25.4.2014   

EN

Official Journal of the European Union

C 124/1

1.

The Internal Agreement establishing the 11th European Development Fund (EDF) was signed by the Member States in June 2013. The Internal Agreement only enters into force after ratification by all the Member States. This process will probably be concluded in 2014.

2.

To make funds available between January 2014 and the entry into force of the Internal Agreement of the 11th EDF, the Council has established transitional measures (‘Bridging Facility’) which will be financed from funds of previous EDFs and accounted for under the 11th EDF.

3.

The financial rules applicable to the 11th EDF cannot be adopted by the Council before the entry into force of the 11th EDF Internal Agreement. Therefore, the Commission proposes that the Council Regulation on the Financial Regulation applicable to the 10th EDF be modified in such a way that the financial rules which will apply to the 11th EDF also apply to the Bridging Facility.

4.

The Court was requested for an opinion on the proposal for a Council Regulation on the Financial Regulation applicable to the 11th European Development Fund. The Opinion was published in December 2013 (opinion No 3/2013).

5.

The Court welcomes that a number of observations formulated in its opinion No 3/2013 on the financial rules applicable for the 11th EDF have been addressed in the present proposal and in particular the following points:

6.

In its opinion No 3/2013, the Court made other observations which remain relevant and are described hereafter (see paragraphs 7 to 20).

7.

The proposal contains many references to the general Financial Regulation (15), indicating which of its articles are to apply. However, it frequently adds further provisions or references to provisions in the general Financial Regulation that are not to apply. Certain provisions of the general Financial Regulation are to apply not directly but ‘mutatis mutandis’ and certain terms must be read as having a different meaning from that which applies in the general Financial Regulation (see the list in Article 2(4) of the proposal).

8.

The resulting draft Financial Regulation is far from user-friendly. It is not a stand-alone document. It is impossible to understand it without reference to the general Financial Regulation and its rules of application. This complexity leads to a significant risk of legal uncertainty. The document as currently presented would be difficult for managers, beneficiaries and auditors to use. Thus there is a significant risk that its provisions may be misinterpreted and that errors may occur.

9.

The Court regrets that the Commission has not produced a transparent stand-alone draft regulation designed to be of maximum clarity to users and to minimise the risk of error through misunderstanding.

10.

The Court also regrets that, despite the Court’s suggestions in its opinions Nos 12/2002, 2/2007 and 9/2007, the Commission has not yet proposed a single Financial Regulation, applicable to all present and future EDFs, which, like the general Financial Regulation, could be amended whenever there was felt to be a need. A measure of this type would ensure continuity, without the risk of interrupting the implementation of the EDFs, and could be expected to simplify management.

11.

Article 17 provides, inter alia, that the provisions of the general Financial Regulation on ‘indirect management’ shall apply. However, paragraph 3 of Article 17 introduces elements going beyond those provisions.

12.

Paragraph 3 provides that the ‘entrusted entities’ can further entrust budget-implementation tasks to other organisations in the same way, thus, in effect, creating a cascade of trust relationships. The power is very widely drawn, permitting ACP states and OCTs to entrust budget implementation tasks to bodies governed by private law on the basis of a service contract. It is not clear why this provision has been inserted into the proposal. There is a significant risk that it will obscure and potentially frustrate the application of the provisions of Article 60(1) of the general Financial Regulation. These state, inter alia, that entities and persons entrusted with budget implementation tasks ‘shall guarantee a level of protection of the financial interests of the Union equivalent to that required under this Regulation when they manage Union funds…’.

13.

The Court recommends that the Council examines the justification for the inclusion of paragraph 3: in particular whether any advantages from its inclusion would outweigh the risks of obscuring where responsibility lies for the proper spending of EDF monies.

14.

According to Article 37 of the proposal the provisions of the general Financial Regulation on grants broadly apply to financial contributions from the EDF. Paragraph 3 however contains an additional provision emphasising the need for the Commission to take into account specific needs and contexts when defining modalities. It is not clear why it is thought necessary to include this provision in the EDF Financial Regulation for the Bridging Facility when there appears to be no equivalent provision in the general Financial Regulation.

15.

The Court recommends that the Council examine whether there is good justification for the inclusion of such a provision and whether the provision is sufficiently clearly defined.

16.

The first paragraph of Article 39 of the proposal provides that Article 186 of the general Financial Regulation shall apply to EDF budget support payments. That Article of the general Financial Regulation provides that financing decisions under which budget support is paid shall detail its objectives and expected results, and that payment will depend on progress in fulfilling conditions (paragraph 2); that financing agreements must provide for reimbursement of irregular expenditure (paragraph 3); and that the Commission shall support in beneficiary countries the development of parliamentary control and audit capabilities and shall increase transparency and public access to information (paragraph 4).

17.

The second to seventh paragraphs of Article 39 of the proposal consist of a series of principles and practices relating to budget support from the EDF. They include general statements of policy (second and fourth paragraphs), restatements or paraphrased versions of some of the provisions of Article 186 of the general Financial Regulation (third, fifth and sixth paragraphs) and an obscure reference to links between OCTs and the Member States concerned (seventh paragraph).

18.

The text thus appears to go beyond what is appropriate in a Financial Regulation (16). It is also a source of potential confusion in that, on the one hand it claims to apply the corresponding provisions in the general Financial Regulation while, on the other, it paraphrases some of those provisions.

19.

The Court has made a number of recommendations in recent reports regarding the use of budget support (17), including in particular the need to set objectively verifiable, and wherever possible, quantified criteria and to monitor progress against them. The text could usefully be strengthened in this sense. Some of the text included in the present draft (for example the references to ‘differentiation’ and ‘key determinants’ in the fourth paragraph), could on the other hand be interpreted as a justification for taking a relatively relaxed view of the need for budget support payments to be rigorously conditional.

20.

The Court recommends that the Council examine this article of the proposal in the light of the considerations set out above.