How to manage EU funds: Lessons from Slovenia

Effective management of European Union (EU) funds is not only high on the agenda of the new EU member states but also of the Western Balkan countries that are progressing in the EU integration process. As such, these countries face several important challenges and questions today.

On becoming an EU member, how much will the budget calendar and its preparation need to change? How best to plan and execute projects which are pre-financed? How to record unspent EU funds in the next fiscal year? To what extent should the Ministry of Finance be involved in the process before the signing of financial agreements with the EU? These and other questions arise in relation to the impact on a country’s fiscal position, co-financing obligations, pre-financings and bridging resources, and payment of errors.

Consequently, there is a strong demand among the Western Balkan countries to learn more about best-practices in the management and spending of EU funds.

The experience of Slovenia, in particular, is highly relevant for the Western Balkans. The country went through a similar process of EU integration in the recent past and subsequently made the necessary adjustments to its financial recording and public finance systems, the latter having some commonalities with those of the Western Balkans.

With this in mind, the PEMPAL Budget Community of Practice (BCoP) Executive Committee recently invited government representatives to a study visit in Slovenia in order to hear about the country’s experiences in planning, executing and recording EU funds, as well as issues of financial reporting and statistical reporting. From 19-21 November, fourteen representatives from Albania, Bosnia and Herzegovina, Croatia, Kosovo, Montenegro, and Serbia met in Ljubljana to discuss with staff from Slovenia’s Ministry of Finance and its counterparts.

During the visit, participants identified several characteristics of Slovenia’s public finance system that they found to be particularly interesting and potentially suitable for application in their respective countries.

Overall, Slovenia has a well-conceptualized and institutionalized system that is not overburdened with superfluous laws and regulations; bureaucracy is minimalized, thereby enabling better functionality for budget users.

Slovenia’s experience highlights the importance of following simple logic when it comes to institutionalization of the functional requirements of the EU, and using current capacities to the maximum (rather than starting from scratch and establishing new institutions or units). The functions needed for EU integration should be integrated into the national system, legislation and institutions in a simple, but effective, manner.

Another important pre-condition for success is having the “right people in the right positions” on a continuous basis, rather than having a high turnover of higher-level positions in the administration.

With regard to financial control, Slovenia’s system benefits from the leading role played by the Ministry of Finance, and supported by the work of specific bodies such as the Budget Supervision Office (which functions as the Audit Authority). In-depth analyses and evaluation can help in planning the use of EU funds in a timely way, thereby ensuring a high absorption of funds.

Slovenia also demonstrates the importance of having an efficient system for the free-flow of documents and payments among key stakeholders in EU fund management. Ensuring fair competition between different projects vying for EU funds can also help promote higher quality, better implementation and greater absorption of those funds.

The study visit helped participants to identify common issues that need to be addressed and improved upon, including institutional and functional dichotomy, lack of a harmonized calendar for EU fund programming and national budget planning, and sub-par involvement of Ministries of Finance in programming of EU funds. Last, but not least, the need for political support was identified as an important pre-condition for the implementation of much-needed reforms.

This article was first published by the World Bank’s Voices blog. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Maya V. Gusarova is a Public Sector Specialist at the World Bank.

Image: A huge euro logo is pictured next to the headquarters of the European Central Bank (ECB) August 7, 2014. REUTERS.