CELEX: 51988PC0838
Language: en
Date: 1988-12-21
Title: Proposal for a COUNCIL REGULATION (ECSC, EEC, EURATOM) amending the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities (presented by the Commission)

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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                         COM(88 ) 838 final
                                         Brussels , 21 December 1988
                          Proposai for a
             COUNCIL REGULATION ( ECSC , EEC , EURATOM )
     amending the Financial Regulation of 21 December 1977
            applicable to the general budget of the
                       European Communities
                 ( presented by the Commission )
                            t       /v
                                        vN'*' fd   /r* v» />
 ---pagebreak---                                       - I -
                                    CONTENTS
                                                                    Page
PREFACE                                                              1
А.  ШПШСПШ                                                           3
B.  DETAILS OF PROPOSED AMENIKENTS                                   6
    I. RATIONALIZING AND MXERNIZING THE PRESENTATION
         OF THE BUDGET                                               6
         1.  Reforming the structure                                 6
         2.  The need to present appropriations in a more
             uniform fashion                                         8
         3.  Details concerning the entry of appropriations          9
             (a) Entry of commitment appropriations                  9
             (b) Determination of amounts to be entered in
                  the expenditure column ( financial year n-2)       9
    II .     MEASURES TO IMPROVE RELATIONS BETWEEN THE INSTITUTiaNS 10
         1.  Symmetry of powers : powers of Parliament to
             decide on non-automatic carryovers in
             non-canpulsory expenditure                             10
         2.  Financial statement                                    11
         3.  Action to be taken by the Council in response to
             preliminary draft supplementary or amending
             budgets                                                12
         4.  Systematic information on the utilization of advances
             for the EAGGF Guarantee Section                        12
    III .    AMENDMENT OF SOME PROVISIONS IN ORDER TO RATIONALIZE
             IMPLEMENTATION OF THE BUDGET                           13
         1 . New provisions concerning transfers                    13
         2.  Additional details concerning implementation
             of the provisional-twelfths arrangements               15
                                                                    15
 ---pagebreak---                                     - II -
                                                                   PagC
     3.  Reuse , repayments air?, treatment of
         exchange differences                                      17
          (a) Reuse                                                17
          (b) Repayrosnt of advonees                               17
          (c ) Treatment of exchange differences                   18
     4.  Updating of certain amounts connected, with contracts
         and transfer of these provisions to the Regulation on
         the implementing ru_l.es                                  38
IV .     AEDITICKAL DETAILS ON RELATIONS EEIVEEN THE COURT OF
         AUDITORS AND THE OTHER 3NSTIT0TTCNS                       IS
V.       AMENDMENT OF THE SPECIAL PROVISIONS RELATING TO
         RESEARCH AIT) TECHNOLOGICAL DEVELOPMENT                   20
VI .     INTRODCXHTQN OF SPECIAL PROVISIONS APPLICABLE TO
         EXTERNAL AID                                              22
     1.  Operating appropriatioiiS                                 22
     2.  Administrative appropriations relating to Ihe
         operation of the Delegations ard Offices outside
         the Commun!ty                                            24
VII .    NEED FOR CERTAIN TECHNICAL IMPROVEMENTS AND MORE DETAILED
         PROVISIONS QN SPBCIJTC POINTS                            25
     1.  Adjustment of certain dates and deadline                 25
     2.  Implications for budgetary management of use of
         integrated computer systems                              25
     3.  Strengthening the role of the ECU                        23
     4 . New general provision on the payment of interest
         or penalties by defaulters                               26
     5.  Article 65 (Council Directives on public works
         and. supplies )                                          27
     6.  Amendment of the provisions relating to the
         establishment plan                                       27
         (a )  Half-time verb                                     27
         (b)   Updating of provds"1 ons on. the
               establishment plan for research activities
               and other charges in presentation                  28
 ---pagebreak---                                      - III -
                                                                     Page
     VIII .  AMENDMENTS TO THE FINANCIAL REGUIATICN ARISING COT OF
             THE NEW DECISION ON OHN RESOURCES                       29
    ГШ& ООИ51РЕЕАТ1СИ5                                               30
     (a)     Presentation of borrowing and lending operations        30
     (b)     Food aid                                                31
     (c)     Clearance of EAGGF Guarantee Section accounts           31
                                        *
                                      *   *
ANNEX 1 :    Commission proposals for the revision of the
             Financial Regulation applicable to the general
             budget of the European Gommunities                      35
ANNEX 2A :   Current structure of the general budget                 36
ANNEX 2B-1 :      Proposed future structure of the budget            37
ANNEX 23-2 :      Additional details                                 38
ANNEX 2C :   Layout of the section on expenditure common to
             ail the institutions                                    39
ANNEX 3A : Brief summary of various presentations of research
             and technological development appropriations since 1973 40
ANNEX 3B : layout of the section concerning research and
             technological develonment appropriations                41
ANNEX 4 :    Summary of provisions governing transfers               43
ANNEX 5 :    Comparison of current timetable and proposed
             timetable                                               45
                                        *
                                      «   *
Enclosed : Formal proposal to revise the Financial Regulation .
 ---pagebreak---                                       - 1 -
                                    PREFACE
The Financial Regulation is the basic text governing the conditions for
establishing and implementing the general budget of the European
Communities , pursuant to Article 209 of the EEC Treaty .
As a result of the impetus provided in particular by the Copenhagen
European Council in December 1987 and the Brussels European Council in
February of this year , the Council took a series of decisions last June
introducing fundamental reforms to the Community 's finances . These
decisions were accompanied by the Inter! institutional Agreement concluded on
29 June , which heralded a new era in relations between the institutions .
The reforms would not be complete , however , without the essential revision
of the Financial Regulation , the overall text laying down the conditions
governing the procedure for the authorization and utilization of budget
resources .   Conscious of this need , the European Council of
11-13 February 1988 therefore       adopted the following objective in
point 18 of its conclusions :
     *’A general revision of the Financial Regulation win be parried °»t
     before the end of 1988 ".
Th-Lq Commission proposal will make it possible to achieve that objective .
 ---pagebreak---                                       - 3 -
                                   >!
  The Financial Regilation currently in. force dates back to 21 September
  1977,1 aid has been revised on only four occasions , to amend specific
  provisions in response to isolated needs . 2
  Article 107 of the current Financial Regulation states :
       "At three-year intervals the European Parliament and the Council shall
      examine this Financial Regulation in the light of a proposal from the
      Commission
  The legislator quite rightly felt that provision should be made for a
  periodic revision of this fundamental text to adapt it to the inevitable
  changes in the political and technical requirements of budgetary
  management .
  The Commission accordingly presented a proposal at the end of 1980 for a
  general revision of the Financial Regulation , thereby fulfilling its
  obligations under Article 107 and making all the changes required at the
  time . Despite the fact that the Court of Auditors and Parliament delivered
  their opinions in 1981 and 1983 respectively and the Commission then
  presented an amended proposal at the beginning of 1984 , the Council failed
  to reach a decision .
1   OJ L 356 , 31.12.1977 .
2   - Régulation No 1252/79 (OJ L 160 , 28.6.1979), amending certain
      provisions concerning carryovers and research appropriations ,
    - Regulation No 1176/80 (OJ L 345 , 20.12.1980), replacing the EDA by
      the ECU ,
    - Regulation No 1600/88 (OJ L 143 , 10.6.1988), introducing temporary
      arrangements for the EAGGF Guarantee Section ,
    - Regulation No 2049/88 (OJ L 185 , 15.7.1988), revising in particular
      the provisions concerning carryovers (annual i ty) and the EAGGF
      Guarantee Section , and introducing the concept of a negative reserve .
 ---pagebreak---                                      - 4 -
In 1987 , therefore , the Commission was forced , in view of the changing
situation and in order to meet certain new requirements , to table proposals
for revision of some specific points .   The table in Annex 1 to this
explanatory memorandum gives a brief summary of all the proposals put
forward since 1980 , making a distinction between those which, were adopted
and those which are still under discussion .
A very brief review of the various proposals leads in particular to the
following three conclusions :
-   as budgetary policy and the content of the budget are constantly
    changing , a general revision is essential . This was clearly the
    intention of the legislator at the outset , and is amply confirmed by
    the detailed explanations given below . It is impossible to continue
    working with basic rules which are outdated and contain cany gaps ;
    all the institutions concerned have been aware of this need for several
    years now .  This is demonstrated by the explicit undertaking made in
    the Joint Declaration of 30 June 1982,1 the repeated observations of
    the Court of Auditors in virtually all its annual reports , and the
    formal undertaking contained in the conclusions of the European Council
    of 11-13 February 1988 , referred to in the preface ;
    accordingly , the Commission would stress that , in preparing this
    proposal under its powers of initiative , it has sought to voice the
    desires of all the institutions concerned as lest it can , on the basis
    of the experience acquired over the fifteen years during which the 1977
    Financial Regulation has been in force .
1   OJ C 194 , 28.7.1982 (point IV , paragraph 4).
 ---pagebreak---                                      - 5 -
As a result , the Commission considers it necessary to table the entire
dossier again , updating and consolidating its proposals In order to enable
the competent bodies to make an overall reassessment , and ensure that the
revision is completed as soon as possible .
It goes without saying that this proposal replaces all the previous
proposal s sti.ll under discussion (see Annex 1 , point I ).
To sum up , the changes proposed by the Commission my be broken down under
the following min headings , which are analysed in detail overleaf :
I.     Rationalizing and modernizing the presentation of the budget
II .   Measures to improve relations between the institutions
III .  Amendment of same provisions in order to rationalize implementation
       of the budget
IV .   Additional details on relations between the Court of Auditors and the
       other institutions
V.     Amendment of the special provisions relating to research and
       technological development
VI .   Introduction of special provisions applicable to external aid
VII . Need for certain technical improvements and more detailed provisions
       on specific points
VIII . Amendments to the Financial Regulation arising out of the new
       decision on own resources .
 ---pagebreak---                                      - 6 -
B. TTCTATTS OF KRDPOSFD AMEKEMENTS
I. RATIQNALIZI^ AMD MSESNIZBfc THE PRESENTATION OF THE BUDGET
   In the Commission 's vie.-?, there are two shortcomings in the way in
   which the budget is currently presented , which must be eliminated if
   the general budget is to became the satisfactory instrument , from both
   the political and the technical point of view , which the Community
   requires . The two remedies are the rationalisation of the structure of
   the budget and greater uniformity in the composition of appropriations .
   1.    Reforming the structure
   In both its specific proposal made in 19811 and its 1984 proposal for
   a general revision, 2 the Commission proposed reforms to the structure
   of the general budget . The present structure , which is the product of
   a long evolution with no overall review having been conducted , contains
   the following three anomalies (illustrated by the table in Annex 2):
   (a) there is an obvious disproportion between the size in financial
         terms of the Commission section ( Section III , which accounted for
         some 44 60S million ECU in 1988 , or about 98.4% of the budget ),
        and the sections for the other institutions (Sections I , II , IV
        and V , which accounted for only 696 million ECU , or about 1.6% of
         the general budget);
   (b) the present structure of the general budget is in fact a mixture
         of expenditure relating to the administration of the institutions
        and operating expenditure . A clear distinction between the two
        would be most desirable . Section III (Commission) comprises the
         two categories of expenditure , on the basis of a rather insecure
        breakdown into " Part A " and " Part B " , which came about because the
        legislator was unable in 1981 to make the amendments to the
        Financial. Regulation proposed by the Commission at the time for
         the very purpose of producing the clarity required .
        By adopting this pragmatic solution , however , the budgetary
        authority was acknowledging - albeit tentatively - the need to
         separate administrative expenditure and operating expenditure ;
1  OJ C 158 , 27.6.1981 (OCM(81)306 final of 11 June 1981 ).
2  OJ C 97 , 9.4.1984 (0QM(84)123 final of 9 March 1984 ).
 ---pagebreak---                                           - 7 -
     (c) as a result , there is a clear Imbalance in the present structure
         between the amount of space in the budget occupied by administrative
         expenditure (Sections I , II , III (Part A), IV and V), and the space
         occupied by operating expenditure (only Part B of Section III ). Part B
         is therefore very crowded and does not provide the necessary
         transparency . Total administrative expenditure , some 1 974 million
         ECCJ , represents about 4% of the general budget and yet takes up four
         entire sections (I , II , IV and V) as well as Part A of Section III .
    The Commission is therefore proposing a reform of the structure of the
    budget (see diagram in Annex 2) , with a view to achieving the following
    objectives :
    (a) creation of a clear distinction between :
           - administrative expenditure                      i .
                (administrative budget of the institutions) ) (Sections I to VI)
           - and operating expenditure                )
                (operating budget of the Communities) J (Sections VII to XV)1
    (b) allocation of sufficient space in the budget (transparency) for the
         operating appropriations , so that individual policies can be easily
         identified ,
    (c) amended presentation of the appropriations relating to research and
         technological development in the interests of clarity and to enable the
         appropriations to be identified according to destination (programme
         objectives) and type (see Annex 3A),
    (d) proper identification of the "inter.lnstitutional " appropriations
         (Section VI ) .
    This proposal relates mainly to Article 12.
1 The layout and numbering of the sections shown in Annex 2 are just one
  possible solution . The Financial Regulation should simply establish
  the principle of the new structure , with the individual sections being
  determined subsequently by the budgetary authority during the budgetary
  procedure , on a proposal from the Commission .
 ---pagebreak---                                      - 8 -
2. The need to present appropriations In a more uniform fashion
     While administrative expenditure , because it can be determined on a
     strict annual basis , is made up entirely of non-differentiated
     appropriations , operating expenditure is at present made up of both
     non-differentiated appropriations and , for multiannual activities ,
     differentiated appropriations .
     The technique of differentiation was generally applied to all
     research appropriations from 1959 onwards and was subsequently
     introduced to the general budget in 1975 for ERDF appropriations .
     The principle was enshrined in the 1977 Financial Regulation
     (Article 1 ) and its application has become more and more widespread
     over the years ; however no overall assessment has ever
     been made . Here again , the situation has evolved in such a way that
     there is now a complete lack of uniformity in the composition of the
     operating appropriations entered in Part B of Section III .
     This is the case of a large number of chapters , where headings
     containing differentiated appropriations stand alongside headings
     made up of non-differentiated appropriations , as a result of the way
     in which the nomenclature has developed over time . The adverse
     effects of this lack of uniformity are well known : it is difficult to
     read and understand the budget and to work out totals , and problems
     arise with accounting operations and comparisons , etc . In addition ,
     the procedures for transfers , which often have to be made from one
     type of appropriation to the other , are complex and raise problems of
     principle for both the Commission and the budgetary authority .
     The Commission considers , therefore , that it is essential to simplify
     the system in the interest of all users of the budget . Accordingly ,
     it is proposing that :
     (a)     the following should be non-differentiated :
                   administrative appropriations ("Part One " in the diagram
                   in Annex 2)
                   EAGGF Guarantee Section appropriations1 (including the
                   "monetary reserve ")
                   " technical " appropriations^ (relating mainly to
                   repayments );
     (b)     al 1 the other appropriations , relating to operational
             activities (virtually 1 of which , are in fact multiannual
             operations) should be differentiated . It would still , of
 1  Titles 1 and 2 of Part B of the present Section III .
 2  Title 8 of Part B of the present Section III .
 ---pagebreak---                                       - 9 -
                course , be possible for some headings containing
                differentiated appropriations to carry an identical amount in
                commitment appropriations and payment appropriations .
          This change , which should not give rise to any problems ,
          particularly in view of the reform of the carryover arrangements ,
          will he a major advance in rationalizing and simplifying the
          budget . The benefits will be felt in the budgetary procedure , in
          the implementation cf the budget and in the rendering of the
          accounts , as the uniform presentation of the figures will       it
          much easier to assess the financial data .
3 . Details concerning the entry of appropriations
      In addition to the changes proposal at 1 . and 2 . above , which are
      particularly important , the following two purely technical amendments
      are also necessary , either because the current Regulation is outdated
      (point a), or has left gaps (point b):
      (a)      Entry of commitment appropriations
               Article 1(3) of the present Financial Regulation provides for
               commitment appropriations to be shown in the budget only on
               the right hand pages under "Remarks ": this presentation - as
               experience lias shown - was unsatisfactory in several
               respects , since it did not afford the essential budgetary
               transparency .
               For several years now the budgetary authority , on a proposal
               from the Commission , has therefore adopted a pragmatic
               solution in the presentation of the budget to provide a clear
               picture of the dimension of the commitment appropriations , by
               entering them on the left-hand page too .
               The provisions of the Financial Regulation (see Article 1(5))
               should therefore be amended accordingly to give formal
               recognition to this practice .
      (b)     Determination of amounts to be entered in the expenditure
               column ( financial year n-2 )
               Besides the appropriations authorized for the financial year
               for which it is adopted , the budget - for the sake of
               comparison - also shows the appropriations authorized for the
               preceding financial year (financial year n-1 ) and "the actual
               expenditure in the last financial year for which the accounts
              have been closed " ( financial year n-2), as required by the
               last indent of Article 16(2)(b)(ha).
              As experience has shown that this provision is not
               sufficiently clear , the current text needs to be made more
              detailed and the gaps filled .
              The revised proposal attached therefore carries the
              appropriate new provisions (Article 20(2) (b)).
 ---pagebreak---                                         - 10 -
IT .
       The whole question of the division of powers between the Camrunity
       institutions is dominated by two issues which have been at the root
       of virtually ail the debates , or even conflicts , since the 1975
       reform of the Treaties .     These are :
       - first , the attribution of budgetary powers on the basis of the
           breakdown of the budget into compulsory expenditure and non-
           corcpulsoi'y expenditure ,
       - second , the interplay between legislative powers (which devolve
           ultimately on the Council ) and budgetary powers (which are shared
           by the Council and Parliament) .
       The problems raised by this situation have led to the conclusion of a
       number of agreements between the institutions , of which the most
       important axe the Joint Declaration of 30 June 19821 and the
       Interinstitutional Agreement of 29 June 1988 . 2
       The Financial Regulation , therefore , should also reflect the
       improvement in interinstitutional relations on certain specific
       aspects . The following points are worthy of mention :
       1 . Symmetry of powers : power of Parliament to decide on non-automatic
           carryovers in non-compulsory expenditure
                 The grounds for the Commission 's proposal are as follows :
                       Council Regulation No 2049/88 of 24 June 1988 trade a
                       radical overhaul of the system of carryovers for
                      differentiated appropriations , in order to reinforce
                       the principle of annual i/ty . As a result , carryovers are
                      no longer automatic , ( the Commission nay decide , by way
                       of exception and on the basis of specific technical
                       criteria , to retain certain appropriations );
                      The possibility of non-automatic carryovers for
                      non-differentiated appropriations
                      Although they are rare , there are nonetheless cases
                      where the requirements of budgetary implementation and
                      the operation of the institutions may , exceptionally ,
                      mean that a non-automatic carryover (i.e. in the absence
                      of a commitment ) is necessary for non-differentiated
                      appropriations . The Financial Regulation in its present
1    OJ C 194 , 28.7.1982 .
2    CJ L 185 , 15.7.1988 .
 ---pagebreak---                                      - 11 -
         form contains    an anomaly in the division of powers which
         needs to be corrected .
         Vhen the Financial Regulation of 21 December 1977 vas drawn up -
         reflecting the 1975 reform of the Treaties , and in particular the
         entry into force of Article 203 - the provisions relating to the
         approval of transfers were adapted accordingly , dividing the
         powers between the Council and Parliament on the basis of the
         distinction between compulsory and non-compulsory expenditure .
         For reasons relating to the handling of the dossier at the time.l
         this harmonisation in respect of transfers was not extended to
         carryovers . As a result , the provision currently in force dates
         bach to the Financial Regulation of 25 April 1973 , i.e. prior to
         the reform of the Treaties in 1975 .
         In the Commission 's view this inconsistency needs to be corrected .
         An appropriate amendment is therefore proposed (Article 73(3)) to
         give Parliament the power to decide on non-automatic carryovers in
         respect of non-campHsory expenditure . This is line with the
         powers which Parliament already enjoys in respect of such
         expenditure both in establishing and adopting the budget and in
         deciding on transfers .
2. Financial . statement
      In line with the practice agreed informally a number of years ago ,
      the Ooum.iss.ton attaches to its proposals with financial implications
     a financial statement shoving the budgetary consequences , including
     any effects on staff numbers . It would, therefore be appropriate to
     add a provision to this effect to the Financial Regulation .
     1    See 021(76 ) 210 final of 19 May 1976 .
 ---pagebreak---                                       - 12 -
  3.  Action to be taken by the Council In response to preliminary draft
      supplsmentary or anending budgets
      The Commission has the right of Initiative to propose the Initiation of
      the supplementary or amending budget procedure in order to cover
      requirements . The budgetary authority consists of two arms : Council
      and Parliament . It is important that each arm of the budgetary
      authority should be given the possibility , in accordance with the
      provisions applicable , in particular Article 203 EEC , of stating its
      position on the Commission proposal .
      Past experience has shown that it would be a good idea if the Financial
      Regulation stated that the Council may not halt a supplementary or
      amending budget procedure without the appropriate consultation with
      Parliament ; as far as procedures are concerned , this implies that
      Parliament must receive formal notice of the Council 's position so that
      the prerogatives conferred on it by the Treaty are preserved . A
      provision to this effect is proposed in Article 15(5 ).
      Even if the Council felt - in the field of non-ccmpulsory expenditure ,
      for instance - that there was no case for establishing a supplementary
      or amending budget , it would not , however , be entitled to take
      unilateral action to halt the procedure initiated by the Commission ,
      thereby preventing Parliament - the second arm of the budgetary
      authority - from seeing the situation in a different light and hence
      from exercising its rights under the Treaty .
 4.   Systematic information on the utilization of advances for the EAGGF
      Guarantee Section
 Regulation No 2049/88 of 24 June 19881 has already amended the provisions
 of the Financial Regulation to take account of the changes in the system of
 financing the EAGGF Guarantee Section (advances against booking of
 expenditure) introduced by Regulation No 2048/ 88 , amending the basic
 Regulation No 729/70 .
 The changes made to the system of financing , together with the Council
 Decision of 24 June 1988 on budgetary discipline (in particular Articles 6
 and 7), make it possible for the budgetary authority to be informed each
 month of the state of play as regards utilization of the EAGGF Guarantee
 Section appropriations for each market organization (i.e. by chapter).
The Commission feels it would be useful , therefore , to incorporate a
provision in the Financial Regulation specifying that this information has
 to be transmitted each month (Article 100(2)).
1    OJ L 185 , 15.7.1988 .
 ---pagebreak---                                       - 13 -
III .   AHENIKENT QF BO/E PROVISIONS IN ORDER TO RATIONALIZE IMP! J>fF!NTATTnw
        OF THE BUDGET
The Commission is proposing amendments to certain provisions
 to improve implementation of the budget . The main improvements pi a-rmpd
are as follows :
1.    New provisions concerning transfers
The budget is the instrument for estimating and authorising expenditure .
But the following considerations must be borne in mind :
-     since the expenditure figure is an estimate - which 1s worked out
      between at least same eight months and at most nearly twenty months
      before specific funds are actually spent - the accuracy of the estimate
      may obviously include a margin of approximation which varies from one
      sector to another : it is , in principle , quite normal then that
      adjustments should be made while the budget is being implemented ;
      over and above this purely technical aspect , the budget is not an
      entirely static instrument , since it nay be necessary , because of
      political developments during the financial year , to switch between
      operations in progress .
The use of transfers constitutes the standard procedure for adapting the
budget to changing circumstances . It is therefore essential that the
provisions concerning transfers be sufficiently clear , comprehensive and
flexible for this procedure to be fully effective .
But the current provisions of Article 21 of the Financial Regulation in
respect of transferts contain two deficiencies which must be made good :
(a) Technical obstacles
In the first place the current provisions must be expanded :
-    in order not to exclude possible transfers - which my be necessary in
     specific and/or exceptional situations - between differentiated and
     non-differentiated appropriations and , if necessary , , between
     appropriations carried over ,
-    and in order to provide for the appropriate procedural rules (see
     Article 26(7) and (8 )).
 ---pagebreak---                                       - 14 -
      In recent financial years , it has been necessary , exceptionally , to
      carry out transfers of this hind . The authorities concerned were ,
      however , placed in an awkward situation owing to the fact that no rules
      existed .
(a ) Exercise of decision-making powers
     The division of decision-making powers would gain frcru a new balance
      reflecting both technical and political requirements .
     The foilowing changes appear necessary :
     - Transfers within the sections for the Court of Justice and Court of
        Auditors
        It became Cl Mr in discussions of the 1980 and 1984 proposals for a
        general revision of the Financial Regulation that discrimination now
        exists between the provisions applying to the Commission and those
        applying to the Court of Justice and Court of Auditors . The
        Commission therefore proposes that Use Court of Justice and Court of
        Auditors should also be able to take transfer decisions within their
        respective sections provided that they inform the budgetary authority
        and the Commission three weeks beforehand (Article 20(2 )).
        The Commission should be able to take decisions itself concerning all
        transfers between payment appropriations which are differentiated
        appropriations ; such transfers - where nothing political is at
        stake , since the real dimension of Community participation is
        constituted by the commitments - are made simply to adjust the
        estimate , inevitably very relative , to the flow of cash required to
        cope with actual payments . In view of the cumbersome and costly
        procedures involved and the time they inevitably take , it appears
        both unnecessary and inappropriate , therefore , that such transfers
        should require the approval of the budgetary authority .
     The Commission 's proposal is designed therefore to simplify and.
     rationalize procedures to ensure efficiency and sound management , in
     the interests of both the Institutions and the recipients (. see
     Article 26(3 ) (e )).
     The table in Annex 4 to this explanatory memorandum gives an overall
     summary of the current situation as regards transfers and the changes
     proposed .
 ---pagebreak---                                        - 15 -
2.  Additional dftta.11 s oonoarpljig Implementation of the
    provisional -twelfths arrangements
Past experience has shown on several occasions , when the ComtnunitY Hag H*ri
no budget as a result of a delay in adoption or rejection by Parliament ,
that it is essential for Article 8 of the Financial Regulation to be more
detailed and more explicit in order to cover the various situations which
arise . The Commission is therefore proposing additional provisions which
would mate things easier        if the provisional twelfths arrangements Had
to be used again in future .
These additional provisions my be summarized as follows :
(a) Treatment of "global commitments " under the EAOGF Guarantee Section as
     " commitments "
    It is proposed that a provision be added stating explicitly that the
     "global commitments " under Article 100 be considered - as has happened
    in practice in the past - as "commitments " (Article 9(2)(a)).
    It is quite right that the Guarantee Section should not he exempt from
    the method applied for commitments in all areas of the budget . The
    fact that the "global commitments " of the Guarantee Section are in
    reality advances paid to the Member States should not , in the
    Commission 's view , affect the general principle underlying this
    provision of the Financial Regulation : the commitment enables a start
    to be made and for that reason a quarter of the appropriations for
    commitment are available in January . The purpose of the "advances "
    from the Guarantee Section is basically the same , since they are not
    charged to the budget formally and in detail, until a later stage , in
    accordance with Article 101 .
(b) Determination of the second of the two limits on expenditure when no
    budget exists
    The basic principle underlying the twelfths arrangements is that of two
    limits ; pending adoption of the budget , appropriations are
    administered provisionally on a chapter-by-chapter basis and Kay not
    exceed the lower of the amounts appearing in
    - the budget for the preceding year , taking transfers into account (in
        order to reflect the actual situation more accurately);
    - or the budget (preliminary draft or draft) in preparation .
 ---pagebreak---                                      - 16 -
    Two points can be marie :
     - if the budget is rejected it is not possible to work solely on the
       basis of the previous year 's budget , since the second limit would
       then not be respected and risks would arise ;
    - it should be indicated more clearly than in the present Regulation
       what document (i.e. stage of the procedure) constitutes the second
       limit , notably in the event of rejection .
    To clarify this the Commission proposes appropriate provisions in the
    new paragraphs 3 and 4 of Article 9 .
(c) Need for a stable base , not subject to alteration , for the twelfths
    arrangements
    It should also be pointed out that the twelfths arrangements - for
    obvious reasons of administrative stability - cannot be uncertain and
    subject to alteration ; i.e. the basic figures must not change as the
    budget subsequently passes the various stages in the procedure . The
    figures standing at the end of the financial year - on the basis of the
    last official instrument in the unfinished budgetary procedure - are
    therefore the basis for the application of the twelfths , and no change
    is possible until the budget is adopted . This is specified in the
    proposed clause entered as Article 9(3).
(d) Technical details for the application of the twelfths arrangements
    The new , expanded Article 9(5) contains more detailed provisions which
    practical application of the twelfths arrangements in the past has
    shown to be necessary . It would appear useful to specify that :
    - for both commitments and payments the budgetary authority can
       authorize additional twelfths (the current text is not explicit);
    - these additional twelfths are authorized whole and cannot be split .
(e) Possibili ty of transferring available allocations
    Practical application of the twelfths arrangement has shown that in
    some exceptional cases , the only way of dealing intelligently with
    certain particular situations is by adjusting allocations available
 ---pagebreak---                                        - 17 -
      under the twelfths arrangements .
      The Commission 's object here is essentially pragmatic . The purpose of
      the twelfths arrangements is clearly to ensure the vital continuity of
      activities pending adoption of the budget . The twelfths arrangements
      must thus never be allowed to cause paralysis , for that would be just
      the opposite of what an interim measure for continuity was designed to
      achieve . The Commission is therefore proposing that it be possible to
      switch available resources from chapter to chapter , such moves being
      treated procedural 1 y as transfers .
      Since the present Regulation neither provides for nor precludes this
     possibility , a specific provision has been introduced as the new
     Article 9(5) .
3.   Reuse , repayment and treatment of exchange differences
The following amendments are proposed to meet the requirements of the
situation :
 (a) Reuse
     Further provisions should be added to the present Article 22(2), which
     authorizes reuse , to cover proceeds from the sale of immovable property
     and sums connected with lettings . Given the gradual increase in the
     number of properties owned by the Communities and the number of leases
     entered into , particularly outside the Community , it seems appropriate
     not to mate a distinction between movable and immovable property for
     the purposes of reuse (see Article 27(2) (d)).
(b) Repayment of advances
     Systems of advance payments have been introduced by the sectoral rules
     for various policies to improve the effectiveness of the operations
     involved . However , for various administrative reasons the Community
     nay have to recover same of these payments , especially where the
     recipients have not satisfied the required conditions within the
     time-limit set .
     Whether or not this revenue can be reused must , however , be assessed in
     future in the light of the stricter application of the animality
     principle imposed by Council Regulation No 2049/88 of 24 June 1988 . ^
1    OJ L 185 , 15.7.1988 , p.3 .
 ---pagebreak---                                        - 18 -
       It is therefore proposed that this revenue he treated in the same way
       as appropriations released when the projects for which they have been
       allocated are not implemented in full or at an (currently
       Article 6(6)); the Commission would decide each financial year (n+1 )
       by 15 February whether or not the revenue from the repayment of the
       advances is to be reused , and notify the budgetary authority of its
       decision by 15 March . Revenue which is not to be reused will be
       entered as miscellaneous revenue for the year in which it was entered
       in the accounts (financial year n) (new Article 27(6)).
  (c) Treatment of exchange differences
       Established practice for the closure of accounts in recent years has
       been to show the final exchange gain or loss for a financial year in
       the balance sheet , although the current Article 22(4) states that it
       should be shown as revenue or expenditure in the execution of the
       budget .
       Since this entry in the budget , in particular on the expenditure side ,
       is not feasible for various reasons - the difficulty in obtaining the
       necessary funds at the end of the year or the need to resort to the
       "open transfer " formula - the obvious solution is to make the entry in
       the balance sheet . 1
       The Commission is therefore proposing that the relevant provision be
       suitably amended to enshrine the current practice in the rules (new
      Article 27(4)).
  4.  Updating of certain amounts connected with contracts and transfer of
       these provisions to the Regulation on the Implementing rules
       The need to modernize the Financial Regulation on this point is
      particularly evident . Experience has shown that it is laborious to
      adjust the various amounts by means of the Financial Regulation while
       the procedure for the implementing rules , which are laid down by
      Commission decision , is better suited to the actual situation .
      Owing to the problems encountered in carrying   out the general revision
      of the Financial Regulation , the amounts laid  down in 1977 are still in
      force , although they have long been outdated .  This has considerably
      hampered the budget management , affecting all  the institutions .
1    This proposal is in line with Article 15 of the Regulation presented by
     the Commission (0CM(88)483 final ) implementing the new Decision on own
     resources .
 ---pagebreak---                                      - 19 -
     For reasons of necessity and consistency , the Commission therefore
     proposes that all these various amounts - contained in Articles 52 , 54 ,
     56 , 5? and 94 of the present test - should no longer be laid down by
     the Financial Regulation but should be determined tinder the Regulation
     on tie implementing rules , to be adopted by the Commission after
     consulting all the other institutions , in accordance with the
     provisions of Article 106 (new Article 123). As an interim measure ,
     the updating of these amounts is covered by Article 128 , pending
     revision of the implementing rules once the general revision of the
     Financial Regulation has been completed .
IV . АГОГПЖАТ , ПРТА7ТД ПГМ1КСТТ                       THE MJU» ? OF AUDITQRS
     АЖ) ТНЕ ОГНЕН Ш5ТГГОПШ5
     The Court of Auditors' annual report and the comments (special reports )
     which it may make on its own initiative form the cornerstone of
     external control on which the exercise of political control rests .    It
     is essential therefore to make appropriate amendments to certain
     provisions of the present Financial Regulation .
     The Commission 's new proposal is accordingly designed to ensure more
     rational presentation of the annual report (Court 's comments to be
     treated as confidential in the preliminary stage , separate section to
     be established for each institution and replies to be presented
     immediately after the final comments ) (Article 89).
     Appropriate provisions are also proposed for the treatment of the
     Court 's special reports on individual sectors , which have become
     increasingly common in recent years (Article 91 ).
                                    *     *
 ---pagebreak---                                       - 20 -
 V.            r OF THE SPECIAL PROVISIONS KELATPEI TO RESEARCH AND
               IICAL DEVELOPMENT
 The Financial Regulation contains a series of special provisions (Articles
 86 to 94 of the present text ) governing the presentation and conditions for
utilising the appropriations relating to research and technological
development activities , in view of the specific requirements of this
 sector .
These provisions need to be revised chiefly for two reasons :
     first , the current presentation and the implications of the provisions
     currently in force with regard to implementation and management are too
     complex and need to be simplified ;
     second , new developments , arising in particular from the Single Act ,
     make it necessary to update these provisions , which no longer meet the
     requirements of the present situation .
It should also be stressed that the Commission - for various reasons ,
including the comments of the Court of Auditors and , in particular , the
amendments adopted by Parliament in 1983 - has already tabled two proposals
in the past designed to revise and simplify the arrangements applied to
research and technological development appropriations .!
Annex 3B gives a very brief summary of the various ways in which the
appropriations for this sector have been presented since 1973 .
To sum up , the current presentation has the following shortcomings :
     it is too complex (dual structure), since it combines elements formally
     contained in the budget (appropriations entered under the various
     headings of Chapter 73 , tables of equivalence and schedules in an
     Annex) with elements such as the financial plans which are not
     contained in the budget but which nevertheless constitute the formal
     structure for implementation of the budget :
1   03M(84)123 final of 9 March 1984
    004(87)458 final of 30 September 1987 .
 ---pagebreak---                                         - 21 -
        it means that all the appropriations for this sector are entered in one
        chapter (Chapter 73) using its own nomenclature , which is "out of
       phase " with the nomenclature of the budget as a whole . ^ THa is the
       result of the fact that too little space is set aside in the budget for
        this sector , which is constantly increasing in importance ;
       it does not mate al l owance for the increased scope of this sector and
       the implications of Articles 13Qi to 130q in particular .
  The revision now proposed is therefore designed to meet the following
  objectives :
  (a) the new budgetary structure proposed for operating appropriations will
       allow a section to be set aside exclusively for research and
       technological development , thus reflecting the importance of this
       sector ;
  (b) the dual structure which characterizes the present system is to be
       simplified :
       - the table of equivalence will continue to be annexed to the budget
          and will give a breakdown , in accordance with the provisions to be
          laid down in the implementing rules , by type of expenditure (staff
          expenditure , administrative and technical expenditure , contracts ,
          etc .) for each research programme (l.e . by objective) on the basis of
          appropriate accounting methods ;
       - the schedule annexed to the budget will give , for each year , a
          tentative timetable , in commitments and payments , for the utilization
          of the allocations (amounts considered necessary) for the various
          programmes ;
  (c) the proposed new nomenclature (see Annex 3A) is based on the
       requirements arising out of the Framework Programme , and takes into
      account the presentation for 1988 and 1989 . It is determined by the
      nfyarj to separate the objectives arising out of the Framework Programme
       from other activities ;
  (d) by harmonizing nomenclature it will be possible to bring the provisions
       relating to transfers into line with those for the rest of the budget
       (with the exception of the ad hoc authorization which can be granted by
       the budgetary authority each year in the context of the budget ,
       enabling the Commission to decide on certain transfers for the JFC);
  (e) finally , the necessary provisions will be laid down to cover services
      performed for outside bodies and individuals , an area of activity which
       is set to become increasingly important , particularly for the Joint
      Research Centre .
  This revision relates to the new Articles 92 to 98 .
1   See Article 94(1 ) of the current Regulation , which reads as follows :
    "1 . For the purposes of applying Article 21 , the articles , items and
    subitems of the chapter provided for in Article 87 shall be treated as
    titles , chapters and articles respectively".
 ---pagebreak---                                       - 22 -
VI . HL ¥ÏMJUΤΠΟΝ ΟΡ 8ΡΞΧ^ΙΑΙ( ΡΒΟνίδΙΟΝδ ΑΡΡΤΙΟΑ3ΤΞ Τ
The existing Financial Regulation contains special provisions for certain
areas which cannot be covered under the general body of the Regulation . At
present there are several such areas : research appropriations (Title VII ),
EAGGF Guarantee Section appropriations (Title VIII ), and appropriations for
food aid (Title IX).    The activities of the Office for Official
Publications , which serves all the institutions , also require special
provisions .
These ad hoc provisions are necessary because certain specific features of
the areas in question require separate rules , relating principally to the
implementation of the budget .
For same years now the budget has included appropriations relating to
protocols with certain Mediterranean countries and appropriations for Latin
American and Asian developing countries . Further special provisions should
therefore be introduced laying down the specific conditions for the
utilization of appropriations in these areas .
The geographical location of the countries concerned , the nature of the aid
(non-repayahle aid , special loans , interest rate subsidies , etc .), the
decentralized administrative system which has had to be set up in some
cases in order to implement this policy , the special conditions for the
award of contracts , etc . - all these are specific features which cannot be
properly covered by the general body of the Financial Regulation and
accordingly require special provisions .
The proposed special provisions included in the attached draft regulation
cover the following aspects :
1 . basic principles : framework for assistance (on the basis of
     preferential agreements such as financial protocols , or of financing
     agreements or contracts), type of aid , etc . ;
2.   definition and responsibilities of the executive organs administering
     some of the appropriations in this sector (chief authorizing officer ,
     national authorizing officer , Commission delegate , paying agent )
     required as a result of decentralization and the legal framework for
     these policies ;
3.   special conditions relating to the award of contracts . As the
     geographical , economic and political conditions differ from those in
     the Member States , special provisions are required in this field .
 ---pagebreak---                                     - 23 -
The gap which exists in the Financial Regulation in this respect must
therefore he filled (new Articles 106 to 121 ).
                                    *     *
Dp to now , the implementing rules for financial and technical cooperation
have been laid down in contractual provisions between the Commission and
the State receiving the aid .
In the case of the first financial protocols with the Maghreb and Mashreq
countries and financial and technical cooperation with the Latin American
and Asian developing countries , these provisions have been incorporated in
the general clauses of the financing agreements concluded with the
recipient countries for each project .
In the case of the second financial protocols with the Maghreb and Mashreq
countries , and in order that the Implementing rules should have valid
contractual status for the entire period of the protocol , an exchange of
letters annexed to the protocol has been negotiated between the Commission
and each of the recipient countries .
It is essential therefore that these special provisions , which govern the
utilization of appropriations entered in the general budget of the European
Communities , should be incorporated , where necessary , in the Financial
Regulation , since they represent a derogation from the general body of the
Regulation .
Finally , since the basic rules governing food aid have been amended1 so
that the Commission is now directly responsible for its management , the
special provision contained in the present Article 102 is now redundant .
 1 Regulation No 3972/86 of 22 December 1986 (QJ L 370, 30.12.1986),
     renewed by Regulation No 3785/87 (CXT L 356 , 18.12.1987).
 ---pagebreak---                                      - 24 -
2.   Administrative appropriations relating to the operations of the
     Delegations and Offices outside. _the Community
The Community 's aims and policies have led to its assuming an increasingly
important role outside the territory of the Member States .
This "external role" played by the Commission has came to be reflected over
the years in the establishment of appropriate administrative structures
locally .
This has led to :
(a) the creation of two new budget chapters (Chapters 18 and 28 in Part A
     of Section III ) to cover the administrative expenditure relating to
     this infrastructure ;
(b) as regards the internal organization of the departments concerned , the
     creation of a Directorate (DAD) responsible for the administration of
     the outside offices .
In view of the specific requirements of budgetary management in this
sector , the Commission 1s proposing that the Financial Regulation be
amended to incorporate new special provisions (new Title X). 1 These will
be supplemented at a later stage by the appropriate implementing rules , to
be adopted by the Commission in due course in the light of requirements .
                                        *
                                     *     *
   1   New Articles 122 to 124 .
 ---pagebreak---   VII .   NEED FOR CERTAIN T]                       AND MORE UFTATT ,FD PROVISIONS
          ON SPECIFIC POINTS
  It is inevitable , given the passage of time , the nhangi-ng situation        the
  experience acquired , that a general revision of the Financial Regulation
  should bring to light the need to amend pertain specific provisions . The
  gain changes are summarized below :
  1.    Mtustroent nf certai n dates and dradllneç;
  In 1934 the Commission proposed pertain adjustments to the dates for the
  closure of accounts and the procedure for rendering the accounts . 1
  However , one of the amendments to the Financial Regulation rode on
  24 June 1988 was to bring forward the end of the "additional period" for
  the EAGGF Guarantee Section from 31 March to 31 January , thereby creating a
  new situation .
  In addition , as regards the management of the appropriations for the
  administration of the Delegations and outside offices , it has proved
  necessary to allow an "additional period" of one and a half , month because of
  geographical decentralization .
  Accordingly , the Commission is proposing the adjustments which it considers
  necessary in this new context . The table in Annex 5 gives an overall
  picture of the dates and deadlines concerned .
  2.    Implications for budgetary management of use of integrated computer
        systems
  Technological development and the increasingly widespread use of data
  processing in financial management , in both the private and public sectors ,
  have given rise to a new situation which cannot be ignored .
  It is clear that :
  -    past regulations could not have predicted the developments which have
       tafcpm place and are set to continue ;
  -    the basic principles of sound financial management will in no
       circumstances be jeopardized .
1    CGM(84)123 final Of 9 March 1984 .
 ---pagebreak---                                           2ô -
  In the Commission 's view therefore , the important thing at this stage is
  simply to introduce a reference into the Regulation to the
  possibility - increasingly sophisticated resources are in fact already
  being introduced - of mating use of these new instruments to modernize and
  rationalize the organization of the various management and accounting
  systems , while adhering to the principles of sound management . The
  granting of approval and the treatment of supporting documents will be
  particular targets .
  The Commission is therefore proposing the necessary addition to the text
  (new Article 23).
  3.   Strengthening the role of the ECU
  As a result of the various proposals tabled in the past1 and the new
  situation created by Article 20 of the Single Act which , by adding
  Article 102 to the EEC Treaty , constitutes official recognition of the EOT ,
  the Commission feels it is essential to promote the development of the EOT
  in the budget context too .
  The Commission therefore proposes incorporating in the Financial
  Regulation - as a way of encouraging its progressive application - the
  principle of use of the EOT not merely as an accounting instrument (which
  has always been the case ) , but in future also as the instrument in which
  the Community 's ri ghts and obligations are made out , and as an instrument of
  settlement (payment) in the implementation of the general budget (with
  exceptions being possible where required by the rules for specific
  sectors ). Article 11 is adapted accordingly .
  4 . New general provision on the payment of Interest or penalties by
  Point 111.3(b) above referred to the budgetary treatment of repayments of
  certain advances . However , in more general financial terms there is a
  major problem to which the audit bodies have already drawn attention
  several times : it is essential to ensure that Community monies are used
  wisely and to penalize any abuses which may occur .
  The Commission therefore considers it necessary2 to Include a new
  provision to this effect in the Financial Regulation (Article 48).
1    OOM(76)513 final of 4 October 1976
     and 001(87)400 final of 24 July 1937 .
2    - Report on ways of increasing the effectiveness of the structural
       Funds (00td(83)501 Of 28 July 1983 , p. 22)
     - Proposal for a horizontal Regulation for the structural Funds
       (OQM(68)500 of 29 August 1988 , Article 25).
 ---pagebreak---                                         - 27 -
  5.                                            icvc
  The Council has Issued two Directives on public contracts one in 1971 on
  public works (71/305/EBC)^ and the other in 1977 on supplies
   (77/62/EEC)    the Member States have to comply with them in their
  national procedures .
  It is only right that these Directives should be applicable to Community
  activities as well .
  New provisions should therefore be added to Article 65 : 1
       drawing attention to the supplies Directive (which is not mentioned at
       present );
       stating' that more detailed and explicit provisions' will be laid down
       as ‘'implementing rules " to be adopted by Commission Regulation in
       accordance with Article 128 (present Article 106) of the Financial
       Regulation .
  6.   Amendment of the provisions relating to the establishment plan
  Article 20(3 ) and (4 ) has been amended and expanded for two reasons :
  (a) half-time work
       Article 55a of the Staff Regulations offers Community officials the
       possibility of working half-time : fairly large numbers of staff in
       the various institutions do in fact do so .
       The Commission , for instance , has around 290 staff working half time
       at the moment ; 57.7% in the C category , 0.4% in the D category , 11.3%
       in the E category and 30.6% in the language service).
  Establishment posts are , of course , approved by the budgetary authority in
  order to meet each institution 's manpowers needs - which have been
  substantiated and scrutinized in detail on the assumption that these posts
  are occupied full time . Consequently , if the institutions allow staff to
  work Hal f time , under present rules this deprives them of same of the total
  manpower which the budgetary authority intended them to have : i.e. the
  effect on the Commission at present is as if its establishment plan had
  been cut by around 145 posts .
1     Present Article 58 .
2     Amendai by Directive 78/669/EEC .
3     Amendai by Directive 80/767/EEC .
 ---pagebreak---                                      - 28 -
    For the sate of fairness the Commission is proposing that officials
    working half-time should henceforth be reckoned as filling only ha,l f a
    post in the establishment plan : in other words it would seem
    reasonable that a single post in the budget should be allowed to
    support two half-time officials .
    There are therefore good administrative reasons to justify the
    Commission 's proposal , as well as considerations of fairness and sound
    budgetary management .
    Moreover , the fallback solution - the insertion of a footnote below the
    establishment plan - used in recent budgets is not satisfactory ,
    because it is too limited and too vague .
(b) Updating of provisions on the establishment plan for research
    activities and other changes in presentation
    The present text of the second indent of Article 16(2) (c) no longer
    reflects the real position .
    The discrepancy has arisen because Regulation No 2615/761 introduced
    special provisions for research staff , providing in particular for the
    "establishment staff " category to be abolished and a distinction made
    between permanent and non-permanent staff .
    The Commission is accordingly proposing that the text be adjusted to
    bring it up to date (second Indent of Article 20(3) of the attached
    draft Regulation).
    The Commission is also taki ng this opportunity to make a clear
    presentation of the provisions relating to the various establishment
    plan contained in the budget .
1   OJ L 299 , 29.10.1976 .
 ---pagebreak---                                       - 29 -
  VIII . AMEMENTS TO THE FINANCIAL REGUIATION ARISING COT OF THE NEW
         DECISION ON OVm RESOURCES
  The adoption by the Conned 1 on 24 June 1968 of the Decision on the system
  of the Community 's own resources entails a number of amendments to the
  Financial Regulation which , depending on their nature , relate to :
  -   the overall thrust of the decision and the reference to its provisions
      or its implementing Regulation (Articles 4 , 6 , 17 and 31 to 35 );
  -   the detailed rules for the making- over of own resources to the
      Community ;
  -   the rules governing conversion from BCD's to national currencies and
      vice versa in respect of the supplementary research programmes in
      process (Article 35) and the rules of budgetary implementation for the
      supplementary programmes based on Article 1301 of the Treaty , as
      amended by the Single Act .
  -   General thrust of the Decision of 24 June 1988 - References
      The Financial Regulation must take account of the creation of an
      additional resource - which serves as a budget-balancing item - based
      on the sum of of the Member States' GNP . The Financial Regulation also
      contains a series of articles which refer to the own resources
      Decision , and to its implementing Regulation ;  these references need to
      be updated .
      Detailed rules for the making over of own resources to the Community
      Article 34 of the amended proposal of 9 March 1984 (0QM(84)123 final)
      contains technical provisions governing the method of crediting the own
      resources due to the Commission accounts with the rational treasuries .
      These provisions are now redundant , since they are the subject of a
      proposal for a Council Regulation implementing the Decision of
      24 June 1988 . 1 It is thought preferable to deal with all these points
      uniformly in one set of rules and thus avoid cross references .
      However , it will be necessary to retain the provisions governing the
      rate of conversion of the the Member States' contributions to the
      financing of the supplementary research programmes in progress(HFR) .
1   0QM(88)483 final of 19 September 1988 .
 ---pagebreak---                                       - 30 -
    Rules                                    T                            rrc
    under Article 1501 of the Treaty
    As the second subparagraph of Article 6 of the Decision of 24 June 1938
    leaves open the question of the treatment of contributions by certain
    Member States to supplementary programmes provided for in Article 1301
    of the Treaty establishing the European Economic Community , it would
    appear appropriate not to propose rules of budgetary implementation at
    the present time , in particular as regards the mating available of the
    contributions and their conversion into ecus , but to settle these
    matters later by means of an appropriate legal instrument .
                                         *
                                       *   *
This proposal for a general revision of the Financial Regulation leaves out
certain elements which featured in the previous proposals (particularly
those of 1989 and 1984 ), since they are no longer relevant in the present
situation .   They are as follows :
(a) Presentation of borrowing and lending operations
    On 12 June 1978 the Commission proposed a formula for including
    borrowing and lending operations in the budget . 1 The proposal was
    renewed in 1980 and 1984 .
    However , the discussions held on the subject and the realization that
    the general context and the min features of the Community budget
    procedures (e.g. definition of revenue and expenditure , classification
    of expenditure as compulsory or non-compulsory , rules governing
    carryovers and transfers , etc .) could not be applied to these
    operations have convinced the Commission that its
    original proposal tor formal inclusion in the budget Is not
    appropriate , since borrowing and lending operations have their own
    specific characteristics .
    The Commission is therefore not renewing its proposal , talcing’ the view
    that the emphasis should be placed on clear presentation of the figures
    for the implementation of these operations which are annexed to the
    budget .
 1   COM (78 ) 263 final (OJ C 160 , 6.7.1978 ).
 ---pagebreak---                                        - 31 -
  (b) Food ald
      As Indicated above , special provisions are no longer required for food
      aid , which is now administered directly by the Commission . However ,
      the Commission feels it is essential , in the interests of rational
      management , to retain the "communicating doors " proposal (transfer
      facility between the EAQGF Guarantee Section headings and the food aid
      headings , where such transfers are made necessary by changes , in
      relation to the appropriations authorized , in the parts of the
      expenditure chargeable to the respective chapters) (Article 105(4)).
  (c) Clearance of EAQGF Guarantee Section accounts
      In 1984 , after receiving the opinion of the Court of Auditors , the
      Commission proposed including provisions in the Financial Regulation
      laying down a realistic timetable for the clearance of the EAGGF
      Guarantee Section accounts . 1 The conclusions of the European Council
      of 11-13 February prompted it to repeat this proposal in 1988 . 2
      The Council felt , however , that it would be better to incorporate the
      appropriate provisions in Regulation No 729/70 (see Regulation
      No 2049/88 of 24 June 1988).
      The Commission will therefore be putting forward the necessary proposal
      in conjunction with the present proposal .
1    0CM(84)123 final of 9 Mardi 1984 .
2    001(88)148 final of 18 March 1988 .
 ---pagebreak---                              - 33 -
                            ANNEXES
ANNEX 1      Commission proposals for the revision of the Financial
             Regulation applicable to the general budget of the
             European Communities
ANNEX 2A :   Current structure of the general budget
ANNEX 2B - 1 Proposed future structure of the budget
ANNEX 2B - 2 Additional details
ANNEX 20 :   Layout of the section on expenditure common to all the
             institutions
ANNEX 3A :   Brief summary of various presentations of research and
             technological development appropriations since 1973
ANNEX SB :   Layout of the section concerning research and
             technological development appropriations
ANNEX 4      Summary of provisions governing transfers
ANNEX 5      Comparison of current timetable and proposed timetable
 ---pagebreak---                                                                                                                      35                                                               ANNEX 1
                                                                                     CONN I SSI ON PROPOSALS FOR THE REVISION OF THE FINANCIAL REGULATION
                                                                                        APPLICABLE TO THE GENERAL BUDGET OF THE EUROPEAN CONNUNITIES
                                                                                                      OJ PUBLICATION              COURT OF AUOITORS               PARLIAMENT * S       COUNCIL
          PROPOSALS                                 DATE               COM DOCUMENT
                                                                                                                                         OPINION                    OPINION            DECISION
I.   PROPOSALS WHICH DID NOT RESULT IN A COUNCIL DECISION
     Propalai· for gittoni rovltlon
                                                                  COM(60)760 final                OJ C 119 ( 21.5.19B1        21 May 1981                  12 September 1983
     Proponi to amend the Financial              12.12 . 1980
                                                                  ( general revision )                                        ( OJ C 232 , 11.9.1981 )     ( OJ C 277 , 17.10.1983 )
      Regulation of 21 December 1977
      Amendment of the proponi for a             9.3.1994         COM ( 04)123 final               OJ C 97 , 9.4.1984
      Council Regulation ( ECSC , ECC ,                            ( general revision )
      Euratom ) amending the Financial
      Regulation of 21 December 1977
      Proponi· for llmlt.d nvlilon·
                                                                   C0M(87)284 final                OJ C 186 , 16.7.1987       29 October 1987
       Proponi for · Council R.gulatlon           25 .6 . 1987
                                                                    ( naw budgat                                               ( OJ C 337 , 16.12.1987 )
       ( Euratom , ECSC , EEC ) (minding thi
       Financial Regulation of                                      atructura )
                                                                                                                                                                                                     OJ
       21 Oictmbir 1977                                                                                                                                                                              U1
                                                                                                                               26 November 1987             18 November 1897                          1
       Proposal for a Council Regulation          24.7.1987         COM ( 87 ) 400 final            OJ C 278 , IS . 10 . 1987
                                                                     ( eona.qu.ne.a of                                         ( OJ C 339 , 17.12.1987 )    ( OJ C 345 , 21.12.1987 )
        ( ECSC , EEC , Euratom) amending the                                                                                                                ( OJ Annex No 358 )
        Financial Regulation of                                     Odora packagi )
        21 December 1977
                                                                     C0M(87)4S8 final               OJ C 313 , 25.11.1967      27 November 1987
        Proposal for a Council Regulation          30.9.1987
                                                                      ( raaaarch )                                              ( OJ C 339 , 17.12.1987 )
         ( ECSC , EEC , Euratom ) amending the
         Financial Regulation of
         21 December 1977
   1 . PROPOSALS WHICH RESULTED IN A COUNCIL DECISION          ( L IMI TED REVISIONS )
                                                                                                                                19 November 1987             18 D.cmbar 1987           7.6.1988
          Proposal for a Council Regulation         19.10.1987        COM ( 87)511 final             OJ C 298 , 7.11.1987
                                                                       ( lamporary ayatam for                                    ( OJ C 337 , 16.12.1987 )   ( OJ C 13 , 18.1.1988 )   ( Reg . No
          ( Euratom , ECSC , EEC ) amending                                                                                                                  ( OJ Ann.x No 359 )       1600 /88 )
          temporarily the Financial                                    1987 for EAGGF
                                                                       Guaranta . Section                                                                                              ( OJ L 143 ,
          Regulation of 21 December 1977                                                                                                                                               10.6.1988 )
                                                                       advaneaa )
                                                                                                                                 19 May 1988                 16 June 1988              24.6.1988
           Proposal for a Council Regulation        1B.3.19BB          COM ( 88 ) 148 final          OJ C 99 , 14.4.1988
                                                                        ( following the                                                                                                ( Reg . No
           ( ECSC , EEC , Euratom ) amending the                                                                                                                                       2049 / 88 )
           Financial Regulation of                                     conclusions of the
                                                                       European Counell of                                                                                             ( OJ L 186 ,
           21 December 1977     .
                                                                                                                                                                                       15 . 7 . 1988
                                                                        11-13 February 1988 )
 ---pagebreak---                                                 36 -                           ANNEX 2A
              _                                                                     1
               CURRENT STRUCTURE OF THE GENERAL BUDGET ( EXPENDITURE ) 1
                                                                 Volume of appropriations
                                                                      ( million ECU )
 Section I
 PARLIAMENT                400                                             400
 Section II                         Economie and Social Conriittee
 COUNCIL                   174           40                                214
                                                         Publications office
 Section III                      Part A
 COMMISSION           ( Administrative appropriations )           29
                                  1 249
                                  Part B                               44 606
                        ( Operating appropriations )
                                 43 328
Section IV
COURT OF JUSTICE            53                                               53
Section V
COURT OF AUDITORS           29                                               29
 Rounded figures in appropriations for commitments ( million ECU ) giving an idea
 of the relative size of each section on the basis of the 1988 budget .
NB . The size of the boxes is for optical effect only and does not accurately
     reflect the actual figures .
 ---pagebreak---                                                   - 37 -                           ANNEX 2B - 1 .
                        PROPOSED FUTURE STRUCTURE OF THE GENERAL BUDGET
                     PART ONE                                         PART TW01
       ( Administrative expenditure )                           ( Operating expenditure )
   ( Administrative budget of the institutions )           ( Budget of Community operations )
                                   Parliament                               EAGGF Guarantee Section
   Section I                                               Section VII
                                   COUNCIL                                  Fisheries
   Section II                                              Section VIII
                                                  ESC
                                                                           Structural Funds
                                   COMMISSION             Section IX
                    General functioning
                                                                           Research and
                                                                                                       2
                                                                           Technological . development
  Section III                                             Section X
                                                                           Environment , éducation etc
                                                          Section XI
                                    COURT OF JUSTICE
                                                                            Energy , industry , etc
  Section IV                                              Section XII
                                    COURT OF AUDITORS
                                                                            Cooperation with
 Section V                                                                  non-member countries
                                                         Section XIII
                                                                            Technical appropriations
                                                         Section XIV        prepayments, etc )
                         INTERINSTITUTIONAL
                         EXPENDITURE
                                                                             Reserves
                                         Publications    Section XV
Section VI ( 3 )                         office
TOTAL                                                    TOTAL
1
  The creation of separate sections for the major policies was already proposed in
  C0M(84 ) 123 final of 9 March 1984 ( OJ C 97, 9.4.1984 )
2
  Annex 3 gives a tentative breakdown of this section .
3
  Section VI would relate in particular to pensions and some other interinstitutional
  expenditure , especially the Publications Office and the European Schools ( see
  Annex 20 .
  M3.    See 'Additional Details' on the next page.
 ---pagebreak---                               Ku>jvw»;jKAL .DETAILS
The following comments should be made with regard to the new structure set
out in Annex 2B-1 :
1.  The presentation of Sections VII to XV , which are to accommodate the
    operating appropriations , is tentative at this stage . A different
    presentation , grouping or order of the contents is possible . A formal
    proposal will have to be made by the Commission and the decision will
    be taken by the budgetary authority in the course of the budgetary
    procedure .
    It is not the role of the Financial Regulation to lay down binding
    provisions regarding the order and content of each of the sections
    devoted to operating appropriations .
2 . As regards the planned new presentation for the appropriations relating
    to research and technological development , the proposal contained in
    OOM(87)458 of 30 September 1987 is replaced by a new presentation (see
    Annex 3B) which tabes account of the views of the Court of Auditors and
    the Council 's Budget Committee .
3.  Finally , there is no formal place in the diagram in Annex 2B for
    borrowing and lending operations . Since these operations are not
    included in the budget , the current provisions will continue to apply
    (with factual information being presented in an annex to the budget .
 ---pagebreak---                                        - 39 -
                                                                   ANNEX 2C
                       LAYOUT OF THE          Ш ЕХРЕШ1Т0КЕ
    Title l :    Pensions
                 (Article A-120 of the 1988 budget)
    Title 2 :    Publications Office                           ANNEX
                 (Article A-342 of the 1988 budget)         Statement of
                                                            revenue and
    Ti tle 3 :   European Schools and other schools         expenditure for
                 (Article A-326 of the 1988 budget)         the Publications
                                                            Office
  NB .    The utilization of the appropriations entered in this section has
          always been the responsibility of the Commission. * In order to
          safeguard the decision-mating autonomy of each of the institutions ,
          the appropriations relating to allowances for staff assigned non¬
          active status , retired in the interests of the service or
          dismissed will be retained in the sections relating to the staff and
          administrative expenditure of each institution .
*  Subject to the special provisions applicable to the Publications
   Offioe .
 ---pagebreak---                                         - 40 -
                                                                     ANNEX 3A
                      BRIEF SUMMARY OF VARIOUS PRESENTATIONS OF
                         RESEARCH APPROPRIATIONS SINCE 1973
  This sector has been presented in three diferent ways in the budget :
  (a) the first presentation , 1 which applied from 1973 to 1978 , used the
       " functional " structure for both the establishment of the budget
      (forming an annex of around 500 pages ) and implementation . Thi .<=:
      presentation was extremely cumbersome and complicated ;
  (b) the second , 2 introduced in 1978 , was intended to simplify the
      budgetary structure in this sector , so that the appropriations could be
      dealt with more easily in the budgetary procedure . However , it
      involved a "dual structure " ; the appropriations were entered in
      Chapter 73 , but were managed under " financial plans " ;
  (c) the third , introduced in 1988-89 , is designed to show the staff
      appropriations for the Joint Research Centre separately (the entry of
      the appropriations relating to indirect activities remains unchanged),
      and to highlight the distinction between activities under the Framework
      Programme and other activities . In all other respects , the
      presentation is the same as at (b).
1 Articles 93 to 103 of the Financial Regulation of 25 April 1973
  (OJ L 116 , 1.5.1973).
2 Financial Regulation of 21 December 1977 , as amended by Regulation
  No 1252/79 of 25 June 1979 (GJ L 160 , 28.6.1979).
 ---pagebreak---                                                                                - 41 -
                                                                                                                                               ANNEX 3B
                                    LAYOUT OF THE SECTION CONCERNING RESEARCH AND TECHNOLOGICAL DEVELOPMENT APPROPRIATIONS
A. FORMAL BUDGETARY PRESENTATION (contents of the special section for research and technological development)
TITLE 1 - JOINT RESEARCH CENTRE                             TITLE 2 - SHARED-COST ACTION PROJECTS/CONCERTED ACTION
           ( Direct action)                                                                                                     TITLE 3 - HORIZONTAL ACTIVITIES
                                                                      PROJECTS ( FRAMEWORK PROGRAMME)                                      OUTSIDE FRAMEWORK PROGRAMME
                                                                       ( Indirect action )
Chapter 10 - Staff                   Chapter 21 - Quality of life                      Art . 253 Fusion
                                                                                                                                     Chapter 30 - Préparation of
Art . 100 Framework Programme        Art . 210 Medical research                        Art . 254 JET
                                                                                                                                                   new programmes
Art . 101 Non-Framework Prograrrme   Art . 211 Predictive medicine
                                     Art . 212 Radiation protection                                                                  Chapter 31 - Coordination of
Chapter 11 - Quality of life     ~'                                                    Art . 255 Non-nuclear energy                                national research
                                     Art . 213 Environment
                                                                                       Chapter 26 - Science and technics for
Art . 110 Radiation protection                                                                        development                    Chapter 32 - Studies
                                     Chapter 22 - Towards a large market
Art . 111 Environment
                                     Art . 220 Esprit                                  Art . 260 S/ T for development                Chapter 33 - International
Chapter 12 - Modernization of        Art . 221 Race                                                                                                cooperation
               industrial sectors    Art . 222 Delta                                   Chapter 27 - Exploitation of marine
                                     Art . 223 Drive                                                  resources                      Chapter 34 - Codes and standards
Art . 120 Advanced materials         Art . 224 Aim
Art 121 Standards                    Art . 225 Transport                               Art . 270 Marine research                     Chapter 35 - Seconded staff
                                                                                       Art . 271 Fisheries
Chapter 13 - Energy                  Chapter 23 - Modernization of industrial                                                       Chapter 36 - Services for outside
                                                    sectors                            Chapter 28 - Euro S/T coopération                          bodies and individuals
Art . 130 Fusion
Art . 131 Fission                                                                      Art . 280 Science                            Chapter 37 - Support activities for
                                    Art . 230 Brite                                    Art . 281 Spes ( Economic stimulation)
                                    Art . 231 Brite-Euram                                                                                         common agricultural
Chapter 14 - Exploratory                                                               Art . 282 Scientific awards                                policy ( CAP)
               Research             Art . 232 Aeronautical technology                  Art . 283 Support for major facilities
                                    Art . 233 Raw materials                            Art . 284 Fast
                                    Art . 234 CBR                                                                                   Chapter 38 - Complet ion
                        Framework
                                                                                       Art . 285 Spear (Assessment of research)
                        Programme                                     Framework                                                                                 Outside
                                                                     Programme                                      Framework                                   Framework
                                                                                                                    Programme                                   Programme
 ---pagebreak---                                                                                                                                       ANNEX 3B
Chanter 15 - Support for             Chapter 24 - Exploi tation of biological
               Commission's                                                       Art . 286 Doses-Expert systems for       TITLE 4 - PARTICIPATION IN
                                                   resources                                statistics
               aepsrtments                                                                                                           INTERNATIONAL ACTIVITIES
                                     Art . 24G Biotechnology                      Art . 287 Dissemination and use of       Chapter 40 - Eureka
Art . 150
                                                                                            results
                                     Art . 241 Eclair
Art . 151                                                                                                                  Chapter 41 - Support for Cost
                                                                                  Art . 288 Eurotra
                                     Art . 242 Flair
Art . 152
                                     Art . 243 Agricultural research
Art . 153
                                     Art . 244 Biomolecular engineering
                                     Chapter 25 - Energy
Chapter 16 - Services for outside
               bodies and            Art . 250 Radioactive waste
               individuals
                                     Art . 251 Decommissioning
Chapter 17 - HFR ( including
               completion)           Art . 252 Teleman
Chapter 18 - Complet ion of                                                                                                                                   cr
               earlier activities                                                                                                                             u>
                      Outside                                  Framework
                      Framework
                                                                                                                Framework                         Outside
                                                               Programme                                       Programme
                      Programme                                                                                                                   Framework
                                                                                                                                                  Programme
B. Annex (documents annexed to the special section on research and technological development).
     (a) Table of ^valence giving abreakdo^of expenditure by type (to be defined in the implement^ measures)
    (b) Schedule of commitments and payments for the achievement of the objectives on the basis of the program* decisions.
 ---pagebreak---                                                                  - 43 -                                 ANMEX 4
                   PROVISIONS GOVERNING TRANSFERS (ARTICLE 25 OF THE' FINANCIAL REGULATION)
                                                           COMPARISON                                -
                                                      A. PRESENT SITUATION
                           ccrrussiON SECTION                                COUNCIL               OTHER SECTIONS
                                                                               AND               ( COURT OF JUSTICE
     Sector                    Procedure                             PARLIAMENT SECTIONS        AND COURT OF AUDITORS )
                                                       I. GENERAL FRAMEWORK
  Part A
  Titles 1 S 2        (a) It takes decision concerning             They take decisions      They submit transfers
                           transfers between items and             concerning all transfers between items and articles
                           articles .                              within their own         to the Commission, which
                      (b) It takes decisions concerning            sections .               takes decisions .
                           transfers between chapters,
                           within titles, two weeks after          They inform the          They submit proposals for
                           informing the budgetary                 Commission of their      transfers from one chapter
                           authority .                             decisions .              to another to the Commission
 Part B
                                                                                            for transmission to the
                                                                                            budgetary authority .
 Titles 182           (a) It takes decisions concerning
  ( EAGGF                  transfers between items arjd
 Guarantee                 articles up to 31 January .
 Section)            (b) It makes proposals to the
                          Council - which takes decisions
                          up to 31 January - concerning
                          transfers from one chapter to
                          another .   Parliament is
                          informed of these transfers .
 Food Aid            It takes decisions concerning
                    transfers from one article to
                            _ _ _     ~r * LI _ L C.
                    another    tp to_ 31   March .
Other titles         (a) It takes decisions concerning
                          transfers between items and
                          articles .
                    (b) It makes proposals to the
                         budgetary authority concerning
                         all transfers between chapters .
Research           Ad hoc flexibility : "functional
appropriations     budget"
( Chapter 73)       ( see Articles 86 to 94).
                                               II . PRESENT TECHNICAL OBSTACLES
1 . Transfers of appropriations carried over .
2 . Distinction in the procedure between transfers of commitment
     appropriations and transfers of payment appropriations                              No spécifie provisions in
    (appropriations for the current financial year).                                     the existing Régulations
                                                                                         (gap in Financial Régulation)
3. Transfers between differentiated appropriations and
     non-differentiated appropriations .
 ---pagebreak---                                                          - 43 bis                                 Annex 4
                                    B. SITUATION RESULTING FROM THE PROPOSAL
               I
                               COMMISSION SECTION                  COUNCIL              OTHER SECTIONS
                                                                     AND             ( COURT OF JUSTICE
  Sector                         Procedure                     PARLIAMENT SECTIONS  AND COURT OF AUDITORS )
                                           I. GENERAL FRAMEWORK PROPOSED
Present Part A      ( Section III under proposed new
                   structure)
Titles 1 & 2
                   No change (apart f rom the advance
                   notice to be given to Council and
                   Parliament : three weeks instead
                   of tuo ).
Present Part B     Section VII et seq. inder proposed
                   new structure )
                                                                                   They take decisions
                   (a) Commitment appropriations and                               on transfers within
                          appropriations for commitments                           their section after
                          ( all non-differentiated                                 informing the
                         appropriations )                                          Council , Parliament
                         No change for transfers between                           and the Commission
                                                                                   three weeks in
                         commitment appropriations
                          (differentiated) or between                              advance .
                         appropriations for commitments
                         (non-differentiated).     Decisions
                        on all transfers between chapters
                         are therefore taken by the
                        budgetary authority .
                  (b) Payment appropriations                       No change
                         ( differenti ated
                        appropriations)
                        It is proposed that all decisions
                        on transfers between payment
                        appropriations be taken by the
                        Commission .
                 ( c ) EAGGF Guarantee Section
                        food aid
                        Introduction of the principle
                       of "comTLni eating doors"
                       between the EAGGF Guarantee
                       Section and Food Aid .
                 (d) Research appropriations
                       To be brought into line with
                       the general provisions . However,
                       the annual budget will continue
                       to authorize the Commission to
                       take decisions on certain
                       transfers .
 ---pagebreak---                                                          - 43 ter -                                  Annex 4
                                  II . SOLUTIONS PROPOSED TO OVERCOME TECHNICAL OBSTACLES
1 . Transfers of appropriations carried over (non-differentiated                    These transfers are allowed
                                               appropriations)                      on an exceptional basis .
                                                                                    Decisions are to be taken
                                                                                    by the budgetary authority.
2 . Distinction in the procedure between (appropriations of the
    current financial year)      transfers of commitment appropriations
                                 transfers of payment appropriations        : Decisions on all transfers
                                                                              ( between items, articles and
                                                                              chapters) to be taken by the
                                                                              Conmission .
3. Transfers between differentiated appropriations and
    non-differentiated appropriations                                       : Decisions on all transfers
                                                                              (between items, articles and
                                                                              chapters) to be taken by the
                                                                              budgetary authority .
"We amended by Regulation No 2049/88 of 24 June 1988.
^This date was not formally amended by Regulation No 2049/88 of 24 Jure 1988.
 ---pagebreak---                                                                                                                                       ANNEX 5
                                                          COMPARISON BETWEEN PRESENT DATES AND PROPOSED DATES                                   Changes
                                                                                                                                                resulting from
                                                                                             Present situation Proposal        ^ an9î-          this proposal
                                                                                             31 December       31 December     No change
. Deadline for contracting commitments
. Deadline for payment authorization to reach                                                31 December       31 December     No change
    financial control
. Deadline for payment authorizations to reach                                                                 10 January      New                    X
     accounting officer                                                                      Not provided for
                                                                                              15 January        15 January     No change
 . Deadline for the accounting officer to execute payments
      Closure of accounts for the EAGGF Guarantee Section (‘additional period1 )              ( 31 March)       31 January1     New**
                                                                                                                                2 months earlier
      Closure of accounts for administrative appropriations relating to                            -
                                                                                                                15 February     New                   X
      the Delegations and outside offices
  . Commission Decision
       . on norr-automatic carryovers for differentiated appropriations                             -
                                                                                                                 15 February
                                                                                                                             1  New1
       . to make released commitment appropriations available again
   . Notification of the budgetary authority of decisions taken by                                               15 March *     New1
       the Commission
   . Information from other institutions for the revenue                                                                         One-and-a-half
                                                                                               1 April           15 February
        and expenditure account                                                                                                  months earlier         X
    . Applications for non-automatic carryovers (non-differentiated                             21 April         15 February     66 days earlier        X
                                                    appropriations)
                                                                                                1 June            1 May          One month earlier      X
     . Drawing-up of the revenue and expenditure account
     . Presentation of the Court of Auditors' "comments"                                        15 July           15 July        No change
     . Presentation of the institutions' replies                                                31 October        31 October      No change
                                                                                                30 November       30 November     No change
      . Final dispatch of the Court of Auditors' report
     1 Changes introduced by Regulation No 2049/88 of 24 June 1988 (OJ L 185, 15.7.1988).
      ^Appropriations entered in Chapters 18 and 28 of the present Part A of Section III .
 ---pagebreak---                                    Proposai for a
                      ОСШСТЬ ЕНЗШАТ1Ш ГВПЗП .
               amending the Financial Regulation of 21 December 1977
                      applicable to the general budget of the
                                European Ocammmities
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Coal aid Steel
Community , and in particular Article 7Sh thereof ,
Having regard to the Treaty establishing the European Economic Community ,
and in particular Article 209 thereof ,
Having regard to the Treaty establishing the European Atomic Energy
Community , and in particular Article 183 thereof ,
Having regard to the proposal from the Commission, 1
Having regard to the opinion of the European Parliament , 2
Having regard to the opinion of the Court of Auditors , 3
Whereas the conciliation provided for in the Joint Declaration of 4 March
1975 of the European Parliament , the Council and the Commission4 took
place in a Conciliation Committee ;
Whereas Article 107 of the Financial Regulation of 21 December 1977 , 3 as
last amended by Regulation (ECSC , EEC , Euratom) No 2049/88^- (hereinafter
referred to as the Financial Regulation) , provides for the         Financial
Regulation to be examined by the European Parliament and the Council in the
light of a proposal from the Commission ;
Whereas , in view of the evolution of the general budget of the European
Communities aid of the application of the Financial Regulation , it is
necessary to adjust many of the provisions of the said Financial
Regulation ; whereas the European Council of 11 , 12 and 13 February 1988
npi 1 1 pd for a general revision of the Financial Regulation by the end of
1988 ;
1
2
3
4 OJ C 89 , 22.4.1975 , p. 1 .
5 0JL 356 , 31.12.1977 , p. 1 .
6 OJ L 185 , 15.7.1988 , p. 3 .
 ---pagebreak---                                       - 2 -
Whereas provision should be made for an appropriate budgetary structure for
all expenditure in order to give a clearer picture of the policy breakdown
of appropriations and thus create the conditions essential for effective
management ; whereas , to this erd , the present Section III of the budget
should be reserved for Commission staff and admirdstrative appropriations
and a new section should be introduced for expenditure ccmmcn to ail the
institutions , as well as several sections for operating appropriations ,
taking into account past changes in the contents of the budget and future
prospects ;
Whereas it is necessary to produce a more transparent presentation of the
appropriations for research and technological development and to introduce
appropriate rules for this presentation ;
Whereas , in order to cover all the appropriations entered in the general
budget of the European Communities , the Financial Regulation should
contain special provisions for the budgetary management of Community
external aid ;
Whereas , in view of the changes to the rules on food aid , it is no longer
necessary to include special provisions in the Financial Regulation ;
Whereas special provisions should be entered in the Financial Regulation ,
to be supplemented by implementing measures , to meet the specific
requirements of managing the administrative appropriations relating to
staff serving outside the Community and related administration ;
Whereas budgetary appropriations should be presented in a more uniform
manner with the appropriations for all administrative expenditure , for the
European Agricultural Guidance and Guarantee Fund Guarantee Section , and
same technical appropriations being non-differentiated , while
appropriations for the various policies intended to cover multiannual
operations are differentiated ;
Whereas , in the light of the experience acquired since its entry into
force , certain provisions of the Financial Regulation need to be made more
detailed or revised notably in respect of the arrangements for provisional
twelfths and transfers ;
 ---pagebreak---                                     - 3 -
Whereas , in order to improve interinstitutional relations , the Financial
Regulation should include provisions on the procedure for supplementary and
amending budgets , the establishment of the financial statement to accompany
proposals , improvements to the organization of relations between the
institutions and the Court of Auditors ard the information to be given to
the budgetary authority on the utilization of advances from the EAGGF
Guarantee Section ;
Whereas , in connection with the repayment of Coinmunity aids , the Financial
Regulation should contain provisions concerning the payment of interest ;
Whereas , in view of the technological advances in management and accounting
systems , rules should be laid down to allow the budget to be implemented in
a computerized environment ;
Whereas , since the cost of living is rising constantly , it has become
essential that , for the determination of certain amounts in connection with
the awarding of contracts and with inventories , reference be made to the
rules for the implementation of this Regulation , so that these amounts can
be adjusted by a legislative procedure that is more appropriate from the
technical angle ;
Whereas , following the entry into force of this Regulation , a consolidated
version of the Financial Regulations should be published in series C of the
Official Journal , taking account of the various amendments made to it since
its adoption ;
HAS ADOPTED THIS REGULATION :
 ---pagebreak---                                       - 4 -
                                    ARTICLE 1
ThA Financial Regulation is tiereby amended as follows :
1.   In the second subparagraph of Article 1(1 ), the third indent is
     replaced by the following :
          the revenue and expenditure of the European Atomic Energy Community
     which may be credited to or charged against the budget pursuant to the
     Euratom Treaty and to the measures taken in implementation thereof . "
2.   In Article 1(2), the second subparagraph is replaced by the following :
     " Expenditure may not be authorized for a period extending beyond the
     financial year . "
3.   Article 1(3 ) is replaced by the following :
     "3 .    Administrative expenditure arising from :
                   contracts which have been concluded , in accordance with
                   local usage , or
                   contractual provisions relating , in particular , to the
                   supply of equipment ,
     for periods extending beyond the financial year shall be charged to
     the budget for the financial year in which it is effected . "
 ---pagebreak---                                    - 5 -
4. In Article 1 , paragraphs 3a , 4 and 5 are replaced by the following :
    "4 .  Staff and administrative expenditure , expenditure under the
         European Agricultural Guidance and Guarantee Fund , Guarantee
          Section and expenditure on repayments to the Member States , as
         well as loan guarantees , shall be entered in the budget in the
         form of non-differentiated appropriations .
         Other expenditure shall be entered in the form of differentiated
         appropriations .
         Commitment appropriations shall cover , for the current financial
         year , the total cost of the legal obligations entered into for
         operations whose implementation extends over more than one
         financial year .
         Payment appropriations shai 1 cover expenditure arising from
         commitments entered into in the current financial year and/or
         preceding financial years .
   5.    Differentiated appropriations shall be shown in the budget as
         follows :
                the commitment appropriation authorized for the financial
                year concerned and the payment appropriation for the same
                financial year shall be entered under the appropriate
                heading ;
                the estimated annual payment appropriations required for
                subsequent financial years shall be set out against the
                commitment appropriations in an indicative schedule in the
                remarks column .
   6.    The sum of the non-differentiated appropriations and the
         commitment appropriations shall constitute the appropriations
         for commitments .
         The sum of the non-differentiated appropriations and the payment
         appropriations shall constitute the appropriations for payments .
 ---pagebreak---                                           - s -
     7.     The legal carmitments entered into for measures extending over
            tr.ore tiian one iinancdal year shall contain a time limit for
            “ implementation which must be specified to the recipient in due
            form when the aid is granted ,
            lhis time limit shall be determined with due regard to the need
            for multiannual implementation of the operations financed and
            the specific conditions of implementation in relation to the
            various spheres of intervention .
            The Commission may , in special aLrcumstances . adjust the time
            limit for implementation of these commitments , on the basis of
            appropriate proof supplied by the recipients . "
5.   The following new Article 3 is inserted :
                                       "Article 3
     Where proposals submitted to the Council and Pari lament may have
     budgetary consequences , including significant changes in the number of
     posts , the Commission shall draw up a financial statement .
     In the case of multiannual operations , this financial statement shall
     contain the estimated schedule of annual requirements in
     appropriations and posts . "
6.   Article 3 is renumbered Article 4 .        It is replaced by the following :
                                       "Article 4
     1.     Subject to Article 27 , all revenue and expenditure shall be
            entered in full in the budget and in the accounts without any
            adjustment against each other .
     2.     Total revenue shall cover total appropriations ; revenue shall
            not be assigned to a specific purpose .
            However , certain revenues shall not be vised for any other
            purpose , notably :
                    financial contributions from Member States to certain
                    research programmes pursuant to the second paragraph of
                    Article 6 and Article 11 (2 ) (c) of Council Decision
                    88/ 3'76/EEC , Euratom of 24 June 1988 on the system of the
                    Communities' own resources , 1 hereinafter referred to as
                    the Decision of 24 June 1988 ;
1 OJ L 185 , 15.7.1988 , p. 24 .
 ---pagebreak---                                   - 7 -
               revenue earmarked, for a specific purpose , such as income
               from foundations , subsidies , gifts , bequests ;
               contributions to Community activities from non-Member
               States or various bodies ;
               revenue from third parties in respect of work carried out
               at their request .
   3.    The total appropriations referred to in paragraph 2 filial 1 be
         represented by the appropriations for payments .
   4.    The Commission may accept airy donation made to the Communities ,
         and in particular foundations , subsidies , gifts and bequests .
         The Commission may accept donations which nay involve same
         financial charge only subject to prior authorization from
         Parliament and the Council , which shall act on the matter within
         two months of the date of receipt of the request from the
         Commission . If no objection has been made within this period ,
         the Commission shall take a final decision in respect of
         acceptance . "
7. Article 4 is renumbered Article 5 . The present text; is numbered
   paragraph 1 and trie following paragraph 2 is added ;
   "2.   No expenditure may be committed, or authorized in excess of the
         authorized, appropriations , without prejudice to Article 27(2)."
 ---pagebreak---                                        - 8 -
 8.  Article 5 is renumbered Article 6 . It is replaced by the following :
                                    "Article 6
     The              year shall run from 1 January to 31 December .
     The revenue of a financial year shall be entered in the accounts for
     the financial year on the basis of the amounts collected during the
     financial year , with the exception of the own resources for the month
     of January of the next financial year , in respect of which advance
     payment may be made pursuant to Article 10(2) of Council Regulation
      (EEC , Euratom , ECSC) No 2891/77 of 19 December 1977 implementing the
     Decision of 21 April 1970 on the replacement of financial
     contributions from Member States by the Communities' own resources 1 .
     The readjustment of entries in respect of value added tax own
     resources and , if appropriate , of financial contributions , shall be
     carried out in accordance with the third subparagraph of Article 10(3)
     of the abovementionei Regulation .
     The alloted appropriations shall be used solely to cover expenditure
     properly entered into and paid in the financial year for which they
     were granted , save as otherwise provided in Articles 7 and 104 , and to
     cover the debts relating to preceding financial years for which no
     appropriation was carried forward .
     The commitments shall be entered in the accounts on the basis of the
     commitments contracted up to 31 December .
1 OJ L 336 , 27.12.1977 , p. 1 .
 ---pagebreak---                                    - 9 -
   The expenditure of a financial year shall be entered in the accounts
   for that year on the basis of the expenditure for which authorization
   reached the financial controller not later than 31 December and the
   accounting officer not later than the following 10 January , and for
   which payment was effected by the accounting officer not later tha.n
   15 January .
   Notwithstanding     the   two   preceding    subparagraphs ,  the
   expenditure of the EAG5GF Guarantee Section , shall be taken into
   account for a financial year in accordance with the rules laid down in
   Article 102 ."
9. Article 6 is renumbered Article 7 .
   (a)   Paragraph 1 is replaced by the following :
         "1 .   In the case of budget head ings where there is no
                distinction between commitment appropriations and payment
                appropriations :
                (a) appropriations relating to remunerations and
                allowances of members and staff of the institutions nay
                not be carried over ;
                (b) a decision nay be taken to carry over to the next
                fnancial year only the portion of the other appropriations
                still uncommitted at the close of the financial year ;
                (c) appropriations in respect of payments still
                outstanding by virtue of commitments duly entered into
                before the close of the financial year Shall be carried
                over automatically to the next financial year only ."
   (b)   Paragraph 3 is replaced by the following :
         "3 .   In the case of appropriations for which a decision to
                carry over may be taken in accordance with paragraph 1(b)
                above , the Commission shall suhsnit to the budgetary
                authority , not later than 15 February , the duly
                substantiated requests to carry over appropriations made
                by Parliament , the Council , the Court of Justice , the
                Court of Auditors and by the Commission itself .
 ---pagebreak---                                - 10 -
            The Council shall consult Parliament and., acting by
            qualified majority , shall decide on the requests to carry
            over appropriations in respect of expenditure necessarily
            resulting from the Treaties or acts adopted in accordance
            therewith .
            Parliament shall, consult the Council and act on the
            requests to carry over appropriations in respect of
            expenditure other than that necessarily resulting from the
            Treaties or acts adopted in accordance therewith .
            If no decision is taken by the budgetary authority within
            six weeks , the requests to carry over appropriations shall
            be deemed to have been approved .
(c) Paragraph 4 is replaced by the following :
    "4 .    Unused revenue and appropriations available at 51 December
            arising from the specific revenue referred to in
            Article 4(2 ) shall be carried over automatically ."
(d) Paragraph 5 is replaced by the following :
    5.      The following appropriations shall lapse at the end of the
            year :
            (a)    appropriations from the previous financial year .
                   - appropriations carried over by decision of the
                     budgetary authority under paragraph 1(b) which,
                     have been neither committed nor paid ,
                   - appropriations carried over automatically under
                     paragraph 1(c) which have not been paid ,
                   - commitment appropriations and payment
                     appropriations carried over by the Commission
                     under paragraph 2 aid. remaining unused at the end
                     of the financial year ;
            (b)    appropriations of the financial year which have not
                   been carried over . "
(e) Paragraph 7 is replaced by the following :
    " 77 .. The revenue and expenditure account shall show the
            automatic carryovers , the appropriations carried over by
            decision of the budgetary authority , those carried over by
            decision of the Commission and the appropriations made
            available again by the decision of the Commission after
            commitments have been cancelled . "
 ---pagebreak---                                      - 11 -
10 . Article 7 is renumbered Article 8 , and
     - the first and second paragraphs are numbered 1 and 2 ,
     - the third paragraph is replaced by the following :
     "3 .  Expenditure relating to rents or certain associated expenditure
           which is payable in advance in accordance with provisions lain
           down by law or contracts may give rise to payments from
           20 December onwards to be charged to the appropriations for the
           next financial year . ”
11 . Article 8 is renumbered Article 9 . It is replaced by the following :
                                   "Article 9
     1.    If the budget is not finally adopted at the beginnning of the
           financial year , Article 78b of the ECSC Treaty , Article 204 of
           the EEC Treaty and Article 178 of the Euratom Treaty shall apply
           to commitment and payment of expenditure already approved in
           principle in the last budget duly adopted .
           An item of expenditure shall be considered as having been
           approved in principle in the last budget duly adopted if it
           could have been charged to a specific budget heading under the
           financial year concerned .
     2.    (a) Commitments may be entered into in respect of any chapter :
           - for up to one quarter of the total appropriations entered in
           the relevant chapter for the preceding financial year , account
           being        of all transfers , plus one twelfth for each
           completed month ,
           - without exceeding the appropriations provided for in the draft
           budget or , in the absence thereof , in the preliminary draft
           budget .
           The global provisional commitments of the EACGF Guarantee
           Section referred to in Article 100 shall be treated as
           commitments for the purposes of these provisions .
 ---pagebreak---                              - 12 -
    (b)  Payments nay be cade monthly in respect of any chapter :
         - up to one twelfth of the total approppriations entered
         in the chapter concerned for the preceding financial year ,
         account being taken of all transfers ,
         - as long as this measure does not have the effect of
         placing at the disposal of the Commission , for any month ,
         appropriations in excess of one twelfth of those provided
         for in the draft budget or , in the absence thereof , in the
         preliminary draft budget .
3. The draft budget referred to in paragraphs 2(a) and 2(b) above
   shall be the draft in the form in which it stands at the start
   of the financial year when the provisional-twelfths arrangements
   began to be applied .
4. Where the absence of a budget is due to the rejection of the
   draft budget by Parliament , as provided for by Article 78(8) of
   the ECSC Treaty , Article 203(8) of the EEC Treaty and
   Article 117(8) of the Euratom Treaty , the appropriations
   referred to in the second indent of paragraph 2(a) and in the
   second indent of paragraph 2(b) shall be those entered in the
   rejected draft budget or , where appropriate , in the new draft
   budget drawn up , following the rejection decision , before the
   start of the financial year .
5. If the continuity of Community activities and administrative
   needs so require :
   (a) for compulsory expenditure , the Council , acting by a
   qualified majority , may , at the request of the Commission and
   after consulting Parliament , authorize simultaneously two or
   more provisional twelfths for both commitments and payments in
   addition to those automatically made available under
   paragraphs 2(a) and 2(b);
 ---pagebreak---                                - 13 -
    (b) for non-compulsory expenditure , the second subparagraph of
   Article 78b(2) of the BCSC Treaty, the third paragraph of
   Article 204 of the EEC Treaty and the third paragraph of
   Article 178 of the Eurator. Treaty shall apply.
   The additional twelfth shall be authorized in whole and may not
   be split .
   Where this procedure is to be applied , the annual amount
   authorized for each chapter as twelfths my not exceed the
   amount in the chapter of the budget for the previous year ,
   account being taken of transfers , or the amount In the chapter
   of the draft budget or , in the absence thereof , the preliminary
   draft budget .
6. If , for a given chapter , the expenditure required to prevent any
   interruption of Community action in the sector concerned cannot
   be met by application of the procedures referred to in
   paragraphs 2 to 5 , appropriations available under the twelfths
   arrangements my , on a proposal from the Commission , be
   transferred between chapters .
   Decisions on the proposal for transfer shall be taken in
   accordance with the procedure laid down in Article 78b(2) of the
   ECSC Treaty , Article 204 of the EEC Treaty and the third
   paragraph of Article 178 of the Euratom Treaty .
   If , however , in the case of transfers involving both expenditure
   necessarily resulting from the Treaties or from acts adopted in
   accordance therewith and other expendi ture , the Council and
   Par] lament disagree on the amount to be transferred , the smaller
   of the amounts accepted by one of the two institutions shall be
   deemed to have been approved . Where one of the institutions
   rejects the principle of the transfer , such transfer shall not
   be made .
7. The decisions referred to in the preceding paragraphs Shall
   specify the requisite measures in respect of resources for the
   purposes of this Article .
8. The budgetary authority shall seek to limit the period for which
   the system of provisional twelfths is applied . "
 ---pagebreak---                                        - 14 -
12 . Article 9 is renumbered Article 10 . The following second paragraph is
      added :
       "Publication shall , under normal circumstances , take place within one
      month of the final adoption of the budget . "
13 . Article 10 is renumbered Article 11 .      It is replaced by the following :
                                    "Article 11
      1.      The budget shall be drawn up in Ecus .
      2.      The Ecu is the sum of specified amounts of the currencies of the
              Member States as set out in Council Regulation (EEC) No 3180/78
              of 18 December 1978 changing the value of the unit of account
              used by the European Monetary Cooperation Fund . 1 , 2
              Any change in the composition of the Ecu decided on in
              accordance with Regulation (EEC) No 3180/78 , shall automatically
              apply to this provision .
              The value of the Ecu in a given currency shall be equal to the
              sum of the equivalent in that currency of the amounts of the
              currencies which make up the Ecu .
      3.      The financial rights and obligations of the Communities shall be
              expressed and implemented in Ecus .
      4.      Vhen the principle set out in the third paragraph cannot be
              complied with because of special derogations arising from the
              application of sectoral rules governing debts or expenditure ,
              any conversion between the Ecu and a national currency shall be
              effected in accordance with the implementing rules in Article 128 ."
1 OJ L 379 , 30.12.1978 , p. 1 , as last amended by Council Régulation (ESC)
  No 2626/84 (OJ L 247 , 16.9.1984 , p. 1 ).
2 The following amounts applied when this Regulation entered into force :
  - German marks          0,719 ,
  - Pounds sterling       0,0878 ,
  - French francs         1,31 ,
  - Italian lira          140,00 ,
  - Dutch guilders        0,256 ,
  - Belgian francs        3,71 ,
  - Luxembourg francs 0,14 ,
  - Danish kroner         0,219 ,
  – Tri.«=:h pminriR      0,00871 ,
  - Greek drachmas        1,15 .
 ---pagebreak---                                         - 15 -
14 . Title II : the heading is replaced by the following :
                                      "TITLE II
                   ESTABLISHMENT AMD STRUCTURE OF THE BUDGET "
15 . Section I : the heading is replaced by the following :
                                    " SECTION I
                          ESTABLISHMENT OF THE BUDGET "
16 . Article 11 is renumbered Article 12 . It is replaced by the following :
                                   "Article 12
     Parliament , the Council , the Court of Justice and the Court of
     Auditors shall , each year before 1 July , draw up an estimate of their
     revenue and expenditure for the following year .
     The Economic and Social Committee shall , Before 1 June , forward to the
     Council an estimate of its revenue and expenditure for the following
     year .
     These estimates shall be forwarded to the Commission and , for
     information , to Parliament and the Council , no later than 1 July ."
17 . Article 12 is renumbered Article 13 .      It is replaced by the following :
                                   "Article 13
     1.     The Commission shall , in the preliminary draft budget which it
            places before the Council not later than 1 September of each
            year , draw up a general statement of revenue of the Communities
            and consolidate the estimates referred to in Article 12 .
            It shall at the same time forward the preliminary draft budget
            to Parliament .
     2.     The Commission shall prepare a general introduction to the
            preliminary draft budget . This introduction shall contain in
            particular :
            (a) financial tables covering the entire budget ; and
 ---pagebreak---                              - 16 -
    (b) as regards the Commission sections :
   - a description of the policies for which the appropriations are
   requested ,
   - an explanation of the changes in appropriations from one
   financial year to the next ,
   - a detailed statement on borrowing and lending policy .
3. Each of the sections of the preliminary draft budget shall be
   preceded by an introduction prepared by the institution
   concerned . The Commission shall prepare a single introduction
   to its sections .
4. The preliminary draft budget shall be accompanied by working
   documents containing the following information :
    (a) in respect of staff :
   - for each category of staff , a detailed list of budgetary posts
   and numbers of persons in post on the date of the submission of
   the preliminary draft budget , indicating their distribution by
   grade and administrative unit (or principal operational unit for
   the establishments of the Joint Research Centre),
   - where a change in the number of persons in post is proposed
   and in particular the creation , regrading or conversion of
   posts , a statement in support of such changes ;
   (b) in respect of subsidies to the bodies set up pursuant to the
   Treaties or acts adopted in accordance therewith , and having
   legal personality , and subsidies to the European Schools , an
   estimate of revenue and expenditure prefaced by an explanatory
   statement drawn up by the bodies concerned .
5. The Commission shall also attach to the preliminary draft
   budget :
   - an analysis of the financial management for the preceding
   financial year , as provided for in Article 81 , and a balance
   sheet of assets and liabilities of the Communities as at
   31 December of the preceding financial year , as provided for in
   Article 82 , and
   - an opinion on the estimates of the other institutions ; this
   opinion may contain different estimates , accompanied by the
   reasons therefor ."
 ---pagebreak---                                        - 17 -
 18 .  The following new Article 14 is Inserted :
                                    "Article 14
 The Commission may , on its own initiative or if requested by Parliament ,
 the Council , the Court of Justice or the Court of Auditors in respect of
 their section , present to the Council a letter of amendment to the
preliminary draft budget necessitated by the receipt of new information
which was not available at the time the preliminary draft was established . "
 19 .  The following new Article 15 is inserted :
                                    "Article 15
1.    In the event of unavoidable , exceptional or unforeseen circumstances ,
the Conmd.ssj.on nay submit preliminary draft supplementary airi/or
budgets .
Preliminary draft supplementary budget means any proposal which would alter
the total amount of appropriations and hence of revenue or which would
finance one or more new operations without , however , increasing the total
amount of appropriations .
Preliminary draft amending budget means any proposal which would not change
or would reduce total appropriations or revenue and which involves internal
financial or technical changes to the budget .
2 . Preliminary draft supplementary and/or amending budgets shall be
subject to the provisions of Article 78 of the ECSC Treaty , Article 203 of
the EEC Treaty and Article 177 of the Euratom Treaty .
They shall be submitted , examined , established and finally adopted in the
same form and according to the same procedure as the budget whose estimates
they are amending . They must be substantiated by reference to the latter .
3 . All preliminary draft supplementary and/or amending budgets must , as a
general rule , be forwarded to the Council by the date laid down for the
submission of the preliminary draft budget for the following financial
year .
The competent authorities shall discuss them in the light of their urgency .
 ---pagebreak---                                       - 18 -
 4.  Bequests for supplementary and/or amending budgets from Parliament , the
 Council , the Court of Justice or the Court of Auditors shall be forwarded
 by the Commission to the budgetary authority .   The Commission nay attach a
dissenting opinion .
 5 . Where the Commission proposes a preliminary draft supplementary and/or
amending budget , the Council must present a draft supplementary and/or
amending budget . However , if the Council does not consider it necessary to
 establish a draft budget , it shall consult with Parliament and the
Commission .
6 . Preliminary draft and draft supplementary and/or amending budgets shall
be accompanied by statements of grounds and the information available on
the implementation of the current budget at the time of their
establishment .
7 . Preliminary draft supplementary and/or amending budgets shall take into
account the transfers approved up to the time of their establishment . "
20 .  Article 13 is renumbered Article 16 .
21 . Article 14 is renumbered Article 17 .    It is replaced by the following :
                                  "Article 17
1 . The budget shall be adopted in accordance with Article 78 of the
ECSC Treaty , Article 203 of the EEC Treaty and Article 177 of the
Euratom Treaty .
2 . Once the budget has been declared finally adopted by the President of
Parliament , each Member State shall , from 1 January of the following
financial year or from the date of the formal declaration if it is made
after 1 January , be bound to make over to the Community the payments due as
specified in the texts implementing the Decision on the system of the
Communities ' own resources . “
22 .  The following new Article 18 is inserted :
                                  "Artide 18
The Commission and the budgetary authority my agree to bring forward
certain dates for the adoption and transmission of the preliminary draft
and draft budgets . This agreement my not , however , have the effect of
reducing or delaying the periods allowed for consideration of these texts
under Artide 78 of the ECSC Treaty , Article 203 of the EEC Treaty and
Article 177 of the Euratom Treaty . "
 ---pagebreak---                                        - 19 -
23 . Section II : the heading is replaced by the following :
                                    " SECTION II
                    STRUCTURE AND PRESENTATION OF THE BUDGET "
24 . Article 15 is renumbered Article 19 . It is replaced by the following :
                                    "Article 19
1.    The budget shall consist of :
- a general statement of revenue ,
- a general statement of expenditure , consisting of :
    .   one part for the staff and administrative expenditure of the
        institutions , divided into a section each for Parliament , the
        Council , the Commission , the Court of Justice and the Court of
        Auditors containing a statement of revenue and expenditure , and a
        section for expenditure common to the institutions .
        The revenue and expenditure of the Economic and Social Committee
        shall be entered in an annex to the Council section and presented in
        the form of a statement of revenue and expenditure .
        The revenue and expenditure of the Office for Official Publications
        of the European Communities shall be attached to the section for
        expenditure common to all the institutions , in accordance with
        Article 125(2);
    .   one part for operating expenditure , divided into as many sections as
        are required .
2 . Within each section , the items of revenue and expenditure shall be
classified according to their type or the use to which they are assigned
under titles , chapters , articles and items .
3 . The budgetary nomenclature shall be determined as regards the
apportionment of revenue and expenditure under separate titles , chapters
and articles , during the budgetary procedure .
 ---pagebreak---                                       - 20 -
 4 . Each section of the part relating to staff and administrative
 appropriations may include a chapter for "provisional appropriations " and a
 "contingency reserve " chapter . The appropriations entered in these
 chapters nay be used only by means of transfer in accordance with the
procedure laid down in Article 26 .
 5 . The part of the budget relating to operating expenditure shall Include
a section for "provisional appropriations " and a "contingency reserve ".
This section may include a "negative reserve " limited to a maximum amount
 of 200 million Ecus . This reserve , which shall be entered in a separate
chapter , may comprise both appropriations for commitments and
appropriations for payments .
The appropriations in this section may be utilized and the negative reserve
applied only in accordance with the procedure laid down in Article 26 .
6 . The section for EAGGF Guarantee Section expenditure shall include a
monetary reserve , for which the entry , utilization and financing conditions
are determined by Council Decision 88/377/EBC of 24 June 1988 concerning
budgetary discipline , 1 and the Decision of 24 June 1988 ana the provisions
adopted for implementing the latter .
7 . In addition , the document showing all the borrowing and lending
operations referred to in point 5 of Article 20 shall be annexed to the
part relating to operating expenditure .
  1 OJ L 185 , 15.7.1988 , p. 29 .
 ---pagebreak---                                       - 21 -
25 . Article 16 is renumbered Article 20. It is replaced by the following :
                                   "Artide 20
The budget shall show :
1.   In the general statement of revenue :
- the estimated revenue of the Communities' for the financial year in
    question , divided into titles , chapters , artides and items ,
- the revenue for the preceding financial year , divided into titles ,
    chapters , artides and items ,
- appropriate remarks on each subdivision.
2.   In the Commission sections and the section for each of the other
institutions :
(a)    as regards the statement of revenue :
- the estimated revenue for each institution for the financial year in
    question , divided into titles , chapters , artides and items , following a
    decimal classification system ,
- the revenue entered in the budget for the preceding financial year and
    the revenue established for the last financial year for which accounts
    have been dosed , using the same classification ,
- appropriate remarks on each revenue heading ;
(b)    as regards the statement of expenditure :
(ba) in the case of the various items , artides , chapters and titles :
    - the appropriations made available for the financial year in question ,
       these appropriations being the commitment appropriations and the
       payment appropriations for the budget headings for which this
       distinction has been agreed ,
    - the appropriations made available for the preceding financial year ,
   - the actual expenditure in the last financial year for which the
       accounts have been dosed , determined as follows :
       . for the headings where the distinction between commitment
         appropriations and payment appropriations has not been made :
   - actual payments in the last financial year for which the accounts
       have been dosed plus the carryovers to the next financial year ,
 ---pagebreak---                                     - 22 -
    .  for the headings where the distinction between commitment
       appropriations and payment appropriations has been made :
       - in commitments : commitments entered into during the financial year
         against appropriations for that financial year and against
         appropriations carried over from the preceding financial year ;
       - in payments : payments made during the financial year against
         appropriations for that financial year and against appropriations
         carried over from the preceding financial year ;
(bb) in the case of operations covered by commitment appropriations and
       payment appropriations : in the remarks column , an indicative
       schedule of the payments for the financial year concerned and
       subsequent financial years ;
(be) appropriate remarks on each subdivision . These remarks shall
       include :
   - basic legal instrument , where one exists ,
   - all such explanations as my be necessary concerning the nature and
       purpose of the appropriations .
3.   As regards staff :
- for each section of the part of the budget for staff and administrative
   appropriations , an establishment plan setting the number of permanent
   and temporary posts for each grade in each category and in each service
   authorized within the limits of the budget appropriations . The staff of
   the Supply Agency shall be shown separately in the Commission 's
   establishment plan ;
- an establishment plan for staff paid, from the research and technological
   development appropriations , classified by category and grade and
   distinguishing between permanent and non-permanent staff , authorized
   within the limits of the budget appropriations .
 ---pagebreak---                                      - 23 -
    As regards scientific and technical staff , the classification nay be
    based on groups of grades , in accordance with the conditions laid down
    in each budget . The establishment plan must specify the number of
    highly qualified technical or scientific personnel who are accorded
    special advantages under the Staff Regulations applicable to these
    officials .
- an establishment plan setting the number of posts for each grade in each
    category in :
    .  the Office for Official Publications ,
    .  the European Centre for the Development of Vocational Training
    .  the European Foundation for the Improvement of Living and Working
       Conditions .
The establishment plan shall show next to the number of posts authorized
for the financial year the number authorized for the preceding year .
4 . The establishment plan shall constitute an absolute limit for each
institution ; no appointment may be made in excess of the limit set .
In cases of hal f time work authorized by the appointing authority in
accordance with Article 55a of the Staff Regulations of Officials of the
European Communities , a post in a given grade may serve for the assignment
of two officials of the sarnie grade or of a lower grade . Such assignment
shall automatically terminate when the authorization expires .
5 . As regards borrowing and lending operations :
(a)    in the appropriate section of the part for operating expenditure :
    - the budget headings relating to the categories of operation and
       carrying a token entry so long as no effective charge which has to be
       covered by specific resources has arisen ,
 ---pagebreak---                                       - 24 -
      - remarks giving a reference to the legal basis and , where appropriate ,
         the volume of the operations envisaged and the financial guarantee
         given by the Communities in respect of these operations ;
 (b)     in a document annexed to the part for operating expenditure , as an
         indication :
       - current capital operations and crûment debt management ,
      - the capital operations and debt management for the financial year in
         question . "
26 .    Article 17 is renumbered Article 21 .
27 . Article 18 is renumbered Article 22 .     Paragraph 3 is replaced by the
following :
 " 3 . With the exception of decisions overruling the Financial Controller
provided for in Articles 40 , 50 and 53 , the Commission and each of the
other institutions may delegate their powers of budgetary implementation in
accordance with the conditions laid down by their internal rules of
procedure and within the limits which they themselves lay down in the act
of delegation .
Those so empowered may act only within the limits of the powers expressly
conferred upon them .
The acts of delegation shall be communicated to all the parties concerned
in accordance with the implementing rules provided for in Article 128 ."
28 . The following new Article 23 is inserted :
                                   "Article 23
Where revenue and expenditure operations are managed by means of integrated
computer systems , the provisions of Sections II and III and of Title VI
shall apply with due allowance for the possibilities and requirements
deriving from computerized management . To this end :
- the supporting documents may remain with the authorizing officer for the
      purposes of checking ;
- signatures and approvals may in appropriate computerized form .
The conditions for implementing this Article shall be determined by the
implementing rules provided for in Article 128 ."
 ---pagebreak---                                      - 25 -
29 . Article 19 is renumbered Article 24 . It is replaced by the following :
                                  "Article 24
Each, institution shall appoint a financial controller .
He shall be responsible for monitoring :
- the commitment and authorization of all expenditure ,
-   the establishment and collection of all revenue .
The financial controller shall be consulted on all accounting systems
applied by the institution to which he is attached . He shall access to the
information contained in these accounts .
Monitoring shall be carried out by that official by means of inspection of
the files relating to expenditure and revenue and , if necessary , on the
spot .
The financial controller may be assisted in his duties by one or more
assistant financial controllers .
The special rules applicable to such officials , which shall be laid down in
the implementing rules provided for in Article 128 , shall be such as to
guarantee that they are independent in the performance of their duties .
Their appointment , their promotion and disciplinary rules or transfer , and
any interruption or termination of appointment by whatever procedure shall
be the subject of reasoned decisions to be forwarded , for information , to
Parliament , the Council , the Commission and the Court of Auditors .
The persons concerned and the institutions to which they belong may
institute proceedings before the Court of Justice ."
 ---pagebreak---                                        - 26 -
50 . Article 20 is renumbered Article 25 . It is replaced by the following :
                                    "Article 25
In each institution , the collection of revenue and the payment of
expenditure shall be carried out by an accounting officer .
The accounting offioer shall be appointed by the institution .
Without prejudice to the system provide! for in Articles 4 and 5 of Council
Regulator (ESC) No 729/70 of 21 April 1970 on the financing of the common agricultural
policy , and subject to the second paragraph of Article 54 on payments
procedures , to Article 55 on imprests and to Article 112 on the financing
of external aid of       this        Regulation , the accounting officer alone
is empowered to manage monies end other assets . Ee shall be responsible
for their safekeeping .
The accounting officer shall be responsible for preparing the financial
statements provided for in Articles 79 , 80 , 81 and 82 of this Regulation .
He may be assisted in his duties by one or more assistant accounting
officers , appointed under the same conditions as the accounting offioer .
The special rules applicable to the accounting officer and to assistant
accounting officers shall be laid down in the implementing rules provided
for in Article 128 .
 1 0J No L 94 , 28.4.1970, p. 13 ."
 31 .    Article 21 is renumbered Article 26 . It is replaced by the following :
                                    " Article 26
1.    Appropriations shall be earmarked for specific purposes by chapter and
article .
2.    Parliament , the Council , the Court of Justice and the Court of Auditors
may transfer appropriations from one chapter to another and from one
article to another within their own sections of the budget .
The Court of Justice and the Court of Auditors shall inform die budgetary
authority and the Commission three weeks before raking such transfers .
3.    The Commission ray , within its own sections of the budget :
(a)     transfer appropriations from one article to another within each
        chapter ;
(b)     transfer appropriations from one chapter to another within each of
        the titles relating to staff and administrative expend:.ture . It
        shall inform the budgetary authority three weeks before making such
        transfers ;
 ---pagebreak---                                     - 27 -
(c)   transfer payment appropriations from one chapter to another ;
 (d)  transfer appropriations entered in the chapter of the budget
      containing the provisional appropriations to the budget hiding for
      which they were initially earmarked provided that the suspensive
      condition that originally gave rise to entry of the appropriations in
      this special chapter has been satisfied . It shall inform the
      budgetary authority three weeks before making such transfers .
4 . Without prejudice to the transfers which it my make on its own
authority in accordance with paragraph 3,      the . Commission may make
proposals to the budgetary authority for transfers from one chapter to
another .
5 . The budgetary authority shall take decisions on transfers of
appropriations as follows :
(a)   in the case of proposals for transfers relating to expenditure
      necessarily resulting from the Treaties or from acts adopted in
      accordance therewith , the Council shall , after consulting Parliament ,
      act by a qualified majority within six weeks , except in urgent cases .
      Parliament shall deliver its opinion within such time as will permit
      the Council to be apprised of it and to act within the time limit
      indicated .  Where the Council does not act within this time limit ,
      the proposals for transfers shall be deemed to be approved ;
(b)   in the case of proposals for transfers relating to expenditure other
      than that necessarily resulting from the treaties or from acts
      adopted in accordance therewith , Parliament shall , after consulting
      the Council , act within six weeks , except in urgent cases . The
      Council shal 1 deliver its opinion within such time as will permit
      Parliament to be apprised of it and to act within the time limit
      indicated .  Where Parliament does not act within this time limit , the
      proposals for transfers shall be deemed to be approved ;
(c)   proposals for transfers relating both to expenditure necessarily
      resulting from the Treaties or from acts adopted in accordance
      therewith , and to other expenditure shall be deemed to be approved if
      neither the Council nor Parliament has decided otherwise within six
      weeks of the date on which the two institutions received the
      proposals ;
 ---pagebreak---                                      - 28 -
 (d)   if , in the case of proposals for transfers referred to in
        ( c ), Parliament and the Council reduce the
       proposal for a transfer by different amounts , whichever is the
       smaller of the amounts accepted by one of the two institutions shall
       be deemed to be approved . Where only one of the institutions rejects
       the principle of the transfer , such transfer shall not be made .
6 . For the purposes of this Article the Commission sections shall be
treated as a single section .
7 . Only appropriations for the current financial year may be transferred .
By way of exception, appropriations carried over nay be transferred by a
decision of the budgetary authority in accordance with paragraph 5 .
8 . Appropriations nay also be transferred , by decision of the budgetary
authority , between headings where a distinction is made between commitment
appropriations and payment appropriations and headings where no such
distinction is made .
9 . Every proposal for a transfer within a chapter or from one chapter to
another shall be subject to the approval of the financial controller , who
shall certify that the appropriations are available .
10 . Appropriations may be transferred only to budget headings for which the
budget has authorized appropriations or carried a token entry .
11 . This Article shall apply to the appropriations corresponding to revenue
earmarked for a specific purpose under Article 4(2) only as long as the
revenue is not used for any other purpose .
12 . Transfers within the titles of the budget devoted to the European
Agricultural Guidance and Guarantee Fund , Guarantee Section shall be the
subject of special provisions under Article 105-
13 . As regards the section for expenditure common to all the institutions ,
the Commission nay , without prejudice to the provisions of Article 125 ,
transfer appropriations from one chapter to another within the same title ,
and from one article to another . It shall inform the budgetary authority
three weeks before maki ng such transfers . “
 ---pagebreak---                                      - 29 -
32 .  Article 22 is renumbered Article 27 :
 (a)   In the first subparagraph of paragraph 1 , the reference "from
       Article 3 " is replaced by " from Article 4 " .
 (b)   Paragraph 2 is replaced by the following :
 "2 . Notwithstanding     Articles 4         and 5 . the following sums may be
reused under the heading to which the initial expenditure was charged :
(a)    revenue arising from the refund of amounts paid in error against
       budget appropriations ;
(b)    proceeds from the supply of goods and services to other institutions
       or bodies , including refunds by such institutions or bodies of
       mission allowances paid on their behalf ;
(c)    insurance payments received ;
(d)    revenue from the sale of buildings or scons connected with lettings ;
(e)    revenue from the sale of publications and films ;
(f)    refunds of taxes - incorporated in the price of the products or
       services provided to the Communities - effected by Member States
       pursuant to the provisions of the Protocol on the Privileges and
       Immunities of the European Communities ;
(g)    revenue from the supply of goods and services against payment ;
(h)    proceeds from the sale of vehicles , equipment and installations and
       scientific and technical apparatus , equipment and materials which are
       being replaced or scrapped .
 ---pagebreak---                                    - 30 -
     Such sums must be reused before the end of the financial year
     following that in which the revenue was collected .
     The chart of accounts shall include suspense accounts to record reuse
     operations in both evertue and of expenditure . "
(c ) In paragraph 3 , the reference "Article 3 " is replaced by “Article 4 ".
(d)  Paragraphs 4 and 5 are replaced by the following :
"4 . Notwithstanding      Article      ;■ 4 , adjustments must be made in
     respect of exchange differences occurring in budget operations . The
     final gain or loss shall be included in the balance for the year .
 5.  In the cases referred to in paragaphs 1(c) and 2(b), (d), (e), (g)
     and (h), reuse and deduction shall be possible only if provision
     therefor is made in the renarks column in the budget .
 6.  Revenue from the repayment of advances made by recipients of
     Cammunity aid shall be entered in suspense accounts .
     At the beginning of each financial year the Commission shall examine
     the volume of this revenue and assess , in the light of requirements ,
     the need for reuse under the heading to which the initial expenditure
     was charged .
     The Commission shall tale this decision by 15 February of each
     financial year , and shall inform the budgetary authority by 15 March
     of the decision taken .
     Revenue not reused shall be entered as miscellaneous revenue for the
     financial year in which it was entered in the accounts . "
 ---pagebreak---                                          - 31 -
 33 .    Article 23 is renumbered Article 28 .
 (a)     In the first subparagraph of paragraph 1 , the second sentence is
         replaced by the following :
          " Such proposals shall be sent to the financial controller of the
         institution for his approval and to ‘the accounting officer for
         provisional registration . "
 (b)     In the final sentence of the final subparagraph of paragraph 1 ,
          “every three months " is replaced by “within one month".
34 .     Article 24 is renumbered Article 29 .
 (a)     The following sentence is added to the third subparagraph of
         paragraph 1 :
          "If necessary , he shall initiate the recovery procedure ."
(b)      In the final sentence of the third subparagraph of paragraph 2 ,
          " every three months " is replaced by "within one month".
35 .     Article 25 is renumbered Article 30 .
36 .     Article 26 is renumbered Article 31 .
The reference "in Article 4(2) and (3) of the Decision of 21 April 1970" is
replaced by "in Article 2(7) of the Decision of 24 June 1988" .
37 .     Article 2? is renumbered Article 32 .    It is replaced by the
         following :
                                      "Artide 32
The balance from each financial year , calculated in accordance with
Artide 15 of Council Regulation (EEC , Euratom , ECSC) No 2891/77 , shall be
entered as revenue in the case of a surplus or expenditure in the case of a
defidt in a supplementary or amending budget in the following financial
year . "
38 .     Artide 28 is renumbered Article 33 .
(a)      Paragraph 1 is replaced by the following :
"1 .     Thp contributions    for the financing of certain supplementary research
         programmes provided for in Article 11(2)(c ) of the Decision of 24 June
         1955         shall be paid over as follows :
 ---pagebreak---                                      - 32 -
      - seven twelfths of the amount shown in the budget not later than
         31 January ,
      - the remaining five twelfths not later than 15 July .
  2.  If the budget is not finally adopted before the start of the
      financial year , the contributions provided for in paragraph 1 shall
      be based on the amount shown in the draft budget , as referred to in
      Article 9(3 ) and (4) of this Regulation or , if this does not exist ,
      in the preliminary draft budget . "
 (b)  Paragraph 2 is renumbered paragraph 3 .
 (c)  Paragraph 3 is renumbered paragraph 4 .
39 .  Article 29 is renumbered Article 34 .   It is replaced by the
      following :
                                  "Article 34
The Commission shall , four times a year , present to Parliament and the
Council a report on the implementation of the budget and of any
supplementary or amending budgets and on the Communities' financial
situation , covering both revenue and expenditure . This report shall also
give details of the utilization of appropriations carried forward from
previous financial years .
TM.q report shal 1. at the same time be sent to the Court of Auditors . "
40 .  Article 30 is renumbered Article 35 .   It is replaced by the
      following :
                                  "Article 35
The financial contributions referred to in Article 11 (2 ) (c) of the Decision
of 24 June 1988 (for the completion of supplementary research programmes )
shall be converted at the rate for the Ecu applying on the last but one
working day of the month preceding the final date for entry in the
accounts . "
41 .  Article 31 is renumbered Article 36 .
 ---pagebreak---                                     - 33 -
42 . Article 32 is renumbered Article 37 .
 (a) in paragraph 2 , "Article 96" is replaced by "Article 100"
 (b) in paragraph 3 , "Article 106" is replaced by "Article 128".
43 . Article 33 is renumbered Article 38 .   Ctn the last line , "Article 106"
     is replaced by "Article 128 ".
44 . Article 34 is renumbered Article 39 .
(a)  The first paragaph is renumbered paragraph 1 .
(b)  The following paragraph 2 is added :
"2 . Approval my not be conditional ."
(c)  The second paragraph is renumbered paragraph 3 .
45 . Article 35 is renumbered Article 40 .
(a)  In the first paragraph, "Article 34" is replaced by "Article 39(1 )".
(b)  In the second paragraph , the phrase "in the first two paragraphs of
     Article 18 " is replaced by "in the first two paragraphs of Article
     22 ".
(c)  In the final sentence of the final paragraph , "every three months " is
     replaced by "within one month".
46 . Article 36 is renumbered Article 41 .
47 . Article 37 is renumbered Article 42 .
(a)  In paragraph 1 , "Article 106 " is replaced by "Article 128".
(b)  Paragraph 2 is deleted .
(c)  Paragraph 3 is renumbered paragraph 2 .
48 . Article 38 is renumbered Article 43 .
49 . Article 39 is renumbered Article 44 .
 ---pagebreak---                                        - 34 -
 50 .    Article 40 is renumbered Article 45 , The third indent is replaced by
         the following :
      the amount to be paid (in figures and words ) , expressed. In Ecus or in
      national currency ."
51 .     Article 41 is renumbered Article 46 .   In the first paragraph "Article
         106 " is replaced by "Article 128 " and "Article 59 " is replaced by
          "Article 66 " .
52 .     Article 42 is renumbered Article 47 .
(a)      The second paragraph is replaced by the following :
 "The authorizing officer may grant advances if the Staff Regulations or the
rules governing the policy concerned specifically provide therefor . "
(b)      In the third paragraph "Article 106 " is replaced by "Article 128 " .
(c)      In the fourth paragraph "Article 49 " is replaced by "Article 55 ".
53 .     The following new Article 48 is inserted :
                                    "Article 48
Interest shall be due , in accordance with the implementing rules provided
for in Article 128 , on any amount paid to recipients of Community aid :
-     either as an advance
- or under the normal payment procedure
which gives rise to repayment to the general budget . "
 ---pagebreak---                                        - 35 -
54 .   Article 43 is renumbered Article 49 .
55 .   Article 44 is renumbered Article 50 . The reference "Article 35 " is
       replaced by "Article 40 “ .
56 .   Article 45 is renumbered Article 51 .
57 .   Article 46 is renumbered Article 52 .
58 .   Article 47 is renumbered Article 53 .
59 .   Article 48 is renumbered Article 54 . In the second paragraph
       "Article 106 " is replaced, by "Article 128 ".
60 .   Article 49 is renumbered Article 55 .
(a)    In the first paragraph "Article 106 " is replaced by "Article 128 ".
(b)    The following new second paragraph is added :
"Only the accounting officer may replenish the imprest accounts , save in
exceptional, cases defined in the implementing rules ."
(c)    Thfi second paragraph _   becomes _ the third paragraph .
61 .   The following new section is inserted :
                                   " SECTION IV
                             MANAGEMENT OF FOSTS "
62 .   The following new Article 56 is inserted :
                                   "Article 56
Within fwih institution the following shall be established :
(a)    an establishment plan ;
(b)    an organization chart shewing the organization of the departments ."
 ---pagebreak---                                       - 36 -
63 .   In Title IV the title of Section I is replaced by the following :
                                   " SECTION I
                CONTRACTS FOR THE SUPPLY OF GOODS AND SERVICES ;
                    OONTRACTS POR PURCHASE , LEASE AND HURE "
64 .  Article 50 is renumbered Article 57 .    Paragraph 1 is replaced by the
      following :
 "1 . Contracts for the purchase or hiring of buildings or goods , for the
      provision of servioes or for the performance of construction work
      gha.1 1 be in writing . Apart from contracts relating to the purchase
      of a building already constructed or to the leasing of a building ,
      all such contracts shall be concluded after an invitation to tender
      has been issued either by the automatic public tendering procedure or
      the discretionary tendering procedure .
      However , contracts nay be made by private treaty in the circumstances
      referred to in Article 59 .
      Contracts nay be made against invoice or bill of costs in cases
      provided for in Article 64 . "
65 .  Article 51 is renumbered Article 5'8 .   in paragraph 3 "Article 106 " is
      replaced by "Article 128 ".
66 .  Article 52 is renumbered Article 59 .
(a)   In point (a) "where the contract . . . involves an amount not exceeding
      6 500 Ecus" is replaced by the phrase "within the limit laid down in
      the implementing rules provided for in Article 128 " .
(b)   In point (b) "Article 51 " is replaced by "Article 5 8".
67 .  Article 53 is renumbered Article 60 .
 ---pagebreak---                                        - 37 -
68 .    Article 54 is renumbered Article 61 . It is replaced by the
        following :
                                   "Article 61
Each Institution shall set up its own advisory committee on procurements
and contracts to express an opinion on contracts before the authorizing
officer takes the decision .
If required , an advisory committee on procurements and contracts common to
all the institutions may be set up .
Details of the operation of these committees and the limit values for the
contracts of which they are to be consulted shall be laid down in the
implementing rules provided for in Article 128 ."
69 .    Article 55 is renumbered Article 62 .    In the first paragraph "Article
        54 " is replaced by "Article 61 ".
70 .    Article 56 is renumbered Article 63 .    The third paragraph is replaced
        by the following :
"Beyond . the limit laid, down by the implementing rules provided for in
Article 128 , the provision of security shall be obligatory . A guarantee
may be retained until final acceptance . "
71 .    Article 57 is renumbered Article 64 .    It is replaced by the
        following :
                                   "Article 64
Contracts may be made against invoice or bill of costs within the limits
laid down by the implementing rules provided for in Article 128 . "
72 .    Article 58 is renumbered Article 65 .    It is replaced by the
        following :
                                   "Article 65
Without prejudice to the provisions laid down in this Financial Regulation,
when concluding contracts referred to in this Regulation , each institution
shall comply with the Council Directives^- on        public works and
1 TTia following Directives were in force at the time this Regulation was
     drawn up :
     (a) public works :    Directive 71/305/EEC of 26 July 1971
                           (OJ L 185 , 16.8.1971 , p.5) amended by Directive
                           78/669/EEC of 2 August 1978 (OJ L 225 , 16.8.1978 ,
                           p.4l ).
(b)
(b)     supplies ::
        supplies           Directive 77/62/EBC of 21 December 1976 (OJ L 13 ,
                           15.1.1977 , p.l ) amended by Directive 80/767/EEC of
                           22 July 1980 (OJ L 215 , 18.8.1980 , p.l).
 ---pagebreak---                                      - 38 -
supplies , whenever the amounts involved are equal to or greater than the
amounts provided for in those Directives .
The implementing rules provide! for in Article 128 shall include the
supplementary provisions which may be required in order to implement this
article . ”
73 .   Article 59 is renumbered Article 63 :
 (a)   In the first paragraph "permanent quantitative inventories " is
       replaced by "permanent inventories showing the quantity and value " .
(b)    In the final paragraph , the following phrase is added :
       "in accordance with the implementing rules provided for in
      Article 123 . "
74 .  Article 60 is renumbered Article 67 .   In the first paragraph "Article
       106 " is replaced by "Article 128 " .
75 .  Article 61 is renumbered Article 68 . In the first paragraph the
      phrase "disposed of " is replaced by "sold , given away free of charge ,
76 .  Article 62 is renumbered Article 69 .   In the first paragraph "Article
      59 " is replaced by "Article 66 " .
77 .  Article 63 is renumbered Article 70 .   In the last sentence the phrase
       "in European units of account" is replaced by "in Ecus ".
78 .  Article 64 is renumbered Article 71 .   It is replaced by the
      following :
                                  "Artide 71
The chart of accounts shall mahe a dear distinction between budgetary
accounts and cash accounts .
It shall comprise two parts :
(a)   accounts of budgetary expenditure and revenue , which show the
      detailed implementation of the budget ,
(b)   the balance sheet accounts , which disdose the assets of the
      institutions . These accounts shall show the expected effect of the
      Communities' legal obligations .
 ---pagebreak---                                      - 39 -
The detailed conditions for the establishment arid operation of the chart of
accounts for transactions relating both to assets and to the implementation
of the budget shall be determined by the implementing rules provided for in
Article 123 .
These accounts shall make it possible to draw up an annual balance of
assets and a monthly statement of revenue and expenditure by chapter and
article .
These statements shall be forwarded to the financial controller , the
authorizing officer and the Court of Auditors ."
79 .  Article 65 is renumbered Article 72 .
(a")  In the first paragraph "Articles 96 and 102 is replaced by
       "Article 100 ".
(b)   In the second paragraph "Article 42 “ is replaced by "Article 47".
80 .  Arti.de 66 is repealed .
SI .  Article 67 is renumbered Article 73 .
82 .  Article 68 is renumbered Article 74 .   The following sentence is
      added :
"The same shall apply if they neglect to issue payment orders or are ,
without justification , late in issuing them , thereby rendering the
institution liable to civil action by third parties . "
83 .  Article 69 is renumbered Article 75 .
84 .  Article 70 is renumbered Article 76 .
(a)   In the first subparagraph of paragraph i " the third paragraph of
      Article 46 " is replaced by " the third paragraph of Article 52".
(b)   In paragraphs 3 and 5 "Article 106 " is replaced by "Article 128 ".
(c)   The third and fourth subparagraphs of paragraph 3 are numbered
      paragraph 4 .
(d)   Paragraph 4 is renumbered paragraph 5 .
85 .  Article 71 is renumbered Article 77 .
86 .  Article 72 is renumbered Article 78 .
 ---pagebreak---                                      - 40 -
87 .    Article 73 is renumbered Article 79 .
(a)     The introductory words and point 1 are replaced by the following :
"The Commission shall draw up , not later than 1 May of the following year ,
a consolidated revenue and expenditure account of the general budget of the
European Communities for the financial year ended 31 December . The
consolidated revenue and expenditure account shall include :
1 . a table of revenue comprising :
- estimated revenue for the financial year ;
- amendments to the revenue estimates as a result of supplementary or
     amending budgets and additional revenue as specified in the second
     subparagraph of Article 4(2);
- entitlements established in the course of the financial year ;
- entitlements still to be collected from the preceding financial year ;
- revenue collected during the financial year and revenue carried over
     pursuant to Article 7(4);
- amounts still to be collected at the end of the financial year .
Statements shall be attached to this table showing revenue carried over
pursuant to Article 7(4) and , where appropriate , the balance and gross
amounts of the operations referred to in Article 27(2) ; "
(b)     In the last indent of point 2 "Article 6 " is replaced by "Article 7 ".
(c)     In point 3 :
- 4th indent : "Article 6 " is replaced by "Article 7 "
- 5th indent : "Article 6 " is replaced by "Article 7 "
- In the second paragraph "Article 22(2) is replaced by "Article 27(2)".
 ---pagebreak---                                          - 41 -
88 .    Article 74 is renumbered Article 80 . It is replaced by the
         following :
                                      "Article 80
Each institution shall , not later than 15 February , transmit to the
Commission , after submitting it to its financial controller , the
information required for drawing up the revenue and expenditure account and
the balance sheet , together with a contribution to the analysis of the
financial management referred to in Article 81 . "
89 .    Article 75 is renumbered Article 81 . (Amendment does not affect
        English version. )
90 .    Article 76 is renumbered Article 82 . It is replaced by the
        following :
                                     "Article 82
1 . The Commission shall draw up not later than 1 May a consolidated balance
     sheet of assets and liabilities of the Communities as at 31 December of
     the preceding financial yean .     A statement showing the movements and
     balances of the accounts at the same date shall be attached thereto .
2 . These documents shall be submitted to the financial controller . "
91 .    Article 77 is renumbered Article 83 . "1 June " is replaced by "1 May".
92 .    Article 78 is renumbered Article 84 .     It is replaced by the
        following :
                                     "Article 84
1 . The Court of Auditors and its members may , in carrying out the task of
     the Court , be assisted by officers of the Court . The Court itself or
     one of its members shall notify the authorities with which the delegated
     officer is to work of the tasks delegated to him .
2 . Parliament , the Council and the Commission shall inform the Court of
     Auditors , as soon as possible , of all decisions and rules taken pursuant
     to Articles 4(4 ), 7(2 ), ( 3) and (6), 9 , 17(1 ) and 26 .
 ---pagebreak---                                        - 42 -
3 . The Institutions shall transmit to the Court of Auditors any rules of
     procedure in respect of financial natters .
4 . The Court of Auditors shall be Informed of the appointment of
     authorizing officers , financial controllers , accounting officer and
     administrators of imprest accounts and of the acts of delegation or
     appointment under Articles 22 , 24 , 25 and 55 .“
93 .    Article 79 is renumbered Article 85 .   "Article 19 of Council
        Regulation (EEC , Euratam , ECSC) No 2891/77 and to Article 80 of this
        Financial Regulation" is replaced by "Article 18 of Council
        Regulation (EEC , Euratam , ECSC) No 2891/77 and to Article 86 of this
        Financial Regulation".
94 .    Article 80 is renumbered Article 86 .
(a)     (Amendment does affect Engl i sh version).
(b)     In the second paragraph "Article 82 " is replaced by "Article 88".
(c)     In the third paragraph "Articles 18 and 19 of Regulation (EEC ,
        Euratam , ECSC) No 2891/77 " is replaced by "Articles 17 and 18 of
        Regulation (EEC , Euratam , ECSC) No 2891/77".
(d)     The following fourth paragraph is added :
        "At the request of the Court of Auditors , each institution shall
        authorize outside persons to permit the Court to make any checks to
        ensure that external data tally with the accounts . "
95 .    Article 81 is renumbered Article 87 .
96 .    Article 82 is renumbered Article 88 .
(a)     In point (b) of the second paragraph " the first paragraph of
        Article 80" is replaced by " the first paragraph of Article 86".
(b)     The final paragraph is replaced by the following :
        "The grant , of Community funds to beneficiaries outside the
        institutions shall be subject to the agreement in writing by the
        recipients to an audit being carried out by the Court of Auditors on
        the utilization of the amounts granted . "
 ---pagebreak---                                        - 43 -
97 .    Article 83 is renumbered Article 89 . It is replaced by the
        following :
                                    "Article 89
The annual report of the Court of Auditors provided for in Article 78 of
the ECSC Treaty , Article 206a of the EEC Treaty and Article 180a of the
Euratam Treaty shall be governed by the following provisions :
1 . The Court of Auditors shall transmit to the Commission and the
     institutions concerned , by 15 July at the latest , any comments which
     are , in its opinion , of such a nature that they Should appear in the
     annual reports . These comments must remain confidential . Each
     lnsitutions shall address its reply to the Court of Auditors by
     31 October at the latest . The replies of the institutions other than
     the Commission shall be sent simultaneously to the Commission .
2 . The annual report shall contain an assessment of the soundness of
     financial management .
3 . Thp annual report shall comprise a section for each institution .     Each
     section shall contain all the comments of the Court of Auditors on the
     relevant institution .   The replies of each institution shall be
     published immediately following the comments relating to that
     institution .
4 . The Court of Auditors shall transmit to the authorities responsible for
     giving discharge and to the other institutions , by 30 November at the
     latest , its annual report accompanied by the replies and it shall ensure
     publication thereof in the Official Journal of the European
     Communities . "
98 .    Article 84 is repealed .
99 .    Article 85 is renumbered Article 90 .   It is replaced by the
        following :
                                    "Article 90
1 . Parliament , upon a recommendation from the Council , acting by a
     qualified majority , shall , before 30 April of the next year , give a
     discharge to the Commission In respect of the implementation of the
     budget . If that date cannot be met , Parliament or the Council shall
     inform the Commission of the reasons for the postponement .
2 . Parliament shall deliver its opinion on the discharge , in particular on
     the ba.gi g of the accounts of all revenue and expenditure of the
     Communities audited by the Court of Auditors .
3 . The financial controller shall take account of the comments in the
     decisions giving discharge .
 ---pagebreak---                                         - 44 -
 4 . The institutions shall take al l appropriate steps to act on the comments
      appearing in the decisions giving discharge .
 5 . At the request of Parliament or the Council , the institutions shall
      report on the rules taken in the light of these comments , and , in
      particular , on the instructions given to those of their departments
      which are responsible for the implementation of the budget . Such
      reports shall also be transmitted to the Court of Auditors .
6 . If Parliament decides to postpone the discharge the Commission must as
      rapidly as possible remove any obstacles to the discharge decision .
7 . Supporting documents pertaining to the accounts and the preparation of
      the revenue and expenditure account and the balance sheet shall be kept
      for a period of five years following the date of the decision giving
      discharge in respect of the implementation of the budget .
     However , the documents relating to transactions not finally closed shall
     be kept for longer than the said period until the end of the year
      following the year in which such transactions are finally closed . "
100 . The following new Article 91 is inserted :
                                     "Article 91
1 . In add i tion to the annual report , the Court of Auditors nay also , at any
      time , submit observations , in the form of special reports , on specific
     questions and deliver opinions at the request of one of the institutions
      of the Communities .
2 . The special reports shall be transmitted to the institution or body
     concerned .
     The institution concerned shall have two and a half months in which to
     inform the Court of Auditors of any comments it wishes to make on the
     observations in question .
     Should the Court of Auditors decide to have such observations published
     in the Official Journal of the European Communities , it shall include
     after them any comments submitted by the institution or institutions
     concerned .
3 . If the opinions referred to in paragraph 1 do not relate to proposals
     for legislation or draft legislation on which it has been consulted , the
     Court of Auditors shall not publish them unless the institution which
     lias requested the opinion and the institution concerned agree . In this
     case , these opinions shall be accompanied by the replies of the
     institution or institutions concerned . "
 ---pagebreak---                                       - 45 -
101 . TITLE VII : the heading is replaced by the following :
                                    "TITLE VII
                        SPECIAL PROVISIONS APPLICABLE TO
            RESEARCH AND TECHNOLOGICAL DEVELOPMENT APPROPRIATIONS "
102 . Articles 86 to 94 are replaced by the following :
                                   "Article 92
The provisions of Titles I to VI and XII shall apply to the research and
technological development appropriations entered in the special section
provided for in Article 93 , save as otherwise provided in this Title or
where they are incompatible with the special provisions of this title .
                                   Article 93
1 . The appropriations relating to the activities covered by this Title
    shall be entered in a special section in the part of the budget devoted
    to operating appropriations .
    This section shall contain the appropriations intended for the
    realization of research and technological development objectives through
    the implementation of the following :
(a)    direct action , consisting of research programmes carried out by the
       establishments of the Joint Research Centre (JRC) and in principle
       entirely financed from the general budget of the European
       Communities ;
(b)    indirect action , consisting of programmes carried out under contracts
       to be concluded with third parties and in principle partially
       financed from the general budget of the European Communities
       (shared-cost action projects);
(c)    concerted action , consisting of work undertaken by the Community to
       coordinate the individual research projects carried out in the Member
       States , in respect of which the administrative expenditure alone is
       financed from the general budget of the European Communities ;
 ---pagebreak---                                      - 46 -
 (d)   possible financial contributions by the Community to supplementary
       programmes in accordance with Article 130 L. of the EEC Treaty , or to
       research and development programmes undertaken by several Member
       States , including participation in the structures created for the
       execution of those programmes , in accordance with Article 130 m of the
       EEC Treaty , or cooperation with third countries or international
       organizations as provided for in Article 130 n of the EEC Treaty ;
(e)    other activities of the JRC such as exploratory research , scientific
       and technical support activities for the Commission and services for
       outside bodies and individuals .
2 . The appropriations for projects under the framework programme of
    activities in the field of research and technological development sha.i i
    be entered separately in this section .
                                  Article 94
1 . The nomenclature of the special section provided for in Article 93 shall
    be based on the purpose of the expenditure in achieving research and
    technological development objectives or in the other activities referred
    to in that Article .
    The remarks for each subdivision shall also show :
    - the number of staff assigned for the current year ,
    - details of supplementary programmes , programmes undertaken by several
       Member States and cooperation with third countries or international
       organizations , with an indiction of the amount of any financial
       contribution from the Community .
2 . However , staff appropriations for the Joint Research Centre shall be
    entered separately in a single Chapter .
 ---pagebreak---                                       - 47 -
                                   Article 95
The following shall be annexed to the special section referred to in
Article 93 :
- a table of equivalence giving the breakdown by purpose and type of
   expenditure of the appropriations made available in the section , as
   specified in the implementing rules provided for in Article 128 .
   For management purposes , the Commission may create appropriation
   accounts corresponding to the instruments of implementation;
- a provisional schedule of commitments and payments showing the planned
   utilization of the commitment appropriations and the corresponding
   payment appropriations .
   The schedule shall be reviewed annually .
                                  Article 96
Notwithstanding     Article    _26*      the Commission may , within the
special section referred to in Article 93 , transfer appropriations from one
chapter to another within a limit of 15% for the commitment appropriatons
relating to the activities referred to in Article 93(1 ) (a) and (e),
provided that these activities fall under the framework programme .
These   ' transfers    ■ . may  not . v have the effect of increasing the
appropriations earmarked for exploratory research by more than 5% of the
initial allocation for the total appropriations in respect of the JRC tinder
the framework programme .
Thlg special provision does not concern staff appropriations for the JHC .
 ---pagebreak---                                        - 48 -
                                    Article 97
1 . The Commission may provide services for outside bodies or individuals ,
    in accordance with the remarks in the budget for the chapters and
    articles in question .
     Notwithstanding     Article     5,      the resulting revenue may give rise
    to additional appropriations :
    - in commitments , equal to the amount of the repayments provided for in
        the contracts concluded with the outside bodies or individuals ,
    - in payments , equal to the entitlements established from these
        repayments .
2 . .Notwithstanding    Article 7(2 ), additional    appropriations shall be
    maintained until they are cancelled by means of the revenue and
    expenditure account .
3 . Where provision is made in the remarks column for certain categories of
    expenditure to be repaid to the general budget , such repayments shall be
    booked to the statement of revenue , in accordance with the implementing
    rules , tinder headings entered specifically for this purpose .
                                    Article 98
With regard to the award of contracts in the fields falling under this
Title , the implementing rules provided for in Article 128 may lay down
special provisions on :
- the limit values determining the conditions for concluding contracts ,
- the operation and the determination of the powers of the advisory
    committee on procurements and contracts . "
 ---pagebreak---                                         - 49 -
 103 . Article 95 is renumbered Article 99 . It is replaced by the
          following :
                                     "Article 99
 This Title shall apply to expenditure financed under the EAGGF , Guarantee
 Section , in accordance with Regulation (EEC) No 729/70 , effected through
 the authorities or bodies referred to in Article 4(1 ) of         Regulation
 (EEC) No 727/70 , under the implementing provisions adopted pursuant to
 Article 5(3) of that Regulation.
 Special operations which the Commission manages directly , shall be
 implemented in accordance with the rules laid down in Title III of this
 Regulation . "
 104 .   Article 96 is renumbered Article 100 .
 (a)     The first and second paragraphs are numbered paragraph 1 .
 (b)     The following paragraph is added :
 "2 .    The Commission  shall rake a monthly report to Parli ament and the
         Council . This  communication on actual expenditure shall be
         accompanied by  any information which it deems appropriate within the
         context of the  early warning system provided for in Article 6 of
         Decision 88/ 377/EEC . "
 105 .   Article 97 is renumbered Article 101 .  In paragraph 2 "Article 96 " is
         replaced by "Article 100 ".
 106 .   Article 98 is renumbered Article 102 .
 107 .   Article 99 is renumbered Article 103 . In paragraph 3 "Articles 97
         and 98 " is replaced by "Articles 101 and 102 ".
108 .    Article 100 is renumbered Article 104 .  It is replaced by the
         following :
                                    "Article 104
ffl nba.1 provisional commitments which have been made for a financial year in
accordance with Article 100 and which have not been specifically committed
under the budget nomenclature in accordance with Article 101 by 1 February
of the following financial year , shall be released under the original
financial year . "
 ---pagebreak---                                      - 50 -
109 . Article 101 is renumbered Article 105 .    It is replaced by the
       following :
                                  "Article 105
1 . Transfers from one article to another within each chapter shall be made
    by decision of the Commission , to be taken not later than 31 January in
    accordance with the procedure provided for in Article 13 of Regulation
    (EEC) No 729/70 .
    The Commission shall inform the budgetary authority of such transfers .
2 . Not later than one morth before 31 January of the following financial
    year , the Commission may submit proposals to the budgetary authority for
    transfers of appropriations from one chapter to another . Acting by a
    qualified majority , the Council shall take a decision within three
    weeks , after consulting Parliament , in accordance with Article 26 . If
    it does not act within that period , the transfers of appropriations
    shall be deemed to be approved .
3 . Decisions on transfers relating to the monetary reserve referred to in.
    Article 19(6) shall be taken by the budgetary authority in accordance
    with Article 26(5 ) (a).
4 . Decisions on transfers between the EAGGF Guarantee Section headings to
    which refunds in connection with food, aid are charged and the food aid
    chapter , which are made necessary by changing requirements , in relation
    to the appropriations authorized , in the parts of the eirpenditure
    chargeable to the respective headings shall be taken by the Commission .
    The Commission shall inform the budgetary authority of such transfers
    fifteen days in advance . "
 ---pagebreak---                                           - 51 -
 110 .    Title IX and Article 102 are deleted .
 111 .    The following new Title IX is inserted :
                                       " TITLE IX
                            SPECIAL PROVISIONS APPLICABLE
                                    TO EXTERNAL AID
                                       БЕСИШ I
                                  GENERAL PROVISIONS
                                      Article 106
1.     Subject to derogation , the provisions of Titles I to VI and XII shal 1
       apply to foreign aid financed from the Community budget , in so far as
       they are not incompatible with the provisions of this Title .
2 . The appropriations assigned by the Caranunity to its cooperation policy
       fihal T be used either under coooeration agreements with a financial protocol
        (" preferential agreements ") or as aid granted unilaterally .
3.    The appropriations may be earmarked in particular for grant aid ,
       special loans , risk capital or interest rate subsidies , and shall be
      used by the Commission , which may confer authority on behalf of the
      Community to administer a part thereof , either on the European
      Investment Bank or , under its responsibility , on other organizations .
      This provision shall not prejudice the audit powers of the Court of
     Auditors under Article 2C6a of the EEC - Treaty .
4 . The following provisions shall govern the use of appropriations by the
     Commission .
5 . The amount of special loans and risk capital granted shall be shown in
      the balance sheet provided for in Article 82 .
 ---pagebreak---                                     - 52 -
                                  Article 107
1 . Any cooperation project adopted by the Commission may be covered by :
   - a financing agreement drawn up between the Commission , acting for the
     Community , and the Government of the recipient State or the governing
     bodies of the recipient organizations or institutions , hereinafter
     referred to as the recipient ,
   - or a contract with international organizations , or natural or legal
     persons responsible for carrying out the project .
2.   The financing agreement or contract shall determine the financial
     commitment of the Community for the measure concerned . No expenditure
     in excess of this amount may be charged to the budget without an
     additional commitment .
3.   In addition , a loan contract shall be drawn up between the Commission ,
     acting for the Community , and the borrower in respect of any investment
     project financed by a special loan .
 ---pagebreak---                                     - 53 -
                              SECTION         H
                                IMPLEMENTATION
                                 Article 108
Projects covered by a financing agreement shall be implemented by the
recipient in close collaboration with the Commission , which shall retain
responsibility for the utilization of appropriations .
                                 Article 109
1.  The functions performed by the Commission nay be referred to in the
    preferential agreements or the financing agreements as those of chief
    authorizing officer .
2.  The Commission , in close cooperation with the recipient , shall ensure
    that participants in tendering procedures can compete on an equal
    footing , that there is no discrimination and that the tender selected
    is economically the most advantageous . In particular , it shall approve
    the terms of the invitation to tender before it is Issued , be apprised
    of the results of the examination of the tenders , and approve the
    proposal for the award of the contract .
                                 Article 110
1 . In the case of preferential _ . agreements           in particular , the
    recipient may appoint a national authorizing officer to represent the
    national authorities in «n operations relating to projects financed by
    the Community which are the subject of an agreement between the recipient State
    and the Community .
2 . The recipient shall submit invitations to tender to the Commission for
    agreement before issuing them . On the basis of the decisions thus
    endorsed and in close cooperation with the Commission , the recipient
    shall issue invitations to tender , receive tenders , preside over the
    examination of tenders and establish the results of the tendering
    procedure .
 ---pagebreak---                                    - 54 -
3. It shall transmit to the Commission for agreement the results of the
   examination of the tendering procedure and. a proposal for the award, of
   the contract . It shall sign contracts , additions to contracts , and
   estimates and shall notify the Commission thereof . For contracts ,
   additions to contracts , and estimates , the Commission , where
   appropriate , shall enter into individual commitments in accordance with
   the procedures laid down in Articles 37 to 40 . Individual commitments
   shall count towards the commitments under the financing agreements
   provided for in Article 107(2) .
4. Where appropriate , the recipient shall validate and authorize any
   expenditure which is the subject of an agreement between that State and
   the Community against appropriations committed by the Commission . It
   shall remain financially liable to the Commission until the Commission
   clears the operations for the execution of which the recipient is
   responsible .
                                Article 111
1. For the purposes of applying the preferential agreement or convention
   between the Community and the recipient State , and in respect of the
   appropriations for which it is the authorizing officer , the Commission
   may be represented in the recipient State by a representative approved
   by that State .
2. While operations are in progress the Commission 's representative shall
   verify , on the basis of documents and on the spot , that the work or
   services comply with their description in the financing agreements ,
   contracts or estimates .
 ---pagebreak---                                            - 55 -
                                        Article 112
1 . For payments in a currency other than that of the recipient State , the
     Commission shall make payment direct for services provided in
     connection with projects financed with grant aid .
2.   For payments in the currency of the recipient State , accounts
     denominated in Ecus may be opened with a financial institution in the
     recipient State in the name of the Commission or of the recipient .
     In the case of preferential              agreements ,..    the tasks referred
     to in paragraphs 5 and 6 may be entrusted to a financial institution ,
     referred to as the paying agent .
3.   The accounts referred to in paragraph 2 shall be replenished to meet
     actual cash requirements . Transfers shall be made in Ecus or ,
     exceptionally , in the currency of a Member State and converted into the
     currency of the recipient State as payments fall due , at the exchange
     rate ruling on the day of payment .
4.   Interest on the deposits in the accounts referred to in paragraph 2 shall be used exclu¬
     sively for the projects concerned, unless agreed otherwise when the functions
     of payiig agent axe being exercised by a public financial institution .
    The paying agent shall not be remunerated for his services .
5.  Within the limits of the funds available , the paying agent , after
     obtaining the approval of the Commission 's representative , shall make
     the payments authorized after verifying that the supporting documents
    provided axe substantively accurate and in order .
6 . At regular intervals , and at least once a quarter , the paying agent
    .cfha.1 1 send the Commission a statement of actual expenditure and
    revenue , together with supporting documents .
 ---pagebreak---                                         - 56 -
7.   Payments made and revenue received in the currency of the recipient
     State sha.11 be subject to a clearance procedure before they are finally
     booked to the budget appropriations . Clearance shall consist of an
     examination by the Commission to establish that validation ,
     authorization and payment and the collection of revenue have been
     properly effected , in accordance with this Regulation .
                               SECTION             III
                                AWARD OF CONTRACTS
                                    Article 113
 Notwithstanding ~     Title    IV    7 of this Financial Regulation , the award
of contracts financed by the Community for recipients of external aid shall
be governed by the following provisions .
                                    Article 114
The procedure to be followed for the award of works , supply or service
contracts , or the conclusion of technical cooperation contracts , shall be
specified in the financing agreement , subject to the following principles .
                                    Article 115
1.   Participation in tendering procedures shall be open on equal terms to
     all natural and legal persons coming within the scope of application of
     the Treaties and to all natural and legal persons in the recipient State .
     The specifications shall therefore require tenderers to state their
     nationality and to present the supporting evidence nonrally acceptable
     under their own law .
2 . By way of exception , it may be decided , on the basis of the specific
     conditions laid down in the basic instruments governing cooperation , to
     allow nationals of third countries to compete for contracts financed by
     the Community .
 ---pagebreak---                                      - 57 -
                                 Article 116
The Commission and the recipient shall take the necessary implementing
measures to ensure that participants in tendering procedures        other
procedures for the award of contracts financed by the Community ran compete
on an equal footing .
To this end , without prejudice to Articles 117 and 119 , care whai i be taken
in particular to :
(a) ensure advance publication in reasonable time of invitations to tender
    in the Official Journal of the European Communities and the official
    journal of the recipient State ;
(b) eliminate any discriminatory practice or technical specification liable
    to hamper participation on equal terms by all natural or legal persons
    of the Member States and of the recipient State .
                                 Article 117
In urgent cases or where the nature , small scale or particular
characteristics of certain works or supplies so warrant , the Commission or
the recipient may , by agreement with the Commission stating the reasons
therefor , exceptionally authorize :
- the award of contracts after open invitations to tender , confined to a
  specific geographical area ;
- the award of contracts after restricted invitations to tender ;
- the conclusion of contracts by private treaty ;
- the performance of contracts through public works departments .
                                 Article 118
The Commission and the recipient shall ensure that Articles 116 , 117 and
119 are observed for each operation and that the tender selected is
economically the roost advantageous , with due regard notably to the price ,
utilization costs , technical value , the qualifications of and the
guarantees offered by the terderers , the nature and conditions of execution
of the works or supplies .
The Commission and the recipient shall ensure that all the selection
criteria are specified in the invitation to tender .
The result of invitations to tender shall be published at the earliest
possible date in the Official Journal of the European Communities .
 ---pagebreak---                                     - 58 -
                                 Article 119
1.  Contracts for services and. technical cooperation shall be awarded after
    restricted invitations to tender .
2.  However , some contracts may be awarded by private treaty , particular in
    the following cases :
    - short projects or projects of minor importance ,
    - projects being carried out by non-profit institutions or
      associations ,
    - extensions to projects already under way ,
    - where the invitation to tender has been unsuccessful .
3.  Contracts for services and technical cooperation shall , as a rule , be
    prepared , negotiated and concluded by the Commission .
4.  In the case of preferential        agreements ,    . or in cases where
    express provision is made therefor in the financing agreements , the
    tasks referred to in paragraph 3 shall be delegated to the recipient ,
    in agreement and in collaboration with the Commission 's representative .
                                 Article 120
Only service contracts awarded in the interests of the Commission shall be
governed by the provisions of Articles 57 to 65 .
 ---pagebreak---                                   - 59 -
                            SECTION         IV
                           AUDITING O? AOOOÜNTS
                                Article 121
1. Each, agreement shall make express provision for the Court 's power of
   audit .
2. Should the Court of Auditors wish to carry out audits on the territory
   of recipient States , or States in which recipients are located , it
   shall do so by agreement with the relevant authorities of the State
   concerned . Such audits shall be limited to the inspection agreements
   implemented pursuant to the provisions governing Community aid and
   shall not apply in respect of the execution arrangements which are the
   responsibility of the national authorizing officer ."
 ---pagebreak---                                        - 60 -
112 .   The following new Title X is inserted :
                                      "TITLE X
                 SPECIAL PROVISIONS APPLICABLE TO THE MANAGEMENT
                  OF APPROPRIATIONS RELATING TO STAFF SERVING
               OUTSIDE THE COMMUNITY AND TO THEIR AIKINISTRATTON
                                   Article 122
The provision of Titles I to VI and XII shall apply to activities in this
field , in so far as they are not incompatible with the provisions of this
Title .
                                   Article 123
The expenditure of a financial year shall be booked to the accounts for
that year on the basis of the expenditure for which notification of
authorization reaches the Financial Controllor not later than 31 December
and in respect of which payment is made before 15 January . However ,
expenditure involving payments made not later than 31 December under the
imprest accounts may still be booked to the accounts for that year up to 15
February of the following year .
                                   Article 124
In accordance with Article 128 the Commission shall adopt implementing
rules relating , in particular , to :
- the award of contracts ;
- the keeping of inventories ;
- the system of accounts ;
- imprest accounts ."
 ---pagebreak---                                          - 61 -
 113 .    Title X is renumbered Title XI .
 114 .    Article 103 is renumbered Article 125 .
 (a) Paragraph 2 is replaced by the following :
        "2 . The appropriations for the Office , the total amount of which sbai i
             be entered under a special budget hiding within the section for
             expenditure common to all the institutions , shAii be set out in
             detail in an annex to that section . The appropriations shown under
             this specific budget heading may be transferred in accordance with
             the conditions set out in Article 26 .
             The annex shall take the form of a statement of revenue and
             expenditure , subdivided in the same way as the sections of the
             budget .
             The appropriations entered in that annex shall cover all the
             financial requirements of the Office in the performance of its
             duties in the service of the Community 's institutions .
       3 . 'Where necessary , the estimates nay be adjusted during the financial
             year by the Management Committee of the Office , which shall take
             decisions on the transfers required within the annex as a result of
             such adjustments . It shall inform the budgetary authority three
             weeks before effecting transfers from one chapter to another ."
(b) Paragraph 3 is renumbered paragraph 4 . The third subparagraph is
     deleted .
(c) Paragraph 4 is deleted .
(d) In the second subparagraph of paragraph 6 , "Article 22 " is replaced by
       "Article 27 ".
(e) In the second subparagraph of paragraph 8 , the sentence "such payments
     nay not exceed the total amount of the appropriations entered for this
     purpose in the Commission budget " is replaced by "such payments may not
     exceed the total amount of the appropriations entered for this purpose
     in the section for expenditure common to «.n the institutions , which
     contains a.n the appropriations for the Publications Office ".
(f) in paragraph 9 "Articles 73 and 76" is replaced by "Articles 79 and
      82 ".
 ---pagebreak---                                      - 62 -
115 . The following new Article 126 is ineerced :
                                  "Article 126
The financial rules of Community bodies with legal personality which
receive subsidies from the general budget shall take over as far as
possible the provisions of this Regulation and diverge from them only when
their specific operational requirements warrant . "
116 .   Article 104 is renumbered Article 127 .
117 .   Article 105 is deleted .
118 . Article 106 is renumbered Article 123 .   It is replaced by the
following :
                                  "Article 128
After consulting the other institutions , whoses opinions must be given
within two months , the Commission shall adopt rules for implementing this
Financial Regulation . It shall inform all the institutions of these
rules . "
119 . Article 107 is renumbered Article 129 .   It is replaced by the
following :
                                  "Article 129
"Amendments to this Financial Regulation , proposed by the Commission , shall
be adopted by the Council after conciliation with Parliament ."
120 .  Article 108 is deleted .
 ---pagebreak---                                          - 63 -
121 .    His following new Article 130 is inserted :
                                      "Article 130
Until the entry into force of the implementing rules provided for in
Article 126 , the limit values to be specified for the purposes of
Articles 59 , 61 , 63 , 64 and 98 shall be as follows :
- Article 59 , first paragraph , subparagraph (a): the limit below which
  contracts may be made by private treaty shall be 15 000 Ecus ;
- Article 61 : the limit above which the powers of the Advisory Committee
  on Procurements and Contracts take effect shall be 50 000 Ecus ;
- third paragraph of Article 63 :       the threshold for compulsory security
  Shall be 350 000 Ecus ;
- Article 64 : the limits below which contracts may be made against invoice
  or bill of costs shall be 750 Ecus and 2 000 Ecus respectively for
  expenditure away from the provisional places of work ;
- Article 98 :       the limit below which contracts may be made by private
  treaty shall be 75 COO Ecus for scientific and technical equipment and for
  works contracts ;
- the limits for the powers of the Advisory Committee on Procurements and
  Contracts shall be :
  . 350 000 Ecus for scientific and technical contracts and contracts
      relating to the purchase of buildings ;
  . 75 000 Ecus for equipment and supply contracts not of a scientific or
      technical nature ;
  . 25 000 Ecus for equipment and supply contracts not of a scientific or
      technical nature , to which the provisions of Article 59 (c), (d) and
      (e ) apply . "
 ---pagebreak---                                    ARTICLE 2
rhi g Regulation shaT 1 enter into force on –
 This Regulation shall be binding in i^s entirety and directly applicable in
 all Member States .
                                                 Done at Brussels ,