Special Report No 13 // 2016#EU assistance for strengthening the public administration in Moldova #(pursuant to Article 287(4), second subparagraph, TFEU)
Date: 2016-04-19
Institutions: European Court of Auditors
Subjects: EU aid, European neighbourhood policy, Moldova, corruption, financial aid, judicial reform, organisation of health care, public administration, public finance, water resources

EN 

2016 

NO 13

Special Report  EU assistance for 

strengthening the public 
administration in Moldova

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EN 

2016 

NO 13

Special Report

EU assistance for 
strengthening the public 
administration in Moldova

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

Audit team

02

The ECA’s special reports set out the results of its performance and compliance audits of specific budgetary areas or 
management topics. The ECA selects and designs these audit tasks to be of maximum impact by considering the risks 
to performance or compliance, the level of income or spending involved, forthcoming developments and political and 
public interest.

This performance audit was produced by Audit Chamber III — headed by ECA Member Karel Pinxten — which specialises 
in external actions spending areas. The audit was led by ECA Member Hans Gustaf Wessberg, supported by the Head of 
his office, Peter Eklund and Emmanuel-Douglas Hellinakis, Attaché; Sabine Hiernaux-Fritsch, Principal Manager; Laura 
Gores, Head of Task; Erika Soveges and Alexandre Tan, auditors.

From left to right: E.-D. Hellinakis, S. Hiernaux-Fritsch, H. G. Wessberg, L. Gores, A. Tan,  
E. Soveges, P. Eklund.

Contents

03

Paragraph

Acronyms

I - VII 

Executive summary

1 - 8 

Introduction

9 - 11 

Audit scope and approach

12 - 67  Observations

12 - 47 

Budget support had a limited effect in strengthening the public administration in the sectors 
targeted

13 - 28 

The Commission could have responded more quickly to risks and programmes were not sufficiently aligned 
to national strategies

29 - 34 

Conditionality was not sufficiently exploited

35 - 37 

Additional incentive‑based funds were not well justified

38 - 47 

There was only limited evidence of progress in the sectors targeted by SBS

48 - 67 

The projects partially contributed towards strengthening the public administration

49 - 51 

The projects were relevant, but needs analyses were impaired by weaknesses

52 - 63 

The projects were not always well‑coordinated with SBS programmes

64 - 67 

The results were not always sustainable due to lack of political will and other external factors

68 - 77  Conclusions and recommendations

Annex I  —  List of contracts audited

Annex II  —  Summary ratings of sector budet support contracts in the audit sample

Annex III  —  Summary ratings of project contracts in the audit sample

Replies of the Commission and the EEAS

 
 
 
 
 
Acronyms

04

ENI: European Neighbourhood Instrument

ENP: European Neighbourhood Policy

ENPI: European Neighbourhood Partnership Instrument

EUHLPAM: European Union High Level Policy Advice Mission to the Republic of Moldova

JSRS: Justice Sector Reform Strategy

PFPRs: Public Finance Policy Reforms

SBS: Sector Budget Support

Executive  
summary

05

I
The Republic of Moldova is the poorest country in Europe. Since 2007, it has been allocated aid amounting to 
782 million euros through the European neighbourhood instruments. This represents annually nearly 37 euros per 
inhabitant — the highest amount in all of the EU’s eastern neighbours. In 2014, Moldova and the EU signed an asso-
ciation agreement, including provision for a deep and comprehensive free trade area.

II
Among Moldova’s main problems are widespread corruption and the weakness of its public institutions, which have 
been an important element of EU assistance since 2007. A significant share of the aid comes in the form of budget 
support. This involves the transfer of funds to the partner country’s national treasury on condition that certain 
requirements are satisfied. The remaining aid is channelled through projects.

III
We examined whether EU assistance had contributed effectively towards strengthening the public administration. 
Our sample covered four budget support programmes in the sectors of justice, public finance, public health and 
water. It also included 20 projects in various public authorities.

IV
We concluded that EU assistance only partially contributed to strengthening the public administration. External fac-
tors explained a number of the shortcomings observed. Others could be attributed to weaknesses in the design and 
implementation of the audited programmes and projects.

V
Since little progress had been made in the sectors targeted, we concluded that budget support had a limited effect 
in strengthening the public administration. The Commission could have responded more quickly when risks associ-
ated with the support materialised. Programmes were not sufficiently aligned to Moldovan strategies. The potential 
benefit of the programmes was reduced by the fact that the Commission did not make full use of its ability to set 
preconditions for disbursement. Some specific conditions were fulfilled between programme negotiation and the 
start of the sector budget support or were not directly measurable. The Commission could have been more strin-
gent when assessing whether they had been fulfilled. Also, the granting of additional incentive-based funds was 
not fully justified.

Executive summary  

06

VI
Project designs were generally found to be relevant. EU assistance channelled through projects was partially effec-
tive in strengthening the public administration. In this connection, the scope and timing of projects was not always 
well coordinated with budget support programmes. The specific, budget support- related, technical assistance for 
the development of administrative capacity did not start until months after the main budget support programme. 
Other technical assistance and twinning projects were not always used to prepare or support budget support pro-
grammes. Projects generally delivered the expected outputs. However, the results were not always sustainable due 
to lack of political will and other external factors.

VII
We make a number of recommendations for the Commission to improve the effectiveness of EU assistance to 
Moldova.

Introduction

07

01 
Moldova is located in south-eastern Europe, between Romania and Ukraine, with 
a population of 3.6 million. It emerged as an independent republic in 1991, after 
the dissolution of the Soviet Union, although the region of Transnistria had uni-
laterally declared independence and is still governed separately.

02 
After a protracted period of economic decline, the Moldovan economy started 
growing again in 1998. Nevertheless, with a per capita GDP of 1 687 euros, and 
a poverty rate of 12.7 %, it is still the poorest country in Europe1. Moldova’s popu-
lation has decreased since independence, due primarily to low birth rates and 
high labour migration, and remittances have come to play an important role in its 
social and economic life.

03 
Moldova and the EU first established contractual relations in 1994, through 
a partnership and cooperation agreement. In June 2014, they signed an asso-
ciation agreement, which included a deep and comprehensive free trade area. 
This agreement aims to improve political and economic relations and gradually 
integrate Moldova into the EU‘s internal market. The free trade area provides for 
removing customs tariffs and quotas and harmonising laws and regulations with 
those in the EU in various trade sectors. According to the European Parliament, 
Moldova ‘has a European perspective and may apply to become a member of 
the European Union provided it adheres to the principles of democracy, respects 
fundamental freedoms and minority rights, and ensures the rule of law’2.

04 
The EU cooperates with Moldova under the European neighbourhood policy 
(ENP) and, more specifically, its eastern regional dimension, the eastern partner-
ship. The European neighbourhood instrument (ENI) is an EU financial instrument 
dedicated to the neighbourhood for the 2014-2020 period. It replaced the 2007-
2013 European neighbourhood and partnership instrument (ENPI). Under these 
schemes, 782 million euros in bilateral aid have been allocated to Moldova from 
2007 to 20153. In 2014, aid amounted to nearly 37 euros per inhabitant — the 
highest amount in all of the EU’s eastern neighbours4.

1  Per capita GDP in 2014 from 
Eurostat (www.ec.europa.eu/
eurostat/statistics-explained/
index.php/European_
Neighbourhood_Policy_-_
East_-_economic_statistics); 
Poverty rate in 2013, according 
to the latest available World 
Bank World Development 
Indicators (http://data.
worldbank.org).

2 

European Parliament, 
Committee on Foreign Affairs, 
Report containing a motion for 
a non‑legislative resolution on 
the draft Council decision on the 
conclusion, on behalf of the 
European Union, of the 
Association Agreement 
between the European Union 
and the European Atomic 
Energy Community and their 
Member States, of the one part, 
and the Republic of Moldova, of 
the other part, A8-0022/2014, 
21.10.2014.

3  Over the same period, aid 
contracted amounted to 
547 million euros and aid paid 
to 363 million euros. Moldova 
also received aid through 
regional projects under ENPI 
cross border cooperation, 
macro-financial assistance, the 
Neighbourhood Investment 
Facility, the Development 
Cooperation Instrument, the 
European Instrument for 
Democracy and Human Rights 
and the Instrument for 
Stability.

4 

The eastern countries in the 
ENP are Armenia, Azerbaijan, 
Belarus, Georgia, Moldova and 
Ukraine.

Introduction 

05 
One of the main problems affecting Moldova is the weakness of its public ad-
ministration. Public institutions suffer from excessive bureaucracy, a lack of focus 
on core functions, a high turnover of staff, and, consequently, low efficiency. 
Corruption also remains an issue, with Moldova ranking 103rd out of 168 in the 
2015 Transparency International corruption perceptions index. In this connection, 
support for public administration in Moldova has been an important element of 
cooperation across all sectors since 2007. However, it has received increased at-
tention under the ENI, since ‘public administration reform’ is one of three priority 
areas for cooperation for the years 2014-2017, alongside ‘agriculture and rural 
development’ and ‘police reform and border management’.

06 
The main aid delivery method used in Moldova is sector budget support (SBS5). 
Both budget support funds and additional support granted through the same fi-
nancing agreements accounted for 74 % of the bilateral aid paid out in 2007-2015 
(see also Graph 1). Budget support involves the transfer of funds to the partner 
country contingent upon its compliance with agreed conditions for payment. 
Compliance with these conditions is an essential requirement for budget support 
(a principle known as ‘conditionality’). Fixed tranches are disbursed if eligibility 
criteria are met6. Variable tranches are additionally linked to progress against spe-
cific conditions.

08

5  Budget support may be 
provided either as sector 
budget support (SBS) or as 
general budget support (GBS). 
While GBS contributes 
towards a national 
development strategy, SBS 
supports a sector policy. Since 
2013, the EU grants SBS with 
Sector Reform Contracts, 
previously called Sector Policy 
Support Programmes. For the 
sake of consistency, this report 
uses the term SBS for all 
budget support contracts 
audited.

6 

EU budget support is subject 
to four eligibility criteria: 
a stable macro-economic 
framework, sound public 
financial management, 
transparency and oversight of 
the budget and relevant and 
credible national/sector 
policies and reforms.

1 Budget support granted to Moldova in 2007‑2015 (in million euro)
h
p
a
r
G

140

120

100

80

60

40

20

0

Additional support (technical 
assistance, evaluations, etc.)

Budget support funds

2007

2008

2009

2010

2011

2012

2013

2014

2015

NB: Funds are presented according to the budgetary year of the underlying Commission decision.
Source: Common Relex Information System (CRIS).

 
Introduction 

09

07 
In Moldova, the Commission’s financing agreements also provide for additional 
support to accompany the main SBS operation, in particular technical assistance 
projects for capacity development in public bodies (‘SBS technical assistance‘).

08 
Moldova also received aid, in a variety of domains, by means of projects. Projects 
in our audit sample took the form of twinning and technical assistance. Twinning 
involves cooperation with public authorities in an EU Member State, whereas 
technical assistance is typically provided by external experts from the private 
sector.

Audit scope  
and approach

10

09 
The audit examined whether EU aid to Moldova contributed effectively towards 
strengthening public administration in terms of its capacity to effectively and 
efficiently perform the various governance functions, including the delivery of 
public services. We looked at the two main aid delivery methods, by focusing on 
the following two questions:

(a)  Did SBS programmes contribute effectively towards strengthening public 

administration?

(b)  Did projects contribute effectively towards strengthening public 

administration?

10 
The audit focused on ENPI and ENI assistance from 2007 to 2014. The audit sam -
ple included:

(a)  four SBS programmes for promoting sector reform, including two in core 

areas of public administration, i.e. justice and public finance policy, and two 
aimed at improving the delivery of public health and water services,

(b)  twenty projects to strengthen the central authorities, notably seven projects 

in the justice sector, three consecutive projects to provide high-level policy 
advice to Moldovan Ministries (known as the Euhlpam projects, from the 
European Union High Level Policy Advice Mission to the Republic of Moldova) 
and a project to support the State Chancellery, which is the central authority 
in charge of coordinating EU funds in Moldova.

11 
Our sample covered 40 % of the bilateral ENPI/ENI aid contracted since 2007 (see 
Annex I). The audit work was carried out between March and September 2015. 
We examined documentary evidence, such as programming documents and 
progress, monitoring and evaluation reports. The audit included a desk review 
and a visit on the spot in Moldova. We interviewed staff from the Moldovan au-
thorities, the EU delegation in Chisinau, the European External Action Service, the 
Commission’s Directorate-General for Neighbourhood and Enlargement Negotia-
tions, international organisations, other donors, consultancy firms and NGOs.

Observations

11

7 

8 

Special Report No 11/2010 
‘The Commission’s 
management of general 
budget support in ACP, Latin 
American and Asian countries’. 
(http://eca.europa.eu)

European Commission, 
Directorate-General for 
Development and 
Cooperation — EuropeAid, 
Budget Support Guidelines. 
Programming, Design and 
Management — A modern 
approach to Budget Support, 
September 2012, p. 126.

9  Annual Report concerning the 
financial year 2014, paragraphs 
8.6 to 8.8 (OJ C 373, 10.11.2015).

Budget support had a limited effect in strengthening 
the public administration in the sectors targeted

12 
In this chapter, we examine the contribution of SBS programmes towards improv-
ing public administration in Moldova. We assess the design of programmes, the 
application of conditionality, the basis for granting additional funds and the con-
tribution of SBS to the development of the four sectors audited: justice, public 
finance, health and water (see Annex II).

The Commission could have responded more quickly to risks 
and programmes were not sufficiently aligned to national 
strategies

13 
In order to assess the design of SBS programmes, we looked at whether the Com-
mission had taken sufficient steps to analyse and mitigate the risks associated 
with SBS. Also, we examined whether the four programmes audited sufficiently 
reflected national reform strategies.

The Commission could have responded more quickly when risks 
associated with SBS materialised

14 
While featuring advantages such as greater country ownership, reduced transac-
tion costs and better donor coordination, budget support is also characterised 
by a number of risks that are inherent to its nature (see the Court of Auditors’ 
Special Report No 11/2010)7. The specific risk profile for budget support is related 
to the fact that it uses the country’s systems, as it involves a transfer of financial 
resources to the national treasury of the recipient country8. Given that budget 
support funds are merged with the recipient country’s budget resources they too 
suffer from any weaknesses in the country’s financial management9. We assessed 
whether the European Commission correctly analysed and mitigated these risks.

Observations 

15 
In 2012, the Commission introduced a more systematic analysis of risks, high-level 
steering committees for budget support operations and an early warning sys-
tem10 for when risks materialised. This was a noticeable improvement over the 
previous approach.

16 
Decentralised management11 and budget support both strongly rely on country 
systems. The country systems as regards public finance control are not certi-
fied by the EU services. The decentralised management mode for EU assistance 
for projects is not in place. At the same time, budget support was the main aid 
method used, representing almost three quarters of total EU assistance paid to 
Moldova in 2007-2015.

17 
Corruption risks are high in Moldova. Transparency International’s corruption per-
ceptions index indicates that the situation has worsened since 2012 (see Box 5).

18 
In November 2014, macroeconomic risks materialised in Moldova when it became 
known that 1 billion US dollars of depositor funds had been lost in a corruption 
scandal involving three Moldovan banks (see Box 1). The high-level steering com-
mittee of December 2014 decided to be attentive to the case of Moldova in 2015 
in the context of the budget support allocation as the risk level would increase. 
After an internal analysis of potential risk mitigating measures, in July 2015 the 
European Commission responded by publicly announcing the suspension of 
budget support payments, pending the conclusion of an agreement between the 
International Monetary Fund (IMF) and Moldova12. It also significantly reduced 
the share of budget support programmed in 2015, compared to the previous 
years (see Graph 1). The situation in the banking sector seriously called into 
question the integrity of the EU funding paid into the Moldovan state budget. It 
is however not possible to prove that EU funds were concerned specifically, since 
they were merged with the overall state budget.

12

10  The early warning system will 
be activated in cases where 
there is an immediate and 
severe deterioration of the 
situation or the occurrence of 
an event identified as risk that 
has a major impact on the 
programme objectives. In 
these cases, the EU needs to 
react immediately in order to 
avoid serious damage to the 
EU’s image and reputation. 
This may be, for example, 
a result of a major corruption 
or fraud case or a breach of the 
fundamental values. The EU 
Delegations should report on 
these cases immediately to 
Headquarters. Cf. Budget 
Support Guidelines, p. 132.

11  For decentralised 
management, the 
Commission may decide to 
apply the beneficiary 
country’s procurement or 
grant procedures. Cf. Art. 18(4) 
of Regulation (EC) No 
1638/2006 of the European 
Parliament and of the Council 
of 24 October 2006 laying 
down general provisions 
establishing a European 
Neighbourhood and 
Partnership Instrument.

12  EU Delegation to Moldova, EU 
Budget Support for the Republic 
of Moldova — pending the 
fulfilment of several conditions, 
Chisinau, 8 July 2015.

Observations 

13

1
x
o
B

Background information to Moldova’s banking crisis

In November 2014, three Moldovan banks were placed under special administration by the National Bank, 
after having issued loans worth 1 billion US dollars. These transactions had no sound economic rationale, and 
resulted in such a significant deterioration in the banks’ balance sheets that they were no longer viable as go-
ing concerns. Massive public liabilities accrued from this incident and the estimated cost for saving the banks 
amounts to at least 13 % of Moldova’s GDP.

At the time of the audit, criminal investigations into the banking fraud had made little progress, and no re-
covery strategy had been prepared. This situation sparked off public protests and contributed to a period of 
protracted political instability. Three governments resigned between November 2014 and December 2015.

19 
Moldova’s last IMF programme expired in 2013. The last programme review had 
not been completed due to disagreements on fiscal and financial sector policies. 
The World Bank suspended its budget support of 45 million US dollars in April 
2014 because it considered that risks for public funds stemming from the bank-
ing sector were too substantial to make any transfers to Moldova’s state budget.

20 
While the European Commission correctly identified risks of corruption and mac-
roeconomic instability in Moldova, it could have responded more quickly when 
risks materialised. In the context of the signing of the association agreement/
deep and comprehensive free trade area in 2014, the Commission concluded two 
financing agreements, one for SBS operations on public finance policy reforms 
(PFPRs) and one on the implementation of the free trade area in October and No-
vember 2014. In this connection, it disbursed 16 million euros in December 2014. 
Risks related to the banking sector had been mentioned by both the IMF and the 
Commission since 201213.

13 

International Monetary Fund, 
IMF Country Report No 12/288, 
Republic of Moldova, Staff 
report for the 2012 Article IV 
consultation, fifth reviews under 
the extended arrangement and 
under the 3‑year arrangement 
under the extended credit 
facility, and requests for waivers 
for non‑observance and 
modification of performance 
criteria, September 2012; IMF 
Country Report No 14/190, Staff 
report for the 2014 Article IV 
consultation and first 
post‑program monitoring 
discussions, June 2014.

 
Observations 

14

SBS programmes were not sufficiently aligned to national 
strategies and it was unclear how budgets for SBS were 
determined

14  For more details, cf. Budget 
Support Guidelines, Annex 3: 
Assessing Public Policy 
Eligibility.

21 
We assessed whether SBS programmes supported relevant, clearly formulated 
and fully owned national strategies. Conditions for the disbursement of budget 
support funds should derive from and be aligned with the national strategy14.

22 
Two SBS programmes out of the four in the audit sample do not fully match na-
tional strategies. The SBS on public finance supports a national strategy without 
sector-related objectives (see Box 2), whereas the justice SBS does not directly 
contribute to implementing the national reform strategy.

Specific conditions were not sufficiently aligned with a national strategy: the SBS 
for public finance policy reforms

2
x
o
B

The SBS for public finance policy reforms is based on Moldova’s 2020 national development strategy, which 
covers seven sectors including infrastructure, pension schemes and education. However, it does not set out 
any objectives concerning public finance. Moldova has a national strategy for public financial management 
for 2013-2020, which consists of an overall strategy, annual action plans and a monitoring framework.

The financing agreement for the SBS lays out 12 specific conditions, which have to be fulfilled for the dis-
bursement of its three variable tranches. These conditions are not envisaged in the national development 
strategy and they also do not directly reflect the priorities set out in the public financial management 
strategy.

For instance, one condition concerns the creation of a Fiscal Council, which is not explicitly envisaged in any 
strategic document concluded between Moldova and the EU. The same goes for two conditions, which envis-
age the publication of a ‘citizens’ budget‘15 and mid-year reports on budget implementation. Public access 
to key fiscal information received an A grade in the 2011 public expenditure and financial accountability16 
assessment.

15  A citizen’s budget is a non-technical presentation of the state budget that is designed to reach and be understood by as large a segment of the 

population as possible.

16  The Public Expenditure and Financial Accountability (PEFA) program is a multi-donor partnership to assess the condition of public expenditure, 
procurement and financial accountability systems. PEFA assessments analyse the performance of a country’s public financial management 
system through a set of 31 indicators, which are rated with scores ranging from A to D (www.pefa.org).

 
Observations 

15

23 
While the justice SBS states that its objective is to support Moldova’s justice sec-
tor reform strategy (JSRS), its specific conditions linked to the judiciary are not 
expressed in the same terms. Some conditions of the SBS concern public finance 
matters and are not mentioned in the reform strategy. Therefore, there is no 
strict correlation between the action undertaken under the JSRS and the SBS. 
Moreover, this requires that additional monitoring and reporting requirements 
are set up for the SBS.

17  For more details, cf. Budget 
Support Guidelines, Annex 3: 
Assessing Public Policy 
Eligibility, 3.2. Policy Financing.

24 
The SBS programmes to improve the delivery of public health and water services 
were not based on clearly formulated Moldovan reform strategies. The guidelines 
call for sector strategies to be properly budgeted, in order to be eligible for SBS17. 
However, for the health SBS, the national strategy was not fully aligned with the 
overarching national health policy and was not entirely reflected in the budget-
ary projections. The water SBS was designed to support the national 2007 water 
strategy. However, the latter turned out to be overambitious, since it targeted 
a large number of objectives without providing a time-bound action plan or 
a clear institutional set-up for implementation.

25 
We also examined the basis for setting budgets for SBS programmes. Accord-
ing to the budget support guidelines published in 2012, these must be based 
on a number of criteria, such as the financing needs of the partner country and 
its commitment to allocating budget resources in line with its national strategy. 
Other criteria included the effectiveness, value for money and impact of budget 
support in achieving objectives, the track record and absorption capacity of past 
disbursements, how effectively agreed objectives were achieved with budget 
support and the result orientation of the development strategy.

26 
From our review of the selected programmes, it was insufficiently clear how 
budgets had been determined. The SBS for public finance policy reforms was the 
first programme in the audit sample to be set up according to the new methodol-
ogy. However, no comprehensive assessment of the criteria listed in paragraph 25 
had been carried out.

Observations 

16

27 
Even though the guidelines did not apply to SBS programmes designed before 
2012, a prior assessment of financing needs had been carried out for the justice 
sector reform strategy. However, it did not provide reliable information, since the 
initial estimate of 124 million euros was halved after 2 years of implementation18. 
A reassessment of financing needs started with the support of an EU-funded 
technical assistance project in 2015 (see paragraph 61). For the other three SBS 
programmes, there was no evidence of an assessment of financing needs.

18  The action plan (Parliament 

Decision No 6, 
16 February 2012, p. 168) 
provides for 1 989 million 
Moldovan leus 
(124 million euros, 2012) for 
the implementation of the 
JSRS. The 2014 Annual Report 
estimates 1 034 million leus 
(50 million euros, 2014).

28 
Also, regarding the budget-setting procedure, we saw that the planned budget 
varied in the preparation phase, without a clear justification. For the justice SBS, 
whose budget was 58.2 million euros, an external assessment carried out prior to 
designing the programme had suggested 40 million euros. An ad hoc increase of 
5 million euros was given to the water SBS during its implementation, based on 
political considerations.

Conditionality was not sufficiently exploited

29 
The performance monitoring system and disbursement criteria are at the heart 
of budget support, providing the framework for conditionality. Variable tranches 
are linked to progress against specific conditions: they create incentives for 
improved performance because partial performance is matched with partial pay-
ment. We assessed whether the conditions for tranche disbursement provided 
meaningful incentives for reform. We also examined whether disbursements 
were consistently based on the fulfilment of these conditions.

Some specific conditions for tranches were fulfilled between 
programme negotiation and the start of the SBS or were not 
directly measurable

30 
The contracts in the audit sample included specific conditions that required 
limited action by the Moldovan authorities or were fulfilled between programme 
negotiation and the start of the SBS (see Box 3). Targets that are insufficiently 
challenging reduce the incentive effect. There is a risk linked to the inclusion of 
measures, which were fulfilled prior to the start of the programme, since it is pos-
sible that they would have been wholly or partly undertaken without the aid.

Observations 

17

3
x
o
B

Examples of specific conditions

Example 1 — Some specific conditions required limited action by the Moldovan authorities

One condition of the PFPRs SBS, which started in 2014, provides for the publication of mid-year reports on the 
implementation of the budget. Moldova had already been publishing monthly reports on the implementation 
of its budget for several years.

Example 2 — Some specific conditions were already fulfilled between the programme negotiation and 
the start of the SBS

The financing agreement for the health SBS was signed in 2009. The first variable tranche of 13.4 million euros 
was disbursed after an assessment of 53 indicators, 22 of which concerned measures taken in 2008, after the 
programme negotiation took place.

The justice SBS started in June 2013. Three disbursement conditions - concerning the modernisation of the ap-
peal system, the amendment to criminal procedure and the reduction of the immunities of judges - were fully 
or partially met with laws adopted between April and July 2012, after the programme negotiation took place.

31 
The four contracts contained specific conditions that were not unambiguously 
measurable. For instance, the specific conditions for the justice SBS needed to be 
further explained after the disbursement of the first variable tranche, due to diffi-
culties in agreeing on what they meant19. Furthermore, the PFPRs SBS has specific 
conditions, but no separate indicators and not all specific conditions are directly 
measurable. For the health SBS, about half the indicators were too vague20. The 
water SBS also included unverifiable, aggregated or unclear indicators.

Conditions were not always applied consistently to encourage 
reform

32 
The Commission’s budget support guidelines state that tranches should only 
be disbursed when the relevant specific conditions and performance indicators 
have been fulfilled. We saw examples of an inconsistent use of conditionality for 
three of the four programmes audited21. As shown in Box 4, for the health SBS, 
funds were still disbursed even when the conditions had not been fulfilled. Also, 
for the three SBS programmes on health, justice and water, the assessment of the 
compliance with the conditions could have been more stringent for a number of 
conditions.

19  Explanatory tables had to be 
prepared, with the support of 
an EU-funded technical 
assistance project (see 
paragraph 61), and discussed 
in the working group that 
monitors the SBS.

20  Examples are indicators such 
as ‘Optimisation of the primary 
health care structure’, ‘Analysis 
of options for encouraging of 
private investments into health 
care system’ or ‘Continuation of 
improvement of strategic 
planning in health care sector 
based on the MTEF’.

21  At the time of the audit, the 
compliance with the specific 
conditions had not yet been 
assessed for the budget 
support programme on public 
finance policy reforms, which 
had only started at the end of 
2014.

 
Observations 

18

4
x
o
B

Funds were disbursed, even when specific conditions and performance indicators 
were not fulfilled

Example 1 — More funds were disbursed than recommended in the external evaluation report

Disbursement decisions for SBS funds were based on an external evaluation report, which examined the fulfil-
ment of the specific conditions attached to disbursement. Disbursements under the health SBS deviated from 
the recommendations made by the external evaluation report for two variable tranches out of three. In 2011, 
the second variable tranche totalled 13.6 million euros, 9 % higher than the 12.5 million euros recommended, 
based on the assessment of 28 conditions. The third tranche (4.1 million euros), in 2012, was 11 % higher 
(9 conditions assessed). Most of the difference came from the disbursement of funds reallocated from SBS 
technical assistance to budget support, which was not associated with any new activities or conditions.

Example 2 — Disbursements were made after an insufficiently stringent assessment of compliance 
with conditions

One condition of the water SBS required at least 600 million Moldovan leus to be allocated in the national 
budget for the water and wastewater sectors. In 2012, allocations amounted to 252 million leus (42 % of 
600 million leus), falling significantly short of the minimum threshold. The condition was nevertheless as-
sessed as having been partially met and 42 % of the funds attached to it were disbursed.

Another condition of the health SBS required that public expenditure for the health care sector, adjusted to 
inflation, should not decrease. In 2010, Moldova’s health budget increased by 5 % compared to 2009, in nomi-
nal terms. However, considering an inflation level of 9 % for 2010, adjusted health sector expenditure actually 
decreased compared to the previous year. Nevertheless, the condition was considered to have been met.

33 
According to the Commission’s budget support guidelines, the reprogramming 
of undisbursed funds in later tranches risks reducing the initial incentive effect of 
conditions. However, the health SBS included a last tranche to regroup the bal-
ance of undisbursed funds remaining from previous tranches.

34 
The water SBS, at the start of the programme in 2009, did not envisage a last 
tranche for remaining funds. Nevertheless, an additional tranche of 6.1 mil-
lion euros was created later on, in the run-up to the signing of the association 
agreement/free trade area in 2014. New conditions were identified, in line with 
the overall objectives of the water SBS, enabling the disbursement of 4.9 mil-
lion euros out of the funds left over, due to non-compliance with the conditions 
attached to previous tranches.

 
Observations 

Additional incentive‑based funds were not well justified

35 
In 2012, the Commission introduced the principle of ‘more for more’, which 
provides for additional incentive-based funds to reward partner countries’ 
progress towards democracy. Under this scheme, additional country allocations 
are meant to depend on progress in the reform process, as assessed in the ENP 
progress report, and in accordance with internationally recognised standards and 
benchmarks22.

36 
In total, Moldova received 93 million euros in this way for the years 2012 to 2014, 
including 28 and 35 million euros through the eastern partnership integration 
and cooperation programme, in 2012 and 2013 respectively, and 30 million euros 
under the ENI umbrella programme in 201423. These funds were mainly allocated 
to new or ongoing SBS programmes.

37 
On the basis of our documentary review, the rationale for awarding additional 
funds to Moldova was not clear. For the 3 years, a limited analysis of progress 
underpinned the allocations. The ENP progress reports do not demonstrate that 
Moldova has made progress towards democracy. According to the 2013 report, 
in the first half of the year, ‘Moldova went through its deepest political crisis in 
years’24, described as an ‘institutional meltdown’25 which did ‘lasting harm to the 
credibility of Moldova’s democratic institutions’26.

There was only limited evidence of progress in the sectors 
targeted by SBS

38 
As far as possible, we assessed whether the SBS programmes had contributed to-
wards progress in the four sectors audited, justice, public finance, health and wa-
ter, on the basis of available indicators and reports. In evaluating budget support, 
the OECD suggests a three step approach, ‘whereby: (i) Step One encompasses 
the assessment of the inputs, direct outputs and induced outputs of budget sup-
port […]; (ii) Step Two encompasses the assessment of the outcomes and impact 
of the government’s policies, strategies and spending actions […]; and (iii) Step 
Three entails an exploration of the contribution of budget support to the gov-
ernment’s policies, strategies and spending actions, which have produced the 
outcomes and impact identified in Step Two, to be carried out by combining and 
comparing the results of Steps One and Two’27.

19

22  The main criteria for assessing 

progress are democratic and 
credible elections, freedom of 
association, expression and 
assembly, free press and 
media, the rule of law 
administered by an 
independent judiciary and the 
right to a fair trial, the fight 
against corruption, the reform 
of security and law 
enforcement, democratic 
control over the armed forces 
and respect for other human 
rights. (Annex to Commission 
Implementing Decision 
C(2012)4170 of 26.6.2012.)

23  10 % of the ENI budget is 

reserved for the 
incentive-based approach: 
multi-country umbrella 
programmes reward progress 
towards deep and sustainable 
democracy and the 
implementation of agreed 
reform objectives (Regulation 
(EU) No 232/2014 of the 
European Parliament and of 
the Council of 11 March 2014 
establishing a European 
Neighbourhood Instrument 
(OJ L 77, 15.3.2014, p. 27), 
Article 7(6), recital 4; 
Commission Implementing 
Decision C(2014)2988 of 2.5. 
2014). The eastern partnership 
integration and cooperation 
programme granted 
additional funds to those 
partners that delivered on 
reforms for deep democracy 
and respect for human rights. 
(Commission Implementing 
Decisions C(2012)4170 of 
26.6.2012, C(2013)8140 of 27.11. 
2013).

24  European Commission, High 
Representative of the EU for 
Foreign Affairs and Security 
Policy, Joint Staff Working 
Document. Implementation of 
the European Neighbourhood 
Policy in the Republic of 
Moldova. Progress in 2013 and 
recommendations for action 
accompanying the document 
Joint Communication to the 
European Parliament, the 
Council, the European Economic 
and Social Committee and the 
Committee of the Regions. 
Neighbourhood at the 
Crossroads: Implementation of 
the European Neighbourhood 
Policy in 2013, p. 5.

25 

Ibid., p. 2.

26 

Ibid., p. 5.

27  Cf. OECD-DAC, Evaluating 

Budget Support, 
Methodological Approach, p. 3.

20

28  Results usually cover three 

categories: outputs, outcomes 
and impact. For precise 
definitions, see Special Report 
No 21/2015 ‘Review of the risks 
related to a results-oriented 
approach for EU development 
and cooperation action’, p. 7. 
(http://eca.europa.eu)

29  Special Report No 21/2015 

‘Review of the risks related to 
a results-oriented approach 
for EU development and 
cooperation action’ (http://
eca.europa.eu).

30  Special Report No 21/2015, 

p. 23.

Observations 

39 
However, even where a clear logical link between action and results28 can be 
established, it can be difficult — if not impossible — to assess which part of 
the results is attributable to EU intervention and which is due to other factors29. 
Indeed, it is the partner country’s budget that supports its development strat-
egy, so the outputs of EU budget support relate to changes that are not solely 
the consequence of the budget support programme, but also of various other 
government actions, assistance programmes and external factors30. Despite 
these limitations, evidence shows that, in Moldova, SBS achieved limited results, 
since indicators and reports do not demonstrate that much progress was made 
in three of the sectors targeted (justice, health and water services). At the time of 
the audit, it was too early to assess the potential effects of the SBS programme 
on public finance.

40 
Under the justice SBS, 28.2 out of 30 million euros have been disbursed to date 
in two tranches. The sum was reduced, as only 88 % of the conditions were 
met. Outputs, such as amendments to laws, were not achieved in the fields of 
the pre-judicial investigation process, juvenile justice and intolerance towards 
corruption.

41 
While the March 2015 ENP progress report judged that Moldova had made some 
overall progress in implementing the justice sector reform strategy, international 
indicators cast doubt on whether there had been progress (see Box 5).

Observations 

21

5
x
o
B

International indicators show that Moldova had made little progress in justice 
sector reforms and the fight against corruption

Several think tanks and NGOs publish indicators on justice and corruption across the world. They give a mixed 
picture of progress in Moldova.

Freedom House downgraded it (on a scale of 1-7) from 4.5 in 2012 to 4.75 in 2015 for its judicial framework and 
independence; its corruption rating improved slightly from 6 to 5.7531.

The 2014-2015 Global Competitiveness Report ranked its judicial independence 141 out of 144 countries32.

The World Bank’s rule of law indicator deteriorated from the percentile rank of 45 in 2012 to 42.7 in 2013, but 
improved to 46.6 in 2014 33.

According to the Public Policy Institute, the trust of citizens in justice decreased in the last decade from 41 % 
to 23 % at the end of 201434.

Moldova lost ground in Transparency International’s corruption perception index: it ranked 94th out of 176 
countries in 2012 and 103rd out of 168 in 2015. Moldovans perceived the justice sector as the second most cor-
rupt after the police35.

31  https://freedomhouse.org

32  http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf

33  http://info.worldbank.org/governance/wgi/index.aspx#countryReports

34  Public Policy Institute of Moldova, Barometer of Public Opinion of November 2014 (http://www.ipp.md)

35  http://www.transparency.org/country#MDA

 
Observations 

42 
Under the health SBS, 43.5 million euros were disbursed, amounting to 99.2 % of 
the budget. This rate was achieved because a last tranche allowed the disburse-
ment of funds left over due to non-compliance with the conditions attached to 
previous tranches (see paragraph 33). Prior to this, the disbursement rate had 
been 89.7 %.

43 
A 2012 World Health Organisation assessment draws a mixed picture of outcomes 
in the Moldovan health sector. Progress remains behind expectations with regard 
to financial protection (i.e. the extent to which people are protected from the 
financial consequences of ill health), and equity in the financing of the health 
system. Unequal access to health services remained an issue. While it is difficult 
to assess overall quality in the delivery of health services, the study judges that 
some progress was made, notably in preventive care36. Overall, it is difficult to 
assess how the SBS programme has contributed to improving the health systems 
and thus the health of the population in Moldova. Other factors played a role, 
such as improvements in socioeconomic status37, and relevant data were not 
systematically collected and available38. This is also explained by the fact that no 
follow-up assessment was carried out on the impact of the health SBS after the 
end of the programme in 2013.

44 
The water SBS fell short of expectations in terms of the outputs set out in the fi-
nancing agreement. External factors, such as the economic crisis that hit Moldova 
in 2009 and political instability in the country, coupled with the weak institutions 
in the water sector and the absence of technical assistance, meant that the condi-
tions had only been partially fulfilled for all variable tranches. For this reason, the 
Commission disbursed only 68 % of the funds of the third tranche.

22

36  European Observatory on 

Health Systems and Policies, 
a partnership hosted by the 
WHO, ‘Republic of Moldova, 
Health system review’, Health 
Systems in Transition, Vol. 14 
No. 7, 2012, p. 131-139.

37 

38 

‘It is always difficult to 
disentangle the contribution 
that health care makes to 
improving health from overall 
improvements in 
socioeconomic status. This is 
particularly the case for the 
Republic of Moldova, which 
has a relatively small 
population so some trends 
over time have to be treated 
with caution’., Ibid., p. 135.

‘It is difficult to assess overall 
quality in the delivery of 
health services because the 
necessary data for such 
indicators are not routinely 
collected and made available. 
For example, patient-reported 
outcome measures are not 
routinely used, and in-hospital 
mortality rates for acute 
admissions are not collected. 
Patient safety data are also not 
routinely collected and 
analysed. For example, 
although data on 
post-operative complications 
in general are collected, they 
are not broken down by cause 
or contributory factors and so 
they cannot be used as patient 
safety indicators.’, Ibid, p. 136.

Observations 

45 
Public water services in Moldova are still affected by weaknesses. Only around 
50 % of the population have access to clean drinking water, the sector is consid-
erably underdeveloped, institutional capacity is weak and the implementation 
capacity of municipalities to manage water systems and supply is limited. In 
a 2012 report on the water sector performance, the Moldovan Court of Accounts 
concluded that: ‘the situation on water and sanitation supply of the localities 
in the Republic of Moldova is difficult and has got in a deadlock’. Another 2012 
report by the Court stated that: ‘in order to reach the expected benefits in the 
field of rehabilitation and construction of drinking water and sanitation systems 
it is necessary to improve the administration of public means targeted to these 
benefits achievement and the management system of the public authorities in 
charge of projects implementation in the field’. However, a recent study by the 
WHO and Unicef shows that the use of water sources and sanitation facilities 
improved from 1995 to 2015 39.

46 
SBS funds may provide little added value for the national sector budgets. We 
observed that this was the case for the health SBS, since national health budg-
ets, adjusted to inflation, decreased during programme implementation, in 
2010 and 201140 (see Box 4, example 2). This was seen as a sign that limited prior-
ity was being given to the sector, and cast doubt on the capacity of the Health 
Ministry to implement the national health policy. A study published by the WHO 
in 2012 indicated that total health expenditure was still very low relative to other 
European countries, and this significantly limited the volume and quality of the 
package of services provided41.

47 
Similarly, for the water SBS, little progress had been made due to the election 
period, empty sector investment budgets and management problems at the 
Ministry of Environment (see also Box 4, example 2). This situation illustrates how 
important it is that the commitments entered in the context of EU budget sup-
port operations are reflected in state budgets, by providing the funds needed for 
the relevant line ministries to fulfil the disbursement conditions.

23

39  Cf. WHO / UNICEF, Joint 

Monitoring Project for Water 
Supply and Sanitation, June 
2015 (wssinfo.org).

40  Government health 

expenditure in real terms 
decreased in 2010 and 2011, 
according to most sources 
(WHO, A review of health 
financing reforms in the 
Republic of Moldova, 2012, p. 4; 
calculations with inflation data 
(Consumer Prix Index, GDP 
deflator) from the World Bank 
(http://data.worldbank.org/
country/moldova) and 
Consumer Price Index from 
the Moldovan National Bureau 
of Statistics (http://www.
statistica.md)). Real 
expenditure increased slightly 
in 2011 when using the GDP 
deflator from the National 
Bureau.

41  The European Observatory on 
Health Systems and Policies, 
a partnership hosted by the 
WHO, ‘Republic of Moldova, 
Health system review’, Health 
Systems in Transition, Vol. 14 
No. 7, 2012, p. 43.,see also 
WHO, A review of health 
financing reforms in the 
Republic of Moldova, 2012, p. 3: 
‘the share of the government 
budget allocated for health is 
widely used as an indication of 
the priority given by 
government to health relative 
to other sectors of the 
economy. (…) the message is 
clearly one of falling 
importance’.

Observations 

24

The projects partially contributed towards 
strengthening the public administration

48 
In this section, we examine the contribution of projects towards strengthening 
the public administration in Moldova. We look at the design of projects, the sup-
port provided by projects to SBS programmes and the sustainability of results 
(see Annex III).

42  The national coordination unit 

is empowered with 
coordinating the foreign 
assistance provided by donors 
at the national level.

The projects were relevant, but needs analyses were 
impaired by weaknesses

49 
The EU provided significant support towards improving the central Moldovan 
public authorities’ capacity to manage and coordinate EU aid. In particular, this 
went to the State Chancellery, which acted as the national coordination unit42 for 
EU funds. This type of aid is relevant, given the Moldovan authorities’ limitations 
in managing funds, as was shown, for example, by their problems in setting up 
twinning projects (see Graph 2).

(in million euro)

2 Twinning: planned projects vs. projects actually carried out in 2007‑2010  
h
p
a
r
G

8

7

6

5

4

3

2

1

0

2007

2008

2009

2010

Source: Common Relex Information System (CRIS).

Planned projects

Amount used

 
Observations 

25

50 
As shown in Annex III (question 1.1), we found that needs analyses carried out for 
the projects were overall satisfactory: only two projects in the audit sample were 
based on an insufficient analysis. However, for nine projects, the analysis was 
impaired by partial weaknesses, resulting in project designs which were not fully 
in line with the Moldovan administration’s needs or objectives.

43  Twelve activities listed in the 

initial terms of reference were 
considered no longer relevant 
due to decreased demand 
from the beneficiary.

51 
In some cases, these shortcomings could be addressed during project implemen-
tation or at subsequent stages. For the technical assistance project No 13 (see 
Annex III), the consultant made efforts to adapt the initial terms of reference 
several months after the project start, following consultations with the Supreme 
Court of Justice, the Superior Council of Magistracy, regional courts and other 
donors43. For the Euhlpam project, in phases I and II, the EU delegation did not 
carry out a structured needs analysis to confirm the real needs and issues faced 
by the Moldovan administration in order to prioritise them effectively and target 
them more specifically. This task was left to the individual advisers. Since there 
were no handover procedures, each new adviser had to carry out a needs analysis 
of his/her own. However, more attention was paid to such analyses in phase III of 
the project.

The projects were not always well‑coordinated with SBS 
programmes

52 
The following two sub-sections look at coordination between SBS and projects 
for two different types of project. The first examines the SBS technical assistance 
that is envisaged in SBS financing agreements (see paragraph 7 and Graph 1) and 
the second looks at other technical assistance and twinning projects (see para-
graph 8).

Observations 

26

The specific SBS technical assistance for the development of 
administrative capacity came late due to contracting procedures

53 
The Commission provided specific technical assistance to help the Moldovan 
administration with the implementation of SBS in the four financing agreements 
audited. This is because partner country governments are often characterised by 
institutional capacity constraints, which may hinder the implementation of the 
strategy supported with SBS.

54 
However, this technical assistance is not synchronised with the main budget sup-
port programme. It can only be launched once the financing agreement for the 
SBS programme has been signed, and given the necessary delays for tendering 
and contracting procedures, it starts several months after the main programme 
(see Table).

l

e Delay between budget support and specific SBS technical assistance for the 
b
a
T

contracts audited1

SBS 
programme

Technical assistance envisaged in 
SBS financing agreement  
(million euro) 

Start of SBS programme  
(signature financing agreement)

Start of technical  
assistance operations 
(signature contract)

Health

Justice

PFPRs

Water

3.15

1.82

4

3

February 2009

June 2013

October 2014

August 2009

June 2010

none

October 2015

September 2011

Time gap

16 months

-

12 months

25 months

1  Only technical assistance specifically made available through the SBS grant. Other projects in the same sector exist, for instance, in the justice sector.
2  This amount is used for financing the evaluation missions before the payment of tranches.
Source: Common Relex Information System (CRIS).

Observations 

27

55 
These delays had a negative impact on the implementation of the health and wa-
ter SBS, since the national administrative capacity was insufficient to manage the 
programmes. For the health SBS, several specific conditions were not fulfilled due 
to the late start of the technical assistance. For the water SBS, the 2012 monitor-
ing report states that a better time synchronisation between the planned techni-
cal assistance support and the SBS would be more beneficial and would secure 
successful implementation. In its final report, the contractor recommended that 
budget support should be preceded by technical assistance and not followed by 
it, as was the case.

Other technical assistance and twinning projects were not always 
used to prepare or support SBS programmes

56 
The EU delegation paid attention to creating synergies between SBS and projects 
targeting the same sector. In general, twinning and technical assistance were 
used to accompany SBS programmes. This was the case for instance for a pro-
gramme on rural areas (even though this programme was not included in the 
audit). Also, projects prepared the ground for SBS, for example for a programme 
on the free trade area. Finally, four technical assistance projects in the justice sec-
tor covered needs that were related to those tackled by the budget support (see 
Annex III, projects No 12-14).

57 
Despite these efforts, in the cases audited, projects were not always used to 
prepare or support SBS programmes (see paragraphs 58 to 63 and Box 6). The 
main aid delivery methods favoured by the Commission were budget support 
and twinning, even though there was a need for technical assistance and a high 
government demand for it, especially in the areas where budget support was 
planned afterwards, to prepare the area for more successful results.

Observations 

28

6
x
o
B

Training on budget support for Moldovan officials came late

A fully fledged training session on budget support for Moldovan officials was first organised through a techni-
cal assistance project in March 2014 that amounted to 40 000 euros (see Annex III, project No 9). At that time, 
budget support had been used for over 7 years in Moldova.

The training, which took place over 6 days and benefited 24 officials, revealed that they had a limited un-
derstanding of this aid delivery method. Participants did not progress significantly, since scores in the initial 
and final tests only improved from 3.2 to 3.9 points out of 10. Scores even worsened in four of the ten areas 
assessed.

This limited result was not addressed and followed up comprehensively, since no other fully fledged train-
ing on budget support has taken place since. The Commission did, however, organise several half-day round 
tables and presentations in Moldova.

58 
In 2011, the Commission financed an ex ante assessment of the justice sector. This 
assessment recommended focusing on technical assistance as the main method 
of aid delivery prior to programming SBS. Prior technical assistance is necessary 
since it would not be possible for the government to develop a reform strategy in 
the justice field without coordination with the judiciary branch, which is consti-
tutionally separate from the executive. In 2011, when the justice sector reform 
strategy was being prepared, shortcomings in the executive’s domestic coordina-
tion efforts cast doubt on its capacity to set up a coherent reform strategy that 
would be fully endorsed by the judiciary.

59 
In line with this assessment, four technical assistance projects had been planned 
in the justice sector since 2011, but were delayed due to staff constraints in the 
EU delegation. One project started 2 months prior to the signature of the financ-
ing agreement for the SBS, in April 2013, the other three started 18 months later 
(see Annex III, projects No 12 - 14).

 
Observations 

29

60 
The Moldovan justice sector reform strategy was adopted in 2011 with the goal 
of achieving eligibility for SBS. Its implementation is hindered by inadequate 
progress in the prosecution reform and insufficient support by the judiciary. 
A new reform initiative, developed by the Superior Council of Magistracy and the 
Supreme Court of Justice, was presented publicly in May 2015, with the logistic 
support of technical assistance project No 13.

44  SIGMA (Support for 

Improvement in Governance 
and Management) is an EU 
and OECD joint initiative. 
SIGMA experts provide 
assistance in six key areas of 
public administration. (http://
www.sigmaweb.org)

61 
Technical assistance project No 12 currently assists working groups with the revi-
sion of budget estimates for the JSRS and the explanation of the specific condi-
tions for SBS (see paragraphs 27 and 31). This technical assistance project is an 
example of flexible adjustment to additional needs arising in the implementation 
of an SBS programme, even where such support was not explicitly envisaged in 
the initial project contract.

62 
The public financial management sector provides examples for the deployment 
of various types of support, such as SIGMA44, technical assistance, twinning and 
SBS. Twinning projects on public procurement and internal financial control end-
ed in 2012 and 2013, with reports stressing the need for the consolidation of re -
sults (see Annex III, projects No 2 and 4). Efforts in these areas continue, through 
SIGMA and policy dialogue. However, the specific conditions of the SBS for public 
finance policy reforms do not address these weaknesses. EU-funded advisers 
(under the Euhlpam project) were deployed in institutions that are relevant for 
public financial management, such as the state tax inspectorate, but none took 
office in any of the three institutions implementing the SBS programme (Court of 
Accounts, Ministry of Finance, Parliament).

63 
However, since 2014, the Commission has paid better attention to creating 
synergies between the SBS and projects, as evidenced by a twinning project at 
the Moldovan Court of Accounts (see Annex III, project No 5) and the planned 
deployment of an Euhlpam adviser at the Parliament in 2016.

Observations 

30

The results were not always sustainable due to lack of 
political will and other external factors

64 
Overall, projects delivered the expected outputs. Examples of such concrete 
achievements include an online platform for monitoring activities carried out by 
civil society organisations in Moldova, the provision of strategic advice to various 
ministries, a draft law on state aid or a manual of procedures for the management 
of EU aid.

65 
Concerns exist on the sustainability of the results achieved with the projects, 
often due to an insufficient political will on the part of the national authorities 
to tackle some of the obstacles to strengthening public authorities (see Box 7). 
As shown in Annex III (question 1.3), there were partial concerns for half of the 
fourteen projects evaluated, and substantial concerns for the rest.

66 
The Commission provided technical assistance to support the Moldovan State 
Chancellery in the context of the TTSIB project (see Box 7), from 2011 to 2013. 
While the purpose of this project was to build the State Chancellery’s capacity for 
technical leadership for the identification, preparation and implementation of 
activities funded by external assistance, TTSIB consultants also provided services 
which partly replaced the operational tasks of the State Chancellery staff. TTSIB 
project reports considered that, while many expected results had been achieved, 
the State Chancellery did not have a sufficient capacity to carry out tasks, absorb 
training and apply acquired skills.

67 
As a good practice, in view of the absence of sustainability elements in previous 
projects, the EU delegation encouraged the development of exit strategies for 
both the TTSIB and the Euhlpam projects in phase III. This was to make sure that 
sustainability issues were addressed by each adviser before he left. However, in 
the case of the TTSIB, the strategy was not implemented, as the Moldovan au-
thorities felt that it was too resource intensive.

Observations 

31

7
x
o
B

Sustainability issues with a project: technical assistance to support Moldova in 
building the capacity for the application of aid schemes (1.9 million euros)

A technical assistance project supported the Moldovan State Chancellery in the overall coordination of EU aid, 
and more specifically, in building the capacity for the application of the twinning, TAIEX45 and SIGMA instru-
ments, and in the preparation and implementation of the comprehensive institution-building programme 
(TTSIB-project, see Annex III, project No 6).

After the end of the project in 2013, part of the EU aid coordination function was transferred from the State 
Chancellery to the Ministry of Foreign Affairs. The Moldovan authorities did not ensure that the knowledge 
acquired over the years by the State Chancellery was preserved, either by transferring trained staff or by 
coaching staff at the Ministry. The EU delegation programmed a technical assistance project for the Ministry, 
albeit one of more limited scope than the TTSIB. Plans are ongoing to move the coordination function back to 
the State Chancellery, but a substantial part of the State Chancellery’s staff has left since 2013.

45  TAIEX is the Technical Assistance and Information Exchange instrument of the European Commission. TAIEX supports public administrations 

with regard to the approximation, application and enforcement of EU legislation as well as facilitating the sharing of EU best practices.

 
Conclusions and 
recommendations

32

68 
The EU faces significant challenges with regard to implementing assistance in 
Moldova. Political and macroeconomic instability, poor governance and weak 
public administration significantly reduce the Commission’s leverage to encour-
age reform.

69 
We examined whether EU assistance provided to Moldova had contributed effec-
tively towards strengthening the public administration. To this end, we assessed 
how well the Commission had designed and implemented the financial support 
provided via SBS programmes, on the one hand, and by traditional projects on 
the other. The audit looked at projects and SBS in the sectors receiving the bulk 
of EU support: justice, public finance, health and water.

70 
On the basis of our audit work, we concluded that the EU assistance only par-
tially contributed to strengthening the public administration. External factors 
explained a number of the shortcomings observed. Others could be attributed to 
weaknesses in the design and implementation of the audited programmes and 
projects.

71 
Since little progress had been made in the sectors targeted, we concluded that 
budget support had a limited effect in strengthening the public administration 
(see paragraphs 38 to 47).

72 
We also found that the Commission could have responded more quickly when 
risks associated with the support materialised. Programmes were not sufficiently 
aligned to Moldovan strategies (see paragraphs 13 to 28).

73 
The potential benefit of the programmes was reduced because conditionality 
was not sufficiently exploited: some specific conditions were fulfilled between 
programme negotiation and the start of the SBS or were not directly measurable. 
The Commission could have been more stringent when assessing compliance 
with disbursement conditions (see paragraphs 29 to 34). Also, the granting of ad-
ditional incentive-based funds was not fully justified (see paragraphs 35 to 37).

Conclusions and recommendations 

33

74 
Project designs were generally found to be relevant. EU assistance chan-
nelled through projects was partially effective in strengthening the public 
administration.

75 
The scope and timing of projects was not always well coordinated with SBS pro-
grammes (see paragraphs 52 to 63). The specific, budget support related, techni-
cal assistance for the development of administrative capacity did not start until 
months after the main budget support programme. Other technical assistance 
and twinning projects were not always used to prepare or support budget sup-
port programmes.

76 
Projects generally delivered the expected outputs. However, the results were 
not always sustainable due to lack of political will and other external factors (see 
paragraphs 64 to 67).

77 
Based on the above conclusions, we formulate the following recommendations.

Recommendation 1 
Mitigate risks linked to budget support operations

The Commission should apply the existing measures in the context of the early 
warning system more rigorously to prevent or mitigate risks and set out more 
clearly the course of action to be followed where risks become a reality. Such ac-
tion should be taken in a timely manner.

Recommendation 2 
Align SBS programmes with a well‑defined national reform 
strategy

The Commission should better link the budget support programmes to national 
strategies. It should sequence the aid, ensuring that there is a well-defined na-
tional reform agenda. It should specifically appraise the relevance and credibility 
of the country’s strategy in relation to the available institutional and financial 
resources.

Conclusions and recommendations 

34

Recommendation 3 
Strengthen the use of conditions and performance indicators

The Commission should strengthen its use of conditionality. This should involve 
(i) setting clear and relevant conditions and performance indicators to better 
assess and demonstrate results, (ii) responding firmly, proportionally and quickly 
where the Moldovan government shows insufficient commitment to comply with 
what has been agreed.

Recommendation 4 
Link additional incentive‑based funds more clearly to 
demonstrable progress

Incentive-based funds should be allocated on a more stringent application of the 
existing methodology.

Recommendation 5 
Coordinate projects with SBS programmes

The Commission should use projects more systematically to prepare or support 
SBS programmes. SBS technical assistance should be better timed to provide sup-
port for SBS programmes from the outset.

Recommendation 6 
Ensure the sustainability of projects

The Commission should ensure that sustainability aspects are embedded in the 
planning of all projects, by more systematically assessing the capacity and politi-
cal commitment of public authorities to sustain outcomes.

This Special Report was adopted by Chamber III, headed by Mr Karel PINXTEN, 
Member of the Court of Auditors, in Luxembourg at its meeting of 19 April 2016.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA
President

 
 
 
Annexes

35

I List of contracts audited
x
e
n
n
A

Projects

Contract 
year

Status

Justice reform

Contract title

2009

2010

2011

2012

2013

2014

2014

Closed

Closed

Closed

Support to Moldova in Prisons System upgrading and Penal Reform

Assessment of Rule of Law and Administration of Justice for sector-wide programming

Support for the formulation of the Sector Budget Support and preparation of tenders in 
the justice sector

Ongoing

Monitoring justice sector reform for increased Government's accountability

Ongoing

Support to coordination of the Justice Sector reform in Moldova

Ongoing

Increased Efficiency, Accountability and Transparency of Courts in Moldova

Ongoing

Support to the Pre-Trial Investigation, Prosecution and the Defence Set-Up in Moldova

Other Central Public Administration

Closed

Closed

Closed

Closed

Closed

Support to Moldova PFM reforms

EU High Level Policy Advice Mission (Euhlpam)

Support to the Public Procurement System in the Republic of Moldova

Support to Implementation and Enforcement of Competition and State Aid Policy

Support to the implementation of the Comprehensive Institution Building Programme 
for the Republic of Moldova

Ongoing

Support to the Government of Moldova in the field of anti-corruption, reform of the 
Ministry of Internal Affairs, including police and personal data protection

Closed

Closed

Closed

Technical assistance to support the Government of the Republic of Moldova in building 
the capacity for application of Twinning, TAIEX and SIGMA instruments, and to provide 
support in preparation and implementation of the CIB Programme

Strengthening Public Financial Management in the Republic of Moldova

EU High Level Policy Adviser Mission II (Euhlpam II)

Ongoing

EU High Level Policy Advisers' Mission III (Euhlpam III)

Ongoing

Training on EU Budget Support for the Government of Moldova

Ongoing

Capacity building on management of EU institution building programmes

2009

2010

2010

2011

2011

2011

2011

2011

2012

2013

2013

2014

2014

Planned 
amount
(euro)

Paid
(euro)

850 500

198 193

850 500

198 193

139 304

139 304

274 105

2 231 800

2 078 700

2 007 500

246 695

1 476 324

709 357

872 085

7 780 102

4 492 458

114 474

114 474

3 152 441

3 152 441

914 008

926 244

914 008

926 244

111 370

111 370

2 853 790

2 832 718

1 900 859

1 900 859

1 369 926

2 864 015

1 369 926

2 864 015

2 977 291

2 840 539

39 148

225 018

37 533

211 448

779 546

Ongoing

Consolidation and Strengthening the External Public Audit in the Republic of Moldova

1 598 069

19 046 653

18 055 121

Total

26 826 755

22 547 579

 
Annexes 

I
x
e
n
n
A

Projects

Contract 
year

Status

Contract title

Public administration - Transversal Functions

2013

2014

Ongoing

Support to the Justice Sector

Ongoing

Support to Public Finance Policy Reforms in Moldova (PFPR)

Public administration - Public Services Delivery

2009

2009

2010

2010

2011

2012

2013

Closed

Closed

Closed

Ongoing

Sector Policy Support Programme Health

Sector Policy Support Programme in the water sector ENPI AAP 2009

Health Sector Budget Support Related Technical Assistance

Rehabilitation of the water supply system in the Municipality of Nisporeni, Republic of 
Moldova

Ongoing

TA for the implementation of Sector Policy Support Programme in the Water Sector

2 771 010

1 611 437

Closed

SPSP in the water sector ENPI AAP 2009 - Addendum 01 to FA 2009/020-520 (additional 
5MEUR to the budget support component)

5 000 000

5 000 000

Closed

EaPIC - Moldova - scale-up of Health Sector Policy Support Programme (2008/19655)

6 000 000

6 000 000

100 655 299

98 995 726

Total

191 855 299

135 195 726

Grand Total

218 682 054

157 743 305

36

Planned 
amount
(euro)

Paid
(euro)

58 200 000

28 200 000

33 000 000

8 000 000

91 200 000

36 200 000

43 114 336

43 114 336

35 777 200

35 777 200

2 992 753

2 992 753

5 000 000

4 500 000

 
Annexes 

I Summary ratings of sector budet support contracts in the audit sample
I
x
e
n
n
A

Title

Support to Public 
Finance Policy Reforms 
in Moldova (PFPR)

Support to 
Justice Sector 
Reforms

Sector Policy 
Support Pro-
gramme in the 
Water Sector

37

SBS programme 
‘Sector Policy 
Support Pro-
gramme Health’

Contract duration, months
Contract year

60
2014

72
2013

108
2009

60
2009

? Programme did contribute to a clear overall strategy

d
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There were clearly formulated national priorities, on which SBS was based

Objectives of programme match national priorities

Political and economic risks were evaluated as limited before granting SBS

The fiduciary risk was mitigated through an ex ante assessment of the cost 
of the reform
There were documented, clear, objective and relevant reasons for using SBS 
as aid modality

Past evaluations/lessons learnt were taken into account

MD administration implemented programme fully and on time

programme ongoing

programme ongoing

Technical assistance was targeted, timely and created sustainable capacity

N/A

Tranches were only disbursed when conditions were fulfilled

Objectives were directly measurable

Top-ups of budgets were justified

The monitoring framework includes SMART objectives and measurable 
indicators
Information was available to establish baselines and monitor / evaluate 
progress

Monitoring and evaluation was continous

no variable tranche 
disbursed

N/A

Corrective actions were taken when programme was not on track

programme ongoing

programme ongoing

? Expected outputs/results were achieved

s
t
l

Conditions effectively stimulated reforms

Programme had a positive impact on administrative capacity

SBS provided relevant support and created sustainable capacity in MD 
administration
Actions financed are clearly additional compared to what MD was undertak-
ing prior to the aid

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Legend - the following ratings have been established:

Criterion met

Criterion partially met

Criterion not met

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AQ1: Did projects contribute effectively to strengthening public administration?

1.1 Were projects 

well-designed?

1.2 Were projects well-implemented?

1.3 Did projects produce tangible and 

sustainable results?

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Annexes 

38

I Summary ratings of project contracts in the audit sample
I
I
x
e
n
n
A

Project No  

Contract 
Year

Contract 
duration, 
months

Title

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19
20

2009

2010

2011

2011

2014

2011

2011

2011

2014

2014

2012

2013

2014

2014

2009

2010

2012

2013

2010
2011

2

24

30

24

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38

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36

36

36

24

TA - Support to Moldova PFM Reforms

Twinning - Support to the Public Procurement System 

TA - Support to the GOM in the field of anti-corruption, reform of the Ministry of Internal Affairs (component III)

Twinning - Strengthening Public Financial Management 

Twinning - Consolidation and Strengthening the External Public Audit 

TA - Support the GOM in building the capacity for application of Twinning, TAIEX and SIGMA & CIB Programme (TTSIB)

Twinning - Support to Implementation and Enforcement of Competition and State Aid Policy

Study - Support to the implementation of the CIB Programme 

TA - Training on EU Budget Support for the Government of Moldova

TA - Capacity building on management of EU institution building programmes

Monitoring Justice Sector Reform For Increased Government Accountability (PROMOLEX)

N/A

N/A

N/A

TA - Support to Coordination of Justice Sector Reform in Moldova

TA - Increased Efficiency Accountability and Transparency of Courts in Moldova (ATRECO)

TA - Support to the Pre-Trial Investigation, Prosecution and Defence Set Up

Twinning - Prison system Upgrading

project ongoing

project ongoing

project ongoing

project 

ongoing

project ongoing

project ongoing

project ongoing

project ongoing

project 

ongoing

project 

ongoing

project 

ongoing

project ongoing

project ongoing

project ongoing

26.5

EU High Level Policy Advice Mission EUHLPAM I

20

18

18
17

EU High Level Policy Advice Mission EUHLPAM II

EU High Level Policy Advice Mission EUHLPAM III

Assessment of the Rule of Law (consulting activity)
Support for preparation of the SBS (consulting activity)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

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N/A

N/A

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project ongoing

N/A

N/A

N/A

project ongoing

project ongoing

project ongoing

N/A

N/A

N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annexes

39

AQ1: Did projects contribute effectively to strengthening public administration?

1.1 Were projects 
well-designed?

1.2 Were projects well-implemented?

1.3 Did projects produce tangible and 
sustainable results?

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d
d
a

-
r
e
d
n
u
s
a
w
D
M

t
a
h
w
o
t

d

i
a
e
h
t
o
t

r
o
i
r
p
g
n

i
k
a
t

N/A

N/A

N/A

N/A

N/A

N/A

N/A

project ongoing

N/A

N/A

N/A

project ongoing

project 
ongoing

project ongoing

project ongoing

Monitoring Justice Sector Reform For Increased Government Accountability (PROMOLEX)

N/A

N/A

N/A

project ongoing

project ongoing

project ongoing

project 
ongoing
project 
ongoing
project 
ongoing

project ongoing

project ongoing

project ongoing

project ongoing

project ongoing

project ongoing

project ongoing

N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

Legend - the following ratings have been established:

Criterion met

Criterion partially met

Criterion not met

Summary ratings of project contracts in the audit sample

Project No  

Contract 

Year

Contract 

duration, 

months

Title

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

2009

2010

2011

2011

2014

2011

2011

2011

2014

2014

2012

2013

2014

2014

2009

2010

2012

2013

2010

2011

2

24

30

24

24

38

21

5

3

12

24

36

36

36

24

20

18

18

17

TA - Support to Moldova PFM Reforms

Twinning - Support to the Public Procurement System 

TA - Support to the GOM in the field of anti-corruption, reform of the Ministry of Internal Affairs (component III)

Twinning - Strengthening Public Financial Management 

Twinning - Consolidation and Strengthening the External Public Audit 

TA - Support the GOM in building the capacity for application of Twinning, TAIEX and SIGMA & CIB Programme (TTSIB)

Twinning - Support to Implementation and Enforcement of Competition and State Aid Policy

Study - Support to the implementation of the CIB Programme 

TA - Training on EU Budget Support for the Government of Moldova

TA - Capacity building on management of EU institution building programmes

TA - Support to Coordination of Justice Sector Reform in Moldova

TA - Increased Efficiency Accountability and Transparency of Courts in Moldova (ATRECO)

TA - Support to the Pre-Trial Investigation, Prosecution and Defence Set Up

Twinning - Prison system Upgrading

26.5

EU High Level Policy Advice Mission EUHLPAM I

EU High Level Policy Advice Mission EUHLPAM II

EU High Level Policy Advice Mission EUHLPAM III

Assessment of the Rule of Law (consulting activity)

Support for preparation of the SBS (consulting activity)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Replies of the Commission 
and the EEAS

40

Summary

V
The Commission points out that there was progress, albeit partial, in 2 of 4 audited Budget Support sectors (water 
and health) while the other two (justice and public finance policy reform), more recent programmes remain ongo-
ing and their final results can therefore not be measured yet.

The Commision's response to risk was actually quick taking account of the actual unfolding of events and internal 
decisions as indicated in the replies to paragraphs 13-28.

The present situation with regards to budget support payments in Moldova is that all disbursements are on hold, 
pending fulfilment of all general conditions, including macro econcomic stability and budget transparency. An IMF 
agreement is essential in this respect.

Regarding alignment with national strategies, the Commission’s concept of a strategy is not static and formal. The 
Commission was attentive to the essential, substantial elements of what should constitute a strategy while con-
stantly adjusting to the pressing needs dictated by an ambitious association agenda and a challenging geopolitical 
environment. The fact that the Commission did not hesitate to go beyond the sometimes narrow scope of certain 
national strategies actually demonstrates that the Commission did ensure that maximum reform leverage would be 
made from conditions. 

The Commission emphasises that Budget Support as an aid modality is a comprehensive package of measures 
including funding, capacity building, policy dialogue and performance indicators. Policy dialogue, even in the for-
mulation phase of the programme, can result in measures taken by the Government before any funds being trans-
ferred which is very positive. 

The Commission further underlines that partial fulfilment of performance criteria would warrant partial disburse-
ment. The Commission recognises that in one case, in particular, the assessment could have been more stringent 
but this is not systemic.

The Commission points out that ‘more for more’ funding was awarded after internal reviews. Those decisions were 
taken by the Commission under its implementation mandate of external assistance, with political guidance from the 
EEAS, and endorsed by Member States, in full respect of comitology.

VI
The Court rightly points to the quality of project design, their effectiveness and their outputs. 

The Commission agrees on the need for sequencing between technical assistance, twinning projects and Budget 
Support. However, in the context of the present financial rules, there will always be a lead time between technical 
assistance or twinning and budget support operations.

Replies of the Commission and the EEAS

41

Introduction

05
Weaknesses in public administration, in particular in public finance systems or related to corruption hinder develop-
ment in general and aid effectiveness. Their potential impact is not confined to budget support. What is clear is that 
the improvement in financial control and public procurement systems pursued in the context of budget support 
effectively reduces the scope for corruption.

07
The Commission underlines that in addition to complementary assistance within the same programme, there are 
many important instances of project-based assistance deployed upstream, ahead of Budget Support operations. 

Regarding the audited programmes, this notably applies to the areas of Justice whereas it also applies in other sec-
tors such as Vocational Education and Training and the European Neighbourhood Programme for Agriculture and 
Rural Development.

Observations

14
The Commission stresses that by working through national systems, budget support strengthens ownership and 
reduces transaction costs for the beneficiary country. 

Sector Budget Support other than targeted Budget Support is designed to reward results rather than to finance 
activities. Therefore it is clear that controls and audits in general cannot go beyond the stage where funds are trans-
ferred following the achievement of agreed conditions. 

Budget support operates in a development context where core government systems such as public financial 
management can have major weaknesses. However, the observation fails to highlight that Sector Budget Supports 
strengthens country systems for sustainable development, supports the role of the national institutions, favours 
transparency and fosters domestic accountability and strengthens the policy dialogue. 

Eligibility conditions are rigorous. A partner country is eligible for budget support only when the government has 
a relevant and credible strategy in place to address these weaknesses. The Commission can also require specific 
short-term measures to mitigate the risks. New budget support guidelines (which were revised in 2012 following the 
Commission proposals and Council Conclusions of 14 May 2012 for a new approach to budget support) now include 
a number of new provisions to further clarify the rules. This includes new eligibility rules on transparency and over-
sight, a formal risk assessment process and a senior management governance framework.

Public Finance Management (PFM) criteria are indeed one of general conditions embedded in all new SBS programs 
and it is reviewed on the occasion of each payment decision. Whereas the Court cites the use of country PFM sys-
tems as a risk, it falls short of mentioning that for good economic governance and sustainable development, a well-
functioning PFM system and a solid domestic revenue base are necessary.

This aid delivery mechanism represents one of the ways in which the Commission has responded to calls by the 
international development community and EU stakeholders for more effective interventions which focus on results 
and ownership and are less administratively complex, thereby reducing transaction costs for partner countries. It is 
an answer to the limitations met by the traditional project modality in supporting key reforms.

Replies of the Commission and the EEAS

42

16
The Commission points out that budget support and decentralised management are two different aid implementa-
tion modalities that do not rely equally on country systems. 

As explained above Budget support operates in a development context where core government systems as public 
financial management can have major weaknesses; nevertheless eligibility conditions are rigorous. A partner coun-
try is eligible for budget support only when the government has a relevant and credible strategy in place to address 
these weaknesses. The Commission can also require specific short-term measures to mitigate the risks. New budget 
support guidelines (which were revised in 2012 following the Commission proposals and Council Conclusions of 
14 May 2012 for a new approach to budget support) now include a number of new provisions to further clarify the 
rules. This includes new eligibility rules on transparency and oversight, a formal risk assessment process and a sen-
ior management governance framework. 

Thirdly, the Commission points out that the ratio of aid delivered through Budget Support put forward by the Court 
includes in reality all additional support such as Twinning or Technical assistance, which is granted through the 
same financing agreements and paid directly to the aid providers, and is not transferred to the country's treasury.

17
The Commission points out that corruption hinders aid effectiveness in general and its impact is not confined to 
general budget support programmes. What is clear is that the improvement in financial control and public procure-
ment in the context of budget support programmes can effectively reduce the scope for corruption.

18
The Commission emphasises the description of the actual unfolding of events and internal decisions below.

Indeed, as soon as the banking scandal broke out in November 2014, the Commission’s Budget Support Steering 
Committee decided in December 2014 to review aid modalities in the context of the 2015 programming and to 
introduce further risk mitigation. This included: systematically taking up the issue at high level with the Moldovan 
authorities; a decision in the Financial Assistance Steering Committee of February to increase the risk rating of 
Moldova leading to enhanced scrutiny on any Budget Support transaction; instructions to the EU Delegation to 
enhance monitoring of risks. Furthermore this led to a significantly reduced share of budget support programmed 
in 2015, compared to the previous years. 

From June 2015 after three major banks had been put under state controlled administration, no major progress had 
been observed in criminal investigations in the banking frauds, no recovery strategy had been prepared, and an IMF 
mission planned for mid-June had to be cancelled due to the Prime Minister’s resignation. This triggered the Com-
mission’s now public response of July 2015 underlining that Budget Support disbursement was on hold pending an 
agreement between the International Monetary Fund (IMF) and Moldova.

Moreover it should be clear that the billion USD lost in the three Moldovan banks consists of depositor money - 
mainly Moldovan - and not, as far as the Commission is aware of, EU taxpayers' money.

Replies of the Commission and the EEAS

43

Box 1 ‑ Background information to Moldova’s banking crisis
The Commission has urged the Moldovan authorities on all possible occasions and in all relevant institutional set-
tings to investigate the lost funds and take the necessary steps to recovery.

The EU position was confirmed in the February 2016 Council Conclusions, namely that efforts should continue to 
recover the funds which therefore cannot be deemed as definitively lost.

At the time of the audit - and with the support of international partners - the Government of Moldova is putting in 
place a recovery mechanism for recuperating the maximum value of all misused assets.

20
The Commisson points out that it made disbursements in December 2014 following discussion at a meeting of its 
Budget Support Steering Committee that discussed the political and macroeconomic risks inherent to the country 
situation; on balance, its overall conclusion was to approve the pending disbursements, with the understanding 
that aid modalities would be reviewed and risk mitigation measures would be taken, which indeed took place in the 
following weeks and months as described above.

22
The Commission emphasises that both the Justice and public finance support were each anchored into national 
strategies while going beyond these in well defined cases explained below.

This ambitious approach is also coherent with the Commission’s expectation to see maximum leverage being 
achieved through conditionality to advance reforms (see Commission replies to paragraphs 29-34). 

Box 2 ‑ Specific conditions were not sufficiently aligned with a national strategy: the 
SBS for public finance policy reforms
The Commission emphasises that the SBS on public finance goes beyond the narrower PFM strategy and supports 
the national development strategy Moldova 2020 as well as the public finance management reform objectives. The 
SBS for public finance policy reforms relies not only on a national strategy for Public Finance Management aspects, 
but more strategically on developing accountable public finance policies aimed to a transparent and reliable imple-
mentation of Moldova’s national development strategy. This was documented during the quality review process 
leading to the final adoption of the PFPR BS programme. 

As explained above the SBS is anchored in a broader strategic document and in well defined cases explained below 
further strategic goals enshrined elsewhere would be used.

The Commission’s expectation is to see maximum leverage being achieved through conditionality to advance 
reforms (see Commission replies to paragraphs 29-34).

The creation of a Fiscal Council is based on Article 47 of the EU-Moldova Association Agreement and on common 
practice in several EU Member States, as well as the Single Support Framework. In addition, the expectations men-
tioned here reflect good international practice in public financial management. Moldova, given its level of develop-
ment, has to move forward in terms of fiscal discipline, medium-term budgeting and more transparency.

Replies of the Commission and the EEAS

44

23
The Commission considers that, beyond the formal correspondence, in substance the Policy Matrix of the SBS 
Justice is aligned with the country Justice Sector Reform Strategy 2011-2016. A significant exception is one major 
condition regarding the drafting, submission and adoption of the law on ratification of protocol 12 to the European 
Convention of Human Rights. This was to address an important concern and also align with the new Budget Sup-
port Guidelines. The Commission’s expectation is to see maximum leverage being achieved through conditionality 
to advance reforms (see Commission replies to paragraphs 29-34).

24
The Commission notes that costing sector strategies is unfortunately not very common yet in many countries. This is 
not a requirement for eligibility by itself. In the referred annex, the new BS 2012 guidelines which entered into force 
in January 2013 (in any event after the Health SBS would be set up) set out a framework for analysis, but decision 
on eligibility is based on the presence of a credible and relevant sector strategy. This is assessed using many criteria 
and involves a judgement.

In the present case, the SBS programme to improve the delivery of public health was based on the Healthcare 
System Development Strategy which is a sector specific strategy which addresses issues like financing of the health 
sector or delivery of health services. The SBS programme to improve the delivery of water services was however not 
based on a clearly formulated Moldovan reform strategy.The water SBS was designed to support the national 2007 
water strategy. However, the latter turned out to be overambitious during programme implementation, since it 
targeted a large number of objectives without providing a time-bound action plan or a clear institutional set-up for 
implementation. Mitigation measures were taken such as a TA to address the institutional issues.’ 

26
The Commission points out that the action document contains the rationale for determining the amount of support 
as follows: 

—  On the criterion ‘Financing needs of the partner country’, a Needs Assessment was done at formulation stage of 
the PFPR programme, assessing technical and financial resources required to implement the PFM Reform Strat-
egy 2013-2020. The main findings are summarized in the final Action document. This Action document for PFPR 
also provides a brief analysis of the criterion on ‘commitment of the partner country to allocate national budget 
resources in line with development strategy and objectives’. 

—  On the Criterion on ‘Result orientation in the partner country’s development strategy including a monitoring system’ 
a supplementary document to the Action Document on public policy assesses the monitoring system for the 
implementation of the National Development strategy put in place by the state Chancellery. 

—  Concerning the criterion on a ‘Track record and absorption capacity of past disbursements and how effectively 

agreed objectives were achieved with budget support operations’, specific information is constantly reported in the 
disbursement file of each budget support programme (e.g. ESRA and energy BS).

Replies of the Commission and the EEAS

45

28
The Commission recalls that in the case of the justice SBS, the budget variation stemmed in part from the decision 
to add a Human Rights protection component.

30
The Commission emphasises that Budget Support as an aid modality is a comprehensive package of measures 
including funding, capacity building, policy dialogue and performance indicators. By construction Budget Support 
achieves reform leverage by rewarding own progress by government rather than delivering inputs. Policy dialogue, 
even in the formulation phase of the programme, can result in measures taken by the Government before any funds 
being transferred which is very positive.

Moreover, the long programme cycles stemming from the financial regulation and from the regulations on the 
intruments mean that governments are aware of the conditions way before signing the actual financing agreement. 
In the cases audited the measures were taken after the identification phase of the programme.

Box 3 – Examples of specific conditions 
Example 1 – Some specific conditions required limited action by the Moldovan authorities
The Commission does not consider that this condition of the PFPRs SBS was particularly easy to meet. The Ministry 
of Finance did not publish mid-year reports with the necessary aggregated data. PEFA 2011 and 2015 refer only to 
monthly reports. In terms of budget transparency and quality of budget implementation reports, the Commission 
correctly considered that such improvements were important and necessary. 

Example 2 – Some specific conditions were already fulfilled between the programme negotiation and the 
start of the SBS
The Commission confirms that, after project identification had taken place and project formulation was well under-
way, the beneficiaries of the Health SBS took some of the measures required by the indicators. 

The Commission underlines that in the case of the Justice SBS, the identification mission for the justice SBS 
started in July 2010 leading to a draft produced in April 2011, and Quality review of the programme took place on 
05 March 2012 that is, before the adoption of the laws. Due to internal Moldovan procedures the financing agree -
ment triggering the formal launch of the Budget Support component was eventually ratified on 25/09/2013. 

31
Regarding the extent to which SBS conditions were measurable, the Commission emphasises the need to both 
address constantly evolving circumstances and the long programme cycles stemming from the financial regulation 
and from the regulations on the instruments.

For SBS Justice the explanatory table has been prepared in order to bring more clarity between both parties, EU 
delegation and Ministry of Justice, it being understood that the evaluation for the disbursement of each tranche is 
also drawn from an external evaluation mission.

Replies of the Commission and the EEAS

46

32
The Commission points out that funds were partially disbursed where partial fulfilment of relevant criteria was 
noted. The Commission's own assessment of disbursement requests may lead it to update the assessment of the 
fulfilment of conditions and disburse less, or more funds, than recommended in the external evaluation report.

Box 4 ‑ Funds were disbursed, even when specific conditions and performance 
indicators were not fulfilled
Example 1 – More funds were disbursed than recommended in the external evaluation report
The Commission points out that it has the responsibility to review the recommendations of the external reviewers 
and, based on its assessment and own sources of information, disburse less or more in line with contract terms.

In the case of the Health SBS, the time gap between the expert's analysis and the EU Delegation’s review explains 
the difference between the expert recommendations and the Commission disbursement of the second tranche, 
which followed the payment dossier prepared by the Delegation in May 2012. Some positive developments were 
indeed recorded between December 2011 (experts report's finalisation) and May 2012. 

Example 2 ‑ Disbursements were made after an insufficiently stringent assessment of compliance with 
conditions
The Commission underlines that funds were partially disbursed where partial fulfilment of relevant criteria was 
noted. In the case of the Water SBS, the government was able to present evidence of partial fulfilment of the condi-
tion related to national allocation of budget to the water and wastewater sectors. 

The Commission recognises that in this case in particular it could have been more stringent in applying conditions 
but this is not systemic.

Moreover, it is important to keep in mind that Moldova has the largest share of Government expenditures for health 
as % of total Government expenditures among all WHO European region countries. Therefore the slight fluctuations 
in that indicator as a result of fiscal space should not be interpreted as low priority given by the Government to the 
health sector. Not only the health care budget increased in real terms as documented in the review documents, it 
also increased in terms relative to the overall government expenditure. In practical terms further confirming the 
government commitment to healthcare, this increased expenditure also allowed the increase of the benefit package 
for the population (including the uninsured) since 2009, the introduction of free access to public health Care (PHC) 
and emergency care for all the population, further expansion of access to free diagnostic and in-patient treatment 
services.

34
The Commission acknowledges the genuine efforts which have already been made to leverage further reform pro-
gress from available resources, through new conditions. 

Replies of the Commission and the EEAS

47

37
The Commission and EEAS point out that internal reviews were made in each of these years. Furthermore, this deci-
sion taken by the Commission under its implementation mandate of external assistance, with political guidance 
from the EEAS, was endorsed by member states, in full respect of comitology. 

The ENP progress reports for 2011, 2012 and 2013 mention both significant elements of advancement and items 
of concern. According to the 2013 Progress Report, in the first half of the year, ‘Moldova went through its deep-
est political crisis in years, described as an ‘institutional meltdown’ which did ‘lasting harm to the credibility of 
Moldova’s democratic institutions’. However, this sentence needs to be considered in its full context, in particular 
the overall conclusion in the preceding sentence that ‘. .. despite backwards steps in the first half of 2013, Moldova 
managed to make progress on significant and sensitive areas of the ENP Action Plan, identified as priorities in the 
previous ENP progress report’. A number of concrete reform steps, including revision of laws and implementation of 
action plans, underpinned the decision relating to progress on deep and sustainable democracy in 2013, in line with 
the assessment made in the ENP Progress Report for Moldova of that year. 

The Commission and EEAS underline that in the absence of specific EU acquis or explicit standards or even of 
identical practices of member states in the area of deep and sustainable democracy, any assessment of the value of 
specific reforms undertaken will contain a residual element of subjectivity.

54
The Commission points out that technical assistance is not always synchronised with the main budget support 
programme. It can only be launched once the financing agreement for the SBS programme has been signed, and 
given the regulatory periods for tendering and contracting procedures, it starts several months after the main 
programme.

57
The Commission stresses that the four Technical Assistance projects on Justice were designed to support the imple-
mentation of the Justice sector reform Strategy (2011 - 2016). The SBS Justice is based on the country Justice sector 
Reform Strategy.

59
The Commission points out that the Technical Assistance project accompanying the SBS and supporting the coor-
dination of the Justice Sector reform started on 09 April 2013, therefore half a year prior to the ratification of the 
financing agreement triggering the official start of the SBS Programme on Justice on 25 September 2013. 

61
This is an example of flexible adjustment to additional needs arising in the implementation of an SBS programme, 
even where such support was not explicitly envisaged in the initial project contract.

Replies of the Commission and the EEAS

48

Conclusions and recommendations

70
The Commission points out that there was progress, albeit partial, in two (water and health) of four audited Budget 
Support sectors while the other two (Justice and PFPR), more recent programmes remain ongoing and their final 
results can therefore not be measured yet. The Court rightly points to the good project outputs. As opposed to 
Budget Support, traditional aid projects by construction suffer from reduced ownership which can thus affect 
sustainability. However, the detailed findings from the Court’s sample rather point to partial achievement of 
sustainability.

71
The Commission points out that there was progress, albeit partial, in two (water and health) of four audited Budget 
Support sectors while the other two (Justice and PFPR), more recent programmes remain ongoing and their final 
results can therefore not be measured yet.

72
The Commission agrees that the response could have been quicker. The Commission’s response to risk was actually 
quick taking account of the actual unfolding of events and internal decisions as indicated in the Commission replies 
to paragraphs 13-28. 

The present situation with regards to budget support payments in Moldova is that all disbursements are on hold, 
pending fulfilment of all general conditions, including macro econcomic stability and budget transparency. An IMF 
agreement is essential in this respect.

Regarding alignment with national strategies, the Commission’s concept of a strategy is not static and formal. The 
Commission was attentive to the essential, substantial elements of what should constitute a strategy while con-
stantly adjusting to the pressing needs dictated by an ambitious association agenda and a challenging geopolitical 
environment.

The fact that the Commission did not hesitate to go beyond the sometimes narrow scope of certain national strate-
gies actually demonstrates that the Commission did ensure that maximum reform leverage would be made from 
conditions. 

73
The Commission emphasises that Budget Support as an aid modality is a comprehensive package of measures 
including funding, capacity building, policy dialogue and performance indicators. Policy dialogue, even in the for-
mulation phase of the programme, can result in measures taken by the Government before any funds being trans-
ferred which is very positive. 

The Commission further underlines that partial fulfilment of performance criteria would warrant partial disburse-
ment. The Commission recognises that in one case, in particular, the assessement could have been more stringent 
but is is not systemic.

The Commission points out that ‘more for more’ funding was awarded after internal reviews. Those decisions were 
taken by the Commission under its implementation mandate of external assistance, with political guidance from the 
EEAS, and endorsed by member states, in full respect of comitology.

Replies of the Commission and the EEAS

49

74
The Commission emphasises the quality of project design, their effectiveness and their outputs. 

75
The Commission agrees on the sequencing between technical assistance, twinning projects and Budget Support. 
However, in the context of the present financial rules, there will always be a lead time between Technical assistance 
/ twinning and budget support operations. 

Recommendation 1
The Commission accepts the recommendation. 

Recommendation 2
The Commission accepts the recommendation 

Recommendation 3
The Commission accepts the recommendation. 

Recommendation 4
The Commission accepts the recommendation 

Recommendation 5
The Commission accepts the recommendation.

Recommendation 6
The Commission accepts the recommendation. 

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Event

Adoption of APM / Start of audit

Official sending of draft report to Commission (or other auditee)

Adoption of the final report after the adversarial procedure

Commission’s (or other auditee’s) official replies received in all languages

Date

24.3.2015

15.2.2016

19.4.2016

25.5.2016

 
 
 
Moldova receives the highest amount of EU aid per 
inhabitant of all of the EU’s eastern neighbours. We 
assessed whether EU aid had contributed effectively to 
improving the country’s public administration. 
We concluded that budget support had had a limited 
effect. The Commission could have responded more 
quickly when risks materialised, and programmes were 
not sufficiently aligned to Moldovan strategies. The 
Commission did not make full use of its ability to set 
conditions for disbursement, and additional incentive-
based funds were not fully justified.
The projects we assessed were relevant, and had delivered 
the expected outputs. However, they were not always well 
coordinated with budget support programmes, and 
results were not always sustainable.

EUROPEAN
COURT
OF AUDITORS