Articles 29 and 30 of the Financial Regulation enshrine the principle of transparency.
Under Article 29, the budget must be established and implemented and the accounts presented in compliance with the principle of transparency. The budget, any amending budgets and the consolidated annual accounts must all be published in the Offi cial Journal of the European Union.
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Information on borrowing-and-lending operations contracted by the Com- munities for third parties must be given in an Annex to the budget and information on operations of the Guarantee Fund for external actions in the fi nancial statement (Article 30(1) and (2) of the Financial Regulation). The 2006 revision of the Financial Regulation added a new obligation relating to information on benefi ciaries of funds from the EC budget. This obligation already existed for benefi ciaries of funds managed by the institutions, either directly or indirectly (Articles 90 and 110 of the Financial Regulation). It has now been extended to all methods of man- aging the EC budget (Article 30(3) of the Financial Regulation).
9. The principle of sound fi nancial management
of the Community budget
The principle of sound fi nancial management is based on Article 274 of the EC Treaty, which provides that ‘the Commission shall implement the budget … on its own responsibility and within the limits of the appropri- ations, having regard to the principles of sound fi nancial management’. Article 27 of the Financial Regulation links this principle to the princi- ples of economy, effi ciency and effectiveness. The principle of economy requires that the resources used by the institution to engage in its activi- ties be made available in due time, in appropriate quantity and quality and at the best price. The principle of effi ciency is concerned with the best relationship between resources employed and results achieved. The prin- ciple of effectiveness is concerned with attaining the specifi c objectives set and achieving the intended results.
In practice, sound fi nancial management is based on setting verifi able objectives which can be monitored by measurable indicators, in order to switch from means-based management to results-oriented management. Allocation of resources to activities (using activity-based budgeting or ABB) makes it possible to integrate the cost of the activities and their objectives. Appropriate application of this principle requires that the planning, budgeting, management and reporting processes take place within a sin- gle common conceptual framework. Consequently, a common structure of activities and policy areas provides the framework for defi ning policy
priorities, allocating and managing resources in line with those priorities and reporting the results achieved. In this context, activity-based budget- ing is the budgetary component of a wider ‘activity-based management’ (ABM) approach. The main instruments of ABM are:
the annual policy strategy (APS), the purpose of which is to set out the —
policy priorities and the overall resources required to meet them; the preliminary draft budget (PDB), which includes Activity Statements —
as the main instrument for justifying the appropriations proposed by the Commission in terms of objectives and indicators (see Chapter 11); the annual management plans (AMPs), which are prepared by all Com- —
mission departments and include specifi c objectives and performance indicators for all activities with the resources (fi nancial and human), which are managed in line with predefi ned policy priorities; and the annual activity reports (AAR), with the declarations by Directors- —
General on the legality and regularity of operations and on achieve- ment of the objectives.
10. Evaluation of Community action
and sound fi nancial management
The concept of evaluation is fully integrated throughout the programme cycle and is understood as a continuous process which must cover the entire duration of a measure: from the preparation stage in order to defi ne the objectives and means, through allocation of resources in the budget to completion of the measure, when the results will be assessed and conclu- sions drawn on whether the measure should be renewed.
10.1. Legislative decisions
1) Ex ante evaluation, an essential requirement for sound and effi cient management of Community programmes
Ex-ante evaluation is a process that supports preparation of proposals for
new or renewed Community action. Its purpose is to gather information and carry out analyses which help to ensure the delivery of policy object-
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ives, the cost-effectiveness of the instruments used and the possibility of reliable evaluation at a later stage.
An ex ante evaluation should be seen as an analytical process, which can stretch over a long period of time. Different steps can be followed separately. An ex-ante exercise is not necessarily a one-off project, which merely produces a report, but rather a process consisting of separate phases and different pieces of analysis.
Article 2 of the Financial Regulation of December 1977, as amended by Council Regulation (EC, Euratom, ECSC) No 2333/95 of September 1995, already stipulated that ‘… mobilisation of Community resources must be preceded by an evaluation to ensure that the resultant benefi ts are in pro- portion to the resources applied’.
This requirement was maintained in the Financial Regulation adopted in 2002 which states that ex ante and ex post evaluations ‘shall be applied to all programmes and activities which entail signifi cant spending and evaluation results disseminated to spending, legislative and budgetary authorities’ (Article 27 of the Financial Regulation).
Ex ante evaluation must address:
the need to be met in the short or long term; —
the added value of Community involvement; —
the objectives to be achieved; —
the policy options available, including the risks associated with them; —
the results and impact expected, in particular economic, social and —
environmental impact, and the indicators and evaluation arrange- ments needed to measure them;
the most appropriate method of implementation for the preferred —
option(s);
the internal coherence of the proposed programme or activity and its —
the volume of appropriations, human resources and other administra- —
tive expenditure to be allocated with due regard for the cost-effective- ness principle;
the lessons learned from similar experiences in the past. —
In addition to this ex ante evaluation, each proposal for a programme or activities leading to budget expenditure must set out the monitoring, reporting and evaluation arrangements. These must take account of the responsibilities of each level of government that will be involved in imple- menting the proposed programme or activity. This will avoid any dupli- cation of evaluations, in particular in case of shared management with Member States.
2) Legislative fi nancial statement
At the Commission, proposals to be submitted to the legislative authority are assessed from both the fi nancial and resources point of view by means of a fi nancial statement, which is submitted to the budgetary author- ity with expenditure proposals. The same obligation is also imposed on Member States when they submit proposals in conformity with the rel- evant provisions of the EU Treaty and on any institution submitting an amendment to a proposal or initiative which may have appreciable impli- cations for the budget, including changes in the number of posts (Arti- cle 28 of the Financial Regulation).
The fi nancial statement is designed to provide information on both administrative and human resources and operational appropriations. A fi nancial statement is referred to as ‘budgetary’ when it accompanies the preliminary draft budget and as ‘legislative’ when it accompanies legisla- tive proposals with budgetary implications.
A legislative fi nancial statement analyses the reasons for the appropria- tions requested in two different ways. Firstly, it demonstrates the need for the Community action envisaged by clarifying its general objective and value added. It also gives an overall description of the logic behind the proposal in order to give reasons for the particular action to be fi nanced and demonstrate its cost-effectiveness in achieving the stated objectives. Secondly, the fi nancial statement provides output and costing informa- tion by specifying the predicted nature and volume of output and estab-
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lishing the unit cost. The purpose of this is to facilitate assessment of the proposed level of funding and of its impact on the expected results. In addition to these explanations, the legislative fi nancial statement will also provide information on the fraud prevention and protection meas- ures in place or planned.
10.2. Budget decisions
In the Commission, the budgetary decision-making process starts with the annual policy strategy (APS) decision and ends with the preliminary draft budget (PDB). The role of evaluation is to support this process by providing fact-based evidence on the performance and progress of the Community programmes.
The fi ndings of the individual evaluations provide relevant input for preparation of the annual policy strategy. In addition, the Commission decides annually on a limited number of strategic evaluations, designed specially to prepare its APS debate. These evaluations, which cut across a number of areas, are designed to supplement the results of the evaluations carried out by operational departments. They assess the impact of any policy that uses the resources of several departments.
10.3. Implementation of the budget
In order to provide relevant and timely information for subsequent deci- sion-making, all programmes or activities, including pilot projects and preparatory action, mobilising resources exceeding EUR 5 million will be subject to an interim and/or ex post evaluation of the human and fi nancial resources allocated and the results obtained (Article 27 of the Financial Regulation, as defi ned by the Implementing Rules).
In this context, mid-term and ex post evaluations need to be adapted both to decision-making needs and to the life-cycle and nature of each activity. However, as a general guideline, activities should be subject to an overall evaluation at least every six years. In the case of multiannual programmes or activities, at least one thorough evaluation during the life-cycle of the action is needed.