42 Financial Management of the 8th-10th
European Development Funds
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10289/10
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| Commission Annual Report on the Financial Management of the 8th-10th European Development Funds (EDFs) in 2009
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| Legal base | —
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| Document originated | 29 April 2010
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| Deposited in Parliament | 4 June 2010
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| Department | International Development
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| Basis of consideration | EM of 21 June 2010
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| Previous Committee Report | None
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| To be discussed in Council | To be determined
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
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.
Conclusion
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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