STANDARD TWINNING LIGHT PROJECT FICHE

Capacity Building for the management of EU funds and IPA within the Central Financing and Contracting Department and the National Fund

1  Basic Information

1.1  Programme: National Programme 2007 for Transition Assistance and Institution Building (TAIB)

1.2  Twinning Number: MK2007/IB/FI/02/TWL

1.3  Title: Capacity Building for the management of EU Funds and IPA within the Central Financing and Contracting Department (CFCD) and the National Fund (NF)

1.4  Sector: Good Governance and the Rule of Law

1.5  Beneficiary Country: the former Yugoslav Republic of Macedonia

2  Objectives

2.1  Overall Objective(s):

The overall objective is to strengthen the administrative capacity of the country to cope with the requirements for decentralised management of EU funds under the IPA Regulation.

2.2  Project purpose:

Тhe project's purpose is to help the Governmental institutions, namely the National Fund (NF), the National Authorising Officer (NAO) and the Central Financing and Contracting Department (CFCD) within the Ministry of Finance to manage EU funds according to internal control standards set out in the Accreditation Criteria (Annex I to IPA Implementing Regulation 718/2007) under the Decentralised Implementation System (DIS).

2.3  Contribution to National Development Plan/Cooperation agreement/Association Agreement/Action Plan

Both the NPAA and the European Partnership stress the importance of the establishment of transparent and accountable administrations, internal controls and audits in the decentralised management of funds.

The MIPD stresses that the Pre-accession assistance for the period 2007-2009, 2009-2011 is, among others, concentrated on the preparation for decentralised management of EU funds across the various components. The pre-accession assistance shall prepare the country to meet the Accession Criteria and to fulfil the Copenhagen criteria for membership thereby enhancing their administrative capacity for programming, management and implementation of the EU Cohesion and Structural Funds and Rural Development Policy after accession. The national administration must be endowed with the necessary structures as well as the management expertise and capacity to assume full responsibility for the decentralised management of IPA funds. Furthermore, it states that assistance will focus on, inter alia, capacity building of national administrations to assume full responsibility for the decentralised management of EU funds and developing accountable administrations and institutions (e.g. agencies), with appropriate capacity, for the decentralised management of EU funds.

3  Description

3.1  Background and justification:

The country obtained the EU Candidate country status in December 2005 and as such received access to all five components of the Instrument for Pre - Accession Assistance, as stated in the IPA Council Regulation (EC) No. 1085/2006, adopted on 17 July 2006, provided that it has fulfilled the requirements related to the management of the instrument.

3.1.1 Institutional frame

The Government of the former Yugoslav Republic of Macedonia has established the structures for Decentralised Implementation System (DIS) of IPA funds – for the first four IPA Components under DIS with ex-ante control and for the Fifth Component – under fully DIS without ex-ante control in accordance with the Accreditation Criteria as set in the Annex to the Commission Regulation (EC) No 718/2007 (IPA Implementing Regulation). In February 2008 the Government adopted an Action Plan for Establishment of DIS in the country.

All the necessary bodies and authorities under DIS were officially appointed and staff was recruited. The legal framework including all implementing legislation to appropriately allow these institutions to function has been established.

- The Central Financing and Contracting Department [1] (CFCD) is a Department within the Ministry of Finance responsible for tendering, contracting, payments, accounting and sound financial management of all projects under the first four IPA Components with ex-ante approval from the EUD in the country. It also acts as a Lead Body in the Operating Structures for the first four IPA Components under the supervisory role of Head of OS that is also the Head of CFCD.

- The National Fund[2] (NF) is a central treasury body established within the Ministry of Finance (Treasury Department) consisted of two separate Units, through which the pre-accession funds from the European Commission will be transferred to the former Yugoslav Republic of Macedonia pursuant to Annex A of the Framework Agreement. NF is responsible for ensuring efficient and effective functioning of the management and control systems. NF is responsible for the financial management of IPA, under the responsibility of National Authorizing Officer (NAO), and shall perform the following tasks within its competences:

-  opening and managing bank accounts,

-  requesting funds from the European Commission,

-  approving the transfer of funds from the European Union to the Operating Structures for all five IPA components, and

-  submitting financial reports to the European Union.

Furthermore, the Government has also appointed the following bodies of decentralised management:

- National IPA Coordinator (NIPAC) is responsible for overall coordination of assistance under the IPA Regulations, and in particular in charge of the responsibilities as per point 2 of Annex A of the Framework Agreement and Article 22 of IPA IR.

- Competent Accrediting Officer (CAO) is a body of decentralised management, issuing accreditation to the National Authorising Officer and the National Fund for decentralised and fully decentralised management of all five IPA components, pursuant to the requirements prescribed in Point 1Annex A of the Framework Agreement.

- Strategic Coordinator (SC) is responsible for ensuring coordination of the assistance awarded in line with the Regional Development Component and the Human Resource Development Component, pursuant to point 3, Annex A of the Framework Agreement.

- National Authorising Officer (NAO) is high ranking official of the Ministry of Finance, heading the National Fund and being entrusted the overall responsibility for the financial management of EU funds, and effective functioning of the management and control systems, as per point 4 of Annex A of the Framework Agreement and Article 25 of IPA IR.

- Programme Authorising Officer (PAO) is a body of decentralised management, managing the Operating Structures (Ops) for implementation of IPA Component I and IPA Component II, and shall be accountable for timely and efficient fulfillment of the obligations referred to in point 6, Annex A of the Framework Agreement.

- Head of Operating Structure (HOS) is a body of decentralised management, managing the Operating Structures for implementation of IPA Component III and IPA Component IV, and shall be accountable for timely and efficient fulfillment of the obligations referred to in point 6, Annex A of the Framework Agreement.

- Head of National Fund (HNF) is an authority in the decentralised management system appointed to perform the functions of Head of NF, being directly responsible to NAO and responsible for the proper performance of the functions of NF.

- Audit Authority (AA) is a functionally independent body that audits the organisational set-up and the functionality of the structures and the control systems for management of pre-accession funds of EU in the former Yugoslav Republic of Macedonia, established under the Law on Modifications and Amendments to the Law on State Audit (Official Gazette, No. 133/ 07).

- Line Ministries/ Beneficiary Institutions are also part of the respective Operating Structures being responsible for programming, technical implementation and monitoring. The CFCD operates in close liaison with the Line Ministries/ Beneficiary Institutions, while the Head of OS, who is also the Head of CFCD, bears the overall supervision for projects/programmes implementation.

- Senior Programme Officers (SPOs)/IPA Coordinators in the Line Ministries/ Beneficiary Institutions have been appointed as structures in charge of programming, technical implementation and monitoring of the implementation of projects under IPA.

- The IPARD Agency[3] is an autonomous state administration body having legal capacity, established according to the Law on establishing the Agency for Financial Support in Agriculture and Rural Development. The IPARD Agency, as part of the Operating Structure for the fifth IPA Component, is responsible for tendering, contracting, payments and accounting of all projects under the fifth IPA Component.

3.1.2 Current state of play

In January 2009 the Accreditation Packages for conferral of management powers for IPA Component I and IPA Component III were submitted to the EU. In March 2009 a joint Audit Mission by the representatives from DG ELARG and DG REGIO took place. Following the audit mission for IPA Component I, the final Audit Report was submitted by DG Enlargement in August 2009, identifying 12 high and medium risks.

Subsequently, the DIS Authorities launched an Action Plan to address these weaknesses in order to fulfil the accreditation criteria as per IPA Implementing Regulation (IR), and all high risks should be addressed before the summer 2010

Projects under Component I of the 2007 and 2008 National Programmes are implemented under centralised management by the EUD. In this regard CFCD performs activities related to coordination of the preparation of the terms of reference/technical specifications by the Line Ministries/ Beneficiary Institutions, and performs quality check of the documents before their submission to the EUD. In addition, with respect to these contracts, the CFCD staff takes part in the Evaluation process organised by the EUD as observers, aiming to get practical experience with procurement procedures, prior to conferral of management.

In terms of IPA Component II, the Accreditation Package has not been submitted yet. Furthermore, different management approaches apply to the implementation of the different CBC Programmes between the former Yugoslav Republic of Macedonia and the respective neighbouring countries (centralised, decentralised, shared and transitional arrangements). The four different CBC Programmes are as follows:

-  Operational Programme for CBC between the former Yugoslav Republic of Macedonia and Republic of Albania to be implemented in a centralised management[4];

-  Operational Programme CBC between: the former Yugoslav Republic of Macedonia - Republic of Greece to be implemented under transitional arrangements[5];

-  Operational Programme CBC between: the former Yugoslav Republic of Macedonia - Republic of Bulgaria to be implemented in a shared management[6],

-  Transnational SEE Programme to be implemented in a centralised management.

In terms of IPA Component III, following the DG REGIO Audit Mission in March 2009, the auditors identified only 3 high-risk findings in the draft-Audit Report delivered to the National Authorities on 5 June 2009. After the remedial actions taken by the National Authorities, the European Commission adopted a Decision on conferral of management powers regarding the Operational Programme for Regional Development within the IPA on 24 July 2009.

Concerning the implementation of the projects under the IPA Component III- Regional Development, the CFCD has started performing activities under decentralised management, following the conferral of management powers, with ex-ante control by the EUD.

In April 2009 the Accreditation Package for IPA Component IV was submitted to the EC for approval. An Audit Mission organised by DG EMPL took place in May 2009. The draft-Audit Report, delivered to the national Authorities by the DG EMPL on 16 July 2009, provisionally concluded that the Operating Structure for Human Resources Development has designed internal control procedures in a manner that would ensure satisfactory results in practice i.e. there were no blocking elements to the conferral of management powers. As such, the European Union adopted a Decision for conferral of management powers under IPA component IV on 16 October 2009.

Concerning the implementation of the projects under the IPA Component IV- Human Resources Development, the CFCD has started with activities under decentralised management, following the adopted conferral of management powers, with ex-ante control by the EUD.

In terms of IPA Component V, the Accreditation Package for IPA Component V was submitted to the EC for approval in June 2009. An Audit Mission with representatives from DG AGRI took place in September 2009. The final version of the Accreditation Package for IPA Component V, with included recommendations given by the DG AGRI auditors, was submitted to EC for approval in October 2009. All the identified risks were appropriately addressed by the national authorities, and the conferral of management powers for this Component was granted by the EC on 18 December 2009.

Under the Rural Development Component, the IPARD Agency will implement the projects under fully decentralised management without ex-ante approval by the Commission. The main focus of the IPARD Programme will be placed on improving market efficiency, implementation of Community standards and rural diversification.

The programmes that are relevant for the implementation of the Twinning Light Project include:

1.  National Programme for TAIB 2009;

2.  Different CBC Programmes that the former Yugoslav Republic of Macedonia has with other neighboring countries;

3.  Operational Programme for Regional Development 2007-2009;

4.  Operational Programme for Human Resources Development 2007-2013 and

5.  Operational Programme for Rural Development 2007 - 2013.

Moreover, the mid-term plans of the country and the Roadmap contain indicative benchmarks and agreed time frame to achieve decentralization without ex ante controls by the EU, as referred to in Articles 14 and 18 of IPA Implementing Regulation.

3.2  Linked activities:

The following projects, implemented in the last years through the CARDS programme, are related to the capacity building of the implementing bodies:

Reference: Contract No. 2007/141-876

Title: CARDS 2005 Project “Technical Assistance to the former Yugoslav Republic of Macedonia: Capacity Building Support to the Decentralisation of Management Assistance”

Description: The global objective of the project is to perform a gap assessment of the targeted national institutions and Implementing Agencies (IAs). The gap assessment was based on the requirements under PHARE, since the IPA Regulation had not been in force. However, in compliance with the Implementing Rules for the Instrument for Pre-Accession assistance, new structures, functions and requirements were introduced. Therefore, in order to assess the current situation in the establishment of DIS and to point out the issues which need improvement, a gap assessment review project has been contracted (in June, 2007). Under the same project, technical assistance was provided to the State Audit Office (Audit Authority), in order to identify potential gaps and to strengthen its administrative capacity.

Duration: October 2005- January 2006

Reference: Contract No. 2008/157-719

Title: EU CARDS 2006”TA Capacity Building in Support to the Decentralisation of Management of Assistance in the former Yugoslav Republic of Macedonia”