Active Monitoring and Forecast of Budget Implementation 2015 Information Note

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1 2 March 2016 INFO(2016) 11 Active Monitoring and Forecast of Budget Information Note Contents 1. SUMMARY AND CONCLUSIONS INTRODUCTION AND METHODOLOGY IMPLEMENTATION OF THE BUDGET at the end of December Reprogrammed commitments Adjustments of payment appropriations (Global Transfer and End of Year Transfer) Programmes with significant under-implementation Commitments Payments IMPLEMENTATION OF APPROPRIATIONS CARRIED FORWARD FROM IMPLEMENTATION OF ASSIGNED REVENUE EVOLUTION OF RAL LATE INTEREST PAYMENTS COHESION POLICY: COHESION POLICY: LATEST SUBMISSION OF MEMBER STATES' PAYMENTS FORECASTS FOR YEAR State of play at end January submission of Member States' payment forecasts for Implications of Member States' forecasts for Budget Cohesion policy decommitments Conclusions ANNEX 1: IMPLEMENTATION COMMITMENTS AND PAYMENTS ANNEX 2: HEADING 1B LATEST FORECASTS FROM MEMBER STATES (JANUARY 2016) ANNEX 3: COHESION POLICY DECOMMITMENTS IN... 25

2 1. SUMMARY AND CONCLUSIONS 1. Essentially, all commitment and payment appropriations were consumed in. At end- the implementation of commitment appropriations (after s) amounted to EUR 170,0 billion (99,9 % of available appropriations). The implementation of payment appropriations reached EUR 138,6 billion (after s), corresponding to 99,9% of available appropriations. 2. In spite of the record high level of commitment appropriations available in within heading 1b (Economic, social and territorial cohesion), due to almost EUR 20 billion of structural funds carried over or reprogrammed from 2014, all of them were implemented, as all operational programmes were adopted before the end of the year. The backlog of unpaid claims for operational programmes at the end of was EUR 8,2 billion, compared to EUR 24,7 billion a year earlier. The backlog was significantly lower than forecast due to much lower submission of payment applications than expected (in particular from three Member States), and the transfer of appropriations from the new programmes due to delays in the designation of managing authorities. The 'abnormal' backlog is expected to be fully phased out by the end of 2016 in line with the 'payment plan' agreed with the Parliament and the Council. 3. In the course of, two Amending Budgets (5 and 7) increased commitment and payment appropriations of headings 3 (Security and Citizenship) and 4 (Global Europe) to address the refugee crisis. Whereas commitments increased by EUR 406,5 million compared to the initial budget, payment appropriations were redeployed within and between headings, leaving the total amount unchanged. 4. As expected, there was a slowdown in the pace of increase of late interest payments in the course of the year, with the total amount paid in reaching EUR 2,2 million, significantly lower than the interest paid in 2014 (EUR 3 million). Given the level of payment appropriations authorised in the 2016 budget, a further decrease of late interest payments is expected in After the artificial decrease in outstanding commitments ('RAL', from the French acronym "reste à liquider") at the end of 2014 (due to the reprogramming in of most of the EUR 32 billion commitment appropriations carried over from 2014 because of the delays in the adoption of operational programmes), the level of RAL increased by EUR 27,9 billion in reaching EUR 216,7 billion, approaching the level of RAL in 2012 (EUR 216,9 billion) and 2013 (EUR 221,5 billion). As commitment appropriations are over EUR 11 billion higher than payment appropriations in the 2016 budget, the RAL is expected to rise again in

3 2. INTRODUCTION AND METHODOLOGY This Information Note gives an overview of budget implementation as at 31 December, for both commitment and payment appropriations in the Commission's section of the budget (Section III). The starting point for the analysis is the budget as adopted by the budgetary authority, including amending budgets, s from 2014 into, transfers and mobilised reserves. Section 3 deals briefly with the reprogramming of significant commitments from 2014 to (section 3.2) as well as the adjustments of payment appropriations in (section 3.3). This section gives also explanations of the most significant deviations from the budget in terms of the implementation of appropriations (section 3.4) 1. In addition, the note shows the implementation of appropriations carried over from 2014 to (section 4) and the implementation of assigned revenue (section 5). Section 6 provides a report on the evolution of RAL while section 7 presents the latest figures on late payment interest. Finally, section 8 reviews the cohesion backlog situation and presents the outlook for 2016 taking into account the latest Member States' forecasts. At this stage, except for heading 1b, rural development and the fisheries fund, it is not possible to estimate the amount of backlog for the other programmes before the completion of the cut-off exercise linked to the establishment of the provisional accounts due for 31 March at the latest. Analysis of this backlog will be provided in the next Active Monitoring and Forecast of Budget note which will be published at the beginning of July. 1 It should be noted that all figures are provisional pending the final accounts for the year. 3

4 3. IMPLEMENTATION OF THE BUDGET 3.1. at the end of December The analysis focuses on commitment and payment appropriations by heading. Furthermore, for the main programmes 2, it provides more detailed analysis, if the programme's under-implementation was EUR 10 million or more. The following table shows the implementation by heading at the end of December as well as the from to Table 1: Budget FINANCIAL FRAMEWORK HEADING Av ailable (1) COMMITMENTS ( m) ( m) % ( m) ( m) ( m) % (a) (b) (c)=(b)/(a) (d)=(b)-(a) (e) (f)=(a)+(e) (g)=[(a)+(e)]/(a) 1a Competitiveness for growth and jobs ,9% ,9% 1b Economic, social and territorial cohesion ,0% ,0% 2 Sustainable growth: Natural Resources ,3% ,9% 3 Security and Citizenship ,9% ,9% 4 Global Europe ,5% ,6% 5 Administration ,0% ,0% Total ,7% ,9% Special Instruments ,0% ,0% Grand Total ,5% ,6% before carrov er after carry ov er after carrov er FINANCIAL FRAMEWORK HEADING Av ailable (1) PAYMENTS before after carry ov er carry ov er ( m) ( m) % ( m) ( m) ( m) % (a) (b) (c)=(b)/(a) (d)=(b)-(a) (e) (f)=(a)+(e) (g)=[(a)+(e)]/(a) 1a Competitiveness for growth and jobs ,1% ,8% 1b Economic, social and territorial cohesion ,0% ,0% 2 Sustainable growth: Natural Resources ,2% ,9% 3 Security and Citizenship ,3% ,8% 4 Global Europe ,4% ,8% 5 Administration ,7% ,4% Total ,3% ,9% Special Instruments ,7% ,9% Grand Total ,3% ,9% (1) initial budget and adopted amending budgets + appropriations carried forward from 2014, mobilised reserves and transfers. Excludes assigned revenue. after carry ov er The implementation of commitment appropriations amounted to EUR 169,5 billion (99,7% of available appropriations). However, the implementation reached 99,9% taking into account the of appropriations from to 2016, leaving EUR 120 million under-implemented. The implementation of payment appropriations amounted to EUR 137,8 billion (99,3% of available appropriations). After the of appropriations to 2016, the implementation rate reaches 99,9% and the underimplementation amounts to only EUR 143 million. 2 Defined as the programmes having at least EUR 100 million of payment appropriations in. 4

5 At the heading level, the table provides the following information: For heading 1a (Competitiveness for growth and jobs), virtually all the commitment and payment appropriations were consumed. In the newly created European Fund for Strategic Investment (EFSI) was added to heading 1a and provided with EUR million of commitment appropriations (reallocated from the Connecting Europe Facility, Horizon 2020 and the International Thermonuclear Experimental Reactor (ITER) programme as stipulated in Amending Budget 2/), all of which was fully implemented. For heading 1b (Economic, Social and Territorial Cohesion), implementation reached 100% for both commitments and payments. The year saw the highest-ever level of commitment appropriations available to heading 1b, which was due to almost EUR 20 billion carried-over or reprogrammed from 2014, not implemented in 2014 due to delays in the adoption of the operational programmes. For payments, the payment claims for cohesion policy that arrived in proved to be lower than Member States' forecasts, which reduced the pressure on payments and led to a significant decrease in the backlog of unpaid claims at the end of the year. (see section 8 for further details). Heading 2 (Sustainable growth: Natural Resources) recorded almost full implementation in for both commitments and payments. The underimplementation originated mostly from the European Agricultural Guarantee Fund (EAGF) Reserve for crisis in the agricultural sector, which was not used, and as a consequence was transferred to to reimburse the financial discipline to the farmers up to the amount allowed by the legal base (see section for further explanation). Both commitment and payment appropriations in heading 3 (Security and Citizenship) were essentially fully implemented. As a result of the migration crisis this heading was significantly reinforced throughout the year (through Amending Budgets 5 and 7/ and the Global transfer, in total EUR 165,1 million in commitments and EUR 130,4 million in payments). The migration crisis also had an impact on heading 4 (Global Europe), whose appropriations were also reinforced in (through Amending Budget 7, the Emergency Aid Reserve and the Global transfer, in total EUR 582,5 million in commitment appropriations and EUR 248,0 million in payment appropriations). The available commitment and payment appropriations of the heading were nearly fully consumed, with some commitments left under-implemented within the Common Foreign and Security Policy (see section for further details) Reprogrammed commitments Because of the delays in the adoption of the operational programmes for the cohesion policy (and other shared management programmes such as rural development and the European Maritime and Fisheries Fund in heading 2 as well as AMIF and ISF in heading 3), a large amount of commitment appropriations were not implemented in Where the adoption process of the operational programmes was nearly completed, the corresponding commitment appropriations were carried 5

6 over in order to be implemented before 31 March. Where the adoption process was not sufficiently advanced, the commitments were reprogrammed to or subsequent years. All 28 Member States were concerned by this reprogramming exercise. The amending budget (AB) No 1 to the budget which was presented in parallel with the Commission's proposal for a revision of the multiannual financial framework (MFF) for the years , in accordance with Article 19 of Council Regulation No 1311/2013 (MFF Regulation) implemented this reprogramming. The revision of the MFF and the adoption of AB No 1 were a necessary condition for the adoption of the programmes in. In accordance with the MFF revision, AB No 1 proposed a EUR 16,5 billion increase in commitment appropriations in for the various funds under shared management under heading 1b, heading 2 and heading 3. AB No 1 also proposed an increase of EUR 2,5 million for the Instrument for Preaccession Assistance (IPA II) under heading 4, to maintain similar treatment between contributions from heading 4 and heading 1b to the European Regional Development Fund (ERDF) European territorial cooperation (ETC) programmes. The reprogrammed commitment appropriations were fully implemented in Adjustments of payment appropriations (Global Transfer and End of Year Transfer) In there were two transfers aiming to rebalance payment appropriations: the "Global Transfer" adopted in October and the "End of Year Transfer" adopted in January 2016, but implemented in December. Like all transfers, these are zero-sum operations whereby reinforcements are only possible if appropriations are made available from elsewhere. The "Global Transfer" amounted to EUR 424,0 million. 73 budget lines were concerned (26 for reinforcement and 47 for reductions). The programmes with the most significant reductions in appropriations were ITER (- EUR 110 million), CEF Transport, EGNOS and GALILEO (- EUR 53 million). Among the programmes with the highest reinforcements were Erasmus + (+ EUR 150 million), the Development Cooperation Instrument (+ EUR 50 million) and the Internal Security Fund (+ EUR 41 million). The "End of Year Transfer" amounted to EUR 415,9 million. It enabled payment appropriations, mostly from the Fund for the European Aid to the Most Deprived (- EUR 285,8 million) to be transferred to cover part of the outstanding need for funds in Rural development (+ EUR 288,5 million) and the European Regional Development Fund (+ EUR 127,4 million). The amount was drawn from 62 budget lines. 6

7 3.4. Programmes with significant under-implementation This section identifies the main programmes (i.e. programmes with budgeted appropriations of at least EUR 100 million) with under-implementation of at least EUR 10 million. Annex 1 gives detailed information for all the programmes Commitments Technical assistance In million 31/12/ Carry over to 2016 Under-implemented 192,8 173,0 89,7% 19,9 0 19,9 Following the delayed adoption of operational programmes compared with the initial planning, a number of technical assistance actions supporting the programme implementation were cancelled or postponed to This covers mainly communication activities, evaluations and other studies as well as organisation of workshops. Delayed adoptions also had an impact on the timely implementation of the Joint Assistance to Support Projects in European Regions (JASPERS) facility for the preparation of the major projects. Finally, negotiations procedures with International Organisation (OECD and World Bank) took longer than initially planned, thus also having an impact on the implementation of the budget European Agricultural Guarantee Fund (EAGF) In million 31/12/ Carry over to 2016 Under-implemented , ,6 99,0% 451,5 409,8 41,7 In the first place, a total amount of EUR 433 million of non-committed appropriations was transferred from item Reserve for crisis in the agricultural sector, to item Reimbursement of direct aids in relation to financial discipline. Then, in accordance with Article 169(3) of Regulation (EU, Euratom) No 966/2012 and Article 26 of Regulation (EU) No 1306/2013, 2% of the initial appropriations (or the amount of the adjustment of direct payments for financial discipline) could be carried over to the following financial year. Therefore, the amount of EUR 409,8 million, respecting the 2% limit mentioned above, was carried over. This amount, in accordance with Article 26(5) of Regulation (EU) No 1306/2013 will be made available to the Member States for reimbursement. 7

8 4.0.8 Common Foreign and Security Policy (CFSP) In million 31/12/ Carry over to 2016 Under-implemented 285,2 239,9 84,1% 45,3 17,2 28,1 The lower-than-expected implementation in commitment appropriations relates to the downsizing of the biggest Common Security and Defence Policy missions (Afghanistan, Kosovo); the reduced activities and costs for the mission in Libya (due to the deterioration of the security situation in the country) and the delay in establishment and financing the Kosovo Specialist Chambers, which has been postponed to While EUR 50,9 million was transferred to other policy areas in heading 4 and EUR 17,2 million was carried over to 2016, EUR 28,1 million were left unused at the end of the year Payments European Agricultural Guarantee Fund (EAGF) In million 31/12/ Carry over to 2016 Under-implemented , ,1 98,9% 467,8 423,6 44,2 Explanation as above for EAGF commitments. 4. IMPLEMENTATION OF APPROPRIATIONS CARRIED FORWARD FROM 2014 Table 2: Budget Carried Forward from 2014, by Heading COMMITMENTS - CARRYOVERS FROM 2014 PAYMENTS - CARRYOVERS FROM 2014 FINANCIAL FRAMEWORK HEADING ( m) ( m) % ( m) ( m) ( m) % ( m) (a) (b) (c)=(b)/(a) (d)=(b)-(a) (e) (f) (g)=(f)/(e) (h)=(f)-(e) 1a Competitiv eness for growth and jobs 0,0 0,0-0,0 111,9 99,7 89,1% -12,2 1b Economic, social and territorial cohesion 8 479, ,7 100,0% 0,0 16,0 14,0 87,2% -2,1 2 Market Ex penditure & Direct Aids 868,2 854,0 98,4% -14,2 884,3 868,4 98,2% -15,9 2 Other Heading 2 Programmes (1) 1 998, ,8 100,0% 0,0 17,8 16,9 94,9% -0,9 3 Security and Citizenship 253,5 253,5 100,0% 0,0 7,9 7,0 89,4% -0,8 4 Global Europe 335,2 334,7 99,9% -0,5 42,1 36,8 87,3% -5,4 5 Administration 0,0 0,0-0,0 301,5 272,3 90,3% -29,2 Total , ,7 99,9% -14, , ,2 95,2% -66,3 Special Instruments 162,3 162,3 100,0% 0,0 35,8 35,7 99,7% -0,1 Grand Total , ,0 99,9% -14, , ,8 95,3% -66,4 (1) rural development, fisheries, LIFE, etc As mentioned earlier, the exceptionally high level of of commitment appropriations from 2014 to was due to the delayed adoption of the operational programmes for shared management. Programmes that were sufficiently advanced and on the verge of adoption at the end of 2014 benefitted from the procedure. All the corresponding appropriations were fully committed in once the programmes had been adopted. The EUR 14,7 million of the commitment appropriations carried-over from 2014 which were not implemented 8

9 relate almost exclusively to the EAGF and specifically to the amount of financial discipline applied on the 2014 direct payments for which Member States did not request a reimbursement in. Table 3: Budget Payments Carried Forward from 2014, by Programme PAYMENTS - CARRYOVERS FROM 2014 FINANCIAL FRAMEWORK SUB-HEADING ( m) ( m) % ( m) (a) (b) (c)=(b)/(a) (d)=(b)-(a) Customs, Fiscalis and Anti-Fraud 0,1 0,1 73,5% 0,0 Heading 1a Administrative (=ex -BA lines) 111,8 99,7 89,1% -12,1 Total Heading 1a 111,9 99,7 89,1% -12,2 Heading 1b Administrative (=ex -BA lines) 16,0 14,0 87,2% -2,1 Total Heading 1b 16,0 14,0 87,2% -2, Market related ex penditure and direct pay ments 878,6 863,0 98,2% -15, European Agricultural Fund for Rural Development 0,2 0,2 97,5% 0,0 Heading 2 Administrative (=ex -BA lines) 23,3 22,2 95,2% -1,1 Total Heading 2 902,1 885,3 98,1% -16,8 Heading 3a Administrative (=ex -BA lines) 7,9 7,0 89,4% -0,8 Total Heading 3a 7,9 7,0 89,4% -0, Instrument contributing to Stability and Peace (IcSP) 6,2 6,2 100,0% 0, Humanitarian Aid 0,1 0,1 99,8% 0, European Voluntary Humanitarian Aid Corps (EVHAC) 2,4 2,4 99,9% 0,0 4.0.SPEC Actions financed under the prerogativ es of the Commission and specific competences conferred to the 0,1 0,1 100,0% 0,0 Heading 4 Administrative (=ex -BA lines) 33,3 28,0 83,9% -5,4 Total Heading 4 42,1 36,8 87,3% -5, European schools 1,9 1,9 100,0% 0, X Commission administrative expenditure 299,6 270,5 90,3% -29,2 Total Heading 5 301,5 272,3 90,3% -29, European Globalisation Adjustment Fund (EGF) 35,5 35,5 100,0% 0,0 Special Instruments Administrative (=ex -BA lines) 0,2 0,1 51,7% -0,1 Total Special Instruments 35,8 35,7 99,7% -0,1 Total 1 417, ,8 95,3% -66,4 The payment appropriations carried forward from 2014 into may be split between non-administrative expenditure (EUR 923,2 million) and administrative expenditure (EUR 494,1 million, of which EUR 301,5 million is in heading 5). The under-implementation was EUR 15,6 million for non-administrative expenditure (mostly linked to the non-implementation of the non-differentiated appropriations for the EAGF) and EUR 50,8 million for administrative expenditure, of which EUR 29,2 million in heading 5 (EUR 7,6 million related to the budget line for Damages). 5. IMPLEMENTATION OF ASSIGNED REVENUE Table 4: Budget Assigned Revenue, by Heading COMMITMENTS PAYMENTS Av ailable Av ailable FINANCIAL FRAMEWORK HEADING ( m) ( m) % ( m) ( m) % (a) (b) (c)=(b)/(a) (d) (e) (f)=(e)/(d) 1a Competitiv eness for grow th and jobs 2 538, ,6 53,7% 3 263, ,5 37,4% 1b Economic, social and territorial cohesion 410,8 390,6 95,1% 348,7 245,9 70,5% 2 Sustainable grow th: Natural Resources 2 395, ,7 45,5% 2 373, ,9 60,3% 3 Security and Citizenship 93,3 52,6 56,4% 83,9 60,5 72,1% 4 Global Europe 643,7 317,1 49,3% 534,0 236,6 44,3% 5 Administration 344,0 208,0 60,5% 347,7 172,9 49,7% Special Instruments 68,8 0,0 0,0% 68,8 35,5 51,6% Total 6 494, ,7 52,7% 7 019, ,7 48,5% 9

10 Over 75% of available assigned revenue appropriations concern headings 1a and 2. Whereas heading 1a revenues mainly derive from third party participation in research and education programmes, heading 2 revenues come from agriculture recovery orders and recoveries carried over from Table 5: Budget Assigned Revenue, by Source SOURCE ASSIGNED REVENUE : COMMITMENTS Av ailable ASSIGNED REVENUE : PAYMENTS Av ailable ( m) ( m) % ( m) ( m) % (a) (b) (c)=(b)/(a) (d) (e) (f)=(e)/(d) RECOVERIES OF 3 006, ,5 43,1% 3 020, ,2 50,4% EAGF Clearances, Irregularities, Milk Levy 1 631,6 735,2 45,1% 1 631,6 735,2 45,1% Other 1 374,7 560,3 40,8% 1 388,8 786,9 56,7% RECOVERIES CARRIED OVER FROM ,1 859,6 78,6% 807,5 788,2 97,6% EAGF Clearances, Irregularities, Milk Levy 341,3 341,3 100,0% 341,3 341,3 100,0% Other 752,9 518,3 68,8% 466,2 447,0 95,9% EFTA 423,2 418,6 98,9% 391,8 390,2 99,6% Candidate Countries' Contributions 29,2 19,5 66,8% 39,3 5,0 12,6% JRC Competitiv e Income 475,8 80,6 16,9% 390,6 86,4 22,1% Other Earmarked Rev enues (Third Party ) 1 408,8 700,5 49,7% 2 300,5 566,6 24,6% Coal and Steel Income 56,6 47,3 83,7% 69,6 45,1 64,8% Total 6 494, ,7 52,7% 7 019, ,7 48,5% The implementation of assigned revenue appropriations amounted to EUR 3 421,7 million for commitment appropriations (52,7 %) and EUR 3 403,7 million for payment appropriations (48,5 %). While the implementation for commitments is comparable in both absolute and percentage terms with the implementation in 2014 (EUR 3 429,1 million, 51,4%), the implementation for payments is significantly below its 2014 level (EUR 3 757,6 million, 48,5%) The EAGF assigned revenue appropriations that are newly declared by Member States, which originate mainly from clearance of accounts corrections, irregularities and the milk levy, are usually used towards the end of the budget year of recovery or the beginning of the next year. In accordance with the applicable rules, amounts collected in one budget year which are not used at the end of that year can be carried over to the next year only, and consequently they are fully consumed in that year. The implementation of EFTA appropriations follows a different pattern, and since they are normally received and consumed within the same year, the implementation of both commitment and payment appropriations is high in comparison with most other types of assigned revenue. Almost 95% of EFTA appropriations (both commitments and payments) are concentrated in heading 1a. The other types of assigned revenue mainly concern third party or third country participation in Community programmes. These are generally received and committed within the same year or the following year. However, the corresponding payments are made over a number of years, depending on the life cycle of the programmes concerned. Unused appropriations are therefore carried over to subsequent years without any limitation, but following the duration of the programme whose actions are being financed. This explains low annual levels of implementation for these types of appropriations. 10

11 6. EVOLUTION OF RAL Table 6: RAL In million Financial Framew ork Heading End 2007 End a. Competitiveness for growth and jobs b. Economic, social and territorial cohesion Sustainable growth: Natural Resources Security and Citizenship Global Europe Total As expected, after an artificial decrease in the RAL at the end of 2014, its level increased significantly in as a natural consequence of the full implementation of EUR 32 billion of differentiated commitment appropriations, either reprogrammed or carried over from Its level is, nevertheless, over 2% lower than at the end of 2013, the year of the highest RAL. In 2016, due to a difference of over EUR 10 billion between budgeted commitment and payment appropriations, a further increase of RAL is expected. This evolution of the RAL in and 2016 is in line with the projections used for the multiannual financial framework. End 2009 End 2010 RAL End 2011 End 2012 End 2013 End 2014 End 7. LATE INTEREST PAYMENTS Due to the lack of payment appropriations in 2014, payment of late interest was concentrated in the first half of. In the second half of the year, as the pressure on payments was released, there was a slowdown in the accumulation of late interest which at the end of the year amounted to EUR 2,2 million and was over 25% lower than at the end of 2014 (the amount for the whole is lower than the amount given in October's AMFBI report due to corrections made at the end of the year). Due to diminished pressure on payments, a further decrease in late interest payments is expected in

12 Table 7: Late interest paid in 2014 and In Heading a Competitiveness for grow th and jobs b Economic, Social and Territorial Cohesion Sustainable grow th: Natural Resources Security and Citizenship Global Europe Administration Total Almost all the interest on late payments relates to headings 1a and 4 (over 98% in ). Late payment interest in four programmes (the Development Cooperation Instrument, Energy Projects to aid Economic Recovery (EERP), the European Neighbourhood Instrument and the Instrument contributing to Stability and Peace) account for over 66% of all late interest paid in. 8. COHESION POLICY: COHESION POLICY: LATEST SUBMISSION OF MEMBER STATES' PAYMENTS FORECASTS FOR YEAR State of play at end Full implementation has been achieved in, both in commitment and payment appropriations, for heading 1b programming period. By the end, 256 (out of 463) programmes, of which 65 for the European Social Fund (ESF), and 191 for the Cohesion Fund (CF) and the European Regional Development Fund (ERDF) had submitted enough valid payment applications to reach the 95% ceiling 4 (100% for Greece 5 ) which the Commission can reimburse before closure. Total payments (prefinancing and interim) made by the end of represent around 89% of the Heading 1b envelope (after decommitments) programming period. All the 417 operational programmes were adopted before the end of and the corresponding tranches of pre-financing have been paid over the last two years. The first interim payment applications were already received and paid in programmes In the 'payments plan' of May 6, the European Parliament, the Council and the Commission agreed to progressively phase out the 'abnormal' backlog of outstanding 3 End of January is the deadline for Member States submissions of their updated forecasts. Data as of 24/02/ The 95% ceiling in payments is set out in Art. 79 of the Council Regulation 1083/2006: "The cumulative total of pre-financing and interim payments made shall not exceed 95% of the contribution from the Funds to the operational programme. When this ceiling is reached, the certifying authority shall continue transmitting to the Commission any certified statement of expenditure on 31 December of year n, as well as the amounts recovered during the year for each Fund, at the latest by the end of February of year n+1". 5 Regulation /1839, amending Regulation (EU) No 1303/2013 as regards specific measures for Greece. 6 Joint statement on a payment plan agreed on 19 May. 12

13 payment claims for the Cohesion programmes by the end of 2016, to a maximum level of EUR 2 billion (depending on the actual level of remaining suspensions and late submission of applications). The backlog of unpaid claims for the Cohesion policy by end- stands at EUR 8,2 billion, significantly lower than the EUR 17 billion expected on the basis of Member States forecasts 7. The faster than expected phasing-out of the abnormal backlog consolidates the objective defined in the 'payment plan'. It also makes it possible to avoid cash-flow constraints and delays in reimbursing the Member States in the first part of the year, which would have been experienced with a larger backlog. This lower than expected backlog is explained partly by a reinforcement of appropriations for the programmes by some EUR 2 billion through transfers coming from the programmes, for the reasons explained below. However, most of the difference is due to submission of payable claims which were some EUR 7 billion lower than expected (EUR 25 billion received instead of an expected EUR 32 billion 8 ). This is the first time for years that the summer Member States' forecasts present such an important deviation from the actual outcome 9. While the pattern in the submission of claims was comparable to previous years until mid- December, submission of claims in the last two weeks of December was far lower (14% of the annual claims compared to 36% in 2014). The absence of N+2/N+3 automatic decommitments deadlines for most Member States (with the exception of Romania, Slovakia and Croatia) might explain this delay, as claims can be sent till 31 March programmes Concerning the programming period, the Commission already expected in its autumn report 11 that the submission of payment claims would progress at a slower pace than indicated by Member States' July forecasts, but the actual submission of claims has been even lower than predicted (i.e. EUR 1,5 billion, of which EUR 1,3 billion of payable claims 12 ). This is explained by the slow progress in the designation of the managing and certifying authorities of the programmes, which is a 7 See information provided in the autumn information note on Active Monitoring and Forecasts of Budget of , based on the Member States' forecasts as submitted by 31 July. 8 Including the impact of the removal of the 95% capping for Greece and the 100% co-financing, which has been estimated at around EUR 0,5 billion in. 9 Over-estimation of 27% for the programmes that had not yet reached the 95% ceiling compared to the over-estimation of around 2% to 3% on average over the last years for forecasts submitted in summer. 10 Art. 93 of Council Regulation No 1083/2006. However, in the Commission decision C() 2771 (guidelines on the closure), it is recommended that the certifying authority submits the last interim payment claim by 30 June 2016, at the latest. 11 Autumn information note on Active Monitoring and Forecasts of Budget of Forecasts have been adjusted to take into account the 10% retention amount set in Art. 130 of the Council Regulation 1303/2013: "The Commission shall reimburse as interim payments 90 % of the amount resulting from applying the co-financing rate for each priority, laid down in the decision adopting the operational programme, to the eligible expenditure for the priority included in the payment application". 13

14 pre-requisite for sending interim payment applications 13. At end of, only 67 authorities had been designated (for 417 adopted programmes). Out of EUR 1,3 billion of payable claims submitted, EUR 0,8 billion were paid as interim payments, while a few claims were sent too late in the year to be properly processed and paid, leading to a 'normal' backlog of around EUR 0,5 billion to be paid in January submission of Member States' payment forecasts for 2016 Every year 14, national authorities are invited to submit by 31 January the forecasts of payment claims they expect to send for the current and following year (see Annex 2). The table below summarises the expected interim claims in 2016 for both the and programming period programmes Member States forecast to submit in 2016 some EUR 11,4 billion of payable claims, more than doubling the previous forecasts submitted in July. Furthermore, Member States also expect that 96% of these payable claims (some EUR 11 billion) will be submitted in the first part of 2016, while only the remaining 4% would be sent in the last two months of the year. Consequently, the claims arriving too late to be properly processed and paid should be negligible. The current forecasts seem to confirm that the Member States are on the right path for catching-up with most of the EUR 7 billion payable claims not submitted in (see Chapter 8.1 above), of which some EUR 6,4 billion are expected in 2016, while 13 CPR, Art. 124 states that the Member State shall notify the Commission of the date and form of the designations of the managing authority and, where appropriate, of the certifying authority, prior to the submission of the first application for interim payment to the Commission. 14 In accordance with Article 112 of the Council Regulation 1303/2013, covering the programming period for the following Funds: ERDF, CF, ESF. Forecasts regarding FEAD are required on a voluntary basis. Forecasts related to the programming period are required by the Council Regulation 1083/2006 once a year and Member States are required to update them on a voluntary basis. 14

15 the rest shall be submitted by 31 March 2017 (the legal deadline for the submission of closure documents) programmes Member States forecast to submit EUR 18,9 billion in payable claims in With respect to their previous forecasts in July, they have reduced their predictions by EUR 4 billion. This may be explained by the fact that the managing authorities of 350 programmes still need to be designated in However, the lack of formal designation of the responsible authorities does not prevent starting the implementation of projects; thus, an acceleration of the submission of payment claims in the last part of the year cannot be excluded. In this regard, Member States currently forecast to submit around 40% of their claims (EUR 7,7 billion) in the last two months of The absence of N+3 decommitment deadline 17 is probably another reason for the reduced estimate for 2016 claims. The N+3 deadline will apply in 2017 for the first time Implications of Member States' forecasts for Budget programmes Whereas Budget 2016 (EUR 21,5 billion payment appropriations) had been prepared under an assumption of a backlog around EUR 17 billion at the end of, to be paid in 2016, as mentioned above the actual backlog was some EUR 9 billion lower. In their January forecasts, Member States envisage to submit in 2016 EUR 11,4 billion of payable claims, EUR 6,4 billion more than expected during the preparation of the 2016 budget, therefore partially counterbalancing the substantial reduction in the remaining backlog. A limited number of programmes which did not reach the 95% ceiling by end of did not submit a 2016 forecast as requested. The Commission takes then into account the possibility to receive payable claims for those programmes, up to a maximum amount of some EUR 0,5 billion. In addition, unlike in the latest years, Member States forecast a quite different pattern in the distribution of the claims during the year: 96% of the payable claims are forecast to be sent in the first part of 2016, drastically reducing the risk of a high amount of unpaid claims at end 2016 due to late submission. Consequently, the January forecasts of Member States seem to point towards the following outlook: the objective of fully phasing out, by the end of 2016, the 'abnormal' backlog of unpaid claims will be reached within the available appropriations; 15 The open commitments will be automatically decommitted in case this date is not respected. 16 Data as 31/12/. 17 YEI and Greece additional pre-financing is the exception to the rule, having deadline in

16 the 'normal' backlog at the end of 2016 should mostly include the latest interruptions and suspensions not yet lifted before the closure; this amount should be quite limited but cannot be assessed at this stage. At this early stage of the year many uncertainties still affect the pace of implementation of programmes. Based on the latest forecasts received from Member States by 24 February 2016, the payable claims at the end of 2016 could be some EUR 2 billion below the payment appropriations. However, the actual level of submission of claims remains uncertain, especially as some forecasts are still missing. Furthermore, the outlook of the programmes cannot be considered independently from the programmes, as transfers between programming periods cannot be excluded programmes Member States have reduced their previous expectations for 2016 (the forecasts are down from EUR 22,8 billion to EUR 18,9 billion) but their estimate remains higher than the budget available for interim payments after taking into account pre-financing by some EUR 2,7 billion. Taking into account the backlog from the end of (EUR 0,5 billion), the payment needs, as forecasted by the Member States, would exceed the available budget by some EUR 3 billion, as illustrated by the table below. Comparison between payment appropriations in Budget 2016 and payment expectations In billion Period ERDF CF ESF+YEI FEAD Total (a) Budget 2016 for interim payments (b) End- backlog (c) Capped forecasts ,7 9,0 0,4 2,2 3,6 4,9 5,9 0,1 0,5 0,4 (d)=(a)-(b)-(c) Difference -2,1-1,1 16,3 0,5 18,9-3,2 16

17 However, two factors may reduce the gap between forecasts and appropriations: Member States forecasts tend to be over-estimated. For instance, corrected by the over-estimate experienced on average over the last five years 18, the expected claims would be some EUR 2 billion lower. Some payment applications are always submitted too late in the year to be paid in the same year and a residual backlog is recurrent. However, the recent experience of demonstrates that, in absence of a legal deadline at the end of the year, a large concentration of the submission of the payment applications in the very last days of December is not the most plausible scenario 19. Accordingly, a reinforcement of the budget lines, reversing the transfer made at the end of, is not certain at this stage Cohesion policy decommitments In EUR 1,14 billion was decommitted for the Cohesion policy, of which EUR 0,45 billion was linked to closure of the period programmes, EUR 0,5 billion was linked to the consequences of the N+2/N+3 automatic decommitments, while the remaining EUR 0,2 billion is related to programmes prior 2000, technical assistance and preparatory actions (see tables in Annex 3) Conclusions The payment forecasts submitted in January by Member States provide relatively clear picture in relation to the programmes, while the outlook is more uncertain with regard to the programmes. At the end of 2016, the programmes will be left with a negligible 'normal' backlog, and the budgeted payment appropriations will be more than sufficient to cover needs; the unused appropriations could be some EUR 2 billion, though the precise amount will become clearer as implementation progresses in the course of Three main factors can influence it: the relevance of interruptions and suspensions not lifted at the end of 2016 (whose precise extent will be known only later in the year); a possible reinforcement for the programmes (though its need and potential size are still undefined on the basis of current data); and the accuracy rate in the Member States' payment forecasts, including the role played by the programmes which have not submitted forecasts by the last deadline. The Commission closely monitors the situation, with a special focus on the Member States which have experienced the largest error rates in forecasting, and it will reassess its current estimates after the receipt of the summer update of payment forecasts. In relation to the programmes, a limited 'normal' backlog (some EUR 1,5 billion) may be expected at the end of 2016, with a near balance between available budget appropriations and payment claims. Taking into account the high 18 The correction has been made applying the average error rate (14%) experienced in the period for the same year forecasts. 19 For instance, only some 10% of the overall claims for programming period have been submitted in the last ten calendar days in. 17

18 degree of divergence in Member States` payment forecasts for compared to the real outcome, and the uncertainty related to the timing in the designation of managing and certifying authorities, this scenario will have to be reassessed on the basis of the summer forecasts from Member States 20 ; on that basis, the Commission may propose to amend the budget, as appropriate. The Commission will continue to monitor the submission of claims and the designation of the authorities, to adjust its expectations to the actual needs of these programmes. 20 A new update is due by 31 July,

19 Description ANNEX 1: IMPLEMENTATION COMMITMENTS AND PAYMENTS Excluding Assigned Revenues by heading of Multiannual Financial Framework Provisional Data Available 31 December COMMITMENTS PAYMENTS 31 December Amount % 19 before after Available 31 December 31 December Amount % 1. SMART AND INCLUSIVE GROWTH 1.1 Competitiveness for growth and jobs 1.1.1X Large infrastructure projects European Fund for Strategic Investments 1 360, ,5 100,0% 0,0 0,0 3,6 3,6 100,0% 0,0 0, European Satellite Navigation Systems (EGNOS & GALILEO) 1 060, ,6 100,0% 0,0 0,0 811,0 809,6 99,8% -1,4 0, International Thermonuclear Experimental Reactor (ITER) 391,9 390,7 99,7% -1,2-1,2 398,0 394,9 99,2% -3,1-2, European Earth Observation Programme (COPERNICUS) 556,4 556,3 100,0% -0,1-0,1 508,9 506,1 99,5% -2,7-0, Nuclear Safety and Decommissioning 133,0 133,0 100,0% 0,0 0,0 150,0 149,7 99,8% -0,3-0, X Common Strategic Framework (CSF) Research & Innovation Horizon , ,9 100,0% -0,5-0, , ,6 99,1% -77,7-14, Euratom Research and Training Programme 302,1 302,1 100,0% 0,0 0,0 349,2 331,7 95,0% -17,5-2, Competitiveness of enterprises and small and mediumsized enterprises (COSME) 304,1 304,0 100,0% -0,1-0,1 342,9 339,0 98,9% -3,8-0, Education, Training, Youth and Sport (Erasmus+) 1 608, ,1 100,0% 0,0 0, , ,7 99,5% -7,3-0, Employment and Social Innovation (EaSI) 128,6 126,9 98,7% -1,7-1,7 92,3 85,1 92,2% -7,2-5, Customs, Fiscalis and Anti-Fraud 122,0 121,7 99,7% -0,3-0,2 107,4 105,4 98,2% -2,0-0, X Connecting Europe Facility (CEF) Energy 397,2 397,0 100,0% -0,1-0,1 79,7 77,7 97,5% -2,0-0, Transport 945,9 944,7 99,9% -1,2-1, , ,9 99,4% -7,0-5, Information and Communication Technology (ICT) 92,0 92,0 100,0% 0,0 0,0 23,3 22,4 96,4% -0,8-0, Energy projects to aid economic recovery (EERP) 384,6 384,6 100,0% 0,0 0,0 1.1.OTH Other actions and programmes 215,6 214,1 99,3% -1,4-1,4 202,8 201,6 99,4% -1,3-0,3 1.1.SPEC Actions financed under the prerogatives of the Commission and specific competences conferred to the 131,0 124,6 95,1% -6,4-6,4 117,3 112,9 96,3% -4,4-4,4 Commission 1.1.PPPA Pilot projects and preparatory actions 20,8 19,7 94,5% -1,1-1,1 17,8 17,0 95,5% -0,8-0,8 1.1.DAG Decentralised agencies 242,6 242,6 100,0% 0,0 0,0 235,0 234,8 99,9% -0,2-0,2 SUB-TOTAL , ,5 99,9% -14,3-14, , ,4 99,1% -139,7-38,3 1.2 Economic, Social and Territorial Cohesion Regional convergence (Less developed regions) , ,9 100,0% 0,0 0, , ,5 100,0% 0,0 0, Transition regions 6 895, ,4 100,0% 0,0 0,0 785,4 785,4 100,0% 0,0 0, Competitiveness (More developed regions) , ,6 100,0% 0,0 0, , ,9 100,0% 0,0 0, Outermost and sparsely populated regions 278,5 278,5 100,0% 0,0 0,0 25,4 25,4 100,0% 0,0 0, Cohesion fund , ,5 100,0% 0,0 0, , ,3 100,0% 0,0 0,0 before after

20 Description ANNEX 1: IMPLEMENTATION COMMITMENTS AND PAYMENTS Excluding Assigned Revenues by heading of Multiannual Financial Framework Provisional Data Available 31 December COMMITMENTS PAYMENTS 31 December Amount % before after Available 31 December 31 December Amount % before after European territorial cooperation 1 098, ,1 99,3% -7,2 0, , ,4 100,0% 0,0 0, Technical assistance and innovative actions 192,8 173,0 89,7% -19,9-19,9 179,1 159,6 89,1% -19,5-5, European Aid to the Most Deprived (FEAD) 537,3 536,6 99,9% -0,6-0,6 46,0 45,5 99,0% -0,5-0, Youth employment initiative (specific top-up allocation) 1 636, ,9 100,0% 0,0 0, , ,1 100,0% 0,0 0, Contribution to the Connecting Europe Facility (CEF) 1 217, ,0 100,0% 0,0 0,0 394,7 393,6 99,7% -1,1-1,1 1.2.PPPA Pilot projects and preparatory actions 3,5 3,5 100,0% 0,0 0,0 4,1 3,7 91,8% -0,3-0,3 SUB-TOTAL , ,9 100,0% -27,7-20, , ,4 100,0% -21,5-7,0 TOTAL SMART AND INCLUSIVE GROWTH , ,4 100,0% -42,0-34, , ,8 99,8% -161,1-45,3 2. SUSTAINABLE GROWTH: NATURAL RESOURCES European Agricultural Guarantee Fund (EAGF) - Market related expenditure and direct payments , ,6 99,0% -451,5-41, , ,1 98,9% -467,8-44, European Agricultural Fund for Rural Development (EAFRD) , ,3 100,0% -3,6-3, , ,5 100,0% -4,3-2, European Maritime and Fisheries Fund (EMFF) 1 651, ,8 99,9% -1,0-1,0 787,1 785,9 99,8% -1,2-0, Regional Fisheries Management Organisations (RFMOs) and Sustainable Fisheries Agreements (SFAs) 135,1 134,7 99,7% -0,4-0,4 124,8 124,8 100,0% 0,0 0, Environment and climate action (LIFE) 435,1 434,5 99,9% -0,6-0,6 345,6 339,1 98,1% -6,5-1,4 2.0.SPEC Actions financed under the prerogatives of the Commission and specific competences conferred to the 5,3 4,3 80,7% -1,0-1,0 9,1 8,4 92,3% -0,7-0,7 Commission 2.0.PPPA Pilot projects and preparatory actions 2,9 2,3 80,9% -0,6-0,3 13,7 13,4 97,9% -0,3-0,3 2.0.DAG Decentralised agencies 50,4 50,4 100,0% 0,0 0,0 50,4 50,4 100,0% 0,0 0,0 TOTAL SUSTAINABLE GROWTH: NATURAL RESOURCES , ,0 99,3% -458,7-48, , ,6 99,2% -480,9-49,4 3. SECURITY AND CITIZENSHIP Asylum, Migration and Integration Fund (AMIF) 807,7 807,4 100,0% -0,4-0,4 405,3 403,2 99,5% -2,1-0, Internal Security Fund (ISF) 613,5 613,0 99,9% -0,5-0,5 352,0 349,9 99,4% -2,1-0, IT Systems 18,9 18,9 100,0% 0,0 0,0 16,4 16,4 100,0% 0,0 0, Justice 48,4 48,3 99,8% -0,1-0,1 30,7 29,6 96,5% -1,1-0,3 20

21 Description ANNEX 1: IMPLEMENTATION COMMITMENTS AND PAYMENTS Excluding Assigned Revenues by heading of Multiannual Financial Framework Provisional Data Available 31 December COMMITMENTS PAYMENTS 31 December Amount % before after Available 31 December 31 December Amount % before after Rights and Citizenship 57,4 56,8 98,9% -0,6-0,6 39,0 38,3 98,0% -0,8-0, Civil protection 29,3 29,0 99,0% -0,3-0,3 24,6 23,8 96,8% -0,8-0, Europe for Citizens 24,3 24,2 99,7% -0,1-0,1 18,9 18,5 97,6% -0,4-0, Food and Feed 252,5 252,5 100,0% 0,0 0,0 203,5 202,3 99,4% -1,2-0, Health 59,8 59,7 100,0% 0,0 0,0 46,2 45,6 98,7% -0,6 0, Consumer protection 24,7 24,4 99,1% -0,2-0,2 20,3 19,0 93,4% -1,3-0, Creative Europe 177,7 177,6 100,0% 0,0 0,0 162,8 161,0 98,9% -1,8-0,2 3.0.OTH Other actions and programmes 3.0.SPEC Actions financed under the prerogatives of the Commission and specific competencies conferred to the 85,8 85,7 99,9% 0,0 0,0 90,0 89,2 99,1% -0,8-0,1 Commission 3.0.PPPA Pilot projects and preparatory actions 17,7 17,5 98,8% -0,2-0,2 11,7 11,6 99,0% -0,1-0,1 3.0.DAG Decentralised agencies 558,2 558,2 100,0% 0,0 0,0 549,6 549,6 100,0% 0,0 0,0 TOTAL SECURITY AND CITIZENSHIP 2 775, ,1 99,9% -2,5-2, , ,1 99,3% -13,1-4,0 4. GLOBAL EUROPE Instrument for Pre-Accession Assistance (IPA) 1 687, ,8 99,9% -0,9-0, , ,3 99,2% -11,9-7, European Neighbourhood Instrument (ENI) 2 385, ,5 100,0% -0,3-0, , ,0 99,6% -7,0-0, Development Cooperation Instrument (DCI) 2 447, ,4 100,0% 0,0 0, , ,7 99,4% -12,4-3, Partnership Instrument (PI) 118,0 118,0 100,0% 0,0 0,0 66,1 63,9 96,8% -2,1-1, European Instrument for Democracy and Human Rights (EIDHR) 171,9 171,9 100,0% 0,0 0,0 151,1 147,7 97,8% -3,4-0, Instrument contributing to Stability and Peace (IcSP) 330,4 330,4 100,0% 0,0 0,0 264,1 260,8 98,7% -3,4-0, Humanitarian aid 1 295, ,9 100,0% 0,0 0, , ,1 99,6% -4,9-0, Common Foreign and Security Policy (CFSP) 285,2 239,9 84,1% -45,3-28,1 261,2 260,9 99,9% -0,3 0, Instrument for Nuclear Safety Cooperation (INSC) 61,2 61,2 100,0% 0,0 0,0 54,5 54,0 99,1% -0,5 0, Macro-financial assistance (MFA) 0,5 0,1 12,6% -0,4-0,4 23,0 23,0 100,0% 0,0 0, EU guarantees for lending operations 144,4 144,4 100,0% 0,0 0,0 144,4 144,4 100,0% 0,0 0, Civil protection and European Emergency Response Centre (ERC) 19,9 18,6 93,1% -1,4-1,4 14,5 14,5 100,0% 0,0 0, European Voluntary Humanitarian Aid Corps (EVHAC) 7,4 7,4 100,0% 0,0 0,0 3,8 3,7 100,0% 0,0 0,0 4.0.OTH Other actions and programmes 75,8 74,9 98,8% -0,9-0,9 58,2 58,0 99,7% -0,2-0,1 Actions financed under the prerogatives of the 4.0.SPEC Commission and specific competences conferred to the 62,0 61,4 99,0% -0,6-0,6 53,0 53,0 99,9% 0,0 0,0 Commission 21