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WORKSHOP 1

SIMPLIFICATION AND SIMPLIFIED COSTS OPTIONSMonday 18th June, afternoon session

DG Regional Policy, Audit Directorate Unit C3

Isabel Pardo

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• Simplified Cost Options

– Omnibus: 2014-2020

– Post 2020 proposal

• Management Control systems & Audits

– Omnibus: 2014-2020

– Post 2020 proposal

Click to add text

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KEY SIMPLIFICATION MEASURE IN THE CPR

Increased possibility for using SIMPLIFIED COST OPTIONS: flat rate

financing, standard scales of unit costs and lump sums.

A DIFFERENT MINDSET

SCOs are about results: when conditions are met then costs should be

accepted

Balance between trust & control

Clarity

Communication

Passive Gold Plating

USE SCOs AS MUCH AS POSSIBLE

SCOs 2014-2020 1/4

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SCOs 2014-2020 2/4

The audit approach must be aligned with simplification

objectives=> reduce administrative burden & costs

The audit is carried out at two levels:

1. At Programme level on the Methodology => MA/IB

2. At Beneficiary level on the Implementation of the SCOs

(payments based on SCOs- conditions for reimbursement have been

fulfilled)

Best Practice:

Μethodology drawn by the MA to be validated by the AA prior to its

implementation

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SCOs 2014-2020 3/4

SCOs 2014-2020

Omnibus: 2014-2020 3/4

Omnibus 2014-2020 Post 2020 Proposal

New types Forms of grants Art. 48 • Lump sums: No upper limit Art. 67(1)(c) • Financing on the fulfilment of conditions related to

progress in implementation or the achievement of objectives of programmes - in delegated acts (e.g. energy efficiency, TA) Art. 67(1)(e)

• Compulsory use when public support ≤ EUR 100.000 for operations not implemented exclusively through public procurement Art. 67(2a)

• Possibility of an expert judgment for setting tailor-made SCOs (Art. 67(5)(a)(i)

• Draft budget on a case-by-case basis and agreed ex ante by the MA when public support ≤ EUR 100.000 Art. 67(5)(a)(bis)

• Off-the-shelf SCOs: EC can adopt in a delegated act SSUC and FR Art. 67(5a)

Y

Link cost of the operation are based on either: fulfilment of conditions ; achievement of results

Compulsory use when public support ≤ EUR 200.000

Y

Draft budget ≤ EUR 200.000 ex ante by the body selecting the operation

Art. 88 EC can adopt SSUC, Lump sum and FR

Costs Public Procured

Where public procurement is limited to certain categories of costs: SCOs may be used to cover the entire operation Art. 67(4)

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SCOs 2014-2020

Omnibus: 2014-2020 4/4

Flat rates Art. 68 Art. 68a Art. 68b Art. 49-50-51 Proposal Art. 68 Flat rates for indirect costs

Up to 25% Method required

Up to 15% of eligible direct staff costs

Existing methods applicable in EU policies for similar type of operations and beneficiaries

Staff costs up to 20% of other direct costs of an operation as a flat rate for direct staff costs Art. 68a(1)

– cannot be used without calculation method when the direct costs of the operation include public works contracts above threshold defined in the public procurement directive

40% of eligible direct staff costs for calculating remaining eligible costs Art. 68b

– cannot be applied to staff costs calculated on the basis of a flat rate e.g. 20%

Y

Y

Up to 7% of eligible direct costs

Y

Y

Member state flat rate for similar type of operations in 2014-20 ( NOT longer beneficiaries)

Restructuring Article 68 (a) Staff costs

Full time

latest documented annual gross employment cost/1720 hours:

pro-rata, extrapolation when not enough data available

Number of hours declared/year cannot exceed the number of hours used for the calculation of the hourly rate

Part-time work:

Y

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How is the Commission helping ?

– Seminar in the European Week of Regions and Cities 10-17

– INTERACT workshops on SCOs Q&A Malta 05-17/Amsterdam

09-17

– TAIEX-REGIO Peer to Peer workshop on SCOs 10-17/Bratislava

– Workshop on the use of SCOs _ Hungary 01-18/ Berlin 02-18

– ISCO WG

– Draft on Key principles for auditing SCOs in colaboration with

ECA

– Update of the Guidance on SCOs based on Omnibus

– Provide answers to one-off questions from programmes (GEO

Units)

– Survey on current and intended use of SCOs 03-18)

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Management Control systems & Audits 1/4

Omnibus: 2014-2020

Novelties for the MA in Art. 125(4)(a) (ii)

(ii) that where SCOs are used, managing authority has to verify that

that the conditions for reimbursement of expenditure to the

beneficiary have been met.

Novelties for the AA in Art. 148(1)

thresholds below which an operation may be subject to one audit by

either the audit authority or COM are doubled to EUR 400 000 for

the ERDF and the Cohesion Fund .

– An escape clause is introduced for MS in accordance to which if they

deem necessary to do so in order to be able to issue an audit opinion

Novelties for Commission audit reports in Art. 75 (2) (a)

Draft in 3 months after the audit mission and Final in 3 months

after a complete reply by MS

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Management Control systems & Audits 2/4

Post 2020 proposal

General principles management/control systems

Simplification to alleviate control and audit burden

Stability: roll over of the 2014-2020 management and control

systems, retain assurance model based on accounts, functioning of

systems and Legality and Regularity of expenditure certified

The audit work should focus on providing assurance on the

functioning of the management and control system

Reinforce single audit arrangements, increased synergies between

1st level controls and audits

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Management Control systems & Audits 3/4Post 2020 proposal

Management verifications (Art. 68) Risk-based management verifications and proportionate to risks

identified (risk management strategy )

Accounting function to be performed by managing authority or

another body identified as a programme authority (Art. 70)

– shall not comprise verifications at the level of beneficiaries

Audit work :Single audit arrangements (Art. 74) EC and AAs shall first use of all information and records available

including results of management verifications at MA level

Audit of operations: The threshold and escape clause of Omnibus

are kept

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Management Control systems & Audits 4/4

Post 2020 proposal

Enhanced proportionate arrangements on MCS and Audits Criteria

for application (Art. 77-79)

EC has confirmed in the AAR for 2 consecutive years:

• the MCS of OP functions effectively and TER below 2%

ETC sample of audit of operations at EU level (ETC Art. 47- 48)

Significant reduction of audit effort and associated costs, in 2015 the

audit carried out for ETC represented 15% (1300 operations) of total

while ETC weight on expenditure was of 3%

Commission selects a representative sample of OPs for which have

provided necessary information

Stratification can be used for group of programmes depending on the

risks identified

When residual error rate above 2%, no automatic extrapolated

correction. Assessment needed to determine the targeted actions to

be implemented (additional audit work, financial corrections,..)

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Thank you for your attention

REGIO-D2-CROSS-BORDER-COOPERATION@ec.europa.euREGIO-TRANSNATIONAL-AND-INTERREGIONAL-COOPERATION@ec.europa.eu