EUROPEAN COMMISSION Brussels, 7.9.2018 COM(2018) 614 final 2018/0322(COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 1303/2013 as regards the adjustment of annual pre-financing for the years 2021 to 2023



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •Reasons for and objectives of the proposal Evidence shows that annual pre-financing paid to Member States for a given accounting year and cleared with the acceptance of accounts results in annual recovery orders of a significant magnitude (for instance, EUR 6.6 billion in 2017). This means in practice that payment credits are requested from Member States from payment appropriations in the Union's budget to pay to them annual pre-financing that a year later has to be recovered to a significant extent. Therefore, to increase transparency and contribute to the predictability of budgetary planning and to a more stable and predictable payment profile, it is proposed that for the last three years of the current implementation period 2021-2023, which are overlapping with the next implementation period starting in 2021, the annual pre-financing is reduced to the necessary minimum. This approach also takes account of payment needs stemming from pre-financing arrangements proposed for the 2021-2027 programmes where only initial pre-financing would be paid in six annual tranches. This intention was already signalled by the Commission. •Consistency with existing policy provisions in the policy area The proposal is consistent with the provisions concerning budgetary management of the European Structural and Investment (ESI) Funds as set out in Regulation (EU) No 1303/2013. The amendment does not introduce a structural change of those provisions. •Consistency with other Union policies The proposal is consistent with other proposals and initiatives adopted by the European Commission. It is also consistent with the requirements of sound budgetary management. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis Regulation (EU) No 1303/2013 defines the common rules applicable to the ESI Funds. Based on the principle of shared management between the Commission and the Member States, this Regulation includes provisions for the programming process as well as arrangements for programme (including financial) management, monitoring, financial control and evaluation of projects. •Subsidiarity (for non-exclusive competence) The proposal concerns the decrease of annual pre-financing provided by the Commission from the budget of the Union to Member States. The rates of annual pre-financing are established at Union level in Regulation (EU) No 1303/2013. Therefore an amendment of the provisions set out in this regulation requires the amendment of this Regulation. National or regional means are not appropriate to address the problem at hand. Therefore, the proposal complies with the subsidiarity principle. •Proportionality The proposal is in conformity with the proportionality principle as it does not go beyond the minimum required to achieve the stated objective at Union level and what is necessary for that purpose. The rate of annual pre-financing is decreased to be commensurate with cash-flow requirements taking into account the increased pace of cash-flow on the basis of interim payment applications stemming from the accelerated implementation of the ESI Funds. When establishing the proposed rate, the Commission took into consideration that for the years concerned the basis to which the percentages relate already include the performance reserve, hence a lower share can guarantee the same amount of pre-financing. •Choice of the instrument Proposed instrument: amendment of the current Regulation. The Commission has explored the scope for manoeuvre provided by the legal framework and considers it necessary to propose amendments to Regulation (EU) No 1303/2013. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

•Ex-post evaluations/fitness checks of existing legislation There was no ex-post evaluation/or fitness checks of the existing legislation. •Stakeholder consultations There was no consultation of external stakeholders. •Collection and use of expertise Use of external expertise has not been necessary. •Impact assessment The proposal is not expected to have significant economic, social or environmental impacts. The proposal will result in decreasing the annual pre-financing from 3% of the amount of the support from the Funds and the European Maritime and Fisheries Fund (‘EMFF’) for the whole programming period to the operational programme to 1% for the years 2021-2023, more suitable to the cash-flow requirements stemming from programme implementation. This lower pre-financing takes into account the anticipated accelerated submission of interim payment claims, the fact that for these years the basis for calculating the amount of annual pre-financing is increased by the size of the performance reserve which will be definitely allocated by then as well as pre-financing available for Member States from the 2021-2027 programming period. Given that annual pre-financing is made available for an accounting year which spans over two annual budgetary years, the excess amount paid in year N as annual pre-financing will be cleared in year N+1, which results in unnecessary payment flows without added value. Reducing the rate of annual pre-financing for the proposed years will contribute to increasing the predictability of budgetary planning, to a more stable and predictable payment profile, to the reduction of the risk of payment backlogs, to increased transparency in payment needs and, therefore, to better budgetary management. •Regulatory fitness and simplification This is not an initiative within the Regulatory Fitness Programme (REFIT). •Fundamental rights The proposal has no consequences for the protection of fundamental rights. 4.BUDGETARY IMPLICATIONS There is no impact on commitment appropriations since no modification is proposed to the maximum amounts of the ESI Funds financing provided for in the operational programmes for the programming period 2014-2020. The overall impact on payment appropriations is neutralised. As detailed in the financial statement attached to the proposal, the suggested change will contribute to a reduction in payment appropriations related to the year 2021 entirely due to the reduction of the annual pre-financing amounts which will be compensated by higher payment needs for the year 2024. For the years 2022 and 2023, lower annual pre-financing will be offset in the framework of the examination and acceptance of accounts, therefore the effect is neutral. 5.OTHER ELEMENTS •Implementation plans and monitoring, evaluation and reporting arrangements Not applicable. The existing delivery systems of the ESI Funds can be used to monitor the implementation of this proposal. •Explanatory documents (for directives)

Not applicable. •Detailed explanation of the specific provisions of the proposal Article 134(2) will be modified to set the annual pre-financing for the years 2021 to 2023 at 1%, from the currently applicable 3%, of the amount of the support from the Funds and the EMFF for the whole programming period to the operational programme. The annual pre-financing for the year 2020 is maintained at 3% of the amount of the support from the Funds and the EMFF for the whole programming period to the operational programme. 2018/0322 (COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 1303/2013 as regards the adjustment of annual pre-financing for the years 2021 to 2023 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 Article 177 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, Acting in accordance with the ordinary legislative procedure, Whereas: (1)Regulation (EU) No 1303/2013 of the European Parliament and of the Council lays down the common and general provisions applicable to the European Structural and Investment Funds. (2)Evidence suggests that the annual pre-financing is set at a particularly high level in comparison with financial management requirements stemming from the implementation of operational programmes; this is in particular the case for the budgetary years 2021 to 2023. (3)In order to ease the pressure on payment appropriations in the Union budget for the budgetary years 2021 to 2023 and to enhance the predictability of payment requirements and thus contribute to more transparent budgetary planning and a more orderly payment profile, the rate of annual pre-financing for those years should be decreased. (4)Regulation (EU) No 1303/2013 should therefore be amended accordingly, HAVE ADOPTED THIS REGULATION:

Article 1 Article 134(2) of Regulation (EU) No 1303/2013 is amended as follows: (a) The fifth indent is replaced by the following: "— 2020: 3 %"; (b) The following indent is added: "— 2021 to 2023: 1 %." Article 2 This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, For the European Parliament For the Council The President The President LEGISLATIVE FINANCIAL STATEMENT 1.FRAMEWORK OF THE PROPOSAL/INITIATIVE 1.1.Title of the proposal/initiative 1.2.Policy area(s) concerned in the ABM/ABB structure 1.3.Nature of the proposal/initiative 1.4.Objective(s) 1.5.Grounds for the proposal/initiative 1.6.Duration and financial impact

1.7.Management mode(s) planned 2.MANAGEMENT MEASURES 2.1.Monitoring and reporting rules 2.2.Management and control system 2.3.Measures to prevent fraud and irregularities 3.ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 3.1.Heading(s) of the multiannual financial framework and expenditure budget line(s) affected 3.2.Estimated impact on expenditure 3.2.1.Summary of estimated impact on expenditure 3.2.2.Estimated impact on operational appropriations 3.2.3.Estimated impact on appropriations of an administrative nature 3.2.4.Compatibility with the current multiannual financial framework 3.2.5.Third-party contributions 3.3.Estimated impact on revenue LEGISLATIVE FINANCIAL STATEMENT 1.FRAMEWORK OF THE PROPOSAL/INITIATIVE 1.1.Title of the proposal/initiative Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 1303/2013 as regards adjusting the level of annual pre-financing for the years 2021 to 2023 1.2.Policy area(s) concerned in the ABM/ABB structure EMPLOYMENT, SOCIAL AFFAIRS AND INCLUSION REGIONAL AND URBAN POLICY

MARITIME AFFAIRS AND FISHERIES 1.3.Nature of the proposal/initiative ⌧ The proposal/initiative relates to a new action ◻ The proposal/initiative relates to a new action following a pilot project/preparatory action ◻ The proposal/initiative relates to the extension of an existing action ◻ The proposal/initiative relates to an action redirected towards a new action 1.4.Objective(s) 1.4.1.The Commission's multiannual strategic objective(s) targeted by the proposal/initiative N/A 1.4.2.Specific objective(s) and ABM/ABB activity(ies) concerned Specific objective No N/A ABM/ABB activity(ies) concerned N/A 1.4.3.Expected result(s) and impact Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. N/A 1.4.4.Indicators of results and impact Specify the indicators for monitoring implementation of the proposal/initiative.

N/A 1.5.Grounds for the proposal/initiative 1.5.1.Requirement(s) to be met in the short or long term N/A 1.5.2.Added value of EU involvement N/A 1.5.3.Lessons learned from similar experiences in the past N/A 1.5.4.Compatibility and possible synergy with other appropriate instruments N/A 1.6.Duration and financial impact ⌧Proposal/initiative of limited duration –⌧ Proposal/initiative in effect from 2021 to 2024 –⌧ Financial impact from 2021 to 2024 ◻ Proposal/initiative of unlimited duration –Implementation with a start-up period from YYYY to YYYY, –followed by full-scale operation. 1.7.Management mode(s) planned ◻ Direct management by the Commission –◻ by its departments, including by its staff in the Union delegations;

–◻ by the executive agencies ⌧ Shared management with the Member States ◻ Indirect management by entrusting budget implementation tasks to: –◻ third countries or the bodies they have designated; –◻ international organisations and their agencies (to be specified); –◻the EIB and the European Investment Fund; –◻ bodies referred to in Articles 208 and 209 of the Financial Regulation; –◻ public law bodies; –◻ bodies governed by private law with a public service mission to the extent that they provide adequate financial guarantees; –◻ bodies governed by the private law of a Member State that are entrusted with the implementation of a public-private partnership and that provide adequate financial guarantees; –◻ persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU, and identified in the relevant basic act. –If more than one management mode is indicated, please provide details in the ‘Comments’ section. Comments N/A 2.MANAGEMENT MEASURES 2.1.Monitoring and reporting rules Specify frequency and conditions. N/A 2.2.Management and control system 2.2.1.Risk(s) identified

N/A 2.2.2.Information concerning the internal control system set up N/A 2.2.3.Estimate of the costs and benefits of the controls and assessment of the expected level of risk of error N/A 2.3.Measures to prevent fraud and irregularities Specify existing or envisaged prevention and protection measures. N/A 3.ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 3.1.Heading(s) of the multiannual financial framework and expenditure budget line(s) affected ·Existing budget lines In order of multiannual financial framework headings and budget lines. Heading of multiannual financial framework Budget line Type of

expenditure Contribution Number Diff./Non-diff. from EFTA countries from candidate countries from third countries within the meaning of Article 21(2)(b) of the Financial Regulation 1B -

Economic, Social and Territorial Cohesion 04 02 60 - European Social Fund — Less developed regions Diff NO NO NO NO 04 02 61 - European Social Fund — Transition regions Diff NO NO NO NO 04 02 62 - European Social Fund — More developed regions Diff NO NO NO NO 04 02 64 - Youth Employment Initiative Diff NO NO NO NO 13 03 60 - European Regional Development Fund — Less developed regions Diff NO NO NO NO 13 03 61 - European Regional Development Fund — Transition regions Diff NO NO NO NO 13 03 62 - European Regional Development Fund — More developed regions Diff NO NO NO NO 13 03 63 - European Regional Development Fund — Additional allocation for outermost and sparsely populated regions Diff NO NO NO NO 13 03 64 01 - European Regional Development Fund — European territorial cooperation Diff NO NO NO NO 13 04 60 - Cohesion Fund Diff NO NO NO NO 2 - Sustainable Growth: Natural Resources 11 06 60 - Promoting sustainable and competitive fisheries and aquaculture, balanced and inclusive territorial development of fisheries areas and fostering the implementation of the common fisheries policy Diff NO NO NO NO ·New budget lines requested : N/A 3.2.Estimated impact on expenditure 3.2.1.Summary of estimated impact on expenditure EUR million (to three decimal places) Heading of multiannual financial

framework 1B Economic, Social and Territorial Cohesion DG EMPL Year

2021 Year

2022 Year

2023 Year

2024 TOTAL • Operational appropriations 04 02 60 Payments (1) -1 013,958 0,000 0,000 1 013,958 0,000 04 02 61 Payments (2) -249,832 0,000 0,000 249,832 0,000 04 02 62 Payments (3) -504,477 0,000 0,000 504,477 0,000 04 02 64 Payments (4) -88,224 0,000 0,000 88,224 0,000 Appropriations of an administrative nature financed from the envelope of specific programmes N/A N/A N/A N/A N/A TOTAL appropriations

for DG EMPL Payments -1 856,491 0,000 0,000 1 856,491 0,000





DG REGIO Year

2021 Year

2022 Year

2023 Year

2024 TOTAL • Operational appropriations 13 03 60 Payments (1) -2 608,675 0,000 0,000 2 608,675 0,000 13 03 61 Payments (2) -509,195 0,000 0,000 509,195 0,000 13 03 62 Payments (3) -647,801 0,000 0,000 647,801 0,000 13 03 63 Payments (4) -31,108 0,000 0,000 31,108 0,000 13 03 64 01 Payments (5) -186,707 0,000 0,000 186,707 0,000 13 04 60 Payments (6) -1 265,652 0,000 0,000 1 265,652 0,000 Appropriations of an administrative nature financed from the envelope of specific programmes N/A N/A N/A N/A N/A TOTAL appropriations

for DG REGIO Payments -5 249,139 0,000 0,000 5 249,139 0,000



• TOTAL operational appropriations Payments -7 105,630 0,000 0,000 7 105,630 0,000 • TOTAL appropriations of an administrative nature financed from the envelope for specific programmes N/A N/A N/A N/A N/A TOTAL appropriations

under HEADING 1B

of the multiannual financial framework Payments -7 105,630 0,000 0,000 7 105,630 0,000 Heading of multiannual financial

framework 2 Sustainable Growth: Natural Resources DG MARE Year

2021 Year

2022 Year

2023 Year

2024 TOTAL • Operational appropriations 11 06 60 Payments (1) -114,987 0,000 0,000 114,987 0,000 Appropriations of an administrative nature financed from the envelope of specific programmes N/A N/A N/A N/A N/A TOTAL appropriations

for DG MARE Payments -114,987 0,000 0,000 114,987 0,000 If more than one heading is affected by the proposal / initiative: • TOTAL operational appropriations Payments -7 220,617 0,000 0,000 7 220,617 0,000 • TOTAL appropriations of an administrative nature financed from the envelope for specific programmes N/A N/A N/A N/A N/A TOTAL appropriations

under HEADINGS 1 to 4

of the multiannual financial framework

(Reference amount) Payments -7 220,617 0,000 0,000 7 220,617 0,000







Heading of multiannual financial

framework 5 ‘Administrative expenditure’



EUR million (to three decimal places) Year

N Year

N+1 Year

N+2 Year

N+3 Enter as many years as necessary to show the duration of the impact (see point 1.6) TOTAL DG: <…….> • Human resources • Other administrative expenditure TOTAL DG <…….> Appropriations TOTAL appropriations

under HEADING 5

of the multiannual financial framework (Total commitments = Total payments) EUR million (to three decimal places) Year

N Year

N+1 Year

N+2 Year

N+3 Enter as many years as necessary to show the duration of the impact (see point 1.6) TOTAL TOTAL appropriations

under HEADINGS 1 to 5

of the multiannual financial framework Commitments Payments 3.2.2.Estimated impact on operational appropriations –◻ The proposal/initiative does not require the use of operational appropriations –◻ The proposal/initiative requires the use of operational appropriations, as explained below: Commitment appropriations in EUR million (to three decimal places) Indicate objectives and outputs ⇩ Year

N Year

N+1 Year

N+2 Year

N+3 Enter as many years as necessary to show the duration of the impact (see point 1.6) TOTAL OUTPUTS Type Average cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost Total No Total cost SPECIFIC OBJECTIVE No 1… - Output - Output - Output Subtotal for specific objective No 1 SPECIFIC OBJECTIVE No 2 ... - Output Subtotal for specific objective No 2 TOTAL COST 3.2.3.Estimated impact on appropriations of an administrative nature 3.2.3.1.Summary –◻ The proposal/initiative does not require the use of appropriations of an administrative nature –◻ The proposal/initiative requires the use of appropriations of an administrative nature, as explained below: EUR million (to three decimal places) Year

N Year

N+1 Year

N+2 Year

N+3 Enter as many years as necessary to show the duration of the impact (see point 1.6) TOTAL

HEADING 5

of the multiannual financial framework Human resources Other administrative expenditure Subtotal HEADING 5

of the multiannual financial framework Outside HEADING 5

of the multiannual financial framework Human resources Other expenditure

of an administrative nature Subtotal

outside HEADING 5

of the multiannual financial framework TOTAL The appropriations required for human resources and other expenditure of an administrative nature will be met by appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints. 3.2.3.2.Estimated requirements of human resources –◻ The proposal/initiative does not require the use of human resources. –◻ The proposal/initiative requires the use of human resources, as explained below: Estimate to be expressed in full time equivalent units Year

N Year

N+1 Year N+2 Year N+3 Enter as many years as necessary to show the duration of the impact (see point 1.6) • Establishment plan posts (officials and temporary staff) XX 01 01 01 (Headquarters and Commission’s Representation Offices) XX 01 01 02 (Delegations) XX 01 05 01 (Indirect research) 10 01 05 01 (Direct research) • External staff (in Full Time Equivalent unit: FTE) XX 01 02 01 (AC, END, INT from the ‘global envelope’) XX 01 02 02 (AC, AL, END, INT and JED in the delegations) XX 01 04 yy - at Headquarters - in Delegations XX 01 05 02 (AC, END, INT - Indirect research) 10 01 05 02 (AC, END, INT - Direct research) Other budget lines (specify) TOTAL XX is the policy area or budget title concerned. The human resources required will be met by staff from the DG who are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints. Description of tasks to be carried out: Officials and temporary staff External staff 3.2.4.Compatibility with the current multiannual financial framework –◻ The proposal/initiative is compatible the current multiannual financial framework. –◻ The proposal/initiative will entail reprogramming of the relevant heading in the multiannual financial framework. Explain what reprogramming is required, specifying the budget lines concerned and the corresponding amounts.