Strasbourg, 27 August 2008

Dear Mr G.,

On 16 August 2007, acting on behalf of One Earth, you submitted a complaint to the European Ombudsman against the European Commission concerning the rejection of its application for the conclusion of a Framework Partnership Agreement with the Commission.

On 10 October 2007, I forwarded the complaint to the President of the Commission. The Commission sent its opinion on 19 December 2007. I forwarded it to you with an invitation to make observations, which you sent on 29 February 2008.

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

THE COMPLAINT AND ITS BACKGROUND

On 14 March 2007, OE submitted an application to the European Commission's Directorate-General for Humanitarian Aid ("DG ECHO") for the conclusion of a Framework Partnership Agreement ("FPA").

In an e-mail of 20 June 2007, addressed to One Earth ("OE"), the Commission stated the following:

"It appears that you have not provided us with the annual accounts of the last two fully revolved calendar years or financial years, certified by an external professional auditor. We cannot consider as audited financial statements the documents titled "Balance sheets as at December 31st, 2005 fiscal year" and "Balance sheets as at December 31st, 2006" you sent us. This document is part of the obligatory documents to be provided in support of your FPA application. We would ask you to please provide us with ONE EARTH annual accounts of the last two fully revolved calendar years or financial years, certified by an external professional auditor".

Subsequently, by e-mail dated 25 June 2007, OE asked for a "clarification on what are the 'annual accounts,' indicating that "there is no such term in the Greek accountancy." It also invited the Commission to "specify if the Annual Balance of accounts could cover [its] request".

On 26 June 2007, OE contacted by telephone the person in charge of the dossier (Ms M.) asking for clarifications on what are the annual accounts. On 4 July 2008, OE sent to the Commission additional documentation in support of its application.

On 9 July 2007, the Commission sent to OE a letter closing the file of its application, on the basis of incomplete documentation. The Commission explained that (a) OE had provided it with certified accounts, without including "profit and loss", or notes to the balance of the last two fully revolved years and (b) it appeared that the statement of the auditor submitted by OE was limited to the balance.

By letter dated 18 July 2007, OE challenged the Commission's above decision. OE noted, in particular, that (i) its "annual balance sheet[s]", which it had sent to the Commission, included information on "profit and loss"; (ii) it had provided the Commission with the "annual balance of accounts", which Ms M. had confirmed would suffice; (iii) if this was not what the Commission expected, this was clearly due to a misunderstanding, resulting from the fact that it had to communicate in a foreign language using terms that were not clearly determined and commonly accepted throughout Europe; (iv) it now assumed that the Commission wanted to examine the so-called "profit and loss statement", which it could provide to the Commission. In light of the above, OE considered that it had been treated unfairly and that the Commission was wrong in deciding that OE had not provided the requested documentation. Finally, it asked the Commission to give it the opportunity to provide additional information or appropriate explanations concerning its annual accounts.

In its reply of 27 August 2007, the Commission maintained its contested position, by noting that (a) DG ECHO's procedure uses the same terminology contained in Regulations 1605/2002 and 2342/2002, which have been published in all official languages of the EU; (b) in accordance with these regulations, an audit report produced by an approved external auditor and covering the last two financial years available should be submitted before the conclusion of the FPA.

On 16 August 2007, the complainant submitted the present complaint to the Ombudsman. He alleged that the Commission's decision to reject OE's application for the conclusion of a FPA was unfair and unlawful. He claimed that OE should be given the opportunity to provide the Commission with additional information or proper explanations concerning the documents that OE had sent and that the Commission should re-examine OE's file and application which it had been erroneously rejected.

THE INQUIRY

The Commission's opinion

In its opinion on the complaint, the Commission noted, inter alia, the following. The FPA is the instrument that sets the principles of partnership between the Commission and humanitarian organisations, defines the partners' respective roles, rights and obligations and contains the legal provisions applicable to the humanitarian operations financed by the Commission.

Applications concerning to the FPA 2003 were made on-line. An applicant had to identify itself by completing an identification form, and to carry out a self-assessment of eligibility by answering six preliminary questions. If the self-assessment gave a positive result, the applicant was contacted by the Commission and received an individual and unique login and a password. This login and password allowed the applicant to complete a 60-question survey intended to verify its operational, administrative and financial strengths. After completing the APPEL Questionnaire ("the questionnaire"), the applicant had to validate its final input, which was recorded in the Commission's database in this way, print the validated questionnaire and have it signed by the person entitled to sign the FPA. The complete and official application dossier, which was to be sent to the Commission within one month by registered mail, was composed of (i) the questionnaire, which was validated and signed by the authorised representative of the organisation, and (ii) all the supporting (compulsory) documents, such as the "Annual accounts of the last two fully revolved calendar years or financial years, certified by an external professional auditor" and proof of the answers given in the questionnaire. All the supporting documents that had to be provided were mentioned on DG ECHO's website and listed in the first page of the questionnaire validatedby the applicant NGO. Applications that were not formalised within the deadline by sending the complete set of paper documents (printout of the validated questionnaire signed by the authorised person and supporting documents) were considered null and void.

On 14 March 2007, OE applied for FPA partnership, by validating the questionnaire. The supporting documents were received by the Commission on 10 April 2007.

• Document number 20, entitled "Accounting Standards", contained the following statement:

"Books to be printed:

(…) 2. Annual accounts book and balance sheet. (…)".

• In document number 21, entitled "Accounting and Financial Procedures", OE affirmed:

"The administrative council has decided the optional bookkeeping of accounts of 3rd category for the reasons below: (...)

5) Easy and essential analysis of all financial documents by the external cooperator-auditor" (...)

"Annual Procedures

1) Checking of all financial documents from the external auditor (...)".

• OE answered YES to question 11 of the questionnaire, which read: "[f]or practical operational reasons, ECHO applies a restricted working language policy (English and French) in order to speed up the procedures for the assessment and implementation of humanitarian operations. Does your organisation accept this condition?"

On 14 June 2007, the Commission finished the evaluation of the documents provided by OE as "audited financial accounts" for the fiscal years 2005 and 2006. The result of the Commission's analysis was "Unfavourable" with the following comments:

"Condition Annual accounts / balance sheet not signed! Not clear who established it. ECHO funding only after presentation of independent annual accounts!"

After the negative evaluation from the Commission, on 20 June 2007, the Commission sent an e-mail to OE saying:

"It appears that you have not provided us with the annual accounts of the last two fully revolved calendar years or financial years, certified by an external professional auditor. We cannot consider as audited financial statements the documents titled "balance sheets as at December 31 st, 2005 fiscal year" and "balance sheets as at December 31, 2006" you sent us. This document is part of the obligatory documents to be provided in support of your FPA application. We would ask you to please provide us with ONE EARTH annual accounts of the last two fully revolved calendar years or financial years, certified by an external professional auditor".

On 25 June 2007, OE sent an e-mail asking for a "clarification on what are the ‘annual accounts’ as there is no such term in the Greek accountancy. Please specify if the Annual Balance of accounts could cover your request". On 26 June 2007, OE contacted by telephone the person in charge of the dossier who explained that the Commission needed the annual accounts certified by an external auditor and that such accounts could be what are referred as "annual balance of accounts", provided that the latter contained all the detailed accounts of each year. The same person added that OE would have to send audited accounts signed by an external auditor. The person representing OE said that she did not want the Commission to send her an e-mail explaining the reply to OE’s question, because for her it was clear enough.

On 4 July 2007 the document entitled "CERTIFICATION OF ANNUAL ACCOUNT", not dated, "Annual Balance of Accounts year 2006" (in the Greek version, dated 01.01.2006) and "Annual Balance of Accounts year 2005" (in the Greek version, dated 31.12.2006) were received and sent to the Commission, together with the documents called "Balance Sheet as at December 31st, 2005" and " Balance Sheet as at December 31 st, 2006".

The result of the Commission analysis was "Unfavourable" with the following comments:

"No profit & loss accounts

No notes to the balance

Statement of the auditor doubtful and limited to balance

Full certified accounts including profit & loss account should be submitted".

DG ECHO gave this opinion having due regard to the International Standards on Auditing (ISAs) and International Auditing Practice Statements (IAPSs) set under the auspices of the International Federation of Accountants (IFAC) which outlines the basic requirements to which auditors should adhere.

On 9 July 2007, the Commission sent a letter closing OE's file, on the grounds that it contained incomplete documentation. The Commission went on to explain that it had been provided with certified accounts which did not include "profit and loss", or notes to the balance, for the last two fully revolved calendar years or financial years and that the auditor's statement furnished was limited to balance.

On 18 July 2007, OE requested that the Commission reconsider its decision not to approve OE's application and asked that OE be given "an opportunity to provide [...] additional information or proper explanation on [its] annual accounts plus any additional auditing by external auditor information". It went on to explain that its request was based on the fact that the problem which arose "is clearly due to a misunderstanding resulting from the fact that [they had] to communicate in [a] foreign language terms that are not clearly determined and commonly accepted throughout Europe". After a careful examination of the information submitted by OE, the relevant Commission service decided, on 27 August 2007, to maintain its decision to close OE 's application for the signature of a FPA on the grounds that it contained incomplete documentation.

Relatedly, the Commission noted that its procedure used the same terminology contained in (i) Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities(1) ("Regulation 1605/2002") and (ii) Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities(2) ("Regulation 2342/2002"). It further pointed out that both of these regulations were published in the 23 official languages of the European Union, including Greek.

Comparing the documents it had received from OE on 10 April and 4 July 2007 to the documents the complainant submitted to the Ombudsman as "Additional financial data sent to ECHO", the Commission noted, in particular, the following:

• On 10 April 2007, the Commission received an English version of the 2005 and 2006 balance sheets, neither of which was signed or dated. The Commission never received the Greek version, which was signed and dated (documents (a) and (b)) and was submitted to the Ombudsman along with the complaint.
• The Commission did not receive the document in English entitled "External audit report" signed by George Delikouras on 30 July 2007 (document (c)), which was submitted to the Ombudsman together with the complaint. This document was signed after the Commission had, on 4 July 2007, received the additional documentation sent by OE and referred only to the "31/12/2006" cash balance without mentioning the accounts for the year 2005.
• The Commission never received the document "profit and loss statement 2005-2006" (document (d)), which was submitted to the Ombudsman together with the complaint.
• On 4 July 2007, the Commission received the document entitled "Certification of annual accounts". This document was not dated and referred only to the annual balance of accounts.

The Commission concluded by rejecting the complainant’s allegation.

The complainant's observations

In his observations, the complainant maintained his allegation and stated, inter alia, the following. OE never consented to an oral Commission reply to its question for clarifications on the term "annual accounts". OE had sent its balance sheets to the Commission in Greek, together with their translation. OE could not accept the Commission’s argument that it had not received the document "profit and loss statement 2005-2006", which OE had sent to it. The date of "30/07/2007", which appeared on document (c) that was submitted to the Ombudsman together with the complaint, was indeed different from the date of the document sent to the Commission, which was the original.

THE DECISION

1 Allegation that the Commission's decision to reject OE's application for the conclusion of a FPA was unfair and unlawful and related claims

1.1 The complaint concerns the rejection of the application by One Earth ("OE") for the conclusion of a Framework Partnership Agreement ("FPA") with the European Commission, on the grounds that it contained inadequate supporting (compulsory) documentation. In its opinion on the complaint, the Commission confirmed that its challenged decision complied with the applicable requirements. The complainant does not accept this point of view.

1.2 The Ombudsman, first, recalls that, under Article 173(4) of Regulation 2342/2002(3), an applicant in the context of an award procedure such as the one here concerned has to submit "an audit report produced by an approved external auditor" which "shall certify the accounts" for the last two financial years available. Moreover, it is not in dispute that the applicable selection rules, which were published on ECHO's website(4),

1. referred specifically, to the above provision of Regulation 2342/2002 in as far as the legal bases used were concerned;
2. provided that, following the validation by an applicant of the completed questionnaire, "one additional month [wa]s allowed to collect evidences of the answers and to send to ECHO the complete set of documents, by one single registered mail" and that "[a]pplications that [we]re not formalised within the deadline by sending the complete set of paper documents (printout of the validated questionnaire signed by the authorised person + support documents) [would] be considered null and void"; and
3. required that an applicant submit, as "compulsory documents", inter alia, "[a]nnual accounts of the last two fully revolved calendar years or financial years, certified by an external professional auditor". In the questionnaire validated by OE, the applicant accepted, without any reservations, the "restricted working language policy (English or French)" ECHO used "in order to speed up the procedures for the assessment and implementation of humanitarian operations". OE, thus, accepted ECHO’s condition to use English or French in its application.

1.3 In relation to the above-mentioned requirements, OE submitted, in April 2007, only a one-page "balance sheet" for the fiscal year 2005 and a one-page "balance sheet" for the fiscal year 2006, numbered as supporting documents 8 and 9(5). These documents, in English, did not bear any certification by an auditor or translator. In addition, these documents were neither signed nor dated. Hence, they did not fulfil essential conditions for their validity. Moreover, there is no proof or clear indication that they were accompanied by the relevant (original) documents in Greek, certified by an approved external auditor. Indeed, in the list of compulsory documents accompanying OE’s application, there is no indication of such documents. Further, such documents are not included in the documentation that the Commission submitted to the Ombudsman as having been received by it from OE. Furthermore, in its opinion, the Commission explicitly confirmed that it did not receive such documents. This factual statement carries with it a (refutable) presumption of truthfulness(6) and the complainant has not made any duly substantiated arguments to rebut it. More importantly, the content of the list of compulsory documents accompanying OE’s application does not show, somehow, that these documents were actually sent by OE as part of the supporting documentation the Commission received in April 2007. Under these circumstances, the Ombudsman finds that OE clearly failed to comply with its obligation to submit, within the specified deadline, annual accounts certified by an external auditor.

1.4 This failure implied, under the rules applicable to the selection procedure in question, that OE’s application was null and void. This application could not, thus, be accepted without disregarding these rules. Hence, the Ombudsman finds no instance of maladministration corresponding to the complainant’s allegation. This, further, means that the complainant’s related claims are not well founded either.

1.5 The Ombudsman notes that, instead of rejecting OE’s application, the Commission invited OE, by its e-mail of 20 June 2007, to remedy the above clear shortcoming in the documentation supporting this application. The Ombudsman will make a relevant further remark in this regard.

1.6 The Ombudsman also notes that the main issue in dispute between the Commission and OE was the need to specify what kind of documentation could meet the requirement of "annual accounts" certified by an auditor. About this matter, the Ombudsman will make a second further remark at the end of the present decision.

2 Conclusion

On the basis of his inquiries into the present complaint, the Ombudsman finds no instance of maladministration corresponding to the complainant’s allegation.

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

Further remarks

In the present case, an applicant for a FPA was given the opportunity to remedy its failure to submit, within the specified deadline, certain compulsory documents, namely, annual accounts certified by an approved external auditor. This was not consonant with the rules applicable to the selection procedure in question, which was published on ECHO's website. It may also be incompatible with the principle of equal treatment of applicants in the context of selection procedures like the one here concerned. The Commission is, thus, invited to take properly into account these elements in future similar cases. The Commission may wish to give applicants in procedures like the one here at issue the possibility to remedy shortcomings in their supporting documentation, such as the one found in the present case. In this regard, it may consider adopting clear provisions to that effect, in the rules governing the selection procedure, after examining whether these provisions would be compatible with the fundamental principle of equal treatment of applicants and the relevant requirements of the Financial Regulation and its Implementing Rules.

The Commission could consider providing potential applicants in procedures like the one here concerned with clearer guidance as to the required content of the "accounts" to be certified and submitted in accordance with Article 173(4) of Regulation 2342/2002, for example, by referring to specific international standards or kinds of accounts provided for in the legislation of each Member State.

Yours sincerely,

 

P. Nikiforos DIAMANDOUROS

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(1) OJ 2002, L 248, p. 1.

(2) OJ 2002, L 357, p. 1.

(3) See footnote 2.

(4) The Commission annexed to its opinion on the complaint a print-out of the relevant ECHO webpages, which were communicated to the complainant, together with the Commission’s opinion. In his observations on the Commission’s opinion, the complainant did not contest the accuracy of this information provided by the Commission.

(5) In the list of compulsory documents accompanying OE’s application, these documents were referred to respectively as "Audited financial account for the fiscal year 2005” (document 8) and "Audited financial account for the fiscal year 2005” (document 9).

(6) Cf. Case T-311/00 British American Tobacco v Commission [2002] ECR II-2781, paragraph 35.