10 Financial management
| (26712)
11021/05
COM(05)181
| Draft Regulation amending Regulation (EC, Euratom) No. 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities
Commission Report on the application of the provisions of the new Financial Regulation
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| Legal base | Article 279(1); consultation; unanimity
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| Document originated | 3 May 2005
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| Deposited in Parliament | 13 July 2005
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| Department | HM Treasury |
| Basis of consideration | EM of 3 October 2005
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared. Further information awaited
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Background
10.1 Management of the general budget of the European Communities
is governed by Council Regulation (EC, Euratom) No. 1605/2002,
the so-called Financial Regulation, and Commission Regulation
(EC, Euratom) No. 2342/2002, the so-called Implementing Rules.
These Regulations were a significant recasting of the previous
legislation, introducing new accounting practices and systems,
and came into operation from 1 January 2003. When the new Financial
Regulation was adopted in 2002 to the Commission gave a formal
undertaking to the Council to report by 1 January 2006 on its
operation, particularly in relation to the discontinuation of
centralised ex ante (before the event) controls and, if
necessary, to submit appropriate proposals.
The document
10.2 In this document the Commission present both the promised
report and a draft Regulation to amend the Financial Regulation.
It says that the main objectives of the review were to:
- improve efficiency and transparency in the operation of the
rules, frequently by clarification rather than change;
- simplify the procedural and documentation requirements
for contracts and grants and ensure they are proportionate to
costs and risks;
- simplify the requirements for grants for prior
verification and for financial and legal guarantees and ensure
they are proportionate to costs and risks; and
- clarify and streamline the rules governing methods
of management.
10.3 The criteria for proposing change the Commission
adopted for the review were:
- limiting legislative changes
to where there is no alternative;
- amendments reversing internal reforms or undermining
key elements deemed unacceptable; and
- any legislative amendments should facilitate
the Commission's budgetary obligations under the Treaty, improve
or ensure sound financial management, enhance the protection of
the Community's financial interests against fraud and illegal
activities and contribute to achieving a positive Statement of
Assurance.
10.4 The Commission presents the amendments it considers
necessary under the headings of Budgetary Principles (refining
the principles set out in the Financial Regulation), Methods of
Management (concerning shared management with Member States, international
bodies and other agencies), Financial Actors (concerning principally
internal audit), Recovery of Amounts Receivable, Public Procurement
and Contracts, Grants (simplification of checks and guarantees
in relation to risk), Accounting and Offices (concerning inter-institutional
offices).
10.5 The Commission notes that its proposals are
in accordance with present Treaty requirements. If ratified, the
Constitutional Treaty might require further amendments to the
Financial Regulation.
The Government's view
10.6 The Economic Secretary to the Treasury (Mr Ivan
Lewis) says that the proposals in this document contribute to
the process of improving financial management in the Commission
and protecting the financial interests of the Community. But he
notes that the Commission considers the current Financial Regulation
to be too stringent and in some need of clarification. The Minister
tells us that consideration of them has begun in the Council's
Budget Committee, but that the Commission is expected to put forward
revised proposals in 2006 in the light of awaited opinions of
the European Parliament and the European Court of Auditors.
Conclusion
10.7 Significant improvement in management of
the Communities' financial resources is important and long awaited.
However, given the expectation that this document will be overtaken
by revised proposals from the Commission, we are postponing consideration
of this matter until the new document is deposited.
10.8 Meanwhile, we do not clear this document.
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