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• Financial assistance

Decentralisation

Decentralisation involves the transfer of responsibility from the Commission to the Contracting Authority of the recipient country. The Contracting Authority becomes responsible for the tendering and contracting, as well as the financial and administrative management of the projects. There are two steps in the decentralisation process involved in the programming and implementation of the pre-accession instruments: the first and usual one based on ex-ante approval and then the second "extended" one based on ex-post control.

The Commission exercises systematic ex-ante controls; that is to say, the decisions concerning the procurement and award of contracts are referred for prior approval to the Commission Delegation before they are taken by the Contracting Authority in the recipient country.

The ex-ante decentralisation procedure

In practice, the ex-ante control decentralisation procedure carried out by the Commission Delegations involves four essential checks:

1. Approving the content of the tender dossier before the tender is launched.

2. Approving the composition of the evaluation committee (which is responsible for recommending a bidder to the Contracting Authority)

3. Checking and approving the evaluation report

4. Endorsing the contract, through the signature of the Head of Delegation on the contract itself, not as a party to the contract but to confirm that the project can receive EU financing.

The main actors are the National Aid Co-ordinator, the National Authorising Officer, the National Fund, the Programme Authorising Officer in the respective Implementing Agency, EC Delegations and the final beneficiaries.

The National Aid Co-ordinator (NAC) is responsible for ensuring co-ordination both at the level of programming (with the aim of ensuring a close link between the general accession process and the use of Community financial assistance) and at the level of monitoring and assessment of the Phare programmes (or the respective pre-accession funds in the case of Cyprus and Malta). This person is usually a high-ranking official appointed by the government.

The National Authorising Officer is the NAC's financial counterweight (also appointed by the government) and is responsible for the National Fund, which is now the only channel (since 1998) through which Community pre-accession funds flow. It is the sole financial entity that deals with:

• financial management of all programmes
• requests to and the receipt of funds from the Commission
• redistribution of funds to the relevant beneficiaries
• financial reporting to the Commission

In short, the Fund bears the overall responsibility for financial management, including the observance of the Financing Memoranda and the « Practical Guide to contract procedures financed from the EC general budget in the context of external actions ». It is located in a national ministry with central budgetary competence, such as the Ministry of Finance.

The Implementing Agencies (IAs) are located within a ministry or administration in the recipient country. They are responsible for the implementation of Phare projects and fall under the authority of the National Authorising Officer (NAO). A Programme Authorising Officer (PAO) is in charge of each agency and is nominated by the NAO in consultation with the National Aid Co-ordinator. The PAO is responsible for the sound financial management of the programme(s) to be implemented by the IA, including the observance of tendering and contracting procedures, and the monitoring of project implementation. One of the implementing agencies is the Central Financing and Contracting Unit (CFCU). The role of the Implementing Agencies is to carry out the tendering and contracting elements of the programme whereas project selection and monitoring remain the responsibility of the ministries/administrations directly benefiting from the assistance. In addition, the CFCUs manage Institution Building programmes, which are multi-sectoral by nature, as well as being the specialised agency for the administrative and financial management of twinning operations.

The final beneficiaries (institutions, municipalities, ministries) will also be part to the contract for project implementation, in particular if they financially contribute to it. As a general rule, all investments must be co-financed.

With the increasingly accession-driven approach of financial assistance to candidate countries from 1997 onwards, a process of Deconcentration was undertaken that involved a substantial transfer of personnel and resources from Brussels to the Commission Delegations in the candidate countries. Deconcentration still applies to a number of Phare programmes, but given the phasing out of Delegations in the new Member States, the bulk of projects are moving towards a system of Extended Decentralisation.

Extended Decentralisation

In May 2004, 8 countries which previously were eligible for the Phare programme, have become new Member States and this has prompted the need to evolve from a system of ex-ante control to a system of ex-post control (this change is also valid for Cyprus and Malta). The principal reasons are two-fold. Firstly, the participation of the new Member States in Community funds (above all in the area of regional and agricultural policy) requires Member States to adapt their administrations in order to cope with a framework of ex-post control. Secondly, the phasing out of Delegations in the new Member States will lead to a significant transfer of human and financial resources away from the Delegations in these countries, which will be replaced by smaller Representations (as in the older Member States) that fulfil the primary functions of information and communication. As such, all countries which previously were eligible for the Phare programme, Bulgaria and Romania and in the longer perspective also Turkey, are presently moving towards an Extended Decentralisation Implementation System (EDIS) whereby the Commission’s ex-ante approval on project selection, tendering and contracting is waived in accordance with Council regulation 1266/1999.

The advancement towards EDIS was laid down in the documents entitled ‘Preparing for Extended Decentralised Implementation System of the Phare and ISPA programmes’ that were sent to candidate countries in December 2000 and the ‘Roadmap to EDIS and PHARE’ sent to candidate countries in October 2001. These documents set out the four procedural stages that have to be undergone before extended decentralisation can be granted. With the assistance of the Commission, candidate and acceding countries are required to undertake the first three stages themselves. These consist of :

1. Gap assessment : This involves carrying out an assessment of the target national institutions (principally the National Fund and the Implementing Agencies) in order to determine to what extent the conditions for EDIS are currently met and to identify specific actions, changes and improvements required.

2. Gap filling : the national authorities must make the necessary changes and improvements to the target institutions and procedures through implementation of the recommendations of the Gap Assessment Report (GAR)

3. Compliance Assessment : this exercise enables the national authorities responsible to determine whether the pre-conditions are fulfilled so that a formal application of EDIS can be submitted to the Commission.

The fourth and final stage is the Preparation for a Commission decision, which remains the exclusive responsibility of the Commission services that analyse the EDIS application to enable them to decide whether to confer decentralised management under Article 12(2) of the Co-ordination Regulation 1266/1999.

Note: The other financial instruments have followed the same path of decentralisation. In the case of ISPA the approach was essentially the same as for Phare. Please see Directorate General for Regional Policy website for further information. As regards rural developmental actions in the framework of SAPARD, it should be noted that establishing an extended decentralised system was a precondition; implementation agencies had to be accredited in all countries before SAPARD funds could be paid to beneficiaries. The reason for this approach is the large amount of small projects from farmers and agro-businesses to be supported. Please see Directorate-General for Agriculture website for further information