# EUR-Lex - 52011SC1142 - EN

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# 52011SC1142

**COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT /* SEC/2011/1142 final */**

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1. 
Executive summary

This is the Impact
Assessment of the legislative proposal for a regulation laying down common
provisions on the European Regional Development Fund, the European Social Fund,
the Cohesion Fund, the European Agricultural Fund for Rural Development and the
European Maritime and Fisheries Fund covered by the Common Strategic Framework
and laying down general provisions on the European Regional Development Fund,
the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No
1083/2006. (Common provisions regulation). It covers issues related to the
European Regional Development Fund (ERDF), European Social Fund (ESF) and
Cohesion Fund for the post 2013 programming period. It is complemented by
impact assessments for the European Agricultural Fund for Rural Development and
for the European Maritime and Fisheries Fund.  It is part of a package of
Impact Assessments which also includes the Impact Assessment of the ERDF,
Cohesion Fund and ETC Regulations, and the Impact Assessment of the ESF
Regulation.

Extensive public
consultations have been carried out such as the High Level Group on future
Cohesion Policy, a Task Force on Conditionality, and a
public consultation between 12 November 2010 and 31 January 2011 on the Conclusions
of the Fifth Cohesion report.[1]

The 5th
Cohesion Report and the ex-post evaluations of the different 2000-2006
programmes provide evidence that cohesion policy has made a significant
contribution to spreading growth and prosperity across the Union delivering European policy priorities, while
reducing economic, social and territorial disparities[2].
However, there are a number of problems which need to be addressed.

1.1. 
Problem related to the capacity to deliver
European added value

a) Geographical distribution of support

The problem relates to the
optimal geographical coverage of cohesion policy. Some argue that full coverage
needs to remain in place in order to support the Europe 2020 Strategy in all
regions and further reduce disparities across the Union. Others argue that with
ever increasing pressure on public finances, better use can be made of
resources allocated to richer regions.

b) Concentrate on a limited number of priorities in line with the
Europe 2020 strategy

There is a strong
rationale for cohesion policy to concentrate on EU priorities. The
Europe 2020 strategy provides both a clear set of common objectives, including
headline targets and flagship initiatives and a clear framework for
identification of funding priorities. Thus the explicit
linkage of cohesion policy and Europe 2020 provides the opportunity both to continue
to help the poorer regions of the EU to catch up, and to further develop cohesion
policy into an important enabler of growth for the whole of the EU. For this to
occur, a number of problems need to be addressed.

a) 
Lack of concentration on strategic objectives. A number of studies and ex-post evaluations have identified
problems with insufficient concentration on strategic objectives, insufficient
performance orientation and lack of incentives to promote concentration on delivering
results. There have been attempts to address the issue of greater concentration
on strategic priorities and objectives in the 2007-2013 period, but with
limited impact.

b) 
Lack of predictability of funding volumes for
the ESF. Despite the importance of jobs and skills
to the Europe 2020 Strategy, over the last four programming periods the
importance of the ratio of ESF to (ESF, ERDF and CF) allocations has declined
steadily from 40% in 1989-1993 to 22% in the current programming period.

c) 
Insufficient coordination. Related to the two problems mentioned above is the issue of insufficient
coordination and complementarity between the different funds (ESF, ERDF and CF)
and other EU policies and financial instruments as well as Member State
National Reform Programmes. On coordination, stakeholders often complain about
the complexity generated by overlapping schemes or by lack of coordination at
strategic level.

1.2. 
Problems related to the performance of the
policy

As a policy based on the
principles of shared management, cohesion policy has often been characterised
by a tension between on the one hand focusing on delivering the best possible
results and on the other having a predictable financial allocation over a 7
year period with strict time-limited spending requirements.

Policy,
regulatory and institutional framework conditions

The effectiveness of the
structural funds depends on sound macroeconomic policies, a favourable
microeconomic environment and a strong institutional framework.

Macro-fiscal
conditions

The current regulatory
framework foresees macro-fiscal conditionality in the Cohesion Fund to
reinforce the implementation of the stability and convergence programmes and
avoid excessive deficit. There is scope to revise existing rules and align it
with the new SGP enforcement measures to be adopted as part of the Sixth
Economic Governance Package.

Performance in
terms of reaching objectives and targets set

Although the ex-post
evaluations of the 2000-2006 period suggest that cohesion policy has generated significant
and immediate spill-overs to domestic policies, particularly in areas of
strategic planning, evaluation culture, and performance orientation in national
policies, a number of problems still exist with regard to monitoring and
evaluation, making it difficult to judge performance.

1.3. 
Problems related to the delivery of the policy

Sound,
effective and efficient management of the delivery of cohesion policy resources
requires appropriate, effective and transparent structures in national and
regional administrations.

1.4. 
Justification for EU action

EU action is justified
both on the grounds of the objectives laid out in Article 174 of the Treaty and
on the subsidiarity principle. The right to act is constituted by Article 3 of
the Treaty on European Union, which states that "[the Union] shall promote
economic, social and territorial cohesion and solidarity among Member
States", as well as by Article 175 of the TFEU which explicitly requests
the Union to implement this policy by means of Structural Funds, and Article
177 which defines the role of the Cohesion Fund. The aims of European Social
Fund (ESF), European Regional Development Fund (ERDF) and Cohesion Fund (CF)
are defined in Articles 162, 176 and 177.

2. 
Objectives

The general objective
is defined in the Treaty to promote balanced and harmonious development of Member States and regions and reduce disparities between the levels of development of the various
regions and the backwardness of the least favoured regions.

The specific objectives
are to assist Member States and regions to promote smart, sustainable and
inclusive growth in line with the Europe 2020 strategy by addressing the
specific problems. Given the scope of this IA, the specific objectives are to
ensure that the Structural Funds and the Cohesion Fund are spent in:

· 
a way which provides a high European value
added,

· 
an effective way
– which means that they are used in a way to achieve maximum impact,

· 
an efficient way
– minimizing inefficiencies by unnecessary administrative requirements or
overly complicated procedures and incentivising the efficient use of resources.

Such general issues
translate into the following operational policy objectives:

· 
concentrating cohesion
policy resources on developing the framework conditions for sustainable
development and growth is needed to achieve the highest European added value,

· 
providing the appropriate mechanisms within the
regulations to allow for full alignment with the Europe 2020 strategy,
objectives and headline targets,

· 
ensuring the optimal coordination between
the Funds themselves and with other financial instruments,

· 
setting clear and measurable targets,

· 
striking the right balance between on the one
hand, low administrative costs/administrative burden for managing authorities
and beneficiaries, and minimising the risk to the EU budget.

3. 
Options, analysis and comparison

On 29 June 2011, the Commission adopted a proposal for the
multi-annual financial framework for the period 2014-2020 which called for
strengthening the effectiveness of cohesion spending. A number of options
reflect the proposal in their design.

3.1. 
Delivering European added value

Under geographical
concentration of support, Option 1 envisages a no-change scenario with
concentration of support on less developed regions and current convergence regions which exceed the 75% threshold would
benefit from phasing-out support. Option 2 would be similar but with the main
difference that a new transition category would be established replacing the
current statistical phasing-out and phasing-in regimes. Option 3 would present
a more radical approach, with no cohesion policy support outside Member States
with an average GNI/head of less than 90% of the Union's average per capita. Under
Option 3, phasing-in and statistical phasing-out regions as well as
Competitiveness regions would not be eligible for cohesion policy
interventions.

Table 1: Budget allocation for each Option

|| Option 1 || Option 2 || Option 3

Less developed regions || 70.3% || 67.9% || 100%

Transition regions || 8.4% || 13.5% || 0%

More developed regions || 21.3% || 18.6% || 0%

Total || 100% || 100% || 100%

Options 1 and 2 would
ensure coverage, at different aid intensities, of the entire population of the
EU. Therefore, all EU regions would receive cohesion policy support, while
Option 3 would ensure that cohesion policy resources are concentrated on
lagging Member States only. Only Option 2 provides more comprehensive
population coverage through the intermediate region category and achieves the
highest GDP growth of all options while at the same time providing high aid
intensities to lagging regions.

Under concentration on
EU priorities, Option 1 envisages the earmarking of expenditure towards
Europe 2020 objectives with the Community Strategic Guidelines at EU level.
Option 2 goes further with a menu of thematic objectives directly linked to the
Europe 2020 strategy and defining investment priorities for the funds.
Concentration on EU priorities will be reinforced by setting minimum shares of
structural funds support in certain policy areas. Given the limited
geographical coverage under Option 3, concentration on EU priorities only
occurs in less developed Member States.

Option 1 presents a more
flexible approach for Member States through the earmarking provisions, while
Option 2 provides a more visible and comprehensive link with the Europe 2020
headline targets and Integrated Guidelines. Option 3 only concentrates on EU
priorities in less developed countries. Therefore, the Option 2 contributes
most to the headline targets, while Option 1 would lead to a fragmentation of
cohesion policy interventions.

For the visibility and
predictability of funding for the ESF, only Options 2 and 3 would ensure
minimum shares for the ESF, while Option 1 would allow Member States the
flexibility to negotiate their ESF allocation in line with their needs.

Under coordination with
other EU policies and financial instruments, Options 1 through 2 represent
a graduated approach towards strategic alignment with Europe 2020. While Option
1 provides a loose alignment based on non-binding Community Strategic
Guidelines, Option 2 provides a more comprehensive alignment with the Europe
2020 objectives through the Common Strategic Framework and Partnership
Contract, while Option 3 provides no alignment beyond formal compliance. The
contribution to Europe 2020 headline targets is the highest in Option 2 due to
its more binding strategic framework, while it is lower in Option 1 and the
lowest in Option 3 due to its non binding nature and the lower geographical
coverage.

From geographical
concentration through coordination with other EU policies and financial
instruments, option 2 delivers the highest European added value.

3.2. 
Increasing the performance of the policy
3.2.1. 
Option 1 – Status quo

Under the no policy change
option, the following conditionalities would continue to exist:

- 
macro-fiscal conditionality under the Cohesion
Fund (although this has to date never been enforced),

- 
procedural compliance,

- 
compliance with sectoral EU legislation directly
applicable to investment and some thematic conditionalities linked to strategic
frameworks.

The main advantage of this
option is no new requirements for managing authorities. The main drawback is
that inefficiencies linked to poor institutional capacity, poor compliance with
EU legislation, inadequate fiscal policies and strategic frameworks would
continue to exist. Macro-fiscal conditionality of the Cohesion Fund would
remain discretionary. The lack of a system of rewarding and incentivising
performance limits the impact on the effectiveness and efficiency of the
policy.

3.2.2. 
Option 2 – Ex-ante conditionalities

Ex-ante conditionality is linked
to the fulfilment of preconditions related to strategic, regulatory and
institutional frameworks as well as to the policy delivery in accordance with
EU policy guidance. The preconditions may often be in place before the new
generation of programmes are adopted. However, in some cases, depending on the
specific context, further changes or adjustments might be necessary and tied to
a binding time plan by Member States and regions. The actual implementation of the commitments would be monitored.

The main advantage of this
option is that it would increase the effectiveness of cohesion spending by putting in place regulatory, strategic and institutional preconditions
which are necessary for the investments to be effective. The main drawback of
this option lies with the risk of delays in starting the programmes and
increase in administrative burden.

3.2.3. 
Option 3 ‑ Performance framework and performance reserve

A performance framework
would be established which would express the intended pace of progress towards
the objectives and targets set at the beginning of the period by putting in
place intermediate targets – "milestones". They would be linked to
commitments, outputs and where appropriate, expenditure and results. The
performance framework would be agreed in the Partnership Contracts and
programmes. The performance reserve would be allocated to the Member State for programmes/priority axes which have achieved their milestones.

The main advantage of this
option is that it introduces a mechanism which incentivizes the contribution of
the funds towards European objectives and targets and monitors and reports on
the targets achieved. The main drawback is increase in administrative burden,
the challenge of robust measurement techniques, as well as uncertainties
created through suspension of programmes.

3.2.4. 
Option 4 ‑ Strengthened macro-fiscal
conditionality

Macro-fiscal
conditionality of cohesion policy could be strengthened in two steps:

(i)         An
effective application of the existing Cohesion Fund conditionality could be
ensured by revising the current provisions for its implementation such as
potentially earlier triggers in the EDP, progressive suspension of all or part
of the committments in the case of repeated breaches of the SGP based on
objective and transparent ex ante provisions.

(ii)        These
revised rules on macro-fiscal conditionality of the Cohesion Fund could be
extended to the Structural Funds as their effectiveness is also dependent on
sound macroeconomic and fiscal policies which are conducive to growth.

3.2.5. 
Option 5 - Combination of option 2, option 3 and option 4

This option combines all the elements of
Option 2, Option 3 and Option 4, including the following elements (i) ex-ante
conditionality; (ii) the performance framework and the performance reserve and
(iii) strengthened macro-fiscal conditionality, including extension to the
structural funds.

The main advantage of this option would be
that it would address all problems identified in terms of the performance of
the policy. It would ensure adequate strategic, regulatory and institutional
conditions as well as sound macro-fiscal policies. It would incentivize and
monitor the actual performance of the programmes in terms of reaching
objectives and targets linked to objectives and targets. The main disadvantage
of this option would be the increased administrative burden generated by the
need to fulfil the necessary conditions and put in place the performance framework.

3.2.6. 
Comparing the options on performance

The options have been assessed on the basis
of their contribution to addressing the problems related to (i) strategic,
regulatory and institutional preconditions, (ii) macro-fiscal conditions and
(iii) performance in terms of achieving objectives and targets. To address the
necessary conditions for effective investment, the options have been assessed
in line with the World Bank principles on conditionalities[3].

Option 1 does little to
ensure the necessary preconditions needed for effective support and to
incentivize the performance of the programmes; Option 2 would only address the
preconditions which are necessary for effective support; however would do
little in incentivizing the actual performance of the programmes; whilst Option
3 would only focus on the latter. The preferred option is the combination of
option 2, 3 and 4 which would address all problems related to
performance.

3.3. 
Streamlining delivery and minimising the error risk
3.3.1. 
Simplification – reducing administrative costs
and minimising the risk of error
3.3.1.1. 
Option 1 – No policy change

- 
Reimbursements made on real costs; some optional
simplified cost options

- 
No substantial guidance on e-Governance[4] at EU level for cohesion policy
implementation

- 
National accreditation of management and control
systems with 100% review by Commission

3.3.1.2. 
Option 2 – Flexible approach

- 
Flexible payment options by operation to be
determined by beneficiaries

- 
Guidance based approach to e-Governance

- 
Member State responsibility for the ex-ante review of management and control
systems (pure national accreditation)

3.3.1.3. 
Option 3 - Prescriptive approach

- 
Payments based on deliverables of the project

- 
Mandatory E-Governance at EU level

- 
Commission review of management and control
systems

3.3.1.4. 
Option 4 – Proportional approach

- 
Payments based on either real costs or
simplified cost options

- 
Mandatory E-governance at MS or regional level

- 
Proportional approach to the ex-ante review of
management and control systems

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 e-governance in the
context of cohesion policy.

Option 4, the proportional
approach, is preferred because it leads to a significant potential reduction in
the cost of controls and a decline in workload; for administrations the
proportional approach to assurance would represent a decline in workload by
around 4% compared to the no change option. It also better respects the
subsidiarity principle. Furthermore, an additional reduction of 5-10% could be
attained by simplification on national rules and procedures to implement EU
regulations and by reduction of national gold plating (adding national
requirements on top of EU rules).

3.3.2. 
Coordination between cohesion policy instruments
3.3.2.1. 
Option 1 – No policy change

The programming of ERDF
and the ESF takes the form of mono-fund programmes. Delimitation between the
funds is essentially done on the basis of the type of investment. At
operational level, "cross-financing" of certain investments is
allowed thanks to a flexibility clause.

3.3.2.2. 
Option 2 – Facilitating integrated programming

Under this option, Member
States would be encouraged to use multi-fund programmes with common
processes for preparation, negotiation, management and implementation. Where
appropriate, a "lead fund" would be established, linked to the policy
domain(s) of the programme. The lead fund's interventions would be complemented
by interventions from the other structural funds so to ensure coherent support
for the different thematic objectives under cohesion policy.

3.3.2.3. 
Option 3 – One policy, one fund approach

Under this option, the
programming of ERDF and the ESF could take the form of mono-fund programmes
or multi fund programmes and creating strict delimitation between funds.

Option 2 provides for the
highest efficiency gains as well as for the highest degree of flexibility.
Option 1 places an additional administrative burden (because of cross financing
provisions), and option 3 would create rigid demarcations.

4. 
monitoring and evaluation

The options
presented in this Impact Assessment set out how the policy objectives and
design would be reformulated to address three particular issues. In this
respect, monitoring and evaluation plays an important role. Under all change
options, the monitoring and evaluation systems will be reinforced in comparison
to the current situation. The proposed changes to the monitoring and evaluation
systems would improve the focus on results and alignment with the Europe 2020
strategy.

· 
All programmes will have a clearer intervention
logic, clearly outlining how spending resources (inputs) on particular
interventions (outputs) will contribute to the results.

A set of common
indicators, aligned with EU2020 objectives, will be used in all programmes
where relevant. These indicators will include mainly outputs but also some
intermediate results.

[1]       "Results of the public consultation on the conclusions
of the fifth report on economic, social and territorial cohesion Brussels", Commission Staff Working Paper, SEC(2011) 590 final, 13.5.2011.

[2]       5th Report on Economic, Social and Territorial
Cohesion, November 2010. Ex-Post Evaluation of Cohesion Policy programmes
2000-06 co-financed by the ERDF (Objective 1 & 2) Synthesis Report, prepared
by Applica, Ismeri, The Vienna Institute for International Economic Studies,
April 2010. A more elaborate discussion on the achievements and shortcomings in
cohesion policy in reducing disparities is presented in Section 2.5.

[3]       World Bank (2005), Review of World Bank Conditionality,
Operations Policy and Country Services, The World Bank, Washington, DC, September.

[4]       E-governance in cohesion policy would be to ensure that
beneficiaries are not asked to submit the same information more than once, and
that information is available and transmitted in electronic format.