European Social bunds - to be lost due to excessive bureaucracy - 25/2/2006

'Poor' spending of EU funds
Herman Grech

A report probing Malta's use of EU structural funds has called for a thorough review of the Department of Contracts amid claims that delays in procedures were leading to tardy payments.

Though the authorities were applauded for securing approval of EU funding, the report indicates that the level of spending has been particularly poor.

The analysis, drawn up by PricewaterhouseCoopers for the Office of the Prime Minister, shows that by last December 14, a total of 85.5 million had been committed across all measures and projects, representing no less than 99 per cent of the total programme value.

However, only 2.3 million, or just under three per cent, of the total programme value was spent and requested back from the EU by this date. A spokesman for the Office of the Prime Minister said there had been a considerable take-up of the available funding in the last weeks since the report was drawn up.

Moreover, as 47.4 million spending is now forecast for 2006, this adds to the considerable level of spending that would need to be achieved in order to meet the financial shortfall.

The reasons leading to this are several, including staff shortages in key areas, evidence of high staff turnover, and bottlenecks in addressing planning requirements.

Given the timing requirements of the programme, the government should instigate a number of measures to expedite payments - including enforcing the current payment procedures that provide the timely processing of payments.

The report called for the introduction of a customer service desk within the Contracts Department to enable it to deal quickly with queries from ministries, bidders and other users.

The present practice of the general contracts committee needs to be revised so that it can meet more often than the twice-weekly practice. The report even calls for an increase in the maximum appeals application fee to minimise the incidence of vexatious claims.

In a number of cases, objections to contract decisions have led to suspensions in projects, which have threatened the full implementation of such projects within the timescale.

Furthermore, the report notes that the maximum penalty of Lm25,000 may not be a sufficient deterrent for petty objections in the case of the larger value projects.

The level of frustration is also supported by a survey which found that only 25 per cent of project leaders indicated they were satisfied with the contracting process, with a further 45 per cent indicating they were having problems with the procedures.

On the other hand, an overwhelming 80 per cent of project respondents said they were satisfied with the manner in which the programme is managed.

The sectors which benefited most from funding were: enterprise (19 per cent), employability and adaptability (15.6 per cent) and improving processing and marketing of agricultural products (7.6 per cent).

By contrast, several sectors have achieved verified expenditure of two per cent or less, including infrastructure, the environment and human resources.

Despite the steep learning curve, much has been achieved over the last 18 months, the report notes.

The managing authority has been established and has provided strong leadership and has successfully worked to set up programmes. No fewer than 64 projects were successfully selected following the call for applications.

The necessary horizontal structures to support the programme have been put in place, including the intermediate bodies, a paying authority and units in relevant ministries. Contractual procedures complying with EU best practice guidance have also been set and a comprehensive structural funds database was established.

The report says that, through grant initiatives, the programme has reached out to particular target and marginalised groups and encouraged wider involvement in programme processes and outcomes. The programme is, for example, providing support to the unemployed and farmers.

The banks are criticised for not facilitating matters. While the EU grant only co-finances farmers for 50 per cent, the balance is sourced from local loans or private investment.

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