Communication from the Commission to the European Parliament and the Council on the Implementation of Commitments undertaken by the acceding countries in the context of accession negotiations on chapter 21 - regional policy and coordination of structural instruments {SEC (2003) 828 }
Date: 2003-07-16
Institutions: European Commission
Subjects: EU regional policy, Structural Funds, accession negotiations, accession to the European Union, enlargement of the Union

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 16.7.2003
COM(2003) 433 final

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT AND THE COUNCIL

ON THE IMPLEMENTATION OF COMMITMENTS UNDERTAKEN BY THE
ACCEDING COUNTRIES IN THE CONTEXT OF ACCESSION NEGOTIATIONS
ON CHAPTER 21 – REGIONAL POLICY AND COORDINATION OF
STRUCTURAL INSTRUMENTS

{SEC (2003) 828 }

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT AND THE COUNCIL

ON THE IMPLEMENTATION OF COMMITMENTS UNDERTAKEN BY THE
ACCEDING COUNTRIES IN THE CONTEXT OF ACCESSION NEGOTIATIONS
ON CHAPTER 21 – REGIONAL POLICY AND COORDINATION OF
STRUCTURAL INSTRUMENTS

INTRODUCTION

The European Council at its meeting in Brussels on 24-25 October 2002 endorsed the
Commission’s intention – as contained in the 2002 Strategy Paper on enlargement  -
to  present,  six  months  before  accession,  a  comprehensive  monitoring  report  on  the
state-of-play in the implementation of the commitments made by acceding countries
in the context of accession negotiations. This is envisaged for November this year.

Furthermore, the Commission committed itself to present a report, no later than July
2003 on the progress made in the preparations in the field of regional policy and co-
ordination of Structural Instruments (Chapter 21). Accession negotiations resulted in
a financial allocation for the new Member States of €22 billion for Structural Funds
and  Cohesion  Fund  for  the  period  2004-2006.  Ensuring  programmes  conductive  to
growth and employment, the adequate absorption capacity and putting into place the
necessary  administrative  structures  for  an  efficient  implementation  of  structural
funds  is  a  particular  challenge  for  the  new  Member  States,  taking  into  account  in
particular, the short programming period available.

In  this  context,  the  acceding  countries  have  committed  themselves  to  carry  out  the
necessary  preparations  before  the  end  of  2003  concerning  the  establishment  and
implementation  of  administrative  structures  as  well  as  monitoring  and  control
procedures  which  are  indispensable  for  the  sound  implementation  of  these  funds.
Respect  of  this  timetable  is  of  particular  importance  given  that  the  eligibility  of
projects to be funded  under the Structural Funds and Cohesion Fund upon accession
already starts on  1 January 2004.

The objective of this Communication is to assess how acceding countries are meeting
these  commitments  and  to  assess  the  state  of  play  of  preparations  of  the  acceding
countries in view of the management of the Structural and Cohesion Funds. For this
purpose,  it  highlights  the  progress  made  by  the  acceding  countries  as  well  as  the
outstanding issues, which still need to be tackled. In addition, it provides advice on
the  necessary  steps  to  be  taken  to  ensure  that  each  country  is  able  to  establish  a
system for the sound and efficient implementation of the Funds. The assessment on
the preparations for structural funds management and control systems in the report is
based  principally  on  the  information  provided  by  the  acceding  countries  following
detailed questionnaires sent out by the Commission.

Following  adoption  of  the  programmes  and  the  finalisation  of  the  implementation
arrangements for the Cohesion and Structural Funds, the Commission will complete
its  review  of  compliance  of  the  systems.  The  on-going  process  of  negotiation  of
programme  between  the  Commission  and  the  acceding  countries  is  particularly

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important in this context. The EU has already made clear that the Commission will
not  be  able  to  approve  Community  funding  until  all  conditions  set  out  in  the
Structural and Cohesion Funds Regulations are satisfied.

1. 

LEGISLATIVE FRAMEWORK

Harmonisation of the national legislation with the acquis and its full transposition in
the  areas  of  public  procurement,  state  aids/competition,  environment  and  equal
opportunities  is  essential  for  the  implementation  of  the  Structural  and  Cohesion
Funds.

Public  procurement  legislation  is  still  not in  full  compliance  with  EC  legislation.
Action  in  this  area  is  particularly  urgent  since  all  projects  to  obtain  support  from
Structural  and  Cohesion  Funds  upon  accession,  including  those  for  which  national
expenditure will be made between 1 January 2004 and the date of accession, need to
be in compliance with EC public procurement rules.

As  far  as  legislation  in  the  area  of  budgetary  management  is  concerned,  further
work  is  needed  to  prepare  and  adopt  the  legislation  required  for  reorganising  the
budget  structure,  facilitating  multi-annual  commitments  and  reallocation  of  funds
between and within the programmes.

Progress  has  been  made  in  the  adoption  of  competition/state  aid  legislation,
however,  notification  of  aid  schemes  to  the  Commission  needs  to  be  accelerated
since only state aid schemes that are approved by the end of 2003, will be eligible for
assistance under Structural Funds from 1 January 2004.

Concerning  environmental  protection,  significant  progress  has  been  made  in  all
countries.  Nevertheless  there  are  still  a  number  of  legislative  provisions  and
implementing  steps  in  the  areas  of  environmental  impact  assessment,  nature
protection and waste management that need to be completed and whose application
is a pre-condition for the implementation of Cohesion and Structural Funds.

2. 

INSTITUTIONAL FRAMEWORK

Whereas  overall  progress  has  been  made  with  regard  to  inter-ministerial  co-
ordination,  this  issue  remains  a  concern.  Practice  shows  that  this  co-ordination  is
often  weak.  In  some  cases,  the  responsible  authority  should  be  more  proactive  and
show reinforced commitment to steer this process. In others, there is a need to allow
full participation and co-operation of all sectoral Ministries.

Delays  have  occurred  in  finalising  the  institutional  arrangements  of  the
implementation  system,  which  in  a  number  of  countries  appear  to  be  weak  and
insufficiently defined. An issue of particular concern for  the Commission  relates to
the number and role of Intermediate Bodies. A clear description of the delegation
of  tasks  and  the  reporting  lines  between  the  different  bodies  involved  must  still  be
elaborated and laid down in written agreements in all countries.

An issue still to be resolved is the questions on the independence of the certifying
role of the Paying Authority. In view of the importance of the Paying Authority’s

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role in ensuring the regularity of expenditure co-financed this issue should be rapidly
resolved to guarantee fully compliant arrangements.

It appears that the acceding countries are aware of financial control requirements
and have taken appropriate steps to ensure compliance. However, some issues must
still be addressed, in particular the adequate separation of control functions.

Adequate  internal  audit  arrangements  are  in  general  foreseen,  but  information
concerning a number of relevant authorities is still outstanding or needs to be further
clarified  as  arrangements  are  in  the  process  of  being  finalised.  Most  countries  still
need to develop an audit strategy in order to be ready for controls from the beginning
of programme implementation.

3. 

ADMINISTRATIVE CAPACITY

Although  most  countries  have  developed  recruitment  and  training  plans  in  line
with  the  commitments  made  in  the  accession  negotiations,  the  recruitment  of
additional  staff  has  been  delayed.  In  general,  recruitment  plans  address  the  human
resources requirements for the Managing and Paying Authorities. Nevertheless a full
assessment of needs in this area will only be possible when a  clear  decision  on  the
number  and  role  of  Intermediate  Bodies  has  been  made.  Furthermore,  in  those
countries  where  Intermediate  Bodies  have  been  designated,  these  seem  to  remain
understaffed  in  view  of  their  future  tasks.  Particular  attention  needs  to  be  paid  to
reinforce administrative capacity of regional and local administrations. Finally, in the
majority of cases the public administrations have problems in attracting and retaining
qualified and motivated staff.

The basic steps of project application flows have been identified for the majority of
the  future  operational  programmes.  Further  fine-tuning  and  clarification  of
responsibilities of the different actors involved in the selection process are required
in order to be fully operational before accession.

All countries are in the early stages of developing guidelines and manuals for their
operational  programmes.  These  tools  are  essential  to  accumulate  know-how  within
an organisation, and also to make it less vulnerable to fluctuation of staff.

4. 

PROGRAMMING CAPACITY

the  Commission 

Despite  some  delays  in  the  submission  of  the  programming  documents,  the
acceding countries have made significant efforts in this area. Furthermore, and in line
they  have  adopted  a  simplified
with 
programming  approach  with  a  significantly  reduced  number  of  Operational
Programmes,  priorities  and  measures  in  coherence  with  the  short  programming
period until 2006. Most programmes have been subject to a wide-scale consultation
of  the  regional  and  local  actors,  economic  and  social  partners  and  other  relevant
institutions.

recommendations, 

However,  the  programming  documents  often  appear  to  lack  a  coherent  strategic
framework  due  to  difficulties  in  organising  an  effective  inter-ministerial  co-
ordination. This is illustrated by the potentially overlapping or insufficiently focussed
description of the priorities and measures in many of the documents submitted.

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The  definition  of  monitoring  indicators  and  the  setting  up  of  a  computerised
system  for  the  collection  and  exchange  of  the  data  required  to  fulfil  the
management, monitoring and evaluation requirements has been seriously delayed in
most countries. The timetables by which the system should be operational often seem
to  be  unrealistic,  given  that  they  are  still  in  the  process  of  designing  the  system  or
contracting  the  provider  responsible  for  introducing  a  new  system.  In  any  event,
appropriate physical and financial monitoring indicators need to be defined, and the
Managing  Authorities  need  to  set  up  a  system  which  enables  them  to  gather  this
information and to provide for an adequate evaluation of the impact of the Structural
Funds interventions.

5. 

FINANCIAL AND BUDGETARY MANAGEMENT

In  view  of  the  number  of  bodies  involved  in  the  financial  and  budgetary
management, the establishment of adequate structures;  which can  guarantee sound
financial management is complex and time-consuming. While overall the satisfactory
arrangements are expected to be in place by 1 January 2004, significant efforts still
need to be undertaken in some areas.

As  regards  the  flow  of  funds,  clarifications  are  still  necessary  concerning  the
submission of expenditure statements to  the Commission  in  a  number  of  countries.
This is a key element in ensuring the regularity of expenditure. If any doubt about the
independence  of  the  Paying  Authority  and  the  checks  carried  out  remain,  the
Commission  may  not  be  in  a  position  to  make  payments  to  the  Member  State
concerned.

The  distinction  between  the  two  types  of  control  requirements  for  the  Structural
Funds  and  the  Cohesion  Fund,  namely  verification  checks  to  be  carried  out  by
management  and  sample  checks  to  be  carried  out  by  staff  independent  of
management and payment functions, is an essential element in the control framework
for the Funds.

Most acceding countries have yet to introduce proper rules and procedures to ensure
the retention of supporting documents, which is an important requirement of an audit
trail.  Information  is  also  missing  concerning  the  provisions  of  a  winding-up
declaration by an independent service in a number of countries.

The  situation  regarding  the  provision  of  appropriate  and  separate  accounting
systems/accounting codes for the Structural Funds and the Cohesion Fund is varied.
It  appears  that  in  some  cases  there  is  still  important  action  to  be  taken  in  order  to
ensure  that  satisfactory  accounting  systems  are  in  place  for  Structural  Funds  and
Cohesion Fund.

6. 

FUTURE PROJECT PIPELINE

The  Commission  believes  that  not  all  acceding  countries  have  taken  into
consideration  the  difficulty  and  complexity  of  developing  a  project  pipeline  to
ensure that full use will be made of the greatly increased funds as of 2004. Many of
the  acceding  countries'  project  preparation  proposals  must  still  be  worked  out  in
sufficient  detail.  Most  countries  have  no  targeted  budgets  or  timetables  for  future
project  preparation.  The  Commission  is  particularly  concerned  that  the  actions

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planned  at  this  stage  will  not  be  sufficient  to  guarantee  a  full  absorption  of  the
Structural and Cohesion Funds.

The  Commission  strongly  recommends  reinforcing 
the  efforts  for  project
preparation,  including  the  use  of  specific  technical  assistance  where  necessary.
While pre-accession funds should be used to the greatest extent possible to this aim,
ownership of the projects should fall mainly under the responsibility of the acceding
countries  themselves  which  have  to  ensure  that  additional  resources,  especially
sufficient trained personnel are allocated to this aim. All available sources of project
preparation  funding  should  be  mobilised.  Project  preparation  needs  to  include  the
identification and provision of financial means for co-financing.

Establishing  an  adequate  project  pipeline  is  only  an  early  step  in  the  project  cycle.
The  experience  of  the  pre-accession  funds  has  shown  that  the  implementation  of
projects after approval has been a major bottleneck and that key stages in the project
cycle which have proved to be weak in the past, especially public procurement, will
require special attention from the national authorities.

7. 

CONCLUSIONS AND RECOMMENDATIONS

The  Commission  acknowledges  the  considerable  progress  made  by  the  acceding
countries in their preparations to ensure the sound and effective management of the
Structural  and  Cohesion  Funds.  However,  much  remains  to  be  done.  It  has  to  be
recalled that acceding countries, as agreed in the accession negotiations, will benefit
of eligibility of project and expenditure to be funded by the Structural and Cohesion
Funds  upon  accession,  already  from  the  1  January  2004.  Therefore,  all  legislation
relevant  for  the  Structural  and  Cohesion  Funds  needs  to  be  aligned  and  fully
transposed by 31 December 2003.

The following ten items need to be addressed as matter of urgency if the Commission
is to grant Community finance as provided for in the Regulations:

1)

2)

Delays in the alignment and implementation of public procurement rules are
the  bodies  and
of  particular  concern.  An  adequate  reinforcement  of 
mechanisms  ensuring  proper  implementation  in  this  area  is  of  utmost
importance.  Full  use  should  be  made  of  technical  assistance  to  strengthen
further the capacity of the national administrations.

Inter-ministerial  co-ordination  must  be  reinforced.  The  Commission  is
particularly concerned as regards the delays in fully and properly defining the
institutional  arrangements  for  the  management  of  the  Funds,  in  particular  as
regards the  respective roles of the Managing Authorities and the Intermediate
Bodies. In some countries, clarifications on the independence of the certifying
role of the Paying Authority are still outstanding.

3) With regard to financial management and control, the main weaknesses are –
on the one hand - a confusion between the management checks which are the
responsibility  of  the  Managing  Authority  or  Intermediate  Bodies  and  the
independent sample checks, and on the other hand the insufficient segregation
of functions between the implementing bodies and the control bodies.

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4)

5)

6)

7)

8)

9)

Adequate  accounting  systems,  which  are  a  prerequisite  for  sound  financial
management, are still not established in all acceding countries. This needs to be
dealt with urgently.

In several countries the recruitment of additional staff for the management of
structural  funds  has  been  delayed.  This  is  in  particular  true  for  Intermediate
Bodies and regional administrations. Delays in the definition of the number and
tasks of Intermediate Bodies have  also affected the correct evaluation of staff
needs.  Significant  efforts  in  terms  of  timely  recruitment  and  training  are
necessary.  The  acceding  countries  are  encouraged  to  fully  explore  the
possibilities  to  co-finance  certain  additional  administrative  expenses  from  the
future technical assistance budgets.

The objective to finalise the  programme negotiations by end of December
2003  needs  to  be  maintained  in  order  to  avoid  any  delays  as  regards  the
implementation  of  the  Structural  Funds  programmes.  In  this  context,  it  is  of
major  importance  to  better  define  the  priorities  and  measures  within  the
programmes with a view to correctly reflecting the needs of each country and
to avoid overlaps between the programmes.

The Commission is particularly concerned that the actions planned at this stage
within    the  project  pipeline,  will  not  be  sufficient  to  guarantee  a  full
absorption of the significant allocation for the Structural  and Cohesion Funds
in  2004.  The  Commission  strongly  recommends  reinforcing  the  efforts  for
project  preparation, including the  use of specific technical assistance  where
necessary. It has to be recalled that ownership of the projects should fall mainly
under the responsibility of the acceding countries themselves.

The  acceding  countries  have  made  a  significant  effort  to  implement  the
partnership principle. This effort needs to be maintained in the course of the
negotiating  and  the  implementation  period  as  good  partnership  structures
improves the efficiency of EU interventions.

Substantial delays have occurred in the set up of the monitoring systems. This
matter  needs  to  be  addressed  with  urgency  since  the  functioning  of  these
systems conditions the transparency of the implementation of the programmes
and plays a decisive role in terms of financial absorption.

10)

In  view  of  the  efforts  needed  in  several  countries  to  achieve  sound  public
finance,  careful  planning  of  the  national  co-financing  components  linked  to
the  Structural  and  Cohesion  Funds  is  an  essential  part  of  the  successful
implementation of cohesion policy in the acceding countries. Therefore, project
preparation needs to cover the identification of sources of co-financing.

These ten issues must be given urgent attention in the coming months. The ongoing
negotiations on Structural Funds interventions provide a unique opportunity for each
acceding country to address the remaining tasks in these ten areas. The Commission
is  confident 
the  best  possible
the  acceding  countries  will  establish 
implementation  conditions,  and  the  Commission  will  be  a  constructive  partner  in
ensuring this is the case.

that 

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