REPORT on discharge in respect of the implementation of the budget of the European GNSS Supervisory Authority for the financial year 2007

1. PROPOSAL FOR A EUROPEAN PARLIAMENT DECISION

20.3.2009 - (C6‑0446/2008 – 2008/2273(DEC))

Committee on Budgetary Control
Rapporteur: Christofer Fjellner

Procedure : 2008/2273(DEC)

Document stages in plenary

Document selected :

A6-0164/2009

Texts tabled :

A6-0164/2009

Debates :

PV 21/04/2009 - 19
CRE 21/04/2009 - 19

Votes :

PV 23/04/2009 - 8.22

Texts adopted :

P6_TA(2009)0296

1. PROPOSAL FOR A EUROPEAN PARLIAMENT DECISION

Date adopted

Result of final vote

+:

–:

0:

Members present for the final vote

Jean-Pierre Audy, Herbert Bösch, Costas Botopoulos, Mogens Camre, Paulo Casaca, Antonio De Blasio, Christofer Fjellner, Ingeborg Gräßle, Aurelio Juri, Dan Jørgensen, Rodi Kratsa-Tsagaropoulou, Nils Lundgren, Marusya Ivanova Lyubcheva, Hans-Peter Martin, Ashley Mote, Jan Mulder, Bart Staes, Søren Bo Søndergaard

Substitute(s) present for the final vote

Vasilica Viorica Dăncilă, Christopher Heaton-Harris, Edit Herczog

on discharge in respect of the implementation of the budget of the European GNSS Supervisory Authority for the financial year 2007

(C6‑0446/2008 – 2008/2273(DEC))

The European Parliament,

– having regard to the final annual accounts of the European GNSS[1] Supervisory Authority for the financial year 2007[2],

– having regard to the Court of Auditors' report on the final annual accounts of the European GNSS Supervisory Authority for the financial year 2007, together with the Authority's replies[3],

– having regard to the Council's recommendation of 10 February 2009 (5588/2009 – C6‑0060/2009),

– having regard to the EC Treaty, and in particular Article 276 thereof,

– having regard to Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities[4], and in particular Article 185 thereof,

– having regard to Council Regulation (EC) No 1321/2004 of 12 July 2004 on the establishment of structures for the management of the European satellite radio-navigation programmes[5], and in particular Article 12 thereof,

– having regard to Commission Regulation (EC, Euratom) No 2343/2002 of 19 November 2002 on the framework Financial Regulation for the bodies referred to in Article 185 of Regulation (EC, Euratom) No 1605/2002[6], and in particular Article 94 thereof,

– having regard to Rule 71 of, and Annex V to, its Rules of Procedure,

– having regard to the report of the Committee on Budgetary Control (A6‑0164/2009),

1. Grants the Executive Director of the European GNSS Supervisory Authority discharge in respect of the implementation of the Authority's budget for the financial year 2007;

2. Sets out its observations in the resolution below;

3. Instructs its President to forward this Decision and the resolution that forms an integral part of it to the Executive Director of the European GNSS Supervisory Authority, the Council, the Commission and the Court of Auditors, and to arrange for their publication in the Official Journal of the European Union (L series).

2. PROPOSAL FOR A EUROPEAN PARLIAMENT DECISION

on the closure of the accounts of the European GNSS Supervisory Authority for the financial year 2007

(C6‑0446/2008 – 2008/2273(DEC))

The European Parliament,

– having regard to the final annual accounts of the European GNSS[7] Supervisory Authority for the financial year 2007[8],

– having regard to the Court of Auditors' report on the final annual accounts of the European GNSS Supervisory Authority for the financial year 2007, together with the Authority's replies[9],

– having regard to the Council's recommendation of 10 February 2009 (5588/2009 – C6‑0060/2009),

– having regard to the EC Treaty, and in particular Article 276 thereof,

– having regard to Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities[10], and in particular Article 185 thereof,

– having regard to Rule 71 of, and Annex V to, its Rules of Procedure,

– having regard to the report of the Committee on Budgetary Control (A6‑0164/2009),

1. Notes that the final annual accounts of the European GNSS Supervisory Authority are as annexed to the Court of Auditors' report;

2. Approves the closure of the accounts of the European GNSS Supervisory Authority for the financial year 2007;

3. Instructs its President to forward this Decision to the Executive Director of the European GNSS Supervisory Authority, the Council, the Commission and the Court of Auditors, and to arrange for its publication in the Official Journal of the European Union (L series).

3. MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

with observations forming an integral part of the decision on discharge in respect of the implementation of the budget of the European GNSS Supervisory Authority for the financial year 2007

(C6‑0446/2008 – 2008/2273(DEC))

The European Parliament,

– having regard to the final annual accounts of the European GNSS[13] Supervisory Authority for the financial year 2007[14],

– having regard to the Court of Auditors' report on the final annual accounts of the European GNSS Supervisory Authority for the financial year 2007, together with the Authority's replies[15],

– having regard to the Council's recommendation of 10 February 2009 (5588/2009 – C6‑0060/2009),

– having regard to the EC Treaty, and in particular Article 276 thereof,

– having regard to Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities[16], and in particular Article 185 thereof,

– having regard to Rule 71 of, and Annex V to, its Rules of Procedure,

– having regard to the report of the Committee on Budgetary Control (A6‑0164/2009),

A. whereas the Court of Auditors (ECA) stated it was unable to form an opinion on the accounts of the European GNSS Supervisory Authority for the financial year 2007 and pointed out that the entire architecture of the Galileo project was being revised in 2007 and that the Authority's accounts were prepared in a fragile legal environment,

B. whereas, at the same time, the ECA stated that the underlying transactions are legal and regular,

C. whereas the Authority became financially autonomous in 2006,

D. whereas the ECA, in its report on the annual accounts of the Authority for 2006, issued a positive statement of assurance,

E. whereas on 22 April 2008 Parliament granted the Executive Director of the European GNSS Supervisory Authority discharge in respect of the implementation of the Authority's budget for the financial year 2006[19],

1. Notes from the ECA's annual report that the Authority's final budget for the financial year 2007 was EUR 436 500 000, as compared to EUR 7 000 000 in 2006; observes that the 2007 budget was mainly financed from Commission subsidies (an operating subsidy of EUR 7 600 000 and operational funds of EUR 194 500 000), transfers from the Galileo Joint Undertaking and third country contributions;

2. Notes the ECA's observation that the appropriations actually made available to the Authority (EUR 210 000 000) were substantially lower, due to delays incurred in the Galileo programme;

Incomplete statement of assurance with regard to the accounts

3. Regrets that the ECA was not in a position to form an opinion with regard to the reliability of the Authority's annual accounts for 2007; notes the ECA's explanation that the annual accounts for 2007 were established, and the ECA carried out its audit, when the Galileo project and the role of the Authority were under revision and the new legal framework still incomplete, notably as regards the management of the project's funds and the ownership of its assets;

4. Notes that, in the meantime, Regulation (EC) No 683/2008[20] entered into force; notes that under that Regulation, the Commission is the manager of the Galileo and EGNOS[21] programmes and the Community the owner of all tangible and intangible assets created or developed under the programmes;

5. Notes that the Authority will establish its annual accounts for 2008 under the new legal framework;

6. Invites the ECA, in its report on the annual accounts of the Authority for 2008, to assess how far the uncertainties with regard to the accounts have been remedied;

Budget implementation

7. Is concerned that the ECA found the following weaknesses with regard to budget implementation: low consumption level of commitment and payment appropriations for operational activities (63 % for commitments and 51 % for payments); absence of a clear link between the Authority's work programme and the budget; transfers neither justified nor documented; repeated late booking of recovery orders; inconsistent presentation of budget implementation;

8. Acknowledges that the Authority performed a high number of transfers due to an exceptional budgetary situation, with a 50 % reserve on the operating budget;

9. Calls on the Authority to report on the action taken following the ECA's observations with regard to budget implementation, and on the results achieved, in its report on budgetary and financial management for 2008;

Uncertainties with regard to Galileo and EGNOS project assets

10. Observes the ECA's criticism, with regard to Galileo project assets, that the Authority was unable to provide sufficient information in its accounts, as no list of the assets held by the European Space Agency (ESA) had been established by the end of 2007;

11. Notes the Authority's reply to the ECA that these assets were controlled by the ESA, not by the Authority, at 31 December 2007;

12. Observes the ECA's criticism, with regard to EGNOS project assets, that no accurate inventory of these assets was available and that there was no indication of their value in the Authority's accounts;

13. Notes the Authority's reply that the EGNOS project assets were, at 31 December 2007, still under the control of the ESA; further notes from the replies of the Authority's Executive Director to the Parliament that substantial progress was made in 2008, as the EGNOS investors agreed on the conditions of the transfer of the assets;

14. Notes that, under Regulation (EC) No 683/2008, the Community is the owner of the Galileo and EGNOS project assets; notes that the process of transferring these assets from the Authority to the Commission, which exercises ownership on behalf of the Community, started in December 2008;

15. Calls on the Authority to do its utmost in order to clarify the situation with regard to Galileo and EGNOS project assets in its annual accounts for 2008;

16. Calls on the Commission, to which the Galileo and EGNOS project assets are currently being transferred, to consider the ECA's observations and ensure that these assets are properly recorded in the accounts;

17. Notes the ECA's observation that the costs of the in-orbit validation phase of the Galileo project should be equally shared between the ESA and the EU, and that, however, the EU's contribution exceeded that of ESA by some EUR 114 000 000; notes that, according to the ECA, this pre-financing should have been shown in the Authority's accounts;

18. Notes that the Authority disagreed with the ECA and only recognised advance payments of EUR 53 200 000;

The Authority's role in the winding-up of the Galileo Joint Undertaking (GJU)

19. Recalls that the Authority took over all activities and assets from the Galileo Joint Undertaking (GJU) with effect from 1 January 2007;

20. Is concerned by the ECA's critical remarks as to how certain assets were transferred from the GJU to the Authority and recorded in the Authority's accounts;

21. Notes that the Authority replied in great detail to the ECA and disagreed with many of the ECA's observations;

22. Takes the view that the winding-up of the GJU, including the role played by the Authority, must be thoroughly examined by the discharge authority, on the basis of the ECA's audit results;

23. Observes that the ECA is currently carrying out an audit of the management of the Galileo development and its in-orbit validation phase; invites the ECA to put particular emphasis on the takeover of the GJU's activities and assets by the Authority, and welcomes the ECA's intention to publish its audit results in a special report before the 2009 summer break;

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24. Refers for other observations accompanying the discharge decision which are of a horizontal nature to its resolution of ... April 2009 on financial management and control of EU agencies[22].

EXPLANATORY STATEMENT

The area of activities of the GNSS[23] Supervisory Authority (GSA) is highly political and bears substantial financial implications for the EU budget. The Authority was created in 2004. Originally, its tasks were twofold: (1) manage the public interests relating to the European GNSS programmes, Galileo and EGNOS[24], and (2) act as the regulatory authority for the programmes during the deployment and operational phases of the Galileo programme. Its main task was to establish a public private partnership for the implementation of the Galileo deployment and operational phases. In November 2007 it was decided that the deployment phase would be fully funded from the Community budget. Consequently, the governance structure of the Galileo and EGNOS programmes and the role of the Authority changed fundamentally. Whereas the political decisions were taken in late 2007, the legal framework in order to implement the changes, Regulation (EC) No 683/2008 on the further implementation of the European satellite navigation programmes (EGNOS and Galileo), only entered into force on 25 July 2008.

1. Incomplete statement of assurance

The 2007 discharge exercise is the first one covering a whole year of activity of the Authority. In its annual report for 2007, the ECA issued a positive statement of assurance with regard to the underlying transactions.

However, the ECA declared it was unable to form an opinion as to the reliability of the Authority's accounts. The ECA explained that, when the accounts for 2007 were established and the ECA carried out its audit, the new legal framework was still incomplete. Several questions concerning the ownership of assets and the presentation of the assets of the Galileo and EGNOS programmes in the Authority's accounts remained open.

The fact that the statement of assurance is incomplete does not have any binding effect on Parliament's decision concerning discharge. With a view to granting discharge Parliament shall examine the accounts and financial statements of the Community body in question, the annual report by the European Court of Auditors, any relevant ECA special reports and the statement of assurance[25]. The statement of assurance is only one element among others which form the basis for the discharge decision.

2. Legal and organisational environment in transition

The financial year 2007 is marked by two factors: firstly, the takeover of the activities and assets of the Galileo Joint Undertaking (GJU) by the Authority as from 1 January 2007; secondly, the uncertainty about the status of the Authority following the fact that the public private partnership concept for the deployment phase was given up.

a) GSA and the winding up of GJU

The Authority's founding regulation, as amended in 2006, specifies that the Authority takes over all activities from the Galileo Joint Undertaking (GJU). Furthermore, from the end of GJU, GSA shall be the owner of all assets created during the development phase, including those owned by GJU and those created by the European Space Agency (ESA). GJU had been established in 2002 for a period of 4 years in order to implement the development phase of the Galileo programme, ensure unity of administration and financial control and mobilise the funds assigned to the programme[26]. As GJU ceased to exist on 31 December 2006, the takeover of GJU's activities and assets by the Authority took effect on 1 January 2007.

b) GSA's changing role under Regulation No. 683/2008

The new legal basis, Regulation No. 683/2008[27], stipulates that the Commission will be the manager of the programmes. The Authority's role is now reduced to carrying out specific tasks related to the programmes, in accordance with guidelines issued by the Commission.

The new regulation also provides that the Community shall be the owner of all assets created under the Galileo and EGNOS programmes. The Community is represented by the Commission. Before, since the end of the duration of the GJU on 31 December 2006, the Authority was considered as the owner of all tangible and intangible assets created during the development phase of the Galileo programme, including those owned by the GJU. In addition, the Authority was considered as the owner of all tangible and intangible EGNOS assets subject to agreement with the EGNOS investors on the terms and conditions on the transfer from ESA of ownership of all or part of the EGNOS facilities and equipment.

3. The ECA's observations and the agency's replies

The ECA's observations cover the Authority's budget implementation, the uncertainties as regards the accounts, which concerned in particular the Galileo and EGNOS project assets and issues related to the takeover of the activities and assets of GJU by the Authority.

a) The Authority's performance with regard to budget implementation

The ECA highlighted the fact that, whereas the Authority's final budget was EUR 436,5 million, there was a de facto 50 % budget reduction due to delays in the Galileo programme. The funds actually made available to the Authority were EUR 210 million. The ECA criticised that the consumption level for operational activities was low, 63 % for commitments and 51 % for payments. In addition, the ECA highlighted weaknesses in the management of the budget: absence of a clear link between the Authority's work programme and the budget, transfers neither justified nor documented, repeated late booking of recovery orders and inconsistent presentation of the budget implementation. In its reply the Authority explained that it had to perform a high number of transfers due to an exceptional situation, the de facto budget reduction of 50 %, which made it extremely difficult to keep a clear link between work programme and budget. In his additional answers provided to questions by the rapporteur the Executive Director of the Authority explained he had taken into account the ECA's observations in order to improve budgetary reporting, documenting budget transfers and timely booking of recovery orders.

b) Galileo and EGNOS project assets in the accounts

With regard to Galileo project assets the ECA criticised that the Authority was unable to provide sufficient information about in its accounts, as no list of the assets held by ESA had been established by the end of 2007, despite existing transfer agreements between the parties concerned (GJU, ESA and the Authority). In its replies to the ECA the Authority stated that these assets were controlled by ESA, not by the Authority at 31 December 2007. The Authority agreed that an inventory of Galileo project assets held by ESA was desirable. In his replies to the rapporteur's additional questions the Authority's Executive Director referred to the agreement between ESA and the Authority of 16 May 2007 on the Galileo in orbit validation phase and EGNOS, which provides that the ownership of the assets produced in the Galileo in orbit validation phase shall be transferred to the Authority. He stated that the rights and obligations out of this agreement will be transferred to the Community in accordance with Regulation No. 683/2008, pursuant to which the Community is the new owner of the Galileo project assets.

With regard to EGNOS project assets the ECA criticised that no accurate inventory of these assets was available and there was no indication of their value in the Authority's accounts. In its replies to the ECA the Authority pointed out that the EGNOS project assets were, at 31 December 2007, still under the control of ESA, not the Authority. In his replies to the rapporteur's additional questions the Authority's Executive Director also referred to the above-mentioned agreement between ESA and the Authority of 16 May 2007. According to this agreement assets produced in the framework of the EGNOS programme vested in ESA shall be transferred to the Authority, subject to an agreement with the EGNOS investors. He informed that substantial progress was made in 2008 as the EGNOS investors agreed on the conditions of the transfer of the assets. Pursuant to Regulation No. 683/2008 the Community is the owner of the assets created under the EGNOS programme.

The current situation is as follows: According to the Executive Director's replies the transfer of Galileo and EGNOS assets from the Authority to the Community has already started: On 10 December 2008, the Commission notified the Authority that it decided to exercise its ownership rights of the Galileo and EGNOS programmes on behalf of the Community. This means that the Authority was the owner of these assets only for a transitional period in 2007 / 2008, from the moment when it took over those assets from GJU until the moment it transferred them to the Commission. Thus, the questions highlighted by the ECA now also concern the Commission.

An additional remark from the ECA concerned advance payments made by the Authority to ESA: Although the costs of the in orbit validation phase of the Galileo project should be equally shared between ESA and the European Union, the Union's contribution exceeded ESA's contribution by some EUR 114 million; this pre-financing should have been shown in the Authority's accounts. The Authority replied that it only recognised advance payments of EUR 53,2 million.

c) Takeover of GJU activities and assets by the Authority

The ECA formulated a series of critical remarks concerning the transfer of GJU activities and assets to the Authority. The transfer took effect on 1 January 2007 and thus directly concerns the 2007 discharge exercise. The Authority provided explanations concerning each critical remark, disagreeing with many of the ECA's observations.

The ECA highlighted that GJU assets included pre-financings paid to the ESA. It criticised that, although ESA had received an amount of some EUR 558 million, the Authority only recorded EUR 53,7 million which the Authority paid to ESA in 2007. The ECA concluded that there was a serious uncertainty with regard to the real amount of outstanding pre-financings forming part of the Authority's assets as at the end of 2007. The Authority replied that all payments made by GJU were treated as expenditure in the GJU annual accounts and therefore not recorded in the Authority's accounts.

In addition, the ECA criticised how the Authority recorded an amount of EUR 150,5 million transferred to the Authority from GJU in 2006 and 2007.

Finally, the ECA noted that the GJU had received EUR 15 million from third parties, i.e. amounts of EUR 5 million each from the Israeli Industry Centre for Research and Development (MATIMOP), the National Remote Sensing Centre of China (NRSCC - People's Republic of China) and Belgium. The ECA criticised that the status of these sums was unclear and they were not disclosed in the Authority's accounts. The Authority replied that in the liquidation plan of GJU it was decided not to redistribute the unused amounts to the GJU shareholders and that the liquidator of GJU informed the Authority that all unused funds except an amount of EUR 200 000 had been transferred to the Authority.

4. The 2007 discharge procedure

The rapporteur recommends that Parliament grants the Executive Director of the Authority discharge for the following reasons: The Executive Director of the Authority cannot be held directly responsible for the legal uncertainties surrounding the 2007 accounts, which were due to highly political decisions concerning the Galileo project. The Authority's accounts for 2008 will have to be established and audited by the ECA under the new legal framework. Thus, the forthcoming 2008 discharge exercise will allow Parliament to evaluate if the new framework allows for a proper establishment of the accounts.

The rapporteur is concerned about the ECA's critical remarks on how the Authority managed the takeover of GJU activities and assets. He considers that this issue deserves further examination by the discharge authority. As the ECA currently carries out a specific audit task on this issue, the rapporteur recommends that Parliament should await the specific audit findings of the ECA in order to form its final opinion. The ECA should be invited to present a special report.

RESULT OF FINAL VOTE IN COMMITTEE

[1] GNSS: Global Navigation Satellite Systems.
[2] OJ C 278, 31.10.2008, p. 38.
[3] OJ C 311, 5.12.3009, p. 107.
[4] OJ L 248, 16.9.2002, p. 1.
[5] OJ L 246, 20.7.2004, p. 1.
[6] OJ L 357, 31.12.2002, p. 72.
[7] GNSS: Global Navigation Satellite Systems.
[8] OJ C 278, 31.10.2008, p. 38.
[9] OJ C 311, 5.12.2008, p. 107.
[10] OJ L 248, 16.9.2002, p. 1.
[11] OJ L 246, 20.7.2004, p. 1.
[12] OJ L 357, 31.12.2002, p. 72.
[13] GNSS: Global Navigation Satellite Systems.
[14] OJ C 278, 31.10.2008, p. 38.
[15] OJ C 311, 5.12.2008, p. 107.
[16] OJ L 248, 16.9.2002, p. 1.
[17] OJ L 246, 20.7.2004, p. 1.
[18] OJ L 357, 31.12.2002, p. 72.
[19] Texts adopted, P6_TA(2008)0162.
[20] Regulation (EC) No 683/2008 of the European Parliament and of the Council of 9 July 2008 on the further implementation of the European satellite navigation programmes (EGNOS and Galileo) (OJ L 196, 24.7.2008, p. 196).
[21] European Geostationary Navigation Overlay System.
[22] Texts adopted, P6_TA-PROV(2009)...
[23] GNSS: Global Navigation Satellite Systems.
[24] European Geostationary Navigation Overlay System.
[25] Article 95 Commission Regulation (EC, Euratom) No. 2343/2002, OJ L 357, 31.12.2002, p. 72.
[26] Founding regulation Reg. (EC) No. 876/2002 as amended by Regulation No. 1943/2006.
[27] Regulation No. 683/2008 of the EP and the Council of 9 July 2008 on the further implementation of the European satellite navigation programmes, OJ L 196, 24.7.2008, p.196.

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