Special Report No 11/2003 concerning the Financial Instrument for the Environment (LIFE), together with the Commission's replies
Date: 2003-09-11
Institutions: European Court of Auditors
Subjects: EU environmental policy, EU financial instrument, environmental protection, report

2.12.2003

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I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 11/2003

concerning the Financial Instrument for the Environment (LIFE), together with the Commission’s
replies

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

(2003/C 292/01)

CONTENTS

Paragraph

Page

Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

THE OBJECTIVE OF THE AUDIT AND THE AUDIT APPROACH . . . . . . . . . . . . . . . . . . . . . . .

COMMUNITY AID FOR THE PROTECTION OF THE ENVIRONMENT . . . . . . . . . . . . . . . . . . .

General context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contribution to the designation of Natura 2000 sites . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHARACTERISTICS OF THE LIFE PROGRAMME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Structure and fields of activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SELECTION OF PROJECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selection procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Evaluation criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The role of the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Risk of double-funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IMPLEMENTATION OF THE PROJECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Imprecise administrative provisions concerning eligible costs . . . . . . . . . . . . . . . . . . . . . .

Delays in payment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Practical problems in connection with the implementation of the projects . . . . . . . . . . . .

Problems with the co-financing of projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Beneficiaries’ accounts insufficiently detailed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Uncertainty concerning the future use of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I-VIII

1

2-4

5-14

5-10

11-14

15-27

15-20

21-22

23-27

28-45

28-33

34-37

38-40

41-45

46-65

46-51

52-55

56-65

56-59

60-62

63-65

3

4

5

5

5

5

7

8

8

9

9

12

12

13

14

14

15

15

15

17

17

17

17

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Paragraph

Page

MONITORING, CONTROL AND EVALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unclear tasks of the technical assistance offices (TAOs) under LIFE II . . . . . . . . . . . . . . . . .

Observations on the audits carried out by the Commission . . . . . . . . . . . . . . . . . . . . . . . .

External certification of the records of expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Report on the implementation of the programme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recent initiatives to improve dissemination of the results of projects . . . . . . . . . . . . . . . . .

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

General conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66-84

67-72

73-75

76-77

78-80

81-84

85-94

85

The programme’s objectives and connection with Community environmental strategy . . .

86-87

Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88-89

Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Monitoring, control and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

90-94

Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

18

18

18

19

19

19

20

20

20

20

20

20

21

21

22

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ABBREVIATIONS

ACE

Action by the Community relating to the environment

ACNAT

Action by the Community relating to nature conservation

TAO

Technical assistance office

DG ENV

Directorate-General for the Environment

Fifth EAP

Fifth environmental action programme

LIFE

Financial Instrument for the Environment

Medspa

Strategy and plan of action for the protection of the environment in the Mediterranean

NGO

Norspa

Non-governmental organisation

Community action to protect the environment in the coastal areas and coastal waters of the Irish Sea, North
Sea, English Channel, Baltic Sea and North-East Atlantic Ocean

OLAF

European Anti-fraud Office

Sixth EAP

Sixth environmental action programme

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SUMMARY

The Court examined the management of the Financial Instrument for the Environment (LIFE), which is
I.
managed directly by the Commission and is being implemented in phases. The programme consists of three
strands: LIFE-Nature, LIFE-Environment and LIFE-Third countries, plus accompanying measures. The audit
focused in particular on the second phase (1996 to 1999, LIFE II).

II.
The global objective of LIFE — to contribute to the development and, if need be, implementation of
Community policy and legislation in the environmental field — is very broad and has not been defined in suf-
ficient detail. By contrast, with regard to the individual strands, LIFE-Nature is more precisely defined, inas-
much as its actions depend on the implementation of two Directives concerning the conservation of natural
habitats and of wild fauna and flora and the conservation of wild birds (see paragraphs 16 and 17).

III.
LIFE is the largest programme amongst the special measures under the ‘Environment’ title of the bud-
get. Of the Community participation of 450 million euro for the second phase (LIFE II), 435 million euro was
used during the period for which it was allocated (see paragraphs 23 to 27).

IV.
The Commission evaluates proposals according to different criteria for each strand of the programme
and only calls on independent experts in the case of the ‘Environment’ and ‘Third countries’ strands. Some of
the evaluation documents drawn up by these experts have not been kept (see paragraphs 29 to 33).

V.
The complementarity of environmental projects financed by LIFE with those funded by other Com-
munity sources (Structural Funds, research) is still poor, and the interdepartmental consultation procedure does
not wholly eliminate the risk of double-funding (see paragraphs 41 to 45).

The Court identified numerous difficulties affecting the implementation of the second phase of LIFE

VI.
(LIFE II). The main points revealed by an on-the-spot audit of a sample of projects were:

(a)

staff expenditure was borne which had not been backed up by reliable records and which included the
salaries of civil servants usually already covered by public budgets (see paragraphs 47 to 49);

(b)

a large number of Commission payments were affected by substantial delays (see paragraphs 52 to 55);

(c)

the financial arrangements for the projects suffered from deficiencies and the beneficiaries failed to keep
sufficiently transparent and detailed accounts to allow the movements of funds to be retraced in their
entirety (see paragraphs 56 to 62);

(d)

the volume of expenditure on the purchase of land for actions under the ‘Nature’ strand was considerable
and there were insufficient guarantees that this land would continue to be used for nature conservation
purposes once the implementation period for the actions was over (see paragraphs 63 to 65).

VII.
With regard to the monitoring and control of the projects, the Commission increased the number of
on-the-spot visits and the findings revealed several types of errors at beneficiary level. The tasks of the techni-
cal assistance offices (TAOs), which act as external project-monitoring teams, were not well defined and the
monitoring of the actions suffered as a result (see paragraphs 67 to 75).

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VIII.
kept up. To this end, the Court recommends that:

The efforts made to reduce the shortcomings in the management of the LIFE programme should be

(a)

(b)

(c)

(d)

LIFE’s role should be explained in the context of the multiannual environmental action programmes and
its objectives better defined and, if possible, quantified;

the Commission should examine whether it would be expedient to separate the management of the
‘Nature’ and ‘Environment’ strands;

the evaluation of project proposals should be carried out by outside experts for all the strands of the
programme and these experts must be selected by a public call-for-proposals procedure;

the administrative provisions concerning implementation of the actions should be reviewed in order to
achieve a better definition of eligible costs, in particular in respect of the accounting for the projects, staff
expenditure, depreciation and purchases of land for ‘Nature’ projects;

(e)

the Commission’s on-the-spot checks should be stepped up, if need be by employing outside auditors;

(f)

the results of the projects should be disseminated.

INTRODUCTION

LIFE is a financial instrument managed directly by the
1.
Commission and devoted exclusively to the environment. The
overall objective is to contribute to the development and, where
necessary, the implementation of Community policy and legisla-
tion in the field of the environment. As far as the Community is
concerned, eligible areas of action for financial support under
LIFE are actions to conserve nature (LIFE-Nature) and actions
intended to implement Community policy and legislation in the
field of the environment (innovative, demonstration and prepara-
tory actions) (LIFE-Environment). In respect of third countries, the
main aim is to provide financial support in the form of technical
assistance (LIFE-Third countries). Lastly, LIFE is also intended to
cover the accompanying measures needed for monitoring and
publicising the projects and for the circulating of information on
the experience gained from these actions and on their results.

THE OBJECTIVE OF THE AUDIT AND THE AUDIT APPROACH

2.
The objective of the Court’s audit was to examine the con-
ception, management and implementation of the LIFE Financial
Instrument (particularly LIFE II) by focusing on the following
aspects.

(a) Are the objectives clearly identified, measurable and relevant

with regard to strategy?

(b) Has the Commission set up:

— an adequate system of management?

— adequate controls for the projects?

— an effective system for making use of the results?

3.
Checks were carried out at the Commission’s Directorate-
General for the Environment, at the national authorities and at
the TAOs during the period from March 2001 to June 2002. The
audit focused mainly on the implementation of LIFE II. At
31 December 2002, almost half of these projects, decided between
1996 and 1999 and running for a period of between two and five
years, had not been closed. Project files relating to the three strands
of the programme were examined at the Commission. A sample
of 46 projects out of a total of 810 under the ‘Nature’ and ‘Envi-
ronment’ strands, involving eight Member States (Germany, Spain,
France, Ireland, Italy, Portugal, Sweden, the United Kingdom),
were checked on the spot.

4.
The sample of projects examined on the spot was selected
on the basis of criteria relating to the eligible field of action, the
type of beneficiary, the type of project, the volume of finance and
the state of progress. The sample was drawn in such a way as to
give an overall view of the type of problems occurring within a
large spread of activities selected from amongst the actions
financed.

COMMUNITY AID FOR THE PROTECTION OF THE
ENVIRONMENT

General context

5.
There are many forms of EU aid measures in the field of
the environment and they are managed by a number of directorates-
general which are responsible for the Structural Funds, the Cohe-
sion Fund, Research, Agriculture, external programmes, the pre-
taken by the
accession instrument and special measures

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Directorate-General for the Environment. They account for an
estimated annual average of 11 100 million euro, which includes
5 300 million euro financed from appropriations under the gen-
eral budget and 5 800 million euro in the form of loans granted
by the EIB (see Table 1). This Community expenditure is made
within the framework of the environmental action programmes
(EAPs) adopted by the European Parliament and the Council (1).

The EAPs play an important role in the development of
6.
Community policy on the environment. They are strategy papers
covering a multiannual period and their aim is to identify the
major challenges that the EU will have to deal with in this field,

to set objectives and provide guidelines. The EU’s first environ-
mental action programme dates back to 1973.

7.
In 1993, the fifth Community programme of policy and
action in relation to the environment and sustainable development
(fifth EAP) (2) came into force. It defined the broad policy guide-
lines with regard to the environment for the period 1993 to 1999
and mentioned the Community Financial Instrument for the Envi-
ronment (LIFE) for the first time as one of the financial support
mechanisms. The fields of action of the fifth EAP are laid down in
the LIFE II Regulation, with the exception of the tourism section,
which was incorporated into the LIFE guidelines at a later date.

The European Union’s financial operations relating to the environment

Table 1

Programme

Period

Amount
(million
euro)

Title B4-3 and Article B7-8 1 0 of the budget:
Environment

1996-1999

639

Of which LIFE

1996-1999

434

EAGGF-Guarantee Section: Agroenvironmental
measures

1996-1997

2 902

Structural Funds

Cohesion Fund

Fifth framework programme for research: Spe-
cial programme, ‘The environment and sustain-
able development’

1994-1999

9 445

1993-1999

8 424

1998-2002

1 083

ISPA — Instrument for Structural Policies for
Preaccession

2000-2006

3 640

External programmes

1996-1998

485

Total subsidies

Individual loans by the EIB: The environment
and quality of life

1997-2001

29 000

Total

Average per
year
(million
euro)

(%)

160

3 %

109

1 451

1 640

1 203

217

2 %

27 %

31 %

22 %

4 %

520

10 %

3 %

100 %

162

5 353

5 800

11 153

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(1) Commitments in Sincom.
(2) SR 14/2000 (OJ C 353, 8.12.2000).
(3) SR 4/98 (OJ C 191, 18.6.1998).
(4) Directorate-General for Regional Policy.
(5) Directorate-General for Research.
(6) Council Regulation (EC) No 1267/1999 of 21 June 1999 (OJ L 161, 26.6.1999, p. 73).
(7) The European Community external cooperation programmes. Policies, management and distribution — Overseas Development Institute

on behalf of the Commission, 1999.

(8) The European Investment Bank’s Activity Report for 2001.

(1) See the ‘Background’ section of Chapter 6 of the Court’s Annual
Report for the financial year 1994 (OJ C 303, 14.11.1995, p. 161).

(2) Council resolution of 1 February 1993 (OJ C 138, 17.5.1993, p. 1).

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The sixth EAP, adopted in 2002, does not (generally) state
8.
the instruments which are intended to implement the measures
planned, with the exception of one explicit reference to LIFE in
the context of improving the dissemination of results (1). As in the
case of the fifth EAP, the fields of action covered were redefined
in the LIFE guidelines.

of the duration and opening and closing dates of hunting seasons
that threaten protected species) (5). According to this Directive,
the Commission is obliged to produce a report on its application
every three years. The last report covers the period 1996 to 1998,
but was not adopted by the Commission until 2002, as the Mem-
ber States had not provided all the required information within
the desired time (6).

9.
Although the EAPs are a display of the political will to take
account of environmental strategies aimed at ensuring sustainable
development, the fact that the instruments are scattered between
various directorates-general with no horizontal coordination
makes their implementation difficult at operational level. With
regard to LIFE in particular, no complementarity could be found
in practice between the aid measures financed in the form of
projects and other forms of aid measure, especially the Structural
Funds.

As the Court already recommended in 1992 in its Special
10.
Report on the environment (2), the Directorate-General for the
Environment’s task must be defined precisely so that
the
Directorate-General is more able to ensure greater complementar-
ity and effectiveness of the environment-related aid measures
financed by several directorates-general. For example, actions
co-financed by the Structural Funds must be subject to an ex ante
evaluation which enables their compatibility with environmental
legislation to be verified. According to the 13th Annual Report on
the Structural Funds (2001) (3), however, these evaluations revealed
a general weakness with regard to a lack of harmonised basic
environmental data and indicators. The Directorate-General for
the Environment could contribute to this harmonisation, in par-
ticular by using the results of the LIFE projects specifically devoted
to collecting and harmonising these indicators.

Contribution to the designation of Natura 2000 sites

11.
LIFE encourages Member States to designate protected
natural sites, as provided for in the Habitats and Birds Directives.
However, Member States have been very slow to implement these
directives.

12.
It was not until the end of 2000, some six-and-a-half
years after the June 1994 deadline, that the Conservation of Habi-
tats Directive was transposed into national law in all the Member
States. There are also delays in transposing the Directive on the
conservation of wild birds (4) into national law. In some cases,
these delays have been caused by Member States enacting national
legislation which contradicts the Directives (for example, in respect

(1) Decision No 1600/2002/EC of the European Parliament and of the
Council (OJ L 242, 10.9.2002, p. 1), Article 3(5), fifth indent.
(2) Special Report on the environment (OJ C 245, 23.9.1992, p. 1).
(3) COM(2002) 591 final, 30 October 2002.
(4) For example, amendment of Annex 1 should have led to the trans-
position of the relevant provisions into national law on 30 Septem-
ber 1998 at
in accordance with new Commission
Directive 97/49/EC (OJ L 223, 13.8.1997, p. 9). At present, the Direc-
tive has only been transposed by five Member States.

the latest,

13.
Furthermore, the designation of six biogeographical
regions defined according to the characteristics of the species liv-
ing there (i.e. Alpine, Atlantic, Boreal, Continental, Macaronesian
and Mediterranean) has been delayed. This is, however, essential
for the protection of natural habitat types of Community inter-
est. The list of sites selected as being of Community importance,
identifying those sites which host one or more priority natural
habitat types or priority species, should have been established
within six years of the notification of Directive 92/43/EEC. The
first biogeographical region (Macaronesian) was nevertheless not
officially approved until December 2001 (7). This region covers
the archipelagos of the Azores, Madeira and the Canary Islands.

14.
The actions under the ‘Nature’ projects should be contin-
ued in areas that have the advantage of a formal decision by the
Commission. Such a decision, despite the important principles
expounded in this respect by the Court of Justice (8), would help
to make these actions more lasting.

(5) Almost 40 % of all cases under examination at the European Court
of Justice from 1987 to 2001 concerning the application of Commu-
nity law are related to the environmental domain. A large number of
them concern the two nature conservation Directives (19th Annual
Report on monitoring the application of Community law (COM
(2002)324 final of 28 June 2002)).
Infringements relating to inadequate application of national measures
implementing the Directives:
— Council Directive 92/43/EEC of 21 May 1992 on the conserva-
tion of natural habitats and of wild fauna and flora: 32;
— Council Directive 79/409/EEC of 2 April 1979 on the conserva-

tion of wild birds: 31.

Infringements relating to non-compliance of national measures imple-
menting the Directives:
— Council Directive 79/409/EEC of 2 April 1979 on the conserva-

tion of wild birds: 6;

— Council Directive 92/43/EEC of 21 May 1992 on the conserva-

tion of natural habitats and of wild fauna and flora: 7.
(6) Report by the Commission on the application of Directive 79/409/
EEC on the conservation of wild birds (COM(2002) 146 final of
25 March 2002).

(7) Commission Decision 2002/11/EC of 28 December 2001 (OJ L 5,

9.1.2002).

(8) Court Judgment of 2 August 1993 relating to Case C-355/90.

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CHARACTERISTICS OF THE LIFE PROGRAMME

Structure and fields of activity

‘Environment’ and ‘Third countries’. Initially, this programme,
which covered the period 1991 to 1995 (LIFE I), was allocated a
budget of 400 million euro. LIFE II (6) covered the period 1996 to
1999 and was allocated an amount of 450 million euro. Lastly,
LIFE III (7), which runs from 2002 to 2004, has been allocated
funds amounting to 640 million euro.

Adopted in 1992, the LIFE programme (1) replaced the
15.
previous financial instruments (ACE (2), ACNAT (3), Medspa (4)
and Norspa (5). It is designed to be applied in the long term and
to be implemented in several phases under three strands: ‘Nature’,

The table below shows a breakdown of the actions across

16.
the three strands of the financial instrument:

LIFE-Environment

Demonstration projects intended to:
— encourage the integration of environmental considerations into land-use development and plan-

Actions financed by the LIFE II programme

ning,

— promote the prevention of pollution in the context of industrial activities,
— improve waste management,
— develop an integrated production cycle.
Preparatory projects intended to:
— prepare and implement Community actions and instruments regarding the environment in the

following areas:
— the protection and sustainable management of coastal areas, of rivers which flow into coastal

areas and of their wetlands,

— reduction of waste, in particular toxic and hazardous waste,
— protection of water resources and water management, including waste or contaminated water

treatment,

— air pollution, acidification, tropospheric ozone.

LIFE-Nature

— Conservation of natural habitats and of wild fauna and flora of interest for the European Union
— Conservation of wild birds
— Setting-up of the Natura 2000 European Network

LIFE-Third countries

Technical assistance intended to:
— establish the administrative structures needed in the environmental sector,
— encourage nature conservation,
— continue demonstration projects that promote sustainable development.

Source: LIFE II Regulation.

(1) Council Regulation (EEC) No 1973/92 of 21 May 1992 establishing a
financial instrument for the environment (LIFE) (OJ L 206, 22.7.1992,
p. 1).

(2) ACE: Council Regulation (EEC) No 1872/84 of 28 June 1984 on action
by the Community relating to the environment (OJ L 176, 3.7.1984,
p. 1).

(3) ACNAT: Regulation (EEC) No 3907/91 of 19 December 1991 on
action by the Community relating to nature conservation (OJ L 370,
31.12.1991, p. 17).

(4) Medspa: Council Regulation (EEC) No 563/91 of 4 March 1991 on
action by the Community for protection of the environment in the
Mediterranean region (OJ L 63, 9.3.1991, p. 1).

(5) Norspa: Council Regulation (EEC) No 3908/91 of 19 December 1991
on Community action to protect the environment in the coastal areas
and coastal waters of the Irish Sea, North Sea, English Channel, Baltic
Sea and North-East Atlantic Ocean (OJ L 370, 31.12.1991).

(6) Council Regulation (EC) No 1404/96 of 15 July 1996 amending Regu-
lation (EEC) No 1973/92 establishing a financial instrument for the
environment (OJ L 181, 20.7.1996, p. 1).

(7) Regulation (EC) No 1655/2000 of the European Parliament and of the
Council of 17 July 2000 concerning the Financial Instrument for the
Environment (LIFE) (OJ L 192, 28.7.2000, p. 1).

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While aiming to set up a single financial instrument for
17.
the environment which should contribute ‘to the development
and implementation of Community policy and legislation in the
field of the environment’, the LIFE Regulation simply combined
the four previous regulations which each applied to a specific field
of action. This produced neither a clear vision of the objectives to
be obtained nor coherence between the fields of action.

The three strands of LIFE, namely ‘Nature’, ‘Environment’
18.
and ‘Third countries’, were run until the beginning of 2001 by
three units responsible for the actual management and by one
joint financial unit in the Directorate-General for the Environ-
ment.

19.
As the Court found in the course of its audit, the ‘Nature’
and ‘Environment’ strands of LIFE are aimed at very different
spheres of intervention, each with its own specific management
features, which justified the separation of these two units. LIFE-
Third countries, however, had similarities with LIFE-Environment.

20.
The Directorate-General for the Environment’s depart-
ments were nevertheless reorganised, with the aim of standardis-
ing and clarifying the administrative procedures for the three
strands of LIFE in order to improve the efficiency of the manage-
ment (1). The three LIFE management units were merged into one
single unit to which a further unit responsible for the financial
management was added. Because of the complexity of the task
and the high turnover of staff, the changes to the procedures went
on being made until the end of 2002.

Management and financing

21.
The Commission manages the LIFE programme centrally.
The Commission receives assistance from the Member States and
the national authorities of the third countries, and has recourse
to technical assistance offices (TAOs) (2). Two committees made
up of representatives of the Member States, one for the Nature
strand, the other for the Environment and Third countries strands,
help the Commission to decide on the projects to be financed.

22.
The LIFE rate of financial support is, in general, a maxi-
mum of 50 % of the eligible costs of the projects. The rate is
reduced to 30 % for projects which generate substantial revenue,
and increased to 75 % for measures which, within the EU, relate
to priority natural habitats or priority species within the mean-
ing of Directive 92/43/EEC or to the species of birds referred to
in Directive 79/409/EEC which are in danger of extinction. Expen-
diture on technical assistance and accompanying measures is
reimbursed at the rate of 100 %.

(1) On the basis of the report. ‘Evaluation of the Financial Instrument for
the Environment (LIFE)’, Arthur Andersen, final report, June 1998.
(2) The TAOs are currently known as TAA (technical and administrative

assistance).

Financial implementation

23.
Table 2 shows the development and utilisation of the
budget appropriations for the financial years 1995 to 2002 in
respect of the special budget headings managed by the Directorate-
General for the Environment (3). LIFE-Environment and LIFE-
Nature are financed under budget heading B4-3 2 0 (4) and LIFE-
Third countries under heading B7-8 1 0. Altogether, LIFE
represents approximately 70 % of all the appropriations managed
by the Directorate-General for the Environment.

The commitment appropriations available for each finan-
24.
cial year were used almost in their entirety, with the exception of
those for 2000. Only 32 % of the latter were used, owing, in par-
ticular, to the low rate of utilisation of the appropriations avail-
able for LIFE (4 %): the Regulation concerning the third stage of
LIFE was adopted in July 2000 but did not result in any projects
being approved in that year.

Of the budget of 450 million euro provided for in the
25.
Regulation, 435 million euro were, in the end, charged to the
budgets for 1996 to 1999. A comparison of the ‘Nature’ and
‘Environment’ strands of LIFE II shows a fairly equal distribution
of the commitment appropriations (207,9 million euro for ‘Nature’
compared with 207,8 million euro for ‘Environment’) and the
payment appropriations (160,7 million euro for ‘Nature’ com-
pared with 157,6 million euro for ‘Environment’) (see Table 3). Of
the new countries applying for accession, Romania was the first
to participate in these strands of the LIFE programme. Table 4
shows the amounts allocated to projects under the ‘Third coun-
tries’ strand in the context of LIFE II. (5)

According to the Regulation the amount of resources to
26.
be allocated to accompanying measures such as monitoring and
evaluation is 3 % of the total budget. This rate was exceeded and
3,17 % of the earmarked commitments were allocated, i.e. a total
of 13,81 million euro. For LIFE-Nature, the rate was higher (4 %,
i.e. 8,2 million euro) (see Table 5).

Outstanding commitments are still significant, in terms
27.
of both their number and their amount. In December 2002, for
LIFE II, these commitments, numbering 380, were 47,2, 50,3 and
3,9 million euro for LIFE-Nature, LIFE-Environment and LIFE-
Third countries respectively. Twenty-six of these commitments
(4,8 million euro) overran the final date for implementation.

(3) For the previous years, please refer to Chapter 6 of the Court’s Annual
Report concerning the financial year 1994 (OJ C 303, 14.11.1995,
p. 161).
In 1995 LIFE-Environment was financed under budget heading
B4-3 5 0.

(4)

(5) The ‘Third country’ strand is open to Albania, Algeria, Bosnia and
Herzegovina, Croatia, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta,
Morocco, Syria, Tunisia, Turkey, the West Bank and the Gaza Strip,
Kaliningrad and the region of St Petersburg.

Appropriations in the ‘environment’ title of the budget and use made of them from 1995 to 2002 (differentiated appropriations)

(million euro)

Table 2

Commitment appropriations

Payment appropriations

Commitments entered into against
appropriations for the year

Payments against appropriations for the year

Final appropriations
available

Total commitments

(a)
48,500
48,500
5,750
102,750
146,618
90,000
6,000
96,000
136,329
90,000
4,500
94,500
132,066
100,000
4,825
104,825
141,031
135,252
5,550
140,802
184,098
113,131
6,622
119,753
161,797
170,912
9,184
0,315
180,411
232,776
148,510
6,522
0,381
155,413
213,431

(b)
48,500
48,488
5,447
102,435
143,715
89,923
6,000
95,923
135,850
89,909
4,312
94,221
131,920
99,669
4,824
104,493
140,385
134,451
5,540
139,991
182,907
4,762
0,022
4,784
49,212
152,525
9,067
0,215
161,807
213,355
148,461
5,733
0,381
154,575
212,040

Utilisation rate
(%)

(c)=(b)/(a)x100
100,00
99,98
94,73
99,69
98,02
99,91
100,00
99,92
99,65
99,90
95,82
99,70
99,89
99,67
99,98
99,68
99,54
99,41
99,82
99,42
99,35
4,21
0,33
3,99
30,42
89,24
98,73
68,25
89,69
91,66
99,97
87,90
100,00
99,46
99,35

Final appropriations
available

(d)
48,090
48,660
6,500
103,250
150,039
75,400
6,000
81,400
123,179
90,000
5,400
95,400
138,186
82,200
4,000
86,200
126,272
92,552
4,500
97,052
140,265
94,435
4,432
98,867
150,933
121,445
4,685
0,315
126,445
180,406
106,524
7,092
0,381
113,997
163,138

To settle the com-
mitments for previ-
ous years
(e)
20,883
24,506
4,103
49,492
63,952
53,981
2,902
56,883
85,317
53,435
3,177
56,612
83,376
42,459
3,246
45,705
69,993
39,679
4,377
44,056
61,198
51,266
4,426
55,692
79,145
20,989
—
—
20,989
21,220
—
—
—
—
—

To settle the com-
mitments for the
year
(f)
4,592
7,852

—
12,444
27,201
21,248
—
21,248
35,510
29,913
1,094
31,007
45,420
35,694
0,749
36,443
51,494
37,921
0,074
37,995
59,849
0,102
—
0,102
23,851
87,255
2,220
0,144
89,619
134,620
99,699
6,576
0,297
106,572
151,925

Total payments

(g)=(e)+(f)
25,475
32,358
4,103
61,936
91,153
75,229
2,902
78,131
120,827
83,348
4,271
87,619
128,796
78,153
3,995
82,148
121,487
77,600
4,451
82,051
121,047
51,368
4,426
55,794
102,996
108,244
2,220
0,144
110,608
155,840
99,699
6,576
0,297
106,572
151,925

Utilisation rate
(%)

(h)=(g)/(d)x100
52,97
66,50
63,12
59,99
60,75
99,77
48,37
95,98
98,09
92,61
79,09
91,84
93,20
95,08
99,88
95,30
96,21
83,84
98,91
84,54
86,30
54,40
99,86
56,43
68,24
89,13
47,39
45,68
87,48
86,38
93,59
92,72
77,95
93,49
93,13

Year

Financial instrument

Budget Article/ Title

1995

1996

1997

1998

1999

2000

2001

2002

LIFE-Nature
LIFE-Environment
LIFE-Third countries

Environment — Title B4-3 (1)
LIFE-Nature and Environment
LIFE-Third countries

Environment — Title B4-3 (1)
LIFE-Nature and Environment
LIFE-Third countries

Environment — Title B4-3 (1)
LIFE-Nature and Environment
LIFE-Third countries

Environment Title B4-3 (1)
LIFE-Nature and Environment
LIFE-Third countries

Environment — Title B4-3 (1)
LIFE-Nature and Environment
LIFE-Third countries

Environment — Title B4-3 (1)
LIFE-Nature and Environment
LIFE-Third countries
LIFE-Third countries

Environment Title B4-3 (1)
LIFE-Nature and Environment
LIFE-Third countries
LIFE-Third countries

Environment Title B4-3 (1)

B4-3 2 0
B4-3 5 0
B7-8 1 0
Total LIFE

B4-3 2 0
B7-8 1 0
Total LIFE

B4-3 2 0
B7-8 1 0
Total LIFE

B4-3 2 0
B7-8 1 0
Total LIFE

B4-3 2 0
B7-8 1 0
Total LIFE

B4-3 2 0
B7-8 1 0
Total LIFE

B4-320
B7-810
B7-810A
Total LIFE

B4-320
B7-810
B7-810A
Total LIFE

Total Title B4-3

Total Title B4-3

Total Title B4-3

Total Titre B4-3

Total Title B4-3

Total Title B4-3

Total Title B4-3

Total Title B4-3

(1) Budget headings:
B4-3 0 4
B4-3 0 4 A
B4-3 0 5
B4-3 0 6
B4-3 0 7
B4-3 0 8
B4-3 1 0 1
B4-3 0 9
B4-3 2 0
B4-3 3 0
B4-3 4 0 0

Fifth action programme (legislation)
Fifth action programme (legislation)
Sustainable urban development
Awareness-raising and subsidies
Radiation protection/ 2002= marine pollution
2002= Civil protection
European Environment Agency
Completion of earlier measures ACE/ACNAT/Medspa/Norspa
LIFE
Civil protection (end of 2001)
Decommissioning of nuclear installations and waste management.

Source: Revenue and expenditure accounts (Volume II) for the years mentioned.

C
2
9
2
/
1
0

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
U
n
o
n

i

.

.

2
1
2
2
0
0
3

2.12.2003

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Official Journal of the European Union

C 292/11

LIFE II Nature + Environment — B4-3 2 0 0 + B4-3 2 0 1 and part of B4-3 2 0 9 from 2000 onwards — Comparison of the amounts of
commitments and payments

Table 3

LIFE II-Nature — B4-3 2 0 0
and part of B4-3 2 0 9 from 2000 onwards

LIFE II-Environment — B4-3 2 0 1
and part of B4-3 2 0 9 from 2000 onwards

Country

Number of com-
mitments

1996 to 2002

Amounts com-
mitted to the
projects

Amounts paid to
the projects

Number of com-
mitments

Belgium
Denmark
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
Netherlands
Austria
Portugal
Finland
Sweden
United Kingdom
Romania
Total without administrative expenditure
External assistance and administrative
expenditure
Total (projects, external assistance and
administrative expenditure)
Source: Revenue and expenditure accounts Volume II, Sincom1 (1996/1997) and Sincom2 (from 1998).

6 115 390,87
1 987 651,05
14 798 168,13
12 900 799,39
21 105 393,46
12 890 783,68
945 390,00
17 050 709,96
618 686,60
5 042 933,69
12 438 466,58
8 330 285,76
14 479 909,89
12 358 309,73
11 780 414,85
392 413,83
199 700 581,83 153 235 707,47
7 501 967,77

7 801 990,00
2 501 418,00
18 950 305,37
15 744 650,00
29 924 908,38
17 559 250,04
1 513 475,00
23 816 292,40
1 351 985,00
5 396 924,00
15 318 662,40
10 512 039,00
16 367 319,00
18 326 045,00
14 098 261,00
517 057,24

14
4
29
17
58
31
1
72
2
5
13
17
20
14
11
4
312
14

207 928 444,83 160 737 675,24

8 227 863,00

326

38
16
50
29
63
55
11
62
2
38
22
20
23
21
43
6
499
64

563

1996 to 2002

Amounts com-
mitted to the
projects

16 017 621,35
8 651 845,98
21 010 803,15
13 189 471,46
21 203 105,20
21 313 000,00
4 935 832,98
23 881 311,90
1 188 073,74
14 674 705,49
9 248 543,82
5 333 628,39
7 700 524,39
11 521 149,24
22 152 757,18
734 120,47
202 756 494,74
5 053 817,89

Amounts paid to
the projects

9 711 669,27
7 336 368,14
18 976 992,29
9 879 468,74
16 266 421,78
18 133 973,58
3 559 854,27
18 178 319,94
950 459,42
10 425 142,68
6 321 804,85
3 276 844,63
7 069 531,52
9 868 071,79
12 322 611,20
565 182,99
152 842 717,09
4 712 621,83

207 810 312,63

157 555 338,92

LIFE II-Third countries — B7-8 1 0 0 — Comparison of the amounts of commitments and payments

Table 4

LIFE II-Third countries — B7-8 1 0 0
1996 to 2002

Code

Country

Number of commit-
ments

Amounts committed
to the projects

Amounts paid to the
projects

AL
BA
CY
DZ
EG
IL
JO
LB
MA
MT
PS
RU
SY
TN
TR
INT

Albania
Bosnia and Herzegovina
Cyprus
Algeria
Egypt
Israel
Jordan
Lebanon
Morocco
Malta
West Bank and Gaza
Russia
Syria
Tunisia
Turkey
International (countries not specified)
Subtotal
External assistance and administrative
expenditure

Total (projects, external assistance
and administrative expenditure)

2
3
7
1
2
5
1
2
5
4
3
11
2
2
11
6
67
9

76

763 520,00
701 000,00
1 744 975,06
50 000,00
827 850,00
1 234 607,20
402 580,00
719 260,00
1 074 217,46
860 921,09
1 341 636,25
2 734 945,00
638 536,67
380 026,49
3 585 987,51
3 050 130,25
20 110 192,98
533 367,00

746 867,57
647 080,00
1 398 305,57
30 000,00
745 065,00
933 804,72
336 274,00
639 063,90
449 317,26
779 367,53
1 274 936,25
2 295 813,64
595 201,00
280 244,69
2 789 731,59
2 374 831,43
16 315 904,15
436 603,62

20 643 559,98

16 752 507,77

Source: Revenue and expenditure accounts Volume II, Sincom1 (1996/1997) and Sincom2 (from 1998).

C 292/12

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Official Journal of the European Union

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LIFE II — Implementation — Comparison of the maximum amount indicated in Regulation (EC) No 1404/96,
Annex 1, Article 8(1), with the amount actually committed

Table 5

Allocation to the various strands

Percentage rate of the amount of 450
million euro to be allocated to each of
the strands according to Regulation (EC)
No 1404/96

Share of the amount of 450 million euro
to be allocated to each of the strands

LIFE
II-Nature

LIFE-II
Environ-
ment

LIFE
II-Third
countries

Accom-
panying
measures

Total for
LIFE II

46 %

46 %

5 %

3 %

100 %

207,00

207,00

22,50

13,50

450,00

Amounts committed (million euro)

199,70

202,76

20,11

13,81

436,38

Percentage rate of the total amount actu-
ally committed to each strand

45,76 %

46,46 %

4,61 %

3,17 %

100 %

(1)

(2)

(3)

(4)

(5) = (3) — (2)

Difference (million euro)

- 7,30

- 4,24

- 2,39

0,31

- 13,62

(6) = (5) / (2)

Percentage difference for each of the
strands

- 3,5 %

- 2,1 %

- 10,6 %

2,3 %

- 3,0 %

(7)

External assistance and administrative
expenditure (million euro)

8,23

5,05

0,53

(8) = (3) + (7)

Total committed (million euro)

207,93

207,81

20,64

(9) = (7) / (8)

Percentage rate of total amount actually
committed to ‘External assistance and
administrative expenditure’

3,96 %

2,43 %

2,58 %

Source: Revenue and expenditure accounts Volume II, Sincom1 (1996/1997) and Sincom2 (from 1998).

—

—

—

13,81

436,38

3,17 %

SELECTION OF PROJECTS

Selection procedures

28.
The aim of the selection procedure is to ensure sound
management of Community funds. It is based on selection criteria
which reflect the objectives of the programme and compares the
different proposals to ensure that the projects with the best con-
tribution to those objectives are chosen.

29.
In accordance with Article 9 of the LIFE Regulation, the
Member States forward to the Commission, before 31 January of
each year, proposals for actions to be financed. Applications from
third countries are submitted to the Commission by the national
authorities concerned. Information meetings, attended by Com-
mission representatives, are organised at varying intervals for
potential beneficiaries in the Member States. The proposals received
are then evaluated with a view to a possible decision to finance
them. The procedures for selecting the proposals are different for
the three strands of LIFE.

30.
In the case of LIFE-Environment, the Commission employs
outside experts to evaluate the project proposals but does not
issue any public calls for applications when selecting these experts.
For the projects that were checked, the curricula vitae of these
experts were not usually kept. It was therefore not possible to
ascertain that they did not in fact come from a national body
which was itself directly or indirectly responsible for the manage-
ment of LIFE projects (1).

31.
In the case of the LIFE II period, since the evaluation
reports drawn up by the experts are not systematically archived
or registered in the Commission’s files, the results of the evalua-
tion cannot be substantiated. These documents, which are of fun-
damental importance for supporting and justifying the choices
made, have not been kept. In those cases where the marks awarded
are available in an electronic database it is seldom possible, in the
absence of the original documents, to verify their authenticity and
conformity with the underlying evaluation.

(1) See also the Court of Auditors’ Annual Report concerning the finan-

cial year 2001, paragraph 4.22 (OJ C 295, 28.11.2002).

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Selection procedures for the three strands of LIFE II

In the case of the LIFE-Nature projects, the evaluation of
32.
the proposals is carried out by the Commission’s desk officers,
who may have the status of national experts, and who are then
entrusted with monitoring the implementation of these same
projects. For the sake of independence, transparency and har-
monisation of procedures, the Commission should consider the
possibility of entrusting the evaluation to outside experts.

outside experts were not kept, as there were no precise instruc-
tions on this subject.

Evaluation criteria

As regards project proposals under LIFE-Third countries,
33.
the desk officer preselects an initial list of projects and submits it
to a group of external evaluators. The projects selected by the out-
side experts are then submitted to the LIFE-Environment Regula-
tory Committee for an opinion. It was noted, for all the files
examined, that the basic evaluation documents drawn up by the

Article 9a of the LIFE Regulation lays down the list of
34.
general criteria, specific criteria for actions concerning nature
conservation as defined under Article 2(1)(a), actions concerning
industrial activity and to support local authorities, preparatory
actions and criteria applicable to actions to be implemented in
third countries.

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Official Journal of the European Union

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Projects put forward for financing are classified by award-
35.
ing them a mark in the case of the ‘Environment’ and ‘Third coun-
tries’ strands and on the basis of a qualitative assessment in the
case of the ‘Nature’ strand.

36.
In the case of projects under LIFE-Environment, some of
the criteria that the evaluators were obliged to apply were amended
for LIFE III in comparison with LIFE II in order to simplify them (1).
Nevertheless, it is still difficult for the evaluators to form a precise
opinion on the subject because the criteria have been combined
and as a consequence have become more vague and difficult to
apply.

37.
Evaluation criteria for all the strands of LIFE III are now
published in the application guides available on the LIFE website
but with varying degrees of detail: LIFE-Nature and LIFE-
Environment define the criteria whereas for LIFE-Third countries
they appear, without explanation, in the form of a simple list
without any detailed description.

The role of the Member States

States and on the basis of proof of a neutral financial impact. The
audit found no technical justification for these changes. With-
drawal of a project from the priority list should in fact lead to its
replacement by the first project on the reserve list, regardless of
the ‘nationality’ of the project withdrawn. In practice, it is replaced
by a project of the Member State concerned. This runs counter to
the results of the preliminary evaluation and undermines the
effectiveness of the use of Community funds.

Risk of double-funding

Actions receiving aid under the Structural Funds or other
41.
financial instruments are not eligible for aid under LIFE (3). For
this reason, applicants for aid are obliged to declare the sources
of finance for the projects proposed, but compliance with these
conditions is not adequately enforced. The fact that environmen-
tal issues are covered by a number of possible types of Commu-
nity funds gives rise to a special risk of double funding, mainly for
LIFE-Environment.

38.
In accordance with the LIFE Regulation, the Member
States forward proposals for LIFE-Environment and LIFE-Nature
projects to the Commission for selection. Some Member States
apply the Commission’s criteria or their own criteria to evaluate
the proposals and give them an order of priority. The results of
these practices, which are not provided for in the Regulation,
should be comparable so that the prioritisation of proposals is
done at European level.

42.
Before the decision granting aid, the Directorate-General
confirms the beneficiaries’ eligibility by using the Commission’s
accounting software, Sincom2. However, this system does not
contain adequate information to allow verification of whether the
same beneficiaries have already received other Community funds
(Structural Funds, Cohesion Fund or funds for research activities).
These data, which play an important role in the Structural Fund
programmes, are not entered in detail in Sincom, which therefore
means that the control is not effective.

39.
Before adoption by the Commission, draft decisions to
grant financial aid must receive a favourable opinion from one of
the two Regulatory Committees, one responsible for LIFE-Nature
and the other for LIFE-Environment and LIFE-Third countries. The
Commission sends the Committees a list of projects ranked accord-
ing to the evaluation carried out, divided into two parts: the first
represents the budget available, the second is a reserve list. For
LIFE-Environment the Member States’ evaluation is attached to
the evaluation sheet for the projects submitted to the Committee,
but this is not the case for LIFE-Nature (2).

40.
The representatives of the Member States take part in the
selection of the projects in the context of the work of the Com-
mittees. In some cases the discussions have resulted in the Com-
mission replacing projects with others of the same value but with
less priority at the request of the representatives of the Member

(1) Various criteria, such as ‘the Community interest’ and ‘fostering coop-
eration’, or ‘the innovative character’ and the ‘exemplary character’ for
2000/2001 and the ‘Community interest’ and ‘environmental prob-
lem’ or ‘innovation’ and ‘progress’ for 2002, were combined.

(2) The Committees in question, for which the Commission provides the
chairman and secretariat, are made up of representatives of the Mem-
ber States.

43.
The various project proposals are examined during the
interdepartmental consultation procedure at Commission level to
check complementarity of the aid with other Community funds
and, in particular, to ensure that there is no double-financing.
Within the framework of LIFE II, in addition to the horizontal
departments, the Directorates-General for Agriculture, Research,
Fisheries and Regional Policy were consulted for LIFE-Nature, but
only the Directorate-General for Regional Policy was consulted
for LIFE-Environment. The Directorate-General for Research was
not consulted on the ‘Environment’ strand even in the case of
projects proposed by bodies which, as the Court noted, were the
beneficiaries of several research contracts. In the absence of basic
data, in particular in connection with the Structural Funds, the
results of the consultation are often very sparse and the risk of
double-financing persists.

44.
Where the beneficiaries of the programme are bodies
which receive Community research contracts on a continual basis,
separation of the activities is difficult to ascertain. The audit
showed that these bodies often do not comply with the rules for
granting Community funds with regard to the keeping of accounts

(3) Article 5 of Regulation (EEC) No 1973/92.

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for the projects (see paragraph 60) as they do not have account-
ing systems which are sufficiently detailed or systems for record-
ing working time for the various projects. As a consequence it is
not possible to demonstrate specific allocations of resources to
the projects or to verify whether there may have been double-
financing.

45.
One example of this audit finding is a project under the
‘Environment’ strand which received LIFE financing for three
parts: the project study, the equipment and the measures to dis-
seminate the results. It also received aid granted by the region
under the regional operational programme financed by the Struc-
tural Funds, which covered the first two parts too and the con-
struction of the buildings. This being so, the project is not eligible
for LIFE financing. As the action received indirect financing under
the European Regional Development Fund through the opera-
tional programme, the overlapping of these forms of aid was not
identified and the beneficiary did not notify the Commission in
respect of the Community aid.

IMPLEMENTATION OF THE PROJECTS

Imprecise administrative provisions concerning eligible costs

46.
Article 9b of the LIFE Regulation lists the expenditure
which is to be considered ineligible. By contrast, the Standard
Administrative Provisions (1) concerning eligible expenditure were
neither precise nor uniform for the various strands of the pro-
gramme. When preparing the new LIFE III Regulation, the Com-
mission harmonised these provisions and made numerous amend-
ments to them, but failed, however, to rectify all the weaknesses
revealed by the audit (see paragraphs 47 to 51).

47.
With regard to eligible expenditure, staff expenditure rep-
resents the largest part of the costs of the projects. It includes the
salaries of national civil servants, which make up a significant
portion of the expenditure, in particular in the case of LIFE-Nature.
The Court notes that these remunerations are already covered by
the budgets of the public bodies and therefore do not constitute
an additional remuneration which would represent an extra cost
for the programme.

48.
This being so, the contribution by the beneficiary public
body does not represent a national contribution, as LIFE is really
reimbursing expenditure which the Member States would have
had to bear in any case. The administrative provisions should be
amended in such a way as to exclude the possibility of financing
the salaries of civil servants, including cases where public bodies
are involved in carrying out projects as partners of the benefi-
ciary.

(1) The standard administrative provisions are annexed to the decision
granting aid which is sent to the beneficiaries and include special pro-
visions relating to the implementation of the projects.

In the case of the projects audited, staff expenditure rep-
49.
resented 41 % of total certified costs. The Court’s checks revealed
that:

(a)

(b)

in certain cases the contribution by the staff to Community
actions is charged at an hourly rate which is higher than the
actual salary rate, with no justification provided;

some beneficiaries have no time-recording system which
enables the hours actually worked and charged to the project
to be identified;

(c)

statements affected by this included:

(i) work carried out by third parties which should have

been charged to external assistance;

(ii)

charging the entire salary of staff employed to carry out
the general work of the beneficiary.

50.
Subcontracts accounted for 25 % of the expenditure of
the projects examined. The administrative provisions do not clearly
set out the details of the supporting documents required in respect
of services provided by subcontractors and therefore do not pro-
vide a possiblity of verifying whether these services were really
provided. Thus, in one extreme case, the Court was unable to
reconstruct the constituent parts of the costs invoiced, as the sub-
contractor refused access to the documentary evidence, arguing
that his contract contained no clause giving the Court access to
these documents. In view of this incident, the Commission has
amended these provisions in such a way that the subcontractors’
invoices allow identification of every constituent part of the ser-
vice rendered.

With regard to expenditure in respect of the depreciation
51.
of consumer durables, the Commission accepted the principle of
linear depreciation over the project’s period of implementation.
As the Standard Administrative Provisions were imprecise, depre-
ciation was not calculated on a pro rata temporis basis applied to
the period of use of these goods. The Commission subsequently
amended the rules governing the charging of these costs and now
accepts as eligible expenditure 50 % of their real cost, irrespective
of the time required to implement the project. These new provi-
sions are therefore still not taking into account the actual use of
the goods in the context of the projects.

Delays in payments

52.
Under LIFE II, payments are made in the form of an
advance of 40 % of Community financing after adoption by the
Commission of the decision granting aid, then an interim pay-
ment, which can also be as much as 40 %, made on the basis of a
claim by the beneficiary after acceptance of the statement of
expenditure and the activities report, and, lastly, a final payment
once the Commission has accepted the final report. The

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administrative, financial and technical conditions relating to the
LIFE programme stipulate, as a general rule, that payment by the
Commission must take place within 60 days of the receipt of the
statements of expenditure. This period may not be exceeded unless
the beneficiaries’ applications are incomplete or additional infor-
mation is required.

ity for this should be shared jointly by the Commission and the
beneficiary (lack of system for issuing automatic reminders to
beneficiaries under LIFE II). In three out of 46 cases, this informa-
tion was required because the beneficiary had made changes to
the structure of the budget without informing the Commission.

In view of

the volume of delayed payments,

53.
the
Directorate-General for the Budget adopted measures to ensure
that 95 % of payments would be made within the set time limit,
with the remaining 5 % having to be settled, at the latest, within
90 days (1). According to the information available to the Com-
mission, 43 % of the payments made under the LIFE programme
during the financial years 1999 to 2002 did not comply with this
maximum limit of 90 days (see Diagram 1). Nineteen per cent of
the payments were not settled by the Commission until more
than six months after receipt of the statements of expenditure.
The Court notes an improvement in 2002 as compared with pre-
ceding years, as shown in Diagram 1.

54.
From the information available in the Commission’s
accounting system it was not possible to ascertain the reason for
the delays in payment. By examining a sample of files the Court
was able to determine the main reasons for these delays. The first
is related to the late replies by beneficiaries to requests for addi-
tional information sent to them by the Commission; responsibil-

Other reasons are connected to Community manage-

55.
ment, i.e.:

— a break in the continuity of the technical assistance con-
tracts. For example, the TAO responsible for the LIFE-
Environment projects in one Member State had to discon-
tinue its activities between November 1999 and January
2001 because it had no contract (see paragraph 68). During
this period no external team existed to analyse the imple-
mentation reports prior to the issuing of payment orders
and this led to delays,

— the distribution of human resources; the desk officers suf-
fered from an excessive workload because of the combina-
tion of tasks allocated to these managers. As a result, a num-
ber of files could not be dealt with in time in the Commission’s
departments.

There was no efficient system for monitoring payment claims.

Diagram 1

Time taken to settle payments

Source: The Directorate-General for the Environment.

(1) SEC(95) 1122 and, more recently, the action plan in the White Paper
on Reform — COM(2000) 200 — which postpones the 1995 objec-
tive until 2002.

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Practical problems in connection with the implementation of
the projects

Problems with the co-financing of projects

56.
The proposals submitted sometimes contain erroneous
or incomplete information concerning the arrangements for
financing the projects. They do not always make allowance for all
the financial contributions planned or the revenue generated by
the projects. These are, however, elements which represent an
important factor in the evaluation stage and for the adoption of
the decision laying down the rate of Community financing.

57.
The audit revealed that one NGO, after the decision, had
received an amount equivalent to more than 100 % of the cost of
the project through national subsidies which had not been declared
in the application file. This co-financing, for which no provision
was made in the initial proposal, shows the shortcomings in the
financial arrangements for the projects. Applicants are obliged to
declare their sources of finance (see paragraph 41) but it is up to
the Commission to verify the validity of these declarations. The
Community aid must therefore be recalculated and the relevant
amount paid in excess should be recovered by the Commission.

58.
Likewise, this large NGO, which received numerous con-
tributions under LIFE, entered a LIFE contribution in its project
proposal which was equivalent to the maximum rate of 50 %.
However, the audit revealed that the NGO in question had financed
its contribution almost completely by applications to several pri-
vate and public sources. This information, of which the NGO was
aware, was nevertheless not mentioned in the proposal and was
thus not available to the Commission when it took its co-financing
decision.

One project under LIFE-Environment ran into financial
59.
difficulties, mainly due to the fact that the beneficiary’s own funds
proved inadequate and the beneficiary obtained a higher Com-
munity contribution on the basis of declarations of expenditure
which it had not incurred; this higher contribution allowed it to
cover the major part of its own contractual contribution to the
project. Following the Court’s on-the-spot audit, a recovery pro-
cedure is now under way.

Beneficiaries’ accounts insufficiently detailed

60.
Unlike other forms of Community aid such as the Struc-
tural Funds, the administrative provisions for LIFE II do not impose
an obligation on the beneficiaries to keep separate accounts for
the project. The Court’s checks showed that both private bodies
with general accounting systems and public administrations did
not keep sufficiently detailed accounting records of the financial
transactions relating to the projects. For this reason it is not pos-
sible to identify all the movements of funds in respect of the rev-
enue and expenditure concerning these projects. In such circum-
stances, no link can be established between a particular item of
expenditure and the project to which it relates, as the documen-
tary evidence submitted does not explicitly indicate the purpose
of the equipment or the services concerned.

In addition, the audit revealed one case where items of
61.
expenditure were charged outside the accounts with the aim of
obtaining the total maximum Community contribution provided
for in the contract, even though this did not reflect reality. The
risk of the same item of expenditure being chargeable to several
projects cannot be ruled out, because it is not possible from
examining the accounts to determine the project for whose imple-
mentation the expenditure can be charged. The checks carried out
confirmed this risk.

62.
One of the biggest non-governmental organisations,
which manages a large number of projects subsidised by the
Commission, only introduced a system of accounting records of
this kind after 15 years of Community support. In another case,
following an on-the-spot check, the Commission had, rightly,
refused to grant the association the Community contribution
because it did not have a system of general accounts making it
possible to substantiate the costs presented in the final report.

Uncertainty concerning the future use of land

Purchases of land accounted for one third of the total
63.
expenditure on the LIFE-Nature projects, i.e. 131,7 million euro.
The impact on the budgets varies from one project to another, but
may in some cases be equivalent to the entire project. This sub-
stantial item of financing should therefore be examined in depth
by the Commission during the evaluation stage in order to ensure
that the land purchased is actually reserved in the long term for
nature conservation purposes.

64.
The classification of land purchases as eligible expendi-
ture is peculiar to LIFE-Nature projects. In the case of nature con-
servation and preservation projects, the eligibility of land pur-
chases depends on an undertaking by the beneficiaries to continue
conservation activities once the period laid down in the decision
granting financing for the LIFE projects is over.

The Community has no guarantee in respect of the future
65.
use of such assets, except for a general clause in the Standard
Administrative Provisions, and the use made of this land will
depend solely on the beneficiaries’ wishes. Under LIFE I the pur-
chase contracts included a clause according to which disposal or
a change of use of this land could not be carried out without the
Commission’s agreement. This clause was abolished for LIFE II
and LIFE III. The Court observes that this risk would be reduced
if the Commission were to apply similar rules to those of the
Structural Funds (1). The eligibility of such purchases is subject,
amongst other things, to the condition that ‘the purchase is made
by or on behalf of a public institution or a body governed by pub-
lic law’.

(1) Commission Regulation (EC) No 1685/2000 of 28 July 2000 laying
down detailed rules for the implementation of Council Regulation
(EC) No 1260/1999 as regards eligibility of expenditure for operations
co-financed by the Structural Funds (OJ L 193, 29.7.2000, p. 39) (see,
in particular, Rule No 5 — Purchase of land, p. 43).

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MONITORING, CONTROL AND EVALUATION

66.
Monitoring and control of the projects and evaluation of
the results of the programme are functions that are important for
guaranteeing an appropriate implementation of the financial
instruments, for the timely identification of certain shortcomings
and for deciding on the corrective measures which are needed for
the programme to succeed.

Unclear tasks of the technical assistance offices (TAOs)
under LIFE II

67.
Expenditure on accompanying measures is, to a large
extent, intended for the technical assistance offices (TAOs), which
are the technical interface between the Commission and the ben-
eficiaries. These external teams inform the beneficiaries about the
documents to be presented to the Commission and monitor the
projects. Their main role is to follow up and evaluate the projects’
progress, which includes on-the-spot visits and the evaluation of
implementation reports.

68.
In the case of the call for tenders issued in April 1999 for
selecting the TAOs for LIFE-Environment, potential applicants
had difficulty in interpreting the description of tasks (1) and this
delayed the selection of the new TAOs. The LIFE-Environment
projects in two Member States were left without intermediaries
for almost 13 months. The tasks of the TAOs for LIFE-Third coun-
tries are not clearly defined in the contract.

69.
Owing to the different procedures followed by the three
units which managed the three strands of LIFE, the TAOs did not
apply uniform working methods. In addition, no criteria had been
laid down for the evaluation of the TAOs’ services. Since 2001,
monitoring instruments have been in place and the work is evalu-
ated individually. It would, however, be useful for the Commis-
sion to make an overall evaluation of the TAOs.

70.
In the technical Annex to the contract made with the
TAOs, the Commission specifies the human resources required, in
terms of both total cost and the time needed for monitoring the
projects in each country. Since the number of projects to be
monitored varies and no exact provisions can therefore be made
for them when the call for tenders is being prepared, no connec-
tion can be made between the fees and the actual amount of

(1) See ‘Replies to tenderers’ queries at the information session held in
Brussels on 29 April 1999’, 5 May 1999, ‘Open invitation to tender’
XI/B2/ASS/990015 TO 990022; paragraph 3.3, for example:
‘the
Commission expects the contractor to propose methods to define
indicators and to adopt a dynamic approach’. Likewise, later: ‘the con-
tractor is requested to formulate suggestions as to the user’s require-
ments, the conceptual data model and the description of the main
results that the proposed system provides’.

work. For example, in one Member State, the fees of a TAO were
fixed at almost three times the amount entered in the previous
call for tenders, while, at the same time, the number of projects
to be monitored fell by half.

71.
The TAOs have collected a large amount of documenta-
tion concerning the beneficiaries of the LIFE projects. The Com-
mission gave no instructions to those in charge of technical assis-
tance concerning how long these documents are to be kept. Nor
has the Commission specified the conditions on which these
documents should be forwarded to the Commission or to the
new contractor, once the technical assistance contract has been
completed.

72.
Thus, two TAOs did not receive the data collected by the
previous contractors, either in computerised form or on paper.
They reconstructed the files with the help of the Commission’s
desk officer and the beneficiaries of the projects, who were asked
to forward their entire files. One of these TAOs, in turn, failed to
forward the files to its successor on completion of its contract. It
should be noted that the new contracts with the TAOs make
explicit provision for forwarding these files.

Observations on the audits carried out by the Commission

73.
It is the Directorate-General for the Environment’s finan-
cial unit that decides which LIFE projects are to be audited, on its
own initiative or at the request of the LIFE II technical units. The
financial unit, which is also responsible for on-the-spot audits,
does not determine the number of projects to be audited on the
spot on the basis of precise criteria and objectives. In 2001 this
unit audited 29 LIFE projects and in 2002, 32 projects.

74.
Of the projects audited in 2001, which accounted for a
total of 15,9 million euro in commitments, 10 were the subject of
proposals to draw up recovery orders for amounts ranging between
4 243 euro and 393 746 euro and totalling 675 592 euro, i.e.
4,2 % of the total committed for the projects audited. In the case
of five other files, termination of the projects was proposed with-
out further payment and the files of two projects were sent to the
European Anti-fraud Office (OLAF) because the same expenditure
had been declared twice (2).

75.
In spite of the existence of precise instructions, an analy-
sis of the content of the audit reports reveals a lack of homoge-
neous structure and great variations in quality. Half of the reports
examined were vague in content or very brief and must therefore
be regarded as inadequate. Five reports did not get beyond the
preparatory stage. As they were drawn up by the financial unit,
the observations mainly concerned financial aspects and said
nothing about the implementation or the results of the measures

(2) The Court has also sent OLAF its audit findings for two other projects.

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taken. In spite of improvements in the procedures, the Commis-
sion’s departments were unable to provide precise information
concerning the number of audits actually carried out in the years
before 2000 although programmes in respect of on-the-spot
checks did exist.

Similarly, there have not yet been any analyses of the
79.
contribution made by LIFE II to achieving the aims of the fifth
EAP. Because the objectives are not defined properly, the instru-
ment is only mentioned in these terms: ‘LIFE, the only programme
completely devoted to the environment, has produced many
examples of innovative technologies, good practice and integra-
tion at local levels’ (2).

External certification of the records of expenditure

The Standard Administrative Provisions for LIFE II con-
76.
tained a clause, in respect of the ‘Nature’ strand, which encour-
aged beneficiaries to include certification of their records of expen-
diture by an authorised auditor. In the case of LIFE-Environment,
a clause stated that a certificate drawn up by a chartered accoun-
tant, before final payment, would guarantee the beneficiary accel-
erated payment and reduce the risk of disagreement. In the absence
of precise instructions from the Commission concerning the audit
work to be carried out, the scope and quality of this work vary
considerably. The Court found cases where the certificates were
inadequate because no detailed analysis of the expenditure had
been attached. The certificates are mainly concerned with the
conformity of expenditure with national rules.

In its communication on the sixth EAP, the Commission
80.
states that the implementation of the LIFE programme has ‘con-
tributed substantially to the improvements’ made to the quality of
the environment and that it will continue to be ‘a valuable instru-
ment in illustrating the possibilities and advantages of better envi-
ronmental performance by business and local authorities’ (3). This
statement has not been further enlarged upon.

Recent initiatives to improve dissemination of the results of
projects

77.
Since 2001 the provisions have standardised the require-
ment for independent financial audit for all strands of the pro-
gramme and oblige the beneficiary to appoint an auditor to verify
expenditure records. This auditor ‘should not only verify compli-
ance with national legislation and accounting rules but should
also certify that all costs incurred respect the Standard Adminis-
trative Provisions for the LIFE programme’. However, the form
and content of the audit reports has still not been set out in detail.

In view of the fact that LIFE finances, amongst other
81.
things, innovative and demonstration projects, dissemination of
the results of these projects is crucial. In the absence of a clear
strategy for dissemination laying down the objectives, the target
groups, the methods and the media, there is a risk that dissemina-
tion will not be effective and this will limit the impact of such
projects. In its replies to Special Report No 3/98 (4), the Commis-
sion acknowledged, in general, the need to put in place a strategy
for disseminating the results of the LIFE projects.

Report on the implementation of the programme

78.
The aim of an evaluation is to assess, using clear, relevant
and measurable criteria, what the real situation of the project is
in relation to the set objectives. The activity report relating to
LIFE II (1) was drawn up in accordance with Article 14 of the
Regulation and in the light of the evaluation made by the outside
consultant. It paints a general picture of the programme’s imple-
mentation, but says nothing about the attainment of specific
objectives. In particular, it does not state to what extent the
projects financed by LIFE-Nature have, for example, helped to
reverse the trend of the decline of species facing extinction, nor
does it say how the projects financed by LIFE-Environment have
contributed to the development and implementation of environ-
mental policies. In the latter case, the Commission has not made
any in-depth assessment of the results obtained concerning the
innovative nature of projects, contrary to what is required by the
provisions of the Regulation governing this subject.

(1) COM(1998) 721 final of 4 December 1998.

82.
During LIFE II, each ‘Environment’ project was required
to include a dissemination plan and to publish a general report in
printed and in electronic formats. One of LIFE’s stated objectives
is to contribute to developing and implementing environmental
policies and legislation, but the Commission did not set down
precise standards on these activities, nor have the results been
used by the Commission itself. Effective management of the pro-
gramme is only possible, however, if the Commission uses the
results to help improve the strategy and application of Commu-
nity environmental policy.

83.
LIFE results are mainly published in the Commission’s
reports and in the newsletters produced by the TAOs, which
present in detail the results of a selection of projects. For example,
in the case of LIFE-Nature, there is a report on the long-term
effects of nine LIFE I projects and a newsletter issued three times
a year; in the case of LIFE-Environment two reports have been

(2) See ‘Global assessment — Europe’s environment: what directions for
the future?’, section 6.22(2), p. 20 (COM(1999) 543 final of 24 Novem-
ber 1999).

(3) COM(2001) 31 final of 24 January 2001.
(4) Special Report on water pollution, paragraph 127 (OJ C 191,

18.6.1998).

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published describing the best projects (‘success stories’) (1). No
systematic monitoring was carried out in respect of the results of
the projects, and only a summary of the proposals relating to the
projects financed was presented on the LIFE website.

84.
In March 2002 the LIFE unit presented a communication
strategy for the dissemination of the results of projects, recognis-
ing that such a strategy had been lacking until then. The main
emphasis of this strategy is on the Community nature of projects,
proximity to citizens and networking of environmental stakehold-
ers. The strategy describes how the shortcomings highlighted by
the external evaluation could be remedied. One major plan is to
reinforce the link between the LIFE unit and the thematic units of
the Directorate-General for the Environment.

CONCLUSIONS AND RECOMMENDATIONS

General conclusion

As from 2001, in the context of the reorganisation of the
85.
Directorate-General’s departments, a major effort was made to
tackle the shortcomings in the management of the LIFE pro-
gramme, at the level of the organisation of departments and in
the procedures put in place by the Commission and the benefi-
ciaries. For the measures taken since then to be effective this effort
must be kept up.

The programme’s objectives and connection with Community
environmental strategy

LIFE is a tool for furthering the development and imple-
86.
mentation of Community policy and legislation in the field of the
environment. However, LIFE-Environment does not clearly reflect
the way in which it is supposed to contribute to the attainment
of the general and specific objectives set out in the strategic guide-
lines of the environmental action programme (see paragraphs 5
to 10).

87.
The definition of clear and measurable objectives is an
essential element for ensuring effective evaluation of the imple-
mentation of this Community programme. In the case of LIFE
these objectives have not been set down, owing, on the one hand,
to difficulties in setting targets for the innovative aspect of projects
and, on the other, to the absence of harmonised ecological param-
eters. There is insufficient complementarity with the other Com-
munity aid measures in the field of the environment and the risk
of double-financing persists (see paragraphs 16 and 17 and 41 to
45).

(1) The reports are available on the Directorate-General for the Environ-

ment’s website:
http://www.europa.eu.int/comm/environment/index_en.htm

Recommendations

— The Court recommends that the role of LIFE should be made
clearer, in particular in the environmental action programmes
to be adopted in future. Precise objectives, quantified where
possible, should be defined so that the instrument’s effective-
ness can be evaluated. The Commission should improve the
interdepartmental consultation procedure so to ensure the
complementarity of the aid measures.

Management organisation

88.
The organisation of the LIFE Financial Instrument in three
distinct strands is, in fact, a regrouping and not an integration of
the previous instruments. In order to improve the situation, the
Commission merged three units to form a single unit which is
responsible for managing the financial instrument in its entirety
(see paragraphs 15 to 20).

89.
The Court’s audit revealed structural differences between
the three strands of the programme which are reflected in the
selection procedure, including the role of the Member States and
of the outside experts. The Standard Administrative Provisions
concerning the eligibility of expenditure were harmonised for
LIFE III, particularly as regards the financial aspects (see para-
graphs 28 to 40).

Recommendations

— The Court recommends that the Commission examine
whether it would be expedient to separate the management
of the ‘Nature’ and ‘Environment’ strands in future, in view
of their intrinsic differences. This ought to ensure consistent
management of the instrument in the long term. Taking into
account the similarities in management and its relative impor-
tance, the ‘Third countries’ strand should be attached to the
‘Environment’ strand.

— Nevertheless, during the project proposal evaluation phase,
use should be made of outside experts for all three strands
of LIFE, as is the case for certain other Community pro-
grammes, in order to guarantee the transparency of proce-
dures where the evaluator is, at the same time, responsible
for monitoring implementation of the project. It would also
be advisable to organise calls to tender on a regular basis for
the recruitment of outside experts and the Commission
should keep their curricula vitae and the evaluation forms in
its files.

— The Standard Administrative Provisions should give a more
precise definition of eligible costs in order to avoid differ-
ences of interpretation. The Court recommends that the
Commission should adopt the proposals resulting from the
audit concerning the keeping of separate accounts for the
projects, staff expenditure, depreciation and the purchase of
land.

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— In particular, with regard to nature conservation projects
where the beneficiary is a public body, the salaries of civil
servants should represent a special contribution by the Mem-
ber States, as is the case with other funds, and only addi-
tional expenditure should constitute eligible expenditure in
the context of the projects.

— The Court considers that the Commission should restrict
financing of purchases of land solely to public institutions or
bodies governed by public law. Financing granted to other
beneficiaries should, if need be, be restricted to covering the
cost of maintenance of the land acquired. Where the Com-
mission continues to grant non-public bodies financing for
purchases of land, it should set up a system of control to
ensure the land is used for the purposes stipulated.

Monitoring, control and evaluation

90.
The work of the TAOs makes up the bulk of the accom-
panying measures. In the context of the procedure for renewing
tenders, an inadequate definition of the tasks assigned to the TAOs
made evaluation of the proposals submitted difficult (see para-
graphs 67 to 72).

For several years the Commission did not carry out suf-
91.
ficient on-the-spot checks on the projects. A greater effort has
been made and now the on-the-spot checks, which mainly con-
cern the financial aspects, are more regular and consistent and
their results bring substantial problems to light (see paragraphs 73
to 75).

‘Environment’ projects, optimum dissemination of the results of
the projects is a crucial element in the success of this instrument
(see paragraphs 78 to 84).

Recommendations

— The Court suggests that the Commission should maintain
and, if possible, increase the number of on-the-spot visits
and should improve their quality. These checks should con-
centrate more on material implementation of the projects
and analyse their success rate in relation to the expenditure
incurred. By employing outside auditors to perform sound
financial management audits, the Commission would have
at its disposal a suitable additional resource for stepping up
its checks.

— The Court attaches great importance to the external audit of
the projects because this is the only means of controlling all
the expenditure in the budget and recommends to the Com-
mission that it should strengthen and improve this instru-
ment by verifying the quality of these audits.

— The Court notes with approval the measures taken by the
Commission, which in 2002 set out a strategy for the dis-
semination of project results. It suggests that it should intro-
duce instruments to analyse the effectiveness and measure
the impact of the projects with a view to setting up a system
for the dissemination of results in accordance with the pro-
posals put forward.

92.
There are great discrepancies in the quality of the exter-
nal certification reports, which are indispensable for effective
monitoring of the performance of the projects, and they are not
always reliable. They are often very brief and, before the new
LIFE III provisions were brought in, concentrated mainly on the
eligibility of expenditure in terms of national legislation (see para-
graphs 76 and 77).

93.
The programme has been evaluated from the point of
view of the implementation of the actions but no general analysis
of its impact has been carried out. Particularly in the case of the

94.
For many years LIFE has been an important instrument
of the Commission’s environmental policy. The Court’s report
highlights the need to improve the existing management proce-
dures in order to increase the effectiveness of the instrument and
the Court urges the Commission to keep up the efforts towards
improvement that have already been made. The Commission
should also pay more attention to using the results of the projects
financed under the LIFE Instrument in order to ensure that a sat-
isfactory relationship is achieved between financing and the attain-
ment of environmental policy objectives. By 2004, the LIFE Regu-
lation should be adapted to meet the specific needs of its various
strands and it should be split up, preferably, to improve manage-
ment of the objectives of these strands.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 11 September 2003.

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

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THE COMMISSION’S REPLIES

SUMMARY

The Commission takes note of the Court’s observations, in

I.
particular concerning LIFE II.

II.
The Commission accepts that there is still room for further
improvements in terms of the objectives and scope of the Regula-
tion and will therefore continue its efforts to specify the objec-
tives of LIFE-Environment in the framework of Community en-
vironmental policy and legislation.

The Commission has taken steps to ensure that evaluation

IV.
documents are systematically kept.

V.
The Commission makes every effort to reduce the risk of
double-funding mentioned by the Court, but, since it is aware of
this problem and in the light of the Court’s remark, it will exam-
ine whether other steps might be considered in order to obviate
this risk even more.

The complementarity between LIFE and other Community sources
is proven in many cases. The scope for improving this comple-
mentarity will be the subject of in-depth reflection.

VI.
The Commission considers that under LIFE III it has made
the improvements suggested by the Court following its finding
concerning LIFE II projects.

The Commission has defined and provided a framework
VII.
for the tasks and responsibilities of the technical and administra-
tive assistance offices (TAOs) for LIFE III.

VIII.
The Commission considers that the management of the
LIFE programme has substantially improved since its restructur-
ing.

(a)

The Commission intends to clarify the role of LIFE-
Environment in relation to the sixth environmental action
programme (sixth EAP).

(b) The integrated management of the instrument has proved to

be effective.

(c) Whenever the Commission has considered it necessary to
use external experts, it has applied a tender procedure.

(d) The Commission considers that the recently adapted Stan-
dard Administrative Provisions (SAP) fully comply with the
new Financial Regulation and are adequate. The Commis-
sion is nevertheless ready to study the Court’s recommenda-
tions in a future revision of the SAP.

(e) Apart from regular technical and financial monitoring visits
(by technical/financial desks and external teams) as well as
financial audits by DG Environment’s Financial Unit, an
external audit of the final statement of expenditure is obliga-
tory for all projects funded under LIFE III.

(f)

The communication strategy is being implemented and has
already led to tangible results.

The following improvements have been made for LIFE III:

INTRODUCTION

(a)

since LIFE III, time sheets are compulsory to record the time
devoted by staff in the context of LIFE projects. The Com-
mission will examine the question of taking account of the
salaries of civil servants;

(b)

since the restructuring of the management of the LIFE pro-
gramme, the number of delayed payments has gradually
been reduced;

(c)

an effort has been made in the context of LIFE III to ensure
better financial arrangements for projects;

1.
LIFE is an instrument which consumes a small portion of
the Community budget (around 0,15 %) and which has developed
significantly over a 10-year period. It has made it possible to build
up a considerable amount of positive experience.

COMMUNITY AID FOR THE PROTECTION OF THE
ENVIRONMENT

(d)

the Commission is prepared to review the terms and condi-
tions regarding land purchased by non-public beneficiaries
(9 %).

9.
Special care has always been taken to the extent possible
to avoid overlaps with other Community funding instruments
and to ensure complementarity between LIFE and other Commu-
nity instruments.

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There are several projects that have worked in synergy with other
funds in the case of LIFE-Nature.

LIFE is currently focused mainly on demonstration
10.
projects. The Commission takes note of the observations made by
the Court.

By May 2003, the number of open files with expired
27.
commitments had decreased to 21. For 15 of these commitments,
there will be either an automatic decommitment (done within six
months after the final payment) or a recovery procedure is in
progress. The remaining six commitments concern problematic
projects for which the Commission has requested further infor-
mation from the beneficiary or a financial audit, or which are cur-
rently under final examination.

CHARACTERISTICS OF THE LIFE PROGRAMME

17.
Coherence between the various fields of action of the LIFE
programme is ensured through compliance with the general objec-
tive of the Regulation. In each field of action, LIFE projects must
contribute towards improving the protection of the environment
on the basis of Community directives. To ensure compliance with
this objective, the Commission, when selecting projects, takes
pains to select them on the basis of their contribution to imple-
menting Community law in their respective fields of activities.
This is an essential (eliminatory) criterion for choosing LIFE
projects.

The Commission considers that

20.
the improvements
achieved since 2001 justify the reorganisation of the management
of the entire LIFE programme, including the financial project
management, within one single unit. Different project themes and
contents do not necessarily require different management meth-
ods or follow-up procedures for the projects.

The Commission has taken specific steps to ensure close coopera-
tion between the LIFE unit and the thematic units of the Directorate-
General for the Environment which cover the fields of action of
the LIFE programme.

Following the reorganisation in 2001/2002 and 2003, manage-
ment procedures and methods have stabilised.

Due to the late adoption of the LIFE III Regulation, it was
24.
impossible to organise a call for proposals and a selection proce-
dure to be terminated before the end of the year 2000.

The unused commitment appropriations of 2000 were conse-
quently carried over to 2001 and consumed at a rate of 90 %.

The ratio is below the threshold of 3 % in the case of

26.
LIFE-Environment (2,4 %) and LIFE-Third Countries (2,6 %).

SELECTION OF PROJECTS

As from the financial year 2003 the Commission selects
30.
experts on the basis of a call for applications. The LIFE unit is cur-
rently preparing a call for tender. For the entire period of LIFE III,
the CVs have certainly been kept systematically.

In this period, the LIFE unit closely examines the CVs of the exter-
nal experts and contracts with the external experts include a ‘dec-
laration of independence’ to be signed by the expert.

31.
The Commission has taken the necessary actions to over-
come these weaknesses under LIFE III. In 2001, the Commission
introduced a transparent computerised evaluation system (‘ESAP’)
to manage the pre-decision phase of LIFE-Environment propos-
als. ESAP covers the entire evaluation, selection and award pro-
cedure, from the online registration of the initial proposal until
the generation of the decisions.

32.
The Commission has taken note of the observations of
the Court. Under LIFE III, the evaluations are carried out indepen-
dently by at least two people. Decisions are then taken collectively
at a meeting between the LIFE units and the Nature unit where all
the proposals are reviewed one by one and commented upon.

36.
The Court’s finding highlights the difficulty of combin-
ing simplicity and precision. There has been a progressive, con-
tinuous and pragmatic effort to improve the evaluation proce-
dure. The LIFE Committee has accepted that a good balance has
been struck between the need for transparency/objectivity and
quality of the projects with respect to the objectives of the LIFE
Regulation.

As a consequence of the experience gained in the management of
the LIFE II programme, the Commission came to the conclusion
that the 3 % ratio for accompanying measures was insufficient.
Consequently, the ratio was raised to 5 % in the LIFE III Regula-
tion.

37.
For the next evaluation round (projects to be financed in
2004), the Commission will publish the details of the evaluation
criteria also for LIFE-Third countries.

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Under LIFE III, Member States have been informed about

38.
the detailed criteria used by the Commission in its selection.

39.
The Member States’ evaluation for the three branches of
the LIFE programme can now be consulted on the computerised
evaluation system (ESAP).

40.
The Commission considers that if a project has to be
withdrawn from the shortlist for whatever reasons, it should be
replaced by the first available project from the reserve list.

Therefore, for Nature projects under LIFE II and for the entire LIFE
III, the Commission no longer responds to Member States’ inter-
vention by replacing projects on a neutrality basis but by taking
from the top of the reserve list.

41.
In order to avoid double-financing of the same project,
from LIFE and other EU funds, the Commission checks the dec-
larations about funding from other EU sources in LIFE applica-
tions and in applications for funding from other directly managed
budget lines. For the Structural Funds, apart from major projects
with over EUR 50 million of EU funding, the Commission is not
involved in project selection. The checking of project applications
for Structural Funds, including the issue of double-funding, is an
essential part of the management and control systems that the
Member States are required to have in place for these funds.
Checking the effectiveness of these systems is one of the main
objectives of the Member States and the Commission in their
audit work.

The Commission therefore makes every effort to reduce the risk
of double-funding mentioned by the Court. However, it is aware
of this problem and in the light of the Court’s remark, it will
examine whether other steps could be considered in order to
obviate this risk even more.

The procedures have been modified for LIFE III-
43.
Environment, and Directorates-General RTD, REGIO, TREN, AGRI,
ENTR, ELARG are being involved in an inter-service consultation
on the proposals. This contributes to a more comprehensive veri-
fication of financial and technical reliability of the participants
and reduces the risk of double-funding.

Where the LIFE unit detects elements that give rise to the as-
sumption of double-financing, the case is further examined and/,
if necessary, the file is transmitted to OLAF.

44.
Since the entry into force of the LIFE III programme, the
obligations of beneficiaries as regards the keeping of accounts for
projects (see reply to point 61) and the recording of working time
(see reply to point 49(b)) have been reinforced.

45.
Since the beneficiary has failed to inform the Commis-
sion, it was virtually impossible for DG Environment to identify
such double-funding. Possible measures to be taken are being
examined.

IMPLEMENTATION OF THE PROJECTS

46.
For LIFE II-Nature projects, detailed SAP have existed
since 1996 and have served as the basis for the harmonised SAP
for LIFE III. The Commission is confident that this single set of
rules for the administration and management of LIFE projects
constitutes a substantial improvement and contribution to the
performance of the Commission services managing the LIFE pro-
gramme. They have simplified and clarified the rules for the
project beneficiaries. Based on the Court’s observations during
the audit phase, the Commission has once again reviewed the SAP
in 2002.

To check the solvency of beneficiaries, the DGs have a
42.
link with external databases. EWX is a tool in Sincom2 allowing
a certain check of the financial reliability of a potential beneficiary
providing indications on beneficiaries at risk. In each DG there is
an ‘early warning system contact point’ which has access to the
complete payments database and to the full third party file of the
Commission and which can therefore check whether payments
have been made, in the past, to a given beneficiary.

47 and 48.
The SAP does not make a distinction between a
private company/organisation or a public institution to establish
the eligibility of expenditure. At present, there is no reason to dis-
allow the costs incurred, if the expenditure is provided for in the
project budget, if the person concerned has worked on the project
and this work has been sufficiently documented by time records.
The part of the salaries borne by the public institution can be
considered as co-financing.

As part of the modernisation of the accounting system, the sup-
plier file will be modified and will make it possible to verify directly
whether Commission contractors have already received other
Community funds.

The Commission will, nevertheless, examine the conditions con-
cerning the Community contribution for the intervention of civil
servants in LIFE-Nature projects.

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In fact, only audits on the beneficiaries’ premises now
49.
increased by the Commission can lead to findings of the nature
described by the Court.

The analysis of the figures shows that the positive devel-
53.
opment already visible in 2001 following the creation of the LIFE
unit has continued to improve in 2002.

Whenever required, the Court’s specific remarks have been or are
being taken into account in the management of the individual
project files.

(a) The correct application of this rule is being monitored. The
Commission refuses now to reimburse expenses that are not
directly related to actual salaries.

(b)

For LIFE III, the project working time of each employee must
be registered.

(c)

(i)

Since this problem has been identified in the past, new
definitions of eligible personnel costs and external assis-
tance costs have been introduced in the SAP for LIFE III
(Articles 6, 21(2) and 21(4)).

(ii) The Commission considers that only the part of the
salary corresponding to the working time actually spent
on the project is eligible. At least for LIFE II-Nature
projects, the then applicable SAP (Article 9) clearly
stipulated that ‘personnel costs shall be charged in
respect of the actual time devoted to the project.’

50.
Based on the Court’s observations during the audit phase,
the Commission has already solved this problem by modifying
the SAP in 2002. The following Article 6(5) was introduced: ‘All
invoices by subcontractors shall include a clear reference to the
LIFE project (i.e. number and title or short title) and to the order/
subcontract issued by the beneficiary/partner. All invoices shall
also be sufficiently detailed as to allow identification of single
items covered by the service delivered (i.e. clear description and
cost of each item).’

51.
The Commission considers that the revised depreciation
rules applicable under LIFE III (eligible costs represent 25 % of the
purchase costs for infrastructure and 50 % for equipment costs)
are appropriate in view of the peculiarities of the programme.
They take account of the fact that several beneficiaries of LIFE
projects are public entities, which often do not apply deprecia-
tion on durable goods but register the full purchase price as
expenditure at the moment of the acquisition. The Commission
considers that the present rule meets the need to simplify the
method of how durable goods are accounted for, both at the time
of the evaluation and selection of the project proposal as well as
at the moment of interim and/or final payment procedures.

54.
Adequate measures have been introduced to overcome
this problem. Now, whenever an outstanding reply is overdue, the
responsible desk officer is alerted by a computerised monitoring
and control tool (see point 55 ‘Butler’) and is therefore automati-
cally required to take the necessary follow-up steps.

55. — The problem raised by the Court was due to an unsuc-

cessful result of the tendering procedure.

— Due to the workload and the unpredictability of incom-
ing reports with payment requests, some short-term
delays in the treatment of the files are almost inevitable
at certain periods. The frequency of such a situation has
however gradually decreased since the creation of the
LIFE unit.

— The Commission has since introduced a computerised
monitoring and control system (‘Butler’) for the monitor-
ing and the follow-up to all three components of the LIFE
programme, including payment requests.

Since 2002, the LIFE unit examines proposals from the
56.
financial point of view. One of the major aspects of the financial
analysis prior to the funding decision consists of assessing the
realistic nature of the conditions laid down by the partners/co-
financers before committing themselves to a project. This risk
analysis is designed to enable the Commission to take its deci-
sions with a full knowledge of the facts.

57 and 58.
The Commission has taken note of the Court’s
observations and will take the necessary steps. In addition, the
2003 standard administrative provisions have been modified
(Article 13(2)) in order to include the obligation for the benefi-
ciary to obtain the written agreement of the Commission before
any substantial modification of the funding plan while a project
is being carried out.

59.
Based on the information received from the Court dur-
ing the audit phase, the Commission has also taken action to
investigate the case further.

60.
The standard administrative provisions applicable to the
LIFE III programme require beneficiaries to keep specific accounts.

The Commission will however examine the feasibility of introduc-
ing a more precise, but still simple, method for the calculation of
the eligible costs for durable goods if the LIFE programme is con-
tinued.

Appropriate steps have been taken following the Court’s

61.
remarks concerning this project.

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In the second case referred to by the Court, the Commu-
62.
nity contribution was partially recovered and the beneficiary was
included in the list of organisations excluded from LIFE funding
until clear proof was received that the administrative deficiencies
were eliminated and a reliable accounting system installed. On the
occasion of an additional financial verification, the Commission
could establish that the beneficiary had meanwhile introduced a
new and effective accounting system comprising the necessary
tools for analytical and thus project specific accounting.

63.
The thorough examination of proposed costs for land
purchase according to clearly established written and published
rules constitutes an essential part of the evaluation procedure for
LIFE-Nature project proposals. There is always a notarial clause of
alienation of the land to ‘Nature’ and 91 % of the land is pur-
chased by public bodies.

In the case of the small percentage of land (9 %) which is
65.
not purchased by public bodies but essentially by nature protec-
tion NGOs, the Commission is prepared to examine measures
offering even more guarantees than at present (notarial clause of
alienation).

FOLLOW-UP, CONTROL AND EVALUATION

The Commission continues its effort to constantly

66.
improve the required procedures already in place.

The tasks of the external teams for LIFE-Third countries
68.
are described in more generic terms, but two long meetings have
been devoted to a detailed description of their tasks at the begin-
ning of the contract; and the agreed vademecum is applied to
them as well.

69.
Under LIFE III the working methods of the TAOs have
been standardised. The Commission takes note of the Court’s
observation with regard to the evaluation of the TAOs as a whole.

70.
The Court’s observation refers to the period 2000/2001
which was exceptional since, contrary to the Commission expec-
tations, the late adoption of the LIFE III Regulation delayed a
selection exercise.

The Commission has since negotiated a new overall contract with
a single external team in 2001. The distribution of staff was cal-
culated on the basis of the number of foreseeable projects (the
Commission is forced to make estimates since it never knows in
advance how many projects will be selected per Member State)
and the external team has been asked to provide more services in
terms of communication (new LIFE communication strategy). The
negotiation of a single contract for all the external teams makes
for greater flexibility in the utilisation of the external staff accord-
ing to the number of projects actually adopted in the different
countries.

The previous monitoring teams contracts did not
71 and 72.
foresee any obligation to hand over the project files to a new
team. However, the handing over of these files has in most cases
been achieved through voluntary agreements. The new contracts
starting from 2001 have remedied this lack by including such an
obligation.

73 to 75.
The current approach to on-the-spot audits was
developed during the period up to 2001 following the identifica-
tion of the need by the Commission to supplement the existing
arrangements provided by other services.

The fundamental requirement of the Commission was, and still is,
for the Financial unit to focus on the financial aspects of projects
and specifically the eligibility of costs. On the other hand project
performance and outputs were deemed to be the responsibility of
the operational units concerned.

From 2002 on clearer audit project selection criteria have been
developed and documented and audit reports have been standar-
dised. In addition, experience gained is now being applied to the
preparation of a model audit programme and to the refinement
of the risk analysis, for the selection of the projects for audit.

For LIFE II-Environment projects, the ‘administrative and
76.
information’ distributed to beneficiaries included a
financial
detailed ‘standard work programme for the audit of expenses’ in
public sector and private sector versions.

The quality of the audit certificates is variable and range from
very detailed and thorough reports to simple declarations claim-
ing the correctness of the financial statements. Since an insuffi-
cient external certification of the expenditure alone cannot result
in the rejection of a final financial statement, the Commission’s
responsible financial desk run an in-depth examination.

The Commission takes note of the Court’s observation
77.
concerning the lack of precise form and content rules of the audit
reports and is envisaging a new updated set of guidelines for
external audits.

78 to 80.
The Commission has taken steps to be able to carry
out a more precise and overall assessment of its activities under
LIFE III (preparation of databases, final data sheets by project with
key words, LIFE-Nature study, cross-sectional studies for water
and agrienvironmental measures. The Commission has also had
an external evaluation carried out.

81 to 84.
With regard to the Court’s observations concern-
ing the requirement for improved dissemination of project results,
The Commission services have developed a communication strat-
egy in 2002.

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The individual measures in the strategy including the LIFE website
supplement the many local, national and international commu-
nication activities in relation to the LIFE projects.

— The present definitions of cost eligibility are compatible with
those set out in the implementing rules for the new Financial
Regulation. The Commission will examine the Court’s rec-
ommendations in the revision of the SAP.

CONCLUSIONS AND RECOMMENDATIONS

The efforts made have been effective, as the results
85.
obtained since 2001 show. The Commission would refer in par-
ticular to its replies to points 30, 31, 46, 53, 54, 55, 84.

The Commission recognises that there is room for

86.
improvement where LIFE-Environment is concerned.

The Commission will examine whether improvements

87.
can be made.

— The Commission will examine the question of taking into

account the salaries of civil servants.

— The Commission will examine the issue of land purchased
by private entities which represents 9 % of the land acquired
through the LIFE programme.

90.

The Commission has since rectified this situation.

The Commission will draft a new updated set of guide-

92.
lines for external audits if the LIFE programme is continued.

The Commission will evaluate the LIFE instrument in the

93.
light of progress with carrying out the programme.

Recommendations

The Commission will take the necessary measures to define more
precise objectives in future action programmes.

Recommendations

It is prepared to examine means of improving the effectiveness of
the inter-service consultation procedures.

Recommendations

— The Commission considers that, since the introduction of
centralised management, the programme is better managed
and that sectoral results are starting to emerge more clearly.

The Commission would like the units responsible for moni-
toring the thematic activities to be more involved in the
monitoring of LIFE to ensure that the instrument makes a
clearer contribution to the achievement of their objectives.

— The Commission has increased the number of its inspection
visits and established procedures aimed at responding to the
Court’s observations.

— External audits, which are already compulsory, need to be
improved. Therefore, the Commission is envisaging the
update of guidelines.

— One of the components of the communication strategy is to
analyse the impact of projects and improve dissemination.

The Commission has improved the management proce-

94.
dures.

The Commission is at present focusing much of its efforts on the
utilisation of results.

— The Commission has launched a call for applications to
recruit outside experts. Evaluation-related elements are now
kept in the ESAP system.

It considers that, since the introduction of centralised manage-
ment, the programme is better managed and sectoral results are
starting to emerge more clearly. It therefore considers that the
LIFE Regulation should not be split up.