Strasbourg, 14 November 2006

Dear Mr H.,

On 20 April 2004, you made a complaint to the European Ombudsman on behalf of the European Trade Union Institute ("ETUI"). Your complaint concerned a decision of the European Commission to recover EUR 109 318 from a grant awarded to ETUI for its Work Programme 2000 (Grant Agreement VS/2000/0017).

On 2 June 2004, I forwarded the complaint to the President of the Commission. The Commission sent its opinion on 2 August 2004. I forwarded it to you with an invitation to make observations.

On 12 October 2004, you sent me your observations on the Commission's opinion.

On 21 March 2005, I informed you that I had decided to conduct further inquiries into your complaint. The Commission sent me its reply to my further inquiries on 30 May 2005. I forwarded the Commission's reply to you with an invitation to make observations. You sent your observations on 6 July 2005.

On 13 September 2005, I informed you that I had decided to conduct further inquiries on the basis of the new information submitted in your observations. The Commission sent its reply on 17 November 2005. I forwarded it to you with an invitation to make observations. You sent your observations on 30 January 2006.

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

THE COMPLAINT

The complaint was made by the European Trade Union Institute (the "ETUI"), the research institute of the European Trade Union Confederation (the "ETUC"). The complaint concerned a decision of the Commission to recover EUR 109 318 from a grant awarded to ETUI for its Work Programme 2000 (Grant Agreement VS/2000/0017). The recovery order was based on a Commission audit report of 4 September 2002, the conclusions of which ETUI had contested.

The Commission's auditors had presented an overall positive report, but had also proposed to the Commission to recover the amount of EUR 109 318 mainly for meeting costs, staff costs, travel costs and some other minor items including water and coffee consumption ('vivres et boissons'). Previous audits had not rejected the item 'vivre et boissons', and the complainant therefore failed to understand why it had been rejected this time.

With regard to the rejection of the expenses related to a specific conference (the EXPO 2000 conference, which took place in Hanover), the complainant's work programme had referred to this event in the work programme that had been approved by the Commission. The Commission had therefore essentially approved that event.

The complainant alleged that the Commission's recovery order for EUR 109 318, as communicated to it on 20 January 2003, was unjustified and inadequately reasoned.

THE INQUIRY

The Commission's opinion

The complaint was sent to the Commission for opinion. In its opinion, the Commission made the following comments:

(1) Audit procedure

On 10 and 11 April 2002, auditors from the Commission carried out an audit at the premises of ETUI in Brussels. The audit related to grant agreement VS/2000/0017, concerning the running costs of the beneficiary's annual budget. The amount paid by the Commission to the beneficiary was EUR 3 500 000, equivalent to 100% of the total eligible costs.

After the audit had been completed, the auditors held a final meeting on 11 April 2002 to present the audit findings to Mr HO., the Director of ETUI; Mr HU., the administrator; and Mr F. of ETUC, the latter being the organisation that deals with ETUI's bookkeeping. All findings mentioned in the draft report were sent to ETUI on 7 June 2002 and were discussed with the representatives of the beneficiary during the final meeting.

In the letter of 7 June 2002, the Commission's services requested ETUI's Director to inform them of any possible observations that he might have in respect of the draft report, and to do so before 15 July 2002.

The ETUI communicated its observations by letter of 11 July 2002. Several audit findings of the Commission were accepted by ETUI.

The Commission analysed the reply in detail and drafted a final report in which it formulated a position in respect of all the relevant comments made by ETUI. Some arguments made by ETUI, and for which sufficient additional information was submitted, were accepted by the Commission. The final report was sent to ETUI on 4 September 2002, which marked the end of the audit procedure.

(2) Post audit procedure

On 16 October 2002, the Commission received a letter in which ETUI expressed disagreement with one particular point in the auditor's report concerning the expenditure in relation to the EXPO 2000 conference. No other points were mentioned in the letter, implying that ETUI accepted all other points mentioned in the audit report.

Despite the fact that ETUI had not presented any new information in the letter referred to above, the Commission services re-examined the file and invited the Director of ETUI for a meeting with the Commission, on 12 December 2002, where the above point was, once more, discussed in great detail, and in light of additional documents presented by the Director during the meeting. The services of the Commission concluded that, both on formal and material grounds, these documents - which had not been presented in the files examined during the audit - could not lead to a re-consideration of the audit conclusion in respect of the EXPO 2000 conference. As a result, the Commission decided to initiate the recovery procedure. On 21 January 2003, the Commission issued the recovery order. On 13 February, 22 May and 7 November 2003, ETUI addressed further letters to the Commission, asking, among other things, for the audit conclusions to be re-considered and requesting another meeting with the services of the Commission. On 14 May 2003, an amount of EUR 109 318 was reduced from a payment of the Commission to ETUI under the 2003 grant agreement. On 16 June 2003, a letter from the Commission was sent to ETUI stating that the audit procedure could not be re-opened. The services of the Commission nevertheless accepted the request for a meeting, which took place on 25 November 2003 and during which the participants discussed once more in great detail the correction in respect of the EXPO 2000 conference. No new information was, however, presented by the representative of ETUI. The ETUI did not appeal the recovery order in a court.

(3) The audit findings

During the on-the-spot check at ETUI, the auditors established the following:

1. As far as staff costs were concerned, it was found that, in general, the level of the salaries of staff members was reasonable, but that an effort should have been made towards more transparency concerning the salaries and additional benefits for its management.

The Commission had refused expenditure relating to 'vivres et boissons' and 'chèques cadeaux' which had never been justified and explained in advance to the Commission, and which were thus not eligible. The Commission had agreed with ETUI that its staff would be offered an extra-legal accident insurance, an extra-legal pension fund insurance, a hospitalisation insurance, one 'chèque repas' per working day and a MTB/public transportation subscription.

(4) The complaint to the European Ombudsman

The ETUI alleged that the Commission’s recovery order for EUR 109 318 was unjustified and inadequately reasoned. In its letter of 20 April 2004 to the Ombudsman, ETUI referred, in particular, to the expenses relating to water and coffee consumption ('vivres et boissons') and to the refusal of the expenses relating to the EXPO 2000 conference.

(i) The reference to ‘water and coffee consumption’ is misleading. The examination by the auditors of this particular account revealed numerous uncontrollable items ordered via the caddy-home system including 'vins rouges et blancs'. The services of the Commission maintain their opinion that expenses in respect of snacks and drinks for office parties are of a purely private nature, and that they cannot be accepted under the eligible staff costs.

(ii) While examining the accounts relating to 'meetings', the auditors found an amount of BEF 4 125 093 under item 011108 entered as HBS 3-5.10.2000.

The file presented by ETUI showed a payment authorisation marked as " co-financing the EXPO 2000 conference in Hanover from 3 to 5 October 2000". The auditors found an invoice for an amount of DM 200 000 of the Hans Böckler Stiftung (HBS) to ETUI for services provided.

An examination of the file showed that the payment of the amount was not related to any real costs incurred by ETUI. It was rather a subsidy or gift to HBS for which this organisation produced a global invoice. The Commission had rejected the amount because the grant agreement did not allow financial participation or contributions to other entities.

In its reply of 11 July 2002, ETUI referred to the action as sponsoring.

The file examined by the auditors was a closed file. It did not contain a final account of HBS or the relevant supporting documents to justify the costs, nor any justification which could demonstrate the correct use of the amount of DM 200 000 financed by ETUI. Article 3(3) of the grant agreement(1) in conjunction with Article 11(1) of part B of annex 2 to the agreement(2) stipulated that the Commission could only accept real costs which were identifiable and controllable. Giving a subsidy not linked to real costs was a way of avoiding controls by the Commission.

In the letter to the Ombudsman, ETUI further argued that the EXPO 2000 conference had been duly announced in ETUI Work programme 2000, which was approved by the Commission.

The services of the Commission point out that ETUI had never informed the Commission that it would sponsor this event with an amount of DM 200 000 (about one third of its yearly budget for meetings), despite the fact that the contract with HBS had already been signed in August 1999. The final declaration presented by ETUI to the Commission after the event did not mention the amount or a justification for the use of this amount. The expenses were only detected because the Commission decided to carry out an ex post on-the-spot check.

The fact that the activity was generally referred to in the work programme was not an authorisation for the beneficiary to sponsor the activity for an arbitrary amount. Indeed, the grant agreement stipulated clearly that costs could only be considered eligible if they complied with the principles of sound financial management, in particular value for money and cost effectiveness. If beneficiaries of Community grants were to be allowed to freely sponsor activities simply because they are linked to the work programme, the Commission would no longer be able to carry out its supervisory tasks, with the result that fraud and irregularities could no longer be avoided.

5. Conclusions

On the basis of the above, the Commission concluded that the complainant's justifications had not been sufficient and that the principles of sound financial management of Community funding had not been complied with in this case.

The complainant's observations

In their observations on the Commission's opinion, the complainants first addressed the Commission's refusal to recognise ETUI's payment in relation to the EXPO 2000 conference. It emphasised that the Commission knew about ETUI's planned participation in the EXPO 2000 conference, and that ETUI was co-organising - and therefore not subsidising - the event. The complainant noted that:

"[w]hat we have not been able to do until now and what is quite impossible to do is to identify within the global invoices addressed to the Hans Böckler Stiftung, the main organiser and local contractor for all services to be provided, the exact share which relates to ETUI for the 2 meetings wherefore we were responsible and for ETUI's part in the general costs related to the Conference posts as whole like printing costs, interpretation, subsistence, meals, travel costs and technical equipment, which were contracted by the HBS for the whole event. Therefore it is impossible to identify exactly how much of these costs should be allocated to ETUI".

With regard to the costs for 'vivres et boissons', the complainant stated that "[n]one of the three previous audits conducted since 1978 has ever opposed to the costs for 'vivres et boissons'. Accordingly, we fail to understand why these costs have all of a sudden been rejected now."

Further inquiries
The further inquiries

After careful consideration of the Commission's opinion and the complainant's observations, it appeared that further inquiries were necessary. On 21 March 2005, the Ombudsman asked the Commission to provide further information regarding the following statement by the complainants: "None of the three previous audits conducted since 1978 has ever opposed to the costs for 'vivres et boissons'. Accordingly, we fail to understand why these costs have all of a sudden been rejected now."

The Commission was furthermore informed that it was welcome to comment on the entirety of the complainant's observations.

The Commission's reply

In its reply of 30 May 2005, the Commission made the following comments:

(1) Regarding 'vivres et boissons'

The item 'vivres et boissons' had never been mentioned as such in ETUI's provisional budget or in the final declaration presented to the Commission, nor had it been expressly accepted in any audit reports. Rather, the costs for 'vivres et boissons' had apparently been entered under the expenses for 'staff costs'.

In the year 2000, ETUI had declared an amount of EUR 1 822 576 for staff costs (more than half of its total budget). This included an amount of EUR 72 819 for the item "other staff costs". According to the information from ETUI, the item "other staff costs" in the yearly budget of ETUI covers costs for 'chèques repas', transport costs for staff, and accident and hospitalisation insurance. The amount seems a priori not unrealistic for an agency the size of ETUI. However, the Commission was not expressly informed that ETUI had also included an amount of EUR 7 000 for "snacks and drinks for office parties" under "other staff costs". This amount was not identifiable in the final declaration submitted by the beneficiary to the Commission.

In order to be eligible, expenditure under the heading "Other staff costs" must be explained and justified in ETUI activity reports and identifiable as being of a professional and not of a private nature. This was clearly not the case for the budget item 'vivres et boissons' examined in detail during the on-the-spot audit. It is furthermore nowhere documented that the Commission has accepted any costs for 'vivres et boissons', or that ETUI has informed the Commission that parts of its staff costs were used for that purpose. The Commission therefore maintains that these expenses are not eligible.

(2) The EXPO 2000 conference

(i) In respect of ETUI's expenses for the EXPO 2000 conference, ETUI had not demonstrated that the expenses were eligible. As stated in the audit report, the auditors only received one global invoice for ETUI's expenses. Long after the audit procedure had been closed, the Director of ETUI submitted additional documents, which the Commission agreed to examine. However, these additional documents did not demonstrate the eligibility of the expenses.

(ii) The ETUI has stated in its observations that the Commission has not rejected expenses related to other meetings. First, this statement is wrong. It is clear from the audit report that the Commission rejected expenditure declared under the subheading "meetings" because ETUI had not demonstrated that it had incurred real costs in relation to that meeting. The ETUI agreed with the rejection of the expenditure concerned.

(iii) On page one of its observations, ETUI argues that its involvement in the EXPO 2000 conference was not a subsidy but a payment of costs related to real participation.

However, in its letter of 11 July 2002 to the Commission, ETUI had clearly stated that it had sponsored this activity. This was not foreseen in the grant agreement.

In ETUI's correspondence sent to the Commission after the closure of the audit procedure, ETUI no longer referred to sponsoring, but claimed instead that the payment of the DM 200 000 related to real costs which had actually been incurred by the beneficiary. However, during a meeting with the Commission held on 12 December 2002, ETUI was not able to link the amount to any costs it had incurred. The invoices of HBS and other companies which were presented during the meeting did not relate to the two workshops in which ETUI took part. They related to overall expenditure incurred by third parties during the total duration of EXPO 2000. It should be added that ETUI had organised the two workshops together with four other institutions. It was concluded during the meeting that the beneficiary was not able to prove that the declared expenditure related to costs which had actually been incurred by ETUI. The amount was therefore a subsidy or a gift. It is clear that fraud and irregularities could no longer be avoided if beneficiaries of Community grants were allowed to freely sponsor activities relating to their work programme.

(iv) In its observations, ETUI slightly changed its argumentation by referring to "sub-contracting". However, no amount of sub-contracting was foreseen in the budget that was included as an integral part of the grant agreement.

(v) It should be emphasised that ETUI never informed the Commission that it would make the financial contribution to the Hanover event, despite the fact that it had made the commitment already in August 1999. Furthermore, this financial contribution was never mentioned in ETUI's regular reports sent to the Commission.

The complainant's observations

The Commission's reply of 30 May 2005 to the Ombudsman's further inquiries was forwarded to the complainant, which submitted, on 6 July 2005, the following observations:

(1)'Vivres et boissons'

It is true that the post 'vivres et boissons' has never been mentioned as such in official documents such as in the provisional budget or in the final declaration presented to the Commission, but it has been mentioned in the more detailed budget of ETUI, which ETUI always adds to the official budget, for information. The reason why the post 'vivres et boissons' did not appear explicitly in the official budget model, which ETUI had to use (for the provisional budget as well as for the final declaration) was because the post 'vivres et boissons' was not explicitly mentioned as a standard post on that form. Thus, in order correctly apply the Commission's budget form requested, ETUI had to add together several posts of ETUI budget(3).

When the Commission argues that it has no reference to audit reports which have ever expressly accepted such expenses, it has to be pointed out that audit reports in general mention what is rejected, not what is accepted.

The Commission also seems to suggest that ETUI has hidden 'vivres et boissons' under the post 'staff costs'. However, the normal bookkeeping method used in Belgium, and which has to be respected by all organisations in Belgium, foresees in the balance the heading 'staff costs', with a subdivision 'other staff costs', and within this the post 'vivres et boissons'. This shows that ETUI applies the relevant Belgian legislation correctly.

The Commission criticises ETUI for not having informed it during the audit about the EUR 7 000 expenses for "snacks and drinks for office parties" under 'other staff costs'. However, during the audit, which lasted two days, all ETUI's books and invoices covering one year were carefully examined by the auditors. The ETUI therefore fails to understand why the auditors did not see that the post 'vivres et boissons' did not cover "snacks and drinks for office parties" but merely water, coffee, tea, milk, toilet paper and the like (with the exception EUR 107.09 for wine) for the staff and the participants in ETUI's meetings. It is normal practice in Belgium for companies to offer water, coffee and tea to their employees during working hours. Furthermore, ETUI's participants at meetings do not receive a per diem, and it is therefore only normal that ETUI offers them a soft drink during the meetings.

All the above explanations show clearly that the costs under 'vivres et boissons' were of a professional and not of a private nature. The ETUI admits that it did not explain and justify this specifically in its activity report. However, ETUI presumed that in the activity report - a document which is published - ETUI had to report on its research activities, publications and conferences, and not on the consumption of water and toilet paper.

2. The Expo 2000 conference

The ETUI had already admitted to the Commission that one can discuss the level of the expenses for this important conference, but not, however, the fact that ETUI assumed responsibility for certain costs which were linked to the two workshops. Since the activity was announced in ETUI Work Programme for 2000, which was approved by the Commission without an explicit budget figure being mentioned for this activity, and reported in ETUI's Activity report 2000, ETUI still considers that it is possible to recognise the eligibility of costs involved in the co-financing arrangement.

Further inquiries

In the light of the complainant's observations, the Ombudsman considered it necessary to request the Commission to reply to the following:

(1) In their observations, the complainants state that they have always submitted to the Commission a more detailed non-compulsory budget-account on which the cost item "vivres et boissons" was clearly indicated (cf. annex 1 in the observations). The complainants also point out that the "caddy home" deliveries under this item did not concern "private office parties".

I would be grateful if the Commission could submit comments regarding these points.

(2) In the light of the information provided by the complainants, I would furthermore be grateful if the Commission could provide me with copies of the non-compulsory budget-accounts submitted by ETUI for the years 1995 to 1999, as well as any information as to how the Commission has dealt with the information contained on those accounts.

(3) I would also be grateful if the Commission could provide me with copies of the "caddy home" invoices that it may have collected for the year 2000.

The Commission's reply

On 15 November 2005, the Commission submitted its reply to the Ombudsman's further inquiries. It made, in summary, the following comments:

(1) Non-compulsory budget accounts

The ETUI has stated that it has always submitted to the Commission a more detailed non-compulsory budget-account on which the post 'vivres et boissons' was clearly indicated. It refers to the document in Annex 1 of its observations.

The Commission's services have examined the files for the requested period. In the budget accounts submitted by ETUI in the years concerned, the post 'vivres et boissons' is not mentioned. In some cases, the budget account mentions 'sheet 1', which seems to suggest that other sheets existed. These, however, have not been sent to the Commission. In one other case (year 1997), the cover letter is not in the file, probably because the account had been submitted directly to the Commission. The document in Annex 1 to the observations of ETUI relating to the year 2000 has not been sent to the Commission either.

The post 'vivres et boissons' was therefore not identifiable in the budget-accounts presented to the Commission between 1995 and 1999.

(2) Caddy-home invoices

In its opinion of 2 August 2004 on the present complaint, the Commission noted that this expenditure basically related to numerous uncontrollable items ordered via the 'caddy home' system. Neither during the on-the-spot control nor during the "contradictory procedure" without being sure to what it specifically refers in the present context, which ended on 15 July 2002, has the beneficiary provided any supporting documents which could demonstrate the eligibility of the expenses concerned. The invoices concerned were not filed in 2000, and thus no copies of the annexes for that year can be submitted to the Ombudsman in the present inquiry. The grant agreement, signed by ETUI, provides that costs which are not identifiable and controllable cannot be considered eligible costs.

Even if the supporting documents annexed to the complainant's last set of observations had been presented to the Commission during the contradictory procedure, the Commission would have maintained its rejection of the post 'vivres et boissons' for the following reasons:

(i) the 'caddy home' invoice annexed to the complainant's last set of observations relates to the year 2001 (the audit here concerned covering 2000 only) Furthermore, this document also refers to different account numbers, not only to 'vivres et boissons'.

(ii) 'vivres et boissons' relates to snacks and drinks. The handwritten reference, in English, made on the supporting documents in Annex 3 to ETUI's last observations, intended to suggest that such deliveries also related to non-food overhead, had been entered a posteriori.

(iii) The ETUI argues that the deliveries "covered merely water, coffee, tea, milk and the like for the staff and the participants in ETUI meetings who do not receive a per diem, which means that it is reasonable to offer such drinks during the meetings". The Commission disagrees with this remark because water, tea and coffee consumption had also been entered under other headings in the bookkeeping, not under 'vivres et boissons'. By way of example, reference is made to items 010034, 011035, 010395 and 010040 in the bookkeeping for the year 2000. These products do therefore not relate to the 'caddy-home-invoices' booked under 'vivres et boissons'.

(iv) Concerning ETUI staff itself, it should be added that the Collective Agreement applicable to the year 2000 provides for 'chèques repas' of EUR 5.60 per day for each staff member precisely to cover the costs of their snacks and drinks.

(v) Finally, not all staff costs mentioned in the Belgian bookkeeping plan are eligible under the terms of the grant agreement. Staff costs which have not been justified and explained in advance to the Commission are not acceptable.

With regard to the complainant's remark that the Commission's auditors examined all the books and invoices during the audit in April 2002, the Commission points out that, as stated in the audit report, only a selection of items had been checked. It is not possible for auditors to carry out an exhaustive check as the bookkeeping and administration of an ETUI-budget year involve thousands of different items and corresponding supporting items. Not all costs entered in the accounts can be examined during the on-the-spot control. This does not, however, mean that the Commission has accepted all costs which have not been expressly rejected during the audit. The Commission can always reject these costs later, for example, following investigations by OLAF or other control authorities.

With regard to the EXPO 2000 conference, the Commission maintained its position set out in its previous opinions.

The complainant's observations

The complainant submitted, in summary, the following observations:

(1) Non-compulsory budget accounts (years 1995 - 1999)

The Commission argues that the budget item 'vivres et boissons' was not identifiable in the budget accounts presented to it between 1995 and 1999. This is true for the official accounts referred to by the Commission, for the very simple reason that these accounts had to respect the budget structure model imposed by the Commission. However, ETUI has explained in its previous observations that the item 'vivres et boissons' did appears explicitly in the more detailed budget that was made in accordance with Belgian legislation. The ETUI sent, on different occasions, copies of the more detailed budget accounts to the Commission in addition to the official and less detailed accounts(4).

(2) Caddy-home invoices

The Commission argues that the caddy-home invoices are not identifiable and controllable. It also maintains its argument that it had not been aware of the fact that ETUI had entered such expenses for snacks and drinks under staff costs. As previously demonstrated, all caddy-home invoices were explicitly mentioned in ETUI's Compte Grand-Livre of 2000, which was available for ex post control. The ex post controllers can therefore not argue that these invoices were neither identifiable nor controllable. The ETUI incorporated these costs under 'other staff costs' because of the normal Belgian bookkeeping plan, and not in order to hide those costs from the Commission.

(3) The EXPO 2000 conference

ETUI maintained its position.

THE DECISION

1 Allegation of unjustified and inadequately reasoned recovery order

1.1 The complaint was made by the European Trade Union Institute (the "ETUI"), which contested a Commission recovery for EUR 109 318. This recovery order concerned a grant awarded by the Commission to ETUI for its Work Programme 2000. The recovery order was based on an audit report of 4 September 2002. The auditors had proposed to the Commission to recover the amount of EUR 109 318 mainly for meeting costs, staff costs, travel costs and some other minor items including water and coffee consumption ('vivres et boissons').

The complainant stated that previous audits had not rejected the item 'vivre et boissons'. It therefore failed to understand why it had been rejected this time.

With regard to a specific conference mentioned in the audit report (the EXPO 2000 conference, which took place in Hanover), the costs for which had been rejected, the complainant stated that its work programme, which had been approved by the Commission, had referred to this event. In the complainant's view, the Commission had therefore essentially approved that event.

The complainant alleged that the Commission's recovery order for EUR 109 318, as communicated to it on 20 January 2003 was unjustified and inadequately reasoned.

1.2 In its opinion on the complaint, the Commission rejected the allegation. In its observations, the complainant maintained this allegation. The Ombudsman conducted further inquiries, asking the Commission for additional information. The arguments of both parties are set out below (point 1.5).

1.3 In the light of the inquiries conducted, the Ombudsman first notes that the present case concerns, in essence, an allegation that the Commission has failed to provide valid and adequate grounds for its decision to issue the above-mentioned recovery order. This order involved the following relevant items: (i) expenses for 'vivres et boissons', and (ii) expenditures related to the EXPO 2000 conference.

1.4 With regard to 'vivres et boissons', the Ombudsman notes that the relevant applicable provision in the "General terms and conditions applicable to Grant Agreements of the European Communities" (applicable according to the Preamble of specific grant agreement here concerned) provided as follows:

"Article 11 - Eligible costs

1. Eligible costs of the Operation are taken to mean costs which satisfy the following criteria:

• They must be directly linked to the subject matter of the Agreement and be provided for in the Agreement;
• They must be necessary for carrying out the Operation covered by the Agreement;
• They must be reasonable and comply with the principle of sound financial management, and in particular of value for money and cost-effectiveness;
• They must have been incurred during the lifetime of the Operation as defined in Article 2.1 of the Agreement;
• They must have been actually incurred, be recorded in the beneficiary's account or tax documents and be identifiable and controllable.

2. The following direct costs shall be eligible:

• The cost of staff assigned to the project, corresponding to real salaries plus social security charges and other costs making up remuneration;
• Travel and subsistence costs for staff taking part in the Operation;
• Purchase costs for equipment (new or used), land and buildings, provided that these correspond to normal market costs and that the value of the items concerned is written down in accordance with the tax and accounting rules applicable to the beneficiary. Only the proportion of depreciation of the item corresponding to the duration of the Operation may be taken into account by the Commission, except where the nature and/or the use of the item justifies different treatment by the Commission;
• The costs of consumables and supplies;
• Expenditure of subcontracting, provided that the Commission has given advance written agreement for subcontracting. In this case the beneficiary shall ensure that the terms applicable to it under the Agreement are also applicable to subcontractors;
• Costs deriving directly from the requirements of the Agreement (dissemination of information, specific evaluation of the Operation, translation, reproduction, etc.), including, where appropriate, financial service costs (in particular the costs of financial guarantees), but not including exchange risks;
• A contingency reserve of no more than 5 % of direct eligible costs."

1.5 The Ombudsman notes that the complainant has, in summary, put forward the following arguments with respect to the rejection of the expenses for 'vivres et boissons':

• previous Commission audits had never opposed the cost item of 'vivres et boissons';
• 'vivres et boissons' had been mentioned in a more detailed budget produced in accordance with the relevant Belgian legislation, and copies of this more detailed budget had been provided to the Commission;
• under the relevant Belgian legislation, the item 'vivres et boissons' appears under 'other staff costs', and this is why this item was inserted under that heading;
• various 'caddy-home' invoices were explicitly mentioned in its books available to auditors;
• 'vivres et boissons' do not simply cover snacks and drinks for office parties, but also cover water, coffee, tea, milk, toilet paper, and the like for staff and participants in meetings organised by ETUI. It is normal practice in Belgium for companies to offer such items to employees during working hours and to participants in meetings(5).

The Commission, for its part, has argued that:

• it had been specifically agreed between the Commission and ETUI that "other staff costs" should include accident insurance, pension fund insurance, hospitalisation insurance - public transportation subscription and one 'chèque repas' (of EUR 5.60) for each staff member per working day (the 'chèques repas' covering, specifically, food and drinks(6)); it had not been agreed that "other staff costs" should include "snacks and drinks for office parties";
• the costs for 'vivres et boissons' were not identifiable in ETUI 's final declarations; specifically, they were not explained and justified in ETUI activity reports and identifiable as professional as opposed to private costs;
• the 'vivres et boissons' costs were, accordingly, not eligible; they had never been justified and explained in advance;
• the 'vivres et boissons' costs encompassed, notably, several uncontrollable items ordered via the caddy-home system, including vins rouges et blancs;
• these costs were not identifiable in the budget-accounts for 1995-1999;
• in any event, the invoices presented in an untimely manner by ETUI could not justify the expenses: (i) the invoice attached to ETUI 's last observations refers to 2001 (the audit here concerned was for the year 2000) and refers to several account numbers, not only 'vivres et boissons'; (ii) the handwritten notes made on ETUI 's supporting documents appear to have been made a posteriori; (iii) water, tea, and coffee had also been entered under other headings in the bookkeeping;
• finally, items which have not been expressly rejected during an audit are not, for that reason, implicitly accepted; it is not the case that auditors carry out an exhaustive check of every single cost item, of which there are several thousand.

1.6 Taking into account the above arguments made by the complainant and the Commission, and the above-mentioned provisions of the Grant Agreement, the Ombudsman finds that the Commission has offered valid and adequate grounds for its decision to reject the expenses for 'vivres et boissons', since:

(i) as agreed between the Commission and ETUI , "other staff costs" included the expenses for 'chèques repas' for the complainant's staff members (destined to cover specifically meals and drinks);

(ii) these expenses encompassed, notably, several non-identifiable or uncontrollable items (ordered via the caddy-home system) and ETUI failed to submit relevant, valid and sufficient, supporting documents/invoices;

(iii) such expenses also appeared under other headings in the complainant's books (which does not appear to have been contested by the complainant).

1.7 With regard to the complainant's argument that previous Commission audits had not rejected the item 'vivres et boissons', the Ombudsman recalls that principles of good administration embodied in Article 10(2) of the European Code of Good Administrative Behaviour(7) required that the Commission respect the legitimate and reasonable expectations the complainant had in the light of how the Institution had acted in the past. According to the established case-law of the Court of First Instance, three conditions must be satisfied in order to claim entitlement to the protection of legitimate expectations. First, precise, unconditional and consistent assurances originating from authorised and reliable sources must have been given to the person concerned by the Community authorities. Second, those assurances must be such as to give rise to a legitimate expectation on the part of the person to whom they are addressed. Third, the assurances given must comply with the applicable rules(8).

1.8 In the present case, it has not been shown that the first of the above-mentioned conditions is met. In this regard, it must be noted that the mere non-rejection by the past Commission's audits of the relevant item, which, as stated by the complainant, was included in the more detailed ETUI budgets, drafted in accordance with the Belgian legislation and available to the Commission's auditors, cannot be considered as amounting to the provision of precise, unconditional and consistent assurances on the part of the Commission that expenses for this item would also be not rejected in the future, even if (i) "other staff costs" included those for 'chèques repas' for the complainant's staff members, (ii) such expenses encompassed several non-identifiable or uncontrollable items and were not supported by relevant, valid and sufficient, documents/invoices, and (iii) such expenses also appeared under other headings in the complainant's books.

1.9 In the light of the foregoing, the Ombudsman finds that that has been no maladministration with respect to this part of the case.

1.10 With regard to the dispute relating to the expenses incurred by the complainant in relation to the EXPO 2000 Hanover conference, two issues have been raised: first, whether those expenses are identifiable and controllable; second, whether the expenses were, at all, eligible under the grant agreement here concerned.

1.11 With regard to the first issue, the Commission has argued, in summary, that the file examined by its auditors was a closed file which did not contain a final account of the relevant supporting documents to justify the relevant costs, nor any justification which could demonstrate the correct use of the amount of DM 200 000 spent by the complainant. However, Article 3(3) of the grant agreement(9) in conjunction with Article 11(1) of part B of annex 2 to the agreement(10) stipulated that the Commission could only accept real costs which were identifiable and controllable.

1.12 The complainant, for its part, has itself noted that "[w]hat we have not been able to do until now and what is quite impossible to do is to identify within the global invoices (...) the exact share which relates to ETUI for the 2 meetings wherefore we were responsible and for ETUI's part in the general costs related to the Conference posts as whole like printing costs, interpretation, subsistence, meals, travel costs and technical equipment (...). Therefore it is impossible to identify exactly how much of these costs should be allocated to ETUI".

1.13 In the light of the above, the Ombudsman finds that the Commission has provided valid and adequate grounds for its rejection of the expenses related to the EXPO 2000 conference, which were not identifiable and controllable, and thus did not meet the relevant requirement laid down in the Grant Agreement. For this reason, the Ombudsman finds no maladministration with respect to the Commission's refusal to finance these expenses.

1.14 With regard to the second issue of whether the expenses for the EXPO 2000 conference were eligible in the first place, the Ombudsman concludes that, in the light of his above finding in point 1.9 further inquiry into and consideration of this matter is neither necessary nor justified.

2 Conclusion

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

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

Yours sincerely,

 

P. Nikiforos DIAMANDOUROS

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(1) "Should the real costs on completion of the Beneficiary's annual budget execution prove to be lower than the estimated eligible costs specified in paragraph 1, the Commission's contribution will be limited to the amount calculated by applying the percentage specified in paragraph 2 to real costs. The Beneficiary undertakes to repay to the Commission any sums already paid in excess of this amount."

(2) "Eligible costs of the Operation are taken to mean costs which satisfy the following criteria:
- They must be directly linked to the subject matter of the Agreement and be provided for in that Agreement;
- They must be necessary for carrying out the Operation covered by the Agreement;
- They must be reasonable and comply with the principles of sound financial management, and in particular of value for money and cost-effectiveness;
- They must have been incurred during the lifetime of the Operation as defined in Article 2.1 of the Agreement;
- They must have been actually incurred, be recorded in the beneficiary's accounts or tax documents and be identifiable and controllable."

(3) The complainant annexed copies of the model budget form handed in to the Commission, as well as the budget made in accordance with Belgian legislation. It also annexed three copied pages on 'vivres et boissons' from its 'Compte grand-livre'. These contained the references to 'caddy-home' deliveries. Some of these "caddy-home' items were not specified in terms of products; one such item contained the handwritten note '= water, coffee, toilet paper, kitchen paper'; others referred, in typed form, to products such as 'vins rouges et blanc', "sucre/café/spa-reine", "café/eau/filtres". In addition, the complainant annexed a copy of a "caddy-home" invoice from January 2001, containing product items such as kitchen rolls, toilet paper, water and juice.

(4) The complainant enclosed a copy of a fax message to the Commission dated 2 February 1999, addressed to Ms Jackie MORIN, "Administrateur Principal, Commission Européenne, DG V". The cover letter of the message contained the following text: " Cher Jackie, Voici le projet de budget 1999 de l'ISE pour vos commentaires. A bientot! H.". The budget enclosed contained the budget item 'vivres et boissons'. This item featured amongst six other items under the heading COTISATIONS PATRON. SEC.SOC, between the items 'abonnements train + MTB' and "chèques repas".

(5) The complainant annexed copies of the model budget form handed in to the Commission, as well as the budget made in accordance with Belgian legislation. It also annexed three copied pages on 'vivres et boissons' from its 'Compte grand-livre'. These contained the references to 'caddy-home' deliveries. Some of these "caddy-home' items were not specified in terms of products; one of such items contained the handwritten note '= water, coffee, toilet paper, kitchen paper'; others referred, in typed form, to products such as 'vins rouges et blanc', 'sucre/café/spa-reine', 'café/eau/filtres'. In addition, the complainant annexed a copy of a 'caddy-home' invoice from January 2001, containing product items such as kitchen rolls, toilet paper, water and juice.

(6) 'Chèques repas' are cheques with which, in general, persons receiving their remuneration through public money can buy meals and drinks in restaurants, cafés or similar places.

(7) "1. The official shall be consistent in his own administrative behaviour as well as with the administrative action of the Institution. The official shall follow the Institution’s normal administrative practices, unless there are legitimate grounds for departing from those practices in an individual case; these grounds shall be recorded in writing.

2. The official shall respect the legitimate and reasonable expectations that members of the public have in the light of how the Institution has acted in the past."

The European Code of Good Administrative Behaviour is available on the Ombudsman's website (www.ombudsman.europa.eu/code/en/default.htm).

(8) See Case T-203/97 Forvass v Commission [1999] ECR-SC I-A-129 and II-705, paragraph 70; Case T-199/01 G v Commission [2002] ECR-SC I‑A-217 and II-1085, paragraph 38; Case T-347/03 Branco v Commission, paragraph 102.

(9) "Should the real costs on completion of the Beneficiary's annual budget execution prove to be lower than the estimated eligible costs specified in paragraph 1, the Commission's contribution will be limited to the amount calculated by applying the percentage specified in paragraph 2 to real costs. The Beneficiary undertakes to repay to the Commission any sums already paid in excess of this amount."

(10) See point 1.4 of the present decision.