Draft FINANCIAL REGULATION applicable to development finance cooperation under the Fourth ACP-EEC Convention amended by the Agreement of 14 November 1995
Date: 1996-12-13
Institutions: European Commission
Subjects: European Investment Fund, Member States' contribution, development aid, fourth Lomé Convention

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.12.1996 
COM(96) 676  final 

96/0307 (CNS) 

Draft 

FINANCIAL REGULATION 

applicable to development finance cooperation under the 
Fourth ACP-EEC Convention amended by the 
Agreement of 4 November 1995 

(presented by the Commission) 

EXPLANATORY  MEMORANDUM 

In accordance  with  the terms of  Article  32 of  the  Internal  Agreement  for  the eighth  EDF, 
this Regulation  sets out the provisions implementing that Internal  Agreement. 

The  Council  must  give  its  opinion  by  a  qualified  majority,  having  first  received  the 
opinions of the European  Investment Bank and the Court of Auditors on this  draft. 

Summary 

Title  I  : 

Financial  estimates,  rules  for  payment  of  contributions  to  the  EDF  by  the 
Member  States and general principles. 

Title II  : 

Financial  administration  of EDF appropriations  by the  Commission. 

Section I : 
Section II : 
Section HI :  Commitment, validation, authorization and payment of expenditure 

General provisions 
Revenue and debts 

1. 
2. 
3. 
4. 
5. 
6. 
7. 

Commitment of expenditure 
Assigned funds 
Validation of expenditure 
Authorization of expenditure 
Payment of expenditure 
Payments effected  locally 
Imprest accounts 

Section IV :  Accounts 
Section V : 

Responsibilities  of  authorizing  officers, 
accounting officers  and administrators of advance funds 

financial 

controllers, 

Title  III  : 

Implementing  measures 

Section I : 

EDF operations administered by the Commission 

1. 
2. 
3. 
4. 

General 
Tenders and contracts 
Structural adjustment support 
Management  of  the  export  earnings  stabilization  system 
(Stabex). 

Section II : 

Aid managed by the Bank 

1. 
2. 

Risk capital 
Subsidized loans 

2 

Title IV : 

Executive agents 

1. 
2. 

The Chief Authorizing Officer 
The paying agent 

Title V : 

Presenting and auditing accounts 

Title VI  : 

General and final provisions 

Annex 

v 

DRAFT 

FINANCIAL REGULATION 

of 

1996 

applicable to development finance cooperation 
under the Fourth ACP-EEC Convention amended by  the Agreement  of 4 November  1995 
(96/.../EC) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to the Treaty  establishing the European  Community,  hereinafter  referred  to  as 
"EC treaty" 

Having  regard  to  the Fourth  ACP-EEC  Convention,  signed  at Lomé on  15 December  1989, 
hereinafter  referred  to as "the Convention", amended  by  the  Agreement  signed  in  Mauritius 
on 4 November  1995, 

Having regard  to the Internal  Agreement  on the financing  and  administration  of  Community 
aid,  signed  in  Brussels  on  20  December  1995,1  hereinafter  referred  to  as  "the  Internal 
Agreement" and in particular Article 32 thereof, 

Having  regard  to  Council  Decision  91/482/EEC  of  25  July  1991  on  the  association  of  the 
overseas  countries  and  territories  with  the  European  Economic  Community,  hereinafter 
referred  to as  "the Decision",  amended  by the Decision of 

,3 

: 

Having  regard  to  the  General  Regulations  and  General  Conditions  for  Works,  Supplies  and 
Service Contracts financed  by the European Development Fund  which were approved  by the 
ACP/EEC  Council  of  Ministers  on  29  March  1990  (hereinafter  referred  to  as  "the  General 
Regulations and Conditions of Contract"), 

Having regard to the draft Financial Regulation submitted by the Commission, 

Having regard to the opinion of the European Parliament, 

î 

3 

OJNo 

OJNoL263,  19.9.1991, p. 1. 

OJNo 

OJ No L 382, 31.12.1990, p.3. 

5 

OJ No  .,  . . 

Having regard to the opinion of the European Investment Bank, hereinafter  referred  to'as  "the 
Bank". 

Having regard to the opinion of the Court of Auditors, 

Whereas, pursuant to Article 1  (1) of the Internal Agreement, the Member States have set up an 
Eighth European Development Fund, hereinafter  referred to as "the EDF"; 

Whereas,  under  Article  32  of  the  Internal  Agreement,  the  provisions  for  implementing  this 
Internal  Agreement shall be the subject of a Financial Regulation adopted, upon the entry into 
force of the Convention, by the Council acting by the qualified majority  laid down in Article 21 
(4) of the said Agreement; 

HAS ADOPTED THIS FINANCIAL REGULATION: 

6  OJ No  .  .  .  . 

6 

TITLE I 

FINANCIAL  ESTIMATES, 
RULES  FOR  PAYMENT 
OF  CONTRIBUTIONS  TO THE  EDF BY THE  MEMBER  STATES 
AND  GENERAL PRINCIPLES 

Article 1 
The  amount  of  the  8th  EDF  set  in Article  1 of  the  Internal  Agreement  shall  be  allocated 
according  to the  credit  lines  given  in Annex  1,  for  which  the appropriations  and  rules  of 
transfer  are  laid  down  by  the  Convention,  Decision  91/482/EEC,  fourth  paragraph  and 
the Internal  Agreement. 

Article 2 

1. Annual contributions to the EDF shall be called up in four instalments payable on: 

- 20 January, 
-1 April, 
-1 July, 
-1  November. 

Supplementary  contributions decided on by the Council in accordance with Article 6 (4) of the 
Internal Agreement shall, unless otherwise decided by the Council, be due and be made within 
as  brief  a  period  as  possible  which  shall  be  laid  down  in  the  decision  to  call  for  such 
contributions and which may not exceed three months. 

2.  The  Commission  shall  notify  the  Member  States  as  soon  as  possible,  not  later  than  the 
beginning of each financial  year, and on the basis of the Council decision referred  to in Article 
6 (1) of the Internal Agreement, of the amount of the instalments of contributions to be paid on 
each of the due dates. The Commission shall set the amounts to be paid by each Member  State 
so that they  are in proportion to  its  contributions  to the EDF  as fixed in Article  1 (2)  of  the 
Internal Agreement. 

The Commission shall inform the Member States of any alteration to the amount of the calls for 
contributions  as soon  as possible before the date on which each instalment of  contributions  is 
due,  on  the  basis  of  the  cash  situation  of  the  EDF  and  its  expenditure  estimates  for  the 
remainder of the year. 

3. Where an instalment of contributions payable under this Article is not paid within  15 days of 
the  due  date, the Member  State concerned  shall be required  to  pay  interest  in  respect  of  the 
amount  not  paid  on  the  basis  of  a  rate  of  two  percentage  points  above  the  interest  rate  for 
short-term financing applicable on the date on which the instalment is due on the money market 

^ 

of the Member State for the ecu. This rate shall be increased by 0.25 of a percentage point for 
each month  of  delay.  The  increased  rate  shall be  applicable  to  the  entire  period  of  delay. 
Amounts received by the Commission in respect of such late payment interest shall be credited 
to the account provided for in Article 9 (2) of the Internal Agreement. 

Article 3 

1. The financial contributions of the Member States shall be expressed in ecus. 

2. Each Member State shall pay the amount of its contribution in ecus. 

3. Financial contributions shall be credited by each Member State to a special account entitled 
"Commission of the European Communities - European Development Fund" opened with the 
bank of issue of that Member State or the financial institution designated by it. The amount of 
such contributions shall remain in these special accounts until required to meet payments needs 
provided for in Article 319 of the Convention. 

4. Upon expiry of the Convention,  that part of  the  contributions which the Member  States 
remain obliged to make shall be called up by the Commission, as required on the conditions 
laid down in this Financial Regulation. 

Article 4 

1. The ecu is the sum of specified  amounts of the currencies of the Member  States as set 
out in Council Regulation  (EC) No 3320/94 of 22 December  1994, on the consolidation 
of  the  existing  Community  legislation  on  the  definition  of  the  ecu  following  the  entry 
into force of the Treaty on European Union.7 

Any change in the composition of the ecu decided on by the Council pursuant  to the EC 
Treaty, shall automatically apply to this provision. 

2.  The value of the ecu  in a given currency  shall be equal  to the sum of  the equivalents 
of the amounts of the currencies which make up the ecu. 

It  shall  be  determined  by  the  Commission  on  the  basis  of  the  exchange  rates  recorded 
each day on the exchange markets. 

The daily rates for  conversion into the various national currencies shall be available each 
day and shall be published  in the Official  Journal of the European Communities. 

3.  Any  operations  involving  conversions  of  the  ecu  into  a  national  currency  shall,  in 
principle,  be  effected  on  the  basis  of  the  exchange  rate  applicable  on  that  day; 

OJ No L 350, 31.12.1994, p.27. 

derogations  from  this  principle  may  be  permitted  in  exceptional  cases,  in  accordance 
with  the  implementing  rules  referred  to  in  Article  139  of  the  Financial  Regulation 
applicable  to the general  budget of  the European  Communities. 

Article 5 

In  order  to  make  payments  provided  for  in  Article  319(1)  and  (4)  of  the  Convention,  the 
Commission  shall open accounts with financial  institutions  in the ACP  States  and  the  OCT, 
for  payments  in the national  currencies  of the ACP States or  in the local currencies  of  the 
OCT,  and  in  the  Member  States,  for  payments  in  ecus  and  other  currencies.  Subject  to 
Article  319  (3)  of  the  Convention,  deposits  in  these  accounts  shall  bear  interest.  Subject  to 
Article  192 of  the  Convention,  such  interest  shall be  credited  to  the  account  provided  for  in 
Article 9 (2) of the Internal Agreement. 

Article 6 

1. The  Commission  shall  transfer  from  the  special  accounts  opened  pursuant to  Article  3(3) 
amounts needed to replenish the accounts opened  in its name in accordance with Article  5 of 
this Financial  Regulation.  Such transfers  shall be made on the basis of the cash  needs  of  the 
projects and programmes. 

2. The Commission  shall, as far  as possible, make any withdrawals from  the special  accounts 
referred  to  in  Article  3 (3)  in  such  a way  as to  maintain  a distribution  of  its  assets  in  those 
accounts corresponding to the proportions in which the various Member States contribute to the 
EDF. 

Article 7 

The  signatures  of  the  Commission  officials  and  agents  who  are  empowered  to  carry  out 
operations on the EDF's accounts shall be lodged with the banks concerned when the accounts 
are opened or, in the case of officials  and agents who are authorized  subsequently,  when they 
are designated.  This  procedure  also  applies  to  the  lodging  of  signatures  of  national  and 
regional  authorizing  officers  and  their  deputies  for  operations  in  paying  agent  accounts 
opened  in the ACP  States  or  the  OCT  and,  where  appropriate,  in the  accounts  opened  in 
the Member  States. 

Article 8 

1.  EDF  resources  must  be  used  in  accordance  with  the  principles  of  sound  financial 
management, and in particular those of economy  and  cost effectiveness.  Quantified  objectives 
must be identified  and the progress of their realization monitored, 
see Article 6 

9 

2.  To  this  end  the  use  of  EDF  resources  must  be  preceded  by  an  evaluation .of  the 
operation  to be undertaken  with  a view  to ensuring  that  the expected  results justify  the 
means deployed. 

3.  All operations  must be periodically  examined  and their  grounds checked,  particularly 
with a view  to the estimates  of  calls  for  contributions  referred  to  in Article  6(1)  of  the 
Internal Agreement. 

Article 9 
1.  The  financing  decisions  taken  pursuant  to  Articles  25  and  27  of  the  Internal 
Agreement,  with  regard  to  aid  administered  by  the  Commission,  and  the  financing 
agreements,  have  a  time  limit  for  starting  implementation  of  the  project.  Beyond  this 
date, the financing  decision and agreement no longer apply. 

2.  The  financing  decisions  referred  to  in  paragraph  1  also  have  a  time  limit  for 
implementation of  the operation.  Continuation of the operation beyond this date must be 
justified  by  the  third  party  beneficiary  and  accepted  by  the  Commission  before  the 
implementation time limit expires. 

TITLE n 

FINANCIAL  ADMINISTRATION  OF  EDF  APPROPRIATIONS  BY  THE 
COMMISSION 

SECTION I 
GENERAL PROVISIONS 

Article 10 
Subject  to Article  15 (3)(c) and Article 39, the provisions of this Title are not applicable 
to risk capital and interest rate subsidies managed by the Bank. 

Article 11 

1. Appropriations shall be administered by authorizing officers, who alone shall have the power 
to enter into commitments regarding expenditure, establish sums due to be collected and issue 
recovery orders and payment orders. 

2. Collection and payment operations shall be carried out by the accounting officer. 

3.  The  duties  of  authorizing  officer,  financial  controller  and  accounting  officer  shall  be 
mutually incompatible. 

Article 12 

1 «o 

Where  revenue  and  expenditure  operations  are  managed  by  means  of  integrated  computer 
systems, the provisions of Sections II and HI of this Title shall apply with due allowance for the 
possibilities and requirements deriving from computerized management. 

To this end: 

- 

- 

the supporting documents may remain with the authorizing officer  or the accounting  officer 
or their deputies for the purposes of checking, 
signatures and approvals may be added in appropriate computerized  form. 

However, the financial  controller may request the original supporting documents if he considers 
it necessary for the purposes of checking. 

The financial  controller shall be consulted on the setting up of the EDF accounting system and 
shall have access to the data of the system. 

Article 13 

1. In  accordance  with  Article  311  (1)  of  the  Convention,  the  Commission  shall  appoint  the 
chief authorizing officer  of the EDF. 

2.  The  chief  authorizing  officer  of  the  EDF  may  delegate  his powers  of  implementation 
of  the  EDF  to  authorized  persons,  whom  he  shall  appoint,  subject  to  approval  by  the 
Commission.  The rules governing responsibilities  adopted under this Title shall apply to such 
persons  within  the  limits of the powers  delegated  to them. Each  decision to  delegate  powers 
shall state the extent and,  where appropriate,  the duration  of the delegation. 

3. Those to whom powers are delegated may act only within the limits of the powers expressly 
conferred upon them. Decisions to delegate powers shall be notified  to those to whom  powers 
are delegated, to the accounting officer,  the financial  controller, the authorizing officers  and the 
Court of Auditors. 

Article 14 

1.  The  financial  controller  of  the  EDF  shall  be  the  financial  controller  of 
the 
Commission.  He  shall  be  responsible  for  monitoring  the  commitment  and  authorization  of 
expenditure  and  for  monitoring  the  recording  and  collection  of  revenue  and  debts.  The 
financial  controller may be assisted in his duties by one or more assistant financial  controllers. 

2. Monitoring shall be carried out by the financial  controller by means of inspection of the files 
and,  if  necessary,  on  the  spot.  In  this  connection  he  shall  have  access  to  files  relating  to 
commitments,  expenditure  and  revenue  and,  where  appropriate,  to  files  relating  to 
appropriations  and  assigned  funds.  Any  document  or  information  drawn  up  or  kept  on  a 
magnetic  medium  which  the  financial  controller  deems  necessary  for  the  performance  of 
his work shall be sent  to him at his  request. 

/in 

3. The special rules applicable to the financial  controller are those  laid  down  in  the  Financial 
Regulation applicable  to the general budget of the European  Communities. 

Article 15 

1. The  accounting  officer  shall  be  appointed  by  the  Commission.  He  may  be  assisted  in 
his  duties  by  one  or  more  assistant  accounting  officers  appointed,  on  the  basis  of  a 
reasoned  opinion  by  the  accounting  officer,  under  the  same  conditions  as  the  accounting 
officer. 

2.  The  accounting  officer  shall  be  responsible  for  the  collection  of  revenue  and  the 
payment  of  expenditure,  the  recovery  of  debts  and  the  management  of  the  cash  flow. 
Subject to Article  36, the accounting officer  alone shall be  empowered  to manage  funds  and 
assets. He shall be responsible for their care. 
3. The accounting officer  shall be responsible for maintaining the accounts  for: 

(a) the appropriations  referred  to in Article  1 ; 
(b) the commitments  referred  to in Article 20; 
,(c) the risk capital decisions  and  interest rate subsidies  referred  to in Article 39; 
(d) payments, revenue and debts. 

4.  The  accounting  officer  shall be responsible  for  the  preparation  of  the  financial  statements 
referred to in Article 68 (2) of this Financial Regulation. 

Article 16 

The  Court  of  Auditors  shall  be  notified  of  the  appointment  of  the  authorizing  officer,  the 
accounting officer  and the administrator of advance funds  referred  to  in Article  36 and of the 
accounting plan referred to in Article 40. The Commission shall forward  to the Court any rules 
of procedure drawn up by it in respect of financial matters. 

/ i£ 

SECTION n 
REVENUE and DEBTS 

Article 17 

1. EDF revenue consists of payments made by the Member States in accordance with the 
Internal  Agreement,  the  income  generated  by  deposits  and  any  other  sum  whose 
acceptance is established by the Council. 

2.  The  accounting  officer  shall  be  responsible  for  the  monitoring  and  entry  in  the 
accounts of payments by the Member States and other revenue. 

3.  For all other  revenue,  the accounting  officer  shall draw  up a revenue  order  which is 
sent  to  the  financial  controller  for  prior  approval.  The  purpose  of  the  approval  of  the 
financial  controller  shall be to establish that: 

(a) the revenue is booked to the correct item; 
(b) the order  is in order and conforms  to the relevant provisions; 
(c) the supporting documents are in order; 
(d) the order conforms  to the principles of sound financial  management; 
(e) the amount and currency of the revenue are correct. 
Entry  in  the  accounts  of  revenue  becomes  final  after  the  approval  of  the  financial 
controller. 

Article 18 

1. All measures or situations which may give rise to or modify a debt due to the Commission 
must be preceded by a debt estimate from the authorizing officer.  Such estimates shall be sent 
to  the  financial  controller  for  his  approval  and  to  the  accounting  officer  for  provisional 
recording in the accounts. They shall mention, in particular, the type of revenue, the estimated 
amount  thereof  and  the  budget  item  to  which  it  is  to  be  booked  and  also  the  name  and 
description of the debtor.  The purpose of the approval of the financial  controller  shall be to 
establish that: 

(a) 
(b) 

the revenue is booked to the correct item; 
the  proposal  is  in  order  and  conforms  to  the  relevant  provisions  relating  to  the 
management  of  the  EDF  and  all  acts  made  in  implementation  thereof  and  to  the 
principles of sound financial management referred to in Article 8. 

The financial controller may withhold his approval if he considers that the conditions laid down 
in paragraph 1  (a) and (b) above have not been met. 
The  Commission  may,  by  a  decision  stating  the  full  reasons  therefore,  and  on  its  sole 
responsibility,  overrule  this  refusal.  This  decision  shall  be  final  and  binding;  it  shall  be 
communicated  for  information  to the financial  controller.  The Commission  shall  inform  the 
Court of Auditors of all such decisions within one month. 

*  3> 

2. Without prejudice to the provisions of Article  12, the  authorizing officer  shall draw up, in 
respect of every established,  liquid  and payable debt due to the Commission  in the  context 
of  the  implementation  of  EDF  appropriations,  a  recovery  order  which  shall  be  sent  with 
supporting  documents  to the financial  controller  for  his  prior  approval.  Such recovery  orders 
shall,  after  they  have  received  the  approval  of  the  financial  controller,  be  recorded  in  the 
accounts by the accounting  officer. 

The purpose of the approval shall be to establish that: 

(a) 
(b) 
(c) 
(d) 
(e) 
(f) 

the revenue is booked to the correct item; 
the order is in order and conforms to the relevant provisions; 
the supporting documents are in order; 
the debtor is correctly described; 
the due date is indicated; 
the order conforms to the principle of sound financial  management referred  to in Article 

(g) 

the amount and currency of the sum to be recovered are correct. 

If approval is withheld, the third subparagraph of paragraph  1  shall apply. 

3. If the authorizing officer waives the right to recover a debt as referred  to  in paragraph  1, he 
shall send beforehand  a proposal for cancellation to the financial  controller for his approval and 
to  the  accounting  officer  for  his  information.  The  purpose  of  approval  by  the  financial 
controller  shall be to  establish that the waiver is in order  and  conforms  with  the principles  of 
sound  financial  management.  The  proposal  concerned  shall  be  registered  by  the  accounting 
officer. 

If approval is withheld, the last subparagraph of paragraph  1  shall apply. 

4. Where the financial controller finds that a recovery  order  has not been drawn up or that a 
sum due has not been recovered, he shall inform the Commission thereof. 

Article 19 

1. The accounting officer  shall  assume  responsibility  for recovery orders that have been duly 
drawn up. 

2. The accounting officer  shall do all in his power to ensure that the debts referred  to in Article 
18 are  recovered  at  the  due  dates  indicated  in  the  recovery  orders  and  shall  ensure  that  the 
relevant rights of the Community are safeguarded. 

3. The accounting officer  shall inform the authorizing officer  and the financial  controller of any 
debts  not recovered within the time limits laid down. 

A  y 

4. If necessary,  he shall  initiate the recovery procedure. 

SECTION  m 
COMMITMENT,  VALIDATION, AUTHORIZATION AND PAYMENT  OF 
EXPENDITURE 

1. Commitment of expenditure 

Article 20 

1.  All  measures  which  may  give  rise  to  expenditure  payable  by  the  EDF  must  be 
preceded  by  a proposal  for  commitment  of  expenditure  from  the authorizing  officer  and 
can  create  legal  obligations  vis-à-vis  third  parties  only  after  approval  by  the  financial 
controller  of  the proposal  for  commitment and after  a Commission financing  decision. 

2. Financing decisions taken by the Commission in accordance with Articles  25  to  27  of  the 
Internal  Agreement  and the provisions authorizing it to grant financial  aid from  the EDF shall 
constitute commitments of expenditure. 

Article 21 

1. Without prejudice to Article  12, proposals for commitments, accompanied by the supporting 
documents,  shall  be  transmitted  to the financial  controller.  They  shall  show  in  particular  the 
purpose of the expenditure, the estimated amount involved, the item to which it is to be charged 
and the name and description of  the recipient of the  financing. 

2.  Proposals  for  commitments  shall be  subject  to  endorsement  by  the  accounting  officer 
after approval by the financial controller and a Commission  financing  decision. 

Article 22 

1. The purpose of approval of proposals for commitment by the financial  controller shall be to 
establish that: 

(a) 
(b) 
(c) 
(d) 

(e) 

the proposal  conforms  to Article 20(1); 
the expenditure has been charged to the correct item; 
appropriations are available; 
the financing  proposal  is correct  and  in conformity  with  the  provisions  applicable  to 
the EDF; 
the principles of sound financial management referred to in Article 8 have been applied. 

2. Approval may not be conditional. 

A  ^ 

Article 23 

1. The financial  controller may withhold  his  approval  if he  considers  that  the  conditions  laid 
down  in  Article  22  are  not  met.  If  he  withholds  his  approval,  he  shall  furnish  a  written 
statement giving the reasons therefor.  The authorizing officer  shall be notified accordingly. 

Where approval is withheld and the authorizing officer  maintains his proposal, the refusal  shall 
be referred for a decision to the Commission. 
2. Except where the availability of appropriations is in doubt, the Commission may, by means 
of a decision stating the full reasons therefor and taken on its sole responsibility, overrule such a 
refusal.  This  decision  shall be final and binding;  it shall be communicated  for  information  to 
the  financial  controller.  The  Commission  shall  inform  the  Court  of  Auditors  of  all  such 
decisions within one month. 

2.  Assigned  funds 

Article 24 

1.  The  contracts  concluded  by  the  beneficiary  for  the  implementation  of  a  project  or 
programme  which  was  the  subject  of  a  financing  decision  referred  to  in  Article  20  (2) 
and  approved  by  the  Head  of  Delegation,  shall  be  recorded  in  the  accounts  by  the  chief 
authorizing  officer.  This recording  is called  assigned  funds.  The  same holds  for  contracts 
and  estimates  concluded  directly  or  on  behalf  of  the  beneficiary  by  the  Commission  for 
the  implementation  of  such projects  and programmes. 

2.  The  assigned  funds  recorded  shall  be  set  off  against  commitments  of  expenditure  of 
the financing  decisions referred  to in Article 20(2). 

3. Validation of expenditure 

Article 25 

The validation of expenditure shall be the act whereby the authorizing  officer: 
(a) 
(b) 

verifies the existence of the creditor's claim; 
determines or verifies the existence and the amount of the sum due; 
and 
verifies the conditions under which payment falls due. 

(c) 

1£ 

Article 26 

1. Validation  of  any  expenditure  shall be subject  to the submission  of  supporting  documents 
showing the creditor's  claim and, where appropriate, the service rendered or the existence of a 
document justifying  payment.  The Commission shall lay down the nature and contents  of  the 
supporting documents to be enclosed with the payment orders. 
2. For certain categories of expenditure, advances may be granted. 

3.  The  authorizing  officer  empowered  to  validate  expenditure  shall  personally  check  the 
supporting documents or shall, on his own responsibility, ascertain that this has been done. 

4. Authorization of expenditure 

Article 27 

Authorization  is  the  act  whereby  the  authorizing  officer,  by  the  issue  of  a  payment  order, 
authorizes the accounting officer  to pay an item of expenditure which he has validated. 

The payment order shall state: 

Article 28 

(a) 
(b) 
(c) 
(d) 
(e) 
(f) 

the item against which payment shall be charged; 
the amount to be paid, in figures and in words, showing the currency; 
the name and address of the  beneficiary; 
the bank account; 
the method of payment; 
the purpose of the expenditure. 

The payment order shall be dated and signed by the authorizing  officer. 

Article 29 

1. The payment order shall be accompanied by the original supporting documents, which shall 
bear or be accompanied by a statement  confirming that the amounts to be paid are correct and 
that the supplies  have been received or the service performed.  The payment order  shall  show 
the numbers and dates of the relevant approvals of commitment. 
2. Copies of the supporting documents, certified  as true copies by the authorizing officer  or the 
Commission delegate, may, in duly warranted cases, be accepted in place of the originals. 

Article 30 

1. Subject  to  Article  35,  payment  orders  shall  be  sent  to  the  financial  controller  for  prior 
approval. The purpose of this prior approval shall be to establish that: 
(a) the payment order was properly issued; 
(b) the payment order agrees with the creditor's  claim; 

13 

(c) the expenditure is charged to the correct item; 
(d) the appropriations are available; 
(e) the supporting documents are in order; 
(f) the payee is correctly named and described. 

Z-  Should approval be withheld, the provisions of Article 23 shall apply. 

3. After  approval by the  financial  controller,  the original of the payment order, together with 
all supporting documents, shall be forwarded to the accounting  officer. 

5. Payment of expenditure 

Article 31 

1. Without prejudice to Article 313 and 319 (8) of the Convention concerning respectively  the 
responsibilities  of  the  national  authorizing  officer  and  the  financial  liabilities  of  the  agents 
responsible for the management and execution of development finance cooperation, payment is 
the final action whereby the EDF is discharged of its obligations towards its creditors. 

2. Subject  to  Article  36, payment shall be made by the accounting officer  within the limits of 
the funds available. 

Article 32 

In event of a substantive error or of the validity of the discharge being contested or of failure to 
observe  the  formalities  prescribed  by  this  Financial  Regulation,  the  accounting  officer  shall 
suspend payment. 

Article 33 

1. If payment  is suspended, the accounting officer  shall give the reasons  for  his  decision  in a 
written statement which he shall send forthwith to the authorizing officer  and, for  information, 
to the financial  controller. 

2. Except where the validity  of the discharge is contested,  the authorizing officer  may,  where 
payment  is suspended,  refer  the matter to the Commission.  The latter may  require,  in writing 
and on its own responsibility, that payment be  effected. 

Article 34 

1.  Payments  shall  be  effected  through  the  bank  accounts  described  in  Article  4.  The 
procedures  for  opening,  administering  and  using  such  accounts  shall  be  determined  by  the 
Commission. 
2. These conditions shall in particular require two signatures on cheques and on transfer orders, 
one  signature  being  that  of  the  accounting  officer,  an  assistant  accounting  officer  or  an  (...) 
administrator  of  advance funds;  these  conditions  shall,  moreover,  require  the  specification  of 
the expenditure in respect of which payment must necessarily be made either by cheque or by 
transfer. 

ig 

6.  Payments  effected  locally 

Article 35 

1.  In cases  where  the  authorizing  officer  has  delegated  his  responsibilities  to  the  head  of 
delegation  in  accordance  with  Article  13,  the  corresponding  payments  may  be  effected 
by an assistant  accounting  officer,  on the spot,  appointed  under  the conditions  referred  to 
in Article  15. 
The assistant  accounting  officer  effects  payments  in local currency  from  the paying  agent 
account  in  the  ACP  State  or  OCT  and,  where  appropriate,  payments  in  foreign  currency 
from  one or  more paying  agent accounts  in Europe. 

2.  The  entry  in  the  EDF  accounts  of  the payments  effected  pursuant  to paragraph  1 may 
also be entrusted  to the assistant accounting  officer. 

3.  For  payments  made  by  the  assistant  accounting  officer,  the  financial  controller  will 
carry  out checks  after  they  are effected  or possibly  after  their  entry  in the accounts. 

7.  Imprest  accounts 

Article 36 

1. For the payment of certain categories of expenditure, advance funds may be set up under the 
conditions laid down by the Commission. 
2. Only the accounting officer  may replenish the imprest accounts. 
3. The rules governing the management of the advance funds shall cover in particular: 
(a) the appointment of administrators of advance funds; 
(b) the nature and maximum amount of each item of expenditure to be incurred; 
(c) the maximum amounts which may be advanced; 
(d) the procedures for the production of supporting documents and the time within which they 
must be produced; 
(e) the responsibility of the administrator of advance funds. 
4.  The  authorizing  officer  and  the  accounting  officer  shall  take  the  necessary  steps  towards 
clearing,  in respect of  the  exact  amounts  and within the appropriate  period,  advances  granted 
under the terms of Article 319 (2) of the Convention. 

SECTION IV 
ACCOUNTS 

Article 37 

Accounts  shall  be  kept  in  ecus by the  double  entry  method  and  on  the  basis  of  the  calendar 
year. They shall show all : 

/) 3 

(a) commitments, 
(b) assigned  funds, 
(c) revenue, expenditure and collection  operations for the year in full  and  without any 
adjustment  against each other. 

They shall be substantiated by supporting documents 
When debts or commitments are expressed in .national currencies, the accounting system should 
make it possible, where necessary, for them to be recorded in national currencies as well as in 
ecus. 

Article 38 

1.  The commitments  defined  in Article  20(2)  shall be recorded  in ecus  for  the value 

of the financing  decisions taken by the Commission. 

2.  The assigned  funds  defined  in Article 24 shall be recorded  in ecus at the equivalent 
of  the  value  of  the  contracts  and  estimates  concluded  by  the  beneficiary  ACP  or 
OCT  state  or  by  the  Commission  in  the  performance  of  the  project.  This  value 
shall include where appropriate: 

(a)  provision  for  the  payment  of  (reimbursable)  expenses  on  presentation  of 
supporting documents; 
(b) provision for the revision of prices and contingencies as defined  in  EDF-funded 
contracts; 
(c) financial  provision for exchange rate fluctuations. 

3. 

The conversion  rates  to be used  for  final  accounting  of  payments  made under  the 
projects  or  programmes  referred  to  in Part  3, Title  III  of  the  Convention  shall  be 
the rates applicable on the actual date of such payments. That date shall correspond 
to  the  date  on  which  the  Commission  accounts  referred  to  in  Article  4  of  this 
Financial Regulation were debited. 

4.  All accounting records referring  to the fulfilment  of a commitment shall be kept for 
a period  of  five  years  from  the date of  the decision  giving  discharge  in respect of 
implementation of the EDF, referred  to in Article 33(3) of the Internal  Agreement, 
concerning  the  financial  year  during  which  the  commitment  was  closed  for 
accounting purposes. 

Article 39 

1.  The  Commission  shall  keep  accounts  of  the risk  capital  and  interest-rate  subsidies 

administered by the Bank on behalf of the Commission. 

<2o 

2.  Before  the  financing  decision  is  adopted  by  the  Bank's  Board  of  Directors  in 
accordance  with  Article  29(3)  and  (4)  of  the  Internal  Agreement,  a  proposal  to 
enter  the decision in the accounts shall be sent to the financial  controller  and to the 
accounting officer  by the authorizing  officer. 

3. 

The proposal  shall  indicate,  inter  alia,  the purpose,  the estimated  amount  and  the 
item  to  which  the  expenditure  is  to  be  booked  as  well  as  the  beneficiary  of  the 
financing. 

The purpose of the approval of the financial  controller shall be to establish that: 

(a) the expenditure is booked to the correct item; 
(b) appropriations are available. 

Validation by the accounting  officer  shall take place after  the Bank's  Board  of  Directors 
has adopted the financing  decision. 

4. 

(a) Financing decisions relating to risk capital adopted by the Bank shall be entered 
in the accounts at their nominal value. 

(b)  In  the  case  of  interest-rate  subsidies,  a provisional  entry  shall  be  made  in  the 
accounts  based  on  a  value  estimated  by  the  Commission  when  the  decision  was 
adopted.  This  shall  be  finalized  in  the  accounts  on  receipt  of  the  estimate  of  the 
amount of the interest-rate subsidy from  the Bank when the contract  is signed. This 
amount shall be adjusted  at the end of the contract. 

5.  Requests  for  payments  of  funds  as referred  to  in Articles  60(2)  and  62(3)  shall  be 

sent to the financial  controller for approval by the authorizing  officer. 

The following  shall be indicated in requests for payment: 

(a) the item against which payment shall be charged; 
(b) the amount to be paid,  in figures  and in words, showing the currency; 
(c) the name and address of the payee; 
(d) the bank account and the method of payment; 
(e) the purpose of the expenditure; 
(f)  the value date of the payment. 

6. 

The payment shall be made and entered in the accounts by the accounting  officer. 

2-1 

Article 40 

1. 

Entries  in the accounts  shall  be made on the basis of  an  accounting  plan  comprising  a 
nomenclature of budgetary  items which makes a clear distinction between the  financial 
statements and revenue and expenditure accounts 

2. 

The  detailed  conditions  for  drawing  up  and  operating  the  accounting  plan  shall  be 
defined by the Commission on a proposal  from  the accounting  officer. 

Article 41 

The accounts shall be closed at the end of the calendar year to enable the financial  statements 
and  revenue  and  expenditure  accounts  of the EDF to be drawn up. These shall be submitted 
for the financial controller's  opinion. 

zz. 

SECTION V 

RESPONSIBILITIES  OF AUTHORIZING OFFICERS, 
FINANCIAL  CONTROLLERS, ACCOUNTING OFFICERS AND  ADMINISTRATORS 
OF ADVANCE FUNDS 

Article 42 

Without prejudice to Article 313(l)(f)  and 319(8) of the Convention, authorizing officers  who, 
the  Commission,  entering  into 
to  be  recovered  for 
when  establishing  entitlements 
commitments  of  expenditure  or  signing  payment  orders,  do  so  without  complying  with  this 
Financial  Regulation,  shall  render  themselves  liable  to  disciplinary  action,  and  where 
appropriate,  to payment  of  compensation.  The  same  shall  also  apply  if  they  neglect  to  issue 
recovery  or  payment  orders  or  are,  without  justification,  late  in  issuing  them,  thereby 
rendering the Commission liable to civil action by third parties. 

Article 43 

Financial controllers shall be liable to disciplinary action and, where appropriate, to payment of 
compensation for any action taken during their terms of office,  in particular where they approve 
expenditure in excess of appropriations. 

Article 44 

1. 

The  accounting  officer  and  assistant  accounting  officers  shall  be  liable  to  disciplinary 
action  and,  where  appropriate,  to  payment  of  compensation  as  regards  payments  they 
make in disregard of Article 33. 

They  shall  render  themselves  liable  to  disciplinary  action  and  to  payment  of 
compensation  as regards any loss or deterioration of the monies, assets and documents in 
their  charge where  such  loss or  deterioration  was  caused  by  intentional  mistake  or  was 
due to serious negligence on their part. 

Under the same conditions, they  shall be responsible for  the correct execution of orders 
received  by  them  in  respect  of  the  use  and  administration  of  accounts  held  with 
recognized financial institutions and, in particular: 

(a) where the recoveries or payments made by them do not agree with the amounts on the 
corresponding recovery or payment orders; 
(b) where they effect payments to a party other than the entitled payee. 

2.3 

Administrators  of  advance  funds  shall  be  liable  to  disciplinary  action  and,, where 
appropriate, to payment of compensation: 

(a) where they  cannot show due warrant with proper documents for  payments  made by 
them; 
(b) where they effect payments to a party other than the entitled payee. 

They shall be liable to disciplinary  action and to payment of compensation  in respect of 
any loss or deterioration of the monies, assets and documents in their charge where such 
loss or deterioration was caused by intentional mistake or was due to serious negligence 
on their part. 

The accounting officer,  assistant accounting officers  and administrators of advance  funds 
shall  insure  themselves  against  any  risk  they  may  incur  under  this  Article,  and  which 
cannot be covered by the guarantee fund provided for in paragraph 4. 

The Commission shall cover the relevant insurance costs. 

Special  allowances  shall be granted  to  accounting  officers,  assistant  accounting  officers 
and  administrators  of  advance  funds.  The  amount  of  these  allowances  shall  be 
determined  by  the  Commission  departments.  The  sums  corresponding  to  these 
allowances  shall  be  credited  each  month  to  an  account  opened  by  the  Commission  on 
behalf of each of these officials  in order to establish a guarantee fund to cover any cash or 
bank shortage for which the person concerned might render himself liable. 

The  credit  balance  in  these  guarantee  accounts  shall  be  paid  over  to  the  persons 
concerned after they terminate their appointment as accounting officer  or administrator of 
advance  funds.  In  the  case  of  accounting  officers,  this  shall  be  conditional  upon 
receipt  of  the  final  discharge referred  to in Article 46. 

Article 45 

liability  of  authorizing  officers, 

The 
financial  controllers,  accounting  officers  and 
administrators  of  advance  funds  to payment  of  compensation  and  disciplinary  action  may  be 
determined in accordance with Articles 22 and 86 to  89 of the Staff Regulations of Officials  of 
the European Communities. 

Article 46 

The Commission  shall be allowed  a period  of two years from  the date on which the  financial 
statements are submitted to the Council to take a decision on the final discharge to be given to 
accounting officers  for the transactions relating thereto. 

2 Lf 

TITLE III 

IMPLEMENTING  MEASURES 

SECTION I 

EDF OPERATIONS ADMINISTERED BY THE 
COMMISSION 

1. General 

Article 47 

Where  aid  accorded  is onlent to the final borrower  in accordance with Articles 219(5), 
233(3) and 266 of the Convention, the financial agreement shall specify the terms of such 
lending,  inter  alia rates of interest,  duration of loan, grace period,  and  arrangements  for 
the utilization of funds provided by reimbursement of capital and interest. In fixing  these 
terms,  due  regard  will  be  paid  to  all  relevant  provisions  of  the  Convention,  and  in 
particular, to Articles 233(4)(b), 240(l)(a) and 291. 

Article 48 

Claims for  delayed payments for which it is responsible by virtue of Article  319 of  the 
Convention shall be borne by the Commission from  the account provided  for  in Article 
9(2) of the Internal Agreement. 

2. Tenders and contracts 

Article 49 

1. 

The Commission shall take all appropriate measures to ensure the effective  dissemination 
of  information  for  the  economic  operators  concerned,  notably  through  periodical 
publication of forecasts of contracts to be financed from the resources of the EDF. 

2.  A similar procedure shall be followed  in communicating decisions to intervene in respect 

of carrying out studies and supplying technical assistance. 

zs 

Article 50 

The Commission shall inform the Council each year of any contract concluded during that year. 
Where appropriate, it shall notify  the Council of any measures it has taken or proposes to take 
to improve the terms of competition for participation in invitations to tender issued by the EDF. 
In its report, the Commission  shall provide the Council with information  enabling it to  assess 
whether  the  measures  taken  by  the  Commission  have  in  fact  given  all  undertakings  of  the 
various  Member  States,  of  the  African,  Caribbean  and  Pacific  States  (ACP)  and  of  the 
associated  countries  and  territories  equal opportunity  of  access to works  and  supply  contracts 
financed by the EDF. 

Article 51 

Information  relating  to  direct  agreement  contracts,  works  or  supply  contracts  concluded 
following  restricted  invitation  to  tender  or  direct  labour  contracts  shall  be  contained  in 
the annual  report  to the Council  referred  to in Article 50 of  this  Regulation. 

Article 52 

The  results  of  invitations  to  tender  referred  to  in  this  section  shall  be  published  as  soon  as 
possible in the Official  Journal of the European Communities. 

Article 53 

1.  Without  prejudice  to  Article  20(1 )(c)  of  the  Internal  Agreement,  the  provisions  of  the 
General Regulations  and Conditions of Contract shall apply  to  all tenders  and  contracts 
financed from  the EDF. The payments  arrangements  and  the  currency  or  currencies  of 
payment shall be specified  in the wording of the relevant contracts. 

2. 

The price offered  in tenders for contracts financed  by the EDF shall take into account the 
applicable tax arrangements provided for in Articles 308, 309 and 310 of the Convention. 

3.  Where  payment  is  made  in  the  national  currency  of  an  ACP  State,  it  shall  be  made 
through  a  bank  established  in  that  State  or  in  the  country  where  the  contractor's 
registered  office  is located. 

Where payment is made in ecus  or  in a  foreign  currency,  it shall be made through the 
intermediary  of an approved bank or agency established  in a Member  State,  in  an  ACP 
State or  in the country  where the contractor's  registered  office  is  located. 

<!£ 

3. Structural adjustment support 

Article 54 

1. 

Support  for  structural  adjustment  programmes  provided  under  the  Convention  shall  be 
implemented  in  accordance  with  Article  248  of  the  Convention  and  the  following 
principles: 

- integration of Community support in the framework  of the programmes adopted by the 
ACP  States,  in  particular  where  those  programmes  are  supported  by  the  main 
international donors, 

- adaptation of  Community  aid, whether  implemented  through  import programmes  and 
the targeted  and consistent use of counterpart funds,  with sound budgetary  management, 
or  through  direct  budgetary  aid  according  to  the  same  criteria  as  regards  targeting, 
consistency  and  budget  management, to the specific priority needs to the ACP States as 
defined  in Articles 226 and 244 of the Convention, in keeping with the detailed rules for 
implementation of those instruments as defined  in those Articles, 

-  definition  of  operational  procedures  for  the  implementation  of  structural  adjustment 
programmes  in  the  relevant  financing  proposals  and  the  corresponding  financing 
agreements. 

Contracts  arising in the case of import programmes which take the form  of provision of 
foreign  exchange may be expressed  in currencies other than those of ACP  States or the 
ecu, such other currencies to include those of countries which are not Contracting Parties 
to the Convention. 

On the occasion of each advance of funds provided in structural adjustment  programmes, 
the Commission shall check regularity and conformity  with respect to the justification  of 
the use of funds  and the rules applicable pursuant to Articles 246, 248  and  294(1 )(b) of 
the Convention and to Article 20 of the Internal Agreement. 

2. 

3. 

4. Management of the export earnings 
stabilization  system  (Stabex) 

Article 55 

The  annual  resources  available  to  the  Stabex  system  provided  for  in  Article  191  of  the 
Convention shall be managed by the Commission in accordance with the following procedures: 

^ 

(i) 

half  of  each  annual  instalment  shall  be  credited  to  the  system  on  1 April  and. 1 July 
respectively  and  transferred  to a  special  Stabex  bank  account. However,  the first half 
annual instalment in each year shall be reduced by  any  amount  used  in  advance  in the 
preceding  year  under  Article  194(1)  of  the  Convention.  The  second  half  annual 
instalment  in  each  year  shall  be  increased  by  any  amount  used  in  advance  in  the 
preceding  year  under  Article  194(1)  of  the  Convention.  Any sums due to the Stabex 
system  in the year  in which the Convention  came into  force  shall  be  transferred  to  the 
Stabex  account on the date of  entry  into force  of this Financial  Regulation,  with  effect 
from the due dates laid down above; 

(ii) 

interest  shall  be  provided  on the  amounts  of  annual  instalments  credited  to  the  Stabex 
system's resources as follows: 

- from  1  April each year on the amount of the first half of each annual instalment less any 
advance and transfers paid from the Stabex system's resources, 
-  in  like  manner,  from  1 July  each  year  in  respect  of  the  second  half  of  each  annual 
instalment; 

(iii)  any  part  of  an  annual  instalment  which  has  not  been  paid  by  way  of  advance  or 
transfer  shall  continue  to  bear  interest  which  shall  accrue  to the  system's  resources 
until its utilization in the following year; 

(iv) 

the transfers  referred  to in Article 211 of the Convention  shall be made  in ecus  into  an 
interest-bearing  bank  account  chosen by mutual  agreement between the ACP  State and 
the Commission.  All interest accruing shall be credited to that account.  All withdrawals 
from  the account shall require two signatures, one being that of  a person  designated  by 
the ACP State concerned, the other that of the Commission's head of  delegation. 

The  funds  in  the  account,  including  interest,  shall  be  mobilized  in  accordance  with 
Article 186(2) of the Convention. 

Article 56 

Where advance use is made of the following year's instalment as provided for in Article  194 of 
the  Convention,  the  advances  referred  to  in  Article  206  of  the  Convention  shall  be  reduced 
proportionately. 

Article 57 

The quarterly report to the Member  States on the cash situation of the EDF treasury,  provided 
for  in Article  2(1),  shall  include specific  information  on the financial  situation  of the  Stabex 
system. 

?-% 

Article 58 

Wherever  the  calculation  of  the  amount  of  a transfer  or  advance  requires  the  conversion  of 
statistics  expressed  in  the  national  currency  of  the  ACP  State  concerned,  or  of  any  other 
currency, into ecus, the exchange rate applicable shall be the average annual rate in force in the 
calendar year to which the statistics concerned refer. 

Z3 

SECTION II 

AID MANAGED BY THE BANK 

Article 59 

The Bank  shall  forward  to the  Commission  at the beginning  of  each  quarter  estimates  of  all 
amounts expected to be claimed from  the EDF in that quarter in respect of the risk capital and 
interest  rebates  that  it  administers 
in  accordance  with  Article  10  of  the  Internal 
Agreement. 

1. RISK  CAPITAL 

Article 60 

Each decision to grant risk capital shall set a limit to the Community's  commitment  and 
financial  responsibilities  and,  in the  case of shareholdings, to the  extent  of the rights  in 
the company  to which  such operations relate.  The decision shall  also  take  into  account 
the  provisions  in  Article  234(2)  of  the  Convention  relating  to  responsibility  for 
exchange-rate risks. 

The instruments giving  effect  to risk-capital  operations  shall be  concluded  by the Bank 
acting as the Community's authorized agent. 

When  each  disbursement  takes place, the Bank  shall request the Commission  to pay in 
ecus  the  amount  of  the  risk  capital  disbursed.  The  Commission  shall  pay  this  amount 
within 21 days of receipt of the request for payment with the same value date as that of 
the disbursement by the Bank. 

When the disbursement takes place in currencies other than the ecu,  the  exchange  rates 
used to determine the amounts to be disbursed shall be those obtained by the Bank  from 
the correspondent responsible for the exchange transaction. 

The  ecu  exchange  rates  to  be  used  by  the  borrower  to  calculate  the  amounts  due  in 
respect  of  products,  income  and  reimbursements  from  risk  capital  operations  shall  be 
those in force one month before the date of payment. 

Amounts  due  in  respect  of  receipts,  income  and  repayments  relating  to  risk  capital 
operations  shall  be  collected  by  the Bank  on  behalf  of  the  Community,  in  accordance 
with Article  61 of this Financial Regulation. 

3o 

Article 61 

The sums collected by the Bank in the form of receipts, income or repayments from  risk-capital 
operations  shall  be  credited  to a special  account opened  on behalf  of  the  Community  for  the 
Member  States  in  proportion  to  their  contributions  to  the  EDF.  The  account  shall  be 
denominated  in ecus and managed by the Bank in accordance with Article 9(1) of the Internal 
Agreement.  The Bank  shall  agree with  the Member  States  on the information  to  be  supplied 
concerning the account. 

The technical  procedures  for  the management  of the  account,  including  those  relating  to  the 
fixing  of  the  rates  of  interest  on  it,  shall  be  decided  upon  by  the  Council  and  the  Bank  in 
agreement with the Commission. 

2. SUBSIDIZED LOANS 

Article 62 

1. 

2. 

3. 

(i) 

(ii) 

(iii) 

The  aggregate  amount  of  interest-rate  subsidies  on  each  loan  from  the  Bank  shall  be 
calculated  in ecus in accordance with Article 235 of the Convention on the basis of  the 
composite  interest  rate  to  be'  fixed  in  accordance  with  the  procedures  set  out  in 
paragraph 3(iii) of  this Article. 

On the signing of each loan contract, the Bank shall communicate to the Commission the 
estimated total amount of the interest rate subsidy expressed in ecus. 

Upon  the  disbursement  of  each  instalment  of  the  loan,  the  Bank  shall  request  the 
Commission to pay the interest subsidy relating to the instalment based on the  following 
calculations: 

the  equivalent  in  ecus  of  the  amounts  of  currencies  in  which  the  loan  instalment  was 
disbursed  at  the  conversion  rate  for  those  currencies  and  the  ecu  as  published  in  the 
Official  Journal  of  the  European  Communities  in  operation  on  the  date  on  which  the 
amount of currencies to be disbursed is determined, which date shall be communicated to 
the Commission; 
application  of  the  percentage  rate  of  interest  subsidy  to  the  declining  annual  capital 
balance due at each repayment date; 
the present value of the interest subsidies relating to the loan disbursement. Calculation of 
the present value  shall  be made  by  reference  to  a composite  discount  rate  equal  to  the 
annual interest rate(s) which the Bank would in fact receive in the currency or currencies 
used for the relevant disbursement of the loan if the loan did not benefit from  an interest 
subsidy.  The  actual  calculation  of  present  value  shall  use  this  composite  discount  rate 
reduced by four-tenths of a percentage point. 

3i 

4. 

The Commission shall pay in ecus the amount of subsidy, discounted in accordance with 
the  procedures  described  in  paragraph  3, within  21  days  of  receipt  of  the  request  for 
payment, the value date being that of the disbursement of the relevant loan instalment. 

5.  Where the whole of an interest subsidized loan is repaid in advance, the Bank shall pay to 
the  Commission  the  total  balance  of  the  discounted  subsidy,  adjusted  for  the  period 
between  receipt  and  payment  by  the  Bank,  on  the  first  contractual  repayment  date 
subsequent  to  the  advance  payment.  Where  only  part  of  such  a  loan  is  repaid,  the 
payment by the Bank to the Commission  shall relate to that part of the loan which  has 
been repaid. 

6. 

The sums reimbursed to the Commission  shall be added to the appropriations  available 
for  the  financing  of  interest  rate  subsidies  provided  for  in  Article  4  of  the  Internal 
Agreement. 

7.  All payments provided for in this Article shall be made in ecus. 

32-

TITLE IV 

EXECUTIVE  AGENTS 

1. The Chief Authorizing  Officer 

Article 63 

The Chief Authorizing Officer  of the EDF, referred to in Article 311 of the Convention, 
shall  take  all  measures  necessary  for  the implementation  of  Articles  294  to  307  of  the 
Convention. 

Article 64 

1. 

The  Chief  Authorizing  Officer  shall  take  all  measures  to  ensure  that  National  or 
Regional  Authorizing  Officers  perform  the  tasks  for  which  they  are  responsible  by 
virtue  of  the  Convention,  and  in particular Articles 312 to 315 thereof,  and  that  they 
comply  with  the provisions  of this Financial  Regulation. 

2.  Where  the  Chief  Authorizing  Officer  of  the  EDF  becomes  aware  of  delays  in  the 
carrying  out  of  procedures  relating  to  management  of  EDF  resources,  he  shall,  in 
conjunction  with  the  National  or  Regional  Authorizing  Officer,  make  all  contacts 
necessary to remedy the situation and take  any  steps  appropriate.  These  may  include 
the  temporary  replacement  by  the  Chief  Authorizing  Officer  of  the  National  or 
Regional  Authorizing  Officer  should  they  fail  to perform  their duties  correctly. 

2. The paying agent 

Article 65 

The relations between the Commission and the paying agents provided for in Article 319 of the 
Convention  shall  be  the  subject  of  contracts  which  shall  require  the  prior  approval  of  the 
financial controller. Once signed, these contracts shall be sent to the Court of Auditors. 

5 5 

TITLE V 

PRESENTING AND AUDITING ACCOUNTS 

Article 66 

1. 

The Commission shall draw up, not later than  1  May each year, the financial  statements 
and  the  revenue  and  expenditure  accounts  of  the  EDF  describing  the  financial 
situation  of  the Fund as at 31 December of the preceding year. 

2. 

The financial statements shall be drawn up by the accounting  officer  and  include: 

(a) 

a  balance  sheet  of  the  EDF's  assets  and  liabilities  at  the  end  of  the  preceding 
financial  year; 

(b) 

a statement of  sources and uses of  funds  covering  the preceding  financial  year; 

(c) 

a statement  of  revenue and expenditure  in the preceding  financial  year; 

(d) 

a table of revenue showing: 

- estimated revenue for the calendar year; 
- amendments to the revenue estimates; 
- entitlements established in the course of the calendar year; 
- amounts still to be received  at the end of the calendar year; 
- additional revenue. 

(e) 

a table of  debts  showing: 

- debts  still  to be recovered  at the beginning  of  the calendar  year; 
-  entitlements  established  in the course of the calendar  year; 
-  amounts  recovered  in the course of the calendar  year; 
-  cancellation  of  established  entitlement; 
- debts  still  to be recovered  at the end of  the calendar  year. 

(f) 

notes  indicating  which  accounting  principles  were  applied  in  the  preparation  and 
presentation  of  the  accounts  providing,  where  appropriate,  additional  explanations 
of various  headings  in the tables referred  to in points a,  b, c,  d and e above. 

3>V 

Article 67 

1.  The revenue and expenditure account referred  to in Article 68(1) shall be drawn up 
by  the  Chief  Authorizing  Officer  in  conjunction  with  the  accounting  officer  and 
shall include: 

(a) 

a table showing changes during the preceding year in the credit lines referred  to in 
Article 1; 

(b)  a  table  showing  the  total  by  credit  line  of  commitments,  assigned  funds  and 
authorizations  effected  during  the  financial  year  and  aggregate  totals  since  the 
opening of the EDF; 

(c) 

tables showing by credit line, country,  territory,  region or  sub-region,  the total by 
credit  line  of  commitments,  assigned  funds  and  authorizations  effected  during  the 
financial  year and aggregate totals since the opening of the EDF. 

2. 

The revenue and expenditure accounts shall be prefaced  by an analysis of  financial 
management during the preceding year. 

Article 68 

1.  Without  prejudice  to  Article 33(5)  of  the  Internal  Agreement,  the  Commission  shall 
forward  the  financial  statements  and  revenue  and  expenditure  accounts  to  the 
European Parliament, the Council and the Court of Auditors not later than 1  May of the 
following financial year. 

2. 

The  financial  statements  and  revenue  and  expenditure  accounts  shall  be  published 
in the Official  Journal of the European Communities. 

Article 69 

The  Court of  Auditors  and its Members may seek the assistance of the Court's  staff  in the 
discharge of their duties. 

The Court itself, or one of its Members, shall notify the authorities with which members of the 
Court's  staff  to  whom  such  responsibilities  have been  delegated  are  to  work  on  the  tasks 
delegated to them. 

IS 

Article 70 

1.  Without prejudice to Article 33(5) of the Internal Agreement, the audit carried out by the 
Court of Auditors shall be based on records and, if necessary, be performed  on the spot. 
Its purpose  shall  be to  establish  that  all revenue has been received  and' all  expenditure 
incurred in a lawful  and regular manner with regard to the provisions applicable and that 
the financial management has been sound. 

2. 

3. 

In the performance  of  its  tasks,  the  Court  of  Auditors  may,  under  the  conditions  laid 
down  in  paragraph  6,  consult  all  documents  and  information  relating  to  the  financial 
management  of  the  departments  subject  to  its  inspection;  it  has  the  power  to  hear  any 
official  responsible for revenue and expenditure operations and to use any of the auditing 
procedures appropriate to those departments. 

The Court of Auditors shall ensure that all securities and cash on deposit or  in hand  are 
checked  against  vouchers  signed  by  the  depositaries  or  against  official  memoranda  of 
cash and securities held. The Court may itself carry out such checks. 

4.  At  the  request  of  the  Court  of  Auditors,  the  Commission  shall  authorize  financial 
institutions holding EDF deposits to enable the Court to ensure that the external data tally 
with the accounts. 

5. 

The Commission  shall  afford  the  Court of Auditors  all the  facilities  and  give  it  all the 
information which the Court may consider necessary for the performance of its tasks, and 
shall in particular provide all the information  available to the Commission  as a result of 
the  checks  which  it  has  carried  out,  pursuant  to  the  regulations  in  force,  within  the 
departments  responsible  for  the  management  of  EDF  finances  and  for  effecting 
expenditure on behalf of the Community. In particular, it shall place at the disposal of the 
Court all  documents  concerning the conclusion  and implementation  of  contracts  and  all 
accounts of  cash  or materials,  all  accounting records or  supporting  documents  and  also 
the  administrative  documents  pertaining thereto,  all  documents  relating  to  revenue  and 
expenditure,  all  inventories,  and all lists of posts in the departments which the Court of 
Auditors may consider necessary and all documents and data created or stored on a data 
medium. 

To this end, officials  subject to audit by the Court of Auditors shall in particular: 

(a) disclose their records of cash in hand, any other cash, securities and materials of any 
kind and the supporting documents in respect of their management of which they are the 
depositaries and any books, registers and other documents relating thereto; 
(b)  present 
implementation of the audit referred  to in paragraph 1. 

the  correspondence  or  any  other  document  required  for 

the  full 

The information  referred  to under (b) may be requested only by the Court of Auditors. 

ÏQ 

The  Court of  Auditors  shall  be  empowered  to  audit the  documents  in  respect  o_f EDF 
revenue  and  expenditure  which  are  held  by  the  Commission's  departments  and,  in 
particular, by the departments responsible for decisions on such revenue and expenditure. 

The  task  of  establishing  that  revenue  has  been  received  and  expenditure  incurred  in  a 
lawful  and proper manner  and that the financial  management has been  sound  shall  also 
encompass  the utilization  by bodies outside the Commission of  Community  funds  they 
have received. Any grant of EDF funds to beneficiaries  outside the Commission shall be 
subject to the agreement in writing by the recipients to an audit being carried out by the 
Court of Auditors on the utilization of the amounts paid out. 

Article 71 

1. 

2. 

The  Court  of  Auditors  shall  draw  up  an  annual  report  at  the  end  of  each  financial 
year. 

The Court of Auditors may also, at any time, submit observations, notably  in the form of 
special  reports,  on  specific  questions  and  deliver  opinions  at the  request  of  one  of  the 
institutions of the Communities. 

3. 

The special reports shall be transmitted to the institution or body concerned. 

The institution  concerned  shall have two and a half months within which  to  inform  the 
Court of Auditors of any comments it wishes to make on the observations in question. 

Should the Court of Auditors decide to have such observations published  in the  Official 
Journal  of  the  European  Communities,  it  shall  include  after  them  any  comments 
submitted by the institution or institutions concerned. 

The special reports shall be transmitted to the European Parliament and the Council, each 
of which shall decide, in conjunction  with the Commission if appropriate, what action is 
to be taken in response. 

Article 72 

1. 

(a) 

The annual report of the Court of Auditors provided for in Article 188c of the EC Treaty 
shall be governed by the following provisions: 

the Court of Auditors shall communicate to the Commission, not later than  15 July, any 
observations which  it  considers  should  appear  in the  annual  report.  These  observations 
must  remain  confidential.  The  Commission  shall  forward  its  replies  to  the  Court  of 
Auditors not later than 31 October of the relevant year; 

^ 

(b) 

the  annual  report  shall  contain  an  assessment  of  the  soundness  of  the  financial 
management. 

2. 

The  Court  of  Auditors  shall  send  its annual  report,  together  with  the  Commission's 
replies,  not  later  than  30  November,  to  the  Commission  and  to  the  authorities 
responsible  for  giving  discharge  pursuant 
the  Internal 
Agreement,  and  shall  ensure  its publication  in the  Official  Journal  of  the  European 
Communities. 

to  Article  33(3)  of 

Article 73 

At  the  same  time  as  the  annual  report  referred  to  in  Article  71,  the  Court  of  Auditors 
shall  provide  the  European  Parliament  and  the  Council  with  a  statement  of  assurance  as 
to  the  reliability  of  the  accounts  and  to  the  legality  and  regularity  of  the  underlying 
transactions. 

Article 74 

1. 

2. 

3. 

4. 

Before 30 April of the following year, the European Parliament, upon a recommendation 
from  the  Council,  which  shall  act  by  a  qualified  majority,  shall  give  the  Commission 
discharge  in  respect  of  the  execution  of  the financial  management  of  the  EDF  for  the 
preceding financial  year, in accordance with Article 33 (3) of the Internal Agreement. If 
this date cannot be complied with, the European Parliament or the Council  shall  inform 
the Commission of the reasons for which this decision has had to be deferred.  Should the 
European Parliament postpone the decision giving discharge, the Commission shall make 
every effort to take measures, as soon as possible, to facilitate removal of the obstacles to 
this decision. 

The  discharge  decision  shall  include  an  assessment  of  the  responsibility  of  the 
Commission in the execution of the financial management during the preceding period. 

The financial  controller  shall take account of the observations  appearing  in the decision 
giving discharge. 

The Commission shall take all appropriate steps to act on the comments appearing in the 
decision giving discharge. 

5.  At the request of the European Parliament or the Council, the Commission shall report on 
the measures taken in the light of these comments, and, in particular,  on the instructions 
given to those of its departments which are responsible for the management of the EDF. 
This report shall also be sent to the Court of Auditors. 

3<? 

The  financial  statements  and  the  revenue  and  expenditure  accounts  for  each 
financial  year  and the decision giving the discharge shall be published  in the  Official 
Journal of the European Communities. 

TITLEVI 

GENERAL AND FINAL  PROVISIONS 

Article 75 

Unless  otherwise  specified,  references  in  this  Financial  Regulation  to  the  provisions  of  the 
Convention shall be deemed to refer to the corresponding provisions of Decision 91/482/EEC, 
as last amended by  Decision  96/.../EC. 

Article 76 

This Financial Regulation  shall be applicable to the aid  specified  in the Financial Protocol  to 
the  Convention.  This  Financial  Regulation  shall  be  applicable  for  the  same  period  as  the 
Internal Agreement. 

Done at Brussels, 

1996. 

For the Council 

The President 

M>o 

ANNEX 

M>\ 

ANNEX I 

In accordance with Article  1 of the Internal  Agreement,  the  8th  European  Development 
Fund shall consist of ECU  13 132 million, of which: 

1. 

ECU  12 967 million,  for  the ACP States,  shall be allocated  under  the  following 
credit lines: 

(a) 

Grants reserved for  structural adjustment  support 

(b) 

Grants reserved for the Export Earnings Stabilization System (Stabex) 

(c) 

Grants reserved for SYSMIN 

(d) 

Grants reserved for emergency aid 

(e) 

Grants reserved for refugee aid 

(f) 

Grants reserved for regional cooperation including: 

an amount  reserved  to finance  the budget  of  the  Centre  for  the  Development  of 
Industry 
an amount reserved for the purposes of Annex LXVIII to the Convention 
an  amount  reserved  to  finance  regional  programmes  pertaining 
development as referred  to in Article  138 of the Convention 
an  amounts  reserved  for  the  incentive  financing  of  institutional  support  as 
referred  to in Article 224(m) of the Convention 

to  trade 

(g) 

Grants  reserved  for  the  financing  of  interest-rate  subsidies  as  referred  to  in 
Article 235 of the Convention 

(h) 

Grants reserved for  the financing  of national programmable aid 

(i) 

Risk capital 

2. 

ECU  165  million,  for  the  OCT  countries,  allocated  under  the  following  credit 
lines: 

(a) 

Grants reserved for the Export Earnings Stabilization System (Stabex) 

(b) 

Grants reserved for SYSMIN 

(c) 

Grants reserved for emergency aid 

M>2-

(d) 

Grants reserved for refugee aid 

(e) 

Grants reserved for regional cooperation 

(f) 

Grants  reserved  for  the  financing  of  interest-rate  subsidies  as  referred  to  in 
Article  157 of the Decision 

(g) 

Grants reserved for  the financing  of national programmable aid - British OCT 

(h) 

Grants reserved for the financing  of national programmable aid - French OCT 

(i) 

(j) 

Grants reserved for the financing  of national programmable aid - Dutch OCT 

Risk capital 

M^ 

ISSN 0254-1475 

COM(96) 676  final 

DOCUMENTS 

EN 

11 

Catalogue  number  :  CB-C0-96-688-EN-C 

ISBN  92-78-13573-9 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg 

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