Special Report No 13/2001 on the management of the common foreign and security policy (CFSP), together with the Council's replies and the Commission's replies
Date: 2001-09-13
Institutions: European Court of Auditors
Subjects: common foreign and security policy, report

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I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 13/2001

on the management of the common foreign and security policy (CFSP), together with the
Council’s replies and the Commission’s replies

(pursuant to Article 248(4), second subparagraph, EC)

(2001/C 338/01)

CONTENTS

Paragraph

Page

GLOSSARY OF ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

The common foreign and security policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common measures: financial and budgetary data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Court’s Opinion No 1/97 on the common foreign and security policy . . . . . . . . . . . . .

Some implications for the CFSP of the Treaty on European Union . . . . . . . . . . . . . . . . . . . .

Objectives and scope of the present audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PRELIMINARY REMARKS ABOUT SOME CHARACTERISTICS OF CFSP ACTIONS . . . . . . . . .

OBSERVATIONS ON THE IMPLEMENTING OF CFSP ACTIONS . . . . . . . . . . . . . . . . . . . . . . . .

Council decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary framework for the Republic of Srpska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conference on the Stability Pact for South-eastern Europe . . . . . . . . . . . . . . . . . . . . . . .

Special representative for Yugoslavia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Special representative for the Royaumont Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial and budgetary arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Different budget lines to finance CFSP operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contributions in kind and co-financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Availability of resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Delays in launching the actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contracting and extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Employment conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reporting and evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating versus administrative costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I - XII

1-18

1-6

7-9

10

11-15

16-18

19-23

24-64

24-30

24

25-26

27-28

29

30

31-58

32-34

35-40

41-43

44-47

48-54

55-58

59-61

62-64

3

4

5

5

6

7

7

7

8

8

8

8

8

9

9

9

9

10

10

11

11

12

13

13

14

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Paragraph

Page

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

65-77

Improvements since the Court’s Opinion No 1/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65

Framework for the CFSP actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66-67

Budgetary arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68-69

Delays in launching the actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70-71

Contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

72-73

Employment conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74-75

Reporting and evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76-77

ANNEX 1 — Institutional responsibilities and functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ANNEX 2 — Amounts allocated in 1997 to 2000 to common measures . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ANNEX 3 — Budgetary execution 1997 to 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ANNEX 4 — Time lapses in implementation of joint actions having financial implications . . . . . . . . . . . . . .

ANNEX 5 — Closure of actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Council’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Commission’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

14

14

15

15

15

15

16

17

18

19

21

24

28

29

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GLOSSARY OF ABBREVIATIONS

BiH

— Bosnia and Herzegovina

CARDS Regulation — Community assistance for reconstruction, development and stabilisation, Council Regulation
(EC) No 2666/2000 of 5 December 2000 on assistance for Albania, Bosnia and Herzegovina,
Croatia, the former Yugoslav Republic of Macedonia and the Federal Republic of Yugoslavia
(OJ L 306, 7.12.2000).

CFSP

Coreper

ECMM

EDF

EUSR

GFAP

ICRC

JA

MAPE

NATO

NSG

OHR

PDB

PESC

Phare

PIC

SADC

SG/HR

TEU

UNMIK

WEU

— Common foreign and security policy

— Permanent Representatives Committee

— European Communities Monitoring Mission (= EUMM: European Union Monitoring Mission)

— European Development Fund

— European Union special representative

— General framework agreement for peace (Bosnia and Herzegovina)

— International Committee of the Red Cross

— Joint action

— Multinational advisory police element

— North Atlantic Treaty Organisation

— Nuclear Suppliers Group

— Office of the High Representative to Bosnia and Herzegovina

— Preliminary draft budget

— Politique étrangère et de sécurité commune

— Poland-Hungary: aid for economic restructuring (Community aid programme for central and

east European countries)

— Peace Implementation Council (Bosnia and Herzegovina)

— Southern African Development Community

— Secretary-General of the Council/High Representative

— Treaty on European Union

— United Nations Interim Mission in Kosovo

— Western European Union

Weudam

— Western European Union Demining Assistance Mission to the Republic of Croatia

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SUMMARY

I. The Court of Auditors has assessed the evolution of the conditions governing the implementation of expen-
diture under the common foreign and security policy (CFSP) for the period 1997 to 1999, following the Court’s
Opinion No 1/97 on the same subject (see paragraphs 10 and 16 to 18).

II. Title V of the Treaty on European Union lays down the provisions establishing and governing the CFSP
(see paragraphs 1 to 6 and 11 to 15). An important change of the Treaty of Amsterdam was the creation of
the function of High Representative for the CFSP, fulfilled by the Secretary-General of the Council.

III. The instrument on which this report is focused is the one on joint actions, which ‘shall address specific
situations where operational action by the Union is deemed to be required’ as well as the implementing deci-
sions of common positions which ‘shall define the approach of the Union to a particular matter of a geographi-
cal or thematic nature’. The average amount committed was 35 million euro per year during the period 1997
to 2000 (see paragraphs 7 to 9).

IV. Despite a number of changes in the Treaty on European Union, the Commission’s role in determining the
financial, legal and operational arrangements is still not clear. Depending on the action, either the Commis-
sion or the Council defines the arrangements for its implementation. In practice, this complicates day-to-day
management both in the field and at headquarters level (see paragraphs 19 to 30).

V. Criteria were laid down by the end of 1999 on the sourcing of Community-funding for CFSP actions but
exceptions were left open for so-called ‘borderline cases’. Furthermore, only limited information is available
on contributions in kind made available by the institutions and on the amounts contributed by different Mem-
ber States. The basis for the sharing costs between other donors and the Union has not been adequately laid
down (see paragraphs 31 to 40).

VI.
In 2000, about 40 % of the commitment appropriations used reflected decisions taken by the Council
before 31 December 1999. In 1999, the equivalent percentage was 19 %. In the years 1997 to 1999, the total
amount of Council decisions in respect of the CFSP operations exceeded the appropriations available by about
24 % (see paragraphs 41 to 43).

VII. The time lapse between the Council decision and the first payment increased considerably from 1998 to
1999, and was then even higher than in 1997, when the procedure to transfer appropriations from the reserve
to the operational budget lines was used (see paragraphs 44 to 47).

VIII. Contracting was very complex in a number of actions as a result of an accumulation of extensions and
other adjustments, to the extent that a proper follow-up to the financial situation was made very difficult (see
paragraphs 48 to 54).

IX. Arrangements for remuneration and salary-related costs and allowances for special representatives and
office staff are not laid down or not applied unambiguously (see paragraphs 55 to 58).

X. Reporting is often late and irregular, and reports in some cases present insufficient information. This forms
a weak basis for any evaluation. The limited frequency of financial reports in particular forms a serious con-
straint to the Commission in supervising projects on a systematic basis (see paragraphs 59 to 61).

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XI. The question of the definition of administrative versus operating expenditure is still not resolved: although
a budget line was introduced from 1998 under subsection B8 to cover preparatory costs (which were previ-
ously regarded as administrative costs), the Council decided on 30 March 2000 that the costs of EUSRs should
be considered to be administrative expenditure, to be covered by the budget of the Council’s General Secretariat
(see paragraphs 35 and 62 to 64).

XII. On the basis of its audit conclusions, the Court makes the following recommendations:

— the European Parliament, the Council and the Commission should adopt at an interinstitutional level clear
operational principles and arrangements with regard to the Commission’s role in the implementation of
the CFSP,

— the financing of the CFSP actions should be managed in a more transparent manner,

— the Commission should launch an enquiry on the causes of long delays and reassess the action as well as

the partner for the management of the action,

— the Commission should amend contracts retroactively or extend them only in cases of force majeure. Cer-

tain practical measures facilitating the smooth implementation of actions should be sought,

— the Council and the Commission should establish clear rules on remuneration and salary-related costs,

— arrangements should be laid down for adequate reporting, audit and evaluation.

INTRODUCTION

2. Article 12 defines the type of action to be taken:

The common foreign and security policy

‘The Union shall pursue the objectives set out in Article 11 by:

— defining the principles of and general guidelines for the CFSP,

1. Title V of the Treaty on European Union (TEU) lays down the
provisions establishing and governing the CFSP. Its objectives, as
set out in Article 11(1) of the Treaty, are:

— deciding on common strategies,

— adopting joint actions (1),

— adopting common positions (2),

‘— to safeguard the common values, fundamental interests, inde-
pendence and integrity of the Union in conformity with the
principles of the United Nations Charter,

— strengthening systematic cooperation between Member States

in the conduct of policy.’

— to strengthen the security of the Union in all ways,

— to preserve peace and strengthen international security, in
accordance with the principles of the United Nations Charter,
as well as the principles of the Helsinki Final Act and the
objectives of the Paris Charter, including those on external
borders,

— to promote international cooperation,

— to develop and consolidate democracy and the rule of law,
and respect for human rights and fundamental freedoms.’

(1) According to Article 14(1) of the TEU, ‘Joint actions shall address spe-
cific situations where operational action by the Union is deemed to
be required’.

(2) According to Article 15 of the TEU, ‘Common Positions shall define
the approach of the Union to a particular matter of a geographical or
thematic nature’.

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Institutional responsibilities for the approval and implementa-
3.
tion of these common measures as set out in the TEU are outlined
in Annex 1. It does not include the role of the Secretary-General
of the Council in his capacity as High Representative for the CFSP,
who, according to Article 26 of the TEU, ‘shall assist the Council
in matters coming within the scope of the common foreign and
security policy, in particular through contributing to the formula-
tion, preparation and implementation of policy decisions, and,
when appropriate and acting on behalf of the Council at the
request of the Presidency, through conducting political dialogue
with third parties’. The common measures decided by the Council
in the period 1997 to 1999 are listed in Annex 2, showing their
financial impact on the budget of the European Union.

4. Article 28(2) and (3) of the TEU contains the following basic
provisions for financing the CFSP under two categories of expen-
diture:

(a)

‘Administrative expenditure which the provisions relating to
the areas referred to in this title entail for the institutions shall
be charged to the budget of the European Communities.’

(b) ‘Operating expenditure to which the implementation of those
provisions gives rise shall also be charged to the budget of the
European Communities, except (...) cases where the Council
acting unanimously decides otherwise.’

5. Additional financial provisions are specified in the Council
decisions adopting common measures. When adopting joint
actions, the Council lays down their objectives and scope, the
means to be made available to the Union, and, if necessary their
duration, and the conditions for their implementation (1).

6. The range of common measures is broad from the point of
view of geography, subject matter and duration. Furthermore, the
implementing body may be an international organisation or
agency, a non-governmental organisation, a national, provincial
or local government department, agency or institute, private sec-
tor company or person. In 1999, the amount of Community
financial resources (2) allocated to joint measures varied between
0,2 million euro and 16,2 million euro. In some cases the Com-
mission has to perform the measures very quickly. In the period
1993 to1996, there were 18 Council decisions for joint measures
financed from subsection B8, whereas there were 40 actions in
the period 1997 to 1999 (see Annex 2).

Common measures: financial and budgetary data

7. The total amount allocated to common measures in 1997 to
2000 under subsection B8 of the general budget of the European
Union was 141,2 million euro. Annex 3 gives more detailed

(1) Article 14(1) of the TEU.
(2) B8 only.

information about the budgetary implementation of budget head-
ings under subsection B8 (3) in 1997 to 1999, the years primarily
covered by the Court’s audit (see paragraphs 17 and 18). However,
this does not reflect completely the total costs of CFSP actions.
Member States and other donors co-finance some of the common
measures and the Council or the Commission may also finance
such measures using other financial resources (see paragraphs 32
to 40). Moreover, the Council uses budget item A-1 1 1 3 for the
preparatory costs of common measures. The amounts commit-
ted under this heading were 0,2 million ECU in 1997, 0,5 million
ECU in 1998, 0,6 million euro in 1999 and 1,2 million euro in
2000. However, this budget heading covers the expenditure for all
the Council’s special advisers, including activities outside the CFSP,
so that the cost of the preparation of CFSP actions cannot be
derived directly from that budget heading.

Table 1

Common foreign and security policy
Budgetary execution 1997 to 1999

Community Budget

Initial budget
Supplementary and amending budget
transfers

Final budget

Execution
%

(Mio ECU/EUR and %)

Appropriations

Commitment

Payment

60,0

34,2

94,2

74,7
79,3 %

44,2

41,4

85,6

65,6
76,6 %

Source: General budget of the European Union 1997 to 1999. Compte de Gestion

1997 to 1999. Sincom.

8. The operating budget of the CFSP under subsection B8 was
approximately 179 Mio ECU for the period 1993 to 1996, which
was an average of 45 Mio ECU per year. However, it is to be noted
that the joint action concerning the European Union administra-
tion in Mostar with an operating budget of 122 Mio ECU occurred
during that period. It was by far the largest CFSP action. Without
this action the average amount committed would have been
14 Mio ECU per year. For 1997 to 2000, the average amount per
year was 35 million euro and the largest amount for a single
action was 16,2 million euro.

(3) Annex 3 describes the implementation of the budgets for 1997 to
1999 in 1997 to 1999. It does not include the appropriations carried
over from the earlier years or carried over to the years after 1999, but
it includes payments to actions decided earlier than in 1997. Annex 2
describes the implementation of the projects in 1997 to 2000. The
difference in the total amount of commitments between Annexes 2
and 3 is approximately 13 Mio euro. It derives mainly from the situ-
ation where the commitment is charged against appropriations of the
year following that of the Council decision.

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9. From 1999 onwards the financing of operations contributing
to developing and consolidating democracy and the rule of law,
and respect for human rights and fundamental freedoms, and
support for elections and election-monitoring was transferred
from subsection B8 (CFSP) to subsection B7 (External actions).

defence, should the European Council so decide’. However, on the
basis of Article 28(3) of the TEU, the budget of the European
Communities does not include operating expenditure arising from
operations having military or defence implications.

The Court’s Opinion No 1/97 on the common foreign and
security policy

In 1996 to 1997, in response to a request from the European
10.
Parliament (1) the Court audited the conditions governing the
implementation of expenditure under the CFSP. The Court’s Opin-
ion No 1/97 on 10 April 1997 (2) made the following main points:

(a) there was a lack of clear criteria for determining the source of

Community funding;

(b) little or no information was available on the amounts dis-
bursed by different Member States or by other donors;

(c) preparatory work was considered by the Council as adminis-
trative expenditure and therefore charged to Section II —
Council — of the general budget, leading to a loss of transpar-
ency in the management of the budget;

(d) financial resources were not made available in time to permit
efficient implementation or to carry out the preliminary work
required before a common measure is decided upon;

(e)

in the absence of clear definitions, the Commission’s role in
determining the financial, legal and operational arrangements
needed for the implementation of the CFSP measures involv-
ing expenditure was not clearly established.

Some implications for the CFSP of the Treaty on European
Union

11. The Amsterdam Treaty on European Union entered into force
in May 1999. The text concerning the CFSP was partly modified
and restructured.

12. Article 17 of the TEU extends the CFSP to ‘all questions relat-
ing to the security of the Union, including the progressive fram-
ing of a common defence policy, which might lead to a common

(1) Resolution sent to the Court, in the name of the President of the
European Parliament, by the Secretary-General on 29 April 1996.

(2) The opinion was not published.

13. The Treaty of Amsterdam is less detailed about the content
of CFSP Decisions than the previous Treaty, thereby implicitly
allowing the delegation of some implementing authority from the
Council to the Commission (3). So far, this possibility has not
been used in the context of the CFSP. However, certain activities
previously financed under CFSP expenditure (subsection B8) have
now been or will be covered by Council regulations, which means
that such actions are or will be financed from budget headings
under the first pillar. These include activities in the area of human
rights and democracy, mine-clearance activities, the costs of the
Office of the High Representative (OHR) to Bosnia and Herze-
govina and support for the United Nations Interim Mission in
Kosovo (UNMIK). Consequently, for these activities, decision-
making authority is transferred from the Council to the Commis-
sion.

14. The role of the Secretary-General of the Council in his capac-
ity as High Representative is set out in the TEU. However, the TEU
neither supplies nor requires a definition, spelling out the respec-
tive roles of the Secretary-General of the Council and of the Com-
mission.

15. The possibility of appointing special representatives (EUSR (4))
with a mandate in relation to particular policy issues was also
introduced by the Treaty of Amsterdam (Article 18(5)). This was
the recognition of a practice which was already in place.

Objectives and scope of the present audit

In December 1997, the European Parliament requested the
16.
Court of Auditors in its resolution (5) about Opinion No 1/97 ‘to
submit a special report on the implementation of CFSP no later
than two years after the entry into force of the Amsterdam Treaty’.

17. The objective of the audit was to assess the evolution of the
conditions governing the implementation of expenditure under
the CFSP in the period 1997 to 1999. Simultaneously the audit
examined whether the main shortcomings pointed out by the
Court in its earlier opinion had been corrected.

18. The audit covers all operations decided by the Council dur-
ing the period 1997 to 1999 (partly implemented during 2000
and 2001). The audit also covered actions decided before 1997
but implemented in 1997 or later. It was based on documenta

(3) Article 14(1) of the TEU.
(4)

In this report, this title is also used as a universal definition, even
though the Council Decision may have used another title, such as
‘special envoy’.

(5) Resolution of the European Parliament of 19 December 1997 on the

Court’s Opinion No 1/97, point 7 (OJ C 14, 19.1.1998).

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tion available, mainly at the level of the Commission’s depart-
ments, but did not include on-the-spot visits to carry out checks
on CFSP actions.

PRELIMINARY REMARKS ABOUT SOME CHARACTERISTICS
OF CFSP ACTIONS

19. A number of objectives governing the CFSP relate to security
of the Union, peace preservation and strengthening of interna-
tional security, promotion of international cooperation and lead
to actions in crisis or post-crisis areas. Consequently, CFSP actions
are considered as highly political and in many cases they are
intended to be implemented rapidly and within short deadlines.

20. The responsibility for carrying out and monitoring the com-
mon measures is shared between the Presidency of the Council,
the Secretary-General of the Council in his capacity of High Rep-
resentative and the Commission. According to Article 18(1) of the
TEU, the Presidency of the Council represents the Union in all
CFSP matters (see Annex 1, which contains the institutional respon-
sibilities and functions under the CFSP). The Presidency shall be
assisted by the Secretary-General of the Council in his capacity as
High Representative. The Presidency is also assisted, if necessary,
by the next Member State to hold the Presidency (Article 18(4)).
According to Article 18(4) ‘The Commission shall be fully associ-
ated in the tasks referred to in paragraphs 1 and 2 (1)’.

Party have this amongst many other responsibilities. ... This slows
up decision-making ...’ In this respect, the situation has not changed
and it does not create the best conditions for a coherent, balanced
and responsive Community CFSP. Although the role of the High
Representative is still evolving, the responsibility of the imple-
mentation of the CFSP lies within the Presidency of the Council.
Only the administrative implementation of the CFSP actions is the
Commission’s responsibility. The present situation leads to eco-
nomic inefficiency in running the CFSP. The present text of the
Treaty does not allow delegation in full of the implementation of
actions to the Commission (see Annex 1).

23. The combination of the above factors (highly political con-
tent, rapid implementation, unclear definition of responsibilities)
have led to problematic implementation of the Council Decisions
(see paragraphs 24 to 30), to complex and sometimes inappropri-
ate financial and budgetary arrangements (see paragraphs 32 to
58), to confusion about the responsibilities for evaluations to be
carried out (see paragraph 60) and to inconsistent definition and
funding of ‘operating’ and ‘administrative’ expenditure (see para-
graphs 35 and 62 to 64).

OBSERVATIONS ON THE IMPLEMENTING OF CFSP ACTIONS

Council decisions

Background

21. The Court pointed out in its Opinion No 1/97 that the
meaning of ‘fully associated’ has not been defined either in the
TEU or in subsequent regulations and that the lack of definition
had resulted in a situation in which the exact responsibilities for
making financial, legal, technical and other operational arrange-
ments required for the carrying-out of the measures had not been
established and were defined on a case-by-case basis.

24. During 1997-1999 a number of actions for south-eastern
Europe was decided by the Council. Given the political situation
it was felt that actions were to be undertaken urgently. However,
by doing so, not all relevant factors influencing the implementa-
tion of the actions were taken properly into account as the fol-
lowing examples show.

22.
In its Special Report No 2/96 concerning the accounts of the
administrator and the European Union administration, Mostar (2)
the Court stated that ‘the six-monthly rotation in the Council
Presidency is, unfortunately ill-adapted to the need of continuity
of a joint action such as Mostar. The personnel responsible for the
ultimate decisions and their execution changes every six months
and, as is normal with the functioning of the Presidency of the
Council, the apparatus shifts from one Member State capital to
another as the Presidency rotates. The ad hoc Working Party also
has not provided a suitable permanent structure for overall super-
vision of the joint action. The officials that make up the Working

(1) Article 18(2): ‘The Presidency shall be responsible for the implemen-
tation of decisions taken under this title; in that capacity it shall in
principle express the position of the Union in international organisa-
tions and international conferences.’

(2) Special Report No 2/96, paragraphs 61 and 62 (OJ C 287, 30.9.1996).

Budgetary framework for the Republic of Srpska

25. The joint action which aimed to help the new Government
of the Republic of Srpska to establish a coherent and transparent
budgetary framework formulated conditions according to which
‘the Government of the Republic of Srpska is expected to estab-
lish rapidly the 1998 budget in a manner satisfactory to the Inter-
national Monetary Fund, to work closely with the Customs and
Fiscal Assistance Office (CAFAO) and other international organi-
sations on restoring control over the collection of customs duties,
excises and sales tax revenues, to implement the common Bosnia
and Herzegovina customs tariff schedule and to submit to Parlia-
ment draft legislation on the reform of excise and sales taxes’. It
was also stipulated that the High Representative to Bosnia and
Herzegovina could suspend assistance if the Government of the
Republic of Srpska acted in a manner contrary to the objectives
and criteria set out in that joint action.

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26. The total assistance of 6 Mio ECU, agreed on 24 February
1998, was transferred to the Republic of Srpska in four instal-
ments between 25 February and 25 May 1998. On the basis of
the Council Decision (1), the expenditure was eligible retroactively
to 1 December 1997. There was no reference, when these pay-
ments were made, to the abovementioned conditions, nor were
they assessed in the final report. The payments to the beneficiary
were made before the Srpska Government could provide evidence
of having fulfilled the conditions. Laying down conditions for this
type of grant is important, but only when the conditions are fea-
sible and when the Commission is in the position to verify their
fulfilment.

Federal Republic of Yugoslavia, which was to expire on 31 Decem-
ber 1998, should not be extended. The obvious reason was the
fundamentally changed political situation which led to the NATO
intervention in Yugoslavia in April 1999. However, by its deci-
sion of 28 December 1998, the Council extended the action until
31 January 1999 and subsequently, on 25 January 1999, until the
end of 1999. The EUSR presented a resignation request to the
Presidency on 4 June 1999, because he considered, given the
development of the conditions in the area, that it was not realistic
to expect him to fulfil the mandate bestowed upon him by the
Council. However, it was not until 11 October 1999 that the
Council repealed the action. This delay cost the Union a total of
150 000 euro (5), which was the expenditure in 1999.

Conference on the Stability Pact for South-eastern Europe

27. The Council took a Common Position (2) to convene a con-
ference on the Stability Pact for South-eastern Europe on 17 May
1999. The arrangements for the conference thereupon were begun
by the country holding the Presidency without any specific deci-
sion having been taken by the Council, and without consulting
the Commission on the terms of the arrangements with the Gov-
ernment of Bosnia and Herzegovina. On 19 July 1999 the Council
took a decision for a joint action in order to make the resources
available for the Conference of Heads of State and Heads of Gov-
ernment (3), which was to take place on 29 and 30 July 1999, less
than two weeks after the decision. According to the decision, this
joint action should apply until 30 September 1999. However, the
contract between the Council of Ministers of Bosnia and Herze-
govina and the Commission was not signed until 26 November
1999. In the contract it was agreed retroactively that the date on
which the implementation of the joint action ended was 30 Sep-
tember 1999. In the meantime, the EU Presidency and the Coun-
cil of Ministers of Bosnia and Herzegovina had agreed, on 27 July
1999, that the Member State holding the Presidency should pre-
finance a part of the costs of the summit which was not to exceed
40 % of the eligible costs to be paid under the joint action. The
Commission reimbursed the prefinanced amount to the Member
State on 14 December 1999.

28.
In so far as no provision was made in the Council Decision
of 19 July 1999 for financing expenditure incurred before that
date (4), it is arguable that part of the reimbursement to the Presi-
dency was technically not eligible. It is important that in compa-
rable circumstances in future the Presidency should avoid finan-
cial commitments before appropriate consultation with the other
Member States and the Commission has taken place.

Special representative for Yugoslavia

29. At the end of 1998, the Council Working Party of CFSP
Counsellors indicated that the mandate of the EUSR for the

(1) 98/117/CFSP, Support of the Bosnian peace process (OJ L 35, 9.2.1998).
(2) 1999/345/CFSP, Stability Pact for South-eastern Europe/A conference

on south-eastern Europe (OJ L 133, 28.5.1999).

(3) 1999/480/CFSP, A meeting of Heads of State and Government in
Sarajevo, Bosnia and Herzegovina, concerning the Stability Pact for
South-eastern Europe (OJ L 188, 21.7.1999).

(4) According to the final report the Organisation Board and subboards

began to operate from 9 July 1999.

Special representative for the Royaumont Process

30. On 31 May 1999, the Council appointed an EUSR for the
Royaumont Process (Process on stability and good-neighbourliness
in south-east Europe). The relevant Commission decision to make
the appropriations available was only taken on 12 October 1999.
The contract with the EUSR was signed two days later. The EUSR
presented his resignation to the Presidency on 3 February 2000
to take effect on 1 March 2000, justifying his step by stating, inter
alia, that: ‘my resignation will facilitate efforts by the Council for
the rationalisation and streamlining of European Union activities
in the region of South-eastern Europe. Moreover, it will open the
way for the full integration of the Royaumont Process in the Sta-
bility Pact for South-eastern Europe’. The Council, however, did
not accept the resignation, and informed the EUSR that his res-
ignation should coincide with the expiry date of the Council deci-
sion i.e. on 31 May 2000. For some reason it was found difficult
to repeal this action, despite the fact that it was already clear at
the moment of the Commission decision that this joint action
was not relevant any more.

Financial and budgetary arrangements

31. The Court’s Opinion No 1/97 mentioned several cases where
similar operations were financed simultaneously both by appro-
priations from CFSP and by ‘non-CFSP parts of the budget’. This
is partly caused by the Treaties, which mention actions for human
rights and democracy both in the context of CFSP (Article 11 of
the TEU) and of development cooperation (Article 177 of the EC
Treaty), and includes under the CFSP, inter alia, humanitarian and
rescue tasks (Article 17 of the TEU), which can also be financed
under the first pillar. The Court emphasised at that time that ‘clear
criteria for determining the source of Community funding should
be established’ so that ‘transparency and consistency in the man-
agement of budget appropriations must be assured’. Despite a
number of improvements, certain arrangements and procedures
need further clarification.

(5) Caused by the fact that the staff of the EUSR remained in office until
the EUSR’s resignation request was accepted. The EUSR did not receive
renumeration from the Community funds.

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Different budget lines to finance CFSP operations

by the WEU (see also paragraph 32). It is difficult to see how this
capacity-building operation falls under the terms of Article 17.

32. The funding of similar actions by more than one budget sub-
section (B7 and B8) continued during 1997 to 1999. Several anti-
personnel landmine actions as well as election-monitoring actions
were financed by subsections B7 and B8 (1). The election process
in Nigeria was supported by the EDF as well as by subsection B8.
The project ‘Re-establishment of a viable police force in Albania’
(MAPE) was earlier financed by Phare, notably through the rebuild-
ing of stations and the provision of equipment, whereas the train-
ing activities were financed under subsection B8.

33.
It was not until November 1999, that the Permanent Repre-
sentatives Committee (Coreper) adopted criteria providing that
normally the operating expenditure for actions for which there is
a specific Council regulation should be financed from subsection
B7 of the budget, whereas subsection B8 is reserved for actions
which are not or only partially covered by a Council regulation.
Also it was correctly stated that CFSP funds cannot be used as an
‘urgency’ procedure. However, at the same time, exceptions were
left open for so-called ‘borderline cases’, which according to the
Council document ‘mainly pertain to actions to develop and con-
solidate democracy and the rule of law, respect for human rights
and freedoms in third countries, as well as cases on conflict pre-
vention’, although Council regulations to support actions of this
kind were adopted only seven months earlier (2). Since November
1999 the criteria were followed, with the exception of two opera-
tions implemented by the Western European Union (WEU), one
of the operations consists of anti-personnel landmine actions
which type of action is also covered by Council regulations (3) for
financing by subsection B7. However, the Commission’s view-
point is that on the basis of Article 17 of the TEU, any action
implemented by the WEU needs a legal basis in the form of a joint
action to be financed under subsection B8. The second action was
to re-establish a viable police force in Albania, also implemented

(1)

In 1999, budget headings B7-6 6 1 ‘Community participation in
action concerning anti-personnel mines’, B7-7 0 0 ‘Support for democ-
racy in the countries of central and eastern Europe, including the
Republics formerly part of Yugoslavia’, B7-7 0 9 ‘Support for, and
supervision of, electoral processes’.
In 1998, budget headings B7-6 6 1 ‘Community participation in
action concerning anti-personnel mines’, B7-7 0 0 ‘Support for democ-
racy in the countries of central and eastern Europe, including the
Republics formerly part of Yugoslavia’, B7-7 0 9 ‘Support for, and
supervision of, electoral processes’.
In 1997, budget headings B7-6 6 1 ‘Community participation in action
concerning anti-personnel mines’, B7-7 0 0 1 ‘Community measures
to help democracy and support the peace process for the Republics
formerly part of Yugoslavia, B7-7 0 9’ ‘Support for, and supervision
of, electoral processes’.

(2) Council Regulations (EC) No 975/1999 and (EC) No 976/1999

(OJ L 120, 8.5.1999).

(3) Council Regulations (EC) No 1257/96 of 20 June 1996 concerning
humanitarian aid (OJ L 163, 2.7.1996) and (EC) No 2258/96 of
22 November 1996 on rehabilitation and reconstruction operations
in developing countries (OJ L 306, 28.11.1996).

34. At the time of the Court’s Opinion No 1/97, some of the
appropriations were placed initially under Title B0-4 ‘Reserves
and provisions’, and transferred to the budget headings in subsec-
tion B8 ‘Common foreign and security policy’. The Court criti-
cised the delays in releasing funds as a result of cumbersome pro-
cedures for transferring appropriations from the reserve to the
operational budget. The reserve has not existed since 1998, which
has simplified procedures.

Contributions in kind and co-financing

35. The budget subsections B7 and B8 do not show all costs of
the operations. The Council and the Commission second staff to
the EUSR and furthermore the Council has provided office space
in Brussels (4) for three EUSRs. As administrative expenditure, the
costs of these secondments and offices are financed from part A
of the budget. Consequently some salaries and logistical support
were regarded as administrative and some other, similar, costs as
operating expenditure (5). This practice is not transparent.

36. Nevertheless, some improvement has occurred. Since 1999
the financial statements (6) accompanying draft Council decisions
mention usually as a ‘p.m.’ and/or as a description of the contri-
butions in kind from the Commission and from the Council,
whereas previously no information about Community contribu-
tions in kind was given. Secondments of personnel by Member
States were usually included in the financial statements as ‘p.m.’
items, but since 1999 more specific information has been given
for a number of actions. The nature and financial importance of
contributions in kind has not been presented in the financial
reports produced on the CFSP actions.

37. Apart from the contributions in kind, the operational expen-
diture was shared with a number of non-member States in the
case of the High Representative’s mission to Bosnia and Herze-
govina. This action started at the beginning of the year 1996 and
is still continuing. The costs were allocated to the different donors
on the basis of a key introduced in 1996. However, no formal
agreement exists between the different donors on the respective

(4) On the basis of Article 3(4) of JA 96/676/CFSP (EU special envoy for
the Middle East peace process) and of Article 4(4) of JA 96/250/CFSP
(Special envoy for the African Great Lakes region), logistic support
could have been given only ‘in the region’. The new decisions (JA
2000/794/CFSP, Article 4(6) and Council Decision 1999/423/CFSP,
Article 2(3)) have the respective formulations.
In 2001, all costs are paid from part A of the general budget of the
European Union, because the appropriations for EUSRs have been
transferred from B8 to A-1 1 1 3.

(6) A financial statement mentions, inter alia, the budget line concerned,
the legal basis of the action, objectives and duration of the action,
donors of the action and budget of the action.

(5)

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shares. At the time, the Community’s share was 50,6 %. However,
2,4 % of the budgets was not allocated to any donor. In May 1999,
Coreper accepted the increase of the EU’s share to 53 % on request
of the High Representative, but only from 1999 onwards. The
Community did not accept that this higher share should also be
adopted for expenditure in the years 1996 to 1998. The OHR
financing shortfall is further increased by the fact that from the
beginning a number of countries paid their share only partly or
not at all. The financial report of the OHR as at 31 December
1999 shows that the outstanding amounts are in the order of
4,7 million euro (1) of which 2,6 million euro stems from ‘bad
payers’. The budgets for the OHR should be prepared on a solid
basis and should not include unreliable pledges.

38. When deciding on the European Union’s 10 Mio ECU par-
ticipation in the implementing structures of the Bosnia and Herze-
govina peace agreement on 20 December 1995, the Commission
also decided to provide additional funds of 2 130 000 ECU for
infrastructure and running expenses (2) directly paid by the Com-
mission. It was thus not included in the accounts of the OHR. For
that reason it was not shared with the other donors.

39. So far, the Commission has not checked whether its contri-
butions exceed its authorised share of eligible expenditure (50,6 %
for 1996 to 1998 and 53 % from 1999 onwards) (see para-
graph 37). The Commission financed the OHR on the basis of
expenditure forecasts. The OHR reports annually on its expendi-
ture to the Commission. In 2000 the Commission recovered
1,2 million euro of the contribution made in 1999. However, the
OHR’s reporting of its expenditure includes items which are not
real cash expenditure and therefore not eligible. Notably it includes
‘provisions for unpaid donations’, ‘depreciation’ and ‘losses on dis-
posal of property, plants and equipment’. In 1996 to 1999 the
total amount of provisions for unpaid donations was around
4,7 million euro and the depreciation (on assets already financed
by the EU) was around 5,5 million euro. As a result for the years
1996, 1997, 1998 and 1999 the Commission paid nearly 4 mil-
lion euro more than its share. The Commission should, without
delay, carry out reconciliations covering the years 1996 to 2000
and from then on this should be done on an annual basis. In case
of overpayment, recovery should be made from the OHR.

Availability of resources

41. The Financial Regulation requires financial resources to be
available when a decision to finance an action is taken. The Com-
mission submitted a declaration to Coreper on 20 October 1998
in which ‘The Commission notes that two joint actions on the
observation of the Nigerian elections and on the forensic experts
mission to Kosovo will be adopted on the basis of the commit-
ment appropriations of the 1999 budget. Whilst recognising the
urgency and importance of both actions and the fact that they
will only enter into force in 1999, the Commission recalls the pre-
vious agreement that this improper method would no longer be
used and points out that it will lead to a situation in which a sig-
nificant percentage of subsection B8 of the Community budget
will be unavailable as of the beginning of that year on account of
past decisions’. Nevertheless, the commitment appropriations of
the budget for the year 1999 were used. Several commitments,
before or after the Commission’s declaration, were made in a dif-
ferent budget year from the one in which the Council decision
was adopted. In 2000, about 40 % of the commitment appropria-
tions used reflected decisions taken by the Council before
31 December 1999 (3). In 1999, the equivalent percentage was
19 % (4).

42. Also at the Coreper meeting on 20 October 1998, the Com-
mission repeated its opposition to the incorrect budget technique
again used in another joint action (5), which consisted in charg-
ing some of the commitments required to a future budget. It
noted with satisfaction, however, the Member States’ unanimous
agreement that the technique was used on an exceptional basis
and therefore all the commitments required for CFSP actions
would be charged in their entirety to the budget for the year of the
decision. Since that statement, so-called ‘split commitments’ have
not been used again.

43.
In the years 1997 to 1999, the total amount of Council deci-
sions in respect of the CFSP operations came to 117 million
euro (6), which exceeded the appropriations available by 20,6 mil-
lion euro. The Commission decisions exceeded the appropriations
available by 7,7 million euro. The Council decisions and the Com-
mission decisions should be made within the limits of commit-
ment appropriations of the relevant year in the general budget of
the European Union.

40. Another case was the Royaumont Process which included
the financing of 11 projects. According to the financial statement,
the share financed by the Community varied between 30,5 % and
100 % and averaged 79 %. The other donors were not mentioned
in preparatory documents, nor were reasons given for the differ-
ent levels of Community financing.

Delays in launching the actions

44. The time lapse between Council decision and first payment
by the Commission provides an indicator of the speed at which

(1) From this amount about 1 900 000 euro is allocated to the EU. This
audit shows, however, that the EU had paid even more than its due
share.

(2) The share of the Commission of the budgeted costs of the OHR was
either 55,4 % or 61,4 % depending on whether the OHR budget
included the 2,13 Mio ECU. During the audit, the real costs to the
Commission from this contribution have not been clarified.

(3) Cover note of the Council, 8290/2000 CFSP 214. According to
Sincom, 18 600 166 euro was committed due to the Council decision
made in 1999. The commitment appropriation was 47 million euro
for the year 2000.

(4) Forwarding note of the Council, 10814/1999 CFSP 269. Decision
98/623/CFSP (75 000 euro) is missing from the list in the abovemen-
tioned note.

(5) Decision 98/608/CFSP, Special envoy for Middle East peace process.
(6) See Annex 4.

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actions are implemented. This time lapse is often considerable,
despite the apparent urgent nature of many interventions.

45. During the period 1997 to 1999, the average time from the
Council decision to the first payment was 173 days (1) (see
Annex 4). By not using the reserve since 1997 (see paragraph 34),
this time span was reduced in 1998. However, in 1999 it was
higher than in 1997. The delay between the Council decision and
first payment varies considerably from action to action: in one
case, the time from the Council decision to the first payment was
only four days; in one other case 18 days and in two other cases
less than 50 days; in three cases the delays were between one and
two years; for half of the cases, the delay was between 104 and
232 days in 1997, between 61 and 192 days in 1998 and between
128 and 183 days in 1999.

46. The time span between the Council decision and the Com-
mission decision was more than 120 days in seven cases out of
40 in the period 1997 to 1999 of which six were related to 1999
Council decisions (see Annex 4). The joint actions and the imple-
menting decisions related to Common Positions are usually taken
when the Council considers that there is urgent need for a Com-
munity action. As the Court pointed out in its Opinion No 1/97,
one factor causing delays is an insufficient involvement of the
Commission in the preparatory phases of the common measures.
A smooth fulfilment of the Council decision is hardly possible if
the Commission does not participate in the preparatory work
from the beginning. Another cause of delays has been coordina-
tion problems or other difficulties within the Commission’s depart-
ments. The Commission has stated that the reorganisation of the
CFSP tasks within the Commission should avoid repetition of
such cases.

47. Due to the delays, actions often start much later than origi-
nally intended. Such delays are a threat to the effectiveness of the
measures. The Commission should pay special attention to cases
where there is a high risk of a long delay before any action is likely
to take place. In those cases a re-assessment of the measure as
well as of the intended partner for the management of the action
should be considered. The result of such assessments and the
eventual corrective action taken should be included in the project
files.

Contracting and extensions

48. Contracting was in particular very complex for the assis-
tance programme to support the Palestinian Authority in its
efforts to counter terrorist activities emanating from the territo-
ries under its control. During three years the Commission signed
two contracts with the EU adviser and concluded a total of 10
amendments. The annual renewal of the first contract occurred

(1) 186 days in 1997, 122 days in 1998 and 199 days in 1999.

late so that an amendment to prolong the first contract for three
months was needed. The signing of the second contract, however,
led to an overlap with the first one. Amendments were needed to
clarify points that were not well defined in the contracts, but they
resulted in discrepancies between the contracted and actual
amounts. It also caused problems closing the first contract, which
was achieved in 2000 by means of the fifth amendment which
tailored the budget of the contract to the actual expenditure.

49.
In other cases, too, contracts were amended in order to
extend their validity after they had expired (2). In some cases the
extension exceeded the final deadline set in the Council decision
for the measure. The Commission does not have the authority to
do this. The reason for extending contracts was often that all of
the amount committed had not been used by the time the con-
tract expired. In these cases the unused funds should have been
decommitted.

In seven out of 40 cases, the implementation period did not
50.
correspond to the periods indicated in the contracts: activities
were implemented after the contract had expired, or contracts
covered costs retroactively or covered expenditure which had been
incurred before the contract was concluded. In this manner ineli-
gible costs are charged to the budget. In most of the cases these
irregular transactions appear to be motivated by a desire not to
‘lose’ budgetary appropriations.

51. For the action concerning the EUSR for the African Great
Lakes region the amount of two contracts exceeded the amounts
of the corresponding budgetary commitments by 1,2 million
euro. Such practices are contrary to Article 1(4) of the Financial
Regulation.

(2) Re-establishment of a viable police force in Albania.

Contract dated 8 July 1999, valid until 30 June 2000, extended on
28 July 2000.
Southern African Development Community
Contract dated 19 December 1997, valid until 18 June 2000, extended
on 27 July 2000.
UNMIK
First amendment on 28 May 2000, retroactively from 1 January 2000.
EUSR for the African Great Lakes region
Third amendment of first contract on 31 July 1999, retroactively for
the period from 1 August 1997 to 31 July 1998, corrected on
11 November 1999. Second contract on 31 July 1999 retroactively for
the period from 1 August 1997 to 31 July 1998.
EUSR for Federal Republic of Yugoslavia
First amendment on 7 April 1999, retroactively from 1 January 1999.
EUSR for the Middle East peace process
Second amendment of first contract on 9 December 1997, from
25 November 1996 to 30 April 1998.
Third amendment of first contract on 2 December 1998, from 1 May
1998 to 24 November 1998.
Second contract dated 18 December 1998 for the period from
26 November 1998 to 31 July 1999.
First amendment of the second contract dated 16 June 1999 from
26 October 1998 to 31 December 1999.
EUSR Royaumont process
Fourth amendment dated 15 June 2000, retroactively from 1 June
2000.

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52. The action for Bosnia and Herzegovina was financed in 1996
to 1999 by four successive decisions and two extensions. The first
extension was justified, because at the time of the Council deci-
sion it was expected that only the Community budget would
finance the action, whereas at a later stage more donors made sig-
nificant contributions. The extension of the third decision, by
which the operating time was extended by one year until 31 Decem-
ber 1999, was the result of the fact that the need for additional
support was overestimated. Due to a cumulation of decisions and
extensions, the action was covered by two decisions for long peri-
ods and in the period between 26 October 1998 and 31 Decem-
ber 1998 it was even simultaneously covered by three different
decisions. These circumstances make a proper financial follow-up
difficult.

was entered in the accompanying financial statement. There is,
however, no apparent justification for such a special allowance.

57. According to the Commission decision concerning the remu-
neration of the EUSRs and other persons appointed by the Coun-
cil (2), an insurance must be taken to cover the high risks which
may arise during the mission of the EUSRs or other persons
nominated by the Council. No comparable rule is applied to ex-
patriate staff and family members, when sited on the spot outside
the Union, by analogy with the provisions of Articles 24 and 25
of Annex X to the Staff Regulations.

53. The Council decisions usually indicate the planned duration
of the actions with effect from the date of the decision. Whilst the
duration may remain realistic, the deadline for the actions, also
mentioned in the decisions, rapidly becomes obsolete if the prepa-
ration of an action takes so much time that the contract for its
implementation is signed with considerable delay. This leads to
situations where the contract goes beyond the deadline set by the
Council decision, or to operations with more limited scope than
planned in the Council decision. It has also required in some cases
a Council decision with the sole aim to extend the deadline.

54. Once an action is completed, the Commission often does
not close the commitments promptly (see Annex 5). To some
extent, this has been due to delays in receiving reports (see para-
graphs 59 and 60).

Employment conditions

In its Opinion No 1/97 the Court criticised the fact that
55.
employment conditions for the special envoys were not laid down
in the Council decisions and that the Commission’s departments
had to agree them after appointment. The Commission issued a
communication concerning the remuneration of EUSRs in June
1998, which also determines which articles of the Staff Regula-
tions apply to an EUSR. The communication specifies that exist-
ing (more favourable) arrangements were not revised by the new
rules as long as the EUSRs concerned fulfil the same mandate.

56. This Decision has since been applied to all new EUSRs and
other special envoys of the Union appointed by the Presidency,
with one exception. In that case the Council decision (1) explicitly
introduced a special allowance for the EUSR. The amount of the
special allowance was not mentioned in the Council decision, but

58. Apart from mission expenses all the salary-related costs of
the seconded staff should be paid by the seconding Member State
or Community institution, for example installation, housing,
removal and resettlement allowances, high risk insurance, addi-
tional compensation for working abroad or at an insecure site and
free tickets for private journeys to permanent home country. In
practice the treatment is different depending on the action or the
seconding Member State or institution.

Reporting and evaluations

59.
In its Opinion No 1/97 the Court criticised the inadequacy
of accounting and financial reporting. In a number of cases
reviewed for the period 1997 to 1999, reports were still sent late,
not produced annually and the information given was, in some
cases, insufficient. Because information presented in progress
reports, interim and final reports forms the basis for the Com-
mission’s supervision, it is difficult to carry out such enquiries
when the quality of reporting is inadequate. Also a limited scope
of reports can be a serious constraint for closing the accounts for
the actions. During the period audited, the projects were usually
not audited by an independent auditor.

60.
In cases where the Council decision requests an evaluation
or a review of the measure, this request has not always been met.
Between the Council and the Commission, no clear agreement
exists on the responsibility for conducting evaluations, unless a
requirement is explicitly indicated in the Council decision.

61. On the basis of the Interinstitutional Agreement of 6 May
1999 between the European Parliament, the Council and the
Commission on budgetary discipline and improvement of the
budgetary procedure (3), the financial statements of each CFSP
action entailing expenditure should be sent immediately after the
Council decision to the European Parliament. So far the Council
has only included those documents in its annual report to Parlia-
ment.

(1)

JA 1999/523/CFSP, Special representative of the European Union to
act as coordinator of the Stability Pact for South-eastern Europe
(OJ L 201, 31.7.1999), Article 3. JA 1999/822/CFSP extended the
validity of this joint action until 31 December 2000 (OJ L 318,
11.12.1999).

(2) E/97/2709 — SEC(98) 925 of 4 June 1998. The Commission deci-

sion does not cover members of family.

(3) OJ C 172, 18.6.1999.

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Operating versus administrative costs

62. The Court stated in its Opinion No 1/97 that ‘preparatory
works and launching expenses can be considered and should nor-
mally be financed from operating appropriations’. The Court also
noted that, in the case of special envoys, there is no reason for
classifying the same sort of expenditure first as administrative and
later — when the joint action has been adopted — as operating.
Since 1998, the situation improved in that the general budget of
the European Union introduced a specific budget heading under
subsection B8 for preparatory measures (1)
(see also para-
graph 35).

63. The Council decided on 30 March 2000 that any EUSR,
whose appointment is based on Article 18(5) of the TEU, will be
placed under a contractual obligation to the Council instead of
the Commission. The Council Legal Service argued that the nomi-
nation of EUSR by the Council entails expenditure for that institu-
tion. Therefore, in accordance with Article 28(2) of the TEU, such
administrative expenditure should be charged to the administra-
tive budget of the Council. Consequently, according to the Coun-
cil document, the contract of EUSR as ‘special adviser’ to the
Council involved a change in the budgetary responsibility for the
financing of EUSR administrative expenditure (notably salaries
and travel expenses), which under a temporary arrangement with
the Commission dating from 12 February 1997 was charged to
the CFSP budget chapter to cover operating costs. It was decided
that such administrative costs will be charged to Item 1 1 1 3 of
the Council section of the EU budget as from 1 January 2001.

64. The documents underlying the above Council decision do
not define what is meant by ‘administrative’ and by ‘operating’
expenditure. Obviously the decision to consider the costs of the
EUSRs as ‘administrative’ is based on the nature of costs rather
than on the objective of the activities. According to Article 14(1)
of the TEU, ‘Joint actions shall address specific situations where
operational action by the Union is deemed to be required’.
Article 15 of the TEU states that ‘Common Positions shall define
the approach of the Union to a particular matter of a geographi-
cal or thematic nature’. On the basis of those definitions, it is in
general difficult to regard the expenditure incurred by a joint
action or a Common Position as administrative. Therefore

(1)

In the budget for 1999, budget heading B8-0 1 4. In the budget for
1998, both commitment and payment appropriation for this purpose
were 500 000 ECU, but they were transferred in their entirety. In
1999 they were 250 000 ECU. From the commitment appropriation
81 115 ECU and from the payment appropriation 150 000 ECU were
transferred. In 2000, there are different headings for existing and new
measures. The title has changed into ‘Preparatory measures and joint
strategies’. The amount is 1 500 000 euro for new measures and ‘p.m.’
for existing ones.

expenditure related to joint actions which consist of the activity
of special representatives should be treated as operating expendi-
ture. By defining the costs of EUSR as administrative expenditure
the Council has created a situation whereby a legislative body will
implement its own political decisions, making a political control
difficult.

CONCLUSIONS AND RECOMMENDATIONS

Improvements since the Court’s Opinion No 1/97

65. There have been some notable improvements in recent years,
such as improving the criteria determining the source of Com-
munity funding, creation of a budget line for preparatory costs,
abandoning of budgetary reserve and setting employment condi-
tions for EUSRs. However, more remains to be done to solve fully
the problems raised in the Court’s Opinion No 1/97 (see para-
graph 10).

Framework for the CFSP actions

66. The role of the Commission in determining the financial,
legal and operational arrangements is still unclear (see para-
graphs 19 to 30). Furthermore, by defining the costs of EUSRs as
‘administrative’ and consequently financing those costs through
the Council’s budget, a part of the implementing authority has
been shifted to the Council. This weakens the Commission’s role
in the implementation of CFSP actions (see paragraphs 62 to 64).

67. Recommendation 1

The European Parliament, the Council and the Commission should adopt
at an interinstitutional level clear operational principles and arrange-
ments with regard to the Commission’s role in the implementation of the
CFSP.

In this context for example the following matters in particular should be
dealt with:

(a) the role of the Commission in influencing the conditions for the
implementation of Council decisions related to joint actions and
Common Positions should be enhanced;

(b) the Commission’s role in closing an ongoing action, when its con-

tinuation is no longer relevant, should also be enhanced;

(c)

the present classification of the costs of the Special Representatives
as administrative expenditure should be reconsidered;

30.11.2001

EN

Official Journal of the European Communities

C 338/15

(d) the Commission services should have an adequate staffing level to
meet the requirements of managing properly the CFSP actions.

71. Recommendation 3

Budgetary arrangements

68. The Council decisions and the Commission decisions in
respect of the CFSP operations exceed the annual limits of the
appropriations in the general budget of the European Union. In
case of co-financing, agreement on cost-sharing between differ-
ent donors is lacking and the total costs for actions can still not
be derived from preparatory documents or from financial reports
on the actions. On the basis of the present criteria similar actions
can still be financed by more than one budget subsection (see
paragraphs 32 to 43).

69. Recommendation 2

The Commission should launch an enquiry on the causes of long delays
and reassess the action as well as the partner for the management of the
action.

Contracting

72.
In many cases, contracts between the Commission and those
implementing CFSP actions have been amended. Often this has
meant retroactive changes to the elements of the project budget
and/or extension of the duration of the project. In some cases the
extension exceeded the final deadline set by the Council, even
though the Commission does not have authority to do this. The
reason for extending contracts was often that the entire amount
committed had not been used by the time the contract expired
(see paragraphs 48 to 53).

The financing of the CFSP actions should be managed in a more trans-
parent manner.

73. Recommendation 4

In particular:

The Commission should amend contracts retroactively or extend them
only in cases of force majeure. Certain practical measures facilitating the
smooth implementation of actions should be sought.

(a) commitments should be charged to the budget of the year in which

decision for actions is taken;

In particular:

(b) in cases of co-financing clear arrangements should be made on the

sharing of the costs;

(c)

the Commission and the Council should work out together a method
by which the contributions in kind are evaluated in a consistent way
on the basis of the real costs of the contributions. If, however, reli-
able information cannot be obtained from all Member States, the
financial statements accompanying Council decisions should at least
include the functions of seconded persons, the name of the seconding
Member State, and the duration of secondments. The contributions
in kind made by the institutions and the Member States should be
reported in the financial reports produced on CFSP actions;

(d) the preparatory costs, financed by the Council, should have a sepa-

rate budget item;

(e)

the general criteria for the exercise of either Community powers
(financing through other subsections than B8) or the European
Union’s powers under the CFSP (financing through subsection B8)
should be developed in order to eliminate borderline cases.

(a) given the delays between the Council decisions and the start of the
action, and the need to reduce extensions of actions while maintain-
ing the planned scope of the actions, the deadline laid down for the
completion of a project should be set from the time of the signing of
the contract between the Commission and those implementing the
action;

(b) if an existing operation is to be continued, the relevant Council deci-
sion should be taken sufficiently early for the extension of contracts
relating to the implementation of the action to be finalised in time
to avoid the interruption of contracts which hinders the smooth
implementation of the actions. The target should be to reach a Coun-
cil decision by July of one year for an activity which is to continue
the following year;

(c) contracts should provide systematically for informing the Commis-
sion about minor changes, within set limits, through the normal
periodical reporting system, avoiding formal amendment of the con-
tract;

(d) a specific manual on the implementation of CFSP actions should be

introduced.

Delays in launching the actions

Employment conditions

70. The time lapses between the Council decision and the imple-
mentation of actions are often considerable which can put the
impact of actions at risk (see paragraphs 44 to 47).

74. Conditions governing remuneration and salary-related costs
for EUSRs were laid down in a Commission communication in

C 338/16

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Official Journal of the European Communities

30.11.2001

June 1998, and followed with one exception. They were, however,
not applied to EUSRs appointed before that date. Besides, condi-
tions for other staff financed under the projects have not been laid
down. The practice concerning salary-related costs of seconded
staff paid from the CFSP project funds varies depending on the
action and/or the seconding Member States or institution (see
paragraphs 55 to 58).

75. Recommendation 5

timely basis about the result of CFSP actions. Audits and evalua-
tions are not carried out on a systematic basis (see paragraphs 59
and 60).

77. Recommendation 6

The Council and the Commission should establish clear rules on remu-
neration and salary related costs.

Arrangements should be laid down for adequate reporting, audit and
evaluation.

In particular:

(a) the applicable rules should be applied without exception both to
EUSRs and other staff financed by projects. When the contracts of
the EUSRs are next renewed, the rules should also be applied to
those who are still benefiting from more favourable terms;

(b) for seconded staff, only mission costs should be paid from CFSP

project funds;

(c) high risk insurance for the spouses or children of EUSRs or other
staff should be paid from project funds, when sited in high risk areas
only, in analogy with the provisions of Annex X to the Staff Regula-
tions.

Reporting and evaluations

76. Reporting is irregular, incomplete and unclear. Neither the
Commission nor the budgetary authority is fully informed on a

In particular:

(a) the Commission should develop clear reporting formats and should
establish clear rules on the frequency and content of reporting at
various levels of the operation;

(b) to improve the quality of overall control, the Commission should
arrange for audits to be carried out systematically for all important
actions on the basis of clear terms of reference covering the totality
of operations financed by the EU or co-financed with other donors.
For actions of a longer duration audits should be carried out on an
annual basis. The reports should present detailed findings and rec-
ommendations;

(c)

the Commission should have independent evaluations made, at least
for more important types of operation, even when the Council deci-
sion does not explicitly request them. It would be useful to prepare
the terms of reference for such evaluations in cooperation with the
Council.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 13 September 2001.

For the Court of Auditors

Jan O. KARLSSON

President

30.11.2001

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Official Journal of the European Communities

C 338/17

ANNEX 1

COMMON FOREIGN AND SECURITY POLICY (CFSP)
Institutional responsibilities and functions

Institution

Political action

Implementation

Budgetary execution and operative arrangements

European Council

— Defines principles and general

guidelines

Political Committee (Political
Directors)

— Monitors political situation and delivers

opinions to Council

— Monitors implementation

Council

— Defines and implements CFSP
— Defines Common Positions
— Decides matters subject of joint action
— Adopts joint actions
— For joint actions lays down:

— the scope
— the specific objectives
— if necessary the duration

— For a joint action, lays down:

— the means
— the procedures
— if necessary, the conditions

— Decides the financial mechanism and

source to cover the measure. (Community
budget/Member States contributions)
— Determines amount of appropriations
allocated for each specific measure
— Exerts budgetary powers (within the
limits relative to non-obligatory
expenditure) for the management of CFSP
appropriations charged to the general
budget

— Manages administrative appropriations

covered by its own budget

Presidency of the Council

— Represents the Union

— Responsible for implementation
— Keeps informed and consults the

European Parliament

Council Working Party CFSP
Counsellors

— General overview

— General overview

— General overview

Council Working Parties set up
for common CFSP measures

— Preparation and follow-up to Council

Decisions

— Assists the Presidency
— General overview

— General overview

European Parliament

— Refers questions to the Council

— Refers questions to the Council and to

the Commission

— Submits proposals to the Council

— Exerts budgetary powers for the manage-
ment of CFSP appropriations charged to
the general budget

— As the appropriations are classified as

non-obligatory expenditure, Parliament
has final responsibility
According to Article 39 of the
Interinstitutional Agreement of 6 May 1999,
the financing agreement is reached in
conciliation. If no agreement is reached the
European Parliament and the Council will
enter in the budget the amount contained in
the previous budget or the amount proposed
in the preliminary draft budget, whichever is
the lower.

European Commission

— Submits proposals to the Council

— Associated with the Presidency

— Manages operative expenditure covered by

— Holds an annual debate

the general budget
— Proposal Budget transfers
— Commitments
— Payments

— Informs the European Parliament

— Commission Delegations shall cooperate

Member States

— Inform one another

— Diplomatic and consular missions shall

— Grant funds to cover operational

cooperate

expenditure (as decided by Council)

— Submit proposals to the Council

Source: Treaty on European Union and Guide d’usage pratique de la PESC — General Secretariat of the Council, July 1996, with some amendments.

C 338/18

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Official Journal of the European Communities

30.11.2001

COMMON FOREIGN AND SECURITY POLICY (CFSP)
Amounts allocated in 1997 to 2000 to common measures, decided by the Council in 1997 to 1999

ANNEX 2

Common measure
(Joint action/Common Position)

Council Decisions adopting CFSP
common measure

Operating budget
Part B

Date

Reference

Committed to
31.12.2000

Paid to
31.12.2000

(Mio ECU/EUR)

Outstanding
commitments to
31.12.2000

1997

1998

1999

Support electoral process in Bosnia and Herzegovina
Nuclear related export control - NSG seminar
Support Palestinian Authority against terrorist activities
Special envoy for the African Great Lakes region
Special envoy for the Middle East peace process
Implementing structures of the peace plan for Bosnia and
Herzegovina
Conflict prevention and resolution in Africa
Anti-personnel landmines: special appeals from ICRC
Anti-personnel landmines: SADC and ICRC programmes
Support democratic transition process Congo

Support of the Bosnian peace process
Support of the Government of Montenegro
Support electoral process in Bosnia and Herzegovina
Special representative for Federal Republic of Yugoslavia
Special envoy for the African Great Lakes region
Implementing structures of the peace plan for Bosnia and
Herzegovina
Special envoy for the Middle East peace process
Second Nuclear Supplier Group seminar
Specific action of assistance for mine clearance
Support of the democratic process in Nigeria
Forensic experts missions in Federal Republic of
Yugoslavia

Communication system Nuclear Suppliers Group
Re-establishment of a viable police force in Albania
Implementing structures of the peace plan for Bosnia and
Herzegovina
Special envoy for Kosovo
Collection and destruction of weapons in Albania
Stability and good-neighbourliness south-east Europe
Special Envoy for the African Great Lakes region
Stability Pact for South-eastern Europe
Installation structures of the United Nations (UNMIK)
Coordinator of Stability Pact South-eastern Europe
Stability and good-neighbourliness south-east Europe
Implementation of Lusaka ceasefire in Democratic
Republic of the Congo
Combating spread of light weapons in Cambodia
Coordinator of Stability Pact South-eastern Europe
Special envoy Middle East peace process
High Representative in Bosnia and Herzegovina
Combating spread of light weapons in Mozambique
Installation structures of the United Nations (UNMIK)
Non-proliferation and disarmament in the Russian
Federation

24.3.1997
29.4.1997
29.4.1997
16.7.1997
22.7.1997

22.7.1997
20.10.1997
28.11.1997
28.11.1997
11.11.1996

2.2.1998
30.4.1998
30.4.1998
8.6.1998
13.7.1998

26.10.1998
26.10.1998
3.11.1998
9.11.1998
22.12.1998

97/224/CFSP
97/288/CFSP
97/289/CFSP
97/448/CFSP
97/475/CFSP

97/476/CFSP
97/690/CFSP
97/818/CFSP
97/819/CFSP
96/656/CFSP

98/117/CFSP
98/301/CFSP
98/302/CFSP
98/375/CFSP
98/452/CFSP

98/607/CFSP
98/608/CFSP
98/623/CFSP
98/627/CFSP
98/735/CFSP

22.12.1998

98/736/CFSP

25.1.1999
9.3.1999

1999/074/CFSP
1999/189/CFSP

9.3.1999
30.3.1999
10.5.1999
31.5.1999
28.6.1999
19.7.1999
29.7.1999
29.7.1999
22.10.1999

15.11.1999
15.11.1999
9.12.1999
17.12.1999
17.12.1999
17.12.1999
21.12.1999

1999/191/CFSP
1999/239/CFSP
1999/320/CFSP
1999/361/CFSP
1999/423/CFSP
1999/480/CFSP
1999/522/CFSP
1999/523/CFSP
1999/694/CFSP

1999/729/CFSP
1999/730/CFSP
1999/822/CFSP
1999/843/CFSP
1999/844/CFSP
1999/845/CFSP
1999/864/CFSP

17.12.1999

1999/878/CFSP

4,4
0,1
1,2
1,2
2,1

10,9
0,9
8,0
3,5
2,0

6,0
3,0
5,0
0,9
0,8

2,8
2,9
0,1
0,4
0,8

1,0

2,1

16,2
0,0
0,5
0,6
1,1
1,3
0,9
0,9
1,8

1,2
0,5
2,5
0,6
11,0
0,2
0,3

7,9

Sources: Council Decisions adopting common measures 1997 to 1999. Commission accounting system (Sincom).

NB: Due to decommitments and rounding differences, outstanding commitments are not equal to commitments less payments.

Total
%

107,6
100 %

4,4
0,0
1,1
1,1
1,9

10,9
0,0
3,2
2,3
0,0

6,0
3,0
3,0
0,3
0,8

2,8
2,9
0,1
0,4
0,4

0,7

1,8

15,9
0,0
0,0
0,4
1,1
1,3
0,9
0,8
0,9

0,6
0,4
1,9
0,5
9,8
0,0
0,3

0,0

81,9
76 %

0,0
0,0
0,1
0,1
0,2

0,0
0,9
4,8
1,2
2,0

0,0
0,0
2,0
0,0
0,0

0,0
0,0
0,0
0,0
0,4

0,3

0,3

0,3
0,0
0,0
0,0
0,0
0,0
0,0
0,1
0,9

0,2
0,1
0,6
0,1
1,2
0,2
0,0

7,9

24,2
22 %

30.11.2001

EN

Official Journal of the European Communities

C 338/19

ANNEX 3

COMMON FOREIGN AND SECURITY POLICY (CFSP)
Budgetary execution 1997 to 1999

Budget line

Year

Appropriations

Initial budget

+/- Transfer

Final budget

Execution (1)

%

(ECU/EUR and %)

B8-0 1 0
Support for democratic
transition and electoral
processes

B8-0 1 1
European Union special envoys

B8-0 1 2
Disarmament

B8-0 1 3
Prevention of conflicts
and support for peace processes

B8-0 1 4
Preparatory measures

1997

1998

1999

Total

1997

1998

1999

Total

1997

1998

1999

Total

1997

1998

1999

Total

1997

1998

1999

Total

Commitment

Payment

Commitment

5 000 000

Payment

3 000 000

Commitment

3 000 000

Payment

2 400 000

Commitment

8 000 000

1 000 000

– 349 403

– 360 000

– 435 778

– 360 000

1 000 000

5 000 000

2 650 597

2 640 000

1 964 222

7 640 000

1 000 000

100,00 %

5 000 000

100,00 %

2 650 597

100,00 %

817 137

30,95 %

394 368

20,08 %

5 817 137

76,14 %

Payment

5 400 000

214 819

5 614 819

4 044 965

72,04 %

Commitment

Payment

Commitment

5 000 000

Payment

3 300 000

Commitment

5 000 000

Payment

3 300 000

Commitment

10 000 000

Payment

6 600 000

Commitment

Payment

– 785 075

– 178 601

– 16 460

2 723 956

– 801 535

2 545 355

4 214 925

3 121 399

4 983 540

6 023 956

9 198 465

9 145 355

4 214 925

100,00 %

2 517 991

80,67 %

4 937 000

99,07 %

5 224 602

86,73 %

9 151 925

99,49 %

7 742 593

84,66 %

Commitment

4 500 000

– 4 362 092

137 908

Payment

3 000 000

– 3 000 000

Commitment

5 750 000

Payment

3 000 000

2 994 031

1 500 000

Commitment

10 250 000

– 1 368 061

Payment

6 000 000

– 1 500 000

8 744 031

4 500 000

8 881 939

4 500 000

924 197

10,57 %

1 203 657

26,75 %

924 197

10,41 %

1 203 657

26,75 %

Commitment

24 540 000

24 540 000

16 090 000

65,57 %

Payment

1 000 000

22 384 000

23 384 000

15 117 763

64,65 %

Commitment

10 000 000

7 647 167

17 647 167

17 647 167

100,00 %

Payment

8 000 000

7 306 004

15 306 004

14 223 311

92,93 %

Commitment

12 000 000

9 303 544

21 303 544

20 103 544

94,37 %

Payment

10 000 000

11 986 974

21 986 974

18 846 501

85,72 %

Commitment

22 000 000

41 490 711

63 490 711

53 840 711

84,80 %

Payment

19 000 000

41 676 978

60 676 978

48 187 575

79,42 %

Commitment

Payment

Commitment

Payment

Commitment

Payment

Commitment

Payment

500 000

500 000

250 000

250 000

750 000

750 000

– 500 000

– 500 000

– 81 115

– 150 000

– 581 115

– 650 000

168 885

100 000

168 885

100 000

142 709

84,50 %

5 910

5,91 %

142 709

84,50 %

5 910

5,91 %

C 338/20

EN

Official Journal of the European Communities

30.11.2001

(ECU/EUR and %)

Budget line

Year

Appropriations

Initial budget

+/- Transfer

Final budget

Execution (1)

%

B8-0 1 5
Emergency measures

Total common foreign and
security policy

1997

1998

1999

Total

1997

1998

1999

Total

Commitment

Payment

Commitment

5 000 000

– 2 000 000

Payment

2 450 000

550 000

Commitment

4 000 000

– 2 140 000

Payment

4 000 000

– 1 425 152

Commitment

9 000 000

– 4 140 000

Payment

6 450 000

– 875 152

3 000 000

3 000 000

1 860 000

2 574 848

4 860 000

5 574 848

3 000 000

100,00 %

3 000 000

100,00 %

1 860 000

100,00 %

1 426 994

55,42 %

4 860 000

100,00 %

4 426 994

79,41 %

Commitment

24 540 000

24 540 000

16 090 000

65,57 %

Payment

1 000 000

23 384 000

24 384 000

16 117 763

66,10 %

Commitment

30 000 000

30 000 000

29 862 092

99,54 %

Payment

20 250 000

3 828 000

24 078 000

22 391 898

93,00 %

Commitment

30 000 000

9 700 000

39 700 000

28 784 587

72,51 %

Payment

22 950 000

14 200 000

37 150 000

27 102 033

72,95 %

Commitment

60 000 000

34 240 000

94 240 000

74 736 679

79,30 %

Payment

44 200 000

41 412 000

85 612 000

65 611 695

76,64 %

(1) Excluding commitments and payments over appropriations carried over from previous years, totalising 2 Mio euro for commitments and 15 Mio euro for payments. Includ-

ing payments relating to common measures previous to 1997 (7 Mio EUR).

Sources: General budget of the European Union 1997 to 1999. Revenue and expenditure account 1997 to 1999. Sincom.

TIME LAPSES IN IMPLEMENTATION OF JOINT ACTIONS HAVING FINANCIAL IMPLICATIONS (1997 TO 1999)

ANNEX 4

Year

Council Decision

Subject

1997

97/224/CFSP

97/288/CFSP

97/289/CFSP

97/448/CFSP

97/475/CFSP

97/476/CFSP

97/690/CFSP

97/818/CFSP

97/819/CFSP

96/656/CFSP

Support electoral process in Bosnia
and Herzegovina
Nuclear-related export control - NSG
seminar
Support Palestinian Authority against
terrorist activities
Special envoy for the African Great
Lakes region
Special envoy for the Middle East peace
process
Implementing structures of the peace
plan for Bosnia and Herzegovina
Conflict prevention and resolution in
Africa
Anti-personnel landmines: special
appeals from ICRC
Anti-personnel landmines: SADC and
ICRC programmes
Support democratic transition process
Congo

Date of
Council
Decision

(a)

Council
Decision
amount

Date of
Commission
Decision

Time lapse
in days

(b)

(b - a)

24.3.1997

5 500 000

21.4.1997

29.4.1997

75 000

7.7.1997

29.4.1997

3 600 000

4.7.1997

16.7.1997

1 415 000

18.7.1997

22.7.1997

2 051 000

18.11.1997

22.7.1997

10 860 331

31.10.1997

20.10.1997

860 000

8.10.1998

28

69

66

2

119

101

353

Date of
Commission
first com-
mitment
(c)

27.5.1997

28.7.1997

10.7.1997

17.2.1998

31.10.1997

27.11.1998

28.11.1997

8 000 000

16.12.1997

18

23.3.1998

28.11.1997

3 500 000

13.11.1997

– 15

18.12.1997

Time lapse
in days

Date Com-
mission first
payment

Time lapse
in days

Total time
lapse

Difference to
average

(c - b)

(d)

(d - c)

36

21

6

11.6.1997

11.8.1997

10.7.1997

28.10.1997

102

31.10.1997

15

14

0

3

22

5

91

0

50

97

35

105

54

11.3.1998

5.11.1997

6.10.1999

313

15.4.1998

31.12.1997

7.8.1997

23

13

128

54

– 107

– 82

– 114

– 79

46

– 80

530

– 48

– 153

83

79

104

72

107

232

106

716

138

33

269

186

11.11.1996

4 000 000

17.12.1996

Sum/Average

39 861 331

1.4.1997

36

78

.

3
0
1
1
2
0
0
1

.

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

C
3
3
8
/
2
1

Year

Council Decision

Subject

1998

98/117/CFSP
98/301/CFSP

98/302/CFSP

98/375/CFSP

98/452/CFSP

98/607/CFSP

98/608/CFSP

98/623/CFSP

98/627/CFSP

98/735/CFSP

98/736/CFSP

Support of the Bosnian peace process
Support of the Government of
Montenegro
Support electoral process in Bosnia
and Herzegovina
Special representative for Federal
Republic of Yugoslavia
Special envoy for the African Great
Lakes region
Implementing structures of the peace
plan for Bosnia and Herzegovina
Special envoy for the Middle East peace
process
Second Nuclear Supplier Group
seminar
Specific action of assistance for mine
clearance
Support of the democratic process in
Nigeria
Forensic experts missions in Federal
Republic of Yugoslavia

Date of
Council
Decision

(a)

Council
Decision
amount

Date of
Commission
Decision

Time lapse
in days

(b)

(b - a)

2.2.1998

6 000 000

3.2.1998

30.4.1998

3 000 000

13.5.1998

30.4.1998

5 000 000

2.6.1998

8.6.1998

900 000

24.6.1998

13.7.1998

813 925

27.7.1998

26.10.1998

2 800 000

16.12.1998

26.10.1998

2 850 000

15.12.1998

3.11.1998

75 000

15.12.1998

1

13

33

16

14

51

50

42

Date of
Commission
first com-
mitment
(c)

4.2.1998

15.5.1998

11.6.1998

6.7.1998

21.9.1998

31.12.1998

18.12.1998

24.3.1999

9.11.1998

435 000

25.2.1999

108

12.3.1999

22.12.1998

810 000

27.1.1999

22.12.1998

950 000

7.1.1999

Sum/Average

23 633 925

8.3.1999

17.5.1999

36

16

35

C
3
3
8
/
2
2

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

Time lapse
in days

Date Com-
mission first
payment

Time lapse
in days

Total time
lapse

Difference to
average

(c - b)

(d)

(d - c)

1

2

9

12

56

15

3

99

15

40

130

35

6.2.1998

18.5.1998

30.6.1998

24.7.1998

2

3

19

18

2.7.1999

284

31.12.1998

24.3.1999

19.5.1999

26.4.1999

22.3.1999

2.7.1999

0

96

56

45

14

46

53

4

18

61

46

354

66

149

197

168

90

192

122

– 118

– 104

– 61

– 76

232

– 56

27

75

46

– 32

70

.

3
0
1
1
2
0
0
1

.

Year

Council Decision

Subject

Date of
Council
Decision

(a)

Council
Decision
amount

Date of
Commission
Decision

Time lapse
in days

(b)

(b - a)

Date of
Commission
first com-
mitment
(c)

Time lapse
in days

Date Com-
mission first
payment

Time lapse
in days

Total time
lapse

Difference to
average

(c - b)

(d)

(d - c)

.

3
0
1
1
2
0
0
1

.

1999

1999/074/CFSP

1999/189/CFSP

1999/191/CFSP

1999/239/CFSP
1999/320/CFSP

1999/361/CFSP

1999/423/CFSP

1999/480/CFSP
1999/522/CFSP

1999/523/CFSP

1999/694/CFSP

1999/729/CFSP

1999/730/CFSP

1999/822/CFSP

1999/843/CFSP

1999/844/CFSP

1999/845/CFSP

1999/864/CFSP

1999/878/CFSP

Communication system Nuclear Sup-
pliers Group
Re-establishment of a viable police
force in Albania
Implementing structures of the peace
plan for Bosnia and Herzegovina
Special envoy for Kosovo
Collection and destruction of weapons
in Albania
Stability and good-neighbourliness
south-east Europe
Special envoy for the African Great
Lakes region
Stability Pact for South-eastern Europe
Installation structures of the United
Nations (UNMIK)
Coordinator of Stability Pact South-
eastern Europe
Stability and good-neighbourliness
south-east Europe
Implementation of Lusaka ceasefire in
Democratic Republic of Congo
Combating spread of light weapons in
Cambodia
Coordinator of Stability Pact South-
eastern Europe
Special envoy Middle East peace
process
High Representative in Bosnia and
Herzegovina
Combating spread of light weapons in
Mozambique
Installation structures of the United
Nations (UNMIK)
Non-proliferation and disarmament in
Russian Federation

25.1.1999

200 000

15.3.1999

9.3.1999

2 100 000

23.4.1999

9.3.1999
30.3.1999

16 153 544
510 000

4.6.1999
22.12.1999

10.5.1999

500 000

9.9.1999

31.5.1999

550 000

12.10.1999

28.6.1999
19.7.1999

1 137 000
1 250 000

28.7.1999
28.7.1999

29.7.1999

910 000

4.8.1999

29.7.1999

850 000

11.8.1999

22.10.1999

1 800 000

22.12.1999

15.11.1999

1 200 000

22.12.1999

49

45

87
267

122

134

30
9

6

13

61

37

16.3.2000

367

N/A

8.7.1999

22.6.1999
15.3.2000

11.11.1999

9.11.1999

30.7.1999
11.11.1999

13.9.1999

20.8.1999

76

18
84

63

28

2
106

40

9

27.7.1999

23.6.1999
18.10.2000

N/A

9.11.1999

6.10.1999
14.12.1999

15.9.1999

14.9.1999

5.5.2000

135

29.5.2000

13.3.2000

82

5

5.5.2000

22.3.2000

15.11.1999

500 000

16.3.2000

122

21.3.2000

9.12.1999

2 485 000

10.12.1999

17.12.1999

2 845 000

8.3.2000

17.12.1999

11 000 000

22.12.1999

17.12.1999

200 000

28.3.2000

21.12.1999

290 000

25.4.2000

17.12.1999

8 900 000

16.5.2000

1

82

5

102

126

151

75

64

29.3.2000

110

10.4.2000

15.6.2000

30.3.2000

5.3.2001

21.6.2000

15.3.2001

26.5.2000

9.2.2000

29.9.2000

25.5.2000

30.11.2000

79

49

185

30

198

73

57

Sum/Average

53 380 544

Total/Average

116 875 800

N/A= Information not available.

N/A

– 59

– 93
369

N/A

– 37

– 99
– 51

– 151

– 152

21

– 27

– 71

– 76

– 18

– 95

245

– 16

317

N/A

19

1
217

N/A

0

68
33

2

25

24

53

1

12

20

50

157

27

167

52

53

N/A

140

106
568

N/A

162

100
148

48

47

220

172

128

123

181

104

444

183

516

199

173

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

C
3
3
8
/
2
3

95/206/CFSP

6.6.1995

Burundi

Balance at
31.12.1999

0

96/589/CFSP

1.10.1996

Special envoy for the African
Great Lakes region

103 750

96/588/CFSP

1.10.1996

96/676/CFSP

25.11.1996

96/251/CFSP

25.3.1996

97/288/CFSP

29.4.1997

97/289/CFSP

29.4.1997

97/289/CFSP

29.4.1997

Specific action of assistance
for mine clearance

Special envoy for the Middle
East peace process

Specific action of assistance
for mine clearance

Special envoy for the African
Great Lakes region

Nuclear related export control
- NSG seminar

Support Palestinian Authority
against terrorist activities

Support Palestinian Authority
against terrorist activities

1 400 000

720 000

11

0

ANNEX 5

CLOSURE OF ACTIONS

Paid in 2000

Commission action

Date of Com-
mission action

Date of final
report

Deadline in
contract

Assessment of audit

0

0

0

Decommitted

18.8.1997

Eligible expenditure until
31.7.1997

Commitment expired
31.12.1998

24.11.1996

Before
December
1996

27.1.1999

Monthly

Should be partly decommitted,
see report: should be
decommitted, late report

No report

1.6.1998

Should be decommitted

0

107 930

Decommitted

1.1999

26.1.1998

23.2.1998

Decommitment late

Commitment expired
31.12.1997

0

0

No report

31.3.1998

Should be decommitted

15 000

Decommitted

14.10.1998

5.10.1998

1.12.1997

147 738

147 738

Closed

21.9.2000

27.7.2000

30.7.2000

316 571

213 681

Contract continues until
13.4.2003

Should be decommitted

Delay in delivering the final
report

Very long time for reporting,
extended several times

The continuation has no sense.
A new contract should have
been done.

Should be decommitted, late
report

97/448/CFSP

16.7.1997

Special envoy for the African
Great Lakes region

162 231

3 150

Commitment expired
31.12.1998 expenditure until
31.7.1998

27.1.1999

There has
been one
payment in
2000

6 months
after the
final pay-
ment

97/475/CFSP

22.7.1997

Special envoy for the Middle
East peace process

157 502

157 502

Decommitted

22.11.2000

17.6.1999

23.5.1999

Decommitment late

C
3
3
8
/
2
4

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

.

3
0
1
1
2
0
0
1

.

.

3
0
1
1
2
0
0
1

.

Balance at
31.12.1999

Paid in 2000

Commission action

Date of Com-
mission action

Date of final
report

Deadline in
contract

Assessment of audit

E
N

97/690/CFSP

20.10.1997

Conflict prevention and
resolution in Africa

854 000

5 664

97/818/CFSP

28.11.1997 Anti-personnel landmines:
special appeals from ICRC

4 800 000

97/819/CFSP

28.11.1997 Anti-personnel landmines:

1 194 000

0

0

SADC programmes

Contract extended until
27.5.2001

Commitment expired
31.12.2000

OK

8.6.2000

1.3.2000

Should be cleared, the final
report confusing

Prolonged until April 2001

27.7.2000

OK

97/819/CFSP

28.11.1997 Anti-personnel landmines:

41 152

41 152

Decommitted

13.3.2000

18.3.1999

18.3.1998

Decommitment late

97/875/CFSP

19.12.1997

98/30/CFSP

24.3.1997

98/30/CFSP

24.3.1997

98/375/CFSP

8.6.1998

ICRC programmes

Support democratic transition
process Congo

Support electoral process in
BiH B7-7 0 9 0

Support electoral process in
BiH B7-7 0 9 0

Special representative for
Federal Republic of Yugoslavia

1 984 408

1 968 000

32 000

637 438

0

0

0

0

Not implemented

Commitment expired
31.12.1999

Commitment expired
31.12.1999

Should be decommitted

Audit April
2000

Audit April
2000

31.12.1998

Should be decommitted

31.12.1998

Should be decommitted

Recovery order, decommitted

22.12.2000

3.2.2000

10.4.2000

Commission late, the costs after
cancellation of the action
should be recovered as well

98/607/CFSP

26.10.1998

98/608/CFSP

26.10.1998

98/623/CFSP

3.11.1998

98/627/CFSP

9.11.1998

98/735/CFSP

22.12.1998

Implementing structures of
the peace plan for BiH

Special envoy for the Middle
East peace process

Second Nuclear Supplier
Group seminar

Specific action of assistance
for mine clearance

Support of the democratic
process in Nigeria B7-7 0 9

561 369

561 367

Paid

22.5.2000

22.3.2000

31.8.1999

Report late

46 920

46 920

Paid

1.12.2000

10.11.2000

Report late

16 340

1 637

Decommitment and Payment

17.10.2000

28.6.2000

31.10.1999

Final report late
decommitment late

96 048

96 048

Paid

17.7.2000

N/A

31.5.2000

422 769

0

10.2.2000

31.8.1999

Report and the Commission
late. Expenditure partly after the
expiry date

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

C
3
3
8
/
2
5

Balance at
31.12.1999

Paid in 2000

Commission action

Date of Com-
mission action

Date of final
report

Deadline in
contract

Assessment of audit

98/736/CFSP

22.12.1998

Forensic experts missions in
Federal Republic of Yugoslavia

215 334

0

20.7.2000

31.7.2000

99/074/CFSP

25.1.1999

99/189/CFSP

9.3.1999

99/191/CFSP

9.3.1999

Communication system
Nuclear Suppliers Group

Re-establishment of a viable
police force in Albania

Implementing structures of
the peace plan for BiH

200 000

0

Valid contract

1 100 020

799 984

Continues until 31.12.2000

28.7.2000

28.2.2001

226 435

0

12.7.2000

30.6.2000

Commission late, unauthorised
budget excesses, VAT, should be
partly decommitted and
recovered

Slow implementation

Should be decommitted,
requested time for the report
late

99/239/CFSP

30.3.1999

Special envoy for Kosovo

46 520

16 830

Partially paid

13.10.2000

11.11.1999

2.3.2000

Commission very late

99/320/CFSP

10.5.1999

Collection and destruction of
weapons in Albania

500 000

Interrupted

N/A

N/A

N/A

Action repealed by Council
Decision 2000/723/CFSP of
20 November 2000. Should be
cleared

99/361/CFSP

31.5.1999

99/423/CFSP

28.6.1999

99/480/CFSP

19.7.1999

99/522/CFSP

29.7.1999

99/523/CFSP

29.7.1999

99/729/CFSP

15.11.1999

Stability and good-
neighbourliness south-east
Europe

Special envoy for the African
Great Lakes region

Stability Pact for South-eastern
Europe

Installation structures of the
United Nations (UNMIK)

Coordinator of Stability Pact
South-eastern Europe

Implementation of Lusaka
ceasefire in Democratic
Republic of Congo

132 036

0

Recovery order

30.11.2000

28.6.2000

31.8.2000

Commission late

754 797

754 797

Paid

15.12.2000

No report

31.1.2001

Report late

750 000

750 000

Paid

17.5.2000

25.2.2000

30.11.1999

Report late

217 672

217 672

Paid

23.6.2000

6.6.2000

28.2.2001

Paid in time

46 290

0

5.6.2000

28.2.2000

Should be decommitted

1 200 000

560 500

19.4.2000

No report

8.11.2000

No report

C
3
3
8
/
2
6

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

.

3
0
1
1
2
0
0
1

.

.

3
0
1
1
2
0
0
1

.

Balance at
31.12.1999

Paid in 2000

Commission action

Date of Com-
mission action

Date of final
report

Deadline in
contract

Assessment of audit

99/822/CFSP

9.12.1999

Coordinator of Stability Pact
South-eastern Europe

2 485 000

595 337

99/844/CFSP

17.12.1999 High Representative in BiH

11 000 000

9 780 779

17.7.2000

29.11.2000

28.2.2001

30.6.2001

Requested time for the report
late

99/845/CFSP

17.12.1999

99/864/CFSP

21.12.1999

Combating spread of light
weapons in Mozambique

Installation structures of the
United Nations (UNMIK)

200 000

0

290 000

280 412

21.6.2000

28.2.2001

Very high advance

99/878/CFSP

17.12.1999 Non-proliferation and

8 900 000

0

disarmament in Russian
Federation

N/A= information not available.

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

C
3
3
8
/
2
7

C 338/28

EN

Official Journal of the European Communities

30.11.2001

THE COUNCIL’S REPLIES

1. Recommendation 1

Recommendation 1 will be debated fully in the Council bodies.

As from 2001, the Council decision of 30 March 2000, which the
Court addresses as a separate point, refers to the administrative
expenditure of the special representatives, and this can be consid-
ered as covering de facto the previous notion of preparatory
expenditure as far as the Council budget is concerned.

2. Recommendation 2d (and point 7)

Preparatory costs

It is correct to state that the Council has in the past — to a very
limited extent — used budget Item 1 1 1 3 to finance costs which
might be qualified as preparatory costs of common measures; the
Council also agrees that because budget Item 1 1 1 3 covers the
expenditure for all the Council’s special advisers, and more recently
its seconded national experts, the specific amounts allocated to
the preparation of the CFSP actions cannot be derived directly
from the budget heading as such.

The Council will examine the possibility of identifying these CFSP
costs under a separate budget item, in the context of its prepara-
tion of the draft estimates for 2003.

3. Sundry

In practice, however, the Council takes this opportunity to con-
firm categorically that Item 1 1 1 3 was not used at all either in
1999 or in 2000 to cover CFSP expenditure.

Subject to those two remarks, the Council agrees with all the
observations that relate to it.

30.11.2001

EN

Official Journal of the European Communities

C 338/29

THE COMMISSION’S REPLIES

SUMMARY

IV. Regarding the legal framework of CFSP, Article 14 TEU foresees that the scope, means and conditions for
the implementation have to be laid down in the joint action. Yet, the Commission retains certain discretionary
powers as regards the modalities of implementation in accordance with Article 274 EC. Furthermore and not-
withstanding the somewhat vague wording of Article 18 TEU, in practice a division of labour is emerging in
a logical way: the Presidency is responsible for the overall achievement of the objectives of the joint action
(JA), assisted by the Secretary-General/High Representative (SG/HR), while the Commission is responsible for
the proper execution of the actions through preparing and negotiating contracts with the implementing agen-
cies and monitoring of implementation as reported to the Commission.

V. The Commission stresses that the criteria for Community funding and notably the budgetary remarks have
been strictly respected.

On the other hand it agrees that during the observation period of the audit, there were cases where informa-
tion was lacking on the contributions of third parties. For political reasons and for reasons of good manage-
ment it is further not always possible nor desirable to flag exactly the amounts of each contributor. In fact in
order to create the required political momentum to engage in a specific project political pledges are often
solicited which due to the political development on the ground are not always honoured afterwards by the
third parties being geographically or politically less concerned than the EU. The Union might, however, for
imperative reasons of conflict prevention or political stabilisation have an interest to continue the project in
question irrespective of possible lack in contributions.

There is, however, a clear improvement on this issue in 2000 and 2001 since contributions in kind are indi-
cated in the financial statements.

VI.
In 1998 and 1999 a number of Council decisions were attributed to commitment appropriations of the
following year, three and five decisions respectively. Although the amounts were much higher in 1999/2000
than in 1998/99, this cannot be considered as a tendency but rather as an exception since in 2000 there was
just one case.

Concerning the availability of resources, the Commission wishes to recall that the financial provisions in the
Council decisions are indicative (see points 41 and 43).

In terms of rule compliance, the practice of committing appropriations during the budgetary year after the
Council decision is not irregular. The objective in implementing CFSP actions is the adoption in the same
budgetary year of the budgetary commitment (i.e. the Commission decision) and the legal commitment (i.e.
the contract).

In the case of renewal of an existing action with a calendar year end (this applies to most financially important
actions) the Council has to take a decision sufficiently early for the Commission to be able to make its financ-
ing decision and legal commitment in the same year. In terms of sound financial management, the Commis-
sion is therefore often put in a difficult position as the Council decides the renewal of an action at a date too
close to the budgetary year end.

VII. Tailor-made solutions often need to be drawn up for the implementation of joint actions. Standard con-
tracts can rarely be applied, which means that negotiation and preparation of contracts to implement joint
actions normally take more time than in the case of grants to NGOs or international organisations.

C 338/30

EN

Official Journal of the European Communities

30.11.2001

VIII. To ensure a timely reaction to political events the Council adopts joint actions with normally only a short
time frame. CFSP actions are easily affected by political and security developments necessitating adjustments
or extensions to the existing action, which should be addressed in the case of minor adjustments by contractual
amendments whereas significant changes to the mandate or renewals of the mandates should generally lead to
new contracts. This approach is the most practical and effective way, even if this may make the follow-up more
difficult.

IX. A significant effort to establish clear criteria has been made with the adoption of two communications in
1997 and 1998, defining the position of the special representatives. These rules have been applied to those
special representatives (EUSRs) whose mandates originate from after the two communications. In any case,
from 2001 onwards the remuneration and salary-related costs and allowances for special representatives are
financed from the administrative budget of the Council.

The Commission acknowledges that for office staff the situation is indeed somewhat ambiguous and might
need to be addressed in a more coherent way. However the indirect application of ‘market rules’ has so far often
led to the most cost-effective results.

X. As regards in particular the financial and technical reporting from the beneficiaries, it has indeed been
insufficient in some cases and should in the future be improved by a closer and more interactive follow-up.
The average project lasts for one year which normally requires two financial reports. The reports are obliga-
tory prior to payment, thereby allowing a sufficient and regular control. Moreover the Commission proposed
in the budgetary remarks to B8-0 1 5 (Preparatory actions) for the PDB 2002 the possibility for the Commis-
sion of launching autonomously evaluations and audits where needed.

XI. As the Court notes, one of its greatest concerns for the Court in its earlier report has been resolved: the
classification of preparatory costs as administrative.

The Court’s comment is valid regarding the contributions in kind by the Council and the Commission to the
offices of EUSRs.

As regards the Council decision of 30 March 2000 on EUSRs the Commission had already in December 2000
brought certain problems linked to the practical implementation of the aforementioned Council decision to
the attention of the Permanent Representatives Committee in writing: while stating its support for the objec-
tive of the new guidelines to place the EUSRs clearly under the authority of the SG/HR, it expressed a need to
define what is to be considered as administrative and what is to be considered as operating expenditure.

In 2001, the Commission launched an audit on EUSRs of which the objective is in part to help give a better
definition of administrative and operating expenditure.

XII. The Commission welcomes the proposal by the Court for clear operational principles and arrangements
with regard to the Commission’s role in the implementation of the CFSP, and fully supports the request for
more transparency. Improvements can be made, notably by the proposed rationalisation of the number of
budget articles in the PDB 2002 as proposed by the Commission.

The Commission already reacted by adopting its new management structure and by considering further sim-
plification tools such as an empowerment by the College of the Commissioner in charge of external relations
for the required financing decision. Yet, delays are sometimes not avoidable. Also they are not always a sign of
bad management but instead of thorough preparation of contracts so as to avoid problems during subsequent
implementation and demands on obtaining more adequate reports from the implementing agency.

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The Commission refers to its reply under point VIII where it concluded that minor adjustments should be
addressed by contractual amendments whereas significant changes to the mandate or renewals of the mandates
should generally lead to new contracts.

Clear rules on remuneration and salary-related costs were meanwhile adopted for the EUSRs, falling however
outside the period of assessment.

The Commission refers to its reply under point X where it concluded that in particular the financial and techni-
cal reporting from the beneficiaries should in future be improved by a closer and more interactive follow-up.
The average project lasts for one year which normally requires two financial reports. The reports are obliga-
tory prior to payment, thereby allowing a sufficient and regular control. Moreover the Commission proposed
in the budgetary remarks to B8-0 1 5 (Preparatory actions) for the PDB 2002 on the possibility for the Com-
mission of launching autonomously evaluations and audits where needed.

INTRODUCTION

(d) ‘Financial resources were not made available in time to permit effic-
ient implementation or to carry out the preliminary work required
before a common measure is decided upon’

Common measures: financial and budgetary data

The Commission refers to its reply given under point 65(d).

8 and 9. The comparability of amounts across years is rendered
more difficult by the fact that some actions earlier financed under
budget title B8, civilian mine-clearing and election observation,
have been shifted to the first pillar during the observation period
as described by the Court.

(e)

‘In the absence of clear definitions, the Commission’s role in deter-
mining the financial, legal and operational arrangements needed for
the implementation of the CFSP measures involving expenditure was
not clearly established’

The Commission refers to its reply given under point 65(e).

The Court’s Opinion No 1/97 on the common foreign and
security policy.

Some implications for the CSFP of the Treaty on European
Union

10. The Commission welcomed the Court’s findings expressed
in its Opinion No 1/97 and took the following measures to
respond to the five main observations of the Court.

(a)

‘There was a lack of clear criteria for determining the source of Com-
munity funding’

The Commission refers to its reply given under point 65(a).

(b) ‘Little or no information was available on the amounts disbursed by

different Member States or by other donors’

The Commission refers to its reply given under point 65(b).

(c)

‘Preparatory work was considered by the Council as administrative
expenditure and therefore charged to Section II - Council - of the
general budget, leading to a loss of transparency in the management
of the budget’

13. The delegation of implementing authority towards the Com-
mission in the fields of human rights, mine-clearing, etc. repre-
sents a growing trend towards communitarisation of policies
which had so far been tackled in the intergovernmental frame-
work of the second pillar. The Commission has initiated and
actively supported this tendency by taking the corresponding legal
initiatives

14. The Commission considers the definition of the role of the
SG/HR to correctly reflect his organisational function within the
Council institution.

PRELIMINARY REMARKS ABOUT SOME CHARACTERISTICS
OF CFSP ACTIONS

The Commission refers to its reply given under point 65(c).

20. The Commission shares the Court’s analysis of the complex
political and legal characteristics of CFSP actions.

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21. Article 14 TEU foresees that the scope, means and condition
for the implementation have to be laid down in the joint action.
Yet, the Commission retains certain discretionary powers as
regards the modalities of implementation in accordance with
Article 274 EC. Furthermore and notwithstanding the somewhat
vague wording of Article 18 TEU, in practice a division of labour
is emerging in a logical way: the Presidency is responsible for the
overall achievement of the objectives of the JA, assisted by the
SG/HR, while the Commission is responsible for the proper execu-
tion of the actions through preparing and negotiating contracts
with the implementing agencies and monitoring of implementa-
tion as reported to the Commission.

OBSERVATIONS ON THE IMPLEMENTING OF CFSP ACTIONS

Council decisions

Budgetary framework for the Republic of Srpska

26. The Commission accepts this criticism and considers this to
be an isolated case.

22. While the Commission fully agrees that a clearer delegation
of implementing powers could lead to more economic efficiency
it would like to point out that the Mostar administration was a
very specific case: not only did the Presidency change every six
months, but also a number of key staff in the field changed.

In December 2000, the Council adopted a joint action on the
European Union Monitoring Mission (EUMM) where the specific
point raised by the Court is addressed: A Head of Mission has
been appointed for three years, conditional on the continuation
of the Mission. The Head of Mission takes all operational deci-
sions as long as he stays within his mandate and as long as he
does not exceed his budget. He reports regularly to the Presidency
and to the SG/HR (not existing at the time of the Mostar admin-
istration), receiving feedback and guidelines in return. On all
activities undertaken in the framework of his contract, notably
regarding the implementation and the use of his budget, the Head
of Mission reports, and is supervised by, the Commission. Con-
tinuity on all levels is thus assured. The system has already dem-
onstrated its flexibility and capacity to react to the political changes
and security developments of the first five months of 2001.

23. The Commission agrees with the Court that the complex
political and legal characteristics of CFSP actions often lead to
implementation problems. It, however, does not share all the
observations made by the Court. The relevant points of disagree-
ment are illustrated in the replies of the Commission under the
relevant points indicated by the Court.

Conference on the Stability Pact for South-eastern Europe

27. The Commission understands this criticism to be primarily
addressed to the Presidency and to the General Secretariat of the
Council. Proper preparation with full participation of the Com-
mission speeds up the subsequent signature of the contract, which
should indeed take place before the beginning of the action and
in this specific case under consideration before the conference.

Based on the experience gained from the action in question, the
‘action statements’ have been introduced in 1999 for a more thor-
ough preparation of the CFSP actions. If they were filled in as they
should be for each project by the Council’s thematic or geographic
working groups before discussion in the External Relations Coun-
sellors’ Group, then these action statements would constitute the
required preparatory tool to allow the establishment of a correct
financial statement and a good implementation framework.

28. The Commission agrees with the Court’s findings that in
future the Presidency should avoid financial commitments before
appropriate consultation with the other Member States and the
Commission has taken place.

Special representative for Yugoslavia

29. The situation may have been determined by particular politi-
cal events that were not entirely predictable. Yet, the Commission
would point out that it had insisted on several occasions in the
various Council forums concerned, on a swift repeal of the joint
action.

Special representative for the Royaumont Process

30. The Commission does not consider it appropriate to reply
on the Court’s findings that are addressed to the Council.

In addition, inside the Commission, some implementation prob-
lems can be attributed, on the one hand, to changes of responsi-
bilities between services and DGs during the observation period
and, on the other hand, to the lack of human resources available
for the management of the CFSP. The latter point is related to the
Court’s recommendation 1(d) on the necessity of an adequate
staffing level.

Financial and budgetary arrangements

31. A large number of improvements have indeed been accom-
plished. Clarifications are given below on those arrangements and
procedures described in the Commission’s reply under points 32
to 34.

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Different budget lines to finance CFSP operations

In 1996, the European Parliament created budget Article
32.
B7-6 6 1 ‘Community participation in action concerning anti-
personnel mines’. The financing of mine actions by the Commu-
nity has since been progressively concentrated under that article.
This trend will accelerate with the establishment of a specific
Council regulation in 2001. In the period 1998 to 2001, no mine
actions have been committed from the CFSP budget. The only
exception is the mine action in Croatia, which could not be
financed under the relevant first pillar regulation because the
implementing body, WEU, was a military organisation.

Article 17 of the TEU establishes conditions under which the
WEU can be mobilised by the EU for the purpose of implement-
ing an action of the Union. There is no possibility for the EU of
mobilising WEU without such a legal basis. This fact conditioned
the choice of the legal basis for JA 2000/231/CFSP (and also JA
2000/798/CFSP on the different area of police mission in Alba-
nia). It would have been contrary to the Treaties to establish
financing under a Community regulation for an action which was
established by a CFSP act, as it would be legally unacceptable to
instruct, via a second pillar instrument, the WEU to undertake a
Community activity.

to reconstruction, development and stabilisation) Regulation. The
Commission refers to its interpretation given under point 32 on
the necessity of using Article 17 for actions implemented by the
WEU.

The Commission considers that the borderline cases mentioned
in the Court’s report have been taken over by the new Council
regulations.

According to Council Joint Action 2000/798/CFSP of 14 Decem-
ber 2000 (third preamble) the general idea is reflected that WEU
structures (including MAPE) be integrated into the EU, i.e. into the
CFSP. In 2001, the Commission rejected the integration of the
MAPE structure into the CFSP on the grounds that the type of
action envisaged under the structure would fall under an existing
first pillar legal basis, namely the CARDS Regulation. As a result,
those elements of the MAPE structure which continue to be
operational will now be taken over under this Council regulation.

34. The Commission notes the conclusion by the Court accord-
ing to which the initial criticism has been properly addressed by
the budgetary authorities and the problem in question has been
solved.

Contributions in kind and co-financing

Since the adoption of Council Regulations (EC) No 975/1999 and
(EC) No 976/1999 (human rights), election monitoring has been
financed exclusively under the first pillar. Furthermore, election
processes in Nigeria and Bosnia and Herzegovina were initially
funded by subsection B8, but due to the adoption of the regula-
tion they were shifted to Item B7-7 0 9 0 as of 1 January 2000.

35. The number of seconded staff was limited to the following:
two secretaries by the Council and one administrative assistant by
the Commission to EUSR Moratinos and one administrator by the
Commission to EUSR Hombach.

Phare indeed supported the Albanian police through the rebuild-
ing of stations and the provision of equipment. It did not finance
the activity which was subsequently conducted by the WEU.
Although the objectives of the actions cited were hence comple-
mentary, the actions were distinct as regards funding, legal base
and corresponding budget line.

33. The criteria of Coreper on the financing of an action under
subsection B8 were always followed, except in two cases. These
cases were financed under budget subsection B8 due to the fact
that in both cases the implementing body was the Western Euro-
pean Union, a military organisation, which could not have been
a beneficiary under the first pillar budget lines. The cases in ques-
tion are the anti-personnel landmine action in Croatia (Weudam),
due to terminate in November 2001, and the action for the
re-establishment of a viable police force in Albania (MAPE), which
has been terminated in the meantime. Certain elements of sup-
port to the Albanian police, which are not linked to the WEU as
such will be continued under the CARDS (Community assistance

36. The Commission tries to mention all the known contribu-
tions in the financial statements. Whenever contributions are
made in kind or when personnel is seconded, this is indicated.

Calculating the financial importance of contributions in kind is
difficult and in most cases not desirable politically. See further the
replies given under point V.

A solution, which was for instance adopted in the case of the spe-
cial coordinator of the Stability Pact, is to pay only a well-defined
component of the total project.

37 and 38. The High Representative and his Office (OHR) were
established under the ‘General Framework Agreement for Peace’
(GFAP; Annex 10), initialled in Dayton on 21 November 1995 and
signed, by the three parties to the conflict, in Paris on 14 Decem-
ber 1995. The Agreement was witnessed by other countries and
the ‘special EU negotiator’. A Peace Implementation Conference at

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Lancaster House, London, on 8 and 9 December 1995 agreed on
the dissolution of the structures of the International Conference
on the Former Yugoslavia (ICFY) and established a Peace Imple-
mentation Council (PIC), in which the European Commission is
represented (Lancaster House conclusions, paragraph 21). The
Conference agreed on the following (paragraph 22): ‘A budget to
cover the operational costs of the PIC, notably the cost of the
headquarters and offices of the High Representative (...) will be
proposed by the Steering Board [of the PIC]. The PIC undertakes
to provide funding for this budget on a key derived from the ICFY
to be agreed by consensus. It was noted the EU was already tak-
ing steps to provide for certain immediate costs for the High Rep-
resentative and for its share of the total.’

In December 1995, before the other donors, the EU agreed on a
contribution of ECU 10 million, which when assessed against the
OHR budget of ECU 19,763 million agreed by the Steering Board
in March 1996 equated to 50,6 %. A ‘funding gap’ of 2,4 %
opened, because the OHR erroneously included in the funding
key a one-off contribution-in-kind from the Commission (accom-
modation for the OHR in Brussels).

In a letter of 10 December 1996, Commissioner Hans van den
Broek confirmed to the OHR, that henceforth the contribution
from the Community budget as a proportion of the general bud-
get of the OHR would be 50,6 %.

On 11 May 1999, the Council stated that since 1997 the EU’s
share was 50,6 % of the adopted budget of the OHR (as stated in
the financial statements attached to the Council decisions), but
that the Council had never formally decided that the EU’s share
would be at this percentage. In the same decision the Council
agreed to finance 53 % of the OHR’s budget of the year 1999
under three conditions: that there be no nominal increase in the
EU contribution for 1999, that there be a net reduction in the
OHR’s budget in the year 2000; and that there be no retroactive
assessment for the period 1996 to 1998. Since then the EU’s share
is 53 % of the adopted budget of the OHR. As stated by the Court
it is the case that not all members of the Peace Implementation
Council subsequently contributed to the budget of the OHR. These
members are mostly economically less-advanced countries.

While it is the case that there was no formal agreement establish-
ing donor shares on a long-term basis, the shares of all donors
were established annually in the context of the approval of the
OHR budget.

The Commission accepts that the budgets of the OHR should be
prepared on a reliable basis and agrees in principle that unreli-
able pledges should be excluded. However, it must be recognised
that while this will not necessitate an increase in the monetary
contribution of the contributing members of the PIC to cover the
entire budget, it will increase the percentage share paid by the
contributors.

39. The Commission will make the reconciliations recommended
by the Court, and will communicate the results to the OHR. Where
necessary, a recovery will be made.

The net effect of calculating unpaid contributions as expenditure
has been to ensure that the OHR’s budget remained balanced,
with the actual contributors increasing their contributions on a
pro rata basis. The unsatisfactory situation in relation to non-
paying members of the PIC has been discussed on a number of
occasions in the financial experts working group of the PIC Steer-
ing Board. The Commission urged the OHR to take action to
address the problem. However, it has been concluded by the
members of the PIC that for political reasons non-paying mem-
bers should not be expelled. In 1999, China declared that it was
no longer a member of the PIC and was consequently excluded
from the funding key. Efforts to invite new members to join the
PIC to cover the financing gap have been unsuccessful.

As regards the practice of reporting as expenditure ‘depreciations’
and ‘losses on disposal of property, plant and equipment’, the
Commission and other donors have had no reason to suspect that
this has contradicted accepted accounting standards. This was
never highlighted as a problem in the annual audit reports of the
OHR prepared by recognised international auditors. Nevertheless,
in light of the Court’s comments, the issue would seem to merit a
re-examination by accounting experts.

40. The different levels of Community financing are explained
by the fact that in some projects there were co-donors willing and
able to contribute more than in other projects. Also the share of
own funding by the implementing agencies was larger in some
projects than in others.

Availability of resources

41. The decision to finance an action refers to the Commission
decision which is taken after checking the availability of financial
resources. Since the end of 2000, the verification is made auto-
matically due to the introduction of a new technical function of
the accounting system (pre-commitment).

According to Article 34(2) of the Interinstitutional Agreement
(IIA) of 6 May 1999 the financial reference amount in the Council
decision is to ‘be taken as illustrating the will of the legislative
authority and will not affect the powers of the budgetary author-
ity as defined by the Treaty’ (see also the Commission’s reply
under points IV and VI).

The clarification made by the IIA solves the objection raised by
the Commission in its Coreper declaration of 1998.

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In the case of CFSP joint actions it is the Commission’s role
43.
to ensure that appropriations are available before adopting a com-
mitment decision. It has to comply with the rules and restrictions
of the Financial Regulation, but it can also use the possibilities of
this Regulation to implement the JA in a flexible way. Notably in
the case of a Council decision taken at the very end of the year
the possibility of carrying over appropriations to the following
year for a well-defined action or of taking both the financing deci-
sion and the legal commitment in the beginning of the following
year exists (see also Commission’s reply under points 41 and VI).

The Commission agrees with the Court that Commission and
Council decisions should be made within the annual budgetary
limit. As regards the specific period mentioned (1997 to 1999) by
the Court, the Commission would like to point out that the over-
all amount of commitments did not exceed the global CFSP bud-
get, as demonstrated by Annex 3 to the present report.

Delays in launching the actions

44. Speed is often an important factor in CFSP, but it is equally
important to concentrate on the proper preparation of contracts
and on the overall implementation framework in order to avoid
problems during the implementation phase.

In addition, the Commission is currently reflecting on tools to
reduce the internal decision-taking period, such as by an empow-
erment of the Commissioner for External Relations for the financ-
ing decision.

45. At the end of 1997 an internal restructuring took place in
the Commission, separating in two different DGs the manage-
ment of the preparatory phase of the project cycle and the imple-
mentation phase. This situation lasted until the end of 2000 and
caused longer time lapses between the Council decisions and the
first payments. The reunification of the project cycle into one unit
at the beginning of 2001 is expected to shorten these delays.

46. The Commission refers to its replies under points 44 and 45.

47. The rapid launching of an action is largely dependent on
proper preparation prior to the Council decision. The situation
has improved in 2000/2001 after the introduction in November
1999 of action statements. If complete action statements are pro-
vided by the Council’s thematic and geographic working groups,
contracts can be signed rapidly. The first payments are normally
made upon signature.

Contracting and extensions

48. The large number of contracts and amendments was partly
dictated by the budgetary and implementation framework of the
action. The joint action of 29 April 1997 entailed commitments
from three successive Community budgets (a practice that was
abandoned in 2000, although the necessity for concluding con-
tracts and amendments remained). It established a need for indi-
vidual Commission decisions during three successive years. These
decisions, in turn, included explicit authorisations to sign, and in
the latter two cases, to extend the contract with the EU adviser
(Decisions C(1997) 2077, C(1998) 2616 and C(1999) 1537).

49. The Council does not set the deadline for the operation but
it often sets an end date for the validity of the decision itself. In
fact, the operation cannot terminate by the end date of the Coun-
cil decision unless the project implementation starts on the date
of the decision (unless the intended duration of the operation is
shorter than the period of validity of the decision, which is in
practice never the case). Due to the necessity of preparing a Com-
mission financing decision and a contract with the implementing
agency, the execution of the operation will start some time later.
Hence, the Commission agrees with the Court’s recommendation
4(a) that a deadline should be laid down for the completion of a
project, but that the implementation period should start from the
signature of the contract with the implementing agency. Yet in
cases where funds are unused, the Commission agrees that these
should be decommitted.

50. One important reason for contracts covering costs retroac-
tively is the fact that Council decisions are taken too late to extend
interrupting actions waiting for the
existing actions. Besides,
administrative implementation (extension of a contract) of a taken
political decision would in many cases substantially hinder the
achievement of the objectives sought.

51. Although the Commission agrees that such practices contra-
vene Article 1(4) of the Financial Regulation, it would like to
point out that it concerns an isolated case with no negative bud-
getary or financial implications. Indeed, the amount foreseen
under the first contract was too high in proportion to the activi-
ties completed. Therefore it was never fully consumed and the
total amount effectively spent under the two contracts in ques-
tion never exceeded the amounts of the corresponding budgetary
commitments.

52. The Commission agrees with the assessment. In order to
support the OHR, the Commission had to adapt to the many suc-
cessive decisions.

This being said, the Commission welcomes the Court’s recom-
mendation on a recognised right of reassessment in cases where
there is a risk of a long delay before any action is likely to take
place.

53. See the reply by the Commission under points 47 and 49
and the Court’s recommendation 4(a), which is supported by the
Commission.

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54. The Commission takes note of the assessment and would
like to point out that the delays can in most cases be attributed to
late or incomplete reports leading to further delays when provid-
ing subsequent additional information requested by the Commis-
sion.

60. The evaluation responsibility depends on the nature of the
action. While the financial and technical evaluation fall to the
Commission, sometimes a specific evaluation of the political
opportunity to continue an action is needed. This evaluation is
implicitly made by the Presidency and the Council working groups
each time an action is extended. This is also the main reason why
the duration of most of the actions is so short.

Employment conditions

55. The Commission considers that the initial criticism regard-
ing the employment conditions of the EUSR has been satisfacto-
rily addressed by the adoption of the corresponding communica-
tions adopted by the Commission in 1997 and 1998.

56. The special allowance in the specific case raised by the Court
was entered in the financial statement by the Council against the
advice of the Commission, which insisted on respecting the remu-
neration scheme for the EUSRs referred to by the Court.

57. The special representatives do not contribute to the sickness
and accident schemes of the Community. They are covered by a
high-risk insurance without any social security aspects, such as
reimbursement of medical expenditure.

58. The Commission would like to clarify that since the adop-
tion of the Commission communication on EUSR remunerations
of 1998 the treatment is uniform for the people seconded to the
offices of those EUSRs whose mandates originate from after 1998.
As regards these ‘new EUSRs’, high-risk insurances and other ben-
efits listed in the Court’s comment are not granted for the sec-
ondees.

Reporting and evaluations

59. Each action is different, and it is not always necessary to
have an audit for each JA. Some actions can very well be evalu-
ated on the basis of a final report, especially when a Commission
Delegation is involved in the implementation. However, the Com-
mission has recently taken efforts to improve management in
these respects.

Since the Court’s last opinion the Commission has tried to ensure
more interaction and dialogue at an early stage between the file
managers and the implementing bodies. Furthermore two audits
were launched in 1999 regarding the Organisation for Security
and Cooperation in Europe (OSCE) in Bosnia and Herzegovina
and the ECMM (since 1 January 2001 now called EUMM). Another
audit has been launched in 2001 on the three EUSRs and a fourth
one is planned regarding the joint action in Cambodia. Regarding
the latter action an evaluation has been completed by an external
expert.

61. The Commission does not wish to comment on the assess-
ment made, which is addressed to the Council.

Operating versus administrative costs

62. The Commission notes that according to the findings of the
Court, the criticism raised in its opinion of 1997 regarding pre-
paratory measures has been satisfactorily met with the introduc-
tion of the corresponding budget heading.

64. The Commission made a note to Coreper in December 2000
where, while stating its support for the objective of the new
guidelines to place the EUSRs clearly under the authority of the
SG/HR, it expressed a need to define what is to be considered as
administrative and what is to be considered as operating expen-
diture.

The Commission has also launched an audit in 2001 on the
operations of EUSRs Hombach, Ajello and Moratinos, where the
definition of administrative and operating expenditure is among
the issues to be addressed.

CONCLUSIONS AND RECOMMENDATIONS

Improvements since the Court’s Opinion No 1/97

65. The Commission has taken the following important mea-
sures to respond to the five main observations in the Court’s
Opinion No 1/97.

(a) There was a lack of clear criteria for determining the source of Com-

munity funding.

Clear criteria were established in the document ‘General cri-
teria for the exercise of either Community powers or the
European Union’s powers under the CFSP Brussels’, Council
Document 13314/1999 of 24 November 1999 according to
which competence determines the source of financing.

In general, greater attention has been paid to the control and
evaluation headings in the financial statements. Further, there is
a clear intention to plan more control missions on the spot.

Since the Court’s opinion of 1997, even before the publica-
tion of these criteria, mine actions (with the exception of
Weudam due to the fact that it was implemented by the WEU,

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being a military organisation) and election-monitoring have
been financed under the applicable Council regulations.

Recommendation 1

(b) Little or no information was available on the amounts disbursed by

different Member States or by other donors.

Financial contributions and contributions in kind are now
indicated in the financial statements.

(c) Preparatory work was considered by the Council as administrative
expenditure and therefore charged to Section II - Council - of the
general budget, leading to a loss of transparency in the management
of the budget.

Since the Court’s opinion, a budget article for preparatory
action has been created under budget subsection B8.

(d) Financial resources were not made available in time to permit effi-
cient implementation or to carry out the preliminary work required
before a common measure is decided upon.

67. The European Parliament, the Council and the Commission should
adopt at an interinstitutional
level clear operational principles and
arrangements with regard to the Commission’s role in the implementa-
tion of the CFSP.

The Commission welcomes the proposal by the Court for clear
operational principles and arrangements with regard to the Com-
mission’s role in the implementation of the CFSP and believes that
the proposals made by the Court aiming at an enhanced Com-
mission role in the implementation and closing of actions would
lead to an overall improvement of the management of CFSP
actions.

The Commission is generally satisfied with the guidelines regard-
ing the EUSRs and the financing of administrative expenditure
from the Council’s administrative budget. However, the Commis-
sion has itself proposed to have the distinction between ‘admin-
istrative’ and ‘operating’ expenditure clarified.

The delays in the mobilisation of financial resources have
become shorter with the creation of the budget article for pre-
paratory action and the abandoning of the budgetary reserve.

The rapid development of CFSP reflected in a growing number of
actions presents a challenge to the Commission, which it can only
meet if it has the adequate human resources.

(e) In the absence of clear definitions, the Commission’s role in deter-
mining the financial, legal and operational arrangements needed for
the implementation of the CFSP measures involving expenditure was
not clearly established.

Budgetary arrangements

The Commission’s task of implementing the budget is unam-
biguous. The Commission is responsible for the proper man-
agement of the Community resources decided to be used for
the CFSP actions (see also Article 28 TEU and Article 274 EC).
Yet, the participation of the Commission in the preparation of
the Council decision is still restricted.

Framework for the CFSP actions

68. As the financial statements accompanying the Council deci-
sions are only ‘illustrating the will of the legislative authority’,
their annual total constitutes not a real constraint. On the con-
trary, the total of the amounts of the Commission decisions should
not exceed the total of the budgetary appropriations available. If
necessary and under strict conditions laid down in the Financial
Regulations, the Commission can respond to extra requirements
of funds without transfers from other budgetary subsections by
using available appropriations of the following budgetary year.
This is not unusual when the Council decision is taken at the end
of the year.

Regarding the different budget lines to finance CFSP operations
and contributions in kind and co-financing, the Commission
refers to its position expressed in points 32 and 35 to 37.

In practice a division of tasks between the Council and the
66.
Commission has been established which is working well for most
of the JA, although some legal precisions would improve the clar-
ity.

Recommendation 2

As the working conditions of the EUSRs were already largely
defined by the Council and as they politically report to the Coun-
cil, it seems a matter of good management to have them classi-
fied under the administrative expenditure of the Council. Thereby
the respective roles of the institutions have been clarified from a
budgetary point of view, which has not affected negatively the
Commission’s overall role in the implementation of CFSP actions.

69. The financing of the CFSP actions should be managed in a more
transparent manner.

The Commission takes note of this recommendation and will try
to reduce the time lapse between the Council decision and the
Commission decision. It will avoid cases where the contract is
signed in another budgetary year than the Commission’s commit-
ment decision.

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In general, the Commission agrees that it would contribute to a
more transparent management if Council decision, Commission
decision and contract could be made in the same budgetary year.
However, in cases where Council decisions are taken late in the
year this is not always possible.

The Commission now systematically alerts the Presidencies of the
need to ensure timely decision-making, so as to enable the Com-
mission to take the commitment decision and to prepare the con-
tract before the end of the budget year.

The Commission will continue to ask the Council to establish
clear arrangements on co-financing. The Commission tries to
mention all the known contributions in the financial statements
accompanying the joint actions. Whenever contributions are made
in kind or when personnel is seconded, this is indicated.

An alternative solution that has been used in the case of the spe-
cial coordinator of the Stability Pact was to pay only a well-defined
component of the total project.

The finding of a method to evaluate the contributions in kind
does not seem feasible since comparable and detailed information
may not be obtainable from the Member States or other contribu-
tors. However, the Commission agrees with the Court that the
mentioning of functions of secondees, names of the seconding
MS and duration of secondments are the minimum information
to be included in the financial statements.

The Commission does not wish to comment on this recommen-
dation, which is addressed to the Council.

Regarding the issue of general criteria established by the decision
of 24 November 1999, the Commission refers to its reply under
points 10(a) and 65(a).

Delays in launching the actions

70. Speed is often an important factor in CFSP, but it is equally
important to concentrate on the proper preparation of contracts
and on the overall implementation framework in order to avoid
problems during the implementation phase and to ensure a qual-
ity output.

In addition, the Commission is currently reflecting on tools to
reduce the internal decision-taking period, such as by an empow-
erment of the Commissioner for External Relations for the financ-
ing decision.

At the end of 1997 an internal restructuring took place in the
Commission, separating in two different Directorates-General the
management of the preparatory phase of the project cycle and the
implementation phase. This situation lasted until the end of 2000
and caused longer time lapses between the Council decisions and
the first payments. The reunification of the project cycle into one
unit at the beginning of 2001 should shorten these delays.

The rapid launching of an action is largely dependent on proper
preparation prior to the Council decision. The situation has
improved in 2000/2001 after the introduction in November 1999
of action statements. If complete action statements are provided
by the Council’s thematic and geographic working groups, con-
tracts can be signed rapidly. The first payments are normally made
upon signature.

In some cases, the Court’s recommendation on reassessments
would be in contradiction with the comment referring to statistics
in the delays in the first payment. If the Commission engages
more often in reassessing actions and implementing partners
between Council decision and contracting, the average delay in
making the first instalment is likely to be greater.

This being said, the Commission welcomes the Court’s recom-
mendation on a recognised right of reassessment in specific cases
where there is a risk of a long delay.

Recommendation 3

The number of borderline cases has declined and will continue to
decline. Election-monitoring and mine actions have been taken
over by the Community under budget subsection B7 under appli-
cable Council regulations. Election-monitoring is implemented
under the Council Regulations (EC) No 975/1999 and (EC) No 976/
1999 of 29 April 2001 and a specific Council regulation on anti-
personnel landmines is being adopted. Weudam will be termi-
nated in November 2001. MAPE is terminated and only specific
elements of the training of the Albanian police force, which are
not linked to the WEU will continue to be covered by the CARDS
Regulation. Nevertheless, there is a continuous need to monitor
new potential grey areas and develop criteria for their classifica-
tion.

71. The Commission should launch an enquiry on the causes of long
delays and reassess the action as well as the partner for the management
of the action.

An improvement is expected due to the Commission’s reorganisa-
tion and more specifically to the concentration of the whole CFSP
project cycle within one unit. The Commission should be duly
involved in the preparation phase of the actions. Besides, in the
framework of the Commission reform, internal control tools are
being strengthened.

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C 338/39

Contracting

72. The Council does not set the deadline for the operation but
it often sets an end date for the validity of the decision itself. In
fact, the operation cannot terminate by the end date of the Coun-
cil decision unless the project implementation starts on the date
of the decision (unless the intended duration of the operation is
shorter than the period of validity of the decision, which is in
practice never the case). Due to the necessity of preparing a Com-
mission financing decision and a contract with the implementing
agency, the execution of the operation will start some time later.
Hence, the Commission agrees with the Court’s recommendation
4(a) that a deadline should be laid down for the completion of a
project, but that the implementation period should start from the
signature of the contract with the implementing agency.

foreseeable changes the Commission will reflect on abandoning
the requirement for prior authorisation.

In line with the reform, the Commission is preparing a vade-
mecum on the implementation of CFSP actions.

Employment conditions

74. Regarding the employment conditions of EUSRs, the Com-
mission would like to point out that the special allowance in the
specific case raised by the Court was entered in the financial state-
ment by the Council against the advice of the Commission, which
insisted on respecting the remuneration scheme for the EUSRs
referred to by the Court.

One important reason for contracts covering costs retroactively
is the fact that Council decisions are taken too late to extend exist-
ing actions.

Regarding other staff, the Commission acknowledges that there
are ambiguities and that the situation might need to be addressed
in a more coherent way. However the indirect application of ‘mar-
ket rules’ has so far often led to the most cost-effective results.

Recommendation 4

73. The Commission should amend contracts retroactively or extend
them only in cases of force majeure. Certain practical measures facilitat-
ing the smooth implementation of actions should be sought.

The Commission agrees that contracts should be amended retro-
actively only in cases of true exceptions. It, however, would like
to point out that such exceptions are often created by a belated
Council decision extending an action which is due to expire in a
few days or which has already expired. In these cases the eligibil-
ity of expenditure must be established retroactively in order to
avoid a gap in financing.

Political and security developments typically affect CFSP actions
in ways that may delay activities. In clear cases, extensions should
rather be granted as a rule than an exception.

The Commission supports this proposal and will investigate the
best ways of how to conform.

A secondment is already a sign of goodwill and a cost-reducing
factor of the action. In practice only the mission costs of seconded
personnel are reimbursed from the project budget. More detailed
conditions were already introduced in the case of the European
Union Monitoring Mission, setting the minimum period of ser-
vice. The Commission will continue to insist on more uniform
practices.

Recommendation 5

75. The Council and the Commission should establish clear rules on
remuneration and salary related costs.

The Commission will continue to insist that applicable rules on
remuneration and salary-related costs are indeed applied and that
for seconded staff, only mission costs should be paid from CFSP
project funds.

It is specified in the Commission communication of 1998 that the
rules do not apply to those EUSRs whose mandates originate
from a period preceding the communication. Only two EUSRs are
hence benefiting from these more favourable terms. Since 1 Janu-
ary 2001, remunerations of the EUSRs are being covered by the
Council’s administrative budget.

The Commission will examine the recommendation made by the
Court.

The Commission agrees with the recommendation to prepare the
Council decisions for actions to be continued the following year
early and has taken initiatives to address the issue with the vari-
ous Presidencies.

Reporting and evaluations

The possibility of using the contingency reserve has always existed
and, since 2001, minor changes concerning transfers between
budget headings have systematically been authorised. For minor

76. A distinction should be made between project reporting and
reporting on the overall implementation to the budgetary author-
ity. The Commission reports on the overall implementation in its
quarterly reports to the European Parliament.

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As regards project reporting, each action is different, and it is not
always necessary to have an audit for each JA. Some actions can
well be evaluated on the basis of a final report, especially when a
Commission Delegation is involved in the implementation. How-
ever, the Commission has recently taken efforts to improve man-
agement in these respects.

Recommendation 6

77. Arrangements should be laid down for adequate reporting, audit
and evaluation.

Audits have already been undertaken for important actions and
further ones are planned on a more regular basis.

Some standard reporting formats have already been developed.
Furthermore they have to be adapted to the wide variety of
projects under CFSP.

In general, greater attention has been paid to the control and
evaluation headings in the financial statements.

The evaluation responsibility depends on the nature of the action.
While the financial and technical evaluation fall to the Commis-
sion, sometimes a specific evaluation of the political opportunity
to continue an action is needed. This evaluation is to be made by
the Presidency and the Council working groups each time an
action is extended. This is also the main reason why the duration
of most of the actions is so short.

The Commission agrees that audits should be carried out on a
more regular basis, in particular for financially important actions.

In general the Commission agrees that evaluations should be car-
ried out on a more regular basis for the more important types of
operation but points out that it has limited appropriations to that
end.