Report from the Commission to the European Parliament and the Council - Commission's Report on the follow-up to 2002 Discharges
Date: 2004-09-30
Institutions: European Commission
Subjects: European Commission, budgetary discharge, financial year, institutional reform, report

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 30.9.2004 
COM(2004) 648 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Commission's report on the follow-up to 2002 Discharges 

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TABLE OF CONTENTS 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE 
COUNCIL 
Commission's report on the follow-up to 2002 Discharges 

I. 

European Parliament Resolution on General Budget ...................................................4 

a) The Reform of the Commission..............................................................................................4 

b) The European Anti-Fraud Office (OLAF)..............................................................................5 

c) Corruption ...............................................................................................................................5 

d) Shared Management ...............................................................................................................6 

e) Eurostat ...................................................................................................................................7 

f) Own Resources........................................................................................................................8 

g) Agriculture..............................................................................................................................8 

h) Structural Funds......................................................................................................................9 

i) Internal Policies and Research.................................................................................................9 

j) Enlargement.............................................................................................................................9 

k) External policies ...................................................................................................................10 

II. 

III. 

IV. 

V. 

European Parliament Resolution on European Development Fund (EDF) ................10 

European Parliament Resolution on ECSC ................................................................11 

European Parliament Resolution on Agencies............................................................11 

Recommendation of the Council on General Budget .................................................12 

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PREAMBLE 

According to Article 276 of the EC Treaty and Article 180b of the EAEC the “Commission shall 
take all appropriate steps to act on the observations in the decisions giving discharge and on other 
observations  by  the  European  Parliament  relating  to  the  execution  of  expenditure,  as  well  as  on 
comments accompanying the recommendations on discharge adopted by the Council. At the request 
of the European Parliament or the Council, the Commission shall report on the measures taken in 
the  light  of  these  observations  and  comments  and  in  particular  on  the  instructions  given  to  the 
departments which are responsible for the implementation of the budget. These reports shall also be 
forwarded to the Court of Auditors"1 

The  Commission,  acting  on  requests  from  the  Council  and  Parliament,  accordingly  produces  the 
present Follow-up Report, which relates to the Council recommendation of 9 March 2004 and the 
Resolutions voted by the European Parliament on 21 April 2004. This Follow-Up Report relates to 
Discharges  given  for  the  2002  financial  year2,  as  well  as  to  the  EP  resolutions  on  "OLAF 
Assessement ", on "Fight against fraud and protection of the financial interests of the Communities" 
(Mr Bösch reports) and on the Eurostat resolution of 22 April 2004. 

The  Follow-up  Report  is  presented  to  the  European  Parliament,  the  Council,  and  the  Court  of 
Auditors. It summarizes each sector or themes raised by the European Parliament and the Council, 
the actions that the Commission intends to take or has already taken and also the recommendations 
that Commission will not or is not able to follow-up. 

This  synthesised  Follow-up  Report  is  complemented  with  a  Commission  working  document 
detailing the answers to each specific recommendation of both Council and Parliament. 

1  
2  

See also Article 147 of the Financial Regulation 
2002 General Budget Discharge, 2002 EDF Discharge, 2002 Agencies Discharge, 2002 ECSC Discharge 

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I. 

EUROPEAN PARLIAMENT RESOLUTION ON GENERAL BUDGET 

A) The Reform of the Commission 

The Reform of the Commission was initiated in 2000 with the aim of improving the service culture 
of  the  Commission,  more  clearly  identifying  the  Commission’s  political  priorities,  instituting  a 
modern  human  resources  policy  and  overhauling  the  Commission’s  systems  of  financial 
management and control. 

Two  of  the  key  elements  in  the  Reform  process  are  the  new  Financial  Regulation  and  the 
modernised  Staff  Regulation  which  respectively  entered  into  force  on  1  January  2003  and  1  May 
2004.  All  the  main  instruments  of  the  Reform  are  now  part  of  the  day-to-day  functioning  of  the 
Commission and are contributing to the improvement of the Commission’s management as well as 
increasing accountability and transparency. 

The  Commission  agrees  with  the  European  Parliament  that  the  Reform  is  a  continuous  process 
which does not end with the adoption of the legislative texts. It has therefore taken good note of the 
recommendations included in the resolution on the 2002 discharge and is to a very large extent in 
agreement with  the ideas  presented.  However, the Commission does not agree with  the European 
Parliament that it is appropriate already now to propose changes to the key elements of the financial 
reform  introduced  in  the  recast  Financial  Regulation.  The  Commission  has  undertaken  to  make  a 
report by 1 January 2006 on the application of the provisions of the new FR and, if necessary, will 
submit  appropriate  proposals  to  the  legislative  authority  in  the  framework  of  the  triennial  review 
foreseen in Article 184. 

The European Parliament has also proposed changes in the internal organisation of the Commission, 
integrating the Internal Audit Service into the Commission Presidency. The Commission has taken 
good note of the proposals but believe it is up to the incoming Commission to decide. Among the 
many issues raised by the European Parliament, the Commission wishes to highlight the following: 

(i) 

Accounting Reforms 

The modernisation of the accounting system is on track. The Commission will continue to inform 
the  European  Parliament  on  a  regular  basis  about  progress  made.  At  this  point  in  time,  the 
Commission does not have problems in recruiting the appropriate staff. 

(ii) 

Internal Controls 

Significant progress has been made, in the implementation of the internal control standards. In early 
2004,  an  assessment  of  the  DGs  readiness  to  comply  with  the  baseline  requirements  of  the  24 
standards showed that - across DGs - 91 per cent of the standards were fully achieved at the end of 
2003  and  8  per  cent  were  partially  implemented,  in  some  cases  at  an  advanced  stage.  As  far  as 
effectiveness is concerned, there is still some work to be done. In future, the focus will be more on 
the  underlying  systems,  verifying  that  the  systems  are  working  well  in  practice  and  that  the 
necessary assurances are delivered. 

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(iii) 

The Annual Activity Reports 

The  Commission  is  aware  that  the  Directors  Generals  must  strike  a  balance  between  making  a 
declaration which on the one hand truly reflects the picture on internal control, especially in areas 
under shared management, and on the other hand does not empty the declaration of its meaning. In 
the Annual Activity Reports for 2003, the DGs and services have expressed their reservations using 
a standard set of minimum requirements in order to increase the comparability of the reservations. 
The  Commission  has  also  carried  out  for  the  second  time  a  peer  review  exercise,  i.e.  before 
finalisation  of  the  Annual  Activity  Reports,  draft  reservations  are  reviewed  by  peers.  Both 
initiatives have contributed to greater consistency in the approach. 

B) The European Anti-Fraud Office (OLAF) 

The Commission has taken note of the European Parliament’s remarks concerning the Commission 
proposal (COM (2004) 103) amending Regulation (EC) No. 1073/1999. These issues will be dealt 
with in the course of the deliberations of the legislative authority. 

As regards the specific case "Blue Dragon", the Commission recalls that the Ombudsman produced 
a draft recommendation dated 16 February 2004. OLAF was asked to send a detailed opinion by 31 
May  2004.  OLAF  transmitted  its  reply  to  the  Ombudsman  on  18  March  2004.  The  Ombudsman 
adopted his decision on the case on 22 July 2004. He concluded that OLAF had accepted his draft 
recommendation as it had examined the file and considered whether it was appropriate to reopen its 
inquiry or to open a new one. He considered that OLAF’s decision not to reopen its inquiry or to 
open a new one was reasonable and closed the case. 

Finally, the Commission would like to stress that all cases inherited from UCLAF have been closed. 
OLAF will submit a report on the matter to the OLAF Supervisory Committee. 

c) Corruption 

The  Commission  agrees  with  the  European  Parliament  that  anti-corruption  strategies  of  the 
accession  countries,  candidate  countries  and  Member  States  shall  be  supported.  For  the  new 
Member States, several measures were initiated already during the pre-accession phase. 

Furthermore, following the request of the European Parliament, a new budget line amounting to 3 
million € was created in the 2004 Budget for special support to NGOs in the new Member States to 
act as watchdogs for civil society and uncover corruption practice in public administration. 

The European Parliament has recommended that NGOs meet certain standards as regards accounts 
and audits as well as transparency. The Commission agrees but must recall that it is not entitled to 
monitor  or  intervene  in  the  internal  management  of  NGOs.  However,  NGOs  must  –  as  all  other 
beneficiaries of funds from the general budget of the European Union – fulfil the requirements of 
the  Financial  Regulation.  This  includes  inter  alia  the  obligation  to  present  final  reports  and 
accounts,  as  well  as  evidence  on  its  integrity  and,  where  necessary,  the  integrity  of  their  legal 
representatives, previous to the awarding of grants or contracts. 

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D) Shared Management 

The  Commission  agrees  with  the  European  Parliament  that  shared  management  is  an  issue  that 
deserves – and already today is given – high priority. However, the many layers of administration 
involved combined with differences in administrative structures in Member States complicates the 
task of ensuring that the principles of sound financial management are respected. The Commission 
is grateful to the European Parliament for pointing out that “the Member States are obliged to carry 
out their part of the work in accordance with the guidelines adopted by the Union..”3 

The  Commission  endeavours  to  ensure  that  the  basic  principles  set  out  in  the  Treaty  and  in  the 
Financial Regulation – in particular the principle of sound financial management (Art. 274 EC) – 
are integrated into proposals for new or modifications of existing sectoral legislation. Of course, it 
is  only  the  legislative  authority  that  can  ensure  that  the  principles  are  maintained  in  the  final 
legislation. 

The European Parliament has stressed the need for the Commission to lay down common standards 
and  offer  Member  States  the  necessary  guidance.  The  Commission's  strategy  for  ensuring  sound 
financial  management  already  follows  the  approach  of  setting  common  basic  standards  for 
management in Member States, supervising their application and providing guidance in the form of 
manuals and practice notes. The lessons learned will be taken into account in the legislation for the 
new period. 

The  Commission  is  grateful  for  the  European  Parliament’s  support  as  regards  the  use  of  sunset 
clauses and financial corrections. Time limits such as the rule providing for decommitment at year n 
+  2  have  proved  to  be  effective  instruments  to  improve  levels  of  implementation  and  the 
Commission will therefore propose to maintain and reinforce such clauses in the future. Financial 
corrections and suspension of payments can also be effective in getting Member States to correct 
weaknesses in management and will therefore likewise be maintained. 

However, the Commission does not agree with the European Parliament that a Member State should 
lose  its  right  to  agricultural  support  from  the  EAGGF  Guarantee  Fund  if  it  fails  to  implement 
IACS4.  The  fact  is  that  no  Member  State  entirely  fails  to  implement  IACS  but  rather  some 
component may not be (fully) in place. In light of this, the Commission has opted for the strategy of 
imposing  ex  post  financial  corrections.  The  amount  of  these  corrections  is  linked  to  the  level  of 
risks  of  irregular  payments  arising  from  weaknesses  in  the  IACS  as  implemented  by  a  Member 
State. 

Finally,  the  Commission  welcomes  the  support  of  the  European  Parliament  for  application  of  the 
single audit approach, which can help to maximise the effectiveness of the overall audit effort by 
the Commission and Member States. 

3  

4  

Point 6 in the European Parliament resolution accompanying the decision concerning discharge in respect of 
the implementation of the general budget of the European Union for the 2002 financial year. 
Point 13 in the European Parliament resolution accompanying the decision concerning discharge in respect of 
the implementation of the general budget of the European Union for the 2002 financial year. 

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E) Eurostat 

The European Parliament has raised several concerns in the framework of the Discharge procedure 
on the Eurostat case. The Commission as already pointed out on different occasions and especially 
at the plenary session in April 2004, has taken the necessary measures or has already embarked on 
doing  so.  The  Commission  would  also  like  to  point  out  that  it  has  regularly  kept  Parliament 
informed  through  its  Budgetary  Control  Committee  during  the  various  steps  of  the  procedure 
leading to the granting of the Discharge. 

It  is  particularly  the  case  when  European  Parliament  requested  that  Commission  should  establish 
safeguards against concealment of critical information or when it asked for the review of relations 
between the different actors and the individual Commissioners as well as the College itself in the 
functioning of the accountability chain. 

The Commission confirms its assessment presented to the European Parliament on two occasions in 
September & November 2003; on these occasions the President of the Commission pointed out that 
all main facts, as  identified by the Audit Report and by the inquiries, occurred before the present 
Commission's mandate and prior to the Reform engaged by it. 

Furthermore he recognised the problem of informing the political level, identifying the reasons of 
this situation and committed the Commission to finding a solution in the context of the Action Plan 
which  was  adopted  by  the  Commission  on  10  February  2004.  This  Action  Plan  and  the  adopted 
measures  aim  to  make  more  explicit  the  existing  rules  on  the  communication  of  sensitive 
information and insist on active information. 

As  far  as  the  request  of  making  a  full  and  complete  written  evaluation  by  31  July  2004  of  the 
circumstances  of  the  Eurostat  case  including  all  OLAF  reports  is  concerned,  the  Commission 
considers that a new assessment of the deficient circulation of' information within the Commission 
is not necessary and would not bring new elements. It is necessary to ensure the implementation of 
the new mechanisms in place. 

Regarding the demands addressed to the Commission to ensure full and thorough implementation of 
the specific actions of the White Paper, the rehabilitation of whistleblowers or the drawing up of the 
Annual  Activity  Reports  by  the  Directors  Generals  reflecting  their  responsibilities  as  Authorising 
Officers, the Commission has already implemented them. 

However, in some cases, the Commission could not follow the requests of the European Parliament, 
for  example  the  publication  of  the  IAS  and  IAC  reports  or  the  creation  of  central  management 
supervision of the control systems operating in individual departments. 

As far as the revision of the Financial Regulation is concerned, the Commission has not identified 
any weaknesses in the new Financial Regulation which may expose the Community Budget to the 
risk of fraud. In any case, the Commission will assess carefully the fraud-proofing of financial rules 
in the first review of the Financial Regulation that will be carried out in 2005 according to article 
184 of that Regulation which foresees a review every three years. 

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F) Own Resources 

The  Commission  is  ready  to  fulfil  most  of  the  requests  of  the  European  Parliament.  Thus  the 
Commission has published a report on the possibilities of introducing a more direct link between 
taxpayers and the EU budget. Concerning the Community’s transit system, the Commission has in 
June 2004 presented a survey showing the implementation of the 38 recommendations made by the 
first  temporary  committee  of  inquiry  in  1997.  Furthermore  the  Commission  continues  to  promote 
the  transition  to  phase  3.2  of  the  New  Computerized  Transit  System  (NCTS)  which  should  take 
place  in  all  Member  States  by  31  December  2005.  The  utilisation  of  NCTS  has  been  steadily 
increasing as shown by the figures transmitted. 

However, the Commission considers that an amendment to the Customs Code concerning the need 
to put an end to the practice of regarding incorrectly or falsely declared goods as not being involved 
in the transit procedure would be inappropriate. Otherwise, it would make the guarantor of transit 
operations liable for a customs debt which has already been incurred prior to the transit operation 
and would put at risk the balance of the existing legislation. 

Concerning the number of staff required for physical duties in the customs administrations of the 
Member  States,  under  the  current  legal  framework,  it  is  the  responsibility  of  the  national 
governments  to  establish  the  necessary  structure  and  ensure  adequate  staffing  of  their 
administrations. 

G) Agriculture 

On  the  main  issues  raised  in  the  Parliament  Resolution,  the  Commission  has  already  taken  or 
planned corrective actions. Concerning the setting of export subsidy rates, this has been done in the 
context  of  the  implementation  of  the  Commission’s  comprehensive  action  plan.  However,  the 
Commission  is  not  able  to  submit  documentation  for  the  information  selected  when  setting  the 
export subsidy rates as this information is too commercially sensitive to be released. 

On  the  prefinancing  of  export  refunds,  the  Commission  carried  out  a  review  of  the  system,  and 
decided to retain prefinancing but limit the scope of its application. The effectiveness of these new 
rules will be assessed before any new decision. 

The  Less  Favoured  Areas  Scheme  was  evaluated  in  the  context  of  the  ex-post  evaluation  of 
Regulation (EC) 950/97 finalised in July 2003. The final report on this study has been published on 
the Commission Website5. Currently the Commission is preparing a specific evaluation of the Less 
Favoured Areas Scheme under the Rural Development Regulation. The results of this study will be 
available  in  late  2005.  The  effective  implementation  of  the  management,  control  and  sanctions 
system  by  the  Member  States  is  assessed  during  audits  by  the  Commission’s  services.  The 
Commission will follow up on this issue, as deemed appropriate. 

5  

See page: http://europa.eu.int/comm/agriculture/eval/reports/950/index_en.htm 

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H) Structural Funds 

The Commission regularly informs the Discharge Authority of the measures taken for better budget 
implementation.  The  preparation  of  the  next  Structural  Funds  Regulations  will  incorporate  the 
lessons  learnt  and  any  measure  like  the  n  +  2  rule  that  accelerates  the  implementation  will  be 
continued with the improvements required when applicable. 

The  Commission  considers  that  sanctions  mechanisms  on  Member  States  for  poor  budgetary 
estimates,  provision  of  SAPARD  notes  in  all  languages  of  the  acceding  countries  and  a  quarterly 
breakdown of the situation as regards the application of the n + 2 rule are inappropriate. It already 
informs Parliament each year of the actual application of n + 2 rule as soon as the final figures are 
known. 

Finally,  the  Commission  disseminates  good  practices  based  on  the  results  of  monitoring  and 
evaluation,  but  experience  shows  that  successful  management  of  Structural  Funds  depends  on  a 
wide range of factors. 

I) Internal Policies and Research 

On  internal  control,  the  Commission  regularly  reviews  its  internal  control  framework  in  view  of 
making  the  implementation  of  internal  control  standards  more  effective.  In  this  context,  the 
Research  DGs  contribute  to  the  self  assessment  exercises  aimed  at  identifying  areas  where  the 
implementation effort must be intensified. 

Measures to reinforce  the  process  of  recovering amounts  unduly paid is already  being set up: the 
Commission has taken stock of the improvements decided in the field of recoveries at the Cocobu 
meeting  of  3 November 2003.  The  improvements  introduced  in  the  domain  of  the  recovery  are 
threefold: they concern the new procedures, new IT tools and organisational structures. 

Management  and  co-ordination  of  the  on  site  audits  is  carried  out  in  a  harmonised  manner  in  all 
Research  DGs.  Monthly  meetings  take  place  between  the  Audits  Units  of  five  Research  DGs  to 
discuss audit practices, the implementation of audit results and audit strategies and exchange audit 
experiences. 

The  Commission  will  indeed  report  on  the  audits  carried  out  in  relation  to  the  5th  Research 
Framework Programme at the end of the activities concerned. A great deal of information on the ex-
post audit situation is already available in the Annual Activity Reports. 

J) Enlargement 

The Commission supports the European Parliament’s view, that information to be provided by the 
Commission  to  the  Discharge  authority  and  to  the  public  should  be  as  accessible  and 
comprehensible as possible – also after enlargement. The Commission believes that it already today 
meets  the  majority  of  the  recommendations  listed  by  the  European  Parliament.  Some  are  still 
outstanding, e.g. the structure of the annual report on budgetary and financial management will only 
be  changed  in  order  to  reflect  policy  areas  as  of  the  financial  year  2004  which  was  the  first  year 
where the budget was presented in ABB format. 

Furthermore,  the  European  Parliament  has  rightly stressed  the  importance  of  ensuring  that  shared 
management is implemented in accordance with the principles of sound financial management. As 

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stated  by  the  European  Parliament,  it  is  a  complicated  exercise  involving  many  administrative 
bodies  in  each  Member  State.  However,  the  appropriate  standards  are  in  place  and  will  be 
continuously developed and refined as necessary. 

The Commission would also like to highlight the issue of twinning. A revised manual for twinning 
projects entered into force on 1 May 2004 and includes inter alia streamlined payment procedures 
as well as new requirements for the setting of objectives and results. A global report on the projects 
approved 
on 
available 
http://europa.eu.int/comm/enlargement/phare_evaluation_pdf/interim_s_zz_eur_01006_fv.pdf 

produced 

between 

2001 

1998 

been 

and 

and 

has 

is 

K) External policies 

The  Commission  has  taken  due  note  of  the  European  Parliament’s  recommendations  concerning 
controls  relating  to  external  measures.  In  2002  the  Commission  (EuropeAid)  launched  a  major 
initiative  aimed  at  improving  both  the  coverage  and  the  quality  of  audits  conducted  by  external 
auditors.  It  has  i.a.  elaborated  annual  audit  plans  for  2003  and  2004  and  tightened  general 
requirements concerning the selection of auditors and their compliance with international standards, 
in particular auditor’s independence. 

Furthermore,  the  Commission  is  taking  or  has  taken  the  recommended  actions  regarding  the 
Neighbourhood and the PHARE Programmes as well as the aid allocated to education and health. It 
has systematically been reviewing outstanding commitments in order to reduce the amount of old or 
dormant RAL. For the implementation of humanitarian aid, the Commissions has already selected 
over  160  partner  humanitarian  organisations  under  a  new  Framework  Partnership  Agreement 
entered into force on 1 January 2004. 

II. 

EUROPEAN PARLIAMENT RESOLUTION ON EUROPEAN DEVELOPMENT FUND (EDF) 

The Commission accepts the Parliament’s recommendations and already has or is currently taking 
the  necessary  action.  Furthermore,  the  Commission  welcomes  the  Parliament’s  support  to  the 
proposal of budgetising the EDF, i.e. integrating the EDF into the general budget of the European 
Union. The proposal is currently under discussion in Council. 

Among  the  recommendations  made  by  Parliament,  the  Commission  would  like  to  highlight  the 
following: 

(i) 

Budgetary support 

The Commission agrees that budgetary support funds, after having been released to an ACP State 
once  the  conditions  set  out  in  the  financing  agreement  have  been  fulfilled,  become  part  of  the 
beneficiary  State’s  budget,  and  therefore  are  managed  and  spent  according  to  national  (and  not 
EDF) financial management procedures. The Commission has changed its supervision and control 
systems  in  order  to  take  account  of  the  particular  challenges  arising  from  increased  use  of  the 
budgetary support instrument. Inter alia delegations in ACP States receiving budgetary support have 
been instructed to extensively report every six months on the quality of public finance management, 
using  standards  developed  by  the  Commission  Headquarters.  This  complements  the  analysis  and 
reviews of public finance management which are regularly carried out by other Donors working in 
co-operation with the Commission. 

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(ii) 

Audit and evaluation strategy 

The European Parliament has highlighted the need for the Commission to ensure coordination and 
cooperation  between  Delegations  and  Headquarters.  The  Commission  supports  this  objective  and 
has inter alia taken the necessary steps to ensure better coverage and quality of audits conducted by 
external  auditors.  Likewise,  new  guidelines  for  evaluations  entered  into  force  in  July  2003.  The 
audit and evaluation strategy is linked to a risk assessment which was transmitted to the European 
Parliament, Council and the Court of Auditors on 12 March 2004 (SEC (2004)318). 

(iii) 

Financial Management Report 

The  European  Parliament  has  asked  for  several  new  issues  to  be  included  in  the  Financial 
Management  Report.  The  Commission  has  taken  all  these  recommendations  on  board  in  the 
Financial  Management  Report  for  2003  on  the  6th,  7th,  8th  and  9th  European  Development  Funds 
which was transmitted to the European Parliament on 22 June 2004.  

III. 

EUROPEAN PARLIAMENT RESOLUTION ON ECSC 

The  Commission  has  taken  note  of  the  recommendations  made  by  the  European  Parliaments  on 
ECSC  and  will  be  taking  the  necessary  actions  in  due  course.  In  particular,  it  has  undertaken  to 
carry out a study on the work of the ECSC during its fifty years of activity, with the intention of 
publishing an overview suitable for the general public by the end of 2004 

IV. 

EUROPEAN PARLIAMENT RESOLUTION ON AGENCIES 

The  European  Parliament  decisions  on  the  discharge  concerning  the  agencies  are  directed  to  the 
Director  of  each  individual  agency.  Moreover,  the  resolutions  accompanying  the  decision  on  the 
discharge  contain  a  number  of  horizontal  recommendations  regarding  both  the  agencies  and  the 
Commission.  Thus  the  institutional  relations  between  agencies  and  the  Commission  have  been 
considerably  reinforced  in  the  new  Financial  Regulations,  i.a.  concerning  accounting  and  internal 
audit. 

In  general,  the  Commission  arranges  regular  meetings  with  the  Agencies  to  discuss  accounting 
matters in particular to provide updates on the progress of the modernisation project. For accounting 
matters, the Commission has a designated contact point for Agencies to answer questions they may 
have. 

In accordance with article 185 of the new Financial Regulation the Commission’s internal auditor 
(IAS) shall exercise the same powers in the Agencies receiving Community financial support as he 
does within the Commission. Given initial staffing levels, the IAS has first put focus on the analysis 
and the evaluation of the structures of internal control in order to prioritise subsequent audit work 
and to provide initial consultancy input. 

Moreover,  the  Commission  is  taking  the  recommended  actions  concerning,  i.a.,  a  harmonised 
operating framework for the agencies, staff policy and other assistance to the individual agencies. 
On  the  other  hand,  the  Commission  considers  that  further  general  studies  of  the  activities  of  the 
agencies  as  well  as  their  administrative  expenditures  are  not  appropriate.  It  further  recalls  that 
financial contributions from a Member State hosting an agency are entirely voluntary. 

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V. 

RECOMMENDATION OF THE COUNCIL ON GENERAL BUDGET 

The Commission has taken due note of the annexed comments to the Council Recommendation in 
which it recommends the European Parliament to give a discharge to the Commission in respect of 
the implementation of the budget of the European Communities for the financial year 2002. 

The Commission joins the Council in its hopes to see the results of the improvements made by the 
Commission  with  regard  to  the  legality  and  regularity  of  underlying  transactions  reflected  in 
practice  in  the  shortest  possible  timeframe  so  that  a  positive  DAS  can  obtained.  Thus  the 
Commission  will  continue  its  efforts  to  ensure  that  its  supervisory  systems  provide  reasonable 
assurance regarding its management of the risk of error in underlying transactions. 

The Commission also agrees with Council that cooperation with national control authorities is as an 
important means of improving shared management. It is therefore taking action to strengthen that 
cooperation. In the Structural Funds the Commission is seeking to progress towards a “single audit” 
approach, based on the increased exchange of information and the coordination of audit work. 

Moreover,  the  Commission  is  taking  the  necessary  actions  to  follow  up  on  the  comments  of  the 
Council regarding the individual chapters of Court of Auditor’s Annual Report. 

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EN 

12 

   EN