Table of Contents

A. FINANCIAL ASSISTANCE TO THE WESTERN BALKANS, ICELAND AND TURKEY 3

CROATIA.. 4

1. SUMMARY.. 4

2. STRATEGIC PLANNING AND PROGRAMMING.. 6

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 9

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 16

MONTENEGRO.. 20

1. SUMMARY.. 20

2. STRATEGIC PLANNING AND PROGRAMMING.. 20

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 224

4. IMPLEMENTATION MODALITIES AND STRUCTURES. 29

SERBIA.. 33

1. SUMMARY.. 33

2. STRATEGIC PLANNING AND PROGRAMMING.. 33

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 36

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 46

THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA.. 51

1. SUMMARY.. 51

2. STRATEGIC PLANNING AND PROGRAMMING.. 51

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 56

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 61

ALBANIA.. 66

1. SUMMARY.. 66

2. STRATEGIC PLANNING AND PROGRAMMING.. 66

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 70

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 81

BOSNIA AND HERZEGOVINA.. 84

1. SUMMARY.. 84

2. STRATEGIC PLANNING AND PROGRAMMING.. 84

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 89

3.1 IPA.. 89

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 91

KOSOVO.. 96

1. SUMMARY.. 96

2. STRATEGIC PLANNING AND PROGRAMMING.. 96

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 99

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 104

TURKEY.. 107

1. SUMMARY.. 107

2. STRATEGIC PLANNING AND PROGRAMMING.. 107

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 114

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 120

ICELAND.. 125

1. SUMMARY.. 125

2. STRATEGIC PLANNING AND PROGRAMMING.. 125

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 126

B. MULTI - BENEFICIARY.. 128

1. SUMMARY.. 128

2. STRATEGIC PLANNING AND PROGRAMMING.. 128

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013. 133

C. Evaluation findings. 138

D. PHARE, CARDS, TURKEY PRE-ACCESSION AND TRANSITION FACILITY FINANCIAL DATA AT 31ST DECEMBER 2012 : 142

1. EU 12 – PHARE and Transition Facility - Decentralised Management 142

2. Candidates and Potential Candidates - CARDS (and PHARE for HR) or Turkey Pre-accession Assistance - FINANCIAL DATA .................................................................................................... 146

INTRODUCTION

The Instrument for Pre-accession Assistance (IPA) is the means by which the EU supports reforms in the 'enlargement countries' with financial and technical help. It accompanies the accession policy, as set out by the European Union, with a view to implementing Article 49 of the Treaty on European Union which offers the prospect of EU membership to all European countries that respect the fundamental values of the EU and are committed to promoting them. The IPA funds build up the capacities of the countries throughout the accession process, resulting in progressive, positive developments in the region. For the period 2007-2013 IPA had a budget of some EUR 11.5 billion; its successor, IPA II, will build on the results already achieved by dedicating EUR 11.7 billion for the period 2014-2020. Beneficiaries for this period were: Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Iceland, Kosovo*, Montenegro, Serbia, and Turkey. Since its entry into the EU, in July 2013, Croatia is no longer an IPA beneficiary, but still benefits from the Transition Facility.

In 2013, the enlargement countries further advanced on their path towards the European Union. There were a number of positive developments in the candidate countries[1] and potential candidates[2], including progress made on EU-related reforms. Accession negotiations with Iceland were put on hold by the Icelandic government in May 2013 and will only be resumed by the Icelandic side if the government decides to continue on the path towards EU membership.

The policy objectives of the Commission in the field of enlargement are supported by the Instrument for Pre-Accession Assistance (IPA)[3]. The instrument is the means by which the EU supports reforms towards alignment to EU standards and acquis in the enlargement countries through both financial and technical help. IPA funds build up the capacities of the countries throughout the accession process, thus resulting in progressive, positive developments in the region.

IPA replaced the previous instruments for pre-accession: PHARE, ISPA, SAPARD, the pre-accession instrument for Turkey, and the financial instrument for the Western Balkans, CARDS. Since 2007, the enlargement countries have received EU funding and support through this single channel.

IPA is divided into five components:

o I (Transition Assistance and Institution Building)

o II (Cross-Border Cooperation)

o III (Regional Development)

o IV (Human Resource Development)

o V (Rural Development)

Components I and II are under the responsibility of the Directorate-General for Enlargement (DG ELARG) and open to all beneficiary countries. The other components, aimed at preparing the beneficiaries for the implementation of structural funds after joining the EU, and were only accessible to candidate countries and are managed under the responsibility, respectively, of the Directorate-General for Regional Policy (DG REGIO), the Directorate-General for Employment, Social Affairs and Inclusion (DG EMPL) and the Directorate-General for Agriculture and Rural Development (DG AGRI).

EU pre-accession funds are a sound investment into the future of both the enlargement countries and the EU itself. They help the beneficiaries make political and economic reforms, preparing them for the rights and obligations that come with EU membership. Those reforms should provide their citizens with better opportunities and allow for development of standards equal to the ones enjoyed by the citizens of the EU. The pre-accession funds also help the EU reach its own objectives regarding a sustainable economic recovery, energy supply, transport, the environment and climate change, etc.

The 2013 Annual Report is an occasion to look back at success stories and lessons learnt from IPA which can help shape future assistance under the new IPA II for 2014-2020 .

The present Staff Working Document accompanies the Communication presenting an overview of the achievements of IPA in 2013.

A. FINANCIAL ASSISTANCE TO THE WESTERN BALKANS, ICELAND AND TURKEY

CROATIA

1. SUMMARY

Throughout 2013 Croatia continued to actively implement measures to further strengthen its capacity to meet the obligations of membership to the European Union (EU). Since 1 July 2013, Croatia has been an EU Member State.

Under the National Programme for IPA Component I, the first six months allocation for 2013 was adopted in 2012 together with the IPA 2012 Transition Assistance and Institution Building allocation. The total amount of the 2012 and 2013 National Programmes was EUR 46.80 million (2012: EUR 35.22 million; 2013: EUR 11.58 million).

Furthermore, Croatia continued to report on a quarterly basis to the Commission on the achievements in meeting the requirements and benchmarks as regards transactions, system and its supervision, which were agreed with the Commission in the “Roadmap to waive ex-ante controls”. After a steady decrease of rejection rates[4], the Commission waived ex- ante controls on procurement and grant award procedures for IPA component III on 24 January 2013, IPA components I and II on 12 February 2013 and IPA component IV on 19 February 2013. Since IPA component V was implemented from the outset without ex-ante controls, as of 19 February 2013, the whole instrument was implemented in Croatia without prior controls by the Commission.

As far as the National Programme for IPA Transition Assistance and Institution Building (TAIB) 2012 is concerned, the Financial Agreement was signed on 9 May 2013 with final date for contracting 29 November 2016. Concerning the National Programme for IPA TAIB 2013, the Financial Agreement was signed on 26 July 2013 with a contracting deadline set at 14 January 2017.

Under IPA component I and II, an adequate institutional set up for decentralised management of IPA funds has been fully established. A system with internal rules of procedure and personal responsibilities was developed. Implementing and operational agreements have been signed, defining the roles and responsibilities within the system: between the National Authorising Officer (NAO) and the Head of the Operating Structure and among bodies and responsible persons within the Operating Structure. Manuals of procedures were developed for each body within the system, with a clear description of all processes and procedures and with audit trails developed.

The multi-annual Human Resources Development Operational Programme (HRDOP) under IPA Component IV for the period 2007-2013 aimed at supporting Croatia in policy development as well as preparation for the implementation and management of the Union's cohesion policy; in particular regarding the European Social Fund. In line with the Multi-annual Indicative Planning Document (MIPD), it focused on tackling unemployment through targeted actions; promoting social inclusion, reducing the barriers to employment, facilitating the delivery of new, high-quality VET curricula as well as developing the administrative capacity of the institutions in charge of the implementation. An increasing policy focus has been placed on improving the adaptability of enterprises and workers since 2011. A new priority axis has been introduced in 2012 targeting the civil society organizations and the promotion of social dialogue.

2. STRATEGIC PLANNING AND PROGRAMMING

2.1. Multi-annual Indicative Planning Document (MIPD)

The Instrument of Pre-accession Assistance (IPA) support for the period 2012-2013 had a strong focus on the new sector approach developed for IPA. A positive effect of this new approach was the more targeted assistance allowing easier identification of the remaining gaps as well as improved donor coordination.

During the first six months of 2013 EU assistance continued to be provided in the following sectors:

1. Justice and home affairs and fundamental rights;

2. Public administration reform;

3. Environment and climate change;

4. Transport;

5. Private sector development;

6. Social development;

7. Agriculture and rural development.

Table 1: MIFF[5] allocations per component, in million EUR

Component || 2011 || 2012 || 2013 || 2011-2013

I – Transition Assistance and Institution Building || 39.96 || 39.97 || 17.44 || 97.37

II – Cross-border cooperation || 15.87 || 16.44 || 9.75 || 42.06

III – Regional Development || 58.20 || 57.45 || 30.09 || 145.74

IV – Human Resources Development || 16.00 || 15.90 || 8.55 || 40.45

V – Rural Development || 26.50 || 25.82 || 27.70 || 80.02

TOTAL || 156.53 || 155.59 || 93.52 || 405.64

2.2. Programming

2.2.1. IPA Component I

The most important strategic document for the IPA Programme is the MIPD. The purpose of the document is to set out the EU’s priorities for assistance to the beneficiary for a three year programming period. Apart from its multi-annual nature, the MIPD is reviewed annually.

The programming process for 2012 and 2013 was conducted in parallel starting from September 2011. According to the Croatia MIPD 2011 – 2013, the focus of the programming under the IPA 2012/2013 National Programme was primarily on the following MIPD sectors: Justice, Home Affairs and Fundamental Rights and Public Administration Reform. The needs identified under the other sectors are mainly covered by the IPA components III-IV. With regard to the programming context, the IPA 2012/2013 National Programme was the last programming cycle, with the sector approach partially applied to Croatia. Programming of the IPA programme for the last two consecutive years, had been officially concluded with the ratification process in December 2013 for programming year 2012 and at the beginning of January 2014 for the programming year 2013.

2.2.2 IPA Component II

After the accession, the new Croatian Managing Authority (Ministry of Regional Development and EU Funds, of the Republic of Croatia) started its negotiations with the neighbouring IPA countries on the preparation of the next programming period 2014-2020. Subsequently, two new programmes were agreed to be launched: Croatia-Serbia and Croatia- Bosnia and Herzegovina and Montenegro, under the share management principle. Following the European Commission’s favourable opinion to the preparation of the programmes falling under IPA, namely Croatia-Serbia (Future IPA CBC programmes between Croatia and beneficiary countries, Ref. Ares(2013)3245615 - 15/10/2013), the Republic of Croatia and the Republic of Serbia have decided to establish a Task Force for the preparation of the programming period 2014 – 2020. Its first meeting took place in November 2013.

2.2.3. Transition Facility

The Transition Facility programme for Croatia for the year 2013 aims at providing assistance in the area of Justice, Fundamental Rights and Home Affairs, Public Administration Reform and Administrative Capacity Development, as well as the Implementation of the EU acquis.

Overall, the programming process for the Transition Facility programme for Croatia has been defined in article 30 of the Accession Treaty. This article establishes the Transition Facility, with commitment appropriations of EUR 29 million in total for 2013 to continue to support the Republic of Croatia in its efforts to further develop and strengthen its administrative and judicial capacity to implement and enforce EU law.

The programming of the Transition Facility was initialized at the beginning of October 2012, based on the information and instructions regarding the Transition Facility provided by DG ELARG. In the first stage of programming the potential beneficiaries drafted “Transition Facility Priority Assessment Templates” in which they identified and justified priorities and operations for financing under the Transition Facility. At the end of November 2012, the Ministry of Regional Development and EU funds (MRDEUF) submitted to the Commission the first package of the programming documents for the Transition Facility. Following the programming mission in December 2012, beneficiaries with the support of the DSP(?) within the MRFDEUF continued to work on further elaboration of project proposals in the form of Operation Identification Sheet (OIS). First drafts of respective OISs for project proposal were submitted in February 2013. From March until October 2013 the Commission provided three rounds of comments on the OISs while beneficiaries and NIPAC updated OISs accordingly. Final versions of OISs were sent by the MRDEUF on 3 October 2013. The Commission adopted the Transition Facility Programme on 22 November 2013 with implementing decision C (2013) 8057. There are 21 projects approved in the TFP amounting to 29 million EUR (total budget is EUR 32.1 million). The contracting deadline is 22 November 2016.

2.2.4 Component III

Under IPA Component III, "Regional Development", the programming exercise continued to follow a multi-annual approach, mirroring the Cohesion and Structural Funds programmes.

The three Operational Programmes related to the Environment, Transport and Regional Competitiveness sectors focus on the support of the reforms and projects in the following sectors: the development of waste management infrastructure, the improvement of the water supply and the waste water management systems, the upgrading of the rail and inland waterway systems, the support of business-related infrastructure, to the technology transfer and support for the Small and Medium-Size Enterprises (SMEs).

In line with the provisions of the accession Treaty[6] the pre-accession IPA programmes under the component III (Regional development) have been revised following the accession. They became programmes under the Cohesion policy, co-funded by European Structural and Investment Funds. Their strategic focus remained unchanged; their implementation period were extended until the end of 2016, and a new allocation of million EUR 378.2 of European Regional Development Fund and Cohesion Fund were committed, adding to the former million EUR 330 of IPA III funds,

2.2.5 – Component IV

The Operational Programme for Human Resources Development was modified on 1 August 2012 (Commission Implementing Decision C (2012) 5580). The modifications consisted of an allocation of additional resources (for 2012 and 2013), adaptation of indicators and addition of one new priority (Priority 5 - Strengthening the role of civil society for better governance). Two new bodies were also included in the Operating structure: the National Foundation for Civil Society Development and the government's office for NGOs.

The Commission Decision on waiving of ex-ante controls by the Commission on the tendering of contracts and launch of calls for proposals and the award of contracts and grant was adopted on 19 February 2013.

2.2.6 Component V

As regards IPA Component V, the programme was adopted on 25 February 2008 and has been revised six times. The last modifications adopted by the Commission on 18.10.2013 concerned mainly on the adaptation of financial tables to take into account: a) the new financial allocation for 2013 according to the MIPD 2011-2013; b) the automatic de-commitment of funds in 2009 due to the under spending in 2012 ("n+3" rule), and c) re allocation of funds between measures and priorities due to non-implementation of measure 201 – Agri-Environmental measures and under spending of measure 501 – Technical Assistance.

This amendment included the full 2013 allocation, as the programme, contrary to Components III and IV, is implemented by the end of 2013.

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013

In the following section, some examples are provided to show the objectives and scope of some successful IPA projects.

3.1 Success stories

IPA 2010 FF RAC "Strengthening the Administrative Capacity of CTA on Mutual Cooperation in the Field of Taxation" (budget: EUR 0.22 million)

During the project implementation the cooperation between twinning partners, beneficiary´s staff and all stakeholders involved was very good. After the project completion employees of CTA´s Central Liaison Office (CLO) are able to transfer their knowledge to other CTA´s officials and they are well prepared for tasks in the area of mutual assistance and cooperation with other EU Member States tax administrations. Improved procedures, methodological tools and knowledge acquired within the project will enable CTA staff to keep up with legislative changes, further improve the working environment according to the EU legislation as well as continuously strengthen administrative capacities of the CTA.

IPA 2009 FPP RAC "Further Enhancing the Functioning of Croatian AFCOS System with the Aim of Efficient Protection of EU Financial Interests" (budget: EUR 0.21 million)

The project activities aimed at strengthening the Croatian Anti-Fraud Coordination Services (AFCOS) system through the adjustment and alignment of the structure and functioning of the system to the framework of EU Structural Instruments. The project's scope covered actions improving the overall functioning and competences of each body in the AFCOS system. Enhanced procedures on managing irregularities and fraud; cooperation agreements and trainings carried out within the project contributed to the improvement of the AFCOS system so as to adjust it to efficient protection of EU financial interests within the EU Structural Instruments environment.

IPA 2009 FPP RAC "Strengthening the Administrative Capacity of the Agency for the Audit of European Union Programmes Implementation System for the Audit of EU Cohesion, Agricultural and Fisheries Instruments" (budget: EUR 0.54 million)

This project had a direct impact on the successful setting up of the system for the audit of EU Cohesion, Agricultural and Fisheries Instruments through the development of relevant procedures and improvement of the capacities of the Audit Authority (ARPA) staff. The activities implemented strengthened the sound financial management of EU funds in Croatia.

IPA 2008 TW "Development of Probation Service in Croatia" (budget EUR 1.8 million).

The overall objective of the project was to reduce the prison population and increase the efficiency of the criminal justice system. The project's activities were implemented successfully. The major results achieved were strengthening the capacities of the Ministry of Justice and the probation service administration, developing an offender assessment tool for risks of harm and reconviction and criminogenic needs as well as elaboration of a national register for use throughout the probation service in Croatia.

IPA 2009 SER "Roll-out of ICMS on Selected Municipal Courts" (budget EUR 0.52 million)

The overall objective was to support the reform of the judiciary and enhance the administrative and management capacities of the municipal courts to contribute to a better and more efficient protection of citizens’ rights. The project established a more efficient court administration and case management system in 33 selected municipal courts, provided capacity building tools for usage and administration of ICMS(?) and finally improved the quality of services by developing the knowledge database available to all Ministry of Justice and court employees on internal network and also externally to the citizens by providing the information on case status and an online public notice board online.

3.2 Overview of the implementation status of the different instruments and components

One of the main objectives of the IPA instrument is that, in addition to supporting the efforts of the country in the negotiating process, it also prepares the country for managing the cohesion and rural development instruments, which become available after accession. In order to achieve this, the full potential of IPA is reached when the beneficiary country becomes fully responsible for managing the assistance it receives from the EU without prior controls by the Commission.

3.2.1. Component I

By 31 December 2013, 66.66% of the IPA TAIB 2010 allocations has been contracted.

With regards to the IPA TAIB 2011 programme, by 31 December 2013, 3.86% of the IPA allocation has been contracted. The percentage of IPA TAIB 2011 allocation for projects under the category "pending" stands at 8.52%. For those projects selection procedure has been successfully completed and the signature of contracts is expected in the first and second quarter of 2014. A significant percentage of the IPA TAIB 2011 allocation (36.38%) falls under the category of projects that were launched and are now under evaluation.

Under IPA 2012, the tender for the project "Supply of IT Equipment for the Customs Administration" was published on 28 June 2013 and was subsequently successfully completed; which should result in two signed contracts (one for each of the two Lots) which are expected to be signed at the beginning of 2014 with the value of EUR 1.27 million or 4.22% of allocated IPA funds.

Other projects are in various stages of preparation of the tender documentation. Launch of the majority of tenders is expected in the second half of 2014.

3.2.2. Component II

The IPA Cross-border Programmes – Bosnia and Herzegovina, Croatia-Serbia and Croatia – Montenegro have been revised in order to include the 2013 allocations till 30 June 2013. IPA funds for the second half of 2013 are committed through separate Commission Decisions.

After the accession, the new Croatian Managing Authority (Ministry of Regional Development and EU Funds, of the Republic of Croatia) started its negotiations with the neighbouring IPA countries on the preparation of the next programming period 2014-2020. Subsequently, two new programmes were agreed to be launched: Croatia-Serbia and Croatia- Bosnia and Herzegovina and Montenegro, under the shared management principle. Following the Commission’s favourable opinion on the preparation of the programmes falling under IPA, namely Croatia-Serbia , the Republic of Croatia and the Republic of Serbia have decided to establish a Task Force for the preparation of the programming period 2014 – 2020. Its first meeting took place in November 2013.

Hungary-Croatia IPA CBC programme:

Overall, 3 calls for proposals have taken place under this programme. From among the 42 projects selected in the 1st Call, only one, a large infrastructural project (developing a waste water treatment plant) was still under implementation at the end of 2013. In the 2nd Call, 59 projects were initially selected; one project started with delay. At the end of 2013 only one project was still under implementation.

The Joint Monitoring Committee (JMC) selected those projects for which the additional ERDF funding to the Programme was needed under suspensive clause. The Commission approved the modified Operational Programme with modifications resulting from the accession of Croatia. Furthermore, it announced the definitive amounts of decommitment and commitment resulting from the ERDF money attributed to Croatia as a new EU Member State.

In 2013, the ERDF funding for the programme amounted to EUR 10.92 million and the total progamme's ERDF amouted to EUR 54.82 million with 85% co-financing rate.

Slovenia-Croatia IPA CBC programme:

The 8th Joint Monitoring Committee of the Programme was set for 17-18 December 2013.

All project partners' reports for projects co-financed under the 1st call for proposals have been submitted and validated; whereas some of the final reports for the 2nd call have not yet been validated.

39 projects were selected within the 3rd (and final) Call for proposals. It was agreed that all available money from the 2 previous calls, together with additional ERDF of EUR 3.8 million, due to the EU accession of Croatia, should be transferred to the selected projects under the 3rd Call for proposals.

The Commission approved the modified Operational Programme.

In 2013, the ERDF funding for the programme was of EUR 9.02 million and the total progamme's ERDF amouted to EUR 44.77 million, with 85% co-financing rate.

3.2.3. Component III

Under IPA Component III, "Regional Development", the programming exercise continued to follow a multi-annual approach. Three Operational Programmes related to the Environment, Transport and Regional Competitiveness sectors were changed to European Regional Development Fund (ERDF) programmes on the 1st of July 2013. Despite several modifications including the transfer to ERDF and adding further EUR 450 million to the budget, the strategic priorities of these programmes remain the same: the development of waste management infrastructure, the improvement of the water supply and the waste water management systems; the upgrading of the rail and inland waterway systems, the support of business-related infrastructure, to technology transfer and support for Small and Medium-Size Enterprises (SMEs).

The IPA III allocations 2007-mid 2013 were also subject to the transfer to the ERDF and therefore the IPA Component III for Croatia finished with the Accession.

3.2.4. Component IV

The Operational Programme for Human Resources Development was modified on 1 August 2012 (Commission Implementing Decision C (2012) 5580). The modifications consisted of an allocation of additional resources (for 2012 and 2013), adaptation of indicators and addition of one new priority (Priority 5 - Strengthening the role of civil society for better governance). Two new bodies were also included in the Operating structure: the National Foundation for Civil Society Development and the government's office for NGOs.

The Commission Decision on waiving of ex-ante controls by the Commission on the tendering of contracts and launch of calls for proposals and the award of contracts and grant was adopted on 19 February 2013.

3.2.5. Transition Facility

Financial assistance under the Transition Facility for Croatia is aimed at developing and strengthening its administrative and judicial capacity to implement and enforce Union law, as well as to foster the peer exchange of knowledge and experience. Three priority axes are built upon needs identified by the Accession Treaty. The priorities are to provide support in the area of Justice, Fundamental Rights and Home Affairs, Public Administration Reform and Strengthening Administrative Capacity. The third axis is aimed at assisting the implementation of the EU acquis with supporting measures related to the areas of climate change and health and consumer protectionlike:

1. Improvement of Quality of the National Cancer Screening Programmes Implementation' - Croatia Transition Facility 2013

2. 'Ensuring Optimal Health Care for People with Mental Health Disorders'.

All projects under the Transition Facility are in various stages of preparation of projects' and tender documentation.

3.2.6 – Component V

As regards Component V, after some start up difficulties, many problems have been solved and in 2013 the programme has achieved a cruising speed and intensive implementation is on-going while the last calls achieved spectacular success in popularity with the highest number of submitted projects.

So far, through all 19 calls, Croatia has received 1153 applications, out of which 184 have been paid (EU contribution of 33.3 million), 350 have been contracted (EU contribution of 72 million) and about additional 400 are in a processing phase (with the EU contribution of about 60 million EU).

However due to increased number of applications and a long term projects realisation, the de-commitment of 7.4 million out of 26 million from 2010 allocation could not be avoided.

Although a number and value of submitted projects is satisfactory, Croatia still has to contract about 50% and to pay about 77 % of a total IPARD allocation.

Moreover in 2013, the Croatian authorities received conferral of management for the two remaining programme measures, namely measure 501 "Technical Assistance" and the measure 202 " Preparation and implementation of local development strategies", followed by the first call for selection of Local Action Groups (LAGs). Implementation of the "LEADER approach"[7] still in the pre accession period is crucial to guarantee readiness of Croatian LAGs for implementation of long term local rural strategies as a Member State.

Although absorption under IPARD encountered some difficulties, it must be however mentioned that the established pre-accession management and control system has been the effective mean for a comprehensive capacity and institution-building to prepare Croatia for a new RDP as a member state.

3.2.6. Sigma

During 2013 SIGMA continued to provide support to Croatia in the following major areas:

Legal Framework and Civil Service Management

Support to the Ministry of Public Administration in further developing professional civil service and adequate human resource management (HRM) practices across the public administration through:

· Preparation of the strategic documents related to the structural funds to be allocated to administrative capacity development.

· Drafting of a new code of ethics.

· Drafting of a law on salaries of the public sector.

· Advice on public agencies reform.

· Advice on the quality of public services delivery.

Public Finance Management

1. Support to the Ministry of Regional Development and EU Funds (MRDEUF) and the Ministry of Finance in final preparations for the implementation of the 2014-2020 Cohesion Policy programmes including:

· Advice in drafting the secondary legislation for the 2014-2020 programmes, including horizontal (common) instructions and guidelines.

· Support in optimising the management and control system for 2014-2020 programmes, including the system for on-spot controls.

· Providing EU Member States' comparative experience for ad hoc issues emerging in the course of preparing for the implementation of the 2014-2020 Cohesion Policy programmes.

2. Support to the Ministry of Finance in further improving the conditions for financial management and control, as well as internal audit including:

· Support in conducting internal quality assessment of the internal audit functions in a way that enables smooth external quality assurance (or verification) according to the IPPF standards.

· Advising the Central Harmonisation Unit of the Ministry of Finance in practical preparations for the implementation of the financial management training programme for different target groups in the public sector.

· Support in adjusting the methodology for the quality analysis of financial management and control arrangements in budget organisations after the pilot analyses carried out by the CHU.

Public Procurement

Support to the Ministry of Economy and other institutions relevant to the public procurement system on:

1. The preparation for transposition of the new public procurement directives.

2. Advising on the practical aspects with regard to the better integration of social and environmental considerations, and the innovation in the procurement procedures based on EU Member States' comparative experience.

3.2.7. TAIEX

During the first half of 2013 the EU Delegation to Croatia continued to receive TAIEX applications for review and approval primarily covering activities in the following sectors: judiciary and fundamental rights, justice, freedom and security, public administration, public finance, agriculture and rural development, environment, consumer and health protection.

As from 1 July 2013 these review functions have been taken up by the national authorities in co-ordination with relevant COMMISSION services.

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES

Implementation structures have remained stable since the original conferral of management in 2008 and represent a sound basis for the design of the implementation system of cohesion and agricultural instruments in Croatia as a Member State. The accession had no impact on internal controls within the system and external oversight of its functioning and performance.

The monitoring system is set up by the National IPA Coordinator office to ensure regular follow-up on the progress made in relation to preparation and implementation of each project approved for financing through adoption of each annual national programme. In particular, the monitoring system provides support to ensure that project and programme objectives are achieved; and that projects are sustainable and correspond to the project fiche through the following mechanisms:

Regular monthly Project Implementation Unit meetings in the beneficiary institution in which NIPAC office staff participate and through participation of the NIPAC representatives in the management boards (Steering Committees) of the projects which are held quarterly.

1. Semi-annual reports on implementation (i.e. Monitoring reports) for each project approved for financing through IPA Component I. NIPAC office staff control the quality of the reports; and before each reporting round, hold workshops for the beneficiaries on the preparation of the monitoring reports. Point 5.2 of the monitoring report is referring to the information on the sustainability of the project. Furthermore the monitoring report template has been expanded, with additional points related to findings of the on-the-spot checks carried out, and fulfilment of the activities following the on-the-spot checks.

2. Following the finalization of the monitoring reports, implementation reports are prepared which represent a summary of the key information from the separate monitoring reports; as well as from other sources of information available to NIPAC office staff. Implementation reports also cover the part related to the sustainability of projects and their results; as well as the Sectoral Annual Implementation Report (SAIR).

3. Evaluation reports per sectors, as well as monitoring of the fulfilment of the recommendations given by the evaluators taken on board in the sectoral monitoring reports/implementation reports, and discussed at the Sectoral Monitoring Committees and IPA Monitoring Committee. Recommendations and follow-up activities carried out by beneficiaries or Central Finance and Contract Authority (CFCA) are monitored regularly at least biannually through the monitoring system by the NIPAC office.

4. The report by the evaluators in the Country Programme Interim Evaluation 2011 also included analysis on the sustainability of the projects which were covered by that evaluation and relevant recommendations which were followed continuously. The TAIB Monitoring Committee in May 2013 concluded that all recommendations were fulfilled.

5. In addition to the above-mentioned, following the instructions of the Commission, NIPAC office has to prepare an implementation report for IPA Component I, to be presented to the Transition Assistance and Institution Building (TAIB) Monitoring Committee. This report also focuses on the monitoring of the sustainability of projects, both ongoing and finalized, and their results.

In general, EU projects have broad and long-term ambitions which go well beyond the sheer transposition of the acquis. In that sense, the issue of sustainability of outcomes after the termination of EU funded projects appears of vital importance. In order to boost the determination of beneficiaries to ensure the longevity of project results and achievement of envisaged goals the MRDEUF encourages beneficiary institutions to make assessment and measurement of performance of the projects in their individual monitoring reports in the context of giving rationale and more consideration regarding what results have been achieved and what remains to be done in the projects.

While the ownership of beneficiary institutions had already visibly improved in the course of 2012 throughout the institutions which are contributing to the successful fulfilment of the projects’ purpose and the achievement of intended results; this has continued throughout 2013. The capability of the beneficiary institutions has become even more important in the context of Croatia’s EU accession. In addition, the EU and national legislation provide a stable basis for sustainable operations of the assisted institutions. In general, and in most projects, sustainability is assured by the Croatian Government’s commitment to the application of EU legislation and to maintaining EU standards.

An audit report issued by the European Court of Auditors states that in terms of results the EU assistance has made an important contribution to building up Croatia’s capacity for managing post-accession funding, including through learning by doing. At the beginning of 2013, MRDEUF coordinated an inter-institutional process by creating an action plan according to which the Croatian institutions are to tackle the recommendations given in the Report of the Court of Auditors, and to give information on what has been done and what is to be done in order to finalise the post-accession funds management system. NIPAC’s Office coordinated an inter-institutional process of updating the activities to be undertaken according to recommendations with a cut-off date 30 November 2013. The updated version of the Action plan was sent to the Commission in March 2014.

FINANCIAL DATA (EUR million and %)

Status of implementation of IPA financial assistance (IPA), as at 31 December 2013 - implementation under decentralised management

Status of implementation of IPA financial assistance, as at 31 December 2013 IPA Component II, implemented by Regional Policy DG

IPA CBC || Committed || Paid until 31 December 2013 || Percentage

Hungary- Croatia || -Committed amount before the accession= 52.433.025 -Further to the accession of Croatia to the EU = 54.823.266 || 27.760.361,17 (Incl. Advance payment because of the accession of Croatia to the EU= 1.142.400,00) || 60%

Slovenia-Croatia || -Committed amount before the accession= 42.703.502 -Further to the accession of Croatia to the EU = 44.774.910 || 20.976.325,64 (Incl. Advance payment because of the accession of Croatia to the EU= 1.142.400,00) || 60%

Status of implementation of IPA financial assistance (Component III) as at 31 December 2013 (in million EUR) and distribution of total committed funds (2007-2013 allocations) by Operational programme

Operational programme (OP) || Committed || Paid* || % (with advance payment)

OP Regional competitiveness || 187.78 || 14.57 || 21%

OP Transport || 236.98 || 28.67 || 25%

OP Environment || 281.10 || 2.33 || 21,05

Total Croatia || 705.86 || 45.57 || 6%

* The payment of funds was possible until the end of June 2013. In line with the accession Treaty, the payments were interrupted whilst awaiting the favourable opinion of the Commission regarding the compliance of the management and control system for the three programmes; which occurred in April 2014.

Status of implementation of IPA financial assistance (Component IV), as at 31 December 2013 IPA, - implemented by Employment, Social Affairs and Inclusion DG – Million EUR

Countries || Allocated || Contracted || Paid || Percentage contracted || Percentage paid

Croatia || 92.41 || 43.18* || 44.74 || 45.73 || 48.4%

* until June 2013

Status of implementation of IPA financial assistance (Component V), as at 31 December 2013 - implemented by Agriculture and Rural Development DG:

Committed || Paid || Percentage paid

144.28 || 33.33 || 23%

MONTENEGRO

1. SUMMARY

As regards Montenegro, progress was made in the accession negotiations. In June 2013, the country adopted comprehensive action plans for chapters 23 and 24. Five new chapters were opened in December 2013, including the important rule of law related chapters 23 and 24, bringing the total to 7 opened chapters, of which 2 were provisionally closed. The screening meetings with Montenegro were concluded in June 2013.

The programming and implementation of pre-accession assistance funds (IPA) for Montenegro during 2013 took place in the context of ongoing accession negotiations. The reporting period has also been marked by preparations for the transition to the IPA II framework for the financial period 2014-2020.

The initial budgetary allocation for 2013 had already been programmed by the end of 2012. Similarly, Operational Programmes for 2012-2013 under Component III (EUR 22.24 million) and Component IV (EUR 5.58 million) were adopted at the end of 2012. However, additional funds were allocated to Montenegro in the course of 2013, which were programmed in the second half of 2013 and adopted as amendments to the 2012-2013 part I and II National Programmes.

During 2013 Montenegro put significant efforts in the process of conferral of management for decentralised implementation of IPA funds. Audits were undertaken on IPA Component I and II, in parallel with the ones for Components III and IV.

Preparations for IPA II were launched with the Montenegrin authorities and gained momentum in the second half of 2013, with a focus on the introduction of the sector approach and the start of the preparations for the Indicative Strategy Paper for Montenegro.

2. STRATEGIC PLANNING AND PROGRAMMING 2.1. Strategic planning

The main planning activities undertaken during 2013 have been focused on the preparation of the Indicative Strategy Paper, in line with the sector approach foreseen under IPA II. In January 2013, the IPA II Conference held in Brussels kicked off the IPA II preparations, outlining to all stakeholders the main features of the new framework for pre-accession assistance during the next financial period. As a follow-up of the kick-off conference, a workshop was organised in Podgorica on the new sector approach methodology and guidelines, with wide participation from the Montenegrin administration and the international donor community.

The preparation of the Indicative Strategy Paper for Montenegro has been based on the inputs of the Montenegrin national authorities; the priorities outlined in the 2013 Enlargement strategy; the needs identified during the screening exercise and during the start of the accession negotiations. The experience accumulated in the programming and implementation of IPA 2007-2013 and the inputs of the EU Delegation in Podgorica contributed to its preparation. The Montenegrin authorities, under the coordination of the NIPAC office, submitted to the Commission in May 2013 an overview of the national priorities of Montenegro as outlined in the Montenegrin Development Direction 2013-2016 and other sectoral strategies, as well as those priorities that would necessitate financial and technical support from the pre-accession funds.

The draft Indicative Strategy Paper outlines that IPA will continue to support Montenegro throughout the accession process; not only by providing financial resources, but also by providing Montenegro with the expertise and technical support necessary for meeting the EU membership criteria. The emphasis of the assistance will be on the two most strategic sectors: Rule of law and fundamental rights and Democracy and governance. In these sectors, IPA will support the implementation of the Action Plans for Chapters 23 and 24, as well as the reform of the public administration, the strengthening of civil society and improving public financial management.

The Montenegro Strategy Paper also reflects the recent economic experience in Europe. Contributing to the socio-economic development and implementing structural reforms will represent a priority for pre-accession assistance. Therefore, the assistance to the sectors competitiveness and innovation, as well as education, employment and social policies will be of crucial importance for ensuring stable economic growth and convergence towards the EU development standards. Finally, the sectors agriculture and rural development, environment and climate action, as well as transport are also key sectors for IPA II assistance not only due to their strong economic potential, but also because these sectors are investment intensive and technically demanding.

Table 1: MIFF[8] allocations per component, in EUR million

Component || 2011 || 2012 || 2013 || 2011-2013

I – Transition Assistance and Institution Building || 29.84 || 19.61* || 12.36** || 61.81

II – Cross-border cooperation || 4.31 || 4.59 || 4.67 || 13.57

III – Regional Development || || 7.98 || 14.75 || 22.74

IV – Human Resources Development || || 2.78 || 2.81 || 5.58

V – Rural Development || || || ||

TOTAL || 34.15 || 34.96 || 34.59 || 103.70

* Includes a reallocation from Component V of EUR 3.26 million, transferred from DG AGRI to DG ELARG and approved by the Budgetary Authority in September 2012.

** Includes a reallocation from Component V of EUR 7.29 million, transferred from DG AGRI to DG ELARG and approved by the Budgetary Authority in November 2013.

2.2 Programming 2.2.1 Component I

The programming of the initial 2013 allocation was successfully completed in December 2012, with the adoption of the 2012-2013 TAIB National Programmes (Part 1) and the 2012 TAIB National Programme part II; the latter including only measures in the agriculture sector financed from funds that had been reallocated from IPA Component V. However, during the course of 2013 additional funds were allocated to Montenegro under IPA Component I, which were subsequently programmed and adopted as amendments to the 2012-2013 part I and respectively part II National Programmes.

Firstly, EUR 2.37 million resulting from the recovery of unused funds were allocated to Montenegro for addressing needs emerging from the accession negotiations. These additional credits were used for two new projects; one supporting the development of a Schengen Action Plan and a second one strengthening the capacities of the Ministry of Foreign Affairs and European Integration, as well as topping-up the Project Preparation Facility and Technical Assistance in addition to the Support Measures Facility.

Secondly, the allocation reserved for IPA Component V, amounting to EUR 7.29 million, was transferred to IPA Component I. This aimed at avoiding the de-commitment of a significant amount of the allocation at a later stage, given the delays in the preparations for conferral of management under Component V. Nevertheless, the funds have been used in the same sector to support the implementation of rural development measures in line with the basic rules of IPA Component V. This 2013 additional allocation has been added to the existing IPA 2012 part II National Programme. Two projects are to be implemented: one project supporting the establishment and implementation of the Land Parcel Identification Systems (LPIS) and one project supporting the implementation of IPA Component V-like measures (grant scheme and technical assistance to be implemented through a joint management with the World Bank).

Table 2: Indicative financial allocations for the year 2013 under the National Programme part I, per priority axis and per project, in EUR million:

Priority Sector || Project || EU contribution

Sector 1: Justice and Home Affairs || 2.50

|| 02 – Identifying durable solutions for (I)DPs and residents of Konik camp – II phase || 1.00

|| 15 - Strengthening the capacities of the Ministry of Interior for the preparation and introduction of the Schengen Acquis || 1.00

|| 16 - Strengthening the Capacities of Diplomatic-Consular Network of Foreign Affairs and European Integration || 0.50

Sector 2: Public Administration Reform || 0.70

|| 04 - Enhanced statistical capacity and provision of economic and social statistics || 0.70

Supporting programmes || 2.64

|| 10 - Support for participation in Union programmes || 0.62

|| 12 - Technical Assistance and Project Preparation Facility (TA/PPF) || 1.12

|| 14 - Support Measures Facility || 0.90

TOTAL || 5.84

Table 3: Indicative financial allocations for the year 2013 under the National Programme part II, per priority axis and per project, in EUR million:

Priority Sector || Project || EU contribution

Sector 7: Agriculture and rural development || 7.28

|| 02 – Strengthening Montenegrin agriculture through IPARD like measures || 5.28

|| 03 - Strengthening Montenegrin agriculture with establishing Land Parcel Identification Systems (LPIS) || 2.00

TOTAL || 7.28

2.2.2 Component II

Montenegro, together with the neighbouring countries and the Commission, launched in 2013 the preparations for the next generation of cross-border cooperation programmes for the period 2014-2020; in particular defining the geographic scope and the thematic priorities.

Under IPA II, Montenegro will participate in the following IPA CBC programmes: IPA CBC with Member States: Croatia - Bosnia and Herzegovina - Montenegro and Italy – Albania – Montenegro (trilateral) and IPA CBC at intra-Western Balkan borders: Serbia - Montenegro; Montenegro - Bosnia and Herzegovina; Montenegro – Albania and Montenegro – Kosovo.

Each of the IPA CBC programmes will focus on a selection of the following thematic priorities, as listed in Annex III to the IPA II Regulation: (1) promoting employment, labour mobility and social and cultural inclusion; (2) protecting the environment, promoting climate change adaptation and mitigation, risk prevention and management; (3) promoting sustainable transport and improving public infrastructure; (4) encouraging tourism and cultural and natural heritage; (5) investing in youth, education and skills; (6) promoting local and regional governance, planning and administrative capacity building; (7) enhancing competitiveness, business and SME development, trade and investment; (8) strengthening research, technological development, innovation and ICT.

Selection of the thematic priorities will be made jointly by the countries involved in the cross-border programme, according to the specific situation of the border region, and finalised in 2014.

After the accession, the new Croatian Managing Authority (Ministry of Regional Development and EU Funds, of the Republic of Croatia) started its negotiations with the neighbouring IPA countries on the preparation of the next programming period 2014-2020. Subsequently, Croatia- Bosnia and Herzegovina and Montenegro will form the new trilateral IPA CBC Programme, under the share management principle

2.2.3 Components III and IV

Following the adoption of the "Regional Development" operational programme under IPA Component III and of the Human Resource Development under Component IV, the Montenegrin authorities officially requested the conferral of management powers related to these programmes in Spring 2013. Consequently, a Commission audit missions took place in in April and May 2013, and final audit reports were communicated in the second half of 2013. The main critical findings concerned the level of staffing in operating structures; the status of contracts (permanent vs. short term contracts), the premises of the CFCU, and the readiness of the Audit Authority. The national authorities have since reported progress made on the various issues, in particular the nomination of the Head of the Audit Authority in December 2013.

As regards support to the implementation of IPA Component III, JASPERS[9] technical assistance (in the volume of EUR 0,5 million) started in 2013 to provide support to Montenegro with the aim of accelerating the preparations of projects under component III for the absorption of the EU funds by supporting the development of a sound pipeline of infrastructure projects. JASPERS assisted the national authorities with:

– Project pipeline development and screening: advice on the maturity of each project and highlighting outstanding issues before they are ready for submission to the EU,

– Advising on EU submission requirements,

– Cost-benefit analysis training covering water tariff requirements,

– Screening of environmental impact assessment procedures undertaken and general advice on EU requirements

2.2.4 Component V

The Montenegrin authorities decided during the year 2013 to start the implementation of the Rural Development Assistance only under the new IPARD II instrument. For this reason a transfer of appropriations from Component V to Component I was approved in December 2013 by the budgetary authority, leading to the adoption of Part 2 of the National Programme for Montenegro under Component I, as detailed in section 2.2.

During 2013, Montenegro continued its preparation for meeting the objectives for the entrustment of budget implementation tasks for the management of rural development funds.

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013 3.1 Success stories

IPA 2011 Support to the Integration and Voluntary Return of Internally Displaced Persons (I/DPs) and residents of Konik Camp (EUR 1.3 million)

This project aimed at improving local integration of Roma and Egyptian (RE) IDP families by facilitating access to legal status, education, health and employment, and facilitating voluntary return. Regarding education, 62 RE children from the camp were enrolled into 6 primary schools in Podgorica in 2013 and were supported in the desegregation process by 72 student volunteers. The number of children attending morning and afternoon pre-school groups increased from the 60 initially planned to 103. As regards employment, 69 grants for income generation were awarded and a further 44 people received vocational training. Roma health mediators were successfully introduced in Montenegro and an assessment of the health situation of all residents of Konik camp was made. In terms of legal status, over 1,000 documents were obtained from Serbia and Kosovo and financial assistance was provided to 123 beneficiaries to regulate their status. 278 beneficiaries participated in informative cross-border pre-return activities, and 4 families (29 people) returned to Kosovo.

IPA 2008-2010-2011 - EU Municipal Development Grant Scheme, Inter-municipal grant scheme and Technical Assistance (EUR 9.1 million overall IPA contribution)

Linked to EU grant funding for improvements to local infrastructure, this programme focused on supporting local government units in less developed areas in the country, to remedy regional imbalances and to improve the capacity of local administrations in strategic planning and in working with EU funds. Various projects were approved such as a selective waste management system in Danilovgrad, a tourism strengthening project in Kolasin, or a beach maintenance project in Ulcinj. Other projects included new local roads, city-street infrastructure, construction of fire stations, car parks, a refurbished sports hall, or equipment for improvement of waste-water and water-supply systems. The projects resulted in immediate improvements of quality of life for local citizens, in a country where infrastructure is run-down after decades of poor maintenance and low investment. Other long-lasting results include the creation of a pool of local trainers and training provided to more than 100 staff from the selected municipalities.

IPA 2010 - Strengthening the Administrative Capacities of the Phytosanitary Directorate of Montenegro (EUR 0.8 million)

The project has achieved its aim to promote co-operation between plant health services in Montenegro and the EU, in order to more rapidly detect, identify and control harmful plant pests and diseases many of which have the potential to devastate both Montenegrin and European crops and cause serious damage to the economies of affected countries. As a result of the project much of the Montenegrin plant health legislation and operational procedures have been harmonised with those of the EU, and knowledge of harmful pests and diseases which are potential threats to Montenegro and the EU has been improved. A new IT system has been developed to improve internal and external communications and enhance the capacity of the responsible institutions to respond effectively to future threats from harmful organisms.

3.2 Overview of IPA implementation in 2013

Implementation of IPA projects advanced well in 2013: IPA 2007-2010 Component I Programmes have been fully contracted and IPA 2011-2013 is well underway. IPA Component II also shows a high rate of implementation. At the end of 2013, there were 368 ongoing IPA contracts for a value EUR 105.2 million. The size of the country, the limited absorption capacity of individual beneficiary institutions and the high number of CBC projects are, among others, the reasons for a high number of small value contracts.

The implementation of these funds directly contributed to the achievements of the country during the screening process in 2013, as most institutions involved in this process benefitted to some extent from pre-accession assistance.

There were 122 TAIEX events in Montenegro in 2013. The EU Delegation contracted 1 twinning and 3 twinning light projects with Member States for a total value of EUR 1.75 million. While Montenegro appreciates the added value of twinning, the number of such projects remains limited; reflecting the limited capacity in the administration which still needs to resort largely to technical assistance. IPA also contributed to the participation of Montenegro to the 5 Union Programmes: Culture 2007-2013; ICT Policy Support Programme, and Innovation specific programme under the Competitiveness and Innovation Framework Programme; 7th Framework Programme for Research; Customs 2007-2013.

3.3 Sector I: Justice and Home Affairs and Fundamental Rights

During 2013, IPA financial assistance supported the preparation of the Actions Plans for Chapters 23 and 24 which have been of vital importance for the opening of the accession negotiations of these Chapters. IPA support contributed to strengthening the administrative capacity of the law enforcement, judicial and prosecutorial authorities resulting in the establishment/consolidation of a track record of investigations, indictments, prosecutions and convictions of organised crime and corruption cases. The Centre for Irregular Migrants, which was co-funded by IPA, was opened and put into operation during the reporting period. Other key deliverables obtained with IPA support include the preparation and adoption of the Serious and Organised Crime Threat Assessment, and the implementation of a public awareness campaign on anti-corruption. Alternative sanctions to detention have been implemented with the support of IPA assistance which contributed to upgrading the legal and regulatory framework in line with EU standards and provided the necessary capacity building/training to ensure adequate enforcement. In the area of fundamental rights, the key achievements were in gender equality and integration of Roma and Egyptian population (see project example above).

3.4 Sector II: Public Administration Reform (PAR)

In the area of PAR, IPA projects supported the implementation of the new law on Civil Servants and State Employees and the preparation of amendments to the Law on Local Self Governments. Support was also provided for capacity building at local level. IPA projects supported the development and adoption of 5 new laws and 15 by-laws in the internal market area, and 3 laws and by-laws in the area of public finance were developed. Significant support was offered to the new Agency for protection of competition; for the system of state aid and to public procurement, market surveillance, accreditation and metrology. Special focus was given for the first time on analysing the deficiencies in the system of trade with pharmaceuticals and cosmetics. In public finance, the focus was on preparation for the decentralised management of the EU funds, on internal and external audit. In the area of statistics, significant support was delivered for improving the national accounts, business statistics and agricultural statistics, which allowed Monstat to achieve transmission of data to Eurostat for 20 domains and 27 sub-domains.

3.5 Sector III: Environment and climate change

The projects implemented during 2013 in the area of environmental protection and climate change relate mainly to the construction of water and waste infrastructure. For water, the beneficiary municipalities are Niksic and Pljevlja where the focus is placed on waste water (the funds are complementing EIB loans), while for waste 35 collection trucks and over 2,000 containers have been distributed mainly in the northern municipalities. Moreover, preparation of waste management strategy and plans has started and awareness actions on the environment continued. Preparations for an environmental management system, for an approximation strategy, for a climate change strategy, for the establishment of Natura 2000 network and assistance to the Operating Structure for IPA Component III have commenced.

3.6 Sector IV: Transport

In the transport sector, IPA activities have continued focusing on railway and maritime transport. Technical capacities of relevant maritime authorities have been further enhanced with the provision of equipment for prevention of sea pollution from vessels. In the area of railway transport, works were made to further rehabilitate the railway line Bar-Belgrade. Technical support was provided to the Railway Infrastructure Company, increasing their capacities in dealing with the procurement and financial management procedures of the EU and other IFIs. An important technical assistance was provided to the Railway Directorate to draft specific secondary legislation and to provide training on specific issues prescribed by the new Law on Safety and Interoperability of the Railways.

3.7 Sector V: Social development

The reform of the social protection system as well as the development of the civil society sector have continued to be priorities under IPA in 2013 and concrete improvements have been achieved. A basket of interventions with contribution agreements to UN agencies and some grants to civil society organisations have made up the bulk of EU's assistance in this field. The social and child protection system continue to be modernised through legal harmonisation and rationalisation of standards and procedures, trainings of stakeholders at service delivery and administration level (centre for social works particularly), equipment, and constructions works. A nationwide communication campaign on foster care has also improved citizens' awareness on needs of children without parental care. Although a lot remains to be improved, following the results of 2013, vulnerable groups now receive more focused, better quality and more cost-effective services and support with less red tape.

3.8 Sector VI: Agriculture and rural development

The objective in this area is to support the development of a sustainable agriculture sector and to assist alignment to the common agricultural policy and EU standards. In the veterinary area, a wide range of support resulted in further alignment with the acquis notably for classical swine fever and rabies prevention and control. Capacity control of rabies and classical swine fever was strengthened with the ultimate aim of ensuring eradication of rabies and classical swine fever. The fourth and fifth oral rabies vaccination campaigns successfully continued as part of an EU wide campaign in the Western Balkans. The capacity of the forestry sector was strengthened through the establishment of, and training in, sustainable forest management systems in line with EU standards. In the area of rural development, support was given to the Montenegrin administration to prepare for later decentralised management of EU pre-accession funds dedicated to rural development.

3.9. Cross-border Cooperation

In 2013, Cross-border Cooperation (CBC) continued to be one of the most dynamic sectors under IPA with 115 ongoing projects. In the framework of the five bilateral CBC Programmes in which Montenegro participates, during 2013 the last call for proposals under the CBC programme Albania – Montenegro was evaluated and seven new projects were selected and contracted. Three new bilateral CBC calls for proposals were launched with Bosnia and Herzegovina, Croatia and Kosovo.

Milestones were the establishment of the Joint Technical Secretariat (JTS) for the CBC Montenegro-Kosovo Programme in Peja/Peć with its Antenna in Bijelo Polje and the launching of the first call for proposals as well as the approval of the strategic project under the CBC Albania-Montenegro programme with an estimated total value of over EUR 3 million. Through improving the infrastructure at two important border-crossing points, the strategic project will have a significant impact for the cross-border traffic between Albania and Montenegro and has the potential to foster economic relations and reduce illegal border-crossing activities.

Another important step was the preparation of the Montenegrin Operating Structures for the decentralised management of the bilateral CBC Programmes. During 2013 the Montenegrin authorities put great effort in finalising the establishment of the structures needed to manage CBC and managed to fulfil most requirements. It is expected that Montenegro will be granted conferral of management powers for CBC in the near future.

During 2013, the CBIB+ (Cross Border Institution Building) project published a list of several best practice CBC projects. Those involving Montenegrin beneficiaries are the “Summer school of inclusion” under CBC BIH-MNE, “Olympic Hopes” in the framework of the CBC HR-MNE Programme, “Active Youth for Active Societies” under the Programme with Serbia and the Project “Marubi - a cooperative model for tourism promotion”- under the Programme with Albania. For further information, please see: http://www.cbibplus.eu/e-publications.

4. IMPLEMENTATION MODALITIES AND STRUCTURES

All IPA 2007-2013 programmes under Component I and II were implemented in centralised management by the EU Delegation. The Operational programmes for components III and IV have been approved by the Commission in 2012, but implementation has not commenced pending the completion of the conferral of management process. The approval of the IPA Rural Development programme under Component V has been suspended as the IPA Component V funds have been transferred to IPA Component I and will be implemented in centralised management mode.

Montenegro has made good progress in terms of preparations for the conferral of management. Audit missions for IPA Components I-IV took place in April and May 2013, and a follow-up mission in October 2013.

The verification audit report from September 2013, outlined 17 high-risk findings and 27 medium-risk findings in the internal control system set up by the national authorities. All high-risk findings, except two - related to the premises of the CFCU and the management of the Audit Authority - were addressed by November 2013, when the follow-up audit report was issued. In December 2013, following the official appointment and an interview of the new Head and Deputy Head of the Audit Authority, the auditors delivered a positive opinion as regards the capacity of the Audit Authority.

As regards IPA Component V, in December 2013 the IPARD Agency and Managing Authority submitted improved Manuals of Procedures for IPA Component V to the National Fund NF. Following the progress in preparing the procedures and legal documents for decentralised management in January, a compliance assessment was launched by an external auditor, with a preliminary report submitted in February 2014 and an intensive gap-plugging phase by the end of April. The submission of the accreditation package is expected in the second half of 2014; following the compliance assessment report.

The Result Oriented Monitoring (ROM) contractor produced 23 assessments in 2013 covering IPA expenditure of a value of EUR18.9 million. There were 14 ROM ongoing assessments, 12 of which reported satisfactory results, 1 project performing with problems and 1 non-performing project. For the 9 ROM ex-post assessments, 6 had satisfactory results, 2 had performed with problems and 1 was non-performing. Overall, there were high (A or B grade) scores for relevance (91%) and impact (83%). The efficiency and effectiveness scoring for ongoing projects was better than in 2012 but the effectiveness scoring for the ex-post reviews was low with 5 (55%) C grades. The lessons learned included some good examples of twinning, with a mixed participation of "old" and "new" Member States. The lower ex-post effectiveness scores reflected the difficulty in several sectors (food, marine fisheries, intellectual property rights) with institutional development and horizontal cooperation. The effectiveness of the strengthening of the Audit Authority project was affected by difficulties in attracting a suitable complement of staff.

There were 48 monitoring missions by Task Managers outside Podgorica in 2013. In addition to regular ongoing monitoring by Task Managers and Joint Technical Secretariats (under CBC), three external monitors visited and completed monitoring reports for 30 grant projects (CBC, EIDHR, Civil Society Facility) in the reporting period. No major problems were reported.

In addition to this in-depth monitoring of the financial assistance, supervision by the Commission services was done through the participation in an IPA Monitoring Committee meeting on 23 July 2013, and a "shadow" Sectoral Monitoring Committee for IPA Component IV on 12 July 2013. These meetings were used to monitor the implementation of IPA funds and to identify jointly with the national authorities mitigating strategies/solutions where problems arose. The meetings were also an opportunity to take stock of the progress in preparing for Conferral of Management for all IPA Components.

Evaluation

A country programme interim evaluation of IPA assistance in Montenegro was completed in 2013. It was focused on assessing the effectiveness, efficiency, sustainability and impact of IPA programmes 2007-2009 in the sectors of Environment and energy and Agriculture and fisheries and to assess the extent to which this assistance contributed to the development of the sectors. The evaluation concluded that the assistance had contributed to the further development of the sectors, but to varying degrees. The energy sub-sector especially has made progress in developing by-laws and improving market rules. There has been clear capacity building in environmental management, but progress has been more challenging in delivering investments in waste water and waste. The achievements in the agriculture and fisheries sector have often been less than expected due to insufficient resources or commitment of the beneficiary in the areas of rural development.

The assistance was assessed as efficient and effective. The projects in both sectors have been mostly implemented in a timely manner and strengthened capacity in all beneficiary institutions and the public services. However, effectiveness depends heavily on adequate recruitment of new staff. In some areas, cost effectiveness has been compromised by the lower than expected results where the administrative burden exceeded capacity. Human resource capacity remains a key systemic constraint to effective utilisation of EU funds in Montenegro.

The evaluation concluded that prospects for sustainability vary across the sub-sectors and in the long run, sustainability will depend on additional staff and further political commitment. Assistance was assessed as contributory in delivering impact objectives outlined in the European Partnerships.

FINANCIAL DATA (EUR and %)

Status of implementation of financial assistance (IPA Component I + Component II), as at 31 December 2013

IPA- ELARG || Allocated || Contracted || Paid || % Contracted || % Paid

Montenegro || || || || ||

IPA 2007 || 27,054,128 || 26,508,864 || 26,228,321 || 97.98% || 96.95%

IPA 2008 || 30,047,296 || 29,206,600 || 28,127,629 || 97.20% || 93.61%

IPA 2009 || 31,744,421 || 30,761,314 || 28,312,244 || 96.90% || 89.19%

IPA 2010 || 30,938,823 || 30,874,989 || 24,706,604 || 99.79% || 79.86%

IPA 2011 || 29,693,599 || 13,325,728 || 7,704,585 || 44.88% || 25.95%

IPA 2012 || 20,954,779 || 4,640,451 || 1,431,218 || 22.15% || 6.83%

IPA 2013 || 16,281,056 || 315,000 || 101,653 || 1.93% || 0.62%

Total || 186,714,102 || 135,632,946 || 116,612,253 || 72.64% || 62.45%

Status of implementation of financial assistance (Component I), as at 31 December 2013

IPA || Allocated || Contracted || Paid || % Contracted || % Paid

Montenegro || || || || ||

IPA 2007 || 23,870,504 || 23,495,717 || 23,301,285 || 98.43% || 97.62%

IPA 2008 || 26,800,000 || 26,248,215 || 25,558,344 || 97.94% || 95.37%

IPA 2009 || 28,432,179 || 28,118,488 || 26,382,192 || 98.90% || 92.79%

IPA 2010 || 28,638,823 || 28,602,291 || 23,328,524 || 99.87% || 81.46%

IPA 2011 || 26,493,599 || 11,699,033 || 6,917,918 || 44.16% || 26.11%

IPA 2012 || 17,804,779 || 4,325,451 || 1,329,565 || 24.29% || 7.47%

IPA 2013 || 13,131,056 || 0 || 0 || 0.00% || 0.00%

Total || 165,170,940 || 122,489,195 || 106,817,828 || 74.16% || 64.67%

Status of implementation of financial assistance (IPA Component II - CBC), as at 31 December 2013

IPA- ELARG- CBC Programmes || Allocated || Contracted || Paid || %Contracted || % Paid

Montenegro || || || || ||

IPA 2007 || 3,183,624 || 3,013,148 || 2,927,036 || 94.65% || 91.94%

IPA 2008 || 3,247,296 || 2,958,385 || 2,569,285 || 91.10% || 79.12%

IPA 2009 || 3,312,242 || 2,642,826 || 1,930,052 || 79.79% || 58.27%

IPA 2010 || 2,300,000 || 2,272,698 || 1,378,080 || 98.81% || 59.92%

IPA 2011 || 2,900,000 || 1,626,694 || 786,666 || 56.09% || 27.13%

IPA 2012 || 3,150,000 || 315,000 || 101,653 || 10.00% || 3.23%

IPA 2013 || 3,150,000 || 315,000 || 101,653 || 10.00% || 3.23%

Total || 21,243,162 || 13,143,751 || 9,794,425 || 61.87% || 46.11%

Status of implementation of IPA financial assistance (Component III) as at 31 December 2013 (in million EUR) and distribution of total committed funds (2007-2013 allocations) by Operational programme – implemented by Regional Policy DG

Operational programme (OP) || Committed || Paid || % (with advance payment)

OP Regional Development || 22.24 || 0.00 || 0%

Status of implementation of IPA financial assistance (Component IV) as at 31 December 2013 (in million EUR) - implemented by Employment, Social Affairs and Inclusion DG

|| Allocated || Contracted || Paid || Percentage contracted || Percentage paid

Montenegro || 5.58 || 0 || 0 || 0% || 0%

SERBIA

1. SUMMARY

The decision by the June 2013 European Council to open accession negotiations with Serbia followed the historic agreement between Serbia and Kosovo reached in April 2013 in the framework of the EU-facilitated dialogue. Subsequently, in December 2013, the General Affairs Council adopted the negotiating framework for accession negotiations and set the date for the first Inter-Governmental Conference (IGC) which took place in January 2014.

The IPA 2013 Annual Programme was adopted in December 2013 and active preparations for IPA II (draft Indicative Country Strategy Paper) and “decentralised implementation system” -DIS (conferral of management of IPA components I and II) have taken place throughout 2013.

Serbia received the conferral of management for indirect management (formerly called “decentralised implementation system” - DIS) for the management of IPA funds in March 2014. The programmed EU contribution regarding IPA Component I, allocated in 2013 under the National Programme, was EUR 178.78 million.

In 2013, EUR 89 million were contracted from IPA I (National programmes) and EUR 1.70 million from IPA II (CBC) coming to a total of EUR 95.15 million. Another EUR 4.4 million were contracted from other budgets (among which: civil society – EUR 1.97 million and The European Instrument for Democracy and Human Rights (EIDHR) – EUR 1 million).

The ownership of national bodies responsible for the IPA programming process continued to improve; particularly on donor coordination. The programming exercise benefited from lessons learned when developing the sector approach in 2013.

2. STRATEGIC PLANNING AND PROGRAMMING 2.1 Multi-annual Indicative Planning Document

The government of Serbia, local stakeholders, the EU Member States and other donors have all been consulted on the design of the Multi-annual Indicative Planning Document (MIPD) for 2011-13, which was the basis for IPA programming 2013. To achieve the priorities selected for EU support in this programming period, IPA support primarily focused its assistance on the following sectors: Justice and Home affairs and Public Administration Reform, as well as Social Development and Private Sector Development in addition to Transport, Environment and Agriculture.

During 2013, the EU Delegation continued to play a leading role in donor coordination. The coordination mechanisms that were established at the beginning of 2009 (regular EU Member State meetings on assistance as well as informal donor group meetings with donors and IFIs) continued functioning well; bringing added value to the overall international assistance in Serbia. In 2013, led by the Serbian European Integration Office (SEIO) and with the strong support by the EU Delegation, a reform of donor coordination system was started, in order to more successfully align donor coordination with Serbia's Needs Assessment Document for International Assistance. In the new set-up, which has now become fully operational, all sector coordination groups had to be gradually taken over by the relevant national authorities under the overall coordination of SEIO. A lead donor will be associated to each of the groups, which have been organised by sector.

IPA II preparation

Meanwhile, the Commission in close cooperation with Serbian authorities, main donors and civil society organisations, prepared the implementation of the new IPA II framework for the period 2014 – 2020, i.e. the Country Strategy Paper. The focus of IPA II will be on key sectors, closely linked to the enlargement strategy, such as democracy and governance, rule of law or growth and competitiveness.

Table 1: MIFF[1] allocations per component, in EUR million:

Component || 2011 || 2012 || 2013 || 2010-2013

I – Transition Assistance and Institution Building || 190.56 || 190.6 || 196.68 || 577.84

II – Cross-border cooperation || 11.32 || 11.50 || 11.63 || 34.45

TOTAL || 201.88 || 202.10 || 208.31 || 612.29

During 2013 Serbia continued to prepare for the introduction of the indirect management for IPA components I and II and consequently receiving the conferral of management for these two components in March 2014. Nevertheless, the indirect management system will need further improvements after the start of its implementation. For example, the Commission has noted that further efforts are needed to ensure an adequate staff recruitment and retention policy in line with the anticipated workload and considering the risk of possible high staff turnover.

2.2 Programming 2.2.1 Component I

The programming of IPA 2013 took into account the various lessons learned from previous CARDS and IPA programming exercises: preparedness and maturity of the selected projects, beneficiary absorption capacity and past achievement records of implementing institutions. Project maturity was assessed against the quality of existing project documentation such as needs assessments and feasibility studies; especially in terms of investment projects involving works and supplies. In line with the requirements for indirect management, joint co-financing has become obligatory; increasing the contribution of national authorities to the programme. The ownership of national bodies responsible for the IPA programming process continued to rise; which was particularly evident in the donor coordination aspect.

The programming exercise has proven to have benefited from the lessons learned with the further development of the sector approach in 2013, which led to a smoother application of the new methodology of programming, including also improved donor coordination. For example, the programming discussions were largely conducted in the framework of sector working groups, bringing together relevant stakeholders in a given sector.

Table 2: Indicative financial allocations for the year 2013 under the National Programme, per sector, in EURmillion:

Sector || Total IPA

Public administration reform || 11.33

Justice and Home Affairs || 23.02

Private sector development || 32.15

Transport || 16.08

Environment, climate change and energy || 38.05

Social development || 23.61

Agriculture and rural development || 3.23

Other EU acquis and horizontal activities || 31.31

TOTAL || 178.78

In addition to the IPA 2013 National Programme for Serbia, EUR 4 million has been allocated for the Tempus programme, EUR 2.5 million for the Civil Society Facility and EUR 12 million for the Regional Housing Programme for refugees (Sarajevo process). All these programmes are implemented under the IPA 2013 Multi-beneficiary programme and will be adopted by separate Financing Proposals. Furthermore, EUR 0.6 million has been re-allocated from Component II to Component I. Consequently, the 2013 national programme for Serbia (Component I) amounts to EUR 178.78 million. 2.2.2 Component II

Institutional bodies involved in the programming and implementation of Cross-Border and Transnational Programmes were already performing their roles, with a setup which is prefiguring the indirect management system. The conferral of management for IPA component II was subsequently granted in March 2014.

Serbia participates in 3 intra-Western Balkans Cross Border Cooperation (CBC) Programmes (between Serbia and Croatia, Montenegro and Bosnia and Herzegovina respectively) and one transnational interregional programme (South East Europe). The impact of CBC in terms of fostering dialogue and reconciliation is large. The bottom-up approach and joint dialogue at grass-root level, which is the essence of the CBC produced direct positive effects on the relations between the countries. CBC programmes all enjoy a high degree of visibility at local level.

The Joint Working Group for the future Romania-Serbia IPA CBC Programme that will be implemented under the shared management principle met twice in 2013. The preparations for the new programme between Bulgaria and Serbia are also progressing successfully, the task force met twice in 2013 as well. Hungary-Serbia has made the biggest progress in this regard: their Joint Working Group has already met 7 times and begun preliminary preparations for the new period.

A further increase of interest was registered in the field of environmental protection, energy efficiency and rural tourism development. This reflected the early attempt to improve the efficiency and effectiveness of the management of the CBC programme in view of the next Financial Perspective.

After the accession, the new Croatian Managing Authority (Ministry of Regional Development and EU Funds, of the Republic of Croatia) started its negotiations with the neighbouring IPA countries on the preparation of the next programming period 2014-2020. Subsequently, Croatia-Serbia will establish a new IPA CBC programme, under the shared management principle. Following the Commission’s favourable opinion on the preparation of the programmes falling under the Instrument for pre-Accession Assistance (IPA), Croatia and Serbia have decided to establish a task force for the preparation of the programming period 2014 – 2020. Its first meeting took place in November 2013.

2.2.3 Components III, IV and V

The government has decided not to go ahead with the preparation for the management of components III and IV under the present Financial Framework.

Concerning component V, the required structures, i.e. the future paying agency and the future managing authorities, continued the setting-up process during 2013 with the support of both a twinning project and a technical assistance project. However, due to delays in preparations for the conferral of management, it was ultimately decided not to allocate funds for component V in 2013.

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2013 3.1 Success stories

IPA 2010 – "Land management" (EUR 2.78 + EUR 1 million Member State contribution – German Ministry of Cooperation BMZ)

Land consolidation, effective land management in state owned land and the legal framework of land issues are not only a problem stemming from centralised planned economies such as the former Republic of Yugoslavia but also present a significant challenge in several EU Member States. This project based its inputs on EU Member States experiences to enhance and enrich technical assistance with lessons learnt in order to improve Serbia's land management in private and public properties. The programme started with pilot projects for land consolidation and reduction of abandoned land in 2013 in 7 pilot municipalities in south east Serbia on an area of 1,968 ha, introducing new standards such as participation of land owners and users, environmental assessments and other checks and balances to the processes. Acknowledging the benefits of the approach, the beneficiary institutions and 3 municipalities have already extended to an area of 5,273 ha. The average size of a land parcel will rise from currently 0,21 ha by at least 40%. Furthermore the share of abandoned land in the pilot areas will be reduced by at least 10%. The benefits of such a program over time will include increased production and employment, improved infrastructure, more accurate property registers and cadastral maps in rural areas.

IPA 2009 – "Improvement of Preschool Education in Serbia" (EUR 2 million service contract + EUR 1.75 million supply contract)

This project aimed at increasing the number of children attending pre-schools activities through several measures. The main beneficiaries of this project were marginalised children, in particular Roma children leaving in settlements. Specific support was provided for the development of specialised programmes for marginalised children. More than 1,000 children (previously not enrolled in pre-schools) have been reached through these programmes. In order to increase participation and access to pre-school, ten mini-vans and a mobile bus have been delivered to provide transport for 290 children in nine municipalities. This support is aimed at reaching socially excluded and vulnerable children from remote and underprivileged areas. As a direct result, the increase of children attending pre-school activities increased by more than 14% on average and reached 50 to 80% for some small and poor rural communities. In addition, seven prefabricated kindergartens were delivered in 6 municipalities which did not have enough facilities to accommodate additional children. This resulted in an additional 450 children being enrolled in pre-school in these targeted municipalities. In total, more than 1,700 additional children for all 15 municipalities benefited from project activities and support. Compared with the project's starting total of around 5,700 children enrolled in preschools in the 15 pilot municipalities, project support increased access to pre-school in these municipalities by almost 30%. Many of the children that benefitted from the assistance were Roma.

3.2 Overview of IPA implementation in 2013

In 2013, the Commission committed EUR 95.15 million in new contracts and made payments for EUR 121.06 million, which is above the contracting and payment targets for 2013. By the end of the reporting period, EUR 195.95 million remains to be contracted under centralized management, including the just adopted IPA 2013 programme. The tendering procedures for the remaining contracts to be committed under IPA 2009, 2010 and 2011 have been initiated to ensure that the remaining resources will be committed before the end date for contracting. Savings under IPA 2011 are in the process of reallocation.

Serbian institutions submitted 88 TAIEX applications, of which 76 were accepted. The largest number of applications was submitted by the Ministry of Agriculture. In 2013, a total of 3,268 representatives of the Republic of Serbia participated in 104 events organised by TAIEX including study visits, seminars and regional seminars.

3.3 Sector I: Public Administration Reform

Public Administration Reform covers a broad area of activities which are reflected in the following key projects.

The EUR 2 million service contract "Reforming policy coordination and the Centre of Government" started at the end of September 2013. The objective is to redesign the policy- making structure and processes in the Government so that the policies are strategic, outcome focused, flexible, innovative and linked to strategies so that proper policy coordination from the Centre is ensured. The project touches upon systemic issues of the Government's functioning and of the policy-making process where improvements are needed.

The EUR 7.6 million project (EUR 9.5 million with national contribution) "Modernisation and strengthening of the institutional capacities of the Serbian Tax Administration" supported the establishment of an efficient tax administration in line with EU standards. This requires further modernisation and strengthening of institutional capacities, both in the tax administration itself, and in other organisations and bodies involved in the management of the tax system. The emphasis is on the improvement of business processes; upgrading of technical infrastructure; improving the knowledge and skills of the employees, as well as improvement of the services that are being provided for the taxpayers and citizens.

The EUR 2.5 million project titled "Strengthening the institutional capacity of the National Bank of Serbia" (NBS) ended in December, contributing to sustainable macroeconomic and financial system stability by supporting the NBS in its efforts to align its standards, rules and policies with those of the European System of Central Banks as well as to align its activities with best international practices. The project covered 13 main areas identified as strategic priorities that need to be fulfilled in order to maintain a stable and sustainable financial sector. All 178 activities have been successfully completed.

3.4 Sector II: Justice, Home Affairs and Fundamental Rights

Important activities have also been carried out in 2013 in this sector especially improving capacities of the judiciary system as well as improving implementation of penal sanctions.

In terms of supporting the judiciary system in Serbia, some key projects have been implemented with the aim of enhancing capacities of staff and improving transparency and efficiency of judiciary system. In this field, an IPA 2011 project of EUR 3,2 million is specifically devoted to the "Implementation of Justice Sector Reform and Anti-corruption Policies". This project has two components. The first component of EUR 1 million aims to contribute to democracy and the rule of law through the implementation of institutional reforms aimed at preventing and combating corruption (“Strengthening the Capacities of Law Enforcement and judiciary in the Fight against Corruption in Serbia”. It is implemented through a Contribution Agreement with the Council of Europe. In 2013, the project performed a set of activities, including risk assessments for judiciary institutions and the Ministry of Interior, as well as capacity building activities to help law enforcement agencies and the judiciary to detect, investigate, prosecute and adjudicate corruption cases. The second component consists of support to the Multi Donor Trust Fund for Justice Sector, implemented by the World Bank (EUR 2 million). It aims at introducing a sector wide approach in designing, programming and implementing justice sector reform initiatives. The most relevant intervention in 2013 was the launching of a Functional Review for the Justice Sector.

In this field too, the IPA 2012 project "Implementation of the New Serbian Code of Criminal Procedure" (EUR 1.7 million) began implementation in January 2014. It aims at increasing the skills of judges, prosecutors, police officers and defence counsel in implementing the new Criminal Procedure Code (CPC), systematically enforced as of 1st October 2013, at establishing a civil sector mechanism able to produce fair reports and assessments of the CPC implementation and at increasing awareness about witnesses’ and victims’ protection needs in criminal proceedings.

In the fundamental rights field, the EUR 1.5 million project “Implementation of Anti-Discrimination Policies in Serbia" aims at strengthening the institutional capacity of the Office for Human and Minority Rights and the Office of the Commissioner for the Protection of Equality with a view to increase the alignment of anti-discrimination policies with EU standards and best practice. During 2013, the project provided training to judges on the implementation of the new hate crime provisions of the Criminal Code. It also provided training to over 100 representatives of the Ministry of Interior on the fight against discrimination and hate crimes, as well as representatives of the line ministries on the proper monitoring and reporting in relation to international human rights instruments. Preventative and promotional actions took place in 11 local self-governments of Serbia, on the prevention of discrimination and hate speech.

When it comes to Home Affairs, the IPA 2011 project “Development of strategic planning at the Ministry of Interior” (EUR 1.5 million) aims at institutionalizing strategic planning, strategic management and evaluation and monitoring in the Ministry of the Interior of the Republic of Serbia. For this purpose to be achieved, the twining partner assists in applying all modern analytical techniques for a strategic planning process, establishing a functional strategic planning system and ensuring continuous improvement of strategic management and accountability of the institution.

Moreover, the "Implementation of the Strategy to Fight against Drugs" (IPA 2010, EUR 1.5 million) project aims at strengthening Serbian institutions in the sectors of health and home affairs by introducing internationally recognised best practices in prevention and repression of drug abuse and trafficking from production to destruction of drugs.

3.5 Sector III: Social Development

An IPA 2011 project titled "Enhancing the position of residents in residential care institutions for persons with mental disability and mental illness and creation of conditions for their social inclusion in the local community" (EUR 2 million) is preparing the transformation plans for 11 residential institutions, a feasibility study for 5 psychiatric institutions and a development plan for cross-sectorial community-based social and health services. It also helps implement the transformation and development plans and strengthens capacity at national and local level to improve range and quality of services for de-institutionalization of persons with mental health disorders. The project also provided support to a Grant Scheme (EUR 2.55 million) awarded recently for the provision of community-based social and mental health services.

The "Second chance" project (EUR 4.5 million) introduced the three years cycle of Functional Elementary Adult Education in 78 schools in Serbia. The programme is accredited and is integral part of the adult education in state schools. It was completed in September 2013.

The "Modernisation of VET schools in Serbia" (EUR 3.8 million) supported the revision of the curricula in VET, worked on the National Qualification Framework and supplied equipment worth EUR 2.8 million to nearly 150 VET schools. This project was closed in August of 2013.

3.6 Sector IV: Private Sector Development

The IPA 2010 "Integrated Innovation Support Programme – IISP" (value: EUR 3 million) was completed end of December 2013. The project was designed to address weaknesses in innovation support and innovation management and in access to equity–based finance in the SME sector in Serbia. The project's main target group was the SME sector, and over 500 SMEs participated in the various training and support activities of the IISP. The contribution of the Project to the development of the Serbian SME sector is positively evaluated. It enhanced innovation, notably through the development of policy support on EU best practices in this field, and support to local-level business-research linkages, and contribution to a pilot project of cluster support. It financed innovation management training for SMEs. It promoted awareness, promotion and regulatory reform for equity-based investments and better access for SMEs to potential investors. Finally, it contributed to the design of a National Innovation Voucher System, which provides SMEs with small grants to contract small innovation projects.

The IPA 2010 project "Strengthening of the Serbian system of Market Surveillance for non-food and food products" (EUR 2.5 million) had its implementation peak in 2013. Aiming to improve the market surveillance system in Serbia to effectively and efficiently perform its tasks and responsibilities under the new legislation for products' safety and food safety, the project's ultimate goal is in protecting consumers against prod