A.

Whereas, pursuant to Article 74 of the Financial Regulation of 16 June 1998 the Commission shall take all appropriate steps to act on the comments appearing in the decision giving discharge and to report, at the request of the European Parliament, on measures taken in light of these comments.

B.

Whereas the present Commission took office in September 1999, launched the reform of the management of EC external assistance in May 2000 (5) and the reform of the European Communities' development policy in November 2000 (6).

C.

Whereas the Partnership Agreement between the members of the African, Caribbean and Pacific Group of States of the one part, and the European Community and its Member States, of the other part, signed in Cotonou on 23 June 2000 (the Cotonou Agreement) (7), which entered into force on 1 April 2003, has reformed aid to the ACP States and increased focus on poverty reduction.

D.

Whereas, due to the long ratification process for the Cotonou Agreement, the ninth European Development Fund (EDF) covering the period 2000 to 2005 had not entered into force at the end of 2002, making it necessary for the Commission during 2002 to use funds from the eighth EDF in order to initiate financing decisions based on programming for the ninth EDF.

E.

Whereas the ACP-EU Joint Parliamentary Assembly, at its meeting in Rome from 11 to 15 October 2003, adopted a resolution (8) on the use of the EDF, calling on the Commission to speed up implementation of funds,

1.

Notes that the Court of Auditors is of the opinion that the revenue entered in the accounts, the amounts allocated to the European Development Funds (EDFs), the commitments and the payments of the financial year are, taken as a whole, legal and regular;

2.

Notes that the Court of Auditors has formed its opinion based on an analysis and testing of the supervisory systems and controls of the Commission as well as on controls carried out on a number of underlying transactions in Brussels and on the spot in six ACP States;

3.

Supports the Court of Auditors' approach of giving analysis of supervisory systems and controls high priority;

4.

Supports the Court of Auditors' intentions to perform on-the-spot controls in ACP States; invites the Court of Auditors to ensure that all delegations of the Commission are visited and controlled within a limited number of years;

5.

Notes that the Court of Auditors made the following critical remarks:

6.

Notes with satisfaction that the annual activity report and declaration of the Director-General of AIDCO for 2002 also covered the EDF, even though the charter for authorising officers by delegation did not at that time extend to EDF transactions; however, also notes that the Court of Auditors considers that, from the viewpoint of methodology, the Director-General of AIDCO did not yet have all the requisite information concerning the reality, legality and regularity of the on-the-spot transactions as regards the following information:

Calls on the Director-General of AIDCO to address the abovementioned weaknesses pointed out by the Court of Auditors;

7.

Notes that the Commissioner for Development and Humanitarian Aid does not believe it to be part of his responsibilities to ensure that the Director-General of AIDCO includes a reliable declaration in the AIDCO annual activity report;

8.

Does not find that the opinion of the Commissioner for Development and Humanitarian Aid on this issue is in accordance with the Code of Conduct for Commissioners and Departments, which states that ‘directors-general shall be answerable to their Commissioner for the sound implementation of the policy guidelines laid down by the Commission and the Commissioner.’;

9.

Questions the value of such a declaration when it does not have any consequence for a director-general if serious criticism is raised against the approach taken in working out the declaration;

10.

Notes that budgetary support has increased its share of implemented primary commitments from 14 % in 2001 to 23 % in 2002; notes that the Commission intends to increase this share further in future years;

11.

Acknowledges that budgetary support may be effective in achieving the objectives of poverty reduction and better management of public finances in beneficiary countries, inter alia by increasing ownership of the beneficiary country;

12.

Notes that according to the Cotonou Agreement, direct budgetary assistance in support of macroeconomic or sectoral reforms shall be granted where (9):

13.

Acknowledges that when budget support funds have been released to an ACP State, these funds are spent and controlled according to national and not EDF control procedures; is aware that this necessitates a change in the Commission's follow-up procedures away from traditional controls and checks of transactions towards an assessment of the state of public finance management based on monitoring information and performance indicators; however, notes that the Court of Auditors finds that criteria used to release budget support funds essentially consist of macroeconomic indicators but provide only partial information about public finance management, and that no separate, clear analysis and evaluation of the quality of public finance management is produced;

14.

Is deeply concerned that the Commission is increasing the use of budget support at the same time as the Court of Auditors - in the absence of monitoring information and of performance indicators on the evolution of the quality of public finance management in ACP States - is not able to give an opinion on the use of direct budgetary assistance by the ACP States;

15.

Has been informed that other donors are also increasing the use of budgetary support and that the Commission is cooperating with such donors, notably the World Bank, on the development of performance indicators;

16.

Invites the Commission to continue to cooperate with other donors in order to ensure a harmonised approach among donors towards ACP States, not just on performance indicators but also on requirements placed on ACP States as regards, for example, controls and reporting;

17.

Strongly supports the Court of Auditors' intentions to adopt a special report during 2004 on the use of budgetary support;

18.

Asks the Commission to include a list of countries granted budgetary support, including information on whether tranches of budgetary support have been withheld, in a communication on financial information on the EDFs for the 2003 financial year; asks the Commission also to outline in this communication - for each country receiving direct budgetary aid - whether the three main conditions for receiving such aid as stated in Article 61(2) of the Cotonou agreement are met;

19.

Asks the Commission to report, by 1 September 2004, on the state of play of work within the public expenditure and financial accountability programme, including information on the expected deadline for agreement on a final list of public finance management performance indicators;

20.

Calls on the Commission, in connection with the upcoming negotiations on possible amendments of the Cotonou Agreement, to enter into a dialogue with the ACP States on the possibility of making budgetary support conditional on the beneficiary country agreeing to spend the equivalent of 5 to 10 % of any amount received as budgetary support for institutional support measures;

21.

Recalls its opinion regarding the importance of involving ACP States' supreme audit institutions in EDF control (10);

22.

Notes that the Court of Auditors regrets the absence of a clear, structured approach to strengthening the national control and audit institutions on the part of the Commission;

23.

Asks the Commission to include information on funds spent on projects involving supreme audit institutions in a communication on financial information on the EDFs for the 2003 financial year;

24.

Invites the Commission to consider entering the condition that an ACP State must agree to introduce a multiannual programme for creating and/or strengthening a supreme audit institution before budgetary support can be granted;

25.

Supports the Commission's devolution of resources and decision-making powers to the delegations of the Commission; expects this to contribute to even higher implementation levels for commitments and payments than those achieved by the Commission in 2002; is aware that the deconcentration exercise is ongoing and expected to be fully implemented during 2004;

26.

Emphasises that the audit and evaluation strategy of the Commission must reflect the change in the management of aid and support and be underpinned by a risk assessment; stresses that audits and evaluations must be independent and of high quality; asks the Commission to communicate its working document on risk assessment as soon as it has been finalised and by 1 July 2004 at the latest;

27.

Stresses that heads of delegation must ensure that key controls are carried out and take action if the national authorising officer does not fulfil the obligation of performing such controls; is concerned that delegations may not have sufficient qualified staff available in order to respect new obligations regarding financial control;

28.

Is concerned that headquarters' overview of audit and evaluation activities in the delegations is inadequate; notes that EDF activities are expected to be integrated into the CRIS system during first half of 2004; notes the Court of Auditors' concern that in the short term the CRIS-system is not likely to address weaknesses relating to the terms of reference, audit reports and follow-up of audit reports; asks the Commission to report by 1 September 2004 on whether: 1. the process of linking the OLAS accounting system to the CRIS system has been successful; and 2. whether audits concerning EDF funds have been included in the CRIS system;

29.

Regrets that the Commission does not systematically collect audits and evaluations from delegations and therefore has not been able to react in a timely manner to a request from the rapporteur to receive a number of audit and evaluation reports; regards this as confirmation of headquarters' lack of an overview of audit and evaluation activities; notes that lists of audits received by the rapporteur in some cases contained wrong information about the prices of an audit, the size of the underlying project etc.; regards this as a further confirmation of headquarters' lack of an overview of audit activities;

30.

Asks the Commission to provide a structured plan by 1 July 2004 as to how headquarters should control delegations' controls within a deconcentrated management system; stresses that financial audits and evaluation should be coordinated, monitored and followed up by Headquarters; is especially worried by the apparent lack of systematic follow-up of audits and evaluations;

31.

Asks the Commission to present by 1 July 2004 a list of audits and evaluations performed in 2003 by delegations and headquarters as well as providing information on how audits and evaluations have been followed up; stresses that the requested list shall only include audits and evaluations actually performed, not merely planned;

32.

Notes that the Commission is not certain that it has full information about evaluations carried out by delegations (11); asks the Commission to include information on how this situation has been resolved when it forwards the list of evaluations performed in 2003;

33.

Considers that the level of unspent EDF resources, currently standing at EUR 11,3 billion (12), is regrettable in a fund aimed at assisting many of the poorest countries in the world; appreciates the factors that limit the Commission's ability to redress this problem, such as the responsibility of the National Authorising Officer for processing invoices, the need to obtain the National Authorising Officer's agreement for decommitments, the circumstances preventing the implementation of programmes in certain countries in crisis and the absence of any time-limit on the use of funds; recognises the value of changes to the Financial Regulation and new Financing Agreements aimed at keeping RAL under control for the ninth EDF; stresses the fact that many of these problems would be resolved if the EDF were to be brought within the Community budget;

34.

Notes that resources not yet committed under the sixth, seventh and eighth EDFs in total amounted to EUR 2,9 billion (or 8,9 % of total resources) at the end of 2002, even though it was respectively 17, 12 and five years since the three EDFs entered into force;

35.

Notes that implemented secondary commitments (contracts) and payments amounted to respectively EUR 2,1 billion and EUR 1,9 billion, thereby maintaining a relatively high level compared to earlier years; however, is also aware that increased use of budgetary support is the main reason for achieving higher implementation levels;

36.

Notes that outstanding commitments, or RAL (reste à liquider), amounted to EUR 8,4 billion at the end of 2002, of which EUR 1,2 billion was considered to be abnormal RAL (13),

37.

Asks the Commission to include in a communication on financial information on the EDFs for the 2003 financial year a table showing the RAL per sector and per year of commitment as well as information on the level of abnormal RAL and specific actions taken in 2003 in order to reduce the abnormal RAL;

38.

Welcomes the Communication from the Commission to the Council and the European Parliament of 8 October 2003 entitled ‘Towards the full integration of cooperation with ACP countries in the EU budget’ (COM(2003) 590);

39.

Considers that the EDF shall be budgetised, i.e. integrated into the general budget of the European Union, in order to grant the EDF the same status as other parts of the acquis communautaire and eliminate the current democratic deficit;

40.

Emphasises that, apart from the political significance of budgetisation, considerable advantages related to budgetary management can be achieved by integrating the EDF into the general budget of the European Union, for example, more efficient implementation due to the possibility of harmonising existing procedures, greater level of flexibility in implementation, a higher level of transparency concerning total Community aid, and avoiding the current complications of transitional measures between EDFs;

41.

Notes that a new Financial Protocol succeeding the ninth EDF has to be determined at the same time as negotiations start on respectively a new financial perspective for the European Union and possible amendments of the Cotonou Agreement, offering an exceptionally good opportunity to budgetise the EDF;

42.

Calls on the Commission and the Member States to decide on and implement budgetisation of the EDF without delay;

43.

Considers it essential that the Commission continue to speed up implementation of commitments and payments from the EDF in order for the European Community and its Member States to fulfil the political commitments to the ACP States, as well as minimising possible complications related to budgetisation of the EDF;

44.

Invites the Commission to enter into a dialogue with the ACP States on how to eliminate the RAL, taking into account the specific problems that may be encountered in connection with budgetisation;

45.

Stresses that budgetisation of the EDF must not lead to a decrease in total funds available to the ACP States; asks the Commission to ensure transparency so that the discharge authority continues to be able to ascertain the level of funds spent for purposes set out in the Cotonou Agreement;

46.

Draws attention to the principal objective of the Community's development policy, which is to reduce poverty with a view to its eventual eradication (14), and highlights the endorsement given by the Commission and all Member States to the millennium development goals (MDGs) as the means by which this objective is to be achieved; furthermore recognises that there has to be careful monitoring of whether appropriate resources are going to health and education at country level;

47.

Notes that the benchmark formula requires the 35 % to be allocated ‘mainly (to) education and health’ which are the two most prominent sectors in the MDGs; observes that the figures reported to the Development Assistance Committee for 2002 commitments in these sectors (15) remain far from this target, and that structural adjustment programme conditionalities are most unlikely to make up such a large shortfall; expresses concern about the figures given for EDF commitments (16) in these sectors; calls on the Commission to improve its performance in this area in future years;

48.

Regrets that the Commission has not provided an analysis of its contribution towards achieving the MDGs but has limited its study (17) to measuring the progress made by developing countries towards this objective; considers that assessment of the effectiveness of Commission programmes is hampered by the absence of such an analysis; calls for an analysis of aid effectiveness to be included in the mid-term review of the Cotonou Agreement;

49.

Congratulates the Commission on the results of its assessment of the involvement of non-state actors in the programming process for the ninth EDF, which showed that consultations were carried out in 62 countries out of 68; notes, however, that changes to draft country strategy papers only resulted in 36 countries, raising questions about the impact of consultations in the remaining cases; calls particularly for regular and formal consultation of ACP parliaments and the ACP-EU Joint Parliamentary Assembly;

50.

Notes that several EDF financed contracts have been signed with one of the companies at the centre of the Eurostat scandal in the context of the Common Market of eastern and southern Africa; notes that serious questions regarding these contracts were raised in the final Internal Audit Service report of October 2003;

51.

Regrets that Eurostat's consistent advice in favour of using CESD did not raise concern within AIDCO despite what was known internally about the company; notes this as another example of inadequate transparency and lack of communication between Commission departments;

52.

Finds it deeply dissatisfying that AIDCO did not issue a recovery order on EUR 200000, outstanding since 1999, before the Eurostat scandal broke in July 2003; expects the Commission to inform the European Parliament as soon as possible as to whether the recovery order on EUR 324 088 (accrued interest) issued to CESD has been fulfilled;

53.

Welcomes the fact, however, that AIDCO has ended contractual relations with the company in question;

54.

Recalls that the Court of Auditors in its annual report for the 2000 financial year, had serious criticism for the ACP Secretariat, as well as for the EUR 18 million financing agreement for 2000 to 2004 benefiting the ACP Secretariat and signed by the Commission on 9 March 2000;

55.

Recalls the European Parliament resolution relating to discharge for the 2000 financial year (18), in which the Commission was asked to inform the ACP Secretariat that it must, in all cases, respect the final rulings of the Belgian Courts on matters still pending;

56.

Is aware that the ACP Secretariat has not yet complied with a ruling from the Belgian Courts and paid compensation to a former employee, arguing that the ACP Secretariat seeks diplomatic immunity; notes that the ACP Secretariat has appealed to the Belgian Cour de Cassation; does not agree that diplomatic immunity should make it possible for the ACP Secretariat not to honour its responsibilities as an employer;

57.

Notes that the present agreement on the financing of the ACP Secretariat will expire at the end of 2004; calls on the Commission to include in any agreement on future financing a mechanism ensuring suspension of the financing agreement if the ACP Secretariat does not respect a final ruling of the Belgian courts;

58.

Asks the Commission to inform the discharge authority by 1 July 2004 at the latest about the result of contact made with the ACP Secretariat as requested above, as well as the expected content of a proposal for a future financing agreement benefiting the ACP Secretariat;

59.

Invites the Court of Auditors to follow up on observations on the ACP Secretariat made by the Court of Auditors in its annual report concerning the financial year 2000; invites the Court of Auditors, at the same time, to consider whether the ACP-EU Joint Parliamentary Assemblies are organised in accordance with the principles of sound financial management;

60.

Takes note of the Decision of the ACP-EC Council of Ministers on 11 December 2003 on the use of EUR 250 million from the long-term development envelope of the ninth EDF for the creation of a Peace Facility for Africa;

61.

Welcomes the creation of a Peace Facility for Africa, but is concerned about the risk of such funds being used on purposes other than those for which they were intended, for example, on military spending; invites the Commission to enter into a dialogue with the Parliament on the use of the Peace Facility for Africa within the overall development policy framework;

62.

Asks the Commission to specify in the annual accounts the amounts used for the Peace Facility for Africa and to inform the discharge authority, on an annual basis and in good time, and to be taken into account during the discharge procedure, about the management of such funds, including information about the specific activities financed by the funds;

63.

Notes that EUR 90 million in the Financial Protocol of the Cotonou Agreement are reserved for the CDE (Centre for the Development of Enterprise, formerly Centre for the Development of Industry); notes that the legal status of CDE is unclear and its objectives not well defined; deplores that there are still management shortcomings and weaknesses in internal and external control despite repeated criticism in different audits over the last years; calls on the Commission to follow up on the criticism raised by the Commission's own audits as well as in the Court of Auditors' annual report for 2002.