Annexes to COM(2011)695 - Annual report on the instrument for structural policies for pre-accession (ispa) 2010

Please note

This page contains a limited version of this dossier in the EU Monitor.

dossier COM(2011)695 - Annual report on the instrument for structural policies for pre-accession (ispa) 2010.
document COM(2011)695 EN
date November  4, 2011
Annex III of the Financing Memorandum, as applicable under the regime of ex-ante control by the Commission. The key elements relate to the establishment of internal financial control systems and procedures that can ensure transparent and non-discriminatory procurement procedures, the accuracy of declared expenditure, adequate internal audit capability, sufficient audit trail and appropriate treatment of irregularities.

The EU Delegation in Zagreb continued as the main mechanism for ensuring sound financial management and control. The rejection rate for ISPA documents continued to be high which is a clear sign that still more work needs to be carried out by the Croatian authorities before confidence exists of their ability to correctly manage ISPA funds independently.

DIS

The requirement for the DIS (Decentralised Implementation System) accreditation of the implementing agency in Croatia, the CFCA, follows the provision of Article 164 of the Financial Regulation[4]. DIS accreditation was awarded by the Commission on 13th February 2006.

EDIS

Since ISPA ended in 2006 with the introduction of the Instrument for Pre Accession (IPA) the purpose of moving ISPA to EDIS (using the Extended Decentralised management Implementation System – EDIS with only ex-post control by the Commission) has become superfluous. Recent efforts by the Croatian authorities have therefore been concentrated on preparing the IPA structures for the move to decentralised management without ex-ante controls as these structures will stay in place after accession. In the meantime the EU Delegation in Croatia continues to perform its important role in supervising the daily management, implementation and monitoring of the ISPA measures.

RISK ASSESSMENT

The audit strategy planned for 2010 was based on the results of an analysis of the state of ISPA implementation and the related objectives of the Audit Directorate of Directorate General for Regional Policy. The audit strategy sets out the objectives which are defined by the senior management of Directorate General for Regional Policy. These objectives are defined on the basis of detailed discussions with the operational directorates during which information on potential risk is shared. The audit strategy then sets out the actions to achieve the objectives, taking account of the risks identified. In general, risk is minimized by implementing this strategy. Audit of ISPA was carried out in Croatia in 2010.

The audit unit of DG REGIO carried out in March 2010 audit for ISPA measure Vinkovci to Tovarnik to State Border Railway Rehabilitation . The audit covered the implementing agency (CFCA), the final beneficiary (Croatian Railways) and the national authorising officer for the selected measure. The findings of this audit refer to 1) the delays in implementation of signalling contract, 2) delays between tender evaluation meetings and contract signature in three contracts, 3) and maintained high rejection rate by the EU Delegation within ex-ante controls.

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

EUROPEAN COURT OF AUDITORS FINDINGS

European Court of Auditors initiated in spring 2010 "Performance audit of pre-accession assistance to Croatia". The audit covered all types of pre-accession instruments including ISPA. The two-week audit mission to Croatia took place in October 2010. The audit report has not been finalised yet.[5]

CO-FINANCING PARTNERS – EIB AND EBRD

Given their expertise in project preparation and implementation, the Commission has maintained regular contact with these lending institutions, both at a horizontal level to co-ordinate policy and methodological issues related to programming and implementation, and at country level. The European Investment Bank is not involved in any ISPA project in Croatia.

The European Bank of Reconstruction and Development is the only International Financial Institution which is actively involved in an ISPA project in Croatia with the provision of a EUR 10 million loan for an environmental project approved in 2005 – the Karlovac Water and Wastewater Treatment Programme. Representatives of the EBRD therefore took part in both ISPA Monitoring Committees held in Croatia in 2010.

Contribution to European Union policies

PUBLIC PROCUREMENT

The fulfilment of the legal requirements for sound, fair and transparent public procurement as enshrined in the PRAG rules has proved to be a major challenge in the implementation of ISPA projects. Difficulties in complying with PRAG led to delays in the implementation of ISPA projects. The EU Delegation in Zagreb continued to intervene to ensure that procedures were correctly applied and errors rectified.

The ex-ante approval by the Commission, which governs the tendering and contracting of ISPA projects, continues to be entirely justified as plans to move to EDIS have now been dropped (see point 15). Under the current ex-ante system of approval and in line with the DIS decision for the conferral of management, only the CFCA plays the role of the contracting authority responsible for project implementation, whereas the Commission endorses each step of the procurement process. It follows that, although the Commission is not a contracting partner, it bears shared responsibility for the procedural correctness of the procurement process (without the Commission’s approval, contracts concluded between beneficiaries and contractors are not valid).

COMPETITION POLICY

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

Environment policy

By providing direct assistance to priority projects for the environment, ISPA contributes to the implementation of environmental policy and to the compliance with EU standards in Croatia. Experience gained through project development and implementation enhance administrative capacity in the environment sector. ISPA environmental projects and experiences paved the way for bigger number of environmental projects being currently financed under IPA.

TRANSPORT POLICY

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

Co-ordination among pre-accession instruments

CO-ORDINATION WITH THE IPA INSTRUMENT

MANAGEMENT OF ISPA MEASURES AND IPA PROGRAMMES UNDER REGIONAL DEVELOPMENT COMPONENT BY THE SAME COMMISSION SERVICES ENSURES CLOSE coordination of activities, complementarity of supported actions and continuity of policies.

Publicity

PUBLICITY ACTIONS

ISPA monitoring committee in June 2010 was held in Karlovac where investments in water and wastewater sector are supported by ISPA. At the margin of the committee press conference was organised which was followed by the visit on project site. Moreover, EU assistance is advertised in all investment projects by billboards and publicity actions in media.

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

[2] Following modification of Guidelines on the Closure of Cohesion Fund and Ex-ISPA projects 2000-2006 adopted in order to extend the final date of eligibility of expenditure up to 31 December 2011, similar provisions were made for the ISPA projects presently under implementation in Croatia. In Croatia one year extension was granted to four ISPA measures.

[3] Council Regulation (EC) No 1267/1999 of 21 June 1999 establishing an Instrument for Structural Policies for Pre-accession [OJ L 161, 26.6.1999, p. 73].

[4] Provision, however, deleted as of 1 May 2007 by Regulation (EC, Euratom) No 1995/2006 [OJ L 390, 30.12.2006, p. 1].

[5] At the time of drafting this report the statement of preliminary findings has been communicated to the Commission services.