Contents. Gold-plating in ESIF Discussion Paper for the focus group 16 November 2016, Brussels

Transcription

1 16 November 2016, Brussels Frank Holstein, Maria Toptsidou, Sabine Zillmer, Kai Böhme Contents 1 Introduction Understanding of gold-plating in ESIF Typical reasons for gold-plating Main effects of gold-plating in ESIF Gold-plating may be justified in some cases How can gold-plating be avoided? The programme period Post Next steps Spatial Foresight GmbH 7, rue de Luxembourg L-7330 Heisdorf Luxembourg Société à responsabilité limitée R.C.S. Luxembourg B TVA LU (13)

2 1 Introduction 16 November 2016, the preliminary findings of the study Gold-plating in European Structural and Investment Funds were discussed during a focus group in Brussels. The main conclusions from this focus group feed into the analysis of the study. Subsequently, the study facilitates the information of members of the European Parliament concerning gold-plating in the case of ESIF, focusing on EU regulations and their implementation in Member States and programmes. The discussion between programme authorities, beneficiaries and representatives of socio-economic partners of ESIF programmes focused on the reasons, effects and solutions of gold-plating. 2 Understanding of gold-plating in ESIF Key definitions Gold-plating refers to obligations that go beyond EU requirements: an excess of norms, guidelines and procedures accumulated at European, national, regional and local levels interfering with the expected policy objectives. In the context of ESIF, gold-plating thus refers to requirements going beyond ESIF-regulations. Administrative costs are the costs for an administrative task measured in terms of money of bodies responsible for delivering a policy. This includes costs for administrative workload and costs for the purchase of services and goods. In the context of ESIF administrative costs occur for all bodies involved in delivering ESIF programmes. Administrative burden describes the costs to businesses and citizens of complying with the information obligations resulting from government imposed legislation and regulation. In the framework of ESIF administrative burden arises for the funds beneficiaries and final recipients (in case of financial instruments) respectively. Gold-plating happens irrespective of the administrative level and time of ESIF management process. The management of ESIF falls under the shared management of EU institutions and national and regional authorities. All these different levels of decision making are responsible for effective and efficient delivery of the funds. This means, they have the responsibility to meet the objectives and to achieve intended results (effective delivery of ESIF). At the same time they are obliged to get the most out of the available resources (efficient delivery of ESIF). In other words, improving delivery of ESIF is a constant struggle between (a) ensuring accountability and best use of taxpayer s money and (b) making the procedures as simple and lean as possible for everyone involved. At EU level rules and requirements for the delivery of the five ESI Funds (ERDF, CF, ESF, EAFRD and EMFF) are set out in the Common Provision Regulation (CPR), fund-specific regulations, and delegated and implementing acts. Together, this ESIF regulatory framework sets out the minimum requirements. In addition, other EU regulatory frameworks need to be considered for the implementation of ESIF. For example legislation in relation to EU Competition Policy such as state aid and public procurement rules, or legislation from EU Environmental Policy such as the obligation to perform Environmental Impact Assessments need to be respected. 16 November 2016, Brussels 2 (13)

3 The application of EU rules and day-to-day implementation of ESI Funds happens in variety of different national and regional contexts. These require that also regulations, procedures and routines from national and regional levels need to be considered. This may lead to increasing administrative cost for the managing authorities of ESI Funds and/or to additional administrative burden for beneficiaries. This process is called gold-plating (see also the figure below). Figure 1 Understanding gold-plating in ESIF Gold plating in the case of ESIF ESIF EU regulatory framework other EU regulatory frameworks national frameworks sub-national frameworks Gold plating adding to the minimum requirements of the ESIF regulatory framework Interpretations of regulatory frameworks Programme management and implementation minimum administrative workload and costs + additional administrative workload and costs + additional administrative workload and costs Beneficiaries management and implementation of funded actions minimum administrative burden + additional administrative burden + additional administrative burden Gold-plating is mainly seen as actively increasing administrative costs and burdens by introducing new or additional rules and requirements. This is called active gold-plating. At the same time, gold-plating can also occur if Member States or programme authorities do not apply simplifications measures for beneficiaries. This is called passive gold-plating. Box 1 Key lessons from the discussion Gold-plating in all phases of the ESIF programming cycle Accreditation of ESIF programme bodies. Programme authorities may be obliged to deal with stricter rules imposed by national and regional regulatory frameworks, making the accreditation process more burdensome. Project application. Beneficiaries need to consider and comply with many additional rules to prove their eligibility for ESIF support during their project application phase. These rules derive either from the ESIF or other EU regulatory framework, from national and regional regulations, or programme specific procedures. Reporting and payment claims. To comply with rigid controls and reporting obligations, beneficiaries are frequently required to provide additional administrative documents even at the end of the programme phase. Financial controls. Gold-plating also occurs at the final phase of the programme, where stricter rules interpretation, extension of rules and additional control procedures often take place, increasing the risk of gold-plating. 16 November 2016, Brussels 3 (13)

4 3 Typical reasons for gold-plating Risk aversion, fear and uncertainty drive more to additional rules and requirements rather than inconsistent regulatory frameworks. While theoretically the reasons for gold-plating might be linked to complex and inconsistent pieces of regulations, it appears that uncertainty and fear are the main reasons for gold-plating. These primary reasons are driven by a variety of other reasons for gold-plating, leading to a complex system of direct and indirect factors leading to additional rules and requirements. Figure 2 displays the main direct and indirect reasons for gold-plating. In addition to the direct and indirect reason, some of the reasons can be described as a vicious circles. For example, there are various factors that create uncertainty and fear for audit findings and subsequent corrections etc. as well as administrative cultures and habits which increase administrative costs and burden to safeguard a correct implementation of ESI Funds. This in turn increases the complexity of the implementation and the risk for errors. Higher error risks lead to increasing uncertainties and fears, thereby enforcing a vicious circle. Figure 2 Reasons for gold-plating Inconsistencies & additional policy objectives Changing regulations Delayed regulations Bad experience Interpretation uncertainties Risk aversion and fear Back seat driving by auditors Administrative traditions and cultures Complexity of the system Vested interests Bureaucratic power Lack of communication and cooperation more rules = higher error risks = more uncertainty 16 November 2016, Brussels 4 (13)

5 Taking it step by step: Inconsistencies & additional policy objectives. Inconsistencies between ESIF regulatory frameworks and national or regional regulatory frameworks are not considered as key source for gold-plating. Still, nationally and regionally rooted procedures might conflict with the minimum requirements set at EU level for the management of ESIF. Often it is difficult to deviate from these established procedures with the risk of having parallel systems in place. Regulations relevant for ESIF but addressing other policy objectives such as EU competition or Environmental policies seems to have a bigger impact on gold-plating than inconsistencies between the ESIF frameworks and domestic regulations. Changing regulations increase uncertainty. As experienced in past programming periods, changes in the regulatory framework contribute to uncertainty for the authorities implementing the programmes. The regulations do not only change between programming periods, but changes also occur during the programme period due to different timing in the adoption of delegated and implementing acts, other EU regulations relevant for ESIF and the publication of guidance documents. Programme authorities need time to adjust their established procedures to the new regulatory frameworks. During such periods of change there is a higher risk of gold-plating. Furthermore, changes create uncertainty which results in increasing risks for gold-plating. Delayed regulations increase uncertainty. The multifaceted process leading to the final adoption of the Common Provision Regulation (CPR) implied that the final version of the regulatory framework became available at a time when Member States and programmes already were rather advanced with the elaboration of Partnership Agreements and Operational Programmes etc. Working on draft versions of the CPR implied that responsible players at national and programme level felt in some cases uneasy and tried to safeguarded themselves. This provides a first step towards potential gold-plating. Bad experience in the past increasing the risk of gold-plating. Though justified, experience with audit findings and their consequences do not only lead to improved behaviour but often also to additional safeguarding measures. Differences in interpretation become an issue if it affects accountability of the ESI Funds. Many programme authorities fear strict interpretation of the regulatory framework, including guidance documents by different audit authorities in ESIF management. Auditors aim to reduce the number of errors. In anticipation of strict audits, managing authorities introduce additional requirements. In addition, multiple audits may take place if errors have been found in procedures of similar kind, even after a longer period of time. As a result, programme authorities become extra careful when implementing ESIF and risk to generate gold-plating. Administrative cultures do also play a role. It has to be acknowledged that administrative cultures differ widely across Europe. This concerns structures and procedures as well as the level of responsibility. Administrative cultures which are characterised by low levels of responsibility lead to usually more burdensome procedures and requirements to ensure an accurate implementation. Furthermore, there also different traditions in terms of administrative simplification 16 November 2016, Brussels 5 (13)

6 and the general attitude towards daily procedures such as collecting signatures and stamps. Just looking at the number of signatures etc. needed for an ESIF funding application tells a story about that. Complexity of the system. The management of ESIF is in general perceived as complex, party stemming from the shared management system. This complexity implies that roles of individual players are very limited. Thus, an understanding of overarching goals and a coherent picture of understanding of the other players involved is often missing. The own perspective and needs dominate the decisions taken by the players rather than the achievement of the overall objectives. Under such conditions, administrative behaviour is increasingly characterised by a lack of responsibility towards commonly sharing objectives. Interpretation uncertainties are a key reason for gold-plating. ESIF regulations are not stringent and different articles are described in different levels of detail. This leaves room for interpretation for national authorities and authorities involved in the management of the ESI Funds. Whereas in some Member States this is perceived as beneficial for including own (established) procedures in the ESIF management, programme authorities in other Member States are uncertain about the interpretation of different elements in the regulation causing inefficiency in the implementation of regulations. This uncertainty results, for example, in numerous requests for guidance documents to the European Commission. Risk aversion is another example of a consequence of this uncertainty. In this case, programme authorities might introduce new procedures and requirements. Different interpretations increase uncertainties and thus gold-plating. Players involved in the management of ESIF have different roles in the system. Accordingly, they often interpret the regulations from their perspective. Moreover, ESIF management and implementation involves a large number of players with a high task division. Even players with limited responsibilities might influence the implementation of certain practices with their specific interpretation (e.g. in cases of ITI and CLLD). The perspectives of all these different players are often also based on habits and traditions, consciously or unconsciously. These different interpretations from different perspectives can lead to an accumulation of rules. For example, o a variety of bodies are involved in programme development and implementation, for example through the partnership or through specific instruments such as ITI and CLLD. o audit authorities have a more strict reading of the regulatory framework than managing authorities who are more aware of the context in which decisions are made. Fear and uncertainty are the main drivers for additional rules and requirements. Summing up, uncertainty and fear imply that imagined auditors become back seat drivers and the main argument for gold-plating. Players involved in the management of ESIF are on the one hand uncertain about the interpretation, meaning or rationale of the rules that have to be applied. On the other hand players fear the risk of not correctly implementing the rules and being accountable for actions that at some point may be considered inappropriate. 16 November 2016, Brussels 6 (13)

7 Box 2 Key lessons from the discussion Power of different players in managing ESIF. The different reasons for gold-plating create considerable additional administrative costs and burden. Considering them jointly and in the context of the complexity of the whole system delivering ESIF, contributes further to goldplating. This is not at least linked to the shared management approach. In this context, complexity of the system stems from various sources: Shared management contributes complexity not at least because of the variety of interests and perceptions to be considered but in terms of communication needed to balance these perceptions. Such complexity is either overcome by additional coordination and communication efforts, adding to the administrative costs of managing authorities or leads to misunderstandings and follow-up adjustments etc. inducing a trail of gold-plating if additional rules are introduced to clarify misunderstandings. A lack of communication in turn may also affect the positioning of institutions involved in the delivery of ESIF. The above example of auditors from one level with different interpretations reflects only one possibility for different voices of one and the same institution. This can also occur within one ministry, DG etc., which in turn reflects also the variety positions and roles of different people within one institution. Furthermore, complex systems give a voice to vested interests and increasing bureaucratic power. Various players have vested interest in pushing for certain requirements and procedures. Any form of bureaucracy in general has a tendency to demonstrate its power through enforcing regulations on others. The more vested interests are raised and considered in legislative processes the more complex the process becomes, the higher the number of rules to be considered etc. That means public management systems have an inherent tendency to grow complex and increase gold-plating over time. 4 Main effects of gold-plating in ESIF Gold-plating affects negatively both beneficiaries as well as programme bodies. It increases the administrative costs and burden of ESIF implementation, makes ESIF less attractive and actually risks to increase gold-plating. Increasing administrative costs. Managing authorities have a central position in the ESIF management system. Here information flows and procedures come together and need to be coordinated. Furthermore, all additional requirements fulfilled by beneficiaries need to be checked and controlled again by the managing authorities. Increasing intensity of the regulatory frameworks as well as increasing coordination needs require more staff, or outsourcing of tasks. Other programme bodies, such as audit authorities and line ministries, experience also higher workload due to defining and interpreting the rules as well as due to monitoring and control practices. Increasing administrative burden. Most importantly gold-plating increases the administrative burden of ESIF beneficiaries. This concerns both the preparation of funding applications as well as the reporting once a funding agreement is in place. One of the most frequent mentioned examples of gold-plating is the presence of parallel reporting systems. The CPR obliges programme 16 November 2016, Brussels 7 (13)

8 authorities to establish an electronic system to communicate with beneficiaries and for beneficiaries to report output and financial management. In many countries this is challenged by national procedures and habits that entail different ways of reporting, resulting in double reporting for beneficiaries in a national system and in the ESIF system. In other cases this leads to the repeated submission of the same formal documents. While all types of beneficiaries are affected by gold-plating, it seems SMEs are affected to a larger degree. Furthermore, instruments and funding arrangements which involve a wide range of players have the risk that gold-plating effects multiply as the increased administrative burden is faced by a larger number of players. Decreasing attractiveness of ESIF. In some Member States ESI Funds are perceived as burdensome and gold-plating increases the burden even more. Players with some qualitatively good projects might decide to not apply for ESIF due to the perceived administrative burden. Additional requirements might be even a discouragement for applicants. As consequence, projects that could have made a valuable contribution to the programme s objectives do not apply, or submit a less convincing proposal that in the end may not be selected. Therefore, ultimately, beneficiaries already having a working capital, who can afford to wait for funding, are the ones applying. Increasing risk of errors. Albeit some additional rules and requirements are introduced to limit the risk or avoid errors in ESIF management, gold-plating generally risks to generate errors. The relation between errors and gold-plating can be described as a vicious circle. Excessive rules and requirements to comply with entail also careful monitoring and controlling these rules. Limited resources to assess the fulfilment of all requirements or fear to make mistakes in turn tend to cause mistakes. Similarly, fear for audits, can lead to the introduction of more frameworks and procedures with the intention to reduce errors. However, these rules and requirements often lead to increased fear and uncertainty to perform well and thus to more errors. Increasing focus on compliance rather than performance. Stakeholders involved in ESIF have to find a balance between delivering outcomes against targets and to deliver projects efficiently. Frequent discussions on accountability of expenditure of public resources risk overshadowing valuable projects that make a contribution to European policy objectives. The application of rigid rules may not only lead to potential errors but also might cause a decrease of quality in single projects. As a matter of fact, gold-plating increases the focus on compliance issues rather than on performance. 4.1 Gold-plating may be justified in some cases Gold-plating is present in ESIF management and can happen in all moments of the ESIF programme lifecycle (application and accreditation, implementation and controlling and payment phases). In some of these phases additional requirements seem unavoidable, for example when adjusting regulations into operational practices. This opens to discussing cases where gold-plating is necessarily always bad. 16 November 2016, Brussels 8 (13)

9 The above sections highlighted a variety of sources and consequences of requirement going beyond ESIF regulations. These sources and consequences are often interlinked and in some cases reinforce each other. Different loops of fear and uncertainty affect the administration of programme bodies and beneficiaries. Therefore, gold-plating is largely seen as something to be avoided and actions focus on reducing gold-plating. However, gold-plating might be justified in some cases: In cases where gold-plating causes increased administrative costs, but maintaining or reducing the administrative burden gold-plating might be justified. In these cases the programme authorities take their responsibility in the shared management system of avoiding administrative burden. In cases where gold-plating increases the effectiveness of the programme. If due to higher administrative costs and/or burden a programme delivers outputs and results better supporting its targets gold-plating might be justified. In this case, however, the question arises where to draw the line between justified and unjustified gold-plating. In cases where gold-plating contributes to achieving other (non ESIF) policies objectives. Examples for this can e.g. be initiatives for green or social public procurement. Box 3 Key lessons from the discussion Changing focus of ESIF management between compliance and performance Changing focus between compliance and performance effects both programme bodies and beneficiaries. Increasing intensity of the regulatory frameworks as well as increasing coordination needs require more staff, or outsourcing of tasks. Furthermore, all additional requirements fulfilled by beneficiaries need to be checked and controlled again by programme bodies. In addition, increasing focus on compliance tasks risks to reduce the technical assistance resources available for supporting project development. Beneficiaries have more reporting requirements with an increased focus on performance, with increasing need for specified knowledge. This affects mostly the smaller and/or less experienced (potential) beneficiaries of ESIF, as they have less capacity to collect or obtain the required data and knowledge. 5 How can gold-plating be avoided? Gold-plating often seems an unavoidable practice. The European Parliament has highlighted the need for simplifying the rules for Cohesion Policy and ESI Funds, including addressing unnecessary additional requirements and rules at all governance levels. There are some promising actions to take and reduce or avoid gold-plating in the short and longer term. Non-exhaustive proposals for potential actions at different levels are presented below. They differentiate between the on-going programming period and the post-2020 period. 5.1 The programme period As mentioned earlier, the management of ESIF works under the shared management of EU institutions and national and regional authorities. Therefore, the responsibilities for reducing goldplating are to be shared among all players and thus different actions to reduce or avoid it are also a responsibility of all players. The regulatory framework already includes a number of 16 November 2016, Brussels 9 (13)

10 provisions to reduce administrative costs and burden, which do not always reach their full potential because of gold-plating. Further promising actions to be taken into account by different players that may start already in the current programming period are presented below. All players horizontal actions Better balance between compliance checks and performance orientation. While several other actions described in the following may be supportive for reducing gold-plating, they may not necessarily be effective without an overall movement from input to output and therefore performance orientation. This shift is not to be mixed with the formal movement to result orientation as requested in the ESIF regulations with introducing a stronger result orientation in terms of the indicator systems and the performance framework. In contrast, for reducing gold-plating this shift has to be filled with life by not just aiming to fulfil the formal results and thereby to be compliant but by looking first for results and before focusing on compliance. Promote capacity building. Today, there is a lack of experience and knowledge exchange on goldplating in Europe. Thus, dialogue on how to reduce or avoid gold-plating needs to be fostered among all players. This may also increase the uptake of simplification measures as they would be more widely promoted. Awareness raising events, experience exchange platforms, sharing of good practices and ideas, consultancy and advice would be first steps toward this direction. Promote a Single information Single audit system. Encourage the use of a single information and single audit for financial reporting and compliance checks can reduce gold-plating risks, as well as administrative costs and burden in general. The system entails that the lower government authorities only report once a year to the central authority (single information) and therewith perform one audit. Understand guidance as guidance. Through the ESIF programming cycle various players ask for guidance. In many cases this is also provided in form of European Commission guidance documents. However, while generally guidance is understood as non-binding support which helps players to make their own decisions, ESIF guidance are partially seen as binding recommendations. Re-think the role of auditors. A new role of auditors can be initiated, be that EU-level auditors or national audit authorities. Coordination between different audit authorities can be promoted to limit different interpretations between them. Auditor checks need to be in line with the subsidiarity and proportionality principles and carried out only when necessary. Meetings with auditors can be introduced, which can clarify uncertainties early during the programme lifetime. In addition, a new, expanded role of auditors can be considered. When auditors notice gold-plating practices, they can identify reasons for it and then possibly provide solutions on how to solve and prevent it next time. In addition, more cooperation between national and audit authorities can be promoted to prevent goldplating issues at different stages of programming. In consequence, this should reduce the controlling effort of auditors. 16 November 2016, Brussels 10 (13)

11 European Union level Increase transparency between programme bodies and European Commission. Programme bodies can learn from each other s experience. Thus Q&A from programme bodies to the European Commission can be public and available for all players to create a more uniform communication among desk officers and between them and the European Commission. Promote clarity, simplicity and continuity. While fully clear rules that do not leave room for interpretation are difficult to achieve, it is important to be aware of likely interpretations and the effects of delayed or changing regulations. Thus, increased awareness among desk officers and other staff involved at EU level about the need for better clarity, simplicity and continuity could represent a starting point to better shared management. As a rule, increasing numbers of articles in regulation might indicate less clarity and especially less simplicity, even if formally aiming at simplification. National level Develop e-governance tools further. In the context of e-cohesion, national online tools and electronic systems to be used at all stages of the project cycle would be an advantage. Web-based information systems, online application support systems and other e-tools can reduce the administrative burden to beneficiaries and lead to more efficient programming. Thus, national stakeholders are asked to reflect critically on the necessary documents and search for simplifications in administrative procedures. Initiate administrative changes in the countries. The reduction of programmes, of intermediate bodies, as well as of unnecessary legislation is a step that Member States can take and reduce the administrative burden among their bodies. Increase national coordination. The transfer process of the EU regulation to Member States can be more coordinated and uniformed within a Member State, so that all managing and implementing bodies have the same information and develop a common course of action. Programme level Provide clarity for beneficiaries. Beneficiaries should take the least administrative burden possible. Providing clear steps for all moments of the project cycle would be helpful in decreasing unnecessary work. 5.2 Post 2020 The recommendations provided above for the current programming period point at two different directions as they include both more stringent and more flexible ideas. These can be the pre-steps for further actions in preparation of the next programming period. For the latter, the question remains which way of action would be most efficient to choose. At the moment, three different arguments can be put forward. 16 November 2016, Brussels 11 (13)

12 The below overview helps to see pro and contra arguments for three different routes which could be taken to reduce gold-plating in the ESIF post 2020 if still relevant. The arguments are merely meant to inform decision making processes. The final decision lies with the legislators and clearly there is no best way to go. More and tighter rules with a main focus on input control and compliance Following the current trend from compliance to performance Less rules, more flexibility and trust with a main focus on achievements and performance Stringent EU regulations to be followed as measures by national and programme authorities Continuation of the current management system slowly increasing the focus on performance. A flexible regulatory framework based on trust and a new role for auditors. Arguments in favour Arguments in favour Arguments in favour + Harmonised set of rules with minimum uncertainty of its interpretation. + Easier to move between programmes both at programme level and for beneficiaries. + Exactly the same rules apply for all programmes. + Stable continuation of the current system with only minor changes. + Reduction of the compliance and input perspective. + Stronger focus on the use of SCO and reduction of passive gold-plating. + More focus on performance than compliance. + Audits will also consider the context in which different rules and interpretations of these rules are applied. + Proportionality will be applied when it comes to controls and error rates. Arguments against Arguments against Arguments against There is no one-size fit s all as national administrative and legal systems differ. No flexibility to adhere regional or sector specificities. Subsidiarity principle is not respected. Risk of establishing a system with a lot of administrative sots and burden for both compliance and performance. Inertia among players which benefit from the current focus on compliance and input control. Regionally differentiated systems challenge the assessment of accountability of ESIF at European level. Regionally differentiated systems challenge harmonised procedures for application and limits applicants to apply in different areas. 16 November 2016, Brussels 12 (13)

13 6 Next steps The key discussion points and experiences collected during the focus group supplement the information collected via document studies and interviews in the development of a report for the European Parliament. The overall objective of this study is to analyse gold-plating in European Structural and Investment Funds (ESIF) in view of their impacts on the administrative work and burden for programme bodies and beneficiaries under all five ESI Funds. The final report will have largely the same structure as this report, but with a more detailed assessment and argumentation and different examples of gold-plating practices, reasons, effects and solutions collected from different EU Member States and ESI Funds. The final report of this study will be published by the European Parliament. 16 November 2016, Brussels 13 (13)