European Scrutiny Committee Contents

42 Financial Management of the 8th-10th European Development Funds



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Commission Annual Report on the Financial Management of the 8th-10th European Development Funds (EDFs) in 2009

Legal base
Document originated29 April 2010
Deposited in Parliament4 June 2010
DepartmentInternational Development
Basis of considerationEM of 21 June 2010
Previous Committee ReportNone
To be discussed in CouncilTo be determined
Committee's assessmentPolitically important
Committee's decisionCleared


42.1 The European Development Fund (EDF) is the EU's main development co-operation instrument for 78 African, Caribbean and Pacific (ACP) countries and 20 Overseas Countries and Territories (OCTs). The 8th EDF was established in 1995.

42.2 The 9th EDF was signed in 2000 and came into force in 2003 under the Cotonou Agreement.[169] The 9th EDF provided €13.8 billion (£11.7 billion) of Community assistance for the period 2003-2007. The UK share of the 9th EDF was 12.69%. Funds are still being drawn down for the 9th EDF.

42.3 The 10th EDF provides €22.7 billion (£19.3 billion) of Community assistance for the period 2008-2013. The UK share of the 10th EDF is 14.82%.

The Commission Report

42.4 The 10th EDF Financial Regulation requires the Commission to report each year on the financial management of the EDFs.

42.5 This report and accompanying annex summarises the European Commission's main achievements in meeting its financial and operational objectives for the EDF in 2009. Set out against the headings "more aid, better aid, faster aid" and "Respect of the principles of sound financial management: ensure an effective control environment and accountability", they include:  

—  40% of 10th EDF funds now committed and approved;

—  targets for global and individual commitments and contracts exceeded;

—  €192 million (£163 million) disbursed under the Vulnerability Flex (VFlex) and Flex mechanisms in 11 ACP States helping to reduce the 2009 fiscal gap in countries most affected by the global economic downturn;

—  €3.1 billion (£2.6 billion) payments made, equivalent to 94% of the target rate;

—  the signature of the Intra-ACP Co-operation Strategy in March 2009, which included the approval of €200 million each (£170 million) for the new 10th EDF Water and Energy Facilities, both of which incorporate a co-financing window with EU development finance institutions; and

—  closely monitoring transactions, using samples, annual audit plans and follow-up Internal Audit Service and Internal Audit Capability recommendations.

42.6 In cases where targets were not fully met, the report provides explanations, for example:

—  the slight shortfall in payments is due to the delay in payments to countries who are either currently subject to Article 96 consultations (a process which applies to countries who do not abide by the Cotonou Agreement principles of democracy, human rights and the rule of law) or who have not ratified the Cotonou Agreement);

—  that total amounts committed by September 2009 were behind the target of 28% was due partly to technical problems with the Commission's internal systems, which delayed commitments to later in the year, and partly to bottlenecks in its programming process; and

—  unspent commitments increased by 2.7%, following a high number of commitments at the end of 2009 to ensure full use of the 9th EDF funds; however, due to slow contracting processes, a high number of these commitments were not spent in 2009.

42.7 The report also outlines priorities for the EDF in 2010 as being to:

—  accelerate progress on the commitment and implementation of the Regional Indicative Programmes and on the Overseas Countries and Territories (OCT) programmes;

—  ensure commitment and disbursement of the 2010 VFlex resources, together with other B envelope resources;[170] and

—  incorporate the results of the Country Strategy Paper/National Indicative Programme Mid Term Reviews in the planning of Annual Action Programmes for 2011.

The Government's view

42.8 In his Explanatory Memorandum of 21 June 2010, the Parliamentary Under-Secretary at the Department for International Development (Mr Stephen O'Brien) notes that there are no major policy implications stemming from what he describes as "this clearly written and informative report", which he welcomes, and which he says "provides a detailed summary of another largely positive year, with a frank assessment of the challenges ahead."

42.9 Referring to the Commission's 2009 objectives, the Minister says that he agrees with these objectives, that they have been largely achieved and that the Commission has provided plausible evidence in the report to substantiate its assessments. He welcomes the progress made to date, but also says:

"We will however continue to push for faster disbursement of EU aid and ensure that we are getting value for money through our EU spend on development."

42.10 Where targets have not been met, the Minister says that a full explanation has been provided, that he acknowledges these explanations and that he will work with the European Commission and other Member States to make sure these issues are addressed for the future.

42.11 The Minister goes on to explain that, in response to the current economic crisis, the European Commission established the Vulnerability Flex (V-Flex) instrument to assist the most vulnerable ACP states, and that €500 million (£424 million) from EDF10 reserves has been allocated for 2009-2010 to mitigate the social consequences of the crisis and maintain public expenditure in priority areas:

"We have been very supportive of this instrument. It demonstrates the Commission's willingness to respond quickly to the crisis and take the initiative."

42.12 Turning to "value for money" issues, the Minister says:

"The European Commission's Quality Support Groups continue to play an important role in improving the quality of its projects. We welcome the overall increased focus on results, monitoring and evaluation, in the management of Commission aid, and are pleased to see the 7% increase in projects scoring as good or very good performers.

"We also welcome the revision of the guidelines on General Budget Support and will continue to work with our EU counterparts to put in place mechanisms and safeguards to improve the transparency and accountability of the Commission's Budget Support."

42.13 The Minister concludes by describing the details on the Commission's audit processes in the annex as useful.


42.14 No questions arise. We thought it appropriate, however, to draw this report to the attention of the House because of the widespread interest in development issues, both generally and more specifically (such as the focus on General Budget Support), and the sums of money involved (in the UK's case, €3.36 billion, or £2.86 billion, in the 10th EDF).

42.15 We now clear the document.

169   EDFs 7 and 8 were established under the 3rd Lomé Convention, which preceded the Cotonou Agreement. The Cotonou Partnership Agreement between the African, Caribbean and Pacific (ACP) states and the European Community and its Member States was signed in June 2000 for a period of twenty years. It provides the legal basis governing the political, commercial and developmental relations between the two parties. Back

170   All countries receive A & B envelopes. A envelopes provide funding for programmes and B envelopes for emergency and unforeseen needs. Back

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