Select Committee on Foreign Affairs Appendices to the Minutes of Evidence


APPENDIX 5

Memorandum submitted by Article 19, the International Centre against Censorship

SUMMARY

  This submission focuses on the need for urgent institutional reform of the system for funding NGOs to carry out activities promoting human rights and democratisation.

  This document outlines serious problems with process, transparency and accountability which have been identified by ARTICLE 19 and other human rights organisations when dealing with the European Commission. These problems occur at every stage of the funding process, from applications for funds, to receiving the contracted monies and closing off projects. The main problems lie within the European Commission's structure for granting funds to NGOs after the Parliament has agreed a budget line for activities.

  The Appendix illustrates problems ARTICLE 19 has had in dealing with the European Commission on programmes to promote human rights, including a nine-month wait for the reimbursement of £250,000 for a completed project.

  Problems detailed in this memorandum include:

    —  Complete absence of grant supervision at the Commission for a number of human rights budget lines for a year;

    —  Extremely late payments of large sums owed by the Commission;

    —  Reports lost by the Commission leading to considerable extra work for NGOs;

    —  Inflexibility in project contracts leading to underpayment on contracted funds;

    —  Opaque decision making and lack of clear guidelines for applications;

    —  Lack of a complaints process or remedy for problems encountered.

1.  PROJECT APPLICATION AND MANAGEMENT PROCESS

Background

  1.  In 1999 a new system was introduced for dealing with the human rights and democratisation budgets. A series of guidelines applicable to all the budget lines has replaced the previous fractured and unco-ordinated approach to inviting applications.

  1.2  The handling of different budget lines has until now been carried out in different ways in different parts of the Commission. For example, DG VIII has directly handled the Africa budget line under which ARTICLE 19's Nigeria programme is being carried out, while DGIA has, since 1980, contracted out handling of the Eastern European project management—the Phare/TACIS Democracy Programme—to the European Human Rights Foundation (EHRF).

  1.3  It is not clear how the new system will work in practice. One example of change is that the EHRF may expand to take on the management of further budget lines on behalf of the Commission.

  1.4  It is feared that the new system will not address many of the existing problems, which are described in greater detail below.

Recent problems

  1.5  In May 1998 the contract for the EHRF to carry out its funding activities expired and was not renewed until May 1999. No alternative arrangements had been made by the Commission to ensure that funds and projects were managed. In May 1999, the European Commission finally renewed its contract with the EFRF—for a one-year period.

  1.6  During the period when the EHRF was inactive, NGOs were unable to contact anyone from the Commission for payments outstanding, information on the progress of projects in the application stage, details of future funding rounds etc.

  1.7  The negative impact this situation had on NGOs cannot be overstated. Project management was thrown into chaos, budgeting made impossible and cashflow management, particularly for smaller organisations, precarious.

  1.8  There is no official information available as to the arrangements being made for the period following expiry of the EHRF's current contract in May 2000, and no explanation or apology has ever been given for the problems which occurred in 1999.

  1.9  ARTICLE 19 is about to sign a contract for a two-year project with a budget of Euros 600,000 which is due to be administered by the EHRF. We are extremely concerned about the lack of information on future planning, given the implications for relations with partner organisations, budgeting, time planning and, indeed, the overall viability of the project should the current uncertain situation remain unresolved.

2.  ADMINISTRATION OF PAYMENTS

  2.1  The Commission is responsible for payment of funds to NGOs. NGOs submit to requests for payment to the Commission directorates, or to agents such as the EHRF, according to schedules worked out at the contracting stage.

  2.2  Despite contractural clauses which state that payment should be made within a stipulated period (usually 60 days), the Commission has a history of long delays—sometimes in excess of a year. (See Appendix for examples).

  2.3  In such an environment, starting projects on contracted dates becomes difficult for many NGOs, since even the first tranche of money is often delayed. Many NGOs have insufficient resources to commence projects without the project funds from the EC, particularly when reimbursement may take an unspecified amount of time.

  2.4  When payments are eventually made, interest which will have accrued is not paid over to the NGO, nor is any account taken of the costs incurred when delaying projects.

  2.5  Payment of tranches of project funds always rely on reports being submitted. ARTICLE 19 always, therefore, sends reports by courier. This is an expensive and time-consuming business, and ARTICLE 19's submissions have weighed as much as 14 kilos to satisfy all reporting requirements. Despite evidence that our packages have been received by the Commission, on more than one occasion we have—when attempting to chase overdue payments—been told to resubmit our reports as the department in question cannot locate the original version sent.

  2.6  Due to the Commission's strict reporting criteria, it can take up to a month to produce a project and financial narrative. As this process occurs after the end of the project, the staff costs cannot be included in the project budget, however substantial they may be.

  2.7  Because there is a rigid financial reporting structure, little flexibility is allowed for transfer of monies within a project once it has been agreed. This approach does not allow for reasonable cost variations (eg flights becoming cheaper, but venue hire going up) over the lifetime of a project, which might be up to three years. Overspends in one area and underspends in others (above a minimal percentage) cannot be used to balance each other out. In practice, this means that an organisation will receive less than the amount stipulated in its original budget, with the Commission keeping the difference.

  2.8  The two principal effects of these issues are that projects timelines often have to be re-written, to the detriment of the intended beneficiaries (see also 4.3), and that the actual cost of projects to an organisation can be substantially more than the Commission permits for inclusion in the budget.

  2.9  It is ARTICLE 19's observation that the Commission's concern is with audit at the expense of financial management: creating a trail of receipts that shows that money has been spent takes precedence over achieving value for money or examining how spending can best ensure the objectives of a project are achieved.

3.  PROCESS OF AWARDING CONTRACTS

  3.1  There is currently no accountability as to who receives funds and why. The decision-making process within the Commission is completely opaque.

  3.2  For example, we understand that there is acknowledgement at Commissioner level that the Commission can only cope with administration of large projects, therefore applications from small organisations or low-budget proposals from large NGOs will almost certainly fail.

  3.3  We are unsure as to the reasons for this situation, but understand it may be due to a lack of capacity in terms of human resources within the Commission.

  3.4  Nowhere in the guidelines for applicants is this criterion mentioned, leading to a lot of wasted time on the part of those whose applications are doomed to fail from the outset.

4.  FLEXIBILITY DURING PROJECT IMPLEMENTATION

  4.1  It has taken up to a year for ARTICLE 19's project proposals to receive approval and the first funding tranche to be paid. Thus, a three-year project might be completed four years after a proposal was submitted, during which time events on the ground may have changed a situation significantly.

  4.2  There is no practical mechanism for responding to such changes by varying projects, which are specific in their design, once a contract has been signed under certain budget lines. This was the case under the old PHARE/TACIS Democracy Programme and is likely to apply to all budget lines under the new system. Until now, an addendum to any contract has been required for such amendments. The process for agreeing this is onerous and negotiating an overly bureaucratic process can itself take several months. This means that responding to events on the ground—often necessary in a human-rights oriented context—can be difficult.

  4.3  Due to delays caused by the Commission's processes, projects are often forced to overrun the scheduled finish date. Ironically, this requires an official extension to the contract, negotiation of which costs yet more time. This happened with a PHARE contract for work in Albania, Romania and Slovakia which ARTICLE 19 signed in 1996.

5.  LACK OF REMEDY

  5.1  ARTICLE 19 has been unable to find any remedy or practical means for addressing the concerns raised in this document. We were astonished to be informed in one e-mail that it was not the policy of the Commission to identify which employee was dealing with an issue, or to provide any phone or e-mail contacts.

  5.2  MEPs who worked with us, notably Glenys Kinnock MEP, have tried repeatedly to secure information on our behalf and to speed up processes, including payment of overdue money, but again without success.

  5.3  Other mechanisms having failed, we wrote both to Chris Patten, Commissioner for External Relations, and Neil Kinnock, Vice President of the Commission, about these matter in early December (see Appendix to this Memorandum). We have yet to receive a substantive reply from either, although both have said the matters we raise are under investigation and the money for the Africa project was received in January 2000.

  5.4  The European Paliament designates a large amount of taxpayers' money for budget lines on human rights. The European Commission is charged with administering these funds.

  5.5  In ARTICLE 19's experience, the European Commission in no way fulfils its obligation, as a public body administering public monies, to be accountable, transparent or efficient in the management of those funds or in dealings with those seeking to assist in the implementation of the human rights priorities of the European Union.

  5.6  In short, ARTICLE 19 is of the opinion that the European Commission regards itself as being above the normal systems of accountability. The recent draft regulation on provision of information by the Commission does not begin to address this situation.

6.  CONCLUSIONS AND RECOMMENDATIONS

  6.1  It is clear that many of the problems outlined above are due to bureaucratic and administrative incompetence. However, equally clear is that in the field of administration of the EU's human rights budget lines there is a cumbersome system with no accountability, no clear lines of responsibility and no transparency. It may also be that insufficient funds are available for the Commission to provide the human resources to manage the budget lines efficiently and effectively.

6.2  ARTICLE 19 urges the Committee to make the following recommendation:

  A thorough and independent external audit of the administration of the EU's human rights budget lines must be undertaken urgently, which produces an honest and publicly-available critique. Those conducting the audit should talk to all parties with an interest in the matter, including NGOs and produce a set of recommended improvements to be carried out according to a specified timeline. The audit should be commissioned from a major international funder with extensive experience of administrating large human rights programmes.

  6.3  Outcomes of this process which ARTICLE 19 would hope to see would include:

6.31  Project application and management process:

    —  Introduction of a clear and timely planning process for the future management of funds for human rights projects.

    —  Establishment of a stable situation whereby a single individual in the Commission or its chosen contractor is allocated to each human rights project for its entire duration, providing a point of contact and support for NGOs carrying out projects.

    —  Sufficient funding should be allocated to the Commission to ensure that there are adequate staff to manage a range of projects of different sizes, carried out by organisations with different capacities. Funding opportunities should not be limited to large organisations proposing large projects.

6.32  Administration of payments

    —  Whilst we recognise the need for adequate financial accountability, the exhaustive reports required of NGOs should be scaled down. If not, the Commission should allow the inclusion in project budgets of a specific allocation of staff costs for the production of such reports.

    —  There must be prompt payment by the Commission of contracted funds. Any delays beyond those allowed for in contracts should result in timely explanations, payment of interest accrued, and possibly compensation.

    —  Greater flexibility should be allowed in cost allocation in budgets, preferably introduced at the contract stage.

6.33  Process around awarding of contracts

    —  Guidelines issued for project applications should reflect the criteria actually used to assess those applications.

—  Feedback should be given to applicants when projects are rejected.

6.34  Involvement in project implementation

    —  The Commission should recognise the need for flexibility in timelines without excessive bureaucratic negotiation, particularly when over-running is due to problems at their end.

6.35  Lack of remedy

    —  Clear lines of authority and responsibility should be established which are made public, and a complaints process introduced.

6.36  Evaluation

    —  There should be scope for the Parliament to receive regular feedback from all parties involved on progress of human rights projects, both effectiveness and process. Parliamentarians should be able to scrutinise such reports closely, perhaps via a Committee process, and there should be a way for them to make recommendations for improvements which will be taken on by the Commission.

February 2000


 
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