Explanatory Memorandum to COM(2011)615 - Common provisions on ERDF, ESF, CF, EAFRD and EMFF (the Common Strategic Framework Funds) and general provisions on ERDF, ESF and CF

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On 29 June 2011, the Commission adopted a proposal for the next multi-annual financial framework for the period 2014-2020: A Budget for Europe 2020. Simplification of policy delivery, focus on results and increased use of conditionality are among the major hallmarks of the next set of programmes.

Simplification has been defined as a key objective in the EU Budget Review Communication, the Smart Regulation agenda and the aforesaid communication on the next multi-annual financial framework. Experience suggests that in the current programming period, the diversity and fragmentation of rules governing spending programmes are often perceived as unnecessarily complicated and difficult to implement and control. This imposes a heavy administrative burden on beneficiaries as well as on the Commission and Member States, which can have the unintended effect of discouraging participation, increasing error rates and delaying implementation. This means that the potential benefits of EU programmes are not fully realised.

The European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD) and the future European Maritime and Fisheries Fund (EMFF) (hereinafter referred to as the CSF Funds) pursue complementary policy objectives and their management is shared between the Member States and the Commission. It is therefore important to maximise the effectiveness of all structural instruments in terms of delivering objectives and targets set in programmes and optimise synergies and efficiency of the different instruments. This will be achieved through sound policy, regulatory and institutional framework conditions for the funds, an increased focus on results and monitoring progress towards objectives and targets agreed in programmes as well as the harmonisation, to the extent possible, of implementation rules and control requirements.

Against this background, this Regulation delivers a common set of basic rules. It is divided into two parts.

The first part sets out a series of common provisions governing all structural instruments covered by the Common Strategic Framework. These provisions concern the general principles of support such as partnership, multi-level governance, equality between men and women, sustainability and compliance with applicable EU and national law. The proposal also contains the common elements of strategic planning and programming, including a list of joint thematic objectives derived from the Europe 2020 Strategy, provisions on the Common Strategic Framework at Union level and on Partnership Contracts to be concluded with each Member State. It sets out a common approach to reinforce the performance orientation of the cohesion policy, the rural development policy and the maritime and fisheries policy and therefore includes provisions concerning conditionalities and performance review, but also the arrangements for monitoring, reporting and evaluation. Common provisions concerning the implementation of CSF Funds are also set out with regard to eligibility rules, and special arrangements are defined for financial instruments and community led local development. Some management and control arrangements are also common for all CSF Funds.

The second part includes specific provisions set out for the ERDF, the ESF and the CF. These include provisions related to the mission and goals of cohesion policy, the financial framework, specific programming and reporting arrangements, major projects and joint action plans. The second part sets out the requirements on management and control systems under cohesion policy and elaborates the specific arrangements for control and financial management.

At the same time, the Commission will ensure that synergies already obtained through simplification and harmonisation of the first pillar (EAGF – European Agricultural Guarantee Fund) and the second pillar (EAFRD) of the Common Agriculture Policy are preserved. The strong link between the EAGF and the EAFRD will therefore be maintained and the structures already in place in the Member States will be sustained.



The Regulation draws on extensive consultations with stakeholders, including Member States, regions, social and economic partners, academic experts and international institutions in the context of the preparation of the proposal for each structural fund for the 2014-2020 financial framework. The results of the ex post evaluations carried out on the 2000-2006 programmes; and a broad range of studies and expert advice were used as input.

For the next cohesion policy framework, expert advice was provided by the High Level Group reflecting on future Cohesion Policy, with 10 meetings held between 2009 and 2011, an informal platform established to support the work of the Commission in developing the future directions of cohesion policy as well as a Task Force on Conditionality, which met three times in early 2011. A public consultation on the conclusions of the Fifth Cohesion Report was held between 12 November 2010 and 31 January 2011. A total of 444 contributions were received. A summary of the results was published on 13 May 2011.

On the future of rural development, a public consultation was held between 23 November 2010 and 25 January 2011 and an advisory committee with stakeholders was organised on 12 January 2011.[5] Altogether, 517 contributions were received by the Commission. Of the contributions from organisations, 44% came from the farming and processing sector and 40% from national, regional and local authorities, environmental organisations, think-tanks and research institutes as well as, development organisations, the trade sector, and consumer organisations. Other organisations (12%) participating in the consultation included health protection organisations, water management bodies and civil society representations.

On reform of the common fisheries policy, a Green Paper was adopted in April 2009, followed by a public consultation. In addition to the public consultation, approximately 200 meetings with Member States, the Advisory Committee on Fisheries and Aquaculture (ACFA) and the Regional Advisory Councils (RACs), the fishing industry, the processing and marketing sector, trade unions, NGOs, and the research community were organized. In particular: (i) two meetings with the Member States, during which future funding was discussed, took place in Gent (12-14 September 2010) and Noordwijk (9-11 March 2011); (ii) a dedicated seminar on the future European Fisheries Fund with the participation of stakeholders from industry, trade unions and Member States was organised on 13 April 2010, in Brussels; (iii) a conference on the future of local development in fisheries areas took place in Brussels (12-13 April 2011).

A number of common conclusions can be drawn from the results of the different public consultations which confirmed the following:

– A majority of stakeholders called for continued financial support of these policies;

– EU support should focus on a number of priorities and the different policies should be aligned with the Europe 2020 Strategy;

– For cohesion policy in particular, stakeholders called for a more results-oriented approach and there was strong support for a more transparent and simplified set of financial management procedures;

A majority of stakeholders called for a more integrated approach or joined-up strategies with other EU policies and financial instruments.


2.2. Impact assessment

This proposal draws on three Impact Assessments: one carried out for the ERDF, the CF and the ESF together; and one each for the EAFRD and for the EMFF. These impact assessments analysed issues including EU added value, performance and delivery of the policies, as well as simplification and harmonisation of rules. The options assessed in the impact assessments related to (i) improving the capacity of the policies to deliver European added value, (ii) increasing the performance of the policies and (iii) simplification – reducing administrative costs and minimising the risk error.


2.2.1. Delivering European added value

To be able to deliver greater European added value, the structural programmes need to both: a) concentrate their support on EU priorities and b) coordinate with other EU policies and financial instruments. The Europe 2020 Strategy provides a clear set of common objectives, including headline targets and flagship initiatives, as a clear framework for identification of funding priorities. There is broad consensus among stakeholders on the role of the different policies (cohesion policy, rural development policy and maritime and fisheries policy) in contributing to the achievement of the Europe 2020 Strategy i.

As for concentration on EU priorities, the options assessed included a flexible approach to concentration by earmarking provisions; a more visible and comprehensive link with the Europe 2020 headline targets and the Integrated Guidelines, ensuring a critical mass for the ESF and, thirdly, concentration on EU priorities in less developed Member States only. The preferred option is to establish a strong link to Europe 2020 targets which would contribute most to reaching the headline targets.

As for coordination with other EU policies and financial instruments, the options examined included a loose alignment based on non-binding Community Strategic Guidelines, a more comprehensive alignment with the Europe 2020 objectives through the Common Strategic Framework and Partnership Contract, and no alignment with other EU policies and financial instruments beyond formal compliance. Strategic planning arrangements which include the Common Strategic Framework at Union level and Partnership Contracts at national level are considered to ensure effective coordination between Union policies and instruments.


2.2.2. Increasing the performance of the policy

The effectiveness of the different structural instruments depends on sound policy, regulatory and institutional frameworks. In many sectors, a combination of strategic and regulatory conditions and public investment is needed to address bottlenecks to growth effectively. The options examined in this context related to: a) the status quo (macro-fiscal conditionality under the CF, compliance with procedures and with EU sectoral legislation and strategic frameworks, albeit unsystematically applied, no provisions related to performance; b) ex ante conditionalities to be fulfilled prior to the adoption of the programmes; c) ex post conditionalities including the performance framework and performance reserve; d) strengthened macro-fiscal conditionality; and e) combined option. The preferred option was the combined option since this option would allow addressing the preconditions necessary for the effective use of the CSF Funds and would provide incentives to attain predefined objectives and targets and align the implementation of programmes with the Union's economic governance.


2.2.3. Simplification - reducing administrative costs and minimising the risk error

Sound, effective and efficient management of the structural instruments requires appropriate, effective and transparent systems involving all the different administrations concerned. These systems need to ensure the selection of high quality operations and the effective implementation of these operations to achieve the objectives of the policy. The management and control systems must also ensure the prevention and detection of irregularities, including fraud, and thus reasonable assurance on the regularity of expenditure. At the same time the delivery system should be as simple and streamlined as possible to ensure efficient implementation and the reduction of administrative burden for beneficiaries

The options examined for cohesion policy included different reimbursement options (based on real costs and simplified cost options), eGovernance and assurance. The main differences between the options relate to the level of Commission involvement in the assessment of management and control systems, to the availability of reimbursement options linked to results, and to the mechanisms for promoting eGovernance in the day to day management of EU funds. A proportional approach entailing risk based control arrangements, the availability of a wide range of reimbursement options, and advanced eGovernance at the level of Member States and regions is the preferred option since it could lead to a significant potential reduction in the cost of controls and a decline in workload and would also comply better with the subsidiarity principle.



EU action is justified both on the grounds of the objectives laid out in Article 174 of the Treaty on the Functioning of the European Union (TFEU) and the subsidiarity principle. The right to act is enshrined in Article 175 of the TFEU which explicitly calls on the Union to implement this policy by means of Structural Funds, in conjunction with Article 177, which defines the role of the CF. The aims of the ESF, ERDF and the CF are defined in Articles 162, 176 and 177 of the TFEU respectively. The actions related to agriculture and fisheries are justified by Articles 38 and 39 of the TFEU.

Article 174 of the TFEU states that particular attention shall be paid to rural areas, areas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps such as the northernmost regions with very low population density and island, cross-border and mountain regions.

Article 349 of the TFEU states that specific measures shall be adopted to take account of the structural social and economic situation of the outermost regions, which is compounded by certain specific features which severely restrain their development.



The Commission's proposal for a multi-annual financial framework foresees an amount of EUR 376 billion for economic, social and territorial cohesion for the period 2014-2020.

Proposed budget 2014-| EUR billion

Less developed regions Transition regions More developed regions Territorial cooperation Cohesion Fund Extra allocation for outermost and sparsely populated regions| 162,6 38,9 53,1 11,7 68,7 0,926

Connecting Europe Facility for transport, energy and ICT| 40 (with an additional EUR 10 billion ring fenced inside the Cohesion Fund)

*All figures in constant 2011 prices

The Commission's proposal has also established, with the aim of enhancing the contribution of the CSF Funds in delivering on the headline targets of the Europe 2020 Strategy, minimum shares for the ESF for each category of regions. The application of the shares result in a minimum overall share for the ESF of 25% of the budget allocated to cohesion policy, i.e. EUR 84 billion. It is however important to note that the indicated minimum ESF allocation includes the budget for a forthcoming Commission proposal regarding food support for the most deprived persons.

The Commission's proposal for the financing of the EAFRD and the EMFF will be included in the Fund-specific regulations for each Fund.


5. SUMMARY OF THE CONTENT OF THE REGULATION 5.1. Common provisions governing all CSF Funds 5.1.1. General principles

The general principles governing the support of all CSF Funds will include partnership and multi-level governance, compliance with applicable EU and national law, promotion of equality between men and women and sustainable development.

Within this context, for the ESF, the Commission will continue to be assisted by the Committee foreseen in Article 163 of the Treaty and composed of one government representative, one representative of the workers' organisations and one representative of the employers' organisations from each Member State.


5.1.2. Strategic approach

In order to maximise the impact of the policy in delivering European priorities, the Commission proposes to reinforce the strategic programming process. This involves defining a list of thematic objectives in the Regulation in line with the Europe 2020 Strategy:

strengthening research, technological development and innovation;

enhancing access to and use and quality of information and communication technologies;

enhancing the competitiveness of small and medium-sized enterprises, the agricultural sector (for the EAFRD) and fisheries and aquaculture sector (for the EMFF);

supporting the shift towards a low-carbon economy in all sectors;

promoting climate change adaptation, risk prevention and management;

protecting the environment and promoting resource efficiency;

promoting sustainable transport and removing bottlenecks in key network infrastructures;

promoting employment and supporting labour mobility;

promoting social inclusion and combating poverty;

investing in education, skills and lifelong learning;

enhancing institutional capacity and an efficient public administration.

The Common Strategic Framework will translate the objectives and targets of the Union priorities of smart, sustainable and inclusive growth into key actions for the ERDF, the CF, the ESF, the EAFRD and the EMFF which will ensure an integrated use of the CSF Funds to deliver common objectives.

Partnership Contracts between the Commission and each Member State will set out the commitments of partners at national and regional level and the Commission. They will be linked to the objectives of the Europe 2020 Strategy and the National Reform Programmes. They will set out an integrated approach for territorial development supported by all the CSF Funds and include objectives based on agreed indicators, strategic investments and a number of conditionalities. They will contain commitments to give yearly account of progress in the annual reports on cohesion policy, on rural development policy and in other public reporting.


5.1.3. Conditionalities and performance

To reinforce performance, new conditionality provisions will be introduced to ensure that EU funding creates strong incentives for Member States to deliver Europe 2020 objectives and targets. Conditionality will take the form of both ‘ex ante’ conditions that must be in place before funds are disbursed and ex post conditions that will make the release of additional funds contingent on performance.

The rationale for strengthening ex ante conditionality for these funds is to ensure that the conditions necessary for their effective support are in place. Past experience suggests that the effectiveness of investments financed by the funds have in some instances been undermined by bottlenecks in policy, regulatory and institutional frameworks. The concept of conditionality is not a new concept within the framework of cohesion policy. Over successive programming periods, a number of mechanisms have been introduced to maximise the effectiveness of the interventions. Some are linked to management and control disciplines while others to strategic and regulatory frameworks as well as administrative capacity. The experiences with the application of conditionalities however indicate variations across programmes. A more transparent and systematic application is therefore justified.

'Ex post' conditionality will strengthen the focus on performance and the attainment of the Europe 2020 objectives. It will be based on the achievement of milestones related to targets for outputs and results linked to Europe 2020 objectives set for programmes in the partnership contract. 5% of the budget of the relevant funds will be set aside and allocated, during a mid-term performance review, to the Member States whose programmes have met their milestones. In addition to the performance reserve, failure to achieve milestones may lead to the suspension of funds, and a serious underachievement in meeting targets for a programme may give rise to a cancellation of funds.

To ensure that the effectiveness of the funds is not undermined by unsound macro-fiscal policies, the Commission proposes to reinforce the rules governing the Funds on macro-fiscal conditionality and align them with the new Stability and Growth Pact enforcement measures to be adopted as part of the Sixth Economic Governance Package.

At the same time, a higher co-financing rate (by 10 percentage points) can be applied when a Member State is receiving financial assistance in accordance with Articles 136 and 143 of the TFEU, thus reducing the effort required from national budgets at a time of fiscal consolidation, while keeping the same overall level of EU funding.


5.1.4. Common management arrangements

The proposal envisages a management and control system which is similar across shared management instruments and is based on common principles. A system of national accreditation is put in place to emphasize the commitment of Member States to sound financial management. The arrangements underpinning the assurance of the Commission with regard to the regularity of expenditure have been harmonised and new common elements such as a management declaration of assurance and annual clearance of accounts have been introduced to reinforce assurance.


5.1.5. Community-led local development

Member States will have the possibility to use common processes for preparation, negotiation, management and implementation, and will be encouraged to do so in particular where the need for improved coordination of human capital and infrastructure investments is greatest.

The CSF Funds need to address multiple development needs at sub-regional and local level. To facilitate the implementation of multi-dimensional and cross-sectoral interventions, the Commission proposes to strengthen community-led initiatives, facilitate the implementation of integrated local development strategies and formation of local action groups, based on the experience of the LEADER approach.


5.1.6. Financial instruments

In addition to grant funding, it is proposed that support for enterprises and projects expected to generate substantial financial returns will be delivered primarily through innovative financial instruments.

While financial instruments will remain similar to those employed in 2007-2013, several elements of simplification should be emphasized. First, the Commission will offer ready made solutions through access to financial instruments set up at EU level and models for national and regional funds based on standard terms and conditions laid down by the Commission. Second, the proposal represents a clear framework for the implementation of these instruments, and addresses the ambiguities which arose in the context the 2007-2013 legislative framework, increasing legal certainty for all parties. Third, financial instruments can in the future be used for all types of investment and beneficiary representing a significant extension of the possibilities to use these innovative instruments.


5.1.7. Monitoring and evaluation

Common provisions for all CSF funds in the area of monitoring and evaluation include the role and composition of the monitoring committee, annual implementation reports, annual review meetings, progress reports on the implementation of the Partnership Contract, ex ante and ex post evaluations.


5.1.8. Simplified and streamlined eligibility rules

In the current period, many beneficiaries using funds from different Union funding instruments are faced with different eligibility rules which increases the complexity of management and thus also the risk of errors. Emphasis has therefore been placed on measures to ensure that administrative costs are proportionate and that the administrative burden associated with the management of EU funds by beneficiaries is reduced. The aim is to harmonise, to the extent possible, these basic rules for instruments implemented under shared management, in order to reduce the multiplicity of rules applied on the ground. Simplified costs options such as flat rates and lump sums provide the means for Member States to introduce performance-oriented management at the level of individual operations.

Common provisions on the delivery include common rules on eligible expenditure, the different forms of financial support, simplified costs, and durability of operations. The proposal also envisages common principles for the management and control systems

In the context of the CAP, the current rules on administrative costs and the control systems will be maintained and sustained.


5.2. General provisions applicable to the ERDF, the ESF and the CF

Part Three of the Regulation defines the mission and goals of cohesion policy, the geographical coverage of support, financial resources and principles of assistance, programming, major projects, joint action plans, territorial development, monitoring and evaluation, information and communication, eligibility of expenditure and management and control systems.


5.2.1. Geographical coverage of support

This includes a distinction in relation to less developed, transition and more developed regions.

Less developed regions: In accordance with the TFEU, supporting the less developed regions will remain an important priority for cohesion policy. The catching up process of economically and socially lagging regions will require long-term sustained efforts in a world of increasing uncertainty. This category concerns those regions whose GDP per capita is less than 75 % of the average GDP of the EU-27.

Transition regions: A new category of region – transition regions – will be introduced to replace the current phasing-out and phasing-in system. This category will include all regions with a GDP per capita between 75% and 90% of the EU-27 average.

More developed regions: While interventions in the less developed regions will remain the priority for cohesion policy, there are important challenges that concern all Member States such as global competition in the knowledge-based economy, the shift towards the low carbon economy and social polarisation exacerbated by the current economic climate. This category concerns those regions whose GDP per capita is above 90% of the average GDP of the EU-27.

All regions whose GDP per capita for the 2007-2013 period was less than 75% of the average of the EU-25 for the reference period but whose GDP per capita has grown to more than 75% of the EU-27 average will receive two thirds of their 2007-13 allocation.

Minimum shares for the ESF will be established for each category of regions (25% for convergence regions, 40% for transition, and 52% for competiveness regions).

The CF will support Member States whose GNI per inhabitant is less than 90% of the EU-27 average in making investments in TEN-T transport networks and the environment. Part of the Cohesion Fund allocation (EUR 10 billion) will be ring-fenced to finance core transport networks under the Connecting Europe Facility

Experience with the current financial framework shows that many Member States have difficulties in absorbing large volumes of EU funds over a limited period of time. Furthermore, the fiscal situation in some Member States has made it more difficult to release funds to provide national co-financing. In order to address the issue of absorption of funding the Commission is proposing a number of steps:

– to fix at 2,5% of GDP the capping rates for cohesion allocations;

– capping co-financing rates at the level of each priority axis within the operational programmes at 85% in less developed regions (or in certain cases, 80% and 75%) and outermost regions, 60% in transition regions and 50% in more developed regions;

– to include certain conditions in the partnership contracts regarding the improvement of administrative capacity.


5.2.2. Reinforced strategic programming geared towards results

The Commission proposes a more results-oriented programming process to ensure that cohesion policy programmes have a clear intervention logic, are oriented towards results, and include the appropriate provisions for an integrated approach to development and the effective implementation of the Funds. In particular, the Commission proposes to introduce the Joint Action Plans, which are operations comprising a group of projects as part of an operational programme, with specific objectives, result indicators and outputs agreed between the Member State and the Commission. They offer a simplified management and control system geared towards performance.


5.2.3. Streamlining financial management and control

Management and control system need to find a balance between the costs of management and control and the risks involved.

The Commission's role in the ex ante review of national management and control systems will be proportionate, as an obligatory review by the Commission is replaced by a risk based approach. Small programmes will be exempt from a Commission review. The risk-based approach reduces administrative costs associated with small programmes and solid administrations. It also reinforces assurance, as Commission resources can be used more efficiently and targeted to areas of higher risks.

Electronic data management can be a major source of reductions in administrative burden and at the same time increase the controllability of projects and expenditure. It is therefore proposed to require all Member States to set up systems by the end of 2014 to enable beneficiaries to submit all information by way of electronic data exchange.

One of the complexities associated with the financial management system in the 2007-2013 programming period is the general rule that all supporting documents for individual operations have to be retained until three years after the programme has been closed. The proposal therefore foresees a mandatory annual closure of completed operations or expenditure in the framework of the annual clearance of accounts. This aims to reduce the burden associated with a long retention period of documents for individual beneficiaries and the risks associated with the loss of the audit trail.