Examples of using Variable tranches in English and their translations into Hungarian
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Of the five countries visited three have already received variable tranches.
This makes it difficult to ensure that variable tranches reward good-quality processes.
Budget support paymentsare made in the form of either fixed or variable tranches.
Variable tranches have a maximum value specified in advance in the financing agreement.
II We examined whether the Commission used relevant and reliable performance data for disbursing budget support variable tranches.
The variable tranches audited for the selected contracts involved a total of 248 performance indicators.
The financing agreement for the SBS lays out 12 specific conditions,which have to be fulfilled for the disbursement of its three variable tranches.
The disbursement of variable tranches 11 The process for disbursing a variable tranche starts with a disbursement request by the partner country.
The main audit question was:“Did the Commission use relevant andreliable performance data for disbursing budget support variable tranches?”.
These are more frequently applied to the disbursement of variable tranches(see Table 3) and are usually translated into performance indicators and targets.
We also checked the design of the budget support contract provisions,in particular the quality of the performance indicators used in the variable tranches.
Variable tranches as an incentive to achieve results 07 Prior to each disbursement, the Commission analyses the fulfilment of general conditions attached to the budget support contract.
Conclusions and recommendations 54 We examinedwhether the Commission used relevant and reliable performance data for disbursing budget support variable tranches.
While the indicators for disbursing the variable tranches are only one element, the level of disbursement can be a proxy of the ambition(or at least difficulty, which should be correlated) of the indicators.
EN EN A total of Ű147 million was paid for the programmes audited of which Ű140million for the BS component(including Ű88 million of variable tranches payments).
Most variable tranches reviewed contained indicators whose targets struck the right balance between being ambitious and achievable, and we consider that they provided the intended incentive effect.
We make a number of recommendations to improve the formulation of indicators, increase the use of outcome indicators andimprove the verification of the performance data used to disburse variable tranches.
Ū not all pfm-related weaknessescan be addressed in budget support variable tranches but need to be addressed through the pfm general conditions, in capacity-building and through policy dialogue.
Variable tranches are used to create incentives for partner countries to improve policy delivery, and are paid based on performance achieved in relation to specified performance indicators and targets, if the general conditions are all met.
Recommendation 2- Improve the formulation of performance indicators The Commission should enhance the quality control arrangements in order toensure that performance indicators of variable tranches measure the results achieved by partner countries in an objective manner.
Considering the importance of variable tranches in budget support payments and the fact that the performance data on which those payments are based originate from the recipient countries, incorrect or unreliable data would imply that budget support payments do not reward actual results as intended.
Insufficiently documented payments to Moldova 53 Although not linked directly to the verification of performanceindicators we found that the Commission had paid three variable tranches to Moldova, a total amount of €26.3 million, without sufficiently documenting the reasons supporting these payments(see Box 15).
An internal Commissionassessment of the full set of indicators used in variable tranches(a total of 3642 indicators) covering the period from 2014 to 2018 shows that 33.7% of the indicators are outcome indicators, 26.8% output indicators, 35.4% process indicators and the remaining small share(4.1%) is made up of input and impact indicators.
EU budget support programmes were increasingly provided over three-year periods with annual fixedtranches subject to compliance with eligibility criteria, and variable tranches linked also to performance against agreed targets on selected outcome indicators, mainly in social sectors.
Variable tranches often paid when conditions were neither met nor verified 58 The disbursement of the variable tranches17 was based on sources of verification stipulated in the financing agreement and agreed at design stage between the Commission and the ministries, as well as other official sources provided by the government.
Particular attention should be paid to:(a) Using performance indicators that are specific and do not allow different interpretations;(b) Using baseline values and targets Timeframe:end of 2021 57 An important objective of budget support variable tranches is to produce incentives for partner countries to advance in their reform agendas.
Recommendation 6-Improve the verification of the performance data used to disburse variable tranches The Commission should:(a) review the underlying evidence supporting the performance data provided by partner countries in the disbursement request, unless it has already explicitly concluded that this data is reliable;(b) when using external reviews, require in the terms of reference the verification of the reliability of key performance data provided by partner countries.
In its reply to the Court's findings the Commission also noted that‘A distinction must be made, on the one hand, between the eligibility criteria for budget support, which require a holistic approach based on credibility and positive implementation and which are by nature general, and, on the other hand, the specific conditions,attached to variable tranches, which must indeed be clear and specific.
VII We make six recommendations to the Commission in order to:o Increase the use of outcome indicators in variable tranches; o Improve the formulation of performance indicators; o Safeguard the incentive effect of variable tranches; o Simplify the disbursement process for variable tranches; o Improve the assessments of the countries' capacity to provide performance data used in variable tranches; o Improve the verification of the performance data used to disburse variable tranches. 5.
The Commission considers that the proportion of gbs allocated to the variable tranche should be higher in countries where it has more concerns about their commitment to poverty reduction and reforms. however, this approach is not referred to in the Commission's internal guidelines or individual programme documents. furthermore, in a significant number of the gbs programmes,particularly in asian and latin american countries, variable tranches are not used.