52000PC0341

Proposal for a COUNCIL REGULATION amending the Financial Regulation and separating the internal audit function from the ex ante financial control function (Article 24, paragraph 5, of the Financial Regulation)

(presented by the Commission)

EXPLANATORY MEMORANDUM

In the White Paper on administrative reform adopted on 1 March 2000 the Commission decided that its proposal for the recasting of the Financial Regulation would include abolishing the prior control by the Financial Controller (via ex ante approval) of financial transactions (commitments, payments, forward estimates and recovery orders).

This recasting of the Financial Regulation will take time. In the light of past experience, some 18 to 24 months will probably elapse between the proposal for the recasting of the Financial Regulation and its adoption by the Council.

During the transitional period between the proposal for the recasting of the Financial Regulation and its adoption by the Council, the Commission considers (action 70 of the Action Plan annexed to the White Paper) that the internal audit functions entrusted to the Financial Controller under Article 24, paragraph 5, second sentence of the Financial Regulation should be separated from the traditional ex ante control functions exercised through the prior approval of financial transactions. This separation of the control ex-ante and ex-post will contribute to an increased specialisation, a better counterbalance and more efficiency of the two functions.

It should therefore be proposed that the current link between the internal audit and the Financial Controller under Article 24, paragraph 5, second sentence of the Financial Regulation be severed by making each institution's internal audit function independent of that of the Financial Controller.

The Commission is asking the Council to adopt this proposal as soon as possible, after consulting the European Parliament and the Court of Auditors, so that this important part of the reform can be implemented. The proposal to use the fast-track procedure is restricted to amendment of Article 24 of the Financial Regulation.

2000/0135 (CNS)

Proposal for a COUNCIL REGULATION amending the Financial Regulation and separating the internal audit function from the ex ante financial control function (Article 24, paragraph 5, of the Financial Regulation)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 279 thereof,

Having regard to the Treaty establishing the European Coal and Steel Community, and in particular Article 78h thereof,

Having regard to the Treaty establishing the European Atomic Energy Community, and in particular Article 183 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the Court of Auditors 4 3 2 1,]]]] [5]

[1]

[2]

[3]

[4]

[5] OJ C, p.

Whereas:

(1) The accumulation of the internal audit function and the control ex-ante by the Financial Controller under Article 24, paragraph 5, second sentence of the Financial Regulation may give rise to a dispersal of the two functions without necessarily ensuring the right balance between the two.

(2) Pending the adoption of the Financial Regulation, the internal audit function should be separated from the Financial Controller's other functions as soon as possible. The result of this would be that the Financial Controller will continue to fulfil his present functions, including ex ante control, but not that of internal audit, which will be performed by an Internal Auditor independent of the Financial Controller.

(3) The Internal Auditor will enjoy the same benefits and prerogatives as those granted to the Financial Controller in Article 24 of the Financial Regulation.

HAS ADOPTED THIS REGULATION:

Article 1

Paragraph 5 of Article 24 of the Financial Regulation shall be replaced by the following:

"Monitoring shall be carried out by that official by means of inspection of the files relating to expenditure and revenue and, if necessary, on the spot."

Article 2

An Article 24a is added:

"Article 24a

The internal audit function of the institution shall be performed by an Internal Auditor who is independent of the Financial Controller. He shall be appointed in each institution in the same way as the Financial Controller and, in order to be able to exercise his duties, shall have access to the same information as the Financial Controller and, in order to maintain his independence, shall be subject to the same rules and specific measures as are applicable to the Financial Controller under paragraphs 8 and 9 of Article 24.

The internal audit shall include an evaluation of the effectiveness of the management and control systems and verification of the regularity of operations. These duties shall be exercised in accordance with the implementing rules provided for in Article 139."

Article 3

This Regulation shall enter into force on the seventh day following its publication in the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, [...]

For the Council

The President