/ EUROPEAN COMMISSION
DIRECTORATE-GENERAL
REGIONAL POLICY
Policy Coordination
The Director

Minutes of the 40th meeting

of the Coordination Committee of the Funds

Brussels, 18 November 2010

Mr Rudolf Niessler (DG Regio, Director for policy coordination) opened the meeting and welcomed the delegations. He started with some preliminary remarks on:

The reiteration of the Commission thanks to the Belgium presidency for the projects visits which took place in Mons. This was a fruitful mission with a lot of lessons to learn from final beneficiaries in the field of research and innovation.

The adoption by the Commission of the report on Cohesion Policy: Responding to the economic crisis, namely "a review of the implementation of cohesion policy measures adopted in support of the European Economic Recovery Plan", on the 25th of October. The report was sent to delegates by email and uploaded on Circa where all the linguistic versions are available as well. The document would be discussed in the European Parliament and in the Council. Dates confirmed so far were the 1st of December for the REGI Committee and the 7th of December for the Council Working Group.

The publication of the 5th Report on Economic, Social and Territorial Cohesion on the 10th of November. The Report would be largely discussed in the various fora concerned. In addition, this adoption marked the launch of apublicconsultation process which would run until 31January 2011.All stakeholders were invited to submit their views on the different questions raised in the conclusions of the report.Comments could be posted on InfoRegio website. In the meantime, a joint working party with the TCUM sub-group was planned for the 16th of December (morning session only) to discuss territorial issues in relation with the 5th Cohesion Report.

The modification of the December COCOF meeting which would be a two-day meeting to be held on 14 and 15 December. The morning session of the 14th of December would be devoted to a technical meeting covering two main issues: the categorisation of data (following the presentation made by J. Walsh at the October COCOF meeting) and the reporting on core indicators in the annual implementation reports (AIRs). The COCOF meeting itself would start in the afternoon and continue the day after.

The simplified costs - flat rates for indirect costs issue. So far four cases of flat-rates approved (DK, Belgium (Flanders), AU and UK (Wales)); Cases in an advanced stage of assessment: Flanders/NL (ETC programme), Thüringen (DE); Case under initial assessment: Poland; Expected case from Finland (not received yet, but already examined bi-laterally); and Hungary had withdrawn its proposal.

In order to facilitate the submission of flat-rate proposals and their subsequent assessment by DG REGIO services, Member States had already received an application form. This application form was for ERDF and not for ESF. The use of this application form was optional for national authorities. It did not replace the documents which were necessary to submit the proposal. Although the idea of this application form was to avoid additional correspondence with national authorities, if this was needed, DG REGIO could ask for additional information. As they were at the middle of the programming period, Member States were encouraged to submit their flat-rate proposals by the end of the year. In any case, they could present proposals for assessment later on, but of course the simplification effect might be more limited. However Member States were invited to raise any comments or to ask any questions if they considered that the application form would need to be improved or if they envisaged adopting standard scale unit costs and lump-sums for ERDF programmes.

Then he invited the MemberStates to raise any concerns concerning cohesion policy in general and COCOF activities in particular.

Some Member States asked for the simplified costs application form to be available on Circa and for information about its use for ESF and ETC programmes.

The Chairman indicated that all information requested would be available on Circa.

  1. Approval of the draft Agenda:

The Chairman presented the draft agenda of the meeting. He indicated that the point presentation of the study on "the objective of economic and social cohesion in the economic policies of Member States" was postponed to the December meeting as the speaker had a last minute constraint and finally could not make the presentation.

The draft agenda was approved with the modification mentioned.

  1. Treatment of "simple" bankruptcies at the closure of 2000-2006 assistance:

The Chairman indicated that the point was already on the agenda of the September COCOF but at that stage, the Commission discovered still some uncertainties as regards the legal base and the presentation in only one Commission decision. Commission had to revise the initial legal base, had to be enlarged the proposal in its scope of application as well to the Cohesion fund and split into two decisions one addressed to the Member States and one addressed to the Commission.

The proposal was now grounded on Art. 70(3) and 105(1) of the General Regulation N°1083/2006 and the corresponding provisions for the European Fisheries Fund and European Agricultural Fund for Rural Development (EAFRD). This was as well the reason why the proposal would be not presented anymore for information but for approval in line with the committee procedures of Art. 103(3).

The proposal referred to the old programming period 2000-2006 and thus to all funds covered by the repealed Regulation N°1260/1999. Beside COCOF the proposal was presented to the European Fisheries Fund Committee the week before and would be presented to the STAR committee the next day.

The proposed decisions were supposed to provide a real simplification and to address the heavy administrative burden arising from the individual treatment of bankruptcy cases and small irregularities under EUR 10.000, both for the MemberStates and the Commission.

The Chairman gave the floor to Mr Andreas Von Busch (DG Regio, Deputy Head of Unit D1) to present both draft decisions with the support of a powerpoint (available on Circa).

During the discussion, Member States welcomed the draft decisions and its positive effect on the simplification of the closure process. They asked for clarification on the relevance of the decisions for already submitted special reports and on the effect of the decisions on the monitoring required still at national level, on the need to adapt the winding-up declaration, on the definition of a simple bankruptcies in comparison to normal bankruptcies and on the treatment of cases, which came to light after the closure of a programme.. Finally, they wanted to know the argument behind the extension of the elimination of reporting obligations for irregularities under EUR 10.000 to the period 2000-2006.

Mr Von Busch indicated that the decision do not exempt Member states from the monitoring of the completion of projects and irregularities related to this, including bankruptcy cases. However the decision will release member states to provide reports on irregularities that are linked to simple bankruptcies and irregularities under EUR 10.000 if the Member state is convinced that it has acted in best faith without negligence or fraud. The Commission can request, however, for specific cases these report if it want to receive assurance that the negligence or a fault of the MemberState in project selection and monitoring is origin of financial burdens linked simple bankruptcies, which are then not to be shared by the Community budget. Member states are supposed to submit with the closure documentation the extract of the debtors ledger that records references and status of all irregularities. This requirement of the winding-up declaration remains. But they do not have to provide reports on any of the irregularities that are covered by the draft decisions, even if they request the Commission to share the financial burden of these. He underlined that the decisions will cover the whole programming period 2000-2006 and apply explicitly already for all cases for which Member States have already reported to the Commission. These5.2 reports will not be scrutinized by the Commission.

Mrs Maria Ntziouni-Doumas (OLAF) added that procedures were managed at national level as before. However there was no more need to submit the special report referred to in Article 5(2) for irregularities under the threshold of communication as well as for cases of simple bankruptcies. The Commission would not adopt any formal decision concerning the above mentioned cases but Commission audits were still possible. If there were detected cases which fall to the above mentioned categories of cases after the closure of the programme concerned of PP 2000-2006, national authorities had to report in the frame of Article 8 (Annex 2) of Regulation 438/2001. Suspected frauds were defined in the Regulation (EC) N°1681/94 as amended by Regulation (EC) N° 2035/2005. Simple bankruptcies are cases where the failure to partially or totally execute an operation co-financed by the EU budget owing to the bankruptcy of the final beneficiary and/or the final recipient, not preceded by an irregularity nor involving suspected fraud.

Mr Dirk Peters (DG Regio, Unit B3) explained that the motivation for increasing the threshold up to EUR 10.000 extending the elimination of reporting obligations for these irregularities under EUR 10.000 to the whole period 2000-2006 was both to reduce the workload at national and European levels, and to take into account past experience as there was almost no case of co-financing irregular expenditure unduly paid from the EU budget in the past. Recital 10 of the Decision addressed to the Member states highlights still the obligation for Member states to take all appropriate measures to recover amounts unduly paid and to account to the Commission for amounts which are recovered, but this applies to concrete cases and not to the all cases, for which before an ample reporting was necessary.

As no more Member States asked for the floor, the Chairman invited them to express their opinion formally as this point falls under comitology rules.

The Committee adopted by unanimity both draft Commission decisions:

- exempting certain cases of irregularity arising from operations co-financed by the Structural Funds and the Cohesion Fund for the 2000-2006 programming period from the special reporting requirements laid down by Article 5(2) of Regulation (EC) No 1681/94 and by Article 5(2) of Regulation (EC) No 1831/94; and

- concerning the financial consequences for the Union budget of Decision C(2010)xxx of dd mm 2010 exempting certain cases of irregularity arising from operations co-financed by the Structural Funds and the Cohesion Fund for the 2000-2006 programming period from the special reporting requirements laid down by Article 5(2) of Regulation (EC) No 1681/94 and by Article 5(2) of Regulation (EC) No 1831/94.

The Chairman thanked the Member States for their support and Mr Von Busch, Mrs Ntziouni and Mr Peters for their explanations.

  1. Revised guidance note on Article 55 Regulation N°1083/2006 (following modification of the Regulation):

The Chairman indicated that this was the third round of discussion on the guidance note and real progress was made from the beginning. Again, the last version of the note showed that Commission services took many of Member States' suggestions into account.

The controversial issue was the 10% flexibility. The Commission position was not to translate the 10% flexibility from refunding to deduction only situation. However it had to be kept in mind that the new guidance note gave a lot of flexibility to Member States in any case, as only new net revenue stemming from either new tariffs or new sources of revenue not taken into account before, had to be calculated under Art. 55.4.

For the treatment of other net revenue, the principle of sound financial management allowed to rely in general on the application of national rules.

As requested at the last COCOF meeting, the document with comments from delegations and an informal reaction by DG REGIO had been refined further. It would be published on CIRCA as reference material.

Mr Anton Schrag (DG Regio, Unit D1) took the floor to present the modifications made on the draft note following the discussion in the last COCOF meeting.

Member States thanked the Commission for taking on board many of their proposals of modification but some of them stated that the note is not yet fully satisfactory. Some issues were raised during the discussion: time needed to implement arrangements foreseen for monitoring and audit, application of proportionality principle in addition to sound financial management principle, treatment of incidental revenue, possibility to apply the 10% flexibility, the management of projects below EUR 1 million,and audit out of the scope of Art. 55.

In response to comments, Mr Schrag provided a set of responses:

- Concerning the question about the time needed to implement arrangements foreseen for monitoring and audit, there was nothing to propose. This was linked to the calendar of programmes themselves. This was not a new concern for managing authorities.

- The proportionality principle applies through the threshold of EUR 1 million.

- Concerning audit covering projects out of the scope of Art. 55, there was no financial consequences for individual projects.

- Residual value was reconsidered in the note. There were also comments in the question and answer table.

- On the flexibility of the 10%, there might be a few cases where 10% flexibility was given in contracts with beneficiaries, based on the previous guidance note only as legal basis. A footnote was proposed to encourage Member States to capture from as many projects as possible the net revenue to be deducted: "If the Managing Authority or another body of the Member State, before the entry into force of Regulation N°539/2010, in good faith entered into contractual arrangements with a third party whereby it provided assurance in a binding manner to its counterpart that the funding gap-calculation of projects does not lead to a change in the public contribution if revenues increase by less than 10% of the initial calculation, these contract should be revised to the extent possible."(the exact wording to be possibly revised before publication of the note on CIRCA)

- Concerning incidental revenue, following Member States request, in the concerned phrase in page 17, “shall” would be replaced by “are to”.

- This was for the managing authorities to deal with projects below EUR 1 million.

Mr Erich Unterwurzacher (DG Regio, Head of Unit D1)thanked the Member States for their contributions. It was a long work to fix this new version of the guidance note on Article 55. He indicated that the discussion was closed and the note finalised. However the Commission services remained available for any bilateral meetings to clarify specific situations at national level.

The Chairman concluded by reminding that this note was only applicable to the ERDF and the Cohesion Fund. He added that DG EMPL would present a note to the ESF Committee to address the ESF side of this issue. He thanked the MemberStates for their understanding and support, and Mr Schrag for his work.

  1. Draft Amending Decision C(2009)10429 of 16 December 2009 concerning the adoption of a financing decision concerning operational and non-operational technical assistance at the initiative of or on behalf of the Commission under the European Social Fund for 2010 and serving as a work programme for this technical assistance:

The draft amending Decision was presented by Mrs Monique Raquet (DG Empl, Unit A1).

As no MemberState asked for the floor, the Chairman invited them to express their opinion formally as this point fell under comitology rules.

The Decision was adopted by unanimity.

  1. Draft Decision of the Commission on European Social Fund Technical Assistance Financing Decision 2011:

The draft Decision was presented by Mrs Monique Raquet (DG Empl, Unit A1).

During the discussion, Member States asked for confirmation on keeping the total amount of the budget of Technical Assistance for 2011 at the same level as for 2010, and for clarification of the indicative dates in relation to the events foreseen under the Danish EU presidency.

Mrs Raquet confirmed that the total amount of the 2011 budget remained the same as for 2010 and indicated that referred dates were at the conclusion of the grant or at the launch of the tender.

As no MemberState asked for the floor, the Chairman invited them to express their opinion formally as this point fell under comitology rules.

The Decision was adopted by unanimity.

The Chairman thanked the MemberStates for their support and Mrs Raquet for both presentations.

  1. Revision of the Rules and conditions applicable to actions co-financed from Structural Funds and Cohesion Fund. An overview of the eligibility rules in the programming period 2007-2013 (following revisions of the Regulation):

The Chairman recalled that the initial brochure on eligibility was presented at the COCOF meeting of 2 December 2008 and finalised in February 2009. The modification of the document, as per the revision of other COCOF notes, aimed at reflecting the amendment of certain EU provisions governing the implementation of Structural Funds and Cohesion Fund interventions.