EN Official Journal of the European Union C 313/31

Opinion of the European Committee of the Regions — Outcome of the negotiations on the partnership agreements and operational programmes

(2015/C 313/08)

Rapporteur: Ivan ŽAGAR (SI/EPP), Mayor of Slovenska Bistrica

POLICY RECOMMENDATIONS

THE EUROPEAN COMMITTEE OF THE REGIONS

General assessment and objectives of this opinion

1. stresses that the opinion aims at assessing the agreed Partnership Agreements (PAs) and Operational Programmes (OPs) from the perspective of beneficiaries from regional and local authorities (LRAs);

2. underlines the crucial role of cohesion policy in achieving the Treaty objective of economic, social and territorial cohesion through ‘reducing disparities between levels of development of the various regions and the backwardness of the least favoured regions.’ In fact, the Structural and Investment Funds are, as a general rule, the European Union’s main tools for promoting harmonious overall development in all Member States;

3. points out that, since its inception, cohesion policy has made progress in reducing disparities between and within European regions and, since the economic crisis began in 2008, has made it possible to contain its effects in terms of cohesion. However, significant imbalances, which are aggravated by the ongoing crisis, remain and the future cohesion policy must have the resources to reduce these disparities further. As envisaged by Article 96.2 (a) of the Common Provisions Regulation (CPR), these policy objectives must be based on the social and economic development needs of regions, cities and municipalities;

4. notes that cohesion policy changed significantly in character following its reform in 2013. The CoR is pleased that the reform has strengthened the connection with the EU’s priorities (greater synergies between cohesion policy and the Europe 2020 Strategy). New implementation methods, new tools and a stronger focus on effectiveness, efficiency and results in particular have been introduced in the new 2014-2020 programming period. The CoR is interested to see how the effectiveness, efficiency and impact of European Structural and Investment Funds (ESIF) can be maximised in practice;

5. draws attention, as the mid-term review of the Europe 2020 Strategy proceeds, to the importance of direct, effective links between the new strategy and cohesion policy and, in this connection, to the need for a robust territorial dimension and a real partnership as the main criteria for ownership of the reform process by all institutional levels and for selecting policies and support measures;

6. already sees cause for concern, however, that the requirements laid down by the Commission still fail to set the objective of reducing the burden of administration and control. The CoR therefore urges the Commission when developing the administrative and control systems and carrying out audits to avoid further measures that would create even more red tape for beneficiaries and administrators in the Member States and which would reduce the potential contribution of the European Structural and Investment Funds to meeting the goals of the Europe 2020 strategy;

7. observes that links between cohesion policy and other EU policies and initiatives (rural development policy, Horizon 2020, Connecting Europe Facility, etc.) have also been strengthened. The CoR believes that more should have been done to ensure further alignment of all EU policies and funds having a territorial impact, and hopes this can have a positive impact on the development of the regions;

8. welcomes that, through the creation of the Common Strategic Framework, there has been an alignment between the priorities of the European Regional Development Fund, the European Social Fund and the EU funds for Rural Development and Maritime and Fisheries, expressed in each Member State through a Partnership Agreement common to all these funds. This is undoubtedly a very significant step to achieve more policy coherence. Thus the Committee regrets that these synergies have not been fully exploited further at the moment of drawing-up Operational Programmes at national, regional and local levels. The rural development programme above all must be more obviously coordinated with the European Regional Development Fund, since rural development is an integral part of regional development efforts;

9. agrees that the investment strategy within PAs and OPs should also be comprehensive and consistent with the National Reform Programmes and should address the reforms described in the country-specific recommendations of the European Semester. In times of economic crisis and budgetary constraints, coordination between the EU budget and national budgets is essential for improving economic governance, transparency and the efficiency of public spending;

10. reiterates that the Juncker Commission’s first new core initiative, the Investment Plan for Europe, highlights cohesion policy’s potential for promoting growth and jobs in Europe, but it should be emphasised that because the Investment Plan for Europe and European Structural and Investment Fund policies (cohesion, but also rural development, fisheries, etc.) target different policy and institutional levels, they need to strengthen each other, not least in terms of resources. The Investment Plan for Europe must be additional to existing EU programmes and traditional European Investment Bank activities, and it is important that the resources allocated to the Structural Funds are not automatically recycled into the Investment Plan;

11. notes that strategic planning is crucial for the successful implementation of cohesion policy. In this respect, the most important strategic elements of cohesion policy are the PAs and OPs as they outline how the Structural and Investment Funds are to be spent in a particular Member State or region. Regrets that the late adoption of the cohesion policy legislative package and the curtailment and underestimation of the time Member States and LRAs need for highly complex programming (multi-instrument, multi-level and multi-actor) in the adoption of the PAs and OPs have led to purely superficial partnerships being established and have delayed the start of the new programming period. Regrets that no clear, common methodology or methodologies have been created for drafting Partnership Agreements that would help to meet the objectives. The absence of this methodology means that each Member State has taken its own entirely individual approach to drafting Partnership Agreements, so that they are not comparable with one another and their implementation will also be difficult to compare (particularly with regard to implementation of Integrated Territorial Investments, in terms of actual use and an appropriate implementation and management structure). For the 2014-2020 development policy period, the Committee proposes that a uniform methodology for the amendment of Partnership Agreements be drawn up;

12. notes that the CoR has conducted an extensive online survey, which support the views expressed in this opinion (1);

13. asks the European Commission to take into consideration the opinion of LRAs, expressed in the following paragraphs of this opinion, when drafting its report on the outcome of negotiations on the PAs and OPs by the end of 2015;

14. recalls the shared principles and objectives set out in the Charter for Multilevel Governance in Europe, adopted by the Committee of the Regions on 3 April 2014, with a view to promoting innovative and efficient political and administrative cooperation between institutional actors and to developing broad democratic participation together with greater economic, social and territorial cohesion;

Multi-level governance and partnership

15. is pleased that the reform of cohesion policy has strengthened the provisions on partnership. Article 5 of the Common Provisions Regulation now states: ‘For the Partnership Agreement and each programme, each Member State shall in accordance with its institutional and legal framework organise a partnership with the competent LRAs.’ Moreover, the Commission has passed a delegated act, the European Code of Conduct on Partnership, which outlines how the partnership principle should be applied and which the CoR particularly welcomes as the first ever piece of legally enforceable EU legislation dealing with Multi-Level Governance;

16. the quality of partnership in European funds is of crucial importance and the CoR expects the real needs detected at regional and local level to be reflected in the PAs and OPs;

17. underlines that effective and well-functioning partnership means better anchored and appropriate efforts that meet needs and requirements at different levels of society. Ultimately this will also lead to more effective use of funding. In countries where the partnership is not properly established and is purely superficial, the European Commission should also assist in examining mechanisms to put the partnership on the right track and avoid complexity and excessive and disproportionate administrative burdens that might further delay implementation of structural and investment funds across the EU;

18. points out that the partnership principle is not an empty concept but a precondition for the success of cohesion policy, particularly as ‘de facto’ competences are distributed between at least three policy levels (EU, Member States and LRAs). In fact, good practice in the area of the partnership principle leads to: — bottom-up identification of real and specific needs of European cities, municipalities and regions, as well as identification of the final beneficiaries of assistance, — the ability to identify the development potential of municipalities and regions and to promote their development through targeted efforts, — common development of feasible and acceptable solutions, — better implementation as all stakeholders are working towards common objectives and share responsibilities and tasks, — fewer errors as actors understand the logic underpinning the procedures, — better and lasting measurable results, which have been achieved more efficiently, — better quality programming by the relevant actors, — distribution of financing tasks, — opportunities for implementing larger-scale, multi-regional projects;

19. underlines that proper application of the partnership principle helps increase the effectiveness of EU spending and makes reference to the European Court of Auditors’ analysis whereby ‘the effectiveness of EU spending is reduced because there is inadequate assessment of needs, unclear objectives, contradictory or incompatible objectives and priorities, and inadequate selection procedures to prioritise projects that maximise impact.’ Genuine partnership can remedy all of these shortcomings;

20. is concerned that the partnership principle cannot be applied appropriately in all Member States. The negotiations on the PAs and OPs showed that while LRAs were consulted in most cases, their involvement did not amount to full partnership as outlined in the European Code of Conduct on Partnership. In fact, the Committee regrets that LRAs have rarely been sufficiently involved in drafting the PAs and OPs as their role is often more that of a stakeholder rather than that of a partner (2). The European Commission should also consider partnership mechanisms and the time needed for talks with multi-level institutional structures to allow for more in-depth and informed discussion, matching the time needed for the procedure. This would strike a balance between the time needed for adoption at European level and that for presentation of the programmes at national level;

21. regrets the fact that no methodology for using Integrated Territorial Investments (ITI) was set out clearly before Partnership Agreements were drafted and adopted. As a result, each country takes a completely different approach to ITIs, if it takes any approach at all. In those cases where the ITI instrument has, however, been used in a Partnership Agreement, those drawing up the individual ITIs continue to encounter a lack of clarity at both national and Commission level. Added to this in many cases is a reluctance on the part of managing authorities to include ITIs in their Operational Programmes at all. The Committee of the Regions therefore calls on the European Commission to make sure that, in countries that have opted to use the ITI instrument, it will be possible to use it to the appropriate extent in all Operational Programmes and that appropriate implementation and management systems will be quickly created so that ITIs really can be used and effects of synergy generated;

22. regrets the fact that no extent, purpose and methodology for the use of the territorial dimension was clearly set out before partnership agreements were drafted and adopted. This is the main reason why each country deals with the territorial dimension in very different ways and on radically different scales. This considerably reduces the impact a pan-European implementation of the territorial dimension could have not only for carrying out the Europe 2020 strategy, but also for the development of the EU in general;

23. asks the European Commission to provide for the possibility for LRAs to elaborate their own ‘Regional’ PA as an integrated part of the general PA concluded at national level. Doing this, the Commission will give full recognition to Article 4 TEU respecting the internal constitutional order of the Member States, whilst giving maximum effect to the subsidiarity principle;

24. asks the European Commission to speak with one voice during the negotiations on the PAs and OPs and notes in this respect that several LRAs have complained that during the negotiations different services of the European Commission had different, sometimes contradictory, demands which were not justified by real, practical requirements and/or existing legislation. Calls on the Commission to involve local and regional authorities, which develop and implement a significant part of the programmes, earlier in the negotiations, and to provide a clear, standard interpretation of the fundamental provisions of the Regulation right from the start of the process of developing operational programmes. The Commission’s late submission of comments to the programmes submitted, and the short deadline for updating the programmes, have undermined political ownership at local and regional level;

25. underlines that good practice in the area of the partnership principle requires the right mind-set and administrative culture rather than force of law. The discrepancy between legislation and the context in which it must be applied leads to ‘ticking the box’ practices (3), jeopardising the objective of high-quality, effective programming and making it nothing more than an administrative burden that hinders implementation of the funds themselves across the EU;

26. therefore, the CoR believes that the partnership principle can be strengthened by the Commission helping to examine the operating mechanisms and identifying best practices, including assessment of the time needed for discussion given the complexity of the institutions and the programme. Welcomes, in this respect, that the European Commission has launched a study on the partnership principle and plans to hold regular ‘structured dialogue’ meetings which aim to discuss the implementation of the partnership principle with stakeholders. Points out that the CoR, as the representative body of LRAs, needs to be the key strategic partner in this process;

27. asks the Commission to consider in particular the extent to which the partnership principle and the territorial dimension are upheld in the national programmes framed under cohesion policy. There is a trend in the majority of Member States towards more explicit centralisation of cohesion policy implementation, with national programmes being introduced at the expense of regional ones. It is essential to defend the primary goal of cohesion policy, which is to reduce regional differences and imbalances, and to promote regional growth;

Financial resources, programme structure and performance

Financial resources

28. points out that the subnational level was responsible for 55 % of total public investments in 2013 and thus plays a significant role in promoting economic growth in Europe. In some regions, ESIF funds are virtually the only source of public investment;

29. draws attention to the fact that subnational finances are in a difficult situation as LRAs find themselves confronted with high levels of debt and austerity measures imposed by higher levels. The CoR notes in this respect that a lack of available subnational financial resources has a direct impact on the implementation of cohesion policy. The multilevel financing system should therefore be improved in the future. Calls, consequently, for Member States making use of the flexibility granted by the Commission to remove the compulsory share of national co-financing for interventions funded by the ESIF from the constraints of the internal stability pact;

30. is therefore pleased that in the 2014-2020 programming period, cohesion policy allows financial instruments to play a stronger role, and notes that financial instruments, if implemented effectively, can significantly increase the impact of financing for local authorities and regions, provided that the economic and social dimension of the investment is taken into consideration;

31. points out that difficulties arise when implementing Structural Funds through financial instruments. In many cases, implementation remains very complex, and even the relevant Commission departments do not always interpret these provisions identically or consistently, particularly during the verification and control phase. Despite efforts by the European Commission to provide guidance, in most cases setting up financial instruments still necessitates the use of external consultancy firms, which implies additional costs;

32. welcomes the launch of fi-compass, a new information and advisory hub for the use of financial instruments under the ESIF. This tool should help to facilitate the implementation of financial instruments and make it more understandable;

33. stresses the role of the EIB, whose Structural Programme Loans could be an excellent means of mobilising financial resources for viable projects which are of critical size under a given operational programme. Unfortunately, the possibilities that this source of financing offers are not recognised enough at all levels (4). Points out, moreover, that these possibilities cannot at present be fully exploited by local authorities, due to the extremely complex procedures for accessing and implementing such loans. Therefore calls for the rules governing loans for structural programmes to be simplified;

Programme structure

34. notes that stronger thematic concentration is one of the key reforms of cohesion policy 2014-2020. Thematic concentration serves the purpose of concentrating funds on a limited number of thematic areas in order to reach critical mass and have real impact. As predefined thematic objectives determine what ESI funds can be spent on, provisions on thematic concentration have a significant impact on the structure of PAs and OPs;

35. draws attention to the fact that owing to internal regional disparities, it may still be necessary even in more developed regions to invest in infrastructure providing basic services in the areas of environment, transport, information and communication technologies (ICT), social services, health and education;

36. is pleased that additional flexibility has been introduced through new tools such as Community-Led Local Development (CLLD) and Integrated Territorial Investment (ITI), which allow for the use of multi-fund programmes and the implementation of innovative projects. Welcomes that on paper, many countries and regions are considering using these instruments, however the Committee is concerned that the regulatory differences across the funds, and the reticence by Managing Authorities to delegate at the local level, remain an issue that limits the potential on these new instruments for integrated territorial development;

37. draws attention to the fact that combining different funding sources and different tools for a single project may offer significant advantages only if different funding sources and tools entail equivalent reporting and eligibility requirements, making this combination work by reducing implementation errors as well as costs incurred through dealing with additional administrative procedures;

38. notes that in some Member States new tools have been met with scepticism and will not be widely implemented where they would be useful, and that in some cases the national level has impeded LRAs use of new tools; consequently, the European Commission is urged to provide more detailed background explanations in cases where this option has been ruled out;

39. calls on the European Commission and the EIB to harmonise administrative and eligibility requirements when providing support to various cross-cutting projects;

Performance

40. is pleased that the reformed cohesion policy puts a stronger emphasis on OP performance. Good performance can be considered to be achieving objectives efficiently and in accordance with the rules;

41. underlines that good performance of cohesion policy is the primary concern of all LRAs as good results significantly improve the quality of life in regions, cities and municipalities;

42. specifies that the most important elements of performance should be the long-term results, resulting in the achievement of predefined objectives. Results may include the employment rate, the level of unemployment, reduced congestion and less pollution, etc. In contrast, outputs such as number of training courses offered, kilometres of road built or number of buildings renovated, are only intermediate steps towards achieving results and are therefore a less important element of performance;

43. regrets in particular that the reintroduced performance reserve might encourage the setting of unambitious objectives with a view to obtaining the additional resources from the performance reserve easily. However, it will only become clear whether the objectives are ambitious as implementation moves forward. In any case, holding back financial resources from operational programmes creates unnecessary uncertainty in financial planning and entails additional risk for project managers;

44. moreover, given that cohesion policy is inherently long term, an overly strict emphasis on short-term or mid-term financial or output indicators undermines the achievement of all long-term objectives set when the operational programmes are being negotiated, indeed the CoR calls for a new performance framework based not on outputs but on outcomes to be developed for the next programming period;

45. moreover, it is unfortunate that the performance framework makes financial indicators as well as output indicators mandatory, while results indicators are only optional. Nevertheless, the CoR believes that a focus on achieving results needs to be a mandatory element of the strategic planning of all Structural Funds, which should also be taken into account within the performance framework;

46. welcomes in this respect that the European Commission will produce annual reports summarising the implementation reports of the Member States from 2016 onwards and invites the European Commission to discuss these reports with CoR members. The CoR suggests that these reports also include an analysis of progress in simplifying the implementation system;

47. notes that financial indicators, such as the absorption rate of funds, are not a results-oriented performance indicator. The CoR therefore urges the European Commission to give less importance to financial indicators within the performance framework;

Simplifying procedures and administrative capacity

Simplifying procedures

48. notes that in the past, cohesion policy has received considerable criticism for its complex implementation system. Most of the managing authorities still see the new regulations as bureaucratic and complex. In this respect, simplifying eligibility rules, avoiding gold plating and focusing on results were considered as most essential by respondents of the CoR consultation;

49. points out that gold-plating is still one of the main reasons for the administrative burden. This overly strict national interpretation of EU rules, coupled with the fact that in many Member States each Fund is subject to separate Ministerial and management lines, leads to unnecessary administrative requirements, silo approaches, and an additional bureaucratic burden on beneficiaries and managing authorities, as well as hampering the use of integrated territorial development instruments such as ITI or CLLD;

50. asks the European Commission to monitor national application of EU rules and, in the event of gold-plating, to convince national authorities to apply EU rules in a less onerous way. Cases of gold-plating should be made publicly available for mutual learning processes;

51. however, there is ample room for simplification within EU rules as well (regulations, implementing and delegated acts). The CoR therefore insists on further simplification in the management of EU-funded projects. This should include a reduction in the time period for reimbursement for beneficiaries, the creation of one set of common auditing rules for projects, simpler rules for projects which generate their own revenue, consistent rules concerning the eligibility of costs, the wider use of simplified costs, a closer connection between payments and results, E-cohesion, the ‘one-stop-shop’ principle for beneficiaries, and a proportionate and unified approach to supervision, the harmonisation of procedures as part of first-level monitoring of territorial cooperation programmes, and simplification of public procurement controls. The CoR stresses the importance of providing local and regional authorities, as well as companies, with appropriate expert assistance in their search for answers and advice relating to legislation (particularly in the area of public procurement) and its correct application. The CoR urges the European Commission to include representatives from the local and regional authorities in the high level group of experts monitoring simplification for beneficiaries, thus making use of the practitioners’ experience on implementation of projects with the aim of reducing the administrative burden, increasing funds absorption and improving the impact of programmes;

52. draws attention to the excessive burden placed on local and regional authorities by the large number of uncoordinated controls, which could lead to a decrease in interest in implementing European projects. If necessary, combined controls should be carried out or controls should be mutually recognised by the relevant authorities. Proposes making use of the results of controls or audits to prevent errors, thus making implemented projects more successful;

53. with this in mind, calls on the Commission to consistently apply to the European Structural and Investment Funds the approaches adopted under its REFIT programme, taking both delegating and implementing acts into account. It is also important to include the many internal Commission guidelines and the procedure for adopting these, since while not officially binding they considerably add to the complexity and red tape involved in implementing the Structural and Investment Funds at local level;

54. The CoR firmly believes that specific measures are immediately required to simplify territorial cooperation programmes. The results of European territorial cooperation programmes and projects also need to be made more visible. Complexity is a source of delay and errors which hamper the effectiveness of EU cohesion policy. Rules that are clearer, more transparent and simpler to apply lead to fewer problems downstream, at the expenditure certification stage and during control and audit operations; ex-post controls by the European Commission should also be harmonised and in any case meet the criteria of consistency, subsidiarity and, most importantly, proportionality;

Administrative capacity

55. notes that the administrative capacity of LRAs is key to implementing cohesion policy successfully, but unfortunately is still lacking in some LRAs;

56. points out that there are many potential reasons for inadequate administrative capacity, including: — inefficient distribution of tasks and responsibilities, — inefficient cooperation between levels of governance, — lack of qualified human resources (skills), — lack of financial resources, — inappropriate rules and regulations (e.g. gold-plating), — political obstacles (e.g. inappropriate strategic planning), — internal organisation of bodies unsuited to managing complex projects such as those co-financed by ESIF;

57. calls for the Member States, not just less developed ones but all across the EU, to make greater use of the technical assistance available for operational programmes in order to improve the capacity of local and regional bodies and other participants to draw and manage EU funds as well as to support better statistical data being collected at local level;

58. underlines that strengthening the administrative capacity at local and regional level will lead to more effective and result oriented implementation of the OPs. Benchmarking, exchange of experience and knowledge between regions and cities should be supported by EU and Member States, also by using instruments such as the European Territorial Cooperation programmes;

59. welcomes the European Commission’s Lagging Regions Initiative whose objective is to identify key drivers and bottlenecks for growth and investment at regional level, in particular in less developed regions. Calls on the European Commission to use the knowledge of regional and local experts and take into account the specific needs of lagging regions when providing recommendations on how to unlock their growth potential;

60. acknowledges that ex-ante conditionalities (Article 19 CPR) ensure that EU resources are invested in a legal environment that complies with European law and that they are geared to reducing competitive advantages derived from non-compliance with the rules, but draws attention to the following: — the CoR considers it unacceptable that funding on the territory of LRAs should be delayed due to some failings at European and national institutional level and hopes that in the long-term LRAs will benefit from the application of ex-ante conditionalities, — the CoR firmly opposes ‘external conditionality’ for ESIF regarding the freezing of regional aid for Member States which breach EU budget deficit rules. Such measures would primarily penalise LRAs for the failures of their national governments, — cohesion policy is essentially a regional policy and must remain so, avoiding more or less centralising policies at all levels of governance;

61. would encourage the Member States taking part in cooperation programmes and on whose territory an European Grouping of Territorial Cooperation (EGTC) has its headquarters to entrust the EGTC with the role of managing authority for some or all territorial cooperation programmes relating to the territory covered by the EGTC, in accordance with the relevant provisions of Article 22 of Regulation (EU) No 1299/2013 of the European Parliament and of the Council of 17 December 2013 on specific provisions for the support from the European Regional Development Fund to the European territorial cooperation goal.

Brussels, 9 July 2015. The President of the European Committee of the Regions Markku MARKKULA

(1) 317 valid contributions to the survey were sent by a wide range of stakeholders, authorities and services. Most contributions (70 %) were sent by representatives of public administrations. 89 respondents also provided contributions in the form of open comments. A detailed analysis of the consultation results can be found on the CoR website.

(2) A CoR consultation confirmed that a large majority of LRAs and other stakeholders have been involved in the preparatory phase of PAs and OPs. However, more than 70 % of respondents feel that the needs of LRAs have only been taken into account partially or not at all.

(3) Formal compliance with rules but without substantive application of rules.

(4) More than 50 % of the respondents of the CoR consultation stated that they were not aware of Structural Programme Loans.