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I Information

Court of Auditors

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SPECIAL REPORT No 5/2004

concerning Phare support to prepare Candidate Countries for managing the Structural Funds, together with the Commission’s replies

(pursuant to Article 248(4), second subparagraph, of the EC Treaty)

(2005/C 000/01)

CONTENTS

The Commission’s replies

LIST OF ABBREVIATIONS

SUMMARY

The overall approach of using the Phare programme to prepare Candidate Countries for managing the Structural Funds

Phare procedures

Allocations for and implementation of programmes to prepare for the Structural Funds

Results of institution-building projects to prepare Candidate Countries for managing the Structural Funds

Overall conclusion

Recommendations

INTRODUCTION

Phare assistance to prepare Candidate Countries for managing the Structural Funds

The Court’s audit

Table 1

Special Preparatory Programme and Economic and Social Cohesion programme commitments

THE OVERALL APPROACH OF USING THE PHARE PROGRAMME TO PREPARE CANDIDATE COUNTRIES FOR MANAGING THE STRUCTURAL FUNDS

The choice of Phare made preparation of Candidate Countries for the ERDF and ESF more difficult

The design of Phare ESC programmes differed from Structural Fund Objective 1 approaches

Constraints affecting strategy of using Phare to prepare for the ERDF and ESF

PHARE PROCEDURES

Delays in establishing Extended Decentralised Implementation System

Multi-annual programming not introduced

FUNDING AND IMPLEMENTATION OF PHARE PROGRAMMES TO PREPARE CANDIDATE COUNTRIES FOR MANAGING THE STRUCTURAL FUNDS

Allocation of funding to most countries was less than foreseen

Table 2

ESC commitments as a percentage of Phare National Programmes 2000-2002

Difficulties experienced in preparing programmes similar to Structural Fund Objective 1 programmes

Delays in programme implementation

Table 3

Implementation of ESC programmes 2000-2002 (31.12.2003)

Table 4

ESC commitments 2000-2002 compared with Structural Fund allocations 2004-2006

RESULTS OF INSTITUTION-BUILDING PROJECTS TO PREPARE CANDIDATE COUNTRIES FOR MANAGING THE STRUCTURAL FUNDS

CONCLUSIONS

Difficulties in the overall approach of using the Phare programme to prepare Candidate Countries for managing the Structural Funds

Limited progress in moving Phare closer to Structural Funds

Variable allocations for and delayed implementation of ESC programmes

Only partial achievement of results of institution-building projects to prepare Candidate Countries for managing the Structural Funds

Overall conclusion

RECOMMENDATIONS

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 7 and 8 July 2004.

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

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(1)  The Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Slovenia and Slovakia.

(2)  Objective 1 funding is allocated to EU regions defined as lagging behind in their development by the fact that their gross domestic product per capita is below 75 % of the EU average. Approximately two thirds of Structural Funds are allocated to this objective.

(3)  The principal objective of the ERDF is to promote economic and social cohesion within the European Union through the reduction of imbalances between regions or social groups. The ESF is the main financial instrument allowing the Union to realise the strategic objectives of its employment policy. The EAGGF is designed to contribute to the structural reform of the agriculture sector and to the development of rural areas. For the Structural Fund programming period 1994-1999, 52 % of funds were implemented through the ERDF, 30 % through the ESF and 16 % through the EAGGF. The remaining 2 % were implemented through the fourth Structural Fund, the Financial Instrument for Fisheries Guidance (FIFG).

(4)  The Cohesion Fund finances environment and transport infrastructure projects in countries whose GNP per capita is below 90 % of the EU average (current recipients are Greece, Spain, Ireland and Portugal).

(5)  The new orientation agreed was set out in a Communication to the Commission from Commissioner van den Broek: New Orientations for the Phare Programme in the Context of Pre-Accession Assistance (COM(97) 112/8, Brussels, 18 March 1997).

(6)  As well as the countries referred to in footnote 1, which will join the European Union in May 2004, the Phare programme also provides assistance to Bulgaria and Romania which are foreseen to join the European Union at a later date.

(7)  COM(97) 112/8, Brussels, 18 March 1997.

(8)  The Helsinki Summit of the European Council in December 1999 opened the possibility of accession to a further six countries (Bulgaria, Latvia, Lithuania, Malta, Romania and Slovakia). Subsequently the Nice European Council in December 2000 established 2004 as the target date for accession. The Laeken European Council of December 2001 declared that accession was irreversible and that these 10 countries should be ready in 2004.

(9)  Council Regulation (EC) No 1267/1999 of 21 June 1999 establishing an Instrument for Structural Policies for Pre-Accession (OJ L 161, 26.6.1999, p. 73).

(10)  Council Regulation (EC) No 1268/1999 of 21 June 1999 on Community support for pre-accession measures for agriculture and rural development in the applicant countries of central and eastern Europe in the pre-accession period (OJ L 161, 26.6.1999, p. 87).

(11)  Based on Structural Fund assistance 1994-1999: ERDF 75,0 billion euro; ESF 43,4 billion euro; EAGGF 23,5 billion euro.

(12)  ‘Guidelines for Phare Programme Implementation in Candidate Countries for the Period 2000-2006 in Application of Article 8 of Regulation (EEC) No 3906/89’. Commission Decision: SEC(1999) 1596 final, Brussels, 13 October 1999.

(13)  The second area to be funded under investment was 'Alignment with EU norms and standards' which primarily involved the provision of equipment to key institutions for the monitoring and enforcing of the acquis.

(14)  See Section 3 ‘Institution-Building’ of the 2000-2006 Guidelines.

(15)  Directorate-General Enlargement, C(2000) 3103/2, 27 October 2000.

(16)  The Court is carrying out a separate audit on the management of the Sapard pre-accession instrument which is linked to the third main Structural Fund, the EAGGF. In addition, the Court examined aspects of the management of ISPA in its Special Report No 5/2003 ‘Phare and ISPA Funding of Environmental Projects in Candidate Countries’, OJ C 167, 17.7.2003

(17)  From 1998-2003 the Commission issued annually ‘Regular Reports’ on Candidate Countries’ level of preparedness for EU membership. Following completion of the accession negotiations at the end of 2002 with eight of the ten Candidate Countries from central and eastern Europe, the Commission published in November 2003 a ‘Comprehensive Monitoring Report’ on the extent to which they had taken further steps in preparation for membership.

(18)  Most commitments for the ESC included a Twinning component. In a limited number of cases, a separate commitment was made for a Twinning project in relation to ESC. These projects were also examined by the Court and are included in Table 1.

(19)  The ‘Nomenclature of Territorial Units for Statistics’ (NUTS) divides countries into NUTS I (national), NUTS II (regional) and NUTS III (county) levels. In larger countries with more than one NUTS II region, the NUTS II level is normally the level for which Structural Fund regional operation programmes are established. However, in small countries the whole country may only correspond according to this classification to a NUTS II level.

(20)  Community Support Frameworks are the strategic documents required by the Structural Fund Regulation and are designed to provide co-ordination of all Community structural assistance in the regions concerned.

(21)  Synthesis Paper arising from Twinners Seminar, ‘Preparations for the Structural Funds in the Candidate Countries’ held on 15 and 16 March 2001 in Brussels.

(22)  In Ireland for the 1994-1999 programming period 100 % of the funds were implemented through sectoral programmes in industry, economic infrastructure, human resources, environmental services, tourism, transport, agriculture and rural development, local development, fisheries, and technical assistance. In Portugal 78 % and in Greece 68 % of funds were implemented through sectoral operational programmes. (Source: Report from the Commission: 11 Annual Report on the Structural Funds (1999), Volume II, Annex 7, COM(2000) 698 final, Brussels, 13 November 2000).

(23)  In June 2000, the Director-General for Regional Policy wrote to the Directors-General for Enlargement, Employment, Fisheries and Agriculture that: ‘Dans la mesure où ces pays sont potentiellement éligibles à l'objectif no 1 des Fonds structurels, il me parait nécessaire de mettre l'accent sur la préparation à cette objectif, qui mobilisera des ressources financières importantes dès leur adhésion et nécessitera des adaptations par rapport à l'approche actuelle de Phare.’ (Letter of 6 June 2000, ref. D(2000) JFD.A. 1 001 01111).

(24)  Council Regulation (EC) No 1266/1999 of 21 June 1999 on coordinating aid to the Applicant Countries in the framework of the pre-accession strategy (OJ L 161, 26.6.1999, p. 68).

(25)  A circular letter sent by the Directors-General for Enlargement and Regional Policy to National Aid Coordinators in December 2000 stated that 'national preparatory efforts should start as soon as possible in those countries interested in moving to EDIS'.

(26)  The only exception was Hungary where EDIS was symbolically introduced on 30 April 2004.

(27)  On the subject of co-financing see also the Court's observations in its Annual Report 2002, paragraphs 8.10 and 8.11 (OJ C 286, 28.11.2003).

(28)  The average annual allocation for the Phare national programme over the period 2000-2002 for Poland was 373 million euro and Romania 251 million euro. For the eight other countries average annual allocation over the same period was 51 million euro.

(29)  Phare Programming Guide 2001, paragraph 5e).

(30)  The Structural Fund Regulation (EC) No 1260/1999 Article 31.2 foresees that ‘the Commission shall automatically decommit any part of a commitment which has not been settled by the payment on account or for which it has not received an acceptable payment application... by the end of the second year following the year of commitment’.

(31)  Notwithstanding the closeness of accession, the Commission's November 2003 ‘Comprehensive Monitoring Report’ pointed to continuing weaknesses in Candidate Countries' capacity for managing the Structural Funds. The countries needed to make what the Commission termed ‘enhanced efforts’ in their preparations for accession.

(32)  NUTS II level.

(33)  NUTS III level.

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THE COMMISSION’S REPLY

SUMMARY

INTRODUCTION

THE OVERALL APPROACH OF USING THE PHARE PROGRAMME TO PREPARE CANDIDATE COUNTRIES FOR MANAGING THE STRUCTURAL FUNDS

PHARE PROCEDURES

FUNDING AND IMPLEMENTATION OF PHARE PROGRAMMES TO PREPARE CANDIDATE COUNTRIES FOR MANAGING THE STRUCTURAL FUNDS

RESULTS OF INSTITUTION-BUILDING PROJECTS TO PREPARE CANDIDATE COUNTRIES FOR MANAGING THE STRUCTURAL FUNDS

CONCLUSIONS

RECOMMENDATIONS

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Corrigenda

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CORRIGENDA

Corrigendum to Special Report No 2/2004 concerning pre-accession aid: ‘Has Sapard been well managed?’ together Commission’s replies

(Official Journal of the European Union C 295 of 30 November 2004)

In the contents, on the cover page:

for:

‘Special Report No 2/2004 concerning pre-accession aid: “Has Sapard been well managed?” together Commission’s replies’,

read:

‘Special Report No 2/2004 concerning pre-accession aid: “Has Sapard been well managed?” together with the Commission’s replies’.

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