Report from the Commission to the European Parliament, the Council and the European Court of Auditors - Annual Report on the financial management of the 7th-9th European Development Funds (EDFs) in 2007 {SEC(2008)518}
Date: 2008-04-24
Institutions: European Commission
Subjects: European Development Fund, activity report, financial management, financial year

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 24.4.2008 
COM(2008) 224 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT,  
THE COUNCIL AND THE EUROPEAN COURT OF AUDITORS 

Annual Report on the Financial Management of the 7th-9th European Development 
Funds (EDFs) in 2007 

{SEC(2008)518} 

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TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

5.1. 

5.2. 

Introduction .................................................................................................................. 3 

Significant events in 2007............................................................................................ 3 

Highlights..................................................................................................................... 4 

Financial situation of the 7th-9th EDFs, year-end 2007 .............................................. 4 

Delivering ACP programmes in a timely and effective way: performance against 
objectives in 2007 ........................................................................................................ 5 

Increase programmes' quality, impact and sustainability............................................. 5 

Deliver aid more quickly.............................................................................................. 8 

5.2.1.  Keeping overall RAL stable....................................................................................... 10 

5.2.2.  Spreading commitments evenly over the year (avoiding “backloading” at year-end)

.................................................................................................................................... 11 

5.2.3.  Stabex......................................................................................................................... 11 

5.3. 

5.4. 

5.5. 

Co-ordinate and harmonise operations with other donors ......................................... 12 

Ensure an effective control environment and accountability..................................... 13 

Implement an active human resources policy and improve internal processes ......... 14 

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1. 

INTRODUCTION 

This  report  fulfills  the  requirement  laid  down  in  Articles  96.2  and  102,  second 
sentence of the 9th European Development Fund (EDF) Financial Regulation1 for the 
Commission to report each year on the EDF’s financial management.  

Figures  used  for  EuropeAid’s  performance  targets  and  OECD-DAC  reporting 
exclude de-commitments and recovery orders, so are gross, not net. Similarly, figures 
in this section and in annex are gross, unless stated otherwise. 

2. 

SIGNIFICANT EVENTS IN 2007 

2007 was a special year for the management of EDF by EuropeAid, since its activity 
has mostly been influenced by the need to commit all 9th EDF resources before end 
2007. 

In May 2005, the Council set the deadline for the commitment of the funds of the 9th 
EDF at 31.12.2007. This decision is known as the “Sunset Clause”2. Exceptions were 
provided for Stabex, and for support expenditure3. 

In May 2007, the ACP-EU Council of Ministers decided on the allocation of part of 
the 9th EDF envelope’s reserve initially dedicated to long term development in favour 
of consolidated B envelopes, intra ACP FLEX programmes, African Peace Facility, 
and the Infrastructure Trust Fund.  

In  November  2007,  the  Council  allowed  for  further  extension  of  deadlines  for 
financing decisions under the Single Programming Documents of the French OCTs 
and interest on the EDF4. 

In 2007, the Commission took decisions in the context of the End of Term reviews of 
the  9th  EDF,  and  EuropeAid  was  called  upon  to  implement  the  re-adjustments  of 
allocations between countries, regions and sectors.  

The  Commission  was  able  to  comply  with  all  the  implications  of  the  "Sunset 
Clause", in particular: 

(1) 

(2) 

De-committing  all  unnecessary  funds  by  end  March  2007,  to  make  these 
funds available for re-commitment before the year end; 

Submitting all the programmes committing envelope A country and regional 
allocations for opinion by the EDF Committee by end July 2007 

1 
2 
3 

4 

OJ L 83, 01.04.2003, p. 1 
Decision 2005/446/EC, OJ L 247, 18.6.2005, p.19 
Annex Ib as contained in Annex to Decision No 1/2006 of the ACP-EC Council of Ministers (OJ L 247, 
9.9.2006, p.22) 
Decision 2007/792/EC, OJ L 320/31, 6.12.2007  

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(3) 

Preparing  for  decision,  within  the  deadline  set  in  the  “Sunset  Clause”,  the 
new programmes identified as priorities by the ACP-EU Council of Ministers 
decision of May 2007. 

In this way it was possible to commit all 9th EDF resources by end of 2007, with the 
exceptions  of  the  French  OCT's  and  EDF  interests,  as  allowed  under  Decision 
2007/792/EC.  This  is  the  first  time  ever  that  an  EDF  has  been  entirely  committed 
before the entry into force of the next EDF.  

In 2007, DEV completed programming under the 10th EDF for 51 Country Strategy 
Papers/National  Indicative  Programmes  for  an  amount  of  €  8.7  billion  representing 
65%  of  the  planned  country  allocations.  Completion  of  the  programming  for  the 
remaining allocations is expected in 2008, while the earliest possible entry into force 
of the 10th EDF would now be June 2008. 

3. 

HIGHLIGHTS  

•  Financial  objectives  2007  –  The  Commission  met  almost  all  of  its  financial 
objectives,  exceeding  its  targets  for  global  commitments  and  contracts.  For  the 
first time ever, an EDF has been entirely committed before the entry into force of 
the next EDF.  

•  EDF  payments  reached  a  record  level  (€  2.92  billion)  but  were  constrained  by 
cash flow shortages. The increase in the pace of EDF payments in recent years is 
putting  pressure  on  Member  States  to  accelerate  their  contributions.  Already  in 
2007,  some  Member  States  were  not  willing  to  increase  their  contributions  as 
requested and there is a risk that a cash flow shortage could arise in 2008.  

•  Internal  controls  and  processes  –  the  EDF  has  still  to  be  integrated  into  the 
Common  Relex  Information  System  (CRIS).  In  addition,  the  introduction  of 
ABAC-FED has been further delayed until beginning 2009.  

•  Staffing – Following the EuropeAid workload assessment, 11 additional contract 
agents  could  be  recruited  in  2007  in  AIDCO/C  Headquarters.  Whilst  this 
mitigated  our  staff  constraints,  the  workload  per  staff  in  the  ACP  Directorate  in 
EuropeAid remains high compared to other geographical areas. Delegations in the 
ACP states continued to work within tight staffing constraints.  

4. 

FINANCIAL SITUATION OF THE 7TH-9TH EDFS, YEAR-END 20075 

The  table  below  shows  the  overall  financial  situation  for  the  7th-9th  EDFs  at  end 
2007. 2006 was closed with an amount of €3.16 billion still uncommitted, whereas a 
residual figure of € 49 million remained at the closure of 2007 (close to 0,001% of 
the funds allocated).  

Table 1: Financial situation of the 7th-9th EDFs, year-end 2007 (€m) 

5 

In sections four and five, commitments and payments figures reflect a correction which the Commission 
made in 2004 to figures for Stabex payments made between 2002 and 2004 

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Funds allocated  
to ACP states and OCT States 
(by EDF)6 
9th  

7th-8th  

Total, 
7th-9th 
c (a+b) 

A 

b 

D 

21422.27 15 906.38 37 328.65  37 279.37 

Funds 
committed 

Funds 
spent 

Funds/commitments outstanding 

Funds 
uncommitted 
f (c-d) 
49.28 

Commitments unspent 
(RAL) 
G (d-e) 
10 579.40 

Total remaining 
funds unspent 
h (f+g) 
10 628.69 

E 
26 699.96

The  €  49.28  M  of  uncommitted  funds  are  the  resources  available  to  fund  the 
exceptions provided under the "Sunset Clause".  

5. 

DELIVERING  ACP  PROGRAMMES 
PERFORMANCE AGAINST OBJECTIVES IN 2007 

IN  A  TIMELY  AND  EFFECTIVE  WAY: 

EuropeAid's objectives, insofar as EDF is concerned, are defined in: 

•  The ACP section of EuropeAid’s Annual Management Plan, and 

•  The relevant central performance indicators agreed by EuropeAid Management.  

The following chapter explains how these objectives were met or exceeded. 

5.1. 

Increase programmes' quality, impact and sustainability 

–  Reviewing all programmes at the identification and formulation stages  

EuropeAid’s  Quality  Support  Groups  (QSGs)  assess  operations  before  they  are 
implemented  (ex-ante).  QSG  coverage  of  EDF  financing  proposals  rose  in  2007, 
reaching 91% of the programmed funds committed in that year.  

Table 2: QSG review of EDF financing proposals, 2007 

Project  
cycle stage 
Identification 

Formulation 

Identification 
reviewed 
Financing 
reviewed 

Indicator 

fiches 

proposals 

Number  
Value (€m) 
Number  
Value (€m) 

2006 

2007 

156 
2276 
181 
3094 

169 
1636 
272 
3173 

% change, 
year-on-year 
8% 
- 28% 
50% 
3% 

Project  proposals  are  reviewed  at  identification  and  formulation  stage.  As  a  rule,  a 
thorough analysis at the identification stage will reduce the need for modifications at 
the  subsequent  level.  In  2007,  the  number  of  ex-ante  reviews  at  formulation  stage 
increased substantially, reflecting the high number of financing decisions necessary 
to  complete  the  commitment  of  the  remaining  9th  EDF  funds.  The  proportion  of 
reviews at the identification stage logically decreased in value: reviews at the initial 
identification stage had in some cases already been carried out in previous years.  

6 

Throughout  this  report,  figures:-include  European  Investment  Bank  (EIB)  risk  capital  and  related 
interest-rate  subsidies  from  the  7-8th  EDFs,  because  the  Commission  holds  accounting  responsibility 
for  these  funds;  -exclude  the  EIB’s  Investment  Facility,  funded  from  the  9th  EDF,  because  the  EIB 
holds accounting responsibility for the Facility. 

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For  each  proposal  reviewed  by  the  QSG,  several  criteria  are  ranked  in  terms  of 
positive  and  negative  scores  (A/B  and  C/D),  the  objective  being  to  clearly  identify 
weak points in the proposal, that will be subject to further improvements.  

The  table  below  shows  that  QSG  reviews  helped  to  improve  the  quality  of  project 
proposals between identification and the formulation stage: 

Table 3: QSG impact on EDF project proposals’ quality, 2006-07  
- % of positive and negative scores awarded at each review stage 

Type of score 

2006 

2007 

Positive scores (A/B)  
Negative scores (C/D) 

Identification 
90 
10 

Formulation 
95 
5 

Identification 
92 
8 

Formulation 
94 
6 

Negative  QSG  scores  mean  that  project  proposals  are  either  approved  subject  to 
modifications, or, rejected in order for further improvements to be made before they 
are  presented  to  the  QSG  again.  After  the  formulation  stage,  the  Commission 
services  improve  proposals  still  further,  by  fulfilling  the  QSG’s  recommendations 
before implementation starts. 

–  Continuing to invest in budget and sector support where appropriate  

In  2007,  the  Commission  approved  General  Budget  Support  in  38  countries, 
amounting to € 415 million, and Sector Budget Support in 16 countries, totalling € 
259  million.  These  represent  11.4%  and  7%  respectively  of  total  commitments  and 
are very close to targets set at the beginning of the year (10% and 7% respectively).  

Table 4: New GBS and SBS, 20077 (€m) 

Type of programme 

Commitments 

General budget support 

Sector Budget Support 

Total  

2006 
198 

414 

612 

2007  % change 
+109% 
415 

2006 
431 

Payments 
2007  % change 
455 

+5,6% 

259 

674 

-37% 

207 

129 

-38% 

+10% 

638 

584 

-8,5% 

In 2007 in the area of budget support the Commission has: 

- published guidelines on General Budget Support (January 2007); 

- published revised guidelines on Support to Sector Programmes (July 2007); 

- continued the carrying out of Public Expenditure Framework Assessment exercises. 
15 additional ACP countries have been covered by PEFA exercises in 2007, which 
makes 54 countries so far. 

- initiated work on two studies - one on documenting the use of the variable tranche 
in budget support operations; and the other assessing the coherence between Public 
Finance Management (PFM) assessment and support to PFM Reforms 

-  tested  the  use  of  the  Results  Oriented  Monitoring  (ROM)  on  sector  programmes, 
including those using budget support 

7 

The data used in this chart is provisional. 

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- initiated work on developing a coherent methodology for evaluating budget support 
operations, arising from the joint evaluation of budget support completed in 2006. 

–  Monitoring  

In 2007, 544 on-going operations consisting of national and regional projects (with 
their specific national components) implemented in 77 ACP countries and the OCTs 
have  been  monitored.  This  exercise  produced  600  monitoring  outputs.  The  total 
budget  of  the  operations  monitored  was  €  5.959  million  of  which  €  5.551  million 
financed  from  the  EDF  and  €  408  million  financed  from  the  EC  Budget  in  ACP 
states. 

ROM results showed that EC cooperation with ACP countries performed rather well 
in  2007,  presenting  for  all  ROM  criteria  (relevance  of  design,  efficiency, 
effectiveness, impact and sustainability) an overall average score of 2,66 in relation 
to a target parameter of 2,5 for projects "on track". 

In  addition,  49  projects  whose  activities  had  been  closed  since  12-24  months  have 
been monitored on an ex-post basis. Findings of this exercise, which feed back into 
future  programmes'  design,  gave  an  overall  score  of  2,58  and  a  score  of  2,6  in 
reference with effectiveness, impact and relevance of projects' design. Both of these 
scores are above the target parameter of 2.5.  

–  Evaluation 

In 2007, the Commission completed 3 geographical evaluations covering EC aid to 
ACP countries (Mozambique, Southern Africa Development Community and Pacific 
Region) and one thematic evaluation (Agricultural and Rural Development) covering 
ACP  and  non-ACP  countries.  The  main  recommendations  of  these  evaluations  are 
highlighted below: 

•  National strategy for Mozambique: the strategic coordination role the EU should 
play  in  the  justice  sector;  the  increased  support  it  should  bring  to  an  “envisaged 
model”  of  democratic  decentralization;  continued  moves  towards  increasing  the 
proportion of General Budget Support and Sector Budget Support; and support to 
the  Government  of  Mozambique  in  the  preparation  of  the  national  capacity 
development policy. 

•  Regional  strategy  for  the  SADC  region:  efforts  to  integrate  the  Regional 
Indicative Programmes and the National Indicative Programmes; moving towards 
channelling  funds  using  recipient  countries  procedures;  providing  funds  to  help 
SADC  develop  their  own  procedures;  the  institution  of  regular  regional 
delegations meeting to address regional issues; and increasing support to SADC’s 
facilitation and coordination role. 

•  Regional  Strategy  for  the  Pacific  ACP  Region:  strengthen  policy  dialogue; 
increase efforts to help the Pacific region  address  the  issues of environment and 
natural  resources  management;  improve  the  linkages  between  regional  and 
national  levels;  and  better  link  Contribution  Agreements  to  results  and  improve 
their follow-up and monitoring.  

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•  Thematic  evaluation  of  the  EC  cooperation  in  the  area  of  agricultural  and  rural 
development:  redefine  strategy  and  priorities  in  the  agricultural  sector;  orientate 
the strategy towards the concept of an integrated management of rural space in the 
field of rural development; give priority to sector-oriented approaches and move 
towards  sector  budget  support  when  possible;  examine  effects  of  compensatory 
measures set up in order to mitigate the consequences of the CAP reform on ACP 
countries;  and  carry  out  environmental  strategic  evaluations  at  the  Country 
strategy paper level, as foreseen by Directive 2001/42. 

In  2007  only  3  geographical  ACP  related  evaluations  were  completed,  while  this 
figure  had  been  7  in  2006.  The  evaluation  unit  in  EuropeAid  manages  evaluations 
not only for ACP region (DEV) but also for non-ACP area (RELEX), plus thematic 
and sector evaluations which often cover both areas, thus the number of completed 
evaluations may vary on a yearly basis. 

The duration of sector and thematic evaluation processes is clearly longer than one 
year and it is normal that the number of the completed evaluations vary on an yearly 
basis depending on the timing of the start of the evaluation and on the complexity of 
the process. 

5.2. 

Deliver aid more quickly 

As in 2006, the EDF achieved almost all the financial targets set for 2007. 

The situation can be summarised as follows: 

Table 5: EDF key performance figures, 2003-07 (€m) 

Global 
commitments 
Individual 
commitments 
Payments 

2003 

2004 

2005 

2006 

3 769 

2 648 

3 511 

3 408 

Target 
3 450 

2007 
Actual 
3 636  

105% 

3 062 

3 038 

3 057 

3 654 

3 500 

3 816  

109% 

2 345 

2 464 

2 544 

2 826 

3 005 

2 920  

93% 

Commitments 

As  explained  in  section  2  above,  the  major  challenge  for  the  EDF  in  2007  was  to 
commit  all  available  resources  (9th  EDF  and  transfers  from  previous  EDFs)  by  the 
end of 2007. This ambitious objective was achieved, being the first time in history of 
the EDF that all available funds have been committed before the entry into force of 
the next EDF. The 2007 commitments amounted to €3 636 M exceeding the target of 
€3 450 M, including amounts that were de-committed and re-committed by the end 
of 2007.  

Contracts 

The performance for contracts substantially exceeded the 2007 target of € 3 500 M 
reaching € 3.816 M, a new record for the EDF and a consequence of the continued 
efforts of 2007 in accelerating implementation. 

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EuropeAid Indicators defined as targets the levels of contracting to be reached by the 
the EDF, as follows:  

% contracted on 

2003 commitments 
2004 commitments 
2005 commitments 
2006 commitments 
2007 commitments 

2007 targets 
97 % 
95 % 
80 % 
59 % 
27 % 
With  a  view  to  accelerate  contracting,  the  Financial  Regulation  of  the  9th  EDF8 
foresees  the  application  of  a  "D+3"  rule  –  individual  legal  commitments  must  be 
concluded  no  later  than  3  years  from  the  date  of  the  corresponding  financial 
commitment  by  the  Commission.  The  table  above  reflect  this  situation,  with  the 
residual  individual  commitments  on  2003  and  2004  relating  mostly  to  credits 
earmarked for final audits and evaluations or reserves for contingencies. 

Situation at 31.12.2007 
96 % 
97 % 
72 % 
65 % 
30 % 

Payments 

EDF payments achieved an amount of € 2 920 M which is the highest amount ever 
realised (e.g. €2 826 m in 2006, €2 544 m in 2005).  

The  initial  2007  target  for  payments  (€3 136 M)  was  revised  downwards  in  the 
context of the October Communication to the Council to € 3 005 M, inter alia to take 
into account the fact that planned payments, such as the € 100 m for the HIPC and € 
40  m  for  the  EU-Africa  Infrastructure  Trust  Fund,  were  postponed  to  2008  as  a 
consequence  of  delayed  fulfilment  of  conditions  for  disbursement  and  also 
expectations  that  a  cash  flow  shortage  was  going  to  arise  in  the  year  end. In  the 
events, actual payments reached € 2 920 million, and would have been almost € 200 
million higher except for cash flow shortages.  

Since  1990,  both  global  commitments  and  payments  have  risen  steadily,  reflecting 
faster implementation: 

EDF commitments and payments (1990-2007) 
(gross amounts - nominal values)

5.000

4.000

3.000

2.000

1.000

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

DECISIONS 953 1.433 2.236 1.843 2.689 1.874 1.538 784 2.606 2.958 4.006 1.927 2.125 3.769 2.648 3.511 3.408 3.636

PAYMENTS 1.257 1.191 1.984 1.443 1.860 1.758 1.509 1.382 1.595 1.352 1.640 1.779 1.922 2.345 2.464 2.544 2.826 2.920

–  Keeping RAL stable, focusing on contracts and old and dormant commitments 

8 

J.O L 83, 1.4.2003, pg 1 

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5.2.1.  Keeping overall RAL stable  

Unspent commitments (or ‘RAL’, for reste à liquider) must be disbursed in line with 
the  rules  of  sound  financial  management.  The  Commission  monitors  overall  RAL 
closely. 

During 2007, RAL increased from € 10.281 million to € 10.579 million (+2.9%). The 
increase in RAL in comparison with 01.01.2007 can be explained as follows: 

Stock of RAL on 01.01.2007 

plus new global commitments in 
2007 

Less de-commitments 

Less payments in 2007 

Plus recovery orders 

Stock of RAL on 31.12.2007 

10.281 

3.636 

464 

2.920 

45 

10.579 

As  illustrated  by  the  table  above,  an  important  impact  in  the  increase  in  total  RAL 
stems from the high level of global commitments  in 2007 (following  the ending of 
the Sunset clause end 2007). 

- Focusing on implementation of "old" and "dormant" commitments  

The  efforts  deployed  in  previous  years  to  accelerate  implementation  continue  to 
deliver good results. 

For example, the average time taken to implement projects - measured by the ratio of 
RAL to annual payments – fell by 25 % between 2001 and 2007:  

Table 6: Average no. of years taken to implement projects (ratio of RAL to annual payments) 
2007 
3.6 

2005 
4.1 

2002 
4.5 

2004 
4.0 

2001 
4.96 

2003 
4.2 

2006 
3.6 

Within the approach to stabilise overall RAL, the Commission carefully monitors old 
and dormant RAL, as defined below: 

Table 7: Evolution of old and dormant RAL, 2006-07 

Indicator 

Balance (€m) 

Comment 

Name 

Definition 

31.12.06 

31.12.07 
Target  Actual  

Old  
RAL  
Dormant 
RAL  

funds committed >5 years ago, 
still unspent 
funds committed but neither 
contracted nor spent in >2 
years 

822 

860 

276 

250 

903  The Old RAL target was 
practically achieved 
100  Dormant RAL decreased 
by more than 60% in 
2007.  

Old + Dormant RAL equalled € 1.098 at the end of 2006 and was € 1.003 at the end 
of 2007, which is a decrease of about 10%. 

A  special  effort  has  been  deployed  to  de-commit  all  outstanding  commitments  that 
were no longer necessary, in time to recommit them by end 2007. For this purpose, 

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the  Commission  defined  a  de-commitment  target,  set  for  end  March  2007.  This 
ambitious target has been exceeded.  

The following table show the achievement in 2006 and 2007 

Table 8: EDF de-commitments, 1.1.2006 to 31.3.2007 
Definition 
Indicat
or 

Amount (€m) 
2007 

De-
commit
ments 

funds previously committed but 
unspent, now freed up for new 
programmes 

2006 

Target 
(to 
31.3.07) 

Actual 
(to 31.3.07) 

689 

391 

464 

Annex  1  and  4  in  the  Staff  Working  Paper,  present  a  detailed  breakdown  of  the 
evolution  of  unspent  funds  since  2003  and  totals  for  decommitments  and  recovery 
orders, and gross and net commitments and payments respectively.  

5.2.2. 

Spreading commitments evenly over the year (avoiding “backloading” at year-end)  

In spite of the higher number of decisions taken to complete the commitment of the 
9th EDF, the level of EDF global commitments made before end September remained 
at 58% as in previous year. 

5.2.3. 

Stabex9  

In 2007, the Commission continued to implement the action plan for Stabex, which 
consists in approving new Frameworks of Mutual Obligation (FMO), to mobilise the 
outstanding funds under new programmes adjusted to current needs, with a target of 
having  all  FMO  signed  by  end  of  2008.  The  table  below  provides  a  provisional 
situation of the STABEX funds managed by the Commission as of 31/12/2007. 

Table 9 : STABEX - situation 2006/2007 (€)  

Total funds made available (transfer agreements + interests) 
FMO's signed 
Funds for which FMO's remain to be signed (by 31/12/2008) 
Funds mobilised 
Security accounts (to be paid by 31/12/2010) 

2006 
2.703.475.370 
2.546.769.644 

2007 
 2.741.845.131 
 2.656.264.965 

156.708.847  85.580.166 

 2.065.612.214 

 2.154.826.786 

191.602.109  99.609.288 

Under Article 212 of the Lomé IV Agreement, the National Authorising Officers of 
the ACP countries benefiting from STABEX funds are required to submit an annual 
report on the financial management of Stabex funds. Some of these reports on 2007 
are  still  awaited  at  the  time  of  finalising  this  report.  As  such,  a  more  detailed 
reporting  on  the  2007  implementation  of  Stabex  will  be  provided,  once  all  the 
information has been received and analysed.  

9 

Stabex  was  a  financial  instrument  created  by  the  Lomé  Convention  (Articles  186-212)  intended  to 
offset instability in ACP states’ export earnings. The Cotonou Agreement replaced Stabex with a new 
instrument, Flex. 

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5.3. 

Co-ordinate and harmonise operations with other donors 

–  Sectoral concentration of EDF 

The sectoral breakdown of EDF spending in 2007 was as follows: 

Table 10 : EDF commitments and payments by OECD-DAC, 2007 (€ million) (*) 
Sector 

Commitments 

€m  

% of 
total 

Payments 

€m  

Education, health, water, basic sanitation 
Transport, communications, energy 
Agriculture, fisheries, trade, industry, tourism 
Environment, other cross-cutting issues 
Commodity Aid and general programme assistance 
(**) 
Debt relief  
Other, including reconstruction relief 
Administrative costs 
Total 

1.247  
751  
373  
324  

461  
23  
261  
50  
3.489  

36%  852  
22%  799  
11%  274  
9%  156  

13%  557  

-  

1% 
7%  134  
1%  61  
100%  2.833  

% of 
total 
31% 
28% 
10% 
5% 

19% 
0% 
5% 
2% 
100% 

* Provisional figures 
Bilateral and Multilateral ODA and OA flows 
Peace Facility not included: commitments = € 147 Million, Payments = € 86 Million 
** Commodity aid and general programme assistance 
Commitments 
(€ m) 
415 

Payments (€ m) 

% of total 

12% 

455 

Of  which  General  budget 
support 
Of  which  Food  aid  /  food 
security  programmes  and 
Stabex 
Total 

46 

1% 

136 

461 

13% 

55710 

% of total 

16% 

4% 

19% 

–  Funding via International Organisations  

Contracts with the UN family and the World Bank Group amounted to € 432 M in 
2007, or 11,3 % of the total contracts of that year. This percentage indicates a stable 
trend over the period 2005-2007.  

In 2007 the Commission contracted: 

•  € 226 million with the World Bank, of which € 150 million went to Protection of 

Basic Services in Ethiopia, which includes the delivery of basic services in 
primary and secondary education, health, agriculture and natural resources and 
water by sub-national governments, while promoting and deepening transparency 
and accountability in service delivery.  

•  € 205 million with the UN family, and more specifically € 71.5 million with the 

UNICEF, € 47.6 million with the UNDP and € 11.7 million with the FAO. 

10 

This amount includes Stabex as well as Food Aid figures, but excludes compensation for losses, debt 
relief and emergency relief, contrary to the payment figure of 455 given in table 4  

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In  early  2007,  joint  reporting  guidelines  were  agreed  with  the  UN  family  for 
application to on-going contracts. 

Annex  5  of  the  Staff  Working  Paper  presents  detailed  figures  on  2007  contracts, 
payments and amounts still to pays to the various agencies of the UN and the WB. 

5.4. 

Ensure an effective control environment and accountability 

–  Closely monitoring transactions, using samples 

EuropeAid's  control  activities  are  based  on  the  Financial  Regulations  applicable  to 
the  Budget  and  to  the  EDF.  The  aim  is  to  have  a  balanced  control  system  which 
makes  it  possible  to  achieve  the  objectives  with  regard  to  legality  regularity  and 
sound  financial  management.  The  primary  assurance  mechanism  over  legality  and 
regularity  is  represented  by  the  controls  carried  out  on  each  and  every  transaction 
before  it  is  authorised.  Ex  ante  controls  are  important  as  they  prevent  errors  and 
avoid  the  need  for  ex-post  corrective  actions  and  they  cover  both  the  financial  and 
operational aspects of transactions.  

The  primary  control  mechanism  is  completed  by  ex-post  controls  as  well  as  by 
additional audits, 

The  ex  post  control  system,  having  undergone  structural  change  in  2005  and 
methodological  refinement  in  2006,  was  not  further  changed  in  2007  which  was 
rather a year of consolidation of the previous changes. 

The  target  is  to  carry  out  ex  post  controls  on  1%  of  EuropeAid's  transactions 
(payments,  recoveries  and  clearance  of  prefinancing,  for  EDF  and  Budget 
altogether),  although  with  minimum  thresholds  for  the  absolute  number  of 
transactions  to  be  checked.  Each  transaction  is  studied  with  a  view  to  detecting 
systemic  problems  and  to  detect  and  correct  any  financial  anomalies  which  might 
lead to too much or too little being paid, recovered or cleared. 

142  transactions  were  selected  for  control  out  of  the  basic  population  of  18,718 
transactions  (0.75% of  the  total  number)  for  a  value  of  €  961,027,683  and  controls 
were due to be completed by the end of April 2008 for all the transactions sampled, 
indicating that the total number of errors is relatively low and that they do not have 
any major financial impact.  

Table 11: Ex-post control of transactions (EDF and Budget) in 2007 – status, Feb. 2008 

No. of transactions  % of total transactions 

Total transactions  
Transactions for which controls planned 
- controls completed (transactions Jan-Oct 07) 
- controls due end Apr 08 (transactions Jul-Dec 07)  

18718 
142 
119 

23 

100% 
0.75% 
0.63% 
0.12% 

In addition, the Commission: 

•  conducted  ex-post  controls  of  26  transactions  with  which  the  authorising  officer 
proceeded, despite reservations by the financial verifying officer, 11 were related 
to  payments,  the  other  to  contractual  or  procurement  issues.  The  by-pass 
procedure has been less utilised in 2007 than in 2006 (39 transactions); 

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•  reviewed  transactions  and  internal  controls  in  situ  in  three  ACP  delegations 
identified through a risk analysis. Terms of Reference of these missions are being 
reviewed this year for a better harmonisation within Headquarters. Usually there 
are 4 verifications missions planned. In 2007 3 missions out of the four planned 
have  been  carried  out  due  in  Angola,  Democratic  Republic  of  Congo,  Guinée 
Bissau.  

–  Annual Audit Plans 

The  Annual  Audit  Plan,  established  following  a  risk  assessment,  is  implemented 
under  the  responsibility  of  the  services  concerned,  at  Headquarters  and  in 
Delegations. It aims at providing a second layer of assurance complementary to the 
one  provided  by  the  mandatory  audits.  Audits  are  therefore  completely  integrated 
into the whole project management cycle. 

With  a  view  to  reinforcing  the  central  monitoring  on  audit  activities,  EuropeAid 
carries  out  an  analysis  of  audit  reports  finalised  during  the  year,  relating  to  audits 
included  in  the  Annual  Audit  Plan.  The  main  findings  for  2007  showed  a  good 
assurance that, generally speaking, the funds have been spent in accordance with the 
agreement terms and conditions and that internal controls provided for the prevention 
and detection of errors, irregularities and fraud. 

Given  the  variety  of  the  audit  reports,  the  comparison  between  them  was  difficult. 
The  standardised  Terms  of  Reference  published  by  EuropeAid  in  September  2007 
will  remedy  these  variances  and  increase  the  report's  quality  (as  the  specific 
objectives with the tasks to be performed are detailed in the TOR) and facilitate their 
comparison (the basis will be the same).  

–  Compliance with the four pillars 

international  organisations'  procedures  with 
The  compliance  analysis  of 
internationally  accepted  standards  has  been  performed  for  the  World  Bank  and 
twelve  UN  organisations  (UNDP,  WHO,  FAO,  UNHCR  UNFPA,  WFP,  UNMAS, 
UNCTAD,  UNRWA,  UNICEF,  IFAD,  and  UNOPS),  as  well  as  for  other 
international  organisations  including  ACP  regional  organisations.  The  UN  analyses 
cover  more  than  97%  of  EuropeAid  contributions  to  those  organisations  which  are 
signatories to the FAFA. 

The results of this analysis are satisfactory, showing that the organisations generally 
meet  the  standards  identified  for  the  four  criteria  of  article  53(d)  of  the  FR  for  the 
General  Budget  (accounting,  audit,  internal  control,  procurement).  Where  the 
analyses  revealed  that  some  ACP  regional  organisations  do  not fully  meet  the 
standards  identified,  the  agreements  with  those  entities  were  modified  accordingly 
prior to signature. 

5.5. 

Implement an active human resources policy and improve internal processes 

–  Implement an active human resources policy  

Following the AIDCO workload assessment, 11 additional contract agents could be 
recruited  in  2007  in  Headquarters.  Whilst  this  mitigated  our  staff  constraints,  the 

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workload  per  staff  in  Directorate  C  remains  high.  Delegations  in  the  ACP  states 
continued to work within tight staffing constraints. 

Table 12: EuropeAid staff vacancy rates: HQ ACP directorate & ACP delegations, 2006-07 
Location 

Staff type 

ACP delegations 

Headquarters  
(ACP Directorate) 

Officials 
Other staff 
Officials 
Other staff 

Year-end vacancy rate 
2006 
7% 
9% 
0% 
1% 

2007 
4% 
10% 
2,6% 
4,4% 

Higher  vacancy  rates  at  year  end  are  frictional  and  mostly  subject  to  ongoing 
recruitment procedures. 

–  Further develop information systems and improve accounting systems  

With  a  view  to  deal  with  the  continued  difficulties  in  the  completion  of  the 
integration of EDF into CRIS and ABAC, a special plan of action has been put into 
place  to  achieve  operational  status  from  the  beginning  of  the  2009  exercise. 
Developments  are  being  accelerated  for  all  modules,  training  sessions  are  being 
planned  and  the  full  system  is  expected  to  be  operational  soon  after  the  closure  of 
2008 accounts. 

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