Commission Report 2002 (Hungary)

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 21: Regional policy and co-ordination of structural instruments

Progress since the last Regular Report

Since the last Regular Report, progress has been made in preparing for the implementation of structural policies.

Concerning territorial organisation, Hungary confirmed to EUROSTAT in January 2002 the provisional NUTS classification designating the whole country as one single unit corresponding to NUTS level I, with seven regions corresponding to NUTS level II. This provisional NUTS classification was agreed with the Commission.

There have been no particular developments since the last Regular Report regarding the legislative framework.

With regard to institutional structures, Hungary has re-defined the responsibilities of various ministries in terms of programming and managing the Structural Funds and the Cohesion Fund. The responsibility for the co-ordination of programming and implementation of Structural and Cohesion Fund assistance has been transferred to a new structure within the Prime Minister`s Office, the National Development Office. This office will co-ordinate the preparation of the National Development Plan and act as managing authority for the future Objective 1 Community Support Framework (CSF) and for the Cohesion Fund. The responsibility for regional development has been transferred to the Regional Development Office within the Prime Minister`s Office. The ministries in charge of establishing the managing authorities of the various operational programmes have been formally designated and specific ministerial units/departments have been identified to that effect. Finally, the Ministry of Finance has been designated as single paying authority for the Structural Funds and the Cohesion Fund.

While the programming process started in January 2001, the preparation of the development plan and the operational programmes for Objective 1 have been considerably delayed in the reporting period. The first part of the plan, including the description of the current situation, the analysis of strengths and weaknesses and the development strategy, is under preparation and discussion with all relevant bodies and partners concerned. The approval by the Government of the development strategy and the resulting priorities took place in September 2002.

In the context of the recent reorganisation, Hungary has adopted measures to ensure a wider application of the partnership principle. A separate unit responsible for partnership, information and communication has been established in the National Development Office, reflecting the Government`s willingness to give a higher profile to the association of the partners in the programming and implementation of Structural and Cohesion Funds assistance. In this context, the Regional Development Councils and Agencies play a pivotal role in organising the involvement of partners at regional and local level. A Reconciliation Council of Development Regions, consisting of the presidents of the Regional Development Councils, has been established as a consultative forum with a view to developing a common position of the regions on questions such as their involvement in the preparation and implementation of Structural Funds assistance.

With regard to monitoring and evaluation, preparatory work on the ex-ante evaluation of the first chapters of the development plan, and on a macro-economic impact study, has been undertaken by the Ministry of Economy. The National Development Office, to which the overall responsibility for evaluation has been transferred, is setting up a monitoring and evaluation unit comprising seven experts. An evaluation sub-committee within the Interministerial co-ordination Committee on Development Policy has also been established.

The software for the monitoring system for collecting, reporting and monitoring data under the pre-accession instruments (MEMOR) has been developed. The system also includes a Structural Funds module, which will be tested in 2002 and adapted to the requirements of monitoring Structural and Cohesion Funds assistance.

The financial control department of the Ministry of Finance has the overall responsibility for the regulation and development of the Public Internal Financial Control System, including the establishment of adequate financial management and control systems for Structural and Cohesion funds. Functionally separate internal audit units have been established within the line ministries. The Ministry of Finance has designated the Office of the National Authorising Officer as the unit in charge of setting up the single paying authority. This Office was reorganised in December 2001 and currently includes the National Fund through which pre-accession funds are channelled. Within the Hungarian Treasury System, three separate units have been established (Debt Management Agency, Public Finance Office and Treasury). The system for payments under the Structural and Cohesion Funds and for the matching national co-finance has been outlined.

The Ministry will also have overall responsibility for the on-the-spot checks and, in the performance of those tasks, will draw on the existing audit capacity within the ministries in which the managing authorities will be located as well as in the Government Control Office (GCO). The GCO has been designated as the body responsible for issuing declarations of winding-up of the assistance.

A system of multi-annual planning of budgetary expenditure, including provisions for transfers between budget appropriations, already exists in Hungary in relation to preaccession funds. A draft methodology has been prepared concerning the verification of the additionality principle.

In relation to statistical information, the compilation of regional data for analysis, evaluation and monitoring has continued.

Overall assessment

Hungary has already organised its territory into units corresponding to the NUTS classification. As regards the legislation necessary to implement the acquis covered by this chapter, the Government is, however, committed to further amending the Act on Public Finance with a view to adapting its current framework for multi-annual budget programming as well as for transfers between budget lines in order to ensure the increased flexibility required for the efficient management of Structural Funds assistance.

Hungary has designated the bodies, which will be responsible for the implementation of the Structural and Cohesion Funds. However, the allocation of tasks has still to be completed, in particular as they relate to the designation of all the intermediate bodies, the functions they will perform on behalf of the respective managing authority and the definition of the system for reporting and monitoring on the performance of their tasks.

The capacity within the bodies identified as future managing and paying authorities, as well as of the line ministries and other intermediate bodies acting under their responsibility, needs to be further strengthened in the short term. Further steps must also be taken to ensure effective inter-ministerial co-ordination.

Further progress must be made with the technical preparation of projects eligible for Structural and Cohesion Funds assistance (project pipeline). The capacity of regional and local actors as well as other relevant partners to prepare, and implement projects, needs to be considerably strengthened. Hungary will also have to ensure that project selection and decision-making is managed within a framework established on the basis of transparency, efficiency and reliability in the implementation of programmes. It should also continue to work towards developing the structures and co-ordination mechanisms necessary to manage financial assistance from the European Social Fund in the context of the European Employment Strategy and the Social Inclusion process.

With regard to programming, the preparation of the development plan and the operational programmes has been considerably delayed over the reporting period. Considerable efforts on the part of all actors concerned, as well as strong and effective inter-ministerial co-ordination, will be needed in order to maintain the timetable in line with the commitments undertaken by Hungary during the negotiations for finalising the programming documents, without compromising the quality of the process or diminishing the sense of ``ownership` to be developed through close association of all relevant partners.

Work on ensuring compliance with the acquis requirements for monitoring and evaluation must continue, in particular as concerns the ex-ante evaluation of the development plan and draft operational programmes. To ensure effective and efficient implementation of the Structural Funds programmes, an effective system and capacity for monitoring and evaluation must also be established, both centrally and within the implementation structure being put in place.

Hungary continues to advance the process of establishing its financial management and control systems. In this context, it is finalising the specific procedures for financial control, auditing, and certification of expenses and correction of irregularities specifically applicable to the Structural and Cohesion Funds. However, the appropriate systems and procedures for financial management and control still need to be strengthened, in particular as regards the structure of the managing and paying authorities. The capacity of the internal audit units within the line ministries need to be strengthened through training and other measures in order to fulfil the specific requirements of the Structural Funds regulations.

The system envisaged for ex-ante checks on payments of national and Community funding to final beneficiaries still appears quite centralised and may need to be reviewed in order to process payments to final beneficiaries in a more efficient way.

Conclusion

In its 1997 Opinion, the Commission observed that Hungary was introducing the legal basis for a comprehensive regional policy, and commented that its administrative capacity to manage integrated regional development programmes seemed satisfactory. It also noted that Hungary needed to further develop institutional capacity and strengthen co-ordination among ministries and between the central and the local level. The Commission concluded that, subject to the introduction of the remaining reforms, Hungary should be ready to apply Community rules and channel effectively the funds from EC Structural Policies.

Since the Opinion, Hungary has made steady progress in legislative terms, and, more recently, has moved forward with developing the necessary administrative capacity. With the Government decisions taken in June 2002, Hungary has established a more efficient institutional framework for programming and implementation of Structural and Cohesion Funds. This creates the conditions for substantial progress. However, the administrative capacity in all Ministries and bodies concerned still needs to be considerably improved in order for Hungary to be able to properly implement the Structural and Cohesion Funds upon accession.

Negotiations on this chapter have been provisionally closed. Hungary has not requested any transitional arrangements. Hungary is generally meeting the commitments it has made in the accession negotiations on this chapter.

In order to be ready for membership, Hungary`s efforts now need to focus on finalising the programming documents and on developing the necessary implementation capacity in accordance with the timetable agreed through sustained action at all levels. Interministerial co-ordination needs to be further strengthened and the correct application of the partnership principle ensured. Hungary has started to take measures in that respect. Ongoing efforts now need to be substantially stepped up

---

Next: Chapter 22: Environment
Up: 3.1. The chapters of the
Previous: Chapter 20: Culture and audio-visual