EUROPEAN COMMISSION Strasbourg, 29.5.2018 COM(2018) 375 final 2018/0196(COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL On 2 May 2018, the Commission adopted a proposal for the next multi-annual financial framework for the period 2021-2027. Administrative simplification has been defined as a key objective in reflection paper on EU finances, by the ex post evaluation and by the public consultation. Experience suggests that the rules are over-complex and fragmented between funds and forms of finance, leading to an unnecessary burden on programme managers and final beneficiaries. This proposal for a Common Provisions Regulation (CPR) will set out common provisions for seven shared management funds. This proposal will not replace the existing Regulation EU No 1303/2013 which will continue to govern programmes adopted in the 2014-2020 period. The proposal reduces fragmentation of rules, delivering a common set of basic rules for seven funds: ·CF: Cohesion Fund ·EMFF: European Maritime and Fisheries Fund ·ERDF: European Regional Development Fund ·ESF+: European Social Fund Plus ·AMIF: Asylum and Migration Fund ·BMVI: Border Management and Visa Instrument ·ISF: Internal Security Fund These proposals provide for a date of application as of 1 January 2021 and are presented for a Union of 27 Member States, in line with the notification by the United Kingdom of its intention to withdraw from the European Union and Euratom based on Article 50 of the Treaty on European Union received by the European Council on 29 March 2017. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis Article 317 of the Treaty on the Functioning of the European Union (TFEU) provides that the Commission is to implement the budget in cooperation with the Member States, in accordance with the provisions of the regulations made pursuant to Article 322 TFEU. Article 322(1)(a) TFEU provides the legal basis for the adoption of regulations establishing the financial rules which determine in particular the procedure to be adopted for establishing and implementing the budget and for presenting and auditing accounts. The principle of subsidiarity does not extend to the financial rules, for which it is clear that only the Union can, or even has to act. EU action for the European Structural and Investment Funds is justified on the grounds of the objectives laid out in Article 174 TFEU. The right to act is enshrined in Article 175 TFEU which explicitly calls on the Union to implement this policy by means of Structural Funds, in conjunction with Article 177, which defines the role of the Cohesion Fund. The aims of the ESF, ERDF and the Cohesion Fund are defined in Articles 162, 176 and 177 TFEU respectively. The actions related to fisheries are justified by Article 39 TFEU. Article 174 TFEU states that particular attention shall be paid to rural areas, areas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps. These latter include the northernmost regions with very low population density and island, cross-border and mountain regions. Article 349 TFEU states that specific measures shall be adopted to take account of the structural social and economic situation of the outermost regions, which is compounded by certain specific features which severely restrain their development. The Regulation establishing the Asylum and Migration Fund is based on Articles 78(2) and 79(2) and (4) of the TFEU. A Regulation establishing, as part of the Integrated Border Management Fund, the instrument for financial support for border management and visa, is based on Article 77(2) of the TFEU. The Regulation establishing the Internal Security Fund is based on Articles 82(1), 84 and 87(2) of the TFEU. Article 317 of the TFEU provides for the legal base for the common set of rules regarding the implementation of the budget, in cooperation with Member States. Article 322 of the TFEU defines the scope and the procedures to establish it.

Subsidiarity and proportionality of the individual funds above is set out in the explanatory memorandum for each fund. However, the CPR makes additional contributions: ·To subsidiarity by promoting shared management: insofar as programmes are not managed directly by the European Commission, but instead implemented in partnership with the Member States. ·To proportionality, by unifying and consolidating rules (and therefore reducing the burden on stakeholders). Article 11 of the TFEU states that environmental protection requirements should be integrated into the definition and implementation of the Union policies and activities in particular with a view to promote sustainable development and this is addressed in this Regulation. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS The various funds have their own evaluations and many of the findings are most relevant to their specific regulations. The following are the key findings applicable to the CPR. 1. Simplification: the need to reduce the administrative burden. This was a key and repeated finding in the evaluation of all funds: ·The ex post evaluations of the ERDF and the Cohesion Fund found that management, control and audit systems were over-complex. This was a source of administrative uncertainty and delays in implementation. Complexity was a particular issue in EU-15 countries where the funding was relatively smaller, suggesting a need for proportionality. ·The ESF evaluation found that both the funding landscape (ie the range and mix of instruments) and the implementation process needed to be simplified. ·The EMFF evaluation also found that the administrative burden was too high. At the application stage it acted as a disincentive for applying for support. Moreover, the complexity of certain projects seemed to have created disincentives for potential beneficiaries, in particular in cases where a large network of partners was involved. ·Interim evaluations for relevant components of the AMF, BMVI and ISF also found a need for simplification. The use of simplified cost options was a particular recommendation. This point is addressed throughout the CPR. Notable examples include Title V (e.g. simplified cost options, payments based on conditions, elimination of specific rules for major projects and revenue generating investments) and Title VI (simplified and more proportionate control and audit). 2. The need for flexibility to respond to emerging needs: ·The ex post evaluation of ERDF and the Cohesion Fund found that the adaptation of programmes in the economic crisis was one of the success stories in the 2007-2013 period and should be built upon. ·The ex post evaluation of the ESF named flexibility as one of the key points for improvement. ·The interim evaluations of the predecessors of AMIF, BMVI and ISF indicate that these funds responded adequately to the migration and security crises. However, more flexible mechanisms to allocate funding are needed. This point is addressed in Title III (which enables relatively small transfers without the need for programme modification) and II (programme allocations are set out for the first 5 years, and then the last 2 years allocated on the basis of a review) while complementary rules for the AMIF, BMVI and ISF are outlined in the Fund-specific Regulations. Further, the possibility to use the InvestEU guarantee facility increases flexibility for Member States. 3. The potential of financial instruments (FIs): ·The ex post evaluation of ERDF and the Cohesion Fund found that FIs have the potential to be a more efficient means of funding investment in some policy areas, but there are delays in implementation and it is a challenge to spread their use. ·The EaSI mid-term evaluation found that different rules made it difficult to tap into complementarities between funds. The evaluation recommended streamlining and alignment of FI rules.

This point is addressed in Title V which simplifies the implementation of FIs, aligning many of the provisions with those for grants. •Public consultations The Commission carried out the following public consultations: ·EU funds in the area of cohesion policy (10 January 2018 to 9 March 2018) ·A stakeholder consultation in the context of the ex post evaluation of the EMFF (February to May 2016). ·EU funds in the area of migration (10 January 2018 to 9 March 2018) ·EU funds in the area of security (10 January 2018 to 9 March 2018) Stakeholder consultations struck a similar note to the ex post evaluations – the main conclusion of relevance for the CPR is simplification (especially in terms of audit and control procedures), followed by flexibility: ·In the consultation on cohesion policy, stakeholders found complex procedures to be by far the main obstacle to success, followed by heavy audit and control requirements, lack of flexibility, difficulty to ensure financial sustainability and delays in payments ·For EMFF, complex administrative delivery is seen as the biggest shortcoming and many stakeholders call for radical simplification and flexibility. The intervention logic is considered too rigid, not allowing Member States to address their own specificities. ·The consultations in the areas of migration and security found that respondents strongly supported simpler delivery and greater flexibility (specifically in relation to the ability to respond to migration and security related crises). The concerns raised by stakeholders are addressed in the various simplification measures throughout the CPR (see below). •Expertise and administrative costs In terms of expertise, the "High Level Group" of experts was convened to discuss the simplification of cohesion policy. It concluded the following: ·Alignment of rules between EU Funds. This concern is partly addressed by the scope of the current regulation. ·Fewer, clearer, shorter rules. As noted above, the current regulation includes numerous simplifications. ·Genuine subsidiarity and proportionality: reliance on national management and control systems and procedures to a much larger extent. This is addressed in Title VI (see below). ·A stable yet flexible framework: no need to re-appoint institutions for the next programming period. Programmes should also be modified more easily. This is addressed in Titles VI and III respectively. ·Single audit principle: extension of the single audit principle. This is addressed in Title VI. Indeed, there is evidence of substantial administrative costs associated with the ERDF and the Cohesion Fund, estimated in a recent study at 3% of average programme costs for the ERDF and 2.2% for the Cohesion Fund. The administrative burdens on beneficiaries (including SMEs) are higher.

Many of the simplifications in the CPR are difficult to quantify financially in advance, but the study made the following estimates ·Greater use of simplified cost options (or payments based on conditions) for the ERDF and the Cohesion Fund could substantially reduce total administrative costs – by 20-25% if these options are applied across the board. ·The more proportionate approach to control and audits would imply a major reduction in the number of verifications and the audit burden for “low risk” programmes thus reducing total administrative costs of the ERDF and the Cohesion Fund by 2-3% and costs for affected programmes by a much greater amount. •Impact assessment The CPR itself is not the subject of an impact assessment, since it sets common rules and a delivery mechanism for other policies. The related funds are each accompanied by their own impact assessments. •E-cohesion and data exchange The 2014-2020 programmes, except for the predecessors of the AMIF, BMVI and ISF, required a system of electronic data exchange between beneficiaries and managing authorities, and between different authorities of the management and control system. The current regulation builds on this and further develops certain aspects of data collection. All data necessary for monitoring progress in implementation including results and performance of programmes will now be transmitted electronically and every two months to the Commission, meaning the open data platform will be updated in almost real time. Beneficiary and operations data will similarly be made public in electronic form, on a dedicated website run by the managing authority. This will give greater visibility to achievements and allow better communication. •Fundamental rights By introducing an enabling condition to ensure the respect of the Charter of Fundamental Rights of the EU, this Regulation will have a positive impact on the respect and protection of all fundamental rights in the managements of all seven funds. Respect for the rule of law is covered in a self-standing regulation based on Article 322 TFEU. 4.BUDGETARY IMPLICATIONS The Commission's proposal for a multi-annual financial framework sets out an amount of EUR 330 billion for economic, social and territorial cohesion for the period 2021-2027. Cohesion policy total 330 624 European Regional Development Fund (ERDF) 200 629 ·Investment for jobs and growth 190 752 ·European territorial cooperation 8 430 ·Outermost regions and sparsely populated areas 1 447 Cohesion Fund (CF) 41 349 ·of which contribution to CEF Transport 10 000 European Social Fund+ (1) 88 646 (1) This amount does not include the amount for health, employment and social innovation (EUR 1 042 million). These are the largest financial headings covered by the CPR. The Commission's proposal for the financing of the EMFF, AMIF, BMVI and ISF will be included in the Fund-specific Regulations for each Fund. 5.SUMMARY OF THE CONTENT OF THE REGULATION

The main objectives of the architecture and provisions of the proposed CPR are to: 1.Substantially reduce unnecessary administrative burden for beneficiaries and managing bodies while maintaining a high level of assurance of legality and regularity. This is the key guiding principle of the reform, and includes a large number of simplifications and alignments across the regulations – but especially in terms of: i.The roll-over of management and control systems (and other measures which facilitate programme launch). Greater use of "proportionate arrangements", where lower risk programmes can rely more on national systems. ii.The use of simplified cost options and payments based on conditions. iii.Financial instruments. 2.Increase flexibility to adjust programme objectives and resources in the light of changing circumstances and also in terms of voluntary contributions to EU-level directly managed instruments. 3.Align the programmes more closely with EU priorities and increase their effectiveness. This includes: i.Aligning the intervention logic and reporting with the MFF headings and increasing concentration requirements on priority areas. ii.Forging a closer link with the European Semester process. iii.Setting more meaningful enabling conditions that need to be maintained throughout the implementation period. Title I: Objectives and general support The CPR brings together seven European Funds delivered through shared management. The goal is to create a common set of simplified and consolidated rules, reducing the administrative burden for programme authorities and beneficiaries. The basis is laid here for the strong emphasis on shared management and partnership, which runs throughout the regulations. Article 5 provides the basis for shared management, Article 6 for partnership with regional and local authorities, urban and public authorities, economic and social partners, civil society and bodies promoting social inclusion, fundamental rights, gender equality, non-discrimination and rights of people with disabilities. The Commission proposal for the 2021-2027 Multiannual Financial Framework set a more ambitious goal for climate mainstreaming across all EU programmes, with an overall target of 25% of EU expenditure contributing to climate objectives. The contribution of this programme to the achievement of this overall target will be tracked through an EU climate marker system at an appropriate level of disaggregation, including the use of more precise methodologies where these are available. The Commission will continue to present the information annually in terms of commitment appropriations in the context of the annual draft budget. To support the full utilisation of the potential of the programme to contribute to climate objectives, the Commission will seek to identify relevant actions throughout the programme preparation, implementation, review and evaluation processes. Title II: Strategic approach Eleven thematic objectives used in 2014-2020 have been simplified to five clear policy objectives in this regulation: 1.A smarter Europe - innovative and smart economic transformation. 2.A greener, low-carbon Europe.

3.A more connected Europe - mobility and regional ICT connectivity. 4.A more social Europe - implementing the European Pillar of Social Rights. 5.Europe closer to citizens – sustainable and integrated development of urban, rural and coastal areas through local initiatives. In addition, policy objectives of the AMIF, BMVI and ISF have been set out in the Fund-specific Regulations. This simplification enables synergies and flexibility between various strands within a given objective, removing artificial distinctions between different policies contributing to the same objective. It also lays the basis for thematic concentration for the ERDF and the ESF. "Ex ante conditionalities" in the 2014-2020 period are replaced by "enabling conditions". These are fewer, more focussed on the goals of the fund concerned and – in contrast to the 2014-2020 period – monitored and applied throughout the period. The principle will be strengthened: Member States will not be able to declare expenditure related to specific objectives until the enabling condition is fulfilled. This will ensure that all co-financed operations are in line with the EU policy framework. To build on the good practice of performance orientation it is proposed to maintain the performance framework in a streamlined, clearer manner. Conditionality linked to the European Semester is similarly maintained but simplified. In particular, Country-Specific Recommendations (CSRs) will be taken into account in programming at least on two occasions: at the beginning of the programming and during the mid-term review. Measures to promote sound economic governance are maintained. However suspensions will be linked to commitments only, not payments, in order to avoid aggravating economic crises. The CPR creates flexibility for the ERDF, ESF+ and the Cohesion Fund. Only the first 5 years will be programmed initially. Allocations for the last 2 years will be made on the basis of a substantial and in-depth mid-term review leading to corresponding reprogramming in 2025. The review will revisit the initial priorities and objectives of the programmes taking account of: progress in achieving objectives by end-2024; changes in the socio-economic situation; new challenges identified in country specific recommendations. This builds on the concept of the performance framework and the performance reserve and further reinforces the performance angle of the policy including through reprogramming. The performance reserve is however discontinued. Synergies between different EU instruments will be encouraged through the strategic planning process, which will identify common objectives and common areas for activities across different programmes, e.g. with the Common Agricultural Policy (CAP); Horizon Europe; the Connecting Europe Facility (CEF); the Digital Europe Programme (DEP); the Erasmus+ Programme; the InvestEU Fund; LIFE; Erasmus+ and with the External Instrument. Title III: Programming The content of programmes will be more streamlined and strategic. To harmonise and speed up the programming process and implementation at the beginning of the period, a common programme template for the ERDF, the Cohesion Fund, ESF+ and EMFF programmes and a separate one for the AMIF, BMVI and ISF are annexed to this Regulation. To make programming more flexible, there will be a 5% threshold at priority level below which it will be possible to adjust allocations within the programme without the need for formal programme amendment. To address specific challenges at the sub-regional and local level, the CPR introduces a simplified approach to community-led local development (including the possibility of naming a lead fund, reducing the administrative burden for beneficiaries). The CPR also harmonizes the approach to other territorial tools, including the existing integrated territorial investments. The CPR also includes provisions to enable voluntary transfer of resources towards the five policy windows of the InvestEU instruments to benefit from an EU-level budgetary guarantee mechanism. Furthermore, Member States could request the transfer of up to 5 % of programme financial allocations from any of the funds to any other fund under shared management or to any instrument under direct or indirect management. This should facilitate attaining the objectives set for the programmes during their implementation. The approach to technical assistance of Member States has been simplified. A flat rate mechanism is introduced which enables topping up each interim payment by a percentage between 2.5% and 6% depending on the fund and thus links the EU payment of technical assistance to progress in implementation. In addition, administrative capacity building actions may continue in form of payments based on conditions. Title IV: Monitoring, evaluation, information and communication Electronic data enables the combination of simplification and transparency. In the 2014-2020 period, except for the predecessors of the AMIF, BMVI and ISF, it was a requirement to establish a system of electronic data exchange between beneficiaries and managing authorities as well as between different authorities of the management and control system. The current regulation builds on this and develops further certain aspects in terms of gathering data. All data necessary for monitoring progress in implementation including results and performance of programmes will now be transmitted electronically and every two months, meaning the open data platform will be updated in almost real time. It is proposed to give a more prominent role to the monitoring committees in supervising the programme performance and all the factors influencing this. For transparency, documents submitted to the monitoring committees will be required to be publicly available. For all funds, the annual performance review will be an occasion for a policy dialogue on key issues of programme implementation and performance. Frequent data transmission enables a simplification of the performance review process. For cohesion policy funds this enables eliminating the annual report document – the annual review meeting will be on the basis of the latest results and limited set of qualitative information submitted. Responsibilities of both programme authorities and beneficiaries regarding visibility and communication have been reinforced. Common communication, transparency and visibility requirements ensure more coherent, effective and efficient communication actions.

Evaluations will be carried out in line with paragraphs 22 and 23 of the Interinstitutional Agreement of 13 April 2016, where the three institutions confirmed that evaluations of existing legislation and policy should provide the basis for impact assessments of options for further action. The evaluations will assess programme effects on the ground based on the programme indicators and targets and a detailed analysis of the degree to which the programme is relevant, effective, efficient, provides EU added value and is coherent with other EU policies. Evaluations will include lessons learned, problems and opportunities to further improve the actions and their impacts. Title V: Financial support To reduce the administrative burden, the CPR systematises and increases the use of simplified cost options, i.e. flat-rate reimbursement, standard scales of unit costs or lump sums. To make such options easier to apply, the CPR simplifies rules and calculation methods, providing more off-the-shelf options building on the Commission's Omnibus proposal. The option of payments based on conditions will also contribute to the performance orientation, allowing for payments based on achieved and verified performance. Financial instruments will be a key delivery mechanism for 2021-2027 investments generating revenue or costs savings; the provisions for their use have been streamlined and updated to ensure better and easier implementation as well as quicker set-up: ·Financial instruments will be better integrated into the programming and implementation process from the outset and the ex-ante assessment streamlined accordingly; ·Managing authorities will have the same basic flexible implementation options – management under the responsibility of the managing authority or direct management by the managing authority – but the related conditions have been simplified; ·Combination of EU resources will be possible under one set of rules; there will be no more multiplication of diverse rules applied to similar situations; ·Flexibility is proposed for the combination of grants with financial instruments; ·The eligibility rules have been clarified, and rules on management costs and fees have been simplified while keeping them performance based to encourage efficient management; ·The rules on payments have been considerably simplified while maintaining the all-important link between payments to financial instruments and the corresponding disbursements to final recipients; ·Reflows and fund recycling have been simply codified, to enable a smoother flow from one period to next. ·There will be no additional separate reporting on financial instruments as these are incorporated under the same reporting system as all other forms of finance. Further simplifications include: ·The combination of different funds – and of financial instruments and grants – is codified in simple rules; ·There will no longer be specific rules for revenue generating investments; ·There will be no major project process (instead, strategic projects will be followed by the monitoring committee). ·Funding will be simplified, for example through the seal of excellence approach. To avoid wasteful subsidy competitions provisions on business relocation have been strengthened. Title VI: Management and control

The tasks and responsibilities of different bodies in the management and control system are set out in a clearer way. There is no requirement to undertake the designation process; the provisions promote the roll-over of existing systems and simpler rules for identifying new bodies. Eligibility requirements will help ensure that only quality operations, making the highest contribution to agreed objectives with the best cost-benefit ratio, are received for support. It is also proposed to systematically check whether the operation is financially sustainable and its environmental screening was based on the latest requirements. The number of controls and audits will be significantly reduced. This will decrease the administrative burden for programme authorities and beneficiaries. In addition to provisions in previous titles which reduce the audit burden, this title further reduces the burden by: ·Extension of the single audit principle; ·Fewer controls; ·For programmes with a low error rate, an enhanced proportionate approach based on a well-functioning national system with a minimum audit arrangement for assurance purposes. Project proposals which have received a Seal of Excellence under Horizon Europe will not need to pass another application and selection process if they are consistent with the programme's smart specialisation strategy. This reduces the burden on both managers and beneficiaries. Similarly, this approach could be extended to other EU instruments, like LIFE+ or Erasmus+. Title VII – Financial management, submission and examination of accounts and financial corrections The system of annual accounts is maintained including the retention of 10% of the amounts declared in interim payments. The submission of payments requests will follow a regular schedule and will take place four times a year. Zero accounts will not require a corresponding procedure. This section also includes decommitment rules. Since simplification will make it easier for programmes to reduce delays and in order to promote sound financial management as well as timely implementation, the CPR includes an "n+2" rule. For the same reason, the level of pre-financing has been reduced to an annual payment of 0.5% based on the total support from the Funds. In this context, in order to ensure sufficient resources, a revision of the 2014-2020 annual pre-financing arrangements for the ERDF, the ESF+, the Cohesion Fund and the EMFF may be necessary. Title VIII – financial framework This sets out financial allocations and co-financing based on categories of regions and applies to the ERDF, ESF+ and Cohesion Fund. The CPR also returns co-financing rates for these three Funds to pre-financial crisis levels. EU co-financing rates increased for these three Funds in the 2007-2013 period. This was a response to the financial crisis, to maintain essential investments in a time of tight public budgets. High EU co-financing rates are no longer necessary and lower rates promote "ownership". Lower EU co-financing rates also increase the overall cohesion policy budget, taking account of the national contributions. This also adds to financial flexibility Member States have as the co-financing rates at programme and priority level could be established flexibly. Title IX – delegation of power, implementing, transitional and final provisions To ensure an early start for implementation in the next period all necessary legislative provisions will be included in the legislative package (either in the CPR or the Fund-specific regulations). Notably, the number of empowerments is substantially reduced and kept to a minimum. This will prevent possible delays in drawing up and adopting secondary legislation. It also ensures an internal coherence of legislative provisions and predictability for stakeholders as all applicable EU rules will be found in one place. Conditions for operations subject to phased implementation are introduced to provide clarity and legal certainty on the circumstances where phasing is accepted. 2018/0196 (COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 177, 322(1)(a) and 349 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee, Having regard to the opinion of the Committee of the Regions, Having regard to the opinion of the Court of Auditors, Acting in accordance with the ordinary legislative procedure, Whereas: (1)Article 174 of the Treaty on the Functioning of the European Union ('TFEU') provides that, in order to strengthen its economic, social and territorial cohesion, the Union is to aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands, and that particular attention is to be paid to rural areas, areas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps. Article 175 of the TFEU requires that the Union is to support the achievement of these objectives by the action it takes through the European Agricultural Guidance and Guarantee Fund, Guidance Section, the European Social Fund, the European Regional Development Fund, the European Investment Bank and other instruments. Article 322 of the TFEU provides the basis for adopting financial rules determining the procedure to be adopted for establishing and implementing the budget and for presenting and auditing accounts, as well as for checks on the responsibility of financial actors. (2)In order to further develop a coordinated and harmonised implementation of Union Funds implemented under shared management namely the European Regional Development Fund ('ERDF'), the European Social Fund Plus ('ESF+'), the Cohesion Fund, measures financed under shared management in the European Maritime and Fisheries Fund ('EMFF'), the Asylum and Migration Fund ('AMIF'), Internal Security Fund ('ISF') and Integrated Border Management Fund ('BMVI'), financial rules based on Article 322 of the TFEU should be established for all these Funds ('the Funds'), clearly specifying the scope of application of the relevant provisions. In addition, common provisions based on Article 177 of the TFEU should be established to cover policy specific rules for the ERDF, the ESF+, the Cohesion Fund and the EMFF. (3)Due to the specificities of each Fund, specific rules applicable to each Fund and to the European territorial cooperation goal (Interreg) under the ERDF should be laid down in separate Regulations ('Fund-specific Regulations') to complement the provisions of this Regulation. (4)The outermost regions and the northern sparsely populated regions should benefit from specific measures and from additional funding pursuant to Article 349 of the TFEU and Article 2 of Protocol No 6 to the 1994 Act of Accession. (5)Horizontal principles as set out in Article 3 of the Treaty on the European Union ('TEU') and in Article 10 of the TFEU, including principles of subsidiarity and proportionality as set out in Article 5 of the TEU should be respected in the implementation of the Funds, taking into account the Charter of Fundamental Rights of the European Union. Member States should also respect the obligations of the UN Convention on the Rights of Persons with Disabilities and ensure accessibility in line with its article 9 and in accordance with the Union law harmonising accessibility requirements for products and services. Member States and the Commission should aim at eliminating inequalities and at promoting equality between men and women and integrating the gender perspective, as well as at combating discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation. The Funds should not support actions that contribute to any form of segregation. The objectives of the Funds should be pursued in the framework of sustainable development and the Union's promotion of the aim of preserving, protecting and improving the quality of the environment as set out in Article 11 and Article 191(1) of the TFEU, taking into account the polluter pays principle. In order to protect the integrity of the internal market, operations benefitting undertakings shall comply with Union State aid rules as set out in Articles 107 and 108 of the TFEU. (6)Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 of the Treaty on the Functioning of the European Union apply to this Regulation. These rules are laid down in the Financial Regulation and determine in particular the procedure for establishing and implementing the budget through grants, procurement, prizes, indirect implementation, and provide for checks on the responsibility of financial actors. Rules adopted on the basis of Article 322 TFEU also concern the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States, as the respect for the rule of law is an essential precondition for sound financial management and effective EU funding. (7)Where a time limit is set for the Commission to take any action towards Member States, the Commission should take account of all necessary information and documents in a timely and efficient manner. Where submissions from Member States are incomplete or non-compliant with the requirements of this Regulation and of Fund-specific Regulations, thus not enabling the Commission to take fully-informed action, that time limit should be suspended until the Member States comply with the regulatory requirements. (8)In order to contribute to Union priorities, the Funds should focus their support on a limited number of policy objectives in line with their Fund-specific missions pursuant to their Treaty-based objectives. The policy objectives for the AMIF, the ISF and the BMVI should be set out in the respective Funds-specific regulations. (9)Reflecting the importance of tackling climate change in line with the Union's commitments to implement the Paris Agreement and the United Nations Sustainable Development Goals, the Funds will contribute to mainstream climate actions and to the achievement of an overall target of 25 % of the EU budget expenditure supporting climate objectives. (10)Part of the budget of the Union allocated to the Funds should be implemented by the Commission under shared management with Member States within the meaning of Regulation (EU, Euratom) [number of the new Financial Regulation] of the European Parliament and of the Council (the 'Financial Regulation'). Therefore, when implementing the Funds under shared management, the Commission and the Member States should respect the principles referred to in the Financial Regulation, such as sound financial management, transparency and non-discrimination.

(11)The principle of partnership is a key feature in the implementation of the Funds, building on the multi-level governance approach and ensuring the involvement of civil society and social partners. In order to provide continuity in the organisation of partnership, Commission Delegated Regulation (EU) No 240/2014 should continue to apply. (12)At Union level, the European Semester of economic policy coordination is the framework to identify national reform priorities and monitor their implementation. Member States develop their own national multiannual investment strategies in support of these reform priorities. These strategies should be presented alongside the yearly National Reform Programmes as a way to outline and coordinate priority investment projects to be supported by national and Union funding. They should also serve to use Union funding in a coherent manner and to maximise the added value of the financial support to be received notably from the Funds, the European Investment Stabilisation Function and InvestEU. (13)Member States should determine how relevant country-specific recommendations adopted in accordance with Article 121(2) of the TFEU and relevant Council recommendations adopted in accordance with Article 148(4) of the TFEU ('CSR's) are taken into account in the preparation of programming documents. During the 2021–2027 programming period ('programming period'), Member States should regularly present to the monitoring committee and to the Commission the progress in implementing the programmes in support of the CSRs. During a mid-term review, Member States should, among other elements, consider the need for programme modifications to accommodate relevant CSRs adopted or modified since the start of the programming period. (14)Member States should take account of the contents of their draft National Energy and Climate Plan, to be developed under the Regulation on the Governance of the Energy Union, and the outcome of the process resulting in Union recommendations regarding these plans, for their programmes, as well as for the financial needs allocated for low-carbon investments. (15)The Partnership Agreement, prepared by each Member State, should be a strategic document guiding the negotiations between the Commission and the Member State concerned on the design of programmes. In order to reduce the administrative burden, it should not be necessary to amend Partnership Agreements during the programming period. To facilitate the programming and avoid overlapping content in programming documents, Partnership Agreements can be included as part of a programme. (16)Each Member State should have the flexibility to contribute to InvestEU for the provision of budgetary guarantees for investments in that Member State. (17)To ensure the necessary prerequisites for the effective and efficient use of Union support granted by the Funds, a limited list of enabling conditions as well as a concise and exhaustive set of objective criteria for their assessment should be established. Each enabling condition should be linked to a specific objective and should be automatically applicable where the specific objective is selected for support. Where those conditions are not fulfilled, expenditure related to operations under the related specific objectives should not be included in payment applications.. In order to maintain a favourable investment framework, the continued fulfilment of the enabling conditions should be monitored regularly. It is also important to ensure that operations selected for support are implemented consistently with the strategies and planning documents in place underlying the fulfilled enabling conditions, thus ensuring that all co-financed operations are in line with the Union policy framework. (18)Member States should establish a performance framework for each programme covering all indicators, milestones and targets to monitor, report on and evaluate programme performance. (19)The Member State should carry out a mid-term review of each programme supported by the ERDF, the ESF+ and the Cohesion Fund. That review should provide a fully-fledged adjustment of programmes based on programme performance, while also providing an opportunity to take account of new challenges and relevant CSRs issued in 2024. In parallel, in 2024 the Commission should, together with the technical adjustment for the year 2025, review all Member States' total allocations under the Investment for jobs and growth goal of cohesion policy for the years 2025, 2026 and 2027, applying the allocation method set out in the relevant basic act. That review together with the outcome of the mid-term review should result in programme amendments modifying the financial allocations for the years 2025, 2026 and 2027. (20)Mechanisms to ensure a link between Union funding policies and the economic governance of the Union should be further refined, allowing the Commission to make a proposal to the Council to suspend all or part of the commitments for one or more of the programmes of the Member State concerned where that Member State fails to take effective action in the context of the economic governance process. In order to ensure uniform implementation and in view of the importance of the financial effects of measures being imposed, implementing powers should be conferred on the Council which should act on the basis of a Commission proposal. To facilitate the adoption of decisions which are required to ensure effective action in the context of the economic governance process, reversed qualified majority voting should be used. (21)It is necessary to set out common requirements as regards the content of the programmes taking into account the specific nature of each Fund. Those common requirements can be complemented by Fund-specific rules. Regulation (EU) [XXX] of the European Parliament and of the Council (the ‘ETC Regulation’) should set out specific provisions on the content of programmes under the European territorial cooperation goal (Interreg). (22)In order to allow for flexibility in programme implementation and reduce administrative burden, limited financial transfers should be allowed between priorities of the same programme without requiring a Commission decision amending the programme. The revised financial tables should be submitted to the Commission in order to ensure up-to-date information on financial allocations for each priority. (23)To strengthen the integrated territorial development approach, investments in the form of territorial tools such as integrated territorial investments ('ITI'), community-led local development ('CLLD') or any other territorial tool under policy objective "a Europe closer to citizens" supporting initiatives designed by the Member State for investments programmed for the ERDF should be based on territorial and local development strategies. For the purposes of ITIs and territorial tools designed by Member States, minimum requirements should be set out for the content of territorial strategies. Those territorial strategies should be developed and endorsed under the responsibility of relevant authorities or bodies. To ensure the involvement of relevant authorities or bodies in implementing territorial strategies, those authorities or bodies should be responsible for the selection of operations to be supported, or involved in that selection. (24)To better mobilise potential at the local level, it is necessary to strengthen and facilitate CLLD. It should take into account local needs and potential, as well as relevant socio-cultural characteristics, and should provide for structural changes, build community capacity and stimulate innovation. The close cooperation and integrated use of the Funds to deliver local development strategies should be strengthened. Local action groups, representing the interests of the community, should be, as an essential principle responsible for the design and implementation of CLLD strategies. In order to facilitate coordinated support from different Funds to CLLD strategies and to facilitate their implementation, the use of a 'Lead Fund' approach should be facilitated. (25)In order to reduce the administrative burden, technical assistance at the initiative of the Member State should be implemented through a flat rate based on progress in programme implementation. That technical assistance may be complemented with targeted administrative capacity building measures using reimbursement methods that are not linked to costs. Actions and deliverables as well as corresponding Union payments can be agreed in a roadmap and can lead to payments for results on the ground. (26)It is opportune to clarify that, where a Member State proposes to the Commission that a priority of a programme or part thereof is supported through a financing scheme not linked to costs, the actions, deliverables and conditions agreed should be related to concrete investments undertaken under the shared management programmes in that Member State or region. (27)In order to examine the performance of the programmes, the Member State should set up monitoring committees. For the ERDF, the ESF+ and the Cohesion Fund, annual implementation reports should be replaced by an annual structured policy dialogue based on the latest information and data on programme implementation made available by the Member State. (28)Pursuant to paragraphs 22 and 23 of the Inter-institutional agreement for Better Law-Making of 13 April 2016, there is a need to evaluate the Funds on the basis of information collected through specific monitoring requirements, while avoiding overregulation and administrative burden, in particular on Member States. These requirements, where appropriate, can include measurable indicators, as a basis for evaluating the effects of the Funds on the ground. (29)To ensure availability of comprehensive up-to-date information on programme implementation, more frequent electronic reporting on quantitative data should be required. (30)In order to support the preparation of related programmes and activities of the next programming period, the Commission should carry out a mid-term assessment of the Funds. At the end of the programming period, the Commission should carry out retrospective evaluations of the Funds, which should focus on the impact of the Funds.

(31)Programme authorities, beneficiaries and stakeholders in Member States should raise awareness of the achievements of Union funding and inform the general public accordingly. Transparency, communication and visibility activities are essential in making Union action visible on the ground and should be based on true, accurate and updated information. In order for these requirements to be enforceable, programme authorities and the Commission should be able to apply remedial measures in case of non-compliance. (32)Managing authorities should publish structured information on selected operations and beneficiaries on the website of the programme providing support to the operation, while taking account of requirements for data protection of personal data in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council. (33)With a view to simplifying the use of the Funds and reducing the risk of error, it is appropriate to define both the forms of Union contribution to Member States and the forms of support provided by Member States to beneficiaries. (34)As regards grants provided to beneficiaries, Member States should increasingly make use of simplified cost options. The threshold linked to the obligatory use of simplified cost options should be linked to the total costs of the operation in order to ensure the same treatment of all operations below the threshold, regardless of whether the support is public or private. (35)To enable immediate implementation of flat-rates, any flat rate established by Member States in the 2014-2020 period based on a fair, equitable and verifiable calculation method should continue to be applied for similar operations supported under this Regulation without requiring a new calculation method. (36)In order to optimise the uptake of co-financed environmental investments, synergies should be ensured with the LIFE programme for Environmental and Climate Action, in particular through LIFE strategic integrated projects and strategic nature projects. (37)In order to provide legal clarity, it is appropriate to specify the eligibility period for expenditure or costs linked to operations supported by the Funds under this Regulation and to restrict support for completed operations. The date from which expenditure becomes eligible for support from the Funds in case of adoption of new programmes or of changes in the programmes should also be clarified, including the exceptional possibility to extend the eligibility period to the start of a natural disaster in case there is urgent need to mobilise resources to respond to such disaster. (38)To ensure the effectiveness, fairness and sustainable impact of the Funds, there should be provisions guaranteeing that investments in infrastructure or productive investment are long-lasting and prevent the Funds from being used to undue advantage. Managing authorities should pay particular attention not to support relocation when selecting operations and to treat sums unduly paid to operations not complying with the requirement of durability as irregularities. (39)With a view to improving complementarities and simplifying implementation, it should be possible to combine support from the Cohesion Fund and the ERDF with support from the ESF+ in joint programmes under the Investment for jobs and growth goal. (40)In order to optimise the added value from investments funded wholly or in part through the budget of the Union, synergies should be sought in particular between the Funds and directly managed instruments, including the Reform Delivery Tool. Those synergies should be achieved through key mechanisms, namely the recognition of flat rates for eligible costs from Horizon Europe for a similar operation and the possibility of combining funding from different Union instruments in the same operation as long as double financing is avoided. This Regulation should therefore set out rules for complementary financing from the Funds. (41)Financial instruments should not be used to support refinancing activities, such as replacing existing loan agreements or other forms of financing for investments which have already been physically completed or fully implemented at the date of the investment decision, but rather to support any type of new investments in line with the underlying policy objectives. (42)The decision to finance support measures through financial instruments should be determined on the basis of an ex ante assessment. This Regulation should lay down the minimum mandatory elements of ex ante assessments and should allow Member States to make use of the ex ante assessment carried out for the 2014-2020 period, updated where necessary, in order to avoid administrative burden and delays in setting up financial instruments. (43)In order to facilitate the implementation of certain types of financial instruments where ancillary grant support is envisaged, it is possible to apply the rules on financial instruments on such combination in one financial instrument operation. Specific conditions preventing double financing in such cases should be set out. (44)In full respect of the applicable State aid and public procurement rules already clarified during the 2014-2020 programming period, the managing authorities should have the possibility to decide on the most appropriate implementation options for financial instruments in order to address the specific needs of target regions. (45)In accordance with the principle and rules of shared management, Member States and the Commission should be responsible for the management and control of programmes and give assurance on the legal and regular use of the Funds. Since Member States should have the primary responsibility for such management and control and should ensure that operations supported by the Funds comply with applicable law, their obligations in that regard should be specified. The powers and responsibilities of the Commission in that context should also be laid down. (46)In order to hasten the start of programme implementation, the roll-over of implementation arrangements from the previous programming period should be facilitated. The use of the computerised system already established for the previous programming period, adapted as required, should be maintained, unless a new technology is necessary. (47)To streamline programme management functions, the integration of accounting functions with those of the managing authority should be maintained for the programmes supported by the AMIF, the ISF and the BMVI, and should be an option for the other Funds. (48)Since the managing authority bears the main responsibility for the effective and efficient implementation of the Funds and therefore fulfils a substantial number of functions, its functions in relation to the selection of projects, programme management and support for the monitoring committee should be set out in detail. Operations selected should be in line with the horizontal principles. (49)In order to optimise synergies between the Funds and directly managed instruments, the provision of support for operations that have already received a Seal of Excellence certification should be facilitated. (50) To ensure an appropriate balance between the effective and efficient implementation of the Funds and the related administrative costs and burdens, the frequency, scope and coverage of management verifications should be based on a risk assessment that takes account of factors such as the type of operations implemented, the beneficiaries as well as the level of risk identified by previous management verifications and audits.

(51)The audit authority should carry out audits and ensure that the audit opinion provided to the Commission is reliable. That audit opinion should provide assurance to the Commission on three points, namely the legality and regularity of the declared expenditure, the effective functioning of the management and control systems and the completeness, accuracy and veracity of the accounts. (52)A reduction of verifications and audit requirements should be possible where there is assurance that the programme has functioned effectively for the latest two consecutive years since this demonstrates that the Funds are being implemented effectively and efficiently over a prolonged period of time. (53)To reduce administrative burden on beneficiaries and administrative costs, the concrete application of the single audit principle should be specified for the Funds. (54)In order to improve financial management, a simplified pre-financing scheme should be provided for. The pre-financing scheme should ensure that a Member State has the means to provide support to beneficiaries from the start of the implementation of the programme. (55)To reduce the administrative burden for Member States as well as for the Commission, a compulsory schedule of quarterly payment applications should be established. Commission payments should continue to be subject to a 10 % retention until the payment of the annual balance of accounts when the Commission is able to conclude that the accounts are complete, accurate and true. (56)In order to reduce the administrative burden, the procedure for the annual acceptance of accounts should be simplified by providing simpler modalities for payments and recoveries where there is no disagreement between the Commission and the Member State. (57)In order to safeguard the financial interests and the budget of the Union proportionate measures should be established and implemented at the level of Member States and of the Commission. The Commission should be able to interrupt payments deadlines, suspend interim payments and apply financial corrections where the respective conditions are fulfilled. The Commission should respect the principle of proportionality by taking into account the nature, gravity and frequency of irregularities and their financial implications for the budget of the Union. (58)Member States should also prevent, detect and deal effectively with any irregularities including fraud committed by beneficiaries. Moreover, in accordance with Regulation (EU, Euratom) No 883/2013, and Regulations (Euratom, EC) No 2988/95 and No 2185/96 the European Anti-Fraud Office (OLAF) may carry out administrative investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union. In accordance with Regulation (EU) 2017/1939, the European Public Prosecutor's Office may investigate and prosecute fraud and other criminal offences affecting the financial interests of the Union as provided for in Directive (EU) 2017/1371 on the fight against fraud to the Union's financial interests by means of criminal law. Member States should take the necessary measures so that any person or entity receiving Union funds fully cooperates in the protection of the Union’s financial interests, grants the necessary rights and access to the Commission, the European Anti-Fraud Office (OLAF), the European Public Prosecutor's Office (EPPO) and the European Court of Auditors (ECA) and ensures that any third parties involved in the implementation of Union funds grant equivalent rights. Member States should report to the Commission on detected irregularities including fraud, and on their follow-up as well as on the follow-up of OLAF investigations. (59)In order to encourage financial discipline, it is appropriate to define the arrangements for decommitment of budgetary commitments at programme level. (60)In order to promote the objectives of the TFEU related to economic, social and territorial cohesion, the Investment for jobs and growth goal should support all regions. To provide balanced and gradual support and reflect the level of economic and social development, resources under that goal should be allocated from the ERDF and the ESF+ on the basis of an allocation key which is predominantly based on GDP per capita. Member States whose per capita gross national income ('GNI') is less than 90 % of that of the Union average should benefit under the Investment for jobs and growth goal from the Cohesion Fund. (61)Objective criteria should be established for designating eligible regions and areas for support from the Funds. To this end, the identification of the regions and areas at Union level should be based on the common system of classification of the regions established by Regulation (EC) No 1059/2003 of the European Parliament and the Council, as amended by Commission Regulation (EU) No 868/2014. (62)In order to set out an appropriate financial framework for the ERDF, the ESF+ and the Cohesion Fund, the Commission should set out the annual breakdown of available allocations per Member State under the Investment for jobs and growth goal together with the list of eligible regions, as well as the allocations for the European territorial cooperation goal (Interreg). Taking into account that the national allocations of Member States should be established on the basis of the statistical data and forecasts available in 2018 and given the forecasting uncertainties, the Commission should review the total allocations of all Member States in 2024 on the basis of the most recent statistics available at the time and, where there is a cumulative divergence of more than +/- 5 %, it should adjust those allocations for the years 2025 to 2027 in order for the outcomes of the mid-term review and the technical adjustment exercise to be reflected in programme amendments at the same time. (63)Trans-European transport networks projects in accordance with Regulation (EU) No [new CEF Regulation] will continue to be financed from the Cohesion Fund via both shared management and the direct implementation mode under the Connecting Europe Facility ('CEF'). Building on the successful approach of the 2014-2020 programming period, EUR 10 000 000 000 of the Cohesion Fund should be transferred to the CEF for this purpose. (64)A certain amount of the resources from ERDF, the ESF+ and the Cohesion Fund should be allocated to the European Urban Initiative which should be implemented through direct or indirect management by the Commission. (65)With a view to ensuring an appropriate allocation to categories of regions, as a principle, the total allocations to Member States in respect of less developed, transitional and more developed regions should not be transferable between the categories. Nevertheless, to accommodate Member State's needs to tackle specific challenges, Member States should be able to request a transfer from their allocations for more developed regions or for transition regions to less developed regions and should justify that choice. In order to ensure sufficient financial resources for less developed regions, a ceiling should be established for transfers to more developed regions or to transition regions. Transferability of resources between goals should not be possible. (66)Within the context of the unique and specific circumstances on the island of Ireland, and with a view to supporting North-South cooperation under the Good Friday Agreement, a new 'PEACE PLUS' cross-border programme should continue and build on the work of previous programmes, Peace and INTERREG, between the border counties of Ireland and Northern Ireland. Taking into account its practical importance, this programme should be supported with a specific allocation to continue support for peace and reconciliation actions, and that an appropriate share of the Irish allocation under the European Territorial Cooperation goal (Interreg) should also be allocated to the programme. (67)It is necessary to establish the maximum rates of co-financing in the area of cohesion policy by category of region in order to ensure that the principle of co-financing is respected through an appropriate level of public or private national support. Those rates should reflect the level of economic development of regions in terms of GDP per capita in relation to the EU-27 average. (68)In order to supplement and amend certain non-essential elements of this Regulation, the power to adopt acts in accordance with Article 290 of the TFEU should be delegated to the Commission in respect of the amendment of the elements contained in certain Annexes to this Regulation, i.e. for the dimensions and codes for the types of intervention, the templates for partnership agreements and programmes, the templates for the transmission of data, the use of the emblem of the Union, the elements for funding agreements and strategy documents, , the audit trail, electronic data exchange systems, the templates for the description of the management and control system, for the management declaration, for the audit opinion, for the annual control report, for the audit strategy, for the payment applications, for the accounts as well as for the determination of the level of financial corrections. (69)In addition the power to adopt acts in accordance with Article 290 of the TFEU should be delegated to the Commission in respect of the establishment of the criteria for determining the cases of irregularities to be reported, the definition of unit costs, lump sums, flat rates and financing not linked to costs applicable to all Member States as well as the establishment of standardised off-the-shelf sampling methodologies. (70)It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(71)In order to ensure uniform conditions for the adoption of Partnership Agreements, the adoption or amendment of programmes as well as the application of financial corrections, implementing powers should be conferred on the Commission. The implementing powers relating to the format to be used for reporting on irregularities, the electronic data to be recorded and stored and for the template for the final performance report should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council. Although these acts are of a general nature, the advisory procedure should be used given that they only set out technical aspects, forms and templates. The implementing powers in relation to the establishment of the breakdown of financial allocations for the ERDF, ESF+ and the Cohesion Fund. should be adopted without comitology procedures given that they merely reflect the application of a pre-defined calculation methodology. (72)Since Regulation (EU) No 1303/2013 of the European Parliament and of the Council or any act applicable to the 2014–2020 programming period should continue to apply to programmes and operations supported by the Funds covered under the 2014–2020 programming period. Since the implementation period of Regulation (EU) No 1303/2013 is expected to extend over to the programming period covered by this Regulation and in order to ensure continuity of implementation of certain operations approved by that Regulation, phasing provisions should be established. Each individual phase of the phased operation, which serves the same overall objective, should be implemented in accordance with the rules of the programming period under which it receives funding. (73)The objectives of this Regulation, namely to strengthen economic, social and territorial cohesion and to lay down common financial rules for part of the budget of the Union implemented under shared management, cannot be sufficiently achieved by the Member States by reason on the one hand due to the extent of the disparities between the levels of development of the various regions and the backwardness of the least favoured regions, as well as the limit on the financial resources of the Member States and regions and on the other hand due to the need for a coherent implementation framework covering several Union funds under shared management. Since those objectives can therefore rather be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the TEU. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives. (74)This Regulation respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union, HAVE ADOPTED THIS REGULATION: title i

objectives and general rules on support CHAPTER I

Subject-matter and definitions Article 1

Subject-matter and scope 1.This Regulation lays down: (a)financial rules for the European Regional Development Fund ('ERDF'), the European Social Fund Plus ('ESF+'), the Cohesion Fund,, the European Maritime and Fisheries Fund ('EMFF'), the Asylum and Migration Fund ('AMIF'), the Internal Security Fund ('ISF') and the Border Management and Visa Instrument ('BMVI') ('the Funds'); (b)common provisions applicable to the ERDF, the ESF+, the Cohesion Fund and the EMFF. 2.This Regulation shall not apply to the Employment and Social Innovation and the Health strands of the ESF+ and to the direct or indirect management components of the EMFF, the AMIF, the ISF and the BMVI, except for technical assistance at the initiative of the Commission. 3.Articles 4 and 10, Chapter III of Title II, Chapter II of Title III, and Title VIII shall not apply to the AMIF, the ISF and the BMVI. 4.Title VIII shall not apply to the EMFF. 5.Article 11 of Chapter II and Article 15 of Chapter III of Title II, Chapter I of Title III, Articles 33 to 36 and Article 38(1) to (4) of Chapter I, Article 39 of Chapter II, Article 45 of Chapter III of Title IV, Articles 67, 71, 73 and 74 of Chapter II and Chapter III of Title VI shall not apply to Interreg programmes. 6.The Fund-specific Regulations listed below may establish complementary rules to this Regulation which shall not be in contradiction with this Regulation. In case of doubt about the application between this Regulation and Fund-specific Regulations, this Regulation shall prevail: (a)Regulation (EU) […] (the 'ERDF and CF Regulation'); (b)Regulation (EU) […] (the 'ESF+ Regulation'); (c)Regulation (EU) […] (the 'ETC Regulation'); (d)Regulation (EU) […] (the 'EMFF Regulation');

(e)Regulation (EU) […] (the 'AMIF Regulation'); (f)Regulation (EU) […] (the 'ISF Regulation'); (g)Regulation (EU) […] (the 'BMVI Regulation'). Article 2

Definitions For the purpose of this Regulation, the following definitions apply: (1)'relevant country specific recommendations' mean Council recommendations adopted in accordance with Article 121(2) and Article 148(4) of the TFEU relating to structural challenges which it is appropriate to address through multiannual investments that fall within the scope of the Funds as set out in Fund-specific Regulations, and relevant recommendations adopted in accordance with Article [XX] of Regulation (EU) [number of the new Energy Union Governance Regulation] of the European Parliament and of the Council; (2)'applicable law' means Union law and the national law relating to its application; (3)'operation' means: (a)a project, contract, action or group of projects selected under the programmes concerned; (b)in the context of financial instruments, a programme contribution to a financial instrument and the subsequent financial support provided to final recipients by that financial instrument; (4)'operation of strategic importance' means an operation which provides a key contribution to the achievement of the objectives of a programme and which are subject to particular monitoring and communication measures; (5)'priority' in the context of the AMIF, the ISF and the BMVI, means a specific objective; in the context of the EMFF it means a 'type of areas of support' as referred to in the nomenclature laid down in Annex III of the EMFF Regulation; (6)'specific objective' in the context of the EMFF, shall be understood as 'areas of support' as referred to in Annex III of the EMFF Regulation; (7)'intermediate body' means any public or private law body which acts under the responsibility of a managing authority, or which carries out functions or tasks on behalf of such an authority; (8)'beneficiary' means: (a)a public or private law body, an entity with or without legal personality or a natural person, responsible for initiating or both initiating and implementing operations; (b)in the context of public-private partnerships ('PPP'), the public law body initiating a PPP operation or the private partner selected for its implementation; (c)in the context of State aid schemes, the undertaking which receives the aid; (d)in the context of financial instruments, the body that implements the holding fund or, where there is no holding fund structure, the body that implements the specific fund or, where the managing authority manages the financial instrument, the managing authority; (9)'small project fund' means an operation in an Interreg programme aimed at the selection and implementation of projects of limited financial volume;

(10)'target' means a pre-agreed value to be achieved at the end of the programming period in relation to an indicator included under a specific objective; (11)'milestone' means an intermediate value to be achieved at a given point in time during the programming period in relation to an indicator included under a specific objective; (12)'output indicator' means an indicator to measure the specific deliverables of the intervention; (13)'result indicator' means an indicator to measure the short term effects of the interventions supported, with particular reference to the direct addressees, population targeted or users of infrastructure; (14)'PPP operation' means an operation which is implemented under a partnership between public bodies and the private sector in line with a PPP agreement, and which aims to provide public services through risk sharing, pooling of private sector expertise or additional sources of capital; (15)'financial instrument' means a structure through which financial products are provided; (16)'financial product' means equity or quasi equity investments, loans and guarantees as defined in Article 2 of Regulation (EU, Euratom) [...] ('the Financial Regulation'); (17)'final recipient' means a legal or natural person receiving support from the Funds through a beneficiary of a small project fund or from a financial instrument; (18)'programme contribution' means the support from the Funds and the national public and private, if any, co-financing, to a financial instrument; (19)'body implementing a financial instrument' means a body, governed by public or private law, carrying out tasks of a holding fund or of a specific fund; (20)'holding fund' means a fund set up by a managing authority under one or more programmes, to implement financial instruments through one or more specific funds; (21)'specific fund' means a fund, set-up by a managing authority or a holding fund, to provide financial products to final recipients; (22)'leverage effect' means the amount of reimbursable financing provided to final recipients divided by the amount of the contribution from the Funds; (23)'multiplier ratio' in the context of guarantee instruments, means a ratio between the value of the underlying disbursed new loans, equity or quasi-equity investments, and the amount of the programme contribution set aside as agreed in guarantee contracts to cover expected and unexpected losses from those new loans, equity or quasi-equity investments; (24)'management costs' means direct or indirect costs reimbursed against evidence of expenditure incurred in the implementation of financial instruments; (25)'management fees' means a price for services rendered, as determined in the funding agreement between the managing authority and the body implementing a holding fund or a specific fund; and, where applicable, between the body implementing a holding fund and the body implementing a specific fund; (26)'relocation' means a transfer of the same or similar activity or part thereof within the meaning of Article 2(61a) of Commission Regulation (EU) No 651/2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the TFEU; (27)'public contribution' means any contribution to the financing of operations the source of which is the budget of national, regional or local public authorities or of any European grouping of territorial cooperation (EGTC) established in accordance with Regulation (EC) No 1082/2006 of the European Parliament and of the Council, the budget of the Union made available to the Funds, the budget of public law bodies or the budget of associations of public authorities or of public law bodies and, for the purpose of determining the co-financing rate for ESF+ programmes or priorities, may include any financial resources collectively contributed by employers and workers; (28)'accounting year' means the period from 1 July to 30 June of the following year, except for the first accounting year of the programming period, in respect of which it means the period from the start date for eligibility of expenditure until 30 June 2022; for the final accounting year, it means the period from 1 July 2029 to 30 June 2030; (29)'irregularity' means any breach of applicable law, resulting from an act or omission by an economic operator involved in the implementation of the Funds, which has, or would have, the effect of prejudicing the budget of the Union by charging unjustified expenditure to that budget;

(30)'serious deficiency' means a deficiency in the effective functioning of the management and control system of a programme for which significant improvements in the management and control systems are required and where any of the key requirements 2, 4, 5, 9, 12, 13 and 15 referred to in Annex X, or two or more of the other key requirements are assessed into categories 3 and 4 of that Annex; (31)'total error rate' means the sum of the projected random errors and, if applicable, systemic errors and uncorrected anomalous errors, divided by the population; (32)'residual error rate' means the total error rate less the financial corrections applied by the Member State which intend to reduce the risks identified by the audit authority in its audits of operations; (33)'completed operation' means an operation that has been physically completed or fully implemented and in respect of which all related payments have been made by beneficiaries and the corresponding public contribution has been paid to the beneficiaries; (34)'sampling unit' means one of the units, which may be an operation, a project within an operation or a payment claim by a beneficiary, into which a population is divided for the purpose of sampling; (35)'escrow account' means, in the case of a PPP operation a bank account covered by a written agreement between a public body beneficiary and the private partner approved by the managing authority or an intermediate body used for payments during and/or after the eligibility period; (36)'participant' means a natural person benefiting from an operation but not receiving financial support from the Funds; (37)'climate proofing' means a process to ensure that infrastructure is resilient to the adverse impacts of the climate in accordance with national rules and guidance, where available, or internationally recognised standards. Article 3

Calculation of time limits for Commission actions Where a time limit is set for an action by the Commission, that time limit shall start when all information in accordance with the requirements laid down in this Regulation or in Fund-specific Regulations have been submitted by the Member State. That time limit shall be suspended from the day following the date on which the Commission sends its observations or a request for revised documents to the Member State and until the Member State responds to the Commission. CHAPTER II

Policy objectives and principles for the support of the Funds Article 4

Policy objectives 1.The ERDF, the ESF+, the Cohesion Fund and the EMFF shall support the following policy objectives: (a)a smarter Europe by promoting innovative and smart economic transformation; (b)a greener, low-carbon Europe by promoting clean and fair energy transition, green and blue investment, the circular economy, climate adaptation and risk prevention and management; (c)a more connected Europe by enhancing mobility and regional ICT connectivity; (d)a more social Europe implementing the European Pillar of Social Rights; (e)a Europe closer to citizens by fostering the sustainable and integrated development of urban, rural and coastal areas and local initiatives. 2.The ERDF, the ESF+ and the Cohesion Fund shall contribute to the actions of the Union leading to strengthening of its economic, social and territorial cohesion in accordance with Article 174 of the TFEU by pursuing the following goals:

(a)Investment for jobs and growth in Member States and regions, to be supported by the ERDF, the ESF+ and the Cohesion Fund; and (b)European territorial cooperation (Interreg), to be supported by the ERDF. 3.Member States shall provide information on the support for environment and climate objectives using a methodology based on types of intervention for each of the Funds. That methodology shall consist of assigning a specific weighting to the support provided at a level which reflects the extent to which such support makes a contribution to environmental objectives and to climate objectives. In the case of the ERDF, the ESF+ and the Cohesion Fund weightings shall be attached to dimensions and codes for the types of intervention established in Annex I. 4Member States and the Commission shall ensure the coordination, complementarity and coherence between the Funds and other Union instruments such as the Reform Support Programme, including the Reform Delivery Tool and the Technical Support Instrument. They shall optimise mechanisms for coordination between those responsible to avoid duplication during planning and implementation. Article 5

Shared management 1.The Member States and the Commission shall implement the budget of the Union allocated to the Funds under shared management in accordance with Article [63] of Regulation (EU, Euratom) [number of the new financial regulation] (the 'Financial Regulation'). 2.However, the Commission shall implement the amount of support from the Cohesion Fund transferred to the Connecting Europe Facility ('CEF'), the European Urban Initiative, Interregional Innovative Investments, the amount of support transferred from the ESF+ to transnational cooperation, the amounts contributed to InvestEU and technical assistance at the initiative of the Commission under direct or indirect management in accordance with [points (a) and (c) of Article 62(1)] of the Financial Regulation. 3.The Commission may implement outermost regions' cooperation under the European territorial cooperation goal (Interreg) under indirect management. Article 6

Partnership and multi-level governance 1.Each Member State shall organise a partnership with the competent regional and local authorities. That partnership shall include at least the following partners: (a)urban and other public authorities; (b)economic and social partners; (c)relevant bodies representing civil society, environmental partners, and bodies responsible for promoting social inclusion, fundamental rights, rights of persons with disabilities, gender equality and non-discrimination. 2.In accordance with the multi-level governance principle, the Member State shall involve those partners in the preparation of Partnership Agreements and throughout the preparation and implementation of programmes including through participation in monitoring committees in accordance with Article 34. 3.The organisation and implementation of partnership shall be carried out in accordance with Commission Delegated Regulation (EU) No 240/2014. 4.At least once a year, the Commission shall consult the organisations which represent the partners at Union level on the implementation of programmes. title ii

strategic approach CHAPTER I

Partnership Agreement Article 7

Preparation and submission of the Partnership Agreement 1.Each Member State shall prepare a Partnership Agreement which sets out arrangements for using the Funds in an effective and efficient way for the period from 1 January 2021 to 31 December 2027.

2.The Member State shall submit the Partnership Agreement to the Commission before or at the same time as the submission of the first programme. 3.The Partnership Agreement may be submitted together with the relevant annual National Reform Programme. 4.The Member State shall draw up the Partnership Agreement in accordance with the template set out in Annex II. It may include the Partnership Agreement in one of its programmes. 5.Interreg programmes may be submitted to the Commission before the submission of the Partnership Agreement. Article 8

Content of the Partnership Agreement The Partnership Agreement shall contain the following elements: (a)the selected policy objectives indicating by which of the Funds and programmes they will be pursued and a justification thereto, and where relevant, a justification for using the delivery mode of the InvestEU, taking into account relevant country-specific recommendations; (b)for each of the selected policy objectives referred to in point (a): (i) a summary of the policy choices and the main results expected for each of the Funds, including where relevant, through the use of InvestEU; (ii) coordination, demarcation and complementarities between the Funds and, where appropriate, coordination between national and regional programmes; (iii) complementarities between the Funds and other Union instruments, including LIFE strategic integrated projects and strategic nature projects; (c)the preliminary financial allocation from each of the Funds by policy objective at national level, respecting Fund-specific rules on thematic concentration; (d)where relevant, the breakdown of financial resources by category of regions drawn up in accordance with Article 102(2) and the amounts of allocations proposed to be transferred between categories of regions pursuant to Article 105; (e)the amounts to be contributed to InvestEU by Fund and by category of regions; (f)the list of planned programmes under the Funds with the respective preliminary financial allocations by fund and the corresponding national contribution by category of regions; (g)a summary of the actions which the Member State concerned shall take to reinforce its administrative capacity of the implementation of the Funds. With regard to the European territorial cooperation goal (Interreg), the Partnership Agreement shall only contain the list of planned programmes. Article 9

Approval of the Partnership Agreement 1.The Commission shall assess the Partnership Agreement and its compliance with this Regulation and with the Fund-specific rules. In its assessment, the Commission shall, in particular, take into account relevant country-specific recommendations. 2.The Commission may make observations within three months of the date of submission by the Member State of the Partnership Agreement.

3.The Member State shall review the Partnership Agreement taking into account the observations made by the Commission. 4.The Commission shall adopt a decision by means of an implementing act approving the Partnership Agreement no later than four months after the date of submission of that Partnership Agreement by the Member State concerned. The Partnership Agreement shall not be amended. 5.If, pursuant to Article 7(4), the Partnership Agreement is included in a programme, the Commission shall adopt a decision by means of an implementing act approving that programme no later than six months after the date of submission of that programme by the Member State concerned. Article 10

Use of the ERDF, the ESF+, the Cohesion Fund and the EMFF delivered through InvestEU 1.Member States may allocate, in the Partnership Agreement or in the request for an amendment of a programme, the amount of ERDF, the ESF+, the Cohesion Fund and the EMFF to be contributed to InvestEU and delivered through budgetary guarantees. The amount to be contributed to InvestEU shall not exceed 5 % of the total allocation of each Fund, except in duly justified cases. Such contributions shall not constitute transfers of resources under Article 21. 2.For the Partnership Agreement, resources of the current and future calendar years may be allocated. For the request for an amendment of a programme, only resources of future calendar years may be allocated. 3.The amount referred to in paragraph 1 shall be used for the provisioning of the part of the EU guarantee under the Member State compartment. 4.Where a contribution agreement, as set out in Article [9] of the [InvestEU Regulation], has not been concluded by 31 December 2021 for an amount referred to in paragraph 1 allocated in the Partnership Agreement, the Member State shall submit a request for amendment of a programme or programmes to use the corresponding amount. The contribution agreement for an amount referred to in paragraph 1 allocated in the request of the amendment of a programme shall be concluded simultaneously with the adoption of the decision amending the programme. 5.Where a guarantee agreement, as set out in Article [9] of the [InvestEU Regulation], has not been concluded within nine months from the approval of the contribution agreement, the respective amounts paid into the common provisioning fund as a provisioning shall be transferred back to a programme or programmes and the Member State shall submit a corresponding request for a programme amendment. 6.Where a guarantee agreement, as set out in Article [9] of the [InvestEU Regulation], has not been fully implemented within four years from the signature of the guarantee agreement, the Member State may request that amounts committed in the guarantee agreement but not covering underlying loans or other risk bearing instruments shall be treated in accordance with paragraph 5. 7.Resources generated by or attributable to the amounts contributed to InvestEU and delivered through budgetary guarantees shall be made available to the Member State and shall be used for support under the same objective or objectives in the form of financial instruments. 8.The Commission shall re-budget contributed amounts which have not been used for InvestEU for the year in which the corresponding programme amendment is approved. Such re-budgetisation may not go beyond the year 2027. The decommitment time limit for the re-budgeted amount in accordance with Article 99 shall start from the year in which the contribution has been re-budgeted. CHAPTER II

Enabling conditions and performance framework Article 11

Enabling conditions 1.For each specific objective, prerequisite conditions for its effective and efficient implementation ('enabling conditions') are laid down in this Regulation. Annex III lays down horizontal enabling conditions applicable to all specific objectives and the criteria necessary for the assessment of their fulfilment. Annex IV lays down thematic enabling conditions for the ERDF, the Cohesion Fund and the ESF+ and the criteria necessary for the assessment of their fulfilment. 2.When preparing a programme or introducing a new specific objective as part of a programme amendment, the Member State shall assess whether the enabling conditions linked to the selected specific objective are fulfilled. An enabling condition is fulfilled where all the related criteria are met. The Member State shall identify in each programme or in the programme amendment the fulfilled and non-fulfilled enabling conditions and where it considers that an enabling condition is fulfilled, it shall provide justification.

3.Where an enabling condition is not fulfilled at the time of approval of the programme or the programme amendment, the Member State shall report to the Commission as soon as it considers the enabling condition fulfilled with justification. 4.The Commission shall, within three months of receipt of the information referred to in paragraph 3, perform an assessment and inform the Member State where it agrees with the fulfilment. Where the Commission disagrees with the assessment of the Member State, it shall inform the Member State accordingly and give it the opportunity to present its observations within one month. 5.Expenditure related to operations linked to the specific objective cannot be included in payment applications until the Commission has informed the Member State of the fulfilment of the enabling condition pursuant to paragraph 4. The first sub-paragraph shall not apply to operations that contribute to the fulfilment of the corresponding enabling condition. 6.The Member State shall ensure that enabling conditions are fulfilled and applied throughout the programming period. It shall inform the Commission of any modification impacting the fulfilment of enabling conditions. Where the Commission considers that an enabling condition is no longer fulfilled, it shall inform the Member State and give it the opportunity to present its observations within one month. Where the Commission concludes that the non-fulfilment of the enabling condition persists, expenditure related to the specific objective concerned cannot be included in payment applications as from the date the Commission informs the Member State accordingly. 7.Annex IV shall not apply to programmes supported by the EMFF. Article 12

Performance framework 1.The Member State shall establish a performance framework which shall allow monitoring, reporting on and evaluating programme performance during its implementation, and contribute to measuring the overall performance of the Funds. The performance framework shall consist of: (a)the output and result indicators linked to specific objectives set in the Fund-specific Regulations; (b) milestones to be achieved by the end of the year 2024 for output indicators; and (c) targets to be achieved by the end of the year 2029 for output and result indicators. 2.Milestones and targets shall be established in relation to each specific objective within a programme, with the exception of technical assistance and of the specific objective addressing material deprivation set out in Article [4(c)(vii)] of the ESF+ Regulation. 3.Milestones and targets shall allow the Commission and the Member State to measure progress towards the achievement of the specific objectives. They shall meet the requirements set out in Article [33(3)] of the Financial Regulation. Article 13

Methodologies for the establishment of the performance framework 1.The methodologies to establish the performance framework shall include: (a)the criteria applied by the Member State to select indicators; (b)data or evidence used, data quality assurance and the calculation method;

(c)factors that may influence the achievement of the milestones and targets and how they were taken into account. 2.The Member State shall make those methodologies available upon request by the Commission. Article 14

Mid-term review 1.For programmes supported by the ERDF, the ESF+ and the Cohesion Fund, the Member State shall review each programme, taking into account the following elements: (a)the challenges identified in relevant country-specific recommendations adopted in 2024; (b)the socio-economic situation of the Member State or region concerned; (c)the progress in achieving the milestones; (d)the outcome of the technical adjustment as set out in Article 104(2), where applicable. 2.The Member State shall submit to the Commission by 31 March 2025 a request for the amendment of each programme in accordance with Article 19(1). The Member State shall justify the amendment on the basis of the elements set out in paragraph 1. The revised programme shall include: (a)the allocations of the financial resources by priority including the amounts for the years 2026 and 2027; (b)revised or new targets; (c)the revised allocations of the financial resources resulting from the technical adjustment set out in Article 104(2) including the amounts for the years 2025, 2026 and 2027, where applicable. 3.Where as a result of the review a new programme is submitted, the financing plan under point (ii) of Article 17(3)(f) shall cover the total financial appropriation for each of the Funds as of the year of the programme approval. CHAPTER III

Measures linked to sound economic governance Article 15

Measures linking effectiveness of Funds to sound economic governance 1.The Commission may request a Member State to review and propose amendments to relevant programmes, where this is necessary to support the implementation of relevant Council Recommendations. Such a request may be made for the following purposes: (a)to support the implementation of a relevant country-specific recommendation adopted in accordance with Article 121(2) TFEU and of a relevant Council recommendation adopted in accordance with Article 148(4) TFEU, addressed to the Member State concerned; (b)to support the implementation of relevant Council Recommendations addressed to the Member State concerned and adopted in accordance with Articles 7(2) or 8(2) of Regulation (EU) No 1176/2011 of the European Parliament and of the Council provided that these amendments are deemed necessary to help correct the macro-economic imbalances.

2.A request by the Commission to a Member State in accordance with paragraph 1 shall be justified, with reference to the need to support the implementation of the relevant recommendations and shall indicate the programmes or priorities which it considers are concerned and the nature of the amendments expected. 3.The Member State shall submit its response to the request referred to in paragraph 1 within two months of its receipt, setting out the amendments it considers necessary in the relevant programmes, the reasons for such amendments, identifying the programmes concerned and outlining the nature of the amendments proposed and their expected effects on the implementation of recommendations and on the implementation of the Funds. If necessary, the Commission shall make observations within one month of the receipt of that response. 4.The Member State shall submit a proposal to amend the relevant programmes within two months of the date of submission o