Sabina De Luca Italian Ministry of Economic Development

1. Strengthening the Performance of Cohesion Policy through Performance Reserve and Ex-Ante Conditionality Sabina De Luca Italian Ministry of Economic Development Department for development and economic cohesion Gdansk, 07 July 2011

2. Possible tools to enhance the performance orientation of Cohesion Policy • PERFORMANCE RESERVE • Reserve set aside (as a percentage of total funds); disbursed (fully or in part) as a reward if pre-specified targets are achieved by the deadline • EX ANTE CONDITIONALITIES • Programme funds are disbursed when some pre-conditions for policy effectiveness are satisfied • EX POST CONDITIONALITIES • Programme funds are disbursed if expected results are achieved

3. Performance Reserve: 3 experiences in Italy • EC performance reserve in 2000-06 (so called 4% reserve) • Targeted at more effective management of structural funds; 1.9 billion Euro reward allocated in 2004 • National performance reserve in 2000-06 (so-called 6% reserve) • Targeted at institution building as a pre-condition for policy effectiveness; 2.6 billion Euro reward assigned at the end of 2002 • National performance reserve in 2007-13 (so-called “Obiettivi di Servizio”) • Targeted at minimum standard in the provision and quality of public services; 3 billion Euro reward to be distributed in 2013

4. Performance Reserve: It works if… • Indicators and targets are defined at national level through partnership • Indicators (and targets) are the same for all programmes (risks with output indicators) • Rules, criteria and allocation mechanism are set in detail from the beginning (fine-tuned during implementation) • An adequate time span is available to put in place actions to meet the targets • Achievements are regularly monitored and made available to the public (technical group) • Reward is proportional to the targets achieved (flexible mechanism) • A strong and continuous commitment, even political, is guaranteed at the central and regional level • Responsibilities for the achievement of targets are clearly identified

5. CRITERIA AND INDICATORS DESCRIPTION 4% indicators A1. EFFECTIVENESS A.1.1. outputs Comparison of actual and planned outputs for some measures (covering at least half of the value of the programme) A.2 MANAGEMENT A.2.1 Quality of the Monitoring System Introduction of a system of indicators and of monitoring procedures responding to national agreed standards and guaranteeing the availability of financial, physical and procedural data from Jan 2001 A.2.2. Quality of Financial Control Upgrading of the control system to the model proposed in the CSF A.2.3 Quality of Project Selection Systems Selection procedures based on feasibility studies and on criteria favouring environmental sustainability and equal opportunities (for a significant amount of projects in terms of % of commitments) A.2.4 Quality of the Evaluation System Appointment of the independent evaluator by October 2001 and definition of terms of reference responding to national standards A.2.5 Quality of the labour market analysis system Set up within the managing authority of a system of analysis of the most significant aspects of labour market and of employment effects of interventions; diffusion of results A.3 FINANCIAL MANAGEMENT A.3.1 Financial absorption Attainment of 100% of declared expenditure in relation to planned expenditure in the financial plan for 2000 and 2001 A.3.2 Public-private partnership Implementation of at least 4 public-private partnership schemes for the financing of projects

6. The 6% performance reserve: targets achieved by Region Regions (results on 30 September, 2002)

7. National v. EU performance reserve • In the Italian experience, national 6% reserve worked better than EC 4% reserve, i.e. programme authorities more committed to achieving targets during implementation: • objectives and targets were more relevant to the strategy, more specific for the Italian (objective 1) situation • partnership approach in defining objectives and targets also helped in guaranteeing the commitment • The EC 4% reserve was based on indicators and rules negotiated with the EC, within a very rigid framework. It did improve to some extent the performance in the management of Structural Funds, but it was felt more as an administrative burden. • The final assessment and allocation of reserves was conditioned by the approach followed in other Member States (where rules had been defined at a later stage and great flexibility had been allowed in their interpretation, see the 2004 Report by the European Commission).

8. Intermediate v. Final Objectives • Weakness of the 2000-06 performance reserves linked to intermediate objectives, i.e. pre-conditions for policy effectiveness: • results differ greatly from what citizens experience • risk of mere formal compliance or interruption of commitment when the incentive system is over (monitoring continued until the end of programming period) • … in 2007-13 the performance reserve was targeted at final objectives (results, measured with statistical indicators)

9. 2007-13 Performance Reserve: Indicator and targets

10. Issues to be dealt with by final objectives • choice of objectives and indicators: relevant to the strategy and directly linked to action (delivery and quality of public services rather than macroeconomic indicators); indicators from official sources • longer time span needed to achieve final objectives (2013): • problems with the use of structural funds for rewards (national funds used instead) • political cycle shorter, need for an intermediate step (reward linked to the improvement from the baseline in 2009) • responsibilities for the achievement of final objectives go beyond the scope of authorities managing cohesion policies: an overall effort is required to pool all available resources (not only financial) in order to reach objectives (action plan, role of line Ministries)

11. Is performance reserve linked to final objectives enough? • So far the experience of the 2007-13 performance reserve linked to final objectives shows: • Administrations are using indicators as a programming tool, increased orientation towards results (action plan very useful to identify all actions needed to achieve final results); • Incentives seem to work better for those objectives like child and elderly care where rewards are significant compared to available resources for investment, there is a closer link between action and indicators, integration with national policy is easier; • More complex with environmental objectives, where basic pre-conditions for the effectiveness of the policy are not guaranteed and responsibilities are shared among different players; even if there is a greater awareness of the actions needed, there are more obstacles for them to take place • … need to use other tools to enhance the performance orientation of cohesion policies

12. The need for ex-ante conditionalities A reward for the achievement of final results is not a powerful incentive where basic pre-conditions for the effectiveness of investments are missing For a more performance-oriented future cohesion policy, a performance reserve, designed and implemented at national level, should be strengthened by ex-ante conditionality directly linked to cohesion policy investments.

13. Ex-ante conditionalities should ... • not be confused with sanctions (so called macroeconomic conditionality); • refer only to aspects directly linked to cohesion investments (attempts to overload cohesion policy with “exogenous” objectives should be rejected); • anticipate the solution for potential friction concerning the implementation which is likely to emerge anyway at a later stage with various players involved; • induce action by those directly and (more importantly) indirectly accountable for the outcomes of OPs: some players (e.g. Ministries responsible for sectoral regulations, main investors, etc.) are currently, at the same time, unaccountable but crucial for the achievement of results;

14. Synopsis of possible conditionalities by sector of investment

15. Conclusions • For enhancing performance orientation of future cohesion policy, prefer a combination of: • ex-ante conditionality, focused on the achievement pre-conditions for policy effectiveness, strictly linked to cohesion policy • performance reserve, set aside at national/programme level, focused on the achievement of final objectives, relevant to the context and the strategy of the programme, measured with statistical indicators • Many doubts about ex-post conditionality, sanctions linked to the delivery of output or results. Risk of not ambitious targets, difficult to assess and monitor, more debatable on methodological grounds. • Rather prefer a more diffused use and stricter monitoring of action plans, or similar results-led programming tools, where all actions leading to final results are identified and responsibilities are clearly stated.