Report from the Commission to the European Parliament on the follow-up to 2003 Discharge Decisions (Summary) - European Parliament Resolutions {SEC(2005)1161}
Date: 2005-09-19
Institutions: European Commission
Subjects: EU office or agency, European Development Fund, budgetary discharge, closing of accounts, financial year, general budget (EU), report, resolution of parliament

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 19.9.2005 
COM(2005) 449 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT 

on the follow-up to 2003 Discharge Decisions (Summary) - European Parliament Resolutions 

{SEC(2005)1161} 

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TABLE OF CONTENTS 

PREAMBLE ...............................................................................................................................3 

I - Commission responses to the recommendations made by the EP in the general budget discharge 

resolution ......................................................................................................................4 

a) Horizontal issues.....................................................................................................................4 

b) Sectoral issues:........................................................................................................................5 

II - EP Discharge on EDF ...........................................................................................................8 

III - EP Discharge on Agencies...................................................................................................9 

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PREAMBLE 

Due  to  the  present  translation  constraints,  the  Commission's  report  on  the  follow-up  to  European 
Parliament (EP) Discharges given for the 2003 financial year1 is being published in all EU official 
languages 
to  each  specific 
recommendation by the Parliament are also available in a Commission working document2 which is 
published  in  English,  French  and  German.  Both  these  follow-up  reports  relate  to  the  resolutions 
adopted by the European Parliament on 12 April 2005. 

this  summarised  form.  The  Commission’s  full  answers 

in 

Each  chapter3  of  this  summary  report  includes  cross-references  to  the  relevant  recommendation 
numbers  in  the  full  Commission  working  document  mentioned  above.  These  references  will  help 
readers to find in the working document all recommendations (and action planned or already taken 
by  the  Commission)  relating  to  a  given  chapter  or  presenting  a  particular  interest  to  them. 
Therefore,  although  this  summary  report  deals  with  every  theme  raised  by  the  EP  in  its  2003 
discharge resolutions, owing to the length limits which it had to comply with, it is advisable to look 
in the full working document for more information on any particular theme. 

Both reports have been drafted pursuant to Article 276(3) of the EC Treaty and Article 180b of the 
Euratom Treaty, and to Article 119(5) of EDF’s Financial Regulation and similar provisions in the 
former  ad  hoc  EDF  Financial  Regulation  which  state  that  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"4. 

In the discharge decisions for the general budget, the EDF and the Agencies, the Commission has 
identified  a  total  of  113  recommendations  made  by  the  European  Parliament  to  the  Commission. 
The Commission considers that for 45 recommendations the required action has already been taken. 
For  another  52  recommendations  the  Commission  agrees  to  take  the  action  recommended  by 
Parliament. Finally, the Commission cannot accept 16 recommendations and will therefore not be 
taking the requested action.5 

1 
2 
3 

4 
5 

2003 General Budget Discharge, 2003 EDF Discharge, 2003 Agencies Discharge. 
Working document on the follow-up by the Commission to all the EP’s 2003 discharge recommendations. 
Both the present summarised report and the integral working document follow the structure of the resolutions 
containing the recommendations of the European Parliament. 
See also Article 147 of the Financial Regulation 
For General Budget : recommendations 14, 16, 18, 25, 29, 64, 65, 67, 69 & 70 ; for EDF : recommendations 
81, 83, 86 & 96 ; for Agencies : recommendations 104 & 112. 

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I - COMMISSION RESPONSES TO THE RECOMMENDATIONS MADE BY THE EP IN 

THE GENERAL BUDGET DISCHARGE RESOLUTION 

In response to the express wish of the European Parliament, the Commission has adopted a roadmap 
to  an  integrated  internal  control  framework  (COM(2005)  252  of  15 June 2005).  The  aim  is  to 
establish,  in  close  collaboration  with  Parliament  and  the  Council,  how  the  current  internal 
framework can be improved in order to make it possible for the Commission to provide the Court of 
Auditors with reasonable assurance as to the legality and regularity of underlying transactions. 

The integrated internal control framework will build on the positive results achieved by the reform 
of the internal control framework of the Commission.  

A summary follows of the Commission's replies to the specific requests made by Parliament in its 
2003 Discharge Resolutions. 

A) HORIZONTAL ISSUES 

Reliability of the accounts (recommendation 3) 

A  proposal  has  been  made  to  amend  the  Financial  Regulation  in  order  to  require  the  Accounting 
Officer to sign off the Commission's accounts and therefore to certify that they are reliable. To this 
end,  in  the  declarations  of  assurance  annexed  to  annual  activity  reports,  Directors-General  should 
certify that the accounts for which they are responsible are accurate and exhaustive.  

Delegation risk to Member States (recommendations 4 & 10) 

The  Commission  considers  that  the  introduction  of  formal  Disclosure  Statements  and  annual  ex-
post Declarations of Assurance on the legality and regularity of underlying transactions from each 
Member  State's  highest  level  would  enhance  the  Commission’s  insight  into  Member  States' 
management  and  control  systems.  To  this  end,  the  Commission  suggested  that  the  Council 
Presidency  establish  a  High-Level  Interinstitutional  Trialogue  responsible  for  negotiating  and 
reaching  an  agreement  on  a  common  understanding  of  what  would  constitute  an  adequate  and 
satisfactory  Community  integrated  control  framework,  as  well  as  on  the  necessary  steps  to 
implement it. On 13 July 2005 the Council asked COREPER to examine, in full respect of the EC 
Treaty,  the  panel's  work  with  a  view  to  preparing  draft  conclusions  for  consideration  at  the 
November ECOFIN Council.6  

Single audit (recommendations 6 & 8) 

With  the  Communication  of  15  June  2005  on  a  Roadmap  to  an  integrated  internal  control 
framework,  the  Commission  intends  to  reach  an  agreement  with  the  Parliament  (as  discharge 
authority) and the Council on how the current internal control framework can be improved in order 
to make it possible for the Commission to provide the Court of Auditors with reasonable assurance 
as to the legality and regularity of underlying transactions. After identifying the gaps and proposing 
plans of action, the Commission will present in October 2005 an initial report proposing a basis for 

6 

See also Communication from the Commission to the European Parliament and the Council “The respective 
responsibilities of the Member States and the Commission in the shared management of the Structural Funds 
and the Cohesion Fund” (COM(2004)580 final). 

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an understanding with Member States. Then the Commission will adapt, if necessary, the legislative 
proposals  for  2007-2013  to  include  the  provisions  which,  in  the  light  of  the  gap  assessment,  are 
required to complete the integrated control framework. 

Improvement of annual activity reports by Directors-General (recommendations 12 & 14) 

The  new  guidelines  for  the  Annual  Activity  Reports  for  2004  (SEC(2004)  1562),  address 
Parliament’s  concern  about  the  risk  in  underlying  transactions.  They  constitute  a  more  solid  and 
transparent basis for the assurance to be given by authorising officers by delegation, and provide a 
more  coherent  framework  for  the  Commission  departments’  declarations  to  be  taken  into  account 
for  the  Court  of  Auditors'  declaration  of  assurance.  The  Commission  considers  that  the  Annual 
Synthesis  Report  contains  its  position  on  main  management  and  control  issues  and  includes 
appropriate actions for issues requiring remedy at Commission level. 

Further horizontal recommendations (recommendations 16, 17 & 18) 

The Commission cannot produce estimates of error rates for all sectors every year. Its audit strategy 
is based on a multi-annual approach and audits are system-based. 

A  review  of  the  Financial  Regulation  is  under-way  and  aims  at  improving  the  efficiency  and 
transparency of provisions and the simplification of procurement procedures . 

The  Commission  has  already  established  a  number  of  principles  regulating  Cabinets’  activities 
which  are  considered  sufficient  to  mitigate  the  risk  of  insufficient  exchange  of  information 
regarding  audit  matters.  As  a  basic  rule  the  Commissioner  shall  be  regularly  informed  about  all 
audit  work.  The  Audit  Progress  Committee  (APC)  ensures  follow-up  of  the  implementation  of 
audits  of  the  Internal  Audit  Service  and  the  European  Court  of  Auditors,  as  well  as  assessing 
internal audit quality. 

B) SECTORAL ISSUES: 

Own resources  

As regards GNI-related own resources, the Commission continues its usual thorough verification of 
the  GNI  data  and  the  sources  and  methods  used  by  Member  States  to  compile  it.  In  addition  the 
Commission is currently examining ways to carry out more direct verification in the sense indicated 
by the Court in its 2003 Annual Report. A pilot project is planned for 2005 (recommendation 22). 

Agriculture, animal health and measures to combat fraud 

The Commission is going to report to Parliament on progress made in Member States’ reporting of 
irregularities by September 2005 (recommendation 23).  

The Commission has undertaken to produce a report on how the EUR 1.12 billion not yet recovered 
the  2004  discharge  procedure 
in 
from  1971 
(recommendation 24).  

to  2004  will  be 

recovered 

time 

for 

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Parliament  gave  its  opinion  on  the  new  regulation  on  the  financing  of  the  CAP,  which  sets  out 
revised  rules  for  recoveries,  prior  to  its  recent  adoption  by  the  Council.  As  to  the  monitoring  of 
paying  agencies,  the  new  Council  regulation  requires  the  head  of  each  paying  agency  to  sign  a 
declaration of assurance (recommendations 26 & 28).  

The  Commission  is  confident  that  the  Taskforce  Recovery  will  make  significant  progress  in  the 
recoveries’  backlog  problem 
informed 
(recommendation 27).  

responsible  Committee 

and  will  keep 

the 

Structural measures 

The  Commission  mentions  in  its  annual  activity  reports  the  countries  and  regions  that  have  been 
slow  to  implement  improvements.  With  regard  to  incomplete  Article  8  statements,  financial 
corrections have been applied where the further information the Commission asked Member States 
to  provide  or  the  additional  audit  work  it  asked  them  to  carry  out  as  a  result  of  incomplete 
statements still left a risk of irregular expenditure in the final payment claim (recommendation 46). 

The  Commission  uses  its  power  to  suspend  payments  where  Member  States'  systems  display 
persistent  weaknesses  representing  a  serious  risk  to  Community  funds  and  the  Member  State  has 
failed to correct the weaknesses (recommendation 47). 

As  regards  Interreg  III,  the  Commission  has  steadily  improved  the  input  of  regional  analysis  into 
programmes  via  ex  ante  evaluations  and  will  continue 
this  direction 
(recommendation 48).  

to  work 

in 

Internal policies  

The Commission has sponsored a meeting in June (16/17) in Luxembourg with the Presidency and 
the Court of Auditors to discuss simplification of the 7th Framework Programme and the issues to 
be addressed in its rules for participation (recommendation 51).  

The  proposal  for  the  7th  Framework  Programme  adopted  by  the  Commission  on  6 April  2005 
clearly indicates a simplification in the intervention mechanisms.  

Community  research  activity  has  for  many  years  been  the  subject  of  ex  post  evaluation  which 
includes  the  scientific  results  and  impact.  Value-for-money  criteria  are  among  the  issues  that  are 
addressed  through  the  evaluations,  especially  in  terms  of  providing  European  Added  Value 
(recommendation 55). 

The  Commission  is  now  using  all-electronic  proposal  submission  for  calls  for  proposals,  which 
simplifies  and  reduces  the  costs  for  applicants.  It  has  also  indicated  that  it  will  put  in  place  an 
electronic  registration  procedure,  allowing  applicants  to  submit  their  administrative  details  only 
once, at the time of their first proposal submission. (recommendation 56) 

The Commission’s proposals for the 7th Framework Programme provide that the Commission, with 
the assistance of external experts, will carry out an interim evaluation on the quality of the research 
activities under way and progress towards the objectives set (recommendation 58) . 

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The  Commission  has  indicated  in  its  proposals  for  FP7  its  intention  to  “externalise”  the 
management  of  a  significant  proportion  of  the  activities  to  an  executive  structure.  The  extra 
resources that will thus be dedicated to the administration of the projects will allow the Commission 
staff to concentrate better on the scientific follow-up of projects and on feeding the lessons learned 
back into policy (recommendation 60) . 

External policies  

As  regards  the  recommendation  to  conduct  a  qualitative  assessment  of  EC  external  assistance 
separate from the Annual Report, the Commission produced the requested report in July 2005. The 
Commission  will  also  provide  an  interim  report  on  the  progress  with  implementing  information 
management  systems  and  a  system  of  supervision  of  the  work  of  the  Delegations  regarding  the 
evaluation  of  financial  risks.  The  Commission  will  provide  a  report  on  the  control  structures  in 
place in Delegations (recommendations 62-63) before the next discharge exercise. 

As  regards  the  observance  of  tender  and  procurement  procedures  by  project  implementing 
organisations,  in  June  2003  the  Commission  took  remedial  action  through  the  introduction  of  a 
revised standard contract for grants, including the introduction of an audit certificate according to 
which  auditors  are  required  to  check  the  respect  by  the  beneficiaries  of  applicable  procurement 
rules.  The  Commission  is  currently  revising  the  template  of  the  audit  certificate  and  developing 
improved terms of reference for the auditors. In view of this, the Commission does not see the need 
for an action plan as recommended by Parliament (recommendation 64). 

As  regards  a  comparison  of  the  efficiency  of  various  international  aid donors,  the  Commission  is 
already  participating,  in  various  frameworks,  in  initiatives  aimed  at  comparing  the  efficiency  of 
international aid donors. The Commission therefore does not consider any additional initiatives to 
be justified for the time being (recommendation 65).  

The European Parliament’s 2003 discharge resolution also contains a number of recommendations 
related  to  development  policy  (recommendations  66-72).  The  Commission’s  replies  to  these 
recommendations can be found in the working document attached. 

Pre-accession aid  

PHARE  

The Commission intends to take measures to ensure that the accreditation process for many PHARE 
and  ISPA  agencies  in  Bulgaria,  Romania  and  the  future  acceding  countries  is  completed  before 
accession. Corrective action includes ensuring that those countries have appropriately staffed Phare 
fund  management  systems  in  place  by  end  2005.  Reassessment  of  the  allocation  of  funds  for  the 
period 2004-2006 is based on a management system assessment to be carried out during 2005 and 
its follow-up (recommendation 73).  

The  draft  framework-instrument  (IPA)  has  been  presented  to  Parliament  and  the  Council.  The 
regional  development  component  of  IPA  will  concentrate  on  development  priorities  in  a  limited 
number  of  key  sectors  and  implementing  bodies,  and  provide  capacity  building  for  the 
implementation of Structural Funds. The Commission adopted on 27 May 2004 the new IPA draft 
regulation together with the RELEX package and negotiation is since ongoing in the Council and 
Parliament (recommendation 74). 

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SAPARD 

The Commission believes that it has already put great emphasis on projects which increased quality, 
health and environmental standards. Their promotion is an integral part of the support given to the 
most  important  measures,  which  cover  49%  of  the  programmes.  All  investments  must  meet 
Community 
areas 
(recommendation 77). 

improvements 

and  will 

inevitably 

standards 

these 

lead 

to 

in 

The  Commission  has  planned,  and  implements,  a  system  to  audit  the  expenditure  and  the 
management  and  control  systems  of  the  SAPARD  programmes.  This  includes  annual  financial 
clearance  of  accounts  and  ad-hoc  conformity  clearance  processes.  When  weaknesses  that  may 
imply a risk of loss of EU money are identified in the systems in place in the SAPARD countries, 
they are followed up by means of specific clearance procedures that may lead to the application of 
financial corrections (recommendation 78). 

II - EP DISCHARGE ON EDF 

The  Commission  accepts  most  recommendations  concerning  the  European  Development  Funds 
(EDF). It wants to draw attention to the following points: 

Development policy (recommendations 79-81) 

The  great  majority  of  EC  development  aid  is  devoted  to  achieving  the  Millennium  Development 
Goals (MDG), because achieving the MDGs requires economic growth, progressive distribution of 
the benefits of growth, and improved public services. Moreover, the Commission reports regularly 
on  the  outcome  of  the  previous  year’s  commitments  to  the  social  infrastructure  sector.  The 
Commission does not agree with the imposition of an input target for basic health and education for 
the reasons outlined in the working document attached. 

Accounts, Statement of Assurance, etc. (recommendations 82-86) 

The Commissions has sent progress reports to Parliament on the modernisation of its accounts, including the 
EDF accounts. The latest report, covering the period up to 31 May 2005, was approved by the Commission 
and transmitted to Parliament on 4 July 2005. 

The Commission continues to improve supervisory systems and controls, including those covering 
contracts and payments and recovery orders. It should be noted that the internal control standards 
are applied by all Commission departments, including Delegations.  

The  Commission  has  further  enhanced  the  EDF  Financial  Management  Report.  However,  as  activities 
related to the EDF are integrated into the Commission's other activities concerning development aid 
and  political  relations  with  developing  countries,  the  total  administrative  costs  charged  to  the 
general budget cannot be divided between EDF activities and other activities in a meaningful way. 

Implementation and the RAL (recommendations 87-88) 

An increase in the RAL is normal when taking into account the natural cycle of the EDF. However, 
the  Commission  has  taken  the  necessary  steps  to  control  the  volume  (accelerate  implementation, 
reduce ‘abnormal’ RAL, flexible programming). The level of unspent resources (RAL) rose much 
less (€400 million) by the end of 2004 and the Commission hopes to reverse the tendency by the 
end  of  2005.  With  the  reorganisation  within  its  headquarters,  EuropeAid  has  emphasized  the 

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importance  of  closing  projects  after  the  end  date  of  the  Financial  Agreement.  Special  attention  is 
being given to old projects that have remained open to date.  

Budgetary support (recommendations 89-91) 

The  Commission  has  introduced  tools  to  assess  the  situation  of  the  countries  receiving  budgetary 
support  as  regards  each  of  the  criteria  in  Article  61(2)  of  the  Cotonou  Agreement  during  both 
programme  preparation  and  implementation.  It  continues  to  work  in  close  coordination  with  the 
IMF  and  the  World  Bank  in  assessing  economic  reforms.  It  has  also  expanded  its  range  of 
instruments  to  provide  itself  with  a  solid  analysis  of  the  public  financial  management  of  the 
beneficiary countries: six-monthly monitoring reports by the Delegations and, in particular, a new 
analysis framework drawn up in conjunction with other donors (including the World Bank) under 
the  PEFA  (Public  Expenditure  and  Financial  Accountability)  partnership  which  should  be 
operational in the second half of 2005. 

Evaluation (recommendation 95) 

The Commission considers that the baseline requirement of evaluation is met.  

Financial Regulation (recommendation 96) 

The  Commission  does  not  currently  intend  to  propose  modifications  of  the  Financial  Regulation  of  the 9th 
EDF. 

III - EP DISCHARGE ON AGENCIES 

The Commission accepts most recommendations concerning Agencies. It wants to draw attention to 
the following points7: 

Regulations and structure of the agencies (recommendations 97-98 and 100-102) 

The Commission has proposed a draft Interinstitutional Agreement (COM(2005) 59 final) which is 
now on the table of Council and of the European Parliament. Once an agreement has been reached 
concerning  common guidelines for future Agencies, the Commission, together  with  the two other 
Institutions, will see what implications this can have for existing non-executive Agencies. 

In  line  with  the  recommendation  to  analyse  the  added-value  of  new  agencies,  the  Commission 
decided that from 2005 any legislative proposal included in the Commission Work Programme will 
be subject to an impact assessment whereby needs, added-value, the principles of subsidiarity and 
budgetary austerity, amongst others, are taken in consideration. 

Proposals for the amendment of the basic regulations for the Agencies, either individually or across 
the  board,  are  permanently  underway  in  order  to  adapt  the  Agencies  to  changing  realities,  or  to 
optimise the Commission's relations with them. These are ongoing processes following a need, not 
necessarily a fixed calendar. 

The guidelines concerning staff policy in the Agencies are in their final stages of preparation and 
will be issued before the end of 2005. 

7 

Commission  replies  to  recommendations  addressed  to  it  concerning  individual  agencies  can  be  found  as 
recommendations 105-113 in the working document, but are not summarised here. 

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Cross-cutting analysis of evaluations (recommendation 99) 

The Commission is willing to carry out regular cross-cutting analyses of the evaluations carried out 
on  individual  agencies,  as  it  did  in  its  2003  'pilot'  exercise  'Meta-evaluation  of  the  Community 
Agency System'. However, it is important that their timing and frequency be made dependent on the 
availability  of  a  sufficient  number  of  underlying  evaluation  reports.  The  Commission  therefore 
expects such an overall analysis to be available by the end of 2006 at the earliest. 

Contract-awarding procedures (recommendation 103) 

The Commission has established close and effective cooperation with the Agencies on the matters 
of  procurement  and  management  of  contracts.  A  set  of  related  training  events  focused  on  their 
specific needs has been delivered to numerous Agencies. The Commission plays an active role in 
coaching  the  responsible  Agencies’  officers,  particularly  for  newly  established  agencies.  The 
Agencies have been integrated in the network of correspondents of horizontal budgetary units and 
receive  thereby  permanent  advice  and  ad-hoc  support.  On  various  occasions  the  Commission 
delivered contributions and took part in meetings of the Inter-Agency Legal Network (IALN). 

Updated information on Agencies (recommendation 104) 

The Commission considers that Parliament’s primary source for obtaining updated information on 
the Agencies should also in future be the written questions to and hearings of the directors of the 
Agencies which are an integrated part of the discharge procedure. 

* * * 

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