1. Anthoula Charalambous Savvides Senior Coordination Officer, Planning Bureau Structural and Cohesion Funds Directorate Managing Authority Budapest 5 October 2012 Setting Up the New Cohesion Policy Implementation System Objectives and Challenges Lessons Learnt from PP 2007-2013

2. Overview 2  Management and Control System (MCS) 2014-2020 Legal Basis (not final)  MCS Key Objectives  Good Governance  Internal Controls  Institutional Framework  Tools for Effective Operation of the MCS  E-Cohesion Policy  Strengths and Weaknesses - Cyprus case

3. Cohesion Policy Implementation System PP 2014-2020 Objective: Simplification of the cohesion policy delivery system, aiming at the reduction of administrative burden for beneficiaries Challenge: Balance the accountability of designated bodies to the complex regulatory environment, with the public interest, by bringing about positive outcomes and added value Distinction between the soundness of the management and control procedures and processes and the goals that they are meant to achieve remains very important (Goal: efficient and effective allocation of resources, consistent with policy priorities)

4. Management and Control System PP 2014-2020, Legal Basis ( not final ) Common Provisions Regulation, Part 2-Common Provisions Applicable to CSF Funds, Title VIII Management and Control, Chapter III, Article 65 Commission Powers and Responsibilities Common Provisions Regulation, Part 3- General Provisions Applicable to the ERDF, the ESF and the CF, Title VI, Chapter I, Management and Control Systems, Articles 113-116 Designation and functions of MA, CA and AA Financial Rules Regulation, Article 56 Shared Management with Member States 4

5. Common Provisions Regulation (CPR), Management and Control, Commission Powers and Responsibilities (not final)  satisfies itself that MS have set up management and control systems which function effectively and in compliance with the CPR and the Fund-specific rules  may carry out on-the spot audits or checks respecting the principle of proportionality, by taking into account the need to avoid duplication of audits, the level of risk to the Union Budget and the need to minimize administrative burden to beneficiaries Scope of Commission’s audits, verification of effective functioning of systems and assessment of the sound financial management of programs 5 The Commission,

6. Financial Rules Regulation, Article 56 Shared Management with Member States respect the principles of sound financial management, transparency and non- discrimination The Commission and Member States ensure correct and effective implementation in accordance with applicable rules designate and supervise bodies responsible for the management and control carry out controls respecting the principle of proportionality and prevent, detect and correct irregularities Member States monitors the Management and Control Systems set in MS respects the principle of proportionality and level of assessed risk in its audit work Commission provide the Commission by 15 February, annual accounts, annual summary of final audit reports and of controls (accompanied by an opinion of an independent audit body) Designated Bodies

7. Member States  Designate MAs (public or private body) and CAs (public body). MA which is public body may carry out the functions of CA  Designate AA functionally independent from MA & CA  May designate IBs to carry out certain tasks of MA & CA (arrangements between IBs and MA&CA formally recorded in writing)  MA, CA & AA may be part of the same public body for the investment for growth and jobs goal, for programs EU contribution<€250 mln  Notification of formal designation of MA and CA prior to submission of 1 st application for payment  Designation based on a report & an opinion of independent audit body. Audit work may not be carried out where the MCS essentially the same as for 2007-2013 & evidence of effective functioning. ( Report and opinion of audit body may be requested by Commission for OPs exceeding €250 mln and for which there are significant changes) Common Provisions Regulation, Provisions Applicable to ERDF, ESF and CF Management and Control Systems ( not final ) (1)

8. Managing Authority, responsible for managing the OP in accordance with the principle of sound financial management (management of OP, selection of operations, financial management & control, verifications) Certifying Authority, responsible for payment applications, for drawing up accounts (Art 56 of FR) and certifying their accuracy, completeness & veracity, for amounts recoverable and withdrawn, for maintaining accounting records Audit Authority, carries out audits on the proper functioning of the MCS and responsible, for audit opinion according to Article 56 of FR and control report Common Provisions Regulation, Provisions Applicable to ERDF, ESF and CF Management and Control Systems ( not final ) (2)

9. MCS Key Objectives To view the management and control system only through the regulatory and technical prism would distort the picture Design a system based on the key objectives it is supposed to achieve Key Objectives:  Allocation of resources consistent with policy priorities (requires good planning)  Expenditure control (requires effective internal controls system)  Good operational management to promote efficiency and effectiveness – (requires good coordination among involved Authorities) Basic Requirement: good governance

10. Good Governance Accountability Officials answerable and have consequences for acts of commission or omission Predictability clear laws and regulations enforced uniformly and effectively Transparency clear roles and responsibilities, access to information, open program preparation, execution and reporting Participation by all stakeholders for feedback and reality check

11. Internal Controls appropriatecost effectivefunctioning consistently as planned promote orderly, economical, efficient and effective operations safeguard resources and adhereance to laws and regulations develop and maintain reliable data

12. Institutional Framework Poor efficiency and effectiveness is partly rooted in institutional issues. Institutions comprise both formal and informal rules (“established practices”). Three basic points:  Failure to take into account key informal rules is likely to lead to a failure of the system ( it was the unexposed part of the iceberg that sank the Titanic ). Improvements may fail if in conflict with the less visible informal rules.  Total stock of institutions is always larger than is visible on the formal surface.  Organizations and units can be merged, restructured, recombined and new created, but no change in outcomes will result unless the basic processes and procedures change as well. Build the management and control system based on the new legal framework and taking into consideration the existing institutional framework

13. E-cohesion The E-cohesion initiative stemmed from the need to,  simplify implementation by reducing the administrative burden on beneficiaries, so the ‘only once’ principle may be applied and to  increase transparency and openness To comply with the e-Cohesion initiative MS are expected to have in place, for the PP 2014- 2020, an IT environment enabling the secure exchange of information in an electronic way.  Consider reengineering processes to maximize efficiency (to apply advanced IT to inefficient processes means to computerize inefficiency)  IT cannot substitute for good management and internal controls IT system should meet the following criteria, fit real objectives and user requirements go hand in hand with improved rules and processes protect data and systems integrity aim at an integrated strategy and avoid piecemeal approach

14. Management and Control System 2007-2013- Cyprus case Tools for Effective Operation of the MCS MCS Circulars (common procedures) MIS (tools and reports) Support (continuous) Seminars and Workshops 14

15. Management and Control System 2007-2013 Lessons Learnt Strengths - Cyprus case Common/Single system of monitoring and controls (and MIS) enforced through MA circulars, enhanced efficiency Emphasis on internal system of controls, ex-ante verifications (administrative and on-the-spot, timing and content controlled by MA and inbuilt in MIS) ensured correctness of operations Emphasis on capacity building/strong IBs (staff / training / support) promoted effectiveness Close communication and coordination between responsible bodies ensured better planning and coordination of activities, financial management and control Help Desk (provision of continuous support to Beneficiaries and IBs) 15

16. Management and Control System 2007-2013 Lessons Learnt Weaknesses - Cyprus case Extensive controls at Beneficiary and IB level delaying submission and verification of expenditure Management Information System not integrated with national accounting system and/or other IT systems Different financial flow system for different kinds of beneficiaries (effort not to create parallel structures, but designed number of financial flows systems) MIS does not support electronic submission of data from aid schemes’ Beneficiaries (mainly private sector) IBs performing extensive controls on Beneficiaries that are Government Departments (expend. already well controlled because of national procedures) 16

17. Conclusions Implementation systems should be more efficient and effective,  reconsider procedures, processes and specific roles  rethink what we do and what we can do differently  gather, process and store information and transform it to knowledge and wisdom  give more emphasis on Beneficiaries’ needs and improve accessibility  face bureaucracy built in our systems and challenge the structures  learn from our experiences Management should be more than administration. Care should be taken so that we are not reduced to systems and controls. To achieve efficiency and effectiveness we should a)simplify b)simplify and c)simplify more

18. Thank you for your attention http://www.structuralfunds.org.cy