Report from the Commission - Annual Report of the Cohesion Fund (2004) {SEC(2005)1396}
Date: 2005-11-07
Institutions: European Commission
Subjects: Cohesion Fund, accession to the European Union, activity report, financial control, implementation of the budget, management audit

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.11.2005 
COM(2005) 544 final 

REPORT FROM THE COMMISSION 

ANNUAL REPORT OF THE COHESION FUND (2004) 

{SEC(2005)1396} 

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TABLE OF CONTENTS 

REPORT FROM THE COMMISSION ANNUAL REPORT OF THE COHESION FUND 
(2004) ANNUAL REPORT ON THE COHESION FUND (2004)........................................... 3 

1. 

2. 

3. 

4. 

4.1. 

4.2. 

5. 

6. 

7. 

8. 

Budget execution.......................................................................................................... 3 

Economic environment and conditionnality ................................................................ 8 

The accession of the ten candidate countries ............................................................... 8 

Coordination with transport and environmental policies ............................................. 9 

Transport ...................................................................................................................... 9 

Environment............................................................................................................... 10 

Inspections and conclusions....................................................................................... 10 

Irregularities and suspension of aid............................................................................ 11 

Evaluation .................................................................................................................. 11 

Information and publicity........................................................................................... 12 

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REPORT FROM THE COMMISSION 

ANNUAL REPORT ON THE COHESION FUND (2004) 

This  report  is  presented  in  conformity  with  Article  14.1  of  Regulation  (EC) 
n°1164/1994  establishing  a  Cohesion  Fund.  It  covers  the  activities  of  the  Cohesion 
Fund during 2004. 

1. 

BUDGET EXECUTION 

Cohesion  Fund  resources  available  for  commitment 
to  
€ 2 723 606 000 (1999 prices) for the 3 Member States of EUR 15 (Portugal, Spain, 
Greece),  and  €  2  897  000  000  in  1999  prices  for  the  10  new  Member  States.  As  a 
result of its growth in GNI per head, Ireland is no longer eligible under the Cohesion 
Fund  with  effect  from  1  January  2004.  These  amounts  include  technical  assistance 
credits (€ 1 001 118 for the 3 “old” Member States, and € 1 500 000 for the 10 new 
Member States).  

in  2004  amounted 

The  commitment  appropriations  were  almost  entirely  used  (99,96%)  with  only  
2 084 326 € of the total being carried over to 2005. 

Implementation of commitments in 2004 (in euro) 

Commitment 
appropriations 

Initial 

Movements 

Final 
resources 

Outturn 

Cancelled 

Carryovers 
2005 

2004 budget 

2 784 500 000 

2 835 258 341 

5 619 758 341 

5 619 403 018 

355 322 

2 084 326 

Appropriations 
carried  over  from 
2003 

Appropriations 
made 
again 

available 

3 377 996 

0 

3 377 996 

3 377 996 

7 413 307 

0 

0 

7 413 307 

7 413 307 

0 

0 

Repayments 

0 

0 

0 

0 

0 

0 

0 

Totals 

2 795 291 303 

2 835 258 341 

5 630 549 644 

5 630 194 321 

355 322 

2 084 326 

A total of €134.8 million of payment appropriations was transferred to the Cohesion 
Fund. Taking account of this transfer, some 95.16 % of the payment appropriations 
were implemented in 2004. 

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Implementation of payments in 2004 (in euro) 

Payment 
appropriations 

Initial 

Movements 

Final 
resources 

Outturn 

Cancelled 

Carryovers 
2005 

2004 budget 

2 641 600 000 

134 811 585 

2 776 411 585 

2 642 101 718 

134 309 867 

Appropriations 
carried over 
from 2003 

Appropriations 
made available 
again 

Repayments 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

Totals 

2 641 600 000 

134 811 585 

2 776 411 585 

2 642 101 718 

134 309 867 

Budget implementation of appropriations in 2004 by Member State 

Commitment appropriations 2004 (in euro) 

Member State 

Environment 

Transport 

Mixed 

Total 

0 

0 

0 

0 

0 

Amount 

% 
Envir
. 

Amount 

% 
Trans
p. 

Amount 

Amount 

% 

724 068 354 

42.6 

977 541 835 

57.4 

1 101 600 

1 702 711 789 

30,3% 

296 658 028 

55.4 

239 009 533 

44.6 

261 887 832 

54.6 

217 955 247 

45.4 

- 

0 

18 257 000 

100 

- 

- 

- 

535 667 561 

9,5% 

479 843 079 

8,5% 

18 257 000 

0,3% 

171 710 713 

54.2 

144 816 038 

45.8 

371 280 

316 898 031 

5,6% 

65 595 930 

62.1 

31 561 105 

37.9 

8 539 200 

105 696 235 

1,9% 

España 

Ellada 

Portugal 

Kypros 

Ceska 
Republika 

Eesti 

Magyarország 

188 216 500 

50.0 

188 216 500 

50.0 

- 

376 433 000 

6,7% 

Latvija 

Lietuva 

Malta 

Polska 

80 196 588 

42.2 

102 876 822 

57.8 

6 892 365 

189 965 775 

3,4% 

45 991 729 

21.9 

148 920 771 

78.1 

14 659 500 

209 572 000 

3,7% 

7 418 000 

100 

- 

0 

- 

7 418 000 

0,1% 

698 528 072 

49.4 

707 162 832 

50.6 

8 947 500 

1 414 368 404 

25,2% 

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Member State 

Environment 

Transport 

Mixed 

Total 

Amount 

% 
Envir
. 

Amount 

% 
Trans
p. 

Amount 

Amount 

% 

125 556 724 

65.1 

67 417 276 

34.9 

- 

192 974 000 

3,4% 

19 295 525 

29.7 

45 605 942 

69.3 

45 000 

64 946 467 

1,2% 

- 

- 

- 

- 

4 381 678 

4 381 678 

0,1% 

2.685.123.995 

48.2* 

2.889.340.901 

51.8* 

44.938.123 

5.619.403.018  100% 

Slovensko 

Slovenija 

Technical 
Assistance 

Total 

* mixed amounts no taken into account 

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Payment appropriations 2004 (in euro) 

Figures for the new Member States refer only to payments for projects adopted under 
the  Cohesion  Fund  as  from  1  May  2004  (i.e.  not  taking  into  account  pre-accession 
aid for ISPA projects). The second table below shows payments effected in 2004 in 
relation to ISPA projects adopted before accession.  

Member State 

Environment 

Transport 

Mixed 

Total 

Amount 

% 
Env
ir. 

Amount 

% 
Transp. 

Amount 

Amount 

% 

1 052 792 007 

54.3 

886 931 978 

45.7 

3 084 

1 939 727 070  73,4% 

85 219 745 

24.3 

265 538 804 

75.7 

1100 

350 759 649  13,3% 

8 179 679 

31.6 

17 669 517 

68.4 

123 130 259 

38.9 

193 354 445 

61.1 

0 

0 

0 

0 

0 

0 

0 

0 

- 

- 

- 

- 

- 

- 

- 

- 

0 

0 

0 

0 

0 

- 

- 

- 

- 

- 

3 719 306 

100 

0 

- 

2 486 700 

100 

244 720 

15.5 

1 335 490 

84.5 

0 

0 

- 

- 

0 

0 

- 

- 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

25 849 196 

1,0% 

316 484 704  12,0% 

0 

0 

0 

0 

0 

- 

- 

- 

- 

- 

3 719 306 

0,1% 

0 

- 

2 486 700 

0,1% 

1 580 210 

0,1% 

0 

- 

1 494 883 

1 494 883 

0,1% 

1 269 566 410 

48.1* 

1 371 036 240 

51.9* 

1 499 067 

2 642 101 718  100% 

España 

Ellada 

Ireland 

Portugal 

Kypros 

Ceska 
Republika 

Eesti 

Magyarország 

Latvija 

Lietuva 

Malta 

Polska 

Slovensko 

Slovenija 

Technical 
Assistance 

Total 

* mixed amount not taken into account 

For the third year running, there was tendency in favour of projects in the transport 
sector, although in a less marked manner than in the two previous years. 

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New Member States – Payments made in 2004 related to former ISPA projects 

Member State 

Environment  

Transport 

Amount 

% 
Envir. 

Amount 

% 
Transp. 

Total 

Amount 

17 801 156 

26.5 

49 355 929 

73.5 

67 157 085 

Ceska 
Republika 

Eesti 

Latvija 

Lietuva 

10 196 374 

42.7 

13 675 285 

57.3 

9 844 972 

42.2 

13 490 711 

57.8 

3 948 533 

27.5 

10 395 195 

72.4 

23 871 659 

23 335 683 

14 343 728 

36 082 686 

Magyarorszàg 

25 960 588 

71.9 

10 122 098 

28.1 

Polska 

Slovenija 

Slovensko 

Technical 
assistance 

TOTAL 

80 792 048 

36.6 

139 872 597 

63.4 

220 664 645 

6 024 627 

78.9 

 1 611 175 

21.1 

17 390 376 

46.6 

19 933 084 

53.4 

7 635 802 

37 323 460 

68 076 

171 958 668 

40.0 

258 456 071 

60.0 

430 482 824 

The major effort to clear outstanding appropriations on actions begun before 2000 was 
continued : a total of 50 projects were closed in 2004. Some 33,4 % of the outstanding 
appropriations  existing  at  the  beginning  of  the  year  were  paid  or  subject  to 
decommittment in 2004. By the end of 2004, outstanding appropriations had fallen to 
just 15 % of the annual budget of the Cohesion Fund (against over half at the end of 
2002 and 39% at the end of 2003). This effort to reduce outstanding appropriations shall 
be maintained in 2005 in partnership with the national authorities who are responsible 
for project implementation and the related payment claims. 

Settlement in 2004 of commitments for the period 1993-99 (in euro) 

Member State 

Initial amount to 
be settled 

Decommitments 

Payments 

Final amount to be 
settled 

España 

Ellada 

Ireland 

Portugal 

Total 

650 933 534 

4 952 169 

268 409 585 

377 571 780 

424 708 187 

86 288 597 

29 744 454 

308 675 136 

51 096 704 

0 

4 037 714 

47 058 990 

139 854 914 

5 852 657 

23 728 888 

110 273 369 

1 266 593 339 

97 093 423 

325 920 642 

843 579 275 

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2. 

ECONOMIC ENVIRONMENT AND CONDITIONNALITY 

The Council Regulation on the Cohesion Fund1 sets conditions for financing by the 
Fund in relation to macro-economic management. No new projects or, in the event of 
large  projects,  no  new  project  stages  can  be  financed  if  the  Council  finds  that  a 
Member State has not implemented its stability or convergence programme in such a 
way as to avoid an excessive deficit. 

In 2004, seven recipient Member States under the Cohesion Fund, including six new 
Member States, were considered to have an excessive deficit. 

For  the  six  new  Member  States  concerned  (the  Czech  Republic,  Cyprus,  Hungary, 
Malta, Poland and Slovakia), the Council decided on 5 July 2004 that they were in 
excessive  deficit  and  recommended  that  this  be  corrected  by  2005  (Cyprus),  2006 
(Malta),  2007  (Poland  and  Slovakia)  and  2008  (Czech  Republic  and  Hungary).  On 
22  December  2004,  the  Commission  concluded  that  all  except  Hungary  had  taken 
effective action in response to the Council recommendations, so that no further steps 
under the EDP were necessary at the time. In January 2005, the Council concluded 
along  the  same  lines.  As  regards  Hungary,  the  Council  established  on  18  January 
2005  that  Hungary  had  not  taken  effective  action  in  response  to  the  Council 
recommendations  and  adopted  on  8  March  a  new  Council  recommendation, 
requesting  Hungary  to  take  effective  action  by  8  July  2005  regarding  additional 
measures to achieve the 2005 deficit target. 

The Council decided on 5 July 2004 that an excessive deficit existed in Greece and 
recommended  that  this  be  corrected  by  2005.  The  Council  decided  on  18  January 
2005 that Greece had taken no effective action in response to this recommendation 
and on 17 February adopted a decision giving notice to Greece to take measures to 
remedy this situation. It recommended a  rigorous implementation of the budget for 
2005 as well as an additional adjustment of at least 0.6% of GDP in 2006, with a new 
update  of  the  Greek  stability  programme  to  be  submitted  in  21  March  2005  and  a 
deadline  for  taking  the  requested  additional  measures  of  21  March.  The  Council 
reassessed the situation in Greece on 12 April 2005 on the basis of the Commission 
Communication  of  12  April.  It  concluded  that  the  Greek  government  is  taking 
effective action in response to the Council notice. 

3. 

THE ACCESSION OF THE TEN CANDIDATE COUNTRIES 

On  accession  on  1  May  2004,  all  8  new  Member  States  formerly  benefiting  from 
ISPA,  together  with  Cyprus  and  Malta,  met  the  criteria  for  eligibility  under  the 
Cohesion Fund. 

Projects previously adopted under the ISPA financial instrument were automatically 
transformed into Cohesion Fund projects, and are since then governed by Cohesion 
Fund rules. 

1 

Article 6 of Council Regulation (EC) No 1164/94 as amended by Council Regulation (EC) No 1264/99. 

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For 2004-06, €24 billion (current prices) was earmarked for structural assistance in 
the 10 new Member States acceding to the EU, of which over one third (€8.5 billion) 
has been allocated to the Cohesion Fund.  

Table: Cohesion Fund allocations for the acceding countries 2004-06: 

Country 

Kypros 

Ceska Republika 

Eesti 

Mid-range allocations 
(€ million - 2004 prices) 

53.94* 

936.05 

309.03 

Magyarország 

1 112.67 

Latvija 

Lietuva 

Malta 

Polska 

Slovensko 

Slovenija 

Total 

515.43 

608.17 

21.94 

4 178.60 

570.50 

188.71 

8 495.04 

* Including the Financial Instrument for Fisheries Guidance (FIFG) 

4. 

COORDINATION WITH TRANSPORT AND ENVIRONMENTAL POLICIES  

4.1. 

Transport 

In  2004,  the  transport  sector  accounted  for  marginally  over  half  (51.8  %)  of  total 
Cohesion  Fund  commitments.  As  in  the  past,  the  Commission  asked  the  Member 
States to give particular preference to railway projects. The projects adopted in 2004 
by Member State are set out in the Annex. 

The Cohesion Fund provides funds specifically for transport infrastructure networks 
relating  to  trans-European  networks.  Good  coordination  between  the  Structural 
Funds and the Cohesion Fund is important in order to ensure consistency between the 
central  regions  of  the  Community  and  those  regions  which  are  structurally 
handicapped by their insular, landlocked or peripheral status. 

The  revised  Decision  on  Community  Guidelines  for  the  development  of  the  trans-
European  transport  network  was  adopted  by  the  European  Parliament  and  the 
Council  on  29  April  2004.  The  decision  specified  30  priority  projects  of  European 
interest with a cost of around € 225 billion. The Decision calls on Member States to 
give priority to these projects. It asks the Member States concerned to pay particular 

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attention  to  these  projects  under  the  Cohesion  Fund  and  more  generally  under  the 
Structural Funds. 

Following the accession of the new Member States on 1 May 2004 the Commission 
examined the infrastructure situation in the trans-European network, in particular the 
cost of the 30 priority projects and projects such as ERTMS and SESAME2, and their 
financing.  In  the  financial  perspectives  for  the  period  2007-2013,  the  Commission 
proposed  an  increase  in  the  maximum  co-financing  rate,  following  publication  in 
July  2004  ((COM)  475  –  2004)  of  its  in-depth  review  of  the  TEN  financial 
framework.  

4.2. 

Environment 

The year 2004 was important for the environmental projects which accounted for just 
under half (48.2 %) of total Cohesion Fund commitments. The priorities in this sector 
remained  the  supply  of  drinking  water  and  the  treatment  of  waste  water  and  solid 
waste.  The  Cohesion  Fund  contributes  to  Community  objectives  in  relation  to 
sustainable development, especially on the  management  of  natural resources,  waste 
and climatic changes. The projects and operations adopted in 2004 by Member State 
are set out in the Annex. 

The Cohesion Fund contributed to developing the implementation of environmental 
legislation,  not  only  through  the  direct  financing  of  infrastructures,  but  also  by 
providing  incentives  encouraging  the  application  of  directives  as  part  of  the 
preconditions  to  the  granting  of  support.  This  concerns  thematic  interventions  such 
as solid waste and waste-water management and the environment impact assessment 
(EIA).  

The  new  Member  States  have  set  water  and  solid  waste  management  as  important 
priorities  for  expenditure.  Investments  and  infrastructure  needs  remain  high  in  the 
majority of cases in fields such as solid waste and water (in particular urban waste-
water treatment), but also in the fields of air quality and the effort to reduce industrial 
pollution.  Support  for  environmental  infrastructure  under  the  Cohesion  Fund  is 
therefore important for the new Member States.  

5. 

INSPECTIONS AND CONCLUSIONS 

In  Ireland,  Spain,  Greece  and  Portugal,  10  project  audit  missions  and  6  audit 
missions of management and control systems were carried out. 

At  project  level,  the  main  deficiencies  observed  concerned  the  procedures  for  the 
award  of  public  contracts,  although  the  situation  is  different  between  the  Member 
States concerned. With regard to the systems set up by Member States to fulfill the 
requirements of Commission Regulation (EC) n°1386/2002 on the management and 
control  systems,  progress  was  achieved  in  2004,  although  some  difficulties  were 
identified in 2003 in Greece, Spain and Portugal and communicated to the national 
authorities in the framework of the partnerships. 

2 

ERTMS :  European  Rail  Trafic  Management  System.  SESAME :  Single  European  Sky  Air  Trafic 
Management Modernisation Programme. 

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All  ten  new  Member  States  transmitted  the  description  of  their  management  and 
control  systems  to  the  Commission  which  found  that  they  were  in  conformity  with 
the standards required by Community legislation. These favorable opinions suggest 
that a good start has been made in putting in place the right implementation systems, 
which will be subject to further checks by the Commission in the coming years. Thus 
in  2005,  in  accordance  with  the  audit  strategy  of  the  Directorate-General  for 
Regional  Policy,  there  will  be  on-the-spot  checks,  and  conformity  tests  made 
randomly  on  a  selected  sample  of  projects.  The  tests  will  be  made  in  all  ten  new 
Member States. 

Ten  project  audit  missions  were  carried  out  in  Latvia,  Hungary,  Estonia,  Poland, 
Czech  Republic,  Slovakia  and  Slovenia.  These  audits  covered  primarily  the 
examination of the financial flows of the projects and compliance with the rules on 
eligibility of expenditure. 

6. 

IRREGULARITIES AND SUSPENSION OF AID 

Under  Article  3  of  Commission  Regulation  (EC)  n°1831/943  (on  irregularities  and 
the recovery of the amounts unduly paid by the Cohesion Fund and the organization 
of information systems), the beneficiary Member States must inform the Commission 
on any cases of irregularities which have been the subject of initial administrative or 
judicial findings of fact. 

to 

the  Commission  a 

total  of  275  cases  of 

For 20044, three of the four old Member States, namely Greece, Spain and Portugal, 
communicated 
irregularities  
(262,  1  and  12  respectively).  Ireland  informed  the  Commission,  under  the  above-
mentioned Regulation, that it had not registered any irregularities during 2004. The 
cases communicated by the Greek authorities involved € 126 058 589 in Community 
contribution. The majority of cases concerned irregularities in the form of a failure to 
respect  fully  the  rules  on  public  procurement  and  the  remainder  concerned  the 
presentation  of  non-eligible  expenditure.  The  case  communicated  by  the  Spanish 
authorities  involved  €  384  407  and  the  12  cases  communicated  by  the  Portuguese 
authorities involved € 22 234 344 of Community contribution. Furthermore, two of 
the  new  Member  States,  namely  Poland  and  Latvia,  communicated  to  the 
Commission  a  total  of  six  cases  of  irregularities  (5  and  1  respectively).  The  cases 
communicated  by  the  Polish  authorities  involved  €  802  426  in  Community 
contribution and the case communicated by the Latvia authorities involved € 1 273. 
The type of irregularities detected is of the same kind as mentioned above. 

7. 

EVALUATION 

In  late  2004  DG  Regional  Policy  launched  a  dialogue  with  all  Cohesion  Fund 
beneficiary  Member  States  on  "quality  assurance  capability"  (QAC).  The 
Commission  provided  a  description,  closely  based  on  the  requirements  of  the 
Regulation, of the functions that should be performed before an application reaches 

3 
4 

OJ L 191 of 27.7.1994, p.9. 
Situation  to  14.03.05;  these  figures  do  not  contain  yet  the  communications  under  the  4th  quarter  of 
2004. 

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the Commission. The Member States were invited to undertake a self-assessment of 
the performance of the existing mechanisms throughout their administration with the 
aim of identifying any potential obstacle to the preparation of projects. In the light of 
such a self assessment, relevant technical assistance proposals could be proposed for 
co-financing before the end of the 2000-2006 period. 

In  accordance  with  the  provisions  of  Article  13  of  Regulation  (EC)  n°1164/94,  the 
Commission  and  Member  States  must  ensure  the  effectiveness  of  Community  aid 
when implementing the projects co-financed under the Cohesion Fund. This implies 
the  use  of  monitoring  and  evaluation  techniques.  The  Commission  and  Member 
States  can  carry  out  an  appraisal  and  an  evaluation  of  projects  where  necessary  in 
cooperation with the European Investment Bank. 

At a methodological level, each project application is consequently accompanied by 
a  cost-benefit  analysis  (CBA).  The  CBA  should  show  that  the  socio-economic 
benefits identified in the medium term are commensurate with the financial support 
provided.  It  is  for  the  Commission  to  examine  this  evaluation  with  the  help  of  the 
cost-benefit  analysis  guide  published  in  20035  which  is  a  common  reference  used 
both by the project sponsors and by the Commission itself. 

In  January  2004,  DG  REGIO  launched  an  ex-post  evaluation  of  a  sample  of  200 
projects  co-financed  by  the  Cohesion  Fund  (1993-2002)  in  Greece,  Spain,  Ireland 
and  Portugal.  The  synthesis  report  and  the  four  country  studies  were  finalised  in 
January  2005,  following  close  cooperation  with  the  services  of  the  Commission 
directly concerned. The main findings are presented in the Annex (point 5.4.). 

8. 

INFORMATION AND PUBLICITY 

Two  information  meetings  bringing  together  all  25  Member  States  were  held  in 
Brussels,  on  24  June  and  24  November  2004.  At  the  November  2003  meeting, 
several  delegations  expressed  the  wish  to  see  the  Commission  Decision  n° 
96/455/EEC of 25 June 1996 concerning information and publicity measures for CF 
reviewed  by  the  Commission  services.  Indeed,  they  claimed  that  certain  measures 
had proved too complex to implement and some provisions proved to be inconsistent 
with  the  Regulation  n°1164/94  as  revised  in  1999.  A  Commission  Regulation  was 
then adopted in April 20046, replacing the 1996 Commission Decision. 

was 

published 

With a view to facilitating implementation of this new regulation, an explanatory fact 
sheet 
website  
on 
http://europa.eu.int/comm/regional_policy/sources/docoffic/official/regulation/regpu
b_fr.htm  under  the  supervision  of  the  Directorate-General  for  Regional  Policy.  For 
the  same  purpose,  the  Regulation  was  also  presented  in  DG  Regio's  magazine, 
Inforegio  Panorama  (N.14-September  2004),  where  a  full  set  of  articles  were 
dedicated to the Cohesion Fund. 

Inforegio 

the 

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6 

http://europa.eu.int/comm/regional_policy/sources/docgener/guides/cost/guide02_fr.pdf 
Commission  Regulation  (CE)  n°621/2004  « laying  down  rules  for  implementing  Council  Regulation 
(EC) n°1164/94 as regards information and publicity measures concerning the activities of the Cohesion 
Fund »,1 April 2004 

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Additionally,  in  order  to  provide  basic  information  on  the  Cohesion  Fund  for  the 
general  public,  the  Regional  Policy  DG  updated  the  Cohesion  Fund  reference 
website  (http://europa.eu.int/comm/regional_policy/funds/procf/cf_en.htm).  In  place 
since  spring  2005,  the  site  now  provides  links  to  legal  documents,  financial  data, 
maps  and  project  examples  in  19  Community  languages  plus  Bulgarian  and 
Romanian. 

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