THE SYSTEM OF SUPPORT FOR PROJECTS CO-FINANCED BY EU FUNDS IN THE CZECH REPUBLIC.

• Author: Kostalova, Jana

1. Introduction

   The European Union (EU) finances the fulfillment of its agricultural, fishing, and regional policy through investment and structural funds. Investment funds include the European Agricultural Fund for Rural Development (EARFD) and the European Maritime & Fisheries Fund (EMFF), which are purposefully intended to support agriculture and commercial fishing. Structural funds are comprised of the European Regional Development Fund (ERDF) and the European Social Fund (ESF), and are intended to support disadvantaged regions. The ERDF helps develop the economy in the form of infrastructural projects with a very wide focus, while ESF is intended to support activities in the area of employment and the development of human resources. Apart from these funds, the EU also has the Cohesion Fund (CF), which is intended to support the development of countries rather than individual regions (European Commission, 2014).

   The paper focuses on the system of financing projects in the Czech Republic (CZ) within the context of EU regional policy application, i.e. financing from structural funds and the Cohesion Fund. Currently, the implementation of projects with the support of structural funds and the Cohesion Fund (together they are called EU funds) represents an important opportunity for all economic entities in the CZ, as well as in other EU countries. During the programming period (PP) 2007-2013, 26.69 billion [euro] were allocated to the CZ on the basis of the National Strategic Reference Framework (NSRF) approved by the European Commission (Ministry of Regional Development, 2007a). The NSRF specified the basic strategic targets and 22 operational programs (OPs) through which these targets were to be met (Ministry of Regional Development, 2007d). The priority axes and support areas were specified within each OP, and the applicants were approached through individual calls to prepare data and draw up applications for funds for particular projects.

   The OPs within which the applicants could obtain support in the CZ during the PP 2007-2013 can be divided into four basic groups: regional OPs (Central Bohemia, Central Moravia, Moravia-Silesia, North-East, North-West, South-East, South-West), thematic OPs (Transport, Environment, Enterprise and Innovations, Research and Development for Innovations, Human Resources and Employment, Education for Competitiveness, Integrated Operational Programme, Technical Assistance), OPs intended for the capital city of Prague (Prague--Competitiveness, Prague--Adaptability), and OPs relating to European territorial cooperation (Cross-Border Cooperation Czech Republic-Bavaria, Cross-Border Cooperation Czech Republic-Poland, Cross-Border Cooperation Czech Republic-Austria, Cross-Border Cooperation Czech Republic-Saxony, Cross-Border Cooperation Czech Republic-Slovakia) (Ministry of Regional Development, 2007c).

   The system of support for projects co-financed through EU funds was designed in CZ to arrange for the process of applying for support and for project implementation within the OPs. To be able to assess the quality of this system, it is necessary to obtain feedback, particularly from the project organizers, based on their experience with submitting applications and solving practical problems during project implementation. In this way, it is possible to identify potential problem areas in this system and propose measures leading to their elimination.

2. Research objectives and limiting factors

   The research aims are: to analyze and evaluate the system of support for projects co-financed through EU funds (from the point of view of the organizers) applied in CZ during the PP 2007-2013, both from the point of view of the process of making an application and from the point of view of project implementation; and, on the basis of the performed evaluation, to identify the problem areas in this system.

   The next objective is to propose measures to be taken to improve the system of support in the area of making an application for support and in the area of the implementation of projects co-financed through EU funds in the CZ, which would be usable for the specification of the conditions for the PP 2014-2020, and to verify their usability from the point of view of the project organizers.

   It is possible to see a limiting factor in the fact that the assessed PP has not yet been completely finalized. Projects falling within the PP 2007-2013 can be implemented until the end of June 2015; the subsequent financial settlement with respect to EU Funds should be performed by the end of 2015. However, the PP 2014-2020 is already being intensively prepared, and thus it is desirable to use feedback from the previous PP, even though such feedback will only be finalized after the new PP has already begun.

3. Literature review and hypotheses

   The processes of filing applications and subsequent project implementation are specified by rules defined by the EU and the institutions authorized to provide funds at the national level. In the CZ, the general rules for drawing funds are defined by the Ministry of Regional Development (Ministry of Regional Development, 2007b). The detailed implementing decrees--the calls, methodology, handbooks, newsletters, etc., which the applicants and subsequently project organizers have to comply with--are specified by the ministries responsible for individual OPs and, for the regional OPs on the level of regions, by the authorities of regional councils. For orientation in particular problem areas, it is also possible to draw on other available sources, e.g. Marek and Kantor (2009), Mikusova Merickova and Stejskal (2014), Tauer, Zemankova and Subrtova (2009), which assist in the phase of writing an application for a contribution or in project implementation. Another document specifying the conditions for project implementation is a so-called decision on the provision of a grant, or an agreement on financing, which specifies the provision of the grant and defines the conditions of the provision and the grant recipient's obligations. The applicant and subsequently the project organizer also have to comply with the general legislative rules and also have to take account of any internal rules and methodologies the respective organization is governed by. Generally, the processes of drawing up applications and project implementation are also affected by the level of awareness of the project management (Ernst & Young, 2013; Kratky et al., 2012).

   To obtain support from EU funds, it is necessary to take several steps (Ministry of Regional Development, 2007b). First, it is necessary to become acquainted with all the above documents. Next, it is necessary to create a project plan; to determine a suitable OP, the priority axis, and the area of support; and to draw up a project support application, including the required annexes in accordance with the currently effective call. Subsequently, the application is evaluated by the provider and the support is either granted or refused; if granted, the project is implemented.

   Project implementation itself is then affected by the conditions set by the given OP. The project implementation period is based on the applicant's schedule and can last several months or several years. Projects implemented in the first part of the PP (2007-2010) can take a maximum of 3 years to complete (the n+3 rule). Projects implemented in the second part of the PP (2011-2013) must take no longer than 2 years (the n+2 rule) in order for all projects to be completed by 2015 (Ministry of Regional Development, 2009b). Project implementation runs in phases, in so-called monitoring periods, during which the project objectives approved in the decision to provide the grant are gradually fulfilled. At the end of each monitoring period, the recipient draws up a monitoring report giving detailed information about the course of the respective monitoring period, including the achieved values, the so-called monitoring indicators, which reflect the quantitative fulfillment of the project outputs. The monitoring report is sent to the support provider for approval together with a potential application for the partial release of funds to reimburse financial costs (Ministry of Regional Development, 2009a). The process of approving a monitoring report runs parallel with the next monitoring period. At the end of the project implementation period, the final monitoring report is submitted and, upon its approval, the project is accomplished and its accounts are settled and all the remaining justified expenses are reimbursed. For some projects, depending on their focus, the following period is a period of so-called sustainability, within which the support recipient has to ensure the application of usable project outputs (Ministry of Regional Development, 2009c).

   Within the individual monitoring periods, the recipient is obliged to proceed in compliance with strictly set rules and deadlines. For instance, the running monitoring reports have to be sent within 1 month from the end of the monitoring period, and the final monitoring report has to be sent within 2 months from the end of the project (Ministry of Education, Youth and Sports, 2014; Ministry of Labour and Social Affairs, 2014, Ministry of Environment, 2014). On the other hand, there are no strict deadlines within which the support providers' representatives are obliged to evaluate the support application, to approve the monitoring report or the final monitoring report, or to perform the final rendering of accounts.

   There are very detailed rules for project financial management, which include the conditions for the qualification of individual types of costs, the obligatory processes for documenting costs and their monitoring, the conditions for changing the budget, and the rules for selecting outside suppliers, e.g. in the guidebooks of Ministry of Education, Youth and Sports, Ministry of Environment and Ministry of Labour and Social...