EU: Audit Suggests Aid Allocated To Russia Ineffective

The European Court of Auditors said today that the use of TACIS funds provided to Russia between 1991-2003 -- amounting to nearly 3 billion euros -- was largely ineffective. What the court described as a "representative audit" gave a positive assessment to only five EU-funded projects out of a total of 29 audited. However, the court and the European Commission insist there is no evidence of fraud and that things have improved since 2003.

Ahto Lobjakas

BRUSSELS, April 20, 2006 (RFE/RL) -- The EU auditors' findings make embarrassing reading for the European Union, which has long been beset by charges that it spends taxpayer money inefficiently.

The official who lead the audit, Jacek Uczkiewicz, summarized his findings as follows.

"Overall, the court concluded that in the case of 12 audited projects, [out of] 29, the objectives were not achieved at all, and the results of only five projects were sustainable," Uczkiewicz said. "This shows that [the] effectiveness of the use of TACIS funds in the Russian Federation has been very low. And thus the court cannot assess the performance of TACIS projects in [that] country positively."

Overall, he said, the situation is "poor." He said that even the five projects that received a positive assessment were not managed effectively -- they stand out mainly because they made a measurable difference that outlasted their lifespan.

Uczkiewicz said he believes the results of the audit of 29 projects are representative of Russia's share of the EU's TACIS (Technical Aid to the Commonwealth of Independent States) program. Since 1991, the EU has channeled 7 billion euros via the program, of which 40 percent has been given to Russia. In many cases, equipment purchased with EU money was never used for its intended purpose.

A press release issued by the EU court of auditors says the individual projects awarded EU funds were not evaluated thoroughly. Their objectives were often imprecise and not measurable. Worst of all, the statement says, "in some cases the beneficiaries accepted assistance which they actually did not want."

Auditors described a case where the Russian applicants had set up a fictitious company to qualify for funds. In another case, the Russian side -- involving a ministry and two regions in Siberia -- boosted the scale of their environmental project aimed at limiting the effects of oil spills by adding sub-projects dealing with "fish hatcheries" and communal heating. EU funding was secured in both cases.

In many cases, equipment purchased with EU money was never used for its intended purpose. EU auditing team head Uzckiewizc said today this was "poor expenditure, not fraud."

Uczkiewicz also said his audit had uncovered no evidence of fraud. He noted in a different context, however, that his audit only dealt with the EU side of the projects and that Russian auditors had handled inquiries relating to the details of expenditures on the ground.

Uczkiewicz ascribed the problems to poor communication between EU and Russian institutions and "vague objectives" for projects.

European Commission spokeswoman Emma Udwin told RFE/RL today that the commission -- which oversees the TACIS program -- believes that in a majority of cases the required "level of effectiveness was there."

She also noted political issues in Russia that complicated the preparation of the audited projects.

"It's important to remember that the cases they looked at -- the projects they audited -- were prepared in the period between [19]97 and 2000," Udwin said. "That was a very particular period for Russia when the political climate was not at its most constructive and there was a financial crisis which made it very difficult to have the kind of dialogue that we would have wished to have with the Russian authorities. And that impacted as well on Russia's sense of ownership and Russia's involvement and cooperation in the projects we're talking about."

A senior commission official dealing with Russia, Gerhard Lohan, told the European Parliament's budgetary oversight committee today that Russia's mushrooming bureaucracy was partly to blame for the problems. "That was a very particular period for Russia when the political climate was not at its most constructive and there was a financial crisis which made it very difficult to have the kind of dialogue that we would have wished to have with the Russian authorities." -- European Commission spokeswoman

Udwin also stressed that the situation has changed significantly since 2003.

"But I think it's also important to point out that we ourselves identified a long time ago that there was need for improvement in some areas of the way that we deliver our external assistance," she said. "And that is why, under the last commission [1999-2004], some very important reforms were brought in and the court recognizes this in its report as well, that the performance -- our performance -- including through TACIS, has improved very much with the implementation of those reforms."

EU auditor Uczkiewicz rejected interpretations that large amounts of EU aid money have been misspent or wasted, saying instead the money was "used ineffectively." He did add, however, that what he described as a "political debate" within the European Parliament must now establish whether anyone should be held responsible for the problems.

The European Commission’s delegation to Ukraine: ethics teached to the others….

The European Commission’s technical assistance to Ukraine has been so far important (2 billions) and still will be (0,5 billion) in the next years. But it is ineffective and spilled, partly due to the incompetence of the whole chain of involved actors, who in some (many?) cases are not anyhow aware of the topics they are supposed to deal with. In addition, although ethic rules are clear, public and in spite of the insistence from the Commission that Ukraine should better struggle against corruption, the EC’s delegation to Ukraine is far from being a model when it comes to apply the rules to its own officials. A concrete example is detailed in the article.

The European Union, through its administrative body the Commission and in particular its delegation in Kyiv, has been active in Ukraine since the independence. Altogether, the European Union, i.e. the Commission and the member States, is the first contributor to Ukraine in financial terms. The sole Commission spent more than 2 billions euros in technical assistance to Ukraine so far, and almost half a billion euros (494 millions) will be brought in 2007-2010 in the framework of the new European neighbourhood policy instrument (ENPI).

Given the sums contributed by European taxpayers, it is worth paying attention to the way this money is spent, not only from the general point of view of the effectiveness of the financed programs and projects, but when it comes to ethics and procedures as well.

As far as the general effectiveness and efficiency are concerned – these two words are highly valuated and even overused nowadays by all management experts in general and the European Commission in particular - it would be worth a specific article and lots of reports. Let us just bring an example and a reference…

The reference is a recent report about the effectiveness of Tacis programmes in Russia: As the European Court of Auditors expressed it on April 20, 2006, the use of TACIS funds provided to Russia between 1991-2003 -- amounting to nearly 3 billion euros -- was largely ineffective (BRUSSELS, April 20, 2006 (RFE/RL)). No similar information was made public about Ukraine, but one can guess the situation is not better although not officially assessed and confirmed.

The example is the one of an ongoing project called SLD – sustainable local development -, granted with 5 million Euros for services and 13 for associated equipment. Although ambitiously aimed at supporting sustainable development models in middle-sized territories of Ukraine, it is in fact nearly reduced to a mere spending of millions for buying equipment in some cities. The project is presently exclusively implemented by engineers with absolutely no experience of either regional development or local administration in a EU member state or even in CIS. The key and other international experts employed there, in case they are actually present as initially foreseen, are so aware of their duties and responsibilities that they spend a noticeable part of their time playing cards on their computer…. Anyway, on the five key experts initially foreseen in the contract, only three actually remain, one of them having been illegally fired and another having been present overall a mere fortnight throughout the first year and a half…. Instead of the comprehensive regional development strategy initially foreseen, the project hardly deals with delivery of water pipes and energy saving advice, while nobody knows about - and subsequently nobody deals with - regional planning, local finances and institutional cooperation, and neither anybody cares about the mobilisation of financial resources for regional development activities… Anyway, who could actually question so incredible and evident deficiencies? The Task manager, controlling on behalf of the European commission, has not the faintest idea of what a municipality usually deals with, and is interested in its sole personal interests; he and his superiors from the European commission are not really aware as well of the topic, and mainly worry about the timely spending of money; neither the monitoring expert, paid out of the European tax payer as well, has ever stepped in a body of local self-government in any EU member State. Given the absolute lack of any awareness and practice of the real job by all the involved actors, a successful and effective spending of money would be purely a chance and even a miracle….


Elaborating on the topic would be long and tedious. The European taxpayer might soothe himself with the thought that “Well, maybe the money is spent ineffectively, even spilled at times, but at least all is done in a clean and honest way, not a single penny is stolen or spent regardless of the rules, and violations are immediately and heavily sanctioned”…. Alas, even in this area, the Commission heavily fails to meet the moral rules it urges the target countries – especially Ukraine- to adopt and observe.

Let us rely on concrete cases again. In the delegation of the European Commission in Kyiv, a scandal occurred in 2006, when some officials were suspected of attempts to take personal profit out of the contracts they were in charge of managing. Although a low publicity was given to the facts, it is known that an official from the European delegation in Kyiv was arrested and handcuffed while landing in Brussels, and it is suspected as well that some other officials, while not officially convicted of infringements, were moved to other positions outside the country… The final sanctions remain unknown…

At the end of the very same year, another official from the European commission, Dominique Charpentier, in charge of controlling important contracts, imposed the Team-leader of one of these contracted projects to engage his common law spouse. The said had no choice but to accept, although the young woman did not hold any relevant experience. After he opposed a third, unrealistic augmentation demanded by Mr Charpentier, the latter started to campaign against the former, who finally complained in his turn of this situation. Mr Charpentier surprisingly acted as if the consortium had contracted a debt to him – true to say, he was the key evaluator in the tender this consortium had passed through- . He was at first suspended from managing this project on behalf of the delegation, and his common law spouse spontaneously resigned. The OLAF - European antifraud-office – was involved and started to inquiry. But the Delegation, compelled to react, did not congratulate the one who revealed this misbehaviour. The black sheep, who dared revealing the scandal with clear written evidence of it, was accused of infringing alleged - and for sure unexpressed – rules, by mentioning his rank on his visit cards. Infringing in turn its own written rules and procedures, the delegation obtained this Team-Leader to be fired by his employer on this illegal basis. And after having confirmed this illegal prohibition on using his official ranks, the head of delegation – who illegally grants himself the title of ambassador! -, reinstalled Mr Dominique Charpentier in his former functions, as if nothing had occurred.

To date, this ethically questionable character is still in charge of a project in which he had obtained evident personal interests after having chosen the victorious executor. Notwithstanding, he is still part and a key intervenor of further contracts to be granted! One can easily imagine at least some of the conditions for winning the tender in which this official acts on behalf of the Commission….

The unsaid message of this shameful example is clear: never reveal a scandal when you somehow depend on those who are in charge of redressing it; the one openly and evidently infringing the rules of ethics will be supported and honoured, and the one who dared suggesting for the law to be applied will be soiled and moved away.

This is the way the delegation of the European commission and its head understand morals and ethics…. As a temporary conclusion, the helpless European taxpayer cannot be too optimistic: not only is doubtful the effective use of his taxes, but it is yet used with a questionable sense of morals and ethics…. 'Something is rotten in the state of Denmark'......