Special Report No 6/2012 ‘European Union Assistance to the Turkish Cypriot Community’
Date: 2012-05-24
Institutions: European Court of Auditors
Subjects: Cyprus, EU aid, EU programme, Türkiye, development aid, economic development, economic infrastructure, sociocultural group

EUROPEAN
COURT OF AUDITORS

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EUROPEAN UNION ASSISTANCE  
TO THE TURKISH CYPRIOT 
COMMUNITY

EN

 
 
 
 
Special Report No 6 

 2012

EUROPEAN UNION ASSISTANCE TO 
THE TURKISH CYPRIOT COMMUNITY

(pursuant to Article 287(4), second subparagraph, TFEU)

EUROPEAN COURT OF AUDITORS

EUROPEAN COURT OF AUDITORS
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E-mail: eca-info@eca.europa.eu
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Special Report No 6 

 2012

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ISBN 978-92-9237-625-3
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© European Union, 2012
Reproduction is authorised provided the source is acknowledged.

Printed in Luxembourg

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CONTENTS

Paragraph

I–V	

EXECUTIVE	SUMMARY

1–10	

INTRODUCTION

1–7	

BACKGROUND

8–10	

EU	FINANCIAL		ASSISTANCE

11–12	

AUDIT	SCOPE	AND	APPROACH

13–57	

OBSERVATIONS

13–33	

	THE	COMMISSION	FACED	SIGNIFICANT	CONSTRAINTS	IN	THE	SETTING	UP	AND	IMPLEMENTATION	
OF	THE	PROGRAMME

14–21	

22–27	

	INTERVENTIONS	REFLECTED	THE	PROGRAMME’S	OBJECTIVES	DESPITE	THE	WIDE	RANGE	OF	SECTORS	TO	BE	
COVERED,	THE	REGULATION’S	DELAYED	ADOPTION,	AND	THE	ABSENCE	OF	A	MULTIANNUAL	PERSPECTIVE

	THE	EFFECTIVENESS	OF	THE	COMMISSION’S	LOCAL	SUPPORT	OFFICE	HAS	BEEN	UNDERMINED		
BY	SEVERAL	FACTORS

28–33	

	PROGRAMME	IMPLEMENTATION	PROCEDURES	NOT	ALWAYS	EFFECTIVE

34–57	

	SUSTAINABILITY	OF	PROJECTS	AT	RISK	DESPITE	SOME	RESULTS

35–42	

	OBJECTIVE	1:	DEVELOPMENT	AND	RESTRUCTURING	OF	INFRASTRUCTURE

43–47	

OBJECTIVE	2:	PROMOTION	OF	SOCIAL	AND	ECONOMIC	DEVELOPMENT

48–51	

	OBJECTIVE	3:	FOSTERING	OF	RECONCILIATION,	CONFIDENCE-BUILDING	MEASURES	AND	SUPPORT		
TO	CIVIL	SOCIETY

52–55	

OBJECTIVE	4:	BRINGING	THE	TURKISH	CYPRIOT	COMMUNITY	CLOSER	TO	THE	EU

56–57	

OBJECTIVE	5:	PREPARATION	FOR	THE	ACQUIS COMMUNAUTAIRE

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58–66	

CONCLUSIONS	AND	RECOMMENDATIONS

58–62	

	CONCLUSIONS

63–66	

	RECOMMENDATIONS

ANNEX	I	 —	

	BREAKDOWN	OF	ALL	INDIVIDUAL	PROJECTS/SECTOR	PROGRAMMES		
AS	AT	30	SEPTEMBER	2011

ANNEX	II	 —	 OVERVIEW	OF	AUDITED	CONTRACTS

REPLY	OF	THE	COMMISSION

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5

EXECUTIVE SUMMARY

I.
The Court of Auditors assessed whether the Commis-
sion is managing the instrument for financial support 
to the Turkish Cypriot community (hereafter referred 
to as TCc) in the northern part of Cyprus1 effectively. 
Specifically, the Court examined whether the Commis-
sion drew up an assistance programme which reflected 
the instrument’s objectives and put in place appro-
priate implementing arrangements and whether the 
individual projects are achieving their intended results.

II.
The audit covered the period from the adoption of 
Council Regulation (EC) No 389/2006 in February 2006 
to the third quarter of 2011. It included the examina-
tion of a sample of 34 contracts totalling approximately 
one third (97,5 million euro) of all budget allocations 
to the instrument from 2006–11.

III.
Despite the difficult political context and a compressed 
timetable, the Commission managed to establish a 
programme which reflected the regulation’s objectives. 
It was also able to quickly set up a programme man-
agement office and introduce suitable implementa-
tion mechanisms. The main weaknesses resulted from 
the programme support office not operating under 
more devolved procedures like EU delegations and 
from  contracts  for  some  key  staff  being  limited  to 
three years.

1   The phrase ’northern part of Cyprus’ is a geographical term used to 
designate the areas of the Republic of Cyprus in which the Government 
of the Republic does not exercise effective control.

IV.
The programme has assisted a great number of dif-
ferent beneficiaries across the TCc and some results 
have already been achieved. However, the planned 
construction of a seawater desalination plant, the pro-
gramme’s largest project (27,5 million euro), cannot be 
implemented, which represents a significant setback 
for the programme. More generally, the sustainability 
of projects is often in doubt due to limited administra-
tive and financial capacity of the TCc authorities and 
their delayed adoption of relevant ‘laws’.

V.
On  the  basis  of  the  above  obser vations  the  Court 
makes a set of recommendations to the Commission 
covering different possible scenarios based both on 
developments in the reunification process and the 
level of future EU assistance:

 — If there is no settlement in the short term and it is 
decided that further significant funding should be 
provided to the TCc, the Commission should take 
a number of steps to strengthen its management 
of the assistance programme (see paragraph 64).

 — If it is decided not to support a further large-scale 
assistance programme, an action plan should be 
prepared to scale down or phase out the Commis-
sion Task Force’s operations (see paragraph 65).

 — If clear progress is made in the reunification pro-
cess, the Commission should make early prepar-
ations  for  a  programme  to  enable  the  whole 
country to benefit from EU funding following re-
unification (see paragraph 66).

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INTRODUCTION

6

1.	

2.	

3.	

4.	

5.	

BACKGROUND

Cyprus became independent in 1960. The Treaty of Guarantee signed the 
same year by Greece, Turkey, the United Kingdom and the representa-
tives of the Greek Cypriot and Turkish Cypriot communities intended 
to guarantee the basic provisions of the constitution and the territorial 
integrity and sovereignty of Cyprus. However, disagreements over the 
revision of the constitution soon surfaced and led to a political break-
down in 1963 and an upsurge in intercommunal violence. After United 
Nations (UN) Security Council Resolution 186 in March 1964, the UN 
Peacekeeping Force in Cyprus (UNFICYP) was established and is still in 
place with a current strength of approximately 1 000 troops.

The existing de facto division of Cyprus dates back to Turkey’s military 
intervention in the northern part of the island in July 1974. This followed 
years of intercommunal struggles and a short-lived military coup by sec-
tions of the Cypriot National Guard led by Greek officers. 

In the aftermath of the Turkish military intervention the UN Security 
Council expanded UNFICYP’s mandate, which now includes supervision 
of the de facto ceasefire and maintenance of a buffer zone along the 
’green line‘ which marks out the northern and southern parts of the is-
land. As a result of the 1974 events, the vast majority of Greek Cypriots 
and Turkish Cypriots live separately on the respective sides of the buffer 
zone. The resulting property issue has been one of the most difficult 
problems to solve as part of the ongoing efforts to reach a settlement 
(see paragraph 32).

The self-proclaimed ’ Turkish Republic of Northern Cyprus‘ was declared 
on 15 November 1983 but is recognised only by Turkey. UN Security 
Council Resolution 541 (18 November 1983) states that the attempt to 
create the ’ Turkish Republic of Northern Cyprus’ was invalid. The UN 
recognises the sovereignty of the Republic of Cyprus according to the 
terms of its independence in 1960.

At its meeting in Helsinki in December 1999, the European Council decid-
ed that a political settlement would not be a precondition for the acces-
sion of Cyprus to the European Union (EU), although it underlined that 
a settlement would facilitate the accession process. In December 2002, 
the European Council decided in Copenhagen that Cyprus would be 
admitted as a new EU Member State, while reiterating its preference for 
the accession of a unified Cyprus.

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2  Council Conclusions on 
Cyprus, DG E I 8907/04. 
Brussels: Council of the 
European Union, 27.4.2004.

3  No progress has been 
made for the adoption of 
the ’direct trade‘ regulation. 
The movement of persons, 
goods and services from the 
northern to the southern 
part of Cyprus is regulated by 
the ’Green Line Regulation‘ 
which entered into force on 
1.5.2004, Council Regulation 
(EC) No 866/2004 of 
29 April 2004 on a regime 
under Article 2 of Protocol 
No 10 of the Act of Accession 
(OJ L 161, 30.4.2004, p. 128).

6.	

7.	

8.	

9.	

However, in an April 2004 referendum the Annan Settlement Plan was 
rejected by 76 % of the Greek Cypriots voting, while 65 % of Turkish 
Cypriots voting approved it. The Republic of Cyprus therefore joined the 
EU on 1 May 2004 with the island still de facto divided. While the whole 
island legally is part of the EU, the acquis communautaire is suspended 
in the northern part, an area over which the Republic of Cyprus does 
not exercise effective control. This constitutes a unique political, legal 
and diplomatic context.

A new round of UN-sponsored talks was launched in September 2008 and 
is still ongoing. The United Nations Secretary-General and the leaders of 
the Greek Cypriot and Turkish Cypriot communities agreed to meet for 
a fifth time in January 2012.

EU	FINANCIAL	ASSISTANCE

Following the 2004 referendum the Council (General Affairs and Exter-
nal Relations), a week before the accession of the Republic of Cyprus 
to the EU, requested the Commission to submit a proposal for an aid 
programme. In its conclusions the Council stated:

‘ The Turkish Cypriot community has expressed their clear desire for a 
future within the European Union. The Council is determined to put an 
end to the isolation of the Turkish Cypriot community and to facilitate 
the reunification of Cyprus by encouraging the economic development 
of the Turkish Cypriot community. The Council invited the Commission 
to bring forward comprehensive proposals to this end, with particular 
emphasis on the economic integration of the island and on improving 
contact between the two communities and with the EU.’2

On 7 July 2004, the Commission proposed a package of two regulations: 
one for a financial support instrument to encourage the economic devel-
opment of the Turkish Cypriot community and a ’direct trade‘ regulation. 
It proved, however, difficult for the Council to agree on the adoption of 
this package and the two regulations had to be decoupled3.

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10. 

The  Council  regulation  for  the  instrument  of  financial  suppor t  was 
eventually adopted on 27 February 2006 4 with an initial allocation of 
258,8 million euro. This was in fact the amount which had been ear-
marked for the Turkish Cypriot community for the implementation of EU 
policies in Cyprus if a political settlement was reached before accession. 
Smaller additional amounts totalling 33,5 million euro were allocated 
over the period 2009–11. The funding allocation to the instrument’s 
objectives is set out in the Table. A detailed list of the projects fund-
ed under each objective is given in Annex I. As at 30 September 2011 
some 69 % of the total contracted amount for the instrument had been 
paid by the Commission.

4  Council Regulation (EC) 
No 389/2006 of 27 February 
2006 establishing an 
instrument of financial 
support for encouraging 
the economic development 
of the Turkish Cypriot 
community and amending 
Council Regulation 
(EC) No 2667/2000 of 
5 December 2000 on the 
European Agency for 
Reconstruction (OJ L 65, 
7.3.2006, p. 5).

TABLE

FINANCIAL	ALLOCATIONS	BY	OBJECTIVE	(AS	AT	30	SEPTEMBER	2011)

(million euro)

Planned

% of total 
planned

Contracted

Paid

% paid of total 
contracted

Objective 1 
Developing and restructuring of infrastructure
Objective 2 
Promoting social and economic development
Objective 3 
Fostering reconciliation, confidence-building  
measures and support to civil society
Objective 4 
Bringing the Turkish Cypriot community  
closer to the EU
Objective 51
Preparing the Turkish Cypriot community to  
introduce and implement the acquis communautaire 
and unallocated TA and Programme Reserve facility

129,25

44,2 %

84,65

29,0 %

135,02

64,87

76,49

49,41

56,6 %

76,2 %

23,50

8,0 %

19,90

17,61

88,5 %

12,50

4,3 %

8,62

7,49

87,0 %

21,35

7,3 %

15,69

14,15

90,2 %

Subtotal — Operational part

271,25

92,8 %

244,10

Management (Staff and Missions), Logistics

21,05

7,2 %

15,30

Total

292,30

100,0 %

259,40

165,15

13,64

178,79

67,7 %

89,1 %

68,9 %

1 

’Objective 5‘ here includes Unallocated Technical Assistance and a Programme Reserve Facility to which 1,74 million euro has been 

allocated.

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AUDIT SCOPE AND APPROACH

9

11. 

The audit addressed the overall question:

‘Is the Commission managing the EU instrument of financial support to 
the Turkish Cypriot community effectively?’

This question focused on whether:

(a) 

(b) 

the  Commission  had  been  able  to  draw  up  an  assistance  pro -
gramme which reflected the instrument’s objectives and had put 
appropriate arrangements in place for implementing it;

the individual projects financed in the framework of the programme 
are achieving their intended results and whether they are likely to 
be sustainable.

The audit did not seek to assess whether the programme is contributing 
to the instrument’s political objective of reunification.

12. 

The audit gathered evidence for its assessment through documentary 
review, interviews and three on-the-spot audit visits to Cyprus in 2011. 
In particular, the audit examined a sample of 34 contracts selected from 
nine of the main projects out of 24 projects funded through the pro-
gramme and covering all five of the instrument’s policy objectives. The 
contracts audited totalled 97,5 million euro or one third of the total 
budget allocations to the instrument (292,3 million euro). The complete 
list of contracts covered by the audit is given in Annex II.

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OBSERVATIONS

10

13. 

14. 

15. 

THE	COMMISSION	FACED	SIGNIFICANT	
CONSTRAINTS	IN	THE	SETTING	UP	AND	
IMPLEMENTATION	OF	THE	PROGRAMME	

The audit assessed whether the Commission had effectively managed 
the  setting  up  of  the  programme. To  do  this  it  examined  whether  it 
had established clear, logical and timely priorities and actions focused 
on the main objectives of the instrument and based on the needs of 
the TCc. It also examined whether the Commission, in setting up the 
specific implementation structures and procedures for this programme, 
had taken account of previous Commission experience, had evaluated 
different possible options, and had ensured it had adequate expertise 
to implement the programme.

INTERVENTIONS	REFLECTED	THE	PROGRAMME’S	OBJECTIVES		
DESPITE	THE	WIDE	RANGE	OF	SECTORS	TO	BE	COVERED,	THE	
REGULATION’S	DELAYED	ADOPTION,	AND	THE	ABSENCE	OF		
A	MULTIANNUAL	PERSPECTIVE

The overall objective of the assistance financed by the instrument ac-
cording to Article 1 of the Council regulation is to facilitate the reunifica-
tion of Cyprus. This is to be done ‘by encouraging the economic devel-
opment of the Turkish Cypriot community with particular emphasis on 
the economic integration of the island, on improving contacts between 
the two communities and with the EU, and on preparation for the acquis 
communautaire’. Article 2 of the regulation lists a wide range of more 
specific objectives which the assistance is required to cover (see Box 1). 
This broad formulation of the objectives meant that assistance had to be 
funded across a wide range of sectors which represented a considerable 
implementation challenge for the Commission, including in relation to 
allocating the necessary human resources. An approach focused on a 
more limited number of objectives would have allowed the Commission 
to better target the assistance.

All the audited interventions contributed to varying degrees to the regu-
lation’s objectives in Article 2. The focus on infrastructure and economic 
development of the TCc was intended to ensure that the level of devel-
opment of the TCc economy compared to that of the Greek Cypriot com-
munity would not be an obstacle to a political settlement. The lar gest 
financial allocations were made to the water and sanitation and rural 
development sectors. This reflected the priority needs, the absorption 
capacity in the different sectors, and the results of the specific feasibility 
studies carried out (see Table and Annex I).

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BOX	1

OBJECTIVES	OF	COUNCIL	REGULATION	(EC)	NO	389/2006

Overall	Objectives	and	Beneficiaries

Article	1

The Community shall provide assistance to facilitate the reunification of Cyprus by encouraging the economic 
development of the Turkish Cypriot community with particular emphasis on the economic integration of the 
island, on improving the contacts between the two communities and with the EU, and on preparation for the 
acquis communautaire.

Article	2

Objectives

Assistance shall be used to support inter alia:

(a)  the promotion of social and economic development including restructuring, in particular concerning rural 

development, human resources development and regional development,

(b)  the development and restructuring of infrastructure, in particular in the areas of energy and transport, the 

environment, telecommunications and water supply,

(c)  reconciliation, confidence building measures, and support to civil society,

(d)  bringing the Turkish Cypriot community closer to the Union, through inter alia information on the European 
Union’s political and legal order, promotion of people to people contacts and Community scholarships,

(e)  preparation of legal texts aligned with the acquis communautaire for the purpose of these being immediately 

applicable upon the entry into force of a comprehensive settlement of the Cyprus problem,

(f )  preparation for the implementation of the acquis communautaire in view of the withdrawal of its suspension 

in accordance with Article 1 of Protocol No 10 of the Act of Accession.

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16. 

17. 

18. 

19. 

12

The ’reconciliation and confidence-building‘ objective also represented 
an  important  complementary  means  of  supporting  the  overarching 
reunification objective. However, the actual amount of the financing 
decision of December 2006 was 35 % lower than the initial proposal 
of July 2004. This shift reflected the outcome of consultations with TCc 
leaders who considered the TCc’s infrastructure and economic develop-
ment to be the instrument’s primary objectives.

5  Twinning contracts 
involves experts 
from Member States 
administrations working 
alongside civil servants 
in the beneficiary countries 
to transfer know-how.

6  See footnote 1.

The Commission in its assistance programmes generally makes wide-
spread use of capacity-building support to accompany its projects in 
 order to strengthen national administrations and improve the sustain-
ability of projects funded. However, the Commission’s scope for develop-
ing such approaches in this programme has been significantly reduced 
because the TCc administration is not officially recognised internation-
ally. Thus, for example, the Commission has not been able to use twin-
ning contracts which are its prefered capacity-building instrument in 
countries preparing to adopt the acquis communautaire5. In cases where 
the Commission used technical assistance from consultancy companies 
for capacity building, the extent to which such technical assistance could 
work together with the TCc authorities was also limited by the political 
circumstances (see also paragraph 45).

The  long  time  required  for  the  adoption  of  the  Council  regulation 
(see paragraph 9) meant that the financing decisions for the initial al-
location of 259 million euro had to be developed and approved in the 
course  of  just  one  year.  A  series  of  preparator y  activities  which  had 
been planned for 2004–05 could not take place and the Commission 
had to finance important feasibility studies through a budget of only 
2 million euro made available under a 2003 Special Aid Package for the 
northern part of Cyprus6. The time pressure during the project prepara-
tion phase was one reason for the major problems encountered in the 
water desalination plant project (see paragraphs 38 to 40).

The delayed approval also had a negative impact on the preparation of 
contracts to implement the projects, in particular the technical speci-
fications for tenders, which instead of being spread over the four and 
a half years between July 2004 and December 2009, had to be com-
pleted in three years before the contracting deadline expired. This posed 
a  particular  challenge  for  infrastructure  projects  in  the  water  sector 
(see Box 2 (c)). As a result, of the total allocations to the contracts cov-
ered by the audit, some 62 % were only contracted in 2009, while as 
many as 44 % were not contracted until December 2009, the month that 
the deadline expired.

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7  Council Regulation 
(EC) No 1756/2006 of 
28 November 2006 amending 
Regulation (EC) No 2667/2000 
on the European Agency 
for Reconstruction 
(OJ L 332, 30.11.2006, p. 18). 
In a December 2005 report 
to the Council and the 
Parliament, the Commission 
proposed to discontinue 
the European Agency 
for Reconstruction, but 
nevertheless to extend its 
existence until 31.12.2008.

8  The Task Force is led 
by a Head of Unit in the 
Commission’s Directorate-
General for Enlargement. 
The EUPSO is under 
a Programme Officer who 
reports to this Head of Unit. 
The Task Force consists of 
eight officials and 26 contract 
staff, of whom two and 20 
respectively are on long-term 
mission in EUPSO. They are 
assisted by 12 support staff 
from GTZ (see paragraph 24).

20. 

21. 

22. 

23. 

Due to the delayed adoption of the regulation it was not possible for the 
Commission to take advantage of the envisaged multiannual program-
ming framework for 2004–06. Moreover, funding since 2006 has been 
made available only on an ad hoc and limited basis (see paragraph 10).

This absence of a multiannual programming framework has not been 
conducive to effective management of the programme. In particular, it 
has meant that the Commission has not been able to plan ahead and 
sequence its interventions for maximum impact and to move funding 
between different sectors of intervention according to how well they 
are performing and lessons learnt. The assistance to the telecommuni-
cations sector (see paragraph 35) and to the scholarships programmes 
(see paragraph 53) are two areas which have experienced particular dif-
ficulties in this regard. The lack of a multiannual perspective also makes 
human resource management more difficult (see paragraph 27).

THE	EFFECTIVENESS	OF	THE	COMMISSION’S	LOCAL	SUPPORT	OFFICE	
HAS	BEEN	UNDERMINED	BY	SEVERAL	FACTORS

The Commission faced a major challenge in finding a suitable structure 
for implementing the programme. While EU funding in Member States 
is normally implemented through national bodies, this was not possible 
for this programme given that the Republic of Cyprus does not exercise 
effective control over the northern part of Cyprus. At the same time, 
however, it was also not possible to set up an EU delegation to imple-
ment the assistance because delegations can only be established outside 
the EU and the whole island is legally part of the EU (see paragraph 6). 
It was originally foreseen in the regulation that the assistance would 
be implemented using the European Agency for Reconstruction (EAR), 
through which the Commission had implemented much of its assistance 
in the western Balkans since 2000, but a decision to close the EAR meant 
that this was also not an option7.

Faced with this challenge the Commission drew on its wide experience to 
identify the most appropriate alternative institutional set-up. The model 
chosen was a headquarters-based task force with a local programme 
support office — the European Union Programme Support Office (here-
after EUPSO) — in the northern part of Cyprus. This was inspired by the 
technical assistance offices used by the Commission in the West Bank 
and took into account the costs and benefits of different approaches as 
well as the political context8.The location of EUPSO in the northern part 
of Cyprus enabled the assistance programme to monitor implementation 
more closely and better respond to the needs of the project beneficiaries.

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9  GTZ (Gesellschaft 
für Technische 
Zusammenarbeit) was 
renamed GIZ (Gesellschaft 
für Internationale 
Zusammenarbeit) on 
1 January 2011. It is a 
private contractor but 
brings together expertise 
from German government 
agencies.

10  This was for the EU’s 
Technical Assistance and 
Information Exchange 
Instrument (TAIEX). TAIEX 
delivers public short-term 
technical assistance and 
expertise, helping users 
to understand and draft 
EU-compliant legislation. 
Organisationally, it is part 
of the Enlargement DG 
and physically located in 
Commission headquarters. 
TAIEX is supporting the TCc 
to introduce and implement 
the acquis communautaire 
through a 13,7 million euro 
TA Facility funded by the 
instrument (see Annex I).

11  Staff Regulations of 
Officials and Conditions 
of Employment of Other 
Servants of the European 
Union.

24. 

25. 

26. 

27. 

The Commission was able to quickly establish EUPSO through a service 
contract signed in December 2006 with GTZ9. This contractor was already 
to provide logistical support for technical assistance in the northern part 
of Cyprus under an existing agreement10.

Nevertheless EUPSO’s management of the programme has been con-
strained by the fact that it has not been able to operate in the same way 
as EU delegations which typically manage EU assistance programmes. 
In the absence of a head of delegation, all key decisions have to be re-
ferred back to Commission headquarters. This also applies to tendering, 
contracting and payment procedures as they have not been devolved to 
EUPSO in the way that they are in EU delegations and which slows down 
operations. Moreover, within the Enlargement DG four different units 
are involved in authorising contracts and payments. A 2009 evaluation 
of the programme also highlighted the lengthy verification procedures 
resulting from the centralised nature of the approval process.

EUPSO, unlike EU delegations, does not have its own press and communi-
cation section and therefore cannot issue its own press releases. Instead, 
EUPSO consults with the EC Representation in the Republic of Cyprus, 
which is located in the part of Nicosia over which the Republic of Cyprus 
exercises effective control, on all material produced for publication by 
the EU projects. While there are potential benefits in this arrangement 
given the politically sensitive context, there is no detailed operational 
agreement on the procedures for such consultations and delays of up 
to two months have been encountered in obtaining the EC Representa-
tion’s clearance of documents (see also paragraph 55).

A further constraint faced by EUPSO is that, according to the Staff Regula-
tions11 of the European Union, headquarters-based contract agents can 
only be employed for a maximum of three years. This contrasts with the 
five-year contract duration, sometimes with the possibility of renewal, 
for contract agents in delegations. As a result of this shorter contract 
duration, the Task Force has lost capable and experienced staff even 
when the projects they managed were not yet completed. Moreover, 
EUPSO currently has considerable difficulties attracting staff with the 
appropriate profile to replace them, as the Commission can only offer 
one-year contracts owing to the uncertainties over the future financing 
of the instrument (see also paragraph 20).

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28. 

29. 

PROGRAMME	IMPLEMENTATION	PROCEDURES		
NOT	ALWAYS	EFFECTIVE

The Commission has taken appropriate steps to evaluate the most suit-
able implementation methods for individual projects. As it cannot enter 
into financing agreements with the TCc authorities because they are not 
officially recognised by the international community, the Commission 
has primarily implemented the assistance by entering into contracts 
directly and acting as the sole contracting authority. In addition, the 
Commission jointly managed some interventions with the United Na-
tions Development Programme (UNDP) and this approach has proved 
appropriate for launching the EU assistance because it allowed it to build 
on previous UN activities. There is nevertheless a need to review whether 
these initial start-up advantages are still relevant given the experience 
the Commission has now built up before funding new EU interventions 
through the UN.

The monitoring arrangements put in place by the Commission have gen-
erally been adequate. EUPSO task managers and heads of section fol-
lowed up and took corrective action with partners and contractors for the 
projects covered by the audit. EUPSO was supported where ne cessary by 
programme management units and technical assistance experts. Its co-
operation in the area of monitoring for projects implemented through 
joint management with the UNDP has, however, posed problems. The 
 audit found significant weaknesses in the contribution agreements with 
the UNDP for local and urban infrastructure, the Joint Committee of Miss-
ing Persons and demining operations where performance indicators were 
often not appropriate or not reported on consistently.

30. 

The Commission recognised from the outset that providing assistance to 
the TCc involved considerable financial and operational risks. An evalu-
ation carried out in 2009 identified the most significant risks to the pro-
gramme’s relevance, efficiency, effectiveness, impact and sustainability 
for each of the instrument’s objectives.

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12  An observation made by 
the Enlargement DG’s internal 
audit capability.

13  COM(2007) 536 final 
of 18 September 2007: 
Annual Report 2006-2007 
on the implementation of 
Community assistance under 
Council Regulation (EC) 
No 389/2006 establishing 
an instrument of financial 
support for encouraging 
the economic development 
of the Turkish Cypriot 
community.

31. 

32. 

33. 

This evaluation has provided a sound basis for the Task Force’s risk man-
agement and the implementation of an assurance strategy. The Com-
mission has taken several measures to mitigate the need for corrective 
controls and to reduce exposure to additional demands or penalties 
from contracting parties. There remains a post-project risk related to the 
way in which liabilities connected with the ownership and operations of 
infrastructure investments are transferred to beneficiaries that are not 
officially recognised12.

A particular risk relates to the fact that an estimated 78 % of privately 
owned  land  in  the  northern  part  of  Cyprus  legally  belongs  to  Greek 
Cypriots13, whose consent was required for EU-funded infrastructure in-
vestments on their land. The Commission has established procedures to 
verify property ownership in cooperation with the Department of Lands 
and Surveys of the Republic of Cyprus. While there were initially legal 
challenges to this process and significant delays, processing times have 
since been reduced.

The Commission, despite considerable efforts, did not effectively man-
age the implementation risks for the 27,5 million euro contract for the 
construction of a seawater desalination plant in Sirianokhori/Kumköy 
(see Box 2).

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BOX	2

MANAGEMENT	OF	IMPLEMENTATION	RISKS

The	construction	of	a	seawater	desalination	plant

(a)  The Commission was aware of the risk that if a company with Greek Cypriot workers won a tender under the 
assistance programme, they might have difficulties performing the contract because of potential restric-
tions on their access rights to the northern part of Cyprus. This risk materialised for the largest contract to 
be financed under the programme, the Sirianokhori/Kumköy seawater desalination plant.

(b)  In the procurement notice for the works contract for the seawater desalination plant it is stated that the 
tenderer must provide a performance guarantee for the completion of the contract of 10 % of the contract 
value no later than 30 days after receiving the signed contract or else the contract becomes void. Yet, the 
contractor never provided it. In accordance with the procurement notice, the Commission should therefore 
have terminated the contract already on 17 January 2010, in which case the 27,5 million euro would have 
been de-committed.

(c)  By contracting the works at the latest possible moment (the contracting deadline expired on 18 Decem-
ber 2009) the Commission also missed an opportunity to offer the contract to another tenderer. The pro-
curement notice states that ‘if the selected tenderer fails to provide such a guarantee within this period, the 
contract will be void and a new contract may be drawn up and sent to the tenderer which has submitted 
the next cheapest compliant tender’. As the contracting deadline had expired, this was no longer an option.

(d)  The Commission only started the high-level dialogue with the TCc political leaders in June 2010,  seven months 
after the contract was signed in December 2009. While the TCc leader responded on 17 June 2010, express-
ing his political commitment to the project, access restrictions were only partially removed in August 2010. 
If the Commission had started the dialogue already in December 2009, this would have allowed more time 
to tackle the access issue.

(e)  As a mitigating measure, the Commission introduced an addendum to the contract in June 2010, which 
would legally enable it to cancel the contract without penalties if it could not obtain assurances from the 
beneficiary concerning the contractor’s access rights. The Commission subsequently terminated the contract 
on 22 December 2011.

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SUSTAINABILITY	OF	PROJECTS	AT	RISK	DESPITE	
SOME	RESULTS

34. 

The Court audited a sample of contracts (see paragraph 12 and Annex II) 
covering the instrument’s five objectives to assess whether they were 
achieving their intended deliverables and results and whether the results 
achieved are likely to be sustainable.

OBJECTIVE	1:	DEVELOPMENT	AND	RESTRUCTURING	
OF INFRASTRUCTURE

TELECOMMUNICATIONS	SECTOR

35. 

36. 

The objective of EU support to the development and restructuring of 
the telecommunications infrastructure is to eventually bring the tele -
communications sector in the northern part of Cyprus into line with EU 
standards in accordance with the acquis communautaire. The support is 
intended to provide a network where everyone can have access to mod-
ern telecommunication services, and which can easily be interconnected 
with the telecommunications network in the areas under the effective 
control of the Government of the Republic of Cyprus. Although behind 
schedule most of the equipment had been delivered by 30 June 2011. 
The accompanying technical assistance contract was facing significant 
delays, mainly because TCc ‘laws and regulations’ had not been adopted 
according to the planned schedule.

As for other sectors (see below), in the absence of financing agreements, 
the Commission has implemented the programme without an obligation 
for the beneficiary to implement the necessary reform actions before 
the signing of contracts for the supply of equipment. There is therefore a 
risk of sector reforms not being implemented, despite the programme’s 
considerable investment in equipment. Initial announcements from the 
TCc leadership in May 2011 about restructuring the sector were met by 
strike action and demonstrations by workers at the ‘TCc Telecommunica-
tions Office’.

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37. 

38. 

39. 

40. 

Based on the experience of reforms of the telecommunications sector in 
other countries, including EU Member States, it can also be questioned 
whether 18 months was a realistic timeframe for this project. In addi-
tion, the financial sustainability of the ‘ TCc Telecommunication Office‘ 
as a service provider is undermined by the TCc central administration’s 
management of the Office’s finances.

WATER	SECTOR

The  construction  of  the  seawater  desalination  plant  at  Sirianokhori/ 
Kumköy is not only the main project in the water sector but also the 
largest intervention funded under the instrument, amounting to ap-
proximately 10 % of total contracted funding. The plant was intended 
to provide 23 000 m3 of clean drinking water per day covering the needs 
of an estimated 100 000 people. The design of the plant changed con-
siderably during the project formulation process. The original proposal 
had been to build a plant to treat brackish groundwater but this ap -
proach was dropped because of concerns over compliance with the 
Water Framework Directive.

Despite its importance, very limited progress was made on the imple-
mentation of the contract, mainly due to the Greek Cypriot workers of 
one of the consortium’s contractors being denied access to the site by 
the Turkish armed forces and the unresolved issue of the performance 
guarantee (see Box 2). According to the contract conditions, the Com-
mission, as contracting authority, is responsible for providing access to 
the construction site but in practice this is outside its control.

The failure to implement this project represents a significant setback for 
the overall assistance programme. Water supply is becoming an increas-
ingly critical issue for the island following a 40 % decrease in the mean 
annual rainfall in the past 30 years. Moreover, as one of the purposes of 
the project was to stop the ecologically unsustainable use of ground-
water reserves, the cancellation of the project means that this serious 
environmental issue will not be addressed. The aquifer is under increas-
ing threat from saline intrusion due to over-pumping and pollution from 
human and agricultural activities.

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41. 

Two smaller water infrastructure projects have been more successful.

(a)  An EU-funded contract, which represents 50 % of a wider project 
to renew the water distribution network in Nicosia, has renovated 
87 km of the network in the north of Nicosia. However, the Com-
mission did not establish any indicator to assess the effectiveness 
of the project in terms, for example, of the reduction in leakages 
or annual repair costs.

(b)  The construction of the new Mia Milia/Haspolat Wastewater Treat-
ment Plant ( WW TP) aims to modernise wastewater treatment in 
the whole of Nicosia and the surrounding area. Due to the exist-
ing plant’s bi-communal organisation, the project also supports 
reconciliation and confidence building. The builder of the WWTP 
is contracted to maintain and operate the plant for 10 years after 
handover to ensure that capacity needs will continue to be met. 
However, the ’joint entity‘ to be formed by the two communities to 
manage and supervise this contract has still not been set up, which 
poses a risk to the project’s sustainability.

42. 

Equipment for water sampling, analysis and laboratory information man-
agement has also been funded to provide additional capacity to carry 
out water quality analysis for all drinking water and wastewater services 
in the northern part of Cyprus in accordance with the relevant EU direc-
tives. Although all the equipment was supplied as envisaged, it is not 
clear whether the project objectives will be achieved as the laboratory 
is not currently performing according to EU standards. While additional 
training of beneficiary staff was planned under a capacity-building sup-
port contract to help ensure the continued use of the supplied equip-
ment, it was not clear at the time of the audit when this training would 
be provided and if the necessary human resources would be allocated.

OBJECTIVE	2:	PROMOTION	OF	SOCIAL	AND	ECONOMIC	DEVELOPMENT

RURAL	DEVELOPMENT	SECTOR

43. 

The expected results of the rural development sector programme in-
cluded the preparation of a rural development plan, increased admin-
istrative capacity to programme and implement an EU-aligned policy, 
the implementation of grant schemes for on-farm investments and farm 
diversification in line with these new policies, and the improvement of 
village conditions.

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44. 

45. 

46. 

Both a rural development plan and local development strategies of the 
kind used in the EU Leader programme have been established. More than 
200 individual farmers or entrepreneurs have benefited from a grant to 
enable them to upgrade their operating facilities and move closer to 
EU standards. In addition, nearly 40 community development grants 
have been made to local bodies and non-governmental organisations 
(NGOs). Grant beneficiaries have received Commission-funded technical 
assistance support during the preparation and implementation of their 
projects and through the grant schemes have learnt modern bookkeep-
ing, procurement and monitoring practices.

Nevertheless, the capacities of the local administrations and the final 
beneficiaries continue to need strengthening. The transfer of know-how 
from the technical assistance provided to the TCc authorities responsible 
for rural development has been hindered by the fact that the technical 
assistance does not work in the offices of the TCc authorities because 
of the political situation. At the same time ownership of the new Rural 
Development Plan, and, in particular, of the local development strategies 
which are intended for use by Member States in the framework of the EU 
Leader programme, is still weak. Sustainability is therefore unlikely to be 
achieved without additional support in the coming years. While further 
EU interventions are indeed being developed they now face competition 
from Turkish funding in the sector but direct coordination with Turkey 
is not possible in the current circumstances.

LOCAL	AND	URBAN	INFRASTRUCTURE

EU  support  to  modernise  local  and  urban  infrastructure  is  intended 
to help revitalise the northern part of Cyprus, including through the 
opening of new crossing points on the Green Line. Approximately 40 in-
dividual  interventions  have  been  financed  through  the  UNDP  under 
the two phases of the programme, including some high-profile ones 
with significant impact such as the opening of two key crossing points 
( Ledra Street in Nicosia and Kato Pyrgos and Karavostasi — also known 
as  Limnitis/Yeşilırmak) and the restoration of the Bedestan, a major cul-
tural heritage and tourist site in the north of Nicosia (see Box 3). Most of 
the individual actions have experienced delays although, in many cases, 
these delays have been linked to political difficulties and problems with 
property checks, which are largely out of the hands of the Commission 
and the UNDP.

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47. 

Sustainability of the interventions is potentially undermined by the lim-
ited participation of the Turkish Cypriot community. There is no formal 
mechanism at project level where the TCc is represented, including in 
the project steering committee. At the level of the interventions, while 
the UNDP has cooperated closely with the local bodies at municipal 
level to involve them in project management, the UNDP remains the 
only contractor, which means that these local administrations have not 
gained experience as contracting authorities. The issue of sustainability 
is not explicitly addressed in the UNDP reports with the exception of the 
Bedestan project (see Box 3).

BOX	3

RESULTS:	UPGRADING	OF	LOCAL	AND	URBAN	INFRASTRUCTURE

Opening	of	crossing	points

According to Article 2 of the Green Line Regulation, the line shall be crossed only at crossing points authorised 
by the competent authorities of the Republic of Cyprus. Today there are seven such crossing points, two of 
which, Ledra Street and Kato Pyrgos and Karavostasi (also known as Limnitis/Yeşilırmak), were opened in the 
framework of the project in April 2008 and October 2010 respectively.

The opening of new crossing points facilitates contacts between the two communities and promotes mutual 
understanding. A total of 1,6 million crossings were registered during the latest eight-month reporting period: 
26 % by Greek Cypriots from government-controlled areas to the northern part of Cyprus, 46 % by Turkish Cyp-
riots from the northern part of Cyprus to the government-controlled areas, and 28 % by EU citizens other than 
Cypriots and nationals of non-EU countries14.

Restoration	of	the	Bedestan

The Bedestan was initially built as a Byzantine Church but was transformed into a closed market in the 16th 
century. By the 1930s, the building had fallen into disuse. When the EU-funded project started, it was in very 
poor condition, with a collapsed roof and various other structural damage. The works were completed in two 
phases: structural work between 2004 and 2006, and conservation and restoration work between 2005 and 2009.

In November 2009, the Bedestan was reopened to the public as a cultural centre and the inauguration ceremony 
was attended by representatives from both communities. The project was awarded the European Union Prize 
for Cultural Heritage/Europa Nostra Award in the research category.

14  COM(2011) 284 final of 30 May 2011: Seventh Report on the implementation of Council Regulation (EC) No 866/2004 of 29 April 2004 
and the situation resulting from its application covering the period 1 May until December 2010.

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48. 

49. 

50. 

51. 

OBJECTIVE	3:	FOSTERING	OF	RECONCILIATION,	CONFIDENCE-	
BUILDING	MEASURES	AND	SUPPORT	TO	CIVIL	SOCIETY

Support has been provided to the Joint Committee on Missing Persons 
to try to bring closure in relation to this painful aspect of the history 
of Cyprus and thereby contribute to the process of reconciliation be-
tween the Greek Cypriot and the Turkish Cypriot communities. During 
the period covered by the first 1,5 million euro agreement (March 2007 
to May 2009), 155 remains out of an estimated 1 958 missing persons 
were identified and returned to their families. Funds for future activities 
will continue to depend on the availability of funding from donors, of 
which the EU is the most significant. At this stage no clear end goal or 
exit strategy has been formulated for the support to the Joint Committee 
on Missing Persons.

The Commission also used the instrument to finance seminars organised 
by the Council of Europe Academy of Political Studies to give both Turk-
ish Cypriot and Greek Cypriot participants a better insight into some of 
the common challenges which the island will be facing in the future. 
These seminars have contributed to better integrating Turkish Cypriot 
leaders although they have not always been well attended. The Com-
mission has not taken any specific action to ensure the sustainability 
of the ’European Forum Cyprus‘, an alumni network for participants in 
these seminars.

‘Civil Society in Action’ and ‘Civil Society Support Team’ programmes were 
launched with the aim of strengthening civil society organisations and 
the development of a civil society culture in the TCc. Both programmes 
have  been  able  to  build  capacity  but  further  support  is  required  to 
strengthen operational and financial management capacity in Turkish 
Cypriot civil society organisations.

EU assistance has made a major contribution to demining in Cyprus. 
Almost all minefields in the buffer zone have  now been cleared and 
since 2007 the EU has financed 6,5 million out of a total of 9 million euro 
invested in this effort. Among the benefits of the demining have been 
the facilitation of trade and population movement as a result of the 
opening of new crossing points (see Box 3). It has also helped confi-
dence building through the cooperation between the Turkish and the 
Republic of Cyprus armed forces during the demining process.

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15  This corresponds to 
approximately 1 out of 
450 people living in the 
northern part of Cyprus.

16  See European Union 
Infopoint Nicosia,  
http://www.abbilgi.eu.

52. 

53. 

54. 

55. 

OBJECTIVE	4:	BRINGING	THE	TURKISH	CYPRIOT	COMMUNITY	CLOSER	
TO	THE	EU

The EU scholarship programme is one of the areas of EU assistance best 
known and most valued by the TCc. It has played a useful part in reduc-
ing the isolation of the TCc by enabling 400 students and teachers to 
live and study in another Member State for one year15.

However, the programme’s effectiveness and sustainability are hindered 
by the lack of a multiannual perspective. The timing of the call for pro-
posals is determined not by operational needs but by when Commission 
financing decisions are taken. The fact that there is no guarantee that the 
programme will continue from one year to another means that potential 
applicants cannot plan ahead (in particular those who cannot consider 
spending one year abroad without a grant).

It is not possible to assess the extent to which the overall objective of 
the project has been met because an ex post survey among the individual 
beneficiaries has not yet been carried out. The contracting for the latest 
call concerning academic year 2011/12 has encountered serious delays, 
due mainly to a temporary shortage of staff in EUPSO (see paragraph 27). 
The Commission has not been able to sign any contract before the end 
of August 2011, just before the start of the academic year.

The  European  Union  political  and  legal  order  information  project 
(‘InfoPoint’) aims to bring the TCc closer to the EU through information 
activities and by improving understanding of the EU and of efforts to-
wards a settlement and reunification. The project has already achieved 
some  significant  results,  including  the  creation  of  the  open  access 
‘InfoPoint’ office and a website16 in English and Turkish. Nevertheless 
diverging views between the EC Representation in Nicosia and the Task 
Force on a number of subjects in the framework of the project steering 
committee have led to the postponement of decisions and subsequent 
implementation delays. Thus, for example, the launch of the project’s 
website was delayed by 16 months because of such problems.

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56. 

57. 

OBJECTIVE	5:	PREPARATION	FOR	THE	ACQUIS COMMUNAUTAIRE

The Commission has also funded projects to prepare for the acquis com-
munautaire. The Court examined one of the largest of these projects 
for air quality monitoring. Despite problems encountered (see Box 4), 
which are also illustrative of challenges faced by other projects, both 
the technical assistance and all the equipment were delivered.

By including 12 months of ‘after sales service’ in the supplies contract 
the Commission has made an effort to address the project’s sustain-
ability. The local authorities’ decision to engage the technical assist-
ance contractor for continued operational and maintenance support 
also represents an attempt to ensure sustainability. A new ‘environmental 
law’ which complies with EU legislation has been adopted and the TCc 
beneficiary has developed a concept paper which sets out the budgetary 
and staff implications of implementing the ‘law’. Nevertheless the overall 
sustainability is at risk due to the severe budget constraints faced by the 
TCc ‘Environmental Protection Department’.

BOX	4

IMPLEMENTATION	PROBLEMS	IN	THE	AIR	QUALITY	MONITORING	PROJECT

The final report by the technical assistance for the air quality monitoring project addressed the following im-
plementation problems, which pose a risk to the project’s results and their sustainability:

(a)  the start of the project was delayed four months after contract signature while waiting for the installation 

of four new air quality monitoring stations under the first of two supply contracts;

(b)  two other EU-funded technical assistance projects were working with the TCc ‘Environmental Protection 
Department’ (EPD) at the same time, which meant close coordination was necessary to avoid having four ex-
perts simultaneously trying to work with just two ‘EPD’ staff. However, this situation did arise for a few weeks;

(c)  fewer individuals than planned took part in the training due to the ‘EPD's’ budget constraints.

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CONCLUSIONS AND RECOMMENDATIONS

26

58. 

59. 

60. 

CONCLUSIONS

The Commission succeeded in developing a programme where the ob-
jectives of the instrument were reflected in the interventions funded 
and largely appropriate implementing arrangements were put in place. 
The programme has already achieved some positive results but their 
sustainability is often in doubt, particularly given the uncertainty over 
future EU funding.

The Commission had to manage the difficult political context and the 
challenges posed by the broad formulation of the regulation’s objectives, 
its late adoption and uncertain timeframe. Despite this, it has been able 
to develop a programme which addresses and appropriately prioritises 
all sectors referred to in the regulation’s objectives. It also found a way 
in  the  face  of  significant  constraints  to  quickly  set  up  a  programme 
management office in the northern part of Cyprus and use largely suit-
able implementation methods and risk mitigation measures. The main 
weaknesses in the management of the programme resulted from the 
local support office not operating under more devolved procedures in 
the same way as EU delegations and from the staff contracts being too 
short for them to manage the projects financed from start to finish. In 
addition, monitoring in the framework of joint management with the 
UN was not sufficient.

The programme has assisted many different beneficiaries across the TCc, 
including farmers, students and those using the new crossing points, 
and some important results have already been achieved. However, it has 
not been possible to implement the single largest project, the construc-
tion of a seawater desalination plant (27,5 million euro). This represents 
a significant setback for the programme and may also have serious en-
vironmental consequences. More generally, the sustainability of projects 
is often in doubt due to the limited administrative capacity, the delayed 
adoption of relevant ‘laws and regulations’ and the uncertainties over 
future funding on the part of the TCc authorities.

61. 

At the time of the audit it was still unclear whether or not significant 
further funding for the EU assistance programme would be made avail-
able. This uncertainty makes the programme management more difficult 
and has a negative impact on its effectiveness and sustainability.

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62. 

63. 

64. 

Despite the efforts of the EU in setting up and implementing the assist-
ance to the TCc, the ultimate objective of the instrument, the reunifica-
tion of Cyprus, only can be achieved if the two communities involved 
have the political will to do so.

RECOMMENDATIONS

The specific recommendations on the Commission’s management of 
EU assistance to the Turkish Cypriot community necessarily depend on 
developments in the reunification negotiations and EU policy in this re-
gard. The recommendations seek to take into account different possible 
scenarios.

In  the  current  situation,  where  a  settlement  for  the  reunification  of 
 Cyprus has not been reached and if it is decided that a further EU assist-
ance programme should be funded, the Commission should implement 
the following measures:

(a)  put in place a mechanism with a multiannual perspective in order 
to ensure better planning, implementation and sustainability;

(b) 

identify ways to ensure appropriate flexibility in the length of em-
ployment of staff working for the Task Force;

(c)  devolve management from Commission headquarters to EUPSO 

where this will increase the efficiency of the programme;

(d)  develop formal procedures to ensure better coordination between 
the EC Representation in Nicosia and the Task Force in order to 
make information from EUPSO and the projects more readily avail-
able to the public;

(e)  better define future contribution agreements with partner organi-
sations, notably the UNDP, in order to ensure proper financial and 
operational reporting, including more relevant and up-to-date per-
formance indicators;

(f ) 

take into account not only new projects but also the need to help 
secure the sustainability of existing projects when deciding on the 
allocation of any future funding;

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(g)  give a particular priority to thoroughly preparing a new project to 

address the major issue of the limited water supply;

(h) 

require the TCc beneficiaries to put in place the necessary legal 
framework, human and financial resources, and reforms of public 
administration and financial management to support the effective 
and sustainable implementation of assistance.

If it is decided not to support a further large-scale EU assistance pro-
gramme, an action plan should be prepared to scale down or phase out 
the Task Force’s operations.

In order to prepare for the scenario where a political settlement leads 
to the end of the de facto division of the island, the Commission should 
develop a proposal for a programme to enable the whole country to 
benefit from EU funding following reunification.

65. 

66. 

This Report was adopted by Chamber III, headed by Mr Karel PINXTEN, 
Member  of  the  Cour t  of  Auditors,  in  Luxembourg  at  its  meeting  of 
6 March 2012.

For the  Co ur t  of Auditor s

Vítor Manuel da SILVA CALDEIRA
President

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ANNEX	I

BREAKDOWN	OF	ALL	INDIVIDUAL	PROJECTS/SECTOR	PROGRAMMES		
AS	AT	30	SEPTEMBER	2011

Objectives and projects

Objective 1: Developing and restructuring of infrastructure

Sub-objective 1: Protecting the environment 

Project 1.1: Sector programme for updating the quality  
and management of water supply and sanitation services

Project 1.2: Support to the Turkish Cypriot community as regards man-
agement and protection of potential Natura 2000 sites  
in northern part of Cyprus

Project 1.3: Solid waste sector programme for the  
Turkish Cypriot community

Project 1.4: Feasibility study for the rehabilitation of the  
Lefke mining area

Sub-objective 2: Improving management of the energy sector

Planned 
(euro)1

Contracted 
(euro)

Paid 
(euro)

Paid /contr. 
(%)

71 400 000

83 852 225

40 619 611

48 %

5 000 000

5 176 480

3 855 268

74 %

21 200 000

19 367 570

10 750 517

56 %

900 000

906 500

906 500

100 %

Project 1.5: Upgrading the management of the energy sector

5 000 000

6 035 972

8 750 000

5 341 486

5 841 195

5 135 356

97 %

96 %

Project 1.6: Development and restructuring of the  
energy infrastructure — Part II

Sub-objective 3: Improving traffic safety 

Project 1.7: Improving traffic safety

Sub-objective 4: Telecommunications 

3 000 000

2 724 511

2 266 958

83 %

61 %

57 %

67 %

100 %

90 %

81 %

Project 1.8: Development and restructuring of telecommunications 
infrastructure

14 000 000

11 617 413

7 113 606

Subtotal

129 250 000

135 022 157

76 489 010

Objective 2: Promoting social and economic development

Project 2.1: Rural Development Sector Programmes I & II

Project 2.2: Upgrading of local and urban infrastructure

Project 2.3: Upgrading of local and urban infrastructure — Part II

Project 2.4: Human resources development sector programme

Project 2.5: Micro and small enterprises loan programme — cancelled 
in 2009 (funds from this project were reallocated to the TAIEX project, 
ICT/SME, water/wastewater projects)2

37 350 000

7 000 000

8 000 000

9 200 000

29 837 192

7 000 000

9 784 225

8 080 948

19 941 407

7 000 000

8 850 803

6 542 745

9 000 000

0

0

0

Project 2.6: Sustainable economic development sector programme

6 000 000

6 971 860

3 913 291

Project 2.7: Supporting private sector development within the  
Turkish Cypriot community

8 100 000

3 198 200

3 160 000

Subtotal

84 650 000

64 872 425

49 408 246

56 %

99 %

76 %

1  Planned amounts are as indicated in the financing proposals attached to Commission decisions.

2  The project could not go ahead due to difficulties to reaching agreement with Kreditanstalt für Wiederaufbau (KfW) in the special 
conditions prevailing in the northern part of Cyprus.

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ANNEX	I

Objectives and projects

Planned 
(euro)1

Contracted 
(euro)

Paid 
(euro)

Paid / contr. 
(%)

Objective 3: Fostering reconciliation, confidence-building measures and support to civil society

Project 3.1: Reconciliation, confidence-building measures and  
support to civil society

14 000 000

13 404 835

11 115 091

Project 3.2: Demining assistance programme

6 500 000

6 495 894

6 495 894

Project 3.3: Support to the development of new trends in history  
teaching for reconciliation and stability in Cyprus — cancelled in 2008 
(funds from this project were reallocated to the civil society projects)

Support for the cultural heritage monuments of great importance  
for the communities of Cyprus

1 000 000

2 000 000

0

0

0

0

83 %

100 %

0

0

Subtotal

23 500 000

19 900 729

17 610 985

88 %

Objective 4: Bringing the Turkish Cypriot community closer to the European Union

Project 4.1: Community scholarship programme

Project 4.2: Promotion of youth exchanges and other  
people-to-people contacts

Project 4.3: Information on the European Union political and legal order

8 000 000

3 000 000

1 500 000

Subtotal

12 500 000

6 256 875

1 047 892

1 313 100

8 617 867

5 536 216

904 893

1 053 100

7 494 209

88 %

86 %

80 %

87 %

Objective 5: Preparing the Turkish Cypriot community to introduce and implement the acquis communautaire

Project 5.1: Technical assistance to support legal transportation  
as well as implementation of the acquis through the 
TAIEX instrument — Part II (Component A — Assistance through TAIEX); 
(Component B — Small scale equipment facility) + Part I

17 150 000

13 699 997

12 911 242

94 %

Project 5.2: Capacity building in the environment sector

2 460 000

1 140 690

1 117 554

Unallocated Technical Assistance and Programme Reserve Facility (and 
wrongly encoded on Decision 2006/018-150)3

1 740 000

850 203

621 579

Subtotal

21 350 000

15 690 890

14 650 375

98 %

73 %

93 %

Total 1

271 250 000

244 104 068

165 152 825

68 %

Overall technical assistance for the implementation of the programme

Subtotal a (Studies, expertise, office management logistics)

11 400 000

8 436 605

6 776 955

80 %

Subtotal b (Staff and mission costs)
Decision 2006/018-621, Decision 2006/018-316, Decision 2006/018-317

9 650 000

6 865 323

6 858 993

100 %

Total 2

21 050 000

15 301 928

13 635 948

89 %

Overall total

292 300 000

259 405 996

178 788 773

69 %

1  Planned amounts are as indicated in the financing proposals attached to Commission decisions.

3  This is referred to as ‘Objective 6’ in the financial reports from the Task Force. Funds from the Programme Reserve Facility 
were transferred on the basis of the Commission Decision (2009)2928 to the following projects: CMP (2 million euro), demining  
(1,5 million euro). 1,2 million euro was reallocated from the Unallocated Technical Facility in the TAIEX project.

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31

ANNEX	II

OVERVIEW	OF	AUDITED	CONTRACTS

Contract type

Contract period

Contract title

Contracted 
amount1
(euro)

Paid amount1
(euro)

Project 1.1: Sector programme for upgrading the quality and management of water supply and sanitation services

PMU/SUP

Nov. 2009–May 2010

Supply of water sampling, analysis and laboratory information 
management equipment

Feb. 2009–Nov. 2010

Renewal of water distribution network in the northern part 
of Nicosia

580 500

580 500

2 640 000

2 375 624

Dec. 2009–Feb. 2012

Construction of seawater desalination plant

27 517 814

0

Jan. 2010–July 2013

Construction of new Mila Milia/Haspolat wastewater  
treatment plant

8 192 242

4 657 046

PMU/WKS

PMU/WKS

UNDP/C.A.

Project 1.8: Development and restructuring of telecommunications infrastructure

-/SUP

-/SER

Oct. 2009–Oct. 2012

Upgrading of the telecommunications infrastructure network 

Dec. 2008–Dec. 2011

Development and restructuring of telecommunications  
infrastructure

9 828 453

1 598 750

5 897 072

1 098 750

Project 2.1: Rural development sector programme

PMU/SER

-/SER

PMU/SUP

PMU/GRS

May 2008–July 2011

TA to support rural development policy

Sept. 2008–Sept. 2012

TA to support implementation of the rural development  
sector programme 

Dec. 2009–June 2011

Supply of equipment for veterinary laboratories

Nov. 2009–Jan. 2011

Adataş (Rural development grant scheme call 1, No 127937)

Oct. 2009–Oct. 2010

Andaç (Rural development grant scheme call 1, No 127937)

PMU/GRS

Dec. 2009–Aug. 2011

Çatalköy — Fight Against Insects

Dec. 2009–Dec. 2011

Bü yükkonuk Culture House

Dec. 2009–Dec. 2011

Serdarlι Culture and Art House

Projects 2.2–2.3: Upgrading of local and urban infrastructure

UNDP/C.A.

Nov. 2006–Sep. 2010

Upgrading of local and urban infrastructure 

Dec. 2007–Oct. 2011

Upgrading of local and urban infrastructure Part II

Project 3.1: Reconciliation, confidence-building measures and support to civil society

UNDP/C.A.

CoE/C.A.

-/SER

-/GRS

March 2007–May 2009

Support to the CMP

Aug. 2007–May 2011

Council of Europe Academy Pol. Studies

Feb. 2008–Feb. 2011

TA to support the development of reconciliation measures and to 
support civil society in the TCC: the CSST

Aug. 2009–Dec. 2010

Post Research Institute: Education for Peace III (CSA call No 126199)

May 2009–May 2011

KYTD: Celebrating Diversity and Volunteerism across Cyprus  
(CSA call No 126199)

May 2009–May 2011

MRG-KISA: Minority rights: a contribution to the Cyprus problem 
(CSA call No 126199)

1  As of 30 September 2011, excepted for grant contracts: 31 March 2011.

2 868 200

1 994 080

422 154

15 192

52 435

144 098

158 400

85 998

8 249 869

9 784 225

1 469 566

600 000

1 499 000

89 310

166 909

197 313

2 265 878

1 595 264

422 154

15 192

52 435

72 049

126 720

68 798

7 424 869

8 850 803

1 469 566

351 000

1 349 631

82 437

133 528

157 851

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32

ANNEX	II

Contract type

Contract period

Contract title

Project 3.2: Demining

Contracted 
amount1
(euro)

Paid amount1
(euro)

UNDP/C.A.

Jan. 2007–Feb. 2009

Landmine and Ordnance Clearance in Cyprus IV

Jan. 2010–Dec. 2011

Landmine and Ordnance Clearance in Cyprus V

3 995 894

2 500 000

3 995 894

2 500 000

Project 4.1: Community scholarship programme

Jan. 2007–April 2007

Call for Interest — Community scholarships  
programme 2007/08 (Call 1)

Oct. 2007–April 2008

Call for interest — European Community scholarships  
programme 2008/09 (Call 2)

-/GRS

Nov. 2008–Feb. 2009

European Union Scholarships III Programme for the Academic  
Year 2009/10 Local Grant Scheme (Call 3)

Dec. 2009–Feb. 2010

Scholarships for the Turkish Cypriot community Programme  
for the Academic Year 2010/11 (Call 4)

Feb. 2011–April 2011

Scholarships for the Turkish Cypriot community Programme  
for the Academic Year 2011/12 (Call 5)

Project 4.3: Information on the European Union political and legal order

-/SER

Feb. 2009–Feb. 2012

Setting up of an open access information point on the  
European Union

396 160

396 160

1 564 919

1 537 988

2 346 580

2 271 597

1 313 440

1 051 796

-

-

1 300 000

1 040 000

Project 5.2: Capacity building in the environment sector

-/SUP

-/SER

June 2009–Feb. 2011

Supply of Air Quality Monitoring (AQM) Equipment

June 2009–Sept. 2010

TA for AQM activities in the northern part of Cyprus

645 450

197 983

645 450

183 121

GTZ contracts for support to EUPSO

-/SER

-/SER

July 2006–June 2008

TA in running a PSO in the northern part of Cyprus (GTZ.A)

June 2008–June 2012

Setting up of a PSO in the northern part of Cyprus (GTZ.B)

3 476 000

1 496 795

2 836 524

1 496 795

Total

97 387 729

57 474 492

1  As of 30 September 2011, except for grant contracts: 31 March 2011.

WKS = Works contract 

PMU = Project Management Unit

SUP = Supplies contract 

UNDP = United Nations’ Development Programme

SER = Service contract 

CoE = Council of Europe

C.A. = Contribution agreement 

GRS = Grant scheme

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REPLY OF THE 
COMMISSION

EXECUTIVE	SUMMARY

III.
The  Commission  admits  that  not  operating  under  more 
devolved procedures is a constraint, but it has made con-
siderable efforts to work with the options available to pro-
vide the most appropriate alternative institutional set-up. 

IV.
The  loss  of  the  seawater  desalination  plant  project  was 
an unfortunate setback. After extensive efforts to rescue 
and proceed with the project, the Commission had to act 
to protect its financial interests and terminated the con-
struction contract. No payments have been made under 
this contract. The Commission agrees with the Court's con-
clusion on the risks to sustainability and the reasons for it 
and will continue to help the Turkish Cypriot community to 
develop administrative and technical capacity.

V.	First	indent	
The  Commission  largely  agrees  with  the  Court’s  recom-
mendations. The Commission attempted to find the best 
practical  solution  considering  that  the  establishment 
of a Delegation within EU territory is not possible. Since 
the  audit,  fur ther  efficienc y  improvements  have  been 
achieved. When considering further devolution of manage-
ment, however, the Commission must balance the possible 
efficiency gains against the risks of reducing the supervi-
sion from headquarters, given the particular circumstances 
of the assistance to the TCc.

V.	Second	indent	
The  Commission  is  committed  to  providing  continued 
assistance to the Turkish Cypriot community and to work-
ing towards reunification of the island of Cyprus. A phas-
ing-out  of  the  operations  is  not  currently  planned  and 
these will continue on an appropriate scale. 

V.	Third	indent	
Reunification  is  the  central  aim  of  the  assistance  pro-
gramme. The  Commission  recognises  that  reunification 
would  require  a  review  of  the  assistance  to  Cyprus. The 
Commission  would  make  timely  preparations  for  this 
scenario.

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REPLY OF THE  
COMMISSION

OBSERVATIONS

14.
The scope of the aid programme is laid down in the Coun-
cil regulation as adopted by the Council. The Commission 
agrees  that  it  was  a  programming  and  implementation 
challenge to cover the broad range of topics.

16.
The 2004 proposal contained preliminary allocations only. 
This was a new programme for the Commission and, dur-
ing the period of delay in the adoption of the Aid Regula-
tion, further consultation took place with stakeholders. The 
allocations in the December 2006 Financing Decision were 
adjusted as a result and therefore somewhat different from 
those of the 2004 planning. The Commission prioritises the  
'reconciliation and confidence-building' objective, and the 
final contracted amounts in 2009 included use of the pro-
gramme reserve for demining activities and for support to 
the  Committee  on  Missing  Persons.  By  the  end  of  2009, 
including the commitments on Green Line crossing points, 
the 'reconciliation and confidence-building' objective was 
supported by commitments only about 18 % below the 
level envisaged in 2004, rather than 35 % less. 

21.
The  Commission  agrees  that  a  multiannual  perspective 
would  facilitate  the  planning  and  implementation  of 
assistance to the TCc, but this must be seen in the broader 
political context. The Commission strongly supports efforts 
towards a settlement of the Cyprus issue and reunification. 
Meanwhile,  the  Commission  proposes  to  continue  sup-
porting the Turkish Cypriot community on the basis of the 
current Aid Regulation.

22.
The  Commission  had  to  consider  ver y  carefully  how  to 
establish the most efficient management structure from 
the options available at the same time as it was developing 
the technical elements of the programme to be delivered.

23.–25.	Joint	reply
The  Commission  admits  that  not  operating  under  more 
devolved procedures is a constraint, as the establishment 
of a Delegation in an EU Member State is not possible. The 
Commission has worked with the options available to pro-
vide the most appropriate alternative institutional set-up.

Besides  this,  another  substantial  amount  was  commit-
ted for the (bi-communal) Nicosia wastewater treatment 
plant, which was included with reconciliation as a prime 
motivation.

In  addition  to  the  above,  the  entire  allocation  for  2010, 
which was 3 million euro, was devoted, through the Com-
mittee on Missing Persons, to the 'reconciliation and confi-
dence-building' objective.

17.
The  Cour t ’s  comments  on  the  difficulties  of  providing 
effective technical assistance highlight one aspect of the 
challenging environment for the assistance programme.

The  Commission  has  taken  measures  to  facilitate  oper-
ations and financial circuits including derogations of nor-
mal procedures and regular missions from the Authoris-
ing Officer by sub-Delegation (AOSD) to Nicosia. A new IT 
structure was put in place at the end of 2011 to allow com-
mon file access between Nicosia and Brussels and the 2012 
reorganisation of the Enlargement DG has streamlined the 
internal processes; the number of units involved in con-
tracts and payments has been reduced from four to two. 

The  Commission  has  also  to  take  into  account  the  risks 
ar ising  from  operations  in  such  a  sensitive  political 
environment.

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REPLY OF THE  
COMMISSION

26.
The Commission Representation (ECR) in the Republic of 
Cyprus is formally consulted as part of the Communication 
DG in the context of the Commission ‘inter-service’ process. 
This ensures information flow, cooperation and coordina-
tion. The delays in the ECR's responses were also caused by 
the substantial workload.

The current staff reinforcement of the ECR — also due to 
the incoming Council Presidency of Cyprus — will further 
strengthen the cooperation with the other services of the 
Commission.

27.
The situation of the contractual agents in EUPSO is indeed 
different from that of contractual agents in Delegations. 
As  the  Cour t  notes,  moreover,  current  legislation  (Ar t-
icle 3b, Article 88, first paragraph, point b of the Condi-
tions of Employment of Other Servants of the European 
Union) does not allow the engagement of contract staff for 
a total period of more than three years and does not pro-
vide for any derogation from that rule. In December 2011, 
the Commission proposed to change the Staff Regulations 
and the Conditions of Employment (COM(2011) 890 final) 
to prolong the duration of the contracts to a maximum of 
six years. This proposal has still to be adopted. In review-
ing the length of contracts, however, the Commission will 
have to take into account the availability of funds as well 
as the overall political situation in the context of the set-
tlement talks. 

28.
The Commission will start an overall programme evalua-
tion in 2012. The advantages of implementing some parts 
of the programme through the UNDP will be considered in 
this review. 

29.
Weaknesses  in  the  first  Committee  on  Missing  Persons 
Contribution Agreement ( joint management with UNDP) 
found by the Court have been addressed in later agree -
ments,  e.g.  better  definition  of  indicators  related  to  EU 
funding, better definitions of numbers exhumed and iden-
tified, better general output–input relation and improved 
reporting.

30.
Decisions on the management arrangements, including 
setting up EUPSO and the degree of ‘devolution’, formed 
part of the risk analysis undertaken by the Commission.

33.
No funds have been disbursed yet under the construction 
contract  and  the  contract  was  terminated  in  December 
2011, after considerable efforts to rescue the project, when 
there was no prospect of progress. The Commission’s finan-
cial interests have been protected. 

The  risk  management  included  designing  a  two-phase 
project starting with a pilot plant, but the developments 
that led to termination could not reasonably have been 
anticipated at the start of the project. 

Box	2	(a)	
The Commission evaluated the risk in the context of the 
selection of the company for the construction of the sea-
water desalination project. The outcome of this interna-
tional open tender was fully based on established rules.

Box	2	(b)	
The guarantee was not provided by the contractor. In the 
early stages this was primarily due to issues arising from 
the complex local context, which the Commission tried to 
solve. Even if the contract had been terminated in Janu-
ary 2010, it would not have been possible to recommit the 
money, since the contracting deadline had passed.

Box	2	(c)	
The  assistance  to  the  Turk ish  Cypriot  community  was 
a new programme for the Commission. During the three-
year contracting window between 2006 and 2009 allowed 
by the regulations, the programme management and logis-
tics, as well as the projects themselves, had to be devel-
oped. Given the need for thorough project preparation, the 
Commission considers that it would not have been pos-
sible to contract the works for the desalination plant at an 
earlier date.

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REPLY OF THE  
COMMISSION

39.
The problems affecting the implementation of the con-
struction contract for the desalination plant illustrate the 
difficult operational environment.

40.
The failure of the desalination plant project is a disappoint-
ment. The environmental effects of the salination of the 
Morphou aquifer will be taken into account, however. The 
water sector situation is changing with significant new ele-
ments arising. Water and wastewater investments remain 
in the draft assistance programme which is being drawn 
up for the coming years.

41.	(a)
Reliable  baselines  and  indicators  were  not  available 
for  water  distribution,  which  is  one  of  the  reasons  why 
investments in the water laboratory were made, but the 
evidence is that there are considerable improvements in 
service and leak rates for Nicosia water, the latter being 
previously up to 50 % in some areas.

41.	(b)
UNDP  is  implementing  the  Mia  Milia/Haspolat  project 
under joint management. The UNDP Deputy Director for 
Europe  is  aware  of  the  need  for  the ‘joint  entity ’  for  the 
WW TP  and,  along  with  the  Commission,  is  engaged  in 
resolving this.

42.
In addition to the training that was provided by the sup-
pliers of the laboratory equipment, the capacity-building 
project provided training in sampling and analysis to meet 
the requirement of the Water Framework Directive, Drink-
ing Water Directive and Bathing Water Directive. 

Training on the Laboratory Information System (LIMS) is 
planned for 2012. The laboratory was inspected and passed 
the  accreditation  audit  for  four  procedures  for  heavy 
 metals, pesticides, microbiology and food.

Box	2	(d)	
Commission staff were involved at all stages and started 
negotiations  as  soon  as  problems  became  apparent. 
A  delay  to  the  start  of  the  contract,  pending  resolution 
of site access issues was formally agreed on 17 December 
2009. Contacts with the TC authorities were numerous and, 
given the large size of the contract and the nature of the 
problems arising, it was clear that the TC leadership was 
fully  aware  of  the  situation. The  high-level  intervention 
from the Commission side (letter from the Commissioner 
to  the  leader  of  the Turkish  Cypriot  community  of  June 
2010) followed after the elections in the Turkish Cypriot 
community.

35.
The telecom liberalisation ‘law’ was adopted on 11 Janu-
ary 2012. The assistance programme can now proceed with 
the completion of the hardware component and prepara-
tion for handover to the beneficiary.

36.
The  absence  of  a  formal  financing  agreement  with  the 
(non-recognised) beneficiary was a risk of which the Com-
mission  was  aware. The  Commission  has  implemented 
a considerable aid programme within short contracting 
deadlines  and  a  wide  mandate  to  fulfil.  Equipment  and 
infrastructure were provided in the areas specifically men-
tioned in the Aid Regulation and where it was necessary 
to make a real impact. In some areas it was necessary to 
try to deliver real benefits and encourage sector reforms 
in parallel.

37.
This is the first experience by the TCc of major EU assist-
ance. The complexity of the alignment to the  acquis and 
the  size  of  the  reforms  necessar y  in  this  context  were 
underestimated  by  the  beneficiary. The  aid  programme 
for the TCc is still relatively new and the major contract-
ing took place only in 2009. The Commission services had 
no previous experience of working with the TC beneficiary. 

38.
The seawater desalination plant design change arose from 
stakeholder and expert consultations, and was related to 
concerns that the requirements of the Water Framework 
Directive would not otherwise be met.

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REPLY OF THE  
COMMISSION

45.
The Commission agrees that sustainability is a critical issue. 
Unless reunification occurs before, this issue will be taken 
up in the programming for 2012–13.

One of the challenges of the programme environment is 
the difficulty of working with a beneficiary that is not for-
mally recognised.

46.
The  issue  of  property  is  a  sensitive  one  and  tracing  the 
ownership history has proved a significant complicating 
factor in project implementation.

47.
The TCc is not formally represented in the Project Steering 
Committee, but no project goes ahead without the agree-
ment/approval  of  the  relevant TC  interlocutors.  Imple-
mentation through the UNDP does somewhat restrict the 
experience  gained  by  local  bodies,  but  does  give  more 
confidence  in  the  physical  completion  of  projects. The 
problem of capacity development in local bodies is partly 
addressed by the access to the community development 
grants, outside the UNDP Contribution Agreement. 

48.
The  missing  persons  issue  is  sensitive  and  the  work  of 
the Committee on Missing Persons (CMP) is much appre-
ciated  by  both  communities  and  strongly  supported  by 
the European Parliament. A significant proportion of the 
total number of ‘missing’ have not been found or identified 
yet. The Commission has not yet planned an exit strategy, 
but  is  aware  that,  eventually,  programme  activities  will 
decrease. It is important that the two communities take 
the initiative in this process. 

49.
Continuation of the European Forum Cyprus by building 
upon the alumni network is foreseen.

Members of the European Forum Cyprus (EFC) alumni net-
work participated in the European Forum for Democracy in 
Limassol in October 2011.

50.
The Commission will consider the need for further cap acity 
building in future programmes to the extent that funds are 
available.

53.
The  Commission  agrees  that  a  multiannual  perspective 
would facilitate the planning and implementation of assist-
ance to the TCc, but this must be seen in the broader polit-
ical context. 

54.
The ex post survey on the scholarships referred to by the 
Court will be launched in 2012.

55.
The Commission agrees that collaboration between the 
Enlargement and Communication DGs could be strength-
ened and is making supplementary efforts in this respect.

Box	4	(b)	
Environment is very important from the point of view of 
the acquis communautaire. The programme therefore calls 
for significant support in this area. 

CONCLUSIONS	AND	RECOMMENDATIONS

59.
The Commission admits that there are constraints asso-
ciated  with  running  the  EUPSO  programme  office  with-
out fully devolved management, but, since a Delegation 
could not be established, the most appropriate alterna-
tive institutional set-up was provided for. Measures have 
been taken to facilitate operations (see the response to 
point 23), including some streamlining since the audit was 
carried out.

Improvements have also been made to contribution agree-
ments since the time of the audit. 

60.
The Commission’s financial interests have been protected 
with the cancellation of the desalination plant project. No 
payments have been made under the construction con-
tract. The failure of this project, despite the Commission's 
efforts to complete it, is, nevertheless, a setback to efforts 
to improve the water supply problem and the related issue 
of salination of the aquifer. The water and wastewater sec-
tor remains high on the list of priorities for future support.

The Commission agrees with the Court's conclusion on the 
general risks to sustainability and will continue to support 
the Turkish Cypriot community with a view to enhancing 
administrative and technical capacity.

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REPLY OF THE  
COMMISSION

61.
The Commission has committed itself to providing con-
tinued assistance to the Turkish Cypriot community. Rein-
forcing the sustainability of new and existing projects is 
a priority.

64.	(a)
The  Commission  agrees  that  a  multiannual  perspective 
would  facilitate  the  planning  and  implementation  of 
assistance to the TCc, but this must be seen in the broader 
political context. The Commission strongly supports efforts 
towards  a  settlement  of  the  Cyprus  issue.  Until  this  is 
achieved, the Commission intends to continue supporting 
the Turkish Cypriot community on the basis of the current 
Aid Regulation. 

64.	(b)
The  Commission  agrees  with  this  recommendation. The 
overall length of future contracts will depend on the out-
come of the Commission's proposed change to the Staff 
Regulations.

64.	(c)
Since the audit, efficiency improvements have been made 
in  Commission  headquarters  (see  for  example  point  23 
above), which help to streamline finance and contract pro-
cedures. The Commission will consider the issue of devo-
lution, taking into account both its potential advantages 
and risks in the particular circumstances of assistance to 
the TCc.

64.	(d)
The Commission accepts the recommendation on coor-
dination  with  the  Commission  Representation  (ECR)  in 
Nicosia. There are already formal procedures for inter-DG 
co operation at headquarters and the Commission is mak-
ing further efforts to improve cooperation between the 
ECR in Nicosia and the Task Force on the ground.

The current staff reinforcement of the ECR — also due to 
the  incoming  Cyprus  Council  Presidency  —  will  help  to 
strengthen cooperation with the other services and this 
will also bring the benefit of achieving better coherence 
and consistency.

64.	(e)
The recommendation on improvements to contribution 
agreements  is  accepted  by  the  Commission  and  these 
improvements have already been made including better 
definition of indicators related to EU funding, better defini-
tions of numbers exhumed and identified, better general 
output–input relation and improved reporting.

64.	(f )
The  recommendation  on  ensuring  sustainability  will  be 
taken into account in completing existing projects and the 
programming of new interventions will reflect the steps 
taken  by  the TC  beneficiar y  in  creating  an  appropriate 
environment  in  terms  of  organisation,  operation,  main-
tenance, etc.

64.	(g)
The Commission accepts the recommendation on water 
supply. A water sector evaluation has already been carried 
out since the audit. 

64.	(h)
The Commission agrees with the Court’s analysis in terms 
of the needs for the legal and administrative framework 
and continues to cooperate with the beneficiary in these 
areas. The Commission must, however, take into account 
the  current  political  and  legal  context,  which  does  not 
allow the imposition of any legal commitment on the TCc.

65.
The  Commission  is  committed  to  providing  continued 
assistance to the Turkish Cypriot community and to work-
ing towards reunification of the island of Cyprus. A phas-
ing-out  of  the  operations  is  not  currently  planned  and 
these will continue on an appropriate scale.

66.
Reunification  is  the  central  aim  of  the  assistance  pro-
gramme. The Commission recognises that a breakthrough 
in the reunification process would require a review of the 
assistance to Cyprus. The proposal for the next financial 
perspective contains a clause to this effect.

Special Report No 6/2012 — European Union assistance to the Turkish Cypriot community

European Court of Auditors

Special	Report	No	6/2012
European	Union	assistance	to	the	Turkish	Cypriot	community

Luxembourg: Publications Office of the European Union

2012 — 38 pp. — 21 × 29.7 cm

ISBN 978-92-9237-625-3
doi:10.2865/14996

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Q
J
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A
B
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1
2
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0
0
5
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E
N

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C

THE COURT CONCLUDES THAT THE EUROPEAN COMMISSION ESTABLISHED A 

PROGRAMME THAT DULY REFLECTED THE OBJECTIVES OF THE INSTRUMENT 

FOR FINANCIAL SUPPORT TO THE TURKISH CYPRIOT COMMUNITY AND THAT, 

DESPITE FACING SIGNIFICANT CONSTRAINTS, THE IMPLEMENTING ARRANGE-

MENTS  IT  PUT  IN  PLACE  WERE  GENERALLY  APPROPRIATE.  IT  ALSO  CON -

CLUDES THAT SOME RESULTS HAVE ALREADY BEEN ACHIEVED, BUT THEIR 

SUSTAINABILIT Y  IS  OFTEN  IN  DOUBT  AND THE  PROGRAMME’S  LARGEST 

PROJEC T COULD NOT BE IMPLEMENTED. THE COURT PROVIDES A SET OF 

RECOMMENDATIONS FOR THE FUTURE MANAGEMENT OF THE PROGRAMME.

EUROPEAN COURT OF AUDITORS