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EU Funds: Code Red -- Looking Back to Look Firmly Forward

Date: 05/14/2013
Source: KPMG Romania
Although the rate of contracting Structural Funds in Romania is close to the average recorded in the other member states, Romania again ranks last of the EU member states for absorption of EU funds at the end of 2012, a KPMG study in 10 Central and Eastern Europe countries, including Romania, shows.

For EU Member States in Central and Eastern Europe (CEE), EU funds make up anywhere from around 11% to up to 26% of their annual GDP.
How well these countries are able to absorb funds is clearly crucial to their economic wellbeing, especially during the downturn, according to a recently released study by KPMG entitled EU Funds in Central and Eastern Europe – Progress report 2007-2012.
KPMG's survey includes the European Union's 10 newest Member States – Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia - which completed accession to the EU in 2004 and 2007.
The report points out that in the 2007-2012 period, in CEE, altogether EUR 180.9 billion was available for spending on national improvement and economic and social cohesion. In that sense, CEE Member States are doing well: in the six years of implementation of EU co-funded programmes beneficiaries signed contracts totaling nearly EUR 149 billion. This exceeded 80% of the budget available for the 7-year programming period.

As Serban Toader, KPMG in Romania’s Senior Partner, explains: “We welcome the Government’s commitment to the landmarks defined by the 2020 Agenda and continuous efforts to sign the Partnership Agreement under optimum terms. During the 1st and 2nd quarters of 2013, the Romanian authorities (mainly the Prime Minister as power vector, the Ministry of European Funds, and the Minister of Large Projects) undertook a series of emergency measures to remove the current pre-suspension and to boost the absorption rate. These measures are extremely welcome and must be further supported by a series of actions to restore and optimize implementation tactics, including outsourcing to professional companies, improving institutional capacity and coordination, and simplifying and speeding up the current procedures for public procurement.”
Disbursal of funds, however, is taking a bit longer. By the end of 2012 just over half of the contracted grants, i.e. EUR 79.4 billion, had been disbursed to beneficiaries.

In addition to providing an overview of the progress of each country's National Strategic Reference Frameworks, KPMG's report ranks each of these countries according to the level of success attained in accessing and using the funds. The rankings are calculated according to ratios, e.g. the contracting ratio, which equals the amount of actual contracted grants in 2007-2012 divided by the budget available for 2007-2013.

“The absorption of EU funds in Romania was strongly affected by factors such as limited administrative capacity of the institutions responsible for managing the funds, existence of financial constraints (co-financing is particularly difficult to obtain for private sector beneficiaries as well as for local authorities), and difficult procurement procedures which led to failure of the initial schedules of activities and also to delays in reimbursing the beneficiaries’ payments. As Romania has a unique opportunity to break a vicious circle, we call for the mobilization of all capable and specialized resources, governmental, inter-ministerial, and business decision-makers to align with the national interest to develop a coherent and integrated vision and create a realistic and strategic projection of national and trans-sectorial priorities for the next period based on competitivity and economic growth criteria,” says Daniela Nemoianu, Executive Partner, KPMG in Romania.

Having nearly completed the end of the 2007-2012 programming period, the CEE countries surveyed have reached a milestone - it will be completed this year. As Toader adds: "Being at the end of the programming period provides us with an excellent opportunity to evaluate how each country in CEE has been able, not only to access, but also to use EU structural and cohesion funds in the 2007-2013 period.”
In addition to providing insights on how these processes have taken place and how they might be carried out more efficiently, the report highlights how KPMG firms have taken an active part in the entire process of EU funds management: beginning from procurement, carrying on through evaluation, feasibility studies and grants auditing to overall project management.
“KPMG in Romania, through the EU Funding and Public Sector Department strongly supports public authorities in their approach to ensure a sustainable increase of the absorption of Structural Funds for 2007-2013 and support the strategic planning efforts of interventions for the future programming period 2014-2020,” concludes Florin Banateanu, Senior Director, Public Sector Advisory, KPMG in Romania.

About KPMG
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 156 countries and have 152,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
KPMG in Romania and Moldova operates from six offices located in Bucharest, Cluj-Napoca, Constanta, Iasi, Timisoara and Chiºinãu. We currently employ more than 650 partners and staff; Romanians and Moldovans as well as expatriates.

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