Report from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions - SAPARD Annual Report – Year 2003 {SEC(2004)1719}
Date: 2005-01-05
Institutions: European Commission
Subjects: EU aid, EU financial instrument, accession to the European Union, activity report, aid to agriculture, economic integration, implementation of the budget, rural development

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 05.01.2005 
COM(2004)851 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, 
THE COUNCIL, THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 

SAPARD ANNUAL REPORT – Year 2003 

{SEC(2004)1719} 

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1. 

INTRODUCTION 

During  2003,  all  SAPARD  beneficiary  countries  continued  the  implementation  of  their 
programmes.  In  certain  countries,  additional  measures  envisaged  were  implemented.  In 
addition  to  reporting  on  new  developments,  this  report  will,  in  particular,  focus  on  the 
implementation  of  SAPARD  and  absorption  in  the  beneficiary  countries,  and  the  progress 
made  towards  achieving  the  objectives  set  out  in  the  “SAPARD”  Regulation1  and  the 
respective SAPARD programmes. 

The  most  essential  monitoring  data  summarising  the  EU  support  in  the  respective  countries 
have been used in preparation of the annexes designed to provide background data necessary 
for  assessing  the  progress  made  towards  achieving  the  objectives  set  out  in  the  SAPARD 
Regulation. 

2. 

SAPARD – STATE OF PLAY 

2.1 

State of Programme Implementation 

The main objectives of SAPARD, as outlined in the SAPARD Regulation are: 

•  to contribute to the implementation of the acquis communautaire concerning the common 

agricultural policy and related policies,  

•  to  solve  priority  and  specific  problems  for  the  sustainable  adaptation  of  the  agricultural 

sector and rural areas in the beneficiary countries. 

Within  the  framework  of  these  objectives,  each  beneficiary  country  defines  their  national 
objectives  and  priorities  on  the  basis  of:  a)  a  needs  assessment  (SWOT  analysis);  b)  the 
perspective for accession; c) the resources available and d) the national policies. To achieve 
the  objectives  set  out  in  their  programme,  beneficiary  countries  can  choose  to  apply  one  or 
more  of  the  fifteen  different  measures  specified  in  the  SAPARD  Regulation.  By  analysing 
how a particular beneficiary country has channelled EU funds into various sectors under the 
chosen  measures,  it  is  possible  to  make  an  early  assessment  of  the  progress  made  towards 
achieving these objectives. 

All programmes focus in particular on four key measures: a) investments in food processing 
and marketing; b) farm investment; c) rural infrastructure and d) diversification of economic 
activities (Annex A, table I).  

These  measures  relate  in  particular  to  the  two  main  objectives,  or  priority  axes,  of  the 
programmes: a) restructuring and preparing for the implementation of acquis related standards 
in the agricultural sector and b) promoting sustainable economic development and job creation 
in rural areas. An overview of the funds allocated and the levels of commitments per measure 
in each country are provided in Annex B. 

Agri-environmental  measures  are  included  in  all  SAPARD  programmes  in  beneficiary 
countries  except  for  Slovenia2.  These  measures  are  designed  as  pilot  actions  allowing  the 
countries to gain practical experience in implementation of agri-environmental actions prior to 

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Council  Regulation  1268/1999  on  Community  support  for  pre-accession  measures  for  agriculture  and 
rural  development  in  the  applicant  countries  of central  and  eastern  Europe  in  the pre-accession  period 
(OJ L 161, 26.6.1999, p. 87). 
In Slovenia such actions have already been implemented as part of an advanced national scheme. 

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accession3.  As  regards  the  first  priority  axis,  which  concerns,  in  particular,  investments  in 
agricultural  holdings  and  the  food  processing  industry,  emphasis  has  been  placed  on  the 
sectors where acquis related investments are most demanding. 

As  regards  investments  in  agricultural  holdings,  the  most  essential  sectors  in  terms  of 
requirements for acquis related investments are the livestock sectors and, to a certain extent, 
the  wine,  fruit  and  vegetable  sectors.  Investments  in  the  crop  sector  are  largely  focused  on 
rationalisation, mechanisation and the improvement of efficiency. As illustrated by Annex B, a 
significant  share  of  the  investments,  with  a  few  exceptions,  relate  to  investments  in  these 
sectors. 

Data  from  programme  monitoring  and  the  mid-term  evaluation  reports  suggest  that 
investments in the crop sectors have progressed faster than investments in the livestock sectors 
due to, inter alia, economic problems and a lack of financial resources available for the latter. 
The  Commission  is  addressing  this  issue  in  the  context  of  following  up  on  the  annual 
implementation reports and, where appropriate, the mid-term evaluation reports (MTE). This 
includes reviewing and, if necessary, adapting the programmes in accordance with the Multi-
Annual  Financing  Agreement  (MAFA),  with  the  objective  of  improving  access  to  the 
programme  for  the  sectors  requiring  most  support  to  prepare  for  accession,  and  to  achieve 
balanced progress in all sectors covered by this measure. 

As  regards  investments  in  food  processing  and  marketing,  the  need  for  acquis  related 
investments  to  meet  acquis  standards  is  most  pressing  within  the  dairy  and  meat  processing 
sectors.  Meeting  EU  standards  is  also  important  in  the  fishery,  wine,  fruit,  and  vegetable 
sectors.  A  significant  share  of  investments  under  this  measure  relates  to  investments  in  the 
sectors  with  a  tendency  towards  a  higher  activity  level  in  the  field  of  further  procession. 
Investments  in  first  stage  processing,  and  in  particular,  slaughterhouses,  develop  at  a  slower 
pace. Data from programme monitoring and, where appropriate, the MTE suggest that there is 
a certain amount of  deadweight  investment,  especially in the  further processing  sectors. The 
Commission  is  addressing  these  issues  in  the  context  of  following  up  on  the  annual 
implementation and the MTE with a particular emphasis  on  reviewing the programmes with 
the objective of strengthening the focus of the programmes on acquis related investments and 
the preparation for accession. 

The group that contributes in particular towards achieving the second priority axis consists of 
investments  in  rural  infrastructure  and  the  diversification  of  economic  activities  with  an 
emphasis on investments in local infrastructure, communication networks and job creation. 

As to the investments in rural infrastructure, the most important activities relate to investments 
in local roads, water supply and sewage systems with the level of investments depending on 
the situation in their respective rural communities and the objectives set out. 

With  regard  to  the  investments  in  diversification  in  economic  activities,  the  most  important 
activities  relate  to  investments  in  improvement  and  development  of  rural  tourism  facilities, 
small and medium sized food processing enterprises and local service providers. 

As regards agri-environment measures, the progress made in preparing for the implementation 
of  this  measure  varies  as  beneficiary  countries  have  either  focused  efforts  on  improving 
efficiency  in  the  implementation  of  already  accredited  measures  with  a  view  to  increasing 
absorption, or have concentrated on preparing the post-accession agri-environment measures. 
In the Czech Republic and Slovakia, Commission decisions conferring management of aid for 

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Such actions will constitute an obligatory element of post-accession rural plan development. 

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agri-environmental  measures  were  taken  on 19/02/2003 and 14/08/2003 respectively. By the 
end  of  2003,  the  Czech  Republic  contracted  36 projects  committing  a  total  of  €524 380  of 
SAPARD  funds.  The  first  payment  made  to  the  Czech  Republic  in  January  2004  totalled 
€124 756. 

2.2 

Monitoring of programme implementation 

In  2003,  19  Monitoring  Committee  meetings  were  held.  The  main  topics  of  discussion  and 
decisions  were  as  follows:  a)  monitoring  the  implementation  of  SAPARD  programmes  by 
using previously agreed monitoring indicators; b) approving modifications to be introduced in 
the  SAPARD  programmes;  c)  examining  the  MTE  reports  and  d) approving  the  annual 
implementation reports prior to submitting them to the Commission. 

Monitoring of commitments 

Each  country  has  been  monthly  communicating  the  commitments  of  the  SAPARD  Agency 
made to its final beneficiaries. This information has proved useful for benchmarking, the early 
warning of a lack of progress and the potential risk of cancellation of unused appropriations. 
This  has  enabled  the  Commission  to  address  such  issues  at  an  early  stage  by  advising  the 
countries on ways of ensuring more effective implementation. 

Programme modifications 

In  2003,  9  SAPARD  programmes  have  been  amended  by  12  Commission  decisions.  The 
amendments took into account the results of the practical implementation and prepared further 
measures for the conferral of management. (Annex D, table I). 

Mid-Term Evaluation (MTE) 

By the end of 2003, every beneficiary country, except for Romania, had submitted their MTE 
reports4.  The  Commission  is  considering  the  implications  of  the  evaluation  with  a  view  to 
assessing the programme. 

Rural Credit Window 

Due to the difficulties faced by farmers and rural businesses in gaining access to suitable credit 
facilities  for  co-financing  their  projects,  the  Commission  adopted  a  decision  regarding  the 
financing  of  the  PHARE  SME  Facility  for  2003.  A  new  feature  under  this  facility  is  the 
creation  of  a  Rural  Sub-Window  with  the  purpose  of  strengthening  the  financial  sector’s 
capacity  to  provide  financial  services  to  farmers  and  rural  businesses  which  when 
implemented  will  improve  access  to  credits  for  farmers  and  small  and  medium  sized 
enterprises in rural areas. 

2.3 

Changes in Legal Frameworks 

Regulation 696/2003 increased the limits on the intensity of  aid  under Sapard in the case of 
exceptional natural disasters5. 

Regulation  188/20036  provided  detailed  rules  for  cases  of  exceptional  natural  disasters  and 
introduced new deadlines for the cancellation of appropriations, ensuring that all beneficiary 

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Romania submitted their report on 17/05/2004. 
OJ L 99, 17.4.2003, p. 24. 

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countries are treated equally by extending the time limit. The 2000 and 2001 allocations were 
extended to 2004 and 2005 respectively. The 2002 and 2003 allocations were extended 2006. 

These changes were described in the 2002 report. 

2.4 

AFA 2003 

The AFA 2003 was put forward in early 2003 in order to make available appropriations to the 
beneficiary  countries  as  early  as  possible.  It  also  modifies  the  previous  AFA  and  MAFA 
,covers  the  Community  contribution  under  the  2003  budget  (€560  million),  adjusts  the 
provisions  concerning  the  submission  of  applications  for  payment  from  the  Commission, 
aligns its public procurement procedures with those in the Financial Regulation 1605/20027 , 
clarifies that public  procurement  procedures will be transparent, non-discriminatory and will 
not give rise to conflicts of interest and clarifies the definition of “irregularities”, “fraud” and 
the conditions for co-financing general costs8 for a given project. 

Additional resources totalling €3,9 million were made available to the beneficiary countries in 
2004 through an amendment to the AFA 2003 (Annex C, table I). 

2.5 

Execution in 2003 – Financial and Budgetary Issues 

For budget appropriations available and financial execution in 2003 see Annex C, table II. 

2.5.1  Commitment appropriations 

SAPARD budgetary allocations for commitments in the 2003 budget were set at €564 million 
of  which  €560  million  was  allocated  to  programme  line  B7-010,  and  €4  million  to  the 
administrative management line B7-010A. 

On  23/12/2003,  €3,9  million,  the  amount  not  used  by  the  Commission  for  administrative 
purposes under Article 7(4) of the SAPARD Regulation (line B7-010A), was made available 
to programme line B7-010 and was carried over to 2004. No appropriations were carried over 
from 2002 and no appropriations lapsed in 2003. 

2.5.2 

Payments appropriations 

Appropriations for payments were set at €428,9 million for budget line B7-010 (after a global 
transfer of €10 million), and €4 million (of which €3,9 million was carried over to 2004) for 
line B7-010A. 

No appropriations were carried over from 2002. €169,4 million of payment appropriations was 
not  used  in  2003  and  lapsed.  The  major  reason  for  this  was  that  Romania,  for  which  the 
conferral decision was granted in July 2002, did not apply for reimbursement of any incurred 
expenditure chargeable to the 2003 budget, and that the uptake of funds in Poland was lower 
than expected, especially during the first half of the year. The share of these countries in the 
total appropriations is around 61%. 

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OJ L 27, 1.2.2003, p. 14. 
On the Financial Regulation applicable to the general budget of the European Communities (OJ L 248, 
16.9.2002, p. 1). 
General  costs  for  a  given  project  comprise  costs  for  architects,  engineers,  consultants,  and  legal  fees, 
costs  of  feasibility  studies  for  preparing  and/or  implementing  the  project,  and  costs  for  acquisition  of 
patents and licences, directly related to that project. 

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Payments  for  administrative  support  totalling  €82 900  were  made  towards  3  seminars.  Total 
payments for the programmes made in 2003 amounted to €263 378 761. 

Second instalment of payments on account was made to 4 countries in 2003 (Annex C, table 
III). 

Payments  to  reimburse  the  actual  expenditure  as  set  out  in  the  expenditure  applications  for 
payments were made as indicated in Annex C, table III. For Poland and Slovakia this was the 
first time that payments other than the payment on account were made. 

In addition, first payment applications were received from Hungary (in July and October for 
€0,3  million)  and  Romania  (in  November  2003  for  €0,5  million).  These  claims  remained 
outstanding at the end of 2003 due to a lack of necessary documentation. 

Global  commitments  to  the  beneficiary  countries  made  by  the  end  of  2003  amounted  to 
€2 183 billion and covered the AFA 2000 – 2003. 

Payments  made  by  the  Commission  to  the  beneficiary  countries  from  the  beginning  of  the 
programme  to  the  end  of  2003  amounted  to  €417,6  million,  of  which  €207,6  million 
represented  payments  on  account  and  €210  million  reimbursement  payments  based  on 
expenditure declarations (Annex C, table IV). 

3. 

ACTIVITIES IN RELATION TO CONFERRAL OF MANAGEMENT, AUDITS AND CONTROLS 

3.1 

Update on the Conferral of Management 

By  the  end  of  2002,  every  beneficiary  country  was  in  a  position  to  implement  some  of  the 
measures  under  SAPARD.  In  2003,  the  Commission’s  services  focussed  on  the  so-called 
“second wave” of conferral of management covering the remaining measures or a part of those 
measures. 

Decisions were adopted for 6 countries (Annex D, table II). At the end of 2003, in 8 countries, 
the  measures  covered  by  a  conferral  of  management decision represented  more than  90% of 
the budget allocated to SAPARD. 

The conferral audits carried out also aimed at preparing the remaining decisions for Estonia, 
Hungary and Slovenia, which were adopted in 2004. 

After  the  first  wave  of  conferral  of  management,  a  monitoring  of  the  existing  systems  was 
achieved  by  conducting  on-the-spot  checks 
in  Hungary,  Poland  and  Romania. 
Recommendations for improvements were addressed to the authorities concerned. 

3.2 

Clearance of accounts decision 

All countries except for Hungary and Romania have declared expenditure for 2002. 

The  Commission’s  services  have  carried  out  their  own  verifications  of  the  information 
provided before clearing the accounts. Various audit missions were conducted in the SAPARD 
Agencies, National Funds and Certifying Bodies of all countries, except for Romania where a 
desk check was performed. 

The  Commission  decision  of  31/10/2003  has  cleared  the  2002  accounts  of  all  beneficiary 
countries. This decision has been taken without prejudice to the subsequent decisions that aim 
to exclude the expenditure not yet executed in compliance with MAFA. 

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3.3 

Conformity Clearance decision 

A compliance audit enquiry began in September, with five audits carried out by the end of the 
year. The accredited agencies and the local bodies responsible for the management and control 
of the SAPARD measures implemented in Bulgaria, Estonia, Lithuania, Latvia and Slovenia 
were  subject  to  an  overall  verification  of  the  implemented  procedures.  Selected  samples  of 
payment files were also examined and some final beneficiaries were inspected on the spot. 

The auditors focussed particularly on specific requirements of MAFA that were considered to 
present  a  higher  degree  of  risk  as  regards:  a)  the  principles  of  sound  financial  management 
and,  in  particular,  economy  and  cost-effectiveness;  b)  double  funding  or  overlapping  of 
funding;  c)  expenditure  not  eligible  for  Community  co-financing  under  SAPARD; 
d) eligibility  criteria  set  out  in  the  rural  development  programmes  for  each  measure;  e)  the 
extent and quality of controls; f) the changes in staff considered as “key personnel”; g) public 
procurement and h) specific allegations. 

The weaknesses detected were addressed to the authorities concerned in the form of a letter of 
observation. The application of possible financial corrections to the expenditure affected will 
be evaluated at the end of the present enquiry. 

3.4 

Threat of possible de-commitment not materialised 

The  new  deadlines  for  the  cancellation  of  appropriations  would  be  applied  from  the  end  of 
2004. Recent developments suggest that there will be no cancellations. 

3.5 

Work carried out in relation to the Court of Auditors 

Throughout  2003,  the  Court  of  Auditors  continued  closely  monitoring  the  execution  of 
SAPARD.  The  main  observation  made  in  the  Annual  Report  2002  was  the  slow 
implementation,  and  as  a  result  the  amount  of  unused  budget  payment  appropriations  which 
lapsed. In 2003, the Court also started working on a special SAPARD report which was finally 
presented to the Commission on 19/02/2004. 

3.6 

Information 
on  OLAF 
communications from beneficiary countries 

activities 

concerning  SAPARD 

irregularity 

In  2003,  all  beneficiary  country,  except  Romania  and  Hungary,  received  payments  from  the 
Commission which obliged them to report on the irregularities.14 cases of irregularities where 
brought to the attention of OLAF.A timely forwarding of the information in Estonia prevented 
an  irregularity  of  an  obvious  conflict  of  interest.  The  experience  shows  the  majority  of 
irregularities  arise  from  the  incorrect  application  of  the  legislation  governing  the  public 
contracts, or the provision of wrong documentation. 

Working together with notified beneficiary countries, OLAF initiated various inquiries. 

4. 

SEMINARS 

A seminar on developing and promoting local initiatives in the beneficiary countries was held 
in Pardubice, Czech Republic, in May. It provided a forum for the exchange of views on the 
implementation  of  SAPARD,  especially  the  work  involving  NGOs.  The  Member  States  and 
beneficiary  countries,  exchanged  views  on  involving  local  partners  in  developing  efficient 
partnerships  at  local  level  and  with  central  governments  to  support  the  implementation  of 
SAPARD. 

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A  second  series  of  workshops  on  evaluation  was  to  assist  each  beneficiary  country  with  the 
task  of  managing  their  MTE  exercises  was  held  for  all  countries,  except  for  Slovenia.  They 
provided  reinforced  Commission  Guidelines  on  MTE,  ensured  that  the  evaluation  exercise 
would  be  undertaken  in  a  comprehensive  and  timely  fashion  and  addressed  specific  queries 
raised by the evaluators. 

5. 

POST-ACCESSION TRANSITION 

As 8 out of 10 beneficiary countries became Members States in May 2004, the Commission 
has  taken  certain  actions  to  facilitate  transition  from  the  SAPARD  to  post-accession  Rural 
Development instruments: 

•  The  organisation  of  a  seminar  on  “Post-Accession  Rural  Development  Instruments”  in 
March 2003, where guidelines for the transition from SAPARD to these instruments were 
presented. 

•  The preparation of the legal framework on the basis of the Act of Accession Articles 32(5) 

and 33(5) that mainly addresses the following issues: 

– 

– 

Rules facilitating the transition from SAPARD to the programming instruments 
available  to  the  Member  States.  These  rules  define  when  the  new  Member 
States  must  stop  contracting  under  SAPARD  as  well  as  the  way  to  deal  with 
projects contracted under SAPARD but for which funding was not sufficient. 

Rules on the continuation of the application of the AFA and MAFA in the new 
Member  States  until  closure  of  the  SAPARD  programmes,  including  certain 
necessary adaptations of these agreements to take into account the new status of 
these countries. 

The above provisions were adopted by the Commission in 2004. 

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