Case study

1
Case study

• Hungarian Environmental Protection Fund

2
Chapters

• 1. Legal framework of the EPF
• 2. Legal structure for the EPF
• 3. Budget of the EPF
• 4. Types of Recipients
• 5. Rules of Funding

3
Chapters

• 6. Management of the Funds Administration Unit
• 7. Relation to other National Public funds
• 8. Project Cycle
• 9. Budget Plan
• 10. Role of the Submission Unit

4
Chapters

• 11. Role of the Commercial Banks
• 12. Role of the Administration Unit
• 13. Role of the IMC
• 14. Role of the Minister
• 15. Funds Disbursement

5
Chapters

• 16. Monitoring, Evaluation and Reporting
• 17. Internal financial auditing
• 18. Safeguarding against misuse of EPF Funds and
  Improper Practices
• 19. Information Distribution
• 20. Implementation of the long term strategy

6
Handbook

• Implementation of the long term strategy
• Examples/models of Austria, Germany
• Basic comment on the attached documents (act,
  guidelines)
• Examples of information sheets (indicators,
  evaluation criteria, target group)

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1. Legal framework

• EU rules on state aid Environment, SME, RD,
  sensitive sectors
• EU rules on structural funds State Aid Sub
  Committee
• Budgetary rules (national, monetary union)
• Rules of co-financing separation/co-operation
• Environmental rules need of support

8
2. Legal structure

• Hierarchy of rules
• Act
• Guidelines (Decree)
• Internal rules
• Contract of subsidisation

9
3. Budget of the EPF - sources

• State budget multi-annual granting frame
  (acquis) bound to subsidisation
• EU structural funds (program planning process)
• International funds (IFIs, Kyoto process)
• New sources utilisation fees, CO2 tax, others
  (e.g. sale of loans, privatisation)
• Commercial banks interest grants for commercial
  financing (call)

10
3. Budget of the EPF-expenditures

• Costs of aid
• Costs of preparation of subsidisation (IT costs,
  info sheets, conditions and obligations)
• Management costs (costs of the administration
  unit according to the management contract)
• Costs for monitoring and evaluation (EU
  requirements, external experts, success of the
  KAC
• Costs of urgent measures

11
4. Types of recipients

• 3 sectors - different relevance of EU rules on
  state aid
• Communal and infrastructure projects (water
  framework directive)
• Entities under competition (above/ under de
  minimis)
• Small grants

12
5. Rules of funding

• Laid down in the Internal rules
• Working instruction for the administration unit
• Priority settings (no exclusions)
• Main information instrument for the applicants

13
6. Management of the fund

• No double structure
• No separation between appraisal and management
• No double data account in the IT system
• Efficient control systems

14
7. Relation to other funds

• No co-financing (projects, areas)
• Exemptions ESF, IFIs, infrastructure, small
  grants Co-operation/procedural rules between
  involved funds
• Clear demarcation, responsibility (e.g..
  Renewable energy)
• In the case of Co financing common
  administration unit

15
8. Project cycle

• Clear responsibilities
• Clear instructions (guidelines, internal rules)
• Main procedure with two exemptions
• Small grants
• Bank programs
• Rights of applicant clarification

16
9. Budget plan

• Strategic part of the call
• Priority setting by the Ministry (waste, water,
  air,) reflected by the budget allocation
• Discussion within the Ministry
• Discussion with the IMC
• Approval by the Minister

17
10. Submission unit

• Inspectorates or national park authorities
• transparent responsibility, based on the regional
  context (not on the project)
• Admissibility check (scope of the project,
  relevant documents)
• Enter data to IT
• Comment on regional aspects
• Submission to the Administration unit
• Control of the environmental success

18
11. Commercial banks

• All projects meeting a certain volume of
  investments
• Screening of the applicant (balance sheets, bank
  guarantee for large projects)
• Screening of the project (Costbenefit analysis)
• Credit confirmation

19
12. Administration Unit

• Management and Administration according to the
  contract with the Minster (KÖM)
• Analysis of the technical, financial and
  ecological data
• Data entry to IT system
• Ranking of projects by predefined criteria
  (information sheet)

20
13. Advisory body

• Activities guidelines, internal rules for
  operating, budget planning
• Appraisal of results of the evaluation process
  (Administration unit)
• Members ministries, lobbies, NGOs
• Chairman Representative of Minister

21
14. Minister

• Issues guidelines (decree), internal rules
• Approval of the proposed projects on the basis of
  a summary list
• Disapproval applicants must be informed about
  the reasons
• Deviation from appraisal or recommendation of
  IMC/administration unit in written form

22
15. Funds disbursement

• Precondition open capital market after accession
  (liberalisation)
• Open choice for project financing (loans, PPP,
  leasing,)
• Basic decision by the KAC grants or loans
• If funding by loans or interest rates, the
  administration unit should be (not only act as a)
  bank

23
16. Monitoring and reporting

• Consequence of the separation of the project
  appraisal
• Guarantees a high transparency and therefore
  avoids the misuse
• Who all involved bodies
• Scope according to national and international
  reporting duties

24
17. Internal financial audit

• Data structure (national, EU requirements)
• Closed data systems within every involved body
• Data transfer only after completion of work
  (submission to the following unit)
• Restricted rights of access Minister, one
  department of KÖM
• Regular reports

25
18. Steps against misuse

• Defined as one of the major problems by Hungarian
  partners
• Regular procedures without exemptions
• 4 eyes principle on institutional level
• Clear demarcation and responsibilities
• Decision making process in steps by different
  units
• Written recommendations to the next step

26
19. Information distribution

• Internet (all forms and information sheets,
  standard obligations, model contract)
• By request (telephone or email) from
  administration unit and submission unit
• Multiplier (members of the IMC, lobbies, chamber
  of commerce, NGOs, banks)

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20. Implementation

• Decision by the government and minister
• Fulfilment of acquis (environment, EU-state aid
  regulations)
• Co-financing of the EPF by SF
• Strategy for the intermediate time until
  accession
• Finance expiring sectors
• Finance competition sectors higher
• Concentration to the acquis
• Time schedule

28
Main recommendations

• Act decree internal rules
• List all kinds of expenditure but don't finance
  all with the same procedure
• Separate on the criteria of beneficiaries, not by
  tasks
• Offensive information to all participants
• One stop shop principle

29
Main recommendations

• Include commercial co-financing sources (provide
  annuity subsidies)
• Hold the ministry out of the daily business, only
  the strategic part is ministerial duty
• Restrict the data output to few persons
• Separate strategy and controlling but merge
  appraisal and payment

30
Main recommendations

• All decisions should be laid down in writing
• Transparency on all stages, reports about results
  and evaluations to the parliament
• Give the applicant the possibility for additional
  comment within the process and the right to legal
  remedy after decision.