Report from the Commission - Annual Report on the Cohesion Fund (2006)
Date: 2007-11-06
Institutions: European Commission
Subjects: Cohesion Fund, activity report

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 6.11.2007 
COM(2007) 678 final 

REPORT FROM THE COMMISSION 

ANNUAL REPORT ON THE COHESION FUND (2006) 

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TABLE OF CONTENTS 

ANNUAL REPORT ON THE COHESION FUND (2006) ...................................................... 3 

1. 

2. 

3. 

3.1. 

3.2. 

4. 

5. 

6. 

7. 

8. 

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

Economic environment and conditionality .................................................................. 9 

Coordination with transport and environmental policies ........................................... 10 

Transport .................................................................................................................... 10 

Environment............................................................................................................... 11 

Inspections ................................................................................................................. 11 

Irregularities and suspension of aid............................................................................ 12 

Evaluation .................................................................................................................. 13 

New Regulatory framework for the 2007-2013 period.............................................. 13 

Information and publicity........................................................................................... 14 

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ANNUAL REPORT ON THE COHESION FUND (2006) 

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 2006. 

1. 

BUDGET EXECUTION 

Cohesion  Fund  resources  available  for  commitments  in  2006  amounted  to  
€ 6 032 082 110 (current prices) for the 13 beneficiary Member States. This amount 
includes technical assistance credits (€ 8 100 000). It should be noted that Ireland, as 
a result of economic growth is no longer eligible under the Cohesion Fund since 1 
January  2004.  As  from  1  January  2007,  Romania  and  Bulgaria  acceded  to  the 
European  Union  and  are  since  then  eligible  under  the  Cohesion  Fund  (but  are  not 
covered by this report for the year 2006). 

The  commitment  appropriations  were  entirely  used  and  no  appropriations  were 
carried over to 2007. 

Table 1. Implementation of commitments in 2006 (in Euro) 

Commitment 
Appropriations 

Initial 

Movements  Final resources 

Outturn 

Cancelled 

Carryovers 
2007 

2006 Budget 

6 032 082 110 

Appropriations 
carried 
from 2005 

over 

Appropriations 
made  available 
again 

- 

- 

Repayments 

TOTAL 

- 
6 032 082 110 

- 

-

-

-
- 

6 032 082 110 

6 032 082 110 

-

-

- 

- 

-
6 032 082 110 

- 
6 032 082 110 

- 

- 

- 

- 

- 

- 

-

-

-

-

Table 2. Implementation of payments in 2006 (in Euro) 

Payment 
Appropriations 

Initial 

Movements 

Final resources 

Outturn 

Cancelled 

2006 Budget 

3 515 408 175 

- 500 000 000 

3 020 358 175 

3 015 989 461 

4 368 713 

- 

60 776 

-

- 

-

- 

- 

- 

- 

- 

Carryovers 
2007 

-
-

60 776 

Appropriations 
carried 
from 2005 

over 

Appropriations 
made  available 
again 

Repayments 

TOTAL 

- 
3 515 468 951 

-
-500 000 000 

-
3 020 358 175 

- 
3 015 989 461 

- 
4 368 713 

-
60 776 

The implementation rate of payments in the first nine months of the year progressed 
favourably in the sense that by end-September 2006 they reached a level comparable 
to  end-November  2005.  However,  the  remaining  appropriations  could  not  be 
executed with the necessary scrutiny as regards sound financial management, and a 

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transfer  of  a  total  € 500 million  of  payment  appropriations  was  made  from  the 
Cohesion  Fund  to  ERDF  (as  part  of  the  global  transfer  procedure  with  other 
Structural  Funds).  This  transfer  meant  that  some  99.8 %  of  the  payment 
appropriations  were  executed  in  2006.  Implementation  of  the  appropriations  by 
country is shown in the following tables (Tables 3, 4 and 5, refer). 

Budget implementation of appropriations in 2006 by Member State: 

Table  3.  Commitment  appropriations  2006  (in  Euro)  -  including  technical 
assistance 

Environment 

Transport 

Technical 
Assistance 

TOTAL 

Amount 

%  

Amount 

% 

Amount 

Amount 

% MS 
on Total 

1 045 081 820 

57.6 % 

769 323 551 

42.4 % 

315 453   1 814 720 824 

30.0 % 

191 616 437 

38.8 % 

298 556 462 

60.4 % 

4 026 467 

494 199 366 

273 923 751 

55.4 % 

218 291 973 

44.2 % 

1 983 642 

494 199 366 

15 599 762  

75.5 % 

5 058 456 

24.5 % 

- 

20 658 218 

8.4 % 

8.2 % 

0.3 % 

169 425 877 

46.6 % 

192 728 948 

53.0 % 

1 343 504 

363 498 329 

6.0 % 

51 641 255 

45.3 % 

59 936 657 

52.5 % 

2 505 460 

114 083 372 

210 331 313 

49.3 % 

209 390 382 

49.1 % 

6 910 457 

426 632 152 

84 648 355 

50.3 % 

75 472 277 

44.9 % 

8 112 593 

168 233 225 

Lithuania 

121 403 548 

53.7 % 

99 888 363 

44.2 % 

4 807 152 

226 099 063 

1.9 % 

7.1 % 

2.8% 

3.7 % 

0.1 % 

4 305 250 

51.0 % 

4 075 480 

48.3 % 

65 171 

8 445 901 

751 359 517 

46.9 % 

828 944 996 

51.7 % 

21 905 810 

1 602 210 323 

26.5 % 

79 712 721 

36.4 % 

138 255 724 

63.2 % 

826 055 

218 794 500 

27 925 173 

38.6 % 

44 270 658 

61.2 % 

165 000 

72 360 831 

3.6 % 

1.2 % 

3 026 974 779 

50.1 % 

2 944 193 927 

48.9 % 

52 966 764   6 024 135 470 

100 % 

- 

- 

- 

- 

4 218 779 

4 218 779 

- 

Member State 

Spain 

Greece 

Portugal 

Cyprus 

Czech 
Republic 

Estonia 

Hungary 

Latvia 

Malta 

Poland 

Slovakia 

Slovenia 

TOTAL 

Administrative 
Technical 
Assistance 

Table 4. Payment appropriations 2006 (in Euro) - including technical assistance  

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). Table No 5 shows the payments made in 2006 in relation to 
ISPA projects adopted before accession. 

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Environment 

Transport 

Technical 
Assistance 

TOTAL 

Amount 

%  

Amount 

%  

Amount 

Amount 

% MS 
on 
Total 

558 740 071 

43.6 % 

723 413 784

56.4 %

819 183 

1 282 973 038

47.0 %

194 069 922 

40.2 % 

289 132 091

59.8 %

27 991 936 

70.8 % 

11 521 393

29.2 %

- 

- 

483 202 013

17.7 %

39 513 329

148 750 484 

73.1 % 

53 874 121

26.5 %

899 853 

203 524 458

- 

0.0 % 

6 001 512

100.0 %

- 

6 001 512

32 982 124 

26.2 % 

92 544 105

73.6 %

278 460 

125 804 689

6 769 474 

17.0 % 

32 972 870

82.9 %

23 322 

39 765 666

82 157 579 

70.9 % 

33 767 249

29.1 %

- 

115 924 828

14 060 182 

23.4 % 

42 930 570

71.5 %

3 075 450 

60 066 202

- 

15 601 766 

0.0 % 

6.1 % 

2 591 637

100.0 %

239 697 120

93.7 %

589 292 

255 888 178

18 811 566 

58.7 % 

13 218 768

41.3 %

7 502 018 

24.1 % 

23 651 860

75.9 %

- 

- 

32 030 334

31 153 878

- 

0.0 % 

-

0.0 %

965 686 

965 686

- 

- 

48 831 102

2 591 637

1.4 %

7.5 %

0.2 %

4.6 %

1.5 %

4.2 %

2.2 %

1.8 %

0.1 %

9.4 %

1.2 %

1.1 %

0.0 %

Member 
State 

Spain  

Greece  

Ireland 

Portugal  

Cyprus  

Czech 
Republic  

Estonia  

Hungary  

Latvia  

Malta  

Poland  

Slovakia  

Slovenia  

Undefined 

Lithuania  

17 587 842 

36.0 % 

31 243 260

64.0 %

TOTAL 

1 125 024 964 

41.2 % 

1 596 560 340

58.5 %

6 651 246 

2 728 236 550

100 %

Administrati
ve  Technical 
Assistance 

- 

- 

-

-

1 625 128 

1 625 128

-

Table 5. New Member States – Payments made in 2006 to former ISPA projects 

Environment 

Transport 

Technical 
Assistance 

TOTAL 

Member State 

Amount 

%  

Amount 

%  

Amount 

Amount 

% MS 
on 
Total 

Czech 
Republic  

48 347 040 

35.8 % 

86 126 672

63.8 %

448 521 

134 922 233

19.8 %

Estonia  

17 872 983 

55.6 % 

13 213 810

41.1 %

1 036 078 

32 122 871

4.7 %

Hungary  

42 045 203 

54.0 % 

34 943 145

44.9 %

856 649 

77 844 997

11.4 %

Latvia  

12 195 774 

24.8 % 

33 083 549

67.3 %

3 890 083 

49 169 406

7.2 %

Lithuania  

21 227 151 

55.0 % 

15 421 582

39.9 %

1 955 102 

38 603 835

5.7 %

Poland  

136 381 574 

51.4 % 

126 946 209

47.9 %

1 872 421 

265 200 204

38.9 %

Slovakia  

33 197 820 

43.6 % 

40 809 790

53.6 %

2 120 189 

76 127 799

11.2 %

Slovenia  

5 176 729 

73.4 % 

1 875 000

26.6 %

0 

7 051 729

1.0 %

TOTAL 

316 444 274 

46.5 % 

352 419 757

51.7 % 12 179 043 

681 043 074

100 %

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The following table indicates the total implementation in 2000-2006 in each country (including technical assistance): 

Table 6. Implementation of commitments 2000-2006 by Member State (in Euro) - including technical assistance 

Allocation 

Member State 

2000-2006 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

TOTAL 

Spain 

Greece 

Ireland 

Portugal 

EUR 4 

Cyprus 

Czech 
Republic 

Estonia 

Hungary 

Latvia 

Lithuania 

Malta 

Poland 

Slovakia 

Slovenia 

EUR 10 

TOTAL 

12 067 110 566  

1 601 305 968 

1 676 893 850 

1 973 389 704 

1 543 094 747  

1 702 761 789 

1 806 465 241 

1 814 720 824  12 118 632 123  

3 307 420 974  

435 532 521 

467 400 382 

335 157 938 

529 459 151  

535 843 689 

438 083 755 

494 199 366 

3 235 676 802  

584 614 000  

169 624 664 

115 000 000 

182 661 340 

117 322 580  

584 608 584  

3 308 065 713  

450 770 587 

455 699 130 

296 780 734 

648 181 282  

479 843 079 

491 649 967 

494 199 366 

3 317 124 145  

19 267 211 253   2 657 233 740 

2 714 993 362 

2 787 989 716 

2 838 057 760  

2 718 448 557 

2 736 198 963 

2.803 119 556  19 256 041 654  

54 065 989  

937 882 036  

308 576 628  

1 115 106 832  

518 407 608  

609 432 251  

21 938 260  

4 186 767 157  

571 744 353  

188 021 130  

8 511 942 244  

18 257 000 

15 099 477 

20 658 218 

54 014 695  

316 898 031 

256 811 441 

363 498 329 

937 207 801  

105 696 235 

89 794 099 

114 083 372 

309 573 706  

376 433 000 

310 982 360 

426 632 152 

1 114 047 512  

189 965 775 

157 667 664 

168 233 225 

515 866 664  

209 572 000 

173 199 790 

226 099 063 

608 870 853  

7 418 000 

6 102 388 

8 445 901 

21 966 289  

1 414 638 404 

1 166 908 584 

1 602 210 323 

4 183 757 311  

192 974 000 

159 432 592 

218 794 500 

571 201 092  

64 946 467 

51 835 729 

72 360 831 

189 143 027  

2 896 798 912 

2 387 834 124 

3 221 015 914 

8 505 648 950  

27 779 153 497   2 657 233 740 

2 714 993 362 

2 787 989 716 

2 838 057 760  

5 615 247 469 

5 124 033 087 

6 024 135 470  27 761 690 604  

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Overview of the 2000-2006 period (including RAL) 

At  the  end  of  2006,  the  outstanding  commitments  corresponding  to  the  2000-2006 
period amounted to € 15 682 million (€ 13 206 million for CF and € 2 476 million 
for  ex-ISPA  projects).  This  relatively  large  stock  of  outstanding  commitments 
corresponds  to  approximately  three  years  of  commitments,  which  among  others  is 
explained  by  the  time  required  to  realise  often  complex  and  large  infrastructure 
projects, and to a lesser extent by the fact that the rule of automatic decommitment 
('N+2  rule')  which  applies  to  the  Structural  Funds  does  not  apply  to  the  Cohesion 
Fund.  

Table 7.1. Cohesion Fund accepted amounts in 2000-2006 (including RAL)1 

Country 

Net Committed 

Paid 

RAL 

Greece 

Ireland 

Portugal 

Spain 

2 815 806 760 

1 236 273 691 

1 579 533 069 

575 411 134 

517 830 136 

57 580 998 

3 128 862 926 

1 467 756 462 

1 661 106 465 

11 773 161 809 

7 383 381 713 

4 389 780 096 

TOTAL EU-4 

18.293.242.629 

10.605.242.001 

7.688.000.628 

Cyprus 

54 014 695 

11 059 968 

42 954 727 

Czech Republic 

748 976 735 

141 131 405 

607 845 330 

Estonia 

Hungary 

Latvia 

Lithuania 

Malta 

Poland 

Slovakia 

Slovenia 

242 449 651 

39 765 666 

202 683 985 

812 924 360 

185 512 701 

627 411 659 

376 863 199 

79 841 253 

297 021 946 

517 642 688 

97 697 349 

419 945 339 

21 966 289 

2 591 637 

19 374 652 

3 191 270 327 

255 730 261 

2 935 540 066 

264 254 882 

32030 334 

232 224 548 

172 654 702 

39 651 472 

133 003 230 

TOTAL EU-10 

6 403 017 528 

885 012 045 

5 518 005 483 

TOTAL 

24 696 260 157 

11 490 254 046 

13 206 006 111 

. 

1 

Commitment  is  lower  than  allocation  (Table  6,  refers)  due  to  decommitment  of  unused  amounts  and 
closure. 

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. 

Table 7.2. Accepted amounts for former ISPA projects in 2000-2006 (including 
RAL) 

Country 

Net Committed 

Paid 

RAL 

Czech Republic 

479 117 990 

351 044 435 

128 073 555 

Estonia 

Hungary 

Latvia 

Lithuania 

Poland 

Slovakia 

Slovenia 

185 251 384 

121 573 113 

63 678 271 

669 677 980 

307 713 993 

361 963 987 

333 856 759 

183 662 936 

150 193 823 

307 765 169 

161 019 456 

146 745 712 

2 444 163 012 

1 093 425 990 

1 349 686 751 

501 995 906 

263 375 354 

238 620 552 

83 499 178 

45 820 204 

37 678 974 

TOTAL 

5 005 327 377 

2 527 635 482 

2 476 641 625 

. 

Implementation of the budget for the 1993-99 period 

Changes in 2006 in appropriations to be settled for 1993-99 were as follows: 

Table 8. Settlement in 2006 of commitments for the period 1993-99 (in Euro) 

Member State 

Initial Amount 
to be settled 

Decommitments

Payments 

204 299 149 

82 165 494 

29 637 545 

29 514 596 

17 163 676

52 585 827

19 003

1 555 707

99 864 092 

3 476 269 

17 387 263 

15 998 198 

Final Amount 
to be settled 

87 271 381

26 103 398

12 231 279

11 960 691

Spain 

Greece 

Ireland 

Portugal 

TOTAL 

345 616 784 

71 324 213

136 725 822 

137 566 749

Cohesion  Fund  commitments  are  made  from  differentiated  appropriations.  In  other 
words, the payments follow the initial commitments of resources. If all the projects 
are  implemented  in  line  with  the  decisions,  an  amount  to  be  settled  exists 
"automatically" because of the gap between the date of the decision and the date of 
payment of the balance (normally 4 to 5 years). 

In  order  to  increase  the  level  of  payments  made  on  past  commitments,  a  particular 
effort to clear outstanding appropriations – on actions that begun before 2000 – was 
continued. Some 40 % of the outstanding appropriations existing at the beginning of 
the year were either paid or subject to decommittment in 2006. By the end of 2006, 
outstanding  appropriations  had  fallen  to  just  2.7 %  of  the  annual  budget  of  the 
Cohesion Fund (compared to some 50 % at the end of 2002, 39 % at the end of 2003, 

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15  %  at  the  end  of  2004  and  6.7  %  at  the  end  of  2005).  The  effort  to  reduce 
outstanding appropriations has been carried through into 2007 in partnership with the 
national  authorities  who  are  responsible  for  project  implementation  and  the  related 
payment claims. 

Details on the projects adopted in 2006 for each Member State are presented in the 
Annex to this report. 

2. 

ECONOMIC ENVIRONMENT AND CONDITIONALITY 

The Council Regulation of the Cohesion Fund2 attaches macro-economic conditions 
to  the  use  of  the  Fund.  It  states  that  "no new  projects  or,  in  the  event  of  important 
projects, no new project stages shall be financed by the Fund in a Member State in 
the event of the Council, acting by a qualified majority on a recommendation from 
the Commission, finding that the Member State has not implemented [its stability or 
convergence  programme]  in  such  a  way  as  to  avoid  an  excessive  deficit".  This 
reflects  the  role  of  the  Cohesion  Fund  as  an  instrument  of  budgetary  support  at 
national level helping Member States to maintain macro-economic rigour. 

Four  recipient  Member  States  under  the  Cohesion  Fund  (Cyprus,  Hungary,  Poland 
and  Portugal)  were  involved  in  additional  steps  of  the  excessive  deficit  procedure. 
For  none  of  these  countries  did  the  steps  require  the  matter  of  suspending  the 
financing by the Fund to be considered. 

The  Council  decided  in  June  2006  to  abrogate  the  procedure  for  Cyprus,  as  it 
corrected  its  excessive  deficit  in  2005.  In  the  case  of  Portugal,  the  Commission 
issued a communication in June 2006 stating that the country is on track to correct its 
excessive deficit.  

It  has  already  been  established  on  two  occasions  since  the  start  of  the  excessive 
deficit procedure in 2004 that Hungary has not taken effective action in response to 
Council  recommendations,  first  in  January  2005  and  then  in  November  2005. 
However, on none of these occasions did the Commission recommend a suspension 
of Cohesion Fund commitments to the Council. As Hungary is not a member of the 
Euro  area,  it  has  a  specific  derogation  from  the  application  of  further  steps  of  the 
excessive  deficit  procedure.  Thus,  after  the  September  2006  submission  of  the 
revised  2006  convergence  programme  update,  the  Council  could  address  further 
recommendations  to  Hungary  only  on  the  basis  of  a  new  Article  104(7)3  decision. 
Should  the  country  fail  to  comply  with  this  recommendation,  the  provisions  of 
Article  104(8)  will  apply  which  include  the  possibility  to  suspend  Cohesion  Fund 
commitments.  

In  November  2006,  Poland  was  issued  an  Article  104(8)  decision  by  the  Council, 
establishing that its actions taken to correct its excessive deficit in line with the 2004 
Council recommendations were proving to be inadequate. This decision was issued 
still on the basis of targets set in the 2005 update of the convergence programme and 

2 

3 

Based on Article 6 of Council Regulation (EC) n°1164/94, as in the codified version presented by the 
Commission 
Treaty establishing the European Community, Article 104 on the excessive government deficits 

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in the Spring 2006 fiscal notification. However, according to the recent 2006 update 
of  the  convergence  programme,  Poland  will  correct  its  excessive  deficit  by  2007, 
partly because it qualifies for the provision of the reformed Stability and Growth Pact 
which allows a part of the pension reform cost to be deducted.  

Greece appears to be on the way to correcting its excessive deficit: in line with the 
Article 104(9) Council decision of February 2005, it reduced its deficit below 3% of 
GDP in 2006. In three recently acceded Member States placed in excessive deficit in 
2004  –  the  Czech  Republic,  Malta  and  Slovakia  –  the  budgetary  developments 
necessitated no further steps of the excessive deficit procedure since the Commission 
concluded  in  December  2004  that  all  these  countries  had  taken  effective  action  in 
response to the Council recommendations. However, an abrogation of the excessive 
deficit  procedure  did  not  take  place  for  these  countries  in  2006.  In  line  with  the 
Council  recommendations,  Malta  corrected  its  excessive  deficit  by  2006.  Slovakia 
will reduce its deficit below 3% of GDP by 2007, while the Czech Republic plans to 
reach this goal by 2010. 

The regulation on the Cohesion Funds for the period 2007-20134 has cleared several 
uncertainties that surrounded the application of Cohesion Fund conditionality in the 
past.  It  foresees  that  an  Article  104(8)  decision  provides  an  opportunity  for  the 
Commission  to  propose  the  suspension  of  Cohesion  Fund  support.  In  turn,  the 
Council may decide to suspend the totality or parts of commitments, with effect from 
1st  January  of  the  year  following  the  decision.  If  later  on  the  Council  finds  in  the 
context of the EDP that the Member State has taken the necessary corrective action, 
this  automatically  implies  a  decision  to  lift  the  suspension  of  Cohesion  Fund 
commitments. Rules for re-budgeting the suspended commitments were created. 

3. 

COORDINATION WITH TRANSPORT AND ENVIRONMENTAL POLICIES  

3.1. 

Transport 

In  2006,  the  transport  sector  accounted  for  a  little  less  than  half  (49.2  %)  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 2006 
by Member States are set out in the Annex to this report. 

In  the  transport  sector,  Community  support  is  delivered  in  a  coordinated  way  by  a 
variety  of  instruments:  Cohesion  Fund,  ISPA,  ERDF,  Trans-European  Networks 
programmes,  EIB  loans.  Financial  support  from  these  instruments  is  essentially 
directed towards the Trans-European transport networks (TEN-T). 

In  agreement  with  Article  3  of  Regulation  (EC)  n°  1164/94  as  amended  by 
Regulation  (EC)  n°1264/1999,  the  Cohesion  Fund  may  provide  assistance  for  the 
transport infrastructure projects of common interest, financed by Member States and 
which are identified within the framework of the Guidelines for the development of 
the TEN-T. 

4 

Council Regulation (EC) No. 1084/2006 of 11 July 2006, establishing a Cohesion Fund and repealing 
Regulation (EC) No. 1164/1994.  

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The Community guidelines on TEN-T were established by Decision n° 1692/96/EC 
as  amended.  The  Decision  specifies  30  priority  projects  of  European  interest  and 
calls on Member States to give priority to these projects. Article 19a) of Decision n° 
1692/96/EC provides that when submitting their projects under the Cohesion Fund, 
in  accordance  with  Article  10  of  Regulation  (EC)  n°  1164/94,  the  Member  States 
shall give appropriate priority to the projects declared to be of European interest. 

3.2. 

Environment 

In  2006,  the  environment  sector  accounted  for  just  over  half  (50.8  %)  of  total 
Cohesion  Fund  commitments.  In  general,  the  projects  supported  by  the  Cohesion 
Fund  contribute  to  the  global  objectives  of  environmental  policy  in  relation  to 
sustainable development, in particular to the achievement of the priority areas of the 
Sixth  Action  Programme,  notably  for  the  management  of  natural  resources,  waste 
management  and  in  relation  to  investments  that  seek  to  limit  the  impacts  from 
climate  change.  The  seven  Thematic  Strategies  adopted  in  2005  and  2006  in  the 
fields  of  air,  resources,  waste  and  recycling,  urban  environment,  soil,  marine  and 
pesticides  are  relevant  to  the  Cohesion  Fund  co-financed  operations.  The  projects 
adopted in 2006 by Member States are set out in the Annex to this report. 

During 2006, the Cohesion Fund continued to contribute to the implementation of the 
environmental  legislation,  not  only  through  the  direct  financing  of  infrastructures, 
but also by providing incentives encouraging the application of relevant directives as 
part of the preconditions to the granting of support. This concerns notably thematic 
interventions  with 
territorial  dimension  such  as  nature  preservation,  waste 
management  and  wastewater  management  and  environmental  impact  assessment 
(EIA). 

The  Acts  of  Accession  of  the  new  Member  States  have  set  intermediate  targets  for 
the investment in the environment acquis. Therefore, these countries have set water 
and  waste  management  as  important  priorities  for  their  expenditures.  Investments 
and infrastructure needs remain high in the majority of cases for the key directives in 
fields  such  as  waste  management  and  water  (in  particular  urban  wastewater 
treatment),  but  also  in  the  fields  of  air  quality  and  in  efforts  to  reduce  industrial 
pollution  (Integrated  Pollution  Prevention  and  Control).  Support  for  environmental 
infrastructure  under  the  Cohesion  Fund  is  therefore  crucial  for  the  new  Member 
States. 

4. 

INSPECTIONS 

For the four original beneficiary Member States, a total of seven audit missions were 
carried  out  in  Spain,  Portugal  and  Greece  to  verify  the  implementation  of  action 
plans  and  perform  follow-up  for  CF  projects  audited  in  2004-2005.  The  year  2006 
also  involved  verifying  the  work  of  the  winding  up  bodies  for  closure  of  Cohesion 
Fund projects.  

In  addition,  procedures  were  put  in  place  in  the  Directorate  General  for  Regional 
Policy  in  2006  for  the  closure  of  Cohesion  Fund  projects  to  ensure  that  adequate 
information is obtained from the Managing Authority and the winding-up body in the 

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closure process so as to provide assurance on the legality and regularity of the final 
expenditure claim, failing which financial corrections would be applied. 

For  the  Member  States  which  acceded  in  2004,  the  audit  work  carried  out  in  2006 
focused  mainly  on  follow-up  audits  to  verify  the  effective  implementation  of 
recommendations made from the systems audits performed in 2005 and further audits 
to test project expenditure. Special emphasis was also given to reviewing the work of 
the  national  audit  bodies  including  checking  the  quality  of  system  audits,  sample 
checks  and  other  issues  in  relation  to  the  work  of  the  preparation  of  the  audit 
certificate.  A  total  of  thirteen  audit  missions  were  carried  out,  including  missions 
combined with the audit of the ERDF (European Regional Development Fund). 

Given the specific risks in implementing sound tendering and contracting procedures, 
a  specific  thematic  enquiry  was  launched  in  2005  focusing  on  contracts  awarded 
after  accession  in  the  new  Member  States  with  a  preventive  objective  as  well  as  a 
corrective  objective.  During  2006,  recommendations  made  based  on  these  audits 
were followed up in subsequent audits. 

In the Directorate General's Annual Activity Report for 2006, for the functioning of 
the  management  and  control  systems,  an  unqualified  opinion  was  given  for  the 
systems in 5 Member States (Cyprus, Estonia, Greece, Malta and Slovenia). 

For  the  remaining  Member  States  the  opinion  was  qualified  as  a  result  of  material 
deficiencies affecting key elements of the system (Czech Republic, Hungary, Ireland, 
Latvia, Lithuania, Poland, Portugal, Slovakia and Spain). None of the Member States 
was given an adverse opinion. 

5. 

IRREGULARITIES AND SUSPENSION OF AID 

According to Article 3 of Regulation (EC) n°1831/945 concerning irregularities and 
the recovery of amounts unduly paid, as well as the organisation of an information 
system in this area, some eight of the beneficiary Member States have communicated 
228  irregularity  cases  involving  €  186  604  797  of  Community  contribution.  These 
cases have been subject of initial administrative or judicial findings of fact. 

It is worth noting that the majority of these cases (183) have been communicated by 
the  four  original  Member  States  benefiting  from  the  Cohesion  Fund,  with  a 
predominance  of  Greek  cases  (103),  involving  a  total  of  € 117 856 924  in 
Community  contribution,  of  which  only  € 12 698 144  remains  to  be  recovered,  the 
remaining  part  having  been  deducted  from  requests  of  final  payment  made  to  the 
Commission.  During  the  year,  there  has  been  progress  in  the  application  of  the 
above-mentioned regulation in Spain, where 82 cases were communicated, involving 
€  44  472  847  in  Community  contribution,  of  which  €30  179  534  remain  to  be 
recovered. Of the 18 cases communicated by the Portuguese authorities involving € 
23 747 904 in Community contribution, some € 14 850 306 remain to be recovered. 

5 

OJ  n°L  191,  27  July  1994,  p.9,  as  last  amended  by  Regulation  (EC)  n°2168/2005,  OJ  n°L  345, 
28 December 2005, p.15 

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Only  five  new  Member  States,  Poland,  Czech  Republic,  Hungary,  Latvia  and 
Lithuania,  have  notified  cases  to  the  Commission  (respectively  10,  6,  6,  2  and  1 
cases) involving less important amounts than those cited above. Part of the amounts 
involved  has  been  deducted  before  presentation  of  the  payment  requests  to  the 
Commission. 

The  other  beneficiary  Member  States  have  informed  the  Commission  that  no 
irregularities  have  been  observed  during  2006.  A  certain  number  of  cases  detected 
during  national  and/or  Community  audit  missions  remain  to  be  notified  in 
accordance with the relevant regulation. 

In most notified cases, irregularities relate to the application of public procurement 
rules, and for the remaining cases, the presentation of ineligible expenditure. 

During  the  year  2006  Regulation  (EC)  n°1828/2006  entered  into  force  for  the  new 
programming period 2007-2013. Section 4 of this regulation on "Irregularities" now 
governs  the  notification  of  irregularities  and  applies  also  to  the  Cohesion  Fund  for 
projects  adopted  within  the  new  programming  period.  Regulation  (EC)  n°1831/94 
continues to apply to decisions adopted under Regulation (EC) n°1164/94. 

During 2006, the European Anti-Fraud Office (OLAF) opened three cases in relation 
to the information received concerning Cohesion Fund. Among these, one case led to 
the opening of a "monitoring case"6 and the two other cases have been transferred to 
the  year  2007  waiting  for  an  evaluation.  No  control  mission  linked  to  Regulation 
(EC) n°2185/967 has been realised. 

6. 

EVALUATION 

Article  13  of  the  revised  Regulation  (CE)  n°1164/94  requires  the  Commission  and 
the  Member  States  to  ensure  that  the  implementation  of  Cohesion  Fund  projects  is 
effectively  monitored  and  evaluated.  This  implies  recourse  to  project  appraisal, 
monitoring  and  evaluation  measures  on  the  basis  of  which  projects  are  adjusted,  if 
necessary. 

The Commission and the Member States carry out, if necessary in cooperation with 
the European Investment Bank, appraisal and evaluation of all co-financed projects. 

The  projects  to  be  financed  by  the  Fund  are  adopted  by  the  Commission  in 
agreement  with  the  beneficiary  Member  State.  As  regards  project  appraisal,  each 
request for assistance is accompanied by a cost-benefit analysis (CBA) of the project. 
The  CBA  has  to  demonstrate  that  the  socio-economic  benefits  in  the  medium  term 
are proportional to the financial resources mobilised. The Commission examines this 
evaluation on the basis of the principles set out in the guide for cost-benefit analysis.8 
The guide, published in 2003, is now in the process of being updated.  

6 

7 
8 

Monitoring cases are cases for which another body or Member State authority performs its own external 
investigation although OLAF would also be competent to do so.  
OJ n°L 292, 15 November 1996, p.2 
http://ec.europa.eu/regional_policy/sources/docgener/guides/cost/guide02_en.pdf 

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this  basis, 

the  Commission  provided  during  2006 

On 
internal 
methodological  support  and  assisted  Member  States  through  actions  of  capacity 
building  aiming  to  improve  the  consistency  of  the  ex-ante  financial  and  economic 
analysis  of  the  projects.  In  October  2006  the  Commission  adopted  a  guidance 
document  on  the  methodology  to  be  used  in  carrying  out  CBA9.  The  working 
document presents some general principles of CBA along with a set of working rules 
and encourages the Member States to develop their own CBA guidelines.  

important 

In addition, the Commission carries out ex-post evaluation on samples of projects co-
financed by  the  Cohesion Fund. The most recent evaluation was published in 2005 
and looked at a sample of 200 projects implemented over the 1993-2002 period. The 
next ex-post evaluation is foreseen to be performed in 2009. 

7. 

NEW REGULATORY FRAMEWORK FOR THE 2007-2013 PERIOD 

Cohesion Fund Regulation (EC) n°1164/94 sets the rules for the implementation of 
the  Fund  until  31  December  2006.  In  view  of  the  start  of  the  next  programming 
period  (2007-2013),  the  Commission  has  drafted  a  new  set  of  Regulations  for  the 
implementation  of  the  Cohesion  Fund,  as  well  as  the  European  Regional 
Development Fund and the European Social Fund. 

These  Regulations  were  adopted  in  the  course  of  2006.  The  new  Regulations 
concerning Cohesion Fund implementation are the following: 

-  Council  Regulation  (EC)  n°1083/2006  of  11  July  2006  laying  down  general 
provisions on the European Regional Development Fund, the European Social Fund 
and the Cohesion Fund and repealing Regulation (EC) n°1260/1999; 

-  Council  Regulation  (EC)  n°1084/2006  of  11  July  2006  establishing  a  Cohesion 
Fund and repealing Regulation (EC) n°1164/94; 

-  Commission  implementing  Regulation  (EC)  n°1828/2006  of  8  December  2006 
setting out rules for the implementation of Council Regulation (EC) n°1083/2006. 

All Regulations applicable to the 2007-2013 period are available on the INFOREGIO 
internet 
address: 
http://ec.europa.eu/regional_policy/sources/docoffic/official/regulation/newregl0713
_en.htm  

following 

site 

the 

at 

8. 

INFORMATION AND PUBLICITY 

Two information meetings with the 25 Member States were held in Brussels, on 22 
June  and  20  December.  At  the  first  meeting,  the  Commission  presented  the  2006 
final allocations for each Member State. As 2006 is the last year of the programming 
period, it was stressed that all commitment credits still available will have to be used 

9 

European Commission, DG for Regional Policy, 'Guidance on the methodology for carrying out cost-
benefit  analysis',  2007-2013 
-  Evaluation  Unit  Working  Document  n.  4,  available  at 
http://ec.europa.eu/regional_policy/sources/docoffic/working/sf2000_en.htm 

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before  31  December.  No  transfer  of  credits  from  other  budget  lines  was  foreseen. 
Also,  a  presentation  of  the  Joint  Assistance  in  Supporting  Projects  in  European 
Regions  (JASPERS  initiative)  was  made.  This  initiative,  set  up  in  cooperation 
between the Commission and the EIB, is meant to assist Member States in appraising 
technically future major projects to be submitted to the Commission. JASPERS will 
be in place as from 2007. At the December meeting, the Commission presented the 
draft guidelines on the closure of Cohesion Fund projects. The Commission insisted 
on bearing in mind that: (i) in dealing with closure, the projects on the ground must 
be in line with the relevant Decisions; (ii) the final date of eligibility for projects of 
the 2000-2006 period remains the 31 December 2010; (iii) the one modification rule 
applies. Finally, the Commission recalled that this information meeting was the last 
one  in  the  framework  of  Regulation  (EC)  n°1164/94.  The  issues  concerning  the 
Cohesion  Fund  will,  as  from  1  January  2007,  be  dealt  within  the  Coordination 
Committee of the Funds, according to the new Regulation (EC) n°1083/2006. 

The Commission organised two meetings in 2006 for communication officers from 
both  the  ERDF  and  the  Cohesion  Fund.  These  took  place  on  15  June  and  5 
December. Various communication topics were discussed, the implementation of the 
new  regulations  was  explained  and  a  number  of  case  studies  and  sample  products 
were presented. These meetings for information officers will continue in 2007. 

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