REPORT FROM THE COMMISSION: I. ON ACTION TAKEN IN RESPONSE TO THE COMMENTS MADE IN PARLIAMENT'S RESOLUTIONS ACCOMPANYING THE DECISIONS GIVING DISCHARGE IN RESPECT OF THE GENERAL BUDGET, THE ECSC AND THE EUROPEAN FOUNDATION FOR THE IMPROVEMENT OF LIVING AND WORKING CONDITIONS - DEFERRING DISCHARGE IN RESPECT OF THE EUROPEAN CENTRE FOR THE DEVELOPMENT OF VOCATIONAL TRAINING - II. ON ACTION TAKEN ON THE COMMENTS ACCOMPANYING THE COUNCIL RECOMMENDATION ON THE DISCHARGE - FOR THE 1994 FINANCIAL YEAR
Date: 1997-02-25
Institutions: European Commission
Subjects: Cedefop, Community budget, European organisation, budgetary discharge, general budget (EU)

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  25.02.1997 
COM(97) 48  final 

REPORT FROM THE COMMISSION 

I.  ON  ACTION  TAKEN  IN  RESPONSE  TO  THE  COMMENTS 
MADE  IN  PARLIAMENT'S  RESOLUTIONS 
ACCOMPANYING  THE  DECISIONS 

•  GIVING  DISCHARGE  IN  RESPECT  OF  THE  GENERAL  BUDGET,  THE  ECSC 
AND  THE  EUROPEAN  FOUNDATION  FOR  THE IMPROVEMENT  OF  LIVING 
AND  WORKING CONDITIONS 

DEFERRING  DISCHARGE  IN  RESPECT  OF  THE  EUROPEAN  CENTRE  FOR 
THE DEVELOPMENT  OF  VOCATIONAL  TRAINING 

II.  ON  ACTION  TAKEN  ON  THE  COMMENTS  ACCOMPANYING 
THE  COUNCIL  RECOMMENDATION 
ON  THE  DISCHARGE 

FOR  THE  1994 FINANCIAL  YEAR 

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

Brussels,  25.02.1997 
COM(97) 48  final 

REPORT FROM THE COMMISSION 

I.  ON  ACTION  TAKEN  IN RESPONSE  TO  THE  COMMENTS 
MADE  IN  PARLIAMENT'S  RESOLUTIONS 
ACCOMPANYING  THE  DECISIONS 

•  GIVING  DISCHARGE  IN RESPECT  OF THE  GENERAL  BUDGET,  THE  ECSC 
AND  THE  EUROPEAN  FOUNDATION FOR  THE IMPROVEMENT  OF  LIVING 
AND  WORKING  CONDITIONS 

DEFERRING  DISCHARGE  IN RESPECT  OF THE  EUROPEAN  CENTRE  FOR 
THE DEVELOPMENT  OF  VOCATIONAL TRAINING 

II.  ON  ACTION  TAKEN  ON  THE  COMMENTS  ACCOMPANYING 
THE  COUNCIL  RECOMMENDATION 
ON  THE  DISCHARGE 

FOR  THE  1994 FINANCIAL  YEAR 

CONTENTS 

I. 

PARLIAMENT 

1. 
PARLIAMENT RESOLUTION CONTAINING THE 
COMMENTS WHICH FORM PART OF THE DECISION GIVING 
DISCHARGE TO THE COMMISSION IN RESPECT OF THE 
IMPLEMENTATION  OF THE GENERAL BUDGET OF THE 
EUROPEAN UNION FOR THE 1994 FINANCIAL YEAR 

GENERAL ISSUES 

THE STATEMENT OF ASSURANCE (DAS) 

OWN RESOURCES 

EXPENDITURE 

2. 
RESOLUTION ON THE REPORT OF THE COURT OF 
AUDITORS ON THE ACCOUNTS OF THE EUROPEAN COAL 
AND STEEL COMMUNITY AT 31 DECEMBER 1994 AND ON 
THE REPORT OF THE COURT OF AUDITORS ON THE 
MANAGEMENT OF THE ACCOUNTS AND THE FINANCIAL 
MANAGEMENT OF THE ECSC 

DECISION GIVING DISCHARGE TO THE ADMINISTRATIVE 

3. 
BOARD OF THE EUROPEAN FOUNDATION FOR THE 
IMPROVEMENT OF LIVING AND WORKING  CONDITIONS 
(DUBLIN) IN RESPECT OF THE IMPLEMENTATION OF ITS 
BUDGET FOR THE 1994 FINANCIAL YEAR 

RESOLUTION OF THE EUROPEAN PARLIAMENT 
4. 
INFORMING  THE MANAGEMENT BOARD OF THE EUROPEAN 
CENTRE FOR THE DEVELOPMENT OF VOCATIONAL 
TRAINING  (CEDEFOP) OF THE REASONS WHY THE DISCHARGE 
CANNOT AT PRESENT BE GIVEN IN RESPECT OF THE 
IMPLEMENTATION  OF ITS BUDGET FOR THE 1994 
FINANCIAL YEAR 

II. 

COUNCIL 

ACTION TAKEN ON THE COMMENTS ACCOMPANYING 

1) 
THE COUNCIL RECOMMENDATION ON THE DISCHARGE TO BE 
GIVEN IN RESPECT OF THE 1994 FINANCIAL YEAR 

CHAPTER  1: OWN RESOURCES 

CHAPTERS 2-13: EXPENDITURE 

1 

Page 

5 

5 

5 

26 

27 

59 

64 

68 

70 

71 

73 

2) 

RELEVANT  SPECIAL  REPORTS 

3) 
ACTION  TO  BE TAKEN  ON THE  COMMENTS 
ACCOMPANYING  THE  COUNCIL  RECOMMENDATION  OF 
11 MARCH  1996  ON  THE  DISCHARGE  TO BE GIVEN  TO  THE 
EUROPEAN  FOUNDATION  FOR  THE IMPROVEMENT  OF 
LIVING  AND WORKING  CONDITIONS  IN RESPECT  OF  THE 
1994 FINANCIAL  YEAR 

4) 
ACTION  TO  BE TAKEN  ON THE  COMMENTS 
ACCOMPANYING  THE  COUNCIL  RECOMMENDATION  OF 
11 MARCH  1996  ON  THE  DISCHARGE  TO BE GIVEN  TO  THE 
EUROPEAN  CENTRE  FOR  THE DEVELOPMENT  OF  VOCATIONAL 
TRAINING  IN  RESPECT  OF  THE  1994 FINANCIAL  YEAR 

93 

100 

102 

PARLIAMENT RESOLUTIONS ACCOMPANYING THE DECISIONS 

GIVING DISCHARGE IN RESPECT OF THE GENERAL BUDGET,  THE ECSC 
AND THE EUROPEAN FOUNDATION FOR THE IMPROVEMENT OF LIVING 
AND  WORKING CONDITIONS 

DEFERRING DISCHARGE IN RESPECT OF THE EUROPEAN CENTRE FOR 
THE  DEVELOPMENT  OF  VOCATIONAL TRAINING  FOR  THE  1994 
FINANCIAL YEAR 

1. 

PARLIAMENT RESOLUTION CONTAINING THE COMMENTS WHICH 
FORM  PART  OF  THE  DECISION  GIVING  DISCHARGE  TO  THE 
COMMISSION  IN  RESPECT  OF  THE  IMPLEMENTATION  OF  THE 
GENERAL  BUDGET  OF  THE  EUROPEAN  UNION  FOR  THE  1994 
FINANCIAL  YEAR 

GENERAL  ISSUES 

(Parliament) 

Calls  on  the  Commission  to  fulfil  the  duties  entrusted  to  it  by  the  Treaties  by 
seeing to it that Union expenditure  is managed  in a way ensuring  full  compliance 
regrets  in  this  respect  the  lukewarm  attitude  taken  by  the 
with  Union  law; 
Commission towards Member  States which ignore their  legal  obligations;  insists 
that the  Commission  make full  use  of the means at  its disposal  to  guarantee  that 
appropriations spent represent good value for money and that the Union's  financial 
interests  are  fully  protected; 

Commission  reply 

The Commission does its best to see to it that the Member  States properly  discharge their 
obligations  in  respect  of  the  implementation  of the Union  budget.  The  effectiveness  of 
such  measures  is  limited  by  the  resources  available  as  compared  with  the  number  of 
sectors to be monitored.  This  is why the Commission  has invited  the Member  States  to 
join  it,  as  part  of  Stage  III  of  the  SEM 2000  exercise,  in  giving  thought  to  ways  of 
making  all partners aware of the need to manage Union money  correctly.  One aim  is to 
make  the  conditions  for  the'granting  of  Community  aid  clearer.  In  the  Commission's 
view,  this  is the  most  promising  path  towards  achieving  better  budgetary  discipline. 

THE  STATEMENT  OF  ASSURANCE  (DAS) 

8. 

Asks the  Commission  henceforth  to include in the accounts of the  European 
Union  an account  under the heading  "specified  amounts subject to  recovery 
proceedings",  specifying  individual  cases  and  sub-totals,  on  the  basis  of  the 
substantial  errors  reported  by  the  Court  of Auditors;  asks  furthermore  the 
Commission  to  inform  the  budgetary  authority  of  action  taken  on  each  of 
those  cases; 

Commission  reply 

In  the  balance  sheet  for  the  1996  financial  year  the  Commission  will  include  a  special 
heading  to make  clear  the  actual  amounts owed  following  substantial  errors  detected  by 
the  Court of Auditors in respect of the statement of assurance.  The Commission  would, 
nevertheless, point  out that  if such debts are highlighted  in the balance  sheet,  it must  be 
with  due  regard  for  general  accounting  principles, particularly  the  principle  of  caution, 
the  object  of  which  is to  avoid  overvaluing  assets and  undervaluing  debts. 

In the case  in point,  the debts constitute an asset which, pursuant to the  abovementioned 
principle, may  not be over-  or undervalued.  A medium-term  solution  therefore  needs to 
be  found,  as  indeed  was  stressed  in the  report  giving  the  discharge  for  1994.1 

The Commission therefore  proposes to put in an amount as a token entry and give  details 
of  it under  the  orders  for  recovery  issued  by  authorizing  officers  against  operators  who 
have  received  Union  resources  where  a  substantial  error  was  made  in  the  payment  of 
same. 

COMMISSION REPLY  TO THE CASES RAISED BY  THE COURT OF  AUDITORS 
IN ANNEX  W  TO  THE SPECIAL REPORT SUPPORTING  THE 1994  DAS 

AGRICULTURAL  SECTOR 

Commission  reply 

Since November  1995, following identification of specific cases, the Commission  officials 
concerned  (EAGGF  - Clearance  of accounts) have been requested  to take account  of the 
cases referred  to  in Annex  IV to  the  Special  1994 DAS  Report  when  carrying  out  their 
inspection  visits. 

The  letters  sent  to  the  Member  States  with  comments  take  account  of  all  such  cases. 
Provided that the Member States do not dispute the facts and the regulations are properly 
interpreted,  the  Commission  will  draw  all  the  requisite  financial  conclusions  when 
clearing the accounts for the  1994 financial  year.  In this connection, discussions with the 
Member  States  are  scheduled  for  30  September  1996 and  11 October  1996.  If  all  goes 
smoothly,  the  final  decision  will  be taken  at the end  of  1997. 

The  Commission  will  attach  a  sheet  to  the  summary  report  on  the  clearance  of  the 
accounts  for  the  1994  financial  year  setting  out  the  action  taken  on  each  of  the  cases 
referred  to by the Court; the financial  corrections which need to be made to these  are set 
out  below. 

Storage costs in respect of quantities cereals the existence of which had not been 

1. 
proved. 

Commission reply 

During  the  1995  financial  year  the  Italian  authorities  made  a  physical  inventory  of  the 
quantities and quality of all cereal intervention stocks (100%).  The outcome of the check 
was that in the  1995 financial  year the initial stock figure  of 23  505.9 tonnes was reduced 
(the  financial  consequences  of the  reduction  for  the  1994 financial  year  will  have  to  be 
established when the accounts for this year are cleared) and a loss of  107  524.371 tonnes 
was registered;  the  EAGGF  was reimbursed  a  sum of the  order  of  ECU  14 million. 

1 

Working  document  PE  218.048, para.  14. 

6 

A  stock  of  physical  cotton  different from  the  stock  stated  in  the  accounts 

2. 
audited,  thus  implying  an  over-declaration concerning the  quantity  of  raw  cotton. 

Commission  reply 

Raw cotton,  Greece: 

- correction  of the  6 cases =  DRA  1 383  849  645 

-  5% flat-rate  correction 

=  DRA  10 035  213  214 

3. 

Subsidization  of tomatoes  which were unsuitable for  processing. 

Commission reply 

Processed  tomatoes,  Spain: 

correction  PTA  195 325  406 

4. 

Coefficients  which overestimated packaging  costs. 

Commission reply 

The rules  in force  at the  time  allowed  two packaging  coefficients  (0.65  and  0.90)  to  be 
used.  Following  checks by the Commission,  a  10% flat-rate  correction  was proposed  in 
the  case  of  Greece  as  regards  the  expenditure  linked  to  the  withdrawal  of  peaches  and 
nectarines  by  the  professional  associations.  The  0.90  coefficient  has,  moreover,  been 
abolished  for  the  1995-96  growing  season. 

5. 

Surface  areas subsidized  different from  the actual  areas. 

Commission  reply 

Arable  crops: 

-  UK 

: correction  UKL  18 243.69 

-  Greece 

: correction  DRA  6 268  761.6 

-  Italy 

: correction  LIT  2 058  189 860 

-  France 

: correction  FF  1 091.15 

6. 

Quality coefficients  overstated the qualities  subsidized 

Commission reply 

France  has been requested  to  notify  the amounts  of  compensation  overpaid. 

7. 

A payment  made  twice to the same beneficiary. 

Commission reply 

Grubbing  up  of  vines:  Italy:  correction  LIT  71 213 615. 

Tobacco production  premiums paid for  quantities exceeding those stipulated  in 

8. 
the  contracts. 

Commission  reply 

Italy:  correction  LIT  774  393 428. 

Tinned  meat  not  containing  the  ingredients  (according  to  the  laboratory 

9. 
certificate) justifying  the  rate  applied for  the payment  of export  refunds. 

Commission  reply 

Italy:  correction  LIT  157 293 262. 

Underestimation  of  the profit  on sales in the  calculation  of the  public-storage 

10. 
costs. 

Commission  reply 

Italy:  In  the  final  statement  of  public-storage  costs  produced  by  the  computerized 
FAUDIT-ED  system  and  supplied  to  Member  States by  the Commission,  the  anomalies 
noted  by the  Court  (underestimation  of the profit  on sales)  were automatically  corrected 
in the  accounts  for  the  1995  financial  year. 

Underestimation of the amount of the subsidy paid  owing to the  misapplication 

11. 
of the  agricultural  conversion  rate. 

Commission reply 

Dried  fodder  - olive  oil:  Spain:  correction  - PTA  171  763 893. 

Application  for  a  premium  unacceptable  owing  to  its  submission  after  the 

12. 
deadline. 

Commission reply 

Special  beef  and  veal  premium:  Italy: correction  LIT  5 384 460. 

An  item of expenditure  declared for  1994, whereas it should have been  charged 

13. 
to the financial  year  1995. 

Commission reply 

As  part  of  the  overhaul  of  the  accounts  clearance  system  and  in  view  of  the  need  for 
assent  from  the  paying  organizations,  the  Italian  authorities  propose  to  simplify  the 
payments  circuit  (the  funds  required  for  payment  purposes  will  no  longer  have  to  go 
through  the  national  treasuries),  which  would  enable  it  to  comply  with  the  concept  of 
payment  as  laid  down  in Article  9 of  Regulation  (EEC) No  2776/88. 

Dried  fodder:  Italy:  expenditure  of  LIT  245  099  865  wrongly  declared  in  1994 
when  it related  to  the  1995  financial  year. 

8 

Sheepmeat: Italy: 3 payments totalling  7 526  809 declared in  1994 whereas it was 
expenditure  for  1995. 

The  annual  statement  of  expenditure  will  be  adjusted  accordingly. 

14.  Non-imposition  of  penalties  in  respect  of  the  late  submission  of  a  subsidy 
application. 

Commission reply 

Beef  and  veal:  penalty  in  respect  of  the  late  submission  of  a  subsidy  application.  Italy: 
correction  LIT  7 619 636. 

Overvaluation  of the  amount of aid owing to the incorrect classification  of the 

15. 
land set  aside. 

Commission reply 

Italy: positive  correction  + 250  829. 

16. 

Declared  expenditure  in  excess of actual expenditure. 

Commission reply 

Italy:  corrections  LIT  346  895  600  and  LIT  268  061 025. 

An  over-high final  payment  made  owing  to  the  use of  an  incorrect  exchange 

17. 
rate and  to  the  oversight  of  an  advance already  paid 

Commission reply 

Italy: correction  LIT  2  859  500. 

18. 

A  subsidy paid for  processing  products  which did not meet  the  specifications. 

Commission reply 

Dairy  products:  UK:  correction  UKL  21  118.3. 

19. 

An  amount  recovered  lower than the amount owed. 

Commission reply 

Italy:  correction  LIT  308 296. 

20. 

A  set-aside  subsidy paid for  ineligible land. 

Commission reply 

Germany:  corrections  DM  3  551.31  and  DM  1 579.51. 

21. 

A premium  paid  in  respect of ineligible breeding stock. 

Commission reply 

Sheepmeat: Italy:  correction  LIT  4 290  198. 

Overestimation  of  stock  depreciation  owing  to  the  application  of  the  wrong 

22. 
coefficients. 

Commission reply 

In the final  statement of public-storage costs produced by the computerized  F AUDIT-ED 
system  and  supplied  to  Member  States  by the  Commission,  the  anomalies  noted  by  the 
Court (overestimation of stock depreciation) were automatically corrected in the accounts 
for  the  1995  financial  year. 
Beef  : Ireland  : correction  1 959  936,73  IRL. 

23. 

No  deduction  in respect  of overlapping subsidies. 

Commission reply 

Arable  crops: France:  correction  FF  335.86. 

Subsidy increased owing to the application of the wrong agricultural conversion 

24. 
rate. 

Commission reply 

Bananas: France: correction  FF  338 851.93. 

25. 

Subsidy paid  in respect  of a non-existent winegrowing plot. 

Commission reply 

France:  correction  FF  7 824.38. 

Non-application  of the pro-rata  reduction in cases of non-compliance  with  the 

26. 
obligation  to set  aside 15%  of  the  land 

Commission  reply 

France:  corrections  FF  319.46,  FF  1 176.28, FF 203.26  and  FF  74.87. 

Expenditure declared although the corresponding payments  had not been made 

27. 
to  beneficiaries. 

Commission reply 

Arable  crops: correction  included  (see point  5). 

10 

Sugar  storage subsidies  which should have  been paid  monthly  and  charged  to 

28. 
the financial  year  1993. 

Commission  reply 

Sugar  storage  subsidies  which  should  have  been  declared  in  1993  but  were  declared  in 
1994.  The  annual  statement  of  costs will  be adjusted  accordingly. 

29. 

Reimbursement  of the  costs of sugar stored  in an  unauthorized  warehouse. 

Commission  reply 

The  Spanish  authorities  have  produced  evidence  that  the  warehouse  in  question  was 
recognized. 

30. 

Advances  in  excess of  the ceilings stipulated  in the  Regulation. 

Commission  reply 

Improvement  in  milk  quality:  Spain:  correction  PTA  1 018  022 422. 

FISHERIES 

The  payment  of  a final  balance  on  the  basis  of  documents  that  were  not 

31. 
adequate  according  to  the  regulations. 

Commission  reply 

The Commission can only confirm  the reply given to the special DAS report, which was 
that  while  admitting  that  a  number  of  secondary  vouchers  were  not  sent  in  with  the 
payment  application,  the  Commission  said  that  the  documents  supplied  were  adequate 
grounds  for  paying  the  amount  requested  in  full.  However,  the  departments  concerned 
have been instructed to inspect the vouchers which have to be submitted with applications 
for  payment  very  carefully. 

REGIONAL  SECTOR 

The settlement  of the error cases presented by the Court  in the regional  sector,  mainly  in 
the  area  of  ERDF  expenditure,  requires the  following  steps: 

Examination  whether  the  DAS  errors  had  a  direct  impact  on  the  Commission 

I. 
payments  and therefore  require  a recovery  of  amounts  paid  (corrective  action). 

Examination  whether  the  DAS  errors  have  a  potential  future  impact  on  the 
II. 
Community budget and therefore  imply preventive action on the part of the  Commission. 

implies 
the  substance  of 
III.  Detailed  examination  of 
identification  of  the  cases,  collection  of  sufficient  information  and  evaluation  of  the 
arguments  in favour  of  and  against  the existence  or  severity  of  an  error. 

the  problems,  which 

11 

Taking  a  documented  view  on  the  substance  of  each  case  and  taking  any  necessary 

IV. 
action (corrective or preventive). 

!• 

Direct impact of the errors on the Commission payments 

The  ERDF  co-finances  operational  programmes,  which  are  series  of  coordinated  multiannual 
activities. The  selection  of the individual  projects,  the control  of their  implementation  and  the 
verification  of compliance  with  Community  legislation  are primarily  the  responsibility  of the 
Member States. 

ERDF  payments  are  mainly  advances  to  Member  States,  conditional  on  the  progress  of  the 
implementation of the programme. The amounts to be advanced are fixed on the adoption of the 
programme. The timing of each payment, after  the initial advance, depends on the  expenditure 
declared by the Member  State. The Commission establishes threshold  levels (trigger points) of 
expenditure,  required  to  be  achieved  and  declared  by the  Member  State  in  order  to  receive  a 
certain payment. When the Member State declares expenditure above a certain "trigger point", it 
receives  the  prefixed  advance.  At  the  closure  of  the  programme,  Commission  and  Member 
States  make  the  final  settlement.  If the  Member  State  has  not  made  sufficient  expenditure,  it 
may  refund  part  of the  amounts  received.  If it has made expenditure  above  the  budget  of  the 
programme, it limits the ERDF payment claim to the maximum grant approved. 
Any impact of Member  State errors (eg. ineligible expenditure) on the ERDF payments  would 
take place through the declarations of expenditure, in the sense that the expenditure which was 
declared  to the  Commission  and  triggered  the ERDF payment  might  be  insufficient  when  the 
errors are taken into account, so that the full ERDF payment would not be justified. 

In this context, the Commission stated in its reply to the  1994 DAS report that these errors had 
in  fact  had  no  impact  on  the  ERDF  payments  examined  by  the  Court.  This  is  because  the 
Member  States normally declare a level of expenditure well above the level required to trigger 
payment by the Commission of the next advance. Thus, even if the Member  State declarations 
of expenditure included some ineligible items, the ERDF payments were justified  by the sum of 
eligible items. 

Even if the  level  of expenditure  declared  had not been  sufficient  to cover the DAS  errors, the 
only consequence would have been on the timing, not the amounts of the ERDF advances. This 
is because the Member States continue spending after the submission of the declarations and the 
total level of expenditure therefore  gradually increases. If the Member States had been aware of 
the  ineligible  expenditure  items,  they  would  have  simply  delayed  the  submission  of  the 
declarations until the levels of eligible expenditure had reached the trigger points. 

The table following  this section of the Commission's comments demonstrates that in almost all 
cases, the expenditure  declared by the Member State (column  8) was considerably  higher than 
the  expenditure  required  for  the  ERDF  payment  (column  9),  and  that  there  was  therefore 
sufficient  margin  to cover the amounts of expenditure which were considered  by the  Court  as 

12 

ineligible. Only  in one case (para 33) was the DAS error not fully  covered  by this margin; the 
result in this case was that the ERDF advance was paid two months early. 

The  Member  State  payment  claims  may  have  been  inaccurate  but  were  nevertheless  valid 
because, even  taking  into account  the errors, the eligible  expenditure  declared  was  above the 
trigger  points  and  therefore,  the  claims qualified  for  the  ERDF payments.  For  this  reason,  no 
recovery of amounts paid is required. The Court itself has recognised (para 3.146 of  1994 DAS 
report) that in the area of Structural  Funds the errors do not necessarily  affect  the  Commission 
payments. 

The Commission considers that the categorisation of these problems by the Court as substantial 
errors was mistaken and misleading. According to the Court's definitions,  errors which have no 
direct  and  measurable  detrimental  impact  on the Community  budget  are  considered  as  formal 
errors (see DAS  1994, para 1.40). 

II. 

Potential future impact of the errors on the Community budget 

The Commission has acknowledged  in its Annex to the  1994 DAS report (pp. 88-90) that even 
if  the  DAS  errors  had  no  impact  on  the  specific  ERDF  advances,  they  are  nevertheless 
considered by the Commission  as potential risks to be taken into account in the  Commission's 
financial  management. A future  impact of these errors on the Community  budget is conditional 
on the following : 

- the errors presented by the Court are justified  in the sense that the Member  State  declarations 
of expenditure indeed include ineligible expenditure items, 

-  these  errors  are  not  corrected  by  the  Member  State  authorities  and  the  final  declarations  of 
expenditure therefore continue to include the ineligible items, 

- at the closure of the programme there is insufficient  margin to compensate  for these errors in 
the  sense  that  the  programme  is  closing  within  the  approved  budget  and,  therefore,  the 
Commission  payments  relate  to  all  expenditure  items  included  in  the  declaration,  even  the 
ineligible ones. 

On  these  three  assumptions,  the  DAS  errors  bear  a  risk  of  a  potential  future  impact  on  the 
Community budget and therefore may require preventive action on the part of the Commission. 

This conclusion however  is quite different from the allegations  of the Court when  it presented 
these  problems  as  "substantial  errors"  which,  by  definition,  imply  a  direct  and  measurable 
detrimental  impact  on  the  1994  Community  budget.  The  main  argument  of  the  Commission 
against  the  1994  DAS  approach  was  that  the  Court  made  the  assumption  that  any  ineligible 
items  included  in  the  Member  State  declaration  had  a  direct,  automatic  impact  on  the 
Community  budget. In its Annex  (see  1994 DAS, pp.88-90) the  Commission  replied  that this 
assumption  was not valid  and  explained  the technical  limitations  of this  approach,  mainly  the 
Court's unsuccessful  attempts to link the underlying transactions to  specific  advance  payments 

13 

and to quantify  the DAS errors (these have been ultimately presented in "gross values", i.e. total 
sums  paid  out  by  Member  States,  of  which  the  Community  co-financing  could  form  only  a 
part). 

HI. 

Examination  of  the  substance  of  the  problems  (identification, 
evaluation) 

information, 

Given  that  the  majority  of  the  1994  DAS  errors  concern  expenditure  under  the  1989-93 
programmes, which are being closed during  1996, the Commission launched an examination of 
the  substance  of all the problem  cases  brought  up  in the  1994 DAS  and  Annual  reports.  The 
objective  of  this  examination  is to  ensure  that  all  problems  reported  by  the  Court  have  been 
satisfactorily  settled before the closure of the programmes, in the sense that the Commission has 
available a written statement of the Member State, either explaining the situation in a reasonable 
and documented  way and concluding that the Court's observation  is not valid, or accepting the 
observation  and  undertaking  the  correction  of  the  error,  usually  in  the  next  declaration  of 
expenditure. 
This examination  has been based  on  information  included  in the detailed  audit  reports  (sector 
letters) of the Court of Auditors and in the Member State replies. Where the information  or the 
Member  State  explanations  were  not  sufficient  to  show  that  the  problems  have  been 
satisfactorily  settled, the Commission wrote to the Member  State authorities requesting  further 
clarification. 

This  follow-up  examination  however  has  encountered  certain  difficulties,  mainly  because  the 
information  available from the Court of Auditors is, in some cases,  insufficient: 

1. 
The Commission has not been informed  of the opinion of the Court of Auditors on the 
sufficiency  of  most  of  the  Member  States'  explanations.  Since  these  problems  have  been 
discovered  by  the  Court  and  only  the  Court  itself  is  fully  aware  of  the  facts  supporting  the 
observations,  it  would  be  useful  for  the  Commission  to  have  the  Court's  opinion  on  the 
explanations  of  the  national  authorities.  Moreover,  it  should  be  noted  that  especially  for  the 
1994  DAS  errors, the  sector  letters  were  sent  to the  Member  States  rather  late,  and  in  many 
cases  the Member  State  comments  have not  been taken into account  in  the  DAS  report.  This 
implies a certain risk for the validity of the DAS errors (e.g. 8 out of 26 cases needed  a simple 
clarification  by the national authorities) and, therefore, for the possibility of justifying  financial 
corrections at the closure of the programmes. 
So far, the Court has informed the Commission in only a limited number of cases of its opinion 
on the sufficiency  of the Member State explanations  of the DAS errors. 

2. 
Many of the amounts of error included in the DAS report cannot be easily traced to the 
sector letters or to the Member State replies. In some cases, the amounts of error indicated in the 
sector  letters  are  different  from  those  included  in  the  DAS  report  ;  in  some  other  cases,  the 
sector  letters  do  not  indicate  any  specific  amounts  of  error.  The  Member  State  authorities 
comment  on the observations  and the amounts indicated in the sector letters but they  often  do 
not recognise the cases to which the DAS errors refer.  Therefore, the identification,  evaluation 
and  follow-up  become  laborious  and,  in  some  cases,  impossible.  These  difficulties  are 

14 

compounded  in the case of the so-called  "known errors", for  which there  are no  specific  DAS 
sector  letters but  a reference  to other audit reports of the Court; the  Commission  has  to try  to 
identify these cases by reference to the size of the error mentioned. 

The Commission wrote to the Court in March  1996 requesting specific information  for tracing a 
number of DAS cases. No reply has been received yet. 

IV. 

Conclusions of the follow-up  examination 

Of the 26 cases of "substantial  DAS errors" in the area of ERDF, covered  by paragraphs 22 to 
43 of Annex IV of the DAS report,  3 cases are still under examination  under Article 24 of Reg. 
No 4253/88 and 2 cases have not been identified  because the information  provided by the Court 
is not sufficient,  the other 21 cases are considered as satisfactorily  settled and do not appear to 
require any further  follow-up by the Commission. 

The  table  following  this  section  of  the  Commission's  comments  summarises  the  situation. 
Detailed information for each individual case is given below. 

32. 
Items of 1991 and 1992 expenditure declared as justifying  other expenditure in 1993 
presented  as  justification  for  an  advance paid  in  1994,  compounded  by  a  statement  of 
expenditure  which  did  not  correspond  to  the  accounts  of  the  beneficiary  audited,  and 
computing equipment subsidized under a telematics project 

Commission reply 

The observation concerns a project which was financed under the Telematics OP. Its eligibility 
is  questioned  by  the  Court  because  it  concerns  the purchase  of  informatics  equipment;  other 
problems  concern  the  expenditure  declarations  and  the  accounting  system  of  the  beneficiary. 
The Member  State authorities  do not  accept these observations. In view  of the  closure  of  this 
programme,  the  Commission  wrote  to  the  competent  national  authorities  asking  for  further 
clarifications.  It  is  underlined  however  that  the  final  amount  of  expenditure  declared  by  the 
Member State for this programme is considerably higher than the amount required for triggering 
the  ERDF  advance  and  final  payment,  forming  thus  a  sufficient  margin  to  cover  the  error; 
therefore this DAS error has no financial impact on the Commission payments and the question 
of recovery does not appear to arise. 

33. The payment of costs connected with ineligible operations. 

Commission reply 

As explained  by the  Commission  in its reply to the  DAS  report  (point  33/2, page  82) 
1) 
this case concerns the certification by the Member State of expenditure concerning new actions, 
before the official  approval of them by the Commission. The practical effect  in this case is that a 
Commission payment was made two months early; the question of recovery does not appear to 
arise. 

15 

2) 
The  information  available to the Commission  does not  allow the  identification  of this 
case mentioned  by the Court;  it concerns  "a known error"  for  which there  is no  specific  DAS 
sector  letter.  The  Commission  wrote  to  the  Court  in  March  1996  requesting  information  for 
tracing a number of DAS cases (this  one included) but no reply has been received yet. In view 
of the closure of the programme concerned, the Commission took further  action; it wrote to the 
national  authorities  concerned  asking  for  identification  and  clarification  of  this  case.  It  is 
underlined  however  that  the  amount  of  expenditure  declared  by  the  Member  State  for  this 
programme  is considerably  higher than the amount required  for  triggering  the ERDF  advance, 
forming thus a sufficient  margin to cover the error; therefore at this stage, the DAS error has no 
financial  impact  on  the  Commission  payments  made  and  the  question  of  recovery  does  not 
appear to arise (see also para. 40). 

Having been sufficiently  informed  by the Court and considering that the Member  State 
3) 
replies  were  not  satisfactory  and  these  two  problem  cases  were  not  settled,  the  Commission 
launched  an  examination  under  Article  24  of  Regulation  No.  4253/88  which  has  not  been 
concluded  yet.  However,  the  amounts  of  expenditure  declared  by the  Member  State  for  these 
programmes  are  considerably  higher  than  the  amounts  required  for  triggering  the  ERDF 
advances, forming thus sufficient  margins to cover these DAS errors and ensuring the regularity 
of the Commission advances made. 

4) 
The  error,  mentioned  also  in  the  1994  Annual  Report  of  the  Court  (para  4.18 a), 
concerns  a declared  purchase  cost of about ECU  1.7 million  for  a piece  of  land  which  in  fact 
represented  ECU 0.56 million disbursed before  the eligibility  date, and ECU  1.13  million  used 
to  repay  a  loan  taken  out  when  the  land  was  purchased.  In  their  reply  to  specific  questions 
addressed by the Commission for the clarification  of this problem, the Member State authorities 
undertook  the  correction  of  the  error.  Therefore,  the  question  of  recovery  does  not  appear  to 
arise. 

5) 
The observation concerns an amount of ECU 748.648 paid by the beneficiary  for several 
phases  of  a  project,  some  of  which  were  not  cofinanced  by  ERDF.  The  Court  recognized, 
however,  in the  sector  letter  that  this  error  was  probably  corrected  in  the  next  declaration  of 
expenditure.  The  competent  national  authorities,  in  answer  to  a  specific  question  from  the 
Commission on this subject,  clearly  stated that this error had indeed been corrected  in the next 
declaration of expenditure; therefore, the question of recovery does not appear to arise. 

16 

6) 
The  Commission  amended  its  initial  decision,  C(94) 672/3  of  12 April  1994,  by 
Decision  C(95)  1719  final  of  17 July  1995.  The  application  for  amendment  of  the  decision 
submitted  by the Member  State covered,  among  other things, the work  and  the  corresponding 
costs of ECU 572 779, as mentioned  in Commission  letter No  171845 of  16 December  1994. 
With the amendment of the said decision, these costs become eligible and there is therefore  no 
need at this stage to effect  a recovery. 

34. 

Expenditure lacking conclusive justification, certified by a Member State. 

Commission reply 

The  observation  concerns  an  amount  of  ECU  47 547 which  was  deemed  by  the  Court  to  be 
ineligible because it was not substantiated during the auditors' visit. The national authorities, in 
their  reply,  did  not  accept the  validity  of the observation  and presented  copies  of the  relevant 
supporting documents; therefore the question of recovery does not appear to arise. 

35. 

Declared expenditure below that in the beneficiary's accounts. 

Commission reply 

1) 
The two  DAS  errors  concern  two  amounts totalling  about  ECU  1 million  which  were 
declared in excess of the actual expenditure. The Member State authorities accepted the validity 
of  the  observation  and  committed  themselves  to  correcting  it  in  the  next  declaration  of 
expenditure. It is underlined  however that the amount of expenditure  declared  by the  Member 
State  for  this  programme  is  considerably  higher  than  the  amount  required  for  triggering  the 
ERDF  advances,  forming  thus  a  sufficient  margin  to  cover  the  errors; therefore  at  this  stage, 
these DAS errors have no financial  impact on the Commission payments made and the question 
of recovery does not appear to arise. 

This  observation  concerns  a  "negative"  error  of  ECU  21  691, i.e.  the  Member  State 
2) 
declared  an  expenditure  amount  lower  than  that  actually  incurred.  The  question  of  recovery 
does not appear to arise (see also para. 36). 

36. 

Expenditure declared lower than the eligible expenditure incurred 

Commission reply 

This observation concerns a "negative" error of 449.176 ECU, i.e. the Member State declared an 
expenditure amount lower than that actually incurred. The question of recovery does not appear 
to arise (see also para. 35/2). 

17 

3 7. 

Unpaid invoices and/or provisions included in a statement of expenditure. 

Commission reply 

1) 
This observation concerns an error of ineligible expenditure of ECU 758. However, the 
very  small  value  of  the  error  in  relation  to  the  fact  that  the  programme  concerned  has  been 
closed with actual expenditure about ECU  11 million above the approved  ERDF budget  means 
that no correction or recovery is required. 

2) 
The two errors, totalling about ECU  1  060 000, concerned expenditure which according 
to the  Court  had  not  been  actually  incurred  at the time  of the declaration  to  the  Commission. 
The Member  State authorities  state that these amounts were not  included  in the declaration  of 
expenditure examined by the Court but in a subsequent declaration, when the relevant  amounts 
had  indeed  been  paid  out.  The  Court's  observation  does  not  therefore  seem  valid  and  the 
question of recovery does not appear to arise. 

3) 
The  observation  concerns  the  method  of  certification  of  expenditure  by  a  beneficiary 
company  which  is based  on the  cost  accounting  records  and not  on the  actual  payments.  The 
Court  however  has  later  informed  the  Commission  that  in  a  subsequent  audit  in  the  same 
company  (DAS  1995),  the  officials  of  the  company  assured  the  auditors  that  the  method  of 
certification  of  expenditure  had  been  modified.  In view  of the  closure  of  the  programme,  the 
Commission addressed specific questions on this subject to the competent national authorities in 
order  to  ensure  that  the  expenditure  certifications  submitted  to the  Commission  concern  only 
expenditure actually incurred. The national authorities assured the Commission of the eligibility 
of the expenditure in the subsequent declarations.  Therefore, the question of recovery  does not 
appear to arise. 

VAT,  which  was  deductible for  the  beneficiary,  included  in  the  statement  of 

38. 
expenditure. 

Commission reply 

The  observation  concerns  the  certification  of  an  amount  of  about  ECU  304 305  which, 
according to the Court, represented recoverable VAT. The national authorities explained in their 
reply that this amount of VAT was not in fact recoverable and was therefore  eligible for  ERDF 
cofinancing.  The  Court  of  Auditors,  in  a  subsequent  letter  to  the  Commission,  accepted  the 
validity of the Member  State explanations. Therefore, the question of recovery does not  appear 
to arise. 

18 

39. 

Expenditure in respect of which the supporting documents could not be produced 

Commission reply 

The  observation  concerns  certified  expenditure  of  about  ECU  7.6  million  which, 
1) 
according  to  the  Court,  was  not  supported  by the documentary  evidence  required.  The  same 
observation was included  in the "non-auditable" cases in the  1994 DAS report  (para 3.132 (k), 
page 42), quantified  at  about  ECU  74 million. The national  authorities,  in their  reply,  explain 
that the documentary  evidence  of the expenditure made by the communes  is available  only  at 
the  level  of  the  communes  and  not  at  the  central  administrative  service  where  the  auditors 
carried  out  their  control.  The  Commission  auditors,  during  their  own  controls,  have  already 
verified  that the documentary  evidence concerning the communes is available only at the  level 
of 
from  a 
misunderstanding, does not seem valid and the question of recovery does not appear to arise. 

the  Court's  observation,  probably 

the  communes.  Therefore 

resulting 

This  observation concerns an error of ineligible expenditure of 39 ECU. However, the 
2) 
very  small  value  of  the  error  in  relation  to  the  fact  that  the  programme  concerned  has  been 
closed with actual expenditure about ECU  11 million above the approved ERDF budget means 
that no correction or recovery is required (see also para. 37/1). 

40. 

Expenditure outside the eligibility period 

Commission reply 

1) 
The  observation,  included  also  in  the  1994  Annual  Report  (para  4.16  (a),  page 105), 
concerns certified  expenditure of ECU 317 178 which was effected  outside the eligible period. 
The  national  authorities  did  not  present  a  complete  reply  to  this  observation.  In  view  of  the 
closure  of  the  programme,  the  Commission  addressed  specific  questions  regarding  this 
observation to the competent national authorities. It is underlined however that the final  amount 
of expenditure declared by the Member State for this programme is considerably higher than the 
amount required for triggering the ERDF advances and final payment, forming thus a  sufficient 
margin to cover this error; therefore this DAS error has no financial impact on the  Commission 
payments and the question of recovery does not appear to arise. 

2) 
The observation concerned expenditure of about ECU 7 170 000 which, according to the 
Court, was effected  outside the eligible period. In the relevant sector letter however, the  Court 
makes  clear  that  the  expenditure  was  only  invoiced  outside  the  eligible  period  but  was  paid 
within  this  period;  therefore  the  Court  concludes  that  the  observation  is  valid  only  on  the 
condition that the "invoice date criterion" applies. The Member State explains that the criterion 
for  eligibility  is  when  the  expenditure  is  actually  incurred  (i.e. paid  out)  and  not  when  it  is 
simply committed or invoiced. The Commission considers that this observation resulted from a 
misunderstanding  on the  part  of the  Court  in the  sense that the  relevant  provisions  relate  the 
certification of expenditure and the eligible period to the actual payments and not to the invoices 
concerned. The question of recovery does not therefore appear to arise. 

19 

3) 
The  observation  concerns  certified  expenditure  of  about  ECU  290 000  which  was 
effected  outside  the  eligible  period.  In  the  relevant  sector  letter,  the  Court  accepted  that  this 
error had no impact on the Commission payment. The Member State authorities, in their reply, 
accepted that the observation was valid and that the declaration of expenditure  submitted  to the 
Commission  included erroneously this amount. Given that the programme concerned had  been 
closed  before  the  notification  of this DAS error, the  Commission  examined  carefully  whether 
this  problem  had  any  impact  on  the  ERDF  payments, justifying  thus  a  recovery.  The  total 
expenditure  declared  by  the  Member  State  amounted  to  about  ECU  27.8  million  while  the 
programme  requirements were for  ECU 27 million. Therefore,  the amount  of ECU  0.8  million 
spent and declared by the Member State above the approved ERDF budget is sufficient  to cover 
the  DAS  error  of  ECU  0.3  million,  thus  allowing  the  Member  State  to  qualify  for  the  total 
ERDF grant; under these circumstances, no recovery of ERDF grant paid is justified. 

4) 
The  information  available  to the  Commission  does not  allow  the  identification  of  this 
case; it concerns  a  "known  error"  of ECU  732  516 for  which  there  is no  specific  DAS  sector 
letter. The Commission wrote to the Court in March  1996 requesting  information  for  tracing a 
number  of  DAS  cases  (this  one  included)  but  no reply  has  been  received  yet.  In  view  of  the 
closure  of  the  programme  concerned,  the  Commission  took  further  action;  it  wrote  to  the 
national  authorities  concerned  asking  for  identification  and  clarification  of  this  case.  It  is 
underlined  however  that  the  amount  of  expenditure  declared  by  the  Member  State  for  this 
programme  is considerably  higher than the amount required  for  triggering  the ERDF  advance, 
thus forming  a sufficient  margin to cover the error; therefore,  at this  stage, this DAS error  has 
no financial  impact on the Commission payments made and the question  of recovery  does  not 
appear to arise (see also para. 33/2). 

41. 

Advances paid in excess of the limits stipulated in the Regulation. 

Commission reply 

The error concerns the  Commission  payment procedures  and  it has already  been  explained  in 
the Commission's  reply to the  1994 DAS report (page  82, point 41). The question  of  recovery 
does not appear to arise. 

Expenditure  which  was  ineligible because it  did  not  relate  to  the project  financed 

42. 
under the Operational Programme concerned 

Commission reply 

The observation concerns the eligibility of certain expenditure items included in the declaration 
of expenditure, amounting to  1.726  ECU.  The national authorities did not present  a complete 
reply to this observation. In view of the closure of the programme, the Commission wrote to the 
competent  Member  State  authorities  asking  for  further  clarifications.  It is underlined  however 
that  the  final  amount  of  expenditure  declared  by  the  Member  State  for  this  programme  is 
considerably  higher  than  the  amount  required  for  triggering  the  ERDF  advances  and  final 

20 

payment,  forming  thus a sufficient  margin to cover the error; therefore,  this DAS  error  has no 
financial  impact on the Commission payments and the question of recovery  does not appear to 
arise. 

A  building  used for  purposes  other  than  those  which  justified  (and  conferred 

43. 
entitlement to) the Community contribution. 

Commission reply 

Having been sufficiently  informed  by the Court and considering that the Member  State replies 
were  not  satisfactory  and  this  problem  case  was  not  settled,  the  Commission  launched  an 
examination  under  Article  24  of  Regulation  No.  4253/88  which  has  not  been  concluded  yet. 
However,  the  amount  of  expenditure  declared  by  the  Member  State  for  this  programme  is 
considerably higher than the amount required for triggering the ERDF advance, forming  thus a 
sufficient  margin  to  cover  this  DAS  error  and  ensuring  the  regularity  of  the  Commission 
advances made (see also para 33/3). 

21 

SUBSTANTIAL  ERRORS  CONCERNING  ERDF  PAYMENTS,  INCLUDED  IN  THE  1 9 94  STATEMENT  OF ASSURANCE  (DAS)  REPORT 

(ECU) 

DAS 
para 

DAS 
test 

M-S  Programme 
(ERDF  No) 

Nature 
of 

payment 

PROBLEM 

Amount 
of  DAS 
error 

Expenditure 
declared 
by  M-S 

Threshold  level 
of  expenditure 
equired  for  paym 

Impact 
on  ERDF 
payments 

M-S 
response 

D G X VI 
Follow-up 

Explanations 

1 

| 

2 

|  3 

| 

4 

| 

5 

| 

6 

| 

7 

| 

8 

| 

9 

| 

10 

| 

11 

| 

12 

| 

13 

para 32 

|PP4 

|  ES  | 9 1 1 1 1 0 0 05 

|Adv1,2/93 

|ineligible  project 

|  4 . 2 2 3 . 0 0 0| 

5 8 . 7 2 7 . 1 2 8| 

3 4 . 7 3 9 . 7 0 0|  NO 

| 

| 

no  follow-up 

|see  detailed  comments 

para  33 
para  33 
para  33 
para  33 
para  33 
para  33 

KNPP31 
KNPP34 
KNPP36 
KNPP37 
KNPP38 
PP194 

ES 
ES 
BE 
BE 
ES 
PO 

9 2 1 1 0 3 0 04 
9 2 1 1 0 9 0 06 
9 1 1 0 0 9 0 03 
9 0 1 0 1 0 0 02 
9 2 1 1 0 9 0 06 
9 0 1 2 1 0 0 02 

Adv2/prog 
Adv2/93 
A d v l / 93 
Adv1/92 
Adv2/93 
Adv2/93 

ineligible  operations 
ineligible  operations 
ineligible  operations 
ineligible  operations 
ineligible  operations 
ineligible  operations 

4 . 2 3 5 . 4 31 
4 . 9 5 7 . 2 90 
2 0 . 6 13 
164.839 
1.625.752 
7 4 8 . 6 48 

6.396.515 
55.339.345 
11.626.532 
7.054.191 
55.339.345 
2 4 . 4 9 6 . 0 00 

3.095.505 
3 6 . 7 3 9 . 5 00 
10.334.946 
5.284.396 
3 6 . 7 3 9 . 5 00 
2 0 . 5 5 7 . 0 00 

early  pay 
NO 
NO 
NO 
NO 
NO 

satisfactory 

unsatisfactory 
unsatisfactory 
correction 
correction 

settled  case 
letter  to  CoA,M-S 
Article  24 
Article  24 
settled  case 
settled  case 

see  DAS94,p.82,  point  33/2 
non  identified  case 

para 34 

|PP12 

|  UK  | 9 1 0 9 0 9 0 16 

|Adv1/93 

|non  justified  expenditure 

| 

4 7 . 5 4 7| 

3 . 4 3 8 . 9 6 0| 

7 2 0 . 0 0 0|  NO 

|  satisfactory 

| 

settled  case 

| 

para  35 
para  35 
para  35 

KNPP40 
KNPP41 
PP15 

ES 
ES 
ES 

8 8 1 1 0 9 0 02 
8 8 1 1 0 9 0 02 
9 0 1 1 0 9 0 22 

Adv1,2/93 
Adv 1,2/93 
Adv1,2/93 

decl.differ.from  account. 
decl.differ.from  account. 
decl.lower  than  account. 

8 2 3 . 6 94 
130.563 
-21.691 

54.821.133 
54.821.133 
4 0 . 1 4 1 . 0 68 

3 9 . 4 2 3 . 7 00 
3 9 . 4 2 3 . 7 00 
2 5 . 6 5 1 . 2 50 

NO 
NO 
NO 

correction 
correction 

settled  case 
settled  case 
no  follow-up 

"negative  error" 

para 36 

|PP398 

|  DE  | 8 9 0 2 0 9 0 02 

|Final 

jdeclar.lower  than  actual 

| 

- 4 4 9 . 1 7 6|  1 0 9 . 7 3 7 . 1 7 6j 

1 0 9 . 5 5 0 . 0 0 0|  NO 

| 

| 

no  follow-up 

|"negative  error" 

para  37 
para  37 
para  37 
para  37 

KNPP389 
KNPP496 
PP17 
PP496 

IRL 
GR 
ES 
GR 

8 9 0 4 0 9 0 01 
9 0 0 8 1 0 0 01 
9 2 1 1 0 9 0 07 
9 0 0 8 1 0 0 01 

Final 
Adv2/93 
Adv2/93 
Adv2/93 

unpaid  invoices,  provisions 
unpaid  invoices,  provisions 
unpaid  invoices,  provisions 
unpaid  invoices,  provisions 

758 
260.286 
3 9 5 . 3 08 
7 9 8 . 4 73 

920.014.222 
106.275.665 
12.914.944 
106.275.665 

9 0 9 . 6 8 4 . 0 00 
3 2 . 9 9 4 . 0 77 
9.248.500 
32.994.077 

NO 
NO 
NO 
NO 

satisfactory 
correction 
satisfactory 

no  follow-up 
settled  case 
settled  case 
settled  case 

closed  progr. 

para 38 

|PP218 

|  ES  |921103003 

|Adv2/prog 

|non  eligibility  of  VAT 

| 

3 0 4 . 3 0 5| 

2.790.479] 

1.994.250|  NO 

|  satisfactory 

| 

settled  case 

] 

para  39 
para  39 

PP389 
PP397 

IRL 
DE 

8 9 0 4 0 9 0 01 
9 4 0 2 0 9 0 04 

Final 
Adv2/94 

lack  of  documentation 
lack  of  documentation 

39 
7.596.257 

9 2 0 . 0 1 4 . 2 22 
2 3 6 . 3 0 0 . 0 00 

9 0 9 . 6 8 4 . 0 00 
6 1 . 8 3 1 . 5 00 

para  40 
para  40 
para  40 
para  40 

KNPP32 
KNPP39 
PP384 
PP407 

ES 
ES 
PO 
DE 

911110005 
9 2 1 1 0 9 0 06 
9 4 1 2 0 9 0 08 
8 8 0 2 1 0 0 01 

Adv1,2/93 
Adv2/93 
Adv2/94 
Final 

out  of  eligible  period 
out  of  eligible  period 
out  of  eligible  period 
out  of  eligible  period 

3 1 7 . 1 78 
732.516 
7.170.255 
290.275 

58.727.128 
55.339.345 
28.893.828 
27.784.953 

3 4 . 7 3 9 . 7 00 
3 6 . 7 3 9 . 5 00 
12.025.000 
2 7 . 0 3 0 . 6 34 

NO 
NO 

NO 
NO 
NO 
NO 

satisfactory 

no  follow-up 
settled  case 

closed  progr. 

no  follow-up 
letter  to  CoA,M-S 
settled  case 
settled  case 

satisfactory 
satisfactory 

see  detailed  comments 
non  identified  case 

para 41 

|PP219 

|COM1850503048 

|lnterim 

|advances  above  limits 

|  1.854.6381  this  concerns  the  Commission 

NO 

para 42 

|PP400 

j.  BE  J921009002 

|Adv2/93 

(ineligible  expenditure 

j 

1.726J 

4 . 7 9 3 . 2 3 9| 

3 . 5 8 2 . 5 0 0|  NO 

| 

| 

| 

no  follow-up 

see  DAS94,p.82,point  41 

no  follow-up 

|see  detailed  comments 

para43 

|KNPP26  |  BE  | 9 0 1 0 1 0 0 02 

|Adv1/92 

| non  ERDF  use 

| 

5 1 1 . 4 7 8| 

7.054.191 | 

5 . 2 8 4 . 3 9 6|  NO 

| unsatisfactory  | 

Article  24 

| 

Social  sector 

44. 
The financing  of a general pre-training measure where only a training measure 
leading to qualification  was eligible, combined with certification of expenditure  based 
on  previous  supporting  documents  which  was  insufficiently  substantiated  by  the 
Member  State. 

Commission reply 

The  idea  of  training  leading  to  a  qualification  is  not  to  be  found  in  the  Community 
regulation on the old programming (1989-94), which merely states that training must lead 
to a job.  The Commission has decided to regard pre-training measures as eligible if,  and 
only if,  they are part of a training course leading to a job.  Thus, for  example, in the case 
of  Contrats  Formation  Individualisée  (CFI - Customized  Training  Contracts), which  are 
in three parts (mobilization, pre-qualification, qualification), only the last stage is regarded 
as automatically eligible.  The first  stage has been automatically  excluded and the second 
has on occasion been considered  if the applicant has been able to prove that there  would 
be  follow-up  right  up  to the  trainee's  being  recruited  to  a job. 

45. 

Use of PRODEPII  funds  as finance for  PRODEPI  operations. 

Commission reply 

This  was  the  first  time  the  problem  raised  by  the  Court  had  been  detected  by  the 
Commission,  which  therefore  decided  to  block  the  advances  for  CSF  II.  The  Member 
State then agreed to open separate accounts for the old fund  (1986-89), CSF  I (1990-94), 
CSF  II  (1994-99)  and  the CIPs.  It undertook  to  channel  ESF  funds  in accordance  with 
Community decisions.  The Commission has been able to ascertain that the Member  State 
has abided  by  its  undertakings. 

46. 

Declared  expenditure  in excess of actual expenditure. 

Commission reply 

Greece: the balances from  1990-93 have not yet been closed  as the Commission  is in the 
process  of  making  the  requisite  corrections  in collaboration  with the  Member  State. 

Italy: the Commission  is keeping  a close watch on the cases currently  before  the  courts. 
It has joined  a civil  claim  to  the  public  prosecution  in  several  cases. 

Social  Fund  aid  used for  training students  who  were neither  unemployed  nor 

47. 
seeking  work. 

Commission reply 

The  Commission  has  no  information  in  its  possession  at  present  which  would  indicate 
whether the students on the training courses in question were  seeking work or not  before 
they  started  the courses.  The  Commission  would  stress that  it is extremely  difficult  for 
it to  carry  out this type  of  exercise  with  its own resources. 

22 

Subsidies  used for  an  ineligible  re-training  measure  were  recovered  by  the 

48. 
regional  authorities,  but not  repaid to the Commission. 

Commission  reply 

It  is  planned  that  the  overpayment  by  the  Tuscany  region  to  which  the  Court  alludes 
should be deducted  from  the amount outstanding for  1993.  However,  it has not yet been 
possible to book the request for  the balance due which was submitted to the  Commission 
by  the region  on  14 February  1996, as an annex required  for  processing  the  request  had 
to  be redone.  Despite  several  letters  from  the  Commission,  the Tuscany  region  has  not 
yet amended its request for the balance due, and the planned deduction has, therefore,  not 
yet  been  made.  The  Commission  is, however,  keeping  a close  watch  on this  case. 

The financing  of  ineligible  training  measures for  infant  and primary  school 

49. 
teachers 

Commission  reply 

The  Commission  has  studied  the problem  raised  by  the  Court  and  has  recently  initiated 
the  procedure  provided  for  in  Article  24 of  Regulation  No 2082/93. 

An  advance  paid  on  the  basis  of  estimated  expenditure  instead  of  actual 

50. 
expenditure. 

Commission  reply 

Advances for a particular year N are based on the certificates  of implementation  submitted 
by the  Member  States  in  respect  of  year N-I,  except  in the  case  of  the  first  year  of  the 
planning  period,  for  which  the  first  advances  automatically  follow  the  adoption  of  the 
various  forms  of  financial  contribution. 

As  some  courses  last  several  years  and  the  academic  year  straddles  two  calendar  years, 
a Member  State  sometimes has to submit certificates  of implementation  at the end  of the 
year  based  partly  on  actual  expenditure  and  party  on  estimated  expenditure.  When  the 
requests for the balance due are submitted, at the latest by 30 June of the following  year, 
the  Commission  then  makes the  requisite  adjustments  so that  only  actual  expenditure  is 
booked. 

Funds  transferred  between  Operational  Programmes  to  cover  costs  which 

51. 
increased  as a  result of significant  changes in exchange rates. 

Commission reply 

The  new  rules  for  the  use  of  exchange-rate  gains  should  prevent  resources  being 
transferred  from  one  operational  programme  to another  in  future. 

23 

ENVIRONMENT 

Declared  expenditure  relating  to  an  advance  paid,  rather  than  the  final 

52. 
beneficiary's  actual  expenditure. 

Commission  reply 

The Commission,  in its reply to the  1994 DAS report (p.  83), explained  that the advance 
payments  should  not  be  considered  as a priori  ineligible  expenditure  but  was not  aware 
of  the  exact  context  referred  to  by  the  Court.  The  Commission  has  no  sound  basis 
therefore  for  considering  that  the  expenditure  in  question  is  ineligible.  This  project  has 
been included in the Commission's programme on-the-spot  controls and the eligibility  of 
the  declared  expenditure  will  then  be  verified. 

EAGGF  GUIDANCE SECTION 

Expenditure  declared  equivalent  to  an  advance  paid,  rather  than  the  final 

53. 
beneficiary's  actual  expenditure. 

Commission reply 

In a letter to the Commission  dated  3 April  1996, the Region of Puglia confirmed  that it 
would in future take care not to pay any more advances to beneficiaries under Operational 
Programmes.  In  the  case  in  point,  however,  no  recovery  needs  to  be  made,  since  the 
payment  of  Community  funds  is  an  operation  by  the  Member  State  to  make  the  funds 
available which will be regularized when the balances due for  1992 and  1993 are paid and 
the  final  statements  of  expenditure  are  submitted. 

The  levying  of  a  commission  by  the  administrative  body  on  subsidies  paid  to 

54. 
beneficiaries. 

Commission reply 

As  far  as  Italy  is  concerned,  the  Commission  contacted  the  Fondo  di  Rotazione  and 
MIRAAF  by  letter  of  22  February  1996  to  ask  for  the  situation  to  be  rectified  and  for 
them to notify  the Commission  of the measures taken for  that purpose.  No  response  has 
yet  been  received. 

As  regards  Portugal,  despite  assurances  given  by  IFADAP  on  several  occasions  that  no 
commission  would  be  levied  on beneficiaries  after  October  1994, it has been  confirmed 
that the practice  continues indirectly through the presentation of a separate  invoice.  It is 
no longer  linked to the amount  of aid paid, however, but to the investment.  Thus, in the 
case  of  CSF  II,  0.9%  is being  charged  on measures  2,  3 and  5 and  0.45%  on  measures 
1  and  4.  The  ministerial  decision  to  charge  these  commissions  is  to  be  notified  to  the 
Commission  for  assessment. 

24 

RESEARCH 

An  expenditure statement artificially inflated in such a way that the  Community 

55. 
contribution financed  all  of the costs. 

Commission reply 

Following  a preliminary  audit  by  the Court  of  Auditors, the  Commission  (DG  XIII  and 
UCLAF)  carried  out  a  full  audit  the  outcome  of  which  was  that  the  company  under 
suspicion  was  charged  with  fraud  against  the  Community  budget  in  respect  of  the 
irregularities it had committed.  The Commission consequently took steps to terminate the 
company's  participation  in the  contracts under  audit,  claim  repayment  of  the  sums  paid 
to the company under the contracts and suspend all payments in its favour.  As fraud  was 
involved,  the  Commission  also  decided  in  July  1996 to  forward  the  case  papers  to  the 
competent judicial  authorities  in the Member  State in which the company  concerned  has 
its head  office. 

Expenditure submitted for  Community support which had already been financed 

56. 
by a national  research  institute. 

Commission reply 

The  Commission  deducted  £8  532  from  the  final  payment  made  on  24  January  1996. 

Declared costs overstated by using exaggeratedly high rates or omitting to deduct 

57. 
the  amount  of an advance  already paid. 

Commission reply 

Following  the  Court  of  Auditors'  comments  the  Commission  wrote  to  the  contractor  to 
ask for  further  information  on the points raised by the Court.  DYCAT  International  has 
not  yet  supplied  the  information,  and  the  project  coordinator  has  undertaken  to  serve 
notice  on the  company  to  supply  the requisite  documents  by  15 June  1996.  If no  reply 
is  received  from  DYCAT  by  that  date,  the  Commission  will  reduce  the  amount  of  the 
final  payment. 

AID  TO EASTERN  EUROPEAN  COUNTRIES 

58. 

Financing  of the  ineligible  VAT portion  of a PHARE  project. 

Commission reply 

The amount in question,  125 000 Hungarian forint (approximately ECU  874), was repaid 
by  the  Hungarian  tax  authorities  on  16 February  1995. 

25 

ADMINISTRATIVE  EXPENDITURE 

59. 
Payment  by the  Commission of the purchase price  of the  "Clovis/Wilson" plot, 
even though it was not payable  because the related contract had not been signed  in the 
presence  of  a  notary. 

Commission  reply 

The error referred  to by the Court was noticed and corrected by the relevant  Commission 
department  at  once.  An  order  for  recovery  was  issued  and  the  amount  concerned 
recovered. 

No  payment  can  be  authorized  unless  the  relevant  contract  has  been  validly  signed  by 
both parties.  The error brought to light by the Court was the result of a mistake as to the 
chronological  order of the stages in a purchase procedure at the end of the financial  year, 
to  the  advantage  of  a  transfer  aggregating  appropriations  which  had  not  yet  been 
implemented. 

OWN  RESOURCES 

(Parliament) 

10. 

Believes  that  the  Commission  and  the  Member  States  must  step  up  their 
checks on the acceptance and customs status of goods at the Union's  external 
frontiers  and  calls  upon  the  Commission  to  draw  up  a  report  on  these 
matters; 

Commission  reply 

The  Commission  shares  Parliament's  view  that  checks  on  the  acceptance  and  customs 
status of  goods are a matter of particular  interest.  They  have therefore  been  included  in 
its programme  of  checks  in  the  Member  States and  it  will  step  up  its work  in  this  area 
still  further. 

The  results  of  the  checks  carried  out  by  the  Commission  from  1990  to  1993  were  the 
subject  of  a  communication  to  the  two  arms  of  the  budgetary  authority  via  the  three-
yearly  report  of  4  January  1994  (COM(93)  691)  on the  operation  of  the  own  resources 
checking  system.  A  similar  communication  on the results of  checks into  own  resources 
from  1993 to  1995 is due to come out by the end of December  1996 or the beginning  of 
1997 at  the  latest. 

Regarding the responsibility borne by the Member States, Community customs regulations 
lay  down  that  goods brought  into  the  customs territory  of the  Community  shall  be  kept 
under customs surveillance  for  as long as is required for  the competent  authorities  in the 
Member  States to  satisfy  themselves  as their  customs  status. 

As regards goods moving from  one part of the Community's customs territory to another 
by  sea, the  customs  status of which may be a matter of doubt to the  national  authorities 
concerned, the Commission has embarked on the preparatory work for the adoption of the 
proposal  for  an amendment  to the legislation  designed  to  stiffen  the checks on  goods  as 
indicated  by  Parliament.  The  work  is well  under  way.  There  are  still,  however,  some 

26 

problems  as  regards  goods  subject  to  excise  duty  which  have  yet  to  be  resolved;  these 
might somewhat delay the adoption of the proposed amendment, which was originally due 
for  adoption  by  the  end  of  1996. 

(Parliament) 

11. 

Calls on the Commission to submit an annual report on the forcible  recovery 
by  Member  States  of  all  amounts  owed  to  the  Community  budget; 

Commission  reply 

As a means of following  up the action taken by the Member  States to recover  traditional 
own resources, particularly those affected  by fraud  and irregularities, as recommended  in 
Regulation No  1552/89, a method has been set up involving  sample monitoring  of  cases 
where recovery has proved difficult  up to the point of final clearance.  "A" samples relate 
to own  resources  fraud  cases involving  amounts  of more than  ECU  500  000, while  "B" 
samples  relate  to  notifications  within  the  mutual  assistance  scheme  involving  amounts 
greater  than  ECU  1 000  000. 

As far  as  "A"  sampling  in  1994  (A/94)  is concerned,  there were  some  100 cases  of  this 
type,  the  sum  of  which  accounted  for  70%  of  the  base  still  to  be  recovered.  When 
questioned  about  the  cases, the  national  authorities reported  on  progress  with  recovery. 
As  far  as  "B"  sampling  is concerned,  six cases were selected  for  1994 and  23  for  1995. 
The  cases in the  sample file  are especially  important as they  are technically  complicated 
and sensitive to deal with in practical terms.  As it is unusual for  such cases to be  settled 
quickly, owing to the lengthy administrative and legal procedures involved, they go quite 
a long way back in time.  In addition, the new "A" and  "B" samples set up each year take 
over samples from  previous years in respect of which final clearance has not taken place. 

On  6  September  1995 the  Commission  sent  Parliament  a preliminary  report  on  the  "A" 
sample for  1994.  It will send the report  on the  "B"  sample for  the  same year very  soon. 

As regards enforced recovery procedures carried out at the national level, the Commission 
sent the Member  States a questionnaire  on the subject in autumn  1994; the replies to this 
are  now  being  processed,  to  enable  the  Commission,  should  the  need  arise,  to  draw 
appropriate  operational  conclusions  in both  legislative  and  administrative  terms. 

AGRICULTURAL  SPENDING 

(Parliament) 

13. 

Notes that, in spite of measures introduced in the context of the reform  of the 
common  agricultural  policy,  farm  spending's  share  of  the  1994  budget 
increased  by  1.3%  compared  to  the  previous year; 

Commission  reply 

Agricultural spending fell heavily between 1993 and 1994, dropping from ECU  35  billion 
in  1993 to  ECU  33 billion  in  1994.  Table  1 below  shows  the  changes  in  expenditure 
between  1993 and  1994; the nomenclature for  1993 expenditure has been aligned  on that 
for  1994,  for  purposes  of  comparison. 

27 

The  cut  in  market  prices  for  arable  crops  decided  on when  the  reform  of  the  CAP  was 
adopted  in  1992  was  made  in  three  stages,  covering  1994,  1995  and  1996,  with  a 
corresponding  rise  in compensatory  aid,  leading to a programmed  rise  in expenditure  on 
compensatory  aid  over  the  period  in  question. 

The rise  in expenditure  in the arable  crop sector  (ECU  2 billion)  attributable  to the  first 
stage  of  the  establishment  of  direct  aid  for  arable  crops  and  in  the  pigmeat  sector 
(ECU  215  million)  following  the  compensating  measures  implemented  as  part  of  the 
programme  of  eradication  of the  epizootic of classical  swine  fever  was largely  offset  by 
a  fall  in  expenditure  in  most  other  sectors.  The  sectors to which  most  of  the  reduction 
can  be  attributed  are: 

milk  and  dairy  products  (-  ECU  960 million,  including  ECU  360  million  owing 
to  the  fall  in  spending  on  refunds,  particularly  on  butter  following  a  cut  in 
quantities,  ECU  230  million  owing  to  a  fall  in  spending  on  promotion  and 
marketing, and ECU  220 million owing to the decisions to reduce expenditure on 
compensation  for  abandonment  of production  taken  in  1987-88  and  1991-92); 

olive oil (- ECU  650  million, owing largely to a catching-up of ECU  300  million 
in  production  aid payments  in Italy  in  1993 in respect  of  years  prior  to  1992-93 
and  to a decision  by the  Council to reduce the level  of  consumption  aid  in  1994, 
which  accounted  for  ECU  170 million,  as  well  as  an  ECU  140 million  cut  in 
intervention expenditure, which had been high in 1993 following heavy production 
in  1991-92); 

sheepmeat  and  goatmeat  (-  ECU  520 million,  owing  to  the  difficult  market 
situation  in  the  1993  season,  which  entailed  payment  of  higher  ewe  premiums; 
conditions  returned  to  normal  in  1994); 

beef  and  veal  (-  ECU  520 million,  resulting  from  the  fall  in  intervention 
expenditure in  1994 with the cessation of buying-in in 1994, following the buying-
in of 425  000 tonnes in  1993 and the running down of publicly held stocks, which 
led to a rise in sales from  525  000 tonnes in  1993 to 730  000 tonnes in  1994 and 
a  consequent  cut  in  expenditure  of  nearly  ECU  1.6 billion,  partly  offset  by  the 
decision  to  raise  premiums  following  the  reform  of  the  CAP  in  1992,  entailing 
additional  expenditure  of nearly  ECU  1.1  billion); 

wine  (-  ECU  330  million,  reflecting  a  fall  in  production  of  table  wine  from 
107 million  hectolitres  in  1992-93 to  91  million  hi  in  1993-94). 

The fall  in agricultural  spending from  year to year demonstrates that the reported  growth 
in agricultural spending as a proportion of total expenditure does not mean that the  former 
is out  of  control,  nor  is  it  a consequence  of the  setting  up  of  stage two  of  the  reform. 

28 

TABLE  N°l: 

CHANGES  IN  AGRICULTURAL  SPENDING  BETWEEN  1993 AND  1994 

General  expenditure  from  appropriations  for 
the  financial  year 

Î993 

1994 

Difference 

Bl-10  Arable  crops 
Bl-11  Sugar 
Bl-12  Olive  oil 
Bl-13  Dried  fodder  and  dry  vegetables 
Bl-14  Textile  plants 
Bl-15  Fruit  and  vegetables 
Bl-16  Wine 
Bl-17  Tobacco 
Bl-18  Other  sectors 

10.611 
2.189 
2.468 
532 
861 
1.664 
1.510 
1.165 
259 

12.652 
2.062 
1.820 
378 
864 
1.557 
1.176 
1.057 
287 

TITLE  I 

21.258 

21.853 

Bl-20  Dairy  products 
Bl-21  Beef  and  veal 
Bl-22  Sheepmeat  and  goatmeat 
Bl-23  Pigmeat 
Bl-24  Eggs  and  poultry 
Bl-25  Other  operations 
Bl-26  Fisheries 

TITLE  II 

Bl-30  Non-Annex  II 
Bl-31  Accession  compensatory  amounts 
Bl-32  Monetary  compensatory  amounts 
Bl-33  Food  aid  refunds 
Bl-34  Interest  repayments 
Bl-35  Free  distribution 
Bl-36  Fraud  prevention 
Bl-37  Clearance  previous  period 
Bl-38  Rural  development 
Bl-39  Other  measures 

TITLE  III 

Bl-40  Income  support 
Bl-50  Flanking  measures 

5.211 
3.986 
1.800 
201 
291 
135 
32 

11.657 

744 
7 
136 
160 
100 
130 
80 
-385 
445 

1.418 

36 
222 

4.249 
3.467 
1.280 
416 
240 
117 
35 

9.804 

631 
0 
4 
86 
83 
136 
77 
-  612 
340 
47 

794 

30 
490 

2.042 
-  127 
-649 
-  154 
3 
-  107 
-  333 
-  108 
28 

595 

-962 
-  520 
-  521 
215 
-  51 
-  18 
3 

-  1.853 

-  112 
-  7 
-  132 
-  74 
-  17 
6 
-3 
-227 
-  105 
47 

-  624 

-6 
268 

TOTAL  EAGGF  GUARANTEE  SECTION 

34.590 

32.970 

-  1.620 

29 

(Parliament) 

14.  Deplores yet again the large gap between budget estimates and actual  spending 
in  the  agricultural  sector; 
takes  the  view  that  these  differences  cannot  be 
explained solely by unexpected factors (weather conditions, diseases, etc);  urges 
therefore the Commission to tighten management measures, in particular in the 
chapters  showing  a  repeated  overspend,  and  to  work  closely  with  Member 
States  for  the  improvement  of  forecasts  used  as  a basis  for  the  budget; 

Commission  reply 

The Commission  notes that the underimplementation  of the budget was in large measure 
due  to  the  difficulty  of  accurately  estimating  the  parameters  for  gauging  progress  in 
implementing  the  1992  reform,  particularly  the  rate  of  use  of  the  basic  area  for  arable 
crops  and  the  beef  and  veal  premium  quotas  in the  Member  States.  In  the  absence  of 
detailed  information  from  the  Member  States  when  the  budget  was  drawn  up,  the  first 
year  of  implementation  of the reform  being under way at the time, the Commission  had 
to  proceed  on  the  basis  of  reasonable  assumptions  based  on figures  from  the  Statistical 
Office  relating to the number of farmers joining the new scheme; these figures  proved  to 
be  too  high. 

Another  major  factor  in the  low take-up  was beef  and  veal.  1994  saw a turn-around  in 
the market which few forecasters  would have dared predict when the scheme was first  set 
up  some  eight  months  earlier.  The result  was that there was practically  no  intervention 
buying-in  and  it became possible to run down publicly  held  stocks from  900  000  tonnes 
to less than 250  000 tonnes by the end of the year, through an active export  sales policy. 

With the chapters where there was an over-run, the Commission has not stood idly by but 
has applied Article  6 of the decision on budgetary discipline, taking the appropriate  steps 
where  these  were  within  its  sphere  of  responsibility  (reducing  or  indeed  eliminating 
certain  refunds  for  eggs  and  poultry),  putting  proposals  for  reform  of  the  COM  in 
question (cotton) before the Council and setting up a system of strict financial  supervision 
for  the newly  adopted  flanking  measures. 

The  Commission's  chief  concern  is  to  bring  about  improvements  on  the  agricultural 
estimates  for  the  EAGGF  Guarantee  Section,  both  in  its  own  departments  and  in  the 
national  administrations. 

It  is, however,  very  difficult  to  look to the lessons of the past for  a better  understanding 
of the future  in this area.  The  experience  of past years shows that each year the  process 
of  drawing  up  and  executing  the  budget  follows  a  pattern  which  is  all  its  own.  The 
Commission  does, however,  believe that more effective  budgetary  implementation  could 
be  achieved  by  reviewing  the  budget  adoption  procedure  so  that,  by  updating  the 
economic  assumptions  on  which  the  preliminary  draft  budget  was  based  when  it  was 
drawn  up  some  eight  months  or  more  before,  the  draft  budget  could  be  corrected  by 
means of an amending letter before  the Council's second reading, or the budget could  be 
corrected  by means of  a supplementary  and amending  budget following  adoption  by  the 
President  of  Parliament,  applying  a more  flexible  amendment  procedure.  Revising  the 
budget  in this way  should  be  a normal  stage  in the budgetary  procedure. 

30 

The  Commission  also believes  that  if the Community  rules  are simplified  and applied  in 
the  Member  States  with  a  proper  regard  for  the  time  limits  for  payment,  it  will 
substantially  reduce  the  margin  for  uncertainty. 

(Parliament) 

15.  Calls  on  the  Commission,  pending  the  final  decision  on  the  amount  of  the 
penalty  to  be  imposed  for  malpractices  which  occurred  in  the  Irish  beef 
processing  industry,  to  ensure  that  the  Irish  authorities  fully  implement 
Regulation  (EEC)  No  2456/93,  aimed  at  guaranteeing  the  proper  functioning 
of  the  beef  market; 

Commission  reply 

As part  of the process of clearing the accounts for  1992, the Commission  has decided,  in 
respect  of public  storage  of meat  in Ireland,  that a financial  correction  of  10% for  1990 
should  remain  in  force,  in  view  of  the  seriousness  of  the  shortcomings  detected  there. 
Having  regard  to the  steps taken  by the  Irish  authorities  in  1991 to  make  controls  more 
effective  and  reliable, the  correction  was reduced  to  5% for  1991. 

It has not been possible to implement Regulation No  2456/93 in full,  given the very  small 
amount  of  intervention  buying  of  beef  and  veal.  The  Commission  will  give  special 
attention  to  this  matter  now that  the  Council  has  decided  to  take  intervention  measures 
following  the  recent  outbreak  of  bovine  spongiform  encephalitis  (BSE). 

(Parliament) 

16.  Calls on the Commission  to ensure that the French authorities  fully  implement 
in  Haute-Corse  the  regulations  on the  special  aid  for  hill  and  mountain  areas 
and  on  the  suckler  cow  premium  and  calls  on  the  Commission  to  find  a 
satisfactory  solution  regarding the restitution  of unduly  paid premiums;  states 
that  Parliament  will  pay  full  attention  to  this  in  the  clearance  of  accounts 
procedure; 

Commission  reply 

The  Commission  is keeping  a very  close watch on the results of the controls carried  out 
in Haute-Corse.  Regarding  the  special allowance  for  hill  and mountain  areas,  proposals 
will  be  made  for  recovery  of payments  from  1998 to  1994.  In the case  of the  premium 
for  maintenance  of  suckler  cow herds,  a financial  correction  of  25% of  the  expenditure 
has been  proposed  in respect  of the  financial  years  1991 to  1994. 

31 

COMMON  ORGANIZATION  OF  THE  MARKET  FOR  FRUIT  AND 
VEGETABLES 

(Parliament) 

20.  Calls on the Commission  to check on the cases raised by the Court of Auditors 
as  part  of  the  clearance  of  accounts  and  to  take  the  appropriate  financial 
action,  if  necessary  against  the Member  States  concerned; 

Commission  reply 

When  carrying  out  the  scheduled  controls  in  this  sector,  the  Commission  takes  all  the 
Court  of  Auditors'  comments  into  account.  Provided  the  facts  are  not  disputed  by  the 
Member  States  and  the  regulations  are properly  interpreted,  the  Commission  will  draw 
and  act  on  all  the  requisite  financial  conclusions  when  clearing  successive  accounts. 

Should  it  prove  necessary,  the  Commission  will  examine  in  greater  detail  the  matters 
raised  by  the  Court  and  disputed  by the  Member  States. 

In  1996 investigations concerning nuts took place in Spain (in February and April).  With 
regard  to  tomato  processing,  two  missions  were  sent  to  Spain  (in  June  and  September) 
and  a third  to the Netherlands  (in August).  A control  mission to  Greece  relating  to  free 
distribution  is  planned  for  October,  and  another  to  Portugal  in December  in  connection 
with  citrus  fruit. 

(Parliament) 

21.  Calls  on the Member  States to apply  in full the provisions  of the future  COM 
and  calls  on  the  Commission  to  reduce  the  monthly  advances  paid  under  the 
EAGGF  Guarantee  to  Member  States  which  do  not  comply  with  the  COM 
rules; 

Commission  reply 

The monthly  advances paid under the EAGGF Guarantee will be reduced  in the event  of 
failure  to  comply  with  the  rules. 

(Parliament) 

22.  Calls  on  the  Commission  to  increase  the  material  resources  allocated  to 
monitoring  the  implementation  of  the  COM,  to  draw  up  a  systematic 
monitoring  programme  and to consider  a broader framework  for  cooperation 
between  Community  inspectors  and  those  of  the Member  States; 

Commission  reply 

The controllers'  team is at present down to two people, plus one other from  the Accounts 
Clearance  Unit.  This  team  works  with the Member  States'  inspectors  in  the  sense  that 
it  avails  itself  of  their  services  for  the purposes  of  quality  controls. 

32 

FISHERIES  POLICY 

(Parliament) 

24.  Asks  the Commission  to  analyse  existing legal  provisions  to  bring  Community 
rules  into  line  with  real  market  situations  and  the  specific  features  of  the 
Community  tuna  sector; 

Commission  reply 
The  existing  legal  provisions  will  be  analysed  in  the  course  of  the  on-the-spot  control 
In  the  light  of  the  findings,  the  Commission  will  make 
missions  referred  to  at  25. 
proposals  for  any  regulatory  or  administrative  improvements  which  may  be  necessary. 

(Parliament) 

25.  Calls upon the Commission, in cooperation with the authorities  in the  Member 
States,  to  carry  out the  checks  referred  to  in the  Court  of  Auditors'  report  in 
the  1996  financial  year  and  to report  to Parliament  on  the  results; 

Commission  reply 

Last  February  the  Commission  (DG XIV  and  DG  XX)  drew  up  a  programme  of  four 
control  missions  -  two  to  Spain  and  one  each  to  Portugal  and  France  -  to  check  the 
compensatory  allowances  paid to tuna producers.  The primary  purpose  of the  checks  is 
to  find  out  what  the  actual  situation  is  in the  sector,  so  that  the  Commission  can  make 
proposals  for  any  amendments  needed  to the  existing  rules. 

Two control missions have already taken place, to Spain (involving DG  XIV and DG  XX) 
from  22 to 26  April  1996 and to Portugal (involving DG  XIV) from  28 to 30  May  1996; 
a  second  mission  to  Spain took  place  from  17 to  21  June  1996 and  the  last  one  will  be 
to  France  in  October.  The  findings  will  not  be  known  until  after  the  last  mission  in 
October. 

(Parliament) 

26.  Invites  the  Commission  to carry  out  an analysis  of the  current  customs  policy 
on  tuna,  in  order  to  bring  it  into  line  with  the  sector's  real  needs,  by  taking 
equal  account  of  producers'  and  processors'  interests; 

Commission  reply 

The  whole  tuna  trade  framework  was  considered  in  the  debate  on  the  Commission's 
report of 28  June  1994 (COM(92)  266 final).  Following the debate, the Council  adopted 
Regulation  No  3318/94  amending  the  basic  regulation  governing  the  COM  in  fishery 
products (Regulation No  3759/92).  The amendment simplifies the awarding system while 
retaining  the principles  underlying  the allowance,  and  will  make  it  possible  to  improve 
the  management  system  for  the  measure. 

There  are  no  plans  at  this  stage  for  any  review  of  the  outcome  of  the  debate.  At  all 
events, the  Commission  is keeping  a watch on market  developments,  so that  it  can  take 
any  steps  which  may  be  required. 

33 

STRUCTURAL  FUNDS 

(Parliament) 

28.  Considers  that  the Commission  must  adopt, with  the necessary  changes  to  the 

Regulation,  an  integrated  approach  containing  the following  elements; 

enhancing the role of the monitoring committees  so that they  genuinely 
monitor  compliance  with  Community  provisions  and  monitor  the 
progress  and  management  of  the  projects;  recalls,  in  this  respect,  its 
views  on  this  matter  expressed  already  in  its  resolution  on  the  1989 
discharge; 

drawing  up  selection  criteria  and  other  procedures  so  that  compliance 
with Community provisions - particularly in the field of the environment 
and  public  works  contracts  -  and  the  progress  and  management  of 
projects  can  be  monitored  more  effectively; 

using Article 24 (possibly in an amended form) of Regulation 2082/93 in 
such  a  way  that  failure  to  comply  with  the  rules  will  genuinely  and 
directly  result  in  a  reduction  in  or  suspension  or  cancellation  of  the 
assistance; 

Commission  reply 

The Commission intends to review the regulations in the context of the preparation of the 
arrangements  to  follow  the  end  of the current  1994-99 programming  period. 

The  Commission  considers  that  the  existing  Monitoring  Committee  procedures  already 
reflect  to  a  large  extent  an" integrated  approach,  given  that  the  responsibilities  of  the 
Committees  for  ensuring  compliance  with  Community  legislation,  operating  project 
selection  and  reporting  overall  progress  form  integral  elements  of  each  programme 
implemented  under  the  partnership. 

Under  the  present  Regulations,  compliance  with  Community  legislation  by  Monitoring 
Committees  is ensured  by: 

specific  questions (notably on environmental and public procurement  requirements) 
on  the  application  forms  completed  by potential  beneficiaries  of  Community  aid; 

checks  made  by  the  Monitoring  Committee  body  responsible  for  project  selection 
as part  of  the  appraisal  of  individual  projects; 

queries made by the Commission representative in Monitoring Committee meetings. 

In  addition,  on-the-spot  checks  are  made  by  the  Commission  services,  together  with 
checks on  the  basis  of  statements  made  in the annual  progress  reports. 

As  far  as  selection  criteria  and  associated  monitoring  procedures  are  concerned,  the 
current  generation  of  programming  documents  includes project  selection  criteria  which 
were  either  present  when  the  programmes  were  approved  by  the  Commission,  or  (as 

34 

agreed  with  the  Member  States  concerned)  were  to  be  added  after  approval,  or  were 
completed  at  the  first  meeting  of  the  Monitoring  Committee  concerned. 

The operation of these selection  criteria is monitored by regular progress reports made to 
each  Committee  by  the  body  delegated  to  effect  the  actual  selection  of  projects.  This 
procedure is designed to ensure not only that the projects selected are compatible with the 
overall objectives of the programme and that they respect Community legislation, but also 
serves to identify  projects where progress is unsatisfactory  and remedial action is required. 

On  the  application  of  Article  24  of  Regulation  No  4253/88  [not  2082/93  as  stated  by 
Parliament],  current  practice  generally  allows  projects  affected  by  irregularity  to  be 
withdrawn  from  Community  financing  and replaced  with other  suitable  projects  so  long 
as the programme in question is still running. Identified  ineligible expenditure is normally 
deducted from  subsequent Member  State declarations of expenditure. There has  therefore 
been,  to  date,  little  formal  application  of  Article  24.  However,  with  the  closing  of  the 
1989-93  programmes  Article  24  may  need  to  be  applied  in  a  number  of  cases.  The 
Commission  intends to ensure  the full  and proper  application  of this article  in particular 
where  there  have  been  infringements  of  Community  law,  for  example  in  the  areas  of 
environment  or  public  tendering. 

(Parliament) 

29.  Believes  that  internal  procedures  operated  by  the  Commission  which  either 
formally  or  in  practice  may  weaken  Community  provisions  or  management 
should  be  reviewed; 

Commission  reply 

For each Community  Support  Framework (CSF), Single Programming  Document  (SPD) 
and Operational Programme (OP), a Commission department is appointed lead department 
and  is responsible  for  the  overall  coordination  of  its  implementation. 

Allied to this, the Commission's Structural Fund departments have established at the level 
of  the  CSF  or  SPD  a  consistent  system  of  permanent  participants  in  Monitoring 
Committees  (the  four  Structural  Fund  departments)  and  a  sectoral  participation  (other 
Commission  departments when the specific  nature of the programme justifies  this and as 
interdepartmental  meeting).  This  approach  ensures 
determined  by  a  preparatory 
coordinated participation by the Commission in Monitoring  Committees and, to date, has 
worked  well. 

In  addition,  the  first  two  stages  of  SEM  2000,  focusing  on  the  Commission  itself, 
concentrate  on  streamlining  procedures  and on the  strengthening  of financial  units.  This 
is  now  under  way  and  is  being  complemented  by  stage  three,  which  aims  to  create  a 
better and closer partnership with the Member States on budgetary and financial  matters. 

35 

(Parliament) 

30.Takes  the view that existing lacunae in the rules, such as those with  regard  to  interest 
revenue and the powers and obligations of intermediary bodies, must be remedied; 

Commission reply 

Concerning  financing  channelled  via  the  Member  States'  civil  service  departments  under  the 
Structural Fund arrangements, the Community ceases to be the owner of the funds once they are 
transferred  to  the  Member  States.  Nevertheless,  the  Commission  is  concerned  to  check  that 
Article 21(5) of coordinating  Regulation No 4253/88, as amended,  is complied  with:  this  lays 
down  a  three-month  time  limit,  in  most  cases,  for  the  transfer  of  such  funds  to  the  final 
beneficiaries.  In any case the question of the bank interest generated  on Community  advances 
is being looked into as part of Stage III of the SEM 2000 exercise. 

The Commission also considers that clear guidelines are provided by Article 6(1) of Regulation 
No 4254/88, which defines the role and operating procedures of intermediary  bodies.  It would 
stress that  it is up to the Member  States, with the agreement  of the  Commission  of  course, to 
designate  the  intermediary  bodies.  It  is  therefore  these  which  are,  in  the  first  instance,  and 
particularly as regards their subsidiary financial  accountability in relation to the management of 
Community assistance, answerable for the proper implementation of these guidelines, which are 
in fact set out in the guide to global grants produced by the Commission. 

(Parliament) 

31.Considers that global subsidies should not be used to provide loans; 

Commission reply 

In the  Commission's  view, Article 6 of Regulation  (EEC) No 4254/88  as amended  in no  way 
excludes the possibility  of assistance  in the form  of financial  engineering  and,  as appropriate, 
loans,  in  so  far  as  it  is the  "agreement  [which]  ...  shall  detail  ... the  types  of  measure  to  be 
carried out". 

Article  1(c) of the same regulation expressly provides for ERDF assistance in the form of action 
to  support  local  development  initiatives,  which  are the  priority  field  for  global  grants.  Such 
measures, as defined  by this article, do indeed include "improvement of access for enterprises to 
the capital market, particularly by the provision of guarantees and equity participation". 

The eligibility  criteria for  such expenditure  are under  consideration  as part  of  Stage III  of the 
SEM 2000 exercise. 

36 

(Parliament) 

33.  Asks  the  Commission  to  honour  its  undertaking  to  forward  to  Parliament 
regular  reports  on  the  utilisation  of  the  Structural  Funds  by  Fund,  Objective 
and  Community  Support  Framework,  showing  in  all  cases  the  relative 
performance  of  each  Member  State; 

Commission  reply 

This  is done  in  the  Commission's  annual  reports on the  Structural  Funds. 

(Parliament) 

34.  Calls on the Commission,  and on the Member States in particular,  to  improve 
the  rate  at  which  projects  and  programmes  are  submitted  so  as  to  avoid  a 
build-up  of  commitments  in the last  few  months of each financial  year,  which 
leads to serious  risk that decisions will be taken  in undue haste and hence  that 
errors  will  arise; 

Commission  reply 

Article  19(3)  of  Regulation  (EEC)  No  4253/88  requires  the  Member  States  to  submit 
payment  requests  in  accordance  with  a  "balanced  schedule"  throughout  the  year.  The 
Commission  exercises  no  direct  control  over  the  rhythm  at  which  the  Member  States 
forward  such requests: these usually reflect national administrative practices and  financial 
years. 

The problem  of the concentration  of financial  operations  at the end of the financial  year 
is being  addressed  in the  framework  of  "SEM  2000  Stage  III".  However,  it  should  be 
mentioned that the concentration of financial operations late in the year does not, of itself, 
suggest  an  increased  error propensity;  the programmes  in  question  will  often  have  been 
under  careful  examination  for  a period  of months. 

It  should  also be  noted  that  the  situation  improved  in  1995, despite  the  late  adoption  of 
certain  Community  Initiative  programmes  and the modification  of the financial  plans  of 
a  number  of  existing  programmes  in the  latter  part  of  the  year. 

(Parliament) 

35.  Urges the Commission  to implement  the Interreg initiative  much more  strictly 
and  points  out  that  the  aim  of  this  initiative  is  to  promote  cross-border 
cooperation and not merely the economic development of the areas in question, 
which  could  be  achieved  by  other  operations  under  the  Community  Support 
Frameworks; 

Commission  reply 

During  the  negotiations  on  the  Interreg  II  operational  programmes  before  they  were 
approved  by  the  Commission,  the  Commission  made  special  efforts  to  ensure  that  the 
measures  and  provisions  for  cross-border  cooperation  were  satisfactory.  There  are  also 
plans  for  a  flanking  measure  to  support  the  proper  implementation  of  this  Community 

37 

initiative,  involving  technical  assistance  and  the  promotion  of  cross-border  cooperation 
as a whole. 

EUROPEAN  SOCIAL  FUND 

(Parliament) 

38.  Calls  on  the  Commission  to  take  action  to  prevent  the  frequent  delays  before 
ESF  funds  are  disbursed  to  final  recipients,  these  delays  being  due  to  the  fact 
that  intermediate  bodies  wish  to  accumulate  disproportionately  high  interest 
income; 

Commission  reply 

The  Commission  does,  as a  matter  of  course,  take  steps, when  carrying  out  on-the-spot 
inspections,  to  ensure  that  Member  States  abide by  the  three-month  time  limit  between 
receiving  appropriations  and passing  on advances and payments  to final beneficiaries  in 
accordance  with  to  Article  21(5)  of  Regulation No 2082/93. 

The  Commission  is aware  that the time  limit  is not  always respected  and  believes  there 
are  two  main  reasons  for  this.  The  first  is  that  many  programmes  adopt  the  method 
involving a call for projects, which means that the three-month time limit runs only  from 
the time when a project  meeting  all the advance requirements  is selected.  The  second  is 
that  in  some  Member  States  there  are  national  rules  governing  the  attaching  of 
appropriations  to  the  national  budget  which  require  appropriations  to  be  carried  over  at 
the end of the financial year.  Thus Community appropriations reaching the Member  State 
after  October are usually carried over and obviously cannot be made available to the final 
beneficiary  within  the  required  90 days. 

This  state  of  affairs  is  an  instance  of  Community  regulations  and  national  rules  being 
incompatible,  but  the  Commission  undertakes  to  make  further  efforts  to  ensure  that 
Community  law  is  respected. 

(Parliament) 

39.  Calls  once  again  on the  Commission  to continue  to  monitor  the application  of 
the additionally principle and, to this end, to exert its influence on the Member 
States to ensure that all information  necessary to ensure transparency  is made 
available; 

Commission  reply 

The  Commission  is  continuing  to  monitor  the  implementation  of  the  additionality 
principle  as  part  of  the  current  budgetary  estimates  exercise,  the  object  of  which  is  to 
ascertain  much  more  reliably  and  accurately  what  the  Member  States  propose  to  spend 
as  the  national  contribution  to  cofinanced  ESF  schemes.  This  indirectly  enables  the 
Commission to check that national contributions are being made, and how much they are, 
and thereby  to  guarantee  that  ESF  cofinancing  is additional. 

38 

Internal  policies 

(Parliament) 

40.  Points  out  that  the implementation  of the commitment  appropriations  for  the 
budget policies included in heading 3 of the Financial Perspective has not posed 
major  problems, with  the  exception  of  the  budget  line  on  combating  fraud  in 
the sector of  research  (B6-840), which  UCLAF  is formally  requested  to  utilize 
in  forthcoming  financial  years; 

Commission  reply 

In  1994  ECU  50 000  were  allocated  to  heading  B6-840  and  entered  in  the  reserve  at 
BO-40.  The appropriations were transferred  to the heading at the end of November  1994 
by decision  of the budgetary  authority.  As the appropriations  for  fraud  prevention  were 
therefore  made  available to the heading  late in the year,  it was not possible to  use  them 
in  1994. 

In  1995 commitment appropriations of ECU  50 000 were allocated to the heading.  Take-
up  during  the  year  was  84%  (appropriations  committed:  ECU  42  000).  For  1996  the 
heading  has  again  been  allocated  ECU  50 000  in  commitment  appropriations.  The 
Commission  will  take  the  requisite  steps  to  ensure  that  all  the  appropriations  are 
committed. 

(Parliament) 

49.  Calls on the Commission  to act on the remarks made by the Court of Auditors 
relating  to  the  sectors  of  environment  and  research  and  in  particular  the 
remarks  contained  in  paragraphs  6.12  to  6.17  and  9.10  to  9.15  of  the  annual 
report; 

Commission  reply 

(a)  Environment 

The Commission would emphasize that a major  review and improvement of the selection 
procedures  for  LIFE  projects  has  been  carried  out  as  part  of  the  implementation  of 
LIFE  II. 

An informative  booklet is widely circulated each year, containing  full  details of both  the 
selection  procedure  and  the  criteria  applied.  All  projects  are  also  considered  by  a 
Management  Committee  consisting  of  representatives  of  the  Member  States.  The 
Committee  adopts  an  opinion before  the  Commission  goes through  its  decision-making 
procedure. 

The facilities  introduced by the new regulation will make for more effective  technical and 
financial  follow-up  of  current  projects  under  LIFE II. 

An  auditing  unit,  which  has  been  fully  operational  since  the  beginning  of  the  1996 
financial  year,  is  now  responsible  for  ex  post  project  assessment.  A  preliminary 
assessment  of  LIFE  I was  submitted  to  the  Council  and  Parliament  in November  1995 

39 

when the regulation  was amended.  As soon as the LIFE  I projects  are wound  up  (at  the 
end  of  1998),  a  final  assessment  will  be  carried  out  and  the  results  circulated  to  the 
institutions,  the  Member  States  and  interested  parties. 

(b)  Research 

9.11  The  rotation and abstention principles applying to assessors on selection  boards  are 
fully  secured  in  the  programme  on  Training  and  Mobility  for  Researchers  (TAR) 
(4th  framework  programme),  the  successor  to  the  Human  Capital  and  Mobility 
(HAM)  programme. 

9.12  The  assessment  boards  for  research  projects  put  forward  under  TAR  programmes 
consist of independent, high-level scientific  experts.  The boards are coordinated  by 
the  Commission.  The  results  of the assessments  of  proposals  for  networks,  large-
scale  facilities  and  flanking  measures  are  submitted  to  the  Programme  Committee 
for  an  opinion.  On  fellowships  the  Committee  is  not  consulted,  merely  informed. 
The  information  is sent  after  the  Commission  has taken  a decision,  resulting  in  an 
appreciable  saving in time over the procedure followed  for  the previous  programme 
(HAM). 

9.13  Since  the  TAR  programme  came  into  operation,  the  time  taken  to  go  through  the 
written  procedures  relating  to  assessments  has  ranged  from  a month  and  a  half  to 
two  months  and  three  weeks.  The  Commission  is  still  working  on  cutting  down 
these  times. 

9.14  The  informative  dossier  describing  the  network  activities  in  the  TAR  programme 
gives  very  precise  details  of the  limits  on Community  financing  and  states  exactly 
what  information  must  be  given  in  proposals.  Where  projects  are  selected  for 
financing,  the effect  of this information  is to simplify  and  shorten  considerably  the 
contract negotiation  stage, which under the previous programme  frequently  delayed 
the  start  of  research  work.  Thus,  the  84  contracts  which  came  out  of  the  first 
selection  process  for  large-scale  facilities  were negotiated  within  six  weeks. 

The  contract  negotiations  for  Euroconferences  have been  greatly  simplified 
and  the  time  taken  is some ten days. 

These  problems  do  not  arise  with  fellowships;  in  most  cases,  no  contracts 
have to  be  negotiated. 

9.15  Institutional  fellowships  no  longer  form  part  of  the  programme  on  Training  and 
Mobility  for  Researchers.  The  two-stage  selection  procedure  peculiar  to  that 
particular  activity  is no  longer  applied  in the TAR  programme. 

40 

(Parliament) 

50.  Calls  on  the  Commission  to  submit  a  legal  basis  for  subsidies  to  consumer 
organizations  and  to  conduct  its  own examination  as  to whether  the  subsidies 
to  be  granted  provide  value  for  money; 

Commission  reply 

DG XXIV  is  finalizing  a  proposal  for  a  legal  basis  which  will  be  submitted  by  the 
Commission  at the  beginning  of  1997.  In its proposal  the  Commission  will  set  out  the 
priority  themes  on  which  the  Union  and  the  organizations  concerned  will  be  able  to 
develop joint measures over the next few years.  Given the limited resources available and 
the  extremely  wide  range  of  needs  which  have  been  expressed,  all  possible  ways  of 
establishing  synergy  for  the  development  of  major  projects  must  be  sought  out  and  as 
many  organizations  as possible,  from  different  geographical  areas, must  be  involved  in 
jointly developed projects of this kind.  This should appreciably enhance the  effectiveness 
of  Community  action  on  behalf  of  consumers. 

In  its proposal  the  Commission  also  expects to  set  out the  precise  criteria  and  practical 
arrangements  for  the  granting  of  financial  support  by the European  Union. 

Without prejudice to any decisions taken by the legislative authority, the Commission has 
been  keen  to  prepare  the  ground  for  1997  and  in  OJ  C 213  (23  July  1996,  p.  18)  it 
published  a  call  for  the  presentation  of  projects  for  the  promotion  and  protection  of 
consumer  interests.  The  notice  sets  out  a  number  of  priority  themes  (including 
information,  education,  access  to  the  information  society,  sustainable  consumption, 
transparency in the service sector and better access to justice), the project selection criteria 
and  the  conditions  for  obtaining  financial  assistance. 

Special  attention  will  be  paid  to  the  assessment  of  projects  submitted,  particularly 
regards performance  and  cost-effectiveness  indicators. 

as 

(Parliament) 

51.  Calls  on  the  Commission's  Public  Health  Directorate  in  DG  V  and  the 
Directorate-General  for Consumer Policy to produce annual  overviews  similar 
to  those  produced  by  the  Directorate-General  for  the  Environment,  Nuclear 
Safety  and  Civil  Protection; 

Commission  reply 

Once the current departmental reorganization has been completed, DG  XXIV should have 
the  resources,  as  provided  for  in  the  SEM  2000  programme,  with  which  to  monitor 
operations under way as effectively  as possible with a view to gauging how effective  they 
are.  Assessment  indicators  are  being  introduced  into  all  operations  carried  out  or 
supported  by  the  Commission.  As  a  first  stage,  a  report  on  the  implementation  of 
measures in  1996 will be submitted at the end of 1997. Once detailed assessment has been 
carried out and the indicators have been monitored in operations carried through in  1997, 
a detailed  report  will  be produced  at the end  of the next  financial  year. 

41 

(Parliament) 

52.  Calls  on  the  Commission  to  ensure  a  fuller  rate  of  utilization  of  payment 
appropriations  in  policy  areas  such  as  transport  safety  (Article  B2-702)  and 
combined transport (Article B2-706), to which Parliament  has always  attached 
high  priority; 

Commission  reply 

the 

The  reason  for 
low  rate  of  utilization  of  payment  appropriations  under 
Articles  B2-702  (transport  safety)  and B2-706  (combined  transport)  is that  a  substantial 
proportion  of  the  commitment  appropriations  were  implemented  in  the  last  quarter  of 
1994. 

Because  of  this  delay  in  making  commitments,  it  was  not  possible  to  use  the 
corresponding  payment  appropriations;  the  advances  on  certain  contracts  concluded 
towards the end of  1994 were not paid in good time before  the end of the financial  year. 

The  situation  was  corrected  in  1995,  with  close  to  100%  utilization  of  payment 
appropriations  under  all  headings  in  Chapter  B2-270  (Transport). 

LENDING  AND  BORROWING 

(Parliament) 

54.  Reiterates  its  demand  that  the Court  of Auditors  have  full  audit  access  to  the 
operations  of the European Investment Fund in order that it can report to  the 
budget  authority  on matters  relating to the Community  budget;  calls  however 
on  the  Commission,  the  EIB  and  the  Court  of  Auditors  to  negotiate  an 
agreement with the European Parliament  on the treatment  of the  information 
thus  obtained  to  ensure  that  the  interests  of  EIF  investors  and  borrowers  are 
protected; 

Commission  reply 

Further  discussions  are  taking  place  between  the  Court  of  Auditors  and  the  EIF  with  a 
view to securing as satisfactory  an agreement as possible on the arrangements for  auditing 
the  EIF, particularly  the processing  of  information,  so  as to  guarantee  that  the  interests 
of  the  EIF's  creditors  and  debtors  are  safeguarded.  The  Commission  is taking  steps  to 
bring  about  a results  which  satisfies  all the  institutions  concerned. 

(Parliament) 

55.  Notes that the Guarantee Fund is insufficiently  resourced to meet the  potential 
level  of  demand  made  upon  it  and  that  the  mechanism  by  which  it  is  funded 
in practice places an excessively low limit on the amount of external lending the 
Community  is  able  to  undertake;  supports  therefore  the  following  measures: 

an  increase  in  the  budgetary  resources  available  to  finance  the 
Guarantee Fund and the revision of the Financial Perspective  necessary 
to  achieve  this, 

42 

the establishment of the target level for the Guarantee Fund on the basis 
of  an  ongoing  risk  analysis  of  loans  outstanding  at  any  given  time, 
together  with  an  appropriately  flexible  funding  system, 
the  reduction  of  the  amount  of  the  guarantee  granted  to  the  EIB  for 
loans  in  the  countries  of  Central  and  Eastern  Europe  and  the 
Mediterranean  basin  from  100% to 75%; 

Commission  reply 

At  the  end  of  1995,  the  resources  available  to  finance  the  Guarantee  Fund  came  to 
ECU  300  million.  Payments  expected  to  fall  due  in  the  course  of  1996  come  to 
ECU  1081  million,  so  that  the  Fund  covers  nearly  30%  of  payments  falling  due.  The 
resources  available  to  the  Fund  should  be  sufficient  for  it to  respond  if the  guarantee  is 
called  on. 

The  Fund  was  deliberately  set  up  to  prevent  any  potential  defaults  from  upsetting  the 
implementation  of the budget.  Its purpose  was also to enable  borrowing  and  lending  to 
develop  in a framework  consistent with budgetary  discipline, which necessarily  involves 
imposing  limits  on  such  activity. 

The machinery  also comprises provisions which in a simple but automatic way  determine 
the target  amount  in relation  to the amounts of guarantees  covered  by the  Fund  and  still 
outstanding. 

The rate  of  cover  of the  guarantee  given to the EIB  is currently  being  examined  by  the 
Bank  and  the  Commission.  Any  reduction  in  the  rate  would  release  considerable 
additional lending and loan guarantee capacity, even without any increase in the budgetary 
resources  allocated  to the  Guarantee  Fund. 

(Parliament) 

56.  Regrets the fact that the Court of Auditors continues to comment  adversely  on 
the  management  of  the  finance  provided  for  earthquake  reconstruction  work 
in  Italy  since  1980;  asks  the  Commission  to  review  its  decision  to  re-allocate 
unused  funds  intended  for  earthquake  reconstruction  to  another  project 
completed ten years previously, and arrange with the Italian authorities for the 
reallocation  of  the  sum  to  an  eligible  ongoing  project; 

Commission  reply 

The decision  to reallocate  to  another  project  part of the  loans  already  granted  to  the  12-
year programme  of reconstruction  was taken when the transfer  decision  was taken.  This 
procedure was expressly  provided  for  in the protocol  of agreement  countersigned  by  the 
Commission,  the  EIB  and  the  Italian  Government;  it  was  used  only  on  an  exceptional 
basis, to complete the programme.  The protocol was signed for  a  12-year term  (expiring 
at  the  end  of  1993)  in  line  with  the  guidelines  laid  down  in the  Italian  Framework  Act 
on the  reconstruction  of disaster  areas.  There  are currently  therefore  no  further  eligible 
projects  under  way. 

43 

FIGHT  AGAINST  FRAUD 

(Parliament) 

57.  Regrets  the low  utilisation  of appropriations  of some  key  headings  in the  fight 
against  fraud  such  as  B1-360  and  B2-5190 (in  the  agricultural  sector)  B6-480 
(research)  etc;  asks the  Commission  to ensure full  utilisation  of all  anti-fraud 
headings,  and  to  consider,  where  appropriate  in  cooperation  with  Member 
States,  necessary  measures  to  increase  the  utilisation  capacity  of  the  latter; 

Commission  reply 

The Commission also regrets the excessively  low utilization by the Member  States of the 
fraud  prevention  appropriations  (heading  B1-360)  made  available  to  them  under 
Regulation  (EEC)  No  307/91  for  the  purpose  of  strengthening  their  control  facilities. 
This  underconsumption  has  occurred  despite  constant  and  ongoing  prompting  of  the 
national  governments  concerned by the Commission.  The report which the  Commission 
submitted to the Council on  12 October  1995 (COM(95) 467) sets out the reasons for  the 
low take-up  and  ways  of  rectifying  the  situation. 

On  the  question  of  heading  B2-519,  the  Commission  notes  that  it  was  created  by 
Parliament  when  the  1994  PDB  was  in  preparation,  without  any  consultation  with 
Commission  departments  and  without  regard  to  the  identical  possibilities  for  funding 
offered  by  other  headings.  Even  so,  60%  of  the  appropriations  used  and  18  of  the 
19 operations  financed  can be  ascribed  to the  agricultural  control  departments. 

In  a  broader  sense, the  Commission  would  draw  Parliament's  attention  to  the  fact  that 
although  the making  available  of  financial  resources  for  fraud  prevention  is a  necessary 
operation,  it is not a sufficient  one, just  as the rate of take-up of appropriations  can  only 
be  a partial  indicator  of the effectiveness  of the measures  undertaken. 

Applying  the  lessons of  its experience  in this area, the Commission  has proposed  a new 
regulation,  which  is  currently  under  discussion  in  the  Council,  on  the  carrying  out  of 
Member States' action programmes in the field of EAGGF Guarantee expenditure control. 

The reason for  the low rate of implementation  of the headings containing  appropriations 
for  fraud  prevention  in  the  field  of  the  Structural  Funds,  the  amounts  for  which  were 
initially  entered  in  the  reserve  under  BO-40  (this  also  applies  to  headings  B6-840, 
Research  -  see  point  40  -  and  B7-530,  relating  to  the  cooperation  sector),  is  the  late 
availability  of  the  operational  appropriations. 

From  1996,  operational  appropriations  in  the  area  of  the  structural  policies  (and  other 
internal  policies)  have  been  brought  together  under  a  single  heading  (new  heading 
B2-150).  Appropriations relating to agriculture are also to be found under a new heading 
(B5-910), which also covers traditional own resources.  A firm expenditure plan for these 
two plans  in  1996 (and other years) will be drawn up, in accordance with the policies  of 
strengthening operational  presence in the field and technical assistance or logistical back 
up (including training for national officials)  which the Commission is pursuing in relation 
to the  Member  States'  specialist  fund  control  and management  departments. 

44 

COOPERATION  WITH  THE  MEDITERRANEAN  COUNTRIES.  THE 
DEVELOPING  COUNTRIES  AND  OTHER  THIRD  COUNTRIES 

(Parliament) 

59.  Urges the Commission to remove the unnecessary constraints and conditions on 
the  use of the funds  granted  to support  structural  adjustment  in the  countries 
of  the  Southern  and  Eastern  Mediterranean,  inter  alia  by  considering  the 
possibility of abandoning import programmes, provided the foreign trade of the 
beneficiary  countries  is  sufficiently  liberalized  and  the  currencies  are  freely 
convertible  and 
such  programmes  with 
straightforward  balance-of-payments  support; 

transferable,  and  replacing 

Commission  reply 

The  Commission  endorses  Parliament's  remarks  as to  the  desirability  of  converting  the 
adjustment  support  instruments  into direct balance-of-payments  assistance  instead  of  aid 
for  import  programmes  (on  condition  that  foreign  trade  is  sufficiently  liberalized  and 
currencies  are  freely  convertible  and  transferable). 

These comments reflect the thinking in Commission departments as validated by Council 
Resolution  No  7566/95  of  1 June  1996.  The  Commission  has  in  fact  applied  this 
approach  in the context  of  a new programme  of  adjustment  in Tunisia  and  Jordan. 

(Parliament) 

60.  Calls on the Commission  to ensure that its supervision and control  procedures 
are improved  and better targeted, and to increase the staff  resources  allocated 
to  the  structural  adjustment  support  programmes  by  means  of  internal 
redeployment,  making additional  staff  available who have the  necessary  skills 
and  experience  to  perform  the  budgetary  and  financial  analyses  required  for 
each  beneficiary  country  and  ensure  that  the  budgetary  strategies  of  those 
countries  are  compatible  with  the  economic  reform  programmes; 

Commission  reply 

The  reallocation  of  certain  responsibilities  to  the  Resources  Directorate  in  line  with 
SEM  2000 allows a rationalisation  of responsibilities within the operational  directorates. 
In  particular,  the  release  of  technical  units  (including  the  newly  created  economic 
cooperation  units  which  formerly  covered  a  part  of  their  task)  from  carrying  out  the 
financial and administrative work of contract award and negotiation, will allow those units 
to  take  the  lead  role  for  projects  within  their  respective  responsibilities  throughout  the 
project  cycle (in effect,  the  "task management" approach advocated  in the recent  internal 
audit).  This,  in  turn,  will  allow  geographical  units  to  discharge  more  effectively  their 
policy  and  coordination  role  in  respect  of  our  partner  countries.  A  new  post  for  an 
economist has been created in the Mashreq unit and another for the Maghreb.  It has also 
been decided to involve DG  II in these matters, and to step up coordination with the IMF 
and the  World  Bank. 

45 

Regarding  1996,  the  budgetary  authority,  at  the  Commission's  request,  has  decided  to 
allocate a maximum of 3% of the appropriations available for the Mediterranean  countries 
to the preparation,  follow-up  and evaluation of the projects and programmes financed by 
the  Community  in the  countries  concerned. 

COMMON  FOREIGN  AND  SECURITY  POLICY  (CFSP) 

(Parliament) 

64.  Calls  on  the  Commission  to  submit  a  report  by  1 September  1996  on  all  the 
financial  and  associated  institutional  aspects  of  the  CFSP,  including,  in  the 
interests of complete transparency, the role and significance of the contributions 
made  by  the  Member  States  towards  its  funding; 

Commission  reply 

The  financial  aspects  of  the  implementation  of  CFSP measures  are  as  follows. 

Introduction:  the  legal  basis 

When  the  Council  adopts  a  common  position  or measure  with  financial  implications  in 
the  context  of  the  CFSP,  it  may,  in  accordance  with  the  second  paragraph  of 
Article  J. 11 (2)  of  the  Treaty,  decide  that  all  of part  of the  expenditure  is to  be  charged 
either  to the  Member  States  or to the budget  of the European  Communities. 

When  the  Council  adopts  the  first  of  these  approaches,  it  decides  on  an  amount  and 
proposes  a  scale  for  determining  the national  contributions. 

In  the  second  case,  the  usual  budgetary  procedure  applies  and  the  Commission  is 
responsible  for  the  budgetary  implementation  of the measure. 

Financing  charged  to  the  Member  States 

The national contributions decided on by the Council in the framework  of CFSP measures 
related  to  the  channelling  of  humanitarian  aid to  Bosnia. 

through,  decided 
On  20  December  1993,  the  Council,  to  carry  this  objective 
(93/729/CFSP)  on  a  sum  of  ECU  48.3  million,  charged  partly  to  the  budget  of  the 
European  Communities  (see  Annex  2)  and,  in  respect  of  ECU  24.15  million,  to  the 
Member States, applying a method of dividing the sum up which was to be decided  later. 

On  7 March  1994  the  Council  extended  the  decision  to  30  September  1994.  National 
financing  of  ECU  17 million  was  mobilized  to  assist  the  administration  of  Mostar, 
applying a GNP-based  scale, by Council Decision No  94/308/CFSP of  16 May  1994.  A 
further  decision  (No  94/51/CFSP  of  27 July  1994)  was  taken  on  the  remaining 
ECU  7.15 million.  Both  decisions were  extended  (see Annex  1). 

Funding  charged  to the budget  of the  European  Communities 

Since the Maastricht Treaty came into force,  11 operations have been financed  in this way 
from  the  appropriations  held  in  reserve  in  the  budget  of  the  European  Communities, 

46 

accounting  for  ECU  163.360  million  in  commitments  (ECU  126  150  for  Mostar  and 
ECU  37.210  for  other  purposes  -  see  Annex  2,  Summary 
table  of  budgetary 
implementation).2  The  annual  budget  has  been  progressively  adjusted  for  this  purpose. 

1993  and  1994: establishment  of  budgetary  headings  for  the  CFSP 

-  For  1993:  in  anticipation  of  the  adoption  of  the  Treaty  on  European  Union,  the 
budgetary  authority  inserted  a  special  chapter,  B7-01,  for  the  Common  Foreign  and 
Security Policy.  A token entry was made against Article  B7-010 (operational costs of the 
CFSP). 

At  the  end  of  the  budgetary  procedure,  an  allocation  of  ECU  14.150  million  was 
committed  to  Article  B7-010,3  of  which  ECU  10 million  was  assigned  to  Mostar  and 
ECU  4.15  million to sending humanitarian aid to Bosnia (by airlift).  The cost of carrying 
than  originally  expected  and  nearly 
the 
ECU  0.75  million  was  decommitted. 

latter  operation 

through  was 

less 

-  For  1994:  ECU  20 million  in  commitment  appropriations  and  ECU  10 million  in 
payment  appropriations  were  entered  against  Article  B7-010  by  way  of  SAB No  2  and 
committed  for  the  administration  of  Mostar  (CFSP joint  action  94/790  of  12  December 
1994).  The draft  budget was amended at Parliament's first reading  in order to add to the 
Commission's  operational  reserves  (Chapter  BO-40)  an  allocation  of  ECU  1 million  to 
create  a possibility  of  transfer  to  CFSP  operational  reserves. 

Since that time the making  available of these appropriations has been subject  to  decision 
In  the  case  of  non-compulsory 
by  the  budgetary  authority  on  each  joint  action. 
expenditure,  Parliament  has  the  final  say  on  whether  or  not  to  approve  such  transfers 
within  a time  limit  of  six weeks. 

Implementation  of the  1995'budget 

A new  subsection  for  the  CFSP,  B-8, was  created  in  the  1995  budget.  Certain  articles 
were  put  into  it  for  the  purpose  of  implementing  measures  previously  identified:  Joint 
action of the European Union in Mostar (B8-100), Joint action of the European Union  for 
a stability pact  (B8-101), Joint action of the European  Union for  the  1995 conference  on 
the Non-Proliferation  Treaty (B9-102), Other joint actions of the European Union for  the 
CFSP  (B8-103).4 

Not just  the  appropriations  for  B8-100  (ECU  50 million  in  commitment  appropriations 
and ECU  35 million in payment appropriations) were entered in the reserve (B8-040), but 
also those  for  B8-103  (ECU  48.5  million  in CAs and  ECU  38.5  million  in PAs). 

With  the  exception  of  Council  Decision  No  93/604/CFSP  of  9 November  1993 
concerning  the joint  action  concerning  the  dispatch  of  a  team  of  observers  for  the 
parliamentary  elections  in  the  Russian  Federation,  regarded  as  "administrative 
expenditure"  incurred  by  the  Council  within  the meaning  of  Article  J. 11(2). 
By transfer  25/93. 
See Council Decisions 93/728/CFSP of 20  September 1993,94/367/CFSP of 14 June 
1994 and  94/509/CFSP  of  25 July  1994  respectively. 

47 

Budgetary  implementation  in  CAs  under  heading  B8-100,  concerning  Mostar,  came  to 
ECU  60  million (10 million entered against the heading and 50 million from  the reserve). 
In  PAs,  ECU  63.25  million  were  implemented  out  of  ECU  65  million  authorized  (five 
against the heading, 35 from  the reserve and 25 from a SAB).  Implementation of heading 
B8-103  came  to  ECU  24.660  million  in  CAs  and  ECU  12.326  million  in  PAs  of  the 
ECU  23.660  million  authorized. 

Implementation  of  the  1996  budget 

The  Commission  proposal  in  its  preliminary  draft  was  for  ECU  92 million  in  CA 
(32  million  against  heading  B8-010,  Mostar,  and  60  million 
for 
heading  B8-013,  Other  joint  actions  for  the  CFSP),  and  ECU  91.250  million  in  PA 
(36.250  million  against  heading  B8-010,  10  million  against  heading  B8-013  plus 
45 million in reserve for heading B8-013).  The budgetary authority decided to reduce the 
amount  planned  for  the  other  CFSP  operations by half,  leaving  ECU  30 million  against 
reserve  heading  BO-40. 

in  reserve 

After  nine  months  of  budgetary  implementation,  all  the  appropriations  against  heading 
B8-010  had  been  mobilized  and  nearly  50%  of  the  appropriations  had  been  placed  in 
reserve  for  heading  B8-013. 

PDB  and  DB  for  1997 

In  its preliminary  draft  budget  for  1997 the  Commission  proposed  increasing  the  CFSP 
reserve  allocation  to  ECU  50 million.  Following  the  expiry  of  the  EU  mandate  to 
administer  Mostar,  there  is no  provision  for  any  commitment  appropriation  for  1997. 

Conclusion:  Proposed  improvements 

The  length  of  the time  limit" attached  to the  budget  transfer  procedure  may  obstruct  the 
implementation  of  CFSP  actions,  particularly  those  taken  in  response  to  an  emergency 
situation  and/or  intended  to  cover  a  limited  period. 
It  would  be  useful  to  set  up  an 
accelerated  procedure  for  CFSP  actions requiring  rapid  implementation. 

In  addition,  as  a  flanking  measure  alongside  any  resulting  reduction  in  the  above  time 
limit, and so that the ground may be prepared as effectively  as possible for the budgetary 
implementation  of  CFSP  actions,  it  would  be  desirable  for  the  Commission  to  be  given 
a margin for  financial  manoeuvre similar to the heading in the Council budget for  special 
envoys. 

PHARE  PROGRAMME 

(Parliament) 

66.  Asks  the  Commission  to  provide: 

explicit job definitions  and responsibilities for all elements in the  Phare 
management  structure  (especially  delegations), 

48 

full  and  technically  qualified  staffing  for  delegations,  to  be  achieved 
through  the  creation  of  a  "diplomatic  service",  ensuring  genuine  staff 
mobility, in the Commission, 

clear  regulations  on  the  conditions  and  competences  for  local  staff  in 
delegations, 

financial  autonomy  (local  budgets  and  spending  limits)  and  project 
approval by delegates, with due regard to the location of the delegation, the 
seniority and experience of the delegate, etc., 

clear and explicit  delineation  of administrative  responsibilities  of  statutory 
staff, temporary staff and outside consultants, 

rationalisation of PMUs on the basis of an analysis of genuine  management 
need; 

Commission reply 

At  the  beginning  of  1996  the  Commission  provided  the  budgetary  authority  with  a 
memorandum  on the division of responsibilities and chains of command  between  headquarters 
and the Delegations  (Countries of Central and Eastern Europe - Newly  Independent  States)  in 
the context of the Phare and Tacis programmes. 

The purpose of the memorandum was to act on Parliament's resolutions in connection with the 
granting  of the  discharge  for  1994 and the draft  budget  for  1996.  The  object  was  to  help  to 
constitute the basis for the agreement sought by the European Parliament, and the memorandum 
set out to consider the following: 

• 

• 

• 

• 

the  state of the network  of delegations  in the countries  of  Central  and  Eastern  Europe 
(CCEE) and the Newly Independent States (NIS), and the shortcomings of the network; 
a  reshaping  of  the  network  of  delegations  in  line  with  the  new  framework  for  pre-
accession relations with the CCEE and partnership with the NIS; 
a reallocation of responsibilities between headquarters, the delegations and other bodies, 
and 
strengthening  arrangements  for  the  application  of  the  new  system  of  division  of 
responsibilities between the CCEE-NIS delegations and headquarters. 

The  Commission  has  meanwhile  prepared  a  new  guide  to  procedures  concerning  the 
implementation  of  Phare,  which  will  provide  the  basis  for  a  further  déconcentration.  In  that 
framework,  the  Commission's  delegations  should  be  in  a  position  to  assume  more 
responsibilities  as  a  result  of  the  reinforcement  of  their  staff,  as  mentioned  in  the  budgetary 
comments of budget line B7-500. 

49 

Thus  the  new procedural  framework  has taken account  of  the  exhaustive  survey  carried 
out  into  the  position  of  the  programme  management  units  (PMUs).  The  new  guide 
therefore  makes provision for rationalization and greater transparency as regards the costs 
of programme  management. 

(Parliament) 

67.  Calls  on  the  Commission  to produce,  by 30 September  1996, a strategy  paper 
defining  the  role  of the  Phare  Programme  in  the preparation  of the  countries 
of  Central  and  Eastern  Europe  for  accession  to  the EU; 

Commission  reply 

Following  the  Essen  and  Cannes  European  Councils,  new  planning  and  monitoring 
instruments  for  the  Phare programme  have  been  developed  for  the  1995-99  period. 

Acting on the timetable adopted by the Madrid European Council at the end of  1995, the 
Commission  sent the CCEE concerned  a very comprehensive questionnaire to be used as 
a  basis  for  a  Commission  opinion  on the applications  for  membership. 

The  Commission  will  carry  out  its  analysis  of  Phare  in  the  light  of  the  pre-accession 
strategy  with  due  regard  for,  among  other  things, these  new  instruments  and  the  replies 
to  questionnaire  sent  out  to the  CCEE. 

(Parliament) 

68.  Calls for a more pro-active  approach to project definition  and approval by the 
Commission, including the stipulation of conditions designed to ensure concrete 
results,  dissemination  of  technical  know-how  and  medium  term  sustainability 
of  effect  for  Phare  projects  in  all sectors; 

Commission  reply 

The  identification  and  definition  of  Phare-financed  programmes  and  projects  generally 
takes  place  at  the  planning  stage.  This  is  done  through  negotiations  at  which  the 
Commission  acts as a driving  force  to bring about agreement with the partner  countries. 

When  they  were  submitted  to  the  Phare  Management  Committee,  the  programmes  and 
projects  identified  were  analysed  in order to  guarantee: 

• 

the conditions in which they would be implemented (particularly through  application 
of  the  logical  framework  method,  which  ensures  a constant  link  between  activities 
and the  objectives  in view),  and 

sustainability  in the  medium  term. 

Regarding programme monitoring, the Commission has just (mid-1996) introduced a more 
pro-active  approach  involving  systematic  consideration  of  each  programme.  The 
consideration  involves  checking  up,  in  partnership  with  the  beneficiary,  on  how 
programmes  and  projects  are  advancing  towards  their  objectives  and,  where  necessary, 

50 

taking  corrective  action.  This  more  intense  form  of  follow-up  should  improve  Phare 
performances. 

TACIS  PROGRAMME 

(Parliament) 

69.  Asks  the  Commission  to  specify  unambiguously  which  tasks  involved  in the 

management  of Tacis: 

should  be  the  exclusive  responsibility  of  public  authorities  and  only 
carried  out by public  officials, 

can  be  carried  out by  non-officials  employed  by the  Commission  and 
overseen  by  officials, 

can  be contracted  out under  supervision; 

asks the Commission furthermore to state what staff resources are required for 
each  category  of work; 

Commission  reply 

The following Tacis tasks must be carried out by Commission officials  and other  in-house 
staff. 

Responsibility for the selection of sectors and projects during the preparation of Indicative 
Programmes (selection of focal  sectors and areas) and preparation of Action  Programmes 
(selection  of projects)  lies with  officials. 

Sectoral  strategies are prepared by officials  (80%) with the assistance of external  experts 
(20%)  for technical  aspects. 

Preparation  of  terms  of  reference  (ToRs): the technical  specifications  are prepared  by 
external  experts  (50%) and the ToRs are finalized  by officials  (50%). 

Tendering  and contracting:  officials  are responsible  for the short  lists, the evaluation of 
the  bids  and negotiation  of the  contracts  (30%); external  experts  are responsible  for all 
administrative  tasks relating  to the tendering  and contracting  procedure  (70%). 

The  supervision  of  project  implementation  is  entrusted  to  officials  (80%)  with  the 
assistance  of external  experts. 

Monitoring  and  Evaluation  are  carried  out  by  external  experts  (80%)  under  the 
supervision  of officials  (20%., 

Payments are made  by Commission  officials  assisted by other  intra-muros  staff. 

Tacis  services are understaffed  and in this respect the reinforcement  of the  Commission 
representation  in the Newly  Independent  States (NIS) should be the priority. 

51 

(Parliament) 

70.  Calls  on  the  Commission  to  open  permanent  delegations  with  clear-cut 
competences in all countries benefiting from Tacis assistance, and to ensure that 
they are fully  staffed  with  appropriately  qualified  officials;  to this  end  believes 
that the relevant directorate-general  of the Commission  should  recruit  officials 
on  the  basis  of  compulsory  mobility;  asks  the  Commission  to  report  to 
Parliament  on  the  action  it  intends  to  take  to  meet  these  requirements  by  31 
July  1996; 

Commission  reply 

The Commission  fully  agrees with the stated need to open new delegations in those New 
Independent  States  benefiting  from  Tacis,  when  there  is  currently  no  Commission 
Delegation.  Budgetary  constraints  render  this  impossible  in the  coming  year.  It  should 
however  be  possible  to  strengthen  existing  delegations  to  allow  them  to  give  greater 
attention to relations with one or two neighbouring countries.  As regards the recruitment 
of  officials  on  the  basis  of  obligatory  mobility,  this  is  made  a  condition  of  recruitment 
with the external  services DGs, but necessarily  in accordance with the statute of  officials. 

(Parliament) 

71.  Asks the Commission  to pay more attention to the medium-term  sustainability 
of projects when approving them, in particular by making greater demands on 
beneficiaries  in  terms  of  performance,  follow-up  and  the  dissemination  of 
results  and  by  linking  projects  to  other  forms  of  support  and  assistance  such 
as EIB/EBRD loans, finance from local credit institutions, equity participations, 
etc.; 

Commission  reply 

The  Commission  has  already  addressed  this  issue  of  project  sustainability.  A  better 
choice  of  the  adequate  beneficiary  in  the  recipient  country  should  already  help  the 
targeted  results  for  every  project.  Cooperation  with  EBRD  allows  some  projects  to  be 
financed  when  the  technical  assistance  come  to  an  end  and  when  the  beneficiaries  start 
making  the  subsequent  investments.  In  the  framework  of  cooperation  with  EBRD,  the 
Bangkok Facility enables Commission funds to be used to assess and prepare  investments 
in  viable  projects  by  EBRD.  Other  Tacis  programmes  like  the  ISTC  (International 
Science  and  Technology  Centre),  increasingly  seek  the  co-funding  of  EU  industrial  or 
governmental  partners  to  ensure  project  sustainability. 

52 

(Parliament) 

72.  Asks  the  Commission  to  produce  a  global  strategic  evaluation  of  the 
achievements  of  Tacis  so  far  in  political,  social  and  economic  (sectoral  and 
macro-economic)  terms and to propose strategic targets for the next five years 
of  Tacis;  asks  that  this  evaluation  be  available  to  the  European  Parliament 
before  it  adopts  its  opinion  on  the  new Tacis  Regulation; 

Commission  reply 

The  Commission  is currently  preparing  to  launch  a thorough  and  exhaustive  evaluation 
of  the  Tacis  program  and  of  its  performance  to  date.  Given  that  visits  to  all  CIS 
countries  are  needed  as  part  of  the  study,  and  given  that  the  selection  of  a  reputable 
consortium  to  conduct  an  independent  evaluation  takes  time,  the  report  will  only  be 
available  by  mid-1997.  Tacis  is  cooperating  with  the  overall  evaluation  of  EU 
Development Instruments and Programmes, and the methodology of the Tacis Evaluation 
has been  harmonized  with that  of the overall  exercise. 

There  are already thorough  and extensive results from  the Tacis monitoring  programme. 
These  were  prepared  in  an  overall  review  in  November  1995,  and  are  available  for 
consideration  by  Parliament  should  it  so wish. 

The programme  of evaluation  of Tacis activities, in addition to the overall  evaluation  of 
Tacis,  is  gathering  pace.  The  first  country  evaluation  has  now  been  completed  (for 
Belarus) and it is now intended that this programme, both by country and by programme, 
should  be  developed. 

(Parliament) 

73.  Expresses its concern as to the threat posed by fraud, especially that committed 
by  organised  crime,  to  the  Tacis  Programme;  stresses  the  importance  of 
checking the credentials of applicants for Tacis contracts and of monitoring the 
use to which money is put in the course of the contract; asks moreover that the 
Commission  take  a firm  line  in dealing with  allegations  of  fraud  involving  its 
own  officials; 

Commission  reply 

The  selection  of  all  projects  supported  by  Tacis  is  made  by  DG  1A  departments  in 
Brussels on the basis of proposals put forward  by the NIS authorities.  Furthermore,  the 
tender  and  contracting  process  is  centralized  in  Brussels.  DG  1A  departments  are 
responsible  for  the  drawing  up  of  short  lists,  the  preparation  of  tender  dossiers,  the 
evaluation of bids and the awarding of contracts.  Concerning the payment of contractors, 
it  must  be  stressed  that  all  invoices  are  checked  and  payments  are  made  by  Tacis 
headquarters. 

The Commission in fact shares Parliament's concern at the threat of fraud to the  financing 
of the Tacis programme, and has taken on itself to carry out several investigations in that 
area. 

53 

The  Commission  would  also  confirm  that  it  intends  to  give  careful  consideration  to  all 
cases  in  which  the  finger  of  suspicion  points  at  its  officials  or  other  servants  and  will, 
where  necessary,  take  the  appropriate  steps  available  to  it  to  penalize  improper  or 
fraudulent  behaviour. 

The  financial  situation  of  the  companies  is  taken  into  consideration  when  Tacis 
departments  select  the  contractors. 

ADMINISTRATIVE  EXPENDITURE 

(Parliament) 

74.  Asks  the  Commission  to  report  to  Parliament  in  time  for  the  first  reading  of 
the  1997  budget  on  the  whole  series  of  measures  taken  to  ensure  proper 
financial  and  administrative  management  of  the  Commission's  a)  external 
delegations  and  b)  assets  (excluding  research); 

Commission  reply 

(a)  Management  of  external  delegations 

Rules  governing  working  conditions  of  locally  recruited  staff 

At the  beginning  of August  1996 there were  100 delegations  with their  own  local  rules. 
The  only  ones  missing  from  the  list  were  certain  delegations  in  Central  Europe  or  the 
former  Soviet  Union (Albania,  the Czech Republic, Georgia etc.)  and  those  where  there 
were  special  problems  as  regards  either  operations  (Algeria)  or  legal  status  (China, 
Canada,  Japan  etc.).  Similarly,  the  local  rules  for  certain  Offices  where  a  very  small 
number  of  officials  work  (such  as Belize  and  Tonga)  are  yet  to  be  finalized. 

Special  arrangements  for  administrative  and technical  staff  in certain  delegations 

The  Commission  is  still  giving  consideration  to  the  question  of  introducing  special 
provisions  covering  local  administrative  and  technical  staff  of  Community  origin,  in 
accordance with the guidelines set out by the Court of Auditors.  In so doing  it will  take 
account of the comment made by the Council on 11 March  1996 when the discharge was 
granted,  calling  for  a rationalization  of personnel  management. 

Determination  of  step on  initial  classification  in grade  and  reclassification  of  local 
staff 

The procedure for checking classification as implemented following the Court's comments 
(see  point  13.16  of  the  Commission's  reply)  is now operational.  The  object  of  it  is  to 
oblige  local  administrators  to  be  more  painstaking  when  giving  consideration  to  the 
awarding  of  steps. 

Ongoing  inventories  of  furniture  and fittings 

• 

All  the  delegations  have  now  sent  their  inventories  in  to  headquarters  in 
computerized  form.  The  figures  are being  checked  before  being  incorporated  into 
the  balance  sheet. 

54 

There  is now  software  which  enables  items  worth  less  than  the  statutory  threshold 
of  ECU  350  to  be  identified. 

Regular  reminders  of  the  writing-off  procedures  are  issued  and  checks  for 
compliance  are  made  on the  spot  when  inspection  teams  visit  the  delegations. 

The  Commission  would  confirm,  however,  that  it  cannot  act  on  the  Court's  remark 
concerning  the  whereabouts  of  items  in  the  delegations.  To  avoid  the  need  to  keep 
updating  the  inventories,  the  lists  sent  to  headquarters  show  what  is  held  in  each 
delegation  as  a whole,  not  in  each  room  or premises. 

Service  vehicles 

• 

• 

• 

The  new  rules  on  the  use  of  service  vehicles  and  private  cars  on  Commission 
business  entered  into  force  on  15 July  1996. 

Tougher  checks  are  being  made  on  overtime  worked  by  drivers.  Staff  are  being 
encouraged  to use alternative  methods of transport,  such as airport  shuttle  services. 

Management  of  annual  leave 

Action taken to reduce the number of leave days carried  over from  year to year  has 
produced  encouraging  results: 

carryovers  from  1993 to  1994: 240  officials  involved 

carryovers  from  1994 to  1995: 275 

carryovers  from  1995 to  1996: 204 

The  rising  curve  has  now  been  stopped.  Thanks  to  this  step,  plus  a  more  binding 
timetable  for  forward  planning  and  more  thorough  analysis  of  the  reasons  given  for 
carrying  leave days over, the Commission now has greater  administrative resources  with 
which to  take  a  firmer  grip  of  leave  management. 

• 

There  have,  on  the  other  hand,  been  delays  in  setting  up  the  computerized  leave 
monitoring  programme.  The  system  is being  reorganized. 

Housing 

Most  of  the  agreements  with  officials  occupying  housing  leased  or  owned  by  the 
Commission  have  now  been  signed.  The  remaining  cases  are  to  do  with  local 
peculiarities. 

Irregularities 

The Commission has reported directly on the action taken on this matter to the rapporteur 
of Parliament's  Committee  on Budgetary  Control. 

55 

(b)  Assets  management  (excluding research^ 

At  the  beginning  of  1995  the  Commission  embarked  on  a  programme  to  overhaul  the 
management  of  its assets completely,  involving  drawing up a full  inventory  of  its  assets 
and  laying  down  new  rules  and  management  procedures  which  should  make  for  more 
effective  asset  management  in  future. 

1.  The  inventory  of  assets  was  completed  in  June  1996  and  covered  all  the 
Commission's  movable  assets  at  headquarters  offices  in Brussels  and  Luxembourg. 

The exercise covered 68 buildings in Brussels and  13 in Luxembourg, where 314  238 and 
81 482 items respectively were inventoried.  A new identification  technique involving the 
use  of  barcodes  and  optical  readers  was  introduced  for  the  first  time,  to  create  a 
computerized  inventory  which  will  be  faster  and  more  efficient  to  use  in the  future. 

The  rate  of  statistical  error  recorded  during  this exercise  was  lower  than  1°/°°, which  is 
regarded  as  acceptable. 

The  SYSBIEN  inventory  database  is  now  being  updated  using  the  results  of  the 
inventorying  exercise.  Reconciliation  of the data should  be completed  by  31  November 
1996. 

In  addition  to  the  reconciliation,  a  series  of  more  restricted  inspections  involving 
particular  sectors  and  sites  will  be  carried  out,  at,  for  example: 

• 

• 

• 

the  Transport  Service; 

the  Offices  in the  Union; 

the  Commission's  offices  in  Strasbourg. 

Some  100 000 dossiers are to be processed by 31 December  1996; the inventory  situation 
will then  be such that the control  authority  can be given true and  reliable  data  regarding 
the  Commission's  asset  holdings. 

2.  Managing  the  inventory  is the  second  stage  of the  operation. 

To  ensure that the  data  from  the  inventorying  exercise  remain  reliable,  the  Commission 
decided: 

• 

to  adopt  a new  Regulation  on  inventories  for  its own  purposes; 

to  amend  the  principles  and  procedures  for  managing  the  inventory. 

The  new  Regulation  on  inventories  was  adopted  by  the  Commission  on  21  December 
1995.  The procedures for applying this regulation are being worked out, and should make 
it possible  for  the  inventorying  of  assets to be  decentralized  from  1 January  1997. 

A  system  of  regular  inventories  will be  set up to check that the  data held  in  inventories 
are reliable, in accordance with the stipulation in the Financial Regulation and  elsewhere 
that  inventories  should  be  conducted  every  three years. 

56 

In practice the burden of keeping  inventories will be shared by carrying  out one or  more 
each  month. 

(Parliament). 

76.  Requests  the  Interinstitutional  Committee  on  Data-processing  to  carry  out  a 
comparative  study  on  Union  Institutions'  information  available  on  EU  data 
bases with a view to eliminating areas where there is overlap and/or duplication 
of  effort. 

Commission  reply 

Parliament's request for  a comparative  study of Union data bases has been put before  the 
Interinstitutional  Committee  on  Data-Processing.  The  study  is  now  at  the  stage  of 
compiling  information  about  the  Union  data  bases  concerned. 

57 

ACTION TO BE TAKEN IN RESPONSE TO 
THE COMMENTS IN PARLIAMENT'S  RESOLUTION 
ACCOMPANYING THE DECISION GIVING 
DISCHARGE IN RESPECT OF THE ECSC 

58 

2.  RESOLUTION  ON  THE  REPORT  OF  THE  COURT  OF  AUDITORS  ON 
THE ACCOUNTS  OF THE EUROPEAN COAL AND STEEL  COMMUNITY 
AT  31  DECEMBER  1994  AND  ON  THE  REPORT  OF  THE  COURT  OF 
AUDITORS  ON  THE  MANAGEMENT  OF  THE  ACCOUNTS  AND  THE 
FINANCIAL  MANAGEMENT  OF THE  ECSC 

POLICY  FOCUS 

(Parliament) 

1.  Believes  that  ECSC  activities  will  continue  to  make  a positive  contribution  to 
the interests  of the coal  and steel sectors in the period  leading up to the  expiry 
of the ECSC Treaty;  asks the Commission, however, in view of the diminishing 
resources  available  to  finance  those  activities,  to  focus  on  those  forms  of 
intervention  not  available  under  the  EC Treaty,  in  particular  social  measures 
and  redeployment  aid,  and  to transfer  other  activities  to  the  EC  forthwith; 

Commission  reply 

The  1995,  1996  and  draft  1997  budgets  have  made  full  provision  for  expenditure  on 
readaptation  aid.  Moreover,  the  Commission  is  proposing  in  the  draft  1997  budget  to 
increase  the  total  funding  of  the  supplementary  programme  in  the  coal  sector  for  the 
period  1994 to  1997 from  an initial  estimate of ECU  110 million to ECU  132 million  to 
take  account  of  the  higher  than  expected  level  of  demand  for  the  measures  concerned. 
This should ensure that all aid requests are fully  met and demonstrates the  Commission's 
commitment  to  the  social  measures  in the ECSC  treaty. 

The only social measures for  which ECSC aid is no longer available are training and self-
employment. These measures continue to be eligible for European Social Fund assistance. 

For  financial  activities  by  the  ECSC  in  borrowing  and  lending  form,  the  Commission, 
since  the  Treaty  is  due  to  expire,  adopted  ad  hoc  adjustment  measures  in  the 
communication  published  in  Official  Journal  C  175 (28  June  1994, p. 5). 

The  application  of  these  measures  had  its effect  on the volume  of  ECSC  loans paid  out 
in  1995, which  fell  to  ECU  402.8  million  in  all  (compared  with  ECU  673.4  million  in 
ECSC  loans  paid  out  in  1994).  In  1995,  64.6%  of  ECSC  loans  were  for  reduced-rate 
financing  of conversion  measures  entailing  new job  creation; the ECSC will  cease  to  be 
involved  in  such  activity  after  1997. 

THE  1994  FINANCIAL  STATEMENTS 

3.  Notes  that  the  amount  of  the  ECSC s  outstanding  lending  accounted  for  by 
large exposures to single debtors has risen above the levels envisaged for credit 
institutions  by  Council  Directive  92/121/EEC;  believes  that,  though  this 
Directive  does  not  apply  to the ECSC and the situation  is not yet  critical,  it  is 
indicative  of  a  potential  risk  to  the  financial  security  of  the  ECSC,  especially 
where 
large  loans  are  not  covered  by  first-class  guarantees;  asks  the 
Commission  therefore  to  monitor closely  its large  exposures as far as  possible, 
making  the  necessary  specific  provisions,  and  to  review  the  target  ratios  of 
reserves  to  outstanding  lending  in the light  of the  situation; 

59 

Commission  reply 

The Commission  is responsive to the recommendations put forward  by Parliament  on the 
basis  of  the  Court  of  Auditors'  comments. 

To be able to evaluate the approach to be adopted  to dealing  with  large exposures  more 
effectively,  the  Commission  felt  it  needed  a  certain  amount  of  additional  information. 
The final results of a study  carried  out by an international  consultancy  were delivered  to 
the  Commission  in April  1996 and  have already  been taken  into account  in the  drafting 
of the  ECSC  financial  statements  relating  to  management  in  1995. 

On the  basis  of  the  recommendations  in the  study, the  Commission  has decided  to  deal 
with the question  of  the concentration  of risk  on certain loans by setting  up  a provision 
to cover large exposures, applying to loans which are not covered by first-class guarantees 
and  on  which  the  outstanding  debt  exceeds  25%  of  the  ECSC s  own  resources.  The 
provision,  which  has  been  calculated  on  the  basis  of  the  debt  outstanding  on  these 
particular  large exposures  at 31  December  1995 and applying the method  recommended 
by the  international  consultancy,  stands at ECU  55 million. 

The  new  provision  has  been  entirely  funded  from  the  profit  and  loss  account  for  the 
financial  year ending  on 31  December  1995.  The ECSC s solvency ratio is not  affected 
by the  setting  up  of  the new  provision. 

(Parliament) 

5.  Calls attention  again  to the lack of transparency  in the way that  buildings  are 
acquired  by  the  ECSC  and  subsequently  transferred  to  the  EC  in  return  for 
"rental"  payments;  believes  that  this  arrangement,  which  in  effect  subsidises 
the  ECSC  at the  expense  of  the EC general  budget,  should  be  more  explicitly 
presented  in  the  accounts  of  both  communities,  especially  the EC; 

Commission  reply 

The various buildings still owned by the ECSC were in their time made available for  use 
by  the  European  Community  by  agreement  in  return  for  payment  of  rental,  in 
consideration  of  the  funds  invested  by the ECSC. 

As  allowed  under  these  agreements,  the  general  budget  of  the  EC  fully  refunded  the 
remaining  capital  due  to the  ECSC  in  1994 and  1995, with  a view to the  legal  transfer 
of the  ECSCs  buildings  to  the  EC. 

At  31 December  1995  only  the  legal  transfer  of  the  building  in  Haren  had  been 
completed. 

As far as the other buildings are concerned, the advances from the European  Community, 
amounting  to  ECU  7 288  355  in all, are shown  as liabilities  in the ECSC balance  sheet 
at  31 December  1995, pending  completion  of the  legal  formalities  for  transfer. 

SOCIAL  AND  REDEPLOYMENT  MEASURES 

(Parliament) 

60 

7.  Welcomes the Court of Auditors' finding  that ECSC  redeployment  aid is well-
administered  by  the  Commission  and  the  Member  States,  but  asks  the 
Commission  to  make  greater  efforts  to  ensure  that  Member  States' 
administrations  are  fully  aware  of  ECSC  workers'  entitlements  from  the 
operating  budget  and  the  means  of obtaining  them; 

Commission  reply 

Commission  services arrange an annual meeting  in Brussels, to which representatives  of 
the national administrations are invited, to discuss all relevant aspects of the readaptation 
aid  scheme  and  missions  to  the  Member  States  are  carried  out  regularly.  National 
administrations  are therefore  well  aware  of the  scheme. Readaptation  aid  has  moreover 
been available for  many  years and is extremely  well known by the  social partners  in the 
coal and steel industries. Parliament can be assured that, even if national administrations 
were somehow unaware of the scheme, they would quickly be informed  of it by the social 
partners when job  losses occur  in the industries and the need for  ECSC assistance arises. 

LENDING  ACTIVITIES 

(Parliament) 

8.  Acknowledges that there cannot and should not always be an even  distribution 
of  ECSC  lending  between  Member  States  in  any  given  year;  asks  the 
Commission  however  to  ensure  that  all  Member  States  have  equal  access  to 
funding  and  that  no  perception  of unfairness  can  arise; 

Commission  reply 

The eligibility of projects for financing  is defined on the basis of objective technical rules 
applicable to  all me Member  States. 

The  Commission  will  continue  to  do  its  best  to  ensure  that,  as  far  as  possible  and  in 
compliance  with  these  objective  rules,  all  Member  States  have  equal  access  to  ECSC 
lending. 

UK PIT  CLOSURES 

(Parliament) 

11.  Accepts  that the  ECSC  will  not be able to  recover by  legal  means the  interest 
rate subsidies  paid to  finance  production-enhancing  investment  in two  British 
coal  mines  which  were  closed  shortly  afterwards;  considers  it  highly 
unsatisfactory  however  that  a  Member  State  whose  explicit  policies  directly 
cause the wastage of ECSC funds should be under no obligation  to make  good 
this wastage;  asks the  Commission  to  put  this  point  to the  UK  Government. 

Commission  reply 

Parliament's comment relates to the last three loans given to the British Coal  Corporation 
by the ECSC  between  1989 and 1991. 

61 

The Commission  would  remind  Parliament  that the three  loans were  intended to  finance 
investment  in  15 different  coal  mines,  of which  only  two  (Lea  Hall  and  Frickley)  were 
closed.  Of  a total  of  ECU  12  177 078  in interest rate  subsidies  decided  on  for  projects 
to be carried  out  at  the  15 sites covered  by the ECSC  loans, the  subsidies  actually  paid 
to the  British  Coal  Corporation  on the three  loans came to  only  ECU  7 454 428. 

The Commission therefore  decided not to pay ECU 4  722  650 of the subsidies  originally 
approved.  The  sum withheld takes account of  all suspensions of activity  associated with 
the  privatization  process  and  includes  the  portion  of  the  subsidies  corresponding  to 
planned  investment  in  the  two  mines  which  were  then  closed.  The  British  Coal 
Corporation,  as a  State-owned  company, was officially  informed  of the  move. 

Having  regard  to  this  result  and  to  contractual  commitments  to  the  British  Coal 
Corporation, the Commission believes it has taken the proper steps to protect the  general 
interest of the ECSC.  The Commission does not therefore  think it advisable to raise the 
matter  with the UK  Government  at a later time. 

62 

ACTION  TO  BE  TAKEN  IN RESPONSE  TO 
THE  COMMENTS  IN  PARLIAMENT'S  RESOLUTION 
ACCOMPANYING  THE  DECISION  GIVING 
DISCHARGE  IN RESPECT  OF  THE 
EUROPEAN  FOUNDATION  FOR THE  IMPROVEMENT  OF LIVING  AND 
WORKING  CONDITIONS 
FOR  THE  1994 FINANCIAL  YEAR 

63 

3.  DECISION GIVING DISCHARGE TO THE ADMINISTRATIVE BOARD OF 
THE EUROPEAN  FOUNDATION  FOR THE IMPROVEMENT  OF  LIVING 
AND  WORKING  CONDITIONS 
(DUBLIN)  IN  RESPECT  OF  THE 
IMPLEMENTATION  OF ITS BUDGET FOR THE 1994 FINANCIAL  YEAR 

(Parliament) 

2.  Recommends again the appointment  of a part-time financial controller for  the 
Centre,  working  under  the  Commission's  financial  controller,  as  a  means  of 
reducing  the excessive  recourse to imprest accounts;  suggests that this  reform 
be  introduced  across  the  board  as  part  of  a  general  review  of  the  financial 
regulations  applying  to  all  the  external  agencies  of the  European  Union; 

Foundation  reply 

In  principle, 
the  Foundation  supports  the  proposals  of  Parliament.  However,  its 
implementation  may  prove  difficult  because  the  work  involved  would  probably,  on 
average, not  exceed  a few  hours per  week. 

An  alternative  approach  to  this problem  would  be  for  the  Foundation's  Administrative 
Board to nominate the Financial  Controller.  This procedure would require  action by  the 
Commission  to  provide  an  amendment  to  Article  19  of  the  Foundation's  financial 
regulation (Council Regulation (EEC) no. 1417/76 of 1  June 1976 as amended by Council 
Regulation  (EEC) No  1949/93  of  30  June  1993. 

A  further  alternative  would  be  to  amend  Article  43  of  the  Foundation's  financial 
regulation  in order to make explicit provision for  usage of the imprest account at a level 
commensurate with optimal efficiency  and in the context of regular visits by the Financial 
Controller. In practice the imprest account is used for expenditure covered by provisional 
commitments and, in accordance with the implementing rules relating to Article 54, these 
commitments  are  strictly  for  current  expenditure. 

However,  modern  audit  accounting  techniques  enable  such  bodies  to  be  effectively 
controlled.  More  particularly,  the  forthcoming  introduction  of  a  new  computerized 
accounting  system common to all the decentralized agencies or bodies, linked directly to 
Financial  Control  in  the  Commission,  will  enable  prior  control  of  commitments  and 
payments to be carried out in real time, without having to send out DG XX staff.  These 
measures will cut the cost of dispatching dossiers to the absolute minimum and will mean 
that  the use of  the  imprest  account  can be  gradually  reduced. 

(Parliament) 

3.  Calls on the Management  Board of the Foundation to respect the terms  of the 

its  financial  regulation  in  respect  of transfers  of  appropriations; 

Foundation  reply 

The problem relating to transfers  is caused by an anomaly  in the Foundation's  financial 
regulations where, under Article  15, provision is made for the Foundation's budget to be 
subdivided  into  titles,  chapters,  articles  and  items,  whereas  Article  21,  paragraph  1 

64 

indicates that the budget shall only be classified  by chapters and articles and that  transfers 
may  be  effected  from  one  chapter  to  another. 

Prior  to  1994  this  anomaly  caused  no  problems  as  the  budget  was  classified  only  by 
chapters.  From  1994,  in  response  to  a  recommendation  of  the  Court  of  Auditors,  the 
budget  was  reclassified  so that  what  were previously  "chapters" became  "titles". 

It  is understood  that  there  is no  fundamental  reason  why  transfers  between  titles  of  the 
Foundation  budget  should  not  be  permitted,  and  indeed  it  is  in  the  interest  of  sound 
financial  management,  that  such  transfers  are  necessary.  The  Commission  is  giving 
consideration to taking appropriate action to amend the Foundation's financial  regulation 
to  provide  the  necessary  consistency. 

(Parliament) 

4.  Asks  the  Foundation  to  review  its  policy  on  holding  large  cash  balances,  and 
in  future  to  draw  down  its  subsidy  from  the  Commission  in  a  manner  more 
closely  related  to  its  actual  need  to  carry  out  expenditure; 

Foundation  reply 

In line with past recommendations of the Court of Auditors, the Foundation has, in recent 
years, requested payments of its subsidy to cover commitments rather that cash needs  for 
the financial  year.  This has resulted  in cash balances arising  at the year  end which  were 
surplus  to  operational  requirements.  The  procedure  will  now  be  revised  to  ensure  that 
subsidy  requests  are  on the  basis  of  actual  cash  requirements. 

(Parliament) 

5.  Continues  to consider it essential  to avoid overlap between the activities  of the 
Foundation  and  those  of  the  Commission  and  other  Community  bodies  with 
closely  related  mandates;  notes  the Commission's willingness  to  report  to  the 
European Parliament on the integration and organisation of Union activities in 
the  fields  concerned,  and  to  present  proposals,  as  appropriate,  aimed  at 
ensuring  greater  complementarity  and  cost-effectiveness; 
again  asks  it 
therefore  to  do so; 

Foundation  reply 

The report  referred  to  is  in course  of  preparation; 

It  should  be  noted  that  the  Foundation's  work  programmes  are  established  by  the 
Administrative Board in agreement with the Commission. During the preparation of these 
programmes  the  services  of  the  Commission  examine  the  proposals  to  ensure  the 
complementarity  of work  and  to  avoid  duplication. 

(Parliament) 

6.  Looks  forward  to  the  definitive  resolution  of  the  long-standing  difficulties 
relating  to  the  ownership  of  the  land  occupied  by  the  Foundation;  asks  the 

65 

Foundation  to inform  the European  Parliament as soon as the legal  formalities 
for  the  acquisition  of  the  leasehold  of the  land  have  been  completed; 

Foundation  reply 

Parliament  will  be  informed  as  soon  as  the  legal  formalities  relating  to  the  lease  are 
completed. 

66 

ACTION  TO  BE  TAKEN  IN RESPONSE  TO 
THE  COMMENTS  IN  PARLIAMENT'S  RESOLUTION 
ACCOMPANYING  THE  DECISION  GIVING 
DISCHARGE  IN  RESPECT  OF  THE 
EUROPEAN  CENTRE  FOR THE  DEVELOPMENT  OF 
VOCATIONAL  TRAINING 
(CEDEFOP) 

67 

4.  RESOLUTION  OF  THE  EUROPEAN  PARLIAMENT  INFORMING  THE 
MANAGEMENT  BOARD  OF  THE  EUROPEAN  CENTRE  FOR  THE 
DEVELOPMENT  OF  VOCATIONAL  TRAINING  (CEDEFOP)  OF  THE 
REASONS WHY THE DISCHARGE  CANNOT AT PRESENT BE GIVEN IN 
RESPECT  OF THE IMPLEMENTATION  OF ITS BUDGET  FOR  THE  1994 
FINANCIAL  YEAR 

(Parliament) 

A.  whereas  CEDEFOP  represents  an  instrument  of  Community  policy,  and  its 

activities  must  contribute  to  the wider  pursuit  of  that  policy, 

B.  whereas  CEDEFOP  has  relocated  from  Berlin  to  Thessaloniki  without  any 

resolution  as yet  of  the  staffing  problems  arising  from  this  move, 

Commission  reply 

Under the existing regulations, a framework  agreement on social measures relating to the 
relocation  of  CEDEFOP  to  Thessaloniki  was  reached  between  CEDEFOP  management 
and  staff.  This  agreement  made  the  transfer  socially  acceptable  and  was  approved  by 
CEDEFOP's  Management  Board  on  27 January  1995.  A  system  of  voluntary  early 
retirement  for  17 people at the Centre (aged over  55 and with ten years'  service, or aged 
over  50  and  with  15 years'  service)  is  not  part  of  the  framework  agreement,  but  there 
were  great  hopes  that  it  would  be  introduced.  Any  such proposal  must  be  looked  at  in 
the light of the decision by the Council of the European Union on  17 November  1995 to 
confine  voluntary  redundancies  to  Parliament. 

Since  1 March  1995  CEDEFOP  staff  have  been  subject  to  the  Staff  Regulations  of 
Officials  and Conditions of Employment of other servants of the European  Communities. 

The  CEDEFOP  Management  Board  has granted  staff  (apart  from  management  and  new 
staff)  the  status  of  Community  officials,  established  following  a  competition  based  on 
qualifications  followed  by  the  regulation  probation  period.  Staff  at  the  Centre  have 
become  officials. 

(Parliament) 

1.  Notes  that  CEDEFOP's  current  staffing  situation  seriously  compromises  the 
efficient  accomplishment  of  its work;  notes  furthermore  that  no  satisfactory 
resolution  of  this  problem  is yet  in  sight; 

Commission  reply 

The CEDEFOP Management Board has instructed the Director of the Centre to take steps 
to  have  staff  with  valid  reasons  for  not  being  able  to  move  to  Thessaloniki  with  the 
Centre  detached  or  seconded  to  national,  international  and  Community  bodies  and 
departments.  Officials  who cannot  leave Berlin may thus stay on for  a period  of at least 
six months,  corresponding  to  one  month  for  each year  or  part  of  a year  served  with  the 
Centre.  They  are paid  by  CEDEFOP. 

68 

The  Centre  and  the  Commission  have  done  all  they  could  for  CEDEFOP  staff  to  help 
them  find  legal  and  practical  solutions  to  their  concerns.  The  institutions  have  even 
anticipated 
the  Staff  Regulations  allowing  mobility  under 
Article  29(1 )(c). 

the  amendment 

to 

(Parliament) 

3.  Reserves its discharge decision until such time as the European Parliament  can 
be  satisfied  that  the  management  strategies, working  conditions  and  activities 
of  CEDEFOP  are  such  as to  ensure: 

(a) 

value  for  money  for  the  budgetary  expenditure  used  to  support 
CEDEFOP, 

(b) 

efficient  use  of  human  and  other  resources, 

(c) 

products  of  quality which  respond  to the  needs  of  CEDEFOP's  clients, 

(d) 

a  clear  and  coherent  role  within  the  policies  of  the  European 
Community  on vocational  training. 

Commission  reply 

Following  the  thorough  audit  of the  accounts  by the  Court  in  1993,  the  report  on  1994 
is shorter  and  more positive.  Since the Centre was transferred  to Thessaloniki  (the  new 
management  made  moving  a priority),  the  CEDEFOP  has resumed  its  work  in  Greece. 
The  1995 annual  report  discusses  production  and  performance. 

Results have in fact been positive and in certain cases (e.g. the translations of the Review) 
the  delays  have  been  made  up.  The  study  visit programme (a task  of  the  Centre  under 
the  Leonardo  programme)  has run  smoothly,  with  more than  540 people  taking  part. 

Aside from  the social  measures (which had to be taken because  of the transfer  and  were 
paid  for  from  the  Centre's  budget),  decisions  have  been  taken  at  each  meeting  of  the 
Management  Board  since March  1996 to make the Centre more cost-effective;  there  has 
already  been  an  improvement,  despite  the tight  staffing  in  Thessaloniki. 

These decisions on revitalizing the Centre, setting medium-term priorities and raising  the 
standard  of  services  should  soon  start  showing  results.  CEDEFOP's  tasks  and  the  part 
it  plays  are  not  changing:  it  provides  technical  and  scientific  back-up  in  relation  to  the 
development  of  vocational  training  in the European Union.  Vocational  training,  on  the 
other hand,  is playing  an increasing  role, as background developments  show: the  Treaty 
of Maastricht, the Leonardo  da Vinci programme, changes in industry, the White  Papers 
on  growth,  competitiveness  and  employment  and  on the  learning  society,  and  the  wide 
range  of  decisions  taken  by  European  Councils  since Essen. 

CEDEFOP  is therefore  developing  so that it can deal effectively  with the challenges it is 
having  to  face. 

69 

II.  ACTION TAKEN ON THE COMMENTS ACCOMPANYING THE COUNCIL 
RECOMMENDATION ON THE DISCHARGE TO BE GIVEN IN RESPECT 
OF THE 1994 FINANCIAL YEAR 

70 

CHAPTER 1 
OWN  RESOURCES 

(THE  COUNCIL) 

1.  BUDGET  IMPLEMENTATION  AND  FINANCIAL  MANAGEMENT 

In  the  area,  in  particular,  of  the  provision  to  the  Community  budget  of  the 
established  entitlements, the Council would encourage the Commission  to pursue its 
efforts  at coordination with the national administrations.  It shares the Court's view 
of the  need  to step  up the  use of  monitoring  programmes  and  risk  analysis  systems 
in  accordance  with  the  Commission's  guidelines. 

Commission  reply 

The  guidelines worked  out by the Commission  in the form  of a guide to risk  analysis  in 
customs  controls  were  approved  by  the  Member  States'  representatives  meeting  in  the 
Customs  Policy  Committee  on  9  and  10 February.  Recently,  in  cooperation  with  the 
Member  States,  procedures  were  set  up  to  amend  the  guidelines  in  certain  areas  of 
customs control identified  as being particularly  sensitive.  The Commission also uses risk 
analysis techniques when selecting the subjects to be checked in the annual own resources 
control  programme. 

(THE  COUNCIL) 

2.  MUTUAL  ASSISTANCE  IN  COMBATING  CUSTOMS  FRAUD 

In  this  area  and  in  particular  with  regard  to  the  monitoring  of  recoveries,  the 
adjustment  of customs legislation  and Commission  supervision of national  recovery 
instruments,  the  Council  anticipates  a  stepping  up  of  collaboration  between  the 
national  administrations  and  the  Commission  thanks 
in  particular  to  the 
implementation  of  the  amended  Regulation  No  1552/89;  regarding  the  financial 
impact  of  the  legislation,  the  Council  agrees  with  the  Court  and  the  Commission, 
and would  like  the  latter  to  propose  revision  of the  legislative  texts. 

Commission  reply 

The  monitoring  of  the  Member  States'  action  to  recover  traditional  own  resources, 
particularly  those  affected  by  fraud  and  irregularities,  as  advocated  by  Regulation 
No  1552/89,  has  been  carried  out  by  setting  up  a  method  of  sample  monitoring  of 
difficult  recovery cases up to final clearance.  "A" samples relate to notifications  of  fraud 
involving  more  than  ECU  500  000  in  own  resources,  while  "B"  samples  relate  to 
notifications  under  the  mutual  assistance  system  involving  sums  of  more 
than 
ECU  1 000  000. 

The  "A"  sample  for  1994  (A/94)  included  about  100  cases  of  this  type,  the  aggregate 
amount  accounting  for  70% of the base  still to  be recovered.  The  national  government 
departments  were  questioned  about  the  cases  concerned  and  reported  on  progress  with 
recovery. 

71 

The  Commission  gave  a presentation  of  this  method  of  monitoring  in  its  first  report  on 
the  A/94  sample  sent  to  the  Council  and  Parliament  on  6  September  1995.5 

The  object  of  Stage  III  of  the  sound  and  efficient  financial  management  project 
(SEM  2000)  is to  create optimum  conditions  for  close cooperation  between  the  Member 
States  and  the  Commission  in  supervising  national  recovery  instruments,  in  both 
qualitative  and  quantitative  terms.  In this context  the  Council,  on  8 July  1996,  adopted 
RegulationNo  1355/96(OJL  175,13.7.1996)amendingRegulationNo  1552/89.  Among 
other  things,  the  new  regulation  provides  for  the  Commission  to  be  given  more 
information  about fraud  cases and irregularities, and it entered into force on  14 July  1996. 

As the  Commission  has  stated  in  its reply  to  the  Court's  comments,  it  is, together  with 
the Member States, looking into whether the Member States actually apply the prescribed 
penalties for  failure  by economic interests to apply the customs rules, and  if necessary  it 
will  put  forward  legislative  proposals.  In  addition,  as part  of  the  work  on  Stage  III  of 
SEM  2000,  the  Commission,  together  with  the  Member  States,  is  currently  examining 
ways  of  giving  greater  force  to  the  Member  States'  financial  accountability  by  laying 
down  a number  of  financial  penalties  for  failure  to  apply  the  relevant  financial  rules. 

(THE  COUNCIL) 

3.  COMMUNITY  TRANSIT  ARRANGEMENTS 

The  Council  notes that  the European  Parliament,  referring  to the  provisions  of the 
TEU,  has  just  set  up  a  temporary  Committee  of  Inquiry  into  Community  transit 
arrangements.  It  also  notes  the  Court's  remarks  on  the  application  of  the  transit 
arrangements  in  the  Member  States;  it  considers  that  these  remarks  reflect  the 
urgent need to strengthen the system and welcomes the Commission  communication; 
it also takes note of the replies from the Commission  and the Member  States on the 
procedures  initiated  in the cases referred  to by the Court in its report; it invites  the 
Commission to take account of these remarks and of the outcome of the proceedings 
of  the  ad  hoc  Working  Party,  in  drawing  up  future  legislative  proposals. 

Commission  reply 

The  Commission  communication  on  combating  fraud 
transit 
arrangements,  which was adopted  on 21  February  1996 and was officially  transmitted  to 
the  Council  on  8 May  1996,  lists  a  number  of  steps  which  the  Commission  regards  as 
essential  if fraud  is to be combated  more effectively  and more of the  sums  owing  to  the 
Community  and  nationally  are  to  be  recovered.  Some  of  the  measures  set  out  became 
applicable at the beginning of April  1996.  Others have been proposed, but adopting them 
creates  certain  difficulties  for  the  Member  States.  For  instance: 

in  relation  to  the 

The  draft  provision  setting  the  global  guarantee  at  100%  of  the  duties  and  levies 
concerned  did not win the assent of the Customs Code Committee, Transit  Section. 
Nevertheless, on  15 July  1996 the Commission presented a proposal on this measure 
to the Council in accordance with the third paragraph of Article  249 of the  Customs 
Code. 

COM(95)  398. 

72 

transit 
In  the  same  way,  the  proposals  for  adoption,  under  the  common 
arrangements,  of  measures  similar  to  those  adopted  at  the  Community  level  in 
respect  of  guarantees  did  not  receive  the  assent  of  the  EC-EFTA  working  party. 
Proposals  for  appropriate  measures, designed  to mesh the two transit  arrangements 
together  in a coherent whole, will be put before the Joint Committee at the  meeting 
scheduled  for  the beginning  of  December  1996. 

The other measures proposed in the communication are currently being considered by the 
Transit  Task  Force which has been set up within the Commission and whose  assignment 
is to conduct an overall analysis of the transit rules.  As soon as the interim report by the 
Task Force  has been  adopted by the Commission,  it will be sent to the other  institutions 
for consultation; they may put forward  any comments and suggestions with a view to the 
drafting  of the final report, which will contain the Commission's proposals  for  measures 
to  overhaul  the  transit  system  and  will be  adopted  in February  1997. 

As  for  the  Court's  comments  on  the  external  transit  system,  the  Commission  is  taking 
appropriate  financial  and regulatory  action  on them. 

(THE  COUNCIL) 

4.  VAT  ON  COMMUNITY  TRADE 

The Council  supports the viewpoint  of the Court and the Commission  and, like  the 
Court, invites the Commission to monitor carefully the development of VAT revenue 
in  order to  detect  any  problems  linked with  the transition  from  the  current  to  the 
final  arrangements. 

Commission  reply 

The  Commission  has  taken  steps  to  improve  the transmission  by  the  Member  States  of 
information  on VAT and excise revenue and thus enable it to follow the development  of 
revenue  in  the  Member  States  more  effectively.  At the  meeting  of  Deputy  Directors-
General  for  indirect  taxation  which  took  place  on  12 December  1995,  the  Commission 
urged the Member  States to set up an automatic mechanism for the transmission  of  such 
information.  The  Commission  proposes  to  hold  bilateral  discussions  with  the  Member 
States  for  this purpose  and to  give  detailed  consideration  to the  information  available. 

(THE  COUNCIL) 

5.  GROSS  NATIONAL  PRODUCT 

The Council takes note of the conclusions  of the Court  and invites  the  Commission 
to  continue  its  statistical  work  with  a  view  to  ensuring  the  exhaustiveness  and 
comparability  of  national  GNPs,  given  the  increasing  relative  importance  of  this 
resource in the financing of the Community budget.  In addition, it stresses the need 
to  improve  the  GNP  own  resources  forecasting  system  and  the  application  of  that 
system  by  the  Commission. 

73 

Commission  reply 

Report  COM(96)  124  on  the  effective  degree  of  harmonization  of  national  GNPs  was 
adopted  by the Commission  on  Wednesday,  27 March  1996 and  sent to the Council  and 
Parliament  on 28  March  1996.  The report  shows that progress has been  made  on  many 
fronts.  The most important gaps in estimates of Member States'  GNPs have already  been 
filled  or  should  be  filled  shortly.  The  estimates  of  Member  States'  GNPs  are  therefore 
more  complete,  reliable  and  comparable  than  they  were  before. 

Given the problems remaining, however, there is still a great deal of progress to be made. 
The  main  problem  is the  exhaustiveness  of  GNP  estimates.  The  others relate  to: 

a  series  of  across-the-board  problems,  i.e.  points  which  need  to  be  checked  or 
improved  by all the Member  States: for  instance, the transition from  GDP to GNP, 
the  processing  of housing  services  and the handling  of  financial  institutions; 

• 

a  series of  problems  specific  to particular  countries: for  instance,  certain  problems 
connected  with  compliance  with  the  rules  of  the  European  System  of  Accounts 
(ESA)  and  the  application  of the rules  on  territoriality. 

Much  of  this  work  should,  if  all  goes  well,  be  completed  by  October  1997;  whatever 
happens,  the  whole  of  it,  including  the  work  on  exhaustiveness,  should  be  finished  by 
October  1998. 

CHAPTER  2 

EUROPEAN  AGRICULTURAL  GUIDANCE  AND  GUARANTEE  FUND, 
GUARANTEE  SECTION  (EAGGF  GUARANTEE  SECTION) 
The  common  market  organization  (CMO)  in fruit  and  vegetables. 

(THE  COUNCIL) 

The  Council  entirely  shares  the  view  that  the  operation  of  the  management  and 
control system and of the PO system should both be strengthened, in order to enable 
them  to  carry  out  effectively  their task  of  managing  the  market  in  this  sector. 

It  stresses  the  importance  it  attaches  to  the  control  and  reduction  of  structural 
surpluses in the main producer Member States, and hopes that the new  Regulation 
will  be  implemented  as  soon  as  possible. 

It  asks  the  Commission  to  assess  the  intervention  arrangements  of  the  CMO,  once 
the reform  has been fully  implemented,  and calls for products withdrawn  from  the 
market  to  be  put  to  better use. 

The Council considers that the application  of Regulation  No  729/70 on the  EAGGF 
Guarantee  Section,  as  last  amended  by  Regulation  No  1287/95,  should,  where 
appropriate,  make  possible  the  recovery  of  overpayments. 

74 

Commission  reply 

In  carrying  out  the  planned  checks  in  the  area  of  the  COM  in  fruit  and  vegetables, 
Commission departments will take care to check that the management and control  system, 
including  that  relating  to  professional  organizations,  is working. 

Once  the 
intervention 
investigations  are  complete,  an  evaluation  of  the  COM 
arrangements  will be carried  out.  This will  also be an opportunity  to clear the accounts, 
when  payments  made  for  failure  to  apply  the rules correctly  will  be  recovered. 

In  the  COM  in  fruit  and  vegetables  approved  by  the  Council  in  July  1996  there  is 
provision  for  setting  up  a body  of  inspectors  especially  for  that  particular  COM. 

CHAPTER  3 

COMMON  POLICY  ON  FISHERIES  AND  THE  SEA 

(THE  COUNCIL) 

The Council  considers that the Commission  must continue its action to improve  the 
administration  of  this  aid,  in  particular  by  stepping  up  its  checks  in  the  Member 
States,  after  which  it  will  report  back  in  the  context  of  the  follow-up  action  in 
response to the Recommendation.  In addition, it should examine in partnership with 
the  Member  States  concerned  the  adjustments  which  need  to  be  made  to  the 
legislation,  particularly  those  relating  to  the  checks  to  be  carried  out  in  tuna-
processing canning factories situated in a Member State other than that in which the 
compensatory  allowance  was  paid  to  the  producers. 

Commission  reply 

As stated during the discussions, "the Commission does ... share the Court's wish,  firstly, 
to make  checks  on the  Community  origin  of  the tuna more  efficient,  for  which  purpose 
a new verification  document  will be drawn up following  a recently  adopted  amendment, 
and, secondly, to examine with the Member States concerned the necessary  improvements 
to the  application  of  this  legislation  and  to  its  monitoring." 

The  new  document  referred  to  above  was  introduced  by  Commission  Regulation 
No  482/96  of  19 March  1996  (OJ  L  70,  20.3.96).  The  Commission  also  scheduled  a 
series of on-the-spot  inspection missions to the Member  States directly  concerned  by  the 
compensatory  allowance payments (Spain in April and June  1996, Portugal  in May  1996 
and France in October  1996).  These were to be the occasion for  an analysis of the  legal 
arrangements  in  force. 
In  the  light  of  the  findings  from  these  inspections,  the 
Commission  will  make  proposals  for  any  regulatory  and  administrative  improvements 
which  may  be  necessary. 

As  regards  the  inspections  to  be  carried  out  in  tuna-processing  canneries  situated  in  a 
Member  State other than that in which the compensatory  allowance was paid, the  subject 
will be discussed during the on-the-spot missions.  They have been planned in such a way 
as to  cover  the major  sites  for  unloading  and use  (in  Galicia,  the  Azores  and  Brittany). 
Contacts  are  under  way  with  a view to  organizing  a mission to  Italy. 

75 

CHAPTER  4 

REGIONAL  SECTOR 

(THE  COUNCIL) 

1.  BUDGETARY  AND  FINANCIAL  DATA 

The  Court  notes  in  particular  a rate  of  implementation  of  the  final  overall  budget 
of the Structural Funds in terms of payment appropriations which is deemed  rather 
low; moreover, the excessive concentration of commitments and payments at the end 
of  the  financial  year  increased  further. 

The Council stresses the existence of a recurrent problem in this area, which  should 
It  feels  that  the  new  rules  governing  the  Funds  provide  the 
be  faced  up  to. 
appropriate  context  for  improved  expenditure  planning; this  should  help to  reduce 
significantly  the current concentration  of a large proportion  of payments at the end 
of the  financial  year. 

Commission  reply 

The incidence  in time  of  Commission  financial  operations basically  reflects  the  progress 
of  operations  on  the  ground  in  the  Member  States  and  the  timing  of  the  receipt  of 
Member  State  expenses  declarations.  Article  19(3)  of  Regulation  (EEC)  No  4253/88 
requires  the  Member  States to  submit  payment  requests  in accordance  with  a  "balanced 
schedule"  throughout  the  year.  The  Commission  exercises  no  direct  control  over  the 
rhythm  at which the Member  States forward  such requests: these usually reflect  national 
administrative  practices  and financial years. 

The problem  of the  concentration  of financial  operations at the  end of the financial  year 
is being  addressed  in the  framework  of the  exercise  "SEM 2000  phase  III". 

It should be noted that the situation improved in  1995, despite the late adoption of certain 
Community Initiative programmes and the modification of the financial plans of a number 
of  existing  programmes  in the  latter  part  of the  year. 

(THE  COUNCIL) 

2.  REVIEW  OF  THE  REFORM 

It  stresses  the  importance  of  greater  collaboration  between  the  competent  national 
authorities  and  the  Commission  departments  concerned;  it  is necessary  to  avoid  at 
all costs  confusion  about  the  division  of tasks  and  responsibilities  between  national 
and  Community  operators. 

Commission  reply 

At  a general  level, the  division  of responsibilities  is quite clear  - the  Member  States  are 
responsible  for  managing  projects  in  such  a  way  as  to  ensure  that  Community  law  is 
respected and financial errors and irregularities minimized. The Treaty (Article 205) gives 
the  Commission  ultimate  responsibility  for  the  execution  of the  budget. 

76 

At  the  level  of  practical  implementation  the  Commission  is  aware  that  in  certain  areas 
some confusion  may exist. At the informal  meeting  of Ministers responsible  for  regional 
policy  in  Venice,  in  May  1996,  Ministers  agreed  on  the  need  for  this  question  to  be 
addressed  in the context  of  "effectiveness,  control  and  simplification"  and  in the  light  of 
the  principle  of  subsidiarity  and  the  division  of  tasks  between  the  Commission  and  the 
Member  States. 

(THE  COUNCIL) 

4.  PUBLIC  CONTRACTS 

The Court  remarks  that  not all the Directives  on the transparency  and  opening  up 
of  public  contracts  have  been  satisfactorily  transposed  into  provisions  of  domestic 
law adopted by each Member State and that in practice application remains limited. 
The Commission only proceeded very late with checking the operation of the system 
for  monitoring  compliance  with  the  rules  on  public  contracts. 

The  Council  invites  the  Commission  to  take  all  due  care  to  ensure  that  all  the 
operators  concerned  receive  the  necessary  information  and  that  the  application  of 
Community  Directives  in  the  implementation  of  each  operational  programme  is 
strictly  monitored. 

Commission  reply 

The primary responsibility for ensuring compliance with Community legislation in respect 
of public procurement lies with the Member States. The programming documents granting 
Structural  Fund  assistance  for  the period  1994-99 stipulate  the  following  provisions  for 
reinforcing  control  of  compliance  with public  procurement  requirements: 

1.  Pursuant  to  Article  25(6)  of  Regulation  (EEC)  No  4253/88,  notices  sent  for 
publication  in the  Official  Journal  of the European  Communities  pursuant  to  those 
directives  must  specify  the projects  in respect  of  which  Community  assistance  has 
been  applied  for  or  granted. 

2.  Applications  for  assistance  in  respect  of  the  major  projects  referred  to  in  Article 
16(2)  of  Regulation  (EEC)  No  4253/88  must  include  a  complete  list  of  contracts 
already awarded  and the relevant written reports when these  are required  under  the 
public  contracts  directives.  An updated  version  of  this  information  is to  be  sent  to 
the  Commission  with  the  application  for  payment  of  the  balance  for  contracts 
awarded  in  the  meantime. 

In  the  case  of  other  important  projects  (in  particular  those  included  in  operational 
programmes and forming  part of structures whose total  value is above the thresholds  for 
major  projects),  the  written  report  on  each  contract  awarded,  when  provided  for  in  the 
public contracts directives, shall be made available to the Monitoring Committee and sent 
to the  Commission  if  it  so requests. 

77 

(THE  COUNCIL) 

5.  ENVIRONMENT 

The  Court  considers  that  the  slow  and  incomplete  transposition  of  Community 
environmental  Directives  into  national  law  and their  poor  application  is  extremely 
harmful.  It emphasizes the need to make provision for environmental impact studies 
in the context of any evaluation  exercise prior to the completion of the programmes 
co-financed  by  the  ERDF. 

The  Council  reiterates  its  appeal  to  the  Commission  and  the  Member  States  to 
ensure  that  the  legislation  in  this  area,  which  is now  clearer  and  more  effective,  is 
applied  and  that  compliance  is  strictly  and  continuously  monitored  at  all  stages  of 
implementation  of  the  action  financed  by the  Structural  Funds. 

Commission  reply 

The  Member  States  bear  the  primary  responsibility  for  ensuring  compliance  with 
Community  environment  law  by  operations  cofinanced  by  the  Structural  Funds.  The 
Commission will intensify  its efforts  in the Monitoring Committees to develop and make 
use  of  project  eligibility  and  selection  criteria  which  reflect  sustainable  development. 
legislation,  the 
However,  as  the  Structural  Funds  are  implemented  by  national 
Commission  cannot  insist  on  the  use  of  specific  environmental  indicators  or  selection 
criteria. 

As regards the prevention  of infringements  of environmental  rules, the Commission  will 
seek to play a more active role, including, where appropriate, requiring the reimbursement 
of  Community  funds  under  Article  24 of  Regulation No  4253/88.  It  is essential  that  the 
Commission  is  swiftly  supplied  with  all  necessary  information  by  regional  or  national 
authorities  as well  as non-gôvernmental  organisations. 

In  addition,  active  participation  by  national  or  local  environmental  authorities  in  the 
Monitoring  Committees  in  managing  programmes  which  are  "sensitive"  from  an 
environmental  point of view also contributes to ensuring  compliance with  environmental 
legislation  in  Structural  Funds  interventions. 

(THE  COUNCIL) 

6.  OVERALL SUBSIDIES AS AN INSTRUMENT OF LOCAL DEVELOPMENT 

The  Council  considers  that  the  Commission  should  make  more  effort  to  clarify  the 
role and operational  procedures of the intermediary  bodies in the administration  of 
the  overall  subsidy  granted  by the  Structural  Funds.  The  Commission  should  also 
step up monitoring  and follow-up  action.  The use of this instrument  can be judged 
to be satisfactory  only if stringent financial  control of the operations  reveals  greater 
cost-effectiveness  and  less  risk  of irregularity  than  those  found  by  the  Court. 

Commission  reply 

The Commission considers that clear guidelines are supplied by Article  6(1) of Regulation 
No  4254/88  with regard  to defining  the role and functioning  of the intermediary  bodies. 

78 

It  emphasizes  that  it  is  for  the  Member  States,  in  agreement  with  the  Commission,  of 
course,  to  designate  the  intermediary  bodies.  These,  particularly  in  view  of  their 
subsidiary  financial  accountability  in  respect  of  the  management  of  Community  funds, 
then  bear  the  primary  responsibility  for  the  proper  application  of  the  guidelines,  which 
are,  moreover,  set  out  in the  guide  to  overall  subsidies  produced  by  the  Commission. 

With  regard  to  the  monitoring  and  follow-up  of  overall  subsidies,  these  operations  are 
carried out just  as strictly as for  other forms of intervention.  The Commission  notes that 
the  Court  of  Auditors  has  found  no  major  irregularity  in this  area. 

(THE  COUNCIL) 

7.  COMMUNITY  INITIATIVE  CONCERNING  INTER-REGIONAL  AND 

CROSS-BORDER  COOPERATION  (INTERREG) 

The Court notes that this initiative  has to a large extent been implemented  through 
operational  programmes  which  are  not  always  appropriate  to  its  cross-border 
nature.  The  difficulties  encountered  in  its  administration  prevent  any  conclusive 
the  impact  of  the  programmes  financed  or  verification  of  their 
evaluation  of 
complementarity  with  other  action. 

The  Commission  admits  the  administrative  complexity  and  the  problems  it  had  to 
face.  It  has  taken  the  necessary  measures  to  broaden  the  scope  and  to  clarify  with 
the Member States involved the concept of the cross-border nature of the operations. 

The  Council  invites  the  Commission  to  continue  its  efforts  to  increase  the 
effectiveness  of  this  initiative. 

Commission  reply 

During  the  negotiations  on  the  Interreg  IIA  operational  programmes  before  they  were 
approved  by the Commission, the Commission made special efforts,  notably by  referring 
to the sound practice already established in some border regions and stressing the political 
importance  of  a  genuine,  shared  cross-border  approach,  to  ensure  that  the  cross-border 
cooperation  measures  and  provisions  were  satisfactory.  Furthermore,  as  a  means  of 
supporting  the  implementation  of  this  particular  Community  initiative,  the  exchange  of 
experience between border regions and action to build on and disseminate sound practices, 
the Commission granted financial  support under Article  7 of the ERDF Regulation to the 
Association  of  European  Frontier  Regions,  to  help  it  carry  out  an  operation  involving 
technical assistance and promoting cross-border cooperation in relation to the Community 
Interreg  II  initiative  as a whole. 

(THE  COUNCIL) 

8.  FOLLOW-UP,  MONITORING  AND  EVALUATION 

The  Court,  while  recognizing  the  efforts  made  inter  alia  in  clarifying  the  texts 
concerning  this  area,  stresses  the  need  to  improve  and  strengthen  evaluation  at  all 
stages, in particular  at the preparatory  level  and when  the  implementation  reports 
are  drawn  up. 

79 

The  Council  stresses  the  fundamental  importance  of  ex ante  evaluation  with  a  view  to 
ensuring efficient  implementation  of the Structural Funds, and invites the Commission  to 
take full account of the Court's remarks in implementing its programme. 

Commission reply 

Within the Structural  Fund framework, the Commission has taken increasing steps to carry out 
evaluation, with three basic priorities: 

1. 

2. 

3. 

More effective  supervision of the evaluation process, to ensure and enhance  standards. 
Four  lists  of  technical  specifications  on  questions  relating  to  evaluation  have  been 
produced  for  this  purpose  and  widely  distributed  to the  various  bodies  involved,  both 
within government departments and outside (various experts and consultancies). 

Work  is under  way  on  drawing  up  a framework of  reference  for  ex post  and  ex ante 
evaluation,  standardized  indicators  and  more  effective  assessment  of  the  impact  on 
employment. 

To  promote  a  culture  of  evaluation.  The  Commission  organized  a  conference  on 
evaluating  structural  policies  in  November  1995,  mobilizing  some  250  national  and 
regional  partners  directly  or  indirectly  involved  in  evaluating  structural  policies.  A 
conference on the more technical aspects was held in December 1996. 

At the operational level, the Commission  has carried out a comprehensive evaluation of 
economic  and  social  cohesion,  of  which  the  structural  policies  form  the  centrepiece. 
This  led to the  publication  of the first Cohesion  Report  produced  by  the  Commission 
pursuant to Article  13 OB of the Treaty. 

With the national and regional authorities, the Commission  has set up the structure  for 
intermediate evaluations on the activities under way in respect of the  1994-99 period. 

Having  regard  to  the  decisions  to  be taken  on the  new  Objective 2  programming,  the 
Commission  has  on  its  own  initiative  carried  out  an  ex post  evaluation  of  operations 
cofinanced under Objective 2 for the  1989-93 period. 

The Commission emphasizes its attachment to the idea of evaluation  but draws attention to the 
constraints upon such operations,  given the limits on  the quality and quantity of data produced 
at the regional and national levels. 

80 

CHAPTER  5 

SOCIAL  SECTOR,  STIMULATION  OF  UNDERTAKINGS  (SMEs)  AND 
TRAINING 

(THE  COUNCIL) 

1.  MANAGEMENT  OF THE EUROPEAN  SOCIAL  FUND  (ESF) 

The  Council  recognizes  the  importance  of  the  problem  of  overcommitment  of  the 
Social  Fund,  which  is  tending  to  become  recurrent;  it  invites  the  Commission  to 
apply  the  financial  legislation  in  force  rigorously  in  order  to  ensure  that  budget 
implementation 
the  availability  of 
appropriations. 

is  consistent  with  programming  and 

With  regard  to Community  initiatives, the Council  considers  it  advisable  to  ensure 
an  operational  separation  between  the  management  and  control  roles  and  tasks 
within  the  Commission,  while  ensuring  full  and  effective  coordination  at  all  levels. 
Internal  measures  to  improve  the  management  of  the  Fund  should  be  taken  in  a 
consistent  manner  and  according  to  a precise  timetable. 

Commission  reply 

The Commission acknowledges that it is important to guarantee that the management  and 
control  functions  within  its  departments  remain  separate.  As  part  of  the  SEM  2000 
operation,  DG  V's  organization  chart  was  modified  on  17 July  1996  to  establish  a 
Resources  Directorate  combining  responsibility  for  allocating  and  managing  human  and 
financial  resources,  auditing,  monitoring  and  evaluation.  This  new  body  has  been  in 
operation since  1 September  1996.  The new auditing and control unit, separated off  from 
the  financial  unit,  now  carries  out  across-the-board  checks  on  all  DG  V  activities 
(including  non-ESF  activities). 

(THE  COUNCIL) 

2. 

Small  and  medium-sized  enterprises  (SMEs) 

The  Council  considers  it  necessary  to  apply  uniformly  a  definition  which  closely 
matches the reality of the situation, with the use of precise criteria.  Action on behalf 
of  SMEs  should  be  redirected  to  take  account  of  their  actual  requirements.  The 
access  of  these  enterprises  to  existing  instruments  should  be  improved  and  efforts 
made  to  arrive  at  a  better  assessment  of  the  means  used  and  results  attained  in 
respect  of  Community  action  in  this  area. 

Commission  reply 

The Commission shares the Council's view as to the importance of clearly defining  SMEs 
and therefore adopted a recommendation to the Member States (OJ  L  107, 30.4.96) which 
makes  all  Community  programmes  and  instruments  subject  to  the  same  set  of  rules  as 
regards  defining  SMEs,  small  enterprises  and  micro-enterprises.  The  recommendation 
lays down  precise criteria  in terms of  numbers of employees, capital  base and  company 
independence,  so  that  action  to  support  SMEs  can  be  focused  on  enterprises  which 

81 

because  of  their  size  are  genuinely  in  need  of  special  measures.  This  recommendation 
should make  it possible  to make programmes  and measures to aid this type of  enterprise 
more consistent and visible, thereby facilitating  access to such programmes and enhancing 
their  efficiency. 

The  Commission  can  only  share  the  Council's  view  as  to  the  usefulness  of  orienting 
action to help SMEs within the European Social Fund framework  more effectively,  while 
pointing  once  again  to the  decisive  part the  Member  States themselves  play  in  defining 
such  action. 

The Commission  is, however,  particularly  sensitive to the need to  improve  access to  the 
existing instruments  for  SMEs; to bring this about, as part of the recent reorganization  of 
the Directorate-General  responsible  for  the policy to help  SMEs, it set up a unit to  carry 
out that  task,  among  others, within  a new  directorate. 

The  recommendation  cited  above  lays  down  that  the  Member  States  and  Commission 
departments should take the requisite steps to adapt the statistics that they produce in line 
with  harmonized  size-classes  reflecting  the thresholds  chosen  for  defining  SMEs,  small 
enterprises  and  micro-enterprises.  All  the  Directorates-General  have  been  advised  that 
they  must  adopt  their  statistical  data  bases  so  that  all  instruments  and  programmes 
involving  SMEs can be more  effectively  coordinated  and progress evaluated  in the  next 
Commission  report  on  the  coordination  of  activities  to  help  SMEs  and  small  craft 
industries. 

(THE  COUNCIL) 

3. 

SOCIAL  DIALOGUE 

The  Council  feels  that  action  to  promote  social  dialogue  should  be  better  targeted 
and stresses the need for strict monitoring of the positive initiatives  benefiting  from 
Community  financing. 

Commission  reply 

To ensure better targeting of action, the Commission has included cost-effectiveness  and 
European  added  value  among  the  criteria  for  assessing  applications  submitted  to  it  for 
assistance  under  the  budgetary  headings  relating  to  social  dialogue.  With  regard  to 
monitoring, the Commission has carried out several on-the-spot inspections on recipients 
of  grants  and  proposes  to  carry  out  further  missions  of this type. 

82 

CHAPTER 6 

FINANCIAL  INSTRUMENTS  FOR  THE  ENVIRONMENT: 
"LIFE"AND ITS  PREDECESSORS 

(THE  COUNCIL) 

Commission  reply 

The Council notes that the first phase of the programme was characterized  by a lack 
of  rigour  in  the  selection  and  management  of  certain  projects;  the  financial 
implementation  was  delayed  to  some  extent  and  the  financial  audit  was  also 
inadequate. 
It  considers  that  the  Commission  should  apply  stricter  and  more 
selective criteria and increase the control and monitoring of the projects carried out. 

The  Council  acknowledges  the  Commission's  efforts  to  make  the  necessary 
improvements in the context of the new LIFE II programme; it also stresses the need 
for  appropriate  dissemination  of the  results  obtained  to the  authorities  involved  at 
every  administrative  level  in  the  Member  States. 

The  Commission  would  stress  that  the  selection  procedures  for  LIFE  projects  were 
thoroughly  overhauled  and  improved  as part  of the  implementation  of  LIFE  II. 

An  informative  booklet  is  widely  distributed  each  year;  this  gives  full  details  of  the 
selection  procedure  and  the  criteria  applied.  All  projects,  too,  are  considered  by  a 
Management  Board consisting  of representatives of the Member  States.  The  Committee 
adopts  an  opinion  before  the  Commission  embarks on its decision-making  procedure. 

The facilities  offered  by the new regulation mean that the technical  and  financial  follow-
up  of  projects  under  way  will  be  further  strengthened  in  the  case  of  the  LIFE  II 
programme. 

An  auditing  unit  which  has  been  fully  operational  since  the  beginning  of  the  1996 
financial  year  is  now  responsible  for  ex post  evaluation  of  projects.  A  preliminary 
evaluation  of  the  LIFE  I  programme  was  submitted  to  the  Council  and  Parliament  in 
November  1995 when  the  regulation  was  revised. 

As  soon  as the LIFE  I projects  are closed,  at the end of  1998, a final evaluation  will  be 
carried out and the results circulated to the institutions, the Member States and the parties 
concerned. 

83 

CHAPTER  8 

FINANCIAL  INSTRUMENTS  AND  BANKING  ACTIVITIES 

(THE  COUNCIL) 

1.  NCI  LOANS  AND  INTEREST  SUBSIDIES  IN  THE  EARTHQUAKE-

DAMAGED  REGIONS  OF  ITALY 

The Court of Auditors examined more closely two operations (concerning  industrial 
areas  and  schools)  and  considers  that  the  objectives  of  these  two  operations,  in 
particular job-creation,  have  not  been  completely  attained. 

The Council,  confining  itself  to the  aspects relating to the  budget  discharge,  invites 
the  Commission  to  improve  coordination  of its actions with  the  local  authorities  in 
the  future. 

Commission  reply 

As the  Commission's  preliminary  replies  made  clear,  the  number  of jobs  involved  was 
not  a  condition  of  the  loan  but  a target.  It  was not  fully  achieved,  for  a wide  range  of 
reasons over which the Commission  had no control, such as developments  in the  overall 
economic situation.  The Commission does, nevertheless, share the Council's concern that 
its  actions  should  be  better  coordinated  with the  local  authorities  in the  future. 

(THE  COUNCIL) 

2.  EUROPEAN  INVESTMENT  FUND 

The  Court  of  Auditors  considers  that  it  is its  duty  to  examine  the  EIF  accounts. 

The  Commission  is  taking  steps  to  arrive  at  a  result  satisfactory  to  all  the 
institutions  concerned. 

The  Council  takes  note  of  these  remarks  and  anticipates  a  swift  solution  to  the 
problem. 

Commission  reply 

The discussions  between the  institutions  and bodies concerned  regarding  the  procedures 
for the monitoring by the Court of Auditors of Community participation  in the  European 
Investment  Fund  have  not  yet  produced  a  final  result.  However,  the  Commission  is 
sparing  no  effort  to  ensure  that  agreement  is reached  as swiftly  as possible. 

84 

CHAPTER  9 

RESEARCH:  Human  capital  and  mobility  programme 

(THE  COUNCIL) 

The Court observes that there have been considerable  delays in implementing  some 
aspects of the programme.  Coordination  between the different  DGs responsible  for 
implementing  the various parts of the programme has not been sufficient  to  ensure 
support  for  the  projects  which,  overall,  are  the  most  deserving. 

The  Court  also  notes  that  a  large  number  of  grant  holders  have  benefited  from 
support from  the programme  in circumstances which do not guarantee  an  increase 
in  mobility.  The  participation  of  industrial  research  laboratories  has  proved 
inadequate;  in  addition,  it  has  not  been  possible  to  show  that  the  programme  has 
contributed  to  the  promotion  of  the  objective  of cohesion. 

The  Council  shares  the  concerns  expressed  by  the  Court. 

The Council  notes, however, that  the Commission  has learned  from  the  experience 
and  has  made  considerable  improvements.  It  stresses  the  need  to  ensure  full  and 
consistent  management  of  the  programme  by  the  Commission's  own  means  and 
optimum  coordination  between  the  departments  concerned. 

Commission  reply 

The  Commission  would  point  out  that  as  part  of  the  1994  annual  report  procedure  it 
replied  point  by  point  to  the  Court's  comments  to  which  the  Council  refers.  This 
notwithstanding,  it  has  indeed,  as  the  Council  stresses,  learned  from  the  experience  it 
acquired  in  implementing  the  special  human  capital  and  mobility  programme,  making 
considerable improvements in the field covered by the programme.  These  improvements 
were  carried  out  with  greater  effectiveness  in  the  adoption  and  implementation  of  the 
special programme in the field of the training and mobility of researchers which  followed 
on  from  the  human  capital  and  mobility  programme.  The  measures  adopted  in  the 
programme  in  question  included: 

stricter  rules  on applying  the  criterion  of  mobility.  However,  the  factors  designed 
to facilitate  the incorporation  of the applicant grant holder into its forthcoming  induction 
laboratory  were taken  into  account,  as with the human capital  and mobility  programme; 

regular  exchanges  of  information  with  other  Commission  departments  running 
training  activities  were  stepped  up  as  a  particular  priority,  especially  as  the  rules 
governing  grants  for  training  by  research  are  applied  uniformly  to  all  the  Commission 
DGs awarding  such  grants; 

industry  participation  in  implementing  the  programme  was  stepped  up  (with  more 
industrial  researchers  on  the  various  project  evaluation  panels,  the  industry  component 
being  taken  into  account  during  project  selection  and the  setting  up  of  a working  party 
to  study  industry  participation  in the programme); 

85 

the  cohesion  principle  was  more  effectively  applied,  in  that,  in  addition  to  a 
strengthening  of  the measures  laid  down  and  successfully  implemented  in  the  course  of 
the human  capital  and  mobility programme,  a working  party  was set up to  look  into  the 
involvement  of  the  less  favoured  regions  in  the  programme.  A  preliminary  report  and 
recommendations  by the working party  were  submitted  to the programme  committee  on 
23  February  1996. 

CHAPTER  10 

MEASURES  IN  FAVOUR  OF  THE  COUNTRIES  OF  CENTRAL  AND 
EASTERN  EUROPE, THE NEWLY  INDEPENDENT  STATES  (FORMER 
SOVIET  UNION)  AND  MONGOLIA 

The  Court  of  Auditors  focused  its  audit  on  the  budgetary  implementation  of  the 
PHARE  and  TACIS  programmes. 

The  Council  agrees  with  the  Court's  remarks  and  invites  the  Commission  to 
continue  its efforts  to improve the effectiveness  of the two programmes  in line with 
the  conclusions  of  the  European  Council  meetings,  although  it  is  aware  that  the 
Commission  must  carry  out  its  activities  in  a particularly  difficult  environment. 

In  particular,  it wishes  to  highlight  the  following  points: 

- 

- 

- 

- 

rigorous  application  of  the  tendering  procedure  for  the  award  of  contracts 
under  these  two  programmes; 

the  request first to carry out systematic  monitoring  and  evaluation  before  any 
decision  is  taken  on  renewing  each  programme; 

the need to  improve  coordination  between  those taking  part in  any  operation; 

certainty that specific  action will  follow  the studies carried out in particular in 
the  context  of TACIS. 

Lastly,  the  Council  expects  the Commission  to submit  proposals  for  improvements 
in the context  of the implementation  of the two programmes  and  of a report  on the 
management  of  the  staff  of the  external  delegations. 

Commission  reply 

(a)  TACIS 

1. The  Commission  strictly  complies  with  tendering  procedures  laid  down  in  the  Tacis 
and  financial  Regulations.  The rules  are  as follows  : 
-  Service  contracts  : 

• 

• 

direct  agreement  up  to  ECU  150 000, 

direct agreement after informal consultation for contracts between ECU  150 000 and 
ECU  300  000, 

86 

restricted  tender  above  300,000  ECU  (200,000  ECU  when  the  new  Tacis  Regulation 
comes into force). 

- Supply contracts : 

direct agreement after informal consultation up to ECU 50 000, 

open tender above ECU 50 000. 

2. The Commission is currently preparing to launch a thorough and exhaustive evaluation of the 
Tacis programme  and  its performance  to  date, as  a basis  for  future  decisions  to  continue  the 
programme. 

3. The coordination  between  all parties  involved  in the implementation  of the programme  has 
been  continuously  improved.  Nowadays,  Tacis  actively  coordinates  with  the  Member  States, 
EBRD, IFIs and other donors in various constituted and informal  fora. 

4. At the beginning  of the programme's life, there was a real need for  a proper  analysis  of the 
real  situation  in the Tacis countries. By now, Tacis can build on the knowledge  gained  in this 
initial period and focuses more strongly on its real subject  : the provision of technical assistance 
and the transfer of European know-how to the partner states. Only in specific  facilities, Tacis is 
still  systematically  called  upon  to  finance  (pre-investment)  studies,  e.g.  in  the  framework  of 
cooperation with  EBRD under the "Bangkok" facility.  In this particular  case, it shall  be  noted 
that in 1995, 74% of the Tacis funded  studies were actually linked to an investment project. 

b)EHAEE 

The Commission, with a view to limiting the number of contracts and the administrative burden 
on both partner  country  and the  Commission, has introduced  13 sectoral  framework  contracts 
which in principle will be used below 300,000 ECU. 

If  in  specific  cases  the  framework  contracts  cannot  be  used  the  option  exists  for  direct 
agreement, normally after informal consultation, for contracts up to 50,000 ECU. 

All  other  tenders  must  respect  Article  118 and  are therefore  being  announced  on the  Internet 
followed by official  pre-qualification on which basis the short list is established. 

87 

A  new  Monitoring  and  Evaluation  Manual  has  been  put  in  place  for  the  Phare 
Programme.  It specifically  provides  for an annual  review of each  sector  programme,  on 
the basis of which  decisions on further  funding  for  the relevant  sector will  be taken.  The 
Phare  Management  Committee  will  take  these  reviews  into  account  before  giving  its 
opinion  on  the  financing  proposals  presented  by  the  Commission. 

c) 

Staff  management  in the  external  delegations 

The  report  requested  will  be  found  below,  in  the  section  entitled  "Comments  on  the 
operating  appropriations  for  institutions  and  bodies  of  the  European  Communities". 

CHAPTER  11 

COOPERATION  WITH  DEVELOPING  COUNTRIES 
AND  THIRD  COUNTRIES  (EXCEPT  FOR  THE 
COUNTRIES  OF  CENTRAL  AND  EASTERN  EUROPE) 

(THE  COUNCIL) 

The  Court  devotes  most  of  the  Chapter  to  the  results  of  its  check  on  the  legality, 
regularity  and  sound  financial  management  of  the  expenditure  relating  to  the 
structural  adjustment  support  programmes  on  behalf  of  the  Mediterranean 
countries. 

The  Council: 

- 

- 

requests  that  the  Commission  should  accept  the  Court  of  Auditors' 
recommendation  inviting  it  to  carry  out  a  country-by-country  budgetary 
analysis  to  ensure  that  the budgetary  strategy  followed  is compatible  with  the 
adjustment  programme  under way; 

invites  the  Commission  to consider  better allocation  of  its  human  resources  in 
order  to  improve  the  conditions  for  implementation  and  organization  of  the 
monitoring  of  these  support  programmes. 

Commission  reply 

The reallocation of certain responsibilities in line with SEM 2000 allows a rationalization 
of responsibilities within the operational directorates. In particular, the release of technical 
units  (including  the  newly  created  economic  cooperation  units  which  formerly  covered 
a part of their task) from  responsibility for the administrative work of contract award  and 
negotiation, will allow those units to take the lead role for projects within their respective 
responsibilities  throughout  the project  cycle (in effect,  the  "task  management"  approach 
advocated  in  the  recent  internal  audit).  This,  in  turn,  will  allow  geographical  units  to 
discharge  more  effectively  their  policy  and  coordination  role  in  respect  of  our  partner 
countries.  It  should  be noted  that  a new post  for  an economist  in the  Mashreq  unit  and 
a post  for  an economist  for  the Maghreb have been created.  It has also been  decided  to 
involve  DG  II  in considering  these questions,  and to  step up  coordination  with the  IMF 
and the  World  Bank. 

88 

For  1996, the  budgetary  authority,  at  the  Commission's  request,  decided  to  allocate  3% 
of  the  appropriations  available  for  the  Mediterranean  countries  to  the  preparation, 
monitoring  and evaluation  of the Community-financed  projects  and programmes  in those 
countries. 

CHAPTER  13 

COMMISSION  (STAFF  AND ADMINISTRATIVE  EXPENDITURE  OF  THE 
EUROPEAN  COMMISSION  DELEGATIONS) 
FINANCIAL  AND  ADMINISTRATIVE MANAGEMENT  OF  ASSETS 
(EXCLUDING  RESEARCH) 

(THE  COUNCIL) 

The Court of Auditors  notes differences  in the application  of Staff  Regulations  and 
local  provisions  in  the  delegations,  in  particular with  regard  to  the  employment  of 
local staff and the special arrangements applying to the administrative and technical 
staff.  With  regard  to  decentralized  local  management,  certain  weaknesses  or 
shortcomings  were  noted  by the  Court,  in  particular in view  of  the  new  provisions 
of  the  Financial  Regulation  on  decentralization.  Adjustment  of  the  structure  of 
permanent  inventories  of  delegations'  movable  property  also  appears  to  the  Court 
to  be  essential. 

The  Council  notes  that  the  Commission  is  acting  on the  Court's  recommendations 
and  invites  the  Commission  to  continue  its  efforts  in that  direction. 

It stresses the importance it attaches to the strict application of the rules of the  Staff 
Regulations  of  officials  and  the  conditions  of  employment  of  local  staff  in  the 
Commission's  delegations.  It  requests  a rationalization  of  staff  management. 

Commission  reply 

a)  Management  of  the  external  delegations 

Rules  governing  working  conditions  of  locally  recruited  staff 

At the beginning  of  August  1996 there  were  100 delegations  with  their  own  local  rules. 
The  only  ones  missing  from  the  list  were  certain  delegations  in  Central  Europe  or  the 
former  Soviet  Union  (Albania,  the Czech  Republic, Georgia etc.)  and those where  there 
were  special  problems  as  regards  either  operations  (Algeria)  or  legal  status  (China, 
Canada,  Japan  etc.).  Similarly,  the  local  rules  for  certain  Offices  where  a  very  small 
number  of  officials  work  (such  as Belize  and  Tonga)  are yet  to  be  finalized. 

Special  arrangements  for  administrative  and technical  staff  in  certain  delegations 

The  Commission  is  still  giving  consideration  to  the  question  of  introducing  special 
provisions  covering  local  administrative  and  technical  staff  of  Community  origin,  in 
accordance with the guidelines  set out by the Court of Auditors.  In so doing it will take 
account of the comment made by the Council on  11 March  1996 when the discharge  was 
granted,  calling  for  a rationalization  of personnel  management. 

89 

Determination  of  step on  initial  classification  in  grade and  reclassification  of  local 
staff 

The procedure for checking classification as implemented following the Court's comments 
(see  point  13.16  of  the  Commission's  reply)  is now  operational.  The  object  of  it  is  to 
oblige  local  administrators  to  be  more  painstaking  when  giving  consideration  to  the 
awarding  of  steps. 

Ongoing  inventories  of  furniture  and  fittings 

• 

• 

• 

All  the  delegations  have  now  sent  their  inventories  in  to  headquarters  in 
computerized  form.  The figures are being  checked  before  being  incorporated  into 
the  balance  sheet. 

There  is now  software  which  enables  items  worth  less than  the  statutory  threshold 
of  ECU  350 to  be  identified. 

Regular  reminders  of  the  writing-off  procedures  are  issued  and  checks  for 
compliance  are  made  on the  spot when  inspection  teams visit  the  delegations. 

The  Commission  would  confirm,  however,  that  it  cannot  act  on  the  Court's  remark 
concerning  the  whereabouts  of  items  in  the  delegations.  To  avoid  the  need  to  keep 
updating  the  inventories,  the  lists  sent  to  headquarters  show  what  is  held  in  each 
delegation  as a whole,  not  in  each room  or premises. 

Service  vehicles 

• 

• 

• 

The  new  rules  on  the  use  of  service  vehicles  and  private  cars  on  Commission 
business  entered  into  force  on  15 July  1996. 

Tougher  checks  are  being  made  on  overtime  worked  by  drivers.  Staff  are  being 
encouraged  to  use  alternative  methods  of transport,  such as  shuttle  services  to  and 
from  airports. 

Management  of  annual  leave 

Action taken to reduce the number  of leave days carried over from  year to year has 
produced  encouraging  results: 

carryovers  from  1993 to  1994: 240 officials  involved 

carryovers  from  1994 to  1995: 275 

carryovers  from  1995 to  1996: 204 

The  rising  curve  has  now  been  stopped.  Thanks  to  this  step,  plus  a  more  binding 
timetable  for  forward  planning  and  more  thorough  analysis  of  the  reasons  given  for 
carrying  leave days over, the Commission now has greater administrative  resources with 
which  to take  a firmer  grip  of  leave  management. 

90 

There  have,  on  the  other  hand,  been  delays  in  setting  up  the  computerized  leave 
monitoring  programme.  The  system  is being  reorganized. 

Accommodation 

Most of the agreements with officials  occupying accommodation  leased  or owned  by the 
Commission  have  now  been  signed.  The  remaining  cases  are  to  do  with  local 
peculiarities. 

(b)  Assets  management  (excluding  research) 

At the  beginning  of  1995  the  Commission  embarked  on  a programme  to  overhaul  the 
management  of  its assets completely,  involving  drawing up a full  inventory  of  its  assets 
and  laying  down  new  rules  and  management  procedures  which  should  make  for  more 
effective  asset  management  in  future. 

1.  The  inventory  of  assets  was  completed  in  June  1996  and  covered  all  the 
Commission's  movable  assets  at headquarters  offices  in Brussels  and  Luxembourg. 

The exercise covered 68 buildings in Brussels and  13 in Luxembourg, where 314  328 and 
81 482 items respectively were inventoried.  A new identification  technique involving the 
use  of  barcodes  and  optical  readers  was  introduced  for  the  first  time,  to  create  a 
computerized  inventory  which  will  be faster  and  more  efficient  to  use  in the  future. 

The  rate  of  statistical  error  recorded  during  this  exercise  was  lower  than  17° °, which  is 
regarded  as  acceptable. 

The  SYSBIEN  inventory  database  is  now  being  updated  using  the  results  of  the 
the  data  should  be  completed  by 
inventorying  exercise. 
31 November  1996. 

Reconciliation  of 

In  addition  to  the  reconciliation,  a  series  of  more  restricted  inspections  involving 
particular  sectors  and  sites  will  be  carried  out,  at,  for  example: 

the  Transport  Service; 

the  Offices  in the  Union; 

the  Commission's  offices  in  Strasbourg. 

• 

• 

Some  100 000 dossiers are to be processed by 31 December  1996; the inventory  situation 
will then be such that the control authority  can be given true and reliable  data  regarding 
the Commission's  asset  holdings. 

2.  Managing  the  inventory  is the  second  stage  of  the  operation. 

To ensure  that the  data  from  the inventorying  exercise remain  reliable, the  Commission 
decided: 

• 

to  adopt  a new  Regulation  on inventories  for  its own purposes; 

91 

to  amend  the  principles  and  procedures  for  managing  the  inventory. 

The  new  Regulation  on  inventories  was  adopted  by  the  Commission  on  21  December 
1995.  The procedures for applying this regulation are being worked out, and should make 
it possible  for  the  inventorying  of  assets to be  decentralized  from  1 January  1997. 

A  system  of  regular  inventories  will be  set up to check that the  data held  in  inventories 
are reliable, in accordance with the stipulation in the Financial Regulation  and  elsewhere 
that  inventories  should  be conducted  every  three years. 

In practice the burden  of keeping inventories will be shared by carrying  out one or  more 
each  month. 

92 

RELEVANT  SPECIAL  REPORTS 

Special Report No 3/94 concerning the implementation  of the intervention  measures 
provided  for  by  the  CMO  in  the  beef  and veal  sector; 

(THE  COUNCIL) 

The Council  indicated  in particular  that  it wished  the Commission  to  carry  out  an 
evaluation  of the intervention  arrangements  of the CMO once the  reform  had  been 
fully  applied. 

It also invited the Commission  to study the measures which still needed  to be  taken 
in  the  area  of  management  of  stocks  and  to  submit  any  appropriate  proposals. 

Commission  reply 

No  public  intervention  took  place  in  the  beef  and  veal  sector  from  December  1993  to 
March  1996,  during  which  period  the  opportunity  was  taken  to  improve  the  operating 
rules  for  the  arrangement,  with  regard  in  particular  to  the  comments  by  the  Court  of 
Auditors  in  its  special  report  No  3/94. 

Since that time, public buying-in has had to resume, owing to the critical  situation in the 
beef and veal sector following  the release of reports about the risk of bovine  spongiform 
encephalitis being transmitted  to humans.  It is still too soon to evaluate the operation  of 
the  intervention  arrangement  (buying  and  selling  procedures,  stock  management)  since 
buying-in resumed  in April  1996.  At that time unsold  stocks stood at some 8000 tonnes 
(carcass  equivalent  weight),  held  mainly  in the United  Kingdom  (see  stock  situation  in 
the  attached  table). 

93 

BEEF AND VEAL 
NOTIFICATION  UNDER ARTICLE 27 
OF REGULATION  (EEC) No 859/89 
INTERVENTION  BUYING-IN  AND SALES 
SITUATION  AT END MARCH  1996 

ANNEX 

STOCKS  UNSOLD 
AT  31.12.1995 
BONED 
MEAT 

TOTAL 

MEAT 
ON  THE 
BONE 

BUYING-IN 
FROM  1.1.1996 

TOTAL 

I  N  C  L  . 
MEAT  FOR 
BONING 

* 

BELGIUM 
DENMARK 
GERMANY 
GREECE 
SPAIN 
FRANCE 
IRELAND 
ITALY 
LUXEMBOURG 
NETHERLANDS 
UNITED KINGDOM 
TOTAL 
C A R C A SS 
EQUIVALENT 

-
3 
-
-
-
-
-
-
-
-
-
3 
3 

-
68 
-
-
-
-
36 
345 
-
-
5.072 
5.521 
8.119 

-
71 
-

-
-
-
36 
345 
-
-
5.072 
5.524 
8.122 

-

-
-

-
-
-
-
-
-
-
-
-

-

-
-

-
-
-
-
-
-
-
-
-

* Revised 

94 

-
-
-
-
-
-
-

-
-

154 

SALES 
FROM  1.1.1996 
BONED 
MEAT 

N 

MEAT 
0 
T HE 
BONE 
-

STOCKS  UNSOLD 
AT  31.03.1996 
BONED 
MEAT 

N 

TOTAL 

MEAT 
0 
T HE 
BONE 
-
3 
-
-
-
-
-
-
-
-
-
3 
3 

-
58 
-
-
-
6 
-
345 
-
-
5.007 
5.416 
7.965 

-
61 
-
-
-
6 
-
345 
-
-
5.007 
5.419 
,7.968 

-
10 
-
-
-
-
30 
-
-
-
65 
105 
154 

Special  Report  No  4/94  concerning  the  urban  environment 

(THE  COUNCIL) 

The  Court  of  Auditors  observes  in  particular  that  action  in  this  area  must  be 
integrated  into the longer-term  urban programming plan, that projects suffer  from 
that 
being 
inter-departmental  consultation  should  be  improved  in  order  to  avoid  too  much 
dissipation  of  effort. 

imprecise  as  regards  the  operations 

to  be  carried  out  and 

It  recommends  that  action  should  be  effectively  coordinated,  at  both  Community 
and local level, and that the Commission should provide precise, systematic  support 
for  each  action. 

The  Council  asks the  Commission  to take  action  on the  Court's  comments. 

Commission  reply 

The  Commission  recognizes  the  growing  importance  of  the  urban  dimension  in  several 
Community  programmes  and initiatives.  An Interdepartmental  Working  Party  on  Urban 
Affairs  was set up at the beginning  of  1995 and meets regularly to enhance  coordination 
of  Community  action. 

With regard to coordination at local level, there is, for example, the clause in the call  for 
new urban pilot project  proposals published  in OJ C 319/95, 30.11.95, p.  31: "Proposals 
may relate to any activity which is the responsibility  of the participating  local  authorities 
provided  the  actions  proposed  are  necessary  components  of  an  integrated  innovative 
socioeconomic  strategy  agreed  by  the  local  partnership  and  aimed  at  tackling  specific 
identified  urban  problems,  or  anticipate  future  ones, in a  sustainable  way." 

Special Report No  3/95 concerning the implementation of the intervention  measures 
provided  for  by  the  CMO  in  the  sheepmeat  and  goatmeat  sector 

(THE  COUNCIL) 

The Court of Auditors makes several recommendations, in particular: improving the 
statistics  in  respect  of  quality  and  transmission  time,  a  more  reliable  system  for 
recording prices, strengthening controls on premiums, strengthening the supervision 
of  private  storage  by  the  Member  States,  examination  by  the  Commission  of 
alternatives  to  the  current  mechanism,  in  particular with  a view  to  focusing  more 
on support  for  producers  in  less-favoured  areas,  and  at  the  same  time  a review  of 
the  concept  of  less-favoured  areas  as  regards  its  implications  for  the  granting  of 
premiums,  and  examination  by the Commission  of the possibility  of abolishing  the 
system  of  fattening  to produce  heavy  carcasses. 

The  relevant  Council  bodies have examined the Court's  report;  the Council  invites 
the  Commission  to  take  account  of the  conclusions  in the  Working  Party's  report. 

95 

Commission  reply 

The  Commission  takes  note  of  the  recommendations  to  the  Member  States  with  regard 
to improving  the  statistics  in  respect  of  quality  and  transmission  time  and  strengthening 
the  supervision  of  private  storage. 

The Commission  does not,  on the other hand, plan to make any proposal  to the  Council 
for  abolition  of  the  system  of  fattening  to  produce  heavy  carcasses,  which  was  the 
outcome of a compromise  achieved with difficulty  in the Council; the  Commission  will, 
however,  do  its  best  to  improve  the  management  of  the  system  by  the  start  of  the  next 
marketing  year  by means  of  adjustments  designed  to make  controls more  effective. 

With  regard  to  the  recommendation  that  the  premium  system  be  focused  more  on 
providing  support  for  producers  in  less-favoured  areas,  the  Commission  sides  with  the 
majority  of  the  Member  States, who  do not  support  such  recommendations. 

Special  Report  No  4/95  concerning  the  management  of  EAGGF  Guidance  Section 
expenditure  in  Portugal  from  1988  to  1993 

(THE  COUNCIL) 

The Council  takes  note  of  the  intention  of the  competent  Portuguese  authorities  to 
improve,  in  collaboration  with  the  Commission,  internal  procedures  for  the 
management,  control  and  monitoring  of programmes  financed  in  this  area. 

Commission  reply 

1. 

2. 

3. 

This report was produced  after  the Court conducted  a special  audit between  June 
and November  1994 in  response  to  a request  made by  Parliament's  President  in 
February  1994.  It  highlighted  shortcomings  in  the  system  of  management  and 
control  and  specific  situations which the Court  considered  irregular. 

In  exercising  its  right  of  reply,  the  Commission  has  not  accepted  some  of  the 
Court's  claims.  In  other  instances,  however,  the  Commission  has  promised  to 
identify  the  cases,  clear  them  up  with  the  Member  State  and,  if  necessary,  take 
corrective  measures. 

To follow up this undertaking, there has been an exchange of correspondence with 
the  Portuguese  authorities  and  a  meeting  in  Lisbon  attended  by  the  agencies 
responsible  for  the management  of EAGGF  expenditure. 

4. 

The  final  conclusions  reached  were  as  follows: 

As regards the distribution of management and control duties between the 
4.1 
various agencies, the changes made as a result of the ministerial orders  Despacho 
32/96 and Despacho  33/96 of 3 April  1996 and Portaria  130/96 of 24 April  1996 
have  remedied  the situation  since they  clearly  define  each agency's  powers.  The 
Commission  will  closely  monitor  the  implementation  and  effectiveness  of  these 
provisions. 

96 

The  Court  considered  that,  when  selecting  projects  for  a  number  of 
4.2 
programmes,  insufficient  attention  was paid  to the  actual  capacity  for  marketing 
the  products  in  question.  Although  Portugal  has  much  the  same  level  of 
requirements as the other Member States, this has been pushed even further  by the 
introduction of stricter parameters and studies of markets and outlets for  the more 
important  projects  involving  the  processing  and  marketing  of  agricultural  and 
forestry  products. 

Some  of  the  difficulties  noted  by  the  Court  resulted  from  unforeseeable 
developments  on the Portuguese market  following  the country's  accession to  the 
European Union and its accelerated exposure to the single market. This aspect will 
have  to  be  given  careful  attention  at the  time  of  any  future  enlargements  of  the 
Union. 

As  regards  compliance  with  the  selection  criteria  relating  to  production 
4.3 
capacity  in  accordance  with  Regulation  (EEC)  No  866/90,  the  Portuguese 
authorities have shown that, for  each slaughterhouse co-financed,  they  eliminated 
an identical amount of production  capacity. At all events, the projects  referred  to 
by the Court were approved  under  Regulation (EEC) No  355/77 before  the  entry 
into force  of  Regulation (EEC) No 866/90 and the selection criteria laid down in 
Commission Decision 90/342/EEC of 7 June  1990. There was thus no irregularity. 

4.4 
Point  3.2.7  of  the  report  deals  with  the  excessive  delays  in  some  of  the 
intermediary agency's payments to beneficiaries. This was indeed true of the three 
cases  mentioned  by  the  Court,  but  they  were  exceptions.  As  regards  the 
cooperative  in question,  it is essential to consider the time needed to formulate  a 
proper  application  and  check  whether  the  request  for  an  advance  was  legally 
sound.  The  delay  in the  second  case was due to the budgetary  difficulties  of  the 
Autonomous  Region  of  Madeira.  In the  case  of  the  vocational  training  centre  it 
was not the late payments that prompted  application of the price review  formula. 
The delay was caused by the technical hold-ups in the construction work imposed 
by the  city  hall. 

4.5 

Point  3.3.3  of the  report 

The  Court  claims  that,  under  PEDAP,  the  Member  State  financed  85%  of  the 
expenditure  by public health protection groups in the sixth year.  Since, from  the 
sixth year, beneficiaries  should bear 20% of the eligible expenditure  themselves, 
the criticism  appears valid. However,  the case in question,  which  is the  result  of 
the adjustment  of the reference year for a number of projects  to bring it into  line 
with  the  calendar  year,  complies  with  the  rules  since  this  additional  public 
expenditure was deducted from the final applications for  repayment. In fact,  they 
were  financed  in full  by the national  budget. 

4.6 

Point  3.3.4  of the  report 

Still in connection with the health protection groups, the Court concluded that, in 
view  of  the  confusion  surrounding  the  VAT  arrangements  applying  to  these 
beneficiaries,  in  several  cases  recoverable  VAT  was  erroneously  regarded  as 
eligible expenditure. After the exhaustive check requested by the Commission, the 

97 

Portuguese  authorities  confirmed  that  all  cases  of  eligible  VAT  concerned 
beneficiaries  who were unable to recover it. 

4.7 

Points  8.2.2  and 8.2.3  of the report 

As regards the special allowances for young farmers, the departments responsible 
for  certifying  that  agricultural  activity  was the  main  source  of  revenue  for  the 
applicants did not have reliable information. The same was true for the obligation 
to have  sufficient  training or experience. 

This situation may indeed be criticized, but the Portuguese authorities have shown 
great  determination  to  improve  the  system by  introducing  stricter requirements, 
adopting  a new  legal  framework  and, in particular,  stepping up ex post  controls, 
as has already  occurred with the second CSF. 

4.8 

Point  8.2.4  of the report 

The Court found that Portugal had used national funds to finance  more than two 
projects  per  beneficiary  in  each  six-year  period.  Indeed,  under  national  law, 
beneficiaries  may  present  more  than  two  projects  during  the  reference  period 
provided another undertaking  is involved. 

As regards the surface area declared for the purpose of compensatory allowances, 
the définitive  implementation  of the  system of  integrated  control  under  Council 
Regulation  (EEC) No  3887/92 will  improve controls. 

4.9 

Point  8.2.6  of the report 

As  four  beneficiaries  had  failed  to  comply  with  the  conditions  required  for 
Community aid, it was considered that the aid paid should be recovered. For one 
of  these  projects,  the  Member  State  did  not  recover  the  Community  aid  but 
converted it into national aid instead as it still met the conditions for this aid. The 
Portuguese  authorities will have to provide further details before the other cases 
can be closed. 

4.10  Points 9.2.8,  9.2.9  and 9.2.10  of the report 

The Court found that aid had been granted to some projects outside the areas laid 
down  in  the  operational  programme  for  farmers  who  had  suffered  from  bad 
weather. Apart from the aspect of whether the expenditure itself was eligible, the 
Member  State  submitted  for  approval  a  programme  which  did  not  include  the 
northern region. After the programme was approved, a ministerial order extended 
the  area  of  intervention  to  specific  places  in  other  areas.  The  Commission 
considers that expenditure on these projects is not eligible and it will be deducted 
from the final  application for the balance from the programme. 

4.11  Point 9.2.11  of the report 

Two  major  projects  accounting  for  some  60% of  aids  under  the  "Mira Rural 
Development" operational programme went bankrupt. The intermediary agency has 

98 

started legal action for the recovery of the aid paid and will keep the Commission 
informed  of proceedings. 

4.12  Points  9.2.12 to 9.2.16  of the report 

In  the  case  of  the  operational  programme  involving  "measures  to  promote 
silviculture",  the  Forestry  Institute,  as  a  beneficiary  of  a  public  afforestation 
project, was confronted by attempted fraud on the part of a private operator with 
the complicity of one of its officials.  By using false declarations, this operator was 
about to pocket all of the aid without completing the work. The Forestry Institute 
itself  will  resolve  the  matter  and will  repay to  the  intermediary  agency  the  aid 
which it should not have received.  The Commission will ensure that the amount 
recovered is taken into consideration in the balance of EAGGF financing  for this 
programme.  The  intermediary  agency  and the  subsidiary  control  agencies  have 
stepped up controls in this sector. 

99 

ACTION TO BE TAKEN ON THE COMMENTS  ACCOMPANYING 
THE COUNCIL  RECOMMENDATION 
OF  11 MARCH  1996 
ON THE DISCHARGE TO BE GIVEN TO THE 
EUROPEAN FOUNDATION  FOR THE IMPROVEMENT 
OF LIVING AND  WORKING CONDITIONS 
IN RESPECT OF THE  1994 FINANCIAL  YEAR 

100 

(THE  COUNCIL) 

As in previous reports, the Court  of Auditors observes that the Foundation must press 
on with the introduction of procedures which are consistent with the Financial Regulation, 
particularly  with  respect  to  the  almost  systematic  use  of  imprest  accounts,  prior  to 
approval  by  a  financial  controller,  transfers  between  budget  titles,  the  segregation  of 
duties  between  the  accounting  officer  and  the  authorizing  officer,  the  growth  in  the 
amounts of appropriations being carried over, particularly  in title 3, which infringes the 
principle  of  the  annual  nature  of  the  budget  and  the under-utilization  of  the  amounts 
carried over in the subsequent financial year. 

The Council has taken note of the Court of Auditors' comments and of the Foundation's 
reply and notes that the Foundation has already taken a number of the measures the Court 
wished it to take.  The Council recommends that in 1996 the Foundation also follow 
up the Court's other observations.  It also notes that the transfers to which the Council 
alludes are not in breach of the regulations in force. 

Reply from the Foundation 

Separation of functions  of the Accounting Officer  and the Authorizing  Officer. 

The separation of the duties of the Accounting Officer  and the Authorizing Officer  will 
be possible  following  the delivery  of  a new computerized  accounting  system  which  is 
scheduled to be in operation in 1997. 

Carryovers 

It should be noted that carryovers are effected  in full accordance with Article 6.1 .(d) of 
the Foundation's financial  regulation. 

Imprest Account Payments 

See Foundation's reply to Parliament's comments. 

The Legal Basis for  Transfers 

See Foundation's reply to Parliament's comments. 

101 

ACTION  TO BE TAKEN ON THE COMMENTS  ACCOMPANYING 
THE COUNCIL  RECOMMENDATION 
OF  11 MARCH  1996 
ON THE DISCHARGE TO BE GIVEN TO THE 
EUROPEAN  CENTRE FOR THE DEVELOPMENT 
OF VOCATIONAL  TRAINING 
IN RESPECT OF THE  1994 FINANCIAL  YEAR 

102 

(THE  COUNCIL) 

The Centre  stresses that, as a result of more rigorous management,  it has been  able 
to  reduce  the  proportion  of  available  appropriations  cancelled  at  the  end  of  the 
financial year or carried over to the next year; the rate of utilization during the year 
of  the  final  appropriations  for  1994 has  improved  as a  result. 

The  Council  draws  attention  to  the  Commission's  undertakings  in  this  connection 
and asks it and the Centre to make every effort  to ensure that, at an early date, the 
Centre is fully  operational and able to realize its full  potential in fulfilling  the  tasks 
assigned  to  it, while  demonstrating  effective  budgetary  and financial  management. 
It takes the view that the transfers between titles to which the Court alludes are not 
in breach  of  the  financial  rules  applicable  to  the  Centre. 

Reply  from  the  Centre 

Mrs Cresson,  Member  of the  Commission,  took part  in a seminar  with the  Management 
Board  in March  1996 at which she emphasized the lines of action which CEDEFOP will 
have to  follow. 

Decisions have been taken at each meeting  of the Management  Board  since March  1996 
to make the  Centre  more  cost-effective;  cost-effectiveness  has  already  risen,  despite  the 
reduced  staffing  level  in Thessaloniki.  Of these  decisions, those  relating  to  revitalizing 
the  Centre,  setting  medium-term  priorities  and  raising  the  standard  of  services  should 
shortly  show results. 

103 

ISSN 0254-1475 

COM(97) 48  final 

DOCUMENTS 

EN 

01 

Catalogue number  : CB-CO-97-046-EN-C 

ISBN 92-78-15631-0 

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