Source: EURLEX
Language: en
Format: md

### **EN 2016**

**Special Report**

# **NO 20**

##### **Strengthening** **administrative capacity** **in Montenegro: progress** **but better results needed** **in many key areas**

(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 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
private office, Peter Eklund; Emmanuel-Douglas Hellinakis, Attaché; Torielle Perreur-Lloyd, Head of Task; Stéphanie Girard,
Ainhoa Pérez Infante, Aurelia Petliza, auditors.

_From left to right:_ A. Pérez Infante, E.-D. Hellinakis, T. Perreur-Lloyd, H. G. Wessberg, A. Petliza,

P. Eklund, S. Girard.

## **Contents 03**

**Paragraph**

**Abbreviations and acronyms**

**I-X**
**Executive summary**

**1-10** **Introduction**

**1-3** **Montenegro’s road towards EU integration**

**4-10** **EU pre-accession assistance**

**11-15** **Audit scope and approach**

**16-40** **Observations**

**16-20** **Part I — The audited projects addressed administrative capacity needs and in most cases were**
**well coordinated with other IPA projects and donor interventions**

**17** **Projects addressed capacity-building needs**

**18–20** **Coordination between projects and with other interventions was mostly good**

**21-28** **Part II — Inappropriate use of outputs reduced the effectiveness of some of the audited projects**

**22-24** **Projects generally delivered outputs but they were not always used by the beneficiaries or followed up**
**by the Montenegrin authorities**

**25-28** **There was insufficient information to show progress over time in strengthening administrative capacity**

**29-40** **Part III — The Commission used its non-financial means to support the reform process well,**
**but major issues remain unresolved**

**31-33** **SAA mechanisms for political dialogue operate well**

**34-37** **There was lack of clarity regarding the use of tools to encourage reform provided by the accession**
**negotiation process**

**38-40** **The potential for using decentralised management to strengthen administrative capacity has not yet been**
**fully exploited**

## **Contents 04**

**41-47** **Conclusions and recommendations**

**Annex I — Key dates in EU–Montenegro relations**

**Annex II — Projects audited**

**Reply of the Commission**

## **Abbreviations 05**
#### **and acronyms**

**ACA** : Anti-Corruption Agency

**CPCol** : Commission for Prevention of Conflict of Interests

**CSOs** : Civil-Society Organisations

**DACI** : Directorate for Anti-Corruption Initiative

**ECAA** : European Common Aviation Area

**EPA** : Environmental Protection Agency

**IGC** : Inter-Governmental Conference

**IPA** : Instrument for Pre-accession Assistance

**IRM** : Integrity Risk Manager

**PAR** : Public Administration Reform

**ReSPA** : Regional School of Public Administration

**SA** : Stabilisation and Association

**SAA** : Stabilisation and Association Agreement

**SAI** : State Audit Institution

## **Executive
 06**

#### **summary**

###### **I**

Since declaring its independence in 2006, Montenegro has progressed along the road towards European integra­
tion. In 2010 it became a candidate country for membership of the EU and in June 2012 the Council adopted a nego­
tiating framework, following which accession negotiations began. By the end of 2015, 22 out of 35 negotiating
chapters had been opened, and two of these were provisionally closed.

###### **II**

The Commission has helped Montenegro to build up institutions and to enhance administrative capacity with
the objective of supporting its transition to a democratic and economically developed country. EU pre-accession
assistance is both financial under the Instrument for Pre-accession Assistance (IPA) and non-financial through the
mechanisms of political dialogue.

###### **III**

During the 2007-2013 period the EU allocated 235.7 million euro in financial assistance to Montenegro to help the
country prepare for accession. 76 % of this amount was contracted by the end of 2015. For the 2014-2020 period, IPA
indicative financial allocations for the country amount to 270.5 million euro. The country also has access to pro­
grammes and projects financed under multi-beneficiary programmes covering the whole of the Western Balkans
region and Turkey.

###### **IV**

We audited 19 projects in three main sectors of IPA I assistance (2007-2013): public administration reform (13 pro­
jects), transport (three projects) and environment (three projects). Fifteen of these projects were funded through
Montenegro’s allocation and the other four from the regional allocation. In addition we looked at the mechanisms
for political dialogue set up under the Stabilisation and Association Agreement and the accession negotiating

process.

###### **V**

The objective of the audit was to assess whether EU pre-accession financial and non-financial assistance during
2007-2013 contributed effectively to strengthening administrative capacity in Montenegro. We conclude that,
despite the slow progress noted in several key areas, EU pre-accession assistance has helped to strengthen admin­
istrative capacity in Montenegro. However, for 12 out of the 19 IPA-funded projects which we audited the effect­
iveness of the support was reduced by the fact that some of the capacity-building outputs were not fully used or
followed up by the Montenegrin authorities. The majority of the projects we audited did not set out a clear require­
ment for the national authorities to follow up and capitalise on IPA investments.

###### **VI**

The audited projects generally delivered planned outputs which addressed important capacity needs, for example,
by successfully supporting legislative changes and the establishment of institutions and by providing training. Pro­
jects were in most cases coordinated well and took into account the work carried out by other donors. However, we
found examples of overlap or where the sharing of information between IPA projects run only in Montenegro and
regional (multi-beneficiary) projects covering several pre-accession countries could be improved.

## **07**

**Executive summary**

###### **VII**

We also found that although the Commission monitors the country’s progress in strengthening administrative
capacity, the assessment was qualitative and different parts of the public administration were examined. This made
it difficult to compare improvement over time. The Commission initiated the publication of new data in 2015, but it
was too early for us to assess this.

###### **VIII**

The mechanisms for political dialogue worked well but, in important areas of public administration reform, the
envir­onment and the fight against corruption, results are only being achieved slowly. We observed that limited
progress in key areas was often due to weak commitment to reform by the national authorities despite EU preaccession assistance. The Commission possesses tools to encourage reform including the ‘overall balance’ clause. It
is not always clear whether or how this tool will be referred to or used if new laws and institutions supported by the
EU do not deliver results in key areas such as the fight against corruption.

###### **IX**

The Commission decentralised the management of 12 % of IPA I funds to the Montenegrin authorities. We observed
that the decentralised mode of management of EU funds provides a potentially useful tool for strengthening
administrative capacity through transfer of knowledge which was not fully exploited under IPA I.

###### **X**

We make a number of recommendations in support of strengthening administrative capacity.

## **Introduction 08**

**Montenegro’s road towards EU integration**

###### **01**

Montenegro is a small, mountainous country in the Western Balkans [1] . It has
a coast on the Adriatic Sea to the south-west and is bordered by Croatia to
the west, Bosnia and Herzegovina to the north-west, Serbia to the north-east,
Kosovo* [2] to the east and Albania to the south-east. Its capital and largest city is
Podgorica. The population of 625 266 inhabitants is comprised of the following
ethnic groups: Montenegrin 44.98 %, Serbian 28.73 %, Bosniak 8.65 %, Albanian
4.91 % and other 12.72 % [3] .

###### **02**

Montenegro has made progress on its path towards EU accession since it de­
clared its independence in 2006. In 2007 the country signed a Stabilisation and
Association Agreement (SAA) with the EU [4] and in 2010 the Council granted
Montenegro the status of candidate country for EU membership. In June 2012 the
Council adopted a negotiating framework and accession negotiations began. In
the same year the first negotiating chapter was opened [5] . By the end of 2015, 22
out of 35 chapters [6] had been opened, and two of these were provisionally closed.
See _**Annex I**_ for the timeline for Montenegro’s EU integration.

###### **03**

Despite allegations of electoral fraud and a parliamentary boycott by some op­
position parties, Montenegro has remained stable in the years following the start
of the accession negotiations. Although it is confronted by a similar pressing
need for reform as in the rest of the Western Balkan region, for example in public
administration and to tackle corruption, Montenegro is currently considered to
be the most advanced in its accession process.

1 At the time of the audit the
following six countries made
up the Western Balkans:
Albania, Bosnia and
Herzegovina, the former
Yugoslav Republic of
Macedonia, Kosovo*,
Montenegro and Serbia.

- This designation is without
prejudice to positions on
status, and is in line with
UNSCR 1244 and the ICJ
Opinion on the Kosovo
Declaration of Independence.

2 Ibid.

3 2011 census. See ‘Montenegro
in figures’ by the Montenegro
Statistical Office, 2013.

4 The SAA came into force
in 2010.

5 This was Chapter 25, which
covered science and research.
It was also provisionally closed
in the same year.

6 Each chapter relates to
a policy area of EU legislation.

## **Introduction 09**

**EU pre-accession assistance**

###### **04**

Since 2007 Montenegro has received EU financial assistance under the Instru­
ment for Pre-accession Assistance [7] . The allocation of 235.7 million euro under
IPA I covering the 2007-2013 period [8] can be presented across the different sectors
of support as follows:

**IPA assistance to Montenegro 2007-2013 (million euro)**

|Sector|Total allocation per sector|Percentage|
|---|---|---|
|Public Administration Reform|45.6|19 %|
|Environment and Climate change|35.3|15 %|
|Cross-Border Cooperation|30.3|13 %|
|Transport|30.0|13 %|
|Justice and Home Afairs|25.5|11 %|
|_Ad hoc_ measures|25.0|11 %|
|Agriculture and Rural Development|22.5|9 %|
|Social development|21.5|9 %|
|**TOTAL 2007-2013**|**235.7**|**100 %**|

_Source:_ European Commission.

###### **05**

The objective of EU funding under IPA I has been to support the transition of
Montenegro into a democratic and economically stable country on the road
towards European integration. The Commission has used funding under IPA I to
help Montenegro build up institutions and enhance administrative capacity, as
well as to promote economic and social development in its endeavours to meet
the Copenhagen criteria [9] . By the end of 2015, 76 % of IPA I funds had been con­
tracted and 87 % of this had been paid out.

7 IPA I was established by
Council Regulation (EC)
No 1085/2006 of 17 July 2006
establishing an Instrument for
Pre-accession Assistance (IPA)
(OJ L 210, 31.7.2006, p. 82) and
Commission Regulation (EC)
No 718/2007 of 12 June 2007
implementing Council
Regulation (EC) No 1085/2006
establishing an Instrument for
Pre-accession Assistance (IPA)
(OJ L 170, 29.6.2007, p. 1).

8 The total IPA I allocation for
the 2007-2013 period was
10 billion euro.

9 The Copenhagen criteria set
by the European Council in
June 1993 consist of:

(a) political criteria: stability of
institutions guaranteeing
democracy, the rule of law,
human rights and respect for
and protection of minorities;

(b) economic criteria: the
existence of a functioning
market economy as well as the
capacity to cope with
competitive pressure and
market forces in the EU;

(c) the ability to assume the
obligations of membership,
including adherence to the
aims of political, economic
and monetary union.

## **Introduction 10**

###### **06**

IPA II follows on from IPA I and sets out a new framework for pre-accession assist­
ance for the 2014-2020 period with an indicative allocation of 270.5 million euro.
IPA II projects target structural reform in sectors covering the key areas set out in
the EU’s enlargement strategy, such as democracy and governance, rule of law,
sustainable growth and competitiveness.

###### **07**

The EU also provides pre-accession assistance at a regional level in the form of
multi-beneficiary (multi-country) projects and programmes covering the whole
of the Western Balkans and Turkey. The regional allocation for IPA I was 1.357 bil­
lion euro and for IPA II, 2.959 billion euro.

###### **08**

EU pre-accession assistance builds on strategic documents, such as the SAA, the
annual Enlargement Strategy and the annual progress reports adopted by the
Commission for the country. These were reflected in Multiannual Indicative Plan­
ning Documents until 2013 and are now included in Indicative Strategy Papers.
Annual or multiannual programmes are adopted by the Commission following
consultation with the beneficiary countries and other stakeholders.

###### **09**

The Commission has mainly implemented EU projects in Montenegro directly
under a centralised management mode. At the end of IPA I, it decentralised
management of Human Resources Development and Regional Development
programmes to the national authorities, but remains accountable for these funds
and carries out checks of the transactions. Under IPA II, the Commission is con­
tinuing to use a mix of centralised and decentralised management modes, now
called ‘direct and indirect management’, complemented by other implementa­
tion modalities, such as sector budget support [10] .

###### **10**

The Commission assesses Montenegro’s progress for the preceding 12-month
period through the Enlargement Package and the annual progress reports. Until
2014 the annual Strategy Paper, included in the Enlargement Package, set out re­
cent achievements and the main challenges for the 12 months that would follow,
including specific conclusions and recommendations. In 2015, the Strategy Paper
included a longer-term overview of challenges, covering the rest of the mandate
of the present Commission.

10 Budget support involves

direct financial transfers to the
national treasury of the
partner country — conditional
on eligible criteria (welldefined strategy, stable
macroeconomic framework,
good public financial
management or a credible
programme to improve it and
transparency and oversight of
the budget) and on policy
dialogue, performance
assessment and capacity
building.

## **Audit scope
 11**
#### **and approach**

###### **11**

The audit objective was to assess whether EU pre-accession assistance during
2007-2013 contributed effectively to strengthening administrative capacity in
Montenegro. The scope extended to both financial assistance (projects funded
by IPA) and non-financial assistance (mechanisms for political dialogue between
the EU and Montenegro).

###### **12**

The audit addressed the following three main questions.

(a) Did the audited projects address the need to strengthen administrative ca­

pacity appropriately?

To answer this question we looked at whether the audited projects were
designed to address administrative capacity needs identified as important by
the Commission and the national authorities and whether the projects were
coordinated well with other IPA projects and with the interventions of other
donors.

(b) Did the audited projects achieve results in terms of strengthening adminis­

trative capacity?

To answer this question we looked at whether the audited projects delivered
expected outputs related to capacity-building and whether these outputs
were used and followed up by the national authorities. Where outputs were
not used or followed up we examined the main reasons for this. We also
looked at the Commission’s assessment of the effectiveness of the EU sup­
port in improving administrative capacity.

(c) Did the Commission use non-financial assistance effectively to improve ad­

ministrative capacity?

To answer this question we looked at how the Commission had used the
mechanisms for political dialogue set up under the SAA and accession nego­
tiations. We also examined how the Commission used leverage available to it
to obtain the active commitment of the national authorities to reform. Finally,
we examined whether the Commission used the potential for transferring
capacity by encouraging the spread of good practice developed under the
decentralised mode of managing IPA funds.

## **12**

**Audit scope and approach**

###### **13**

We focused on three sectors important for Montenegro’s integration with the
EU: public administration reform (PAR), transport and the environment. These
accounted for 47 % of the total country allocation for Montenegro under IPA I [11] as
shown in _**Table 1**_ . We also looked at projects addressing capacity building in the
public administration funded out of IPA’s regional (multi-beneficiary) allocation,
also providing assistance to other countries eligible for assistance under IPA [12] .
Since all of these areas of support are also assisted under IPA II (2014-2020), the
Commission can take into account the observations and recommendations of
this report when implementing IPA II and when preparing the mid-term review of
IPA II planned for 2017.

###### **14**

We looked at a sample of 19 projects. In the sector of PAR we selected 13 projects
focusing on procurement, the fight against corruption, internal control, external
audit, local self-government and the Regional School for Public Administration
(ReSPA). In the transport sector we selected 3 projects, targeting civil aviation,
the Railways Directorate and road construction. In the environment sector, we
selected three projects focusing on management by central government, com­
munal services and waste management. Fifteen projects in the sample were
financed from Montenegro’s country allocation and the remaining four from the
regional allocation. See _**Annex II**_ for details of the projects selected.

###### **15**

The audit included analysis of documents and interviews with representatives of
the Commission and the national authorities. We also consulted other stakehold­
ers, such as Civil-Society Organisations (CSOs) and donor organisations. We used
evidence provided in project and programme documents, evaluations and as­
sessments of IPA I and of the country, the Commission’s annual progress reports
and resolutions of the budgetary authority.

11 We looked at IPA I because

projects were not yet being
implemented under IPA II by
the time of the audit.

12 Countries eligible under IPA

include the Western Balkans
and Turkey. These
programmes and projects are
also referred to as ‘regional’ or
‘multi-country’. The total
allocation under IPA I for
multi-beneficiary programmes
and projects was
1 137 million euro.

## **Observations 13**

**Part I — The audited projects addressed**
**administrative capacity needs and in most cases were**
**coordinated well with other IPA projects and donor**
**interventions**

###### **16**

To contribute effectively to strengthening the administrative capacity of the
public administration of Montenegro, IPA projects should address the main ca­
pacity needs identified by the Commission and Montenegro. We expected to see
good coordination between IPA projects and with the support provided by other
donors, for example to avoid overlaps. New IPA projects should be built on the
results achieved by earlier EU-funded actions.

**Projects addressed capacity-building needs**

###### **17**

We examined the Commission’s Multiannual Indicative Financial Framework and
the Multiannual Indicative Planning Document where the main EU support areas
and objectives are defined, the Financing Agreements of the selected projects
where their specific objectives are described and national strategy documents.
All of these pointed to the need to strengthen administrative capacity. We as­
sessed whether the audited projects aimed to address one or more of the capa­
city needs referred to in these documents. We observed that all 19 projects were
designed to meet administrative capacity needs identified. _**Table 2**_ provides an
overview of the capacity-building objectives of the projects audited.

## **Observations 14**

**How the audited projects were designed to address gaps in administrative capacity**

|Area|Projects|Capacity-building objectives|
|---|---|---|
|Procurement|1, 2, 3|οο<br>improving legislation and the capacity of contracting authorities through strengthening the capacities of the<br>Public Procurement Authority<br>οο<br>deliver training and organise a certifcation programme|
|Corruption|4, 5|οο<br>building up capacity in institutions concerned with preventing corruption<br>οο<br>building local-level capacity to fght corruption, including CSOs|
|Internal control|6, 7|οο<br>introducing public internal fnancial control<br>οο<br>preparing for planned future management of EU funds by the national authorities|
|External control|8, 9|οο<br>improving the capacity of the State Audit Institution (SAI) to plan its work and develop its audit methodology<br>οο<br>developing audit quality control|
|Local self-government|10, 11|οο<br>developing training programmes and providing mentoring<br>οο<br>drawing up strategic plans for municipalities|
|ReSPA|12, 13|οο<br>support for capacity building in the public administrations of the Western Balkans region|
|Transport|14, 15, 16|οο<br>developing capacity to improve legislation on roads, railways and civil aviation, to set up public private<br>partnerships and concession funding for transport infrastructure<br>οο<br>strengthening capacity to manage International Financing Instrument investments<br>οο<br>developing technical and managerial skills at local level|
|Environment|17, 18, 19|οο<br>drawing up strategies for developing, harmonising and implementing legislation<br>οο<br>developing capacity to implement projects at all levels|

_Source:_ Prepared by ECA using European Commission data.

## **Observations 15**

**Coordination between projects and with other interventions**
**was mostly good**

###### **18**

We examined whether projects were coordinated well with other actions funded
by the EU and other donors in the country. We found that generally projects were
coordinated well with other IPA projects, for example by building on the work
of previous IPA projects in the same area. Although the number of other donors
has diminished considerably in Montenegro since the start of IPA I in 2007 [13], we
found that IPA projects took account of work done by these donors (see exam­
ples in _**Box 1**_ ).

**Examples of good coordination**

13 Many donors reduced their

support, or withdrew it, in the
context of the availability of
EU pre-accession assistance
under IPA and the start of the
EU accession negotiating
process.

**Projects 6 and 7** helped (1) to establish management and control systems specifically for the planned future
decentralisation of management of EU funds by Montenegro and (2) to introduce public internal financial
control more widely to the whole of the public administration.

To achieve the first objective, project 6 built on a project financed by the EU before IPA I began. During im­
plementation of project 6, the Commission asked the contractor to modify the outputs to reflect work being
carried out concurrently by the Commission’s services to check the compliance of the structures set up by the
national authorities to prepare for decentralised management. Project 7 then provided further support and
training to prepare Montenegrin staff to operate the decentralised management structures.

To achieve the second objective, the two projects focused firstly on central public administration, then on the
local level. In particular, project 6 aimed to introduce internal control in central government ministries, includ­
ing establishing internal audit units with comprehensive audit plans and networking between them. Project 7
began a few months after project 6 ended and focused on weak management practices identified during the
first project.

**Projects 8 and 9** aimed to strengthen Montenegro’s State Audit Institution (SAI). Building on a project funded
previously by German donors, project 8 provided plans, guidelines and workshops for auditors. For example,
it built capacity in the area of performance audit, which was a new type of audit work for the SAI. During
implementation the IPA project was coordinated with work on strengthening performance audit capacities
being carried out by German and Swedish donors. Project 9 was a twinning project led by the Lithuanian SAI.
Despite a gap of 2 years between the two projects, it was well coordinated with the support provided under
project 8 and developed quality control in the Montenegrin SAI through increasing technical capacity and
preparing guidelines.

## **Observations 16**

###### **19**

We found, however, that the coordination between IPA projects run only in Mon­
tenegro and multi-beneficiary projects covering several pre-accession countries
was not always good (see examples in _**Box 2**_ ).

**Examples of weak coordination between IPA projects**

**Projects 1, 2 and 3** — We audited all IPA I projects [14] supporting public procurement in Montenegro. The first
project provided support only in Montenegro, whereas the other two were multi-beneficiary projects avail­
able to other pre-accession countries. While project 1 successfully established a public procurement system
in the country, we found that the capacity-building outputs of the three projects were not coordinated well.
The projects developed capacity to improve legislation on public procurement by helping to draft new laws.
They also strengthened the performance of contracting authorities by delivering training and a certification
programme for public procurement officials. The multi-beneficiary projects (2 and 3) were implemented after
project 1 but they did not build effectively on the courses already provided by project 1 with additional, more
specific training. Instead, in some cases, the content of the courses was very close or even exactly the same:
all three projects provided training on basic public procurement procedures, both projects 1 and 2 addressed
implementation of the Utilities Directive [15] and both projects 2 and 3 addressed the Remedies system [16] . In ad­
dition, the participants at the courses were often the same individuals, for example the training-for-trainers
courses run under projects 1 and 3.

**Projects 12 and 13** — The Regional School of Public Administration (ReSPA) was created to help strengthen
administrative capacity and boost regional cooperation in the public administrations of the Western Balkans.
While the six participants, including Montenegro, contribute 150 000 euros each annually, most of the cost of
ReSPA is funded by IPA multi-beneficiary projects. We found that ReSPA’s training activities were not coord­
inated sufficiently well with other training delivered under IPA projects in Montenegro. For example, ReSPA
training was mostly aimed at junior staff whose needs were largely met by other capacity-building initiatives.
There was also insufficient information available to public officials about the training available. As a result
Montenegro made little use of ReSPA’s training offer.

14 This does not include Technical Assistance and Information Exchange contracts.

15 Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities

operating in the water, energy, transport and postal services sectors (OJ L 134, 30.4.2004, p. 1).

16 The EU Remedies Directives are Council Directive 89/665/EEC of 21 December 1989 (OJ L 395, 30.12.1989, p. 33), Council Directive 92/13/EEC of

25 February 1992 (OJ L 76, 23.3.1992, p. 14) and Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007
(OJ L 335, 20.12.2007, p. 31). Remedies are legal actions available to economic operators participating in contract award procedures, which
allow them to contest the award decision.

## **Observations 17**

###### **20**

Since 2014, the Commission has recognised the need for better coordination
between national and regional (multi-beneficiary) instruments and has revised
its procedures. For example, the Commission has encouraged ReSPA to consult
with national IPA coordinators and adjust its output accordingly. Furthermore,
the Commission set up in 2015 the Centre of Thematic Expertise on PAR in the
Directorate-General for Neighbourhood and Enlargement Negotiations to man­
age a number of multi-beneficiary (regional) programmes in the PAR area, includ­
ing ReSPA contracts. One of the objectives of this centre is to ensure coordination
between IPA regional and national assistance. It was however too early for us to
verify whether these new developments yielded the required improvements in
the coordination between national and regional IPA assistance.

**Part II — Inappropriate use of outputs reduced the**
**effectiveness of some of the audited projects**

###### **21**

To contribute effectively to strengthening the administrative capacity of the pub­
lic administration of Montenegro, IPA projects should deliver expected capacitybuilding outputs. Once delivered, these outputs should be used by the bodies
targeted by the projects (the beneficiaries) and then followed up by the national
authorities so that the results of the projects are sustainable and their full impact
is achieved. In order to show what has been achieved with EU funds, we expect
the Commission to report clearly on progress achieved, including the extent to
which administrative capacity is improving in the country.

**Projects generally delivered outputs but these were not**
**always used by the beneficiaries or followed up by the**
**Montenegrin authorities**

###### **22**

For the projects audited, we examined interim and final reports, Commission
monitoring and evaluation reports and the minutes of monitoring commit­
tee meetings, and we interviewed beneficiaries. We found that in general the
projects delivered outputs as planned. Some of these were related to capacity-­
building objectives and some were designed to achieve other objectives, such as
road construction. We focused on outputs related to capacity building. In 12 out
of the 19 projects audited, we found that one or more of the capacity-building
outputs were not used fully by beneficiaries or the national authorities did not
carry out the necessary follow-up action to sustain the results achieved.

## **Observations 18**

###### **23**

Where the beneficiary did not use outputs, the overall effectiveness of the projects
concerned in strengthening administrative capacity was reduced because the po­
tential improvements they offered did not always materialise. Often the reason for
not using the outputs was related to budgetary or human-resource constraints.

See _**Box 3**_ for examples of outputs not fully used by the beneficiaries.

**Examples of outputs not fully used by the beneficiaries**

**Project 4** was designed to focus on the prevention of corruption, targeting the two main bodies working in
this area at the time: the Directorate for Anti-Corruption Initiative (DACI) and the Commission for Prevention
of Conflict of Interests (CPCoI). Two of the planned outputs were not fully used by the beneficiaries.

οο The CPCoI did not use the automated data-exchange system on asset declarations prepared by the project.
Although it did not have adequate resources to keep it up to date, the CPCoI preferred to continue using
the manual register.

οο The project prepared an Integrity Risk Manager (IRM) IT tool for DACI to supervise integrity plans prepared
to help mitigate risks of corruption identified in the public administration. Although 72 institutions out of
102 in the country had developed integrity plans, only four of these had used the IRM tool by the time of
the audit. This situation was partly because of insufficient staffing and partly because Montenegro did not
procure the necessary funding to continue developing and introducing the tool. (Montenegro relied on
a possible 400 000 euros from other donors according to the Action Plan for chapter 23. When this did not
materialise it did not provide the necessary funds from its own resources).

While project 4 was being implemented, the national authorities decided to merge the CPCoI and the DACI
into a new Anti-Corruption Agency (ACA). By the date of our audit there was no evidence that any of the
IT solutions developed by the IPA project for the DACI and the CPCoI would be used in the ACA.

**Project 14** drafted technical specifications for contracting out the preparation of a database for managing
road infrastructure in Montenegro. The national authorities had not used the database by the time of the
audit, 4 years after it was prepared. The same IPA project helped to build capacity in the Montenegrin public
administration to implement infrastructure projects. However, in some cases the expected capacity-building
benefits were lost due to high staff turnover. By the time of the audit, six out of the eight people trained in the
Railways Infrastructure Company had already left their jobs, in most cases because they were on temporary

contracts.

**Project 19** helped to strengthen capacity in waste management at local level. The outputs initially planned
were modified during the implementation of the project. However, we observed during our audit that even
these revised outputs were not all being used, partly because of lack of staff and financial resources. For
example, the recycling yard financed by the project and completed in 2013 was still not being operated, partly
due to lack of staff to run it. In addition, equipment purchased as part of the project had not been maintained
because of budgetary constraints in the municipality. Other items purchased by the project were not being
used at all, for example recycling bins.

## **Observations 19**

###### **24**

Where the national authorities did not follow up the outputs of projects, this
often reduced the intended impacts. In some cases the national authorities did
not adopt the necessary legislation, which meant the outputs were not fully ef­
fective. In other cases the institutions created were not granted independence, or
bodies which should have enforced legislation adopted were not empowered to
do so. Sometimes the national authorities did not provide the necessary addi­
tional human or financial resources to follow up outputs of IPA projects.
See _**Box 4**_ for examples of outputs not followed up by the national authorities.

**Examples of outputs not followed up by the national authorities**

**Project 5** aimed to strengthen the role of local administrations and CSOs addressing corruption at local level
and to improve citizens’ awareness of the importance of effective anti-corruption measures. The project
achieved its planned capacity-building outputs (studies, panel discussions, policy recommendations). Howev­
er, the Ministry of the Interior, mainly responsible for reporting on the implementation of local anti-corruption
plans, decided not to participate in the consultation process initiated by the project to set up a multisectoral
advisory anticorruption council. This weakened the council, which then did not meet after the end of the
project.

**Project 14** contributed successfully towards harmonising the law on air transport to prepare for the first
phase of the European Common Aviation Area (ECAA) agreement. However, the national authorities had not
adopted many of the by-laws drafted as part of the project to help bring the country into line with the re­
quirements of the ECAA agreement by the date of the audit, 3.5 years after they had been prepared [17] .

**Project 15** delivered a business plan in 2013 to improve the efficiency of the Railways Directorate. However,
the national authorities had not implemented the business plan by the time of the audit because of financial
constraints which led to delays in the recruitment of necessary additional staff (seven vacancies out of 17
posts in the directorate). In addition, the national authorities had not granted the directorate financial inde­
pendence from the Ministry of Transport, which was necessary for the directorate to operate as intended.

**Project 17** devoted 180 000 euro to strengthening capacity in the Environmental Protection Agency (EPA) to
collect, validate and disseminate environmental data. To do this, the project spent a year developing an En­
vironmental data collection, validation and dissemination system and related training courses. Although this
work was completed in 2012, by the time of the audit the system developed was not yet in place and there
was no significant improvement in capacity in the agency, or in the quality of its reports. The national author­
ities had not followed up the project output by allocating sufficient staff and financial resources.

**Project 18** assisted the national authorities to prepare 29 pieces of secondary legislation in the area of Com­
munal Services and Waste Management. Although drafts for the legislation had been prepared by the end of
the project in August 2013, by the time of the audit only half of them had been adopted and published by the
national authorities, reducing the impact of the IPA project.

17 Project ended in November 2011 and the audit was carried out in May 2015.

## **Observations 20**

**There was insufficient information to show progress over**
**time in strengthening administrative capacity**

###### **25**

We examined the information available to measure improvement in adminis­
trative capacity in Montenegro over the period audited. We looked at the ‘En­
largement Package’ of documents adopted every year by the Commission. This
includes the Enlargement Strategy Paper, which sets out the way forward for
future years and takes stock of progress made by each candidate and potential
candidate country. It also includes annual progress reports, in which progress
made each year by individual countries is described in more detail. In addition,
we looked at progress reported in monitoring committees and in sectoral com­
mittees set up under the SAA and the first PAR baseline measurement exercise
carried out in 2015.

###### **26**

We found that although the Commission’s annual progress reports present
overall progress in meeting the Copenhagen criteria and assess the state of play
for individual negotiating chapters, they do not include assessments of progress
in strengthening capacity over a longer time frame. They were also not designed
to draw on the results of individual projects. Based on our reading of the reports,
we tried to construct a picture of progress in strengthening administrative capa­
city for key areas of reform over the years 2011-2014 (see _**Table 3**_ _)_ .

###### **27**

Our aggregation of the Commission’s annual progress reports indicates slow
progress in strengthening capacity. However, we found that the different reports
did not always assess the same parts of the public administration, and that the
qualitative nature of the assessment meant that the criteria for assessing the ad­
ministrative capacity as ‘weak’ or ‘increased’ were not clearly defined. This made
it difficult to compare improvement over time.

## **Observations 21**

**Overview of administrative capacity assessments in Commission annual progress**
**reports (2011-2014) for the areas audited**

|Col1|Chapter1|Policy areas|2011|2012|2013|2014|
|---|---|---|---|---|---|---|
|5|Public Procurement|Public Procurement Directorate, Public Procurement Administration|||||
|5|Public Procurement|Commission for the Control of Public Procurement Procedures|||||
|5|Public Procurement|Inspection services|||||
|5|Public Procurement|Concessions|||||
|14|Transport policy|Accident investigation body|||||
|22|Regional policy and coordination<br>of structural instruments|Institutional Framework|||||
|22|Regional policy and coordination<br>of structural instruments|Financial management, control and audit|||||
|23|Judiciary and<br>Fundamental rights|Anti-corruption policy|||||
|23|Judiciary and<br>Fundamental rights|Commission for Prevention of Confict of Interest|||||
|23|Judiciary and<br>Fundamental rights|Anti-corruption coordination|||||
|27|Environment and<br>Climate change|Horizontal issues|||||
|27|Environment and<br>Climate change|Air quality|||||
|27|Environment and<br>Climate change|Waste management|||||

|Col1|Administrative capacity is still weak or limited and needs substantial or urgent improvement.|
|---|---|
||Administrative capacity has increased but still needs further improvement.|
||Administrative capacity has increased: no need for further improvement.|

1 The reports follow the negotiating chapters even when they have not yet been opened.

_Source:_ ECA using European Commission progress reports.

## **Observations 22**

###### **28**

Recognising the importance of good data for continuous measurement of pro­
gress on reform, the Commission used a new reporting methodology for the an­
nual assessment in the 2015 progress reports [18] in nine areas on a pilot basis [19] . For
these areas, the report provided more detailed information than previously on
the state of play in addition to the progress achieved in the previous 12 months.
Assessment scales were better harmonised and reports made more comparable,
both between countries and over time. This will help in future to put the progress
being made into context and also provide an indication of what should be the
focus for the coming year [20] . By the time of the audit, the Commission had not yet
expanded these exercises to other areas such as the transport and environment
sectors. The Commission also initiated baseline measurement reviews of the
public administration in 2015, which will allow for quantitative and comparative
reporting of progress [21] .

**Part III — The Commission used its non-financial**
**means to support the reform process well, but major**
**issues remain unresolved**

###### **29**

To contribute effectively to strengthening administrative capacity in Montene­
gro, the Commission should make effective use of its non-financial means to
support the reform process. Mechanisms for political and policy dialogue should
be set up and operate well and we expect the Commission to make explicit and
consistent use of leverage available to it as part of this dialogue to obtain the
active commitment of the national authorities to reform. Where there is potential
for transferring knowledge, for example by learning from the management and
implementation of IPA projects, the Commission should take advantage of this.

###### **30**

We examined the main structures for political dialogue between the Commis­
sion and Montenegro created under the Stabilisation and Association Agreement
(SAA) and the accession negotiating process, including the new approach to
negotiations applied in Montenegro. We looked at tools for encouraging reform,
including the ‘overall balance’ clause. We examined whether the Commission had
used these tools effectively to stimulate improvements in administrative capac­
ity. We also looked at the extent to which the Commission uses the potential for
encouraging good practice using the decentralised management of IPA funds.

18 Progress reports are called

‘country reports’ from 2015
onwards.

19 The new presentation is

applied for all candidate
countries and potential
canditates and covers the
areas of functioning of the
judiciary, corruption,
organised crime, freedom of
expression, economic criteria,
PAR, public procurement,
statistics and financial control.

20 See Annex 2 to the EU

Enlargement Strategy
(COM(2015) 611 final of
10 November 2015).

21 The first review was

performed in 2015 examined
capacity, structural, legal,
procedural and other issues.
It used the Principles of Public
Administration agreed in all
enlargement countries and
resulted in a detailed country
report analysing how
Montenegro is performing in
the PAR area, and it suggesting
detailed and sequenced
recommendations for
[reform (http://www.](http://www.sigmaweb.org/publications/public-governance-baseline-measurement-reports.htm)
[sigmaweb.org/publications/](http://www.sigmaweb.org/publications/public-governance-baseline-measurement-reports.htm)
[public-governance-baseline-](http://www.sigmaweb.org/publications/public-governance-baseline-measurement-reports.htm)
[measurement-reports.htm).](http://www.sigmaweb.org/publications/public-governance-baseline-measurement-reports.htm)

## **Observations 23**

**SAA mechanisms for political dialogue operate well**

###### **31**

Following Montenegro’s independence in 2006, political dialogue was estab­
lished at ministerial level between the Government of Montenegro and the EU
institutions. The SAA signed in 2007 then laid the basis for political dialogue at
different levels: the Stabilisation and Association (SA) Council, the SA Committee,
seven SA subcommittees and, from 2014, the Special Group on PAR. The Com­
mission and the Montenegrin authorities have met regularly since 2007 through
these mechanisms to discuss, inter alia, the need for progress on reform and in­
sufficiencies in administrative capacity in the country. Alignment with the _acquis_
and the means to achieve this are the main focus of the sectoral subcommittees.
The output of the subcommittees is discussed annually in the SA Council and in
the SA Committee meetings.

###### **32**

The Commission has used the mechanisms of political dialogue with the Mon­
tenegrin authorities well, for example to encourage legislative changes in many
areas and to support the creation of institutions necessary to take forward the
reform process. This dialogue has highlighted important areas in which results
have not been achieved, or are only being achieved slowly. For example, in its
2015 Progress Report, the Commission pointed out that: ‘better internal audit­
ing within contracting authorities remains crucial for improving monitoring and
verifying contract implementation’ and ‘Internal audit capacity continues to be
an issue of concern’ [22] . The same report concluded that ‘Montenegro is at an early
stage of preparation on, inter alia, environment and climate change. Aligning
with the acquis and strengthening the administrative capacity remain a substan­
tial challenge for Montenegro’ [23] . The Commission’s analysis is confirmed by the
observations arising from our audit, reported in paragraphs 16 to 24.

22 Chapter 5 (Public

Procurement) and Chapter 32
(Financial Control)
(2015 Montenegro Progress
Report).

23 Ibid p. 6.

## **Observations 24**

###### **33**

There has been strong forward momentum towards EU integration in Montene­
gro since independence, illustrated by steady progress in the accession process
and a current high level of support for EU membership in the population [24] . This
has provided the Commission with considerable potential leverage for strength­
ening administrative capacity. However we observed that the national authorities
were sometimes not actively committed to the reform process and did not always
use or follow up actions supported under IPA I to ensure the delivery of results
(see paragraphs 23 and 24). We found that the majority of the audited projects
did not set out a clear requirement for the national authorities to capitalise on
the IPA investment. The importance of sustainability and the impact of results is
reflected in the IPA II Framework Agreement with Montenegro [25] .

**There was lack of clarity regarding the use of tools**
**to encourage reform provided by the accession**
**negotiation process**

###### **34**

The accession process, and more specifically the accession negotiations which
opened between the EU and Montenegro in 2012, provided the EU with new
tools for supporting legal, administrative and economic reform. An example of
this is the opportunity provided in the dialogue surrounding the 35 negotiating
chapters which cover all parts of the _acquis_ . The setting of opening, closing and,
where appropriate, interim benchmarks (the latter only for the rule of law chap­
ters) provides tools to encourage the country in its alignment process.

###### **35**

As part of the negotiating framework agreed in 2012 the EU introduced a ‘new
approach’ in which the two chapters concerned with the rule of law [26] were identi­
fied as being at the core of the enlargement process. These two chapters were
opened early on in the accession process to give Montenegro enough time to
establish the necessary legislation, institutions and track records of implementa­
tion before the closure of negotiations. Under the new approach, progress in ne­
gotiating on ‘technical’ chapters such as transport and environment would only
be possible if the country continued to make progress in the area of the rule of
law. The tool created to help encourage progress in this way is called the ‘overall
balance clause’ [27] . Montenegro is the first negotiating country for which the ‘new
approach’ has been introduced.

24 In March 2016 74 % of

Montenegrins said they
would vote to join
the EU in a referendum
[(http://www.cdm.me/english/](http://www.cdm.me/english/more-than-73-of-citizens-would-vote-for-joining-the-eu-in-a-referendum)
[more-than-73-of-citizens-](http://www.cdm.me/english/more-than-73-of-citizens-would-vote-for-joining-the-eu-in-a-referendum)
[would-vote-for-joining-the-](http://www.cdm.me/english/more-than-73-of-citizens-would-vote-for-joining-the-eu-in-a-referendum)
[eu-in-a-referendum).](http://www.cdm.me/english/more-than-73-of-citizens-would-vote-for-joining-the-eu-in-a-referendum)

25 Framework agreement

between Montenegro and the
European Commission on the
arrangements for
implementation of EU
financial assistance to
Montenegro under IPA II. The
reporting requirements of the
national authorities (Article 58)
and the role of the IPA
monitoring committees
(Articles 52-54) include the
obligation ‘to enhance the
overall efficiency,
effectiveness, impact and
sustainability’. Furthermore,
article 55 sets out specific
evaluation obligations for
IPA II assistance, including
in view of achieving its
long-term objectives
and impact.

26 Chapters 23 (Judiciary and

fundamental rights) and 24
(Justice and home affairs).

27 Ministerial meeting opening

the Intergovernmental
Conference on the Accession
of Montenegro to the
European Union (Brussels,
29 June 2012). AD 23/12:
‘should progress under these
chapters significantly lag
behind progress in the
negotiations overall, and after
having exhausted all other
available measures, the
Commission will on its own
initiative or on the request of
one third of the Member
States propose to withhold its
recommendations to open
and/or close other negotiating
chapters, and adapt the
associated preparatory work,
as appropriate, until this
imbalance is addressed’, p. 11.

## **Observations 25**

###### **36**

The first time the Commission referred to the overall balance clause was in the
2014 Progress Report [28] and in the 2014-2015 Enlargement Strategy Paper [29], where
it pointed out: ‘The Commission recalls the existence of the “overall balance”
clause of the negotiating framework. Progress in meeting the interim bench­
marks on the rule of law chapters and the relevant identified shortcomings
above, demonstrated by tangible results, will impact upon the pace of accession
negotiations overall, including the agendas of future IGCs [30] ’. The Montenegrin
authorities reacted to the reference to the clause and addressed some of the
shortcomings identified by the Commission by adopting new legislation. The
Commission and the EU Member States considered the action taken sufficient to
continue opening new negotiating chapters.

###### **37**

The experience of recalling the overall balance clause in 2014 has shown that
this tool can be used to good effect. However, in 2015, despite investment by the
Commission in the area and undertakings made by the national authorities, there
were few tangible results in terms of implementing anti-corruption legislation.
Referring to generally slow progress in the fight against corruption, the Commis­
sion pointed out in its 2015 Progress Report that ‘institutions should demonstrate
a more proactive attitude in fulfilling their mandate. Montenegro’s track record
on effective investigation, prosecution and final convictions in corruption cases,
in particular regarding high-level corruption, remains limited’ [31] . Although pro­
gress towards reform remained limited in this key area, no reference was made
to the overall balance clause. The Council and the Commission have not set out
clearly the circumstances in which the clause is likely to be recalled or applied.
For example, it is not clear whether the clause would be recalled in 2016 if the
new anti-corruption legislation and institutions such as the ACA (see example
in _**Box 3**_ ) do not function as planned and deliver tangible results.

28 2014 Progress Report, p. 1.

29 2014-2015 Enlargement

Strategy Paper, p. 19 and p. 21.

30 Intergovernmental

conferences.

31 2015 Progress Report. The

same report pointed out that:
‘Results on investigation,
prosecution and convictions
in corruption cases are limited
to low and medium-level
corruption. A high rate of
investigations into reported
corruption-related offences
never results in indictments.
So far there have been no final
convictions for high-level
corruption.’ and ‘Financial
investigations are not yet
systematically used in cases of
corruption. In no corruption
case has the confiscation of
assets been ordered’, and
‘on law enforcement, the
institutional and operational
capacity of prosecutors,
judges and police to fight
corruption is insufficient’, p. 14.

## **Observations 26**

**The potential for using decentralised management to**
**strengthen administrative capacity has not yet been**
**fully exploited**

###### **38**

In Montenegro, the Commission contracted and implemented most of IPA I cen­
trally. The Financial and IPA regulations provide for management of pre-accession
funds to be conferred to enlargement candidate countries to prepare them for
their future management of the EU’s structural and agricultural funds. In accord­
ance with the regulations, during 2012-2013, Montenegro asked the Commission
to decentralise management of IPA I funds and created the required operating
structures to this end. After checking that requirements for decentralised man­
agement had been met, the Commission granted the country responsibility for
managing 12 % of the total IPA I allocations in the country. This was made up
of 22.7 million euro covering transport and environment projects and 5.6 mil­
lion euro covering employment and social inclusion projects. Montenegro’s
request for decentralised management of IPA II allocations relates to a greater
proportion of funds.

###### **39**

Apart from increasing ownership of EU-funded projects, this management mode
can deliver valuable capacity building in the operating structures. This is be­
cause, in the early years of decentralised management, the Commission carries
out detailed and thorough checks of the work of the operating structures at all
stages of contracting and implementing each project. Spreading good practice
on project management accumulated in the IPA structures to the rest of the Mon­
tenegrin public administration operating in the same area can provide a poten­
tially effective means of strengthening administrative capacity.

###### **40**

However, strengthening administrative capacity was not included as an object­
ive when the regulations governing decentralised management were adopted.
This meant that the Commission has not encouraged the national authorities to
consider how good practice could be actively developed in the structures set up
for decentralised management and then used to build capacity in the rest of the
public administration. We also considered that there is a risk, as we observed in
another pre-accession country [32], that IPA operating structures become organisa­
tions parallel to the rest of the public administration.

32 See paragraphs 54 and 55 of

European Court of Auditors
Special Report 11/2016,
‘Strengthening administrative
capacity in the former
Yugoslav Republic of
Macedonia: limited progress
in a difficult context’
[(http://eca.europa.eu).](http://eca.europa.eu)

## **Conclusions and 27**

#### **recommendations**

###### **41**

The objective of the audit was to assess whether EU pre-accession financial and
non-financial assistance during 2007 to 2013 contributed effectively to strength­
ening administrative capacity in Montenegro. We conclude that despite the slow
progress noted in several key areas, EU pre-accession assistance has helped to
strengthen administrative capacity in Montenegro. However, for 12 out of the
19 IPA-funded projects which we audited the effectiveness of the support was
reduced by the fact that some of the capacity-building outputs delivered were
not fully used or followed up by the Montenegrin authorities. We make five rec­
ommendations in paragraphs 42 to 47 of which the Commission can take account
when implementing IPA II. The Commission could also consider these recommen­
dations in the context of the 2017 mid-term review of IPA II.

###### **42**

We found that the audited projects addressed important capacity-building
needs, for example by successfully supporting legislative changes and the
establishment of institutions and by providing training. The audited projects
were in most cases coordinated well and took into account work carried out by
other donors. However, we found examples of overlap or where the sharing of
information between IPA projects run only in Montenegro and regional (multibeneficiary) projects covering several pre-accession countries could be improved
(see paragraphs 17 to 20).

**Recommendation 1 — Better coordinate actions**
**strengthening capacity**

The Commission should ensure that capacity-building actions funded at both
national and regional levels address priority needs, take full account of other
completed, ongoing and planned support and are appropriately communicated
to potential participants. Under IPA II, the Commission should closely monitor
the relevance of capacity-building actions and improve coordination between
national and regional actions.

## **Conclusions and recommendations 28**

###### **43**

The audited projects generally delivered the expected capacity-building outputs.
However, in some cases these outputs were not fully used by the beneficiaries
or followed up by the national authorities to ensure the sustainability of results.
The overall effectiveness of the audited projects in strengthening administrative
capacity was thus reduced because the potential improvements they offered did
not always materialise. Reasons for not using or following up the IPA projects
appropriately included the national authorities not ensuring adequate staff avail­
ability, not adopting the necessary legislation to allow the output to be used or
not granting the necessary independence to institutions created
(see paragraphs 21 to 24).

###### **44**

Overall, we observed that limited progress towards strengthening administrative
capacity in key areas was often due to weak commitment to reform by the na­
tional authorities. The majority of the projects we audited did not set out a clear
requirement for the national authorities to follow up and capitalise on IPA invest­
ments (see paragraphs 31 to 33).

**Recommendation 2 — Improve commitment to use outputs**
**and follow-up results**

When programming EU pre-accession assistance under IPA II, the Commission
should require the national authorities to actively commit to using the outputs
of IPA projects and following up results so that they are sustainable. During
implementation of projects funded by IPA II the Commission should monitor
closely the action being taken by the national authorities to meet commitments
made in this respect to allow time to apply corrective measures before projects
are closed. The Commission should take account of whether commitments have
been met when deciding in which areas to invest future pre-accession assistance.

## **Conclusions and recommendations 29**

###### **45**

We found that, although the Commission monitors progress in strengthening
administrative capacity, there was insufficient comparable information on the
progress achieved by the country over time (see paragraphs 25 to 28).

**Recommendation 3 — Develop better tools for measuring**
**progress towards improved administrative capacity**

The Commission should:

(i) build on the pilot presentation of data in the 2015 Progress Report for the

2016 report, and on the baseline measurement review of PAR carried out in
2015;

(ii) examine whether these initiatives could be extended to other relevant areas

such as transport and environment.

###### **46**

The mechanisms for political dialogue worked well although, in important areas
of public administration reform, the fight against corruption and the environ­
ment, results are only being achieved slowly. The Commission possesses tools for
reform, but it is sometimes not clear, for example in the case of the ‘overall bal­
ance’ clause, how they will be applied if new laws and institutions do not deliver
results in key areas such as the fight against corruption (see paragraphs 34 to 37).

**Recommendation 4 — Make full use of tools to support**
**progress on reform**

The Commission should encourage results on reform by:

(i) making full use of all of the tools at its disposal as part of the accession nego­

tiating process to support progress on reform;

(ii) being transparent about how the ‘overall balance clause’ is referred to or

used.

## **Conclusions and recommendations 30**

###### **47**

The Commission decentralised management of 12 % of IPA I funds to Mon­
tenegro. We observed that the decentralised mode of management of EU
funds provides a potentially useful tool for strengthening administrative ca­
pacity through transfer of knowledge, which was not exploited under IPA I
(see paragraphs 38 to 40).

**Recommendation 5 — Use decentralised management to**
**spread good administrative practice**

Once examples of good practice have been established in the operating struc­
tures set up for decentralised management, the Commission should encourage
the national authorities to emulate these practices in other parts of the admin­
istration, for example to encourage the delegation of decision-making to the
appropriate level and to strengthen internal control systems.

This Report was adopted by Chamber III, headed by Mr Karel PINXTEN,
Member of the Court of Auditors, in Luxembourg at its meeting of 12 July 2016.

_For the Court of Auditors_

Vítor Manuel da SILVA CALDEIRA

_President_

## **Annexes 31**

**Key dates in EU–Montenegro relations**

|1999|•|26 May — Stabilisation and Association Process for countries of south-east Europe.|
|---|---|---|
|**2000**|•|24 January — Council adopts negotiating directives for Stabilisation and Association Agreement.|
|**2003**|•|21 June — EU–Western Balkans Summit celebrated in Thessaloniki, where the EU reiterates its support to the European perspective of<br>the Western Balkan countries.|
|**2006**|•|3 June — Montenegrin Parliament declares independence following the 21 May referendum.|
|**2007**|•|22 January — Council adopts European Partnership for Montenegro.|
|**2007**|•|15 October — Stabilisation and Association Agreement (SAA) signed in Luxembourg.|
|**2007**|•|28 December — Interim Agreement on trade and trade-related issues signed.|
|**2008**|•|1 January — Interim Agreement and Visa facilitation and Rreadmission agreement enter into force.|
|**2008**|•|15 December — Montenegro applies for EU membership.|
|**2009**|•|19 December — Visa-free travel to the Schengen area granted.|
|**2010**|•|1 May — The SAA enters into force.|
|**2010**|•|9 November — The Commission recommends granting candidate status to Montenegro.|
|**2010**|•|17 December — The Council agrees to give Montenegro the status of candidate country.|
|**2011**|•|12 October — The Commission recommends the opening of accession negotiations.|
|**2011**|•|9 December — The Council launches accession process with Montenegro.|
|**2012**|•|26 June — The European Council endorses the Commission’s assessment and opens accession negotiations.|
|**2012**|•|29 June — Accession negotiations start and the Accession Conference adopts the Negotiating Framework.|
|**2012**|•|18 December — Opening and provisional closure of frst negotiating Chapter 25 — Science and Research|
|**2013**|•|15 April — Opening and provisional closure of Chapter 26 — Education and culture.|
|**2013**|•|27 June — Screening meetings are completed.|
|**2013**|•|18 December — Opening of negotiations on Chapter 5 — Public procurement, Chapter 6 — Company law, Chapter 20 — Enterprise<br>and industrial policy, Chapter 23 — Judiciary and fundamental rights and Chapter 24 — Justice, freedom and security.|
|**2014**|•|31 March — Opening of Chapter 7 — Intellectual property law and Chapter 10 — Information society and media.|
|**2014**|•|7 May — Screening process is completed (last screening report presented to the Council).|
|**2014**|•|24 June — Opening of negotiations on Chapter 4 — Free movement of capitals, Chapter 31 — Foreign, security and defence policy and<br>Chapter 32 — Financial control.|
|**2014**|•|16 December — Opening of negotiations on Chapter 18 — Statistics, Chapter 28 — Consumer and health protection,<br>Chapter 29 — Customs union and Chapter 33 — Financial and budgetary provisions.|
|**2015**|•|30 March — Opening of negotiations on Chapter 16 — Taxation and Chapter 30 — External relations.|
|**2015**|•|22 June — Opening of negotiations on Chapter 9 — Financial services and Chapter 21 — Trans-European networks.|
|**2015**|•|21 December — Opening of negotiations on Chapter 14 — Transport policy and Chapter 15 — Energy.|

_Source:_ European Commission.

## **Annexes 32**

**Projects audited**

|No|Project title|Contract No|Contracted<br>(euro)|
|---|---|---|---|
|**Procurement**|**Procurement**|**Procurement**|**Procurement**|
|1.|Further development and strengthening of the Public Procurement System in Montenegro|205-748|1 080 017|
|2.|Support for Improvement in Governance and Management (SIGMA)|253-091<br>296-874<br>319-423|10 000 000<br>2 458 035<br>9 834 337|
|3.|Training in Public Procurement in the Western Balkans and Turkey|248-580|3 962 000|
|**Corruption**|**Corruption**|**Corruption**|**Corruption**|
|4.|Support to the implementation of the anti-corruption strategy and action plan|297-271|643 419|
|5.|Corruption in local government — zero tolerance!|306-428|211 454|
|**Internal control**|**Internal control**|**Internal control**|**Internal control**|
|6.|Strengthening the Management and Control Systems for EU Financial Assistance in Montenegro|252-719|2 000 000|
|7.|Strengthening the Management of EU funds and General Administrative Procedures|327-819|1 261 500|
|**External audit**|**External audit**|**External audit**|**External audit**|
|8.|Strengthening State Audit Institution (SAI) of Montenegro|234-548|837 384|
|9.|Audit Quality control in the SAI of Montenegro|338-180|236 138|
|**Capacity-building initiative**|**Capacity-building initiative**|**Capacity-building initiative**|**Capacity-building initiative**|
|10.|Technical assistance to Local Self-Government reform|229-836|638 950|
|11.|Capacity building and support to local self-government for implementation of municipal develop­<br>ment grants|282-481|1 065 900|
|**ReSPA**|**ReSPA**|**ReSPA**|**ReSPA**|
|12.|Running of ReSPA and organisation of ReSPA activities|256-128|2 400 000|
|13.|Running of ReSPA and organisation of ReSPA activities|331-241|3 500 000|
|**Transport**|**Transport**|**Transport**|**Transport**|
|14.|Technical assistance to the Transport Sector|233-959|1 160 668|
|15.|Technical assistance for Institutional Development of the Railways Directorate in Montenegro|289-223|139 684|
|16.|Reconstruction of part of road Crkvicko Polje-Nikovici|256-594|789 807|
|**Environment**|**Environment**|**Environment**|**Environment**|
|17.|Support to Environmental Management|258-795|912 465|
|18.|Drafting legal documents in the Field of Communal Services and Waste Management|290-255|155 055|
|19.|Improvement of waste management in Danilovgrad|256-597|983 193|

_Source:_ European Commission.

## **Reply of the
 33**
#### **Commission**

**Executive summary**

**VIII**
The Commission points out that the political dialogue can only encourage reform, but the ownership of the reform
process lies with the national authorities.

The Commission further stresses the importance in the reform process of prioritising quality over speed.

The Commission’s position is that the use of the balance clause is sufficiently defined in the negotiating framework.

The use of tools for managing the accession process, including the overall balance clause, is based on a broad
assessment of the existing shortcomings and the extent to which the country is making progress as can be
expected.

**Observations**

**Box 2 — Examples of weak coordination between IPA projects**
**Projects 1, 2 and 3**
The Commission points out that taking into account the small size of the Montenegrin administration and the early
stage of setting up the public procurement system in Montenegro, some complementary overlap between the vari­
ous training courses was inevitable.

**Projects 12 and 13**
The Commission points out that during the latter part of the period audited, the Regional School of Public Adminis­
tration (ReSPA) managed to reorient from a training organisation into a regional hub contributing to policy dialogue
through comparative studies and regional research, peer reviews, summer schools, in-country seminars, mobility
schemes and study visits, thematic networks, etc. In this context, Montenegro has benefited from the interaction
among government representatives in the different events organised by ReSPA, as well as from the comparative
studies undertaken.

Since 2013, the organisation took a more strategic, high-level approach targeting only senior officials and
decision-makers.

**Box 3 — Examples of outputs not fully used by the beneficiaries**
**Project 4**
The Commission notes that the Anti-Corruption Agency (ACA) was established on 1 January 2016. The agency is
currently using the Integrity Risk Manager platform as a model for the development of a new-version IT system, as
all the modules of ACA’s IT system, including the module for integrity plans, have to be developed under unified
standards.

## **34**

**Reply of the Commission**

**Project 19**
The Commission points out that a number of bins are held in stock for potential replacement of bins in use, as a roll­
ing stock of unused bins is necessary.

**Box 4 — Examples of outputs not followed up by the national authorities**
**Project 14 contributed successfully**
The Commission stresses that it is important to note also that delays with the implementation of the European Com­
mon Aviation Area (ECAA) agreement are also due to the delayed ratification by some EU Member States (signed
in 2006 and it has still not entered into force). Overall, Montenegro’s level of preparedness in this area has been
assessed very positively by the Commission. The latest ECAA assessment visit in October 2015 concluded that Mon­
tenegro is fulfilling the requirements of phase I of the ECAA agreement.

**28**
The Commission points out that transport and environment will be covered by the new reporting methodology as
of 2016.

**37**
The Commission’s position is that the use of the balance clause is sufficiently defined in the negotiating framework.

The use of the overall balance clause is based on a broad assessment of the existing shortcomings and to what
extent the country is making progress as can be expected. In the case of the overall balance clause, the specific
problems raised in 2014 had been addressed, following the Commission reminding the Montenegrin authorities of
the existence of the clause.

**Conclusions and recommendations**

**Recommendation 1 — Better coordinate actions strengthening capacity**
The Commission accepts recommendation 1.

**Recommendation 2 — Improve commitment to use outputs and follow-up results**
The Commission accepts recommendation 2.

**45**
Progress on a year-by-year basis has always been reflected in the reports. Bringing together several subsequent
reports allowed for comparisons over longer periods of time. With the introduction of the new reporting method­
ology in 2015 and the strengthened focus on readiness in addition to progress over the previous year, will make
comparisons over longer periods of time even easier in the areas covered.

## **35**

**Reply of the Commission**

**Recommendation 3 — Develop better tools for measuring progress towards**
**improved administrative capacity**
The Commission accepts recommendation 3.

The Commission will continue to expand its new reporting methodology to additional areas in 2016. This will allow
for better comparability between countries and also over time in the areas covered. Transport and environment will
be covered by the new methodology as of 2016.

The assessment given under the new methodology, while taking into account quantitative elements, primarily
remains qualitative. This is necessary to provide a realistic picture of all the elements that are relevant to assess the
situation in a specific area.

**46**
The Commission points out that the political dialogue can only encourage reform, but the ownership of the reform
process lies with the national authorities.

The Commission further stresses the importance in the reform process of prioritising quality over speed.

The Commission’s position is that the use of the balance clause is sufficiently defined in the negotiating framework.

The use of tools for managing the accession process, including the overall balance clause, is based on a broad
assessment of the existing shortcomings and the extent to which the country is making progress as can be
expected.

**Recommendation 4 — Make full use of tools to support progress on reform**
The Commission partially accepts recommendation 4.

(i) The Commission agrees with the Court that the use of all political tools at its disposal is essential to the accession

process. The Commission considers that this is the case already, but the Commission is equally committed to the
credibility of the process and favours quality of reform over speed. It is important to underline in this context that
the speed of reforms in particular is under the control of the Montenegrin authorities.

(ii) The Commission considers that it is transparent in its referral to or use of the balance clause.

The negotiating framework, which governs what is an intergovernmental process, sets out very clearly the con­
ditions (see below) under which the overall balance clause may be applied. It is important to underline that the
Member States decide on the use of the balance clause, based on a proposal from the Commission. The negotiating
framework also speaks about the balance clause being used after having exhausted all other available measures.
Hence, the Commission cannot accept this part of the recommendation.

## **36**

**Reply of the Commission**

The relevant text of the negotiating framework states: ‘An overall balance in the progress of negotiations across
chapters should be ensured. Given the link between the chapters “Judiciary and fundamental rights” and “Justice,
freedom and security” and the values on which the Union is founded, as well as their importance for the imple­
mentation of the _acquis_ across the board, should progress under these chapters significantly lag behind progress
in the negotiations overall, and after having exhausted all other available measures, the Commission will on its
own initiative or on the request of one third of the Member States propose to withhold its recommendations to
open and/or close other negotiating chapters, and adapt the associated preparatory work, as appropriate, until
this imbalance is addressed. The Council will decide by qualified majority on such a proposal and on the condi­
tions for lifting the measures taken. The Member States will act in the Intergovernmental Conference in accordance
with the Council decision, without prejudice to the general requirement for unanimity in the Intergovernmental
Conference.’

**Recommendation 5 — Use decentralised management to spread**
**good administrative practice**
The Commission accepts recommendation 5.

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|Event|Date|
|---|---|
|Adoption of the Audit Planning Memorandum/Start of audit|27.1.2015|
|Official sending of draft report to Commission (or other auditee)|23.5.2016|
|Adoption of the final report after the adversarial procedure|12.7.2016|
|Commission’s (or other auditee’s) official replies received in all languages|28.7.2016|