Brussels, 28/05/2010 (Agence Europe) - On Friday 28 May, the European Commission adopted a proposal amending the financial regulation, which sets out the rules for the establishment and implementation of the general budget of the European Communities. The aim of the proposal is to simplify access to EU funds by cutting red tape and saving costs for EU beneficiaries. The new rules will also provide more scope for combining public and private funding for a bigger investment impact. The Commission also proposes that the EU create its own trust funds to facilitate Community aid in the area of external action.
The changes will help deliver the new generation of EU programmes post 2013. The Commission proposal has to be approved by the Parliament and Council. Formal adoption is expected to be completed by the end of 2011, so that the new rules can come into effect on 1 January 2012.
European Budget and Financial Programming Commissioner Janusz Lewandowski told a small group of journalists that his main goal was to make EU funding more accessible to European businesses, SMEs, researchers and others, by simplifying and cutting red tape. These are important changes in this period of crisis with its liquidity problems. He said that beneficiaries should not have to complete and submit the same document every time they apply for funds. Nor should they have to open a specific bank account and pay back the interest accrued on upfront payments, he said. The Commission is proposing to raise to €50,000 the current €25,000 ceiling under which grants require simpler administrative procedures. The Commission wants to focus the subsidies system more on the results to be achieved by the beneficiaries of the payments. “The Commission's long-term goal is to shift the emphasis of the grant system from reimbursing cost claims to paying for the delivery of results,” the commissioner stated, stressing the importance of new measures to make member states more accountable for the way they manage EU funds.
The main changes proposed by the Commission are:
Cutting red tape. The Commission proposes: - 1) to abolish the obligation to open separate bank accounts and return to the Commission interest on “pre-financing”. Currently, beneficiaries of grants need to open a dedicated bank account to receive an upfront payment at the outset of the project, and need to return to the Commission any interest earned while the money is kept on this account. They will no longer be obliged to do so. This will reduce the amount of paperwork and time in the crucial initial phase of the project; - 2) to extend lighter administrative requirements to more beneficiaries. At present, the simplified procedure operates for applications up to a ceiling of €25,000 (in grants). The Commission proposes that current maximum threshold be raised to €50,000. Parallel simplification measures are proposed for businesses that bid for Commission contracts. The Commission could, for example, rely on documents previously submitted instead of requesting them for each subsequent application; - 3) to allow beneficiaries more scope for using the EU grant to involve other project partners. As things stand, so-called cascading grants cannot exceed a maximum threshold for the total grant amount. This cap will be abolished; - 4) to shift the emphasis of the grant system from reimbursing cost claims to paying for the delivery of results. Often, EU grants are reimbursements of the actual costs incurred by the beneficiary, which implies time-consuming paperwork both for the beneficiary and the Commission, which must check the eligibility of all the costs and invoices the beneficiary has sent. The changes proposed build on the simplification measures already in place such as the use of lump sum payments and flat rates; - 5) to abolish the maximum threshold per lump sum payment (currently €25,000). Instead, beneficiaries will be paid lump sums to undertake specific tasks and will then need to demonstrate that they have done so effectively and efficiently, rather than report individual cost items; - 6) for some costs, e.g. salaries, to make it possible to pay against the usual average costs as applied by the beneficiary, rather than against the actual costs from the payrolls of each member of the research team.
Making the control system of EU funds more effective and efficient. The proposal seeks to strike the right balance between simplification and ensuring an effective system for monitoring the use made of taxpayers' money. With some 80% of the EU budget being spent at national level, the Commission is proposing new measures that make member states more accountable for how they manage EU funds. Thus, national paying agencies for structural funds would issue a statement of assurance (as is already the case for EU agricultural payments) that will then be subject to independent audit.
Should the 2% acceptable error threshold used in the audit of EU funds be the same for all EU activities, even though the risk may differ significantly, for example, between administrative expenditure and complex rural development aid? Following recommendations from its external auditors (i.e. the European Court of Auditors), and from the budgetary authority, the Commission's proposal formally introduces the concept of tolerable risk of error. In practice, for each policy area, the Commission would carry out an analysis of the risk and controls applied. Then, it would propose a corresponding tolerable risk of error, to be decided by the political authorities (the European Parliament and the Council) - see related article.
New innovative financial mechanisms. In the area of external action, the Commission will be empowered to set up its own EU multi-donor trust funds, the Commission says in its proposal. These EU trust funds would make it possible to pool the resources of the European Union, its member states and citizens in order to provide coordinated, quick financial assistance in crisis and post crisis situations (such as after an earthquake or other natural disaster) “while improving the delivery and visibility of EU aid,” the Commission says. Trust funds could also be used for specific, long-term thematic action requiring funding from a number of sources.
With the changes proposed by the Commission, it will also be easier to better pool EU resources with private companies through public-private partnerships (PPPs). Currently, such partnerships have to adhere to all EU budgetary and financial rules. In future, PPPs could apply the national legislation of the country where they are based (on condition that they adhere strictly to Community obligations on accounting, auditing and transparency).
The use of novel financial instruments, especially when there is a pooling of funds (e.g. guarantee funds, risk capital, blended instruments mixing a Union grant with a loan or guarantee) will give Union funds a multiplying effect with the view to make them more effective. The new rules will also facilitate running joint projects and allow potential partnerships with the European Investment Bank group; cooperation with the EIB would be streamlined, in line with its enhanced status under the Lisbon Treaty. Under current rules, the Commission must treat the EIB as an external partner and go through time-consuming procedures before it can commit funds to common projects. (L.C./transl.rt)