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If Monitoring Indicators are not achieved project funding may be cut off

Area: Project implementation news

Topic: At the end of a project allocated funding may be cut off if monitoring indicators are not reached. But how can these sanctions be avoided?

Author: Project Compliance and Reporting Officer Dovilė Kontutytė

After the project co-financed by the European Union (hereinafter - EU)  Structural Funds has been granted funding, project owner signs the project financing and administration agreement (hereinafter - the Project Agreement), which undertakes to achieve the monitoring indicators (hereinafter – MI) planned in the application. MI are regulated by 2014-2020 EU funds investment operational program of MI calculation description, project administration and funding rules and a description of the relevant measure under which the project is being carried out.

Project owner reports on the MI to the Implementing Authority (LVPA, ESFA, CPVA or other project supervising authority) by submitting payment requests. But the final achievement is calculated at the end of the project and / or within post-project period (some projects have 3 years of post-project period, others - 5 years (you should check your Project Agreement requirements to find out which post-project period is applied).

Although project owners do their best to achieve all MI during project implementation period by implementing  planning, risk management and other methods, there are frequent cases when project owners are unable to manage force majeure and incompletely achieve or do not achieve all MI. In many cases, this frightens project owner, but the failure to achieve MI does not necessarily mean that sanctions will be imposed, and funding will be cut off.

WHEN IS THE PROJECT FUNDING CUT OFF DUE TO NON-ACHIEVED MONITORING INDICATORS?

1. Allocated project funding is reduced if non-achievement of the MI value is related to the reduction of the specific project activity AND the project owner does not justify the project costs incurred taking into account non-achievement of the MI value.

2. If non-achievement of the MI value is NOT related to the decrease in the scope of specific project activities, but is due to factors that could have been reduced by the project owner, the reduced project funding part is calculated depending on non-achievement intensity:

  • 10 - 25% (inclusive) - funding cut off by 5%
  • 25 - 40% (inclusive) - funding cut off by 10%
  • 40 - 50% (inclusive) - funding cut off by 15%
  • More than 50% - funding cut off by 20%
  • If more than one MI is unreached more than 10% project funding is cut off by only one (the biggest) calculated amount.

Comment: a tolerated project MI non-achievement limit is 9%. Expl. If there is only one MI - to educate 300 unique participants and at the end of project there are educated 273 which is 9%, you will not be claimed to any sanctions. Otherwise, educated only 272 unique participants will lead you to the first monitoring indicators non-achievement block (10 – 25%) and without reasonable justifications for unreached MI Implementing Authority will request you to refund 5% of allocated funding.

It is worth noting that once the reduction of 20% for non-achievement MI is made, it cannot lead to further reductions of project funding. However, if the project funding has been cut off by less than 20% for non-compliance with the MI, the project funding may be further reduced, but by no more than 20%.

Comment: if you see any risk of MI non-achievement by more than 10% while implementing the project – you have to inform Implementing Authority as soon as possible.

WHEN IS THE PROJECT FUNDING NOT CUT OFF DUE TO NON-ACHIEVED MONITORING INDICATORS?

Allocated funding to the project cannot be cut off, if at least one of the following conditions are met:

  • The MI has not been achieved due to the implementation of a specific project activity to a lesser extent, but project owner justifies all project costs incurred to achieve this indicator.
  • Project activities are fully implemented, but MI are not achieved due to the factors that could not have been decreased by project owner and project owner provides reasonable explanations within the end of the project or post-project period.

In conclusion, if project owners do their best to fully implement all obligations including MI listed in the Project Agreement, actively seek to remove any obstacles that may affect the achievement of MI and inform Implementing Authority about possible risks and deviation during project, the combination of these actions.

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