Report from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - SAPARD annual Report - Year 2004 {SEC(2005) 1375}
Date: 2005-10-28
Institutions: European Commission
Subjects: Central and Eastern European countries, EU programme, accession to the European Union, activity report, aid to agriculture, rural development

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.10.2005 
COM(2005) 537 final 

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

SAPARD ANNUAL REPORT – Year 2004 

{SEC(2005) 1375}

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1. 

INTRODUCTION 

Beginning  in  2000,  the  European  Union  reinforced  its  pre-accession  assistance  for  the  rural 
development of ten candidate countries of eastern and central Europe by creating Sapard, the 
Special Accession Programme for Agriculture and Rural Development. Detailed information 
regarding the implementation and management systems of Sapard can be found in the 2000 
annual Sapard report. 

Financial  support  provided  under  Sapard  is  intended  to  assist  the  Sapard  countries  to  make 
structural improvements to their agricultural and rural environment in anticipation of joining 
the  EU.  The  European  Union  provided  financial  support  to  improve  product  processing, 
marketing and quality standards, to meet the requirements of the EU. Sapard assistance was 
also used to solve specific problems identified by the countries. 

2. 

MAIN RESULTS OF SAPARD IMPLEMENTATION

1 

From 2000 to 2004, a total of €2 412.1 million was allocated to the Sapard countries for the 
improvement of their rural and agricultural sectors, of which €1 334.2 million was allocated 
to the new Member States and €1 077.9 million to Bulgaria and Romania. From 2000 to 2004, 
€991  million  was  actually  paid  to  the  Sapard  countries.  During  2004  alone,  €573.5  million 
was paid to the Sapard countries, of which €380.4 million was paid to the new Member States 
and €193.1 million was paid to Bulgaria and Romania. 

On 1 May 2004, eight out of ten Sapard countries joined the EU. During the course of 2004, 
the  new  Member  States  stopped  contracting  new  projects  under  their  respective  Sapard 
programmes and switched to contracting under the post-accession programmes.  

As  a  result  of  Sapard  implementation,  the  new  Member  States  were  able  to  make  use  of 
already  existing  Sapard  structures  for  their  post-accession  programme  management. 
Furthermore, the data on contracting post-accession funds for Sapard type measures suggest 
that in the majority of countries the contracting levels under these measures are higher than 
under other measures, for example, in Latvia the contracting has reached 100% and in Estonia 
the average level is 63%. 

By the end of 2004, the Sapard agencies had contracted over 37 000 projects accounting for 
over €2.2 billion of Community contribution. 

3. 

ASSESSMENT OF ACHIEVEMENT OF SAPARD OBJECTIVES

2 

Now  that  contracting  of  the  Sapard  funds  has  stopped  in  the  new  Member  States,  it  has 
become easier to assess the overall result of Sapard implementation. For a number of reasons, 
such as diversity of indicators and investments, an assessment based on the indicators set out 
in the Sapard programmes is not practically achievable. Instead, this report will focus on the 
implementation  as  compared  to  the  Sapard  objectives.  The  report  will  analyse  the  state  of 
implementation of the investment measures for farms and food industry, which contribute, in 
particular, to the attainment of acquis standards, and the other two investment measures for 
rural infrastructure and diversification of economic activities which contribute, in particular, 

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See Annex A. 
Annexes B and C contain a horizontal overview. 

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to  sustainable  economic  development  and  job  creation  in  rural  areas.  These  four  measures 
account for 86% of the total allocation under Sapard. 

As  regards  Bulgaria  and  Romania,  this  report  will  focus  on  the  progress  made  throughout 
2004. 

3.1 

New Member States 

By  the  end  of  2004,  all  eight  countries  managed  to  entirely  contract  EU  funds  allocated  to 
them,  as  well  as  to  prepare  a  pipeline  of  projects  eligible  under  the  post-accession 
programmes. 

Under the farm investments measure, the share of animal production and products, which is 
the  most  essential  sector  in  terms  of  adoption  of  acquis  standards  has  reached  41%  of  the 
overall  amount  contracted  under  this  measure  in  the  eight  countries.  At  the  same  time, 
investments  in the  arable crops sector represent 16%. Although in some countries the  crops 
sector  is  relatively  important,  concentration  on  this  sector  is,  to  some  extent,  a  result  of 
economic difficulties in the animal production and products sector. 

As regards investments in food processing and marketing, meat products and milk and dairy 
products,  the  two  most  vital  in  terms  of  acquis  sectors,  have  reached  51%  and  22%. 
Furthermore,  the  monitoring  data  suggest  that  the  level  of  investments  in  first  stage 
processing, and in particular slaughterhouses, has in certain countries increased, hence placing 
more  emphasis  on  the  adoption  of  acquis  standards.  For  example,  the  number  of 
slaughterhouses projects in Hungary has nearly tripled. 

A preliminary assessment of these results suggests that investments under these two measures 
have, to a large extent, contributed to achieving the Sapard objectives. 

In 2004, the rural infrastructure measure was the most important in terms of contracting levels 
which  reflects  the  substantial  need  for  improvement  of  infrastructure  in  rural  areas,  in 
particular in Poland. 

Under investments in diversification of economic activities, 20% of the EU funds allocated to 
this  measure  were  used  for  investments  rural  tourism  and  11%  for  development  of  basic 
services. 

Investments  under  these  two  measures  have  contributed  towards  improving  the  basic 
infrastructure and supporting sustainable development of economic activities in the rural area. 

The  main  aim  of  the  agri-environmental  measure  was  to  obtain  sufficient  experience  in 
preparation  and  implementation  of  the  agri-environmental  programme  post-accession  which 
was accomplished, in particular in Slovakia and the Czech Republic. 

3.2 

Bulgaria and Romania 

The total amounts committed to Bulgaria and Romania for 2004 amounted to €226.7 million. 

In terms of approved projects, the implementation of Sapard in Bulgaria progressed very well 
in 2004. By 31 December 2004, the Sapard agency had approved 1 909 projects accounting 
for €285.4 million of EU contribution, and therefore almost doubled the number of approved 
projects as compared to 2003. This figure corresponds to 100% of the Sapard allocation for 
the years 2000–2004. 

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Under the farm investment measure, the EU funds allocated to that measure were completely 
contracted.  The  number  of  projects  contracted  by  the  end  of  2004  more  than  doubled  as 
compared  to  the  end  of  2003.  The  share  of  the  arable  crops  sector  still  remains  high  (44%) 
compared to other countries which is justified by the substantial need for rationalisation and 
mechanisation. 

Under the processing and marketing measure, 96% of EU funds allocated to that measure for 
the period 2000–2004 have been contracted. Investments in the meat products sector represent 
31%, in the milk and dairy products 14%, and in fruit and vegetables 28%. 

The contracting level and the number of projects have also increased under the diversification 
of economic activities measure. The most important activities related to investments in rural 
tourism (42%) and investments in timber, carpentry and biofuels (33%). 

Additionally, in 2004 rural infrastructure and the renovation of villages became operational. 
By  the  end  of  2004,  the  contracting  levels  for  these  two  measures  reached  84%  and  71% 
respectively.  Under  the  rural  infrastructure,  83%  of  the  funds  were  used  towards  road 
infrastructure. 

In Romania, by the end of 2004, the Sapard agency approved 1 096 projects accounting for 
€452.4 million of EU funds. This figure corresponds to 57% of the Sapard allocation for the 
years 2000–2004. 

The rural infrastructure measure, the principal measure in Romania, was allocated the largest 
share  of  EU  Sapard  contribution  to  Romania.  By  the  end  of  2004,  the  contracting  level 
reached 122% of which in roads (49%), drinkable water (35%) and sewerage (16%). 

Rapid  progress  in  contracting  under  processing  and  marketing,  farm  investment  and 
diversification measures is essential in order to avoid losing funds by the end of 2005. 

The  processing  and  marketing  measure  was  allocated  the  second  largest  share  of  the  EU 
contribution. The level of contracting under this measure reached 41% for the period 2000–
2004 of which the meat products sector received 51% and the milk and dairy sector 21%. 

The contracting under the  farm investments measure only reached 15%, with 53% spent on 
the arable crops sector. The level of contracting under the diversification measure has reached 
a mere 11%, with 94% relating to rural tourism. 

4. 

PROGRAMME IMPLEMENTATION AND MANAGEMENT 

4.1 

Monitoring of programme implementation 

During  2004,  18  Sapard  Monitoring  Committee  meetings  took  place  and  six  Sapard 
programmes were amended. In addition to the usual monitoring, the work of the Committees 
focused  on  programme  modifications.  The  principle  aims  of  the  modifications  were  as 
follows: (i) the revision of certain aspects of accredited measures in the light of the experience 
gained and/or of the results of the mid-term evaluation; (ii) the update of the financial tables, 
and  in  certain  countries,  the  allocation  of  interest  earned  and  (iii)  the  adjustment  of  the 
programmes in preparation for accreditation. In the eight new Member States, the work also 
concentrated on the final adaptation of the financial tables, as well as on the final adjustment 
of the programmes (Annex D). 

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In  Bulgaria,  the  modifications  related  to  further  concentration  on  implementing  measures 
which  (i)  contribute  to  the  adoption  of  the  acquis  and  (ii)  enhance  the  productivity  of  the 
farms  in  the  light  of  approaching  accession.  In  Romania,  the  Monitoring  Committees 
discussed  the  issue  of  improving  the  level  of  contracting,  as  well  as  the  proposals  for 
programme  modification  to  reflect  the  issue  of  conflict  of  interest  in  the  infrastructure 
projects. 

Furthermore, all ten countries submitted their annual implementation reports. 

4.2 

Mid-term evaluation 

In 2004, the Commission analysed the mid-term evaluation reports. Relevant conclusions and 
recommendations  of  the  reports  were  taken  into  account  for  the  purpose  of  modifying  the 
programmes for Bulgaria and Romania. This information was also taken into account under 
the post-accession programme management in the eight new Member States. 

4.3 

Rural Credit Window 

In order to help improve the rural credit system, a special project, the Rural Credit Window, 
was established under the PHARE SME facility in 2003. The progress in the implementation 
of  the  Rural  Credit  Window  component  designed  to  facilitate  farmers  and  rural  business 
access  to  financial  services  has  been  slower  than  initially  predicted.  The  Commission  is 
currently  analysing  the  reasons  for  the  current  situation  and  considering  possible  causes  of 
action to improve implementation. 

5. 

LEGAL INITIATIVES 

Set out in this section is a summary of the legal initiatives carried out during 20043. 

The Sapard Council Regulation and the Commission implementing Regulation were modified 
so as to align the financial assistance provided to Bulgaria and Romania with the assistance 
provided to the new Member States post-accession. This involved, inter alia, (i) an inclusion 
of  a  new  eligible  measure  allowing  the  rural  communities  to  prepare  and  implement  local 
rural development strategies; (ii) an adaptation of the aid intensities similar to those granted to 
the new Member States and (iii) an introduction of certain flexibility for the use of national 
schemes facilitating access to credits. 

The Council Regulation was further amended to include Croatia as a beneficiary of Sapard for 
the period 2005–2006. 

The  Commission  adopted  a  new  regulation  which  extended  the  validity  of  the  financing 
agreements  (MAFA  and  AFA)  previously  concluded  with  the  Sapard  countries  that  became 
Member  States.  For  a  transitional  period,  these  countries  are  permitted  to  follow  the  rules 
different  to  the  usual  EU  rules.  Under  this  regulation  certain  provisions  contained  in  these 
agreements, such as those governing the conferral of management procedure ceased to apply. 

In order to advise the new Member States on the closure of the programmes, the Commission 
prepared Guidelines for Closure of the Sapard programmes. 

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Annex E. 

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In 2004, the Commission adopted financing agreements allocating to Bulgaria and Romania 
€225.2  million.  In  order  to  allocate  additional  €1.5  million  to  Bulgaria  and  Romania 
Commission adopted a further financing agreement. 

6. 

ACTIVITIES  IN  RELATION  TO  CONFERRAL  OF  MANAGEMENT,  AUDITS  AND 
CONTROLS 

6.1 

Update on Conferral of Management of Aid and monitoring missions4 

In 2004, three additional Commission decisions conferring management of aid were adopted. 
By the end of the year, the conferral of management covered 100% of the allocation for the 
Czech Republic, Slovakia and Slovenia. 

Monitoring  audit  missions  to  Slovakia  (March  2004),  Poland  (April  2004),  Romania  (May 
2004)  and  Bulgaria  (October  2004)  were  carried  out  in  order  to  assess  the  operation  of  the 
management and internal control systems. Recommendations were made where appropriate. 

6.2 

Clearance of accounts decision 

The  2003  accounts  for  seven  Sapard  countries  (Estonia,  Hungary,  Latvia,  Lithuania,  Czech 
Republic,  Slovakia  and  Slovenia)  were  cleared  by  Commission  Decision  C(2004) 3603  of 
28 September 2004. 

The  Bulgarian,  Polish  and  Romanian  accounts  were  not  cleared  pending  the  receipt  and 
evaluation of the additional information requested. 

6.3 

Conformity Clearance decision 

The  compliance  audit  enquiry,  which  began  in  September  2003,  was  continued  in  2004.  In 
2004, six audits were performed. The accredited agencies and the local bodies responsible for 
the management and control of the Sapard measures in the Czech Republic, Slovakia, Poland, 
Hungary and Romania were subject to an overall verification of the implemented procedures. 
A second audit was carried out in Bulgaria to cover the expenditure declared during 2004. 

During  all  these  audits,  selected  samples  of  payment  files  were  examined  and  some  final 
beneficiaries were inspected on the spot. 

The  auditors  focussed  particularly  on  specific  requirements  of  the  MAFA  that  were 
considered to present a higher degree of risk as regards: (i) the principles of sound financial 
management  and,  in  particular,  economy  and  cost-effectiveness;  (ii)  double  funding  or 
overlapping  of  funding;  (iii)  expenditure  not  eligible  for  Community  co-financing  under 
Sapard; (iv) eligibility criteria set out in the rural development programmes for each measure; 
(v) the extent and quality of controls; (vi) the changes in staff considered as “key personnel”; 
(vii) public procurement, and (viii) specific allegations. 

The  weaknesses  detected  were  addressed  to  the  authorities  concerned.  The  application  of 
possible financial corrections to the expenditure affected will be evaluated at  the  end of the 
clearance of accounts procedures linked to the present enquiry in application of the provisions 
of the MAFA. 

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See Annex F. 

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6.4 

Work carried out in relation to the Court of Auditors 

On  19  February  2004,  the  Court  of  Auditors  presented  to  the  Commission  a  special  Sapard 
report: “Has Sapard been Well Managed”. The report was critical in terms of achievement of 
the Sapard objectives. It pointed out delays in implementation caused by a lack of planning on 
the part of the Commission. The report also concluded that the lack of the final beneficiaries’ 
own  resources,  problems  of  access  to  credit  for  potential  beneficiaries,  as  well  as  complex 
procedures resulted in a significant under-utilisation of funds. 

Nevertheless, the Court also concluded that the Commission’s decision to apply decentralised 
implementation was correct given the likely large number of projects to be financed. It stated 
that it had ensured that (i) well defined systems with key controls were  in place before any 
funds  could  be  spent;  (ii)  the  procedures  were  well  documented;  (iii)  the  systems  were 
generally working in practice, and (iv) for most files reviewed the checking procedures were 
followed. The Court recognised that Sapard has contributed positively to the preparation for 
EU-membership. 

6.5 

Information on irregularities 

In 2004, 91 cases of irregularities where brought to the attention of OLAF: 27 in Poland, 23 in 
Slovenia, 18 in Romania, 15 in Lithuania and 8 in Hungary. A clear improvement in both the 
quality and the quantity of the reports should be noted. However, the Commission continues 
to deplore the existence of considerable delays, the lack of information from certain countries, 
and occasionally the poor quality of communications which has led to the loss of important 
information. 

The  majority  of  irregularities  arose  from  the  incorrect  application  of  procurement  rules  for 
measures  in  infrastructure  and  slaughterhouses,  the  ineligibility  of  certain  expenses  and  the 
insufficient assessment of the impact of the projects on the environment. Inadequate staffing, 
the lack of training, and the importance of rotation are considered as the risk factors. 

7. 

FUTURE DEVELOPMENT 

7.1 

Croatia 

In order to start the preparatory work for the implementation of the pre-accession assistance, 
the Commission carried out a fact-finding mission to Croatia in September 2004. At the same 
time,  the  Croatian  authorities  were  advised  as  to  the  key  steps  to  be  undertaken  in  order  to 
ensure an early start to their pre-accession assistance implementation. 

In  November  2004,  the  Commission  organised  an  introductory  seminar  to  provide  Croatia 
with information regarding the Sapard programme, and the system required to be set up by the 
country before it can receive EU funds. 

7.2 

Instrument for Pre-accession Assistance (IPA) 

financial  perspectives  2007–2013 
The  Communication 
recommended  a  reform  of  the  external  aid,  including  pre-accession5.  The  Commission  put 

the  Commission 

from 

for 

5 

COM(2004) 101. 

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forward  a  single  framework  for  pre-accession  assistance  –  referred  to  as  the  Instrument  for 
Pre-accession Assistance (IPA). 

Under  the  future  financial  perspective,  the  type  of  assistance  provided  under  the  Sapard 
instrument will continue under the Rural Development Component. 

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