8 Financial management
(a)
(27519)
9628/06
COM(06) 213
(b)
(27768)
12226/06
SEC(06) 866
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Amended draft Regulation amending Regulation (EC, Euratom) No. 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities
Draft Commission Regulation (EC, Euratom) amending Regulation (EC, Euratom) No. 2342/2002 laying down detailed rules for the implementation of Regulation (EC, Euratom) No. 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities
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Legal base | Article 279(1); consultation; unanimity (from 1 January 2007 QMV)
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Document originated | (b) 4 July 2006
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Deposited in Parliament | (b) 5 September 2006
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Department | HM Treasury |
Basis of consideration | (a) Minister's letter of 29 September 2006
(b) EM of 29 September 2006
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Previous Committee Report | (a) HC 34-xxxiv (2005-06), para 5 (5 July 2006)
(b) 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 | Document (a) not cleared, further information requested
Document (b) cleared
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Background
8.1 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 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.
8.2 In May 2005 the Commission presented both the
promised report and a draft Regulation to amend the Financial
Regulation[24] The draft
Regulation was intended to clarify, simplify and streamline the
Financial Regulation. In May 2006 the Commission presented document
(a), an amended draft Regulation to amend the Financial Regulation.
The Commission said that this revised draft did not change the
basic structure or key elements of the original proposal, that
is amendments it considered 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), and Accounting and Offices
(concerning inter-institutional offices).
8.3 When we considered the revised proposal in July
2006 we commented that improved management of the Communities'
financial resources was important and overdue. But we said that
before considering the document further we should like to hear
the outcome of the Government's detailed consideration of the
proposal, particularly as to any significant issues it needed
to pursue before agreeing to the legislation. Meanwhile we did
not clear the document.[25]
The new document
8.4 The draft Commission Regulation, document (b)
is to match and complement document (a) by amending the present
Implementation Rules. It is based on a Commission staff working
document which accompanied a draft Commission Regulation to amend
the Implementing Rules, in relation to the existing Financial
Regulation, presented by the Commission in October 2005.[26]
8.5 This draft Regulation would make a series of
amendments to the rules in relation to Budgetary Principles, Methods
of Management, Financial Actors, Recovery of Debts, Public Procurement
and Contracts, Grants, Accounting, External Actions, Offices and
External Experts.
The Government's view
8.6 In his letter on the amended draft Regulation
in document (a) the Economic Secretary to the Treasury (Ed Balls)
repeats the favourable comments we have already reported, in July
2006, about the new budgetary principle of effective and efficient
internal control and about defining tolerable levels of risk.
He adds that the Government thinks it important to have a Financial
Regulation that is fit for purpose and believes that this proposal
will achieve this. But the Minister does not tell us explicitly
that there are no significant issues it needs to pursue before
agreeing to the legislation.
8.7 In his Explanatory Memorandum on the draft Commission
Regulation in document (b) the Minister says:
- the proposals in the draft
Regulation contribute to the process of improving financial management
in the Commission and protecting the financial interests of the
Community;
- they are consequential upon the proposed amendments
to the Financial Regulation;
- the Government agrees that the current Implementing
Rules are in need of some simplification and clarification in
the light of the proposed amendments to the Financial Regulation;
- most of the amendments are technical, covering
the payments of grants and procurement procedures, and are not
controversial; and
- the definition of effective and efficient internal
control, and the procedures described for agreement on the level
of tolerable risk, are integral to the development of a Community
integrated internal control framework.
Conclusion
8.8 As we commented before, improved management
of the Communities' financial resources is important and overdue.
We clear the draft Commission Regulation in document (b). But
before clearing the amended draft Regulation in document (a) we
should be grateful for confirmation that there are no significant
issues which need to be pursued before the Government agrees to
the legislation.
24 (26712) 11021/05: See HC 34-vii (2005-06), para
10 (26 October 2005). Back
25
See headnote. Back
26
(26960) 13542/05 + ADD1: See HC 34-xiii (2005-06), para 14 (14
December 2005). Back
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