EUROPEAN PARLIAMENT DIRECTORATE-GENERAL FOR RESEARCH BRIEFING. Budgetary Affairs Nr 8
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1 EUROPEAN PARLIAMENT DIRECTORATE-GENERAL FOR RESEARCH BRIEFING Budgetary Affairs Nr 8 Controlling implementation of the budget in the course of the year ---- The "Notenboom Procedure" The views expressed are the sole responsibility of the authors and do not necessarily reflect the official position of the European Parliament PE DA DE EL EN ES FR FI IT NL PT SV
2 Summary A review of the development of the "Notenboom procedure" since its establishment in 1976 is accompanied by an explanation of how the Parliament currently monitors and controls implementation of the budget in the course of the financial year. * * * AUTHOR: PUBLISHER: A.COMFORT Principal Administrator Schuman Building 6/60 EUROPEAN PARLIAMENT DIRECTORATE A Division for Budgetary Affairs, Civil Liberties and Internal Affairs, Rules of Procedure, Petitions and Comparative Law L-2929 LUXEMBOURG Phone: (00352) Fax: (00352) acomfort@europarl.eu.int Original: English - also available in French, German, Spanish and Italian Manuscript finished in December 1998 PE
3 INDEX Pages Introduction... 1 Objectives... 1 The procedure before The 1990 Notenboom procedure... 2 The procedure from 1994 to The criticisms... 3 The Commission s proposals of March The procedure in The global transfer in Annex... 7 * * * PE
4 Introduction The EP s control over the budget during the course of the year follows the method established under the so-called "Notenboom procedure" -first put into effect in 1976, but thereafter substantially revised. The institution of a global transfer in 1983 was a major procedural step which helped to clarify the situation but itself involved many difficulties. This briefing is intended to provide Members of the European Parliament with both a review of the development of the procedure and an outline of its current operation. It has been compiled in response to a request from the Committee on Budgetary Control and forms part of the internal studies included in the DG IV Work Programme for Objectives The purpose of the "Notenboom procedure" and the global transfer is to make available to Parliament information on implementation of the budget in the course of the financial year and to increase the transparency of the budgetary process. It originated in the mid-1970s when Mr Aigner, then Chairman of the Committee on Budgetary Control, was anxious to ensure that the debate on the following year s budget reflected utilisation of that of the previous and current year. From 1976 to 1994 there was an annual debate every autumn on budget implementation for the year in progress, based on an oral question to the Commission from the Committee on Budgetary Control. The Parliament examined expenditure for the year on the basis of a report from the Commission showing implementation up to the most recent date possible - until 1994 this meant up until the end of June but with some updating until the end of August. This report included - and still does - some comments and analysis of the reasons for underspending or overspending on the budget lines concerned and looks ahead to changes foreseeable by the end of the year. Criticisms of this report are discussed below. It was formerly accompanied by a proposal for a major transfer of funds between underspent and overspent lines - the so-called "global transfer". Parliament has been especially concerned to see proper implementation of lines in which it has shown a particular interest during the preceding budgetary procedure. Until recently this meant ensuring that money was spent on those items of political importance to the EP, even though the other institutions may have been reluctant to see money included in the budget for these items. However, with the introduction of a financial perspective and an inter-institutional agreement which commits all institutions to a highly prudent approach to EU expenditure, the global transfer became a tool to ensure that proper financial management was exercised by the Commission and that any major changes between lines of the budget were fully justified. The procedure before 1994 The Commission has for many years been sending to both arms of the budgetary authority monthly statements on execution of budget, in accordance with the Financial Regulation, and also quarterly reports. On the basis of these reports and of a special report updating the situation to end August which was submitted in September with explanations on under- or over-spending, the rapporteur of the Committee on Budgetary Control drew up a list of questions. These questions frequently PE
5 concentrated on the degree to which the Commission had respected Parliament s wishes expressed during the previous year s budgetary procedure. In view of the limitations on its powers prior to the Treaty of Maastricht, the Parliament was always keen to use its margin of manoeuvre in the budgetary procedure to the maximum. It was therefore a major preoccupation to ensure full implementation of especially those lines for whose introduction into the budget Parliament itself had been responsible or where major increases had resulted from the Parliament s pressure. The timetable of the EP s procedures meant that - until the oral question with debate took place in October (based on expenditure up to the end of June), but with no possibility of a detailed investigation of budget implementation nor of a real impact on the following year s budget. Nevertheless, the EP wished to ensure that its approval of budget lines for the following year reflected the usage made of those lines in the year under way. The 1990 Notenboom procedure As an example of the procedure as it operated before 1994, the Committee on Budgetary Control drafted an oral question with debate for the Commission on 11 September The question drew attention to overspending on certain agricultural lines of the budget but also to a high level of carryovers from Specific problems were highlighted in regard to: * the Early Warning System for monitoring agricultural expenditure which was said to encourage extra funds to be transferred to sectors in deficit without bringing about any stabilisation of expenditure; * inadequate execution in sectors considered as a high priority by the EP (employment, social protection and public health, environment); * a lower level of implementation for the structural funds than in the preceding year; * low usage of funds for transport because of a failure by the Council to adopt a programme. The Cocobu then put a series of 6 specific questions to the Commission concerning its expectations for budget implementation in various sectors; the reasons for under-spending and the consequences; progress in filling the establishment plan; and the impact on the following year s budget. DG XIX of the Commission submitted a written reply to these questions based on the state of execution at 31 August which then formed the basis of the debate in plenary in October, following which a resolution was adopted on on "the implementation of the budget of the European Communities for the 1990 financial year (Notenboom procedure)". This resolution also calls on Parliament s Committee on Budgetary Control to define more closely the terms of the Notenboom procedure. The procedure from 1994 to 1997 From 1994 some refinements were introduced to improve the procedure, especially in regard to the timetable. In particular, the "quarterly"reports from the Commission were regrouped to fit in better with the budgetary procedures and were established on the basis of the results available at the end of May, August and December. The Commission also began sending a communication to Parliament in July based on execution of the budget as at end May; a list of questions was then drawn up by the rapporteur (usually approved by the Committee on Budgetary Control - or "Cocobu" - in late July) and other committees PE
6 concerned were supposed to inform the Cocobu of particular problems in the execution of their part of the budget. Replies in writing were received from the Commission to the Cocobu s questions by early September, in the form of fact sheets on the points raised. A debate in committee then took place in the second half of September and a draft report was sent to plenary for adoption at the end of this month (in accordance with what is now rule 87.2 of the Rules of Procedure). This was intended also to provide a useful contribution for the debates on establishment of the following year s budget. The global transfer was detached from this procedure, being submitted in the middle of October, but was supposed to reflect EP concerns expressed in the debates in committee and plenary. It had to be adopted by the EP by the end of November. This procedure replaced the oral question with debate that was the traditional method of the old Notenboom procedure. The criticisms However, there were still criticisms which concerned in particular the global transfer. This was accused of creating de facto policy changes which had not been approved by Parliament. The lines concerned varied from year to year but there had been frequent underspending in those concerned with the structural funds. The Commission sought to take money from lines which were underspent and to use the resources where needed elsewhere. It used the term "pot commun" as the basis for this global transfer, i.e. the money was not taken from or transferred to specific lines as a matter of policy, nor transferred directly between lines, but simply transferred in response to circumstances at the time into or out of a "common pot". The justification of these transfers was prepared ad hoc and involved a large mass of paperwork, but the results were often criticised by the EP as lacking in transparency because the justification provided was considered insufficient by the Committees on Budgetary Control and Budgets, both in regard to the lines which were underspent and to the need for additional funds on those lines to which the money was to be transferred. Furthermore, since transfers from the reserve were mixed in with transfers between budget lines, the result was lacking in clarity and difficult to follow. A specific problem concerned certain budgetary lines created in the expectation that a legal base for the expenditure will follow in the course of the year -in accordance with the Common Declaration of 1982 on budgetary procedure. The money could be placed in a reserve and the Notenboom global transfer was used as a convenient method of making the relevant funds available when the base was eventually adopted (although other transfers from the reserve take place throughout the year). This added to the confusion and lack of transparency. One of the principle purposes of the Notenboom procedure has of course been to permit the necessary adjustments to the budget in the light of experience. Initial estimates for expenditure often fail to correspond to real expenditure patterns for a wide variety of reasons and need to be corrected in the course of the year. It makes obvious sense to transfer money from lines where it is not needed to others where it is -provided that there is no change of direction in policy terms implied by such transfers PE
7 The Commission s proposals of March 1998 To meet the continuing problems outlined above, the Commission submitted new proposals to the Parliament s Committees on Budgets and Budgetary Control. In particular, it proposed: 1) Global treatment for reserves: the Commission services would present proposals for transfers from the reserves onto the relevant budget lines by end-july and for transfers to be implemented as and when the conditions were fulfilled, in any case by 15 September; 2) Suppression of global treatment for transfers of commitment appropriations: the Commission is to limit itself to individual transfers involving one or two lines only, but with some exceptions for the EAGGF-Guarantee Fund and for mopping-up transfers (as well as one major such global transfer for the "re-programming" of the structural funds). 3) A single transfer for payment appropriations: this is the core of the current Notenboom global transfer and would still be necessary in the autumn in order to make the best use of the available resources. Short, standardised justifications would be used in recognition of the need for flexibility in the management of these appropriations. An explanation of the progress of individual spending programmes would have to be sought elsewhere (e.g. in the quarterly reports on implementation). Transfers involving policy changes would have to be presented a supplementary and amending budget (SAB). 4) Submission of a preliminary Supplementary and Amending Budget (SAB), replacing the Notenboom global transfer, would be envisaged but would be impossible before end- September. Procedures involving second readings in Council and Parliament would not allow this to be produced in time to take effect in the course of the budgetary year and so a single reading procedure would be used to make this possible by November. This SAB would apply to transfers of appropriations requiring decisions of a political nature and would have to meet the provisions of Article 15 of the Financial Regulation ("unavoidable, exceptional or unforeseen circumstances"). Following a positive reaction from the Council at the Trialogue of 31 March 1998, at which it announced its readiness to examine any proposal which might improve transparency in this procedure, a mandate was prepared for the EP s representatives in the necessary negotiations between Commission and Parliament. In April 1998 the two EP committees concerned approved this mandate on reform of procedures for the global transfer (PE ). In so doing the committees also approved the proposal above concerning the splitting of the global transfer and they sought agreement with the Council on a new procedure for a Supplementary and Amending Budget based on Article 15 of the Financial Regulations (which provides for this eventuality in exceptional circumstances) and which would observe a specific timetable. The procedure in 1998 The Notenboom procedure can thus be seen to be developing rather rapidly. The resolution adopted by Parliament each year in October, on the basis of a draft presented by the Committee on Budgetary Control, often overlapped with this Committee s opinion to the Committee on Budgets on the draft budget for the following year. The rules applied also required that the EP resolution be voted in PE
8 plenary without amendments. It has therefore been decided with effect from 1998 to incorporate the comments on implementation of the current year s budget in the Budgetary Control Committee s opinion on the subsequent year s budget in order to simplify matters and introduce greater clarity. No resolution on implementation of the current year s budget has therefore been adopted in 1998 nor will be in future. In regard to agriculture only, it had already been decided in April 1997 to apply Article 14 of the Financial Regulation on letters of amendment to the preliminary draft budget during the year in order to reflect up-to-date information about expenditure patterns (the "Tillich-Mulder ad hoc procedure"). For this part of the budget there is therefore already in place a mechanism which will permit budget implementation figures to have a direct impact on the following year s budget. In mid-july 1998 the Commission submitted to Parliament a note on implementation of the 1998 budget based on the situation at 30 June. (The normal presentation under the procedure of 1994 would have required presentation on the basis of results at 31 May, but the ruling of the Court of 1 Justice on the absence of legal base for certain budgetary headings resulted in a delay.) The rapporteur, Mr Tillich, submitted a list of questions concerning the implementation of the budget on 20 August 1998 (PE ) and a draft opinion was drawn up for the Committee on Budgets report on the draft general budget for 1999 which took account of implementation problems in 1998 (PE ). In this opinion on the 1999 budget the Committee on Budgetary Control summarised the developments in regard to reform of the global transfer and to the question of legal bases and included general remarks on implementation of the 1998 budget by heading. It then offered 16 conclusions for the Committee on Budgets to keep in mind when examining the draft budget for The opinion was discussed at the Committee meeting of 2/3 September 1998 at which the Commission representative reviewed the new Notenboom procedure. In the Commission s view, the overall aim is to allow examination of the reasons for under- or over-spending on the budget of the current year and to increase clarity in regard to any changes needed. According to the Commission, proposals for transfer will be in future be grouped by category and 2 where any individual item exceeds MECU 100 a Supplementary and Amending Budget will normally be submitted. (But the Commission will not maintain a rigid approach on this point and will assess the need for an SAB in each case.) There remains a problem of timing since the EP wishes to have the SAB presented by the Commission in early September while the latter believes that this will not be possible until the end of the month. 1 2 Court of Justice of the European Communities, C-106/96 Statement to the Committee on Budgetary Control of 3 September PE
9 The global transfer in 1998 The "omnibus transfer proposal", here referred to as the global transfer, was presented by the 3 Commission this year on 15 October A explained above, this proposal now concerns payment appropriations only; for commitment appropriations, the Commission proposes either separate transfers or else a Supplementary and Amending Budget, especially for cases exceeding MECU (MEURO from 1999) 100. The payment appropriations concerned by this year s proposal amount to MECU 561, of which MECU 29 are compulsory expenditure (i.e. mostly EAGGF). In its Explanatory Memorandum accompanying this proposal for a transfer, the Commission states that it has maintained the principle of restoring the overall balance of payment appropriations, i.e. transferring funds from under-used lines to those which need reinforcement. It also states that it has "overhauled its presentation of the grounds for the proposed transfers to make it more succinct and user-friendly". The "grounds" are in fact now presented in a separate part of the document in which each increase and reduction is explained, albeit briefly. The transfer concerns in particular structural operations and seeks to provide an extra MECU 320 for Objective 1 regions (the ERDF "Community Support Frameworks") and MECU 20 for the fisheries restructuring initiative (FIFG) by redeploying unused funds from the Cohesion Fund, from "Community Initiatives" and from transitional ERDF measures. In addition, MECU 18 are added to the Veterinary Fund for measures concerning the swine fever epidemic, MECU 23 million for "...information measures and a number of headings under other social operations", while research funding receives an additional MECU 81. These reinforcements are financed by appropriations from the programme for the modernisation of the Portuguese textile industry, the JEV and LIFE programmes, energy networks and from other sectors of the research budget. In addition, a number of transfers are proposed in regard to external action. Increases for Asian developing countries, TACIS and various environmental measures are to be funded by unused appropriations for Turkey, MEDA, fisheries agreements and the financial protocols with Mediterranean countries. However, contrary to initial expectations, there is also a Letter of Amendment No.2 to the Supplementary and Amending Budget No.1/98. This will increase ERDF Community Support Frameworks by a further MECU 80 and add appropriations to the Veterinary Fund, to trans- European networks and to the Esprit programme. An increase initially proposed for PHARE of MECU 30 in the SAB is now raised to MECU 200. It would seem therefore that the Commission is indeed respecting the arrangement proposed whereby major transfers and those involving political choices will be treated through Supplementary and Amending Budgets, while minor changes of a "house-keeping" nature are included in the global transfer. The global transfer (No 36/98) was approved for those aspects concerning the EP s Committee on Budgets on 17 November and by the Committee on Budgetary Control on 25 November * * * 3 Transfer of appropriations No 36/98; SEC(1998) PE
10 ANNEX Oral questions with debate Year No. Session Doc. PE No. OJ Date / / / / / / / / / / / / / /84 C p /85 B2-0943/ C p /86 B2-0977/ C p /87 B2-0998/ C p /88 B2-0633/ C p B3-0218/89 C291/D p /90 B3-1505/ C p /91 B3-1455/ D p254 EN /92 B3-1285/ / D p53 EN /93 B3-1199/ D p52 EN Resolutions Year Document Date OJ Date of publication 1989 B3-0327/ C , p B3-1735/ C , p B3-1627/ C , p B3-1384/ C , p B3-1532/ C , p B4-0061/ C , p28 (D-451) 1995 B4-1203/ C , p190 (D-468) 1996 B4-1097/ C , p123 (D-489) 1997 B4-0818/ C , p18 (D-506) PE
11 New.eu Domain Changed Web and Addresses The introduction of the.eu domain also required the web and addresses of the European institutions to be adapted. Below please find a list of addresses found in the document at hand which have been changed after the document was created. The list shows the old and new address, a reference to the page where the address was found and the type of address: http: and https: for web addresses, mailto: for addresses etc. Page: 2 Type: mailto Old: mailto:acomfort@europarl.eu.int New: mailto:acomfort@europarl.europa.eu Addendum: 1
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