Opinion No 8/2001 on a proposal for a Council Regulation laying down the statute for executive agencies to be entrusted with certain tasks in the management of Community programmes
Date: 2001-10-25
Institutions: European Court of Auditors
Subjects: EU office or agency, EU programme, European Court of Auditors, drafting of EU law, legal status, management

6.12.2001

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Official Journal of the European Communities

C 345/1

I

(Information)

COURT OF AUDITORS

on a proposal for a Council Regulation laying down the statute for executive agencies to be
entrusted with certain tasks in the management of Community programmes

OPINION No 8/2001

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

(2001/C 345/01)

THE COURT OF AUDITORS OF THE EUROPEAN COMMUNITIES,

HAS ADOPTED THE FOLLOWING OPINION:

Having regard to the Treaty establishing the European Commu-
nity, and in particular Article 248(4), second subparagraph, thereof,

Introduction

Having regard to the request for an opinion, drafted by the Coun-
cil of the European Union on 15 March 2001 and received at the
Court on 21 March 2001,

Having regard to the proposal for recasting the Financial Regula-
tion, presented by the Commission (1), and the Court’s opinion
on the proposal (2),

Whereas the proposal for a Council Regulation is part of the
framework for outsourcing the management of Community pro-
grammes;

1. The commitment of the Commission, set out in December
1999 (3), to develop a coherent and manageable externalisation
policy, in order to correct aberrations caused by poor control of
various technical assistance offices (TAOs) meets a need high-
lighted by the Court over several years in its annual and special
reports (4). In light of its past comments, the Court generally wel-
comes this proposed Regulation. Forming a central part of the
Commission’s externalisation policy, it sets out a legal framework
for entrusting responsibility for the implementation and manage-
ment of Community programmes to executive agencies.

2. There are, however, a number of provisions in the draft Regu-
lation which the Court considers require clarification or more
substantial amendment. These are set out in the following para-
graphs, which follow the structure of the draft Regulation.

Article 3: Creation and winding-up of executive agencies

Whereas the proposal concerns the statute for executive agencies
that are entrusted with certain tasks in the management of Com-
munity programmes,

3. The Court notes that Article 3(1) and (2) of the draft Regula-
tion reflect the temporary nature of an executive agency, by

(1) COM(2000) 461 final, 17.10.2000.
(2) Opinion No 2/2001 of the Court of Auditors of the European Com-

munities of 8 March 2001 (OJ C 162, 5.6.2001, p. 1).

(3)

‘Orientations for the externalisation policy’, SEC(1999) 2051/7 of
14.12.1999.

(4) See for example, Special Report No 1/96 MED-programmes.

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providing that the Commission may fix the duration of its exist-
ence, and decide to wind it up if it no longer needs its services.
The Court wishes to emphasise that the Commission will need to
exercise effectively this discretion in respect of agencies which are
no longer needed.

4.
In paragraph 2 of Article 3, in so far as an executive agency
performs tasks entrusted to it by the Commission, on its winding
up the Commission should immediately take back into its accounts
the total outstanding assets and liabilities of the agency without
waiting for the completion of the winding-up process.

Article 5: Headquarters

5. Although it is clear that the links between an executive agency
and the Commission services should be very close, it is not appro-
priate to specify that the headquarters of an executive agency can
only be in one of the places where the Commission departments
are located. It would be preferable to provide that such headquar-
ters should be established where they can perform their tasks
most efficiently.

Article 6: Tasks

6. Since, as delegating institution, the Commission remains
responsible for the agencies’ execution of its powers, it is consid-
ered advisable for the Regulation to lay down general rules con-
cerning the controls which the Commission operates in relation
to the activities of the agencies, so that it may intervene if an
agency acts in a way that is contrary to the object of the Com-
munity programme in question or, on a more general level, acts
unlawfully. The control procedures could be specified in the
instrument of delegation (having regard to the individual aspects
of each agency), but the general control framework should be
established by the Regulation laying down the statute for execu-
tive agencies.

Article 9: Tasks of the steering committee

7. With regard to Article 9(2) which provides for the steering
committee to adopt at the latest at the beginning of each year the
work programme of the executive agency, it would be desirable
to provide explicitly for the steering committee, when an agency
is first established, to adopt clear objectives for the agency, together
with indicators of performance to be used to assess how well the
agency is carrying out its tasks. This would emphasise from the
outset the importance to be attached to the agency’s achievement
of results, in line with the orientation of the Commission in the
current process of reform.

8. Similarly, this framework Regulation should specify that the
annual activity reports of an agency (Article 9(7)) should contain
information on all financial resources received, whether from the
Community or other sources, and on their utilisation. The reports
should also contain sufficient information and analysis for an
appreciation of the extent to which the objectives of the agency
concerned have been met, and of the efficiency of the agency’s
management.

9. The Regulation should also provide for the evaluation at regu-
lar intervals of the efficiency and effectiveness of an agency. There
is currently no such provision in the draft proposal. Such evalu-
ations should be carried out under the responsibility of the Com-
mission but in close cooperation with the agency and its steering
committee, and the resulting reports should be sent to the Coun-
cil, European Parliament and the Court of Auditors.

10. The steering committee should approve the detailed accounts
of an executive agency which are submitted to it by the Director,
before they are submitted to the European Parliament, the Court
of Auditors and the Commission as provided for in Article 14(2).

Article 11: Tasks of the Director

11.
It would be appropriate to provide explicitly that the Direc-
tor of an executive agency must ensure that an effective system of
internal control is established in the agency.

Articles 12 to 16: Operating budget of the agency and operat-
ing appropriations of the programme(s) which the agency is
involved with managing (1)

12. The proposed Regulation provides that the operating budget
of an executive agency will cover its running costs only for the
year in question. This budget will be financed, firstly, by a grant
from the Commission representing a specified percentage of the
annual financial allocation to the Community programmes which
the agency is involved in managing, and, secondly, by any revenue
from other sources. The operating appropriations of the Com-
munity programmes themselves will be entered in the general
budget of the European Union and not in the agency’s operating
budget. Expenditure on these programmes will be posted directly
to the appropriate headings in the general budget.

(1) The English text of the draft Regulation refers to the ‘operating bud-
get’ for the running costs and to the ‘operating appropriations of the
Community programmes’ for the cost of the operations. This is rather
confusing. It would be preferable for the Commission to find termi-
nology which differentiates more clearly between the two types of
expenditure. For example, for the second category ‘operational appro-
priations’ would be preferable.

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13. Under the proposal, the accounts of an executive agency
will, therefore, only include its administrative expenditure and
other running costs, and the revenue to cover these costs. They
will not contain the expenditure on the Community programmes
managed by the agency.

(a)

in Articles 12 and 13 it would be preferable to refer to a ‘con-
tribution’ rather than a ‘grant’ for the funds that the Commis-
sion will make available to an executive agency to cover its
running costs. This is because the nature of ‘grants’ as cur-
rently defined in the Vademecum on grant management is
rather different from what is envisaged in this proposal;

14. Charging the expenditure on operations managed by the
agency directly to the general budget is welcome. It avoids the risk
that payments out of the general budget constitute no more than
shifting of funds from the Commission to intermediate organisa-
tions (1). However, it implies that the financial statements of an
agency may not include expenditure on the operations which it is
responsible for managing. The production of financial statements
only dealing with operating expenditure on running costs would
not be in line with the steps being taken by the Commission to
introduce activity based management/activity based budgeting
(ABM/ABB) for its programmes. ABM/ABB involves bringing the
financial resources to be spent on programmes together with
those required to cover the costs of managing those programmes.
It is important that an executive agency should have an obliga-
tion to account in global terms for the operating appropriations
it manages.

(b) it is also not clear whether the ‘contribution’, calculated as a
percentage of the annual financial allocation to the Commu-
nity programme which the executive agency is involved in
managing, is acquired revenue of the agency even if the pro-
grammed amounts are not committed or paid. The objective
should be to finance the essential running costs of the agency,
subject perhaps to a ceiling. The provisions of Article 13 need,
therefore, to be clarified;

(c) an executive agency will be able to receive revenue from
sources other than the contribution of the Commission from
the general budget (Article 12(3), Article 17). The draft Regu-
lation implies that the detailed annual accounts provided for
in Article 14(2) will contain running costs only associated
with such other revenue, but it is not clear how expenditure
on the programmes funded by this other revenue will be
accounted for. In line with the arguments set out in paragraph
14, an executive agency should be required to account for its
utilisation of all funds that it is called upon to manage.

15. The Commission might also consider including the budgets
for the running costs of an executive agency in the general budget
itself, together with the operating appropriations for the pro-
grammes it manages. In this case, the running cost expenditure
would also be directly posted to the general budget.

Article 19: Supervision

16. Such a solution might facilitate the production of complete
financial statements for an agency containing both running costs
and operating expenditure for the programmes managed by it. It
is, however, important that the potential advantages in terms of
flexibility of taking the operating budget of an executive agency
outside the scope of the Financial Regulation be retained. The
very least the Regulation should require is that the annual accounts
of an agency should contain a financial report detailing the utili-
sation of operating appropriations for Community programmes
in terms of commitments and payments (see paragraph 8).

18. Article 14 provides that the Director of an executive agency
shall submit detailed annual accounts of revenue and operating
expenditure (running costs) to the European Parliament, the Court
of Auditors, the Commission and the steering committee (see
paragraph 10 for the Court’s proposals to modify this provision
to require the steering committee to approve the accounts before
they are submitted to the institutions). The European Parliament
grants discharge to an executive agency.

19. Article 19 provides that the Court of Auditors shall scrutin-
ise an executive agency’s accounts in accordance with Article 248
of the Treaty.

17. There are several points which require clarification in the
proposed Articles 12 to 16:

(1)

It may be noted that this is not the way that the European Agency for
Reconstruction operates. The Agency receives large transfers of funds
from the Commission to fund the operations it is managing and its
running costs. Each transfer is recorded as a single payment out of the
Commission accounts, while the Agency records this as income and
draws up accounts showing what it has committed and paid for both
operations and running costs.

20.
If the policy of externalisation of the Commission leads to
the creation of a significant number of executive agencies, the
task of conducting annual audits of their accounts would be con-
siderable, and would require an increase in the Court’s resources.
Under the terms of the proposed Regulation the accounts would
cover the running costs of the agencies only. Annual audits of all
of these accounts would not be the most cost-effective use of the
Court’s limited resources. In order to minimise this problem, and
facilitate the most cost-effective use of the Court’s resources, the

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framework Regulation should provide for prior scrutiny of Agen-
cies’ expenditure, both operating expenditure on programmes
and running costs, by independent auditors before it is incorpo-
rated into the consolidated accounts of the Commission. This
would be without prejudice to the Court’s prerogatives under
Article 248 of the Treaty. The Court would audit the use of the
operating appropriations of Community programmes managed
by an agency, such audit including the efficiency and effectiveness
of the agency’s management. For the purposes of its audit certifi-
cate concerning the running costs, the Court should be able to
obtain assurance on matters of legality and regularity from this
prior scrutiny.

In this context, it may be questioned whether it is appropri-
21.
ate for the European Parliament to grant discharge to each execu-
tive agency in respect of their running costs only. In such circum-
stances, the external audit of an executive agency might be
considered to be part of the Commission’s internal control over
the work of bodies to which it has entrusted or delegated certain
tasks. As part of its general discharge of the Commission, the

European Parliament would examine the performance of the
Commission and its executive agencies, rather than give separate
discharge to each agency. Such an arrangement would better
reflect the continuing ultimate accountability of the Commission
under the discharge procedure for the operating expenditure del-
egated to executive agencies for the programmes.

Article 21: Legality of acts

22. Article 230 of the EC Treaty makes no provision for the pos-
sibility of reviewing the legality of the acts of the agencies as such.
The Court of Justice’s powers of review are laid down by the EC
Treaty and thus cannot be amended or extended by a Council
Regulation. In order to avoid giving the impression that this draft
Regulation is proposing an amendment or widening of scope to
that effect, it would therefore be preferable for this Article to pro-
vide that the Commission, as the delegating institution, is legally
responsible for the acts of the executive agencies.

This opinion was adopted by the Court of Auditors in Luxembourg at its meeting of 25 October 2001.

For the Court of Auditors

Jan O. KARLSSON

President