Amended proposal for a COUNCIL REGULATION (EC, ECSC, Euratom) on the Financial Regulation applicable to the general budget of the European Communities

(presented by the Commission)

TABLE OF CONTENTS

EXPLANATORY MEMORANDUM

1. Procedure

2. Analysis of the amendments suggested by the other institutions

2.1. General remark

2.2. Scope of the Financial Regulation

2.3. Budget principles

2.3.1. Principle of unity

2.3.2. Principle of annuality

2.3.3. Principle of equilibrium

2.3.4. Principle of universality

2.3.5. Principle of specification

2.3.6. Principle of transparency

2.3.7. Principle of the unit of account

2.3.8. Provisions

2.3.9. Reverse reserve

2.4. Structure of the budget

2.4.1. Activity-based budgeting and management

2.4.2. Removal of negative expenditure and revenue

2.4.3. Constitution of a reserve for unforeseen expenditure in the Commission section

2.4.4. Flexibility up to 10% of the establishment plan in each institution

2.4.5. Inclusion of the financial perspective in the Financial Regulation

2.5. Implementation of the budget

2.5.1. Methods of implementation (Articles 50-54 of the Commission's initial proposal)

2.5.2. Role and responsibility of the actors

2.5.2.1. The authorising officer (Articles 56 et seq. of the Commission's initial proposal)

2.5.2.2. Internal auditor (Articles 80 to 82 of the Commission's initial proposal)

2.5.3. Waiving of debts

2.5.4. Commitment

2.5.5. Keeping and presentation of accounts

2.6. External audit and discharge (Articles 122 to 133 of the initial proposal)

2.7. Special provisions (Part Two)

2.7.1. European Agricultural Guidance and Guarantee Fund, Guarantee Section.

2.7.2. Structural Funds

2.7.3. Research

2.7.4. External actions

2.7.5. Offices

2.8. Transitional and final provisions (Part Three)

2.8.1. Agencies

3. Action taken on Parliament's amendments

4. Conclusions

Amended proposal for a COUNCIL REGULATION (EC, ECSC, Euratom) on the Financial Regulation applicable to the general budget of the European Communities

PART ONE COMMON PROVISIONS

TITLE I SUBJECT

TITLE II Budgetary principles

Chapter 1 Principle of unity

Chapter 2 Principle of annuality

Chapter 3 Principle of equilibrium

Chapter 4 Principle of unit of account

Chapter 5 Principle of universality

Chapter 6 Principle of specification

Chapter 7 Principle of sound financial management

Chapter 8 Principle of transparency

TITLE III ESTABLISHMENT AND STRUCTURE OF THE BUDGET

CHAPTER 1 ESTABLISHMENT OF THE BUDGET

CHAPTER 2 STRUCTURE AND PRESENTATION OF THE BUDGET

TITLE IV IMPLEMENTATION OF THE BUDGET

CHAPTER 1 GENERAL PROVISIONS

CHAPTER 2 METHODS OF IMPLEMENTATION

CHAPTER 3 FINANCIAL ACTORS

Section 1 Principle of separation of duties

Section 2 Authorising officer

Section 3 Accounting officer

Section 4 Imprest administrator

CHAPTER 4 LIABILITY OF THE FINANCIAL ACTORS

Section 1 General rules

Section 2 Rules applicable to authorising officers by delegation and subdelegation

Section 3 Rules applicable to accounting officers and imprest administrators

CHAPTER 5 REVENUE OPERATIONS

Section 1 Making available of own resources

Section 2 Estimate of amounts receivable

Section 3 Establishment of amounts receivable

Section 4 Authorisation of recovery

Section 5 Recovery

CHAPTER 6 EXPENDITURE OPERATIONS

Section 1 Commitment of expenditure

Section 2 Validation of expenditure

Section 3 Authorisation of expenditure

Section 4 Payment of expenditure

Section 5 Time-limits for expenditure operations

CHAPTER 7 IT SYSTEMS

CHAPTER 8 INTERNAL AUDITOR

TITLE V PROCUREMENT

CHAPTER 1 GENERAL PROVISIONS

Section 1 Scope and award principles

Section 2 Publication

Section 3 Procurement procedures

Section 4 Guarantees and control

CHAPTER 2 PROVISIONS APPLICABLE TO CONTRACTS AWARDED BY THE COMMUNITY INSTITUTIONS ON THEIR OWN ACCOUNT

TITLE VI GRANTS

CHAPTER 1 SCOPE

CHAPTER 2 AWARD PRINCIPLES

CHAPTER 3 AWARD PROCEDURE

CHAPTER 4 PAYMENT AND CONTROL

CHAPTER 5 IMPLEMENTATION

TITLE VII PRESENTATION OF THE ACCOUNTS AND ACCOUNTING

CHAPTER 1 PRESENTATION OF THE ACCOUNTS

CHAPTER 2 INFORMATION ON THE IMPLEMENTATION OF THE BUDGET

CHAPTER 3 ACCOUNTING

Section 1 Common provisions

Section 2 General accounts

Section 3 Budget accounts

CHAPTER 4 PROPERTY INVENTORIES

TITLE VIII EXTERNAL AUDIT AND DISCHARGE

CHAPTER 1 EXTERNAL AUDIT

CHAPTER 2 DISCHARGE

PART TWO SPECIAL PROVISIONS

TITLE I EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND, GUARANTEE SECTION

TITLE II STRUCTURAL FUNDS

TITLE III RESEARCH

TITLE IV EXTERNAL ACTIONS

CHAPTER I GENERAL PROVISIONS

CHAPTER 2 IMPLEMENTATION OF ACTIONS

CHAPTER 3 PROCUREMENT

CHAPTER 4 AWARD OF GRANTS

CHAPTER 5 AUDITING OF ACCOUNTS

TITLE V EUROPEAN OFFICES

CHAPTER 1 GENERAL PROVISIONS

CHAPTER 2 EUROPEAN ANTI-FRAUD OFFICE

TITLE VI ADMINISTRATIVE APPROPRIATIONS

PART THREE TRANSITIONAL AND FINAL PROVISIONS

TITLE I TRANSITIONAL PROVISIONS

TITLE II FINAL PROVISIONS

EXPLANATORY MEMORANDUM

1. Procedure

On 26 July 2000 the Commission adopted a proposal for the revision of the Financial Regulation applicable to the general budget of the European Communities (COM(2000)461 final) repealing and replacing Council Regulation (ECSC, EEC, Euratom) No 356/77 of 21 December 1977.

As required by Articles 78h ECSC, 279 EC and 183 Euratom, the proposal was sent to the Council, the European Parliament and the Court of Auditors.

The Court of Auditors delivered its opinion on 8 March 2001 and suggested amendments to the proposal.

Before adopting its opinion, on 31 May 2001 Parliament adopted a resolution containing some 180 amendments to the proposal.

In view of the top priority assigned to reform of the Commission and modernisation and the increased rigour in the management of Community finances, the Council agreed to conduct an initial examination of the proposal before it had received the opinions of the Court of Auditors and Parliament and on this basis adopted conclusions on 5 June 2001.

The Economic and Social Committee adopted an own-initiative opinion on 11 July 2001.

On the basis of the positions expressed by the institutions, the Commission has adopted this amended proposal.

2. Analysis of the amendments suggested by the other institutions

2.1. General remark

The institutions which have delivered opinions have endorsed the general line and the fundamental points of the initial proposal, in particular as regards:

* simplification of the Financial Regulation, rationalisation of the budget structure, by having only differentiated appropriations and doing away with negative expenditure, and the restriction of exceptions to the budget principles;

* activity-based budgeting (ABB);

* budget implementation arrangements and externalisation;

* the new role for financial actors;

* and the proposed provisions for procurement and grants.

2.2. Scope of the Financial Regulation

In order to reinforce the role of the Financial Regulation, the European Parliament suggested that it be specified that any regulation containing budget provisions must comply with the Financial Regulation.

The Commission partly accepts this amendment, which is incorporated into Article 2 of the amended proposal, to specify that any regulatory act relating to implementation of the budget must be based on the principles of Title II of the Financial Regulation.

2.3. Budget principles

2.3.1. Principle of unity

Parliament adopted a number of amendments to have the Community budget include expenditure on European security policy, the Community agencies and the EDF. The Commission is unable to take up these amendments.

As regards expenditure on the common security and defence policy, the Commission would point out that Article 28(3) of the Treaty on European Union expressly rules out the possibility of charging operational expenditure with military or defence implications to the Community budget.

The Commission continues to be in favour of incorporation of the EDF in the budget, but it believes that the Financial Regulation is not the appropriate legal instrument. Entry of the EDF in the budget would mean amending and ratifying the Lomé III, IV and IVa agreements, the Cotonou agreements and their financial protocol and also amending the internal financial agreements for the sixth, seventh, eighth and ninth EDFs. The financial perspective would also have to be revised.

On the question of Community agencies, the Commission cannot take up Parliament's amendment to have the agencies fully included in the budget, as this amendment would amount to denying their budget autonomy. In order to enhance democratic control and coherence in the discharge for the agencies, the Commission does, however, propose that this be made the responsibility of Parliament. Appropriate proposals will be made in due course to align the specific basic regulations for the agencies on the recasting of the Financial Regulation.

2.3.2. Principle of annuality

The Court of Auditors wished to drop the arrangements for the carryover of appropriations, which is an exception to the rule of annuality, and suggested that the solution would lie in more flexible use of transfers.

The Commission cannot accept this suggestion. It would point out that the arrangements are laid down in Articles 78a ECSC, 271 EC and 175 Euratom. Although these arrangements are indeed an exception to the principle of annuality, they exist in all the Member States and meet needs connected with the management of appropriations.

2.3.3. Principle of equilibrium

The Commission believes that its proposal to provide the possibility of raising loans for the sole purpose of investing in immovable assets is a real application of the principle of sound financial management. It is, however, proposing that Article 13 of the initial proposal be tightened up to stipulate that loans may be raised for the sole purpose of acquiring land and buildings and by adding that such loans may be raised only if they offer every guarantee of sound financial management. These guarantees will be spelt out in the implementing rules for the amended recasting proposal as deriving from a demonstration of better financial management by means of a cost-effectiveness study.

2.3.4. Principle of universality

Following its opinion 1/2001, the Court of Auditors again criticised the Commission's proposal that EAGGF negative expenditure be treated as earmarked revenue and suggested that it be entered in the budget as miscellaneous revenue. Parliament took the same position.

The Commission's view is that the existence of negative expenditure is an exception to the principles of no-offsetting and transparency. On the other hand the use of the earmarked revenue arrangement - even though it breaches the rule of non-assignment - is compatible with the transparency and the ceilings of the financial perspective and does not entail any financial losses for the CAP. In addition there would be no other incentive for discipline and effective management in the implementation of the agricultural policy if the fruits of the efforts made were not clearly and visibly linked to this policy area. The earmarked revenue arrangement is, in the eyes of the Commission, the most appropriate way of providing this link. The Commission is therefore upholding its initial proposal on this point.

2.3.5. Principle of specification

Parliament adopted an amendment which would reduce the added flexibility proposed for transfers and which would mean, for the Commission, the possibility of transferring up to 10% of appropriations between chapters within any one title. Parliament would like to reduce this facility to 5% of the initial appropriations and also to give the budgetary authority the right to block the transfers.

The Court of Auditors, on the other hand, supported the proposed flexibility. The Commission is therefore maintaining its proposal to have the flexibility of being able to transfer 10% of the initial appropriations, but takes over Parliament's amendment, supported by the Council, concerning prior information for the budgetary authority.

2.3.6. Principle of transparency

The Court of Auditors criticised the retention of the negative reserve, on the grounds that it is not compatible with the principle of transparency.

It is quite true that the reasons for this process are more historical than logical, but Parliament and the Council alike are still very much attached to it and the Commission sees it as a very useful tool in that it regularly provides a solution to the differences which arise between the two arms of the budgetary authority during the budget adoption procedure.

2.3.7. Principle of the unit of account

Parliament requested that the principle of the implementation of the budget in euros be added. Given the political importance of this principle for asserting the role of the single currency, the Commission is incorporating the amendment, which is also supported by the Court of Auditors.

2.3.8. Provisions

The Commission proposed spelling out and laying down a framework for the provisions of Article 19(4) of the current Financial Regulation in Article 40 of the recasting proposal. This article provided that each section of the budget could carry a "provisions" title where no legal basis exists when the budget is established or where there is uncertainty about the adequacy or need for the appropriations entered on the operational lines. The procedure envisaged was a transfer which the Commission could make on its own initiative.

The institutions are in favour of this "reserve" but have asked for clarification. The Court of Auditors would like the facility to cover all appropriations (administrative as well as operational). Parliament wanted to add a further condition concerning uncertainty about the possibility of implementing appropriations in keeping with the principle of sound financial management and asked that the transfer procedure be spelled out, which would require a decision by the budgetary authority on a proposal from the Commission.

The Commission is proposing a new drafting which incorporates the condition of sound financial management and the clarifications requested concerning the procedural arrangements for the transfer from the reserve to the budget line.

2.3.9. Reverse reserve

Parliament also suggested that when there are serious implementation difficulties the transfer decision should be taken by the budgetary authority.

The Commission takes up this amendment.

2.4. Structure of the budget

2.4.1. Activity-based budgeting and management

The institutions consulted approve the nomenclature proposed for the Commission section, which would provide a title for each policy area and a chapter for each activity, with the administrative appropriations grouped in a single chapter within each title.

The Commission therefore maintains its initial proposal with certain clarifications of the budget nomenclature in the light of Parliament's amendments, but without making it too rigid at the level of the Financial Regulation.

2.4.2. Removal of negative expenditure and revenue

The Court of Auditors has repeatedly requested that for the sake of rigour and transparency the Community budget should no longer contain any negative amounts.

Article 39 of the Commission's original proposal satisfies this request and provides that the net amount of own resources collected pursuant to the Council decision on the own resources system be entered in the statement of revenue.

Parliament criticised this Commission proposal and regretted the failure to reveal the fixed amount returned to Member States by way of own resources collection costs. The Court of Auditors, on the other hand, suggested side-stepping the question of collection costs and mentioning only the entry of revenue available.

The Commission understands Parliament's concern to present these collection costs which are borne by the Community budget but is unable to reconcile this legitimate concern with the desire to restate the budget principles and the refusal of negative amounts. The Commission is therefore not amending the drafting of its proposal on this point.

The treatment of the former EAGGF Guarantee negative expenditure was discussed above (point 2.3.4).

2.4.3. Constitution of a reserve for unforeseen expenditure in the Commission section

Parliament passed an amendment which would provide the possibility of entering a reserve for unforeseen expenditure in addition to the two reserves provided for in Article 42 of the Commission's initial proposal.

The Commission has not taken up this suggestion, the aim of which is already effectively covered by the existing supplementary and amending budget procedure.

2.4.4. Flexibility up to 10% of the establishment plan in each institution

The Court of Auditors and the Economic and Social Committee are very much in favour of this flexibility proposed in Article 44 of the Commission's recasting proposal. Parliament, on the other hand, suggests that such a decision is a matter for the budgetary authority acting on a proposal from the Commission.

The Commission upholds its position on this point but points out that this flexibility will be applied within the confines of the budget appropriations and is without prejudice to other proposals it is making on the Staff Regulations.

2.4.5. Inclusion of the financial perspective in the Financial Regulation

The Commission considers it inappropriate to include in the Financial Regulation a mechanism of such a highly political nature as the financial perspective.

2.5. Implementation of the budget

2.5.1. Methods of implementation (Articles 50-54 of the Commission's initial proposal)

The Court of Auditors called for clarification on the responsibilities flowing from the various methods of implementation, and in particular inclusion of a provision restating that the Commission is ultimately responsible for implementation of the budget.

Parliament asked the Commission to spell out what tasks can be performed by executive agencies on behalf of the Commission and under its responsibility. Parliament also wanted the Commission to define in its proposed implementing rules the conditions and rules governing the exercise of these delegated powers. Finally Parliament passed an amendment which would strengthen the Commission's control and would require it to report to the budgetary authority twice a year on delegated budget implementation.

The Council likewise took this approach and in particular requested that it be stipulated that budget implementation tasks may not be entrusted to legal persons governed by private law.

The Commission takes up most of these amendments in its amended proposal.

2.5.2. Role and responsibility of the actors

2.5.2.1. The authorising officer (Articles 56 et seq. of the Commission's initial proposal)

The institutions supported the move towards empowerment of authorising officers.

The Court of Auditors would like at the same time to include provisions in the Financial Regulation increasing their liability to pay compensation. In particular, the Court asked for the Financial Regulation to contain a definition of situations in which authorising officers would be liable to disciplinary action and payment of compensation, and that an independent body be set up to be responsible for ruling on the liability of any official to payment of compensation.

Parliament takes the same line as the Court but would prefer to see a specialised financial irregularities committee set up; it would determine whether the authorising officer is liable to payment of compensation and would refer the case to the disciplinary procedure under the Staff Regulations of Officials of the European Communities. At the same time Parliament also wanted stronger guarantees of internal departmental control by the introduction of a system of dual checks by two officials and the separation of the functions of decision and verification.

The Council shared the concern of the other institutions on the authorising officer's liability to payment of compensation, but does not state whether it preferred the liability to be specified in the Staff Regulations of Officials of the European Communities or in the Financial Regulation.

On the question of the location of this definition of the liability of authorising officers, the Commission feels that in accordance with action 67 of the action plan in the Reform White Paper, all officials and other servants should be subject to a single system of liability to payment of compensation as set out in the Staff Regulations of Officials of the European Communities. The Commission cannot therefore agree with the institutions which advocate reinstating in the Financial Regulation specific provisions concerning liability to payment of compensation.

Action 66 in the White Paper also identified the need to set up a specialised financial irregularities panel which would judge the conduct of any official. In the amended proposal the Commission therefore acts on the requests made by the institutions that such a panel be set up via the Financial Regulation.

Finally the Commission takes up Parliament's amendment concerning the tightening of internal control systems within authorising departments (Article 60).

2.5.2.2. Internal auditor (Articles 80 to 82 of the Commission's initial proposal)

The Commission has broadly taken over the amendments suggested by Parliament and the other institutions. It has not, however, adopted the wording of Parliament's amendment 122, which might suggest that the role of the internal auditor is to check each transaction, this being at odds with the spirit of the reform now under way, which is to give responsibility to authorising officers.

2.5.3. Waiving of debts

In response to the concern expressed by the discharge authority, the Commission intends to stipulate that waiver decisions must be adopted at the level of authorising officer (i.e. the institution) and may be delegated only as laid down in the implementing rules.

2.5.4. Commitment

The Commission proposed a definition of commitment based on the distinction between budget commitment (reservation of appropriations) and legal commitment (conclusion of contract) and also between an individual commitment (where the amount and the beneficiary are known) and global commitment (where at least one of the elements needed to identify the individual commitment is still unknown).

As regards the first distinction the Court of Auditors suggested a definition which includes the financing decision and which could be a source of more confusion than clarification, as was demonstrated by the initial debate in Parliament. The Commission is therefore proposing that the principle of its initial definition be retained but that the three stages be clarified:

1) first the financing decision taken by the institution under the implementing powers conferred on it by Article 202 of the Treaty;

2) then the budget commitment (reservation of appropriations);

3) and finally the legal commitment (conclusion of contract).

Finally the Court of Auditors wanted to remove the possibility of making commitments in annual instalments in the case of budget commitments for operations extending over more than one financial year. The Commission cannot go along with the Court of Auditors' suggestions on this point, as they are at odds with the legislation on the Structural Funds and the international fisheries agreements and would undermine the very principle of the financial perspective.

All the institutions asked for a tighter definition of global commitment; the Commission has gone along with this, restricting it to cases where the beneficiary is unknown.

2.5.5. Keeping and presentation of accounts

The Court of Auditors criticised the Commission's initial proposal which it considers inadequate in that the Commission does not clearly explain the accounting framework chosen and the accounting methods, rules and objectives it intends to apply. The Council, for its part, stresses the importance it attaches to accounts reflecting the real costs of each of the Community's activities.

The Commission has acted on these positions. The amended proposal contains a thorough overhaul of the articles in question in line with the Court's comments. ABB will strengthen the management and monitoring instruments as requested by the Council.

In addition, in response to requests by the Court and Parliament, the Commission proposes bringing forward the timetable for the presentation of the provisional accounts from 1 May of the following year to 31 March.

Parliament also requested that the procedure for the closure of the definitive accounts be shortened by a month and a half. To match the shortening of the timetable for the presentation of the provisional accounts, the Commission proposes that the cut be the same, i.e. one month.

In addition the Commission proposes that the new dates be effective for the first time in respect of 2005, when the new accounting system could be in place.

2.6. External audit and discharge (Articles 122 to 133 of the initial proposal)

The Court of Auditors was against the idea of having a specific title in the Financial Regulation covering external audit. It took the view that the provisions of the Treaties are adequate and feared that a specific title in the Financial Regulation may impinge on its prerogatives.

The Commission does not agree with the Court's reasoning. The reference to the Financial Regulation in Article 279(a) EC implies that the Financial Regulation should spell out the external audit aspect (Part I, Title VI of the existing Financial Regulation). What is more, the Treaty provisions are not sufficient in themselves and require secondary legislation, the Financial Regulation, to define, as does the existing Financial Regulation, the arrangements for performing the audit function assigned to the Court of Auditors. The Commission is therefore upholding its initial proposal on this point.

On the other hand the Court of Auditors and the other institutions were in favour of a title on discharge. Parliament adopted an amendment which would leave it free to judge whether or not discharge should be given and which would require that it have access to all information (including confidential information).

The Commission has not accepted Parliament's amendment concerning the refusal to grant discharge, but proposes a new wording which would deal with a situation where Parliament does not grant discharge. The Commission has not accepted the amendments designed to give Parliament unlimited access to all documents, which go further than what is provided for in the Treaty.

2.7. Special provisions (Part Two)

2.7.1. European Agricultural Guidance and Guarantee Fund, Guarantee Section.

The Court of Auditors took the view that there is no need for special provisions for the EAGGF Guarantee Section since the exceptions they contain could be either dropped (as with assigned revenue discussed at 2.3.4 above) or incorporated in Part One.

The Commission believes that this would hide in the Financial Regulation a section accounting for half Community expenditure and would detract from the clarity of the text.

2.7.2. Structural Funds

The Court suggested that this title be dropped. Parliament suggested a provision to deal with the financial corrections mechanism.

On this point too the Commission is upholding its initial proposal: the title on the Structural Funds is essential to anchor in the Financial Regulation the exceptions allowed for the management of these appropriations. As regards financial corrections, they are subject to the ordinary mechanisms provided for in Title IV of Part One, and the procedural details suggested by Parliament are contained in the implementing rules.

2.7.3. Research

The Court again suggested that this title be dropped. The Commission, however, intends to retain it, since it contains exceptions to Part One in the shape of specific provisions relating to ABB and transfers and specific provisions for the JRC.

2.7.4. External actions

The Court of Auditors considered this title superfluous. The Council, on the other hand, is in favour of it, in particular because it provides a basis for joint action with international organisations (Article 164). The Commission is retaining the title for the sake of coherence and readability.

The Court of Auditors argued that the minimum criteria for decentralised implementation of the budget in non-member countries are unrealistic and difficult to verify (Article 165). The Commission has therefore reviewed these criteria and is proposing a new wording setting criteria in terms of objectives which do not presuppose an administrative structure identical to that of the Community institutions.

For external actions the Commission has proposed more time for the conclusion of contracts than applied to ordinary operations (Article 77(2)), the deadline being 31 December of year N + 3, N being the year when appropriations are reserved (budget commitment). The Court of Auditors finds this to be too short, in particular for development aid projects, whereas the Council finds it too long and would prefer N + 2. The Commission is therefore maintaining its initial midway proposal.

The Commission also proposed in this title (Article 170) an exception to the principle of co-financing for grants. For the Court of Auditors, which rejects this principle, this exception is not relevant. For the Council, on the other hand, the rule and the exception are both justified, but the exception should be confined to humanitarian aid, which would mean that implementation of development projects for the poorest countries would be blocked. The Commission is upholding its midway proposal between these two opposing views.

2.7.5. Offices

Arguing that other offices could be set up in future, the Court of Auditors and Parliament suggested a generic title for offices rather than one for the Publications Office and OLAF alone.

The Commission is taking up this recommendation by including in the proposal a title on offices with a general chapter containing general rules applying to all offices and a chapter covering the specific features of OLAF.

2.8. Transitional and final provisions (Part Three)

2.8.1. Agencies

The Court and Parliament suggested that the Financial Regulation for agencies be drawn up in accordance with framework regulations adopted by the Commission after obtaining the opinion of the Court of Auditors, Parliament and the Council.

The Commission accepts this suggestion and is introducing a time-limit for adoption of these opinions.

The Commission also proposes that Parliament should give discharge in respect of the implementation of the agencies' budget and that the Commission's internal auditor should have the same powers over the agencies as over Commission departments. The specific regulations governing the agencies will have to be adapted accordingly to comply with the Financial Regulation.

3. Action taken on Parliament's amendments

The Commission's position on each of the amendments adopted by Parliament on 31 May 2001 is annexed.

4. Conclusions

In accordance with Article 250 of the EC Treaty the Commission is transmitting this proposal to the Council for adoption within the time-limits set by the Göteborg European Council. [1]

[1] Point 18 of the conclusions of the Presidency of the Göteborg European Council states: "The recast Financial Regulation should be adopted before the end of 2002".

2000/0203 (CNS)

Amended proposal for a COUNCIL REGULATION (EC, ECSC, Euratom) on the Financial Regulation applicable to the general budget of the European Communities

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 279 thereof,

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 Atomic Energy Community, and in particular Article 183 thereof,

Having regard to the proposal from the Commission [2],

[2] OJ C 96 E, 27.3.2001, pp. 1.

Having regard to the opinion of the European Parliament [3],

[3] OJ C

Having regard to the opinion of the Court of Auditors [4],

[4] OJ C 162, 5.6.2001, pp. 1.

Having regard to the opinion of the Economic and Social Committee [5],

[5] OJ C 260, 17.9.2001, p. 42.

Whereas:

(1) Since times have changed enormously since the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities [6] was adopted, in particular as a result of a series of enlargements, a financial perspective forming a framework for the development of the budget and changes to the institutional structure, that Financial Regulation has been substantially amended several times. Since further amendments are necessary to take account, in particular, of the requirements of simplification in legislative and administrative matters and the tightening up of management of Community finances, the Financial Regulation of 21 December 1977 should be recast in the interests of clarity.

[6] OJ L 356, 31.12.1977, p. 1; Regulation as last amended by Regulation (EC, ECSC, Euratom) No 762/2001 (OJ L 111, 20.4.2001, p. 1).

(2) This Regulation should be confined to stating the broad principles and basic rules governing all budgetary matters referred to in the Treaties and the detailed provisions should be moved to a Regulation laying down rules for the implementation of this Regulation (hereinafter: "the implementing rules") in order to produce a better hierarchy of rules and make the Financial Regulation easier to read.

(3) As regards budget principles, the establishment and implementation of the budget should respect the four fundamental principles of budgetary law (unity, universality, specification, annuality), and the principles of equilibrium, unit of account, sound financial management and transparency.

(4) This Regulation should reassert those principles, keep exceptions to an absolute minimum and impose strict conditions on those exceptions.

(5) As regards the principle of unity, this Regulation should state that it also applies to expenditure on the common foreign and security policy and cooperation in the field of justice and home affairs where this is charged to the budget. Decisions on the establishment plans of the Community agencies should be taken by the budgetary authority as part of the budgetary procedure in view of their impact, real or potential, on the number of European civil servants and on the general budget, via subsidies paid or planned by those agencies, or the pensions which will be paid to their staff.

(6) As regards the principle of universality, the practices of repayment of payments on account and re-use should be discontinued; in some cases they should be replaced by assigned revenue. These amendments should not affect the special rules applicable to the Structural Funds.

(7) As regards the principle of specification, the Commission needs to have some degree of management flexibility for transfers of staff and administrative appropriations between titles relating to different policy areas and between chapters for operational expenditure. This Regulation should allow integrated presentation of the allocation of financial and administrative resources by purpose. The procedures for transferring administrative appropriations should be harmonised for all the other institutions so that transfers between titles are a matter for the budgetary authority and those within titles a matter for each institution. The budgetary authority should be allowed to constitute reserves in only two cases: where there is no legal base or where it is not certain that appropriations are adequate or can be used in accordance with the principle of sound financial management.

(8) As regards annuality, differentiated appropriations should be used in all areas, although the technical arrangements applied at present to appropriations of the European Agricultural Guidance and Guarantee Fund (EAGGF) should be retained. Decisions on carryovers of commitment and payment appropriations should be taken by the institution concerned as a result of the simplification brought about by the abandoning of non-differentiated appropriations. The additional periods should be confined exclusively to the cases where they are absolutely necessary, namely EAGGF payments.

(9) As regards transparency, the aim is to improve information on implementation of the budget and the accounts. A strict deadline should also be set for the publication of the budget and the principle laid down that it should published provisionally by the Commission between the declaration of adoption by the President of the European Parliament and official publication in the Official Journal of the European Communities. In addition, in order to do away with negative amounts, negative expenditure should now be treated as assigned revenue. The possibility of a negative reserve is, however, to be retained.

(10) Finally, the principle of sound financial management should be defined by reference to the principles of economy, efficiency and effectiveness, and compliance with those principles checked by means of measurable indicators in such a way that results can be assessed. Provision should be made for evaluation throughout the cycle of a programme.

(11) As regards the establishment and presentation of the budget, budgetary procedures should be harmonised and simplified by elimination of the distinction, which has no practical impact, between supplementary budgets and amending budgets.

(12) The Commission section of the budget should present appropriations and resources by purpose (activity-based budgeting), with a view to enhancing transparency in the management of the budget with reference to the objectives of sound financial management and in particular efficiency and effectiveness.

(13) The Commission should enjoy a measure of flexibility in the management of its staff complement in relation to what is authorised in the budget, especially as the emphasis in management is now to be on results and not on means. This freedom will, however, continue to be restricted by the dual limit of budget appropriations and the total number of posts allocated; in addition there will be no latitude as regards grade A1 and A2 posts.

(14) As regards implementation of the budget, there should be clarification of the various possible methods of implementing the budget, either on a centralised basis by the Commission or on a shared basis with the Member States or on a decentralised basis with third countries receiving external aid or jointly with international public-sector organisations. It should be possible for centralised management either to be performed directly by Commission departments or indirectly by delegation to national or Community public-sector bodies. The implementation methods must guarantee that the procedures for protecting Community funds are complied with, whatever the entity responsible for all or part of this implementation and must confirm that final responsibility for budget implementation lies with the Commission in accordance with Article 274 of the EC Treaty.

(15) As the Commission is responsible for implementation of the budget, it may not delegate any tasks of public authority involving the use of discretionary powers. This Regulation should restate this principle and specify the scope of the tasks that may be delegated. It should also be stipulated that private-sector bodies, other than those which have a public-service mission guaranteed by the States, should not be able to undertake any budget implementation measure but only provide specialist technical or administrative services or perform preparatory or ancillary tasks.

(16) For the sake of compliance with the principles of transparency and sound financial management, the public-sector bodies or bodies with a public-service mission guaranteed by the State to which implementing tasks are delegated on behalf of the Commission should have transparent procurement procedures, effective internal controls, a system for presentation of the accounts which is separate from their other activities and an external audit.

(17) This Regulation meets the requirements of Article 279 of the EC Treaty by defining the powers and responsibilities of authorising officers, the accounting officer and the internal auditor. Authorising officers are made fully responsible for all revenue and expenditure operations executed under their authority and must be held accountable for their actions, including, where necessary, through disciplinary proceedings. This empowerment must therefore be strengthened by the removal of centralised prior controls and in particular the ending of the advance approval of revenue and expenditure operations by the financial controller and of the checking that payment constitutes valid discharge by the accounting officer. The accounting officer continues to be responsible for the proper execution of payments, the collection of revenue and the recovery of receivables. He manages the treasury, keeps the accounts and is responsible for drawing up the financial statements of the institutions. The internal auditor performs his duties in accordance with international audit standards. His role is to provide the institution with reasonable assurances concerning the proper functioning of the management and control systems put in place by the authorising officers. The internal auditor is not an actor involved in the financial operations and does not have the role of exercising control over these operations ahead of the decisions by the authorising officers; the authorising officers should now assume full responsibility for these decisions.

(18) The liability of authorising officers, accounting officers and imprest administrators is not different from that of other officials and staff and should be subject, under the Staff Regulations of officials of the European Communities, and the Conditions of Employment of other Servants of those Communities, to the application of the existing disciplinary and financial compensation measures. On the other hand, certain specific provisions identifying specific cases of misconduct of accounting officers and imprest administrators, given the nature of their duties, should be retained; they will no longer have any special allowance or insurance. In cases not involving fraud, in order to provide the appointing authority with the necessary expertise, each institution should set up a specialised financial irregularities panel which will determine whether or not an irregularity has occurred which could make the official or other servant liable to disciplinary action or payment of compensation and, if it has detected problems with systems, to report to the authorising officer and the internal auditor. For cases of fraud, however, this Regulation should refer to the provisions in force on the protection of the European Communities' financial interests and on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union.

(19) The concepts of budget and legal commitment of expenditure and the conditions of application should be defined. In order to limit in time the potential budget impact of Commission decisions and to restrict the volume of dormant commitments, the period during which individual legal commitments may be made on the basis of global budget commitments should be limited.

(20) This Regulation should define the typology of payments which may be made by authorising officers. Payments must be made principally as a function of the effectiveness of the action and the results which flow from it.

(21) This Regulation should stipulate that the operations of validation, authorisation and payment must be completed within a time-limit which will be set in the implementing rules and that in the event of failure to respect this time-limit creditors will be entitled to default interest to be charged to the budget.

(22) As regards procurement, the Directives of the European Parliament and of the Council coordinating the procedures for the award of public supply, service and works contracts should apply to public contracts awarded by the institutions acting on their own account; their principles should also govern the rules applicable to all contracts awarded on behalf of third parties.

(23) In order to prevent irregularities and to combat fraud and corruption and promote sound and efficient management, candidates or tenderers who are guilty of such acts or have conflicting interests should be excluded from the award of contracts.

(24) For the sake of transparency, candidates and tenderers should be informed in an appropriate manner about the award of contracts.

(25) Finally, as part of the process of empowerment of authorising officers, the current Advisory Committee on Procurement and Contracts should be dispensed with.

(26) As regards grants, a framework for the award and monitoring of Community grants involving specific provisions for implementing the principles of transparency, equal treatment, co-financing, prohibition of retrospective awards, collective assessment and control should be put in place.

(27) In order to avoid any cumulation, it should not be possible for grants to be awarded to finance twice the same action or routine expenditure for the same year.

(28) In a similar manner to the rules concerning the award of public contracts, grounds for excluding certain parties from the award of grants should be laid down in order to have appropriate means of combating fraud and corruption.

(29) So that the rights and obligations of the institution and of the beneficiary are clear, the grant award should be the subject of a written agreement.

(30) As regards accounting and the presentation of accounts, it should be stipulated that the accounts comprise general accounts and budget accounts and it should be added that the general accounts are based on a system of accrual accounting whereas the budget accounts are intended to draw up the budget outturn account and the reports on implementation of the budget.

(31) The principles on which the general accounts are based and the financial statements are presented should be defined by reference to internationally accepted accounting principles and the Council Directives on the annual accounts of certain types of companies, where they are relevant in the context of the public service.

(32) The provisions on the supply of information concerning implementation of the budget should be adapted to extend this information to the use of appropriations carried over, made available again and re-used and to the various Community-law bodies, to improve the arrangements for providing monthly figures and the report on implementation, which will be sent three times a year to the budgetary authority.

(33) The accounting methods employed by the institutions should be harmonised and, in this field, the Commission's accounting officer should have the right of initiative.

(34) It should be specified that the use of computerised financial management systems should in no way restrict the Court of Auditors' rights of access to supporting documents.

(35) The rather vague concepts of advance and payment on account should be removed; payments should be made in the form of pre-financing, interim payments and payments of the final balance, when the entire amount is not paid in one instalment.

(36) As regards external audit and discharge, although the Commission is fully responsible for implementation of the budget, the importance of management shared with the Member States requires their full cooperation throughout the audit procedure by the Court of Auditors and the discharge by the budgetary authority.

(37) In order to provide optimum conditions for the presentation of the accounts and the discharge procedure, the timetable leading up to discharge should be amended.

(38) In order to improve interinstitutional operation, the Commission should present to the European Parliament, at its request, any information relating to the year in question required for the smooth application of the discharge procedure, with due respect for fundamental human rights, the protection of business secrecy, the provisions governing judicial and disciplinary proceedings and the interests of the Union.

(39) Special provisions should be laid down for certain Community policies; such provisions should be based on the principles of this Regulation.

(40) As regards the EAGGF, the specific management features, relating in particular to the fact that commitment appropriations and payment appropriations are equal and to the carryover arrangements, should be maintained, although the appropriations for rural development will not be covered with effect from 1 January 2007.

(41) In order to guarantee the overall amount of appropriations available, revenue from the EAGGF Guarantee Section should be assigned to it as an overall amount.

(42) Provision should be made for the possibility of advance commitments against EAGGF and administrative appropriations from 15 November preceding the financial year in question.

(43) As regards the Structural Funds, the provision for repayment of payments on account and making appropriations available again contained in the Commission declaration annexed to Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds should be retained.

(44) As regards research, the presentation of the budget should be harmonised with the provisions concerning activity-based budgeting, whilst preserving the flexibility of management which the Joint Research Centre currently enjoys.

(45) As regards external action, decentralisation of management of external aid should be authorised provided that the Commission is given guarantees of sound financial management and the beneficiary state is accountable to the Commission for the funds paid to it.

(46) Financing agreements or contracts signed with the beneficiary state or a national, Community or international public-sector body or natural or legal persons governed by private law must include the general procurement principles laid down in Title V of Part One and Title IV of Part Two of this Regulation as regards external actions.

(47) A special title should be included containing the general provisions for the management of European offices. Given the status and special remit of the European Anti-Fraud Office (OLAF), a separate chapter in that title should contain the special rules for its management.

(48) A separate title should also contain the special rules applicable to administrative appropriations.

(49) It should be stipulated that the special provisions relating to the appropriations for the EAGGF Guarantee Section will apply to the programmes on rural development and accompanying measures only until the end of the current programming period.

(50) The change in the timetable for the consolidation of the institutions' accounts should be deferred until 2005 in order to allow time to put in place the essential internal procedures involved.

(51) Time-limits governing the procedure for adopting the rules for implementing this Regulation should be laid down, in order to ensure that any change made to the Financial Regulation becomes effective within a reasonable time.

(52) A suitable framework, tailored to the specific management needs, should be provided for the financial rules to apply to bodies set up by the Communities, with their own legal personality, which may receive subsidies from the budget. At the same time, and without in any way impairing the operational autonomy required by these bodies for the performance of their functions, the substance of the rules governing certain matters, and in particular discharge and accounting, needs to be harmonised. The Commission's internal auditor should exercise over these bodies the same powers as over Commission departments. The specific provisions governing these bodies will have to be adapted accordingly to comply with this Regulation,

HAS ADOPTED THIS REGULATION:

PART ONE COMMON PROVISIONS

TITLE I SCOPE

Article 1 (Initial proposal: Article 1)

This Regulation lays down the rules for the establishment and implementation of the general budget of the European Communities, hereinafter "the budget".

For the purposes of this Regulation, the Economic and Social Committee, the Committee of the Regions and the Ombudsman shall be treated as Community institutions.

Article 2 (New)

All other regulatory instruments concerning the implementation of the revenue and expenditure of the budget shall be based on the principles set out in Title II.

TITLE II Budgetary principles

Article 3 (Initial proposal: Article 2)

The budget shall be established and implemented in compliance with the principles of unity, annuality, equilibrium, unit of account, universality, specification, sound financial management and transparency as set out in this Regulation.

Chapter 1 Principle of unity

Article 4 (Initial proposal: Article 3)

1. The budget is the instrument which, each year, forecasts and authorises the revenue and expenditure considered necessary for the Communities.

2. The revenue and expenditure of the Communities shall comprise:

(a) the revenue and expenditure of the European Community, including administrative expenditure for the common foreign and security policy and for cooperation in the field of justice and home affairs and the related operational expenditure where this is charged to the budget;

(b) the administrative expenditure of the European Coal and Steel Community and the related revenue;

(c) the expenditure and revenue of the European Atomic Energy Community.

3. The budget shall record the guarantee for borrowing and lending operations entered into by the Communities and payments to the Guarantee Fund for external actions.

Article 5 (Initial proposal: Article 4)

1. Subject to Article 74, no revenue shall be collected and no expenditure effected unless booked to a line in the budget.

2. No expenditure may be committed or authorised in excess of the authorised appropriations.

3. An appropriation may not be entered in the budget if it is not for an item of expenditure considered necessary.

4. Subject to Article 74, interest yielded by the funds which remain the property of the European Communities shall be entered in the budget as general revenue.

Chapter 2 Principle of annuality

Article 6 (Initial proposal: Article 5)

The appropriations entered in the budget shall be authorised for one financial year which shall run from 1 January to 31 December.

Article 7 (Initial proposal: Article 6)

1. The budget shall contain differentiated appropriations, which shall consist of commitment appropriations and payment appropriations.

2. Commitment appropriations shall cover the total cost of the legal commitments entered into during the current financial year, subject to Articles 77(2) and 167(2).

3. Payment appropriations shall cover payments made to honour the legal commitments entered into in the current financial year and/or earlier financial years.

4. Paragraphs 1 and 2 shall be without prejudice to the special provisions of Titles I, IV and VI of Part Two. They shall not prevent appropriations being committed globally nor budgetary commitments being made in annual instalments.

Article 8 (Initial proposal: Article 7)

1. The revenue of a financial year shall be entered in the accounts for the financial year on the basis of the amounts collected during the financial year. However, the own resources for the month of January of the next financial year may be paid in advance pursuant to the Council Regulation implementing the Decision on the system of the Communities' own resources.

2. The entries in respect of value added tax own resources, the additional GNP-based resource and any financial contributions may be adjusted in accordance with the Regulation referred to in paragraph 1.

3. The appropriations authorised for a given year may be used solely to cover expenditure committed and paid in that financial year, save as otherwise provided in Title I of Part Two, and to cover amounts due against commitments from earlier financial years.

4. Commitments shall be entered in the accounts on the basis of the legal commitments entered into up to 31 December, subject to the global commitments referred to in Article 77(2) and the financing agreements referred to in Article 167(2), which shall be entered in the accounts on the basis of the budget commitments up to 31 December.

5. Payments shall be entered in the accounts for a financial year on the basis of the payments effected by the accounting officer by 31 December of that year at the latest.

6. By way of derogation from paragraphs 4 and 5, the expenditure of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) shall be entered in the accounts for a financial year in accordance with the rules laid down in Title I of Part Two.

Article 9 (Initial proposal: Article 8)

1. Commitment appropriations and payment appropriations which have not been used at the end of the financial year for which they were entered shall be cancelled.

However, they may be carried over to the following financial year only, by a decision taken by the institution concerned by 15 February at the latest, in accordance with paragraphs 2 and 3.

2. Commitment appropriations may be carried over in respect of:

(a) amounts corresponding to commitment appropriations for which all the preparatory stages of the commitment procedure as specified in Article 60 have been completed by 31 December. These amounts may then be committed up to 31 March of the following year;

(b) amounts which are necessary when the legislative authority has adopted a basic instrument in the final quarter of the financial year and the Commission has been unable to commit the appropriations provided for this purpose by 31 December.

3. Payment appropriations may be carried over in respect of amounts needed to cover existing commitments or commitments linked to commitment appropriations carried over, when the appropriations provided for the relevant lines in the budget for the following financial year do not cover requirements. The institution concerned shall first use the appropriations authorised for the current financial year and shall not use the appropriations carried over until the former are exhausted.

4. The institution concerned shall inform the European Parliament and the Council (hereinafter "the budgetary authority") by 15 March at the latest of the carryover decision taken and shall state, for each budget item, how the criteria in paragraphs 2 and 3 have been applied to each carryover.

5. Appropriations placed in reserve and appropriations for staff expenditure may not be carried over.

Article 10 (Initial proposal: Article 9)

Revenue not used and appropriations available at 31 December arising from the assigned revenue referred to in Article 18 shall be carried over automatically. The appropriations available corresponding to assigned revenue carried over must be used first.

Article 11 (Initial proposal: Article 10)

Where amounts are decommitted as a result of total or partial non-implementation of the actions for which they were earmarked, in any financial year after that in which the appropriations were entered in the budget, the appropriations concerned shall be cancelled.

Article 12 (Initial proposal: Article 11)

The appropriations entered in the budget may be committed with effect from 1 January, once the budget has been finally adopted, save as otherwise provided in Title I and Title VI of Part Two.

Article 13 (Initial proposal: Article 12)

1. If the budget has not been finally adopted at the beginning of the financial year, Article 273 of the EC Treaty, Article 78b of the ECSC Treaty, and Article 178 of the Euratom Treaty shall apply to commitment and payment of expenditure approved in principle in the last budget duly adopted.

2. If, for a given chapter, the authorisation of two or more provisional twelfths granted in the circumstances provided for in the Treaties is not sufficient to cover the expenditure necessary to avoid a break in continuity of the Communities' activity in the area in question, authorisation may exceptionally be given under the procedures provided for in the Treaties to exceed that amount. In this case the overall total of the appropriations available in the budget of the preceding year may not be exceeded.

Chapter 3 Principle of equilibrium

Article 14 (Initial proposal: Article 13)

1. Budget revenue and payment appropriations must be in balance.

2. The Communities may not raise loans to cover a budget deficit. They are, however, authorised to raise loans for the sole purpose of acquiring land and buildings on the strict condition that such loans offer every guarantee of sound financial management.

Article 15 (Initial proposal: Article 14)

1. The balance from each financial year shall be entered in the budget for the following financial year as revenue in the case of a surplus or as a payment appropriation in the case of a deficit.

2. The estimates of such revenue or payment appropriations shall be entered in the budget during the budgetary procedure and, where appropriate, in a letter of amendment presented pursuant to Article 34. They shall be drawn up in accordance with the Council Regulation implementing the Decision on the system of the Communities' own resources.

3. After the presentation of the accounts for each financial year, any discrepancy with the estimates shall be entered in the budget for the following financial year through an amending budget in accordance with Article 37.

Chapter 4 Principle of unit of account

Article 16 (Initial proposal: Article 15)

The budget shall be drawn up and implemented in euro and the accounts shall be presented in euro.

However, for the cash-flow purposes referred to in Article 61, the accounting officer and, in the case of imprest accounts, imprest administrators, shall be authorised to carry out operations in national currencies as laid down in the regulation laying down the rules for implementing this Regulation, hereinafter referred to as "the implementing rules".

Chapter 5 Principle of universality

Article 17 (Initial proposal: Article 16)

Total revenue shall cover total payment appropriations, subject to Article 18. All revenue and expenditure shall be entered in full without any adjustment against each other, subject to Article 20.

Article 18 (Initial proposal: Article 17(1))

1. The following items of revenue shall be used to finance specific items of expenditure:

(a) financial contributions from Member States to certain research programmes pursuant to the Council Regulation implementing the Decision on the system of the Communities' own resources;

(b) interest on deposits and the fines provided for in the Regulation on speeding up and clarifying the implementation of the excessive deficit procedure;

(c) revenue earmarked for a specific purpose, such as income from foundations, subsidies, gifts and bequests;

(d) contributions to Community activities from third countries or various bodies;

(e) revenue from third parties in respect of goods, services or work supplied at their request;

(f) revenue arising from the repayment of amounts wrongly paid;

(g) proceeds from the supply of goods, services and works for other institutions or bodies, including refunds by other institutions or bodies of mission allowances paid on their behalf;

(h) insurance payments received;

(i) revenue from payments connected with lettings;

(j) revenue from the sale of publications and films, including those on an electronic medium.

2. A legal basis may also assign the revenue for which it provides to specific items of expenditure.

3. The budget shall carry lines to accommodate the categories of assigned revenue referred to in paragraphs 1 and 2 and wherever possible shall indicate the amount.

Article 19 (Initial proposal: Article 17(2))

1. The Commission may accept any donation made to the Communities, such as foundations, subsidies, gifts and bequests.

2. Acceptance of donations which may involve some financial charge shall be subject to the authorisation of the European Parliament and the Council, which shall act on the matter within two months of the date of receipt of the request from the Commission. If no objection has been made within that period, the Commission shall take a final decision in respect of acceptance.

Article 20 (Initial proposal: Article 18)

1. The implementing rules may specify the cases where certain revenue may be deducted from invoices or requests for payment, which shall then be passed for payment of the net amount.

2. The cost of products or services provided to the Communities incorporating taxes refunded by the Member States pursuant to the Protocol on the Privileges and Immunities of the European Communities or by third countries on the basis of the relevant agreements shall be charged to the budget for the ex-tax amount.

3. Adjustments may be made in respect of exchange differences occurring in the implementation of the budget. The final gain or loss shall be included in the balance for the year.

Chapter 6 Principle of specification

Article 21 (Initial proposal: Article 19)

Appropriations shall be earmarked for specific purposes by title and chapter; the chapters shall be further subdivided into articles and items.

Article 22 (Initial proposal: Article 20)

1. Each institution may, within its own section of the budget, propose to the budgetary authority transfers from one title to another.

Proposals made by the other institutions for transfers from one title to another shall be forwarded by the Commission to the budgetary authority for its decision. The Commission may attach its own opinion to such proposals.

2. Each institution may, within its own section of the budget, transfer appropriations from one chapter to another and from one article to another. These institutions shall inform the budgetary authority and the Commission of the transfers they have made.

3. The provisions of paragraphs 1 and 2 are without prejudice to the specific provisions of Article 23 as regards the Commission.

Article 23 (Initial proposal: Article 21)

1. The Commission may, within its own section of the budget:

(a) transfer appropriations within articles and, with the exception of expenditure on staff and administration, from one article to another within each chapter;

(b) as regards expenditure on staff and administration, transfer appropriations from one title to another provided that the appropriations are used for the same purpose;

(c) as regards operational expenditure, transfer appropriations between chapters within the same title, up to a maximum of 10% of the appropriations for the year shown on the line from which the transfer is made.

Three weeks before making the transfers referred to at points (b) and (c) of the first subparagraph, the Commission shall inform the budgetary authority of its decision.

2. The Commission may propose to the budgetary authority, within its own section of the budget, transfers other than those referred to in paragraph 1.

Article 24 (Initial proposal: Article 22)

1. The budgetary authority shall take decisions on transfers of appropriations as provided for in paragraphs 2, 3 and 4, save as otherwise provided in Title I of Part Two.

2. In the case of proposals for transfers of appropriations relating to expenditure necessarily resulting from the Treaties or from acts adopted in accordance therewith, the Council shall, after consulting the European Parliament, act by a qualified majority within six weeks, except in urgent cases. The European Parliament shall deliver its opinion within such time as will permit the Council to take note of it and to act within the stipulated time-limit. Where the Council does not act within this time-limit, the proposals for transfers shall be deemed to be approved.

3. In the case of proposals for transfers relating to expenditure other than that necessarily resulting from the Treaties or from acts adopted in accordance therewith, the European Parliament shall, after consulting the Council, act within six weeks, except in urgent cases. The Council shall deliver its opinion, by a qualified majority, within such time as will permit the European Parliament to take note of it and to act within the stipulated time-limit. Where no decision is taken within this time-limit, the proposals for transfers shall be deemed to be approved.

4. Proposals for transfers relating both to expenditure necessarily resulting from the Treaties or from acts adopted in accordance therewith, and to other expenditure shall be deemed to be approved if neither the European Parliament nor the Council has decided otherwise within six weeks of the date on which the two institutions received the proposals. If, in the case of such proposals for transfers, the European Parliament and the Council reduce the proposed transfer by different amounts, whichever is the smaller of the amounts accepted by one of the two institutions shall be deemed to be approved. Where one of the institutions rejects the principle of the transfer, the transfer shall not be made.

Article 25 (Initial proposal: Article 23)

1. Appropriations may be transferred only to budget lines for which the budget has authorised appropriations or carries a token entry (p.m.).

2. Assigned revenue may be transferred only if it is used for the purpose to which it is assigned.

Article 26 (Initial proposal: Article 24)

1. Transfers within the titles of the budget devoted to the EAGGF, Guarantee Section, the Structural Funds and research shall be the subject of special provisions under Titles I, II and III of Part Two.

2. Decisions on transfers to allow the utilisation of the reserve relating to Community loans and loan guarantees to third countries and the reserve for emergency aid shall be taken by the budgetary authority on a proposal from the Commission.

The procedure provided for in Article 24 shall apply. However, if the European Parliament and the Council are unable to agree on an amount different from the one indicated in the Commission's proposal or if they fail to act, the Commission's proposal for a transfer shall be deemed to be approved.

Chapter 7 Principle of sound financial management

Article 27 (Initial proposal: Article 25)

1. Budget appropriations shall be used in accordance with the principle of sound financial management, that is to say, in accordance with the principles of economy, efficiency and effectiveness.

2. The principle of economy requires that the resources used by the institution for the pursuit of its activities shall be made available in due time, in appropriate quantity and quality and at the best price.

The principle of efficiency is concerned with the best relationship between resources employed and results achieved.

The principle of effectiveness is concerned with attaining the specific objectives set and achieving the intended results.

3. Objectives which can be checked by means of measurable indicators shall be set and achievement of these objectives shall be monitored.

4. In order to apply the principle of sound financial management, the institutions shall evaluate programmes or actions regularly.

Article 28 (Initial proposal: Article 26)

1. Any proposal submitted to the legislative authority which may have an impact on the budget, including changes in the number of posts, must be accompanied by a financial statement.

2. During the budgetary procedure, the Commission shall provide the necessary information for a comparison between changes in the appropriations required and the initial forecasts made in the financial statements. This information shall include progress made and the stage reached by the legislative authority in its consideration of proposals presented. The appropriations required shall, where appropriate, be revised in the light of the deliberations on the legal basis.

Chapter 8 Principle of transparency

Article 29 (Initial proposal: Article 27)

1. The budget shall be established and implemented and the accounts presented in compliance with the principle of transparency.

2. The President of the European Parliament shall have the budget and amending budgets, as finally adopted, published in the Official Journal of the European Communities.

The budget shall be published within two months following the date on which the budget is declared finally adopted.

The consolidated financial statements shall be published in the Official Journal of the European Communities. The financial management reports and analyses drawn up by each institution shall also be published in the Official Journal of the European Communities.

Article 30 (Initial proposal: Article 28)

1. Information on borrowing and lending operations contracted by the Communities for third parties shall appear in an annex to the budget.

2. Information on the operations of the Guarantee Fund for external actions shall appear in the financial statements.

TITLE III ESTABLISHMENT AND STRUCTURE OF THE BUDGET

CHAPTER 1 ESTABLISHMENT OF THE BUDGET

Article 31 (Initial proposal: Article 29)

The European Parliament, the Council, the Court of Justice of the European Communities, the Court of Auditors, the Economic and Social Committee, the Committee of the Regions and the Ombudsman shall draw up an estimate of their revenue and expenditure, which they shall send to the Commission before 1 July each year.

These estimates shall also be sent by these institutions to the budgetary authority for information by no later than 1 July each year. The Commission shall draw up its own estimates, which it shall also send to the budgetary authority by the same date.

In preparing its own estimates the Commission shall use the information referred to in Article 32.

Article 32 (New)

Each body referred to in Article 190 shall, in accordance with the instrument establishing it, send to the Commission by 1 April each year an estimate of its revenue and expenditure, including the establishment plan, and its work programme.

The Commission shall forward these documents to the budgetary authority for information, except in the case provided for in point (3)(d) of Article 46(1).

Article 33 (Initial proposal: Article 30)

1. The Commission shall place a preliminary draft budget before the Council by 1 September each year at the latest. It shall at the same time transmit the preliminary draft budget to the European Parliament.

The preliminary draft budget shall contain a summary general statement of the expenditure and revenue of the Communities and consolidate the estimates referred to in Article 31.

2. The Commission shall attach to the preliminary draft budget:

(a) an analysis of financial management in the previous year;

(b) an opinion on the estimates of the other institutions; this opinion may contain different estimates, accompanied by the reasons therefor;

(c) any working paper it considers useful in connection with the establishment plans of the institutions and the grants which the Commission awards to the bodies referred to in Article 190 and to the European Schools;

(d) information on objectives for the activities and on any evaluation available.

Article 34 (Initial proposal: Article 31)

1. The Commission may, on its own initiative or if requested by the other institutions, each in respect of its own section, present to the Council a letter of amendment to the preliminary draft budget on the basis of new information which was not available at the time the preliminary draft was established.

2. However, save as otherwise agreed by the institutions or in exceptional circumstances, the Commission shall put such letter of amendment to the Council at least thirty days before the first reading of the draft budget by the European Parliament. The Council must put the letter of amendment to the European Parliament at least fifteen days before the said first reading.

Article 35 (Initial proposal: Article 32)

1. The Council shall establish the draft budget in accordance with the procedure laid down in Article 272 of the EC Treaty, Article 78 of the ECSC Treaty and Article 177 of the Euratom Treaty.

2. The Council shall place the draft budget before the European Parliament by 5 October at the latest. The Council shall attach to that draft budget an explanatory memorandum defining, where appropriate, its reasons for departing from the preliminary draft budget.

Article 36 (Initial proposal: Article 33)

1. The President of the European Parliament shall declare the budget finally adopted in accordance with the procedure provided for in Article 272 of the EC Treaty, Article 78 of the ECSC Treaty and Article 177 of the Euratom Treaty.

2. Once the budget has been declared finally adopted, each Member State shall, from 1 January of the following financial year or from the date of the formal declaration if it is made after 1 January, be bound to make over to the Community the payments due as specified in the Council Regulation implementing the Decision on the system of the Communities' own resources.

Article 37 (Initial proposal: Article 34)

1. If necessary, or in the case provided for in Article 15(3), the Commission may present preliminary draft amending budgets.

Preliminary draft amending budgets from institutions other than the Commission shall be sent to the Commission.

2. The Commission shall, save in exceptional circumstances, submit any preliminary draft amending budget to the Council by 1 September each year at the latest. It may attach a dissenting opinion to the requests for amending budgets from the other institutions.

3. The budgetary authority shall discuss them with due account for their urgency.

Article 38 (Initial proposal: Article 35)

1. Where the Council has received a preliminary draft amending budget, it shall draw up a draft amending budget in accordance with Article 35.

2. Except for the timetable, Articles 35 and 36 shall apply to amending budgets. They must be substantiated by reference to the budget whose estimates they are amending.

Article 39 (Initial proposal: Article 36)

The Commission and the budgetary authority may agree to bring forward certain dates for the transmission of the estimates, and for the adoption and transmission of the preliminary draft and draft budgets. This agreement may not, however, have the effect of shortening or delaying the periods allowed for consideration of these texts under Article 272 of the EC Treaty, Article 78 of the ECSC Treaty and Article 177 of the Euratom Treaty.

CHAPTER 2 STRUCTURE AND PRESENTATION OF THE BUDGET

Article 40 (Initial proposal: Article 37)

The budget shall consist of:

(a) a summary statement of revenue and expenditure;

(b) separate sections subdivided into statements of revenue and expenditure for each institution.

Article 41 (Initial proposal: Article 38)

1. Commission revenue and the revenue and expenditure of the other institutions shall be classified by the budgetary authority according to their type or the use to which they are assigned under titles, chapters, articles and items.

2. The statement of expenditure for the Commission section shall be set out on the basis of a nomenclature adopted by the budgetary authority and classified according to purpose.

A title shall correspond to a policy area and a chapter shall, as a rule, correspond to an activity.

Each title may include operational appropriations and administrative appropriations.

The administrative appropriations for a title shall be grouped in a single chapter.

Article 42 (Initial proposal: Article 39)

The budget may not contain negative revenue or expenditure.

The own resources paid under the Council Decision on the system of the Communities' own resources shall be net amounts and shall be shown as such in the summary statement of revenue in the budget.

Article 43 (Initial proposal: Article 40)

1. Each section of the budget may include a "provisions" title. Appropriations shall be entered in this title in the following two circumstances:

(a) where no legal basis exists for the action concerned when the budget is established;

(b) where there is uncertainty, on serious grounds, about the adequacy of the appropriations entered on the budget lines or about the possibility of using them in a manner consistent with sound financial management.

The appropriations in this title may be used only after transfer in accordance with the procedure laid down in Articles 22, 23 and 24.

2. In the event of serious implementation difficulties, the Commission may propose, in the course of a financial year, that appropriations be transferred to the "provisions" title. The budgetary authority shall take a decision on these transfers as provided in Article 26.

Article 44 (Initial proposal: Article 41)

The Commission section may include a "negative reserve" limited to a maximum amount of EUR 200 million. This reserve, which shall be entered in a separate chapter, may comprise both commitment appropriations and payment appropriations.

This reserve must be drawn upon before the end of the financial year by means of transfer in accordance with the procedure laid down in Articles 22, 23 and 25.

Article 45 (Initial proposal: Article 42)

1. The Commission section of the budget shall include the following two reserves:

(a) a reserve for emergency aid for third countries;

(b) a reserve relating to Community loans and loan guarantees to third countries.

2. The conditions for the entry, utilisation and financing of the reserves referred to in paragraph 1(a) and (b) are laid down in the Council Regulation on budgetary discipline and in the Council Regulation implementing the Decision on the system of the Communities' own resources respectively.

Article 46 (Initial proposal: Article 43)

1. The budget shall show:

(1) in the summary statement of revenue and expenditure:

(a) the estimated revenue of the Communities for the financial year in question;

(b) the estimated revenue for the preceding financial year and the revenue for year N - 2;

(c) the commitment and payment appropriations for the financial year in question;

(d) the commitment and payment appropriations for the preceding financial year;

(e) the expenditure committed and the expenditure paid in year N - 2;

(f) a summary statement of the schedule of payments due in subsequent financial years to meet budget commitments entered into in earlier financial years;

(g) appropriate remarks on each subdivision;

(2) in the section for each institution, the revenue and expenditure shall be shown in the same structure as in point 1, with appropriate remarks on each subdivision, and with schedules of payments due in subsequent financial years to meet budget commitments entered into in earlier financial years.

The estimated annual amounts of payment appropriations required for subsequent financial years in relation to the commitment appropriations for the current year shall be shown, as an indication, in a schedule entered in the remarks column of the budget.

(3) as regards staff:

(a) for each section of the budget, an establishment plan setting the number of posts for each grade in each category and in each service and the number of permanent and temporary posts authorised within the limits of the budget appropriations;

(b) an establishment plan for staff paid from the research and technological development appropriations for direct action and an establishment plan for staff paid from the same appropriations for indirect action; the establishment plans shall be classified by category and grade and shall distinguish between permanent and temporary posts, authorised within the limits of the budget appropriations;

(c) as regards scientific and technical staff, the classification may be based on groups of grades, in accordance with the conditions laid down in each budget. The establishment plan must specify the number of highly qualified technical or scientific personnel who are accorded special advantages under the specific provisions of the Staff Regulations of Officials of the European Communities and Conditions of Employment of Other Servants of the European Communities hereinafter referred to as "the Staff Regulations";

(d) an establishment plan setting the number of permanent and temporary posts, authorised within the limits of the budget appropriations, by grade and by category in each body mentioned in Article 190.

The establishment plans shall show next to the number of posts authorised for the financial year the number authorised for the preceding year;

(4) as regards borrowing and lending operations:

(a) in the general statement of revenue, the budget lines corresponding to the relevant operations and intended to record any reimbursements received from beneficiaries who initially defaulted, leading to activation of the performance guarantee. These lines shall carry a token entry (p.m.) and be accompanied by appropriate remarks;

(b) in the Commission section:

(i) the budget lines containing the Communities' performance guarantees in respect of the operations in question. These lines shall carry a token entry (p.m.), so long as no effective charge which has to be covered by definitive resources has arisen;

(ii) remarks giving the reference to the legal basis and the volume of the operations envisaged, the duration and the financial guarantee given by the Communities in respect of these operations;

(c) in a document annexed to the Commission section, as an indication:

(i) ongoing capital operations and debt management,

(ii) the capital operations and debt management for the financial year in question;

(5) the budget lines under revenue and expenditure necessary for implementing the reserve relating to Community loans and loan guarantees to third countries and also for implementing the Guarantee Fund for external actions.

2. In addition to the documents referred to in paragraph 1 the budgetary authority may attach other documents to the budget.

Article 47 (Initial proposal: Article 44)

1. The establishment plan described in point (3) of Article 46(1) shall constitute an absolute limit for each institution or body; no appointment may be made in excess of the limit set.

However, save in the case of grades A1 and A2, each institution or body may modify each establishment plan by up to 10% of posts and within the limit of the budget appropriations and the total number of posts allocated.

2. By way of derogation from the first subparagraph of paragraph 1, the effects of part-time work authorised by the appointing authority in accordance with the Staff Regulations may be offset by other appointments.

TITLE IV IMPLEMENTATION OF THE BUDGET

CHAPTER 1 GENERAL PROVISIONS

Article 48 (Initial proposal: Article 45)

1. The Commission shall implement the budget in revenue and expenditure in accordance with this Regulation, on its own responsibility and within the limits of the appropriations authorised.

2. The Member States shall cooperate with the Commission to ensure that the appropriations are used in accordance with the principle of sound financial management.

Article 49 (Initial proposal: Article 46)

1. A basic act must first be adopted before the appropriations entered in the budget for any Community action or any other Union action may be used.

2. The following appropriations may be used without a basic act provided that the actions they are intended to finance fall within the competence of the Community:

(a) appropriations for pilot projects of an experimental nature designed to test the feasibility of an action and its usefulness;

(b) appropriations for preparatory actions, designed to prepare proposals for the adoption of future Community actions;

(c) appropriations for one-off actions, or even actions for an indefinite duration, carried out by the Commission by virtue of tasks resulting from its prerogatives at institutional level other than its right of legislative initiative and under specific powers directly conferred on it by the Treaties;

(d) appropriations for the operation of each institution under its administrative autonomy.

Article 50 (Initial proposal: Article 47)

The Commission shall confer on the other institutions the requisite powers for the implementation of the sections of the budget relating to them.

Article 51 (Initial proposal: Article 48)

The Commission and each of the other institutions may, within their departments, delegate their powers of budget implementation in accordance with the conditions laid down by this Regulation and by their internal rules and within the limits which they lay down in the instrument of delegation. Those so empowered may act only within the limits of the powers expressly conferred upon them.

Article 52 (Initial proposal: Article 49)

All financial actors shall be prohibited from taking any measures of budget implementation which may bring their own interests into conflict with those of the Communities. Should such a case arise, the actor in question must refrain from such measures and refer the matter to the competent authority.

CHAPTER 2 METHODS OF IMPLEMENTATION

Article 53 (Initial proposal: Article 50)

1. The Commission shall implement the budget:

(a) on a centralised basis;

(b) by shared or decentralised management; or

(c) by joint management with international organisations.

2. Where the Commission implements the budget on a centralised basis, implementation tasks shall be performed either directly by its departments or indirectly, in accordance with the provisions of Articles 54 to 57.

3. Where the Commission implements the budget by shared management, implementation tasks shall be entrusted to Member States in accordance with the provisions of Titles I and II of Part Two.

4. Where the Commission implements the budget by decentralised management, implementation tasks shall be entrusted to third countries in accordance with the provisions of Title IV of Part Two.

5. In cases of shared or decentralised management, in order to ensure that the funds are used in accordance with the applicable rules, the Commission shall apply clearance of accounts procedures or financial correction mechanisms which enable it to assume its responsibility for the implementation of the budget in accordance with Article 274 of the EC Treaty.

6. In the methods of budget implementation referred to in paragraphs 3 and 4, the Member States and third countries shall conduct regular checks to ensure that the actions to be financed from the Community budget have been implemented correctly.

They shall take appropriate measures to prevent irregularities and fraud and if necessary shall bring prosecutions to recover funds wrongly paid.

7. Where the Commission implements the budget by joint management, certain implementation tasks shall be entrusted to international public-sector organisations as specified in the implementing rules.

These organisations shall, in their accounting, audit, control and procurement procedures, apply standards which offer guarantees equivalent to internationally accepted standards.

Article 54 (Initial proposal: Article 51)

1. The Commission may not entrust to third parties the executive powers it enjoys under the Treaties where they involve a large measure of discretion implying political choices. The implementing tasks entrusted must be clearly defined and supervised.

2. Within the limits laid down in paragraph 1, the Commission may, when implementing the budget on a centralised basis and indirectly under Article 53(2), entrust tasks of public authority and in particular budget implementation tasks to:

(a) agencies governed by Community law, referred to in Article 55, hereinafter: "executive agencies";

(b) bodies set up by the Communities as referred to in Article 190;

(c) national public-sector bodies or bodies with a public-service mission guaranteed by the State.

3. Where the bodies referred to in paragraph 2 perform implementation tasks, they shall conduct regular checks to ensure that the actions to be financed from the budget have been implemented correctly.

Such bodies shall take appropriate measures to prevent irregularities and fraud and if necessary bring prosecutions to recover funds lost, wrongly paid or incorrectly used.

Article 55 (Initial proposal: Article 52)

1. The executive agencies shall be set up by Commission decision. They shall be legal persons under Community law to which powers can be delegated to implement all or part of a Community programme or project on behalf of the Commission and under its responsibility.

2. The conditions and arrangements for the creation and operation of these executive agencies shall be defined in such a way that the Commission retains control of implementation and can monitor their operation.

Article 56 (Initial proposal: Article 53)

1. Decisions entrusting executive tasks to the bodies referred to in Article 54(2) shall include all appropriate arrangements for ensuring the transparency of operations carried out and must comprise:

(a) transparent, non-discriminatory procurement and grant award procedures which prevent any conflicts of interest;

(b) an effective internal control system for management operations;

(c) accounting arrangements for these operations and procedures for the presentation of the accounts which will enable the correct use of Community funds to be ascertained and the true extent of this use to be reflected in the Community accounts;

(d) an independent external audit.

2. The Commission may accept that the audit, accounting and procurement systems of the national bodies referred to in Article 54(2)(c) are equivalent to its own, with due account for internationally accepted standards.

3. The Commission shall ensure periodic supervision, evaluation and control of the implementation of the tasks entrusted.

Article 57 (Initial proposal: Article 54)

1. The Commission may not entrust measures of implementation of funds deriving from the budget, in particular payment and recovery, to external private-sector entities or bodies, other than those which have a public-service mission guaranteed by the State under Article 54(2)(c).

2. The tasks which may be entrusted by contract to external private-sector entities or bodies other than those which have a public-service mission guaranteed by the State are technical expertise tasks and administrative, preparatory or ancillary tasks involving neither the exercise of public authority nor the use of discretionary powers of judgment.

CHAPTER 3 FINANCIAL ACTORS

Section 1 Principle of separation of duties

Article 58 (Initial proposal: Article 55)

The duties of authorising officer and accounting officer shall be separated.

Section 2 Authorising officer

Article 59 (Initial proposal: Article 56)

1. The institution shall perform the duties of authorising officer.

2. Each institution shall lay down in its internal rules the staff of an appropriate level to whom it delegates the duties of authorising officer, the scope of the powers delegated and the possibility for the persons to whom these powers are delegated to subdelegate them.

3. The powers of authorising officer shall be delegated or subdelegated only to persons covered by the Staff Regulations.

4. Authorising officers by delegation or subdelegation may act only within the limits set by the instrument of delegation or subdelegation.

Article 60 (Initial proposal: Article 57)

1. The authorising officer shall be responsible in each institution for implementing revenue and expenditure in accordance with the principles of sound financial management and for ensuring that the requirements of legality and regularity are complied with.

2. To implement expenditure, the authorising officer by delegation and by subdelegation shall make budget commitments and legal commitments, shall validate expenditure and authorise payments and shall undertake the preliminaries for the implementation of appropriations.

3. Implementation of revenue shall comprise drawing up estimates of amounts receivable, establishing entitlements to be recovered and issuing recovery orders. It shall involve waiving established entitlements where appropriate.

4. The authorising officer by delegation shall put in place, in compliance with the minimum standards adopted by each institution and having due regard to the risks associated with the management environment and the nature of the actions financed, the organisational structure and the internal management and control procedures suited to the performance of his duties. Before an operation is authorised, the operational and financial aspects shall be verified by members of staff other than the one who initiated the operation. Initiation and verification of an operation shall be separate functions.

5. All staff responsible for controlling the management of financial operations must have the necessary professional skills. They shall respect a specific code of professional standards established by each institution.

6. Any member of staff involved in the financial management and control of transactions who considers that a decision he is required by his superior to apply or to agree to is irregular or contrary to the principles of sound financial management shall inform the authorising officer by delegation in writing and, if the latter fails to take action, the panel referred to in Article 66(3). In the event of any illegal activity, fraud or corruption which may harm the interests of the Community, he shall inform the authorities and bodies designated by the applicable legislation.

7. The authorising officer by delegation shall report to his institution on the performance of his duties in the form of an annual activity report covering the results of the operations by reference to the objectives set, the risks associated with these operations and the use made of the resources provided. The authorising officer by delegation shall submit to his institution the annual activity report, together with financial and management information.

Section 3 Accounting officer

Article 61 (Initial proposal: Article 58)

1. Each institution shall appoint an accounting officer who shall be responsible in each institution for:

(a) proper implementation of payments, collection of revenue and recovery of amounts established as being receivable;

(b) preparing and presenting the accounts in accordance with Title VII;

(c) keeping the accounts in accordance with Title VII;

(d) laying down, in accordance with Title VII, the accounting rules and methods and the chart of accounts;

(e) laying down and validating the accounting systems and where appropriate validating systems laid down by the authorising officer to supply or justify accounting information;

(f) treasury management.

2. The accounting officer shall obtain from authorising officers, who shall guarantee its reliability, all the information necessary for the production of accounts which give a true image of the Communities' assets and of budget implementation.

3. Save as otherwise provided in this Regulation, the accounting officer is alone empowered to manage monies and other assets. He shall be responsible for their safekeep