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Common rules on EU funds (2021–2027)

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Summaries of EU Legislation

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Common rules on EU funds (2021–2027)

SUMMARY OF:

Regulation (EU) 2021/1060 laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, the Just Transition Fund and the European Maritime, Fisheries and Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the Internal Security Fund and the Instrument for Financial Support for Border Management and Visa Policy

WHAT IS THE AIM OF THE REGULATION?

Known as the common provisions regulation, it sets out a set of common financial rules applying to the following sources of European Union (EU) funding, as well as additional common provisions for the funds marked with an asterisk (*):

the European Regional Development Fund (ERDF) (*);
the European Social Fund Plus (ESF+) (*);
the Cohesion Fund (*);
the Just Transition Fund (JTF) (*);
the European Maritime, Fisheries and Aquaculture Fund (EMFAF) (*);
the Asylum, Migration and Integration Fund;
the Internal Security Fund; and
the Instrument for Financial Support for Border Management and Visa Policy.

KEY POINTS

Five policy objectives

ERDF, ESF+, the Cohesion Fund and EMFAF support the following policy objectives:

a more competitive and smarter Europe, promoting:
- innovative and smart economic transformation,
- regional information and communication technology connectivity;
a greener, low-carbon economy, transitioning towards net zero carbon, promoting:
- a clean and fair energy transition,
- green investment (related to conserving natural resources),
- blue investment (related to oceans, seas and coasts),
- the circular economy,
- climate change mitigation and adaptation,
- risk prevention and management,
- sustainable urban mobility;
a more connected Europe, by enhancing mobility;
a more social and inclusive Europe, implementing the European Pillar of Social Rights; and
a Europe closer to citizens, achieved through the sustainable and integrated development of all types of territories and local initiatives.

Climate targets

The funds should contribute to the mainstreaming of climate actions and to achieving an overall target of 30% of the EU budget expenditure supporting climate objectives. In particular, EU Member States must provide information on how they are supporting environment and climate objectives, with their contribution to the overall target expressed as a percentage of their total ERDF and Cohesion Fund allocation. If there is insufficient progress towards reaching these targets, the Member State and the European Commission agree on remedial measures in the annual review meeting.

Key principles

Member States and the Commission implement the budget allocations based on the following principles.

Shared management between the Commission and Member States. Actions are planned jointly. Member States are responsible for implementing the actions and reimbursing expenditure to beneficiaries, while the Commission monitors implementation, reimburses Member States and is ultimately accountable for the budget.
Partnership and multi-level governance. Member States must organise and implement a comprehensive partnership including at least the following partners:
- regional, local, urban and other public authorities;
- economic and social partners;
- relevant bodies representing civil society, such as environmental partners, non-governmental organisations, and bodies promoting social inclusion, fundamental rights, rights of persons with disabilities, gender equality, and non-discrimination;
- research organisations and universities.
Horizontal principles, ensuring:
- respect for fundamental rights and compliance with the EU Charter of Fundamental Rights;
- that equality between men and women, gender mainstreaming and the integration of a gender perspective, and accessibility for persons with disabilities are taken into account;
- that appropriate steps are taken to prevent any discrimination based on gender, racial or ethnic origin, religion or belief, disability, age or sexual orientation during the preparation, implementation, monitoring, reporting and evaluation of programmes.

Partnership agreement

Each Member State prepares a partnership agreement setting out how they intend to make effective and efficient use of ERDF, ESF+, the Cohesion Fund, JTF and EMFAF for the 2021–2027 period.

Programming

In cooperation with partners, Member States prepare funding programmes for 2021–2027 to be submitted to the Commission no later than 3 months after submitting the partnership agreement. The regulation sets out rules on the following programming aspects:

content;
approval;
amendment;
joint support from ERDF, ESF+, the Cohesion Fund and JTF;
transfer of resources, including special rules for transfers from ERDF and ESF+ to JTF.

Territorial development

The integrated territorial development approach is strengthened and can be supported in any of the following ways:

integrated territorial investment, allowing Member States to combine funding from several funds, programmes or priorities of the same programme to ensure an integrated strategy for a specific territory;
community-led local development, a tool used at the sub-regional level, complementing local-level support to mobilise and involve local communities and organisations, focusing on:
- building capacity,
- implementation of operations, and
- strategy management, monitoring and evaluation, including communication between stakeholders;
other territorial tools designed by the Member State.

Technical assistance

On the Commission’s initiative, the funds may support preparatory, monitoring, control, audit, evaluation, communication, visibility, administrative and technical assistance to implement the regulation and, where appropriate, also in non-EU countries.

On the initiative of a Member State, the funds may support actions for the effective administration and use of the funds, including building the capacity of partners and preparation, training, management, monitoring, evaluation, visibility and communication.

Performance

Member States set up a system to allow them to monitor, report on and evaluate performance, consisting of:

output and result indicators linked to specific objectives;
milestones to be achieved by the end of 2024 for output indicators; and
targets to be achieved by the end of 2029 for output and result indicators.

Monitoring

Each Member State sets up a monitoring committee within 3 months of a programme being approved. The committees meet at least once a year to review progress towards achieving the programme objectives. The Member State determines the composition of the committee and must ensure a balanced representation of the relevant bodies and partner representatives.
Each member of the monitoring committee shall have a vote. The rules of procedure regulate the voting rights and the details on the procedure in the monitoring committee.
Commission representatives participate in a monitoring and advisory capacity.
Annual review meetings between the Commission and each Member State are organised to examine the performance of each programme.

Evaluation

Member States or their managing authorities evaluate the programmes, using functionally independent experts, with the aim of improving programme quality and implementation.

The Commission carries out its own midterm evaluation of each fund by the end of 2024 and a retrospective evaluation by 31 December 2031. The evaluations are based on the following criteria:

effectiveness
efficiency
relevance
coherence
benefit to the EU.

Evaluations may also take into account inclusiveness, non-discrimination and visibility.

In addition, Member States must carry out an evaluation for each programme to assess its impact by 30 June 2029.

Visibility

Each Member State shall ensure both the visibility of support in all activities relating to operations supported by the funds, and the communication to EU citizens of the role and achievements of the funds through a single website portal providing access to all programmes involving that Member State.

In particular, beneficiaries and bodies implementing financial instruments shall acknowledge support from the funds in line with the rules set out by the regulation; if they fail to do so, the managing authority is entitled to apply measures and cancel up to 3% of the support from the funds to the concerned operation.

Financial support

EU financial contribution may take any of the following forms:

financing not linked to costs, based on either fulfilling conditions or achieving results;
reimbursement of grants provided by Member States to beneficiaries;
reimbursement of programme contributions from managing authorities to financial instruments;
eligible unit costs;
lump sums clearly identified in advance;
flat-rate financing identified in advance;
a combination of the above.

Member States use the funds to provide support to beneficiaries in the form of grants, financial instruments or prizes (or a combination thereof).

Eligibility

Eligibility of expenditure is determined by national rules, except where there are specific rules in this regulation or fund-specific regulations.

The following costs are not eligible for a contribution from the funds:

interest on debt, with minor exceptions;
land purchase exceeding 10% of the total eligible expenditure, or 15% for derelict sites and former industrial sites comprising buildings (not applicable if the project involves environmental conservation);
value added tax (VAT), except for:
- operations below €5,000,000 (including VAT),
- operations above €5,000,000 (including VAT) where VAT is non-recoverable under national legislation, or for
- some small project funds and investments under the European territorial cooperation goal (Interreg).

Fund-specific regulations may identify additional costs that are not eligible for a contribution from the particular fund.

Management and control

Member States shall have effectively functioning management and control systems for their programmes and are responsible, among other things, for:

ensuring that programmes function in accordance with the principle of sound financial management and detailed key requirements;
ensuring the legality of expenditure in the accounts submitted to the Commission;
preventing, detecting, correcting and reporting irregularities, including fraud;
ensuring the quality, accuracy and reliability of the monitoring system and of data on indicators;
ensuring that all exchanges of information between beneficiaries and the programme authorities are carried out by means of electronic data exchange systems;
ensuring the publication of information;
having systems and procedures to ensure that all documents required for the audit trail are kept.

The Commission must, among other things:

be satisfied that Member States have effective, efficient and compliant management and control systems;
carry out audits up to 3 years following the acceptance of the accounts, except where fraud is suspected.

The managing authorities are responsible, among other things, for:

selecting operations;
carrying out programme management;
supporting the work of the monitoring committee;
supervising intermediate bodies;
securely recording data on each operation for monitoring, evaluation, financial management, verifications and audits.

The regulation sets out detailed rules for audits carried out by national audit authorities, including:

audits of operations;
single audit arrangements;
reliance on national management systems through enhanced proportionate arrangements.

Financial management

The regulation sets out detailed rules, including for:

budgetary commitments;
repayment;
rules for payments to Member States;
types of payments and common rules applicable;
EU contribution based on unit costs, lump sums and flat rates, and on financing not linked to costs;
interruptions and suspensions;
content, submission and examination of accounts;
balance calculation;
financial corrections;
decommitment (withdrawal) principles, rules, procedures and exceptions.

Financial framework

ERDF, ESF+ and the Cohesion Fund support the investment for jobs and growth goal allocated in all NUTS level 2 regions as set out in Regulation (EC) No 1059/2003, as amended by Regulation (EU) 2016/2066 (see summary).

In particular, resources from EDRF and ESF+ are allocated to the following three categories of regions:

less-developed regions, whose gross domestic product (GDP) per person is less than 75% of the EU-27 (all 27 Member States) average;
transition regions, whose GDP per person is between 75% and 100% of the EU-27 average;
more-developed regions, whose GDP per person is above 100% of the EU-27 average.

The Cohesion Fund supports those Member States whose gross national income per person, measured in purchasing power standards and calculated on the basis of EU figures for the 2015–2017 period, is less than 90% of the average gross national income per person of the EU-27 for the same reference period.

The regulation also details the following:

resources for economic, social and territorial cohesion;
resources for the investment for jobs and growth goal and for Interreg;
transferability of resources; and
the determination of co-financing rates.

Review

The European Parliament and the Council of the European Union must review the regulation by 31 December 2027.

Additional flexibility to address the consequences of Russian aggression in Ukraine

The FAST-CARE amendment (Regulation (EU) 2022/2039) amends the common provisions regulations on the use of EU funds spanning two budgetary periods – the 2014–2020 period (Regulation (EU) No 1303/2013 – see summary) and the 2021–2027 period (Regulation (EU) 2021/1060).

Regarding the 2021–2027 common provisions regulation, the FAST-CARE amendment seeks to ease the burden on Member States’ budgets and facilitate the implementation of operations addressing the challenges arising from Russia’s aggression.

The amending regulation includes the following.

It increases the rate of pre-financing for programmes from ERDF, ESF+ and the Cohesion Fund under the investment for jobs and growth goal by 0.5% in 2022 and 0.5% in 2023 of the total support from the funds set out in the decision approving the programme in all Member States.
It allows for an EU co-financing rate of up to 100% until 30 June 2024 for separate priorities, set up within programmes, that support operations promoting the socioeconomic integration of non-EU nationals. At least 30% of the support within the priority must be granted to beneficiaries that are local authorities and civil society organisations operating in local communities. The total amount programmed under such priorities in a Member State cannot exceed 5% of the initial national allocation of that Member State from ERDF and ESF+ combined. The co-financing rate of up to 100% will be reviewed by 30 June 2024.
A new article (Article 118a) grants eligibility for support in the 2021–2027 programming period to operations with a total cost exceeding €1 million that were selected for support under Regulation (EU) 1303/2013 and had started before 29 June 2022, and allows for direct granting of support by the managing authority, provided that certain important conditions are met.
It also updates Table I in Annex I to Regulation (EU) 2021/1060 to cover the phased operations that would otherwise not have been eligible for support in the 2021–2027 period.

Supporting affordable energy (SAFE)

Amending Regulation (EU) 2023/435 is part of a larger policy change to address the EU’s energy dependency on Russia.

It amends, among other acts, the 2014–2020 common provisions regulation for the use of EU funds (Regulation (EU) No 1303/2013) to address the consequences of the increase in energy prices in all Member States as a result of the Russian invasion of Ukraine.

It also amends the 2021–2027 common provisions regulation, specifically allowing Member States to use up to 7.5% of the 2021–2027 cohesion policy allocation to contribute to REPowerEU objectives. Such measures should remain in line with the fund-specific rules, including the principle of ‘do no significant harm’.

Regulation (EU) 2023/435 also modifies the following acts:

the Recovery and Resilience Facility, specifically by introducing a chapter on REPowerEU in the recovery and resilience plans (Regulation (EU) 2021/241);
the Brexit Adjustment Reserve (Regulation (EU) 2021/1755);
the directive establishing an emissions trading scheme (Directive 2003/87/EC).

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 1 July 2021.

BACKGROUND

MAIN DOCUMENT

Regulation (EU) 2021/1060 of the European Parliament and of the Council of 24 June 2021 laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, the Just Transition Fund and the European Maritime, Fisheries and Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the Internal Security Fund and the Instrument for Financial Support for Border Management and Visa Policy (OJ L 231, 30.6.2021, pp. 159–706).

Successive amendments to Regulation (EU) 2021/1060 have been incorporated into the original text. This consolidated version is of documentary value only.

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