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COUNCIL OFBrussels, 27 January 2012
THE EUROPEAN UNION
5798/12
Interinstitutional File:
2011/0276 (COD)
FSTR 9
FC - 6
REGIO 18
SOC 59
AGRISTR 15
PECHE 31
CADREFIN 47 CODEC
210
COVER NOTE
from:
Mr Vítor CALDEIRA, President of the Court of Auditors
date of receipt: 26 December 2012
to: Mr Radoslaw SIKORSKI, President of the Council of the European Union
Subject: Opinion 7/2011 on the proposal for a Regulation of the European Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund covered by the Common Strategic Framework and laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1083/2006
The special report, which is shortly to be published, was adopted by the Court at its meeting on
15 December 2011.
(Complimentary close).
(s.) Vítor CALDEIRA
________________________
Encl.: Opinion No. 7/2011 on the proposal for a Regulation of the European Parliament and of the
Council laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund covered by the Common Strategic Framework and laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1083/2006
1
EURÓPAI SZÁMVEVSZÉK
TRIBUNAL DE CUENTAS EUROPEO IL-QORTI EWROPEA TAL-AWDITURI
EVROPSKÝ ÚCETNÍ DVR EUROPESE REKENKAMER
DEN EUROPÆISKE REVISIONSRET EUROPEJSKI TRYBUNAL OBRACHUNKOWY
EUROPÄISCHER RECHNUNGSHOF TRIBUNAL DE CONTAS EUROPEU
EUROOPA KONTROLLIKODA CURTEA DE CONTURI EUROPEAN
O EURÓPSKY DVOR AUDÍTOROV
EUROPEAN COURT OF AUDITORS CORTE DEI CONTI EUROPEA EVROPSKO RACUNSKO SODISCE
COUR DES COMPTES EUROPÉENNE EIROPAS REVZIJAS PALTA EUROOPAN TILINTARKASTUSTUOMIOISTUIN
CÚIRT INIÚCHÓIRÍ NA HEORPA EUROPOS AUDITO RMAI EUROPEISKA REVISIONSRÄTTEN
Opinion 7/2011
on the proposal for a Regulation of the European Parliament and of the Council laying down
common provisions on the European Regional Development Fund, the European Social Fund,
the Cohesion Fund, the European Agricultural Fund for Rural Development and the European
Maritime and Fisheries Fund covered by the Common Strategic Framework and laying down
general provisions on the European Regional Development Fund, the European Social Fund
2
TABLE OF CONTENTS
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Paragraph
Introduction 1 - 2
Part I 3 - 50
General observations 3 - 8
Strategic issues 9 - 21
EU added value 9 - 10
Thematic concentration 11 - 13
Common Strategic Framework 14
Partnership contracts 15
Ex ante conditionalities 16
Ex post conditionality (mid-term performance review, performance reserve)
17 - 18
Macro-economic conditionality 19 - 20
Joint Action Plans 21
Common management and control arrangements 22 - 50
3
Part II
Detailed comments to the Commission's proposal
4
THE COURT OF AUDITORS OF THE EUROPEAN UNION,
Having regard to the Treaty on European Union, and in particular Articles 4 and
5, and the Treaty on the Functioning of the European Union (TFEU), in
particular Articles 174 to 178, 287(4), second subparagraph, 317, 318 and 322
thereof;
Having regard to Council Regulation (EC, Euratom) No 1605/2002 of 25 June
2002 on the Financial Regulation applicable to the general budget of the
European Communities2 and to its implementing rules3;
Having regard to the Council's request for an opinion, which reached the Court
on 11 November 2011;
Having regard to the proposal for a general Regulation presented by the
Commission4 as well as its Funds-specific proposals5;
Having regard to the impact assessment on the proposed regulatory package
revising the Regulations applicable to the management of the Structural and
Cohesion Funds6;
Having regard to the Commission communications entitled `Conclusions of the
5
Having regard to its Annual and Special reports as well as to the Court's
Opinion No 2/2004 on the `single audit' model10, the response by the European
Court of Auditors to the Commission's communication 'Reforming the Budget,
Changing Europe'11, the Court's Opinion No 1/2010 `Improving the financial
management of the European Union budget: Risks and challenges'12 and the
Court's Opinion No 6/2010 on a proposal amending the Financial Regulation13;
Whereas, pursuant to Article 5 of the Treaty on European Union, the Union
takes action in areas which do not fall within its exclusive competence only if
and insofar as the objectives of the proposed action, by reason of the scale or
effects, can be better achieved at Union level;
Whereas following Article 174 of the Treaty on the functioning of the European
Union, in order to promote its overall harmonious development, the Union shall
develop and pursue its actions leading to the strengthening of its economic,
social and territorial cohesion;
Whereas Article 317 of the Treaty on the functioning of the European Union
makes the Commission responsible for the implementation of the budget,
having regard to the principle of sound financial management, and requires the
Member States to cooperate with the Commission to ensure that the
6
INTRODUCTION
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1.The European Regional Development Fund (ERDF), the European Social
Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural
Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF)
(hereinafter referred to as the 'CSF14 Funds') pursue complementary policy
objectives and their management is shared between the Member States and
the Commission. 'CSF Funds' could represent up to 45 % of the total
expenditure for the 2014-20 period whose leading theme is the Europe 2020
strategy 15. The contribution of the EU Budget to meeting the Europe 2020
objectives depends therefore to a large extent on an economical, efficient and
effective use of CSF funds. This will also impact on the credibility and
legitimacy of the EU action.
-
2.The Court opinion so far as possible follows the structure of the
Commission's explanatory memorandum regarding the content of the general
Regulation. It consists of two parts, the first deals with general observations
and the second contains a detailed analysis of the draft general Regulation.
7
is a significant policy change, whose impact needs to be assessed by the
Commission.
-
4.Overall, the proposal essentially retains the framework that was established
in the previous programming periods, although a further emphasis is placed on
Member States' responsibilities, in particular concerning systems set-up and
financial management. The respective roles and responsibilities of the
Commission and Member states remain a key theme in the design of Cohesion
spending instruments. The ongoing challenge for the Union is to obtain good
qualitative results from a scheme where funds are pre-allocated among
Member States and absorption is an implicit objective. An effective supervision
and accountability from the Commission on the use of the funds will support
Member States' capacity to use these funds successfully.
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5.The arrangements for Cohesion spending are complex. There are six layers
of rules (common provisions, general provisions, Fund-specific provisions,
delegated acts, implementing acts, Commission's guidelines). National
legislation will, in some cases, constitute an additional layer. The Court notes
the positive efforts to reduce beneficiaries' administrative burden (for example,
through the increased use of lump sums and standard costs). However, the
8
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7.The Court also notes the distinction between `common' provisions
(applicable to all CSF Funds) and `general' provisions (applicable only to some
of them: ERDF, ESF and CF). This leads to an incoherent legislative framework
and the question is whether it would be preferable to limit the general
Regulation to those provisions which are applicable to all five Funds (the
`common provisions') and to include other provisions (`general provisions') in
Fund-specific regulations.
-
8.Finally, the Court would like to point out that on several aspects the
regulatory requirements are deferred to a later stage, through delegated and
implementing acts under Articles 290 and 291 TFEU. Prior adequate
consultation with all stakeholders concerned will therefore be key in ensuring
that those acts comply fully with the objectives laid down by the general
Regulation. The Court notes in particular that matters to be covered by
delegated acts, meant to cover non-essential elements of EU legislation, deal
in reality with key elements of the future Cohesion scheme16. Concerning the
conferral on the Commission of implementing powers17, the Court observes
that in several cases the procedure (advisory or examination) for adoption of
these acts following the Regulation (EU) No 182/2011 is not specified. As a
result, the respective roles of the Commission and of the Member States
9
Strategic issues
EU added value
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9.The Court has highlighted that expenditure programmes which do not add
European value are by definition unlikely to be an effective and efficient use of
the EU taxpayer's money18. It has therefore recommended articulating the
concept of European added value in a suitable political declaration or in EU
legislation in order to provide guidance to the EU's political authorities to be
used when choosing expenditure priorities19. A favourable opportunity for the
Legislative authorities is to do so when putting in place the legal framework for
the 2014-20 period.
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10.A fundamental pre-requisite of EU spending added value is that it must offer
clear and visible benefits for the EU and for its citizens which could not be
achieved by spending only at national, regional or local level20. In that
perspective, the Court has suggested recasting expenditure programmes in
terms of acceptable outputs; with programmes based on a set of concrete
objectives, and disbursements linked to the achievement of results21. The
Commission endorsed this stance in its proposal for amendment of the
Financial Regulation22 and indicates in the explanatory memorandum to the
10
this aspiration and remains fundamentally input-based. The claimed switch
towards a performance oriented scheme is limited to the introduction of a
performance reserve and of Joint Action Plans.
Thematic concentration
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11.The Court has suggested that reasonable concentration of expenditure is
prima facie likely to support the objective of adding value25 so as to build up a
critical mass and make it more likely that EU interventions will have a tangible
impact.
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12.The proposal (Article 9 of the draft general Regulation) provides for 11
thematic objectives derived from the Europe 2020 Strategy. Collectively they
represent a very wide range of activities in support of which money from CSF
funds can be spent. Out of these thematic objectives, the ERDF intervention
should focus on three of them26, in particular for more developed and transition
regions. Four `thematic objectives' are proposed for the ESF27. Within these
`thematic objectives', the number of investment priorities for the ESF is limited
to four (Article 4(3) of the ESF draft Regulation). However, the ERDF could
intervene in each of the 32 investment priorities foreseen (Article 5 of the ERDF
draft Regulation). This would make possible to fund almost any kind of
11
thematic objectives29 and, as a consequence, it will be even more difficult to
achieve the necessary critical mass for those priorities.
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13.Finally, whereas for the ERDF, ESF and CF a maximum amount of support
is to be defined for each priority axis, for the EAFRD and the EMFF this
maximum amount of support is to be established at the level of each measure.
No justification is provided for this distinction. At present, the amounts in the
EAFRD programmes are allocated to priority axes which makes it possible to
fix (and concentrate) budgets per objective rather than per measure.
Common Strategic Framework
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14.The provision for a Common Strategic Framework (Article 11 of the draft
general Regulation) is meant to translate the objectives and targets of the
Union priorities into key actions for CSF funds. The Common Strategic
Framework should also identify coordination mechanisms among Cohesion
funds and other EU policies and instruments (for example, EIB financial
instruments, Research Framework programmes, Connecting Europe Facility
and Trans-European Networks, Competitiveness and Innovation Framework
Programme). Given the significant part of CSF funds proposed for Research
and Innovation, such coordination will be of particular interest in this area. The
12
Partnership contracts
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15.With the aim of encouraging results-oriented spending Article 14 of the draft
general Regulation provides for the setting of agreed condtionalities and
targets. For this the proposal envisages the introduction of a Partnership
Contract, an additional layer compared to the current programming period. It is
however for consideration whether this extra provision is necessary or if
conditionalities and targets could be set instead in the programmes
themselves, building upon the implicit `contract' between the EU and national
authorities in the operational programmes which apply in the current
programming period.
Ex ante conditionalities
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16.The Commission proposes (Article 17 and Annex IV of the draft general
Regulation) that a number of ex ante conditionalities shall be defined for each
Fund. This is a key development which could reinforce the "intervention logic"
of EU actions by facilitating the necessary integration of CSF funding with other
EU policies and finally have a positive impact on the effectiveness of the
investments. Indeed, Court's audits' show30 that funding projects without taking
account of broader EU policy requirements (for example, environment and
13
in time for the mid-term review and the lack of an appropriate methodology for
assessing progress achieved by programmes. In the 2007-13 period Member
States might introduce such a reserve but very few have made use of this
possibility.
-
18.The method for the performance review (detailed in Annex I of the draft
general Regulation) shows that this review will still mainly focus on financial
implementation (financial indicators), on outputs and only in a limited way on
results (outcomes, impacts). In line with the Impact assessment, one should
also consider whether it would be feasible to set robust indicators, how factors
unrelated to a specific programme could be identified, how results which may
only be visible in the long term could be taken into account31. The added-value
of a performance reserve will be considerably reduced if very low and easy to
achieve targets will be set or if performance disbursements will in the end be
mainly based on absorption grounds as the Court noted for the period 2000-06.
Also, the allocation of a performance reserve should be subject to a sufficient
implementation of operational programs 32. It should therefore be provided that
the reference years for the review of performance, currently 2016 and 2018, will
be revised in case of delayed start of the programs.
14
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20.The application of the envisaged macro-economic conditionality would
require careful consideration, since it might entail difficulties for the
implementation of CSF programmes, legal uncertainties and a potential risk for
the the fulfilment of long term obligations taken in the framework of partnership
contracts by the respective partners at national and regional level.
Joint Action Plans
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21.In view of simplifying and reinforcing the result orientation of EU funds, the
Commission proposes the introduction of Joint Action Plans (Article 93 of the
draft general Regulation) for ERDF, ESF and CF. These consist of a group of
projects as part of an operational programme, where EU funds are directly
linked to the respect of specific objectives and outputs, agreed milestones,
result indicators. Such an instrument could represent an alternative intervention
mechanism geared towards performance as long as it replaces rather than
complements the current input based management structure.
Common management and control arrangements
15
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23.The Court notes that one of the thematic objectives put forward by the draft
general Regulation is `Enhancing institutional capacity and an efficient public
administration'. This constitutes rather a pre-requisite for achieving the other 10
thematic objectives than an objective itself. It is also noted that the support for
administrative capacity is limited for the ESF to Member States with less
developed regions or eligible to the Cohesion Fund; this is not the case for
ERDF although national systems for the two Funds are subject to similar
requirements.
National accreditation
-
24.With the introduction of an accreditation procedure, the draft Regulation
reinforces Member States' responsibilities concerning the administrative
capacity of national management and control bodies (recitals 42 to 44 and
Article 64 of the draft general Regulation). The intention is to submit to an
accreditation process all bodies responsible for the management and control of
CSF funds (Article 64(1) of the draft general Regulation). Thus, national
authorities would accredit management authorities and, where appropriate,
certifying authorities for the implementation of ERDF, ESF, CF.
16
national accreditation as provided for in the relevant delegated act. This would
require, at the start of the programmes, to assess the documentary evidence
provided by the Member States and subsequently to review the functioning of
the systems, for example on a risk basis in line with the suggestion made in the
explanatory memorandum36.
-
26.In addition, the draft Regulation foresees that Audit authorities, who provide
an opinion on the CSF annual accounts submitted to the Commission, are
designated by Member States. The Court considers that since the Commission
is using the work of these bodies as a source of assurance, it should review (by
systematic on-the-spot visits) their systems and their performance in order to
ensure that their work is reliable37.The Court also points out that the role of
annual accounts and of their audit is not clear in the Commission's proposal.
Extensive accounting information is to be provided at the mid-point of the
financial year (at present not required for Commission's accounts) but there is
no clear requirement for reliable information at year end (information that is
required for Commission's accounts). The Commission proposal therefore
requires significant clarification.
Management declaration of assurance
17
the legality and regularity of the underlying transactions and the respect of the
principle of sound financial management38.
-
28.As stated by the Court, whether these declarations provide useful
information to the Commission for assurance purposes will depend on the
scope and quality of the work that underlies them39. This should be clarified in
the implementing act adopting the model for the management declaration. In
this respect the Court draws attention to the weaknesses found in the
agriculture area40 (insufficient basis for paying agencies' statement of
assurance, limited added value of the certification bodies' opinion) which, if
unresolved, will limit the assurance the Commission can take from these
declarations.
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29.The Court also notes that the extent to which this declaration may
meaningfully cover the sound financial management of Cohesion spending will
depend on a shift from the current focus on processes and financial
implementation towards a performance-based system, with criteria against
which performance is to be measured. In this respect, as noted earlier (see
paragraph 6), the Cohesion scheme remains fundamentally input-based and
while the managing authority has in principle a day-to-day responsibility for
18
Clearance of accounts, `rolling' closure and financial corrections
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30.The Commission proposes to introduce an annual clearance of accounts
procedure and an annual `rolling' closure of completed operations or
expenditure (Articles 130 and 131 of the draft general Regulation).
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31.The Court notes that the `clearance decision' (Article 76 of the proposal)
shall cover `the completeness, accuracy and veracity of the financial accounts
submitted and shall be without prejudice to any subsequent financial
correction'. As the annual clearance decision would not cover the legality and
regularity of the underlying transactions, the same problems noted by the Court
for agriculture expenditure42 will be extended to all CSF funds. The Court
recommends bringing Article 76 in line with the provisions of the Financial
Regulation. Also, as stated already in its Special Report No 7/2010, the Court
recommends establishing time limits for all stages of the procedure and, in
particular, a time limit for the Commission to take its final decision on a specific
financial year.
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32.According to the Financial Regulation (Article 53b(4)) and its implementing
rules (Article 42), the aim of the clearance of accounts is to establish the
amount of expenditure recognised as chargeable to the budget after the
19
the rolling closure may potentially bring some benefits for the Cohesion area as
national checksand audits will have to take place at an earlier stage, hence
permitting better preventive control arrangements. The fact that any irregularity
detected subsequent to the presentation of the annual accounts will lead
automatically to a net financial correction (Article 137(6) of the draft general
Regulation) is the consequence of the increased Member States'
responsibilities and reliance on their reimbursement claims.
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34.As discussed above, the Cohesion scheme is set out as a multi-annual
process. Full compliance of expenditure is not sought by the Commission
annually but several years later and ultimately at the stage of the closure of
operational programmes. Financial corrections mechanisms are the key
instrument for this purpose. They are to be applied first and foremost by
Member States themselves. When the latter fail to correct irregularities, the
Commission may on its turn impose financial corrections on the Member
States.
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35.Recent Court audits confirm what was noted previously43. Despite a lengthy
administrative process, there is no assurance that financial corrections
mechanisms compensate in an adequate manner the errors uncovered, and
20
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36.The effectiveness of these mechanisms depends on the incentive they
provide to recover irregular payments from final recipients and to bring about
improvements in the supervisory and control systems. For errors detected in
individual transactions where the final recipient is at fault, the initiation of
recovery proceedings is expected.44 The Commission should therefore clear
irregularities only when the Member State has at least initiated such a
procedure.
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37.There is finally a need to assess the realism of the intention to apply
financial corrections where the shortfall in the achievement of milestones or
targets is significant (recital 18, Article 20(4)). The Commission may not be able
to assess the reliability of the data provided by Member States and may not
dispose of independent information sources (see paragraph 39). It also remains
to define what a `significant' shortfall in the achievement of milestones or
targets is.
Monitoring and evaluation
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38.According to the draft general Regulation (Article 24), each funded
programme shall define priorities setting out specific objectives. Each priority
shall set out indicators to assess progress of programme implementation
21
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39.As a result, the draft general Regulation requires the Member States to
produce a significant amount of data for monitoring and evaluating the
programmes (Articles 41 to 50 of the draft general Regulation). Courts' audits45
have shown serious deficiencies in relation to the relevance and reliability of
the information presented by the Member States to the Commission. Therefore,
the aim of making EU funds conditional upon results would require significant
improvements as these data could trigger the EU disbursements and should as
a result be subject to verification and control procedures. The more so as in
accordance with the Treaty (Article 318 TFEU) the Commission has the
obligation to establish annually an evaluation report on the Union's finances
based on the results achieved. The Commission should therefore consider how
far is possible to ensure that the data produced by the Member States in
relation to the monitoring, evaluation and performance of programmes have an
acceptable quality level in terms of relevance, comparability and reliability.
Simplified and streamlined eligibility rules
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40.The draft general Regulation provides for the harmonisation of eligibility
rules with other EU financial support instruments. At the same time, the general
principle introduced in the current 2007-13 period by which eligibility rules are
22
way of electronic data exchange. To make this proposal operational a number
of technical aspects and specifications will need to be agreed within Member
States and regions, but also between the different Commission's Directorates-
General and national authorities. Also, the type of non-financial monitoring data
that will need to be reported still needs to be determined.
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43.The Court also considers useful the provision in the draft general Regulation
whereby the functions of the Managing and Certifying Authorities can be
merged (Article 113(3)). This may strengthen accountability by assigning
responsibility for financial management and control to one authority and reduce
the national administrative burden and the control burden of beneficiaries.
Retaining the audit authority and its main functions as an independent audit
body guarantees in principle the required segregation of responsibilities.
Community-led local development
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44.The proposal is to extend the community- led local development approach
(LEADER) to all funds, as a method to achieve the EU objectives through a
bottom-up, rather than the traditional top-down approach. It promises an added
value from a collaborative and strategic approach, local decision making and
innovative measures. The Court notes that that such an approach entails
23
Financial instruments
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46.Financial instruments are a form of intervention which can, in principle,
leverage in private funding and ensure the re-use of resources for future
recipients. The Commission proposes to encourage and enhance their use in
the next programming period as an alternative to non-reimbursable grants.
-
47.The draft general Regulation provides for ex ante assessment specific to
financial instruments and the possibility to have financial instruments set up at
Union level, and the increase of the EU co-financing rate up to 100 % at the
`priority axis' level (Articles 32, 33 and 110).
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48.The Court notes that financial instruments present risks and problems47, for
example, in the accounting of the use of EU funds, their supervision, the
ownership of the financial instruments, the capacity of Commission services to
manage relatively complex financial instruments.
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49.Recent audit work by the Court cast significant doubt on the suitability of the
2000-06 and the 2007-13 ERDF regulatory framework within which financial
instruments have been or are being implemented. In particular, the Court
identified the following main weaknesses: the insufficiency of leverage and fund
24
appropriate monitoring and supervisory control systems are in place. The
Parliament and Council might also wish to satisfy themselves whether the draft
Regulation limits the support to only relatively conventional forms of financial
instruments (equity participations, loans, guarantees), and will not permit
support for less transparent financial instruments such as derivative or
structured financial instruments.
25
PART II
Detailed comments to the Commission's proposal
Article Observation
Recital 41 It would add legal certainty if the draft general Regulation listed the specific provisions on State aid regarding financial instruments.
Recital 87 The Court recommends to change the text as follows `...In
order that the level of auditing by the Commission is proportionate to the risk, the Commission should be able to reduce its audit work in relation to operational programmes where there are no significant deficiencies and where the audit authority can be relied on.
'
Article 4(5) It is not clear from the regulation how the principle of proportionality should be applied and how proportionality should be assessed.
Article 4(9) This provision, limited to effectiveness, is redundant and contradictory with Article 4(8) which refers to Article 73 of the Financial Regulation, and therefore also to the principles of economy and efficiency. In any event, the stages of
`planning' and `implementing' should be added to
monitoring, reporting and evaluation.
26
Articles 28 to 31 The `Community-led local development' could be an
important mechanism to create and upgrade local institutional capability towards result oriented implementation. While recital 21 of the draft Regulation states that 'to better mobilise local potential it is necessary to facilitate community-led local development .... Responsibility ... should be given to Local Action Groups (LAGs) representing the interests of the community... ', most rural (and urban) areas already have structures that represent the interests of the local community, i.e. communes, councils or other local government structures. These have advantages over LAGs in that they are representative of the local population; they are democratically accountable and have already established administrations with the capacity to manage budgets. Attention should be paid to ensure that the LEADER approach offers a real added-value over the alternative of channelling the funding for local development strategies through these existing bodies.
Articles 32 to 40 The term `financial instrument' should be defined. The term is commonly used in the financial industry to designate securities or contracts providing their holder (or owner) with a claim. Such instruments are typically loans, guarantees, equity or quasi-equity investments or participations or other risk-bearing instruments. A similar definition is used in the proposal for amendment of the Financial Regulation (art. 130). However, Article 33 of the draft general Regulation does not refer to the above mentioned instruments, but to vehicles that provide financial instruments, i.e. fund of funds and funds.
27
where all in- and outflows (initial contributions, loans granted, payment linked to guaranteed defaulted borrowers, premia, interests, returned resources, management fees) are respectively deposited/withdrawn.
A separate accounting for the financial instruments should be kept, which should be reconciled with the bank account. Annual financial statements for the financial instruments should be prepared and audited.
Failing to lay down these constraints entails the risk that, under the proposed legal framework, (a) financial instruments are used to circumvent the obligation of national co-financing and that (b) the auditors are unable to detect this breach of the EU regulation.
Article 32(2) When final recipients are also beneficiaries of grants from various public sources (CSF funds, other EU grants, national/regional grants), the requirement to maintain separate records creates an additional complication, as the information reported would miss out on the actual level of public support received.
In order to ensure completeness, the Annual Implementation Reports should report on a consolidated basis on the different sources of financing used for financial instruments in the programme area.
Article 33(3) Article 33(3)(b) leaves the door open to funding vehicles not regulated by future implementing acts under Article 143.
Article 33(4)(a) and (c) There is a risk of supporting Managing Authorities without significant experience in financial services. In addition to that, under Article 33(4)(a), a Managing Authority may recapitalise public banks or funds overloaded with liabilities as long as new investment vehicles are set up without any funding of new SMEs or SMEs particularly at risk.
28
the total eligible expenditure recorded.
Articles 36(1), 55(2) and 114(4) The capping of management costs per type of vehicle (fund of funds and other funds per type of financial instrument) should be regulated.
As in the 2007-13 General Regulation, the Proposal is ambiguous regarding guarantees. Provided that a sound financing gap assessment has been prepared, guaranteed amounts of portfolio guarantees should be eligible expenditure. Article 36(1) is unclear whether portfolio guarantees committed during the eligibility period would be eligible even if the underlying instruments (e.g. loans) are issued after closure of the programming period.
Article 36(2) Given the delays observed during operational programming, in the case of Venture Capital funds, the extension of the period for eligible expenditure should be longer (e.g. 10 years), which, in combination with the
respect of pari passu and leverage requirements, would help EU funds delivering increased legacy funding.
Articles 37 and 39 As under the 2007-13 Regulation, it is unclear whether interest and other gains attributable to EU support paid to financial instruments should be used for the same type of financial instruments and for how long after closure (revolving nature of interest and capital gains). As per Article 39, legacy funding (including gains and other earnings) may be used to fund grant schemes, therefore limiting the revolving effect.
29
-
-The pari passu principle, applied under the Multiannual programme for enterprises and entrepreneurship (MAP) and the Competitiveness and Innovation Framework Programme (CIP) (for equity instruments) has not been referred to. It leaves the EU funds subject to any kind of preferential treatment. Alternatively, the Commission could refer to the alignment of interest principle. Without further clarification, the EU legacy funding foreseen for future SMEs is at risk.
In addition, resources returned to and revenues earned by the financial intruments should not be re-directed elsewhere before the closure of the operational programme, as it is proposed in Article 38(1) and 38(2): such resources should return to the relevant financial
instruments.
Article 38(3) The period during which records pertaining to the re-use of resources have to be kept and may be audited is not defined.
Article 39 Article 39 defines to re-use of financial instrument resources attributable for CSF Funds (10 years after the closure of the programme). It is still not clear however how this will be monitored.
Whilst the definition of the minimum revolving period of 10 years is welcomed, it does not take into account the specificities of the different types of financial instruments and is not detailed in terms of leverage ratios and indicators.
30
Article 44 The Member States shall submit a final report on the implementation of the programme by 30 September 2023 for the ERDF, ESF and CF and an annual implementation report for the EAFRD and EMFF. It is not clear why this distinction is made between the structural funds on one hand and the EAFRD and EMFF on the other hand.
Articles 51 and 52 The Court takes the view that technical assistance should support the generation and upgrading of
`local lasting
institutional capability' which goes beyond the generation
and implementation of a single project or the carrying out of related operations with the help of external expertise.
Article 56 This Article introduces new forms of support, such as prize and repayable assistance. No definition however, especially for prize, is provided.
The conditions for repayable assistance should be more detailed, for example for state aid schemes.
Article 57 It is unclear at which level the possible methods are to be defined and monitored. It would not be acceptable that the calculation method is established by the beneficiaries.
It is unclear whether the simplified cost method can be used for cost categories which were subject to procurement
as well.
Article 58 The acceptable direct and indirect costs are to be clarified.
Article 59 The `period of support for the operation' in Article 59(2)(c)
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Article 64 Reference should be made to the criteria set by the Commission (Article 117(1)).
Article 76 It is unclear what is meant by veracity of the annual accounts.
Article 77 Article 77(2) seems to suggest that financial corrections will be applied only to compliance issues. This would be inconsistent with Article 20(4).
Article 77(4) of the draft general Regulation stipulates that the criteria and the procedures for applying financial corrections shall be laid down in the Fund-specific rules, but the Fund Regulations are silent in this respect.
Article 84(4) and (5) It is unclear how these amounts will be divided-up by Member State.
Article 90 There is no conceptual or legal argument why financial instruments could not be considered as major projects if their combined size exceeds 50 million euro.
On the contrary, there is a lost opportunity here, as recognition as a
`major project' could be a way to promote
the creation of fund of funds with sufficient critical mass, considering the legal certainty a Member State obtains after applying for a
`major project'.
Articles 91 and 92 The funding gap issue is not resolved; it is unclear whether the funding gap needs to be applied for interim payments.
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-
-that the combined legacy funding of CSF and other EU funds remains subject to de-commitments.
Article 117(4) The Commission should be in a position to request the report and the opinion of the independent audit body and the description of the management and control system for all operational programmes, independently from the amount of EU support.
Article 130 The Court recommends specifying an additional date at which the Annual Managment Declaration needs to be produced to make the proposed timetable work.
Article 131 There are several uncertainties about this proposed procedure, for instance with regard to the deduction of revenues for already completed projects. The arrangements for ERDF/CF and the ESF should be aligned, i.e. for ESF the rolling closure should also apply to
`operations' and the related expenditure rather than just
`expenditure'.
Article 132 This provision limits the Court's powers and leaves solely to the Commission the possibility to ask for an extension of the availability period.
With the new electronic systems to be used it is important to clarify what form of documents can be accepted as audit evidence (i.e. use of certification of conformity of documents at national level point 5, and security standard of electronic documents point 6).
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This Opinion was adopted by the Court of Auditors in Luxembourg at its
meeting of 15 December 2011.
For the Court of Auditors
Vítor Manuel da SILVA CALDEIRA
President
| publication date | 27-01-2012 |
|---|---|
| reference | 5798/12 |
