Special Report No 1/2001 concerning the URBAN Community initiative, together with the Commission's replies
Date: 2001-02-22
Institutions: European Court of Auditors
Subjects: EU initiative, report, urban area

25.4.2001

EN

Official Journal of the European Communities

C 124/1

I

(Information)

COURT OF AUDITORS

concerning the URBAN Community initiative, together with the Commission’s replies

SPECIAL REPORT No 1/2001

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

(2001/C 124/01)

CONTENTS

Paragraph

Page

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

ALLOCATION OF RESOURCES AND FINANCIAL SITUATION . . . . . . . . . . . . . . . . . . . . . . . .

SELECTION OF ELIGIBLE URBAN AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PROGRAMMING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The integrated approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selection of measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Programme approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTEGRATION WITH OTHER COMMUNITY POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MANAGEMENT AND MONITORING STRUCTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At the decision-taking level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At the level of implementation and monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At the level of technical assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IMPLEMENTATION OF THE PROGRAMMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selection and implementation of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

1-5

6-10

11-16

17-25

17-18

19-20

21-25

26-33

34-48

34-36

37-42

43-48

49-63

49-54

55-60

61-63

64-72

ANNEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

2

3

6

7

7

7

7

8

9

9

10

11

11

11

12

13

14

16

18

C 124/2

EN

Official Journal of the European Communities

25.4.2001

INTRODUCTION

local partnership proposals. Priority will be given to integrated
programmes which are of an innovative character, which have a
demonstrable added value and help create employment’.

1.
In June 1994, the Commission decided to adopt, pursuant to
Article 11 of Regulation (EEC) No 4253/88 (1) (Regulation on the
coordination of the Structural Funds), a Community initiative in
favour of urban areas, called URBAN. This initiative complements
the urban pilot projects co-financed by the European Regional
Development Fund (ERDF) concerning 33 urban areas for the
period 1989 to 1993 and 26 areas for the period 1994 to 1999 (2).
In two communications published in the Official Journal in July
1994 (initial allocation of 600 million euro) (3) and July 1996
(supplementary allocation of 157 million euro) (4) the Commis-
sion set guidelines for the operational programmes (OPs) which
Member States are invited to establish under the URBAN initia-
tive. The guidelines set by these two communications are the
same as regards the scope and objectives of the URBAN initiative,
the eligible areas and measures and their implementation. A vade-
mecum designed to simplify the drawing up of OPs was prepared
by the Commission in September 1994.

2. The strategy defined by the Commission (5) consists of pro-
viding Community aid, deriving simultaneously from the ERDF
and the European Social Fund (ESF) ‘in favour of integrated devel-
opment programmes for a geographically defined and limited
part of a city. The integrated approach should address in a com-
prehensive way the economic, social and environmental prob-
lems of the deprived urban area. The integrated programme
should comprise a balanced and coherent set of economic devel-
opment, social integration and environmental measures based on

3. The objectives for the initiative (6) are set out in rather general
terms: ‘URBAN aims to act as a catalyst in a broad-based approach,
by undertaking key schemes to help deprived urban areas achieve
a lasting improvement in living standards for their inhabitants’.

4. The Court has already examined the Community initiatives
Interreg, SME, Leader and PEACE (7), as well as Community inter-
ventions in the spheres of the urban environment and local devel-
opment (8). The Court concluded, among other things, that some
ill-assorted measures had been implemented in the urban envi-
ronment, and that they were marked by major fragmentation (9).
The Court decided to examine the URBAN Community initiative
because of the large number of Community measures specifically
targeting the urban question. URBAN is also one of the four Com-
munity initiatives to have been renewed for the period 2000 to
2006 (10).

5. The aim of the Court’s audit was to examine the consistency
of the regulatory framework and appraise the quality of the pro-
gramming, implementation, financial management and evalua-
tion of URBAN. Audits were carried out at the Commission and
in nine Member States (Italy, Spain, France, Greece, the United
Kingdom, Germany, Ireland, the Netherlands and Portugal) (11).
The programmes for these nine Member States account for more
than 90 % of URBAN expenditure.

(1) Regulation (EEC) No 4253/88 laying down provisions for implement-
ing Regulation (EEC) No 2052/88 as regards coordination of the
activities of the different Structural Funds between themselves and
with the operations of the European Investment Bank and the other
existing Financial Instruments, as amended by Council Regulation
(EEC) No 2082/93, OJ L 193, 31.7.1993. Article 11, entitled ‘Commu-
nity initiatives’, provides that the Commission may, on its own initia-
tive, decide to propose to the Member States that they submit applica-
tions for assistance in respect of measures of significant interest to the
Community.

(2) The urban pilot projects are co-financed by the ERDF pursuant to
Article 10 of the Regulation governing it (Council Regulation (EEC)
No 4254/88, as amended by Regulation (EEC) No 2083/93 laying
down provisions for implementing Regulation No 2052/88 as regards
the ERDF). The general objective of the urban pilot projects is that of
exploring and using innovative resources and designs as regards urban
policy and programming with a view to promoting sustainable eco-
nomic and social cohesion.

(3) Notice to the Member States laying down guidelines for operational
programmes which Member States are invited to establish in the
framework of a Community initiative concerning urban areas
(OJ C 180, 1.7.1994, p. 6).
Even though amounts were specified in ecus at the time when the
notice was adopted, the word euro has been used throughout the
report and applies for both euro and ecus.

(4) Communication to the Member States laying down guidelines for
operational programmes which Member States are invited to establish
in the framework of a Community initiative concerning urban areas
(URBAN) (OJ C 200, 10.7.1996, p. 4).

(5) Paragraph 14 of the communications from the Commission.

(6) Paragraph 7 of the communications from the Commission.
(7) Annual Report concerning the financial year 1994, paragraphs 4.61
to 4.73 (Community initiative for interregional and transfrontier
cooperation — Interreg). Annual Report concerning the financial
year 1995, paragraphs 7.9 to 7.60 (Leader Community initiative 1990
to 1993) and Annual Report concerning the financial year 1996,
paragraphs 6.86 to 6.91 (SME initiative) and
Special Report No 7/2000 concerning the International Fund for Ire-
land and the Special Support Programme for Peace and Reconcilia-
tion in Northern Ireland and the border counties of Ireland (1995 to
1999) (OJ C 146, 25.5.2000).

(8) Special Report No 4/94 on the urban environment (OJ C 383,
31.12.1994). Annual Report concerning the financial year 1994, para-
graphs 4.39 to 4.60 (Global subsidies as an instrument for local
development). Annual Report concerning the financial year 1995,
paragraphs 5.71 to 5.87 (Exchanges of experience between local and
regional authorities).

(9) See, in particular, paragraphs 6.1 to 6.7 of Special Report No 4/94 on

the urban environment.

(10) Only four of the 13 Community initiatives from the period 1994 to

1999 received extensions for the period 2000 to 2006.

(11) The following are examples of the types of project most frequently
co-financed by URBAN: enterprise centres and centres for assisting
unemployed people; aid for SMEs (especially commercial and craft
enterprises); refurbishment of public spaces (roads, pavements, parks,
etc.); renovation of buildings; sociocultural facilities; welfare services
for the underprivileged; vocational training courses.

25.4.2001

EN

Official Journal of the European Communities

C 124/3

ALLOCATION OF RESOURCES AND FINANCIAL SITUATION

6. The Court has already examined the procedure for allocating
available Structural Fund resources, by objective (1), Member State
and Community initiative for the period 1994 to 1999 (2). The
Annex presents in detail the process for allocating the URBAN
resources between Member States and shows that it was subject
to numerous adjustments. The Commission communications pro-
vided for indicative global allocations between the Objective 1
regions and other areas. However, they did not define the criteria
for allocating resources between the various Objective regions,
and the other areas within the Member States and between bene-
ficiary areas.

7. One of the Commission’s objectives was to concentrate
resources on a maximum of 50 urban areas initially, and then, fol-
lowing the extension of the initiative (3), on 70 areas. The Com-
mission also intended there to be a high ratio of Community
funding to population for each of the selected communities, so as
to achieve a high degree of concentration that would ensure that
the measures were more effective and visible. In the end, however,
118 urban areas received funds under URBAN. An analysis of the
beneficiary areas reveals very wide differences: 34 areas have less
than 10 000 inhabitants, whilst 17 have more than 50 000. This
results in very significant differences with regard to the overall
programme contribution per head of population.

8. The table presents the initial financial plans and the financial
plans at 31 December 1999, and gives a breakdown of overall
costs, with details of the contributions from the ERDF and ESF,
as well as public and private expenditure. The Structural Funds
contribution resulting from the financial plans in the programmes
at 31 December 1999 stands at 898,32 million euro (49,5 % of
the total cost), comprising 750,06 million euro from the ERDF
and 148,26 million euro from the ESF, which represents an aver-
age of 7,61 million euro per beneficiary area, 6,35 million euro
of it from the ERDF and 1,26 million euro from the ESF. National
public expenditure and private-sector expenditure respectively
account for 45,1 % and 5,4 % of the total cost. Of the 61 pro-
grammes adopted, 18 initially made provision for a private-sector

contribution of more than 10 %. For the programmes as a whole
the private-sector contribution was eventually reduced by 63 %.
Diagrams 1 and 2 present Community commitments and Com-
munity payments, respectively, for the financial years 1994 to
1999. For the period 1994 to 1999 as a whole, the commitments
and payments made represent 858,17 million euro and 469,88
million euro, or 95,53 % and 52,31 % respectively of the approved
Structural Funds contribution.

9. The URBAN OPs generally have made very slow progress
when compared with the initial forecasts in the financial plans.
An analysis of the changes to these plans shows a final concentra-
tion of expenditure in the last year (see Diagram 3). The Court has
already observed (4), firstly, that the procedure for drawing up
financial plans within the framework of the Structural Funds is
not based on the needs of the measures concerned, and, secondly,
that the primary objective of the changes made to the financial
plans at the end of 1999 was to make it possible to commit all of
the Community aid. In the case of the programmes committed in
annual instalments, the mechanism for the Community commit-
ments would only have allowed the 1999 instalment to be com-
mitted if the actual expenditure incurred by the final beneficiaries
represented 100 %, 80 % and 40 % of the expenditure relating to
the instalments for 1994 to 1996, 1997 and 1998 respectively (5).
In view of the implementation delays, the financial plans were
therefore brought into line with the real situation (substantial cuts
to the annual instalments for the period 1994 to 1998), so as to
make it possible for the balance on the programmes to be com-
mitted in full.

10. Moreover, the changes that were made to the financial plans
in the last months of 1999 are not all reflected in the accounts as
at 31 December 1999. In consequence, the commitments made
were for the previous plans instead of the current ones, so that,
for several programmes, the commitments entered in the accounts
are higher than the legal commitments. This anomaly also appears
in the advances paid, because they are effected in proportion to
the commitments entered in the accounts. As a result some pay-
ments were in excess of the totals given by the new financial
plans. For one programme, the advances paid were greater than
the total amount of Community aid granted.

(1) The Structural Funds contribute towards attaining six priority objec-
tives, with Objective 1 consisting of promoting the development and
structural adjustment of areas lagging behind in terms of develop-
ment, and Objective 2 consisting of converting regions, border regions
or parts of regions seriously affected by industrial decline.

(2) Special Report No 16/98 on the implementation of appropriations
for structural operations for the programming period 1994 to 1999
(paragraph 3.1 and Annex 1) (OJ C 347, 16.11.1998, p. 48), and
Annual Report concerning the financial year 1995 (paragraphs 5.32
and 5.33).

(3) Paragraph 12 of the communications from the Commission.

(4) Annual Report concerning the financial year 1997 (paragraphs 3.24
to 3.34) and Annual Report concerning the financial year 1999 (para-
graph 3.3 and paragraphs 3.18 to 3.22), as well as Special Report
No 16/98 on the implementation of appropriations for structural
operations for the programming period 1994 to 1999, para-
graph 6.19.

(5) Financial implementing provisions applicable to interventions. Mecha-
nisms for Community commitments and payments. Standard annex
to Community support frameworks, single programming documents
and operational programmes.

Position of the URBAN programmes as at 31 December 1999

Table

Programme

Type of programme

ERDF No

Name

Date of
presentation

Date of adop-
tion

Time
(in years)

Total cost

Private
expenditure

Total cost

National

Initial financial plan

Public expenditure

Structural Funds

Total

ERDF

5 663
2 200
2 582
1 521
12 880
2 732
12 000
9 200
12 888
7 200
16 100
8 000
8 001
8 100
7 000
7 000
7 000
8 881
7 000
4 866
7 000

7 000
15 817
507
4 650
4 650
9 770
3 958
4 970
16 950
17 296
8 036
8 036
8 036
6 786
6 786
13 648
5 612
7 653

7 000
660
9 779
7 110
5 320
5 331
5 320
3 500
5 299
6 500
6 500
3 590
3 933
4 506
4 506
4 506
4 506

4 241
1 771
2 021
1 341
12 205
2 732
9 884
8 035
12 693
5 940
12 706
6 520
5 618
6 811
5 297
6 043
6 512
7 795
6 432
4 478
3 938

5 416
7 909
429
3 674
4 219
6 838
3 148
3 140
8 117
14 808
6 429
6 429
5 842
5 563
5 089
9 988
4 377
6 122

5 706
660
8 701
3 657
5 320
3 848
3 936
3 008
4 264
6 500
6 500
2 890
2 547
3 105
3 456
3 386
3 380

ESF

1 422
429
561
180
675
0
2 116
1 165
195
1 260
3 394
1 480
2 383
1 289
1 703
957
488
1 086
568
388
3 062

1 584
7 909
78
977
431
2 932
810
1 830
8 833
2 488
1 607
1 607
2 194
1 223
1 697
3 660
1 235
1 531

1 294
0
1 078
3 453
0
1 483
1 384
492
1 035
0
0
700
1 386
1 401
1 050
1 120
1 126

Total

11 326
4 964
14 724
3 042
19 395
5 152
16 016
12 584
17 180
9 611
30 008
15 795
20 458
16 200
14 000
18 048
15 821
20 302
24 003
9 701
17 583

17 613
21 091
1 033
18 766
37 497
25 890
5 279
9 940
24 138
31 850
16 072
16 429
16 072
13 839
14 317
28 309
11 498
15 306

14 000
1 320
19 668
14 263
15 688
13 950
12 738
6 514
15 414
18 374
25 371
11 680
9 054
9 316
9 834
9 261
9 059

11 326
11 053
15 234
3 042
19 943
5 152
16 016
141 312
17 180
9 611
31 048
16 310
22 574
18 650
20 478
20 897
17 036
22 760
26 616
9 731
17 583

17 613
21 091
1 033
19 683
68 229
31 926
5 279
11 920
24 516
35 666
20 637
17 294
17 743
14 890
14 827
32 736
11 732
16 326

14 000
1 320
19 684
14 987
18 504
14 008
15 112
6 514
16 371
23 550
25 971
23 410
10 201
9 478
11 478
9 371
9 567

Financial plan at 31 December 1999

Public expenditure

Structural Funds

Total

ERDF

5 886
2 200
3 499
1 562
13 077
2 773
12 432
9 532
13 364
7 459
16 761
8 288
8 288
8 391
7 000
7 000
7 000
9 003
7 762
4 866
7 077

7 000
21 207
420
4 804
4 805
12 345
4 048
5 114
19 808
19 496
8 072
8 072
8 072
6 816
6 816
15 610
6 593
7 688

7 172
1 418
10 176
7 480
5 320
5 321
2 576
3 500
5 299
7 048
6 500
4 255
4 044
4 506
4 506
4 506
4 506

4 306
1 771
2 937
1 226
12 402
2 773
10 071
8 343
13 169
6 199
13 367
6 808
5 905
6 748
5 297
6 043
6 069
7 726
7 421
4 780
4 015

6 101
12 575
307
3 828
4 359
9 413
2 962
3 284
10 707
16 575
6 465
6 465
5 878
5 593
5 119
11 677
5 358
6 157

5 878
1 418
9 098
3 847
5 320
3 948
2 412
3 008
4 264
7 048
6 500
3 555
2 650
3 105
3 456
3 386
3 380

ESF

1 580
429
561
336
675
0
2 361
1 189
195
1 260
3 394
1 480
2 383
1 643
1 703
957
931
1 277
341
86
3 062

899
8 632
113
976
446
2 932
1 086
1 830
9 101
2 921
1 607
1 607
2 194
1 223
1 697
3 933
1 235
1 531

1 294
0
1 078
3 633
0
1 373
164
492
1 035
0
0
700
1 394
1 401
1 050
1 120
1 126

Total

11 772
5 388
17 128
3 131
19 808
5 241
16 946
12 973
17 815
10 049
28 985
16 371
24 599
16 782
15 744
18 048
17 242
22 426
29 956
9 731
14 495

17 500
28 276
865
20 275
25 383
33 266
5 397
10 228
27 942
36 186
16 144
16 501
16 144
13 899
14 377
32 719
13 460
15 376

14 343
3 884
13 799
16 139
18 721
11 053
5 203
6 562
15 782
20 575
20 281
14 125
9 328
9 316
9 834
9 261
9 059

11 772
6 094
17 638
3 131
20 389
5 241
18 015
14 817
17 815
10 049
29 053
16 886
24 755
19 279
19 048
20 897
17 444
25 356
34 583
9 731
14 816

17 500
28 276
865
21 292
27 753
39 302
5 397
12 229
28 383
40 142
20 709
17 366
17 815
14 950
14 887
37 146
13 734
16 396

14 343
3 884
13 815
17 024
21 267
14 063
6 978
6 562
16 657
26 198
20 281
25 855
10 475
9 478
11 478
9 371
9 567

(thousand EUR)

Private
expenditure

National

5 886
3 188
13 629
1 569
6 731
2 468
4 514
3 441
4 451
2 590
12 224
8 083
16 311
8 391
8 744
11 048
10 242
13 423
22 194
4 866
7 418

10 500
7 069
445
15 471
20 578
20 921
1 349
5 114
8 134
16 690
8 072
8 429
8 072
7 083
7 561
17 109
6 867
7 688

7 171
2 466
3 623
8 659
13 401
5 732
2 628
3 062
10 483
13 527
13 781
9 870
5 284
4 810
5 328
4 755
4 553

0
706
510
0
581
0
1 069
1 844
0
0
68
515
156
2 497
3 305
2 849
202
2 930
4 627
0
321

0
0
0
1 017
2 371
6 036
0
2 001
441
3 956
4 565
865
1 671
1 051
510
4 427
274
1 020

0
0
16
885
2 546
3 010
1 775
0
875
5 623
0
11 730
1 147
162
1 644
110
508

3 764
0
11 906
146

5 663
2 764
12 142
1 521
6 515
2 420
4 016
3 384
4 292
2 411
13 908
7 795
12 457
8 100
7 000
11 048
8 821
11 421
17 003
4 836
10 583

10 613
5 274
526
14 116
32 847
16 120
1 321
4 970
7 188
14 554
8 036
8 393
8 036
7 053
7 531
14 661
5 886
7 653

7 000
660
9 889
7 153
10 368
8 619
7 418
3 014
10 115
11 874
18 871
8 090
5 121
4 810
5 328
4 755
4 553

0
6 089
510
0
548
0
0
128 728
0
0
1 040
515
2 116
2 450
6 478
2 849
1 215
2 458
2 613
30
0

0
0
0
917
30 732
6 036
0
1 980
378
3 816
4 565
865
1 671
1 051
510
4 427
234
1 020

0
0
16
724
2 816
58
2 374
0
957
5 176
600
11 730
1 147
162
1 644
110
508

5 325
287
13 426
750

941010005 Charleroi (B)
941010007 Brussels (B)
941010008 Antwerp (B)
940110001 Denmark (DK)
940210018 Magdeburg (D)
940210019 Halle/Saale (D)
940210020 Rostock (D)
940210021 Chemnitz (D)
940210022 Erfurt (D)
940210023 City of Brandenburg (D)
940210024 Berlin (D)
940210048 Bremen (D)
940210049 Saarbrücken (D)
940210050 Duisburg (D)
940310042 Amiens (Picardie) (F)
940310043 Mulhouse (Alsace) (F)
940310044 Les Mureaux (Île-de-France) (F)
940310045 Aulnay-sous-Bois (Île-de-France) (F)
940310046 Est-Lyonnais (Rhone-Alpes) (F)
940310047 Valenciennes (Nord-Pas-de-Calais) (F)
940310048 Marseille (F)
940310049 Roubaix-Tourcoing (Nord-Pas-de-

Calais) (F)

940410001 Ireland
940610001 Luxembourg
940710002 Amsterdam (NL)
940710009 The Hague (NL)
951310001 Vienna (A)
951410002 Joensuu (FIN)
961510002 Malmö (S)
940910001 Northern Ireland (UK)
940910008 Merseyside (UK)
940910009 Birmingham (UK)
940910026 Hackney (London) (UK)
940910027 Manchester (UK)
940910028 Nottingham (UK)
940910029 Sheffield (UK)
940910030 Scotland (UK)
940910031 Swansea (UK)
940910036 Park Royal (London) (UK)

21.12.1994 10.7.1995
3.11.1994
14.3.1996
28.10.1994 24.7.1995
31.10.1994 20.11.1995
28.7.1995
4.11.1994
9.12.1996
4.11.1994
21.12.1995
4.11.1994
28.9.1995
4.11.1994
27.7.1995
4.11.1994
27.11.1995
4.11.1994
6.11.1995
4.11.1994
6.11.1995
4.11.1994
4.11.1994
6.11.1996
31.10.1994 18.12.1995
12.3.1996
8.11.1994
12.3.1996
8.11.1994
12.3.1996
8.11.1994
12.3.1996
8.11.1994
20.5.1996
8.11.1994
24.10.1996
8.11.1994
12.3.1996
8.11.1994

8.11.1994
23.7.1996
22.12.1994 30.7.1996
31.10.1994 20.11.1995
18.9.1995
5.12.1994
5.12.1994
18.9.1995
21.12.1995
17.7.1995
22.11.1995 30.7.1996
12.6.1996
9.12.1996
31.10.1994 24.2.1995
31.10.1994 30.7.1996
31.10.1994 6.11.1996
31.10.1994 6.11.1996
31.10.1994 30.7.1996
31.10.1994 30.7.1996
31.10.1994 30.7.1996
31.10.1994 30.7.1996
31.10.1994 6.11.1996
31.10.1994 6.11.1996

17.3.1998
15.1.1997
26.3.1999
30.9.1998
9.12.1996
26.3.1997
17.12.1996 15.4.1997

971010001 Mons-La Louvière (B)
981010001 Anderlecht (B)
970210001 Sachsen (Zwickau) (D)
970210002 Schleswig-Holstein (D)
970310001 Clichy-Montfermeil (Île-de-France) (F) 10.1.1997
10.1.1997
970310002 Châlons-sur-Saône (Bourgogne) (F)
10.1.1997
970310003 Saint-Etienne (Rhône-Alpes) (F)
10.1.1997
970310004 Bastia (Corse) (F)
10.1.1997
970310005 Mantes-la-Jolie (Île-de-France) (F)
27.8.1996
960710001 Rotterdam (NL)
27.8.1996
960710002 Utrecht (NL)
15.7.1996
961310001 Graz (A)
10.1.1997
971410001 Helsinki/Vantaa (FIN)
10.1.1997
970910001 Coventry (UK)
10.1.1997
970910002 Bristol (UK)
10.1.1997
970910003 Brighton (UK)
10.1.1997
970910004 Leeds (UK)

1.8.1997
4.8.1997
1.8.1997
12.12.1997
8.12.1997
11.4.1997
11.4.1997
24.10.1996
26.5.1997
28.7.1997
28.7.1997
28.7.1997
17.10.1997

0,55
1,36
0,74
1,05
0,73
2,10
1,13
0,90
0,73
1,06
1,01
1,01
2,01
1,13
1,34
1,34
1,34
1,34
1,53
1,96
1,34

1,71
1,61
1,05
0,79
0,79
0,43
0,69
0,49
0,32
1,75
2,02
2,02
1,75
1,75
1,75
1,75
2,02
2,02

1,17
0,48
0,29
0,33
0,56
0,56
0,56
0,92
0,91
0,62
0,62
0,28
0,37
0,55
0,55
0,55
0,77

0,39
0,71
1,46
0,72

URBAN
Round one (1)
single commitment

URBAN
Round two (2)
single commitment

URBAN
Round one
commitment in
annual instalments

URBAN
Round two
commitment in
annual instalments

(1) Following Commission communication of July 1994.
(2) Following Commission communication of July 1996.
Source: Court of Auditors.

940810002 Greece
941110003 Spain
940510001 Italy
941210004 Lisbon and Oporto (P)

28.3.1995
7.11.1994
3.11.1994
19.7.1995
15.11.1994 30.4.1996
28.10.1994 19.7.1995

67 167
248 684
280 696
62 017

61 841
248 397
267 270
61 267

45 200
162 599
117 652
44 297

34 075
144 937
102 037
35 276

11 125
17 662
15 615
9 021

16 641
85 798
149 618
16 970

64 086
263 437
328 906
70 702

60 323
263 437
317 000
70 556

45 242
171 288
136 684
50 882

34 117
152 284
120 368
44 952

11 125
19 004
16 316
5 930

15 081
92 149
180 316
19 675

971110001 Spain II

9.1.1997

3.3.1998

1,15

121 410

121 410

77 330

67 108

10 222

44 080

0

120 164

120 164

76 085

65 863

10 222

44 079

0

Total 1 880 192 1 616 541

842 919

694 845

148 073

773 622

263 651 1 815 543 1 717 313

898 319

750 056

148 263

818 993

98 230

C
1
2
4
/
4

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

.

.

2
5
4
2
0
0
1

25.4.2001

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Situation of the URBAN programmes at 31 December 1999 — Commitments 1994 to 1999

Diagram 1

R
U
E
d
n
a
s
u
o
h
T

800 000

700 000

600 000

500 000

400 000

300 000

200 000

100 000

0

ERDF
ESF

1994
0
0

1995
133 136
27 163

1996
187 938
25 663

1997
88 887
27 680

1998
158 247
23 288

1999
174 562
11 611

Total
742 771
115 404

Source: Commission revenue and expenditure account.

Situation of the URBAN programmes at 31 December 1999 — Payments 1994 to 1999

Diagram 2

R
U
E
d
n
a
s
u
o
h
T

450 000

400 000

350 000

300 000

250 000

200 000

150 000

100 000

50 000

0

ERDF
ESF

1994
0
0

1995
63 911
13 372

1996
100 161
12 220

1997
40 923
11 297

1998
129 306
10 694

1999
72 032
15 961

Total
406 333
63 543

Source: Commission revenue and expenditure account.

ERDF

ESF

ERDF

ESF

 
 
C 124/6

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Comparison between the initial and final financial plans (at 31 December 1999) for the eight URBAN single programmes for
all the beneficiary areas in a Member State (%))

Diagram 3

80,0

70,0

60,0

50,0

40,0

30,0

20,0

10,0

0,0

Initial plans

Final plans

1994

1995

1996

1997

1998

1999

Source: Aid decisions for the eight URBAN national programmes (Nos ERDF 940110001, 940810002, 941110003, 940410001, 940510001, 940610001,
941210004, 961510002) adopted pursuant to the Commission communication of July 1994. These programmes represent around half of the financing
granted by URBAN. Note, the difference of approximately 10 % between the extent of the initial financial plans and the final financial plans is due to
indexing and the increase in the total budgets for some of these programmes.

SELECTION OF ELIGIBLE URBAN AREAS

11. The Commission has not defined precise criteria for deter-
mining which urban areas are eligible. In principle, urban areas in
cities and conurbations with over 100 000 inhabitants are eli-
gible: ‘Target areas could be urban neighbourhoods geograph-
ically identifiable, either an existing administrative unit such as a
borough, a commune or even smaller entities, within a densely
populated zone, with a high level of unemployment, with a
decayed urban fabric, bad housing conditions and a lack of social
amenities. In addition and in duly justified cases, support could
be provided for operations in medium-sized or smaller cities suf-
fering from overall economic decline’ (1).

12.
In the explanatory memorandum to the first communica-
tion concerning the URBAN initiative (2) it was proposed that the
final selection of the programmes should be based on the advice
of a group of independent experts, nominated by the Commis-
sion in cooperation with the Member States, using criteria estab-
lished in advance. In the end, however, the Commission did not
take this option. The division of responsibilities between the
Commission and the Member States was not clearly defined. The
Commission, which adopts the decisions to grant assistance,

(1) Paragraph 10 of the communications from the Commission.
(2) COM(94) 61 final/2 of 20 April 1994, ‘Community initiative concern-

ing urban areas (URBAN)’.

intervened by means of informal discussions, in a manner which
was not very transparent, in order to reduce the excessive number
of beneficiary urban areas proposed by the Member States, but,
for all that, did not reach the target number of 70 (see para-
graph 7).

13. The following example illustrates the problems associated
with the selection procedure. The Italian authorities invited 24 cit-
ies to submit projects. Nine cities which had not been invited to
do so, but which were aware that the URBAN initiative had been
launched, also submitted projects, on their own initiative and out-
side the procedure established by the national authorities. Faced
with this situation, the Member State sent all these very different
proposals to the Commission for it to take a decision. In the end
the selection was negotiated jointly by the Commission and the
Member State since, despite all its efforts, the Commission found
it impossible to make a positive assessment of the proposals sub-
mitted, for want of a methodology and the appropriate informa-
tion.

14. The Member States had to implement their ad hoc selection
mechanisms swiftly. In practice this consisted of first shortlisting
certain cities and then leaving the relevant local authorities to
select the beneficiary urban areas. In several cases no formal
shortlisting procedure was used to select the beneficiary cities and
areas, and the relevant authorities were unable to supply any
documentation in support of their choices. In cases where Mem-
ber States did attempt to select cities and areas in an objective
manner, the end result was altered in order to redress geographi-
cal imbalances and prioritise certain cities, and capital cities in

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particular, or to compensate areas not selected for other Struc-
tural Funds measures. In practice, selection was based not on a
comparison of predetermined, quantifiable, objective factors but
on criteria which varied from one Member State to another and
were difficult to compare, which also resulted in fragmentation of
the objectives targeted.

15. The lack of relevant statistical data and indicators that would
allow evaluation and comparison of the situation in the 350 or
400 cities with over 100 000 inhabitants and in other cities faced
with widespread economic decline makes it impossible to assess
the merits of the selection process. The same applies to the selec-
tion of the beneficiary urban areas within cities. The Commission
communications list some socioeconomic indicators that can be
used to identify the most deprived areas (1). However, these indi-
cators are so diverse that almost every area of any large or
medium-sized European city is, on the basis of one or more of
these indicators, disadvantaged in comparison to the average for
that city. Moreover, the indicators may sometimes be available for
a city as a whole, but hardly ever for the individual areas of it.
What is more, the areas selected do not always correspond to geo-
graphical, statistical or administrative units and, in some cases,
cover parts of a city that are not adjacent to one another.

16. Due to the fact that the selection process lacked transpar-
ency, it was difficult for the national authorities concerned to jus-
tify decisions to exclude many of the applicant areas. After disput-
the cities concerned were
ing these decisions, several of
compensated by being included in new URBAN programmes or
in other Community or national measures.

PROGRAMMING

The integrated approach

18. Even though the communications provided that ‘the Struc-
tural Funds could be used to finance the designing of global urban
strategies at the request of the Member States or local and regional
authorities concerned’ (2), no applications of this type were made.
URBAN made no contribution towards improving planning instru-
ments at city level. URBAN did, however, make it possible for a
number of local authorities to coordinate the planning and imple-
mentation of various actions in particular areas of cities for the
first time.

Selection of measures

19. The areas selected have very different problems: high unem-
ployment, heavy traffic, run-down historic centres, crime, drug
abuse, prostitution, economic decline, low-quality housing, etc.
Nevertheless, the measures included in the programmes are iden-
tical or very similar. Some national authorities have taken the cat-
egories of measures proposed in the communications as the con-
tent of a model programme and their proposals follow this format
to the letter. While the programmes should have been centred on
the problem which justified the city or area being selected, they
usually comprise a wide array of operations, thus mirroring
regional measures financed by the Structural Funds.

20. The result of this is that Community finances are deployed
too thinly, in a way that is very awkward to manage and to moni-
tor, given not only the number and diversity of the projects, but
also the relatively low level of Community financing (an average
of 7,61 million euro per area). The Member States and the Com-
mission have not succeeded in using the partnership framework
to focus measures more closely on the basic problems of the
urban areas concerned. Interviews with managers in the field con-
firmed that, as a general rule, they would have preferred simpler
programmes comprising only a few operations. They would also
have preferred programmes to be financed from a single source
(ERDF or ESF) in order to avoid the complexities of dealing with
two structural funds at the same time (see paragraph 2), each gov-
erned by different rules and with different methods of implemen-
tation. Moreover, the contribution made by the ESF is too small
to have any significant impact. It should be noted that the URBAN
II initiative (2000 to 2006) will be financed by the ERDF only.

17. A strategy based on the integrated approach envisaged by the
Commission (see paragraph 2) is highly ambitious and presup-
poses the existence of long-term integrated urban development
plans in which the public administrations and local and social
partners are involved. Such a scenario is very rare, however, and
depends on the institutional characteristics of the Member States.
In some cases municipal plans exist, but they are usually oriented
towards fields that are traditionally the preserve of the boroughs
(e.g. urban development plans) or towards sectors of economic
activity (transport, highway and traffic improvement plans, etc.).

Programme approval

21. Even though the Commission communications allowed very
little time for the preparation of programmes (four months in the
first communication and six months in the second) (3), the Com-
mission approved the majority of the programmes well behind
schedule (4), and in some cases not until two years after the sub-
mission date. The average time required to adopt an URBAN

(1) Paragraph 5 of the communications from the Commission. The indi-
cators are: unemployment rate, levels of education, the level of crime,
quality of housing, the percentage of social service providers, the
social and ethnic mix, the extent of urban decay, deterioration of pub-
lic transport and the mediocrity of local amenities, etc.

(2) Paragraph 15 of the communications from the Commission.
(3) Paragraph 20 of the communications from the Commission.
(4) Article 14(3) of the Coordinating Regulation stipulates that provided
that all the requirements are fulfilled, the Commission shall, as a gen-
eral rule, reach a decision within six months of receipt of the applica-
tion.

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25.4.2001

programme following the first communication was 15 months,
but this was reduced to seven months for programmes submitted
after the 1996 extension of URBAN. Some of the delays can be
explained by the poor quality of the programmes submitted and
the lengthy discussions linked with the final selection of benefi-
ciary areas, the determination of the individual financial packages
and the reworking of programmes. The number of beneficiary
areas and the financial packages awarded to them were not deter-
mined until after the programmes had been submitted. Other
delays can be explained by the unwieldiness of the Commission’s
internal procedures for adopting decisions, which involve around
20 departments. The Table lists the dates on which the pro-
grammes were submitted and the dates on which they were
adopted.

22. Although the regulatory provisions and the communica-
tions from the Commission stipulate that proposals for pro-
grammes should include an appraisal of the situation setting out
the objectives to be attained, the programme proposals submit-
ted went no further, with a few exceptions, than describing the
areas in question and their social and economic characteristics,
and repeating the objectives set out in the communication. Almost
all the programmes examined were characterised by a lack of
clear objectives and of appropriate physical and impact indica-
tors. Efforts were made to rectify this situation in some of the
programmes during their implementation, but these belated ini-
tiatives cannot be expected to yield satisfactory results.

23. The lack of appropriate ex ante appraisals can be ascribed to
the very short deadlines set for drawing up the programmes,
which left no time for thorough analysis. It was also due to a lack
of reliable data of a statistical or social and economic nature on
the areas concerned, and to the shortage of overall information
on the status of current and scheduled Community, national,
regional and local operations and financing. In most cases, the
appraisals performed were aimed at justifying choices already
made. It should be noted that improvements were found in the
programmes submitted from 1996 onwards.

24. The Commission took various approaches when it examined
the programmes. In some Member States a programme was
approved for each area, while in others a single programme was
adopted for all the areas, even, in some cases, when the Member
States had proposed the opposite. The files give no clear reasons
for the choices. The reworking of programmes, which became
necessary whenever one approach was preferred to another, led
to unjustifiable delays in the adoption of the programmes.

25. The choice of format can have significant consequences. In
the case of programmes centring on individual cities, the whole
financial package may be committed when the decision is adopted,
in view of the small size of the programme. The beneficiaries are
also entitled to advances of up to 50 % of the overall sum. In
single programmes, the payment of advances from the Commu-
nity follows another pattern, which is based on the declarations
of expenditure submitted for the relevant urban areas as a whole.
Since single declarations of expenditure are made, it only takes
one city to fall behind schedule for all the others to pay the price.

The need to coordinate all the participants makes negotiations on
adopting programmes and the drawing-up of declarations of
expenditure and annual reports more difficult. On the other hand,
single programmes enable a smoother coordination of measures
and improve the exchange of valuable information.

INTEGRATION WITH OTHER COMMUNITY POLICIES

26. Numerous interventions in the field of urban development
are currently in progress within the ambit of the Community’s
main policies. The existence of a large number of direct or indirect
operations targeting cities and their development (covering such
fields as competitiveness and employment, economic and social
cohesion, sustainable development, research and technological
development, the European spatial development perspective, edu-
cation, training and youth, culture, transport and the information
society) calls for major efforts in terms of coordination in order
to guarantee a smooth integration of approaches and ensure
maximum efficiency.

27. The Commission therefore undertook, in 1997 (1), to look
into ways of adapting its internal structures in order to set up
mechanisms that focused on closer integration of approaches in
the urban field. In 1998, for the first time, it drafted a ‘framework
for action for sustainable urban development in the European
Union’ (2), the aim of which was to enhance coordination and to
better target Community actions in urban areas. The document
envisaged a range of initiatives for enhancing coordination and
integration, given that one of the fundamental challenges that this
document mentioned, for every layer of authority involved, was
that of preventing the various bodies concerned from working in
an uncoordinated fashion when addressing urban problems. How-
ever, only a few tangible initiatives have been implemented thus
far.

28. The Commission has stipulated (3) that, where possible, and
appropriate, operations receiving funding under this initiative
should be planned and implemented with due regard to other
actions under the Structural Funds and Community programmes,
such as Poverty IV and Leonardo, as well as actions supported by
the Cohesion Fund and the European Free Trade Association
(EFTA) and loans from the European Investment Bank (EIB).

29. However, it is unrealistic, given the current circumstances, to
expect the planning and implementation of operations to take
other Community actions into account. The fact is that the man-
agement of Community actions continues to be marked by their

(1) COM(97)197 final of 6 May 1997. Communication from the Com-

mission ‘Towards an urban agenda in the European Union’.

(2) COM(98) 605 final of 28 October 1998. Communication from the
Commission ‘Sustainable urban development in the European Union:
a framework for action’.

(3) Paragraph 19 of the communications from the Commission.

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compartmentalisation at every level, whether Community,
national, regional or local, and by the lack of up-to-date, compre-
hensive and reliable information on the implementation, and even
the existence, of operations which often form part of framework
programmes. As yet, there has been no inventory of all the Com-
munity operations, such as those targeted under the URBAN ini-
tiative, that take place in a particular borough or urban area. Such
a survey would require the cooperation of all the managers and
potential beneficiaries, which would be a very ambitious task.
This situation has significant consequences for monitoring and
control.

30. As concerns the ERDF more particularly, the Commission
has conducted a study (1) of the financial impact of the Fund on
cities, which are defined as being urban areas with a population
of at least 100 000. The study shows that approximately 40 % of
the total ERDF budget for Objective 1 (1994 to 1999) and Objec-
tive 2 (1994 to 1996) is devoted to urban development (some
21 000 million euro). Apart from this summary evaluation of the
purely financial impact, and despite the scale of the financing
granted to urban development, there has been no evaluation of its
impact in terms of development.

In the special case of cities in Objective 1 regions, where the
31.
operations targeted under the URBAN initiative often constitute
only a fraction of the Community operations being implemented
(especially those implemented via the Structural Funds), it makes
little sense to study URBAN operations outside the general con-
text of Community support frameworks (CSFs) or single pro-
gramming documents (SPDs) (2). The aid per capita from the
Structural Funds solely for the CSFs relating to Objective 1 regions
and the period 1994 to 1999 exceeded 1 000 euro (3), while the
aid granted under the URBAN initiative was not more than 280
euro per head of population.

32. Furthermore, the URBAN pilot projects and numerous Struc-
tural Fund interventions specifically target urban issues (4). Since
the measures which the URBAN initiative targets are similar to

(1) Estimate of the financial impact of the European Regional Develop-
ment Fund and the Cohesion Fund on cities — Annex III to COM(97)
197 final of 6 May 1997.

(2) The CSF is a document approved by the Commission, in agreement
with the Member State concerned, after assessing the plan submitted
by the Member State, containing the strategy and the priority actions
of the Structural Funds and the Member State, their specific objec-
tives, the contribution from the Funds and the other financial resources.
The operational programme is a document approved by the Commis-
sion which targets the implementation of a CSF.
The SPD is a single document, approved by the Commission, which
combines all the items contained in a CSF and in an operational pro-
gramme.

(3) 1995 Annual Report, Table 5.3 ‘Community aid, population and GDP

per region for Objective 1’.

(4) By way of example, the ‘Environment and urban renewal’ OP (Portu-
gal), which was adopted before the URBAN initiative was planned,
already provided for subprogrammes aimed at rehabilitating deprived
areas in the conurbations of Lisbon and Oporto. The same situation
has arisen in Ireland as concerns the ‘Local urban and rural develop-
ment’ OP.

interventions which already exist, they could have been more
cohesively and efficiently implemented within the original frame-
work, thus avoiding the long and costly procedures of drafting,
appraisal and management. Local authority involvement in the SF
regional measures that target local development was quite insig-
nificant in most of the countries. URBAN has enabled local
authorities to access Community co-financing.

33. Moreover, national programmes frequently exist within the
Member States with the aim of supporting measures similar to
those envisaged under the URBAN initiative. The extent to which
there is coordination and integration between these programmes
and the URBAN initiative varies greatly. In several cases, new
actions have been established and implemented, instead of taking
existing national urban redevelopment actions as the basis for fur-
ther measures, mainly because of slight differences in scheduling
and approach between the national measures and the communi-
cation on URBAN. The result is a proliferation of interventions
which target similar objectives, and an increase in management
costs (5).

MANAGEMENT AND MONITORING STRUCTURES

At the decision-taking level

34. The Treaty does not provide for the implementation of a
Community policy in the field of urban affairs, and Community
action must therefore be based on the principle of subsidiarity (6).
Even though this principle was incorporated into the text of the
communications from the Commission, a clearer definition was
needed, in order to prevent confusion with the principle of part-
nership: ‘In accordance with the principle of subsidiarity, the mea-
sures to be included in an integrated programme should be drawn
up by the local partnership, taking into account the diversity of
problems faced by cities’ (7). The practicalities of applying the sub-
sidiarity principle in the context of the URBAN initiative have
presented numerous problems, some of which are described below.

35. Substantial differences in approach coexist within the Com-
mission. For some programmes (in the United Kingdom, for
example), and in line with its interpretation of the principle of
subsidiarity, the Commission considered that it should not inter-
vene in the project selection procedure. As a result there is no
reference to individual projects in the programmes. In the case of
other programmes, however, the Commission has been closely

(5) This was the case in Italy with the national urban redevelopment pro-
gramme and in the United Kingdom with programmes such as the
SRB (single regeneration budget) and City Challenge. In France and
the Netherlands, on the other hand, some URBAN programmes are
based entirely on ‘city challenges’ and large-scale national urban
projects, and on the ‘Grote Stedenbeleid’ (big cities policy) respec-
tively.

(6) Article 5 (ex Article 3b) of the Treaty establishing the European Com-
munity and the Protocol on the application of the principles of sub-
sidiarity and proportionality.

(7) Paragraph 17 of the communications from the Commission.

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involved in defining and selecting projects. This has led to discus-
sions on somewhat marginal aspects of individual projects and to
very detailed programmes. In Greece, for example, the imple-
menting procedures for the projects only take effect once the rel-
evant Commission departments have given authorisation for each
individual project.

36. According to the Commission communications, the local
partnership is the preferred means of deciding on the measures
to be carried out and the management of them. This approach
has come up against a lack of legal structures on which to build,
and these have thus had to be thought through and created. In the
United Kingdom, as a result of a wholesale change in the approach
originally proposed, new local partnership structures were impro-
vised, without the appropriate legal framework, leading to numer-
ous discussions which significantly affected the implementation
of the programmes. In general, the programmes were designed
and implemented by public authorities (central, regional or local)
and the part played by the social partners in drawing up the pro-
grammes was small or, even, non-existent. They were, however,
able to assist in the implementation of a number of measures.

At the level of implementation and monitoring

37. The URBAN initiative is implemented, at the Commission,
by a horizontal department in the Regional Policy Directorate-
General (DG). This department is responsible for urban issues and
framed the guidelines for the initiative. Other departments in the
Regional Policy DG and the Employment DG are responsible for
examining and managing programmes. There was a need for bet-
ter coordination between the managing departments and the
horizontal department in order to ensure that all the programmes
received equal attention during the search for solutions that would
enable objectives to be achieved, and to prevent too much varia-
tion in approach as regards the monitoring of the initiative. More-
over, the management of the multifund programmes (see para-
graph 2), and of small programmes in particular,
is highly
cumbersome and it is difficult to coordinate the various Commu-
nity and national departments, given the human resources avail-
able and their individual priorities. The Employment DG’s partici-
pation in the management and appraisal of URBAN programmes
is thus mainly formal and focuses primarily on decision-making
and budgetary procedures.

38. Since the wording of the communication is so vague and the
numerous departments involved, both at the Commission and in
the Member States (central, regional and municipal administra-
tions, etc.), are not always familiar with the Community rules,
rapid and efficient information exchange networks should have
been established. The dissemination of information and the reso-
lution of the many problems that arose during the implementa-
tion of highly complex Community programmes hinged to a large

extent on informal contacts between the various levels of man-
agement, and thus upon the personal qualities of the managers.

39. Due to their composition and the intervals at which they
meet, monitoring committees (1) are not always the most appro-
priate forum in which to address technical problems relating,
among other things, to the implementation of measures and the
eligibility of expenditure; they tend to concentrate on more gen-
eral subjects and on formalising changes to the programmes (2).
Besides this, the approval of large numbers of small programmes
on a per area basis makes the Commission’s participation in the
monitoring committees problematic. A high staff turnover, both
at Commission and at Member State level, in circumstances where
many discussions are carried on informally at the various admin-
istrative levels, has also hampered effective management.

40. The success of the measures implemented depends to a large
extent on the beneficiaries’ remits. Indeed, the majority of the
programmes were not designed on the basis of urban develop-
ment strategies, but around the beneficiaries. Once the benefi-
ciary has been pinpointed (in many cases the beneficiary is simply
the borough council), the measures are skewed towards this coun-
cil’s spheres of intervention. Several councils tried to implement
measures in fields that they were not used to managing, such as
State aid or vocational training. This resulted in inefficiency and
the duplication of tasks, due to the fact that the councils had to
create new implementing mechanisms in addition to those that
already existed.

41. The areas of intervention for the ERDF and the ESF and the
eligibility of the measures are determined on the basis of differ-
ent Structural Fund objectives. This means that the measures
which are potentially eligible vary according to the location of the
urban areas concerned, even when they belong to the same pro-
gramme. A total of 66 urban areas are located in Objective 1 or 6
regions, 33 in Objective 2 areas, and around 20 in areas not cov-
ered by Objectives 1, 2 or 6. The infrastructure investment tar-
geted by the ERDF Regulation (3) varies according to the objec-
tive, while investment in the fields of health and education is
possible only in Objective 1 regions. Investment in these fields
has nevertheless been co-financed, under the URBAN initiative, in
non-Objective 1 regions. Furthermore, the implementing provi-
sions (in particular the evaluation, follow-up and powers of the
Monitoring Committees and financial implementation) for the
CSFs and SPDs are not exactly the same for each objective and
evidently do not exist for areas not covered by any objective. In
view of this, the provisions governing the measures should have
been clearly defined to ensure there are no blanks or grey areas

(1) As provided for in Article 25 of Regulation (EEC) No 4253/88 as
amended by Council Regulation (EEC) No 2082/93 of 20 July 1993
(OJ L 193, 31.7.1993, p. 20).

(2) Special Report No 16/98 on the implementation of appropriations
for structural operations for the programming period 1994 to 1999,
paragraphs 6.12 and 6.13.

(3) Regulation (EEC) No 4254/88 as amended by Regulation (EEC)
No 2083/93 laying down provisions for implementing Regulation
(EEC) No 2052/88 as regards the European Regional Development
Fund (OJ L 193, 31.7.1993, p. 34).

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and to facilitate the task of managers, who are not always accus-
tomed to working with Community rules (1).

42. The coordinating Regulation for the Structural Funds (2) cites
implementation reports as being priority monitoring
annual
instruments. However, the Commission only requests annual
reports when a commitment account is being closed. The annual
reports thus become, in effect, reports on the closure of annual
instalments, and in cases of single commitments (i.e. in all cases
except Italy, Greece, Spain and Portugal), the annual reports coin-
cide with the final, and only, reports. In some of these cases, the
text embodying the decision stipulates that a report is to be drawn
up each year, but this provision has not always been respected. In
the case of many single-commitment programmes, no annual
report had been drawn up at 31 December 1999. In the case of
commitment-by-instalments programmes, progress reports were
drawn up belatedly. For example, the first annual reports on the
Greek OP were only submitted in November 1999.

In some cases, the structures created were disproportionate
46.
in terms of their composition or location. In other cases, the man-
agement of the programmes had been entrusted to companies in
the private sector, which can result in conflicts of interest. Indeed,
in Greece, one of the programme management companies was
also a programme beneficiary. In addition, the cost of the consul-
tancy services it supplied to the small and medium-sized compa-
nies (SMEs) that were beneficiaries of the URBAN programme
was also met by the programme in question. In several cases
(Spain and Greece), management companies were, contrary to the
Community VAT Directives, treated as public authorities and not
as taxable persons, so that there were no invoices for the works
and services supplied by these companies. In Portugal, a founda-
tion was set up to manage one programme. This resulted in a sig-
nificant increase in infrastructure costs, since the applicable rate
of VAT for infrastructure work commissioned by a body such as
a foundation is higher than that applied where the main contrac-
tor is a local authority (17 % instead of 5 %).

At the level of technical assistance

43. An examination of the financing plans for the URBAN pro-
grammes revealed that expenditure on technical assistance, includ-
ing management, monitoring, evaluation and control, was mark-
edly higher than that generally envisaged in the CSFs or SPDs
(around 2 %). Although the nature of the Community initiative
programmes is such that additional requirements in terms of
technical assistance may be justified, there were some instances
where this expenditure amounted to more than 10 % of the finan-
cial package for the programmes.

44.
It was noted on several occasions, in connection with techni-
cal assistance, that new offices and even new development com-
panies had been set up, simply to meet the needs of the URBAN
Initiative. The nature of the measures carried out and the scale of
the programmes do not warrant the creation of new managerial
bodies.

45. The creation of these new bodies was justified, in the Mem-
ber States, by the complexity and unwieldiness of Community
management procedures and the need to coordinate the various
managers concerned, as well as by the weaknesses of local depart-
ments. But the sums spent on technical assistance could have had
more long-lasting effects if these financial packages had been used
to reinforce and upgrade existing structures, given that the new
structures created are supposed to be dismantled once the pro-
gramme is over.

(1) Anomalies have nevertheless been detected. As regards the first Span-
ish URBAN programme, Article 8 of the Decision establishes as the
implementing provisions those annexed to the text of the programme,
which are not very detailed. At the same time, the Annex to this Deci-
sion includes standardised implementing provisions. In consequence
there are, for example, two sets of rules governing the operation of
the Monitoring Committees and their responsibilities. In the case of
the second Spanish programme, the only provisions that exist are
those set out in the text of the OP, and the standard provisions are
missing, which means that important aspects of the implementation
of the programme are not covered, and that of financial implementa-
tion in particular.

(2) Article 25 of Regulation (EEC) No 4253/88 as amended by Council
Regulation (EEC) No 2082/93 of 20 July 1993 (OJ L 193, 31.7.1993,
p. 20).

47. Despite the considerable funding provided for technical assis-
tance, URBAN programmes showed the same types of weakness
(pointed out by the Court on a number of occasions (3) as the
other programmes co-financed by the Structural Funds with regard
to financial management (expenditure accounting and declara-
tions of expenditure), monitoring and evaluation. Furthermore,
little was done to promote information exchanges between ben-
eficiary cities, despite the fact that this objective (4) was used to
justify increasing the funds envisaged in order to include techni-
cal assistance.

48. The Commission itself enlisted the assistance of a consult-
ant. Despite the title of the tasks to be performed by the selected
consultant (‘Coordination and reporting on Urban Community
Initiative’), the results were modest: creation of an Internet site,
preparation of ‘programme summary’ sheets and preparation of
case studies on around 20 neighbourhoods covered by URBAN.
This was due in particular to the vague description of the tasks
that the consultant was to perform. Furthermore, the Internet
site, which simply describes the URBAN initiative and its pro-
grammes, has not been updated since November 1999.

IMPLEMENTATION OF THE PROGRAMMES

Financial management

49. The final date for legal and financial commitments at national
level was set at 31 December 1999 and the Commission did not

(3) Most recently in the Annual Report concerning the financial year
1999, ’Specific appraisal in the context of the Statement of Assur-
ance’, paragraphs 3.38 to 3.81, and ’Financial management of struc-
tural measures’, paragraphs 3.100 to 3.127.

(4) Paragraph 16 of the communications from the Commission.

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authorise any extensions of that deadline. The final date for pay-
ments was set at 31 December 2000 (unless an extension was
allowed). In view of the slow progress of the OPs (see para-
graphs 8 and 9), some of which did not actually get under way
until 1999, the managers of them were obliged to look for tech-
niques that would make it possible to enter commitments for the
actions quickly, in order to avoid underimplementation of the
OPs and the cancellation of the corresponding Community fund-
ing.

50. The Monitoring Committees had until 31 December 1999 to
propose or make adjustments to the programmes that came
within their terms of reference. They made ample use of this
option. The content of the programmes was therefore adjusted to
bring them into line with what had been done, thereby calling
into question the quality of the programming. The series of
changes made to the programmes in the last months of 1999 cre-
ated uncertainty among managers and beneficiaries, as they often
had to work on the basis of three different texts and financial
plans: those in force, those being examined by the Commission
and those that were probably going to be adopted at the last
Monitoring Committee meeting for the year.

51. Some of the techniques used to facilitate the commitment of
measures, although not necessarily irregular were open to ques-
tion. They included:

(a) the original operations and measures were replaced by others
that could be carried out more rapidly or had already been
completed. Actions that were to have been carried out in con-
junction with the private sector and innovative measures,
which are more difficult to implement, were replaced by more
traditional measures (see paragraph 8);

(b) the rate of Structural Fund co-financing was increased, so that
programmes could be finalised more rapidly, but for the same
amount of expenditure. Analysis of the financial plans for
programmes shows substantial reductions in the national
contributions for some programmes (see the table);

(c) agreements concerning the conduct of actions were con-
cluded between the authority responsible for implementing
the OP and other public or part-public authorities or compa-
nies, with the object of treating as final beneficiary a party
that was, in the final analysis, only the manager;

(d) goods and services were ordered well in advance of the date
on which they would usually have been ordered. Several cases
were detected where beneficiaries had already purchased equip-
ment or contracted for services in connection with activities
that were to take place in buildings which were still under
construction or, even, at the design stage;

(e) funds were set up, ostensibly for the purpose of implement-
ing certain measures. The mere act of setting up a fund was
regarded by the responsible authorities as a legal and financial
commitment. This practice does not comply with the imple-

menting provisions and makes it possible for measures to be
closed in terms of commitments even if no action or project
has been launched.

52. Furthermore, amendments were made to the financing plans
for the programmes and to the actual content of the measures at
the end of the period. These amendments should have been
accompanied by changes in the objectives, in the indicators and
in the conclusions of the ex ante evaluations, which is not the case.

53. The slow progress of the programmes resulted in a concen-
tration of contracting procedures in the final months of 1999.
Furthermore, many infrastructure projects will only be completed
after the end of the commitment and payment periods. The provi-
sion of services and the execution of the activities for which this
infrastructure was intended, and which were the main reasons for
funding it, will not therefore be carried out under URBAN. Steps
must therefore be taken to ensure that the investments made are
actually geared towards achieving the intended objectives. In fact,
the areas targeted by URBAN II (2000 to 2006) are mainly new
ones and there is a real risk that, in the absence of suitable moni-
toring, the proposed activities will be abandoned.

54. Measures that were planned as being spread over the lifetime
of OPs were carried out over a much reduced time span. Several
cases were noted where training courses that had initially been
intended to be spread over a period of five or six years were pro-
vided in a matter of months. Moreover the systems of aid for
SMEs did not get under way until the end of the period, in view
of the difficulty of defining a legal framework for a small popula-
tion.

Selection and implementation of actions

55. At the programming stage, for most interventions, the ben-
eficiary, the type of action and often, even, the individual projects
had already been defined, either implicitly or explicitly. It was,
therefore, only rarely that selection procedures took place for
individual projects.

56. For most of the audited programmes, the financing of admin-
istrative expenditure for some public services, including the field
of social welfare (1), was permitted. Moreover, the same services

(1) Creches and childcare centres; drugs rehabilitation centres (syringes
and methadone have also been co-financed); advisory centres for
families in difficulty or the elderly; combined library and swimming
pool complexes; sporting and cultural activities; dance classes, fish-
ing lessons; cafeterias; a centre for the integration of ethnic minori-
ties; public showers; educational support for children; health centres;
free buses; attendance at football matches as a means of relaxation for
local children.

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were, in some URBAN programmes, funded by the ERDF and in
others by the ESF. However, neither the ERDF Regulation nor the
ESF Regulation (1) permits the financing of such services.

57. The justification that managers gave for introducing this type
of action into the URBAN programmes was the ambiguity of the
communication, which, they claimed, gave the impression that
the initiative sought to promote measures aimed at social integra-
tion in cities (2), and the development of the inherent potential
available within neighbourhoods. However, a communication is
simply a document that sets out the Commission’s guidelines and
it may never depart from Community regulations.

58. The eligible area should be a geographically defined and lim-
ited part of a city. On this point, the Court’s audit revealed the fol-
lowing problem cases:

(a)

in the case of several programmes, the eligible area was not
accurately defined. This gave rise to uncertainty and debates
which, in the case of the Netherlands (The Hague), were not
resolved until 1998, when the neighbourhood was redefined;

(b) several areas were redefined along the way, in order to make
particular projects eligible and there was even a case where
one area was substituted for another (Madrid);

(c)

in other cases, programme managers were under the impres-
sion that interventions in areas other than the eligible area
were not excluded, provided that most of the actions were
concentrated in the area in question (Greece);

(d) projects were found to have been carried out outside the eli-
gible area, e.g. a bridge sited in another part of the local
authority area in question (Spain-León), or a drugs rehabilita-
tion centre (Greece) situated in another local authority area.

59. More commonly, projects to construct or renovate buildings
in order to provide accommodation for welfare services or for use
by SMEs are physically located in eligible neighbourhoods, but the
potential beneficiaries that they are targeting are resident through-
out the borough, or even the region. For example, in Peristeri
(Greece, population 140 000), the eligible area, which has a popu-
lation of approximately 5 000, is an industrial neighbourhood
where infrastructure is to be sited for the benefit of the entire bor-
ough. Given the large scale of the investment involved, restricting
access to these services to those resident in the neighbourhood
would constitute a waste of resources. Actions of this type should
have found a place as part of other, broader measures.

(1) Article 1 of Regulation (EEC) No 4254/88 as amended by Regulation
(EEC) No 2083/93 laying down provisions for implementing Regula-
tion (EEC) No 2052/88 as regards the European Regional Develop-
ment Fund (OJ L 193, 31.7.1993, p. 34).
Article 1 of Regulation (EEC) No 4255/88 as amended by Regulation
(EEC) No 2084/93 laying down provisions for implementing Regula-
tion (EEC) No 2052/88 as regards the European Social Fund
(OJ L 193, 31.7.1993, p. 39).

(2) Point 14 of the Commission communications.

60. Other actions that caused problems are the following:

(a) the actions in favour of SMEs are mainly concerned with the
construction of new infrastructure in support of SMEs, but
suitable studies were not always carried out beforehand in
order to check that there was a real need;

(b) given that the whole of the Community territory is eligible
either under Objective 1 or under Objectives 3 and 4 and a
substantial range of training courses is already available, the
organisation of new training schemes which sometimes over-
lap with those that already exist at regional or local level, is
hard to justify. Furthermore, the training schemes were not
always confined to residents of the qualifying neighbourhood,
and urban areas were sometimes redefined in order to increase
the eligible population. Had there been a real, identified need
in the selected neighbourhood, the scheme could have tar-
geted the residents of that neighbourhood alone. If, on the
other hand, the scheme was of a general nature, it should have
formed part of broader municipal or regional interventions;

(c) housing is not eligible for URBAN funding (3), although the
communication provided that poor-quality housing was one
of the criteria to be applied in selecting neighbourhoods. In
Utrecht, the local authorities thought that actions in the area
of housing came within the scope of the principal measure of
the ‘Quality of life’ programme, and launched the first projects.
When they realised that these operations were ineligible, the
programme had to be completely revised in order to reduce
significantly the funding that had been allocated to the mea-
sure in question (from 78 % to 40 % of the OP). Lastly, projects
in this field have been co-financed indirectly, for example, the
restoration of façades (Spain), the renovation of dwellings with
a view to possibly letting rooms to tourists (Italy) or the
co-financing of communal areas and commercial premises in
new social housing complexes in proportion to the habitable
area (Portugal).

Evaluation

61. Repercussions of the shortcomings detected in the ex ante
evaluations (see paragraphs 22 and 23) were apparent at the
monitoring and interim evaluation levels. The lack of relevant
physical indicators and impact indicators and the absence of pre-
cise, quantifiable objectives limited the validity and comparabil-
ity of subsequent evaluations.

62. Few interim evaluations were carried out in time for their
results to be taken into account when the last amendments to
programmes were made before the deadline for commitments
(31 December 1999). Even though the few evaluations that were
conducted did produce some interesting facts, their utility was
limited by the lack of a benchmark by which to gauge compari-
sons. In several cases, they may be described as ex ante appraisals

(3) Point 15 of the Commission communications.

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and they did have the merit of establishing systems of indicators,
albeit of a very limited value since the interventions were already
at a very advanced stage. In some countries, there is no provision
for any interim evaluation and in most cases the interim evalua-
tion is carried out for the sake of formal compliance with the
regulations, rather than as a way of obtaining worthwhile results.
Indeed, interim evaluations carried out after the end of the com-
mitment period can have no effect on the current programmes
and they come at too early a stage for them to be able to assess
the impact. There is also a risk that they will be made redundant
by the ex post evaluations.

63. The Commission communications include, by way of illus-
tration, an indicative list of measures (1) that could be included in
the integrated programmes. However, the Court has already
noted (2) on several occasions that the Commission does not yet
have comprehensive, reliable information systems for identifying,
for each homogeneous category of measures, the actions that are
in progress and their expected and actual impact. This is an
obstacle to appropriate evaluation of the overall effects of Com-
munity funding.

CONCLUSIONS AND RECOMMENDATIONS

64. The URBAN Community initiative has supported the imple-
mentation of many urban development projects in 118 areas of
the European Union and has provided local authorities with access
to Community co-financing. However, these projects could, in the
Court’s view, equally well have been carried out under existing
Community measures, thus avoiding the creation of new proce-
dures and expensive management structures. In future any new
Community intervention should be preceded by in-depth analysis
of needs, taking into account the Court’s observations, as well as
previous experience, so as to ensure that the added value which
they generate is real.

65. The Commission communications laying down guidelines
for the URBAN initiative set numerous ambitious targets, but they
are vague. The programmes adopted also lack precise, specific
objectives. This has resulted in a dissipation of effort, which makes
it very difficult to assess the impact of the programmes and of the
initiative as a whole. The new Commission communication (3)
also sets ambitious objectives for the period 2000 to 2006. If it is
really going to be possible for ex ante appraisal, monitoring and

(1) These include measures which are intended to promote new eco-
nomic activities, employment at local
level, the improvement of
amenities in the areas of health, welfare and safety, or the improve-
ment of infrastructure and the environment.

(2) Annual Report concerning the financial year 1999, paragraphs 3.23

to 3.28.

(3) Communication from the Commission to the Member States of
28 April 2000 laying down guidelines for a Community initiative
concerning economic and social regeneration of cities and of neigh-
bourhoods in crisis in order to promote sustainable urban develop-
ment (URBAN II) (OJ C 141, 19.5.2000, p. 8).

evaluation to influence the design and implementation of inter-
ventions, precise objectives must be assigned to the interventions
in advance.

66. The lack of clear procedures for determining eligible urban
areas on the basis of a comparison of objective, preset parameters
has yielded a questionable selection of areas. The number of ben-
eficiary areas (118) is higher than that envisaged (70) and the ben-
eficiary areas are often too extensive for the funding granted to
have any significant impact (see paragraphs 7 and 11 to 16).
Responsibilities for the selection of eligible areas have been speci-
fied for the new period. In future, it will be the Member States that
are responsible for identifying areas and breaking down the funds
by area according to certain criteria which are mentioned in the
new communication (4). The Commission is to ensure that precise
criteria and transparent, competitive selection procedures are laid
down by the Member States in accordance with the national rules
for allocating public subsidies.

67. The allocation of Community funds among Member States,
regions, cities and urban areas lacked clarity and the final deci-
sions on the number of beneficiary zones and their respective lev-
els of financing were only taken after the programmes had been
drawn up and submitted, which resulted in delays and in awk-
ward internal reworking of programmes (see paragraphs 6 and
21). The process of allocating resources should take place at the
earliest possible stage, in order to avoid too much persistent
uncertainty about the financial resources for which the various
interventions may qualify.

68. Although the problems affecting urban areas differ greatly in
type, the measures proposed in the OPs with a view to remedy-
ing them are very similar. Given the scale of the programmes, this
strategy has resulted in scattershot financing, which is extremely
difficult to manage (see paragraphs 19 and 20). The new interven-
tions, which from now on will be financed by the ERDF only,
should be simpler and better tailored to the main problems of the
areas concerned.

69. The implementation of URBAN was characterised by very
long delays, so that operations were concentrated at the end of
the period. This was the consequence of superficial, or even non-
existent, ex ante appraisals of the programmes, unrealistic pro-
gramming and poor monitoring. Moreover, the techniques used
to facilitate the commitment of interventions before the deadline
of 31 December 1999 were questionable (see paragraphs 49 to
54). Reinforcing the programming and ex ante appraisal instru-
ments is essential in order to improve monitoring and evaluation
of interventions. Furthermore, financing plans should not simply
reproduce the annual allocations provided for by the financial
perspective. They should be accompanied by realistic forecasts of
how the actions are expected to progress.

(4) Point 16 of the new Commission communication.

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70. The URBAN programmes ran independently of the other
Community and national interventions that were being imple-
mented at the same time in the areas concerned. The lack of reli-
able, up-to-date information systems at the Commission meant
that it was impossible to access tangible information on the
actions which, in urban environments, are co-financed by the
Structural Funds. Tangible initiatives should be taken, in order to
obtain information about intervention in urban areas and whether
it is consistent and well integrated (see paragraphs 26 to 33). In
addition, the Commission’s recommendation concerning the rein-
forcement of the actions to benefit urban development (1) as
regards Structural Funds intervention for the period 2000 to 2006
should help to reduce the special instruments in support of cities
that are already covered by the priority objectives of the Struc-
tural Funds.

71. The weaknesses of the indicators, and of impact indicators in
particular, and the delays in, and even absence of, annual imple-
mentation reports are evidence of weak monitoring of the inter-
vention, despite the scale of the cofinancing granted for technical
assistance (see paragraphs 22 and 23, 42 and 61). Improvements
in statistical data at local level are necessary and the efforts that
are already being made, for example, under Audit urbain (2),

should continue. The Commission should also, as part of the
partnership, establish paths for the exchange of operational infor-
mation, in order to avoid delays in examining files and prevent
uncertainty in dealing with the technical problems associated with
implementation (see paragraphs 37 to 41). Very little has been
obtained by way of tangible results from the measures which aim
to promote the exchange of know-how. The Commission should,
therefore, reflect how it can effectively foster the spread of good
practice in the urban environment, without confining itself to
operations that are co-financed by URBAN.

72. The Court’s main findings concerning the implementation
of URBAN are similar to those already expressed in previous
inquiries on Structural Funds measures, and the Community ini-
tiatives in particular. The new regulations and the start of the
2000 to 2006 programming period represent a fresh opportunity
for the Commission and the Member States to introduce tangible
initiatives rapidly, with the aim of simplifying and improving the
programming, management, monitoring and evaluation of struc-
tural actions.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 21 and 22 February 2001.

For the Court of Auditors

Jan O. Karlsson

President

(1) The Structural Funds and their coordination with the Cohesion Fund.
Guidelines for programmes in the period 2000 to 2006, COM(1999)
344 final of 1 July 1999.

(2) Audit urbain is a pilot project financed by the ERDF. It aims at com-

piling an inventory of cities in the European Union.
The results of the first phase cover 58 cities, including the main cities
in each of the Member States, and were published in 2000.
(Ref: Vol. 1 — ISBN 92-828-9242-5 and Vol. 2 — ISBN 92-828-
9244-1.)
Note that, in view of the new priorities for URBAN II (2000 to 2006),
only a few of the cities examined by Audit urbain will receive finance
under URBAN.

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ANNEX

ALLOCATION OF RESOURCES FOR THE URBAN COMMUNITY INITIATIVE

1. The initial allocation of 600 million euro (400 million euro for Objective 1 regions and 200 million euro for other
regions) was as follows:

C(94) 1818 of 5 July 1994

B

10,5

DK

1,5

D

EL

E

F

IRL

I

L

96,8

45,2

130,4

55

15,5

115,3

0,5

Mio EUR (1994 values)

NL

9,9

P

UK

43,7

75,6

Total

600

2. According to the Commission, the principal criterion for the allocation of these resources was the population concerned
by Objectives 1, 2 or 5b, but some adjustments were made (increments in favour of Spain and the United Kingdom and
deductions in the case of France, Germany and Italy).

3. Following the apportionment of the 600 million euro, further adjustments were made for Spain (30 million euro), the
United Kingdom (21,6 million euro) and the Netherlands (– 0,7 million euro). After the transfer of the Textile Portugal
programme to heading 3 of the financial perspective, a further adjustment of 50 million euro was made in favour of Spain.

4. The first apportionment of Community initiatives among the new Member States was as follows:

COM (95) 123 final of 4 April 1995

Austria

9,77

Finland

3,89

Sweden

3,37

Mio EUR (1995 values)

Total

17,03

5. Following the allocation of the Community initiatives reserve and the second URBAN communication, an additional
157 million euro became available (61 million euro for Objective 1 regions and 96 million euro for other regions). The
allocation of resources, per Member State, for which no objective criterion was set, was as follows:

SEC(96) 851

B

DK

D

EL

E

F

IRL

I

L

NL

P

UK

A

FIN

S

Total

8,43

16,89 5,31 26,93 24,77 4,82 18,21

13,00 5,12 24,75 3,50 3,77 1,50

157

Mio EUR (1995 values)

6. The breakdown for all these apportionments and adjustments, at 1995 values, is as follows:

B

DK

D

EL

E

F

IRL

I

L

NL

P

UK

A

FIN

S

Total

19,07

1,52 115,02 51,13 240,22 80,53 20,53 135,10 0,51 22,33 49,42 123,29 13,27 7,66 4,87

884

Mio EUR (1995 values)

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7. Following the sixth meeting of the Management Committee for Community initiatives on 22 September 1998, the Com-
mission approved a change to the allocations concerning the various Community initiatives on 16 December 1998. As
regards URBAN, the adjustments decided upon amounted to – 18,7 million euro (– 2,6 for France; – 7,4 for Greece; – 3,2 for
Italy; – 0,2 for Luxembourg and – 5,3 for the United Kingdom). Since these were funds that had already been programmed,
notably for national OPs, the new allocations could not be reprogrammed in their entirety unless the Member States con-
cerned gave their agreement to the reductions in funding, which is far from being the case. Moreover, the table of alloca-
tions per Member State and per initiative, which was the subject of the Commission’s Decision, is expressed in million euro
and has thus been rounded.

8. On 29 March 1999, the Italian Republic brought an action (C 107/99) against the Commission for annulment of the
Decision of 16 December 1998 concerning the allocations. The application for suspension of enforcement of that decision
formed the subject of a summary procedure before the President of the Court of Justice on 29 June 1999. Some of the
evidence submitted during this summary procedure and the necessity of waiting for the Court judgment created fresh uncer-
tainty about the definitive apportionment of the allocations of resources for Community initiatives.

9. The final result, at 1999 values, taking into account the various adjustments mentioned above, is as follows:

Mio EUR (1999 values)

B

DK

D

EL

E

Objectives 1 and 6

13

86

45

194

F

9

21

107

51

IRL

I

L

NL

P

UK

A

FIN

S

39

86

14

4

4

5

Total

570

327

Non-Objectives 1
and 6

6

2

32

53

72

29

0

23

10. The last months, and even the final weeks, of 1999 saw a considerable reorganisation of Community initiatives on the
Commission’s decision. Transfers were made to the URBAN initiative from other initiatives and the allocations provided for
URBAN were reduced in favour of other programmes.

Grand total

897

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THE COMMISSION’S REPLIES

INTRODUCTION

3. The Commission would point out that the scope and object-
ives of the Community initiative URBAN I are defined in the
guidelines. (1)

amendments to the financing plan which are outside the compe-
tence of the Monitoring Committee, the amounts entered in the
amended financing plan under previous years must correspond to
actual expenditure in these years, as certified and set out in the
annual reports on implementation’. For the years following an
amendment, the financing plan is a projection and must keep to
the implementation timetable.

The initiative is intended to support a number of flagship schemes
designed to show that, even in neighbourhoods considered to
have intrinsic structural problems, a sense of hope can be instilled
in local residents and the economy revived.

As regards the programmes for which funding is committed in
annual instalments, the Commission has, in accordance with the
implementing rules and procedures, amended the decisions on
the programmes to adapt them to the realities of implementation
and thus ensure that all the funding is committed as planned.

This initiative was not intended as a comprehensive remedy for
what is a major problem in modern societies. Instead the aim was
to help the authorities responsible for these areas to create a cli-
mate conducive to investment and a sense of confidence and
security for the local residents by reintegrating them into the eco-
nomic and social mainstream.

Clearly, therefore, URBAN I is fully in line with the principles of
subsidiarity and cohesion.

ALLOCATION OF RESOURCES AND FINANCIAL SITUATION

6. The task of allocating Structural Fund assistance to Objec-
tives, Community initiatives and Member States posed consider-
able technical and political hurdles and the Commission believes
it handled the operation effectively and in accordance with the
Regulations. The process was carried out on the basis of object-
ive criteria, supplemented by input from negotiations with the
Member States.

7. This Community initiative was notable both for the heavy
demand it stimulated among beneficiaries and the resolute back-
ing it has received from the European Parliament.

Overall, the initiative was responsible for some EUR 1 800 mil-
lion worth of investment benefiting 3,2 million people (equiva-
lent to EUR 560 per head of population in the communities cov-
ered — similar to the ratio achieved by the Objective 2
programmes).

9. Any changes to the financing plans for the programmes are
subject to the financial management rules annexed to each pro-
‘In the event of
gramme. Point 18 of these rules states that,

(1) See points 3 to 8 of the guidelines.

10. The Commission issued instructions to the Member States to
the effect that they avoid as much as possible transferring resources
between Funds where this involved adjustments to the Commu-
nity accounts. Where such transfers proved unavoidable, the
Member States were instructed to give the Commission sufficient
notice (i.e. no later than 31 July 1999) to be able to enter them in
its accounts before the year end. These instructions expressly
stated that all proposed amendments involving reductions in
commitments and payments were inadmissible.

However, in exceptional cases for very special reasons, exceptions
to this rule were permitted. For example, for programmes where
the final instalment of funding (for 1999) had been committed in
1998, or for certain programmes where all the funding was com-
mitted in a single instalment.

The Commission would point out that the discrepancies high-
lighted by the Court in the Commission accounts for year end
1999 are simply a reflection of certain temporary circumstances
likely to occur at any point of the financial year and which can be
rectified by adjusting the accounts once the programme amend-
ment procedures have been completed. This was the purpose of
the adjustments, decommitments and recoveries carried out in
2000 (based on decisions adopted towards the end of 1999), in
response to the downward revision of contributions from one of
the participating Funds.

THE SELECTION OF ELIGIBLE URBAN AREAS

11 to 16. The process used to select urban areas for funding was
in keeping both with the arrangements laid down in the guide-
lines for the initiative and, more generally, with the Structural
Fund Regulations.

Under these arrangements, the proposals for the operational pro-
grammes were to be made jointly by the Member States and the
local authorities, working together and each in accordance with
the relevant procedures.

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The Member States were required to put forward their shortlists
of areas for the URBAN initiative, based on the criteria suggested
by the Commission (high unemployment, decaying infrastruc-
ture, poor housing stock, lack of social amenities, etc. (1)) and tak-
ing account of their domestic situation, in particular the existence
of any other national urban regeneration programmes.

The Commission attributes this to the complexity of the current
institutional and legislative arrangements surrounding urban plan-
ning and feels that, under the principle of subsidiarity, Member
States’ choice of whether or not to pursue all the possible accom-
panying measures is their own affair.

For these reasons, the idea of consulting a group of experts on the
final choice of areas (see point 12 of the report) was dropped and
is not in the final guidelines for URBAN adopted by the Commis-
sion on 15 June 1994.

The Court does however recognise that, for a number of local
authorities, URBAN was the first opportunity to become involved
in programming and implementing a coordinated package of
diverse measures in certain areas of their cities.

As regards the submission of the new URBAN II programmes, the
Commission will be encouraging the cities to employ a uniform
structure for their programmes, in so far as is possible.

In the light of our experience with URBAN I, in devising URBAN
II a considerable effort was made to improve the procedure for
selecting eligible areas, mainly by establishing a set of nine stan-
dard indicators. Each selected area will now have to be justified by
reference to at least three of these indicators.

Selection of measures

To prevent the deliberations on the number of selected areas
becoming unwieldy and delaying the programme negotiations,
the selection procedure for URBAN II comprises the following
steps:

— firstly, the number of areas each Member State is allowed is
confirmed, with any increase requested by the Member State
having to be approved in advance,

— the areas are then identified and the funding for each is set,
using the criteria laid down by the Commission under point
11 of the new guidelines.

The lack of statistical data referred to by the Court under point 15
is an undeniable problem that cannot be remedied in the short
term. This will require the Commission to sit down together with
the Member State and look at the real situation in the areas con-
cerned, where necessary basing their assessment on qualitative
factors and/or other indicators.

PROGRAMMING

The integrated approach

18. None of the Member States took up the option of backing up
the projects in the selected urban areas with more ambitious over-
all strategies addressing the urban environment as a whole.

(1) See point 10 of the guidelines.

19. The Commission does not share the view that the pro-
grammes ought to have been targeted exclusively on the core
problem(s).

While it is true that the problems experienced by the different
areas vary in seriousness, they generally all have broadly similar
socioeconomic consequences: economic decline, a deterioration
in transport networks and the environment, insecurity for local
residents, etc.

The principal advantage of the URBAN initiative is its integrated
approach, which gives priority to a multisectoral strategy which,
rather than addressing symptoms, tackles the root causes of urban
decay.

20. The Court reports that the managers of the schemes on the
ground would have preferred simpler programmes, where pos-
sible financed from a single Fund only (either the ERDF or the
ESF).

While it shares this view, which has been incorporated into the
new URBAN II initiative (which will be financed solely from the
ERDF), and agrees that the management of the programmes
should be simplified, the Commission is against oversimplifying
the initiative to the detriment of the value added by its integrated
strategy, as explained below and in points 31 and 32.

It should not be forgotten that of the 118 cities covered by URBAN,
only 20 or so were not covered by one of the Structural Fund
Objectives, with the rest in Objective 1, 2 or 6 areas. The added
value provided by the URBAN initiative derives primarily from its
integrated approach, since many ‘simpler’ programmes were
already carried out in the 1994 to 1999 period as part of main-
stream Structural Fund programming, and the number of such
programmes is set to increase even more in 2000 to 2006, when
Objective 2 will contain an urban funding section.

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Programme approval

In some cases, the Commission felt it appropriate to go along
with the management procedures normally used for Structural
Fund programmes in a particular Member State.

21. We agree with the Court that the delays it highlights in the
adoption of the programmes submitted in 1994 can be attributed
in part to the unwieldy procedure for selecting the eligible areas
and the detailed and substantial negotiations between the Com-
mission and the Member States. The delays are also due to the
major revision work required on a number of programmes to
reach a satisfactory level of quality, since this was the first time
that the local authorities had been called upon to play a key role
in programming.

The experience thus gained by the local administrations was bear-
ing fruit as early as 1996, when the adoption time for programmes
was less than half that in 1994.

In any event, the practice is now to resolve the selection problems
before the programmes are submitted for approval (see the com-
ments on points 11 to 16 above) and this problem is not expected
to recur under URBAN II.

22.

(See point 61.)

23. The Commission agrees that the four-month period allowed
for drawing up the first generation of URBAN programmes in
1994 proved in some cases to be too short. It also agrees with the
Court that the situation improved for the programmes that started
after 1996. The submission period for the 2000 to 2006 URBAN
programmes has been extended to six months.

Among the causes cited by the Court, the Commission acknowl-
edges that the absence of reliable statistical and socioeconomic
information on the areas in question was a serious problem. This
cannot be solved satisfactorily in the short term. However, the
Commission accepts the Court’s suggestion (in point 71 of the
draft report) that it continue the efforts launched by the Urban
Audit to improve information and statistical data at local level.

In addition, the Commission will urge the authorities responsible
for drafting the URBAN II programmes in so far as is possible to
draw up a standard list of priorities that can be used to form the
basis of a consistent monitoring system, and a limited number of
standard indicators that could greatly improve the consistency of
the programme assessments.

24. Responsibility for proposing operational programmes lay
with the Member States, (1) as did the choice between having
separate programmes by area or a single national programme.

(1) See point 20 of the guidelines.

25. The Court considers that the two approaches used (single
national programme or individual programme for each city) some-
times caused delays in programme adoption and inefficient pro-
gramme management. In this connection, it cites the example of
national programmes, where, since a single statement of expen-
diture is made for the entire programme, a delay on the part of
just one city is enough to penalise all the others. In the light of its
experience with URBAN I, the Commission shares this view and
has sought to rectify the problem in URBAN II, the guidelines for
which state that ‘each programme shall target an urban area and
must be drawn up by the local authorities responsible for that
area’.

On the other hand, once the negotiation stage begins, the Com-
mission will seek to make the process as simple and efficient as
possible, by taking advantage of the ‘smoother coordination of
measures and [an] improve[d]... exchange of valuable informa-
tion’, the clearest signs of which seem to be in the national pro-
grammes. For example, where possible all the monitoring com-
mittees will sit in parallel, a single paying agency will be appointed
and the control system will be standardised.

INTEGRATION WITH OTHER COMMUNITY POLICIES

27.
It should be pointed out that while some of the measures
provided for in the framework for action (such as the Interdepart-
mental Group or the Group of Experts) have not so far been
implemented, this has been due to the Commission concentrat-
ing its efforts on other priority measures announced in the frame-
work. These include Actions 1 (2), 8 (3) and 18 (4), which were
given particular priority in the new guidelines for Structural Fund
programmes in 2000 to 2006 adopted by the Commission
(COM(99) 344 final of 1 July 1999).

(2) Action 1, ‘Explicit urban programming for Structural Fund support’,
focuses on the central role played by urban centres in regional devel-
opment. It encourages regional plans and operational programmes to
include reference to the specific development problems, opportuni-
ties and objectives presented by the main urban areas in each region.
These documents should include specific measures to develop the
urban areas in question.

(3) Action 8, ‘Structural Fund support for area-based action for urban
regeneration’, is concerned with the economic and social regenera-
tion of areas experiencing structural problems, especially urban areas.
In addition to the areas of this type that fall under Objective 1 and, as
industrial areas, under Objective 2, the general Structural Fund Regu-
lation (Regulation (EC) No 1260/1999) makes provision for identify-
ing deprived urban areas for which an integrated spatial approach like
that employed under the URBAN initiative is particularly relevant.
(4) Action 18, ‘EU Structural Fund support for protecting and improving
the urban environment’, underlines the importance of environmental
sustainability in urban development.

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As acknowledged by the Court in point 71 of its report, the Urban
Audit, which was mentioned in Action 23 of the framework for
action, is an example of the Commission’s efforts to improve the
quality of its comparative data on urban areas. It will be contin-
ued in collaboration with Eurostat.

neighbourhood partnership networks and the involvement of
local residents. While it is true that this approach is also possible
under the general rules on Structural Fund measures, the Court
recognises that ‘... local authority involvement in the Structural
Fund regional measures that target local development was quite
insignificant in most of the countries. URBAN has enabled local
authorities to access Community part-financing’.

The Commission is also planning to give special priority to
another major theme of the framework (Action 20: Raising aware-
ness, sharing experience and building capacity for sustainable
urban development), thanks to the opportunities provided by the
new URBAN II initiative, under which EUR 15 million will be ear-
marked for information-sharing schemes in 2000 to 2006.

33. The Commission believes that all the programmes adopted
under the URBAN initiative are integrated with the other national
urban regeneration programmes that exist in the Member States.

29. The situation described by the Court is a real problem and
applies to all the measures implemented by the Community in a
particular geographical context.

This does not, however, mean that the degree of integration is the
same in all Member States, since this is at the discretion of each
Member State, in accordance with the principle of subsidiarity.

The Commission is aware of this problem and has, therefore
arranged for all expenditure on urban renewal (i.e. spending on
urban transport networks and investment in urban regeneration)
made under the new Structural Fund programmes and URBAN II
to be identified in the expenditure codification system.

Italy: The participating cities and the projects to be carried out
under the URBAN initiative for Italy were selected jointly by the
Commission and the competent national authorities, such as the
Dipartimento per le aree urbane or the Ministries for the Environ-
ment, Industry, Home Affairs, Public Works, Labour, etc., and in
consultation with the local and regional authorities. In this way,
an urban regeneration strategy was developed at national level.

In accordance with the Regulation, the Commission intends
30.
to evaluate the Objective 1 and 2 programmes to determine the
longer-term impact of Structural Fund operations. These evalua-
tions will not be completed before the end of 2003. As suggested
by the Court, they will include an assessment of the programmes’
impact on urban development.

The United Kingdom: There was indeed a degree of overlap
between the URBAN programmes and some national programmes
(i.e. SRB or City Challenge). This was due to the choice of delivery
by the UK authorities and the fact that the SRB serves as a part-
financing fund to the URBAN programmes. However there were
some differences between URBAN and the UK programmes in
terms of scope and selection criteria.

31. With regard to the financial significance of the assistance
granted under URBAN, it should be noted that:

— URBAN I had the catalysing effect it was planned to have,
mobilising considerable investment in the target areas to the
total amount of EUR 560 per capita on average (meaning that
the Community contribution was matched by counterpart
financing from national public and private sources),

— while it is true that the EUR 280 per head of population
sourced through URBAN is a small amount compared to the
EUR 1 000 per capita granted in the 66 cities covered by
Objective 1, it should not be forgotten that in the 33 Objec-
tive 2 cities this amount approaches the levels of funding
granted under the CSFs and SPDs and, for cities not covered
by Objectives 1 or 2, was the only urban regeneration sup-
port provided by the Structural Funds.

MANAGEMENT AND MONITORING STRUCTURES

At the decision-taking level

34. The Commission regards subsidiarity as one of the key prin-
ciples of the URBAN initiative, in both the preparation and the
implementation of the programmes.

35. Although their role in the monitoring committees may dif-
fer, the Member States always retain responsibility for selecting
projects.

32.
It should be pointed out that URBAN was not conceived
simply to provide top-up funding to Objectives 1 and 2. Its real
added value lies in basing urban regeneration on the creation of

On the issue of the Commission’s role in decision-making (in
Spain), although it did not have a say in the project selection pro-
cedure, it was closely involved thereafter in determining project
content.

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The Court is right that in Greece all the projects part-financed
under the programme were subject to scrutiny and approval by
the programme’s Monitoring Committee. These arrangements
applied throughout the 1994 to 1999 period not only to Com-
munity initiatives but also to all CSF II programmes in Greece. As
a member of the Monitoring Committee, the Commission was
involved in assessing and approving these projects. The purpose
of such scrutiny was to ensure that only projects which had
reached the required level of ‘maturity’ were included in the pro-
gramme. It was in fact largely due to this approach that the
projects were up and running within the prescribed deadline and
could thereby make a full contribution to the programme object-
ives.

36. The Commission considers that the partnership dimension
of URBAN is one of the initiative’s strongest points, and that the
involvement of the social partners and local residents in imple-
mentation has generally been satisfactory. It must be admitted,
however, that they were not involved to the same degree in draw-
ing up the programmes, due mainly to the lack of appropriate
structures for this.

At the level of implementation and monitoring

37. The Commission coordinates the programmes at all stages
through a process of interdepartmental consultation on all deci-
sions and management issues.

The new URBAN II initiative will be funded from a single Fund
(the ERDF).

38 to 40. Because of its particular approach, one of the key fea-
tures of which is to promote a high level of participation by the
competent authorities in programme implementation, the URBAN
initiative has experienced a number of problems due mainly to
the fact that these authorities (mainly at local level) were not
always familiar with the relevant Community rules.

While it is true that this may have caused delays or inefficiency in
some cases, these shortcomings are to a large extent compensated
for by the experience gained by the authorities in the course of
the URBAN initiative, which equips them to take a more active
role in implementing the whole range of Structural Fund pro-
grammes in their regions.

As regards the excessive number of Community departments
handling the initiative, the Commission is confident that it has
solved this problem by centralising all responsibility for scrutinis-
ing and managing the URBAN II programmes in a single DG
REGIO unit.

42.
In the Commission’s view, these shortcomings have not
prejudiced the monitoring of the programmes and the monitor-
ing system worked well.

The general problems experienced with the submission of the
annual implementation reports can now be considered a thing of
the past, since under URBAN II all requests for interim payments
will be conditional on the submission to the Commission of the
latest annual implementation report (Article 32(3)(b) of Regula-
tion (EC) No 1260/1999). This report will also be required as a
basis for the annual consultations between the Commission and
the managing authority provided for in Article 34(2) of the Regu-
lation.

At the level of technical assistance

43.
It is clear that, for Community initiative programmes, such
as URBAN, expenditure on technical assistance accounts for a
greater proportion of total funding than it does in CSF and SPD
programmes.

For URBAN in particular, this is due in part to the innovative
nature of the integrated approach promoted by these programmes
and partly also to the frequent inexperience of the competent
authorities in managing Structural Fund programmes (see points
20 and 38 to 40).

The problem is acknowledged in the new Regulation (EC) No 1685/
2000 on the eligibility of expenditure under the Structural Fund
programmes in 2000 to 2006, and in particular its rule 11 which,
in laying down ceilings for expenditure on technical assistance,
provides for a higher ceiling of 5 % for Community initiatives,
well above that set for the CSFs and the SPDs.

It should be pointed out here that funding for technical assistance,
as well as covering traditional forms of technical assistance (man-
agement, monitoring, evaluation and control, which will be capped
at 5 % as described above), also covers promotional and publicity
measures for projects and support for cooperation networks and
information-sharing schemes.

46. The situation encountered with the management company
in Greece must not be repeated. The Commission is currently
examining this case with a view to taking the appropriate action.

In addition, on the issue of VAT, it should be noted that the infra-
structure in question belongs to the local council, which, as a
public body, is not liable for VAT. If part of this infrastructure
were in future to be managed or run on a for-profit basis by a
private management company that invoiced its services to third
parties and applied VAT, one possible solution would be to refund
the portion of VAT relating to the project that had been charged
to the programme. However, this is hypothetical. And the size of
the amounts involved could mean that the operation would not
necessarily be viable in terms of cost/benefit.

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In Portugal, the lower rate of VAT levied on infrastructure work
carried out on behalf of local authorities compared with the rate
applicable to the same work when carried out on behalf of other
bodies (in this case a foundation) is a provision of Portuguese law.

IMPLEMENTATION OF THE PROGRAMMES

Financial management

In Spain, VAT liability is likewise governed by national legislation.
The Commission will nevertheless examine the Court’s findings
and take the appropriate action.

49 to 51.
In its management and supervision of the URBAN ini-
tiative projects, the Commission will ensure that all the Structural
Fund legislation is enforced. To this end, it will examine the Court’s
findings and take the necessary action.

47.
It should be pointed out that funding for technical assistance,
as well as covering traditional forms of technical assistance (man-
agement, monitoring, evaluation and control), also covers pro-
motional and publicity measures and support for cooperation
networks and information-sharing schemes.

In the light of the objective and specific arguments advanced in
point 43, the Commission believes that expenditure on technical
assistance has generally been kept within reasonable limits. In
Spain, for example, it accounted for 5 % of the total budget.

As regards the lack of specific measures to promote information
exchange, it should be noted that the beneficiary cities have indeed
shared a significant amount of information with one another.
However, in most cases this took place at national level and thus
did not always feature a genuine Community dimension.

Since this problem was partly due to the lack of a specific fund-
ing line for transnational information-exchange schemes, the Com-
mission believes that, with the EUR 15 million now earmarked for
such schemes in the URBAN II initiative (see point 27), the situ-
ation is unlikely to recur.

48.
It should be noted that the tasks referred to were introduced
in an amendment to a more general contract (ERDF 96/00/29/
010) governing technical assistance for URBAN pilot projects.

The parts of this contract that concern the URBAN initiative are
specified in points 2 and 4.1 of Annex II to this amendment. The
respective funding allocations for the services in the financial
statement of the amendment are EUR 125 775 for part 2 and
EUR 8 700 for part 4.1.

The consultant was commissioned to carry out a number of tasks,
including revising an electronic file containing information on the
118 cities covered by URBAN, compiling summary sheets in five
languages and producing a 30-page brochure in two languages
outlining a number of examples of best practice, compiled on the
basis of visits and case studies carried out in some 20 of the cities
covered by URBAN. The consultant has not updated the URBAN
website he created because the technical assistance contract expired
on 31 December 1999.

The Commission is satisfied with the technical assistance pro-
vided in this case and considers that the terms of the contract
were fulfilled.

53. The URBAN initiative is subject not only to all the rules gov-
erning the Structural Funds but also to all the relevant control
mechanisms for implementation.

The delays in programme implementation were caused by several
factors, including the fact that the programmes grouped together
cities with different profiles (see points 24 and 25), and that
responsibility for managing them was too fragmented (points 38
and 39). These situations will not recur under URBAN II. What is
more, with the publication of the URBAN II handbook in Sep-
tember 2000, the rules governing the development of programme
proposals were tightened.

Expenditure on infrastructure projects must now be completed in
the eligible period (before the end of the payment period). Only
in duly justified cases can this period be extended.

Infrastructure projects must produce concrete results within the
programming period, or at least at some subsequent stage.

Finally, as regards the abandonment of activities, the Community
initiative programmes were designed to be limited in duration.
What is more, if they meet all the conditions and remain eligible
for ERDF funding, some former URBAN I areas may receive fund-
ing from programmes adopted under URBAN II.

Selection and implementation of actions

56 and 57. Regenerating and adapting the social infrastructure
of urban areas is a key feature of the integrated approach that
characterises the URBAN projects.

Nevertheless, in its management and supervision of the URBAN
initiative projects, the Commission will ensure that all the Struc-
tural Fund legislation is enforced. To this end, it will examine the
Court’s findings and take the necessary action.

58. The eligible area to be covered by each project is defined
when the programme is submitted. However, in some cases the
areas were amended very slightly, either to correct errors that
were detected or to ensure that the planned measures could be
properly implemented.

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The Madrid project encountered a different problem: following
the amendment of the spatial planning rules for the Madrid
municipality, the project that had been approved initially could
not be implemented, so the Spanish authorities proposed replac-
ing it with another project in another part of the city.

although the two types of evaluation have different objectives.
Drawing on the experience of the 1994 to 1999 period, Regula-
tion (EC) No 1260/1999 sets 31 December 2003 as the last pos-
sible date for submitting mid-term evaluations for the 2000 to
2006 programming period.

It is true that under the León project a bridge was built outside of
the eligible area. It should be pointed out, however, that the object
of that project was to create a link to a neighbourhood that had
previously been separated from the city by railway lines. The deci-
sion on where to locate the bridge giving access to this neighbour-
hood was conditioned by spatial planning rules and the cost and
environmental impact of the work involved.

59.
It would indeed be a shame to restrict the use of infrastruc-
ture part-financed by the Community exclusively to the residents
of the eligible area if other residents of the city can also benefit
from it. This would constitute a waste of resources.

60. The Commission will examine the findings of the Court and
take the necessary action.

As regards the URBAN operational programme for Spain, no
part-financing was used to fund housing improvement schemes.
The only action of this type undertaken was a number of mea-
sures to restore building facades required in some cases under
general schemes to rehabilitate the environment of deprived areas.

On a more general level, it is quite correct that housing is excluded
from financing under URBAN. On the other hand, the Commis-
sion believes that it is not contradictory to include poor-quality
housing as one of the objective and indicative criteria for select-
ing neighbourhoods for financing (see also comments on points
11 to 16).

Evaluation

63. Based on a Commission proposal, Article 36(1) of Council
Regulation (EC) No 1260/1999 on the Structural Funds provides
for the categorisation of fields of operation in the 2000 to 2006
programming period. The Commission made a proposal to this
effect in its methodological working paper ‘Indicators and their
quantification’ and in one of the Annexes to the draft implement-
ing Regulation (concerning Article 38 of Regulation (EC) No 1260/
1999). This approach will be employed by the Member States in
their programming documents.

The Commission expects the categorisation of operations and the
prior assessments to provide more detailed feedback on the use
and effects of the Structural Funds.

CONCLUSIONS AND RECOMMENDATIONS

64. The real added value lies in basing urban regeneration on the
creation of neighbourhood partnership networks and the involve-
ment of local residents. While it is true that this approach is also
possible under the general rules on Structural Fund measures, the
Court recognises that the URBAN initiative has indeed played a
role in giving local authorities access to Community part-financing.

The benefits derived from the local partnership are one of the rea-
sons why the institutions, in particular the European Parliament,
decided to continue the URBAN Community initiative in the 2000
to 2006 programming period.

61. The Court correctly points out that the quantified objectives
decided on for the last programming period had certain short-
comings. This hampered evaluation somewhat. The initial draft
programmes for 2000 to 2006, which are based on the new
Regulations and improved methodological guidelines from the
Commission, give reason to expect significant improvements in
this area.

62. The Commission shares the view of the Court that several
mid-term evaluations provided results that may be useful for
improving (and in some cases establishing) systems of indicators.
These results can also be used for the new programming period.

Where mid-term evaluations are behind schedule, this may, as the
Court points out, interfere somewhat with the ex post evaluations,

65. This initiative could not hope to completely solve a major
problem of contemporary society, i.e. the serious social and eco-
nomic problems of neighbourhoods in many European cities,
some of which could even be described as ghettos.

Instead the object of the initiative was to provide finance for a
number of flagship projects to demonstrate that, even in neigh-
bourhoods of this type, a sense of hope can be instilled in local
residents and the economy revived.

As regards the need to identify more clearly the objectives of the
programmes adopted under URBAN II, the Commission will be
taking a number of steps to promote effectiveness and simplifica-
tion including the use of a standard set of funding priorities and
a limited number of standard indicators.

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66. The eligible areas were selected on the basis of the rules laid
down in the guidelines for the initiative and, more generally, in
the Structural Fund Regulations. Under these arrangements, the
proposals for the operational programmes were to be made jointly
by the Member States and the local authorities, working together
and each in accordance with the relevant procedures.

68. While it is true that the problems experienced by the differ-
ent areas vary in seriousness, they generally all have broadly simi-
lar socioeconomic consequences: economic decline, a deteriora-
tion in transport networks and the environment, insecurity for
local residents, etc.

The Member States were required to put forward their shortlists
of areas for the URBAN initiative, based on the criteria suggested
by the Commission (high unemployment, decaying infrastruc-
ture, poor housing stock, lack of social amenities, etc.) and taking
account of their domestic situation, in particular the existence of
any other national urban regeneration programmes.

As regards URBAN II, the Court itself recognises that the ‘respon-
sibilities for the selection of eligible areas have been specified for
the new period’.

In the light of experience with URBAN I, in conceiving URBAN II
a considerable effort has been made to improve the procedure for
selecting eligible areas, mainly by establishing a set of nine stan-
dard indicators. Each area selected will now have to be justified by
reference to at least three of these indicators.

The principal advantage of the URBAN initiative is its integrated
approach, which gives priority to a multisectoral strategy which,
rather than addressing symptoms, tackles the root causes of urban
decay.

And while this may bring its own special problems, the approach
is a valid one because many ‘simpler’ programmes were already
carried out in the 1994 to 1999 period as part of mainstream
Structural Fund programming, and the number of such pro-
grammes will increase even more in 2000 to 2006, when Object-
ive 2 will contain an urban funding section.

The Commission shares the desire of the Court to make URBAN
II as simple as possible, providing this does not prejudice the inte-
grated approach which is its defining feature.

The fact that the URBAN initiative will henceforth be financed
through a single Fund, the ERDF, represents a significant step in
this direction.

67. The task of allocating Structural Fund assistance to Objec-
tives, Community initiatives and Member States posed consider-
able technical and political hurdles and the Commission believes
it handled the operation effectively and in accordance with the
Regulations.

69.
It should be noted that one of the inherent difficulties with
the URBAN initiative was linked to the key role that local authori-
ties were called on to play, often for the first time, in both prepar-
ing and implementing the programmes.

The delays in the adoption of the programmes submitted in 1994
can be attributed in part to the unwieldy procedure for selecting
the eligible areas and the detailed and substantial negotiations
between the Commission and the Member States. The delays are
also due to the major revision work required on a number of
programmes to reach a satisfactory level of quality, since this was
the first time that the local authorities had been called upon to
play a key role in programming.

To prevent the deliberations on the number of selected areas
becoming unwieldy and delaying the programme negotiations,
the selection procedure for URBAN II comprises the following
steps:

— firstly, the number of areas each Member State is allowed is
confirmed, with any increase requested by the Member State
having to be approved in advance,

While it is true that this may have caused delays or inefficiency in
some cases, these shortcomings are to a large extent compensated
for by the experience gained by the authorities in the course of
the URBAN initiative, which equips them to take a more active
role in implementing the whole range of Structural Fund pro-
grammes in their regions.

The experience thus gained by the local administrations was bear-
ing fruit as early as 1996, when the adoption time for programmes
was less than half that in 1994.

The techniques used do not necessarily constitute irregular prac-
tice. In its management and supervision of the URBAN initiative
projects, the Commission will ensure that all the Structural Fund
legislation is enforced.

— the areas are then identified and the funding for each is set,
using the criteria laid down by the Commission under point
11 of the new Guidelines.

As regards the lack of prior assessments and standard indicators
for monitoring and evaluation, the Commission intends to sim-
plify URBAN II and make it more effective. Its efforts will focus
on the following objectives:

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— a single structure for all new programmes,

— a standard set of funding priorities and a limited number of

standard indicators,

— consistent, standardised evaluations.

The Commission has also centralised all responsibility for scruti-
nising and managing all the new programmes in a single DG
REGIO department.

70. The Commission believes that the programmes adopted
under the URBAN initiative are integrated with the other Com-
munity programmes, especially those part-financed by the Struc-
tural Funds, and with the other national urban regeneration pro-
grammes that exist in the Member States.

The situation described by the Court as regards overseeing every
project part-financed by the Structural Funds in urban areas is a
real problem and applies to all the measures implemented by the
Community in a particular geographical context.

The Court does however recognise that, for a number of local
authorities, URBAN was the first opportunity to become involved
in programming and implementing a coordinated package of
diverse measures in certain areas of their cities (point 18).

In any event, the Commission is aware of this problem and has
therefore arranged for all expenditure on urban renewal (i.e.
spending on urban transport networks and investment in urban
regeneration) made under the new Structural Funds programmes
and URBAN II to be identified in the expenditure codification sys-
tem.

The Commission also notes that dropping URBAN pilot projects
from the innovative measures in the 2000 to 2006 period is in

line with the Court’s recommendation to reduce the number of
specific assistance measures for cities already covered by the pri-
ority Objectives of the Structural Funds.

71. The Commission acknowledges that there were a number of
problems with the monitoring of the URBAN programmes. These
should now have been rectified in URBAN II (see point 69). It
believes that these shortcomings have not prejudiced the moni-
toring of the programmes and that the monitoring system worked
well.

As the Court points out, the Urban Audit is an example of the
Commission’s efforts to improve the quality of the comparative
data on urban areas and it will be continued in collaboration with
Eurostat.

As regards the lack of specific measures to promote information
exchange, it should be noted that the beneficiary cities have indeed
shared a significant amount of information with one another.
However, in most cases this took place at national level and thus
did not always feature a genuine Community dimension. Since
this problem was partly due to the lack of a specific funding line
for transnational information-exchange schemes, the Commis-
sion believes that, with the EUR 15 million now earmarked for
such schemes in the URBAN II initiative (see point 27 above), the
situation is unlikely to recur.

In the light of the above comments, the Commission believes
72.
that the conditions have been created for URBAN II to fully realise
its potential to add value while at the same time being more effec-
tive and simpler.

The Commission shares the view of the Court regarding the goals
of simplifying and improving management, monitoring and evalu-
ation that are set out in the new Regulations for the 2000 to
2006 period. It also agrees with the Court that the new program-
ming period gives us the ideal opportunity to introduce such
much-needed measures.