Squandering Kosovo’s Aid funds

December 22, 2008

A big part of EU Aid for reconstruction projects of Kosovo has been wasted due criminal activities, corruption, frauds and mismanagement reports German daily Die Welt on 18th Dec. 2008. As base of this claim are the investigations conducted by the EU Anti Fraud Office (OLAF), UN investigators and the Italian Financial Police. More than 50 cases of financial embezzlement was found – most of them in energy sector. In twelve of these cases there is proof of criminal liability.

According to EU data roughly 2.3 billion euro have been granted for Kosovo as aid since 1999, after the NATO bombing of Serbia. Some 400 million euros has been wasted for energy projects. According to the alleged reports, EU funds that had been destined for Kosovo’s energy sector, were misappropriated by UN officials in Kosovo, in conduit with local politicians. Whatever the reasons the results are humble at best – after eight years investments power cuts are still part of daily life in Kosovo.

Aid money for Kosovo

While most of the 2.3 billion Euros invested in the reconstruction of Kosovo has disappeared without a trace and when it is expected that by 2011 the EU will throw Kosovo another one billion euro it could be clever to spare a minute for quality-planning and future management.

Case Bulgaria

On July 2008 I wrote an article “Bulgaria wrestles for EU funds and credibility”  about different aspects of misuse of EU funds. In addition to normal crimes etc. I highlighted also the structure, conflicting regulations, misunderstandings, management priorities etc as reason for claims of misuse of funds.

My main message in case Bulgaria was that criminal activities such as fraud and corruption explained only a minor part sc. misused EU funds. I think that the same is true also with case Kosovo.

Case Kosovo

Criminal activities and mismanagement at operational or implementing level are some reasons for waste of foreign Aid money in Kosovo. However the province has also some characteristic aspects as follows:

  • The main power plant is old and during last decade before Nato bombings it needed creative improvisation by then Serb workers to operate. After bombings that staff escaped, unskilled Albanian workers came in and could not do the same. Also foreigner consultants could not teach improvisation, their experience was from different field.
  • Kosovo administration was and still is a chaos. EU throw Aid money through its own agency or different programmes, through UN system or UNMIK’s EU Pillar; donor money went through bilateral agreements through administrative structure or NGOs or even through Kfor; the implementation of development plans and projects in many cases was made by individual consultants/firms so coordination was nonexistent.
  • Local expertise, commitment and participation to project implementation was insignificant so the foreigners – who were distributing Aid – had their own sandbox and the local beneficiaries their own. The point of view was that of service provider not the one of client.

The bottom line

There seems to be a huge gap between fine ideas/plans/collected money in Brussels and their reasonable distribution at local level in Kosovo. The biggest mismanagement or misuse of Aid money is not according my opinion local criminal activities. The strategic error has made in international level by not knowing the demands on the ground, not adjusting ideas and plans according local needs or the moment of Aid delivery, using indefinite mixture of emergency relief and long term planning, lack of simple and unambiguous development strategy and strategic leadership.

The real crime will be if international community does not correct earlier errors and practices at strategic level – only after that one can demand smoothly flowing project at local level.

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Bulgaria wrestles for EU funds and credibility

July 23, 2008

The European Commission is set to withdraw the accreditation of two Bulgarian agencies and bar them for using EU funds after details of a European Commission report on Bulgaria’s fight against corruption and organised crime will be officially issued on July 23. Two agencies under the Ministry of Regional Development and Public Works and the Finance Ministry will lose their permits to operate with EU funding under the bloc’s pre-accession programme PHARE. This could deprive Sofia of about €600 million. Two other agency/programme can meet the same procedure.

Some average reader could think that some clever crocks have put nice sum in their pockets because the report highlights corruption, organized crime and economical fraud activities in Bulgaria. Undoubtedly this kind of crimes has happened. However the question about administration of EU funds is more complex than simple crimes. I have worked some 15 years with EU projects and would like bring forward some other aspects from fieldlevel of project management.

EU has some 500-800 different programmes from where individual projects can have 10-100 % financing of their costs. There is some general guidelines, but nearly every programme has also individual regulations, practice and details. For administration it is huge task to manage, coordinate and implement this puzzle.

EU funding/payment can be delayed or revised e.g. if project manager has offered coffee to participants during training session in one programme when this is allowed with other EU programme. Also he can make mistake using real exchange course in payment claim when only monthly average course is allowed. Most projects need own or SME financial contribution but sometimes according one programme rules it comes from too big company, or company is wrong side of municipal border while implementing regional development project. In payment claim some costs can be in wrong budget line or project manager has forgot to ask amendment/revision decision from Management Authority to do so. Some times it is also difficult to interpret if part of project partners´administrative work is its normal development work (uneligible cost) or strictly project development work (eligible cost).

So there is different regulations which are eligible costs in each project depending from which programme main financing is coming. Many times while programme period changes even the EU officials do not know all details which to apply on the beginning of programme period – how then the project manager or province/state level managing authority could forecast them.

Before mentioned boring details can give picture about bad project management, when similar details occurs with most of the projects one can judge situation as bad programme/EU fund management. But one can also see, that this kind of details are far away from organized crime scene.

What is crime from my point of view is that most EU officials/Management Authorities are more interested about small financial details than the outcome of programme/projects. It is possible to keep budget lines, make a perfect financial report where every cent is in right place without any impact on the field. It is as well possible to implement project with excellent results, superb beneficiary feedback, with many spin-offs and follow-ups which following an insufficient financial report will be doomed as failure.

In accordance of my opinion EU should shift the emphasis of the activity from financial nitpicking to goal orientated approach and the first question from EU officials should be the results on the field. The priorities could be e.g. following:

  • Is there any sence in proposed Logical Framework of programme/project
  • What are the results, are they verified and real
  • How the results were achieved (not to estimate justification of costs but to find best practices for similar cases in other regions/fields)
  • How much were the costs (to compare relation of results to investment)

In case of Bulgaria I do not know how much the question is corruption, organized crime etc. and how much simply problems with applying  complex EU bureacracy  in new member state.  However as taxpayer I would like to see EU concentrating to big lines in real world instead detail hooning between specialists about topics those influence to average citizen are close to zero.