Common rules for the European Structural and Investment Funds (2014–2020)

KEY POINTS

• The ESI funds consist of five funds:
  • the European Regional Development Fund (ERDF);
  • the European Social Fund (ESF);
  • the Cohesion Fund (CF);
  • the European Agricultural Fund for Rural Development (EAFRD);
  • the European Maritime and Fisheries Fund (EMFF).
• The shared objective of investments under the ESI funds is to provide support for the delivery of smart, sustainable and inclusive growth.
• The regulation:
  • defines common principles, rules and standards for the use and implementation of the ESI funds;
  • sets out common rules for the ESI funds to improve coordination between them and other EU policies and programmes, such as Horizon 2020, which has since been replaced by Horizon Europe;
  • defines the tasks, priority objectives and organisation of the funds;
  • draws particular attention to the relationship between this regulation and the other regulations specific to each fund;
  • sets out the principle of thematic concentration to ensure that investments are concentrated on a limited number of core priorities;
  • puts a stronger focus on results:
    • a performance framework with objectives and targets is set out,
    • an annual review meeting takes place between each Member State and the European Commission,
    • a performance review of the programmes was to be carried out in each Member State in 2019;
  • introduces conditionalities (prerequisites designed to ensure that the necessary means to make effective use of EU support are in place);
  • sets out the allocation of resources for the investment for growth and jobs goal among three categories of regions, according to their gross domestic product per capita: less-developed regions, regions in transition from one level of support to another and more-developed regions.
• The Commission has adopted a decision setting out the list of regions fulfilling the criteria of the three categories of regions.
• Criteria are set out that Member States and regions have to satisfy in order to be eligible for support from the funds. Resources should be allocated from the ERDF and the ESF among the less-developed regions, the regions in transition and the more-developed regions, according to their gross domestic product per capita. As Member States vary considerably in their types of administrative and planning areas, the EU has devised a common system of classification for selecting regions and areas to be supported. The financial resources available and the criteria for their allocation are specified.
• The ESI funds deliver support through multiannual programmes on the basis of partnership agreements developed for each Member State. A partnership agreement is a document setting out the overall investment strategy of a Member State and agreed with the Commission. It is prepared by the Member State in accordance with its own systems and procedures and involves partners who represent regional and local public authorities, along with a wide range of social, economic, environmental stakeholders and other interests.

Court of Auditors report

• In 2017, the European Court of Auditors published a report on the partnership agreements signed between the Commission and Member States.
• The report concluded that the funds have focused on growth and jobs, identified investment needs and successfully translated these into objectives and results. However, it also noted that too many performance indicators have been developed and that performance measurements are not harmonised across the various funds.

COVID-19 pandemic – amendments to the regulation

• Regulation (EU) 2020/460 amends Regulation (EU) No 1303/2013 as regards specific measures to mobilise investments in Member States’ healthcare systems and other sectors of their economies in response to the COVID-19 outbreak (coronavirus response investment initiative).
• Regulation (EU) 2020/558 amends Regulation (EU) No 1303/2013 as regards specific measures to provide exceptional flexibility to Member States for the use of ESI funds in response to the COVID-19 outbreak. It offers them the possibility to mobilise all unused support from the ERDF, ESF and CF.
• Regulation (EU) 2020/2221 amends Regulation (EU) No 1303/2013, introducing exceptional additional resources and implementing arrangements under the investment for growth and jobs goal and the European territorial cooperation goal, to provide assistance to enable crisis repair in the context of the COVID-19 pandemic and preparing a green, digital and resilient recovery of the economy.

Extension of the period of the regulation’s application to EAFRD programmes

Regulation (EU) 2020/2220 extends to 31 December 2022 both the application of Regulation (EU) No 1303/2013 to programmes supported by the EAFRD and the period of duration of those programmes. This is subject to the submission of a request to amend the relevant rural development programmes for the 2-year transitional period, which will run until the new common agricultural policy is implemented as of 1 January 2023.

Cohesion’s Action for Refugees in Europe (CARE)

Following Russia’s invasion of Ukraine, Regulation (EU) 2022/562 amends Regulation (EU) No 1303/2013 in the following ways.

• Allows cross-financing between ERDF and ESF funds to address the inflow of refugees. For example, this allows Member States to reallocate resources previously earmarked for infrastructure projects to be redirected for healthcare and education.
• Allows greater flexibility to redirect unspent cohesion policy funding from the 2014–2020 budgetary period, including REACT-EU.
• Extends by 1 accounting year the 100% financing from the EU budget for cohesion programmes (as opposed to the obligatory national co-financing under normal circumstances) to alleviate the burden on national and regional budgets.
• Allows reimbursement of operations which tackled the migratory challenges but started before a formal request could be made to the Commission. Such projects are eligible as of 24 February 2022, as long as they comply with fund-specific rules.

Increase of pre-financing from REACT-EU resources and the establishment of a unit cost (CARE+)

To complement these measures, a second amendment was introduced to increase the pre-financing from REACT-EU resources and to establish a unit cost per person, known as CARE+ (Regulation (EU) 2022/613). The main purpose of this regulation was to provide additional liquidity and simplify administrative procedures relating to expenditure.

The increased pre-financing came from the REACT-EU budget, where all Member States received an additional 4%, thereby increasing the pre-financing rate from 11% to 15%. Moreover, the Member States which border Ukraine or had an inflow of refugees exceeding 1% of their populations in the first month following the Russian invasion received an additional 34%, increasing their pre-financing rate from 11% to 45%. These nine Member States are Bulgaria, Czechia, Estonia, Lithuania, Hungary, Austria, Poland, Romania and Slovakia.

The EU-level simplified cost option aims to significantly reduce administrative burden so that efforts can be focused on the achievement of broader policy objectives, and lengthy management and control verifications will not delay implementation. Instead of providing documentation for each purchase (for example, blankets, hygiene items, basic food and personal items), the managing authority can simply claim a unit cost of €40 per week per person with a temporary protection (or other adequate protection under national law) for a maximum of 13 weeks. This option may effectively address the costs borne by the non-governmental organisations and the local authorities who provided immediate support at the border from the first day of the invasion. The simplified cost option was enhanced further by the FAST-CARE amendment, increasing the amount to €100 per week per person and extending the support to 26 weeks (see below).

Flexible assistance for territories – FAST-CARE

Regulation (EU) 2022/2039 amends Regulation (EU) No 1303/2013 and the regulation laying down the rules for the 2021–2027 period, Regulation (EU) 2021/1060 (see summary). As it concerns the modifications of the 2014-2020 common provisions regulation, the rules aim at introducing greater flexibility to help optimise the use of the resources from the 2014–2020 programming period and to allow a smoother phasing-in of delayed projects between the 2014–2020 and 2021–2027 programmes.

• Exceptionally, for operations addressing migratory challenges resulting from Russia’s military aggression, it allows for an exemption from the requirements linked to the location of the operation within a given Member State, given that people fleeing the war may move to multiple locations after their arrival.
• It introduces the possibility to declare expenditure for operations which are already physically completed or fully implemented, and introduces flexibilities between funds, allowing the use of the Cohesion Fund for operations addressing the migratory challenges resulting from the Russian military aggression against Ukraine, and between thematic objectives, allowing for transfers within programmes.
• It allows for a co-financing rate of up to 100% that can be applied to a separate priority axis established within a programme to promote the socioeconomic integration of non-EU nationals, including those dedicated to operations addressing migratory challenges as a result of the Russian military aggression. At least 30% of the financial allocation of such a separate priority must be allocated to operations whose beneficiaries are local authorities or civil society organisations active at the local community level.
• It relaxes the criteria to ‘phase’ projects between the 2014–2020 and 2021–2027 budgetary periods by decreasing the minimum limit of the total cost of the project from €5 million to €1 million for it to be eligible for phasing, among other specific criteria. This effectively transfers the remaining parts of the project to the next programming period, thereby releasing resources in the 2014–2020 period. These can in turn be used to address the migratory challenges, if the Member State so wishes.
• It enhances the simplified cost option by increasing the unit cost amount from €40 to €100 per week per person and by prolonging the support from 13 weeks to 26 weeks. This applies to all people who have requested and received temporary protection or other adequate protection under national law.
• It increases flexibility at the closure of 2014-2020 programmes by increasing payments of the final balance for each priority per fund and per category of regions in the final accounting year from 10% to 15%. This means that if, for example, one priority axis (a specific type of investment) was over-contracted by 15%, this amount can be financed by another priority axis which has underperformed by the same amount, as long as it concerns the same programme, the same category of region and the same fund.

Supporting affordable energy (SAFE)

As part of the amendments included in Regulation (EU) 2023/435, the targeted and exceptional changes to the 2014-2020 common provisions regulation, known as SAFE, aim at supporting Member States and regions facing the challenges resulting from the current energy crisis.

Specifically, SAFE allows for:

• financing working capital of small and medium-sized enterprises particularly affected by the energy price increase, in line with the applicable State aid rules;
• financing energy consumption costs of vulnerable households in order to address energy poverty;
• providing enhanced support to short-time work schemes for maintaining jobs of employees and self-employed people through the possible use of ERDF, the Cohesion Fund and ESF.

These targeted changes are based on on the same rules as the previous flexibilities offered by CARE and FAST-CARE:

• All cohesion policy funds (ERDF, ESF and Cohesion Fund) may be used to offer support to these measures through cross-financing, and REACT-EU resources may also be used.
• Resources from any of the three categories of regions (more developed, transition and less developed) may be used to support these measures, removing the obligation linked with the location of the operation.
• All the proposed actions may benefit from 100% EU co-financing.
• Expenditure will be eligible from 1 February 2022 until the end of 2023, including already completed operations.
• The budget for these exceptional measures may amount to maximum 10% of the total national cohesion policy funds allocation for 2014–2020.
• Payments from the Commission to Member States must not exceed €5 billion in 2023.