1. Modification of Regulation (EC) No 1828/2006
COCOF 09/0014/00-EN
Modification of Regulation (EC) No 1828/2006
COCOF meeting
24 March 2009
Several months ago we started with you the process of revision of the existing implementing rules to see where simplification or clarification is needed based on our joint experience from the start of the programming period. This is very useful and important process as it gives us an insight into the practical difficulties with the implementation of the Community rules on the ground.
We share with you the same objective to make the rules as simple as possible in order to be able to concentrate on the key issues – to deliver good quality projects that will make a real difference to the European citizens.
As you know, in the simplification group we were able to clarify certain issues. We also promised that in some cases modification of the Implementing Regulation is not necessary and we committed ourselves to clarify these problems in the guidance notes that would be discussed in COCOF (for example on Article 11 regarding reporting of categories).
Nevertheless, we agreed that in some cases modifications of the Implementing Regulation are necessary. Today we have the first occasion to discuss the proposed amendments to the Implementing Regulation. We will continue the discussion in the next meeting in April and I hope we will be able to conclude in May in Prague so that the amendment could be adopted by the Commission in June.

2. The general objectives of the modification
To simplify and clarify the existing provisions based on the experience to-date
To adapt the text to the changes currently underway in the General and Fund-specific Regulations
To correct technical errors
There are three key objectives of the amendments:
To simplify and clarify the existing implementing provisions based on our joint experience to-date (such as publicity requirements, reporting on irregularities, financial management issues); some of the issues were raised in the simplification TF, in other cases the Commission itself identified a need to modify the text;
To adapt the text of the Implementing Regulation to the changes currently underway in the General and Fund-specific regulations (such as on eligibility of energy efficiency and renewable energy investments in the housing sector, provisions for eligibility of overheads); these are inevitable changes in order to align the legal provisions;
To correct technical mistakes (e.g. wrong references in the footnotes). We noted, also through the TF, several incoherencies in the various language version, these can nevertheless be only corrected once the modified text is adopted (in a form of corrigendum).
Retroactivity: for reasons of legal certainty, all these modifications except for modifications in Article 8 and 9 will apply after the adoption of the amendments. The reason for retroactive application of art. 8 and 9 is the fact that these provisions have no implication for selection of operations and thus cannot risk unequal treatment of beneficiaries or potential beneficiaries.
On the next slides I will present in a more detail the various amendments and their objectives.
We have distributed the text of the amended articles and annexes in track changes so that it can be easily identified where the changes are proposed.

3. Publicity and information issues
Article 8: More flexibility in fulfilling the publicity requirements in case of purchase of a physical object
Article 9: Activities implemented via a few operations of different funds: possibility of one visual identity for operations
Annex I: Correction of a technical mistake
Amendments of the publicity provisions come directly from the discussion in the Task for on simplification
Article 8:to provide more flexibility in fulfilling the publicity requirements in case of purchase of a physical object
We learned that the current provisions created practical problems to put an explanatory plaque in some cases. Therefore the new provision will allow the use of other means than the explanatory plaque to publicise the operation.
Article 9: to open a possibility of one visual identity for co-funded operations. We understand that the current provisions have led to multiplication of logos and statements which was contradictory to an effort to publicise in a simple way the EU contribution. This should now be possible in case of activities implemented through few operations jointly financed by different Funds. For example a communication campaign.
Annex I: correction of a technical mistake in description of colours for internet presentations. This amendment will put in line the text of the Regulation with already existing guidance which is available on Inforegio.

4. Financial issues Annex X
Simplifying information in the statement of expenditure:
no need to report on annual breakdown of the total certified eligible expenditure as not relevant for the Commission
no need to include expenditure on operations subject to partial closure as the information is provided in Annex XIV
deletion of the reference concerning major projects (for interim payments only) in the light of changes in Article 56 of General Regulation
These changes aim at simplifying the information to be submitted in the statements of expenditure. As a result, it should mean less information to be submitted and thus less burden.
Modifications in Annex X concern :
Removal of the requirement to report on annual breakdown of the total certified eligible expenditure from the statement of expenditure for interim payment and payment of the balance given the disproportionate workload for Member States to complete these tables and its limited relevance for the Commission.
2) Deletion of expenditure on operations subject to partial closure as it is already provided at the moment the statement of expenditure for partial closure is sent. Therefore, it is not necessary to duplicate this requirement.
3) Deletion of the reference on the declaration of expenditure concerning major projects in the certificate of expenditure accompanying the interim payments in light of the ongoing change of Article 56 of Regulation (EC) No 1083/2006 In fact, it will now be possible to include in the declaration of expenditure even expenditure for not yet approved major projects. In case of negative decision of the Commission on a given major project, the next statement of expenditure would then have to be corrected by withdrawing the amounts already paid to that major project.

5. Financial issues (cont.) Annex XIV
Simplifying information in the statement of expenditure for partial closure:
Deleting the reference to transitional support as not needed
Aligning with the information and template required in Annex X
Modification of Annex XIV on partial closure:
1) Deleting the reference to transitional support which is not needed
2) aligning with the information required in Annex X. This has already been explained in footnote 3 of the COCOF guidance note on partial closure

6. Management and audit issues: reporting on irregularities
Article 28: initial reporting
-l) and m): Community contribution to be indicated by applying co-financing rate of priority axis to public contribution or total expenditure as appropriate
-n): in case of a suspected fraud, and where no payment of the public contribution has been made, indicate the amounts which would have been unduly paid had the irregularity not been identified
-o): indicate code of region or area where the operation was located/carried out (by specifying NUTS level or otherwise)
Article 28: reporting - derogations
- the critical element in relation to reporting derogations is considered to be whether the expenditure concerned has been included in a certified statement to the Commission; Articles 28 (2) b and c are modified

7. Management and audit issues: reporting on irregularities (cont.)
Article 30 (1):
-quarterly follow-up reporting to be limited to reporting on details concerning the initiation, conclusion or abandonment of any procedures for imposing administrative or criminal penalties and whether fraud was established
-details on recovery measures no longer to be reported (decoupling of reporting)

8. Management and audit issues: reporting on irrecoverable amounts
Article 14: accounting records of the Member States maintained in accordance with Article 61(f) of Regulation (EC) No 1083/2006 to show the reference number of an irregularity which has been reported to OLAF
Article 20: annual reporting on irrecoverable amounts, not ad hoc
-to provide by 1 March 2010 and each year thereafter, a list of amounts which cannot be recovered or which are not expected to be recovered, classified by the year in which the recovery orders were issued (new reporting table added to Annex XI)
-for statements of withdrawals, recoveries and amounts to be recovered using tables in Annex XI, aggregate amounts related to irregularities reported to be provided (tables modified)
-for irrecoverable amounts, if amount was reported to OLAF, the reference number must be provided

9. Management and audit issues: reporting on irrecoverable amounts
Article 30 (2):
-a Member State may indicate, in the new table in Annex XI, that the Community share should be born by the EU budget
-if, within one year from the statement, the Commission does not request information, or does not inform the Member State in writing of its intention to open up an enquiry in respect of that amount, the Community share will be borne by the EU budget
-no Commission decision will be needed
-the time limit of one year does not apply in cases of suspected or established fraud

10. Management and audit issues: co-operation with Member States
Articles 33, 35:
-streamlining contacts with MS on irregularities by merging the provisions in articles 33 and 35 to avoid overlaps between various committees dealing with irregularities.
-as a result, Article 35 is cancelled

11. Audit issues Clarification of rules for ETC programmes
Article 13 paragraphs 2, 3 and 4 modified to add reference to “relevant controllers” for ETC in relation to management verifications
Article 18 paragraphs 2 and 3 modified to make clear that the closure declaration for an ETC programme covers the whole programme and all expenditure

12. Audit issues Sampling in case of small populations
Annex IV is modified by the addition of a paragraph 5
to cover the case where the number of operations is to small to allow a statistical sampling method. In line with the guidance document on sampling, it is stated that:
a non-statistical method may be used
the method must ensure random selection
the size of the sample must be based on level of assurance from system and be sufficient for AA to draw valid conclusions

13. Audit issues List of data on operations
Modification of Annex III, Field 32 to add reference to expenditure relating to flat rate for indirect costs, unit costs and lump sums.

14. Article 47 in the field of housing interventions
Eligibility issues
Article 47 in the field of housing interventions
Aligning with changes of ERDF regulation (recovery plan):
Deletion of reference to energy efficiency
More flexibility:
criteria for selection of areas: one criteria to choose instead of three
no need to define benchmarking values
deletion of definition of "common parts“
Article 47:
Aligning with the recovery plan: deletion of the reference to energy efficiency as the new ERDF provisions provide for a new approach and in all MS.
In addition, we provide as much flexibility as possible in the housing operations within the current legislative framework. We would prefer removing this Article completely but we need to keep it due to the reference in the ERDF regulation. More flexibility: In practice, one or more criteria provided in the list must be chosen, as opposed to at least three criteria compulsory at the moment. It is legally not possible to make the criteria optional.
There will be no need to define benchmarking values as is currently the case.
More manoeuvre is also provided on which common parts of the buildings can be co-financed by ERDF since the Commission Regulation will no longer define what "common parts" mean.

15. Eligibility issues (cont.)
Simplification and clarification of the rules for ETC programmes:
Article 50: Expenditure by public authorities relating to the implementation of operation
Clarification of “additional costs” in par.3 to make clear that they must derive directly from the operation
Article 52: Overheads
Deletion of the specific article as more extended provision in the modified ERDF regulation for all types of ERDF grants (recovery plan)
Article 50: Clarification of “additional costs” in ETC programmes. This point comes from the simplification TF. We revised the text of the Article to make clear what additional costs mean by using the wording of the provisions of the eligibility rules (rule n°11).
Article 52: Deletion of specific provision for overheads in ETC programmes as the new provisions in the revised ERDF regulation will allow a more extended use of overheads and other forms of eligible costs.

16. Annual and final reporting (Annex XVIII)
Clarification on the use of physical indicators by explaining the information required at the level of achievements, baseline and targets (point 2.1.1)
Reporting of private expenditure in all cases to monitor the leverage effect of the Funds (point 2.1.2)
Reporting on both quantitative and qualitative implementation of new provisions to allow monitoring on the use of recovery plan: energy efficiency and renewable energy in housing, simplified costs
The changes proposed in the format for the annual and final reports have an objective to improve reporting on the implementation of operational programmes and thus to allow the Commission report to other institutions and general public about the achievements of cohesion policy.
Clarification on the use of indicators: based on the experience until now we see the need to provide more clarification on how the indicators should be encoded. This is of particular importance if we want to be able to report on the policy achievements and make a comparative analysis. The evidence shows that Member States apply different approaches and we hope that the clarification provided in the footnotes will help to do the encoding correctly
Clarification on reporting of private expenditure including where financing plans are calculated on the basis of public costs. This is particularly important to see the leverage effect generated by the investments from the Funds.
NB: We are aware of the problems with filling in this table but due to the fact that this is the exact copy-paste of the provisions in Article 67 of general regulation, we cannot delete it at this stage.
Reporting on implementation of new provisions of Fund-specific regulations (energy efficiency and renewable energy in housing, simplified costs): this is to allow the Commission to fulfil the commitment we made to EP to report on the implementation and effects of the recovery plan in MS.

17. Annual and final reporting (cont.) (Annex XVIII)
Improving reporting on major projects (point 5) by specifying which information is required :
ongoing major projects: timetable, financing
completed major projects: date of completion, total final costs, key output and result indicators
Clarifying reporting on publicity and information measures by deleting unnecessary information and aligning it with Article 4 (point 7)
Improving reporting on major projects. The current legislation on reporting did not make any distinction between ongoing and completed major projects. We do not ask for more information but we ask for reporting on the basis of information already provided in the major project applications. In addition, major projects are the flagship of cohesion policy and therefore we want to improve reporting on the achievements of these investments. Therefore we need to receive key output and results of the completed major projects.
Clarifying reporting on publicity and information measures to simplify the information required and avoid references which are of limited relevance for the Commission.

18. Information on major projects (Annex XX to XXII)
Reporting on expenditure certified before submitting of the application to the Commission (recovery plan)
Annex XX:
Reduction in the number of structured data to be encoded as limited relevance or are provided somewhere else
Use of core indicators to strengthen the reporting mechanisms
Annex XXI and XXII:
Use of infrastructure form for all types of projects, including with state aid
Clarification of the funding gap methodology in line with the existing guidance (Article 55 and CBA guide)
The modifications aim at simplifying and clarifying information necessary to be provided by Member States when submitting major project applications and to align with the new provisions in GR on expenditure for MP certified before submission to the Commission
Annex XX: as you can see, we deleted those structured data which are of limited relevance for the Commission or which are provided somewhere else. On the other hand, new is to encode core indicators relevant for the major project in question for the purposes of the Commission's reporting (linked to annex XVIII).
Annex XXI and XXII:
Use of infrastructure form for all types of projects, including with state aid; the footnote referring to infrastructure projects falling under scope of Article 55(6) has been deleted in both forms. All infrastructure projects regardless whether they involve state aid or not have to use infrastructure forms.
The method for the calculation of the EU contribution is also clarified and put in line with the existing REGIO guidance notes, e.g. Art. 55 and CBA guide,
some corrections/clarifications have also been made in the footnotes based on the experience to-date.

19. Financial engineering (Articles 43 - 46)
Clarification about the possibility to combine grants and support from financial engineering instruments to the same enterprise, PPP or other urban project
Increase of eligible management costs by 0.5% for outermost regions
Possible further drafting improvements and clarifications
NB: This part has not yet been introduced in the documents distributed to COCOF due to a need for further internal reflection.
The modifications will concern the following:
Clarification that the same enterprise or project may receive both a non repayable grant and a loan , equity or guarantees, by the Structural Funds, this was a frequent question raised by Member States. In the same time, it should be noted that a financial engineering instrument cannot function as a vehicle to disburse the grant because its revolving function would not be accomplished.
Increase the thresholds for management costs in outermost regions to cover the additional expenses, especially travel costs. In practice, this means that the thresholds may be increased by up to 25% to cover the additional management expenses.
Other issues:
The provisions on a business plan by financial engineering instruments to the managing authority or to the holding fund were simplified, allowing for any other appropriate document to replace a business plan.
The approval by the monitoring committee of the criteria for decisions about contributions from operational programmes to financial engineering instruments is introduced in article 43(3), to reply many questions on this issue raised by MS and to help managing authorities in clarifying the implementation of Articles 4(3) and 65(a) of the general regulation regarding approval of project selection criteria in the case of financial engineering
In article 46(2), a more general and flexible approach is introduced, regarding urban development funds investing in PPPs or other urban projects by means of repayable investments such as equity or loans, or guarantees for repayable investments (in accordance with the general provision of Art 43 (1) of Commission Regulation)
Several drafting simplifications and clarifications are proposed, basically in Article 43 but also in Articles of the Regulation.