Special Report No 3/91 on financial and technical cooperation with Mediterranean non-member countries accompanied by the replies of the Commission
Date: 1991-07-18
Institutions: European Court of Auditors
Subjects: Mediterranean third countries, budgetary resources, financial cooperation, financial protocol, report, technical cooperation













EUR-Lex - 31991Y0926(06) - EN






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31991Y0926(06)

Special Report No 3/91 on financial and technical cooperation with Mediterranean non-member countries accompanied by the replies of the Commission  


Official Journal C 252 , 26/09/1991 P. 0001 - 0049 





 TABLE OF CONTENTS     Paragraph reference   1.Introduction 1.1  - 1.5   2.The framework of financial and technical cooperation 2.1  - 2.4   3.The system of Protocols 3.1  - 3.31  Procedure for concluding the Protocols 3.1  - 3.5   The consequences 3.6  - 3.7   Budgetary management 3.8  - 3.20  Spreading-out of commitments 3.8  - 3.12  Utilization of the balance 3.13 - 3.15  Allocation of grant aid 3.16 - 3.18  The consequences as regards implementation 3.19 - 3.20  Implementing Regulation 3.21 - 3.22  Observations on the system of Protocols 3.23 - 3.31  4.The management systems 4.1  - 4.43  The accounting systems 4.1  - 4.11  Presentation of the systems 4.1   Monitoring the implementation of the Protocols 4.2  - 4.5   Financial monitoring of the projects 4.6  - 4.11  The measures entrusted to the EIB 4.12 - 4.23  Legal basis of the EIB mandates 4.13 - 4.14  The Commission's role 4.15 - 4.23  Measures managed by the Commission 4.24 - 4.43  The aid management system 4.24 - 4.27  The sharing of responsibilities 4.28 - 4.29  Instructions 4.30 - 4.33  Work programmes and implementation reports 4.34 - 4.38  Evaluation 4.39  Staff resources 4.40 - 4.41  The role of the delegations 4.42 - 4.43  5.The implementation and results of financial and technical cooperation 5.1  - 5.91  Audits by the Court 5.1  - 5.4   Budgetary implementation 5.5  - 5.19  General observations 5.5  - 5.11  Turkey 5.12  Malta 5.13  Algeria 5.14  Morocco 5.15  Tunisia 5.16  Egypt 5.17  Jordan 5.18  Lebanon 5.19  Project conception 5.20 - 5.36  Project environment and objectives 5.21 - 5.23  Local partners 5.24 - 5.26  Finance plans 5.27 - 5.30  Implementation timetables 5.31 - 5.32  The Community resources committed 5.33 - 5.35  The form of aid chosen 5.36  Execution of projects 5.37 - 5.53  Delays 5.37 - 5.38  Major project modifications 5.39 - 5.43  Technical assistance 5.44 - 5.48  Recipients' commitments 5.49 - 5.52  Administrative structures 5.53  Effectiveness of projects 5.54 - 5.91  General observations 5.54  Turkey 5.55  Malta 5.56  Algeria 5.57 - 5.61  Morocco 5.62 - 5.69  Tunisia 5.70 - 5.76  Egypt 5.77 - 5.85  Jordan 5.86 - 5.91  6.Conclusions 6.1  - 6.12  ANNEXES:  page   Annex 1: Legal provisions governing the cooperation programmes with the Mediterranean non-member countries  42   Annex 2:The framework of financial and technical cooperation  43   The Commission's replies  50   SPECIAL REPORT No 3/91 on financial and technical cooperation with Mediterranean non-member countries accompanied by the replies of the Commission (91/C 252/01)   1. Introduction  1.1. For several years the Court has been carrying out a  programme of audit inquiries on financial and technical  cooperation with the Mediterranean countries, in particular  by making on-the-spot visits to a number of countries which  are receiving  Community aid.  In the course of this audit, the Court has taken account of  the request made to the Court by the European Parliament,  in its decision on the discharge for the implementation of  the general budget for the financial year 1987(1) , to  assess financial and technical cooperation with the  Mediterranean countries, in view of the under-utilization  of budgetary appropriations in this sector.  1.2. By the end of 1990, the Council had reached an  agreement on the general outline and the content of the  policy of Community aid and cooperation in the context of  the fourth series of Protocols to be concluded with the  southern and eastern  Mediterranean countries for the period  1992-1996. In addition to a substantial increase in the  Community's financial commitment(2) , the scope of this  policy has been enlarged to include support for economic  reforms in these countries, the financing of regional  projects and cooperation measures covering several  countries, aid to private undertakings, cooperation with  Community  companies and also better access to the Community  market for certain agricultural products from Mediterranean  countries. When it comes to draw up and implement the new  Protocols, it is important that the Community take fully  into consideration the  lessons learnt from the preceding  Protocols and endeavour to rectify the shortcomings which  have been uncovered. This report aims to assist in this  process.  1.3. This report deals with the implementation over a  period of some ten years, from about 1979 to 1989, of  financial and technical cooperation with the following ten  countries:  a)three Maghreb countries: Algeria, Morocco and  Tunisia, hereinafter referred to as 'the Maghreb  countries'(3) ;  b)four Mashreq countries: Egypt, Jordan, Lebanon and  Syria, hereinafter referred to as 'the Mashreq  countries'(4) ;  c)Cyprus, Malta and Turkey.  The total amount of aid made available to these countries  during the period in question was 3 783,5 Mio ECU. Of that  amount, 1 714,5 Mio ECU was financed from the general  budget and 2 069 Mio ECU from the European Investment  Bank's (EIB) own  resources. Table 1 gives a detailed  breakdown of this aid.(5)  1.4. This report relates only to operations involving  budgetary resources; this includes sums disbursed by way of  the global guarantee which the Community gives for loans  made from the EIB's own resources. The actual operations  which are financed  from the EIB's own resources are  excluded from this evaluation; that explains why this  report does not deal with financial cooperation with Israel  and Yugoslavia, which involves exclusively the latter form  of financing(6) . Furthermore, financial cooperation with  those countries which have joined the Community (Spain,  Greece and Portugal) is also not covered by this report.  1.5. After an introduction, in the second Chapter of this  report, to the general framework of financial and technical  cooperation, Chapter 3 makes an assessment of the actual  system of Financial Protocols; it analyses their merits and their  weaknesses, by comparing them in particular with the  provisions governing Community aid to countries in other  parts of the world. In Chapter 4, the quality of the  management systems set up by the Commission is examined;  for this purpose, a separate  analysis is made of the  measures whose management is entrusted to the EIB and of  those of which the Commission remains directly in charge.  Chapter 5 presents an evaluation of the implementation and  results of the Community aid, and Chapter 6  contains a  summary of the main conclusions of this report.   Table 1 - Community aid to Mediterranean non-member countries  (Mio ECU)   1 2 3 4 5 6 7 8  Country or geographical area Period of application Loans from EIB own resources    Aid from budgetary resources Total aid     Grant aid Special loans Risk capital Total budgetary aid    TURKEY  3rd Protocol 1979-31.10.1981  90,0 0,0 220,0 0,0 220,0 310,0  Special aid 1.07.1980-30.06.1982  0,0 75,0 0,0 0,0 75,0 75,0  Total    90,0 75,0 220,0 0,0 295,0 385,0  CYPRUS  1st Protocol 1.01.1979-31.12.1983  20,0 6,0 4,0 0,0 10,0 30,0  2nd Protocol 1.05.1984-31.12.1988  28,0 10,0 6,0 0,0 16,0 44,0  3rd Protocol 1.06.1990-31.12.1993  44,0 13,0 0,0 5,0 18,0 62,0  Total    92,0 29,0 10,0 5,0 44,0 136,0  MALTA  1st Protocol 1.11.1978-31.10.1983  16,0 5,0 5,0 0,0 10,0 26,0  2nd Protocol 1.10.1986-31.10.1988  16,0 10,5 3,0 0,0 13,5 29,5  3rd Protocol 1.08.1989-31.10.1993  23,0 12,5 0,0 2,5 15,0 38,0  Total    55,0 28,0 8,0 2,5 38,5 93,5   NORTHERN MEDITERRANEAN   237,0 132,0 238,0 7,5 377,5 614,5   ALGERIA  1st Protocol 1.11.1978-31.10.1981  70,0 25,0 19,0 0,0 44,0 114,0  2nd Protocol 1.01.1983-31.10.1986  107,0 28,0 16,0 0,0 44,0 151,0  3rd Protocol 1.03.1988-31.10.1991  183,0 52,0 0,0 4,0 56,0 239,0  Total    360,0 105,0 35,0 4,0 144,0 504,0  MOROCCO  1st Protocol 1.11.1978-31.10.1981  56,0 16,0 58,0 0,0 74,0 130,0  2nd Protocol 1.01.1983-31.10.1986  90,0 67,0 42,0 0,0 109,0 199,0  3rd Protocol 1.11.1988-31.10.1991  151,0 162,0 0,0 11,0 173,0 324,0  Total    297,0 245,0 100,0 11,0 356,0 653,0  TUNISIA  1st Protocol 1.11.1978-31.10.1981  41,0 15,0 39,0 0,0 54,0 95,0  2nd Protocol 1.06.1983-31.10.1986  78,0 37,0 24,0 0,0 61,0 139,0  3rd Protocol 1.05.1988-31.10.1991  131,0 87,0 0,0 6,0 93,0 224,0  Total    250,0 139,0 63,0 6,0 208,0 458,0  MAGHREB  1st Protocol   167,0 56,0 116,0 0,0 172,0 339,0  2nd Protocol   275,0 132,0 82,0 0,0 214,0 489,0  3rd Protocol   465,0 301,0 0,0 21,0 322,0 787,0  Total    907,0 489,0 198,0 21,0 708,0 1 615,0  EGYPT  1st Protocol 1.11.1978-31.10.1981  93,0 63,0 14,0 0,0 77,0 170,0  2nd Protocol 1.01.1983-31.10.1986  150,0 76,0 50,0 0,0 126,0 276,0  3rd Protocol 1.08.1988-31.10.1991  249,0 189,0 0,0 11,0 200,0 449,0  Total    492,0 328,0 64,0 11,0 403,0 895,0  JORDAN  1st Protocol 1.11.1978-31.10.1981  18,0 18,0 4,0 0,0 22,0 40,0  2nd Protocol 1.01.1983-31.10.1986  37,0 19,0 7,0 0,0 26,0 63,0  3rd Protocol 1.02.1988-31.10.1991  63,0 35,0 0,0 2,0 37,0 100,0  Total    118,0 72,0 11,0 2,0 85,0 203,0  LEBANON  1st Protocol 1.11.1978-31.10.1981  20,0 8,0 2,0 0,0 10,0 30,0  2nd Protocol 1.03.1983-31.10.1986  34,0 11,0 5,0 0,0 16,0 50,0  3rd Protocol 1.03.1988-31.10.1991  53,0 19,0 0,0 1,0 20,0 73,0  Total    107,0 38,0 7,0 1,0 46,0 153,0  SYRIA  1st Protocol 1.11.1978-31.10.1981  34,0 19,0 7,0 0,0 26,0 60,0  2nd Protocol 1.02.1983-31.10.1986  64,0 22,0 11,0 0,0 33,0 97,0  Total    98,0 41,0 18,0 0,0 59,0 157,0  3rd Protocol Reserve Earmarked for Syria  110,0 34,0 0,0 2,0 36,0 146,0  MASHREQ  1st Protocol   165,0 108,0 27,0 0,0 135,0 300,0  2nd Protocol   285,0 128,0 73,0 0,0 201,0 486,0  3rd Protocol   475,0 277,0 0,0 16,0 293,0 768,0  Total    925,0 513,0 100,0 16,0 629,0 1 554,0   SOUTHERN MEDITERRANEAN  1st Protocol   332,0 164,0 143,0 0,0 307,0 639,0  2nd Protocol   560,0 260,0 155,0 0,0 415,0 975,0  3rd Protocol   940,0 578,0 0,0 37,0 615,0 1 555,0  Total    1 832,0 1 002,0 298,0 37,0 1 337,0 3 169,0   MEDITERRANEAN   2 069,0 1 134,0 536,0 44,5 1 714,5 3 783,5            | | |  The difference of 54 Mio ECU between the total overall budgetary amount shown in column 7 (1 714,5 Mio ECU) and the amounts shown in Tables 2 and 4 (1 660,5 Mio ECU) is due to the fact that the latter do not include the Third Protocol with Cyprus (18  Mio ECU), which entered into force in 1990, or the reserve (36 Mio ECU) earmarked for the Third Protocol with Syria, which had not yet been signed as of 31.12.1989.     2. The framework of financial and technical cooperation  2.1. Preferential relations with the Mediterranean  countries began to be established in the Sixties, in the  form of Association Agreements based mainly on trade  relations. In 1972 the Community started to introduce a  policy based on an overall  approach to the Mediterranean  countries, in particular with the inclusion in the  Agreements of a section devoted to financial and technical  cooperation. Since 1976, Cooperation Agreements of  unlimited duration have been signed with the Maghreb and   Mashreq countries and with Malta and Cyprus. Relations with  Turkey continue to be governed by the provisions of the  1963 Association Agreement.  2.2. With each of the partner countries, financial and  technical cooperation has been the subject of Protocols by  which the Community undertakes to make available to the  country concerned an overall amount of aid which is  intended to help finance  projects or measures that  contribute to the social and economic development of the  recipient country; these Protocols lay down, amongst other  things, the duration of their application and the volume  and forms and field of application of financial  and  technical cooperation; in addition, they contain some  provisions on the appraisal and carrying-out of the projects which are being financed. The framework of  cooperation with Mediterranean non-member countries is to a  large extent based on the  main principles of the EDF  system: the aid is multiannual, it is administered jointly  and there are several financing instruments.  2.3. By the end of 1990, three series of Protocols had  been signed (see Annex 1). As shown in Table 1, of the  1 714,5 Mio ECU granted from budgetary resources,  708 Mio ECU was for the Maghreb countries, 629 Mio ECU for  the Mashreq countries and  377,5 Mio ECU for Cyprus, Malta  and Turkey. Graphs 1 and 2 illustrate how the aid from  budgetary resources is divided up between the geographical  areas and recipient countries concerned.  2.4. Annex 2 briefly describes the framework for financial  and technical cooperation. It gives details of:  a)the period of application of the Financial  Protocols;  b)the financing instruments covered by the Protocols;  c)the general objectives of Community aid during the  three series of Protocols and the fields of  application of the latter;  d)the budgetary basis;  e)the implementing provisions for the Protocols and  the dividing-up between the EIB and the Commission  of the power to administer the aid;  f)the procedures for deciding the financing and for  drawing up the agreements and financing contracts;  g)the administrative methods used by the Commission  and the recipient States for implementing the  Protocols.   3. The system of Protocols  Procedure for concluding the Protocols 3.1. The whole process of negotiating and concluding the  Protocols is relatively slow and is sometimes affected by  factors that are not directly linked to financial and  technical cooperation.  3.2. Although they are based on Article 238 of the EEC  Treaty, the First Protocols with the Maghreb and Mashreq  countries and with Cyprus and Malta were nevertheless  subject - unnecessarily - to ratification by the Member  States. This delayed their  entry into force by one and a  half to two and a half years, depending on the case (see  Annex 1).  3.3. The Second Protocols with the Maghreb and Mashreq  countries were signed nine months to one year after the  expiry of the previous Protocols (31 October 1981) and did  not come into force until 14 to 19 months after their   theoretical date of  entry into force (1 November 1981). The  delays were even longer in the case of the Second Protocol  with Malta, the negotiations for which were impeded until  1985 by a number of Maltese legal constraints. The Protocol  came into force in October 1986,  i.e. virtually three years  after the theoretical date (1 November 1983).  3.4. The entry into force of the Third Protocols with the  Maghreb and Mashreq countries was spread out over the whole  of 1988 (see Annex 1), one and a half to two years after  the expiry of the preceding Protocols (31 October 1986).The fact that these  negotiations proved to be particularly  lengthy can be explained by the need to adapt the  provisions of the agreements in the field of trade  relations, following Spain and Portugal's entry into the  Community; the subordination of financial and  technical  cooperation to factors which are not directly linked to it  is particularly evident in the case of Morocco, where the  preliminary to the negotiations concerned the conclusion of  a new fisheries agreement.  3.5. The Third Protocols with Cyprus and Malta were no  exception in this respect and came into force 17 months and  nine months respectively after the expiry of the preceding  Protocols (see Annex 1).  The consequences 3.6. Except for the First Protocols with Cyprus and Malta,  the period of application is not fixed in relation to their  date of entry into force but in respect of an expiry date  (see Annex 2, paragraph 2). Any delay affecting their entry  into force  therefore means a reduced period of application.  In fact, the latter is in most cases less than four years,  and is sometimes reduced to three years or even less (see  Annex 1).  3.7. These delays result, furthermore, in a break in the  sequence of the Protocols. As already pointed out (see  paragraphs 3.3 - 3.4), there are generally one to two years  between the expiry of one Protocol and the entry into force  of the succeeding  one. For some countries, this means a  break in the continuity of the cooperation. For countries  such as Malta, Morocco or Tunisia, which arranged under the  first two Protocols for the appropriations to be committed  during the fixed period of  application (see Tables 2  and 3), this means that the pattern of commitments is broken; during the period separating two Protocols,  financial and technical cooperation is thus confined to  carrying out approved projects.  Budgetary management Spreading-out of commitments 3.8. According to the Protocols, the total amount of the  individual sums that are to be committed each year should  be spread as evenly as possible over the whole period of  application; at the beginning of the period of application,   commitments may  nevertheless be made for proportionally  higher amounts, within reasonable limits.  3.9. In practice, this provision is rarely complied with.  The implementation of the Protocols follows a pattern of  its own, depending mainly on the ability of the partner  countries to present for financing projects which can be  implemented  immediately. Table 2 and Graphs 4 to 18 show in  respect of several Protocols and several countries that  financial years for which very considerable amounts of  appropriations have been committed are followed by periods  where commitments are very low,  or even non-existent.  3.10. Moreover, this provision loses a considerable amount  of its significance because of the reduction which has been  observed in the period of application of the Protocols: the  aid measures and, consequently, the appropriations relating  to them,  are thus concentrated. It also impedes speedy  implementation of the Protocols in countries which are able  from the outset to present projects that take up a  proportionally much larger part of the overall amount of  appropriations granted.  3.11. Furthermore, the creation in 1987 of a single  article (965) for all three Protocols with the Maghreb and  Mashreq countries makes it much less necessary to ensure  for each individual Protocol that the expenditure charged  to the general budget  is spread out.  3.12. Consequently, this provision should not be included  in future Protocols. Instead, the Commission, together with  the recipient countries, should rather bring its efforts to  bear at the planning stage in order to draw up realistic  plans for  implementing financial and technical cooperation.  Such planning cannot disregard budgetary constraints.  Utilization of the balance 3.13. The Protocols lay down that any funds not committed  at the end of the implementing period 'shall be used, until  exhausted'. This balance sometimes represents a  considerable share of the overall budgets specified in the  Protocols. This is the  case in particular for the First and  Second Protocols with Algeria and Egypt where it varies,  according to case, by approximately 30 % to 50 % of the total  sum earmarked (see Table 3). At the end of 1989, moreover,  these Protocols had still not been  closed.  3.14. The Protocols may be implemented with a measure of  flexibility, in order to allow for adjustment to new  circumstances which could not reasonably be foreseen at the  outset. Nevertheless, in the form in which it is formulated  and applied, this  provision authorizes a commitment of  funds for an indefinite period and deprives the multiannual  framework in which the Protocols are theoretically set of  all meaning.  3.15. The experience gained should be turned to account  for future protocols. First of all, the budgetary amount allocated for financing under a particular protocol should  be fixed by taking account of the actual chances of its  being fully utilized  during the implementing period. The  utilization of any balance should form the subject of a  well-defined procedure resulting in a formal decision by  the Association Council. This decision should be based on  an examination of the situation regarding  cooperation with  the country concerned and should be taken on the expiry of  the implementing period for the Protocol, or near to that  time. Following this decision, the balance should either be  transferred, in full or in part, to the finance  allocated  to the next Protocol or it should be cancelled, so as to  put an end to the current series of unclosed Protocols.  Allocation of grant aid 3.16. The Protocols are drawn up in such a way that non-reimbursable aid, in the form of grants, financed from  budgetary resources, is used in the first instance to  satisfy EIB needs. The aim is to allow it to grant the   interest-rate subsidies that  are an essential precondition  for and are automatically linked to the signing of loan  contracts up to the maximum amount that the EIB is  authorized to make. The forward management of the financing  packages is thus organized in such a way as to  ensure that  the EIB always has a source of funds from which to finance  interest-rate subsidies.  3.17. The EIB is not, however, able to make its actual  requirements known right from the outset of the  implementation of a protocol, which makes it difficult to  provide for strict planning of the financings and tends to  defer the use of a part of  the Commission's budgetary  resources.  3.18. Fixing the overall amount of budgetary funds  intended to finance interest-rate subsidies in the Protocol  itself would be one way of getting round this difficulty.  The Commission and the recipient country would thus have  accurate information  from the outset as to how much money  was available for use in the form of interest-rate  subsidies. It should be pointed out here that the EDF's  budget contains an overall sum that is reserved for  interest-rate subsidies.  The consequences as regards implementation 3.19. The implementation of the Protocols does not adhere  to the theoretical five-yearly framework. As a result,  there is a series of unclosed Protocols, the most blatant  examples being those with Algeria and Egypt: the balance of  uncommitted funds  at the end of the implementing period for  the first two series of Protocols with these two countries  varies between 30 % and 50 % of their overall budgets (see  Tables 2 to 4 and Graphs 8 and 12). If this situation is to  be prevented from worsening,  it is up to the Commission to  take the appropriate measures when concluding future  Protocols.  3.20. The Court considers that, whilst a measure of  flexibility should be retained (see paragraph 3.14),  stricter provisions governing the timetable for using funds  allocated for this purpose are required in order to put a  stop to this uncontrolled  drift. Whatever provisions may be  adopted, they should include a mechanism for closing  unclosed Protocols, which would lead to a formal decision  as to the utilization of the balance (see paragraph 3.15).   Table 3 - Utilization of overall budgets for Protocols at the end of the financial year in which the Protocols expired  (%)   Country or geographical area Protocol Commit- ments con- tracted Payments effected   Turkey Third  100,0 27,8   special aid  61,3 5,3  Cyprus First  99,6 23,0   Second  65,0 51,6  Malta First  100,0 73,6   Second  100,0 0,0   Algeria First  66,9 4,7   Second  54,5 10,0  Morocco First  100,0 34,3   Second  99,3 82,7  Tunisia First  73,5 23,3   Second  99,5 17,7  Maghreb First  83,2 23,3   Second  90,2 45,5   Egypt First  69,4 13,9   Second  53,0 8,4  Jordan First  85,6 31,1   Second  85,0 37,7  Lebanon First  55,8 25,4   Second  100,0 3,8  Syria First  70,1 11,2   Second  95,8 2,5  Mashreq First  69,8 16,1   Second  67,9 10,9   Southern First  77,3 20,1  Mediterranean Second  79,4 28,7  Implementing Regulation 3.21. The absence of any implementing regulation until the  beginning of 1987 (see Annex 2, paragraphs 14 - 17), i.e.  for nearly eight years, was a major shortcoming. Besides  the fact that it deprives the Commission of its managerial  powers and  responsibilities, use of the ad hoc procedure  during this period sometimes produced considerable delays  in the adoption of projects on account of the need for a  unanimous vote. Each Member State has a right of veto,  which means that, if it so  wishes, it can hold up the  Commission's activities in order to settle a dispute with  the country which is to receive the envisaged aid.  3.22. The implementing Regulation, (EEC) No 3973/86, makes  specific references, in its recitals, to the Second  Protocols with the Maghreb and the Mashreq countries and  Cyprus and Malta only. At the very least a Council  regulation should have  extended the scope of Regulation  (EEC) No 3973/86 to include the Third Protocols, and that  need still exists. Appropriate provisions should, moreover,   be immediately adopted as soon as the forthcoming Fourth  Protocols have been concluded. The same  applies to  financial and technical cooperation with Turkey, which is  still not covered by an implementing regulation (see  Annex 2, paragraph 17).  Observations on the system of Protocols 3.23. A comparison may be made between this system of  Protocols and the system that applies to the financial and  technical aid that the Community gives to Asian and Latin  American developing countries (PVDALA). This aid, which is  financed from  Chapter 93 of the general budget, has its  sole legal foundation in Council Regulation (EEC)  No 442/81(7) , which lays down the general objectives,the forms, the fields of application as well as the  Community's decision-making and internal management  procedures.  3.24. The Protocols, which result precisely from the  Community's wish to institute a policy based on a global  approach, constitute an appropriate framework within which  to provide, durably and with a pre-established overall  budget, sectoral guidance  for financial and technical  cooperation of a form that meets the priority objectives  for development adopted by each of the recipient countries.  The planning stage is essential in this respect. The Third  Protocols with the Maghreb and Mashreq  countries and Malta  and Cyprus did, moreover, constitute a considerable  improvement on the previous ones. Their specific  cooperation objectives are much more precise, they define  the nature of the projects or measures likely to be  financed and they  require the drawing-up of an indicative  programme committing both parties.  3.25. The lack of multiannual planning until the end of  1990 within the framework of financial and technical aid to  the PVDALA and the artificial pressure of annual and  budgetary timetables are recognized by the Commission as  amounting to a  considerable weakness. Plans exist to  introduce multiannual planning as from 1991, which would  make for improved utilization of financial resources.  3.26. Though, in principle, the Protocols do make for more   efficient and effective utilization than a system with no  planning, in practice, certain weaknesses may be observed.  3.27. First of all, the Protocols form an additional  stage, compared with the system governing the financial and  technical aid to the PVDALA. The slowness that is inherent  in the process for negotiating and concluding Protocols(which only provide a  legal framework for five years),  which is sometimes affected by other factors that are not  directly related to financial and technical cooperation  (see paragraphs 3.1 - 3.5), has the effect of delaying  implementation and even of interrupting the  continuity of  financial and technical cooperation (see paragraph 3.7).  3.28. The Protocols involve, moreover, a vast amount of  identification work, the carrying-out of studies and the   drawing-up of projects at the beginning of their period of  application. This represents a considerable volume of work,  both for the  Commission and the recipient countries, which  has to be completed in a very short space of time. The  Court wonders whether some of the weaknesses found in the  quality of the projects and measures financed are caused by  the hastiness with which this  preparatory work is carried  out.  3.29. Moreover, by fixing a well-defined overall budget  that is available for a specific period, the Protocols are  likely to encourage competition between potential  recipients in the countries concerned. This may result in  projects that are badly or  inadequately conceived and  which, in part if not wholly, are aimed at keeping back a  share of the overall amount made available by the Community  for the bodies submitting them. This weakness is not found  in financial and technical aid to the PVDALA  because, while  it is also necessary to choose between projects, given the  limited volume of Community aid, their effects are more  widespread since there is not this dual limit of an overall  budget that is clearly determined and non-extendable and   related to a multiannual implementing period.  3.30. One disadvantage of the system of Protocols concerns  the impact on budgetary implementation of factors which,  although alien to financial and technical cooperation,prevent its normal operation. The implementation of the  Protocols with Turkey,  Syria and Lebanon has been blocked  for political reasons: the Community has not repudiated its  commitments in respect of any of the recipient countries  concerned, the implementation of the financial and  technical cooperation has merely been  postponed until such  time as circumstances make it possible again. In the  specific cases of Lebanon and Syria, the overall packages  granted or earmarked for the Third Protocols will be added  to those to be granted, normally at the end of 1991,  within  the framework of the Fourth Protocols, which is not likely  to improve the rate of budgetary implementation. In the  case of financial and technical aid to the PVDALA, the  Commission may, under such circumstances, decide not to  undertake any  more commitments, i.e. not to take any more  financing decisions.  3.31. Finally, as things stand, and mainly on account of  the provisions governing the use of the balance (see  paragraphs 3.13 - 3.15), the overall budget provided for in  the Protocol is legally due to the recipient country and it  may not be called  into question by slow implementation.  Financial and technical aid to the PVDALA makes it  possible, on the contrary, to adapt the volume and rate of  cooperation to each country's own absorption capacities.  The Commission has the possibility of  refusing to finance  new projects when it finds that there are difficulties or  delays in the utilization of the aid that has already been  made available to the country concerned.   4. The management systems The accounting systems Presentation of the systems 4.1. The Commission has two tools:  a)the budgetary accounting system, with which to implement  the budget correctly. For a given financial year and  down to the level of individual accounting commitments,  it gives the details of payments made and outstanding  commitments at the  beginning and end of the financial  year. This is the information that is set out in the  revenue and expenditure account;  b)an auxiliary accounting system, known as FINPICS  (Project Information and Control System), the aim of  which is to meet the administrators' specific needs as  regards the follow-up of projects and the implementation  of Financial Protocols(8) . It is a database  containing chronological details of the payments made  for each accounting commitment.  Monitoring the implementation of the Protocols 4.2. Neither the budgetary accounting nor the FINPICS  system in its present form provides constant and directly  available information, in respect of each Financial  Protocol, on the distribution of the amounts committed and  the amounts paid,  according to the nature of the financial  instruments. These observations also hold true of a  sectoral analysis of financial operations that the EIB  carries out on its own initiative, in particular for the  loans on special terms that it manages under  a broad  mandate (see Annex 2, paragraph 23). The Commission should consider, in any event as from the next Protocols,  equipping itself with the means necessary to obtain easy  access to this type of information.  4.3. The budgetary accounting system is not equal to the  task of providing constant and direct access to information  on the state of financial implementation of the Protocols.  Some items of revenue, repayments made by the EIB of excess  funds  supplied by the Commission (on the payment of  interest subsidies or when a loan instalment under special  conditions is released) are not re-used for the project  concerned and are credited to sundry revenue. In order to  be able to make available to  the EIB the whole amount  agreed upon for the loan or interest subsidies, the  Commission is then obliged to make further commitments from  new appropriations. The budgetary accounts then show  amounts committed and paid which are higher than those of   the aid fixed and actually paid. As can be seen in Table 4,  the total amount committed for a Financial Protocol, as  reconstituted from the budgetary accounting system, is thus  higher than the overall amount of the financing package  (First Protocols  with Malta and Jordan, First and Second  Protocols with Syria).  4.4. The FINPICS system is established and updated  incorrectly, in that it does not reconstitute all the  accounting transactions. It does not include several  commitments established in 1979, nor does it take account  of possible revenue, whether  re-used or not.  4.5. It thus makes it difficult to close the Financial  Protocols if the Commission cannot retrace the debits and  credits and is unaware of any balances available for re-use. To bring the FINPICS system up to scratch would not  result in insuperable  difficulties. It would involve  incorporating all omitted commitments as well as revenue received. The Commission would then have a system providing  it with a readily available and reliable picture of the  financial implementation of a given Protocol.    Table 4 - Utilization of overall budgets for Protocols and validation of commitments entered into at 31.12.1989   Country or geographical area Protocol Overall budgets   Commitment situation     Payment situation     Commitments entered into Unutilized finance 3 - 4 Utilization of finance 4 / 3 Payments effected Unutilized finance 3 - 7 Utilization of finance 7 / 3 Outstanding commitments 4 - 7 Commitments validated 7 / 4    (Mio ECU) (Mio ECU) (Mio ECU) (%) (Mio ECU) (Mio ECU) (%) (Mio ECU) (%)  (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)   TURKEY 3rd  220,0 220,0 0,0 100,0 217,5 2,5 98,9 2,5 98,9   Spec. aid  75,0 75,0 0,0 100,0 46,3 28,7 61,8 28,7 61,8   Total   295,0 295,0 0,0 100,0 263,9 31,1 89,4 31,1 89,4  CYPRUS 1st  10,0 10,0 0,0 99,6 10,0 0,0 99,6 0,0 100,0   2nd  16,0 14,6 1,4 91,4 10,2 5,8 63,6 4,5 69,6   Total   26,0 24,6 1,4 94,6 20,1 5,9 77,5 4,5 81,9  MALTA 1st  10,0 10,0 (0,0) 100,0 10,0 0,0 100,0 0,0 100,0   2nd  13,5 13,5 0,0 100,0 0,8 12,7 5,9 12,7 5,9   3rd  15,0 0,0 15,0 0,0 0,0 15,0 0,0 0,0   Total   38,5 23,5 15,0 61,0 10,8 27,7 28,0 12,7 45,9     NORTHERN MED- ITERRANEAN Total   359,5 343,1 16,4 95,4 294,8 64,7 82,0 48,3 85,9   ALGERIA 1st  44,0 38,2 5,8 86,8 23,1 20,9 52,5 15,1 60,5   2nd  44,0 42,2 1,8 95,9 9,6 34,4 21,8 32,6 22,8   3rd  56,0 27,4 28,6 48,9 0,4 55,6 0,7 27,0 1,4   Total   144,0 107,7 36,3 74,8 33,1 110,9 23,0 74,7 30,7  MOROCCO 1st  74,0 74,0 0,0 100,0 73,2 0,8 98,9 0,8 99,0   2nd  109,0 108,3 0,7 99,4 95,3 13,7 87,4 13,1 87,9   3rd  173,0 122,3 50,7 70,7 0,0 173,0 0,0 122,3 0,0   Total   356,0 304,6 51,4 85,6 168,5 187,5 47,3 136,1 55,3  TUNISIA 1st  54,0 53,7 0,3 99,4 53,1 0,9 98,4 0,5 99,0   2nd  61,0 61,0 0,0 100,0 41,1 19,9 67,4 19,9 67,4   3rd  93,0 59,7 33,4 64,1 13,2 79,8 14,2 46,5 22,1   Total   208,0 174,3 33,7 83,8 107,4 100,6 51,6 66,9 61,6  MAGHREB 1st  172,0 165,8 6,2 96,4 149,4 22,6 86,9 16,4 90,1   2nd  214,0 211,5 2,5 98,8 146,0 68,0 68,2 65,6 69,0   3rd  322,0 209,3 112,7 65,0 13,6 308,4 4,2 195,8 6,5   Total   708,0 586,7 121,3 82,9 309,0 399,0 43,6 277,7 52,7  EGYPT 1st  77,0 76,5 0,5 99,3 58,1 18,9 75,5 18,4 76,0   2nd  126,0 122,7 3,3 97,4 54,2 71,8 43,0 68,5 44,2   3rd  200,0 44,3 155,7 22,1 0,3 199,7 0,1 44,0 0,7   Total   403,0 243,4 159,6 60,4 112,6 290,4 27,9 130,9 46,2  JORDAN 1st  22,0 22,3 (0,3) 101,4 21,8 0,2 99,1 0,5 97,7   2nd  26,0 25,0 1,0 96,3 18,1 7,9 69,6 6,9 72,3   3rd  37,0 17,4 19,6 47,0 2,1 34,9 5,6 15,3 11,9   Total   85,0 64,7 20,3 76,1 42,0 43,0 49,4 22,8 64,8  LEBANON 1st  10,0 9,9 0,1 99,4 5,5 4,5 54,9 4,5 55,2   2nd  16,0 16,0 0,0 100,0 1,6 14,4 10,1 14,4 10,1   3rd  20,0 0,0 20,0 0,0 0,0 20,0 0,0 0,0    Total   46,0 25,9 20,1 56,4 7,1 38,9 15,4 18,8 27,4  SYRIA 1st  26,0 26,0 (0,0) 100,0 20,2 5,8 77,9 5,8 77,8   2nd  33,0 33,0 (0,0) 100,0 9,9 23,1 30,1 23,1 30,1   Total   59,0 59,0 (0,0) 100,0 30,2 28,8 51,2 28,8 51,2  MASHREQ 1st  135,0 134,7 0,3 99,8 105,6 29,4 78,2 29,1 78,4   2nd  201,0 196,7 4,3 97,9 83,8 117,2 41,7 112,9 42,6   3rd  257,0 61,7 195,3 24,0 2,4 254,6 0,9 59,3 3,8   Total   593,0 393,1 199,9 66,3 191,8 401,2 32,3 201,3 48,8  SOUTHERN MED- ITERRANEAN 1st  307,0 300,5 6,5 97,9 255,0 52,0 83,1 45,5 84,9   2nd  415,0 408,2 6,8 98,4 229,8 185,2 55,4 178,4 56,3   3rd  579,0 271,0 308,0 46,8 15,9 563,1 2,8 255,1 5,9   Total   1 301,0 979,8 321,2 75,3 500,8 800,2 38,5 479,0 51,1   MEDITER- RANEAN Total   1 660,5 1 322,9 337,6 79,7 795,6 864,9 47,9 527,3 60,1  The differences of 54 Mio ECU between the total overall budgetary amount shown in column 3 (1 660,5 Mio ECU) and the amount shown in Table 1 (1 714,5 Mio ECU) is due to the fact that the above table does not include the Third Protocol with Cyprus, which  entered into force in 1990, or the reserve (36 Mio ECU) for the Third Protocol with Syria which had not yet been signed as of 31.12.1989. The figures in brackets in column 5 are negative because the amount of commitments is in excess of the overall  budget. (0,0) indicates that the negative amount is less than 50 000 ECU.    Financial monitoring of the projects 4.6. The Commission has no information system showing the  projects' actual state of financial implementation.  4.7. The information supplied in the statement of payments is inadequate in several respects. First of all, it takes  no account of revenue (see paragraph 4.3). During its   records-based audit of projects financed in Turkey, the  Court had to  reconstitute payments out and revenue received  in order to establish what had actually been paid to the  recipients. Moreover, there are sometimes abnormally long  delays in the accounting for local payments made from the  paying agent's account. In  the case of projects financed in  Egypt, these delays may be up to two years and involve  several hundred thousands of ECU. Furthermore, delays in  the decommitment of unused appropriations, apart from  unnecessarily immobilizing appropriations, create  the  illusion, sometimes for several years, that a project is  still being implemented when it has in fact been completed.  This sort of situation was noted in the case of projects  financed in Morocco, Egypt and Turkey. Sound financial  management  requires both the accounting for local payments  and the decommitment of unused appropriations to be  effected as quickly as possible.  4.8. Each project is normally covered by a single  accounting commitment but often includes different types of  measure (supply of equipment, technical assistance,  construction work, etc.), which are defined, along with the   estimated cost, in the  financing agreement. Each of these measures then often gives rise to several contracts  (separate batches, multiple contractors, etc.).  4.9. Whereas it has developed a system to manage the EDF,  the Commission has not created anything comparable which  would help it to monitor, by individual measure and  contract, the situation regarding 'secondary' commitments  entered into in respect  of third parties (contracts signed,  etc.) and the payments made. Such a monitoring device is,  however, an essential prerequisite of sound financial  management, and would, in particular, make it possible to  detect immediately any specific  implementation  difficulties, such as overspending on a measure or delays  or blockages affecting the implementation of certain  measures or contracts.  4.10. The most conscientious administrators keep, on their  own initiative and usually by hand, a record of secondary  commitments and payments, by contract and, less frequently,  by measure. Apart from the fact that they are not always  correctly  updated, these records are extremely  heterogeneous and subject to errors or omissions.  4.11. The Court takes the view that the Commission should  give absolute priority to setting up a harmonized system  which meets the above-mentioned criteria and to making the  information in this system available to all of its  departments that are  responsible for implementing the  Protocols. To this end the Commission could well base  itself on the computerized system that its Moroccan  delegation has installed for its own needs. It should also  be pointed out that the Commission is currently  developing  a similar system known as 'OLAS' (On-Line Accounting  System) for the EDF. This basic requirement of sound  financial management is not confined to financial  cooperation with Mediterranean countries: financial cooperation with the PVDALA  suffers from the same  shortcomings.  The measures entrusted to the EIB 4.12. This section of the report is concerned more  specifically with loans on special terms and under a broad  mandate, in respect of which the EIB has been invested with  the broadest responsibilities. The Court's objective is to  examine whether the  current procedures and systems enable  the Commission to manage the Community's budgetary  resources adequately.  Legal basis of the EIB mandates 4.13. The Court reiterates the reservations that it  formulated in its annual report in respect of the financial  year 1982(9) , i.e. that it is worth enquiring whether  the Commission in fact had the legal powers required in  order to confer upon the EIB, in November 1978 (see  Annex 2, paragraph 19), the management of certain  appropriations entered in the general budget. The  signed  agreements are not in fact based on any text signed by the  Council and the First Protocols make no mention of the  distribution of responsibilities between the EIB and the  Commission. Moreover, there are no implementing provisions  defining  them, and the 'ad hoc' procedure has not yet been  established (see Annex 2, paragraphs 14 - 17).  4.14. The Agreement signed on 16 June 1987, which relates  to the implementation of the Third Protocols with the  Maghreb and Mashreq countries, refers to Article 3 of  Regulation (EEC) No 3973/86. This Regulation, however,  constitutes the implementing  provisions for the Second  Protocols (see paragraph 3.22). The second mandate was  therefore given without a correct legal basis. This also applies to the extension, in November 1989, of this same  Agreement to cover the Protocols with Cyprus and Malta.   The Commission's role 4.15. As regards the loans on special terms under broad  mandate and operations concerning the formation of risk  capital, the EIB has been given full responsibility for  identifying, appraising and negotiating without the need  for any intervention by  or direct involvement of the  Commission. The latter is, of course, consulted on the  financing projects, but its prerogatives are in fact very  limited. The financing proposals submitted to it do not  contain sufficient details to allow the projects'  technical  merits to be assessed. After that it no longer has any  control over the decision to grant finance. The 'ad hoc'  procedure, which is based on the principle of unanimous  voting, has left all the decision-making power to the  Council for  almost eight years, in an area which concerns  day-to-day management. Regulation (EEC) No 3973/86 in its  turn allows the Commission the right to oppose  (Article 11(2)) any EIB financing proposal which leads to  consultation of the Council, as the  authority empowered to  take the final decision. So the Commission's prerogatives  are not thereby increased.  4.16. The situation is particularly worrying as regards  interest-rate subsidies. Here again the 'ad hoc' procedure  has the consequences referred to in paragraph 4.15. The  decision-making procedure adopted by Regulation (EEC)  No 3973/86 (Article  11(4)) leaves, in the absence of a  favourable opinion from the Article 9 Committee, the power  of final decision to the EIB's Board of Directors. In its  Opinion No 2/86(10)  on the draft implementing financial  regulation, the Court has already criticized the fact that  this mechanism does not allow the competent authority to maintain any control over the appropriations entered in the  general budget, with a view to  ensuring implementation.  4.17. The proposals for implementing financial regulations  submitted by the Commission to the Council in 1977 and 1978  (see Annex 2, paragraph 16) and Regulation (EEC) No 3973/86  require the Commission to ensure that the EIB carries out  its mandate  and that the conditions under which the  projects are used by the recipients are satisfactory. At  present, the procedures and systems in force do not allow  the Commission to comply with these requirements  satisfactorily.  4.18. Under the terms of its mandate, the EIB is not bound  to send the Commission the necessary documents, in  particular the progress and inspection reports. Up until  1984 the Commission did not even have any copies of the  financing contracts. The  annual report that the EIB submits  to the Commission boils down to a list of financing  decisions and summary financial statements. On-the-spot  inspections and visits of projects receiving finance are  only carried out by representatives of the EIB  itself.  4.19. As the Court discovered during a documentary audit  of two projects financed in Turkey for a total amount of  160 Mio ECU under the Third Protocol, the result of this  situation is a total lack of information in the  Commission's files regarding  the implementation and results  of the projects. The EIB mandate, however, expressly limits  its responsibilities 'to the sound implementation of the  mandate, in accordance with banking practice'. The  development objectives are not mentioned and  remain the  Commission's full responsibility. The latter should  therefore procure, on its own initiative or via the EIB,  the information that it requires for this purpose. In its  special report(11)  on the EIB's management of Community development aid funds, the Court has already commented on  the inadequate nature of the Commission's files in respect  of projects financed by the EDF or by the Protocols and  managed by the EIB. The Court  reiterated its observations  in its annual report for the financial year 1985(12) .  4.20. The Commission does not make appropriate use of the  financial information available to it. Thus, for the same  two projects financed in Turkey referred to under  paragraph 4.19, the absence of a statement of payments made  to the EIB and  repayments made by it made it difficult, at  the time of the audit, for the Court to assess the extent  to which accounting commitments had been validated and  loans on special terms had been utilized.  4.21. The Commission does not attempt to keep up to date  an aggregate statement of part payments against loans from  EIB own resources which are receiving interest-rate  subsidies. This would allow it, however, once the loans had  been fully disbursed,  to decommit immediately any  appropriations not used for interest-rate subsidies. Under  the present arrangement, the Commission waits to be  informed by the EIB that a loan has been disbursed before  acting. As the Court observed in the case of  projects  financed in Morocco, this may mean that the appropriations  remain unnecessarily committed for several years.  4.22. The Commission is therefore not in a position to  fulfil its responsibilities in respect of the  implementation of the budget. It is impossible for the  Commission to know whether budgetary funds allocated to  finance measures managed under  mandate by the EIB (see  paragraph 4.12) have been utilized in accordance with the  Financial Regulation and make it possible for the desired  objectives to be achieved.  4.23. In conjunction with the EIB, the Commission should  establish the procedures necessary for it to obtain  sufficient information on projects managed under broad  mandate by the EIB. As is, for example, required by the  Committee for Development  Banks, which manages aid to the  PVDALA on behalf of the Community, the Commission should at  least be kept informed of the following:  a)a detailed description of projects together with the  technical and economic assessments;  b)periodic reports on each project's progress;  c)reports on on-the-spot inspections carried out by the  EIB;  d)any recommendations for technical changes sent by the  EIB to the project managers.  The Commission should have full entitlement to participate  in on-the-spot inspections by the EIB and should be free to  make such audit visits as it desires on its own initiative,  in accordance with procedures to be laid down jointly with  the EIB.  Measures managed by the Commission The aid management system 4.24. The quality of the information available in the  Commission's files, like its monitoring of project  implementation, was very uneven and generally insufficient.  4.25. The projects financed in Malta and Turkey were  characterized by a shortage of information on  implementation; there was nothing to indicate whether the development objectives had been, or would be, achieved.  There was no fundamental difference  in the case of projects  financed in Egypt, over the achievement of which the  Commission does not generally exercise enough control; in  the case of the agricultural projects, the situation has  improved recently, following staff changes in the   delegation. Supervision of the projects financed in Algeria  was similarly insufficient, and it was impossible for the  Commission to evaluate the results of them.  4.26. The situation was less open to criticism in the case  of Morocco, where information concerning the actual  execution of the measures financed by the Community was  generally available to the Commission; the information was  incomplete, however, in  that the flow stopped once the  Community financial contribution had been used up, and the  information itself did not always cover measures financed  by the Moroccan contribution; generally speaking, it was  once again impossible for the Commission to  assess the  effectiveness of these projects.  4.27. There are various factors that give rise to  situations of this kind. They all have their origin in the  fact that the Commission has omitted to set up an adequate  project management system.  The sharing of responsibilities 4.28. The provisions regarding the division of  responsibilities between the various Commission departments  (see Annex 2, paragraph 31) are not always as precise as  they should be, and they are not always complied with. The  system was seen to be  blurred in outline and too  complicated; the extreme sub-division of tasks made it  difficult to prevent dilution of responsibilities. For  example, execution of the credit operation on behalf of small farmers (Morocco) was monitored by neither the   officer responsible for the geographical area nor by the  officer responsible for the technical aspects, who was  convinced that this was a project which was being managed  by the EIB under mandate. In the case of the Beypazari  lignite mines project  (Turkey), the Commission sent  invoices to the EIB for payment in November 1987, even  though this project was not covered by the EIB's mandate  either. Neither DG I nor DG VIII took responsibility for  the Lignite prospecting project (Turkey) and a  commitment  of almost 160 000 ECU has been outstanding for five years,  even though the expenditure to be borne by the Commission  has been paid in full.  4.29. The Commission should ensure that the division of  responsibilities between the various departments concerned  is clear and that it is respected.  Instructions 4.30. The Commission had not issued any instructions  regarding the structure and content of the files on the  projects and measures financed or the nature, frequency or  recommended form of the monitoring and of the information  to be provided by the  central departments and the  delegations. These had been left to individual initiative,  and in consequence the quality of the files and of the  supervision was very uneven.  4.31. The delegations generally draw up annual reports  with a special profile for each project or measure.  Frequently the comments varied little from one year to the  next, which raises questions as to the standard of the  monitoring on which they are  based; the Court, for its  part, has found such reports to be of limited use in  preparing for missions to the countries concerned.  4.32. The files held by the geographical and technical  officers were often poorly maintained or incomplete and  were very difficult to use as a tool for ascertaining the  state of progress of projects or measures, identifying  particular weaknesses or  problems and evaluating results.  This was particularly true of the projects and measures  financed in Egypt and Turkey which the Court examined.  4.33. A special effort must be made to improve the quality  of these files. Guidelines should be issued, so as to  harmonize the organization and presentation of them. A  system of periodic follow-up cards (for example at six-monthly intervals) could be  created. These cards would  indicate, for example, in a very brief form, the state of  progress of a project, particular weaknesses or problems  encountered, action undertaken or envisaged and the results  achieved or to be expected, as well as the  extent to which  the objectives were being achieved; the system of six-monthly reports and 'warning signals' introduced by the EDF  is a useful example in this context. This approach should  also be adopted for the annual reports compiled by the   delegations, which in turn should be given the attention  they need if they are to be of real value.  Work programmes and implementation reports 4.34. The Commission does not always ensure that the  recipients fulfil their obligations to submit work  programmes, which is, however, stipulated in the financing   agreement. In the absence of work programmes it was  impossible for the Commission to  tell whether activities  receiving finance were in fact part of projects, as in the  case of the fodder improvement and fodder production  improvement projects in Egypt.  4.35. Some financing agreements do not require the aid  recipients to submit implementation reports to the  Commission. This applied to the projects financed in Turkey  up till 1987 under the special aid arrangements and to most  of the projects  financed in Malta. The Commission did not  have a delegation in Turkey until 1987 and it has not  always had a representative in Malta. Under these  conditions, project monitoring becomes awkward, to say the  least.  4.36. There is a similar obligation in the case of the  projects financed in the Maghreb and Mashreq countries, but  recipients frequently fail to comply with it. The Court was  able to confirm this view when it reviewed a sizeable  number of projects  in Egypt and Morocco. The Commission was  unusually unresponsive to such cases. It is also the case  that, if the Community is providing the finance for a  technical assistance measure for a project, both the  Commission and the recipient tend to  consider that the  reports compiled by the experts are a substitute for those  which recipients are required to supply.  4.37. The financing agreements are very vague as to the  nature and extent of the information which must be provided  in the implementation reports. As a result, the quality of  these reports is frequently inadequate. They are very often  confined to a  simple description of the work carried out  using Community funds and say nothing about measures  financed with the recipient country's own funds. In any  case, they are rarely of any use as a management tool.  4.38. The Commission should ensure that recipients fulfil the obligations imposed on them under the terms of the  financing agreements. The latter documents, moreover,  should define far more precisely the nature and extent of   the information which is  to be included in the workprogrammes and implementation reports. They should provide  full information on both financial matters and on-site  work, which means that they must cover all the measures  proposed as part of the project, not just those  financed  with Community funds. These programmes and reports should  also provide an evaluation of the state of progress of the  project - both expected and achieved - in terms of the  attainment of the development objectives; these objectives  must be  clearly set out and quantified in the financing  agreement; furthermore, in view of the time-lag between the  completion of a capital project and the point at which its  effects begin to be felt, programmes and reports should  continue to be submitted  to the Commission even after the  Community financial aid has been disbursed fully. If this  were so, the Commission would have access to a proper  information system which it could use in its project  management and which would be a real tool for  monitoring  the execution of the projects and evaluating their end  result. Finally, it should be clear to the recipients that  failure on their part to meet their obligations in this  area could result in the Community's reviewing its  undertaking to  provide financial aid.  Evaluation 4.39. Projects should be evaluated systematically during  and at the end of implementation in order to assess the  effectiveness of the Community aid, size up the  difficulties encountered, apply the necessary corrective  measures and draw any  conclusions that may be of benefit  for the future. Only recently, for the projects financed  under the Third Protocols with the Maghreb and Mashreq  countries, has the Commission begun to include provisions  to that effect in the financing agreements.   Staff resources 4.40. As a result of the delays which affect projects,  there is very often a succession of people with  responsibility for the implementation and monitoring of  them within the various Commission departments concerned.  The consequence of that is that  part of the information  inevitably disappears with each person who leaves the  department; each person tends to have only a partial  knowledge of the project, confined to the phase with which  he or she has been associated; if problems arise it is   difficult to establish responsibilities. Because of the  delays in finding replacements, which sometimes takes  several months, there is no continuity of monitoring. The  high level of staff mobility makes it even more imperative  that instructions be  drawn up and adequate supervision  established for the officials who are responsible for  managing project files. 4.41. Financial and technical cooperation is only one aspect of the agreements signed with the non-member  countries of the Mediterranean area. The other main aspect  is trade relations, which are even more important in the  case of the Maghreb  countries. Moreover, delays in  implementing the Financial Protocols have also led to an  accumulation of projects which are in the process of being  carried out. There is no certainty that the Commission  departments concerned will be able to carry out  their  responsibilities under adequate conditions in view of the  increase in their workload, and the imminent conclusion of  the Fourth Protocols with the Maghreb and Mashreq countries  (in principle at the end of 1991) will only aggravate the   situation.  The role of the delegations 4.42. The Commission delegations in the recipient  countries are required to play an important part in the  implementation of cooperation agreements, as it is they who  provide the contact with local partners and maintain a  direct dialogue with them.  The delegations are not free of  the weaknesses that have been mentioned above and the  negative effect of the latter is aggravated by the  geographical distances involved. In particular, it should  be pointed out that there were no Commission  instructions  regarding the precise responsibilities conferred on the  delegations, the form of monitoring they are to provide, or  the nature of the information they are to provide and the  frequency with which they are to provide it.  4.43. In the absence of a reference framework, the quality  of the delegation's monitoring of project implementation is  very variable and largely dependent on the initiative and  conscientiousness of the people in charge of the files.  Egypt offers a  very good illustration of this. The  monitoring of the agricultural projects in that country was  rather poor, until it was realized that there was a need  for stricter control (see paragraph 4.25). As part of the  effort which should be made to  establish an adequate aid  management system, to ensure that the central departments  and the delegations work together and to increase the  effectiveness of the projects, the Commission should pay  particular attention to providing a clear definition  of the  delegations' responsibilities during the execution and  monitoring of projects and should consider ways of checking  the quality of their work.   5. The implementation and results of financial and technical cooperation  Audits by the Court 5.1. The following section of the report is based  particularly on the results of the audit work carried out  by the Court between 1986 and 1990(13) . Table 5 provides  an overview of the projects and measures audited by the  Court, with the amount of aid granted for them by the  Community. In total they represent a financial package  amounting to slightly more than 500 Mio ECU, 55 % of the  total  budget finance for the Protocols concerned.  5.2. The representativeness of the sample of projects and  measures examined by the Court was, in fact, higher, as it  is the state of budgetary implementation at the time of the  audits, rather than the total financial package, that  should be taken as  the reference point.   Table 5 - List of projects and measures audited by the Court on the spot or on the basis of documents 1986-1990    Thrid Protocol (Mio ECU) % of overall budget Special aid (Mio ECU) % of overall budget   TURKEY   1. Karakaya hydroelectric complex  85,0   2.Elbistan thermal power station  75,0   3.Beypazari lignite mines    22,0   4.Lignite-related prospecting    8,0     160,0 72 30,0 40    First Protocol (Mio ECU) % of overall budget Second Protocol (Mio ECU) % of overall budget   MALTA   5. Technical assistance and training programme  4,6   6.Port of Valetta  5,0     9,6 96 - (1)  -    ALGERIA   7.Establishment and extensions of vocational training centres  11,7   8.Ministry of Commerce support  2,2   9.Executive training in the public works sector    2,75  10.Executive training for heavy industries    4,0     13,9 31 6,75 15   MOROCCO  11.National veterinary vaccine production laboratory  2,36  12.Lexar lexicographical database  0,40  13.Haouz Central improvement  16,00  14.Institute of applied technology - vocational training  15,30  19,00  15.Aït Chouarit dam    42,00  16.Credit operation for the benefit of small farmers    26,56  17.Sale slum clearance scheme    18,00     34,06 46 105,56 96  (1) At the time of the Court visit, the state of budgetary implementation did not merit audit.     First Protocol (Mio ECU) % of overall budget Second Protocol (Mio ECU) % of overall budget   TUNISIA  18. Establishment of vocational training centres  3,90  19.Training scheme for the benefit of the Institut de financement et de développement tuniso-algérien (IFID)  0,23  20.Marine science research programme  0,24  21.Agricultural loans scheme BNDA    18,07  22.Technical assistance for the BNDA    0,67  23.Finance for small and medium-sized agricultural and agroindustrial measures - global loans    14,13  24.Finance for 10 trawlers BNDA    3,02  25.Economic and technical survey for the establishment of date-palm groves in the Réjim-Maatoug region    1,90  26.Technical assistance for the IFID    0,27  27.Increased research capacity Water resources directorate Ministry of Agriculture    1,00  28.Inventory of southern Tunisian soil resources    0,40  29.Improvement of irrigation management    2,50     4,37 8 41,96 68   EGYPT  30.University cooperation  2,85  31.Investment promotion  2,00  32.Agency for the development of renewable energy sources, Egypt  7,70  33.Helwan sewerage  32,04  20,30  34.Agricultural storage at Daqahlia  6,00  4,00  35.Sinaï water resources studies  2,08  3,00  36.University cooperation on marine sciences    3,00  37.Fodder improvement    2,40  38.Improvement of fodder production    1,30     52,67 68 34,00 27   JORDAN  39.Agricultural loan to small farmers - Agricultural Credit Corporation  3,70  1,66  40.Jordan Valley Authority seedling production unit  0,95  41.Assistance to the Royal Scientific Society  0,98  42.Assistance to the Science Faculty of Yarmouk University  2,50  2,50  43.Assistance to the Engineering and Technology Faculty of the University of Jordan  6,68     14,81 67 4,16 16  Total budgetary aid for the projects/measures examined : 511,84 Mio ECU Total overall budget for the Protocols concerned: 942,00 Mio ECU Proportion of the overall budget examined: 55 %   5.3. With the exception of Turkey, it was not possible to  audit any projects financed under the Third Protocols, as  implementation of them was only just beginning at that  point. The Court did not carry out any audits of project  financing in Lebanon  because of the internal situation  there, or in Syria, in view of the state of relations  between the Community and that country. For similar  reasons, financial and technical cooperation with these two  countries was virtually at a standstill. As the  Court  stated in its Annual report concerning the financial year  1987(14) , it was unable to carry out an on-the-spot  audit in Cyprus because the Cypriot authorities refused  permission for the audit, on the grounds that the EIB had  opposed it.  5.4. The observations made by the Court in this section of  the report are concerned with the Protocols covering the  projects audited. This therefore rules out the Third  Protocols, with the exception of the Protocol with Turkey.  The Court's  observations and findings refer to the state of  projects at the time of the audits.  Budgetary implementation General observations 5.5. Table 2 traces, by country and geographical area, the  changes in the financial packages provided from budgetary  resources in accordance with the provisions of the  protocols, as well as the commitments entered into and the  payments effected.  These figures are illustrated by  Graphs 4-18. Table 4 shows the position with regard to the  utilization of the sums allocated and the execution of  commitments at 31 December 1989.  5.6. Overall, the rate of budgetary implementation of the  Protocols is slow. As of 31 December 1989, commitments  amounted to approximately 1 322,9 Mio ECU, 79,7 % of the  total financial package; payments effected amounted to  approximately 795,6 Mio  ECU, or 47,9 % of the total and  60,1 % of commitments entered into.  5.7. In the case of the countries of the northern  Mediterranean (Turkey, Cyprus and Malta), 95,4 % of the  financial package had been committed and 82 % disbursed. It  must be remembered, however, that Turkey accounted for the  major part of the  finance available for this area (more  than 80 %) and that it had been granted the aid in question  around ten years earlier.  5.8. The sums allocated to the First and Second Protocols  with the Maghreb and Mashreq countries were almost fully  committed, with the exception of the First Protocol with  Algeria. The payments effected represented 83,1 % of the  total finance for  the First Protocols, and 55,4 % of that  for the Second Protocols. In the case of the Third  Protocols, which took effect during 1988 and were therefore  almost halfway through their period of implementation at  the review date, commitments represented  slightly less than  half (46,8 %) the financial package; it should, however, be  noted that the level of utilization was markedly higher for  the Maghreb countries (65 %) than for the Mashreq countries  (24 %). The payments were only just beginning then  and  amounted to only 2,8 % of the amount of the total financing  and 5,9 % of the amount of commitments entered into.  5.9. Taking the table showing the utilization of the  various financial packages at the end of the period of  application for each of the expired Protocols (see  Table 3), it will be seen that a significant proportion had  still not been committed at  that point; the residue  amounted to more than 20 % for the Maghreb and Mashreq  countries as a whole and fluctuated between 30 % and almost  50 % in the cases of Algeria and Egypt.  5.10. At the same dates, between 70  % and 80  % of the total  finance allocated remained to be paid out, although the  rate of payment was faster for certain countries, such as  Cyprus, Malta (First Protocol), Morocco and Jordan. Thus,  as can be seen  from Table 2 and Graphs 4-18, in the case of  these countries it takes about five to eight years to  disburse the financial package for a given Protocol; for  the other countries, and Algeria, Egypt, Lebanon and Syria  in particular, the rate of  payments is so slow that it  sometimes takes more than ten years. The observed  variations are the result of the particular, and highly dissimilar, situations within each of these countries (see  paragraphs 5.12 - 5.19).  5.11. The Community global guarantee for loans granted by  the EIB from its own resources to the ten countries  discussed in this report (see Annex 2, paragraph 6)  represented around 789,7 Mio ECU at 31 December 1990, which  was the full amount of  loans granted. The guarantee has  been invoked on several occasions since 1988, to cover  obligations that Lebanon and Syria were unable to meet. As  at 31 December 1990 the total amount for payments effected  in this way from the general budget was  around 21,6 Mio  ECU; Lebanon and Syria have already repaid some 8,3 Mio ECU  of this total.  Turkey 5.12. Following the coup d'état in Turkey in September  1980, the Commission froze the residual 29 Mio ECU of  special aid, which then remained frozen until 1986 (see  Table 2 and Graph 4). In certain cases the implementation  of projects that had been  approved before the freeze was  also affected; the start of the Beypazari lignite mines  project was delayed by two years because a parallel  technical assistance and training project was held up. On  account of the human rights situation and the  Cypriot  problem, the Fourth Protocol, which was initialled in June  1981, has still not been sent to the Council.  Malta 5.13. The relative speed with which the First Protocol  with Malta was implemented (see Table 2 and Graph 6) was  due to the fact that the Community financial aid had been  granted for measures which were already substantially under  way, not to say  completed. It was a matter of reimbursing expenditure which was deemed to be eligible and could be  identified and examined very quickly. There was a marked  difference in the case of the Second Protocol: the overall  budget was indeed committed in full  over a period of two  years, but the payments did not begin to filter through  until 1989.  Algeria 5.14. The implementation of the First and Second Protocols  with Algeria was marked by particularly serious delays (see  Table 2 and Graph 8) due to a combination of adverse  circumstances. Algeria's relative prosperity at the start  of the 1980s, the  policies pursued by that country, which  to some extent closed it to the outside world, and the fact  that the amount of Community aid was deemed to be minimal  resulted during that period in a certain lack of interest  in financial and technical  cooperation with the Community  on the part of the Algerian authorities. Difficulties were  encountered in defining the objectives of such cooperation  and identifying the actual measures and projects to be  financed. In the case of the first two  Protocols, the  programming exercise required several years. The  implementation of projects then came up against other  difficulties in the form of administrative procedures; the  national authorizing officer proved to be weak and  inefficient; the  Algerian government's refusal to change  its customary procedures in order to comply with the  Community tendering procedures also proved to be a major  obstacle.  Morocco 5.15. The higher rate of implementation that was observed  in the case of Morocco (see Table 2 and Graph 9) was due to  that country's interest in Community financial aid which, admittedly, was more substantial. The authorities  responsible for  implementing the projects were generally  competent and efficient. The particularly rapid rate of  payments in the case of the Second Protocol was also due,  however, to the special nature of these payments: in some  cases they represent advance  payments and in others fast,  global transfers of finance which are reflected in  accounting entries, but not in progress on the ground;  there were also instances where the Community financial  contribution was granted for the execution of works that   were already substantially under way.  Tunisia 5.16. The rate of execution for financial and technical  cooperation with Tunisia was middling. Up to 1985 there was  a considerable delay in implementing the Second Protocol  (see Table 2 and Graph 10) due to the nature of the  projects and measures  financed (agricultural sector) and to  the change of national authorizing officer at the end of  1983. The rate has speeded up since then.  Egypt 5.17. In the case of Egypt (see Table 2 and Graph 12), the  projects were particularly late in starting up, owing to  the phases prior to execution. This was due to the time  taken to produce the project profiles, define the  components precisely,  examine and approve them, sign the  financing agreement and select contractors at the end of  the tendering procedures. Very often it was three years  before projects could start. Implementation of them then  encountered a number of constraints, not  least of which  were the cumbersome national bureaucracies, the inertia  which damaged the projects' chances of success and the lack  of capacity, particularly in terms of financial and human resources, within the bodies responsible for executing  these  projects and measures.  Jordan 5.18. The rate of implementation was considered to be  satisfactory in the case of Jordan (see Table 2 and  Graph 13). The general climate was more favourable as, in  the first half of the 1980s, Jordan was a relatively  wealthy country, with a  relatively high level of education  and training among the population. Community financial aid  was concentrated on a fairly small number of projects in  the field of vocational and university training and  agricultural production.  Lebanon 5.19. The implementation of the Protocols with Lebanon has  been held up by the civil war in that country (see Table 2  and Graph 14). This applies particularly in the case of the  Second Protocol which, even though the overall budget has  been  committed in full, had not resulted in any kind of  achievement on the ground for several years, and also in  the case of the Third Protocol, for which no commitments  had yet been entered into.  Project conception 5.20. Project conception is a key factor in the  satisfactory execution and effective utilization of  Community funds. The audits carried out by the Court showed  up a number of weaknesses in the conception of the projects  examined which had negative  repercussions when the projects  were carried out.  Project environment and objectives 5.21. The decision to finance a project or measure is  sometimes open to criticism because it fails to take  account of an unfavourable environment which considerably  impedes the attainment of the socio-economic objectives  from the outset.  5.22. In Egypt some of the agricultural development  projects were practically doomed to failure from the moment  they were launched because of controls on farm prices and  the subsidies paid on certain foodstuffs. Advisory measures  presuppose an  existing network of cooperatives or advisory  services, but, in fact, they did not exist or were  inoperative. It was impossible to make optimum use of some  investments because of supply quotas on the raw materials.  5.23. In Morocco the production and marketing of certain  veterinary products was stymied by a price-fixing system  which promoted the distribution of imported products, even  though they were more expensive.  Local partners 5.24. In Egypt, agricultural projects which were primarily  targeted on development, advisory and/or distributional  measures had been placed with research institutes which did  not have the resources to carry them out successfully.  5.25. In Tunisia, the organization responsible did not, at  the time when the agricultural loan operations were  launched, have the local structure that was necessary for  fast and efficient implementation of the system of loans  for promoting the  development of small and medium-sized  agricultural holdings.  5.26. In Algeria the problem was more general, because the  national authorizing body did not perform the functions  expected of it (see paragraph 5.14). Due to the small  number of staff, who had very little training for work of  this kind, the  organization was unable to manage the  development aid funds correctly. It did not have the power  to exert a positive influence on the progress of measures  and was unable to mediate between the various government  departments. The effects of this  weakness were   particularly apparent in the management of projects.  Finance plans 5.27. Community financial aid was sometimes granted for  projects for which no clear financing plan had been  established, or even where there was no adequate guarantee  that all the necessary resources would be obtained.  5.28. In Turkey, the Community contribution was granted  for a project that was already under way, in order to make  good some of the shortage of funds that had arisen in the  financing plan because of delays in carrying it out; the  financing proposal  mentioned contributions from other  sources of funds, but said nothing about the amount.  5.29. In Morocco, the Commission and the EIB were  cofinancing a project on the basis of their respective  estimates of the expected cost, which differed by around  21 Mio ECU and for which the financing was, ultimately, far  from assured.  5.30. The drafting of the financing agreements should be  tighter, more precise and more realistic and the agreements  should be used as the basic reference document for the  implement of the project and the evaluation of its results. Implementation timetables 5.31. The financing agreements generally only mentioned an  overall duration or a final completion date, without going  into great detail. The projects often included different  types of measures (supply of equipment, technical  assistance, construction  work, etc.), but the programming of  timetables that is needed for efficient coordination of  measures did not exist.  5.32. In most cases the schedules were unrealistic and,  for that reason, rarely respected. They assumed that the  conditions under which they were to be implemented were  ideal, whereas such conditions are far from prevalent in  countries like those  where the projects are financed; the  limitations in question are, however, widely known  (procedural problems, weakness of government departments,  shortage of human and financial resources, etc.), especially  to the Commission. These factors should be  taken into  account when the projects are being defined, since failure  to do so jeopardizes the viability of the financing plans,  makes it difficult for management to plan ahead (planning  operations, budget forecasting, etc.) and deprives it of a   reliable reference point on which to base a correct  evaluation of the difficulties encountered, corrective  action to be taken, progress made and results achieved. The  necessity of drawing up a tight, realistic schedule is  underlined by the  provisions concerning the deadline for  implementation of contractual obligations, which were  introduced by Council Regulation (ECSC, EEC, Euratom)  No 2049/88 of 24 June 1988(15) .  The Community resources committed 5.33. In some cases Community resources were committed in  quantitites that were clearly (to the Commission,  especially) substantially in excess of the requirements for  the projects concerned. As a result of this practice  Community aid was being tied  up needlessly, sometimes for  many years.  5.34. In Morocco, some 4,3 Mio ECU were committed for a project, unnecessarily, because the Commission had omitted  to take into account the weakening of the Moroccan currency  and the Moroccan authorities' decision to take over the  works which were,  initially, to have been financed by the  Community. In another case, the Community contribution was  made on the basis of unduly pessimistic financial  estimates, which however provided the justification for  transferring to that project the entire 24  Mio ECU  originally earmarked for another project; in fact, the real  cost of the operation was around 20 % below the forecasts  and the Community, which was to have met approximately 70 %  of the cost of the project, financed virtually all of it.  5.35. In the case of a project in Egypt, the Commission  knew for certain when the financing agreement was signed  that the commitment exceeded the cost of the works by  around 1,3 Mio ECU: the contract for the works had already  been signed several  months before.  The form of aid chosen 5.36. The Court found in the case of a number of projects  in Algeria, Morocco, Tunisia and Malta that the financing  made use of several, if not all, of the instruments  provided for in the Protocols (subsidies, loans on special  terms, loans by the  EIB from its own resources and interest subsidies), without clearly stating the grounds on which a  particular choice had been made, whether the nature, the   repayment period or the profitability forecasts for the  proposed investment.  Execution of projects Delays 5.37. A majority of projects were experiencing substantial delays, of several years, both before they started and  during execution. For example, mention may be made, without  making an exhaustive list of cases, of the following,  starting with the  Elbistan power station (Turkey), which  was to come on-stream in 1983, whereas it took until the  end of 1989 - nine years after the finance was granted - for the loan on special terms to be disbursed in full. A  further two years were required, after  the conclusion of  the work, before the installations at the National  laboratory for the production of veterinary vaccines  (Morocco) began to be used. Even though the Aït Chouarit  and Sidi Driss dams and the Canal de Rocade (Morocco) were  completed  by the deadlines, there will have been a delay of  ten years, at least, before the objectives of the hydro-agricultural refurbishment projects are achieved. Work on  the first stage of the Helwan (Egypt) sewerage project  began at the end of 1986, two  years after the date when it  was, theoretically, to have been completed; work on the  second stage was supposed to start at the end of 1989 and  was already, at the very least, one year behind schedule.  The promotional and advisory work for the Fodder   improvement project (Egypt) had barely started when the  technical assistants left the project. The Agricultural  Loans - BNDA (Tunisia) project was to have been completed  by the end of 1988; as of that date less than half the aid  had been utilized.  The start of the irrigation management improvement project (Tunisia) was affected by serious  delays. It had taken something like ten years to finish the  Creation and extension of vocational training centres  project (Algeria), which was scheduled to  last four years.  5.38. The implementation of projects may, of course, be affected by unexpected constraints, which cannot easily be  foreseen. In the majority of cases, however, the delays are  always due to the same familiar causes, including the  slowness of  procedures, defective administrative  structures, lack of coordination or a local shortage of  human and financial resources. It is this environment,  which is so unconducive to unimpeded implementation of  projects, that ought to be taken into account  at the  planning stage.  Major project modifications 5.39. It was not unusual for there to be radical changes  in the content, or even the general direction, of projects  during implementation, without any advance review being  carried out to demonstrate the need and justification for  such changes in  terms of the environment, resources or  objectives. On occasion, these changes were made simply at  the initiative of the organization which was implementing  the project, without the Commission being either informed  or consulted.  5.40. In Turkey, the Turkish partner doubled the  production objective shortly after one project started; the  volume of investment needed was virtually tripled, and  whereas the Community was to be the only promoter in the  beginning, other sources of  finance were called upon. The  Commission files do not contain any details of the  circumstances which led to the modification.  5.41. In Egypt, a series of substantial changes were made to a storage installation construction project, with the  delegation's assent, but without the Commission's  agreement. There was such a lack of transparency, that,  when it came to the financial  preparations for the second  phase, the Commission department responsible had to enquire  as to the nature of the work that had been done during the  first phase. There was no improvement in the situation  during the second phase, when the Court and the  delegation  discovered in the course of their visits that the recipient  was using the Community funds as he liked, without any  regard for the financing agreement. Owing to the fact that  no reliable research had been done, one project for the   provision of advisory services and the development of  fodder production embarked upon an experimental programme,  without the project's aims being redefined beforehand.  5.42. In Tunisia, a project to finance ten trawlers was defined in terms of a type of fishing that was tending  towards industrial-scale operations. The loan was granted  on special terms (broad mandate) and afterwards the EIB  was informed that the  specification for the trawlers was  different from that which had been adopted at the time of  the preliminary study. The change was not questioned, even  though as a result Community aid was going to finance an  increase in traditional-style fishing,  and, in the medium  or long term, the project was likely to be contrary to the  interests of Tunisia's development.  5.43. As regards the programme for middle management training in the civil engineering sector in Algeria, the  financing agreement, which was signed more than two years  after the Commission decision, was substantially different  from the initial  project. For example, the aim was no  longer to retrain middle management; instead, training  staff were to be trained in technical institutions. From this new standpoint, the measures to be carried out in the  form of scholarships and technical  assistance had been  substantially revised.  Technical assistance 5.44. The quality of the benefits provided by technical  assistance financed by the Community can be affected by  various factors, such as the quality of the experts  themselves, lack of coordination of the technical  assistance with the other  components of the project or,   occasionally, difficult working relations between the  experts and the local supervisory staff.  5.45. In Egypt, the quality of the experts could be  queried in the first stage of a study of the water  resources of the Sinai peninsula: it resulted in a general  lack of information and documentation on the work carried  out and the results obtained.   5.46. In Tunisia, a project for the improvement of the  management of irrigated areas was hampered by frequent  changes of experts, whose work, and their reports in  particular, were of poor quality.  5.47. In the case of several projects in Algeria and  Egypt, the technical assistance was used prematurely in  view of the progress of the other components of the  projects (construction work, materials purchasing) and the  benefits derived by the  projects were accordingly reduced.  5.48. In one project for the improvement of fodder  production in Egypt, the relations between the experts and  their local counterparts suffered from a difference of  opinion on the very orientation of the project and a lack  of coordination. In one  university cooperation programme, the personal relations were so bad that there was total  disagreement on the approach to the work and how to carry  it out; this led to the resignation of the British head of  the projects, though it did not solve the  problems.  Recipients' commitments 5.49. Recipients often do not comply at all with the  commitments which they give in the financing agreements or  often do so only after extended delays. The same may be  said of their providing their financial contribution,  making the sites,  facilities or necessary personnel  available, providing the administrative structures planned  for the execution of the project, or even observing the  Community procedures for tendering and awarding contracts.  Such omissions cause substantial delays  and jeopardize the  achievement of the objectives and occasionally even the  whole approach to the project.  5.50. In a slum clearance project in Morocco, the  establishment of the socio-administrative structures, and  of the medical and school infrastructures in particular,  was significantly behind schedule and there was reason to  doubt the sincerity of the  Moroccan party's professed  intention to carry them out (see paragraph 5.65). Community  aid for a credit operation on behalf of small farmers was  supposed to be managed separately but these provisions were  not being respected.  5.51. A vocational training programme in Algeria mainly  suffered from failure to comply with the agreed procedures  for tendering and award of contract. Having been informed  after the event, the Commission was prevailed on to agree  to multiple  derogations.  5.52. In Egypt, the beneficiary in a project for the  construction of storage installations decided what work was  to be done in the light of its own strategy, rather than in accordance with the financing agreement. Another project  was being delayed by  the inability of the Egyptian partner  to make its financial contribution available in good time;  the Commission has even agreed advances which have not been  repaid. The non-availability of a few hectares of desert  site in a country with 750 000 km2  of surface area, 96 % of  which is desert, is an essential factor in the failure to  carry out a large part of a research programme on soil  improvement. In spite of continual reminders from the  delegation, the structure planned and needed to ensure  the  operation, maintenance and management of a major water  treatment system has still not been set up.  Administrative structures 5.53. The implementation of projects often suffers because   there are too few staff, staff training is inadequate, and  the staff themselves are undermotivated or subject to  frequent transfers. Lack of coordination between the  various parties  concerned, both local and foreign, is also  frequently observed. These findings apply to a number of  projects in agricultural development, vocational training  or research in Algeria, Tunisia, Egypt and Jordan.  Effectiveness of projects General observations 5.54. The effectiveness of financial and technical  cooperation varies considerably from one country to  another, and a separate analysis should therefore be made  of each. In substance, the effects of projects financed in  Jordan and Tunisia generally  give cause for satisfaction.  In Morocco, the implementation of the projects has not  generally run into any particular obstacles and some are  clearly successful; others, which are far from the least  significant in financial terms, show that the  achievement  of the objectives has been considerably delayed, or even jeopardized, because the measures for which the Moroccan  party is responsible have not been executed as planned or  risk never being executed. There is no doubt as to the   effectiveness of the projects financed in Malta; there was,  however, no concept of cooperation, the Community aid being  confined to financing operations which were practically  completed. The implementation of projects in Egypt is  extremely  laborious, mainly due to the shortcomings of the  local partners; in terms of results, failure, if not a  fact, is often to be feared. Financial and technical  cooperation with Algeria has been hit by a particularly  adverse context which has hampered  implementation to the  extent that no results can be expected at this stage. A  check on records at the Commission does not allow the  effectiveness of Community aid to Turkey to be assessed,  for lack of the necessary information.  Turkey 5.55. The inadequacy, or lack, of information in the  Commission's files does not allow any documentary  evaluation of whether the four projects which were examined  and which accounted for total financial aid of 190 Mio ECU,  or nearly 65 % of the  overall budgetary package for the  Third Protocol and the special aid, achieved their  objective of contributing to increasing electric power  production. In the case of the two projects administered  under a broad mandate by the EIB, i.e. the Karakaya   Hydroelectric Complex and the Elbistan Power Station, it is  not even possible to determine what exactly the 160 Mio ECU  of budgetary aid was used to finance. The two projects  managed by the Commission, the Beypazari Lignite Mines and  Lignite  prospecting, did not go beyond the supply of  equipment for the latter and the development objective was  disregarded.  Malta 5.56. Generally speaking, the projects covered by the  First Protocol met justified needs, were implemented  satisfactorily and produced the expected effects. The  technical assistance and training measures were generally  of high quality and satisfied  the Maltese agencies. The  modernization work on the port of Valetta went ahead  without a hitch and the profitability of the investment  seems guaranteed. However, there was no evidence of the  very idea of cooperation in the application of the First   Protocol. It amounted in fact to straightforward financial  aid for measures which were far advanced, if not completed.  Algeria 5.57. One of the priorities set for the first two Protocols was, after the reduction of the food deficit,  meeting the considerable requirements in terms of training  of managerial staff and skilled labour necessary to achieve  the economic and social  development objectives; there is no  doubt that Community aid in these areas has been useful.  Its implementation, however, occasionally meets substantial  difficulties. The general context has, until very recently  in any case, been particularly  unfavourable, as manifested  in the Algerian authorities' lack of interest in Community  aid (see paragraph 5.14). The low rate of budgetary  implementation illustrates this (see Table 4). In these  circumstances, it is difficult to expect tangible  results  as things stand at present.  5.58. It has taken about ten years to complete the project for the creation and extension of vocational training  centres, which was planned to last three or four years. It  is impossible to evaluate the impact of the Community  expenditure for that  part which had been carried out when  the Court carried out its audit; in any case, it is  doubtful that the objective was achieved in terms of creating training posts for the various sectors of  construction and industry. The human resources mobilized  by  this project and the difficulties encountered were out of  all proportion to its effects.  5.59. The project in support of the Commerce Ministry, launched in 1987 and intended to provide training measures  which would allow the export capacity of Algerian  undertakings to be developed, cannot be carried out because  the Algerian party itself  and the Commission are unable to define the nature of the aid which the Community is  supposed to provide. The changes which have taken place in  the Algerian economic landscape call for a review of the  conclusions of the study on which the project is  based, but  the Algerian authorities are not in a position to draw up a  specific request.  5.60. In spite of a long appraisal period (three and a half years), the financing agreement for the project for  training managerial staff from the public works sector does  not contain the elements necessary for the project to be  carried out. In  particular, it makes no mention of the  schedule for the execution of the various measures and it  does not define the nature of the technical assistance  contemplated. Algerian students are following, or have  followed, training programmes in the  Community, although  there is no means of ensuring that the grants awarded fit  within the framework of the project. In the absence of any  technical assistance, which is preventing the project from  getting off the ground, it is doubtful that the  recipients  of grants, once trained, will carry out training duties in  the bodies covered by the project.  5.61. The seminars which have already been organized in  the context of the project for training managers in heavy  industry seem to have lived up to the Algerian party's  expectations as regards the transfer of know-how. It will,  however, be difficult  to evaluate the impact of the project, because the financing agreement makes no attempt  to define the measures to be carried out in anything other  than monetary terms.  Morocco 5.62. By comparison with what is observed in other  countries, the actual realization of the projects in  Morocco gives ground for relative satisfaction.  Nevertheless, while several of the projects examined are  clearly successful (see paragraphs 5.68  - 5.69), certain  others are not, particularly the project for a credit  operation on behalf of small farmers, the exact use made of  the Community funds for which remains unknown (see  paragraph 5.63). The other projects, the usefulness of  which is  not contested, will be able to achieve their  objectives fully only if the Moroccan authorities ensure  that the measures for which they are responsible are  carried out (see paragraphs 5.65 - 5.67).  5.63. The credit operation on behalf of small farmers financed the rescheduling of the debts of around  70 000 farmers with financial difficulties due to repeated  droughts. In the absence of any information on the  collection of these debts, it is  impossible to know whether  this measure produced lasting effects: some information obtained by the Court gives grounds for doubt, at least  where certain regions which have continued to suffer  adverse weather conditions are concerned. The Caisse   Nationale de Crédit Agricole has not kept to its  undertaking to manage operations linked to the credit line  funded by the Community separately; there is therefore no  means of checking that the funds recovered since 1985 have  effectively been re-used  for similar operations or for  granting loans to small farmers on the most favourable  terms. The Commission is largely responsible for this state  of affairs since, once the Community contribution was paid  out, it did not monitor the project.  5.64. The LEXAR lexicographical database project was used  to prepare a computerized dictionary of scientific and  technical terms. However, this database cannot be used for  the present, no works have been published, nor have any  computer access  networks been set up.  5.65. The development work for the Sale slum clearance  project is going ahead relatively satisfactorily and, at  this stage, three of the four shanty towns have been  cleared. The relocation of the families to the prepared  plots and the programme for  the construction of individual  housing seem to be making normal progress. The considerable  delay in providing the socio-administrative facilities,  which are the responsibility of the Moroccan party, does   however encourage the fear that, now that  the land occupied  by the slums has been practically cleared, the Moroccan  authorities have lost interest in this operation; the  relocated families would thus once more be isolated in an  area with none of the necessary medical, school or  commercial  infrastructures.  5.66. This provides one further example of lack of  monitoring by the Commission, which is all the more  regrettable since, when the project was approved, in view  of the importance of the socio-economic aspects of the  operation, the ad hoc committee  expressly asked the  Commission to take particular care to monitor its  execution.  5.67. With the Development of the Haouz Central and Aït Chouarit Dam projects, the Community took part in the  realization of the heavy infrastructures necessary for a  valid and ambitious development plan which was supposed to  allow more efficient and  economic water use and an increase  in foodstuffs production. For technical and financial  reasons, however, the schedule for the execution of the  Haouz development plan is in disarray and the  infrastructures which the Community played a part in  financing are, with the exception of the Marrakech drinking  water supply, not as yet being used for the intended  purposes. If the uncertainties threatening more than one  half of the planned irrigation network are removed and if  the  hydro-agricultural developments progress at the desired  rate, something which has not been observed to date, the  first stage of the irrigation of the Haouz plain will at  best be complete ten years behind the initial schedule.  Here again, the  Commission's monitoring was insufficient  because it was confined solely to the civil engineering  work and ended when that was completed in 1986.  5.68. In spite of a two-year delay in the commissioning of the installations, the national veterinary vaccine  production laboratory has achieved its aims as regards  staff training and the production of vaccines against  diseases of sheep. The  laboratory offers quality products  along with the speed and flexibility needed for effective  vaccination campaigns. For the moment, the production of  fowlpox vaccines is being hampered by a price fixing system  which encourages the distribution of  imported products.  Greater autonomy of management ought soon to allow the  laboratory to develop its activities, particularly towards  the private sector. The Commission's monitoring has been  satisfactory; a project evaluation study was even carried   out at its request by a consultant.  5.69. There is every indication that the projects to train staff for and to equip ten institutes of applied  technology/vocational training are achieving their aim of  providing the Moroccan economy with the technical staff it  needs, mainly in the  industrial, building, public works,  commercial and general services sectors. With a few  exceptions, the training programmes have started as planned  and the attendance rate at the centres is satisfactory. The  trained technicians do, however, have  difficulties in  finding a job outside the most developed and industrialized  areas of the country.  Tunisia 5.70. In spite of certain extrinsic difficulties in  implementation, financial and technical cooperation with  Tunisia has proved to be positive overall. Some reserves  may be expressed on the possible outcome of certain  projects (see paragraphs 5.71 -  5.73), but, otherwise, the  Community's financial intervention has achieved the aims  laid down (see paragraphs 5.74 - 5.76).  5.71. The project for the creation of vocational training  centres suffered from a lack of coordination, and one of  the three centres built has proved unsuited to the type of  teaching which was aimed at. The premature withdrawal of  the technical  assistance financed by the Community reduced  the project to the supply of equipment.  5.72. As a result of the scaling-down of the vessels (see  paragraph 5.42), it is doubtful that the project to finance  ten trawlers can allow the expected increase in industrial  fishing which had provided the grounds for Community  intervention.  5.73. At the time of the audit, it was too early to try to  assess the results of the projects for an agricultural  credit operation and for financing small and medium-scale  agricultural and agro-industrial initiatives by global  loans. In fact,  however, particularly due to the repeated  droughts, many loans have had to be rescheduled and may  even be irrecoverable. The risk of a drain on the working  capital constituted by the Community aid cannot be ruled  out.  5.74. The technico-economic study of the creation of date-palm groves in the Réjim-Maatoug region offers very  promising development prospects; an initial plan, financed  by the Community (15 Mio ECU), provides for the development  of around 1 000  hectares to allow populations to be established in these regions and production to be developed  for which considerable outlets exist.  5.75. The project to develop the research capacity of the  Directorate of Water Resources of the Ministry for  Agriculture seems to have achieved its objectives of  contributing to better management of the resources  mobilized and to the pursuit of  research for mobilizing new  ones. It constitutes a fundamental basis for precise  evaluation of water potential and its use, especially for  the extension of irrigated surfaces.  5.76. The project for an inventory of soil resources in  southern Tunisia has allowed maps to be drawn up, sectors  with potential for agro-pastoral development to be located  and detailed pedological studies to be carried out, which  ought to provide  an incentive to start up the agricultural  development projects which are part of the national  strategy to combat desertification.  Egypt 5.77. A considerable number of projects examined failed to  achieve their objectives. For some, it is hard to establish  the nature of the activities being carried on (see  paragraphs 5.78 - 5.81). For others, the impact of  Community aid is doubtful  owing to the inability of the  Egyptian partner to make effective use of the installations  which were financed (paragraphs 5.82 - 5.85). One of the  projects examined, which is not yet complete, seems to  offer encouraging prospects (see paragraph  5.85).  5.78. Almost half of the measures provided for in the  investment promotion programme had to be abandoned because  of the mediocre services provided by the Egyptian agency  which was responsible. In the absence of any activity  report, in spite of the  Commission's repeated requests, the  results of the measures undertaken are hard to establish; some ten Community firms have reportedly set up some  activity in Egypt.  5.79. The first stage of the study on water resources in  the Sinai peninsula was seriously affected by a whole set  of hindrances, not the least of which were the weakness of  the technical assistance, the lack of human resources,  delays in the  delivery of equipment, lack of coordination  and programming of work and insufficient monitoring on the  Commission's part. Although it is too early to venture an  opinion on the possible outcome of the second stage, it is  starting up on more promising  terms, since it would seem  that lessons have been learned from the past weaknesses.  5.80. A real systematic study programme has yet to be set  up for the marine biology research project under the  university cooperation programme. The strained relations  between the staff of the faculty (see paragraph 5.48) make  it difficult to  recruit students. There is also a risk that  getting the studies under way will be further hampered by  the relocation of the research station to a site which has  neither easy access nor any of the facilities required.  5.81. With the exception of a necessarily modest  experimental programme launched by the technical  assistance, the project for the improvement of fodder  production has had no effect other than to finance the  normal operation of the department of the  research  institute concerned and the purchase of equipment which has  not been used and probably cannot be used. It is clear that  the project will not allow the dissemination of improved  fodder timetables that are better suited to the farmers'   needs.  5.82. The project for the improvement of livestock fodder  was limited to an investment and construction phase but did  not allow any improved fodder techniques to be made  available to small farmers. The production and distribution capacities built  remain considerably under-used. The  advisory work has not even started. The gradual  deregulation of the agricultural sector since 1988, which  ought to lead to the abolition of subsidies for traditional  animal feeds, may hold some interesting  prospects for this  project after it has been completed. The installations  financed can be put to valid use so long as their  management is entrusted to an efficient, motivated body,  which hitherto has not been the case.  5.83. The first stage of the agricultural storage project  in Daqahlia permitted the construction of necessary good-quality warehouses which met the requirements. Their  maintenance, however, is liable to cause concern sooner or  later. More  fundamentally, in the current circumstances  these buildings cannot play a part in achieving the aim of  reducing storage losses of foodstuffs; the warehouses  visited by the Court all held fertilizers in plastic sacks,  while the rice, in jute sacks,  was stored in the open,  without adequate protection. The beginnings of the second  phase would seem to prove that the Egyptian agency uses  Community funds as it sees fit. Thus, without consulting  the Commission beforehand, it has decided to  substantially  amend the nature and location of the warehouses to be  built, and it remains to be seen whether, unlike those  already built, they will in fact be used for storing  foodstuffs.  5.84. The Helwan sewerage project is complex and highly  technical. The delay in the definition and appraisal of the  project has led to considerable financial drift; 15 Mio ECU  of Community subsidy under the Second Protocol will,  moreover, only serve  to bring the costs back up to date,  without financing any additional physical investment.  Thanks in particular to considerable technical aid, the  main technical problems have been solved and the system  ought to be able to function once the work is  completed.  The long-term viability of the system is not, however, guaranteed; in spite of the Commission's repeated  interventions in recent years, the Egyptian authorities  have still not set up the administrative and technical  structures necessary  to ensure the management, functioning  and maintenance of the system. The agency which is  responsible is not even in a position to operate and  maintain the existing system correctly. For lack of  appropriate provisions, which ought to have been  defined at  the time when the project was identified, there is a real  risk that this state-of-the art treatment system will fall  into disrepair.  5.85. The research project on breeding 'Artemia' shrimps  under the university cooperation programme has still not  overcome all the technical or economic obstacles. The  experts think, however, that the conditions exist in Egypt  to allow commercial  production, for which outlets exist, of  these shrimps, which constitute an essential element for  feeding young fry.  Jordan 5.86. The implementation of the projects financed in  Jordan generally calls for no criticism. The investment  carried out plays a part in attaining the objectives set  (see paragraphs 5.90 - 5.91), even though it may be  observed that some are, perhaps  temporarily, under-used  (see paragraphs 5.88 - 5.89). One project elicits  reservations, however, but its possible effectiveness is  less in question than its design (see paragraph 5.87).  5.87. The project for Agricultural Credit for small  farmers raises some questions and some reservations. In  view of the different conditions (grace period, repayment  term and rate of interest) which accompany Community multi-stage loans to the state  of Jordan, then from the latter to  the Agricultural Credit Corporation and finally from the  latter to the farmers, the financial advantages obtained by Community aid are divided between the State, the credit  agency and the farmers. The project in  fact hides a triple  operation, which is the Agricultural Credit Corporation's  financing of small agricultural projects, the increase of  this body's working capital and the government's financing  of small agricultural projects. This system is open to   criticism first and foremost for lack of transparency  because the aims of financing are not clearly defined.  Moreover, this financial arrangement does not allow  adequate control of the utilization of the funds.  5.88. In the case of the project concerning assistance to  the Royal Scientific Society, the fitting-out of the  laboratories, the training measures, the transfer of know-how and the provision of experts were carried out to the  satisfaction of the  recipients. At the time of the Court's  audit, however, the equipment installed for a solar energy  research sub-project seemed to be all but unused, in  particular due to an apparent lack of interest on the part  of the Community partner, the Joint  Research Centre at  Ispra.  5.89. There was some delay in the execution of the project  for assistance to the Engineering and Technology Faculty of  the University of Jordan, but the work on building and  fitting out the laboratories and the technical assistance  work have finally  all been satisfactorily completed. The  objectives of the project have been achieved, although it  has to be observed that the educational ambitions of the  establishment appear modest by comparison with the  equipment supplied.  5.90. There have been problems in implementing the Project  for the Jordan Valley Authority seedling production Unit,  due to a lack of coordination and a technical design error  in the seedling irrigation process. Once the necessary  modifications are  carried out, the installations will allow the intensive seedling production necessary for the  agricultural development of the Jordan valley.  5.91. The project to provide assistance to the Science  Faculty of the University of Yarmouk has been a success.  Modern, high-quality equipment is being used and adequately  maintained. The University is also turning to the  industrial sector and  offering its study and research  services, thus promoting the development of relations  between research activities and the industries which will  use new advances in technology, something that is always  desirable.   6. Conclusions  6.1. There is an element of rigidity in the Financial  Protocols, compared with the great diversity of situations  to be met with on the ground, which means in particular  that the rates of execution vary greatly between the  recipient countries.  Nevertheless, in principle, they offer  an appropriate framework for defining and implementing a  form of financial and technical cooperation which will be  consistent, both over time and with the partner countries'  priority development objectives (see  paragraphs 3.23 - 3.31).  6.2. However, the numerous difficulties experienced in  their implementation and the possibility that was thus left  open of committing Community funds for an unlimited  duration largely made nonsense of the multiannual framework  within which they were  conceived. The result was that the  rate of budgetary implementation was slow overall and  unclosed Protocols piled up. The Court considers that  appropriate measures ought to be taken to bring the  situation under control and observe the time framework  laid  down by the Protocols more strictly. The amount of the  financial package should be established on the basis of  what the recipient countries can actually absorb during the period the Protocols apply. Moreover, a mechanism for  closing the  Protocols, leading in particular to a formal  decision on how any sums left over are to be used (see  paragraphs 3.1 - 3.22), should be created.  6.3. Mention must be made of worrying weaknesses in the  systems which the Commission has set up for the operations  which it itself manages directly and for those which the  EIB manages as the Commission's agent.  6.4. The accounting systems, as they stand, are inadequate  for the purpose of reliable and effective monitoring of the  execution of the Protocols, and there is no system for  monitoring the financial execution of the projects and  measures (see  paragraphs 4.2 - 4.11).  6.5. In the case of those operations that are assigned to  the EIB, the Commission loses control over the financing  decisions even though such decisions commit budgetary  resources. Having failed to ask for a minimum of suitable  information to be  provided on the implementation and the  results of these operations, the Commission finds itself in  a situation where it cannot possibly discharge its  responsibilities as regards the execution of the budget. It  is indispensable for the Commission to  lay down, jointly  with the EIB, appropriate procedures to provide it with the  necessary information on the implementation and the results  of the operations that are being financed (see  paragraphs 4.12 - 4.23). 6.6. The Commission's monitoring of those measures that it  manages directly is all too often inadequate. The lack of  an appropriate management system results in ill-defined and  scattered responsibilities, a lack of clear instructions  and a paucity  of available information on the  implementation of the projects and measures, and it also  means that there is no evaluation of the effectiveness of  Community aid. The slow rate of execution of the projects, combined with the mobility of the Commission  staff and a  workload which is beyond the abilities of the departments  concerned, only aggravate matters.  6.7. The Court considers it necessary for the requisite  improvements to be made without delay. In the first place,  there is need for complete, high-quality information from  the recipients of Community aid. Guidelines should be  issued so as to  harmonize the organization and presentation  of the files on the implementation of the projects, and a  system of regular monitoring should be instituted.  Evaluations in the course and on completion of the  execution of these projects ought to be  carried out  systematically so as to allow the effectiveness of  Community aid to be measured, the necessary corrective  measures to be adopted and lessons to be learned for the  future. Such evaluations ought to be provided for in the  financing  agreements, so that the data needed for them can  be established during the execution of the project (see  paragraphs 4.24 - 4.43).  6.8. The desirable rigour and realism are sometimes not in  evidence when projects are being planned, so that their  potential effectiveness is jeopardized from the outset by  an unfavourable economic environment or the incompetence of  the bodies  responsible for their implementation, or else by  financing plans which are either imprecise or incomplete.  All too often, unrealistic timetables are laid down. The  Court considers that very special care ought to go into the  planning of projects. The  constraints encountered in their  implementation should not be ignored but should, on the  contrary, be taken into account in laying down the  objectives, means and schedules. The financing agreement  should become a real reference for guiding the   implementation and measuring the effectiveness of projects  (see paragraphs 5.20 - 5.36).  6.9. The implementation of projects is frequently affected  by the cumbersomeness of the procedures, the weakness of  the administrative structures in the recipient countries,  the insufficiency of human or financial resources, failure  by the  recipients to abide by their undertakings, or even  occasionally by the lack of any real motivation to see the  projects completed. Substantial changes are sometimes made  to the content or orientation of projects without adequate  prior investigation.  Sometimes, for diverse reasons, the  actual contribution made by the technical assistance  financed by the Community is very minor (see  paragraphs 5.37 - 5.53).  6.10. The effectiveness of Community aid varies  considerably from one country to another. It may be  considered to be generally satisfactory in Jordan and  Tunisia. The same is true in Malta, although, for the First  Protocol, this still only involved  financial participation  in measures which were all but complete. In Morocco, the  achievement of objectives has sometimes been delayed or  jeopardized by failure to carry out the operations for  which the Moroccan party is responsible. In Egypt,  failure  is all too often to be feared or a fact. The implementation  of financial and technical cooperation with Algeria has  until recently been hampered to the point that no results  are to be expected from it at present. In the absence of  the  necessary information, the audit of records that the  Court has carried out does not permit it to offer an  opinion on the effectiveness of Community aid in Turkey  (see paragraphs 5.54 - 5.91).  6.11. The renewed Mediterranean policy, which aims at a  qualitative and quantitative leap forward in the  Community's relations with Mediterranean non-member  countries and the broad lines of which were defined by the  Council in late 1990, implies in  particular a substantial  strengthening of the Community's financial cooperation. For  the five-year period from 1992-1996, the total budgetary resources which it is planned to grant both within and  outside the Protocols is around 1 300 Mio ECU. From  this  standpoint, it is all the more urgent that attention should  be paid to the weaknesses highlighted by the Court and  those improvements made that are necessary for more  efficient and effective use of Community funds.  6.12. Many of the observations which the Court has put  forward in this report are not specific to the management  of financial and technical cooperation with Mediterranean  non-member countries. In many respects, they overlap with  the Court's previous  analyses in the area of the management  of Community funds for development aid, whether aid to  Mediterranean non-member countries, aid to the developing  countries of Latin America and Asia or aid financed in the  context of the EDFs. This highlights  the urgent need,  particularly for the Commission, to give careful  consideration to these problems and to make the corrections  which are needed to improve the management of development  aid as a whole.  This report was adopted by the Court of Auditors in  Luxembourg at the Court meeting of 18 July 1991.   For the Court of Auditors p.p. Aldo ANGIOI President In the President's absence, p.p. Maurice Thoss, Member of the Court   Table 2 - Changes in overall budgets, commitments and payments to 31.12.1989  (Mio ECU)    TURKEY  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 3rd Protocol  220,0 220,0 220,0 220,0 220,0 220,0 220,0 220,0 220,0 220,0 220,0 220,0   Spec. aid  75,0   75,0 75,0 75,0 75,0 75,0 75,0 75,0 75,0 75,0   Total    295,0 220,0 220,0 295,0 295,0 295,0 295,0 295,0 295,0 295,0 295,0 295,0  Commitments 3rd Protocol   12,1 18,1 220,0 220,0 220,0 220,0 220,0 220,0 220,0 220,0 220,0   Spec. aid     46,0 46,0 46,0 46,0 46,0 46,0 56,0 75,0 75,0   Total     12,1 18,1 266,0 266,0 266,0 266,0 266,0 266,0 276,0 295,0 295,0  Payments 3rd Protocol   4,0 4,2 61,2 76,0 108,7 137,7 153,5 200,7 209,0 216,6 217,5   Spec. aid     0,0 4,0 13,4 19,9 34,7 41,8 45,8 46,3 46,3   Total     4,0 4,2 61,2 80,1 122,1 157,7 188,3 242,5 254,8 262,9 263,9    CYPRUS  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0   2nd Protocol  16,0      16,0 16,0 16,0 16,0 16,0 16,0   Total    26,0 10,0 10,0 10,0 10,0 10,0 26,0 26,0 26,0 26,0 26,0 26,0  Commitments 1st Protocol   0,0 0,0 1,5 6,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0   2nd Protocol        0,0 6,8 10,4 10,4 10,4 14,6   Total     0,0 0,0 1,5 6,0 10,0 10,0 16,8 20,4 20,4 20,4 24,6  Payments 1st Protocol   0,0 0,0 1,5 1,5 2,4 5,4 7,9 9,3 9,9 9,9 10,0   2nd protocol        0,0 0,6 1,1 4,8 8,3 10,2   Total     0,0 0,0 1,5 1,5 2,4 5,4 8,5 10,5 14,7 18,2 20,1    MALTA  Overall  budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0   2nd Protocol  13,5        13,5 13,5 13,5 13,5   3rd Protocol  15,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 15,0   Total    38,5 10,0 10,0 10,0 10,0 10,0 10,0 10,0 23,5 23,5 23,5 38,5  Commitments 1st Protocol   0,9 1,8 9,9 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0   2nd Protocol          0,0 3,0 13,5 13,5   3rd Protocol   0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0   Total     0,9 1,8 9,9 10,0 10,0 10,0 10,0 10,0 13,0 23,5 23,5  Payments 1st Protocol   0,4 0,7 5,7 6,2 7,4 8,8 9,2 10,0 10,0 10,0 10,0   2nd Protocol          0,0 0,0 0,0 0,8   3rd Protocol   0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0   Total     0,4 0,7 5,7 6,2 7,4 8,8 9,2 10,0 10,0 10,0 10,8    NORTHERN MEDITERRANEAN  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets   359,5 240,0 240,0 315,0 315,0 315,0 331,0 331,0 344,5 344,5 344,5 359,5  Commitments    13,0 19,9 277,3 282,0 286,0 286,0 292,8 296,4 309,4 338,9 343,1  Payments    4,4 4,8 68,4 87,7 131,8 171,9 206,0 263,0 279,5 291,1 294,8    ALGERIA  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  44,0 44,0 44,0 44,0 44,0 44,0 44,0 44,0 44,0 44,0 44,0 44,0   2nd Protocol  44,0     44,0 44,0 44,0 44,0 44,0 44,0 44,0   3rd Protocol  56,0          56,0 56,0   Total    144,0 44,0 44,0 44,0 44,0 88,0 88,0 88,0 88,0 88,0 144,0 144,0  Commitments 1st Protocol   0,4 2,5 29,4 35,7 37,6 38,2 38,2 38,5 35,0 38,1 38,2   2nd Protocol       0,0 6,4 18,1 24,0 42,2 42,2 42,2   3rd Protocol            0,6 27,4   Total     0,4 2,5 29,4 35,7 37,6 44,6 56,3 62,5 77,2 80,9 107,7  Payments 1st Protocol   0,0 0,1 2,1 4,8 7,4 11,3 18,1 18,8 21,6 22,1 23,1   2nd Protocol       0,0 0,0 2,3 4,4 7,6 8,1 9,6   3rd Protocol            0,0 0,4   Total     0,0 0,1 2,1 4,8 7,4 11,3 20,3 23,2 29,2 30,2 33,1    MOROCCO  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  74,0 74,0 74,0 74,0 74,0 74,0 74,0 74,0 74,0 74,0 74,0 74,0   2nd Protocol  109,0     109,0 109,0 109,0 109,0 109,0 109,0 109,0   3rd Protocol  173,0          173,0 173,0   Total    356,0 74,0 74,0 74,0 74,0 183,0 183,0 183,0 183,0 183,0 356,0 356,0  Commitments 1st Protocol   2,0 7,2 74,0 74,0 74,0 74,0 74,0 74,0 74,0 74,0 74,0   2nd Protocol       37,4 86,6 108,3 108,3 108,3 108,3 108,3   3rd Protocol            11,9 122,3   Total     2,0 7,2 74,0 74,0 111,4 160,6 182,2 182,2 182,2 194,1 304,6  Payments 1st Protocol   0,1 1,3 25,3 42,8 67,7 68,5 70,7 71,5 72,7 72,7 73,2   2nd Protocol       23,4 35,0 72,9 83,5 90,2 92,2 95,3   3rd Protocol            0,0 0,0   Total     0,1 1,3 25,3 42,8 91,1 103,5 143,6 155,0 162,8 164,9 168,5     TUNISIA  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  54,0 54,0 54,0 54,0 54,0 54,0 54,0 54,0 54,0 54,0 54,0 54,0   2nd Protocol  61,0     61,0 61,0 61,0 61,0 61,0 61,0 61,0   3rd Protocol  93,0          93,0 93,0   Total    208,0 54,0 54,0 54,0 54,0 115,0 115,0 115,0 115,0 115,0 208,0 208,0  Commitments 1st Protocol   0,7 3,6 39,7 53,1 53,6 53,9 54,0 54,0 54,0 53,7 53,7   2nd Protocol       0,0 2,9 15,5 60,7 60,7 61,1 61,0   3rd Protocol            39,4 59,7   Total     0,7 3,6 39,7 53,1 53,6 56,8 69,5 114,7 114,7 154,1 174,3  Payments 1st Protocol   0,4 1,1 12,6 18,2 33,1 40,1 43,9 44,3 51,4 52,4 53,1   2nd Protocol       0,0 0,2 3,8 9,5 20,2 32,4 41,1   3rd Protocol            10,8 13,2   Total     0,4 1,1 12,6 18,2 33,1 40,3 47,7 53,9 71,6 95,6 107,4    MAGHREB  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  172,0 172,0 172,0 172,0 172,0 172,0 172,0 172,0 172,0 172,0 172,0 172,0   2nd Protocol  214,0     214,0 214,0 214,0 214,0 214,0 214,0 214,0   3rd Protocol  322,0          322,0 322,0   Total    708,0 172,0 172,0 172,0 172,0 386,0 386,0 386,0 386,0 386,0 708,0 708,0  Commitments 1st Protocol   3,2 13,4 143,1 162,8 165,1 166,0 166,2 166,5 163,0 165,8 165,8   2nd Protocol       37,4 96,0 141,9 193,0 211,2 211,5 211,5   3rd Protocol            51,9 209,3   Total     3,2 13,4 143,1 162,8 202,5 262,0 308,0 359,5 374,1 429,1 586,7  Payments 1st Protocol   0,5 2,6 40,0 65,9 108,3 119,9 132,6 134,6 145,6 147,2 149,4   2nd Protocol       23,4 35,1 79,0 97,4 117,9 132,7 146,0   3rd Protocol            10,8 13,6   Total     0,5 2,6 40,0 65,9 131,7 155,0 211,6 232,1 263,5 290,7 309,0    EGYPT  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  77,0 77,0 77,0 77,0 77,0 77,0 77,0 77,0 77,0 77,0 77,0 77,0   2nd Protocol  126,0     126,0 126,0 126,0 126,0 126,0 126,0 126,0   3rd Protocol  200,0          200,0 200,0   Total    403,0 77,0 77,0 77,0 77,0 203,0 203,0 203,0 203,0 203,0 403,0 403,0  Commitments 1st Protocol   2,0 2,2 53,5 67,9 76,0 76,2 76,2 76,3 76,3 76,5 76,5   2nd Protocol       11,3 35,4 52,3 66,8 112,3 119,8 122,7   3rd Protocol            33,9 44,3   Total     2,0 2,2 53,5 67,9 87,3 111,6 128,5 143,0 188,6 230,2 243,4  Payments 1st Protocol   0,8 1,1 10,7 13,0 16,1 27,4 31,7 38,4 47,5 56,5 58,1   2nd Protocol       0,0 0,9 2,7 10,6 22,5 32,4 54,2   3rd Protocol            0,0 0,3   Total     0,8 1,1 10,7 13,0 16,1 28,3 34,4 48,9 70,0 88,9 112,6    JORDAN  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  22,0 22,0 22,0 22,0 22,0 22,0 22,0 22,0 22,0 22,0 22,0 22,0   2nd Protocol  26,0     26,0 26,0 26,0 26,0 26,0 26,0 26,0   3rd Protocol  37,0          37,0 37,0   Total    85,0 22,0 22,0 22,0 22,0 48,0 48,0 48,0 48,0 48,0 85,0 85,0  Commitments 1st Protocol   1,2 2,2 18,8 20,0 21,7 22,2 22,2 22,3 22,3 22,3 22,3   2nd Protocol       7,8 10,8 14,6 22,1 22,9 24,0 25,0   3rd Protocol            10,5 17,4   Total     1,2 2,2 18,8 20,0 29,5 33,0 36,9 44,4 45,2 56,9 64,7  Payments 1st Protocol   0,8 1,1 6,8 9,6 14,5 17,6 20,8 21,6 21,8 21,8 21,8   2nd Protocol       3,2 4,7 6,9 9,8 12,8 15,5 18,1   3rd Protocol            0,0 2,1   Total     0,8 1,1 6,8 9,6 17,7 22,3 27,7 31,4 34,5 37,3 42,0    LEBANON  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0   2nd Protocol  16,0     16,0 16,0 16,0 16,0 16,0 16,0 16,0   3rd Protocol  20,0          20,0 20,0   Total    46,0 10,0 10,0 10,0 10,0 26,0 26,0 26,0 26,0 26,0 46,0 46,0  Commitments 1st Protocol   0,3 0,7 3,7 5,6 7,1 7,1 7,3 7,4 7,0 9,9 9,9   2nd Protocol       0,0 0,0 16,0 16,0 16,0 16,0 16,0   3rd Protocol            0,0 0,0   Total     0,3 0,7 3,7 5,6 7,2 7,2 23,3 23,4 23,0 25,9 25,9  Payments 1st Protocol   0,0 0,6 1,3 2,5 3,7 3,8 4,0 4,6 4,8 5,4 5,5   2nd Protocol       0,0 0,0 0,0 0,6 1,2 1,6 1,6   3rd Protocol            0,0 0,0   Total     0,0 0,6 1,3 2,5 3,7 3,8 4,0 5,2 6,0 7,0 7,1      SYRIA  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  26,0 26,0 26,0 26,0 26,0 26,0 26,0 26,0 26,0 26,0 26,0 26,0   2nd Protocol  33,0     33,0 33,0 33,0 33,0 33,0 33,0 33,0   Total    59,0 26,0 26,0 26,0 26,0 59,0 59,0 59,0 59,0 59,0 59,0 59,0  Commitments 1st Protocol   1,6 2,0 18,2 19,5 19,9 25,3 25,5 25,7 26,0 26,0 26,0   2nd Protocol       0,0 9,7 18,4 31,6 31,6 33,0 33,0   Total     1,6 2,0 18,2 19,5 19,9 35,0 43,9 57,3 57,6 59,0 59,0  Payments 1st Protocol   0,3 0,6 2,9 6,2 11,9 16,0 18,5 19,5 19,9 19,9 20,2   2nd Protocol       0,0 0,0 0,0 0,8 2,4 7,2 9,9   Total     0,3 0,6 2,9 6,2 11,9 16,0 18,5 20,3 22,3 27,2 30,2    MASHREQ  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  135,0 135,0 135,0 135,0 135,0 135,0 135,0 135,0 135,0 135,0 135,0 135,0   2nd Protocol  201,0     201,0 201,0 201,0 201,0 201,0 201,0 201,0   3rd Protocol  257,0          257,0 257,0   Total    593,0 135,0 135,0 135,0 135,0 336,0 336,0 336,0 336,0 336,0 593,0 593,0  Commitments 1st Protocol   5,0 7,0 94,2 113,0 124,8 130,8 131,2 131,7 131,6 134,7 134,7   2nd Protocol       19,1 55,9 101,4 136,5 182,9 192,9 196,7   3rd Protocol            44,4 61,7   Total     5,0 7,0 94,2 113,0 143,9 186,7 232,6 268,2 314,4 372,0 393,1  Payments 1st Protocol   1,9 3,5 21,7 31,3 46,1 64,8 75,0 84,0 94,0 103,7 105,6   2nd Protocol       3,2 5,6 9,6 21,8 38,8 56,7 83,83rd Protocol            0,0 2,4   Total     1,9 3,5 21,7 31,3 49,3 70,4 84,6 105,8 132,8 160,4 191,8    SOUTHERN MEDITERRANEAN  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets 1st Protocol  307,0 307,0 307,0 307,0 307,0 307,0 307,0 307,0 307,0 307,0 307,0 307,0   2nd Protocol  415,0     415,0 415,0 415,0 415,0 415,0 415,0 415,0   3rd Protocol  579,0          579,0 579,0   Total    1 301,0 307,0 307,0 307,0 307,0 722,0 722,0 722,0 722,0 722,0 1 301,0 1 301,0  Commitments 1st Protocol   8,2 20,4 237,3 275,7 289,9 296,8 297,4 298,2 294,5 300,5 300,5   2nd Protocol       56,5 152,0 243,3 329,5 394,0 404,4 408,2   3rd Protocol            96,2 271,0   Total     8,2 20,4 237,3 275,7 346,4 448,8 540,6 627,6 688,5 801,1 979,8  Payments 1st Protocol   2,4 6,0 61,8 97,1 154,4 184,7 207,6 218,6 239,6 250,9 255,0   2nd Protocol       26,6 40,7 88,6 119,2 156,7 189,5 229,8   3rd Protocol            10,8 15,9   Total     2,4 6,0 61,8 97,1 181,0 225,4 296,2 337,8 396,3 451,2 500,8    MEDITERRANEAN  Overall budgets 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989   Overall budgets   1 660,5 547,0 547,0 622,0 622,0 1 037,0 1 053,0 1 053,0 1 066,5 1 066,5 1 645,5 1 660,5  Commitments    21,1 40,3 514,7 557,7 632,4 734,7 833,4 924,0 997,9 1 140,0 1 322,9  Payments    6,7 10,9 130,2 184,9 312,8 397,3 502,2 600,9 675,8 742,3 795,6  The difference of 54 Mio ECU between the total overall budgetary amount shown in this table (1 660,5 Mio ECU) and the amount shown in Table 1 (1 714,5 Mio ECU) is due to the fact that the above table does not include the Third Protocol with Cyprus (18  Mio ECU), which entered into force in 1990, or the reserve (36 Mio ECU) for the Third Protocol with Syria which had not yet been signed as of 31.12.1989. Due to the effects of rounding, some totals do not correspond exactly to the sum of the component  items (e.g. Syria, 1988 and 1989 payments).     Graph 1  Graph 2    Graph 3  Graph 4  Graph 5  Graph 6  Graph 7  Graph 8  Graph 9  Graph 10  Graph 11  Graph 12  Graph 13  Graph 14  Graph 15  Graph 16  Graph 17  Graph 18  THE COMMISSION'S REPLIES   1. Introduction  1.2. The Court's comments will be taken into account both in drawing up the new Protocols and in assessing cooperation with the Mediterranean countries under the new Mediterranean policy.   3. The system of protocols  The consequences 3.6 - 3.7. The Commission is aware of the problems in the past but would point out to the Court that there has been no delay in implementing the preparatory measures for the Fourth Financial Protocols. Indeed, the Commission introduced the basic texts  on financial and technical cooperation at the very beginning of 1991.  Budgetary management Spreading-out of commitments 3.8 - 3.12. The purpose of evenly spreading out commitments is to facilitate budgetary management and the financial protocols are both realistic and flexible enough to achieve this. Because of this, the provision referred to should not cause any  problems in future protocols. However, the Commission is prepared to consider any scheme that will improve the planning of commitments.  Utilization of the balance 3.13 - 3.15. Given that recipient countries may encounter political and institutional difficulties in utilizing all the funds provided for in the financial protocols within the time limits, imposing more restrictive provisions might not be easy.  The situation is further complicated by the fact that although the uncommitted amounts at the end of the period covered by the financial protocols are well-defined, this is not the case with any balances left over from projects which have already been  financed.  Solutions to such problems must be agreed with the partner during the life of the financial protocol in order to arrive at a reasonable timetable for utilizing all outstanding balances.  In any event, the Commission has recently proposed to all national authorizing officers that they:  - carry over all commitments not allocated under previous protocols to the Fourth Financial Protocols, within a programming framework common to all funds available for commitment;  - wind up all projects under the Second Financial Protocols, to the extent that this is possible.  Allocation of grant aid 3.16 - 3.18. The Commission will look into the methods used in financial cooperation to ensure greater transparency in the utilization of budgetary resources.  The consequences as regards implementation 3.19 - 3.20. See reply to points 3.13 - 3.15.  Implementing Financial Regulation 3.21 - 3.22. The Court has a good point. A proposal for a regulation relating to the implementation of the financial protocols was transmitted by the Commission to the Council at the end of May 1991. The regulation should ensure that the Fourth  Financial Protocols are covered.  Observations on the system of protocols 3.23 - 3.31. Even if the protocol system has a number of disadvantages, it also has some advantages, not the least of which is the scope for multiannual cooperation adapted to the specific circumstances of the countries concerned. The Commission is  continually assessing the systems and procedures currently in force and considers that the protocol system could be strengthened and improved. When new protocols are drawn up, therefore, the Commission will certainly take the Court's suggestions into  account.  At a more general level, the Commission will be reviewing its cooperation policy as the single market approaches and will be considering whether it would be better to continue with the present system or to modify it.   4. Management systems  The accounting systems Monitoring the implementation of the financial protocols 4.2 - 4.5. SINCOM and the improvements to the auxiliary accounting system (FINPICS) should improve financial control of the projects and their components.  The Commission will ensure that the financial implementation of a protocol is closely monitored and constantly updated.  Financial monitoring of the projects 4.6 - 4.11. The Commission is in broad agreement with the Court's comments. It is looking into ways of improving procedures and the accounting system. The Commission has noted the Court's recommendation that priority should be given to setting up a  harmonized system for monitoring 'primary' and 'secondary' commitments. The 'commitments under financing agreements' referred to in Article 106(2) of the Financial Regulation and the 'individual commitments' referred to in Article 109(3), which broadly  correspond to 'primary' and 'secondary' commitments, will be gradually incorporated into the Commission's project accounting.  The measures entrusted to the EIB Legal basis of the EIB mandates 4.13 - 4.14. The Commission agrees with the Court about the provisions of Regulations No 3973/86 as they relate to the EIB; this whole area has now been thoroughly reviewed and the new Financial Regulation (currently in draft form) makes the Commission  solely responsible for implementing the budget. The Commission would point out that although in the past the application of Regulation No 3973/86 represented the law in force, which was faithfully carried out by the Commission, the amended Regulation  should ensure that budgetary orthodoxy is once again fully respected. The situation described by the Court should not, therefore, reoccur.  The Commission would point out that the principle of conferring upon the EIB the management of Community-financed measures has not been called into question, although the rules for giving such a mandate do require altering.  The Commission's role 4.15 - 4.23. The Commission accepts that it only has limited information about the EIB's activities, although the Bank has always respected its obligations whenever it has been asked for information.  As regards financial cooperation under the new Mediterranean policy, the Commission is looking into ways of improving the rules governing its relations with the EIB.  Measures managed by the Commission The aid management system 4.24 - 4.27. The Commission is studying how to set up a harmonized management system to be followed both by the central departments and by the delegations.  The sharing of responsibilities 4.28 - 4.29. The Commission departments are looking into ways of ensuring a clearer division of tasks that is better adapted to the requirements of the financial protocols.  Instructions 4.30 - 4.33. The Commission will try to ensure, to the extent that its resources permit, that harmonized and transparent monitoring is provided both centrally and in the delegations.  Work programmes and implementation reports 4.34 - 4.38. Although the Commission agrees with the Court that recipients should fulfil their obligations, in practice the Commission is often faced with sensitive situations which call for flexible management and where the legal provisions of the  Protocol must be interpreted in the light of the actual conditions in which the projects are implemented.  However, the Commission will not hesitate, whether at the planning or the implementation stage, to take any appropriate and realistic measure to ensure that recipients meet their obligations.  Staff resources 4.40 - 4.41. The Court's observations concerning staff resources are correct. Some of the shortcomings noted by the Court are a direct effect of staff shortages.   5. Implementation and the results of financial and technical cooperation  Project conception 5.20 - 5.36. The Commission agrees with the Court's comments. It shares the Court's opinion that the financing agreement should be used as the reference document for project implementation and evaluation.  The Commission will take steps to ensure that this document is drawn up in the proper manner. It should be noted that the Commission has included a deadline for implementation in the financial agreements since 1988. However, the management of its  partners cannot always be relied upon, with the result that the initial timetable sometimes needs adjusting.  Execution of projects Delays 5.37 - 5.38. It is the Commission's opinion that the conception of projects in the countries studied by the Court should be based on a realistic analysis of all the components which might have an impact on their execution. On the other hand, no ex-ante  evaluation can ever take into account all the obstacles and constraints that a project might encounter.  Major project modifications 5.39 - 5.43. The Commission agrees with the Court's observations. The Commission's departments and delegations will have to improve their monitoring of activities receiving Community funds.  Technical assistance 5.44 - 5.48. The Commission believes that, by and large, the quality of the benefits provided by technical assistance is acceptable, as are relations between the experts themselves and the local institutions concerned.  Recipients' commitments 5.49 - 5.53. The Court's observations are relevant. There are many elements over which Commission departments and delegations have no direct control and over which they can exert only limited influence.  Effectiveness of projects Turkey 5.55. While agreeing that the Court is justified in its comments, the Commission does not accept that in the case of two projects the development objective was disregarded. One of the main aims of the Special Aid was to finance specific measures with a  short-term multiplier effect that would help eliminate bottlenecks in the economy.  Algeria 5.57 - 5.61. The Court's observations are mostly correct. Until recently, the Algerian authorities evinced little interest in cooperating with the Community. Under its new economic policy, Algeria appears to be opening up to the outside world. This  reorientation of economic policy means that some training programmes will need reviewing and the Commission has already requested that some projects be closed down or modified.  Morocco 5.62 - 5.69. The lack of monitoring by the Commission is partly due to the insufficiency of human resources. As regards the Salé slum-clearance project, in view of the delay in providing socio-administrative facilities, the Commission is awaiting a  detailed assessment of current activities before giving its reply to a Moroccan request that the balance should be used for extending the project.  Although it accepts the Court's comments on the Haouz Central development project and the Ait Chouarit dam project, the Commission would point out that the Community's contribution is a relatively small proportion of the whole and so it is difficult for  the Commission to exercise overall control.  Egypt 5.77 - 5.85. Most of the Court's observations do not call for any comment. Cooperation with Egypt is a complex business and institutional weaknesses mean that very close monitoring is required.   6. Conclusions  6.2. The Commission is aware that the implementation of financial and technical cooperation with non-member Mediterranean countries has not proceeded without difficulties. Administrative, institutional or political factors can in some cases prevent  funds from being used within the deadlines. However, the Commission is trying to observe more strictly the time framework laid down for the operations it funds and since 1988 the financing agreements have specified the likely duration of each project.  Although a formal mechanism for closing the protocols does not appear appropriate, the Commission has proposed to its partners that any sums left over from previous protocols should be carried over to future protocols so that they can be programmed  jointly.  6.3 - 6.8. For the most part, the Commission shares the Court's concerns. Improvements to procedures and to the accounting system are planned.  As regards operations assigned to the EIB, the Commission is reviewing, under the new Mediterranean policy, the possibility of improving all the rules applicable to its relations with the EIB.  Furthermore, the Commission broadly agrees with the Court's remarks concerning the monitoring of the measures funded; it is looking into ways of improving monitoring by setting up a management system that can be used both by the delegations and by  headquarters. However, most of the imperfections noted by the Court can be put down to staff shortages both in the delegations and at headquarters.  The Commission would point out that according to a statement in the Council minutes annexed to Council Regulation No 3973/86 of 22.12.1986 evaluations are required for all operations of more than ECU 5 million. The Commission agrees with the Court that  the financing agreement should be the reference document for assessing the implementation of Community-financed projects.  6.9. The Court's observations on the weakness of the administrative structures and the inadequacy of human resources in non-member countries have overall relevance. Under the new Mediterranean policy, the Commission intends to assist the countries in  question to strengthen their institutions and to develop their human resources. As regards Community-financed technical assistance, the Court's criticisms apply only to certain specific cases.  6.10. The Commission agrees with the Court that the effectiveness of Community aid varies for different reasons from one country to another.   (1)OJ No L 247, 23. 8. 1989, p. 7. (2)Total financial aid from the Community under and in  addition to the Protocols will amount to some 4 400 Mio ECU, of which 1 300 Mio ECU will be financed from budgetary  resources, whilst 3 100 Mio ECU  will be funded by loans by  the European Investment Bank from its own resources. (3)Of the five Maghreb countries, Libya does not receive any  Community aid and Mauritania, which is a signatory to the  Lomé Conventions, receives funds from the European   Development Funds (EDF). (4)Of the other Mashreq countries, Sudan, which is a signatory  to the Lomé Conventions, receives funds from the European   Development Funds (EDF), whereas Iraq and the countries of  the Arabian peninsula do not receive any  Community aid. (5)Tables 1, 2, 3, 4 and 5 do not include the budgetary  effects of invoking the Community global guarantee for  loans from EIB own resources mentioned in paragraph 5.11. (6)In the case of these countries there is nevertheless a   possibility that budgetary resources may be used through  the operation of the Community guarantee for loans granted  by the EIB. (7)OJ No L 48, 21. 2. 1981, p. 8. (8)The FINPICS system is not only for aid under the Financial  Protocols; it is also used  for aid to developing countries  in Latin America and Asia financed under Chapter 93 of the  general budget. (9)OJ No C 357, 31. 12. 1983, p. 100, paragraph 10.30. (10)OJ No C 302, 27. 11. 1986, p. 6, 6th recital. (11)Special report No 2/84, adopted on  10.5.1984. This report  has not been published but is obtainable from the Court of   Auditors. (12)OJ No C 321, 15. 12. 1986, p. 146, paragraph 73. (13)The Court made on-the-spot visits to the following countries:  a) Egypt, first in September/October  1986 and   again in January 1990;  b) Jordan, October 1986;  c) Malta, September/October 1987;  d) Algeria, June 1988;  e) Tunisia, November 1988;  f) Morocco, October 1989.  In the case of the projects financed in Turkey, a  documentary audit was  carried out at the Commission at the  beginning of 1990. The on-the-spot visits were preceded by  a review of the files in the various Commission  departments responsible. The visits including working  meetings with the Commission delegations,  discussions with  representatives of national and local authorities, the  organizations responsible for implementing projects and  technical assistance teams, as well as visits to the parts  of financial projects that were already under way, and   interviews with recipients (farmers, trainees, etc.). (14)OJ No C 316, 12. 12. 1988, pp. 135-136, paragraphs 9.6 - 9.8. (15)OJ No L 185, 15. 7. 1988, p. 3, Article 1(1).    ANNEX 1   Legal provisions governing the cooperation programmes with Mediterranean non-member countries   Country  Protocol Period of application Duration   Council Decision or Regulation   No Date signed   No Date Published in the OJ   TURKEY 3 12.05.77 1979-31.10.1981 2 years 10 months  79/281  5.03.79 L 67, 17.03.79   (1) (2) 1.07.1980-30.06.1982 2 years 2/80 (3) 19.09.80 not published   CYPRUS 1 15.09.77 1.01.1979-31.12.1983 5 years 2760/78 23.11.78 L 332, 29.11.78   2 20.12.83 1.05.1984-31.12.1988 4 years  8 months  787/84 26.03.84 L  85, 28.03.84   3 30.11.89 1.06.1990-31.12.1993 3 years  7 months  90/153 26.02.90 L  82, 29.03.90   MALTA 1  4.03.76 1.11.1978-31.10.1983 5 years  939/76 23.04.76 L 111, 28.04.76   2  4.12.85 1.10.1986-31.10.1988 2 years  1 months 2458/86  7.07.86 L 216,  5.08.86   3 20.03.89 1.08.1989-31.10.1993 4 years  3 months  89/378 12.06.89 L 180, 27.06.89   ALGERIA 1 26.04.76 1.11.1978-31.10.1981 3 years 2210/78 26.09.78 L 263, 27.09.78   2 28.10.82 1.01.1983-31.10.1986 3 years 10 months 3177/82 22.11.82 L 337, 29.11.82   3 26.10.87 1.03.1988-31.10.1991 3 years  8 months   88/30 21.12.87 L  22, 27.01.88   MOROCCO 1 27.04.76 1.11.1978-31.10.1981 3 years 2211/78 26.09.78 L 264, 27.09.78   2 10.06.82 1.01.1983-31.10.1986 3 years 10 months 3181/82 22.11.82 L 337, 29.11.82   3 26.05.88 1.11.1988-31.10.1991 3 years  88/453 30.06.88 L 224, 13.08.88   TUNISIA 1 25.04.76 1.11.1978-31.10.1981 3 years 2212/78 26.09.78 L 265, 27.09.78   2 28.10.82 1.06.1983-31.10.1986 3 years  5 months 3183/82 22.11.82 L 337, 29.11.82   3 26.10.87 1.05.1988-31.10.1991 3 years  6 months   88/34 21.12.87 L  22, 27.01.88   EGYPT 1 18.01.77 1.11.1978-31.10.1981 3 years 2213/78 26.09.78 L 266, 27.09.78   2 25.05.82 1.01.1983-31.10.1986 3 years 10 months 3178/82 22.11.82 L 337, 29.11.82   3 26.10.87 1.08.1988-31.10.1991 3 years  3 months   88/31 21.12.87 L  22, 27.01.88   JORDAN 1 18.01.77 1.11.1978-31.10.1981 3 years 2215/78 26.09.78 L 268, 27.09.78   2 10.06.82 1.01.1983-31.10.1986 3 years 10 months 3179/82 22.11.82 L 337, 29.11.82   3 26.10.87 1.02.1988-31.10.1991 3 years  9 months   88/32 21.12.87 L  22, 27.01.88   LEBANON 1  3.05.77 1.11.1978-31.10.1981 3 years 2214/78 26.09.78 L 267, 27.09.78   2 17.06.82 1.03.1983-31.10.1986 3 years  9 months 3180/82 22.11.82 L 337, 29.11.82   3  2.12.87 1.03.1988-31.10.1991 3 years  8 months   88/33 21.12.87 L  22, 27.01.88   SYRIA 1 18.01.77 1.11.1978-31.10.1981 3 years 2216/78 26.09.78 L 269, 27.09.78   2 10.06.82 1.02.1983-31.10.1986 3 years  9 months 3182/82 22.11.82 L 337, 29.11.82  (1) Special aid. (2) Not applicable. (3) Decision of the EEC-Turkey Association.       ANNEX 2  The framework of financial and technical cooperation   The Financial Protocols signed to date  1. The Cooperation Agreements and the Protocols concluded  by the Council with the countries concerned are based on  Article 238 of the EEC Treaty. The references for the  legislative provisions governing the programmes for  cooperation with the ten  countries discussed are listed in  Annex 1. At the end of 1990, three series of Protocols had  been signed (see Annex 1):  a)with the Maghreb and Mashreq countries in 1976/77, 1982  and 1987/88;  b)with Cyprus in 1977, 1983 and 1989;  c)with Malta in 1976, 1985 and 1989;  d)with Turkey in 1963, 1970 and 1977(1) .  As can be seen from Table 1, the overall amount of the aid  granted from budgetary resources was 1 714,5 Mio ECU, of  which 708 Mio ECU was for the Maghreb countries, 629 Mio  ECU for the Mashreq countries and 377,5 Mio ECU for Cyprus,  Malta and  Turkey(2) . Graphs 1 and 2 illustrate how the  aid from budgetary resources is divided up between the  geographical areas and recipient countries concerned.   Period of application of the Financial Protocols  2. The Financial Protocols are designed to cover a period  of five years, during which the funds made available by the  Community may be committed. In fact, as Annex 1 shows, if  the date of entry into force and the specified expiry date  of the  Protocol are taken into account, the true period ofapplication varies between about two and four years (except  for the First Financial Protocols with Cyprus and Malta).  Nevertheless, on the analogy of the various Lomé  Conventions each of the  Protocols has a provision to the  effect that if uncommitted funds remain upon expiry of the  period of application, these funds may be used until  exhausted.   Volume and forms of financial and technical cooperation  3. The total amount fixed in the Protocols involves two  very distinct financing instruments:  a)loans granted by the EIB from its own resources;  b)financial operations which make use of the Community's  budgetary resources and which can assume the various  forms described in paragraph 4.  4. As regards aid financed from budgetary resources, the  Protocols distinguish between the following types of  operation:  a)loans on special terms (40-year duration, 10-year grace  period, interest rate of 1%), which make it possible to  finance development projects where the rate of  profitability is very low. This formula has been  abandoned in the Third Protocols,  except in the case of  the Protocol with Turkey;  b)non-repayable aid which can be used in several  forms(3) :  i)grants in the strict sense of the term, which  make it possible to finance development projects  which are not in themselves profitable,  especially technical assistance projects;  ii)interest-rate subsidies, which enable the EIB, to  which they are paid, to reduce the interest rates  on the loans which it grants from its own  resources. In the case of the First Protocols,  the rate of this subsidy is a uniform 2%; in the  case of  the subsequent ones, the rate varies from  one country to another, with some countries even  opting to forgo it in order to be able to use all  the non-repayable aid in the form of grants (see  Table);    Levels of interest-rate subsidies on loans granted from EIB own resources   Country   Financial Protocols   First Second Third   Cyprus  2 % 2 % 1,5 %  Malta  2 % none  1,5 %  Algeria  2 % 2 % none   Morocco  2 % 2 % none   Tunisia  2 % 3 % 2 %  Egypt  2 % 3 % 2 %  Jordan  2 % 2 % 2 %  Lebanon  2 % none  none   Syria  2 % 3 % (1)   (1) As at 31 December 1989 a Third Financial Protocol with Syria had not been signed.    c)contributions to the formation of risk capital. The  First and Second Protocols allow such contributions,  which are to be charged against the amounts of the  loans on special terms, which may in particular take  the form of subordinated loans,  conditional loans or  participations. The Third Protocols, save that with  Turkey, reserve a specific allocation for operations of  this kind.  The total amount of 1 714,5 Mio ECU of overall aid financed  from budgetary resources can be broken down into 536 Mio  ECU of loans on special terms, 1 134 Mio ECU of non-repayable aid and 44,5 Mio ECU of contributions to risk-capital formation (see  Table 1 and Graph 3).  5. Except for certain restrictions laid down in the First  Protocols, the financing instruments described in  paragraphs 3 and 4 may be used jointly to finance the same  investment project.  6. Although it is not strictly speaking a financing  instrument, mention should be made of the existence of a  globalized Community guarantee, which is entered for the  record in the general budget and applies to loans granted  by the EIB from its own  resources to a group of  Mediterranean countries, including those which are the  subject of this report(4) . For all the countries discussed in this report, this global guarantee is to cover 75% of  the total amount of loans granted by the EIB. The guarantee  has been invoked on several occasions since 1988 (see  paragraph 5.11 of the report).   General objectives and field of application of the aid  7. The general objectives contained in the Protocols -  those of contributing to the economic and social  development of the recipient country - are supplemented by  definitions of the field of application of the aid.  8. The First and Second Protocols with the Maghreb and  Mashreq countries and with Cyprus and Malta provide mainly  that the Community aid is to be used for helping to  finance:  a)investment projects in the fields of production and  economic infrastructure, the aims being to diversify  the economic structure of the countries in question  and, in particular, to promote their industrialization  and the modernization of their  agricultural sector;  b)technical cooperation as a preparation for or a  supplement to investment projects, and technical  cooperation measures in the field of training.  9. The Third Protocols with the Maghreb and Mashreq  countries give priority to the financing of projects or  cooperation measures relating to:  a)the development and diversification of agricultural  production with a view to reducing these countries'  dependence on imports of food, and the diversification  of agricultural production and exports;  b)the development of cooperation in the fields of  industry, training and research, technology, trade and  other services;  c)regional and multilateral cooperation.  10. For their part, the Third Protocols with Malta and  Cyprus confine the field of application of the aid to the  measures referred to in paragraph 9(b). All these Third  Protocols, unlike their predecessors, specify for each of  the main areas in  question the kind of projects and  measures likely to be financed as a matter of priority.  11. The financial aid granted under the Third Protocol  with Turkey aims to strengthen trade and economic relations  between the parties. Financing is granted to investment  projects which help to boost the productivity of the  Turkish economy and which  aim, in particular, to give  Turkey a higher-yielding agriculture and industrial  undertakings or services that are modern and operated  rationally.  12. Decision No 1/80 of 19 September 1980 of the EEC-Turkey Association Council, the aim of which is to give new  impetus to the Association Agreement, authorizes the  financing of investment projects, in particular in the  fields of industry, energy,  agriculture and training, and  technical cooperation projects which are preparatory or  complementary to these projects. It is in this context that  the special aid granted by Decision No 2/80 of this same  EEC-Turkey Association Council should be  looked at in  particular.   Implementing mechanism  Budgetary basis 13. Up until the end of 1990, Chapter 96 of Title B9 of  the general budget provided the support structure for the  commitment and payment appropriations required for  financing financial and technical cooperation in these  countries. The appropriations  relating to cooperation with  Turkey, Cyprus and Malta come under separate articles,  whereas those relating to the Protocols with the Maghreb  and Mashreq countries, designated by the term 'southern  Mediterranean countries' have been pooled since 1987  under  one article (965), which has two items, one (9650) for the  First and Second Protocols and the other (9651) for the  Third Protocols. Implementing sub-headings offer the  Commission the possibility of monitoring the budgetary  operations by  country and by Protocol.  Provisions for the application of the Financial Protocols 14. The procedures and responsibilities relating to the  fixing of the specific objectives of the cooperation  programmme, the appraisal of projects and the execution,  management and maintenance of the projects financed are all  set out in the  Protocols themselves. The Protocols also lay  down the rules for participating in invitations to tender  and the rules governing contracts, as well as the tax  arrangements applicable to the latter.  15. The Protocols say nothing about the Community's  internal procedures for deciding and managing the aid and  relating, in particular, to the division of  responsibilities between the EIB and the Commission(5)  and  to the procedures for directing, examining and approving  the flows of aid. These management rules have to be laid  down in an implementing regulation.  16. In March 1977, and in February and March 1978, the  Commission submitted to the Council proposals for a  regulation on the application of the provisions of the  First Protocols. Differences of opinion on the respective  powers of the Commission and  the committees made up of the  permanent representatives of the Member State governments  prevented any progress.  17. An ad hoc procedure was then set up in December 1978,  which applied until the entry into force on 1 January 1987  of Council Regulation (EEC) No 3973/86(6) , which  determined the provisions for applying the Protocols with  the Maghreb and Mashreq countries and with Cyprus and  Malta. The Commission, following a decision taken on  22 January 1986(7) , has since that date been applying this  Regulation by analogy in respect of projects financed in  Turkey.  Planning 18. Planning missions are carried out jointly by the  Commission and the EIB in each recipient country in order  to identify and select projects which could be eligible for  financing. These missions give rise to reports, which  specify the amounts of  aid reserved for each economic  sector and the type of financing proposed. These reports  are then submitted to the Council's 'Mediterranean' group,  which holds an exchange of views for the purpose of  examining the sectoral angles of the planned  cooperation  measure.   Divisions of competences for the management of the aid  Projects entrusted to the EIB 19. A large part of the operations financed from budgetary  resources is managed by the EIB. On 21 November 1978,  taking as its basis the proposal for an implementing regulation referred to in paragraph 16, the Commission made  two agreements with the  EIB (one for the Maghreb and  Mashreq countries and one for five other countries,  including Turkey, Cyprus and Malta) under which it  entrusted to the latter the management of the following  operations:  a)interest-rate subsidies on loans granted by the EIB  from its own resources;  b)risk-capital operations;  c)loans on special terms in the sectors of industry,  energy, mining, tourism and economic infrastructure in  the Maghreb and Mashreq countries, and all the loans on  special terms for the other countries (broad mandate);  d)loans on special terms managed by the Commission  (restricted mandate).  20. By an exchange of letters dated 22 December 1982 and   6 January 1983, the EIB and the Commission agreed to extend  this agreement to the implementation of the Second  Protocols with the Maghreb and Mashreq countries.  21. On 16 June 1987, another agreement of the same type  was signed, this time relating to Regulation (EEC) No  3973/86; under this agreement the EIB received a general  mandate to manage:  a)interest-rate subsidies on loans granted by the EIB  from its own resources; and b)risk-capital operations,  within the framework of the Third Protocols, still to be  signed at that time (see Annex 1), with the Maghreb and  Mashreq countries.  22. By an exchange of letters in November 1989, the EIB  and the Commission agreed to extend this agreement to the  protocols signed subsequently with Cyprus and Malta.  23. Under the broad mandate, the Commission entrusted the  EIB with:  a)preparing, negotiating and signing the loan contract on  behalf of the Community;  b)the lodging of securities and the organization of  preferential rights in favour of the Community;  c)the disbursement of the loan;  d)the collection of the interest and the recovery of the  principal.  24. Under the restricted mandate, the Community entrusted  the EIB with:  a)collaborating in drawing up the draft loan contract  between the Commission and the borrower;  b)drawing up documents which specify the detailed rules  for monitoring the interest and the repayment of the  principal;  c)lodging securities and organizing preferential rights  in favour of the Community;  d)collecting interest and receiving the repayment of the  principal.   Projects managed by the Commission  25. The Commission remains directly responsible for  managing:  a)subsidies;  b)loans on special terms intended to finance projects in  the Maghreb and Mashreq countries in sectors other than  those specified in paragraph 19(c).  Procedures for making financing decisions 26. Under the ad hoc procedure which existed prior to the  adoption of Council Regulation (EEC) No 3973/86 (see  paragraph 17), projects which received a unanimous  favourable opinion from an ad hoc Council working party  were adopted by the Council.  27. Since the adoption of Council Regulation (EEC) No  3973/86, the decision-making procedures are: a)by the 'Article 6 Committee' at the Commission: this  Committee, which includes a representative of the EIB,  gives its opinion, by a qualified majority, on the  financing proposals submitted to it by the Commission.  The Commission then takes the  financing decisions;  b)by the 'Article 9 Committee' at the EIB: this  Committee, which includes a representative of the  Commission, gives its opinion, by a qualified majority,  on the draft financing decisions drawn up by the EIB  under its general mandate. The Commission  is also  required to state its position on the draft decisions,  except for applications for loans with interest-rate  subsidies(8) . The EIB's Board of Directors then  takes the financing decisions in accordance with the  provisions of its own founding instrument.  28. In the absence of a favourable opinion from these  committees (and/or from the Commission in the case of the  Article 9 Committee), the texts provide for or authorize the matter to be brought before the Council, which takes  its decisions by a  qualified majority.   Financing agreements and loan agreements  Projects entrusted to the EIB 29. On the basis of the decision of the EIB's Board of  Directors to grant financing to a particular project, the  Commission commits the necessary appropriations. The EIB  then signs the loan agreement with the borrower. This  differs from the EDF  procedure, whereby the loan agreement  is signed by the Commission.  Projects administered by the Commission 30. The Commission adopts a financing decision, commits  the appropriations and then enters into a financing  agreement with the government of the recipient State. If  the financing is in the form of a loan on special  conditions, a financing agreement  is also signed with the  borrower. If the latter is not the State itself, a contract  of guarantee is also made with the government of this  State, which undertakes to assume the borrower's financial  and pecuniary obligations in the event of his  default.   Administrative methods used  Methods peculiar to the Commission 31. The Commission, as chief authorizing officer,  implements the financing decisions and is responsible for  administering the resources. Several Commission departments  are involved. The administrative channels vary according to  the management tasks  (selection of projects, drawing-up of  financing decisions and agreements, technical opinions,  monitoring of projects carried out, internal control and  payment of amounts due) and involve the various geographical desks at the Directorate-General for  External  Relations (DG I), the technical departments and the  financial departments of the Directorate-General for  Development (DG VIII), financial control (DG XX) and the  paying and accounting departments of the Directorate-General for Budgets (DG  XIX).  32. Where one exists(9) , the Commission delegation in  the recipient country ensures that the financial and  technical management of the projects is sound. In  particular, it is responsible for taking part in drawing up  and issuing the invitations to tender and examining the   tenders; it puts its stamps of approval on the payment  orders that are issued by the national authorizing officer  (see paragraph 33) and forwarded to the Commission for  clearance.  Methods peculiar to the recipient states 33. The recipient state's government is represented by a  national authorizing officer, who is responsible for  carrying out the project. In this capacity, this body  issues invitations to tender, receives the tenders, directs  the work of examining  them and draws up the result of the  invitations to tender; it indicates its agreement with the  contracts made by the project's prime contractor and  informs the Commission of them; as part of the process of  commitment of appropriations drawn up by  the Commission, it  validates and authorizes the expenditure. The national  authorizing officer may delegate all or some of its  responsibilities to a national body, generally the one  directly entrusted with implementing the project.  34. The paying agent is responsible for making authorized  payments in the currency of the recipient state. It is a  financial institution selected by mutual agreement by the  Commission and the government of the state, and is usually  the Central Bank  of the country in question.  35. The paying agent maintains in its books an account,  denominated in the currency of one of the Member States,  which is topped up, as needed, by the Commission. An  agreement signed by the Commission and the paying agent  specifies the rules for  operating this account and the  nature of the responsibilities conferred upon the paying  agent.    (1)Only the Third Financial Protocol with Turkey and the  special aid granted in 1980 are examined in this report, as  the first two Financial Protocols did not make any calls on  Community budgetary resources. (2)The amounts include the 75  Mio ECU of special aid granted  to Turkey in 1980. The aid is not covered by a financial  protocol, but the implementing procedures are similar. (3)The Third Financial Protocol with Turkey is an exception in  that it only includes loans on special  terms. A grant of  aid, in the form of subsidies, was made available to this  country by way of the special aid introduced by Decision No  2/80 of the EEC-Turkey Association Council of 19 September 1980  (see Table 1). (4)A Council decision of 8.3.1977  was the origin of a contract  of guarantee signed in 1978 at the time of the First  Financial Protocols by the Community, represented by the  Commission and the EIB. A document extending that guarantee  contract has been drawn up for each new Financial  Protocol. (5)This does not apply to the Third Financial Protocols with  the Maghreb and Mashreq countries and with Malta and Cyprus  as they contain provisions to the same effect. (6)OJ No L 370, 30. 12. 1986, p. 5. (7)Minutes COM(86) PV 811,  24.1.1986.(8)Regulation (EEC) No 3973/86 does not mention the  possibility of a Commission opinion concerning a subsidized  loan. (9)It is expected that delegations will be opened in Cyprus  and Malta in 1991.