27.11.2007   

EN

Official Journal of the European Union

C 285/1

I-VIII

1-7

8-10

11-60

11-27

11-19

20

21-27

28-41

28-37

38-41

42-54

45-52

53-54

55-60

61-70

61

62-64

65-67

68-69

70

ADF

Albanian Development Fund

BiH

Bosnia and Herzegovina

CARDS

Community Assistance for Reconstruction, Development and Stabilisation

CFCU

Central Finance and Contracting Unit

CSP

Country Strategy Paper

DG ELARG

Directorate-General for Enlargement

DG RELEX

Directorate-General for External Relations

EAR

European Agency for Reconstruction

EC

European Commission

ECPA

EC Police Assistance mission in Albania

EU

European Union

EURALIUS

European Assistance Mission to the Albanian Justice System

FRY

Federal Republic of Yugoslavia

FYROM

Former Yugoslav Republic of Macedonia

HQ

Headquarter

IPA

Instrument for Pre-Accession

KFOR

NATO led Kosovo Force

MIP

Multiannual Indicative Programme

OSCE

Organization for Security and Cooperation in Europe

OVI

Objectively Verifiable Indicators

ROM

Result Oriented Monitoring

SAI

Supreme Audit Institution

SAp

Stabilisation and Association process

SR

Special Report of the European Court of Auditors

UN

United Nations

UNMIK

United Nations Mission in Kosovo

WB

World Bank

I.

The main objectives of the ‘Community Assistance for Reconstruction, Development and Stabilisation’ (CARDS) programme are to contribute to the recipients' participation in the Stabilisation and Association Process (SAp) and to increase the responsibility of the western Balkan countries and entities in relation to that process. CARDS was designed to encourage sustainable and EU compatible reform, consolidate stability and to bring the region closer to the European Union. For the period of 2000 to 2006 the programme has had a budget allocation of more than 5 000 million euro (see paragraphs 1 to 7).

II.

The Court audited the CARDS programme to conclude on the effectiveness of the Commission's management. This was done by assessing (see paragraph 8):

III.

The Commission's strategic guidance was very general. This was adequate for the reconstruction phase but not for the more challenging institution building objectives. The country strategy papers did not provide sufficient orientation, particularly as they were not supported by timely sectoral strategies. The multi-annual indicative programmes did not prioritise between or within the different areas of intervention. The European partnerships introduced in 2004 were not used to improve guidance for selection of actions (see paragraphs 11 to 27).

IV.

In the past the EU assistance to the western Balkans suffered from the co-existence of three different legal bases, slow implementation of programmes and excessive centralisation. The CARDS Regulation unified the legal bases. The Commission was also successful in ensuring that aid was delivered quickly although this was sometimes at the expense of the capacity of the recipient countries to benefit from the aid. The Commission used four different management approaches. The two main approaches — devolved Delegations and the European Agency for Reconstruction (EAR) — were mostly effective and appropriate (see paragraphs 28 to 41).

V.

While recipient country ownership was considered a priority by the Commission, there was no consistent approach to achieving this aim and the management approaches used did not encourage such ownership (see paragraphs 42 to 54).

VI.

Monitoring and evaluation was good in parts, but inconsistencies exist between the Delegations and the EAR. An absence of adequate project indicators compromised the effectiveness of monitoring (see paragraphs 55 to 60).

VII.

The Court concludes that the Commission's management of the CARDS programme was largely successful in contributing to stabilisation and reconstruction in the recipient countries. However, the aid was less effective in improving administrative capacities, due to an initially low concentration on institution building and insufficient recipient country capacity to absorb the assistance provided (see paragraphs 61 to 70).

VIII.

The CARDS Regulation came to an end in 2006 and the new Instrument for Pre-accession Assistance came into effect in 2007. The Court recommends that the Commission: improves its strategic guidance; ensures that implementation speed takes full account of beneficiaries' ability to absorb the assistance; establishes an effective strategy for ensuring recipient country ownership; and extends best practice in monitoring and evaluation (see paragraphs 61 to 70).

1.

CARDS is the acronym for ‘Community Assistance for Reconstruction, Development and Stabilisation’. The CARDS programme (1) covers the following countries of the western Balkans: Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia (FRY) and the former Yugoslav Republic of Macedonia. Concerning the assistance to the FRY and its successor the State Union of Serbia and Montenegro (2), the CARDS programme was split into three annual programmes: Serbia (3), Kosovo and Montenegro.

2.

CARDS is part of the European Union's Stabilisation and Association strategy towards the western Balkans, which emerged in response to the wars in former Yugoslavia during the 1990s. The Stabilisation and Association strategy marked the end of the military conflict, the start of physical reconstruction and economic re-launch of the countries (i.e. stabilisation) and increasingly closer ties with the European Union (i.e. association). The European Council meeting in June 2000 was explicit that this integration could ultimately mean membership of the European Union.

3.

The preamble of the CARDS Regulation describes the main objective of the assistance: ‘The existing Community assistance should be expanded and redirected to adjust it to the European Union's political objectives for the region and, particularly, to contribute to the stabilisation and association process and increase the responsibility of the recipient countries and entities in relation to that process’. Also, according to the Regulation the regional dimension of Community assistance should be given special attention.

4.

The Stabilisation and Association process (SAp) is a progressive partnership in which the EU offers a mixture of trade concessions (Autonomous Trade Measures), economic and financial assistance (CARDS Programme) and contractual relationships (Stabilisation and Association Agreements).

5.

In the period from 2000 to 2006 the CARDS programme had a total budget of over 5 000 million euro, mainly for investment support and institution building. The total population in the western Balkans region is around 24 million. Thus the CARDS allocation represents an annual support of 30 euro per capita demonstrating the political importance that the EU attaches to the region (4).

6.

The main areas of intervention of the CARDS programme are:

7.

In the European Commission the management of the CARDS programme, until early 2005, was the joint responsibility of the Directorate-General for External Relations (DG RELEX) and the EuropeAid Co-operation Office. DG RELEX had the responsibility for political relations and strategic development such as preparation of the country strategy papers and multi-annual indicative programmes. The EuropeAid Co-operation Office was responsible for the management of the annual programmes. In early 2005 the Directorate-General for Enlargement (DG ELARG) took over the responsibility for the full project cycle from policy formulation and programming to the implementation.

8.

The purpose of the European Court of Auditors audit was to assess on the effectiveness of the Commission's management of the CARDS programme. The main objectives of the audit were to conclude on the extent to which:

9.

The audit work included a review of strategy and planning documents, guidelines and reports. In addition a judgemental sample of CARDS projects (Annex) over the period 2002 to 2005 was examined.

10.

The audit also examined the relevant evaluation reports, prepared on behalf of the Commission — including the mid-term evaluation of the CARDS programme (5), which was completed in June 2004 — as well as the follow-up actions taken by the Commission. The Court concluded that they provided a sufficient basis to use the results as corroborative evidence for its own audit findings (6).

11.

The CARDS regulation provides the legal basis for the main strategy papers used for CARDS assistance: ‘The Community assistance should be governed by a strategy framework and by annual and multi-annual programming, which will be put to the management committee set up by this regulation for an opinion’.

12.

The Court assessed the extent to which the CARDS programme was governed by adequate strategic guidance and directed towards the specific need of the countries involved while being coherent with the regulatory-defined objectives of the programme and the SAp in its wider sense.

13.

In accordance with the CARDS regulation the Commission defined a strategy framework for the western Balkan countries, with country strategy papers (CSPs) for each individual country, and a regional strategy paper, drafted taking into account all the recipient countries. As required by the regulatory framework the Commission has produced two multi-annual indicative programmes (MIPs), one for each country and one for the regional inter-state programme for the periods 2002 to 2004 and 2005 to 2006.

14.

In 2004 — at the end of the first MIP period — European partnership documents were approved by the European Council covering Albania, Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, and Serbia and Montenegro including Kosovo (7), with the aim of intensifying the stabilisation and association process (8). The partnerships were drawn up for each country in the region and identified areas for action and obligations to be fulfilled by the partner countries in order to move them closer to the European Union. EU assistance was to be directed towards the priorities set out in the partnerships.

15.

The audit revealed weaknesses in the strategic guidance of CARDS programming mechanisms. Strategies as described in Country Strategy Papers (CSPs), although formally compliant with the Commission CSP guidelines, were too broadly formulated to be useful for the programming exercise. CSPs were not updated to reflect major changes such as the Council's European partnership documents.

16.

The MIPs did not prioritise between and within sectors as required by Commission guidelines (9) nor indicated timing for the foreseen actions. The first European partnership in 2004 offered an opportunity for the Commission to focus its actions more precisely in the MIP covering 2005 to 2006 (10). Even though the MIPs for 2005 to 2006 contained references to the European Partnership priorities, they still gave insufficient guidance for the selection of actions to be financed.

17.

As provided in the CARDS Regulation the CARDS Management Committee (11) was required to give its opinion on the CARDS programming guidelines, the Multi-annual Indicative Programmes and the Annual Programmes, with the intention of enhancing strategic guidance in the programming process. In reality no evidence was found that the Committee's work contributed to improving the quality of the proposed documents.

18.

Detailed sectoral analyses by the Commission and/or recipient country national strategies mostly did not exist or were produced too late to enhance the strategic guidance. As a result, projects were not selected on the basis of objective criteria and, in certain cases, they were selected in response to the beneficiaries' ad hoc request.

19.

Although the identification process was complex, it did not involve a clear methodology for optimising project selection. For instance, there was no cost-benefit analysis (12) or other comparative analysis of possible alternative projects before selecting the projects. Some projects were simply continuations of earlier support. There were no guidelines to help decide which intervention would best support the stabilisation and association process.

20.

The audit identified differences between the planned and implemented projects. There were essential projects not implemented due to the resistance of the recipient country or projects for which the initial plans were disregarded (Box 1).

Box 1Examples of non-implemented projectsCase 1: No political support to the Serbian Supreme Audit Institution (SAI)As early as 2001 the EAR had identified the necessary building blocks for significant government institutional reform in Serbia, including support to the treasury, the internal audit function as well as a project concerning the creation of a Supreme Audit Institution. However, the necessary backing of the Serbian Parliament did not materialise for the SAI and the project was not taken forward until the 2006 programme.Case 2: The European Commission Police Assistance mission in AlbaniaThe project fiche of the Justice and Home Affairs sector in Albania for the programming year 2002 envisaged for the Police and Public Order component ‘to contribute to the establishment of rule of law and to the establishment of a functioning police force able to contribute to democratic stability’. It established the following: ‘The project will be executed through supporting the EC Police Assistance Mission (ECPA), training and related investment support’. Out of the 8 million euro allocated to the Police and Public order component, 4 million euro were planned for institution building support (financing ECPA mission), 2,5 million euro for training and support component and 1,5 million euro for the investment component.In reality the project fiche was completely disregarded. Not one euro was spent in order to finance the ECPA mission. 4,7 million euro were spent on a Data Communication Network, 1,9 million euro were spent on the power supply equipment and 1 million euro were spent on a grant to the United Nations in order to support the Security Sector Reform programme.

21.

Because the recipient countries were recovering from war the early years of the CARDS programme focused more on reconstruction (through investment projects) than institution building. However, as the programme matured a shift towards more institution building was required.

22.

The redirection of assistance was of interest to the discharge authority. In its report on the European Agency for Reconstruction (EAR) published in May 2002, the European Parliament considered that the EAR should significantly increase EU assistance in the two countries (i.e. the Federal Republic of Yugoslavia and the former Yugoslav Republic of Macedonia) in favour of institution building.

23.

The Court analysed the CARDS projects in order to determine and assess the proportion of institution building projects compared with investment projects (see Graph 1).

24.

In general between 2001 and 2005 the emphasis on institution building projects increased. From the very beginning the focus on institution building was more pronounced in countries where assistance was managed by the Delegations (14) than in countries where it was managed by the EAR (15).

25.

When strengthening the administrative capacity of a country, twinning is recognised as an important instrument (16). However, twinning had a slow start in the western Balkans particularly in the former Yugoslav Republic of Macedonia where the EAR only started to use twinning in 2005. An EAR evaluation of twinning (17) concluded that there was sometimes only limited support from the Agency's Programme Managers for twinning and that EAR staff were not always trained sufficiently in the use of that instrument.

26.

As the countries of western Balkans recovered from the war, the draft programmes and the related Project Fiches  (18) as well as the projects under implementation took into account the Parliament's request to increase the EU assistance from investment support to institution building. However, in some cases the changes to the planned projects led to decreased emphasis on institution building (see Box 2).

Box 2Redirecting an institution building project — Integrated Border Management in the former Yugoslav Republic of MacedoniaThe Annual Programme for CARDS 2003 in the former Yugoslav Republic of Macedonia envisaged, among other things, to strengthen control of the green border and allocated 2,8 million euro for this purpose. According to the Annual Programme, there were a number of short-term actions needed in this area: (1) set-up a dedicated border guard service, (2) improve recruitment procedures, (3) provide basic training and in-depth course on border control and (4) supply equipment for detection of forged or falsified documents and for high-tech vehicle searches, together with corresponding training tools.Objectives for this initiative were twofold: (1) To enhance the co-operational capacity of government border services within the existing organisational framework, to fulfil immediate requirements, and (2) to develop a new organisational structure for the border police and operational capacities in compliance with European Union standards.Instead of consistently addressing the above needs, objectives and priorities, the EAR used the whole amount to purchase vehicles.

27.

The Court found no evidence of on-going monitoring of projects by the Management Committee after the approval stage. In other words the Management Committee did not concern itself with changes to projects once implementation had started.

28.

In July 1998 the Court published Special Report No 5/98 on reconstruction in former Yugoslavia (period 1996 to 1997). The audit covered two countries: Bosnia and Herzegovina and to a lesser extent Croatia. The report criticised that despite the EU's clear declarations of intent, the Commission was not successful in deploying sufficient human resources to the task of reconstruction in former Yugoslavia, neither at its headquarters nor in the areas under reconstruction. The Court concluded the following:

29.

To overcome the deficiencies in EU aid delivery, the Court recommended the Commission should devolve management for its aid effort to its Delegations and focus on a smaller number of sectors.

30.

While taking into account the above-mentioned weaknesses, the Court's current audit assessed the extent to which the CARDS management structures were efficient and whether the aid was delivered with sufficient rapidity.

31.

The audit revealed significant improvement in the efficiency of EU operations in the western Balkans since 1998. Major changes took place. Firstly, the CARDS regulation unified the legal basis for similar operations. Secondly the devolution process was introduced to improve the speed and quality of EC external aid (19). Thirdly the Commission delegated part of the implementation of the assistance to a new organisation specially created for this purpose the European Agency for Reconstruction. All these actions speeded up aid delivery and improved the efficiency of the assistance (see Box 3).

Box 3Example of high contracting rates under CARDSEAR was created as a response to the need to act quickly and efficiently when addressing the urgent post-conflict needs of the population in Kosovo in the immediate aftermath of the 1999 crisis. The Court has in its earlier audits concluded that EAR actions in Kosovo immediately after the crisis met the ambitious objectives in the fields of basic services. The high contracting rates have been maintained in Kosovo throughout the CARDS programme. As of November 2006, the EAR has in Kosovo managed over 1 100 million euro on behalf of the Commission, some 91 % of that money has been contracted and some 86 % disbursed. Along with the KFOR troops, the EU's assistance helped normalise life in Kosovo.

32.

In total CARDS was implemented using four different methods and structures (see Graph 2), most of which left little room for involvement of the recipient states. This was done in order to ensure speedy delivery of aid and reflected the weaknesses of the national administrations.

33.

The main characteristics of the different management structures are as follows:

34.

The Court found that devolved and indirect centralisation (EAR) ensured efficient delivery of aid, whereas weaknesses were noted with the other two structures (i.e. centralised and decentralised) (23).

35.

In both Delegations and the EAR, the speed of project management benefited from the increased capacity in the operational units and from having finance and contracts staff available on the ground. The increased contacts with the beneficiary and other relevant parties and better understanding of local conditions, risks and opportunities improved performance while reducing the time needed to solve problems (24).

36.

The two other implementation structures — although less significant in monetary terms — were less effective. For centralised management — centrally managed regional inter-state programme — there were several shortcomings:

37.

The decentralised implementation structures in Albania and in Croatia also had problems:

38.

The European Court of Auditors has in its reports concerning external actions (for instance Special Report No 6/2006 on the environmental aspects of the Commission's development cooperation (26)) repeatedly criticised the Commission of delays in contracting and implementation. In contrast the CARDS programme had a very high contracting speed (see Graph 3) in Kosovo, Bosnia and Herzegovina, and Serbia but due to the back-log of earlier programmes a relatively slow start in Albania and Croatia.

39.

In Albania the need to compensate this delay led, later on, to a very high concentration of contract signatures: 63 % of the CARDS contracts signed in the period from 2001 to 2005 were signed in 2004, thus leading to the simultaneous implementation of a high number of contracts and an increased challenge to the beneficiaries' absorption capacity (27) (see Box 4). Delays in the 2001 annual programme meant that in Croatia two annual programmes were implemented at the same time.

Box 4Overstretched national administrative capacity in AlbaniaIn Albania in addition to high concentration of projects in a short period of time, most of the assistance was concentrated in the Justice and Home Affairs sector. At the time of the audit, there were at least 48 different, simultaneously on-going projects in the Justice and Home Affairs' area. 13 of them were financed by the EU and 35 by other donors.For example in the Euralius project in Albania (European Assistance Mission to the Albanian Justice System), the audit found out that the level of ambition of the project design was very high. Ten specific objectives had to be achieved involving 15 different types of project partners simultaneously. Each of the ten objectives involved numerous different project partners. As a result, the Ministry of Justice, the principal beneficiary, would be dealing with 78 different foreseen activities.

40.

One of the main unintended side effects of the high contracting speed, encouraged by the Commission was that beneficiaries might not fully benefit from the projects, thus reducing their effectiveness and impact.

41.

To ensure project effectiveness Community assistance under the stabilisation and association process is conditional and failure to respect the conditions could lead the Commission to take appropriate measures. However, there are projects which were implemented in cases where conditionalities were not respected by the beneficiary, thus providing less added value than originally expected. An example in this respect was the support to the Croatian Court System described in Box 5.

Box 5Support to the Croatian Court SystemThe Twinning project financed by the 2002 programme was implemented despite the fact that none of the conditionalities defined in the project form were fulfilled at the time of the project start-up. One of the conditionalities presumed the existence of a strategy for the reform of the judiciary. Given that the project was an absolute priority for the Commission, it was imposed on the recipient. For the above reasons recommendations made to the recipient, although accepted and recognised by the Croatian Ministry of Justice, have not produced major actions in all areas.

42.

In addition to the contribution to the SAp, the preamble of the CARDS Regulation describes the other main objective of the assistance as: ‘The existing Community assistance should … increase the responsibility of the recipient countries and entities in relation to that [SAp] process.’

43.

As set out in paragraph 31, the main reason behind the management structures established was to ensure quick delivery of aid. The downside of this approach is reduced recipient state involvement. This approach was appropriate in the reconstruction phase but less so as the assistance moved from infrastructure projects to institution building projects.

44.

The regulation does not define any specific responsibilities for the recipient countries. Despite the apparent political will to bring the countries as rapidly as possible into the European Union, this has not been matched by any increase in the countries' management responsibilities. The Court did not find any indication of a formal aid management strategy on the Commission's part — general or country specific — to increase progressively the responsibility of the recipients.

45.

The Court assessed to what degree the Commission's management of the CARDS programme contributed to increasing the responsibility of recipient countries in certain critical steps of the project cycle management, and assessed the consequences of insufficient ownership.

46.

The Commission's guidelines for the identification of projects and subsequent drafting of the Annual Programmes (28) did not promote beneficiary participation in the decision-making. The instructions issued by EuropeAid for the 2001 and 2002 annual programming did not specify any kind of beneficiary involvement. The guidelines for the 2003 and 2004 annual programmes specified some involvement — albeit limited — requiring initial contacts to be taken with potential beneficiaries during the preparatory work, and draft project fiches to be sent by the Delegation or EAR to the beneficiaries at least two weeks before finalising the annual programme. The audit assessed the extent of the involvement of the beneficiaries through on-the-spot interviews with around 30 beneficiaries.

47.

The Court found some examples, especially in Bosnia and Herzegovina, Croatia and Serbia, where the Commission and the Agency had tried to increase recipient country ownership (see Box 6).

Box 6Example of good practices in ownershipCase 1: Strengthening the Directorate of European Integration in Bosnia and Herzegovina (BiH)The decision-making process for the CARDS 2006 programming in BiH is a good illustration of ownership and accountability development. Already in the CARDS 2004 and 2005 annual programme, the Commission started to build capacity with the recipient country, for example by introducing senior programming officer posts in BiH line ministries and agencies and by supporting the Directorate for European Integration. Because of the efforts made, in the last year of the CARDS programme, project fiches were prepared by the BiH authorities.Case 2: Nikola Tesla project in SerbiaAlthough the Agency's legal framework (i.e. indirect centralised management) is not the most appropriate for enhancing the ownership of the recipient country, the Agency was still able to find an innovative solution in the case of a power plant project in Serbia (Nikola Tesla A5).The innovative feature of the implementation of the project was the use of a ‘Grant Agreement’. Through this arrangement the responsibility for the planning, including the definition of the technical specifications and management of the project was entrusted to the beneficiary, the Serbian electricity utility.The technical specifications were checked and approved by the contracted supervisor and the tendering procedure and control of payments was maintained by the Agency. All parties, including the beneficiary, were very satisfied with the arrangement and thus it can be concluded that the ownership was as complete as can be expected under the present arrangements.

48.

However, in most cases the Commission was not consistent in promoting recipient country responsibility when developing the so-called project fiches and later the terms of reference. Participation varied from country to country on the basis of initiatives taken by the Delegations or the EAR depending on the capacities of the countries concerned. While the Court noted increasing input from recipient countries, ownership remained limited.

49.

The co-financing of projects with national funds is one indicator of recipient country ownership and interest. Although the CARDS Guidelines encourage the use of national co-financing, it was hardly used (29). A positive exception, i.e. the only one out of the 31 non-grant projects audited, in this respect is the Croatian land cadastre project, which was significantly co-financed and where the donor coordination was effectively led by the Croatian authorities. Similarly the commitment of the beneficiaries of grants was also high (30).

50.

One way of increasing recipient country ownership is to involve national authorities in tender evaluation committees. However, the EuropeAid instructions binding the Delegations and acting as guidance for the EAR, require that the majority of the voting members of the evaluation committees represent the Commission (see Box 7). This contrasts with many other areas of external actions where the Commission is not represented as a voting member on evaluation committees, but retains the right of veto.

Box 7Composition of tender evaluation committeesThe Court assessed 177 tender evaluation committees covering 2002 to 2005. On average 55 % percent of the voting members were task managers from the Delegations or EAR operational centres and 13 % of the voting members were independent external experts. The average representation of beneficiary organisations was 32 % with the exception of Croatia, where the percentage increased significantly to 52 % and Bosnia and Herzegovina where the trend of beneficiary voting members decreased to 24 %.

51.

The EuropeAid instructions require evaluation committees to comprise a minimum of four EC Delegation/EAR staff (i.e. chairman, secretary and two evaluators) for one external evaluator and an additional two EC Delegation/EAR staff for every additional beneficiary evaluator. This draws excessively on the human resources of the Delegations while preventing improved country ownership.

52.

One of the obstacles to decentralisation was a lack of knowledge by recipient countries of the European Commission's contract procedures. In Croatia, representatives from national authorities were systematically invited by the Delegation to participate in the evaluation committee meetings as non-voting observers. This represented good practice by allowing national authorities to become familiar with the detailed tendering procedures, but was not applied systematically in other countries. For example, in Albania, the former Yugoslav Republic of Macedonia and Serbia the practice was applied only in very rare cases.

53.

According to the CARDS guidelines all CARDS support should be co-ordinated with other donors. Donor co-ordination is particularly challenging in the western Balkans because of the high number of donors and the existence of two agendas: the accession agenda of the EU; and the development, poverty-reduction agenda of the World Bank, UN and some agencies of EU Member States.

54.

The ‘Paris Declaration on Aid Effectiveness’ (31) confirmed the principle that the recipient countries themselves should take the lead in coordinating aid at all levels, while the donors should pledge to respect partner country leadership. In the CARDS countries the audit found almost no evidence of such leadership by the recipient countries or of any actions by donors to encourage beneficiary country leadership. The only initiative was visible in Albania (see Box 8).

Box 8Donor co-ordination in AlbaniaIn order to improve donor coordination in Albania, the four multilaterals (EC, OSCE, UN and WB) set up a sectoral coordination mechanism in December 2003. They agreed on the division of responsibilities between themselves in four thematic areas. In order to manage the coordination process, they formed the Donor Technical Secretariat. This contributes to a more effective complementarity and more effective division of labour. The donors are expected to make use of their respective comparative advantages at sector level and to delegate authority to the assigned lead donors for the execution of programmes.The donor community contributed to establishing an Integrated Planning System, which was launched by the Government of Albania in 2005 and which should help the country to lead its own development process. This aims to integrate the various policy frameworks into a single medium-term development plan in 2007 and to set up a new architecture for donor coordination and management of external assistance.

55.

Delegations and the EAR have different monitoring procedures:

56.

Effective monitoring requires projects to have objectives and objectively verifiable indicators (OVIs) to monitor against. However, OVIs are either not provided, or when provided, they are not measurable or time-bound. For instance in a Police Academy project one of the OVIs was ‘adequate teaching of staff’ without specifying the number of participants foreseen or the curriculum. In another project, there were indicators such as ‘enhanced operational capacity’ without specific criteria.

57.

In accordance with the CARDS regulation the Commission evaluated the programme by the end of June 2004. According to the evaluation terms of reference, its objective was to provide the European Commission with an independent and reliable assessment of the assistance strategy under CARDS and its evolution with its wider political setting. It covered the 2001 to 2003 period (see also paragraph 10).

58.

In order to improve financial management a critical part of the evaluation process is the follow-up on the recommendations made. In principle, the Commission has one year to report on its follow-up actions. In this case the Commission reported over two years later. This may have been partly due to the Commission not being satisfied with the quality of some of the recommendations made.

59.

While there was no formal requirement to evaluate individual projects or sectors, this is good practice as it would allow focused results and recommendations. The EAR systematically carried out evaluations at sector and project level. Both mid-term evaluations and ex-post evaluations were made. The executive summaries of these evaluations were published on the EAR website, thus contributing to a dissemination of the findings. In contrast the Delegations rarely carried out project or sector evaluations and the few reports carried out by the Delegations were not published on their websites.

60.

The dissemination of the results of monitoring and evaluation exercises also differs between the Delegations and the EAR. The EAR organises regular meetings and workshops for the Task and Programme Managers from different operational centres in order to exchange experience. However, the same level of dissemination does not take place between Delegation countries. There are some contacts between Delegations and EAR staff but these are not systematic.

61.

The Court concludes that the Commission's management of the CARDS programme was largely successful in contributing to stabilisation and reconstruction in the recipient countries. However, the aid was less effective in improving administrative capacities, due to an initially low concentration on institution building and insufficient recipient country capacity to absorb the assistance provided.

62.

The Commission's strategic guidance was very general and not targeted at specific areas. It was adequate for the reconstruction phase, but not for the more challenging institution building objectives.

63.

The country strategy papers were broadly formulated with the result that they provided insufficient orientation at a detailed level, particularly as they were not supported by timely sectoral strategies. The multi-annual indicative programmes — which form the basis for annual planning and the identification of projects — did not prioritise between or within the different areas of intervention. As such there was no basis for optimising project selection resulting in a number of uncoordinated and isolated projects.

64.

Early in the programmes, aid was mostly directed towards reconstruction investment-type projects, rather than institution building. As the programmes progressed, the focus naturally changed towards institution building which now represents the large majority of expenditure. The Court notes that from the very beginning the focus on institution building was more pronounced in countries where assistance was managed by the Delegations than in countries where it was managed by the EAR. In the latter case it delayed the introduction of twinning projects.

Recommendation 1The strategic guidance for implementing the new Instrument for Pre-Accession Assistance (IPA) (32) should give sufficient attention to individual areas of intervention to ensure an appropriate focus of aid, a systematic approach to key areas and an appropriate basis for prioritising and selecting projects.

65.

The management approaches used by the Commission were largely, but not always, appropriate for recipient countries' circumstances and needs. They were effective in ensuring quick delivery of aid, but gave insufficient consideration to maximising the benefit from the aid.

66.

Four different management approaches were used, with the aim of reflecting the circumstances of the recipient countries concerned. Two of the approaches (i.e. devolved Delegations and the EAR) — covering the majority of expenditure — were mostly effective and appropriate. The other two (i.e. centralised and decentralised management) were less efficient and responsive to the specific needs.

67.

The Commission was successful in responding to previous criticisms of slow implementation by ensuring that aid was delivered quickly. This was of particular advantage during the reconstruction phase. However, for institution building, the focus on speed was not balanced by sufficient consideration of the ability of recipient countries to maximise the benefit from the aid or comply with all preconditions.

Recommendation 2The Commission should maintain its focus on rapid implementation of aid, but also pay sufficient attention to aspects of effectiveness such as the ability of beneficiaries to fully absorb the assistance provided (particularly in the context of institution building projects).

68.

While recipient country ownership was considered a priority by the Commission, there was no consistent approach to achieving this aim and the management approaches used did not encourage such ownership.

69.

Recipient countries had only a limited involvement in the project identification and tendering phases. Towards the end of the programme the input from recipient countries increased, although ownership remained limited. Despite the recipient countries committing themselves to co-ordinating the many different donors in the area — an important indicator of ownership — the audit found no evidence that such coordination had taken place.

Recommendation 3For the IPA programme the Commission should address the important aspect of recipient country ownership through specific strategies in all areas of management and implementation, in particular tendering.

70.

Monitoring and evaluation was good in parts, but of inconsistent quality. Monitoring procedures differed between the Delegations and the European Agency for Reconstruction, although a common methodology was applied from 2005. An absence of adequate project indicators compromised the effectiveness of monitoring. An evaluation of the CARDS programme was carried out as foreseen, but the follow-up by the Commission was late. Unjustified inconsistencies exist between the Delegations and the EAR in respect of the intensity of project or sector evaluations and the dissemination of the results of monitoring and evaluation.

Recommendation 4Monitoring and evaluation practices should be harmonised, including extending to the Delegations the EAR's practice of evaluating individual projects/sectors and of disseminating results and lessons learnt.The Commission should ensure that it follows up evaluations promptly.

(a)

the CARDS programme was highly relevant for ensuring financial and technical support to the Stabilisation and Association process;

(b)

the centralised nature and approach might become an obstacle to the programme ownership and effectiveness;

(c)

balancing support for institution building and development investment was a key challenge;

(d)

the regional dimension of the programme was weak.