Opinion No 2/2005 on the proposal for a Council Regulation laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund (COM(2004) 492 final of 14 July 2004)
Date: 2005-03-18
Institutions: European Court of Auditors
Subjects: Cohesion Fund, European Commission, European Regional Development Fund, European Social Fund, financial management, implementation of the budget, multiannual financial framework, opinion of the Court of Auditors

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OPINION No 2/2005

on the proposal for a Council Regulation laying down general provisions on the European Regional
Development Fund, the European Social Fund and the Cohesion Fund (COM(2004) 492 final of
14 July 2004)

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

(2005/C 121/02)

CONTENTS

GENERAL OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SPECIFIC OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Paragraph

Page

1-29

30

15

18

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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 Articles 5, 10, 158 to 162, 248(4), second
subparagraph, 274 and 279 thereof,

Having regard to Council Regulation (EC, Euratom) No
1605/2002 of 25 June 2002 on the Financial Regulation appli-
cable to the general budget of the European Communities (1) and
to its implementing rules (2),

Having regard to the Council’s request for an opinion, which
reached the Court on 3 January 2005,

Having regard to the proposal for a general Regulation presented
by the Commission (3),

Having regard to the extended impact assessment on the pro-
posed regulatory package revising the Regulations applicable to
the management of the Structural and Cohesion Funds (4),

Having regard to the Communication from the Commission to
the European Parliament and to the Council on the respective
responsibilities of the Member States and the Commission in the
shared management of the Structural Funds and the Cohesion
Fund (5),

Having regard to the Communication from the Commission to
the Council and the European Parliament entitled ‘Building our
common future — policy challenges and budgetary means of the
enlarged Union’ (6),

Having regard to the Communication from the Commission to
the Council and the European Parliament on the Financial Per-
spectives for 2007 to 2013 (7),

Having regard to the Court’s Opinion No 2/2004 (8) on the ‘single
audit’ model,

Whereas, pursuant to Article 5 of the Treaty establishing the
European Community, the Community takes action in areas
which do not fall within its exclusive competence only if and
insofar as the objectives of the proposed action, by reason of its
scale or effects, can be better achieved by the Community;

Whereas Article 274 of the Treaty establishing the European
Community makes the Commission responsible for the imple-
mentation of the budget, having regard to the principles of sound
financial management, and requires the Member States to coop-
erate with the Commission to ensure that the appropriations are
used in accordance with those principles;

(1) OJ L 248, 16.9.2002.
(2) Commission Regulation (EC, Euratom) No 2342/2002 of 23 Decem-

ber 2002 (OJ L 357, 31.12.2002).
(3) COM(2004) 492 final of 14 July 2004.
(4) SEC(2004) 924 of 14 July 2004.
(5) COM(2004) 580 final of 6 September 2004.
(6) COM(2004) 101 final of 10 February 2004.
(7) COM(2004) 487 final of 14 July 2004.
(8) OJ C 107, 30.4.2004.

Whereas, in the sphere of the Structural Funds and the Cohesion
Fund, the budget is implemented within a framework of shared
management with the Member States, as required by Article 53(3)
of the Financial Regulation applicable to the general budget of the
European Communities; and whereas Article 54 of the Financial
Regulation stipulates that the implementing tasks delegated must
be clearly defined and fully supervised as to the use made of
them;

Whereas the efficient and effective internal control of the budget
of the European Union entails establishing clear and consistent
objectives, ensuring effective coordination, producing informa-
tion on costs and benefits and guaranteeing the consistent appli-
cation of requirements;

Whereas the internal control systems covering European Union
revenue and expenditure should provide reasonable assurance
that revenue and expenditure are raised and spent in accordance
with the legal provisions in force and managed so as to achieve
value for money,

HAS ADOPTED THE FOLLOWING OPINION:

GENERAL OBSERVATIONS

Introduction

The proposal for a Regulation essentially retains the frame-
1.
work that was established in the previous programming periods.
Besides this, it focuses on achieving greater simplification with
regard to, in particular, financial instruments and the choice of
themes and, more generally, implementation, management and
control systems. The Court paid particular attention to the con-
sequences of the measures proposed for financial management
and control.

Responsibility for the implementation of the Community
budget

The legal framework for the implementation of the Com-
2.
munity budget is set by Article 274 of the EC Treaty, according
to which the Commission implements the budget on its own
responsibility and in cooperation with the Member States, having
regard to the principle of sound financial management.

3.
In the context of the various methods for implementing
the Community budget, structural measures are included among
‘shared management’ areas, namely, areas in which ‘implementa-
tion tasks shall be delegated to Member States’ (9). The manage-
ment and control of structural measures involve not only several
Commission departments but also hundreds of national, regional
and local offices and departments in the Member States. In future,
these measures could account for nearly half of the appropria-
tions in the Community budget.

(9) Article 53(3) of the Financial Regulation applicable to the general bud-

get of the European Communities.

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The rules currently governing structural measures (Regu-

4.
lation No 1260/1999) already provide as follows:

The proposed regulatory framework

(a)

that ‘in application of the principle of subsidiarity, the imple-
mentation of assistance shall be the responsibility of the
Member States, (…) without prejudice to the powers vested
in the Commission, notable for implementing the general
budget of the European Communities’ (Article 8(3));

(b)

that ‘without prejudice to Article 8(3), the managing author-
ity (…) shall be responsible for the efficiency and correctness
of management and implementation (…)’ (Article 34(1));

(c)

that ‘without prejudice to the Commission’s responsibility for
implementing the general budget of the European Commu-
nities, Member States shall take responsibility in the first
instance for the financial control of assistance (…)’ (Article
38(1)).

5.
The proposal for a Regulation refers, in Article 12, to
shared management within the meaning of Article 53(3) of the
Financial Regulation. However, the wording of the proposal con-
tains no reference to the Commission’s final responsibility. For
instance, it is specified in the last sentence of Article 12(1) that
‘the Member States and the Commission shall ensure compliance
with the principle of sound financial management’, Article 12(2)
essentially limits the Commission’s responsibility for implement-
ing the budget to checking ‘the existence and proper functioning
of management and control systems in the Member States (…)’,
and Article 69(1) makes the Member States alone responsible:
‘Member States shall be responsible for ensuring sound financial
management of operational programmes and the legality and
regularity of underlying transactions’. What is more, it is the
Member States that are assigned a general obligation to guaran-
tee that assistance measures comply with Community law
(Articles 39(f), 59(a), 60(b)(ii) and 66(2)(g)). Yet the fact that
implementation tasks are entrusted to the Member States cannot
limit the Commission’s final responsibility. In a context where the
Member States are both beneficiaries of the Community funds
and responsible for the implementation of measures, only the
Commission is able to ensure that the Community objectives are
applied in a logical and consistent manner. It is therefore crucial
that the notion of the Commission’s final responsibility, as envis-
aged in Article 274 of the Treaty, be reaffirmed unequivocally in
the articles that deal with the responsibility of Member States.

It is worth noting that if the Commission no longer had
6.
final responsibility for implementing the budget, the Communi-
ty’s financial process, and in particular the discharge procedure,
would lose a good deal of its significance. The budgetary authori-
ties’ recommendations (Article 276(3) of the EC Treaty) would be
deprived of all practical effect.

The conditions for an adequate control framework

7.
In order that the Commission can assume its ultimate
responsibility for the implementation of the budget, the proposal
for a Regulation should take into account the following key
aspects, which underpin opinion No 2/2004 of the Court on the
‘single audit’ model:

(i) The intensity of the checks

8.
There is no indication in the current legislation of the
intensity of the checks at final beneficiary level, which should rely
on a comparison of the costs to be borne by the Member States
and the Commission in connection with the controls and the
related benefits. The proposal only indirectly addresses the need
to set acceptable confidence and materiality thresholds (Article
61(1)(e)(ii) and 61(1)(g)). It would be desirable to explicitly pro-
vide for appropriate criteria in the implementing rules specified
in Article 58(6). The terms ‘reasonable assurance’ and ‘validity of
the application’ should also be defined.

(ii) Definition of appropriate standards

The reference to ‘international audit standards’ (Article
9.
61(1)(a)) is not sufficiently explicit to allow the control proce-
dures to be based on common norms and principles. There
should be provision in the implementing rules mentioned above
for a preliminary acceptance procedure covering both the sys-
tem’s audit and the audit of the operations themselves.

(iii) Organisation of the management and control systems

10.
Article 54 of the Financial Regulation specifies that the
implementing tasks delegated must be clearly defined and fully
supervised as to the use made of them. Article 35(1) of the imple-
menting rules states that, where management is shared, the Com-
mission will first carry out documentary and on-the-spot checks
into the existence, relevance and proper operation of the proce-
dures and systems within the entities to which it entrusts imple-
mentation. The proposal for a Regulation departs from these pro-
visions in that, prior to the Commission’s adoption of an
operational programme, only the Member States are required to
ensure that management and control systems have been set up
(Article 70). In this context, it would be desirable to make arrange-
ments, if not for an approval procedure, then at least for the
Commission to oversee the procedures by which management
and control bodies are appointed at national level. Moreover, it
would also be advisable to set up an intermediary body at national
level to ensure liaison with the Community authorities.

11.
A substantial strengthening of Community controls is
the indispensable corollary to a system in which project manage-
autho-
ment

rests with

national

regional

the

or

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rities (1). Given that the rules on the eligibility of expenditure will,
from now on, be largely fixed at national level, the conditions
outlined above will be of even greater importance.

Responsibility in the area of legality and regularity

Article 60(1) of the Financial Regulation makes the
12.
authorising officer responsible for ensuring the legality and regu-
larity of expenditure. In Article 53(6), the Regulation also states
that, where management is shared, the Member States are to con-
duct regular checks to ensure that the actions to be financed from
the Community budget have been implemented correctly. They
are also to take appropriate measures to prevent irregularities and
fraud and if necessary bring prosecutions to recover funds
wrongly paid.

13.
In the light of these provisions, the proposal for a Regu-
lation (Article 69(1)) confers upon the Member States responsi-
bility for the legality and regularity of the underlying transactions
(see paragraph 5). The ensuing transfer of competence to the
Member States also comes as a corollary to the stipulation in
Article 70 that they are to approve the management and control
systems.

14.
It is true that, where there are doubts as to the operation
of these systems, or where irregularities are suspected or con-
firmed, the Commission could interrupt payment for a period of
six to twelve months (Article 89). It is also envisaged that the
Member States and the Commission could adopt financial correc-
tions (Articles 99 and 100). However, such measures could pro-
vide no more than a limited, auxiliary contribution to the neces-
sary rigour of everyday management. Their effectiveness is
essentially dependent on the number of checks performed. Fur-
thermore, since financial corrections would intervene only after
the fact, they could not be enough on their own to make good all
the consequences of any transactions that might be implemented
even though they did not meet
the necessary regulatory
requirements.

Responsibility in the area of sound financial management

Article 60(1) of the Financial Regulation indicates that
15.
the authorising officer is to implement expenditure in accordance
with the principles of sound financial management. Article 27 of
the Regulation sets out the conditions for the use of Community
appropriations in accordance with the principles of economy,
efficiency and effectiveness. The same Article states that specific,
measurable, achievable, relevant and timed objectives are to be set
for all budget activities. The Commission is to undertake ex ante
and ex post evaluations which it then forwards to the spending,
legislative and budgetary authorities.

(1) See Opinion No 10/98 on certain proposals for regulation within the
Agenda 2000 framework (Structural Funds, point 6.3) (OJ C 401,
22.12.1998).

The proposal for a Regulation makes the Member States
16.
responsible for sound financial management (Article 69). How-
ever, this provision does no more than refer to the existence of
‘adequate guidance’ on setting up management and control sys-
tems that will ensure that community financing is used ‘efficiently
and correctly’. On the matter of effectiveness (2), the proposal
refers almost exclusively to the management and control systems,
and by implication to those governing only legality and regular-
ity. Article 59 of the proposal is limited to making the managing
authority responsible for managing and implementing pro-
grammes ‘efficiently, effectively and correctly’ and finally refers, in
indent (e), to the quality standards agreed between the Commis-
sion and the Member States in respect of ex ante evaluations.

17.
Concerning the narrower question of evaluations, the
proposal for a Regulation specifies that the evaluation methods
and standards to be applied (Article 45(5)) are to be agreed
between the Commission and the Member States (Article 59(e)).
The quality of these standards will be of particular importance for
the ex ante evaluations entrusted to the Member States
(Articles 46(2) and 46(3)), which must inter alia identify the added
value that operational programmes bring to the Community.

lt is therefore particularly important that the implement-
18.
ing rules that
to
Article 58(6) of the proposal for a Regulation provide all the nec-
essary clarification of these aspects.

the Commission is to adopt pursuant

Conservation of supporting documents

19.
Article 88 of the proposal for a Regulation says that sup-
porting documents concerning expenditure are to be kept avail-
able for the Commission and the Court of Auditors for a period
of at least three years following closure. In the case of co-financed
assistance, where the eligibility of the expenditure is largely
dependent on national legislation, it would be desirable to state
explicitly that the three-year term is without prejudice to national
rules specifying longer periods.

20.
These remarks apply also to the partial closure of opera-
tional programmes (Article 97). In this specific case by deroga-
tion from the general rule (Article 88), the period for conserving
supporting documents would start on the date of partial closure
(Article 98(2)). This would have the effect of seriously limiting
checks on an operational programme as a whole at the end of the
programming period, since the supporting documents for opera-
tions closed earlier might no longer be available. In the Court’s
view, such an eventuality could encroach upon its audit preroga-
tives as specified in Article 248 of the EC Treaty.

More effective programmes

Programming and setting objectives

21.
The proposal stipulates that each Member State is to
draw up a ‘national strategic reference framework’ that is consis-
tent with the ‘Community guidelines on economic, social and

(2) For example Articles 57(d), (f) and (h), 61(1)(a), 70(1), 71(2) and 72(2).

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territorial cohesion’ to be adopted by the Council (Article 23).
However, there is no reference under the ‘national strategic refer-
ence framework’
to the ‘European territorial cooperation’
objective.

The content of the ‘national strategic reference frame-
22.
work’ (Article 25) is not sufficiently precise (in terms of measures,
the allocation of resources and expected results) to provide
detailed information on the national and regional development
strategy. Neither are the ‘thematic and territorial priorities’, which
are supposed to define the measures to be financed, explained
adequately. This framework is also likely to be limited exclusively
to areas where assistance is co-financed. Thus the Commission,
which is required to adopt the frameworks, would not be in a
position to emphasise some or other aspect in the operational
programmes.

23.
The operational programmes are also characterised by a
lack of precision, no information being requested in respect of the
various measures to achieve the priority objectives. This prevents
any arbitration between measures. Specific objectives would be
quantified by means of a limited number of implementation,
results and impact indicators. Compared with the current legisla-
tion, a description of the arrangements for managing each opera-
tional programme is no longer required (Article 36). Thus, nei-
ther
the
the ‘national strategic reference framework’, nor
operational programmes would be true management and moni-
toring instruments for the Commission. It is consequently unclear
how the Commission will be able to ensure that coordination
with the operational programmes has been established at national
level.

Community average), the contribution ceiling, Article 51 gives
85 % for the Cohesion Fund and 75 % for the ERDF, although the
ERDF ceiling may be increased to 85 % in certain cases (Articles
51(4) and 52(1)), and the matter of pre-financing (Article 81),
which amounts to 7 % for the Structural Funds and 10,5 % for the
Cohesion Fund. ERDF actions and Cohesion Fund projects are
often managed by the same public entities. The concepts of major
projects and revenue-generating projects are equally valid for
both Funds. For reasons of consistency it would be appropriate to
operate a single Fund, at least in the case of the ERDF and the
Cohesion Fund, since the differences given above do not consti-
tute major obstacles.

27.
Looking at Article 3(2) of the proposal, it is difficult to
draw a clear line between actions concerned by indent (a) and
those concerned by indent (b). The real difference appears to be
‘territorial’ (eligible areas) as compared with ‘financial’ (contribu-
tion levels).

From a practical point of view, the provision of Article
28.
33 (financing from a single Fund, with no more than 5 % from
any other Fund) is a further complication arising from the exist-
ence of multiple Funds.

Improved integration of assistance measures

Adequacy of the Commission’s administrative capacity

24.
The extended impact assessment fails to address the rea-
sons for maintaining separate Funds (as opposed to grouping the
Funds as postulated in Article 161 of the EC Treaty). However,
this should have been the subject of a thorough analysis from the
point of view of the advantages and disadvantages of all the avail-
able options, given that the extended impact assessment gives
arguments in favour of setting up a single Fund. As regards the
present Objective 2, in fact, it says that the relative thematic diver-
sity of funded projects and the fragmentation caused by zoning
have blocked the implementation of suitable policies. Moreover,
it has not been possible to exploit sufficiently the ERDF/ESF syn-
ergies under Objective 3. It is therefore concluded that there is a
need for:

29.
In the past, the Court has noted (1) several delays during
the different stages of programming or during the performance of
checks for which the responsibility must lie with Commission
departments. It is therefore vital that administrative structures and
adequate procedures be established. Moreover, precise deadlines
should be laid down in several of the provisions proposed
(Articles 31(5), 32(2), 40(3), 85(2) and 96(1)). It would also be
useful to have the departments responsible for the different Funds
reach a common accord on the audit strategy, the allocation of
resources and the required level of assurance.

— a

greater
competitiveness,

concentration

of

themes

to

promote

— greater complementarity, over and above the ‘Convergence’

objective, between the ERDF and the ESF.

SPECIFIC OBSERVATIONS

25.
Establishing the principle of ‘one Fund/one operational
programme’, in the interest of simplification is not likely to pro-
mote the search for the necessary synergies.

(transport

It is especially difficult to justify the separation between
26.
the ERDF and the Cohesion Fund in the context of the ‘Conver-
gence’ objective. These two Funds are generally to be found in the
same operational programmes and are concerned with the same
themes
environmental
infrastructure
projects/actions). The corresponding actions/projects are often
complementary (for example, where the Cohesion Fund and the
ERDF are both used to finance different parts of a motorway).
What distinguishes them are regional/State eligibility (per capita
GDP of less than 75 % of the Community average in the case of
the Structural Funds, and per capita GNI of less than 90 % of the

and

30.
The Court sets out specific observations in the table
below. In this section the imprecision of certain time limits and
certain expressions used is noted on several occasions. This runs
the risk of giving rise to differing interpretations and undermin-
ing the legal scope of the provisions concerned.

(1) See for example Special Report No 10/2001 (OJ C 314, 8.11.2001),
concerning the financial control of the Structural Funds and Special
Report No 7/2003 (OJ C 174, 23.7.2004), on the implementation of
assistance programming for the period 2000 to 2006 within the
framework of the Structural Funds.

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COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

The reference to action taken under Article 158 of the EC
Treaty is incomplete in that it omits rural development.
However, it is stated in Article 3(3) that assistance under the
Funds is to support, in an appropriate manner, the renewal
of rural areas and areas dependent on fisheries through eco-
nomic diversification, as well as mountain areas.

Article 3.1

The action taken by the Community under Article
1.
158 of the Treaty shall be designed to strengthen the eco-
nomic and social cohesion of the enlarged Community in
order to promote the harmonious, balanced and sustainable
development of the Community. This action shall be taken
with the aid of the Funds, the European Investment Bank
(EIB) and other existing financial instruments. It shall be
aimed at meeting the challenges linked to the economic,
social and territorial disparities which have arisen particu-
larly in countries and regions whose development is lagging
behind, to the speeding-up of economic and social restruc-
turing, and to the ageing of the population. The action taken
under the Funds shall incorporate, at national and regional
level, the Community’s priorities in favour of sustainable
development by strengthening growth, competitiveness and
employment, social inclusion, as well as the protection and
quality of the environment.

Article 3.2

2.
To that end, the ERDF, the ESF, the Cohesion Fund,
the European Investment Bank (EIB) and the other existing
Community financial instruments shall each contribute in an
appropriate way towards achieving the following three
objectives:

The proposal includes ‘administrative efficiency’ among the
actions to be financed under the ‘Convergence’ objective. The
concept of ‘administrative efficiency’, which also appears in
Articles 25(3)(b) and 26(3)(c), needs to be clarified, especially
since the proposal also uses the term ‘administrative capac-
ity’ (Article 44(1)).

the ‘Convergence’ objective shall be aimed at speeding
up the convergence of the least-developed Member
States and regions by improving conditions for growth
and employment through increasing and improving the
quality of investment in physical and human capital,
the development of innovation and of the knowledge
society,
the adaptability to economic and social
changes, the protection and improvement of the envi-
ronment as well as administrative efficiency. This objec-
tive shall constitute the priority of the Funds;

(a)

(…)

Articles 5.1 and 5.2

1.
The regions eligible for funding from the Structural
Funds under the ‘Convergence’ objective shall be regions cor-
responding to level II of the Nomenclature of Territorial Sta-
tistical Units (hereinafter NUTS level II) within the meaning
of Regulation (EC) No 1059/2003 of the European Parlia-
ment and of the Council of 26 May 2003 whose per capita
Gross Domestic Product (GDP), measured in purchasing
power parities and calculated on the basis of Community fig-
ures for the last three years available on (…), is less than
75 % of the Community average.

The NUTS level II regions whose per capita GDP,
2.
measured in purchasing power parities and calculated on the
basis of Community figures for the last three years available
on (…), is between 75 % and (…) % of the Community aver-
age shall be eligible, on a transitional and specific basis, for
financing by the Structural Funds

It is not enough to use GDP alone to identify eligible regions
because of the many dimensions of the development gap.
Aspects that should not be overlooked include the availabil-
ity of basic infrastructure, the unemployment rate, labour
productivity, the economic structure, education and training,
the quality of the environment, emigration and R & D.

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COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

The second percentage referring to the Community average
needs to be inserted.

It should be pointed out that the geographical scope of the
‘Regional competitiveness and employment’ objective is
potentially very broad and therefore all-embracing. Eligibil-
ity criteria need to be defined for this objective.

The description of the ‘European territorial cooperation’
objective should have been preceded by an analysis of the
situation in these areas and a clear definition of their needs
with a view to concentrating activities. The provisions on
the choice of eligible areas should be expanded to include
criteria that are precisely defined and, more particularly,
weighted.

Article 5.2

The NUTS level II regions whose per capita GDP,
2.
measured in purchasing power parities and calculated on the
basis of Community figures for the last three years available
on (…), is between 75 % and (…) % of the Community aver-
age shall be eligible, on a transitional and specific basis, for
financing by the Structural Funds.

Article 6.1

1.
The areas eligible for funding from the Structural
Funds under the ‘Regional competitiveness and employment’
objective shall be those not covered by Article 5(1) and 5(2).
When presenting the national strategic reference framework
referred to in Article 25, each Member State concerned shall
indicate the NUTS I or NUTS II regions for which it will
present a programme for financing by the ERDF.

Articles 7.1 and 7.2

1.
For the purpose of cross-border cooperation, shall be
eligible for financing the NUTS level III regions of the Com-
munity along the internal and certain external land borders
and certain NUTS level III regions of the Community along
the maritime borders separated, as a general rule, by a maxi-
mum of 150 kilometres, taking into account potential
adjustments needed to ensure the coherence and continuity
of the cooperation action. Immediately following the entry
into force of this Regulation, the Commission shall adopt, in
accordance with the procedure referred to in Article 104(2)
the list of the eligible regions. This list shall be valid from
1 January 2007 to 31 December 2013.

2.
For the purpose of transnational cooperation, on the
basis of the Community’s strategic guidelines referred to in
Articles 23 and 24, the Commission in accordance with the
procedure referred to in Article 104(2), shall adopt the list of
the eligible transnational areas. This list shall be valid from
1 January 2007 to 31 December 2013.

Article 10.3

3.
Each year the Commission shall consult the organi-
sations representing the social partners at European level on
assistance from the Funds.

Article 10(1)(b) refers to the economic and social partners. It
would be desirable to use the same expression in para-
graph 3.

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COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

A procedure verifying the application of the additionality
principle is only envisaged for the ‘Convergence’ objective.
There is no such provision for the other two objectives,
which account for around 20 % of appropriations. Only sec-
tion 5.3 of the explanatory memorandum specifies that this
control is to be exercised by the Member States in accor-
dance with the proportionality principle. Neither does the
Commission have to be informed of the results of controls
by the Member States. This represents a change compared
with the current legislation (Article 11(3) of Regulation
No 1260/99).

Article 13

Contributions from the Structural Funds shall not
1.
replace public or equivalent structural expenditure by a
Member State.

2.
For regions covered by the ‘Convergence’ objective,
the Commission and the Member State shall determine the
level of public or equivalent structural expenditure which the
Member State shall maintain in all the regions concerned
during the programming period. That expenditure shall be
agreed by the Member State and the Commission within the
strategic reference framework referred to in
national
Article 25.

3.
The level of the expenditure referred to in paragraph
2 shall be at least equal to the amount of average annual
expenditure in real terms attained during the previous pro-
gramming period. The level of expenditure shall be deter-
mined with reference to the general macroeconomic condi-
tions in which the financing is carried out and taking into
account certain specific economic situations, namely priva-
tisations as well as an exceptional level of public or equiva-
lent structural expenditure by the Member State during the
previous programming period.

The Commission shall,

4.
in cooperation with each
Member State, verify additionality mid-term in 2011 and ex
post by 30 June 2016 for the ‘Convergence’ objective.
Where a Member State is unable to prove on 30 June 2016
that the additionality agreed within the national strategic ref-
erence framework has been respected, the Commission shall
proceed to a financial correction in accordance with proce-
dure laid down in Article 101.

Article 13.3

3.
The level of the expenditure referred to in paragraph
2 shall be at least equal to the amount of average annual
expenditure in real terms attained during the previous pro-
gramming period.

The possibility of taking account of the general macroeco-
nomic circumstances as well as certain specific economic
situations, without further explanation, potentially leaves
enormous scope for discretion.

The level of expenditure shall be determined with reference
to the general macroeconomic conditions in which the
financing is carried out and taking into account certain spe-
cific economic situations, namely privatisations as well as an
exceptional level of public or equivalent structural expendi-
ture by the Member State during the previous programming
period.

C 121/22

EN

Official Journal of the European Union

20.5.2005

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

It would be helpful to indicate how the criteria were weighted
to determine the allocation of Funds to the different compo-
nents.

The text does not define what is meant by ‘objective and fair’.

It would be helpful to indicate how the criteria were weighted
to determine the allocation of Funds to the different compo-
nents.

Article 16.1

Overall resources for the ‘Convergence’ objective shall
1.
amount to 78,54 % of the resources referred to in the first
paragraph of Article 15 (i.e. a total of EUR 264,0 billion) and
shall be distributed between the different components as fol-
lows:

(a) 67,34 % for the financing referred to in Article 5(1),
using eligible population, regional prosperity, national
prosperity and unemployment as the criteria for calcu-
lating the indicative breakdowns by Member State;

(b) 8,38 % for the transitional and specific support referred
to in Article 5(2), using eligible population, regional
prosperity, national prosperity and unemployment as
criteria for calculating the indicative breakdowns by
Member State;

(c)

23,86 % for the financing referred to in Article 5(3),
using population, per capita GNI taking into account of
the improvement in national prosperity over the previ-
ous period, and surface area as criteria for calculating
the indicative breakdowns by Member State; and

(d) 0,42 % for the financing referred to in Article 5(4),
using eligible population as criteria for calculating the
indicative breakdowns by Member State.

Article 16.2

2.
The annual breakdown of the appropriations referred
to in paragraph 1(b) shall be degressive from 1 Janu-
ary 2007. The appropriation in 2007 shall be lower than in
2006, except for those regions that are not fully eligible to
Objective 1 on 1 January 2000 pursuant to Regulation (EC)
No 1260/1999 for which the appropriation in 2007 shall be
objective and fair.

Article 17.1

1.
Overall resources for the ‘Regional competitiveness
and employment’ objective shall amount to 17,22 % of the
resources referred to in the first paragraph of Article 15 (i.e.
a total of EUR 57,9 billion) and shall be distributed between
the different components as follows:

(a) 83,44 % for the financing as referred to in Article 6(1),
using eligible population, regional prosperity, unem-
ployment, employment rate and population density as
the criteria for calculating the indicative breakdowns by
Member State; and

(b) 16,56 % for the transitional and specific support
referred to in Article 6(2), using eligible population,
regional prosperity, national prosperity and unemploy-
ment as the criteria for calculating the indicative break-
downs by Member State.

20.5.2005

EN

Official Journal of the European Union

C 121/23

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

Article 17.2

The appropriations referred to in paragraph 1(a) shall
2.
be divided equally between the programmes financed by the
ERDF and the programmes financed by the ESF. 2.

The text should clarify how the division between the ERDF
and the ESF is to be made.

Article 17.4

The annual breakdowns of

4.
the appropriations
referred to in paragraph 1(b) shall be degressive from 1 Janu-
ary 2007. The appropriations in 2007 shall be lower than
in 2006, except for those regions whose eligibility to Objec-
tive 1 pursuant to Regulation (EC) No 1260/1999 started in
2004 for which the appropriation in 2007 shall be objective
and fair.

Article 22

The Commission ensures that total annual allocations from
the Funds for any Member State pursuant to this Regulation,
including the contribution of the ERDF to the financing of
the cross-border strand of the European Neighbourhood and
Partnership Instrument pursuant to Regulation (EC) No (…)
and of the Instrument for pre-accession pursuant to Regula-
tion (EC) No (…), and from the part of the European Agri-
cultural Fund for Rural Development (EAFRD) pursuant to
Regulation (EC) No (…) originating from the EAGGF, Guid-
ance section, and of the European Fund for Fisheries (EFF)
pursuant to Regulation (EC) No (…) contributing to the
‘Convergence’ objective, shall not exceed 4 % of that Mem-
ber State’s GDP as estimated at the time of the adoption of
the Interinstitutional Agreement.

The Regulations of the financial instruments mentioned in
the previous paragraph other than the Funds include a simi-
lar provision.

Article 24

At the latest three months after the adoption of this Regula-
tion, the Community strategic guidelines referred to in
Article 23 are adopted in accordance with the procedure
laid down in Article 161 of the Treaty. This decision shall be
published in the Official Journal of the European Union. The
Community strategic guidelines shall be subject, if necessary,
to mid-term review in accordance with the procedure laid
down in Article 161 of the Treaty, in order to take account
in particular of changes in the priorities of the Community.

The text does not define what is meant by ‘objective and fair’.

Concerning the total annual allocations from the Funds for
any Member State, the idea put forward in recital 30 of the
preamble, namely, that annual appropriations should be
allocated with regard to the Member States’ capacity for
absorption, has not been taken up.

It is also necessary to question the effects on the frameworks
of any amendment to the Community strategic guidelines.
There is in fact no provision for a revision of the frameworks
in any of the articles.

C 121/24

EN

Official Journal of the European Union

20.5.2005

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

It is stated here that the chosen strategy is to specify ‘the
action envisaged for reinforcing the Member State’s admin-
istrative efficiency, including as regards management of the
Funds’. This implies that the notion of ‘reinforcing the Mem-
ber State’s administrative efficiency’ could go beyond the
management of the Funds, bringing with it the risk that a
very wide range of operations would be financed.

It is inappropriate to specify ‘a limited number’ without giv-
ing further detail. What matters most is that the chosen indi-
cators should enable the results achieved, and the impact of
those results, to be adequately expressed.

Article 25.3

The strategic section of the national strategic refer-
3.
ence framework shall specify the strategy chosen for the
‘Convergence’ objective and the ‘Regional competitiveness
and employment’ objective, demonstrating how the choices
made are consistent with the Community strategic guidelines
on the basis of an analysis of development disparities, weak-
nesses and potential related, in particular, to the expected
changes in the European and world economies. It shall
specify:

(…)

(b)

(…)

for the ‘Convergence’ objective only, the action envis-
aged for reinforcing the Member State’s administrative
efficiency,
including as regards management of the
Funds, and the evaluation plan referred to in
Article 46(1);

Article 25.3

3.
The strategic section of the national strategic refer-
ence framework shall specify the strategy chosen for the
‘Convergence’ objective and the ‘Regional competitiveness
and employment’ objective, demonstrating how the choices
made are consistent with the Community strategic guidelines
on the basis of an analysis of development disparities, weak-
nesses and potential related, in particular, to the expected
changes in the European and world economies. It shall
specify:

(…)

In order to permit monitoring, the main goals of the priori-
ties referred to in point a) shall be quantified and a limited
number of performance and impact indicators shall be iden-
tified.

Article 25.4

For the ‘Convergence’ objective and the ‘Regional
4.
competitiveness and employment’ objective, the operational
section shall contain:

What is meant by ‘an appropriate balance’ is not defined.

the list of operational programmes and the indicative
annual allocation from each Fund by programme,
ensuring an appropriate balance between regional and
thematic action. This list shall include the amount of
the national contingency reserve referred to in Article
49;

(a)

(…)

20.5.2005

EN

Official Journal of the European Union

C 121/25

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

Article 26.2

Each Member State shall send the Commission a pro-
2.
posal for a national strategic reference framework as soon as
possible after adoption of the Community strategic guide-
lines. Member States may decide to present at the same time
the operational programmes referred to in Article 31. The
Commission negotiates this proposal in the framework of
the partnership.

Article 30

The phrase ‘as soon as possible’ should be replaced with an
exact deadline.

The report of the Commission referred to in Article 159, sec-
ond subparagraph, of the Treaty shall include in particular:

It would be advisable to stipulate that the cohesion report
should also address the territorial dimension of cohesion.

(a)

(b)

a record of the progress made on economic and social
cohesion, including the socio-economic situation and
development of the regions, as well as the integration of
the Community priorities;

a record of the role of the Funds, the EIB and the other
financial instruments, as well as the effect of other
Community and national policies on the progress made.
The report shall contain, if necessary, any proposals on
Community measures and policies which should be
adopted in order to strengthen economic and social
cohesion. It shall also propose, if necessary, proposals
concerning any adjustments linked to new Community
policy initiatives in the strategic guidelines on cohesion.
In the year in which the report is presented, it shall
replace the annual report by the Commission referred
to in Article 28. It shall be the subject of an annual
debate in accordance with the procedure laid down in
Article 29.

Article 31.3

3.
The Member State shall submit a proposal for an
operational programme to the Commission containing all
the components referred to in Article 36, as soon as possible
following the Commission decision referred to in Article 26
or at the same of the presentation of the national strategic
reference framework referred to in the same Article 26.

Article 31.5

The phrase ‘as soon as possible’ should be replaced with an
exact deadline.

5.
The Commission shall adopt each operational pro-
gramme as soon as possible after its formal submission by
the Member State.

The phrase ‘as soon as possible’ should be replaced with an
exact deadline (the deadline is currently five months).

Article 32.2

The Commission shall adopt a decision on the requests for
revision of operational programmes as soon as possible after
formal submission of the request by the Member State.

The phrase ‘as soon as possible’ should be replaced with an
exact deadline.

C 121/26

EN

Official Journal of the European Union

20.5.2005

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

Article 35.4

The Commission may, if it considers it appropriate
4.
for the appraisal of major projects, request the EIB to exam-
ine those projects’ technical quality and economic and finan-
cial viability, in particular as regards the financial engineer-
ing instruments to be implemented or developed.

Article 36.1

The fourth paragraph is different in nature from the other
three and would surely be more appropriate as part of
Article 40.

Operational programmes relating to the ‘Conver-
1.
gence’ and the ‘Regional competitiveness and employment’
objectives shall contain:

What is meant by ‘a limited number of indicators …, taking
into account the proportionality principle’ should be clari-
fied.

(…)

(c)

(…)

an information on the priorities and their specific tar-
gets. Those targets shall be quantified using a limited
number of indicators for implementation, results and
impact, taking into account the proportionality prin-
ciple. The indicators must make it possible to measure
the progress in relation to the baseline situation and the
effectiveness of the targets implementing the priorities;

Article 36.4

Operational programmes financed by the ERDF shall
4.
contain in addition for the ‘Convergence’ and the ‘Regional
competitiveness and employment’ objective:

The actions concerned correspond more closely to the ‘Euro-
pean territorial cooperation’ objective.

(a)

actions for inter-regional cooperation with, at least, one
region of another Member State in each regional pro-
gramme;

(…)

Article 40.3

The Commission shall adopt a decision as soon as
3.
possible after the submission by the Member State or the
managing authority of all the information referred to in
Article 39. That decision shall define the physical object, the
amount to which the co-financing rate for the priority
applies, and the annual schedule.

The phrase ‘as soon as possible’ should be replaced with an
exact deadline.

20.5.2005

EN

Official Journal of the European Union

C 121/27

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

The ‘principle of proportionality’ is not defined.

Article 45.3

The evaluation activities referred to in paragraph 1
3.
shall be organised under the responsibility of the Member
State or the Commission, as appropriate, in accordance with
the principle of proportionality and on the basis of a part-
nership between the Member State and the Commission.
Evaluations shall be carried out by independent assessors.
The results shall be published, except where the authority
responsible for the evaluation expressly objects in accor-
dance with Regulation (EC) No 1049/2001 on access to
documents.

Article 46.5

During the programming period, Member States carry
5.
out ad hoc evaluation linked to the monitoring of opera-
tional programmes where the monitoring of programmes
reveals a significant departure from the goals initially set and
where proposals are made for the revision of operational
programmes. The results shall be sent to the monitoring
committee for the operational programme and to the Com-
mission.

The text does not define what is meant by ‘a significant
departure from the goals initially set’ and ‘the revision of
operational programmes’.

This observation only refers to the French version of the pro-
posal. The adjective ‘substantiel’ does not appear in all lan-
guages.

Use of the performance reserve will essentially depend on
criteria for which it is extremely difficult to establish a direct
link with the actions benefiting from Community assistance.
Changes in GDP and the employment rate are dependent on
factors that are far more complex than the operational pro-
grammes alone, whose financial impact, moreover, is gener-
ally more limited than that of public investment as a whole.
Furthermore,
it appears restrictive to consider only the
upward movement of indicators, as the structural measures
may well have contributed towards cushioning a fall.

Article 48

1.
Within the context of the annual debate referred to in
Article 29, the Council shall in 2011, in accordance with the
procedure laid down in Article 161 of the Treaty, allocate the
reserve referred to in Article 20 among the Member States to
reward progress made as compared with the initial situation:

(a)

for the ‘Convergence’ objective, on the basis of the fol-
lowing criteria:

(i)

(ii)

growth in the per capita gross domestic product
measured at NUTS II level, in relation to the Com-
munity average, on the basis of the data available
for the 2004 to 2010 period;

growth in the employment rate at NUTS II level,
on the basis of the data available for the 2004 to
2010 period;

(b)

for the ‘Regional competitiveness and employment’
objective, on the basis of the following criteria:

(i)

(ii)

pro rata to those regions having spent between
2007 and 2010 at least 50 % of their ERDF allo-
cation on innovation-related activities as referred
to in Article 5(1) of Regulation (EC) No (…);

growth in the employment rate at NUTS II level,
on the basis of the data available for the 2004 to
2010 period.

Each Member State shall allocate the amounts con-
2.
cerned among operational programmes taking into account
the criteria referred to in the previous paragraph 1.

C 121/28

EN

Official Journal of the European Union

20.5.2005

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

Article 50

The contribution of the Funds shall be modulated in the light
of the following:

The text should give weightings for the criteria to be applied
for modulations of the contribution rates.

(a)

(b)

(c)

(d)

the gravity of the specific problems, in particular of an
economic, social or territorial nature;

the importance of each priority for the Community’s
priorities as set out in the strategic guidelines of the
Community;

protection and improvement of the environment, prin-
cipally through the application of the precautionary
principle, the principle of preventive action, and the
polluter-pays principle;

the rate of mobilisation of private financing, in particu-
lar under public-private partnerships, in the fields con-
cerned.

Article 54.2

2.
Public expenditure on revenue-generating projects
shall be calculated on the basis of the investment cost less the
current value of the net revenue from the investment over a
specific reference period. The calculation shall take account
of the profitability normally expected of the category of
investment concerned and of the application of the polluter-
pays principle, and, if necessary, of the principle of equity
linked to the relative prosperity of the Member State con-
cerned.

Article 55.1

1.
Expenditure shall be eligible for a contribution from
the Funds if it has actually been incurred by the beneficiary
for carrying out an operation between 1 January 2007 and
31 December 2015. Operations co-financed must not have
been completed before the starting date for eligibility. Expen-
diture on major projects shall be eligible from the date of
submission of the project to the Commission.

Article 55.3

The criteria used to apply the ‘polluter pays’ principle and the
principle of equity linked to the Member States’ relative pros-
perity are not defined. The Commission should provide
methodological support for the setting of assistance levels
for these projects (see Article 40(2)).

It might be beneficial to relax these conditions to take
account of preparatory work on the actions to be financed.
The eligibility period could thus start on 1 July 2006.

3.
The rules on the eligibility of expenditure shall be laid
down at national level subject to the exception provided in
the specific Regulations for each Fund. They cover the
entirety of the public expenditure declared under the opera-
tional programme.

It will be difficult to apply national eligibility rules in the con-
text of the ‘European territorial cooperation’ objective, as the
operations financed concern more than one Member State.
This aspect is not taken into account.

20.5.2005

EN

Official Journal of the European Union

C 121/29

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

Article 57.1

The management and control systems of operational

1.
programmes set up by Member States shall provide for:

(a)

(b)

a clear definition of the functions of the bodies con-
cerned in management and control and a clear alloca-
tion of functions within each body;

a clear separation of functions between bodies con-
cerned in management, certification of expenditure and
control and between those functions within each body;

(c)

adequate resources for each body to carry out the func-
tions allocated to it;

(d)

effective internal audit arrangements;

(e)

(f)

(g)

(h)

(i)

(j)

reliable accounting, monitoring and financial reporting
systems in computerised form;

an effective system of reporting and monitoring where
the performance of tasks is delegated;

the existence of manuals of procedures for the func-
tions to be performed;

effective arrangements for auditing the proper opera-
tion of the system;

systems and procedures to ensure an adequate audit
trail;

reporting and monitoring procedures of irregularities
and of recovery of amounts unduly paid.

Article 57.2

The measures laid down in paragraph 1(b), (c), (d), (f),
2.
and (h) shall be proportionate to public expenditure under
the operational programme concerned.

Subparagraph (j) refers to ‘irregularities’. A precise definition
would be useful, especially since this notion appears in a
number of clauses (for example, Articles 69(3), 73(4), 89(1)
and 99). The value of this provision is limited at present by
the lack of clarity concerning the data to be submitted.

It is envisaged that a number of the measures set out in this
article would be applied in proportion to public expenditure
under the operational programme concerned. However, this
notion is insufficiently clear for the measures to be applied
with any consistency. For this reason, it is difficult to imag-
ine applying the measures in question (separation of func-
tions, adequate resources and arrangements for internal
audit, reporting and the systems audit) in a proportionate
way. Moreover, this derogation does not apply to manuals of
procedure, and no definition is given. It should also be speci-
fied whether the proportionality principle is supposed to
apply to Articles 13 (verification of the additionality prin-
ciple exclusively in the case of the ‘Convergence’ objective),
46(3) (overall or specific ex ante evaluation), 66(2) (content
of the annual and final implementation reports) and 73 (con-
trol procedures).

C 121/30

EN

Official Journal of the European Union

20.5.2005

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

The notion of an ‘appropriate sample’ should be defined in
the implementing rules. In any case, the requirements should
not be less rigorous than for the 2000 to 2006 period.

Article 61.1

The Audit Authority of an operational programme

1.
shall be responsible in particular for:

(…)

(b)

(…)

ensuring that audits are carried out on operations on
the basis of an appropriate sample to verify expenditure
declared;

Article 61.1

The Audit Authority of an operational programme

1.
shall be responsible in particular for:

This clause refers to ensuring that the ‘main bodies’ are
audited, yet without defining what those bodies are.

(…)

(c)

(…)

presenting to the Commission, within six months of the
approval of the operational programme, an audit strat-
egy covering the bodies which will perform the audits
referred to under subparagraphs (a) and (b), the method
to be used, the sampling method for audits on opera-
tions and the indicative planning of audits to ensure
that the main bodies are audited and that audits are
spread evenly throughout the programming period;

Article 61.1

The Audit Authority of an operational programme

1.
shall be responsible in particular for:

(…)

(e)

by 30 June each year from 2008 to 2016:

(i)

(ii)

establishing an annual control report setting out
the findings of the audits carried out in accordance
with the audit strategy in respect of the opera-
tional programme during the previous year and
reporting any shortcomings found in the systems
for the management and control of the pro-
gramme. The information concerning years the
2014 and 2015 may be included in the final
report to accompany the declaration of validity;

issuing an opinion as to whether the management
and control system has operated effectively to give
a reasonable assurance on the correctness of the
statements of expenditure presented to the Com-
mission during that year and the legality and regu-
larity of the underlying transactions;

(…)

The Commission’s assurance concerning the audit of opera-
tional programmes is largely dependent upon the audit
authority’s submission of an annual control report accom-
panied by an opinion. However, owing to the deadline for
submitting these documents (30 June), it will not be possible
to take them into consideration either in the annual declara-
tions to be drawn up by the Directors-General or in the state-
ments of assurance prepared by the Court of Auditors. The
same applies, mutatis mutandis, to the annual report that is
the subject of Article 66.

20.5.2005

EN

Official Journal of the European Union

C 121/31

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

Article 63.2

At its own initiative, a representative of the Commis-
2.
sion may participate in the work of the monitoring commit-
tee in an advisory capacity. A representative of the EIB and
the EIF may participate in an advisory capacity for those
operational programmes to which it makes a contribution.

In contrast with the current rules (see Article 35(2) of Regu-
lation No 1260/1999), the Commission would participate in
the monitoring committees at its own initiative. However,
participation on these terms does appear desirable as a
means of facilitating the exchange of information and the
timely adoption of suitable measures.

It should be stated as a principle that all co-financed projects
will carry implementation objectives and be subject to the
evaluation of results specified in Article 65. Priority-based
management is all too likely to produce only general infor-
mation.

Article 65

1.
The Managing Authority and the Monitoring Com-
mittee shall ensure the quality of the implementation of the
operational programme.

The Managing Authority and the Monitoring Com-
2.
mittee shall carry out monitoring by reference to financial
indicators and indicators of implementation, results and
impact specified in the operational programme. Where the
nature of the assistance permits, the statistics shall be bro-
ken down by sex and by the size of the recipient undertak-
ings.

3.
The Commission, in partnership with the Member
States, shall examine the indicators necessary for monitor-
ing and evaluating the operational programme.

Article 66.2

2.
The reports referred to in paragraph 1 shall include
the following information in order to obtain a clear view of
the implementation of the operational programme:

The exact relationship between the breadth of information
submitted and the amount of public expenditure should be
clarified.

(…)

(j)

(…)

implementation of

the use made of assistance repaid to the Managing
Authority or to another public authority during the
period of
the operational pro-
gramme. The breadth of information transmitted to the
Commission shall be proportional to the total amount
of public expenditure of the operational programme
concerned.

C 121/32

EN

Official Journal of the European Union

20.5.2005

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

Article 73

For programmes for which the level of co-financing
1.
from Community funds does not exceed 33 % of public
expenditure under the operational programme and the
amount of the Funds does not exceed EUR 250 million, the
provisions referred to in Article 61 points (c), (d), and (e)(i)
do not apply.

2.
For the programmes referred to in paragraph 1, the
Member State may exercise the option to establish accord-
ing to national rules the bodies and procedures for carrying
out the functions laid down in Articles 59(b), and in Articles
60 and 61. Where a Member State exercises this option, the
provisions of Article 58(1)(b) and (c), and of Article 60(1)(c)
shall not apply. When the Commission adopts the imple-
menting rules of Articles 59, 60 and 61, it shall specify the
provisions which shall not apply to those Member States
which exercise the option referred to in the first subpara-
graph.

3.
Article 70(3) shall apply, mutatis mutandis, where a
Member State exercises the option referred to in paragraph
2, first subparagraph.

4.
For all operational programmes referred to in para-
graph 1, and irrespective of whether a Member State exer-
cises the option referred to paragraph 2, where the opinion
on the compliance of the system has no reservations, or
where all reservations have been withdrawn following cor-
rective measures, the Commission may inform the Member
State concerned that it will rely principally on the opinion
provided by the Audit Authority, or the body designated by
the Member State where it has exercised the option referred
to, as to the correctness, legality and regularity of expendi-
ture declared and will carry out its own on-the-spot audits
only in exceptional circumstances. In the event that there are
indications of irregularities which have not been detected in
a timely way by the national audit authorities or which have
not been subject to appropriate corrective measures, the
Commission may require the Member State to carry out
audits in accordance with Article 71(3) or it may carry out
its own audits under Article 71(2) in order to obtain assur-
ance on the correctness, legality and regularity of expendi-
tures declared.

Article 73.2

2.
For the programmes referred to in paragraph 1, the
Member State may exercise the option to establish accord-
ing to national rules the bodies and procedures for carrying
out the functions laid down in Articles 59(b), and in Articles
60 and 61. Where a Member State exercises this option, the
provisions of Article 58(1)(b) and (c), and of Articles 60(1)(c)
shall not apply. When the Commission adopts the imple-
menting rules of Articles 59, 60 and 61, it shall specify the
provisions which shall not apply to those Member States
which exercise the option referred to in the first subpara-
graph.

In theory, this simplified procedure would apply during the
2000 to 2006 period to 33 programmes in 10 Member
States, for Community aid worth a total of 3 800 million
euro (2 % of the Community aid budget for 2000 to 2006).
This clause encourages Member States to take advantage of
the associated simplification measures, and it could therefore
concern more programmes than would in theory be calcu-
lated for the current programming period. Of particular
interest in this connection is the exemption from the need to
submit an audit strategy and an annual control report
(Article 61(1)), the possibility of designating management
and control bodies on the basis of national
legislation
(Articles 59 to 61) and the exemption from the need to des-
ignate certifying and audit authorities (Article 58(1)). Fur-
thermore, when the report of the body stating compliance
with the systems has been accepted by the Commission, the
latter will carry out checks in exceptional cases only.

It should be possible to assess all the implications of the
option of the first indent, and it is therefore not justified to
refer to later implementing rules to specify which provisions
will not apply.

20.5.2005

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Official Journal of the European Union

C 121/33

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

Article 73.4

For all operational programmes referred to in para-
4.
graph 1, and irrespective of whether a Member State exer-
cises the option referred to paragraph 2, where the opinion
on the compliance of the system has no reservations, or
where all reservations have been withdrawn following cor-
rective measures, the Commission may inform the Member
State concerned that it will rely principally on the opinion
provided by the Audit Authority, or the body designated by
the Member State where it has exercised the option referred
to, as to the correctness, legality and regularity of expendi-
ture declared and will carry out its own on-the-spot audits
only in exceptional circumstances.

In the event that there are indications of irregularities which
have not been detected in a timely way by the national audit
authorities or which have not been subject to appropriate
corrective measures, the Commission may require the Mem-
ber State to carry out audits in accordance with Article 71(3)
or it may carry out its own audits under Article 71(2) in
order to obtain assurance on the correctness, legality and
regularity of expenditures declared.

Article 79

Member States shall satisfy themselves that the body respon-
sible for making the payments ensures that the beneficiaries
receive the total amount of the contribution from public
funds as quickly as possible and in full. No amounts shall be
deducted or withheld, nor any further specific charge or
other charge with equivalent effect shall be levied that would
reduce these amounts for the beneficiaries.

Article 85.2

2.
If one of the conditions referred to in paragraph 1 is
not met, the Member State and the certification authority
shall be informed as soon as possible by the Commission
that the payment request is unacceptable.

Article 90.1

1.
The Commission shall decide to withhold from
interim payments 20 % of the sums to be reimbursed by the
Commission where the essential elements of the corrective
action plan referred to in Article 70(3) have been imple-
mented and the serious deficiencies referred to in the annual
report by the audit authority for the programme referred to
in Article 61, point (e)(i), have been rectified but amend-
ments still need to be made to give the Commission reason-
able assurance regarding the management and control sys-
tems.

The phrase ‘‘in a timely way’’ should be replaced with an
exact deadline.

The phrase ‘as quickly as possible’ should be replaced with an
exact deadline.

The phrase ‘as soon as possible’ should be replaced with an
exact deadline.

Mention should also be made of the opinion referred to in
Article 61(1)(e)(ii).

C 121/34

EN

Official Journal of the European Union

20.5.2005

COMMISSION’S PROPOSAL

THE COURT’S OBSERVATIONS

What is meant by ‘in good time’ should be clarified.

It is important that the procedures provided for in the area
of partial closures supply the same degree of assurance
regarding the legality and regularity of expenditure as that
which would result from the declaration on the final closure
of the operational programme, in particular as regards the
intensity and extent of the checks.

Article 96.1

The Commission shall inform the Member State and
1.
the authorities concerned in good time whenever there is a
risk of application of the automatic decommitment provided
for in Article 92. The Commission shall inform the Member
State and the authorities concerned of the amount of the
automatic decommitment resulting from the information in
its possession.

The Member State shall have two months’ time from the date
of receipt of that information to agree to the amount or sub-
mit its observations. The Commission shall carry out the
automatic decommitment not later than nine months after
the time limit referred to in Article 92.

Article 97

Partial closure of operational programmes may be

1.
made at periods selected by the Member State.

Partial closure shall relate to completed operations for which
a final payment has been made to the beneficiary not later
than 31 December of year n-1. For the purposes of this
Regulation, operations shall be deemed completed where the
activities under it have been actually carried out and the ben-
eficiary has received a final payment or the beneficiary has
provided a document of equivalent effect to the managing
authority.

The amount of payments corresponding to com-
2.
pleted operations shall be identified in the statements of
expenditure.

Partial closure shall be made on condition that the manag-
ing authority sends the following to the Commission by
30 June of year n:

a)

a statement of expenditure relating to those operations;

b)

a statement certifying the legality and regularity of the
transactions concerned by the statement of expendi-
ture, issued by the audit authority for the programme
referred to in Article 61.

This Opinion was adopted by the Court of Auditors in Luxembourg on 18 March 2005.

For the Court of Auditors
Hubert WEBER
President