1. ESF Technical Working Group Tallinn, 28 November 2017
Mid-Term Review of the Multiannual Financial Framework (MFF) – Amendments to the Common Provisions Regulation (CPR) on the ESI Funds and the ESF Regulation
ESF Technical Working Group
Tallinn, 28 November 2017

2. Overview of the presentation
State of play of the trilogues
Objective of the amendments proposed by the Commission on as part of the package on the Mid-Term Review of the MFF – COM(2016)605 – See Article 265 (amendments to the CPR) and Article (amendments to the ESF Regulation) of the 'Omnibus' Regulation.
Overview of the provisional agreement reached by the co-legislators on the CPR and on the ESF Regulation
Next steps

3. A. State of play of the trilogues on the Financial Regulation and Omnibus Regulation
Trilogues Financial Regulation:
still open issues, but aim to reach political agreement end of 2017
Council and EP against the possibility to transfer resources allocated under shared management to other EU instruments under direct or indirect management (Art. 125 FR, linked to Art. 30a CPR)
Trilogues CPR: provisional agreement reached (in packages) on – Final trilogue on
Trilogues ESF Regulation: provisional agreement reached on

4. B. Objective of the revision of Financial Regulation incl
B. Objective of the revision of Financial Regulation incl. "Omnibus" Regulation
Focus of proposed amendments for the ESI Funds:
Reducing administrative burden for beneficiaries:
Improving synergies with other EU instruments
Streamlining financial instruments
Increasing flexibility for investments in Member States
Proposals took account of first recommendations by the High Level Group monitoring simplification for beneficiaries of ESI Funds

5. C. Overview of the provisional agreement reached by the co-legislators on the CPR and on the ESF Regulation
Amendments to the CPR
I. Reducing the administrative burden
Simplified cost options (SCOs)
Joint Action Plans (JAPs)
II. Improving synergies with other EU instruments
III. Increasing flexibility for investments in Member States
IV. Other changes in the CPR contributing to simplification and legal certainty
Amendments to the ESF Regulation

6. I. Reducing the administrative burden Simplified cost options - Overview
Type of SCOs/Forms of support for grants & repayable assistance
Methodologies for establishing SCOs
Additional options for calculating staff costs
Off the shelf flat rate for calculating remaining eligible costs (other than direct staff costs)
Mandatory use of SCOs
Compatibility of SCOs and State aid
Use of SCOs and public procurement
Management verifications for SCOs

7. I. Reducing the administrative burden 1
I. Reducing the administrative burden 1. Type of SCOs/Forms of support for grants & repayable assistance
Lump sums: removal of the upper limit (Art. 67(1)(c) CPR)
Introduction of a new form for grants and repayable assistance: financing based on the fulfilment of conditions related to progress in implementation or the achievement of objectives of programmes - to be defined in delegated acts - linked to Art. 121 FR (Art. 67(1)(e) and (5a) CPR)
Audit shall exclusively aim at verifying that the conditions for reimbursement have been fulfilled.

8. I. Reducing the administrative burden – 2
I. Reducing the administrative burden – 2. Methodologies for establishing SCOs
The fair, equitable and verifiable calculation method may also be based on an expert judgement (Art. 67(5)(a)(i) CPR)
Additional methodology for determining a SCO: use of a draft budget on a case by case basis and agreed ex ante by the managing authority in case the public support does not exceed EUR (Art. 67(5)(a)(bis) CPR)
Off the shelf SCOs: possibility for COM to adopt delegated acts for the definition of standard scales of unit costs and flat rates and related methods (Art. 67(5a) CPR)

9. I. Reducing the administrative burden –. 3
I. Reducing the administrative burden – 3. Additional options for calculating staff costs (1)
Direct staff costs:
Flat rate of up to 20% of the direct costs other than staff costs (from ETC Regulation).
No need to perform a calculation to establish the applicable rate provided the direct costs of the operation do not include public works contracts above threshold in the public procurement directive (Art. 68a(1) CPR) (See also use of SCOs and public procurement)

10. I. Reducing the administrative burden –. 3
I. Reducing the administrative burden – 3. Additional options for calculating staff costs (2)
Rules for calculating an hourly rate for staff costs (latest documented annual gross employment cost/1720 hours) have been clarified (Art. 68a(2)(3) and (4) CPR):
in case of part-time work: pro rata
in case annual gross employment costs are not available: use available data or employment contract adjusted for a 12 month period
Number of hours declared/year cannot exceed the number of hours used for the calculation of the hourly rate

11. I. Reducing the administrative burden –. 3
I. Reducing the administrative burden – 3. Additional options for calculating staff costs (3)
Specific provision on staff costs for staff working on part-time assignment on an operation (Art. 68a(5) CPR):
fixed percentage of the gross employment costs
no need for separate working time registration, but employer to set out the fixed percentage in a document

12. I. Reducing the administrative burden – 4
I. Reducing the administrative burden – 4. Calculating remaining eligible costs
Remaining eligible costs (other than direct staff costs): flat rate of up to 40% of eligible direct staff costs (Art. 68b CPR)
No requirement to execute any calculation to determine the applicable rate
New provision clarifies that the allowances and salaries paid to participants are not included in the 'remaining eligible costs', but are additional eligible costs.
Cannot be applied to staff costs calculated on the basis of a flat rate.

13. I. Reducing the administrative burden 5. Mandatory use of SCOs (1)
Compulsory use of SCOs for ERDF and ESF grants/repayable assistance where the public support does not exceed EUR for operations not implemented exclusively through public procurement (moved from ESF Regulation) - (Art. 67(2a) CPR)
Does not apply to operations for which the support constitutes State aid, except when the support constitutes de minimis aid  applies in case of de minimis aid
In case of flat rate financing: costs to which the flat rate is applied may be reimbursed as real costs
In case the 40% flat rate (remaining eligible costs) is used, the salaries and allowances paid to participants may be reimbursed as real costs.

14. I. Reducing the administrative burden 5. Mandatory use of SCOs (2)
Transitional period (Art. 152(4) CPR)
The Managing Authority (MA) may decide not to apply the provision during 12 months following entry into force of the Omnibus Regulation.
MA may extend this period for a period it considers necessary if it considers that the obligation constitutes a disproportionate administrative burden. Need to notify the COM prior to the expiry of this period.
Transitional period does not apply to the operations currently covered by Art. 14(4) ESF Regulation (operations for which the public support does not exceed EUR ).

15. I. Reducing the administrative burden 6
I. Reducing the administrative burden 6. Compatibility of SCOs and State aid (1)
COM fiche recalling the principles (for the discussions in the Council):
All operations supported by the ESI Funds have to comply with applicable Union law and the national law relating to its application
De minimis aid, i.e. support meeting the conditions of Regulation (EU) No 1407/2013, does not constitute State
aid
 Need to comply with the conditions set out in the de minimis Regulation
Rules on SCOs and State aid rules are compatible - SCO Guidance
Need to comply with both the ESI Funds rules and the State aid rules on eligibility of categories of costs
SCOs must be a reliable proxy for the real costs

16. I. Reducing the administrative burden 6
I. Reducing the administrative burden 6. Compatibility of SCOs and State aid (2)
General Block Exemption Regulation (as amended by Regulation (EU) 2017/1084) contains a specific provision on the use of SCOs (in Art. 7(1) GBER):
‘The amounts of eligible costs may be calculated in accordance with the simplified cost options set out in Regulation (EU) No 1303/2013 of the European Parliament and of the Council, provided that the operation is at least partly financed through a Union fund that allows the use of those simplified cost options and that the category of costs is eligible according to the relevant exemption provision.'
 MA to set out in the ‘document setting out the conditions for support’ the eligible costs that are covered by the SCO – These costs need to be eligible on the basis of the GBER.

17. ESI Funds support constitutes State aid - How to check compliance with the GBER when SCOs are used? (1)
Verifying the eligibility of costs under the GBER and the ESI Funds rules
Is the cost category eligible under the relevant exemption provision of the GBER ?
Does the methodology used for establishing the SCO only include categories of costs eligible under the GBER (and under the ESI Funds)?
For 'off-the-shelf' SCOs: does the call for proposals only include categories of costs eligible under the GBER (and the ESI Funds)?
document setting out the conditions for support (provided to the beneficiary) to list the categories of costs considered eligible

18. ESI Funds support constitutes State aid - How to check compliance with the GBER when SCOs are used? (2)
Verifying maximum aid intensity
Amount established by an SCO to be used to verify compliance with the GBER
 similar to what is done when using real costs

19. I. Reducing the administrative burden 7
I. Reducing the administrative burden 7. Use of SCOs and public procurement
No COM proposal on the relevant provision (Art. 67(4) CPR)
Excluded from the use of SCOs are: operations ‘implemented exclusively through the public procurement of works, goods or services’
Not excluded are: operations implemented by the beneficiary where PP is limited to certain categories of costs: use of SCOs is possible and may cover the entire operation - See SCO Guidance – section
Agreement to amend the CPR to make this explicit:
"Where the public procurement within an operation or project forming part of an operation is limited to certain categories of costs, all the options referred to in paragraph 1 [i.e. Art. 67(1) CPR] may be applied for the whole operation or project forming a part of an operation.“

20. I. Reducing the administrative burden – 8. Management verifications
Clarification on management verifications when SCOs are used: managing authority has to verify that conditions for reimbursement of expenditure are met (no need to verify expenditure) (Art. 125(4)(a) CPR)
Provision to apply retroactively

21. I. Reducing the administrative burden – Encourage use of Joint Action Plans (JAP)
Lower requirements for minimum public expenditure allocated to a JAP (EUR 5 Mio. instead of EUR 10 Mio.) and for the share of public support of OP (5 % instead of 20%) (Art. 104(2) CPR)
No minimum requirements for first JAP submitted under the Investment for Growth and Jobs and ETC goals (Art. 104(3) CPR)
Various changes to reduce content requirements for the JAP (Art. 106 CPR)
Adaptation of coverage of COM decision approving the JAP (Art. 107 CPR)
No need for JAP steering committee to be distinct from programme monitoring committee (Art. 108 CPR)

22. II. Improving synergies with other EU instruments
Changes on eligibility of expenditure to improve synergies with other EU Funds: provision allowing expenditure to be reimbursed from different ESI Funds, programmes and Union instruments on a pro rata basis in accordance with the document setting out the conditions of support (Art. 65(11) CPR)
Migration and asylum highlighted as horizontal priority for all ESI Funds. Need to ensure coordination with the Asylum, Migration and Integration Fund (AMIF), where appropriate (Art. 9 CPR)

23. III. Increasing flexibility for investments in Member States
Streamlining of procedures for the amendment of the Partnership Agreement (PA) through an annual alignment exercise (Art. 16 (4a) and Art. 30(2) and (3) CPR)
What is it ? When a programme is amended and this affects information in the PA, the corresponding amendment of the PA can be delayed and be part of the annual alignment exercise.
How does it work?
By of year N+1: MS submits an amended PA with the corresponding amendments to the programmes adopted by the COM in year N
By of year N+1: COM adopts a decision on the PA confirming that these PA amendments reflect the programme amendments which the COM approved in year N
In case the MS wants to include additional amendments to the PA as part of the annual alignment exercise: submission deadline is of year N

24. IV. Other changes in the CPR contributing to simplification (1)
Increased legal certainty for electronic documents: no originals are required if the national rules for certification of conformity are complied with (Art. 140(3) CPR)
Clarifications on obligations on information and communication: apply to beneficiaries as from when they obtain the document setting out the conditions for support to the operation (Art. 115 and Annex XII CPR)

25. IV. Other changes in the CPR contributing to simplification (2)
Extension of the exemption to deduct net revenue for operations generating net revenue only during implementation (now for operations with total eligible cost below EUR instead of EUR ) (Art. 65 (8) CPR)
Clarification on the use of cross-financing : need to comply with the rules applicable to the other Fund (Art. 98 (2) CPR)

26. IV. Other changes in the CPR contributing to simplification (3)
Single audit (Art. 148(1) CPR)
Ceilings for small operations subject to one audit by AA or COM (prior to the submission of the accounts for the accounting year in which the operations are completed) are doubled
Introduction of an 'escape' clause so as to ensure that the AA can audit a sufficient number of operations to obtain assurance

27. IV. Other changes in the CPR (4)
Definition of beneficiary (Art. 2(10) CPR):
inclusion of natural persons as beneficiaries of cohesion policy support
in the context of State aid schemes where the aid per undertaking is less than EUR : flexibility for MS to decide that the beneficiary is the body granting the aid (and not the body receiving the aid). This is without prejudice to the de minimis Regulation.
This leads to consequential amendments in the provision on the content of the payment application (Art. 131 CPR).

28. IV. Other changes in the CPR (5)
Definition of macroregional strategy: 'agreed by the Council and, where appropriate, endorsed by the European Council' as it may happen that some macroregional strategies are not be endorsed by the European Council
Clarification of rules for community-led local development and ITIs (Art. 32, 34 and 36 CPR). However, the clarification proposed by the COM when the LAG is not an intermediate body (IB), i.e. that the operations (before final approval by the LAG) need to be submitted to the MA or an IB for final verification of eligibility, was not endorsed by the co-legislators.
- Commission will issue a declaration

29. IV. Other changes in the CPR (6)
Commission powers and responsibilities M&C (Art. 75(2) CPR)
Deadlines imposed on the COM :
Deadline of 3 months (from the end date of the audit) for the COM to present its draft audit report.
Deadline of 3 months (from the date of receiving a complete reply from the MS to the draft audit report) for the COM to present its final audit report
Reports to be made available in at least in one of the official languages of the Union in order to comply with the deadline

30. IV. Other changes in the CPR (7)
Multiple provisions on visibility
Following EP amendments and based on Commission drafting suggestions striking a balance between achieving increased visibility without additional administrative burden, but making already existing obligations more explicit.
No earmarking for communication and visibility actions in TA budget of MS, but in TA budget of COM: at least 15% of COM TA budget to be devoted to communication and visibility

31. IV. Other changes in the CPR (8)
Additional possibilities for the implementation of operations covering different programme areas (Art. 70 CPR and Art. 13 ESF)
Operations concerning the provision of services to citizens or businesses covering the entire territory of the MS: pro rata based on objective criteria
Operations implemented outside the programme area with also benefits for the programme area in which they are implemented: pro rata based on objective criteria
Increasing flexibility for the use of the ESI Funds for technical assistance and clarifications on the calculations of ceilings (Art. 59 and 119 CPR)

32. V. Amendments to the ESF Regulation
Clarification on operations implemented outside the programme area (Art. 13 ESF - similar to Art. 70(2a) CPR)
Deletion of provisions on SCOs which have been moved to the CPR, i.e.
Compulsory use of SCOs for small operations
40% flat rate on direct staff costs to cover remaining costs of the operation. The CPR clarifies that remaining costs do not include salaries and allowances paid to participants.
But reference to the CPR
Deletion of the common indicators on the household situation

33. D. Next steps
Commitment of co-legislators to reach an agreement as soon as possible
CPR:
Technical meeting on (TBC) on drafting of some recitals and retroactive application
Council discussion in SMWP: or
Final trilogue on the CPR on
ESF Regulation
No further trilogues
Financial Regulation
Aim to have a political agreement by end of 2017
Technical meetings until mid-February to 'translate' the politically agreed principles
Entry into force: Spring 2018

34. Thank you!