21.3.2017   

EN

Official Journal of the European Union

C 88/12

1.

stresses that ESIF is one of the few EU instruments to have a direct, concrete and tangible impact on citizens’ quality of life through hundreds of thousands of projects implemented all over Europe and so be capable of improving their overall opinion of the EU at a time when its popularity is declining. Therefore, this instrument should be further maintained and developed in accordance with its key objectives and principles. On the contrary, ESIF — and cohesion policy in particular — should undergo a process of analysis and improvement to increase its effectiveness and added value, with the aim both of achieving the EU’s targets and the Europe 2020 strategy, and also benefiting other areas that are important to the lives of citizens, and thus improving their perception of the EU. One good and important way of achieving this is by simplifying the overall ESIF implementation system and increasing its flexibility;

2.

warns that the procedure for using ESIF is getting more complicated not just with every programming period, but virtually every year. The Committee therefore very much welcomes the initiative of the current regional development commissioner, which underpinned the European Commission’s efforts to seriously address simplification by not only setting up a high level group, but also inviting other partners to debate the issue. The CoR also points out that not only ESIF, but all financial programmes and EU policies, should be examined with a view to simplification;

3.

welcomes the close cooperation with the Dutch and Slovak Council Presidencies in jointly discussing practical steps for simplifying ESIF implementation and suggests continuing this exercise with the upcoming Council Presidencies and in view of the debate on the future of cohesion policy;

4.

notes that part of the simplification process has to be to focus on making the fundamental idea and spirit of cohesion policy a reality — and this is regional policy. It observes that cohesion policy in its current form is gradually moving away from regional policy and increasingly dealing with issues at national level. This is apparent, for example, from the fact that individual partnership agreements are based on the National Reform Programmes. Moreover, cohesion policy is subject to a large number of conditionalities at national level, which cannot be influenced by local and regional authorities and other beneficiaries. Cohesion policy is becoming increasingly complex and complicated, mostly due to the lack of trust among different political and administrative levels. This complexity, in turn, contributes to growing disparities in regions’ development;

5.

points out that the CoR represents local and regional authorities, which can act at various stages in the chain in the management of ESIF’s implementation procedure and in particular, as final beneficiaries, managing authorities or stakeholders. It is clear from this role played by local and regional authorities that their insights and suggestions should be prioritised as part of the simplification process;

6.

emphasises that for simplification to really work, it needs the active involvement not just of all the Directorates-General of the European Commission that are involved in planning and monitoring ESIF, including DG REGIO and DG EMPL, DG AGRI, DG MARE and DG COMP, but other institutions and EU bodies as well (such as audit authorities). The system must be simplified for both, the beneficiaries as well as administrative authorities;

7.

recommends that the simplification process focus on reducing the red tape that is a burden to implementing bodies and on making the audit, reporting and certification of expenditure process less complex. The regulatory framework should be adjusted proportionately to the scale of the project and the effectiveness of the implementation system;

8.

recommends that simplification should be approached systematically, and therefore feels that it would make sense to come up with a methodology for it, along with indicators to measure implementation and success. A distinction needs to be made, therefore, between two kinds of results: those where the insights and proposed solutions can be implemented immediately, and those that will be used in the next programming period. For the current programming period, given the ongoing implementation of operational programmes, far-reaching legislative changes are not realistic in the interest of legal certainty. Nevertheless, immediate actions should be envisaged through changes in implementation practices and non-legal requirements, better cooperation and more effective guidance as well as minor adjustments to the legislative framework of cohesion policy and related legislation. The simplification process should also be structured — according to fields (transport, environment, etc.), funds and the target areas within them (ERDF, ESF, etc.), level (national, regional, urban, local and borough), and the stakeholders involved (public, private, NGOs, etc.). As part of this process, it is necessary to identify the links and impacts both within this structure and outside it and to focus on the simplification of interinstitutional relations between the different levels involved in implementation;

9.

suggests improvement of coordination between individual Funds and programmes at national level. This should be attained also through strategic management and planning during the programming period with the emphasis on general strategic work;

10.

emphasises that it is important for the success of the whole simplification process to answer these basic questions:

11.

does not consider as simplification:

12.

does consider as simplification:

13.

emphasises that simplification is a continuous process that should not be limited to implementing a few measures or drawing up a report or an opinion;

14.

warns that many beneficiaries feel that using ESIF at the present time is a ‘risky business’, since they have no guarantee they will not fall victim to a ‘force majeure’ — that is to say, that funding for their project will not be scrapped or held up because of some dispute between their country and the Commission, perhaps about not meeting conditionality requirements, for example, or errors in the implementation system. And even when the beneficiaries’ project has achieved its aim and effect, support could still be reduced or postponed for a variety of minor errors or because there have been objective grounds for changing the project in the course of implementation. They also face the danger, among a raft of other risks, that the findings of the audit authority on some other project will also be applied retrospectively to them. These elements all influence their willingness to use ESIF funds effectively. The project and its promoter must once again be made the focal point of cohesion policy, by creating conditions favourable to beneficiaries — particularly by cutting back on red tape and limiting reporting by project promoters to data on project delivery, by making the use of simplified costs standard practice and ring-fencing the decision not to question them during audits, and by informing promoters which obligatory documents must be stored in hard copy for a set period of time;

15.

believes that it would be a major simplification if all EU funds applied the same eligibility rules. However, it is essential that responsibility for determining eligible costs remains at national level, and this should be harmonised across the EU Member States;

16.

suggests that some already-existing institution or body could be entrusted with the authority and role of an ombudsman for ESIF, which beneficiaries could turn to as a last resort; due to the complex nature of the system, many beneficiaries, despite making an effort to deliver projects so they have the greatest possible impact, find themselves, paradoxically, in difficult situations that are not only devastating for them in economical and non-material terms, but also do much to foster the dim view the public has of ESIF and of the EU as such. This institution should not be geared solely to communications with DG REGIO, but particularly on addressing ESIF matters across the whole of the European Commission and other EU bodies. Such an institution is missing at EU level, although a raft of other DGs and other bodies get involved in the ESIF issue. It would also make sense for similar institutions to be established in Member States which do not already have them;

17.

stresses once more that it is essential to avoid retroactive findings. Current rulings and changes to procedures or guidelines should not be applied retroactively to other projects, even incomplete projects that are at an advanced stage of implementation. The prevention of retroactivity is a measure that can be applied quickly and that will reinforce legal security for beneficiaries;

18.

advises that the simplification process include reforms to facilitate greater flexibility because the growing complexity of the processes is mostly caused by decisions that are specific to certain projects being incorporated into the general guidelines and directives. To this end, the CoR advises that a working group should be set up made up of specialists in the practical implementation of ESIF to put forward proposals on changes and discuss them with the European Commission and other bodies;

19.

warns of frequent cases of discrepancies between the EU’s legal framework for ESIF and national legislation in apparently unrelated areas, such as laws on financial control or public procurement, which causes fragmentation and different approaches in various Member States; recommends therefore that EU legislation and guidelines concerning ESIF should take precedence over conflicting national or EU legislation because ESIF uses EU and not national funds, even though co-financing is provided from national or sub-national resources, in order to prevent gold-plating;

20.

proposes that examples of good practice be transferred from countries and programmes that in the past had negligible or low error rates. At the same time, care needs to be taken that the conditions are the same for all countries (even though national legislations differ). At present, different territorial units often have diametrically opposing approaches. Situations arise, in fact, where what is considered a correct and routine approach in one country is seen in another as seriously flawed. This does not change the fact, of course, that administrative burdens should take into account the size of projects, the amount of aid and the quality of the implementation system;

21.

points out that if the simplification process is to succeed, the task we face is to reconcile measures combating corruption and reducing error, on the one hand, and cutting the administrative burden of ESIF on the other. We must review the implementing and management provisions that put fraud and unintentional errors on an equal footing, leading to a climate of mistrust between stakeholders and a disproportionate administrative burden for the project promoter. Individual measures that are introduced over time to guarantee transparency and fight against corruption and fraud significantly complicate the entire system. We need to verify a posteriori which of these measures really work and which merely complicate the system and criminalise honest beneficiaries for trivial errors. The fight against corruption should not mean that we treat every beneficiary a priori with mistrust. It should be based on trust, cooperation and clear accountability. This fight should be underpinned by basic moral principles and accountability for achieving what the beneficiary has undertaken, and not on using errors detected to design an inflexible template that — on the contrary and often ineffectively — will bind other beneficiaries. Concentrating just on meeting formal requirements and schedules could in fact itself lead in some cases to funding being taken up expediently or improperly — and with impunity;

22.

following discussions held internally and with other partners, identifies these key elements of the issue that need to be resolved.

23.

As was demonstrated in the workshop on simplification, even though procurement works without any problems in some Member States, representatives of a number of countries currently consider procurement to be one of the most fundamental problems of implementation. We therefore consider that there should be clear EU-wide rules for public procurement under ESIF which would take precedence over national legislation in this area. These are mostly EU and not national resources and therefore calls for tender should be governed by EU-wide and not national rules. In addition to this, the procedures for public tenders should help to deliver the most effective end product and, to achieve this, provide the various types of tender with an element of flexibility, instead of hamstringing the contracting authority and the applicant in a purely formal way in various binding, standardised procedures and processes. Among other things, the value threshold for publication on the public procurement portal and in the Official Journal of the EU should be raised.

24.

As was demonstrated in the workshop on simplification, even though procurement works without any problems in some Member States, representatives of a number of countries warn that the current system is so complicated and risky that smaller contracting authorities are not in a position to draft public tenders themselves and have to use the services of external specialist companies, though this does not exonerate them from responsibility for possible errors. This has created a whole new industry. The paradox is that in some instances selecting a company to draft the call for tenders itself requires a call for tender.

25.

As was demonstrated in the workshop on simplification, even though procurement works without any problems in some Member States, representatives of a number of countries warn that most errors in public procurement are genuine mistakes resulting from complex rules. As a result project promoters are frustrated by ex post audits, which often arrive at a late stage in proceedings, when fixing mistakes is no longer possible and when they do not even have the possibility to ask for a provisional binding ruling. The CoR therefore suggests that audit opinions and other control procedures for public procurement should be performed primarily ex ante in order to anticipate errors, which are very frequent in this area in particular, and thus reduce the number of financial corrections.

26.

It should also be noted that the legislation for the process of assigning contracts focuses on the contracting authority, who is also sanctioned and persecuted for the slightest error, whereas many harmful interference in the results of public procurement takes place on the basis of agreements between tenderers. In areas and segments in which the market is overwhelmingly monopolised, the current public procurement system often does not fulfil its purpose and can even be counter-productive. This is why it would be wise to reflect on the system as a whole and consider completely reassessing the philosophy of the entire system. This is especially the case in smaller countries where the monopolisation of the market is much more pronounced.

27.

It is important that the recently released Guidance for Procurement for ESIF (Guide on public procurement) is urgently reviewed as it refers to the old directives and not to the new Procurement Directives that were approved in 2014 and which entered into force earlier this year. In that respect it is essential that input into the new Guidelines is subject to a proper Territorial Impact Assessment that enables direct input from local and regional experts. This is provided for in the Better Regulation Package, which recognises the role of the CoR as a key partner in better scoping the local and regional impacts of EU proposals.

28.

The question of State aid has become much more complicated over the years and, despite a partial improvement in some programmes recently, the situation remains very complicated for beneficiaries and managing authorities. As we speak, there is no clear, comprehensible interpretation of State aid, with judgements everywhere being based solely on applications and findings. The national authorities tasked with interpretation often have diametrically opposed views and are usually unwilling to issue clear-cut and binding opinions. In a number of countries these authorities are not part of the ESIF implementation system and no clear accountability attaches to their opinions. It would therefore be advisable to incorporate national authorities into implementation structures (in cases where they are not yet incorporated) and oblige them to issue unambiguous statements. Moreover, in some cases, paradoxically, operators in the private sector tend to be in a better position than those in the public sector, with a number of guidelines, regulations and measures they are not required to follow. Although it is much rarer for public bodies to act as competitive economic players and their activities are not carried out with the aim of making a profit, they must undergo the same processes as private bodies.

29.

There is also another important inconsistency in the application of State aid rules. While programmes managed centrally by the European Commission (such as Horizon 2020, CEF and the European Fund for Strategic Investment) are exempt from State aid procedures, funding under the EU’s cohesion policy is not exempt. In terms of State aid, then, projects are not in practice judged on their merits but according to whether it is the Commission or the Member State that grants the funds and the source of their funding.

30.

In this context, the CoR wishes to point out that the basic purpose of cohesion policy is to ensure equal conditions for less developed regions — by providing more funding and a higher rate of co-financing from the EU. It is therefore possible to view cohesion policy as deliberate market distortion. This is why the CoR believes that the procedures that apply to State aid should not in any way apply to ESIF.

31.

Particular attention should be paid to the application of State aid under European Territorial Cooperation programmes. Generally speaking, the effort needed to comply with State aid rules is disproportionate to the risk of distortion of competition. Moreover, State aid is often subject to different interpretations in different Member States and it is therefore not possible to apply these rules with adequate legal certainty, which often makes it quite impossible to carry out high-quality projects. One measure that could be implemented quickly in order to simplify ESIF would be to remove European Territorial Cooperation from the area of application of State aid rules, as is the case for the Horizon 2020 programme, for example.

32.

There is also an issue of clarity and proportionality. Given the small scale of some projects, particularly at local level, it is important that the framework of exemptions from State aid rules is made clearer. At the moment there is often confusion over when and how the de Minimis, Service of General Interest, General Block Exemption and Regional State Aid Guidelines operate. The European Committee of the Regions calls for a better, user-friendly consolidated guidance to be developed already during this programming period and calls for the forthcoming revision of the State aid rules to improve and simplify the existing framework.

33.

Given the revised approach to defining an enterprise, supporting jobs, innovation and business in the regions also requires raising the aid ceiling in line with the de minimis rule.

34.

Lack of consistency in audit methodologies at national and European level is perhaps the biggest challenge for the ESIF implementation process. Managing authorities and different European and national audit authorities frequently arrive at different interpretations of the same rules, while at the same time they are not in any way liable for the audits that are carried out. ESIF projects should be subject to a single audit system (a one-stop shop) at Member State and EU level that will issue a binding opinion — including on public procurement and be accountable for it. The final beneficiary himself should also have the right to request audits so that he can be sure that implementation has been carried out properly and no danger looms in the future — or so that he can make corrections. This also requires a more flexible approach to data sharing and integrated IT solutions such as electronic forms and databases as a precondition to developing a one-stop shop that reduces the form filling burden for beneficiaries and managing authorities. Making a ‘user-friendly’ electronic system standard practice will minimise the documents to be scanned and downloaded. Priority should therefore be given to IT applications that enable the beneficiary’s administrative records to be retrieved directly from the source (such as employees, turnover, fulfilment of tax and social obligations). However, this requires a prior risk assessment on what and which data can be shared and also requires the involvement of the Commission, national and regional audit bodies as well as the European Court of Auditors from the outset, perhaps developing a common Audit Vademecum, to avoid audit issues further down the line. As things stand, auditing is seen as a punitive enforcement measure. As a rule, audits only address the administration of the project and compliance with the procedures laid down and any deviation is severely punished, even if carried out to improve the effectiveness of the project, due to unforeseeable circumstances, or to save money. The CoR therefore proposes that auditors focus on the real cost efficiency and take into consideration the financial seriousness of the mistake and the particular situation (more proportionality in audits). Proportionality should be added to the inspections and compliance rules by enabling higher tolerance levels to minor infractions. We should move towards a more proportionate (with less on-the-spot checks for better performing programmes or delivery bodies) and an outcome-based approach to inspections (so that more than one type of inspection can be carried out on a single visit, something which is particularly important for multi-fund programmes and operations), as well as a more proportionate audit focusing less on penalties and more on improvement and in ensuring the broader outcomes of Cohesion Policy. The auditor should be looked upon as a partner in solving problems and searching for the most effective way to identify and rectify mistakes. This requires a very different attitude from auditors.

35.

Administrative and audit authorities should work hand in hand from the programming phase until the conclusion of programmes, as this is the only way to prevent different interpretations of the same rules. A common control system or a common understanding of the control system we should be aiming at should prevent the same operation being audited several times, since different audit authorities should, as a rule, build on and complement each other’s opinions. In this context, the CoR proposes extending the scope of the proportional control mechanism described in Article 148 of Regulation (EU) No 1303/2013, by applying it not only to the audit authority and the Commission, but also to all types of audit, including those carried out by the managing and certification authorities and the European Court of Auditors. More generally, greater emphasis should be placed on subsidiarity in the audit. The Community audit should be confined to compliance with ESIF rules. The Member State and its managing authorities should assume responsibility for checking compliance with national legislation (including laws derived from European legislation). This subsidiarity in audit activities should be conditional upon the establishment of a contract of confidence between the Commission and each Member State.

36.

Also suggests raising by 50 % the thresholds below which an operation shall not be subject to more than one audit prior to the submission of final expenditure.

37.

Where projects involve several partners, it is unacceptable that, because of irregularities discovered in connection with one of the partners, the whole partnership or, in an extreme case, the whole programme should be penalised with a financial correction.

38.

Although there are some states in which appeal systems work without serious problems, in certain other states these systems, even though they were established on the basis of Article 74(3) of Regulation (EU) No 1303/2013, differ widely and do not always fulfil their role from the point of view of the beneficiary. A single, understandable and rapid appeal system should thus be put in place both at Member State level (where this does not exist) and at EU level. This system should apply not only to audit findings, but to decisions at all levels and in all areas (such as State aid).

39.

The practice whereby Member States go beyond the minimum requirements when transposing EU legislation into national law is supposedly a problem of the Member States and not the European Commission. Nevertheless, the reason it happens is because the Commission’s regulations and implementation guidelines allow for it. If the intention is to reduce the practice to a minimum, the Commission must be given a stronger role in this area. It must clearly stipulate in its regulations and implementing guidelines clear absolute requirements that can be neither tightened nor loosened. This applies to public procurement and auditing, among other fields. ESIF resources are EU funds, so the rules should be set by the EU and not the Member States.

40.

Additional regulatory burdens also occur because in many cases the implementation guidelines are not drafted at European Commission level until the programmes are being carried out. Member States and managing authorities are therefore forced to develop their own guidelines, which are different from those that the Commission publishes ex post. As a result, regulations regarding ESIF must be drafted at the same time as the guidelines, and not afterwards as a means of clarifying and interpreting the way that each of the different articles of the regulation should be interpreted. This approach often results in a delay of more than a year in taking up operational programmes and in additional revisions that again adversely affect the level of ESIF take-up. The number and scope of guidelines and methods must be significantly reduced. At the same time the focus should be on clarity and effectiveness rather than scope, so that the system does not become more complex and ineffective. They should be unambiguous and should not be changed in the course of implementation. On no account should guidelines be retroactive.

41.

It would be expedient to examine to what level programming and thematic concentration should be carried out. Currently, programming impacts on every level of implementation right down to the grass roots. For this reason general goals should be set, as part of a thematic focus, together with the main indicator for how well each of them is being met. Managing authorities should be given leeway as to what activities will enable them to achieve this goal in this or that region, in order to better take into account the needs of the regions with regard to their specific features and the challenges they face. If the goal is to create more jobs, some degree of latitude should be made possible regarding what resources are used to meet it. In some regions, depending on their level, work in areas such as research can help meet the goal; in others it might be tourism. Support for cross-border cooperation, in particular, which aims to integrate regions across borders, should take into account the specific needs of the cross-border region in question and so enable support for important activities beyond the thematic objectives of the EU2020 strategy. An example here could be the Small Projects Funds that support people-to-people projects, tourism and missing transport links. It would generally be worthwhile considering whether all EISF conditions should apply to European territorial cooperation. It should be ensured that there is no decrease in financial allocations.

42.

Programmes should be made more flexible so that they can react flexibly to new situations and to rapid technological development. This flexibility should be genuine, however. In other words, it should be possible to limit and simplify the whole process for amending a programme. The need, for example, to carry out a new SEA assessment should not be considered as genuine programme flexibility. In the above-mentioned case, for example, it should only be necessary to consider carrying out an SEA assessment in cases in which reprogramming entails specific objectives with a significant environmental impact that has already been identified.

43.

Regulation (EU) No 1303/2013 has introduced two instruments that would provide an integrated territorial approach, i.e. Integrated Territorial Investments and JAPs (joint action plans), which would make integrated development of a particular area or region possible. However, the Member States have received very little encouragement from the Commission to use the instruments, not least in that they were defined by the Commission in its delegated and implementing acts in a somewhat vague and complex way. Greater implementation of the two instruments would result in:

44.

In the case of integrated territorial investments (ITI), management systems are required that are totally out of proportion to the amount of financial resources this instrument dispenses. Equally, as highlighted by the Committee opinion on Community Led Local Development (CLLD), the number of separate rules that are required to comply for each fund, which are also often run by separate Managing Authorities, act as a disincentive to develop a CLLD beyond EAFRD. This results that these very innovative integrated local development tools have seen so far a limited deployment on the ground. The need to create these systems not only makes managing the instrument disproportionately more expensive and weighs heavily on those involved, it also significantly complicates and delays the implementation of the projects.

45.

notes that the fact that cohesion policy rules are changed on a 7-year basis or even more frequently has not helped to simplify cohesion policy but rather had the opposite effect. However, a legal framework covering more than one programming period would require prior radical simplification. Smaller, beneficial changes in the cohesion policy implementation system are always possible and desirable, but more substantial changes should be introduced less frequently and prepared well in advance. The impact of these changes should be analysed in advance and, respecting the partnership principle, be discussed in advance with the relevant partners, who are not just the Member States, but also the local and regional bodies represented by the Committee of the Regions.

46.

Sees the use of financial instruments as an important element to increase the leverage effect of ESIF programmes and to combine ESIF and EFSI funding. There is however an urgent need for simplifying the set-up, the reporting requirements and the audit rules for financial instruments under ESIF as it was recently stated at the joint workshop with the Slovak Presidency of the Council (1) on the matter.

47.

Recommends that the European Commission examines why the off-the shelf instruments for financial instruments so far are not being used in most Member States;

48.

Takes note of the findings of the recently published report of the European Court of Auditors Implementing the EU budget through financial instruments — lessons to be learnt from the 2007-2013 programme period and invites the Court to also assess the implementation of financial instruments in the current funding period.

49.

takes note of the recently published Omnibus Regulation (2) which also includes changes to the ESIF regulations particularly with regard to simplifying the use of financial instruments and simplified cost options in ESIF programmes.

50.

proposes that for the purposes of simplification, the EC shall collect and monitor ‘bad practice’ projects. This would serve to illustrate the need to simplify and adapt the approach and would complement the exchange of best practice regarding the implementation of ESIF. Given the practical experience of CoR members, the CoR should play a key role in the process;

51.

The basic documents for the individual funds in the 2014-2020 programming period were published by the Commission so late that it was impossible to begin implementation at the start of the programming period. There were long waiting times and difficulties in coordinating the individual OPs. In future, the documents should be published all together and in good time.

52.

Reiterates that practical tools exist which could help ensure that the simplification of the management of ESIF is effective. The standardisation of procedures, the widespread use of IT tools and e-governance are among the basic elements that are widely applicable to these funds. In addition, progress should continue to be made, among other things, in the use of standard costs, which eliminate administrative burdens, and in the simplification of reports and monitoring, which may avoid additional bureaucratic burdens for beneficiaries and the various authorities involved in managing these resources.

53.

notes that pursuing the principle of partnership with local and regional authorities more readily in the design and throughout the implementation of ESIF would enable the European Commission to obtain feedback that would contribute in a decisive way to simplifying and increasing the effectiveness of the implementation process.