Which objective(s) does the Commission pursue?

For the 2021-2027 financial period, the Commission proposed to modernise the EU Cohesion Policy (which includes the European Regional Development Fund (ERDF), the Cohesion Fund, the European Social Fund+ (ESF+) and the Just Transition Fund). This is one the EU's main investment policy, together with one of its most concrete expressions of solidarity. The proposals included substantial examples of simplifications.

To help Member States and regions tackle the unexpected challenges raised by the COVID-19 pandemic and the Russian war of aggression against Ukraine (peaks in energy and food prices, migration flows, scarcity of input materials, disruption of value chains etc.), the Commission adopted new legislative proposals aiming at introducing flexibility and simplification in cohesion policy rules, alleviating the financing burden, while continuing the efforts to ensure a green, digital and resilient recovery of their economies:

• Coronavirus Response Investment Initiative (COM(2020)113 of 13.6.2020 and COM)2020)138 of 2.4.2020) and REACT-EU (COM(2020)451 of 28.5.2020);

• Cohesion’s Action for Refugees in Europe (CARE), COM(2022) 109 of 8.3.2022

• Pre-financing from REACT-EU resources and establishment of a unit cost, COM(2022) 145 of 23.3.2022 amended by COM(2022) 162 of 31.3.2022;

• FAST (Flexible Assistance for Territories) – CARE, COM(2022) 325 of 29.6.2022

• REPOWER-EU, COM(2022)231 of 18.5.2022

Examples of simplification:

• fewer, clearer, shorter rules;

• more flexible framework;

• lighter controls for programmes with good track record, with an increased reliance on national systems and the extension of the “single audit” principle, to avoid duplication of checks.

• A single rulebook: one set of rules now cover 7 EU Funds implemented in partnership with Member States ('shared management'), which will make life easier for EU Funds programme managers. It will also facilitate synergies, for example between Cohesion Policy Funds and the Asylum and Migration Fund when it comes to the development of local integration strategies for migrants.

• The framework also allows for more efficient synergies with other Funds from the EU budget toolbox. For example, projects under directly managed instruments like Horizon Europe, which were awarded a Seal of Excellence certification but lack available funding, could easily apply for a contribution from the ERDF or the ESF+ - (Article 73(4) of the Common Provisions Regulation - CPR). Furthermore, these projects are funded under the same conditions, including the same State aid regime, as the projects supported by the corresponding Union instrument.

• Concerning the transfer of resources, Member States can choose to contribute with their Cohesion Policy resources to the InvestEU programme - (Article 14 of the CPR). In addition, the Commission proposed increased flexibility to be granted for transferring resources between Funds, completed by additional flexibility for transfers between the ERDF, the ESF+ or the Cohesion Fund, under Article 27 of the CPR.

• For the Just Transition Fund, the Commission proposed to create a dedicated policy objective, aiming at alleviating the social and economic costs stemming from the climate transition, at the benefit of the most impacted territories Moreover, the support from the Just Transition Fund will be based on the territorial just transition plans and programmed under one or more priorities, either in programmes supported also from the ERDF, the ESF+ or the Cohesion Fund or in a dedicated Just Transition Fund programme. The territorial just transition plans will be part of the programmes and will be adopted by the same Commission decision as the programme.

• Adapting to needs: the new framework also combines the stability necessary for long-term investment planning with the right level of flexibility in order to cope with unforeseen events. A mid-term review will determine if changes in the programmes are needed for the last 2 years of the funding period, and limited transfers of resources within EU funds programmes will be possible.

• Another example relates to the proposed Commission’s empowerment to allow for temporary measures for the use of the Funds in response to exceptional and unusual circumstance. This provision was inserted in the CPR in the aftermath of the COVID-19 crisis, clearly aiming at simplifying procedures when a fast reaction from the legislative point of view is needed. 

• The Simplification Handbook (80 simplification measures in cohesion policy 2021-2027¹) provides a detailed view on the proposed simplification measures.

• A focus on key investment priorities, where the EU is best placed to deliver, supporting the twin transition: The bulk of European Regional Development Fund and Cohesion Fund investments will go towards innovation, support to small businesses, digital technologies and industrial modernisation. It will also go to the shift towards a low-carbon, circular economy and the fight against climate change, delivering on the Paris Agreement and European Green Deal.

Examples as regards the proposals adopted in the context of the COVID-19 pandemic and war against Ukraine:

• Establishment of a simple unit cost to facilitate the financing of basic needs and support of persons granted temporary protection, enabling an easy and quick implementation of cohesion policy funds while also reducing the administrative burden for beneficiaries and Member States;

• Management of cohesion policy programmes made simpler to allow the use of the available funds to target the needs (e.g. use of a Fund to finance the actions normally supported by other Funds, possibility to phase delayed projects and to carry them over to the next programme, easier transfers of allocations within programmes, lighter reporting requirements, etc.)

• Increase of the EU co-financing rate up to 100% for priorities addressing migratory challenges

Estimated savings and benefits

There is evidence of substantial administrative costs associated with the European Structural and Investment Funds, estimated in a recent study¹ at 4% of administrative costs (average aggregated costs, taking into account the weighted allocation of Funds). The administrative burdens on beneficiaries (including SMEs) are higher.

Many of the simplifications in the proposals for the 2021-2027 Cohesion Policy are difficult to quantify financially in advance, but the study made the following estimates:

• Greater use of simplified cost options (or payments based on conditions) for the ERDF and the Cohesion Fund could substantially reduce total administrative costs – by 20-25% if these options are applied across the board.

• The more proportionate approach to control and audits would imply a major reduction in the number of verifications and the audit burden for “low risk” programmes thus reducing total administrative costs of the ERDF and the Cohesion Fund by 2-3% and costs for affected programmes by a much greater amount.

1 Spatial Foresight & t33, New assessment of administrative costs and burden in ESI Funds. https://ec.europa.eu/regional_policy/en/information/publications/studies/2018/new-assessment-of-esif-administrative-costs-and-burden

Outcome of Legislative Procedure

Overall, the integrity of the Commission proposals has been widely preserved.

Among the changes agreed by the co-legislators modifying the Commission proposals are: a longer period to spend the funds (by the end of the third year after their allocation instead of two in the proposal) except for the final year; more flexibility in transferring resources (e.g. between categories of regions or among cohesion policy Funds) is enabled; the EU co-financing rates have been increased and further differentiated; the use of a single data-mining tool and the collection and analysis of data on the beneficial owners of the funding has been made optional instead of obligatory; a lower amount (5% instead of 10%) will be retained on interim payments until the Commission is able to conclude that the accounts are complete, accurate and true and able to pay the annual balance of accounts.

Regulations (EU) 2020/460, 2020/558, 2022/652, 2022/613 and 2022/2039 have been adopted by the co-legislators without changes to the proposals.

Further work to translate simpler Cohesion Policy framework into reality on the ground

It is widely established that the primary focus of simplification should be to reduce the administrative burden on beneficiaries and the administrative costs for the Member States’ authorities. The beginning of the new programming period is a good opportunity to identify any unnecessary requirements or practices imposed on beneficiaries and plan new actions in view of further simplification. Furthermore, simplified cost options (SCOs) and financing not linked to costs (FNLC) have been particularly identified as key elements in reducing administrative burden and costs for beneficiaries and managing bodies while maintaining a high level of assurance of legality and regularity. EU rules are complemented by national rules and it has also been acknowledged that a significant part of administrative burden can be due to gold plating. Hence, it is important to keep the spirit of simplification in national legislation and rules linked to Cohesion Policy implementation.

The Commission has established in 2018 the Transnational Network (TN) of ERDF/CF Simplified Cost Options practitioners to discuss how to further simplify the delivery of cohesion policy instruments. The Network is composed of representatives of managing and audit authorities from all 27 Member States and meets three times per year to focus on exchanging good practices regarding the SCO/FNLC methodologies developed by different Member States and discussing various aspects related to the design and setup of methodologies. Through the work carried out within the TN, the Commission is promoting extensively the use of SCOs and FNLC in 2021-2027 programming period.

Other specific topics related to the simplification of cohesion policy have also been on the agenda of the Transnational Network, which widened its scope at the Member States’ request, i.e. selection of operations, management verifications, gold-plating, digitalisation of processes and procedures, collaboration between managing authorities and beneficiaries. More particularly, the network allowed to identify and report 16 cases of better administrative practices with regard to the selection of operations. Network’s members gave substantial feedback on the reflection paper on the use of risk-based management verifications in the 2021-27 programmes and decided to setup a dedicated working group on this topic in view of exchanging good practices with regard to the design and implementation of risk-based management verifications. A mapping of the IT systems used by Member States and good digitalisation practices is underway. All these actions should bear fruit in clearer and simpler procedures for cohesion policy beneficiaries.

Furthermore, the simplification topic will regularly be on the agenda of the monitoring committees, which may also give its opinion on actions to bring/increase simplification in the programme’s implementation and dissemination of best practice examples between different stakeholders.

The Commission is examining the possibility of adopting SCOs and FNLC at EU level, in a number of areas of intervention identified by Member States, to alleviate administrative burden and ensure legal certainty for beneficiaries and programme authorities.

The Commission has also launched a study on the selection of operations. The aim of the study was to take stock of and disseminate information on practices, procedures and criteria used for selection of operations in a sample of 29 programmes and 87 calls for proposals in the 2014-2020 programming period and to develop a handbook of practices for effective selection of operations (including examples of effective selection criteria). The study was finalised in December 2022 and will be published in the 1st quarter of 2023.

In addition, practitioners in the MS have set up a group under the REGIO Peer2Peer Communities to exchange on selection of operations. Programme authorities in the MS also have the possibility to exchange on any topic linked to simplification in the form of study visits, expert missions, or workshops/webinars under TAIEX-REGIO Peer2Peer.