Opinion No 11/2002 on a proposal for a Commission regulation on the framework financial regulation for the bodies referred to in Article 185 of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget
Date: 2002-09-25
Institutions: European Court of Auditors
Subjects: Community body, financial management, financial regulation, general budget (EU), implementation of the budget, management accounting

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(Information)

COURT OF AUDITORS

OPINION No 11/2002

on a proposal for a Commission regulation on the framework financial regulation for the bodies
referred to in Article 185 of Council Regulation (EC, Euratom) No 1605/2002 on the Financial
Regulation applicable to the general budget

(pursuant to the second subparagraph of Article 248(4) of the EC Treaty)

(2003/C 12/01)

CONTENTS

Paragraph

Page

Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Observations concerning compliance with budgetary principles . . . . . . . . . . . . . . . . . . . . . . . .

Observations on the implementation of the budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Observations on the internal auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Observations on the presentation of the accounts and accounting . . . . . . . . . . . . . . . . . . . . . .

1-5

6-12

13-16

17

18-20

2

2

3

4

4

5

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THE COURT OF AUDITORS OF THE EUROPEAN COMMUNITIES,

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

Having regard to the Treaty establishing the European Atomic
Energy Community, and in particular Article 160c(4) thereof,

Having regard to Council Regulation (EC, Euratom) No 1605/
2002 of 25 June 2002 on the Financial Regulation applicable to
the general budget of the European Communities (hereinafter
called the ‘EC Financial Regulation’), and in particular Article
185(1) thereof,

This provision in no way requires the Commission, when it adopts
this framework regulation, to be guided by the rules of the Finan-
cial Regulation applicable to the general budget of the European
Communities, or of any other legislative text of this nature. It fol-
lows that the Commission is at liberty, concerning the draft
framework regulation submitted to the Court for appraisal, to
introduce original financial provisions that are specific to the
management needs of the Community satellite bodies.

2.
The Court reminds the Commission, however, that in its
Opinion No 2/2001 (2) on the draft Financial Regulation appli-
cable to the general budget of the European Communities it set
out three principles on the basis of which it had founded its
appraisal of the text.

These principles are as follows (3):

Having regard to the proposal for a Commission Regulation on
the framework financial regulation for the bodies referred to in
Article 185 of the EC Financial Regulation (SEC(2002) 836 final,
of 17 July 2002, hereinafter called the ‘draft framework financial
regulation’),

(a) the Community budgetary system should apply the existing
budgetary principles and should tolerate only those excep-
tions that are indispensable;

(b) the budgetary system should be as simple as possible;

Having regard to the request for an opinion on this proposal sub-
mitted by the Commission on 18 July 2002,

(c) the budget, in terms of both estimates and implementation,
and the financial statements, should reflect the reality of the
operations and financial situations of the Communities.

Whereas, according to Article 185(1) of the EC Financial Regula-
tion, ‘The Commission shall adopt a framework financial regula-
tion for the bodies set up by the Communities and having legal
personality which actually receive grants charged to the budget’,

The Court sees no reason for not adhering to these three prin-
ciples in its drafting of an opinion on the text submitted to it for
appraisal.

Whereas in a statement for the Council minutes the Commission
undertook to submit a draft for the opinion of the European Par-
liament, the Council and the Court of Auditors before adopting,
on the basis of Article 185, the framework financial regulation for
the bodies set up by the Communities,

3.
Nevertheless, the Court states that, in the current context,
‘existing budgetary principles’ must be understood to mean the
principles on which the EC Financial Regulation is based, as well
as those on which the Community satellite bodies’ own financial
regulations are also currently based.

HAS ADOPTED THE FOLLOWING OPINION:

These principles are as follows:

GENERAL OBSERVATIONS

(a) the principle of the unity of the financial instrument;

(b) the principle of the annual nature of the budget;

1.
The Court welcomes the proposal for a draft framework
financial regulation. It recalls that it had asked for such a com-
mon framework specific to the various Community bodies (1).
The Court notes that Article 185(1) of the EC Financial Regula-
tion invites the Commission to adopt a framework financial regu-
lation for the bodies set up by the Communities and having legal
personality which actually receive grants charged to the budget.

(c) the principle of the unit of account used to draw up the bud-

get;

(d) the principle of the universality of the revenue entered in the

budget to cover all payment appropriations;

(1) See paragraph 72 of Opinion No 2/2001 (OJ C 162, 5.6.2001, p. 1).

(2) OJ C 162, 5.6.2001, p. 1.
(3) See paragraph 4 of Opinion No 2/2001.

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(e) the principle of equilibrium;

(f)

the principle of specification of the appropriations;

(g) the principle of sound financial management;

Financial Regulation. Nevertheless, the Court is compelled to
point out that in its Opinion No 2/2001 it stated clearly that the
budget in terms of estimation and implementation should reflect
the reality of the financial situation and the operations (2). It thus
had a far more concrete understanding of the principle of budget-
ary truthfulness than that set out in the draft framework financial
regulation and the EC Financial Regulation.

(h) the principle of transparency of the actual budget, its accounts

and any action connected with its implementation.

In the Court’s judgment, the Community satellite bodies,
4.
which were set up to manage Community public services, are
subject to the constraints that are specific to public entities. As
independent economic entities, they must certainly act in accor-
dance with the principles of unity and efficiency in their manage-
ment. However, by virtue of their very nature, they must adhere
to the budgetary principles set out in the preceding paragraph. In
order to ensure the unity and efficiency of their management,
some exceptions to the budgetary principles may be indispens-
able. In order for these exceptions to be legitimate, however, they
must satisfy the following requirements:

(a) meet compelling managerial needs specific to the Community

satellite bodies;

(b) be proportionate to the objective pursued without infringing
the budgetary principle to which an exception is being made
any more than is strictly necessary.

5.
The Court also finds that many provisions (1) of the draft
framework financial regulation either faithfully reflect or copy
similar provisions contained in the EC Financial Regulation. With
regard to these provisions, the Court considers that if it had
appraised their relevance in detail, it would have risked creating
more confusion, rather than clarifying the Community financial
legislation. It has therefore preferred to limit itself to making the
comments that were most strictly necessary in their regard.

OBSERVATIONS CONCERNING COMPLIANCE WITH
BUDGETARY PRINCIPLES

The Court notes that the first principle set out in the draft
6.
framework financial regulation is that of ‘budgetary unity and
truthfulness’. It also notes that, as emerges from the tenor of the
relevant provisions, budgetary truthfulness is understood to mean
entering all revenue and all expenditure under a budget heading.
The same principle, with the same tenor, is set out in the EC

7.
The Court finds that a considerable restriction is imposed
with regard to the principle of annuality by the provisions con-
tained in Article 10(7) of the draft, which states as a general rule
that ‘payment appropriations not used at 31 December of year N
shall be carried over automatically’. This rule, which totally negates
the principle of annuality applied to payment appropriations,
should be reviewed in the light of the Court’s doctrine set out in
paragraph 4. The Court reiterates that while the main budgetary
principles may tolerate certain adaptations, where legitimate
imperatives, such as unity and efficiency of management, need to
be satisfied, they cannot allow of any negation that concerns their
actual substance. The Court acknowledges that there are always
good reasons justifying exceptions to the principle of annuality.
However, these reasons must be compelling and, in every case,
proportionate to the objective.

8.
The Court also observes that the wording of Article 10(7)
of the draft is not sufficiently clear. Even though, unlike the EC
Financial Regulation, it adopts the rule concerning the automatic
carry-over of payment appropriations, it nevertheless copies the
wording of the provisions in this regard contained in the EC
Financial Regulation. This gives rise to confusion. The Court is of
the opinion that the text must return to the principle of the annual
character of authorisations under the budget, and only allow spe-
cific exceptions, in the same manner as has also been allowed by
the EC Financial Regulation.

9.
Article 22 provides for the total abandonment of the prin-
ciple of specification as regards payment appropriations: the
director would henceforth manage a single overall budget con-
taining one global appropriation for payments. Commitment
appropriations would remain subject to the principle of specifica-
tion, with the exceptions provided for in Articles 23 and 24. In
the Court’s opinion, the principle of specification applies equally
to both commitment appropriations and payment appropria-
tions. The principle does not result solely from a desire to ratio-
nalise expenditure, but is directly linked to the privileges of the
budgetary authority in its capacity as the authority which defines
the specific framework within which the authority implementing
the budget is required to act. In this regard, the Court must reiter-
ate the doctrine it has already mentioned: the total negation of a
budgetary principle may not be tolerated; exceptions to its appli-
cation are only possible inasmuch as they are necessary and pro-
portionate to a legitimate objective.

(1) Paragraphs 3, 6, 7, 9, 11, 12, 15, 17, 18, 20, 21, 26, 35, 37, 38, 40, 41,
43, 44, 45, 47, 49, 50, 53, 55, 56, 63, 64, 65, 68, 69, 71, 78, 79, 80,
81, 82, 85, 87, 88, 89, 90, 91, 93.

(2) See paragraph 4(c) of Opinion No 2/2001.

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Article 23 of the draft empowers the director to make
10.
transfers from one article to another within each chapter. The
director proposes transfers from one title to another, or from one
chapter to another within a title, to the Management Board. In the
event that the Board does not reach a decision within a month,
the transfers are deemed approved. Lastly, these transfer propos-
als will not have to be accompanied by anything more than jus-
tifications detailing the implementation of the appropriations and
estimates of requirements. The Court notes the flexibility of the
provisions of Article 23 of the draft when compared with the
rigidity of the similar provisions contained in the EC Financial
Regulation. It has no doubt that, given the difficult circumstances
in which the Management Boards meet, the directors of the satel-
lite bodies are empowered, by the abovementioned provisions, to
alter, without any particular constraints, the allocation of all com-
mitment appropriations contained in the budget.

11.
The Court can only conclude that in the event that the
provisions of Articles 22 and 23 of the draft should be adopted
as they are worded in the draft, the principle of the specification
of appropriations, as a whole, will no longer apply in practice to
Community satellite bodies.

12.
With the exception of the points referred to in paragraphs
6 to 11, the Court comes to the conclusion that the existing bud-
getary principles are respected.

OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET

13.
Article 35 of the draft framework financial regulation
provides that all financial actors shall be prohibited from taking
any budgetary implementation measures which may bring their
own interests into conflict with those of the Community body
and that they must refrain from such measures and refer them to
the ‘competent authority’. What is to be understood by ‘compe-
tent authority’, also taking into account situations which might
bring the interests of the Director into a conflict with those of the
Community body, should be determined.

subject, the relationship between the director and the Manage-
ment Board, must be regulated in a coherent and comprehensive
manner within the framework of each Community satellite body’s
own basic regulation (1).

15.
Article 48(4) of the draft framework financial regulation
provides that: ‘The panel set up by the Commission to determine
whether a financial irregularity has occurred and what the con-
sequences, if any, should be, in accordance with Article 66(4) of
the general Financial Regulation, shall exercise the same powers
in respect of the Community body as it does in respect of Com-
mission departments’. Without questioning this proposal as such,
the Court, nevertheless, has doubts as to whether Article 66 or
Article 185 of the EC Financial Regulation empowers the Com-
mission to confer, on a panel purely internal to the Commission,
powers over a Community body.

16.
Under the generic title ‘Rules applicable to authorising
officers by delegation and subdelegation’, Article 48(5) of the
draft provides that: ‘Any member of staff may be required to make
good, in whole or in part, any damage suffered by the Commu-
nity body as a result of serious misconduct on his part in the
course of or in connection with the performance of his duties.
The appointing authority shall take a reasoned decision, after
completing the formalities laid down by the Staff Regulations
with regard to disciplinary matters’. The Court observes that this
provision does not apply to:

— the financial actors,

— or to acts connected with the drawing-up and implementa-

tion of the budget.

In fact, this provision concerns the civil liability of the Commu-
nity satellite body’s staff, with regard to the satellite body, con-
cerning acts committed by the staff in the discharge of their duties.
In addition, in order to redress any damage suffered by the body,
the same clause provides for responsibility to lie with the appoint-
ing authority, i.e. an authority not necessarily involved in the
financial procedures. Without questioning the provision as such
the Court, nevertheless, has doubts whether Article 185(1) of the
EC Financial Regulation provides a legal basis for such a clause.

OBSERVATIONS ON THE INTERNAL AUDITOR

Article 46 of the draft contains the following provision:
14.
‘In order to avoid serious consequences for the financial interests
of the Community body, the Management Board may decide to
suspend the director from his duties as authorising officer of the
Community body. It shall appoint a provisional authorising officer
who shall remain in office until the board has taken a final deci-
sion’. This clause gives the Management Board the power to relieve
the director of his duties as authorising officer while allowing him
to retain his other duties. The Court considers that a director who
has been relieved of his duties as authorising officer cannot have
sufficient authority to discharge his other responsibilities. This

17.
The Court is of the opinion that the proposal should be
more precise concerning the possibility for the decentralised bod-
ies to nominate their own internal auditor. The Court considers
that the decentralised bodies should be entitled to retain this
option.

(1) See paragraph 8 of Opinion No 10/2002 on a Commission proposal
for amendment of the constituent acts of Community bodies follow-
ing the adoption of the new Financial Regulation.

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OBSERVATIONS ON THE PRESENTATION OF THE ACCOUNTS
AND ACCOUNTING

18.
In Title VII, ‘Presentation of the accounts and accounting’,
the EC Financial Regulation contains, in its Articles 128 and 129
applicable to the institutions other than the Commission and to
the ‘bodies referred to in Article 185’, provisions on the procedure
for presenting their interim and final accounts and on the Court
of Auditors’ role in this procedure. Articles 83 and 84 of the draft
include the same procedure and supplement it. In the Court’s
opinion, Articles 128 and 129 of the EC Financial Regulation,
which are also directly applicable to the ‘other institutions’, can-
not be supplemented by provisions that explain or clarify them
and that are enacted under the legislative power delegated to the
Commission on the basis of Article 185(1) of the abovemen-
tioned Regulation. Instead of simplifying the task of the person
called upon to apply the Financial Regulation, such additions
complicate it. In this regard the Court must remind the Commis-
sion of the principle that ‘the budget system should be as simple
as possible’.

Article 133 of the EC Financial Regulation is worded as
19.
follows: ‘1. The Commission’s accounting officer shall, after con-
sulting the accounting officer of the other institutions and bodies
referred to in Article 185, adopt the accounting rules and meth-
ods and the harmonised chart of accounts (…). 2. When adopt-
ing the rules and methods referred to in paragraph 1, the Com-
mission’s accounting officer shall be guided by the internationally
accepted accounting standards for the public sector but may
depart from them where justified by the specific nature of the
Communities’ activities’. Articles 86 to 88 of the draft either
include the provisions quoted above or set out, in general terms,
accounting rules and methods specific to the Community satel-
lite bodies. In the Court’s opinion, the rules set out in Article 133
of the EC Financial Regulation are, within the meaning of this
Article, complete and leave no room for additions; furthermore,
the provision under Article 185(1) of the same Regulation does
not grant the Commission legislative power to amend Article 133
of the same Regulation.

20.
Further remarks of a more technical nature and the
Court’s proposals for modification are laid down in the Annex to
this opinion.

This opinion was adopted by the Court of Auditors in Luxembourg at its meeting of 25 and 26 September
2002.

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

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ANNEX

Draft Commission Regulation

Court’s modifications

Court’s comments

New EC Financial Regulation

Article 4

The budget is the instrument which,
for each financial year, forecasts and
authorises the revenue and
expenditure considered necessary
for the Community body.

The budget is the instrument
which, for each financial year,
forecasts and authorises all the
revenue and expenditure
considered necessary for the Com-
munity body.

It is necessary to respect the traditional
definition of the budget in order to
avoid misunderstandings as to the
application of the principal of
universality.

Article 4

The budget is the instrument

1.
which, for each financial year,
forecasts and authorises all revenue
and expenditure considered neces-
sary for the European Community
and the European Atomic Energy
Community.

Article 5

The budget of the Community body
shall comprise:

The budget of the Community
body shall comprise:

(a) own resources consisting of all
fees and charges which the
Community body is authorised
to collect by virtue of the tasks
entrusted to it, and any other
revenue;

(a) own resources consisting of

all fees and charges which the
Community body is
authorised to collect by virtue
of the tasks entrusted to it,
and any other revenue;

Article 19(1) provides for revenue
earmarked for specific items of
expenditure such as income from
foundations, subsidies or gifts.

(b)

(c)

a subsidy granted by the
European Communities;

the expenditure of the Com-
munity body, including
administrative expenditure.

Article 8

1.
The budget shall contain
differentiated and non-differentiated
appropriations, which shall consist
of commitment appropriations and
payment appropriations.

Administrative appropria-
2.
tions shall be non-differentiated.
Administrative expenditure arising
from contracts covering periods
that extend beyond the financial
year, either in accordance with local
practice or relating to the supply of
equipment, shall be charged to the
budget of the financial year in
which it is effected.

(b)

(c)

(d)

a subsidy granted by the
European Communities;

revenue earmarked for
specific items of expenditure
in accordance with
Article 19(1);

the expenditure of the Com-
munity body, including
administrative expenditure.

The budget shall contain

1.
differentiated and non-
differentiated appropriations,
which shall consist of commit-
ment appropriations and payment
appropriations.

Administrative appropria-
2.
tions shall be non-differentiated.
Administrative expenditure arising
from contracts covering periods
that extend beyond the financial
year, either in accordance with
local practice or relating to the
supply of equipment, shall be
charged to the budget of the
financial year in which it is
effected.

Article 7

1.
The budget shall contain
differentiated and non-differentiated
appropriations, which shall consist
of commitment appropriations and
payment appropriations.

The definition of differentiated
appropriations should be given before
mentioning the rules specific to
administrative expenditure.

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Draft Commission Regulation

Court’s modifications

Court’s comments

New EC Financial Regulation

3.
Commitment appropriations
shall cover the total cost of the legal
commitments entered into during
the current financial year.

2.
Commitment appropria-
tions shall cover the total cost of
the legal commitments entered
into during the current financial
year.

4.
Payment appropriations shall
cover payments made to honour the
legal commitments entered into in
the current financial year and/or
earlier financial years.

3.
Payment appropriations
shall cover payments made to
honour the legal commitments
entered into in the current
financial year and/or earlier
financial years.

Administrative appropria-
4.
tions shall be non-differentiated.
Administrative expenditure arising
from contracts covering periods
that extend beyond the financial
year, either in accordance with
local practice or relating to the
supply of equipment, shall be
charged to the budget of the
financial year in which it is
effected.

Article 10

Commitment appropriations

1.
which have not been used at the
end of the financial year for which
they were entered shall be cancelled.

Commitment

1.
aAppropriations which have not
been used at the end of the
financial year for which they were
entered shall be cancelled.

However, they may, by decision of
the management board taken not
later than 15 February, be carried
over to the next financial year only,
in accordance with paragraphs 2 to
8 below.

However, they may, by decision of
the management board taken not
later than 15 February, be carried
over to the next financial year
only, in accordance with
paragraphs 2 to 86 below.

Appropriations relating to

2.
staff expenditure may not be carried
over.

See paragraphs 7 and 8 of the Court’s
Opinion.

2.
Commitment appropriations
shall cover the total cost of the legal
commitments entered into during
the current financial year, subject to
Articles 77(2) and 166(2).

3.
Payment appropriations shall
cover payments made to honour the
legal commitments entered into in
the current financial year and/or
earlier financial years.

Article 9

Appropriations which have

1.
not been used at the end of the
financial year for which they were
entered shall be cancelled.

However, they may be carried over
to the following financial year only,
by a decision taken by the institu-
tion concerned by 15 February at
the latest, in accordance with
paragraphs 2 and 3 to be carried
over automatically in accordance
with paragraph 4.

Appropriations placed in

6.
reserve and appropriations for staff
expenditure may not be carried
over.

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Draft Commission Regulation

Court’s modifications

Court’s comments

New EC Financial Regulation

Appropriations for commit-

3.
ment of differentiated appropria-
tions and non-differentiated
appropriations not yet committed at
the close of the financial year may
be carried over in respect of
amounts corresponding to commit-
ment appropriations for which
most of the preparatory stages of
the commitment procedure, to be
defined in the rules implementing
the financial regulation of each
Community body, have been
completed by 31 December; these
amounts may then be committed
up to 31 March of the following
year.

4.
Appropriations for payment
of differentiated appropriations may
be carried over in respect of
amounts needed to cover existing
commitments or commitments
linked to commitment appropria-
tions carried over, when the
appropriations provided for the
relevant lines in the budget for the
following financial year do not
cover requirements. The Com-
munity body shall first use the
appropriations authorised for the
current financial year and shall not
use the appropriations carried over
until the former are exhausted.

Non-differentiated appropria-

5.
tions corresponding to obligations
duly contracted at the close of the
financial year shall be carried over
automatically to the following
financial year only.

5.
Non-differentiated
appropriations corresponding to
obligations duly contracted at the
close of the financial year shall be
carried over automatically to the
following financial year only.

Appropriations for commit-

2.
ment of differentiated appropria-
tions and non-differentiated
appropriations not yet committed at
the close of the financial year may
be carried over in respect of:

(a)

(b)

amounts corresponding to
commitment appropriations
for which most of the prepara-
tory stages of the commitment
procedure have been
completed by 31 December.
These accounts may then be
committed up to 31 March of
the following year;

amounts which are necessary
when the legislative authority
has adopted a basic act in the
final quarter of the financial
year and the Commission has
been unable to commit the
appropriations provided for
this purpose by 31 December.

3.
Appropriations for payment
of differentiated appropriations may
be carried over in respect of
amounts needed to cover existing
commitments or commitments
linked to commitment appropria-
tions carried over, when the
appropriations provided for the
relevant lines in the budget for the
following financial year do not
cover requirements. The institution
concerned shall first use the
appropriations authorised for the
current financial year and shall not
use the appropriations carried over
until the former are exhausted.

Non-differentiated appropria-

4.
tions corresponding to obligations
duly contracted at the close of the
financial year shall be carried over
automatically to the following
financial year only.

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Draft Commission Regulation

Court’s modifications

Court’s comments

New EC Financial Regulation

See paragraphs 7 and 8 of the Court’s
Opinion.

Commitment appropriations

6.
may be carried over only if the
commitments could not be adopted
before 31 December of year N for
duly substantiated reasons beyond
the control of the authorising
officer and if the corresponding
operations cannot be financed from
the budget for year N + 1.
Appropriations carried over which
have not been committed by
31 March of year N + 1 shall be
automatically cancelled.
Appropriations carried over in this
way shall be identified in the
accounts.

6.
Commitment appropria-
tions may be carried over only if
the commitments could not be
adopted before 31 December of
year N for duly substantiated
reasons beyond the control of the
authorising officer and if the cor-
responding operations cannot be
financed from the budget for year
N+ 1.
Appropriations carried over which
have not been committed by
31 March of year N+ 1 shall be
automatically cancelled.
Appropriations carried over in this
way shall be identified in the
accounts.

Payment appropriations not

7.
used at 31 December of year N shall
be carried over automatically. The
Community body shall first use the
appropriations authorised for the
current financial year and shall not
use the appropriations carried over
until the former are exhausted. They
shall be added to the payment
appropriations for the following
year.

Payment appropriations not

7.
used at 31 December of year N
shall be carried over automatically.
The Community body shall first
use the appropriations authorised
for the current financial year and
shall not use the appropriations
carried over until the former are
exhausted. They shall be added to
the payment appropriations for
the following year.

The appropriations available

8.
at 31 December arising from the
assignee revenue referred to in
Article 19 of this Regulation shall
be carried over automatically.

The appropriations avail-

6.
able at 31 December arising from
the assignee revenue referred to in
Article 19 of this Regulation shall
be carried over automatically.

Article 14

1.
If the budget of the Com-
munity body has not been finally
adopted at the beginning of the
financial year, the following rules
shall apply to commitment and pay-
ment of expenditure which it has
been possible to book to a specific
line in the budget as part of
implementation of the last budget
duly adopted.

Commitments may be made

2.
per chapter up to a maximum of
one quarter of the total appropria-
tions authorised in the chapter in
question for the previous financial
year, plus one twelfth for each
month which has elapsed, account
being taken of transfers.

Commitments may be

2.
made per chapter up to a
maximum of one quarter of the
total appropriations authorised in
the chapter in question for the
previous financial year, plus one
twelfth for each month which has
elapsed. account being taken of
transfers.

This is obvious and does not need to
be stated.

Article 13

If the budget has not been

1.
finally adopted at the beginning of
the financial year, the first
paragraph of Article 273 of the EC
Treaty and the first paragraph of
Article 178 of the Euratom Treaty
shall apply to commitment and pay-
ment of expenditure which it has
been possible to book to a specific
line in the budget as part of
implementation of the last budget
duly adopted.

Commitments may be made

2.
per chapter to a maximum of one
quarter of the total allotted
appropriations in the chapter in
question of the previous financial
year plus one twelfth for each
month which has elapsed.

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Official Journal of the European Communities

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Draft Commission Regulation

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Payments may be made monthly
per chapter up to a maximum of
one twelfth of the appropriations
authorised in the chapter in ques-
tion for the previous financial year,
account being taken of transfers.

Payments may be made monthly
per chapter up to a maximum of
one twelfth of the appropriations
authorised in the chapter in ques-
tion for the previous financial year.
account being taken of transfers.

This is obvious and does not need to
be stated.

The limit of the appropriations
provided for in the statement of
estimates of revenue and
expenditure may not be exceeded.

3.
If the continuity of action by
the Community body and manage-
ment needs so require, the Director
may simultaneously authorise two
or more provisional twelfths for
both commitments and payments
over and above those automatically
made available by the provisions of
paragraphs 1 and 2.
The Director shall inform the
management board of any such
measure.

If the continuity of action

3.
by the Community body and
management needs so require, the
Director management board may
simultaneously authorise two or
more provisional twelfths for both
commitments and payments over
and above those automatically
made available by the provisions
of paragraphs 1 and 2.
The Director shall inform the
management board of any such
measure.

For this exceptional case which can
only occur extremely rarely, the
authority of the management board
must be respected.

3.
If the continuity of action by
the Communities and management
needs so require:

Payments may be made monthly
per chapter to a maximum of one
twelfth of the allotted appropria-
tions in the chapter in question of
the preceding financial year.

The limit of the appropriations
provided for in the draft budget in
preparation may not be exceeded.

(a)

(b)

the Council, acting by a quali-
fied majority at the request of
the Commission and after
consulting the European Parlia-
ment, may simultaneously
authorise two or more
provisional twelfths both for
commitments and for pay-
ments over and above those
automatically made available
by the provisions of
paragraphs 1 and 2;

for expenditure other than that
necessarily resulting from the
Treaties or acts adopted pursu-
ant thereto, the third
paragraph of Article 273 of
the EC Treaty and the third
paragraph of Article 178 of the
Euratom Treaty shall apply.

Article 14

1.
Budget revenue and payment
appropriations must be in balance.

Article 15

The budget revenue and pay-

1.
ment appropriations of the com-
munity body must be in balance.

Commitment appropriations

2.
may not exceed the amount of the
Community subsidy, plus own
resources and any other revenue
referred to in Article 5(a)

Commitment appropria-

2.
tions may not exceed the amount
of the Community subsidy, plus
own resources and any other
revenue referred to in Article 5(a)

To take into account the proposed
modification of Article 5.

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Draft Commission Regulation

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New EC Financial Regulation

Article 16

Article 15

The budget does not contain commit-
ments as such.

See paragraph 9 of the Court’s
Opinion.

Article 21

Appropriations shall be earmarked
for specific purposes by title and
chapter; the chapters shall be
further subdivided into articles and
items

See paragraph 10 of the Court’s
Opinion.

If the balance is negative and

3.
exceeds the amount of the Com-
munity subsidy granted but not yet
paid, the latter amount shall be
entered in the outturn account for
the following financial year and the
difference shall be entered in the
budget of the following financial
year as a commitment to be charged
to the appropriations for that
financial year.

3.
If the balance is negative
and exceeds the amount of the
Community subsidy granted but
not yet paid, the latter amount
shall be entered in the outturn
account for the following financial
year and the difference shall be
entered in the budget of the fol-
lowing financial year as a commit-
ment to be charged to the
appropriations for that financial
year in payment appropriations.

Article 22

The commitment appropriations in
their entirety shall be earmarked for
specific purposes by title and
chapter; the chapters shall be
further subdivided into articles and
items.
The payment appropriations shall
be entered in the budget in their
entirety. The Director shall divide
them up among the various articles
of the budget according to require-
ments.

The commitment Appropriations
in their entirety shall be earmarked
for specific purposes by title and
chapter; the chapters shall be
further subdivided into articles and
items.
The payment appropriations shall
be entered in the budget in their
entirety. The Director shall divide
them up among the various
articles of the budget according to
requirements.

Article 23

1.
The Director of the Com-
munity body may make transfers
from one article to another within
each chapter.
The Director of the Community
body shall inform the management
board as soon as possible of the
transfers made pursuant to this
paragraph.

2.
The Director of the Com-
munity body may propose to the
management board transfers of
appropriations from one title to
another or from one chapter to
another within a title. The manage-
ment board shall have one month
in which to take a decision on such
transfers; after this time limit they
shall be deemed to be adopted.

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Official Journal of the European Communities

17.1.2003

Draft Commission Regulation

Court’s modifications

Court’s comments

New EC Financial Regulation

Proposals for transfers and

3.
transfers carried out under this
Article shall be accompanied by
appropriate and detailed supporting
documents showing the
implementation of appropriations
and estimates of requirements up to
the end of the financial year, both
for the headings to be credited and
for those from which the appropria-
tions are drawn.

Article 24

1.
Appropriations may be
transferred only to budget lines for
which the budget has authorised
appropriations or carries a token
entry (p.m.).

Assigned revenue may be

2.
transferred only if it is used for the
purpose to which it is assigned.

Appropriations correspond-

2.
ing to assigned revenue may be
transferred only if such revenue is
used for the purpose to which it is
assigned

No reason to deviate from the EC
Financial Regulation.

Article 25

4.
In order to apply the
principle of sound financial
management, the Community body
shall regularly carry out ex ante and
ex post evaluations of programmes
or activities.

In order to apply the principle of
sound financial management 4.In
order to improve decision-making,
the Community body shall
regularly carry out ex ante and ex
post evaluations of programmes or
activities.

No reason to deviate from the wording
of the EC Financial Regulation.

Article 35

1.
All financial actors within
the meaning of Chapter 2 of this
Title shall be prohibited from taking
any measures of budget
implementation which may bring
their own interests into conflict
with those of the Community body.
Should such a case arise, the actor
in question must refrain from such
measures and refer the matter to the
competent authority.

It should be defined what is meant by
‘the competent authority’.
See paragraph 13 of Court’s Opinion.

Article 25

1.
Appropriations may be
transferred only to budget lines for
which the budget has authorised
appropriations or carries a token
entry (p.m.).

Appropriations correspond-

2.
ing to assigned revenue may be
transferred only if such revenue is
used for the purpose to which it is
assigned.

Article 27

4.
In order to improve decision-
making, institutions shall undertake
both ex ante and ex post evaluations
in line with guidance provided by
the Commission. Such evaluations
shall be applied to all programmes
and activities which entail
significant spending and evaluation
results disseminated to spending,
legislative and budgetary authorities.

Article 52

All financial actors shall be

1.
prohibited from taking any
measures of budget implementation
which may bring their own interests
into conflict with those of the Com-
munities. Should such a case arise,
the actor in question must refrain
from such measures and refer the
matter to the competent authority.

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Official Journal of the European Communities

C 12/13

Draft Commission Regulation

Court’s modifications

Court’s comments

New EC Financial Regulation

A conflict of interests arises

2.
where the ability of an actor
involved in implementing the
budget or an internal auditor to
perform his duties impartially and
objectively is impaired because of
family or emotional ties, political or
national affinity, economic interest
or any other pertinent connection
or common interest with the
beneficiary.

Article 46

In order to avoid serious
consequences for the financial
interests of the Community body,
the management board may decide
to suspend the Director from his
duties as authorising officer of the
Community body. It shall appoint a
provisional authorising officer who
shall remain in office until the
board has taken a final decision.

Article 48

The authorising officer shall
1.
be liable to payment of compensa-
tion as laid down in the Staff
Regulations.

2.
There is a conflict of
interests where the impartial and
objective exercise of the functions
of a player in the implementation of
the budget or an internal auditor is
comprised for reasons involving
family, emotional life, political or
national affinity, economic interest
or any other shared interest with
the beneficiary.

Article 66

The authorising officer shall
1.
be liable to payment of compensa-
tion as laid down in the Staff
Regulations, which specify that an
official may be required to make
good, in whole or in part, any dam-
age suffered by the Communities as
a result of serious misconduct on
his part in the course of or in con-
nection with the performance of his
duties, in particular if he determines
entitlements to be recovered or
issues recovery orders, commits
expenditure or signs a payment
order without complying with this
Financial Regulation and its
implementing rules. The same shall
apply where, through serious
misconduct, he omits to draw up a
document establishing a debt or if
he neglects to issue a recovery order
or is, without justification, late in
issuing it, as the issuing of a pay-
ment order may involve third-party
liability of the institution.

See paragraph 14 of the Court’s
Opinion.

No reason to deviate from the EC
Financial Regulation.

The authorising officer shall
1.
be liable to payment of compensa-
tion as laid down in the Staff
Regulations, which specify that an
official may be required to make
good, in whole or in part, any
damage suffered by the Communi-
ties as a result of serious
misconduct on his part in the
course of or in connection with
the performance of his duties, in
particular if he determines entitle-
ments to be recovered or issues
recovery orders, commits
expenditure or signs a payment
order without complying with this
Financial Regulation and its
implementing rules. The same
shall apply where, through serious
misconduct, he omits to draw up a
document establishing a debt or if
he neglects to issue a recovery
order or is, without justification,
late in issuing it, as the issuing of a
payment order may involve third-
party liability of the Community
body.

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Official Journal of the European Communities

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Draft Commission Regulation

Court’s modifications

Court’s comments

New EC Financial Regulation

2.
An authorising officer by
delegation or subdelegation who
considers that a decision falling
under his responsibility is irregular
or contrary to the principles of
sound financial management shall
inform the delegating authority in
writing. If the delegating authority
then gives a reasoned instruction in
writing to the authorising officer by
delegation or subdelegation to
implement the decision in question,
the latter must implement it and
may not be held liable.

In the event of delegation,

3.
the authorising officer shall
continue to be responsible for the
effectiveness of the internal manage-
ment and control systems put in
place and for the choice of the
authorising officer by delegation.

The panel set up by the

4.
Commission to determine whether
a financial irregularity has occurred
and what the consequences, if any,
should be, in accordance with
Article 66(4) of the general
Financial Regulation, shall exercise
the same powers in respect of the
Community body as it does in
respect of Commission depart-
ments.

On the basis of the opinion of this
panel, the Director of the Com-
munity body shall decide whether
to initiate disciplinary proceedings
or proceedings for the payment of
compensation. If the panel detects
systemic problems, it shall send a
report with recommendations to
the authorising officer and to the
Commission’s internal auditor. If the
opinion implicates the Director, the
panel shall send it to the manage-
ment board and the Commission’s
internal auditor.

5.
Any member of staff may be
required to make good, in whole or
in part, any damage suffered by the
Community body as a result of seri-
ous misconduct on his part in the
course of or in connection with the
performance of his duties.

2.
An authorising officer by
delegation or subdelegation who
considers that a decision which it is
his responsibility to take is irregular
or contrary to the principles of
sound financial management shall
inform the delegating authority in
writing. If the delegating authority
then gives a reasoned instruction in
writing to the authorising officer by
delegation or subdelegation to take
the decision in question, the
authorising officer may not be held
liable.

In the event of subdelegation,

3.
within his services, the authorising
officer by delegation continues to be
responsible for the effectiveness of
the internal management and
control systems put in place and for
the choice of the authorising officer
by subdelegation.

Each institution shall set up a

4.
specialised financial irregularities
panel which shall function
independently and determine
whether a financial irregularity has
occurred and what the
consequences, if any, should be.

On the basis of the opinion of this
panel, the institution shall decide
whether to initiate proceedings
entailing liability to disciplinary
action or to payment of compensa-
tion. If the panel detects systemic
problems, it shall send a report with
recommendations to the authorising
officer and to the authorising officer
by delegation, provided the latter is
not the person involved, as well as
to the internal auditor.

See paragraph 15 of the Court’s
Opinion.

See paragraph 16 of the Court’s
Opinion.

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Official Journal of the European Communities

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Draft Commission Regulation

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New EC Financial Regulation

The appointing authority shall take
a reasoned decision, after complet-
ing the formalities laid down by the
Staff Regulations with regard to
disciplinary matters.

CHAPTER 8
Internal auditor

Article 72

1.
The Community body shall
have an internal auditing function
which must be performed in
compliance with the relevant
international standards.

In accordance with

2.
Article 185(3) of the general
Financial Regulation, this function
shall be performed by the Commis-
sion’s internal auditor within the
meaning of Article 85 of the
general Financial Regulation. In this
capacity, he shall be answerable to
the Community body for verifying
the proper operation of budget
implementation systems and
procedures.

Article 73

1.
The internal auditor shall
advise the Community body on
dealing with risks, by issuing
independent opinions on the quality
of management and control systems
and by issuing recommendations for
improving the conditions of
implementation of operations and
promoting sound financial manage-
ment.

He shall be responsible:

(a)

for assessing the suitability and
effectiveness of internal
management systems and the
performance of departments in
implementing programmes and
actions by reference to the
risks associated with them; and

(b)

for assessing the suitability and
quality of the internal control
systems applicable to every
budget implementation opera-
tion.

CHAPTER 8
Internal auditor

Article 85

Each institution shall establish an
internal auditing function which
must be performed in compliance
with the relevant international
standards.

See paragraph 17 of the Court’s
Opinion.

Article 185

The Commission’s internal

3.
auditor shall exercise the same pow-
ers over the bodies referred to in
paragraph 1 as he does in respect of
Commission departments.

Article 86

1.
The internal auditor shall
advise his institution on dealing
with risks, by issuing independent
opinions on the quality of manage-
ment and control systems and by
issuing recommendations for
improving the conditions of
implementation of operations and
promoting sound financial manage-
ment.

He shall be responsible in
particular:

(a)

for assessing the suitability and
effectiveness of internal
management systems and the
performance of departments in
implementing policies,
programmes and actions by
reference to the risks associated
with them;

(b)

for assessing the suitability and
quality of the internal control
and audit systems applicable to
every budget implementation
operation.

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Official Journal of the European Communities

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Draft Commission Regulation

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Court’s comments

New EC Financial Regulation

The internal auditor shall

2.
perform his duties on all the Com-
munity body’s activities and depart-
ments. He shall enjoy full and
unlimited access to all information
required to perform his duties.

3.
The internal auditor shall
report to the management board
and the Director of the Community
body on his findings and recom-
mendations. They shall ensure that
action is taken on recommendations
resulting from audits.

The internal auditor shall

4.
submit to the Community body an
annual internal audit report setting
out, inter alia the number and type
of internal audits conducted, the
recommendations made and the
action taken on these recommenda-
tions. This annual report shall also
mention any systemic problems
detected by the specialised panel set
up under Article 66(4) of the
general Financial Regulation.

See paragraph 15 of the Court’s
Opinion.

5.
Each year the Community
body shall send to the authority
responsible for discharge and the
Commission a report drawn up by
its Director summarising the
number and type of internal audits
conducted by the internal auditor,
the recommendations made and the
action taken on these recommenda-
tions.

5.
Each year the Community
body shall send to the authority
responsible for discharge, the
Court of Auditors and the Com-
mission a report drawn up by its
Director summarising the number
and type of internal audits
conducted by the internal auditor,
the recommendations made and
the action taken on these recom-
mendations.

The Court, as external auditor, should
be aware of any report established by
internal audit.

Article 80

1.
In accordance with the
principle of accrual-based account-
ing, the financial statements shall
show the charges and income for
the financial year, regardless of the
date of payment or collection.

The value of assets and

2.
liabilities shall be determined in
accordance with the valuation rules
laid down by the accounting
methods provided for in Article 132
of the general Financial Regulation.

Correction of a reference error

The value of assets and

2.
liabilities shall be determined in
accordance with the valuation
rules laid down by the accounting
methods provided for in
Article 132 Article 133 of the
general Financial Regulation.

The internal auditor shall

2.
perform his duties on all the
institution’s activities and depart-
ments. He shall enjoy full and
unlimited access to all information
required to perform his duties, if
necessary on the spot, including in
the Member States and in third
countries.

The internal auditor shall

3.
report to the institution on his find-
ings and recommendations. The
institution shall ensure that action is
taken on recommendations result-
ing from audits. The internal auditor
shall also submit to the institution
an annual internal audit report
indicating the number and type of
internal audits carried out, the
recommendations made and the
action taken on those recommenda-
tions.

Each year the institution shall

4.
forward a report to the discharge
authority summarising the number
and type of internal audits carried
out, the recommendations made
and the action taken on those
recommendations.

Article 125

1.
In accordance with the
principle of accrual-based account-
ing, the financial statements shall
show the charges and income for
the financial year, regardless of the
date of payment or collection.

The value of assets and

2.
liabilities shall be determined in
accordance with the valuation rules
provided for in Article 133.

17.1.2003

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Official Journal of the European Communities

C 12/17

Draft Commission Regulation

Court’s modifications

Court’s comments

New EC Financial Regulation

See paragraph 18 of the Court’s
Opinion.

The rules for the Court’s audit should
not be defined in this framework
financial regulation.

Article 83

The accounting officer of the Com-
munity body shall send to the Com-
mission’s accounting officer by no
later than 1 March of the following
year its provisional accounts,
together with the report on budget-
ary and financial management dur-
ing the year, referred to in
Article 77, so that the Commission’s
accounting officer can consolidate
the accounts as provided for in
Article 127 of the general Financial
Regulation.

Article 84

In accordance with

1.
Article 129 of the general Financial
Regulation, the Court of Auditors
shall, by 15 June at the latest, make
its observations on the provisional
accounts of each institution and
each body referred to in Article 185
of the general Financial Regulation.

1.
In accordance with
Article 129 of the general
Financial Regulation, the Court of
Auditors shall, by 15 June at the
latest, make its observations on
the provisional accounts of each
institution and each body referred
to in Article 185 of the general
Financial Regulation.

On receiving the Court of

2.
Auditors’ observations on the
provisional accounts of the Com-
munity body, the Director shall
draw up the final accounts of the
Community body, under his own
responsibility, and send them to the
management board of the Com-
munity body, which shall give an
opinion on these accounts.

On receiving the Court of

1.
Auditors’ observations on the
provisional accounts of the Com-
munity body, the Director shall
draw up the final accounts of the
Community body, under his own
responsibility, and send them to
the management board of the
Community body, which shall give
an opinion on these accounts.

3.
The Director of the Com-
munity body shall send the final
accounts, together with the opinion
of the management board, to the
Commission’s accounting officer
and to the Court of Auditors, the
European Parliament and the
Council, by 1 July of the following
year at the latest.

2.
The Director of the Com-
munity body shall send the final
accounts, together with the
opinion of the management board,
to the Commission’s accounting
officer and to the Court of Audi-
tors, the European Parliament and
the Council, by 1 July of the fol-
lowing year at the latest.

4.
The final accounts of the
Community body shall be published
in the Official Journal on
31 October of the following
financial year.

The final accounts of the

3.
Community body shall be
published in the Official Journal
on 31 October of the following
financial year.

The Director of the Com-

5.
munity body shall send the Court of
Auditors a reply to the observations
made in its annual report by
30 September at the latest.

4.
The Director of the Com-
munity body shall send the Court
of Auditors a reply to the observa-
tions made in its annual report by
30 September at the latest.

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Official Journal of the European Communities

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Draft Commission Regulation

Court’s modifications

Court’s comments

New EC Financial Regulation

Article 86

The accounting rules and methods
and the harmonised chart of
accounts to be applied by the Com-
munity body shall be adopted by
the Commission’s accounting officer
in accordance with Article 133 of
the general Financial Regulation.

The accounting rules and methods
and the harmonised chart of
accounts to be applied by the
Community body shall be adopted
by the Commission’s accounting
officer in accordance with
Article 133 of the general
Financial Regulation.

See paragraph 19 of the Court’s
Opinion.