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

2. 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)

3. 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

4. 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

5. 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.

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

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

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

9. 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

10. 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

11. 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

12. 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.

13. 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”

14. Simplified Cost Options (SCOs)
Estonian Leader Visit
Simplified Cost Options (SCOs)
The 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

15. 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 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

16. 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”

17. 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, 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

18. 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

19. 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?

20. Thank you for your attention. Any questions?