Special Report No 13/2000 on the expenditure of the European Parliament's political groups, together with the European Parliament's replies
Date: 2000-05-25
Institutions: European Court of Auditors
Subjects: European Parliament, administrative expenditure, political group

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EN

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I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 13/2000

on the expenditure of the European Parliament(cid:146)s political groups, together with the European
Parliament(cid:146)s replies

(submitted pursuant to Article 248(4)(b) EC)

(2000/C 181/01)

CONTENTS

Paragraph
reference

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The regulatory and budgetary frameworks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Court(cid:146)s previous audits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The field and scope of the audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS ON THE REGULATORY AND BUDGETARY FRAMEWORKS. . . . . . . . . . . . .

Clarity of the rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Existence of separate rules and budget headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Checking compliance with the rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Volume of and rules for the distribution and carrying-over of appropriations . . . . . . . .

The groups(cid:146) legal status and area of activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS ON THE INTERNAL CONTROL SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS ON THE EXTERNAL AUDIT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS ON THE KEEPING OF THE ACCOUNTS AND THE FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS ON THE LEGALITY/REGULARITY OF THE OPERATIONS. . . . . . . . . . . . . . .

Supporting documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The link between the groups(cid:146) activities and the role and modus operandi of the
Parliament, its political groups and their members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Funds and resources placed at the disposal of political groupings . . . . . . . . . . . . . . . . . .

Activities organised in cooperation with third parties . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial participation in election campaign activities . . . . . . . . . . . . . . . . . . . . . . . . . . .

Activities normally covered by other allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-7

1-5

6

7

8-22

8-11

12-14

15-17

18-19

20-22

23-26

27-31

32-40

41-58

42-43

44-45

46-50

51

52

53

3

3

4

4

5

5

5

5

6

6

6

7

7

8

8

9

9

9

9

9

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Expenditure of a private nature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Staff management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS ON THE FINANCIAL MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Paragraph
reference

54

55-58

59-61

62-69

The European Parliament(cid:146)s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

9

10

10

10

13

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INTRODUCTION

The regulatory and budgetary frameworks

1. The members of the European Parliament may, pursuant to
Articles 29 and 30 of the Institution(cid:146)s rules of procedure (1), either
organise themselves into political groups (referred to hereafter as
(cid:145)groups(cid:146)) or remain non-attached. The Parliament grants to non-
attached groups and members an annual allocation of appropria-
tions to cover their secretarial expenses and administrative oper-
ating expenditure (referred to hereafter as (cid:145)operating expenditure(cid:146)),
their political activities and their information activities. Until
1998, the appropriations for operating expenditure and those for
political activities came under two distinct budget headings,
namely headings 3 7 0 5 and 3 7 0 6 of the Parliament(cid:146)s budget.
Since 1999, these two headings have been brought under a single
heading (3 7 0 7). Appropriations for information activities come
under heading 3 7 0 8. Table 1 shows the figures for appropria-
tions and payments from 1994 to 1998. In 1998, these appro-
priations totalled approximately ECU 34 million.

2. The transfer and use of appropriations are governed by rules
adopted by the Parliament(cid:146)s Bureau, pursuant to Article 22(2) of
the Parliament(cid:146)s rules of procedure (2). These rules have been
amended several times, in particular in 1992, as regards informa-
tion activities, so as to take account of a ruling by the Court of
Justice prohibiting the financing by the Parliament of any kind of
election campaign (3). It was last amended in December 1998 not
only because appropriations for administrative expenditure and
political activities were brought under a single budget heading but
also with a view to improving the management of all of these
appropriations.

3. The distribution of appropriations between non-attached
groups and members is decided each year following a proposal
from the Conference of Presidents (4) and the Bureau (5). The dis-
tribution formula for operating expenditure and for political
activities takes into account the number of members and the lan-
guages used by each group (6). Appropriations for information
activities are divided up proportionately between all of the mem-
bers. Table 2 shows the distribution of appropriations between the
various groups during the financial year 1998.

Expenditure by the European Parliament(cid:146)s political groups - payments made

Table 1

1

Budget heading

3 7 0 5
Secretarial expenses and administrative and
operating expenditure

3 7 0 6
Political activities

3 7 0 8
Information activities

Total
3 7 0 5, 3 7 0 6 et 3 7 0 8

2

Year

1994
1995
1996
1997
1998

1994
1995
1996
1997
1998

1994
1995
1996
1997
1998

1994
1995
1996
1997
1998

Source: Revenue and expenditure accounts, Vol. III, Section 1, Parliament.

(Mio EUR)

3

Payments by the Parliament during the financial year

10,3
11,9
12,3
12,5
12,8
59,8

5,5
6,6
6,8
6,9
7,1
32,9

5,0
14,3
14,3
14,3
14,3
62,4

20,8
32,9
33,4
33,8
34,2
155,1

Sub-total

Sub-total

Sub-total

Grand total

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Expenditure by the European Parliament(cid:146)s political groups (cid:151) Distribution of appropriations in 1998

Table 2

1

2

3 7 0 5

ECU

3

%

4

3 7 0 6

ECU

5

%

6

3 7 0 8

ECU

7

%

8

ECU

Total

9

%

PSE - Group of the Party of European Social-
ists

EPP - European People(cid:146)s Party (Christian Demo-
crats)

UPE - Union for Europe Group

ELDR - Group of the European Party of Liber-
als, Democrats and Reformers

GUE - Confederal Group of the European Uni-
tary Left - Nordic Green Group

GREENS - Group of the Greens in the Euro-
pean Parliament

ARE - Group of the European Radical Alliance

I-EON - Group of Independents for the Europe
of the Nations

Sub-total groups

12 430 591

Unattached

493 821

4 355 530

33,7

2 517 537

34,9

4 882 668

34,0

11 755 735

34,1

3 679 551

1 105 778

28,5

8,6

2 130 777

611 686

29,5

8,5

4 126 198

1 283 706

28,7

8,9

9 936 526

3 001 170

28,8

8,7

958 486

741 291

631 533

495 790

462 632

7,4

5,7

4,9

3,8

3,6

96,2

3,8

520 877

401 442

334 781

247 713

224 586

6 989 399

230 265

7,2

5,6

4,6

3,4

3,1

96,8

3,2

939 856

779 393

641 853

458 466

6,5

5,4

4,5

3,2

2 419 219

1 922 126

1 608 167

1 201 969

412 620

13 524 760

2,9

94,1

1 099 838

32 944 750

848 163

5,9

1 572 249

7,0

5,6

4,7

3,5

3,2

95,4

4,6

Total

12 924 412

100,0

7 219 664

100,0

14 372 923

100,0

34 516 999

100,0

Source: The groups(cid:146) accounts.

4. The appropriations are paid over to the groups at the begin-
ning of the financial year, into bank accounts they have opened
specifically for this purpose. The president of each group is
responsible for the use of these funds. The groups have organised
themselves into one or more national delegations, depending on
the political situation in the Member States concerned, and have
very often delegated part of the management of the appropria-
tions to these delegations. No later than the 30th of June follow-
ing the financial year concerned, each group must send to the
President of the Parliament a report on the use of the funds which,
in the case of information activities, must include a certificate
issued by an approved external audit body. In the case of non-
attached members, the funds are made available according to the
principle of the payment or reimbursement of expenditure by the
Parliament(cid:146)s administration on the basis of supporting documen-
tation submitted by the members.

5. The appropriations referred to above provide additional
resources for the groups. The fact is that the Parliament finances
directly from appropriations under Titles 1 and 2 of its budget (7)
the staff, premises, equipment and other resources which are nec-
essary for the day-to-day operations of the groups.

The Court(cid:146)s previous audits

6. The European Court of Auditors presented in its Annual
Report concerning the financial year 1989 (8) the findings of an
audit of the groups(cid:146) expenditure on information over the 1986-
1989 period. This audit highlighted weaknesses in internal

management procedures, the lack of a uniform system of accounts,
shortcomings in the work of the external auditors responsible for
checking the groups(cid:146) accounts, cases of confusion between infor-
mation expenditure and everyday expenditure and ineligible expen-
diture in respect of election campaigns.

The field and scope of the audit

7. The audit concerned the reliability of the accounts, and the
legality/regularity and some aspects of the financial management
of expenditure by the groups and non-attached members. It cov-
ered the arrangements applicable until the end of 1998. Changes
to the rules, applicable as from 1999 (see paragraph 2), were
taken into account in the Court(cid:146)s observations and recommenda-
tions. The audit comprised an examination of the regulatory and
budgetary frameworks, an assessment of the internal control sys-
tems and external audit arrangements, and tests in respect of
transactions for the financial year 1998 which covered each of the
groups which existed in 1998. The audit also covered the Parlia-
ment(cid:146)s administrative departments in the case of non-attached
members(cid:146) expenditure (which accounted for less than 5 % of total
appropriations) and revealed in this connection situations which
were similar to those of the groups.

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OBSERVATIONS ON THE REGULATORY AND BUDGETARY
FRAMEWORKS

Clarity of the rules

8. The rules for using funds for operating expenditure and politi-
cal activities lay down the procedures and formulae for distribut-
ing appropriations, plus some general provisions concerning the
implementation of expenditure and the presentation of the
accounts by the groups. They lay down no instructions or explicit
limit as regards the nature of the expenditure which may be
financed using these appropriations. It follows that the notion of
political activity as such and the forms it may take are not defined.
According to the wording of the budget, political activities financed
with these appropriations should be (cid:145)supplementary(cid:146) in nature.
However, no criterion is provided to enable a clear distinction to
be made between these activities and activities which are part of
members(cid:146) usual duties as elected representatives.

9. The aim of the appropriations for operating expenditure allo-
cated to non-attached members is unclear. No definition has been
given of the nature of the expenditure that may be refunded to
non-attached members so as to enable a distinction to be made
between this category and expenditure which is usually already
covered by the allowances paid to these members. The areas con-
cerned are the secretarial allowance intended to cover expenditure
incurred when recruiting or employing the services of parliamen-
tary assistants and the general-expenses allowance intended to
cover expenses resulting from parliamentary activities (9).

10.
Information activities may, according to the rules, be organ-
ised in cooperation with third parties provided that the principle
of joint signing on equal terms is observed (10). This principle is
not formally defined. In practice, the aim was to ensure that part-
ners(cid:146) involvement was conspicuously indicated: the placing and
size of the logo (and/or name) of the group and its partners had
to be given equal treatment. The rules do not stipulate the proced-
ure for financing joint measures of this kind, in particular with a
view to guaranteeing transparency as regards their overall cost
and the way expenditure is to be divided up between the group
and its partners.

11.
Information activities may not include any form of election
campaign at the European, national, regional or local levels. How-
ever, the rules adopted in 1992 do not provide any guidance as to
the criteria to be applied in order to establish whether or not a
measure amounts to an election campaign. Only on 26 February
1999, once the rules had been amended, did the Presidents of the
groups adopt joint guidelines for interpreting this ban (11).

activities) and of several budget headings (three up until 1998;
two since 1999) may be justified on the basis of the previous situ-
ation (12). Thus far, this situation has never been called into ques-
tion because of differences in the distribution formulae for the
appropriations concerned, which favour some groups more, in
particular as a consequence of the number of languages used by
their members (see paragraph 3). Nevertheless, it creates compli-
cations which are out of proportion to its objectives, requiring
separate accounts to be kept for activities between which no
genuine difference ultimately exists.

13. The fact is that the distinction between political activities and
information activities seems highly theoretical since, due to the
groups(cid:146) role and as confirmed by comments in the budget, their
information activities are political in nature. In practice, and even
if some groups have defined certain guidelines for making the dis-
tinction (13), the Court observed that the charging of expenditure
by the groups to either budget heading seemed on occasion to be
determined more by the availability of the funds than by a genu-
ine difference in the nature of the activities.

14. The existence of two sets of rules engenders a risk that the
most stringent rules (those governing information activities),
which require a clear link to be established between the activity
financed on the one hand and the Community and its policies on
the other, and which do not allow appropriations to be made
available to political groupings, will simply be circumvented.

Checking compliance with the rules

15.
It is difficult to check certain rules governing information
activities, such as the ban on organising any measures to provide
information in the run-up to the European elections (14). These
measures often take forms (e.g. pamphlets, brochures, posters and
other means of publicity) where checks are straightforward only
in respect of the date they were manufactured or invoiced, and
not of the period for which they were used. Furthermore, the
rules make no provision for recent technological developments,
such as the creation by most of the groups of Internet websites,
which are permanent in nature and which are very often linked
to those of similar political groupings. Access to and development
of these sites are not suspended during the period covered by the
ban.

16. Similarly, checks in respect of the ban on financing election
campaigns at the national, regional or local levels are complicated
by unfamiliarity with the Member States(cid:146) various election time-
tables.

Existence of separate rules and budget headings

12. The existence of two sets of rules (i.e. one for operating
expenditure and political activities and another for information

17. A more general question may also be asked, regarding the
distinction between information and election propaganda and the
use in any election campaign (European or otherwise) of forms of
information which have been published in advance.

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Volume of and rules for the distribution and carrying-over of
appropriations

18. The formulae for distributing appropriations for operating
expenditure and information activities, which take particular
account of the languages used by the groups, imply that belong-
ing to a group provides entitlement to a volume of appropriations
per member which is substantially greater than the amounts allo-
cated to non-attached members. This explains the composition
and modus operandi of certain groups, within which the national
delegations, which are sometimes made up of very few members
(or even a single member), enjoy such autonomy in the pursuit of
their activities and in the use of their share of the appropria-
tions (15)
the very notion of a group, as defined in
Article 29(1) of the Parliament(cid:146)s rules of procedure (1), may be
called into question.

that

19. The appropriations are paid to the groups in full at the
beginning of the financial year. Appropriations for information
activities may be carried over to the following financial year.
Although this procedure is not automatic, the groups have nev-
ertheless employed it systematically. Appropriations for operat-
ing expenditure and political activities may be carried over auto-
matically from one financial year to the next. Although the groups
have interpreted this provision as an unlimited entitlement to
carry appropriations over, in practice there have been only a few
cases of appropriations being carried over beyond a single finan-
cial year. However, by analogy with the Financial Regulation (16),
the Court considers that this provision allows for an entitlement
to be carried over only to the following financial year. The Court
also observed that, during the 1994 to 1998 period, appropria-
tions which were not used by the end of the financial year very
often amounted to the equivalent of six to nine months(cid:146) expen-
diture. As a matter of principle, the fact that such large amounts
are permanently available means there is a risk of poor manage-
ment of appropriations unless these amounts are justified by a
corresponding volume of commitments.

The groups(cid:146) legal status and area of activity

20. The groups are Parliament bodies and, in accordance with
the Parliament(cid:146)s rules of procedure (1), they play an important
role as regards the powers and internal modus operandi of the Insti-
tution. This important role contrasts with the absence of detailed
provisions defining the precise nature of political activities and
information activities, the groups(cid:146) legal status and the nature and
scope of any work they may do independently of the Parliament(cid:146)s
internal modus operandi.

Parliament(cid:146)s authority and to engage its responsibility (17). In the
case of other decisions of a political nature, the groups are not
regarded as authorised representatives of the Parliament and
responsibility falls on the members who make up the groups. In
the case of political and information activities, it seems difficult
to make such a distinction between financial and political aspects,
which raises the question of responsibility for these activities.

22. Neither the Parliament(cid:146)s rules of procedure (1) nor the rules
governing the use of the appropriations (2) covered by this report
define or delimit the activities which the groups may carry out
independently of the Institution(cid:146)s internal modus operandi. In most
cases, the groups have granted considerable autonomy to their
national delegations which frequently conduct political and infor-
mation activities jointly with affiliated political bodies. Shortcom-
ings in the rules and this means of organisation give rise to a lack
of clarity as regards the respective roles and activities of the
groups, of their national delegations, or even of the political
groupings which are linked to them.

OBSERVATIONS ON THE INTERNAL CONTROL SYSTEM

23. At first sight, the facility for financing appropriations allo-
cated to the groups seems to resemble a facility for paying a sub-
sidy to an external body. However, in actual fact, it is a delegation
of the implementation of these appropriations to internal Parlia-
ment bodies, which should therefore comply with the regulatory
framework applicable to budgetary expenditure. However, the
groups, which enjoy considerable autonomy in their financial
management, do not apply the Financial Regulation, the corre-
sponding implementing arrangements or the Parliament(cid:146)s rules of
procedure when implementing their budgets.

24. Some groups have nevertheless formalised internal rules and
instructions, which are similar to those contained in the regula-
tions applicable to the Community budget, for example as regards
delegating the power of signature, the commitment, authorisa-
tion, validation and disbursement of expenditure, the nature of
the supporting documents, the type of contract or repayment
scales. In most other cases, the written internal rules are, to a
great extent, inadequate, or even completely non-existent.

21. The groups have no legal personality and therefore may not
acquire rights or enter into commitments. In relations with third
parties outside the Parliament, decisions taken by the groups to
use the funds (for example when signing employment, rental or
purchasing contracts) are considered to have been taken with the

25. The decentralisation of the implementation of appropria-
tions to the national delegations, which sometimes have only a
few members of staff, or even a single member, is often inad-
equately monitored by the groups(cid:146) authorities. In many cases,
these national delegations enjoy such independence in their use
of funds that the group is unable to supervise their financial
activities in any meaningful way.

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26. The degree of interest shown by the groups(cid:146) authorities and
by those responsible for their general secretariat in the inspection
of financial management varies and is insufficient in the case of
approximately half of the groups. The temporary status (18) of the
staff employed in the groups(cid:146) general secretariat is unlikely to
ensure in all cases that the staff responsible for financial manage-
ment carry out independent and effective checks as to whether
expenditure complies with the regulations. In this respect, it must
be noted that the uniform internal rules governing the manage-
ment of appropriations for information activities (2) allow for the
refusal of payment only in cases where funds are unavailable.

OBSERVATIONS ON THE EXTERNAL AUDIT ARRANGEMENTS

27. Until the end of 1998, only the rules governing information
activities provided for an external audit to be carried out by an
approved body. The terms in which it was couched, however,
were ambiguous since they refer to (cid:145)a certificate as to the regularity
of the accounts(cid:146) and the standardised specimen certificate (19) con-
tains only a declaration of the regularity of the transactions in
respect of some aspects of the rules, namely the capping of oper-
ating expenditure and the ban on purchasing immovable prop-
erty or office furniture. The new provisions (20), which now apply
also to operating expenditure and political activities, are even less
satisfactory since they mention a certificate...that the accounts are
properly kept . It would be more appropriate to instruct the audi-
tor to provide a certificate of the reliability of the accounts and of
the regularity of the operations financed.

28. Although they were not expressly required to do so until the
end of 1998 (21), the groups also submitted their accounts of
operating expenditure and political activities to external audit.
However, some groups did not send the accounts certified by the
external auditor to the President of the Parliament. The fact that
the regulations are silent as regards the eligibility criteria for
expenditure explains why the audit was restricted to the reliability
of the accounts and to the acceptability in accounting terms of
the documents in support of the expenditure.

29. As the external auditors(cid:146) current remit is merely to audit the
appropriations in question, they do not usually possess sufficient
information on the general running of the Parliament, and in par-
ticular on any other resources the Parliament places at the dis-
posal of the groups and the members, for them to be alive in their
work to certain particular risks. Furthermore, the audits are car-
ried out only in respect of the groups(cid:146) general secretariat, not of
the administrative structures of the national delegations in the
Member States, even though, as was explained earlier, they play
an important role in the use of the funds. In practice, the possibil-
ity of checking that the operations financed actually took place is
accordingly reduced.

30. Differences were observed in the nature and scope of the
audit procedures employed by the various auditors. In view of the
findings of the Court(cid:146)s audit, which are set out below, the effec-
tiveness and usefulness of these external audits, which have not
generally yielded significant observations, are debatable given the
circumstances.

31. The external auditors(cid:146) certificates accompany the annual
reports which the groups send to the President of the Parliament,
who forwards them to the Committee on Budgetary Control. As
the Court observed in its Annual Report concerning the financial
year 1989 (22), there was a failure to follow the procedure requir-
ing (23) the Committee on Budgetary Control to draw up for the
Parliament(cid:146)s Bureau a comprehensive report on the extent to
which appropriations have been used in compliance with the
regulations in the field of expenditure on information activities.

OBSERVATIONS ON THE KEEPING OF THE ACCOUNTS AND
THE FINANCIAL STATEMENTS

32. The accounting practices of the majority of the groups do
not call for extensive comment by the Court. Nevertheless, in cer-
tain cases, significant shortcomings and anomalies were uncov-
ered:

(cid:151) in some cases expenditure was decided, carried out and entered

in the accounts by the same persons, acting alone;

(cid:151) the connection between the transactions, the supporting docu-
mentation and the entries in the accounts was not made suf-
ficiently clear by means of adequate references;

(cid:151) advance payments and cash withdrawals were immediately

entered as final expenditure;

(cid:151) cash withdrawals were recorded in suspense accounts with no

possibility of identifying the transactions concerned.

33.
In one group the annual accounts for the financial year 1998
were only submitted after a considerable delay and with numer-
ous transactions which had been in abeyance for some time still
left on suspense accounts, which was indicative, in this case, of a
lack of rigour in the keeping of the accounts.

34. The lack of clarity in the arrangements for keeping the
accounts and presenting the financial statements led to differ-
ences in interpretation and practice between the groups. Some
groups thus introduced cash basis accounting and others accru-
als basis accounting. In addition, some groups drew up a state-
ment of assets and liabilities showing, in particular, their immov-
able property, accounts receivable and debts. Others drew up a
financial balance sheet showing only their cash deposits and li-
quid assets as at the end of the financial year.

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35. Frequent shortcomings were observed concerning support-
ing documents, whether this concerned accounting documents in
the strict sense (contracts, invoices, etc) or documentation of the
activities to which the expenditure was linked (purpose of meet-
ings, list of the persons invited, brochures, etc). Moreover, the
absence of rules on keeping documents and statements of accounts
raises a general problem of control, in particular in the case of the
dissolution, or a change in the composition, of the groups.

36.
In the absence of explicit provisions, only a limited number
of groups kept an inventory or equivalent record of the movable
property acquired with their appropriations. In the case of the
other groups there is no assurance, therefore, of any protection
for this property, particularly in those cases where the group is
dissolved or its composition changes, or where non-attached
members are not re-elected.

37. On 26 May 1993, in line with the Court(cid:146)s proposal in its
Annual Report for the financial year 1989 (24), the groups adopted
a uniform system of accounts for operations concerning informa-
tion activities. This step was not followed in the case of opera-
tions relating to administrative expenditure and political activi-
ties, with the result that, in the case of these types of expenditure,
there is no uniform presentation of the relevant financial state-
ments. This shortcoming was rectified, however, during the review
of the rules by the Bureau of the European Parliament at the close
of 1998.

38. The absence of sufficiently clear rules on the charging of
expenditure, both to the accounts and to the budget, is detrimen-
tal to the informative value of the financial statements. Apart
from the fact that, as noted above, the distinction between polit-
ical activities and information activities is largely theoretical,
expenditure is entered sometimes on the basis of the type of
expenditure and sometimes on the basis of its purpose. In prac-
tice, the Court noted rather frequently that expenditure relating to
similar actions was entered under different headings in the
accounts, or that expenditure concerning one and the same action
was spread over several headings. The new rules, which have been
applicable since 1999, are no improvement in this respect.

39. There are also limits to the informative value of the annual
reports on the use of the appropriations due to the fact that, in
practice, they do no more than present the financial statements
and that, contrary to what one would expect, they do not include
any explanation of the main activities for which expenditure was
incurred during the financial year.

his certificate because of a lack of supporting documentation and
the volume of the amounts still to be settled on the suspense
accounts. In addition, he clearly excluded from his audit certifi-
cate the (cid:145)justification(cid:146) for the system of remuneration financed
from the abovementioned fund. Another group submitted finan-
cial statements containing relatively few details and not those cer-
tified by the external auditors, which were more informative, in
particular in respect of the group(cid:146)s financial operations with
related organisations. In addition, considerable funds, held in
reserve by this group in a foundation - a genuine subsidiary of the
group - are not included in its financial statements. Due to a prob-
lem in the design of its accounting system, a third group(cid:146)s finan-
cial statements did not show the total expenditure of its national
delegations. In the case of a fourth group, a general problem with
entering expenditure in the accounts and in the budget had a
negative impact on the reliability of the information on expendi-
ture.

OBSERVATIONS ON THE LEGALITY/REGULARITY OF THE
OPERATIONS

41. The absence of explicit provisions in the rules concerning
administrative expenditure and expenditure on political activities
does not imply, in the Court(cid:146)s view, that the use of these funds
should remain completely at the discretion of the groups. The
expenditure must remain within reasonable limits which are
appropriate to the modus operandi and the activities of internal Par-
liament bodies. The wording of the budgetary authorisations and
the comments on them confirm this analysis. The Court therefore
considered that the obligation to demonstrate a link with the role
and modus operandi of the Parliament and the bans on financial
participation in election campaign activities and on the transfer
of funds to third parties also apply, de facto, to the use of these
appropriations. This analysis is confirmed by the changes intro-
duced by the new rules which have been in force since 1999 (25).

Supporting documentation

42. Significant anomalies in respect of accounting documents
were found in 50 % of the groups. In general, these take the form
of a frequent absence of contracts (employment, services and
rental contracts), of order forms or delivery slips, of invoices, pay
slips or fee claims, mission orders, tickets, of the authorisation of
payment by the recipient of a service or proof of payment in cases
of reimbursement. These anomalies were all the more significant
in one group, where a not inconsiderable amount of the expend-
iture was made from the group(cid:146)s account by means of banker(cid:146)s
cards and was entered in the accounts without supporting docu-
ments, simply on the basis of the statement issued by the bank.

40.
In several cases the Court noted problems with the reliability
of the financial statements sent by the groups to the President of
the Parliament. The group which submitted financial statements
containing numerous suspense accounts (see paragraph 33) pre-
sented expenditure which had already been settled and which, in
the main, consisted of claims on a fund created for the financing
and adjustment of salaries (see paragraph 58), as appropriations
committed. Moreover, the external auditor added reservations to

43. Some appropriations were paid over to national delegations
without justification as far as the nature and cost of the actions
carried out or planned was concerned. It is sometimes difficult,
in view of the nature of the national delegations in question, to
know whether or not they are indistinguishable from the related
political organisations.

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The link between the groups(cid:146) activities and the role and
modus operandi of the Parliament, its political groups and
their members

49. The Court also found some cases where staff paid by the
groups were working for outside organisations, such as a national
political party, an association liaising with political parties in non-
Member States or a newspaper or magazine.

44.
In the case of a majority of the groups, it is frequently dif-
ficult to establish whether expenditure has a clear connection
with the role and modus operandi of the Parliament, of the group
or of its members, on account of the absence of adequate infor-
mation on the purpose of the action. This difficulty arises, in par-
ticular, in the case of entertainment expenses spent on behalf of
the group and for which there is often a complete absence of
information in respect of the persons invited and the subject of
the meeting. It also arises in the case of expenditure in connec-
tion with the activities of some national delegations, on which no
information is available.

50. Some groups made a financial contribution to national politi-
cal parties in the form of actions which had allegedly been organ-
ised jointly. Apart from the fact that the actions in question
showed no sign of being (cid:145)joint(cid:146) in nature, the contributions from
the groups were paid in the absence of any information on the
overall cost of the operations and on the distribution of the
expenditure and whether it had actually been incurred in every
particular. Consequently, the risk that such operations may con-
stitute financial support for the political parties in question can-
not be excluded.

45. The general absence of clear internal rules, in particular con-
cerning the delegation of powers and authorisation of expendi-
ture, the deficiencies in respect of supporting documents and the
high degree of decentralisation in the use of appropriations all
contribute to making it difficult to ascertain whether there is a
clear link between an item of expenditure and the group(cid:146)s activi-
ties.

Funds and resources placed at the disposal of political
groupings

46. Some groups used part of their appropriations to finance
European political parties or other related groupings. In 1998, a
total of approximately ECU 1 400 million was paid to the latter
in the form of dues, subsidies, repayments of building loans or
contributions to administrative costs. This amount does not reflect
the entirety of the financial support enjoyed by European politi-
cal parties, which also use offices and staff financed directly from
the Parliament(cid:146)s budget and placed at the disposal of the groups.

47. The Court is aware that, since the entry into force of the
Treaty of Amsterdam, Article 191 of the Treaty establishing the
European Community recognises the importance of political par-
ties at European level and that thought is currently being given to
a legal statute for European political parties. Nevertheless, the
Court considers that aid for the financing of European political
parties, as for other similar groupings, cannot be taken from
appropriations which are intended for the activities of the groups.

Activities organised in cooperation with third parties

51.
In 50 % of the groups cases were discovered where the prin-
ciple of joint signing on equal terms was not complied with in
respect of various actions (meetings, round table discussions,
publications, posters, etc) conducted in cooperation with
European political parties or national political groupings. In the
absence of the name and logo of the group and of the Parliament,
these actions are equivalent to actions conducted by the political
groupings in question.

Financial participation in election campaign activities

52. The Court found some cases of direct financial participation
in election campaigns, either for European Paliament elections or
elections in the Member States. In addition, the actions of the
political groupings which received funds or benefited from the
groups(cid:146) other resources, as revealed above, were in principle, of
course, part of the preparation of such election campaigns.

Activities normally covered by other allowances

53. A considerable part of the appropriations of one group was
used to finance expenditure which is normally covered by the sec-
retarial and general expenses allowances received by the members
of Parliament, i.e. parliamentary assistants(cid:146) travelling and over-
night expenses and operational expenditure of the MEPs(cid:146) constitu-
ency and other offices in the Member States. Similar cases, more
isolated however, were also revealed in several other groups.

48. One group, which has set up a foundation (see para-
graph 40) under its own control, transfers part of its appropria-
tions to it every year, i.e. approximately ECU 720 000 million in
1998. At the end of 1998 this foundation(cid:146)s assets totalled more
than ECU 10 million, consisting mainly of bank deposits and stock
exchange investments, the yield from which - approximately
ECU 730 000 in 1998 - served to finance its activities. The funds
thus placed in reserve are not mentioned in the group(cid:146)s balance
sheet.

Expenditure of a private nature

54. Cases of expenditure were found which were of a manifestly
private nature, i.e. equipment installed in a private vehicle and
residence, documentary research work carried out with a view to
the publication of a book, subscriptions to magazines or travel-
ling expenses. There is also a risk of other forms of private

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28.6.2000

appropriation, in particular on account of the frequent inad-
equacy of controls on entertainment expenses and the general
absence of an inventory of office furnishings and equipment
financed from the groups(cid:146) funds and installed, in part, in the
national delegations or in the MEPs(cid:146) constituency offices.

Staff management

55. The Parliament places approximately 530 temporary staff at
the disposal of the groups, whose salaries and associated costs are
financed directly from the appropriations under Title 1 of its bud-
get. Using the appropriations that are the subject of this report,
the groups may take on extra staff according to their individual
requirements. It is difficult to say how many of these supplemen-
tary staff there are exactly, but they can be estimated at a total of
sixty persons (26), plus a certain number of persons recruited on
an occasional basis, to which it is difficult to put a figure.

56. For the majority of the groups, the management of the staff
paid directly by the groups shows a lack of transparency and
reveals anomalies similar to those the Court uncovered in con-
nection with expenditure resulting from the recruitment and
employment of parliamentary assistants (27). This arises firstly
from the multiplicity of contractual arrangements which may be
for paid employment or for the supply of services. These various
arrangements do not necessarily reflect a difference in the actual
nature of the relationship, as the staff are generally placed in the
position of an employee of the group. In many contracts the
validity of certain clauses, with regard to labour law and the tax
and social arrangements, is doubtful. In some cases contracts do
not exist and remuneration or fees are often paid in the absence
of any pay slip or fee claim. The groups are not obliged to submit
the contracts to the Parliament and the latter therefore does not
carry out any controls, even though these contracts are deemed
to have been concluded on the basis of a mandate from the Parlia-
ment and the latter can therefore be held responsible (28).

57. Some of the staff employed by the groups are posted in the
Member States to the national delegations. The Court discovered,
in respect of all the groups, that staff, or bodies, paid by the
groups (within the framework of employment contracts or con-
tracts for the supply of services) were receiving, at the same time,
parliamentary assistants(cid:146) pay, which was paid into the MEP(cid:146)s sec-
retarial allowance. This contravenes the rules, which stipulate, as
the Court underlined in its Special Report on MEP(cid:146)s expenses and
allowances (29), that the two roles are incompatible. There is no
evidence that these staff and bodies actually performed services
for the benefit of the groups. In fact, a part of the groups(cid:146) resources
is therefore being used in this manner to supplement the MEPs(cid:146)
allowances. There is also a risk that other staff paid by the groups,
posted to the national delegations, are not in fact acting as assis-
tants to the MEPs.

58. One group granted supplementary remuneration to its staff,
who were mostly temporary staff already in the Parliament(cid:146)s pay,
in the form of special and end-of-year bonuses. No written rules
had been drawn up in respect of the criteria for, and scales of,
these payments and considerable disparities were noted between
the amounts paid to the various persons concerned in the absence
of any pay slip. Another group has set up a fund which is financed
in part by (cid:145)voluntary(cid:146) payments of part of their salaries by tem-
porary members of staff who are also being paid by the Parlia-
ment. The objective of this fund is to reduce the differentials
between the salaries of the various categories of temporary staff
and to take on extra staff. These structures are irregular, since no
group has the power to adjust the remuneration of temporary
members of staff under contract to and in the pay of the Parlia-
ment. Another effect this has is to encourage tax evasion.

OBSERVATIONS ON THE FINANCIAL MANAGEMENT

59. A prerequisite for sound financial management is that, firstly,
the legality/regularity of the transactions must be assured. The
anomalies exposed by the Court above consequently also have an
impact on the financial management, as the funds were used for
purposes which are not authorised by the rules.

60. Generally speaking, the groups have failed to introduce rules
and mechanisms to ensure the principles of sound financial man-
agement are applied. In particular, the distribution of the appro-
priations, in the form of non-repayable grants, among the national
delegations, the absence of a prior authorisation mechanism for
operations, the absence of rates and scales of pay and the non-
application of procedures to open the awarding of contracts to
competition are not such as to ensure that the expenditure is
always in accordance with the principles of sound financial man-
agement.

61. These weaknesses did not lead to poor overall use of the
funds but some of the transactions examined by the Court give
rise to reservations in respect of compliance with the criterion of
economy. For example, the reimbursement scales for mission
expenses are more generous in some groups than those appli-
cable to the staff of the European Institutions. In the Court(cid:146)s opin-
ion, however, these latter scales are perfectly adequate, under nor-
mal circumstances, for the groups(cid:146) requirements. The conditions
under which meetings, often referred to as (cid:145)study days(cid:146), are organ-
ised by the groups away from the places where the Parliament
conducts its official work should also be reviewed, in particular
in view of the massive presence of the groups(cid:146) staff and, in some
cases, of the fact that these activities are not directly connected
with the groups(cid:146) work in the strict sense of the word. The Court
also observed several cases of expenditure which did not seem
useful or reasonable.

CONCLUSIONS AND RECOMMENDATIONS

62. The lack of clarity in the rules and procedures applicable to
the groups in respect of the eligibility of their expenditure, the
frequent absence of any satisfactory system of internal control

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and the weaknesses of the present external audit system have con-
tributed to the considerable problems discovered by the Court in
respect of the legality/regularity of the transactions. There is no
guarantee that the funds were always used in accordance with the
principles of sound financial management. Obviously, this does
not mean that all the expenditure by all the groups is affected by
the anomalies described in this report. The fact is that the Court(cid:146)s
audit revealed a situation full of contrasts, the problems described
being more frequent in some groups - and some non-attached
members - than in others.

63. Consideration must be given to clarifying the criteria gov-
erning the eligibility of expenditure by means of common rules
applying to all the appropriations in question. The amendment
made at the end of 1998 resulted in no appreciable improvement
in this respect. Thought should be given to placing all the appro-
priations under a single budget heading, in particular so as to end
the highly theoretical distinction between political and informa-
tion activities. This would also facilitate accounting and auditing.

64.
In view of the role ascribed to political parties at European
level by Article 191 of the Treaty establishing the European Com-
munity and in view of the inclusion in the budget of a heading
specifically for contributions to European political parties, con-
sideration should also be given to drawing up transparent rules to
be applied to the financing of these parties. This opportunity
should also be used to clarify the role and activities of the groups
while reaffirming that they are, primarily, internal parliamentary
structures.

65. A way of organising the financial management must also be
devised which, while leaving the groups their legitimate opera-
tional autonomy will ensure that an efficient sytem of internal
control is put in place. This system should allow the rules govern-
ing the implementation of the Community budget to be applied
in full and should, in the Court(cid:146)s view, lead, in particular, to the
centralisation of the disbursement of and accounting for expen-
diture in the Parliament(cid:146)s administrative departments. Special

rules should be drawn up to regulate the making available and use
of the appropriations allocated to non-attached members.

66. Clear rules must be laid down in respect of property and the
inventory of goods acquired using the appropriations in question
in order to ensure protection and optimum management of all
assets, including financial assets, in particular where changes to
the composition of a group occur or it is dissolved. Likewise,
arrangements must be made for conserving the accounting records
of dissolved groups.

67.
In order to allow greater insight, primarily for the Parliament,
into the use made of the appropriations, each group(cid:146)s annual
report should include a sufficiently detailed and informative pre-
sentation of the objectives, the type and the cost of the main
activities financed. The groups(cid:146) certified accounts, which have
been public since 1999, should be published in future.

68. To make it more effective, the external audit of all the groups
should be entrusted, for a set period (for example, one parlia-
ment), to a single body selected by invitation to tender. The exter-
nal auditor(cid:146)s remit should be clearly defined and explicitly include
an audit of the regularity of the transactions, right up to the Mem-
ber States. This external auditor should draw up a report on each
group, every year, and submit it directly to the President of the
Parliament.

69. The multiplicity of employment contracts and service con-
tracts, which are quite frequently at odds with Community and
national regulations, represent major risks with regard to the Par-
liament(cid:146)s legal responsibility. It is essential that consideration
should be given, without delay, to clarifying the contractual rela-
tionship between the groups and their employees and service-
providers. In order to ensure compliance with certain basic legal
forms, a standardisation of the contracts should be undertaken
under the supervision of the Parliament(cid:146)s secretariat, which should,
in addition, automatically receive a copy of all the contracts con-
cluded.

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 25 May 2000.

For the Court of Auditors

Jan O. KARLSSON

President

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NOTES

(1) OJ L 49, 19.2.1997, pp. 1 to 76. Rule 29(1) of Parliament(cid:146)s Rules of
(cid:145)Members may form themselves into groups

Procedure provides,
according to their political affinities(cid:146).

(2) The rules governing the use of funds placed at the disposal of the
political groups for their secretarial expenses and administrative oper-
ating expenditure (3 7 0 5) and their political activities (3 7 0 6) were
adopted by the Parliament(cid:146)s Bureau on 10 July 1986 (EP 107.858/
BUR/Ann. II). These rules were amended by the Bureau on 14 Decem-
ber 1998 (EP 274.329/BUR) at the same time as these appropriations
were brought under a single heading (3 7 0 7).
The rules amending the use of appropriations for information activi-
ties (3 7 0 8) were adopted by the Bureau on 28 January 1992
(EP 158.828/BUR/Ann. II). On 28 October 1993 (EP 175.829/BUR)
the Bureau gave its agreement to the addition to these rules, as an
Annex, of the joint text referred to as the (cid:145)gentlemen(cid:146)s agreement(cid:146)
which was adopted on 26 May 1993 by the Presidents of the political
groups for the purposes of standardising internal rules and harmonis-
ing the systems of accounts and annual reports. These rules were
amended by the Bureau on 14 December 1998 (EP 274.330/BUR).
(3) Court of Justice, judgment of 23 April 1986, Case 294/83, the Green

Group v Parliament.

(4) The Presidents(cid:146) conference is made up of the President of the Parlia-
ment and the Presidents of the groups. Two representatives of the
non-attached members take part in the meetings but do not have vot-
ing rights.

(5) The Bureau is made up of the President and the fourteen Vice-
Presidents of the Parliament. The Quaestors are members of the
Bureau in a consultative capacity.

(6) The formula for distributing appropriations makes provision for:

(cid:151) on the one hand, a lump sum per group (75 % of the groups(cid:146) total
appropriations for heading 3 7 0 5 and 85 % for heading 3 7 0 6),
i.e.:
for groups with between 0 and 39 members: 1 unit,
for groups with between 40 and 79 members: 1,5 units,
for groups with between 80 and 119 members: 2 units,
for groups with between 120 and 159 members: 2,5 units,
for groups with between 160 and 199 members: 3 units,
for groups with between 200 and 239 members: 3,5 units,
(cid:151) and, on the other hand, an amount to be distributed on a propor-
tional basis (25 % of the groups(cid:146) total appropriations for heading
3 7 0 5 and 15 % of the groups(cid:146) total appropriations for heading
3 7 0 6) taking the number of members and the languages used
by each group into account (the proportional sum per member is
increased by 5 % per language up to a maximum of 11 languages).
(7) The share of these other appropriations devoted by the Parliament to
the operations of the political groups can be estimated, very roughly,
at approximately EUR 80 million. The total annual expenditure by the
Parliament in connection with the activities of the political groups

would therefore be of the order of EUR 115 million, compared with a
total budget for the Parliament of EUR 905 million in 1998 (i.e.
approximately 13 %).

(8) OJ C 313, Volume II, 12.12.1990, paragraphs 16.7 to 16.19.
(9) See Special Report No 10/98, OJ C 243, 3.8.1998, p. 1.
(10) The amended rules of 14 December 1998 (EP 274.329/BUR) now

refer to the principle of joint signing on equal terms.

(11) The ban on election campaign activities has also applied, since the
amendment to the rules on 14 December 1998 (EP 274.329/BUR), to
the use of the appropriations under heading 3 7 0 7 for administra-
tive and secretarial expenses linked to political activities.

(12) The appropriations were entered in the Parliament(cid:146)s budget in suc-

cessive stages, i.e.:
(cid:151) as from 1972 for operating expenditure (3 7 0 5),
(cid:151) as from 1974 for political activities (3 7 0 6) and
(cid:151) as from 1982 for information activities (3 7 0 8).

(13) The distinction made is that the information activities must be aimed
at the public or opinion leaders while the political activities are aimed
more at political concertation within the framework of parliamentary
work.

(14) Until the end of 1998 this period was four months. It was subse-

quently shortened to one month.

(15) The groups distribute a variable part of the appropriations received
from the Parliament in grants between the national delegations.

(16) Article 7(7b).
(17) This analysis was confirmed by a Court of First Instance judgment

(Case T-162/89) of 22 November 1990.

(18) Temporary and auxiliary staff and other staff under contract.
(19) This type of certificate was adopted on 26 May 1993 under an agree-
ment between the Presidents of the groups referred to as the (cid:145)gentle-
men(cid:146)s agreement(cid:146) (EP 175.892/BUR).

(20) Provisions adopted by the Bureau of the Parliament on 14 Decem-

ber 1998 (EP 274.329/BUR and EP 274.330/BUR).

(21) The rules only stipulated that each group was to draw up rules con-

cerning controls and checks on the accounts.
(22) OJ C 313, volume II, 12.12.1990, paragraph 16.18.
(23) Article 5(4) of the rules adopted by the Bureau of the Parliament on

28 January 1992 (EP 158.828/BUR/Ann. II).

(24) OJ C 313, volume II, 12.12.1990, paragraph 16.16 (a).
(25) The latter bans participation in any kind of election campaign.
(26) This estimate is based on the number of persons benefiting from a

contract of a certain length in the course of 1998.

(27) See Special Report No 10/98, OJ C 243, 3.8.1998, paragraphs 1.32 to

1.38.

(28) Court of First Instance judgment of 22 November 1990 in Case

T-162/89.

(29) See Special Report No 10/98, OJ C 243, 3.8.1998, paragraph 1.34.

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REPLIES OF THE EUROPEAN PARLIAMENT (1)

Parliament notes that the Court(cid:146)s objective was to undertake an
overall review of the utilisation of the European Parliament(cid:146)s
appropriations earmarked for the activities of the political groups
and of the Non-attached Members.

Parliament notes that, in its conclusions and recommendations,
the Court wanted to draw attention to the lack of clarity in the
general rules and in the internal rules of the groups regarding the
eligibility of expenditure and to the rather frequent absence of sat-
isfactory internal control systems, as well as to the weaknesses of
the current mechanisms for external audit (paragraph 62).

Accordingly, Parliament gave each group the opportunity to reply
individually to the remarks which concerned them more specifi-
cally.

Parliament agrees with the Court that the political groups should
enjoy operational autonomy and that this must be accompanied
by the establishment of a regulatory budgetary framework which
provides for clear, transparent and effective control.

However, Parliament does not consider that centralisation of pay-
ments and of accounting for expenditure in the Secretariat would
be appropriate and effective (paragraph 65).

In agreement with the political groups, Parliament decided to
refer the matter to the appropriate bodies in order to ensure that
all the measures detailed below enter into force on 1 January
2001.

Amendment of the internal rules governing the use of the
budget

Paragraph 23. Parliament(cid:146)s Bureau will have to be consulted on
the revision of the internal rules governing the use of Parliament(cid:146)s
budget with a view to defining the rules applicable to the imple-
mentation of the new budget item created by the amalgamation
of Items 3 7 0 7 and 3 7 0 8.

Adoption of new rules governing the use of the appropri-
ations entered against the new budget item (formerly items
3 7 0 7 and 3 7 0 8) and the Annexes thereto (accounting
plan, harmonised certificate, balance sheet and statement of
expenditure)

The new rules will, in particular, have to clarify the following
issues raised by the Court:

Type of expenditure

Amendment of Rules 29 and 30 of Parliament(cid:146)s Rules of Pro-
cedure

Paragraphs 8, 9, 41. The rules will have to stipulate clearly that
the expenditure of the political groups must be connected with
the activities and policies of the Union.

Paragraphs 20, 21, 22. The Committee on Constitutional Affairs
will have to be consulted with a view to the amendment of Rules
29 and 30 of Parliament(cid:146)s Rules of Procedure.

The Rules will have to define the field of activity of the political
groups as bodies of Parliament, (cid:145)lay down the mechanism for the
dissolution of a group(cid:146) and to specify the status of the Non-
attached Members.

Amalgamation of Items 3 7 0 7 and 3 7 0 8 in Parliament(cid:146)s
budget

Paragraphs 12, 13, 14, 38, 63. The Committee on Budgets will
have to be consulted with a view to the amalgamation of Items
3 7 0 7 and 3 7 0 8 in Parliament s budget and to the amend-
ment of the nomenclature.

Under no circumstances will it be permissible for appropriations
made available to the political groups and to the Non-attached
Members to be used to finance activities specifically covered by
other budget items.

Joint organisation - provision of funds

Paragraphs 10, 50, 51. In addition to the principles already
established with regard to the funding of activities organised
jointly, the new rules will have to specify the procedures for finan-
cial participation, account being taken of the overall budget for
each activity or event which is jointly organised.

(1) Translator(cid:146)s note. No copy of the Court of Auditors report was avail-
able for use as a reference document when this text was translated.
Any discrepancies result from this lack of background material.

A distinction will have to be drawn between the principle of joint
organisation and the principle of the subsidy which is covered by
specific provisions in the Financial Regulation.

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Election campaign

Contract of employment or for the provision of services

Paragraphs 11, 15, 16, 17, 52. Parliament notes with satisfaction
that the political group chairmen have adopted common guide-
lines for the interpretation of the notion of (cid:145)election campaign(cid:146).
These guidelines will have to be included in the new rules and will
have to be supplemented, with particular regard to the use of the
new technologies.

Paragraphs 55, 56, 57, 69. Parliament will lay down a general
rule whereby the groups will be obliged to supply it with a copy,
for information, of any contract concluded between a group and
a third party. What is more, Parliament decided to amend the
Rules governing payment to Members of the Secretarial assistance
allowance. Those new rules, applicable on 1 January 2001, pro-
vide in particular for the publication of a list of assistants.

However, Parliament, like the other institutions, cannot suspend
its flow of institutional and political information so as to fit in
with the timetable of elections in Member States for which the
Member States themselves are responsible.

Along the lines of that decision, the new rules will have to lay
down, in the case of contracts of employment or for the provi-
sion of services concluded by the groups, the obligation to sup-
ply the following documents:

Carry-over to the following financial year

Paragraph 19. The new rules will have to beef up Article 4(3) of
the current rules governing Item 3 7 0 8 concerning the carry-
over of appropriations to the following financial year. The budget
and financial statements of each group will have to indicate the
precise situation of carry-overs of appropriations.

External audit

(cid:151) contract of employment

(cid:151) copy of payslip

(cid:151) proof of payment of social security contributions

(cid:151) proof of social security and occupational accident insurance

cover, and

(cid:151) proof of the contract for the provision of services and copies

of fee invoices.

Paragraphs 27, 31, 68. Parliament endorses the Court(cid:146)s observa-
tions concerning external audit.

Adoption of a financial regulation common to the groups in
application of the rules governing the use of appropriations

It will draw up a list of external audit bodies. The groups will then
select from that list the body they wish to undertake their audit.
The body thus selected will receive explicit instructions from Par-
liament before issuing a certificate as to the reliability of the
accounts and the regularity of the operations financed. Those cer-
tificates will have to be drawn up no later than 31 March in the
year following the closure of the accounts for the financial year
in question.

The groups will retain the possibility of having the reliability of
the documents and the regularity of the operations financed
monitored for internal purposes.

Cash or financial year accounting, retention of documents and
inventory

Paragraphs 60, 61, 24, 25, 26, 42, 43, 44, 45. Parliament(cid:146)s
Bureau will have to adopt a financial regulation common to the
political groups in application of the rules governing the use of
appropriations which, while taking account of the internal organi-
sation of each group, will have to provide, inter alia, for the fol-
lowing elements:

(cid:151) rules on the annuality of the budget, including the criteria for

the carry-over of appropriations

(cid:151) rules on the principle of sound financial management

(cid:151) structure of the budget

(cid:151) internal mechanisms and procedure for approval of the bud-

get, as well as a description of control mechanisms

(cid:151) criteria for the implementation of the budget and, in particu-
lar, procedures for the commitment of expenditure and for
the delegation of power to commit expenditure

Paragraphs 34, 35, 36. The new rules will lay down the account-
ing system to be used by each group, the system for the retention
of documents (cid:150) which will also cover the eventuality of the dis-
solution of the group (cid:150) and the obligation to maintain an inven-
tory of assets registered in Parliament(cid:146)s general inventory.

(cid:151) procedure for clearing expenditure

(cid:151) payment procedure

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(cid:151) imprest accounts

(cid:151) awarding of contracts

(cid:151) uniform accountancy criteria

(cid:151) uniform inventory criteria

(cid:151) procedure for the recovery of debts

(cid:151) rules governing the submission of supporting documents

(cid:151) rules governing the opening and management of current bank

and post office accounts.

The Financial Regulation will have to lay down procedures for the
management of appropriations devolved to national delegations.
The scope of decentralised management entrusted to the national
delegations will have to be strictly limited. Power to clear expen-
diture and power of payment will lie exclusively with the groups.
They will be obliged to refuse payment, should commitments not
comply with the rules in force.

European political parties and other political groupings

Paragraphs 46, 47, 64. Parliament(cid:146)s political authorities were
able to have incorporated into the Treaty of Amsterdam
Article 191 concerning European political parties. For a long time
now, Parliament has been considering that Article, which is essen-
tial for the development of democracy at European level, may be
implemented. (It adopted a resolution on the institutional status
of European political parties on 10 December 1996 and made a
token entry against Item 3 7 1 0 in Parliament(cid:146)s budget.)

For their part, the parliamentary groups concerned and the Euro-
pean political parties called on the European Commission to use
its right to propose legislation so as to implement Article 191 of
the Treaty. Parliament considers that it has done its utmost to
ensure the successful application of Article 191.

Pending adoption of a statute for European political parties, and
of procedures for funding them at European level, Parliament will
have to establish the following transparency measures through
the various sets of rules:

(cid:151) contributions to European political parties paid by the parlia-
mentary groups will have to be set out in their respective bud-
gets, and the amount of those contributions will have to be
capped,

(cid:151) direct or indirect funding of parties, political groupings or
organisations affiliated at national level will be prohibited.

European political parties which receive such contributions will
have to publish their accounts and indicate their sources of fund-
ing.

Parliament will have to establish the limits of and conditions for
the use of the technical facilities (conference rooms and interpre-
tation) made available to the European political parties under the
rules applicable to European political groups.

Expenditure by Non-Attached members

Paragraphs 49, 56. In the absence of a clear text of the rules
specifying the nature of the expenditure which may be charged
against the various budget headings for Non-attached Members,
all that Parliament can do in respect of certain types of expendi-
ture is ensure that such expenditure is authorised, monitored,
entered in the accounts and paid in accordance with the provi-
sions of the Financial Regulation. This applies particularly in the
case of applications for reimbursement in respect of any kind of
expenditure relating to the employment of staff.

Paragraphs 35, 42. As regards the observations relating to the
expenses and the activities financed by means of Item 3 7 0 5 and
3 7 0 6 appropriations, it is sometimes difficult (in view of the
existing text) to distinguish between expenditure relating to equip-
ment and administrative costs (which should be charged to Item
3 7 0 5) and expenditure which should be financed out of the
general expenditure allowance.

Parliament(cid:146)s staff therefore merely check whether or not the
requested refunds (accompanied by supporting documents) are
provided for in the accounting plan and whether or not the neces-
sary appropriations are available.

The staff concerned will be asked to ensure in future that, for any
reimbursement, they have in their possession not only the duly
paid invoices but also documents to prove that the expenditure is
in order.

Paragraph 36. A problem has recently been raised by Parlia-
ment(cid:146)s staff concerning the recording of movable property items
financed by means of headings 3 7 0 5 and 3 7 0 6. However, no
specific measures have yet been taken and a request will be made
concerning the introduction of a system to remedy this short-
coming.

Paragraphs 44, 53. Item 3 7 0 8: on the basis of the invoices
submitted and in the absence of a specific text on the nature of
expenditure, it is on occasion very difficult to establish whether
or not an item of expenditure has had a direct link with the role
and the functioning of the European Parliament and whether or
not the financing thereof out of budget heading 3 7 0 8 is justi-
fied.

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However, the observation made in connection with the manage-
ment of Items 3 7 0 5 and 3 7 0 6 as regards the future need for
Members to present, in addition to paid invoices, documents indi-
cating the nature of the expenditure or, in the case of informa-
tion activities, the substance and the scope of the activity, is still
valid for item 3 7 0 8.

Although Parliament(cid:146)s staff have hitherto merely checked whether
or not expenditure which is eligible for reimbursement under the
rules is accordance with the Financial Regulation, they will in
future be responsible for making sure that they also have in their
possession documents establishing the nature of the expenditure
and confirming that it is in order.