WORKING DOCUMENT. EN United in diversity EN on Agencies. Committee on Budgets. Rapporteur: Jutta Haug EUROPEAN PARLIAMENT

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1 EUROPEAN PARLIAMT Committee on Budgets WORKING DOCUMT on Agencies Committee on Budgets Rapporteur: Jutta Haug DT\ doc PE v01-00 United in diversity

2 Working Document on Agencies The number of decentralised EU agencies, as well as their budget and staff, has increased enormously over the past two decades and so has the attention the European Parliament is paying to those agencies. According to their policy area they are attributed to specific committees in the European Parliament which follow the work of the agencies thematically. Horizontally, EU agencies are accompanied by the Committee on Budgets, especially by appointing a standing rapporteur for the dossier since The issues of concern to agencies have been manifold and certainly they will continue to be multifaceted. The conclusions 1 of the first Interinstitutional Working Group (IIWG) have been a step forward. The new IIWG on resources will contribute to further fostering the understanding and functioning of EU agencies. With this Working Document the standing rapporteur would like to raise a number of new matters as well as problems which have already been addressed in the past, unfortunately without finding a proper answer or a workable solution and which, consequently, merit further attention. Some of them might be taken up by the new IIWG. Others will need attention by the whole European Parliament. The list as presented by the standing rapporteur is neither exhaustive nor represents a certain hierarchy. The document is intended to stimulate the debate on EU decentralised agencies within the European Parliament in the next legislative term und to strive for new and lasting solutions. General remarks Since the beginning of the new millennium the creation of decentralised agencies 2 has increased significantly. The "Working Document on the European Union and its agencies" from deserves an update on the present situation due to agencies' bigger number, their geographical spread across the European Union and in consequence their augmented visibility and contribution to the EU's functioning. Decentralised agencies receive far more attention - by the public, stakeholders and the European Institutions. With the agencies' increased presence on the EU stage, they have been regularly criticised and even their existence has been called into question. It needs to be reminded that decentralised agencies are created and their tasks extended in accordance with the ordinary legislative procedure requiring a legislative proposal by the European Commission and involving the European Parliament and the Council on equal footing, especially since the coming into force of the Lisbon Treaty 4. Consequently, there is no rationale for making agencies responsible for their creation or existence Also called Authority, Centre, Foundation or Office Article 294 of the Treaty PE v /10 DT\ doc

3 Year of Creation Decentralised Agency 1975 European Centre for the development of Vocational Training European Foundation for the Improvement of Living and Working Conditions 1990 European Environment Agency European Training Foundation 1993 European Medicines Agency European Monitoring Centre for Drugs and Drug Addiction 1994 European Agency for Health and Safety at Work Translation Centre for the Bodies of the European Union Office for Harmonization in the Internal Market (fully self-financed) Community Plant Variety Office (fully self-financed) 2002 European Aviation Safety Agency European Maritime Safety Agency European Food Safety Authority European Union's Judicial Cooperation Unit 2004 European GNSS Agency European Railway Agency European Network and Information Security Agency European Centre for Disease Prevention and Control European Agency for the Management of Operational Cooperation at the External Borders 2005 European Fisheries Control Agency European Police College 2006 European Chemicals Agency European Institute for Gender Equality 2007 Fundamental Rights Agency (formerly founded in 1997 as European Union Monitoring Centre on Racism and Xenophobia) 2009 Body of European Regulators for Electronic Communications DT\ doc 3/10 PE v01-00

4 European Agency for the Cooperation of Energy Regulators European Police Office (Europol existed since 1999 on the basis of the Europol Convention and was transformed into an EU agency in 2009) 2010 European Banking Authority European Insurance and Occupational Pensions Authority European Securities and Markets Authority European Asylum Support Office 2011 Agency for the operational management of large-scale IT systems in the area of freedom, security and justice The European Commission's main argument for proposing the establishment of an agency has lately been the common understanding that it has to concentrate on its core tasks. Furthermore, the delegation and externalisation of specialised tasks require a specialised workforce in those EU independent bodies called agencies. This development has another positive side effect for the Commission: By concentrating on its core tasks, achieving the 5% staff reduction target becomes much easier. From the time when the first two agencies 5 were created the tasks to be carried out have changed from providing inter-disciplinary scientific information and data to a wider range of assignments. In addition to data collection and providing independent scientific advice and information, decentralised agencies today perform risk assessment, supervisory functions and certification tasks. Furthermore decentralised agencies are responsible for the pooling of knowledge by setting up EU-wide and international networks, for providing training to national experts, to identify, assess and communicate current and emerging threats as well as to assist in policy development actions. Some agencies provide services for the industry and enterprises in the EU. It is obvious that the execution of the variety of tasks involves human resources. It is also impossible to make a clear distinction between administrative and operational expenditure in this regard and it has to be welcomed that this kind of distinction does no longer apply to the presentation in the EU budget. In this context it is indispensable to mark a clear difference between decentralised agencies and executive agencies 6 which are pure administrative structures within the European Commission, implementing multiannual programmes. Further, joint undertakings 7 as public private partnerships as well as the European Institute of Technology, an entity to bring together research with business opportunities, have no common characteristics with decentralised agencies besides the decision on the contribution from the EU's operational budget and on the establishment plan decided by the budgetary authority- the European Parliament and Council. 5 EUROFOUND and Cedefop 6 EASME, EACEA, Chafea, INEA, ERCEA and REA 7 F4E, IMI, Clean Sky Joint Undertaking, ARTEMIS Joint Undertaking, IAC Joint Undertaking, FCH and SEASAR Joint Undertaking PE v /10 DT\ doc

5 In 2014 the European Budget foresees mio as contributions to the decentralised agencies. Hence, decentralised agencies receive less than 0.6% of Commission's budget posts have been agreed for 32 agencies in DT\ doc 5/10 PE v01-00

6 The legal framework European Union law does not have a legal definition of a decentralised agency, even though they are mentioned in the TFEU. The legal framework for decentralised agencies is set by their individual founding regulation and further changes by subsequent legislation, be it regulations directly amending the founding regulation or other legislation impacting on the tasks of agencies. All EU institutions and bodies, including decentralised agencies, have to implement and apply the Staff Regulation 8 as decided by the co-legislator. Article 208 of the Financial Regulation stipulates that the European Commission has to adopt a framework financial regulation for bodies set up under the TFEU... which have legal personality and receive contributions charged to the budget 9, 10. This framework financial regulation entered into force on 1 January 2014, as did the new Staff Regulation. With the conclusion on the Multiannual Financial Framework a new Interinstitutional Agreement (IIA) came into force which also has an effect on decentralised agencies. In paragraph 27 the three institutions agree to progressively render 5 % of the staff as in the establishment plan on 1 January It is self-evident that this exercise applies also to agencies and has to be completed by the end of Furthermore the IIA defines in paragraph 31 the procedure and its pre-conditions on a timely agreement between the European Parliament and the Council on the financing of a new agency or the financing of an extension of tasks. The link between the legislative process and budgetary issues marks a considerable improvement to the previous arrangements without prejudice to the decision by the Budgetary Authority during the annual budgetary procedure. Furthermore, a Joint Statement and a Common Approach have been endorsed by the three institutions in July 2012 as result of the work of the Interinstitutional Working Group on decentralised agencies (IIWG) which had focussed on assessing the existing situation, specifically the coherence, effectiveness, accountability and transparency of agencies, and finding a common ground on how to improve their work. A new working group of this kind has been agreed in a joint statement accompanying the 2014 EU budget to define a clear development path for agencies in budgetary and human resources terms. Between 2006 and 2013 the Committee on Budgets has issued ten studies focusing solely on decentralised agencies' issues 11. It illustrates the seriousness and the determination of the European Parliament to deal with the dossier politically, horizontally and in budgetary terms. Issues which merit attention in the future 1. The European Parliament fully supports the gradual reduction of staff by 5% until the end of 2017, starting with the voted establishment plans as of 1 January 2013 as reference date. The individual application to each decentralised agency is indisputable. However, it is selfevident that changes of legal acts conveying additional assignments to a decentralised 8 Regulation (EU, EURATOM) No 1023/ Regulation (EU, EURATOM) No 966/ Commission Delegated Regulation (EU) No 1271/ PE v /10 DT\ doc

7 agency and requiring additional financial and/or human resources do not fall under this prerogative as a careful assessment, as defined by paragraph 31 of the IIA, has already been conducted responsibly. At the same time the IIA defines its scope: the implementation of budgetary discipline, the improvement of the functioning of the annual budgetary procedure, the cooperation between the institutions on budgetary matters and to ensure sound financial management. Therefore, the applicability of the staff reduction exercise must be challenged with regard to fully self-financed 12 agencies through fees and charges which contribute to the functioning of the internal market by providing services to Europe's business community. These agencies do not receive a contribution from the EU budget nor is the decision on their establishment plan part of the budget procedure. It is further questionable if with regard to partially self-financed agencies posts financed by fees and charges 13 should be taken into account for the 5% reduction agreement. Payments of this kind, delivered by European industry, are market-driven, are dependent on the needs of the industrial sector, contribute to the functioning of the EU internal market and foster competitiveness and innovation in a globalised world. Furthermore, the gradual implementation of the staff reduction should be left to the discretion of each decentralised agency individually as they know best their potential for efficiency gains and possible savings. In this context it must be noted that efficiency has its limits and striving for it does not solve all problems of general budgetary constraints. 2. In addition to the general 5% staff reduction agreement, the European Commission has proposed an additional redeployment pool 14, i.e. an additional annual 1% levy on the posts of all agencies, to cover new needs in existing or new agencies. The approach has been contested by the European Parliament for several reasons. Firstly, each agency is independent. Each establishment plan is decided upon individual needs. Applying Commission's own redeployment exercise does neither meet the principle of independence nor the individual characteristic of an agency. Secondly, applying this kind of instrument would rather create a 'cannibalism mechanism' amongst decentralised agencies with the effect of sacrificing the proper functioning of those independent bodies which are not assigned with new tasks. 3. Classifying decentralised agencies into agencies at cruising speed, agencies with new tasks and agencies in a start-up phase has been proven inadequate. Commission's main argument for this grouping is the proper reflection of each agency's stage of development. For agencies at cruising speed the Commission proposed in its Draft Budget 2014 in principle a stable EU contribution. However, the Draft Budget 2014 for cruising speed agencies varied from -4.5% to +7.2% implying that no systematic approach has been followed nor has reality been properly reflected. In addition, the Commission considers, as a general rule, only the modification of legal acts as new tasks (see below). It is also questionable that agencies, created in 2010, are in their start-up phase as presented in the accompanying document for the Draft Budget The insufficient classification has, in 12 Fully fee- financed agencies: OHIM and CPVO 13 Partially fee-financed agencies: EMA, ECHA and EASA 14 COM (2013)519 DT\ doc 7/10 PE v01-00

8 consequence, led to unhealthy and misleading comparisons amongst agencies themselves. 4. Commission's definition of additional tasks, i.e. the modification of legal acts, does lack accuracy as it does not take into account assignments to individual agencies deriving from Council Conclusions nor transfers of tasks by Commission regulations. In this context it merits attention how the Commission concludes that certain activities can be transferred to individual agencies by a Commission regulation and how this is covered by legislation. Furthermore, it has to be doubted that those extra responsibilities receive the necessary attention in terms of budget or human resources. 5. During the annual budgetary procedure it is very difficult for the European Parliament to perform an exact assessment of the true budget and staff needs for each agency 15. It has to be noted that the draft budget for each agency has already gone through a scrutinising exercise of the estimates submitted by the agencies by the respective partner Directorate- General (DG) and has been adjusted (normally downwards) by DG Budget before including it into the Commission section of the draft budget. The current system of establishing the draft budget does follow the principals of traditional (incremental) budgeting, relying on a reference point from the past year. Above that the Commission deducts assigned revenues stemming from an agency's surplus when determining the appropriations needed and applies a penalty for cancellation of appropriations which are sometimes beyond an agency's direct control. This system invites agencies to inflate already its estimates and allows Commission to draw conclusions about the rightfulness of cancellations before the discharge authority. Regarding assigned revenues the European Parliament has a strong stand that those are not to be deducted from new needs for partially fee-financed agencies to allow them some flexibility. The dilemma continues as for instance the true needs for staff has an impact on building and office requirements and in consequence on the budget attributed to an agency. 6. The EU legislator has created decentralised agencies as independent bodies - independent from the Commission, a characteristic which is not reflected by grouping agencies according to their main activity under the respective policy area within Commission's section of the EU budget. In line with other EU bodies and striving for a better independent functioning of decentralised agencies it should be explored if the estimates as decided by the management level of each agency should be presented to the budgetary authority for its decision without detouring through Commission's services 16. This approach would also strengthen the direct accountability of agencies towards the budgetary authority. 7. The establishment plans for agencies vary from 20 posts up to more than 700 (without contract agents). The implementation of the Financial Regulation, the Staff Regulation, monitoring and reporting requirements, activities to guarantee the independent functioning of the agency cause a substantial allocation of administrative resources. It remains arguable that the size of an agency has to meet a certain threshold in order to strike a balance between purely administrative activities and assignments deriving from the mandate given by the legislative authority. 15 Leaving aside budgetary decisions for political reasons 16 with the consequence of decreasing respective Headings of policy areas and with the increase of Heading 5 PE v /10 DT\ doc

9 8. In the past the choice of the seat of EU agencies has often been made by the Council on the basis of accommodating the interests of certain Member States, without taking into account objective and financial criteria and practical aspects. The ordinary legislative procedure, coming into force with the Lisbon Treaty, could imply that the European Parliament and the Council decide jointly on the location of a new agency or the relocation of an existing one. However, Council's understanding of Article 341 TFEU 17 covers besides institutions also bodies, offices and agencies. Therefore, it is for procedural and practical reasons rather utopian for the European Parliament to strive for the ordinary legislative procedure in this matter. But it should focus on a proper application of the provisions on seat issues and responsibilities of a host country as laid down in the Common Approach as presented by the IIWG on agencies and endorsed by the three institutions in July In order to contribute to the decision making process for choosing an agency's seat, a positive list of criteria has been included which should be addressed in a transparent way when a Member State presents its offer. In accordance with the Joint Statement, the European Commission has compiled Guidelines with standard provisions for headquarter agreements of EU decentralised agencies based on existing best practices. It has to be monitored that all EU agencies finalise such an agreement with their host country. When assessing Member States' applications for a new agency seat, it should moreover not only be looked at the direct costs involved. Other aspects merit equal attention like other EU bodies being located in the same city (potential sharing of administrative resources) or remoteness of location (resulting in higher travel costs and longer travel times). 9. According to their founding regulation some decentralised agencies earn their income, fully or partially, from fees and charges for services related to the internal market. It seems logical and appealing to apply a fee-system to other services provided by decentralised agencies, thus allowing them to become more independent from contributions from the EU budget. However, there is no 'fits for all' solution. Fees and charges are closely linked to certification and authorisation services which put not at risk the impartiality of an agency. Independent scientific advice and opinions thereof, data collection and evaluation to prepare or underline policy measures should continue to be a public responsibility. Special attention deserves the composition of fees and charges. In this regard the decision process on fees 18 is also noteworthy. It needs to be explored if fees and charges cover for instance pension entitlements for agency staff as otherwise they have to be covered by EU subsidies. Above that, the Commission has changed its regime to contribute to Accredited European Schools (AES), so called Type II European Schools. With the EU budget 2014 contributions are no longer covered by Heading 5. According to the Commission they are shifted to the respective budget line of the agency concerned. However, respective budget lines have only been raised for those activities receiving appropriations from the EU budget. As fee financed services are not covered and contributions to AES have not been foreseen when determining the level of fees and charges, the agencies concerned are left with a financing gap. It goes without saying that attracting qualified staff across the European Union for EU agencies requires the 17 Article 341: "The seat of the institutions of the Union shall be determined by common accord of the governments of the Member States." 18 By ordinary legislation or Commission Regulation DT\ doc 9/10 PE v01-00

10 opportunity for a truly European education. 10. By decision of the EU legislator the European Financial Supervisory Authorities 19 have a new funding model. Subsidies from the EU budget as well as from national contributions, provided by the respective corresponding national authorities, and possible fees paid by entities which are supervised constitute the funding mechanism. This new model creates some difficulties for the agencies concerned. Firstly, unspent appropriations are claimed back by the national authorities against the prerogatives as agreed in the Financial Regulation. Secondly, national contributions/shares are in some cases not paid fully or timely due to budgetary constraints in some Member States, putting at risk the proper functioning of the authorities. A revision of this funding model should therefore be envisaged, ideally abolishing national contributions. 11. The composition of Management Boards with national representatives marks clearly an intergovernmental component and symbolises a possible conflict of interest, especially if financial decisions on management level concern national authorities delegating representatives to the Board. The observation can be made when, for instance, the system of remuneration for services provided by Member State authorities is decided by the Management Board. It is most likely that this system has a (negative) financial impact on the EU budget when the payment system is not based on national authorities' real costs. Efforts to change such mechanisms through legislation have been hampered by the Member States themselves as they would need to compensate potential lower revenues of their national authorities. 12. Paragraph 31 of the new IIA stipulates a new procedure for a timely agreement of the Budgetary Authority on the financing of a new agency or extended tasks. It stimulates further a close link between the legislative and the budgetary parts. In order to gain the full potential of this new procedure, the European Parliament should develop its own internal mechanism. Aligning the common interest of benefiting the agency concerned best, the cooperation between the committee responsible in legislative terms and the Committee on Budgets needs to be specified in the Rules of Procedure. In addition, the European Parliament should pay utmost attention that the Council and its respective formations also establish working mechanisms in this regard to facilitate timely agreements. 19 ESMA, EBA and EIOPA PE v /10 DT\ doc