budgetary implementation

Transcription

1 Analysis of the budgetary implementation of the European Structural and Investment Funds in 2016 May 2017 Budget

2 Europe Direct is a service to help you find answers to your questions about the European Union Freephone number (*): (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). print ISBN ISSN doi: / KV-AM EN-C PDF ISBN ISSN doi: /58021 KV-AM EN-N More information on the European Union is available on the Internet ( Luxembourg: Publications Office of the European Union, 2017 Cover photo: Calafat-Vidin road and rail bridge, financed by Interreg IV Romania-Bulgaria operational programme for the period European Union 2017 European Union 2017 Reproduction is authorised provided the source is acknowledged. NB: The information contained in this Commission staff working paper (DG Budget) is without prejudice to the content of the official Commission reports on the closure of the accounts and on the Structural and Cohesion Funds. Readers should refer in particular to the revenue and expenditure account for the official figures on the 2016 budget out-turn.

3 Analysis of the budgetary implementation of the European Structural and Investment Funds in 2016 May 2017

4 2 This report covers the programming periods and For the programming period the implementation report deals with all the funds under Heading 1b "Cohesion policy" of the financial framework: ERDF, ESF and the Cohesion Fund. For the programming period, the report deals with the European Structural and Investment (ESI) Funds, namely ERDF, CF, ESF (including the YEI specific allocation), EAFRD and EMFF. It also covers the FEAD which is part of Heading 1b but it is not an ESI Fund. The report does not cover the European Agricultural Fund for Rural Development (EAFRD) and the European Fisheries Fund (EFF) of Heading 2 "Natural Resources" of the financial framework , which were no Structural Funds during that programming period.

5 3 LIST OF ABBREVIATIONS AB CA CB CI CEF CF CPR DAB Amending Budget Commitment appropriations Cross-border cooperation Community initiative Connecting Europe Facility Cohesion Fund Common Provisions Regulation Draft Amending Budget EAFRD European Agricultural Fund for Rural Development EAGF European Agricultural Guarantee Fund EC European Commission EMFF European Maritime and Fisheries Fund ENPI European Neighbourhood and Partnership Instrument ERDF European Regional Development Fund ESF European Social Fund ESIF European Structural and Investment Funds ETC European Territorial Cooperation EYT End of the Year Transfer FEAD Fund for European Aid to the most Deprived H1B Heading 1b of the Multiannual Financial Framework H2 Heading 2 of the Multiannual Financial Framework IIA Inter Institutional Agreement IM & TA Innovation measures and technical assistance IPA Instrument for Pre-Accession LDR Less Developed Region MCS Management and Control System MDR More Developed Region MFF Multiannual Financial Framework MS Member State NSRF National Strategic Reference Framework OP Operational programme PA Partnership Agreement PA Payment appropriations RAL "Reste à Liquider" Outstanding Commitments RCE Regional Competitiveness and Employment SF Structural Funds TR Transition Region YEI Youth Employment Initiative LIST OF COUNTRY CODES AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE Austria Belgium Bulgaria Cyprus Czech Republic Germany Denmark Estonia Spain Finland France Greece Croatia Hungary Ireland IT LT LU LV MT NL PL PT RO SE SI SK UK CB Italy Lithuania Luxemburg Latvia Malta Netherlands Poland Portugal Romania Sweden Slovenia Slovakia United Kingdom Cross-border cooperation

6 4 CONTENTS LIST OF ABBREVIATIONS 3 LIST OF COUNTRY CODES 3 LIST OF CHARTS AND TABLES 5 EXECUTIVE SUMMARY Outlook for SECTION 1: THE LEGAL AND FINANCIAL BACKGROUND 9 1. The multiannual financial framework 9 2. The 2016 budgetary procedure 13 SECTION 2: THE PROGRAMMING PERIOD Budget implementation in Reimbursement of additional initial pre-financing paid to Greece in 2015 and Reimbursement of additional initial pre-financing paid to Youth Employment Initiative programmes in The Fund for European Aid to the Most Deprived: reimbursement of initial pre-financing Evolution of the end-of-year concentration of payments and interim payment applications Member States payment forecasts for Heading 1B Overall implementation for the programming period 27 SECTION 3: THE PROGRAMMING PERIOD Implementation in N+2 and N+3 decommitments Overall implementation for the programming period 35 ANNEXES 39 Annex 1: Economic, social and territorial cohesion final allocations by Member State (current prices) 40 Annex 2: Sustainable growth: natural resources (except EAGF) final allocation by Member State (current prices) 42 Annex 3: Change in Member State allocations following the adjustment of cohesion policy envelopes (EUR) 44 Annex 4: Historical analysis of the implementation rate of Member States payment forecasts 45 Annex 5: Implementation rate of forecasts in Annex 6: N+2/N+3 decommitments for the programming period 49 Annex 7: Historical trend in commitments and payments 51 Annex 8: References 54

7 5 LIST OF CHARTS AND TABLES Chart 1: Heading 1b commitments by type of region, Fund and objective (million EUR) 10 Chart 2: Heading commitments by fund (million EUR) 10 Chart 3: Heading 1b envelopes (commitments) following the adjustment of cohesion policy envelopes in 2016 (million EUR) 12 Chart 4: Monthly pattern of submission of payment applications for the programmes (million EUR) 24 Chart 5: Chart 6: Chart 7: Monthly pattern of interim payments made for the programmes (million EUR) 25 Cumulative execution at the end of 2016 by Member State for the period (compared to allocations) 28 Outstanding commitments by Member State for the period at the end of 2016 (million EUR) 29 Chart 8: Cumulative execution at the end of 2016 by Member State for the period (compared to allocations after decommitments) 36 Chart 9: Outstanding commitments by Member State for the period at the end of 2016 (million EUR) 37 Chart 10: Implementation rate of forecasts by Member State January submission 47 Chart 11: Implementation rate of forecasts by Member State July submission 48 Chart 12: Chart 13: Commitment and payment appropriations entered in the budget from 1994 to 2016 including transfers and amending budgets, excluding carry-over (million EUR) 52 Implementation of commitment and payment appropriations and the evolution of outstanding commitments from 1994 to 2016 (million EUR) 52 Chart 14: Outstanding commitments by period of origin (million EUR) 53 Table 1: Heading 1b modification of commitments following the adjustment of cohesion policy envelopes in 2016 (million EUR) 12 Table 2: Voted budget for the 2016 financial year (million EUR) 13 Table 3: Table 4: Table 5: Table 6: Payment appropriations available in the 2016 voted budget and after amending budget 4/2016 (million EUR) 14 Out-turn of commitment appropriations for the programming period in 2016 by fund (million EUR) 16 Out-turn of payment appropriations for the programming period in 2016 by fund (million EUR) 17 Payments: available appropriations and their implementation in 2016 for the programming period (million EUR) 19 Table 7: Additional pre-financing received by Greece in 2015 and 2016 (EUR) 20 Table 8: YEI additional pre-financing: amounts paid and recovered by Member State (EUR) 22 Table 9: Evolution of Member State payment forecasts for 2016 (billion EUR) 25 Table 10: Implementation rate in 2016 of forecasts for programmes January forecasts (million EUR) 26 Table 11: Outstanding commitments for at the end of 2016 (million EUR) 29

8 6 Table 12: Adopted operational programmes and status of the designation of authorities at 31 December Table 13: Evolution of unpaid payment applications at year end for programmes (billion EUR) 31 Table 14: Table 15: Table 16: Table 17: Out-turn of payment appropriations for the programming period in 2016 by Fund (million EUR) 32 Payments: available appropriations and their implementation in 2016 for the programming period (million EUR) 33 N+2/N+3 decommitments for the programming period as of 31 December 2016 (million EUR) 34 N+2/N+3 decommitments by Member State for programming period as of 31 December 2016 (million EUR) 35 Table 18: Outstanding commitments for at the end of 2016 (million EUR) 37 Table 19: Evolution of unpaid payment applications at year end for programmes (billion EUR) 38 Table 20: Table 21: Table 22: Implementation rate of forecasts for the Structural Funds, CF and FEAD January submission (billion EUR) 45 Implementation rate of forecasts for the Structural Funds, CF and FEAD July submission (billion EUR) 45 Implementation rate of forecasts for the Structural Funds and CF (billion EUR) 45 Table 23: Implementation rate of forecasts for the EMFF (billion EUR) 46 Table 24: Implementation rate of forecasts for the EAFRD (billion EUR) 46

9 7 EXECUTIVE SUMMARY 2016 The Commission has achieved the objective established in Elements for a payment plan to bring the EU budget back onto a sustainable track of May 2015 ( 1 ) of completely phasing out the abnormal backlog of outstanding payment claims for the cohesion programmes by the end of At the end of 2016 only a normal backlog could be observed for both programming periods. The 2016 budgetary implementation was characterised by significant under-execution of payment appropriations. Despite a reduction by EUR 7.1 billion in amending budget 4/2016, a further EUR 4.7 billion in payment appropriations remained unused at the end of the year. The level of payment applications submitted by the Member States was significantly lower than their forecasts. As regards the programmes, the delays in implementation observed in the previous years continued in These can be attributed to a number of factors, including significant delays in the designation of national authorities and the additional requirements introduced by the new regulations, which aimed at increasing the quality of programmes but required additional start-up time to be put in place. The programmes progressed towards their closure. The total payments made by the end of 2016 represent around 94 % of the cohesion policy envelope. ( 1 ) plan_en.pdf

10 8 Outlook for 2017 By the end of 2017 the 16 Member States concerned by the adjustment of cohesion policy envelopes ( 2 ) will have to submit to the Commission their revised operational programmes. The Commission is in discussions with the Member States with a view to focusing the additional amounts on the following political priorities: the migration crisis, youth employment and investments in combination with the European Fund for Strategic Investments. The challenge for the years ahead is to reach cruising speed in the implementation of the European structural and investment programmes. In this context, reliable and accurate Member State forecasts are crucial to ensure the orderly progression of payment appropriations and to further reinforce trust in the timely implementation of the European Structural and Investment Funds. The level of outstanding commitments is expected to rise in 2017, since commitments are higher than payment appropriations in the 2017 budget. By 31 March 2017 the Commission had received from Member States the information for the closure of the cohesion policy programmes. Closure payments will be made in 2017, following the examination of the closure packages. ( 2 ) Belgium, Czech Republic, Denmark, Estonia, Ireland, Greece, Spain, Croatia, Italy, Cyprus, Netherlands, Slovenia, Slovakia, Finland, Sweden, United Kingdom.

11 SECTION 1: LEGAL AND FINANCIAL BACKGROUND 9 SECTION 1: THE LEGAL AND FINANCIAL BACKGROUND 1. The multiannual financial framework The multiannual financial framework (MFF) for the programming period was laid down by Council Regulation (EU, Euratom) No 1311/2013 ( 3 ) (the MFF regulation), which allocates EUR billion (in 2011 prices) to Economic, social and territorial cohesion (Heading 1b of the budget) and EUR billion (in 2011 prices) to Sustainable growth: natural resources (Heading 2 of the budget). This last figure also includes Market-related expenditure and direct payments (EUR billion), which is not the subject of this report. Allocations under Heading 1b for the programming period The figure of EUR billion allocated by the MFF regulation to Heading 1b has been adjusted as follows. The amounts in 2011 prices are converted into current prices with a fixed deflator of 2 % per year ( 4 ). In line with the European Council conclusions of June 2013 ( 5 ), additional allocations of EUR 200 million for Cyprus were partly added through a mobilisation of the Flexibility Instrument in 2014 and Adjustments between categories of regions have been made following requests from some Member States (such transfers are permitted up to 3 % of the total appropriations of the reduced category of region ( 6 )). The following chart shows the H1b breakdown of commitments (EUR 367 billion in current prices) among funds and categories of regions ( 7 ). ( 3 ) Later amended by Council Regulation (EU, Euratom) No 2015/623 of 21 April ( 4 ) In accordance with the MFF regulation, Article 6(2). ( 5 ) Conclusions of European Council of 27 and 28 June 2013; Decision of the European Parliament and of the Council of 20 November 2013 on the mobilisation of the Flexibility Instrument (2014/97/EU). ( 6 ) In accordance with Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013, Article 93(2). ( 7 ) The More developed, Transition and Less developed categories of regions can be financed by both the European Regional Development Fund and the European Social Fund, while the Outermost and northern sparsely populated category is covered by the ERDF only.

12 10 SECTION 1: LEGAL AND FINANCIAL BACKGROUND Chart 1: Heading 1b commitments by type of region, Fund and objective (million EUR) More Developed Regions Outermost and northern sparsely populated regions European Territorial Cooperation CF CEF Transition Regions TOTAL: YEI TA and Urban innovative action Less Developed Regions FEAD Allocations under Heading 2 for the programming period As from 2014, the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF) are part of the European Structural and Investment Funds (ESI Funds). The total allocation for these two funds amounts to EUR 105 billion in current prices. Chart 2: Heading commitments by fund (million EUR) EAFRD after EAGF trasnfers EAGF "Market related expenditure and direct payments" EMFF The Chart 2 presents the current share of these two funds vis-à-vis the total Heading 2 envelope, the major component of which is the European Agricultural Guarantee Fund (EAGF), which is not part of the ESI Funds and therefore not covered by this report. With respect to the initial amounts allocated by the MFF regulation to the funds concerned, the figures presented in the Chart 2 have been converted into current prices with a fixed deflator of 2 % per year. In addition, the original amount for the EAFRD (pillar 2 of the common agricultural policy) of EUR million has been increased to EUR million to take into account the transfers and flexibility from EAGF ( 8 ) (pillar 1 of the common agricultural policy). ( 8 ) Article 7(2) and Article 14 of Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009.

13 SECTION 1: LEGAL AND FINANCIAL BACKGROUND 11 Annual breakdowns of allocations The annual breakdowns of allocations for the ESI Funds and the Fund for European Aid to the Most Deprived (FEAD) are laid down by the following legal bases. Commission Implementing Decision C(2014) 2082, as last amended by Commission Implementing Decision C(2016) 6909, for Heading 1b funds. Regulation (EU) No 1305/2013, as last amended by Commission Delegated Regulations (EU) No 2015/791 and No 2016/142 for the EAFRD. Commission Implementing Decision C(2014) 3781 for the EMFF. The annual breakdown by heading is provided in Annex 1 (Heading 1b) and Annex 2 (Heading 2). Adjustment of cohesion policy envelopes The MFF regulation establishes that, to take account of the particularly difficult situation of Member States suffering from the crisis, in 2016 the Commission should review all Member States total allocations under the Investment for growth and jobs goal of the cohesion policy for the years ( 9 ). The methods and results of this adjustment are presented in the communication from the Commission to the Council and the European Parliament of 30 June 2016 (COM(2016) 311). The ceiling for the commitment appropriations of Heading 1b in the years is increased by EUR million (in current prices). The ceiling for payment appropriations has also been modified, with an increase of EUR million (in current prices) in the years ( 10 ). The table below shows the changes in the commitments available for the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund (CF). Both the ERDF and the ESF envelopes increase, with a significant growth in the allocation for transition regions (TR) and less-developed regions (LDR) (a rise of some EUR 2 billion each, representing around 5.8 % and 1.1 % of the original allocation respectively), and a smaller one for more-developed regions (MDR) (EUR 0.72 billion, around 1.3 % of the original allocation). The CF envelope is reduced by EUR 107 million (around 0.2 % of the original allocation). The overall effect at Heading 1b level is an increase by EUR million. Table 1: Heading 1b modification of commitments following the adjustment of cohesion policy envelopes in 2016 (million EUR) Policy funding for H1b Amount Less-developed regions Transition regions More-developed regions 720 Cohesion Fund (excluding CEF) 107 TOTAL ( 9 ) MFF regulation, Article 7. ( 10 ) Given that most of the payments related to the increase in commitments are expected to occur post-2020, the increase in the payment ceiling in the years remains limited.

14 12 SECTION 1: LEGAL AND FINANCIAL BACKGROUND This adjustment mainly benefits the Member States that were more seriously hit by the economic crisis: Spain (which gets an additional EUR 2.1 billion), Italy (EUR 1.6 billion) and Greece (EUR 1 billion). Another eight Member States see a more moderate increase in their allocations (EUR million in total), while five see their envelope reduced (by EUR million in total) due to a better socioeconomic performance (see the detailed list in Annex 3). The chart below shows the Heading 1b breakdown of commitments, after taking into account the effects of the adjustment of cohesion policy envelopes. Chart 3: Heading 1b envelopes (commitments) following the adjustment of cohesion policy envelopes in 2016 (million EUR) More Developed Regions Outermost and northern sparsely populated regions European Territorial Cooperation CF CEF Transition Regions TOTAL: YEI TA and Urban innovative action 0 Less Developed Regions FEAD Pursuant to the adjustment of cohesion policy envelopes, the 16 Member States affected, after having decided how to distribute the financial impact of the change among their operational programmes and priorities, shall submit to the Commission revised versions of the operational programmes concerned ( 11 ). After the receipt of the amended programme, the Commission has 1 month to assess it and make observations, with a view to focusing the additional amounts on the political priorities identified in the technical adjustment communication: measures to help tackle the migration crisis and youth unemployment, and on investments through financial instruments and a combination with the European Fund for Strategic Investments, taking into account the needs and relevance of those priorities for each Member State. When an agreement on the allocation of the resources is reached, the amended programme is adopted, and the additional appropriations can be committed. ( 11 ) In accordance with Regulation (EU) No 1303/2013, Article 30.

15 SECTION 1: LEGAL AND FINANCIAL BACKGROUND The 2016 budgetary procedure For the programming period, the adopted budget for 2016 for the ESI Funds followed the financial programming for commitment appropriations, while for payment appropriations it provided EUR 26.8 billion and EUR 8.9 billion for Heading 1b and Heading 2 funds respectively. The payment appropriations were intended to cover the final tranche of the initial pre-financing, the first instalment of the annual pre-financing and a significant level of interim payments. For the programming period, the budget for cohesion policy was EUR 21.5 billion in payment appropriations, to settle interim payments on the outstanding commitments. No commitment appropriations were included in the budget, as this programming period ended in Table 2: Voted budget for the 2016 financial year (million EUR) (*) Fund Commitment appropriations Payment appropriations ERDF ESF CF YEI FEAD EAFRD EMFF TOTAL ERDF ESF CF TOTAL (*) Figures include operational lines and technical assistance. In March 2016 the Commission detected a risk of under-implementation of cohesion policy payment appropriations, which was communicated to the budgetary authority in the Active monitoring and forecast of budget implementation 2015 information note. Following the confirmation of this expectation by the reduced Member State forecasts submitted by 31 July 2016, the Commission proposed amending budget 4/2016, which decreased the level of payment appropriations for the ESI Funds by EUR 7.1 billion.

16 14 SECTION 1: LEGAL AND FINANCIAL BACKGROUND Table 3: Payment appropriations available in the 2016 voted budget and after amending budget 4/2016 (million EUR) (*) Fund Voted budget AB4/2016 Budget after AB4/2016 ERDF ESF CF YEI FEAD EAFRD EMFF TOTAL ERDF ESF CF TOTAL (*) Figures include operational lines and technical assistance. In addition to amending budget 4/2016, a number of transfers were aimed at meeting the payment needs of different policy areas, in particular the global transfer adopted on 9 November 2016 and the end-of-year transfer. In this last case, the reinforcement carried out was focused on covering the outstanding needs for the closure of EAFRD programmes, while the ESI Fund programmes were not reinforced. As for the programming period, the funds with the most significant reductions of payment appropriations via transfers were the ERDF and the EAFRD, while the CF was reinforced ( 12 ). ERDF LDR (line ) was reduced by EUR 293 million, mainly in favour of ERDF convergence, Structural Reform Support Service and CF. ERDF MDR (line ) was reduced by EUR 252 million, mainly in favour of ERDF regional competitiveness and employment (RCE) and CF. EAFRD (line ) was reduced by EUR 677 million, mainly in favour of EAFRD. CF (line ) was reinforced by EUR 124 million from ERDF (MDR, TR, LDR). ( 12 ) For details on all ESI Fund budget lines, please refer to Table 6.

17 SECTION 1: LEGAL AND FINANCIAL BACKGROUND 15 As for the programming period, the funds with the most significant reinforcement were CF and ERDF regional competitiveness and employment, while ERDF convergence was reduced ( 13 ). CF (line ) received EUR 671 million, mainly from ERDF convergence and ERDF (MDR, TR, LDR). ERDF RCE (line ) received EUR 173 million, mainly from ERDF MDR. ERDF convergence (line ) was reduced by an overall amount of EUR 809 million, mainly in favour of CF. As regards commitment appropriations, for budget lines, territorial cooperation benefited from the transfer of EUR 11.8 million from cross-border cooperation, while the EAFRD received EUR 1 million from the EAGF. For the Youth Employment Initiative (YEI), the initial envelope (commitment appropriations) had been fully front-loaded in 2014 and However, in 2016 EUR million of commitment and payment appropriations were generated as assigned revenue, corresponding to the part of additional initial pre-financing paid to YEI programmes in 2015 but recovered 1 year later ( 14 ). ( 13 ) For details on all cohesion policy budget lines, please refer to Table 15. ( 14 ) For further details, see Chapter 3 in Section 2.

18 16 SECTION 2: PROGRAMMING PERIOD SECTION 2: THE PROGRAMMING PERIOD 1. Budget implementation in 2016 Implementation of commitment appropriations Table 4: Out-turn of commitment appropriations (*) for the programming period in 2016 by fund (million EUR) Fund Voted budget Transfers, amending budgets, additional appropriations Total commitment appropriations Out-turn % ERDF % ESF % CF % YEI % FEAD % EAFRD % EMFF % TOTAL % (*) Figures include operational lines and technical assistance. In line with Article 19 of the MFF regulation, a reprogramming exercise was carried out in As a result, the 2015 commitment appropriations increased significantly ( 15 ). When neutralising the impact of this reprogramming exercise, the 2016 commitment appropriations increased by 3.2 % compared to 2015, in line with the profile provided for in the MFF The only 2014 commitments reprogrammed in 2016 were EUR 4.35 billion for the EAFRD. All available appropriations (EUR 68.3 billion) were committed, except for EUR 0.96 million related to the EAFRD Wales programme and EUR 22.2 million for technical assistance. The reduction in the Wales programme followed the UK High Court Consent Order of 12 December 2014, the implementation of which resulted in a decrease in the programme ( 15 ) For further information, please refer to the previous version of this report (Analysis of the budgetary implementation of the European Structural and Investment Funds in 2015), Chapter 1.2.

19 SECTION 2: PROGRAMMING PERIOD 17 envelope ( 16 ). On the basis of this decision, 2016 commitments have been reduced by EUR 0.96 million. The under-implementation of technical assistance commitments in 2016 is mainly due to the following reasons. The late adoption of many operational programmes, resulting in delays or cancellations of certain actions in the field of support for the effective implementation of the programmes, support for policy analysis and development, capacity building and communication. Lengthy negotiation procedures with international organisations. Savings made on IT contracts. Implementation of payment appropriations Table 5: Out-turn of payment appropriations for the programming period in 2016 by fund (million EUR) Fund Voted budget Transfers, amending budgets, additional appropriations Total payment appropriations Out-turn % ERDF % ESF % CF % YEI % FEAD % EAFRD % EMFF % TOTAL % The payments executed in 2016 amounted to EUR 27 billion, twice the 2015 amount. EUR 12 billion (44 %) was for pre-financing and EUR 15 billion (56 %) was for interim payments. The ratio between pre-financing and interim payments is a good indicator of the progress of implementation on the ground: where pre-financing is higher, such as for the ERDF, the ESF and the EMFF, the implementation experiences some delays; where interim payments are significantly higher, such as for the EAFRD, implementation progresses faster. In 2016 the implementation of payment appropriations for the ESI Funds and the FEAD advanced at a slower pace than initially envisaged during the preparation of the budget, and despite the reduction of appropriations via amending budget 4/2016 and transfers, the implementation amounted to 86.6 % of the available resources, leading to a surplus of EUR 4.1 billion at the end of the year. ( 16 ) The overall decrease in the EAFRD Wales programme is EUR 4.2 million, affecting the years This reduction has been added to the annual net ceilings for direct payments for the United Kingdom.

20 18 SECTION 2: PROGRAMMING PERIOD For Heading 1b funds the Commission paid out EUR 18.7 billion, 82 % of the available resources. At the end of 2016 there was a normal backlog of unpaid claims of less than EUR 1 billion. As for Heading 2 funds, EAFRD programmes almost completely executed their budget (EUR 7.8 billion), while for the EMFF the implementation was EUR 0.2 billion, 96.5 % of the available resources. Many factors contributed to the delays observed in budgetary implementation, including the following. The late adoption of the main legal bases. The new designation process for managing and certifying authorities, which experienced significant delays at national level. Although the designation of authorities does not prevent implementation of programmes on the ground, it is nonetheless a prerequisite for the submission of interim payment claims for all funds except the EAFRD. At the end of 2016 the designation of 176 managing authorities (31 % of the total) had not yet been notified to the Commission. The additional requirements introduced by the new regulations (including a common strategy and stronger coordination requirements for the ESI Funds, and the fulfilment of ex ante conditionalities) are aimed at increasing the quality of programmes and projects, but required additional start-up time to be put in place. The absence of a deadline for automatic decommitments at the end of 2016.

21 SECTION 2: PROGRAMMING PERIOD 19 Table 6: Payments: available appropriations and their implementation in 2016 for the programming period (million EUR) Budget item Title Initial budget Amending budgets Other additional appropriations (*) Transfers Total available appropriations Total execution ESF Expenditure on administrative management ESF Less-developed regions ESF Transition regions ESF More-developed regions ESF Operational TA ESF Operational TA managed by the Commission at the request of an MS YEI Total ESF FEAD Non-operational TA FEAD FEAD Operational TA Total FEAD EAFRD Expenditure on administrative management EAFRD Rural development programmes EAFRD Operational TA EAFRD Operational TA managed by the Commission at the request of an MS Total EAFRD EMFF Expenditure on administrative management EMFF Sustainable and competitive fisheries EMFF Operational TA EMFF Operational TA managed by the Commission at the request of an MS Total EMFF ERDF Expenditure on administrative management ERDF Less-developed regions ERDF Transition regions ERDF More-developed regions ERDF Outermost and sparsely populated regions ERDF European territorial cooperation (ETC) ERDF Operational TA ERDF Operational TA managed by the Commission at the request of an MS ERDF Innovative actions in the field of sustainable urban development ERDF European strategy for the Baltic Sea region Technical assistance ERDF European Union strategy for the Danube region Technical assistance Total ERDF CF Expenditure on administrative management CF CF Operational TA CF Operational TA managed by the Commission at the request of an MS Total CF TOTAL (*) Carry-over (for non-differentiated appropriations), assigned revenue and appropriations made available again.

22 20 SECTION 2: PROGRAMMING PERIOD 2. Reimbursement of additional initial pre-financing paid to Greece in 2015 and 2016 Greece has been badly affected by the consequences of the economic and financial crisis, with persistently negative gross domestic product growth rates, serious liquidity shortages and a lack of public funds available for public investment. This exceptional situation has been addressed by the EU with specific measures, including an amendment of the common provisions regulation (CPR) ( 17 ). Greece benefited from an increase in the 2015 and 2016 initial pre-financing tranches, in an amount corresponding to 3.5 % of its main allocation each year ( 18 ), for programmes financed by the ERDF (with the exception of the European territorial cooperation goal), the CF, the ESF (with the exception of the YEI) and the EMFF ( 19 ). In total, Greece received some EUR 1 billion in additional pre-financing. Table 7: Additional pre-financing received by Greece in 2015 and 2016 (EUR) Fund (*) Total main allocation in programming period Additional initial pre-financing paid to Greece in 2015 and 2016 ERDF ESF CF EMFF TOTAL (*) ESF and ERDF allocations do not include contributions to YEI and European territorial cooperation. If the total amount of the additional initial pre-financing paid in 2015 and 2016 to an operational programme was not covered by payment applications by 31 December 2016, Greece shall repay in total the additional pre-financing for that programme ( 20 ). Greece did not meet the target for two programmes. The EMFF programme (2014GR14MFOP001), for which EUR in additional pre-financing will be recovered. The programme for competitiveness, entrepreneurship and innovation (2014GR16M2OP001), for which EUR in additional pre-financing will be recovered (this only concerns the ESF component). Greece has to repay a total amount of EUR This repayment does not constitute a financial correction and does not reduce the support from the funds for the operational programmes concerned. ( 17 ) Regulation (EU) 2015/1839 of 14 October 2015 amending Regulation (EU) No 1303/2013 as regards specific measures for Greece. ( 18 ) The 3.5 % of additional pre-financing is calculated on the main allocation only (performance reserve is excluded). ( 19 ) For further details on the implications of the CPR modification for programming periods and , please refer to the previous version of this report (Analysis of the budgetary implementation of the European Structural and Investment Funds in 2015), Chapter 2.1. ( 20 ) In accordance with Article 1 of Regulation (EU) 2015/1839, amending Article 134 of the CPR.

23 SECTION 2: PROGRAMMING PERIOD Reimbursement of additional initial pre-financing paid to Youth Employment Initiative programmes in 2015 The urgent need to address youth unemployment, combined with the budgetary constraints faced by Member States at the initial stage of the programming period, led to an increase in pre-financing for the operational programmes supported by the YEI ( 21 ). Additional initial pre-financing (EUR million) from the specific allocation for the YEI was paid in 2015, on top of the normal initial pre-financing, in order to increase the total initial pre-financing for 2015 to 30 % of the YEI s specific allocation (EUR million). Article 1(3) of Regulation (EU) 2015/779 states that if by 23 May 2016 a Member State had not submitted interim payment applications for at least 50 % of its additional initial pre-financing, it should reimburse to the Commission the total additional amount received. Eight Member States (out of 20 supported by the YEI) did not meet the above target, and in 2016 a total amount of EUR million (45 % of total additional pre-financing) was recovered. Of these eight Member States, by 23 May 2016 only the Spanish programme had designated its national authorities and submitted a payment application (although for a lower amount than 50 % of the additional pre-financing received); the other seven Member States had not designated their authorities and consequently could not submit any payment application. These recoveries do not constitute financial corrections and do not reduce the support from the fund. The recovery process was completed in 2016 and generated EUR million in assigned revenue in both commitment and payment appropriations. The commitment appropriations have been used to cover 2016 needs, while payment appropriations were fully carried over to ( 21 ) Regulation (EU) 2015/779 of 20 May 2015 amending Regulation (EU) No 1304/2013, as regards an additional initial pre-financing amount paid to operational programmes supported by the Youth Employment Initiative.

24 22 SECTION 2: PROGRAMMING PERIOD Table 8: YEI additional pre-financing: amounts paid and recovered by Member State (EUR) Member State Additional initial pre-financing received in 2015 Additional initial pre-financing reimbursed in 2016 BE BG CY CZ ES FR GR HR HU IE IT LT LV PL PT RO SE SI SK UK TOTAL The Fund for European Aid to the Most Deprived: reimbursement of initial pre-financing The FEAD is part of Heading 1b, but it is not an ESI Fund. Not being covered by the CPR, the FEAD has its own regime of pre-financing ( 22 ), with no annual pre-financing and an initial pre-financing amount corresponding to 11 % of the fund s overall contribution to the operational programme, paid immediately after the adoption of the OP. Out of a total of 28 FEAD programmes (one per Member State), 25 were adopted in 2014 and had their pre-financing paid in the same year (for a total amount of EUR million). The German, Swedish and UK programmes were adopted in the first part of 2015, and their pre-financing was paid immediately after (EUR 10 million). According to Article 44(3) of Regulation (EU) No 223/2014, the total amount paid as prefinancing shall be reimbursed to the Commission if no payment application ( 23 ) for the ( 22 ) Regulation (EU) No 223/2014 of 11 March 2014 on the Fund for European Aid to the Most Deprived, Article 44. ( 23 ) Unlike the additional pre-financing for the YEI and Greece, in the case of the FEAD the submission of a payment application of any amount is sufficient to fulfil the legal requirement.

25 SECTION 2: PROGRAMMING PERIOD 23 operational programme concerned is sent within 24 months of the date on which the pre-financing was paid. Consequently, the deadlines for the submission of at least one interim application for the 25 programmes adopted in 2014 were in 2016 ( 24 ). All programmes met this requirement with the exception of the Irish OP (2014IE05FMOP001), which must reimburse the entire prefinancing amount received (EUR ) ( 25 ). This recovery does not constitute a financial correction and does not reduce the support from the fund. 5. Evolution of the end-of-year concentration of payments and interim payment applications While most of the commitments for the operational programmes under the ESI Funds and the FEAD are typically made at the beginning of the year in accordance with the legal basis, payments are spread across the year, with a recurrent concentration in the last 2 months. The two following charts illustrate the monthly pattern in the submission of interim payment applications by Member States and in the execution of payments by the Commission ( 26 ). Monthly pattern in the submission of interim payment applications Chart 4 presents the claims as submitted by the Member States, without adjustments to take into account the 10 % retention amount set in Article 130 of the CPR. There is a clear difference in the pattern of submission of claims for the two headings: while EAFRD programmes have mandatory quarterly declarations (in January, April, July and October), the other funds have no such constraints, and the Member States have no regulatory deadlines for the submission of payment claims. In 2016, EUR 6.3 billion in claims were submitted for Heading 2, spread over 8 months, with peaks corresponding to the deadline for EAFRD quarterly declarations. The EMFF accounted for a small part of this amount, with only EUR 13.4 million in claims submitted between May and October. Heading 1b totalled EUR 9.6 billion in claims, with a substantial concentration in November (EUR 1.9 billion, 20 % of the overall claims) and December (EUR 5.1 billion, 53 % of the overall claims). This is in line with the historical trend observed in the programming period. Although at the end of 2016 there was no N+3 regulatory deadline for automatic decommitments, the submission of claims continued to be concentrated in the last 2 months of the year. ( 24 ) Each OP had a different deadline depending on the day the related pre-financing was paid by the Commission. ( 25 ) Of the remaining three programmes only the Swedish OP had already submitted an interim application in ( 26 ) The figures in this chapter refer to claims and payments for ERDF, CF, ESF, YEI, FEAD, EMFF and EAFRD operational programmes; they do not include technical assistance.

26 24 SECTION 2: PROGRAMMING PERIOD Chart 4: Monthly pattern of submission of payment applications for the programmes (million EUR) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec H1b claims H2 claims Monthly pattern in the execution of interim payments In 2016 the Commission paid the pre-financing in the first part of the year, within the regulatory deadlines ( 27 ), and interim payments regularly followed the submission of claims. The total amount of interim payments made for Heading 1b was EUR 8.1 billion, while for Heading 2 it was EUR 6.8 billion. For Heading 1b payments were concentrated in the last 2 months of the year, with EUR 1.7 billion (21 % of the total) paid in November and EUR 3.9 billion (48 % of the total) paid in December, in line with the submission of interim claims by Member States. EUR 0.6 billion in payment applications arrived after 28 December, with their payment then postponed to For the EAFRD payments were concentrated in the months following the quarterly declaration deadlines. For the EMFF there was no specific pattern in payments or in the submission of claims. ( 27 ) Regulation (EU) No 1303/2013, Article 134.

27 SECTION 2: PROGRAMMING PERIOD 25 Chart 5: Monthly pattern of interim payments made for the programmes (million EUR) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec H1b payments H2 payments 6. Member States payment forecasts for Heading 1B Every year, by 31 January and 31 July, Member States must transmit to the Commission a forecast of the payment applications they expect to submit during the current and subsequent financial year, for each operational programme ( 28 ). Table 9 presents the evolution of the payment forecasts related to 2016, starting from the submission of July In January 2015 forecasts were incomplete due to the late adoption of many operational programmes. Table 9: Evolution of Member State payment forecasts for 2016 (billion EUR) Submission date Payment forecasts for 2016 July 2015 January 2016 July 2016 Heading 1b Member States progressively reduced their expectations on interim claims to be submitted to the Commission in 2016, with a 27 % drop (EUR 6.9 billion) between the July 2015 and July 2016 submissions. The following table presents the implementation rate for the payment forecasts submitted by 31 January The implementation rate is the ratio between the actual payment claims submitted by a Member State in 2016 and its forecasts for the same year ( 29 ). ( 28 ) Regulation (EU) No 1303/2013, Article 112(3) for the Cohesion Fund and the Structural Funds. Payment forecasts on the FEAD are provided on a voluntary basis. ( 29 ) The figures presented in the table are the amounts as submitted by Member States, without any adjustment. The table is related to Heading 1b funds: the ERDF, the CF, the ESF, the YEI and the FEAD.

28 26 SECTION 2: PROGRAMMING PERIOD Table 10: Implementation rate in 2016 of forecasts for programmes January forecasts (million EUR) period Year 2016 (a) Payment forecasts (b) Interim claims (c) = (a) (b) Difference (d) = (b)/(a) Implementation rate AT Austria % BE Belgium % BG Bulgaria % CY Cyprus % CZ Czech Republic % DE Germany % DK Denmark % EE Estonia % ES Spain % FI Finland % FR France % GR Greece % HR Croatia % HU Hungary % IE Ireland IT Italy % LT Lithuania % LU Luxemburg % LV Latvia % MT Malta % NL Netherlands % PL Poland % PT Portugal % RO Romania % SE Sweden % SI Slovenia % SK Slovakia % UK United Kingdom % CB % TOTAL % As can be seen from Table 10, the overall implementation rate was 46 %, with the actual claims submitted in 2016 EUR 11.5 billion lower than forecast ( 30 ). The situation varied widely across Member States, though with the common trend of overestimation: only Sweden and Finland had forecasts lower than the payment claims actually submitted in 2016, while the other Member States significantly overestimated their needs ( 31 ). ( 30 ) Annex 4 provides historical data on forecast implementation rate over the last years. ( 31 ) Ireland represents a unicum: both its payment forecasts and interim claims in 2016 were zero.

29 SECTION 2: PROGRAMMING PERIOD 27 The Member States with the best implementation rates were therefore Sweden (194 %) and Finland (113 %), followed by Poland (90 %) and Lithuania (81 %). Looking at the accuracy of the forecasts, in relative terms the most reliable Member States were Poland, Finland and Lithuania, while the Member States with the highest gap between forecasts and claims actually submitted were the Netherlands and Romania. In absolute value, the Member States with the highest levels of overestimation were Hungary, Italy and Spain (EUR 2.2 billion, EUR 1.5 billion and EUR 1.1 billion of overestimation, respectively), while the Member State with the lowest discrepancy between the amounts forecast and claimed was Luxemburg. The update of payment forecasts, submitted by the Member States by 31 July 2016, involved a reduction of EUR 2.7 billion in the total expected amount, down to EUR 18.4 billion ( 32 ). However, even this new estimate proved to be too optimistic, as the overall implementation rate for July forecasts was 52 %, with forecasts EUR 8.8 billion higher than the actual payment applications submitted. This update was one of the elements used by the Commission in the preparation of amending budget 4/2016, together with the data on the pace of implementation on the ground and the delay in the appointment of the programmes managing and certifying authorities. In its calculation, the Commission took a prudent approach and adjusted the Member States forecasts downwards, assuming that programmes for which the national authorities had been appointed in the last quarter of 2016 or in 2017 would not submit any claims in 2016, and applying a 9 % correction rate to the remaining forecasts ( 33 ). This figure was then further reduced to take into account the 10 % retention on interim claims ( 34 ) and an expected end-of-2016 normal backlog of some EUR 1.3 billion. Despite this considerable reduction in Member States forecasts, the interim claims submitted were even lower than expected, leaving some EUR 4 billion in unused payment appropriations at the end of the year. Annex 5 shows the implementation rates of forecasts as sent in January and July 2016, by Member State. 7. Overall implementation for the programming period While the previous chapters are focused on the year 2016, this chapter provides an overview of the implementation of the programmes since the beginning of the programming period and up to 31 December ( 32 ) In view of the change of methodology in the submission of forecasts, for 2016 only, if a programme did not submit an updated forecast by 31 July 2016 the analysis includes the forecast submitted in January According to the CPR, and unlike in the programming period, Member States are now obliged to resubmit their forecasts in July, even if the January figures are still valid. ( 33 ) 9 % was the average error rate observed in the summer submission of payment forecasts in years for the programmes. ( 34 ) Regulation (EU) No 1303/2013, Article 130(1).