Proposal for a COUNCIL REGULATION (EC) amending the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities
Date: 1994-07-01
Institutions: European Commission
Subjects: EAGGF, closing of accounts, general budget (EU)

COMMISSION  OF  THE  EUROPEAN  COMMUNITIES 

a K ( *y  440  fini» 
Brute* I s,  01.07.19*4 

94/0 W3  (CNS) 
•4/0144  (CNS) 

fcfe 

Proposal  for a 

COUNCIL  REGULATION  (EC) 

94/0143  (CNS) 

«•ending Council Regulation  (EEC) *o 729/70 

on the financing of the eemmon agricultural policy 

Proposal  for a 

COUNCIL REGULATION  (EC) 

94/0144  (CNS) 

amending  the Financial Regulation of 21 December  1977 

applicable  to the general budget of the European  Communities 

(presented  by  the  Commission) 

EXPLANATORY  MEMORANDUM 

PROPOSAL FOR A REFORM OF THE PROCEDURE FOR THE CLEARANCE 
OF THE ACCOUNTS OF THE GUARANTEE SECTION 
OF THE EAGGF 

I.  INTRODUCTION 

Having  regard  to  the  growing  difficulties  encountered,  the 
Commission  proposes  to  reform  the  procedure  for  the  clearance  of 
the  accounts  of  the  guarantee  section  of  the  EAGGF  along  lines 
closely  following  the  proposals  by  a  working  party  comprised  of 
high-level experts, of whom four, including the Chairman, Mr Belle, 
came from outside the Commission. 

To  be  put  into  effect,  this  reform  requires  a  modification  to 
Council Regulation  (EEC) n* 729/70 on the financing of the common 
agricultural  policy,  which,  if  adopted,  in  turn  requires  a 
modification to Article 102 of the Financial Regulation. 

Proposed  regulations  putting  into  effect  the  modifications  are 
attached. 

As  it  concerns  technical  modifications,  this  proposal  has  no 
financial consequences. 

II. IDENTIFICATION OF THE DIFFICULTIES ENCOUNTERED 

The  criticisms  which  have  been  voiced  by  the  Member  States, the 
European Parliament, the Court of Auditors and the commission's own 
departments concerning the way the clearance of accounts operations 
are carried out focus principally on: 

- the timetable  for clearance, i.e. the delay  in the commission's 
formulation  of  comments  and  financial  corrections  concerning 
expenditure  (the decision relating to the clearance of the  1990 
financial year was taken on 27 October 1993, 22 months after the 
deadline  set  in  the  regulations,  and  incorporating  significant 
reserves); 

- the accumulation  of  financial corrections which may  result  from 
these delays (three financial years remain open at any one time); 

- the  methods  and  criteria  used  by  the  Commission  to  quantify 

certain financial corrections; 

- the  feeling  of  legal  and  financial  insecurity  engendered  among 
the national administrations which manage the CAP by the growing 
amounts being disallowed and thus charged to national budgets; 

- inadequacies  in  the  dialogue  between  the  Commission  and  the 

Member State concerned when disagreements occur. 

The  inadequate  staffing  of the Commission  departments  responsible 
for the clearance work aggravates these difficulties still further. 
However, these arise principally  from shortcomings inherent in the 
system of clearance of accounts as it has developed  and as it has 
been applied since the seventies. 

III.PROPOSED REMEDIES 

Based  on the  guidelines proposed  by the  Belle working  party, the 
Commission puts forward the following specific remedies : 

(a) revised  objectives  for  an  overhauled  clearance  system  which 

would be : 

- preventive  and  corrective, rather  than  a means  of  imposing 

financial corrections, often perceived as penalties; 

- based to a greater extent on cooperation and partnership; 

- carried  out  at the  same  time  as  the operations,  or  shortly 

after, so as to improve management; 

- a means  of  providing  greater  legal  and  financial  certainty 

for the Community and the Member States; 

- accompanied by adequate procedural guarantees when financial 

corrections prove unavoidable; 

(b) the following measures intended to achieve these objectives: 

the  abolition  of  the  single  clearance  decision  which  is 
regarded as the source of many problems since it has at one and 
the  same  time,  for  a  particular  year,  for  all  the  EAGGF 
Guarantee Section measures and for all the Member States, both 
an  accounting  objective  and  an  objective  of  ensuring  that 
expenditure  complies  with  Community  provisions. The  clearance 
operation should be split into two separate procedures: 

- a purely accounting clearance; 

- a compliance audit; 

(i)  the procedure for establishing and adopting accounts.1 

This would be reduced to the basic  accounting  checks on 
the  annual  summary  declarations  submitted  by  the Member 
states, based on a certification procedure, and within a 
shorter deadline, it would  culminate  in a single  annual 
decision  for all the Member states, to be taken as soon 
as  possible  after  the  end  of  the  financial  year.  The 
decision would serve: 

. from the point of view of  "adoption of the accounts", 
to  determine  for  discharge  purposes  the  total 
expenditure  to be entered  in the  commission's  general 
accounts  under the EAGGF Guarantee  section  (and hence 
the decision could incorporate corrections initiated by 
the commission), and 

. as  a  clearance  decision,  to  incorporate,  if 
appropriate, any provisional rejections  of expenditure 
arising from accounting checks. 

It is envisaged that this decision be taken very shortly 
after the end of the financial year to which it relates, 
provided  that  the  Member  states  agree  in  exchange  that 
paying  agencies'  financial  systems  be  examined  and 
approved  according  to  criteria  to  be  set  by  the 
Commission before payments may  be disbursed  by  them and 
that  the  accounts  concerned  be  certified  by  an 
indépendant body designated by the Member states . 

This  "adoption of the accounts" would provide Parliament 
with the facts it requires to grant a discharge. 

(ii)  The compliance audit 

This would  consist of a  "discussion" phase  followed, if 
this proved unsuccessful, by a "dispute" phase. 

Which could retain the title of "annual clearance of accounts". 

The  first  phase  would  correspond  more  or  less  to  the 
present systems audit phase  (used by the EAGGF). It could 
go on continuously and more or less in real time without 
being linked to any particular financial year except that 
there would  be  a time  limit of  at most  three years; in 
other words, measures  taken by the Member  States before 
this  period  should  no  longer  lead  to  financial-
corrections.  On  the  basis  of  checks  decided  on  by  the 
Commission  and  risk  analyses  it  had  carried  out,  the 
procedure  would  seek  to  determine  whether  the 
administrative  practice  of  the  Member  States  was  such 
that, from both  a management  and control point of view, 
it  could  be  reasonably  concluded  that  operations  were 
carried  out  correctly  or  whether  Member  states  should 
modify their procedures. 

It would still be for the Commission to decide how often 
to undertake its checks and so it would be free to decide 
to  which  years  these  should  relate.  Its  conclusions  on 
its enquiries  would  be  brought  to  the  attention  of  the 
Member  State  and  would  give  rise  to  a  dialogue  which 
would result  either  in an agreement  on the  consequences 
and  corrective  measures  to  be  adopted,  or  in  a 
disagreement.  In  either  case  any  financial  corrections 
would be the subject of an individual Commission decision 
for  each Member  State  and  for each measure  or  group of 
measures  or,  where  appropriate,  a  series  of  decisions 
relating to  several Member  States concerned  by the same 
measures. 

The  phase  following  a  finding  of  disagreement  provides 
the  possibility  for  the  Member  State  of  referring  the 
matter  to  a  "Conciliation  Body"  before  any  decision  is 
taken  by  the  Commission  to make  a  financial  correction 
(subject to appeal by the Member State concerned  to the 
Court of Justice). 

IV. COMMENTS ON THE PROPOSAL 

These proposals cannot be expected to provide a solution to all the 
problems  encountered  in  the  current  system  for  clearance  of 
accounts, but should go a long way towards meeting  the objectives 
of the reform. 

The risk  cannot be ruled out that there would  occur  a  systematic 
resort  to conciliation. This would threaten one of  the  objectives 
of the reform, avoidance of the delays which have occurred hitherto 
in reaching final decisions on clearance, which are the only means 
by which the Member States can be afforded the legal and financial 
certainty which they desire. 

It should also be remembered that, under the EC Treaty, it is the 
Commission, under the supervision of the Court of Justice, which is 
to  act  as  guardian  of  the  Treaty  and  secondary  Community 
legislation  (Article  155)  and  which  is  also  responsible  for 
implementing the budget  "on its own responsibility  and within the 
limits  of  the  appropriations"  (Article  205).  As  far  as  the 
Commission  is  concerned,  its  duties  regarding  the  clearance  of 
accounts are covered by this mandate. At this stage, there can be 
no question of ceasing to apply  faithfully  the rules  laid down by 
the  Community  legislator, particularly  as  regards  the  management 
and  supervision  of  a  particular  measure,  by  introducing 
"corrections" to make interpretation more flexible. 

V.  PROPOSED LEGAL TEXTS 

The  primary  legal  basis  required  to  give  effect  to  the  proposed 
reform is a modification to Council regulation  (EEC) n° 729/70 on 
the  financing  of  the  common  agricultural  policy,  in  order  to 
provide for: 

a)  the  separation  of  the  clearance  operation  into  the  two 
procedures of financial clearance and of compliance audits, and 
the fixing of an early time limit for the financial clearance; 

b)  the  requirement  for  the  Member  states  to  improve  their  own 
controls  over  guarantee  expenditure,  and  to  make  them  more 
transparent,  so  as  to  make  a  meaningful  financial  clearance 
possible within a short period after the year end; 

c)  the obligation for the Commission to evaluate the significance 
of  a  Member  state's  failure  to  comply  with  the  rules  before 
establishing  the  financial  consequences,  and  to  limit  the 
period which those consequences can cover. 

The  opportunity  is  also  taken  to  give  the  Member  States  greater 
certainty of an improved dialogue with the commission by providing 
in the regulation  for a conciliation between their points of view 
before the clearance  decision  is taken, and  also to clean  up the 
text  of  the  regulation  by  eliminating  provisions  which  are  no 
longer applicable. 

The change in the nature of the clearance decision is also required 
to be reflected  in the financial regulation, article  102 of which 
is to be modified. 

Once this legal basis is adopted by the Council, the commission can 
adopt  the  necessary  detailed  rules,  by  replacing  the  existing 
regulation  1723/72 concerning the clearance of the accounts of the 
guarantee section of the EAGGF, already largely outdated, by a new 
regulation  setting  out  the  practical  arrangements,  in  particular 
regarding : 

a)  the channelling  of financial information from a limited  number 
of paying agencies through  a coordinating  body  in each  Member 
State, 

b)  the  definition  of  the  responsibilities  of paying  agencies  as 
regards prepayment controls over the guarantee expenditure, 

c)  the  definition  of  the  nature  and  scope  of  the  audit  to  be 
performed by bodies independent of the paying agencies, and of 
the reports on their conclusions, 

d)  the  procedure  for  the verification  of  the  control  procedures 
within  the  paying  agencies  designated  by  the  Member  State, 
culminating In their accreditation, 

e)  the submission of a much reduced volume of  information  in the 

annual declarations of expenditure, 

f)  the procedure to be followed regarding the communication by the 
Commission of the result of compliance audits, the reply by the 
Member States, and the conciliation procedure, 

g)  the constitution of a conciliation body to be composed  of five 

independent experts. 

Points a) to e) above aim to prevent a financial clearance decision 
becoming  a  mere  formality  or  alternatively  being  unduly  delayed 
while  the Commission  undertakes  lengthy  accounting  verifications. 
The  remaining  points  aim  to detail  the  procedure  to  be  followed 
regarding the outcome of compliance audits. 

The  elements  of  the  reform  which  concern  the  objectives  of 
prevention  and  correction,  rather  than  penalisation,  can  be  put 
into  force  through  a  reorientation  of  the  clearance  work  plan, 
which it is proposed to adopt only after consultation of the EAGGF 
Committee. 

COUNCIL REGULATION  (EC) N* 

of 

94/ 0143 (CNS) 

amending Council Regulation  (EEC) No  729/70 

on the financing of the common  agricultural  policy 

THE COUNCIL OF THE EUROPEAN  UNION, 

Having  regard  to  the  Treaty  establishing  the  European 

Community,  and in particular Article  43 thereof, 

Having regard to the proposal  from the Commission,  (1) 

Having regard to the opinion of the European Parliament,  (2) 

Having regard to the opinion of the Court of Auditors,  (3) 

whereas responsibility  for checking EAGGF Guarantee Section expenditure 

lies  essentially  with  the  Member  states,  which  designate  the 

authorities  and  bodies  empowered  to  effect  expenditure;  whereas  the 

Commission,  being  responsible  for  implementing  the  Community  budget, 

must  check  on the conditions under which  payments  and  checks  have  been 

made;  whereas  the  Commission  can  only  finance  expenditure  where  those 

conditions  offer  all  necessary  guarantees  regarding  compliance  with 

Community  rules; 

(1) 
(2) 
(3) 

Whereas,  during  the  clearance  of  accounts,  the  Commission  is  able  to 

determine  within  a reasonable  time  the total  expenditure  to be  entered 

against  the  Guarantee  Section  in  the  general  account  only  if  it  has 

satisfactory  assurance  that  the  national  controls  are  adequate  and 

transparent  and  that  the  paying  agencies  verify  the  legality  and 

regularity  of  the  payment  requests  which  they  execute;  whereas 

provision  should  therefore  be  made  for  the  accreditation  of  paying 

agencies  by  Member  States;  whereas  it  should  be  stipulated  that  only 

expenditure effected by paying agencies accredited by the Member  States 

should  be  financed;  whereas  in  order  to  ensure  the  transparency  of 

national  controls,  in  particular  as  regards  authorization,  validation 

and  payment  procedures,  the  number  of  authorities  and  bodies  to  which 

these  responsibilities  are  delegated  should,  where  appropriate,  be 

restricted; 

whereas  the  decentralized  management  of  Community  finances,  in 

particular  following  the  reform  of  the  common  agricultural  policy, 

leads  to  the  designation  of  several  paying  agencies;  whereas, 

therefore, where  a Member  State  accredits more  than one  paying  agency, 

it  must  designate  a  single  contact  body  to  ensure  that  financial 

management  is consistent, to provide  liaison between the commission  and 

the various approved paying agencies and to ensure that the  information 

requested by the Commission  concerning the operations of several paying 

agencies is made rapidly available; 

Whereas the time limit  for the clearance of accounts decision  should be 

shortened;  whereas,  therefore,  information  technology  must  be  used  as 

fully  as  possible  for  producing  the  information  to  be  sent  to  the 

Commission; whereas, when carrying out checks, the Commission must have 

access  to  information  on  expenditure  held  in  both  documents  and 

magnetic files; 

% 

Whereas a single annual clearance of accounts decision creates  numerous 

difficulties  in  that,  for  a  given  financial  year,  in  respect  of  all 

measures covered by the Guarantee Fund and in all the Member  States, it 

fulfils  simultaneously  an  accounting  objective  and  a  recognition  that 

expenditure  has  been  effected  in  accordance  with  Community  rules; 

whereas  considerable  time  lags  accompany  the  taking  of  this  single 

decision,  which  is  nevertheless  subject  to  reservations  and 

disjunctions;  whereas  it  is  accordingly  necessary  to  separate  the 

procedure  into  two  types  of  decision,  one  concerning  the  clearance  of 

accounts  proper,  the  other  determining  the  consequences  to  be  drawn 

from the results of compliance  audits; 

whereas  the checks  on conformity  will therefore  no  longer be  linked  to 

a  particular  financial  year;  whereas  the  maximum  period  to  which  the 

consequences  to  be  drawn  from  the  checks  on  conformity  may  be  applied 

must be  determined; 

whereas certain provisions  laid down in Regulation  (EEC) No 729/70 have 

become  irrelevant  and may be repealed, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Regulation  (EEC) No 729/70 is hereby amended as follows: 

1.  Article  4 is replaced by the  following: 

"Article 4 

1.  Each Member state shall communicate  to the commission (4): 

(a)  details of the authorities  and bodies  it accredits  to pay 

the  expenditure  referred  to  in  Articles  2  and  3, 

hereinafter referred to as the paying agencies. 

Only  paying  agencies  providing  sufficient  assurance 

concerning  the proper  functioning  of  their  administrative 

organisation  and  of  their  system  of  internal  control  may 

be  accredited. 

(b)  where  more  than  one  paying  agency  is  accredited,  details 

of  the  authority  or  body  it  charges  with  gathering  the 

information  to  be  supplied  to  the  Commission  and  sending 

the  same,  and  with  ensuring  the  uniform  application  of 

Community 

roles,  hereinafter  referred  to  as  the 

coordinating body; 

only  expenditure  effected  by  accredited  paying  agencies  shall 

be financed, 

2.  Each  Member  state  shall  limit  the  number  of  paying  agencies 

accredited  to  the  minimum  necessary,  taking  into  account  its 

constitutional  and  institutional  structures,  to  affect  the 

expenditure  referred  to  in Articles 2 and  3 under  satisfactory 

administrative  and accounting conditions» 

(4) Amendments  are in bold and underlined. 

\o 

3.  Each Member State communicates to the Commission the following 

particulars concerning those paying agencies: 

- their name and their statutes, 

- the  administrative,  accounting  and  internal  control 

conditions  under  which  payments  are  made  relating  to  the 

implementation of Community rules within the framework of the 

common agricultural policy. 

- the act of accreditation. 

The  Commission  shall  be  informed  forthwith  of  any  change  in 

those particulars. 

4.  Where one or more of the conditions of accreditation are not, 

or are no longer, fulfilled by an accredited paying agency, the 

Member State concerned  shall inform the Commission,  and shall 

withdraw the accreditation unless the paying  agency makes the 

necessary  adjustments  within  a  time  limit  to  be  fixed  in 

relation to the seriousness of the problem. 

5.  The  financial  resources  earmarked  to  cover  the  expenditure 

referred  to  in Article  1(2) shall be mobilized  by  the Member 

States in accordance with the needs of their accredited paying 

agencies. 

6.  The  accredited  paying  agencies  and  the  coordinating  bodies 

shall  at  least  once  a year draw up  reports  and  a  summary of 

accounts relating  to the expenditure referred to in paragraph 

1(a). 

l\ 

Member  states  shall  communicate  those  reports  and  accounts  to 

the  Commission  and  shall  attach  to  them  a  report  drawn  up  by 

the  competent  auditing  or  supervisory  authorities  dealing  with 

such expenditure. 

7.  Detailed  rules  for  the  application  of  this  Article,  covering, 

in  particular,  the  conditions  and  procedure  for  the 

accreditation  referred  to  in  paragraph  1,  and  the  number  of 

paying  agencies  which  may  be  accredited,  shall  be  adopted  in 

accordance with the procedure laid down in Article 13." 

2.  Article  5 is replaced by the  following: 

"Article 5 

1.  Member  states  shall  at  regular  intervals  transmit  to  the 

Commission  the following information, concerning the  accredited 

paying  agencies  and coordinating  bodies  referred  to  in  Article 

4  and  relating  to  transactions  financed  by  the  Guarantee 

Section: 

(a)  statements  of  expenditure  and  estimates  of  financial 

needs; 

(b)  annual  accounts,  accompanied  by  the  information  required 

for 

clearance 

and 

an  attestation 

regarding 

the 

Integrality,  exactitude  and  veracity  of  the  accounts 

transmitted. 

\ 

2.  The Commission,  after consulting the Fund  Committee: 

(a) shall decide on monthly  advances  against booking of expenditure 

effected  by  the  accredited  paying  agencies.  Expenditure  for 

October  shall be  attached  to  October  if  it  is  effected  from  1 

to  15 October  and to November  if  it  is  effected  from  16 to  31 

October. Advance payments  shall be made to the Member State not 

later than the third working  day of the  second month  following 

that in which the expenditure  is effected; 

Additional  advances  may  be  made,  the  Fund  Committee  being 

informed at the next consultation; 

(b) shall, before 30 April of the year following the financial year 

concerned,  on  the  basis  of  the  information  referred  to  in 

paragraph  1(b), clear  the  accounts  of  the  accredited  paying 

agencies.  The  accounts  clearance  decision  shall  cover  the 

integrality, exactitude and veracity of the accounts  submitted. 

The  decision  shall  not  prejudice  the  adoption  of  a  subsequent 

decision pursuant to point (c); 

i2> 

(c) shall  decide  on  the  expenditure  to  be  deducted  from  the 

Community  financing referred to in Articles  2 and  3 where it 

finds that the expenditure has not been effected in compliance 

with  Community  rules.  The  Commission  shall  evaluate  the 

amounts  to  be  deducted  having  regard  in  particular  to  the 

significance of the non-compliance found. 

A refusal to finance may not involve expenditure effected prior 

to the two financial years preceding notification to the Member 

State by the Commission  of the results of those checks. This 

provision shall not apply to the financial consequences: 

- of irregularities as referred to in Article 8, point 2; 

" CODCerning  national  aids,  or  infringements,  for  which  the 

procedures referred to in Articles 93 and 169 of the Treaty 

have been initiated. 

H 

The Commission's  findings and the replies of the Member state 

concerned  shall  be  notified  in writing,  after  which  the  two 

parties  shall  endeavour  to  conciliate  their  respective 

positions concerning the action to be taken, before a decision 

is taken to refuse financing. 

3.  Detailed  rules  for  the  application  of  this  Article  shall  be 

adopted  in  accordance  with  the  procedure  laid  down  in 

Article 13.  Those  rules  shall  cover  in  particular  the 

procedures relating to the attestation of the accounts referred 

to  in  paragraph 1,  and  to  the  decisions  referred  to  in 

paragraph 2." 

3.  The  second  subparagraph  of  Article  8(2)  is  replaced  by  the 

following: 

"The sums recovered shall be paid to the accredited paying agencies 

and deducted by them from the expenditure financed by the Fund." 

4.  The first sentence of Article 9(2) is replaced by the following: 

"Without prejudice to the supervision effected by Member states in 

accordance with national provisions laid down by law, regulation or 

administrative  action  and without  prejudice  to  the  provisions  of 

Article 188(c) of the Treaty, or to any inspection organised on the 

basis  of  Article 209(c)  of  the  Treaty,  agents  appointed  by  the 

Commission to carry out inspections on the spot shall have access 

to the books and all other documents including information created 

or stored  in electronic  form relating  to expenditure  financed by 

the Fund." 

o 

Article 2 

1.  This Regulation shall enter into force on the seventh day following 

its  publication  in  the  Official  Journal  of  the  European 

Communities. 

Article  1(1)  shall  apply  from  the  financial  year  beginning  on 

16 October 1994. 

2.  The monthly advances referred to in Article 5(2)(a) of Regulation 

(EEC) No 729/70 as amended by this Regulation may be made to paying 

agencies  not  yet  approved  in  respect  of  expenditure  effected  up 

until 15 October 1995. 

3.  Refusal  to  grant  financing  as  referred  to  in Article  5(2)(c) of 

Regulation  (EEC) No  729/70 as amended by this regulation may not 

relate to expenditure claimed against a financial year prior to 16 

October 1991. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly 

applicable in all Member states. 

Done at Brussels, 

For the Council 

The President 

IG 

COUNCIL REGULATION  (EC) N* 

of 

94/0144 (CNS) 

amending the Financial Regulation of 21 December 1977 

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 209 thereof, 

Having regard to the proposal from the commission, (1) 

Having regard to the opinion of the European Parliament, (2) 

Having regard to the opinion of the Court of Auditors, (3) 

whereas  Article 5(2)  of  Council  Regulation  (EEC)  No 729/70  of 

21 April 1970 on the financing of the common  agricultural policy (4), 

as last amended by Regulation  (EC) No ..../..  (5), provides for a new 

system  of  clearance  of  the accounts  of  the  Guarantee  Section  of the 

European Agricultural Guidance and Guarantee Fund; whereas this system 

comprises the splitting of the old clearance of the accounts  into two 

separate types of decision, one covering the financial clearance of the 

accounts  submitted by the Member  States, and the other concerning the 

possible refusal of financing by the Fund of expenditure which was not 

(1) 

(2) 

(3) 

(4) OJ n* L94, 28.4.1970, p. 13 

(5) 

U 

disbursed  in  compliance  with  Community  rules; whereas  Article  102  of 

the Financial Regulation of 21 December  1977, applicable to the general 

budget  of  the  European  Community  (6),  last  modified  by  regulation 

(ECSC,  EEC,  Euratom)  No. 610/90  (7)  should  be  aligned  on  the  new 

clearance  of  accounts  procedure  in  order  to  specify  the  budgetary 

treatment of refusals of  financing. 

HAS ADOPTED THIS REGULATION: 

Article 1 

The Financial Regulation  is hereby  amended as follows: 

1.  Article  102 is replaced by the  following: 

"Article  102 

1.  The  object  of the clearance  of accounts  decision,  provided  for 

in Article  5(2)(b)  of  Regulation  (EEC) No 729/70,  shall  be  to 

determine  the  amount  of  expenditure  effected  in  each  Member 

state  during  the  financial  year  in  question  which  must  be 

recognized  as being  chargeable  to the EAGGF, without  prejudice 

to 

decisions 

taken 

subsequently 

in 

accordance 

with 

paragraph 2(c) of that Article (8). 

2.  The  object  of  the  decisions  referred  to  in Article 5(2)(c) of 

Regulation  (EEC)  No. 729/70  shall  be  to  determine  the 

expenditure  which,  because  the  relevant  measures  were  not 

implemented  in  compliance  with  Community  rules,  shall  be 

deducted from the Community  financing referred to in Articles 2 

and 3 of that Regulation. 

3.  The  schedule  for the clearance  of the accounts  is laid down  in 

Regulation  (EEC) No 729/70. 

(6) OJ n#  L356, 31.12.1977 

(7) OJ n# L70, 16.3.1990, p. 1 

(8) Amendments  are  underlined. 

18 

4.  The  outcome  of  the  clearance  decision  referred  to  in 

paragraph 1, i.e. any discrepancy which may exist between the 

total expenditure booked to the accounts for a financial year 

pursuant  to  Articles 100  and  101  and  the  total  expenditure 

recognized  as  allowable  by  the  Commission  when  clearing  the 

accounts shall be booked, under a single article, as additional 

expenditure, or a reduction in expenditure. 

5.  The outcome of the decisions referred to in paragraph 2 shall 

be booked under a single article as a reduction in expenditure. 

Article 2 

This Regulation shall enter into force on the seventh day following its 

publication in the Official Journal of the European Communities. 

It is applicable from the date of entry into force of Regulation  (EC) 

No.  .../.. of the Council of 

, amending Council Regulation  (EEC) 

No. 729/70 on the financing of the common agricultural policy. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly 

applicable in all Member states. 

Done at Brussels, 

For the Council 

The 

President 

Annex 

drift 

COMMISSION  REGULATION  (EC) No 

Of 

1994 

laying down detailed rules  for the application of  council 

Regulation  (EEC) No 729/70 regarding the procedure  for the 

clearance of the accounts of the EAGGF guarantee  fund 

( C(94) 1431 ) 

THE COMMISSION  OF THE EUROPEAN  COMMUNITIES, 

Having regard to the Treaty establishing  the European  Community; 

Having  regard  to  council  Regulation  (EEC) no 729/70  of  21 April  1970 on 

the  financing  of  the  common  agricultural  policy  as  last  amended  by 

Regulation  (EC)  no 

(1),  and  in  particular  Articles  4  and  5 

thereof; 

Whereas  the  reform  of  the  procedure  for  the  clearance  of  the  accounts, 

put  into  effect  by  council  regulation  (EC)  no 

(1), provides  for 

the  establishment  of  detailed  rules  regarding  the  approval  of  paying 

agencies and the presentation  of the annual accounts; 

whereas  the  evolution  of  the  number  and  nature  of  measures  financed  by 

the  EAGGF,  Guarantee  section,  together  with  the  evolution  in  techniques 

for  recording  and  transmitting  information  is  such  as  to  require  a 

revision  of  the  nature  and  content  of  the  information  to be  provided  to 

the Commission  for the purpose of the clearance of the accounts; 

Having regard  to the opinion  of the Fund  Committee, 

(1) 

HAS ADOPTED THIS REGULATION  : 

Article 1 

1. Each  Member  State  shall  limit  the  number  of  paying  agencies  to  be 

accredited  under  Article  4  (1)  of  Regulation  (EEC) No 729/70  to  a 

maximum  of  20.  This  limitation  shall  not  concern  the  number  of 

departments  charged with the administrative  and physical controls over 

claims,  nor to  the number  of departments  charged  with  attesting  their 

eligibility. 

i 

2. Each  Member  state  shall  ensure  that  the  administrative  procedures  of 

each Paying Agency,  and in particular their  internal controls, provide 

reasonable  assurance that : 

the eligibility  of claims and their accordance with Community  rules 

has  been  verified  by  authorized  departments  before  payments  are 

made, 

the accounting  records  are accurate and  complete, 

-  monthly  and  annual  accounts  are  presented  within  the  time-limits 

and in the form prescribed  by Community  rules. 

3. The  paying  agencies  shall,  for  every  payment  made,  keep  full  records 

establishing  the  eligibility  of  the  claim  and  keep  evidence  that  the 

prescribed  administrative  and  physical  controls  have  been  effected. 

However,  for  measures  attracting  a  large  number  of  claims,  these 

documents  may  be  kept  in  the  departments  responsible  for  authorising 

the  payments,  provided  these  departments  submit  to  the  paying  agency 

reports  regarding  the  number  of  checks  undertaken,  their  nature  and 

the measures  taken  in the light of the results. 

4. The  coordination  body  referred  to  in Article  4  (1)  (b) of  Regulation 

(EEC) N°  729/70  shall promote  the harmonisation  of  the  application  of 

Community  rules  and  the  equal  treatment  of  all  beneficiaries,  and 

shall  maintain  at  the  disposal  of  the  Commission  a  record  of  all 

expenditure  incurred  by  all  the  paying  agencies  under  each  measure. 

The  nature  and  minimum  content  of  this  record  shall  be  determined  by 

the  Commission.  The  Member  State  shall communicate  to  the  Commission 

information  concerning  the  name  and  the  statute  of  the  coordination 

body,  and  the  administrative,  accounting  and  internal  control 

conditions relating  to its operation. 

5. Before  accrediting  any  Paying  Agency,  the  Member  State  shall  check 

whether  the  administrative  and  accounting  arrangements  of  the  body 

concerned  comply  with  the requirements  referred to  in paragraphs  1, 2 

and  3. This  examination  shall  cover the  administrative  and  accounting 

conditions  adopted  to  discharge  the  responsibilities  set  out  in  this 

Article,  and  those  adopted  to  protect  the  community's  interests 

regarding  advances  paid,  guarantees  obtained,  intervention  stocks  and 

revenue and recoveries to be  collected. 

The  Member  state  shall  establish  a  report  including  in  particular  a 

* 

detailed  appraisal  of  those  arrangements  regarding  the  execution  of 

payments,  the  safeguarding  of  the  treasury,  the  security  of 

informatics  systems,  the  maintenance  of  accounting  records,  the 

division of duties and the adequacy  of internal and external controls. 

6. If  the report  shows  that  the  Paying Agency  examined  complies  with  all 

relevant  requirements,  the  Member  State  shall  proceed  to  its 

accreditation,  otherwise,  the member  State may  include  in  its  report 

instructions 

relating 

to 

the 

administrative 

and 

accounting 

arrangements, and in particular to any conditions the paying  agency is 

required to fulfil before accreditation may be  granted. 

Accreditation may be provisionally  granted  for a period to be fixed in 

relation  to the  seriousness of  the problem pending  the  implementation 

of  any  required  changes  to  the  administrative  and  accounting 

arrangements. 

7. The  act  of  accreditation,  which  when  relevant  sets  out  the  changes 

required  to  be  made  and  the  period  fixed,  is  communicated  to  the 

Commission, together with the report referred to in paragraph  5. 

n-

8. If  an  accredited  Paying  Agency  no  longer  fulfils  one  or  several 

conditions  required  for  accreditation  the  Member  State  concerned 

withdraws  the  accreditation  unless,  within  a  period  to  be  determined 

with  regard  to  the  seriousness  of  the  problem,  the  Paying  Agency 

implements  the  necessary  adaptation  measures.  The  Member  State 

communicates  a  report  to  the  Commission  which  shall  comprise  in 

particular  all  instructions  relating  to  the  administrative  and 

accounting  arrangements,  and  in  particular  to  the  adaptations  the 

paying  agency  is  required  to  carry  out  in  order  to  avoid  the 

withdrawal,  and the period  allowed  for  implementation. 

Article 2 

Each Member  State  shall charge a department  or body which  is functionally 

independent  of  the  Paying  and  coordinating  agencies  with  the 

responsibility  of  examining  the  annual  accounts  referred  to  in 

Article  5,  (l)(b)  of  Regulation  (EEC) No 729/70  (Certifying  body).  It 

shall  report  on  the  administrative  and  accounting  arrangements  referred 

to  in Article  1 of  each  Paying  Agency,  and  on  the effectiveness  of  these 

arrangements.  The  certifying  body  shall  conduct  its  examination 

according  to  internationally  accepted  auditing  standards.  The  checks 

shall be undertaken  both during  and after the end of each  financial year. 

Before  28 February  of  the  following  year,  the  Certifying  Body  shall 

establish  a  report  of  its  findings  which  shall  in  particular  state 

whether  it has  gained  reasonable  assurance  that  the  accounts  transmitted 

to  the  Commission  are  true,  complete  and  accurate,  and  supported  by 

evidence  that  the  respect  of  Community  rules  was  verified  when  the 

underlying  transactions were  executed. 

For the purpose of establishing  its reports, the Certifying body may take 

account  of  the  result  of  audits  performed  by  auditors  appointed  by  the 

Member  State  for the verification  of individual paying agencies, provided 

it  receives  satisfactory  assurances  that  the  scope  and  the  standards  of 

the audits performed were equivalent  to the requirements  laid down  in the 

first  subparagraph. 

ZS 

Article 3 

1. For  the  purpose  of  the  clearance  of  the  accounts  provided  for  in 

Article 5,  (2)(b) bf  Regulation  (EEC)  no 729/70,  the  Member  states 

shall send to the Commission : 

a) the  annual  summary  account  of  the  expenditure  charged  to  the 

guarantee  section  of  the  fund  and  reports  established  by  each 

department or body under Article 4, (6) of that regulation; 

b) the report established by the certifying body. 

2. The  annual  summary  account  shall  be  sent  to  the  Commission  by  31 

January of the year following the end of the financial year which it 

concerns. The remaining documents referred to in paragraph 1 shall be 

sent  in  four  copies  and must  be  received  by  the  Commission  at the 

latest on the following 15 March. 

3. At the request of the Commission, or at the initiative of the Member 

State, further information relating to the clearance of the accounts 

concerned may  be  sent to the Commission up to a deadline which the 

former  shall  set, taking  account of  the  amount  of work  required  to 

provide  that  information.  In  the  absence  of  this  information,  the 

Commission shall adopt the clearance of accounts on the basis of such 

information as is in its possession at that deadline. 

4. The Commission may accept a delay in sending information if it can be 

justified by exceptional circumstances. 

Article 4 

1. The accounts referred to in Article 3 (1) (a) shall include : 

a) the expenditure summarised by item of the Community budget; 

b) a  summary  of  intervention  operations  and  a  statement  of  the 

quantity and location of stocks at the end of the financial year; 

A 

c) information  regarding  each receipt or payment,  or confirmation  that 

the  detail  of  each  receipt  or  payment  is  held  on  computer  file  at 

the disposal of the  Commission; 

d) confirmation  that  the  details  of  each  movement  of  intervention 

storage  is held on  [computer] file; 

e) explanations  of differences between the expenditure declared  in the 

annual  accounts  and  that  declared  for  the  same  period  in  the 

documents  referred  to  in  Regulation  (EEC)  n*  2776/88  Article  3, 

(5),  as corrected under Article  9  (7) of that  regulation. 

The form and content  of each detailed record  and summary,  both written 

and  in  computer  form,  shall  be  established  by  the  Commission  after 

consulting  the  Fund  Committee  and  transmitted  to  the  Member  states 

within  six  months  of  the  entry  into  force  of  this  regulation.  Any 

modification  shall  be  communicated  to  the  Member  states  within  three 

months of the event occasioning  the modification  and the Member  States 

shall  implement  this  modification  within  three  months  after  its 

communication. 

Article 5 

The  supporting  documents  regarding  the  expenditure  financed  and  the 

income  receivable  by  the  EAGGF,  guarantee  section,  shall  be  kept  at  the 

disposal  of  the  Community  at  least  up  to. three  years  following  that  in 

which the Commission  clears the accounts of the financial year  concerned, 

or,  if later, one year after the conclusion  of any proceedings  before the 

Court of Justice concerning  that year. 

1ST 

Article 6 

1. The  communication  provided  for  under  article  4,  (1)  of  Regulation 

(EEC) n*  729/70  shall  contain  the  following  information  in respect  of 

each paying agency  : 

-  the responsibilities  attributed to it, 

-  the allocation of responsibilities  between its departments, 

-  its  relationship  with  other  bodies,  public  or  private,  which  are 

also charged with  a part  of the responsibilities  for executing  the 

measures under which it charges income or expenditure  to the fund, 

the manner  in which claims by beneficiaries  are received,  verified, 

and  validated,  expenditure  authorised  and  paid,  and  any  internal 

audits  conducted, 

2. The  reports  referred  to  in  Article  3,  (l)(a)  of  this  regulation, 

established  by  each  coordinating  and  paying  agency,  shall  contain  the 

following  information  : 

any  exceptional  transactions  or  technical  difficulties  experienced 

regarding the financial year  concerned. 

-  any  modification  since  the  preceding  report  of  the  information  in 

paragraph  1. 

3. The audit report referred to Article  3,  (l)(b) shall state : 

-  whether the annual summary  account referred to in Article  3,  (l)(a) 

is  in  accordance  with  the  books  and  records  of  the  funding  and 

paying agencies, 

-  whether  the  statements  of  income  and  expenditure  provided  for  in 

article 4  are  a  true,  complete  and  accurate  record  of  the 

operations  charged  to the  fund,  and  fully  supported  by  evidence  of 

the  eligibility  of  claims  and  by  evidence  of  compliance  with  the 

Community  rules by the responsible  services, 

-  whether  the  financial  interests  of  the  community  are  properly 

protected 

as 

concerns 

advances, 

guarantees, 

debtors 

and 

intervention stores, 

x> 

-  whether  the  paying  agencies'  procedures  are  such  as  to  give 

reasonable  assurance  of compliance  of the operations  charged  to the 

. Fund with community  rules. 

The  audit  report  shall be  accompanied  by  the  information  laid  down  in 

annex  1 on  the work done  and  on the operations  of other  audit bodies, 

internal or external to the paying  agencies, from which  all or part of 

the  Certifying  Body's  asssurance  on  the  matters  reported  was  gained 

[cf. present  annex XI, regulation  1723/72]. 

Article 7 

1. For  the  purpose  of  the  clearance  of  the  accounts  provided  for  in 

Article  5,  (2)(b) of  Regulation  (EEC) n*  729/70, the  Commission  may, 

both  during  and  after  the  financial  year  concerned,  verify  the 

integrality,  exactitude  and  veracity  of  the  information  submitted 

under Article  3 by : 

a) undertaking  verifications  in  the  paying  and  coordinating  agencies 

and in the certifying bodies, 

b) examining  the  information  in  Article  4,  (1)  (c)  which  it  may 

require  the  Member  States  to  submit  in  documentary  or  in  magnetic 

form, 

c) examining  such  additional  information  and  explanations  as  it  may 

require. 

The clearance decision  shall fix the amount which  is recoverable  from, 

or payable, to each Member  state after deducting the advances  received 

in  respect  of  the  financial  year  concerned  from  the  expenditure 

declared  under Article  3 for the  same year,  subject  to  any  amendments 

which  are  found  necessary  as  a  result  of  the  commission's 

verifications. 

fr 

The  Commission  shall  communicate  the  results  of  its  verifications  to 

the Member  State  concerned,  together with  any  amendments  it proposes, 

before  31  March  following  the  end  of  the  financial  year.  The  Member 

State and the Commission  shall endeavour  to adopt  jointly  an  agreement 

on  the  amendments  to  be made  to  the  expenditure  declared,  and  either 

party  may  submit  the  case  to  the  conciliation  body  provided  for  in 

Article  10, which  shall endeavour  to bring the parties to an agreement 

before  the  following  15 April,  in  the  absence  of  an  agreement  before 

that  date,  a  report  on  the  disagreement  shall  be  established  at  the 

latest  on  15  April  and  the  conciliation  body  shall  apend  its 

conclusions  regarding  each  party's position. The  Fund  committee  shall 

be informed  of the outcome of the conciliation  procedure. 

Article 8 

this  article 

shall  be  proposed 

setting  up  an  ad-hoc  conciliation 

The  text  of 
decision 

light  of  any 

earlier 

the 

in 
body. 

1. when,  as  a  result  of  any  enquiry,  the  Commission  considers  that 

expenditure  was  not  effected  according  to  Community  rules,  it  shall 

communicate  to the Member  State concerned  its findings, the  corrective 

measures  to  be  taken  to  ensure  future  compliance,  its  evaluation  of 

any  loss  to the  guarantee  fund  over  the period  covered  by  the  enquiry 

and  of the  significance  of  the non-compliance.  The Member  State  shall 

reply  within  two  months,  and  the  Commission  may  amend  its 

communication  accordingly. 

2. The  Member  state  and  the  Commission  shall  endeavour  to  adopt  jointly, 

within  three  months  of  the  date  of  the  Commission's  first 

communication,  an  agreement  concerning  the  measures  to  be  taken,  the 

period  of  implementation  and  the  expenditure  to  be  refused  as  a 

consequence  of  the  non-compliance,  and  inform  the  Fund  Committee  of 

the Commission's  findings, and of the terms of the  agreement. 

3. If the  agreement  cannot  be  reached  within  this period,  the  Commission 

shall record  this  failure  and : 

a) either party may, within one month of that date, submit the case to 

the  conciliation  body  provided  for  in Article  10.  This  body  shall 

require  written  submissions  by  both  parties,  shall  hear  their 

representatives,  may  examine  the  Commission's  files  and  records 

26 

which  support  the  findings  of  the  enquiry  and  may  call  for 

additional  information from both parties.  The body  shall endeavour 

to bring the parties to an agreement within  four months of the date 

of  submission.  In  the  absence  of  this  agreement,  a report  on  the 

disagreement  shall  be  established  and  the  conciliation  body  shall 

append  its  conclusions  regarding  each  party's  position.  The  Fund 

committee  shall  be  informed  of  the  result  of  the  conciliation 

procedure; 

b) the  Commission  may  undertake  any  further  verifications  required  to 

substantiate  its  evaluation  of  the  loss  suffered  by  the  guarantee 

section  of  the  fund  from  the  Member  State's  failure  to  ensure 

compliance  with Community  rules. 

4. After  consulting  the  Fund  Committee,  the  Commission  shall  decide  the 

amount  of  expenditure  to be deducted  from the Community  financing,  as 

provided  for  in  Article  5(2)(c)  of  regulation  (EEC)  729/70,  after 

examining  in  particular  any  agreement  reached  under  paragraph  2  of 

this  article,  any  report  established  by  the  conciliation  body  under 

paragraph  3(a) 

and 

the 

results 

of 

any 

verification 

under 

paragraph 3(b). 

Article 9 

The  Commission  shall,  after  consulting  the  Fund  Committee,  adopt 

guidelines  on  the  scheduling  of  the  clearance  enquiries,  on  the  working 

methods  to  be  employed,  and  on  the  evaluation  of  the  financial 

consequences  which  assure  a  consistency  in  method  and  an  equality  of 

treatment  between Member  states. 

Article  10 

this  article 

shall  be  proposed 

setting  up  an  ad-hoc  conciliation 

The  text  of 
decision 

light  of  any 

earlier 

the 

in 
body. 

[A  conciliation  body  shall  be  established,  composed  of  five  independent 

persons,  of  which  one  the  chairman,  all  appointed  by  the  Commission, 

after  consulting  the  Fund  Committee.  The  chairman  and  two  other  members 

of the body  shall constitute  a quorum. 

2\ 

The composition  of the body  shall be reviewed  at the expiry of each third 

year,  or  on  the  resignation  of  a member  of  the body.  Any  change  in  the 

composition  shall  be  made  by  the  Commission  after  consulting  the  Fund 

committee. 

The body shall be assisted by a secretariat, provided by the  Commission's 

services. 

The  body  shall  adopt  its  own  internal  rules  of  procedure  which  shall 

include  provisions  regarding  the  impartiality  of  its  members,  the 

protection of data and the confidentiality of its proceedings]. 

Article  11 

1. Regulation  (EEC) no  1723/72 is hereby  repealed. 

2. This  regulation  enters  into  force  on  [16 October  1994]  with  the 

exception  of  the  provisions  regarding  certification  which  come  into 

force in respect of the guarantee year ended  [15 October  1995]. 

This Regulation  shall be binding  in its entirety  and directly  applicable 

in all Member States. 

Done at Brussels, 

For the commission 

30 

J jl 

ISSN 0254-1475 

COM(94) 240 final 

DOCUMENTS 

EN 

0103 

Catalogue number : CB-CO-94-264-EN-C 

ISBN 92-77-70234-6 

Offîçe for Official Publications of the European Communities 

L-2985 Luxembourg