The European Commission has presented the SAPARD annual report for the year 2003. Throughout this year, all SAPARD beneficiary countries continued the implementation of their programmes. In certain countries, additional measures envisaged were implemented. Agri-environmental measures are included in all SAPARD programmes in beneficiary countries except for Slovenia.

As regards investments in agricultural holdings, the most essential sectors in terms of requirements for acquis related investments are the livestock sectors and, to a certain extent, the wine, fruit and vegetable sectors. Investments in the crop sector are largely focused on rationalisation, mechanisation and the improvement of efficiency. As illustrated by Annex B, a significant share of the investments, with a few exceptions, relate to investments in these sectors.

Data from programme monitoring and the mid-term evaluation reports suggest that investments in the crop sectors have progressed faster than investments in the livestock sectors due to, inter alia, economic problems and a lack of financial resources available for the latter. The Commission is addressing this issue in the context of following up on the annual implementation reports and, where appropriate, the mid-term evaluation reports (MTE). This includes reviewing and, if necessary, adapting the programmes in accordance with the Multi-Annual Financing Agreement (MAFA), with the objective of improving access to the programme for the sectors requiring most support to prepare for accession, and to achieve balanced progress in all sectors covered by this measure.

As regards investments in food processing and marketing, the need for acquis related investments to meet acquis standards is most pressing within the dairy and meat processing sectors. Meeting EU standards is also important in the fishery, wine, fruit, and vegetable sectors. A significant share of investments under this measure relates to investments in the sectors with a tendency towards a higher activity level in the field of further procession. Investments in first stage processing, and in particular, slaughterhouses, develop at a slower pace. Data from programme monitoring and, where appropriate, the MTE suggest that there is a certain amount of deadweight investment, especially in the further processing sectors. The Commission is addressing these issues in the context of following up on the annual implementation and the MTE with a particular emphasis on reviewing the programmes with the objective of strengthening the focus of the programmes on acquis related investments and the preparation for accession.

As to the investments in rural infrastructure, the most important activities relate to investments in local roads, water supply and sewage systems with the level of investments depending on the situation in their respective rural communities and the objectives set out.

With regard to the investments in diversification in economic activities, the most important activities relate to investments in improvement and development of rural tourism facilities, small and medium sized food processing enterprises and local service providers.

As regards agri-environment measures, the progress made in preparing for the implementation of this measure varies as beneficiary countries have either focused efforts on improving efficiency in the implementation of already accredited measures with a view to increasing absorption, or have concentrated on preparing the post-accession agri-environment measures. In the Czech Republic and Slovakia, Commission decisions conferring management of aid for agri-environmental measures were taken. By the end of 2003, the Czech Republic contracted 36 projects committing a total of EUR 524 380 of SAPARD funds. The first payment made to the Czech Republic in January 2004 totalled EUR 124 756.

As regards the financial and budgetary issues, SAPARD budgetary allocations for commitments in the 2003 budget were set at EUR 564 million of which EUR 560 million was allocated to programme line B7-010, and EUR 4 million to the administrative management line B7-010A. On 23/12/2003, EUR 3,9 million, the amount not used by the Commission for administrative purposes under Article 7(4) of the SAPARD Regulation (line B7-010A), was made available to programme line B7-010 and was carried over to 2004. No appropriations were carried over from 2002 and no appropriations lapsed in 2003.

Payments made by the Commission to the beneficiary countries from the beginning of the programme to the end of 2003 amounted to EUR 417,6 million, of which EUR 207,6 million represented payments on account and EUR 210 million reimbursement payments based on expenditure declarations.

PURPOSE : to present a European Court of Auditor's Report 2/2004 posing the question – "Has SAPARD been well-managed?"

CONTENT : between 1999 and 2000 the pre-accession budget effectively doubled. This coincided with the 1998 Regulation setting up the SAPARD programme. Since its creation, Sapard has been unique amongst other EU financial programmes in that it is the first external aid programme to be implemented in a decentralised manner. The doubling of the pre-accession budget combined with the decentralised structure of Sapard has led the Court of Audit to prepare this Report and pose the question, "Has Sapard been well-managed".

The conclusions of the Report are varied. The Court of Auditors found that management has been of mixed qualities. The main finding of the Report are as follows:

- The Commission did not guarantee that implementation problems were actively and systematically identified and followed up. Nor did they ensure that best practices were applied in all the Sapard countries. According to the Court of Auditors the Commission sees its chief management role as one of monitoring - given the decentralised nature of Sapard.

- There were substantial delays in getting Sapard underway. A further criticism of the Report is that there has been to much emphasis on overly heavy administrative procedures. As a result budgets were systematically over estimated and large proportions of available funds unused. For example, in the first four years of implementation, only EUR 323 million – or 14.8% of the available budget was paid to final beneficiaries.

- The Commission failed to report on how well Sapard had achieved its objectives and there was too much focus on institution building. The Court notes that institution building, though normally a prerogative of the PHARE programme, has been positive in terms of providing hands-on experience for the management of EU funds. It is, nevertheless, not the main priority of the Sapard programme.

- Money for agricultural processing has generally been spent on projects which increase the quantity of agricultural products – more so than on projects which improve the quality of agricultural production.

- Potential beneficiaries have difficulties obtaining credit and have been faced with heavy administrative procedures. Sapard, thus, tends to favour the financially strong with sufficient capital or access to loans. This is a major handicap to smaller farms.

- General costs of up to 2% of total eligible costs may be charged to the project, which at the time of the audit were largely consultants' fees. According to the Court, there was typically no justification for the fees charged. Few checks are made ensuring that costs relate to the services provided or indeed that the services have been provided in the first place.

COMMUNITY MEASURE : Commission Regulation 2222/2000/EC laying down financial rules for the application of Council Regulation 1268/1999/EC on Community support for pre-accession measures for agriculture and rural development in the applicant countries of central and eastern Europe in the pre-accession period.

CONTENT : in accordance with the provisions set out in Council Regulation 1266/1999/EC on the implementation of the Sapard instrument, this Regulation lays down financial rules for the application of Council Regulation 1268/1999/EC on Community support for pre-accession measures for agriculture and rural development in the applicant countries of central and eastern Europe in the pre-accession period. The Commission intends to require the applicant countries to respect these conditions by including them in financing agreements negotiated with each country.

These rules are inspired by the principles set out in the Common Agricultural Policy such as :

- a decentralised management approach organised through agencies in the applicant countries;

- the conformity of paying agencies with the EAGGF-Guarantee provisions;

- the agencies in the applicant countries will need to dispose of the payment function plus an implementation function, appropriate criteria necessary also for that function therefore need to be laid down; - accreditation may also be provisionally granted subject to the respect of essential/minimum criteria; - for the Commission to waive the ex ante approval and to confer management of the aid on an applicant country, the national accreditation of the Sapard agency in the applicant country needs to be approved; - for Sapard purposes, the national fund in each applicant country be the competent authority which accredits the Sapard agency and supervises subsequent compliance with the accreditation criteria. The national authorising officer shall be the contact point for financial information between the Commission and the applicant country;

- laying down general provisions on the Structural Funds. The first commitment shall be made when the Commission lays down its decision approving the assistance. That model may, under these circumstances and with respect to the triggering of the Community budget commitment, be considered as an appropriate model to be applied mutatis mutandis to Sapard; - the execution of ex post controls by the Commission. The EAGGF clearance of accounts procedure is an efficient system to audit payments of the decentralised agencies and, if necessary, to recover irregular or undue payments from the applicant countries.

- Sapard implementing rules should be fixed in bilateral agreements to be concluded between the Commission and each applicant country. The Commission and each applicant country should therefore draw up a multiannual financing agreement in which the conditions determining the use of the Sapard contribution will be set out. Annual financing agreements should set out the financial contribution of the Community.

ENTRY INTO FORCE : 07/06/2000.