Special report No 2/2006 concerning the performance of projects financed under TACIS in the Russian Federation together with the Commission's replies
Date: 2006-03-09
Institutions: European Court of Auditors
Subjects: EU financing, EU programme, Russia, audit, project evaluation, report, technical cooperation

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Official Journal of the European Union

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I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 2/2006

concerning the performance of projects financed under TACIS
in the Russian Federation together with the Commission’s replies

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

(2006/C 119/01)

TABLE OF CONTENTS

Paragraph

Page

ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

The TACIS Programme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TACIS in the Russian Federation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The EU and the Russian Federation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Audit scope and approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Objectives not achieved or achieved only partially . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Programming framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Project identification and planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Poor application of the Project Cycle Management System . . . . . . . . . . . . . . . . . . .

Long project-planning schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unrealistic underlying assumptions and objectives . . . . . . . . . . . . . . . . . . . . . . . . . .

Imprecise or missing objectives

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

Unsuccessful selection and involvement of beneficiaries . . . . . . . . . . . . . . . . . . . . .

Project financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Problems related to the determination of the project size . . . . . . . . . . . . . . . . . . . .

Rare national co-financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Project Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Delays in implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contractors’ performance was generally acceptable . . . . . . . . . . . . . . . . . . . . . . . . .

Ineffective steering committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I-VII

1-16

1-8

9

10-11

12-16

17-53

18-19

20-22

23-34

23-24

25

26-28

29-31

32-34

35-38

35-36

37-38

39-49

39-40

41

42

Equipment not used for the purposes of the project

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

43-46

Purchases free of VAT from domestic suppliers impossible . . . . . . . . . . . . . . . . . . .

47

2

3

4

4

4

4

5

5

5

6

6

6

6

7

7

7

8

8

8

8

8

9

9

9

9

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Paragraph

Page

The monitors performed well . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dissemination, sustainability and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Poor dissemination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Poor sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lack of evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recommendations

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

48-49

50-53

50-51

52

53

54-56

54-55

56

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

9

10

10

10

10

10

10

11

12

ABBREVIATIONS

AP

Action Programme

CBC

Cross-Border Cooperation

CIS

DG

Commonwealth of Independent States

Directorate-General

EuropeAid Europe Aid Cooperation Office

MIP

Multi-annual Indicative Programme

PCA

Partnership and Cooperation Agreement

PCM

Project Cycle Management

RCoA

Russian Chamber of Accounts

RELEX

DG External Relations

SME

Small and Medium Enterprise

SP

Strategy Paper

TACIS

Technical Assistance for the Commonwealth of Independent States

ToR

Terms of Reference

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SUMMARY

I.
From 1991 to 2006 over 7 000 million euro have been allocated by the European Union for the
TACIS (1) programme devoted to assist the newly created Commonwealth of Independent States (CIS) after the
break-up of the Soviet Union. The objective of this programme was and still is to promote the transition to
market economy and to reinforce democracy and the rule of law in the recipient countries. The European Com-
mission services are in the process of devising a new concept and legal basis for assistance from 2007 onwards
(see paragraphs 1 to 8).

II.
The Russian Federation is the largest beneficiary of the TACIS programme, having received about 40 %
of all funding under the programme. In total the TACIS funding allocated to the Russian Federation has been
about 200 million euro annually. TACIS aims to help create the conditions for sound economic growth and
develop a true partnership between the Russian Federation and the EU (see paragraphs 9 to 11).

III.
The objective of the Court’s audit was to assess whether the Commission had managed the TACIS
projects in the Russian Federation in such a way that these projects had been effective. The Court examined
29 contracts (projects) out of a total of 275 from the contracting year 2000 or later and with an expiry date
no later than the end of 2003, i.e. the most recent projects for which the sustainability could be assessed. These
projects were financed under the Actions Programmes 1997 to 2000, and implemented mainly in 2002
and 2003. The total value of the contracts audited was over 56 million euro out of a total population of
109 million euro (see paragraphs 12 to 16).

IV.
Overall the Court concluded that nine of the audited projects achieved their objectives. In eight cases
the objectives were partially met and in twelve cases they were not achieved. The results of five of the projects
were sustainable. Considering the above audit results, which show that the effectiveness of the use of TACIS
funds has been low, the Court cannot assess the performance of TACIS projects in the Russian Federation posi-
tively. However, the audit revealed that the performance of contractors and monitors met the requirements of
their contracts (see paragraph 55).

V.
The Court observed that the Commission had exhaustive programming systems. However, the pro-
gramming process took long and, despite the Commission’s efforts, there was a lack of a real dialogue between
the Commission and the Russian authorities and beneficiaries. As a consequence there were some cases where
the Russian authorities accepted assistance, which the final beneficiaries did not actually want. This had a nega-
tive impact on the effectiveness of the projects (see paragraphs 20 to 22).

VI.
Other observations were that projects’ objectives were sometimes imprecise and not measurable, or
sometimes missing, and in some cases underlying assumptions were unrealistic (see paragraphs 26 to 31). The
selection and involvement of beneficiaries on some occasions was not successful (see paragraphs 32 to 34).
There were problems related to the determination of the project size. In some cases individual projects were
incorporated into one set of ToR with loose connection. Co-financing was hardly used (see paragraphs 37
and 38). In twelve cases (of 29) there were major delays in implementation, but the devolution of responsi-
bilities to the Delegation resulted in more effective project management procedures (see paragraphs 39 and 40).
Steering committees did not work well. Equipment was often not used for the purpose of the project (see para-
graphs 43 to 46). Ex post assessment (evaluations) of the impacts of the projects did not take place (see para-
graphs 48 and 53).

VII.

The main recommendations of the Court are the following (see paragraph 56):

— All planning of external action programmes should be based on a real dialogue between the Commission
and the beneficiaries. Only such projects should be financed where there are clear objectives which are
shared by the Commission and the beneficiaries.

— To improve the working of its systems the Commission should apply the Project Cycle Management (PCM)
including the logical framework whenever appropriate, and it should avoid consolidating small projects
with different objectives and beneficiaries.

— The Commission should appraise realistically the potential for sustainability during the planning phase of
the projects; ensure the ex post assessment, or evaluation, of the completed projects in order to learn the
good and bad practices; and provide information on the projects and their results for dissemination
purposes.

(1) TACIS: Technical Assistance for the Commonwealth of Independent States.

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INTRODUCTION

The TACIS Programme

1.
After the break-up of the Soviet Union, the European
Union devised a technical assistance programme for the countries
of the newly created Commonwealth of Independent States (CIS).
The objective of this programme, named TACIS, was to promote
the transition to market economics and to reinforce democracy
and the rule of law in the recipient countries.

Two Council Regulations (1) covering the period from
2.
1991-1999 made available approximately 4 221 million euro for
assistance to the partner countries of Armenia, Azerbaijan,
Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia,
the Russian Federation, Tajikistan, Turkmenistan, Ukraine and
((EC,
Uzbekistan.
Euratom) No 99/2000 of 29 December 1999 (2)) earmarks
3 138 million euro for TACIS assistance during the period from
2000 to 2006. The Commission services are in the process of
devising a new concept and legal basis for assistance to these
countries from 2007 onwards.

Regulation

Council

current

The

3.
The aim of TACIS is to transfer know-how through tech-
nical assistance, including undertaking studies, preparation of
plans, and giving advice and training. Consultants from the EU
countries work with the beneficiaries with the aim of transferring
know-how and skills, which are intended to be replicated by other
projects and organisations in the recipient country. The aid is
financed through payments from the Community budget being
made directly to the European contractors providing the techni-
cal assistance.

In addition to the Council Regulation (see paragraph 2),
4.
relations between the European Union and the TACIS countries
are based on Partnership and Cooperation Agreements (PCAs)
signed between the EU, Member States and individual partner
countries. The External Relations Directorate-General (RELEX) is
responsible for the programming of TACIS in cooperation with
the partner countries. The implementation of the TACIS pro-
gramme is subsequently defined in multi-annual Country and/or
Regional Strategy Papers (SPs) and Multi-annual Indicative Pro-
grammes (for the national programme as well as the regional or
multi-country programmes) (MIPs). Before establishing the MIPs
the Commission has to discuss the priorities with the Committee
for
(TACIS
assistance
Committee) (3).

to the New Independent States

completed by financing memoranda (agreements between the EU
and the beneficiary countries on the projects to be financed) and
planning documents pertaining to the individual projects (Terms
of Reference, ToR). The TACIS Cross-Border Cooperation (CBC)
programme and the TACIS nuclear safety activities have their
own strategy papers and indicative and action programmes.

6.
The planning of the TACIS intervention is intended to be
dialogue-driven. This means that at all levels of the programming
and project identification stages the Commission and the benefi-
ciary countries should agree on the priorities and the projects.
Therefore all documents mentioned above from the MIPs down
to the ToRs have to be discussed and signed by representatives of
the Commission and of the beneficiary countries.

EuropeAid has overall responsibility for the management
identification to project

7.
of
from project
appraisal, financing, project implementation and evaluation.

the project cycle,

8.
In 2000, the Commission embarked on a major reform of
the management of its external aid programmes (4). The main
objective was to make significant improvements to the speed and
quality of EC external aid. A key component of this reform was
the extensive devolution of aid management tasks and responsi-
bilities to the Commission’s Delegations. As a result of this devo-
lution, the Delegations became responsible for project prepara-
tion, contracting, and financial and technical implementation.
The role of the central services in Brussels has developed from
direct management of projects towards monitoring and support-
ing Delegations.

TACIS in the Russian Federation

9.
The Russian Federation is the largest beneficiary of the
TACIS programme, having received about 40 % of all funding
under the programme. In total the TACIS funding allocated to the
Russian Federation has been about 200 million euro annually.

The EU and the Russian Federation

5.
The Europe Aid Cooperation Office (EuropeAid) currently
transforms the MIPs into annual or bi-annual Action Programmes
(APs) in dialogue with the TACIS national coordinators, relevant
ministries and other organisations in the beneficiary countries
and after internal consultation within the Commission. The
TACIS Committee is required to give its opinion on the contents
including the list of projects. These documents are
of APs,

(1) 1991-1995: (EEC, Euratom) No 2157/91 of 15 July 1991, 1996-

1999: (Euratom, EC) No 1279/96 of 25 June 1996.

(2) OJ L 12, 18.1.2000, p. 1.
(3) The Committee is composed of representatives of the Member States

and chaired by a representative of the Commission.

10.
The European Union’s policy towards the Russian Fed-
eration is geared towards: contributing to strengthening the rule
of law through the development of efficient institutions as well as
effective legislative, executive and judicial systems; improving the
investment climate; enhancing legislative harmonisation with the
EU; and cooperating in the fields of justice and home affairs, envi-
ronment and nuclear safety. These measures should help create
the conditions for sound economic growth in the Russian Fed-
eration, and developing a true partnership with the EU.

(4) Communication to the Commission on the reform of the manage-

ment of external assistance, 16 May 2000, SEC(2000) 814/5.

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The PCA between the European Union and the Russian
11.
Federation regulates the political, economic and cultural relations
between the EU and the Russian Federation. It was signed in 1994
and entered into force on 1 December 1997 for an initial period
of ten years. The Commission and the Russian authorities are in
the process of devising a new instrument for the period after the
expiry of the present PCA.

The sample covered different kinds of actions and areas
16.
of intervention. In addition to large TACIS projects with a budget
of at least 2 million euro, there were three smaller Bistro (4)
projects, three smaller extensions of earlier projects and one fea-
sibility study contract.

Audit scope and approach

12.
The audit objective was to assess whether the Commis-
sion had managed the TACIS projects in the Russian Federation
in such a way that these projects had been effective. To achieve
this the Court audited a sample of projects in order to determine
(i) the extent to which the projects’ objectives had been achieved
and (ii) how far projects were sustainable. In its audit the Court
followed the stages of the Commission’s system of Project Cycle
Management (PCM): programming; project identification and
planning; project
implementation and
evaluation.

financing; project

As the audit concentrated on the project level, the assess-
13.
ment of the programming process was limited to aspects which
had a direct impact on the planning of the projects audited. The
audit did not cover other general non-measurable political objec-
tives of the projects.

14.
In the framework of this audit, the Court was cooperat-
ing with the Russian Chamber of Accounts (RCoA). The RCoA
performed a parallel audit on the side of relevant Russian authori-
ties on TACIS projects. The report of RCoA will be published at
the beginning of 2006.

15.
The Court examined 29 contracts (projects) out of a total
of 275 from the contracting year 2000 or later and with an expiry
date no later than the end of 2003 which were the most recent
projects for which the sustainability could be assessed. These
projects were financed under the Action Programmes 1997-
2000, and implemented mainly in 2002 and 2003. The total
value of the contracts audited was over 56 million euro out of a
total population of 109 million euro (1). The Nuclear Safety
projects as well as TACIS CBC projects were excluded from the
sample, as the Court has published Special Reports based on
audits of these areas in 1998 (2) (with a follow up in the Annual
Report 2000) and 2001 (3).

(1) The contracts audited were selected using the method of Monetary
Unit Sampling. As a consequence, the selection includes more con-
tracts with big amounts than contracts with small amounts.

(2) Special Report No 25/1998 concerning operations undertaken by the
European Union in the field of nuclear safety in central and eastern
Europe (CEEC) and in the new Independent States (NIS)
(1990
to 1997). Follow up in 2000, the Court’s Annual Report, para-
graphs 5.45-5.76.

(3) Special Report 11/2001 concerning the TACIS cross-border coopera-

tion programme.

OBSERVATIONS

17.
Most of the projects faced problems during one or sev-
eral phases of the project cycle. These problems are elaborated
below. Table 1 shows the number of projects affected by the main
problems revealed by the audit.

Table 1

Number of projects affected by the main problems
revealed by the audit

Number of
projects
with
problems

Number of
projects
without
problems

Total number of projects audited = 29

Project identification and planning

Lengthy project-planning schedule

Unrealistic assumptions

Unrealistic objectives

Imprecise or missing objectives

Unsuccessful choice and involvement of
the beneficiary

Project financing

Unclear project size determination

Project implementation

Delays in implementation

Problems with contractors’ performance

Monitoring was ineffective

Objectives were not/only partly met

Conditionalities not set or not respected

Dissemination and sustainability

Poor dissemination

Poor sustainability

Lack of evaluation

8

12

9

16

11

8

12

6

3

12/8

8

17

24

27

21

17

20

13

18

21

17

23

26

9

21

12

5

2

Objectives not achieved or achieved only partially

Nine projects fully achieved their objectives. In eight
18.
cases the objectives were partially reached and in twelve cases the
objectives were not achieved.

(4) Bistro is a TACIS facility designed to respond quickly to requests for
support for small scale projects (as a rule up to 100 000 euro).

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Box 1

Project identification and planning

One project had several specific objectives. One of them was to ensure
harmonisation of legal road standards between the EU and the Rus-
sian Federation. This objective could not be reached because there is
no such EU standard. The second one was to enable comparative
tests of road materials by providing a Russian agency with testing
equipment. The equipment was delivered but it was still unused
almost two years after the project’s end. The third objective, training
of the beneficiary’s staff, was cancelled in the middle of the project.

19.
In general, the most successful projects in terms of meet-
ing their objectives were the small ones, where the objectives
were well and clearly identified. Also projects implemented in the
regions generally performed better than projects targeting minis-
tries at central level because of a greater level of commitment and
feeling of ownership by the beneficiary, and more staff
motivation.

Programming framework

Poor application of the Project Cycle Management System

23.
In 1992 the Commission adopted the PCM methodology
setting out the format and contents of Financing Proposals
and including a requirement to draw up a logical framework (1)
in order to improve its project management. However, the use of
the PCM methodology and logical frameworks was made obliga-
tory by the Commission only from 2001.

24.
In 2001 the Court published Special Report No 21/2000
on the management of the Commission’s external aid pro-
grammes. One of the findings in the report was that the logical
frameworks as part of the PCM were often not well prepared (2).
This TACIS audit showed that the Commission still did not use
the PCM, including the logical frameworks, systematically. The
audit also showed that in most of the cases where the logical
frameworks were used effectively, the projects achieved better
results. The use of the PCM framework forced the planning to be
done more thoroughly.

20.
Over the years the Commission has developed a system
of programming external actions. In theory the system is com-
prehensive and logical. It has been stable already for many years.
In line with other external action programmes many documents
are drafted at various levels of TACIS programming and imple-
mentation (see paragraphs 4 and 5).

Long project-planning schedule

21.
However, the programming process including the inter-
nal and external consultations is long. This put pressure on the
project identification and preparation of the planning documents
for the individual projects and finally when the deadlines for sub-
mission of projects were approaching, resulted in ToRs of insuf-
ficient quality (see paragraph 26).

22.
The results of the projects audited, and the analysis of the
problems faced by them, show that, despite the apparent efforts
of the Commission during the formal consultations, the program-
ming and subsequent project identification including preparation
of financing memoranda and individual ToRs, were carried out in
the absence of an adequate dialogue (see paragraph 6) with the
various levels, i.e. Russian authorities administering the TACIS
programme and beneficiaries (ministries and other organisations).
For some areas of intervention the reform process in the Russian
Federation had not advanced as hoped or the political environ-
ment on the beneficiary side had not matured enough for a con-
structive dialogue with the Commission. As a consequence there
were some cases where the Russian authorities accepted assis-
tance which the final beneficiaries did not actually want. This lack
of dialogue and the length of the planning process (see para-
graph 21) had a negative impact on the effectiveness of the
projects.

The time-span from the original

25.
idea or request for
project funding to the inception of the actual project was very
long. It may take up to three years to launch a consultancy
project, which is too long, as the needs and situations of the ben-
eficiaries change. Due to the delays, the projects, especially those
related to policy development or crisis management, were already
outdated when they eventually started. Consequently, as time had
solved the original problems the contractors had to change the
projects’ approaches which further delayed their implementation.

Box 2

Prior to providing assistance in the area of anti-money laundering
activities the Commission insisted on a feasibility study be produced.
Mainly due to internal coordination difficulties between Commis-
sion services but also because it took the beneficiary organisation
unduly long to approve its ToR, the start of this preparatory project
itself was delayed by two years. Eventually, this delayed the technical
assistance project — which was politically and economically impor-
tant and also urgent for the Russian Federation — by five years.

(1) The logical framework is a tool which makes explicit the underlying
logic of the project design, i.e. how particular inputs should produce
certain outputs which will help meet objectives which will contribute
to wider goals.

(2) OJ C 57, 22.2.2001, paragraph 37.

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Unrealistic underlying assumptions and objectives

Imprecise or missing objectives

26.
The long planning period did not always result in ToRs
of good quality. In nine cases insufficient background investiga-
tions in the project design phase led to unrealistic objectives.
Often, the project designs did not take into account the legal con-
straints in implementing the project, or the objectives were out-
side the competence of the beneficiary, or they were just too
extensive and abstract to be reached by a single project. For
example, most of the projects with objectives or tasks related to
legislation, were
policy formulation,
unsuccessful.

including enacting of

Box 3

A pilot project was established to test a new model for facilitating
the start of new businesses. However, a similar model had already
been established in the Russian Federation with the help of Cana-
dian technical assistance in the middle of the nineties.

27.
The participation of the Russian counterparts, as well as
the line directorates-general at the Commission, in the processes
of drafting and approval of the planning documents varied greatly
and can be deemed to have been insufficient to secure realistic
planning in some cases.

Box 4

In one case a city was involved in a district heating and power project
but not nominated as a primary beneficiary. It did not endorse the
ToR and as a result, the project was delayed and faced other mana-
gerial problems caused by a lack of commitment by the city authori-
ties.

28.
Examples of unrealistic assumptions and objectives
include: the institutional framework of a beneficiary was not
adequate or was non-existent, the target group had no interest in
the services provided, the cooperation potential of the local
administration was over-estimated or the beneficiary was not, by
legislation, allowed to provide the services or information fore-
seen by the project.

29.
Thirteen projects audited had clear objectives. However,
in sixteen of the projects audited, the initial project objectives in
the ToR either described only the intended activities or input
instead of setting clear and measurable objectives; or they were
formulated in the same general way as in the political program-
ming documents, forcing the contractors to define the actual pur-
pose of the projects during implementation. The projects did not
have objectives that would have identified the problems to be
solved nor did they have such objectives against which the
achievements of the projects could have been measured.

30.
For most of the projects audited objectively verifiable
indicators had not been defined. In other cases, where the objec-
tives were clear and intelligible, there were differences between
the actual project activities and the project’s initial objectives as
described in the ToR. In one case the project was executed with-
out specific objectives or objectively verifiable indicators. Instead
it was directed towards providing ad hoc services to a ministry
without being clear about the exact objective of the work. In the
case of another project the beneficiaries in the private sector
received assistance to develop their commercial activities which
in fact was outside the scope of the overall objective of the project.

31.
For some projects the design was overly complex, includ-
ing too many separate and not interlinked tasks and objectives.

Box 6

One project had 23 different major outputs or objectives integrated
into 8 different components. These covered themes like environmen-
tal protection in oil production, energy saving measures and studies
of fish hatcheries. As a consequence of this complexity several of the
foreseen objectives, including the two most significant ones, were not
fully achieved.

Unsuccessful selection and involvement of beneficiaries

Box 5

A remote and entirely local road management project had an inad-
equate overall objective, ‘to facilitate trade between the EU and the
Russian Federation’.

Another example of an unrealistic objective is presented in the box
of paragraph 18 concerning the harmonisation of road standards.

32.
Selecting suitable beneficiaries as project partners was
very problematic because the project objectives were sometimes
outside the competence of the project partner, or the beneficiary
was not ready to receive or able to benefit from the support. In
one case the Commission wanted to support a federal agency for
political reasons, in view of the forthcoming cooperation nego-
tiations between the EU and the Russian Federation. However,
this agency was not in the end involved in the actual negotiations.

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When a project had several beneficiaries, implementation
33.
faced a number of problems. Lack of cooperation between the
federal and regional authorities or lack of cooperation between
different federal and between different regional authorities was
usual. This failing, although apparent, had not been taken into
consideration during the planning.

Box 7

In one case the initiating beneficiary was operating only at the level
of a region. To meet the minimum size requirements of the project
budget it had to be expanded to cover several regions. To solve the
problem another beneficiary was created but only on paper. It did not
have legal identity, nor did it otherwise exist outside the project plan-
ning documents.

34.
In five cases audited the beneficiaries were not involved
in the project planning, or not early enough, to have an influence
on the project design.

Rare national co-financing

to

the

According

TACIS Regulation,

37.
national
co-financing of projects was to be actively encouraged by the
Commission. However, co-financing requirements are rare in the
TACIS projects in the Russian Federation, even though they are
intended to have a positive impact on the beneficiary’s and con-
tractor’s commitment to achieve the expected results. There were
only two cases among the audited projects where the beneficiary
was co-financing the activities. The co-financing had a positive
impact on the ownership of the projects by the beneficiaries
which led to achievement of the projects’ objectives.

38.
Most of the projects include in-kind contributions from
the beneficiaries such as commitments to make local counterpart
staff available or to provide the contractor with premises. In eight
cases there were problems regarding this indirect co-financing
because the commitments were not honoured, particularly for
projects in Moscow. The ministries in the Russian Federation gen-
erally are not legally allowed to provide the contractors with
office accommodation within their premises. Although the Com-
mission was aware of the problem, it continued to insert such
conditions into the ToRs.

Project financing

Project Implementation

Problems related to the determination of the project size

Delays in implementation

35.
According to the programming guidelines, the minimum
budget size of TACIS projects in the Russian Federation should be
2 million euro in order to achieve sufficient impact and visibility.
However, the programme may finance a number of small-scale
initiatives, including Bistro projects. Most projects in the audited
sample had a budget of between 2 and 3 million euro (see para-
graph 16). In eight cases it was not clear from the project docu-
mentation how the project budgets had been arrived at. When the
projects’ objectives are not clear, defining a well-founded budget
is difficult.

36.
In some cases this minimum size led to problems. Instead
of launching several, well-defined and focused projects, multiple
tasks were incorporated into one set of ToR with loose connec-
tion or no synergy at all (see paragraph 31). The audit results
show that such a budget-driven approach, which artificially cre-
ates larger projects, is unlikely to enhance the projects’ impact
and visibility.

Box 8

In the case of an industrial restructuring project 30 subprojects were
planned. The budget was set in order to reach the minimum size
rather than to satisfy the need of the subprojects.

39.
Seventeen projects were implemented within the time
set. In the remaining twelve cases there were major delays in
implementation. In this respect the most critical part was the
inception phase, which usually took more time than planned.
Those delays were mostly linked to an inadequate quality of the
preparation of the projects. Due to the poor ToR, the projects
needed many approvals for changes during inception and imple-
mentation. The procedure to change the project approach
through addenda is time-consuming. Even a change of personnel
requires the same procedure as modifications to the project’s
actual substance.

40.
The devolution of project management responsibilities
from Commission headquarters to the Delegation resulted in
more effective management procedures through more direct con-
tacts between the project managers and project stakeholders; in
fact, more proactive management by the Delegation even sal-
vaged several of the projects from serious difficulties. These obser-
vations are in line with those of the Court’s audit of the devolu-
to the Commission
tion of EC external aid management
Delegations published in Special Report No 10/2004 (1). How-
ever, the implementation of projects which had been pro-
grammed and prepared centrally in Brussels and which in
2002/2003 were transferred to the EC Delegation in Moscow
(about half of all the projects audited) encountered one-off delays
and obvious managerial deficiencies because of this transfer
process.

(1) OJ C 72, 22.3.2005.

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Contractors’ performance was generally acceptable

In many cases the equipment was delivered at the end of
45.
the project, due to the long procurement procedure, and there-
fore could not be used for the project activities.

Although the objectives were often not achieved or
41.
achieved only partially (see paragraph 18), in most of the cases
the contractors had delivered the output (deliverables) as foreseen
either in the original ToR or in the ToR amended through
addenda. A typical problem for the contractors was to find and
maintain suitable staff in more remote project locations when the
staff originally allocated was not available. Only one small project
was a failure due to a lack of output by the contractor. Another
contractor faced financial problems during project implementa-
tion, which led to significant delays in implementation.

Ineffective steering committees

Where steering committees had been established they
42.
usually did not work effectively or efficiently. This hampered the
implementation of the projects. The powers of the committees
were limited by the Commission so the Russian members did not
see what kind of an impact the steering committees could have
and were, thus, not actively participating in the meetings. The
contractors’ project managers had to take over (part of) the tasks
of the steering committees.

Equipment not used for the purposes of the project

According

43.
to the TACIS Regulation (Euratom,
EC) No 1279/96 the programme shall cover reasonable costs of
supplies required in support of the implementation of the tech-
nical assistance (1). TACIS Regulation (EC, Euratom) No 99/2000
states that a maximum of 20 % of the annual budget can be allo-
cated to investment (2). In practice the service contracts included
a supply component which obliged the technical assistance con-
tractors, in cooperation with the beneficiaries, to define the tech-
nical specifications of the supplies, and to manage the procure-
ment process in accordance with the TACIS procurement rules.

46.
The equipment needs maintenance (including the supply
of consumables) after the project has ended. However, this main-
tenance did not always take place.

Box 9

In one case, the customs offices did not have any budget to buy con-
sumables for the laboratory. Another laboratory remained mainly
unused, as the beneficiary did not have adequate premises in which
to use the equipment.

One of the federal beneficiaries refused to accept IT equipment for its
own bureaucratic reasons (as it did not pay for the equipment it did
not know how to book it into the balance sheet).

In another case some of the equipment was sold by the beneficiary
because it did not know how to make use of it. Part of the equip-
ment could not be used because the needed internet connection was
not available. Some fitness equipment was not suited for the target
group, children, but was used by soldiers from a local military acad-
emy.

Purchases free of VAT from domestic suppliers impossible

Contractors indicated problems in domestic procure-
47.
ment of equipment and services as well. According to the TACIS
Regulation (4), taxes and duties are not eligible expenditure. Pur-
chases free of VAT from domestic suppliers in the Russian Fed-
eration were impossible because the Russian secondary legislation
does not allow it. This is not in line with the agreement between
the EU and the Russian Federation (5).

The monitors performed well

44.
There was not always clear synergy between the techni-
cal assistance and equipment provided under the projects. Nor
was there any evidence that the equipment component had
addressed the specific areas described (3) in the Regulation or
Guidelines. The beneficiaries treated the equipment component
(mostly office and IT equipment) more as an additional bonus
given for accepting the consultancy.

48.
An external consulting company was charged with the
monitoring of the projects, during their lifetime. The consultants
(monitors) form an opinion about design, efficiency, effectiveness,
impact and sustainability of the projects. The financial side of the
project is excluded. Also, assessment of the impact of the projects
after the expiry of the projects’ activities was and is not part of the
contract between the Commission and the monitors. The lack of
this assessment was not compensated for by evaluations.

(1) Article 3.
(2) Article 6.
(3) Cross-border cooperation, promotion of Small and Medium Enter-
prises (SMEs), environmental infrastructure and networks of strategic
importance to the Community.

(4) Article 9 of Regulation (EC, Euratom) No 99/2000.
(5) General Rules to the technical Assistance of the European Communi-
ties signed by the European Commission and the Government of the
Russian Federation on 18 July 1997.

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In general the monitors performed according to the
49.
requirements of their contracts. However, in a few cases the
monitors’ reports repeated statements expressing future inten-
tions as if they were merits of the projects. Such reports did not
reveal clearly enough the implementation problems, which may
partly explain the lack of corrective actions.

Dissemination, sustainability and evaluation

Poor dissemination

50.
Typical dissemination activities were seminars, a web-
page and brochures. Even though some projects had some dis-
semination activities during project implementation, those ceased
when the project activities finished. For example, the web pages
created as part of the activities of six projects were not maintained
by the beneficiary after the expiry of the project. To some degree,
this also demonstrates the perceived value of the results achieved,
as insufficient funds were devoted by the Commission and Rus-
sian side to the dissemination of the results.

51.
Nor had the Commission proper systems and instruc-
tions for effectively disseminating the results and lessons learned
from the TACIS projects. For example, there is no consolidated,
public database on TACIS projects. Nor are the Russian authori-
ties fully aware of the results of TACIS projects.

Poor sustainability

52.
As noted above, there were several problems in achiev-
ing the results of the projects and disseminating information
about the results achieved. Furthermore, the beneficiaries have
only rarely used or further developed the outputs such as reports
and models. The results of only five of the projects audited were
sustainable.

Lack of evaluation

The Commission carries out sector or countrywide evalu-
53.
ations, but targets rather seldomly individual projects. Only two
of the 29 projects audited were evaluated. This is inadequate con-
sidering the intended pilot nature of many of the projects as well
as the amount of money involved, and it is not at the level
required to improve the design of future projects.

CONCLUSIONS AND RECOMMENDATIONS

Conclusions

54.
The Russian Federation is an important trading and
political partner of the EU. Effective EU assistance aiming at cre-
ating conditions for democracy, rule of law and sound economic
develop
growth

the Russian

Federation

and

to

in

a true partnership between the EU and the Russian Federation can
be an important and meaningful instrument.

55.
About one third of the audited projects fully achieved
their objectives. In eight cases the objectives were partially reached
and in twelve cases they were not reached (see paragraph 18). The
results of five of the projects audited were sustainable (see para-
graph 52). Considering the above audit results, which show that
the effectiveness of the use of TACIS funds has been low, the
Court cannot assess the performance of TACIS projects in the
Russian Federation positively. However, the audit revealed that
the performance of contractors and monitors met the require-
ments of their contracts. The main failings are the following:

(a)

(b)

for the purposes of planning and management of TACIS and
other similar programmes the Commission has developed
systems of programming and project cycle management.
This system framework is aimed at ensuring effective use of
the funds allocated to an activity although the need to pre-
pare and approve the programming documents and the
related consultations made the programming process long.
Despite the exhaustive programming systems and the Com-
mission’s efforts, a real dialogue with the Russian authorities
and beneficiaries often did not take place resulting in some
cases where the Russian authorities accepted assistance,
which the final beneficiaries did not actually want. Under
these circumstances the documents had to be drafted at a
very general level, not reflecting the real needs of the benefi-
ciaries (see paragraphs 20 to 22);

this was reflected in the design of many projects. Objectives
were sometimes imprecise and not measurable and in some
cases underlying assumptions were unrealistic. This resulted
in ill-founded project budgets. Some apparently larger scale
projects in fact comprised many different small projects with
many different objectives and several beneficiaries. The selec-
tion of beneficiaries and the cooperation between various
beneficiaries was problematic. During the implementation
the beneficiaries often failed to meet their obligations to con-
tribute in-kind (counterpart staff, office accommodation). A
specific aspect illustrating the insufficient dialogue between
the Commission and the Russian authorities is the impossi-
bility of purchases free of VAT from domestic suppliers (see
paragraphs 25 to 34);

(c)

the potential sustainability was not given sufficient consider-
ation by the Commission when planning the projects, and
further, when a project achieved its results, they were not
effectively disseminated. Thus the replication of activities and
learning from the results remained limited (see para-
graph 52). Co-financing was practically not used to get more
ownership (see paragraph 37);

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(d)

the assessment of the impact of the projects after the expiry
of the projects’ activities was not part of the monitors’ duties
and this was not compensated for by evaluations. The Com-
mission could therefore not systematically learn from the
implemented projects in order to develop more effective
future interventions (see paragraphs 48 and 53).

Recommendations

56.
To facilitate improved effectiveness of the future assis-
tance to the Russian Federation the Court makes the following
recommendations.

(a) The Commission should find ways to shorten the program-
ming process and base all planning of external action pro-
grammes on a real dialogue between the Commission and
the recipient leading to a real commitment of the latter.

(b) Projects should only be financed where all the objectives
are specific, measurable, realistic, timed and achievable,
and are truly shared by the Commission and the
recipient/beneficiary, and in which the steering committees,
where appropriate, are made into an important management

instrument through giving them the right powers and insti-
tuting membership at decision making level; and the invest-
ment components (if any) would be co-financed by the ben-
eficiary;
concerning VAT
exemption and indirect in-kind co-financing are made.

arrangements

and realistic

(c) The Court stresses the need for a stable organisation and for
robust and rigorous action in line with the established rules
and guidelines: the PCM including the logical framework
should be applied whenever appropriate; the Commission
should avoid putting small projects together in one larger-
scale project with multiple objectives and different beneficia-
ries; the Commission should promptly react to shortcomings
in project implementation; and the Commission should set
benchmarks for the speed of its administrative procedures
for approvals of and other reactions to the programming
and contracting documents and reports.

(d)

In order to have better overview of the sustainability of the
projects the Commission should appraise realistically the
potential for sustainability during the planning phase of the
projects; ensure the ex post assessment, or evaluation, of the
completed projects in order to improve the future projects;
and ensure that information on the projects results is made
accessible to the public and actively look for the best prac-
tices achieved by its and other donors’ projects.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 9 March 2006.

For the Court of Auditors
Hubert WEBER
President

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THE COMMISSION’S REPLIES

SUMMARY

I.
The European Neighbourhood and Partnership Instrument, proposed by the Commission in September
2004, which will govern the future cooperation with Russia, is currently under consideration in the Council
and the European Parliament. A Country Strategy Paper and a National Indicative Programme covering the
period 2007 to 2010 will be put to Member States for consideration when appropriate.

The Strategy will guide the European Commission in the implementation of financial cooperation at levels
decided by the Council.

II.
The financial funds for Russia have been on a decreasing trend. Russia has achieved much economic
progress in recent years and the capacity of the Russian authorities to finance reform measures itself has grown
significantly at a time when the country has a budget surplus and is repaying its international debts. The over-
all funding level, including also horizontal thematic budget headings, fell to EUR 150 million in 2005 and is
expected to decrease further to around EUR 120 to 130 million in 2006.

The Commission has itself recognised these weaknesses, which arose partly as a result of shortcom-
IV.
ings in the project management, but also as a result of lack of involvement and ownership by the Russian ben-
eficiaries. Moreover, in some cases the impact of the projects was hampered by the diversity of interest within
the Russian society, materialised in diverging interest between the various authorities.

A majority of the projects achieved their objectives fully or partially, and despite the low effectiveness of some
of the projects the Commission believes that its programmes of assistance have helped to broaden the general
level of cooperation between the EU and the Russian Government.

Nevertheless, the Commission will draw the lessons of experience, and of the new economic situation prevail-
ing in Russia, when preparing its new country strategy.

A constructive political environment is vital for the successful implementation of financial coopera-
V.
tion. In the context of assistance to Russia, an occasional lack of such an environment has from time to time
had a negative impact on programming and implementation. Moreover, the programming was affected by the
financial crisis in Russia at the end of the 1990s, when general disintegration made dialogue difficult, thereby
diminishing local ownership.

The Commission has already addressed the weaknesses in the management of the past programmes by intro-
ducing the Reform of External Assistance (the RELEX reform), notably by means of the devolution of EC exter-
nal aid management to the Commission Delegations. The devolution ensures a greater involvement of the part-
ner country from the preparatory phase to the final implementation, and it also strengthens the Commission
involvement in donor coordination on the spot.

Since the design of these projects in 1997 to 2000, significant improvements have been introduced,
VI.
including the development of clear and measurable objectives for actions envisaged. The Court’s observations
also relate to the difficult environment in Russia at the time. The 2005 Monitoring Report of Tacis projects
revealed a significant increase in quality of projects in terms of relevance, efficiency, effectiveness, impact and
sustainability. Moreover, the Commission systematically carries out sector and country-wide evaluations.

Whilst sharing the Court’s analysis that larger-scale projects should not be sought by pooling together a vari-
ety of small projects with multiple objectives and many different beneficiaries, the Commission still intends to
move towards larger-scale projects in the TACIS region as a whole. The Commission also intends examining
the feasibility of new implementing tools to improve the cooperation programme with Russia when the TACIS
Regulation expires and a new instrument will be introduced.

Through building on the Common Space political dialogue with Russia the aim is to maximise ownership by
the partner country.

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VII.

(first indent) The Commission intends to base future cooperation on the Common Spaces agreed between Rus-
sia and the European Union, and will support initiatives emanating from the roadmaps; financial cooperation
will seek to meet policy objectives already agreed between the two sides.

However, despite a generally improved political environment following agreement on the joint Common
Spaces policy in recent years, engaging the large Russian bureaucracy in sustained dialogue over the strategy
for future financial cooperation is not straightforward. Furthermore, the Russian authorities remain hesitant
about the form of the future cooperation. Therefore there will be even more emphasis in the future on fund-
ing actions on which both sides agree. The Commission will be prepared to use financial cooperation to drive
forward the EU-Russia policy agenda.

(second indent) The Commission made PCM and use of logical framework obligatory as of 2001. Amongst
others the External Assistance Reform has also strengthened the quality of the projects, i.e. by introducing sys-
tematic review of projects/programmes at identification and formulation stages by Quality Support Groups,
as well as by systematic use of result-oriented monitoring. On project level also systematic use of logical frame-
work with objectively verifiable indicators is put in place.

(third indent) The Commission systematically carries out sector or countrywide evaluations. It will consider
increasing the number of project-based evaluations. Best practice is to publish all evaluations, including project
evaluations.

There is already a database of results-oriented monitoring of ongoing projects, used as a management tool by
the Commission, which allows learning from good and bad practices. Results are also shared in general with
the beneficiary country.

INTRODUCTION

Delegations. This has and will continue to improve the imple-
mentation and monitoring of bilateral projects on the ground.

2.
The European Neighbourhood and Partnership Instru-
ment, proposed by the Commission in September 2004, which
will govern the future cooperation with Russia, is currently under
consideration in the Council and the European Parliament. A
Country Strategy Paper and National Indicative Programme 2007
to 2010 will be put to Member States for consideration when
appropriate.

9.
Financial cooperation with Russia has been on a decreas-
ing trend, as continued high commodity prices have substantially
improved Russia’s financial position. The overall funding level fell
to EUR 150 million in 2005 and is expected to decrease further
to around EUR 120-130 million in 2006.

10.
EU policy towards Russia is now expressed by the four
Common Spaces (Common Economic Space, Common Spaces of
Justice, Liberty and Security, Common Space of External Security,
Common Space of Research and Education, including Culture) —
with detailed policy commitments set out in the accompanying
roadmaps (agreed in May 2005).

18.
The Commission recognises certain weaknesses in
project implementation at that time. They have been addressed
through the Reform of External Assistance.

Box 1 — See reply to paragraph 18.

21.
A distinction should be made between the two types of
consultations: internal consultations within the Commission take
into account the need to consult, in the case of an important part-
ner such as Russia, most if not all DGs and services. The consul-
tation procedure with Member States takes time, but this is a
regulatory obligation. External consultations with the Russian
side are important to ensure dialogue and a real sense of owner-
ship. Internal and external consultations in any case proceed, to
the greatest extent possible, in parallel.

In some cases the Russian authorities have subsequently delayed
the signature of Action Programmes, therefore delaying the
implementation of the projects themselves.

OBSERVATIONS

17.
The projects examined do not reflect the improvements
in project design procedures introduced since the reform of the
EC external assistance, which has taken place over the 2002
to 2005 period, in particular the devolution of responsibilities to

The Reform of External Assistance (the RELEX reform),
22.
notably by means of the devolution of EC external aid manage-
ment to the Commission Delegations, aims at ensuring a greater
involvement of the partner country from the preparatory phase
to the final implementation, and it also strengthens the Commis-
sion involvement in donor coordination on the spot.

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Attempts have been made, by the Delegation in particular but
also by RELEX Headquarters during a recent programming mis-
sion (October 2005), to engage the Russian Government in dia-
logue over the future strategy, which is firmly based on the Com-
mon Spaces, and at least the Commission has formal Russian
agreement to these (since May 2005).

Harmonised programming guidelines have been devel-
27.
oped since 2000 and programming documents are now system-
atically screened for quality and consistency. As regards the Coun-
try Strategy Paper 2007 to 2013 a consultative mission took
place in October 2005 to ensure the participation of the Russian
authorities in the programming process. See also reply to
paragraph 21.

The dialogue has improved with the Russian authorities since
devolution. Regular dialogue is maintained with the National
Coordination Unit (NCU). However, contacts could be developed
further; they are currently limited by the lack of its prioritisation
by the Russian authorities illustrated by only up to four people
working on the Tacis programme in the NCU. The Russian
authorities remain hesitant about
the future
cooperation.

the form of

24.
Since the reform of EC external assistance, all aspects of
Project Cycle Management (PCM), including the use of the logical
frameworks, are fully institutionalised. The use of the logical
framework approach provides objectively verifiable indicators
and predefined means to assess the effectiveness of the expendi-
ture. Independent and systematic results-oriented monitoring, as
well as mandatory mid-term and final evaluations, are then used
to verify this. Moreover, in order to improve the design of indi-
vidual operations, EuropeAid Office Quality Support Groups
(oQSGs) review projects and programmes twice before the financ-
ing decision is taken — namely, at identification and formulation
stages. Quality of projects/programmes is assessed by the means
of checklists based on a Quality Frame which is coherent with
OECD/DAC criteria (the Quality Frame is a system based on three
quality attributes — relevance, feasibility, and effectiveness and
good management — and 12 criteria indicating the key issues to
be assessed in order to make a judgement about quality). In addi-
tion, the Delegation in Russia has established a system of ‘peer
group perusal’ to review project outlines and terms of reference
before they are approved.

25.
As a result of this reform, including the establishment of
EuropeAid (January 2001) and the devolution of aid management
to the Commission Delegations, together with the New Financial
Regulation (January 2003), project delays will be limited
and contained.

The Policy Advice Programme has been introduced to ensure a
rapid response to Russian policy advice requests. In addition, new
tools have been introduced (e.g. General Technical Assistance
Facility, Accompanying Measures, etc.) enabling also swift replies
where there is an urgent need.

In the meantime devolution has led to a significant
26.
increase in staff in Delegations, which should facilitate the execu-
tion of background studies as well as investigations of the cur-
rent (though quickly changing) legal environment. The increas-
ing role of the Delegation should also contribute to avoiding
problems of the kind mentioned in boxes 3, 4 and 5.

28.

See reply to paragraph 26.

29.
Since 2000 the Commission has put much effort into
developing clear and measurable objectives for action envisaged.
The newly established internal quality support process at the
headquarter focuses, among others, on the appropriateness of
objectives.

30 and 31.
Project design has considerably improved
through the reform of EC external assistance as outlined in the
Commission reply to paragraph 24.

Box 6 — The Commission confirms that the project was complex. How-
ever, the project results gave start to activities in the field of sustainable
and environmentally friendly use of energy resources.

32.
It is the Russian authorities that propose the beneficia-
ries. This process is at times complicated due to Russian internal
coordination difficulties and changes in government structures.

33.
Lack of cooperation between the federal and regional
authorities or lack of cooperation between different federal and
between different regional authorities is a constant feature of the
Russian political environment. The Delegation has nevertheless
made every effort to ensure the effective implementation of
planned projects.

34.
In all cases beneficiaries must sign Statements of Endorse-
ment for Terms of Reference, so they always have the chance to
propose changes to the design of the project.

35.
A consensus will have to be reached, for the period from
2007, to avoid excessive dispersion of modest funding and to con-
centrate and maintain financial cooperation on a limited number
of actions.

36.
The quality of project design has considerably improved
as explained under paragraph 24. The newly establish internal
quality support process at the headquarter focuses, among oth-
ers, on the appropriateness of objectives.

37.
Co-financing is included in the current dialogue with the
Russian authorities. It is a complicated issue and can only be
evolved at a gradual pace.

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Inclusion of office premises within Terms of References
38.
only happens as a result of discussions with the Russian benefi-
ciary. This is part of the discussion on asking the beneficiary to
show material commitment to the project. Normally the benefi-
ciaries (including ministries) commit themselves to providing
accomodation (regardless of whether this is inside or outside a
specific ministry). For the future, the Commission intends to give
a number of specific suggestions for ways in which the Russian
side may demonstrate commitment on their side. For example,
the authorities should facilitate the implementation of actions
funded. Russian commitment could be further engaged through
requests to provide co-financing or in-kind contributions where
appropriate.

The legislation is already in force at federal level (General
47.
Rules are compulsory, the Taxation law refers to the humanitar-
ian aid/technical assistance), but there is a lack of implementation
mechanisms (and willingness) at local level. The regional services
of the tax department do not have the internal instructions needed
to apply the international agreements and to accept the exemp-
tion of the VAT.

Thus, in practice, although the necessary legal base exists and the
projects are all reported to the relevant Commission (2), it is tech-
nically not possible to obtain the exemption at the source, nor the
refunding of the VAT on the goods and the services acquired in
Russia.

39.
As outlined in paragraph 24, the quality of project design
has considerably improved in the context of the reform of EC
external assistance.

This problem is regularly highlighted at the political level, unsuc-
cessfully as of today.

As far as the speed of implementation is concerned there are seri-
ous delays with regard to contracting due to the lengthy signing
procedure by the Russian authorities. As regards the time period
between contracting and finalisation, projects are in general
implemented as planned.

40.
The ‘Qualitative Assessment of the Reform of External
Assistance’ of July 2005 (1) confirms that assistance is now deliv-
ered with more impact and is managed more efficiently. Improve-
ments are still needed and continue to be made.

Indeed the Commission pays much attention to the pro-

41.
cess of selecting (and managing) the best consultants.

The Commission believes that Steering Committees are
42.
an important tool in the guidance of projects. There might be
some shortcomings in the functioning of steering committees,
given that interests of its members may diverge. However, overall
the advantages outweigh the drawbacks.

43.
Since the introduction of the new Financial Regulation,
all contracting of supplies has been done in-house in the EC
Delegation.

44.
The EC Delegation attempts where possible to minimise
the inclusion of the purchase of equipment in projects. However
at times there may be a strong need expressed by the beneficiary
in which case the Commission negotiates.

The Commission has to make every effort to ensure the
45.
transparancy and regularity in the application of the procurement
procedures. In addition Russian VAT and Customs procedures
also cause additional delays.

Office and IT equipment (see paragraph 44) is standard;

46.
beneficiaries are expected to maintain it.

48.
The results-oriented monitoring programme is deemed
to be an important contribution to the project management work
and it has been extended to other areas (outside of Tacis). See also
paragraph 53.

49.
The 2005 Monitoring Report of Tacis projects revealed a
significant increase in quality of all four components (relevance,
efficiency, effectiveness, impact and sustainability) monitored for
projects that were already monitored in 2004. This proves that
corrective action has been taken.

Within the Commission, lessons learnt are systematically
51.
taken into account in the establishment of each project fiche for
Tacis projects. The establishment of the Directorate ‘Quality Sup-
port’ also fosters the build-up of institutional knowledge on
results of previous projects.

52.
Monitoring and evaluation of projects has been enhanced
by obligatory use of the logical framework tool. This will help to
further improve sustainability.

The Commission will consider increasing the number of

53.
project-based evaluations.

CONCLUSIONS AND RECOMMENDATIONS

For the future, the Commission intends to stress the
54.
potential of successful financial cooperation in helping to con-
solidate the EU-Russian partnership based on the Common
Spaces agreed in 2003.

55.
The Commission has itself recognised these weaknesses,
which arose, as indicated by the Court, partly as a result of short-
comings in various phases of the project management cycle and
partly as a result of lack of involvement and ownership by the
Russian beneficiaries. Moreover, in some cases the impact of the

(1) Commission staff working paper ‘Qualitative Assessment of the
Reform of External Assistance’, SEC(2005) 963 of 11 July 2005.

(2) ‘Commission for International Humanitarian and Technical Assis-
tance’ established by decision of the Government of the Russian Fed-
eration in July 2004.

C 119/16

EN

Official Journal of the European Union

19.5.2006

projects was hampered by the diversity of interest within the Rus-
sian society, materialised in conflicting interest between the vari-
ous authorities.

A majority of the projects achieved their objectives fully or par-
tially, and despite the low effectiveness of some of the projects the
Commission believes that its programmes of assistance have
helped to broaden the general level of cooperation between the
EU and the Russian Government.

Nevertheless, the Commission will draw the lessons of experi-
ence, and of the new economic situation prevailing in Russia,
when preparing its new Country strategy.

(a) The Commission intends to use the new generation Country
Strategy Paper 2007 to 2013 and accompanying National
Indicative Programme 2007 to 2010 to set out three bold
priority areas for financial cooperation, largely based on the
roadmaps to the four Common Spaces, officially agreed with
the Russian Federation in May 2005. The priority areas give
rise to a number of possible specific objectives and a series
of examples of possible actions arising from the roadmaps
are also enumerated in the annex to the new National Indica-
tive Programme. The new CSP and NIP should therefore give
rather detailed guidance while leaving room for dialogue.

(b) All aspects of the project cycle management have been
improved since 2001 in the context of the reform of EC
external assistance. Moreover, as part of the reform, the
devolution of the management of aid to the Commission
Delegation ensures a greater involvement of the beneficiaries
in the preparation and planning of the projects.

The dialogue with the Russian authorities has sometimes
been difficult in the past. There has also been intensive dia-
logue on the VAT issue. However no effective solution has
been found by the Russian government so far.

(c) The sustainability of projects should be improved in the
meantime, as monitoring and evaluation of projects has been
enhanced by obligatory use of the logical framework tool.
Co-financing is included in the current dialogue with the
Russian authorities and its importance is witnessed through
its mentioning in the Country Strategy Paper for Russia for
2007 to 2013.

(d) The Commission systematically carries out sector and coun-
try-wide evaluations (see paragraph 53). Furthermore, les-
sons learnt are systematically taken into account in the estab-
lishment of each project fiche for Tacis projects. Finally, the
establishment of the Directorate ‘Quality Support’ also foster

the build-up of institutional knowledge on results of previ-
ous projects.

56.

(a) The Commission would like to shorten the programming
process but without compromising external dialogue and
prejudicing a sense of ownership. Dialogue is important, and
engaging the large Russian bureaucracy in sustained dialogue
is not straightforward, despite a generally improved political
environment following agreement on the joint Common
Spaces policy.

A programming mission did take place in October 2005 and
the Delegation is in constant dialogue with its Russian
counterparts.

The regulatory obligation to consult Member States takes
time. The Commission will endeavour to finalise the National
Indicative Programme 2007 to 2010 sufficiently early to
allow timely project preparation for the 2007 action
programme.

(b) The Commission shares the assessment that projects should
only be financed when their objectives are ‘smart’ (specific,
measurable, achievable, realistic, timed) and ownership of the
beneficiary exists. Co-financing is already an important ele-
ment with the Russian authorities.

(c) Amongst others the External Assistance reform has also
strengthened the quality of the projects, i.e. by introducing
systematic review of projects/programmes at identification
and formulation stages by Quality Support Groups, as well
as by systematic use of result-oriented monitoring. On
project level also systematic use of logical frameworks with
objectively verifiable indicators is put in place. PCM and logi-
cal framework have been systematically used by the Com-
mission since 2001.

Since devolution, due to the Commission’s presence on the
ground, monitoring and consequently reacting to shortcom-
ings in project implementation can be carried out more eas-
ily and efficiently compared to the period under investiga-
tion by the Court.

(d) As for sustainability please see response above (c). To date,
The Commission systematically carries out sector or coun-
trywide evaluations. It will consider increasing the number of
project-based evaluations (paragraph 53). The Delegation in
Moscow also puts a lot of effort into donor coordination
and, consequently, tries to implement best practices wher-
ever appropriate and possible.