The EU regional development fund has become so bureaucratic that rather than helping less-developed regions catch up, it is discouraging innovation, according to a new report calling for a radical shake-up of the rules and guidelines and the axeing routine audits.
“[The system] has long passed the point of being able to be grasped either by beneficiaries or by the authorities involved,” the report says. “There is strong evidence that in many areas the requirements have become disproportionate, and rather than providing positive leverage, they are discouraging more innovation.”
As part of “a good clean up”, the fund must be made simpler, more flexible, better coordinated with member states, and more focused on results and goals, rather than process and administration.
Acknowledging the conclusions of the report, the EU Regional Commissioner Corina Creţu conceded there has been a tendency to micromanage from Brussels. “We cannot justify it; I refuse to justify it,” said Creţu. “I cannot accept that people don’t attempt to apply for funds because of legal or administrative barriers. We became more complicated and more complex every time we spoke about simplification.”
National rules and systems, including national auditing authorities, should be used as much as possible, with wider use of flat rates, unit costs or lump sums for reimbursements, fewer performance assessments and plainer language in documents, the study, led by former Estonian Commissioner Siim Kallas says.
The multi-billion euro EU pot of money designated to modernise Europe's poorest regions, is a pile of accumulated rules, endless forms, and overlapping programmes.
Rules governing regional policy, which absorbs 30 per cent of the EU budget, stretch to more than 600 pages and over 5,000 pages of guidance. Some member states have set up more than 50 programmes to manage incoming funds.
Another part of the prescription is for softer penalties for errors. “Serious issues are lumped together with unintentional mistakes which have no actual financial consequences,” the report says.
To prevent errors, more and more “double checks” and other redundant procedures have been introduced to EU regional funds, even if the money to be reimbursed has already been subject to effective checks under national budget rules. This extensive rule-making displays an untrusting attitude to local politicians, the report says.
Audit procedures “are not transparent enough” and the Commission should consider setting up an appeal committee for authorities to challenge findings.
“The complexity of the implementation system reveals little confidence in the ability of national regulatory frameworks to ensure compliance and efficient fund management,” the report says.
Micromanaging from Brussels
Kallas said the Commission finds itself in a vicious circle with its paperwork. “First, there are too many programmes in structural funds. Then there are rules for every programme and guidelines. But no guideline will be perfect, so there will be another guideline,” he said.
In a rare admission, EU budget Commissioner Günther Oettinger said Brussels has, “rather overdone it with administration in the last few years. We need to move to efficient, simple controls,” he said.
Gearing up for next EU budget
Regional funds are currently receiving a lot of scrutiny, with Brussels gearing up for the next multiannual financial framework, the EU’s overall, long-term budget plan to be negotiated over the next year or two.
Creţu, who said she would implement many of the suggestions in the report, faces intense competition from other parts of the EU budget, such agriculture and research.
A controversial suggestion in report by another former commissioner, Pascal Lamy published last week is that responsibility for a large portion of its budget should move into the research programme.
Regional funding makes up 70 per cent of all public funding in Bulgaria and Romania. In Austria, it amounts to 5 per cent of government spending.
The EU Commission estimates that regional funding can help generate 350,000 new jobs between 2014 and 2020.