Opinion No 9/2007 on the proposal for a Council Regulation on a Financial Regulation applicable to the 10th European Development Fund
Date: 2007-12-06
Institutions: European Court of Auditors
Subjects: European Development Fund, financial regulation

28.1.2008

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Official Journal of the European Union

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on the proposal for a Council Regulation on a Financial Regulation applicable to the
10th European Development Fund

OPINION No 9/2007

(pursuant to Article 248(4) second subparagraph, EC)

(2008/C 23/02)

TABLE OF CONTENTS

Paragraphs

Page

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

MAIN OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alignment with the General Financial Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Simplification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Need for a single Financial Regulation applicable to all EDFs . . . . . . . . . . . . . . . . . . . . . .

Breakdown of responsibilities for the implementation of the EDF and discharge . . . . . . .

Paying managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deadline for the conclusion of individual contracts and agreements . . . . . . . . . . . . . . . .

Provisional accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

2-11

2

3

4

5-6

7-9

10

11

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

12-33

Table of contents

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Resources and Member States contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementation of EDF resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Titles VII and VI

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Presentation of the accounts and accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

External audit and discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Specific conditions governing EDF resources managed by the EIB . . . . . . . . . . . . . . . . . .

12

13-14

15-20

21

22

23-24

25-27

28-30

31-33

4

4

4

4

5

5

5

5

5

5

5

6

6

6

6

6

7

7

7

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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 Article 248(4) thereof,

Having regard to the Partnership Agreement between the ACP
States and the European Community and its Member States,
signed at Cotonou (Benin) on 23 June 2000, hereinafter referred
to as ‘the ACP-EC Agreement’ (1), as revised by the Agreement
signed in Luxembourg on 25 June 2005 (2),

Having regard to Council Decision 2001/822/EC of 27 Novem-
ber 2001 on the association of the overseas countries and terri-
tories with the European Community, hereinafter referred to as
‘the Overseas Association Decision’ (3), amended by Council Deci-
sion 2007/249/EC of 19 March 2007 (4),

Having regard to the Internal Agreement between the Represen-
tatives of the Governments of the Member States, meeting within
the Council, on the financing of Community aid under the mul-
tiannual financial framework for the period 2008 to 2013 in
accordance with the ACP-EC Partnership Agreement and the allo-
cation of financial assistance for the overseas countries and terri-
tories to which Part Four of the EC Treaty applies (hereinafter
called the Internal Agreement), and in particular Article 10(2)
thereof, which provides for consultation of
the Court of
Auditors (11),

Having regard to the Commission’s proposal for a Council regu-
lation on the Financial Regulation applicable to the 10th Euro-
pean Development Fund (12),

Having regard to the Council’s request for an Opinion on that
proposal, sent to the Court on 27 July 2007,

HAS ADOPTED THE FOLLOWING OPINION:

Having regard to Decision No 1/2006 of the ACP-EC Council of
Ministers of 2 June 2006 specifying the multiannual financial
framework for the period 2008 to 2013 and modifying the
revised ACP-EC Partnership Agreement (5),

INTRODUCTION

Having regard to the Court’s Opinion No 2/2002 on an amended
proposal for a Council Regulation on the Financial Regulation
applicable to the general budget of the European Communi-
ties (6), hereafter referred to as the ‘General Financial Regulation’,

Having regard to the Court’s Opinion No 12/2002 on the pro-
posal for a Council Regulation on a Financial Regulation appli-
cable to the ninth European Development Fund under the ACP-EC
Partnership Agreement signed at Cotonou on 23 June 2000 (7),

1.
The Court notes that the time allowed for producing this
Opinion was very short. In fact, the Financial Regulation appli-
cable to the 10th EDF must be adopted before the end of 2007,
so that it can be implemented at the beginning of 2008. The
Council has already reached an advanced stage in the legislative
procedures for the adoption of this Regulation. Therefore, this
Opinion focuses on essential matters of substance, without nec-
essarily combining them with proposals for an alternative text.

MAIN OBSERVATIONS

Having regard to the Court’s Opinion No 10/2005 on the draft
Council Regulation amending Regulation (EC, Euratom)
No 1605/2002 of 25 June 2002 on the Financial Regulation
applicable to the general budget of the European Communities (8),

Having regard to the Court’s Opinion No 4/2006 on the draft
Council Regulation amending Regulation (EC, Euratom)
No 1605/2002 of 25 June 2002 on the Financial Regulation
applicable to the general budget of the European Communities (9),

Alignment with the General Financial Regulation

2.
The Court notes that the draft Financial Regulation suc-
cessfully includes the changes made during the recasting of the
Financial Regulation applicable to the general budget that could
be applied in the EDF context. The Court welcomes the fact that
the timetable for the Court’s Statement of Assurance and Annual
Report is aligned with the corresponding dates in the General
Financial Regulation.

Having regard to the Court’s Opinion No 2/2007 on the draft
Council Regulation amending the Financial Regulation applicable
to the ninth European Development Fund (10),

Simplification

(1) OJ L 317, 15.12.2000, p. 3.
(2) OJ L 287, 28.10.2005.
(3) OJ L 314, 30.11.2001, p. 1 and OJ L 324, 7.12.2001.
(4) OJ L 109, 26.4.2007, p. 33.
(5) OJ L 247, 9.9.2006, p. 22.
(6) OJ C 92, 17.4.2002, p. 1.
(7) OJ C 12, 17.1.2003, p. 19.
(8) OJ C 13, 18.1.2006, p. 1.
(9) OJ C 273, 9.11.2006, p. 2.
(10) OJ C 101, 4.5.2007, p. 1.

The Court welcomes the fact that, as recommended in its
3.
Opinion No 12/2002, the draft Financial Regulation provides
clear and straightforward legislation concentrating on the provi-
sions that are essential and necessary for the implementation of
the EDF, without unnecessarily repeating provisions laid down in
Annex IV to the ACP-EC Partnership Agreement, the Internal
Agreement or the detailed rules for the implementation of the
General Financial Regulation.

(11) OJ L 247, 9.9.2006, p. 32.
(12) COM(2007) 410 final of 16 July 2007.

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Need for a single Financial Regulation applicable to all EDFs

4.
The Court regrets that, despite the suggestion made in its
Opinions Nos 12/2002 and 2/2007, the draft Financial Regula-
tion does not take the opportunity to introduce a single Financial
Regulation applicable to all present and future EDFs, which, like
the General Financial Regulation, could be amended whenever
there was felt to be a need. A measure of this type would ensure
continuity of approach, without the risk of interrupting the
implementation of
the EDFs, and would greatly simplify
management.

Breakdown of responsibilities for the implementation of the
EDF and discharge

5.
Following Article 11 of the Internal Agreement, Articles 2
and 3 of the draft Financial Regulation provide for a breakdown
of the main responsibilities for the implementation of the EDF
between the Commission and the European Investment Bank
(EIB) by creating two separate areas of management, one for each
of the two bodies. This maintains a category of expenditure
which, whilst being subject to audit by the Court (under the EIB-
in
Court-Commission tripartite
Article 134 of the draft Financial Regulation), is not subject to dis-
charge by the competent authorities.

agreement provided for

6.
The Articles relating to the discharge, and Article 143(1)
in particular, exclude the management of the Investment Facility
by the EIB from the scope of the Parliament’s discharge. The Court
regrets that, under the Internal Agreement (Article 11(8) and (9)),
the operations managed by the EIB are not subject to a discharge
procedure involving the Council and Parliament, even though the
operations are conducted by the EIB on behalf of and at the risk
of the Community (Article 11(2) of the Internal Agreement),
using EDF resources. The Court notes that these funds are con-
tributed by European taxpayers, not by the financial market.

Paying managers

Articles 48 to 50 create a new financial actor, the paying
7.
manager, responsible for executing payments in the national cur-
rencies of the ACP States or in the local currencies of the OCTs
from the paying agent accounts. The recitals of the draft Finan-
cial Regulation do not explain why it is felt necessary to create
this new financial actor, and the draft provisions are unclear as to
the determination of his/her responsibilities and obligations,
notably vis-à-vis the authorising officer and the accounting
officer. The Court is particularly concerned by the fact that, as
provided in Article 49(1), the decision by the accounting officer
to appoint the paying manager would be done on the basis of a
proposal from the authorising officer responsible and that this
decision would set out the respective responsibilities and obliga-
tions of the paying manager and the authorising officer. Further-
more, as the paying manager is not mentioned in Article 31, it is
unclear whether the principle of segregation of duties is assured.

The Court observes that, for the implementation of the
8.
ninth EDF, such payments may be effected by an accounting
officer by sub-delegation (Article 66(1) of the Financial Regula-
tion applicable to the ninth EDF) and sees, therefore, no reason
why similar provisions are not proposed in the draft Financial
Regulation. The Court notes also that the paying manager has no
equivalent in the General Financial Regulation, which, in addition
to the authorising and accounting officers, provides only for an
imprest administrator. Imprest administrators are endowed by the
accounting officer alone, without any involvement of the autho-
rising officer (Article 63).

9.
Therefore, the Court suggests that all references to the pay-
ing manager in the draft Financial Regulation should be deleted.

Deadline for the conclusion of individual contracts and
agreements

Article 74(2) and Article 79(a) provide that riders to
10.
existing contracts may be concluded later than three years follow-
ing the date of conclusion of the financing agreement. This
departs from the corresponding provisions of the General Finan-
cial Regulation (Article 166(2)), which allows this possibility only
for the conclusion of contracts and agreements relating to audit
and evaluation. In any case, the extension of this derogation for
the conclusion of riders would render meaningless the general
rule whereby individual contracts and agreements can be con-
cluded no later than three years following the date of conclusion
of the financing agreement.

Provisional accounts

11.
As regards Articles 124 and 125, the Court draws atten-
tion to its Opinion No 2/2002 (paragraphs 20 and 21), which
suggested that all references to ‘provisional’ accounts should be
deleted. The accounts to be presented for audit on 31 March
should be complete, properly drawn up accounts approved by the
Commission. There must be no confusion in the Financial Regu-
lation about the roles of the auditee and the auditor with regard
to the preparation of the accounts. The Court’s task cannot in any
circumstances involve helping the Commission to prepare the
accounts. This responsibility, which is of an administrative and
accounting nature, lies solely with the Commission and is incom-
patible with the Court’s external control responsibility.

OTHER OBSERVATIONS

Table of contents

It would be useful if a table of contents were added, as is

12.
the case for the General Financial Regulation.

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Resources and Member States contributions

Title III of Part One of the draft Financial Regulation con-
13.
tains only one chapter dealing with the composition of EDF
resources. A further chapter, laying down the provisions regard-
ing the establishment of the annual contributions of Member
States, is needed.

14.
Article 16 is unclear as to whether the financial contri-
butions from the Member States, other donor countries or inter-
national organisations to certain projects or programmes that the
Commission will manage on their behalf will be EDF resources
stricto sensu and will be managed according to the rules applying
to the EDF.

Implementation of EDF resources

Article 26 stipulates that, in the case of indirect centra-
15.
lised management, the Commission may accept from the entities
to which it entrusts the implementation, that their audit, account-
ing, procurement and grant-awarded systems ‘are equivalent to its
own, with due account for internationally accepted standards’ (when it
has first obtained evidence of their existence and proper opera-
tion). As the Court noted in its Opinion No 4/2006 (paragraph 9),
the entities to which the Commission entrusts implementation in
such instances are not bound by the provisions of the Financial
Regulation. Furthermore, as there are no internationally accepted
standards for procurement systems nor for compliance audit, the
stipulation to take due account of internationally accepted stan-
dards is meaningless. The same applies for grant-awarded systems.

16.
For the sake of completeness, Article 35 should also
mention cases of joint management with international organisa-
tions as a derogation from this rule.

Article 36 transposes the first subparagraph of Article 23
17.
of the Financial Regulation applicable to the ninth EDF, but omits
the second subparagraph. In the Court’s view, it is necessary to
maintain this provision in order to state clearly that any measure
taken by the authorising officer by delegation pursuant to this
Article shall be taken in the name of and on behalf of the national
or regional authorising officer concerned.

As regards Articles 76 and 80, the Court reiterates the
19.
suggestion made in its Opinion No 12/2002 (paragraph 15(f))
that these provisions should be reviewed, in order to preserve the
idea that the accounting must remain open as long as a transac-
tion has not been finally cleared, but without introducing the idea
that decommitment may be deferred even though there is avail-
able information that makes it possible to adjust (often, by reduc-
ing) the level of the corresponding Community obligation. It is
important to avoid blocking funds unnecessarily when they could
be used on other programmes or projects.

Article 78(1) uses the term ‘appropriations’, which is incor-

20.
rect in the context of non-budgetary funds.

Procurement

21.
Article 92(2) should also refer to grant decisions. Further-
more, as the Court suggested in its Opinion No 12/2002 (para-
it might be advisable to include a chapter on
graph 17),
‘Guarantees and control’, as provided in Article 103 of the Gen-
eral Financial Regulation.

Titles VII and VI

In the English language version, Title VII Direct labour and
22.
Indirect decentralised operations and Title VI Grants are incorrectly
numbered.

Grants

As regards Articles 105 and 107, the Court wishes to
23.
draw attention to its Opinions Nos 10/2005 (paragraphs 41
to 48) and 4/2006 (paragraphs 14 to 16), which indicate that
some of the exceptions and derogations to the non-profit and
non-cumulation principles are not really justified because:

(a)

could entail

they
management;

additional

risks

and complicate

(b) verification might be problematic in some cases;

(c)

simpler solutions could have been found.

18.
If, despite the Court’s comments in paragraphs 7 to 9, the
concept of paying manager is maintained, Article 52(2) should
also provide that paying managers shall be liable to disciplinary
action and the payment of compensation as laid down in the Staff
Regulations.

As is the case for the General Financial Regulation
24.
(Article 120(2)), Article 116(2) should specify that, for the pur-
pose of point (c), the maximum amount of financial support that
can be paid to a third party by a beneficiary shall be determined
by the detailed rules for the implementation of the General Finan-
cial Regulation.

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Presentation of the accounts and accounting

Article 136(2) incorrectly refers to ‘paragraph 6’. The cor-

30.
rect reference is ‘Article 138(4) and (5)’.

25.
To ensure consistency with the Financial Regulation
applicable to the ninth EDF (Article 97) and the General Financial
Regulation (Article 123), in Article 119 of the English language
version, ‘shall’ should be replaced by ‘must’.

26.
In Article 124, there is a difference of one month between
the date for sending the report on financial management and that
for sending the provisional accounts which the report is supposed
to accompany under Article 118(2). As the Court suggested in its
Opinion No 12/2002 (paragraph 21(a)), in order to be aligned
with the corresponding provisions of the General Financial Regu-
lation (Article 128), the report should be sent with the accounts
on 31 March.

27.
In Article 129(2), it would be useful for the chart of
accounts sent to the Court of Auditors to be accompanied by the
applicable rules and methods provided for in paragraph 1.

External audit and discharge

In Article 135(1), the phrase ‘as soon as possible’ should be

28.
replaced by ‘within not more than 15 working days’.

29.
In Article 136(1), the phrase ‘the Treaty establishing the
European Community’ should be inserted before ‘the ACP-EC Agree-
ment’. As the Court indicated in its Opinion No 12/2002 (para-
graph 22 (a)), the Treaty is, in fact, the legal base for the Overseas
Association Decision, as well as for the Financial Regulations
applicable to the EDF itself (1). It might also be advisable to men-
tion the Internal Agreement, which also constitutes the legal base
for the Financial Regulation for the 10th EDF (2).

Specific conditions governing EDF resources managed by the
EIB

Article 149(1) provides that the EIB shall draw up the rel-
31.
evant accounting rules and methods according to international
standards and inform the Commission and the Member States
accordingly. It differs from the corresponding provisions of the
Financial Regulation applicable to the ninth EDF (Article 125(1)),
which provide that the EIB and the Commission shall draw up
these accounting rules and methods by common agreement. As
indicated in paragraphs 5 and 6, the Court regrets the creation of
two separate areas of management, which limits the scope of the
Parliament’s discharge.

32.
In Article 149(2), there is a difference of one month
between the date for sending the report on the implementation
of operations financed from EDF resources managed by the EIB
and that for sending the accounts. As the Court suggested in its
Opinion No 12/2002 (paragraph 21(b)), the report should be sent
with the accounts not later than 28 February.

33.
Article 150 should state that ‘the EIB’s own rules’ for con-
tracts should comply with the general rules governing the man-
agement of the EDF, and in particular the ACP-EC Partnership
Financial
Agreement,
Regulation (3).

Internal Agreement

and the

the

This Opinion was adopted by the Court of Auditors in Luxembourg at its meeting of
6 December 2007.

For the Court of Auditors
Hubert WEBER
President

(1) See the first citation of the proposal to which this Opinion relates.
(2) See the fifth citation of the proposal to which this Opinion relates.

(3) As provided in Article 11(2) of the Internal Agreement.