FINANCIAL REGULATION

of 16 June 1998

applicable to development finance cooperation under the fourth ACP-EC

Convention

(98/430/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, hereinafter referred to as ‘the EC Treaty’,

Having regard to the fourth ACP-EC Convention, signed at Lomé on 15 December 1989, hereinafter referred to as ‘the Convention’, as amended by the Agreement signed in Mauritius on 4 November 1995,

Having regard to the Internal Agreement on the financing and administration of Community aid under the Fourth ACP-EEC Convention(1), signed in Brussels on 20 December 1995, hereinafter referred to as ‘the Internal Agreement’, and in particular Article 32 thereof,

Having regard to Council Decision 91/482/EEC of 25 July 1991 on the association of the overseas countries and territories with the European Economic Community(2), hereinafter referred to as ‘the Decision’,

Having regard to the general regulations and general conditions for works, supplies and service contracts financed by the European Development Fund(3) which were approved by the ACP-EEC Council of Ministers on 29 March 1990, hereinafter referred to as ‘the General Regulations and Conditions of Contract’,

Having regard to the proposal submitted by the Commission,

Having regard to the opinion of the European Investment Bank, hereinafter referred to as ‘the Bank’,

Having regard to the opinion of the Court of Auditors(4),

Whereas, pursuant to Article 1(1) of the Internal Agreement, the Member States have set up an eighth European Development Fund, hereinafter referred to as ‘the EDF’;

Whereas, under Article 32 of the Internal Agreement, the provisions for implementing this Internal Agreement shall be the subject of a Financial Regulation adopted, upon the entry into force of the Convention, by the Council acting by the qualified majority laid down in Article 21(4) of the said Agreement,

HAS ADOPTED THIS FINANCIAL REGULATION:

TITLE I

FINANCIAL ESTIMATES, RULES FOR PAYMENT OF CONTRIBUTIONS TO THE EDF BY THE MEMBER STATES AND GENERAL PRINCIPLES

Article 1

The amount of the EDF set in Article 1 of the Internal Agreement shall be allocated as indicated in Annex I. The allocation of appropriations and the rules of transfer shall be laid down by the Convention and the Internal Agreement.

Article 2

1.   Annual contributions to the EDF shall be called up in four instalments payable on:

— 20 January,

— 1 April,

— 1 July,

— 1 November.

Supplementary contributions for the financial year decided on by the Council in accordance with Article 6(3) of the Internal Agreement shall, unless otherwise decided by the Council, be due and be made within as brief a period as possible which shall be laid down in the decision to call for such contributions and which may not exceed three months.

2.   The Commission shall notify the Member States as soon as possible, not later than the beginning of each financial year, and on the basis of the Council decision referred to in Article 6(1) of the Internal Agreement, of the amount of the instalments of contributions to be paid on each of the due dates. The Commission shall set the amounts to be paid by each Member State so that they are in proportion to its contributions to the EDF as fixed in Article 1(2) of the Internal Agreement.

The Commission shall inform the Member States of any alteration to the amount of the calls for contributions as soon as possible before the date on which each instalment of contributions is due, on the basis of the cash situation of the EDF and its expenditure estimates for the remainder of the year.

3.   Where an instalment of contributions payable under this Article is not paid within 15 days of the due date, the Member State concerned shall be required to pay interest in respect of the amount not paid on the basis of a rate of two percentage points above the interest rate for short-term financing applicable on the date on which the instalment is due on the money market of the Member State for the ecu. This rate shall be increased by a quarter of a percentage point for each month of delay. The increased rate shall be applicable to the entire period of delay. Amounts received by the Commission in respect of such late payment interest shall be credited to the account provided for in Article 9(2) of the Internal Agreement.

Article 3

1.   The financial contributions of the Member States shall be expressed in ecus.

2.   Each Member State shall pay the amount of its contribution in ecus. The Member States may, however, make actual payments of their contributions in their national currencies.

3.   Financial contributions shall be credited by each Member State to a special account entitled ‘Commission of the European Communities — European Development Fund’ opened with the bank of issue of that Member State or the financial institution designated by it. The amount of such contributions shall remain in these special accounts until required to meet payments needs provided for in Article 319 of the Convention.

4.   Upon expiry of the Convention, that part of the contributions which the Member States remain obliged to make shall be called up by the Commission, as required, on the conditions laid down in this Financial Regulation.

Article 4

1.   The ecu is the sum of specified amounts of the currencies of the Member States as set out in Council Regulation (EC) No 3320/94 of 22 December 1994 on the consolidation of the existing Community legislation on the definition of the ecu following the entry into force of the Treaty on European Union(5).

Any change in the composition of the ecu decided on by the Council pursuant to the EC Treaty shall automatically apply to this provision.

2.   The value of the ecu in a given currency shall be equal to the sum of the equivalents of the amounts of the currencies which make up the ecu.

It shall be determined by the Commission on the basis of the exchange rates recorded each day on the exchange markets.

The daily rates for conversion into the various national currencies shall be available each day and shall be published in the

Official Journal of the European Communities.

3.   Any operations involving conversions of the ecu into a national currency shall, in principle, be effected on the basis of the exchange rate applicable on that day; derogations from this principle may be permitted in duly justified exceptional cases, in accordance with the implementing rules of the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities(6).

Article 5

In order to make payments provided for in Article 319(1) and (4) of the Convention, the Commission shall open accounts with financial institutions in the ACP States and the OCT, for payments in the national currencies of the ACP States or in the local currencies of the OCT, and in the Member States, for payments in ecus and other currencies. Subject to Article 319(3) of the Convention, deposits in these accounts shall bear interest. Subject to Article 192 of the Convention, such interest shall be credited to the account provided for in Article 9(2) of the Internal Agreement.

Article 6

1.   The Commission shall transfer from the special accounts opened pursuant to Article 3(3) amounts needed to replenish the accounts opened in its name in accordance with Article 5. Such transfers shall be made on the basis of the cash needs of the projects and programmes.

2.   The Commission shall endeavour to make any withdrawals from the special accounts referred to in Article 3(3) in such a way as to maintain a distribution of its assets in those accounts corresponding to the proportions in which the various Member States contribute to the EDF.

Article 7

The signatures of the Commission officials and agents who are empowered to carry out operations on the EDF's accounts shall be lodged with the banks concerned when the accounts are opened or, in the case of officials and agents who are authorised subsequently, when they are designated. This procedure also applies to the lodging of signatures of national and regional authorising officers and their deputies for operations in paying agent accounts opened in the ACP States or the OCT and, where appropriate, in the accounts opened in the Member States.

Article 8

1.   EDF resources must be used in accordance with the principles of sound financial management, and in particular those of economy and cost effectiveness. Qualitative and quantitative objectives must be identified and the progress of their realisation monitored by means of appropriate indicators.

2.   To this end the use of EDF resources must be preceded by an

ex ante

evaluation of the operation to be undertaken with a view to ensuring that the expected results justify the means deployed.

3.   All operations must be periodically examined and their grounds checked, particularly with a view to the estimates of calls for contributions referred to in Article 6(1) of the Internal Agreement.

Article 9

1.   The financing decisions taken pursuant to Articles 25 to 27 of the Internal Agreement, with regard to aid administered by the Commission, and the financing agreements, have a time limit for starting implementation of the project. Beyond this date, the financing decision and agreement no longer apply.

2.   The financing decisions referred to in paragraph 1 and the financing agreements also have a time limit for implementation of the operation. Continuation of the operation beyond this date must be justified by the third-party beneficiary and accepted by the Commission before the implementation time limit expires.

3.   The termination of a project and the non-commitment of the funds committed under Article 20 shall be carried out when the legal commitment entered into by the Commission in connection with that project with respect to the beneficiary is concluded and the related payments and collections have been recorded in the accounts.

TITLE II

FINANCIAL ADMINISTRATION OF EDF-APPROPRIATIONS BY THE COMMISSION

Section

GENERAL PROVISIONS

Article 10

Subject to Article 15(3)(c) and Article 39, the provisions of this Title are not applicable to risk capital and interest rate subsidies managed by the Bank.

Article 11

1.   Appropriations shall be administered by authorising officers, who alone shall have the power to enter into commitments regarding expenditure, establish sums due to be collected and issue recovery orders and payment orders.

2.   Collection and payment operations shall be carried out by the accounting officer.

3.   The duties of authorising officer, financial controller and accounting officer shall be mutually incompatible.

Article 12

Where revenue and expenditure operations are managed by means of integrated computer systems, the provisions of Sections II and III of this Title shall apply with due allowance for the possibilities and requirements deriving from computerised management.

To this end:

— the supporting documents may remain with the chief authorising officer or the accounting officer or their deputies for the purposes of checking,

— signatures and approvals may be added in appropriate computerised form.

The financial controller shall be consulted on the setting up of the EDF accounting system and shall have access to the data of the system.

Article 13

1.   The chief authorising officer of the EDF, whose duties are laid down in Article 311 of the Convention, shall be appointed by the Commission.

2.   The chief authorising officer of the EDF may delegate his powers of implementation of the EDF to authorised persons, whom he shall appoint, subject to approval by the Commission. The rules governing responsibilities adopted under this Title shall apply to such persons within the limits of the powers delegated to them. Each decision to delegate powers shall state the extent and, where appropriate, the duration of the delegation.

3.   Those to whom powers are delegated may act only within the limits of the powers expressly conferred upon them. Decisions to delegate powers shall be notified to those to whom powers are delegated, to the accounting officer, the financial controller, the chief authorising officer and the Court of Auditors.

Article 14

1.   The financial controller of the EDF shall be the financial controller of the Commission. He shall be responsible for monitoring the commitment and authorisation of expenditure and for monitoring the recording and collection of revenue and debts. The financial controller may be assisted in his duties by one or more assistant financial controllers.

2.   Monitoring shall be carried out by the financial controller by means of inspection of the files and, if necessary, on the spot. In this connection he shall have access to files and to the original supporting documents relating to commitments, expenditure and revenue and, where appropriate, to files relating to appropriations and assigned funds. Any document or information drawn up or kept on a magnetic medium which the financial controller deems necessary for the performance of his work shall be sent to him at his request.

3.   The special rules applicable to the financial controller are those laid down in the Financial Regulation applicable to the general budget of the European Communities.

Article 15

1.   The accounting officer shall be appointed by the Commission. He may be assisted in his duties by one or more assistant accounting officers appointed, on the basis of a reasoned opinion by the accounting officer, under the same conditions as the accounting officer.

2.   The accounting officer shall be responsible for the collection of revenue and the payment of expenditure, the recovery of debts and the management of the cash flow. Subject to Article 36, the accounting officer alone shall be empowered to manage funds and assets. He shall be responsible for their care.

3.   The accounting officer shall be responsible for maintaining the accounts for:

(a) the appropriations referred to in Article 1;

(b) the commitments referred to in Article 20;

(c) the risk capital decisions and interest-rate subsidies referred to in Article 39;

(d) payments, revenue and debts.

4.   The accounting officer shall be responsible for the preparation of the financial statements referred to in Article 66(2) of this Financial Regulation.

Article 16

The Court of Auditors shall be notified of the appointment of the chief authorising officer, the accounting officer, the assistant accounting officer and the administrator of advance funds referred to in Article 36 and of the accounting plan referred to in Article 40. The Commission shall forward to the Court any rules of procedure drawn up by it in respect of financial matters.

Section II

REVENUE AND DEBTS

Article 17

1.   EDF revenue consists of payments made by the Member States in accordance with the Internal Agreement, the income generated by deposits and any other sum whose acceptance is established by the Council.

2.   The accounting officer shall be responsible for the monitoring and entry in the accounts of payments by the Member States and other revenue.

3.   For all other revenue, the accounting officer shall draw up a revenue order which is sent to the financial controller for prior approval. The purpose of the approval of the financial controller shall be to establish that:

(a) the revenue is booked to the correct item;

(b) the order is in order and conforms to the relevant provisions;

(c) the supporting documents are in order,

(d) the order conforms to the principles of sound financial management;

(e) the amount and currency of the revenue are correct.

Entry in the accounts of revenue becomes final after the approval of the financial controller.

Article 18

1.   All measures or situations which may give rise to or modify a debt due to the EDF and are brought to the attention of the Commission by the national authorising officer must be preceded by a debt estimate from the chief authorising officer. Such estimates shall be sent to the financial controller for his approval and to the accounting officer for provisional recording in the accounts. They shall mention, in particular, the type of debt, the estimated amount thereof and the budget item to which it is to be booked and also the name and description of the debtor. The purpose of the approval of the financial controller shall be to establish that:

(a) the revenue is booked to the correct item;

(b) the debt estimate is in order and conforms to the relevant provisions relating to the management of the EDF and all acts made in implementation thereof and to the principles of sound financial management referred to in Article 8.

The financial controller may withhold his approval if he considers that the conditions laid down in paragraph 1(a) and (b) above have not been met.

The Commission may, by a decision stating the full reasons therefor, and on its sole responsibility, overrule this refusal. This decision shall be final and binding; it shall be communicated for information to the financial controller. The Commission shall inform the Court of Auditors of all such decisions within one month.

2.   Without prejudice to Article 12, the chief authorising officer shall draw up, in respect of every established, liquid and payable debt due to the EDF in the context of the implementation of EDF appropriations, a recovery order which shall be sent with supporting documents to the financial controller for his prior approval. Such recovery orders shall, after they have received the approval of the financial controller, be recorded in the accounts by the accounting officer.

The purpose of the approval shall be to establish that:

(a) the revenue is booked to the correct item;

(b) the order is in order and conforms to the relevant provisions;

(c) the supporting documents are in order;

(d) the debtor is correctly described;

(e) the due date is indicated;

(f) the order conforms to the principle of sound financial management referred to in Article 8;

(g) the amount and currency of the sum to be recovered are correct.

If approval is withheld, the third subparagraph of paragraph 1 shall apply.

3.   If the chief authorising officer waives the right to recover a debt as referred to in paragraph 1, he shall send beforehand a proposal for cancellation to the financial controller for his approval and to the accounting officer for his information. The purpose of approval by the financial controller shall be to establish that the waiver is in order and conforms with the principles of sound financial management. The proposal concerned shall be registered by the accounting officer.

If approval is withheld, the third subparagraph of paragraph 1 shall apply.

4.   Where the financial controller finds that a recovery order has not been drawn up or that a sum due has not been recovered, he shall inform the Commission thereof.

Article 19

1.   The accounting officer shall assume responsibility for recovery orders that have been duly drawn up.

2.   The accounting officer shall do all in his power to ensure that the debts referred to in Article 18 are recovered at the due dates indicated in the recovery orders and shall ensure that the relevant rights of the Community are safeguarded.

3.   The accounting officer shall inform the chief authorising officer and the financial controller of any debts not recovered within the time limits laid down.

4.   If necessary, he shall initiate the recovery procedure.

Section III

COMMITMENT, VALIDATION, AUTHORISATION AND PAYMENT OF EXPENDITURE

1.   

Commitment of expenditure

Article 20

1.   All measures which may give rise to expenditure payable by the EDF must be preceded by a proposal for commitment of expenditure from the chief authorising officer and can create legal obligations

vis-à-vis

third parties only after approval by the financial controller of the proposal for commitment and after a Commission financing decision.

2.   Financing decisions taken by the Commission in accordance with Articles 25 to 27 of the Internal Agreement and the provisions authorising it to grant financial aid from the EDF shall give rise to commitments of expenditure.

Article 21

1.   Without prejudice to Article 12, proposals for commitments, accompanied by the supporting documents, shall be transmitted to the financial controller. They shall show in particular the purpose of the expenditure, the estimated amount involved, the item to which it is to be charged and the name and description of the recipient of the financing.

2.   Proposals for commitments shall be subject to endorsement by the accounting officer after approval by the financial controller and a Commission financing decision.

Article 22

1.   The purpose of approval of proposals for commitment by the financial controller shall be to establish that:

(a) the proposal conforms to Article 20(1);

(b) the expenditure has been charged to the correct item;

(c) appropriations are available;

(d) the financing proposal is correct and in conformity with the provisions applicable to the EDF;

(e) the principles of sound financial management referred to in Article 8 have been applied.

2.   Approval may not be conditional.

Article 23

1.   The financial controller may withhold his approval if he considers that the conditions laid down in Article 22 are not met. If he withholds his approval, he shall furnish a written statement giving the reasons therefor. The chief authorising officer shall be notified accordingly.

Where approval is withheld and the chief authorising officer maintains his proposal, the refusal shall be referred for a decision to the Commission.

2.   Except where the availability of appropriations is in doubt, the Commission may, by means of a decision stating the full reasons therefor and taken on its sole responsibility, overrule such a refusal. This decision shall be final and binding; it shall be communicated for information to the financial controller. The Commission shall inform the Court of Auditors of all such decisions within one month.

2.   Assigned funds

Article 24

1.   The contracts concluded by the beneficiary for the implementation of a project or programme which was the subject of a financing decision referred to in Article 20(2) and approved by the Head of Delegation, shall be recorded in the accounts by the chief authorising officer. This recording is called assigned funds. The same holds for contracts and estimates concluded directly or on behalf of the beneficiary by the Commission for the implementation of such projects and programmes.

2.   The assigned funds recorded shall be set off against commitments of expenditure of the financing decisions referred to in Article 20(2).

3.   

Validation of expenditure

Article 25

The validation of expenditure shall be the act whereby the chief authorising officer:

(a) verifies the existence of the creditor's claim;

(b) determines or verifies the existence and the amount of the sum due;

(c) verifies the conditions under which payment falls due.

Article 26

1.   Validation of any expenditure shall be subject to the submission of supporting documents showing the creditor's claim and, where appropriate, the service rendered or the existence of a document justifying payment. The nature of the supporting documents to be enclosed with the payment orders and the particulars they shall include shall be such as to make it possible to carry out the checks provided for in Articles 25 and 29.

2.   For certain categories of expenditure, advances may be granted.

3.   The chief authorising officer empowered to validate expenditure shall personally check the supporting documents or shall, on his own responsibility, ascertain that this has been done.

4.   

Authorisation of expenditure

Article 27

Authorisation is the act whereby the chief authorising officer, by the issue of a payment order, authorises the accounting officer to pay an item of expenditure which he has validated.

Article 28

The payment order shall state:

(a) the item against which payment shall be charged;

(b) the amount to be paid, in figures and in words, showing the currency;

(c) the name and address of the beneficiary;

(d) the bank account;

(e) the method of payment;

(f) the purpose of the expenditure.

The payment order shall be dated and signed by the chief authorising officer.

Article 29

1.   The payment order shall be accompanied by the original supporting documents, which shall bear or be accompanied by a statement confirming that the amounts to be paid are correct and that the supplies have been received or the service performed. The payment order shall show the numbers and dates of the relevant approvals of commitment.

2.   Copies of the supporting documents, certified as true copies by the chief authorising officer or the head of the Commission delegation, may, in duly warranted cases, be accepted in place of the originals.

Article 30

1.   Subject to Article 35, payment orders shall be sent to the financial controller for prior approval. The purpose of this prior approval shall be to establish that:

(a) the payment order was properly issued;

(b) the payment order agrees with the creditor's claim;

(c) the expenditure is charged to the correct item;

(d) the appropriations are available;

(e) the supporting documents are in order;

(f) the payee is correctly named and described.

2.   Should approval be withheld, Article 23 shall apply.

3.   After approval by the financial controller, the original of the payment order, together with all supporting documents, shall be forwarded to the accounting officer.

5.   

Payment of expenditure

Article 31

1.   Without prejudice to Article 313 or Article 319(8) of the Convention concerning respectively the responsibilities of the national authorising officer and the financial liabilities of the agents responsible for the management and execution of development finance cooperation, payment is the final action whereby the EDF is discharged of its obligations towards its creditors.

2.   Subject to Article 36, payment shall be made by the accounting officer within the limits of the funds available.

Article 32

In the event of a substantive error or of the validity of the discharge being contested or of failure to observe the formalities prescribed by this Financial Regulation, the accounting officer shall suspend payment.

Article 33

1.   If payment is suspended, the accounting officer shall give the reasons for his decision in a written statement which he shall send forthwith to the chief authorising officer and, for information, to the financial controller.

2.   Except where the validity of the discharge is contested, the chief authorising officer may, where payment is suspended, refer the matter to the Commission. The latter may require, in writing and on its own responsibility, that payment be effected.

Article 34

1.   Payments shall be effected through the bank accounts described in Article 5. The procedures for opening, administering and using such accounts shall be determined by the Commission.

2.   These conditions shall in particular require two signatures on cheques and on transfer orders, one signature being that of the accounting officer, an assistant accounting officer or an administrator of advance funds; these conditions shall, moreover, require the specification of the expenditure in respect of which payment must necessarily be made either by cheque or by transfer.

6.   

Payments effected locally

Article 35

1.   In cases where the chief authorising officer has delegated his responsibilities to the head of delegation in accordance with Article 13, the corresponding payments may be effected by an assistant accounting officer, on the spot, appointed under the conditions referred to in Article 15.

The assistant accounting officer shall effect payments in local currency from the paying agent account in the ACP State or OCT and, where appropriate, payments in foreign currency from one or more paying agent accounts in the Community.

2.   The entry in the EDF accounts of the payments effected pursuant to paragraph 1 may also be entrusted to the assistant accounting officer.

3.   For payments made by the assistant accounting officer, the financial controller will carry out checks after they are effected or possibly after their entry in the accounts.

7.   

Imprest accounts

Article 36

1.   For the payment of certain categories of expenditure, advance funds may be set up at the decision of the chief authorising officer following a favourable opinion of the accounting officer and of the financial controller.

2.   Only the accounting officer may replenish the imprest accounts.

3.   The rules governing the management of the advance funds shall cover in particular:

(a) the appointment of administrators of advance funds;

(b) the nature and maximum amount of each item of expenditure to be incurred;

(c) the maximum amounts which may be advanced;

(d) the procedures for the production of supporting documents and the time within which they must be produced;

(e) the responsibility of the administrators of advance funds.

4.   The chief authorising officer and the accounting officer shall take the necessary steps towards clearing, in respect of the exact amounts and within the appropriate period, advances granted under this Article.

Section IV

ACCOUNTS

Article 37

Accounts shall be kept in ecus by the double entry method and on the basis of the calendar year.

They shall show all:

(a) appropriations,

(b) commitments,

(c) assigned funds,

(d) revenue, payments, established debts and collection operations for the year in full and without any adjustment against each other.

They shall be substantiated by supporting documents.

When assigned funds, revenue, payments and debts are expressed in national currencies, the accounting system should make it possible, where necessary, for them to be recorded in national currencies as well as in ecus.

Article 38

1.   The commitments defined in Article 20(2) shall be recorded in ecus for the value of the financing decisions taken by the Commission.

2.   The assigned funds defined in Article 24 shall be recorded in ecus at the equivalent of the value of the contracts and estimates concluded by the beneficiary ACP State or OCT or by the Commission in the performance of the project. This value shall include where appropriate:

(a) provision for the payment of (reimbursable) expenses on presentation of supporting documents;

(b) provision for the revision of prices and contingencies as defined in EDF-funded contracts;

(c) financial provision for exchange rate fluctuations.

3.   The conversion rates to be used for final accounting of payments made under the projects or programmes referred to in Part 3, Title III, of the Convention shall be the rates applicable on the actual date of such payments. That date shall correspond to the date on which the Commission accounts referred to in Article 5 of this Financial Regulation were debited.

4.   All accounting records referring to the fulfilment of a commitment shall be kept for a period of five years from the date of the decision giving discharge in respect of implementation of the EDF, referred to in Article 33(3) of the Internal Agreement, concerning the financial year during which the commitment was closed for accounting purposes.

Article 39

1.   The Commission shall keep accounts of the risk capital and interest-rate subsidies administered by the Bank on behalf of the Community.

2.   Before the financing decision is adopted by the Bank's board of directors in accordance with Article 29(3) and (4) of the Internal Agreement, a proposal to enter the decision in the accounts shall be sent to the financial controller and to the accounting officer by the chief authorising officer.

3.   The proposal shall indicate,

inter alia,

the purpose, the estimated amount and the item to which the expenditure is to be booked as well as the beneficiary of the financing.

The purpose of the approval of the financial controller shall be to establish that:

(a) the expenditure is booked to the correct item;

(b) appropriations are available.

Validation by the accounting officer shall take place after the Bank's Board of Directors has adopted the financing decision.

4.

(a) Financing decisions relating to risk capital adopted by the Bank shall be entered in the accounts at their nominal value.

(b) In the case of interest-rate subsidies, a provisional entry shall be made in the accounts based on a value estimated by the Commission when the decision was adopted. This shall be finalised in the accounts on receipt of the estimate of the amount of the interest-rate subsidy from the Bank when the contract is signed. This amount shall be adjusted at the end of the contract.

5.   Requests for payments of funds as referred to in Articles 59(2) and 61 (3) shall be sent to the financial controller for approval by the chief authorising officer.

The following shall be indicated in requests for payment:

(a) the item against which payment shall be charged;

(b) the amount to be paid, in figures and in words, showing the currency;

(c) the name and address of the payee;

(d) the bank account and the method of payment;

(e) the purpose of the expenditure;

(f) the value date of the payment.

6.   The payment shall be made and entered in the accounts by the accounting officer.

7.   The termination of a financing decision and the repayment of the balance available to the relevant appropriation shall be effected at the request of the EIB.

Article 40

1.   Entries in the accounts shall be made on the basis of an accounting plan comprising a nomenclature of budgetary items which makes a clear distinction between the financial statements and revenue and expenditure accounts.

2.   The detailed conditions for drawing up and operating the accounting plan shall be defined by the Commission on a proposal from the accounting officer.

Article 41

The accounts shall be closed at the end of the financial year to enable the financial statements and revenue and expenditure accounts of the EDF to be drawn up. These shall be submitted for the financial controller's opinion.

Section V

RESPONSIBILITIES OF AUTHORISING OFFICERS, FINANCIAL CONTROLLERS, ACCOUNTING OFFICERS AND ADMINISTRATORS OF ADVANCE FUNDS

Article 42

Without prejudice to Article 313(1)(f) or Article 319(8) of the Convention, authorising officers who, when establishing entitlements to be recovered for the EDF, entering into commitments of expenditure, signing payment orders, or issuing recovery orders, do so without complying with this Financial Regulation, shall render themselves liable to disciplinary action, and where appropriate, to payment of compensation. The same shall also apply if they neglect to issue recovery or payment orders or are, without justification, late in issuing them, thereby rendering the Commission liable to civil action by third parties.

Article 43

Financial controllers shall be liable to disciplinary action and, where appropriate, to payment of compensation for any action taken during their terms of office, in particular where they approve expenditure in excess of appropriations.

Article 44

1.   The accounting officer and assistant accounting officers shall be liable to disciplinary action and, where appropriate, to payment of compensation as regards payments they make in disregard of Article 32.

They shall render themselves liable to disciplinary action and to payment of compensation as regards any loss or deterioration of the monies, assets and documents in their charge where such loss or deterioration was caused by intentional mistake or was due to serious negligence on their part.

Under the same conditions, they shall be responsible for the correct execution of orders received by them in respect of the use and administration of accounts held with recognised financial institutions and, in particular:

(a) where the recoveries or payments made by them do not agree with the amounts on the corresponding recovery or payment orders;

(b) where they effect payments to a party other than the entitled payee.

2.   Administrators of advance funds shall be liable to disciplinary action and, where appropriate, to payment of compensation:

(a) where they cannot show due warrant with proper documents for payments made by them;

(b) where they effect payments to a party other than the entitled payee.

They shall be liable to disciplinary action and to payment of compensation in respect of any loss or deterioration of the monies, assets and documents in their charge where such loss or deterioration was caused by intentional mistake or was due to serious negligence on their part.

3.   The accounting officer, assistant accounting officers and administrators of advance funds shall insure themselves against any risk they may incur under this Article, and which cannot be covered by the guarantee fund provided for in paragraph 4. The Commission shall cover the relevant insurance costs.

4.   Special allowances shall be granted to accounting officers, assistant accounting officers and administrators of advance funds. The amount of these allowances shall be determined by the Commission. The sums corresponding to these allowances shall be credited each month to an account opened by the Commission on behalf of each of these officials in order to establish a guarantee fund to cover any cash or bank shortage for which the person concerned might render himself liable.

The credit balance in these guarantee accounts shall be paid over to the persons concerned after they terminate their appointment as accounting officer or administrator of advance funds. In the case of accounting officers, this shall be conditional upon receipt of the final discharge referred to in Article 46.

Article 45

The liability of the chief authorising officer and his deputies, financial controllers, accounting officers and administrators of advance funds to payment of compensation and disciplinary action may be determined in accordance with Articles 22 and 86 to 89 of the Staff Regulations of officials of the European Communities.

Article 46

The Commission shall be allowed a period of two years from the date on which the financial statements are submitted to the Council to take a decision on the final discharge to be given to accounting officers for the transactions relating thereto.

TITLE III

IMPLEMENTING MEASURES

Section I

EDF OPERATIONS ADMINISTERED BY THE COMMISSION

1.   

General

Article 47

Where aid accorded is onlent to the final borrower in accordance with Articles 219(5), 233(3) and 266 of the Convention, the financial agreement shall specify the terms of such lending,

inter alia

rates of interest, duration of loan, grace period, and arrangements for the utilisation of funds provided by reimbursement of capital and interest. In fixing these terms, due regard will be paid to all relevant provisions of the Convention, and in particular, to Articles 233(4)(b), 240(1)(a) and Article 291.

Article 48

Claims for delayed payments for which it is responsible by virtue of Article 319 of the Convention shall be borne by the Commission from the account provided for in Article 9(2) of the Internal Agreement.

2.   

Tenders and contracts

Article 49

1.   The Commission shall take all appropriate measures to ensure the effective dissemination of information for the economic operators concerned, notably through periodical publication of forecasts of contracts to be financed from the resources of the EDF.

2.   The Commission shall ensure that the following are published by the most appropriate means:

(a) indicating the purpose, content and value of each contract forecast:

— once a year, forecasts of the contracts for services and technical cooperation projects to be awarded after invitations to tender during the twelve months following publication,

— once every three months, any changes in the forecasts referred to in the first indent;

(b) the results of invitations to tender at the earliest opportunity.

3.   A similar procedure shall be followed in communicating decisions to intervene in respect of carrying out studies and supplying technical assistance.

Article 50

The Commission shall inform the Council each year of any contract concluded during that year. Where appropriate, it shall notify the Council of any measures it has been led to take or proposes to take to improve the terms of competition for participation in invitations to tender issued by the EDF.

In its report, the Commission shall provide the Council with information enabling it to assess whether the measures taken by the Commission have in fact first given all undertakings of the various Member States, of the ACP and of the associated countries and territories equal opportunity of access to works, supply and services contracts financed by the EDF.

Article 51

Information relating to direct agreement contracts, works, supply and services contracts concluded following restricted invitation to tender or direct labour contracts shall be contained in the annual report to the Council referred to in Article 50.

Article 52

1.   Without prejudice to Article 20(1)(c) of the Internal Agreement, the provisions of the General Regulations and Conditions of Contract shall apply to all tenders and contracts financed from the EDF. The payments arrangements and the currency or currencies of payment shall be specified in the wording of the relevant contracts.

2.   The price offered in tenders for contracts financed by the EDF shall take into account the applicable tax arrangements provided for in Articles 308, 309 and 310 of the Convention.

3.   Where payment is made in the national currency of an ACP State, it shall be made through the intermediary of a bank established in that State or in the country where the contractor's registered office is located.

Where payment is made in ecus or in a foreign currency, it shall be made through the intermediary of an approved bank or agency established in a Member State, in an ACP State or in the country where the contractor's registered office is located.

3.   

Structural adjustment support

Article 53

1.   Support for structural adjustment programmes provided under the Convention shall be implemented in accordance with Articles 243 to 248 of the Convention.

2.   Contracts arising in the case of import programmes which take the form of provision of foreign exchange may be expressed in currencies other than those of ACP States or the ecu, such other currencies to include those of countries which are not Contracting Parties to the Convention.

3.   On the occasion of each advance of funds provided in structural adjustment programmes, the Commission shall check regularity and conformity with respect to the justification of the use of funds and the rules applicable pursuant to Articles 246, 248 and 294(1)(b) of the Convention and to Article 20 of the Internal Agreement.

4.   

Management of the export earnings stabilisation system (Stabex)

Article 54

The annual resources available to the Stabex system provided for in Article 191 of the Convention shall be managed by the Commission in accordance with the following procedures:

(a) half of each annual instalment shall be credited to the system on 1 April and 1 July respectively and transferred to a special Stabex bank account. However, the first half annual instalment in each year shall be reduced by any amount used in advance in the preceding year under Article 194(1) of the Convention. The second half annual instalment in each year shall be increased by any amount used in advance on the following year under Article 194(1) of the Convention. Any sums due to the Stabex system in the year in which the Convention came into force shall be transferred to the Stabex account on the date of entry into force of this Financial Regulation, with effect from the due dates laid down above. Each Member State may, however, convert the contribution owed by it into an open debt producing interest for the benefit of the system in accordance with the arrangements laid down in Annex II;

(b) interest shall be provided on the amounts of annual instalments credited to the Stabex system's resources as follows:

— from 1 April each year on the amount of the first half of each annual instalment less any advance and transfers paid from the Stabex system's resources,

— in like manner, from 1 July each year in respect of the second half of each annual instalment;

(c) any part of an annual instalment which has not been paid by way of advance or transfer shall continue to bear interest which shall accrue to the system's resources until its utilisation in the following year,

(d) the transfers referred to in Article 211 of the Convention shall be made in ecus into an interest-bearing bank account, opened in a Member State of the Community and chosen by mutual agreement between the ACP State and the Commission. All interest accruing shall be credited to that account. All withdrawals from the account shall require two signatures, one being that of a person designated by the ACP State concerned, the other that of the Commission's head of delegation. The funds in the account, including interest, shall be mobilised in accordance with Article 186(2) of the Convention.

Article 55

Where advance use is made of the following year's instalment as provided for in Article 194 of the Convention, the advances referred to in Article 206 of the Convention shall be reduced proportionately.

Article 56

The quarterly report to the Member States on the cash situation of the EDF treasury, provided for in Article 2(1), shall include specific information on the financial situation of the Stabex system.

Article 57

Wherever the calculation of the amount of a transfer or advance requires the conversion of statistics expressed in the national currency of the ACP State concerned, or of any other currency, into ecus, the exchange rate applicable shall be the average annual rate in force in the calendar year to which the statistics concerned refer.

Section II

AID MANAGED BY THE BANK

Article 58

The Bank shall forward to the Commission at the beginning of each quarter estimates of all amounts expected to be claimed from the EDF in that quarter in respect of the risk capital and interest-rate subsidies that it administers in accordance with Article 10 of the Internal Agreement.

1.   

Risk capital

Article 59

1.   Each decision to grant risk capital shall set a limit to the Community's commitment and financial responsibilities and, in the case of shareholdings, to the extent of the rights in the company to which such operations relate.

The decision shall also take into account the provisions of Article 234(2) of the Convention relating to responsibility for exchange-rate risks.

The instruments giving effect to risk-capital operations shall be concluded by the Bank acting as the Community's authorised agent.

2.   When each disbursement takes place, the Bank shall request the Commission to pay in ecus the amount of the risk capital disbursed. The Commission shall pay this amount within 21 days of receipt of the request for payment with the same value date as that of the disbursement by the Bank.

3.   When the disbursement takes place in currencies other than the ecu, the exchange rates used to determine the amounts to be disbursed shall be those obtained by the Bank from the correspondent responsible for the exchange transaction.

The ecu exchange rates to be used by the borrower to calculate the amounts due in respect of products, income and reimbursements from risk capital operations shall be those in force one month before the date of payment.

4.   Amounts due in respect of receipts, income and repayments relating to risk capital operations shall be collected by the Bank on behalf of the Community, in accordance with Article 60.

Article 60

The sums collected by the Bank in the form of receipts, income or repayments from risk-capital operations shall be credited to a special account opened on behalf of the Community for the Member States in proportion to their contributions to the EDF. The account shall be denominated in ecus and managed by the Bank in accordance with Article 9(1) of the Internal Agreement. The Bank shall agree with the Member States on the information to be supplied concerning the account.

The technical procedures for the management of the account, including those relating to the fixing of the rates of interest on it, shall be decided upon by the Council and the Bank in agreement with the Commission.

2.   

Subsidised loans

Article 61

1.   The aggregate amount of interest-rate subsidies on each loan from the Bank shall be calculated in ecus in accordance with Article 235 of the Convention on the basis of the composite interest rate to be fixed in accordance with the procedures set out in paragraph 3(c) of this Article.

2.   On the signing of each loan contract, the Bank shall communicate to the Commission the estimated total amount of the interest-rate subsidy expressed in ecus.

3.   Upon the disbursement of each instalment of the loan, the Bank shall request the Commission to pay the interest subsidy relating to the instalment based on the following calculations:

(a) the equivalent in ecus of the amounts of currencies in which the loan instalment was disbursed at the conversion rate for those currencies and the ecu as published in the

Official Journal of the European Communities

in operation on the date on which the amount of currencies to be disbursed is determined, which date shall be communicated to the Commission;

(b) application of the percentage rate of interest subsidy to the declining annual capital balance due at each repayment date;

(c) the present value of the interest subsidies relating to the loan disbursement. Calculation of the present value shall be made by reference to a composite discount rate equal to the annual interest rate(s) which the Bank would in fact receive in the currency or currencies used for the relevant disbursement of the loan if the loan did not benefit from an interest subsidy. The actual calculation of present value shall use this composite discount rate reduced by four tenths of a percentage point.

4.   The Commission shall pay in ecus the amount of subsidy, discounted in accordance with the procedures described in paragraph 3, within 21 days of receipt of the request for payment, the value date being that of the disbursement of the relevant loan instalment.

5.   Where the whole of an interest subsidised loan is repaid in advance, the Bank shall pay to the Commission the total balance of the discounted subsidy, adjusted for the period between receipt and payment by the Bank, on the first contractual repayment date subsequent to the advance payment. Where only part of such a loan is repaid, the payment by the Bank to the Commission shall relate to that part of the loan which has been repaid.

6.   The sums reimbursed to the Commission shall be added to the appropriations available for the financing of interest-rate subsidies provided for in Article 4 of the Internal Agreement.

7.   All payments provided for in this Article shall be made in ecus.

TITLE IV

EXECUTIVE AGENTS

1.   

The chief authorising officer

Article 62

The chief authorising officer of the EDF, referred to in Article 311 of the Convention, shall take all measures necessary for the implementation of Articles 294 to 307 of the Convention.

Article 63

1.   The chief authorising officer shall take all measures to ensure that national or regional authorising officers perform the tasks for which they are responsible by virtue of the Convention, and in particular Articles 312 to 315 thereof.

2.   Where the chief authorising officer of the EDF becomes aware of problems in the carrying out of procedures relating to management of EDF resources, he shall, in conjunction with the national or regional authorising officer, make all contacts necessary to remedy the situation and take any steps appropriate, including where the national or regional authorising officer does not or cannot perform the duties incumbent on him under the Convention, temporary replacement of that officer by the chief authorising officer.

Article 64

Transactions relating to the execution of projects shall be carried out by the national or regional authorising officer in close cooperation with the head of delegation in accordance with Articles 313 and 317 of the Convention.

In performing the duties laid down in Article 316 the head of delegation shall comply with this Financial Regulation.

2.   

The paying agent

Article 65

The relations between the Commission and the paying agents provided for in Article 319 of the Convention shall be the subject of contracts which shall require the prior approval of the financial controller. Once signed, these contracts shall be sent to the Court of Auditors.

TITLE V

PRESENTING AND AUDITING ACCOUNTS

Article 66

1.   The Commission shall draw up, not later than 1 May each year, the financial statements and the revenue and expenditure accounts of the EDF describing the financial situation of the Fund as at 31 December of the preceding year.

2.   The financial statements shall be drawn up by the accounting officer and include:

(a) a balance sheet of the EDF's assets and liabilities at the end of the preceding financial year;

(b) a statement of sources and uses of funds covering the preceding financial year,

(c) a statement of revenue and payments in the preceding financial year,

(d) a table of revenue showing:

— estimated revenue for the calendar year,

— amendments to the revenue estimates,

— entitlements established in the course of the calendar year,

— amounts still to be received at the end of the calendar year,

— additional revenue;

(e) a table of debts showing:

— debts still to be recovered at the beginning of the calendar year,

— entitlements established in the course of the calendar year,

— amounts recovered in the course of the calendar year,

— cancellation of established entitlement,

— debts still to be recovered at the end of the calendar year,

(f) notes indicating which accounting principles were applied in the preparation and presentation of the accounts providing, where appropriate, additional explanations of various headings in the tables referred to in points (a), (b), (c), (d) and (e).

Article 67

1.   The revenue and expenditure account referred to in Article 68 shall be drawn up by the chief authorising officer in conjunction with the accounting officer and shall include:

(a) a table showing changes during the preceding year in the appropriations referred to in Article 1;

(b) a table showing the total by appropriation of commitments, assigned funds and payments effected during the financial year and aggregate totals since the opening of the EDF;

(c) tables showing by appropriation, country, territory, region or sub-region, the total commitments, assigned funds and payments effected during the financial year and aggregate totals since the opening of the EDF.

2.   The revenue and expenditure accounts shall be prefaced by an analysis of financial management during the preceding year.

Article 68

Without prejudice to Article 33(5) of the Internal Agreement, the Commission shall forward the financial statements and revenue and expenditure accounts to the European Parliament, the Council and the Court of Auditors not later than 1 May of the following financial year.

Article 69

The Court of Auditors and its Members may seek the assistance of the Court's staff in the discharge of their duties.

The tasks delegated to such staff shall be notified by the Court of Auditors itself, or by one of its Members, to the authorities with which the staff in question are required to work.

Article 70

1.   Without prejudice to Article 33(5) of the Internal Agreement, the audit carried out by the Court of Auditors shall be based on records and, if necessary, be performed on the spot. Its purpose shall be to establish that all revenue has been received and all expenditure incurred in a lawful and regular manner with regard to the provisions applicable and that the financial management has been sound.

2.   In the performance of its tasks, the Court of Auditors may, under the conditions laid down in paragraph 6, consult all documents and information relating to the financial management of the departments subject to its inspection; it has the power to hear any official responsible for revenue and expenditure operations and to use any of the auditing procedures appropriate to those departments.

3.   The Court of Auditors shall ensure that all securities and cash on deposit or in hand are checked against vouchers signed by the depositaries or against official memoranda of cash and securities held. The Court may itself carry out such checks.

4.   At the request of the Court of Auditors, the Commission shall authorise financial institutions holding EDF deposits to enable the Court to ensure that the external data tally with the accounts.

5.   The Commission shall afford the Court of Auditors all the facilities and give it all the information which the Court may consider necessary for the performance of its tasks, and shall in particular provide all the information available to the Commission as a result of the checks which it has carried out, pursuant to the regulations in force, within the departments responsible for the management of EDF finances and for effecting expenditure on behalf of the Community. In particular, it shall place at the disposal of the Court all documents concerning the conclusion and implementation of contracts and all accounts of cash or materials, all accounting records or supporting documents and also the administrative documents pertaining thereto, all documents relating to revenue and expenditure, all inventories, and all lists of posts in the departments which the Court of Auditors may consider necessary and all documents and data created or stored on a data medium.

To this end, officials subject to audit by the Court of Auditors shall in particular:

(a) disclose their records of cash in hand, any other cash, securities and materials of any kind and the supporting documents in respect of their management of which they are the depositaries and any books, registers and other documents relating thereto;

(b) present the correspondence or any other document required for the full implementation of the audit referred to in paragraph 1.

The information referred to under (b) of the second sub paragraph may be requested only by the Court of Auditors.

The Court of Auditors shall be empowered to audit the documents in respect of EDF revenue and expenditure which are held by the Commission's departments and, in particular, by the departments responsible for decisions on such revenue and expenditure.

6.   The task of establishing that revenue has been received and expenditure incurred in a lawful and regular manner and that the financial management has been sound shall also encompass the utilisation by bodies outside the Commission of Community funds they have received. Any grant of EDF funds to beneficiaries outside the Commission shall be subject to the agreement in writing by the recipients to an audit being carried out by the Court of Auditors on the utilisation of the amounts paid out.

Article 71

1.   The Court of Auditors shall draw up an annual report at the end of each financial year.

2.   The Court of Auditors may also, at any time, submit observations, notably in the form of special reports, on specific questions and deliver opinions at the request of one of the institutions of the Communities.

3.   The special reports shall be transmitted to the institution or body concerned.

The institution concerned shall have two and a half months within which to inform the Court of Auditors of any comments it wishes to make on the observations in question.

Should the Court of Auditors decide to have such observations published in the

Official Journal of the European Communities,

it shall include after them any comments submitted by the institution or institutions concerned.

The special reports shall be transmitted to the European Parliament and the Council, each of which shall decide, in conjunction with the Commission if appropriate, what action is to be taken in response.

Article 72

1.   The annual report of the Court of Auditors provided for in Article 188c of the EC Treaty shall be governed by the following provisions:

(a) the Court of Auditors shall communicate to the Commission, not later than 15 July, any observations which it considers should appear in the annual report. These observations must remain confidential. The Commission shall forward its replies to the Court of Auditors not later than 31 October of the relevant year,

(b) the annual report shall contain an assessment of the soundness of the financial management.

2.   The Court of Auditors shall send its annual report, together with the Commission's replies, not later than 30 November, to the Commission and to the authorities responsible for giving discharge pursuant to Article 33(3) of the Internal Agreement, and shall ensure its publication in the

Official Journal of the European Communities.

Article 73

At the same time as the annual report referred to in Article 71, the Court of Auditors shall provide the European Parliament and the Council with a statement of assurance as to the reliability of the accounts and to the legality and regularity of the underlying transactions.

Article 74

1.   Before 30 April of the following year, the European Parliament, upon a recommendation from the Council, which shall act by a qualified majority, shall

give

the Commission discharge in respect of the execution of the financial management of the EDF for the preceding financial year, in accordance with Article 33(3) of the Internal Agreement. If this date cannot be complied with, the European Parliament or the Council shall inform the Commission of the reasons for which this decision has had to be deferred. Should the European Parliament postpone the decision giving discharge, the Commission shall make every effort to take measures, as soon as possible, to facilitate removal of the obstacles to this decision.

2.   The discharge decision shall include an assessment of the responsibility of the Commission in the execution of the financial management during the preceding period.

3.   The financial controller shall take account of the observations appearing in the decision giving discharge.

4.   The Commission shall take all appropriate steps to act on the comments appearing in the decision giving discharge.

5.   At the request of the European Parliament or the Council, the Commission shall report on the measures taken in the light of these comments, and, in particular, on the instructions given to those of its departments which are responsible for the management of the EDF. This report shall also be sent to the Court of Auditors.

6.   The financial statements and the revenue and expenditure accounts for each financial year and the decision giving the discharge shall be published in the

Official Journal of the European Communities.

TITLE VI

GENERAL AND FINAL PROVISIONS

Article 75

Unless otherwise specified, references in this Financial Regulation to the provisions of the Convention shall be deemed to refer to the corresponding provisions of Decision 91/482/EEC.

Article 76

This Regulation shall be applicable to the aid specified in the Financial Protocol to the Convention. This Regulation shall enter into force on the day following that of its adoption and shall be applicable for the same period as the Internal Agreement.

Done at Luxembourg, 16 June 1998.

For the Council

The President

M. MEACHER

(1)  

OJ L 229, 17. 8. 1991, p. 288

.

(2)  

OJ L 263, 19. 9. 1991, p. 1

. Decision as amended by Decision 97/803/EC (

OJ L 329, 29. 11. 1997, p. 50

).

(3)  

OJ L 382, 31. 12. 1990, p. 3

.

(4)  

OJ C 223, 22. 7. 1997, p. 1

.

(5)  

OJ L 350, 31. 12. 1994, p. 27

.

(6)  

OJ L 356, 31. 12. 1977, p. 1

. Regulation as last amended by Regulation (EC) No 2444/97 (

OJ L 340, 11. 12. 1997, p. 1

).

ANNEX I

In accordance with Article 1 of the Internal Agreement, the eighth EDF shall consist of ECU 13 132 million, of which:

1.

ECU 12 967 million, for the ACP States, allocated as follows:

2.

ECU 165 million, for the OCT, allocated as follows:

(1)  It should be noted that the allocation of this amount among the three groups of OCT will have to be determined in the context of the revised Decision on the association of the OCT.

ANNEX II

In accordance with Article 54(a) each Member State may convert the contribution owed by it to finance the annual instalments referred to in Article 191 of the Convention into an open debt producing interest for the benefit of the Stabex system; such contributions would be recorded in the Treasury accounts of Member States that operate this system in accordance with the eighth EDF allocation scale determined in the Internal Agreement.

The compound interest on the debt owed by the Member State concerned will be calculated by the EDF accounting officer on the basis of the annual average rate in force at the Bank for international settlements plus quarter of a percentage point.

The mobilisation of the debt will be effected gradually as and when the need arises.

In practice the Member States are liable for the payment of the following amounts on account of Stabex under this proposal: