Special Report No 21/2000 on the management of the Commission's external aid programmes (in particular on country programming, project preparation and the role of Delegations), together with the Commission's replies
Date: 2000-11-30
Institutions: European Court of Auditors
Subjects: Commission Delegation, EU aid, EU programme, aid system, management, third country

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I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 21/2000

on the management of the Commission’s external aid programmes (in particular on country
programming, project preparation and the role of Delegations), together with the Commission’s
replies

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

(2001/C 57/01)

CONTENTS

Paragraph

Page

GLOSSARY OF ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EXECUTIVE SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

COUNTRY PROGRAMMING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The legal framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Procedures for the preparation of country programming papers . . . . . . . . . . . . . . . . . . . . . .

Content of individual country programming papers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PROJECT PREPARATION AND APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financing proposals and financing agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financing Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financing Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Role of the Advisory Committees in the decision-making process. . . . . . . . . . . . . . . . . . . . .

Project start-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE ROLE OF DELEGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The responsibility and decision-making authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Project monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Country programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Project preparation and appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The role of Delegations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-8

9-15

16-27

17-21

22-24

25-27

28-47

35-40

36-38

39-40

41

42-47

48-71

50-53

54-60

61-65

66-71

72-81

72-74

75-77

78

Overall conclusion and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79-81

The Commission’s replies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

3

3

6

6

6

7

8

9

9

9

9

9

10

10

11

12

13

14

14

14

14

14

16

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GLOSSARY OF ABBREVIATIONS

ACP

CRIS

CSP

DG

EDF

EU

FP

ISPA

MEDA

NGO

NIP

NPAA

African, Caribbean and Pacific countries

Common RELEX Information System

Country Stategy Paper

Directorate-General

European Development Funds

European Union

Financing Proposal

Structural pre-accession Instrument

A programme of financial and technical measures to accompany the reform of economic and social struc-
tures in the Mediterranean

Non-governmental organisation

National Indicative Programme

National Programmes for the Adoption of the Acquis

OECD-DAC

Organisation for Economic Cooperation and Development — Development Assistance Committee

OJ

OLAS

PCM

Phare

RAP

Official Journal of the European Communities

Online Accounting System (EDF)

Project Cycle Management

Programme governing aid to the candidate countries of central and eastern Europe

System used in Mediterranean Delegations for managing payments to projects under the Protocols

RELEX DGs

Directorates-General dealing with External Relations

Sapard

SCR

Sincom

Tacis

Special accession programme for agriculture and rural development

A Joint Service which manages the implementation of Community aid to non-member States

The Commission’s accounting system

Programme of technical assistance in favour of economic reform and recovery in the newly independent
States of the former Soviet Union

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EXECUTIVE SUMMARY

1. Aid to the different geographical areas is provided through a
variety of programmes, and governed by different regulations. In
the African, Caribbean and Pacific (ACP) countries it is mainly
provided through the European Development Funds (EDF). In the
other geographical areas the different programmes are funded
directly from the general budget of the European Communities
(see paragraph 9). In 1999 a total of 7 927 million euro of com-
mitments was made (see Table 1).

2. Further to observations made in several annual and special
reports of the Court and following the European Parliament’s
request, the Court examined the adequacy and effectiveness of the
Commission’s systems and procedures for country programming,
project preparation and appraisal, and aid management by Del-
egations (see paragraphs 10-15). The Commission is making
attempts to address some of the problems previously observed,
notably in its document, ‘The European Community’s Develop-
ment Policy’ (1) which highlights areas where improvements are
urgently needed.

3. The Commission has not established common procedures for
the elaboration and approval of country programmes in the dif-
ferent geographical areas. The governments of the beneficiary
countries and the Delegations of the Commission are not always
actively involved in the preparation of the country programmes
— especially in Asia, Latin America and the Mediterranean coun-
tries. In addition, the Commission should reinforce the consulta-
tion with the EU Members States, both on the spot and in the
Advisory Committees. The country programmes adopted by the
Commission do not systematically contain performance indica-
tors and do not always analyse essential issues, such as donors’
coordination or human rights issues (see paragraphs 16-27).

6. Detailed monitoring of projects is largely left to implement-
ing agencies and consultants. Delegations have only limited time
available for project monitoring (see paragraph 66) and in several
cases the monitoring of project implementation by Delegations
has shown shortcomings. A limited number of standardised moni-
toring tools should be used consistently to ensure rigorous
follow-up (see paragraphs 61-65).

7. Many of the weaknesses observed in country programming,
project preparation, appraisal and monitoring can be related to
the Commission’s organisational structure, its procedures and its
use of human resources. The splitting of the project cycle follow-
ing the introduction of the Joint Service (SCR) has made matters
worse; implementation of projects is the responsibility of the SCR,
whilst project preparation remains the responsibility of the vari-
ous RELEX DGs (see paragraphs 68-70).

8. Having accepted that splitting the project cycle is not satisfac-
tory, the Commission is undertaking a further reorganisation of
its External Relations’ services which seems to address many of
the problems presented in this report. The Commission’s pro-
posal should help to improve its delivery of aid, but only if these
changes of structure and procedures are accompanied by changes
in the Commission’s management culture towards a greater flex-
ibility and a results-oriented approach (see paragraphs 79-81).

INTRODUCTION

4. Project preparation shows weaknesses. Subjects requiring
analysis, such as the economic, environmental, and institutional
justification, organisational matters, and the chances for sustain-
ability are not treated systematically. Objectively verifiable indica-
tors are inadequately defined or are missing (see paragraphs 28-
40). As a result, there are frequently long delays before projects
start their activities. This is also due to the cumbersome nature of
the Commission’s procedures (see paragraphs 42-47).

9. Aid to the different geographical areas is provided through a
variety of programmes, and governed by different regulations (2).
In the African, Caribbean and Pacific (ACP) countries it is mainly
provided through the European Development Funds (EDF). In the
other geographical areas the different programmes are funded
directly from the general budget of the European Communities.
Tables 1 to 3 show the funds going to the different areas and the
number of transactions managed by the Commission.

5. Whilst the role of the Commission’s Delegations has expanded
considerably in recent years, their responsibilities still need to be
clearly defined. Decision-making in the Commission is overly
centralised; Delegations should have more responsibility together
with the necessary resources. The number and skills of the staff
needed should be assessed taking into account the different tasks
involved and the change in the type of projects financed (see para-
graphs 48-60).

(1) Communication to the Council and the European Parliament; The
European Community’s Development Policy (COM(2000) 212 final).

(2) Aid to the ACP countries is governed by the Lomé Convention.

Aid to Asia and Latin America (ALA) is governed by Council Regula-
tion (EEC) No 443/92 on financial and technical measures to and eco-
nomic cooperation with the developing countries in Asia and Latin
America.
Aid to the Mediterranean countries is governed by Council Regula-
tion (EEC) No 1488/96 on financial and technical measures to accom-
pany (MEDA) the reform of economic and social structures in the
framework of the Euro-Mediterranean partnership.
Aid to the candidate countries is governed by Phare programme
Council Regulation (EEC) No 3906/89, modified by Council Regula-
tion (EC) No 753/96 and by the new Phare orientations document
(COM(97)112) adopted by the Commission on 19 March 1997.

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Amounts committed and paid in 1999 per main programme

Table 1

Mio EUR

3 500

3 000

2 953

2 500

2 000

1 500

1 000

500

0

Commitments

Payments

1 270

1 444

1 152

1 344

950

1 026

370

410

422

515

388

362

220

EDF

Eastern Europe

Unallocated

Mediterranean

ALA

NIS

Ex Yugoslavia

Source: SCR

Table 2

Amounts committed by main programme

1990

1999

Mio EUR

493

379

228

748

953

18 %

0 %

0 %

14 %

8 %

27 %

34 %

Total

2 801

100 %

Mio EUR

1 444

362

388

410

1 026

1 344

2 953

7 927

18 %

5 %

5 %

5 %

13 %

17 %

37 %

100 %

CEEC

EX-Y

NIS

ALA

MED

Miscellaneous

EDF

Source: SCR

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Table 3

Transactions handled by the SCR in 1999

Value of commitments

Number of commitments

Value of payments

Number of payments

Number of contracts

Total entered into in 1999

Mio EUR 7 927

2 883

Mio EUR 4 899

40 097

7 465

Total outstanding at end of 1999

Total value of commitments remaining to be paid (RAL)

>Mio EUR 20 000

Total number of contracts managed

Total number of projects managed

Source: SCR

16 448

11 640

10.
In recent years there have been increased concerns that the
Commission’s structure, organisation, resources, procedures, and
management of external actions are inadequate. These concerns
have been highlighted in the OECD-DAC reviews (1), in various
evaluations carried out at the request of the Council and the Com-
mission (2) and in many of the Court’s Annual and Special
Reports (3). In 1997, as part of its resolution concerning the dis-
charge on the 1995 accounts, the European Parliament requested
the Court to examine the adequacy and effectiveness of the Com-
mission’s structure, procedures and allocation of human resources
relating to development cooperation (4).

sation were raised with the Commissioners responsible at the
time. Subsequently, the audit focused on those key areas that were
in principle the least affected by the reorganisation: the systems
and procedures used in relation to country programming, project
preparation and appraisal, which remained the responsibility of
geographic Directorates-General (5), and aid management by Del-
egations (6). The audit does not examine the organisation, proce-
dures and systems and resources of the SCR.

11. At the end of 1997 the Commission decided to reorganise its
services by establishing a Joint Service (SCR) to manage Commu-
nity aid to non-member States. Concerns relating to this reorgani-

12. Specific audits were undertaken in four geographical areas:

(a) Asia, in particular Bangladesh and the Philippines;

(1) OECD-DAC,

‘Development Cooperation Review Series: European

(2)

(3)

Community’, 1998 and 1996.
In 1995 the Council requested a full and detailed evaluation of the
European Community’s development instruments and programmes.
Independent evaluations were carried out into European Community
aid to ACP countries, Mediterranean countries, Asian and Latin Ameri-
can countries and the European Community’s humanitarian assis-
tance. The final report was delivered in May 1999.
In particular the Court of Auditors’ Annual Report concerning the
financial year 1991, (OJ C 330, 15.12.1992), which examined proce-
dures and resources for the management of appropriations for finan-
cial and technical cooperation in the Asian and Latin American coun-
tries. The Court of Auditors’ Special Report No 1/98 in respect of
bilateral financial and technical cooperation with non-member Medi-
terranean countries together with the Commission’s replies, (OJ C 98,
Volume 41, 31.3.1998). Annual Report concerning the financial
year 1997 (OJ C 349, 17.11.1998). Special Report No 3/97 concern-
ing the decentralised system for the implementation of the Phare pro-
gramme (period 1990-1995), (OJ C 175, 9.6.1997).

(4) Paragraph 63 of the resolution containing the comments which form

part of the Decision (OJ L 162, 19.6.1997).

(5) RELEX DGs (from the French term ‘Relations extérieures’) is used as a
general term for all the geographical DGs dealing with development
issues. At the time of the audit these were:
DG VIII: ‘Development’ — Bilateral and development cooperation
relations with Africa, the Caribbean and the Pacific: Lomé Conven-
tion. Plus certain budgetary headings such as non-emergency food
aid, and the co-financing of NGOs.
DG IA ‘External Relations’ — Central and eastern Europe, ex-USSR,
Mongolia, Turkey, Cyprus, Malta and other non-member European
countries. Responsible for Phare and Tacis.
DG IB ‘External Relations’ — South Mediterranean, Middle and Near
East, Latin America, South and South-east Asia and North-South
Cooperation.
DG I ‘External Relations’ — Relations with China, Korea, Hong Kong,
Macao and Taiwan as well as international negotiations such as the
Uruguay Round.
In addition to their involvement in the development of country pro-
grammes and in project preparation, Delegations have monitoring
responsibilities during the implementation phase.

(6)

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(b) Latin America, in particular Bolivia and Guatemala;

(c) the Mediterranean countries (1),

in particular Egypt and

Morocco;

(d) the African, Caribbean and Pacific (ACP) countries (2), in par-
ticular, Cameroon, Central African Republic, Chad, Ethiopia,
Eritrea, Gabon, Malawi and Swaziland.

13. Unless otherwise specified in the text, comments relate to
these four areas.

14.
In addition the report draws upon work carried out by the
Court in central and eastern Europe, in particular Romania, Bul-
garia, Estonia and Poland, as some of the problems relating to the
management of funds for pre-accession candidate countries are of
the same nature as those affecting development cooperation (3).
When comments apply to all five regions, this is mentioned spe-
cifically.

15. The audit was carried out in the technical, geographical and
financial services of the Commission and in the countries listed
above. Several Member States’ development agencies and other
major donors were also visited.

COUNTRY PROGRAMMING

16. The purpose of country programming papers (4) is to set out
agreed objectives for development assistance to individual coun-
tries, together with a strategy for achieving them.

18. For the ACP countries, the Lomé Conventions and the pro-
gramming instructions issued by the responsible RELEX DG pro-
vide a framework for the elaboration of a National Indicative Pro-
gramme (NIP) as well as for aid not included in the NIP, e.g.
emergency aid.

19. The specific Council Regulation governing financial and
technical cooperation with Asia and Latin America is not very
detailed. It merely provides that ‘wherever possible, indicative
five-year programming shall be established for each country’ (5).

20. Specific guidelines (6) were adopted concerning the national
indicative programmes (NIPs) as part of the MEDA programme (7).
Although these guidelines contain some positive points, in some
areas they are too general and repetitive and they do not provide
definitions for the various concepts used. They point to the need
to ‘avoid dispersion of the cooperation effort over too wide a
number of activities ...’ but then set out a long list of issues that
should be included in the NIP. The guidelines do not provide a
methodology explaining how a NIP should be prepared.

21. New Phare orientations (8) were adopted by the Commission
in March 1997 for the candidate countries in central and eastern
Europe. Priorities identified in the Commission’s opinions on can-
didate countries’ applications for membership of the EU are set
out in Accession Partnerships complemented by National Pro-
grammes for the Adoption of the Acquis (NPAA) containing details
of how the candidate country will adopt the acquis. Annual Financ-
ing Memoranda, agreed between the Commission and the candi-
date country, including details of projects to be financed, are based
on measures identified as priorities in the opinions and Accession
Partnerships. These documents provide the new framework for
the annual programming of Phare.

Procedures for the preparation of country programming
papers

The legal framework

17. Each of the different programmes of financial and technical
assistance has its own regulatory framework, which governs in
varying degrees of detail the preparation of country programmes.

22.
In Asia, Latin America and the Mediterranean countries a
number of common weaknesses were identified in the way in
which the country programming papers were prepared. The pro-
cedure was highly centralised. The papers were mainly prepared

(1) For activities under the present MEDA programme.
(2) Excluding South Africa.
(3) Tacis was not covered in this report as this was examined in Special
Report No 6/97 (OJ C 171, 5.6.1997) concerning Tacis subsidies allo-
cated to the Ukraine.

(4) Country programming papers have different names depending on the
geographical region. In ACP and the Mediterranean countries there
are National Indicative programmes (NIPs) and Country Strategy
Papers (CSPs). In Asia and Latin America there are Country Strategy
Papers. There are no country programming papers as such for central
and eastern Europe. Programming is done according to Accession
Partnership priorities and takes account of the National Programme
for the Adoption of the Acquis.

(5) Article 9 of Council Regulation (EEC) No 443/92 of 25 February
1992 on financial and technical assistance to, and economic coopera-
tion with, the developing countries. Internal notes setting out formats
for CSPs have been prepared however.

(6) Council Decision of 6 December 1996 concerning the adoption of
the guidelines for the indicative programmes concerning financial
and technical measures to accompany the reform of economic and
social structures in the framework of the Euro-Mediterranean partner-
ship (MEDA) (OJ L 325, 14.12.1996).

(7) Country programmes had also been prepared under the earlier

Protocol regime.

(8) New Phare orientations document (COM(97)112/8) adopted by the
Commission on 19 March 1997 and by the Council on 9 June 1997.

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in Brussels with little involvement of the Delegations or the bene-
ficiary countries’ authorities. This is inefficient, as the knowledge
of the Delegations is not fully exploited. Although Delegations
were asked to comment on draft papers, they were often not
given sufficient time to do so properly, and their comments were
not always taken into account. There was also insufficient con-
sultation with EU Member States’ representatives in the field.
Although Member States’ Advisory Committees (see para-
graph 41) have had an opportunity to discuss the various country
programming papers this has been too hurried. Large numbers of
papers have generally been presented at the same meeting, e.g. 11
South American CSPs were presented at one meeting and Mem-
ber States have complained that they have had inadequate time to
study the documents (1). In addition, their comments were not
always taken into account (2).

23.
In the ACP countries the Delegations are heavily involved in
the programming process. Although it is the responsibility of the
ACP State (3) to draw up a draft NIP, in practice this was done by
the Delegation, involving negotiations with the National Autho-
rising Officer and key ministries and stretching over roughly a
two-year period. Commission’s guidelines for drafting the NIP
existed for the eighth EDF but they were marked ‘for official use
by the Commission and the Delegations only’.

24. For the candidate countries in central and eastern Europe,
the Commission underestimated the resources and time needed
for changes introduced by the new Phare orientations and conse-
quently the 1998 programming timetable was not realistic. The
Council did not decide on the principles and objectives of Acces-
sion Partnerships until March 1998 and formal guidelines for the
1998 programming exercise were not adopted until June 1998.
Consequently, projects in the 1998 programme were conceived in
the framework of the Phare approach for previous years and then
incorporated into the framework of the new orientations, result-
ing in pressure on the timetable. The changes in Phare pro-
grammes and related procedures were not accompanied by effec-
tive systems for defining, planning, monitoring and reviewing
such major changes.

(1) Minutes of the 139th meeting of the PVD-ALA Committee held

27 October 1998, (3 November 1998).

(2) For example, at the MED-Committee in June 1996 there were a num-
ber of critical comments regarding the NIPS submitted; e.g. papers
should include more on cross-sectoral issues, on sustainability, on
evaluations and on coordination with other donors. This general dis-
cussion took up the whole meeting, resulting in the discussion of the
individual NIPs being postponed to the next meeting. Following this
discussion, in the July 1996 meeting of the Committee, the NIPs were
formally approved in the Committee’s September 1996 meeting with-
out any changes.

(3) Article 281(2) of the Lomé IV Convention.

Content of individual country programming papers

25. Overall the ACP NIPs examined were considered to be fairly
comprehensive documents providing a useful framework for the
implementation of the seventh EDF financed development coop-
eration. There were, however, weaknesses in certain areas: the
description of government undertakings and actions; coordina-
tion matters; timetables; gender issues, and poverty alleviation.
There were no performance indicators, so it will be difficult to
evaluate future performance and no requirement for future evalu-
ation was included (4). The NIPs of the least developed coun-
tries (5) did not reflect what particular treatment and specific
measures they should benefit from. In addition, NIPs do not cover
all areas of intervention financed by the Commission.

26. The Asian, Latin American and Mediterranean papers exam-
ined (6) were overly descriptive and lacked analysis in many aspects.
In particular, they did not identify what lessons had been learned
from the Commission’s past development efforts in the country
concerned. As in the ACP papers, performance indicators were
not included, so it will be difficult to evaluate future performance
and nor was there a requirement to carry out any future evalua-
tions. Coordination between the EU and the Member States and/or
other donors was not covered. The Asian and Latin American
papers contained many objectives, described in very general terms,
without proper focus or priority. The Asian papers did not fol-
low a standard format, although one had been provided. For some
countries in Asia and Latin America significant elements of the
Community’s policy, such as human rights issues, have not been
described in the programming paper, even though the Commis-
sion has significant projects in this area. The Mediterranean NIPs,
according to their guidelines are supposed to deal with a long list
of issues (7), many of which were inadequately dealt with in the
Egyptian or Moroccan NIPs.

27. At the end of 1998 the National Programmes for the Adop-
tion of the Acquis (NPAA) for candidate countries of central and
eastern Europe, did not provide a sufficiently reliable overview to
ensure that all objectives were covered by national budgets, Phare
programmes or other forms of assistance. Candidate countries
would have preferred a stronger link between the NPAA and
annual country programmes and consider that the NPAA should
now be developed more as a practical programming and monitor-
ing tool. In addition, the structure and classification of the

(4) For the eighth EDF mid-term reviews are foreseen.
(5) Article 329 of the Lomé IV Convention.
(6) The CSPs/NIPs for a number of countries, including those visited,

were examined.

(7) These include, inter alia, environmental issues, financial and economic
sustainability, women in development, local institutional capacity,
and an assessment of the problems relating to the introduction of free
trade with the European Community.

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programmes was specific to each candidate country, which makes
it hard to compare them.

PROJECT PREPARATION AND APPRAISAL

In the 1991 Annual Report (1) the Court identified signifi-

28.
cant weaknesses in project preparation, notably:

(a) over-hasty preparation of project documents without any real

appraisal stage;

(b) lack of clearly identified, quantified objectives;

(c)

lack of realism in the definition of objectives and implementa-
tion time scales, with insufficient analysis of risks and con-
straints.

29.
In order to improve its project management, including prepa-
ration, in 1992 the Commission adopted the Project Cycle Man-
agement (PCM) methodology (2) and guidelines on the format and
contents of Financing Proposals and on the requirements to draw
up a logical framework (3). The projects examined during the audit
were mostly prepared using this methodology. Although there
has generally been some improvement in the quality of project
preparation and documentation, various weaknesses remain which
are considered below.

30. Projects still suffer in general from insufficient appraisal. The
usual procedure after a project has been initially identified is for a
team of consultants to spend two or three weeks on the spot
examining the project and preparing a project design. The Financ-
ing Proposal (see paragraph 35) is drafted directly by the desk
officer on the basis of these consultants’ reports (4) and in con-
sultation with the technical units. In practice, in all regions, iden-
tification and appraisal are not dealt with as distinct stages of the
project cycle.

(1) Court of Auditors Annual Report concerning the financial year 1991

(OJ C 330, 15.12.1992).

(2) PCM methodology provides a framework for the management of
projects over their whole lifecycle, from project identification and
preparation to ex post evaluation.

(3) The logical framework is a tool which makes explicit the underlying
logic of project design, i.e. how particular inputs should produce cer-
tain outputs which will help meet objectives which will contribute to
wider goals. It also includes information on indicators of achieve-
ment, on sources of data and on assumptions and risks, related to the
project. The results are usually expressed in the form of a matrix with
four rows and four columns.
In practice, consultants often prepare drafts of the FP, and are required
to draft a logical framework.

(4)

In the case of the EDF, the identification and preparation of
31.
projects are the responsibility of the ACP State with the assistance
of the Delegate if requested, while the appraisal is to be done
jointly by the ACP State and the Community (5). In practice,
projects are usually prepared by Delegations with the cooperation
and support of European individual experts made available to the
ACP States’ own institutions. These experts become increasingly
involved in the process because of the workload of Delegations.
Their roles should be clearly defined to ensure transparency in
respect of the execution of the tasks of the ACP States’ authorities
and the Delegations (which do not always have the same priori-
ties).

32. For EDF expenditure a useful initiative was introduced in
1997 (6) in the form of a ‘Quality Support Group’ (7), which aims
to improve the quality of the project/programme preparation and
appraisal. This group examines project preparation documents (8)
for all projects/programmes and has had some success in improv-
ing their quality, although procedures for the following-up of the
Group’s recommendations are weak.

33.
In many cases, the project preparation process is carried out
under time pressure. For non-EDF expenditure the annual cycle of
the budget still influences to an excessive extent the rhythm of
project preparation and approval (9). The rush to commit funds
before the year-end means that a large number of projects are pre-
sented to the Member States’ advisory committees in December.
This reduces the time available for their appraisal and is not con-
ducive to improving the quality of the project preparation.

34. For Phare the annual programming process takes over a year.
This duration is unsuitable, particularly for projects following on
from previous activities. The repetition each year of the complete
programming cycle, based on the timing of the budgetary proce-
dure, is not compatible with the complexity of Phare. A program-
ming cycle more closely related to the duration of projects, i.e.
three to four years, would improve the quality of programming
and project preparation at country level.

(5) Articles 285, 287 and 317(a) of the Lome IV Convention.
(6) Decision of DG VIII of 25 November 1996.
(7) The group is composed of senior officials representing all Director-

ates of DG ‘Development’ and three Directorates of the SCR.

(8) For each project this consists of a project identification sheet, a

Financing Proposal and an end-of-appraisal report.

(9) See Annual Report 1998, paragraphs 5.3-5.6 (OJ C 349, 3.12.1999).

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Financing Proposals and Financing Agreements

Financing Agreements

35. The Financing Proposal is the internal Commission docu-
ment which is presented to the Advisory Committee of Member
State representatives, and on which the financing decision of the
Commission is based. The Financing Agreement (1) is the contract
signed between the Commission and the authorities of the recipi-
ent country.

Financing Proposals

36. The introduction of PCM methodology (see paragraph 29)
has resulted in some improvement in these documents. The
descriptive part of the Financing Proposals, giving the background
to the project, and the project components or activities are gener-
ally adequate.

37. The logical frameworks (2) annexed to the Financing Propos-
als are often not well prepared. The distinctions between the over-
all objective, project purpose, results and activities are often not
clear and objectively verifiable indicators are frequently missing.
The analysis of risks and constraints is often superficial. Logical
frameworks are not always known to the recipient authorities. In
some cases in Asia, project management was not given a copy of
the original logical framework in the Financing Proposals, so that
when they prepared a logical framework for the global work plan,
they had to start from scratch (3).

38. Other elements in the Financing Proposals need improve-
ment; organisational matters, information on other donors’ activi-
ties, or on the results of relevant evaluations are often limited.
Timetables in all the regions are unrealistic. For Asia, Latin America
and the Mediterranean countries, the more analytical aspects of
the preparation, notably the economic, environmental, and insti-
tutional justification, gender assessments and the chances for sus-
tainability are often neglected, or treated only superficially. In the
candidate countries of central and eastern Europe, when a pro-
posed project was a continuation of an earlier project, the Financ-
ing Proposal did not always provide sufficient information regard-
ing the previous project (4).

(1) Sometimes the final beneficiary is not a government authority but an
NGO, for example. In this case the document may have a different
name, but the basic principle, that there is one contractual document
with similar contents to those of the Financing Proposal remains the
same. In Phare countries these Financing Agreements are known as
Financing Memoranda.

(2) The logical framework is a tool which makes explicit the underlying
logic of project design, i.e. how particular inputs should produce cer-
tain outputs which will help meet objectives which will contribute to
wider goals. It also includes information on indicators of achieve-
ment, on sources of data and on assumptions and risks, related to the
project. The results are usually expressed in the form of a matrix with
four rows and four columns.
It was also found that, in some cases, Project Management Units did
not have copies of the consultants’ project preparation reports.
(4) For example, a proposed project in the area of customs in Bulgaria did

(3)

not mention the failure of two previous projects.

39. The Financing Agreement is a key document for project
management. As the legal contract between the Commission and
the recipient countries’ authorities, it provides a binding frame-
work for project management’s actions. However, the following
weaknesses were found in several cases: inadequate description of
the counterpart’s contribution to the project, confusion over the
length of the project, inadequate description of what happens to
assets at the end of the project, poorly structured budgets, and an
inadequate description of responsibilities, in particular when there
are several organisations involved. In addition, regular, indepen-
dent financial audits were not always provided for. General project
managers who had to work with the Financing Agreements were
critical of them for failing to give them a sufficiently clear idea of
the intentions of the Commission and of the recipient govern-
ment’s authorities.

40. The weaknesses of the Financing Agreement indicate that
the function of the document in its current form should be
reviewed. The Financing Agreement should focus on the objec-
tives, resources and the mutual obligations of the donor and the
beneficiary. The detailed planning required for successful project
implementation could be included in another, more flexible,
document.

Role of the Advisory Committees in the decision-making
process

41. The various Council regulations governing external actions
require the Member States, through Advisory Committees, to give
opinions on Financing Proposals over a certain size (5) before the
Commission takes a financing decision. The members of the rel-
evant Advisory Committee receive a copy of the draft Financing
Proposals before the proposal is to be discussed. They usually pass
it on to their local representation in the country in question for
comments. However, this consultation at field level comes too late
in the project preparation process for any substantive comments
to be incorporated. Member States’ representatives submit writ-
ten questions on the Financing Proposals before the meetings, but
although Commission officials spend a lot of time preparing
replies, they tend to concentrate on trying to reassure the repre-
sentatives rather than resolve any weaknesses in project design.

Project start-up

42.
In the ACP countries the average time scale to prepare a
project (defined as the period between elaborating the Project
Identification Sheet and signing the Financing Agreement) is 14
months. In some cases the preparation took two years or more.

(5) Over 2 million euro for ACP and the Mediterranean countries and
over 1 million euro for ALA. For Phare all annual Financing Agree-
ments are adopted with each country after consultation with the
Phare committee.

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In the Asian, Latin American and Mediterranean countries the
average delay between the initial project identification mission
and the signing of the Financing Agreement was 21 months (1).
In two cases in Asia it took over three years.

43. Even after the signature of the Financing Agreement, projects
do not always start promptly. Delays are frequently experienced
in the recruitment of technical assistance to manage the project (2).
In ACP countries, a number of projects reviewed started activities
several years after the Financing Agreement was signed.

It is clear that projects will not always be able to start imple-
47.
mentation as soon as the Financing Agreement is signed. Many
projects, especially ‘process’ projects (3), require an inception
period while diagnostic studies to establish baseline data etc. are
prepared. In these cases, it is not uncommon for the inception
phase to identify significant changes that are needed to the project.
In Asia, Latin America and the Mediterranean countries this leads
to amendments to the Financing Agreement (4), which, in recent
years, have taken a long time to process (see paragraph 52).
Amendments to Financing Agreements requiring no change to
the budget but simply an extension in time are also often required.
Even these simple amendments take a long time to process. The
frequency with which projects are extended is also an indication
that most project timetables are unrealistically short.

THE ROLE OF DELEGATIONS

44. Reasons for delays vary. Some are due to poor project prepa-
ration, which makes projects hard to implement. Others relate to
the slowness of the Commission procedures; the Commission has
been slow even when it has joined other donors in supporting
ongoing projects. In some cases the reason for the delay is outside
the control of the Commission, e.g. when the counterpart author-
ity in the recipient country goes back on previously agreed posi-
tions and seeks modifications. Sometimes it indicates a lack of
‘ownership’ of the project by the authorities, which may be the
result of them being inadequately involved at the project prepara-
tion stage.

48. The role of the Commission’s Delegations has expanded
considerably in recent years. Responsibilities related to the imple-
mentation of external aid programmes are only one of their main
areas of activities. Delegations now increasingly perform a politi-
cal role representing the Union, are active in the economic, com-
mercial, and cultural spheres, and provide information on the
Union and its policies and programmes. The proportion of time
and resources that Delegations had available for external aid pro-
grammes was on average 41 % (5).

In the case of EDF projects, delays seem to arise not so much
45.
from the procedures themselves as from an overly formalistic
application of rules, in particular relating to tendering, together
with a lack of knowledge of these procedures by different parties
in the process.

49. The degree of responsibility of the Delegations for the dif-
ferent phases of the project cycle varies considerably. The ACP
Delegations, under the rules of the Lomé Conventions, have had
more responsibility than the Delegations in Asia, Latin America
and the Mediterranean countries. The new Phare orientations
provide for greater deconcentration of responsibilities to Delega-
tions. All Delegations, however, have important responsibilities
during the implementation phase, which can be put under the
overall heading of project monitoring (see paragraphs 61-65).

46. The new Phare reorientations led to delays in project start-
up: especially as the Commission had introduced the new orienta-
tions without preparing the corresponding procedures that would
be needed As the Commission’s procedures were developed, this
led to further modification of some projects, adding to the pres-
sure on the timetable. Swift project start-up is particularly impor-
tant for a country undergoing rapid change, but 1998 projects,
conceived in mid-1997 by the Estonian administration, could only
begin in the second half of 1999.

The responsibility and decision-making authority

50.
In all regions the duties to be carried out by the staff in the
Delegations and at headquarters in Brussels in relation to the

(1)

In practice, delays may be even longer: in cases were the projects had
not started at the time of the audit visit, the dates of these audit visits
were taken as the basis for the calculation.

(2) The tendering process rarely runs smoothly: delays occur at many
stages of the procedure; experts proposed in the winning bid become
unavailable and must be replaced; sometimes the whole tendering
process must be restarted.

(3) A process project is one where the objective is to set in motion a
development ‘process’, which will continue after the end of the project
period. It compares with a ‘blueprint’ project, such as the construc-
tion of a road, which involves the simple execution of something fully
designed in advance.
In ACP countries, changes are often made to projects without any cor-
responding change being made to the Financing Agreement.
‘Designing tomorrow’s Commission: A review of the Commission’s
organisation and operation; the External Relations service, 24 Febru-
ary 1999.

(4)

(5)

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different stages of the project cycle, are not clearly defined. Nor
has the Commission clearly defined the content, duties, and
responsibilities of each post. Job descriptions for staff in the Del-
egations, where they exist, are too broad to be useful.

Resources

51. This lack of clarity in the division of responsibilities leads to
duplication and delays. In 1998, the Ting report (1) made a num-
ber of recommendations to clarify the situation, and to increase
the responsibilities of the staff in the Delegations. It highlighted
the fact that there are certain tasks which only the Delegations
can reasonably be expected to perform, for which they have been
given responsibility, yet for which they are still required to obtain
approval from headquarters, approval which is given entirely on
the basis of information supplied by the Delegation.

52. This over-centralisation of decision-making procedures in
Brussels is inefficient. Responses of headquarters’ services to ques-
tions or proposals from the Delegations are generally very slow
or sometimes even not forthcoming at all. For the operations
examined by the Court there were significant delays where deci-
sions were required on preparing missions, modifying Financing
Agreements, tender documents, or technical assistance contracts.
In addition, these decisions appear to be taken without clearly
analysing their impact on the implementation of the project. The
highly centralised decision-making in the Commission (2) con-
trasts with that of other donors (3), which have a stronger field
presence, reinforced with professional staff, and a greater Delega-
tion of responsibility.

53. The reorganisation of the services in Brussels in 1998 and
the reallocation of responsibilities exacerbated problems for all
regions, at least in the short-term, as initially people were not sure
who was responsible for what. Apart from the delays that were
experienced, responses were sometimes unpredictable and there
was uncertainty over relatively routine administrative matters.
The Commission’s recent intention to devolve more responsibil-
ity to Delegations, together with reinforced resources, is very
encouraging (4). Up to the time of the audit, only a limited num-
ber of posts was redeployed from the central services to the Del-
egations.

(1) Report by the analysis group on relations between Brussels and the

Delegations.

(2) Although the degree of centralisation varies between the programmes,
and indeed within them, in some cases depending on the individuals
involved, in general, decision-making in all the programmes is cen-
tralised.

(3) Such as in Sweden, the United Kingdom, the Netherlands, and USAID.
(4) Communication from the Commission to the Council and to the
European Parliament, The European Community’s Development Policy
(COM(2000) 212 final).

54. The successful functioning of the Delegations depends on
the adequacy of staff, in terms of their number, but also of their
professional background compared to the actual workload. There-
fore posts should not be left vacant for significant periods (5) of
time, and the specialist knowledge needed to carry out the work
should be easily available.

55. The extent to which officials or local staff are employed var-
ies in the different geographical regions. In general, Delegations
in ACP countries rely largely on Commission officials. Few local
staff (apart from local expatriates) are used for management func-
tions, either administrative or for the management of aid (6). Con-
sidering that qualified staff are available now in most ACP coun-
tries, it should be examined to what extent local staff could be
more actively used. The Commission has also not clearly deter-
mined what tasks local staff can do, e.g. there is no clear policy
on whether local staff should carry out financial functions and
different situations have been found in different countries (see
also paragraph 63).

56. The Commission has not developed criteria to determine
what the workload of a Delegation should be, or the level of staff-
ing required, in relation to its tasks and responsibilities. This is
particularly important in situations of considerable political or
economic change, such as in the candidate countries of central
and eastern Europe. It is therefore not possible to judge on the
basis of any objective information whether and to what extent
Delegations are over- or understaffed.

57. The change in the focus of the Commission’s development
programmes, to include sectoral support in social areas means
that the traditional profile of staff in the Delegations is no longer
appropriate (7). The Staff Regulations are rigid, which prevent the
Commission from changing skills quickly. Training and ‘conver-
sion’ courses could improve the staff mix, but so far the Commis-
sion has made little progress in this area. In particular, the Delega-
tions in Asia, Latin America and the Mediterranean countries lack
staff with specific expertise in financial management, and in mat-
ters such as tendering and contracting.

58. The Commission has sought to support its staff resources in
Delegations by supplementing them with various forms of

(5) Six out of the sixteen ACP Delegations examined had vacancies for
more than one year. The total number of vacancies was 12. In none
of these cases was local staff hired to fill the vacancy (even on a tem-
porary basis).

(6) According to the communication to the Commission (Doc. SEC(97)
605, 1.4.1997 there were 20 local agents in 14 out of 63 ACP Delega-
tions and offices carrying out these types of functions.

(7) See, for example the OECD-DAC Development Cooperation Review

Series: European Community: 1998.

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external personnel. In some cases, technical assistants (1) have
been contracted to help implement specific programmes such as
food security, with the personnel working very closely with the
Delegation even if formally located outside it. External consult-
ants have also been recruited to perform specific tasks such as car-
rying out preliminary studies and analyses for the preparation of
country strategy papers. Twenty Phare Delegations and represen-
tative offices obtained additional staff resources, financed through
Part B of the budget. Between 1996 and 1999 the number of such
staff increased from 29 to 195 (2). This type of staff financing,
which was intended to be linked to the duration of the pro-
gramme, has become a structural solution for overcoming short-
ages of personnel.

detailed monitoring is left to the people actually implementing
the project (5), who are normally required to establish a monitor-
ing and evaluation system. Monitoring is also heavily dependent
on external consultants who carry out support missions and mid-
term reviews. In the Asia and Latin America Delegations, where
there are few specialist staff, monitoring of the technical progress
of projects is left almost entirely to project management and
external consultants. Delegation staff maintain regular contact
with project management, participate in steering committees, and
undertake, as far as possible, regular field visits. Many of their
monitoring tasks, however, are based on reviewing a large variety
of documents.

59.
In a few cases Technical Assistance Offices have been estab-
lished alongside Delegations to provide technical support for the
implementation of programmes. This was authorised by the Bud-
getary Authority in the Mediterranean region with the establish-
ment in 1998 of MEDA teams (3), and in Bosnia. This support has
played an important role in helping the Commission to imple-
ment its programmes by enabling it to compensate for the miss-
ing in-house technical expertise. The flexibility of these mecha-
nisms is, however balanced by less positive aspects. Many of the
solutions are short term, as there is a high turnover of staff, and
the experience and knowledge obtained does not remain in-house.

60. While there will remain a legitimate role for external exper-
tise at Delegation level, the Commission needs to find longer-term
solutions to the problem of inadequate staff resources. This is par-
ticularly so in the context of devolution of competencies from
headquarters to the field.

Project monitoring

61. The Commission defines monitoring as the continuous pro-
cess of examining the delivery of programme outputs to intended
beneficiaries, which is carried out during the execution of a pro-
gramme with the intention of immediately correcting any devia-
tion from operational objectives (4). Delegations play an impor-
tant, though not exclusive, role in monitoring projects. Much

62. Although project monitoring is acknowledged by Delegation
staff to be one of their main responsibilities, as seen in para-
graph 48, the time available for monitoring is limited. A great
deal of the work is focused on project inputs rather than outputs
and much time is spent on the administrative aspects of project
implementation. The concentration of even minor decision-
making in Brussels (see paragraphs 51-52) and the fact that the
duties to be carried out by the staff in the Delegations, and at
headquarters in Brussels, are not clearly defined (see para-
graph 50), means that a lot of time is lost whilst documents are
sent to and fro between the Delegations and the central services.

63.
In practice the attention paid by Delegations to financial
monitoring varies considerably. In the ACP Delegations respon-
sibilities in this area are clearly laid down, but this is not the case
in the Asia, Latin America and Mediterranean Delegations. In
some (6) a comprehensive system for financial monitoring exists,
with staff specifically allocated to this task, whereas in others
arrangements are much looser, with very little checking of pay-
ment requests from projects before they are forwarded to Brus-
sels for payment.

64. Although numerous monitoring activities are undertaken,
corrective action was not always taken even in cases where the
project’s operational objectives were not being achieved. Delega-
tions lack guidance on monitoring procedures.

65.
It is often unclear how much use is made of the progress or
activity reports prepared by project management which are sent
to central services (7). Moreover, the contents of these reports can

(1)

In the past notably through AEC and now directly by the Commis-
sion.

(2) Part B of the budget is supposed to finance operating expenditure
such as projects. Part A of the budget finances administrative costs
such as staff. For comparison there was an increase of 87 posts
financed by Part A of the budget over the same period in these Del-
egations.

(3) Both in headquarters and at each Delegation.
(4) Evaluating EU expenditure programmes — a guide — first edition

January 1997 — European Commission.

(5)

In Asia, Latin America and the Mediterranean region this is usually a
Project Management Unit that has one local and one European Direc-
tor. In Phare countries this is usually within the government’s minis-
tries. In ACP countries different arrangements exist.

(6) Often where at some stage the development counsellor has come

(7)

from an ACP Delegation.
In some cases the reports are accompanied by Delegation comments
in most of the cases they are not; Delegations rarely receive feed-back
on these reports from Central services.

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vary considerably (1); sometimes they constitute merely a descrip-
tion of the activities of the project management without, analys-
ing the project’s implementation and problems. For several projects
the monitoring of project implementation by Delegations has
shown shortcomings, e.g. project evaluations mentioned in the
Financing Agreement have not always been carried out. Delega-
tions do not always consistently monitor the implementation of
actions and measures to be taken by governments of recipient
States. Indeed in one Delegation they did not consider the moni-
toring of the government’s contribution to be their responsibil-
ity.

Management tools

66. The Delegations also suffer from inadequate management
tools. At the basic level of procedural manuals, the ACP Delega-
tions have a detailed procedures manual developed in 1978, but
no comprehensive up-to-date manual existed for the Asian and
Mediterranean Delegations. One was prepared for the Latin
America programme, but is available in Spanish only. The differ-
ent notes issued by headquarters services at various times have
not been consolidated. In these circumstances, it is not surprising
to find that the level of knowledge of the precise procedures to be
followed, amongst headquarters and Delegation staff, is not suf-
ficient and this leads to delays.

67. The Delegations in all regions do not have adequate basic
management information systems to inform them about imple-
mentation progress (2). Most do not have access to the Commis-
sion’s accounting system, Sincom. Other management informa-
tion tools are also inadequate or lacking. For example, in the
Mediterranean, the system used by Delegations for managing pay-
ments to projects under the Protocols (RAP) is not technically
suitable for MEDA but no new system had been introduced at the
time of the audit. In the case of the EDF, the Online Accounting
System (OLAS) in Brussels is of limited value to Delegations, as
they do not have direct access to it; accounting information has
to be transmitted from Brussels manually, which gives rise to

(1) According the Project Cycle Management Manual (p. 59) such reports
should also follow the basic format used for the project implementa-
tion phase, adding the technical and financial details necessary for a
proper understanding of the project’s implementation.

(2) The Court has been pointing this out in various reports since 1992:
Annual Report concerning the financial year 1991 (OJ C 330,
15.12.1992);
Annual Report concerning the financial year 1996 (OJ C 348,
18.11.1997);
Special Report No 1/98 in respect of bilateral and technical coopera-
tion with non-member Mediterranean countries together with the
Commission’s replies, (OJ C 98, 31.3.1998);
Special Report No 7/98 in respect of the European Community
Development Aid Programme regarding South Africa (1986-1996)
(OJ C 241, 31.7.1998).

delays. Similarly at the end of 1998 several Delegations in the can-
didate countries had difficulties in obtaining access to financial
data relating to programmes. As a result Delegations operate their
own computer and/or manual systems to account for project-
related transactions, which is inefficient.

68. The establishment of the SCR, with its task of simplifying,
standardising and codifying procedures, and developing common
management tools, is an important step in overcoming these
weaknesses. The CRIS (3) information system is being developed
to provide Delegations and headquarters with an adequate tool
for management, but it will be some time before a reliable, com-
plete tool is available.

69. The regulatory framework governing the financial manage-
ment of the assistance programmes from the general budget is
not well adapted to requirements. The Financial Regulation itself,
both the general provisions and those dealing specifically with
actions outside the Community, is unsatisfactory (4) and, in the
context of the total revision being carried out since 1999, needs
to be re-examined (5).

70. The Phare countries face a particularly complex regulatory
environment which has been subject to rapid change: centralised
and decentralised, cross-border cooperation, special funds, new
orientations in 1998. Candidate countries are now becoming con-
cerned that in addition from 2000 they will have to cope with
three distinct management environments for Phare, ISPA (6) and
Sapard (7).

71. ACP countries also face problems of a regulatory nature, as
they receive aid not only from the EDF but also from the general
budget. This complicates the management of aid considerably, as
the various sources of funding have to follow different rules, and
different departments in the Commission are responsible for
them (8).

(3) CRIS = Common RELEX Information System. This is being developed
initially by bringing together the various systems developed previ-
ously in the different programme areas. These systems are of varying
degrees of reliability and usefulness, and a great deal of work is
required to transform them into a common tool.

(4) The second report of the Independent Experts highlights many of the
main weaknesses in the regulatory framework, e.g. paragraphs 2.1.29-
2.1.34. See also Court Opinion No 4/97 on the proposal for a Council
Regulation (Euratom, ECSC, EC) amending the Financial Regulation
of 21 December 1977 applicable to the general budget of the Euro-
pean Communities (OJ C 57, 23.2.1998).

(5) Since 1998 in order to fill some of the gaps the Commission has
developed ‘Vade-mecums’ on grant management and on Technical
Assistance Offices which set out key rules to be followed by the ser-
vices.

(6) Structural Pre-accession Instrument.
(7) Special accession programme for agriculture and rural development.
(8) See Annual Report 1998, Report on the Activities of the sixth, sev-
enth and eighth European Development Funds, Chapter III, para-
graphs 37-43, (OJ C 349, 3.12.1999).

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CONCLUSIONS AND RECOMMENDATIONS

Country programming

72. Whilst country programming has now become a feature of
all the Commission’s external aid programmes and improvements
have been noted both in the way in which the programmes are
prepared and in their content, there is still scope for further
improvement. Country programming should become an integral
part of the process of transforming overall policy goals into
operational activities (see paragraphs 16-27) (1).

73. Delegations, in all areas, should have an active management
role. They should be fully involved in the preparation of country
programming papers and there should be close consultation with
the government of the beneficiary country. Consultation with EU
Member States, both on the spot and in the Advisory Commit-
tees, and with the beneficiary countries’ authorities should be
reinforced (see paragraphs 22-24).

74.
Individual country programming papers should better iden-
tify objectives and priorities, and provide a focused framework for
planned interventions. They should cover all areas of intervention
financed by the Commission and identify what lessons can be
learned from previous programmes and projects (see para-
graphs 25-27).

Project preparation and appraisal

75. The introduction of the Project Cycle Management method-
ology has led to some progress in the quality of project prepara-
tion and project documentation, however there remains room for
further improvements (see paragraphs 28-47).

76. Sufficient time must be allowed for the identification and
appraisal stage of project preparation (see paragraphs 30-34).
Financing Proposals should systematically include information on
other donors’ activities and on the results of relevant evaluations.
Timetables should be more realistic. More attention should also
be paid to the identifying and specifying of objectively verifiable
indicators (see paragraphs 36-38).

77. Closer consultation and cooperation with the representatives
of the Member States’ Advisory Committees for project prepara-

tion should be encouraged at field level. The Advisory Commit-
tees’ meetings in Brussels should concentrate more on strategic
matters such as the definition of an overall policy framework,
rather than on individual projects (2). The Advisory Committees
should also be used as a forum for increased two-way informa-
tion and could thereby ensure better coordination among Mem-
ber States’ bilateral development programmes, one of the stated
aims of the Commission’s proposed new development policy (3).

The role of Delegations

78. The role of the Commission’s Delegations has expanded con-
siderably in recent years as Delegations now increasingly perform
a political role representing the Union, are active in the economic,
commercial, and cultural spheres, and provide information on the
Union and its policies and programmes. This limits the time avail-
able for development aid and for project monitoring. The Com-
mission has now accepted that it has to devolve more authority
and responsibility to the Delegations (see paragraphs 48-53) and
the Commission has introduced a programme of pilot exercises
for increased decentralisation of responsibilities to the Delega-
tions. To that effect, the Commission should clearly define the
role and responsibilities of the Delegations (see paragraphs 50-
52) and the profile and number of staff (see paragraphs 54-60).
In this context it is necessary to establish clear qualitative and
quantitative indicators for the workload to be performed for each
of the Delegations and to what extent staff of the central services
could be redeployed to the Delegations. More attention should be
paid to monitoring the results of projects and the quality of project
reporting. A limited number of standardised monitoring tools
should be used consistently to ensure rigorous follow-up (see
paragraphs 61-65).

Overall conclusion and recommendations

79. European external action is governed by a variety of legal
frameworks depending on the source of funding, the geographi-
cal area and the instruments or the channels through which aid is
provided. This results in different procedures at all stages: country
programming, project preparation and implementation and in
the degree of involvement of beneficiary countries and the Com-
mission’s Delegations in those countries, which complicate the
efficient implementation of the different programmes.

(1) The Commission has now recognised the importance of country pro-
gramming and in the communication from the Commission to the
Council and to the European Parliament, The European Community’s
Development Policy (COM(2000) 212 final), says that ‘the Commis-
sion will present to Council a framework for Country Strategy Papers
to become the main instrument for guiding, managing and reviewing
Community assistance programmes’.

(2) Other evaluation reports have also recommended this; for example,
Evaluation of the MEDA Regulation: Final report, Euronet Consult-
ing, 12.2.1999.

(3) Communication from the Commission to the Council and to the
European Parliament, The European Community’s Development Policy
(COM(2000) 212 final).

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80. The weaknesses noted in the management of external aid
have been pointed out in previous reports, notably the 1997
Annual Report (1), and similar observations have also been made
in the reports of the external evaluations commissioned by the
Council and the Commission (2). The attempts so far to improve
the Commission’s organisational structure to implement aid, such
as the establishment of the SCR, have, however, been only partial.

81. The SCR is responsible for the implementation of projects
once the Financing Agreement has been signed. The geographic
RELEX DGs (3) are responsible for overall programming, country

strategies and project preparation. This effectively splits the project
cycle, making decision-making procedures and the interface
between the Delegations and headquarters even more complex.
The Commission has now accepted that splitting the project cycle
is not satisfactory. A further reorganisation of the External Rela-
tions services is, therefore, being undertaken which seems to
address many of the problems presented in this report. The Com-
mission’s proposal should help to improve its delivery of aid, but
only if these changes of structure and procedures are accompa-
nied by changes in the Commission’s management culture towards
a greater flexibility and a results-oriented approach.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 29 and 30 November 2000.

For the Court of Auditors

Jan O. KARLSSON

President

(1) Court of Auditors — Annual report concerning the financial year

(2)

1997, (OJ C 349, 17.11.1998, paragraphs 5.19-5.44).
In 1995 the Council requested a full and detailed evaluation of the
European Community’s development instruments and programmes.
Independent evaluations were carried out into European Community
aid to ACP countries, Mediterranean countries, Asian and Latin Ameri-
can countries and the Community’s humanitarian assistance. The
final report was delivered in May 1999.

(3) DG ‘Development’, DG ‘Enlargement’, DG ‘External Relations’.

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THE COMMISSION’S REPLIES

EXECUTIVE SUMMARY

6. The Commission is developing a simple but effective monitor-
ing system which is rooted in the PCM approach. So far the sys-
tem has been tested on some 70 projects in 13 sample countries.

The Commission welcomes this report, which identifies weak-
nesses in the Commission’s management of external aid pro-
grammes. The Commission has itself recognised these weak-
nesses, which arise, as indicated by the Court, from the different
circumstances in which the various geographical programmes
have arisen, and have been exacerbated by the rapid growth in
most of these programmes leading to complex procedures and
unclear responsibilities. There has not been a corresponding
increase in staff. The Commission has recently taken steps to har-
monise and simplify procedures and structures and these consid-
erations are being taken into account in the proposals for new
regulations, as they are presented.

7 and 8. From the start of 2001, a new office, EuropeAid, will
take responsibility for the project cycle from project identifica-
tion right through implementation.

8. The Commission is introducing various measures to increase
flexibility and develop a more results-oriented approach. It looks
forward to cooperating with the Court in assessing and further
developing such measures.

Additional reform measures are also set out in the communica-
tion on ‘the reform of the management of external assistance’,
SEC(2000) 814.

INTRODUCTION

3. The Commission has acknowledged the need for improved
programming. In particular, the following measures have been
introduced:

i)

greater involvement of partner countries, Member States and
other donors in the process of consultation on country strate-
gies;

In accordance with the structure of the Court’s report,
12 to 14.
the general comments made in the Commission’s replies cover
the four geographical areas listed in paragraph 12.

ii) harmonisation, to the extent possible, of the format and con-

tent of strategy documents in the different regions;

COUNTRY PROGRAMMING

iii) setting up an interservice quality support group to help

improve the quality of country strategies.

Legal framework

4. The generalisation of the application of PCM (project cycle
management) techniques has undoubtedly improved the standard
of project preparation. The long delays before projects are due in
part to the need to ensure correct application of the complex,
centralised and diverse procedures, which have been the subject
of simplification and harmonisation since 1999.

5. The Commission accepts that decision-making has been over-
centralised, and has proposed measures for a major deconcentra-
tion of responsibilities and resources to the Delegations. However,
after the peer group process has exhausted the possibilities of
reallocation of personnel within the Commission, the provision
of adequate additional resources as requested in letter of amend-
ment 1/2001 is an absolute precondition for it to succeed, and
this lies in the hands of the Budgetary Authority.

16 to 18. One of the priorities identified by the communication
of 16 May 2000 on the reform of the management of external
assistance is to ensure that there is improved programming of the
Commission’s aid programmes. The Commission has established
the interservice quality support group (QSGI) with a secretariat in
the Directorate-General for Development. The QSGI will improve
and harmonise programming guidelines and ensure that country
strategy papers and national indicative programmes are of con-
sistently high quality. The Commission has also recently adopted
the standard framework for country strategy papers which applies
to ACP, ALA and MED programming documents and which
should be applied progressively to other regions. This standard
framework promotes a coherent approach to programming which
enhances coordination and complementarity with the Member
States. Finally, the Commission intends to give a higher profile to
evaluation and ensure that it feeds back into the programming
phase.

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In the case of ACP countries the country programming process
has in the past been in two stages, with both a country strategy
paper and an ensuing national indicative programme being pro-
duced. Starting with the programming of the ninth EDF this dual
process will be replaced by a single programming document con-
taining both the strategic analysis and the indicative work plan.
This unified document will be known as the country support
strategy, and will be based on a standard analytical framework
shared also with the ALA and MED country programmes.

19. As part of the reform the Commission intends to improve
programming to ensure that it becomes genuinely operational
and a useful basis for discussion of objectives and priorities with
Member States and partner countries. As part of this process, the
Commission will inevitably be required to provide more explicit
quantified targets and performance indicators than in the past.

20. The guidelines for MEDA national indicative programmes
constitute a legal and political text negotiated with Member States,
according to Article 9(1) of the MEDA Regulation, which takes
the legal form of a Council decision. It represents a compendium
of various currents of interest and analysis.

The first set of MEDA national indicative programmes, and the
country strategy papers which preceded them, did reflect some of
the repetition and inconsistency referred to by the Court. How-
ever the latest (2000 to 2006) financial period draws on the les-
sons of the past and is considerably more coherent. These improve-
ments have been incorporated into the new MEDA II Regulation,
adopted by the Council on 9 October 2000.

Procedures for the preparation of country programming
papers

22. The standard framework for country strategy papers which
has recently been adopted for ACP, ALA and MED programming
documents promotes greater involvement by Member States in
country programming, but correspondingly less micromanage-
ment of individual projects. The intention is not to introduce a
further layer of systematic consultation, but to simplify proce-
dures in general.

The practice of consultation with beneficiary countries and with
European Community (EC) Delegations on programming priori-
ties is well established, as is the need for Member States and the
Commission to exchange information and coordinate their mul-
tilateral and bilateral cooperation activities. Every effort is made
to ensure that this is reflected in programming documents. Con-
sultation does not oblige the Commission to incorporate all the
comments and views expressed: these represent a range of some-
times conflicting interests.

23. The guidelines for programming the ninth EDF are not only
the most comprehensive ever produced, but are also being shared

and discussed from the outset with the ACP partners, not only in
written form but also via a series of regional discussion and train-
ing seminars which will cover all ACP states and EC Delegations
by the end of 2000.

See also response to paragraphs 16 to 18.

24. The coherent set of changes introduced during 1998 was
aimed at refocusing the Phare programme on helping the candi-
date countries prepare for accession, as well as at improving the
management of the programme and at remedying a number of
deficiencies which had been identified during Commission moni-
toring and evaluation, successive reports by the Court of Audi-
tors and observations by the European Parliament. Although the
formal programming documents were not approved until mid-
1998, they represented only one step in a process of reorienta-
tion that began in 1997. The Commission accepts that the demands
on partner countries and Commission staff in the transition year
of 1998 were heavy. The Phare 2000 review concludes that the
benefits of the reforms are now being realised. However, it also
concludes that a basic stability in procedures will be necessary for
the foreseeable future, that changes necessary to bridge to the
Structural Funds should be planned for over a longer period than
was attempted in 1998, and that new tasks should be adequately
resourced in the Commission and candidate countries.

Content of individual country programming papers

25. The Commission services largely concur with the list of
weaknesses identified in respect of past ACP national indicative
programmes. Correcting these weaknesses has been one of the
principal goals of the programming provisions of the recently
signed Cotonou Agreement, which will govern the implementa-
tion of the ninth EDF. Under the new provisions, which will apply
henceforth to all ACP country programming exercises, country
strategies will provide the starting point of the exercise. There will
be a wide-ranging analysis of the situation in each country, which
will include paying special attention to the opportunities for
complementary action with other donors, including EC Member
States. Furthermore a comprehensive review of all available Com-
munity instruments, including budget resources, will form an
integral part of the proposed Community response strategy, which
will be transparently outlined in the text, particularly in the
indicative work plan which will be annexed to the main text.

Least developed countries and vulnerable States will be given spe-
cial attention in the indicative resource allocations which will be
announced at the outset of the programming process, and there
will be a strong poverty reduction focus in all aspects of the pro-
gramming process, in keeping with the objectives recently out-
lined in the Commission’s communication on development policy
(COM(2000) 212).

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The new approach for ACP countries is based on a system of roll-
ing programming with regular review procedures and provision
for modifying the initial resource allocations twice during the
five-year life of the ninth EDF Financial Protocol. Jointly agreed
benchmarks and indicators will be established at the outset of the
programming process, and these will be used to measure and
evaluate progress and to assist in making any adjustments that
may be necessary in the programming.

Along with other country strategy papers, new ACP country sup-
port strategies will be submitted at the outset to the new interser-
vice quality support group (QSGI) under the supervision of the
group of RELEX Commissioners, which will have the task of
ensuring that the proposed strategies meet the high standards laid
down in the respective programming guidelines; the strategies
will also be scrutinised by Member States in the appropriate man-
agement committees.

The procedures for the annual and mid-term reviews of the
national indicative programmes for the eighth EDF have estab-
lished a clear set of criteria for judging the implementation of the
agreed undertakings, and the reviews form the basis for decisions
on the provision of the second tranche of 30 % of the programme.

26. The purpose of the country strategy paper for Latin America
is to set out, on the basis of the analysis of the country’s situa-
tion, a set of guidelines for Community cooperation. In prepar-
ing the final version of the country strategy papers, approved by
the Member States in the ALA Committee, the Commission took
into account as far as possible the proposals of the Delegations
and the suggestions of the Member States.

However, the need to harmonise the papers for each country at
regional level meant that not all the suggestions or comments
received following the dialogue established between the Delega-
tions and the Member States’ representations on the spot could be
taken into account. The country strategy papers identify a certain
number of priority fields, in principle five, in which there should
be Community cooperation, without however the obligation to
cover them all. The number of priority fields may seem high, but
in fact it has already been reduced from what it was previously.

The new framework created will allow some flexibility in the
negotiations with the governments when the multiannual pro-
gramming is prepared.

It is true that the country strategy papers make no reference to
the quantification of objectives or procedures for evaluating
progress in implementation, because this was outside the frame-
work of the country strategy paper.

In the future performance indicators and evaluation of past results

will be one of the key elements to be taken into account in the
new standard framework for CSP.

27. The Commission would also like to see the development of
the national programmes for the adoption of the acquis to ensure
that accession requirements are covered by the different sources
of finance. The Commission expects that as candidate countries
grow to use the NPAA more as a planning tool it will improve and
become the basis for longer term commitments by the Commis-
sion to priority sectors.

PROJECT PREPARATION AND APPRAISAL

28 to 30. As part of the reform of the management of external
assistance, the project cycle from identification to project ex post
evaluation is being placed under the responsibility of the SCR,
while geographical Directorates-General
(External Relations,
Development) will continue to be responsible for the overall strat-
egy and programming. The exceptions to this general rule will be
Phare, managed entirely by the DG Enlargement, humanitarian
aid managed by ECHO, CFSP actions and the rapid reaction facil-
ity managed by DG RELEX and the macrofinancial assistance pro-
grammes run by DG Economic and Financial Affairs. At the
beginning of 2001, the SCR will be replaced by a new office,
EuropeAid, which will be managed by a Board composed of the
RELEX Commissioners. The Commission believes these changes
will result in more coherent and efficient management of projects.

29. The Commission accepts there is still room for improvement
in project preparation. Various measures are being taken based on
‘best practice’ which are explained below.

30. EuropeAid, which will be responsible for project identifica-
tion and appraisal, will develop thorough procedures which will
distinguish more clearly between identification and appraisal, and
will further develop the existing guidelines on thematic questions
such as gender and environment.

31. The use of European individual experts is necessary to pro-
vide adequate technical expertise. Their role will be clarified in the
course of the RELEX reform process.

32. As a result of the progress made since the setting-up of the
quality support group by DG Development for improving the
quality of ACP project/programme preparation and appraisal, the
Commission decided as part of the reform introduced in May this
year to extend the remit of this group to all developing countries.
With this in view and account being taken of the lessons drawn
from experience, the workings of the group will be improved as
part of the reform and extended to all the programmes, with par-
ticular focus on the procedures for following up its recommenda-
tions.

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33. The Commission is still making efforts, within the present
legislative framework, in order to avoid an excessive concentra-
tion of commitments at the end of each financial year. With the
aim of improving the situation as far as possible within the present
budgetary constraints, the Commission has proposed reforming
the management of external aid in order to:

— target the role of management committees (Member States)
on strategy issues rather than examining individual projects,

nied by detailed guides on their preparation. The new format is a
definite improvement on the previous one, setting the project in
context and clearly setting out the intervention logic.

The Commission could accept that detailed information on previ-
ous projects was not always provided in the financing proposal.
However, the lessons to be learned from the previous projects
were taken fully into account.

— strengthen the multiannual approach of programming,

— have the tasks carried out in a more consistent manner by

Financing Agreements

EuropeAid,

— increase resources.

These measures should make it possible to spread commitments
more evenly over the year.

34. The Commission accepts that a planning cycle of a year is
unsatisfactory for many projects. It will introduce from 2002
multiannual programming based on improved NPAAs and national
development plans and drawing on Structural Funds practices.
This will allow longer term indications of support for priority sec-
tors to be given and to allow activities to be phased more effec-
tively within a given period.

Financing proposals and financing agreements

Financing proposal

37. Concerning the necessity of the improvement of the quality
of financing proposals, the Commission wants to emphasise that
the format of those proposals to the ALA Committee has changed.
In the past limitation in the number of pages for financing pro-
posals did not always permit the inclusion of details on some
important issues. The actual format, agreed between the Commis-
sion and Member States, and in application since 1999, foresees
specific references on all the items mentioned by the Court:coor-
dination with Member States and other donors, economic and
environmental impact assessment, evaluation of recent projects in
the same sector, institutional set-up. The Commission is confident
that this will considerably improve the quality of financing pro-
posals.

39. The financing agreements have to be differentiated accord-
ing to the areas concerned.

For Latin America and Asia, the financing agreements drawn up
over the last few years represent a significant improvement in
quality, although it must be recognised that there are still some
problems owing to a lack of definition, a lack of provisions in the
event of non-observance of obligations by the national counter-
part, etc. For Latin America, a number of criticisms have been
definitively and specifically resolved with the signing of the Frame-
work Agreement, a solution which will be considered for Asia.

The Commission accepts that there is still room for improvement
in project preparation and will address the issues in the frame-
work of the new office, which will cover all the project cycle.

40. The Commission intends to review the format for financing
agreements.

Role of the Advisory Committees in the decision-making
process

41. A major part of the reform of the management of external
assistance aims at changing the way Member State committees
deal with external aid. The Commission would like to focus input
from Member States on programming and country programmes
rather than on micromanagement of individual projects. In this
regard, the Commission is currently in the process of analysing
the different comitology procedures and evaluating the possibil-
ity of either proposing a ‘horizontal’ regulation defining the comi-
tology aspects of all external aid instruments of the European
Communities or adjusting existing regulations accordingly.

The format of EDF financing proposals was revised in early 2000
to focus on the relevance, feasibility and sustainability of a project.
New sections deal with lessons learnt from past experiences and
coordination with other donors. The new formats are accompa-

In Asia for example, if the ceiling below which projects do not
need to be screened by the ALA Committee were raised from the
current level of EUR 1 million to EUR 25 million, then the num-
ber of projects passing through that particular Committee would
fall by 58 % while the Member States would still control 51 % of
the financial volumes.

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In the case of Phare countries, the Commission arranges an annual
policy discussion with the Phare Management Committee on each
country before the annual programme is finalised to allow Mem-
ber States’ concerns to be taken into account.

some cases, allowing them to be annulled where there is no real
commitment to carrying out the project.

At the General Affairs Council of 9 October 2000, it was agreed
to reinforce coordination in the field between the Commission’s
Delegations and the representatives of the Member States.

43. Because of the need to ensure correct application of the
complex, centralised tender procedures, and uncompetitive fee
rates, the prompt recruitment of TA has often been difficult.

The new MEDA II Regulation, adopted by the Council on 9 Octo-
ber 2000, has been adapted to allow for increased involvement by
Member States.

44 and 45. The simplification and harmonisation of tendering
procedures was begun in 1999 and is now nearing completion.
This should facilitate the rapid award of contracts and prepare the
way for a greater involvement of Delegations in managing the
procedures.

In the ACP countries there has been significant progress on the
issue of coordination in the field, and considerable changes have
been introduced and welcomed by the Commission in the involve-
ment of Member States in the elaboration of country strategies
and programming. However, corresponding reform efforts have
not been accepted by Member States, in particular as far as the
threshold for referral of financing proposals to the EDF Commit-
tee and the Committee’s decision-making procedure are con-
cerned. (1)

Project start-up

42. The Commission considers that it should be expected that
there is a significant time lapse while complex project proposals
are properly prepared and considered. Some delays may particu-
larly occur during the interservice consultation which takes place
at the appraisal/decision stage, especially for projects which have
fundamental weaknesses. Delays are often a consequence of the
Commission’s objective of funding high-quality programmes, or
relate to the nature of the programmes: programmes which pro-
mote the exchange of know-how usually take much longer to
implement than straightforward construction projects.

It was exactly to avoid over-long delays in start-up that the start
date was included in the Financial Regulation of the eighth EDF,
and it has been successful in giving an impetus to projects, or, in

(1) The Commission has formally stated its disappointment in a Declara-
tion annexed to the new ninth EDF Internal Agreement (statement 17
concerning Article 34(b)), in which it also stresses its concern that the
cumbersome procedures which have been decided will hamper the
efficiency of the ninth EDF and result in lower disbursement rates
than those expected. In the same Declaration, the Commission also
stated that its acceptance of the Member States’ decision did not pre-
judge its position for the revision of the threshold and decision-
making procedure in 2003.

In the Phare countries, there were inevitably difficulties in
46.
finalising programmes in the first year of a radically new approach.
There were several parties involved and in a number of candidate
countries there was a lot of internal debate about responsibility
for and financial control of external funds such as Phare before
decisions could be reached enabling financing memoranda to be
signed. In others delays were due to lengthy internal procedures
before the country was in a position to sign. The position has
improved since, with a reducing interval between financing memo-
randum and contracting as a result of the Commission’s insis-
tence that projects for funding should be ‘mature’. The Commis-
sion is continuing to explore practical measures to reduce the
time taken to sign the financing memorandum after Phare Man-
agement Committee approval.

Following a recent review of twinning, procedures have been
lightened to cut project start-up times.

47. The Commission takes note of the Court’s observation con-
cerning unrealistic timetables of some projects and does agree
that some types of projects need more time for start-up and
implementation. Therefore, estimated project duration has been
prolonged recently, and the inception process, including diagnos-
tic studies, is incorporated in this estimation.

ROLE OF DELEGATIONS

48. The deconcentration of responsibility for implementing and
monitoring aid projects to Delegations is one of the key elements
of the communication of 16 May 2000 on the reform of the man-
agement of external assistance. Deconcentration is already the

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norm in central and eastern Europe. The list of 20 Delegations
which will be included in the next wave of deconcentration in
2001 has already been agreed. The Commission has carefully
assessed the necessary human resources, IT systems and training
which are needed for the smooth implementation of deconcentra-
tion and has included these in the amending letter to the 2001
draft budget. These resources will allow the Commission to launch
the next phase of deconcentration in the autumn of 2001 with a
view to completing the process by early 2003.

Responsibility and decision-making authority

50. With deconcentration, the Commission will be applying the
principle that anything that can be better managed and decided
on the spot should not be managed or decided in Brussels. New
deconcentration instructions have recently been issued clarifying
the relative roles and reporting lines of the Phare and financial
sections of the Delegation and removing areas of overlap.

The generalisation of job descriptions for each staff member based
on the mission statement of each Directorate-General is part of
the Commission reform programme and is being implemented in
Delegations as in all other units of the Commission.

The process of deconcentration is now a clear decision of the
Commission. A further 20 Delegations to which deconcentration
is to be applied in 2001 have been identified and implementation
is now under preparation.

Resources

54. The Commission’s recent communication undertook to pre-
pare an analysis of the workload of each Delegation. This will
help to verify that the Commission’s human resources are being
best used. While every attempt is made to ensure all posts are
filled as soon as possible it is not always possible to find suitable
candidates for some of the less attractive posts.

55. The Commission has introduced a policy of rebalancing the
staff in Delegations to achieve a better equilibrium between local
staff and home-based staff. This applies in particular to ACP Del-
egations which have traditionally employed few senior-level local
agents. There are now 71 such local staff in ACP Delegations. The
Commission’s communication of July 2000 envisages the transfer
of a further 30 home-based officials and their probable replace-
ment by Group I local staff.

51. For Latin America, the Ting Report describes the role which
the Delegations must play for the ‘cooperation function’ through-
out the project cycle.

The Commission believes that financial management is primarily
the responsibility of the Head of Delegation and the other officials
in the Delegation. This responsibility cannot be totally subdel-
egated to local staff, and in May 1999 Heads of Delegation were
reminded to ensure proper supervision.

For the Delegations in Latin America responsibilities had been
deconcentrated, in 1994 and 1995, to a number of Delegations,
for the implementation stage of projects. The approval of the Ting
Report meant the extension of this deconcentration to all the Del-
egations of Latin America and also deconcentration in the
programming-identification-preparation stage.

52. The Commission agrees with the Court’s observations and
has begun preparations for a major exercise of deconcentration to
the Delegations. However this exercise can only be successful if
the necessary resources are approved by the Budgetary Author-
ity.

56. The Commission is developing criteria to establish the work-
load of each Delegation. This will enable a better appreciation of
the staffing of Delegations to be made.

57. The creation of EuropeAid (see response to paragraphs 28 to
30) should enable a greater flexibility in the employment of staff
and thus a more appropriate profile for staff dealing with aid mat-
ters.

58.
In central and eastern Europe, a large proportion of staff are
local nationals, and the Delegations have a wide measure of dis-
cretion about taking on staff to cope with fluctuating pressures.

53. Deconcentration to the Delegations of the Commission’s
role in the implementation of programmes has progressively been
put into practice since 1998 in central and eastern Europe and is
being implemented in Nicaragua. Some 26 posts, including those
of financial officer, have been redeployed from HQ to Delegations
to achieve this initial phase of deconcentration.

59. The Commission has accepted the need to dismantle the
BATs, and most of them will be closed by the end of 2001. The
necessary financial adjustments have been proposed for incorpo-
ration in the 2001 budget year. As contracts for the existing 80
offices in the RELEX sector expire, their activities will be assumed

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directly by the services of the Commission, in particular in Del-
egations and in the new office, EuropeAid, that will be created out
of the present SCR.

60. One of the preconditions for deconcentration to be success-
ful is that Delegations be reinforced with extra personnel, particu-
larly in the area of financial management. In the amending letter
to the 2001 budget, the Commission has requested a total of 261
new grade A posts for the wider area of external relations. Of
these, 40 will be used for strengthening Delegations. Further-
more, the Commission has requested the Budgetary Authority to
allow the funding of 320 external staff through operational cred-
its (BA budget lines) in view of deconcentration. This staff is addi-
tional to the 280 additional external staff for Delegations that
have been requested in view of the dismantling of the technical
assistance offices/bureaux d’assistance techniques (BATs). All these
measures add up to a significant reinforcement of staffing levels
in Delegations, allowing them to effectively manage the additional
tasks which will be entrusted to them with deconcentration.

Project monitoring

61 to 63. The Commission recognises much of the situation
described as regards the varying depth, quality and follow-up of
monitoring. It has already been diagnosed and described in evalu-
ations and progress/monitoring reports, and is the direct conse-
quence of the inadequate staff resources both in field and head-
quarters. In the absence of adequate resources, those available
have concentrated on essential (often financial management) tasks,
to the detriment of formal monitoring and reporting.

The solution envisaged by the Commission consists of several ele-
ments, in particular obtaining additional resources — as part of
the reorganisation of the external services, including deconcentra-
tion, and setting up a project monitoring system to cover all exter-
nal aid programmes. The Phare and Tacis programmes have exter-
nal monitoring systems in place, and a similar system is being
designed and tested for the ACP, ALA and MED programmes for
extensive application beginning in early 2001. It is expected that
practically all projects will have been monitored by the end of
2002: given the scale of the exercise (notably the number and
complexity of projects to be visited by monitors) it is unlikely that
it could be done earlier. In the meantime, existing supervision by
Delegations will continue and, depending on the speed and effec-
tiveness of deconcentration, it may prove possible to reinforce
and accelerate the coverage of monitoring.

It is clear that the monitoring of the government contribu-
65.
tion (being an integral part of the project) must be subject to the
same monitoring as the Community’s contribution. However, it
must be underlined that direct project implementation and moni-
toring activities are carried out by the project implementing
agency and/or other specific bodies such as project implementa-
tion unit (PIU), project management unit (PMU), Project Coordi-
nation and Monitoring Committee, steering committees, etc.

Management tools

66. The Commission is well aware of the problems raised by the
Court. The improvement of monitoring procedures is part of the
global overhaul of Commission financial management, control
and audit as described in the White Paper on reform.

With deconcentration, Delegations will have greater responsibili-
ties for implementation and financial management of projects.
The subdelegation of the authorising officer function to the Head
of Delegation is also foreseen. The elimination of ex ante controls
and increased responsibility will be incentives for Delegations to
apply strict financial control procedures. In view of this transfer
of responsibilities, the Commission will harmonise and improve
management and monitoring tools (manuals, monitoring, inspec-
tions, audits). It will also establish instructions on reporting lines
and the chain of command within Delegations and between head-
quarters and Delegations for staff responsible for implementing
projects.

67 to 69. The Commission shares the concerns expressed by the
Court. As part of the reform of the RELEX Directorates-General,
it plans to give absolute priority to computerising its Delegations
with a special plan aimed first of all at improving the computer
infrastructure of the Delegations, then installing Sincom and lastly
introducing a more wide-ranging management tool, CRIS. A pri-
ority request will be made, in the letter of amendment to the 2001
preliminary draft budget, to the Budget Authority, for action to be
taken on the first stage of this plan at the beginning of 2001, in
particular in South Africa and in the Delegations responsible for
implementing MEDA.

A similar effort will be made at the same time for the EDF. Since
it was not possible to include in Sincom — as
initially
planned — the accounts kept on OLAS, the SCR launched a pilot
experiment to decentralise disbursements and intends actively to
pursue a policy aimed at progressively giving EDF Delegations the
necessary accounting and contractual management tools.

The monitoring exercise and system will strengthen many aspects
of project preparation and design criticised elsewhere in the
Court’s report, by improving the quality of project logframes
(including indicators) and implementation schedules which con-
stitute the necessary basis for monitoring.

Delegations in central and eastern Europe have access to a finan-
cial reporting system, Perseus, which gives them up-to-date infor-
mation on financial progress. Sincom has been installed in these
Delegations. However, a wider improvement in management infor-
mation for Phare is necessary, and DG Enlargement is preparing
to develop a new system based on existing financial reporting sys-
tems.

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Official Journal of the European Communities

C 57/23

69. This summer, the Commission sent the Budgetary Author-
ity a proposal for revising the Financial Regulation to take account
of the requirements and specific features of external relations.

ment concepts and also the quantification of objectively verifiable
indicators, though the quality support group established by DG
Development does play a role in controlling both of these aspects
and has led to some improvements.

70.
In order to simplify the operating context for candidate
countries the Commission has integrated Phare activities as far as
possible into country programmes, begun to align cross-border
cooperation with the main Phare programme and reduced the
number of multi-country programmes to a minimum. The estab-
lishment of Sapard and ISPA adds to the challenge of coordina-
tion for these countries, but in each case they are being required
to develop the structures for programme implementation which
will be needed after accession.

77. The Commission has formally stated its disappointment that
the Member States have not accepted its recent proposals con-
cerning the threshold for referring financing proposals to the EDF
Committee and the Committee’s decision-making procedure. It is
concerned that the cumbersome procedures will hamper the effi-
ciency of the ninth EDF and result in lower disbursement rates
than expected. As far as the other programmes are concerned, the
Commission will propose either a ‘horizontal’ regulation defin-
ing the comitology aspects of all European Union external aid, or
adjustments to existing regulations.

71. The Commission is fully in agreement with the Court of
Auditors’ opinion on certain overlaps between the EDF and devel-
opment budget headings and considers that it would be advisable
to put an end to this situation in 2001, as part of the implementa-
tion of the preliminary draft budget and the discussions of the
Peer Group and also in the context of the reform adopted by the
Members of the Commission on 16 May 2000.

See also response to paragraph 41.

Overall conclusion and recommendations

CONCLUSIONS AND RECOMMENDATIONS

Country programming

72.
Improved programming is a central part of the Commis-
sion’s plans for reform. The two main features are the establish-
ment of the interservice quality support group (QSGI) and the
standard framework for country strategy papers (see response to
paragraphs 16 to 27).

79 to 81. The Commission shares the Court’s view that the vari-
ety of different procedures often complicates the management of
the external aid programmes. The reasons are historical: new pro-
grammes were introduced to respond to new circumstances, such
as the accession of new Member States with interests in different
parts of the world, the fall of communism, etc. The Commission’s
chronic lack of resources and the unclear division of responsibili-
ties within the Commission governing the management of the
entire external aid effort hindered attempts to achieve greater har-
monisation of procedures, although the establishment of the SCR
in 1998 was the first stage in this process. Real progress was made
in developing unified tendering procedures and operational manu-
als.

73. The Commission’s reform programme includes greater
involvement of Member States and other partners in country pro-
gramming, with correspondingly less micromanagement of indi-
vidual projects (see response to paragraphs 22 to 24).

On the initiative of the new Commission, new and further reach-
ing plans for reform are now being instituted, as set out in the
communication on the reform of the management of external
assistance adopted on 16 May 2000. These aim to improve both
the speed of delivery and the quality of the Commission’s external
assistance.

74. The Commission is already giving greater attention to the
quality and content of country programming papers (see response
to paragraphs 25 to 27).

Project preparation and appraisal

75 and 76. As already stated in paragraph 37, a new format for
financing proposals has been developed which is a definite
improvement on the previous one. Having said this, there is still
more work to be done on the correct use of project cycle manage-

The interservice quality support group (QSGI), with a secretariat
in DG Development, will ensure improved programming. The
Commission would like to see all Member States Advisory Com-
mittees focusing on programming and country programmes rather
than on the micromanagement of individual projects. The project
cycle from identification to implementation will be placed under
the responsibility of a single organisation, EuropeAid, which will
replace the SCR. The geographical Directorates-General (External
Relations and Development) will continue to be responsible for
the overall strategy and programming. The backlog of old and
dormant projects is being tackled as a matter of urgency. And
possibly the most ambitious part of the reform programme is the
decision to deconcentrate responsibility to Delegations and, where
possible, national authorities in partner countries.

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Official Journal of the European Communities

22.2.2001

The key to realising these plans will be the acquisition of extra
human resources. In early September the Commission presented
an amending letter to the 2001 preliminary draft budget to the
Budgetary Authority to secure the additional funding required.
The Commission also proposed that the operational appropria-
tions of the 2001 budget be used to contract staff to work in the

SCR/EuropeAid on tasks previously performed by the technical
assistance offices and to reinforce the staff of Delegations. With-
out these additional resources, the Commission will reluctantly be
required to reduce the existing aid programmes so that they can
be managed effectively.