2018 Annual Activity Report - European Commission · KEY RESULTS AND PROGRESS TOWARDS THE...

2018

Annual Activity Report

Directorate General

Neighbourhood and

Enlargement

Negotiations –

DG NEAR

Ref. Ares(2019)2267237 - 29/03/2019

near_aar_2018_final Page 2 of 83

Table of Contents

GLOSSARY 3

THE DG IN BRIEF 6

EXECUTIVE SUMMARY 8

A) KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF GENERAL AND SPECIFIC OBJECTIVES OF THE DG ............................. 8 B) KEY PERFORMANCE INDICATORS (KPIS) ....................................................................................................................... 13 C) KEY CONCLUSIONS ON FINANCIAL MANAGEMENT AND INTERNAL CONTROL (EXECUTIVE SUMMARY OF SECTION 2.1) ................... 16 D) PROVISION OF INFORMATION TO THE COMMISSIONER .................................................................................................... 17

1. KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF GENERAL AND SPECIFIC OBJECTIVES OF THE DG 18

1.1 ENLARGEMENT POLICY ...................................................................................................................................... 19 1.2 NEIGHBOURHOOD POLICY .................................................................................................................................. 25 1.3 TAIEX & TWINNING ........................................................................................................................................ 38 1.4 MIGRATION CRISIS ........................................................................................................................................... 40

2. ORGANISATIONAL MANAGEMENT AND INTERNAL CONTROL 42

2.1 FINANCIAL MANAGEMENT AND INTERNAL CONTROL ................................................................................................ 42 2.1.1 CONTROL RESULTS ........................................................................................................................................... 44 2.1.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS.................................................................................................... 64 2.1.3 ASSESSMENT OF THE EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEMS .................................................................. 67 2.1.4 CONCLUSIONS ON THE IMPACT AS REGARDS ASSURANCE .......................................................................................... 69 2.1.5 DECLARATION OF ASSURANCE AND RESERVATIONS ................................................................................................. 71 2.2 OTHER ORGANISATIONAL MANAGEMENT DIMENSIONS ............................................................................................ 74 2.2.1 EXAMPLES OF ECONOMY AND EFFICIENCY ............................................................................................................. 74 2.2.2 HUMAN RESOURCE MANAGEMENT ...................................................................................................................... 75 2.2.3 BETTER REGULATION ........................................................................................................................................ 76 2.2.4 INFORMATION MANAGEMENT ASPECTS ................................................................................................................ 77 2.2.5 EXTERNAL COMMUNICATION ACTIVITIES ............................................................................................................... 78


GLOSSARY

AAR Annual Activity Report

AER Average Error Rate

AOD Authorising Officer by Delegation

AOSD Authorising Officer by Sub-Delegation

CBC Cross-Border Cooperation

COELA Council Working Party on Enlargement and Countries

Negotiating Accession to the EU

CONT Committee for Budgetary Control of the European

Parliament

COPPS Co-ordination Office for Palestinian Police Support

COTE Centre Of Thematic Expertise

COWEB Council Working Party on the Western Balkans Region

CSDP European Common Security and Defence Policy

DAS Declaration of Assurance

DG Directorate General

DG AGRI DG Agriculture and Rural Development

DG DEVCO DG International Cooperation and Development

DG ECHO DG Humanitarian Aid & Civil Protection

DG EMPL DG Employment, Social Affairs and Inclusion

DG NEAR DG Neighbourhood and Enlargement Negotiations

DG REGIO DG Regional and Urban Policy

EAMR External Aid Management Report

EaP Eastern Partnership

EBCG European Border and Coast Guard Agency

EBRD European Bank for Reconstruction and Development

ECA European Court of Auditors

EIB European Investment Bank

ENI European Neighbourhood Instrument

ENPI European Neighbourhood Partnership Instrument

EP European Parliament


ERP Economic Reform Program

EUBAM European Union Border Assistance Mission

EUD European Union Delegation

EUPOL European Union Police Mission

EUTF European Union Trust Fund

FAFA Financial and Administrative Framework Agreement

FAST Financial Assistance Steering Committee

FR Financial regulation

FRIT Facility for Refugees in Turkey

FTE Full-Time Equivalent

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit

HRVP High Representative Vice President

IAS Internal Audit service

ICAT Internal Control Assessment Tool

ICS Internal Control Standard

ICT Internal Control Template

IFI International Financial Institutions

IMF International monetary Fund

IO International Organisations

IOM International Organization for Migration

IMBC Indirect Management by Beneficiary Countries

IMEE Indirect Management by Entrusted Entities

JOP Joint Operational Programme

KPI Key Performance Indicators

LAS League of Arab States

LISO Local Information Security Officer

MIS Management Information System

MS Member State

NGO Non-Governmental Organisation

OECD Organisation for Economic Cooperation and Development


OLAF European Anti-Fraud Office

PEGASE Palestino-Européen de gestion et d'Aide Socio-

Economique

PFM Public Finance Management

PRAG Practical Guide for

RAP Rules of Application / Regional Action Programme

RER Residual Error Rate

RMF Risk Management Framework

ROM Result Oriented Monitoring

SBS Sector Budget Support

SIGMA Support for Improvement in Governance and Management

SSF Single Support Framework

SSR Security Sector Reform

SUDEP Sustainable Urban Demonstration Projects

TAIEX Technical Assistance and Information Exchange

instrument

TFEU Treaty on Functioning of the European Union

TMS TAIEX Management System

UN United Nations

UNDP United Nations Development Programme

UNHCR Office of the United Nations High Commissioner for

Refugees

UNICEF United Nations Children's Fund

UNRWA United Nations Relief and Works Agency

WB World Bank

WBIF Western Balkans Investment Facility

WGI Worldwide Governance Indicator


THE DG IN BRIEF

The mission of DG Neighbourhood and Enlargement Negotiations (DG NEAR,

hereinafter also referred to as "the DG") is to take forward the EU's neighbourhood

and enlargement policies. The DG primarily serves the Commissioner for

Neighbourhood and Enlargement Negotiations, Johannes Hahn and the High

Representative/Vice-President, the President of the Commission, the Vice-Presidents

and other Commissioners where appropriate. DG NEAR works closely with the

European External Action Service (EEAS) and the line DGs in charge of thematic

priorities.

The DG is based in Brussels and has 1,767 staff members, of whom a third are located

in Headquarters and two thirds in the EU Delegations/Office in the partner countries.

In the neighbourhood region, DG NEAR is responsible for co-ordinating across the

Commission the implementation of the revised European Neighbourhood Policy (ENP),

working closely with the EEAS. Under the ENP, DG NEAR supports political and

economic reforms with the aim of creating a space of stability, security and prosperity

in its direct neighbourhood. Through its financial assistance, the EU support key

priorities of the ENP in its bilateral relations between the EU and its neighbouring

countries covering democracy and rule of law, sustainable economic development,

security and migration and mobility.

In the enlargement area, DG NEAR assists those countries with a perspective of

joining the EU in meeting the criteria defined by the Treaty on European Union and the

European Council. DG NEAR closely monitors the progress of enlargement countries

towards the EU and supports accession negotiations as required by the Council. The

DG manages the bilateral relations of the Union with candidate countries and potential

candidates on their path to the EU, frontloading reforms on rule of law, economic

governance and strengthening democratic institutions, including public administration

reform. In the Western Balkans, the DG develops and implements the Stabilisation

and Association process of the European Union as defined by the European Council.

DG NEAR manages the bulk of the Union’s financial and technical assistance to the

neighbourhood (European Neighbourhood Instrument - ENI) and enlargement

(Instrument for Pre-Accession Assistance - IPA) countries, amounting to EUR 27 billion

in total for 2014-2020.

For both ENI and IPA, assistance is implemented through a broad range of

management modes, which take the different levels of preparedness of each

beneficiary country into account.

The management modes implemented by the DG are as follows:

– Direct management, both centralised (in Brussels) and de-centralised to EU

Delegations under the supervision of DG NEAR.

– Indirect Management, including:

o Indirect Management by Beneficiary Countries (IMBC);

o Indirect Management by Entrusted Entities (IMEE), notably with International

Organisations and with Member State development assistance agencies,

including the use of Financial Instruments with International Financial

Institutions (e.g. EIB, EBRD).

– Shared Management with Member States: Cross Border Cooperation Programmes

under ENI;

– The DG is also the Trust Fund Manager of the EU Regional Trust Fund in Response

to the Syrian crisis and the North of Africa window of the 'EU Emergency Trust

Fund for Africa'. It is also a financial contributor to both Funds.


EXECUTIVE SUMMARY

The Annual Activity Report is a management report of the Director-General of DG

NEAR to the College of Commissioners. Annual Activity Reports are the main

instrument of management accountability within the Commission and constitute the

basis on which the College takes political responsibility for its decisions as well as for

the coordinating, executive and management functions it exercises, as laid down in

the Treaties.

a) Key results and progress towards the achievement of general and specific objectives of the DG

In 2018, the work of DG NEAR continued to be closely linked to President

Juncker's political priorities contributing to 4 general objectives and 7 specific

objectives. The key results 2018 in are as follows:

A Stronger Global Actor (General Objective 1)

As regards enlargement policy, DG NEAR continued to work on improving the

readiness of enlargement countries to join the EU (specific objective 3). DG NEAR

prepared a Communication on "A Credible enlargement perspective for and enhanced

EU engagement with the Western Balkans1", adopted by the Commission on 6

February 2018 (Western Balkans Strategy). It confirmed the firm, merit-based

prospect of EU membership in the region. The Strategy put forward a comprehensive

Action Plan across six flagship initiatives to support the transformation of the Western

Balkans. Progress was achieved in all these areas throughout 2018. DG NEAR

contributed to the preparations for the EU-Western Balkans summit (17 May 2018)

and the Sofia Priority Agenda and is working on the implementation of both the

Strategy and the Sofia Priority Agenda.

DG NEAR maintained its "fundamentals first" approach to enlargement, including in

the programming of financial assistance. Accession candidates must deliver on the rule

of law, fundamental rights, democratic institutions and public administration reform,

as well as economic development and competitiveness.

DG NEAR prepared the annual Enlargement package, consisting of a communication

on the implementation of EU enlargement policy and reports (adopted on 17 April

2018), and contributed to the Commission assessments of the Economic Reform

Programmes. The package included recommendations to open accession negotiations

with Albania and North Macedonia. DG NEAR began the necessary preparatory work

following the adoption of enlargement Council conclusions on 26 June. The DG also led

on the preparations of the Commission’s Opinion on Bosnia and Herzegovina’s

application for EU membership.

DG NEAR stepped up efforts to better align its future financial tools with the policy

priorities identified in the Western Balkan Strategy and the Sofia Priority Agenda

through its proposals for the new Multi-annual Financial Framework and the proposal

for the IPA III Regulation.

In recognition of progress made by certain beneficiaries under IPA in the context of

the performance reward foreseen under the IPA II regulation, the Commission decided

in 2018 to increase the allocations for that year for Albania (+ EUR 20 million), North

Macedonia (+EUR 10 million), Kosovo (+6 EUR million), Montenegro (+ EUR 8 million)

and Serbia (+EUR 34 million).

1 COM(2018)65final


DG NEAR worked to re-engage with and maintain open channels of communication

with Turkey, including through high-level dialogues on issues of joint interest.

However, due to the continued deterioration of the rule of law situation in Turkey, the

Council noted that Turkey’s accession negotiations have effectively come to a

standstill and no further work is foreseen on the modernisation of the Customs Union.

NEAR conducted the 2018 programming exercise in the context of further backsliding

by Turkey in key areas. This was also reflected in the proposal of the mid-term review

of the Indicative Strategy Paper, adopted in August, to reduce IPA II assistance for

Turkey by EUR 759 million in total for the 2018-2020 period (EUR 253 million per year

and an overall 40 % reduction). The European Court of Auditors report on IPA funding

in Turkey concluded that “only limited results were achieved so far”, mainly due to the

lack of absorption capacity on the side of Turkey. DG NEAR took remedial actions,

including intensified support to improve Turkey’s capacity to manage funds and

reviewing project portfolio in sensitive areas.

Throughout 2018, DG NEAR continued to work in favour of improved connectivity

within the Western Balkans and between the latter and the EU, and improved good

neighbourly relations in the region with a view to overcoming the legacy of the past

(specific objective 4). The 2018 connectivity package was endorsed at the EU-

Western Balkans Sofia summit on 17 May 2018 with the Western Balkan Guarantee

Fund announced at the London Western Balkans Summit. Progress on the connectivity

agenda continued in the context of the implementation of the Regional Economic Area

Multi-Annual Action Plan. However, relations between Pristina and Belgrade worsened

towards the end of 2018, which affected regional cooperation overall.

DG NEAR continued to engage with all neighbourhood countries in the context of the

revised European Neighbourhood Policy, with the aim to stabilise and secure its direct

neighbourhood. It mobilised significant support to reforms along the four refocused

priorities (good governance, democracy, human rights and the rule of law; economic

development for stabilisation; security; and migration and mobility), while integrating

the principles of differentiation and shared ownership (specific objective 1).

In 2018, bilateral relations and regional cooperation were further enhanced. In the

East, the DG contributed to further implementing the Association Agreements/Deep

and Comprehensive Free Trade Areas (DCFTAs) and revised Association Agendas with

Ukraine, Georgia and Moldova. New multiannual programming documents 2017-2020

for Armenia, Georgia, and Moldova, as well as the Regional East, and for 2018-2020

for Ukraine, provided the basis for Annual Programming in 2018. A Comprehensive

and Enhanced Partnership Agreement with Armenia entered into provisional

implementation in June. Partnership Priorities were agreed with Azerbaijan and

Armenia, and progress made in negotiating Partnership Priorities with Belarus. A

Single Support Framework was adopted with Azerbaijan.

In the South, the EU and Tunisia agreed on Strategic Priorities for 2018-2020. A

Single Support Framework 2018-2020 for Algeria was adopted in April 2018. The EU-

Morocco Action Plan implementing the advanced status was extended for one year,

and consequently the Single Support Framework to cover the 2018 Annual Action

Programme. The EU-Jordan Association Council agreed on a two-year extension of the

Partnership Priorities until the end of 2020. The first drafts of the Partnership Priorities

with Palestine and Israel were prepared for a discussion with EU Member States early

2019. The Action Plans for both Israel and Palestine were prolonged for three years at

the end of 2018.

In 2018, the EU continued to promote regional cooperation. Under the Eastern

Partnership (specific objective 2), the "20 Deliverables for 2020" adopted at the

Brussels Summit on 24 November 2017, provided the basis for shaping the EU’s

assistance and major programmes. In the Southern Neighbourhood, sector policy

dialogue with regional organisations such as the Union for the Mediterranean (UfM),

the League of Arab States, and the Council of Europe continued.


To address the consequences of the multiple crisis that have hit the European

Neighbourhood, DG NEAR continued to assist the ENP countries in tackling the root

causes of instability through a renewed focus on good governance, the rule of law, and

human rights. Continued efforts and new programmes were supported in both the

East and the South, to drive reforms in the public administration and public finance

management, introducing or reinforcing anti-corruption measures, accompanying

decentralisation or capacity building of local administrations. Significant efforts at

bilateral and regional levels continued to increase the capacity of civil society across

the region in terms of policy shaping, to support Human Rights Defenders, freedom as

well as the accountability of States to their citizens.

In response to the conflict in the east of the Ukraine, the EU continued to provide

humanitarian as well as stabilisation and adopted a significant package to provide

support for recovery and development as well as to strengthen social and economic

resilience in government-controlled areas in the east of Ukraine.

Mitigating the impact of the protracted Syrian crisis remained a constant priority

throughout 2018. The April "Brussels II Conference on Supporting the Future of Syria

and the Region" reaffirmed the engagement of the EU in supporting Syrian refugees

and host communities through the activities of the EU Regional Trust Fund in

Response to the Syrian Crisis.

In Libya, the security situation remained a constraint for the implementation of the

cooperation programmes. Operations continued to be remotely managed from Tunis

where the Delegation is temporarily based.

DG NEAR continued to provide financial assistance via the European Neighbourhood

Instrument and to activate its dedicated financial instrument, such as the North of

Africa window of the European Union Emergency Trust Fund for stability and

addressing root causes of irregular migration and displaced persons in Africa (EUTF for

Africa) and the EU Regional Trust Fund in Response to the Syrian Crisis.

Towards a European Agenda on Migration (General Objective 2)

DG NEAR continued to play a pivotal role in driving forward policies and programmes

aimed at stemming the influx of irregular migrants to the EU, by assisting

enlargement and neighbourhood countries in tackling migration challenges. (specific

objective 5).

The focus of migration continued on the Central Mediterranean route as the main

challenge. The conditions of migrants and refugees in Libya remained a great concern.

Therefore, DG NEAR increased its engagement in the protection of vulnerable migrants

and the fight against trafficking and smuggling of human beings, including through

support to border management.

Additionally, the Western Mediterranean route witnessed a substantial increase of

irregular border crossing from Morocco to Spain. Through a EUR 140 million package

adopted in record time at the end of 2018, the EU stepped up its efforts to fight the

smuggling of migrants and the trafficking in human beings throughout the Western

Mediterranean route.

On the Western Balkans route, 2018 saw an overall stabilisation of the influx of

migrants and refugees to the region at levels closer to those registered before the

crisis in 2015. However, Bosnia and Herzegovina witnessed an increase in the flows in

2018. Substantial financial support of around EUR 10 million was provided to help the

country cope. Smuggling activities in the region were on the rise in 2018. Migration challenges continued to receive EU attention and support. Through the North

of Africa window of the EU Emergency Trust Fund for Africa, the EU is contributing to

addressing the root causes of irregular migration and forced displacement, the

fight against trafficking of human beings and smuggling of migrants and the

return and reintegration of migrants to their countries of origin. The EU Regional

Trust Fund in Response to the Syrian Crisis continued to work in support of 1.9 million


Syrian refugees and internally displaced persons in neighbouring countries, as well as

host communities in the region. The EU Facility for Refugees in Turkey continued to

support the needs of refugees as well as host communities.

A Resilient Energy Union with a Forward-Looking Climate Change Policy

(General Objective 3)

In 2018 DG NEAR worked towards its objective of increased energy security and more

effective climate policies (specific objective 6) by pursuing a strengthened energy

dialogue with Enlargement and Neighbourhood partners. In 2018, DG NEAR continued

to promote the external dimension of the Energy Union in the Neighbourhood

countries.

In the Western Balkans, the implementation of the existing Project of Energy

Community Interest (PECI) priorities continued. While no new project was launched in

2018, the Energy Community approved the 2018 list of PECI projects, of which eleven

new projects could benefit from IPA assistance.

Energy security and energy efficiency continued to be among the key priorities for EU

cooperation with Eastern partner countries. The“EU4Energy” initiative delivered key

inputs in terms of new legislation and improved governance in the energy sector. The

High-Level Energy Efficiency Initiative was implemented, bringing together

international financial institutions in upscaling energy efficiency reforms and

investments. A new innovative action on EU4Climate was adopted to support the

development and implementation of climate-related policies by the Eastern countries.

In the South, 2018 was a year of consolidation and deepening of energy policy and

cooperation. The DG continued to support dialogue among energy regulators, energy

efficiency and renewable energies agencies, as well as the gas carriers, with a view to

integrating energy markets, develop renewable energies and promote energy

efficiency and facilitating regulatory convergence. The Union for the Mediterranean

(UfM) energy platforms continued to support dialogue among Neighbourhood South

partners and with EU Member States.

A New Boost for Jobs, Growth and investment (General Objective 4)

DG NEAR further contributed to increased prosperity in the EU and in the Enlargement

and Neighbourhood countries through new efforts to increase economic and trade

opportunities (specific objective 7). The importance of blending operations through

the Neighbourhood Investment Platform (NIP) was reaffirmed in 2018 as a powerful

instrument to leverage significant additional financial resources for EU objectives and

as a tool to increase co-financing among Financing Institutions. DG NEAR acted

through the External Investment Plan (EIP) to promote inclusive growth, job creation

and sustainable development in the neighbourhood region.

In 2018, DG NEAR continued to work on improving the readiness of enlargement

partners to join the EU including by supporting improvements in our partners’

economic governance through the Economic Reform Programme (ERP) exercise. NEAR

contributed to the Commission’s assessments of the ERPs, which were discussed at

the annual ministerial dialogue on economic and financial affairs. In the Western

Balkans, the Commission, with the help of the Regional Co-operation Council (RCC),

continued to monitor the implementation of the Regional Economic Area. A Digital

Agenda for the Western Balkans was adopted in May at the EU-Western Balkans

Summit in Sofia. The region also adopted a Regional Investment and Reform agenda.

Negotiations on the mobility pillar were opened and further progress was made on the

negotiations regarding a roaming agreement. However, worsened relations between

Pristina and Belgrade and Kosovo’s* decision to impose 100% tariffs on Serbia and

Bosnia and Herzegovina affected regional cooperation.

* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the

ICJ Opinion on the Kosovo declaration of independence


DG NEAR actively supported the implementation of the Deep and Comprehensive Free

Trade Agreements in the Eastern Neighbourhood through continued participation in all

formations and levels of the political dialogue. It also further advanced the

implementation of the 2020 Deliverables for 2020 in the area of 'economic

development and market opportunities'. Through the “EU4Business” initiative, steps to

improve access to finance and the SME environment were undertaken. The Structural

Reform Facility was launched to support the design and implementation of reforms. In

the area of transport, an Indicative Investment Action Plan for extending the TEN-T

core network was prepared in line with the commitments undertaken at the Brussels

Eastern Partnership Summit.

As regards the neighbourhood South, DG NEAR continued to address growth and job

creation through the support of private sector development, Small and Medium

Enterprises (SMEs), business climate, innovation promotion, green economy and

assistance to vocational training. With 30% to 60% of respective country allocations

dedicated to inclusive growth and job creation, with a particular focus on youth and

women, complemented by the extensive use of blending operations through the NIP,

stimulating economic development in the region (see also the contribution to Objective

7 below) remained an important priority of our assistance.


b) Key Performance Indicators (KPIs)

The four KPIs presented in the following table mirror those set in the 2016-2020

Strategic Plan of the DG.

The first two KPIs relate to the Enlargement Policy, the third KPI indicates

performance reached through the European Neighbourhood Policy and the fourth KPI

provides the Residual error rate (RER) for the IPA and ENI spending instruments.

Result/Impact indicator

(description)

Target Latest known results

Strategic Key Performance Indicator 1

Enlargement

Readiness indicators

on fundamental areas

of political criteria

(Areas: Judiciary,

Fighting organised

crime, Freedom of

expression, Fight against

corruption, Public

administration reform)

Target 2020: A

majority of countries

are moderately

prepared in these

areas, which implies

that by 2020 at least

3 more countries will

become moderately

prepared on the

functioning of the

judiciary; at least 4

more countries on

the fight against

corruption; at least 4

more countries on

the fight against

organised crime; at

least 4 more

countries on

freedom of

expression. As for

the public

administration

reform area, a

majority of countries

are moderately

prepared in this area

already in 2015.

Baseline 2015:

Five cases of early

stage of preparation

in these areas.

Interim milestone

2018:

Fewer cases of early


in these areas.

According to the 2018 country

reports2, candidate countries and

the potential candidates made

"some progress" (19 cases across

all countries for the different areas)

and "good progress" (6 cases

across all countries for the different

areas) towards meeting the

political criteria.

In Turkey there has been

backsliding in public administration

reform, functioning of the judiciary,

and freedom of expression).

There have been five cases of “early

stage of preparation” in these

areas, and one case of "early stage

/some level of preparation".

There has been no change in the

number of countries in the category

"moderately prepared".

2 This information will be updated upon adoption of enlargement package 2019.


Performance evolution

There was limited visible progress towards meeting the 2020 target under this KPI.

The enlargement countries need to implement difficult and time-consuming reforms to

advance on the fundamental areas of political criteria, including sustainable and far-

reaching political and societal transformation. The Commission put a particular

emphasis on these areas in its Western Balkans Strategy of February 2018, including

enhanced support to the countries. As regards Turkey, in June 2018 the Council noted

that Turkey has been moving away from the European Union and that Turkey’s

accession negotiations have therefore effectively come to a standstill and no further

chapters can be considered for opening or closing.

Result/Impact

indicator (description)



Enlargement

Readiness indicators

on fundamental areas

of economic criteria

(i.e. functioning market

economy and

competitiveness in the

EU)

Target 2020:

A majority of

countries reach a

good level of

preparation in these

areas.

Baseline 2015:

Four cases of early


in these areas.

Interim Milestone

2018:

Fewer cases of early


in these areas.

According to the 2018 country

reports3, candidate countries and

the potential candidates made some

progress on meeting the economic

criteria; however, in some

countries, there has been no

progress or even backsliding in one

of the two economic criteria.

This indicator remained stable in

2016 compared to the baseline.


There was limited progress towards meeting the 2020 target under this KPI. The

enlargement countries face challenges in advancing on the fundamental areas of

economic criteria, which are interlinked with the political criteria. The Commission put

a particular emphasis on these areas in its Western Balkans Strategy of February

2018, including enhanced support to the countries.

3 This information will be updated upon adoption of enlargement package 2019.


Result/Impact indicator (description)



Neighbourhood:

Ranking to measure

political stability and

absence of violence in

the Neighbourhood

countries 4

Target 2020:

Neighbourhood East:

Increase the number

of countries above

30

Neighbourhood

South: Increase the

number of countries

above 10

Baseline (2014):

Neighbourhood East:

33.89 - 4 countries

above 30

Neighbourhood

South: 11.99 – 5

countries above 10

Neighbourhood East: 27.065 – 3

countries6 above 30 (stable

compared to the last two years)

Neighbourhood South: 13.437 – 5

countries above 10 (stable

compared to the last two years)


In both regions, this KPI is underperforming compared to the 2020 target. This is

essentially due to external factors (political instability, weaknesses in rule of law)

which negatively influence the achievement of DG NEAR’s policy objectives.

This trend makes a strong case for the renewed focus on rule of law, good governance

and institutions strengthening in the revised ENP. The security dimension is also a

growing area of bilateral and regional cooperation in the ENP implementation.

4 This indicator measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism. Higher values in percentile rank indicate better governance ratings.

5 Latest Worldwide Governance Indicator (WGI) data available for the year 2017, as 2018 data not yet

published

6 Belarus, Moldova and Georgia

7 Latest Worldwide Governance Indicator (WGI) data available for the year 2017, as 2018 data not yet

published


Result/Impact indicator (description)



Residual error rate8

(RER) for IPA and ENI

1.1

Target 2018:

The target 2018 for

IPA and ENI is that

this indicator

remains below 2%°

Baseline (2014):

DG NEAR's Strategic

Plan 2016-2020

does not include any

baseline data for

2014 because the

ENI rate was

included in the

global rate of DG

DEVCO in 2014.

For comparison the

20179 results were:

ENI: 0.65%

IPA: 0.90%

IPA IMBC: 0.36%

NEAR (global)

0.67%

European Neighbourhood

Instrument10: 0.41 %

Instrument for Pre-accession

Assistance11:

RER IPA (Excl-IMBC):0.91%

RER IPA IMBC: 0.05%

______________________

Global rate DG NEAR: 0.51%

Further to the risk-indices approach

duly introduced for the relevant

control systems (RCS), RCS-1

(Direct Management of Grants) is

identified as being high-risk with a

2018 reservation (RER 2.26%).


In 2018, the target of this KPI has been achieved, as the global residual error rate of

DG NEAR stayed well below the benchmark of 2%.

Overall the KPI evolution shows a positive trend since the beginning of the strategic

planning period (2016). For the whole period the global residual error rate of DG NEAR

has been maintained below the benchmark of 2% in the 3 components of the indicator

(ENI, IPA (excluding IMBC) and IPA IMBC.

8 The residual error rate is calculated on a yearly basis by an external contractor through desk reviews and

on the spot audits for IPA and ENI instruments and has a coverage of at least 90% of the DG expenditures. The methodology is set out in Section 2.1.1.

9 These are the geographical error rates excluding the thematic lines cross sub-delegated by DG DEVCO in

line with the recommendation of the IAS (ARES(2017)2346205.

10 This covers also MEDA and TACIS programmes

11 This covers also CARDs and PHARE programmes


c) Key conclusions on Financial management and Internal control (executive summary of section 2.1)

In accordance with the governance arrangements of the European Commission, the

staff of DG NEAR conducts its operations in compliance with the applicable laws and

regulations, working in an open and transparent manner and meeting the expected

high level of professional and ethical standards.

The Commission has adopted a set of internal control Principles based on international

good practice, aimed to ensure the achievement of policy and operational objectives.

The Financial Regulation12 requires that the organisational structure and the internal

control systems used for the implementation of the budget are set up in accordance

with these standards. DG NEAR has assessed the internal control systems during the

reporting year and has concluded that the internal control principles are implemented

and function as intended, except for internal control principles 1013, 1214, 1515 and

1616 where major deficiencies have been identified and appropriate mitigating

measures were put in place or reservations were made. Please refer to AAR section

2.1.3 for further details.

In addition, DG NEAR has systematically examined the available control results and

indicators, including those aimed to supervise entities to which it has entrusted budget

implementation tasks, as well as the observations and recommendations issued by

internal auditors and the European Court of Auditors. These elements have been

assessed to determine their impact on the management's assurance as regards the

achievement of control objectives. Please refer to Section 2.1. for further details.

In conclusion, management has reasonable assurance that, overall, suitable controls

are in place and working as intended; risks are being appropriately monitored and

mitigated; and necessary improvements and reinforcements are being implemented.

The Director General, in his capacity as Authorising Officer by Delegation has signed

the Declaration of Assurance albeit qualified by a reservation concerning the error rate

for grants (Quantified Reservation) and a reservation concerning the difficulties in

adequately monitoring all projects in Libya and Syria (Non-quantified

Reservation).

12 Regulation (EU, Euratom) 2015/1929 of the European Parliament and of the Council of 28 October 2015

amending Regulation (EU, Euratom) No 966/2012 on the financial rules applicable to the general budget of the Union 13 The Commission selects and develops control activities that contribute to the mitigation of risks to the

achievement of objectives to acceptable levels.

14 The Commission deploys control activities through corporate policies that establish what is expected and in procedures that put policies into action.

15 The Commission communicates with external parties about matters affecting the functioning of internal control.

16 The Commission selects, develops, and performs ongoing and/or separate assessments to ascertain whether the components of internal control are present and functioning.


d) Provision of information to the Commissioner

In the context of the regular meetings during the year between the DG and the

Commissioner on management matters, also the main elements of this report and

assurance declaration, including the reservations envisaged, have been brought to the

attention of Commissioner Hahn, responsible for the Neighbourhood and Enlargement

Negotiations.


1. KEY RESULTS AND PROGRESS TOWARDS

THE ACHIEVEMENT OF GENERAL AND

SPECIFIC OBJECTIVES OF THE DG

In 2018, the work of DG NEAR continued to be closely linked to President

Juncker's political priorities. In particular, it has contributed to the following

priorities:

A Stronger Global Actor

In 2018, DG NEAR continued to work on improving the readiness of enlargement

countries to join the EU (specific objective 3), including preparations for the Western

Balkans strategy adopted in February 2018, the Enlargement package adopted in April

2018, the connectivity within the Western Balkans and between the Western Balkans

and the EU, and good neighbourly relations in the region with a view to overcoming

the legacy of the past (specific objective 4).

In 2018, DG NEAR continued the work on the implementation of the revised European

Neighbourhood Policy, with the aim of creating the conditions for the stabilisation of

the EU's neighbourhood, which the Review identified as its overarching goal.

Throughout, the year, the reviewed ENP has mobilised significant support to reforms

along the four refocused priorities and has fully integrated the principles of

differentiation and shared ownership (specific objective 1), based on mutual interests

and strengthened regional and cross-border cooperation (specific objective 2).

Towards a European Agenda on Migration

DG NEAR continued to play a pivotal role in driving forward policies and programmes

aimed at stemming the influx of irregular migrants to the EU, by addressing the root

causes of destabilisation, forced displacement and irregular migration in Enlargement

and Neighbourhood countries (specific objective 5).

A Resilient Energy Union with a Forward-Looking Climate Change Policy

DG NEAR worked towards its objective of increased energy security and more effective

climate policies (specific objective 6) by pursuing a strengthened energy dialogue with

Neighbourhood and Enlargement partners, with a particular focus on developing new

national and regional actions on energy efficiency.

A New Boost for Jobs, Growth and investment

DG NEAR further contributed to increased prosperity in the EU and in the Enlargement

and Neighbourhood countries through new efforts to increase economic and trade

opportunities (specific objective 7).

Link between reported Key Results and Programme Statements of the Draft

Budget 2020

The objectives of DG NEAR's main spending programmes are stated in the programme

statements17 of the ENI18 and IPA instrument19. They feed into the 7 specific

17 The Programme Statements provide information according to Article 38 of the Financial Regulation,

encompassing both the ex-post information on programmes’ performance and ex-ante estimations in terms of future outputs and results.

18 The ENI Instrument, Regulation 232/2014 of 11 March 2014 is the main financial instrument for

implementing the Neighbourhood Policy


objectives and 4 general objectives of DG NEAR's Strategic Plan 2016-2020 and the

yearly Management Plan.

To show the link between the objectives of the spending instruments and the

objectives of DG NEAR's strategic plan 2016-2020, chapters 1 (Enlargement policy)

and 2 (Neighbourhood policy) of Part 1 of the Annual Activity Report follow the logic of

the spending instruments with cross references to the targets of DG NEAR's Strategic

Plan.

The achievements of DG NEAR described below are aligned with the performance

information included in the programme statements for the Draft Budget 202020 to the

greatest possible extent.

1.1 Enlargement policy

The DG's achievements in this area have contributed to the following general and

specific objective in line with the Management Plan 2018 and DG NEAR's Strategic

Plan 2016-2020:

1. A stronger Global Actor

Specific Objective 3 The enlargement countries are more ready to join the EU, in

particular on the fundamental areas of rule of law, public

administration reform and economic development, reaping the

benefits of closer integration with the EU before accession.

Specific Objective 4 Enlargement – Improved connectivity within the Western

Balkans and with the EU. Improved good neighbourly relations

in the region with a view to overcoming the legacy of the past

2. Towards a European Agenda on Migration

Specific Objective 5 Stem the influx of irregular migrants to the EU, by addressing

the root causes of destabilisation, forced displacement and

irregular migration in the Enlargement and Neighbourhood

countries. Promote mobility and mutually beneficial migration

3. A Resilient Energy Union with a Forward-Looking Climate Change Policy

Specific Objective 6 Increased energy security and more effective climate policies in

the Enlargement and Neighbourhood countries as well as

increased energy connectivity between the EU and these

countries

4. A New Boost for Jobs, Growth and investment

Specific Objective 7 Increased prosperity in the Enlargement and Neighbourhood

countries and the EU through increased economic and trade

opportunities between the EU and these countries

19 The IPA II Instrument, Regulation 231/2014 of 11 March 2014, is the main financial instrument for

implementing the Enlargement Policy.

20 Programme Statements of the Draft Budget 2020 provide an annual snapshot of the state of play of the

spending programmes' implementation at the end of 2018.The Programme Statements for 2018 are to be found in the Commission documents, COM(2018) 600 – 23 May 2018, as one of the twelve ‘Working Documents’ accompanying the Draft Budget adoption.


EU Enlargement policy

One of the key specific objectives pursued by DG NEAR is to improve the readiness

of candidates and potential candidates to join the EU, in particular with regards

to the fundamental areas of rule of law and fundamental rights, strengthening

democratic institutions, including public administration reform, as well as economic

development and competitiveness, reaping benefits of closer integration with the EU

before accession and ensuring continued progress in the accession negotiations where

relevant (specific objective 3).

DG NEAR led on preparations for the adoption of the Western Balkans Strategy of

6 February 2018, also supporting and monitoring its implementation, and contributed

to the preparations of the Sofia Priority Agenda. The last Enlargement package,

consisting of a Communication on EU Enlargement Policy and individual reports on

each of the seven enlargement partners, was adopted in April 2018. The package

included recommendations to open accession negotiations with Albania and North

Macedonia. DG NEAR provided significant input to the discussions leading to the

adoption of enlargement Council conclusions in June 2018 and, following their

adoption, supported preparations of the next steps in relation to the latter two

countries, including the technical explanations of the acquis. DG NEAR continued to

ensure the Commission’s representation in the Council Working Party on Enlargement

and Countries Negotiating Accession to the EU (COELA) and Council Working Party on

the Western Balkans Region (COWEB). DG NEAR continued to lead on the preparations

of the Commission’s Opinion on Bosnia and Herzegovina’s application for EU

membership.

Performance Reward Mechanism under the Instrument for Pre-Accession

Assistance

In 2018 the Commission granted a Performance Reward to Albania (+ EUR 20

million), North Macedonia (+ EUR 10 million), Kosovo (+EUR 6 million), Montenegro

(+EUR 8 million) and Serbia (+EUR 34 million). The amount of the award and its

distribution were calculated in 2017.

The IPA II Performance Reward21 aims to provide a financial incentive for IPA II

beneficiaries by rewarding notable progress made towards meeting the membership

criteria and/or particularly good results achieved through efficient implementation of

pre-accession assistance. A similar exercise will take place in 2020.

Future Financial Tools

DG NEAR stepped up efforts to better align its future financial tools with the policy

priorities identified in the Western Balkan Strategy and the Sofia Priority Agenda

through its proposals for the new Multi-annual Financial Framework and the proposal

for the IPA III Regulation.

21

Performance reward is to be awarded to the beneficiaries twice during the lifetime of the IPA II regulation,

in 2017 and 2020 (article 14.3 of the REGULATION (EU) No 231/2014 OF THE EUROPEAN PARLIAMENT AND

OF THE COUNCIL of 11 March 2014 establishing an Instrument for Pre-accession Assistance (IPA II) . In

line with the methodology communicated to the Council and European Parliament in June 2016, the overall performance is measured with a score obtained measuring the performance of the progress made towards meeting the membership criteria and the results achieved through efficient implementation of the pre-accession assistance.


Western Balkans

The agenda of 2018 was marked by DG NEAR’s Strategy for "A credible

enlargement perspective for and enhanced EU engagement with the Western

Balkans22", adopted on 6 February 2018. Its aim is to generate renewed reform

momentum in the Western Balkans and better support their preparations for a

successful accession to the EU. The strategy sends a very strong signal of support for

enlargement perspective and sets out clearly what the Western Balkans need to do to

meet the accession criteria. The Strategy put forward a comprehensive Action Plan of

57 actions based on six flagship initiatives to support the transformation of the

Western Balkans: rule of law, security and migration, socio-economic development,

connectivity, digital agenda, and reconciliation and good neighbourly relations. The

key actions of the Strategy were subsequently reflected and endorsed by Member

States and Western Balkans in the Sofia Priority Agenda, annexed to the Declaration

from the Sofia Summit of 17 May 2018.

Progress was achieved in all flagship initiatives of the Strategy throughout 2018.

The actions undertaken by the Commission, EU Agencies and EU Member States to

take the Strategy forward included: enhanced political dialogue (high level meetings

and visits), tightening cooperation between the Western Balkan partners and various

EU agencies, gearing up and reinforcing EU financing instruments (e.g. Western

Balkans Investment Framework and its Guarantee Fund), opening up and promoting

access to EU programmes (Creative Europe, Connecting Europe Facility or the Europe

for Citizens), reinforced capacity building and refocussing the financial engagement

under IPA.

The annual Enlargement package adopted on 17 April 2018 included the

Commission’s recommendations to open accession negotiations with Albania and North

Macedonia. On 26 June 2018 the Council set out the path towards opening accession

negotiations with the two countries in June 2019, depending on progress made. As

noted by the Council, DG NEAR began the necessary preparatory work. The regular

work continued in the Stabilisation and Association Agreement frameworks.

There was further progress in accession negotiations with Montenegro and Serbia

during 2018. Montenegro opened two additional chapters bringing the total to 32

chapters opened, 3 of which are provisionally closed. One chapter only remains to be

opened (chapter 8-competition). The overall pace of negotiations continues to be

determined by progress on the rule of law and Montenegro's capacity to meet the

benchmarks in the various chapters.

Serbia opened four additional negotiations chapters, reaching 16 chapters open and

two provisionally closed by the end of 2018. The overall pace of negotiations continues

to be determined by Serbia’s progress on the rule of law and on the normalisation of

relations with Kosovo. Serbia continued to lead in terms of economic performance in

the region.

22 COM(2018)65final


The Svilaj bridge connecting Bosnia and Herzegovina with Croatia

Construction works on the connection of the downstream bridge over the Sava River

on Corridor Vc near Svilaj were successfully completed at the end of February 2019.

The new cross-border bridge is part of the first Connectivity project approved under

the Connectivity Agenda in 2015 and financed via the Western Balkans Investment

Framework. The EU provided via IPA € 25.1 million in grants for the total investment

of € 109.5 million.

The cross-border bridge is 660 meters long and has two components - a downstream

bridge in the direction to Croatia and an upstream bridge in the direction to Bosnia

and Herzegovina. Each driving way will have three traffic lanes of 3.50 m width, an

emergency lane with protective marginal strips on both sides and a monolith concrete

footway. This motorway bridge is one of the most important infrastructure projects

currently underway in both countries, as it will not only better interconnect the two

neighbours, but also Hungary and Central Europe via the Mediterranean Corridor with

the Adriatic Sea.

Joining of the downstream

cross-border bridge over the Sava River near Svilaj. (c) EU

The works also include

the construction of

modern and efficient

border crossing facilities

and 10.7 km of state-

of-the-art motorway

between Svilaj and

Odzak. The motorway

section is due for

completion in May and

the cross-border bridge

by the end of the

summer 2019. Once in

full operation in early 2020, after the installation of the border crossing facilities, the

motorway and bridge will significantly reduce travel time, decrease vehicle operation

and maintenance costs by approximately 6% and reduce the accident rate by at least

7%. In addition, this modern road infrastructure will enable better regional

cooperation and connectivity between Bosnia and Herzegovina and the EU.

Furthermore, the new investments will increase opportunities for economic

development in the area and create employment for the local population.

The political dialogue between the EU and North Macedonia significantly improved,

which, along with the progress on key reforms, enabled the country to finally

overcome its deep political crisis and get firmly back on its Euro-Atlantic path. The

Pržino agreement was largely implemented and substantial progress was made on

implementing the Urgent Reform Priorities. The country also made significant progress

in strengthening good neighbourly relations, with the Commission’s support, in

particular with Bulgaria (Friendship treaty) and Greece (Prespa agreement). The

Commission’s 2009 proposal for the passage to the second stage of the SAA was

finally adopted and entered into force in December 2018.

Albania maintained focus on delivering on the conditions set in the June 2018 Council

conclusions. The vetting of judges and prosecutors proceeded at steady speed with

more than 100 cases processed. The International Monitoring Operation (IMO), led by

the Commission, ensured that the highest standards were applied to this sensitive

process. Important operations in the fight against organized crime took place and the

good results in the fight against cannabis cultivation were consolidated. The political

context has been dominated by a conflictual rhetoric between majority and opposition.


Supporting the reforms in the justice sector

In Albania, the International Monitoring Operation (IMO) has been deployed by the

Commission to oversee the re-evaluation of judges and prosecutors ("vetting"). The

core monitoring activities are carried out by a team of international observers (seven

from EU Member States and one from the United States) who are embedded in every

step of the work carried out by the domestic vetting institutions. The vetting process

has produced concrete results. Over 200 investigation dossiers have been processed

and around 100 decisions have been taken. On average, for every magistrate

confirmed in office, one is dismissed from duty. The IMO has guaranteed a crucial

external and independent monitoring of the vetting process, thus helping to

consolidate the overall credibility of this endeavour.

The reporting period also saw the launch of the EURALIUS V action (successor to

EURALIUS IV). EURALIUS V supports the consolidation of the justice system of Albania

by providing expertise with a view to enhancing that system's efficiency,

accountability and integrity, and also by strengthening the capacities of all actors

relevant to the judiciary, including the School of Magistrates (education and training of

magistrates). The analytical, planning and operational capacities of policy-makers

have been enhanced for designing and driving relevant reforms in the justice sector.

In Bosnia and Herzegovina, the EU continued to provide guidance to the authorities

on reform priorities on the country's EU path. DG NEAR continued leading on the

preparations of the Commission Opinion on Bosnia and Herzegovina’s application for

EU membership. In this context, in February 2018 the authorities handed over the

replies to 3242 questions of the European Commission. Internal harmonisation was

carried out through the Coordination Mechanism. In June 2018, the Commission sent

655 follow-up questions.

The Commission and Kosovo continued to work on the implementation of the

European Reform Agenda (ERA), adopted in November 2016, to guide reforms under

the implementation of the Stabilisation and Association Agreement (SAA). Regular

political and economic dialogue between the EU and Kosovo took place to advise in

particular on the ongoing reforms in the judiciary, public administration and education

sectors. Despite a highly polarised political context, the Kosovo Assembly managed to

build majorities on several strategic issues for Kosovo. Kosovo unilateral tariff

increases (100%) on goods imported from Serbia and Bosnia and Herzegovina decided

in November 2018 in violation of the CEFTA agreement has affected EU-Kosovo

bilateral relations and the EU’s regional agenda for the Western Balkans.

In a joint effort between Headquarters and EU Delegations in 2018, DG NEAR

programmed and committed IPA assistance for a total value of EUR 767.4 million.

Focus was maintained on the fundamentals, in particular in the area of democratic

governance.


Regional Housing Programme

The Regional Housing programme (RHP) will provide housing to more than 34 000

vulnerable persons in Bosnia and Herzegovina, Croatia, Montenegro and Serbia. In

2018 the EU contributed an additional EUR 40 million to the RHP. This brings the total

support to EUR 287 million, of which the EU is the largest donor, with EUR 234 million

- or over 80% of all contributions.

By the end of 2018 the RHP has

provided 12.000 people-in-need

with quality, durable homes (close

to 4.000 housing units). It has also

given extra assistance, to improve

the lives of these re-housed

people, including making sure they

can access services (health,

education, etc.) and benefit from

rights (pensions, allowances,

documentation, etc.). In addition,

the programme has supported over

30.000 jobs and given 1.000

contracts to local companies. It has

as well improved the skills of

workers, and worked with local

businesses and local

administrations to deliver better

services.

Turkey

Parliamentary and Presidential elections of 24 June 2018 resulted in a victory for

President Erdogan and put in full swing the implementation of the presidential

constitutional system, resulting in further centralising power in the hands of the

President. Despite the lifting of the state of emergency on 19 July 2018, further

backsliding continued in the rule of law and fundamental rights areas, most notably on

freedom of expression, freedom of assembly and association, protection of human

rights defenders and procedural rights.

There has been some re-engagement between the EU and Turkey in 2018, with

increased dialogue. This has included a Leaders’ meeting in March 2018, a High Level

Dialogue on political issues and an Association Committee in November 2018.

However, due to the continued deterioration of the rule of law situation in

Turkey, in June 2018 the Council noted that Turkey’s accession negotiations have

effectively come to a standstill, and no further chapters can be considered for opening

or closing and no further work towards the modernisation of the EU-Turkey Customs

Union is foreseen.

The 2018 programming exercise with Turkey took place in a challenging context,

with further backsliding by Turkey in key areas, as highlighted in the Commission’s

2018 Turkey report. This was also reflected in the mid-term review of the Indicative

Strategy Paper, adopted in August, that reduced IPA II assistance for Turkey by EUR

759 million in total for the 2018-2020 period (EUR 253 million per year and an overall

40 % reduction). The European Court of Auditors report on IPA funding in Turkey

concluded that “only limited results were achieved so far”, mainly due to a lack of

absorption capacity on the side of Turkey. DG NEAR took remedial actions, including


intensified support to improve Turkey’s capacity to manage funds and reviewing the

project portfolio in sensitive areas.

Overall, implementation of IPA II (2014-2020) continues to lag behind scheduled

objectives. In 2018, the contracting of IPA 2014 Annual Programme concluded with

the lowest contracting rate ever at 71.3% compared to IPA I where the average was

77-80 percent) and resulted in a de-commitment of EUR 52 million.

On the EU Facility for Refugees in Turkey, see above under “towards a European

agenda on migration”.

Progress continued in the implementation of the Facility for Refugees in Turkey.

Under the first tranche of EUR 3 billion, as of December 2018, over 1.5 million

refugees with high socio-economic vulnerability benefited from monthly cash transfers

via the Emergency Social Safety Net, close to 900,000 primary health care

consultations were delivered to refugees, and the families of over 380,000 refugee

children attending

school received

financial support. As of

December 2018, 2,569

staff are employed

(69% being Syrian

refugees) and deliver

services in 178 Migrant

Health Centres (MHC).

In March 2018, the

Commission adopted its

decision on a second

tranche of EUR 3 billion

to be committed in

2018-2019. Under the

second tranche, the

Commission will continue to assist Turkey in addressing the humanitarian and

development needs of refugees, persons eligible for subsidiary protection and host

communities, while responding to the protracted displacement of 3.9 million Syrian

refugees in Turkey.

Connectivity Agenda and good neighbourly relations

At regional level, DG NEAR continued to work closely with partners, seeking to

improve co-operation within the region and with the EU, improving connectivity in all

its aspects. The EU supported concrete investments in the 'Western Balkans Six'

(WB6) transport and energy networks with the purpose of creating a regional

environment conducive to economic growth and job creation. At the Western Balkan

Summit in Sofia in May 2018, the Commission delivered a substantial connectivity

package of 11 transport projects totalling EUR 190 million in grants, and leveraging

investments of EUR 1 billion from partner IFIs in the Western Balkans Investment

Framework.

There was continuous progress in the framework of the Western Balkans cooperation

at political and working level. The results included the Headquarters Agreement

with Serbia on the seat of the Transport Community Treaty Secretariat in Belgrade,

and the launch of the new digital agenda for the region. There was significant progress

in completing the Core transport network and the Core transport corridors (65% out

of the 24 priority projects approved and under implementation). Progress was also

made on connectivity reform measures in the transport sector. Important activities

were undertaken on four regional measures: road safety, maintenance, Intelligent

Transport System (ITS), and road border-crossing facilitation. Progress in the

implementation of the existing Project of Energy Community interest (PECI)

continued. While no new project was launched in 2018, the Energy Community


identified and approved the 2018 list of PECI projects, of which eleven new projects

that could benefit from IPA assistance. Montenegro and North Macedonia made

important progress in implementing and enforcing the Energy Community acquis but

the overall picture was mixed in 2018, despite the Secretariat’s work. The ‘Winter

Package’ for a clean energy economy was transposed to the Energy Community.

Regarding the digital agenda, negotiations have progressed very well to deliver a

regional roaming agreement in the context of the Regional Economic Area. DG NEAR pursued a strong agenda for promoting and supporting reconciliation and

good neighbourly relations in the region. Concrete actions were undertaken in the

area of fighting impunity gaps, tackling the issue of missing persons, promoting the

dissemination of truth, and fostering cultural cooperation. DG NEAR developed a more

comprehensive and integrated approach to these issues, engaging with different key

partners in the region and at the international level. Several initiatives were taken to

facilitate the strengthening of cultural ties across the region including via the Creative

Europe programme, or to counter nationalistic narratives and build vibrant

democracies in the region, through support to civil society and to media. The EU also

provided political and financial support to the Regional Youth Cooperation Office

(RYCO), which started its first exchanges among the youngsters of the region.

Continued support to housing care solutions for refugees and displaced persons in the

region was also provided, with close to 4,000 housing units delivered by the end of

2018 thanks to the Regional Housing Programme. However, deteriorating relations

between Pristina and Belgrade towards the end of 2018 affected the EU facilitated

dialogue between Belgrade and Pristina and regional cooperation overall.

1.2 Neighbourhood policy


specific objectives in line with the Management Plan 2018 and DG NEAR's Strategic

Plan 2016-2020:


Specific Objective1 Increased stability in the Neighbourhood in political,

economic and security related terms

Specific Objective 2 Strengthened Eastern Partnership; support regional

cooperation between southern neighbours, including through

the Union for the Mediterranean; promote cross border

cooperation between Member States and partner countries


Specific Objective 5 Stem the influx of irregular migrants to the EU, by addressing

the root causes of destabilisation, forced displacement and

irregular migration in Enlargement and Neighbourhood

countries. Promote mobility and mutually beneficial migration

3. A Resilient Energy Union with a Forward-Looking Climate Change Policy

Specific Objective 6 Increased energy security and more effective climate policies in

the Enlargement and Neighbourhood countries as well as

increased energy connectivity between the EU and these

countries



Specific Objective 7 Increased prosperity in the Enlargement and Neighbourhood

countries and in the EU through increased economic and trade


The EU's relations with its neighbours are guided by the revised European

Neighbourhood Policy (ENP), which is the basis for responding to the Global

Strategy objectives concerning the neighbourhood. Through the ENP, the EU has

greater leverage to achieve its goal of stabilising the Neighbourhood in political,

economic and security related terms (specific objective 1).

Neighbourhood East

During 2018, DG NEAR continued to develop the Eastern Partnership (EaP) firmly

based on common values, mutual interests, shared ownership, responsibility,

differentiation and mutual accountability to deliver tangible results to citizens. The

year was marked by solid progress in bilateral relations and within the Eastern

Partnership framework.

In line with the Association Agreement, Ukraine continued making progress on its

ambitious reform agenda with the help of EU financial and technical assistance support

based on the Association Agreement including its Deep and Comprehensive Free Trade

Agreement as the main guiding framework. The EU Anti-Corruption Initiative

(EUACI) intensified its support to the newly created specialised anti-corruption bodies

and was notably instrumental in the preparations for the establishment of the new

High Anti-Corruption Court, including the recruitment of judges. Reform of the

judiciary continued in 2018 with an intensive accompanying policy dialogue, notably

focusing on the establishment of the new Supreme Court. The EU provided, in close

cooperation with other international partners, advice and support for the selection of

new judges. In Rule of Law, the new programme PRAVO has inter alia supported the

establishment of a new unit to fight organised crime and has continued its work to

support capacities of the Ministry of Justice to improve strategic planning and

enforcement reforms. Following OECD/SIGMA baseline measurement of Ukraine's

public administration, a revised public administration reform (PAR) strategy and

Action Plan until 2021 was adopted in December 2018. A EUR 50 million public

finance management (PFM) financing agreement on PFM was signed in 2018. As

part of its continuing efforts to mitigate the effects of the conflict in eastern

Ukraine, the EU launched a Special Measure for the East, aimed at reinforcing social

and economic resilience in government-controlled areas of Donetsk and Luhansk

regions.

Ukraine - reinforcing multi-level governance through decentralisation

The programme "U-LEAD with Europe: Ukraine Local Empowerment, Accountability

and Development" contributes to the establishment of transparent multilevel

governance which is accountable to and responsive to the needs of Ukraine’s citizens.

The programme is a joint effort of the EU and its member states Denmark, Estonia,

Germany, Poland and Sweden with a total budget of EUR 102 million. "U-LEAD with

Europe" has two main components: capacity building at all levels and establishment of

up to 600 new Administrative Service Centres in newly amalgamated municipalities

(hromadas). The number of newly amalgamated municipalities testifies to the impact

of EU support: another 117 new hromadas organised constituent local election in the

course of 2018. This has been possible due to the vital support measures in capacity

building provided by the “U-LEAD with Europe” Programme across the country.

Professional and committed personnel recruited into the Regional Reform Centres

helped increase the number of municipalities opting for amalgamation.


The implementation of the first Energy Efficiency Support Programme for Ukraine

(EE4U; EUR 50 million) supporting the activities of the Ukrainian Energy Efficiency

Fund started following the signature of agreements with IFC (International Financing

Corporation) and the UN Development Program (UNDP) as the main implementers.

The action aimed to assist individual households or groups of households (house

owners associations) in undertaking energy efficiency investments. The second phase

of the Programme (EE4U; EUR 54 million) was signed towards the end of the year with

the Ukrainian government and the IFC (International Financing Corporation). On the

Ukrainian side, the Energy Efficiency Fund was established during the summer and an

interim director appointed. Moreover, 6 new municipal projects for an amount of €5.4

million were launched in 2018 in the framework of the Covenant of Mayors Program to

support concrete local infrastructure projects. The EU continued to support electricity

sector reform through a project with the Ministry of Energy. In the gas sector, a

project was finalised to develop a business operating model for the new independent

Transmission Operator, an essential element to implement the relevant requirement in

EU and Ukrainian legislation. Overall in 2018 the implementation of gas and electricity

sector reform slowed down. Unbundling of Naftogaz and the establishment of an

independent gas pipeline operator (TSO) did not make sufficient progress despite a

Naftogaz plan developed with the help of an EU project. In 2018, the Cabinet of

Ministers endorsed an updated National Environmental Strategy 2030 and a new Law

on Strategic Environmental Assessment (SEA) was adopted with significant

involvement of an EU project and political support from the EU.

Technical assistance for the reform of important sector legislation to implement

Ukraine’s commitments in transport under the Association Agreement continued. A

EUR 4.7 million project was launched to improve the capacity of central authorities for

transport planning (National transport model and master plan).

In December, two agreements with the EIB were signed aimed at providing technical

assistance on road safety (EUR 4.42 million) and connectivity (EUR 2.1 million) in the

framework of the Neighbourhood Investment Platform (NIP).

In 2018 the government finally adopted a modern National Transport Strategy which

was prepared with significant policy input and project support from the EU.

The European Union and Georgia have further intensified their relations in 2018. A

High-level Meeting between members of the European Commission and of the

Government of Georgia took place in Brussels on 21 November 2018. This followed

from the visit of President Juncker in May on the occasion of the centenary of the first

Republic of Georgia. The priorities and indicative allocations of the Single Support

Framework 2017-2020 (adopted in December 2017) reflect the revised Association

Agenda. Bilateral support in the context of the AAP 2018 focused on security and rule

of law, public finance management, energy efficiency, and on the implementation of

the Association Agreement. Additional projects on Local Currency Lending, Solid Waste

Management and a project on Water Supply and Sanitation in Adjara will be

channelled through the Neighbourhood Investment Platform.

The Comprehensive and Enhanced Partnership Agreement (CEPA) with Armenia

entered provisionally into force on 1 June 2018 marking a new phase of engagement

with the country. In line with the CEPA, Armenia and the EU have jointly developed

Partnership Priorities, signed in February 2018, which will guide future bilateral

cooperation in key areas. Following the elections in Armenia, DG NEAR has engaged

with the new government to review our existing portfolio and clarify available EU

instruments with the intention to enhance the strategic policy engagement and

support in view of the government’s ambitious reform agenda. The EU was the largest

single contributor and supported the early parliamentary elections of 9 December

2018 with a package of EUR 2.4 million. Furthermore, the annual programme for 2018

has focused on economic development in the pilot regions and strengthening

democracy and civic participation in Armenia.


The negotiations on a new Agreement with Azerbaijan advanced during 2018, and

Partnership Priorities were adopted in autumn 2018. The Single Support Framework

for 2018-2020 for Azerbaijan was adopted, followed by the AAP 2018, supporting one

of the 4 main areas of PPs, people-to-people contacts (human capital), through

promoting the creation of employment opportunities, especially within small to

medium sized enterprises (SMEs), by strengthening labour market oriented education

and training systems.

The critical engagement with Belarus progressed and in 2018 negotiations on

Partnership Priorities continued. Due to difficulties to reach agreement of Partnership

Priorities (PP), Special Measures were adopted in 2018. This focused on resource

efficiency, professional exchanges and people-to-people contacts, independent media

and enhanced professional reporting. Likewise, the work on economic reform

continued, in particular the first Twinning project with the National Bank of Belarus,

further strengthening of support to regional and private sector development, and the

signature of the first EIB loan to foster investments.

In the Republic of Moldova, the priorities and indicative allocations of the Single

Support Framework 2017-2020 (adopted in December 2017) reflect the revised

Association Agenda. In light of the deterioration of the rule of law and the democracy

in 2018, EU assistance to Moldova for 2017 and 2018 has been reduced and

recalibrated to focus on those programmes that benefit citizens directly. Bilateral

support in the context of the AAP 2018 hence focuses on programmes to support the

socio-economic development of two focal regions, the confidence building measures

with Transnistria, anti-corruption mechanisms and Erasmus+ and the fight against

gender violence.

Following the endorsement by the Eastern Partnership Brussels Summit of the “20

Deliverables for 2020”23 and its new institutional setup, engagement focused on

implementing the ambitious work plan in four key priority areas: 1) strengthening

institutions and good governance, 2) economic development and market

opportunities, 3) connectivity, energy efficiency, environment and climate change, and

4) mobility and people to people contacts. Implementation also covers crosscutting

deliverables including civil society, gender, and strategic communication. In order to

support Member States and Partner Countries in guiding the implementation process,

DG NEAR, other Commission services and EEAS monitored the implementation of the

Deliverables, highlighting both achievements as well as areas where additional effort

may be needed. The monitoring report in 2018 showed that progress has been noted

across all areas, particularly in the areas of stronger economy, stronger connectivity

and stronger society. However, challenges remain in the area of rule of law, shrinking

space for civil society and independent media.

The “20 Deliverables for 2020”, steered the DG’s programming of assistance. The

programming documents defined the agenda of financial assistance oriented towards

delivering concrete and tangible results for the benefits of the citizens in the region.

The EU continued to step up its political and financial support to civil society to

reflect the pledges presented at the 2017 EaP Summit, investing substantially in the

capacity development of CSOs, promoting civil society’s involvement in policy dialogue

and an enabling environment for CSO activities. The Regional EaP Civil Society Facility

adopted in 2018 paved the way for an innovative and more consistent approach to

civil society support responding to the current political environment, through the

setting up of strategic partnership agreements with trusted CSO partners, scaling up

sub-granting and operating grants. DG NEAR also continued to support the Eastern

Partnership Civil Society Forum in its growth and reform ambitions; the Forum

restructured its governance in 2018 to reflect the new EaP architecture.

23 Staff Working Document 2017/300


Concerning market opportunities and economic development the implementation

of the DCFTAs in the Eastern Neighbourhood was actively supported by DG NEAR

through continued participation in all formations and levels of the political dialogue. In

particular, an informal ministerial meeting on trade was organized in September 2018

with DCFTA Partners to take stock of good practices and challenges and to anticipate

the next steps in the implementation process. In 2018, DG NEAR actively contributed

to the organisation of a Business Forum under the Austrian presidency. It also further

advanced the implementation of the 2020 Deliverables for 2020 in the area of

'economic development and market opportunities' by supporting EaP Partner Countries

to move towards diversified and vibrant economies, to create jobs in new sectors,

attract investments and foster employability. It contributed to the launch and start of

implementation of the External Investment Plan as it relates to Eastern Partnership

countries. Through the “EU4Business” initiative, both access to finance and the SME

environment were improved covering over 40 regional and bilateral programmes. The

initiative is the key tool to deliver concrete support to SME development,

complementary to national reform plans. In the context of the DCFTAs established

between the EU and Georgia, Republic of Moldova and Ukraine, the EU jointly with the

EBRD, EIB and KfW Development Bank, has put in place the DCFTA Facility for SMEs.

EU4Business: Helping women entrepreneurs to achieve their full potential

Promoting the inclusion of women in business is vital to realising a country's full

economic potential, with women’s entrepreneurship playing a key role in creating

jobs and driving economic growth. But women-led SMEs are constrained by a

lack of adequate finance, coupled with fewer opportunities to gain managerial

experience, and limited access to know-how.

The EU-funded Women in

Business programme,

implemented by the EBRD in the

Eastern Partnership region as

part of EU4Business, is helping

to address these issues by

providing dedicated credit

lines for women entrepreneurs

and by offering them tailored

advice and training to

increase their know-how, as well

as networking opportunities.

In the period 2016-2017 alone,

over 2,300 women-led SMEs

received loans under the

programme for a total value of

€21.6 million, while almost

400 women entrepreneurs

benefited from training and

advisory services.

Among those women were Armenian sisters Inga and Elen Manukyan and their

LOOM weaving business. Market research suggested there was room for success, but

a proper presentation of the brand was needed: "EU support made it possible. With

that support we developed the full package of the brand on the basis of the logo idea

we had," says Elen Manukyan. The programme's advice led to a 25% growth in

turnover, made the company more confident, and saw a 30% rise in customers,

and 20% increase in sales. Now, LOOM sells across the world, from Los Angeles to

Paris and Moscow.

To strengthen the rule of law, anti-corruption mechanisms and justice sector

reform for the Eastern Partnership countries, the EU continued its long-standing

cooperation with the Council of Europe under the Programmatic Cooperation

Framework. The programme was renamed 'Partnership for Good Governance' in 2017

to better reflect the priorities of the Eastern Partnership deliverables. Protecting and

http://www.eu4business.eu/success-stories/loom-weaving-armenian-tradition-towards-export-success


promoting human rights, ensuring justice, combating threats to the rule of law,

addressing the challenges of the information society and promoting democratic

governance are at the core of the joint EU-Council of Europe efforts in the Eastern

Partnership countries, which already shows some concrete results on the ground. For

example, the investment into legal reform on conflict of interest and asset declarations

has resulted in the establishment of e-Asset Declaration systems for high-level officials

in five countries already, including Armenia, Georgia, Moldova and Ukraine. When the

data submitted is effectively verified and failure to submit is sanctioned, these new

systems become a powerful tool to detect and prevent conflicts of interests.

As regards connectivity and energy efficiency in 2018, regional cooperation

focused on the four deliverable priorities. Milestones included the implementation of

large new regional programmes to promote evidence-based energy policy-making and

efficient water resource management, as well as the delegated act adopting the

extension of the comprehensive transport network to the Neighbourhood East region

(TEN-T). The joint EU-International Financial Institutions high-level energy efficiency

initiative resulted in establishment of a multi-donor Energy Efficiency Fund in Ukraine

and a first-ever large-scale energy efficiency programme for public buildings in

Georgia. 2018 was also a successful year for the EU's largest climate and energy

initiative in the Eastern Partnership with the number of Covenant of Mayors

signatories growing to 397 at the end of 2018, compared to 342 in 2017.

The“EU4Energy” initiative, steered by DG NEAR, already delivered key support for the

development of new legislation and improved governance in the energy sector, which

is key for the resilience of partner countries. The High-Level Energy Efficiency

Initiative launched by Commissioner Hahn and led by DG NEAR was implemented. This

brought together international financial institutions in upscaling energy efficiency

reforms and investments. Targeted work has started in the pilot countries Ukraine and

Georgia. In Georgia, a dedicated programme on energy efficiency was part of the

Annual Action Programme 2018 and provided technical assistance and investment

grants to improve energy efficiency in public buildings.

In the areas of mobility and people to people contacts, an increased emphasis has

been put on youth partnerships, education and employment opportunities. This has

been highlighted by the November 2017 Eastern Partnership Summit, which endorsed

as one of the ‘20 Deliverables for 2020’ a new Youth and Education Package of EUR

340 million, with the aim to create the necessary conditions for youth to study, work,

participate fully in society and fulfil their potential. One core element of the Package is

the EU4Youth programme (total EU funding EUR 30 million 2016-2022) which strives

to improve youth employment perspectives – notably for disadvantaged young people.

The second phase of the EU4Youth has been adopted in December 2018, and includes

a new call for proposals on social entrepreneurship, new capacity-building projects,

and activities supporting the establishment of the Youth Engagement Roadmaps. The

Eastern Partnership European School in Tbilisi is operational since September 2018,

with 30 diploma students from all Partner Countries. A scholarship scheme covering

tuition and boarding costs is in place for approximately 30-35 new students per year

for 2018-2021. The pre-feasibility studies for the second phase are underway.

Education and youth cooperation has been further supported by Erasmus+ with over

1.500 bilateral projects among EU and Eastern Partnership higher education

institutions, 25.000 individuals participating in academic exchanges, 30.000 young

people involved in youth exchanges, mobility and volunteering, and 1.700 schools

involved in eTwinning Plus.


The first Eastern Partnership European School opened its doors in September

2018 in Tbilisi, Georgia. At the Eastern Partnership Summit in November 2017, all EU

Member States and the six Eastern partner countries endorsed the Eastern Partnership

European School as a top priority and as part of the commitment to strengthen

support to youth and education in

the region.

Students from all Eastern partner

countries now have the unique

chance to receive a high-quality

education, inspired by European and

international values thanks to a

dedicated scholarship programme.

The unique diploma programme

offered at the Eastern Partnership

European School combines academic

excellence with specialised teaching

inspired by the European school

system.

Students aged 16 and 17 attend

classes in a multilingual and multicultural environment to extend and deepen their

knowledge about Europe and the European Union. At the end of the first academic

term, students and faculty members alike reported an extremely positive experience.

The academic performance of the scholarship students, as a group, has so far been

above average. The high level of motivation of all the students demonstrates the

clear potential of this initiative to bring tangible change to young people across the

Eastern Partnership region. For this reason, the number of scholarships has been

increased to 35 for the academic year 2019/2020.

Cross Border Cooperation

Cross Border Cooperation (CBC) is an important element of the EU's policy towards its

neighbours from the East and South. The year 2018 was important for the

implementation of the package of 15 ENI-CBC programmes for the period 2014-2020,

totalling around EUR 1 billion. By the end of the year, 24 out of 25 Financing

Agreements signed with the participating Partner Countries entered into force. In

addition, the designation of Managing Authorities located in the participating Member

States was completed for 9 programmes. The projects to be implemented under these

programmes aim at supporting sustainable economic development along the EU's

external borders, thus reducing differences in living standards and addressing

common challenges across these borders. For each of these programmes the

participating countries have selected up to four thematic objectives such as SME

development, culture or environment and climate change. In 2018, all programmes

launched their first and even second and third calls for proposals for regular projects,

whilst the European Commission approved 54 direct-award Large Infrastructure

Projects. CBC adds a cohesion and territorial cooperation dimension to the EU's

relations with its neighbours.


Neighbourhood South

DG NEAR’s approach to stabilisation in the Neighbourhood South is threefold. In the first place, stabilisation was pursued through tailor-made frameworks

directing EU financial assistance to the sectors most relevant to stabilisation

in each Southern Neighbourhood country. As a result, new policy and cooperation

frameworks were adopted in 2018. The EU and Tunisia, which benefited from an

amount of EUR 305 million in 2018, agreed on Strategic Priorities for 2018-2020. A

Single Support Framework 2018-2020 for Algeria was adopted in April 2018. The EU-

Morocco Action Plan implementing the advanced status was extended for one year,

and consequently the Single Support Framework to cover the 2018 Annual Action

Programme. The EU-Jordan Association Council agreed on a two-year extension of the

Partnership Priorities until the end of 2020. The first drafts of the Partnership Priorities

with Palestine and Israel were prepared for a discussion with EU Member States early

2019. The Action Plans for both Israel and Palestine were prolonged for three years at

the end of 2018. In the second place, DG NEAR continued to focus its resources and policy work

towards addressing the consequences of the conflicts in the region. Mitigating the impact of the protracted Syrian crisis remained a constant priority

throughout 2018. DG NEAR co-organised and financed the April "Brussels II

Conference on Supporting the Future of Syria and the Region", which reaffirmed the

engagement of the EU in supporting Syria's neighbouring countries. The EU remained

at the forefront of the assistance to Syrian refugees and host communities through the

activities of the EU Regional Trust Fund in Response to the Syrian Crisis. Its total

budget reached a volume of EUR 1.65 billion for the provision of basic education and

child protection, better access to healthcare, water and wastewater services, as well

as support to resilience, economic opportunities and social inclusion and protection.

Inside Syria, assistance scaled up in the field of protection and area-based approaches

aimed at protecting the space for local civil society and for social cohesion, mostly

through livelihoods.

EU Regional Trust Fund in Response to the Syrian Crisis - From economic

hardship to a thriving business

Asmaa, one of the first women’s

rights advocates and entrepreneur

from Mafraq, Jordan, turned her

precarious economic situation into

a profitable business. After her

separation, Asmaa moved back to

her parents' home with her sick

daughter. There, she opened a

clothes shop and thanks to funds

provided through the EU Regional

Trust Fund in Response to the

Syrian Crisis, Asmaa received a

loan that helped her expand her

business. With the shop’s profit,

Asmaa was able to treat her sick daughter, help her parents, her neighbours and

relatives. Asmaa is now well-known in the city for her women’s rights activism and

keeps spreading the message that women should not back down because of society.

She likes to tell them to step up and work and is convinced that this in the only way

to success and emancipation. This initiative is one of many similar projects,

implemented through the EU Regional Trust Fund funded LEADERS project. This

project helped some 250,000 Syrian and local community members, like

Asmaa, to become economically self-reliant.


Concerning Palestine and Israel the EU undertook a review of its engagement in

favour of the two-state solution with a view to increasing the efficiency and

effectiveness of its support, which was presented to EU Member State Foreign

Ministers at Gymnich in August 2018. The review's conclusions are being integrated in

the programming. In order to tackle the unprecedented UNRWA funding issue, the EU

provided a rapid response and committed EUR 153 million in 2018. DG NEAR held a

strategic dialogue with UNRWA and initiated an important work with the Agency and

hosting countries to identify ways to tackle its structural deficit and ensure core

services continue to be provided to Palestinian refugees. In Libya, the security situation remained a constraint for the implementation of the

cooperation programmes. Operations continued to be remotely managed from Tunis

where the Delegation is temporarily based. DG NEAR focused its efforts on supporting

the Libyan health system and on assisting the country’s transition towards a stable,

functioning state, accountable towards its citizens, fully in line with the United Nations

mediation efforts. DG NEAR also directed its support towards the improvement of the

Libyan business environment and economic diversification. Thirdly, in 2018 DG NEAR continued to tackle root causes of instability through a

continued focus on good governance, the rule of law, women and youth inclusion,

human rights, sustainable development and economic growth. Significant efforts at

bilateral and regional levels continued to increase the capacity of civil society across

the region in terms of policy shaping, to support Human Rights Defenders, freedom as

well as the accountability of States to their citizens. A specific programme of

intervention with the European Endowment for Democracy was launched in order to

complement EU instruments in Algeria and Egypt. Throughout the region, in 2018

good governance remained an overarching objective and new programmes in Libya,

Palestine and Egypt, aimed at improving public finance management, public

administration reform, training civil servants, accompanying decentralisation or

capacity building of local administrations. With 30% to 60% of respective country allocations dedicated to inclusive growth and

job creation, with a particular focus on youth and women, complemented by the

extensive use of blending operations through the Neighbourhood investment Platform

(NIP), a strong emphasis continued to be put on stimulating economic

development in the region (see also the contribution to Objective 7 below), with a

constant attention to leaving no one behind. In Egypt for example, DG NEAR

continued to support the provision of basic services to the most vulnerable, specifically

the children and the persons with disabilities, and to support the National Population

Council in implementing its National Population Strategy 2015-2030. In Palestine, DG

NEAR continued to support public services through the PEGASE mechanism.


Tunisia - Popular neighbourhoods

Popular neighbourhoods are anarchically-built housing areas, generally located

in the periphery of major cities, where most vulnerable families live. Tunisia

counts more than 1400 such neighbourhoods, hosting 700 000 households and a

total of 3,5 million inhabitants (32% of Tunisia's population).

Since 2012, the European

Union has been working

alongside the French

Development Agency, the

European Investment Bank

and the Tunisian Agency for

Urban Renovation to improve

living conditions in these

areas. Through three

consecutive programmes,

totalling nearly EUR 100

million (25% of total

programme amounts), the EU has contributed to the rehabilitation of these

neighbourhoods by laying asphalt roads, building sewerage networks,

connecting houses to water and sanitation and installing public lighting.

The EU's grants have also contributed to the construction of social and

economic infrastructure (sport halls, playgrounds or economic zones). The EU

and its partners' have already renovated nearly 180 popular neighbourhoods, laying

than 1000 km of asphalted roads, installing more than 13.000 public lighting poles

and nearly 300 km of sewerage networks. A new phase of this programme in

support of the rehabilitation of popular neighbourhoods (entitled: Proville 2) was

adopted in 2017 in the framework of the Neighbourhood Investment Platform and

was signed with the French Development Agency in December 2018.

In addition, as far as security issues are concerned, DG NEAR undertook new

bilateral and regional actions. The new Integrated Border Management programme in

Jordan reflected important developments over the year with the re-opening of border

crossings with Iraq and Syria. In Morocco a new Integrated Border Management

programme aimed at increasing capacities to deal with the growing challenge of

irregular migration. In Lebanon, a rule of law, security and counter-terrorism

programme was launched. At the regional level, several programmes with European

agencies were launched, such as EU for monitoring drugs with EMCDDA and EU4

Borders with FRONTEX. The Building Integrity programme with NATO is expected to

provide practical tools to help participating countries strengthen integrity,

transparency and accountability and reduce the risk of corruption in the defence and

security sectors. DG NEAR’s flagship programmes Euromed Police and Euromed Justice

continue to strengthen links with Europol, Cepol and Eurojust. In 2018 DG NEAR devoted substantial efforts to enhancing coordination

mechanisms in the Neighbourhood South and ensuring coordination of the EU

response at all levels, including via Joint Humanitarian and Development Frameworks

(JHDF) with DG ECHO for Jordan, Lebanon and Syria and permanent discussion and

coordination between the different instruments including humanitarian and crisis

response.

Joint programming continued, especially in Palestine where European Development

Partners started to hold joint policy dialogues with the Palestinian Authority on the

basis of the jointly-designed Results-Oriented Framework.


DG NEAR put an emphasis on the coordination with international, European and

Arab finance institutions working in the Southern Neighbourhood to enhance the

reform agenda in the partner countries. High-level meetings with financing partners

were organised in the margins of the World Bank–International Monetary Fund spring

and annual 2018 meetings. The Luxembourg Group gathering together the main

multilateral finance institutions to meet in January and December. On 12 July 2018,

Commissioner Hahn led in Tunis the first joint high-level mission with eight

European and International Financial Institutions (AFD, AfDB, EBRD, EIB, IFC,

IMF, KfW, WB) in the Southern Neighbourhood. The aim of the mission was to jointly

nudge key Tunisian stakeholders (Government, Parliament, representatives of civil

society, trade unions, and the private sector) to reactivate Tunisia’s socioeconomic

reform programme, and notably to step up efforts to (i) stabilise public finances, (ii)

unleash private sector development, and (iii) alleviate social pressure.

Ongoing environment projects are developing circular economy and contribute to

fulfilling the objectives of the Barcelona convention on biodiversity and the depollution

of the Mediterranean sea. DG NEAR supports national authorities in implementing their

national sustainable and consumption plans, as well as individual companies that have

invested in resource-efficient processes. In view of the shrinking space for CSOs across the region, engagement with civil

society was reinforced. DG NEAR launched several region-wide actions on harnessing

the efforts of youth to contribute to peace. These actions focused also on the pro-

active participation of youth in the preservation of cultural heritage through skills and

capacity development as well as knowledge transfer. A new programme was launched

with the European Endowment for Democracy. The Civil Society Forum for the

Neighbourhood South confirmed itself as a credible and inclusive dialogue platform

between civil society, EU institutions and regional entities, to exchange and debate on

regional policy agenda. This new civil society "Hub for Dialogue" is working towards an

increasing self-ownership of the process by CSOs themselves.

Concerning General Objective 3 (A Resilient Energy Union) and Specific

objective 6 (increased energy security) DG NEAR continued to promote the

external dimension of the Energy Union in the Neighbourhood countries, to enhance

energy security and promote effective climate policies as well as better energy

connectivity between the two regions and within the Mediterranean partners

themselves. 2018 was a year of consolidation and deepening of energy policies and cooperation.

The UfM energy platforms established by the Ministerial Meeting on Energy in Rome in

2016 continued to support dialogue among Neighbourhood South partners and with

EU Member States. The Association of Mediterranean Transmission System operators

developed a master plan for electric interconnections. The Association of

Mediterranean Regulators supported the institutional development of energy

regulators in Egypt and Jordan. With the discoveries of gas in the Eastern

Mediterranean, the role of the Observatoire Méditerranéen de l’Energie (OME) became

increasingly relevant to foster regional cooperation and exchange experiences. The energy transition at regional level progressed through the promotion of energy

efficiency and the deployment of renewable energies with the support of the EU-

funded RECREE and MEDENER associations. In Algeria, the EU continued to provide support to the diversification of the economy

away from the hydrocarbon production through projects on improving business

climate, on public finance reform, on renewable energies and energy efficiency and on

the agricultural sector. A EUR 20 million programme was adopted in November 2018

(as part of the AAP 2018) in support of green and circular economy, as a successful

translation of the regional intervention SwitchMed into bilateral cooperation.


The DG continued to support dialogue among energy regulators, energy efficiency

and renewable energies agencies, as well as the gas carriers (MED TSO, MEDENER,

RCREEE, OME), with a view to integrating energy markets, develop renewable

energies and promote energy efficiency and facilitating regulatory convergence.

Similarly, the regional projects in the transport sector provide technical assistance to

the national authorities, including participation to international conventions and

regulatory convergence, with a long-term objective of making transport in the region

safer, more efficient and environmentally friendly. In relation to General Objective 4 (A New Boost for Jobs, Growth and

Investment) and Specific Objective 7 (Increase prosperity in the

Neighbourhood Countries) support continued to enhance economic governance

and create an enabling business environment, responsible investment

policies, regional trade integration, including convergence towards EU

policies, regulations and standards. Mobilisation of funds and investments for the

region contributed in particular to improved access to finance with a focus on small

and micro enterprises and innovative entrepreneurship. Particular attention was

devoted to use synergies with the External Investment Plan (EIP) in view of the

cooperation with and support from the private sector. Finally, the DG continued to

fully exploit the potential of economic development for job creation, particularly for

the youth, and tackle the economic root causes of migration.

In 2018 DG NEAR continued to address growth and job creation through the

support of private sector development, Small and Medium Enterprises

(SMEs), business climate, innovation promotion, green economy and

assistance to vocational training. Blending through the NIP continued to be a

powerful instrument to leverage investments in the region. In Jordan, a EUR 20 million Innovation promotion programme was initiated. This

reflects the focus of the government in identifying options for relaunching economic

growth in the context of the preparation of the 2019 London Conference on

Investment. Innovation-related actions will also be supported through a top-up to

ongoing EU Budget Support to the Private Sector Development in Jordan (EUR 10

million). At the April CEDRE Conference in Paris, the EU committed to supporting the

implementation of Lebanon's "Vision for Stabilisation, Growth and Employment". The

Commission pledged in support of the Capital Investment Plan through the provision

of technical assistance and blending (up to EUR 150 million grants over 2018-2020

generating up to EUR 1.5 billion in loans). In 2018, EUR 25 million of EU assistance to

Lebanon was committed for promoting growth and job creation, innovation and

entrepreneurship with the wider goal of supporting Lebanon's clean energy transition. In Algeria and Libya, assistance aimed at reducing dependence on gas and oil

through programmes for economic diversification. In Egypt the TVET II programme focused on improving the structure and performance

of the TVET system to better respond to Egypt's new socio-economic needs, on

boosting the employability of youth, and on making the country more competitive. In Tunisia, three out of five new bilateral programmes were adopted in 2018 for a

total of EUR 120 million to support, respectively, (1) economic, political and social

inclusion of youth; (2) innovation ecosystem and entrepreneurship; (3) and

diversification of tourism, the development of handicraft, and the promotion of cultural

heritage. Although Morocco made good economic progresses in the past years with an average

of 4% GDP growth, there are still considerable disparities in the redistribution of its

growth at territorial level and in the society (particularly to create jobs for youth). In

this context, the EU provided a comprehensive package of EUR 182 million in support

to inclusive socio-economic development, including a EUR 25 million programme

benefiting youth.


As a regional contribution under the NIP, DG NEAR used lending in 2018 to promote

micro- small and medium sized enterprises in the Mediterranean through SANAD, a

fund providing debt and equity financing to local partner institutions. It aims at

fostering employment creation, especially among the youth, and economic

development in the MENA region through the sustainable provision of finance and

capacity building to MSMEs. SANAD is targeting the so-called "missing middle", which

is defined as being too small for commercial banks and too large for microfinance

institutions. The Fund is part of the "EU Initiative for Financial Inclusion", an initiative

which will mobilize more than EUR 1.2 billion in new financing, to reach out to up to

200,000 MSMEs. In addition, DG NEAR is contributing to the efforts of the EU to facilitate trade with

partner countries. In Tunisia work continued to reach a Deep and Comprehensive Free

Trade Areas (DCFTA) (4th round of negotiations foreseen Q2 2019), while the re-

launch of the bilateral cooperation expected in 2019 offers good prospects for

resuming talks with Morocco. The EU–Lebanon Working Group on Trade met

twice during the year, to facilitate mutual trade and providing specific support to

enhance Lebanese trade potential.

Regional actions and Cross Border Cooperation in Southern Neighbourhood

In 2018, DG NEAR continued to promote regional cooperation in the Southern

Neighbourhood through sector policy dialogue with regional organisations such as the

Union for the Mediterranean (UfM), the League of Arab States, and the

Council of Europe. In the Union for the Mediterranean framework, a Trade Ministerial was held in

March 2018, giving a new impetus to the dialogue on economic integration in the

Euro-Mediterranean region. Cooperation was discussed on specific trade issues such as

sanitary and phytosanitary measures. Ministers highlighted the close link between

promotion of trade and enhancing investment. The Ministerial contributed to increase

synergies between regional and bilateral cooperation.

The Civil Society Forum for the Neighbourhood South confirmed itself as a credible

and inclusive dialogue platform between civil society, EU Institutions and regional

entities, to exchange and debate on regional policy agenda. The new Civil Society

"Hub for Dialogue" (Majalat) has increased the ownership of this constructive process

by civil society organisations themselves: through Majalat, CSOs were in the driving

seat of the organisation of the Forum.


Regional cooperation –sustainable production methods

The development of the circular economy is a way to promote a more efficient use of

resources in the economic cycle, by extracting more value from the goods and

resources. As such, it allows increasing competitiveness of the companies that adopt

more sustainable production methods, generates jobs, and has a positive impact on

the environment. The SwitchMed project is a particularly successful part of a wider

approach, implemented in Africa and Asia. Through this project the EU promotes the

introduction of sustainable consumption and production patterns in partner countries,

supporting individual businesses, and contributing to raising the awareness of policy

makers and consumers.

Every second year, the “switchers”

meet to showcase their achievements

and disseminate the good practices.

The last meeting took place in

December in Barcelona.

The methods of SwitchMed are being

scaled up within several bilateral

cooperation frameworks. SwitchMed

regional works in synergy with the

national circular economy programmes,

whether they use the Switch label or

not.

SwitchMed is also a way for the EU to share with our partners the principles of the

Circular Economy Package, adopted in 2015.

1.3. TAIEX & Twinning



Plan 2016-2020:


Specific

objective 1

Increased stability in the Neighbourhood in political, economic and

security related terms

Specific

objective 3

The enlargement countries are more ready to join the EU, in

particular on the fundamental areas of rule of law, public

administration reform and economic development, reaping the

benefits of closer integration with the EU before accession.

Specific

Objective 4

Enlargement – Improved connectivity within the Western Balkans

and with the EU. Improved good neighbourly relations among

Enlargement countries with a view to overcoming the legacy of the

past



Specific

Objective 5

Stem the influx of irregular migrants to the EU, by addressing the

root causes of destabilisation, forced displacement and irregular

migration in Enlargement and Neighbourhood countries. Promote

mobility and mutually beneficial migration


Specific

Objective 7

Increased prosperity in the Enlargement and Neighbourhood

countries and in the EU through increased economic and trade


In 2018, the new approach of strategic Technical Assistance and Information

Exchange (TAIEX) strengthened the role of TAIEX in supporting the EU's strategic

objectives in the recalibrated Enlargement policy and the reviewed European

Neighbourhood Policy. TAIEX ensured better synergy with the priorities on

fundamental and structural reforms and as such functions as a catalyst for reforms

both in the enlargement and neighbourhood regions.

TAIEX and its longer–term sibling, Twinning, contributed to achieving several of the

specific objectives of DG NEAR by strengthening capacity and supporting the

work of public administrations. By mobilising experts from the EU Member States,

TAIEX and Twinning assist Enlargement countries in approximating, harmonising or

aligning their legislation with the EU acquis on their path to accession, and

Neighbourhood countries in harmonising their laws in the framework of Cooperation

and Association Agreements with the EU.

Over 1.000 TAIEX activities were organised in the course of 2018. The instrument has

provided support in key areas such as Energy Efficiency, Research Innovation and

Competitiveness and Climate Action – Decarbonising the Economy, and implemented a

variety of activities on migration, such as assistance in drafting new asylum laws,

information materials for asylum seekers, managing irregular migration and preparing

strategies for returnees. During 2018 TAIEX has provided support to at least two of

these dimensions namely Energy Efficiency and Regulatory Oversight through a total

of 9 events.

TAIEX also supported the implementation of the Western Balkans Strategy24 by

organizing in Brussels a successful and well attended multi-country Workshop on

Legacies of the Past in the Western Balkans.

In relation to the migration agenda (general objective 2) TAIEX implemented activities

linked to the drafting and implementation of the new asylum laws in the countries of

Western Balkans, as well as on the return, readmission and integration of returned

nationals.

TAIEX Regional Workshops on the Circular Economy were part of a cycle of

three strategic regional events on the circular economy targeting all IPA and ENI

partners. The Circular Economy is defined as an economy that seeks to maintain the

value of products, materials and resources for as long as possible, helps decoupling

growth in manufacturing, production and consumption from natural resource use and

promises significant economic, societal and environmental benefits. Workshops

presented the developments of the Circular Economy in the EU and in the respective

region in cooperation with DG Environment. The experts shared knowledge on

developing national waste management, a plastics strategy, and turning waste into

new resources. The workshop also touched upon the role of businesses and of regional

cooperation for innovative solutions supporting circular economy.

24 COM (2018) 65 final


1.4. Migration crisis



Plan 2016-2020:


Specific

Objective 5

Stem the influx of irregular migrants to the EU, by addressing the root

causes of destabilisation, forced displacement and irregular migration

in Enlargement and Neighbourhood countries. Promote mobility

and mutually beneficial migration

In line with President Juncker's political priorities, DG NEAR plays a key role in

managing the migration crisis. It drives forward policies and programmes aimed at

stemming the influx of irregular migrants to the EU and tackling the migration

challenges in Enlargement and Neighbourhood countries (specific objective 5). The

main instruments in this area are two EU Trust Funds (EUTFs) managed by DG NEAR:

EUTF in response to the Syrian Crisis, EUTF for Africa - North of Africa window, as well

as the Facility for Refugees in Turkey (FRIT). Assistance to Enlargement and Neighbourhood countries in tackling migration

challenges and their root causes was crucial in that sense. DG NEAR has continued a

balanced approach supporting the multiple aspects of migration, with

a focus on areas of mutual interest such as addressing the root causes of

irregular migration and forced displacement, the fight against trafficking

of human beings and smuggling of migrants and the return and reintegration of

migrants to their countries of origin.

DG NEAR continued to activate its dedicated financial instruments. The pace of

implementation of the North of Africa Window of the EUTF for Africa continued to

increase considerably with new programmes approved for a total amount of EUR 285

million, including contributions to two cross-regional programmes and expansion of

ongoing actions. The EU Regional Trust Fund in Response to the Syrian Crisis

continued to work in support of 1.9 million Syrian refugees and internally displaced

persons in neighbouring countries, as well as host communities in the region.

In March 2018, the Commission adopted a decision on a second tranche of EUR

3 billion under the EU Facility for Refugees in Turkey. Following the Council’s

agreement on the second tranche in July, this decision was amended to reflect the

agreement on the source of contributions, with the EU budget contributing EUR

2 billion and the Member States EUR 1 billion. In October, the Commission started

programming discussions with the Turkish authorities. The comprehensive monitoring

system for the Facility became operational in mid-2018. In November 2018, the

European Court of Auditors issued its Special Report on the Facility. The Commission

welcomed the report and agreed with its recommendations, which it is already

implementing in its programming of the second tranche.

In 2018, the focus of migration continued on the Central Mediterranean route as

the main challenge and, in particular, conditions of migrants and refugees in Libya

remained a great concern. DG NEAR increased its engagement in the protection of

vulnerable migrants and the fight against trafficking and smuggling of human beings,

including through support to border management. Assistance to Libyan

municipalities to promote alternative livelihoods and support the resilience of local

communities hosting migrants remained a key priority. DG NEAR also focused its

efforts on supporting the Libyan health system and on assisting the country’s

transition towards a stable, functioning state, accountable towards its citizens, fully in


line with the United Nations mediation efforts; and supported the improvement of the

Libyan business environment and economic diversification.

However, the Western Mediterranean route witnessed a substantial increase of

irregular border crossing from Morocco to Spain. Through a EUR 140 million package

adopted in record time at the end of 2018, the EU stepped up its efforts to fight the

smuggling of migrants and the trafficking in human beings throughout this route.

Managing Migration Flows in Morocco

Morocco is particularly vulnerable to migration flows, given its geographical position.

To help the country face the arrival of irregular migrants, the EU has set up a

comprehensive programme (EUR 140 million) that will contribute to fighting smugglers

and criminals trafficking human beings, re-inforce maritime surveillance and train the

Moroccan stakeholders in the area of migration and border management, in

compliance with international standards.

The programme includes a component dedicated to Morocco out of the Border

Management Programme for the Maghreb (EUR 30 million), support to Integrated border

and migration management in Morocco (EUR 40 million) and budget support on border

management to the country (EUR 70 million).

On the Western Balkans route, 2018 saw an overall stabilisation of the influx of

migrants and refugees to the region at levels closer to those registered before the

crisis in 2015. However, smuggling activities were on the rise. DG NEAR continued the

implementation of the migration assistance package (EUR 30 million) decided in 2017

to support in particular Serbia and North Macedonia in managing the migration flows.

In addition, in 2018, support was provided to Bosnia and Herzegovina to help the

country deal with a challenge of an influx of more than 20.000 migrants.

TAIEX Instrument and migration

In this area TAIEX implemented activities linked to the drafting and implementation of

the new asylum laws in the countries of Western Balkans, as well as on the return,

readmission and integration of returned nationals.

Concerning the Ukraine, the dialogue on Migration and Asylum Policies intensified in

2018 and led to the adoption of the new Action Plan for Migration. Intensive dialogue

also continued with the State Border Guard Service of Ukraine (SBGU) on the revision

of the Government policy for Integrated Border Management and the establishment of

an Inter-Agency Working Group on Integrated Border Management (IBM).


2. ORGANISATIONAL MANAGEMENT AND

INTERNAL CONTROL

This section explains how the DG delivered the achievements described in the previous

section. It is divided into two subsections.

The first subsection reports the control results and all other relevant information that

support management's assurance on the achievement of the financial management

and internal control objectives25. It includes any additional information necessary to

establish that the available evidence is reliable, complete and comprehensive,

appropriately covering all activities, programmes and management modes relevant to

the DG.

The second subsection deals with the other components of organisational

management: human resources, better regulation principles, information management

and external communication.

2.1 Financial management and internal control

Assurance is an objective examination of evidence for the purpose of providing an

assessment of the effectiveness of risk management, control and governance

processes.

This examination is carried out by the management of the DG, who monitors the

functioning of the internal control systems on a continuous basis, and by internal and

external auditors. Its results are explicitly documented and reported to the Director-

General. The reports produced are:

Monthly financial reports;

The Management Plan 2018 of the Directorate General;

The 2018 annual Management Plan of the Delegations;

Reports by the Authorising Officers by Sub-Delegation made at year end (by

Directors to the Director General), detailing the results of KPIs in HQ as well as

a summary of KPIs in the Delegations under the responsibility of the AOSDs;

The External Assistance Management Reports (EAMRs) produced by the

delegations, together with the statement of assurance signed by each Head of

Delegation. This statement includes - as foreseen in the Financial Regulation -

information on the efficiency and effectiveness of the internal control systems

put in place in the Delegations, as well as information on the management of

the operations sub delegated to them thus providing their assurance to the

relevant Director in accordance with the sub delegation received;

The AOSD report of the EU Trust Fund in response to the Syrian Crisis and

North of Africa window of the EU Emergency Trust Fund for Africa;

The reports from authorising officers in other DGs managing budget

appropriations via cross sub delegations;

Ad-Hoc reports from the Management information System (MIS) (on risk

assessment, financial forecasts);

The reports on control results from management/audit authorities in

Beneficiary Countries in relation to indirect management by those countries;

25 Art 36.2 FR: a) effectiveness, efficiency and economy of operations; b) reliability of reporting; c) safeguarding of assets and information; d) prevention, detection, correction and follow-up of fraud and irregularities; and e) adequate management of risks relating to the legality and regularity of underlying transactions


The reports on control results from management authorities for Cross Border

Cooperation (CBC) programmes implemented under shared management;

Pillar assessment reports: International Organisations and National Agencies

need to pass pillar assessments pursuant to the Financial Regulation in order to

be able to sign delegation agreements under indirect management. These

assessments are designed to check whether the European Commission can

entrust budget implementation tasks to entities that demonstrate a level of

financial management and protection of the EU's financial interest equivalent to

that of the Commission;

Management declarations from International Organisations and Member States

Agencies;

Annual reports and progress reports for financial instruments (EIB);

Supervision mission reports on Delegations visited during the year;

The observations and recommendations reported by the ECA and the IAS;

The 2018 RER study;

The contribution by the Risk Management & Internal Control Director (RMIC),

including the results of internal control monitoring at the DG level;

The reports on recorded exceptions, non-compliance events and any cases of

‘confirmation of instructions’ (Art 92.3 FR);

The Report on OLAF matters to the Commissioner.

These reports result from a systematic analysis of the evidence available. This

approach provides a sufficient guarantee as to the completeness and reliability of the

information reported and results in a complete coverage of the budget delegated to

the Director-General of DG NEAR.

DG NEAR also produces an annual report to DG DEVCO on the cross-sub-delegation of

DG DEVCO to DG NEAR for the management of the thematic budget lines and the

North of Africa window of the EU Emergency Trust Fund for Africa.

This section reports the control results and other relevant elements that support

management's assurance. It is structured into (a) Control results, (b) Audit

observations and recommendations, (c) Effectiveness of the internal control system,

and resulting in (d) Conclusions on the impact as regards assurance.


2.1.1 Control results

This section reports and assesses the elements identified by management that support

the assurance on the achievement of the internal control objectives26. The DG's

assurance building and materiality criteria are outlined in Annex 4. Annex 5 outlines

the main risks together with the control processes aimed to mitigate them and the

indicators used to measure the performance of the relevant control systems.

The breakdown of the total amounts paid by DG NEAR in 2018 by management mode

is as follows:

The new 2018 Financial Regulation introduces a few additional reporting requirements

- confirmation of instructions (art 92.3)

- financing not linked to costs (art 125.3)

- financial framework partnerships for more than 4 years (art 130.4)

- flat rates above 7% (art 181.6)

- derogation to the principle of non retroactivity for grants (art 193.2)

There is no case to be reported for the year 2018.

26 Effectiveness, efficiency and economy of operations; reliability of reporting; safeguarding of assets

and information; prevention, detection, correction and follow-up of fraud and irregularities; and adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of programmes as well as the nature of the payments (FR Art 32).

N

r

.

o

f

EU Budget % ET TF Syria % TOTAL %

Grants in Direct Management 635.030.101,57 22% 86.065.931,63 37% 721.096.033,20 23%

Procurement in Direct Management 286.511.243,93 10% 734.810,83 0% 287.246.054,76 9%

Budget Support 420.311.709,44 14% 0,00 0% 420.311.709,44 13%

Pegase 134.879.689,19 5% 0,00 134.879.689,19 4%

Indirect Management with Beneficiary countries 506.595.926,05 17% 0,00 506.595.926,05 16%

Indirect Management with International

Organizations544.872.899,73 18% 102.799.063,50 44% 647.671.963,23 20%

Indirect Management with Development

Agencies216.466.191,73 7% 36.263.072,30 16% 252.729.264,03 8%

Indirect Management with EIB and EIF 32.985.730,23 1% 0,00 32.985.730,23 1%

Shared Management 141.078.839,05 5% 0,00 141.078.839,05 4%

Administrative expenditure Chapter 01 of EU

Budget (fully managed by or horizontally

codelegated to NEAR)

11.493.410,58 0% 0,00 11.493.410,58 0%

Other expenditure 16.142.204,17 1% 5.243.005,22 2% 21.385.209,39 1%

Total expenditure (excluding contribution

to EU TF)2.946.367.945,67 100% 231.105.883,48 100% 3.177.473.829,15 100%

Contribution to EU Trust Funds 287.370.000,00

Total Expenditure (including contribution to

EU TF) (annex 3):3.233.737.945,67

RCS Coverage 2.642.773.802,68 90% 225.862.878,26 98% 2.868.636.680,94 90%

RER Coverage 2.934.874.535,09 100% 231.105.883,48 100% 3.165.980.418,57 100%

Total Payments made


1. Effectiveness = the control results and benefits

In order to be considered effective, controls are expected to meet the internal control

objectives detailed hereafter and result in benefits.

Legality and regularity of the transactions

DG NEAR has set up internal control processes aimed at ensuring adequate

management of the risks relating to the legality and regularity of the underlying

transactions, taking into account the multiannual character of its programmes as well

as the nature of the payments concerned.

Categorisation of DG NEAR's overall control environment.

DG NEAR's operational environment is a complex and risk-prone environment

characterised by:

Generally speaking, a high level of risk in the partner countries (some more

than others) due to the political, institutional, administrative and social

environment. Also, in recent years, important conflicts in the area (Ukraine,

Syria and Libya) have presented risks to the organisation and the development

of its policies. This risk analysis must be nuanced by country.

Geographically dispersed activities, covering some 24 countries, with

delegations managing funds for DG NEAR.

A high number of operations and associated financial transactions.

Two main financial instruments to manage, along with their predecessors, each

one with a different legal basis and implementing rules and also other financial

instruments (thematic lines), cross sub delegated from other DGs.

A diversity of partners in the implementation of its activities beneficiary states,

private firms, Entrusted Entities, NGOs.

A diversity of forms and modes of financial implementation (project approach,

budget support, sector approach, indirect management with beneficiary country

or with an entrusted entity, blending, trust funds, shared management under

Cross Border Cooperation, etc.).

Controls supporting the achievement of the objectives

The controls27 put in place by DG NEAR management provide reasonable assurance

that the internal control objectives are achieved, the risks related to financial

management are adequately managed and the legality and regularity of underlying

transactions is ensured. They take into account the multiannual character of the DG

programmes as well as the nature of the payments concerned.

DG NEAR's assurance is based on a number of controls, which are implemented either

ex ante or ex post. These are: the financial circuits, supervision missions, the control

plan (including risk-based financial verifications launched by the Commission, and

operational controls such as Result-Oriented Monitoring, evaluations and on the spot

check), contractual verifications launched by the beneficiaries, pillar assessments of

entrusted entities, controls in indirect management with beneficiary countries, control

bodies verifications (ECA/IAS) and the residual error rate study. See annex 10 for

more details.

27 Where appropriate, these controls also apply to all the contributions of the EU Trust funds.


The Residual Error Rate Study

The residual error rate (RER) study enables the effectiveness of the overall control

framework to be evaluated. The RER indicator is designed to identify residual errors

which have not been detected by the internal control system and conclude on its

effectiveness. When the RER is below the materiality threshold of 2% set by the ECA,

it is a strong signal that the controls put in place at all levels of the DG are effective.

Moreover, besides the overall error rate, the RER study reveals the common types of

errors and therefore helps to avoid them in the future.

The RER methodology is regularly updated in order to take into account the

recommendations of the Court of Auditors and the IAS. The methodology takes into

account the multiannual nature of DG NEAR’s programmes, as the contracts closed

during the said period are considered for monetary unit sampling.

In order to detect weaknesses, DG NEAR has categorized its portfolio and described

five major relevant control systems (RCS) defined in terms of management modes. In

addition, DG NEAR has developed risk indices to better support the assessment by

RCS. A notional error rate for each RCS is calculated in order to add information on

risks in the different management modes.

Moreover, as of 2019, following a high error rate identified in grants under direct

management, the number of checks has increased in this particular area and more

precise guidelines on checking second-level procurement have been given to the RER

contractor.

The RER study is an agreed upon procedure which reports on factual findings. The

detailed procedures describing the work performed in an RER exercise are set out in

detail in the Methodology and Instruction Manual. The RER study is not an audit which

provides an audit opinion. However, the DG reaches its own conclusions from the

auditor’s report of factual findings. The auditors use professional skills on the basis of

specific agreed upon procedures and on the basis of IFAC International standards on

related services (ISRS 4400).

The RER study is based on a sample (drawn by monetary unit sampling) of a minimum

of 720 intervals in a population of closed contracts in the period September 2017 to

August 2018. The multiannual nature of DG NEAR’s programmes is taken into account

in this methodology, as the contracts closed during the said period and taken into

account for the monetary unit sampling were authorised over a period of several

years.

The 2018 Residual Error Rate (0.51%) for the DG is very satisfactory. This is a strong

signal that the control strategy put in place at all the levels of the DG is functioning.

In 2018, the residual error rate is as follows:

ENI errors: 0.41 %

IPA (excl – IMBC) errors: 0.91 %

IPA IMBC errors: 0.05 %

DG NEAR 0.51%


Upper and lower error limits

The weighted upper error rate is 2.22% and the lower error rate is 0.09%. This means

that we can state with 95% confidence that the error rate falls between these two

limits.

The breakdown of the upper error limit is as follows:

Upper error limit Weighted

ENI 2.27% 1.46%

IPA 2.77% 0.75%

IMBC 1.76% 0.01%

Total 2.22%

Categorisation of the different control environments

The positive assessment based on the 2018 RER study may obscure weaknesses in

specific parts of the portfolio. In order to detect such weaknesses, DG NEAR has

categorized its portfolio and described 5 major relevant control systems (RCS). These

are not defined in terms of Instruments but rather of management modes. A RCS is

developed when the total amount contracted or paid represents at least 10% of the

total amount of the year for the DG. DG NEAR has also developed risk indices to better

support this assessment by RCS, as recommended by the ECA. See Annex 5 for

details.

Overview table RCS and RER Study

RCS1 (Direct Grants)

RCS2 (procurement)

RCS3 (Budget Support)

RCS4 (IMBC)

RCS5 (IMEE)

ENI X X X X X

IPA excl IMBC X X X - X

IPA IMBC - - - X -

% amount paid 22% 10% 14% 17% 27%

Risk level High Low Low Low Moderate

RER Calculated 2,26% 0,03% 0,00% 0,15% 0,63%

Reservation X - - - -

Consequently, the reservation on grants in direct management is maintained in 2018

(see section 2.1.4).

Benefits of controls : Non-quantifiable benefits derive from sound financial

management as confirmed by the low Residual Error Rate (below 2%). In addition,

quantitative financial benefits of controls amount to EUR 148 million28.

28 This is the sum of ineligible expenditure detected by ex-ante controls: EUR 142 million) + (Recovery orders of ineligible expenditure EUR 6 million)


A. Direct Management

Under Direct Management, funds are channelled to the final recipients through

contracts signed directly by the Commission as contracting authority. Under Direct

Management, the control environments are Grants in Direct Management (RCS 1);

Procurement in Direct Management (RCS 2); Budget Support (RCS 3); in addition the

Pegase mechanism to channel Direct Financial Support to the Palestinian institutions

includes a specific set of controls which has been reviewed in recent years by ECA.

RCS 1: Grants in Direct Management

Control results and risk analysis:

Root causes of errors in grants are related to the essential nature of grants

which are mostly implemented by non-profit organisations based in partner

countries. These entities sometimes lack the necessary expertise for the

rigorous application of the general and specific conditions of the grant

contracts. The difficulties encountered to properly monitor projects in some

countries, and in particular in Libya and Syria, may increase the inherent risk of

such contracts.

Root causes of errors may also result from the poor quality of some of the

expenditure verification reports prepared by auditors contracted by the fund

recipients as part of their contractual obligations. Conclusions of these reports

are often questioned by the ECA or by external auditors contracted by DG

NEAR. However, Terms of Reference have been reviewed in 2018 including a

request for inclusion in audit reports of better information on sampling methods

used, the identification of verified transactions in complete transaction listings,

and the identification of changes between draft and final verification reports.

The 2018 RER calculated for this RCS is 2.26%

Based on the above elements, the level of risk associated with Grants in Direct

Management is assessed by DG NEAR as HIGH.

Several actions are ongoing in order to mitigate these risks:

Following the recent introduction of the new Terms of Reference for

verifications, the authorizing officer can now challenge the quality of an

external auditor’s work, especially in the case of expenditure verifications

launched by the beneficiary. They can identify systemic issues and propose

additional guidance to mitigate them.

DG NEAR has also introduced a quality grid for audits/verifications launched by

the Commission, the use of which is compulsory before the finalisation of a

record in the Audit Module.

Promoting a wider use of simplified cost options (lump sums, unit costs and/or

flat-rate financing).

The RER 2019 will include more controls on grant under direct management.

RCS 2: Procurement in Direct Management

Control results and risk analysis:

Contractual procedures are transparent and well known by the main

contractors.

Desk review of the results of ECA reports of recent years shows that

procurement operations have a rather low risk.

This is confirmed by the result of the 2018 RER study in which very few errors

were identified in procurement contracts.


The 2018 RER calculated for this RCS is 0.03%.

Based on the above elements, the level of risk associated to procurement

contracts in Direct Management is assessed by DG NEAR as LOW.

RCS 3: Budget Support in Direct Management

Control results and risk analysis

Desk review of the results of ECA reports from last year shows that budget

support operations have a very low risk.

This is confirmed by the result of the 2018 RER study in which no errors were

identified for Budget Support operations by the external audit firm.

Low risk also results from the system of ex-ante controls including high level

steering mechanism put in place by DG NEAR for Budget Support operations,

which prevents any disbursement from being made unless all required pre-

conditions and targets have been met by the Beneficiary Countries.


Based on the above elements, the level of risk associated to Budget Support

Operations is assessed by DG NEAR as LOW. This is in line with previous ECA

Reports were it is stated that the nature of the instrument and of the payment

conditions limit the extent to which Budget Support transactions are prone to errors.

B. Indirect Management

Indirect management is a management mode under which the final recipient receives

EU funds through a contract concluded with an intermediary to whom the tasks of

selecting the final recipients and managing the resulting contracts (so-called budget-

implementation tasks) have been entrusted by the Commission. The recipient is either

an Indirect Management Entrusted Entity (IMEE): International Organisation or

Member State Agency; or an Indirect Management Beneficiary Country (IMBC). It is

important to mention that under the ENI instrument, the entrustment to a beneficiary

is only partial as payments are still made directly by the Commission (except for

limited imprest accounts), while for IPA the entrustment is full, including payments.

The significant control environments identified and described below are those of IMBC

in the IPA zone (RCS 4) and IMEE (RCS 5).

RCS 4: Indirect management with IPA beneficiary countries


The 2018 RER study includes a representative sample of IPA transactions under

IMBC.

The 2018 RER study for IPA IMBC has calculated a total RER of 0.05%.

Relevant audit information received from DG AGRI shows that the level of risk

associated to operations in Indirect Management with IPA Beneficiary Countries

is assessed as low.

DG NEAR receives annual management declarations, annual audit activity

reports and annual audit opinions from all IPA beneficiary countries29.

Based on the above elements, the level of risk associated to operations in

Indirect Management with IPA Beneficiary Countries is assessed by DG NEAR as

LOW.

29 All the documents received cover the year 2018


RCS 5: Indirect management with entrusted entities


The RER study includes IMEE transactions.

In certain cases due to some specific framework contractual agreements with

some International Organisations (IO) auditors may be limited in the scope of

the controls they are allowed to perform.

In addition to global annual management declarations received and centralised

by DG DEVCO, DG NEAR received global annual management declarations for

the WBIF portfolio (EIB and KFW) and annual management declarations at

project level30.


An important factor when assessing DG NEAR's relationship with IOs are certain

peculiarities in the field of financial and operational reporting. Reports submitted by

certain IOs do not necessarily allow for a meaningful assessment of whether or not the

reported expenditure can be accepted, due to differences (identified and

acknowledged through the positive assessment of the relevant pillars) in the accounts

systems and costs structure of these organisations compared with those of the

Commission.

Entrusted entities can withhold up to 7% for the administration of funds.

Based on the above elements, the level of risk associated to operations in

Indirect Management with International Organisations and Member States'

Agencies is assessed by DG NEAR as MODERATE.

DG NEAR's main focus in order to reduce this risk is on clarification and

simplification of the rules, procedures, agreement templates, and framework

agreements that apply to its relations with IOs.

DG NEAR is involved in a global assessment of terms of reference and conduct

of verification missions with all UN Agencies and other External Actions DGs in

view of implementing adequately the verification clause as foreseen in the new

FAFA.

C. Expenditure not covered by a specific RCS

Pegase

The protracted crisis situation linked to the stagnation of the Middle East Peace

Process and the fact that Palestine has not yet attained 'statehood' continues to

require specific temporary support measures to contribute to maintaining the viability

of the two-state solution. One measure is the PEGASE Direct Financial Support (DFS)

to the Palestinian Authority (PA)'s national budget.

Through PEGASE DFS, the EU has contributed substantially to the recurrent

expenditure of the PA national budget, with systematic, predictable and unconditional

contributions.

30Delegation Agreements contain the obligation to provide with every report a Management

Declaration following the template annexed to the contract. However, it is possible to agree with the Commission to send annually the Management Declaration covering all the agreements signed with the Commission. In this case, the organisation sends within the year n (this could be either the calendar year or the financial year of the organisation) the Annual Management Declaration for year

n-1 covering all contracts implemented in year n-1. This Management Declaration is valid until the end of year n+1, i.e. it serves as the Management Declaration for payment requests/reports submitted until this point in time


Currently EU support to PEGASE DFS covers three areas:

Contribution to the payment of salaries and pensions to the PA civil servants in

Palestine (West Bank and Gaza Strip) - (PEGASE DFS "Civil Servants and

Pensioners" (CSP) programme).

Contribution to the PA's national cash transfer programme (CTP) for quarterly

payments of social allowances to the poorest and most vulnerable Palestinian

families in the West Bank and the Gaza Strip (PEGASE DFS "Vulnerable

Palestinian Families" (VPF) programme).

Contribution to the payment of health referral bills (PEGASE DFS "East

Jerusalem hospitals" (EJH) programme).

For each programme, contributions from the EU and other donors are pooled in a sub-

account of the PA's single treasury account. Payments to final beneficiaries (i.e. civil

servants, pensioners, poor families, hospitals) are made by the PA after prior

authorization by the EU. The EU carries out robust ex-ante verifications including in-

depth screenings to identify eligible beneficiaries and/or invoices on the basis of prior

agreed eligibility criteria. There are also ex-post control activities to confirm that the

funds have been duly disbursed to the eligible beneficiaries. There is no conditionality

on the availability of the EU contribution similar to budget support conditions.

Shared Management

Shared management mode is used for the Neighbourhood cross-border cooperation

(CBC) programmes. The assurance as regards the legality and regularity of operations

that are conducted by Member States designated authorities in accordance with their

own rules is built on work carried out at two levels:

At Joint Managing Authority level, the daily control framework includes ex ante

financial verifications before declaring expenditure eligible and follow up of

audits conducted by external auditors. The annual report is audited by the

national audit authority of the hosting country.

At Commission level, the analysis is based on:

o National Authority system audit reports;

o Audit Authority opinion on the Annual Accounts;

o Verification missions of CBC programmes by Commission staff

o Relevant information from the ECA and OLAF.

o Any other source of information, formal or informal, acquired by DG NEAR

services in the context of their day-to-day management of the programmes.

In addition, for the programming 2014-2020, the Commission has requested an

independent opinion on the description of the management and control systems of the

designated Managing Authorities for the 16 adopted Programmes. A significant

modification in the programming 2014-2020 is the role of the Audit Authorities of the

countries hosting the Joint Managing Authorities (JMAs) seconded by a group of

Auditors (GoA) representing the Audit Authorities of the partner countries.

DG NEAR contribution to the EU Trust Fund

The Director General of DG NEAR is Delegated Authorising Officer for the EU Regional

Trust Fund in Response to the Syrian Crisis. Related activities and expenditure are

therefore reported in the Annual Activity Report of DG NEAR and covered by the

Declaration of Assurance signed by the Director General. He also receives a cross sub-

delegation for the North of Africa window of the EU Emergency Trust Fund for Africa.

The Commission retains full responsibility for the establishment and the management

of EU TFs for external actions. The Commission sets up the TF and chairs its board


(composed of representative of the Commission and of the donors).

The TFs have to be managed in full compliance with the relevant provisions of the

Financial Regulation, and in particular in accordance with the principles of sound

financial management, transparency, proportionality, non-discrimination and equal

treatment.

The EU Trust Fund operates in the general system of internal control defined by the

Commission. The rules and procedures developed by DG NEAR for the management

and implementation of its operations are equally applicable to the EUTF.

Once approved by the Operational Committee, actions are implemented in accordance

with the implementing procedures provided for in the applicable Commission rules and

regulations. The Trust Fund accounts are subject to an annual external audit.

The Trust Fund Managers take into account reports and recommendations of the

different control bodies, notably the IAS and ECA, for the purpose of providing an

assessment of the effectiveness of risk management, control and governance

processes, in addition to the results of the audits carried out at the level of

contractors/beneficiaries.

Indirect Management with EIB and EIF

This control environment is included in RCS 5 (IMEE). Where appropriate, DG NEAR

receives a management declaration and full reporting package.

Amount at risk

In the context of the protection of the EU budget, at the Commission's corporate level,

the DGs' estimated overall amounts at risk and their estimated future corrections are

consolidated.

For DG NEAR, the estimated overall amount at risk at payment for the 2018 payments

made is EUR 20.07 million. This is the AOD's best, conservative estimation of the

amount of relevant expenditure31 during the year (EUR 2,518.46 million) not in

conformity with the applicable contractual and regulatory provisions at the time the

payment is made32.

This expenditure will be subsequently subject to ex-post controls and a sizeable

proportion of the underlying error will be detected and corrected in successive years.

The conservatively estimated future corrections amount33 for those 2018 payments

made is EUR 7.22 million. This is the amount of errors that the DG conservatively

estimates to identify and correct from controls that it will implement in future years.

The difference between these two amounts leads to the estimated overall amount at

risk at closure of EUR 12.84 million.

31 See footnote [36] below the Table on the next page



near_aar_2018 Page 54 of 83

Estimated overall amount at risk at closure34

34 The amount at risk at closure is based on the RER study. It is therefore the starting point for the estimation of the average error rate at payment. 35 Payments made or equivalent, such as after the expenditure is registered in the Commission’s accounting system, after the expenditure is accepted or after the pre-financing is cleared. In any case, this means after the preventive (ex-ante)

control measures have already been implemented earlier in the cycle. In all cases of Co-Delegations (Internal Rules Article 3), the "payments made" are covered by the Delegated DGs. In the case of Cross-SubDelegations (Internal Rules Article 12), they remain with the Delegating DGs.

36 New pre-financing actually paid by out the department itself during the financial year (i.e. excluding any pre-financing received as transfer from another department). The “Pre-financing” is covered as in the context of note 2.5.1 to the

Commission (provisional) annual accounts (i.e. excluding the "Other advances to Member States" (note 2.5.2) which is covered on a pure payment-made basis). Pre-financings paid/cleared" are always covered by the Delegated DGs, even

in the case of Cross-SubDelegations. 37 Pre-financing actually having been cleared during the financial year (i.e. their 'delta' in FY 'actuals', not their 'cut-off' based estimated 'consumption'). 38 "relevant expenditure" during the year = payments made, minus new pre-financing paid out, plus previous pre-financing cleared

39 2018 Amount at risk at payment divided by the 2018 relevant expenditure.

40 2018 amount at risk at closure plus 2018 estimated future corrections. 41 Estimated future corrections (average 2018/2017) divided by total payments (average 2018/2017), i.e. 9.23/3219 The 2018/2017 average of the estimated future corrections is based on the historic recovery orders issued by NEAR in 2018

and 2017 for the reimbursement of undue payments identified by ex-post controls (i.e.: recovery orders encoded with recovery context "errors", "irregularity" or “olaf notified’). Some adjustments were made in order to exclude amounts of

ex-post recoveries erroneously encoded with recovery context "Errors", "Irregularity" or “olaf notified”. This is in line with last year methodology.

42 ARC in % multiplied by the 2018 relevant expenditure

Payments made (2018; MEUR)35

Minus new pre-financing (2018; mEUR)36

Plus cleared

pre-financing (2018; mEUR)37

= "relevant expenditure" (2018; mEUR)38

Average Error Rate (weighted AER;

%)39

estimated overall amount at risk at payment (2018;

MEUR)40

Average Recoveries and corrections (adjusted ARC; %)41

estimated future corrections [and deductions] (for 2018; MEUR)42

estimated overall amount at risk at closuree (MEUR ; (%))

Total expenditure Including contribution to EU TF

3,233.74 1,902.50 1,387.50 2,718.74

Of which contribution to EUTF In response to the Syrian Crisis

262.37 0.00 17.57 279.94

Of which contribution to EUTF Africa

25.00 0.00 0.00 25.00

Total expenditure (excluding contribution to EU TF)

2,946.37 1,902.50 1,369.93 2413.80

EUTF In response to the Syrian Crisis

231.11 218.16 91.71 104.66

Total 3,177.48 2,120.66 1,461.64 2,518.46 0.80% 20.07 0.29% 7.22 12.84 (0.51%)


Fraud prevention, detection and correction

DG NEAR has developed and implemented its own anti-fraud strategy, elaborated on the

basis of the methodology provided by OLAF. It has been updated in 2018 and approved

for the years 2018-2019.

The general objectives of this anti-fraud strategy are:

Anti-fraud network, data collection and guidance: to establish a network of OLAF

Focal Points within DG NEAR, as well as to develop data and statistics on the OLAF

cases that concern the DG.

Management reporting and relations with EU stakeholders: to establish regular

reporting cycles on anti-fraud issues at senior management level and at the level

of Commissioner, as well as to develop the tools that enable this reporting and to

coordinate relations between DG NEAR and OLAF.

Awareness raising, procedures and document management: to raise the fraud

awareness level of DG NEAR staff, including increasing their knowledge and

capacity for performing preventive and detective controls and to develop

procedures and guidance on reporting fraud and anti-fraud KPIs for the

Management Plan.

Enhanced collaboration with OLAF, fraud prevention awareness campaign in the

partner countries and capacity building of OLAF related structures in IPA and ENI

countries.

During 2018 continued daily support and advice was provided to staff on OLAF issues. An

OLAF questionnaire was launched to assess the level of knowledge on anti-fraud matters.

30% of NEAR colleagues completed the questionnaire. The overall result (66,56% of

correct replies) showed an improvement of 5,5% in comparison to the results of the

2017 OLAF questionnaire.

Seven additional training sessions (some performed jointly with OLAF services and DG

DEVCO) have been provided to staff in Headquarters and the EU Delegations in the

neighbourhood and enlargement zones (four in Brussels for the HQ/Delegations with DG

DEVCO and three by video conference specifically addressed to the NEAR Delegations

with OLAF). In addition, during the 2018 cooperation days, OLAF provided a half day

training for heads of finance and contracts.

A dedicated DG NEAR intranet section includes all relevant guidance documents (OLAF

manual, OLAF administrative agreement, trainings and guidance notes). The list of OLAF

focal points has been updated and daily cooperation with OLAF has been ensured

throughout 2018.

These initiatives complemented the robust fraud prevention and detection system already

in place. During 2018, 24 fraud cases have been closed.

Other control objectives: safeguarding of assets and information, reliability of

reporting

Reporting:

Reporting on activities give a true and fair view of the main risks and constraints, the

performance of the DG assessed against defined benchmarks and the possible mitigating

measures when possible. Benchmarking is implemented through the KPIs in the EAMR

and AOSD reports. AOSD reporting also applies to EUTF managers.

The objective of this reporting structure is to have a solid basis for the DG's AAR to the

College. The risk assessment, audit plan and control plan have been integrated into the

DG's Management Plan. The risk register has been updated for the DG. A single reporting

framework has been introduced for IPA and ENI building on the KPIs and the related


EAMRs, working on the basis of the structure used by DG DEVCO.

The list of the reports produced by the DGs has been communicated in the introduction

of the second part of this AAR.

Assets:

The financial assets of DG NEAR consist of the following elements:

Pre-financing, long-term and short-term

Holdings in financial instruments plus cash and cash equivalents associated with

those financial instruments

In order to protect the budget of the Union, DG NEAR procedures require the proper

management of its pre-financing (pre-financing paid kept to the minimum possible,

clearing undertaken regularly on the basis of the financial reports or contractual

benchmarks). Work in recent years to reduce pre-financing granted under IPA and IPA II

programmes managed by beneficiary countries has achieved a significant reduction in the

level of pre-financing open in this area. DG NEAR also requests and keeps in safe custody

appropriate guarantees on pre-financing when this is required by the Financial

Regulation.

Management receives regular reports on the financial instruments and any associated

cash holdings and is required to ensure that cash payments for these programmes reflect

the minimum required for operational effectiveness.

2. Efficiency = the Time-to-… indicators and other efficiency indicators

Analysis of Financial Key Performance Indicators

Within DG NEAR 25 key performance indicators (KPIs) are monitored on an annual basis

grouped around three objectives to be achieved for financial operations:

Sound Financial Management & Efficient Use of EC Resources (KPI 1 to 13)

Effectiveness of Internal Controls (KPI 14 to 21)

Effectiveness of Audit systems (KPI 22 to 25)

These indicators represent an additional layer in the internal control structure of the DG,

monitoring to ensure that the achievement of the general objectives is sound, efficient

and effective.

For each KPI, targets/benchmarks are set at the beginning of the year against which

each entity managing funds within the DG (Delegation/Unit/Directorate) needs to deliver.

The delivery by all entities contributes to the overall results of the DG and allows the

detection of areas where follow up is required.


KPI Results 2018

21 KPIs out of 25 fully reached the aggregated 2018 targets at DG level corresponding to

an overall success rate of 84%. This result indicates globally stability and

continuity in the performance of DG NEAR (same results as in 2017.)

KPI Name (*) KPI result 2018

Annual Target/Benchmark

KPI result 2017

A - Sound financial management and effective use of EC Resources

K01 Accuracy of initial annual financial forecast for payments

90.31%▼ From 90% to 110% 91.10%▼

K02 Accuracy of initial annual financial forecast for contracts

111.13%▼ From 90% to 110% 108.38%▲

K03 Accuracy of initial annual financial forecast for decisions

96.13%▼ From 90% to 110% 99.99%▲

K04 RAL Absorption Period 4.35▼ Less than 4 years 4.24▼

K05 Time to Grant 71.76 No more than 90 N/A

K06 % of Projects with a red traffic light for Implementation Progress.

3.87%▼ Not more than 10% 3.63%▲

K07 % of Projects with a red traffic light for Achieving Results

3.87%▲ Not more than 10% 4.06%▲

K08 Reduction of Old Pre-financing 35.72%▲ At least 25% 31.23%▼

K09 Expired Contracts as a % of the contract portfolio

14.76%▲ Not more than 15% 18.34%▼

K10 Reduction of Old RAL 22.61%▲ At least 25% 18.43%▼

K11 % of payments paid within the contractual deadline

90.82%▲ At least 85% 88.62%▲

K12 % invoices registered within 7 days of the Commission reception date

90.70%▲ At least 80% 88.44%

K13 Use of DEVCO/NEAR staff and respect of the flexibility arrangements

100.00%= Yes for 100% of

Delegations 100.00%=

B – Effectiveness of Internal Control Systems

K14 ICF – Control Environment 92.47% At least 80% N/A

K15 ICF – Risk Assessment 91.98% At least 80% N/A

K16 ICF – Control Activities 88.99% At least 80% N/A

K17 ICF – Information and Communication 94.11% At least 80% N/A

K18 ICF – Monitoring Activities 93.49% At least 80% N/A

K19 % of projects visited by Commission staff and/or the HoD, by project value

85.68%▲ At least 80% 82.41%▲

K20 % contracting of project evaluations in the Annual Evaluation Plan (AEP)

77.84%▼ At least 75% 80.89%▲

K21 Undue payments prevented by ex-ante

controls as a % of the claimed amount 5.12%▼ At least 2% 6.57%▲

C – Effectiveness of audit system

K22 % contracted of the Annual Audit Plan: Year N

71.33%▼ At least 60% 75.99%▲

K23 % implementation of the Annual Audit Plan: Year N-1

68.98%▼ At least 40% 69.68%▼

K24 % implementation of the Annual Audit Plan: Year N-2

86.45%▼ At least 60% 96.62%▼

K25 Ineligible amounts identified by audits as a % of the audited amount

1.26%▼ At least 2% 1.37%▼

4 KPIs did not reach the 2018 targets at DG level - 3 KPIs concern Sound Financial

management and effective use of EC resources. 1 KPI concerns Effectiveness of Audit

Systems. They are described below:


A – Sound financial management and effective use of EC resources:

KPI 02 - Accuracy of initial annual financial forecast for contracts

The Accuracy of initial annual financial forecast for contracts is slightly above the target

(111.13% against target value between 90% and 110%) compared to 108.38% in 2017

that was within the benchmark. This KPI deviation is mainly a result from changes

concerning two big contracts related to Turkey: Contract (Multi-annual Programme for

Transport) for EUR 13.4 million was forecasted for 2017, but was introduced in the

system only in 2018 and a second contract (FRIT Promoting Integration of Syrian Kids

into the Turkish Education System) for EUR 400 million was signed only in 2018. The

forecast for the FRIT II extension was prepared in February 2018, at a time when the

division of funding between EC and the EU MS was still to be negotiated.

KPI 04 - RAL Absorption Period

The RAL absorption period is slightly above the target (4.35 years against target value of

less than 4 years). This is in line with the result in 2017 (4.24 years). 16 Delegations did

not meet the benchmark for this KPI. This is the result of a combination of high financial

amounts committed during the year and a low level of payment during the reporting

year.

The ENI lower payment level is largely explained by the underperformance of budget

support measures, where general eligibility criteria or result indicators triggering

payments have not been fulfilled by the beneficiary countries.

For IPA, the payments were influenced by the delays of implementation of activities

under indirect management through the Turkish Authorities, a situation which has not

been facilitated by the latest political developments in the country.

Given the fact that budget support and indirect management through beneficiary

countries contribute the lion's share of the payment delays, DG NEAR will review the best

use of these instruments in the next programming rounds and under the new MFF.

KPI 10 - Reduction of Old RAL

The overall result of 22.61% does not meet the target of at least 25 %, but is a real

improvement compared to the result in 2017 (18.43% in 2017). Three Delegations did

not meet the benchmark. Contracts with an old RAL relate mainly to pro-forma

registration (46%) and national funds (19%).

The overall result is mainly due to the following factors:

The increase in the number of contracts which could not be closed for various

outstanding contractual and legal issues.

For some decisions, contracts still have to be concluded. For other decisions,

funds still need to be de-committed after closure. This has not happened due

either to audit and evaluations still to be undertaken, or due to late closure of

contracts.

Pending disbursements for Budget Support (BS) operations which have been

blocked since 2013 in Egypt and the need in recent years to explore alternative

options to Budget Support, leading to a significant increase in EU blending

operations with Egypt. Blending operations, usually concern major and highly

complex investment projects with an average implementation period, significantly

longer than the average duration of EU programmes implemented under other

modalities.

As a mitigating measure, close follow-up on closure of contracts and the launch of data

quality campaigns will further improve the sound financial management and effective use

of EC resources for the 3 KPIs which did not meet the benchmark in 2018.


B – Effectiveness of internal control systems (ICS):

All KPIs related to effectiveness of internal control systems (ICS) reached the aggregated

2018 targets at DG level.

C – Effectiveness of audit system:

KPI25 - Ineligible amounts identified by audits as a % of the audited amount

At DG NEAR level, 1.26% or EUR 10.75 million of audited expenditure was found to be

ineligible which is in line with 2017 results (1.37%). Overall, this reflects that contracts

are in general well monitored by the HQs/EU Delegations (EUD) and ineligible costs are

detected at earlier stages. This is also translated by the level of residual error after all

controls are performed (0.51%).

Performance of newly introduced KPI

One new KPI was introduced in DG NEAR for the 2018 EAMR exercise. The

target/benchmark value has been met for this newly introduced KPI:

KPI5 – Time to grant

KPI 5 – Average Time to Grant is a new KPI compared to 2017. This KPI was previously

only an Indicator43. The average time taken to sign grant agreements or notify grant

decisions in accordance with Art 194.2 FR is 72 days (benchmark: 90 days), and DG

NEAR complies with signing on time in 79% of contracts. The average time taken to

inform applicants of the outcome of the evaluation of their application is 138 days and

the DG complies by informing on time in 62% of the cases. There were some delays in

Kosovo (an average of 224 to inform), Serbia (222 days) and Lebanon (206 days). In

addition to workload pressures delaying some selection process, it is important to note

the consequences of the measures put in place to mitigate the risks on grants in direct

management reported as a reservation. In order to reduce the error rate in grants during

implementation, the selection process is performed carefully. It is necessary that

beneficiaries understand well the contractual conditions, leading to delays in the contract

preparation, including the review of budgets. Delays are also the consequence of search

for sustainability and buy-in of the proposed actions.

The average time to pay (Art 116.1 FR) is 37.2 days. The percentage of payments made

within the contractual deadline is 89%, close to the EC average of 90% and above the

85% target.

Results at Delegations level

Out of a total of 22 DG NEAR Delegations signing the EAMR, 21 met the target of

minimum of 60% of green KPIs. Compared to 2017, an improvement is noticed in the

number of Delegations having 80% and more green KPIs (17 Delegations in 2018

compared to 15 Delegations in 2017). The Syria Delegation did not meet the target. This

is due to the very difficult political situation in the country. However, the performance of

the Delegation improved compared to 2017 with its benchmark increasing from 40% to

56%.

A detailed analysis of KPIs is enclosed in Annex 11.

43 Unlike KPIs, indicators have no formal target/Benchmark


% of green KPIs

2016 2017 2018

Number of Delegations

% Number of

Delegations %

Number of Delegations

%

Total Delegations

22 22

22

80% and more

6 27%▲ 15 68%▲ 17 77%▲

60% and more

21 95%▲ 21 95%= 21 95%=

Less than 50%

1 05%▲ 1 05%= 0 00%▲

Results at Delegations level – detailed results

NEAR Delegations2018 EAMR 2017 EAMR

Sound Financial Management and Efficient Use of EC Resources

KPI 1 Accuracy of initial annual f inancial forecast for payments Betw een 90% and 110% 87,66% 94.57%

KPI 2 Accuracy of initial annual f inancial forecast for contracts Betw een 90% and 110% 119,51% 94.96%

KPI 3 Accuracy of initial annual f inancial forecast for decisions Betw een 90% and 110% N/A N/A

KPI 4 RAL Absorption Period Less than 4 4,34 3.99

KPI 5 Time to Grant No more than 90 days 71,46

KPI 6 % of Projects w ith a red traff ic light for Implementation Progress No more than 10% 3,71% 3.70%

KPI 7 % of Projects w ith a red traff ic light for Achieving Results No more than 10% 4,03% 4.32%

KPI 8 Reduction of Old Pre-financing At least 25% 46,75% 48.83%

KPI 9 Expired Contracts as a % of the contract portfolio No more than 15% 12,25% 15.27%

KPI 10 Reduction of Old RAL At least 25% 29,10% 29.13%

KPI 11 % of payments paid w ithin the contractual deadline At least 85 % 91,17% 89.35%

KPI 12 % invoices registered w ithin 7 days of the Commission reception date At least 80% 91,85% 90.72%

KPI 13 Use of DEVCO/NEAR staff and respect of the f lexibility arrangements 100% 100,00% 100.00%

Efficiency of Internal Controls

KPI 14 ICF - Control Environment At least 80% 92,47% N/A

KPI 15 ICF - Risk assessment At least 80% 91,98% N/A

KPI 16 ICF - Control Activities At least 80% 88,99% N/A

KPI 17 ICF - Information and Communication At least 80% 94,11% N/A

KPI 18 ICF - Monitoring Activities At least 80% 93,49% N/A

KPI 19 % of projects visited by Commission staff and/or the HoD, by project value At least 80% 90,09% 87.12%

KPI 20 % contracting of project evaluations in the Annual Evaluation Plan (AEP) At least 75% 77,84% 80.89%

KPI 21 Undue payments prevented by ex-ante controls as a % of the claimed amount At least 2% 6,74% 7.58%

Efficiency of Audit Systems

KPI 22 % contracted of the Annual Audit Plan: Year N At least 60% 74,72% 75.81%

KPI 23 % implementation of the Annual Audit Plan: Year N-1 At lease 40 % 67,35% 68.01%

KPI 24 % implementation of the Annual Audit Plan: Year N-2 At least 60 % 84,93% 96.62%

KPI 25 Ineligible amounts identif ied by audits as a % of the audited amount At least 2% 1,27% 1.30%




3. Economy = the cost of controls

The cost of controls in DG NEAR has been estimated at EUR 88 million for 2018 (EUR

89 million in 2017). The estimation is made assessing the spending on human resources

related to internal control, as well as on evaluation and audit.

Human resource costs have been estimated at EUR 77 million (EUR 74 million in 2017)

and include direct, indirect and overhead costs. The calculation is based on the number

of officials and contract agents in headquarters and officials, contract agents and local

agents in delegations, multiplied by the average costs provided by DG BUDG, using

allocation keys for each unit. The key is determined by the time spent by each unit on

control activities, where control is defined as per article 2 of the Financial Regulation:

“control means any measure taken to provide reasonable assurance regarding the

effectiveness, efficiency and economy of operations, the reliability of reporting,

the safeguarding of assets and information, the prevention and detection and

correction of fraud and irregularities and their follow-up, and the adequate

management of the risks relating to the legality and regularity of the underlying

transactions, taking into account the multiannual character of programmes as well

as the nature of the payments concerned. Controls may involve various checks, as

well as the implementation of any policies and procedures to achieve the

objectives described in the first sentence".

The cost of controls calculation includes only the costs of the Commission and not of the

IMBC authorities or IMEE partners.

Evaluation costs have been estimated at EUR 6.3 million (EUR 7.8 million in 2017) based

on the spending related to evaluation and monitoring.

Audit costs have been estimated at EUR 5.1 million (EUR 7 million in 2017) based on the

spending related to audit services.

The cost of controls as a proportion of the value of the related funds managed in 2018 is

2,8%, in line with that of the previous year (2.9%) and below the target of 5% which has

been set in the management plan. On this basis the cost of controls is considered to be

sound.

Also, the absolute amount of cost of controls has to be read in the light of the benefits of

controls (sound financial management as confirmed by the low Residual Error Rate below

2%) and the quantitative financial benefits of controls, amounting to EUR 148 million44.

Staff cost of controls is split by management mode, using a weighting key: 80 (total

payments)/20 (number of contracts). Other costs (audits, evaluation, monitoring) are

split according to the population of contracts controlled.

44 This is the sum of ineligible expenditure detected by ex-ante controls: EUR 142 million) + (Recovery orders of ineligible expenditure EUR 6 million)

Cost of control in 2018 by RCS (million) Cost of control % Expenditure

RCS 1 Grants in Direct Management 22,1 3,07%

RCS 2 Procurement in Direct Management 17,2 5,98%

RCS 3 Budget Support 8,6 2,05%

RCS 4 Indirect Management with Beneficiary countries 11,6 2,29%

RCS 5 Indirect Management with Entrusted Entities 20,4 1,72%

NO RCS Other 8,4 2,70%

Total 88,3 2,78%


The ex-ante controls represent 90% of the cost of control. The ex-post represent 10%.

For more details, see Annex 10. point 2.

The highest cost of control in relation to total expenditure incurred for procurements in

direct management, which need significant ex-ante checks and audits.

Cost in indirect management with entrusted entities excludes the management fees

allocated to these entities (up to max 7%45).

The RER study has included the calculation of an error rate by RCS since 2017 in order to

detect any spending area which should require additional controls in the future.

DG NEAR concludes that the assessment of the cost-effectiveness of controls in 2018 is a

'Positive conclusion without high costs in particular segments'.

4. Conclusion on the cost-effectiveness of controls

Based on the most relevant key indicators and control results, DG NEAR has assessed the

effectiveness, efficiency and economy of the control system and reached a positive

conclusion on the cost-effectiveness of controls.

In terms of effectiveness, based on the results of the controls, two reservations are

issued: a quantified reservation for high-risk spending area: grants in direct management

(RCS 1; RER 2.26%), and a non-quantifiable reservation following the difficulties in

monitoring adequately all projects in Libya and Syria. For all other areas, the Authorising

Officer by Delegation has reasonable assurance that resources have been used in

accordance with the principles of sound financial management, and that the control

procedures put in place give the necessary guarantees concerning the legality and

regularity of the underlying transactions.

In terms of efficiency, the time to-… indicators and the KPIs show continuity and stability

compared to 2017. 21 KPIs are in line with the benchmarks. Improvements are still

necessary for KPI 2(accuracy of financial forecasts for contracts), KPI 4 (RAL absorption),

KPI 10 (reduction of old RAL) and KPI 25 (Ineligible amounts identified by audits). All DG

NEAR Delegations continued to meet the target of minimum 60% of green KPIs, with the

exception of Delegation to Syria.

In terms of economy, the control strategy (which has been stable for the past two years)

has a cost of controls (2,8%) which is far below the target (5%) and stable over time.

The control strategy is continuously reassessed though KPIs, RER and other assessments

in order to concentrate the controls on the most risky transactions while keeping a

balance between the financial/reputational impact of errors and the cost of controls. In

this respect, the RER methodology for 2019 will include more controls on grants under

direct management.

45 The entrusted entities’ cost of control has been estimated at maximum 62 million based on the management

fees foreseen in the agreements. These management fees include however other costs than control costs in the strict sense.


2.1.2 Audit observations and recommendations

This section reports and assesses the observations, opinions and conclusions reported by

auditors in their reports as well as the limited conclusion of the Internal Auditor on the

state of internal control, which could have a material impact on the achievement of the

internal control objectives, and therefore on assurance, together with any management

measures taken in response to the audit recommendations.

European Court of Auditors

DG NEAR has ensured during 2018 the coordination, quality control and follow-up on

implementation of the recommendations of the ECA, IAS, EP and Council.

DAS 2017 discharge

The DAS 2017 exercise has followed a new methodology compared to previous years and

was completed in 2018. Under the new methodology, no error rate was calculated for the

‘Global Europe’ chapter, as the number of the transactions subject to audit was not

statistically representative.

The Court of Auditors (ECA) has put more reliance on the RER study commissioned by

DG NEAR and has concluded again this year that the study is broadly fit for purpose.

The ECA published its report on 4 October 2018 and the Hearing of the Commissioner on

18 October, in front of the European Parliament's Committee on Budgetary Control (EP

CONT), was satisfactory.

In its 2017 annual report, the ECA indicated that there was some room for improving the

RER study and issued 3 recommendations: 1) disclose the limitation of the study; 2)

provide more precise guidelines to check second level procurement; 3) put more weight

on direct management grants and less on budget support transactions. DG NEAR has

now fully taken on board the ECA recommendations. In this respect, the following actions

have been taken:

The AAR now includes a section on the limitation of the RER study (see section

2.1);

The RER methodology has been revised to include additional guidelines on

checking second-level procurement;

The RER contractor will perform, as from the 2019 RER exercise, additional testing

on a statistically significant sample of transactions relating to grant contracts.

There is no shift in stratification, only more controls on direct grants, hence RER

results remain representative for the whole DG.

No DG NEAR findings detected by the Court in 2017 affected the overall Commission

accounts published in 2018.

Performance Audits

The detailed analysis of the ECA performance audits published in 2018 is included in

Annex 10.

Follow-up on ECA/EP/Council recommendations

Currently DG NEAR has 18 open ECA/EP/Council recommendations as lead DG and 16 as

associated. Most of these are the result of the performance audits on the EU pre-

accession assistance to Turkey and FRiT for which follow up actions are currently

ongoing.

In 2018, DG NEAR closed 36 ECA/EP/Council recommendations for which it was in the

lead and 12 ECA/EP/Council recommendations for which it was an associated DG.


Internal Audit Service

The IAS limited conclusion on the state of internal control in DG NEAR for 2018 is that

the internal control systems audited are effective, except for 6 very important

recommendations issued at the end of December 2018 and early January 2019. There

are no critical recommendations and six very important recommendations from IAS

audits, all communicated to DG NEAR in early 2019.

A total of four recommendations were issued in relation to the audit on the

Neighbourhood Investment Facility and the Western Balkans Investment Framework

(published in December 2018); one in relation to the audit on the EC-EEAS Coordination

(published in January 2019) and one in relation to the audit on grant and procurement

award process under ENI direct management (published in January 2019). For the audits

on the Neighbourhood Investment Facility and the Western Balkans Investment

Framework and on grant and procurement award process under ENI direct management,

an action plan has already been approved by DG NEAR and accepted by the IAS.

Audit on the Neighbourhood Investment Facility (NIF) and

the Western Balkans Investment Framework (WBIF)

The IAS assessed the adequacy and effectiveness of the management and coordination

activities of DG NEAR for the implementation of the NIF and the WBIF.

The IAS acknowledged that implementation of the investment facilities by DG NEAR is a

challenging task due to the complexity of the implementation modalities, the political

environment in the beneficiary countries and the volume of budget involved. In addition,

the budget allocated to the blending instruments has grown significantly, which also

brings increased expectations in terms of results, efficiency and transparency.

The overall design of both investment facilities by DG NEAR is adequate.

As a result of this audit, the IAS has issued eight recommendations, of which two very

important related to financial management and two very important related to the

monitoring and reporting at facility level.

Following these recommendations, DG NEAR will reinforce its financial monitoring and

reporting, update guidelines and rules of procedures of the two investment facilities.

Audit on the EC-EEAS Coordination

The IAS assessed the effectiveness and efficiency of coordination activities between the

Commission services (specifically, DG DEVCO, DG NEAR and FPI) and the EEAS in areas

relating to management of the EUDs as well as programming and implementing external

instruments.

The IAS concluded that the coordination activities between the Commission (DG DEVCO,

DG NEAR and FPI) and the EEAS, both at headquarters and EUD level, on the

management of the EUDs, and in programming and implementing external instruments

are overall effective and efficient.

As a result of this audit, the IAS has issued four recommendations (one very important

and three important). DG NEAR is associated with DG DEVCO and EEAS to the

implementation of the very important recommendation related to the country level

coordination and improving aid implementation dashboards.

Audit on grant and procurement award process under ENI

direct management

The IAS assessed whether DG NEAR HQ and the EUDs manage grant and procurement

award procedures under the ENPI/ENI in direct management effectively, efficiently and in


accordance with the applicable procedures and guidelines to ensure legality and

regularity of the underlying transactions.

The IAS concluded that the procedures and guidance DG NEAR has put in place for

awarding grants and procurement contracts are in general clear and adequate and ex

ante controls for processing financial transactions work well overall.

As a result of this audit, the IAS has issued three recommendations (one very important

and two important). Concerning the very important recommendation, DG NEAR will

update the Process Manual to improve the effectiveness of its supervisory missions to

Delegations.

Follow-up on IAS recommendations

DG NEAR closed 5 recommendations in 2018. There are currently 14 open

recommendations: all recent, none overdue, none critical and 6 very important.

Conclusion

DG NEAR has considerably reduced the number of open ECA/EP/Council

recommendations during 2018 and taken mitigating measures to deal with concerns

raised by the Court in the 2017 discharge, in particular regarding the RER methodology.

In addition, DG NEAR has implemented all remaining very important IAS

recommendations. The IAS considers the internal control system of the DG as effective.


2.1.3 Assessment of the effectiveness of the internal control

systems

The Commission has adopted an Internal Control Framework based on international good

practice, aimed at ensuring the achievement of policy and operational objectives. In

addition, as regards financial management, compliance with the internal control

framework is a compulsory requirement. In 2018 DG NEAR has assessed for the first

time the effectiveness of its internal control systems on the basis of the new framework.

DG NEAR has put in place the organisational structure and the internal control systems

suited to the achievement of the policy and internal control objectives, in accordance

with the Internal Control Principles and having due regard to the risks associated with the

environment in which it operates.

Management assesses on a continuous basis the effectiveness of the internal control

systems, in order to determine whether they work as intended and ensuring that any

control weaknesses in the system are detected, analysed and considered for

improvement.

In addition, management performs specific assessments to ascertain whether the internal

control systems and their components are present and functioning. The purpose of these

management assessments is to provide reasonable assurance that the internal control

principles adopted by the Commission are implemented and functioning in the DG, that

the assessment findings are evaluated and that any deficiencies are communicated and

corrected in a timely manner, with serious matters reported as appropriate.

Assessment of the internal control systems

Management has assessed the effectiveness of the internal control system following the

methodology established in the "Implementation Guide of the Internal Control

Framework of the Commission". All internal control principles (ICPs) are implemented

and functioning, except for ICP 10, 12, 15 and 16.

The assessment of effectiveness of the internal control systems has been carried out

based on several sources:

the review at internal control principle and component level outlined in

the register of internal control deficiencies:

The review included the analysis of the internal control principles based on:

the internal control monitoring criteria (ICMC); 42 ICMC were

established in order to monitor the effectiveness of the internal control

system of the DG. These were reviewed either by desk review or by a

questionnaire. No major control deficiency was identified based on the

ICMC.

ECA/IAS Audits: the IAS and ECA audits resulted in key findings.

However, all the recommendations issued by the ECA have been addressed

by DG NEAR and all very important IAS recommendations have led to

action plans addressing the underlying issues. There is no residual critical

risk on open recommendations that can affect the declaration of assurance.

the RER study: the study on the residual error rate identified a major

control deficiency in ICP 10 “The Commission selects and develops control

activities that contribute to the mitigation of risks to the achievement of

objectives to acceptable levels”: in 2018 the residual error rate (RER), i.e.

the level of errors which remain undetected and uncorrected by the end of

the implementation cycle, for direct grants was above 2% (2.26%). The

control objective to ensure that the RER is below 2% at the end of the

management cycle was hence not met for the grants section of the DG’s


expenditure. This major internal control deficiency leads to a reservation

detailed in section 2.1.5.

the critical risks: DG NEAR conducted a yearly risk assessment exercise. Some

critical and very important risks were identified affecting mainly ICP 12 (“The

Commission deploys control activities through corporate policies that establish

what is expected and in procedures that put policies into action”), ICP 15 (“The

Commission communicates with external parties about matters affecting the

functioning of internal control”) and ICP 16 (“The Commission selects, develops,

and performs ongoing and/or separate assessments to ascertain whether the

components of internal control are present and functioning”). Concerning the

latter, due to developments on the ground in Libya and security/political concerns

in Syria, the legality and regularity of some projects is of concern. The risk is

accepted because no mitigating measure will wholly offset the risk of operating in

an active conflict zone without a presence on the ground. The risk is therefore

outside the direct control of the Commission. Therefore, the declaration of

assurance provided by the AOD in this AAR report is qualified with a reservation

detailed in section 2.1.5. All other risks are closely monitored and do not affect

the statement of assurance.

Self-assessment: At headquarters level the self-assessment of the effectiveness

of the internal control systems has been carried out via a survey sent to

management and staff using the iCat e-tool developed by DG BUDG. On average,

questions achieved a positive response of 84% for headquarters staff. At

delegations level, the self- assessment has been carried out via a survey sent to

all delegations by the EEAS, whose results fed into 5 internal control KPIs, which

are part of the DG NEAR internal control monitoring criteria. On average,

questions achieved a positive response of 92% for delegation staff.

Exceptions, non-compliance events and confirmations of instruction:

According to NEAR procedures46, all requests for exceptions must be encoded in

the local system CRIS and circulated for approval via ARES before the related

event takes place (ex-ante). Non-compliance events are registered in CRIS after

the related event takes place (ex-post).

In 2018 there were 29 non-compliance events and 45 exceptions (74 in total),

split as follows:

IPA ENI Total

Exceptions 10 35 45

Non compliance events 13 16 29

Total 23 45 74

This is a decrease compared to 105 non-compliance events and exceptions

registered during 2017. There is no particular systemic pattern to be reported.

No major control deficiency has to be reported based on the register of exceptions

and non-compliance events.

There has been no confirmation of instruction to be reported for the year 2018.

In conclusion, DG NEAR has assessed its internal control system during the reporting

year and has concluded that it is effective except regarding internal control principles

10, 12, 15 and 16, which need major improvements. In particular, internal control

deficiencies in ICP 10 and 16 lead to reservations in the declaration of assurance as

46NEAR procedure on prior approval and deviations


detailed in section 2.1.4. For all other aspects, the management has reasonable

assurance that, overall, suitable controls are in place and working as intended; other

risks are being appropriately monitored and mitigated; and necessary improvements and

reinforcements are being implemented.

2.1.4 Conclusions on the impact as regards assurance

This section reviews the assessment of the elements reported above (in Sections 2.1.1,

2.1.2 and 2.1.3), the sub-conclusions above, and draws the overall conclusion supporting

the declaration of assurance and whether it should be qualified with reservations.

The information reported in Section 2.1 stems from the results of management and

auditors review. These reports result from a systematic analysis of the evidence

available. This approach provides sufficient guarantees as to the completeness and

reliability of the information reported and results in a comprehensive coverage of the

budget delegated to the Director-General of DG NEAR.

DG NEAR split the whole population of transactions in 3 coherent segments. The Residual

Error Rate for all 3 segments is far below 2%: ENI (0.41%), IPA excl IMBC (0.91%) and

IPA IMBC (0.05%).

The control instruments in place cover the entire budget expenditure managed by DG

NEAR. DG NEAR has described 5 major control environments (Relevant Control Systems -

RCS) covering 90% of expenditure. The EU Trust Funds operate in the general system of

internal control defined by the Commission. The rules and procedures developed by DG

NEAR for the management and implementation of its operations are equally applicable to

the EUTFs.

Each RCS has been assessed at low or moderate risk, with no indication of particular risk

except for Direct Management Grants, which is considered a high risk, and subject to a

reservation (RER 2.26%). To address this persistently high error (PHE) in a cost-effective

way, the action plan includes the review of the terms of reference for verifications,

further awareness raising on frequently occurring errors in financial and document

management, promoting a wider use of simplified cost options (lump sums, unit costs

and/or flat-rate financing), including for staff costs where relevant, and of the simplified

allocation method for office costs. The RER 2019 will also include more controls on grant

under direct management.

The failure to meet most KPIs target in Syria and the serious difficulties in monitoring

adequately all projects in this country is the basis for a non-quantified reservation. This

conclusion also applies to contracts managed in Libya. There is no EAMR to further

support this conclusion on Libya because the Libyan portfolio is included in the HQ

portfolio, however, the concerns are of the same nature as those in Syria.

The accountability and reporting chain in DG NEAR is organised as a pyramid through

which the statements of assurance signed by each Head of Delegation set the basis for

the assurance provided by the other sub-delegated authorising officers at the upper

levels of the pyramid. All Authorising Officers by sub-delegation substantiate their

statements of assurance in their annual reports taking into account the results achieved

for 24 KPIs regrouped in three categories: sound financial management, efficiency of the

internal control systems and efficiency of the audit system. The KPI results are

automatically assessed via the benchmarks through a “traffic lights” system.

At global level, performance shows continuity and stability compared to 2017. 21 KPIs

are in line with the benchmarks. Improvements are still necessary for KPI 2(accuracy of

financial forecasts for contracts), KPI 4 (RAL absorption), KPI 10 (reduction of old RAL)

and KPI 25 (Ineligible amounts identified by audits). All DG NEAR Delegations continued

to meet the target of minimum 60% of green KPIs, with the exception of Delegation to

Syria.


The cost of control (2.7%) is sound, in line with previous years and far below the set

benchmark of 5%.

The Internal Control Framework is effective except regarding internal control principles

10, 12, 15 and 16 which need major improvements, however mitigating actions have

been put in place during the risk management exercise and where necessary reservations

are made in the context of this report.

Based on the low RER result for the DG, the absence of significant weakness detected in

the RCS (except for the two areas under reservations), the Authorising Officer by

Delegation has reasonable assurance that resources have been used in accordance with

the principles of sound financial management, and that the control procedures put in

place give the necessary guarantees concerning the legality and regularity of the

underlying transactions.

Therefore, under the prevailing risk environment and from a managerial point of view,

DG NEAR's AOD can sign the Declaration - even with reservations concerning the

monitoring difficulties of projects in Libya and Syria and the expenditure on direct

management grants.

Continuous efforts have been made throughout 2018 to address past internal (IAS) and

external (ECA) audit recommendations. During 2017 Discharge, the ECA made some

recommendations concerning the disclosure of the RER study limitations; and

improvement of the RER study through providing more precise guidelines to check

second level procurement and putting more weight on direct management grants and

less on budget support transactions. DG NEAR has now fully taken into consideration

these recommendations. Efforts to implement the remaining open IAS recommendations,

will be continued in 2019.

Other Internal Control Objectives are also met with, for example, an effective Anti Fraud

Strategy and continuous scrutiny of requirements concerning the reports on the financial

instruments.

Overall Conclusion

In conclusion, management has reasonable assurance that, overall, suitable controls are

in place and working as intended; risks are being appropriately monitored and mitigated;

and necessary improvements and reinforcements are being implemented. The Director

General, in his capacity as Authorising Officer by Delegation has signed the Declaration of

Assurance albeit qualified by a reservation concerning difficulties in monitoring

adequately all projects in Libya and in Syria (Non-quantified reservation) and a

reservation regarding the expenditure in direct management grants.


2.1.5 Declaration of Assurance and reservations

I, the undersigned,

Director-General of Directorate-General for Neighbourhood and Enlargement

Negotiations (DG NEAR)

In my capacity as authorising officer by delegation

Declare that the information contained in this report gives a true and fair view47.

State that I have reasonable assurance that the resources assigned to the activities

described in this report have been used for their intended purpose and in accordance

with the principles of sound financial management, and that the control procedures put

in place give the necessary guarantees concerning the legality and regularity of the

underlying transactions.

This reasonable assurance is based on my own judgement and on the information at my

disposal, such as the results of the self-assessment, ex-post controls, the work of the

Internal Audit Service and the lessons learnt from the reports of the Court of Auditors

for years prior to the year of this declaration.

Confirm that I am not aware of anything not reported here which could harm the

interests of the institution.

However, the following reservation should be noted: reservations concerning the

difficulties in monitoring adequately all projects in Libya and Syria (non-quantified

reservation) and reservation concerning the errors in expenditure in Direct Management

Grants.

Brussels, 29 March 2019

"signed"

Christian Danielsson

47 True and fair in this context means a reliable, complete and correct view on the state of affairs in the

DG.


Reservation 1

DG NEAR

Title of the reservation, including its

scope

Difficulties in monitoring adequately all projects in Libya and in Syria (Non-quantified Reservation)

Domain Direct Management Grants and Procurements, Indirect Management with Entrusted Entities.

Programme in which the

reservation made and total

(annual) amount of this

programme

All programmes implemented in Libya (EUR 28.12 million) and Syria (EUR 348.62 million)

Reason for the reservation

Providing financial assistance through ENI in Libya is of high political importance in the context of the establishment of relations with this strategic country (security and migration). Developments on the ground are however making it difficult to adequately monitor all projects. In some cases, it is impossible for the auditor to have access to the supporting documents.

Similarly, for security reasons there are difficulties in monitoring projects inside Syria. Therefore, assurance building is not possible in this case.

Materiality criterion/criteria

The legality and regularity-related criterion of 2%

Quantification

of the impact (= actual

exposure")

There is no quantification of the impact. Today there is no indication of material infringement of the legality and regularity in these programmes; however DG NEAR is not in a position to perform all the checks it needs to do due to the instability in the countries and the lack of access to supporting

documents.

Impact on the

assurance

Report does not give a true and fair view; Resources not used for the intended purpose;

Principles of sound financial management not respected; Legality and regularity of financial transactions at stake;

Responsibility for the

weakness

Instability in the concerned countries


corrective action

DG NEAR is launching audits on a regular basis. However In order to mitigate the lack of field monitoring in these conflict zones, contracts have been signed with implementing partners that train independent experts to monitor projects in the field and provide the necessary feedback to

the Delegations on a regular basis, in particular:

Two contracts for "third-party monitoring" of projects inside Syria (for regime-controlled and opposition areas respectively) started in January 2018;

One contract for monitoring the EU projects in Libya started in August 2018.

The first results are encouraging and gave a good assurance of the implementation of the contracts. Extensive audits and other controls will be performed on the EU funded programmes as soon as the situation in the countries allows.


Reservation 2

DG NEAR

Title of the reservation, including its

scope

Error rate above 2% in Direct Management Grants (Quantified Reservation)

Domain Direct Management Grants

Programme in which the

reservation made and total

(annual) amount of this

programme

All ABB activities in which the domain is used. The corresponding amount of payment made is EUR 721.10 million.

Reason for the reservation

Significant occurrence or errors in the underlying transactions (legality and regularity).

Materiality criterion/criteria

The materiality criterion is the RER, i.e. the level of errors which remain undetected and uncorrected by the end of the management cycle. The control objective is to ensure that the RER is below 2% at the end of the management

cycle. As long as the RER is not (yet) below 2% at the end of the reporting year a reservation should be made.

Quantification of the impact

(= actual exposure")

The estimated amount at risk for the EU is calculated by multiplying the error rate for direct management grants (2.26%) by the relevant expenditure of grants (EUR 360.35 million) in 2018. The actual exposure for 2018 is estimated at EUR 8.14 million.

Impact on the assurance

Legality and regularity of the affected transactions. The assurance is affected within the scope of the quantified budgetary impact.


weakness

Units/Delegations in charge of the respective contracts for which a residual error was found.


corrective action

The action plan includes the following elements: In the context of the new terms of reference for verifications, challenge

the exhaustive list of items tested by the auditors; Further awareness raising on frequently occurring errors in financial

and document management for the implementation of grant contracts. Promoting a wider use of simplified cost options (lump sums, unit costs

and/or flat-rate financing), including for staff costs where relevant, and

of the simplified allocation method for office costs.


2.2 Other organisational management dimensions

This chapter presents the examples of DG NEAR's initiatives in 2018 to increase its

economy and efficiency in achieving its general objectives. In addition, a short summary

of the main achievements in the area of human resource management, better regulation,

information management and external communication are explained in comparison with

the objectives set in the Management Plan 2018. The narrative supports the data

presented in Annex 2.

2.2.1 Examples of Economy and Efficiency

As set out in the Management Plan 2018 DG NEAR has implemented a number of

initiatives focusing on achieving general DG objectives in a more economic and efficient

manner.

Examples of Economy and Efficiency as per Management Plan 2018:

A comprehensive new communication approach on assistance for the Eastern

Partnership

A comprehensive new communication approach for our assistance programmes within

the framework of the Eastern Partnership was developed in 2018. This included concrete

steps towards more coherent messaging, branding and outreach in line with the regional

communication strategy for the Eastern Partnership endorsed by Member States and 6

Partner countries. Key activities included large-scale regional campaigns based on the

impact achieved in our priority areas of cooperation, as well as nation-wide campaigns,

for example in Georgia (EUforGeorgia). In 2018 a more strategic use of communication

funds in all 6 partner countries was also put in place, including the pooling of different

communication budgets from sector programmes, and the allocation of communication

funds in the latest round of multi-annual programming for Armenia, Georgia, Moldova

and the Regional Multi-Annual Indicative Programme for the period 2017-2018.

Blending, operational co-ordination and policy dialogue with Financial

Institutions in the Southern Neighbourhood

Consistent with the line pursued by the EU, aiming at strengthening joint messages and

coordinated efforts, a High Level meeting with the IFIs, the national authorities and

stakeholders, led by Commissioner Hahn, took place in Tunis on 12 July. Coordinated

efforts as regards Private Sector Development were undertaken in the Coordination

Platform for the EU Initiative for Financial Inclusion.

The European External Investment Plan (EIP) was launched in Neighbourhood South

countries (Lebanon, Jordan, Morocco and Palestine) between February and July 2018 to

present the new guarantee mechanism and the thematic priorities of the EIP to

representatives of public, private sector as well as to local financing institutions.

In June and November 2018, the EFSD Guarantee Board gave a positive opinion on 28

guarantee proposals corresponding to a total guarantee coverage of EUR 1.54 billion. The

guarantee coverage for South Neighbourhood amounts to indicatively EUR 286 million.

The Luxembourg Group meeting was organised in January in Brussels and in December

in London. The MENA Days with the World Bank and the EIB was organised in March.


OurNEAR

The OurNEAR process was set up with the objective to facilitate the development of an

open and participatory organisation culture for DG NEAR to create impact on the policy

priorities of the DG and to create an enabling environment. The focus of 2018 was to

further strengthen the capacity that was created already in 2017 and built further on the

issues that were identified by staff in the NEAR Staff Seminar of June 2017. In 2018, the

capacity in the DG to host participatory ways of working was further strengthened as

various large events were hosted by trained colleagues. This included a specific NEAR

Staff Seminar (over 300 participants) and management day (130 participants) involving

Delegations as part of the DEVCO/NEAR Cooperation days, various Directorate Team

Buildings, a staff forum to prepare for the future Commission, discussions on the Centres

of Thematic Expertise and an “all NEAR” Staff Seminar (over 400 participants). The NEAR

Staff Seminar of September 2018 involved around 70 persons across the DG who actively

secured the timely preparation of the seminar. The Seminar focused on taking stock

of ‘how we see ourselves now, after the 2 years of change process towards more open

and participatory ways of working’ and included policy discussions but also “story” telling

of 26 stories of engagement that inspired staff to improve the way of working in the

future. In 2018, the work of the OurNEAR was also further extended to EU Delegations,

including a team building of the EU Delegation Egypt.

Migration to OPSYS/IPA-APP IT application

To achieve its core business in the external assistance domain, DG NEAR is currently

relying on a large portfolio of IT applications, which are either developed by DG DEVCO

or in-house. Against the background of the Commission's IT rationalisation, 2018 marked

the transition to a new corporate application (Opsys) developed by DG DIGIT with the

help of DG RTD and DG DEVCO. In particular, the result management features previously

available in DG NEAR’s local MIS application have been made available in the corporate

Opsys application. This resulted in savings for IT development, maintenance and

support.

The development of the IPA-App in 2018 allowed for a fast modernisation of the IT tool

used for Indirect Management with Beneficiary Countries (IMBC) since 2004 (I-Perseus).

Thanks to the re-use of components developed for MIS, this modernisation could be done

at a lower cost in just 9 months as opposed to having to wait until 2021 after the

finalisation of Opsys. Overall, this technical migration will result in efficiency gains thanks

to the harmonisation of the user interface, which is now based on a Commission

standard, and to the gradual reduction in the number of applications as such. A first

iteration of the tool will be rolled out in 2019.

2.2.2 Human resource management

In line with the objectives outlined in the Management Plan 2018 DG NEAR's main

achievements in the area of human resource management are as follows:

• Increasing gender balance in middle management representation in DG

NEAR

By the end of 2018 the current female representation rate in middle management was

38.09% in DG NEAR. In July 2017 the College adopted a renewed approach to its

commitment to reach at least 40% female managers by the end of 2019. To this effect,

the College repealed the indicative sub-targets per Directorate-General for female

representation in middle management as set out in document SEC (2015) 336 and

instead adopted quantitative targets of first female appointments to be made per

Directorate-General and service at middle management level. For DG NEAR the number


of first time female appointments to middle management positions to be filled between

1 May 2017 and 30 November 2019 was set at two. This target was based on an

estimation of four middle management opportunities occurring during that period. DG

NEAR has a number of management selection procedures ongoing and in each case is

attracting applications from female non-management AD officials. Monitoring of gender

balance remains a top priority for DG NEAR HR Management in 2019. Gender balance in

senior management now stands at 30%.

• Addressing the core issues which contribute to the staff engagement index

namely to ensure that all DG NEAR staff have the tools, training and information

they need to do a good job and feel valued for the contribution they make to the

DG and to the EU project

The work of the across-DG group (Our Near) with members from each Directorate

continued in 2018 with the objective of promoting the creation of a DG NEAR common

identity – using the approach of participatory leadership. In 2018 DG NEAR held a

number of Directorate 'away days' & staff fora, using the participatory approach to

discuss staff engagement issues in both, HQ and EUDs. DG NEAR staff was invited to

participate in discussions on how to make DG NEAR a more efficient and inclusive

workplace which culminated in a DG wide away day in September 2018 involving

'storytelling' on a wide range of topics covering policy, communication, talent

management and smarter working methods. At management level, a more regular

feedback process to staff continues with regular communication and video appearances

by the Director General.

• Increasing satisfaction amongst staff with work life balance through the

promotion of appropriate working conditions

As shown by the results of the staff survey 2018, satisfaction and wellbeing have

substantially increased compared to previous years. DG NEAR will continue to promote

working conditions, which are conducive to achieving a better work life balance namely

promoting teleworking opportunities – both structural and occasional – not only in

Headquarters but also in EU delegations. In 2018 a pilot project for teleworking for staff

in the Delegations was launched.

In addition, the following developments are important to mention in the HR area:

• Corporate policy of middle management mobility

In 2018 DG NEAR had no middle managers in mandatory mobility.

• HR adjustments to political priorities

During 2018 DG NEAR received 14 additional resources to work on priority areas of

Migration, Western Balkans and External Investment Plan (EIP).

• Annual mobility

The DG NEAR annual mobility exercise in 2018 resulted in the re-assignment of 10 AD

and 3 AST staff. This included staff in HQ with more than 5 years in the current job,

volunteers in HQ and staff returning to HQ in the annual rotation exercise.

• 2018 Staff Survey

In 2018 DG NEAR was instrumental in the first ever joint staff survey for all staff –

Commission and EEAS – working in EU Delegations with the possibility to have results

per Delegation when the number of respondents is sufficiently high. This has been a key

objective of DG NEAR following the results of the 2016 staff survey.


2.2.3 Better regulation

DG NEAR does not manage regulatory acquis. Nonetheless, DG NEAR has completed a

country evaluation and two thematic evaluations in 2018. As these evaluations were

operational, they did not have to follow all the Better regulation rules.

The evaluation of EU’s cooperation with Azerbaijan over 2011-2016 allowed to identify

key lessons and inform future choices.

The evaluation of EU support for Security Sector Reform in Enlargement and

Neighbourhood countries (2010-2016) was conducted by DG NEAR to help strengthen

democratic accountability and transparency and improve policy and practice through

evidence-based learning.

The evaluation of EU support to social protection in external action (2007-2013) assessed

to what extent the EU support to social protection contributed to achieving the objectives

of EU cooperation in the area of social protection.

In addition, a Staff Working Document on Economic Governance, which is one of the

“fundamental” strategic axis of its partnership, is under preparation following the

completion of the corresponding evaluation at the end of 2017, in accordance with the

Better Regulation principles.

During 2018 several strategic evaluations have been under implementation, including the

thematic evaluation on Rule of Law, which will also result in the preparation of a Staff

Working Document. Also, four new evaluations have been launched (thematic evaluations

on civil society, local authorities and migration, and a country evaluation for Serbia).

The evaluation on Public Administration Reform could not be completed because of poor

quality of the performance of the contractor. The corresponding contract has been

terminated following an amicable settlement procedure and there will be no Staff

Working Document.

2.2.4 Information management aspects

In 2018, the focus concerning information management aspects was for DG NEAR to

increase the sharing of information between HQ and NEAR EU-Delegations, which has

become effective in Ares/NomCom for all financial files (financing agreements, decisions

and contracts). The objective was to avoid double creation of files in Ares/NomCom and

to make the information available to all entities. This represents 12.522 e-files.

Concerning the number of HAN files to be shared with other DGs, the target of 20% for

2018 has not been achieved due to the 2018 priority explained above. For the future, the

focus will shift to achieve more significant progress in this area too.

The policy of paperless office was closely followed-up in 2018. Around 51% of e-

signatories are now paperless.

An important number of financial workflows have been implemented in Ares (for

decisions, contracts and payments) and all necessary information has been updated in

the NEAR Manual of Procedures (MAP).

Data Protection

With regard to the action plan adopted by the Commission in 2018 on data protection in

the context of the implementation of the Regulation on data protection in the EU

institutions, DG NEAR has undertaken the following measures in 2018 towards complying

with the new data protection rules.


Further to the adoption of a new data protection regulation (Regulation (EC) 2018/1725)

and the launch of a roadmap by the Secretariat General (SG), DG NEAR proceeded with

the establishment of an inventory of all data processing operations within the DG. It

further assessed their compliance with the general principles of the data protection

regulation (Art. 4 of this Regulation), in particular, as regards lawfulness, transparency,

data minimisation and storage limitation. A preliminary state of play was provided to the

SG on 12 July 2018.

The analysis revealed that for DG NEAR’s core business the following issues are in focus:

(a) transfers of personal data to international organisations and beneficiary/partner

countries by liaising with the Data Protection Officer (DPO) and the other services

concerned in order to address the issue and clarify the legal basis for the transfers and

(b) web-sites for communication, visibility and reporting of EU funded projects and for

communication campaigns, which are not yet covered by specific notifications.

Contacts have been established with DG COMM on point (b) to ensure a coherent

approach at the level of the Commission.

In 2018, DG NEAR has raised awareness of both management and staff on the need to

be vigilant and integrate data protection in the performance of daily tasks: guidance on

specific data protection issues and training were provided.

2.2.5 External communication activities

Strategic Communication

In 2018 DG NEAR continued to work closely with the EEAS and EU delegations/office to

improve strategic communication on the enlargement and neighbourhood policies.

On the neighbourhood policy, DG NEAR cooperated closely with the StratCom East Task

Force in the EEAS in promoting strategic communication activities in the Neighbourhood

East region. DG NEAR also cooperated with the StratCom Task Force Arab World and

Delegations on communication about the EU and its activities in the Neighbourhood

South region.

DG NEAR worked together with the EEAS and the EU Delegations/Office to continue the

implementation of the joint Action Plan for Strategic Communication in the Western

Balkans and Turkey.

Communicating at the regional level in the neighbourhood (OPEN

Programme)

Activities implemented in 2018 within the two components of the OPEN Regional

Communication Programme in the neighbourhood region included: thematic online

campaigns, outreach events (OPEN South – campus tours in Algeria and Tunisia; OPEN

East – events with Young European Ambassadors across the Eastern Partnership region),

media outreach activities. Two important pilot projects were finalised, helping

Delegations adopt a more strategic approach to communication: an online platform

integrating all EU projects in Georgia that will facilitate the management of

communications, and a comprehensive communication audit exercise to improve

strategic communication planning in Lebanon. The results were very encouraging so

similar solutions will be rolled out across the two regions (Ukraine and Moldova in the

east; Tunisia and Morocco in the south).

Communication activities in the enlargement region


DG NEAR coordinated the programming and implementation of communication activities

of EU Delegations/Office in the enlargement region, which continued to focus on

promoting EU values and policies, as well as on better visibility of EU funds and their link

to the political priorities set out in the enlargement policy. Delegations/Office continued

to engage with business and civil society, Member States' embassies and other

implementing partners on the ground, such as international organisations, international

financing institutions and national development agencies. Social media and outreach

activities in the region continued to increase.

Communication activities implemented directly by DG NEAR/HQ

In 2018 DG NEAR organised a number of major events promoting the enlargement

policy, namely the EU-Western Balkans Media Days in Skopje (over 300 media

professionals/participants) and over 30 outreach events with prominent think-tanks on

the Strategy for the Western Balkans adopted in February. Outreach activities included

also five press trips with journalists from top EU media and nine training seminars for

project managers on how to communicate about the EU funding. October saw the launch

of the TAIEX pilot on strategic communication, which provides a platform to exchange

know-how between the national administrations in the EU Member States and the

government communicators from the Western Balkans. DG NEAR also organised jointly

with the European Parliament a 2-day conference on the situation of media in Turkey.

As part of its outreach activities in the Neighbourhood South and East regions, DG NEAR

organised seven press trips for journalists from leading EU media (to Georgia, Ukraine,

Tunis, Lebanon and Jordan). Journalists from Eastern Partnership countries were brought

to the Eastern Partnership Business Forum and Annual Conference in Vienna, while a

group of Palestinian journalists participated in a press trip to Brussels. Four

communication and visibility training seminars were organised for implementing partners

in the regions (Egypt and Israel in the South, Belarus and Azerbaijan in the East), in

addition to a training for colleagues at the Delegation in Moscow. Several trainings for

Delegations on the new corporate Visibility Requirements were organised in the form of

Webinars. Furthermore, DG NEAR organised the visit of members of the Amis du

Partenariat EU-Maroc network to Brussels.

Web and Social Media

DG NEAR continued to coordinate the relevant Europa websites and the DG's social media

channels, including relaying political messages, ensuring project visibility and providing

assistance on social media handling. The outreach and engagement rates were clearly

above the targets set, providing the wider public with access to latest information and

activities on our policy areas. On Facebook, we reached 430 000 followers (an increase

of more than 84 000 compared to 2017), with the overall reach of over 18 million. On

Twitter, we had over 38 000 followers, with the overall reach of 7.8 million. 2018 was

the first full year of NEAR Instagram presence, with close to 6 000 followers and the

outreach of 1.4 million.


Examples of successful performance in 2018 in external communication:

Performance story 1:

Communication on the Western Balkans Strategy

The Western Balkans Strategy, adopted by the European

Commission in February 2018, was an important political milestone

widely promoted through a comprehensive set of communication

materials and activities.

A set of factsheets with a new unified visual for the Western Balkans accompanied

the press release and helped explain in a user-friendly manner the strategy, the six

flagship initiatives, the economic potential of the Western Balkans and the enlargement

process. Their take-up in the media and on social media was widespread, also thanks to

proactive sharing with EC Representations, Member States and EU Delegations, and the

availability of material in all EU languages as well as in local languages.

The social media outreach included also the use of Western Balkans statistical

info-cards produced in cooperation with Eurostat. Overall, the posts related to the

Strategy and VIPs visits to the region had a reach of over 1.6 million people

(Facebook, Twitter and Instagram).

A short clip marking the launch of the Strategy

was published on the Commission’s corporate

accounts, reaching over 650,000 people on

Facebook and Twitter and triggering a high

engagement rate.

In order to make all communication materials

easily accessible to the public, as well as to the

EU Delegations, EC Representations and

multipliers, they were shared on a dedicated

webpage on DG NEAR website.

https://ec.europa.eu/neighbourhood-enlargement/policy/eu-and-western-balkans_en

https://ec.europa.eu/neighbourhood-enlargement/policy/eu-and-western-balkans_en


Complementing the outreach on digital channels, DG NEAR collaborated with think

tanks, academia and civil society organisations to organise over 30 events in EU

Member States and in the Western Balkans, with senior managers participating in panel

debates. These aimed at explaining the meaning of the Strategy and the impact and

benefits that the enlargement process brings both to the EU and to the region.


‘Young European Ambassadors’ promoting the EU in the Eastern Partnership region

Young people are at the heart of the EU’s engagement in the Eastern partnership region.

The EU Neighbours East communication project has the objective of improving

perceptions of the European Union across the Eastern Partner countries. As part of these

efforts, the project launched the ‘Young European Ambassadors’ (YEAs) initiative in

June 2016, with the purpose of fostering cooperation and sustainable links between

young people and youth organisations from the EU Member States and the Eastern

Partner countries: Armenia, Azerbaijan, Belarus, Georgia, Republic of Moldova and

Ukraine.

The initiative includes an online platform, which facilitates mutual exchange of ideas and

information on the EU, and promotes engagement of young people in outreach actions.

It focuses on people-to-people contacts and dialogue-driven activities, which contribute

to an enhanced understanding and perception of the EU and a greater appreciation of its

relationships with the Eastern Neighbourhood. Videos and posts related to YEAs activities

are very successful on social media, reaching high engagement rates.

In 2018, the YEAs initiative expanded massively. It now involves around 500 highly

motivated and engaged ‘Young European Ambassadors’ from the Eastern Partner

countries and EU Member States as the driving force of the network. Their activities

include for instance supporting the organisation of public diplomacy and dialogue-driven

activities and events in the Eastern Partner countries and the EU or organising ‘Stronger

Together’ social-media contests for young people from the region.

Throughout 2018, regional and in-country actions have taken place in all six Eastern

Partner countries – including YEA’s participation in the 2018 edition of the EU days – as

well as in several EU Member States. These on-the-ground activities have proven to be

very successful in having a long-lasting impact on young audiences’ awareness of the EU,

and particularly its culture, shared values and what it means to be European. The

activities have stimulated young people’s curiosity and enthusiasm to find out more

about their country’s partnership with the EU, including the opportunities to young

people.

https://www.euneighbours.eu/en/east/eu-in-action/youth/learn-more-get-involved

https://www.facebook.com/EUnear/videos/1583297811744201/



EU4YOUth campus tours reach thousands of students across the Southern Neighbourhood

Communication works when it is targeted to the audiences it aims to reach. The EU

Neighbours South communications project has the objective of improving

perceptions of the European Union across the Southern Neighbourhood countries. It

strives to do so by using the stories of real beneficiaries illustrating the impact of EU

projects and actions. It speaks to its audience (young people) using the language they

speak and tackles themes they are interested in, such as employment and education

opportunities.

The #EU4youth communication campaign was

launched in January 2017 and focused during the

first year mainly on digital campaigning (social

media). In 2018, the #EU4Youth campaign was

developed further to include #EU4Youth campus

tour events in the Southern Neighbourhood partner

countries to complement the digital campaigning.

Campus tour events take place in three universities/campuses per country. Out of

these, at least two are held outside of the capital in order to reach young people also

from rural areas and beyond the audiences in the capitals. During the events, the

participants get to know the EU’s work and projects in their respective country through

engaging activities, e.g. social media contests, graffiti artists, artistic performances, a

project fair and interactive “fishbowl” debates.

The first campus tour events took place in 2018 in Algeria and Tunisia and reached

directly over 3000 students as well as created a buzz around the campaign hashtag

#EU4YOUth on social media.

When preparing the campus tours in 2018, the EU Neighbours South project managed to

secure the support of two Arab singers – Yara (Lebanon) and Douzi (Morocco) who are

major celebrities in the entire Southern Neighbourhood region – as “good-will

ambassadors” to promote the tours. This cooperation resulted in the production of

dedicated video clips per country featuring the celebrities and promoting the

upcoming events, as well as in massive promotion of the campaign on the

celebrities’ social media channels (which reach combined over 10 million followers).

Example of one of the celebrity videos promoting the Algeria campus tours: click here.

Electronically signed on 29/03/2019 15:07 (UTC+01) in accordance with article 4.2 (Validity of electronic documents) of Commission Decision 2004/563

https://www.youtube.com/watch?v=NEgIH0RduIc&index=8&list=PLaGaqba06xpjeF3vVGVcyNlMJlClVqJ03&t=0s

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