1. Budget absorption and automatic decommitment
Monique RAQUET, Mathieu LEFEBVRE
European Commission – DG EMPL
ESF coordination Unit
Technical Working Group –

2. Objective of the presentation
To draw the attention:
to the continuing low budget absorption in Member States and the technical and political implications
to the financial risks at the end of 2009 (n+2)
and to discuss how to prevent decommitment

3. Survey by DG EMPL in May and in August on the following items:
Methodology
Survey by DG EMPL in May and in August on the following items:
1 – the payments forecasts in 2009 concerning the last programming period ( ) and the new one ( ).
2 – for the new programming period, the financial implementation of the OP’s in terms of commitments and payments made by the managing authorities to the beneficiaries and payments certified and transmitted to the Commission.

4. 2009 Budget absorption: old and new programming periods
At EU level, forecasts on the overall payments which would be made in 2009 based on:
advance payments made in 2009
interim payments in 2009
payments requests to be received and paid before the end of the year
At this stage, and according to the most pessimistic scenario, there is a risk that credits could remain unspent in 2009
Main problems identified:
For the period, there was still a blocked amount of 920 M€ at mid August
For the period, slow financial implementation

5. 2009 Budget absorption forecast: old and new programming periods

6. 2009 Budget absorption: old and new programming periods
Implication of a low budget execution
It will become problematic to explain why so much has not been spent in a time of crisis, of increasing needs in terms of unemployment, social inclusion…
It could undermine our arguments for the ESF in the future (current Budget review process and up-coming strategy EU 2020)

7. The financial implementation of the 2007-2013 programming period
Three main ratios used:
Rate of commitment = Total amounts committed to operations by the managing authorities / total allocations (ESF + national) – based on declaration
Rate of payment = Total payments made to beneficiaries by the managing authorities / total allocations (ESF + national) – based on declaration
Rate of certified payments = Amounts Payments certified and transmitted to the Commission / total allocations (ESF + national) – based on SFC2007

8. The financial implementation of the 2007-2013 programming period
The state of play in terms of commitments to operations in the 27 MS
Rate of commitment / total allocations

9. The financial implementation of the 2007-2013 programming period
The situation at mid August
At EU level, M€ committed – 27%
6 countries under 20%
9 countries between 20 and 30%
8 countries between 30 and 50%
4 countries above 50%
The evolution between mid May and mid August
At EU level, increase from 22,5% to 27,2%
3 countries with an increase of more than 25 points between the two periods of reference

10. The financial implementation of the 2007-2013 programming period
The state of play in terms of payments to beneficiaries in the 27 MS
Rate of payment / total allocations

11. The financial implementation of the 2007-2013 programming period
The situation at mid August
At EU level, M€ paid by the MA – 5,23%
8 countries below 2%
10 countries between 2 and 5%
6 countries between 5 and 10%
3 countries above 10%
The evolution between mid may and mid August
At EU level, increase from 3,61% to 5,23%
2 countries with an increase more than 5 points between the 2 periods of reference

12. The financial implementation of the 2007-2013 programming period
The state of play in terms of certified amounts in the 27 MS
Rate of certified payments / total allocations

13. The financial implementation of the 2007-2013 programming period
The situation at mid August
8 countries with no amounts yet certified
11 countries below 1%
5 countries between 1 and 5%
3 countries above 5%
The evolution between mid May and mid August
5 countries have begun to certify
4 countries have increased their rate of certification by at least 1.5 points.

14. Automatic decommitment
Article 93 of the General Regulation:
“The Commission shall automatically decommit any part of a budget commitment in an operational programme that has not been used for payment of the pre-financing or interim payments or for which an application for payment has not been sent in conformity with article 86 by 31 December of the second year following the year of budget commitment under the programme”
N+2 will apply for the commitments 2007 at the end of 2009 for 13 MS

15. Automatic decommitment
At the end of September 2009, the n+2 risk represented, in theory, a maximum of M€.
This amount is the result of the following operations by OPs:
Commitments 2007 – advance payments, interim payments and payments requests received and admissible.
To assess more accurately the n+2 risk, we have used the data on the financial implementation of the programmes

16. Compliance assessments
5 OPs have a n+2 risk because of the delays in the compliance assessment process (update 21/09).

17. Risk n+2 on the basis of the commitments made to operations
Focus on the state of play with commitments made until now at the level of Managing authorities
Calculation : commitments (total allocation committed to operation * cofinancing rate + advances)
This calculation reveals the programmes where the amounts committed to operations + advances are not enough to cover the committments 2007.
8 programmes have not enough commitments to operations at mid August to cover the n+2 risk. It is likely they will be subject to a decommitment, since they need to make the commitments, the payments and the certification in 3 months.

18. Risk n+2 on the basis of the payments made to operations
Focus on the state of play with payments made by the managing authorities (desks data)
Calculation : commitments (total allocation paid to operations * cofinancing rate + advances)
This calculation is probably the closest to the reality since the payments made by the managing authorities should be certified and sent before the end of the year, if the certification runs smoothly.
It is likely that this calculation slightly overestimates the risk, since some additional payments could be made and certified before the end of the year
54 OP currently at risk of decommitment at the end of August based on this calculation

19. Conclusion To avoid the N+2:
MS need to complete as quickly as possible the setting up of Management and Control Systems.
and need to generate additional eligible expenditure and to proceed to certification quickly
To reach an acceptable 2009 budget execution:
maximum payment requests must be sent before the 15 December. It will enable us to pay them from the 2009 budget.

20. Conclusion
Any other suggestions?