On 14 October 2021, the European Commission published its guidelines on the closure of operational programmes adopted for assistance from the European Regional Development Fund, the European Social Fund, the Cohesion Fund (the ‘Funds’) and the European Maritime and Fisheries Fund (‘EMFF’) for the 2014-2020 programming period. The main objective is to simplify the procedures in one of the most complex EU Regulations.
Given the intrinsic complexities of the operational programmes at hand and the additional burdens the COVID-19 pandemic has created amid their execution, the Commission acknowledged the necessity to increase the transparency of this framework. In this regard, the Commission guides Member States based on best practices acquired during the closing of previous programming periods. Indeed, the guidelines aim at facilitating the closure process by providing a methodological framework which enables financial settlement between the Union and a particular Member State.
How are the financials settled?
The financial settlement will be achieved through compensation: the Commission will compare the Union’s outstanding budgetary commitments in favour of the Member State in respect of a programme with the decommitment of the sums unduly paid by the Commission to the Member State to determine whether the final balance of the programme is positive or negative. In performing this exercise, REACT-EU funding, the Recovery Assistance for Cohesion and the Territories of Europe which is an initiative that provides crisis repair measures to alleviate the economic harm resulting from the COVID-19 pandemic, enjoys a different treatment as it is placed on a separate budget line.
The guidelines further provide that overbooking, namely expenditure declared to the Commission in excess of the maximum contribution, will not be carried over to the next accounting year.
A novelty entailing administrative simplification worth highlighting consists of the fact that the final closure and settlement of balances should only be based on the documents relating to the final accounting year and the final implementation report or the last annual implementation report. In other words, the new system of annual examination and acceptance of accounts intends to streamline the procedure with the goal of making it more efficient.
What is the cut-off date for further project amendments or notifications?
The guidelines indicate that requests entailing amendments of programmes or, envisaging an amendment to or the notification of a major project, should be submitted by 30 September 2023 at the latest to allow for a decision to be adopted before the final date of eligibility, namely 31 December 2023. However, an early closure remains possible when all the activities related to the implementation of the programme have been carried out by the Member State concerned. Due to the current context of the pandemic, such an early closure does however not seem likely to us.
Are Member States obliged to report output and result indicator achievement values?
In the context of closure, Member States are expected to report output and result indicator achievement values which correspond to the situation on 31 December 2023 in the final implementation report. However, Member States can propose a revision of targets through a programme amendment but should realise that a serious failure to achieve the targets relating to financial indicators, output indicators and key implementation steps may give rise to financial corrections.
Is the phasing of operations over several programming periods conceivable?
Although in theory, operations should be entirely completed or fully implemented and contributing to the objectives of the relevant priorities at the time of submitting the closure documents, it is sometimes difficult to align operations’ implementation with the programming period. Therefore, phasing operations into the 2021-2027 programming period is accepted if the following conditions are adhered to:
the operation was not co-financed by the Funds or the EMFF under the previous programming period running from 2007-2013;
the combined cost of the two clearly separate and identifiable phases of the operation exceeds EUR 5 million;
the same expenditure is not declared twice to the Commission;
the second phase of the operation is eligible and compliant for co-financing from the Funds under the 2021-2027 programming period; and
the Member State undertakes to complete the second and final phase during the 2021-2027 programming period.
What about operations put on hold by pending investigations and legal or administrative proceedings?
Operations impacted by ongoing national investigations or suspended by a legal proceeding or an administrative appeal having suspensory effect are not automatically excluded from the accounts for the final accounting year as it remains at the discretionary power of the Member State whether to include it.
However, the same does not hold true regarding expenditure for operations which have been suspended after the submission of the final application for an interim payment for the last financial year. For expenditure affected by potential irregularities identified in ongoing OLAF investigations, OLAF reports or the Commission’s or the European Court of Auditors’ audits, the guidelines also provide for an explicit exclusion.
Quid concerning expenditure for non-functioning operations?
As concerns non-functioning operations, expenditure for operations that are not completed or fully implemented and/or not contributing to the objectives of the relevant priorities, Member States must exclude these from the accounts for the final accounting year. Member States may however decide to include them in the accounts for the final accounting year provided that:
each non-functioning operation exceeds a total cost of EUR 2 million; and
the expenditure for the non-functioning operations does not exceed 10% of the eligible total expenditure, on the EU and national level taken together.
Should a Member State indeed decide to include expenditure for non-functioning operations in the accounts for the final accounting year, Member States agree to complete or fully implement them by the cut-off date 15 February 2026, on the penalty of mandatory reimbursement.
Final remarks on the closure process
The closure documents must be submitted by 15 February 2025 (or 31 May 2024 for the last annual implementation report under the EMFF), at the risk of the Commission automatically decommitting the commitments still open on 31 December 2023. The final balance is then determined and paid no later than three months after the date of acceptance of accounts for the final accounting year or one month after the date of acceptance of the final implementation report, whichever occurs later.
The closure of a programming period is always synonym of a lengthy administrative process and litigation with the Commission, national audit organs and the Court of Auditors of the EU notably on the compliance with public procurement and State aid rules, potentially leading to undesirable financial consequences and burdensome follow-up verifications. Time will tell if the new guidance is able to improve this process.