Annual Review Meeting
This document presents an overview of the programme's performance, issues affecting implementation, and management systems. It also discusses the status of EU funds, striving for optimal fund utilization, and closure risks of projects. The Performance Framework indicators and phasing details between 2014-2020 and 2021-2027 are outlined.
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Annual Review Meeting Operational Programme Growth and Employment The Ministry of Finance 22.11.2023.
3. OVERVIEW OF THE PROGRAMME 3.1. Performance of the programme 3.2. Issues affecting the implementation of the programme 3.3. Performance of the management and control systems 2
WHERE WE STAND EU funds 4 641 M EUR Data till 01.11.2023., M EUR, EU funding, % of EU funding, progress % since 01.11.2022. *Incl. state budget overcommitments for ERDF & CF investments 3
Strive for best use of EU funds and 100% absorption towards CLOSURE Cohesion fund (CF) most at risk Ever more targeted and streamlined Risk management Risks offset by overbooking, state budget overcommitments and reallocations Focus on project completion incl. after 2023 as phased or non-functional 4
Performance Framework (PF) 30 output indicators positive outlook: 93% (28) on safe side ( 65 % threthold; up from 25 (83%) in 01.11.2022 65 km to reach 65% 6.2 Improved railway lines: 0% 5 km to reach 65% 4.5 Improved tram lines: 40% (+0%) 8.4 Employed persons trained: 79% (+1%) Intended Project phasing 5.3 People with improved wastewater system: 82% (+22%) 6 PF indicators: 85-100% 20 PF indicators (+6): 100% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% Achieved (progress since 31.10.2022) To reach 65% 5 Data till 01.11.2023., progress since 01.11.2022.
Closure risks - 214 projects (yet to be paid 629,1 M EUR*) Highest uncertainty in transport and health investments *Unpaid EU funds co-financing, M EUR, data as of 06.11.2023. Identified risk of indic. 159 M EUR EU funds* not absorbed until 31.12.2023., to be completed by own resources or phased Mainly in transport, health and energy efficiency *national co-financing rates in the project contracts 6
Phasing between 2014-2020 and 2021-2027 & Non-functional Some already identified & nationally decided up to 01.11.2023. More cases might appear till 31.12.2023. Eligible expenditure (EUR) Total (both phases) 393 000 235 (7% of 14-20 OP) Completion date of the second phase (Year, Q) 2014-2020 phase 2021-2027 phase Priority/ Fund TO BE PHASED Project 284 006 022 (5% of 14-20 OP) 108 994 213 (2% of 14-20 OP) 4.5.1.1/21/I/001 Passenger trains for Riga/Pieriga - major project 9.PA; ERDF9.3.2.0/17/I/013 New A2 building development of Pauls Stradins hospital - major project 9.PA; ERDF9.3.2.0/17/I/004 Infrastructure development of Riga East university hospital 5.PA; ERDF5.5.1.0/20/I/005 Reconstruction and renovation of the Grand Guild building in Amatu street 6, Riga 8.PA; ERDF8.1.3.0/16/I/016 Kuldiga technology and tourism technical school modernisation 4.PA; CF 161 209 300 93 331 700 67 877 600 2024, II 156 738 012 140 447 122 16 290 890 2025, I 57 251 967 43 600 488 13 651 479 2024, IV 10 201 968 433 040 9 768 928 2029, IV 7 598 988 6 193 672 1 405 316 2024, IV Non-functional projects to be included in the final implementation report (project end date after 15.02.2025) Total expenditure (EUR) Eligible expenditure Priority/Fund Project 38 903 448 (0,7% of 14-20 OP) 8 777 979 (0,2% of 14-20 OP) 6.1.1.0/17/I/006 Traffic overpass from Tvaika street to Kundzi sala 6.PA, CF 38 903 448 8 777 979 7
MAJOR PROJECTS at risk PHASING in process for completion in 2021-2027 programme mainly impact from COVID-19, Russian war in Ukraine Data till 01.11.2023. Stradi i - A2 building Total: 156,7 M EUR (cost increase + 16,3 M EUR) incl. ERDF 97,5 M EUR (cost increase + 13,8 M EUR) Approved payments 47,5 M EUR Passenger electric trains for Riga/Pieriga Total: 161,2 M EUR, incl. CF 114,2 M EUR Approved payments 55,0 M EUR PHASING 2014-2020 Total: 140,4 M EUR, incl. ERDF 83,7 M EUR 2021-2027 Total: 16,3 M EUR, incl. ERDF 13,8 M EUR PHASING: 2014-2020 Total: 93,3 M EUR, incl. CF 66,1 M EUR 2021-2027 Total: 67,9 M EUR, incl. CF 48,1 M EUR 17 (from 23) electric trains delivered by 30.09.2023, train type certification in process. Risks materialised: train certification & taking- over process might exceed 31.12.2023. MP application modifications for phasing in process, completion until 03.2024. Submitted to Jaspers IQR on 25.09.2023 (Jaspers ACN 25.09.2023.) MP application modifications for phasing in process, completion until 03.2025. Submitted to Jaspers IQR on 18.09.2023. (Jaspers ACN 11.09.2023.) Remaining risks 2014-2020 construction works slower, beneficiary informs about the identified risk of further delays: total ~ 46 M EUR (ERDF 27.4 M EUR) post 31.12.2023. tests completed, intensity 18.09.2023 - the 8
CF - increasing risks mitigated by reallocations, SAFE instrument & projects phasing (EC decisions on OP & MP modifications necessary). OP amendments in framework of SAFE (On 10.10.2023. submitted to the EC): consist of a new SO 15.1.1. Support measures in the field of centralized heat supply committing 60 M EUR of EU funds to partially cover central heating energy costs for vulnerable households. Funding is redistributed from PA6 "Sustainable transport system" (Cohesion fund). Central heating compensations were provided from the state budget in 2022-2023 heating season and will be covered by a lump-sum payment from EU to Latvia. 9
HORISONTALLY OVERARCHING FOR EFFECTIVE & COMPLIANT IMPLEMENTATION OF INVESTMENTS Effective & efficient Management & Control system (MCS) & Strong Hands-on Risk management is a must inbuilt & continuously upgraded in EU funds implementation in Latvia 10
Audit Authoritys audit conclusions at system level (I): Category 2 - Management and control system(MCS) works effectively,some improvements needed 2 system audits (completed) IT - focused on information system of the management of the EU funds (Cohesion Policy Funds Management Information System) Implementation of recommendations - focused on progress in implementation of AA recommendations. 1 system audit (ongoing) Closure - focused on closure of operational programme MS maintains on using opportunities for further MCS enhancement in balance with the focus on results, higher risk areas 11
Outcomes of the main audit activities II European Commission 1. DRAFT - Thematic audit report on State aid aspects The audited part of the MCS ensuring compliance with state aid rules is provisionally assessed in Category 2 "Works, but some improvement(s) are needed" MS is analysing the recommendations. 2. Follow up of audit findings of desk review with the element of re-performance of audits of operations: Annual control report submitted on 9 February 2021 MS correction made for artificial splitting of contracts) and asked for additional clarifications implemented the recommendation (financial 12
EC Thematic audit in 3 competence centres (CC) EC auditors consider: the audited part of the MCS assessed in Category 3 Works partially, substantial improvements needed 1 overall open recommendation in the final audit report Conflict of interest (CoI) improvements are planned in RRF and 2021-2027 PP MS rejects all the findings with arguments, asks for invitation to the hearing The ad-hoc meetings with EC stakeholders - on 20.06.2023., 10.11.2023. services and LV institution 13
Follow up No. 2 of findings from audit of the programme Growth and Employment in the framework of its Statement of Assurance for 2019 EC remains position on finding code No. 19.P.COH.2112- 9.1: an irregularity - 25% financial correction claiming breach in split roads procurement MS rejects the finding with additional arguments, asks for invitation to the hearing MS on 26.04.2023. submitted additional information. 14
Declaration of the expenditure AA carried out an audit No. DR/ESIF/2022/1-3 where a finding regarding national procurements remains open. regulation for private MA rejects the finding, as a result, financing in the amount of 3 006 008,76 EUR is being withheld. The national authorities and colleagues from EC are planning a meeting regarding this matter. 15
Lessons learned - strong Hands-on Risk management is a must inbuilt in EU funds implementation in Latvia Risk-based management verifications in 2021-2027 planning period MA international Transnational recommendation papers on risk-based management verifications (RBMV) and sharing the experience gathered during 2014-2020 planning period. and central intermediate working Network body established on Simplification CFCA are taking part in under DG developing groups REGIO MA is developing national guidelines for RBMV & CFCA upgrades RBMV approach. In progress developing a system that analyzes risks identified within the Data management system for better, proactive insight on high- risk projects. 16
SUMMING UP focused, streamlined 2014-2020 closure Much awaiting approved EC STEP initiative with prolonged by 1 year submission of Closure documents (incl. final payment request, accounts) Completing projects & decisions on phasing projects or as non-functional after 2023 Other absorption risk mitigation measures, especially CF, 9.PA (e.g., reallocations between SO or projects, state budget overcommitments) Eligibility & compliance risk management on daily basis & based on controls & audits results Cooperation on closure issues withing internal working group (MA, CFCA, CA, AA) Interim work schedule & deadlines to be updated following STEP initiative closure doc. Prolongation by 1 year Open cases (audits and individual requests) still awaiting EC's opinion/position. EC s assistance will be needed for to ensure maximum declared amounts at closure in case of open issues at judicial bodies level 17
Annual Review Meeting Operational Programme Growth and Employment The Ministry of Finance 22.11.2023.
CF lagging behind other funds in claimed allocation Completed projects (% from funding, % increase since 01.11.2022.) 2664,1 M EUR (99,8 %) 2032,8 M EUR (76,3 %) 2031,9 M EUR (76,2 %) 765,9 M EUR (61,4 %) 795,5 M EUR (63,8 %) 678 M EUR (54,4 %) 726,7 M EUR (99,1 %) 532,6 M EUR (73,1 %) 436,6 M EUR (60 %) * Regress due to savings, ineligible expenditure within the ERDF& ESF projects, as well as ERDF terminated, phased projects 19 Data till 01.11.2023., M EUR, EU funding, progress since 01.11.2022.
