PRELIMINARY DRAFT SUPPLEMENTARY AND AMENDING BUDGET No 6 TO THE BUDGET FOR 2002 - STATEMENT OF REVENUE AND EXPENDITURE BY SECTION - Section I - Parliament - Section II - Council - Section III - Commission - Section V - Court of Auditors - Section VI - Economic and Social Committee - Section VIII - Part A- European Ombudsman - Section VIII - Part B - European Data-protection Supervisor

(presented by the Commission)

Having regard to:

- the Treaty establishing the European Community, and in particular Article 272 thereof,

- the Treaty establishing the European Atomic Energy Community, and in particular Article 177 thereof,

- the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities, [1] as last amended by Regulation No 762/2001 of 9 April 2001, [2] and in particular Article 15 thereof,

[1] OJ L 356, 31.12.1977, p.1.

[2] OJ L 111, 20.4.2001, p. 1.

The European Commission hereby presents to the budgetary authority the draft supplementary and amending budget No 6 to the 2002 budget for the reasons set out in the explanatory memorandum.

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TABLE OF CONTENTS

EXPLANATORY MEMORANDUM

1. Introduction

2. The background to this PDSAB

3. Unused 2002 appropriations

4. Bringing expenditure forward from 2003 to 2002

5. Expanding operations in 2002

6. The situation in each institution

7. Summary of the operation

STATEMENT OF REVENUE AND EXPENDITURE BY SECTION

The statement of revenue and expenditure by section is forwarded separately via the SEI-BUD system. A language version of the statement of revenue and expenditure by section is attached as a technical annex by way of example.

EXPLANATORY MEMORANDUM

1. Introduction

At the conciliation meeting in July the budgetary authority decided not to use the flexibility instrument for heading 5 to cover the additional requirements in 2003 resulting from preparations for the forthcoming enlargement. These additional requirements had been announced in the two reports by the Secretaries-General and were subsequently confirmed in the various institutions' statements of estimates.

Instead, the budgetary authority encouraged the institutions to carry out a "frontloading" exercise. The purpose of this operation is to collect the appropriations remaining available for 2002 and transfer them to the budget lines where they can be used to bring forward to 2002 the expenditure initially planned for 2003. The appropriations for these budget lines in the 2003 budget will then be reduced by the amount brought forward to 2002.

The margin resulting from this reduction in 2003 will then cover the requirements which cannot be covered in any other way under the current heading 5 ceiling. This relates in particular to the 500 outside staff which the Commission has requested from the budgetary authority to prepare for enlargement. The operation will also provide the European Parliament with additional appropriations in 2003 to pursue its policy of early repayment on buildings. Finally, it will increase the final margin for heading 5 in 2003, boosting the institutions' capacity to cope with unforeseen requirements which might arise in 2003, a decisive year for enlargement preparations.

The purpose of this preliminary draft supplementary and amending budget (PDSAB) is to redeploy the appropriations which will not be used in 2002 to budget lines in which expenditure can be brought forward. The use of a PDSAB rather than transfers is largely due to the interinstitutional nature of the operation. Some institutions are also using this PDSAB to make internal transfers within their Section. These transfers are not linked directly to the frontloading exercise, but form apart of the development of multiannual programming of some of the expenditure linked with preparations for enlargement.

2. The background to this PDSAB

When the Commission analysed the outturn of the appropriations for 2001 after closure of the accounts, it found that all the Community institutions had cancelled a substantial amount of administrative appropriations. At the conciliation meeting of 11 July the budgetary authority decided that as many as possible of the unused 2002 appropriations should be drawn on for the planned frontloading exercise. In early October 2002 the institutions' Secretaries-General met representatives of Parliament's Committee on Budgets to estimate how many of the unused 2002 appropriations could be included in the exercise.

The Commission departments then sent a letter to the Secretaries-General of the other institutions asking them to take part in the frontloading exercise as promised during the meeting. This PDSAB is based on the institutions' replies to this letter. The total amount of appropriations which the institutions say can be used comes to EUR80.13 million.

On the basis of an estimate of appropriations available and identification of the budget lines for which expenditure could be brought forward, Parliament adopted specific amendments to the 2003 budget at first reading in connection with the frontloading exercise and reduced the appropriations for these headings.

Parliament also adopted amendments to use part of the additional margin resulting from these reductions. These amendments restored the appropriations needed by the Commission for the 500 outside staff projected for enlargement and adjusted the budgets of the other institutions. They also increased Parliament's appropriations for taking part in the operation so that it could continue its policy of early repayment on buildings in 2003.

The budgetary authority should approve this SAB at the same time as its two arms agree on the 2003 budget to ensure consistency between these two elements in the budgetary frontloading exercise. The Council is also contributing to this exercise through an internal transfer of EUR3 million which will allow it to bring forward some of the expenditure involved in publishing the body of Community law. As this amount is not contained in the PDSAB, this will come to EUR77.13 million.

3. Unused 2002 appropriations

Overall, there are a number of reasons why the institutions cannot use all their appropriations in 2002:

* Salaries for the period July 2002-December 2002 have not risen as much as forecast when the 2002 budget was established. The 2002 budget expected a rise of 2.7% for July 2002-December 2002 while the actual rise is only 2%.

* The rate of occupancy for vacant posts has been lower than some institutions planned. The fear of a cut of EUR34 million in appropriations for remunerations compared with the preliminary draft budget for 2003 led the Commission to display a cautious approach to recruitment in mid-2002. OLAF has had a number of problems in filling all its vacant posts compared with the original plan. The Court of Auditors is also experiencing difficulties in recruiting (as well as keeping) some officials in Luxembourg. The flat-rate abatement for the Court of Justice proved a little too low in 2002 (2.5%), less than the 3% abatement planned in the 2003 budget after Parliament's first reading.

* Neither Parliament nor the Commission have used all their provisional appropriations and Parliament failed to use some of its contingency reserve.

* Budgetary savings have resulted from Parliament's early payment of EUR165 million to speed up the financing of the Louise Weiss building in Strasbourg.

* Various savings have resulted from the administrative balances and, in general, certain one-off cases in which the appropriations required have been lower than initially planned and the programming up to the end of 2002 has been revised accordingly.

4. Bringing expenditure forward from 2003 to 2002

As the budgetary authority emphasised at the conciliation meeting in July 2002, the first expenditure to be brought forward to be covered by the unused 2002 appropriations is expenditure on the publication of secondary legislation in the languages of the new candidate countries. Of the EUR29 million initially planned in 2003, EUR25.6 million can already be committed in 2002 to initiate the orders needed for publication. The Commission should commit EUR8.7 million in 2002 (including EUR1 million from the savings made in 2002 under the line for the Official Journal, so that the increase needed by the Commission for 2002 will be only EUR7.7 million) and the Council EUR16.9 million (including EUR3 million from its internal transfer which is not therefore included in this PDSAB, bringing the Council's increase in the PDSAB to EUR13.9 million). The 2003 appropriations for the publication of the body of Community law which cannot be brought forward to 2002 - EUR3.4 million - will have to be provided in the 2003 budget. After all the appropriations connected with publication of the body of Community law were deleted on Parliament's first reading, this amount will have to be restored on second reading.

Some of the acquisitions of goods or services originally planned for 2003 can now be brought forward to 2002. This applies in particular to the renewal of some computer and telecommunications equipment. The Commission is able to bring forward EUR6.5 million for this type of operation.

Finally, most of the Commission's leases require payment of the rent at the start of each quarter. As in previous years, this means that the rent for the first quarter of a year will be committed and paid in December of the previous year, i.e. by 31 December 2002 in the case of the rent for the first quarter of 2003. In this PDSAB, and in line with the rent-related amendments voted by Parliament on first reading, it is planned to pay these amounts from the 2002 appropriations and not by bring forward appropriations from 2003. If there are any difficulties in implementing these payments in 2002, the Commission will request a non-automatic carryover of these appropriations to make up for the reduction of appropriations in 2003. It is proposed that EUR48.9 million be used for this purpose from Chapter A-20 in 2002.

5. Expanding operations in 2002

The Court of Justice and Court of Auditors propose using this PDSAB to boost certain lines for the preparation of enlargement in 2002 from unused appropriations in their section. The increase in 2002 comes to EUR0.15 million for the Court of Justice and EUR0.5 million for the Court of Auditors. The grounds for these increases are set out in the specific paragraphs dealing with these institutions. This EUR0.65 million is therefore not available for the frontloading exercise; this explains the difference between the EUR80.13 million resulting from savings in 2002 and the EUR79.48 million which must be cut from the 2003 budget under this exercise.

6. The situation in each institution

At the end of every year Parliament presents a transfer of appropriations to collect unused appropriations and redeploy them to lines where they can be used to bring forward the repayment of expenditure on its buildings (the redeployment transfer). This year Parliament intends to use this PDSAB as the instrument for redeploying administrative appropriations.

In 2002 this redeployment exercise produced EUR42.7 million, 46% from budget savings resulting from early payments on buildings at the start of the year, 23% from personnel appropriations as a result of vacant posts and a lower salary adjustment, 16% from reserves and the rest from the administrative balance, particularly as regards the cleaning and maintenance of technical equipment and the restaurant and canteen sector.

Not all the technical, legal and financial conditions are met for Parliament to continue the financing of buildings in the near future. In these circumstances, Parliament intends to use the frontloading exercise to obtain extra appropriations in 2003. Of the EUR42.7 million identified by the redeployment exercise, Parliament should recover EUR35 million in 2003, while the remainder will increase the margin in heading 5 and help the Commission finance its additional enlargement-related requirements.

Parliament is also contributing EUR0.87 million to the publication of secondary legislation in connection with enlargement. This amount is not included in the frontloading exercise and will have to be financed from the 2003 budget.

The Council is one of the institutions which is likely and ready to bring forward expenditure from 2003 to 2002 because of its specific responsibilities for publishing the body of Community law. Of the EUR18 million needed to publish its part of the acquis communautaire over the period 2002-03, the Council could already commit EUR16.9 million in 2002. Following the amendments during Parliament's first reading which deleted the whole of the EUR18 million planned for the special reserve financing the acquis communautaire, the difference between the Council's requirements for 2003 (which the Publications Office recently revalued at EUR18.56 million) and the EUR1.66 million covered by the frontloading exercise will have to be reincorporated into the 2003 budget at second reading.

The Council has also identified savings of EUR3 million which can be used in the frontloading exercise. These appropriations will be transferred to the budget lines relating to publication of the acquis by means of an internal Council Regulation. The balance of appropriations needed in 2002 - EUR13.9 million - is provided by this PDSAB.

The administrative appropriations remaining available to the Commission in 2002 are estimated at EUR26.7 million. EUR5 million has been saved by OLAF, largely because of the posts now vacant (although the occupancy rate is increasing now that there are lists of suitable candidates), EUR9 million has been saved on remunerations and pensions, EUR3.6 million is available from the DGs' decentralised expenditure (technical assistance, conferences) and the remainder comes from unused provisional appropriations and one-off aspects of current management such as the failure to use the balance of the subsidy for the European Schools and lower expenditure in 2002 on consolidation and recruitment.

Together with the Council, the Commission is the main institution which is prepared to bring expenditure forward from 2003 to 2002. Accordingly, it is the main recipient of appropriations identified as unnecessary by the various institutions. This PDSAB will thus increase by EUR62.6 million the total appropriations for 2002 in the Commission budget lines concerned. The lines benefiting from these increases will see their 2003 appropriations reduced by the same amount in relation to the draft budget. The remarks for some of these lines have been amended to show clearly that the appropriation has been adjusted under the frontloading exercise.

As in the case of the Council, the 2003 appropriations for publication of secondary legislation will have to be adjusted in relation to Parliament's first reading to cover the 2003 requirements which cannot be brought forward to 2002; the EUR0.87 million involved takes account of the Publication Office's revaluation of the Commission's contribution for the period 2002-03.

The Court of Justice has pinpointed savings, mainly in connection with remunerations, as a direct result of the rate of vacant posts in relation to the flat-rate abatement for 2002, a lower average rate of staff rotation than expected (reducing expenses on entry and termination of service) and the lower rate for the salary adjustment. The Court of Justice has identified further savings in 2002 in connection with the cleaning and maintenance of technical installations and telephone charges. In accordance with certain operations planned from the 2003 budget, the Court of Justice is also using this PDSAB to make an internal adjustment of EUR150 000 in its budget to cover the acquisition of computer equipment. Strictly speaking, this amount does not form part of the frontloading exercise.

The Court of Auditors has mainly pinpointed savings in connection with remunerations. Apart from the lower rate for the salary adjustment, these savings are the direct result of the difficulties it experiences in filling vacant posts in Luxembourg with officials who are specialised in its field of activities.

The Court of Auditors too is proposing to use this SAB to adjust appropriations within Section V. As part of the preparations for the forthcoming enlargement, the Court of Auditors has to finance studies and the additional work necessary for equipping the conference room now being built with 22 interpreting booths. The fact that these booths can be incorporated in the conference room while it is being built leads to a considerable saving. The Court plans to make the room available to all the Community institutions and bodies based in Luxembourg.

The Court is also contributing EUR1.65 million to the frontloading exercise by means of transfer of appropriations No 36/2002 approved by the budgetary authority in October 2002. This transfer is the result of an agreement between the institution and the budgetary authority during the 2003 budgetary procedure to delay construction and thus the financing of the second extension to its main building in Luxembourg and to use part of the appropriations entered in the 2002 budget for the first tranche for bringing forward some of the expenditure initially planned for 2003.

The Economic and Social Committee has pinpointed savings in connection with remunerations due to the fact that the salary adjustment is lower than expected. It has also pinpointed savings in connection with interpreting in relation to what was forecast.

The European Ombudsman has also pinpointed savings in 2002 in connection with office equipment and vehicles. In addition, there has been no need to use the study appropriations in 2002. Some of the appropriations provided for meetings have not been used either now that the meeting between the Ombudsman and the regional ombudsmen in Europe has been postponed to 2003.

Finally, the delay in installing the European Data Protection Officer (EDPS) means that the appropriations provided for him in Section VIII B of the budget can now devoted entirely to the frontloading exercise.

7. Summary of the operation

The following table summarises the appropriations for each institution which have been reduced or increased by this PDSAB. This table also allows to deduct the adjustments to the 2003 budget, to be done in the framework of the 2003 budget procedure. Most of these adjustments were already provided for in Parliament's first reading. A final adjustment will have to be made on second reading to the lines for publication of the Official Journal (in the Council and the Commission), the line for rents (A-200) and possibly to the Commission line for furniture.

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The following tables provide details for each institution.

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