Cohesion Fund

This Regulation establishes the Cohesion Fund which part-finances action in the fields of the environment and transport infrastructure of common interest with a view to promoting economic and social cohesion and solidarity between Member States.

ACTS

Council Regulation (EC) No 1164/94 of 16 May 1994 establishing a Cohesion Fund [See amending acts]

Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded- Annex II: List referred to in Article 20 of the Act of Accession - 15. Regional Policy and coordination of structural instruments [OJ L 236 of 23.9.2003]

CONTENTS

SCOPE

Eligible activities

The Cohesion Fund aims to strengthen the economic and social cohesion of the Community through the balanced financing of projects, technically and financially independent project stages and groups of projects forming a coherent whole, in the fields of the environment and trans-European transport infrastructure networks.

The Cohesion Fund also contributes to preliminary studies related to such projects and their implementation, as well as technical support measures such as comparative studies, impact studies, monitoring and, since entry into force of Regulation (EC) No 1264/1999, publicity and information campaigns.

All projects financed must be compatible with the Treaties and instruments adopted under them and with Community policies, especially those concerned with protection of the environment, transport, trans-European networks, competition and the award of public contracts.

Eligible Member States

Eligibility is restricted to Member States whose per capita gross national product (GNP) is less than 90 % of the Community average and which have a programme designed to achieve the conditions of economic convergence as set out in Article 104 of the Treaty establishing the European Community. At the moment Greece, Spain, Ireland and Portugal are eligible to benefit from the Cohesion Fund. Following enlargement, the 10 new EU Member States are also eligible.

Suspension of eligibility

If the GNP of a Member State benefiting from the Cohesion Fund rises above the 90 % threshold, it may no longer receive funding for new projects or new stages of a project. Accordingly, Regulation (EC) No 1264/1999 provides for a mid-term review before the end of 2003, based on per capita GNP. When this review establishes that a Member State is no longer eligible, financial support from the Cohesion Fund ceases. It was established following the 2003 review that Ireland was no longer eligible under the Cohesion Fund from 1 January 2004.

Conditionality

The conditionality procedure has been changed to allow the Commission to alert the Council if a Member State fails to fulfil its obligations under the stability and convergence programme and allows its public deficit to exceed 3 %, without suspending financing pending the return of until the deficit to 3 %.

Where financing is to be suspended, the Council may exceptionally decide to defer suspension in the case of projects directly affecting more than one Member State.

AVAILABLE RESOURCES

Regulation (EC) No 1264/1999 sets the total resources available for commitments for 2000-06 at EUR 18 billion at 1999 prices. The Act concerning the conditions of accession of the ten new Member States grants a total of EUR 7.59 billion in commitment appropriations at 1999 prices for those countries between 1 May 2004 and 31 December 2006.

How the overall resources of the Fund are allocated among the Member States depends on a number of criteria: each country's population and area, its per capita GNP and socio-economic factors such as the infrastructure it has. However, the total amount that these Member States receive from the Cohesion Fund each year, together with the assistance they receive from the Structural Funds, may not exceed 4 % of their GDP.

FINANCING OF PROJECTS

Approval of projects

The Member States submit their applications for assistance for projects to the European Commission. Applications must contain the information specified in the Regulation (the body responsible for implementing the project, a project description, cost - the total cost may not be less than EUR 10 million -, location, investment timetable, assessment of the impact on employment and the environment, and information on public procurement).

Applications must also comply with certain criteria designed to ensure the quality of projects (generation of medium-term economic and social benefits commensurate with the resources deployed, conformity with the priorities established by the Member States, significant and balanced contribution to Community policies on the environment - including the "polluter pays" principle - and trans-European networks, and consistency with other Community structural measures).

Rate of assistance

The Cohesion Fund contributes a maximum of between 80 % and 85 % of public or equivalent expenditure on projects. However, since 1 January 2000 the Regulation states that it is possible to reduce this rate to take account of any revenue generated by the project and any application of the "polluter pays" principle.

Where projects generate income, as in the case of infrastructure which users pay directly to use and productive investments in the environment sector, the Commission takes account of the income generated when calculating the assistance to be granted by the Cohesion Fund.

Exceptionally, the full cost of preliminary studies and technical support measures may be financed. However, the total expenditure thus incurred may not exceed 0.5 % of the total resources of the Fund.

Overlapping of assistance

No item of expenditure may receive assistance from both the Cohesion Fund and a Structural Fund at the same time. Assistance from the Cohesion Fund, the Structural Funds and other Community aid may not exceed 90 % of the total expenditure on a project.

Financial provisions

Appropriations are committed either by committing 80 % in the grant decision and the 20 % balance later - a "single" undertaking - or, in the case of projects receiving assistance of more than 50 million euros, in annual instalments. The Commission may in appropriate cases commit in one year only the total amount of assistance granted in its Decision.

To qualify for reimbursement, expenditure must have been incurred by the Member State after the date on which the Commission receives the relevant application. A 20 % advance (pre-financing) is paid after the signing of substantial public contracts. Interim payments made after the initial advance must also be closely linked to implementation of the project.

Financial control

Regulation (EC) No 1264/1999 clearly states that the financial control of projects is primarily the responsibility of the Member States. To ensure that the Fund is used in accordance with the principle of sound financial management, they must check that the projects financed are managed correctly, prevent and detect irregularities and recover any amounts lost as a result of irregularities.

The Commission in turn ensures that the Member States' management and auditing systems are functioning smoothly. To that end it may carry out on-the-spot checks, in accordance with the rules on cooperation in Annex II to the Regulation, on systems and projects financed by the Fund. It may also ask Member States to verify the correctness of transactions.

Appraisal, monitoring and evaluation

Before a project is approved, the Commission and the Member States must make an appraisal to assess whether it complies with the Regulation. During its implementation they must make any adjustments needed, and after its completion they must evaluate whether and to what extent the project has achieved its original objectives.

IMPLEMENTATION OF REGULATION (EC) No 1164/94

Council Regulation (EC) No 1265/1999, adopted on the basis of Regulation (EC) No 1164/94, makes a number of changes to the Regulation's implementing rules with a view to improving the use of the Cohesion Fund. The main changes concern the following aspects:

• The definitions of "project", "stages of a project" and "groups of projects" are further clarified
• ex-ante evaluation of projects is made more rigorous in that the Regulation now requires Member States to carry out a more complete study of the alternatives to, and the environmental impact of, the project;
• Financial management: in order to simplify the way in which funds are committed, the Regulation now requires commitments to be made at the start of each financial year. Furthermore, payments must now be made as follows: a single payment in advance of up to 20 % of the assistance from the Fund, followed by interim payments to refund the expenditure certified and actually paid. A balance, usually of 20 %, is paid once the project has been completed;
• Financial corrections: the Regulation sets out clearly the arrangements for financial corrections and introduces various measures to penalise failure to complete projects,
• All Cohesion Fund transactions are to be carried out in euros.

Information and publicity

The Commission must present an annual report on the activities of the Fund and the European Parliament must give its opinion on this report. The Commission must also ensure that Member States give adequate publicity to the measures financed and the possibilities created by the measures.

Review of Regulation (EC) No 1164/94

The Council must review the Regulation by 31 December 2006 at the latest, acting on a proposal from the Commission and on the basis of the assent procedure.

See also

More information on the reform of the structural policy can be found on the website of the Directorate-General for Regional Policy.

RELATED ACTS

Proposal for a Council Regulation of 14 July 2004 establishing a Cohesion Fund [COM(2004) 494 final].

This document proposes the repeal of the current Regulation.

Proposal for a Council Regulation of 14 July 2004 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund [COM(2004) 492 final].

Communication from the Commission to the European Parliament and the Council of 6 September 2004 - The respective responsibilities of the Member States and the Commission in the shared management of the Structural Funds and the Cohesion Fund - Current situation and outlook for the new programming period after 2006 [COM(2004) 580 final].

Commission Communication of 1 July 1999 concerning the Structural Funds and their coordination with the Cohesion Fund - Guidelines for programmes in the period 2000 to 2006 [COM(1999) 344 final - Official Journal C 267 of 22.9.1999].

This communication lays down guidelines to help the Member States and regions draw up their development plans. In that spirit, it lays down the Community priorities that should be reflected in the programming strategies for Objectives 1, 2 and 3. These regional development strategies ensure that the resources of the Structural Funds and, where applicable, the Cohesion Fund, are brought to bear on three priorities:

• increasing the competitiveness of regional economies in order to create sustainable jobs;
• strengthening social cohesion and employment by upgrading human resources.
• promoting urban and rural development in the context of a balanced European territory.

ANNUAL ACTIVITY REPORTS

1998 annual report on the Cohesion Fund [COM(1999) 483 final - Not published in the Official Journal]1999 annual report on the Cohesion Fund [COM(2000) 822 final - Not published in the Official Journal]2000 annual report on the Cohesion Fund [COM(2001) 602 final - Not published in the Official Journal]2001 annual report on the Cohesion Fund [COM(2002) 557 final - Not published in the Official Journal]2002 annual report on the Cohesion Fund [COM(2003) 697 final - Not published in the Official Journal]2003 annual report on the Cohesion Fund [COM(2004) 766 final - Not published in the Official Journal]2004 annual report on the Cohesion Fund [COM(2005) 544 final - Not published in the Official Journal]

DECISIONS TO GRANT FINANCING

Publication of the main points of decisions to grant financial assistance under Regulation (EC) No 1164/94 establishing the Cohesion Fund, as amended by Council Regulations (EC) No 1264/1999 and (EC) No 1265/1999:Official Journal C 361 of 17.12.2001;Official Journal C 126 of 28.5.2002.

List of projects costing more than EUR 50 million, in accordance with Community legislation on the environment - 1999 [Official Journal C 303 of 24.10.2000].

RECOVERY OF SUMS WRONGLY PAID

Commission Regulation (EC) No 1831/94 of 26 July 1994 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the Cohesion Fund and the organization of an information system in this field [Official Journal L 191 of 27.7.1994].

This Regulation, adopted on the basis of Regulation (EC) No 1164/94, sets out certain responsibilities of the Member States and the European Commission concerning financial control for the Cohesion Fund.

It requires Member States to communicate to the Commission:

• the provisions and national bodies through which they carry out financial control,
• details of irregularities which have been the subject of initial administrative or judicial investigations,
• a progress report on procedures instituted to recover amounts wrongly paid.

The Commission must, for its part, brief the Member States through the Advisory Committee for the Coordination of Fraud Prevention, and may also agree to cover the legal costs of Member States. All these exchanges of information are subject to the rules of confidentiality.

MANAGEMENT, CONTROL AND FINANCING CORRECTIONS

Commission Regulation (EC) No 1386/2002 of 29 July 2002 laying down detailed rules for the implementation of Council Regulation (EC) No 1164/94 as regards the management and control systems for assistance granted from the Cohesion Fund and the procedure for making financial corrections [Official Journal L 201 of 31.7.2002]

This Regulation lays down the principles on which the Member States must base their management and control arrangements. It also sets out the principles and procedures to be applied by the Commission in cases where all or part of the assistance granted is cancelled as the result of an irregularity. The Regulation applies to projects first approved after 1 January 2000.

INFORMATION AND PUBLICITY

Commission Regulation (EC) No 621/2004 of 1 April 2004 laying down rules for implementing Council Regulation (EC) No 1164/94 as regards information and publicity measures concerning the activities of the Cohesion Fund [Official Journal L 98 of 2.4.2004]

Consistency is needed between the information and publicity activities for the Structural Funds and for the Cohesion Fund. The information actions and tools include the following: an explanation of the role of the European Union and the European flag. Compulsory measures include: the erection of billboards giving the rate of Cohesion Fund part-financing and later commemoratives plaques and where the total cost of a project is more than EUR 50 million, the organisation of press conferences. In order to achieve the public-awareness objective, other measures may be taken such as displaying posters, producing publications and videos and creating pages on the Internet.

ELIGIBLE EXPENDITURE

Communication from the Commission to the Council and the European Parliament on the results of the eligibility mid-term review in accordance with Article 2 of the Council Regulation (EC) No 1164/1994 establishing a cohesion fund [COM(2004)191 final - Not published in the Official Journal]

Commission Regulation (EC) No 16/2003 of 6 January 2003 laying down special detailed rules for implementing Council Regulation (EC) No 1164/94 as regards eligibility of expenditure in the context of measures part-financed by the Cohesion Fund [Official Journal L2 of 7.1.2003]

To ensure that part-financed measures receive uniform treatment, this Regulation specifies the period of eligibility and the various categories of eligible expenditure compatible with Community rules on the award of public contracts and competition. The categories of eligible expenditure are: planning and design, land purchase, site preparation, construction, equipment, project management, and expenditure on publicity and information measures.

Last updated: 09.01.2006