Select Committee on European Scrutiny Thirty-Eighth Report







SEC(02) 836




SEC(02) 835


Draft Commission Regulation, under the General Budget Financial Regulation, on a framework financial regulation for bodies set up by the Communities.


Draft Commission Regulation on detailed rules for implementation of the General Budget Financial Regulation.

Legal base:

(Both) Article 279 EC, Article 78h ECSC and Article 183 Euratom; unanimity


Document originated:

(a) 17 July 2002

(b) 24 July 2002

Deposited in Parliament:

(a) 11 September 2002

(b) 12 September 2002


HM Treasury

Basis of consideration:

EMs of 11 September 2002

Previous Committee Report:


To be discussed in Council:

No date set

Committee's assessment:

Politically important

Committee's decision:





    1. In April 2002 we cleared an amended draft of a revised Financial Regulation for the General Budget.[46] This Regulation is due to come into operation from 1 January 2003. It will, as part of the wider reforms to the Commission and its working methods, introduce welcome improvements to the budgetary rulebook by:
    2. —  creating a greater feeling of ownership, responsibility and accountability among the Commission's senior officials;

      —  helping to link expenditure to outcomes; and

      —  rationalising the budget structure, so simplifying processes and reducing errors.

      The documents

    3. The Commission now seeks the opinion of the Council and of the European Parliament on its proposals for two Commission Regulations to facilitate implementation of the General Budget Financial Regulation. The first, document (a), would require Community bodies with their own legal personality, such as executive agencies, to adopt their own financial regulation. Such regulations would be based on the principles of the General Budget Financial Regulation. These are:
    4. —  unity — the budget to be the instrument forecasting and authorising revenue and expenditure;

      —  annuality — the budget to be for a financial year 1 January to 31 December;

      —  equilibrium and universality - revenue and expenditure to be in balance, no loans for covering deficits and total revenue to cover total expenditure;

      —  specification — expenditure to be earmarked for specific purposes;

      —  sound financial management — decisions to have regard to economy, efficiency and effectiveness; and

      —  unit of account — budget to be denominated and implemented in euros.

    5. The second Commission Regulation, document (b), would set out the detailed procedures, specifications, definitions and rules required to implement the general principles of the General Budget Financial Regulation. Amongst matters covered are:
    6. —  rules for rates of conversion into and out of euros;

      —  definitions of routine administrative expenditure;

      —  checks of payments by the authorising officer;

      —  procurement procedures;

      —  content of an Invitation to Tender;

      —  presentation of accounts.

      The Government's view

    7. In her Explanatory Memorandum of 11 September on document (a) the Financial Secretary to the Treasury (Ruth Kelly) tells us:
    8. "The recast Financial Regulation applicable to the general budget has brought the EC budgetary rules more in line with systems in the UK and, generally, with modern accountancy and financial management practices. It is therefore important that other Community bodies follow similar financial rules, and have proper financial controls and accountability. For example, the requirement for each body to have its own internal auditing function will ensure that proper checks will be made on the authorisation and payment of expenditure, and also that the body's financial systems will be assessed. This framework Regulation will ensure that individual Financial Regulations for new community bodies meet a common and acceptable standard."

    9. In her Explanatory Memorandum on document (b), the Minister says:
    10. "The Government strongly supported the adoption of the new Financial Regulation, which was one of the major Commission reforms, intended to improve financial management of the Community budget. This draft implementing regulation is clearly an integral part of the implementation process, without which it cannot be properly applied. It is important that the detailed rules and procedures are consistent with the changes which have already been agreed, and that they are clear and simple to apply. The Government intends to play an active role in the detailed consideration of the draft regulation and in the preparation of the Council's opinion to ensure these objectives are met."


    11. We and our predecessors concluded that the new General Budget Financial Regulation, especially as revised, moves the financial management of EU matters in the right direction. These draft Regulations, carrying the process of improvement forward, are politically important and we welcome them.
    12. We clear the documents.


46  (23151) 5017/02; see HC 152-xxiii (2001-02), paragraph 13 (10 April 2002). Back

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