European Ombudsman
This complaint was treated as confidential. This document has therefore been anonymised.
Related documents
1. The relevant national European Consumers Centre (NECC) is part of the European Consumers Centres Network. Its specific aim is to inform consumers in the relevant country about their rights and to provide assistance on cross-border issues, including disputes. The NECC is subsidised by the relevant national Government and by the Commission. In 2005, it had two seats: one, shared with its national hosting body, in one city; and the second one, which was independent from the hosting body, in the capital of the country.
2. The complainant is a non-profit consumer organisation. In 2005, it was the national hosting body of the NECC, which meant that it provided the NECC with some staff management and accounting services ('the NECC project'.) These services were covered by a grant, provided to the complainant by the Commission on the basis of Grant Agreement number X dated Y December 2004. The Grant Agreement ran from 1 January to 31 December 2005 and could be renewed.
3. On 31 November and 1 December 2005, the Commission carried out an urgent ad hoc audit on the expenditure/management of the above grant at the premises of the complainant and of the NECC in one city, as well as at NECC's premises in the capital. Two of the four auditors were Commission officials dealing with the European Consumers Centres Network. The audit was initiated following a complaint by the then Director of the NECC (Ms A.[1]) who, at the time, was also an employee of the complainant.
4. On 20 December 2005, the Commission informed the relevant national authorities by letter of the audit's preliminary results and concluded that the complainant could no longer continue to be the hosting body of the NECC. It therefore asked the relevant national authorities to designate another body to carry out this task.
5. Subsequently, the relevant national Ministry informed the complainant of the Commission's above decision to replace it as the hosting body.
6. On 6 February 2006, the Commission sent the final audit report to the complainant and asked for its comments[2]. According to the report, the complainant was presumed to have infringed the terms of the Grant Agreement by claiming (a) eligibility for expenditure that could not be considered as 'eligible' and (b) the payment of sums which were not due.
7. On 15 March 2006, the complainant sent its comments to the Commission. It also sent its final and technical reports on the implementation of the NECC project covered by the Grant.
8. On 29 March 2006, the Commission asked the complainant to clarify as soon as possible certain specific points relating to the technical report. The complainant did this accordingly.
9. On 13 June 2006, after the complainant had sent its clarifications, the Commission informed it that: (a) on the basis of the auditors' findings, it had decided to suspend the payment representing the balance of the Grant Agreement; (b) it had to carry out further checks in order to establish the exact amount of the complainant's financial entitlement; and (c) it would inform the complainant of the results of its checks. In reply, the complainant asked for partial payment of those sums due under the Grant Agreement which were not disputed by the auditors. The Commission refused.
10. On 4 and 5 October 2006, OLAF carried out an inspection at the complainant's premises.
11. In January 2007, the complainant turned to the European Ombudsman.
12. In the course of the inquiry, the complainant exchanged a number of letters[3] with the Commission concerning the issues to which the inquiry relates. The Ombudsman took into consideration this correspondence in his inquiry.
13. In his original complaint, the complainant made the following seven allegations:
(1) the Commission failed to ensure the complainant's rights of defence and breached the principle of sound administration by informing the relevant national authorities, prior to the formal conclusion of the audit and prior to requesting the complainant to give its views on the conclusions of the audit, that the complainant could no longer continue to be a hosting body of NECC.
(2) the Commission provided inadequate reasons for the suspension of the payment representing the balance of the Grant ('the payment');
(3) the Commission failed to act consistently when asking the complainant for clarification concerning its report (on which the payment depended), and subsequently by informing it that, on the basis of the audit results that were carried out some months before the clarification request, the payment could not be made;
(4) the Commission failed to inform it about the final assessment of its file, notwithstanding its declaration that it would do so;
(5) the Commission acted in a way that was not transparent by entrusting the responsibility for the audit to an official who had a privileged relationship with the author of the accusations against the complainant;
(6) the Commission misused its powers by allowing an official to disclose the contents of the Commission's letter to the relevant national authorities to the person making the accusations against the complainant, and
(7) in light of the above-mentioned privileged relationship between the official carrying out the audit and the person making the accusations against the complainant, the results of the audit were not objective.
14. In his original complaint, the complainant also claimed that the Commission should: (a) withdraw the results of the audit; (b) pay the complainant the balance of the payment resulting from the Grant, including interest for delays calculated as from 6 May 2006; and (c) re-establish the complainant's status as a hosting body of the NECC.
15. Moreover, in its observations on the Commission's opinion dated 30 January 2008, the complainant invoked financial and moral damages and asked for compensation. Given that, in its letter sent directly to the Commission on 29 January 2008, the complainant approached the Commission about the above damages and the Commission replied to that letter on 25 February 2008, the Ombudsman decided to deal with these additional claims in the present decision.
16. In the course of the inquiry, the complainant sent the Ombudsman a number of letters exchanged between itself and OLAF relating, in substance, to (a) the results of OLAF's investigation on the complainant's performance under the Grant Agreement and (b) access to documents. Given that the present inquiry concerns only the complaint against the Commission and not OLAF, the above documents were not taken into consideration by the Ombudsman. The complainant remains however free to submit a separate complaint to the Ombudsman against OLAF after having made the relevant prior administrative approaches to it.
17. On 20 February 2007, the Ombudsman sent the complaint to the Commission for an opinion. On 31 May 2007, the Commission asked for an extension to the deadline for its response. On 20 September 2007, the Commission submitted the opinion in English and, on 15 October 2007 its translation into French. The translation was forwarded to the complainant for observations, which it sent on 30 January 2008.
18. On 10 July 2008, the Ombudsman sent the Commission a proposal for a friendly solution in English and a copy of this proposal to the complainant. On 1 August 2008, the Ombudsman forwarded to the complainant the translation of the proposal into French. After requesting three extensions to the deadline to submit its reply to the Ombudsman's proposal, the Commission, on 4 December 2008, sent its reply in English. On 21 January 2009, it sent the French translation of that reply, which was forwarded to the complaint for observations. On 25 March 2009, the complainant sent its observations.
Part I
Allegations and claim on which the Ombudsman made two proposals for a friendly solution
Arguments presented to the Ombudsman
19. The complainant alleged that the Commission failed to ensure the complainant's rights of defence and breached the principle of sound administration when, prior to the formal conclusion of the audit and prior to requesting the complainant to give its views on the results of the audit, it informed the relevant national authorities that the complainant could no longer continue to be the hosting body of the NECC (first allegation).
20 In support of this allegation, the complainant argued that, on 20 December 2005, the Commission: (a) informed the relevant national Ministry by letter ('the Letter') that the audit results were critical of the complainant; and (b) confirmed that the complainant could no longer be the hosting body. However, it was only on 7 February 2006 that the Commission informed the complainant of the audit results and asked for its comments on them, which the complainant sent on 15 March 2006.
21. The complainant also alleged that the Commission misused its powers by allowing one of its officials to disclose the content of the Letter to Ms A., the person who made the accusation against the complainant to the Commission, which resulted in the audit in question (sixth allegation).
22. In support of the sixth allegation, the complainant submitted a copy of an e-mail dated 19 December 2005, which was addressed by Ms A. to a third person. In that e-mail, Ms A. referred to a section of the Letter. In doing so, she stated that the Commission had declared that it no longer wished to work with the complainant as a hosting body. It had therefore asked the relevant national Ministry to designate a new hosting body. In addition, she mentioned that the official in question informed her about the Letter during a telephone conversation of the same day, that is, 19 December 2005.
23. In its opinion on the complaint, the Commission stated that "due to time constraints of the Commission's financial calendar and so that the financing for the year 2006 would not be delayed by the need to find another host entity in Agreement with the relevant national government it was essential that the relevant national authorities be informed of the Commission's reservations regarding [the complainant's] eligibility before the end of the year".
For this reason, the Commission sent the Letter to the relevant national authorities on 20 December 2005.
24. The Commission added that it was crucial not to let problems it had with one of its beneficiaries hamper the effectiveness of its actions to enhance consumer protection through the NECC. Therefore, in order not to interrupt the financing of the NECC, it had: (a) assessed the proper implementation of the Grant Agreement; and (b) sought, in agreement with the relevant national authorities, a new host structure for the NECC.
25. The Commission concluded that the complainant could defend its rights because it had the opportunity to make comments in writing regarding the audit's findings. These comments were taken into consideration when deciding on the balance payment for 2005.
26. As regards the information provided by a Commission official to Ms A. during a telephone conversation, the Commission pointed out that: (a) the disclosure was in accordance with "the normal principles of openness" and no confidential information was disclosed; (b) "Mrs A. had been indicated by the relevant national authorities as the prospective head of the NECC within the new host entity and she had started preparatory work to take up that function" and therefore the phone call "merely allowed her to confirm that indeed the Commission had signalled its desire to have another host entity"; and (c) the disclosure in question did not affect the complainant's position.
The Ombudsman's preliminary assessment leading to a proposal for a friendly solution
27. The Ombudsman first observed that, on 30 November and 1 December 2005, the Commission carried out an internal audit at the complainant's premises in one city and at NECC's premises in the capital to verify the allegations made against the complainant by the then Director of the NECC, Ms A.
28. However, the complainant only became aware of the auditors' final conclusions in February 2006, when a report on the audit was sent to it with an invitation to provide comments.
29. It follows that, the Commission, in the Letter, could only refer to the auditors' preliminary conclusions when stating that, on the basis of these conclusions, the complainant could no longer continue to be the hosting body of the NECC and that the relevant national authorities should therefore designate another body to host the NECC. The Commission even took the view in its opinion that "the audit's preliminary conclusions ... confirmed the Commission's services in their determination to request from the relevant national authorities the designation of a new hosting body instead of the complainant" (emphasis added).
30. It cannot be excluded that the final conclusions could have been different from the preliminary ones. Therefore, it is not unreasonable to consider that the preliminary conclusions, to which the Commission referred in the Letter and in its opinion, could do no more than illustrate a suspicion vis-à-vis the complainant. The fact that the Commission expressed such a suspicion in the Letter, before the auditors had formulated their final conclusions, might have had negative consequences for the complainant's individual position. The Ombudsman noted in this respect that the complainant referred to the moral damage it had incurred as a result of the Letter.
31. Even if, after having analysed the final audit report and the Letter[4], the Ombudsman were to conclude that the content of the Letter did not substantially differ from the final conclusions in the audit report, he still considered that the complainant should not have been prejudged before the auditors had issued their final report. In this respect, the Ombudsman referred by analogy to the case-law of the Community court on competition law[5], as well as to the recent opinion of the Advocate General in Joined Cases C-55/07 and C-56/07 concerning social policy. The above case-law and the recent opinion require, in substance, that the same general principles (including the presumption of innocence) are applicable to both criminal law and penalties implemented by the administrative authorities[6].
32. The Ombudsman was therefore concerned that the Commission, basing itself only on its auditors' preliminary conclusions, had already chosen on 20 December 2005 to send the relevant national authorities the Letter, which stated categorically that it could not accept the complainant as the hosting body for the NECC in the future and asked these authorities to designate another hosting body instead.
33. The Commission's statement in its opinion that the audit procedure gave the complainant the possibility to comment in writing on the auditors' findings is not relevant in the above context, since the Commission was referring to the complainant's comments on the auditors' final findings, which the complainant could submit only after 6 February 2006. Before sending the Letter, the complainant had no opportunity to defend itself in any form, whether written or oral.
34. The Commission appeared to justify the above on the following grounds.
First, it was free to "shar[e] its views as to the aptitude of [the complainant] to receive further Community funding as host organisation for the [N]ECC with the relevant national authorities, which co-fund the project together with the Commission."
Second, it needed to plan its budgetary expenditure for the coming year 2006 and therefore had to address the relevant national authorities before the end of 2005 to ensure the continuity of the financing provided to the NECC. The Commission appeared therefore to refer to the principle of sound management.
35. The Ombudsman could not accept such a justification.
As regards the Commission's first ground, the Commission argued that its categorical statement in the Letter that it could not accept the complainant as a hosting body for the NECC in the future, and its request for these authorities to designate another hosting body instead[7] merely amounted to "sharing [its] views". The Ombudsman could not agree with the Commission's interpretation and found that its communication did certainly much more than just share its views.
36. As regards the Commission's second ground, the Ombudsman considered that such an objective, no matter how reasonable it may be, cannot be attained by undermining the complainant's rights of defence in any way. Those rights, which derive from the right to a fair hearing guaranteed by Article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, constitute a fundamental right forming part of the general principles of law on which the Union is founded (Article 6 (1) and (2) of the TEU).
37. In light of the above, the Ombudsman considered that the Commission's sending of the Letter before (a) the auditors had issued their final conclusions and (b) before hearing the complainant could be an instance of maladministration.
38. Moreover, the Ombudsman could not accept the Commission's explanation concerning the telephone call between Ms A. and the Commission official. First, in accordance with what was stated in paragraph 35 above, the complainant should have been the very first to receive the information about the Commission's decision affecting its position as hosting body. No one else should have known about it. The Ombudsman considered therefore that the telephone call in question could constitute a second instance of maladministration.
39. In this respect, the Ombudsman noted that, in its letter to the Commission dated 29 January 2008 and in its observations of the next day, the complainant sought moral and financial damages relating to the present allegation. It stated that if the Commission had informed it earlier of the decision not to accept it any longer as a hosting body, it could have reduced its costs resulting from the closure of the NECC, which amounted to EUR 43 000. In its reply of 25 February 2008, the Commission did not refer to the above damages.
40. The complainant did not, however, substantiate in its observations, how it had arrived at the above amount when calculating its losses. It also did not provide any further explanations concerning its claimed moral damages.
41. Nevertheless, the Ombudsman considered that, in light of his preliminary conclusion that there could be two instances of maladministration in the present case regarding the first and sixth allegations, the Commission and the complainant could work together to find appropriate solutions in the context of their direct contacts and agree on the exact amount of compensation for the complainant's claimed losses resulting from the above instances of maladministration. The Ombudsman therefore made the following (first) proposal for a friendly solution:
The Commission could consider paying the complainant adequate compensation for the losses it claims resulted from the fact that it was informed too late that the Commission would, as from 2006, no longer accept it as the hosting body for the NECC in the future.
The arguments presented to the Ombudsman after his friendly solution proposal
42. The Commission reiterated that the complainant's rights of defence were respected during the audit process. It also clarified that the complainant was interviewed during the audit and that his comments were taken into consideration already in the auditors' preliminary findings. Moreover, the complainant was given the possibility to submit its comments on the auditors' final findings, and did so on 15 March 2006. The latter comments were taken into consideration when deciding on the complainant's final payment relating to the Grant for 2005.
43. The Commission argued that it was not necessary to give the complainant an opportunity to express his views before the Letter was sent to the relevant national authorities. First, the Letter was sent in the context of bilateral relations between the Commission and the Member State authorities as co-financing body of the NECC. The Member State decides itself whom to designate as a national hosting body and the relevant national authorities should have been informed (albeit at the last moment of 2005) about the complainant's situation so that they could decide about an alternative hosting body for 2006. Second, the relevant national authorities were already aware, before the audit took place, of the complainant's difficulties in the management of the NECC and of the problem relating to the independence of the NECC's Director.
44. The Commission pointed out that sound financial management required it to suspend the grant pending the outcome of the audit, the initial findings of which had raised concerns regarding the complainant. The Commission admitted however that the Letter was not drafted in a sufficiently precise manner because it was not appropriate to suggest in it that the above suspension was permanent. The Letter should have only referred to the suspension in relation to 2006,
45. As regards the telephone conversation, the Commission emphasised that Ms A. was, at that time, already indicated by the relevant national authorities as the prospective head of the NECC within the new hosting body. The purpose of the telephone call was solely to seek confirmation of that information. The Commission accepted, however, that it would have been better to have referred to "a person telephoning for information"[8] concerning the choice of hosting body to the relevant national authorities.
46. In light of the above, the Commission found it adequate to convey its above position to the complainant directly in a separate letter of 28 November 2008 (a copy of which was attached to the Commission's reply).
47. As regard the Ombudsman's first proposal for a friendly solution, namely, that financial compensation could be paid to the complainant, the Commission referred to the established case-law on the Community's non-contractual liability for damage caused to individuals by a breach of Community law attributable to a Community institution or body, in accordance with Article 288(2) EC. According to this case-law, the Community may incur non- contractual liability if all of the following three elements are present: (a) unlawful conduct on the part of the institution concerned (the breach of legal provision must be sufficiently serious and that provision must confer rights on the individuals); (b) proven damage, and (c) the existence of a causal connection between that conduct and the damage in question. As noted by the Ombudsman, the complainant had not provided evidence of the financial and moral damage allegedly incurred. In addition, it ought to have been aware, as a result of its contacts with the relevant national authorities which took place before and after it submitted its application for the 2006 grant (the deadline for applications was 21 October 2005 and no decision was taken before 20 December 2005), that these authorities did not intend to designate it as the hosting body for the NECC in 2006.
48. In light of the above, the Commission refused to pay financial compensation to the complainant. It held that it would not be consistent with the principle of sound financial management to provide monetary compensation to a complainant who knew that it was under investigation for serious mismanagement. That mismanagement was subsequently confirmed in the auditors' final conclusions and by OLAF.
The Ombudsman's assessment after his first friendly solution proposal
49. The Ombudsman is pleased that, in its opinion, the Commission admitted its shortcomings in the present case and, in addition, courteously addressed a separate letter to the complainant in this respect.
50. He is puzzled, however, by the fact that the Commission admitted its shortcomings only in terms of unfairness and in connection with the telephone conversation with Ms A. While the Commission's behaviour, to which the Ombudsman's second finding of maladministration relating to the telephone conversation refers (paragraph 38 above), could be seen indeed as unfair towards the complainant, the first finding of maladministration concerning the Letter clearly related to the violation of (a) the complainant's right of defence and (b) the principle of the presumption of the complainant's innocence in the procedure, which resulted in the complainant being punished.
51. The facts that (a) OLAF and the auditors confirmed the financial mismanagement of the complainant after the Letter was sent and that (b) the complainant knew that it was under investigation when the Letter was sent, do not call into question the complainant's right of defence and the presumption of its innocence. It is indisputable that the complainant's director was heard by the auditors in the course of the audit, as were many others working for the NECC project. However he was heard as a 'witness' rather than 'the accused' in the context of the audit. He was only able to present the complainant's defence on 15 March 2006, after the Commission had provided him with the auditors' final conclusions.
52. By stating in the Letter that the complainant could not be accepted as the hosting body in future (that is, never again), the Commission sanctioned the complainant before it could defend itself. It appears that the Commission and not the relevant national authorities has the final word concerning the choice of the hosting body. This appears to be the case even if, as argued by the complainant in its last observations, the relevant national authorities only submit one candidate to it. If the Commission announced in the Letter that the complainant's candidature could no longer be accepted as the hosting body, the relevant national authorities did not need to clarify the complainant's situation. This is especially so, considering the Commission's reply to the friendly solution proposal, which revealed that these authorities (a) were aware of the complainant's mismanagement problems before the Letter was sent and (b) did not intend to designate the complainant as the hosting body in 2006.
53. Finally, the fact that the Letter was sent to the relevant national authorities in the context of their bilateral relationship with the Commission within the NECC project does not deprive the complainant of its right of defence, since it happened to be a participant in this relationship.
54. In light of the above, the Ombudsman confirms his original findings of maladministration.
55. In its observations on the Commission's opinion, the complainant did not substantiate its claims for financial and moral damages, as the Ombudsman noted in his proposal for a friendly solution. This does not exclude, however, that it could do so, if contacted by the Commission. The Ombudsman's experience shows that direct negotiations conducted by the relevant institution with a complainant may constitute the most efficient way of resolving claims for damages. The Ombudsman therefore encouraged the Commission to clarify these claims through its direct contacts with the complainant and then consider the amount of compensation. He also stated in this respect that, by doing so, the Commission could demonstrate a citizen-friendly approach.
56. The Ombudsman regrets that the Commission did not enter into contact with the complainant's director to agree with him how it could make good the instances of maladministration identified. In light of the Commission's replies submitted in the course of the inquiry and, in particular, the fact that the Commission stressed that the final audit concluded that there were irregularities in the complainant's management of the NECC and that OLAF confirmed these findings, the Ombudsman does not see any realistic prospects for the successful outcome of a draft recommendation for compensation to be paid to the complainant. Prolonging his inquiry would therefore be fruitless. For this reason, he decides to close this aspect of the case with the critical remarks below.
57. The complainant claimed that the Commission should re-establish its status as a hosting body of the NECC.
58. In its opinion, the Commission stated that the complainant had proved to have "insurmountable" difficulties in ensuring the correct and financially sound implementation of the Grant Agreement signed with the Commission. Retaining the complainant as a beneficiary of the NECC project would have therefore been imprudent and contrary to the rules of sound management. Moreover, the complainant had no entitlement or legitimate expectations to be designated by the relevant national authorities as the beneficiary of the Community funds for 2006.
The Ombudsman's preliminary assessment as regards the claim to be a hosting body leading to the second proposal for a friendly solution
59. According to the Commission's opinion and its letter to the complainant dated 4 October 2007, OLAF did not find any instance of fraud in the complainant's activities. It did, however, find mismanagement of Community funds to the extent that the activities of the complainant were not, from a financial and managerial perspective, distinguished from its activities as a NECC hosting body. The Ombudsman noted in this respect the complainant's argument that this was due to a divergent interpretation held by itself and the Commission concerning its national and cross-border tasks as the hosting body of the NECC.
60. In light of the above, it did not appear proportionate to "ban" the complainant from serving again as a hosting body in the future. The Ombudsman therefore made the following further proposal for a friendly solution:
The Commission could clarify its position concerning the possibility of the complainant becoming a hosting body in the future.
61. The Commission put forward that the grants to cover the activities of hosting bodies are given annually and the selection of their beneficiaries is not automatic. The applications for grants are assessed in relation to each individual case. They are sent to the Commission each year, together with an official letter from the Member State concerned designating the hosting body. Therefore, the complainant could not have any legitimate expectations that it would be selected as the hosting body for 2006 on the ground that it was the hosting body for 2005.
62. The Commission did not exclude however that the complainant could submit an application to become a hosting body for the coming years.
The Ombudsman's assessment after his friendly solution proposal
63. The Ombudsman notes that, in its letter to the complainant of 28 November 2008, the Commission stated that: (a) the relevant national authorities are free to designate the hosting body for the next year, including the complainant[9]; and (b) it would then assess the individual merits of each candidate.
64. Even if, as suggested by the complainant in his observations on the Commission's reply to the friendly solution, the relevant national authorities were to propose only one candidate, the Commission's above statements may be seen as indicating that the complainant would not be banned from becoming the hosting body for the NECC in the future.
65. In light of the above, the Ombudsman considers that the Commission has replied positively to this aspect of the present case, even though it could have been more precise.
Part II
Remaining allegations and claims
66. The complainant alleged that the Commission provided inadequate reasons for suspending the payment representing the balance of the Grant.
67. The complainant referred to the Commission's letter sent to it on 13 June 2006, in which the Commission invoked the results of the audit as a reason for suspending the payment. The complainant stated that the Commission could not reasonably do so because the audit report did not contain any recommendations that the suspension should be made[10].
68. In its opinion, the Commission explained that its decision to suspend the payments in question was based on Article II.16.2 of the Grant Agreement. That Article provides that "[t]he Commission may also suspend its payments at any time if the beneficiary is found or presumed to have infringed the provisions of the Agreement, in particular in the wake of the audits and checks provided for in article II.19."
69. Furthermore, the Commission referred to the fifth point of Article II.19, which foresees the possibility for OLAF to carry out on-the-spot checks and inspections and stated that it suspended the payment in question "in order to be able to take into account the results of OLAF's investigation". In addition, the Commission took the view that, since its audit of November/December 2005 raised doubts as to whether all the staff costs for which the complainant claimed reimbursement for 2005 could be considered eligible, it would have been contrary to the principle of sound management not to have suspended the payment.
The Ombudsman's assessment
70. The Ombudsman wonders why the Commission only referred to the audit on 13 June 2006, when stating the reasons for its decision to suspend the payment in question, if OLAF had already started its investigation in March 2006. According to the Commission, that investigation was indeed the reason behind the suspension. As correctly argued by the complainant, it appears that the auditors did not include any recommendation to this effect in their final report.
71. Nevertheless, the Ombudsman considers that, initially, in its further letter to the complainant dated 3 April 2007, and subsequently, in its opinion on the complaint, when it referred to OLAF's investigation and to the relevant provisions of the Grant Agreement, the Commission elaborated on its 13 June 2006 statement of reasons for its decision to suspend the payment in question. As a result, no further inquiry is necessary with regard to this aspect of the complaint.
72. The complainant alleged that the Commission failed to act consistently by (a) asking it, on 29 March 2006, for clarification concerning its final report for the NECC activities in 2005 for the purposes of the final payment and (b) then informing it that, on the basis of the audit results carried out some months before the clarification request, the payment could not be made (third allegation).
73. The complainant recalled in this regard that, on 6 February 2006, the Commission communicated to it the results of the audit which had been carried out in November/December 2005. Subsequently, on 29 March 2006, the Commission asked the complainant to clarify certain specific points relating to its final report on the implementation of the NECC project covered by the Grant, which it had meanwhile sent to the Commission. Thus, on 29 March 2006, the Commission already knew the audit results. The complainant wondered why, if those audit results formed the basis of the Commission's decision to suspend the payment, the Commission had asked him to send clarifications when it knew full well that the payment could not have been made.
74. The complainant also alleged that the Commission failed to inform it about the final assessment of its file, notwithstanding the declarations contained in its letters to the complainant that it would do so (fourth allegation).
75. Moreover, the complainant referred to the Commission's letters of 13 June and of 8 August 2006, which contained the following statements respectively: "[w]e [will] ... let you know our final assessment within the next few weeks" and "[w]e are in the course of finalising the assessment of your file". In this regard, the complainant stated that, up to the date of its complaint to the Ombudsman, he had not been informed of the outcome of that assessment.
76. As regards the third allegation, the Commission stated in its opinion that, according to Article II.15.4 of the Grant Agreement, it is entitled to ask the beneficiary for any additional information it deems necessary for the approval of the report. The Commission also stated that the correspondence to which the complainant's first allegation of inconsistency refers was designed to verify whether the actions for which the complainant claimed payment had been performed in accordance with the Work Programme agreed between the complainant and the Commission. The Commission added that such correspondence was not a sign of inconsistency.
77. As regards the fourth allegation, the Commission argued that it would have been inappropriate to provide the complainant with a final assessment of its performance before knowing the results of the ongoing investigations that were being carried out by OLAF. The Commission recalled that OLAF had informed it of the investigations' completion on 16 July 2007.
78. Article II.15.4 of the Grant to which the Commission refers states that "[p]ayment of the balance which may not be repeated is made after the end of the action on the basis of the costs actually incurred by the beneficiary in carrying out the action ... the beneficiary shall submit a request for payment of the balance accompanied by the following documents ... On receipt of these documents the Commission shall have the period specified [i]n Article I.4 in order to:-approve the final report on implementation of the action:-ask the beneficiary for supporting documents or any additional information it deems necessary to allow the approval of the report;-reject the report and ask for the submission of a new report..."
79. On 13 June 2006, the Commission decided to suspend the payment of the balance due. Therefore, even though the payment was suspended because of OLAF's investigation (which started in March 2006) and of the final audit results (which were known in February 2006), the decision on the suspension had not yet been taken at the time of the request for clarification. The possibility of paying the balance had therefore not been excluded.
80. Consequently, the request for clarification made in accordance with the above Article II.15.4 of the Grant Agreement was reasonable and consistent. Moreover, the balance payment was finally made in October 2007.
81. In light of the above, the Ombudsman does not find any instance of maladministration as regards the third allegation.
82. In its letter of 13 June 2006, the Commission stated that it would, within the next few weeks, inform the complainant of its assessment. In its letter of 8 August 2006, it stated that such an assessment was in the course of being finalised. The Ombudsman regrets to note that, while the Commission was making the above statements to the complainant, it was in fact referring to OLAF's investigation, the timing of which the Commission was not responsible for.
83. The Ombudsman understands, however, the Commission's view that it would have been inappropriate to provide the complainant with a final assessment of its performance before knowing the results of the ongoing investigations being carried out by OLAF. He notes that, after OLAF had informed the Commission of the results, the Commission made the balance payment to the complainant.
84. In light of the above, the Ombudsman does not find any instance of maladministration in relation to the fourth allegation.
85. The complainant alleged that the Commission acted in a way that was not transparent by entrusting responsibility for carrying out the audit to an official who had a privileged relationship with Ms A., the author of the accusations against the complainant (fifth allegation).
86. The complainant also alleged that, in light of the above-mentioned privileged relationship, the results of the audit were not objective (seventh allegation).
87. In support of its allegations, the complainant argued that another relevant national organisation (W) was lobbying the relevant national administration and the Commission in order to demonstrate that W, and not the complainant, was better placed to be the hosting body of the NECC. According to the complainant, in her dealings with the Commission, the author of the accusations against the complainant (Ms A.) had acted on behalf of W. Ms A. had in the meantime become the new Director of the NECC.
88. In its opinion, the Commission stated that it had no reason to consider that any privileged relationship could exist between Ms A. and any of the Commission officials dealing with the file in question. The contacts between the local directors of the European Consumers Centres (ECC) and the Commission officials dealing with such centres were a normal practice. Thus, there is no reason to consider that the inclusion of two officials from the unit dealing with the ECC-Network among the four auditors resulted in biased auditing or in a biased audit report.
89. The internal audit carried out by the Commission was, as stated in the audit report, an "exceptional" audit and was apparently not carried out by the Commission's Internal Audit Service.
90. Nevertheless, the Ombudsman considers it useful to refer to the ethics of the audit as elaborated by the (American) Institute of Internal Auditors[11], to which the Commission itself refers in its Charte de Mission du Service d'audit interne[12].
"Code of Ethics, Rules of Conduct, Objectivity
2.1 [Internal auditors] shall not participate in any activity or relationship that may impair or be presumed to impair their unbiased assessment. This participation includes those activities or relationships that may be in conflict with the interests of the organisation [subject to their audit]."
"... an assessment of the qualifications and the skills of internal auditors and of the specialists available to participate in the investigation should be performed to ensure that engagements are conducted by individuals having appropriate types and levels of technical expertise. This should include assurances on such matters as professional certifications, licenses, reputation and the fact that there is no relationship to those being investigated or to any of the employees or management of the organisation." (emphasis added).
The Ombudsman stresses that the underlined quotation states "no" relationship.
91. In light of the above, it is not unreasonable to have doubts as to whether an audit can be transparent if a relationship exists between the auditors involved and an employee who was fired from the organisation subject to the audit. This observation stands even if the relationship involved is only professional. The evidence collected in the present inquiry did not reveal that the auditors in question were not objective. Moreover, the Ombudsman notes that, according to the Commission, OLAF, in substance, came to the same conclusions as the Commission's internal auditors following their investigation of the complainant.
92. The Ombudsman therefore does not find that any further inquiries are necessary in relation to this aspect of the complaint.
93. The complainant claimed that the Commission should: (a) withdraw the results of the audit; and (b) pay it the balance of the payment resulting from the Grant, including interest for delays calculated as from 6 May 2006.
94. In reply to the claims, the Commission referred to the results of OLAF's investigation and stated, again, that OLAF confirmed the auditors' conclusions. In its comments on the audit report, the complainant did not contest the auditors' principal finding that it had problems in enforcing "fully and correctly" the provisions of Article 1.10.98 of the Grant Agreement. That Article provides that "... the Director shall run the [NECC] Centre effectively by assuming overall responsibility for administration, finance and policy." The independence of the NECC Director is a crucial element of the joint action, since it contributes to the visibility of the action by differentiating between the ECC activities and those of the host structure.
95. In its observations on the opinion, the complainant informed the Ombudsman that the Commission had made the balance payment. However, in its letter to the Commission dated 29 January 2008, a copy of which the complainant attached to its observations, the complainant maintained that the Commission's financial calculations were based only on the submissions made by Ms A. It also made some financial proposals in this respect and claimed interest "for delay" in paying the balance.
The Ombudsman's assessment as regards the claim that the results of the audit be withdrawn
96. The Ombudsman first points out that, according to the Commission, OLAF confirmed the auditors' findings. Moreover, even if such findings were based on Ms A.'s submissions, it would not necessarily mean that they were incorrect. Further, as stated in paragraph 91 above, the complainant did not succeed in demonstrating that those findings were not objective. Therefore, the Ombudsman considers that the present claim cannot be sustained.
The Ombudsman's assessment as regards the claim on balance payment and interest
97. According to the complainant, the balance payment was made by the Commission in the course of the present inquiry.
98. In its letter to the complainant dated 25 February 2008, the Commission stated that its financial services would still review the payment for the complainant relating to its bulletin.
99. Moreover, as expressed by the Commission in its opinion and its letters to the complainant dated 15 June 2007 and 25 February 2008, the suspension of that payment was, in summary, due to the fact that (a) OLAF had started its investigation, and (b) the suspension took effect before the deadline for payment had expired. As such, it was in accordance with the Grant Agreement.
100. The Ombudsman understands from the complainant's claim that it considers the suspension to constitute late payment.
101. As stated in Article I.4.3, to which the Commission referred, "[t]he Commission may suspend the period for payment [representing the balance of the grant] in accordance with procedure in article II.16.2."
As stated in Article II.16.2 to which the Commission also referred, "[t]he Commission may ... suspend its payments at any time ... in the wake of the audits and checks ... The remaining payment period shall start to run again ... at the end of the suspension period as notified by the Commission."
As stated in Article II.16.3, "[t]he suspension of payment by the Commission may not be considered as late payment".
102. The Ombudsman notes that, in its observations on the opinion, the complainant did not appear to contest: (a) that the Commission's suspension of the payment of the balance pending the results of OLAF's investigation was not contrary to the Grant Agreement; or (b) that the Commission suspended such payment within the deadline of 45 days foreseen in the Grant Agreement for the approval or rejection of the complainant's final technical implementation report. This deadline appears to have started to run again after the complainant submitted its additional clarification[13], in response to the Commission's request of 29 March 2006.
103. The complainant appeared to argue that the suspension of the balance payment could not have taken effect because the Commission failed to inform it of the suspension by registered letter with acknowledgement of receipt, which, in accordance with the third paragraph of Article II.16.2 of the Grant Agreement, it should have done.
104. In relation to the complainant's above argument, the Ombudsman notes that, on 13 July 2006, the Commission sent information concerning the suspension to the complainant, although not by the registered letter. On the same day, the complainant confirmed, in its further letter to the Commission, that he had received this information.
105. The requirement to use a registered letter with acknowledgment of receipt is intended to provide certainty and clarity concerning the moment the Commission's decision to suspend payment becomes effective and the moment the complainant receives such notification. In the present case, the complainant acknowledged its receipt of the letter on the same day. It appears, therefore, that the complainant's present argument is not valid.
106. In light of his above findings, the Ombudsman considers that no further inquiry is necessary in relation to the present claim. The complainant remains however free to contact the Commission regarding the latter's review of the payment to the complainant relating to the bulletin.
As regards the second, fifth and seventh allegations and the claim for the withdrawal of the audit results, no further inquiries are justified.
As regards the third and fourth allegations, no instance of maladministration was found. The claim for the balance payment cannot be sustained.
As regards the first allegation, the following critical remark is made:
When sending the letter to the relevant national authorities, the Commission referred to the auditors' preliminary conclusions and, based on them, asked these authorities to designate another hosting body for 2006. It also stated that the complainant could not be a hosting body in the future. The complainant could not defend himself until after the auditors' final conclusions were sent to him two months later. Given these circumstances, the Commission failed to respect the complainant's right of defence and the principle of the presumption of innocence. This was a first instance of maladministration.
As regards the sixth allegation, the following critical remark is made:
By having informed Ms A. of the content of the above letter even before their addressee and the complainant became aware of it, the Commission failed to act fairly. This was a second instance of maladministration.
As regards the claim concerning the complainant's future status as a hosting body, the Ombudsman considers that the Commission answered positively to the friendly solution in this regard.
The complainant and the President of the Commission will be informed of this decision.
P. Nikiforos DIAMANDOUROS
Done in Strasbourg on 19 May 2009
[1] The complainant referred to a named person, who was the Director of the NEEC at the time and a former employee of the complainant. For the sake of consistency, this person will be referred to as "Ms A." throughout this decision.
[2] The complainant attached to its complaint a copy of the audit report.
[3] Letters dated 20 March, 3 and 4 April, 15 May and 4 October 2007, and 29 January and 25 February 2008.
[4] In that letter, the Commission stated, among other things, that the audit demonstrated that, contrary to the terms of the Grant Agreement, the complainant's director managed all of the NECC's finances and staff issues. The Commission found that it was therefore impossible for Ms A. to assume her duties as Director of the NEEC. In that same letter, the Commission also stated that a number of NECC staff in fact worked for the complainant, even though they were paid by the NECC. Furthermore, the complainant's human resource management was such that the staff were not able clearly to identify which organisation they actually worked for. This was particularly important because 80 % of the NECC project costs were related to staff expenses. Moreover, the complainant's own brochures were published with the aid of Grant monies, even though these funds were designated for NECC publications only. In addition, NECC expenditure had been entered into the complainant's accounts and was not separated. The Commission therefore stated that the complainant could no longer continue to be the hosting body of the NECC. Accordingly, it asked the relevant national authorities to designate another body to host the NECC.
[5] Case T-36/05 Coats Holdings and Coats v Commission [2007] ECR II-110, paragraph 70.
[6] See the opinion of Advocate General Ruiz-Jarabo Colomer in Joined Cases C-55/07 and C-56/07 Michaeler, delivered on 24 January 2008 and not yet reported in the ECR, paragraph 56. The court's judgment in these joined cases was delivered on 24 April 2008.
[7] "... la Commission ne peut plus accepter [the complainant] comme structure hôte pour le CEC [national] à l´avenir et je vous serais reconnaissante de bien vouloir nous communiquer une structure hôte alternative dans les meilleurs délais".
[8] The Ombudsman understands this expression to refer to Ms A.
[9] "En conclusion, je voudrais qu'il soit bien clair que les autorités [national], dans un prochain appel à propositions, sont entièrement libres de nommer l' association de choix, y compris la vôtre, comme structure d'accueil en W. Le moment venu, la Commission évaluera les mérites de chaque candidature."
[10] The relevant section of that Letter is as follows: "... the Commission is suspending the payment representing the balance of the Grant Agreement ... according to article II.16.2.
We consider that we have to carry out further checks to establish the exact amount of the financial entitlements resulting from the Grant Agreement ... based on the information and findings available at the present moment.
In particular we have to take into account the finding of the audit carried out on 31 November and 1 December 2005 based on which [the complainant] as beneficiary is presumed to have infringed the terms of the Grant Agreement ... by claiming eligibility of expenditure which cannot be considered to eligible and to have claimed payment of sums undue.
We estimate [sic] to conclude the checks and let you know our final assessment within the next few weeks."
[11] The website of the (American) Institute of Internal Auditors is available at http://www.theiia.org.
[12] SEC(200)1801/2.
[13] On the basis of the evidence available, the Ombudsman is unaware of the date on which the complainant submitted this clarification.
