European Court of Auditors publishes report on sustainability of financial assistance to the PA – ECA press release/Non-UN document

EU Direct Financial Support to the Palestinian Authority

The EEAS and the Commission welcome today’s report from the Court of Auditors on the EU Direct Financial Support to the Palestinian Authority (PA) through the PEGASE Mechanism. They welcome in particular the Court's conclusion that the Commission and EEAS have succeeded in implementing this support in spite of difficult circumstances and that there is no evidence of corruption or mismanagement. PEGASE has the confidence of Member States, 16 of whom have contributed to it, together with Switzerland and Japan.

Co-operation with the Palestinian Authority takes place in very particular circumstances, in the context of Israeli occupation, with an Authority which does not have the powers of a state government and where part of the Palestinian territory, the Gaza Strip, is run by de facto authorities with which the EU has no relations.

By helping the Palestinian Authority to meet its wages and pensions bill for essential service providers and pensioners, and pay for social allowances to most vulnerable groups, the EU is making a tangible contribution to the preparation for a two-state solution to the Israeli-Palestinian conflict.

The report makes a number of recommendations on how to improve our co-operation with the PA. The Commission and the EEAS agree to review the PEGASE mechanism and take the recommendations made by the Court into account.

Some of these recommendations are being implemented. Both institutions already review the mechanism on a regular basis, taking account of changes on the ground (for example discontinuing one component on fuel deliveries to the Gaza Power Plant and adding others as circumstances change – Private Sector Reconstruction in Gaza following Operation Cast Lead and more recently support to East Jerusalem hospitals). Based on an assessment carried out in 2011, the Commission started providing in 2013, a comprehensive support to the PA for Civil Service Reform, an issue raised by the Court. PEGASE will ensure close links between this action and the CSP programme, facilitating stronger leverage over policy dialogue.

Performance indicators will be introduced in the areas suggested by the Court, bearing in mind that many of the elements required to fulfil these indicators lie partly or wholly outside the control of the Palestinian Authority. The Commission and the EEAS do not consider strict conditionality to be desirable or effective in these circumstances. Ultimately sustainability of the EU’s assistance in this field can only be ensured by political progress on intra-Palestinian reconciliation and, above all, by an end to the Israeli occupation.

The Commission and the EEAS have actively sought to ensure Israeli co-operation. Numerous meetings have been held between the Office of the European Union Representative (West Bank and Gaza Strip, UNRWA) with the Israeli Ministry of Defence, as well as in the framework of EU-Israel, Association Committee, Association Council and in the Political Dialogue with Israel. The EU Delegation in Tel Aviv has also been involved. A clear EU position in this regard has been defined by Council Conclusions of May 2012 and December 2012.

The PEGASE Mechanism is accompanied by an extensive set of verification measures, which the Court itself described as robust, also recognising that the funds channelled through PEGASE are reaching the intended beneficiaries. While this has led to heavy control structure, a necessary balance has to be found between efficiency and security.

The issues surrounding the civil servants who are not able to work in Gaza are complex in the circumstances prevailing in the Gaza Strip. The Commission and the EEAS consider that the PA must continue supporting its workers in Gaza as a key element of maintaining its presence in Gaza and the unity of a future Palestinian State. A solution has to be found that take account of the concerns raised by the Court, while allowing the PA to continue supporting its employees in Gaza.

The Commission and the EEAS believe that the delay in salary payments on a number of occasions by the PA in 2012 was due to the overall financial difficulties of the PA and not to the number of eligible beneficiaries under PEGASE, nor to lower contributions from Member States.

The Commission has also responded earlier this year to the recommendation to reduce the cost of administering PEGASE DFS by:

• using competitive tendering for contracts: two new contracts have been signed for the audits required by the mechanism before and after every payment exercise; a call for tenders for technical assistance for the PA has been launched.

• bringing “in house”, at the Office of the European Union Representative (West Bank and Gaza Strip, UNRWA), the management of the PEGASE database that was previously outsourced.