Official Journal of the European Union, C 72, 22 March 2005
Date: 2005-03-22
Institutions: European Union
Subjects: Commission Delegation, European Commission, European Court of Auditors, administration of the Institutions, aid policy, interinstitutional relations (EU), report

Official Journal
of the European Union

English edition

Information and Notices

Notice No

Contents

I

Information

Court of Auditors

ISSN 1725-2423

C 72

Volume 48

22 March 2005

Page

2005/C 72/01

Special Report No 10/2004 concerning the devolution of EC external aid management to the Commission
delegations, together with the Commission’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 10/2004

concerning the devolution of EC external aid management to the Commission delegations, together
with the Commission’s replies

(pursuant to the second subparagraph of Article 248(4) of the EC Treaty)

(2005/C 72/01)

TABLE OF CONTENTS

Paragraphs

Page

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

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

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Court’s audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Process of devolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Overall management of devolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preparation of delegations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preparation of headquarters for monitoring and support role . . . . . . . . . . . . . . . . .

Results of devolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Indicators for measuring results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Speed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Robust financial procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I-IX

1-14

1-5

6-14

15-63

15-38

15-18

19-26

27-38

39-63

39-42

43-55

56-60

61-63

64-73

74-82

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

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

3

4

4

5

6

6

6

6

7

9

9

10

11

12

12

13

15

16

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ACP

ALAT

CRIS

DEV

EAMR

EC

EDF

EuropeAid

F & C

FR

HQ

IAS

NGO

OLAS

RAC

RAL

RELEX

SINCOM

TAO

GLOSSARY OF ABBREVIATIONS

African, Caribbean and Pacific (countries)

Local technical assistance agent

Common Relex Information System

Directorate-General Development

External assistance management report

European Community

European Development Fund

EuropeAid Cooperation Office

Finance and contracts (unit)

Financial Regulation

Headquarters

Internal Audit Service

Non-governmental organisation

On-line accounting system

‘Restant à contracter’ = commitments to be contracted

‘Restant à liquider’ = commitments to be paid

Directorate-General External Relations

Accounting system of the Commission

Technical assistance office

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SUMMARY

I.
In May 2000 the Commission announced a major reform of the management of its external aid pro-
gramme, the main objectives being to make radical improvements in the speed and quality of EC external aid,
while ensuring robust financial procedures. A key component of the reform is the extensive devolution of aid
management tasks and responsibilities to the Commission delegations. As a result of devolution, delegations
are now responsible for project preparation, contracting, and financial and technical implementation, and have
received substantial extra human and technical resources. Devolution also has important consequences for the
central services of the EuropeAid Cooperation Office (or EuropeAid) in Brussels, as their role is moving away
from direct management of projects towards monitoring and supporting delegations (see paragraphs 1 to 5).

The Court has visited 10 delegations as well as the central services in Brussels, to examine whether the
II.
Commission has managed the devolution process successfully and whether devolved management in the del-
egations is starting to achieve the intended results (given that the delegations had only worked under devolved
management for a fairly short period) (see paragraphs 6 to 14).

III.
The devolution of aid management responsibilities to 78 delegations constituted a major reorganisa-
tion of the Commission’s services in the area of external aid and its implementation is a considerable achieve-
ment, with almost all delegations operating under devolved management by summer 2004 (see paragraphs 15
to 17).

IV.
Regarding the Commission’s management of the devolution process, it can be considered rea-
sonably successful, at least as far as the delegations themselves are concerned. Its planning process, however,
did not incorporate a number of elements which could have facilitated its control over that process, and some
problem areas need further attention (see paragraph 18).

V.
In general, delegations have been reasonably well prepared to operate under devolved management,
although there are problems with filling posts and there is a continuing need for training. The preparation of
the headquarters’ (HQ) services has been less well planned, lacking both analysis and consultation. Delegations
still require considerable support in adjusting to their new role, and central services find it difficult to provide
delegations with the support required, as thematic expertise is becoming thinly spread across geographical
directorates due to reductions in HQ staffing. Although HQ services have developed a number of monitoring
instruments and have provided substantial support to delegations, there is scope for improvement in both areas
(see paragraphs 19 to 38).

VI.
Regarding the results of devolution, it is still too early, after less than two years of devolved man-
agement, to see the envisaged improvements in the speed and quality of EC external aid. Also, the lack of a
complete set of performance indicators at an early stage in the devolution process makes it difficult to mea-
sure progress against the main objectives (see paragraphs 39 to 42, 48 to 51, 53, 56 and 57).

However, in the majority of delegations visited there are signs that devolved management is on the
VII.
right path to achieving the intended results. The speed and quality of project management are benefiting from
the increased capacity in the operational units of the delegations and from having the finance and contract staff
available on the ground. This leads to a better problem-solving capacity within the delegation and to increased
contacts with beneficiaries and other relevant parties as well as to a better understanding of local conditions,
risks and opportunities. Robust financial management procedures are generally ensured under devolution but
are not yet sufficiently developed in respect of the financial monitoring of implementing organisations (see
paragraphs 43, 46, 54, 58, 61 and 62).

VIII.
For the time being, problems in recruiting staff with appropriate expertise and using this expertise in
an optimal way, difficulties experienced by HQ in providing support to delegations, as yet inadequate financial
information systems and complicated procedures are limiting the expected results of devolution in terms of
increased speed and improved quality of project management (see paragraphs 44, 45, 47, 52, 55, 59, 60
and 63).

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The main recommendations made on the basis of the Court’s observations and conclusions are the

IX.
following:

— appropriate indicators should be introduced, relating to both speed and quality of aid, which measure

progress from year to year and against standards to be set,

— the actual costs of devolution should be monitored against the estimated costs,

— the Commission should ensure that its recruitment procedures, salaries and other conditions of employ-
ment can attract staff with the appropriate expertise to fulfil the increased staffing needs of its delegations,

— thematic expertise present within HQ services should be organised in order to provide good quality sup-

port to delegations in an efficient way,

— HQ’s monitoring and support role should be further developed, notably by improving the financial infor-

mation systems and addressing outstanding training needs,

— the Commission should increase its efforts to try to reduce delays in project implementation, particularly

delays in making payments, which occur outside the delegation,

— in order to optimise the results of devolution, the Commission should continue to pay particular atten-
tion to the simplification, harmonisation and clarification of financial and contractual procedures.

INTRODUCTION

Background

1.
In May 2000, the Commission announced a major reform
of the management of its external aid programme (1) based on the
principles in its White Paper on the reform of the Commission in
general (2). Its main objective, as stated in the Commission’s Com-
munication, is to make radical improvements in the speed, qual-
ity and profile of EC external aid. More specifically, the basic aims
are described as follows:

— to reduce substantially the time taken to implement projects,

— to make significant improvements in the quality and respon-

siveness of project management,

— to ensure robust financial, technical and contract manage-
ment procedures, in line with the best international standards
of propriety and accountability,

— to improve the impact and visibility of EC development

cooperation and aid.

(1) Communication to the Commission on the reform of the manage-
ment of external assistance, 16 May 2000, also referred to as docu-
ment SEC(2000) 814/5.

2.
A key component of the reform is devolution i.e. the del-
egation of tasks and responsibilities concerning the management
of EC-financed cooperation activities from the Commission’s
headquarters in Brussels (i.e. EuropeAid) to its delegations in the
beneficiary countries across the world (3). Final responsibility still
remains with the headquarters of the Commission in Brussels.
Other important elements of this reform are: strengthening multi-
annual programming; integration of the project cycle; creation of
a single body in charge of project implementation (EuropeAid);
developing a common administrative culture within the External
Relations services; and actions to eliminate old and sleeping
commitments.

(3) On many occasions in the past the Court has criticised the Commis-
sion’s overly-centralised management of external aid programmes and
the lack of responsibilities and resources in its delegations. See, for
example, the following reports by the Court:
— Special Report No 21/2000 on the Management of the Commis-
sion’s aid programmes, in particular on country programming,
project preparation and the role of Delegations, paragraphs 51 to
53, (OJ C 57, 22.2.2001, p. 1).

— Special Report No 1/98 in respect of bilateral financial and tech-
nical cooperation with non-member Mediterranean countries,
paragraph 39 (OJ C 98, 31.3.1998, p. 1).

— Special Report No 3/97 concerning the decentralised system for
the implementation of the Phare programme, paragraphs 2.13 to
2.22 (OJ C 175, 9.6.1997, p. 4).

— Annual Report 1997, paragraph 5.23 (OJ C 349, 17.11.1998,

(2) COM(2000) 200.

p. 1).

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The guiding principle for the devolution exercise was for-
3.
mulated in the May 2000 Communication as follows: ‘all that can
be better managed and decided on the spot, close to the field,
should not be managed or decided in Brussels’. In operational
terms, the most significant changes for delegations resulting from
devolution are that they are responsible for the identification of
projects/programmes and the preparation of financing proposals
(but with approvals required from HQ), as well as for contracting
and financial and technical implementation (1). At the same time,
the devolution process was also used to address the problem of
general understaffing of delegations to enable them to carry out
operational functions more effectively or to assume the aid man-
agement functions previously performed by technical assistance
offices (TAOs) (2).

Devolution also has important consequences for the cen-
4.
tral services in Brussels as their role evolves away from direct
management of projects towards monitoring and supporting del-
egations (including coordination, quality control and improve-
ment in working practices).

5.
The devolution process involves all geographical areas
covered by the Commission’s external aid programme, whether
financed through the Commission’s budget or through the Euro-
pean Development Funds. Devolution was planned in three
‘waves’ of some 20 to 30 delegations each, in the years 2001 to
2003, covering 78 delegations in total (3). The first group of
21 delegations started to operate with devolved management
from the beginning of 2002, the second group of 26 delegations
(plus the Kabul Office) started at the end of 2002/early 2003, and
the third group of 30 delegations (all of which are in ACP coun-
tries) started at the end of 2003/early 2004. Devolution will con-
cern all programmes, but the geographical programmes (4) are
dealt with first, to be followed by ‘horizontal’ programmes such
as food security, human rights, NGO cofinancing, and regional
programmes (but excluding humanitarian aid, which is not
devolved). According to the Commission, a total amount of
14 billion euro of financial commitments to be paid, relating to
the geographical programmes, was under devolved management
at the end of 2003. This amount represents some 72 % of the
total of such financial commitments.

(1) In the case of budgetary aid the situation is somewhat different, with
delegations responsible for preparing financing proposals and evalu-
ating conditions for disbursements, whilst HQ remains responsible for
the approval of payments.

(2) TAOs were for instance involved in the preparation of financing pro-
posals and monitoring of project implementation. They were phased
out by the end of 2001.

(3) In February 2004 a decision was taken by the Commission also to
devolve operations to its Delegation in Israel, and if the Delegation in
Bosnia is included, which was already devolved before the devolution
process itself started, the total number of delegations operating under
devolved management will be 80.

(4) Geographical programmes are targeted to specific geographical
regions, such as TACIS (former Soviet Union), CARDS (the Balkans),
MEDA (Mediterranean countries), ALA (Asia and Latin America), EDF
(ACP countries) and EPRD (South Africa).

The Court’s audit

6.

The Court’s audit has focused on two main questions:

— has the Commission managed the devolution process

successfully?

— is devolved management in delegations starting to achieve

the intended results?

7.
To answer the first question the audit has looked at the
way in which delegations have been prepared for devolved man-
agement and how the central services have been prepared for
their monitoring and support role.

8.
As for the second question, the audit has specifically
looked at the results in terms of improving the speed and quality
of aid and of ensuring robust financial procedures.

9.
The Court recognises that the devolution process was not
yet completed at the time of the audit (October 2003 to
May 2004) and that the period during which delegations have
worked under devolved management has been fairly short. Yet it
was considered that the preparation and implementation of devo-
lution had sufficiently advanced since its start in 2000 for the
Court to be able to carry out this audit and produce relevant
results, particularly regarding the process of devolution.

10.
Rather than expecting outright improvements in quality
to already become visible in such a short time span, the Court has
been looking, as a first step, for indications of increased involve-
ment of delegation staff in the various phases and activities of the
project cycle. For the same reason the audit has not paid specific
attention to another major reform objective, i.e. to improve the
impact and visibility of EC aid.

Ten delegations (5) were visited in the context of this
11.
audit, seven of these belonged to the ‘first wave’ delegations and
three to the ‘second wave’, while no delegations were chosen from
the ‘third wave’ delegations, as these were expected to start oper-
ating under devolved management, at the earliest, by the end of
2003.

At central level, extensive interviews were held within
12.
EuropeAid (including all its geographical directorates), and within
the Directorates-General for External Relations (RELEX) and
Development (DEV).

(5) The 10 delegations visited (in November 2003 or in March 2004)
were the following: Indonesia, Kenya, Mali, Morocco, Russia, Senegal,
South Africa (all first wave) and Albania, Ethiopia and Uruguay (sec-
ond wave). The delegations in Nicaragua and Tunisia were visited in
early 2003 as part of the preliminary study in preparation for the
audit.

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Concurrently with the Court’s audit, the Commission ser-
13.
vices carried out an evaluation of the devolution process. The
draft report of the evaluation became available to the Court at the
end of 2003, just after the Court had completed its first round of
(six) delegation visits. The report was analysed and compared
with the Court’s findings at that stage, from which it was con-
cluded that there were no significant differences between the main
findings of the two exercises (particularly concerning the major
risk factors involved). The final report of the Commission’s evalu-
ation became available in May 2004 (1).

Reviewing the whole preparation period and the avail-
17.
able documentation covering this period, it is clear that during the
one and a half years between the official decision in May 2000
and the actual start of devolved management in the first delega-
tions in early 2002, there has been extensive planning, consulta-
tion and implementation carried out, in particular by EuropeAid
and by the DGs RELEX and DEV and coordinated through the
Devolution inter-service working group. Since then a similar pro-
cess of preparation has been followed in relation to the second
and third wave delegations. By April 2004 devolution was opera-
tional in 66 delegations and the remaining 12 delegations of the
third wave were expected to be devolved by mid-2004.

In 2003 the Commission carried out an in-depth audit of
14.
EuropeAid. This audit had a different objective, aiming to provide
a reasonable assurance on the EuropeAid internal control system,
but some of its observations are nevertheless relevant to the
Court’s audit, as they confirm several of the Court’s findings, in
particular concerning the Common Relex Information System.

OBSERVATIONS

Process of devolution

Overall management of devolution

18.
However, the planning process did not incorporate a
number of elements which could have facilitated the Commis-
sion’s control over the devolution exercise. For instance, although
the Commission decision of May 2000 included an action plan,
it did not link devolution activities with expected results. In the
Communication to the Commission of January 2002 (2) the total
annual cost of delegations when fully devolved in 2005 was esti-
mated to be some 177 million euro higher than before devolu-
tion. This estimate did not incorporate savings from reductions in
HQ staffing. The monitoring of actual costs against estimated
costs was not done in a way which enables the overall evolution
of costs (and staffing levels) in delegations and HQ to be clearly
understood. Other such missing elements which are developed
further in this report are reference standards for allocating
resources to delegations (see paragraphs 19 to 21), a global plan
and definition of the new role for HQ (see paragraphs 27 to 28)
and performance indicators for the speed and quality of aid man-
agement (see paragraphs 39 to 42).

15.
Detailed preparation of the devolution process started
following the Commission’s Communication of May 2000. A list
of the key actions and dates in the overall preparatory process of
devolution is included in the Annex.

Preparation of delegations

The process of devolution to all 78 delegations was ini-
16.
tially planned to be completed before the end of 2003. In order
to make this process more manageable, and to benefit from les-
sons learned, delegations were to be devolved in three waves. The
devolution of each delegation involved consultations to assess the
delegation’s needs, followed by the recruitment and training of
agreed staff, the increasing of office capacity and IT equipment
and the establishment of computer connections. Progress towards
these objectives in each delegation was monitored using action
plans. In addition, changes to the staffing and structure of HQ
were being planned and implemented.

19.
Delegations chosen in the first ‘wave’ were informed by
HQ in November 2000, and asked to prepare an estimate of their
needs for additional resources (such as staff, office space and
equipment). Second ‘wave’ delegations were similarly approached
in December 2001. Delegations were told to take into account
indicators such as the volume of aid or the number of projects
and payments, but also particular constraints like the local work
environment and the quality of the local public administration.
No specific methodology was provided to delegations to explain
how to translate such factors into an assessment of the additional
resources required.

(1) Evaluation of the devolution process: final report — 6 May 2004 —

SEC(2004) 561.

(2) Communication to the Commission by Commissioners Patten,
Nielsen, Kinnock and Schreyer: ‘Réforme de l’aide communautaire:
Plan de mise en œuvre et de financement de la déconcentration’.
SEC(2002) 85, adopted by the Commission on 30 January 2002.

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The audit has shown that, in general, delegations were
20.
not able to make such an analysis on their own and requests were
made without any clear indication of how the numbers had been
arrived at. Estimates for additional office space, computers and
other office facilities were easier to make, as these would gener-
ally be based on the manpower estimates.

— shortage of certain types of expertise (F & C staff, civil

engineers),

— restrictions because of local legislation (limited possibilities

to renew temporary contracts),

Although not supported by a specific methodology to
21.
assess resource requirements, extensive consultations took place
between HQ and delegations, concluded by a final hearing
between the Head of Delegation and the Directors-General of the
main DGs involved (RELEX, DEV and EuropeAid). The outcome
of this process has been that delegations’ requests were largely ful-
filled and staff in delegations increased considerably. In general,
delegations received two officials and several support staff for a
new Finance and Contracts (F & C) unit, as well as significant rein-
forcements for the operational unit or units responsible for coop-
eration activities (1).

— uncertainty regarding the future possibilities and conditions
for temporary staff, resulting from the new category of ‘con-
tract agent’ provided for in the new Staff Regulations intro-
duced with effect from 1 May 2004.

24.
As for other necessary resources, such as office infra-
structure, computers and communication facilities, these were,
with few exceptions, provided to delegations without major
problems.

22.
As part of the preparatory process, two separate verifica-
tions for all devolved delegations were carried out by HQ, to
make sure that all basic conditions were fulfilled. The first verifi-
cation was the basis for the subdelegation of responsibility for
commitments and payments from the geographical director of
EuropeAid to the Head of Delegation. The second verification was
carried out a few months later involving visits to the delegations,
making sure
that devolved management was operating
satisfactorily.

While delegations visited during the Court’s audit were
23.
generally satisfied with the number of extra posts allocated, six of
the 10 delegations had experienced problems in getting the posts
filled in time and/or with the relevant expertise. Contributing fac-
tors have been:

— long recruitment process (for officials, individual experts (2)

and ALATs (3)),

Major efforts have been undertaken to provide training
25.
for delegation staff. This included training for officials (in particu-
lar the F & C staff) before they take up their posts in the delega-
tion, training courses given by HQ staff in delegations for all del-
egation staff and specialised training courses on a regional basis.
Course subjects covered, in particular, the Commission’s finan-
cial and contract procedures, the CRIS financial information sys-
tem and the reinforcement of managerial capacities.

26.
Audits at the delegations have shown, however, that
despite all the training efforts undertaken, which were mostly
considered to have been very useful, there still remain unfulfilled
training needs, partly because of the regular rotation of staff, and
partly because of inadequate budget provisions for delegations for
local training and for training-related travel expenses. Recently,
due to the reduction in HQ staff, the planned training programme
for 2004 in the Asia region had to be reduced. Topics on which
further training in delegations is considered desirable include in
particular the CRIS system, the new Financial Regulations (FR) (4)
and their implications, project implementation and monitoring,
and management of staff.

Preparation of headquarters for monitoring and support role

— unattractive conditions (e.g. salary scales, leave entitlements

for ALATs),

Structure and staffing of Headquarters

(1) By way of example, the Delegation in Indonesia, which before devo-
lution had 25 staff, received in the first instance 14 extra staff, six for
the F & C unit, three experts for the cooperation unit and five admin-
istrative and support staff.

(2) Individual experts are specialists with a considerable experience (in
areas such as health, forestry, private sector etc.), with a temporary
contract on terms more or less comparable with officials.

(3) ALAT stands for: ‘agent local assistance technique’ (local technical
assistance agent); these are temporary agents of European nationality,
with different degrees of experience, but usually less experienced than
individual experts, with a local contract.

27.
EuropeAid was established in January 2001. However, a
detailed description of the role of HQ in a devolved environment
was first available in November 2002 (5) following seminars and
workshops during 2002, and further developed in July 2003 (6).

(4) The FR applicable to the general budget and the FR for the ninth EDF.
(5) ‘Définition des fonctions du Siège d’EuropeAid dans le cadre d’un envi-

ronnement déconcentré’.

(6) ‘Mission statement, Responsabilités et tâches des services’.

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There was no analysis in any of the abovementioned
28.
documents which quantified the resources necessary for HQ to
carry out its new tasks and responsibilities following devolution,
such as monitoring (see paragraphs 34 and 35) and support (see
paragraphs 36 to 38). Although the needs assessment for delega-
tions also lacked a quantified analysis of the appropriateness of
staffing levels in delegations relative to the tasks to be carried out,
it was, nevertheless, an iterative process based on extensive dis-
cussions and consultations between delegations and HQ ensur-
ing ownership by the delegation. There was, however, no com-
parable process involving Heads of Units concerning the
assessment of needs for HQ, which consequently lacked both
analysis and consultation.

29.
The January 2002 Communication on the implementa-
tion and financing of devolution secured funding for the 1 400
additional staff in delegations (including 375 officials) but did not
indicate how many would be redeployed from HQ. Nevertheless,
according to the Commission, the number of new posts for offi-
cials allocated for devolution is only 158 (44 for the first phase
in 2001 and 114 for the second phase in 2002). The 217 posts
allocated to delegations in 2003 and 2004 were redeployed from
HQ, although it is not clear on what kind of analysis the decision
to reduce HQ posts was based.

Monitoring role of headquarters

With the devolution of responsibilities,

34.
in particular
those for implementation of cooperation programmes, to its del-
egations, the role of the Commission’s HQ is evolving towards
one of monitoring of, and providing support to, its delegations,
as described in detail in the EuropeAid document ‘Mission state-
ment, Responsabilités et tâches des services’ of July 2003. Con-
cerning its monitoring role, HQ uses a number of instruments to
monitor the activities of delegations, the main ones being the
following:

— external assistance management reports (EAMR), prepared

every four months by the delegations,

— quarterly schedules of commitments, payments, RAC and

RAL (1),

— annual management plan prepared by delegations,

— ‘pipeline’ overview of projects under preparation,

— results-oriented monitoring reports on projects,

— financial information systems, CRIS and for the EDF, OLAS,

Geographic directorates

30.
in EuropeAid have been
requested to contribute to the reduction of 217 posts in 2003 and
2004. Most of these reductions will be met by the thematic units
and by the finance and contracts units. The audit has shown that
as a result some thematic units are no longer in a position to pro-
vide effective support to Delegations.

— field visits,

— audits of internal control systems,

— workload assessments.

31.
In order to meet their quota of the overall reduction in
posts, thematic units have sometimes not been able to offer posts
to experienced staff returning from delegations. Staff remaining in
thematic units who were previously responsible for managing
and processing project files may not be able to adapt easily to the
new role of providing support, sectoral knowledge and advice.

32.
The Commission did not consider that a global planning
approach towards the structure of HQ was realistic, and so a
pragmatic, evolutionary approach was adopted instead. However,
although at the time of the audit there was no overall plan for
restructuring EuropeAid, some consideration had been given to
the idea of reorganising thematic units in order to concentrate
thematic expertise. In this way the knowledge and experience of
HQ can be provided more rationally and efficiently to delegations.

33.
As for the Finance and Contracts units of the different
EuropeAid directorates, a comparative workload assessment
showed great variation between the units in the ratio of number
of posts to number and volume of payments.

Although these monitoring instruments provide HQ
35.
with useful
information on the performance of delegations,
because of a lack of operational instructions the application of
these instruments was not always clear for the staff concerned in
terms of the required scope and depth of the monitoring, and
problems have been encountered in the following areas:

(a)

the workload assessments aim to gradually identify internal
reference standards or the relationship between resources
and workload within delegations, as proposed by the Com-
munication of January 2002. However, because of the small
number of delegations visited and the variety of local condi-
tions, the reference standards have not yet been developed.
Therefore, the workload assessments carried out so far do
not demonstrate whether staffing levels in delegations are
appropriate on the basis of factors such as the delegation’s
tasks and responsibilities, the volume of aid managed, the
number and value of payments made and the quality of the
national administration. Neither do the workload assess-
ments show whether less or more time should have been
dedicated to a particular task or process, whether all tasks
were relevant or whether additional tasks should have been
undertaken;

(1) RAC = ‘Restant à contracter’ = commitments to be contracted.

RAL = ‘Restant à liquider’ = commitments to be paid.

(b)

(c)

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there was initially no requirement to provide feedback to del-
egations on their EAMR reports although it was sometimes
given. This has now been addressed and since the end of
2003 providing feedback to devolved delegations on their
EAMR reports is required. However, EuropeAid sometimes
has difficulty identifying from the EAMR reports what action
is expected from HQ, if any (1);

— thematic networks which are intended to play a key role in
quality support to delegations (3). They aim to provide guide-
lines and practical tools for designing projects,

— substantial financial and contracts support including a CRIS
helpdesk, a mailbox for questions, and the drafting of manu-
als and guidelines.

there is a lack of user-friendly reporting facilities in CRIS, to
the extent that several delegations had set up their own par-
allel databases requiring duplicate input of financial project
data. In one geographical area, missing or erroneous country
codes entered into CRIS made it unreliable as a source of
management information. The potential of CRIS as a moni-
toring tool has not yet been fully realised for ACP countries.
It is intended that forecasting information will be included in
CRIS at the end of 2004 and full integration of OLAS into
CRIS is scheduled for 2006. The Commission audit (see para-
graph 14) concluded in this respect that CRIS was not yet a
mature reporting system.

Support role of headquarters

36.
With the transfer of its implementation responsibilities to
the delegations the new role of HQ, in addition to monitoring,
consists of providing support to the delegations in the prepara-
tion, implementation and evaluation of projects. The geographi-
cal coordination units in EuropeAid in particular will be the focal
point for the delegations’ requests, supported by the thematic
units.

The audit has shown that considerable support has been
37.
provided by HQ to delegations, for example in the following
areas:

— a wide range of training in aid management and financial
procedures, systems and audits, both before staff go to del-
egations and whilst they are there: for example, courses on
aid delivery modalities such as project cycle management,
budgetary support and sector wide approaches,

— substantial assistance in project preparation including con-

tributions from quality support groups (2),

(1) As evidenced in a note from a director in EuropeAid to a head of del-
egation requesting a clear indication of when action was required from
HQ.

(2) There are six quality support groups in EuropeAid for Directorates A
to F which are intended to screen all new projects twice, firstly at the
identification stage and then at financing proposal stage.

38.
However, there is still scope for improvement in the tran-
sition of HQ towards its new support role in a devolved environ-
ment in the following areas:

(a)

the websites of the thematic networks are at variable stages
of development and many need important updating work;

(b)

there are still outstanding training needs in delegations (see
paragraph 26);

(c)

the quality support group for the ACP currently only has the
capacity to screen a sample of 20 % of financing proposals;

(d) EuropeAid did not always make guidance available in the
working language of the delegation. There are now clear
instructions to do so, although translation delays remain;

(e)

the Commission was slow to clarify to delegations how
decentralised management of EC aid by beneficiary countries
should be implemented in the context of the new FR and to
provide guidance on financing procedures for the ninth EDF;

(f)

lack of sufficient capacity in the directorate responsible in
DG RELEX, resulting in delays in approval of staff recruit-
ment proposals from delegations.

Results of devolution

Indicators for measuring results

to

the

The

Commission

Communication

39.
of
16 May 2000, concerning the reform of the management of
external aid, stated that performance indicators would be intro-
duced to measure progress made towards the objectives of the
reform (increasing speed of implementation, improving quality of
aid management and robustness of financial procedures) and to
ensure that the success of programmes was no longer judged in
terms of whether a budget allocation in a given year had been
used.

(3) The thematic networks have existed since 2001 with the creation of
EuropeAid and there are now 11 thematic networks and three net-
works of correspondents. The main method of communicating with
delegations is through websites, created in July 2003.

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A number of indicators were adopted by the Commis-
40.
sion in 2001, mainly based on financial data then available. These
included commitments and disbursements, the related RAC and
RAL, the percentage of invoices paid within 60 days, distribution
of commitments and payments throughout the year and the
number of years needed to complete a project.

41.
The indicators mentioned above may be useful in the
long term and at a global level, but they should be complemented
by other indicators to provide a complete picture of the speed and
quality of project preparation and of implementation on the
ground. At the end of 2003 EuropeAid was still considering addi-
tional performance indicators which would meet this objective.

Several delegations visited during the audit had encoun-
45.
tered specific problems in 2003 in the preparation of new financ-
ing proposals, following the introduction of the new FR appli-
cable to the general budget from 1 January 2003. Delegations
were unsure how to interpret and apply new provisions of the FR
relating to the concept of ‘decentralised management’ of aid
activities by beneficiary countries. Repeated requests for clarifica-
tion were left unanswered by HQ, where the subject in question
was apparently still being studied at the time of the second round
of the Court’s audit visits to the delegations in March 2004. As a
result, a number of project proposals could not be finalised for
lack of a clear understanding and agreement on the implementa-
tion mechanisms to be put in place.

Contracting and payments

42.
The delay in introducing such indicators has resulted in
difficulties in establishing base line data on the situation at the
start of devolution (or the reform). In addition, it is difficult to
identify indicators which isolate the impact of devolution from
the impact of the elements of the wider reform. Moreover, indi-
cators may also be affected by other Commission initiatives such
as the introduction of project cycle management, sector-wide
approaches or new Financial Regulations and by developments in
beneficiary countries, such as changes in the local political envi-
ronment or in the quality of the national administration.

46.
The overall conclusion on the basis of the visits to del-
egations is that the routine processes of making contracts and
payments are managed adequately by the delegations. The main
contributory factor has been that the bigger, first wave delega-
tions in particular have received well qualified, experienced staff
for their Finance and Contracts units (F & C), which has facilitated
the smooth introduction of the basic financial systems and
procedures.

Speed

43.
Through its audit, the Court has tried to find evidence of
any improvements in speed in relation to different activities
within the project cycle for which the Delegation now has spe-
cific responsibility, in particular the preparation of financing pro-
posals, the conclusion of contracts, the payment of invoices, and
project implementation. The first phase of the project cycle, i.e.
of programming, is not dealt with here because this is still the
responsibility of HQ, albeit with an expected greater involvement
of the delegations.

Preparation of financing proposals

44.
Although the ‘pipeline’ schedule of projects under prepa-
ration is closely monitored to ensure deadlines are met, in some
cases devolution has slowed down the speed of project prepara-
tion as delegations pass through the necessary learning process.
For example in 2003 Delegation HQ had to assist some delega-
tions in Asia in preparing draft financing proposals, deadlines had
to be postponed and in the end a higher percentage of commit-
ments were concluded in the fourth quarter than in previous years
(80 to 90 %, against some 50 % before).

47.
In countries where the national administration plays an
important role in the contract and payment process (1), delays
within these administrations are sometimes more serious con-
straints to speedy project implementation than any delays occur-
ring in the delegations (2).

48.
Many delegations do not keep track of specific indicators
to measure the periods used to make payments or to conclude
contracts, nor do they usually set themselves specific objectives in
this respect, other than the formal compulsory periods set by the
FR, by contracts or by published tender procedures (3).

(1) This is specifically the case in the ACP countries but also in other
countries where decentralised project management is being applied,
such as in Morocco.

(2) The audit in the Delegation in Senegal for instance showed that, where
the period used inside the Delegation to process a payment had come
down to about 20 days, this was only a fraction of the time taken by
the project management units or the national administration to per-
form their part of the payment process, which could be counted in
months rather than days. In Morocco, the national administration’s
procedures to process payments or conclude contracts took so long
that the Delegation had decided, rather than trying to assist the gov-
ernment in improving its local procedures, to take over complete
responsibility for all payments and commitments in order to reduce
delays.

(3) An exception was found in Senegal, where the routing slips for pay-
ment visas contained a target number of working days for each stage
of the verification process amounting to an overall total of 21 work-
ing days for processing an invoice for payment at the Delegation.

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The financial information systems used in delegations,
49.
CRIS and (for EDF) OLAS, in principle allow the calculation of the
period used to make a payment, but the checks carried out at a
few delegations indicate a number of errors in the underlying
data (1). The reliability of the EuropeAid performance indicator,
which shows the overall percentage of invoices paid within
60 days, is therefore uncertain.

50.
Indicators on the speed of payments are not available
prior to devolution. A manual test was therefore carried out at
two delegations, whereby a number of similar payments was cho-
sen, some made before devolution (and therefore by HQ) and
some made after devolution, and the periods used to process the
payments were compared. The results were inconclusive, show-
ing an improvement in the case of one delegation (average time
taken went down from 61 days before devolution to 47 days after
devolution), but no apparent change in the case of another del-
egation (average time taken remained around 50 days).

half of the delegations visited, the conclusion of the audit was
that the positive effects of devolution are being offset by other
factors.

54.
One common finding of the audit visits is that project
implementation is benefiting from having the Finance and Con-
tracts unit’s staff available on the ground and from the increased
capacity in the operational units of the delegations. Both factors
contribute to a better understanding of local conditions and
together create a better problem-solving capacity regarding any
problems affecting projects and programmes. Interviews held
with delegations’ counterparts (government officials, project staff,
representatives of other donors) confirm the increased capacity of
delegations following devolution, which allow closer contacts
with, and more involvement by, delegation staff.

55.
However, constraints discussed earlier in the report in the
context of the preparation of delegations and HQ for devolution,
may offset improvements in speed resulting from devolution (see
paragraphs 23, 26, 35(c) and 38).

51.
A number of delegations experienced difficulties in rela-
tion to managing payments and contracts as a result of the many
errors which they encountered in the data previously entered in
the CRIS financial information system, after this system became
operational in the course of 2002.

Quality

52.
EC procedures in the area of tendering and contracting
are complicated. The audit indicates that delegation staff, project
staff and local government officials sometimes meet serious dif-
ficulties in this respect even when there is room for derogation or
more flexible interpretation. Often, tender procedures have to be
cancelled and restarted for lack of a sufficient number of inter-
ested parties or of valid offers. Derogations are not easily
approved by HQ and in certain cases not even possible under spe-
cific rules, which require that the tender process be repeated until
a sufficient number of valid offers is received. In these cases
preparation or implementation of projects is seriously hindered.

Project implementation

53.
The effect of devolution on the speed of project
implementation as a whole can not easily be measured (as the
audit visits at delegation level have shown), certainly not yet
considering the relatively short period during which devolved
management is in place in the delegations (2). For more than

(1) Errors found included the wrong date of issue of an invoice, the non-
entry of the period during which a payment request is suspended, e.g.
for lack of supporting documents and payments made once but
recorded twice in the system.

(2) An ongoing project, for instance, may suffer from a design weakness
or a change in circumstances, which cannot be changed (easily) by
devolution.

56.
Regarding the second main objective of the reform and
of devolution, i.e. to make radical improvements in the quality of
EC external aid, it is too early, after less than two years of devolved
management, to see the full potential effect of devolution on the
quality of aid throughout the whole project cycle. This would
require a period of at least four to five years, until a significant
number of projects and programmes prepared under devolved
management are being implemented.

57.
In addition, it would be necessary to identify at an earlier
stage the most appropriate set of indicators for determining the
quality of aid. The results-oriented monitoring system, which the
Commission expanded in 2002 to cover all regions concerned by
EC external cooperation programmes, is meant to give an appre-
ciation of a project’s or programme’s performance. In the longer
term, these assessments could form an important indicator of the
level of quality of EC aid and, provided that the reports are of a
consistent standard so that they are comparable over time, of any
improvements in quality.

The positive factors referred to above in relation to the
58.
speed of project implementation are also at work in relation to
the quality aspect. The audit has shown that in the majority of
delegations visited there are signs of an increased capacity within
the delegations to deal with the different aspects of development
activities, leading to increased contacts with beneficiaries and
other relevant parties and to a better understanding of local con-
ditions, risks and opportunities. File reviews carried out during
the audit also confirm an increased involvement of delegation
staff in project monitoring activities, such as examination of, and
commenting on, project work plans and progress reports.

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On the other hand, there are also constraints at work,
59.
discussed earlier in the report (see paragraph 56) which may off-
set improvements in quality resulting from devolution.

of standard documents or formats for checklists, routing slips,
and guidelines to be used both inside the delegation and by
project management. In at least two delegations visited the F & C
units have started to address the problem of monitoring imple-
menting organisations, and have developed an approach for
external audits of projects, including their systematic follow-up.

In addition, in most delegations visited there were sev-
60.
eral categories of staff (such as individual experts, ALATs and
local agents) working in the operational units and sharing the
workload, usually in such a way that each of them was respon-
sible for a number of projects. This practice does not ensure that
the different types of resources are used in an optimal way,
because it means that the more experienced experts sometimes
spend a considerable part of their time on relatively simple
administrative tasks.

63.
However, the existence of complicated procedures (see
paragraph 52) and inadequate guidance on financial issues (see
paragraph 45) have in some cases had an adverse effect on the
achievement of the two other objectives of improving speed and
quality of aid.

CONCLUSIONS

Robust financial procedures

Conclusions on the process of devolution

The overall opinion from the devolution audit visits to
61.
the delegations, supported by the findings of a number of con-
current financial audits to the same delegations (1), is that robust
financial management procedures are generally ensured under
devolved management. However, the financial monitoring of
implementing organisations is not yet sufficiently developed. In
particular, although the system of audits of implementing organi-
sations has improved since 2002, discussions on the approach
are still under way and in general the use and follow-up of audit
reports is not yet adequate for the purpose of deriving overall
assurance concerning the legality and regularity of transactions
managed by implementing organisations.

64.
The devolution of aid management responsibilities to
78 delegations constituted a major reorganisation of the Commis-
sion’s services in the area of external aid. Its implementation, with
almost all delegations operating under devolved management by
summer 2004, is a considerable achievement (see paragraphs 15
to 17).

65.
The Commission’s management of the devolution pro-
cess can be considered reasonably successful, at least as far as the
delegations themselves are concerned. Its planning process, how-
ever, did not incorporate a number of elements which could have
facilitated its control over that process, and some problem areas
need further attention (see paragraph 18).

62.
There are signs that devolution is having a positive effect,
leading to improvements in supervisory systems and controls.
The early establishment of a Finance and Contracts unit in a del-
egation, often staffed with a strong and experienced team, has led
in many delegations to a strong emphasis on financial proce-
dures. It also contributed to quicker problem-solving and to
improved practices being followed, e.g. through the introduction

66.
In general, delegations have been reasonably well pre-
pared to operate under devolved management, although there are
problems with filling posts and there is a continuing need for
training in financial systems and project management, despite all
the training efforts undertaken (see paragraphs 19 to 26).

(1) Financial audits were carried out in all the countries visited for the pur-
pose of this audit except Ethiopia and Uruguay. See for more details
the Court’s 2003 Annual Report, in particular Chapter 7 on External
action, and the report on the activities of the EDFs. In this context it is
further noted that, although the Commission adopted internal con-
trol standards in 2001, these will only be applied to Delegations from
2004.

67.
The preparation of HQ services has been less well
planned, lacking both analysis and consultation. Delegations still
require considerable support in adjusting to their new role, and
central services find it difficult to provide to delegations with the
support required, as thematic expertise is becoming thinly spread
across geographical directorates due to reductions in HQ staffing
(see paragraphs 27 to 33).

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Although HQ has developed instruments to monitor del-
68.
egations, such as external assistance management reports (EAMR),
its monitoring role and instruments are not yet fully developed
(see paragraphs 34 and 35).

Similarly, although HQ has provided substantial support
69.
to delegations through training initiatives, quality support groups,
thematic networks and helpdesks, there are still shortcomings
in providing guidance and meeting training needs
(see
paragraphs 36 to 38).

There are also indications that project preparation may
73.
slow down in the short term until delegations have adapted to
their new responsibilities in this area. Although the reliability of
indicators on speed of payments is uncertain due to errors in the
underlying data, contracts and payments are generally managed
in a timely manner by delegations. However, serious delays still
occur outside the delegation, for example in the national admin-
istration and programme management units (see paragraphs 43
to 51).

Conclusions on the results of devolution

RECOMMENDATIONS

70.
It is still too early, after less than two years of devolved
management, to see the envisaged improvements in the speed
and quality of EC external aid. Also, the lack of a complete set of
performance indicators at an early stage in the devolution pro-
cess makes it difficult to measure progress against the main objec-
tives. In the meantime, the Commission continues to use mainly
financial data (such as the level of commitments and disburse-
ments) as indicators of speed, although these can vary for reasons
unconnected with devolution or the reform and are precisely the
very criteria for judging EC aid which the reform intended to
replace (see paragraphs 39 to 42, 53, 56 and 57).

However, in the majority of delegations visited there are
71.
signs that devolved management is on the right path towards
achieving the intended results. The speed and quality of project
management are benefiting from the increased capacity in the
operational units of the delegations and from having the Finance
and Contracts staff available on the ground. This leads to a better
problem-solving capacity within the delegation, and to increased
contacts with beneficiaries and other relevant parties, and to a
better understanding of local conditions, risks and opportunities.
Robust financial management procedures are generally ensured
under devolution but are not yet sufficiently developed in respect
of financial monitoring of implementing organisations (see para-
graphs 54, 58, 61 and 62).

A system of appropriate indicators, based on reliable
74.
underlying data, should be introduced, relating to both speed and
quality of aid, which measures progress from year to year and
against standards to be set, at the global level and at the level of
individual delegations.

The actual annual costs of devolution should be moni-

75.
tored against the estimated costs.

76.
The Commission should ensure that its recruitment pro-
cedures, salaries and other conditions of employment can attract
staff with the appropriate expertise to fulfil the increased staffing
needs of its delegations.

77.
Thematic expertise within HQ services should be organ-
ised in order to provide good quality support to delegations in an
efficient way.

72.
For the time being, problems in recruiting staff with
appropriate expertise and using this expertise in an optimal way,
difficulties experienced by HQ in providing support to delega-
tions, as yet inadequate financial information systems and com-
plicated procedures are limiting the expected results of devolu-
tion in terms of increased speed and improved quality of project
management (see paragraphs 52, 55, 59, 60 and 63).

78.
HQ’s monitoring role should be developed by establish-
ing reference standards for assessing staffing levels in delegations,
by providing more systematic and constructive feedback to del-
egations and by continuing to improve the financial information
systems.

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HQ’s support role should be developed, in particular by
79.
providing more clarification on the new FR (applicable to the gen-
eral budget), ensuring guidance is available promptly in the work-
ing language of the delegation and continuing to address out-
standing training needs.

The good example set by some devolved delegations in
81.
developing a comprehensive and systematic approach to external
audits of implementing organisations, including their systematic
follow-up, needs to be extended to all delegations.

80.
The Commission should increase its efforts to try to
reduce delays in project implementation, which occur outside the
delegation at the level of the national administration or project
units, particularly delays in making payments.

82.
In order to optimise the results of devolution the Com-
mission should continue to pay particular attention to the sim-
plification, harmonisation and clarification of
financial and
contractual procedures.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 8 and 9 December 2004.

For the Court of Auditors
Juan Manuel FABRA VALLÉS
President

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ANNEX

List of key actions and dates in the preparatory process of devolution

— preparatory work on devolution started in 1999 (questionnaire to delegations),

— Commission Communication on the overall external aid reform in May 2000,

— start of Inter-service working group meetings in October 2000,

— announcement of first wave of 22 delegations in November 2000,

— adoption of the ‘Concept opérationnel de déconcentration’ in March 2001,

— hearings on extra resources for first wave delegations in March to May 2001,

— start of devolved management in first wave delegations as from January 2002,

— Commission Communication ‘Plan de mise en oeuvre et financement de la déconcentration’ in January 2002,

— EuropeAid seminar on the role of HQ in the context of devolved management, February 2002,

— EuropeAid internal reference document presenting a ‘Définition des fonctions du Siège d’EuropeAid dans le cadre d’un

environnement déconcentré’, November 2002,

— Reorganisation of EuropeAid, following the devolution process, February 2003,

— EuropeAid Cooperation Office: ‘Mission Statement, Responsabilités et tâches des services’, 25 July 2003.

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THE COMMISSION’S REPLIES

SUMMARY

I.
The wide-ranging reform of the management of external
assistance, launched by the Commission in May 2000, included
both the creation of EuropeAid, which was specifically designed
to cope with the transitional period of the reform, and the devo-
lution of the management of the whole project cycle to the del-
egations. Devolution also increased the role of the delegations in
matters such as the policy dialogue with the authorities on com-
plex public service and governance-related reforms, and in coor-
dination with other donors. The reform was implemented in con-
junction with Commission-wide
the
introduction of a new Financial Regulation, and the abolition of
technical assistance offices) which also had an impact on the
devolution process.

(such as

reforms

IV.
The toolbox of planning and monitoring instruments
applied proved to be effective and appropriate for the manage-
ment of the devolution process.

V.
As devolution progressed, a first reorganisation of the ser-
vices in EuropeAid took place with the adoption of a new organi-
gramme on 17 February 2003. Moreover, adjustments in
response to the change of functions are now addressed through
the headquarters’ management plan. The Commission is examin-
ing measures to organise thematic expertise in full respect of the
respective responsibilities of the directorates-general concerned as
reflected in the Inter-service Agreement of 2001.

The entire exercise for human resource allocation took place
against a background of huge staffing deficit compared with all
major donors, including Member States.

The Commission is committed to overcoming remaining
constraints.

VI.
Devolution was just one element of the overall reform
package. The results of the reform are closely monitored, and
Council and Parliament are kept regularly informed. It is not pos-
sible to dissociate the results of devolution from the results of the
rest of the package. Nevertheless, not only was devolution largely
completed within the timescale envisaged, but it did not result in
the losses of quality, or reduction in speed, which many observ-
ers feared. For instance, prior to the reform, the number of years
needed to design, implement and complete a project was increas-
ing; since 2000, this trend has been reversed, and projects are
now completed faster.

While some skilled posts are difficult to fill in a number
VIII.
of clearly identified countries, the Commission feels that the vari-
ety of staff categories in the delegations generally guarantees a
certain measure of
flexibility and adaptability to
requirements.

staff

Measures are being taken to adapt the structure of the services at
EuropeAid, to improve financial information systems and to sim-
plify procedures in order to provide more effective support to del-
egations. However it is essential to maintain strict standards of
financial control.

The Commission’s position on the Court’s recommenda-

IX.
tions is as follows:

— A set of indicators based primarily on financial data was put
in place from the beginning of the reform. Work on the
development of complementary indicators,
to measure
improvement in speed and quality of aid delivery is ongoing.

— At the end of 2005, after the completion of the devolution
process, the monitoring of costs will allow for a comparison
with initial estimates.

— Devolution has focused attention on improving the recruit-
ment procedures and conditions in the delegations. Efforts
are underway to find more effective ways of filling posts in
reputedly difficult countries.

— The Commission is examining measures to organise thematic
expertise in full respect of the respective responsibilities of
the directorates-general concerned as reflected in the Inter-
service Agreement of 2001.

— Enhancing the role of CRIS (Common Relex Information
System) as a planning and management tool will further
improve EuropeAid’s capacity of monitoring and support.
Significant efforts are being been made to ensure proper
training of delegation staff. More training sessions are now
being organised overseas, and e-learning modules are being
developed.

— EuropeAid is taking measures to improve the performance of

national administrations.

VII.
With devolution, stricter financial controls on imple-
menting organisations (for instance, NGOs or project manage-
ment units) can be applied on the spot by the delegations. Over
recent years, the introduction of standard contractual documents
has contributed to improving the level of control; moreover, since
June 2003, project accounts are subject to an audit before the
final payment is made, and an external audit strategy was fina-
lised in 2004.

— Pursuant to Action 73 of the White Paper on ‘Reforming the
Commission’ the Commission established a centralised unit
to harmonise model contracts and grant agreement manage-
ment. Furthermore, the review of the Implementing Rules to
the Financial Regulation launched by the Commission in
October 2004 proposes a simplified system for awarding
contracts for the Commission’s own account, including those
managed by the delegations.

22.3.2005

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Official Journal of the European Union

C 72/17

INTRODUCTION

2 to 4.
The reform of the management of external assistance
included both the creation of EuropeAid, which was specifically
designed to cope with the transitional period of the reform, and
the devolution of the management of the whole project cycle to
the delegations. Devolution also increased the role of the delega-
tions in matters such as the policy dialogue with the authorities
on complex public service and governance-related reforms, and in
coordination with other donors. The reform was implemented in
conjunction with Commission-wide reforms (such as the intro-
duction of a new Financial Regulation, and the abolition of tech-
nical assistance offices) which also had an impact on the situation.

OBSERVATIONS

16.
It was not possible to complete the devolution by the end
of 2003 for budgetary reasons and for some logistical and staff-
ing issues.

18.
As devolution was only one part of the reform process,
it is not possible to dissociate the results of the devolution pro-
cess from the rest of the reforms.

At the end of 2005, after the completion of the devolution pro-
cess, the monitoring of costs will allow for a comparison with ini-
tial estimates.

23. — The rapid increase in staff in the delegations resulted in
a slow-down in the recruitment process, which can be
blamed on the excessively low growth rate of manage-
ment resources in the delegations and in Brussels. The
pre-assignment
training programmes also have an
impact on deadlines for the filling of posts.

— The Commission is striving to offer local and ALAT staff
contractual conditions comparable to those of similar
employers in the locality. The forthcoming general
introduction of the ‘contract staff’ category should con-
tribute to a significant improvement in the conditions of
employment in the delegations.

— The increasing scarcity of certain candidate profiles and
the creation of posts with new job profiles have caused
delays in the filling of posts. Various measures have been
introduced or planned to resolve this situation.

— The aid-management posts created in local-agent or
ALAT categories are covered by fixed-term contracts.
The reasons for this are not only budgetary but also a
concern that expertise should be more closely matched
to the cooperation programmes to be carried out. Con-
straints arising from local legislation should diminish
considerably with the forthcoming general introduction
of the ‘contract staff’ category.

Regarding the other elements mentioned by the Court, see replies
under respective paragraphs.

— Work is under way to draw up the conditions to govern
the application of the new ‘contract staff’ category from
2006.

19.
The methodology used allowed due account to be given
to particular situations (e.g. regional delegations, size/complexity
of portfolio, easiness/difficulty of recruiting staff, etc.) avoiding an
inflexible ‘one size fits all’ approach.

The outcome of the first devolution phase was used as a guide
and benchmark in assessing demands on resources made by the
heads of delegation in subsequent devolution phases. The entire
approach allowed for adaptations and fine-tuning throughout,
retaining the flexibility needed to deal with many different sce-
narios. The human resources allocation process took place against
a background of a huge staffing deficit compared with all major
donors, including EU Member States. Hence, the approach cho-
sen was to use devolution also as an opportunity to put Delega-
tions in a situation where they would finally have the necessary
human resources to discharge all their responsibilities in the man-
agement of external assistance with the level of quality, speed,
management robustness, impact and visibility envisaged by the
RELEX Reform.

20.
Extensive consultations and continous dialogue ensured
ownership of the process by the heads of delegation and led, as
the Court also points out, to general satisfaction in delegations
with the number of posts allocated. Moreover, in the course of the
first wave of devolution more sophisticated guidelines and bench-
marks were developed for allocation of resources in the subse-
quent waves.

26.
During 2004, with the limited resources at its disposal
(particularly as regard mission expenses), the Commission con-
ducted some 10 training courses in the Asia region covering CRIS
and Finance and Contract procedures. New staff recruited locally
should be trained in delegations by colleagues.

The Commission will maintain its substantial training program.
Distance and eLearning courses are under development, and a first
module on CRIS should become available early 2005. This should
facilitate the access of local staff to training possibilities.

27.
The initial structure of EuropeAid was designed to ensure
the stability of the organisation throughout the devolution pro-
cess by opting for a predominantly geographical structure.

Based on the first experience of the first wave of deconcentration,
the description of the new role of headquarters of November
2002 was drawn up. This new role was at that time relevant for a
quarter of the work of EuropeAid.

As devolution progressed, a first reorganisation of the services in
HQ has taken place with the adoption of a new organigramme on
17 February 2003.

C 72/18

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Official Journal of the European Union

22.3.2005

The adjustment

in terms of allocation of human
28.
resources to the change of functions is ongoing. A workload
assessment of units
in
September/October 2004 as part of the preparations for restruc-
turing which should lead to a new organisational structure by
early 2005.

in EuropeAid was

carried out

Moreover, staffing needs for HQ are addressed through the annual
activity based management (ABM) exercise and reflected in the
management plan. The management plan is the key planning,
management and monitoring tool in headquarters. It allows direc-
torates to plan for and manage change.

29.
Sufficient staff has been redeployed from headquarters
for the identified core needs in delegations. This redeployment
takes place within the annual ABM exercise. As the redeployment
occurs in a phased manner and in conjunction with other staff-
ing movements, the process may not be immediately apparent or
easy to reconstruct. It is nonetheless, and has been from the out-
set, a key aspect of the reform, and of devolution in particular.

30.
EuropeAid is aware of the difficulties in providing effec-
tive support to delegations after the reduction in posts. For this
reason (and the reasons highlighted under the reply to point 27)
the present review process should lead to a new organisational
structure for EuropeAid by early 2005.

31.
EuropeAid has consistently attached major importance
to training staff for the roles they will have to accomplish in a
devolved environment. A large proportion of staff participated
during 2002 and 2003 in exercises to help to adjust to their new
roles and to identify problems which might arise between HQ and
delegations.

EuropeAid has tried to ensure reintegration of staff returning
from delegations. In 2003, 21 officials in the rotation exercise
were thus reintegrated within EuropeAid.

32.
The Commission is examining measures to organise the-
matic expertise in full respect of the respective responsibilities of
the directorates-general concerned as reflected in the Inter-service
Agreement of 2001.

As already foreseen in the 2002 Communication, the work-
load assessment has since been developed as a more general
exercise that can go beyond the effects of devolution and give
assessment criteria that can mirror the changing environ-
ment of delegation tasks and practical work in the future.
The pilot phase of this exercise was finished in October 2004
and the general exercise was launched in November 2004.

The workload assessment methodology is based on a delega-
tion’s tasks and responsibilities, and demonstrates the
adequacy of staffing to carry those out.

(b)

Initial inconsistencies in providing feedback on the external
assistance management report (EAMR) have now been over-
come and steps have been taken in 2004 to ensure coordi-
nated, appropriate and timely replies to delegations.

(c)

In respect of the observations of the Court on parallel data-
bases, some delegations have tended to develop their own
internal excel tables. However, as the CRIS system is continu-
ally being developed and made more user-friendly. The need
for such tables should diminish over time.

Efforts have been taken to ensure the accuracy of the non-
financial data registered in CRIS. In May 2004 a number of
non-financial CRIS functions were introduced for the EDF,
including the project monitoring system (Implementation
reporting).

38.
A reorganisation in early 2005 should improve the sup-
port role of HQ. At the same time, the issues raised by the Court
are already being dealt with in the following way:

35.
Many of the monitoring instruments were new as part of
the devolution exercise. They required a period of fine tuning in
terms of use and operational application.

(a)

the vast majority of the websites maintained by the thematic
networks have been updated in 2004. A newsletter is now
being distributed to relevant staff in HQ and delegations
informing them on new updates;

(a) All the criteria mentioned by the Court were covered in the
decisions surrounding the allocation of additional staff and
the reviews of organigrammes (see reply to paragraph 19).

(b)

significant efforts are made to ensure proper training of del-
egation staff (see reply to paragraph 26);

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Official Journal of the European Union

C 72/19

(c)

the work of the QSG (for the ACP countries) is based on a
sampling principle. The sampling rate for 2004 was set at
20 %. This approach was adopted in full awareness of the
annual volume of proposals (over 300). None the less, all
proposals of an innovative or complex nature have been
examined by the group.

Furthermore, all the ACP project identification sheets are
subject to a ‘quality assessment’ at an earlier stage in the
project cycle when intervention and support from HQ is
more appropriate and more effective;

While it is true that the percentage of commitments for
44.
Asia in the last quarter was 80 % in 2003, this improved in 2004
to 61 %, and a planned improvement to +/– 50 % is forecast for
2005. This more even spread of commitments has become pos-
sible as a result of delegations having adapted to their new role
under devolution, in which they have been assisted by training
initiatives and planning seminars. The QSG system has assisted in
improving the quality of projects presented to the management
commitees.

It is part of the function of HQ to assist delegations to prepare
financing proposals which meet increasingly stringent quality
standards.

(d) owing to EuropeAid’s multilingual environment, instruction
notes and manuals have to be translated, implying longer dis-
tribution times;

45.

Please refer to reply to point 38(e).

(e) problems with making preparations and adjustments for the
entry into application in January 2003 of the Financial Regu-
lation and Implementing Rules were experienced in many
services in the Commission. These difficulties were explicitly
recognised in the readiness assessment made at the end of
2002 (1).

47.
EuropeAid is taking measures to improve the national
administrations’ performance (i.e. providing proper institutional
support rather than just technical assistance). An additional incen-
tive has been provided by setting deadlines for implementation of
projects.

For those financing agreements financed on the 2003 bud-
get which were furthest advanced in their preparation, the
Commission issued a written instruction to delegations in
December 2003 that tendering could be proceeded with by
the third country under a suspensive clause.

48.
The Commission (whether headquarters or delegations)
is required to make payments within the deadlines set by the
Financial Regulations and the relevant contracts. The respect of
these deadlines has been regularly monitored by EuropeAid since
2002 for all payments made on the budget lines managed by
EuropeAid and delegations.

By early June 2004 the Commission had issued a revised
Financing Agreement/Technical and Administrative Provi-
sions template taking into account the agreed application of
Article 164 FR;

49.
Though errors may occur in entering data in CRIS, these
are occasional and do not question the reliability of the system.
Efforts are constantly being made to ensure the accuracy of data
registered in CRIS.

(f) please refer to the Commission’s reply to point 23.

The Commission is seeking to improve and expand the

40.
range of indicators in all areas of management.

41.
EuropeAid is studying various options for aggregate indi-
cators of quality, which would complement the already existing
indicators of financial execution.

42.
Devolution is indeed only one, albeit an important, ele-
ment of the overall reform of the Commission’s management of
external assistance. Hence, the improvements in aid delivery over
the recent years can not be explained by Devolution alone, but are
the results of all efforts combined. The Commission regularly
reports on progress of the overall reform to the Parliament and
the Council.

(1) See SEC(2002) 1362 final: Communication by Mrs Schreyer to the
Commission: Overall assessment of the readiness of the Commission
services for integrating the new Financial Regulation in their internal
control systems of 17 December 2002.

The subdelegated authorising officer accords derogations
52.
within a reasonable delay, when a well-founded justification is
provided.

The outcome of tendering procedures cannot be predicted in
advance and depends on various factors, some elements being out
of the influence of the subdelegated authorising officers. The
problem described does not appear to be particularly specific to
delegations and the present Implementing Rules provide already
for the possibility of using ‘negotiated procedures’ in case of
unsuccessful tendering procedures.

53.
It will clearly take some time for the effect of devolution,
as well as the other aspects of the reform package, to have their
full impact. However, prior to the reform, the number of years
needed to design, implement and complete a project was increas-
ing; since 2000, this trend has been reversed, and projects are
now completed faster.

See replies to 23, 26, 35(c) and 38. Steps are being taken

55.
to overcome these constraints mentioned by the Court.

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Official Journal of the European Union

22.3.2005

The concept of quality performance indicators is not a
57.
simple one. EuropeAid is taking stock of the various approaches
for tracking the quality of its operations and intends to adopt suf-
ficiently reliable, and hence credible, quality indicators.

The results oriented monitoring system has proved to be very
helpful in building expertise on the monitoring of the quality of
aid. However, further development is needed before the statistics
produced can be converted into indicators of quality.

59.

Please refer to the Commission’s reply to point 55.

60.
For efficiency reasons, posts have been identified by ref-
erence to project responsibilities rather than the various project-
management tasks. The variety of staff categories in the delega-
tions allow appropriate responses to be made to the various
expertise requirements. Deficiencies and mismatches can be rem-
edied by redefining job profiles when organigrammes are revised
and contracts are renewed. The new Staff Regulations that entered
into force on 1 May 2004 will gradually help to reduce the num-
ber of job categories in the delegations.

61.
With devolution, stricter financial controls can be applied
on the spot by the delegations. Moreover, since June 2003, in line
with the revised grant contract provisions, the project accounts
are subject to an audit before the final payment is made. The
Commission’s monitoring and control systems at the level of HQ
and delegations aim at ensuring the compliance of contract part-
ners (NGOs, public ‘project management units’, …) with the con-
tractual requirements. Checks and audits of the contract partners’
internal control systems are carried out on the basis of risk assess-
ments since in many cases a detailed examination of their overall
internal control systems would be disproportionate on top of
normal checks concerning legality and regularity of payments.

63.
All these problems were addressed as part of the reform
programme. Further improvements are being introduced as the
reforms are followed up. Moreover, EuropeAid decided in
November 2004 to establish a task force to review all procedural
instructions in order to simplify and harmonise them.

CONCLUSIONS

65.
The Communication of 16 May 2000 on the Reform of
the Management of External Assistance included a timetable of
actions to be completed. The toolbox of planning and monitor-
ing instruments applied proved to be effective and appropriate for
the management of the devolution process.

Measures are being taken to try to overcome recruitment
66.
problems, and to adapt the structure of the services at EuropeAid
in order to provide more effective support to delegations. Signifi-
cant efforts have been made to ensure proper training of delega-
tion staff. More training sessions are now being organised over-
seas, and elearning modules are being developed.

67.
As devolution progressed, a first reorganisation of the
services in EuropeAid took place with the adoption of a new
organigramme on 17 February 2003. Moreover, adjustments in
response to the change of functions are now addressed through
the headquarters’ management plan. The management plan is the
key planning, management and monitoring tool in headquarters.
It allows directorates to plan for and manage change. The Com-
mission is examining measures to organise thematic expertise in
full respect of the respective responsibilities of the directorates-
general concerned as reflected in the Inter-service Agreement of
2001.

The entire exercise for human resource allocation took place
against a background of huge staffing deficit compared with all
major donors, including Member States.

68.
Many of the monitoring instruments, such as the EAMR,
were new as part of the devolution exercise. They required a
period of fine tuning in terms of use and operational application.

A reorganisation in early 2005 should improve the sup-

69.
port role of HQ.

70.
The indicators were based more on financial data than on
quality indicators, although some of them also reflect quality con-
cerns; the concept of quality performance indicators is not a
simple one. EuropeAid is taking stock of the various approaches
for tracking the quality of its operations and that should translate
into the adoption of sufficiently reliable, and hence credible, qual-
ity indicators.

71.
With devolution, stricter financial controls of implement-
ing organisations can be applied on the spot by the delegations.
Over recent years, the introduction of standard contractual docu-
ments has contributed to improving the level of control; more-
over, since June 2003, project accounts are subject to an audit
before the final payment is made, and an external audit strategy
was finalised in 2004.

72.
Measures are being taken to try to overcome recruitment
problems, and to adapt the structure of the services at EuropeAid
in order to provide more effective support to delegations.

Efforts have been taken to ensure that the reporting possibilities
within CRIS correspond to the most common needs of the users.
EuropeAid is paying special attention to the development of the
CRIS financial forecasting module and a module for the manage-
ment of the project pipeline including appropriate reporting pos-
sibilities. Finally, attention will be given to develop a limited num-
ber of standardised management indicators on the basis of
information registered in CRIS.

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Official Journal of the European Union

C 72/21

The Commission is aware of the need to improve the

73.
national administrations’ performance.

RECOMMENDATIONS

74.
A set of indicators based primarily on financial data were
put in place from the beginning of the reform. Work on the
development of complementary indicators, both to measure
improvement in speed and quality of aid delivery is ongoing.

75.
At the end of 2005, after the completion of the devolu-
tion process, the monitoring of costs will allow for a comparison
with initial estimates.

76.
In recent years, major efforts have been made to improve
staff management within the External Service. Other measures
planned under the administrative reform of 2002 are now gradu-
ally being implemented. None the less, the Commission acknowl-
edges that improvements are still needed and is studying ways of
achieving them.

77.
The Commission is examining measures to organise the-
matic expertise in full respect of the respective responsibilities of
the directorates-general concerned as reflected in the Inter-service
Agreement of 2001.

All these problems were addressed as part of the reform
78.
programme. Further improvements are being introduced as the
reforms are followed up.

The Commission is already acting upon this recommen-

79.
dation to develop the support role of EuropeAid.

EuropeAid is taking measures to improve the perfor-

80.
mance of national administrations.

81.
the line-
The follow-up of audit results is part of
management functions in delegations and headquarters. Each
audit report should be given appropriate attention and follow-up.
Certain information will be provided, however, by CRIS audit, in
particular on audits undertaken within the framework of the
annual audit plans and other audits launched by headquarters and
delegations.

Pursuant to Action 73 of the White Paper on ‘Reforming
82.
the Commission’, the Commission established a centralised unit
to harmonise model contracts and grant agreement management.
Furthermore, the review of the Implementing Rules to the Finan-
cial Regulation launched by the Commission in October 2004
proposes a simplified system for awarding contracts for the Com-
mission’s own account, including those managed by the delega-
tions. EuropeAid decided in November 2004 to establish a task
force to review all procedural instructions in order to simplify and
harmonise them.