European Structural and Investment Funds: preparing for closure – best practice guide and key deadlines

Post closure activity and monitoring

There are likely to be elements of activity that will need to take place after the operation end date but the Managing Authority will work with you to keep these to a minimum as there will be a cost e.g. staff salaries which will need to be borne by the Lead Partner and/or others who have been engaged in the operation’s delivery.

At operation end, the Managing Authority will inform you of any post closure monitoring requirements for your operation and the process for submission. This will normally take place as part of the closure compliance report. You will need to ensure that the organisation has resources in place with the appropriate knowledge to help with any post closure activity and will need to arrange the appropriate access for these resources to the EUMIS system to submit this information.

That is to say, you need to provide the Managing Authority, via the EUMIS system, with details of the contacts who will be available to process the final claim and address any queries or Managing Authority requirements that must be actioned by the Lead Partner to ensure operation closure. This authorising officer must remain in place and all changes to operation contracts whether registered in EUMIS or otherwise must be notified to the Managing Authority so that we may correct our systems.

Some of the areas the Managing Authority will monitor as part of closure incluve revenue-generating operations.

Definition of a ‘Revenue Generating Operation’ (RGO)

These are ERDF operations where all of the following criteria are met:

• you expect to generate net revenues beyond the completion date of your operation (during the exploitation phase)
• the operation is not subject to state aid rules
• total forecast eligible costs exceed €1 million at the time of funding approval decision
• all or part of the ESIF support is provided as a non-repayable grant. Fully repayable assistance is exempt from the RGO rules

Put another way, the operation is not an RGO if it is subject to state aid rules, or not expected to generate net revenues beyond completion, or has total eligible costs below €1m.

The operation will also be exempt from the classification as a RGO if you intend to be reimbursed on the basis of unit costs or lump sums – rather than real costs – if anticipated revenue has been fully taken into account when the value of the agreed unit costs/lump sums.

State aid

Operations that are subject to state aid rules are not classified as RGO. To clarify, this means public support which constitutes:

• de minimis state aid
• compatible state aid to SMEs, where the aid intensity or an aid amount limit is applied in relation to the state aid
• compatible state aid, where an individual verification of financing needs in accordance with the applicable state aid rules has been carried out

Revenues

Net revenue is defined in the regulations as cash in-flows directly paid by users for the goods and services provided by the operation, such as:

• charges borne directly by users for the use of infrastructure
• receipts from the sale or rent of land or buildings
• payments for services
• operating cost savings, unless they are offset by an equal reduction in operating subsidies, less any operating costs and replacement costs of short-life equipment incurred during the corresponding period. In summary this means any charges levied by the applicant (or delivery partner) and payments made by users (operation beneficiaries) of the services/goods/buildings/equipment etc.

Any payments made directly to the applicant must be considered at the time an application is made and monitored to ensure grant paid does not exceed the gap between the investment costs and the net revenues generated.

How the revenues are treated depends on the nature of the operation and when the revenues are generated. Both capital and revenue operations can generate revenues. Where a facility already generates revenues, only the additional revenues generated as a result of delivering the operation are taken into account.

Operations generating revenues after completion – Article 61

Article 61 of Regulation EU 1303/2013 (the Common Provisions Regulation), sets out the requirements for operations which generate net revenue during and after their completion. Wherever possible the eligible expenditure of the operation should be reduced in advance taking into account the potential of the operation to generate net revenue over a specific period covering both implementation and the period after its completion. This is known as the reference period. Article 61(3) sets out two alternative methods for calculating the potential net revenue, either using a flat rate (usually applicable to large infrastructure operations) or a calculation of the discounted net revenue taking into account the reference period.

Article 61(6) states that where it is not possible (this must be justified and can only be accepted where, for example, a market rate cannot be determined) to determine the revenue in advance, the net revenue generated within three years of the completion of an operation or the deadline for submission of Operational Programme closure documents, whichever is earlier, shall be deducted from the expenditure declared to the European Commission. Circumstances under which this option is used will be limited as in most cases revenues can be estimated.

It may prove difficult to forecast revenues objectively when the operation activity is innovative or involved in an emerging or new market where market rates have not been established. It is therefore envisaged that this method will be used in limited, justified, and exceptional circumstances.

Operations excluded from Article 61:

• ESF operations
• technical assistance
• repayable assistance subject to full repayment
• Financial Instruments
• where operation activities are 100% de minimis aid or compatible state aid
• operations with total eligible expenditure not exceeding €1 million (using the exchange rate at the time the funding agreement is issued)

Post closure audits, monitoring, and other visits

Your operation may be subject to audit and monitoring visits at any time up to the retention period of the programme. The Managing Authority will inform your organisation in good time to allow preparation and expect to find all of the evidence relating to the operation activity and management.