Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1081/2006 on the European Social Fund to extend the types of costs eligible for a contribution from the ESF
Date: 2008-11-26
Institutions: European Commission
Subjects: European Social Fund, arms policy, economic and social cohesion, economic recession, free movement of workers, gender equality, operation of the Institutions, powers of the institutions (EU), principle of subsidiarity, simplification of formalities

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 26.11.2008 
COM(2008) 813 final 

2008/0232 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EC) No 1081/2006 on the European Social Fund to extend the 
types of costs eligible for a contribution from the ESF  

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EXPLANATORY MEMORANDUM 

•  Grounds for and objectives of the proposal 

The  purpose  of  the  proposal  is  to  introduce  a  simplification  into  the  operations  of  the 
European Social Fund.  

•  General context: New challenges for the future ESF 

The European Social Fund (ESF) is set up under Article 146 of the Treaty, which gives it the 
objective  of  helping  to  make  the  employment  of  workers  easier,  and  of  increasing  their 
geographical and occupational mobility. It thereby also contributes to the economic and social 
cohesion  objective  set  out  in  Article  158  of  the  EC  Treaty,  by  supporting  policies  and 
priorities aimed at achieving progress towards full employment, the improvement of quality 
and productivity at work, and the promotion of social inclusion and cohesion, in line with the 
guidelines and recommendations under the European Employment Strategy (EES). 

The  current  financial  crisis  and  economic  downturn  are  rapidly  increasing  competitive 
pressures  on  businesses  in  Europe,  and  have  a  negative  impact  on  public  budgets.  In 
numerous  Member  States  growth  has  reduced  significantly;  in  some  it  has  even  come  to  a 
halt. Unemployment figures are starting to rise.  

It  is  critically  important  in  this  context  that  the  European  Social  Fund  is  used  to  its  full 
potential  to  alleviate  problems  of  the  unemployed,  in  particular  the  most  vulnerable,  in  the 
economic  downturn.  Everything  must  be  done  to  encourage  the  effective,  efficient  and  fast 
uptake  of  available  resources,  although  without  compromising  the  principles  of  sound 
financial management. In this framework the aim of this proposal is to add a further, simpler, 
method  of  spending  the  European  Social  Fund,  so  that  its  contribution  to  addressing  the 
economic and social challenges facing Europe can be faster and more effective. 

Simplification  has  repeatedly  been  identified  by  the  European  Parliament  as  a  key  issue  for 
the  Structural  Funds.  The  European  Court  of  Auditors,  in  its  Annual  Report  on  the 
Implementation  of  the  2007  Budget  made  an  important  recommendation  in  this  respect.  It 
recommends a simplification of "the basis of calculation of eligible cost, and making greater 
use  of  lump  sum  or  flat  rate  payments  instead  of  reimbursement  of  'real  costs"1.  Flat-rate 
payments from ESF have been possible for indirect costs since 2007; 23 Member States will 
take advantage of this provision. However, payment of lump sums is not yet eligible within 
the  ESF  rules.  This  proposal  aims  to  extend  flat-rate  financing  to  direct  costs;  to  widen  its 
scope  to  scales  of  standardised  units  of  cost;  and  to  enable  the  use  of  lump  sum  payment 
systems. 

The proposal will not alter the focus of the European Social Fund regulation on the four key 
areas  for  action  endorsed  by  the  European  Council:  increasing  adaptability  or  workers  and 
enterprises; enhancing access to employment, preventing unemployment, prolonging working 
lives  and  increasing  participation  in  the  labour  market;  reinforcing  social  inclusion  by 
promoting the integration in work of disadvantaged people and combating discrimination; and 
promoting partnership for reform in the fields of employment and inclusion. 

1 

OJ C 286, 10.11.2008, Volume 51 "Court of Auditors – Annual Report of the Court of Auditors on the 
implementation of the budget concerning the financial year 2007, together with the institutions' replies", 
chapter 2, paragraph 42. 

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In  the  least  prosperous  regions  and  Member  States,  the  Structural  Funds  will  continue  to 
concentrate on promoting structural adjustment, growth and job creation. To this end, under 
the  Convergence  objective,  in  addition  to  the  above-mentioned  priorities,  the  ESF  will 
continue to support action to expand and improve investment in human capital, in particular 
by  improving  education  and  training  systems,  and  action  aimed  at  developing  institutional 
capacity  and  the  efficiency  of  public  administrations,  at  national,  regional  and  local  level. 
Lastly, the proposal does not alter the attention devoted to the Union's commitment towards 
the  elimination  of  inequalities  between  women  and  men,  and  promoting  good  governance. 
The involvement of the social partners remains of particular importance in the implementation 
of  the  Fund  priorities  and  operations,  and  notably,  if  required  due  to  the  present  economic 
situation, in the partial re-programming of European Social Fund programmes. 

In parallel to this proposal the Commission is proposing some changes to the Structural Funds 
Regulations (in particular, to the General Regulation) to enable them to be used in the most 
effective manner possible as part of the response to the crisis. One issue which will affect the 
ESF is the proposal that increased advance payments should be made available to Managing 
Authorities, to ensure that they can kick-start new operations. 

•  Consistency with the other policies and objectives of the Union 

N/A 

1. 

LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

The  proposed  action  aims  to  amend  the  ESF  Regulation  to  introduce  elements  necessary  to 
the simplification of its administration and use. 

•  Legal basis 

The proposal is based on Article 148 EC Treaty. 

•  Subsidiarity principle 

The  subsidiarity  principle  does  not  apply,  in  that  the  proposal  falls  under  the  exclusive 
competence of the Community 

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2008/0232 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EC) No 1081/2006 on the European Social Fund to extend the 
types of costs eligible for a contribution from the ESF  

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
148 thereof, 

Having regard to the proposal from the Commission2, 

Having regard to the opinion of the European Economic and Social Committee3, 

Having regard to the opinion of the Committee of the Regions4, 

Acting in accordance with the procedure laid down in Article 251 of the Treaty5, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

2 
3 
4 
5 
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7 

Article  56  of  Council  Regulation  (EC)  No  1083/2006  of  11  July  2006  laying  down 
general provisions on the European Regional Development Fund, the European Social 
Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/19996 provides 
that  rules  on  eligibility  of  expenditure  are  to  be  established  at  national  level,  with 
certain  exceptions  laid  down  for  the  European  Regional  Development  Fund  and  the 
European Social Fund (ESF). 

Article 11(3) of Regulation (EC) No 1081/2006 of the European Parliament and of the 
Council  of  5  July  2006  on  the  European  Social  Fund  and  repealing  Regulation  (EC) 
No  1784/19997  establishes  which  expenditure  is  eligible  for  a  contribution  from  the 
ESF as defined in Article 11(1) of that Regulation.  

The financial crisis justifies the need for further simplifications to facilitate access to 
grants co-financed by the European Social Fund. 

The  European  Court  of  Auditors  recommended  in  its  2007  annual  report  that  the 
legislative  authorities  and  the  Commission  be  prepared  to  reconsider  the  design  of 
future expenditure programmes by giving due consideration to simplifying the basis of 

OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
OJ C 210, 31.7.2006, p. 25. 
OJ L 210, 31.7.2006, p. 12. 

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calculation of eligible cost and making greater use of lump sum or flat rate payments 
instead of reimbursement of 'real costs'.  

(5) 

(6) 

In order to ensure the necessary simplification in the management, administration and 
control  of  operations  receiving  an  ESF  grant,  particularly  when  linked  to  a  result-
based reimbursement system, it is appropriate to add two additional forms of eligible 
costs, namely, lump sums and flat-rate standard scales of unit cost.  

In  order  to  ensure  legal  certainty  in  relation  to  the  eligibility  of  expenditure,  this 
simplification should be applicable to all grants from the ESF. Retroactive application 
should therefore be necessary with effect from 1 August 2006, date of entry into force 
of Regulation (EC) No 1081/2006.  

(7) 

Therefore Regulation (EC) No 1081/2006 should be amended accordingly, 

HAVE ADOPTED THIS REGULATION: 

Article 1 

Paragraph 3 of Article 11of Regulation (EC) No 1081/2006 is amended as follows: 

(1) Point (b) is replaced by the following: 

"(b) 

in the case of grants: 

(i)  indirect  costs  declared  on  a  flat-rate  basis,  up  to  20  %  of  the  direct  costs  of  an 
operation; 

(ii) flat-rate costs calculated by application of standard scales of unit cost as defined 
by the Member State; 

(iii) lump sums to cover all or part of the costs of an operation. " 

(2) The following second, third and fourth subparagraphs are added: 

"The options referred to in points (i), (ii) and (iii) of point (b) of the first subparagraph may be 
combined only where each of them covers a different category of eligible costs or where they 
are used for different projects within the same operation. 

Costs  referred  to  in  points  (i),  (ii)  and  (iii)  of  point  (b)  of  the  first  subparagraph  shall  be 
established in advance on the basis of a fair, equitable and verifiable calculation.  
The lump sum referred to in point (b) (iii) of the first subparagraph shall not exceed EUR 50 
000."  

Article 2 

This  Regulation  shall  enter  into  force  on  the  day  following  its  publication  in  the  Official 
Journal of the European Union. 

However, it shall apply with effect from 1 August 2006.  

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

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Done at Brussels, […] 

For the European Parliament 
The President 

For the Council 
The President 

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