Resolution of the European Parliament containing the comments accompanying the decision concerning discharge to the Commission in respect of the implementation of the budget of the sixth, seventh and eighth European Development Funds for the 2002 financial year
Date: 2004-04-21
Institutions: European Parliament
Subjects: European Commission, European Development Fund, budgetary discharge, closing of accounts, financial year, implementation of the budget

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RESOLUTION

of the European Parliament containing the comments accompanying the decision concerning
discharge to the Commission in respect of the implementation of the budget of the sixth, seventh
and eighth European Development Funds for the 2002 financial year

THE EUROPEAN PARLIAMENT,

— having regard to the balance sheets and accounts of the sixth, seventh and eighth European

Development Funds for the 2002 financial year (COM(2003) 475 - C5-0496/2003),

— having regard to the Commission communication to the Council, the European Parliament and the
Court of Auditors of 7 August 2003 on financial information on the sixth, seventh and eighth
European Development Funds 2002 (COM(2003) 491 - C5-0619/2003),

— having regard to the annual report of the Court of Auditors of the activities of the sixth, seventh and
eighth European Development funds for 2002 together with the institutions' replies (C5-0584/
2003)

(1),

— having regard to the Court of Auditors' Statement of Assurance on the European Development

Funds (C5-0584/2003),

— having regard to the Annual Report 2003 from the Commission to the Council and the European
Parliament on the EC development policy and the implementation of external assistance in 2002
(COM(2003) 527),

— having regard to its resolution of 1 March 2001 on the Commission communication to the Council

and the European Parliament on the European Community's development policy (2),

— having regard to the EuropeAid Cooperation Office's annual activity report 2002,

— having regard to the Council's recommendations of 9 March 2004 concerning the discharge to be
given to the Commission in respect of the implementation of the operations of the European
Development Funds for the financial year 2002 (C5-0146/2004 - C5-0147/2004 - C5-0148/2004),

— having regard to Article 33 of the Internal Agreement of 20 December 1995 between the
representatives of the governments of the Member States, meeting within the Council, on the
financing and administration of the Community aid under the Second Financial Protocol to the
fourth ACP-EC Convention (3),

— having regard to Article 74 of the Financial Regulation of 16 June 1998 applicable to development

finance cooperation under the fourth ACP-EC Convention (4),

— having regard to Rules 93 and 93a, third indent of, and Annex V to, its Rules of Procedure,

— having regard to the report of the Committee on Budgetary Control and the opinion of the

Committee on Development and Cooperation (A5-0183/2004),

A. Whereas, pursuant to Article 74 of the Financial Regulation of 16 June 1998 the Commission shall
take all appropriate steps to act on the comments appearing in the decision giving discharge and to
report, at the request of the European Parliament, on measures taken in light of these comments.

(1) OJ C 286, 28.11.2003, p. 325.
(2) OJ C 277, 1.10.2001, p. 130.
(3) OJ L 156, 29.5.1998, p. 108.
(4) OJ L 191, 7.7.1998, p. 53.

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B. Whereas the present Commission took office in September 1999,

management of EC external assistance in May 2000 (1) and the reform of
Communities' development policy in November 2000 (2).

launched the reform of the
the European

C. Whereas the Partnership Agreement between the members of the African, Caribbean and Pacific
Group of States of the one part, and the European Community and its Member States, of the other
part, signed in Cotonou on 23 June 2000 (the Cotonou Agreement) (3), which entered into force on
1 April 2003, has reformed aid to the ACP States and increased focus on poverty reduction.

D. Whereas, due to the long ratification process for the Cotonou Agreement, the ninth European
Development Fund (EDF) covering the period 2000 to 2005 had not entered into force at the end of
2002, making it necessary for the Commission during 2002 to use funds from the eighth EDF in
order to initiate financing decisions based on programming for the ninth EDF.

E. Whereas the ACP-EU Joint Parliamentary Assembly, at its meeting in Rome from 11 to 15 October
2003, adopted a resolution (4) on the use of the EDF, calling on the Commission to speed up
implementation of funds,

Statement of Assurance

1. Notes that the Court of Auditors is of the opinion that the revenue entered in the accounts, the
amounts allocated to the European Development Funds (EDFs), the commitments and the payments
of the financial year are, taken as a whole, legal and regular;

2. Notes that the Court of Auditors has formed its opinion based on an analysis and testing of the
supervisory systems and controls of the Commission as well as on controls carried out on a number
of underlying transactions in Brussels and on the spot in six ACP States;

3.

4.

Supports the Court of Auditors' approach of giving analysis of supervisory systems and controls
high priority;

Supports the Court of Auditors' intentions to perform on-the-spot controls in ACP States; invites the
Court of Auditors to ensure that all delegations of the Commission are visited and controlled within
a limited number of years;

5. Notes that the Court of Auditors made the following critical remarks:

(a)

(b)

the Commission has not sufficiently addressed weaknesses relating to the terms of reference,
reporting and follow-up of audit reports carried out on EDF operations;

key controls are not always reliably carried out by the National Authorising Officer and/or the
Head of Delegation;

(c) monitoring information and performance indicators on the evolution of the quality of public
finance management in ACP States do not exist, preventing the Court of Auditors from giving
an opinion on the use of direct budgetary aid;

(d)

the Director-General of the EuropeAid Cooperation Office (AIDCO) did not have sufficient
information available when he declared without reservation in the AIDCO annual activity
report for 2002 that control procedures put in place provided the necessary guarantees in
respect of the legality and regularity of the underlying transactions;

(1)

(2)

See Communication to the Commission on the Reform of the Management of External Assistance, adopted by
the Commission on 16 May 2000.
See Statement by the Council and the Commission on The European Community's Development Policy adopted
by the General Affairs Council (Development) on 10 November 2000.

(3) OJ L 317, 15.12.2000, p. 3.
(4) OJ C 26, 29.1.2004, p. 17.

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Declaration of the Director-General of AIDCO

6. Notes with satisfaction that the annual activity report and declaration of the Director-General of
AIDCO for 2002 also covered the EDF, even though the charter for authorising officers by delegation
did not at that time extend to EDF transactions; however, also notes that the Court of Auditors
considers that, from the viewpoint of methodology, the Director-General of AIDCO did not yet have
all the requisite information concerning the reality,
legality and regularity of the on-the-spot
transactions as regards the following information:

(a)

the management of funds by ACP countries had not yet been subjected to risk analysis and
formalised evaluation, particularly in the context of the use of budgetary aid. AIDCO was not
yet able to determine the extent to which Internal Control Standard No 17 on supervision had
actually been implemented as regards the transactions that were managed by the Delegations
and National Authorising Officers;

(b)

the coverage and findings of external audits were neither quantified nor analysed. These
external audits were still not included within the scope of Internal Control Standard No 21 on
audit reports;

(c)

the amounts to be recovered were not entered in the accounts and were not always identified.
There was therefore no guarantee that advances were correctly cleared;

Calls on the Director-General of AIDCO to address the abovementioned weaknesses pointed out by
the Court of Auditors;

7.

Notes that the Commissioner for Development and Humanitarian Aid does not believe it to be part
of his responsibilities to ensure that the Director-General of AIDCO includes a reliable declaration in
the AIDCO annual activity report;

8. Does not find that the opinion of the Commissioner for Development and Humanitarian Aid on this
issue is in accordance with the Code of Conduct for Commissioners and Departments, which states
that ‘directors-general shall be answerable to their Commissioner for the sound implementation of
the policy guidelines laid down by the Commission and the Commissioner.’;

9. Questions the value of such a declaration when it does not have any consequence for a director-
general if serious criticism is raised against the approach taken in working out the declaration;

Budgetary support

10. Notes that budgetary support has increased its share of implemented primary commitments from
14 % in 2001 to 23 % in 2002; notes that the Commission intends to increase this share further in
future years;

11. Acknowledges that budgetary support may be effective in achieving the objectives of poverty
reduction and better management of public finances in beneficiary countries, inter alia by increasing
ownership of the beneficiary country;

12. Notes that according to the Cotonou Agreement, direct budgetary assistance in support of

macroeconomic or sectoral reforms shall be granted where (1):

(a)

public expenditure management is sufficiently transparent, accountable and effective;

(b) well-defined macroeconomic or sectoral policies established by the country itself and agreed to

by its main donors are in place; and

(c)

public procurement is open and transparent;

(1)

See Cotonou Agreement, Article 61(2).

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13. Acknowledges that when budget support funds have been released to an ACP State, these funds are
spent and controlled according to national and not EDF control procedures; is aware that this
necessitates a change in the Commission's follow-up procedures away from traditional controls and
checks of transactions towards an assessment of the state of public finance management based on
monitoring information and performance indicators; however, notes that the Court of Auditors finds
that criteria used to release budget support funds essentially consist of macroeconomic indicators
but provide only partial information about public finance management, and that no separate, clear
analysis and evaluation of the quality of public finance management is produced;

14.

Is deeply concerned that the Commission is increasing the use of budget support at the same time as
the Court of Auditors - in the absence of monitoring information and of performance indicators on
the evolution of the quality of public finance management in ACP States - is not able to give an
opinion on the use of direct budgetary assistance by the ACP States;

15. Has been informed that other donors are also increasing the use of budgetary support and that the
Commission is cooperating with such donors, notably the World Bank, on the development of
performance indicators;

16.

Invites the Commission to continue to cooperate with other donors in order to ensure a harmonised
approach among donors towards ACP States, not just on performance indicators but also on
requirements placed on ACP States as regards, for example, controls and reporting;

17. Strongly supports the Court of Auditors' intentions to adopt a special report during 2004 on the use

of budgetary support;

18. Asks the Commission to include a list of countries granted budgetary support, including information
on whether tranches of budgetary support have been withheld, in a communication on financial
information on the EDFs for the 2003 financial year; asks the Commission also to outline in this
communication - for each country receiving direct budgetary aid - whether the three main
conditions for receiving such aid as stated in Article 61(2) of the Cotonou agreement are met;

19. Asks the Commission to report, by 1 September 2004, on the state of play of work within the public
including information on the expected

expenditure and financial accountability programme,
deadline for agreement on a final list of public finance management performance indicators;

20. Calls on the Commission, in connection with the upcoming negotiations on possible amendments
of the Cotonou Agreement, to enter into a dialogue with the ACP States on the possibility of making
budgetary support conditional on the beneficiary country agreeing to spend the equivalent of 5 to
10 % of any amount received as budgetary support for institutional support measures;

Supreme audit institutions

21. Recalls its opinion regarding the importance of involving ACP States' supreme audit institutions in

EDF control (1);

22. Notes that the Court of Auditors regrets the absence of a clear, structured approach to strengthening

the national control and audit institutions on the part of the Commission;

23. Asks the Commission to include information on funds spent on projects involving supreme audit
institutions in a communication on financial information on the EDFs for the 2003 financial year;

(1)

See paragraphs 21 to 24 of the Resolution containing the comments accompanying the decision concerning
discharge to the Commission in respect of the implementation of the budget of the sixth, seventh and eighth
European Development Funds for the financial year 2001 (OJ L 148, 16.6.2003, p. 3).

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24.

Invites the Commission to consider entering the condition that an ACP State must agree to introduce
a multiannual programme for creating and/or strengthening a supreme audit institution before
budgetary support can be granted;

Decentralisation of management of aid and support

25. Supports the Commission's devolution of resources and decision-making powers to the delegations
of
implementation levels for
commitments and payments than those achieved by the Commission in 2002; is aware that the
deconcentration exercise is ongoing and expected to be fully implemented during 2004;

the Commission; expects this to contribute to even higher

26. Emphasises that the audit and evaluation strategy of the Commission must reflect the change in the
management of aid and support and be underpinned by a risk assessment; stresses that audits and
evaluations must be independent and of high quality; asks the Commission to communicate its
working document on risk assessment as soon as it has been finalised and by 1 July 2004 at the
latest;

27. Stresses that heads of delegation must ensure that key controls are carried out and take action if the
national authorising officer does not fulfil the obligation of performing such controls; is concerned
that delegations may not have sufficient qualified staff available in order to respect new obligations
regarding financial control;

28.

Is concerned that headquarters' overview of audit and evaluation activities in the delegations is
inadequate; notes that EDF activities are expected to be integrated into the CRIS system during first
half of 2004; notes the Court of Auditors' concern that in the short term the CRIS-system is not
likely to address weaknesses relating to the terms of reference, audit reports and follow-up of audit
reports; asks the Commission to report by 1 September 2004 on whether: 1. the process of linking
the OLAS accounting system to the CRIS system has been successful; and 2. whether audits
concerning EDF funds have been included in the CRIS system;

29. Regrets that the Commission does not systematically collect audits and evaluations from delegations
and therefore has not been able to react in a timely manner to a request from the rapporteur to
receive a number of audit and evaluation reports; regards this as confirmation of headquarters' lack
of an overview of audit and evaluation activities; notes that lists of audits received by the rapporteur
in some cases contained wrong information about the prices of an audit, the size of the underlying
project etc.; regards this as a further confirmation of headquarters' lack of an overview of audit
activities;

30. Asks the Commission to provide a structured plan by 1 July 2004 as to how headquarters should
control delegations' controls within a deconcentrated management system; stresses that financial
audits and evaluation should be coordinated, monitored and followed up by Headquarters;
is
especially worried by the apparent lack of systematic follow-up of audits and evaluations;

31. Asks the Commission to present by 1 July 2004 a list of audits and evaluations performed in 2003
by delegations and headquarters as well as providing information on how audits and evaluations
have been followed up; stresses that the requested list shall only include audits and evaluations
actually performed, not merely planned;

32. Notes that the Commission is not certain that it has full information about evaluations carried out by
delegations (1); asks the Commission to include information on how this situation has been resolved
when it forwards the list of evaluations performed in 2003;

(1)

See the Commission's answer to question No 75 in Replies to Questionnaire to the Commission regarding
discharge 2002 - Part II (PE 328.732/FIN2): ‘It is not possible to say with any degree of certainty to what extent
the attached list, which is based on information provided by EC delegations in ACP countries, is complete.’

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Implementation, RAL and budgetisation

33. Considers that the level of unspent EDF resources, currently standing at EUR 11,3 billion (1), is
regrettable in a fund aimed at assisting many of the poorest countries in the world; appreciates the
factors that limit the Commission's ability to redress this problem, such as the responsibility of the
National Authorising Officer for processing invoices, the need to obtain the National Authorising
Officer's agreement for decommitments, the circumstances preventing the implementation of
programmes in certain countries in crisis and the absence of any time-limit on the use of funds;
recognises the value of changes to the Financial Regulation and new Financing Agreements aimed at
keeping RAL under control for the ninth EDF; stresses the fact that many of these problems would be
resolved if the EDF were to be brought within the Community budget;

34. Notes that resources not yet committed under the sixth, seventh and eighth EDFs in total amounted
to EUR 2,9 billion (or 8,9 % of total resources) at the end of 2002, even though it was respectively
17, 12 and five years since the three EDFs entered into force;

35. Notes that implemented secondary commitments (contracts) and payments amounted to respectively
EUR 2,1 billion and EUR 1,9 billion, thereby maintaining a relatively high level compared to earlier
years; however, is also aware that increased use of budgetary support is the main reason for achieving
higher implementation levels;

36. Notes that outstanding commitments, or RAL (reste à liquider), amounted to EUR 8,4 billion at the

end of 2002, of which EUR 1,2 billion was considered to be abnormal RAL (2),

37. Asks the Commission to include in a communication on financial information on the EDFs for the
2003 financial year a table showing the RAL per sector and per year of commitment as well as
information on the level of abnormal RAL and specific actions taken in 2003 in order to reduce the
abnormal RAL;

38. Welcomes the Communication from the Commission to the Council and the European Parliament of
8 October 2003 entitled ‘Towards the full integration of cooperation with ACP countries in the EU
budget’ (COM(2003) 590);

39. Considers that the EDF shall be budgetised, i.e. integrated into the general budget of the European
Union, in order to grant the EDF the same status as other parts of the acquis communautaire and
eliminate the current democratic deficit;

40. Emphasises that, apart from the political significance of budgetisation, considerable advantages
related to budgetary management can be achieved by integrating the EDF into the general budget of
the European Union,
implementation due to the possibility of
harmonising existing procedures, greater level of flexibility in implementation, a higher level of
transparency concerning total Community aid, and avoiding the current complications of
transitional measures between EDFs;

for example, more efficient

41. Notes that a new Financial Protocol succeeding the ninth EDF has to be determined at the same time
as negotiations start on respectively a new financial perspective for the European Union and possible
amendments of the Cotonou Agreement, offering an exceptionally good opportunity to budgetise
the EDF;

42. Calls on the Commission and the Member States to decide on and implement budgetisation of the

EDF without delay;

43. Considers it essential that the Commission continue to speed up implementation of commitments
and payments from the EDF in order for the European Community and its Member States to fulfil
the political commitments to the ACP States, as well as minimising possible complications related to
budgetisation of the EDF;

(1)
(2)

EUR 2,9 billion is yet to be committed, while EUR 8,4 billion relates to outstanding payments.
Abnormal RAL is defined as commitments on which no contracts or payments have been made in the last two
years a well as commitments made before 1997 and not yet paid (see abovementioned Communication from
the Commission on Financial Information on the sixth, seventh and eighth European Development Funds 2002,
section 3.1).

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44.

Invites the Commission to enter into a dialogue with the ACP States on how to eliminate the RAL,
taking into account the specific problems that may be encountered in connection with budgetisation;

45. Stresses that budgetisation of the EDF must not lead to a decrease in total funds available to the ACP
States; asks the Commission to ensure transparency so that the discharge authority continues to be
able to ascertain the level of funds spent for purposes set out in the Cotonou Agreement;

Poverty reduction

46. Draws attention to the principal objective of the Community's development policy, which is to
reduce poverty with a view to its eventual eradication (1), and highlights the endorsement given by
the Commission and all Member States to the millennium development goals (MDGs) as the means
by which this objective is to be achieved; furthermore recognises that there has to be careful
monitoring of whether appropriate resources are going to health and education at country level;

47. Notes that the benchmark formula requires the 35 % to be allocated ‘mainly (to) education and
health’ which are the two most prominent sectors in the MDGs; observes that the figures reported to
the Development Assistance Committee for 2002 commitments in these sectors (2) remain far from
this target, and that structural adjustment programme conditionalities are most unlikely to make up
such a large shortfall; expresses concern about the figures given for EDF commitments (3) in these
sectors; calls on the Commission to improve its performance in this area in future years;

48. Regrets that the Commission has not provided an analysis of its contribution towards achieving the
MDGs but has limited its study (4) to measuring the progress made by developing countries towards
this objective; considers that assessment of
the effectiveness of Commission programmes is
hampered by the absence of such an analysis; calls for an analysis of aid effectiveness to be included
in the mid-term review of the Cotonou Agreement;

Programming

49. Congratulates the Commission on the results of its assessment of the involvement of non-state
actors in the programming process for the ninth EDF, which showed that consultations were carried
out in 62 countries out of 68; notes, however, that changes to draft country strategy papers only
resulted in 36 countries, raising questions about the impact of consultations in the remaining cases;
calls particularly for regular and formal consultation of ACP parliaments and the ACP-EU Joint
Parliamentary Assembly;

CESD contracts

50. Notes that several EDF financed contracts have been signed with one of the companies at the centre
of the Eurostat scandal in the context of the Common Market of eastern and southern Africa; notes
that serious questions regarding these contracts were raised in the final Internal Audit Service report
of October 2003;

(1)

The European Union's Development Policy, conclusions of the 2304th meeting of the Development Council of
10 November 2000.
4,1 % for education and 3.0 % for health. These figures include sector-specific budget support.
1 % for education and 4 % for health.

(2)
(3)
(4) Outlined in the Annual Report on the EC Development Policy and the Implementation of External Assistance in

2002, Chapter 3.

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51. Regrets that Eurostat's consistent advice in favour of using CESD did not raise concern within
AIDCO despite what was known internally about the company; notes this as another example of
inadequate transparency and lack of communication between Commission departments;

52. Finds it deeply dissatisfying that AIDCO did not issue a recovery order on EUR 200000, outstanding
since 1999, before the Eurostat scandal broke in July 2003; expects the Commission to inform the
European Parliament as soon as possible as to whether the recovery order on EUR 324 088 (accrued
interest) issued to CESD has been fulfilled;

53. Welcomes the fact, however, that AIDCO has ended contractual relations with the company in

question;

ACP Secretariat

54. Recalls that the Court of Auditors in its annual report for the 2000 financial year, had serious
criticism for the ACP Secretariat, as well as for the EUR 18 million financing agreement for 2000 to
2004 benefiting the ACP Secretariat and signed by the Commission on 9 March 2000;

55. Recalls the European Parliament resolution relating to discharge for the 2000 financial year (1), in
which the Commission was asked to inform the ACP Secretariat that it must, in all cases, respect the
final rulings of the Belgian Courts on matters still pending;

56.

Is aware that the ACP Secretariat has not yet complied with a ruling from the Belgian Courts and
paid compensation to a former employee, arguing that the ACP Secretariat seeks diplomatic
immunity; notes that the ACP Secretariat has appealed to the Belgian Cour de Cassation; does not
agree that diplomatic immunity should make it possible for the ACP Secretariat not to honour its
responsibilities as an employer;

57. Notes that the present agreement on the financing of the ACP Secretariat will expire at the end of
2004; calls on the Commission to include in any agreement on future financing a mechanism
ensuring suspension of the financing agreement if the ACP Secretariat does not respect a final ruling
of the Belgian courts;

58. Asks the Commission to inform the discharge authority by 1 July 2004 at the latest about the result
of contact made with the ACP Secretariat as requested above, as well as the expected content of a
proposal for a future financing agreement benefiting the ACP Secretariat;

59.

Invites the Court of Auditors to follow up on observations on the ACP Secretariat made by the Court
of Auditors in its annual report concerning the financial year 2000; invites the Court of Auditors, at
the same time, to consider whether the ACP-EU Joint Parliamentary Assemblies are organised in
accordance with the principles of sound financial management;

Peace facility

60. Takes note of the Decision of the ACP-EC Council of Ministers on 11 December 2003 on the use of
EUR 250 million from the long-term development envelope of the ninth EDF for the creation of a
Peace Facility for Africa;

61. Welcomes the creation of a Peace Facility for Africa, but is concerned about the risk of such funds
being used on purposes other than those for which they were intended, for example, on military
spending; invites the Commission to enter into a dialogue with the Parliament on the use of the
Peace Facility for Africa within the overall development policy framework;

(1) OJ L 158, 17.6.2002, p. 28.

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62. Asks the Commission to specify in the annual accounts the amounts used for the Peace Facility for
Africa and to inform the discharge authority, on an annual basis and in good time, and to be taken
into account during the discharge procedure, about the management of such funds,
including
information about the specific activities financed by the funds;

CDE

63. Notes that EUR 90 million in the Financial Protocol of the Cotonou Agreement are reserved for the
CDE (Centre for the Development of Enterprise, formerly Centre for the Development of Industry);
notes that the legal status of CDE is unclear and its objectives not well defined; deplores that there are
still management shortcomings and weaknesses in internal and external control despite repeated
criticism in different audits over the last years; calls on the Commission to follow up on the criticism
raised by the Commission's own audits as well as in the Court of Auditors' annual report for 2002.