Financial Mechanism

Annual Report

for the

Norwegian

Financial Mechanism

MALTA

June 2005 – May 2006

Compiled by:

Ms. Marlene Bonnici, Head – National Focal Point

Ms. Sharleen Gatt, Programme Manager

Mr. Colin Borg, Programme Manager

Planning and Priorities Co-ordination Division

Office of the Prime Minister

Auberge de Castille

Valletta CMR 02

Malta

Tel. No.: 2200 1051

Fax. No.: 2200 1050

Emails: ,

Web:

Table of Contents

EXECUTIVE SUMMARY...... 5

1AN OVERVIEW OF THE FINANCIAL MECHANISMS...... 6

1.1EEA Enlargement...... 6

1.2Aims...... 6

1.3Objectives...... 6

2Initiation of the Implementation Process...... 7

2.1The Signing of the MoU...... 7

2.2PPCD Designated as the NFP...... 7

2.3Priority Areas...... 7

3The Managerial Set-Up...... 9

3.1Main Implementing Structures...... 9

3.1.1The National Focal Point...... 9

3.1.2Paying Authority...... 10

3.1.3Internal Audit & Investigations Directorate...... 11 3.1.4 National Audit Office 11

3.1.5Department of Contracts...... 11

3.1.6Accountant General/Treasury...... 11

3.1.7Budget Office...... 12

3.1.8Central Bank of Malta...... 12

3.2Additional Implementing Structures...... 12

3.2.1Monitoring Committee...... 12

3.2.2Project Selection Committee...... 13

4PUBLICITY: MAKING THE PUBLIC AWARE OF THE FINANCIAL MECHANISM.14

4.1Information Seminars...... 14

4.1.1The EEA & Norwegian Financial Mechanisms: a boost to Norwegian Maltese -cooperation……………………………………………………………………………..14

4.1.2Information Seminar on the call for Project Proposals………………………………...14

4.2Website...... 14

4.3Press Releases and Newspaper Advertising...... 14

4.4Manual of Procedures...... 15

5Call and Submission of Individual Project Proposals...... 16

5.1The Issue of the Call...... 16

5.2Target Applicants...... 16

5.3Total Number of Submissions...... 16

6OVERVIEW OF PROJECT PROPOSALS...... 17

6.1Ineligible Proposals...... 17

6.2Implementation of Schengen Acquis...... 17

6.3Conservation of European Cultural Heritage, including Public Transport and Urban Renewal 17

6.4Strengthening the Judiciary...... 17

6.5Academic Research...... 18

7PROJECT SELECTION PROCESS...... 19

7.1Proceedings of the Project Selection Committee Meetings...... 19

7.1.1First Meeting – 11th November 2005...... 19

7.1.2Second, third and fourth meeting – 29th November, 5th and 14th December 2005..19

7.1.3Fifth and sixth meeting – 23rd January and 7th February 2006...... 19

7.1.4Seventh and eighth meeting – 16th and 17th March 2006...... 19

7.2Cabinet Approval...... 20

8SELECTED PROJECTS...... 21

8.1Reasoned Opinion...... 21

8.2Summaries of Selected Projects...... 21

8.3Selected Reserve Projects...... 23

8.4Summaries of Reserve Selected Projects...... 24

9The contribution of the Final Beneficiaries (Project Promoters) for achieving the EEA Financial Mechanism and Maltese Government Objectives 26

9.1Towards becoming a Schengen State...... 26

9.1.1MaltaInternationalAirport...... 26

9.1.2Malta Police Force...... 27

9.2Converting Mdina into a World Heritage Site...... 28

10WORKPLAN (JUNE 2006 – JUNE 2007)...... 29

11AUDIT PLAN (JUNE 2006 – JUNE 2007)...... 31

11.1Systems Audit...... 31

11.2On-The-Spot Checks...... 31

12Conclusion...... 32

ANNEX I – Project Selection Criteria for the Norwegian Financial Mechanism...... 33

ANNEX II – A complete list of applications received by the Maltese NFP...... 34

ANNEX III – List of non-selected projects...... 36

ANNEX IV – List of ineligible projects...... 37

List of Acronyms

AG / Accountant General
CBM / Central Bank of Malta
DoC / Department of Contracts
EEA / European Economic Area
EU / European Union
FMO / Financial Mechanism Office
IAID / Internal Audit and Investigations Directorate
IAIB / Internal Audit Investigation Board
ISC / Invoice Status Certificate
LN / Legal Notice
MC / Monitoring Committee
MFA / Ministry of Foreign Affairs
MFIN / Ministry of Finance
MIA / MaltaInternationalAirport
MoP / Manual of Procedures
MoU / Memorandum of Understanding
MPF / Malta Police Force
MRAE / Ministry for Rural Affairs and Environment
MRES / Ministry for Resources and Infrastructure
NAO / National Audit Office
NAG / Norwegian Auditor General
NFP / National Focal Point
NGO / Non-Governmental Organisation
NMFA / Norwegian Ministry of Foreign Affairs
OLAF / European Anti-Fraud Office
OPM / Office of the Prime Minister
PA / Paying Authority
PP / Project Promoter
PPCD / Planning and Priorities Co-ordination Division
PSC / Project Selection Committee
TA / Technical Assistance
TORs / Terms of Reference

Norwegian Financial Mechanism – Annual Report Version 1.2

Executive Summary

The Norwegian Financial Mechanism will not only serve as another important milestone for strengthening the already very good bilateral relations between Norway and Malta but it willalso be a means to implement projects for the common good in a number of policy areas.

Given such a vision, the overall objective of the Maltese National Focal Point (NFP) is to manage and administer the Norwegian Financial Mechanism in the most efficient and effective manner. Within this framework, the Maltese NFP strives to ensure that all projects selected by the Project Selection Committee (PSC) through the Financial Mechanism Office (FMO)contribute to Malta’s socio-economic development and are implemented in terms of the Memorandum of Understanding (MoU) and the Rules and Procedures.

Furthermore, the Maltese NFP will ascertain correct day-to-day monitoring of the Financial Mechanism and communicates quickly to all relevant stakeholders any bottlenecks arising during the implementation period.

Achieving the above-mentioned objectives envisaged two main problems for the Maltese NFP. The first one was of an administrative nature especially when considering that a total of 41 project proposals were submitted for both the EEA and the Norwegian Financial Mechanism. The second problem was more of a learning experience nature. It is important to consider that Malta is benefiting from both Financial Mechanisms for the first time. Despite the fact that the NFP is already experienced in managing other EU funds, the Financial Mechanisms have to be managed under their specific rules and procedures and guidelines as determined by the donor countries.

This annual report gives a detailed analysis of the implementation of the Norwegian Financial Mechanism between June 2005 and May 2006 and a comprehensive description of all implementing bodies which are crucial for ensuring a story of success in all projects undertaken. In addition, it sets specific objectives for the following one year period.

1An overview of the Financial Mechanisms

1.1EEA Enlargement

In May 2004, the EEA was expanded by the ten new European Union (EU)countries, totaling to 28 members; all sharing access to the Internal Market. At the same time the three non-EU members of the European Economic Area (EEA) - Iceland, Liechtenstein and Norway - established the EEA Financial Mechanism and the Norwegian Financial Mechanism to support social and economic cohesion within the enlarged EEA.

1.2Aims

Norwegian Financial Mechanism:

“To reduce social and economic disparities within the EEA and to enable Norway to participate fully in the Internal Market”.

The Republic of Malta:

“To select projects for funding, which contribute to the achievement of reducing social and economic disparities”.

Maltese NFP:

“To ensure the effective implementation of the Norwegian Financial Mechanism”.

1.3Objectives

Through the Norwegian Financial Mechanism, Norway will contribute towards:

Solidarity, by reducing the social and economic disparities in the newly enlarged EEA.
Opportunity, by helping new EEA members become fully integrated in the Internal Market.
Cooperation, by bringing old and new EEA members together and opening new arenas for political and economic relations.

2Initiation of theImplementation Process

2.1The signing of the Memorandum of Understanding

Within this framework, on Monday 27June Norway and Malta signed a bilateral MoU establishing a bilateral Financial Mechanism.

The MoU was set up in conjunction with other important documents, which shall constitute the legal framework of the Norwegian Financial Mechanism. These documents include:

Agreement between the Kingdom of Norway and the EU (establishing the Norwegian Financial Mechanism).
The Rules and Procedures and all related guidelines of the Norwegian Financial Mechanism, including all subsequent amendments.
The Grant Agreements, which will be concluded between the NMFA and Malta for each project.

The signing ceremony took place in Valletta, Malta, in the presence of the Maltese Foreign Minister, Dr. Michael Frendo. On the Maltese side the memorandum was signed by the Permanent Secretary of the Foreign Ministry, Ms. Cecilia Attard Pirotta, whereas Ms. Oda Sletnes, Director General of the Norwegian Ministry of Foreign Affairs, signed on behalf of Norway.

2.2PPCD designated as the NFP

The MoU established the Planning and Priorities Co-ordination Division (PPCD)atthe Office of the Prime Minister (OPM) as the main contact point for Malta.The PPCD, as the NFP, will be responsible for the overall management of the Norwegian Financial Mechanism. The portfolio includes the identification, planning, implementation and monitoring of projects in the use of funds in accordance with the Rules and Procedures.

2.3Priority Areas

The MoU, on the implementation of the Norwegian Financial Mechanism, established the following prioritysectors and focus areas:

Conservation of European cultural heritage, including public transport, and urban renewal, consisting of:

revitalisation, conservation, renovation, modernisation and adaptation of historical objects, which have European significance;
condition monitoring and preventive maintenance routines for historical objects and complexes; and propose remedies.

Implementation of Schengen Acquis, including:

support of National Schengen Action Plans;
strengthening police-cooperation in order to prepare for membership in the Schengen information system.

Strengthening the judiciary, including:

improved standard of prison buildings and training of personnel;
educational programmes in prisons;
improved health care and health information for prison inmates;
preventive action to reduce youth criminality;
improved competence programmes and physical conditions for asylum seekers and illegal immigrants.

Academic Research (in the above-mentioned fields).

3The Managerial Set-Up

3.1Main Implementing Structures

An effective managerial set-upensures an efficient implementation of the Norwegian Financial Mechanism in total coherence with the Rules and Procedures. The management structure for Maltais made up of the following bodies:

3.1.1The National Focal Point

The PPCD within the OPM was designed to fulfill the tasks of the NFP. In addition to the Norwegian Financial Mechanism, PPCD is alsoresponsible for the implementation and management of EU funds such as the Pre-Accession Funds, Transition Facility, Structural Funds and the Cohesion Fund.Such management experience in other similar funds serves as an advantage in the administration of the Norwegian Financial Mechanism.

As detailed in Diagram 1, three people formpart of the NFP management structure.Two programme managersreport directly to the Head of the NFP, who is the Director General of PPCD.

Director General
Head - NFP
Programme Manager
Programme Manager

Diagram 1: Organisational Structure of the NFP

Specifically the NFP shall:

i.manage the day-to-day operations of the Norwegian Financial Mechanism;

ii.serve as a contact point between the FMO and Malta;

ensure that the project is implemented in accordance with the Grant Agreement;
ensure that all relevant EU, national and local legislation (including, but not limited to legislation on the environment, public procurement and state aid) shall be fully complied with;
ensure that the Grant is used exclusively for the purpose of the project and according to the approved Project Implementation Plan and that any necessary financial contributions in addition to the Grant are received in a timely manner;
ensure that all assets forming part of the project are used only for such purposes as provided in the Grant Agreement;
ensure regular reporting to the FMO on the implementation of projects financed by the financial mechanism, as well as to immediately report any irregularities;
ensure that project promoters are fully committed and equipped to implement, operate and maintain the project;
preside over the project selection process (the selection criteria was prepared by the NFP and approved by the Monitoring Committee[MC]);
inform the respective project leaders about the outcome of the project selection process;
ensure information and publicity about available funds and inform the general public about the projects implemented under the Norwegian Financial Mechanism in accordance with Article 5.4 of the Rules and Procedures and the Publicity Guidelines;
establish a central information system to gather financial and statistical information on the status of implementation of the programmes and projects and ensure that the relevant data is forwarded to the FMO in line with the requirements of relevant regulations;
ensure an efficient and correct use of available funds;
ensure a complete and sufficient audit trails in all institutions;
ensure effective audits, by the relevant national organisations, of approved projects;
organise annual meetings with the FMO;
draw up and submit for approval to the MC the annual implementation report;
submit the approved annual implementation report to the FMO;
ensure follow-up by the relevant bodies to the FMO’s comments/recommendations concerning the annual report;
ensure follow-up by the relevant bodies in line with information received from auditors;
assist the Office of the Norwegian Auditor General (NAG) and/or the Norwegian Ministry of Foreign Affairs (NMFA) in organising the ex-post evaluation referred to in the Rules and Procedures;
make all the necessary and appropriate arrangements in order to strengthen or change the way the project is managed;
co-ordinate with the Paying Authority (PA) and the Internal Audit and Investigations Directorate (IAID) on issues pertaining to financial management and control systems;
co-operate with the PA on preparation of annual payment forecasts.

3.1.2Paying Authority

The EU Paying Authority Directorate within the Ministry of Finance (MFIN) will act as the PA. The PA shall be responsible for:

i.managing all operations related to financial transactions;

ii.ensuring correctness of all payments requests made to the FMO;

iii.certifying the correctness and accuracy of payment claims to the FMO;

iv.submitting payment claims to the FMO and receiving payments made by the FMO to the Government of Malta;

v.liaising with the Treasury in order to effect payments to project promoters;

vi.keeping record of financial corrections and ensuring that any funds owed to the Government of Malta or to the FMO are collected and reimbursed;

vii.liaising with the PPCD in developing relevant financial management procedures.

3.1.3Internal Audit & Investigations Directorate

The IAID is the executive branch of the Internal Audit Investigations Board (IAIB)within the Cabinet Secretariat of the OPM. It is regulated by the Internal Audit and Financial Investigations Act 2003 (Chapter 461, Laws of Malta).

The IAID is responsible to:

i.certify to the FMO the adequacy of financial control, procurement and operational management structures and systems when utilising the Norwegian Fund;

ii.perform “a priori” audits, examining internal systems, procedures and controls and issuing certificates in this regard and carry out “ex-post” performance auditing in collaboration with the Office of the NAG and/or the NMFA;

iii.perform full and prompt financial investigations into the misuse and/or fraudulent mismanagement of funds, thereby also fulfilling its role as the national counterpart for DG OLAF (Director General – European Anti-Fraud Office) in Malta;

iv.prepare the annual audit plan and a summary of audit reports for each year;

v.perform specific audits on the NFP, the PA and any other relevant stakeholders;

vi.undertake independent ex-post audit reviews of the effectiveness or otherwise of the monitoring benchmarks applied during the implementation of particular projects or initiatives. The report will be submitted solely to the NFP.

3.1.4National Audit Office

The National Audit Office (NAO) is wholly independent of the executive arm of Government and responsible to Parliament where the Auditor General’s reports are debated by the Public Accounts Committee.

In line with article 6.2 of the Rules and Procedures and Annex A of the MoU, the NAO shall have the right to carry out audits as the external auditor of Government.

3.1.5Department of Contracts

The Department of Contracts (DoC) within the MFIN is responsible for the administration of the procurement procedures as laid down in the Public Contracts Regulations (LN 299 of 2003 and as amended by any other subsequent legislation. As of June 2005 LN 177 & LN 178 of 2005 have entered in force). The DoC must ensure that the relevant tenders are launched and published in accordance with the above mentioned regulations and that contracts are awarded in conformity with the principles of free access, fair competition and transparency. The DoC also provides advice and guidance to project promoterson all issues pertaining to public contracts.

3.1.6Accountant General/Treasury

The Accountant General is also referred to as the Director (Treasury) and heads the Treasury Department under the MFIN. In the context of the Norwegian Financial Mechanism, the Treasury is responsible for:

i.checking that sound accounting policies and procedures are applied at all levels;

ii.effecting payments through the Central Bank of Malta (CBM)to 3rd parties in respect of approved projects.

3.1.7Budget Office

The Budget Office within theMFIN is responsible for ensuring that the Malta, where applicable, respects all its national co-financing obligations and its commitments under the principle of additionality in accordance with the agreement between Norway and the EU. At a management level, the Budget Office will be assisted by the NFP and the PA to manage the national co-financing.

3.1.8Central Bank of Malta

The CBM is the official banker of the Government of Malta and is responsible for all money pertaining to the Government of Malta and money held on behalf of 3rd parties. The CBM will also maintain and operate accounts regarding funds advanced by the FMO to finance programmes/projects as instructed by the Director EU PA. In the case of payments for projects co-financed through the Norwegian Financial Mechanism, the CBM will transfer funds into the contractor’s bank account once it receives instructions from the Treasury. When the transfer is effected, the CBM will issue a Debit Advice.

3.2Additional Implementing Structures

Both Monitoring and Project Selection Committeeswere set up in August 2005,before the issue of the call for project proposals. Terms of reference and rules of procedures to carry out their respective functions were drafted for both committees.

3.2.1Monitoring Committee

The MC is to monitor the progress of selected projects and to provide overall guidance to the NFP on the efficiency of the Norwegian Financial Mechanism implementation.The MC shall meet as often as necessary but at least once every year. Its responsibilities include:

monitoring the implementation of projects being co-financed by the financial mechanisms;
considering and approving selection criteria for operations earmarked for co-financing;
periodically reviewing progress registered towards achieving the specific objectives of the assistance;
examining the results of implementation, particularly achievement of set targets for the different projects;
considering and approving the annual and final implementation reports before these are sent to the FMO;
as it deems fit, proposing to the NFP any adjustment or review of the assistance in order to improve its management (including financial management);
be guided by the other relevant provisions of the Rules and Procedures for the implementation of the Norwegian Financial Mechanism.

MC Members