Report from the Commission to the European Parliament and the Council -  General Report on pre-accession assistance (Phare - Ispa - Sapard) in 2004 {SEC(2006) 378}
Date: 2006-03-24
Institutions: European Commission
Subjects: EU programme, accession to the European Union, development aid, environmental protection, pre-accession aid, report, rural development, transport policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 24.3.2006 
COM(2006) 137 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

GENERAL REPORT 
ON PRE-ACCESSION ASSISTANCE 
(PHARE – ISPA – SAPARD)  
IN 2004 

{SEC(2006) 378} 

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1. 

SUMMARY 

This is the fifth report to the European Parliament and the Council on the three pre-accession 
instruments and their co-ordination in accordance with Article 13 of the ‘Council Regulation 
on  the  co-ordination  of  pre-accession  assistance’(EC)  No  1266/991  (in  the  following 
"Coordination Regulation").  

Phare  addresses  priority  measures  concerning  the  adoption  of  the  acquis  communautaire, 
whether  through  improving  administrative  capacity  or  supporting  related  investment.  It  also 
has an element for Economic and Social Cohesion. 

ISPA  (Instrument  for  Structural  Policies  for  Pre-Accession)  finances  major  environmental 
and transport infrastructure projects.  

SAPARD  (Special  Accession  Programme  for  Agriculture  and  Rural  Development)  finances 
agricultural and rural development.  

Detailed information on the activities in 2004 under each pre-accession instrument can 
be found in the relevant annual PHARE, ISPA and SAPARD reports. 

For financial figures on the pre-accession instruments, see section 5 “Financial Overview”.  

The  co-ordination  of  the  three  instruments  is  ensured  by  a  division  of  responsibilities 
between the instruments. A committee at Directorate level ensures co-ordination between the 
Commission services concerned. A ‘General Assistance Document’ covering all instruments 
was  presented  in  June  2005  to  the  Phare  Management  Committee,  the  body  assisting  the 
Commission in co-ordinating the instruments. At country level, the Commission encouraged 
the applicant countries to enhance inter-ministerial co-ordination, which is seen as a key pre-
condition for the successful future management of the Structural Funds.  

2. 

OVERALL DESCRIPTION OF MECHANISMS OF THE PRE-ACCESSION INSTRUMENTS 

2.1. 

Commitments and transfer of funds 

Before EU funds can be transferred, they require: (1) a Commission Decision, in order to be 
committed  into  the  Budget;  (2)  a  Framework  Agreement;  and  (3)  an  annual  bilateral 
Financing  Agreement  or  Memorandum  determining  the  financial  commitment  of  the 
Community  for  the  measure  concerned  towards  the  recipient  country,  i.e.  fixing  rights  and 
obligations  for  both  parties.  However,  the  procedures  leading  to  decision  making  and 
commitment  of  funds  are  different  for  each  instrument.  Detailed  information  on  the 
procedures leading to funding under each instrument can be found in the annex 1.1.  

2.2. 

Implementation structures in Candidate countries 

Funds  from  the  pre-accession  instruments  are  channelled  through  the  National  Fund, 
established in the Ministry of Finance in each country, under the responsibility of the National 
Authorising  Officer.  The  concrete  implementation  of  Phare  and  ISPA  is  carried  out  in 

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Published in the OJ L 161, 21.06.1999, p.68  

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Implementing Agencies (such as the Central Finance and Contracts Unit, CFCU) that receive 
the  funds  from  the  National  Fund2.  For  SAPARD,  the  implementation  is  carried  out  by  the 
dedicated SAPARD Agency that receives the funds from the National Fund. 

2.3. 

Decentralisation  of  implementation  under  Article  12  of  the  Co-ordination 
Regulation3 

Decentralisation is the process by which management of EU funds is devolved to candidate 
country administrations.  

In  Bulgaria  and  Romania,  for  Phare  and  ISPA,  this  process  was  governed  in  2004  by  the 
Decentralised  Implementation  System  (DIS).  DIS  means  that  the  procedures  for  managing 
measures  or  projects  financed  by  ISPA  and  Phare  require  ex  ante  control,  i.e.  decisions 
concerning  procurement  and  award  of  contracts  are  taken  by  the  contracting  authority  and 
referred  to  the  EC  Delegation  in  the  beneficiary  country  for  endorsement.  Thus  the  EC 
Delegations  are  responsible  for  endorsing  procurement  documents  before  tenders  are 
launched or contracts signed. 

On the other hand, SAPARD is implemented on a fully decentralised basis (EDIS = Extended 
Decentralisation  Implementation  System).  EDIS  stands  for  full  decentralisation  of  the 
management and implementation of EU support, meaning the process by which management 
of  EU  pre-accession  funds  is  devolved  to  candidate  country  administrations,  where  the 
Commission  exercises  no  systematic  ex-ante  control  over  individual  transactions,  but  is 
limited  to  an  ex-post  control,  whilst  it  retains  the  final  responsibility  for  general  budget 
execution. 

Such  delegation  of  management  responsibility  requires  each  country  to  set  up  adequate 
management and control systems to be approved at national level by the National Authorising 
Officer.  Once  these  conditions  are  met,  the  Commission  carries  out  the  compliance 
verification prior to the Decision by the Commission conferring management of EU support.  

For both Bulgaria and Romania, the Commission is supporting the countries’ efforts to move 
to EDIS in the first half of 2006. For more information on EDIS, see Annex 1.2.3. In addition, 
the  obligation  to  have  EDIS  in  place  by  the  date  of  accession  was  included  in  the  Act  of 
Accession (article 27) and provides a clear impetus for these countries to complete the final 
preparations for this to be achieved. Nevertheless, the process has suffered from delays.  

For Phare and ISPA, the move to EDIS is done through 4 stages described in the Commission 
Working document  “Preparing for Extended Decentralisation”  and the document “Roadmap 
to EDIS for ISPA and Phare”. The Roadmap sets out the procedural stages leading to an EDIS 
decision.  Stages  1  to  3  are  the  responsibility  of  the  Candidate  countries  and  contain  a  Gap 
assessment,  a  Gap  Plugging  and  a  Compliance  assessment  of  the  management  and  control 
systems. Stage 4 is the preparation for Commission decision and is the responsibility of the 
Commission.  This  decision  is  taken  following  an  in  depth  review,  including  a  verification 
audit  on-the-spot,  of  the  management  and  control  systems  as  described  in  the  EDIS 
application submitted to the Commission by the National Authorising Officer.  

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3 

Unless the National Fund acts as a paying agent on behalf of the Implementing Agency. 
Article 12 of the Co-ordination Regulation provides the legal basis to “waive the Commission’s ex ante 
approval for project selection, tendering and contracting by applicant countries” 

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3. 

MONITORING AND EVALUATION  

3.1. 

PHARE 

Execution  of  the  Phare  programmes  is  subject  to  a  structured  monitoring  and  evaluation 
process. A Joint Monitoring Committee in each country is supported by Sectoral Monitoring 
sub-Committees which meet twice a year.  

In 2004, a revised Joint Monitoring Committee mandate came into force in the new Member 
States.  The  key  purpose  of  it  is  to  further  reinforce  the  monitoring  function,  by  the 
introduction of an Implementation Status Report, strengthening of the JMC operations as well 
as  related  reporting  obligations  to  the  Commission.  The  previous  mandate  still  applies  to 
Bulgaria and Romania. Whilst the Interim Evaluation function remains centrally managed for 
Bulgaria and Romania, it has been decentralised to the new Member States. 

In  2004,  the  external  interim  evaluation  schemes  generated  45  individual  country,  sectoral, 
ad-hoc  or  thematic  evaluation  reports  covering  Phare  and  other  pre-accession  financial 
instruments measures, as well as a Consolidated Summary Report of Phare support allocated 
in  1999-2002  and  implemented  until  November  2003.  On  the  whole,  evaluation  results 
concluded that Phare performance was rather mixed. Three shortfalls in performance account 
for a large part of those findings. First, there were substantial  weaknesses in needs analysis 
and design. Second, achievement of programme/project objectives was only adequate. Third, 
although 
from  pervasive  efficiency  problems. 
Nevertheless,  given  the  complexity  of  the  pre-accession  objectives  and  the  constraint  of  the 
very  limited  implementation  period,  what  has  been  achieved  with  Phare  support  is  indeed 
remarkable. 

implementation  suffered 

improving, 

3.2. 

ISPA  

All ISPA projects are subject to the ISPA Regulation and the Financing Agreement provisions 
of both monitoring and evaluation. Implementation progress is reviewed systematically twice 
a  year  and  periodically  by  Commission  services,  in  particular  through  the  Monitoring 
Committees.  

Requirements  for  ex-post  evaluation  are  stipulated  in  Section  XIII  of  the  annex  to  the 
Financing Memorandum, which is concluded for  each project between the  Commission and 
the  ISPA  beneficiary  state.  This  section  states  that  after  the  completion  of  a  project,  the 
Commission and the beneficiary countries will evaluate the project’s impact and the manner 
in which the project has been carried out. Ex-post evaluation is not an issue yet, as no projects 
are completed at this stage. 

3.3. 

SAPARD  

Implementation  of  SAPARD  programmes  is  subject  to  the  provisions  of  the  ‘Multi  Annual 
Financing  Agreements’  in  respect  of  both  monitoring  and  evaluation.  Since  2001  Sapard 
Monitoring  Committees  were  established  in  each  beneficiary  country,  and  were  largely 
operating under the Structural Funds rules, with the Commission assuming observer status. 

Although,  eight  out  of  the  ten  beneficiary  countries  became  new  Member  States  on  1  May 
2004  they  continued  contracting  Sapard  projects  with  the  final  beneficiaries  until  they  were 
able to switch to post-accession programming.  As  a  consequence  up  to  the  end  of  2004  the 

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Sapard  agencies  approved  as  many  as  over  37.000  projects  involving  €2.2  billion  of 
Community contribution.  

The  Commission  continued  working  closely  with  the  beneficiary  countries  on  adapting  and 
running the monitoring and evaluation systems. The 18 Monitoring Committee meetings held 
on  2004  provided  a  useful  opportunity  to  discuss  and  decide  on:  (i)  monitoring  the 
implementation  of  the  programmes  (ii)  approval  of  modifications  to  be  introduced  in  the 
programmes,  namely  those  resulting  from  the  mid-term  evaluation  exercises  carried  out  in 
2003  and  (iii)  approval  of  the  annual  reports  on  progress  achieved  in  relation  to  the 
implementation  of  the  Sapard  programmes,  before  their  official  submission  to  the 
Commission. 

4. 

CO-ORDINATION 

4.1. 

General 

As  required  by  the  Coordination  Regulation,  the  Commission  ensures  close  co-ordination 
between  the  three  pre-accession  instruments.  The  Regulation  carefully  specifies  the  field  to 
which each instrument provides assistance, thereby minimising potential overlaps between the 
different instruments.  

The  Accession  Partnerships  set  the  general  framework  for  assistance  under  the  three  pre-
accession  instruments.  They  are  complemented,  in  the  case  of  Phare,  by  the  National 
Development Plans, and in  the  case of ISPA, by the national strategies for the  environment 
and  transport.  SAPARD  projects  are  selected  on  the  basis  of  the  Rural  Development 
Programmes  for  2000-2006,  prepared  on  the  basis  of  the  Candidate  countries’  plans  and 
approved for each of the countries by the Commission in 2000. 

The  Phare  Management  Committee  plays  a  key  role  in  general  co-ordination.  According  to 
Article 9 of the Co-ordination Regulation, the Committee should assist the Commission in co-
ordinating  operations  under  the  3  instruments  and  the  Commission  should  inform  the 
Committee  about  the  indicative  financial  allocations  for  each  country  and  per  pre-accession 
instrument about action it has taken as regards co-ordination with the EIB, other Community 
instruments and IFIs.  

4.2. 

Co-ordination inside the Commission 

The Phare programme and the co-ordination of the instruments come under the responsibility 
of  DG  Enlargement,  supported  by  the  Phare  Management  Committee.  ISPA  is  under  the 
responsibility  of  DG  Regional  Policy,  and  SAPARD  under  the  responsibility  of  DG 
Agriculture. 

Programming is co-ordinated through extended inter-service consultations. In addition, a Co-
ordination Committee at Directors level for the pre-accession instruments has been set up in 
the  various  Commission  services  involved.  It  pays  particular  attention  to  the  preparation  of 
EDIS of Phare and ISPA. 

To  avoid  duplication,  the  Commission  has  clarified  the  interface  between  Phare  and 
SAPARD,  taking  into  account  the  provisions  of  the  Co-ordination  Regulation.  As  regards 
project  monitoring,  co-ordination  takes  the  form  of  the  JMC.  The  Joint  Monitoring 
Committee  is  responsible  for  co-ordinating  the  monitoring  of  each  pre-accession  instrument 

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and  for  assessing  the  overall  progress  of  EU–funded  assistance  in  the  beneficiary  countries. 
The Committee issues recommendations to the ISPA Committee or to the Commission when 
relevant. 

Periodic  meetings  were  organised  by  the  Commission  services  (DGs  Enlargement,  External 
Relations  and  Regional  Policy)  with  the  experts  in  the  Delegations  responsible  for  PHARE 
and  ISPA  to  discuss  programming  and  implementation  issues,  in  particular  those  related  to 
tendering and contracting. 

4.3. 

Co-ordination in the Candidate countries 

The Commission strongly encourages the candidate countries to enhance inter-ministerial co-
ordination,  which  is  a  key  pre-condition  for  the  candidate  countries’  successful  future 
management of the Structural Funds and, in the short term, for implementing Phare ESC. In 
several countries, such interministerial co-ordination still needs further improvement. 

As  decentralised  management  is  either  provided  for  from  the  outset  (for  SAPARD),  or  will 
gradually  increase  (for  Phare  and  ISPA),  the  responsibility  of  the  candidate  country  for  the 
proper co-ordination of operations receiving pre-accession support, and for avoiding overlaps, 
must be developed accordingly. 

Therefore, the Commission requires the countries to take the necessary steps for effective and 
efficient co-ordination. The checklist transmitted to the candidate countries and Commission 
Delegations, which allows the latter to verify that the IA is capable of managing a Phare ESC 
‘scheme’  in  a  sound  and  efficient  manner,  states  that  an  assessment  must  be  made  to  show 
that the established co-ordination mechanisms are adequate, and that appropriate mechanisms 
are in place, in order to ensure no overlap occurs between the other Community instruments, 
notably Phare CBC, SAPARD and ISPA. 

4.4. 

Co-ordination with the EIB and International Financial Institutions (IFIs)  

As in previous years, Co-operation with the EIB and other IFIs continued in 2004 under the 
framework  of  the  Memorandum  of  Understanding  on  co-operation  in  pre-accession 
assistance. Figures available for the years 2000 to 2004 show that the operations of the IFIs 
account for 6,9 billion Euro in loans signed with Bulgaria and Romania for the period 2000-
2004. This is a significant amount also demonstrating the leverage effect of Community pre-
accession assistance having itself been reinforced since 2000 

The Commission Services periodically organise meetings with the EIB and other IFIs to co-
ordinate issues related to programming and implementation, as well as procedural issues. In 
view of organising the transition from pre-accession support to full membership of the EU for 
countries acceding in May 2004, the Commission also chaired on 26 March 2004 the EC/IFI 
Working Group, as well as the EC/IFI High-Level Group, which consist of meetings at senior 
management level between EC and all IFIs.  

Given the fact that large infrastructure projects which are commonly subject to international 
co-financing are now financed under ISPA, co-financing under Phare was limited. In terms of 
implementation,  the  main  co-financing  instrument  in  2004  was  again  the  SME  Facility  in 
which  the  EIB,  the  EBRD  and  the  Council  of  Europe  Development  Bank  /  KfW  are 
participating.  The  objective  is  to  continue  co-financing  capacity  building  of  the  financial 
sector to develop financing for SMEs (through the SME Facility) and municipalities (through 

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the Municipal Lending Facility). For more details on these facilities, see details in Annex Part 
II. 

Given that major transport and environment projects are mainly carried out under ISPA, DG 
Regional Policy is the major partner for co-financing with the EIB and EBRD. 

The  Municipal  Lending  Facility  focuses  on  finance  and  capacity  building  measures  to  local 
banks in order to expand their lending operations to local municipalities. 

The EIB and the Commission have established a facility on border regions, as requested by 
the  Nice  European  Council,  and  as  outlined  in  the  Commission  Communication  on  Border 
Regions  (of  25  July  2001  COM(2001)437final).  The  project  concentrates  on 
the 
implementation  of  small  municipal  infrastructure  in  border  regions  to  promote  integration 
with current EU regions. 

Discussions on co-financing the ESC component of PHARE are also ongoing. 

5. 

FINANCIAL OVERVIEW 

The allocations per country for PHARE, ISPA and SAPARD in 2004 (in € million) 

PHARE 

SAPARD 

ISPA 

TOTAL 

Bulgaria 

Romania 

Other4 

Total 

294 

433 

31 

758 

68

159

- 

227

136 

317 

- 

453 

497

907

31

1435

4 

Multi-country  programmes  including  TAIEX,  nuclear  safety,  statistics,  participation  in  agencies  and 
networking  facility.  Also  includes  €  2,5  million  PHARE  contribution  to  the  European  Training 
Foundation. 

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