Opinion No 11/2005 on the draft Commission Regulation amending Regulation (EC, Euratom) No 2342/2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities
Date: 2006-01-18
Institutions: European Court of Auditors
Subjects: financial management, financial regulation, general budget (EU), implementation of the budget

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Official Journal of the European Union

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OPINION No 11/2005

on the draft Commission Regulation amending Regulation (EC, Euratom) No 2342/2002 laying
down detailed rules for the implementation of Council Regulation
(EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget
of the European Communities

(Submitted pursuant to Article 248(4), second subparagraph, of the EC Treaty)

(2006/C 13/02)

CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IMPREST ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

GRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OTHER OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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THE COURT OF AUDITORS OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular Articles 248(4) and 279
thereof,

Having regard to the Treaty establishing the European Atomic Energy Community, and in particular
Article 160(C)(4) and 183 thereof,

Having regard to the Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regu-
lation applicable to the general budget of the European Communities (1), and in particular Article 183 thereof,

Having regard to Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down
detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 (2), last modified by
Commission Regulation (EC, Euratom) No 1261/2005 of 20 July 2005 (3),

Having regard to the draft Commission Regulation amending Commission Regulation (EC, Euratom)
No 2342/2002 (4),

Having regard to the Commission’s request for an opinion on the latter addressed to the Court dated 12 Octo-
ber 2005,

HAS ADOPTED THE FOLLOWING OPINION:

Introduction

1.
The proposal makes technical amendments to the imple-
menting rules of the current Financial Regulation aimed at ‘fur-
ther simplifying the administrative procedures for the institutions,
economic operators and beneficiaries of grants, in particular in
external actions, while maintaining a high level of protection on
the Communities’ financial
interests in the light of the risks
involved.’ The changes largely concern the rules on recovery of
debts, public procurement and contracts and grants. Agricultural
expenditure and structural measures are therefore mostly not
affected.

The Court based its examination of the Commission’s pro-

2.
posal on the following principles:

3.
The Court considers that in most cases the proposed
amendments meet these conditions. However, for the issues set
out in the following paragraphs, this is not the case.

Imprest accounts

4.
In Article 67(2) second subparagraph, the maximum indi-
vidual amount that can be paid by an imprest administrator is to
be doubled from 30 000 euro to 60 000 euro — considerably in
excess of the cumulative effect of inflation since the approval of
the current implementing rules — whereas Article 63 of the
Financial Regulation limits the payment by imprest accounts to
‘small sums’.

— that the proposed revision complies with the principles of

Grants

sound financial management,

— that the proposed revision constitutes simplification without
financial

compromising effectiveness or protection of
interests,

— that the proposed changes are kept to the minimum neces-

sary, and

— that the proposed revision provides no exception to the
principles and norms contained in the Financial Regulation,
except where the Financial Regulation itself provides for such
exceptions.

(1) OJ L 248, 16.9.2002 (as amended by OJ L 25, 30.1.2003).
(2) OJ L 357, 31.12.2002.
(3) OJ L 201, 2.8.2005.
(4) Commission Document SEC(2005) 1240 final.

5.
The Commission’s proposal on Article 172(2) removes the
need for cofinancing in kind to be restricted to ‘duly substanti-
ated exceptional cases’. The practice of cofinancing in kind con-
stitutes a high risk of irregularity in view of the difficulties of
defining an appropriate valuation and verifying its delivery. The
proposed change may encourage its increased use and is there-
fore contrary to the protection of the Communities’ financial
interests.

6.
The modifications proposed to Article 172(3) allows the
authorising officer, depending on his risk assessment, to dispense
with the requirement for beneficiaries to provide evidence of
co-financing in the case of grants of 25 000 euro or less. Given
the risk at this level, and the ease with which such evidence can
normally be provided, the Court considers the change to be con-
trary to the protection of the Communities’ financial interests.

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In the revised Article 173(4) first subparagraph the limits
7.
below which an external audit report is not required have been
raised from 300 000 euro to 750 000 euro in the case of actions,
and from 75 000 euro to 100 000 euro in the case of operating
grants. There is therefore a large disparity in the rate of the
increase between the two, with the first being considerably in
excess of the cumulative effect of inflation since the approval of
the current implementing rules, and contrary to the protection of
the Communities financial interests.

8.
According to the modification proposed to Article 173(4)
sixth subparagraph ‘educational establishments’ no longer need to
present an external audit report certifying their accounts. Under
the current arrangements, such a derogation was optional, based
on an analysis of management risks by the Authorising Officer.

9.
The proposed Article 176(4) adds ‘educational establish-
ments’ to the list of (mostly) public bodies whose financial capac-
ity does not need to be verified. However, there are many private
sector educational establishments — such as private schools and
universities — which pose similar risks to the Communities’
financial interests as other commercial organisations. Further-
more, this amendment makes a distinction between educational
establishments and other private organisations which provide
public sector services which is not justified.

Other observations

In a number of cases the wording of the changes require

10.
clarification:

— the additional wording in Article 7(1) gives the impression
that the conversion rate specified in contracts or grant agree-
ments is to be used by authorising officers in preference to
the official rate, whereas paragraph 3 of point 2.1 of the
explanatory memorandum explains that the contractual rate
is to be used for conversion by contractors and beneficiaries
only,

— Article 21(2) is amended to comply with the Financial Regu-
lation requiring interim and/or ex post evaluations for pro-
grammes and activities entailing significant spending, with-
out defining how the term ‘significant’ should be applied.
Furthermore, the text risks excluding policies of high signifi-
cance and impact but little budgetary spending (eg, compe-
tition, single market) from being evaluated,

— in Article 66(2) the second sentence implies that the imprest
administrator authorises expenditure, whereas in reality he
provisionally validates and makes payments only,

— Articles 130 and 164 (1b) allow, in certain circumstances, for
supporting documents to be reduced to what is ‘strictly nec-
essary’ without defining what this should be. Furthermore, in
no case should requirements ever be more than strictly
necessary,

— the changes made to Article 86(1) and Article 106(5),
although acceptable to the Court, are not coherent with the
Commission’s stated objective of waiving interest ‘in the case
of obstacles resulting from national
legislation in third
countries’.

As stated in its Opinion No 3/2005 the Court considers

11.
that:

— third country legislation cannot take precedence over specific
agreements between the contracting parties (changes pro-
posed to Article 86(1) and Article 106(5)),

— the time limit for tenderers to provide evidence as regards
exclusion criteria should be defined as being before the sig-
nature of the contract (changes proposed to Article 134(2)),

— a mininum level of documentation should always be pre-
sented in the selection process to allow the contracting
authority to justify the tender selection (changes proposed to
Article 135(6)).

This Opinion was adopted by the Court of Auditors in Luxembourg at its meeting of 15 Decem-
ber 2005.

For the Court of Auditors
Hubert WEBER
President