Dear Ms H.,

On 24 October 2002, you made a complaint to the European Ombudsman against the European Commission concerning the latter’s handling of the project EUROCAMPER (reference LIFE99 ENV/D/000448).

On 12 November 2002, I forwarded the complaint to the President of the European Commission.

In an e-mail of 10 December 2002, you informed me that you had since reached agreement with the Commission in so far as one of the aspects of the complaint (the attribution of costs to the headings ‘consumables’ and ‘services by third parties’) was concerned.

On 11 December 2002, you forwarded an e-mail to me that you had sent to the Commission the same day. In this e-mail, you noted that, so as not to complicate the present inquiry, you did not request the Commission to provide any further opinions regarding two other issues that you had raised in your complaint.

The Commission sent its opinion on 20 January 2003. I forwarded it to you on 23 January 2003 with an invitation to make observations, which you sent on 10 February 2003.

I am writing now to let you know the results of the inquiries that have been made.

THE COMPLAINT

The original complaint

On 15 November 1998, the complainant, a German NGO, applied for financial assistance from the Community under the LIFE programme for its project EUROCAMPER (reference LIFE99 ENV/D/000448). The purpose of this project was to develop and implement an environment management system for camping sites. According to the application, the expenses for the project were estimated at 1 491 472 DM, including 410 652 DM for staff and 746 000 DM for services by third parties. It was further specified that the latter figure included services to be provided by 15 camping sites, with 110 work days at a rate of 200 DM per camping site, i.e. a total amount of 330 000 DM.

In a letter that appears to have been sent to Mr B., the Commission’s case-handler, on 9 June 1999, the complainant pointed out that it had changed the financial forms accompanying its application in conformity with what had been discussed over the telephone that day. The complainant noted in particular: "I have taken the monetarised working time (330 000 DM), that will be provided by the owners and managers of the camping sites with the framework of the project, out of services by third parties and attributed it to the item staff." On 11 June 1999, the Commission’s case-handler sent a fax to the complainant in which he informed the latter of the "modified costs" and the "modified EU grant" and asked the complainant to confirm that it was in agreement with these modifications. According to the fax, the figure for ‘staff’ costs had been increased by adding the services of the project partners whereas the figure for ‘services by third parties’ had been reduced accordingly to 416 000 DM. In a letter sent the same day, the complainant confirmed that it agreed with these changes.

By decision of 28 July 1999, the Commission accepted the complainant’s application for financial assistance. The total expenses eligible for assistance were set at 688 726.52 €. The maximum amount of the Community grant was set at 344 363.26 € (that is to say, 50 % of the eligible expenses).

The administrative, technical and financial provisions applicable to the project were set out in Annex 2 of the decision. Points 3.1 and 3.2 of these provisions provided for an advance payment and an interim payment respectively. According to point 3.3, the balance was to be paid upon receipt of "proof of actual total expenditure".

On 13 and 14 February 2002, the Commission carried out an audit regarding the project. A report on this audit was drawn up on 7 March 2002. The auditors came to the conclusion that although the working hours of the project partners (the camping sites) that had been charged under staff costs had been justified by time sheets, the figures declared did not entail any cash flow and could therefore not be considered as eligible expenditure.

On 4 June 2002, the Commission informed the complainant that on the occasion of the audit it had been found that in so far as the services provided by the camping sites were concerned, nobody had incurred any expenses that could be proven. These services thus had to be considered as services in kind and as not being eligible for financial assistance by the Community.

In its reply of 7 June 2002, the complainant pointed out that the relevant services had been provided in part by employees but mostly by independent businessmen. In personal talks with Mr. B., the Commission’s case-handler, it had therefore been agreed to assess and invoice these services at a flat rate of 200 DM per person and day. This approach had not been questioned by the Commission when it had asked for detailed information regarding financial aspects of the project in February and March 2001. The complainant further pointed out that it was only on the occasion of a discussion on 30 May 2002 that it had been informed by the Commission’s new case-handler that Mr. B. may not have been authorised to agree to the approach described above.

The complainant subsequently submitted evidence to the Commission in order to show that the costs that had been charged were appropriate. However, by letter of 23 July 2002 the Commission informed the complainant that it had decided that, on the basis of its review, the financial assistance of the EU amounted to only 271 093.21 €. Given that the Commission had already provided 275 490.60 €, it would proceed to recover the balance (4 397.39 €). The Commission’s calculation was based in particular on a deduction of 250 685.26 DM in respect of the costs of the services provided by the camping sites.

In its complaint to the Ombudsman, the complainant alleged (1) that the Commission’s request to repay grants already provided infringed the relevant agreement and also the principle of the protection of legitimate expectations. The complainant further alleged (2) that the Commission had only informed it of the non-eligibility of these costs five months after the project had ended. According to the complainant, it would have had the possibility to try and make changes if it had been alerted to the problem earlier. The complainant finally criticised (3) that despite seven requests, the audit report had only been sent to it five months after the audit had been carried out.

The complainant added that it also disputed some aspects of the attribution of costs to the headings ‘consumables’ and ‘services by third parties’.

Subsequent developments

In an e-mail of 10 December 2002, the complainant informed the Ombudsman that it had reached agreement with the Commission in so far as the attribution of costs to the headings ‘consumables’ and ‘services by third parties’ was concerned.

On 11 December 2002, the complainant forwarded to the Ombudsman an e-mail it had sent to the Commission the same day concerning heads of complaint number (2) and (3). In this e-mail, the complainant noted that, so as not to complicate the present inquiry, it did not request the Commission to provide any further opinions regarding these issues.

THE INQUIRY

The Commission's opinion

In its opinion, the Commission made the following comments with regard to the main allegation(1):

The request to acknowledge as actual expenditure incurred by the project the partners’ unpaid contributions could not be accepted. The round sum amounts proposed as the project partners’ estimated staff costs had been accepted as part of the originally budgeted total staff costs. However, there was no evidence that there had been any intention to accept either these estimated costs or partners’ contributions as expenses eligible for funding at the project’s outturn. Point 3.3 of Annex 2 of the decision clearly limited the eligibility for funding to actual expenditure, and thus excluded a legitimate expectation to the contrary.

Unpaid in-kind labour clearly did not entail true expenses. Therefore there were no grounds for the claim that by accepting the amount requested for staff costs in the project’s proposed budget as part of total staff costs, the Commission had indirectly accepted the eligibility of estimated expenses and unpaid in-kind support.

Moreover, the interim payment had not been able to create legitimate expectations in the acceptance of in-kind support as actual expense. In its letters accompanying the interim payment, the Commission had underlined that the interim payment did not mean a final acceptance of the expenses claimed.

The Commission submitted a copy of a letter dated 6 November 2002 from the complainant’s lawyer. According to this letter, proof of staff costs amounting to 113 371.39 DM was submitted as an enclosure to this letter.

The Commission further submitted a copy of the letter it had addressed to the complainant on 12 December 2002. According to this letter, staff costs amounting to 113 371.39 DM had been accepted as a result of the evidence submitted to the Commission on 6 November 2002. Taking into account other items, the Commission informed the complainant that it proposed to pay to it a sum of 25 650.36 €.

The complainant's observations

In its observations, the complainant maintained its complaint. In its view, the work carried out by the owners and managers of the camping sites represented a service having financial value and could thus be monetarised. The Commission had however only recognised the work carried out by employees, not that carried out by the owners and managers themselves. Mr B., the Commission’s former case-handler, had confirmed in October 2002 that he would have accepted (or recommended his colleagues to accept) the latter as well.

In the complainant’s view, this problem gave rise to the more principal question as to how those owners of small and medium-sized undertakings who worked without receiving an official salary could take part in LIFE projects. The complainant queried whether the Ombudsman could ask the Commission to provide information as to how it had proceeded in other such cases.

THE DECISION

1 Preliminary remarks

1.1 The complainant, a German NGO, entered into an agreement with the European Commission pursuant to which the latter was to provide financial assistance under the LIFE programme for its project EUROCAMPER (reference LIFE99 ENV/D/000448). In its complaint to the Ombudsman, the complainant alleged that the Commission in the end had incorrectly refused to accept certain costs under the heading ‘staff’ (see point 2 below).

1.2 The complainant also objected to the way in which the Commission had attributed costs to the headings ‘consumables’ and ‘services by third parties’. However, in an e-mail of 10 December 2002 the complainant informed the Ombudsman that it had reached agreement with the Commission regarding this issue. There is therefore no need further to inquire into this aspect of the complaint.

1.3 In its complaint, the complainant further alleged that the Commission only informed it of the non-eligibility of these costs five months after the project had ended and that despite seven requests, the audit report had only been sent to it five months after the audit had been carried out. On 11 December 2002, however, the complainant informed the Ombudsman that it did not request the Commission to provide any further opinions regarding these issues. In these circumstances, the Ombudsman considers that there are no grounds further to inquire into these aspects of the complaint.

1.4 In its observations on the Commission’s opinion, the complainant queried whether the Ombudsman could ask the Commission to provide information as to how it had proceeded in other cases. The Ombudsman considers that there is no need for him to ask the Commission for this information, since the complaint can be dealt with on the basis of the evidence that has already been submitted to him. The complainant is however free to write to the Commission in order to ask for the information it is looking for.

2 Eligibility of costs

2.1 The complainant’s project comprised work carried by the owners and managers of the camping sites that participated in the project and their staff. After the project had been terminated, the Commission took the view that these services could not be considered as eligible for financial assistance. After having deducted the sum that had been declared for these services (250 685.26 DM) and taking into account an advance payment and an interim payment that had already been made, the Commission concluded that the complainant should repay an amount of 4 397.39 €.

2.2 In its complaint to the Ombudsman, the complainant alleged that by doing so, the Commission infringed the relevant agreement and also the principle of the protection of legitimate expectations. In this context, the complainant argued in particular that its approach had been discussed with the Commission’s case-handler at the time when the application had been made and had been accepted by the latter.

2.3 It appears that after the complaint had been lodged with the Ombudsman, the Commission accepted a sum of 113 371.39 DM on account of work carried out by employees of owners and managers of the camping sites concerned, and that as a result it proposed to pay an amount of 25 650.36 € to the complainant. However, the Commission maintained its view that costs on account of work carried out by the owners or managers of the camping sites themselves could not be accepted.

2.4 The Commission took the view that unpaid in-kind labour clearly did not entail true expenses. It stressed that Point 3.3 of Annex 2 of the decision clearly limited the eligibility for funding to actual expenditure, and thus excluded a legitimate expectation to the contrary.

2.5 The present case thus concerns the rights arising out of a contract between the complainant and the Commission.

2.6 According to Article 195 of the EC Treaty, the European Ombudsman is empowered to receive complaints "concerning instances of maladministration in the activities of the Community institutions or bodies". The Ombudsman considers that maladministration occurs when a public body fails to act in accordance with a rule or principle binding upon it. Maladministration may thus also be found when the fulfilment of obligations arising from contracts concluded by the institutions or bodies of the Communities is concerned.

2.7 However, the Ombudsman considers that the scope of the review that he can carry out in such cases 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, if the matter is in dispute. 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.

2.8 The Ombudsman therefore takes the view that in cases concerning contractual disputes it is justified to limit his inquiry to examining whether the Community institution or body has provided him with a coherent and reasonable account of the legal basis for its actions and why it believes that its view of the contractual position is justified. If that is the case, the Ombudsman will conclude that his 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.

2.9 In the present case, the Commission has put forward a coherent and reasonable account of the reasons for which it believes that the relevant services cannot be considered as eligible expenses.

2.10 In these circumstances, there appears to be no maladministration on the part of the Commission.

3 Conclusion

On the basis of the Ombudsman's inquiries into this complaint, there appears to have been no maladministration by the European Commission. The Ombudsman therefore closes the case.

The President of the Commission will also be informed of this decision.

Yours sincerely,

 

Jacob SÖDERMAN

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(1) The Commission also presented comments regarding the attribution of costs to the headings ‘consumables’ and ‘services by third parties’. Since the complainant has confirmed that an agreement had been reached concerning this issue, these comments are not set out here.