Institutional Set Up

Until recently Albania benefited from the instrument for western Balkan countries - CARDS. For the programming period 2007 -2013 IPA replaces CARDS and Albania as a potential candidate country benefits from two IPA Components: TAIB and CBC. In December 2007, Albania signed the IPA Framework Agreement with EU. In April 2009 the Albanian Prime Minister submitted the application for candidate status to EU. In the context of Albanian EU accession process the Decentralised management of EU funds for the TAIB component has started to be prepared by the Albanian authorities with the Technical Assistance provided by the project ‘Preparation of the Albanian Authorities for EU’s Decentralised System (DIS)’.

The following DIS Road-map for IPA is foreseen to be followed:
  1. Establishment stage - when the country appoints IPA authorities such as CAO, NIPAC, NAO, PAO and Audit Authority, sets up the legal framework for designation of the IPA structures within the national administration
  2. Gap assessment stage - when an independent assessment is carried out to determine the level of establishment of the IPA structures and authorities.
  3. Gap plugging stage - when activities are carried out to build the capacities for management of EU funds
  4. Compliance assessment stage - during which an independent audit company is hired to perform audit and prepare independent audit opinion for CAO and NAO (in order to assure themselves that all accreditation criteria are met before national accreditation).
  5. Accreditation stage - following a positive opinion by Compliance assessors the CAO and NAO issue national accreditation and submit the accreditation package to EC. After verification, EC adopts a Conferral of Management Decision to the beneficiary country for decentralised management of IPA.

A Road Map for the IPA component I was prepared by the project ‘Preparation of the Albanian Authorities for EU’s. Following the approval by the NAO, it was sent the EC.

According to the EU DIS Road-map, Albania is in the stage of establishment of structures. The Decision on established of IPA Structures and authorities was adopted. The CFCU was created and staffed with 14 employees. The SPOs are appointed and the SPO structures are in process of establishment. Organigrammes of CFCU, NF, NIPACs office are prepared and will be adopted as such during November. The Audit authority is in the process of establishment.

The PAO function was put together with the CFCU director in order to comply with IPA regulation and to shorten the procedures for approval and signing as well as to enable PAO to manage the implementing agency directly. The Deputy Minister of Finance is the NAO and Director General of the CFCU was named as PAO.

During the Establishment stage - 0 a Training Needs Assessment was carried out and a Training Plan was prepared, and its implementation is ongoing. The model Operational agreement to be signed between PAO and SPOs was prepared. The Implementing agreement to be signed between NAO and PAO was prepared. The Internal Manual of procedures for the DIS structures will be finalized in December 2009.

In general the legal base, procedures for IPA Component I, staffing etc of the following IPA Structures, Authorities and functions have to be prepared by the Government of Albania with Technical Assistance provided by the project ‘Preparation of the Albanian Authorities for EU’s Decentralised System (DIS)’

  • NIPAC
  • NIPAC’s office
  • CAO
  • NAO
  • 2nd NAO function
  • NATIONAL FUND
  • PAO
  • CFCU
  • SPOs and SPO/IPA structures in line ministries
  • AUDIT AUTHORITY

IPA Structures and Authorities (as described in the Inception Report of the project ‘Preparation of the Albanian Authorities for EU’s Decentralised System’.

CAO

A high ranking official in the Government or the state administration responsible for issuing, monitoring and suspending or withdrawing the accreditation of the NAO and the National Fund.

NAO

NAO has two functions. The first is the Financial Management of EU funds (National Fund) and the second is effective functioning of the management and control systems (2nd NAO function).

NIPAC

NIPAC is in charge of ensuring coordination among components and programmes. NIPAC is supported by the NIPAC office (see below). NAO's accreditation role is limited to ensuring that the NIPAC office's control systems / staffing are properly designed (see bellow-Operating Structure). In case though that NIPAC is beneficiary of projects of TAIB components and an SPO is assigned for this purpose, then NIPAC office is subjects to CFCU controls.

AUDIT AUTHORITY

The Authority (AA) is a body designated by the Beneficiary Country, functionally independent from all actors in the management and control system and with the necessary expertise, responsible for verifying the effective and sound functioning of the management and control systems.

NATIONAL FUND

The National Fund (NF) is the sole channel through which Community pre-accession funds flow and is responsible for the establishment of an efficient and transparent EU funds financial management system, which is consistent with the existing EU systems. The National Fund performs the fist function of NAO.

The detailed responsibilities include the following:

Opening bank accounts (in line with the EU rules and procedures) for the management of EU and co-financing funds for specific programmes, as well as efficient management of funds in those accounts; Receiving of EU and co-financing funds and their transfer to sub-accounts of CFCU / Implementing Agencies; Setting up of a monitoring and recording system for those funds; Preparation of withdrawal applications for EU funds and co-financing; Control of payment requests from the CFCU / Implementing Agencies; Preparation of financial reports and other necessary documents in line with EU requirements; Implementation of EU funds surveillance and control system; Setting up of an efficient and effective reporting system filing of documents according to EU rule, etc

Operating Structure[1]

The Operating Structure is composed by all of the following:

  • One or several Implementing Agencies (including any CFCU) - each one headed by a Programme Authorising Officer (PAO) who is designated by the NAO after consultation with the NIPAC (Art 75.2[2]);
  • All relevant Line Ministries or bodies with equivalent tasks -sometimes called 'Implementing Authorities' or 'Programme Implementation Units' (PIUs). The Senior Programme Officers (SPOs) in the Line Ministries are designated by the PAO (Art. 75.3);
  • All relevant internal audit services (Art 28.2k) and
  • The NIPAC office[3] which exercises programming and programme monitoring (Art. 28.2.a, b c and Art. 75.1)[4].

The NAO him/herself is not within the 'operating structure'. However, the NAO is accountable to the CAO and the EC for the effective and efficient functioning of all the operating structures (Art 25.2.b and Art 25.4) - and ultimately for all implementation transactions (Art 75.2a). It is critical that the NAO has the appropriate authority and the tools necessary to properly fulfil this accountability.

The NIPAC office has a programming role in the component I operating structure which it does not have in other components. For these tasks, the NAO's accreditation role is limited to ensuring that the NIPAC office's control systems / staffing are properly designed. It is the NIPAC who is accountable for delivery of appropriate component I programmes and project-level monitoring which are the outputs of those accredited systems (Art 75.1).

This NAO/ NIPAC arrangement for Component I is partly driven by some specific risks which arise in Component I due to the fact that it is often implemented through service contracts or grants whose objectives at project level are set locally and whose output can be hard to objectively define ex-ante or control ex-post. Classical
procurement and payment procedures are therefore not always sufficient to control the risks of insufficiently competitive Terms of Reference or inappropriate awards or
payment approvals in Component I. Segregation of duties between a) programming/project fiche preparation tasks and b) implementation tasks is a valuable control response to these risks where possible - at top level (NIPAC v NAO/PAO), but also at initiation level (Line Ministries). Where this segregation is not practical (e.g. because of small numbers of people involved in Line Ministries) then other mitigating controls need to be established against these risks.

Entities within Operating Structure

SPO’s

SPOs are officials of the national administration (line ministry/agency), who are responsible for technical aspect of the operations within the line ministry and assist the PAO in the good and timely preparation and implementation of operations at technical level where the Implementing Agency is responsible for the administrative and financial implementation of the projects.

A frequent dilemma as regards SPOs is whether they should be considered as undertaking these tasks as 'specific bodies ...outside the operating structure' or as part of the 'operating structure'.

As it is obvious from some of its recent instructions, DG Enlargement considers that for IPA Component I, they must be considered directly as part of the 'operating structure'

In component I, the PAO(s) and ultimately the NAO are accountable for supervising the Line Ministries, often across ministerial boundaries. This is a particularly challenging responsibility for Component 1. Yet if the Line Ministries are not within the 'operating structure' then they are not fully within the scope of the Compliance Assessment Report or of the NAO's and CAO's accreditations. Therefore if the Line Ministries are not each individually considered as directly part of the 'operating structure' for Component 1 - and each one subject to the full accreditation process - there will be a significant risk of inadequate performance by at least some of them which could undermine the sound financial management of the whole system.

HEAD OF THE OPERATING STRUCTURE / PAO

The concept of 'Head of the Operating Structure' is not defined in Reg 718/2007 for Component I (or for Component II DG Enlargement part[5]) Therefore, the extent to
which the entities of the operating structure for these Components should be structured as bodies within a single hierarchical pyramid under a single 'Head', or as a looser collection of bodies, has to be established taking account of the context and risks for these Components.

For Component I the bodies mentioned above do not all fall naturally into a single pyramid. Nonetheless DG Enlargement does not see a separate role for a Head of Operating Structure to operate between a) the heads of the bodies within the operating structure and b) the NAO as described above (responsible for the whole operating structure from outside the operating structure). DG Enlargement is aware that other components may define a separate role for a Head of Operating Structure. Where there is only one Implementing Agency, the PAO as head of that Agency would be a close (albeit not perfect) equivalent to such a role.

CFCU

The Central Financing and Contracting Unit (CFCU) has the sole responsibility over the overall budgeting and cash flow forecasting, tendering, contracting, payments, accounting and financial reporting aspects of the procurement of services, supplies, works and grants in the context of the EU-funded programmes in Albania. The CFCU shall ensure that the EU rules, regulations and procedures pertaining to the procurement of services, supplies, works and grants are adhered to and that a proper reporting system is functioning. The technical issues of programme implementation will be the full responsibility of the authority responsible for implementing each individual programme (Senior Programme Officer).

The CFCU will advise the SPO, on his / her request, on EU external aid implementation procedures (e.g. procurement and contracting procedures) it being clear however that full responsibility for technical implementation remains with the SPO under the overall supervision of the Programme Authorising Officer (PAO).

NIPAC OFFICE

NIPAC office will carry out programming of Components I & II & Monitoring and Evaluation of Component I.

Programming activities include: drafting of annual or multi-annual planning documents such as the Multi-annual Indicative Planning Document - MIPD; drafting of Project Fiches, in close collaboration with the SPOs in Line Ministries; making the final decisions on which project proposals submitted by the various Line Ministries may be acceptable for IPA funding under a given programme on the basis of certain pre-defined criteria such as accession priorities laid down in strategic documents such as the Stabilisation and Association Agreement - SAA

Monitoring and evaluation activities include: participation in and providing reporting input into the several Sectoral Monitoring Committees (SMC) which normally consists of representatives from the Line Ministry concerned and the CFCU, the NIPAC office and the ECD and which aim is to assess the overall situation within a given sector, progress made, problems encountered, remedial actions taken or to be taken. The SMC reports to the IPA Monitoring Committee; participation in and providing reporting input into the Joint Monitoring Committee (JMC) which normally consists of representatives from the NAO, the NIPAC office, the CFCU, the Line Ministry concerned and the EC/ECD and which aims to assess the overall situation in all the sectors, progress made, problems encountered, remedial actions taken or to be taken; participation in and providing reporting input into the IPA Monitoring Committee which includes among its members representatives of the Commission, the NIPAC, the NAO and the OS and will be co-chaired by a representative of the Commission and the NIPAC.

INTERNAL AUDIT SERVICES

Are involved in the second function of the NAO that is the effective functioning of the management and control systems

[1] Clarification of the Operating Structure Concept

[2] The phrase 'shall consist of in art 75.2 (component 1) must be understood as having the same meaning as the phrase 'shall include' in art 139.5a (component 2 DG Enlargement part)

[3] Although the NIPAC office is headed by the NIPAC him/herself, the reference to the 'NIPAC office' here is to avoid any implication that the NIPAC is subordinate to the NAO for programme purposes. The NAO and NIPAC should have broadly equal seniorities. See also the remarks under 'Role of NAO v operating structure' further below.

[4] This part of the NIPAC office role is unique to Component I.

[5] a) CBC between IPA beneficiary countries, and b) Participation of beneficiary countries in i) ERDF transactional or ii) ENPI sea basin programmes

ALL RIGHTS RESERVED. COPYRIGHT © 2010 ALBANIAN MINISTRY OF FINANCE