WRITTEN QUESTION E-0764/04 by José García-Margallo y Marfil (PPE-DE) to the Commission. Use of pre-accession funds.
Date: 2004-03-11
Institutions: European Parliament, Provisional data
Subjects: accession to the European Union, audit, financial control, fund (EU), management audit, use of aid

C 88 E/210

Official Journal of the European Union

EN

8.4.2004

In this context, CESR’s tasks are:

(cid:1) to produce consistent guidelines for the administrative regulations to be adopted at national level;

(cid:1) to compare and review regulatory practices to ensure effective enforcement throughout the European

Union and define best practice;

(cid:1) to periodically conduct peer reviews of administrative regulation and regulatory practices in Member

States.

Along these lines, the CESR (cid:1) in coordination with parallel Commission action (cid:1) is about to organise
ad-hoc meetings to discuss potential problems with regard to the Market Abuse Directive (1).

CESR, when preparing guidelines or its Level 2 advice to the Commission for the elaboration of Level 2
legislation, tries to reach solutions acceptable to all Members. The Commission considers that this process
can contribute to ensure convergence among national authorities, transposing and applying EU legislation.

In banking and insurance, the new Committee of European Banking Supervisors (CEBS) and Committee of
European Insurance and Occupational Pensions Supervisors (CEIOPS) have recently begun their work. They
will play a critical role in the uniform application of new legislation such as new Capital Adequacy
(CAD III) and Solvency II Directives.

The CEBS has adopted an ambitious work programme to ensure convergence of supervisory practices in
key aspects of the future capital adequacy framework, e. g. on the validation of internal measurement
approaches for credit risk and operational risk, and on the supervisory review process leading to the fine-
tuning of individual capital requirements.

The Commission will work with all supervisory committees to ensure the implementation of best practices.

the EC Treaty’

In any event, it has to be borne in mind that the Commission, as part of its institutional role as a ‘guardian
of
is responsible for controlling the transposition and monitoring of good quality
implementation by the Member States. The Commission can provide interpretative tools and contacts to
facilitate implementation, ensure good quality transposition and avoid infringement procedures before the
European Court of Justice (cid:1) this is also part of Level 4 in the context of the Lamfalussy process.

initiatives have been launched in the context of

A number of
the European Securities Committee
(for instance the establishment of contact points for the implementation of each ‘Lamfalussy Directive’) as
well as a series of meetings scheduled to provide interpretative tools to facilitate the implementation of the
Market Abuse and Prospectus Directives (2). CESR actions can complement the Commission’s determination
to improve implementation and enforcement.

(1) Directive 2003/6/EC of the Parliament and of the Council of 28 January 2003 on insider dealing and market

manipulation (market abuse), OJ L 96, 12.4.2003.

(2) Directive 2003/71/EC of the Parliament and of the Council of 4 November 2003 on the prospectus to be published
when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC, OJ L 345,
31.12.2003.

(2004/C 88 E/0218)

WRITTEN QUESTION E-0764/04

by José García-Margallo y Marfil (PPE-DE) to the Commission

(11 March 2004)

Subject: Use of pre-accession funds

In relation to the effective use of pre-accession funds, can the Commission say how many audits have been
carried out in the new Member States?

8.4.2004

EN

Official Journal of the European Union

C 88 E/211

What were the main findings?

What were the shortcomings most frequently found in the use of funds by the countries concerned?

Answer given by Mr Verheugen on behalf of the Commission

(30 April 2004)

In response to the first question of the Honourable Member, it is important to underline that the audits
carried out related to pre-accession funds were essentially management control audits and that these
concerned transactions fall under the decentralised responsibility of the Candidate Countries (management
of pre-accession funds was generally conferred to the national authorities of the Candidate Countries at an
early stage,
in order to prepare them for their future responsibilities in respect of sound financial
management of Community funds.)

Two types of audits were carried out, namely closure audits on the regularity and legality of transactions
or alternatively so-called systems audits.

All contracts funded under pre-accession assistance and managed by the national authorities in the
Candidate Countries are subject to ex ante controls by the Commission, until the date of accession, after
which any new contracts signed shall normally be managed fully by the new Member States themselves,
without Commission ex ante controls, under a system known as EDIS (1).

To a considerable degree closure audits therefore act as a further layer of control over the ex ante controls
already applied by the Commission. As closure audits are by definition carried out at the closure of a
programme, until now these have for the most part been carried out for PHARE pre-accession aid, since
the Instrument for Structural Policies for Pre-Accession (ISPA) and Special Accession Programme for
Agriculture and Rural Development (Sapard) programmes only started relatively recently and have not yet
been closed. Programmes are not ready for closure audit until year n+4, n being the year of programming.
Prior to 2000, closure audits had been undertaken on 139 PHARE programmes. Since 2001, closure audits
have been undertaken on a further 149 PHARE programmes, mainly covering programmes within the
period 1992-1999. Such audits will continue.

Systems audits examine the whole management and control system of pre-accession aid established by the
national authorities in the Candidate Country. Already full systems audits of the EDIS applications have
been effected for PHARE in most of the 10 new Member States (linked to the EDIS verification process).
These will be followed in 2005 for Bulgaria and Romania. A systems audit was also carried out on the
Turkish national authorities prior to the decision taken to confer the management of pre-accession aid to
Turkey on a decentralised basis.

Regarding pre-accession assistance under ISPA, in total 32 systems audit missions (2) have been effected to
date. For three countries EDIS verification missions were also carried out. After 1 May 2004, further audits
carried out in the new Member States will fall within the framework of the Cohesion Fund Regulation.

As the Honourable Member may be aware, the pre-accession instrument known as Sapard has always
operated on a fully decentralised basis, whereby no pre-accession funds were released until the EDIS
accreditation of the agencies of the national authorities, following extensive system audits. Conferral of
management audits served as a basis for the Conferral of Management Decision adopted by the
Commission. A total of 21 conferral of management audits were carried out. Following the conferral of
management, monitoring missions were organized in four countries. In addition, for Sapard, financial
audits were conducted in four countries in 2002 and in eight countries in 2003. These audits cover the
integrity, accuracy and veracity of the accounts submitted by the Sapard Agency and also of the Sapard
euro account. Moreover, conformity audits were carried out in eight countries between September 2003
and March 2004.

As to the main findings/shortcomings, these are similar in nature to those identified in the systems in place
in existing Member States, and are of a minor significance for example in the archiving of tender
documentation of contracts being audited, bearing in mind that such audits take place some years after
contracting. Nevertheless, at an earlier stage these contracts had been ex ante endorsed by the Commission.
The systems audits revealed weaknesses (cid:1) corrected in the EDIS accreditation process (cid:1) such as lack of
adequate staffing or training; nascent local internal audit implementation; lack of preparation for the more
‘non-standard’ types of contracting e.g. twinning, nuclear safety, etc.

C 88 E/212

Official Journal of the European Union

EN

8.4.2004

As for Sapard, any weaknesses identified in the conferral of management audits were minor and were
addressed to the competent authorities in a letter of observations respectively and the Commission
followed up the implementation of the recommendations related to those weaknesses. The financial audits
made recommendations on the management of the Sapard euro account. In some cases the conformity
audits identified minor weaknesses which were addressed to the Candidate Countries in the form of
observations and recommendations.

(1) EDIS (Extended Decentralised Implementation System) is an accreditation process whereby the systems of the
national agencies managing pre-accession funds are accredited by the Commission in a step similar to that used for
Structural and Cohesion Funds, allowing for a waiving of the Commission’s ex ante control over tendering and
contracting (and project selection in the case of grants). Prior to accession all countries have undertaken a process
of improvement of their systems and have put forward applications to be accredited under EDIS (except in some
cases for ISPA where the legal base is changed on accession).

(2) All Acceding Countries except Cyprus and Malta, plus Bulgaria and Romania.

(2004/C 88 E/0219)

WRITTEN QUESTION E-0765/04

by José García-Margallo y Marfil (PPE-DE) to the Commission

Subject: Rating agencies and access to privileged information

(11 March 2004)

On the basis of what European legislation are rating agencies able to gain access to privileged information
from businesses?

Answer given by Mr Bolkestein on behalf of the Commission

(26 April 2004)

According to Article 3(a) and Article 6(3) first sub-paragraph of Directive 2003/6/EC of the Parliament and
the Council of 28 January 2003, on insider dealing and market manipulation (market abuse (1)), an issuer
(or a person acting on his behalf or for his account) may disclose inside information to a third party in the
normal exercise of his employment, profession or duties. The issuer must make public disclosure of this
information simultaneously or promptly except if the person receiving the information owes a duty of
confidentiality, regardless of whether such duty is based on a law, on regulations, on articles of association
or on a contract. On this basis, credit rating agencies might get access to inside information from issuers if
they owe such a duty of confidentiality.

However, as credit rating agencies are not explicitly mentioned in the above-mentioned provisions, their
right (or not) of access to inside information from issuers is left, in practice, to Member States. There is no
harmonised European legislation on this matter yet, contrary to the United States where officially
recognised credit rating agencies may officially have access to such information.

This is the reason why the Member of the Commission who was responsible for Employment and Social
Affairs stated, on 9 February 2004 in the plenary debate on the own initiative report of the European
Parliament (Rapporteur: Mr Katiforis) on credit rating agencies, that among at least four issues to be
resolved regarding credit rating agencies, ‘the legal treatment of the question of access by rating agencies to
inside information from issuers is currently unclear in Europe. There is no harmonised European
legislation, nor even any regulation at national
level. If rating agencies are to have access to inside
information from issuers, we should ensure that the same information is available to all rating agencies.
I think Mr Katiforis’ report reflects this. (…) We have to take action fast on these (…) issues. The European
Commission committed itself to that at the Oviedo European Council in April 2002. We have to respect
our commitment before new scandals occur. The European Commission will thus be able to take a
position on the subject by the summer or autumn of 2004 at the latest. Among other contributions,
Mr Katiforis’ report will be an important element to guide us’.