The Structural Funds And The Cohesion Fund Construction Essay

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"The action taken by the Community under Article 158 of the Treaty shall be designed to strengthen the economic and social cohesion of the enlarged European Union in order to promote the harmonious, balanced and sustainable development of the Community. It shall be aimed at reducing the economic, social and territorial disparities which have arisen particularly in countries and regions whose development is lagging behind and in connection with economic and social restructuring and the ageing of the population".

Therefore the Structural and Cohesion Funds are aimed at enhancing economic cooperation as well as sustainable social development. As of 2012, the European Union (EU) consists of 27 member states and currently there are 6 candidate countries. However, despite 27 countries being members of the same union, there still exist social and economic disparities. The EU attempts to remove these imbalances in order to level the competitive position of all the countries through the European Cohesion Policy and therefore attain economic and social cohesion.

European Cohesion Policy 2007-2013

The main financial instruments through which the European Cohesion Policy 2007-2013 operates involve the following:

Structural Funds which involve two types of funds:

The European Regional Development Fund

The European Regional Development Fund (ERDF) aims to adjust the regions in the European Union in order to bring them to the same economic and social level through investments, innovation, development and technical help.

The European Social Fund

The European Social Fund (ESF) aims to promote employment in the countries of the EU by helping the member states improve their workforce and create more attractive jobs. It aims to adapt workers by improving the presence of disadvantaged people, women and others in the market, improving the education system and providing training and development to existing and potential workers. To date, the total budget allocated to the ESF Funds totals €131 million with €122 million being EU funds (Planning and Priorities Coordination Department, 2008).

The Cohesion Fund

The CF complements the Structural Funds. It is aimed at Member States which have a Gross National Income which is less than the average of the Community and therefore the CF aims to help them overcome the deficiency. Therefore, the Fund enhances the social and economic unity of the Member States.

The National Strategic Reference Framework (NSRF) (2006, p. 60) lists the following as the four main areas on which Malta shall focus through the European Funds co-financed with National Funds:

"Sustaining a growing, knowledge-based, competitive economy"

"Improving Malta's attractiveness and the quality of life"

"Investing in human capital"

"Addressing Gozo's regional distinctiveness"

These shall attempt to counter the social challenges as well as the economic ones encountered specifically by Malta.

Operational Programme II

The NSRF objectives are the objectives on which Malta shall focus in 2007-2013 as described in Section 2.2. One of the programmes through which these objectives operate is Operational Programme II - Empowering People for More Jobs and a Better Quality of Life (OPII) involving the ESF.

OPII focuses on employment, education, training and social inclusion and therefore is primarily focused on human capital with the aim of improving the employability of the workforce and the inclusion of those potential workers which might not be that attractive to the employers such as disadvantaged persons. The ESF Operational Programme 2007-2013 (2012, p. 57) states that OPII is concerned with five Priority Axes which are portrayed in Table 2.1.

Priority Axis 1

Improving education and skills

This is concerned with increasing the participation in education in primary, secondary, vocational or tertiary education and further and hence this will increase and improve the skills of the labour force.

Priority Axis 2

Investing in employability and adaptability of the workforce

This is concerned with investing in increasing opportunities for the current labour force to render it flexible to the requirements of the current economy and therefore reduce unemployment. This is beneficial to employees moving from declining industries to expanding ones as well as enterprises to re-train and adapt their workforce to remain competitive.

Priority Axis 3

Promoting an equal and inclusive labour market

This is concerned with increasing the employment rates in persons who are disadvantaged in the labour market such as women and other disadvantaged groups where there have been particularly low employment rates.

Priority Axis 4

Strengthening of institutional and administrative capacity

This is concerned with improving the efficiency and effectiveness of the public sector, and benefiting the development of effective partnerships in various policy areas.

Priority Axis 5

Technical Assistance

This is concerned with aiding the implementation of the Operational Programme and therefore, improving its efficiency and effectiveness.

Table 2.1 - Four Priority Axes

Relevant Implementing Bodies

The process inherent in the implementation of OPII involves several implementing bodies namely:

The Managing Authority

The Planning and Priorities Co-ordination Division is the Managing Authority in Malta and is therefore responsible for the regulation and operation of Operational Programme I and Operational Programme II among other programmes. Borg (2010, p. 39) establishes that the Managing Authority "coordinates all aspects of the implementation of the Structural Funds Programmes with all stakeholders, ensuring the correctness of operations financed by the Funds.

The Certifying Authority

The European Union Paying Authority Directorate within the Ministry of Finance is the Certifying Authority in Malta. The Certifying Authority certifies the acknowledgement of expenditure and reimbursement requests in connection with the Priorities in the Operational Programmes prior to sending to the European Commission (EC). As Borg (2010, p. 39) stated, the Certifying Authority "receives and accounts for funds transferred by the EC and transfers funds to the Public Account at the Central Bank".

The Audit Authority

The Internal Audit and Investigations Directorate within the Ministry of Finance is the Audit Authority in Malta. This Authority independently ensures that the administration of the Operational Programme is run efficiently and effectively. This is done through conducting audits of the relevant activities.

Body responsible for making payments to the beneficiaries

The Treasury, within the Ministry of Finance, is the body responsible for making payments to the beneficiaries. The treasury operates in two ways:

When operations are being implemented by central government, local government and non-governmental organisations, the Treasury will meet the financial obligations on behalf of the beneficiaries

When operations are being implemented by private enterprises, the beneficiaries will meet the financial obligations themselves and the Treasury will reimburse the appropriate amount. This is conditional to the beneficiary presenting the relevant documentation to the Intermediate body who will then certify to the Treasury.

Monitoring Committee

The Monitoring Committee shall ensure "the effectiveness and quality of the implementation of the Operational Programme" (ESF Operational Programme 2007-2013, 2012, p. 89). It reviews and approves the criteria through which the operations are selected and also assesses the improvement made in the aims of the Operational Programme.

Intermediate bodies

Malta established several intermediate bodies to act on behalf of the Managing Authority or the Certifying Authority under their responsibility. In Malta there are three Intermediate Bodies for the ERDF, two Intermediate Bodies for the ESF and none for the Cohesion Fund. The Employment and Training Corporation (ETC) is one such intermediate body through which the ESF operates. Intermediary bodies are "public organisations identified by the Member State that carry out some functions on behalf of the Managing Authority" (European Social Fund Malta, 2011a).


Beneficiaries are the bodies which ultimately receive financial aid should they fulfil certain criteria. According to European Social Fund Malta (2012, p. 97);

Public Sector beneficiaries include Line Ministries, government departments, public authorities and public corporations

Other public or public equivalent beneficiaries include Local Councils, Socio-Economic Partners, Constituted Bodies and NGO's

Private sector beneficiaries are private enterprises carrying out an individual project and receiving public aid within the context of aid schemes.

In relation to the above-mentioned beneficiaries, the financial aid is conducted in the same manner described previously under Section 2.4.4.

Employment and Training Corporation

Intermediate bodies being one of the implementing bodies mentioned in Section 2.4, are an important part of the application process through which beneficiaries can obtain reimbursement for funds spent on training and development.

The ETC acts as an Intermediate Body (IB) for the ESF. The Managing Authority and the Certifying Authority act through the ETC in de-centralising their roles. Through the Corporation, schemes such as the Training Aid Framework (TAF) and the Employment Aid Programme (EAP) can help employers to financially sustain their endeavours in training and developing their workforce. As the IB for the TAF, the ETC also has additional responsibilities according to the Training Aid Framework including accepting applications from beneficiaries, engaging in Grant Agreements with Beneficiaries and promoting the Aid Scheme.

The ETC in Malta is also the country's public employment corporation. It aims at providing employment services such as recruitment and training, which cater for the needs of both the unemployed and those employers requiring employees. It also provides training to those persons who are seeking a new job or are seeking to further develop their abilities. Its purpose is

"Enhancing employability by recommending policies and implementing initiatives aimed at empowering, assisting and training jobseekers to facilitate their entry or re-entry into the active employment market, promoting workforce development through skills and competency development, and by assisting employers in their recruitment and training needs." (Employment & Training Corporation, 2012)

Training Schemes

The ETC, being the country's public employment corporation, provides opportunities for training and development to enhance the skills of jobseekers and employees as mentioned in Section 2.5. Organisations can receive partial financial compensation for funds spent on training and development regarding employees. Training costs can prove to be a substantial financial burden on organisations especially on small, start-up firms. Schemes such as the TAF are schemes which aid employers in providing training to employees.

Training Aid Framework

The TAF is a scheme administered by the ETC and co-financed by the ESF under Priority Axis 2 in Table 2.1. Its function is to provide funds to organisations which invest in their personnel through training and development. Thus, the TAF's aim is to:

"Promote access to training of persons actively participating in the Maltese labour market

Increase and/or improve the skills of persons currently in employment

Enable the beneficiaries to become more productive and competitive through the development of skills, knowledge and competence" (Training Aid Framework Leaflet, n.d.)

Therefore, the TAF aims to ease the burden of training and development on the company. Companies might hold back on training and development due to the financial resources required. The TAF encourages expenditure on training and development whilst improving the quality of the labour pool.

Application for EU funding

The application for EU funding involves several requirements and processes which must be adhered to in order to qualify for reimbursement once the process is finished. This section involves the process of applying for funds in accordance with the objectives outlined in Chapter 1 Section 1.3.

Eligible Expenditure

In order to apply for funding under the TAF, applicants must first ensure that the expenditure that they are applying for is eligible expenditure. For expenditure to be eligible it has to meet the National eligibility rules which are in line with European Commission Regulations. These are general rules which are applicable to all types of funds under the ESF. Therefore, for expenditure to be eligible, it has to meet the following six criteria as listed by European Social Fund Malta 2007-2013 (2011c):

Approved Project

The expenditure must correspond with the priorities of the OPII. Costs are acceptable for compensation from the ESF if they are expensed from operations which were approved by the Managing Authority or by an Intermediate Body in the case of aid schemes.

Date of when the expenditure was incurred

The expenditure must have been incurred between 1st January 2007 and 30th June 2013. Expenditure which was not incurred within these boundary dates is not eligible.


It must be implemented in Malta, being the eligible country which is benefiting from the ESF.

Proof of expenditure

Proof must be given regarding the expenditure. Different Schemes require different proof of expenditure such as receipts, invoices and reimbursement requests. Furthermore, according to the different Schemes, there must be retention of documents for a number of years. In the case of TAF, documents must be retained until 2020.


The expenditure must form part of an operation which was approved by the Grant Agreement or by the Managing Authority while being implemented correctly. European Social Fund Malta 2007-2013 (2011c) further specifies that "the principles of non-discrimination, equality of treatment, transparency, mutual recognition, proportionality and good governance shall apply in all procurement (public and non-public) and recruitment and selection procedures".

Type of expenditure

The expenditure has to be in line with the objectives of both the OPII and those of the European Union (namely economic growth, competitiveness and job creation). European Social Fund Malta 2007-2013 (2011c) provides several categories of expenditure acceptable for funding from the ESF which are also subject to other conditions such as project management, training costs and wage subsidies.

Furthermore, under the TAF, only certain types of expenses related to training are eligible. According to the ETC (2011b), costs which are applicable for reimbursement include:

"Trainers' personnel costs and/or fees"

"Trainers' and trainees' travel expenses"

"Consultancy services in the form of guidance and counselling services with regard to the training project"

"Trainees' personnel costs"

Other expenses relating to training might not be eligible for reimbursement such as:

"Course registration fee and/or administration fees"

"Renting of training venue"

"Refreshments served during training programme"

Therefore, it is not the case that all expenses related to training are reimbursable. An applicant has to distinguish between the eligible and ineligible expenses to submit an eligible application.

Eligible Applicants

Firms which are engaging in profitable activities are not the target for the kinds of applications for ESF Funding issued by the Planning and Priorities Coordination Department. They are, however, eligible to apply through the ETC as the Intermediate Body for both the TAF and the EAP.

Eligible Activities

Eligible activities under the TAF include successfully completed approved training for which beneficiaries will receive partial compensation for the costs incurred. The training involved for which reimbursement is being applied for will have been for the purpose of Priority Axis 2 in Table 2.1. According to the Employment & Training Corporation (n.d.), training can be

General training which improves the employee's qualifications and that can be useful to other organisations or types of work, or

Specific training which increases the employee's ability but is only applicable (or partially applicable) to the organisation providing the training or the particular field of work.

Eligibility of TAF Application

Whilst considering the application, for an application to be valid, according to the Employment and Training Corporation (2011b, p. 8) it must satisfy the following criteria listed in Table 2.2:

Complete documentation

All details must be filled in together with the relevant required documentation

Falls within the definition of an undertaking

An entity has to fall under the definition of an undertaking carrying out activities which are of an economic nature

Eligible economic activities

Activities must satisfy a list of eligible economic activities

Project implemented within/for the direct benefit of the eligible territory

The applicant's place of business must be in Malta and the employee must be a regular employee of the undertaking

The training objectives are in line with the needs of the undertaking

The aims for which the training is being undertaken need to be for the benefit of the undertaking

Training programme relevant to the needs of the trainee

The programme must have a description of the skills that will be achieved by the trainee participating in the programme

Training programme needs to deliver the desired learning outcomes

The applicant must provide the planned outcomes from the training programme

Trainers need to be qualified and/or experienced in subject matter to be taught

The trainers selected for the programme must be adequate in the subject taught

The trainee needs to be employed with the applicant organisation

The trainee must be an employee of the organisation

Maximum Aid grant allowable in any one year

The highest amount of aid that an undertaking can benefit from is €250,000

Minimum eligible training costs per application

The lowest amount of aid that an applicant can apply for is €350,000

Table 2.2 - Eligibility Criteria

Failure to meet with the above guidelines in Table 2.2 will invalidate the application and the applicant will not be eligible to receive funds from the EU.

Application Process

For a beneficiary to benefit from EU Funding, it must also complete an application form through an open call for proposals. The latest version of the extensive application form provided by the Employment and Training Corporation (2011c) involves the following sections provided in Table 2.3:

Profile of Employer Applying for Training Aid

This section includes details of the employer and the company.

Training Programme

The application form comprises of details of the training operation itself such as training location and training type

Estimated Cost of Training Programme

This section involves details regarding the costs relevant to the training programme being undertaken

General Conditions

General conditions are listed regarding the application including publicity, employees and operations


Declarations regarding the Data Protection Act and other subsidies must be signed

Checklist of Attachments

Different attachments need to be handed in by the applicant together with this application form

Table 2.3 - Application Form

This application process proves as a detailed information pack regarding the training being undertaken. Failure to fill in section/s from the application form will render an application invalid.

Payment Process

Completing the application form does not suggest that the undertaking will receive an amount of funds beforehand through which it will pay for the training before the training event. The beneficiary, being a private undertaking, is obliged to pay for the whole amount of the training. Following the completion of the training, the beneficiary has to forward relevant documentation to the ETC where the reimbursement process begins. In order to receive reimbursement, there must be proof of completion of the programme where attendance sheets are copied and provided as proof of the training covering the period when the training was conducted. Furthermore, proof of payment also needs to be made available for trainer/personnel costs, travel costs, consultancy services and trainees' personnel costs where different proofs of payment need to be made available to the TAF. Once the TAF is satisfied that all the relevant conditions are in place, a payment request is sent to the Treasury.

Evaluation Process

A beneficiary must be eligible in all the criteria mentioned previously under Sections 2.6.1, 2.6.3 and 2.6.4. The Evaluation Committee will then evaluate the application. If the application is successful, an acceptance letter is issued. Furthermore, there will also be a need for a Grant Agreement to take place with the Beneficiary.

When the training is concluded, a claim for reimbursement needs to be filed by the beneficiary where information about trainers and trainees are provided. The Evaluation Committee will assess the information given on which the process for reimbursement will start.

Part of the implementation process involves a verification process where the payments issued by the Treasury are verified and checked before they are submitted to the European Commission for reimbursement. The verification process has two levels:

Project Level which is taken on by Public Beneficiaries or Intermediate Bodies in the case of aid schemes such as the TAF and the EAP where a Statement of Expenditure is compiled which is then submitted to the Managing Authority

Priority Level which is taken on by the Managing Authority where checks are conducted on the Statement of Expenditure at the Project Level. It will then generate a Statement of Expenditure which is submitted to the Certifying Authority.

The evaluation is important in order to ensure that there are checks regarding the payments made at different levels. This happens before the payments are sent to the European Commission by the Certifying Authority.

Certification Process

After the verification process is finished, the Statement of Expenditure is sent to the Certifying Authority which carries its own checks on the documentation.


A beneficiary applying for EU funds is also obliged to monitor the progress of the implementation. A beneficiary is responsible to conduct financial monitoring as well as physical implementation monitoring which must also be documented. Furthermore, a Monitoring Officer can conduct monitoring visits to confirm that the beneficiaries are conducting activities in accordance with the conditions set.

General evaluation proceedings are done throughout the process according to the different needs in order to obtain views on the efficiency and effectiveness of the Funds in order to improve them. These evaluations can be undertaken by different stakeholders such as the Managing Authority and the European Commission. Beneficiaries of the TAF are obliged to take part in the evaluation proceedings.

Compliance with Community Policies

In applying for EU funding, the beneficiary must also be in compliance with Community policies. The European Social Fund Malta 2007-2013 (2011a, p. 19) lists Community Policies which should be adhered to including regulations for the equal treatment of men and women, regulations involving the environment and sustainable development, rules relating to State Aid and regulations concerning non-discrimination and transparency.

Acceptance or Refusal of Applications

Upon the delivery of the application, it will be evaluated for acceptance or non-acceptance for project implementation.

Should the project be successful in its application, an acceptance letter is sent to the Beneficiary informing him of the acceptance of the project together with any relevant conditions. Therefore, implementation can begin after this letter is received.

Should the project be unsuccessful in its application, a refusal letter is sent to the beneficiary notifying him of the refusal of the application together with the reasons of the non-acceptance. Should the applicant decide to, one reserves the right to contest the decision of the Evaluation Committee within fifteen days. European Social Fund Malta 2007-2013 (n.d.) states that

"Applications which do not meet the eligibility criteria will not proceed to the selection process for further appraisal and scoring. Projects that pass the gateway eligibility test but do not score 50% in the appraisal based on the selection criteria, are also rejected. Unsuccessful applicants will be informed in writing (through a letter or e-mail) indicating the criteria where the project failed to acquire at least 50% of the allocated marks. The decision to reject an application will be subject to a right of review within a stipulated time-frame which is also outlined in the letter."

According to Gafa (April 2006), applicants were not given any reason underlying the refusal of their applications but they were simply informed through a letter of non-acceptance. This provides a contrast to the above quotation and to what the Employment and Training Corporation (2011b) states that "Non-successful applicants will also be informed accordingly, explaining why their application was not accepted".

Grant Agreements and Covenants

In order for applicants to initiate a process, a Grant Agreement has to take place. This agreement will include the following details:



Financial allocation of the project

This will be signed by the Managing Authority and the Beneficiary.

Where there are aid schemes which are identified as falling under Article 87 of the EC Treaty, such as schemes specifically for research and innovation and for improvement in employment, there must be a covenant which is signed by the Managing Authority and the Beneficiary which will include the following details:



Implementation methodology

Both of the above-mentioned will ensure that the Beneficiary and the Intermediate Body will conduct the scheme in the right way in accordance with National Rules.

Difficulties and measures taken regarding the implementation of the 2007-2013 programmes

In Section 2.6, the process of application for funds is outlined. Throughout the implementation of several Funds during 2007 and 2013, several difficulties arose which hindered the Funds' efficiency and effectiveness. Measures were drafted to counter these difficulties with relevance to Chapter 1 Section 1.3.

The Planning and Priorities Coordination Department (2009) establishes that measures were drafted during 2006 and 2007 for the smooth implementation of the 2007-2013 programmes. Measures taken included:

"Pre-financing arrangements for payments" in order to mitigate against delays arising from cash flow problems

"Reform of the Structural Fund Database" to enhance existing functions as well as introduce new ones

"Re-organisation of the horizontal structures, introducing middle layers of senior management"

"Strengthening of capacity in a number of horizontal organisations" such as the Managing Authority, the Department of contracts, treasury, certifying and audit authority

Despite the above measures, implementation of the Programme still met a number of drawbacks according to the Planning and Priorities Coordination Department (2009):

Delays in approving operations

Meetings and letters between Applicants and the Project Selection Committees meant that the approving process for applications took up a significant amount of time of the process.

Delays in the procurement process

Upon launching of the programmes, the relevant authority was overwhelmed with the amount of work in relation to tender dossiers and therefore with the centralisation of control, there was a backlog of work.

Approval of planning permits

The long daunting process of applying for permits has been lengthening the process of applying for funds. However, the Government arranged with MEPA in order to quicken the process of applying for permits especially for beneficiaries and horizontal stakeholders.

Delays arising from the crisis

The economic crisis also left its affects on the implementation with beneficiaries being unable to implement the projects due to the less than favourable circumstances.

The European Social Fund Malta 2007-2013 (2011d) highlights three main obstacles met in implementing OPII generally:

Project Selection Process

The Project Selection Process is a disintegrated process with several divisions rather than one centralised process. Therefore this involves more work further lengthening the process. Also, the Committee Members who evaluate the projects might not always be available and therefore this clogs the process even further. In order to deal with these problems, changes were introduced during 2011 in the form of:

An increase in the number of evaluators

A revamped application form with an easier approach to apply and to get reimbursed

Public Procurement Process

The Public Procurement Process is a lengthy centralised process which is one of the main factors contributing to the bottlenecks of the whole process because of several problems including deferments due to submitted bids which were not complying with the rules and delays resulting from appeals as well as the analysis process before the launch (European Social Fund Malta 2007-2013, 2011d). Measures to deal with these problems during 2011 involved the increasing of the acceptance rate of proposals, providing informative sessions to improve the better submission of proposals and reducing the bureaucracy involved in the process.

Payment Process

In the payment process, delays were experienced because of problems encountered earlier in other processes such as the procurement process. Other problems included the large quantity of administration work involved the payment process and the long process of authenticating the payments by the Managing Authority and the IB as established by the European Social Fund Malta 2007-2013 (2011d). . To deal with this problem, an exercise has been initiated to simplify the procedures in the processing and verifying procedures.

The European Social Fund Malta 2007-2013 (2011d) gave further information on the problems met from the Authority's point of view. These problems included the incorrect handing in of requests involving wrong calculations of costs, insufficient documentation and errors in the documentation handed in according to the European Social Fund Malta 2007-2013 (2011d). In order to deal with these problems, simplification procedures were put into place where:

Documentation which the IB would already have in possession would not need to be resubmitted

If the claim is submitted partly incorrect, the correct part is in order to accelerate the process

Another problem relevant to the TAF specifically was the insufficiency of claims. Measures taken to deal with this problem included:

Consulting with relevant industry representatives

Implementing a deadline on the delivering of claims both future and past applicants.

The European Social Fund Malta 2007-2013 (2011b) engaged KPMG to conduct an evaluation which analysed the efficiency of the Operational Programme II from the viewpoint of several bodies as well as beneficiaries which however excluded the TAF and EAP. However, this proved useful in order to familiarise oneself with the main problems inherent in the process for other projects although many elements such as the application process, were different. The evaluation conducted states that some of the main obstacles found included the lack of proficiency in the planning of tenders, the postponements in appeals and delays in the payments due to beneficiaries.


This chapter highlights the different elements involved in the application process. It gives a brief overview on the OPII and how it is construed together with the specific scheme relevant to this dissertation. Also, this chapter describes the workings of the different bodies relevant to the application. Finally, it describes the different stages in the application process as well as the published difficulties and measures taken to address them with respect to some of the projects.