MANAGEMENT OF THE COMMON FOREIGN AND SECURITY
Special report No. 13 /2001 by the Court of Auditors on the management of the Common Foreign and Security Policy (CFSP).
|Forwarded to the Council:
||12 October 2001|
|Deposited in Parliament:
||13 November 2001|
|Department:||Foreign and Commonwealth Office
|Basis of consideration:
||EM of 22 November 2001|
|Previous Committee Report:
|To be discussed in Council:
|Committee's assessment:||Politically important
The Court of Auditors report
9.1 The report provides an assessment by the European
Court of Auditors of the management of the Common Foreign and
Security Policy (CFSP) chapter of the European Community budget
for the period 1997 to 1999. This followed its Opinion No.1/97
of 10 April 1997 which,
according to the report, made the following points:
"(a) there was a lack of clear criteria for determining
the source of Community funding;
(b) little or no information was available on the amounts
disbursed by different Member States or by other donors;
(c) preparatory work was considered by the Council as
administrative expenditure and therefore charged to Section II
Council of the General Budget, leading to a loss
of transparency in the management of the budget;
(d) financial resources were not made available in time
to permit efficient implementation or to carry out the preliminary
work required before a common measure is decided upon;
(e) in the absence of clear definitions, the Commission's
role in determining the financial, legal and operational arrangements
needed for the implementation of the CFSP measures involving expenditure
was not clearly established."
9.2 Article 11, paragraph 1, under Title V of the Treaty
of European Union (TEU), sets out the objectives of the EU's Common
Foreign and Security Policy (CFSP). Article 12 says that the Union
shall pursue these objectives by:
" defining the principles of and general
guidelines for the CFSP;
deciding on common strategies;
adopting joint actions;
adopting common positions;
strengthening systematic cooperation between Member
States in the conduct of policy."
9.3 At Annex 2, there is a list of common measures decided
by the Council during the period 1997-99, showing their financial
impact on the budget. The TEU sets out the basic provisions for
financing the CFSP, under two categories of expenditure, in the
"(a) Administrative expenditure which the provisions
relating to the areas referred to in this Title entail for the
institutions shall be charged to the budget of the European Communities.
"(b) Operational expenditure to which the implementation
of those provisions gives rise shall also be charged to the budget
of the European Communities, except ... cases where the Council
acting unanimously decides otherwise.
"Additional financial provisions are specified in the
Council Decisions adopting common measures. When adopting joint
actions, the Council lays down their objectives and scope, the
means to be made available to the Union and, if necessary, their
duration, and the conditions for their implementation."
9.4 The implementing bodies for these measures, which
differ considerably in subject matter, location and duration,
may be international organisations, non-governmental organisations,
national, provincial or local government departments, agencies
or institutes, private sector companies or private persons.
9.5 The financial instrument, sub-section B8 of the budget,
on which this report focusses, covers Joint Actions and implementing
decisions of Common Positions. The average amount committed was
_35 million per year during the period 1997-2000. From 1999, the
financing of operations which contributed to developing and consolidating
democracy and the rule of law, respect for human rights and fundamental
freedoms, and support for elections and election monitoring was
transferred from subsection B8 (CFSP) to subsection B7 (External
9.6 The Court summarises its findings as follows:
"Despite a number of changes in the Treaty on European
Union, the Commission's role in determining the financial, legal
and operational arrangements is still not clear. Depending on
the action, either the Commission or the Council defines the arrangements
for its implementation. In practice, this complicates day-to-day
management both in the field and at headquarters level (see paragraphs
"Criteria were laid down by the end of 1999 on the sourcing
of Community funding for CFSP actions but exceptions were left
open for so-called 'borderline cases'. Furthermore, only limited
information is available on contributions in kind made available
by the Institutions and on the amounts contributed by different
Member States. The basis for the sharing [of] costs between other
donors and the Union has not been adequately laid down (see paragraphs
"In 2000, about 40% of the commitment appropriations used
reflected decisions taken by the Council before 31 December 1999.
In 1999, the equivalent percentage was 19%. In the years 1997-1999,
the total amount of Council Decisions in respect of the CFSP operations
exceeded the appropriations available by about 24% (see paragraphs
"The time lapse between the Council Decision and the first
payment increased considerably from the year 1998 to the year
1999, and was then even higher than in 1997, when the procedure
to transfer appropriations from the reserve to the operational
budget lines was used (see paragraphs 44-47).
"Contracting was very complex in a number of actions as a
result of an accumulation of extensions and other adjustments,
to the extent that a proper follow-up of the financial situation
was made very difficult (see paragraphs 48-54).
"Arrangements for remuneration and salary-related costs and
allowances for Special Representatives and office staff are not
laid down or not applied unambiguously (see paragraphs 55-58).
"Reporting is often late and irregular, and reports in some
cases present insufficient information. This forms a weak basis
for any evaluation. The limited frequency of financial reports,
in particular, forms a serious constraint to the Commission in
supervising projects on a systematic basis (see paragraphs 59-61).
"The question of the definition of administrative versus
operational expenditure is still not solved: although a budget
line was introduced from 1998 under subsection B8 to cover preparatory
costs (which were previously regarded as administrative costs),
the Council decided on 30 March 2000 that the cost of EUSRs
should be considered to be administrative expenditure, to be covered
by the budget of the Council's General Secretariat (see paragraphs
35 and 62-64).
9.7 On the basis of its audit conclusions, the Court
makes the following recommendations:
" the European Parliament, the Council and
the Commission should adopt at an interinstitutional level clear
operational principles and arrangements with regard to the Commission's
role in the implementation of the CFSP;
the financing of the CFSP-actions should be managed
in a more transparent manner;
the Commission should launch an enquiry on the causes
of long delays and reassess the action as well as the partner
for the management of the action;
the Commission should amend contracts retroactively
or extend them only in cases of force majeure. Certain practical
measures facilitating the smooth implementation of actions should
the Council and the Commission should establish clear
rules on remuneration and salary related costs;
arrangements should be laid down for adequate reporting,
audit and evaluation."
Delays in launching actions
9.8 In the body of the report the Commission comments
more fully on the time lapse between Council Decisions and the
first payment by the Commission. This is often considerable, it
says, despite the apparent urgent nature of many interventions.
During the period 1997-1999, the average time was 173 days. In
one case it was 4 days but for half of the cases in 1999 it was
between 128 and 183 days. Annex 4 shows that in the case of the
Council Decision on Conflict Prevention and Resolution in Africa,
it was 716 days. The Court recalls that it pointed out in its
Opinion No. 1/97 that one cause of delays was that the Commission
was not sufficiently involved in the preparatory phases of common
measures. Delays were also caused by problems of co-ordination
between Commission departments. The Commission claims that these
problems should not occur again, following reorganisation of CFSP
tasks within the organisation.
Contracting and extensions
9.9 The report describes difficulties in the very complex
task of contracting for the assistance programme to support the
Palestinian Authority in its efforts to counter terrorist activities
emanating from territories under its control. It also draws attention
to other cases where contracts were amended to extend their validity
after they had expired: "The Commission does not have the
authority to do this. The reason was often that all of the amount
committed had not been used by the time the contract expired.
In these cases the unused funds should have been decommitted."
Two contracts concerning the EU Special Representative for the
Great Lakes Region exceeded the budgetary commitments by _1.2
million. Such practices are contrary to Article 1.4 of the Financial
Regulation, the Court notes.
9.10 Council Decisions usually indicate the planned duration
of the actions authorised, to take effect from the date of the
Decision. The Court comments:
"Whilst the duration may remain realistic, the deadline
for the actions, also mentioned in the Decisions, rapidly becomes
obsolete if the preparation of an action takes so much time that
the contract for its implementation is signed with considerable
delay. This leads to situations where the contract goes beyond
the deadline set by the Council Decision, or to operations with
more limited scope than planned in the Council Decision. It has
also required in some cases a Council Decision with the sole aim
to extend the deadline."
9.11 Annex 3 covers budgetary execution 1997-1999,
annex 4 covers time lapses in implementation of Joint Actions
having financial implications and annex 5 covers closure
The Council's reply
9.12 The Court's Recommendation 1 reads as follows:
"The European Parliament, the Council and the Commission
should adopt at an interinstitutional level clear operational
principles and arrangements with regard to the Commission's role
in the implementation of the CFSP.
"In this context for example the following matters in particular
should be dealt with:
"a) the role of the Commission in influencing the conditions
for the implementation of Council Decisions related to joint actions
and common positions should be enhanced;
"b) the Commission's role in closing an ongoing action,
when its continuation is no longer relevant, should also be enhanced;
"c) the present classification of the costs of the Special
Representatives as administrative expenditure should be reconsidered;
"d) the Commission services should have an adequate staffing
level to meet the requirements of managing properly the CFSP actions."
9.13 The Council replies that this Recommendation will
be debated fully in the Council bodies.
9.14 Recommendation 2d reads:
"d) the preparatory costs, financed by the Council, should
have a separate budget item".
9.15 In response, the Council comments that use has been
made of Budget Item 1113 to a very limited extent in the past,
but not at all in 1999 or 2000, to cover CFSP expenditure. It
undertakes to see if it can place these costs under a separate
Budget item when preparing the Draft Estimates for 2003.
9.16 Apart from these remarks, the Council agrees with
all the observations in the report that related to it.
The Commission's response
9.17 The Commission comments:
"Regarding the legal framework of CFSP, Article 14 TEU foresees
that the scope, means and
condition for the implementation
have to be laid down in the Joint Action. Yet, the Commission
retains certain discretionary powers as regards the modalities
of implementation in accordance with Article 274 EC Treaty. Furthermore,
and notwithstanding the somewhat vague working of Article 18 of
the TEU, in practice a division of labour is emerging in a logical
way: the Presidency is responsible for the overall achievement
of the objectives of the Joint Action (JA), assisted by the Secretary
General / High Representative (SG / HR), while the Commission
is responsible for the proper execution of the actions through
preparing and negotiating contracts with the implementing agencies
and monitoring of implementation as reported to the Commission.
"The Commission stresses that the criteria for Community
funding and notably the budgetary remarks have been strictly respected.
"On the other hand it agrees that during the observation
period of the audit, there were cases where information was lacking
on the contributions of third parties. For political reasons and
for reasons of good management it is further not always possible
nor desirable to flag exactly the amounts of each contributor.
In fact in order to create the required political momentum to
engage in a specific project often political pledges are solicited
which, due to the political development on the ground, are not
always honoured afterwards by the third parties being geographically
or politically less concerned than the EU. The Union might, however,
for imperative reasons of conflict prevention or political stabilisation,
have an interest to continue the project in question irrespective
of possible lack in contributions.
"There is, however, a clear improvement on this issue in
2000 and 2001 since contributions in kind are indicated in the
"In terms of rule compliance, the practice of committing
appropriations during the budgetary year after the Council Decision
is not irregular. The objective in implementing CFSP actions is
the adoption in the same budgetary year of the budgetary commitment
(i.e. the Commission Decision) and the legal commitment (i.e.
"In the case of renewal of an existing action with a calendar
year end (this applies to most financially important actions),
the Council has to take a decision sufficiently early for the
Commission to be able to make its financing decision and legal
commitment in the same year. In terms of sound financial management,
the Commission is therefore often put in a difficult position
as the Council decides the renewal of an action at a date too
close to the budgetary year end.
"Tailor-made solutions often need to be drawn up for the
implementation of Joint Actions. Standard contracts can rarely
be applied, which means that negotiation and preparation of contracts
to implement Joint Actions normally takes more time than in the
case of grants to NGOs or international organisations."
9.18 The Commission notes that, from 2001 on, the salaries
and related costs and allowances for Special Representatives have
been financed from the administrative budget of the Council. In
December 2000, it drew the attention of the Permanent Representatives
Committee (COREPER) to problems in implementing Council Decision
of 30 March 2000.
In 2001 it initiated an audit of EU Special Representatives, partly
in order to seek a clearer distinction between administrative
and operational expenditure.
9.19 The Commission welcomes the Court's proposal that
there should be "clear operational principles and arrangements
with regard to the Commission's role in the implementation of
the CFSP, and fully supports the request for more transparency.
Improvements can be made, notably by the proposed rationalisation
of the number of budget articles in the PDB
2002 as proposed by the Commission."
9.20 As regards financial and technical reports from
beneficiaries, the Commission acknowledges that these have been
"insufficient" in some cases and that these should be
improved in future through "a closer and more inter-active
follow-up". It says that the average project lasts for one
year and normally requires two financial reports. These are obligatory
prior to payment, to ensure sufficient and regular control.
The Government's view
9.21 The Minister for Europe (Mr Peter Hain) comments:
"The Government considers it important that the European
Community budget is managed to the highest standards of efficiency
and effectiveness. It therefore welcomes the Court of Auditor's
report on the administration of the CFSP chapter of the budget.
It notes that most of the report's specific recommendations are
essentially administrative and directed at the European Commission
as the implementing authority for decisions by the Council to
commit funds from the CFSP budget. The Government also notes the
full response by the Commission and the acknowledgement by the
Court of Auditors within the report of notable improvements in
the framing of Joint Actions by the Council and the administration
of the budget by the Commission since the period covered by the
report. The Government will consider with EU Partners the scope
for further improvement in the use and management of CFSP expenditure
in the light of the Court of Auditors' report."
9.22 The Court of Auditors makes a number of practical
recommendations on action that should be taken by the Council
and the Commission to improve the Union's management of the Common
and Foreign and Security Policy (CFSP). In their responses,
both institutions acknowledge that, for the most part, the findings
and the recommendations are sound. For its part, the Court notes
that there have already been improvements, which is encouraging.
However, significant areas of activity continue to require therapy.
Some maladies are familiar to us, having been highlighted regularly
over the years in reports on the Community's external aid activities.
9.23 We refer in particular to difficulties with time
lapses, extensions and reporting by beneficiaries. The problem
identified in the report of the duration of an action stated in
the Council Decision and the date at which it starts to be implemented
should surely not be difficult to resolve with an appropriate
form of words in the Decision. On extensions to contracts, the
Commission has undertaken to investigate how these can be granted
as a rule rather than an exception. It appears that a number of
the difficulties encountered could be resolved by a more pragmatic
and less bureaucratic approach, without an unacceptable loss of
control and with the gain of a lot less manoeuvring by all parties
to achieve the objectives sought.
9.24 We note that the Government has undertaken to
consider with its EU partners the scope for further improvement,
but are disappointed that the Minister has not attempted to comment
in more detail on the report in general or on what improvements
in particular he has in mind. We urge him to press for the Council
and the Commission to set targets for resolving the structural
problems identified by the Court, or, where solutions are elusive,
for reporting to the Court and to the national parliaments, including
this Committee, on steps taken.
9.25 We now clear this document.
published and not submitted for scrutiny. Back
to Article 14 (1) of the TEU, "Joint actions shall address
specific situations where operational action by the Union is deemed
to be required." Back
to Article 15 of the TEU, "Common positions shall define
the approach of the Union to a particular matter of geographical
or thematic nature." Back
Union Special Representatives. Back
Not deposited. Predates scrutiny of Pillar 2 documents. Back
Draft Budget Back