Select Committee on European Scrutiny Fourteenth Report




Court of Auditors Report concerning the financial accounts of the European Agency for Reconstruction and the implementation of aid for Kosovo for the Year 2000.

Legal base:
Forwarded to the Council:12 November 2001
Deposited in Parliament:3 January 2002
Department:International Development
Basis of consideration:EM of 3 January 2002
Previous Committee Report:None
To be discussed in Council:No date set
Committee's assessment:Politically important
Committee's decision:Cleared, but referred to the International Development Committee for its opinion

The report

  10.1  The report reviews the financial statements, efficiency, management of the operational budget and implementation of the programme in Kosovo of the European Agency for Reconstruction (EAR) in the year 2000.

  10.2  The EAR was created by the Council of the European Union in November 1999 in response to the urgent need for reconstruction in Kosovo, following the 1999 conflict. In 2000, it managed a budget of _266 million.

  10.3  The audit was carried out between November 2000 and May 2001, and examined financial statements for the financial year ending 31 December 2000. The administration and management of the budget in 2000 were found to be highly efficient, although the Court comments that the low ratio of employees to the total value of aid managed could be a risk factor affecting sustainability. By the end of the year, EAR had contracted more than 90% and paid more than 50% of funds committed before December 2000. The Court comments that in both contracting and payments for operational activities, the Agency has been very fast. In implementing the programme, the Agency managed to achieve most of its ambitious targets in the key areas of energy, housing, transport and agriculture.

  10.4  The report identifies the key strengths of the EAR's Kosovo programme in 2000 as its clear focus on a manageable number of priority areas, the high quality and dedication of its staff, flexible application of the rules, and rapid contracting and disbursement of funds. The report also makes a number of suggestions for improvements. The most significant of these are that the EAR's performance could be further improved by developing a practical, sectoral programme to ensure that it remains focussed on priority areas, that there should be clarification and streamlining of the functions of the Governing Board and Management Committee, and that it should put in place a policy framework, and mid- and long-term strategies to ensure the sustainability of its investments.

  10.5  Attached to the report are the responses of the EAR and the European Commission to the ECA's recommendations. The Commission agrees that the Agency should continue to focus on key sectors. It is in the process of drafting the 2002-2006 country strategy paper for the Federal Republic of Yugoslavia, as well as the three-year multi-annual indicative programme, which will be the basis for the Agency's annual programmes in the future. It will pursue the issue of the development of a sustainable policy and regulatory framework with the United Nations Interim Administration Mission in Kosovo (UNMIK) and with the provisional institutions for self-government which are to be elected in Kosovo.

The Government's view

  10.6  The Secretary of State for International Development (Clare Short) comments:

"The UK is content with the report by the Court of Auditors. We agree with its overall conclusion that the EAR's programme in Kosovo in 2000 was efficient, flexible and effective. The report itself is a frank and thorough review that pays attention to the actual outcomes of the EAR's activities in Kosovo, as well as internal management and the disbursement of funds.

"The report's assessment of the strengths of the EAR's programme in Kosovo is accurate. It is an effective, decentralised agency that has developed and delivered its programmes in a timely fashion, in close consultation with the Kosovo authorities and other donors, and has implemented them rapidly and efficiently. The EAR provides useful lessons for other EC agencies, including EuropeAid, in areas such as speed of response and flexibility in application of procedures. The UK has welcomed the subsequent extension of the EAR's remit to cover the Federal Republic of Yugoslavia and the Former Yugoslav Republic of Macedonia.

"The specific recommendations of the report are:

  • that the respective roles of the Governing Board and Management Committee be clarified. This issue has been satisfactorily addressed, as pointed out by the European Commission in its response;

  • that the EAR should adopt a computerised system of budgetary accounts. This is a sound, technical issue, which the EAR is implementing; and

  • that the EAR should develop a prioritised, sectoral programme focussed in key areas, through a policy framework and mid- and long-term strategies. Their proposals have been addressed in the Country Strategy Paper and Multi-Annual Indicative Programme for the Federal Republic of Yugoslavia, including Kosovo, agreed by the European Commission and Member States in December 2001."


  10.7  It is heartening to read such a positive report from the European Court of Auditors. We agree with the Secretary of State that the European Agency for Reconstruction provides useful lessons for other EC agencies.

  10.8  We now clear the document but we refer it to the International Development Committee for its opinion in connection with its inquiry into the Effectiveness of the reforms of European Development Assistance.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 5 February 2002