10 STRUCTURAL AND COHESION FUNDS: ANNUAL
REPORTS
(a)
(25020)
14415/03
COM(03) 646
(b)
(25075)
15149/03
COM(03) 697
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Commission Report: 14th Annual Report on the implementation of the
structural funds.
Annual report of the Cohesion Fund (2002)
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| Legal base | —
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| Document originated | (a) 30 October 2003
(b) 18 November 2003
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| Deposited in Parliament |
(a) 13 November 2003
(b) 24 November 2003
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| Department | Trade and Industry
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| Basis of consideration |
(a) EM of 27 November 2003
(b) EM of 1 December 2003
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| Previous Committee Report |
(a) None; but see (23972) 13133/02: HC 63-v (2002-03), paragraph 17 (18 December 2003)
(b) None; but see (23895) 13256/02: HC 63-i (2002-03), paragraph 19 (20 November 2003)
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| To be discussed in Council
| Not known |
| Committee's assessment | Politically important
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| Committee's decision | (Both) Cleared, but relevant to the debate already recommended on the Commission's 2002 annual report on the fight against fraud and related documents
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Background
10.1 EU aid to combat regional disparities within the
Union is channelled largely through a series of inter-related
funds, collectively known as the Structural Funds. The four main
ones are:
- the European Regional Development Fund (ERDF), which European
Regional Development Fund (ERDF) provides assistance, in particular,
for investment to create or maintain jobs, especially in environmental,
transport and telecommunications and energy infrastructure projects,
tourism and development of local businesses;
- the European Social Fund (ESF), which p European
Social Fund (ESF)rovides assistance to the long-term unemployed,
young jobseekers and people excluded from the labour market, and
promotes equal opportunities and adaptation to changes in industry;
- the Financial Instrument for Fisheries Guidance
(FIFG), which Financial Instrument for Fisheries Guidance (FIFG)
provides assistance to fishermen to modernise vessels, develop
fish farming, protect certain fishing areas, develop port facilities
and promote the processing and marketing of fisheries products;
- the guidance section of the European Agricultural
Guidance and Guarantee Fund (EAGGF) which provides assistance
for new young farmers, hill farms, rural infrastructure, diversification
of land use and improvements, investment in tourism and woodland
protection.
10.2 The funds are co-ordinated in a series
of programmes and can be used in a variety of combinations to
fulfil approved projects. Use of the funds is related to three
objectives: Objective 1— promoting the development and structural
adjustment of regions whose development is lagging behind; Objective
2 — supporting the economic and social conversion of areas
facing structural difficulties; and Objective 3 — supporting
the adaptation and modernisation of policies and systems of education,
training and employment in areas outside Objective 1 regions.
10.3 There are also separate Community Initiatives
which are part of the Structural Funds. These target deprivation
caused by more specific factors. The initiatives are:
- URBAN — to support the
economic and social regeneration of cities and neighbourhoods
in crisis;
- EQUAL — to promote equality between men
and women and to combat all forms of discrimination and inequalities
in the labour market;
- LEADER — to encourage and support rural
areas and sustainable development which enhances the natural and
cultural heritage as well as contributing to job creation; and
- INTERREG — to support cross-border co-operation
between neighbouring authorities and to develop cross-border economic
and social centres.
10.4 The Cohesion Fund supports large-scale
environmental and transport projects in Member States with GNP
of less than 90% of the Community average. The Member States currently
receiving Cohesion Fund support are Greece, Ireland, Portugal
and Spain. The Fund helps these countries to meet the objectives
of environmental policy as defined in Article 174 EC and also
assists the development of transport projects of common European
interest, which form part of or connect with Trans-European Networks
(TENs).
Document (a)
10.5 Document (a) is the annual report for
2002 on the Structural Funds. It has sections on:
- a general assessment of implementation
of the funds during 2002, covering each of the three objectives,
the four Community Initiatives, innovative actions and technical
assistance, complementarity with the programmes of the Cohesion
Fund, the European Investment Bank, the European Investment Fund
and the Trans-European Networks (transport and energy) and closure
of previous programmes. This section refers to the finalisation
of the Objective 2 and Community Initiatives programming (although
some of these programmes were established in 2001), to the overall
satisfactory rate of programme implementation, to the commencement
of the mid term review process and to the application for the
first time of the so-called "n+2" rule, which requires
automatic decommitment of funds which have not been used by the
end of the second year following commitment;
- consistency and complementarity, covering the
relationship of the funds to environmental, transport, energy,
competition, public procurement and information society policies;
- evaluation and financial control — here
the Commission describes both its own evaluation and checking
activities and inspections by the European Anti-Fraud Office (OLAF).
OLAF carried out twelve inspection missions in Member States in
2002. It also conducted joint audits with the Directorates General
involved with the Funds on systems and procedures for monitoring
and following up irregularities. During the year, Member States
notified 4,622 cases of irregularity or fraud involving a total
of €604,466,000 (£419,754,000). Compared with 2001,
the number of irregularities and the amount involved more than
tripled. A reason for this may be that 2002 was the final year
for carrying out inspections for the 1994-1999 programmes;
- the work of the management and advisory committees
of the funds;
- relations with the European Parliament, the Committee
of the Regions and the European Economic and Social Committee;
- information and communication.
10.6 These sections are backed up by extensive
"fact sheets" on activity in each Member State. In the
UK fact sheet, the report notes :
- approval of three major projects
in the English Objective 1 programmes;
- avoidance of decommitment under the n+2 rule
(with the possible exception of one EAGGF programme in Scotland,
negotiations on which are still under way with the Commission);
- implementation of programmes continuing at an
increased level of activity;
- the audit of the Government Office for the East
Midlands, which revealed issues relating to the timing of the
legal and financial commitment of one project, to possible non-compliance
with public procurement rules in another and to management shortcomings,
to be resolved;
- commencement of the mid-term evaluation process.
Document (b)
10.7 Document (b) is the annual report for
2002 on the Cohesion Fund. It has sections on the general context;
implementing principles and assistance granted; projects and measures
adopted; monitoring, inspections and irregularities; assessment
and evaluation; and inter-institutional dialogue, information
and publicity.
10.8 In an introductory summary the Commission
notes:
- the final amount, after indexation,
of the resources of the Cohesion Fund for 2002 was €2,788
million;
- commitment appropriations were implemented at
a rate of 99% during 2002 — only €845,000 was cancelled
at the end of the year and no commitment or payment appropriations
were carried forward from 2002 to 2003;
- the transport sector represented 53.9% of the
total commitments from the Fund and the environment sector 46.1%
;
- as previously, the Commission insisted that the
work of the Fund in the transport sector should concentrate on
railways. The priorities in the environment sector were the supply
of drinking water and the treatment of waste water and solid waste;
- assistance from the Fund depends on avoidance
of excessive deficits. The Commission decided to initiate the
excessive deficit procedure, as laid down in the Council resolution
on the Stability and Growth Pact, as the Portuguese public deficit
for 2002 was 4.1% of GDP (the reference level being 3%). Although
Portugal was also in this position in 2001, the Commission did
not recommend the suspension of the Cohesion Fund. The Commission
ruled officially on the excessive deficit in November 2002 and
asked Portugal to bring its deficit within the statutory limit
by the end of the year, which was achieved.
10.9 The fourth section of the report describes
monitoring, inspections and irregularities. Monitoring Committees
met in all four beneficiary countries during 2002. In addition,
a number of monitoring missions were carried out in each of the
four Member States. The visits were to verify progress in the
completion of the relevant projects, to clarify the difficulties
with certain projects and where appropriate to approve project
amendments. The Commission carried out 22 audit missions during
2002. Problems of various types were identified in each of the
four countries, although these were mainly concerned with the
procedures for awarding public contracts. These are now the subject
of financial correction procedures. In November and December 2002
the European Anti-Fraud Office (OLAF) carried out joint audits
with the Commission in all of the beneficiary countries to look
at their systems and procedures for monitoring and notifying irregularities.
During 2002 Greece and Ireland notified the Commission of one
irregularity each. The other two beneficiary countries reported
that they had not detected any irregularities.
The Government's view
10.10 The Minister of State for Industry
and the Regions and Deputy Minister for Women and Equality, Department
of Trade and Industry (Jacqui Smith) does not draw our attention
to any political implications or new financial implications of
these documents.
Conclusion
10.11 These documents give a useful overview
of the Structural and Cohesion Funds, including the management
and protection of Community resources. We clear the documents,
but we regard them as relevant to the debate already recommended
in European Standing Committee B on the Commission's 2002 annual
report on the fight against fraud and related documents.[22]
22 See (24811) 11954/03 and ADD1 and (24814) 11993/03:
HC 63-xxxiii (2002-03), paragraph 3(15 October 2003). Back
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