Explanatory Memorandum to COM(2006)213 - Modified proposal for a Council Regulation amending Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the EC - Main contents
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| dossier | COM(2006)213 - Modified proposal for a Council Regulation amending Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation ... |
|---|---|
| source | COM(2006)213  |
| date | 18-05-2006 |
The recast Financial Regulation ('FR') was adopted by the Council, acting unanimously, in June 2002, after recourse to a successful conciliation procedure with the European Parliament and after significant input from the Court of Auditors. In December 2002 the Commission adopted the implementing rules ('IR') of the recast FR after extensive consultation of the institutions. Both regulations, which apply to all institutions, entered into force on 1 January 2003.
According to its Article 184, the FR is subject to review every three years, or whenever it proves necessary to do so. In compliance with this obligation, on 3 May 2005 the Commission adopted a proposal for revising the FR.
As provided for in Article 279 of the Treaty establishing the European Community, the Commission's proposal was submitted to the European Parliament for consultation and to the Court of Auditors for an opinion. The other institutions were also informed.
The results of the inter-institutional consultations are as follows:
a) The European Economic and Social Committee (“EESC”), whose opinion is not required under Article 279 TCE, delivered a broadly favourable opinion in October 2005.
b) The Court of Auditors (“ECA”) delivered a broadly favourable opinion in December 2005, while considering that the extent of the revision is too wide and expressing some concern in specific areas.
c) The European Parliament voted its amendments during the plenary session of 15 March 2006. Parliament presented 134 amendments which represents by far the most substantial contribution to the Commission's proposal.
d) The Council completed its first reading of the Commission proposal in March 2006.
The Commission also had extensive consultations with the representatives of civil society and in particular NGOs on the difficulties perceived by them in the implementation of the FR. (hearings in the ECOSOC and EP as well as meetings with Commission services).
The Commission is now taking the initiative of presenting a modified proposal for revising the FR, incorporating to a large extent the opinions of the other institutions and taking account of the concerns expressed by the representatives of civil society. This modified proposal should help to build inter-institutional consensus by accepting the most important requests of the institution and reducing the areas of disagreement, notably between Council and Parliament.
It is recalled that in accordance with Article 184 of the FR a conciliation procedure (within the meaning of the Joint Declaration of 4 March 1975) between Council and Parliament, if the European Parliament so requests, with the active assistance of the Commission, must take place before the Council adopts the revision of the FR. The objective is to reach agreement on the modified proposal during the first half of 2006. This would leave the Commission the second half of the year to prepare the IR linked to the revision of the FR, so that both regulations can enter into force on 1 January 2007.
Contents
- 2. THE COMMISSION'S MODIFIED PROPOSAL FOR REVISING THE FR
- 3. EXPLANATION OF THE MAIN AMENDMENTS
- 3.1. Budgetary principles
- 3.2. Establishment and structure of the budget
- 3.4. Financial Actors (Articles 58-68)
- 3.5. Revenue and expenditure operations (Articles 69-83)
- 3.6. Public procurement and contracts
- 3.7. Grants
- 3.8. Accounting
- 3.9. Administrative appropriations
- 3.10. Recruitment of experts for evaluation of proposals and follow-up and evaluation of projects
- 3.11. Transitional and Final Provisions
The Commission is proposing amendments to its initial proposal in order to take account of the opinions of the other institutions and of comments made during the first reading in the Council. These amendments do not change the basic structure of the Commission’s initial proposal and its key elements. They preserve the “ acquis ” of the financial reform, and strike a better balance between the protection of the financial interests and the proportionality of administrative costs and user-friendly procedures.
In compliance with the 'presentation rules for amended and re-examined proposals' i , the amendments to the Commission's first proposal (COM (2005)181 final) have been highlighted using strikethrough for deleted text and bold and underlined for new or amended text.
a) The proposed modification in Article 8, specifying that own resources paid in advance should be treated as revenue in the following financial year, is deleted as the Council expressed a negative view on this change.
b) The possibility to commit expenditure in advance is maintained as an exceptional measure for crisis management aid and humanitarian aid, but it is specified that the budgetary authority should be informed ex-post of such commitments (amendment No 30 of the Parliament).
c) Cross-references are updated in Articles 11 and 18 to ensure internal consistency within the text.
d) In Article 19, the requirement for authorisation by the budgetary authority is limited to donations involving a financial charge exceeding 10% of the donation made, in compliance with the view expressed by the Council on this Article. Thus, the rights of the budgetary authority are preserved whilst respecting the principle of proportionality as requested by the Parliament.
e) As regards the transfers of appropriations by the institutions other than the Commission, the Parliament asked for the status quo to be maintained (amendments No 34 to 38). Article 22 has been amended accordingly. However, certain provisions on the transfers of the other Institutions have been transferred from the IR to the FR for reasons of legal certainty and better legibility of the texts.
f) As regards the transfers of the Commission, it is necessary to provide for some flexibility for transfers regarding staff expenditure during the last three months of the financial year. To this end, the Commission should decide autonomously on these transfers within the limit of 10 % of the appropriations and inform the budgetary authority in the following month (Article 23 i, second subparagraph). This proposal partially integrates Parliament's amendments Nos 39, 41 and 42. At the same time, for reasons of efficiency (to avoid delays) the Commission should be allowed, after the adoption of the legal basis, to decide autonomously on purely mechanical transfers of appropriations placed in reserve when the budget is adopted for lack of legal basis (Article 23(1)(d); but the Commission should inform ex-post the budgetary authority of these transfers (Parliament's amendment No 40). Cross-references are updated in paragraph 2.
g) An editorial correction is proposed in Article 26, taking into account changes of terminology in Part II of the FR.
h) In line with Parliament's amendment No 50, the scope of Article 28 on financial statements is extended in order to cover legislative proposals presented by Member States in accordance with the Treaty on European Union, and substantial amendments to a legislative proposal which have an impact on the budget.
i) In accordance with Parliament's amendments Nos 45 to 48, the principle of proportionality laid down in Article 5 i of the Treaty establishing the European Community is properly reflected in the new Chapter 7a of the FR.
j) In line with Parliament recommendation No 52 of the report on the discharge for 2004, transparency has to be reinforced by providing for information on beneficiaries of Community funds, irrespective of the mode of the implementation of the budget.
k) In line with the ECA opinion No 2/2004 i, the support of the European Parliament i and Council i towards an effective and efficient integrated internal control framework and the Commission’s commitment in its Action Plan i, a new budgetary principle is added in Chapter 9 of the Title II. This new principle is designed to improve the implementation of the budget, the effectiveness and efficiency of the operations, the reliability of financial reporting, the protection of the financial interests of the Communities and the management of the risks relating to the legality and regularity of the underlying transactions. in such a way as to reach a tolerable level of risk. The terminology used in Articles 60, 66 and 86 is modified accordingly.
l) Concerning Parliament’s amendment No 51 on the follow-up given to the budgetary remarks, the Commission confirms its willingness to supply the Parliament with any information it may consider appropriate to request pursuant to Article 182.
a) In compliance with the new budgetary principle on effective and efficient internal control, information on the tolerable risk of errors should be included in the Activity Statement (Article 33).
b) In line with the opinion of the Court of Auditors, the summary statement of the schedules of payments is included in the list of working documents attached to the preliminary draft budget (Article 33).
c) The amendments to Articles 26, 45 and 46 are maintained in line with the proposed adoption of a new provisioning mechanism for the Guarantee Fund for external actions i. Their final outcome will depend on the legislator’s stand on the proposed mechanism.
3.3. Implementation of the budget – Methods of management (Articles 48-57)
a) In line with the request of the Council, for reasons of legal clarity, some adjustments have been made in Article 49 in order to better reflect the specificities of the Common Foreign Security Policy (CFSP) and to provide for more rapid financing of EU crisis response actions. As the basis for the implementation of expenditure is a basic act adopted by the Council, it appears more appropriate to identify the respective basic acts under the EC Treaty and Title V and VI of the TEU in Article 49 FR instead of in the IR (as is currently the case). In addition, a specific provision is added in order to properly reflect the types of preparatory measures that may be undertaken in the field of the CFSP.
b) In line with Parliament’s amendment No 59, it is specified in Article 50 that the institutions implement their sections of the budget within the limits of the appropriations authorised.
c) For the purpose of clarity, Article 53 is restructured and split into several articles: one general Article and four Articles corresponding to the different methods of implementation. The modifications introduced take account of amendments No 60 and 61 of the Parliament. Also in line with amendment No 62 of the Parliament and requests by several delegations in the Council, the use of bodies, including “national agencies”, is authorised in decentralised management.
d) Following the new inter institutional agreement (point 44) in order to strengthen an integrated internal control of Community funds under shared management, Member States shall submit to the Commission an annual summary at the appropriate national level of the available audits and declarations.
e) In order to enlarge the possibilities of delegation of tasks to Community bodies, Article 54(2)(b) is completed to include in particular the European Investment Bank and the European Investment Fund in order to allow them to carry out specific tasks requiring a high degree of specialisation and expertise notably for the management of instrument referred to in Article 108(2)(c).
a) Article 60 i, which specifies the content of the annual activity report of the authorising officers, has been modified in accordance with Parliament's amendment No 66.
b) In line with Parliament's amendment No 68, the accounting officer, when certifying the accounts, is empowered to make such checks as he considers necessary to the accounts and to make reservations.
c) A small editorial correction is proposed in Article 63, in line with the Council's initial reaction on this issue.
d) As requested by the Parliament (amendment No 69), the application of the financial liability of authorising officers is clarified and, in cases of gross negligence, limited to one year’s salary. For the sake of consistency and equal treatment, the same conditions and limitations should apply to all financial actors and any other persons involved in budget implementation
(e) In line with comments during the Council discussions, the possibility introduced in Article 66(2a) for the authorising officer to refer a matter to the financial irregularities panel is withdrawn, but will be introduced in the implementing rules.
f) In line with Parliament’s amendment No 70 and the Court of Auditor’s opinion, the establishment by several institutions of joint financial irregularities panels is made possible.
a) In accordance with the Protocol on the position of Denmark and the Protocol on the position of the United Kingdom and Ireland annexed to the Treaty on European Union and the Treaty establishing the European Community, Article 72 has been amended in order to properly reflect the special position of these Member States with respect to Title IV of the EC Treaty.
b) In accordance with Parliament's amendment No 75, the direct debit system is authorised for periodic payments of administration or running costs.
a) The FR should provide the possibility of framework contracts pursuant to EP amendments Nos 14 and 80 and, in line with Parliament’s amendments Nos 13 and 78 and a comment from the Court of Auditors, the possibility of carrying out procurement procedures on an interinstitutional basis. The FR should also contain the principle of the prior information procedure before a contract awarded by the institutions on their own account can be signed, in accordance with EP amendment No 93.
b) In line with the Court of Auditors' reaction and comments in the Council, the distinction between obligatory and optional grounds of exclusion is deleted. Pursuant to the EC Public Procurement Directive i, a specific rule should nevertheless be laid down for the purchase of supplies on particularly advantageous terms from either a supplier which is definitively winding up its business activities, or the receivers or liquidators of a bankruptcy, in the case of an arrangement with creditors or a similar procedure under national law. According to amendments No 15 and 82, the maximum duration of legal exclusion should also be fixed in the FR.
c) In line with the remarks of the ESC, the suggestion from the Court of Auditors and amendment No 88 of the EP, a central database for the purposes of exclusion of economic operators from a procurement or grant procedure should be set up and operated by the Commission. The database should be common to the institutions, executive agencies and bodies referred to in Article 185. Member States, third countries and other bodies participating in the implementation of the budget, should communicate to the competent authorising officer information on the most relevant cases of exclusion under the FR and take into account the information in the database when awarding grants and contracts financed from the Communities’ budget.
d) Under EP amendments Nos 84 and 86, participation in a procurement procedure for the award of low value contracts with a single tender and for payments against invoices should be possible without requiring certificates from national authorities certifying that the tenderer is not in a situation giving rise to exclusion.
e) Securities in the context of procurement should be required only when deemed appropriate and proportionate, as requested by the EP in amendments Nos 19 and 96.
a) As suggested by the Parliament (amendment No 98), and following the conclusions of a Commission working group set up to that end, Article 108 is modified to introduce the option for grants to be awarded by means of Commission decisions, instead of using only agreements. Articles 96, 112, 114, 120, 166 and 167 are amended accordingly.
b) As suggested by the Parliament (amendment No 99), provision is made for grants to be awarded by the institutions for information, publicity and communication activities.
c) As required by the Parliament (amendment No 99), social measures in favour of members, staff, former members and former staff of the institutions shall not be considered as grants, but shall constitute administrative allocations.
d) Some clarifications are introduced in relation to the financial instruments which are not considered as grants.
e) It is also clarified that expenditure relating to fisheries markets are not governed by the provisions concerning grants of this Regulation.
f) Following the observations of the Court of Auditors, the principle of appreciation of the non profit at the level of “the beneficiary” is reinstated in Article 109..
g) As suggested by both the Court of Auditors and the Parliament (amendment No 108), provisions are reinforced to avoid multiple financing of the same costs.
h) As requested by the Parliament (amendment No 109), the obligation to gradually decrease operating grants shall not apply to lump sums or flat-rate financing.
i) As suggested by the Parliament (amendment No 112), applicants shall certify that they are not in a situation of exclusion only for grants exceeding a certain value.
j) Article 118 is amended to limit the ability of the authorising officers to require beneficiaries to lodge a guarantee when deemed appropriate and proportionate only, in accordance with the Parliament’s request (amendment No 120).
a) In line with Parliament's amendment No 123, the content of the report on budgetary and financial management is specified in Article 122.
b) A small editorial correction is proposed in Article 128 to clarify the deadline for transmission of the Commission's report on budgetary and financial management during the year.
c) In accordance with Parliament's amendment No 124, Article 139 is amended to ensure that the budgetary authority is duly informed of any internal rules adopted by the institutions in financial matters.
In line with Parliament’s amendment No 130, a three-week period is laid down for the building procedure (i.e. one week for the notification of the intention to issue an opinion plus the existing two-week period for the transmission of the opinion).
3.10. Recruitment of experts for evaluation of proposals and follow-up and evaluation of projects
Following a comment of the Court of Auditors, the specific procedure for selection of experts should be clearly distinguished from procurement procedures.
a) A transitional provision should be added in Article 181a to deal with expenditure from Community Initiatives and Technical Assistance and Innovative Measures provided for in Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds and for which payments still have to be made.
b) It appears appropriate to define how the audit function of each Community body can be exercised (either by an internal or by an external auditor).
c) As suggested by the Parliament (amendment No 134), in the light of the content of Article 133, paragraph 4 of Article 185 appears superfluous and can be deleted.
Finally, it is worth mentioning that the implementation measures for the control linked with the concept of the tolerable risk introduced in Article 30a will be subject to a transitional period (as from 1 January 2009) to be specified in relation to the specific provisions which will be included in the implementing rules of the FR.