Leader ECA audit findings and possible simplification 12 May 2017 Leader ECA audit findings and possible simplification Robert Markus

Topics: Special Report on Leader Findings on legality and regularity Estonian Leader Visit Topics: Special Report on Leader Findings on legality and regularity Findings on performance Simplified Cost Options (SCOs)

Special Report on Leader (5/2010) Estonian Leader Visit Special Report on Leader (5/2010) Some of our recommendations: Exclude projects which started before the grant decision to eliminate a major risk of inefficiency (deadweight) LAGs’ selection of projects to be based on documented assessments that demonstrate the soundness and fairness of the decision in terms of consistent and relevant criteria rules to ensure that the partnerships are not dominated by the local authorities at project selection meetings

Special Report on Leader (5/2010) Estonian Leader Visit Special Report on Leader (5/2010) Some of our recommendations: Avoid any conflict of interests: written declaration of the personal, political, professional or business interest by LAG Members for project assessment or decision- making absence from any discussion, assessment or decision on the project and the matter should be referred to the managing authority in accordance with the financial regulation

Special Report on Leader (5/2010) Estonian Leader Visit Special Report on Leader (5/2010) Some of our recommendations: LAGs should set measurable objectives, specific to their local area, that can be achieved by the Leader programme Member States should then require LAGs to account for achieving their local strategy objectives, for achieving added value through the Leader approach, and for the efficiency of the grant expenditure and the operating costs.

Findings on legality and regularity: Estonian Leader Visit Findings on legality and regularity: Leader projects error? Y N random sample 10 15

Findings on legality and regularity: Estonian Leader Visit Findings on legality and regularity: Reasons for over-payment (4 cases):

Findings on legality and regularity: Estonian Leader Visit Findings on legality and regularity: Reasons for other non-compliances (6 cases):

Findings on performance: Estonian Leader Visit Findings on performance: General ECA finding Member States focus first on the need to spend the EU money available, second on the need to comply with the rules and only third, and to a limited extent, on their expected performance

Findings on performance: Estonian Leader Visit Findings on performance: General ECA finding Member States focus first on the need to spend the EU money available, second on the need to comply with the rules and only third, and to a limited extent, on their expected performance

Findings on performance: Estonian Leader Visit Findings on performance: This also applied to RD We found insufficient targeting and selection procedures: half of the projects not selected on the basis of a transparent procedure, based on comparative merits with relevant selection criteria Typical example selection criteria were defined, but not used to target the support, as the available budget was sufficient to finance all eligible projects – because budgets exceeded actual needs

Findings on performance: Estonian Leader Visit Findings on performance: Reasonableness of costs For around half of the projects we found insufficient evidence that the costs were reasonable: no competitive tendering procedure with selection on the basis of the lowest price or best value for money or no reliable reference costs were used.

General ECA issues Focus on conformity versus focus on performance APM “Simplified Cost Options” General ECA issues Focus on conformity versus focus on performance Focus on costs versus focus on results Complexity versus simplicity “Costs reimbursement schemes” versus “entitlement based schemes for financing” or “predefined methods based on results”

Simplified Cost Options (SCOs) Estonian Leader Visit Simplified Cost Options (SCOs) The 2007-2013 period Rural development projects were typically based on a system of cost reimbursement The expenditure found eligible in invoices presented by beneficiaries, multiplied by the aid rate, constitutes the amount paid Simplified Cost Options were already used in the European Regional Development Fund and the European Social Fund

Standard scales of unit costs Estonian Leader Visit SCOs - possibilities Standard scales of unit costs Eligible costs calculated on the basis of quantified activities (outputs or results) multiplied by a standard scale of unit costs Lump sums A predetermined financial amount, not exceeding 100 000 euro, paid for achieving the agreed output or results, not tied to a quantity Flat rate financing Eligible expenditure is determined as a percentage of some other costs, often used for indirect costs

SCOs – why use them Possible advantages Estonian Leader Visit SCOs – why use them Possible advantages Focus on conformity versus focus on performance Focus on costs versus focus on results Complexity versus simplicity “Costs reimbursement schemes” versus “entitlement based schemes for financing” or “predefined methods based on results”

Use of SCOs for Leader in Estonia Estonian Leader Visit Use of SCOs for Leader in Estonia Flat rate financing M19.1 Indirect costs: 15% of eligible direct personnel costs. No supporting documents. M19.2, 19.3 19.4 Indirect costs: 20% of eligible direct costs. No supporting documents required. LEADER project support – Indirect costs: 15 % of the project management’s eligible direct personnel costs. No supporting documents required. Based on analyzing operating costs of 26 LAGs Standard scales of unit costs and Lump sums Not used

ECA audit on SCOs We are now doing an audit on how to: Estonian Leader Visit ECA audit on SCOs We are now doing an audit on how to: increase the simplification and efficiency during implementation further by using the potential of SCOs remove barriers and increase the uptake of SCOs improve the methodology to ensure economy of the EU budget take output and results more into account for the calculation of SCOs

Simplified Cost Options (SCOs) Estonian Leader Visit Simplified Cost Options (SCOs) We would like ask your opinion on: Can SCOs be used for Leader? Lump sums? Standard scales of unit costs? What are the constraints? What are the possibilities?

Thank you for your attention. Any questions?