REPORT FROM THE COMMISSION ANNUAL REPORT ON THE INSTRUMENT FOR STRUCTURAL POLICIES FOR PRE-ACCESSION (ISPA) 2009    SEC(2010)1304 final
Date: 2010-11-04
Institutions: European Commission
Subjects: European audiovisual area, harmonisation of standards, radiation protection, technical regulations, telecommunications, waveband

EN 

EN 

   EN 

 
 
EUROPEAN COMMISSION 

Brussels, 4.11.2010 
COM(2010) 622 final 

REPORT FROM THE COMMISSION 

ANNUAL REPORT ON THE INSTRUMENT FOR STRUCTURAL POLICIES FOR 
PRE-ACCESSION (ISPA) 2009 

SEC(2010)1304 final 

EN 

   EN 

 
 
 
  
 
 
 
TABLE OF CONTENTS 

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

ISPA project 2005HR16PPE001 - Karlovac Water & Wastewater Programme ......... 4 

ISPA project 2005HR16PPT001 – Vinkovci to Tovarnik to State Border Railway 
Rehabilitation ............................................................................................................... 5 

ISPA budget ................................................................................................................. 5 

New ISPA projects....................................................................................................... 6 

New Commitments ...................................................................................................... 6 

Projects funded between 2005-2009 ............................................................................ 6 

Payments ...................................................................................................................... 7 

Summary tables............................................................................................................ 8 

Forms and methods of providing technical assistance................................................. 8 

Technical assistance on the initiative of the beneficiary country ................................ 9 

Technical assistance on the initiative of the Commission ........................................... 9 

Implementation .......................................................................................................... 10 

Project monitoring...................................................................................................... 11 

Financial management and control, including EDIS.................................................. 12 

Risk assessment.......................................................................................................... 13 

European Court of Auditors Findings ........................................................................ 13 

Co-financing partners – EIB and EBRD.................................................................... 13 

Public procurement .................................................................................................... 14 

Competition policy..................................................................................................... 14 

Environment policy.................................................................................................... 14 

Transport policy ......................................................................................................... 15 

Publicity actions ......................................................................................................... 16 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

10. 

11. 

12. 

13. 

14. 

15. 

16. 

17. 

18. 

19. 

20. 

21. 

22. 

23. 

EN 

2 

   EN 

 
1. 

INTRODUCTION 

Following  the  Brussels  European  Council  in  June  2004,  which  awarded  candidate 
country  status  to  Croatia,  the  country  benefited  from  ISPA  as  of  1st  January  2005. 
Croatia thus followed the previous ISPA beneficiary countries which received ISPA 
assistance  from  when  the  instrument  was  launched  in  2000.  On  1st  January  2007 
Bulgaria  and  Romania  became  members  of  the  European  Union  and  ceased  being 
beneficiaries of pre-accession assistance including ISPA. The accession of these two 
countries left Croatia as the only recipient of ISPA assistance. This report therefore 
only covers the ISPA activities carried out by Croatia.  

The year 2009 witnessed significant progress in the pace of project implementation 
in Croatia although unfortunately this was not reflected in a corresponding increase 
in  ISPA  payments.  The  main  reason  for  this  was  that  a  number  of  major  tenders 
launched  during  the  year  had  not  been  completed  by  the  end  of  the  year  due  to 
complications  in  the  tendering  process.  Despite  this  it  is  worth  noting  a  continual 
flow  of  the  number  of  interim  payment  requests  made  during  the  year  which  is 
evidence of continued physical implementation.  

Despite  the  lack  of  visible  physical  implementation  progress  in  payments  and 
contracting  it  should  be  noted  that  2009  was  not  an  unsuccessful  year  for  ISPA  in 
Croatia.  Several  critical  tenders  were  finally  launched  after  resolving  a  series  of 
significant  and  difficult 
the 
Implementing  Agency  and  the  final  beneficiaries  made  strenuous  efforts  to  ensure 
deadlines  were  met  and  that  technical  documentation  was  of  the  required  standard. 
The  result  of  these  efforts  was  that  the  physical  implementation  of  all  the  6  ISPA 
projects in Croatia will be underway by early 2010. 

issues.  Furthermore  both 

technical  and 

legal 

2009 witnessed the successful physical completion of the first of the 6 ISPA projects. 
Furthermore  as  a  result  of  lower  than  expected  contract  prices,  it  was  possible  to 
modify 2 project Financing Memoranda enabling an increase in the scope of work to 
be financed by ISPA funds, as  well as an increase in the co-financing rate. Further 
modifications  to  the  remaining  4  Financing  Memoranda  are  expected  to  be  carried 
out in 2010 with the same aim in mind. 

The  consequence  of  the  hard  work  and  determination  of  all  the  parties  involved  in 
ISPA project implementation in 2009 is that all the critical contracts for the 6 ISPA 
projects will have been signed by early 2010. In turn this means that the work to be 
carried  out  in  2010  will  concentrate  on  actual  physical  implementation,  project 
management, monitoring and payments, rather than the launching of tenders. 

The  Croatian  ISPA  Implementing  Agency,  the  Central  Finance  and  Contracting 
Agency  (CFCA),  performed  much  better  during  2009  as  a  result  of  the  gradual 
accumulation  of  experience  and  an  increase  of  staff.  Staff  retention  remains  a 
problem, as does the attraction of suitably experienced engineers. Significant training 
of staff continued during the year and it is clear that there has been an improvement 
in the functioning of the Agency.  

One  final  factor  needs  to  be  borne  in  mind  regarding  the  difficulties  being 
encountered  in  implementing  the  ISPA  projects.  This  is  the  fact  that  real  progress 
was made in 2009 despite the parallel start of implementation of projects funded by 
the Instrument for Pre-Accession Assistance (IPA). The start of these IPA operations 

EN 

3 

   EN 

 
has  required  considerable  input  from  the  various  bodies  which  deal  with  ISPA  and 
specifically the two line ministries, the Ministry of Finance and the CFCA. 

2. 

ISPA  PROJECT  2005HR16PPE001  -  KARLOVAC  WATER  &  WASTEWATER 
PROGRAMME 

State of implementation as of winter 2009  

Construction of foundations  

Pouring concrete foundations   

         Excavation and piling works  

Construction site entrance   

EN 

4 

   EN 

 
 
 
  
 
 
 
 
 
 
 
 
 
 
3. 

ISPA  PROJECT 2005HR16PPT001 – VINKOVCI  TO TOVARNIK  TO STATE BORDER 
RAILWAY REHABILITATION 

State of implementation as of winter 2009   

Đeletovci Station looking West 

Đeletovci Station looking East 

         Section of reconstructed railway 

Project information signboard 

4. 

ISPA BUDGET 

In accordance with the Commission’s activity based accounting system, the budget 
for  the  ISPA  was  provided  for  by  two  budget  lines:  the  functional  budget  line 
B13.01.04.02  and  the  operational  budget  line  B13.05.01.01.  The  first  line  contains 
the  means  for  covering  Technical  Assistance  (TA)  administrative  expenses  mainly 
for  reinforcing  the  Delegation  of  the  European  Union  to  the  Republic  of  Croatia. 
This  ended  in  2006.  The  second  budget  line  encompasses  payment  appropriations 
made available for the effective implementation and operation of ISPA for Croatia.  

Budget line B13.05.01.01 covers all expenses for co-financing infrastructure projects 
(measures). A total of EUR 6,762,276.41 was paid out from this line in 2009. 

EN 

5 

   EN 

 
   
 
 
 
 
   
 
 
 
 
Table 1: ISPA budget in 2009 – in Euro  

Budget line 

Payments 
implemented 

Functional budget line B13.01.04.02 (closed in 2006) 

0 

Operational budget line B13.05.01.01 

Total 

6,762,276.41 

6,762,276.41 

Project funding 

5. 

NEW ISPA PROJECTS 

No new ISPA projects were adopted in 2009. 

6. 

NEW COMMITMENTS 

No new commitments were made in  2009 for projects either  in the environment or 
transport sectors since the ISPA ended in 2006. 

7. 

PROJECTS FUNDED BETWEEN 2005-2009 

Between 2005 and 2006, the Commission approved a total of 6 projects on the basis 
of  proposals  submitted  by  Croatia.  Of  these  projects,  3  concern  the  environment 
sector, 2 the transport sector, and  1  horizontal  TA measure (for the organisation of 
the  statutory  monitoring  committees  and  supporting  ISPA  implementing  agencies). 
The total eligible investment cost of these projects is EUR 107,474,736 with a total 
of EUR 59,000,000 or 54.8%, being allocated as ISPA grants. By the end of 2006, 
the  Commission  had  committed  100%  of  the  ISPA  funds  set  aside  for  Croatia 
covering  the  period  2005  to  2006  with  the  commitments  distributed  in  a  balanced 
manner between the environment and transport sectors. 

Table 2: Projects approved in Croatia in 2005-20061 – in Euro 

Sector 

Project 
decisions 

N° 

Eligible cost 

ISPA 
contribution 

Average 
grant rate 

% 

Commitments 

Environment 

Transport 

Horizontal TA 

Total 

3 

2 

1 

6 

46,287,701 

29,466,355 

63.65 

29,466,355 

60,924,700 

29,271,310 

262,335 

262,335 

107,474,736 

59,000,000 

56.5 

100 

73 

29,271,310 

262,335 

59,000,000 

1 

No projects have been approved since 2006 due to the ending in that year of the ISPA programme. 

EN 

6 

   EN 

 
 
                                                 
8. 

PAYMENTS 

Generally,  payments  for  each  investment  project  consist  of  two  advance  payments 
totalling  20%  of  the  ISPA  contribution,  as  well  of  intermediate  payments  (i.e. 
reimbursements)  of  up  to  80%  (and  in  exceptional  cases  up  to  90%)  of  the 
contribution,  as  well  as  payment  of  the  final  balance  after  closure.  A  total  of 
EUR 6.76 million in payments were made in 2009 for the ISPA projects approved in 
Croatia, representing 11.4% of the corresponding ISPA grants.  

Progress  continued  in  2009  in  parallel  with  the  implementation  of  ISPA  measures. 
Most  of  the  payment  requests  for  the  year  were  for  interim  payments.  This  is  an 
encouraging  development  as  interim  payments  are  paid  on  the  basis  of  actual 
incurred  expenditure  and  therefore  reflect  actual  physical  implementation.  Total 
payments  worth  EUR  6,762,276.41  were  made  in  2009.  The  amount  represents  a 
slight  reduction  in  amounts  paid  out  in  comparison  with  the  figure  for  2008 
(EUR 7,888,041.30).  The  reason  for  the  reduction  in  payments  was  because  of 
complications  and  delays  connected  with  two  large  works  tenders  which,  despite 
being launched early on in 2009, had not actually been completed by the end of the 
year.  

By the end of the period 2005-2009, a total of EUR 20,846,023.71 had been paid out 
to Croatia, representing 35.33% of the budgetary commitments implemented in that 
period (EUR 59 million). 

Table 3: Payments – in Euro 

Sector 
Environment 

Transport 

TA 

Total 

2005-2008
5,486,527.00 

8,387,352.30 

209,868.00 

2009
2,390,822.62 

4,371,453.79 

0 

Total 2005-2009 
7,877,349.62 

12,758,806.09 

209,868.00 

14,083,747.30 

6,762,276.41 

20,846,023.71 

EN 

7 

   EN 

 
9. 

SUMMARY TABLES 

Table  4  presented  below  provides  an  overview  of  the  ISPA  interventions  for  both 
the year 2009 and for the period 2005-2009.  

Table 4: Projects decided in Croatia in 2005-2009 – in Euro 

Sub-sector 

N° of 
projects 

Eligible 
cost 

ISPA 
contribution

2009

2005 – 2009

Commitme

Payments Commitment Payments

Water 

Water & wastewater 

Wastewater 

Solid waste 

Air quality 

Horizontal 

Sector total 

Road 

Rail 

Road and rail 

Inland waterways 

Airports 

Horizontal 

Sector total 

TA 

TOTAL 

0

1

0

1

0

1

3

0

1

0

0

0

1

2

1

6

Technical assistance 

Environment

0

0

0

0 

0 

0

36,000,000

22,500,000

0 2,217,698.68 

22,500,000  6,717,698.68

0

0

8,823,601

6,000,049

0

0

1,464,100

966,306

0

0

0

0

0 

0 

0 

0 

6,000,049 

600,005.00

0 

173,123.94 

966,306 

559,645.94

46,287,701

29,466,355

0 2,390,822.62 

29,466,355  7,877,349.62

Transport 

0

0

0

0 

0 

60,182,962

28,789,180

0 4,275,027.79 

28,789,180  12,565,954.0

0

0 

0

0

0

0

741,738

482,130

0

0

0

0

0 

0 

0 

0 

0 

0 

96,426 

482,130 

192,852.00

60,924,700

29,271,310

0 4,371,453.79 

29,271,310  12,758,806.0

Horizontal 

262,335

262,335

0

0 

262,335 

209,868

107,474,736

59,000,000

0 6,762,276.41 

59,000,000  20,846,023.7

10. 

FORMS AND METHODS OF PROVIDING TECHNICAL ASSISTANCE 

The  recourse  to  technical  assistance  measures  constitutes  an  essential  element  for 
ensuring  the  successful  programming  and  implementation  of  ISPA  projects.  These 
measures  focus  on  project  preparation  and  project  implementation  alongside  the 
close  involvement  of  the  beneficiary  thereby  applying  the  "learning  by  doing" 
principle.  In  addition,  by  accompanying  institutional  strengthening  and  the 
enhancement  of  administrative  capacity,  ISPA  contributes  to  the  preparation  of  the 
beneficiary countries for implementing the instruments of cohesion policy.  

Two types of technical assistance measures are utilised: 

- technical assistance which is carried out on the initiative of the beneficiary country 
and which is directly related to project funding, e.g. project preparation/development, 
technical  assistance  for  implementation,  and  technical  assistance  for  enhancing 
administrative capacity; 

EN 

8 

   EN 

 
-  technical  assistance  which  is  carried  out  on  the  initiative  of  the  Commission  and 
which mostly relates to activities performed by the EU Delegation, including project 
appraisal; 

11. 

TECHNICAL ASSISTANCE ON THE INITIATIVE OF THE BENEFICIARY COUNTRY 

Project preparation and institutional strengthening 

TA measures for project preparation have to ensure that, in terms of project concept, 
management and operation, beneficiary countries present technically and financially 
sound projects to the Commission for EU funding. Where required, these measures 
can include the elaboration of strategic studies concerning the (sub-) sectors eligible 
for  pre-accession  assistance.  Moreover,  they  are  usually  aimed  at  developing  a 
pipeline of  quality projects  by providing  a sufficient number of suitable projects in 
time  in  order  to  enable  the  beneficiary  country  to  fully  commit  and  absorb  the 
available funds. The development of a strong project pipeline is also essential for the 
successful  implementation  of  IPA.  In  this  respect  two  of  the  three  technical 
assistance measures being currently implemented are aimed at preparing IPA project 
pipelines in the environment and transportation sectors. The third measure is aimed 
at  developing  the  institutional  capacity  of  the  CFCA  to  manage  and  implement  the 
ISPA projects. 

The  total  number  of  TA  measures  for  project  preparation  approved  between  2005 
and  2006  stands  at  2,  representing  a  total  eligible  cost  of  EUR  2,205,838  of  which 
EUR 1,448,436  (65.6%)  is  being  financed  by  ISPA.  One  technical  assistance 
measure for institutional capacity building was approved in 2006, representing a total 
eligible cost of EUR 262,335 which is 100% financed by ISPA. 

Table 5: Technical assistance measures on the initiative of Croatia  
2005-2009 – in Euro 

Sub-sector 

No of 
projects 

Eligible 
cost 

ISPA 
contribution

Commitments 
2009 

Payments 
2009 

Commitments 
2005-9 

Payments 
2005-9 

Environment 

Sector total 

1 

1,464,100 

966,306 

0 

173,123.94 

966,306 

559,654.94 

Transport 

Sector total 

1 

741,738 

482,130 

0 

96,426.00 

482,130 

192,852.00 

Horizontal TA 

Sector Total 

TOTAL 

1 

3 

262,335 

262,335 

2,468,173 

1,710,771 

0 

0 

0 

262,335 

209,868.00 

269,549.94 

1,710,771 

962,374.94 

12. 

TECHNICAL ASSISTANCE ON THE INITIATIVE OF THE COMMISSION  

Since  the  beginning  of  ISPA,  technical  assistance  activities  carried  out  on  the 
initiative, or  on  behalf of the Commission, have been concentrated on enabling  the 
EU Delegation to perform its ex-ante control procedures (including project appraisal) 

EN 

9 

   EN 

 
in accordance with the standards required for the management of EU funds. No such 
technical  assistance  measures  have  been  funded  by  ISPA  since  2006.  All  such 
measures since that time have been financed from IPA. 

Management and implementation  

13. 

IMPLEMENTATION 

The first two projects in Croatia were approved in December 2005 with a final four 
being  approved  in  July  and  September  2006.  By  the  end  of  2009,  physical 
implementation had commenced on 5 out of the 6 ISPA projects, including 2 out of 
the 3 infrastructure projects. The final infrastructure project was also in the process 
of tendering out with the contracts expected to be signed in early 2010. Three ISPA 
contracts  have  now  been  totally  completed  and  a  number  of  others  are  at  a  very 
advanced  stage.  Furthermore  one  of  the  3  infrastructure  projects  has  been  totally 
contracted out and is at an advanced stage of implementation with about 65% of the 
works complete (see project photos on page 6). 

By the end of 2009 a total of six contracts still remained to be tendered out, of which 
4 were supply contracts. A further two tenders were in the process of evaluation and 
a further 1 contract was due to be retendered due to the termination of a contract.  

Significant problems with tendering and contracting continued to be experienced in 
2009  with  3  critical  tenders  (two  works  and  one  service)  having  to  be  repeated 
thereby  delaying  and  complicating  the  implementation  of  the  affected  projects. 
Furthermore one successful contractor terminated his contract after several months of 
implementation with the result being that the contract needs to be retendered.  

Most  of  the  ISPA  projects  are  now  entering  the  final  stages  of  contracting.  As  a 
result  attention  is  being  focused  more  and  more  on  ensuring  that  the  ISPA  amount 
allocated  to  each  project  is  fully  disbursed.  As  a  result  adjustments  to  the  projects 
may be made by modifying the respective financing memorandum during 2010. 

Following modification of Guidelines on the Closure of Cohesion Fund and Ex-ISPA 
projects  2000-20062  adopted  in  order  to  extend  the  final  date  of  eligibility  of 
expenditure  up  to  31  December  2011,  for  ex-ISPA  (and  now  Cohesion  Fund) 
projects first approved from 1 January 2004 onwards, and up to 31 December 2012 
for  projects  first  adopted  from  1  January  2004  onwards  with  an  assistance  of  100 
million  EUR  or  more,  similar  proposals  will  be  prepared  for  the  infrastructure 
projects presently under implementation in Croatia. The extension of the final date of 
eligibility  was  an  initiative  of  the  Commission  to  assist  ex-ISPA  (now  Cohesion 
Fund)  beneficiary  countries  during  the  economic  crisis.  In  the  case  of  Croatia  this 
one year extension would enable all ISPA funds allocated to the beneficiary country 
to be dispersed successfully. 

During 2009 the Croatian ISPA implementing agency's performance continued to be 
erratic,  although  an  overall  improvement  was  noted.  Amongst  the  reasons  for  this 
continuing  disappointing  performance  are  the  increasing  demands  on  the  staff  who 
are now also dealing with implementing IPA projects. Additionally the lengthy and 

2 

SEC(2008) 415 of 28.3.2008 

EN 

10 

   EN 

 
                                                 
sometimes very bureaucratic internal procedures of the Croatian administration have 
contributed to the unsatisfactory pace of implementation. 

To conclude on a positive note it should be noted that by the end of 2009 almost all 
of  the  6  ISPA  projects  were  under  implementation.  Every  critical  contract  is  now 
either under implementation, or is expected to be signed shortly. Furthermore the few 
contracts that still need to be tendered out are either already at the tendering stage, or 
their  launch  is  imminent.  None  of  them  however,  are  critical  in  terms  of  timing.  It 
would be true to say therefore that 2009 was a crucial year for Croatia with regard to 
the success of ISPA. However, despite severe difficulties, the authorities have finally 
been able to make real progress as a result of huge efforts made by all concerned. 

14. 

PROJECT MONITORING 

Overall  monitoring  and  evaluation  of  the  progress  and  effectiveness  of  ISPA 
implementation  is  ensured  by  regular  meetings  in  the  EU  Delegation  offices, 
monitoring reports submitted by the implementing bodies, site visits by Commission 
staff  and  formal  monitoring  through  the  twice  yearly  ISPA  Monitoring  Committee 
meetings  held  in  Croatia,  as  well  as  the  receipt  of  annual  reports  for  each  ISPA 
project from the implementing authority.  

Two  ISPA  Monitoring  Committees  were  held  in  Croatia  in  2009;  in  June  and 
November  respectively.  Considerable  attention  was  given  during  both  meetings  to 
the resolution of problems connected with two critical works tenders that had to be 
repeated  following  unsuccessful  attempts  to  contract  out  the  work.  Despite  the 
setback  both  tenders  were  re-launched  following  appropriate  adjustments  to  the 
tender documents and by the end of the year both tendering procedures were nearing 
their conclusion.  

Additional  issues  that  were  the  focus  of  attention  during  the  monitoring  committee 
meetings  were  the  following:  the  increase  in  complications  in  implementing  the 
projects resulting from the increasing proximity of the final date of eligibility date for 
payment  i.e.  December  2010;  the  need  to  reduce  the  time  required  within  the 
Croatian  administration  for  document  approvals;  the  need  for  the  more  strict 
observance of tendering procedures (this was the reason for the failure of one of the 
main works contracts mentioned above); the need for the modification of 2 Financing 
Memoranda in order to extend maximally the final date of eligibility for payments, 
adjusting the co-financing rate and scope of work required following the completion 
of  all  tenders;  the  requirements  for  preparing  final  reports;  discussions  concerning 
the  unsatisfactory  performance  of  contractors  and  the  consequences  of  the 
termination of one specific contract; the allocation and use of the interest generated 
on  the  individual  ISPA  accounts;  the  use  of  "surplus"  ISPA  funds  following  the 
completion  of  contracting  process  for  each  individual  ISPA  project;  the  need  to 
increase  staffing  levels  within  the  relevant  Croatian  bodies  involved  in  project 
implementation;  modifications  required  to  be  made  to  the  remaining  Financing 
Memoranda, as well as the need to request special permission to extend the final date 
of eligibility for all 3 infrastructure projects until December 2011 (such an extension 
has already been granted to some Cohesion Fund ex-ISPA projects approved in 2005 
& 2006) to enable full absorption of ISPA funds. 

EN 

11 

   EN 

 
15. 

FINANCIAL MANAGEMENT AND CONTROL, INCLUDING EDIS 

The  principal  requirements  for  both  the  financial  management  and  control  and  the 
treatment  of  irregularities  are  governed  by  the  provisions  of  the  ISPA  Regulation3 
and of Annex III of the Financing Memorandum, as applicable under the regime of 
ex-ante control by the Commission. These requirements are close to those applicable 
to  the  Cohesion  Fund  and  the  Structural  Funds.  The  key  elements  relate  to  the 
establishment  of  internal  financial  control  systems  and  procedures  that  can  ensure 
transparent and non-discriminatory procurement procedures, the accuracy of declared 
expenditure, adequate internal audit capability, sufficient audit trail and appropriate 
treatment of irregularities. 

The  audit  unit  of  DG  REGIO  originally  planned  to  carry  out  an  audit  of  ISPA 
projects  in  Croatia  during  2009.  The  intention  was  to  ensure  that  the  information 
concerning  the  execution  and  financial  flows  related  to  ISPA  projects  provides 
assurance as regards: 1) the legality and regularity of expenditure declarations to the 
Commission;  2)  compliance  with  EU  policies,  in  particular  as  regards  publicity 
requirements;  3)  compliance  with  the  principles  of  a  sound  financial  management. 
However, due to a variety of reasons the audit had to be put back until early 2010.  

The  main  focus  of  attention  for  the  audit  unit  in  2009  was  on  activities  connected 
with the launch of the IPA4. Despite not carrying out any missions to Croatia in 2009 
the audit unit (and the EU Delegation) continued to apply pressure on the Croatian 
authorities to improve their institutional capacity by continuing the recruitment and 
training of staff.  

The EU Delegation in Zagreb continued as the main mechanism for ensuring sound 
financial management and control. The rejection rate for ISPA documents continues 
to be high which is a clear sign that still more work needs to be carried out by the 
Croatian  authorities  before  confidence  exists  of  their  ability  to  correctly  manage 
ISPA funds independently. It should be noted in this context that the EU Delegation 
remains  understaffed  following  further  unsuccessful  recruitment  attempts  and  this, 
combined  with  the  significantly  increased  workload  related  to  IPA  activities,  has 
placed a huge strain and workload on the staff of the Delegation. 

DIS 

The requirement for the DIS (Decentralised Implementation System) accreditation of 
the implementing agency in Croatia, the CFCA, follows the provision of Article 164 
of the Financial Regulation5. DIS accreditation was awarded by the Commission on 
13th February 2006.  

EDIS 

Since ISPA ended in 2006 with the introduction of the Instrument for Pre Accession 
(IPA)  the  purpose  of  moving  ISPA  to  EDIS  (using  the  Extended  Decentralised 
management  Implementation  System  –  EDIS  with  only  ex-post  control  by  the 

3 

4 

5 

Council  Regulation  (EC)  No  1267/1999  of  21  June  1999  establishing  an  Instrument  for  Structural 
Policies for Pre-accession [OJ L 161, 26.6.1999, p. 73]. 
The  main  focus  of  audit  unit  in  2009  was  to  seek  reasonable  assurance  that  the  systems  for  the 
management  and  control  of  IPA  projects  continue  to  comply  with  the  requirements  of  the  applicable 
regulations and function effectively. 
Provision, however, deleted as of 1 May 2007 by Regulation (EC, Euratom) No 1995/2006 [OJ L 390, 
30.12.2006, p. 1]. 

EN 

12 

   EN 

 
                                                 
Commission)  has  become  superfluous.  Recent  efforts  by  the  Croatian  authorities 
have  therefore  been  concentrated  on  preparing  the  IPA  structures  for  the  move  to 
EDIS as these structures will be in place for the foreseeable future until accession. In 
the meantime the EU Delegation in Croatia continues to perform its important role in 
supervising  the  daily  management,  implementation  and  monitoring  of  the  ISPA 
measures.  

16. 

RISK ASSESSMENT 

The  audit  strategy  planned  for  2009  was  based  on  the  results  of  an  analysis  of  the 
state of ISPA implementation and the related objectives of the Audit Directorate of 
Directorate  General  for  Regional  Policy.  The  audit  strategy  sets  out  the  objectives 
which  are  defined  by  the  senior  management  of  Directorate  General  for  Regional 
Policy.  These  objectives  are  defined  on  the  basis  of  detailed  discussions  with  the 
operational  directorates  during  which  information  on  potential  risk  is  shared.  The 
audit strategy then sets out the actions to achieve the objectives, taking account of the 
risks identified. In general, risk is minimized by implementing this strategy. Despite 
originally planning to carry out an audit of ISPA in Croatia during 2009, none were 
carried out. The planned audit has been rescheduled to take place in early 2010.  

Under  the  system  of  ex-ante  approval,  priority  is  given  to  ensuring  that  sufficient 
control procedures are put in place regarding project implementation and payments. 
However, the management of pre-accession funds carries an inherent risk since the 
funds  are  delivered  by  a  variety  of  organisations  and  systems.  Eligibility  of 
expenditure is determined by compliance with rules and conditions fixed at EU and 
national level which can lead to complexity and risk of misinterpretation.  

17. 

EUROPEAN COURT OF AUDITORS FINDINGS 

No missions or audits were carried out in Croatia during 2009.  

18. 

CO-FINANCING PARTNERS – EIB AND EBRD 

Given their expertise in project preparation and implementation, the Commission has 
maintained regular contact with these lending institutions, both at a horizontal level 
to  co-ordinate  policy  and  methodological  issues  related  to  programming  and 
implementation,  and  at  country  level.  The  specialist  skills  of  these  Banks  in 
structuring grant/loan combinations of funding, including public-private partnership 
arrangements,  is  highly  useful  for  improving  the  quality  of  projects  funded  from 
ISPA.  Nevertheless,  the  European  Investment  Bank  is  not  involved  in  any  ISPA 
project in Croatia.  

The  European  Bank  of  Reconstruction  and  Development  is  the  only  International 
Financial Institution which is actively involved in an ISPA project in Croatia with the 
provision of a EUR 10 million loan for an environmental project approved in 2005 – 
the  Karlovac  Water  and  Wastewater  Treatment  Programme.  Representatives  of  the 
EBRD  therefore  took  part  in  both  ISPA  Monitoring  Committees  held  in  Croatia  in 
2009. 

EN 

13 

   EN 

 
Contribution to European Union policies 

19. 

PUBLIC PROCUREMENT 

The  fulfilment  of  the  legal  requirements  for  sound,  fair  and  transparent  public 
procurement as enshrined in the PRAG rules has proved to be a major challenge in 
the  implementation  of  ISPA  projects.  Difficulties  in  ensuring  compliance  with  EU 
procurement  principles  have  led  to  delays  in  the  implementation  of  ISPA  projects 
and  in  several  cases,  the  repeating  of  tenders.  It  has  therefore  continued  to  be 
necessary for the Commission services - especially the EU Delegation in Zagreb - to 
intervene  to  ensure  that  procedures  were  correctly  applied  and  errors  rectified.  In 
addition  on  occasion  it  has  had  to  assist  the  Implementing  Agency  in  liaising  with 
dissatisfied  bidders.  Overall  the  quality  of  the  tender  documents  has  improved,  but 
this improvement is somewhat erratic.  

The  ex-ante  approval  by  the  Commission,  which  governs  the  tendering  and 
contracting  of  ISPA  projects,  continues  to  be  entirely  justified  as  plans  to  move  to 
EDIS  have  now  been  dropped  (see  above).  Under  the  current  ex-ante  system  of 
approval and in line with the DIS decision for the conferral of management, only the 
the  contracting  authority  responsible  for  project 
CFCA  plays 
implementation,  whereas  the  Commission  endorses  each  step  of  the  procurement 
process.  It  follows  that,  although  the  Commission  is  not  a  contracting  partner,  it 
bears shared responsibility for the procedural correctness of the procurement process 
(without the Commission’s approval, contracts concluded between beneficiaries and 
contractors are not valid).  

the  role  of 

20. 

COMPETITION POLICY 

As ISPA assistance is directed primarily to cover public expenditure - or equivalent - 
concerning utility projects, this does not generally raise problems of incompatibility 
with  the  EU  rules  on  competition.  Unless  the  rules  on  public  procurement  are 
infringed,  and  provided  free  access  to  such  infrastructure  is  guaranteed  for  all 
operators meeting the necessary technical and legal conditions, such assistance does 
not confer any special advantage to specific firms.  

21. 

ENVIRONMENT POLICY 

By  providing  direct  assistance  to  priority  projects  for  the  environment,  ISPA  also 
contributes  to  the  implementation  of  environmental  policy  and  to  the  compliance 
with  EU  standards  in  Croatia.  Experience  gained  through  project  development  and 
implementation develops administrative capacity and accelerates sector reform in the 
environment sector. In particular, administrative capacity is being strengthened with 
regard to environmental investment planning and prioritisation. Steady progress has 
also been made in the correct implementation of the EIA directive6, particularly the 
aspects  related  to  public  consultation.  It  is  hoped  that  ISPA  will  in  these  ways 
contribute towards progress in environmental protection in Croatia.  

6 

Council Directive 85/337/EEC of 27 June 1985 on the assessment of the effects of certain public and 
private projects on the environment [OJ L 175, 5.7.1985, p. 40]. 

EN 

14 

   EN 

 
                                                 
It is important to emphasise that, as far as Croatia is concerned, the introduction of 
IPA,  with  its  greater  number  of  bodies  and  a  stream  of  additional  projects,  the 
provision of sufficient financial and human resources for implementation (including 
monitoring, inspection, the provision of permits and reporting) needs to be ensured. 

22. 

TRANSPORT POLICY  

The  transport  networks  in  Croatia,  agreed  in  accordance  with  TINA  (Transport 
Infrastructure  Needs  Assessment)  and  REBIS  (Regional  Balkans  Infrastructure 
Study) were constructed around the framework of pan-European corridors. Several of 
them run across the territory of Croatia including Corridors VII (the Danube river), X 
(Salzburg-Ljubljana-Zagreb-Beograd-Nis-Skopje-Veles-Thessaloniki, 
including 
branch Xa) as well as Corridor V, which has two branches in Croatia (Vb - Budapest, 
Zagreb  Rijeka,  and  Vc  -  Budapest,  Sarajevo,  Ploče).  These  networks  were  used  as 
the  planning  basis  for  the  national  transport  strategy  for  ISPA  purposes.  As  a 
consequence the single ISPA transport (railway) project forms part of the TINA and 
REBIS networks, i.e. it concerns the construction or rehabilitation of a section, nodal 
point or access relating to the networks. The TEN-T networks for Croatia are based 
on SEETO (South East Europe Transport Observatory) recommendations. 

EN 

15 

   EN 

 
Co-ordination among pre-accession instruments 

Co-ordination with EU Delegations 

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. 

Co-ordination with the IPA instrument 

In  order  to  ensure  the  efficient  coordination  of  activities  and  the  prevention  of  any 
duplication,  the  two  ISPA  Monitoring  Committees  held  in  Croatia  in  2009  were 
organised  taking  into  consideration  issues  relating  to  the  Regional  Development 
component  of  IPA.  2  of  the  technical  assistance  measures  being  funded  through 
ISPA relate to the preparation of project pipelines for implementation using IPA co-
finance.  

23. 

PUBLICITY ACTIONS 

No significant publicity actions took place in 2009 with regard to the ISPA projects.  

EN 

16 

   EN