30.8.84 Official Journal of the European Communities No C 228/5 
II 
(Preparatory Acts) 
COURT OF AUDITORS 
OPINION No 1/84 
of the Court of Auditors of the European Communities on the proposal for a Council 
Regulation introducing measures to cover budgetary requirements in 1984 given the 
exhaustion of own resources 
(84/C 228/06) 
THE COURT OF AUDITORS OF THE 
EUROPEAN COMMUNITIES; 
Having regard to the Treaty establishing the 
European Economic Community, and in particular to 
Article 206a thereof, 
Having regard to the proposal from the 
Commission ('), 
Whereas the Council decided on 2 May 1984 to 
consult the Court of Auditors on this proposal, 
HAS ADOPTED THE FOLLOWING OPINION: 
PARTI 
On the legal basis of the Commission's proposal 
1. The Commission has stated that funds available 
under the own resources system will be inadequate to 
meet unavoidable requirements to ensure that the 
Communities will continue to operate satisfactorily in 
1984. 
2. It follows from the combined provisions of 
Article 5 of the EEC Treaty (which requires the 
Member States to 'take all appropriate measures .. . 
to ensure fulfilment of the obligations .. . resulting 
from action taken by the institutions of the 
Community) and of Article 199 (which states that all 
items of revenue and expenditure of the Community 
shall be included in estimates and shall be shown in 
the budget, and that the revenue and expenditure 
shown in the budget shall be in balance), that there is 
an obligation on Member States to make available the 
balance of funds necessary to cover budgetary 
requirements in 1984. 
O OJ No C 126, 12. 5. 1984, p. 5. 3. Such articles are therefore to be seen as the 
proper legal basis of any proposals for the financing 
by the Member States of existing policies, when the 
'own resources' referred to in Article 201, and as 
defined in the Council Decision of 21 April 1970 (*), 
prove to be insufficient. 
4. While these Articles do not prescribe any 
particular method of financing, in the Court's opinion 
they do not allow the payment of interest on 
financing of budgetary requirements. 
5. Article 235 of the Treaty, insofar as it refers to 
the lack of powers to pursue Community objectives, 
is intended to cover new fields of actions and is not a 
relevant basis for the mere provision of financial 
means. 
PART II 
On the sound financial management aspects of the 
Commission's proposal 
6. Notwithstanding the above reservations 
regarding the legal justification, the Court makes the 
following further observations on the proposal. 
A. Budgetary accuracy and transparency 
7. The Commission, in its Explanatory 
Memorandum dated 17 April 1984 to its proposal, 
analysed the requirements to be met by additional 
resources. Its estimate of the total shortfall is given as 
2 726 million ECU which includes: 
— 675 million ECU of EAGGF Guarantee Section 
payments deferred from 1983; 
O Decision 70/243/ECSC, EEC, Euratom; OJ No L 94, 
28. 4. 1970, p. 19. 
No C 228/6 Official Journal of the European Communities 30.8.84 
— 1 456 million ECU of changed requirements in 
the EAGGF section of the general budget, arising 
partly from market situations (+ 1 119 million 
ECU); 
— 100 million ECU underestimated in other sections 
of the general budget, including appropriations to 
meet what appear to be foreseeable obligations to 
EIB loans and employed staff; 
— 495 million ECU shortfall in revenue, mostly on 
agricultural levies where market conditions again 
apply together with currency exchange fluc­
tuations. 
The relative magnitude of these variations between 
successive forecasts clearly underlines the need for 
greater accuracy in the preparation of original budget 
estimates. 
8. The proposal to borrow from the Member 
States for the temporary budgetary shortfall of 1984 
might have been more convincing if it were clear that 
the Commission had fully considered the financial 
requirements for that and future years. The Court 
would have expected the Commission to provide 
realistic and complete projections of expenditure and 
the revenue needed to meet it for future years. 
9. Thus, on the one hand, the Court considers that 
such projections should take account of all known 
financial liabilities. In particular, the Commission 
does not refer to the budgetary implications of: 
(a) repayment of the proposed financing, which, 
according to Article 5 of the proposed Regu­
lation, should be in eight six-monthly instalments 
beginning on 30 June 1986; 
(b) charges arising from EAGGF stocks. The 
difference between cost and net realisable value 
on these stocks is a potential liability for the 
Communities. The Court estimates that such 
potential charges carried forward at year end 
1983 amounted to about 2 800 million ECU. 
Based on the Commission's most recent data (x), 
the Court estimates that the carry forward of 
potential loss at year en 1984 is likely to be of the 
order of 3 600 million ECU; 
0) Doc VI/172/84, 27. 4. 1984. (c) other long term commitments. The Court points 
out that the commitments entered into, mainly on 
structural fund activities, are not fully provided 
for by way of payment appropriations in the 
general budget. This difference, which represents 
a future liability for the Communities, has 
increased rapidly over the last few years; at the 
end of 1983, it represented at least 4 500 million 
ECU. 
10. On the other hand, the Court repeats the 
observations it made in its opinion on a proposal for a 
Council Regulation amending the Financial Regu­
lation (2), when it stated (paragraph 3.3) that a large 
part of the resources for a given financial year is not 
in fact used until the following year. These funds thus 
lie dormant for relatively long periods, even when 
certain expenditure creates the need for additional 
appropriations by way of a supplementary budget. 
The Court suggested that the system applied was no 
longer acceptable since it hinders the best possible use 
of revenue particularly in view of the constraints 
imposed by the limitation of the Communities' own 
resources. It advanced the view of separating the 
notion of authorization of expenditure from that of 
cash requirements, so that revenue is applied only to 
the same year's payment requirements. In this respect, 
the carry over at the end of each of the last few years 
for unused appropriations for payment on the general 
budget has been of the order of 1 400 million ECU. 
11. Moreover, the Court notes that there is also a 
substantial liquid reserve on ECSC funds. 
12. The difficulties in budgetary accuracy and 
transparency arise because the general budget is 
neither a simple payments budget (which would set 
out all the payments to be made in the budget year) 
nor a simple commitments budget (which would set 
out all the liabilities to be incurred during the budget 
year) (}). The Court considers they need further 
consideration in the current context. 
O OJNoC232, 11.9. 1981. 
(3) Cf. the Court's study of the financial systems of the 
European Communites: OJ No C 342, 31. 12. 1981. 
30.8.84 Official Journal of the European Communities No C 228/7 
13. The Court also thinks that the Commission 
ought not to have proposed such a radical departure 
from the existing budgetary principles of the 
Community without an equally radical examination 
of all the options for containing expenditure within 
the limits of the 1984 budget. In that connection the 
Court reiterates its belief (cf. report prepared in 
response to the conclusions of the Stuttgart European 
Council (')) that in the area of EAGGF Guarantee the 
Commission has scope for achieving economies on its 
own initiative through the Management Committee 
system. 
B. Proposed terms of loan 
14. In its proposal, the Commission has estimated 
the additional funds on the basis of budgetary (as 
opposed to cash) requirements. The draft Regulation 
foresees the payment of interest to the Member 
States. According to the draft Article 4, this shall be 
payable from the date funds are 'made available'. 
Article 1 requires the Member States to 'make 
available' the amount of 2 333 million ECU. The 
terminology 'make available' would appear to come 
from the heading to Title III of Council Regulation 
(EEC, Euratom, ECSC) No 2891/77 of 19 December 
1977 (2), which links these transactions with crediting 
the amounts to the accounts opened for this purpose 
in the name of the Commission within the Member 
States' Treasuries. These accounts at present attract 
no interest for the Communities. The Court considers 
that it would not be sound financial management to 
expect the Communites to pay interest on amounts of 
the loan while these are held in the accounts in the 
Member States' Treasuries. The Commission's 
intentions are not clear on this point from the 
wording of the proposed Regulation (see detailed 
observations in Part III). 
15. The precise terms on which the loan will be 
obtained remain to be determined, and it is presumed 
these will be included in the implementing measures 
required by Article 6 of the draft regulation. The 
Court reserves its position on these. At this stage, 
however, it observes that considerable practical 
difficulties can be foreseen from the introduction of 
the concept of borrowing from Member States to 
finance the general budget. 
(') OJNoC287, 24. 10. 1983. 
O OJ No L 336, 27. 12. 1977. PART III 
On the proposed wording of the draft Regulation 
16. These observations on the proposed wording 
of the draft Regulation are made without prejudice to 
the more general observations given in Parts I and II 
of this Opinion. 
Article 1: The funds to be made available take the 
form of a loan, and this term is used throughout the 
Explanatory Memorandum. The Court suggests that 
the words: 'by means of a loan' should be added to 
the text of this Article, and in the considerations. 
There is a difference between the language versions 
as to where the funds should be made available (3). 
Article 2: This table is derived from the 
apportionment of 'Payments in respect of own 
resources accruing from VAT' as set out, under 
powers derived from the Council Decision of 21 April 
1970 and Council Regulation (EEC, Euratom, 
ECSC) No 2891/77 of 19 December 1977, in the 
original general budget of the European Communities 
for the financial year 1984 (4). The Court considers 
that Article 2 should be revised to clarify whether the 
distribution key is subject to any changes introduced 
in amending or supplementary budgets. 
Articles 3, 4 and 5: These Articles do no more than 
outline the loan arrangements, leaving the detailed 
rules to be determined by implementing regulation. 
The Court is therefore not in a position to give an 
appreciation at this stage on the soundness of the 
terms of any loan. In the Court's opinion, terms 
should be examined before a final decision is made. 
In particular, it finds the words: '.. at the market 
rate for a comparable loan . . .' to be imprecise. 
(J) For example: English 'to the Commission'; French 'de la 
Communaute'; German not indicated; Danish 'til 
radighed for Faellesskabet'. 
O OJ No L 12, 16. 1. 1984. 
No C 228/8 Official Journal of the European Communities 30. 8. 84 
In Part II B above, the Court drew attention to the 
need to clarify whether the interest foreseen by 
Article 4 should be payable on the whole of the funds 
or only on those called for under the draft Article 3. 
This refers to calling for funds 'as budgetary 
requirements arise,' but Article 4 relates interest to 
funds as 'made available'. Article 12 of Council Regu­
lation (EEC, Euratom, ECSC) No 2891/77 relates 
the drawing of funds from the central accounts to the Commission's 'cash resource requirements.' 
Court considers clarification essential. The 
Article 6: Article 209 (b) of the EEC Treaty requires 
that the Court be consulted on implementing 
measures; the Court therefore suggests that the 
words: '. . and in the light of the opinion of the 
Court of Auditors,' be added after '... from the 
Commission'. 
This opinion was adopted by the Court of Auditors at its meeting of the 7 June 1984. 
Done at Luxembourg, 12 June 1984. 
For the Court of Auditors 
Pierre LELONG 
President