relating to advances on behalf of third parties in the RTD sector

III. Amendments arising from adoption of the eighth series of amendments to the Financial Regulation

Introduction of the euro

IV. Other amendments

1. Creation of imprest accounts and designation of imprest administrators

2. Third party ledger

3. Determination of thresholds and procedures applicable to contracts

4. Updating of fixed amounts

A. Foreword

1. The Commission Regulation laying down detailed rules for the implementation of certain provisions of the Financial Regulation ("implementing rules") fleshes out the provisions of the Financial Regulation that refer to implementing measures. The implementing rules currently in force are laid down in Commission Regulation No 3418/93 of 9 December 1993 (OJ L 315, 16 December 1993).

Since the current implementing rules were adopted the Financial Regulation has undergone several amendments.

First of all, four series of amendments were made to the Financial Regulation. These dealt mainly with the implications of the Maastricht Treaty, the EEA Agreement, borrowing and lending operations, and the handling of fines and other sanctions plus the new competition provisions for the JRC [1].

[1] Council Regulation No 2333/95 of 18 September (1st series), OJ L 240, 7.10.1995; Regulation No 2730/94 of 31 October 1994 (2nd series), OJ L 253, 12.11.1994; Regulation No 2334/95 of 18 September (3rd series), OJ L 240, 7.10.1995; Regulation No 2335/95 of 18 September (5th series), OJ L 240, 7.10.1995. The fourth series of amendments never materialised and the sixth series did not require implementing rules.

Then came the seventh series of amendments, which flowed from the conclusions of the Liikanen/Gradin group on the second stage of the exercise to improve financial management (SEM 2000) and also tied in with reflections on the first DAS and Sincom 2.

Finally came the eighth series of amendments, which principally replaced the ecu by the euro.

2. On 5 September 1996 the Commission adopted a draft Commission Regulation (SEC(1996)1356 final) amending Commission Regulation No 3418/93 of 9 December 1993 laying down detailed rules for the implementation of certain provisions of the Financial Regulation of 21 December 1977 (OJ L 315, 16 December 1993).

This draft was presented in the wake of the proposal for the seventh series of amendments to the Financial Regulation (COM(1996) 351 final, 26 July 1996) that was subsequently adopted by the Council on 28 November 1998 (Council Regulation No 2548/98 of 23 November 1998; OJ L 320, 28 November 1998).

In view of the differences between the proposed seventh series of amendments and the Regulation as adopted by the Council, the draft Commission Regulation of 5 September 1996 needs to be revised. This revision will also make it possible to take account of adoption of the eighth series of amendments to the Financial Regulation (Council Regulation No 2779/98 of 17 December 1998; OJ L 347) [2]. In addition, it reflects the observations made by the Court of Auditors in its opinion 4/97 regarding the draft of September 1996. The present revision is based on the figures appearing in Regulation No 3418/93, updated by the Commission annually or every three years, as the case may be, on the basis of Article 145 of the implementing rules [3].

[2] The second part of the eighth series of amendments to the Financial Regulation adopted on 13 December 1999 does not need detailed implementing rules. The amendments made are simply to provide that the Economic and Social Committee, the Committee of the Regions, and the European Ombudsman should each have their own sections in the budget.

[3] The amounts are updated from 1 January 2000, in accordance with Decision No ... of ... (OJ ...).

In accordance with Article 139 of the Financial Regulation, this draft will be adopted by the Commission "in consultation with Parliament and the Council and after obtaining the opinion of the other institutions".

3. As regards the substance, the reasons for the specific amendments can be summarised as follows:

1. Provisions on the evaluation of projects and operations must be introduced to comply with the principles of sound financial management.

2. All references to the ecu need to be replaced by references to the euro.

3. The rate of the euro against all the currencies which the institutions use in the implementation of the budget should be determined by the Commission on the basis of the reference exchange rates published by the European Central Bank and not by the Commission's accounting officer.

4. The notion of "confusion or conflict of interests" in the context of budget implementation needs to be defined and the consequences of any such confusionor conflict spelled out.

5. The transparency of subcontracted operations must be guaranteed.

6. A new provision on the validation of payments by the accounting officer should be introduced in view of the development of integrated computer systems.

7. The procedure for creating imprest accounts and appointing imprest administrators should be amended to give the authorising officer the power of initiative and the accounting officer the power of decision. Imprest administrators must be required to have specific qualifications appropriate to the function.

8. The principles governing the performance of internal auditing need to be set out [4].

[4] Wording compatible with the proposal for a Council Regulation amending Article 24 of the Financial Regulation, adopted by the Commission on 30 May 2000.

9. A number of the provisions in Title VII (Commitment of expenditure) should be amended to ensure that legal commitments correspond to accounting commitments.

10. The provisions relating to contracts must be grouped together and rationalised to bring them into line with the Council directives.

11. To ensure that inventories give a true and fair view, the accounts must record changes in value by writing down the value of assets as necessary.

12. In accordance with the principle of prudence, the accounting officer must also constitute provisions for liabilities and charges.

13. The provision relating to advances in respect of activities conducted by the JRC on behalf of third parties should be deleted since these advances no longer exist since the 1995 budget. The provision relating to the existence of the ACPC-JRC should also be deleted.

4. All the amendments to the implementing rules are analysed below.

B. Analysis of amendments proposed

1. Amendments arising from the adoption of the first, second, third and fifth series of amendments to the Financial Regulation

Contracts

The provisions relating to contracts are grouped together and rationalised to bring them into line with the Plurilateral Agreement on Government Procurement (WTO) and the duly amended Council directives (Articles 97 to 105).

2. Amendments arising from the adoption of the seventh series of amendments to the Financial Regulation

1. Evaluation of expenditure

Under Article 2 of the Financial Regulation, budget appropriations must be used in accordance with the principles of sound financial management, and in particular those of economy and cost-effectiveness.

Provisions on the evaluation of projects, programmes and operations entailing expenditure will have to be introduced in order to comply with these principles. This evaluation must not only follow but also precede operations when a new programme has to be assessed. Programmes must also be evaluated periodically during implementation to assess whether they should be continued, modified or suspended.

Finally, a minimum frequency is also laid down for the evaluation of actions which are not included as part of a pluriannual programme (new Article 1).

2. Determination of the euro rate

It would be appropriate and legally more correct for the rate of the euro against each of the currencies which the institutions have to use for the implementation of the budget to be determined by the Commission on the basis of the reference exchange rates established by the European Central Bank and published in the Official Journal and not by the Commission's accounting officer as is now the case, even if the institution subsequently delegates this prerogative.

It is proposed that this change should be made by inserting a new Article 1a and adding that the Commission will use any source of information it considers reliable when determining the rate of the euro against currencies for which the daily rate is not listed in the Official Journal of the European Communities.

3. Confusion or conflict of interests

Article 22(4) of the Financial Regulation spells out the principle that any act of budget implementation is forbidden if it may give rise to a confusion of interests between the authorising officer and the third party who is the recipient of the expenditure. The same article refers to the implementing rules both for a definition of the notion of confusion of interest and for the consequences as regards any act of budget implementation.

This is the objective of the new Article 9a.

4. Subcontracted operations

The new paragraph 4a in Article 22 of the Financial Regulation relating to subcontracting stipulates that the contracts concluded must contain all appropriate provisions for ensuring the transparency of the subcontracted operations and refers to the implementing rules.

The implementing rules must therefore contain a provision guaranteeing the transparency of the operations in question by providing for a separate breakdown of management costs, the treatment of interest and other revenue and the application of the rules for the award of contracts contained in Title IV of the Financial Regulation (new Article 9b).

5. Management by means of integrated computer systems

With the development of integrated computer systems, a new provision must be incorporated in Article 10 to the effect that, when operations are managed by integrated computer systems meeting the criteria of this provision, the traditional verifications carried out by the accounting officer to validate payment operations may be replaced or supplemented by regular audits of these integrated management systems (new Article 10(3)).

6. Internal audit

Under the fifth paragraph of Article 24 of the Financial Regulation, as inserted by the seventh series of amendments, an internal audit function is established in the Community institutions, the principles of which are to be defined in the implementing rules (Article 40, new paragraph 3).

7. Match between legal commitments and budget commitments (Article 36 of the Financial Regulation)

Articles 52 and 53 will have to be adjusted as a result of the amendment of Article 36 of the Financial Regulation to ensure a closer match between legal and budgetary commitments.

These provisions are designed to enable authorising officers, without incurring an excessive workload, to transmit their contracts to the central accounts via Sincom.

The new wording eliminates the need to refer decisions of principle to the financial controller twice (at the proposal stage and once the decision has been taken), replacing prior approval of the draft decision by agreement of the financial controller during interdepartmental consultation (first and second paragraphs of Article 53).

It will also allow the accounting officer to check the amount of the overall financial allocation still remaining for individual contracts. Finally, it will ensure that the procedure for releasing the unused balance operates smoothly (Article 53, new paragraphs 4 and 5).

8. Rules for writing down the value of assets and constituting provisions

The use of the institutions' movable and immovable property results in depreciation which reduces the value of this property.

To ensure that inventories give a true and fair view, the accounts must record changes in value by writing down the value of assets as appropriate (new Article 70a of the Financial Regulation).

The Court of Auditors identified this requirement in the 1994 annual report and in the first statement of assurance.

The relevant provisions appear in the new Title XXa (Articles 131a, 131b and 136(10)). This is purely a matter of accounting entries which will guarantee the reliability and transparency of the revenue and expenditure accounts and the balance sheet.

9. Deletion of the provision relating to advances on behalf of third parties in the RTD sector

Article 139, relating to advances which the Commission receives in respect of the activities it conducts on behalf of third parties in the field of research and technological development, should be deleted since the budget advances for this type of activity have not existed since the 1995 budget and there is no longer any justification for this provision.

3. Amendments arising from the eighth series of amendments to the Financial Regulation

Introduction of the euro

With the third stage of economic and monetary union and the introduction of the euro, all references to the ecu need to be replaced by references to the euro. The references to interest rates also need to be altered, since they will no longer be the ecu rates applied by the EMCF but those applied by the European Central Bank for its main refinancing operations in euros (Articles 32 and 94).

4. Other amendments

1. Creation of imprest accounts and designation of imprest administrators

The current procedure for setting up imprest accounts and designating imprest administrators under the second paragraph of Article 82 and Article 83 has proved to be very cumbersome and unsuitable for an instrument that is normally applied for reasons of urgency. The current procedure requires a decision by the institution itself to set up imprest accounts and appoint imprest administrators. The procedure also requires the accounting officer to give his approval, but there is no indication as to what elements his opinion should cover.

In both cases (setting up imprest accounts and appointing imprest administrators) what is needed is a procedure that will involve the authorising officer, who would take the initiative, and the accounting officer, who would take the decision. When an imprest account is being set up, the Financial Controller's approval should be required, as at present.

Article 14, which deals with the specific qualifications required of accounting officers and assistant accounting officers, should be extended to cover imprest administrators.

2. Third party ledger

With the development of electronic transfers, it is proposed that the security of payments made by intangible means be increased by inserting in the implementing rules a new Article 81a on the establishment of a third party ledger. This ledger would contain, among other things, all the bank details relating to each institution's contractors.

3. Determination of thresholds and procedures applicable to contracts

It is proposed that the threshold above which the ACPC's responsibility comes into play be increased from EUR 46 000 to EUR 500 000, so that the ACPC can concentrate its efforts on analysing the largest contracts awarded by the institutions.

With a view to standardising and streamlining procedures, this provision would also apply to research contracts, for which the present thresholds for referral are EUR 32 900 in the case of non-scientific and non-technical supply and equipment contracts and EUR 460 600 in the case of scientific and technical contracts.

However, the ACPC might decide to examine any contract worth between EUR 50 000 and EUR 500 000, if it deems this necessary, on the basis of a financial information sheet submitted by the authorising officer.

It is also proposed that the institutions be allowed to set lower thresholds, in accordance with criteria which each of them will determine, in order to tighten controls on the award of certain contracts if they feel it necessary.

Finally, this proposal takes note of the Commission decision of 22 July 1999 (SEC(1999 1187) dissolving the ACPC-JRC and transferring to the central ACPC responsibility for examining contracts awarded by the JRC, for the sake of transparency, sound management of Community funds and faster processing of files.

4. Updating of fixed amounts

This draft incorporates the updating - from 1 January 2000 - of the fixed amounts provided for in this Regulation in relation to contracts, the advertisement of sales of moveable property and special allowances, in accordance with Commission Decision No ... of ...

Draft

COMMISSION REGULATION (EURATOM, ECSC, EC)

amending Commission Regulation No 3418/93 of 9 December 1993 laying down detailed rules for the implementation of certain provisions of the Financial Regulation of 21 December 1977

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities [5], as last amended by Regulation No 2673/1999 [6], and in particular Article 139 thereof,

[5] OJ L 356, 31.12.1977, p. 1.

[6] OJ L 326, 18.12.1999, p. 1.

After consulting the European Parliament and the Council,

Having regard to the opinions of the Court of Justice, the Court of Auditors, the Economic and Social Committee, the Committee of the Regions and the Ombudsman,

Whereas:

(1) Commission Regulation (Euratom, ECSC, EC) No 3418/93 [7] must be amended as a result of the amendments made to the Financial Regulation.

[7] OJ L 315, 16.12.1993, p. 1;last updated by Decision No .../2000 EC, ECSC, Euratom.

(2) Provisions on the evaluation of projects, programmes and operations must be introduced to comply with the principles of sound financial management.

(3) All references to the ecu were replaced by references to the euro at the rate of one euro to one ecu from 1 January 1999, in accordance with Council Regulation (EC) No 1103/97 of 17 June 1997 on certain provisions relating to the introduction of the euro [8]. All references to the ecu in Regulation (Euratom, ECSC, EC) No 3418/93 should be read as references to the euro.

[8] OJ L 162, 19.6.1997, p. 1.

(4) The rate of the euro against each of the currencies which the institutions use for the implementation of the budget should be determined by the Commission on the basis of the reference exchange rates published by the European Central Bank.

(5) A new reference rate of interest must be set now that the EMCF no longer exists.

(6) The notion of confusion of interests needs to be defined.

(7) The transparency of subcontracted operations must be guaranteed.

(8) A new provision on the validation of payments by the accounting officer should be introduced in view of the development of integrated computer systems.

(9) The procedure for setting up imprest accounts and appointing imprest administrators needs to be adapted to match the requirements and urgency that warrant recourse to the procedure. In this area the authorising officer should be given the initiating role and the accounting officer the decision-making role.

(10) The principles governing the performance of internal auditing need to be set out.

(11) Following amendment of Article 36 of the Financial Regulation to give a stronger guarantee that legal commitments correspond to accounting commitments, a number of provisions in Title VII need to be adjusted.

(12) A provision on the establishment of a third party ledger should be introduced to increase the security of payments by transfer.

(13) The provisions relating to contracts must be grouped together and rationalised to bring them into line with the Plurilateral Agreement on Government Procurement (WTO) and the Council directives.

(14) In the interests of simplification and harmonisation of the procedures for the award of contracts and of empowerment of authorising officers, the threshold above which the ACPC's responsibility comes into play should be raised.

(15) The accounts must record changes in value by writing down the value of assets where appropriate and record the depreciation of assets by constituting corresponding provisions. In accordance with the principle of prudence, the accounting officer must also enter provisions for liabilities and charges.

(16) The Commission no longer receives advances in respect of the activities it conducts on behalf of third parties in the field of research and technological development and has dissolved the ACPC-JRC.

(17) The Commission decision of ... updating the fixed amounts provided for in this Regulation must be incorporated with effect from 1 January 2000,

HAS ADOPTED THIS REGULATION:

Article 1

1. The first recital is replaced by the following:

"Whereas certain provisions of Articles 11, 22, 23, 24, 25, 28, 29, 36, 37, 38, 41, 45, 46, 49, 53, 54, 56, 58, 59, 60, 63, 64a, 65, 66, 70, 70a, 75, 94, 97 and 123 of the Financial Regulation explicitly provide that detailed rules will be drawn up for their implementation,"

2. The following title is inserted:

"TITLE I

EVALUATION OF EXPENDITURE

(article 2 of the Financial Regulation)

Article 1

1. Proposals for all new programmes and actions occasioning expenditure from the general budget of the European Communities shall be the subject of an ex ante evaluation, which shall identify:

(a) the need to be met,

(b) the objectives to be pursued,

(c) the results expected and the associated indicators,

(d) the added value of Community involvement,

(e) the alternative options available,

(f) the lessons learned from similar experiences in the past,

(g) the volume of appropriations, human resources and other administrative expenditure to be allocated with due regard to the cost-effectiveness principle,

(h) the monitoring system to be set up.

2. All programmes or actions shall then be the subject of an ex post evaluation in terms of the human and financial resources allocated and the results obtained in order to verify that they were in keeping with the objectives set.

3. The results obtained in carrying out a multiannual programme shall be periodically evaluated in accordance with a timetable which will allow the findings of this evaluation to be taken into account for any decision on the continuation, modification or suspension of the programme.

Actions financed on an annual basis shall have their results evaluated at least every six years."

3. Title I is renumbered Title Ia. In Title Ia the word "ecu" is replaced by the word "euro".

4. The following article is inserted:

"Article 1a

1. The Commission shall determine the rate of the euro against each of the currencies which the institutions have to use for the implementation of the budget on the basis of the reference exchange rates established by the European Central Bank and published in the Official Journal of the European Communities.

2. Conversions between the euro and national currencies shall be made at the daily euro rate published in the Official Journal of the European Communities. However, for the accounting purposes provided for in Articles 69 to 72 of the Financial Regulation, pursuant to Article 11(4) of the Financial Regulation, conversion between the euro and national currencies shall be made at the monthly euro rates calculated on the basis of the rate on the penultimate working day of the month preceding that for which the rates are established.

3. The Commission shall use any source of information it considers reliable when determining the rate of the euro against currencies for which the daily rate is not published in the Official Journal of the European Communities."

5. In Articles 2, 3, 4, 5 and 136(8) "Article 1" is replaced by "Article 1a". A further linguistic change is made which does not affect the English language version. In Articles 2, 3, 4, 5, 32, 94, 136 and 145 "ecu" is replaced by "euro".

6. The heading of Title II is replaced by the following:

"TITLE II

DELEGATIONS AND SUBCONTRACTING

(article 22 of the Financial Regulation)"

7. The following Articles 9a and 9b are inserted:

"Article 9a

Before embarking on any act implementing the budget, delegators and delegatees shall declare to their hierarchical superior, in writing, any confusion or conflict with private or personal interests in relation to the beneficiary or beneficiaries which might impair their ability to perform their duties impartially and objectively. The hierarchical superior of the delegator or delegatee shall confirm in writing whether or not a confusion or conflict of interests exists. If it does, the act may not be carried out.

Delegators or delegatees who fail to declare the existence of a confusion or conflict of interests shall be liable to disciplinary action and payment of compensation in accordance with Articles 73 to 77 of the Financial Regulation. They shall be similarly liable if they carry out an act implementing the budget when their hierarchical superior has confirmed the existence of a confusion or conflict of interests.

Article 9b

In order to guarantee the transparency of subcontracted operations, management costs and expenses shall be broken down separately and the interest and other revenue from the funds held by the co-contractor on behalf of the Commission shall be identified.

The contracts concluded shall contain appropriate provisions concerning matters such as the treatment of interest and other revenue, the keeping of accounts and the recovery of unduly paid amounts.

Rules on the management of funds made available to subcontractors, especially as regards payments to the beneficiaries of Community programmes or actions, and rules of conduct as regards incompatibilities, confusion of interest and confidentiality shall be laid down in the contracts which the institutions conclude with subcontractors."

8. Article 10 is amended as follows:

(a) in paragraph 1 a correction is made which does not affect the English language version;

(b) in paragraph 2(f) "estimates of amounts receivable" is inserted after "payment orders" ;

(c) the following sentence is added to paragraph 2: "This shall also apply to the replacement of original supporting documents by electronic document management systems.";

(d) the following paragraph is added

"3. When operations are managed by integrated computer systems in accordance with paragraphs 1 and 2, the verifications carried out by the accounting officer to validate payment operations may be supplemented by regular verifications of these systems."

9. The following second paragraph is added to Article 14:

"Imprest administrators shall be appointed on the grounds of their particular qualifications as evidenced by diplomas or by equivalent professional experience or appropriate prior training, having due regard to the size of the imprests they are required to administer."

10. Article 19 is deleted.

11. Article 27 is deleted.

12. Article 31 is replaced by the following:

"The monthly amount of the special allowance referred to in Article 75(4) of the Financial Regulation shall be:

(a) EUR 137 for the accounting officer.

(b) EUR 92 for assistant accounting officers

(c) EUR 46 for imprest administrators, where the amount of the imprest is at least EUR 3 800 and where the period of the imprest is at least thirty consecutive days.

This allowance shall be denominated in euros and the appropriate amount shall be credited in euros to the guarantee account provided for in Article 32."

13. The third sentence of the first paragraph of Article 32 is replaced by the following:

"This account shall be credited periodically with the monthly allowance referred to in Article 31 and with annual interest corresponding to the annual average of the monthly rates applied by the European Central Bank to its main refinancing operations in euros".

14. The following Article 40a is inserted:

"Article40a

The internal audit function shall be performed in accordance with the relevant international standards. Internal audit reports shall contain an assessment of the effectiveness of management and control systems and an analysis of sound management. The reports shall be sent to the services audited and to the persons designated by the institution concerned."

15. In the first paragraph of Article 44, the first sentence is replaced by the following:

"In accordance with Article 28(1) of the Financial Regulation, the competent authorising officer shall draw up an estimate of amounts receivable for any measure or situation which may give rise to or modify a debt due to the Communities."

16. In Article 46 a correction is made which does not affect the English language version.

17. In Article 49 a correction is made which does not affect the English language version.

18. Articles 52 and 53 are replaced by the following:

"Article 52

Decisions of principle taken by the institution and entailing an obligation vis-à-vis third parties to incur expenditure shall constitute commitments of expenditure.

Article 53

If an item of expenditure requires a decision of principle by the institution, the draft of that decision cannot be adopted by the institution unless it has first received the agreement of the financial controller. The financial controller shall give his agreement only if the draft satisfies the requirements of sound financial management. The authorising officer shall submit a commitment proposal in respect of the decision of principle to the financial controller together with the draft decision itself.

When the institution has approved the draft decision, the corresponding global commitment proposal together with the corresponding draft legal commitment shall be submitted to the financial controller for approval.

Where the institution does not approve the draft decision or reduces the amount of expenditure proposed, the commitment proposal shall be amended or cancelled or, where applicable, replaced by an appropriate commitment proposal, which shall be submitted to the financial controller for approval.

The authorising officer shall conclude the individual legal commitments within the time limits laid down in Article 36(2) of the Financial Regulation. He shall ensure that the budget commitments corresponding to these individual legal commitments are recorded in the central accounts as and when they are entered into, with an indication of the global commitment proposal referred to in the second paragraph, the name of the beneficiary and the amount, and that they are booked to the global commitment to which they refer. They may have a time limit for implementation extending beyond that of the global commitment.

No later than six months after the time limit for implementation of the global commitment, the authorising officer shall decommit the difference between the amount of the commitment referred to in the second paragraph and the sum of the of the amounts recorded in the central accounts in accordance with the fourth paragraph."

19. In Article 81 "ECU 400" is replaced by "EUR 420".

20. The following new Article 81a is inserted:

"Article 81a

1. The accounting officer may make payments by bank credit transfer or post office giro only if the payment beneficiary's bank account details have previously been entered in a ledger managed centrally by each institution.

Entry in the ledger of the beneficiary's bank account details or modification of those details shall be carried out on the basis of a document issued by the beneficiary's bank on paper or in electronic form.

2. With a view to payment by bank credit transfer or post office giro, authorising officers may enter into a commitment vis-à-vis a third party on behalf of their institution only if that third party has provided the documentation required for its entry in the ledger.

Authorising officers shall ensure that the bank account details communicated by the beneficiary remain valid during the period corresponding to the institution's commitment vis-à-vis the beneficiary. Where appropriate, the authorising officer shall update the bank account details in accordance with the second subparagraph of paragraph 1."

21. The second paragraph of Article 82 is replaced by the following:

"Decisions to set up imprest accounts or to amend or substantially alter the conditions governing their operation shall be taken by the accounting officer on a duly reasoned proposal from the authorising officer after obtaining the financial controller's approval."

22. The first paragraph of Article 83 is replaced by the following:

"Decisions to appoint imprest administrators shall be taken by the accounting officer on a duly reasoned proposal from the authorising officer."

23. In the first indent of Article 94(1) the words "European Monetary Cooperation Fund to its operations in ECU" are replaced by "European Central Bank to its main refinancing operations in euros".

24. The heading of Title XV is replaced by the following:

"TITLE XV

PROCUREMENT PROCEDURES

(articles 56 and 58 of the Financial Regulation)"

25. The text of Article 97 is replaced by the following:

"1. The Council directives on public works, supply and service contracts shall be applicable to the award of contracts by the institutions whenever the amounts involved are equal to or greater than the amounts provided for in those directives.

The provisions of these directives govern in particular:

(a) contract award procedures

(b) common advertising rules

(c) common rules on technical specifications

(d) common rules on participation

(e) qualitative selection criteria

(f) contract award criteria.

2. This shall also apply to contracts awarded by the Commission in accordance with the provisions of the Plurilateral Agreement on Government Procurement concluded within the World Trade Organisation. The rules of procedure which the Commission is to follow in applying this agreement are those contained in the Council directives coordinating the procedures for the award of public works, supply and service contracts.".

26. The following Articles 97a to 97f are inserted:

"Article 97a

The terms "works contracts", "supply contracts" and "service contracts" shall be construed in accordance with the definitions laid down in the directives referred to in Article 97.

Article 97b

Where the contracts are financed from appropriations entered in their own section of the budget of the European Communities, the institutions shall be regarded as the "contracting authorities" within the meaning of the directives referred to in Article 97, save when the Institutions act for a beneficiary non-member country or a body it has designated.

Article 97c

For contracts other than those referred to in Articles 97 to 97b, Articles 97d and 97e shall apply.

Article 97d

1. Contracts shall be awarded by invitation to tender, by open or restricted procedure, or by private treaty or by negotiated procedure.

2. Contracts by invitation to tender are contracts concluded between the contracting parties following a competitive tendering procedure.

An open tendering procedure is one where any bidder may submit a tender; a restricted procedure is one where only bidders selected by the Institution on the strength of their particular qualifications may submit tenders.

3. Contracts shall be concluded by private treaty or by negotiated procedure where the contracting authorities consult the tenderers of their choice and negotiate the terms of the contract with one or more of them.

Article 97e

For contracts to which the directives do not apply, the deadline for the submission of tenders shall be fixed according to the nature of the contract and shall be dependent on the length of time necessary for the preparation of the reply to the invitation to tender.

It may not be less than 21 calendar days. When emergency makes this deadline impossible to comply with, the deadline for the submission of tenders may be reduced to ten calendar days, in the case of a restricted procedure, provided it allows genuine competition between tenderers.

Article 97f

The following provisions shall apply to all contracts.

27. Article 98 is replaced by the following:

"Article 98

The contract notices shall be drawn up in accordance with the models annexed to the Council directives on public contracts referred to in Article 97.

28. The following Articles 98a and 98b are inserted:

"Article 98a

1. The purpose of the contract must be stated in comprehensive, clear and precise terms.

2. In all procurement procedures the following selection criteria shall apply:

(a) admissibility of the bidder for the contract in question after verification of the cases of exclusion;

(b) criteria for assessing the bidders' financial and economic standing and technical and professional competence;

3. In all procurement procedures the following award criteria shall apply:

(a) either to the lowest among comparable bids submitted that are in order and satisfy the conditions laid down;

(b) or to the bid offering the best value for money having regard, in particular, to the price proposed, running costs, technical merit and characteristics, methodology, time required for performance or delivery, and after-sales service. The documentation for the invitation to tender must specify any weighting of award criteria and the method used to determine value for money.

4. Criteria for selection and awarding of contracts must be set out in the contract notice, the specifications or the call for tenders.

Article 98b

1. The invitation to tender shall clearly state whether a firm, non-revisable price must be quoted.

If this is not the case, it shall lay down the conditions and/or formulas for revision of prices during the lifetime of the contract.

2. If prices can be revised during the lifetime of the contract, the institution shall take particular account of:

(a) the type of goods/services and the economic situation in which they are to be supplied;

(b) the type of contract and its duration;

(c) the institution's financial interests."

29. Article 99 is amended as follows:

(a) The opening words of the first paragraph are replaced by the following:

"In addition, every invitation to tender shall:".

(b) Point (h) is amended as follows:

(i) the opening words are replaced by the following:

"prohibit any contact between the institution and tenderers during a procurement procedure save in the following exceptional circumstances:"

(ii) in point 1 the two indents are replaced by the following:

- "at the instance of tenderers:

the institutions may provide additional information solely for the purpose of clarifying the nature of the contract; such information shall be communicated simultaneously to all tenderers who have requested the specifications;

- at the instance of the institution:

if the institution's departments notice an error, a lack of precision, an omission or any other clerical defect in the text of the contract notice, the invitation to tender or the specifications, they may inform those concerned simultaneously under exactly the same conditions as for the invitation to tender;"

(iii) point 2 is replaced by the following:

"after the opening of tenders,

if some clarification is required in connection with a tender or if obvious clerical errors in the tender need to be corrected, the institution may contact the tenderer provided that the terms of the tender are not modified as a result."

30. Article 101 is replaced by the following:

"Article 101

Specifications shall be drawn up for each contract and attached to the invitation to tender. The general terms and conditions applicable to contracts shall also be attached."

31. Article 102 is deleted.

32. In the second indent of the first paragraph of Article 103, the words "private messenger services" are replaced by "messenger services".

33. Article 104 is replaced by the following:

"Article 104

1. All tenders that satisfy the requirements of Article 103 must be opened.

2. Tenders shall be opened by an opening committee appointed for this purpose.

The committee shall have at least three members, representing at least two different departments.

The financial controller must be informed of the opening of tenders. The financial controller or his representative may be present as an observer if he considers it necessary.

3. The members of the opening committee shall:

(a) either initial each page of each tender, or

(b) initial the cover page and the pages containing the financial details of each tender, the integrity of the inital tender being guaranteed by the placing of seals or any other equivalent technique by a department that is independent of the department handling the tender, and

(c) sign a written record of the opening of the tenders received, listing those tenders which satisfy the requirements and those which do not, and stating the grounds on which tenders rejected do not satisfy the requirements.

4. All tenders declared to satisfy the requirements shall be evaluated by an evaluation committee appointed for this purpose which also carries out a classification among the tenders.

The committee shall have at least three members, representing at least two different departments.

The committee may be composed of the same members as the committee opening the tenders.

Tenders which do not satisfy the essential requirements set out in the supporting documentation for invitations to tender or the specific requirements of the contract notice, the invitation to tender and/or the specifications shall be eliminated. However, the opening committee may ask candidates or tenderers to supply additional material or to clarify within a deadline it fixes the supporting documents submitted, where it is a question of documentation for the purpose of determining whether candidates or tenderers satisfy the selection criteria.

A written record of the evaluation and classification of tenders declared to satisfy the requirements shall be drawn up and signed by all the members of the committee."

34. The heading of Title XVI is replaced by the following:

"TITLE XVI

DETERMINATION OF THE VARIOUS THRESHOLDS

IN RESPECT OF CONTRACTS"

35. Article 106 is replaced by the following:

"The limit below which contracts may be made by private treaty under point (a) of Article 59 of the Financial Regulation shall be EUR 13 800".

36. Article 107 is replaced by the following:

"Article 107

1. The limit above which the powers of the Advisory Committee on Procurement and Contracts provided for in Article 63 of the Financial Regulation take effect shall be EUR 500 000.

In the case of contracts worth between EUR 50 000 and EUR 500 000, the authorising officer shall send the ACPC an information sheet to enable it to decide whether or not an opinion should be given on the contract. The ACPC shall inform the authorising officer of its decision within five working days of receiving the request. In the meantime the authorising officer may not enter into any commitments on behalf of the institution.

2. An authorising officer may also request that the ACPC deliver an opinion a contract which he has submitted.

3. Requests for opinions and information sheets shall be examined by a permanent department under the authority of the chair of the ACPC. This department shall decide, in the light of volume, risks involved and unusual nature, which items should be examined in detail by the ACPC.

4. Each institution may set itself a lower limit in accordance with the criteria it determines."

37. Articles 108, 109 and 110 are replaced by the following:

"Article 108

The threshold for compulsory security provided for in Article 64a of the Financial Regulation shall be EUR 345 000.

Article 109

The limits below which contracts may be made against an invoice or a bill of costs shall be:

(a) EUR 1 050 for expenditure at the places of work of the institution,

(b) EUR 2 700 for expenditure away from the places of work of the insitution.

Article 110

In accordance with Article 97 of the Financial Regulation, with regard to the award of contracts relating to research and technological development appropriations, the limit below which contracts may be made by private treaty (Article 59(a) of the Financial Regulation) shall be EUR 103 500 for scientific and technical equipment and for works contracts.

The limit above which the powers of the ACPC take effect shall be fixed in accordance with Article 107 of this Regulation. For scientific and technical contracts and for works contracts the threshold above which the authorising officer shall submit the information sheet referred to in the second subparagraph of Article 107(1) shall be EUR 103 500."

38. The heading of Title XVII is replaced by the following:

"TITLE XVII

FUNCTIONING OF THE ADVISORY COMMITTEE ON PROCUREMENT AND CONTRACTS (ACPC)

(Articles 63 and 97 of the Financial Regulation)"

39. In Article 111, "in accordance with the provisions of Articles 60, 61 and 97 of the Financial Regulation" in the opening words is replaced by "in accordance with the provisions of Articles 63, 64 and 97 of the Financial Regulation".

40. In Article 115, "Article 126" is replaced by "Article 97".

41. Section II of Title XVII is deleted.

42. The heading of Title XVIII is replaced by the following:

"TITLE XVIII

GUARANTEES AND PRELIMINARY DEPOSIT BY WAY OF GUARANTEE OF PERFORMANCE OF CONTRACTS

(Article 64a of the Financial Regulation)"

43. In Article 125, "of Article 62" is replaced by "of Article 64a".

44. Title XIX is deleted.

45. In Article 130, "ECU 400" is replaced by "EUR 420".

46. The following title is inserted:

"TITLE XXa

RULES FOR WRITING DOWN THE VALUE OF ASSETS AND CONSTITUTING PROVISIONS

(Article 70a of the Financial Regulation)

Article 131a

The Commission's accounting officer shall lay down the accounting rules applicable to depreciation and inventories after consulting the accounting officers of the other institutions, in accordance with the procedure laid down in Article 21 of this Regulation.

Article 131b

1. The value of fixed assets, other than financial fixed assets, at the closure of accounts (balance sheet value) shall be determined in accordance with a depreciation plan.

2. The depreciation plan shall apply the straight-line method of depreciation for each full year since the year when the asset came into service.

3. When the current value of non-depreciable fixed assets is lower than their book value, an exceptional depreciation shall be applied if the loss in value is judged to be irreversible.

4. Depreciations shall be entered in the non-budget expenditure and income account and shown separately in the annex to the balance sheet if they have not been shown separately in the revenue and expenditure statement.

Article 131c

1. A reduction in the value of an asset or an increase in liabilities due in the more or less long term must lead to the establishment of provisions.

2. The establishment of these provisions must result from causes whose effects are not necessarily irreversible."

47. In Article 132, "ECU 7 700" and ECU "372 900" are replaced by "EUR 8 100" and "EUR 391 100".

48. Article 133 is replaced by the following:

"Article 133

The accounts shall distinguish between general accounts and budget accounts, and these two accounts shall be coordinated with one another. The chart of accounts shall be drawn up so as to permit the keeping of these two sets of accounts."

49. In Article 135, paragraphs 1 to 4 are replaced by the following:

"1. The general accounts shall make it possible to ascertain the institution's assets and liabilities.

2. The chart of accounts to be used for the general accounts shall be drawn up on the basis of a decimal classification system.

3. The list of accounts shall consist of the following classes:

- class 1: Fixed capital account,

- class 2: Fixed asset accounts,

- class 3: Stock accounts,

- class 4: Accounts with third parties,

- class 5: Financial accounts,

- class 6: Expenditure accounts,

- class 7: Income accounts,

- class 8: Special accounts.

4. Each class shall be divided into groups and subgroups, depending on the requirements of the institution, to allow operations to be entered in accordance with the accounting principles referred to in Article 136(10)."

50. Article 136 is amended as follows:

(a) Paragraph 2 is replaced by the following:

"2. The accounts shall be kept by means of a computer program."

(b) Paragraph 7 is deleted.

(c) Paragraphs 8 to 10 are replaced by the following:

"8. The financial (bank and post office giro) accounts shall be kept in national currencies and in euros.

Amounts expressed in national currencies shall be converted into euros at rates to be determined in accordance with Article 1a. The balances in euros of accounts held in national currencies shall be revalued each month.

9. The accounts of the Joint Research Centre shall be consolidated in the Commission's general accounts.

10. The financial statements must comply with the rules and be accurate and comprehensive and present a true and fair view of assets, the financial situation and the outturn of the financial year. They shall be drawn up on the basis of generally accepted accounting principles. The practical arrangements for applying these principles, which will be updated periodically, shall be laid down in accordance with the provisions of Article 21."

(d) The following paragraphs 11 and 12 are added:

"11. The accounting officer shall enter provisions for liabilities and charges to cover past or ongoing events of a specified nature whose outcome is uncertain.

12. The provisions for liabilities and charges relating to reductions in the value of assets and depreciations shall be entered in the non-budget expenditure and income account and shown separately in the annex to the balance sheet if they are not shown separately in the budget revenue and expenditure statement."

51. Article 139 is deleted.

52. In the heading of Title XXIV, "Articles 121, 122 and 123" is replaced by "Article 121 and 123".

53. In Article 143, "Article 60" is replaced by "Article 63".

Article 2

This Regulation shall enter into force on.... .

Done at Brussels, [...]

For the Commission

[...]

Member of the Commission