—

having regard to the Commission report on the follow-up to the 2006 discharge decisions (COM(2008) 629 and its annex SEC(2008) 2579),

—

having regard to the financial statements and revenue and expenditure accounts for the Seventh, Eighth and Ninth European Development Funds for the financial year 2007 (COM(2008) 490 — C6-0296/2008),

—

having regard to the report on the financial management of the Seventh, Eighth and Ninth European Development Funds for the year 2007 (COM(2008) 224),

—

having regard to the Court of Auditors’ annual report on the activities funded by the Seventh, Eighth and Ninth European Development Funds concerning the financial year 2007, together with the Commission’s replies (1),

—

having regard to the statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions provided by the Court of Auditors pursuant to Article 248 of the EC Treaty (2),

—

having regard to the Council’s recommendations of 10 February 2009 (5042/2009 — C6-0057/2009, 5044/2009 — C6-0058/2009, 5045/2009 — C6-0059/2009),

—

having regard to the Partnership Agreement between the members of the African, Caribbean and Pacific Group of States of the one part, and the European Community and its Member States, of the other part, signed in Cotonou on 23 June 2000 (3) and revised in Luxembourg on 25 June 2005 (4),

—

having regard to Council Decision 2001/822/EC of 27 November 2001 on the association of the overseas countries and territories with the European Community (the Overseas Association Decision) (5), amended by Council Decision 2007/249/EC of 19 March 2007 (6),

—

having regard to Article 33 of the Internal Agreement of 20 December 1995, between the representatives of the governments of the Member States meeting within the Council, on the financing and administration of the Community aid under the Second Financial Protocol to the fourth ACP-EC Convention (7),

—

having regard to Article 32 of the Internal Agreement of 18 September 2000, between representatives of the governments of the Member States meeting within the Council, on the financing and administration of Community aid under the Financial Protocol to the Partnership Agreement between the African, Caribbean and Pacific States and the European Community and its Member States signed in Cotonou (Benin) on 23 June 2000, and the allocation of financial assistance for the Overseas Countries and Territories to which Part Four of the EC Treaty applies (8),

—

having regard to Article 276 of the EC Treaty,

—

having regard to Article 74 of the Financial Regulation of 16 June 1998 applicable to development finance cooperation under the fourth ACP-EC Convention (9),

—

having regard to Article 119 of the Financial Regulation of 27 March 2003 applicable to the Ninth European Development Fund (10),

—

having regard to Rules 70 and 71, third indent of, and Annex V to, its Rules of Procedure,

—

having regard to the report of the Committee on Budgetary Control and the opinion of the Committee on Development (A6-0159/2009),

A.

whereas the European Development Fund (EDF) is the European Union’s most important financial instrument for development cooperation with the African, Caribbean and Pacific States,

B.

whereas the total amount of aid channelled through the EDF will increase considerably over the coming years since the amount of Community aid under the 10th EDF for the period 2008 to 2013 has been set at EUR 21 966 000 000 which represents a 62 % increase compared with the financial allocations under the Ninth EDF,

C.

whereas budget support is an aid instrument which requires a paradigm shift in parliamentary oversight moving from control over inputs to check of results and outputs,

D.

whereas it is determined continuously to develop its oversight capacities in order to fulfil as efficiently as possible its obligations as discharge authority,

1.

Agrees with the Commission that ‘weak administrations’ and ‘weak governance’ in many beneficiary countries are significant risks affecting the sound management of the EDFs (Commission’s replies to points 1 to 5 of the Court of Auditors’ Annual Report on the activities funded by the EDFs);

2.

Invites the Commission — when ‘fine-tuning’ its control strategy (points 1 to 5 of the Annual Report on the EDFs) — to identify the point where lack of results and the costs of control call for a policy change;

3.

Takes the view that the implementation strategy for the 10th EDF (EUR 21 966 000 000 for the period from 2008 to 2013) should focus on areas of crucial importance for ensuring sustainable development; encourages the Commission to prioritise and avoid proliferation;

4.

Believes that the Commission, in an effort to prioritise and concentrate its development activities, could look for opportunities to increase assistance to low-income countries;

5.

Points out that due attention must be paid to the sustainability of the Commission’s interventions, including the formulation of a clear exit strategy and monitoring of implementation; considers that the enhanced evaluation of results represents a major factor for ensuring the democratic legitimacy of EU development cooperation;

6.

Welcomes the Commission’s performance in 2007, and notes that payments increased by 12 % and commitments by 9 %, whereas the increase in outstanding commitments was kept down to 2,8 %; considers the implementation rate of 3,7 years as acceptable given the increase in efficiency;

7.

Welcomes the commitment of all available funding for the Ninth EDF in 2007; calls on the Commission to formulate recommendations applicable for the non-committed parts of the Eighth EDF; stresses however that speedy commitment of funds should not be carried out to the detriment of the quality of projects;

8.

Recalls the Commission’s commitment (11) to endeavour to ensure that a benchmark of 20 % of its allocated assistance under the Development Cooperation Instrument (DCI) is dedicated to basic and secondary education and basic health; calls for reporting against the same benchmark to be provided for the EDFs;

9.

Expresses concern at the findings contained in the Court of Auditors’ Special Report No 10/2008 on EC Development assistance to health services in sub-Saharan Africa, which points out that ‘Financial allocations to the health sector in sub-Saharan Africa have not increased since 2000 as a proportion of its total development assistance despite the Commission's MDG commitments and the health crisis in sub-Saharan Africa’; calls on the Commission to prioritise support to health systems and identify the most appropriate aid delivery instruments for this area;

10.

Notes with satisfaction that in the Court’s opinion the abovementioned Commission’s report on the financial management of the Seventh, Eighth and Ninth European Development Funds for the year 2007 presents ‘an accurate description of the achievements of the objectives for the financial year, the financial situation and the events that had a significant influence on the activities carried out in 2007’ (point 13 of the Annual Report on the EDFs);

11.

Regrets however that the Commission’s follow up to observations made by the Court in a number of cases is inadequate; stresses that the Commission’s action on the Court’s recommendations is an important element of accountability for the discharge authority; welcomes the fact that the Commission ‘will provide more detailed information in the future’ (point 13 of the Annual Report on the EDFs);

12.

Notes that, pursuant to Articles 1 and 103(3) of the Financial Regulation of 27 March 2003 applicable to the Ninth European Development Fund, the Statement of Assurance does not extend to the part of the Ninth EDF resources (EUR 2 200 000 000) that is managed by the EIB and for which the EIB is responsible (footnotes 2 and 11 of the Annual Report on the EDFs);

13.

Notes that the Court is of the opinion that the final annual accounts of the Seventh, Eighth and Ninth EDFs fairly present, in all material respects, the financial position of the EDFs as of 31 December 2007 (paragraph VI, Statement of Assurance);

14.

Notes that the Court draws attention to the fact that the validity of the assumptions used for the estimate of the provision for costs incurred has not been demonstrated by the Commission and that this may lead to an understatement of accrued expenditure as well as to an overstatement of the amount of guarantees disclosed in the notes to the financial statements (paragraph VII, Statement of Assurance);

15.

Notes that:

16.

Notes that the Court’s observations regarding the legality and regularity of the underlying transactions are based on:

17.

Regrets that the Commission is still not able to give full accounting information due to technical difficulties; notes the Commission’s reply according to which the ‘introduction of the new accounting system as from 2009 will overcome current limitations’ (point 16 of the Annual Report on the EDFs); welcomes the introduction of the ABAC-EDF system in February 2009;

18.

Notes the Court’s recurrent remark concerning the validity of the Commission’s statistical approach used to estimate the provision for costs incurred in the reporting period for which no invoices have been received at year-end; further notes that this provision amounts to EUR 2 087 000 000 or 83 % of total liabilities (point 17 of the Annual Report on the EDFs); invites the Commission to continue to fine-tune and improve its approach;

19.

Notes the difference of opinion between the Commission and the Court as regards the moment when financing agreements should be ‘drawn up’ and ‘signed’ (point 19 of the Annual Report on the EDFs); regrets the unclear message to the discharge authority, and invites the Commission to provide clarification so that all parties — Commission and ACP States — have the same understanding of ‘drawn up’;

20.

Notes that the Court, in the course of checking transactions, was unable to obtain the relevant documentation from United Nations bodies in the case of two payments (out of a sample of eleven); calls on the Commission, therefore, to ensure full compliance with the financial and administrative framework agreement;

21.

Notes that, on the basis of its audit results (points 32 to 47 of the Annual Report on the EDFs), the Court concludes that EuropeAid’s supervisory and control systems for the EDFs are only ‘partially effective’ (point 53 of the Annual Report on the EDFs);

22.

Further notes that, out of nine elements of the internal control system at central level, six are effective, two are partially effective and one element — quantity of monitoring missions — is not effective at all, and that out of five elements of the internal control system at delegation level, two elements are effective and three only partially effective (Table 3 of the Annual Report on the EDFs);

23.

Notes that the Commission considers that ‘(g)iven the financial and human resources available to it, (…) it has set up control systems which provide reasonable assurance’ (point 53 of the Annual Report on the EDFs);

24.

Regards the Commission’s answers as unsatisfactory in that it seems reluctant to review the arrangements it has put in place, and invites the Commission to give more precise information as to the notion of ‘reasonable assurance’ and, in particular, as regards the actual cost/benefit ratio of controls and the actual error rate, as well as a breakdown indicating which additional human and financial resources are necessary to improve the control system in order to allow the Court to give the mark ‘effective’ as the overall assessment;

25.

Notes that the Court highlights the inadequacy of the controls carried out by supervisors or auditors, which indicates the weaknesses in the supervisory and control systems; calls on the Commission, therefore, to tighten up its controls and, in particular, to introduce a system of review of external audit reports to check their quality;

26.

Notes that in five out of 15 budget support commitments examined, the Court found:

27.

Stresses that the Court is of the opinion that the requirements of the Cotonou Agreement — that public expenditure management has to be sufficiently transparent, accountable and effective — are not met in these five cases;

28.

Recalls that ‘fiduciary risk’ means that there is a risk that European taxpayers’ money is not used for its intended purposes, does not achieve value for money or is not properly accounted for;

29.

Further notes that the Commission ‘does not agree with the Court’s assessment’ that commitments, according to the Commission, were made following an evaluation of ‘sufficient positive progress in PFM (public finance management) systems’, that the countries concerned subsequently ‘continued to show progress’ and have ‘remained on track for further budget support’ (point 26 of the Annual Report on the EDFs);

30.

Regrets the Commission’s reply in so far as it does not reflect the seriousness of the Court’s findings (important matters of ‘concern’, very high fiduciary risk); considers the use of open-ended and non-result-based expressions like ‘sufficient’, ‘progress’ and ‘on track’ in this serious context to be inadequate, if not superficial;

31.

Invites the Commission to provide the evidence on which it has based its conclusions and to present it in such a way that it is clear how much progress has been made (from where to where) and why this amount of progress was considered ‘sufficient’;

32.

Notes that in seven out of 33 financing agreements examined, the Court found that the provisions of the financing agreements for budget support were incomplete or unclear in so far as they did not contain the general conditions for budget support, ambiguously defined the method for the calculation of the amounts for disbursement or referred to commitments made by government without defining a due date and the consequences when these commitments are not met (point 27 of the Annual Report on the EDFs); also notes that the Commission ‘will (…) seek to further improve the quality of financing agreements under the 10th EDF’;

33.

Notes, as regards budget support payments, that the underlying transactions are ‘affected by a material level of error’ (point 52(b) of the Annual Report on the EDFs) due to:

34.

Also notes the following findings by the Court in relation to six out of 30 payments examined:

35.

Notes the Commission's reply, according to which ‘the Commission balances the progress made, the political commitment to reform and the remaining areas of concern to arrive at an informed decision’ (Commission’s reply to point 29 of the Annual Report on the EDFs);

36.

Is worried by the Court’s findings, but even more by the Commission’s replies, which show that the Commission is very reluctant to share the information on which its decisions on budget support are based;

37.

Believes that the decision on use of budget support as a development aid instrument fully falls within the powers of the executive and that budgetary support operations should not require prior parliamentary approval;

38.

Notes that parliamentary assessment of budget support should not focus only on the risks but also on the benefits, as well as on the risks and benefits of alternative aid delivery; notes further that traditional project approaches used over several decades have not delivered what was expected;

39.

Believes that the ultimate aim of parliamentary oversight is to achieve aid effectiveness, which means the effective, economic, legal and regular use of aid to produce sustainable development, and considers the oversight of budget support to be a part of its general efforts in overseeing the effectiveness and the results of overall development spending;

40.

Regrets that it does not have sufficient useful, comprehensive and reliable information in order to carry out an effective oversight of budget support results;

41.

Calls for the ending of the previous system of consecutive EDFs by means of the full consolidation of the financing of EU/ACP cooperation in the EU budget in order to ensure parliamentary oversight of the allocation of resources under the EDFs;

42.

Invites the Commission to draw up an annual report on the use of budget support — and its Committee on Budgetary Control to draw up an own initiative report on this annual report — including useful, comprehensive, reliable, analytical and evaluative, and not only descriptive, information on:

43.

Further invites the Commission to identify, with the utmost rigour, countries or issues in budgetary support implementation where particular parliamentary attention could prove useful in improving donor accountability;

44.

Also invites the Commission to introduce annual monitoring of this risk;

45.

Notes that channelling funds through systems in developing countries which are weak creates a risk of inefficiency and wastage, and that a comprehensive fiduciary risk assessment is therefore absolutely necessary prior to starting budget support programmes;

46.

Recalls that the Commission is not using a system in which risk assessment results in a clear threshold of values below which budget support should not be given, but rather a ‘dynamic approach’ in which the degree of discretion is much higher;

47.

Takes the view that the higher degree of discretion in ‘dynamic approach’ decisions on budget support must be counterbalanced by an equally high degree of transparency; invites, therefore, the Commission to make available to its Committee on Budgetary Control and its Committee on Development the information on which it bases its assessments;

48.

Expects in particular to receive explicit information on the Commission’s risk assessments and analyses of government systems in developing countries, its judgement of the significance of system weaknesses as regards potential inefficiencies and wastage of aid and estimates, quantified to the extent possible, of these factors, as well as information on measures taken, or to be taken in future, in order to mitigate the identified risks;

49.

Notes that the responsible Commissioner Louis Michel in a booklet entitled ‘Budget support — A question of mutual trust’ (12) states that ‘(b)udget support and more of it is the only answer. For this reason I have decided to increase the proportion of budget support from 20 % of our funding to 50 %’;

50.

Invites the Commissioner to review these intentions until rhetoric has been replaced by reality and conclusive evidence, showing the extent to which budget support has given better value for money than other aid instruments or has had an impact on income poverty is available;

51.

Notes the letter and note from Commissioner Louis Michel to Mr Jacek Uczkiewicz, Member of the European Court of Auditors, and with copy to Mr Herbert Bösch, Chairman of the Committee on Budgetary Control, dated 9 January 2009 (DR/amw/S(08)0418) in which the Commissioner indicates that:

52.

Welcomes the Commission’s acceptance of the Court’s observations, as well as the Commission’s intentions, and looks forward to being informed of the detailed design and implementation of this ‘enhanced approach’ (ibidem page 1);

53.

Invites the Court to inform it of the quality of the Commission’s assessment and management of risk, and would welcome more performance audits assessing the results of development spending in general and budget support in particular;

54.

Invites its Committee on Budgetary Control to establish direct contacts with its sister committees in selected recipient country parliaments in order to encourage and support their role in ensuring aid effectiveness through parliamentary oversight activities;

55.

Urges the Commission to prioritise support to partner countries to develop parliamentary control and audit capacities, in particular when aid is provided via budget support, and invites the Commission to report regularly on progress achieved;

56.

Is of the view that the involvement of national parliaments, civil society and local authorities in partner countries is indispensable for achieving genuine ownership of the process; urges the Commission to make every effort to improve dialogue with these bodies at all the different stages of the programming process;

57.

Is worried about ‘the lack of involvement by the ACP States’ in assuring effective control of EDF expenditure and is disappointed that delegations ‘can place only limited reliance on the controls performed by the NAO (National Authorising Officer) administrations’ (point 36 of the Annual Report on the EDFs);

58.

Notes that NAOs are obligatory in ACP States but do not exist in RELEX developing countries; invites the Commission to inform it of the advantages and disadvantages of the EDF approach and to assess best practices across ACP States in order to improve the control of EDF expenditure by NAO administrations;

59.

Further notes that ‘the lack of capacity and resources within NAO administrations’ is ‘regularly reported by delegations’ (point 41 of the Annual Report on the EDFs) to EuropeAid’s central services; invites the Commission to inform it of feedback given to delegations on this issue;

60.

Notes that, according to the Court, the number of Commission staff compared to the funds committed is decreasing, and that no significant increase of staff is foreseen despite the forecasted substantial increase of commitments under the 10th EDF (point 33 of the Annual Report on the EDFs);

61.

Fully agrees with the Court that there ‘is a risk that shortage or inadequate distribution of staff or unavailability of specific skills and knowledge has an impact on the quality of the controls, verification and monitoring’ (point 33 of the Annual Report on the EDFs);

62.

Invites the Commission to explain how it envisages managing the tension — if not contradiction — between the need for additional human resources at delegations and its commitment ‘to maintain stable staffing once all enlargement-related personnel are integrated, with no requests for new posts for the period 2009-2013’ and ‘to meet new staffing needs in key policy areas exclusively through redeployment within and between departments’ (13);

63.

Takes the view that additional human resources could be found by abolishing the split responsibility for development between RELEX and DEV; invites the current Commission to take the necessary steps with a view to facilitating this reorganisation in the new Commission; believes that the current division of labour on development cooperation between DEV and RELEX does not allow the Commission to participate fully in nurturing international efforts to promote development coherence and aid effectiveness; further invites the Commission to ensure that development cooperation is unambiguously dedicated to the primary objective of poverty eradication;

64.

Calls on the Commission to take the necessary measures to increase the number of staff allocated to the EDF’s management and control structures in view of the anticipated increase in the volume of commitments under the 10th EDF;

65.

Notes with satisfaction the Court’s recognition of EuropeAid’s efforts to develop a control strategy; takes the view that an efficient control strategy aims at preventing errors ex ante and not primarily at recovering undue paid funds ex post; invites the Commission to continue developing its control strategy in the light of this approach, which is a priority for the discharge authority;

66.

Fully agrees with the Court’s recommendations expressed in points 55(a) to (g) and 56(a) to (f) of the Annual Report on the EDFs; draws in particular the Commission’s attention to the recommendation set out in point 56(a) that

‘compliance with the Cotonou Agreement should be benchmarked against baseline requirements, such as the availability of timely published and audited accounts, to be met before budget support is granted’

and that set out in point 56(d) that

‘EuropeAid should ensure, before the start of a budget support programme, that there is a clear and complete assessment of the public finance management and that the recipient country has a credible and relevant reform programme to address all significant weaknesses over a foreseeable timetable’;

therefore calls on the Commission to grant budget support only where public expenditure management is sufficiently transparent, accountable and effective, or is at least likely to be so with the implementation within a short time frame of a reform programme; further points out that the selection of financing arrangements for a specific sector should be directly linked to their efficiency for this specific area of intervention;

67.

Invites the Commission to give priority to the swift implementation of these recommendations, to which the discharge authority attaches particular importance, in so far as clear and agreed limits for executive discretion are indispensable for meaningful parliamentary supervision;

68.

Stresses that the recipient country’s use of funds delivered as budget support is outside the direct control of the Commission (and other donors) since it is the sovereign right of the recipient country concerned to manage its budget in accordance with its own specific rules and national budgetary procedures;

69.

Recalls that public sector financial management, internal control and external audit functions in some recipient countries are often not sufficiently reliable to ensure that donors’ funds are managed adequately and used for the intended purposes;

70.

Believes that the Commission, in the light of the growing attention given to accountability issues and the increasing interest among donor country taxpayers in seeing concrete results of development aid, has every interest in knowing the risks assumed when granting budget support and in sharing this knowledge with the discharge authority, to which it is accountable;

71.

Further believes that the Commission should inform recipient countries’ administrations of its accountability obligations and request those who manage funds downstream to be subject to similar obligations;

72.

Takes the view, therefore, that development aid in general and budget support in particular should be tied to an ex-ante disclosure statement, issued by the recipient country’s government and signed by the finance minister, concerning selected issues that affect the governance and accountability structure of a beneficiary country;

73.

Strongly believes that a recipient country’s own assessment and understanding of control weaknesses will provide greater motivation for improvement than audits and controls imposed on it by an outside authority;

74.

Takes the view that a Country Disclosure Statement will enhance transparency and accountability and give international donors valuable information with a view to making an informed judgement of the overall transparency and reliability of the beneficiary country’s governance and accountability structure;

75.

Invites the Commission to take the lead and to present this proposal to other international donors — in particular the World Bank — with a view to developing and implementing such an instrument in agreement with other donors; stresses that the nature of penalties for a deliberately misleading disclosure statement will need particular attention;

76.

Invites the Commission to inform it of a possible timeframe for these negotiations;

77.

Welcomes the Commission engagement to ‘raise again its proposal to fully incorporate the EDF into the budget during discussions on the next financial framework’ (14); invites the Commission to keep its Committee on Budgetary Control fully informed as regards the preparation of this initiative;

78.

Reaffirms its support for the incorporation of the EDF into the general budget of the European Union, which it considers would make it possible to enhance the coherence, transparency and effectiveness of the EDF and to strengthen its oversight system;

79.

Takes the view that its role as regards budget support is to hold the Commission accountable for the results of spending, and that budget support is an aid instrument which requires a paradigm shift in oversight behaviour moving from control over inputs to the checking of results against indicators;

80.

Believes that it is obliged to develop its present way of working in order to achieve this; takes the view that a sub-committee on the oversight of budget support set up by its Committee on Budgetary Control would be an efficient tool to ensure that aid support spending benefits the population of the recipient country and that taxpayers’ contributions to aid spending are not misappropriated;

81.

Recalls that in paragraphs 20 to 24 of its Resolution of 22 April 2008 on discharge in respect of the implementation of the budget of the Sixth, Seventh, Eighth and Ninth European Development Funds for the financial year 2006 (15) it expressed its concern that the management of the Investment Facility by the European Investment Bank (EIB) is excluded from the discharge; further recalls that EDF resources are public money contributed by European taxpayers and not by the financial markets;

82.

Regrets, as did the Court in its Opinion No 9/2007 on the proposal for a Council Regulation on a Financial Regulation applicable to the 10th European Development Fund (16), the creation of two separate areas of management, as this limits the scope of the discharge, creates additional needs for coordination between the Commission and the EIB, and makes it difficult to get a complete picture of results achieved;

83.

Notes that the EIB’s annual report on the Investment Facility contains mainly financial information and very little — if any — information on the results of the different financed programmes;

84.

Invites the EIB to focus its reporting on results and to present complete, relevant and objective information as regards outcomes, objectives set, objectives achieved and reasons for possible deviation, as well as evaluations carried out and a summary of evaluation results;

85.

Stresses that the EIB is operating in ACP countries under the Cotonou Agreement, whose primary aim is to eradicate poverty and promote sustainable development, and that it must therefore respect these goals with regard to its lending policy to these countries;

86.

Invites the Commission to inform it of the specific procedures it has established with the EIB in order to coordinate the two institutions’ efforts to achieve EU development objectives, as well as of the efficiency of these procedures;

87.

Is concerned about the image of the EIB as being the least transparent, least accountable and least democratically controlled institution among all the bodies entrusted with implementing EU policies as well as public financial institutions;

88.

Invites the EIB, in the interests of the European Union and its values and with a view to improving public perception of the EIB as an institution, to present evidence showing:

89.

Invites the Commission to follow up closely the implementation of the Investment Facility with a view to guaranteeing that it fulfils its objective as a development tool, and to inform its Committee on Budgetary Control on a regular basis of its findings;

90.

Invites its Committee on Budgetary Control to strengthen its activities as regards control of the financial activities of the EIB, which fully falls under the responsibilities of that committee under the Rules of Procedure, Annex VI, Chapter V, point 3.