Special Report EU Pre‑accession 
Assistance to SerbiaEN 2014  NO 19
EUROPEAN
COURT
OF AUDITORS
EUROPEAN COURT OF AUDITORS  
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Luxembourg: Publications Office of the European Union, 2014
ISBN 978-92-872-1805-6
doi: 10.2865/59650
© European Union, 2014
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Printed in Luxembourg
EU Pre‑accession 
Assistance to Serbia
(pursuant to Article 287(4), second subparagraph, TFEU)Special ReportEN 2014  NO 19
02
 Contents
Paragraph
 Acronyms
I–VII  Executive summary
1–6 Introduction
1–4 Background
5–6 EU pre‑accession assistance to Serbia
7–8 Audit scope and approach
9–71  Observations
9–48 Part one  — Commission management of IPA projects
9–22  Funding decisions were derived from relevant strategies
23–38  The Commission has started to address project design weaknesses which have contributed to delays in 
implementation
39–48  IPA projects generally produced the planned outputs but results beyond the outputs may not be 
sustainable
49–71  Part two  — Commission management of non‑financial assistance in support of governance
49–63  The Commission addressed governance issues extensively in its dialogue with Serbia with increasingly 
positive impact
64–71  In approving Serbia’s system for managing EU funds, the Commission did not take full account of Serbia’s 
public finance management
03 Contents
72–81  Conclusions and recommendations
72–79  Conclusions
80–81  Recommendations
 Annex I — List of IPA projects audited
 Annex II  —  List of IPA projects reviewed for examination of governance and the fight against 
corruption as cross‑cutting issues
 Reply of the Commission
04
 Acronyms
CSO : civil society organisation
DIS: decentralised implementation system
EP: European Parliament
EPD : enhanced permanent dialogue
IA: Interim Agreement on Trade and Trade-related Matters
IPA: Instrument for Pre -accession Assistance
MIFF : multiannual indicative financial framework
MIPD : multiannual indicative planning documents
NAD : needs assessment document
NIPAC : national IPA coordinator
PAR : public administration reform
PEFA : public expenditure and financial accountability
PFM : public finance management
ROM : result-oriented monitoring
SAA : Stabilisation and Association Agreement
SAP : stabilisation and association process
SEIO : Republic of Serbia European Integration Service
SIGMA : support for improvement in governance and management
SME : small and medium-sized enterprise
05
 Executive  
summary
I
Since 2007, the EU’s financial support to Serbia 
through the Instrument for Pre -accession Assistance 
(IPA) has amounted to approximately 170 million euro 
per year. Governance, identified by the Commission as 
the most challenging area for Serbia, received a quar -
ter of the IPA funding. The EU complements the IPA 
funding with some non -financial means to help Serbia 
prepare for EU membership.
II
The audit objective was to assess whether the Com -
mission is managing pre -accession support to Serbia 
effectively, and, in greater depth, its support for the 
key area of governance. The audit covered the 2007–13 
period and addressed the following two questions.
(a) Has the Commission been managing IPA projects 
effectively?
(b) In its support for governance, has the Commis -
sion been managing non -financial assistance 
effectively?
III
The audit examined the IPA programming process and 
15 IPA -funded projects from the 2007, 2008 and 2009 
IPA annual programmes for Serbia, with a particu -
lar focus on the projects’ results. The non -financial 
assistance audited included the EU–Serbia dialogue on 
governance issues and cooperation to prepare Serbia 
for decentralised management of EU funds. The Court 
also reviewed another sample of 10 IPA projects from 
the 2010, 2011 and 2012 annual programmes to check 
whether governance and the fight against corruption 
were cross- cutting issues in projects where good gov -
ernance was not a primary objective.IV
The audit found that, overall, the Commission is 
managing pre -accession support to Serbia effectively. 
The financial pre -accession assistance to Serbia, 
along with other forms of support effectively helps 
Serbia to implement social and economic reforms 
and to improve governance in the country. Based on 
the experience gained in other IPA beneficiary coun -
tries, the Commission is putting increasing emphasis 
on governance issues in planning its financial and 
non -financial assistance to Serbia.
V
The Commission has been managing IPA projects 
effectively. Programming of the IPA financial assist -
ance is based on a coherent strategic framework and 
the approach to selecting projects relevant to prepar -
ing Serbia for accession is gradually improving. On the 
whole, the audited projects produced their planned 
outputs but suffered from weaknesses regarding their 
design, implementation and sustainability. When 
drawing up the latest IPA annual programmes, the 
Commission took steps to address the shortcomings 
identified by the Court in the earlier IPA projects.
Executive summary 06
VI
The Commission was effective in managing non - 
financial assistance to Serbia in the area of govern -
ance. The audit found that the EU–Serbia structured 
dialogue adequately covered the key governance 
areas and made the link between political priorities 
and policy formulation. The emphasis put on govern -
ance in the dialogue was generally not explicit in the 
projects’ design, but most of the projects reviewed by 
the Court had indirectly contributed to better govern -
ance and/or to the fight against corruption through 
their activities related to building administrative 
capacity. Regarding Serbia’s preparation for decentral -
ised management of EU funds, the audit found that 
the Commission’s approach was effective in support -
ing governance, but only in the limited sphere of the 
IPA management structures. The Commission’s audit 
work on the national IPA structures, in accordance 
with the IPA regulation, was not part of a compre -
hensive assessment of public finance management at 
country level.VII
The report sets out concrete recommendations to 
improve the programming, design and implemen -
tation of IPA projects in Serbia. In relation to the 
non -financial assistance, the Court recommends that 
the Commission support the Serbian authorities in 
further rationalising their national strategies and 
finalising a fully -fledged public finance management 
roadmap, improve the consultation mechanism of 
the CSOs, systematically assess the need for specific 
anti -corruption or other good -governance measures 
during project design and take steps to integrate 
the Commission’s audit work on the national IPA 
structures into the countrywide assessment of public 
finance management.
07
 Introduction
Background
01 
After the fall of Slobodan Milošević’s 
regime in October 2000, Serbia, the 
largest of the western Balkan coun -
tries in terms of both population and 
land area1, began its route to EU pre - 
accession within the framework of the 
stabilisation and association process. 
Figure 1  provides an overview of the 
key events that marked EU–Serbia rela -
tions between 1999 and 2014.1 The Serbian territory covers 
77 474 km2 with a population 
of 7,2 million inhabitants (2014 
data, CIA World Factbook).Figure 1Key dates in EU–Serbia relations
2014•  21 January — The first intergovernmental conference (Council of the European Union, European Commission and Serbia) takes place, 
signalling the formal start of Serbia’s accession negotiations.
2013•  1 September — The EU–Serbia Stabilisation and Association Agreement enters into force. The analytical examination of the acquis  
(‘screening’) starts.
• 28 June — The European Council decides to open accession negotiations with Serbia.
2012 • 1 March — The European Council confirms Serbia as a EU candidate country.
2011• 14 October — The Commission issues its opinion on Serbia’s application for EU membership.
• 20 July — Arrest of Goran Hadžić, the last fugitive sought by the International Criminal Tribunal for the former Yugoslavia (ICTY).
• 26 May — Arrest of Ratko Mladić.
2010•  1 February — Interim Agreement on Trade and Trade‑related Matters (part of the EU–Serbia Stabilisation and Association Agreement) 
enters into force.
2009• 22 December  — Serbia applies for EU membership.
• 19 December — Visa‑free travel to Schengen area for citizens of Serbia.
2008• 21 July — Arrest of Radovan Karadžić.
•  29 April — The EU–Serbia Stabilisation and Association Agreement, along with the Interim Agreement on Trade and Trade‑related 
 Matters, is signed.
2006•  3 May — The EU suspends the EU–Serbia Stabilisation and Association Agreement talks, stating that Serbia is not fully cooperating with 
the International Criminal Tribunal for the former Yugoslavia (ICTY).
2005•  1 October — Serbia starts negotiations with the EU on the signing of the international treaty called the EU–Serbia Stabilisation and As ‑
sociation Agreement.
2003 • 1 June — The Thessaloniki European Council confirms the EU perspective for the western Balkan countries.
2001 • 1 April — Arrest of Slobodan Milošević.
2000•  1 June — The Santa Maria da Feira European Council states that all the stabilisation and association process countries are potential candi ‑
dates for EU membership.
1999•  26 May — A Commission proposal on the stabilisation and association process, the EU policy towards the western Balkan countries, is 
established with the aim of eventual EU membership.
08 Introduction
02 
The stabilisation and association pro -
cess initiated by the EU in 1999 after 
a decade of turmoil and armed con -
flicts in the former Socialist Federal Re -
public of Yugoslavia was underpinned 
by the idea that only the real prospect 
of integration into the EU could bring 
sustainable peace, stability and dem -
ocracy to the Balkan countries. The 
stabilisation and association process 
combines contractual links in the form 
of the Stabilisation and Association 
Agreements (SAAs), trade measures 
providing the region with free access 
to the EU markets for almost all goods 
and substantial financial assistance 
from the EU budget.
03 
The EU insisted that Serbia both 
deliver suspected war criminals to the 
International Criminal Court in The 
Hague and find a lasting solution to its 
relations with Kosovo before it could 
make significant progress towards 
EU membership. Serbia submitted its 
application for EU membership on 
22 December 2009 and was granted 
the status of candidate country on 
1 March 2012 by the European Council 
on the basis of the conclusions of the 
General Affairs Council of 28 February. 
In particular, the conclusions noted 
Serbia’s progress in its dialogue with 
Kosovo2. Progress made by Serbia to -
wards meeting the political elements 
of the Copenhagen criteria3 and the 
surrender to the judicial authorities 
of several alleged war criminals were 
also determining factors in the Council 
decision.04 
Accession negotiations with Serbia 
were formally opened on 1 Janu -
ary 2014. The European Commission 
had previously indicated that it viewed 
governance issues as the main chal -
lenge faced by Serbia and decided 
that this most difficult area should be 
tackled early in the chapter -by-chapter 
negotiations4.2 The ‘Belgrade–Pristina’ 
dialogue was mediated by the 
High Representative of the 
Union for Foreign Affairs and 
Security Policy and Vice 
President of the European 
Commission Catherine 
Ashton, supported by the 
European External Action 
Service.
3 The Copenhagen criteria set 
by the European Council in 
June 1993 consist of: 
(a)  political criteria: stability 
of institutions 
guaranteeing democracy, 
the rule of law, human 
rights and respect for and 
protection of minorities;
(b)  economic criteria: the 
existence of a functioning 
market economy as well 
as the capacity to cope 
with competitive pressure 
and market forces in the 
EU;
(c)  the ability to assume the 
obligations of 
membership, including 
adherence to the aims of 
political, economic and 
monetary union.
4 To facilitate accession 
negotiations, the process is 
divided into 35 EU policy 
chapters. Negotiations on the 
various chapters are not 
limited to regulatory and 
legislative aspects, but also 
cover the setting up of the 
necessary administrative 
structures and the progress 
achieved in building up their 
management capacity. 
Chapters related to 
governance are essentially 
chapters 23 (Judiciary and 
fundamental rights) and 24 
(Justice, freedom and 
security).
09 Introduction
EU pre‑accession 
assistance to Serbia
05 
The priorities of EU pre -accession 
assist  ance include helping the bene -
ficiary countries to strengthen their 
administrative capacity and to sup -
port the adoption and implementa -
tion of the acquis communautaire5. To 
strengthen administrative capacity, 
the Commission funds activities such 
as institution building, the setting up 
of management systems and training.06 
Over the 2007–13 period, the EU pro -
vided assistance to Serbia in the field 
of administrative capacity through 
Component I (Transition assistance and 
institution building) of the Instrument 
for Pre -accession Assistance (IPA)6. IPA 
funding — about 170 million euro per 
annum on average — has been quite 
evenly allocated over a broad range of 
sectors as shown in Table 1 . The area 
of governance — ‘justice and home 
affairs’, including the fight against 
corruption, and ‘public administration 
reform’, including public finance man -
agement (or PFM) reform — received 
a quarter of the funding, which reflects 
the Commission’s recognition of the 
importance of tackling shortcomings 
in this area.5 The acquis  denotes the whole 
range of principles, policies, 
laws, practices, obligations 
and objectives that have been 
agreed or developed within 
the European Union.
6 The IPA was established by 
Council Regulation (EC) 
No 1085/2006 of 17 July 2006 
establishing an Instrument for 
Pre-accession Assistance (IPA) 
(OJ L 210, 31.7.2006, p. 82) and 
Commission Regulation (EC) 
No 718/2007 of 12 June 2007 
implementing Council 
Regulation (EC) No 1085/2006 
establishing an Instrument for 
Pre-accession Assistance (IPA) 
(OJ L 170, 29.6.2007, p. 1).Table 1IPA assistance to Serbia (2007–13)
SectorAllocation  
(million euro)Percentage of total 
allocations
Justice and home affairs 117 9,7 %
Public administration reform 164 13,6  %
Social development 171 14,2  %
Private sector development 109 9,1 %
Transport 146 12,1  %
Environment, climate change and energy 192 16,0  %
Agriculture and rural development 109 9,1 %
Other EU acquis  and horizontal activities 195 16,2  %
Total 1 203
Source:  Multiannual indicative planning document for Serbia, 2011–13.
10
 Audit scope  
and approach
07 
The audit objective was to assess 
whether the Commission is managing 
pre-accession support to Serbia effect -
ively and, in greater depth, its support 
for the key area of governance. The 
audit addressed two main questions:
(a) Has the Commission been man -
aging IPA projects effectively?
(b) In its support for governance, 
has the Commission been man -
aging non -financial assistance 
effectively?
08 
The audit work, performed between 
May 2013 and January 2014, involved 
the following:
(a) The examination of 15 IPA -funded 
projects with a particular focus 
on the project results (see An-
nex I )7. The sample included eight 
governance projects to reflect the 
audit’s focus on governance, and 
seven projects from other fields 
of intervention — social devel -
opment, transport, energy, rural 
development and private sector 
development.(b) The desk review of another sample 
of 10 IPA projects selected from 
the 2010, 2011 and 2012 annual 
programmes (see Annex II ) to as -
sess the integration of governance 
and the fight against corruption 
as cross- cutting issues in projects 
where good governance was not 
a primary objective.
(c) The review of the IPA program -
ming process, of the dialogue 
mechanisms on governance issues 
and of the procedures in place 
to assess Serbia’s readiness to 
manage a decentralised imple -
mentation system (DIS) for the IPA 
assistance.
(d) Audit visits undertaken from 17 
to 28 June 2013 to the European 
Union’s delegation in Belgrade and 
the relevant Serbian line ministries, 
agencies8 and regional or local 
authorities, as well as public en -
terprises. Project sites were visited 
in Belgrade, Horgos, Kragujevac, 
Kraljevo, Leskovac, Niš, Novi Sad, 
Obrenovac, Prokuplje, Subotica, 
and Ušće.7 The 15 IPA projects audited 
were selected from the 2007, 
2008 and 2009 IPA annual 
programmes for Serbia 
because these projects should 
have achieved their expected 
results by the time of the audit 
(mid 2013). The only budget 
support programme to date 
for Serbia, funded under IPA 
2009 for 100 million euro, was 
also part of the audit scope.
8 Notably the Republic of Serbia 
European Integration Service, 
the Anti -Corruption Agency 
and the Public Procurement 
Office.
11
 Observations
Part one  — Commission 
management of IPA 
projects
Funding decisions were 
derived from relevant 
strategies
09 
The Court examined whether the 
strategic documents were consistent 
with each other and contained clear 
priorities and performance indicators, 
and whether the Commission and the 
Serbian authorities had developed 
a process to select the most relevant 
projects for IPA funding. The Court 
also examined whether IPA assistance 
for governance adequately involved 
civil society organisations and whether 
donor coordination was functioning.
IPA assistance is based on 
a coherent set of strategic 
documents
10 
The IPA programming framework is 
complex and consists of numerous 
documents defining political goals and 
strategic priorities (see paragraphs 13, 
14 and Figure 3 ). Nevertheless, the 
documents are generally consistent 
with each other in the assessment of 
country needs and priorities. The IPA 
programming documents for Serbia 
are also consistent with the national 
strategy for EU integration, as well as 
the national needs assessments.11 
The Serbian authorities have devel -
oped more than 70 national strategies 
and action plans to address various 
political and socio -economic issues, 
but their quality was not always uni -
form. In addition, the broad range of 
national strategies did not cover two 
major governance -related areas:
 — due to the politically sensitive na -
ture of territorial decentralisation 
in Serbia, the decentralisation pro -
cess has been implemented with -
out a strategic framework fixing 
the national priorities and a time 
frame for their implementation;
 — there was no overarching strategy 
to coordinate the implementation 
of public finance management 
(PFM) reform.
12 
The coalition government in power 
between July 2012 and spring 2014 
made great efforts to consolidate the 
Serbian strategic framework for EU 
accession preparations, i.e. the adop -
tion, in December 2012, of an action 
plan to follow up the findings of the 
Commission’s progress reports and, 
in February 2013, of the ‘national plan 
for the approximation with the acquis ’. 
In the meantime, the Commission 
and the Republic of Serbia European 
Integration Service (SEIO) also took 
measures to improve the coherence of 
the Serbian strategic framework, for 
instance, by their efforts to consolidate 
the numerous national strategies in 
the 2011–13 needs assessment docu -
ment (NAD). Alignment between the 
national strategies and the IPA goals 
has become even more consistent by 
virtue of the sector -based approach 
since 2012.
12 Observations
Strategic documents contained 
relevant priorities and 
definition of the objectives and 
performance indicators was 
gradually improving
13 
The latest European Partnership with 
Serbia, prepared in 20079, served as 
a policy framework to encourage 
reforms and, through a conditionality 
clause, the basis for potentially sus -
pending financial assistance10. It gave 
a very broad set of short and medium - 
term priorities covering the accession 
criteria and the enforcement of EU 
standards, but without any ranking 
of these priorities according to their 
importance to Serbia’s EU accession or 
receipt of EU funding.
14 
The multiannual indicative planning 
documents (MIPDs), the Serbian NAD 
and the subsequent programming 
documents defined a number of 
objectives and performance indica -
tors, but these were often too broad. 
This made it difficult to evaluate 
progress in the areas of intervention 
objectively11. The newly created sector-  
monitoring sub -committees (SMSCs, 
see paragraph 58) confirmed the 
seriousness of the problem. For exam -
ple, the SMSCs for the rule of law and 
public administration both reported in 
November 2012 that it was generally 
not possible to measure progress due 
to poorly defined indicators and rec -
ommended improving the definition 
of indicators in future programming 
cycles12.15 
However, with the gradual move to 
the sectoral approach, changes were 
introduced during the 2012 and 2013 
IPA programming processes. RACER in -
dicators13, baselines and targets for the 
period until 2020, linked to the latest 
Serbian NAD, were agreed at the sec -
tor working groups for inclusion in the 
2013 sector and project documents14.
The Commission, with the 
Serbian authorities, has 
been gradually improving its 
methodology to select relevant 
projects
16 
In the first part of the 2007–13 pro -
gramming period, project prioritisa -
tion by the SEIO, the EU delegation 
and Commission headquarters did not 
prevent the selection of immature or 
problematic projects. Those projects 
should not have been selected or 
should have been kept in reserve for 
a subsequent annual programme15. 
Problems relevant to programming 
identified by the Commission’s moni -
toring work include the lack of national 
authority support; a lack of interinsti -
tutional coordination; weak project 
design; poor definition of terms of 
reference; unsustainable financing so -
lutions; and inadequate use of lessons 
learnt from previous projects.9 Council Decision 2008/213/EC 
of 18 February 2008 on the 
principles, priorities and 
conditions contained in the 
European Partnership with 
Serbia including Kosovo as 
defined by United Nations 
Security Council Resolution 
1244 of 10 June 1999 and 
repealing Decision 2006/56/
EC (OJ L 80, 19.3.2008, p. 46).
10 Assistance is conditional on 
progress on satisfying the 
Copenhagen criteria and on 
meeting the specific priorities 
of the European partnerships 
themselves (Annex 1, point 5 
of Council Decision 2008/213/
EC).
11 The evaluation of the IPA 
assistance for agriculture and 
rural development in the 
period 2007–11 concluded 
that the measurement of 
expected performance and 
impact was an ‘area of 
continuing weakness’, owing 
to the lack of appropriate and 
measurable indicators in 
programming documents 
— Evaluation report by AESA 
Consortium, January 2013.
12 Minutes of the rule of law 
SMSC meeting of 15.11.2012 
and of the public 
administration reform SMSC of 
16.11. 2012.
13 RACER stands for relevant, i.e. 
closely linked to the objectives 
of the intervention; accepted 
by all stakeholders; credible 
for non -experts and easy to 
interpret; easy to monitor, e.g. 
data collection possible at low 
cost; and robust, i.e. difficult to 
manipulate.
14 Sector and project documents 
are standardised documents 
submitted to the Commission 
by the IPA beneficiary country, 
for a given year, following 
discussions between the 
Commission and the 
beneficiary country. The fiches 
shall set out clearly, at sector 
or project level, the priority 
axes, the objectives, the 
envisaged operations, the 
expected results and related 
objectively verifiable 
indicators and the envisaged 
implementing modalities, 
including milestones.
15 During the period May 2009–
May 2013, there was a monthly 
average of 14 IPA projects 
considered by the EU 
delegation as problematic.
13 Observations
17 
The level of co -funding of the projects 
and the leverage effect expected 
from the IPA funding were not cri -
teria used in the selection process. 
Up to 2012 there were no European 
Commission -issued guidelines on 
parallel co -financing in relation to the 
IPA. Serbia committed to a contribu -
tion of 289 million euro co -financing to 
the 2007–12 IPA annual programmes, 
i.e. 24 % of the overall national and EU 
IPA funding16. However, it was diffi -
cult to monitor whether the national 
co-financing commitment had been 
met and there were no guidelines on 
action to be undertaken when such 
commitments were not fulfilled.
18 
Both the EU delegation and the Ser -
bian authorities made genuine efforts 
to resolve the problems identified 
and to take them into account in the 
subsequent programming exercises. In 
addition, selection process improve -
ments introduced by the Commission 
together with the SEIO under the IPA 
2012  and  2013 programmes included:
(a) stricter requirements on project 
readiness;
(b) a 2012 Commission agreement 
with Serbian authorities on guide -
lines for parallel co -financing.IPA funding for governance 
increasingly involved civil 
society organisations
19 
The European enlargement strategy 
places an emphasis on strengthening 
civil society organisations (CSOs) and 
their involvement in policy develop -
ment. Four support for civil society 
projects were approved within the 
2007–10 IPA annual programmes 
for Serbia, for a total amount of 
9 million  euro.
20 
Since 2007, the status of CSOs and the 
government’s cooperation with them 
has considerably improved. The CSOs 
in Serbia are now very active in the 
field of governance and anti -corrup -
tion17. More generally, since 2010, it has 
been possible to consult the CSOs on 
IPA programming on a regular basis, 
but at the time of the audit the use of 
the consultation mechanism was not 
yet widespread.16 Based on the data in the IPA 
annual programmes for 
Serbia. This high co-financing 
level was achieved mainly 
because, in 2011, the Serbian 
authorities committed 
themselves to allocating 
122 million euro to the 
municipal environment 
grant -loan investment 
programme (MEGLIP) in the 
environment, climate change 
and energy sector.
17 See for instance the results of 
project 15, ‘Civil society 
dialogue’, in Box 8 .
14 Observations
Coordination with other donors 
was only partially effective but 
is improving
21 
Despite some efforts, there was no 
strict discipline in the coordination of 
early IPA projects with those of other 
donors with a view to ensuring com -
plementarity and avoiding overlaps, 
notably in the rule-of-law sector (see 
Box 1 ).
18 The Commission’s partnership 
with international 
organisations is not confined 
to the generation of 
information to be used for the 
dialogue. A number of IPA 
projects are actually 
implemented with the 
involvement of these 
organisations, such as project 
‘Corridor X’ (2010) with the 
World Bank; project ‘Good 
local governance’ (2007) and 
project against ‘Money 
laundering’ (2010) with the 
Council of Europe; project 
‘Hospital information system’ 
(2008) with the UN Office for 
Project Services; project 
‘Support for civil society’ 
(2010) with the OSCE; and 
project ‘Support for SME 
development’ (2012) with the 
EBRD.Examples of coordination gaps in the rule ‑of‑law sector
Project 3, ‘Judiciary system’, is a clear example of poor coordination, from design to implementation. Indeed, 
the EU-funded case management system ran in parallel with another system funded by USAID. The lack of 
coordination and local ownership with regard to IT issues in the rule-of-law sector is demonstrated by the fact 
that major IPA IT investments have been implemented without a proper IT strategy.Box 1
22 
However, since implementation of the 
sector approach, IPA documentation 
testifies to improved and more sys -
tematic donor coordination. Donors 
are now regularly consulted by the 
sector working groups and, in its 
dialogue with Serbia, the Commission 
relies extensively on the involvement 
of international organisations in their 
respective areas of expertise, notably 
the World Bank (PEFA reports), the 
European Bank for Reconstruction and 
Development, the Organisation for 
Economic Cooperation and Develop -
ment (SIGMA assessments), the Organi -
sation for Security and Cooperation 
in Europe, the Council of Europe and 
United Nations organisations18.The Commission has started 
to address project design 
weaknesses which have 
contributed to delays in 
implementation
23 
The Court examined whether the 
15 projects audited (see Annex I ) 
pursued precise objectives and were 
based on a specific needs assess -
ment, and whether the project design 
included relevant conditionality. The 
Court also examined whether the 
projects were implemented according 
to the planned timetable and properly 
monitored, and whether corrective ac -
tions were taken where appropriate.
15 Observations
In project and contract design, 
the Commission initially 
paid inadequate attention to 
precise definition of the project 
objectives, specific assessment 
of the needs and lessons learnt 
from past projects
24 
All the projects examined matched the 
priorities set out in the IPA strategy 
documents but about half of them 
pursued objectives that were too 
vague or unrealistic (see Box 2 ). At 
the same time, the Commission was 
flexible in adjusting the list of object -
ives and expected deliverables where 
the long period of time — up to 4 or 5 
years — between the project outline 
and the actual delivery of the outputs 
made it necessary19. This flexi bility 
counterbalanced substantially  — 
though not fully — the adverse effect 
of initial vague or unrealistic project 
objectives.25 
Some audited projects were designed 
and implemented without reference to 
a precise needs assessment, which in 
some cases has led to inefficient allo -
cation of IPA funds (see Box 3) . In 2012 
the Commission started to introduce 
measures that placed more emphasis 
on needs assessment in the interven -
tion design, as demonstrated by the 
Court’s review of the 2012 IPA project 
and sector documents.19 The long turnaround times are 
also noted by CONT’s draft 
report on EU pre -accession 
funds, ref. 2011/2033(INI), 
20.6.2013, Article 11, p. 25.
Examples of weak needs assessment
In project 14, ‘Rural development’, 40 % of the IT equipment delivered was not used and some of it was still in 
the paying agency warehouse at the time of the audit visit.Examples of vague or unrealistic project objectives
As no benchmark data were provided, it was difficult to assess the extent of the achievement of project 
purposes such as ‘strengthen the role of the Ministry of Health’ in project 10, ‘Emergency medical service’; or 
‘enhancing the accession process through the promotion and improvement of mutual knowledge and the 
understanding of Serbia’s EU integration process’ in project 15, ‘Serbia–EU civil society dialogue’.
Project 7, ‘Public Procurement Office’, included an e -procurement element, which subsequently proved to be 
unrealistic.Box 3 Box 2
16 Observations
26 
The design of the audited projects 
made little use of the lessons learnt 
from the implementation of previous 
projects. The lessons learnt sections in 
the project documents were more of 
a formal exercise. In addition, none of 
the audited project fiches mentioned 
specific lessons learnt from similar 
projects in other beneficiary countries. 
In fact, the lessons -learnt mechanisms 
within the Commission relied princi -
pally on the findings of macro -level 
evaluations, sometimes years after the 
fact, and therefore were not geared 
to feeding into timely responses at 
project design level.
Weaknesses in the 
conditionality for launching the 
projects and sequencing the 
operations were progressively 
being mitigated
27 
Inadequate attention to conditional -
ity and sequencing in project design 
often threatened smooth and timely 
implementation of the IPA projects 
(see Box 4 ).28 
The Commission usually checked 
whether national legislation was in 
place to ensure that the intervention 
was effective. Elements of two of the 
audited projects, however, were not 
sufficiently aligned with the current 
or prospective Serbian legislation and 
were therefore useless (see Box 5 ).
29 
In projects made up of complemen -
tary contracts for supply and capacity 
building, the conditionality did not 
include in -depth preparatory market 
analysis, particularly in the case of 
specialised or sensitive equipment. 
No market research was requested for 
instance in project 1, ‘Police reform’. 
Failure of the supply contract funda -
mentally affected the relevance and 
effectiveness of the complementary 
twinning contract.
Examples of poor conditionality and sequencing in projects
There was poor sequencing between the two service contracts that made up project 9, ‘Regional develop -
ment’. The regional development strategies were drafted before the national plan for regional development 
and therefore had to be subsequently redrafted to be aligned with it.
In project 12, ‘Žeželj bridge’, obtaining the necessary building permits was not a prerequisite but was an activ -
ity within the project. This proved to be a problem because obtaining building permits is a lengthy process 
in Serbia. Indeed, the project started in March 2011 but the contractors did not receive the essential permits 
until April 2012, consequently delaying the project.Box 4
17 Observations
30 
At the same time, conditionality was 
robust and strictly implemented in 
calls for proposals, e.g. in project 15, 
‘Serbia–EU civil society dialogue’,  
which benefited from the high level 
of commitment among the CSOs and 
their project partners.
31 
Compared to IPA 2007 and 2008, the 
programming documents after 2012 
reflect increased emphasis on con -
ditionality. Project proposals were 
postponed due to missing permits20 or 
downscaled following the lack of the 
required feasibility study.Delays occurred in 
implementing the audited 
projects, but overall IPA 
absorption capacity was 
assessed as good by the 
Commission
32 
Implementation of all the audited 
projects was affected by sometimes 
significant delays, which may indi -
cate that the capacity of some of the 
Serbian project partners to implement 
the intervention was overestimated. 
There were frequent bottlenecks in 
relation to the absorption capacity in 
large infrastructure projects such as 
project 12, ‘Žeželj bridge’ (see para -
graph 43). Better absorption of IPA 
funds was reflected by the success of 
the calls for proposals, notably in the 
grant scheme included in project 5,  
‘Municipal support programme’, 
where more than 200 projects were 
submitted, of which 67 were financed 
and mostly completed their activities 
within the planned time frame.20 An example is the intermodal 
transport project, which has 
been postponed for several 
programming years since IPA 
2011 due to missing permits.Examples of legal inconsistencies
An element of project 1, ‘Police reform’, had to be dropped as the beneficiary claimed that integrity testing of 
police was not allowed under Serbian law.
In project 10, ‘Emergency medical service’, the defibrillators that were ordered for public display and use have 
gone virtually unused since Serbian law does not permit the use of defibrillators by persons other than medi -
cal staff.Box 5
18 Observations
33 
At the same time, despite delays and 
no-cost extensions of the contracts in 
the audited sample, the high contract -
ing and payment rates reported by the 
EU delegation for the whole 2007–13 
programming cycle suggest rather 
high absorption capacity at national 
level for the entire IPA scheme.
IPA interventions were 
monitored at contract level, but 
not at project level
34 
IPA interventions were not monitored 
systematically at project level. Steer -
ing committees, though misleadingly 
called ‘project steering committees’, 
were only in charge of certain con -
tracts and not the overall project.
35 
Practices regarding on -site inspections 
by the EU delegation initially varied 
but the EU delegation improved the 
overall situation in 2011 by launching 
a formal mechanism for internal moni -
toring. The result -oriented monitoring 
(ROM) initiated in 2009 is now a preva -
lent external monitoring mechanism 
for capacity -building projects. The 
Court found that the ROM reports on 
the audited projects generally pro -
vided adequate information on the 
progress of projects.36 
In projects where a national element 
and an IPA element coexisted, such 
as project 6, ‘Support for customs’, 
the two elements were managed 
separately without any formal flow 
of information between the Serbian 
authorities and the EU delegation. The 
time constraints applicable to national 
elements were also less demanding 
than those applicable to IPA com -
ponents. Since 2012, the agreement 
concluded with the Serbian authorities 
on parallel co -financing has allowed 
the Commission to step up its efforts 
to address this lack of coordination 
(see paragraphs 17 and 18).
The Commission’s approach in 
terms of corrective action was 
rather limited
37 
The Commission’s corrective actions 
taken, where necessary, during the 
implementation process, did not ad -
dress the difficulties which caused 
delays (see paragraph 16). They mainly 
consisted in flexibly extending the 
duration of the contract without incur -
ring any extra cost or amending the 
contract activities. Where, for instance, 
a project was blocked because of inad -
equate commitment from the Serbian 
authorities, the IPA -funded resources 
were reallocated to other new activ -
ities. Stronger reaction, e.g. postpone -
ment of the implementation until 
issues were resolved or even cancella -
tion of the project, was not considered 
by the Commission.
19 Observations
38 
The conditions embedded in the pro -
ject design were generally not restrict -
ive enough to automatically lead to 
corrective action (see paragraphs 27 to 
29)21. At the same time, the EU delega -
tion addressed and resolved important 
problems on the beneficiary side that 
might jeopardise the tendering, con -
tracting, and implementation process -
es. Issues that could not be resolved 
at EU delegation level were escalated 
to the monitoring committees and 
ultimately to the IPA Joint Monitoring 
Committee.
IPA projects generally 
produced the planned 
outputs but results beyond 
the outputs may not be 
sustainable
39 
The Court examined whether the 
planned outputs and other results 
were obtained and whether the ten -
dering and procurement procedures 
were properly implemented. The Court 
also examined whether the project 
outputs and other results were likely to 
remain sustainable after the end of the 
IPA funding.
40 
Table 2 , for governance -related 
projects, and Table 3 , for projects in 
areas other than governance, show 
a detailed view of the Court’s findings 
regarding the projects’ outputs and 
other results. The Court’s assessment 
took into account, where available, 
relevant conclusions from ROM reports 
and evaluations22.The IPA projects produced most 
of the planned outputs and 
results beyond the outputs
41 
Despite systematic delays, the audited 
projects completed at the time of the 
audit had delivered most of the out -
puts initially planned or revised during 
project implementation. Delivering 
the outputs was in fact a prerequisite 
for the execution of final payments by 
the Commission, which explains why 
there were very few cases of outputs 
which had not been fully achieved 
upon project completion (see Boxes 7 , 
9 and 10). However, some of the audit 
findings raised the issue of the useful -
ness of certain, often relatively minor, 
project outputs in the medium or long 
term (see paragraph 48).
42 
The projects generally achieved good 
results, even beyond the outputs, 
contributing to the achievement of 
the IPA assistance goals. Overall, the 
eight audited governance -related IPA 
projects have helped to increase the 
capabilities of the beneficiary institu -
tions and/or to improve the national 
legal framework (see Box 6 ). The Court 
identified material shortcomings in 
terms of results in four governance 
projects (see Box 7 ).21 As confirmed by the 
‘Evaluation of the rule of law 
sector implemented and 
financed by IPA and other 
donors in Serbia’ (covering the 
2007–11 period), May 2013 
draft: ‘It is always a sign of 
poor design if a project is 
commenced under 
circumstances which are 
premature for proper delivery 
of its activities’ (p. 24) and 
‘Conditionality should be 
introduced, with the possible 
sanction of suspending the 
implementation of the 
project’ (p. 59).
22 Notably the interim evaluation 
and meta -evaluation of IPA 
assistance, country report 
Serbia, Ecorys, August 2013. 
See also the evaluations 
referenced in footnotes 22, 24, 
28 and 30.
20 Observations
 Examples of tangible results from governance‑related projects
Project 2, ‘Fight against corruption’, successfully supported the strengthening of the administrative capacity 
of the Anti -Corruption Agency (ACA), notably by providing IT solutions. It also improved the legal and institu -
tional framework for the fight against corruption by contributing to the drafting of a revised anti -corruption 
strategy and action plan.
Project 5, ‘Municipal support programme’, contributed to enhancing the capabilities of local administrations 
and improving the quality of services to citizens. This was confirmed by the Court’s on-site audits in Kraljevo 
(Geographic Information System) and Niš (Call Centre and Building Permits Centre). The project also helped 
improve communication and cooperation between the municipalities and the public utility companies active 
in their areas.
Examples of mixed results from governance‑related projects
Within the framework of project 5, ‘Municipal support programme’, the specific module supporting the 
municipal bonds initiative had limited results. The Standing Conference of Towns and Municipalities (SCTM) 
encouraged municipal bonds as an alternative to traditional bank loans, but had to face opposition from the 
banks and resistance to change by the municipalities. The volume of municipal bonds was extremely weak. 
By mid 2013 only two cities had issued municipal bonds: the City of Novi Sad, for 35 million euro, and the City 
of Pančevo, for 1 million euro. The secondary market funded by IPA had never started working due to the low 
number of issuances.
Project 8, ‘Public internal financial control’, was successful in establishing a central harmonisation unit (CHU) 
within the Ministry of Finance, but at the time of the audit the unit was focusing all its resources on training 
activities and did not yet exercise other traditional responsibilities of a CHU, like developing internal audit 
strategies and standards. In particular, the CHU had not yet provided support on risk assessment and fraud 
management to financial managers and internal auditors. The planned internal audit units were formally in 
place but were facing personnel problems. The project, however, succeeded in developing a certification 
scheme for internal auditors.
Examples of good results from non‑governance‑related IPA projects
IPA-funded elements of project 13, ‘Electric power of Serbia’, had achieved the expected results concerning 
capacity building for procurement and the installation of anti -pollution systems compliant with the acquis .
The corruption -related CSO grants included in project 15, ‘Civil society dialogue’, achieved sustainable results 
such as the development of hands -on methodologies for fighting corruption in the health sector and moni -
toring public procurement procedures by citizens, and the realisation of a national integrity system survey.Box 6 Box 7 Box 8
21 Observations
43 
Out of the seven projects audited 
in fields of intervention other than 
governance, four had achieved or were 
largely on track to achieve the planned 
results beyond the outputs (see Box 8 ) 
and two were assessed as partially 
effective (see Box 9 ). The seventh 
project, project 12, ‘Žeželj bridge’, at 
the time of the audit was ongoing and 
expected to face an 18-month delay. 
The large infrastructure projects are 
prevalent in the bottleneck lists and 
reveal a recurring problem of stalled 
progress and missed deadlines23. The 
EU had previously funded two other 
projects to support the reconstruction 
of the Žeželj bridge: a CARDS 2004 
project24 to finance the detailed design 
specification and an IPA 2008 project 
for the supervision of the reconstruc -
tion. Despite substantial EU funding 
and technical assistance, Serbian au -
thorities remain weak in planning and 
implementing investment projects. 
The availability of building permits 
continues to be a serious issue that 
the Commission is progressively ad -
dressing in the IPA programming (see 
paragraph 31).23 Evaluation of effectiveness 
and efficiency of development 
assistance to the Republic of 
Serbia per sector, Maxima 
Consulting, reference SWE14/
OC01-18, 2014, p. 80.
24 During the 2000–06 period, 
the programmes supporting 
Serbia were mostly financed 
under the CARDS regulation,  
Council Regulation (EC) 
No 2666/2000 of 
5 December 2000 on 
assistance for Albania, Bosnia 
and Herzegovina, Croatia, the 
Federal Republic of Yugoslavia 
and the former Yugoslav 
Republic of Macedonia, 
repealing Regulation (EC) 
No 1628/96 and amending 
Regulations (EEC) No 3906/89 
and (EEC) No 1360/90 and 
Decisions 97/256/EC and 
1999/311/EC (OJ L 306, 
7.12.2000, p. 1). CARDS stands 
for Community assistance for 
reconstruction, development 
and stabilisation.
Examples of partially effective non‑governance‑related IPA projects
Project 11, ‘Private sector competitiveness’, partially achieved the expected results regarding strengthening 
institutions: at government level, the cluster strategy needs to be redesigned and there is a need to develop 
effective support measures for local chain development. Partial achievement of the objectives was also no -
ticed for internationalisation: five out of eight objectives were achieved.
Project 14, ‘Rural development’, was also partially effective. The paying agency and managing authority had 
been set up, but their accreditation had been delayed (by 1,5 years at the time of the audit) due to develop -
ments outside the control of the project. The paying agency was unable to absorb the planned project activ -
ities, particularly training. The second project element (Leader) also achieved partial results. Efforts to form 
the planned local structures were successful but the project was not able to develop a critical mass of trained 
personnel.Box 9
22 Observations
Tendering and procurement 
procedures were generally 
effective
44 
Tendering and procurement proced -
ures were found generally adequate 
to ensure the timely delivery of the 
expected outputs25. However, in four 
audited projects there were severe 
problems with procuring all or part of 
the equipment planned, in particular 
where it concerned specialised and 
sensitive equipment (see Box 10 ).
45 
The Commission did not require any 
summary monitoring document on the 
history of failed tenders and did not 
analyse the reasons why some tenders 
failed, even repeatedly. No evidence 
has been found that the provisions of 
IPA programming guide 2008 on spe -
cialised equipment were adhered to26.The sustainability prospects of 
the IPA projects were not fully 
satisfactory
46 
In two thirds of the audited projects, 
the Court found problems related to 
the sustainability of certain individual 
outputs and other results. The sustain -
ability of the benefits provided by 
the purchased goods was particularly 
at risk when crucial decisions were 
missing or when the beneficiary had 
insufficient budget resources and was 
donor dependent (see Box 11 ). The 
sustainability of governance -related 
projects was especially jeopardised by 
personnel issues, made more difficult 
by the austerity measures taken by the 
government of Serbia in the wake of 
the global crisis (see Box 12 ).25 As the EU delegation 
undertook the procurement 
procedures under centralised 
management, no conclusion 
can be drawn from the 
projects as regards the 
administrative capacity of the 
Serbian authorities in the area 
of procurement.
26 For investment projects or 
elements of projects covering 
specialised equipment or with 
a substantial amount 
earmarked, the final approval 
of the related project 
document will be subject to 
the prior presentation of an 
adequate market study. Any 
necessary exceptions from this 
rule need to be justified by the 
national IPA coordinator to the 
European Commission in 
writing (Part 7.2 of the IPA 
programming guide).
Examples of problems in tendering and procurement
In project 1, ‘Police reform’, the tendering process for the equipment needed for covert surveillance ran out of 
time and the allocated funds were finally decommitted. The failure to procure the equipment has undermined 
the beneficiary’s commitment and is still impairing the internal control department’s capability to effectively 
combat corruption within the police force, which was a key aim of the project.
In project 6, ‘Support for customs’, lot 2 of the IPA-funded equipment (clothing) was finally dropped from the 
tender because of difficulties in complying with the EU rules of origin and has been funded directly by Serbia.Box 10
23 Observations
Examples of personnel issues in governance‑related projects
The sustainability of the results of project 8, ‘Public internal financial control (PIFC)’, depends on the ability of 
the Ministry of Finance to create an adequate permanent pool of skilled internal auditors in the public sector. 
As it is in competition with the private sector and the state audit institution, it has had difficulty finalising its 
recruitment plan and limiting staff turnover28.
Staff turnover also puts at risk the institutional capacity of the new bodies in charge of implementing the rural 
development component of IPA, funded through project 14, ‘Rural development’29.
28 The internal audit units met during the audit were facing personnel problems. In the Ministry of Justice, two (not certified) internal auditors were 
in place instead of the eight planned. In the Ministry of Finance, only one internal auditor (the head of unit) was active out of the three that are 
planned.
29 See also ‘Evaluation of agriculture and rural development sector implemented and financed by IPA programme and other donors’, January 2013, 
sector evaluation, pp. 37–39.Examples of risks to sustainability
For the sustainability of project 3, ‘Judiciary system’, the crucial decision on which system (EU SAPS or US AVP) 
to roll out to the Serbian court network had not been yet taken by the Serbian authorities at the time of the 
audit. The availability of funding for a nationwide rollout was unclear and it was likely to be hampered by 
software lifetime issues and insufficient or outdated hardware. Around 70 % of the IT budget for the judiciary 
in Serbia was provided through IPA or other donors, with the remaining 30 % coming from the state budget, 
which is not a sustainable solution for IT development and ensuring beneficiary ownership.
The main sustainability issue in project 9, ‘Regional development’, was the unclear organisational set -up for 
the regional development policy at both national and regional levels. There was no clear consensus about the 
extent of decentralisation and how regionalisation would fit27. There was a substantial risk that the supported 
regional development agencies (RDAs) could not survive without clear roles and responsibilities. They also 
faced significant financial problems and were still donor -dependent.
There was no planning and scheduling for replacement of the IPA -funded ambulances which would shortly 
reach the end of their useful lives and had constantly increasing maintenance costs. It was therefore not cer -
tain whether enhanced capabilities resulting from project 10, ‘Emergency medical service’, could be sustained 
in the long run.
27 ‘Ex ante  evaluation of the national plan for regional development and the regional development strategies’, IBF International Consulting, 
July 2012, p. 7.Box 12 Box 11
24 Observations
47 
Whereas legislation proved to be an 
obstacle to the effectiveness of certain 
project elements (see paragraph 28), 
in some cases it has been conducive 
to the sustainability of whole projects. 
The new Serbian public procurement 
law, for instance, has ensured the 
sustainability of many of the results 
of project 7, ‘Public procurement’, as 
well as some of the efforts financed 
from the audited action grants under 
project 15, ‘Civil society dialogue’. Table 2Governance IPA projects — Assessment of outputs and other results
Audit criteriaProject1. Police reform
2. Fight against corruption
3. Judiciary system
4. Prosecutors and penal 
system
5. Municipal support 
programme
6. Serbian customs
7 . Public Procurement 
Office
8. Public internal financial 
control (PIFC) phase 3
Planned outputs were delivered.
Expected results beyond the outputs were achieved.NA
ongoing
Tendering and procurement procedures were ad ‑
equately prepared in order to ensure timely delivery 
of the expected outputs.
The national legislation necessary to ensure that the 
intervention is effective was in place.
The project had good prospects for sustainability 
 after the end of IPA funding, in particular: the 
post‑IPA funding was guaranteed and the benefi ‑
ciary had ownership and capacity to ensure the 
continuity of the project.
Satisfactory
Partly satisfactory
Not satisfactory
25 Observations
48 
There is an absence of appropriate 
follow -up efforts concerning sustain -
ability. Contract impact and usefulness 
are seldom assessed after contracts 
are over. Ex post  ROM exercises have 
not yet been launched in Serbia with 
a view to checking the medium- and 
long -term sustainability of the IPA 
projects’ results. The projects/con -
tracts themselves are not responsible 
for the medium- or long -term impact 
or sustainability of the planned results. Such responsibility ceases immediately 
with the end of the contracted activ -
ities. An appropriate follow -up mech -
anism is particularly missing when the 
practical usefulness of certain deliver -
ables can only be assessed years after 
the project, for instance in the case of 
policy papers, protocols, procedures, 
manuals, analyses, various studies, 
etc., or when it is explicitly stated, e.g. 
in projects 1, ‘Police reform’,  and 10,  
‘Emergency medical service’ .Table 3Non‑governance IPA projects — Assessment of outputs and other results
Audit criteriaProject9. Regional 
development 
programme
10. Emergency 
medical services
11. Private 
sector 
competitiveness
12. Žeželj bridge 
13. Electric 
power of Serbia 
14. Rural devel ‑
opment policies 
15. Civil society
Planned outputs were delivered.NA
ongoing
Expected results beyond the outputs were achieved.NA
ongoing
Tendering and procurement procedures were ad ‑
equately prepared in order to ensure timely delivery 
of the expected outputs.
The national legislation necessary to ensure that the 
intervention is effective was in place.NA
The project had good prospects for sustainability 
 after the end of IPA funding, in particular: the 
post‑IPA funding was guaranteed and the benefi ‑
ciary had ownership and capacity to ensure the 
continuity of the project.
Satisfactory
Partly satisfactory
Not satisfactory
26 Observations
Part two  — Commission 
management of 
non‑financial assistance 
in support of governance
The Commission addressed 
governance issues 
extensively in its dialogue 
with Serbia with increasingly 
positive impact
49 
The Court examined whether the EU–
Serbia dialogue explicitly addressed 
key governance issues and included 
the establishment of action points 
and their follow -up. It also examined 
whether political priorities were taken 
on board in policy formulation and 
project design. The Court reviewed 
10 recent IPA projects implemented 
in sectors other than governance (see 
Annex II ) to assess the extent to which 
governance and the fight against 
corruption were embedded as cross - 
cutting issues into these projects.
There was structured 
Commission–Serbia dialogue 
on governance
50 
The Stabilisation and Association 
Agreement (see paragraph 2) includes 
provisions on the EU–Serbia dialogue 
on political matters and cooperation 
policies30. The Commission has put in 
place a complex system of official and 
less formal meetings and documents 
at multiple levels to enable in -depth 
continuous dialogue with the Serbian 
partners. The structures in place for 
the enhanced permanent dialogue 
(EPD), interim agreement (IA) dialogue 
and higher -level IPA dialogue are rep -
resented in Figure 2 . The complexity 
of the overall policy dialogue and IPA 
programming is illustrated by Figure 3 .51 
The EPD gave great importance to 
public administration reform (PAR) and 
justice sector reform, including the 
fight against corruption, as a part of 
the political criteria. These areas were 
consistently addressed in detail by 
both the EPD plenaries and designated 
sub -EPDs. The continued importance 
of judicial reform and the fight against 
corruption in relation to Serbia’s 
candidate-country status is shown by 
the fact that the related acquis  chap -
ters (23 and 24) are tackled early in the 
negotiation process, based on the ex -
perience of previous accession rounds.30 Notably titles II and VIII of the 
SAA.
27 Observations
EU–Serbia dialogue structures (until September 2013)Figure 2
IPA dialogue struc tureInterim a greemen t (IA )
dialogue struc ture
EU Member Sta tes
only
Governmen t
of S erbiaCommissionEU Member
States
Government
of Serbia
(NIPAC & 
SEIO)CommissionAnnual IP A
Committ ee
Governmen t
of S erbiaCommissionAnnual IA
Committ ee
Transport
Internal Market
and Competition
Trade, Customs
and Taxation 
Agriculture
and Fisheries
StatisticsIA-
sub ommitt eesSAA
Annual EPD Plenary
Justice, Freedom,
Security
Transport, Energy,
Environment,
Regional Policy
Internal Market
Social Policy, 
Info-Society,
AudioVisual,
Research and
Innovation
Economic and
Financial Issues,
Statistics
Agriculture,
Fisheries,
Food Safety 
IndustryEPD
subcommitt eesIPA Join t
Monit oring
Committ ee
Sector working
groups/s ector
monit oring
subcommittees 
Rule of law
Public
Administration
Reform
CSOs & Media
Economic
Development
Transport
Social
Development
Agri and Rural
Development
Environment
and EnergyStabilisa tion and A ssocia tion A greemen t
(SAA )
enhanc ed p ermanen t dialogue
(EPD ) struc ture
Source:  ECA, based on information from the Commission and EEAS.
28 Observations
Key elements of political and IPA ‑related EU–Serbia dialogueFigure 3
Politic al dial ogue Polic y dial ogue Implement ation and foll ow-up
Audit repor t Evalua tions ROM repor tsAnnual C ommission
progress repor tsContrac t interim
and ﬁ nal r epor tsCommissionReporting, Monitoring and Evaluation Projec t ProposalsSerbiaSerbian n eeds
assessmen tSerbian EU in tegra tion
programme
IPA annual
programmeFinancing
decisionMIPD MIFFSerbia
CommissionCommissionCommission
communic ationsEnlar gemen t
stra tegy p aperCouncil
conclusionsEP repor tsEuropean
PartnershipIA SAA
Contrac t adjustmen ts Tendering , procuremen t Decision t o launch c ontrac tCommissionProject/contr act implement ationIPA pl anningPolitical Strategy Framework
Serbian na tional
action plansSerbian na tional
stra tegies
Source:  ECA, based on information from the Commission and EEAS.
29 Observations
52 
Public finance management (PFM) re -
form was usually addressed by the EPD 
plenaries under the heading of PAR, 
but it received somewhat less intense 
emphasis than the other governance 
areas. However, specific PFM  topics — 
such as the state audit institution, pub -
lic internal financial control (PIFC), the 
Central Harmonisation Unit, internal 
audit and budget system law — were 
addressed in greater detail at sub -EPD 
level.
53 
The Commission had an additional 
opportunity to discuss PFM issues 
with Serbia when designing the 
terms of the general budget support 
programme for Serbia under the IPA 
component I for 2009. The programme 
aimed to support macro -financial 
stability in Serbia in the short term 
and to allow the country to pursue 
structural reforms despite the eco -
nomic crisis31. The payment conditions 
focused notably on the reliability of 
financial and administrative proced -
ures in Serbia, the submission by the 
Serbian government of a new budget 
law and the adoption of a strategy 
paper on financial control in the public 
sector. Another condition was the 
launch of a PEFA update with the aim 
of preparing a PFM roadmap. The 
Commission considered that all these 
conditions were fulfilled by the end of 
2010. Although Serbia did not prepare 
a specific PFM roadmap, the Court 
found that Serbia’s PAR strategy for 
2013–16 addresses some PFM issues. 
In addition, the 2012 law on public 
procurement rectified a number of the 
shortcomings identified in the preced -
ing years.Dialogue included the 
systematic establishment of 
good ‑governance ‑related 
action points and their 
follow‑up
54 
The multi -level structures (see Fig-
ures 2  and 3) provided a sound basis 
for an open dialogue to agree on, 
establish, follow up and monitor 
priorities. Action points relating to key 
governance issues were specifically 
revisited from year to year by both EPD 
plenary and subcommittee meetings.
55 
The Commission’s monitoring process 
is crystallised in the annual progress 
reports. The Court’s analysis has 
found that the Commission’s progress 
reports realistically assessed progress 
made in the key areas of governance 
in Serbia. According to the reports, the 
years 2007–13 have seen some tangi -
ble results in the fight against corrup -
tion, ranging from the setting up of an 
institutional framework — with the in -
volvement of IPA assistance — through 
the increased participation of CSOs, to 
investigations into some high -profile 
corruption cases. Progress was also 
perceived in the public administration 
reform and the financial control ele -
ment of public finance management 
reform, and also notable progress in 
the area of public procurement. Justice 
sector reform was most lacking among 
the key good-governance areas, with 
little progress reported since 2007.31 100 million euro of the 2009 
IPA allocation for Serbia was 
designated for budget 
support. This supplemented 
a revised IMF programme of 
2,9 billion euro and 
development policy loans 
from the World Bank.
30 Observations
56 
On the Serbian side, from 2010 on -
wards, the national action plans for the 
implementation of the Commission’s 
recommendations give evidence of 
transparent goals and tasks, as well as 
adequate monitoring and a system -
atic and easy -to-compare summary of 
follow -up action.
The dialogue established links 
between political priorities and 
policy formulation
57 
The main IPA programming docu -
ments for Serbia32 from the years 
2007–13 — the upstream of which 
are basically key dialogue docu -
ments — sufficiently covered the key 
governance areas, although public 
finance management reform received 
a somewhat less intense emphasis. 
The dialogue regularly refers to IPA 
assistance in general, or to specific IPA 
projects as important tools for improv -
ing governance in Serbia. The IPA Joint 
Monitoring Committee (see Figure 2 ), 
which was created in 2008, addressed 
specific implementation aspects of 
the higher -level dialogue and also 
covered the strategic level of financial 
assistance33.58 
In 2012, eight sector -monitoring 
sub -committees started operating 
under the Joint Monitoring Commit -
tee. Their primary focus is the context 
in which IPA assistance is delivered. 
They are run by the Commission and 
Serbia (SEIO), are structured in a trans -
parent way and have put an effective 
and easy -to-compare monitoring 
tool in place. The sector -monitoring 
sub -committees have also significantly 
improved the coordination between 
national needs identification and IPA 
assistance. For example, projects in 
relation to PAR under the latest IPA na -
tional programmes addressed almost 
every priority defined by the PAR sec -
tion of the Serbian NAD for 2011–1334.
Emphasis put on governance 
in the dialogue and the 
programming process was 
generally not explicit in project 
design
59 
High-level IPA programming took 
good governance specifically on 
board, partly in view of the govern -
ance problems faced in previous acces -
sion rounds, which was considered an 
indicator of inadequate preparation of 
the countries concerned. However, this 
emphasis was in general not reflected 
explicitly at project -planning level 
by the Commission and the Serbian 
authorities.32 SAA, Commission 
enlargement strategies, 
European Partnership, MIPD 
and annual national IPA 
programmes.
33 The IPA Joint Monitoring 
Committee is co -chaired by 
a high-level (director-level) 
Commission representative 
and the national IPA 
coordinator, who is currently 
the minister for European 
integration.
34 In addition, increasing 
attention paid to governance 
in policy formulation is 
reflected in the EU 
enlargement strategy 2013–14, 
which envisages substantial 
further efforts to develop 
public sector financial 
management and control.
31 Observations
60 
Fewer than half of the 2007–12 project-
design documents contained specific 
references to good governance. In the 
case of projects where governance 
aspects were relevant but not among 
the primary objectives, the project 
documentation referred most com -
monly, in general terms, to the need 
for transparency. Only in a few project 
design documents did the Commis -
sion and the Serbian authorities refer 
specifically to the risks of corruption or 
potential conflicts of interest. How -
ever, from 2011, the good-governance 
language in the project design became 
stronger.
61 
The list of cross- cutting issues in the 
project design did not include good 
governance or the fight against cor -
ruption. In fact, the project-design 
documents of the 2007–11 period 
confined themselves strictly to three 
cross- cutting criteria: equal opportun -
ities, the environment and minorities. 
Civil society and stakeholder involve -
ment was added as a fourth cross - 
cutting issue in 2012.
62 
None of the projects examined (see 
Annex II ) included in their design 
a formal assessment of the need 
for anti -corruption or other good-
governance measures specific to the 
beneficiary sector, with the exceptions 
of project E, ‘Strengthening legislation 
at central level’, whose project docu -
ment took up corruption in a limited 
way, and project I, ‘Support for SME 
development’, which explicitly aimed 
at fighting corruption and the informal 
economy through the introduction of 
e-services.63 
However, despite the absence of 
explicit reference to anti -corruption or 
governance in their design, most of the 
projects examined have indirectly con -
tributed to the fight against corruption 
and for better governance. Activ  ities 
in some projects that contributed to 
the dissemination of knowledge about 
and the use of good practices for 
procurement and contracts (e.g. pro -
jects A, ‘Municipal infrastructure’, and 
B, ‘Supervision of road construction 
along Corridor X’), were in line with 
the national anti -corruption strategy. 
Project A, ‘Municipal infrastructure’, 
also supported good governance 
through activities dealing with finan -
cial management, control and audit at 
local level and activities dealing with 
the setting-up of a project pipeline 
under EU standards. Projects support -
ing administrative capacity building 
in the environment and energy sector 
(projects D, ‘Strengthening environ -
mental inspectorate’, and H, ‘Energy 
Agency’) and in the agriculture sector 
(projects C, ‘Effective land manage -
ment’, and J, ‘Support for agriculture’) 
can also be considered as having an 
effect on curbing corruption.
32 Observations
In approving Serbia’s system 
for managing EU funds, the 
Commission did not take full 
account of Serbia’s public 
finance management
64 
The Court examined whether the Com -
mission systematically assessed risks in 
the IPA implementing bodies, whether 
the Serbian authorities took appropri -
ate mitigating measures and followed 
them up where necessary and whether 
this process was part of the Commis -
sion’s comprehensive assessment of 
PFM issues.
The IPA implementing bodies 
were subject to systematic 
risk analysis, but there was no 
comprehensive assessment of 
public finance management 
before decentralising the 
management of EU funds
65 
The IPA regulation provides that, 
wherever possible, management of EU 
funds shall be decentralised from the 
Commission to candidate countries to 
enhance beneficiary-country owner -
ship of the management of EU assis -
tance. This is done via new national 
bodies, collectively known as the 
decentralised implementation sys -
tem, implementing the pre -accession 
assistance. Before deciding to confer 
management powers35 on a benefi -
ciary country, the Commission should 
ensure that the country concerned 
meets the established conditions, in 
particular as regards its management 
and control systems36.66 
To achieve decentralisation, first with 
and subsequently without Commission 
ex ante  controls, Serbia is following 
a detailed roadmap with indicative 
benchmarks and deadlines. As part of 
the roadmap, the IPA implementing 
structures37 were subject to systematic 
risk assessments within the framework 
of their accreditation by the Serbian 
authorities and the Commission. 
However, the accreditation process 
concerned only the structures set up 
for decentralised management of IPA 
funds. There was no legal requirement 
to carry out a comprehensive assess -
ment of the overall progress with PFM 
and the prevention of corruption and 
fight against it in Serbia. Consequently, 
the DIS accreditation procedure was 
effective in supporting governance in 
the limited sphere of the IPA manage -
ment structures but was not part of 
a global PFM strategy at country level.
67 
A sufficiently developed internal audit 
capacity at the Ministry of Finance 
and within line ministries is expected 
to make a positive contribution to 
the management and control system 
required for decentralised manage -
ment. Despite some recent progress38, 
the national internal audit capacity is 
still in the early stages of providing 
effective support for the decentral -
ised management of EU funds. The 
2013 SIGMA report39 indicated that no 
policy had been adopted on fraud and 
irregularities in financial management 
and that the central harmonisation 
unit40 at the Ministry of Finance had 
not provided sufficient methodologic -
al support to financial managers and 
internal auditors on risk assessment 
and fraud.35 Under decentralised 
management, the 
Commission confers the 
management of certain 
actions on the beneficiary 
country, while retaining 
overall final responsibility for 
general budget execution.
36 Article 56(2) of Council 
Regulation (EC, Euratom) 
No 1605/2002 of 25 June 2002 
on the financial regulation 
applicable to the general 
budget of the European 
Communities (OJ L 248, 
16.9.2002, p. 1) and Articles 11 
and 19 of the IPA 
implementing regulation, 
Regulation (EC) No 718/2007.
37 Decentralised management 
requires Serbia to establish 
structures for public 
procurement, contracting, 
payment, monitoring and 
reporting on IPA programmes.
38 See conclusions on project 8, 
‘Public internal financial 
control’  in Boxes 7  and 12.
39 SIGMA assessment Serbia, 
April 2013, ‘Public 
administration reform 
coordination, implementation 
and priorities’.
40 The Central Harmonisation 
Unit’s role is to develop and 
harmonise the public service 
internal audit capacity. See 
also Boxes 7  and 12.
33 Observations
68 
In its 2013 enlargement strategy, the 
Commission took steps in the right 
direction highlighting the need to 
address fundamentals first with the 
enlargement countries. It specifically 
mentioned that the PFM systems will 
need to be significantly strengthened 
to reduce the risk of fraud and corrup -
tion. Furthermore, IPA-sector budget 
support is conditional on meeting the 
necessary PFM standards.
Measures to mitigate the risks 
were taken and followed up
69 
The measures taken to mitigate the 
risks identified in the IPA implement -
ing bodies were relevant and their 
implementation was followed up by 
the Commission. Once management 
powers have been conferred, the 
Commission continues to monitor the 
system by following up any outstand -
ing issues (e.g. remaining medium and 
low-risk audit findings). An important 
risk-mitigating factor is that the Com -
mission can withdraw or suspend its 
conferral of management powers in 
the event that requirements are no 
longer fulfilled.70 
Risks related to staff turnover41 and 
political change during the imple -
mentation of decentralised manage -
ment that could lead to the loss of 
experience and synergies cannot 
easily be addressed at the conferral of 
management stage and require active 
follow -up. Furthermore, once hired, 
staff mainly attend training and have 
limited opportunity to gain practical 
experience because there are no trans -
actions yet. This brings further risks in 
terms of demotivation and high staff 
turnover.
71 
Another risk present in the IPA struc -
tures is the limitation in the current 
protection of whistleblowers as 
recognised by the 2013–18 national 
anti -corruption strategy. New legis -
lation on whistleblowing is under 
preparation by the Serbian authorities 
in order to gain the trust of potential 
whistleblowers.41 SIGMA’s 2013 report estimates 
the rate at 15–20 % per year. It 
also notes that changes in 
government lead to higher 
turnover rates, especially in 
senior positions.
34
 Conclusions and 
recommendations
Conclusions
72 
Overall, the Commission is man aging 
pre-accession support to Serbia ef -
fectively. The financial pre -accession 
assistance to Serbia along with other 
forms of support effectively helps Ser -
bia to implement social and economic 
reforms and to improve governance 
in the country. Based on the experi -
ence gained in other IPA beneficiary 
countries, the Commission is putting 
increasing emphasis on governance 
issues in planning its financial and 
non -financial assistance to Serbia.
Has the Commission been 
managing IPA projects 
effectively?
73 
On the whole, the Commission has 
been managing IPA projects in Serbia 
effectively. Programming of the IPA 
assistance is based on a coherent stra -
tegic framework and the approach to 
selecting projects relevant to prepar -
ing Serbia for accession is gradually 
improving (see paragraphs 9 to 22).
74 
The audited projects, both in the area 
of governance and in areas other than 
governance, largely produced their 
planned outputs (see paragraphs 39 
to 43) but suffered from problems 
regarding:(a) Their design: inadequate attention 
was paid to definition of object -
ives, assessment of needs, lessons 
learnt from past projects and con -
ditionality for launching projects 
and sequencing of operations (see 
paragraphs 24 to 31).
(b) Their implementation: the au -
dited projects from the earlier 
IPA programmes were affected 
by, sometimes significant, delays; 
interventions were monitored 
systematically at contract level, but 
not at project level, and corrective 
actions taken by the Commission 
were mostly limited to changes 
in the activities; some individual 
tendering and procurement pro -
cedures were not fully efficient or 
effective (see paragraphs 32 to 38, 
44 and 45).
(c) Their sustainability: results had 
questionable prospects for sustain -
ability in two thirds of the projects; 
in particular, the sustainability of 
governance -related projects was 
at risk due to personnel issues (see 
paragraphs 46 to 48).
75 
The Commission’s flexible manage -
ment approach mitigated the effects 
of some of these design weaknesses 
and, when drawing up the latest IPA 
annual programmes, the Commission 
had taken steps to address the short -
comings identified in the earlier IPA 
programmes (see paragraphs 27 to 31 
and 38).
35 Conclusions and recommendations
In its support for governance, 
has the Commission been 
managing non‑financial 
assistance effectively?
76 
Overall, the Commission was effective 
in managing non -financial assistance 
to Serbia in the area of governance. 
It used its dialogue with Serbia ef -
fectively in addressing governance 
issues and the fight against corruption. 
It gradually improved its approach to 
take them on board in policy formu -
lation and project design. The Com -
mission was effective in supporting 
governance within the structures of 
EU funding but did not fully consider 
national public finance management 
(see paragraphs 50 to 71).
77 
The Commission has put in place 
a structured dialogue on govern -
ance issues with Serbia. The dialogue 
adequately covers the key governance 
areas, includes the establishment of 
action points and their follow -up and 
makes the link between political prior -
ities and policy formulation. The EU 
enlargement strategy and the revised 
IPA regulation pay increasing attention 
to financial and economic governance 
in the accession countries (see para -
graphs 50 to 58).78 
The Court found that the emphasis on 
governance in the dialogue and the 
programming process was reflected 
to a lesser extent in project design. 
Account taken of risks related to 
governance was limited or completely 
absent in the segments of the project 
documentation concerning condition -
ality, the lessons learnt from the past 
and the cross- cutting aspects. How -
ever, despite no explicit mention of 
the need for anti -corruption or other 
good-governance measures in most 
of the recent projects that it reviewed, 
the Court found that a majority of 
those projects had indirectly contrib -
uted to the fight against corruption 
and better governance through their 
activities related to building adminis -
trative capacity (see paragraphs 59 to 
63).
79 
In approving the DIS, the Commis -
sion assessed the Serbian structures 
for managing EU funds. It systemati -
cally assessed the risks within the IPA 
structures and monitored the meas -
ures  taken to mitigate them. However, 
in accordance with the legal require -
ments, the accreditation process 
concerned only the IPA implementing 
bodies, which means that the DIS was 
not linked to a preliminary compre -
hensive assessment of public finance 
management and the fight against 
corruption at country level (see para -
graphs 65 to 71).
36 Conclusions and recommendations
Recommendations
80 
To improve the programming, design 
and implementation of IPA projects, 
the Commission should: 
(a) Make the project prioritisation and 
selection processes more trans -
parent and more systematically 
documented, reflecting the indi -
vidual stages of reasoned project 
prioritisation.
(b) Improve the lessons-learnt pro -
cess by developing a dedicated 
database incorporating lessons 
drawn from past projects in Serbia 
and other relevant beneficiary 
countries. Lessons learnt should 
take into account the track record 
or typology of failed or repeated 
tenders. Entering into the database 
significant recommendations from 
contract final reports should also 
be considered. The database could 
be grouped according to the major 
sectors used by IPA programming.
(c) Systematically document the 
needs assessment underlying the 
expected outputs from projects 
and contracts, notably to improve 
beneficiary ownership of the 
needs identified.(d) Reinforce the principle of condi -
tionality. In particular, the bene -
ficiary’s capacity to do what is 
required for a high-quality project 
should be verified in advance 
and in specific measurable terms, 
as should whether the project 
elements are compliant with the 
national legal framework and 
whether the necessary building 
permits are available. Stronger 
conditionality should help to 
reduce the number of projects that 
are not ready for implementation, 
in particular large infrastructure 
projects.
(e) Set up a system for a regular brief 
progress report in order to ensure 
an appropriate audit trail for the 
entire project instead of individual 
contracts. The overview reports 
should include a complete list of 
the contracts that come under 
a given project/sector.
(f) Put in place a system to check 
the usefulness of project outputs 
(including studies, analyses, pro -
cedures, protocols and training 
materials) in the medium and long 
term. More emphasis on ultimate 
usefulness should help to shift the 
focus from output delivery and 
meeting contracting and payment 
target figures to more lasting 
results.
37 Conclusions and recommendations
This Report was adopted by Chamber III, headed by Mr Karel PINXTEN, Member 
of the Court of Auditors, in Luxembourg at its meeting of 21 October 2014.
 For the Court of Auditors
 Vítor Manuel da SILVA CALDEIRA  
 President
81 
In relation to its structured dialogue 
with Serbia on governance issues and 
to the DIS process, the Commission 
should carry out the following actions.
(a) Express the need for the Serbian 
authorities to further rationalise 
their set of national strategies 
and finalise a fully fledged PFM 
roadmap, and if necessary provide 
technical support in that respect.
(b) Take measures, in the IPA program -
ming, to enhance the consultation 
mechanism with CSOs active in the 
area of governance.(c) Issue guidelines to ensure that 
the need for sector-specific 
anti - corruption or other good-
governance measures is, wherever 
relevant, assessed in the project 
design.
(d) In its assessment of the country -
wide PFM reforms, verify that the 
audit work done by the Com -
mission in the context of the DIS 
accreditation process is fully taken 
into account.
38
 Annexes
List of IPA projects audited
Serial No TitleNational programme/
project NoBudget  
(million euro)1
Governance projects
Justice and home affairs — Fight against corruption and administrative capacity
1. Police reform: internal affairs 2007/6 1,0
2. Fight against corruption 2008/5 2,5
3. Improvement of efficiency and transparency of judiciary system 2007/4 2,6
4.Improvement of transparency and efficiency (prosecutors and penal 
system)2008/8 4,5
Public administration reform (PAR)
5. Municipal support programme 2007/2 22,5
6.Harmonisation of the Serbian Customs Enforcement Division with the 
standards, organisation and operational methodology of EU enforce ‑
ment agencies2008/6 4,4
Public finance management (PFM)
7. Support for the Public Procurement Office 2007/7 2,0
8.Support for the development of public internal financial control (PIFC) 
phase 32008/2 2,0
Non‑governance projects
Social development
9. Regional economic and social development programme 2007/13 23,3
10. Health sector reform emergency medical services 2007/16 10,0
Private sector development
11. Support for private sector competitiveness 2007/22 3,5
Transport
12. Žeželj bridge — rebuilding Serbian infrastructure 2009/4 30,0
Environment, climate change and energy
13. Environmental protection at the Electric Power of Serbia company 2008/17 11,0
Agriculture and rural development
14.Capacity building to implement rural development policies to EU 
standards 2007/32 4,4
Other EU acquis and cross‑cutting activities
15.Support for civil society  I
Support for civil society  II2007/12
2008/112,0
2,5
Total 128,4
1 National co-financing not included.Annex I
39 Annexes Annex IIList of IPA projects reviewed for examination of governance and the fight against 
corruption as cross‑cutting issues
Serial No TitleNational programme/
project NoBudget  
(million euro)
A. Municipal infrastructure support programme — MISP 2010 2010/3 31,1
B.Supervision of road construction works along corridor X (Grdelica — 
Vladicin Han and Pirot — Ciflc sections)2010/15 10,0
C.Institutional capacity building and support for agriculture and rural 
development in Serbia2010/20 2,8
D.Strengthening the Serbian Environmental Inspectorate and relevant 
stakeholders2010/23 2,5
E.Strengthening legislation, policy and coordination capacities at central 
level2011/3 6,5
F. Socioeconomic development in the Danube region 2011/13 18,5
G. Municipal environment grant‑loan investment programme (Meglip) 2011/17 19,1
H. Capacity‑building for the Energy Agency 2011/19 1,5
I. Support for SME development 2012/7 6,2
J.Support for agriculture and rural development (in particular meas ‑
ures 1.4 and 2)2012/10 15,6
Total 113,8
40
11 First indent
The — limited — support provided by the IPA to 
the decentralisation process was based on the pub -
lic administration reform (PAR) strategy adopted by 
the government of Serbia in 2004 and its related 
action plans. The particular areas of IPA support 
have derived directly from the PAR strategy action 
plans. The selected project 5 (municipal support 
programme) focused on building local administra -
tion capacities in priority areas of EU integration. 
In addition, in line with the PAR strategy action 
plan, the project was designed to support elabora -
tion of the decentralisation strategy as requested 
by the then ministry in charge of decentralisation. 
However, the project suffered from a lack of politi -
cal will. Nevertheless, the outputs of this project’s 
component are further used by the newly estab -
lished Council for Decentralisation that reconvened 
in autumn 2013 to proceed with elaboration of the 
strategy. Under the new government, the mandate 
for drafting the decentralisation strategy is given to 
the Ministry for Regional Development and Local 
Self Government. 
The Commission agrees that any further support 
under IPA II for any decentralisation process would 
need to be based on a clear national decentralisa -
tion strategy and its action plan.
11 Second indent
The Commission acknowledges that there was no 
overarching PFM strategy covering all key aspects 
of PFM. Rather, different aspects of PFM have been 
covered under specific strategies such as the fiscal 
strategy or the public internal financial control 
(PIFC) strategy, so that a strategic basis for sup -
porting specific IPA projects existed even in the 
absence of a formal overarching PFM strategy. The 
new enlargement strategy ‘Fundamentals first’ from 
October 2013 puts special emphasis on economic Executive summary
IV
The IPA is focused on needs and its priorities are 
based on assessments of the level of fulfilment of 
EU-related criteria, included in particular in the 
Commission’s enlargement strategy paper and the 
annual reports. The allocation criteria take account 
of Serbia’s capacity to use and to manage the funds 
and their respect of the conditions for accession. 
In this way, the IPA provides the link between the 
political framework for enlargement and the EU 
budgetary process.
VI
The Commission acknowledges the fact that the 
decentralised implementation system (DIS) process 
has been built for the management of IPA funds. 
Serbia is currently preparing a comprehensive pub -
lic finance management (PFM) reform programme, 
which will be based on a comprehensive diagnostic 
of the PFM subsystems. Therefore a public expendi -
ture and financial accountability (PEFA) assessment 
is going to be carried out.
Observations 
11
The Commission has already supported the govern -
ment in improving the quality of its strategic docu -
ments through a number of mitigating measures 
funded from the IPA. The Commission has over the 
last year conducted a number of sector evaluations 
on the past IPA and other donor assistance in Serbia 
in order to support preparations for IPA II, where 
the objective is to support the implementation of 
coherent sectoral strategies/programmes through a 
sectoral approach. Reply of the  
Commission
Reply of the Commission 41
16
The Commission recognises that under the earlier 
IPA programmes some projects were selected due 
to their importance for Serbia based on assurances 
provided by the government for their smooth imple -
mentation. Much stricter requirements concerning 
project readiness have already been introduced 
under the IPA 2012 and 2013 programmes and will 
be enforced even more systematically under IPA 
II. The Commission has supported, through IPA 
assist  ance, the development of a new methodology 
for the selection of investment projects that will 
be part of the national single project pipeline. The 
method  ology aims to help the Serbian government 
to assess (a) prioritisation and (b) the maturity of 
projects/programmes in the infrastructure sectors. 
20
The Commission shares the importance of civil soci -
ety organisations (CSO) and will further continue to 
encourage and support the involvement of CSO in 
IPA programming.
Box 3
Supplies were synchronised with the inputs of 
a parallel twinning in support of the institutional 
development plan for the paying agency (PA). The 
PA had been allocated 105 posts in the systematisa -
tion of the Ministry of Agriculture. During the life -
time of this project the government was reshuffled 
three times, leading to disruptions in the planned 
recruitments for the PA. 
26
Measures have been taken to improve the capacity 
for retaining lessons learnt from previous experi -
ences and thereby improve the IPA II (2014–20) 
programming process. Lessons learnt and recom -
mendations of the IPA component I sector assess -
ments in Serbia have been applied in the design of 
the IPA 2014 programme. A table with the recom -
mendations for each sector individually and for pro -
gramming as a whole has been introduced as key 
starting document for the sector working groups in 
the 2014 programming process. governance as well as public finance management 
and foresees that enlargement countries should 
prepare specific PFM action plans. Therefore, sup -
port under IPA II in this area will be based on a more 
coherent PFM framework than in the past. It is 
important to note that the new Serbian PAR strat -
egy for the period 2013–16 also encompasses PFM. 
This is an important improvement in comparison 
with the past, because it highlights the fact that 
PFM concerns all budget users, not only the Minis -
try of Finance, and that there is a need for coordin -
ation and coherence in implementation. Further on, 
the planned PEFA assessment will contribute to an 
overall picture of PFM systems in place.
13
The purpose of the European Partnerships has been 
to provide a general reference framework rather 
than a policy framework, to indicate the priority 
areas for reform and to provide general guidelines 
for financial assistance in these priority areas, with 
the expectation that the country respects the prin -
ciples and priorities highlighted in it. These princi -
ples have been consistently agreed with Serbia and 
reflected in the national programmes during the 
first years of IPA programming. A more specific and 
accession-relevant framework has been provided 
by the annually updated enlargement strategy and 
country-specific annual progress reports.
14
The Commission recognised the need for improved 
indicators in the programming of IPA assistance and 
has addressed this issue in the IPA II framework. 
The indicative country strategy papers, which will 
define the long-term strategic orientation for IPA 
funding per country, include an annex detailing 
indicators at diverse levels. These, among others, 
also include indicators in the fields of economic 
governance and the fight against corruption. 
Reply of the Commission 42
Serbia would probably not exist and municipalities 
would continue to face high interest rates on bank 
loans. Therefore, the municipal bond support was 
an important starting point for local government 
credit market in Serbia, for communal infrastructure 
finance and for savings in local budgets.
Box 7 — Reply to the second paragraph
IPA financial support is assisting the government in 
meeting the EU criteria and complements the policy 
dialogue. The Commission highlighted the short -
comings in terms of the activities of the CHU and 
the staffing of internal audit units in the relevant 
structures of its political dialogue with the Serbian 
authorities, in particular in the relevant subcommit -
tee of the SAA as well as in the screening report for 
chapter 32. Improvement is therefore expected in 
the short term within the framework of accession 
negotiations. If the 2008 project was not sufficient 
to solve all difficulties, it greatly contributed to 
reaching a level of preparation that would allow the 
Commission to propose opening chapter 32.
43
Generalised conclusions cannot be drawn about 
the effectiveness of EU support in the field of 
public works on the basis of this specific project. 
The majority of delays have been assessed by 
the engineer to be attributable to the contrac -
tor. Further on, in particular as of the IPA 2011, this 
type of difficulty is now addressed through the 
improved links between the policy elements and 
the programming. 
45
The Commission acknowledges the absence of 
a summary monitoring document on the history of 
failed tenders. However, the reasons for a cancelled 
or failed tender are analysed on a case-by-case 
basis and taken into account for a possible relaunch. 27
Since IPA 2012 programming conditionalities 
are used in a targeted way, are clearly defined in 
sector/project documents in a measurable way 
and enforced during implementation. Numerous 
projects have been postponed in programming if 
critical pre-  conditions were not in place. The Com -
mission, however, plans to enforce conditionalities 
more rigorously and made it clear to the Serbian 
government that only fully mature projects will be 
considered for programming.
33
Indeed, the Commission’s reports of the authorising 
officer by subdelegation present the high targets 
met and the contracting rates, which have been 
consistent year after year, therefore demonstrating 
high absorption capacities.
37
The Commission reacted, in particular in the first 
monitoring committees, in order to safeguard the 
successful implementation of ongoing projects, 
which resulted in flexible contract management. 
This process evolved into stronger monitoring 
mechanisms and stricter decisions when difficulties 
appear during the implementation on a case-by-
case basis.
Box 7 — Reply to the first paragraph
The volume of municipal bonds for the city of Novi 
Sad represents the second largest local govern -
ment borrowing in Serbia. The results achieved 
under this programme are still influencing the 
market in 2014, where for example it is envisaged 
to introduce further municipal bonds for the cities 
of Sabac and the municipality of Stara Pazova. The 
standing conference of towns and municipalities 
continues to receive requests for providing support 
for municipal bond issues, representing an alterna -
tive to loans. The Commission is of the opinion, that 
without that support, municipal bond market in 
Reply of the Commission 43
Box 11 — Reply to the third paragraph
The project can be considered as one-off govern -
ment assistance to the municipal structures, which 
have only then become responsible for the main -
tenance and procurement of equipment and infra -
structure in their health institutions.
At the time of purchase, the Ministry of Health 
intended to procure more vehicles to cover for 
more needs (the fleet should have been 1 000, 
and Serbia had only close to 400, including the 
EU donation of 252 vehicles). However, the finan -
cial resources are more and more scarce and only 
repairs and sporadic procurement was made avail -
able to the municipal budgets.
The procurement made by the EU could be consid -
ered as emergency rehabilitation assistance, since 
no such purchases were made before 1991 and 
these vehicles were a serious need for the system. 
Otherwise the implications for service delivery and 
health of the population would have been grave. 
These vehicles are still the newest ones available 
in the country and are still used to the maximum, 
and the project-achieved enhanced capabilities are 
therefore still sustained. Vehicle renewal depends 
on the country’s future economic development. 
Box 12 — Reply to the first paragraph
The Commission agrees to the fact that internal 
audit staff are difficult to recruit in some ministries. 
However, Serbia informed the Commission that an 
internal audit function has been established within 
76 budget users (55 at central government level, 
21 at local government level). These users account 
for 90 % of public funds. All ministries have set up 
internal audit units, but in two ministries positions 
were still not filled. The smaller budget users can 
meanwhile either build up a joint internal audit 
unit or enter into an agreement with budget users 
who have an internal audit function and use their 
auditors.Box 10 — Reply to the first paragraph
The tendering process for the police reform project 
failed due to submission of the only application 
after the formal deadline. After the failure of the 
tendering process the beneficiary (the Internal 
Affairs Unit at the Ministry of the Interior) remained 
committed to the project, while the issues of lack of 
autonomy of the unit, adequate staff and support 
from senior managers in the Ministry of Interior 
continued to affect the internal control depart -
ment’s ability to effectively combat corruption 
within the police force. These issues have been the 
object of specific letters sent by the head of the 
delegation and the ambassador of the twinning 
partner to the minister.
Box 11 — Reply to the first paragraph
The Commission has already applied the lessons 
learnt from this experience. In the IPA 2012 pro -
gramme, the IT aspect for justice includes a needs 
analysis as the first activity. Any further assistance 
can only be deployed upon the finalisation of this 
needs analysis.
Box 11 — Reply to the second 
paragraph
The Commission agrees that the lack of a clear 
regional policy framework presented a sustainability 
risk. There was however no single EU model that could 
have been proposed as organisational aspects have 
to be defined nationally as a political decision of the 
Serbian government. Sustainability became an area of 
concern when it became apparent that Serbia would 
not get a regional policy and legislative framework in 
place early in the process, as well as clear financing 
mechanisms. The Commission wants to point out that 
all EU-funded RDAs have remained operational after 
completion of the project and the EU funding. While 
still largely project dependent, most of them have 
gained regional recognition and benefit from cross-
border cooperation programmes, national funds, 
bilateral donors’ funds and also private income from 
various business service provisions. An important 
lesson to be learnt from the programme is to organise 
a clear sequencing of activities by which, for example, 
the adoption of the strategic/legislative framework is 
a precondition for the granting of further support. 
Reply of the Commission 44
66
Serbia is currently preparing a comprehensive pub -
lic finance management (PFM) reform programme, 
which would be based on a comprehensive diag -
nosis of the PFM subsystems. Therefore, a public 
expenditure and financial accountability (PEFA) 
assessment is going to be carried out. A com -
prehensive and reliable PFM reform programme 
represents one of the key requirements in Serbia’s 
accession negotiations with the European Union 
and, at the same time, also represents one of the 
key elements for planning and implementing long-
term reforms. 
The PEFA assessment will provide the government 
of Serbia with a snapshot of broad PFM perform -
ance allowing to assess the current status in key 
areas and to identify where the limitations and 
risks are in moving forward with a new PFM reform 
strategy. This will also include the assessment of IPA 
structures within the Serbian authorities.
67
The Commission agrees with the need for further 
efforts in order to safeguard the financial interests 
of the EU. The internal audit function has been 
progressively set up in a way to cope with a decen -
tralised management basis. The number of internal 
auditors and performed audits has increased over 
time. An effective and functioning internal audit 
system, however, still remains to be established 
in line with the budget system law requirements 
for many budget authorities and beneficiaries. 
The internal control focus is on ex post checking 
of compliance with laws and detecting potential 
irregularities, as evidenced by the work performed 
by internal auditors, centralised budget inspec -
tors and also the state audit institution. In line with 
the managerial accountability principle, however, 
the focus should gradually move towards making 
managers responsible for setting up and imple -
menting appropriate FMC structures, supported by 
an internal audit function, to prevent irregularities 
in the first place.This issue will be covered under chapter 32 in the 
negotiations, and progress is therefore expected 
and will be closely monitored in this respect before 
closure of the chapter.
Box 12 — Reply to the second 
paragraph
The Commission recognises the difficulty of reten -
tion of trained staff in key administrative structures 
as a horizontal challenge in the candidate countries. 
This issue will be monitored in all fields during the 
negotiations as a chapter can only be closed when 
legislation is fully aligned with that of the EU and 
administrative capacity is identified as sufficient for 
implementation of EU policies. 
48
Steps to mitigate weaknesses in the field of sustain -
ability have already been taken. The 2014 ROM moni -
toring schedule includes a number of ex post  ROM 
exercises with the aim of checking the medium and 
long-term sustainability of the IPA projects’ results.
59
The formal opening of accession negotiations with 
Serbia in January 2014, starting with the rule-of-law 
chapters (chapter 23, ‘Judiciary and fundamental 
rights’, and chapter 24, ‘Justice, freedom and secur -
ity’) put great emphasis on the need to ensure 
a sound and predictable rule-of-law climate condu -
cive to overall improved governance environment. 
This entails in particular, and as a matter of priority, 
an efficient and deterrent fight against corruption at 
all levels and in all sectors, including at project level.
61
In all programming periods, cross-cutting issues were 
included under the more general rule-of-law issues. 
Even if not explicitly mentioned in previous years, 
the Commission tackles those in a cross-  cutting man -
ner, acknowledging however that explicit references 
may serve for more clarity in this regard.
Reply of the Commission 45
74 (b)
The Commission acknowledges isolated problems 
in the implementation of earlier projects, which 
were addressed by the contracting authority in 
order to safeguard the contractual implementa -
tion and provide for sound financial behaviour in 
contract management. Complexity and technically 
demanding tendering procedures have led to some 
failures and were repealed when retendered.
74 (c)
The Commission recognises the difficulty of 
employment and retention of trained staff in admin -
istrative structures as a cross-cutting challenge in 
all candidate countries. This issue will be monitored 
during the negotiations as a chapter can only be 
closed when legislation is fully aligned with that of 
the EU and administrative capacity is identified as 
sufficient for the implementation of EU policies.
76
Serbia is currently preparing a comprehensive pub -
lic finance management (PFM) reform programme, 
which would be based on a comprehensive diag -
nosis of the PFM subsystems. Therefore a public 
expenditure and financial accountability (PEFA) 
assessment is going to be carried out. A com -
prehensive and reliable PFM reform programme 
represents one of the key requirements in Serbia’s 
accession negotiations with the European Union 
and, at the same time, also represents one of the 
key elements for planning and implementing long 
term reforms.
78
In all programming periods cross-cutting themes 
were included under the more general rule-of-law 
issues. Even if not explicitly mentioned in previous 
years, the Commission tackles those in a cross-cut -
ting manner, acknowledging however that explicit 
references may serve for more clarity in this regard.70
The Commission has introduced measures to 
mitigate risks of high staff turnover. Staff take an 
active part in tasks performed by the delegation 
in the current centralised set-up in order to ben -
efit from practical experience on real cases before 
carrying out the transactions themselves when the 
decentralised set-up is eventually introduced. These 
tasks include observing evaluation committees, 
participating in on-the-spot checks and verification 
mission to projects.
71
Strengthening protection of whistleblowers is 
an important element already identified in the 
screening report on chapter 23. The development 
of a functioning whistleblower protection system 
should feature prominently in the action plan 
Serbia is currently preparing to answer the opening 
benchmark for this chapter. A draft law on whistle -
blower protection has been prepared and is to be 
adopted.
Conclusions and recommendations
74 (a)
The Commission acknowledges some design-
related shortcomings, in particular for early IPA 
projects. Therefore the Commission has improved 
its sector documents in this respect. The IPA-funded 
sector evaluations have drawn lessons from the 
implementation of IPA I (2007–12). The recommen -
dations from these assessments have been fed into 
working groups and are in the process of being 
reflected under IPA II programming. Some of the 
specific recommendations addressed in the sec -
tor evaluations have already been reflected in the 
new IPA II setting (Regulation (EU) No 231/2014), the 
common implementing regulation (Regulation (EU) 
No 236/2014) and draft framework agreements, to 
be concluded with each individual beneficiary.
Reply of the Commission 46
and forms of assistance. Additionally, the Commis -
sion intends to study — in the context of setting 
up a monitoring and reporting framework to meet 
the reporting requirements flowing from the IPA II 
legal framework — whether an efficient and cost-
effective reporting tool also addressing the tender -
ing process can be established, possibly building 
on existing tools. Moreover, in line with the recently 
updated policy orientations on evaluation from 
DG Enlargement, a review of current monitoring 
practices and tools is foreseen, as well as a strength -
ening of the synergies between the evaluation and 
the monitoring functions, which will contribute to 
ensuring consistent follow-up to past findings and 
recommendations. 
80 (c)
The Commission accepts this recommendation and 
intends to take it into account by improving the 
logical framework of interventions within action 
documents in IPA II, in particular as regards results 
and outputs from activities, as well as by further 
improving the documentation related to the needs 
assessments as annexes of the action documents.
80 (d)
The Commission accepts this recommendation. 
De facto, it is already largely taken into account, as 
since IPA 2012 programming, conditionalities are 
used in a targeted way, are clearly defined in sector/
project fiches in a measurable way and enforced 
during implementation. Numerous projects have 
been postponed in programming if critical pre-  
conditions were not in place. The Commission, how -
ever, plans to enforce conditionalities more rigor -
ously and made it clear to the Serbian government 
that only fully mature projects will be considered for 
programming. This policy will be further supported, 
as regards infrastructure, by the establishment of 
the single project pipeline, which will include an 
individual assessment of all projects as to their level 
of maturity (and fulfilment of conditionalities). 80 (a)
The Commission accepts the recommendation. The 
prioritisation and selection process has, overall, 
already improved over the lifetime of IPA I. Further 
progress is expected for IPA II projects, in line with 
the newly developed methodology and the move 
to a sectoral approach, which will increase links 
between policy priorities and assistance program -
ming. The key policy priorities for programming will 
be reflected in the country strategy paper, and gaps 
assessed yearly in the Commission’s strategy docu -
ment and progress reports. Following the opening 
of accession negotiations, in each sector, program -
ming should be directly linked to prior ities identi -
fied in the relevant chapters, first in the screening 
reports and subsequently in the opening or closing 
benchmarks, wherever applicable. Another clear 
improvement in the investment field should result 
from the development of a national single pipe -
line of strategic projects in the fields of transport, 
energy, environment and business infrastructure, to 
be adopted by the government and used as single 
basis for IPA support for infrastructure projects.
80 (b)
The Commission accepts the recommendation. In 
the context of thematic sector evaluations, lessons 
learnt from project implementation, relevant across 
countries and or sectors, are already shared, and, 
notably, IPA-funded sector evaluations have drawn 
lessons from the implementation of IPA I (2007–12). 
As a result, some of the specific recommendations 
addressed in the sector evaluations have already 
been reflected in the new IPA II setting (Regula -
tion (EU) No 231/2014), the common implement -
ing regulation (Regulation (EU) No 236/2014) and 
draft framework agreements to be concluded with 
each individual beneficiary. They are also reflected, 
where applicable, in IPA II programming. For inter -
nal monitoring and reporting purposes, a specific 
table reflects the evolution of the steps taken to 
implement the main findings and recommenda -
tions on past evaluations relating to both sectors 
Reply of the Commission 47
81 (b)
The Commission accepts this recommendation and 
welcomes any further involvement of CSOs in the 
policy and programming processes. It is actually of 
the opinion that these measures are already largely 
in place. The Commission has already provided IPA 
support for the establishment of an Office for Coop -
eration with Civil Society. The office was established 
in 2010. In 2010 national authorities also estab -
lished a mechanism called SECO (sector civil society 
organisations) for the participation of civil society in 
the planning, programming and monitoring of IPA 
assistance. The SECO mechanism is organised on 
a sector basis. For each sector, representative CSOs 
have been registered. IPA support has been pro -
vided through technical assistance for the design 
of the SECO mechanism and for strengthening its 
influence towards wider policymaking. Even though 
CSOs have been consulted on regular basis on the 
programming of the IPA, they have in the past made 
rather limited use of this mechanism.
81 (c)
The Commission accepts this recommendation 
and will issue guidelines to ensure that the need 
for sector specific anti-corruption or other good-
governance measures is, where relevant, assessed in 
the project design.
81 (d)
The Commission accepts this recommendation and 
will ensure that the audit work done in the context 
of the accreditation and conferral of the manage -
ment decision from March 2014 is going to be taken 
into account for the PFM reform process.80 (e)
The Commission accepts this recommendation. An 
improved audit trail for the entire project is planned 
to be included in the 2014 report of the authorising 
officer by subdelegation, i.e. for the contracts that 
are included in the annual assurance strategy for 
2014 and for the audit plan 2014 onwards. Results, 
findings and recommendations from the audits 
and on-the-spot monitorings will be presented 
in the overview reports containing data regard -
ing the entire project/sector. Those reports will be 
improved in such a way to facilitate and meet given 
recommendations.
80 (f)
The Commission accepts this recommendation and 
envisages establishing a system in order to include 
samples of such checks in its annual audit and on-
the-spot verification plans. 
81 (a)
The Commission accepts the recommendation. The 
Commission is at the stage of supporting a PEFA 
assessment in order to provide the government of 
Serbia with a broad snapshot of PFM performance. 
Such an assessment will assess the status of key 
areas and identify where the limitations and risks 
are in moving forward with a new PFM reform 
strategy. This will also include the assessment of IPA 
structures within the Serbian authorities. Serbia is 
currently preparing a comprehensive public finance 
management (PFM) reform programme, which will 
be based on a comprehensive diagnostic of the 
PFM subsystems. Progress will be closely steered 
and monitored during the negotiations within the 
framework of chapter 32 on financial control.

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QJ-AB-14-019-EN- N ISSN 1977-5679
This report evaluates whether EU support 
— about 1,2  billion  euro over the 2007–13 period 
— was effective in preparing Serbia for EU 
membership. The audited projects delivered 
their planned outputs although they suffered 
from weaknesses regarding their design, 
implementation and sustainability. Overall, the Court concludes that the Commission is rightly putting emphasis on governance issues in 
planning its assistance to Serbia, and that EU 
support effectively helps Serbia to implement 
structural reforms and improve public finance management.
EUROPEAN
COURT
OF AUDITORS