1. The administration and management of funds acquired from the European Union (EU) to support Operational Programmes are governed by cohesion policies (the current one being Cohesion Policy 2007-2013). In this regard, Malta has adopted two Operational Programmes, one for the European Regional Development Fund (ERDF) and another for the European Social Fund (ESF). The Operational Programme co-financed by ERDF and the Cohesion Fund (CF) is commonly referred to as Operational Programme I (OPI), whereas the Operational Programme co-financed by ESF is referred to as Operational Programme II (OPII). These two programmes, OPI and OPII, were developed according to the strategic priorities identified in the National Strategic Reference Framework. This latter document sets out Malta’s strategic priorities for the Cohesion Policy 2007-2013. In this context, OPI is geared towards investing in competitiveness for a better quality of life, while OPII focuses primarily on employment, education, training and social inclusion.
2. The various roles and responsibilities associated with the implementation of the Cohesion Policy 2007-2013 programme is entrusted to a number of governmental authorities. The Planning and Priorities Co-ordination Division within the Office of the Prime Minister is the designated Managing Authority (MA). The role of Certifying Authority (CA) is fulfilled by the EU Paying Authority Directorate within the then Ministry of Finance, the Economy and Investment, while the duties associated with the Audit Authority (AA) are carried out by the Internal Audit & Investigations Department.
3. The Cohesion Policy is based on a shared management system between the European Commission and Member States, with the principal aim of ensuring that the principles of regularity, legality and sound financial management are complied with. Nonetheless, the regulatory requirements, which govern the use of EU funds across Member States, are often seen as complex and administratively burdensome, prompting regular calls for simplification from the EU and national actors as well as stakeholders. To this effect, amendments were made to the General Regulation (EC) No 1083/2006, with the twin objectives of accelerating payments from the Structural and Cohesion Funds, while simultaneously reducing the administrative burdens associated with policy implementation.
4. The simplification measures being reviewed for the purposes of this performance audit are listed hereunder, with the first seven being optional and the rest being non-optional.
a. Indirect costs (declared on a flat-rate basis of up to 20 per cent of direct costs);
b. Flat-rate standard scales of unit cost;
c. Lump sums;
d. Permitted in-kind contributions to be declared as eligible expenditure in relation to financial engineering schemes;
e. Advanced payments;
f. Increased flexibility for major projects;
g. Co-financed repayable assistance;
h. Raising of threshold of revenue generating projects; and
i. Single threshold for major projects.
5. The Contact Committee of the Supreme Audit Institutions mandated the Working Group on Structural Funds to carry out an audit on “Simplification of the regulations in Structural Funds”. In this regard, the National Audit Office (NAO) agreed to undertake a performance audit that evaluated nine simplification measures related to Operational Programmes funded by the EU. This parallel audit was carried out in conjunction with 13 other Member States.
6. The principal objectives of this performance audit were to:
a. Examine whether simplification measures have been implemented in Malta;
b. Elicit feedback from the relevant authorities and beneficiaries on their experiences so far;
c. Determine why certain simplification measures were not implemented (if applicable); and
d. Gather feedback of the involved authorities with regard to future simplification measures.