Special Report No 3/2000 on the European Social Fund and the European Agricultural Guidance and Guarantee Fund (Guidance section) - Measures to assist the employment of young persons together with the Commission's replies
Date: 2000-01-27
Institutions: European Court of Auditors
Subjects: EAGGF Guidance Section, EU programme, European Social Fund, employment aid, youth employment, youth unemployment

7.4.2000

EN

Official Journal of the European Communities

C 100/1

I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 3/2000

on the European Social Fund and the European Agricultural Guidance and Guarantee Fund
(Guidance section) (cid:151) Measures to assist the employment of young persons together with the
Commission(cid:146)s replies

(pursuant to Article 248(4), second subparagraph, EC)

(2000/C 100/01)

CONTENTS

Paragraph

Page

General introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Summary of audit observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART I (cid:151) ESF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Court(cid:146)s audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Youth education and employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary importance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The EU strategy for young unemployed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Council strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commission(cid:146)s analysis of the NAPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The audit of mainstream ESF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Definition of a young person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Evaluation of implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Coordination of Structural Funds aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Synergy between Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Synergy between ESF activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Specific observations on ESF financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Employment-Youthstart initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Role and aims of Employment-Youthstart. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary importance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Audit of the implementation of Employment-Youthstart . . . . . . . . . . . . . . . . . . . . . . . . .

Age qualification for Employment-Youthstart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selection procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Absence of reliable information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Coordination and dissemination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mid-term evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Technical assistance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-12

2-12

13-60

13-14

15

16-17

18-20

21-23

21-22

23

24-34

24

25-29

30-34

30-32

33-34

35-44

45-60

46-47

48

49-55

49

50-52

53-55

56-57

58

59-60

3

3

4

4

4

4

5

7

7

8

8

8

8

8

8

9

9

10

10

10

11

11

11

12

12

12

12

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Paragraph

Page

PART II (cid:151) EAGGF GUIDANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Court(cid:146)s audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementation of Articles 10, 11 and 26 to 28 of Council Regulation (EC) No 950/97 . . .

Definition of (cid:145)setting-up(cid:146) date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lack of audit trail for interest-rate subsidies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internal control systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Planning difficulties, delays and internal control weaknesses . . . . . . . . . . . . . . . . . . . . . .

Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III (cid:151) CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61-79

61-65

66-67

68-73

72-73

74-75

76-79

76-77

78-79

80-87

The Commission(cid:146)s replies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

12

16

17

17

17

17

17

18

18

20

7.4.2000

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GENERAL INTRODUCTION

integration of efforts between the Directorates-General respon-
sible for Structural Funds (paragraphs 30 to 34).

1. Successive European Council conclusions and resolutions,
Essen 1994, Madrid 1995, Florence 1996, Dublin 1996, Luxem-
bourg 1997, Vienna 1998, and the Amsterdam Treaty have reaf-
firmed that the fight against unemployment is a priority task of
the Community and its Member States. Part I of this report deals
with measures under the European Social Fund (ESF). Part II of
the report deals with aid under the EAGGF Guidance Section. The
purpose of this audit was to examine and assess the management
by the Commission and selected Member States of measures under
the European Social Fund (ESF) to assist young persons in prepar-
ing for and obtaining employment and of measures under the
European Agricultural Guidance and Guarantee Fund, Guidance
Section (EAGGF Guidance) to assist young farmers setting up in
business.

6. Operational programmes from the Community support frame-
work for 1989 to 1993 (CSF1) have still not been closed. For CSF2
(1994 to 1999), there continue to be cases where national
co-financing for ESF funded actions is delayed, and there are sig-
nificant errors in declarations by project managers and by Mem-
ber States to the Commission of expenditure incurred. Member
States(cid:146) administrations still do not correctly apply the definitions
of (cid:145)final beneficiary(cid:146) and (cid:145)expenditure incurred(cid:146). The level of over-
head costs declared by project managers is often too high. There
has been a lack of audit activity by some Member States despite
the regulatory requirement and there is an absence of regular
reporting of irregularities despite some indications that they are
increasing. There remains scope for improvement in the proce-
dures for selection and follow-up of projects (paragraphs 35 to
44).

Summary of audit observations

2. The introduction of national action plans (NAP) provided an
opportunity for coordinating and targeting employment policies.
Monitoring and evaluation of the impact of ESF during imple-
mentation should steadily improve performance. The Commis-
sion has played an important role in this policy development
(paragraph 23).

3. Young persons are one of the main target groups for ESF aid.
However, the target group is not clearly defined and as a result the
definitions applied by Member States vary between operational
programmes (OPs) and Single Programming Documents (SPDs)
and between measures and sub-measures and the age ranges from
14 to 40 years (paragraph 24).

4. The Court(cid:146)s audit and the Commission(cid:146)s analysis of the mid-
term evaluation of ESF implementation during the Community
support framework 1994 to 1999 (CSF2) showed that there were
a number of weaknesses. There were insufficiently clear objectives
including target groups and there is a need for more meaningful
performance indicators. It is essential that these weaknesses are
dealt with by Member States and that the improvements are
monitored by the Commission (paragraphs 26, 27 and 58).

7. The management and control system for Youthstart has
improved in the second phase (1997 to 1999) but implementa-
tion still suffers from some of the weaknesses of the first selec-
tion round. The second selection round was unable to take into
consideration the lessons of the first round as few projects had
been completed (paragraphs 51 to 52).

8. The setting-up of worthwhile transnational partnerships for
Youthstart has been adversely affected by differences in the num-
ber of partners and by the involvement of passive partners whose
contribution is not planned and widely known. Project size, the
lack of partnership coordination and the incomplete and unreli-
able database have also posed problems (paragraphs 54 and 55).

9. There is an absence of common rules on eligible costs for
coordination of Youthstart. Dissemination of results must be
improved so that they can be exploited on an EU-wide basis. It is
almost impossible to evaluate the effectiveness of transnationality
(one of the main reasons for having a Community initiative (CI)
action), as the different projects within a transnational partner-
ship are evaluated on a national basis (paragraphs 56 to 58).

10. The work performed by the Technical Assistance (TA) Agency
has assisted the implementation of the CI (cid:145)Employment(cid:146). The
Commission should take steps to ensure that the expertise gained
in the implementation of TA is not lost (paragraph 59).

5. There is a lack of synergy between Funds in multifund opera-
tional programmes, operational programmes and Community
initiatives, and between interventions in the Member States.
National authorities should ensure a coordinated management of
projects where a single project manager has projects under differ-
ent objectives, which would increase effectiveness and reduce the
risk of double claims. The Commission has not ensured sufficient

11. The introduction of certain financial facilities under EAGGF
Guidance in favour of the setting-up of young farmers is impor-
tant in combating unemployment for this target group. Assis-
tance for agricultural investments in the form of capital grants
and/or interest-rate subsidies involve complex national and
regional administrative procedures. Implementation of EAGGF

C 100/4

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Official Journal of the European Communities

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Guidance measures was delayed due to late approvals of pro-
grammes and the internal control weaknesses. Delays in the
implementation of projects have resulted, in some cases, in the
beneficiaries becoming ineligible (paragraphs 71 to 77).

Youth education and employment

12. Similarly to the ESF, the EAGGF Guidance has shown the
lack of clear objectives and of meaningful performance indicators
(paragraphs 78 and 79).

16.
In 1996, 48 million people were aged between 15 and 24
years (the range used by Eurostat for statistical comparisons of
young and adult persons) in the European Union, 22 million of
whom (46 %) were potentially active in employment terms, while
26 million were in education and training. Five million were
unemployed, giving an unemployment rate for young people of
22 %, which was more than double that of the 25 to 59 age
group. In 1998, the unemployment rate for young people was still
19,5 %. Statistics of unemployment rates appear in Table 1.

PART I

ESF

Introduction

13. There are two main methods of delivery of ESF assistance to
young persons: the mainstream ESF activities under the various
Objectives 1 to 6 and the Community initiative (CI) Employment,
where the Youthstart strand supports projects for young persons.

14. A number of types of actions to assist the fight against youth
unemployment used by the Member States are co-financed by the
ESF. Examples of these are projects to provide young persons with
vocational qualifications and improved skills, counselling and
guidance, apprenticeships and training with work placements,
and also wage subsidies for employers. The balance between the
various types of action is a matter for each Member State but,
with the encouragement of the Commission, there is an increased
tendency for Member States to integrate the actions (1).

The Court(cid:146)s audit

15. The audit of youth employment measures was carried out at
the Commission and in five main beneficiary Member States (Ger-
many, Spain, France, Italy and the United Kingdom). The audit
examined both legality/regularity and sound financial manage-
ment aspects (clear targeting, evaluation of implementation, etc.).
Evidence has also been drawn from the results of audits carried
out for the Statement of Assurance in 12 Member States. In addi-
tion, the Court has audited the support given to the Community
initiative (CI) Employment - Youthstart by the Technical Assis-
tance (TA) Agency which is responsible for supplying assistance
to all CIs.

Table 1

Key unemployment figures

Unemployment rates % of active population

EU-15
B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK

1996

10,8
9,7
6,8
8,9
9,6
22,2
12,4
11,6
12,0
3,0
6,3
4,3
7,3
14,6
9,6
8,2

1997

10,6
9,4
5,6
9,9
10,0
20,8
12,3
9,8
12,1
2,8
5,2
4,4
6,8
12,7
9,9
7,0

Active population = people in work + unemployed looking for work.
Source: Eurostat (cid:151) Harmonised unemployment rates.

Employment rates (15 to 64 years) (%)

(People in work/total population)

EU-15
B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK

1996

59,9
56,3
74,0
64,1
54,9
46,6
59,7
54,9
50,6
59,1
65,4
67,3
62,3
60,5
69,7
68,7

1997

60,1
57,0
75,4
63,6
54,8
48,0
59,4
56,4
50,5
59,9
67,5
67,2
63,4
61,9
68,3
69,7

Note: 1998 results for Ireland refer to 1997.
Source: Eurostat (cid:151) European labour force survey.

1998

10,0
9,5
5,1
9,4
10,7
18,8
11,7
7,8
12,2
2,8
4,0
4,7
5,1
11,4
8,3
6,3

1998

60,8
57,3
75,3
63,7
55,6
49,7
59,9
56,4
50,8
60,2
69,4
67,4
66,8
63,4
68,6
70,2

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C 100/5

Activity rates (15 to 64 years) (%)
Active population = people in work + unemployed looking for a
job/total population

EU-15
B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK

1996

67,3
62,2
79,5
70,4
61,0
60,0
68,2
62,3
57,7
61,1
69,9
71,1
67,5
71,7
77,1
74,9

1997

67,5
62,6
79,8
70,6
60,8
60,8
68,0
62,9
57,7
61,5
71,5
70,9
68,2
72,8
76,4
75,0

Note: 1998 results for Ireland refer to 1997.
Source: Eurostat (cid:151) European labour force survey.

Unemployment rates as a % of active population
(15 to 24 years)

EU-15
B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK

1996

22,0
23,1
10,6
10,0
31,0
41,9
29,2
18,2
33,5
8,5
11,7
6,2
16,8
27,9
20,5
15,5

1997

21,1
23,0
8,4
10,8
30,8
39,1
29,1
15,3
32,7
8,1
9,6
6,7
15,1
25,2
20,6
14,2

Source: Eurostat (cid:151) Harmonised unemployment rates.

1998

67,8
63,2
79,3
70,7
62,5
61,3
68,2
62,9
58,1
61,9
72,6
71,3
70,2
73,1
75,5
74,9

1998

19,6
22,1
7,4
9,8
29,8
35,4
26,6
11,5
33,2
6,9
7,8
6,6
10,6
23,5
16,7
13,6

17. The comparative importance of youth unemployment is
shown in Table 1. In 1998, the highest EU youth unemployment
rates (2) were in Greece (29,8 %), in Spain (35,4 %), in France
(26,6 %) and in Italy (33,2 %). During the last three years there
has been a downward trend in youth unemployment, with Spain,
Ireland, Portugal and Finland showing significant reductions (3).

Budgetary importance

18. The total amount planned for ESF expenditure 1994 to 1999
is ECU 49 000 million at 1999 prices. Table 2 shows the total
amounts of ESF planned to be spent annually in the period 1994
to 1997 under the second Community support framework (CSF2),
with details of the execution known up to November 1999.

19.
In non-Objective 1 regions of Member States, Objective 3 is
used as the main means of delivering ESF measures. The purpose
of Objective 3 is to combat long-term unemployment and facili-
tate the integration into working life of young people and of per-
sons exposed to exclusion from the labour market and to pro-
mote equal employment opportunities for men and women. ESF
Objective 3 funding is split between persons aged 15 to 24 years,
and those aged 25 to 65 years. An average of about 37 % of main-
stream ESF Objective 3 expenditure is spent on employment mea-
sures for young persons and a similar percentage is spent on mea-
sures for the long-term unemployed, see Table 3. The balance of
the ESF Objective 3 expenditure is made under other mainstream
priorities such as equal opportunities, and under the CIs, innova-
tive pilot projects and technical assistance.

Table 2

ESF utilisation of funds by Member State and tranche

B

DK

D

EL

E

F

IRL

I

L

NL

A

P

FIN

S

in billion ECU

UK

Totals (1)

Tranche 1994

Initial plan

Commitments

Payments

112 583 55 032

995 538 337 263 1 233 834

675 902 342 617

791 807 3 931 202 855

153 237 71 218 1 000 218 334 079 1 407 319

718 718 339 163

751 063 5 305 205 368

110 338 54 037

809 675 170 948 1 112 841

522 256 322 400

354 037 3 896 176 401

Effective amount declared by Member State

77 086 42 991

544 563 136 959 1 121 457

385 443 313 231

59 463 3 682 151 468

0 437 009

0 433 293

0 372 576

0 287 029

0

0

0

0

0

0

0

0

784 333 5 972 704

825 386 6 244 367

661 404 4 670 809

655 179 3 778 551

Tranche 1995

Initial plan

Commitments

Payments

127 124 62 057 1 098 243 394 956 1 347 660

842 030 310 812

805 888 4 404 218 998 106 033 450 108 117 110 101 436

897 654 6 884 513

156 993 89 643

844 895 399 402 1 342 468

662 709 306 603

450 442 5 218 181 290 151 823 460 120 149 677 159 076

889 796 6 250 155

122 549 63 404

623 680 325 388 1 240 987

483 954 303 380

346 457 4 630 152 367 115 010 428 704

72 584

77 717

824 084 5 184 895

Effective amount declared by Member State

92 887 44 367

460 685 221 852

484 991

534 313 300 287

212 438 3 916 174 425

25 919 451 973

11 690

1 796

682 391 3 703 930

Tranche 1996

Initial plan

Commitments

Payments

142 027 65 977 1 247 490 449 493 1 516 115

900 511 349 929

927 093 5 237 243 450 115 443 505 692 119 581 145 713 1 040 254 7 774 005

126 970 56 297 1 217 809 124 617 1 404 589

687 426 352 958

785 436 4 100 216 684

93 662 541 979

72 413

49 700

895 811 6 630 451

111 277 65 007 1 080 516 149 265 1 560 381

654 187 331 185

448 097 4 080 213 698

72 040 473 799

88 088

44 939

914 551 6 211 110

Effective amount declared by Member State

93 667 48 284 1 056 815 282 339 1 531 857

684 882 330 233

444 611 4 287 195 976

56 563 468 492

55 400

55 207

947 942 6 256 555

Tranche 1997

Initial plan

Commitments

Payments

137 837 63 267 1 261 426 478 643 1 622 827

825 071 362 635

995 230 5 537 268 858 119 237 557 853 124 804 152 534 1 049 988 8 025 747

143 463 63 220 1 052 479 342 647 1 544 903

630 284 359 739 1 409 747 5 901 283 044 109 086 389 280 143 210 105 453

447 713 7 030 169

111 549 53 497 1 229 694 366 858 1 361 783

788 803 359 198

605 975 5 355 213 637 103 435 504 166 119 345 113 135

743 633 6 680 063

Effective amount declared by Member State

99 723 52 083

964 072 336 455 1 413 989 1 178 536 342 629

109 904 4 583

79 810 130 432 321 198

90 610 107 120

551 912 5 783 056

(1) This column shows commitments and payments made in respect of each tranche in any year.
Note 1: Commitments can be higher than the initial plan because of Article 20(3) of Council Regulation (EEC) No 2082/93 (single commitments) and because of the yearly indexation of the programmes.
Note 2: The figures for 1998 will be available as of November 1999.
Source: Commission DG V (November 1998).

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Breakdown by Member State of the (cid:145)youth(cid:146) and LTU (long-term unemployed) priorities. Objective 3 (1) and
unemployment rate for the active young population by Member State

Table 3

Member State

Total ESF
amount
(1994 to
1999)

Youth priority amount

LTU priority amount (3)

Unemployment
rate in the
young active
population

Belgium

Denmark

Luxembourg

Netherlands (2)

Austria

Finland

Sweden

ECU million

ECU million

401,9

268,1

20,7

923,0

334,0

258,4

347,7

86,1

58,1

3,1

22,9

82,2

97,0

United Kingdom

3 177,6

1 265,8

Germany

France

Italy

Spain

Total (4)

1 682,1

2 562,4

1 316,2

1 494,5

442,0

976,6

566,0

743,7

11 292,1

3 599,8

%

21,4

22,0

15,0

7,0

32,0

28,0

39,8

26,0

38,1

43,0

49,7

36,6

ECU million

134,2

142,4

5,5

113,8

171,5

173,0

1 208,1

944,1

690,7

421,2

519,9

4 004,5

%

33,4

53,1

26,6

34,0

66,3

50,0

38,0

56,1

27,0

32,0

35,0

38,2

20

11

9

11

7

42

22

15

10

28

34

42

(1) This table only shows Objective 3 expenditure. Other ESF expenditure on youth measures takes place under Objective 1.
(2) For the Netherlands there is no clear division of amounts by priorities.
(3) Long-term unemployed.
(4) Comments: In general, the data in the table show that each Member State allocates funds according to the problems it considers important.
A group of countries such as Italy, Spain, the United Kingdom and France spend a large part of the finance on young people, because the
rates of unemployment among young people are very high. It is not impossible for the priorities to overlap in part, i.e. under the LTU
there are also young people. The age of 25 years may be regarded as the most commonly used average for determining this target group,
according to the Commission.

Source: Commission annual reports on the Structural Fund, Eurostat 1996.

20. For Objective 1 operational programmes (OPs), although
there are measures which specifically aim at helping young per-
sons from education into the workplace and at improving exist-
ing education and training systems, it is not possible to identify
all the ESF expenditure in respect of young persons. This is because
there is no clear separation of measures between the different age
groups as the OPs are aimed at overall regional targets using all
three Structural Funds, rather than solely human resources targets
as under Objective 3.

The EU strategy for young unemployed

Council strategy

then prepared, adopted and delivered their first national action
plans (NAPs) by the end of April 1998.

22. The Council adopted four main lines of action (the four (cid:145)pil-
lars(cid:146)):

(a)

improving employability,

(b) developing entrepreneurship,

(c) encouraging adaptability in businesses and their employees,

(d) strengthening the policies for equal opportunities.

21. Following the special European Council on employment in
Luxembourg on 20 and 21 November 1997 the Council was to
draw up guidelines, according to the new title on employment in
the Treaty of Amsterdam, to be taken into account in the national
employment policies (4). The first employment guidelines (for
1998) were adopted on 15 December 1997 and Member States

Nineteen guidelines were adopted around the four pillars, setting
specific targets to be regularly monitored. Four of these guidelines
focus especially on youth employment (5).

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Commission(cid:146)s analysis of the NAPs

23. The Court has examined the Commission(cid:146)s 1998 analysis of
the Member States(cid:146) NAPs. The Commission concluded in June
1998 that the NAPs were vague, making it difficult to assess the
existence of strategy and the priority of measures and that they
indicated general political priorities for (cid:145)improving employability(cid:146)
rather than producing operational plans. In addition, most had
not quantified or specified targets and indicators showing the ESF
aid that will be committed to achieving them, thus making it
impossible to assess the effectiveness of the measures in ESF terms.
Most Member States did not present a systematic analysis of the
ESF-supported interventions. The Commission confirmed in Sep-
tember 1999, in its analysis of the year 1998, that the Member
States recognise that concrete objectives have not yet been estab-
lished.

The audit of mainstream ESF

Definition of a young person

24.
In creating an EU strategy for the employment of young per-
sons there is a need to define the target population for the mea-
sures to be undertaken, but the current ESF Regulation, Council
Regulation (EEC) No 2084/93 (6), in contrast to Article 2 of the
former ESF Regulation (EEC) No 4255/88, does not contain a spe-
cific age limit for young people. The audit found cases where the
definition of a (cid:145)young person(cid:146) varied between and within Member
States depending on the fund, OP or measure, for example in
France some measures for young people included persons aged
40, in Germany (Brandenburg) 27 and in Italy (Sicily) 32.

Evaluation of implementation

26. An example of the lack of focus concerned Germany (Bran-
denburg), where each year about 15 000 young people benefited
from employment subsidies with an ESF contribution. The assis-
tance is given to the training company as a lump sum per trainee
totalling between DEM 3 000 and 7 000 (ECU 1 500 to 3 500)
for the whole period of training (on average three years). The sub-
sidies were paid without specifying qualifying trainees and profes-
sions. This led to a certain grant mentality in the private sector
and to doubts whether additional jobs (positions for trainees)
were created. To avoid dead-weight effects for the future, the
Brandenburg authorities stopped using the measure in 1998 in
order to concentrate the funds on other measures. However, at
present, about 75 % of all apprenticeships participate in the pub-
lic aid schemes.

27. The Court examined the Commission(cid:146)s analysis of the evalu-
ations carried out by the Member States for young people on
measures under Objectives 1 and 3 (8). The Commission (DG V)
had found that, for Objective 1, the data produced using the exist-
ing monitoring systems were insufficient for evaluation purposes.
The analysis shows that the results and impact of the programmes
strengthening education systems have been poor and the links to
vocational training systems need to be assessed.

28. The Objective 3 priority for young people does not cover a
homogeneous group, either by labour market status (short-term
unemployed, long-term unemployed, apprenticeship), or in terms
of their qualifications and/or work experience. Moreover, young
people may be included in other target groups, for example
women, excluded persons, long-term unemployed. The Commis-
sion(cid:146)s evaluations for Objective 3 found serious gaps in the moni-
toring systems with respect to evaluation needs. Most of the
Member States have problems in combining information from
differing national monitoring systems with the generally unreli-
able data on the financial impementation of ESF.

29. The extent to which project and programme evaluation takes
place varies from Member State to Member State and between
regions. The Commission needs to assist the Member States in
setting and using performance indicators.

25. As noted above, appropriate targets and meaningful perfor-
mance indicators have not been set. In certain Member States (7),
an overall plan for using ESF to benefit young persons under
Objective 3 had not been sufficiently developed and applied in the
regions audited. This is confirmed by the Commission(cid:146)s examina-
tion of the national employment action plans. There were similar
problems in identifying total ESF effort for young persons in the
Objective 1 regions examined in Germany and Italy. In Spain a
co-financed action using employment aids apparently created
many thousands of permanent jobs for, among others, young per-
sons. Most of the aid was spent on converting temporary jobs to
permanent ones.

Coordination of Structural Funds aid

Synergy between Funds

30. There are weaknesses within the Commission(cid:146)s own man-
agement coordination. In the multifund OPs the Commission
Directorates-General do not have a common approach. Measures
in the Member States which integrate the different Structural
Funds are the exception. The Commission should give guidance
to the Member States on how to better integrate the various Funds.

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31. The Structural Funds Regulations (9) stipulate that the vari-
ous Fund measures, together with those of the European Invest-
ment Bank (EIB), should be coordinated. In the future, the NAPs
should ensure greater transparency of the support brought by the
different Funds to the employment guidelines. The impact on
investment and job creation concerning the granting by the Com-
munity of interest subsidies on loans by the EIB to small and
medium-sized enterprises, within the context of its lending facil-
ity will be dealt with in a separate special report.

In order to ensure timely and programmed implementation
37.
of ESF measures, it is necessary for Member States to review and
report on the use of funding. This is not always done. The report
attached to the request for the payment of the Objective 3 1997
balance for France indicated that the cumulative rate of imple-
mentation for young persons was substantially less than that for
the long term-unemployed (55,6 % against 73 %). The Member
State did not comment on this in its report and the Commission
did not follow it up.

32. The United Kingdom has introduced the (cid:145)New Deal(cid:146) pro-
gramme which complements ESF measures. The audit noted that
ESF places a greater administrative burden on project managers
than (cid:145)New Deal(cid:146).

Synergy between ESF activities

33. There is a need to ensure synergy between the ESF actions
and projects delivered by the human resources Objective 3 and
the ESF delivered in the same regions using multifund Objective
5b. In addition, there is a need to manage the mainstream ESF and
the ESF in the CIs to ensure a better flow of innovative ideas to
the mainstream ESF and ensure that funding rules are coherent.

34.
In 1997 the United Kingdom placed the management of
Objective 3 under regional offices. Objectives 1 and 2 were already
managed regionally. The change has made it easier to ensure con-
centration and synergy between objectives but weaknesses still
exist as training providers that have projects under more than one
objective are managed separately instead of together. This man-
agement structure which exists in several Member States should
be improved in order to make overall management more effec-
tive and reduce the risk of double claims.

Specific observations on ESF financing

35. The Court has previously indicated on a number of occa-
sions weaknesses in the ESF financing and co-financing systems.
The observations shown below demonstrate that problems per-
sist.

38.
In respect of the OP for Sicily, Italy, the measure for young
unemployed persons seeking work includes ECU 222,7 million
for the period 1994 to 1999, which represents 51,4 % of the total
amount in the OP. By 31 December 1997 execution had attained
only 41 % (ECU 92,3 million). No explanation was given in the
report from the region attached to the claim for payment, nor was
there evidence that the Commission had followed it up.

In Sicily, according to the certifying body at regional level,
39.
the annual declarations of expenditure were drawn up on the
basis of the payments which the promoters declared corresponded
to the invoices paid. The audit findings showed that this was at
odds with the real situation:

(cid:151) part of the expenditure declared by the promoters (40 %) did

not correspond to the invoices paid;

(cid:151) furthermore, an examination of the regional accounts for
1995 and 1996 shows that, for this period, there was a delay
in the payment of the national co-financing. This observation
shows that a problem already highlighted by the Court still
persists despite the efforts made by the Commission.

40. The request for the payment of the balance for Objective
3 1997 was presented by the French authorities to the Commis-
sion on 29 June 1998. A modification, which increased the total
certified by FRF 21,2 million (ECU 3,2 million), was made on 16
September 1998. At the same time changes were made reducing
the amounts due for 1994, 1995 and 1996, as a result of a lower
number of beneficiaries. These weaknesses in the initial record-
ing and reporting system have been corrected after Member State(cid:146)s
ex-post control activities. In addition, the total eligible costs declared
should have been reduced by any revenue from the projects
co-financed by the ESF. The 1997 declaration showed receipts of
FRF 291,8 million (ECU 44,5 million) which should have been
deducted from the total eligible expenditure declared but were
not.

36. One factor which affects the overall amounts that Member
States commit to the training effort is their approach to the
national co-financing of ESF projects. Some Member States use
unemployment benefit and allied social allowances, which would
have been paid anyway, as national co-financing (10). While such
co-financing is within the terms of the Regulations it does not
increase financial support to the ESF actions (11)

41. The United Kingdom authorities grant a jobseekers allow-
ance (JSA) (which may be likened to unemployment allowance).
Rules for the payment of JSA require that, inter alia, a claimant
should be available for work. Entitlement to JSA will be lost if the
claimant works for more than 16 hours a week. Training, work
(including work without remuneration) in order to practice the

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theoretical training given, and private study, if they restrict a
trainee(cid:146)s availability for work, are assimilated into the 16-hour
rule. This has an effect on the type of courses that are designed
for JSA claimants in that they do not, in general, exceed 16 hours
in total per week, in order to avoid loss of JSA by the trainees.
Training courses limited to 16 hours per week may not always
provide the most efficient and effective delivery of training.

The Commission should examine the possibility of introducing a
pilot exercise on the mapping of unemployed persons and job
opportunities in order to better orient ESF funding and overall
employment effort.

Employment-Youthstart initiative

42. There is a need to ensure that the project costs charged to
overheads are reasonable and represent value for money. The
regulatory framework on overheads (12) leaves room for interpre-
tation for Member States and project managers. Overheads will
vary with the type of project, for example they will represent a
higher proportion of expenditure for guidance and counselling
projects whereas they will be much lower for projects granting
employment aid. The Court examined sample claims to see the
size of the overheads. In some Member States, for example France
and Germany, the authorities use notional sums per trainee hour,
in such circumstances it is not possible to establish the amounts
that are allocated for overheads.

In some German projects in Brandenburg no overheads were
43.
charged, the cost being borne by the administration and, in gen-
eral, they were less than 10 %. As regards the OP managed by the
Italian Ministry of Universities, it was found that the level of over-
heads in the University of Catania (Sicily) amounted to 32,7 %. In
the United Kingdom the percentage claimed for a college project
was about 30 %. In general project overheads in the United King-
dom ranged between 28 % and 50 %.

44. The Court(cid:146)s audit noted a number of weaknesses in relation
to the management of ESF projects by Member States(cid:146) authori-
ties. These observations concerned both the legality and regular-
ity of operations and also the sound financial management of
transactions, for example:

(cid:151) delays in the implementation and closure of operational pro-

grammes;

(cid:151) failure to respect the requirement to declare eligible expendi-

ture incurred;

45. This section of the report examines the implementation of
the Youthstart strand of the CI (cid:145)Employment(cid:146) (13). During the
period 1994 to 1998 there were two selection rounds during
which 1 306 projects were selected. The Court(cid:146)s sample related to
the first selection round in which 495 projects were retained. The
Court selected four transnational partnerships covering the five
Member States and visited each partner (nine in all) to evaluate
the implementation.

Role and aims of Employment-Youthstart

46. Youthstart is one of the four strands of the Community ini-
tiative programme (cid:145)Employment(cid:146) (14). The Youthstart strand aims
to help Member States to develop projects to integrate young
people without basic qualifications or training into the labour
market and to assist the development of networks of partnerships
and experience. These projects funded under the CI (cid:145)Employment(cid:146)
should have: transnationality, innovation, a bottom-up approach,
a multiplier effect and complementarity with related EU actions.

47. The implementation of the Community initiatives is mainly
the responsibility of the Member States who have set up for this
purpose national support structures (NSS) (which are national or
sometimes regional TA Agencies). The role of the Commission
includes the coordination and the follow-up of the implementa-
tion in the Member States. In order to be able to assume this role
the Commission has entered into a TA contract financed by part
B of the budget for ECU 5,6 million per annum renewable four
times (i.e. ECU 28 million in total).

(cid:151) weaknesses in management of multiannual projects;

Budgetary importance

(cid:151) inconsistent application of regulations leading to unequal

treatment between Member States;

(cid:151) weaknesses in claiming systems, increasing the risk of the dec-

laration of ineligible expenditure;

(cid:151) inadequate audit activity and failure to monitor irregularities;

(cid:151) weaknesses in the selection and follow-up of projects.

48. The European Union funding of the Employment initiative
for the period 1994 to 1999 is ECU 1 835 million (at 1996 prices)
and the contribution in respect of Youthstart is ECU 441 million
(24 %). Table 4 gives the budgetary execution of the Youthstart
strand by Member State. A maximum amount of 4 % may be
spent on TA in the Member States, to support the preparation and
implementation of projects, and should ensure that a coordinated
approach will be followed.

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Table 4

Budgetary execution of Youthstart

Country

EU budget
period 1994 to
1999

National public
contributions
1994 to 1999

Belgium

Denmark

Germany

Greece

Spain

France

Ireland

Italy

Luxembourg

Netherlands

Austria

Portugal

Finland

Sweden

United Kingdom

Total

(1) Not known.
Source: DG V Commission.

12 644

3 333

46 789

14 436

104 283

44 028

18 306

94 193

100

14 918

4 542

8 580

7 219

5 672

49 605

428 648

14 367

3 508

38 145
(1)

55 003

43 116

5 526

51 351

100

15 135

4 656

2 860

8 699

5 386

58 120

305 972

(in billion ECU)

Commitments
1994 to 1998

Payments
1994 to 1998

12 644

3 181

46 789

8 802

71 027

27 734

13 197

52 110

100

10 534

4 542

4 658

7 219

5 672

6 058

2 545

22 671

5 257

55 477

18 950

10 886

22 467

82

7 670

3 634

3 921

3 609

4 538

33 641

301 850

23 273

191 038

Total

27 011

6 841

84 934

14 436

159 286

87 144

23 832

145 544

200

30 053

9 198

11 440

15 918

11 058

107 725

734 620

Audit of the implementation of Employment-Youthstart

Age qualification for Employment-Youthstart

49. A Commission communication to the Member States (15)
sets as the target group young persons of less than 20 years of
age. This may be varied: (cid:145)In exceptional and duly justified circum-
stances, Member States may include young persons over the age
of 20 ...(cid:146). Some Member States have changed the age limit for
Youthstart, for example Germany (Brandenburg) has admitted
young persons of up to 26 years of age to projects, while the age
limit in Greece is 24 years of age and Austria, in some cases,
applied 15 to 17 years.

Selection procedure

50. Projects are selected by the Member States. The project man-
agers of selected projects then contact each other in order to cre-
ate transnational partnerships. In order to facilitate the partner
search, the TA Agency of the Commission has created a database
called (cid:145)consolidated module(cid:146) which contains information (16) on
individual projects. During the first selection round in 1995, 486
projects were selected and in the second round in 1997, 804
projects.

51. The selection procedure for the second round of projects
funded under the Employment CI showed significant progress in
the coordination between the Member States, particularly due to
the introduction of a common timetable, the use of the common
database to construct the transnational partnerships and in the

removal of the requirement to indicate the transnational partners
in advance. However, other features adversely affecting the imple-
mentation of the projects remain:

(a) few Member States require that the proposal contains an indi-
cation of the identity of the two partners and a description of
the work to be performed by the proposed partners;

(b) ESF could be used to fund the search for partner projects. Six
Member States did so, but the funds per project varied between
ECU 2 500 in Belgium and ECU 14 000 in the United King-
dom, leading to unequal treatment between project manag-
ers;

(c) the Commission gave no guidelines on the funds to be made
available for transnational cooperation. This has led to a large
difference in the amounts available for project promoters to
prepare the transnational partnership.

52. The selection system still does not fully assist the creation of
worthwhile transnational partnerships. At present an overall coord-
ination of the transnational partnerships, including planning,
budget, evaluation, implementation and dissemination is not suf-
ficiently ensured. Frequently, the transnational component con-
sists of a visit to partners and an exchange of information on the
activities performed. Seldom is a common project developed.

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Absence of reliable information

(b) there was a heavy administrative workload due to the nature

of the selection procedure;

53. The data concerning transnational partnerships held on the
(cid:145)consolidated module(cid:146) operated by the Commission(cid:146)s TA Agency
are unreliable as they are based on information supplied in respect
of individual projects and not transnational partnerships. Some
projects indicated other projects as their partners but those latter
partners did not show similar reciprocal information. Thus, the
Commission is unaware of the number of partnerships formed or
indeed, the projects within those partnerships. Indications of the
unreliability of the systems, such as the record that seven projects
in the first round and 87 projects in the second round were being
financed although they were recorded as having no partner, were
not followed up. Given that cooperation via transnational part-
nerships is one of the key elements of the CIs, this apparent
absence of basic information highlights a major weakness in the
system which should be improved.

54. Once a transnational partnership is established, one or more
partners may stop their project. This information is, in general,
not recorded in the database. The development of a partnership
is thus unknown by the parties responsible for the implementa-
tion of the CIs. Some partnerships showed partner projects which
had not been selected by the NSS. These unapproved partners are
not funded by Youthstart and although the partners may partici-
pate actively in a selected project, no complete information on
those partners exists within the management structures of Youth-
start. Indeed, the different partners do not always know that
unapproved partners are involved in the project.

55. The Court has previously observed (17) the weakness that
transnational partnerships do not make one of the partners
responsible for the coordination and management of the partner-
ship.

Coordination and dissemination

56. The interpretation of eligible costs varies between the Mem-
ber States. For example in one Member State the cost of an exter-
nal coordinator is not eligible, whereas in others it is. This has led
in one of the partnerships audited to costs of coordination being
paid through and claimed by the project in another Member State.

57.
In order to obtain a multiplier effect, dissemination is impor-
tant, but a separate budget for those activities is not required for
each project. Dissemination is mainly seen by project managers
as the responsibility of the NSS but the latter do not undertake
dissemination systematically. The Commission should further
encourage the approach of looking actively for opportunities to
implement the results of a project in the mainstream ESF.

Mid-term evaluation

(c) there were problems in the development of transnational

partnerships;

(d) the dissemination of results stategy should be strengthened;

(e) there were inadequate follow-up procedures by some Member

States;

(f) a greater effort is needed to develop success indicators.

Technical assistance

59. The Commission has not developed a specific procedure for
monitoring the total amounts spent on TA for CIs in the Member
States. A system should be laid down to monitor the implementa-
tion of this expenditure.

60. The deadline for the Commission and the Member States to
commit expenditure for the CIs is 31 December 1999. The dead-
line for the implementation of projects is 31 December 2000 and
the deadline for the submission of the final claim by the Member
States is 30 June 2001. As the TA contract ends before the projects
are finished, the Commission should ensure that this situation
will not adversely affect the finalisation of this Community initia-
tive.

PART II

EAGGF GUIDANCE

Introduction

58. The main results of the Court(cid:146)s audit were confirmed by the
Commission(cid:146)s mid-term evaluation, which drew the following
conclusions:

(a) there were delays in the start of projects although progress
was made for projects selected in the second selection round;

61. According to Eurostat (18), in 1997 there were approximately
seven million farms in the European Union of 15 and 6,8 million
of these were owned by individual farmers. More than 55 % of
farmers were aged above 55 years, and only 7,6 % were below 35
years, whereas 28,4 % were above 65 years of age (see Table 5).

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Number of farmers in the European Union by age group

Table 5

Total
number of
holdings

Holder(cid:146)s
being a
natural
person
(persons)

Number of holdings owned by individual farmer

age < 35
years

age 35 to 44
years

age 45 to 54
years

age 55 to 64
years

age 65 years
and over

1

2

3

4

5

6

7

6 989 130

6 868 720

521 810

1 085 650

1 495 350

1 815 480

1 950 420

7 370 040

7 269 230

570 740

1 106 900

1 575 090

1 994 540

2 021 950

(3:2)

(4:2)

(5:2)

(6:2)

(7:2)

7,60 %
7,85 %

15,81 %
15,23 %

21,77 %
21,67 %

26,43 %
27,44 %

28,40 %
27,82 %

1997 average

1995 average

Share in 1997
Share in 1995

Source: Eurostat New Cronos, theme 5-eurofarm-ef-main.

62. Average employment in agriculture dropped from 5 % of the
working-age population (persons aged 15 to 64) in 1985 to 3,1 %
in 1997 (see Table 6) and varied in 1997 from 11,4 % in Greece to
1,3 % in the United Kingdom and Belgium. Table 7 shows the
number of young farmers receiving aid under the relevant mea-
sures from 1994 to 1997.

Table 6

Total employment in the agricultural sector as a share of total
working-age population (15 to 64 years)

Member State

Agriculture 1985

Agriculture 1997

(in %)

Belgium

Denmark

Germany

Greece

Spain

France

Ireland

Italy

Netherlands

Austria

Portugal

Finland

Sweden

United Kingdom

Total EU-14

1,7

5,1

2,9

18,1

8,1

4,7

8,3

6,0

2,8

6,1

13,8

8,6

3,9

1,6

5,0

1,3

3,0

2,1

11,4

4,1

2,7

6,0

3,5

2,6

4,8

9,0

4,5

2,0

1,3

3,1

Source: Employment rates report 1998, Commission (DG XXII).

63. The administrative and financial difficulties encountered by
young persons in taking over agricultural holdings are com-
pounded by important social and structural problems. The pur-
chase or leasing of good land, technical improvements and invest-
ments for specialisation and the purchase of production quotas to
make the farm more competitive are very expensive. In rural
regions, the lack of essential social services (health, education, lei-
sure, transport, etc.) causes depopulation. In addition, the difficult
working conditions and unreliable income render the agricultural
profession less attractive to the young.

64. The European Union has introduced a number of measures
to help young farmers in particular. The most important are those
financed under Objective 5(a) (improvement of agricultural struc-
tures), which aim to help farmers to take over an agricultural
holding. Council Regulation (EC) No 950/97 (amending Regula-
tion (EEC) No 2328/91) provides aid for setting up young farm-
ers (under 40 years of age) through a system of aid for invest-
ments in agricultural holdings, comprising: investment aids in the
form of capital grants or interest-rate subsidies (Article 7), setting-
up aid in the form of capital grant (Article 10) and additional
investment aid (Article 11). These provisions aim at improving
the viability of individual farms and are intended for existing
farmers as well as young farmers setting up in agriculture for the
first time. In 1997, the number of young farmers under 35 years
was 521 810 (19). The overall aid allocated under Articles 10 and
11, according to Commission data was ECU 956,8 million for the
period 1994 to1997. About 25 000 young farmers benefit from
this facility every year. To benefit from investment aids, farmers
are required to present and have approved a material improve-
ment plan (MIP) (see Table 8).

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Table 7

Regulation (EC) No 950/97 - Setting-up aid for young farmers (Article 10) (cid:151) Additional aid for investments for young farmers (Article 11)

Member State

1994

1995

1996

1997

1994 to 1997

Article 10 Article 11 Article 10 Article 11

Article 10

Article 11

Article 10 Article 11 Article 10 Article 11

Number of beneficiaries

Belgium

Denmark

Germany

Greece

Spain

France

Ireland

Italy

Luxembourg

Netherlands

Austria

Portugal

Finland

Sweden

United Kingdom

853

444

594

304

3 256

1 941

11 389

2 974

1 082

6 455

(2)

(2)

16 248

2 088

1 537

1 903

2 119

7 482

8 894

2 561

32 603

10 266

844

438

5 145

705

4 713

7 245

357

2 213

(1)

(1)

(1)

368

420

629

251

2 643

2 277

290

487

(1)

94

(1)

628

514

3 845

1 085

5 621

7 787

884

1 711

72

(1)

(1)

510

394

594

371

2 774

2 710

32

931

545

2 399

1 691

5 914

8 677

1 167

616

419

680

415

2 065

2 718

31

565 1960 (3) (2)

516 (3) (2)

41

28

(1)

1 059

1 025

1 190

1 273

(1)

(1)

(1)

(1)

(1)

22

(1)

114

(1)

(1)

(1)

47

(2)

(2)

49

(1)

67

(1)

68

12

1 671

1 393

1 299

806

981

176

(1)

916

48

0

5

871

539

163

(1)

(2)

(2)

29

(2)

1 285

1 046

148

(1)

1

2 408

3 924

188

2 970

3 926

1 520

453

353

1 032

138

132

2 678

4 260

196

75

Total per annum, per Article

22 719

8 486

23 451

9 337

26 985

9 902

16 086

7 050

87 281

34 259

Total Article 10 + Article 11

31 205

32 788

36 887

23 136

121 540 (4)

(1) Scheme not applied.
(2) Data not yet received.
(3) Average.
(4) From the total of 121 540 beneficiaries it can be deduced that the average number is approximately 30 400 beneficiaries per year. However, beneficiaries may choose to
receive either only Article 10 assistance or a combination of both Article 10 and Article 11. Therefore, a part of the 34 259 Article 11 beneficiaries are included in the 87 281
Article 10 total. Thus, the yearly average is less and this explains the difference from the 25 000 beneficiaries mentioned in paragraph 64 of the Report.

Source: Commission EEC (1999) (cid:151) DG VI.

Table 8

Financial aid for the installation of young farmers in the European Union

Country

Article 10(2)(a)
Installation grants, capital subsidies

Article10(2)(b)
Installation loans for beneficiaries

Article 11
Supplementary aid PAM (1)

Belgium

No capital grants on a national basis, but
some in the Walloon region.
BEF 120 000 (ECU 2 800) for favoured
areas.
BEF 140 000 (ECU 3 300)
favoured areas + provincial aid.

for less-

Subsidies of 5 % over 18 years for the
amount of ECU 20 000 covered by the
EAGGF, i.e. a borrowed capital of around
BEF 3 100 000 (ECU 72 000) over 18
years, with a three-year waiver. The inter-
est payable by the farmer may not be <
3 %. If the loan exceeds the amount of
BEF 3 100 000, national State aids are
used.

Capital grant equivalent to 25 % of the SI
(subsidy for installation) granted for sub-
sidised investments, within the framework
of the scheme (SI of a minimum 5 % of
the remaining 3 % payable).

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Country

Article 10(2)(a)
Installation grants, capital subsidies

Article10(2)(b)
Installation loans for beneficiaries

Article 11
Supplementary aid PAM (1)

Denmark

Germany

Greece

Spain

France

Ireland

Italy

Grant linked to an investment financed
by a State loan: during the first 10 six-
monthly repayments of the loan (five
years), a subsidy equivalent to the six-
monthly repayments, increased by a con-
tribution towards management costs.
Twenty-year
loan granted by the
DIRL (2) , < 23 % of the commercial value
of the holding. Maximum = DKK 1 mil-
lion (ECU 127 000). Subsidy estimated
at DKK 110 000 (ECU 14 000) by the
Ministry of Agriculture.

Capital subsidies:
(cid:151) for buildings: 8,75 % of building costs,
(cid:151) for machinery and installations: 5 %
of purchase price or installation cost
(=added to the aid agreed upon by
PAM).

Federal State L(cid:228)nder framework scheme:
grant linked to the investment: maxi-
mum DEM 15 000 (ECU 7 200) for a
minimum investment of DEM 35 000.
some L(cid:228)nder grant less: DEM 12 000,
others more: DEM 18 000 (additional
regional payment of DEM 3 000).

Additional aid from the agricultural
credit programme (AKP) for small and
medium-sized holdings: Additional dis-
count of 1 point (4 % in favoured areas
(cid:150) 6 % in less-favoured areas), for a loan
of up to DEM 143 000 ECU 73 100 per
MPU (3)

Additional aid from ESF programme in
the form of:
(cid:151) Discount of 1 % or more.
(cid:151) Subsidy of up to 5 % of the amount of

the subsidised loan, or,

(cid:151) Subsidy: 5 % of the expenses eligible

to obtain a grant.

Grant amount varies according to the
volume of work required on the hold-
ing.
(cid:151) 4 million drachma per beneficiary
owning a holding that requires a
work volume of = or < 1,5 UTH,
(cid:151) amount > for holdings that require a

work volume of > 1,5 UTH.

Variable grant of ECU 2 000 to ECU
6 000, according to type of transmis-
sion:
(cid:151) 2 000 if the inheritance does not

involve compensation,

(cid:151) 6 000 when setting up outside the
family circle or with a cooperation
or participation agreement of over
50 % of the business capital,

(cid:151) ECU 4 000 when the total coopera-
tion and participation agreement is
less than 50 % of the business capi-
tal.

DJA (4) modulates
geographically
between FRF 52 000 (ECU 7 500) and
FRF 235 400 (ECU 34 000) (setting up
of young married couples in mountain-
ous areas).

Maximum 5 % discount over 15 years.

Subsidy increased for investments made
within an improvement scheme (PAM).

Maximum discount of 5 % over 15 years.
Capitalised value < ECU 7 000.

Supplement of 25 % on the aid towards
the improvement scheme (PAM).

Loans for investment in modernisation,
within the framework of a PAM: similar
rates as for special loans (Article10(2)(a)).

Special loans aimed at financing invest-
ments in fittings and property involved
in the transfer of the business. Interest
rate of 2,55 % or 3,8 %, depending on
the area (less-favoured areas, plain areas),
with a maximum duration of 15 years.
Duration of the benefit = 15 years in
less-favoured areas and 12 years in plain
areas.
The maximum amount that a young
farmer can borrow at those rates is FRF
720 000 (ECU 109 763).

Grant of IEP 5 600 (ECU 7 500).

No discount loans.

PAM supplement.

Grant limited to ECU 7 500 in general.

15-year 5 % interest discount.

25 % supplement to normal aid.

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Country

Article 10(2)(a)
Installation grants, capital subsidies

Article10(2)(b)
Installation loans for beneficiaries

Article 11
Supplementary aid PAM (1)

Luxembourg

Grant of a maximum amount of LUF
400 000 (ECU 10 000).

Netherlands

Grant of NLG 37 000 (ECU 10 000).

Portugal

Grant of ECU 7 500.

Subsidised loans.
Maximum 5 % discount (with a mini-
mum payable by the farmer: 20 years).
Limit of loans depends upon a price/ha.
Equivalent to the value of the agricul-
tural yield.

The NLG 37 000 grant is to cover the
12,5 % of the interest on bank loans or
family loans lasting > or = 5 years, with
a maximum amount of NLG 300 000
(ECU 129 000).

Discount of 5 % of interest over 15 years
for loans used for investments connected
to the house.
Capitalised value < ECU 6 000.

25 % supplement to normal aid.

25 % increase of the PAM grant. For all
farmers: grant equivalent to a discount of
1,5 % of the interest paid on loans (cid:151)
maximum NLG 100 000 per holding. Dis-
count of up to 4,5 % for investments ben-
eficial to the environment.

PAM supplementary aid = 25 % (minus
national supplement)

Austria

Finland

Sweden

Grant of ATS 125 000 (ECU 9 300)
depending on:
(cid:151) a minimum investment of ATS

200 000 (ECU 14 800),
(cid:151) a minimum eligibility level.

Subsidy of 25 % of the cost of maximum
loan of:
(cid:151) ATS 1 200 000 (ECU 89 285)/MPU
(cid:151) ATS 2 400 000 (ECU 178 571) per

holding.

Compulsory PAM: minimum standards:
animal welfare, environment, maximum
2,5 LSU (5)/ha. Two subsidies that may be
investment
combined:
(between 13 % and 58 % of the total invest-
ment), interest discount: 50 % to 75 %.

subsidy

on

Maximum grant of FIM 70 000 (ECU
12 038). The beneficiary may not receive
more than ½ or ¼ of this amount.

Possibility of a loan at 5 % interest for a
maximum amount of FIM 70 000 (ECU
12 038).

Additional aid of up to ¼ the amount of
the initial aid.

Aid over five years with a payment of
around 6 000 ECU/year during the first
three years and ECU 3 000 the fourth
and fifth year.
This amount may be smaller if the farmer
only works part-time.

United Kingdom

No installation grants are available.

No specific installation grants.

25 % increase on the aid granted within
modernisation schemes, in the form of
subsidies.

(1) PAM: material improvement plan.
(2) DIRL: Danish Farming Real Estate Credit Organisation.
(3) MPU: manpower unit.
(4) DJA: dotation jeune agriculture (young farmer allocation).
(5) LSU: livestock unit.
Source: Conseil EuropØen des Jeunes Agriculteurs (CEJA), Bruxelles.

65. This facility should respect the principles of the CAP reform,
namely the rationalisation of agricultural structures and the avoid-
ance of surpluses.

management of EAGGF Guidance resources for assisting young
farmers in their effort to make farming their principal economic
activity. The audit examined both sound financial management
and legality/regularity aspects.

The Court(cid:146)s audit

66. This chapter examines the measures taken by the Commis-
sion in coordination with the Member States to ensure efficient

67. The audit was carried out at the Commission (DG VI) and in
five Member States (Germany, Spain, France, Ireland, and Italy)
with a focus on Objective 1 regions, and was based on the exami-
nation of a representative sample of final beneficiaries.

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Implementation of Articles 10, 11 and 26 to 28 of Council
Regulation (EC) No 950/97

68.
In implementing Regulation (EC) No 950/97 national authori-
ties have issued guidelines. Table 8 shows the various options, and
the maximum amounts that eligible beneficiaries may obtain
when applying for setting-up aid. The level of assistance varies
even between the different regions within the same Member
States.

69. Between 1994 and 1997, all Member States applied the aid
scheme under Article 10, except the United Kingdom and the
Netherlands. At the end of 1997, the total number of beneficiaries
under Article 10 was 87 281 (see Table 7, footnote 4). There is an
increasing trend in Greece, Spain, Ireland, Portugal and, especially,
France, but it is negative in Germany and Austria. France has the
largest number of young farmers receiving assistance (37 %), fol-
lowed by Spain (18,4 %) and Germany (12,7 %), whereas Italy has
only 4,6 %. Under Article 11, 34 259 young farmers received aid
in the same period. Most were in Spain (20,6 %), France (30 %)
and Portugal (11,8 %) (see Table 7).

70. There is a preference for direct grants rather than interest
subsidies on loans. One of the reasons given is that direct grants
do not involve the complicated and time-consuming administra-
tive procedures and controls that interest subsidies involve.

71. However, the Court has observed on several occasions, most
recently in its Annual Report concerning the financial year 1997
(paragraph 3.21), that within structural assistance loans should,
in general, play a suitable part and should be coordinated with
subsidies. In this context, a strict application of Article 5(1)(c) of
Regulation (EC) No 950/97 would further reinforce the effective-
ness of the coordination between loans and grants as support
instruments for young farmers (in the framework of Article 11 of
Regulation (EC) No 950/97).

Definition of (cid:145)setting-up(cid:146) date

72. According to Article 10(1)(c) of Regulation (EC) No 950/97:
(cid:145)Member States may grant setting-up aid to young farmers less
than 40 years of age if the occupational qualifications are satisfac-
tory at the time of setting-up or at the latest two years thereafter(cid:146).
However, the implementing regional circular in Sicily (approved
by the Commission) laid down that the farmer, in order to be eli-
gible for EAGGF Guidance assistance, should have obtained the
professional qualification at the latest two years after the notifica-
tion by the region of the granting of aid. Since the notification of
the grant decision by the region to the beneficiary was delayed by
up to two years the beneficiaries completed their professional

training after the date limit and three of the six beneficiaries
audited in Sicily should not have been considered eligible (profes-
sional qualifications obtained after the regulatory deadline of two
years from the setting-up date), and one for not having obtained
the necessary qualifications.

73. The regional authorities in Andalusia have interpreted the
notion of first set-up as the date of the decision granting the aid.
This does not comply with the national guidelines established by
the Ministry of Agriculture. Moreover, the verification of the
starting date for the vocational training becomes more difficult.

Lack of audit trail for interest-rate subsidies

74. Under Articles 10 and 11 of the Regulation in certain cir-
cumstances recipients of aid for young farmers may receive both
a single premium and interest-rate subsidies on loans contracted.
Member States which use this facility apply annually to EAGGF
Guidance for reimbursement of its share of the interest-rate sub-
sidies incurred.

75. Thus, in France, accredited banks submit to the French admin-
istrative authorities accounts which invoice the interest-rate sub-
sidies. However, the French authorities are reimbursed from the
EAGGF budget, not on the basis of expenditure incurred (declared
by the banks) as laid down in Article 21 of Regulation (EEC) No
2082/93 (20), but on the basis of an independent mathematical
calculation made by the authorities themselves (DDA) (21). The
same applies to loans granted under Article 7 of Regulation (EC)
No 950/97, which is not directed at young farmers.

Internal control systems

Planning difficulties, delays and internal control
weaknesses

76. The late approval by the Commission on 28 September 1995
of the operational programmes led to the late implementation of
the measures covered. In Sicily for 1995 the implementation of
measures covering young farmers (Articles 10, 11 and 28) was
1,3 % of the total expenditure instead of the 50 % initially tar-
geted.

In Spain, the Court, in the course of its audit of the proce-
77.
dures for certifying expenditure between the regional, national
and Community levels, noted errors in the statements drawn up
in 1997 by the national authorities and in respect of the applica-
tion of Articles 10 and 11 of Regulation (EC) No 950/97 for
Andalusia.

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Evaluations

78.
In Spain an evaluation of the implementation of Regulation
(EC) No 950/97 was to be carried out at Member State level dur-
ing 1999. Some of the conclusions on the mid-term assessment
of the OP as a whole reveal the absence of homogeneous indica-
tors and state that the effectiveness of the OP is measured solely
on the basis of the degree of financial implementation, and not
on the actual effect of the measures.

people by Member States. This means essentially improvements
to the procedures for selection and follow-up of projects, the
removal of problems associated with the funding of multiannual
courses and with the inappropriateness of some of the national
rules impacting on ESF projects, a correct application of the defi-
nition of (cid:145)final beneficiary(cid:146) and (cid:145)expenditure incurred(cid:146) and better
control of the often high level of overhead costs. The Commis-
sion and the Member States need to consider ways of ensuring
that the level of overhead costs declared by project managers is
justified.

79.
In Italy an evaluation report concerning the implementation
of Regulation (EC) No 950/97 was produced in August 1998 only
for the Italian non-Objective 1 regions. In Ireland an evaluation
study for 1994 to 1996, published in February 1997 (22), stated
that the first set-up aid scheme did not make a significant contri-
bution to earlier transfers of farms to young farmers. It concludes
that while promoting the entry of young people into farming is
the main objective of the scheme, it is very difficult to find any
real effect added by the scheme.

83. The Court stated in its Annual Report concerning the finan-
cial year 1995 (OJ C 340, 12.11.1996, Chapter 6, paragraph 6.136)
that there were no effective sanctions against those Member States
that failed to meet the conditions for receiving a Community sub-
sidy, and that the system for recovering unduly paid amounts
needed to be improved. Since that date, the Commission has made
a number of improvements in financial control but the question
of sanctions remains unresolved.

PART III

CONCLUSIONS

80. The Court already observed in its Annual Report concern-
ing the financial year 1995 (OJ C 340, 12.11.1996, Chapter 6,
paragraph 6.135) that the resources devoted to the European
social policy were not planned and used in a way that was closely
targeted towards achieving the priority task of fighting unemploy-
ment and called for an in-depth reappraisal of the methods used
by the Commission and the Member States to target and deliver
the aid. The audits carried out in 1998 have shown that signifi-
cant problems remain in the implementation of the European
Social Fund. The impact of the ESF on the fight against youth
unemployment, representing an estimated 40 % of the ESF expen-
diture, is not known. The Commission and the Member States
need to continue to improve the targeting of funding, the defini-
tion of clear objectives, ensure that reliable data are available and
that the various types of financial efforts are integrated. Such
improvements will enable the Structural Funds to achieve a bet-
ter impact.

81. The mid-term evaluation has had, in the main, too little
impact on policy implementation in the current programming
period (1994-99). The evaluation process (cid:151) which should now
include final evaluations of measures (cid:151) has to be implemented
more effectively by the Commission and the Member States if it
is to influence policy in the next programming period.

82. The findings of the audit concerning ESF financing show
that much greater effort is required to bring about substantial
improvements in the implementation of ESF actions for young

84. There is a need to improve the synergy and coordination of
multifund interventions for the next programming period. Efforts
should be made to simplify the administrative structures and pro-
cedures in the Commission and in the Member States. Manage-
ment structures should ensure an effective coordination between
and within Structural Funds and with the European Investment
Bank (EIB). Such improvements are required to attain an improved
coordinated and integrated approach for intervention under the
Structural Funds. At present, the norm is for structural interven-
tions to be planned by each Ministry separately.

85. Only rudimentary consideration, in isolated cases, has been
given to the type of finance (cid:151) subsidies, loans or interest-rate
subsidies. The tradition of using subsidies, which has existed since
the Structural Funds were launched, has become entrenched.
Changes in the basic conditions which may possibly have occurred
in the meantime are not taken into consideration.

86. The implementation of the CI Employment-Youthstart has
displayed a number of weaknesses. The lack of data on projects
and weaknesses in management by Member States and the Com-
mission, including the TA contract, have reduced the effectiveness
of the initiative. The Commission should take a more active role
in coordination.

87. The EC Treaty (23) stipulates among other things that, in
working out the common agricultural policy, account shall be
taken of the particular needs resulting from the social structure
in agriculture. The Court has been unable to establish the exist-
ence of an overall strategy or plan in respect of the financial con-
tribution made by the ESF and EAGGF Guidance for the benefit
of young farmers. Any impact since 1994 is still undiscovered.

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Official Journal of the European Communities

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This Report was adopted by the Court of Auditors in Luxembourg at its meeting of 26 and 27 January 2000.

For the Court of Auditors

Jan O. KARLSSON

President

NOTES

(1)

(a) Counselling to identify possible employment areas and the setting

of a plan to achieve them;

(b) guidance to assist in achieving the plan including language skills

and interview techniques;

(c) further education, training or employment if necessary with sub-

sidy.

(2) Eurostat, New Cronos database.
(3)

It should be noted that the school-leaving age varies between Member
States.

(4) According to Article 128 of the EC Treaty (ex Article 109Q), the
European Council shall each year (cid:145)consider the employment situation
in the Community and adopt conclusions thereon, on the basis of a
joint annual report by the Council and the Commission(cid:146). The Council
shall each year draw up guidelines on the basis of a proposal from the
Commission and after consulting the Parliament and the Economic
and Social Committee. These guidelines are to be taken into account
by the Member States in their employment policies (i.e. in the national
employment action plans).

(5) The first guideline is (cid:145)Tackling youth unemployment(cid:146). It is intended
that Member States will develop preventive and employment-oriented
strategies. Member States will ensure that every unemployed young
person is offered a new start before reaching six months of unem-
ployment in the form of training, retraining, work practice, a job or
other employability measure.
Guideline 4 (cid:145)Encouraging the partnership approach(cid:146) encourages the
social partners to conclude, as soon as possible, agreements with a
view to increasing the possibilities for training, work experience,
traineeships or other measures likely to promote employability. The
Member States and the social partners will endeavour to develop pos-
sibilities for lifelong training.
Guideline 6 is (cid:145)Easing the transition from school to work(cid:146). As employ-
ment prospects are poor for young people who leave the school sys-
tem early without having acquired the aptitudes required for entering
the job market, the Member States will improve the quality of their
school systems in order to reduce substantially the number of young
people who drop out of the school system early.
Guideline 7 (cid:145)Providing young people with relevant skills(cid:146) should
ensure that young people are equipped with greater ability to adapt
to technological and economic changes, with skills relevant to the
labour market, by implementing or developing apprenticeship train-
ing.

(6) OJ L 193, 31.7.1993.
(7) Germany, Italy, United Kingdom and to a certain extent France.
(8) European Commission (DG V). Conclusions of the ESF mid-term

evaluations, 1998.

(9) See especially Council Regulation (EEC) No 2082/93 (OJ L 193,

31.7.1993, p. 20).

(10) Although Italy, for example, provides new funding through the (cid:145)fondo

di rotazione(cid:146).

(11) ECA Special Report No 22/98 concerning the management by the
Commission of the implementation of measures to promote equal
opportunities for women and men (OJ C 393, 16.12.1998, paragraphs
23 to 24).

(12) Article 2(1), last sentence of ESF Regulation (Council Regulation (EEC)
No 2084/93 of the Council), and eligibility sheet No 5, Annex to
Commission Decisions (OJ L 146, 5.6.1997, p. 31).

(13) In its Annual Report for the year 1996 the Court examined the imple-
mentation of the CI ADAPT and in the Annual Report for the year
1997, the implementation of Employment-NOW.

(14) Commission communication of 15 June 1994 (OJ C 180, 1.7.1994,
p. 10). The other three strands are NOW (new opportunities for
women), Horizon (for disabled) and Integra (refugees).

(15) OJ C 200, 10.7.1996.
(16) The name and address of the project managers; description of the
project; classification by project manager of the projects under certain
categories; duration of the project.

(17) Recently: Special Report No 22/98 concerning the management by
the Commission of the implementation of measures to promote equal
opportunities for women and men (OJ C 393, 16.12.1998, paragraph
37).

(18) Eurostat New Cronos data: 1999.
(19) Eurostat New Cronos data: 1999.
(20) Council Regulation (EEC) No 2082/93 (OJ L 193, 31.7.1993).
(21) Direction dØpartementale de l(cid:146)agriculture.
(22) Sharon Murphy, Analysis and Evaluation Unit: Evaluation of the

scheme of installation aid for young farmers, February 1997.

(23) Article 33(2) of the EC Treaty (ex Article 39): (cid:145)In working out the
common agricultural policy and the special methods for its applica-
tion, account shall be taken of: (a) the particular nature of agricultural
activity, which results from the social structure of agriculture and
from structural and natural disparities between the various agricul-
tural regions(cid:146).

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Official Journal of the European Communities

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THE COMMISSION(cid:146)S REPLIES

GENERAL INTRODUCTION

Summary of audit observations

3. The ESF part-finances measures under Objective 3, through-
out the Community, to facilitate the occupational integration of
young people looking for employment, and measures under Objec-
tive 1 (in the regions concerned) within the national systems of
secondary education or the equivalent and of higher education,
which have a clear link with the labour market.

In accordance with the principle of subsidiarity, Community
regulations do not define the target age group of measures to
assist young people. This definition is the responsibility of the
Member States, which are in a better position to establish the def-
inition depending on the characteristics of employment in each
European region.

5. The Commission is mindful of the potential risk of double
claims by promoters who receive part-financing under several
objectives. Monitoring of these promoters must therefore cover
all the financing that they received during the period.

6. As far as the closure of CSF I is concerned, the number of
cases of Objective 3 programmes that have not yet been closed is
limited and is largely due to the launch of legal proceedings con-
cerning projects, which prevents the programme from being
closed before the courts concerned have given their verdict.

The Commission will take any corrective measures needed for the
cases raised by the Court.

The Commission considers that the introduction of Regulation
(EC) No 2064/97 concerning the control of the Structural Funds
by the Member States has already had positive effects on the
development of national control work.

The Commission agrees that there is a need to make general
improvements to the procedures for the selection and follow-up
of projects.

In most Member States the preliminary evaluation of the first
7.
phase projects was concluded when tenders for the second phase
projects were launched. This tool enabled the Member States and
the Commission to address a number of difficulties that had arisen
in the first phase, and thus before the selection of projects under
the second round.

The Commission is working on a document presenting the stra-
tegic outcomes of Community initiatives ADAPT and Employ-
ment. This document will constitute a reference point for Member
States when they formulate their plans for the new initiative
EQUAL.

8. The Commission will take account of the Court(cid:146)s comments
in this area.

9. Specific rules on eligibility, such as for coordinating the Com-
munity initiative, must be dealt with in accordance with the gen-
eral Community and national rules, with problems of interpret-
ation being settled through partnership. As far as the new
Community initiative EQUAL is concerned, specific questions of
eligibility will be dealt with in a group of representatives of the
Member States headed by the Commission.

The dissemination of the Youthstart Community initiative best
practices takes place at project, Member State and Community
levels. For the next initiative EQUAL, the Commission foresees an
even more focused dissemination strategy.

The effectiveness of transnationality is currently being evaluated
in a EU-wide evaluation at Community level launched in July
1998 in parallel with the final evaluation exercise at national level.

10. The Commission closely monitors and checks the work of
the technical assistance office in order to ensure that it keeps the
experience gained through technical assistance. Furthermore, the
Member States also retain this experience.

11. The Commission points out that delays in programmes may
also be due to late programme notification by Member States. It
should be made clear that aid for young farmers forms part of
these programmes only in Objective 1 and 6 regions. Outside
Objective 1 and 6 regions, aid for young farmers is implemented
via national or regional legislation, which has to be notified to the
Commission in draft version for approval. Commission approval
of these legislative texts usually does not exceed six months.

12. The overall objective of the instrument examined by the
Court (Regulation (EC) No 950/97 on improving the efficiency of
agricultural structures) is primarily the adjustment of agricultural
structures. This is to be achieved by a set of various measures,
which includes measures specifically benefiting young farmers.
The clear objective of granting specific support for young farm-
ers is to facilitate their installation and the subsequent structural
adjustment of the holding. On a more global level, the impact of
such measures may contribute to maintaining a viable agricul-
tural community and thus help develop the social fabric of rural
areas.

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Following the mid-term review exercise, the Commission has
drawn up a set of guidelines including homogeneous physical and
impact indicators for the evaluation of measures under Regula-
tion (EC) No 950/97 outside Objective 1 and 6 areas. These guide-
lines were submitted to the Member States on 24 February 1999.

PART I

ESF

Budgetary importance

20. Article 1 of Regulation (EEC) No 2081/93 defines the prior-
ities for action through the Funds in the Objective 1 regions. This
Objective therefore has a global nature, as intended by the Com-
munity legislator, without specific reference to categories of indi-
viduals. This means that young persons may benefit, in the Objec-
tive 1 regions, from operations under schemes that are either
specifically designed for them or are more general and cover vari-
ous target groups.

The EU strategy for young unemployed

Commission(cid:146)s analysis of the NAPs

23. The Commission shares the concern of the Court of Audi-
tors that the national action plans for employment (NAPs) drawn
up by the Member States should be rigorous and concrete plans
which clearly demonstrate how the employment guidelines are
implemented and which over time provide an assessment of
impact. The Commission also shares the Court(cid:146)s concern that tar-
gets should be quantified where possible and that commonly
agreed indicators should be used to assess progress towards agreed
targets.

However, the Commission(cid:146)s recent analyses show that, in the con-
text of a five-year employment strategy in which NAPs are updated
each year to assess progress and respond to the annual employ-
ment guidelines, significant progress is being made by the Mem-
ber States, working together with the European Commission, on
both the concrete nature of the NAPs and on commonly agreed
indicators and targets. The Court(cid:146)s analysis in early 1998 focuses
on the progress which was achieved within a very tight timeframe
of only four months, a period within which the Member States
had committed themselves to action. The Court also appears to
refer only to the Communication of the Commission of May
1998 (1), without any reference to the joint employment report
adopted later in November 1998 and based not just on the NAPs

(1) COM(98) 316 final, entitled (cid:145)From guidelines to action: The national

action plans for employment(cid:146), 13 May 1998.

but also on 15 national implementation reports presented in July
1998. This second analysis revealed that many of the shortcom-
ings identified by the Commission in its Communication of May
1998 were then corrected, including making the strategy more
concrete in budgetary terms. Moreover, following ratification of
the Amsterdam Treaty, the Employment Title may now be fully
implemented (for example, the Council adopted recommenda-
tions to the Member States in November 1999 for the first time).
There was also an agreement on common indicators reached at
the Cologne European Council in June 1999.

Besides that, it is to be noted that most of the present Objective 1
and 3 programmes were adopted in 1993/1994, whereas the Lux-
embourg process was only launched in November 1997. This has
meant that the inter-linkages between the NAPs and the ESF are
not yet as strong as the Commission would favour. The Commis-
sion will ensure in the forthcoming round of negotiations on the
new programmes that this linkage is more clearly made, as required
by the new Structural Fund Regulations.

The audit of mainstream ESF

Definition of a young person

24. Given the lack of more precise Community rules for the cur-
rent programming period (1994 to 1999), it is up to the Member
States to define binding rules through legislation. These standards
are, by definition, the reflection of the economic and social situ-
ations that vary from one country to another. What is more, dif-
ferences may sometimes be encountered even at national level
when a Member State is organised on a federal or regional basis.

Evaluation of implementation

25. The Court analyses two aspects that relate to different and
unlinked periods of time: operational programmes adopted in
1994 under the second Community support framework, on the
one hand, and the national employment action plans (NAPs) pre-
sented in 1998 by the Member States following the Luxembourg
European Council on employment of November 1997, on the
other. The weaknesses in the opinion of the Court can therefore
not be confirmed on the basis of the NAPs that were adopted
much later in a different context (see the answer to paragraph 23).

Furthermore, as regards ESF assistance in Objective 1 regions, the
Commission(cid:146)s answer to paragraph 20 above also applies in the
German and Italian cases mentioned.

26. This type of ESF assistance appears to be fully justified given
the extremely high youth unemployment in all new L(cid:228)nder, includ-
ing Brandenburg. The mid-term review reports suggest that this
type of ESF-assistance contributed significantly to reducing youth
unemployment in all German Objective 1 regions.

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27. As regards education systems and impact analysis, the con-
tent of the mid-term evaluation was indeed limited, but this was
due to the time scale involved. As detailed in the (cid:145)Conclusions of
the ESF mid-term evaluations(cid:146), pages 31 to 34, evaluators have
succeeded in providing a qualitative assessment of impact on edu-
cation systems, which is all one could hope for at the time of the
mid-term evaluation.

tive ideas but also good practices to the mainstream ESF. This
requires a subtle and sophisticated mechanism. The Monitoring
Committee and the seven national support structures, members
of the European Thematic Group, have already played an impor-
tant role in this process (see the Commission(cid:146)s answer to para-
graph 60).

28. Despite the difficulties quoted by the Court, the (cid:145)Conclusions
of the ESF mid-term evaluations(cid:146) have revealed that young people
are present in every priority in the forms of assistance.

29. Evaluation is carried out at programme, not project, level.
During the mid-term evaluation, evaluators assessed the efficiency
of project selection as part of their analysis of implementation
mechanisms (see for example, pages 25 and 69 of the (cid:145)Conclu-
sions of the ESF mid-term evaluations(cid:146)).

The Commission already provided the Member States with assis-
tance in the definition of quantified objectives for the programmes
when the Community support frameworks were drawn up. It
proved more difficult to measure the progress of the programmes
in relation to these objectives, especially because the national stat-
istical systems were ill-equipped to provide the information
required. A diagnosis by programme was carried out at the time
of the mid-term evaluation and will be taken into account for the
guidelines for the period 2000 to 2006.

Coordination of Structural Funds aid

Synergy between Funds

30. The integrated approach is defined under Article 13 of Regu-
lation (EEC) No 2082/93. Furthermore, the only way of integrat-
ing the Funds is through the forms of assistance and their prio-
rities. This is because Article 14(1) of Council Regulation (EEC)
No 2081/93 (entitled (cid:145)Combination and overlapping of assis-
tance(cid:146)) states that: (cid:145)For any given period, an individual measure or
operation may benefit from assistance from only one Structural
Fund or the FIFG at a time(cid:146).

31. The Structural Funds Regulations and their guidelines for
2000 to 2006 require Member States to integrate the program-
ming of ESF-supported programmes with the implementation of
the employment guidelines and the European employment strat-
egy.

32.
It is true that the New Deal projects do not require the pro-
moters to do as much work to justify their expenditure financed
from national sources, because the British authorities have opted
for the declaration of lump-sum costs by promoters. Discussions
have been launched on this question in connection with the third
CSF.

Synergy between ESF activities

33. The Commission shares the Court(cid:146)s opinion and considers
it necessary to integrate not only Community initiatives(cid:146) innova-

34. As a general rule, the regionalisation of the management of
the Funds reduces the risk of overlap of the operations and of
double claims by bringing programme managers and final bene-
ficiaries closer together. In any event, the Commission is always
mindful of the potential risk of double claims of expenses by a
promoter that benefits from part-financing under several objec-
tives.

Specific observations on ESF financing

36. As the Commission indicated in its reply to paragraphs 23
and 24 of Special Report No 22/98 on the measures to assist the
promotion of equal opportunities, and as the Court stresses in
this point, the expenditure mentioned is provided for in the regu-
lations and can therefore be included under national part-financing.

37. The rate of implementation of priority 2 for young persons
that is indicated in the implementation report attached to the
request for the payment of the 1997 balance for Objective 3 in
France is indeed substantially lower than for priority 1 (73 %) for
the long-term unemployed, since these measures are running
more smoothly than the innovative measures of priority 2. How-
ever, an implementation rate of 55,6 % at the end of 1997, after
four theoretical years for programming but only two years of
actual implementation in practice, because of the periods of time
required to introduce certain measures, may be considered to be
satisfactory.

38. The low implementation rate of the past has always been
carefully monitored by the Commission. This situation was due
to the considerable political instability in the region. Things have
now changed considerably: by 31 August 1999, the Sicily region
of Italy had committed 100 % of the available appropriations.

39. The Sicily region has always declared to the Commission
that its balance requests presented to the Commission are based
on the actual expenditure incurred by the final beneficiaries.
Moreover, the Commission has always demanded that, in accor-
dance with the regulatory provisions and the financial implemen-
tation provisions annexed to the forms of assistance, the balance
declarations must correspond to the expenditure incurred by the
final beneficiaries.

The expenditure incurred may be justified by receipted invoices or
accounting documents of equivalent probative value (point 5 of
the financial implementation provisions annexed to the forms of
assistance and eligibility sheet No 4 on the principle of real cost,
OJ L 146, 5.6.1997). Certain items of expenditure do not neces-
sarily correspond to invoices (e.g. depreciation of facilities or

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premises, costs for internal teaching staff or for administrative
staff of training centres). This may partly justify the gap men-
tioned by the Court between receipted invoices and expenditure
incurred as declared by the two promoters audited by the Court.
The Commission will nevertheless check the extent of the phe-
nomenon mentioned (if this occurred at the time of the Court(cid:146)s
verification and, if so, to what extent) and the degree to which
problems still exist.

the various situations described by the Court that have repercus-
sions on the type and amount of indirect overheads attributed to
the part-financed projects, account must also be taken of the
nature of the operator concerned (university with substantial
overheads or small non-profit-making structure, for example) and
its activities (number of projects part-financed in relation to the
general activity of the promoter).

Certain delays are possible in the payment of national State part-
financing to the final beneficiaries; these do not necessarily con-
travene the regulations if they are linked, for example, to the use
of alternative financing (eligibility sheet No 16, OJ L 146, 5.6.1997).
The Commission will check this point with the regional authori-
ties.

It is true to say that France amended its request for the pay-
40.
ment of the balance for Objective 3 after the submission date of
30 June. In reply to the comments made by the Commission, the
ESF department declares that certain beneficiaries do not obtain
their final data until after this date, which makes it necessary to
send an amending request for payment of the balance. In any
event, the Commission took account of the amended request for
payment of the balance that was submitted in September 1998
and therefore complied with the regulations.

As far as the question of the revenue to be deducted is concerned,
the Court(cid:146)s analysis is correct: the receipts from the operations
part-financed by the ESF must be deducted from the amount of
expenditure. However, the Commission would point out that
these receipts must be deducted, according to the terminology on
the forms in question, from the total cost rather than from the
total eligible cost (defined as (cid:145)total cost(cid:146) - (cid:145)receipts(cid:146)), as mentioned
by the Court. In the case in question (request for payment of the
balance for 1997), this is just what the French authorities did. The
share of the ESF is 28,9 % of the total cost (namely FRF 2 423
million/FRF 8 361 million) and 30,025 % of the total eligible cost
(namely FRF 2 423 million (8361 million (cid:150) 291 million of
receipts)). The maximum rate of ESF part-financing has been
complied with.

41. The Commission broadly agrees with the Court(cid:146)s comment,
not that it thinks that 16 hours of training per week are insuffi-
cient in themselves (this all depends on the total duration of such
training), but rather because the ceiling on the weekly duration of
training is designed solely to ensure that persons undergoing
training retain the status of unemployed people. It is planned to
review the assistance of the Fund relating to this matter for the
new programming period.

42 to 43. As pointed out by the Court, it is not possible for a
regulatory framework that has to apply to all types of operations
part-financed by the three Structural Funds and the FIFG in the
15 Member States to cover all the situations that may arise on the
ground, especially concerning indirect overheads. The objective of
eligibility sheet No 5 is therefore to establish an acceptable rule
for the breakdown and justification of indirect overheads between
projects that are part-financed and projects that are not part-
financed, but not to define what these overheads are. As regards

44. The Court(cid:146)s audit raised four types of case of differing finan-
cial impact:

(a) Certain cases have no financial impact (first, third, fourth and

seventh indents of the Court(cid:146)s text);

(b) Other cases were already known to the Commission, follow-
ing its audits, and have already been the subject of the proce-
dures under Article 24 of Regulation (EEC) No 2082/93 (cor-
responding in part to the second and fifth indents of the
Court(cid:146)s text);

(c) Certain cases pointed out by the Court in its audit have since

been the subject of corrections by the Member States;

(d) Three remaining cases with a financial impact need to be cor-
rected (one case under the second indent, one case under the
fourth indent and one case under the fifth indent of the Court(cid:146)s
text).

For the three types of case (a) to (c), no correction needs to be
made. For the three cases mentioned under (d), the Commission
undertakes to initiate the procedures under Article 24 of Regula-
tion (EEC) No 2082/93 on the basis of the information provided
by the Court.

Employment-Youthstart Initiative

45. Given the size of the sample examined by the Court, pru-
dence needs to be exercised in interpreting and generalising the
results.

Budgetary importance

48.
Initially some 4 % of the national budget was earmarked for
technical assistance (TA). However, the allocation for TA has been
revised and adapted over the years according to the size of the
programme and the specific needs in each country.

Audit of the implementation of Employment-Youthstart

Age Qualification for Employment-Youthstart

49. The Youthstart programme generally applies to young people
up to the age of 20. As quoted by the Court, the Communication

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also foresaw some exceptions in order to include young people
beyond the age of 20. Managing authorities in some Member
States therefore advocated for more flexibility because of duly jus-
tified circumstances. For example, in Germany, the managing
authority operated within the limits set in the 1995 operational
programme and decided that the age group 20 to 25, which was
particularly hard hit by the labour market situation, required the
same kind of Youthstart support as the age group below. In
Greece, the compulsory long military service affects the upper age
limit.

mon consolidated module (CCM) are organised by project and
not by partnership, because this tool was designed essentially to
make it easier to look for partners and to carry out qualitative
analysis of projects (in terms of beneficiaries, activities, topics,
etc.) and not to manage the transnational partnerships. The sta-
tistics of the CCM concerning the partnerships are partial, largely
because of the dependence on the data submitted by the national
support structures and the technical complexity of consolidating
the transnational data.

Selection procedure

50. The Commission is aware of the fact that the preparatory
work and the transnational work is not always being budgeted at
the same level. However, it should be borne in mind that projects
are approved separately by the national authorities and usually
are not based on joint planning and budgeting by the promoters.

The shortcomings in the financing of the preparatory phase will
be addressed by the EQUAL initiative, where the preparatory
phase will be funded in all Member States.

51. The Commission considers that the selection procedure must
be designed in accordance with the principle of subsidiarity, which
attributes a fundamental role to Member States in implementing
the Community initiatives. In line with the underlying philosophy
of the European employment strategy endorsed by the European
Governments (1), the Commission is convinced that the national
authorities are best placed to determine whether a transnational
partnership bears a genuine added value at a local/regional/
national level, e.g. is a (cid:145)worthwhile(cid:146) partnership. It is therefore
crucial that the selection and endorsement of the transnational
activities remains at a national level.

52. As to the overall coordination of the partnerships, the daily
management and monitoring is assured at national level. The
Commission follows closely the progress and results of the trans-
national work through the Monitoring Committee, the national
evaluations, the dissemination events and the national/European
thematic work.

Project visits and the exchange of information are the most typi-
cal transnational start-off activities that generally lead on to more
output-oriented activities. The role of transnationality, which is
perceived by the Member States as one of the main assets of the
Community initiatives, will be incremented in the future initia-
tive EQUAL.

54. As far as the partners that are not funded by Youthstart are
concerned, the only information that has to be provided about
such partners for the purposes of good management and moni-
toring is the cost of the services rendered and charged to the
project that is part-financed by Youthstart.

55. The Commission repeats its reply to paragraph 37 of the
special report on equal opportunities, which is that the working
methods of the transnational partnerships between different
projects are for the partnership itself to arrange. However, the
Commission believes that such a move must remain the preroga-
tive of the individual partners involved and should not be made
compulsory.

Coordination and dissemination

56. The eligible costs, apart from the 22 eligibility sheets adopted
by the Commission in April 1997, are defined at national level.
These costs may therefore differ from one Member State to another.
Under the new Community initiative EQUAL, the Commission
asked the Member States to establish a discussion group on the
eligibility of the costs related to transnationality in order to ensure
as much progress towards harmonisation as possible.

57. The Commission is very interested in incorporating the
Youthstart experiment into the mainstream of the ESF. There are
already several examples of first phase Youthstart projects that
have been integrated into the mainstream ESF programmes. In
addition, the Commission aggregates, on a regular basis, good
practice cases that have been mainstreamed/have a mainstream-
ing potential. These cases are communicated internally to the ESF
geographical desks in the Employment DG.

The European Thematic Group has also proved to be a very effec-
tive means to reach the actors that influence the ESF mainstream
programmes (see also comments to paragraph 58 on the main-
streaming of good practices).

Absence of reliable information

53. As regards the operation of the Commission(cid:146)s database that
is fed by the national databases, it is true that the data of the com-

Mid-term evaluation

(1) That is, employment problems can most effectively be addressed and

solved at the local level.

58. The Commission will take account of the results of the mid-
term evaluation concerning transnationality and dissemination
when the new Community initiative EQUAL is implemented.

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The Commission considers also that the construction of a project
typology, one of the aims of the ongoing EU-wide evaluation, will
be very useful in this regard.

of two years begins from the date of the decision to grant the aid.
This provision was approved by the Commission in order to safe-
guard, in exceptional circumstances, the eligibility of certain young
farmers who are in the process of setting up, and was given a
favourable opinion by the STAR Committee on 26 January 1996.

Technical assistance

59. The technical assistance for the Community initiatives is an
integral part of the programme. As such it is subject to the same
procedure of monitoring and scrutiny as the implementation of
the individual measures. This procedure includes the Monitoring
Committees. Furthermore the ESF missions are obliged to pro-
duce an annual report on the progress of the Community initia-
tives which includes the activities of the technical assistance.

60. The end of the contract of the technical assistance office
(TAO) does not mean that technical assistance (TA) for the pro-
gramme is no longer provided. Evaluation and dissemination are
carried out by independent experts who have no links with the
TAO. Furthermore, at the date on which the TAO(cid:146)s contract ends,
all the projects will already have been selected and approved,
whereas their implementation is not one of the responsibilities of
the TAO.

73. The Commission will examine the situation described by the
Court relating to the interpretation of the notion of first set-up
date made by the regional authorities in Andalusia, and will apply
any financial corrections which may prove necessary.

Lack of audit trail for interest-rate subsidies

75. The Commission already noted France(cid:146)s practice concerning
interest rate subsidies in the agricultural sector when it carried out
its last checks in the country. It is currently examining whether
the application of (cid:145)administrative(cid:146) interest rates by the banks that
are accredited to provide loans with interest rate subsidies consti-
tutes a violation of the Community rules on the Structural Funds.
Depending on the result of the detailed examination that is cur-
rently being carried out, it will adopt the appropriate measures,
including, if necessary, for financial correction.

PART II

EAGGF GUIDANCE

Internal control systems

Implementation of Articles 10, 11 and 26 to 28 of
Regulation (EC) No 950/97

Planning difficulties, delays and internal control
weaknesses

70 and 71. The Commission shares the Court(cid:146)s view concern-
ing the advantages of combining loans and subsidies, where
appropriate; moreover, EAGGF Guidance aid to young farmers
may be granted in both forms. However, Regulation (EC) No
950/97 leaves the choice to Member States whether support is
provided in the form of direct grants or interest rate subsidies,
either for the setting-up aid or the investment aid.

The fact of opting for direct grants or for interest rate subsidies
has no direct link with the economic viability or profitability of
the investment, which are evaluated under the material improve-
ment plan. Account must also be taken of the very high level of
interest rates during the period examined by the Court (1994 to
1997), especially in the Mediterranean countries. This could
explain the reticence of young farmers about borrowing money,
even at subsidised rates.

Definition of (cid:145)setting-up(cid:146) date

72. The Sicilian case raised by the Court is a special case.

Circular No 187 of 15 September 1995, approved by Commission
Decision C(96) 9 of 5 February 1996, stipulates that the period

76. The late approval of this programme following difficulties
with investigation (multi-fund programme requiring various
requests sent to the Member State for the supply of information)
accounted for the difference indicated by the Court between
implementation and the forecasts of the initial financing plan.

77. The Commission will require the Spanish authorities to
incorporate the correction of the mistakes detected by the Court
into the forthcoming implementation report. The examination of
certificates of expenditure by an independent body, as provided
for in Article 8 of Commission Regulation (EC) No 2064/97, will
make it possible to correct errors of this kind, prior to the final
payment of the programme.

Evaluations

78. The Commission acknowledges the need for harmonised
indicators. The evaluation exercise referred to by the Court revealed
the need to strengthen this aspect. Therefore, the Commission has
drawn up guidelines for the evaluation of measures under Regula-
tion (EC) No 950/97 outside Objective 1 and 6 areas. These guide-
lines were submitted in the form of a Working Document (No
VI/7676/98/REV2) to the Member States in the STAR Committee
meeting of 24 February 1999.

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79. The mid-term evaluations of Regulation No 950/97 in the
Italian Objective 1 regions are in the process of being carried out
as part of the evaluation of the regional programmes. Concern-
ing the existing evaluation reports in some Member States referred
to by the Court, the Commission has taken note of the Irish
evaluation report on the setting-up aid. Many factors other than
the provisions of Regulation (EC) No 950/97, such as inheritance
rules and taxation, have an important influence on the setting-up
aid for this transfer. This may partially explain the fact that the
contribution of the setting-up aid for this transfer has not been
significant.

PART III

CONCLUSIONS

80. The assistance of the ESF has been put on a different footing
with the adoption of the European employment strategy. For the
programming period 2000 to 2006, several Member States already
intend to refocus their ESF assistance strategically in accordance
with the approach of the employment guidelines and the national
action plans (NAPs) derived from them. The Court(cid:146)s comment on
impact is premature because the final evaluations will show the
precise impact that the ESF has had over the current period (1994
to 1999). Lastly, during the current programming period, the
Commission and the Member States have adopted a whole series
of initiatives to strengthen the financial framework for the imple-
mentation of the forms of assistance and to guarantee good finan-
cial management of the ESF (see the Commission(cid:146)s reply to para-
graph 83).

81. Some of the conclusions of the mid-term evaluation have
been applied to this programming period (e.g. especially in the
rescheduling of financial resources to the various measures),
whereas others could not (e.g. recommendations on the quanti-
fication of objectives, better programme indicators, etc.). How-
ever, they do constitute valuable information for preparing the
next round of programming and they have been duly taken into
account in the Commission(cid:146)s guidance documents. This type of
feedback enhances the culture of evaluation.

82. Following its checks, the Commission made recommenda-
tions to the Member States that led to a partial reduction in the
problems mentioned (adjustment of grant approval decisions
concerning academic training; commitment to inform the national
authorities concerned of the need to revoke the national provi-
sion which was called into question by the Court and which,
moreover, is not systematically applied according to the Commis-
sion(cid:146)s auditing experience). The adoption of the eligibility forms
by the Commission in April 1997 (OJ L 146, 5.6.1997) also made
it possible to strengthen the financial framework for the imple-
mentation of the forms of ESF assistance, especially by a clearer
definition of the concepts of (cid:145)final beneficiary(cid:146)and (cid:145)expenditure
incurred(cid:146) and of the rule for the charging of indirect overheads.
On this last matter, the level of overheads charged to a project
depends fundamentally on the nature of the promoter and his
activities. Moreover, the Commission knows of national rules that
impose de facto restrictions on the declaration of indirect over-
heads for part-financed operations.

83. Since the Court(cid:146)s Annual Report for the 1995 financial year,
the Commission has fleshed out the commitments that it made
to the Court in its reply to point 6.136 of that report. Accord-
ingly, it has taken a series of initiatives to strengthen monitoring
and the protection of Community financial interests in the area
of the Structural Funds:

(cid:151) decision on the eligibility rules for expenditure in the Struc-

tural Funds taken by the Commission in May 1997,

(cid:151) Regulation (EC) No 2064/97 on the control of the Structural

Funds by the Member States,

(cid:151) establishment of guidelines for the implementation of Article

24 concerning financial corrections.

The general comment made here by the Court is therefore not a
question that is specifically linked to the measures to assist young
people, but concerns all the Structural Funds.

84. The new rules for the 2000 to 2006 programming period
already provide for a reduction in the number of assistance objec-
tives of the Structural Funds and the Community initiatives, espe-
cially in order to simplify the mechanisms for managing the
Structural Funds.

85.
In the area of the ESF, and especially for the measures to
assist young people covered by this special report, training is
organised primarily through subsidies granted to training bodies,
which is not an inherently reprehensible practice.

The Court(cid:146)s comment would in fact apply more to the other
Structural Funds or to certain measures part-financed by the ESF
but not covered by this report. For these cases, the Commission
has already agreed to finance financial engineering mechanisms
that can produce a multiplier effect for public aid by adopting the
eligibility sheets for expenditure under the Structural Funds in
April 1997. The ESF will take account of this new approach in the
negotiation of assistance for the new period 2000 to 2006.

The Commission shares the Court(cid:146)s view concerning the advan-
tages of combining loans and subsidies; incidentally, EAGGF Guid-
ance assistance to young farmers may be granted in both forms.
However, Regulation (EC) No 950/97 leaves the choice to Mem-
ber States whether support is provided in the form of direct grants
or interest rate subsidies, either for the setting-up aid or the
investment.

86. The Commission agrees that the efforts made to improve the
implementation of the Community initiative need to be main-
tained. The technical assistance provided not only at the Commis-
sion, but also, especially, in the Member States, has made it pos-
sible to develop, among other things, a network of databases and
expertise.

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C 100/27

87. The agricultural structures policy implemented in the Euro-
pean Union takes account of the mandate in the Treaty (Article
39(2)) concerning the particular nature of agricultural activity,
which results from the social structure of agriculture. The
setting-up aid for young farmers, for which the Court has indi-
cated the amounts invested and the number of beneficiaries, is a
good example. This concern has always been present in the regu-
lations of the Council and the Commission, in the work of the
Agricultural Structures and Rural Development Committee (STAR)

and in the frequent contact with the trade organisations in agri-
culture. The fact that the Court has been unable to establish the
existence of a joint strategy of the EAGGF-Guidance Section and
the ESF for the benefit of young farmers does not in any way call
into question the compliance with the provisions of the Treaty
that are mentioned by the Court. The impact of this policy in
terms of the amounts invested and the number of beneficiaries is
included in the tables annexed to the Court(cid:146)s report.