Council Regulation (EC, Euratom) No 1995/2006 of 13 December 2006 amending Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities

COUNCIL REGULATION (EC, EURATOM) No 1995/2006

of 13 December 2006

amending Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 279 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,

Having regard to the opinion of the European Parliament ([^E0001]),

Having regard to the opinion of the Court of Auditors ([^E0002]),

Having regard to the opinion of the European Economic and Social Committee ([^E0003]),

Whereas:

• (1) Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities ([^E0004]) (hereinafter the Financial Regulation), lays down the legal foundations of the financial management reform. As such, its essential elements should be maintained and strengthened. Transparency, in particular, should be reinforced by providing for information on beneficiaries of Community funds. Moreover, the budgetary principles established by the Financial Regulation should be respected in all legislative acts and derogations should be kept to a strict minimum.

• (2) In the light of practical experience, certain amendments should be made to the Financial Regulation in order to facilitate budget implementation and the attainment of the underlying policy objectives and to adjust certain procedural and documentary requirements so as to make them more proportionate to the risks and cost involved, in accordance with the principle of proportionality as set out in the third subparagraph of Article 5 of the EC Treaty.

• (3) All amendments should contribute to achieving the objectives of the Commission's reforms and help improve or ensure sound financial management, thus contributing to obtaining a reasonable assurance of the legality and regularity of financial operations.

• (4) Account should be taken of provisions implementing the revenue and expenditure of the budget, contained in the basic legal acts adopted for the period 2007 to 2013, in order to ensure coherence between those acts and the Financial Regulation.

• (5) It should be clarified that sound financial management requires effective and efficient internal control, and the main features and objectives of internal control systems should be defined.

• (6) In order to ensure the transparency of the use of funds deriving from the budget, it is necessary to make available information on the beneficiaries of these funds within certain limits necessary to protect legitimate public and private interests and taking into account the particular accounting period for the European Agricultural Guarantee Fund.

• (7) As regards the principle of unity of the budget, the rule governing interest generated by pre-financing should be simplified. The administrative burden involved in the recovery of that interest is disproportionate to the objective pursued and it would be more efficient to allow interest to be set off against the final payment to the beneficiary.

• (8) With regard to the principle of annuality, more flexibility and transparency should be introduced to respond to functional needs. The carry-over of appropriations should exceptionally be permitted in the case of expenditure on direct payments to farmers under the European Agricultural Guarantee Fund (EAGF) set up by Council Regulation (EC) No 1290/2005 of 21 June 2005, on the financing of the common agricultural policy ([^E0005]).

• (9) Payment requests from the Member States under the new agricultural regulations will be concentrated overwhelmingly at the beginning of the budget year n. Therefore, the maximum threshold for advance commitments against the EAGF (from 15 November of year n-1) to cover routine management expenditure (charged to the budget of year n) should be increased to three quarters of corresponding appropriations in the last adopted agricultural budget. As regards the limit on advance commitment of administrative expenditure, the text should be amended so that it refers to appropriations decided by the budgetary authority, therefore excluding transfers of appropriations.

• (10) The use of non-differentiated appropriations for veterinary measures, charged against the EAGF, unduly hampers the implementation of such measures, especially in respect of the limits placed on the possibilities for carry-overs. The use of differentiated appropriations for such expenditure should therefore be permitted, as this is more in keeping with the multi-annual nature of the actions.

• (11) As regards the principle of universality, two points should be added to the list of assigned revenue. First, as is currently possible under specific research programmes, it should be possible for the Member States to make ad hoc contributions, as assigned revenue, for projects under external relations programmes managed by the Commission. Second, proceeds from the sale of vehicles, equipment, installations, materials, and scientific and technical apparatus which are being replaced or scrapped should be treated as assigned revenue, as an encouragement to authorising officers to obtain the best prices for their disposal.

• (12) At present, the Commission must be authorised by the budgetary authority before accepting any donations, such as gifts or bequests, which involve a charge. To avoid unnecessary and cumbersome procedures, authorisations should be made compulsory only in the case of donations exceeding a certain value and involving significant charges.

• (13) The rules governing transfers of appropriations should be simplified and clarified on certain points because they have proved cumbersome or unclear in practice.

• (14) For reasons of efficiency, the Commission should be allowed to decide autonomously on transfers from the reserve in cases where no basic act exists for the action concerned at the time when the budget is established, but where the basic act is adopted in the course of the year.

• (15) The rules on the Commission's administrative transfers should be adapted to the new Activity-Based Budgeting (ABB) structure. Thus, provision should be made for an exemption from the ‘notification procedure’. During the last month of the financial year, the Commission should be allowed to decide autonomously on transfers of appropriations concerning staff expenditure, within certain limits.

• (16) A number of articles of the Financial Regulation should be amended because of the abolition of the reserve relating to Community loans and loan guarantees to third countries, and because of the adoption of a new provisioning mechanism for the Guarantee Fund for external actions.

• (17) In order to accelerate the mobilisation of funds in exceptional cases of international humanitarian disasters and crises occurring at the end of the budgetary year, the Commission should be allowed to autonomously transfer unused budgetary appropriations available under the relevant heading of the multiannual financial framework to the budget titles concerned.

• (18) As regards the budget procedure, the requirement laid down in the Financial Regulation that the budget be published within two months of adoption has proven unrealistic, and three months would be more practicable. The concept of an ‘Activity Statement’ should be inserted into Financial Regulation in order to render official one of the key elements of ABB, and the content of such statements should be defined more precisely in order to make them operational. Payment schedules should be included in the working documents accompanying the preliminary draft budget listed in the Financial Regulation instead of in the budget itself, as they are not relevant to the budgetary procedure and are unnecessarily burdensome.

• (19) As regards the implementation of the budget, some adjustments are necessary in order to better reflect the specific features of the Common Foreign and Security Policy (CFSP). For reasons of legal clarity, the forms basic acts can take under the EC Treaty and under Title V and VI of the Treaty on European Union should be identified in the Financial Regulation instead of in the implementing rules. In addition, a specific provision should be added in order to properly reflect the types of preparatory measures that may be undertaken in the field of the CFSP.

• (20) As regards methods of management, the relevant Article of the Financial Regulation should be restructured for the purpose of clarity. It is also necessary to remove the limitation of shared management to the European Agricultural Guidance and Guarantee Fund (EAGGF) and Structural Funds, because additional programmes will now operate under shared management. The requirements for joint management need to be made clearer. The relevant provisions of the Financial Regulation should be completed to include in particular the European Investment Bank and the European Investment Fund as Community bodies to which tasks can be delegated by the Commission. The criteria set out in the Financial Regulation for using national public-sector bodies should be simplified in order to facilitate their use and to respond to growing operational needs, and the scope of the provision should be extended to international public bodies. The Financial Regulation should also clarify the position of special advisors or heads of mission appointed by the Council to manage certain actions in the context of the CFSP.

• (21) The responsibilities of the Member States under shared management should be set out in more detail, to take account of the ongoing discussions between the institutions concerning the discharge procedure and the appropriate control systems to put in place, reflecting the mutual responsibilities of the Member States and the Commission. Following the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management ([^E0006]), Member States should be obliged to produce an annual summary of the available audits and declarations in relation to the funds under shared management.

• (22) The prohibition on delegating implementation tasks to private bodies should be modified in the Financial Regulation because the terms of that prohibition have turned out to be unnecessarily strict. It should be possible, for example, for the Commission to engage the services of a travel agency or a conference organiser to take charge of reimbursing the costs of participants at conferences, provided that no discretionary powers are exercised by the private company.

• (23) The establishment by several institutions of joint financial irregularities panels should be made possible.

• (24) Accounting officers' responsibility for certifying the accounts on the basis of the financial information supplied to them by the authorising officers should be clarified. To this end, the accounting officer should be empowered to check the information received by the authorising officer by delegation and to enter reservations, if necessary.

• (25) The relationship between the Commission's internal auditor and bodies set up by the Communities should be clarified. Those bodies should have their own internal audit function reporting to their own management boards, whereas the Commission's internal auditor reports to the College of Commissioners on the procedures and systems of the Commission. It should be necessary for the Commission's internal auditor only to confirm that the bodies' internal audit functions meet international standards, and for that purpose he should be able to conduct assessments of the quality of the internal audit activity.

• (26) A period of limitation on the validity of claims should be introduced. The Community, unlike many of its Member States, is not subject to a period of limitation under which financial claims are extinguished after a certain period of time. Nor is the Community restricted by a period of limitation in the pursuit of its claims against third persons. The introduction of such a period of limitation corresponds to sound financial management.

• (27) The Financial Regulation should reflect the importance of framework contracts in the management of public procurement. It should encourage the use of interinstitutional procurement procedures and allow for the possibility of joint procurement procedures between an institution and a contracting authority from a Member State.

• (28) Certain technical adjustments should be made to ensure that the terminology of the Financial Regulation is fully in line with that of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts ([^E0007]). The possibility, open to Member States under that Directive, to determine specific procedures for contracts declared secret when their performance must be accompanied by special security measures or when the protection of the Member State so requires, should be made available to the Community institutions.

• (29) In line with Directive 2004/18/EC, the rules on exclusion from a procurement procedure need to be clarified. In addition, for reasons of legal certainty and proportionality, a maximum period of exclusion should be specified in the Financial Regulation. In the light of Directive 2004/18/EC, an exception to the rules on exclusion should be made for the purchase of supplies on particularly advantageous terms from either a supplier which is definitively winding up its business activities, from the receivers or liquidators of a bankruptcy, through an arrangement with creditors, or through a similar procedure under national law.

• (30) It should be made obligatory under the Financial Regulation for candidates or tenderers in procurement procedures to certify, if so requested, the ownership or the management, control and power of representation of the legal entity submitting a tender or that their subcontractors are not in one of the situations referred to in Article 93 of the Financial Regulation. Tenderers should not be required to certify that they are not in one of the situations giving rise to exclusion when they participate in a procurement procedure for the award of very low-value contracts.

• (31) In order to enhance the effectiveness of procurement procedures, the database of candidates or tenderers in situations of exclusion should be common to the institutions, executive agencies and bodies referred to in the Financial Regulation.

• (32) In order to take account of the interests of unsuccessful tenderers, it is appropriate to provide that a contract covered by Directive 2004/18/EC cannot be signed before the end of a reasonable standstill period.

• (33) The obligations of the institutions to suspend a procurement procedure or a contract under the Financial Regulation in cases of fraud and irregularities should be clarified in order to enhance the operation of the relevant provisions of that Regulation.

• (34) As regards grants, simplification of the rules is needed. The requirements for checks and guarantees should be more proportionate to the financial risks involved. The definition of grants needs to be clarified, in particular as regards financing related to loan activities or shareholdings and expenditure relating to fisheries markets. To improve the management of grants and to simplify procedures, it should be possible to award grants either by a decision of the institution or by a written agreement with the beneficiary.

• (35) For reasons of clarity and transparency, the use of lump-sum and flat-rate payments should be authorised alongside the more traditional method of reimbursing costs actually incurred.

• (36) For reasons of legal clarity, the exceptions to the non-profit rule which are currently provided for in the implementing rules should be included in the Financial Regulation. Furthermore, it should be made clear that the purpose of awarding grants to certain actions is to help reinforce financial capacity or generate an income.

• (37) The rule that grants should be awarded on the basis of calls for proposals has proved its worth. Experience has shown, however, that in certain cases the nature of the action leaves no choice in the selection of beneficiaries; such cases should thus be exempted from this rule.

• (38) The rule that the same action should not give rise to more than one grant to any one beneficiary should be adjusted. Some basic legal acts do permit Community funding from different sources to be combined, and such cases may increase in future in order to ensure the effectiveness of expenditure. However, it should be made clear in the Financial Regulation that the same costs cannot be financed twice by the Community budget.

• (39) The rule that the agreement on an operating grant may not be signed more than four months after the start of the beneficiary's financial year has proven unnecessarily rigid. This deadline should thus be extended to six months.

• (40) For reasons of simplification, in the case of operating grants taking the form of lump-sums or flat-rate payments, the rule that grants shall gradually decrease should be removed.

• (41) Certain restrictions on the eligibility of beneficiaries should be removed in order to allow for grants to natural persons and certain types of entity which lack legal personality. In line with the principle of proportionality, for very low-value grants, the authorising officer may refrain from requesting applicants to certify that they are not in one of the situations of exclusion under the relevant provisions of the Financial Regulation.

• (42) While grants will continue to be awarded on the basis of selection and award criteria, there is no need in practice to have those criteria evaluated by a committee specifically set up for that purpose, and that requirement should therefore be removed.

• (43) As regards the procurement standards to be applied by beneficiaries of grants, the current rule in the Financial Regulation is unclear and should be simplified. Moreover, express provision should be made for the case in which the implementation of an action necessitates financial support to third parties.

• (44) As regards the rules on accounting and the accounts, the Financial Regulation should make it possible for the Commission's accounting officer to determine, in compliance with international standards, which other bodies in addition to those receiving Community subsidies fall within the scope of the consolidation of the accounts, it being understood that the consolidation of accounts neither entails any transfer of funds from self-financed bodies to the general budget of the European Union nor influences their financial and operational autonomy and the discharge procedures for their accounts.

• (45) In view of the coming into existence of the EAGF, which is to replace the European Agricultural Guidance and Guarantee Fund (EAGGF) with respect to financing of market measures from 1 January 2007, certain terminology in the Financial Regulation should be adjusted. Clarification is also required in the effect that provisional commitments may be made after the normal two-month deadline following receipt of the Member States' statements of expenditure in cases where a decision on a transfer of appropriations is expected. The special provisions of the Financial Regulation concerning transfers should be clarified.

• (46) The terminology should also be adjusted so that reference is made only to the Structural Funds, the Cohesion Fund, the Fisheries Fund and the Rural Development Fund. References to pre-accession structural measures (ISPA) and agricultural measures (Sapard) should be removed, since they involve management by third countries on a decentralised basis in accordance with the Financial Regulation and will continue to be implemented largely in the same way as at present. As regards the making available again of decommitted appropriations, in line with the new basic acts for structural actions in the period 2007 to 2013 which cover the case of force majeure, provision should be maintained in the Financial Regulation only for cases where a manifest error is attributable to the Commission.

• (47) A provision should be added to the Financial Regulation to cover the assigned revenue generated by the winding-up of the European Coal and Steel Community and the making available of the corresponding appropriations.

• (48) It is necessary to allow appropriations, which have been decommitted as a result of total or partial non-implementation of the projects for which they were earmarked, to be made available again. However, that should be possible only under strict conditions, and only in the area of research, since research projects present a higher financial risk than those in other policy areas.

• (49) As regards external actions, it should be clarified that, in line with existing practice, the grant procedures to be applied by third countries in the case of decentralised management have to be specified in the financing agreements concluded with those countries. The ‘n+3 rule’, according to which individual contracts and agreements which implement such financing agreements have to be concluded no later than three years following the date of conclusion of the financing agreement, should apply. Specific rules should be foreseen for the case of decentralised management of multi-annual programmes under Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-Accession Assistance ([^E0008]) and Regulation (EC) No 1638/2006 of the European Parliament and of the Council of 24 October 2006 laying down general provisions establishing a European Neighbourhood and Partnership Instrument ([^E0009]).

• (50) In order to facilitate management, it should be made possible for the institutions to delegate the powers of authorising officers to Directors of inter-institutional European Offices for the management of appropriations entered in their respective sections of the budget. While their content should remain unchanged, the relevant Articles of the Financial Regulation should be slightly re-structured in order to clarify the sub-delegation of authorising powers by the Directors of Offices.

• (51) The procedure under which the budgetary authority may issue an opinion on a building project should be clarified.

• (52) Successive framework research programmes have facilitated the work of the Commission by laying down simplified rules for the selection of external experts for evaluation of proposals or grant applications and technical assistance for the follow-up and evaluation of projects funded. This procedure should be made available in respect of all other programmes.

• (53) Transitional provisions should be added. First, as regards the making available again of decommitted appropriations corresponding to commitments made during the 2000 to 2006 Structural Funds programming period, the case of force majeure should continue to be applied as provided currently in the Financial Regulation until the closure of the assistance. This is in order to avoid disruption of the current system since force majeure is treated differently in Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund ([^E0010]). Second, a transitional provision should be added to the Financial Regulation to deal with the implementation of the provisions on the central database for exclusion from participation in procurement and grant procedures. Finally, a similar provision should be added to permit the outstanding Community commitments to be financially settled in order to close the assistance provided for in the Regulations governing the Structural Funds and the Cohesion Fund for the 2000 to 2006 programming period. For the appropriations concerning operational expenditure, the possibility for the Commission to make transfers from one title to another must be retained, provided that the appropriations in question are for the same objective. Similarly, the Commission should be able to continue to make transfers from one title to another when the appropriations in question relate to Community initiatives or technical assistance and innovative measures, provided that they are transferred to measures of the same nature. This means, for instance, transferring appropriations relating to one Community initiative to another in a different title.

• (54) Regulation (EC, Euratom) No 1605/2002 should therefore be amended accordingly,

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EC, Euratom) No 1605/2002 is hereby amended as follows:

• 1.in Article 1, the first paragraph shall be replaced by the following: ‘This Regulation lays down the rules for the establishment and implementation of the general budget of the European Communities, hereinafter “the budget”, and the presentation and auditing of the accounts.’;

• 2.Article 3 shall be replaced by the following: ‘Article 3 The budget shall be established and implemented in compliance with the principles of unity, budgetary accuracy, annuality, equilibrium, unit of account, universality, specification, sound financial management which requires effective and efficient internal control, and transparency as set out in this Regulation.’;

• 3.in Article 5, paragraph 4 shall be replaced by the following: ‘4.  Subject to Articles 5a, 18 and 74, interest yielded by the funds which are the property of the Communities shall be entered in the budget as miscellaneous revenue.’;

• 4.the following Article shall be added in Chapter 1 of Title II of Part One: ‘Article 5a

The Regulation laying down the rules for implementing this Regulation, hereinafter “the implementing rules”, shall specify the cases in which the authorising officer responsible shall, by way of exception, recover annually such interest. That interest shall be entered in the budget as miscellaneous revenue.

(a)pre-financing which does not represent a significant amount, as determined in the implementing rules; (b)pre-financing paid under a procurement contract within the meaning of Article 88; (c)pre-financing paid to Member States; (d)pre-financing paid under the pre-accession aid; (e)advances paid to members of the institutions and to staff in accordance with the Staff Regulations of officials of the European Communities and the Conditions of employment of other servants of the European Communities, hereinafter “the Staff Regulations”; (f)pre-financing paid in the framework of joint management as referred to in point (c) of Article 53(1).’;

• 5.Article 9 is hereby amended as follows: (a)in the introductory phrase of paragraph 2, the words ‘Appropriations for commitment of differentiated appropriations’ shall be replaced by the words ‘Commitment appropriations’; (b)in the first sentence of paragraph 3, the words ‘Appropriations for payment of differentiated appropriations’ shall be replaced by the words ‘Payment appropriations’;

• 6.in Article 11, the words ‘Article 157’ shall be replaced by the words ‘Articles 157 and 160a’;

• 7.in Article 16, the second paragraph shall be replaced by the following: ‘However, for the cash-flow purposes referred to in Article 61, the accounting officer and, in the case of imprest accounts, the imprest administrators, and, for the needs of the administrative management of the Commission's External Service, the authorising officer responsible shall be authorised to carry out operations in national currencies as laid down in the implementing rules.’;

• 8.Article 18(1) is hereby amended as follows: (a)the introductory phrase shall be replaced by the following: ‘Without prejudice to Article 160(1a) and Article 161(2), the following items of revenue shall be used to finance specific items of expenditure:’; (b)the following point shall be inserted: ‘(aa)financial contributions from Member States and other donor countries, including in both cases their public and parastatal agencies, or from international organisations to certain external aid projects or programmes financed by the Community and managed by the Commission on their behalf, pursuant to the relevant basic act;’; (c)the following point shall be inserted: ‘(ea)proceeds from the sale of vehicles, equipment, installations, materials, and scientific and technical apparatus which are being replaced or scrapped when the book value is fully depreciated;’;

• 9.in Article 19(2), the first sentence shall be replaced by the following: ‘Acceptance of donations of a value of EUR 50 000 or more which involve a financial charge, including follow-up costs, exceeding 10 % of the value of the donation made, shall be subject to the authorisation of the European Parliament and of the Council, both of which shall act on the matter within two months of the date of receipt of the request from the Commission.’;

• 10.Article 22 shall be replaced by the following: ‘Article 22

(a)from one title to another up to a maximum of 10 % of the appropriations for the year shown on the line from which the transfer is made; (b)from one chapter to another and from one article to another without limit.

• 11.Article 23 is hereby amended as follows: (a)paragraph 1 is hereby amended as follows: (i)point (b) shall be replaced by the following: ‘(b)as regards expenditure on staff and administration, transfer appropriations from one title to another up to a maximum of 10 % of the appropriations for the year shown on the line from which the transfer is made, and up to a maximum of 30 % of the appropriations for the year shown on the line to which the transfer is made;’; (ii)the following point shall be added: ‘(d)transfer appropriations, as soon as the basic act is adopted pursuant to the procedure laid down in Article 251 of the Treaty, from the “provisions” title referred to in Article 43 for the cases where no basic act existed for the action concerned when the budget was established.’; (iii)the second subparagraph shall be replaced by the following: ‘Three weeks before making the transfers referred to in points (b) and (c) of the first subparagraph, the Commission shall inform the budgetary authority of its decision. In the event of duly substantiated reasons being raised within that three-week period by either branch of the budgetary authority, the procedure laid down in Article 24 shall apply.’; (iv)the following subparagraphs shall be added: ‘However, during the last two months of the financial year, the Commission may autonomously transfer appropriations concerning expenditure on staff, external staff and other agents from one title to another within the total limit of 5 % of the appropriations of the financial year. The Commission shall inform the budgetary authority within two weeks after its decision on those transfers. The Commission shall inform the budgetary authority within two weeks after its decision on transfers referred to in point (d) of the first subparagraph.’; (b)in paragraph 2, the words ‘paragraph 1(c)’ shall be replaced by the words ‘paragraph 1’;

• 12.Article 26 is hereby amended as follows: (a)paragraph 1 shall be replaced by the following: ‘1.  Transfers within the titles of the budget devoted to the European Agricultural Guarantee Fund (EAGF), the Structural Funds, the Cohesion Fund, the European Fisheries Fund, the European Agricultural Fund for Rural Development (EAFRD) and Research shall be the subject of special provisions under Titles I, II and III of Part Two.’; (b)in paragraph 2, the first subparagraph shall be replaced by the following: ‘Decisions on transfers to allow the utilisation of the reserve for emergency aid shall be taken by the budgetary authority on a proposal from the Commission. A separate proposal must be submitted for each individual operation.’;

(ba)in paragraph 2, the second subparagraph shall be replaced by the following: ‘The procedure provided for in Article 24(2) and (3) shall apply. If the Commission proposal is not agreed to by both arms of the budgetary authority and there is a failure to arrive at a common position on the utilisation of this reserve, the European Parliament and the Council shall refrain from acting on the Commission's proposal for a transfer.’

(c)the following paragraph shall be added: ‘3.  In duly substantiated exceptional cases of international humanitarian disasters and crises, occurring after 15 December of the budgetary year, the Commission may transfer unused budgetary appropriations for the current budgetary year still available in the budget titles falling under heading 4 of the multiannual financial framework to the budget titles concerning the crisis management aid and humanitarian aid operations. The Commission shall inform the two branches of the budgetary authority immediately after making such transfers.’;

• 13.Article 28 is hereby amended as follows: (a)paragraph 1 shall be replaced by the following: ‘1.  Any proposal or initiative submitted to the legislative authority by the Commission or by a Member State in conformity with the relevant provisions of the EC Treaty or the Treaty on European Union (TEU), which may have an impact on the budget, including changes in the number of posts, must be accompanied by a financial statement and the evaluation provided for in Article 27(4) of this Regulation. Any amendment to a proposal or initiative submitted to the legislative authority which may have appreciable implications for the budget, including changes in the number of posts, must be accompanied by a financial statement prepared by the institution proposing the amendment.’; (b)paragraph 3 shall be replaced by the following: ‘3.  In order to prevent the risk of fraud and irregularities, the financial statement referred to in paragraph 1 shall record any information regarding existing and planned fraud prevention and protection measures.’;

• 14.the following Article shall be inserted: ‘Article 28a

(a)effectiveness, efficiency and economy of operations; (b)reliability of reporting; (c)safeguarding of assets and information; (d)prevention and detection of fraud and irregularities; (e)adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multi-annual character of programmes as well as the nature of the payments concerned.’;

• 15.in Article 29, paragraph 2 shall be replaced by the following: ‘2.  The President of the European Parliament shall have the budget and amending budgets, as finally adopted, published in the Official Journal of the European Union. The budget shall be published within three months following the date on which the budget is declared finally adopted. The consolidated annual accounts and the report on budgetary and financial management drawn up by each institution shall be published in the Official Journal of the European Union.’;

• 16.in Article 30, the following paragraph 3 shall be added: ‘3.  The Commission shall make available, in an appropriate manner, information on the beneficiaries of funds deriving from the budget held by it when the budget is implemented on a centralised basis and directly by its departments, and information on the beneficiaries of funds as provided by the entities to which budget implementation tasks are delegated under other modes of management. This information shall be made available with due observance of the requirements of confidentiality, in particular the protection of personal data as laid down in Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data ([^E0011]) and Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2001 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data ([^E0012]), and of the requirements of security, taking into account the specificities of each management mode referred to in Article 53 and where applicable in conformity with the relevant sector-specific rules.

• 17.Article 33(2) is hereby amended as follows: (a)point (d) shall be replaced by the following: ‘(d)the activity statements containing the following: —information on the achievement of all previously set specific, measurable, achievable, relevant and timed objectives for the various activities as well as new objectives measured by indicators, —full justification and cost-benefit approach for proposed changes in the level of appropriations, —clear rationale for intervention at the EU level in keeping, inter alia, with the principle of subsidiarity, —information on the implementation rates of the previous year's activity and implementation rates for the current year. Evaluation results shall be consulted and referred to as evidence of the likely merits of proposed budget changes.’; (b)the following point shall be added: ‘(e)a summary statement of the schedule of payments due in subsequent financial years to meet budgetary commitments entered into in earlier financial years.’;

• 18.in Article 37(1), the following subparagraph shall be added: ‘Before presenting a preliminary draft amending budget, the Commission and institutions other than the Commission shall examine the scope for reallocation of the relevant appropriations, taking into account any expected under-implementation of appropriations.’;

• 19.in Article 40, point (a) shall be replaced by the following: ‘(a)a general statement of revenue and expenditure;’;

• 20.in Article 43(1), the second subparagraph shall be replaced by the following: ‘The appropriations in this title may be used only after transfer in accordance with the procedure laid down in Article 23(1)(d), where the adoption of the basic act is subject to the procedure laid down in Article 251 of the Treaty, and that of Article 24, for all other cases’;

• 21.in the second paragraph of Article 44, the words ‘Articles 22, 23 and 25’ shall be replaced by the words ‘Articles 23 and 25’;

• 22.Article 45 shall be replaced by the following: ‘Article 45

• 23.Article 46(1) is hereby amended as follows: (a)point (1) is hereby amended as follows: (i)the introductory phrase shall be replaced by the following: ‘in the general statement of revenue and expenditure:’; (ii)point (f) shall be deleted; (iii)point (g) shall be replaced by the following: ‘(g)appropriate remarks on each subdivision, as set out in Article 41(1)’; (b)point (2) shall be replaced by the following: ‘(2)in the section for each institution, the revenue and expenditure shall be shown in the same structure as in point (1)’; (c)in point (3), point (c) shall be replaced by the following: ‘(c)as regards scientific and technical staff, the classification may 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 specific provisions of the Staff Regulations;’; (d)point (5) shall be replaced by the following: ‘(5)the budget lines under revenue and expenditure necessary for implementing the Guarantee Fund for external actions.’;

• 24.in the second subparagraph of Article 47(1), the words ‘grades A1, A2 and A3’ shall be replaced by the words ‘grades AD 16, AD 15 and AD 14’;

• 25.Article 49 shall be replaced by the following: ‘Article 49

A basic act is a legal act which provides a legal basis for the action and for the implementation of the corresponding expenditure entered in the budget.

(a)appropriations for pilot schemes of an experimental nature designed to test the feasibility of an action and its usefulness. The relevant commitment appropriations may be entered in the budget for not more than two successive financial years; (b)appropriations for preparatory actions in the fields of application of the EC Treaty and the Euratom Treaty and of Title VI of the TEU, designed to prepare proposals with a view to the adoption of future actions. The preparatory actions are to follow a coherent approach and may take various forms. The relevant commitment appropriations may be entered in the budget for not more than three successive financial years. The legislative procedure must be concluded before the end of the third financial year. In the course of the legislative procedure, the commitment of appropriations must correspond to the particular features of the preparatory action as regards the activities envisaged, the aims pursued and the persons benefited. Consequently, the means implemented cannot correspond in volume to those envisaged for financing the definitive action itself. When the preliminary draft budget is presented, the Commission shall submit a report to the budgetary authority on the actions referred to in points (a) and (b) which shall also contain an assessment of results and the follow-up envisaged; (c)appropriations for preparatory measures in the field of Title V of the Treaty on European Union (concerning CFSP). These measures shall be limited to a short period of time and shall be designed to establish the conditions for European Union action in fulfilment of the objectives of the CFSP and for the adoption of the necessary legal instruments. For the purpose of EU crisis management operations, preparatory measures are designed inter alia to assess the operational requirements, to provide for a rapid initial deployment of resources, or to establish the conditions on the ground for the launching of the operation. Preparatory measures shall be agreed by the Council, in full association with the Commission. To this end, the Presidency, assisted by the Secretary-General of the Council/High Representative for the CFSP, shall inform the Commission as early as possible of the Council's intention to launch a preparatory measure and in particular of the estimated resources required for this purpose. In conformity with the provisions of this Regulation, the Commission shall take all the necessary measures to ensure a rapid disbursement of the funds; (d)appropriations for one-off actions, or even actions for an indefinite duration, carried out by the Commission by virtue of tasks resulting from its prerogatives at institutional level pursuant to the EC Treaty and the Euratom Treaty other than its right of legislative initiative referred to in point (b) and under specific powers directly conferred on it by those Treaties, a list of which is given in the implementing rules; (e)appropriations for the operation of each institution under its administrative autonomy.’;

• 26.in Article 50, the following paragraph shall be added: ‘Each institution shall exercise these powers in accordance with this Regulation and within the limits of the appropriations authorised.’;

• 27.Article 52 shall be replaced by the following: ‘Article 52

• 28.Article 53 shall be replaced by the following: ‘Article 53 The Commission shall implement the budget in accordance with the provisions set out in Articles 53a to 53d in any of the following ways: (a)on a centralised basis; (b)by shared or decentralised management; (c)by joint management with international organisations.’;

• 29.the following Articles shall be inserted: ‘Article 53a Where the Commission implements the budget on a centralised basis, implementation tasks shall be performed either directly by its departments or indirectly, in accordance with Articles 54 to 57.

Article 53b

(a)satisfy themselves that actions financed from the budget are actually carried out and to ensure that they are implemented correctly; (b)prevent and deal with irregularities and fraud; (c)recover funds wrongly paid or incorrectly used or funds lost as a result of irregularities or errors; (d)ensure, by means of relevant sector-specific regulations and in conformity with Article 30(3), adequate annual ex post publication of beneficiaries of funds deriving from the budget. To that effect, the Member States shall conduct checks and shall put in place an effective and efficient internal control system, according to the provisions laid down in Article 28a. They shall bring legal proceedings as necessary and appropriate.

Article 53c

Article 53d

(a)wherever the Commission and the international organisation are bound by a long-term framework agreement laying down the administrative and financial arrangements for their cooperation; (b)wherever the Commission and the international organisation elaborate a joint project or programme; (c)where the funds of several donors are pooled and are not earmarked for specific items or categories of expenditure, that is to say, in the case of multi-donor actions. These organisations shall, in their accounting, audit, internal control and procurement procedures, apply standards which offer guarantees equivalent to internationally accepted standards.

• 30.Article 54 is hereby amended as follows: (a)paragraph 1 shall be replaced by the following: ‘1.  The Commission may not delegate to third parties the executive powers it enjoys under the Treaties where they involve a large measure of discretion implying political choices. The implementing tasks delegated must be clearly defined and fully supervised as to the use made of them. The delegation of budget-implementation tasks shall comply with the principle of sound financial management which requires effective and efficient internal control and shall ensure compliance with the principle of non-discrimination, and the visibility of Community action. No implementing tasks delegated in this way may give rise to conflicts of interests.’; (b)paragraph 2 is hereby amended as follows: (i)the first sentence shall be replaced by the following: ‘Within the limits laid down in paragraph 1, the Commission may, when implementing the budget by indirect centralised management or by decentralised management under Articles 53a or 53c, delegate tasks of public authority and in particular budget implementation tasks to: […]’; (ii)point (b) shall be replaced by the following: ‘(b)bodies set up by the Communities as referred to in Article 185 and other specialised Community bodies, such as the European Investment Bank or the European Investment Fund, provided that to do so is compatible with the tasks of each body as defined in the basic act.’; (iii)point (c) shall be replaced by the following: ‘(c)national or international public-sector bodies or bodies governed by private law with a public-service mission providing adequate financial guarantees and complying with the conditions provided for in the implementing rules.’; (iv)the following point shall be added: ‘(d)persons entrusted with the implementation of specific actions pursuant to Title V of the Treaty on European Union, and identified in the relevant basic act within the meaning of Article 49 of this Regulation.’; (c)in paragraph 3, the second subparagraph shall be replaced by the following: ‘Such bodies or persons shall take appropriate measures to prevent irregularities and fraud and if necessary bring legal proceedings to recover funds wrongly paid or incorrectly used.’;

• 31.Articles 55 and 56 shall be replaced by the following: ‘Article 55

Article 56

(a)transparent procurement and grant-award procedures which are non-discriminatory and exclude any conflict of interest and which are in accordance with the provisions of Titles V and VI respectively; (b)an effective and efficient internal control system for the management of operations, which includes effective segregation of the duties of authorising officer and accounting officer or of the equivalent functions; (c)an accounting system that enables the correct use of Community funds to be verified and the use of funds to be reflected in Community accounts; (d)an independent external audit; (e)public access to information at the level provided for in Community Regulations; (f)adequate annual ex post publication of beneficiaries of funds deriving from the budget in conformity with Article 30(3). The Commission may accept that the audit, accounting and procurement systems of the entities referred to in paragraphs 1 and 2 are equivalent to its own, with due account for internationally accepted standards.

Notwithstanding paragraph (1)(a) and Article 169a, the Commission may decide: —in the case of pooling of funds, and —under the conditions provided in the basic act, to use the procurement or grant procedures of the beneficiary partner country or as agreed among donors. Before taking such a decision, the Commission shall first obtain evidence on a case-by-case basis that such procedures satisfy the principles of transparency, equal treatment and non-discrimination, prevent any conflict of interest, offer guarantees equivalent to internationally accepted standards and ensure compliance with the provisions of sound financial management which requires effective and efficient internal control. The third country, national or international public-sector bodies concerned shall undertake to fulfil the following obligations: (a)to comply, subject to the first subparagraph of this paragraph, with the criteria laid down in paragraph 1; (b)to ensure that the audit referred to in point (d) of paragraph 1 is exercised by a national institution for independent external auditing; (c)to conduct regular checks to ensure that the actions to be financed from the budget have been implemented correctly; (d)to take appropriate measures to prevent irregularities and fraud and, if necessary, to bring legal proceedings to recover funds wrongly paid.

• 32.in Article 57, paragraph 1 shall be replaced by the following: ‘1.  The Commission may not entrust measures of implementation of funds deriving from the budget, including payment and recovery, to external private-sector entities or bodies, except in the case referred to in Article 54(2)(c) or in specific cases where the payments involved are to be made to beneficiaries determined by the Commission, are subject to conditions and amounts fixed by the Commission and do not involve the exercise of discretion by the entity or body making the payments.’;

• 33.Article 59 is hereby amended as follows: (a)the following paragraph shall be inserted: ‘1a.  For the purposes of this Title, the term “staff” refers to persons covered by the Staff Regulations.’; (b)paragraph 2 shall be replaced by the following: ‘2.  Each institution shall lay down in its internal administrative rules the staff of an appropriate level to whom it delegates in compliance with the conditions in its rules of procedure the duties of the authorising officer, the scope of the powers delegated and the possibility for the persons to whom these powers are delegated to subdelegate them.’; (c)paragraph 3 shall be replaced by the following: ‘3.  The powers of authorising officer shall be delegated or subdelegated only to staff.’;

• 34.in Article 60, paragraph 7 shall be replaced by the following: ‘7.  The authorising officer by delegation shall report to his institution on the performance of his duties in the form of an annual activity report together with financial and management information confirming that the information contained in the report presents a true and fair view except as otherwise specified in any reservations related to defined areas of revenue and expenditure. That report shall indicate the results of the operations by reference to the objectives set, the risks associated with these operations, the use made of the resources provided and the efficiency and effectiveness of the internal control system. The internal auditor shall take note of the annual report and any other pieces of information identified. No later than 15 June each year, the Commission shall send to the budgetary authority a summary of the annual reports for the previous year.’;

• 35.Article 61 is hereby amended as follows: (a)in paragraph 1, point (e), the following sentence shall be added: ‘the accounting officer shall be empowered to verify the respect of validation criteria;’; (b)the following paragraphs shall be inserted: ‘2a.  Before the adoption of the accounts by the institution, the accounting officer shall sign them off, thereby certifying that he has a reasonable assurance that the accounts present a true and fair view of the financial situation of the institution. For that purpose, the accounting officer shall satisfy himself that the accounts have been prepared in accordance with the accounting rules, methods and accounting systems established under his responsibility as laid down in this Regulation for the accounts of his institution, and that all revenue and expenditure is entered in the accounts. The authorising officers by delegation shall forward all information that the accounting officer needs in order to fulfil his duties. The authorising officers shall remain fully responsible for the proper use of the funds they manage as well as the legality and regularity of the expenditure under their control. 2b.  The accounting officer shall be empowered to check the information received as well as to carry out any further checks he deems necessary in order to sign off the accounts. The accounting officer shall make reservations, if necessary, explaining exactly the nature and scope of such reservations. 2c.  The accounting officers of the other institutions and agencies shall sign off their annual accounts and send them to the Commission's accounting officer.’; (c)paragraph 3 shall be replaced by the following: ‘3.  Save as otherwise provided in this Regulation, only the accounting officer is empowered to manage cash and cash equivalents. He shall be responsible for their safekeeping.’;

• 36.in Article 62, the first paragraph shall be replaced by the following: ‘The accounting officer may, in the performance of his duties, delegate certain tasks to subordinate staff.’;

• 37.Article 63 shall be replaced by the following: ‘Article 63

However, in the field of crisis management aid and humanitarian aid operations within the meaning of Article 110, imprest accounts may be used without any limitation on the amount while respecting the level of appropriations decided by the budgetary authority on the corresponding budget line for the current financial year.

• 38.in Article 65, paragraph 1 shall be replaced by the following: ‘1.  The provisions of this Chapter are without prejudice to any liability under criminal law which the financial actors referred to in Article 64 may incur as provided in the applicable national law and in the provisions in force on the protection of the Communities' financial interests and on the fight against corruption involving officials of the Communities or officials of Member States.’;

• 39.Article 66 is hereby amended as follows: (a)paragraph 1 shall be replaced by the following: ‘1.  The authorising officer shall be liable for payment of compensation as laid down in the Staff Regulations.’; (b)the following paragraph shall be inserted: ‘1a.  The obligation to pay compensation shall apply in particular if: (a)the authorising officer, whether intentionally or through gross negligence on his part, determines entitlements to be recovered or issues recovery orders, commits expenditure or signs a payment order without complying with this Regulation and the implementing rules; (b)the authorising officer, whether intentionally or through gross negligence on his part, omits to draw up a document establishing an amount receivable, neglects to issue a recovery order or is late in issuing it or is late in issuing a payment order, thereby rendering the institution liable to civil action by third parties.’; (c)paragraph 3 shall be replaced by the following: ‘3.  In the event of subdelegation within his services, the authorising officer by delegation continues to be responsible for the efficiency and effectiveness of the internal management and control systems put in place and for the choice of the authorising officer by subdelegation.’; (d)in paragraph 4, the first subparagraph shall be replaced by the following: ‘4.  Each institution shall set up a specialised financial irregularities panel or participate in a joint panel established by several institutions. The panels shall function independently and determine whether a financial irregularity has occurred and what the consequences, if any, should be.’;

• 40.Article 73(2) shall be replaced by the following: ‘2.  Where the responsible authorising officer by delegation is planning to waive or partially waive recovery of an established amount receivable, he/she shall ensure that the waiver is in order and complies with the principle of sound financial management and proportionality in accordance with the procedures and the criteria laid down in the implementing rules. The waiver decision must be substantiated. The authorising officer may delegate the decision only as laid down in the implementing rules. The responsible authorising officer may furthermore cancel or adjust an established amount receivable, in accordance with the conditions set out in the implementing rules.’;

• 41.the following Article shall be inserted: ‘Article 73a Without prejudice to the provisions of specific regulations and the application of the Council Decision relating to the Communities' own resources system, entitlements of the Communities in respect of third parties and entitlements of third parties in respect of the Communities shall be subject to a limitation period of five years. The date for calculating the limitation period and the conditions for interrupting this period shall be laid down in the implementing rules.’;

• 42.in Article 75(2), the words ‘Article 49(2)’ shall be replaced by the words ‘Article 49(6)(e)’;

• 43.in Article 77(3), the third subparagraph shall be replaced by the following: ‘The amount of a budget commitment corresponding to a legal commitment for which no payment within the meaning of Article 81 has been made in a period of three years following the signing of the legal commitment shall be decommitted.’;

• 44.in Article 80, the following paragraph shall be added: ‘Where periodic payments are made with regard to services rendered, including rental services, or goods delivered, and subject to his risk analysis, the authorising officer may order the application of a direct debit system.’;

• 45.in Article 86(1), point (b) shall be replaced by the following: ‘(b)for assessing the efficiency and effectiveness of the internal control and audit systems applicable to every budgetary implementation operation.’;

• 46.in Article 87, the second paragraph shall be replaced by the following: ‘If the internal auditor is a member of staff, he shall assume responsibility as laid down in the Staff Regulations and spelt out in the implementing rules.’;

• 47.Article 88 shall be replaced by the following: ‘Article 88

These contracts comprise: (a)contracts for the purchase or rental of a building; (b)supply contracts; (c)works contracts; (d)service contracts.

• 48.in Article 89(2), the following subparagraph shall be added: ‘Contracting authorities may not use framework contracts improperly or in such a way that the purpose or effect is to prevent, restrict or distort competition.’;

• 49.Article 90 is hereby amended as follows: (a)paragraph 1 is hereby amended as follows: (i)the first subparagraph shall be replaced by the following: ‘1.All contracts exceeding the thresholds provided for in Article 105 or Article 167 shall be published in the Official Journal of the European Union.’; (ii)the second subparagraph shall be replaced by the following: ‘Contract notices shall be published in advance except in the cases referred to in Article 91(2) of this Regulation, as specified in the implementing rules, and for the service contracts covered by Annex IIB to Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts ([^E0014]). (b)paragraph 2 shall be replaced by the following: ‘2.  Contracts with a value below the thresholds provided for in Article 105 or Article 167 and the service contracts referred to in Annex IIB to Directive 2004/18/EC shall be advertised by appropriate means, as specified in the implementing rules.’.