2007 discharge: 7th, 8th and 9th European Development Funds EDF
The European Parliament adopted a decision which aims to give discharge to the Commission in respect of the implementation of the budget of the Seventh, Eighth and Ninth European Development Funds (EDFs) for the financial year 2007. The decision to grant discharge is also an approval of the closure of the accounts of the three EDFs.
The European Parliament also adopted by 447 votes to 17, with 19 abstentions, a resolution with observations which form an integral part of the decision to grant discharge.
The main observations made by the Parliament can be summarised as follows:
§ Strengthen the control strategy and the Commission’s intervention: Parliament agrees with the Commission that weak administrations and weak governance in many beneficiary countries are significant risks affecting the sound management of the EDFs. It invites the Commission - when fine-tuning its control strategy - to identify the point where lack of results and the costs of control call for a policy change. The implementation strategy for the Tenth EDF should focus on areas of crucial importance for ensuring sustainable development. Parliament also 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.
§ Financial implementation: Parliament 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%. It also welcomes the commitment of all available funding for the Ninth EDF in 2007, while stressing that speedy commitment of funds should not be carried out to the detriment of the quality of projects. Recalling the Commission's commitment 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, Parliament calls on the Commission to prioritise support to health systems and identify the most appropriate aid delivery instruments for this area.
§ The Court of Auditors' Statement of Assurance: overall, Parliament welcomes the Court of Auditors’ conclusions. However, it regrets the lack of transparency for certain expenditure, particularly concerning budget support to developing countries. It also regrets the material level of errors affecting transactions underlying payments of the EDFs. Parliament regrets that the Commission is still not able to give full accounting information due to technical difficulties. It notes, in particular, that Europe Aid's supervisory and control systems for the EDFs are only “partially effective”. It therefore calls on the Commission to tighten up its controls and to introduce a system of review of external audit reports to check their quality.
§ Budget support: Parliament notes the sometimes serious weaknesses highlighted by the Court in terms of budget support and calls on the Commission to provide evidence that the funds were granted effectively. It notes in particular 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. Parliament is concerned about the Court’s findings in this area but are even more worried about 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. It therefore calls on the Commission to draw up an annual report on the use of budget support, including useful, comprehensive, reliable, analytical and evaluative, and not only descriptive, information on expenditure. Moreover, it calls on 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. Parliament also call for technical measures to be taken to assess and manage risks in this area, as channelling funds through systems in developing countries which are weak creates a risk of inefficiency and wastage.
§ Effective parliamentary oversight: Parliament recalls 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. In this context, the oversight of budget support is a part of its general efforts in overseeing the effectiveness and the results of overall development spending. It therefore regrets that they do not have sufficient useful, comprehensive and reliable information in order to carry out an effective oversight of budget support results. It 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. Furthermore, Parliament calls for the establishment of direct contacts with their sister committees in selected recipient country parliaments in order to encourage and support their role in ensuring aid effectiveness through parliamentary oversight activities.
§ Statement from Louis Michel, development Commissioner: Parliament notes that, in a booklet entitled Budget support - a question of mutual trust?, he states that "budget support and more of it is the only answer (and decided to increase the proportion of budget support from 20% of our funding to 50%"). Parliament 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.
§ Involvement of the ACP States: Parliament is concerned about “the lack of involvement by the ACP States” in assuring effective control of EDF expenditure as well as “the lack of capacity and resources within NAO administrations”. Given that there is a shortfall of human resources in this sector in the Commission delegations, Parliament calls on 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. It also 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 Tenth EDF.
§ Reforming the approach to controlling budget support: overall, Parliament is satisfied with Europe Aid's efforts to develop a control strategy and calls on the Commission to continue developing this strategy. It 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. Parliament also 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. It recalls, in this respect, 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. The Commission therefore should have 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. In this context, Parliament takes the view 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. According to the Parliament, a recipient country's own assessment and understanding of control weaknesses will provide greater motivation for improvement. This same type of approach should be applied in other institutions, such as the World Bank.
§ Integration of the EDF budget in the general budget of the European Union: lastly, Parliament welcomes the Commission commitment to raise again its proposal to fully incorporate the EDF into the budget during discussions on the next financial framework. It reaffirms their 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.