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Decision of the European Ombudsman closing his inquiry into complaint 53/2010/OV against the European Commission

Available languages: en
  • Case: 53/2010/OV
    Opened on 29 Jan 2010 - Decision on 28 Mar 2012, 28 Mar 2012
  • Institution(s) concerned: European Commission
  • Field(s) of law: Right of establishment and freedom to provide services
  • Types of maladministration alleged – (i) breach of, or (ii) breach of duties relating to: Fairness [Article 11 ECGAB]
  • Subject matter(s): Award of tenders or grants

The background to the complaint

1. The complaint concerns a dispute that arose in the context of a project funded by the European Commission. The complainant is a Belgian NGO that provides assistance to refugees. It obtained a grant from the European Commission for the 'VALEPRO[1] project'. The grant was made available in the framework of the Call for proposals for "Preparatory Actions B7-667 - Cooperation with Third Countries in the area of Migration" launched in 2003 by the then Directorate-General for Justice and Home Affairs (DG JHA) of the Commission.

2. The Grant Agreement was signed on 28 May 2004. It consisted of five parts: 1) the Special Conditions[2], 2) the General Conditions, 3) Annex I (Description of the action), 4) Annex II (Estimated Budget of the Action) and 5) Annex III (Technical implementation reports and financial statements to be submitted). The complainant was responsible for projects carried out in the Democratic Republic of Congo (DRC), whereas Solidarité-Eau (PS-Eau), another NGO, was responsible for projects to be set up in Benin, Cameroon, Guinea Conakry and Togo. The complainant and PS-Eau entered into partnership agreements with six local partners in these countries to provide local support and monitor the implementation of the ventures[3]. The complainant had two local partners in the DRC, one of which was Cedita-Entreprendre ("Cedita"), a company based in Kinshasa. Cedita was responsible for the selection, assistance, follow-up and evaluation of projects in the wider Kinshasa area.

3. The partnership agreements provided for transfers of specific amounts to PS-Eau and to the local partners. The partnership agreement between the complainant and PS-Eau provided for a transfer commitment of EUR 215 285.25. The partnership agreement between the complainant and Cedita provided for a transfer commitment of a maximum of EUR 54 000. The partnership agreements between PS-Eau and the four local partners provided for a transfer commitment of EUR 3 500 (plus a lump sum of EUR 2 000), together with a contribution in the amount of EUR 3 500 by the partner itself.

4. By e-mail of 16 September 2004, the complainant sent a document entitled "Pièces justificatifs dans le cadre du programme 'VALEPRO' concernant la subvention par activité" to two Commission officials, namely the Commission's contact person and his colleague. The complainant stated that it envisaged using this document as guidance for the submission of supporting documents for some expenditure under the Project, more particularly the expenditure for the individual projects initiated by migrants (heading D of the Budget Estimate: "Consumables and supplies"[4]). The complainant asked the Commission to examine its proposal and to give its advice. It stated that it was important for its partners to know whether the relevant documents would suffice for the final submission of costs. In his reply of the same day, the colleague of the Commission's contact person answered as follows: "This appears OK to me. For clarity I would ask that the name of the project is also mentioned as reference on each supporting document ...".

5. In a letter of 28 September 2004, the complainant sent the above-mentioned document to the Commission again. In its letter, it explicitly asked the Commission for its approval of this working method. By e-mail of 7 October 2004, the Commission, through its contact person, stated: "Hereby, and since you have taken into consideration the remark formulated at the time by my colleague ..., I give you our agreement ...".

6. On 1 December 2005, the complainant submitted its final financial report and cost statements to the Commission. These had been audited by an independent, external auditor appointed by the complainant. The external auditor did not identify any ineligible expenditure. Of the total expenditure of EUR 714 326 declared by the complainant, the Commission accepted EUR 708 863 as eligible expenditure (rejecting less then 1 %). The Commission therefore paid an amount of EUR 470 047.01, namely 66.31 % of the eligible expenditure.

7. By letter of 20 November 2007, the Commission informed the complainant that its Project had been selected for an ex-post audit in the framework of the 2007 annual audit programme of DG JHA. An on-the-spot audit by two auditors took place on 11 and 12 December 2007. The auditors communicated their preliminary findings to the complainant during the field work and at the closing meeting. The main finding was that there were insufficient or inadequate supporting documents for a significant amount of the expenditure claimed. These deficiencies concerned, in particular, the costs incurred by the local partners in the DRC: no supporting documents were available as regards these local partners. According to the auditors, although proof of the transfer of funds (through Western Union for example) from the complainant to the local partners was generally available, the transfer of funds to these partners did not in itself constitute sufficient proof of expenditure by the local partners and thus did not allow the auditors to verify the eligibility of the claimed expenses. The complainant strongly disagreed with the preliminary findings of the auditors. In doing so, it referred to the Commission's e-mail of 7 October 2004 whereby, according to the complainant, the Commission gave it its approval for the complainant's working method.

8. By letter of 3 September 2008, the Commission sent a copy of the draft audit report to the complainant and requested the complainant to react within 15 working days. Among other things, the auditors concluded that a significant portion of the costs claimed under the headings "Consumables and supplies", "Conferences and seminars" and "Other direct costs" were not justified by sufficient supporting documentation. According to the auditors, although proof of payment by the complainant (Western Union transfers, Moneytrans transfers or local transfers), as well as cash receipts, letters, monitoring visit reports, e-mails or internal notes were available, there were no supporting documents (such as invoices or receipts) for the expenses financed by these transfers of funds. The auditors were thus unable to check whether the expenditure was actually incurred and whether it was actually eligible. They also noted that some of the documents presented were unreliable.

9. The auditors further concluded that the majority of the transfers to Cedita were made through an intermediary organisation, Solidarité Socialiste in Kinshasa, and that no evidence of the transfers from Solidarité Socialiste to the local partners in the DRC was provided. The report contained a detailed overview of the ineligible expenditure. The auditors concluded that expenditure amounting to EUR 453 510.95 was eligible but that an amount of EUR 260 815.23 was ineligible. The Commission grant, which covered 66.31 % of eligible expenditure, thus amounted to EUR 300 723.11. Given that the Commission had already paid EUR 470 047.01 (through pre-financing payments of EUR 264 780.34 and EUR 185 346.24, and a balance payment of EUR 19 920.43), the draft audit report suggested that the amount of EUR 169 323.90 be recovered from the complainant.

10. By letter of 16 September 2008, the complainant informed the Commission that it disagreed with the conclusions of the draft audit report. The complainant argued that the difficult context of the region of the DRC where it worked had not sufficiently been taken into account by the auditors. It referred to the "explicit agreement" reached in October 2004 with the Commission on the procedure for the reporting of expenditure and stated that the auditors had not taken this agreement into account. The complainant insisted that it was impossible to treat administrative and financial procedures in a country like the DRC in the same way as corresponding procedures in Belgium. It therefore asked the Commission to accept to discuss the matter in a meeting. The complainant also requested a postponement of the deadline for submitting observations on the draft audit report to 15 October 2008. In an e-mail of 25 September 2008, the Commission pointed out that it did not see the need for a meeting, but that it agreed to the postponement of the deadline.

11. By letter of 15 October 2008, the complainant reacted to the conclusions of the draft audit report. It submitted a number of clarifications concerning the expenditure as well as copies of additional supporting documents. The complainant's comments concerned, among other things: (i) the rejection of the costs incurred by the local entrepreneurs in the DRC (under heading D: "Consumables and Supplies" of the Budget Estimate); and (ii) the rejection of EUR 50 800 of the costs of its local partner Cedita (under heading G: "other direct costs"). The complainant pointed out that the issue of lack of proof of the costs incurred in the DRC was not resolved. However, it argued that it had followed the agreement reached with the Commission's operational unit in October 2004. With regard to the costs of Cedita, it argued that, due to the bankruptcy of the Congolese Banque de Commerce et de Développement (BCD), funds had been transferred from the complainant to Cedita via the Belgian development organisation "Solidarité Socialiste". The complainant expressed the hope that the auditors would reconsider their position, taking into account the impact of the proposed financial correction on the complainant.

12. On 11 December 2008, the Commission sent a copy of the final audit report to the complainant. In this report, the auditors reiterated the general findings concerning the lack of supporting documents. However, on the basis of the additional documents provided by the complainant together with its letter of 15 October 2008, they concluded that the amount of ineligible costs should be reduced to EUR 231 402.33. The total eligible costs thus amounted to EUR 482 923.85. The Commission grant (which was 66.31 % of total eligible costs) thus amounted to EUR 320 226.80. The Commission noted that, as it had already paid EUR 470 047.01 to the complainant, EUR 149 820.21 should now be recovered from the complainant.

13. As regards the exchange of correspondence between the complainant and the Commission's operational unit in September and October 2004, the Commission stated that the Grant Agreement required that costs be identifiable and verifiable. The Grant Agreement also required that any amendment to the Grant Agreement be the subject of a written supplementary agreement (Article II.13.1) and that the supplementary agreement could not result in unequal treatment of applicants (Article II.13.2). The Commission stated that if the content of the exchange of correspondence were to constitute a derogation from Article II.14 of the General Conditions of the Grant Agreement (which provides that "[t]o be considered as eligible costs of the action, costs must satisfy the following general criteria: (...) they must be identifiable and verifiable"), a supplementary agreement should have been drawn up and signed by both parties. It stated that, in the opinion of the auditors, the acceptance of such derogation without a formal amendment of the Grant Agreement would entail the unequal treatment of the Commission's beneficiaries. The Commission noted that the auditors therefore maintained their finding as to the ineligibility of the costs concerned.

14. On 5 June 2009, the Commission sent a debit note to the complainant for the amount of EUR 149 820.21.

15. In various subsequent letters to the Commission, the complainant contested the recovery note. It argued that the "commonly agreed methodology" had raised legitimate expectations which should not be frustrated.

16. After unsuccessfully trying to convince the Commission to accept the documentation in its possession as sufficient proof of the relevant costs, the complainant lodged a complaint with the European Ombudsman. The amount of the debit note was finally recovered by the Commission in February 2011, when it decided to deduct this amount from another payment due to the complainant in the framework of another project.

The subject matter of the inquiry

17. The Ombudsman summarised the complainant's allegations as follows:

1) The Commission infringed the principle of legitimate expectations by failing to respect the methodology for the reporting of the costs of the VALEPRO project that had been agreed between the complainant and the Commission.

2) The Commission's decision to recover the amount of EUR 149 820.21 is disproportionate with regard to the overall positive results of the VALEPRO project, since it failed to take into account the complexity of the project in the DRC and the complainant's efforts to assure the proper use of Community funding.

The inquiry

18. The complaint was forwarded to the Commission for an opinion. On 19 February 2010, the complainant sent further information to the Ombudsman concerning the latest developments in the case. The Commission sent its opinion on 28 June 2010. It was forwarded to the complainant, which sent its observations on 31 August 2010.

19. On 20 October 2011, the Ombudsman made a proposal for a friendly solution to the Commission. The Commission sent its opinion on the proposal on 9 February 2012. The Ombudsman forwarded it to the complainant which, in a telephone conversation held on 2 March 2012, indicated that it was satisfied with the Commission's reaction to the friendly solution proposal.

The Ombudsman's analysis and conclusions

20. After carefully examining the arguments of the complainant and of the Commission, the Ombudsman considers that the first allegation (concerning the infringement of the principle of legitimate expectations) and the second allegation (concerning the disproportionate character of the recovery order) are intrinsically linked. It is therefore appropriate to examine both allegations together.

A. Alleged infringement of the principles of legitimate expectations and proportionality

Arguments presented to the Ombudsman

21. The complainant stated that the disputed costs concerned two types of expenditure, namely (i) the costs incurred by local entrepreneurs in the DRC and (ii) the costs of its partner Cedita.

22. As regards the costs incurred by local entrepreneurs in the DRC, the complainant stated that approximately EUR 150 000 (namely most of the costs under heading D: "Consumables and Supplies") of the rejected expenditure concerned the implementation of local projects in the DRC. It pointed out that in 2004 it anticipated difficulties in complying with EU administrative and financial standards when working in the DRC. Therefore, it asked for and received authorisation from the operational unit of the Commission to use an alternative form of project reporting when financial elements were lacking or insufficient. It argued that the alternative form of project reporting (follow-up visits, pictures) could prove that the activities were in fact carried out and could justify the expenditure. Second, the complainant stated that it entered into contracts with two independent local partners (one of which was Cedita) to carry out follow-up tasks, such as that of establishing the link between the allocated funds and project expenditure. Various reports were made by these local partners. The complainant was thus able, it argued, to ensure that the money was correctly spent. Finally, at the end of the project, the beneficiaries signed statements declaring that they had received the amounts indicated in the Grant Agreement. The signed statements indicated precisely how the funding was allocated. The complainant argued that it had informed the auditors of these procedures during their on-the-spot audit in December 2007 and in all communications afterwards. According to the complainant, the Commission could not go back on the agreement reached because this would breach the principle of legitimate expectations.

23. As regards the costs of Cedita, the complainant stated that Cedita was a Kinshasa-based organisation with considerable experience in assisting SMEs in their start-up phase. In its letter of 11 December 2008, the Commission had stated that EUR 50 800 of the payments made to Cedita were ineligible. According to the complainant, the Commission's letter confused, on the one hand, Cedita as a recipient of funds to be transmitted to the entrepreneurs and, on the other hand, Cedita as the final beneficiary of payments. On 9 April 2009, the complainant therefore asked for clarifications. The Commission replied on 18 June 2009. However, this answer still did not clearly distinguish between Cedita as an intermediary recipient of funds and Cedita as the final beneficiary of the transfers. The complainant stated that it understood that it was difficult for the auditors to follow the cash-flow trail since the bankruptcy of BCD obliged the complainant to channel funds through Solidarité Socialiste in order thereafter to have the funds transferred to Cedita. The complainant stressed, however, that it had provided copies of a release ("décharge") signed by Cedita, as well as of a number of cheques. Also, further documents detailed the work undertaken by Cedita.

24. The complainant further alleged that the Commission's decision to recover the amount of EUR 149 820.21 was disproportionate with regard to the overall positive results of the VALEPRO project, since it failed to take into account the complexity of the project in the DRC and the complainant's efforts to ensure the proper use of Community funding.

25. The complainant argued that the VALEPRO project, which provided support for 59 projects, had been very successful. Businesses, mostly in the agricultural field, were effectively set up. The success of the project was acclaimed in various subsequent evaluations, including an evaluation commissioned by DG JHA itself (carried out by the Centre for Strategy Services LLP in November 2007) on all the projects undertaken under budget line "B7-667 Cooperation with Third Countries in the Area of Migration". Among the general conclusions of this evaluation, the VALEPRO project received an individual positive evaluation. The complainant concluded that the auditors had applied an extremely rigid approach which failed to take into account the complexity of the project in the DRC and disregarded the efforts undertaken by the complainant to ensure the proper and qualitative use of EU funding.

26. In its opinion, the Commission argued that the complainant's obligations were clearly set out in the Grant Agreement, in particular in Article I.9.1 of the Special Conditions and in Article II.14 of the General Conditions. Article I.9.1 of the Special Conditions laid down the obligation to provide supporting documents for the costs claimed. However, the complainant did not fully comply with this obligation since it did not provide adequate and sufficient supporting documents.

27. The Commission further argued that, in its e-mail of 7 October 2004 sent in reply to the complainant's letter of 28 September 2004, although its contact person had "positively replied" to the use of the guidance document, the Commission had not "taken a position" on the issue whether the documents resulting from the implementation of the complainant's guidance note would be considered sufficient to prove the eligibility of the project expenditure. The need for an amendment to the Grant Agreement was not at issue. Therefore, no supplementary agreement was signed by the parties in this connection. The exchange of e-mails that took place on 16 September and 7 October 2004 did not constitute a formal amendment to the Grant Agreement. The Commission stated that an amendment to the Grant Agreement needed to be signed by both parties (as had been the case with an amendment signed in November 2005). The document in question had been presented by the complainant to the Commission as a purely internal guideline for the co-beneficiaries. Therefore, as regards the required supporting documents, the auditors had to base themselves exclusively on the requirements of the Grant Agreement.

28. The Commission also argued that, even if the methodology proposed in 2004 had been accepted, it would not be relevant as far as the Cedita expenditure is concerned. While the Commission never disputed the fact that Cedita delivered services, the cost of these services was not supported by adequate documentation and had therefore to be rejected for reasons of sound financial management. During the lengthy procedure and exchange of correspondence, the complainant was never able to provide accurate documentation concerning the payment of EUR 50 800 to Cedita. Therefore, it did not comply with Article I.9.1 of the Special Conditions. Moreover, in a letter of 12 October 2009 to the Commission, the complainant itself acknowledged that the costs relating to the services of Cedita were not supported by adequate documentation, but only by six-monthly overviews of days worked on the project. Furthermore, the partnership agreement signed between the complainant and Cedita stipulated the need for a detailed justification of each item of the costs incurred as well as a certification by an accountant. Therefore, even supposing that the methodology proposed in 2004 was accepted by the Commission, it would have to be taken into account that this methodology was even not fully respected by the complainant itself. Also, this methodology concerned only part of the complainant's expenditure. The Commission finally mentioned that, in its letter of 12 October 2009, the complainant had provided two samples of files for expenditure incurred by the local entrepreneurs. In that letter, the complainant had acknowledged that one of these files was not compliant with its own methodology. The Commission concluded that it therefore had to maintain its position that the expenditure incurred by the local entrepreneurs was not sufficiently documented. The Commission concluded that it had acted fairly and that its decision to issue a recovery order was well-founded. It had also given sufficient time and guidance to the complainant in order to provide additional documentation.

29. The Commission recalled that the amount of EUR 149 820.21 corresponded strictly to the costs that could not be considered eligible, given that these costs were not substantiated by adequate supporting documents. This did not include, nor did it involve, any sanction. The final amount of the grant was thus determined on the basis of the eligible costs actually incurred. The Commission therefore did not consider the amount of the recovery order to be disproportionate.

30. In its observations, the complainant again referred to the methodology which it had submitted to the Commission on 28 September 2004. It argued that it was not its role to advise the Commission on whether or not the agreement reached should have been formalised in an amendment to the Grant Agreement. The complainant submitted that a positive reaction from two Commission officials, one of them being the appointed contact person, committed the Commission in this respect. As regards the expenditure in the DRC, the proposed methodology clearly stated "copies des factures locales (si disponible)".[5] It stated that the reason this methodology was proposed and agreed upon by both parties was that it turned out to be difficult to obtain, in the DRC, invoices or bills for local expenditure (let alone invoices that comply fully with EU administrative standards). The complainant argued that the success of the projects of the local entrepreneurs would not have been the same if it had not tried to adapt the administrative implementation of the project to the situation prevailing in the DRC.

31. The complainant maintained, in sum, that the Commission had refused to assess the reports of the local entrepreneurs in accordance with the guidance note on which both parties had agreed.

32. As regards the costs of Cedita, the complainant stated that the partnership agreement it had with this firm was poorly structured, given that it set out two contradictory working methods. The Commission rightly observed that the complainant was unable to recover the supporting documents (invoices) from Cedita and was unable to obtain certified documents from an external consultant. This was unfortunate. However, the complainant insisted that it did have a large amount of documents, e-mails and other evidence relating to the work done by Cedita, as well as periodic reviews of days worked on the project. The complainant thus argued that the rejection of EUR 50 800 of the costs of Cedita was disproportionate.

33. In light of the above, the complainant maintained its view that the Commission had breached its legitimate expectations.

34. The complainant also argued that doubts were never raised as to whether or not it had spent the money on the project. The Commission's strict interpretation of the rules therefore had to be considered as a "sanction" on the complainant.

35. The complainant also argued that the Commission's rules on the eligibility of the costs were not always clear and could be subject to interpretation on certain occasions. The complainant argued that the Commission's approach reflected a "zero-risk of financial error" attitude. This attitude resulted in a huge financial and administrative burden on the complainant as a beneficiary. The complainant stated that it fully agreed with a zero-tolerance policy towards fraud. It stressed, however, that no fraud, irregular use or misappropriation of funds was found in the VALEPRO project. Also, previous audits had proven the effectiveness, efficiency and economy of the Project.

The Ombudsman's preliminary assessment leading to a friendly solution

36. The Ombudsman noted that the Commission's position was based on its view that it retained a contractual right to demand from the complainant specific proof of expenditure, principally invoices from the complainant's local partners in the DRC. The Ombudsman noted that the concept of "legitimate expectations", within its strict legal meaning, relates to the obligation of an administration to act consistently with precise, unconditional and consistent information that emanates from authorised and reliable sources within the administration[6]. The Ombudsman agreed that if it were convincingly argued by the Commission that it retained a specific contractual right to require the complainant to provide the Commission with certain defined documentation in order to prove expenditure (that is, invoices from local partners in the DRC), it could not, at the same time, be convincingly argued that there existed "unconditional and consistent assurances" from the Commission that the Commission would act in another way. In sum, it is not possible for a "legitimate expectation" which would run counter to that contractual right to arise.

37. Article I.9.1 of the Special Conditions of the Grant Agreement provides that:

"[w]ith reference to Article II.14.1, indent 5, expenses corresponding to actual payments made by the Beneficiary or its partner organisations as listed in Annex I, and supported by invoices with a proof of payment shall be considered eligible. Expenses incurred by the partner organisations shall be deemed to be eligible provided that they have been re-invoiced to the Beneficiary and appear in the Beneficiary's accounts. Moreover the Beneficiary shall ensure the Commission the availability of supporting documents."[7]

38. Thus, as originally drafted, the Grant Agreement included a requirement to provide invoices proving costs incurred by the beneficiary and its partner organisations.

39. The Ombudsman noted, however, that if the Commission were found to have waived its contractual right to require the said documentation from the complainant, the conditions for the existence of "legitimate expectations" could certainly be fulfilled.

40. As such, a key issue in the present inquiry was whether the Commission had in fact waived its contractual right to the said documentation.

41. The Ombudsman has consistently stated[8] that the scope of the review he can carry out in cases concerning the interpretation of contractual obligations entered into by an institution is necessarily limited. In particular, the Ombudsman is of the view that he should not seek to determine whether there has been a breach of contract by either party. This question could be dealt with effectively only by a court of competent jurisdiction, which would have the possibility to hear the arguments of the parties concerning the relevant national law and to evaluate conflicting evidence on any disputed issues of fact. The Ombudsman therefore takes the view that, in cases concerning contractual disputes, it is justified to limit his inquiries to an examination of whether the institution has provided him with a coherent and reasonable account of the legal basis for its actions and of the reasons for its belief that its understanding of the contractual position is justified. If that it the case, the Ombudsman will conclude that the inquiry has not revealed an instance of maladministration. This conclusion will not affect the right of the parties to have their contractual dispute examined and authoritatively settled by a court of competent jurisdiction.

42. As regards the possible amendment of the contract, Article II.13.1 of the General Conditions provides that:

"1. Any amendment to the grant conditions must be the subject of a written supplementary agreement. No oral agreement may bind the parties to this effect"[9]".

43. The Ombudsmen noted that Article II.13.1 of the General Conditions does not impose any requirement as regards the "form" of an amendment apart from the requirement that it be in writing. In particular, Article II.13.1 of the General Conditions does not impose any requirement that the specific form of an amendment be identical to the form of the original Grant Agreement or of any other amendment. It was clear that the complainant submitted to the Commission a written document proposing an alternative system for the reporting of costs and that the Commission's contact person indicated the Commission's agreement to that alternative system in writing. By letter of 28 September 2004, the complainant sent to the Commission's contact person a letter which included an enclosure in which the alternative system was described. In its letter, the complainant expressly asked for the Commission's "approval for our working method"[10]. In his reply by e-mail of 7 October 2004, the Commission's contact person[11] stated the following: "Hereby, and since you have taken into consideration the remark formulated at the time by my colleague ..., I give you our agreement ...".[12] The Ombudsman could not understand this statement as being anything other than an approval of the new working method[13]. The Ombudsman also noted that the complainant could hardly have been expected to question further the clear written communication from the Commission's contact person (who was the person indicated in Article I.7 of the Special Conditions). In sum, the complainant could not have been expected to write again to any other person within the Commission on the same subject after obtaining express reassurances in writing from the designated contact person. Indeed, it could not have communicated with any other person in the Commission without infringing Article I.7 of the Special Conditions. Finally, the Ombudsman noted that the complainant was entitled to understand that the Commission official concerned had obtained all the necessary internal approvals when he stated, in writing, "I give you our agreement"[14].

44. It was thus at least arguable[15] that the Commission agreed to waive the relevant parts of the Grant Agreement with a view to allowing the complainant to use the alternative cost reporting system. The Ombudsman's provisional conclusion was therefore that the Commission failed to give a coherent and reasonable account of the legal basis for its actions and of the reasons for its belief that its understanding of the contractual position was justified. Further, the Ombudsman found that by requiring a strict adherence to the provisions of the Grant Agreement, without taking due account of the actions of its contact person, the Commission failed to act consistently. The Ombudsman therefore made the proposal for a friendly solution set out below.

45. In order to define the scope of his proposal for a friendly solution, the Ombudsman considered it necessary to comment on the Commission's arguments that the complainant did not fully comply with the alternative system of reporting costs. The Ombudsman noted that the complainant's objections to the recovery order concerned the rejection by the Commission of two types of costs. The first costs were costs of the local partner Cedita. These fell under heading G: "Other direct costs" of the Budget Estimate. The auditors rejected EUR 50 800 of these costs. The second costs were costs incurred by local entrepreneurs in the DRC, which fell under heading D: "Consumables and supplies" of the Budget Estimate. The auditors concluded in their final report that EUR 150 065.69 of these costs were ineligible.

46. As regards the costs of Cedita (EUR 50 800), the Ombudsman noted that, as explained by the complainant itself in its e-mail of 16 September 2004 to the Commission, the alternative cost reporting system concerned the expenditure for the individual projects initiated by migrants (under heading D of the Budget Estimate: "Consumables and supplies"). The costs of Cedita fell under heading G: "Other direct costs" of the Budget Estimate. The alternative system suggested by the complainant could not therefore be applied to the costs of Cedita. It would thus appear that the original provisions of the Grant Agreement continued to apply to the above-mentioned costs.

47. In its observations on the Commission's opinion, the complainant itself admitted that the Commission had rightly observed that the complainant had not been able to recover from Cedita the relevant justifying documents (invoices) mentioned in Article 2 of the partnership agreement or to obtain certified documents from an external accountant. It thus appeared that the Commission's decision to declare ineligible the costs of Cedita, and to proceed with the corresponding recovery, was justified and was not disproportionate.

48. As regards the costs incurred by the local entrepreneurs in the DRC, the Ombudsman noted that the Commission argued that the alternative cost reporting system proposed by the complainant had not been fully respected by the complainant itself as regards costs incurred by the local entrepreneurs in the DRC. This wording seemed to imply that the reporting of the costs incurred by at least some of the local entrepreneurs in the DRC did comply with the alternative cost reporting system proposed to the Commission.

49. The friendly solution proposal set out below therefore concerned the costs incurred by the local entrepreneurs which were reported in accordance with the alternative cost reporting system proposed to the Commission. In sum, the Ombudsman proposed to the Commission that it review the file carefully with a view to determining, with regard to the costs incurred by the local entrepreneurs, whether and to what extent the complainant complied with the alternative cost reporting system. The Ombudsman further stated that in light of that review and of the fact that the Commission has already set off the entire amount of the recovery order with another payment due to the complainant, the Commission could consider paying the complainant the amount corresponding to the costs incurred by the local entrepreneurs which were reported by the complainant in accordance with the alternative cost reporting system. Payment by the Commission would be effected without prejudice to its rights to defend its contractual position before a competent court and without any admission of fault on its part.

50. On the basis of the above considerations, the Ombudsman made the following friendly solution proposal to the Commission: "Taking into account the Ombudsman's findings, the Commission could review the file carefully with a view to determining, with regard to the costs incurred by the local entrepreneurs, whether and to what extent the complainant has complied with the alternative means of justifying expenditure and should on that basis consider paying the complainant the corresponding amount".

The arguments presented to the Ombudsman after his friendly solution proposal

51. In its opinion, the Commission stated that it did not consider the exchanges of e-mails with the complainant to be a modification of the Grant Agreement allowing the complainant to decrease the level of proof required for the costs charged to the Project to be considered eligible. In addition, the alternative method proposed by the complainant in 2004 only applied to costs incurred by the local entrepreneurs in the DRC and not to those incurred by Cedita.

52. However, on reflection, and on the basis of the Ombudsman's analysis, the Commission stated that it could agree that the e-mail exchange of 2004 may have created a legitimate expectation that the "alternative" documentation proposed by the complainant would be accepted by the Commission. Therefore, the Commission declared that for those projects where this method was respected by the complainant, the Commission is ready to accept the corresponding costs as eligible. The Commission thus agrees with the friendly solution proposed by the Ombudsman. It will finalise its analysis of the information provided by the complainant and will communicate to the complainant the amount considered eligible. On this basis, the Commission will make an additional payment.

53. In a telephone conversation held with the Ombudsman's Office on 2 March 2012, the complainant indicated that it was satisfied with the Commission's reaction to the friendly solution proposal and that a friendly solution has thus been agreed.

The Ombudsman's assessment after his friendly solution proposal

54. The Ombudsman welcomes the fact that a friendly solution has been achieved between the complainant and the Commission. The Ombudsman would like to commend the Commission for its willingness to examine the file from a different perspective and to review its analysis on the basis of the Ombudsman's findings. The Commission's acceptance of the friendly solution proposal in the present case will undoubtedly also help it to improve its practices in future. The Ombudsman trusts that the Commission will finalise its analysis of the information provided by the complainant and will communicate to it the amount considered eligible in order to then make the corresponding additional payment.

B. Conclusion

On the basis of his inquiry into this complaint, the Ombudsman closes it with the following conclusion:

A friendly solution has been agreed between the Commission and the complainant.

The complainant and the Commission will be informed of this decision.

 

P. Nikiforos Diamandouros

Done in Strasbourg on 28 March 2012


[1] The full title of the VALEPRO project was "Valorisation de l'épargne des migrants résidant en France et en Belgique par l'appui à des activités productives au Bénin, au Cameroun, en Guinée Conakry, en République Démocratique du Congo et au Togo". The VALEPRO project aimed at supporting micro-business development by migrant entrepreneurs in the Democratic Republic of Congo, Benin, Cameroon, Guinea Conakry and Togo. Migrants of these countries residing in Belgium and France received advice and training on how to set up realistic business plans for a micro-business in their country of origin. They were awarded a sum to invest in the micro-business on condition that they themselves invested an equal sum. In total, 59 projets were subsidised.

[2] Article I.3 of the Special Conditions mentioned that the total cost of the action was EUR 798 660.68 and that the Commission would contribute a maximum of EUR 529 560.69, namely 66.31% of the estimated total cost of the action. An amendment to the Grant Agreement, signed on 15 November 2005, replaced these amounts by EUR 759 250.50 and EUR 503 459 respectively. The amendment also prolonged the initial 18-month duration of the project, which had started on 1 January 2004, by three months, that is until 30 September 2005.

[3] In total, seven partnership agreements were signed, namely one between the complainant and PS-Eau, two between the complainant and its two local partners in the DRC, and four between PS-Eau and its four other local partners.

[4] The total expenditure amounted to EUR 329 000.

[5] Emphasis added by the complainant.

[6] The obligation to act consistently is also mentioned in Article 10(1) of the European Code of Good Administrative Behaviour, which states that "[t]he official shall be consistent in his own administrative behaviour as well as with the administrative action of the Institution ...". The Commission's own Code of Good Administrative Behaviour, annexed to its Rules of Procedure, lays dawn the same obligation to act consistently, Rules of procedure of the Commission (C(2000) 3614), OJ 2000 L 308, p 26, available at: http://ec.europa.eu/civil_society/code/general_en.htm

[7] Emphasis added.

[8] See, for instance, the Ombudsman's decisions in complaint 3249/2008/(BEH)KM and in complaint 1976/2009/BEH.

[9] Emphasis added.

[10] The original Dutch version reads as follows: "Daarom willen wij uw goedkeuring vragen voor onze werkwijze".

[11] The Ombudsman noted that the complainant sent its letter to the person indicated in Article I.7 of the Special Conditions as the person to whom any communication in connection with the Grant Agreement had to be sent.

[12] The original Dutch version reads as follows: "Bij deze, en vermits U rekening hebt gehouden met de opmerking destijds geformuleerd door mijn collega ..., geef ik U hierbij ons akkoord".

[13] Given the response from the Commission's contact person, the Ombudsman was surprised by the statement in the Commission's opinion that although its contact person had "replied positively" to the use of the guidance note, no position had been taken on the issue of whether or not the documents resulting from the implementation of the guidance note would be considered sufficient at the moment of the financial reporting. The statement in the Commission's opinion was clearly not an accurate reflection of what actually occurred.

[14] Emphasis added.

[15] The Court of Justice of the EU has dismissed claims relating to waivers or modifications of contractual rights where no concrete evidence of that waiver or modification was adduced (see Case T-500/04, Commission v Informations-Industrie Consulting GmbH [2007] ECR II-1443, paragraph 64). However, in the present case, e-mails and letters containing precise statements and reassurances have been produced.

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