Original publication: January 2017
Authors: Spatial Foresight: Kai Böhme, Frank Holstein, Maria Toptsidou and Sabine Zillmer supported by ÖIR: Helene Gorny, Sanja Brkanović and Bernd Schuh; t33: Elodie Lorgeoux, Flaminia Cignitti and Nicola Brignani
In addition the research team included Edvinas Bulevičius (BGI), Victoria Chorafa (LKN Analysis), Andrea Floria (ACZ Consulting), Jacek Kotrasinski (EPSEC), Jan Vozáb (Berman Group), Amparo Montán, Sebastian Hans and Silke Haarich (Spatial Foresight) supporting the country specific information collection and analysis.
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Background

Gold-plating is a frequent term when discussing about ‘cutting the red tape’ and reducing the administrative costs and burdens of the European Structural and Investment Funds (ESIF) programme bodies and beneficiaries. Gold-plating can be divided into ‘active gold plating’ and ‘passive gold-plating’. ‘Active gold-plating’ describes the additional administrative procedures and regulatory obligations that go beyond the ESIF requirements set out at European Union (EU) level. ‘Passive gold-plating’ occurs when the national, regional or local players fail to apply simplification measures proposed in the ESIF regulations.

Aim

In order to contribute to the debate and policy dialogue on gold-plating related to cohesion policy, the European Parliament’s REGI Committee seeks to gain insights on gold-plating in ESIF. This study provides thorough information on gold-plating in ESIF and proposes pointers for action to reduce or avoid gold-plating both in the current 2014-2020 as well as in the post 2020 programming period.

Key findings on the presence of gold-plating

Gold-plating happens irrespective of the administrative level and time of ESIF management processes. Gold-plating can occur at any administrative level, from the EU level to the programme and beneficiary level. Similarly, it can occur at any time during the ESIF management.

Gold-plating can be observed during accreditation of ESIF programme bodies. Within the ESIF programme lifecycle, one of the earliest moments where gold-plating can be noted is during the accreditation of programme bodies. In these cases, programme authorities are obliged to deal with stricter rules imposed by the national and regional regulatory frameworks, making the accreditation process more burdensome.

Gold-plating can be observed during the application. Beneficiaries need to consider and comply with many additional rules to prove their eligibility for ESIF support during their project application phase. These rules derive either from the ESIF or other EU regulatory frameworks, from national and regional regulations, or programme specific procedures.

Additional requirements make reporting and payment claims more burdensome. To comply with rigid controls and reporting obligations, beneficiaries are frequently required to provide additional administrative documents even at the end of the programme lifecycle. Despite the use of electronic systems, in some cases hard copies are still required. This causes payment delays and subsequently delays in the implementation of project actions.

Rigid financial controls increase the risk of gold-plating. Gold-plating also occurs at the final phase of the programme. Financial controls based on stricter interpretations of rules, extensions of rules and additional control procedures increase the risk for gold-plating.

Key findings on the reasons for gold-plating

Reasons for the presence of gold-plating are manifold. Although one would expect that inconsistent regulatory frameworks would be the most prominent reason, other reasons such as various uncertainties, risk aversion and fear tend to be more important. Inconsistent regulatory frameworks cause less gold-plating than expected.

Inconsistencies in the different existing regulatory frameworks are a result of different regulatory objectives at different levels of governance or between different policy domains. These inconsistencies increase the risk of gold-plating and can result from other EU rules, timing issues or additional rules in the Member States.

Various uncertainties of authorities managing ESIF contribute to gold-plating. Delayed regulations, changing legal requirements, various interpretations of ESIF regulations and different political agendas create uncertainties. These uncertainties increase the risk for gold-plating, as authorities often tend to safeguard themselves against them.

Gold-plating is also caused by audit fear. Risk aversion and fear are a key reason for gold-plating. Be that due to the administrative cultures and traditions of different Member States, or a previous bad audit experience, the fear of non-compliance often leads players toward more narrow interpretations of rules.

The complexity of the system provides additional reasons for gold-plating. The shared management of ESIF, covering the variety of players, interests and perceptions, as well as the lack of communication among the players create a rather complex management system. This system triggers vested interests and bureaucratic power, which make the system even more complex, thereby increasing gold-plating.

Key findings on the effects of gold-plating

By definition gold-plating increases administrative costs and burden. Coordinating the information flows and procedures of the ESIF management system becomes more resource intensive for ESIF managing bodies. With gold-plating, more rules are to be considered, both for managing and building the necessary capacities, which increase the administrative costs and draws on technical assistance budgets. Gold-plating also adds to the administrative burden of ESIF beneficiaries at various stages from project development to closure. Beneficiaries also need to build capacities to successfully implement ESIF projects.

High administrative burden decreases ESIF attractiveness for players. In some Member States ESIF are perceived as burdensome. Gold-plating increases this burden even more, as additional requirements discourage players with good quality projects to apply for ESIF. As consequence, projects that could have made a valuable contribution to the programme’s objectives do not apply, or submit a less convincing proposal that in the end may not be selected.

Programmes experience increasing risks of errors as an effect of gold-plating. Excessive rules and requirements to comply with entail also careful monitoring and controlling. Limited resources to assess the fulfilment of all requirements or fear to make mistakes in turn tend to cause mistakes.

Compliance dominates over performance focus. ESIF players have to find a balance between delivering outcomes against targets, as well as projects and programmes efficiently. Due to the application of rigid rules the quality of projects becomes often secondary, while the compliance to these formal rules gets more importance, thereby negatively affecting potential results. Together the different reasons and effects create a vicious circle for gold-plating. The relation between error-rates and gold-plating is reinforcing and can become a vicious circle, where additional rules and procedures – intended to reduce errors rates – might lead to fear and uncertainty and thus to more errors.

These findings hold true for most funds and instruments. There are nevertheless some differences between some types of programmes and instruments. For instance European Territorial Cooperation Programmes or multi-fund programmes tend to be more affected by gold-plating due to their complex environments. The differences in the reasons, effects and presence of gold-plating are the biggest, however, between Member States.

Policy recommendations

It can be discussed whether gold-plating is necessarily always a negative practice, as in some cases it may be unavoidable and in others it may reduce administrative costs or burden. In most cases, it is worthwhile reducing its negative effects. Actions to reduce or avoid goldplating can be put already in place in the current 2014-2020 programming period.

The shared management of ESIF needs to encourage all involved players to reduce gold-plating in the 2014-2020 period. Potential actions across levels include capacity building, open dialogue, better focus on a balance between compliance and performance, encouraged use of simplification measures and a possibly new role for the auditors to limit different interpretations of regulations. EU legislators should increase transparency and promote clarity, simplicity and continuity of rules. At national level e-governance tools should be further promoted, national administrative changes can be launched, while national coordination can be increased. As far as programmes are concerned, they need to focus on providing clarity to beneficiaries and to make more use of SCO.

Three possible routes for actions can be discussed for ESIF post 2020. ESIF post 2020 could decide for a move towards one of the principal ‘schools’ of thought:

i) more and tighter rules with a focus on input control and compliance;
ii) more flexibility and trust with a main focus on achievements and performance.

Alternatively, an intermediate third option can be considered. ESIF can continue with the current combination but introduce a clear shift from the focus on compliance to the focus on performance. The final decision lies with the legislators and clearly there is no best way to go.

Link to the full study: http://bit.ly/585-906

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