REPORT on Draft amending budget No 5/2006 of the European Union for the financial year 2006

11.10.2006 - (13561/2006 – C6‑0333/2006 – 2006/2202(BUD)) - *

Section III – Commission
Committee on Budgets
Rapporteur: Giovanni Pittella

MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

on Draft amending budget No 5/2006 of the European Union for the financial year 2006, Section III – Commission

(13561/2006 – C6‑0333000/2006 – 2006/2202(BUD))

The European Parliament,

–   having regard to the Treaty establishing the European Community, and in particular Article 272(4), penultimate subparagraph, thereof,

–   having regard to the Treaty establishing the European Atomic Energy Community, and in particular Article 177 thereof,

–   having regard to Council Regulation (EC, Euratom) No 1605/2002 of 27 June 2002 on the Financial Regulation applicable to the general budget of the European Communities[1], and in particular Articles 37 and 38 thereof,

–   having regard to the general budget of the European Union for the financial year 2006, as finally adopted on 15 December 2005[2],

–   having regard to the Interinstitutional Agreement of 6 May 1999 between the European Parliament, the Council and the Commission on budgetary discipline and improvement of the budgetary procedure[3],

–   having regard to Preliminary draft amending budget No 5/2006 of the European Union for the financial year 2006, which the Commission presented on 20 July 2006 (SEC(2006)0996),

–   having regard to Draft amending budget No 5/2006, which the Council established on 5 October 2006 (13561/2006 – C6‑0333/2006),

–   having regard to Rule 69 of and Annex IV to its Rules of Procedure,

–   having regard to the report of the Committee on Budgets (A6‑0340/2006),

A. whereas Amending Budget No 5/2006 comprises three different elements, namely the mobilisation of new funds for the financial support to encourage the economic development of the Turkish Cypriot community, an increase in the appropriations for the European Year of Equal Opportunities for All (2007) and the creation of two new budget lines following the modernisation of the Commission's accounting system,

B.  whereas the EUR 120 million in new commitments that are proposed by the Commission to support the economic development of the Turkish Cypriot community go back to the decision of Council taken on 26 April 2004 in Luxembourg, following the results of the referenda in Cyprus, and have not been budgeted yet due to delays in the adoption of the legal basis,

C. whereas the increase of EUR 4 million for the European Year of Equal Opportunities for All (2007) is necessary to adjust the appropriations included in the 2006 budget to the amounts noted in the relevant Decision No 771/2006/EC of the European Parliament and of the Council[4],

D. whereas the first provisional closure of the accounts following the Commission's modernisation of its accounting system necessitates the creation of a new budget line for the coverage of expenditure incurred in connection with treasury management and the creation of a new budget line for the EDF contribution to the common administrative support expenditure,

1.  Approves Draft amending budget No 5/2006 unamended;

2.  Instructs its President to forward this resolution to the Council and Commission.

• [1]  OJ L 248, 16.9.2002, p. 1.
• [2]  OJ L 78, 15.3.2006.
• [3]  OJ C 172, 18.6.1999, p. 1. Agreement as last amended by Decision 2005/708/EC of the European Parliament and of the Council (OJ L 269, 14.10.2005, p. 24).
• [4]  OJ L 146, 31.5.2006, p. 1.

EXPLANATORY STATEMENT

Background

PDAB 5 - Commission

Preliminary Draft Amending Budget 5/2006, adopted by the Commission on 25 July 2006, contains the following elements:

1.  The mobilisation of new funds for an amount of EUR 120 000 000 in commitments on line 22 02 11 for the financial support to encourage the economic development of the Turkish Cypriot community, and the correlated modification of the budgetary remarks to allow for the financing of the administrative support expenditure. These new funds are requested from the margin available under the ceiling of Heading 7 (Pre-accession strategy) of the Financial Perspective.

2.  An increase in line 04 04 12 – European Year of Equal Opportunities for All (2007) – to take account of Decision 771/2006 of EP and Council.

3.  The creation of two new budget lines following the modernisation of the accounting system: 27 01 12 02 “Coverage of expenditure incurred in connection with treasury management” and 21 01 04 10 “EDF contribution to common administrative support expenditure”.

No additional payment appropriations are being requested in PDAB 5/2006.

ad 1) Financial support to encourage the economic development of the Turkish Cypriot community:

On 26 April 2004, the Council at its meeting in Luxembourg noted the results of the simultaneous referenda in Cyprus on 24 April 2004:

“The Turkish Cypriot community have expressed their clear desire for a future within the European Union. The Council is determined to put an end to the isolation of the Turkish Cypriot community and to facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community. The Council invited the Commission to bring forward comprehensive proposals to this end, with particular emphasis on the economic integration of the island and on improving contact between the two communities and with the EU. The Council recommended that the 259 000 000 euro already earmarked for the northern part of Cyprus in the event of a settlement now be used for this purpose.”

Further to these conclusions, the Commission put forward on 7 July 2004 a proposal to implement the EUR 259 000 000 over the period 2004-2006 under Heading 7 (Pre-accession strategy) of the Financial Perspective. As a result, an amount of EUR 120 000 000 was put in reserve in the 2005 budget pending adoption of the legal basis and an amount of EUR 139 000 000 was allocated in the 2006 Budget (also in reserve but transferred to the operational line after adoption of the legal basis).

As the legal basis was delayed until its final adoption on 27 February 2006, the funds allocated in reserve in the 2005 budget, i.e. EUR 120 000 000, could not be carried forward and had to be cancelled.

After consulting the Member States on the possibility to reconstitute the EUR 259 000 000 package by requesting additional commitments under Heading 7, where a margin of EUR 1 085.4 million is available under the 2006 ceiling, the Council Presidency received general support and requested the Commission to submit an appropriate proposal for an amending budget 2006.

ad 2) European Year of Equal Opportunities for All (2007)

Decision 771/2006 of EP and Council states that, in 2006, EUR 6 000 000 will be earmarked for preparations for the European Year of Equal Opportunities for All (2007) initiative. However, in the 2006 budget the budgetary authority allocated only EUR 2 000 000 in commitments and EUR 1 000 000 in payments.

For the sake of consistency between the amount in the budget line and the amount referred to in the Decision, it is proposed that the amending budget add EUR 4 000 000 in commitment appropriations.

ad 3) Budgetary adjustments following modernisation of the accounting system

On the first provisional closure of the accounts following the Commission’s modernisation of its accounting system, there is a need, first, to close a number of non-budget accounts that have had outstanding balances for a number of years and, second, to take into account in the budget the EDF contribution to the administrative expenditure of delegations. This is required by the accrual accounting system that is to be installed in the delegations in 2007.

a) Coverage of expenditure incurred in connection with treasury management

Five types of operation are concerned here: bankrupt banks, cash differences, burden of the past, repayments of principal and/or late payment interest set off as well as clearance of non-recoverable amounts of VAT.

The Commission proposes through this amending budget:

First, the creation of a new Item 27 01 12 02 – “Coverage of expenditure incurred in connection with treasury management”, with the following remarks:

“This appropriation is intended to cover budgetary adjustments:

· for imprest accounts, where all appropriate measures have been taken by the authorising officer to deal with the situation and where the adjustment expenditure cannot be booked to another specific budget line,

· in situations where a claim is cancelled in full or in part, after it has been booked to the accounts as revenue (in particular in the event of offsetting against a debt),

· in cases where VAT has not been recovered and where it is no longer possible to book the amount to the line that covered the principal expenditure,

· for any interest relating to the above cases, where it cannot be booked to another specific budget line.”

The Commission also proposes to transfer to this new budget item the 2nd paragraph of the remarks of budget item 27 01 12 01, reading as follows:

· “This item is also intended to accommodate, if necessary, an appropriation to cover any losses resulting from the liquidation or cessation of activities of a bank with which the Commission has accounts for the purposes of imprests.”

b) Creation of a new budget item 21 01 04 10 – EDF contribution to common administrative support expenditure:

A part of the European Development Fund envelope is used to defray the costs incurred by Community budget in supporting expenditure of the EDF in the EU delegations such as external staff, rent, electricity, utilities etc. As the budget for EDF is different from the Community budget, the Commission establishes a recovery order to EDF in the beginning of each financial year based on an estimate of the previous year’s expenditure.

It is proposed to create a budget line on which commitments and payments are automatically entered after collection of the funds received from EDF. The proposed measure is technically required by the accrual accounting system that will be installed in the Delegations aiming at increasing efficiency and transparency.

DAB 5 - Council

Council has adopted its DAB 5 on 5 October 2006 as proposed by the Commission, adding a political statement of Cyprus as an annex.

Assessment

Your rapporteur welcomes the fact that Amending Budget No 5/2006 finally budgets the financial aid to support the economic development of the Turkish Cypriot community which was already decided upon in 2004. Due to delays in the Council's adoption of the legal base, unfortunately, it has taken more than two years for this political decision to be introduced into the EU budget.

The part of Amending Budget No 5/2006 dealing with the European Year of Equal Opportunities for All is a purely technical one and can be accepted as such by your rapporteur.

The creation of a new budget line for “Coverage of expenditure incurred in connection with treasury management” is justified by the Commission by the modernisation of the Commission's accounting system which would require to close a number of non-budget accounts with outstanding balances.

In principal, your rapporteur understands the necessity for entities/organisations/institutions involved in any kind of "business" activities to have such a line in their accounting system. The explanations given by the Commission in this respect are satisfactory enough

for your rapporteur not to raise any objections to this part of the Amending budget.

Your rapporteur can therefore propose to adopt Draft Amending Budget No 5/2006 as established by Council on 5 October 2006.

PROCEDURE

Title	Draft amending budget No 5/2006 of the European Union for the financial year 2006, Section III – Commission
References	13561/2006 – C6-0333/2006 – 2006/2202(BUD)
Legal basis	Articles 272 EC and 177 Euratom
Basis in Rules of Procedure	Rule 69 and Annex IV
Committee responsible          Date of referral	BUDG 0.0.0000
Committee(s) asked for opinion(s)          Date of referral
Rapporteur   Date appointed	Giovanni Pittella 6.12.2004
Previous rapporteur
Preliminary draft amending budget                Date presented by Commission	No 5/2006 – SEC(2006)0996 20.7.2006
Date draft amending budget established by the Council	5.10.2006
Date draft amending budget forwarded by the Council	10.10.2006
Discussed in committee	10.10.2006
Date adopted	10.10.2006
Result of final vote	for: 23 against: 0 abstentions: 0
Members present for the final vote	Reimer Böge, Gérard Deprez, Valdis Dombrovskis, Brigitte Douay, Salvador Garriga Polledo, Ingeborg Gräßle, Louis Grech, Nathalie Griesbeck, Catherine Guy-Quint, Jutta D. Haug, Anne E. Jensen, Wiesław Stefan Kuc, Janusz Lewandowski, Vladimír Maňka, Giovanni Pittella, Antonis Samaras, Esko Seppänen, László Surján, Ralf Walter
Substitutes present for the final vote	Lidia Joanna Geringer de Oedenberg, Viktória Mohácsi, Martine Roure, José Albino Silva Peneda
Substitutes under Rule 178(2) present for the final vote
Date tabled	11.10.2006
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