Performance-based financing in cohesion policy : worthy ambitions, but obstacles remained in the 2014-2020 period. Special report No 24, 2021.
Date: 2022-01-29
Institutions: European Court of Auditors
Subjects: EU budget, EU financing, EU investment, State aid, economic and social cohesion, performance audit, programme budgeting, report

EN 

2021 

24 

Special Report  Performance-based financing in 

Cohesion policy: 
worthy ambitions, but obstacles remained in the 
2014-2020 period 

 
 
 
 
2 

Paragraph 

I-XI 

01-09 

01-04 

05 

06-07 

08-09 

10-15 

16-106 

16-38 

Contents 

Executive summary 

Introduction 

Focusing the EU budget on results was a priority for the 2014-
2020 period 

Performance budgeting: what does it entail? 

Performance-based financing in Cohesion policy in the 2014-2020 
period 

Constraints on performance orientation in Cohesion policy 

Audit scope and approach 

Observations 

Ex-ante conditionalities 

An innovative tool to create the necessary conditions for effective spending 

16-20 

The Commission and Member States did not address EACs in a timely 
manner 

Non-fulfilment of EACs rarely had financial consequences 

Outlook for 2021-2027: ‘enabling conditions’ applicable throughout the 
period and a new ‘rule of law’ conditionality introduced 

Performance reserve and review 

Setting aside part of the funding for better performing measures 

Changes to the rules before the 2019 performance review led to additional 
flexibility for Member States 

The Commission did not determine the reliability of all performance data 
used for the performance review 

21-28 

29-34 

35-38 

39-83 

39-48 

49-60 

61-73 

Performance review had only limited impact on the allocation of EU funding 

74-80 

Outlook for the 2021-2027 period: more flexible allocation of funds, but 
mandatory performance reserve discontinued 

Performance-based funding models 

Use of performance-based funding models broadened in the 2014-2020 
period 

81-83 

84-106 

84-91 

 
 
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Uncertainty on how to use the new performance-based funding models 
hampered their uptake by Member States 

92-99 

Performance-based funding in 2014-2020 was disbursed almost exclusively 
through traditional SCOs 

100-101 

Outlook for the 2021-2027 period: successful rollout of FNLTC requires 
further clarification 

Conclusions and recommendations 

Performance-based financing in Cohesion policy: worthy 
ambitions, but obstacles remained in the 2014-2020 period 

102-106 

107-128 

107-128 

Annexes 

Annex I – Operational Programmes covered by the audit 

Annex II – Previous reports and opinions 

Acronyms and abbreviations 

Glossary 

Replies of the Commission 

Timeline 

Audit team 

 
 
 
 
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Executive summary 

I Delivering results is key in order to achieve the EU’s policy objectives and thus also 
to strengthen the Union’s economic, social and territorial cohesion. Making Cohesion 
policy more performance-based is a shared objective of the European Parliament, the 
Council and the Commission. 

II The 2014-2020 common provisions regulation provided for an explicit 'performance 
framework' for Member States’ operational programmes, including milestones and 
targets to attain with European Structural and Investment Fund investments. 
Moreover, three instruments gave Member States financial incentives to achieve 
results and optimise their use of funding: 

—  The requirement to fulfil specific prerequisites (‘ex-ante conditionalities’) to 

create an investment-friendly environment from the start of the programmes. 
These were also aimed at ensuring that the necessary conditions for the effective 
and efficient use of European Structural and Investment Funds were in place for 
Member State expenditure to be reimbursed from the EU budget; 

—  A mandatory performance reserve of around €20 billion (or 6 % of Cohesion 

spending), which could be released for successful priority axes, or had to be re-
allocated to other priority axes of the same programme or to other programmes 
in the same Member State; and 

—  Performance-based funding models which linked EU financial support directly to 

pre-defined outputs or results. 

III Our audit assessed the use of these instruments in 2014-2020. In particular, we 
examined whether: 

— 

these instruments were well designed to incentivise performance and shift the 
focus to achieving results; 

— 

the Commission and Member States used them effectively; and 

— 

their use made a difference in the way Cohesion funding was allocated and 
disbursed. 

IV All three instruments had the potential to incentivise performance and to shift 
focus to achieving results. Moreover, the instruments are complementary being 

 
 
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applicable at different stages and to different aspects of programme implementation, 
but they all link Cohesion funding to performance and results. 

V The Commission and Member States have been only partially successful in using 
the three instruments to make the financing of Cohesion policy more performance-
based. Our assessment is more positive for ex-ante conditionalities than for the 
performance reserve, and least positive for performance-based funding models 
(except simplified cost options, which already existed before 2014). 

VI Member States fulfilled most but not all ex-ante conditionalities before 
programmes started. Action plans on outstanding ex-ante conditionalities were agreed 
and largely completed, but in some cases only late in the period. The assessment of ex-
ante conditionalities by the Commission was designed as a one-off exercise rather than 
monitoring their fulfilment throughout the period. ‘Enabling conditions’ (their 
successor for the 2021-2027 period) require fulfilment throughout the period. 
However, the monitoring and reporting arrangements for enabling conditions need 
further clarification. 

VII In 2019, the Commission released 82 % of the €20 billion performance reserve 
for the 2014-2020 period. The amounts released were based mainly on Member 
States’ achievement of their spending and output targets, as hardly any result 
indicators were used for allocating the performance reserve. Overall, the allocation of 
the performance reserve had only a limited impact on programme budgets. The use of 
a mandatory performance reserve has been discontinued for 2021-2027 and replaced 
by a mid-term review. However, provisions are vague and do not set out how actual 
programme performance will affect the allocation of funds. 

VIII Member States showed very limited interest in using the two new performance-
based funding models, i.e. ‘joint action plans’ and ‘financing not linked to costs’. The 
Commission was more successful in promoting the use of the more traditional 
simplified cost options, though not all these are performance-based. ‘Financing not 
linked to costs’ will become the dominant EU funding model in the coming years, 
mainly due to its mandatory use under the Resiliance and Recovery Facility. However, 
we consider that there is a need to further clarify the applicable rules on its use in 
Cohesion policy so that Member States are more likely to use this innovative funding 
model. 

IX Overall, our audit confirmed that the introduction of the performance framework 
in the 2014-2020 period has contributed to a cultural change in the financial 
management of Cohesion policy. However, our audit also showed that performance-

 
 
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based financing is not yet a reality in Cohesion policy. In particular, while the three 
new instruments led to new approaches to implementation, they did not make a 
noticeable difference to the way EU funding was allocated and disbursed. 

X We address the following recommendations to the Commission: 

—  Make the best use of enabling conditions in the 2021-2027 period; 

—  Prepare the ground early for an effective mid-term review for the 2021-2027 

period; 

—  Clarify the rules underlying the ‘financing not linked to costs’ funding model; and 

—  Clarify the approach for providing assurance on EU funding through the ‘financing 

not linked to costs’ model. 

XI During the 2021-2027 period, the Cohesion policy funds will run simultaneously 
with the Recovery and Resilience Facility. Some of the lessons from using instruments 
for a performance-based Cohesion funding in 2014-2020 may also be applicable to the 
Recovery and Resilience Facility, where funding will also be performance-based. 

 
 
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Introduction 

Focusing the EU budget on results was a priority for the 2014-
2020 period 

01 Results from EU spending make an essential contribution towards achieving the 
EU’s policy objectives. The EU’s Financial Regulation requires all EU spending to satisfy 
the principles of sound financial management1 in order to maximise value for money. 
In 2015, the Commission launched an initiative called 'EU budget focused on results'2, 
aimed at increasing transparency and accountability in EU spending and putting results 
at the core of the EU budget. 

02 Making Cohesion policy more performance-based was an explicit objective of the 
European Parliament and the Council when adopting the legislative package for the 
2014-2020 European Structural and Investment (ESI) Funds in December 20133. 

03 Cohesion policy is implemented by managing authorities in the Member States 
through about 390 operational programmes (OPs), under the Commission’s 
supervision and guidance. For 2014-2020, the overall budget for Cohesion policy 
amounted to around €357 billion, around a third of the overall EU budget. For 2021-
2027, the budget will be around €373 billion (in current prices). Box 1 provides some 
background information on Cohesion policy in the two periods. 

1  Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 

18 July 2018 on the financial rules applicable to the general budget of the Union, Article 33. 

2  European Commission, Mid-term review/revision of the multiannual financial framework 
2014-2020 - An EU budget focused on results, COM(2016) 603 final, 14 September 2016; 
European Commission, EU Budget Focused on Results (BFOR). 

3  Regulation (EU) 1303/2013 of the European Parliament and of the Council of 

17 December 2013 laying down common provisions, Recitals (3), (16) and (23). 

 
 
                                                      
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Box 1 

Cohesion policy in a nutshell 

The main objective of the EU’s Cohesion policy set by the Treaty is to strengthen 
the economic, social and territorial Cohesion by reducing disparities between the 
level of development of the regions4. In recent years, Cohesion policy has also 
gradually become one of the EU’s main investment tools for implementing its 
overarching priorities and strategies, starting with the Lisbon strategy in the 2007-
2013 period and continuing with the Europe 2020 strategy for 2014-2020. 

In the 2021-2027 period, Cohesion policy will support five policy objectives, with a 
focus on ‘a more competitive and smarter Europe’, ‘a greener, carbon-free Europe 
towards a net zero carbon economy’, ‘a more connected Europe by enhancing 
mobility’, ‘a more social and inclusive Europe implementing European Pillar of 
Social Rights’ and ’a Europe closer to citizens’. Cohesion policy will also support 
the objectives of the European Green Deal. 

In the 2014-2020 period, Cohesion policy was delivered through three of the five 
ESI Funds: the European Regional Development Fund (ERDF), the European Social 
Fund (ESF) and the Cohesion Fund (CF), the other two funds dealing with rural 
development and fisheries.  

04 On 24 June 2021, the European Parliament and the Council agreed on the 
common provisions regulation (CPR)5 setting out the rules for 2021-2027. For most of 
the 2021-2027 period, the Cohesion policy funds will be implemented simultaneously 
with the Recovery and Resilience Facility (RRF) with a budget of €672.5 billion 
(including €312.5 billon in grants). The RRF is aimed at mitigating the economic and 
social impact of the COVID-19 pandemic by funding Member States to achieve agreed 
milestones and targets6. 

4  Treaty on the Functioning of the European Union, Article 174. 

5  Regulation (EU) 2021/1060 of the European Parliament and of the Council of 24 June 2021 

laying down common provisionson the European Regional Development Fund, the 
European Social Fund Plus, the Cohesion Fund, the Just Transition Fund and the European 
Maritime, Fisheries and Aquaculture Fund and financial rules for those and for the Asylum, 
Migration and Integration Fund, the Internal Security Fund and the Instrument for Financial 
Support for Border Management and Visa Policy. 

6  Regulation (EU) 2021/241 of the European Parliament and of the Council of 

12 February 2021 establishing the Recovery and Resilience Facility. 

 
 
                                                      
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Performance budgeting: what does it entail? 

05 Performance budgeting is the systemic use of information about outputs, results 
and/or impacts to inform, influence and/or determine the allocation of public funds7. 
The Organisation for Economic Co-operation and Development (OECD) defines three8 
broad categories of performance budgeting: presentational, performance-informed 
and performance-based budgeting. In this report, we use the term ‘performance-
based financing’ analogously to the latter, but also comprising the financing of 
programmes and operations. 

Performance-based financing in Cohesion policy in the 2014-
2020 period 

06 The 2014-2020 CPR introduced two main components aimed at making Cohesion 
spending more focused on results. First, there was an explicit ‘performance 
framework’, requiring Member States to set out specific objectives to be achieved with 
investments from the ESI Funds. Second, specific instruments for performance-based 
funding in Cohesion policy were introduced to give Member States financial incentives 
and to optimise their use of EU financial support: 

—  The requirement to meet specific ex-ante conditionalities (EACs) needed to create 
an investment-friendly environment from the start of the programmes and to 
ensure that the necessary conditions were in place for Member State expenditure 
to be reimbursed from the EU budget; 

—  A mandatory performance reserve of 6 % of each Member State’s total allocation, 
which could be re-allocated to other priority axes of the same programme or to 
other programmes in the same Member State based on the 2019 performance 
review; and 

—  Broadening the use of performance-based funding models. In particular, two 
funding models (‘joint action plans’ (JAPs) and ‘financing not linked to costs’ 
(FNLTC)) were introduced, the latter in 2019. These linked EU funding directly to 

7  OECD, Budgeting and performance in the European Union: A review by the OECD in the 
context of EU budget focused on results, OECD Journal on Budgeting, Volume 2017/1, 
section 1.2.1. 

8  OECD, Incentivising performance in public investment policies delivered at national and 
subnational levels: Managing across temporal and institutional horizons, 31 March 2017, 
pp. 8-9. 

 
 
                                                      
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the achievement of pre-defined outputs, results or conditions. At the same time, 
Member States were encouraged to apply ‘simplified cost options’ (SCOs) which 
had already been piloted in the 2007-2013 period. 

07 In the 2014-2020 period, the ESI Funds were also subject to a ‘macroeconomic 
conditionality’, where EU funding could be re-programmed or suspended if a Member 
State failed to comply with rules of sound economic governance. However, this rule 
was never applied. 

Constraints on performance orientation in Cohesion policy 

08 The Commission is responsible for making sound use of EU financial support, 
including when it shares the management of these funds with Member States9. 
However, there are a number of particular constraints in making Cohesion policy more 
performance-based10: 

—  Total allocations to Member States (known as their ‘financial envelopes’) are 
agreed from the outset during the multiannual financial framework (MFF) 
negotiations. As a result, there is no flexibility to re-allocate funds between 
Member States over the period; 

—  The seven-year MFF lays down maximum amounts (‘ceilings’) for each category of 

expenditure, which should not be adjusted except in extremis. 

09 An additional difficulty lies in the fact that performance, including the 
achievement of results, depends on many different actors: the Commission, national, 
regional and local authorities in the Member States, and public and private-sector 
participants. They are all involved in achieving objectives, milestones and targets, and 
have to ensure that EU and national funds are spent efficiently, effectively and in 
accordance with the rules. Account also needs to be taken of territorial differences 
which may affect a programme’s performance. External factors, as recently illustrated 
by the COVID-19 pandemic, also have a significant potential impact on programme 
implementation. 

9  Treaty on the Functioning of the European Union, Article 317; Regulation (EU, 

Euratom) 2018/1046, Article 62(3). 

10  European Commission, Mid-term review/revision of the multiannual financial framework 
2014-2020, COM(2016) 603 final, p. 14; ECA annual report 2017, paragraphs 3.6-3.7; ECA 
review 8/2019 ‘Delivering performance in Cohesion’ (Briefing paper), paragraph 26. 

 
 
                                                      
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Audit scope and approach 

10 Our audit assessed the use of instruments for performance-based financing in 
Cohesion in the 2014-2020 period. In particular, we examined whether: 

— 

these instruments were well designed to incentivise performance and shift the 
focus to achieving results; 

— 

the Commission and the Member States used them effectively; and 

— 

their use made a difference in the way Cohesion funding was allocated and 
disbursed. 

11 As part of our audit work, we reviewed the regulatory framework, the 
Commission’s procedures and guidance, and relevant documentation and literature on 
performance-based funding in the EU and Cohesion policy context. 

12 We also analysed data provided by the Commission on the completion of action 
plans for EACs and on the performance review. For our analysis, we selected 14 OPs 
from four Member States (Germany, Italy, Poland and Romania) covering both 
ERDF/CF and ESF funding under five thematic objectives closely linked to Europe 2020 
and eight related action plans for EACs (see Annex I). We also surveyed the managing 
authorities of these 14 OPs on the Commission’s support in meeting EACs, on Member 
States’ checks to ensure the reliability of performance data, and on barriers to the 
uptake of performance-based funding models. 

13 Moreover, we interviewed Commission staff as well as experts in developing and 
implementing performance-based funding models at the Organisation for Economic 
Co-operation and Development (OECD), the World Bank, the European Policy Research 
Centre (EPRC), the Center for European Policy Studies (CEPS) and in four Member 
States (Austria, the Netherlands, Portugal and Germany). 

14 Finally, for this audit, we also draw on our previous reports on performance 
orientation in Cohesion policy and our opinions on Commission legislative proposals 
(see Annex II). 

 
 
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15 Our audit work covered the period up to December 2020. We also reviewed the 
latest developments and identified some risks and opportunities for the 2021-2027 
period. This audit does not, however, address the budget re-allocations made in 2020 
in response to the COVID-19 pandemic11. 

11  Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 
as regards specific measures to mobilise investments in the healthcare systems of Member 
States and in other sectors of their economies in response to the COVID-19 outbreak 
(Coronavirus Response Investment Initiative); Regulation (EU) 2020/558 of the European 
Parliament and of the Council of 23 April 2020 as regards specific measures to provide 
exceptional flexibility for the use of the European Structural and Investments Funds in 
response to the COVID-19 outbreak. 

 
 
                                                      
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Observations 

Ex-ante conditionalities  

An innovative tool to create the necessary conditions for effective 
spending 

16 EACs are one of the main innovations for the 2014-2020 period. EACs concern, for 
example, the existence of an underlying legal framework, the administrative capacity 
to manage the funds and the existence of a strategic framework to guide investments 
from the ESI Funds12. 

17 Before OPs could be adopted, Member States had to either prove that they had 
fulfilled the EACs, or propose action plans explaining how they would fulfil them by 
31 December 2016. Member States had to report on the completion of these action 
plans in their annual implementation reports, to be submitted by 30 June 2017, or in 
progress reports due in August 201713. 

18 Member States had to fulfil 29 thematic EACs linked to certain types of 
investments and seven general EACs (see Box 2 and Figure 1). 

12  ECA special report 15/2017 ‘Ex-ante conditionalities and performance reserve in Cohesion: 

innovative but not yet effective instruments’, Annexes I and II. 

13  Regulation (EU) 1303/2013, Article 19(2). 

 
 
                                                      
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Box 2 

Examples of thematic EACs in 2014-2020 

EAC 1.1 “Research and innovation: The existence of a national or regional smart 
specialisation strategy” required Member States to establish a strategy for 
investment in research to help target EU funding better at investments with a high 
growth potential. 

EAC 2.2 “Next Generation Network (NGN) Infrastructure: The existence of national 
or regional NGN Plans” required Member States to establish plans for investments 
in broadband infrastructure, identifying commercially viable areas where 
investments should primarily come from the private sector and others with low 
profitability that would require public contributions, including EU funding. 

EAC 4.1 requires Member States to “promote cost-effective improvements of and 
investment in energy efficiency when constructing or renovating buildings” as 
required by EU directives. This should act as an incentive for market actors to 
produce and purchase efficient energy services and take measures to improve 
energy efficiency.  

19 Some of the general EACs addressed specific aspects related to the rule of law 
and EU values, such as anti-discrimination, gender equality or the rights of persons 
with disabilities as well as the effective application of public procurement law or state 
aid rules, but there was no general condition in relation to the rule of law. 

20 In a previous audit, we already found that EACs provided a consistent framework 
for assessing Member States’ readiness to implement EU funds and that the Member 
States perceived them as a positive element14. At the same time, we also noted a 
number of weaknesses in the design of EACs. These were also the areas on which we 
focused in this audit. 

14  ECA special report 15/2017, paragraphs 38 and 94. 

 
 
                                                      
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The Commission and Member States did not address EACs in a timely 
manner 

EAC assessment based on broad criteria 

21 Starting in 2014, Member States had to assess themselves on whether they 
fulfilled the EACs. This self-assessment was based on the criteria specified in the CPR15 
and had to be validated by the Commission. The CPR criteria were often broad, left 
considerable room for interpretation, and often did not refer to specific quantifiable 
targets even where such targets could be derived from EU legislation.  

22 In 2014, the Commission issued additional guidance on how Member States and 
its own services should assess progress in achieving EACs. Nevertheless, we identified 
inconsistencies in the way the Commission assessed and validated progress made by 
Member States in completing their EAC action plans. This remained the case until the 
end of the 2014-2020 period, as Box 3 illustrates. 

Box 3 

Inconsistencies in the Commission’s assessment of EACs 

Four Member States (Italy, France, Romania and Cyprus) failed to complete their 
action plans for EAC 6.2 in the waste sector by the reporting deadline at the end of 
August 2017. As a consequence, the Commission notified the Italian and 
Romanian OPs that it intended to suspend payments. In February 2019, the 
Commission actually suspended payments to the Italian OP, but not the Romanian 
OP. For the other two OPs (France and Cyprus), the Commission kept negotiating 
the completion of the action plans. In the case of Cyprus, the action plan was still 
not completed by December 2020. 

Assessment of EACs designed as a one-off exercise at the beginning of 2014-2020 

23 At the OP adoption stage, around one third of thematic EACs remained 
unfulfilled. The Commission identified issues with at least some of the EACs for 26 of 
the then-28 Member States. Only Austria and Denmark fulfilled all relevant EACs at the 
time of adoption of their OPs. The remaining 26 Member States adopted a total of 
761 action plans on how they planned to fulfil EACs after OP adoption. 

15  Regulation (EU) 1303/2013, Article 19 and Annex XI. 

 
 
                                                      
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24 These figures do not give any indication of the potential impact of unfulfilled 
EACs on performance. Nevertheless, they illustrate that non-fulfilment of EACs was not 
an isolated case, but concerned multiple areas and many Member States. 

25 Of the 761 action plans, Member States had reported 746 (98 %)16 as completed 
by the end of August 2017. The 15 outstanding action plans concerned eight Member 
States: Cyprus, Spain, France, Greece, Ireland, Italy, Luxembourg and Romania. By 
2018, most of these Member States had completed their action plans. However, the 
action plans for one Italian OP and one Cypriot OP remained uncompleted as of 
December 2020. 

26 In the 2014-2020 period, the assessment of EACs was designed as a one-off 
exercise. The CPR required Member States to assess whether they fulfilled the EACs at 
the time of OP adoption (or, in certain circumstances, by December 2016), and the 
Commission to validate this assessment. However, the CPR did not require Member 
States and Commission to monitor whether EACs remained fulfilled throughout the 
programme’s lifetime. It is thus unclear whether the achievements reported in this 
process had been sustained throughout the entire 2014-2020 period. 

Limited evidence on the impact of EACs on the effectiveness of spending 

27 Member States’ expectations regarding the impact of EACs differed. In most 
cases they did not consider that their fulfilment would automatically make the 
implementation of Cohesion policy more effective; they perceived EACs rather as a 
useful self-assessment tool17. Our audit work in recent years confirms that even if a 
Member State formally fulfils an EAC, this in itself does not necessarily mean that the 
situation on the ground has improved and that it has created the conditions for 
achieving results (see examples in Box 4).  

16  ECA special report 15/2017, paragraph 34. 

17  ECA special report 15/2017, paragraphs 38-39. 

 
 
                                                      
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Box 4 

EACs fulfilled, but not always linked to improvements on the ground 

In our audit on combating child poverty, we established that the Member States 
examined had all adopted anti-poverty strategies in line with EAC 9.1 “Existence 
and implementation of a national strategic policy framework for poverty 
reduction”18. However, we found several weaknesses in the implementation of 
these strategies. For Poland and Romania, for example, we concluded that 
national authorities had not monitored implementation effectively, and that the 
targets set in the strategies had already been met at the time of adoption. 

In our audit on state aid, we found that the fulfilment of the relevant general EACs 
by Member States did not necessarily result in better compliance for Cohesion 
policy projects on the ground19. Our ‘statement of assurance’ audits also showed 
that non-compliance with state aid rules continued to be a frequent source of 
errors in Cohesion spending after 201720.  

28 At the same time, the introduction of EACs may have made an indirect 
contribution - without them, the conditions for spending EU funds on the ground 
would have been even more challenging. A 2017 Commission study concluded that 
EACs made the deployment of the ESI Funds more effective and structured21. It 
acknowledged, though, that the evidence was limited and that conclusions may be 
premature. Since then, the Commission has not carried out a further assessment of the 
impact of EACs on the effectiveness of spending on the ground. 

Non-fulfilment of EACs rarely had financial consequences 

29 In the 2014-2020 period, there was a direct link between the non-fulfilment of 
EACs and the disbursement of EU funds for the priorities concerned at two stages, as 

18  ECA special report 20/2020 ‘Combating child poverty – Better targeting of Commission 

support required’, paragraph 65. 

19  ECA special report 24/2016 ‘More efforts needed to raise awareness of and enforce 

compliance with State aid rules in cohesion policy’, paragraph 105. 

20  ECA annual report 2018, paragraph 1.30. 

21  European Commission, Staff Working Document: The Value Added of Ex ante 

Conditionalities in the European Structural and Investment Funds, 31 March 2017, 
SWD(2017) 127 final, parts C and D. 

 
 
                                                      
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the Commission had the power to suspend payments if Member States failed to fulfil 
the relevant EACs22: 

— 

firstly, at the OP adoption stage, the Commission could suspend interim payments 
pending completion of the action plans where it could demonstrate significant 
prejudice to the achievement of specific objectives; 

— 

secondly, it could suspend payments where action plans had not been completed 
by 31 December 2016. 

However, non-fulfillment of EACs was not, in itself, sufficient grounds for suspending 
payments. 

The Commission did not suspend any payments for non-fulfilment of EACs at the OP 
adoption stage 

30 As regards the first stage, we found that the Commission had not imposed any 
payment suspensions at the time of OP adoption, even though around one third of 
thematic EACs remained unfulfilled (see paragraph 23). We also found, however, that 
Member States imposed their own suspensions accounting for around 2 % of ERDF/CF 
funding and 3.5 % of ESF funding23. This may have prevented the Commission itself 
from imposing suspensions. It also illustrates that EACs, at least at the beginning of the 
2014-2020 period, had an effect on the implementation of the ESI Funds. 

31 As regards the second stage, the Commission developed procedures to monitor 
the implementation of Member States’ action plans24 and defined criteria for possible 
payment suspensions25. According to the Commission, a suspension was only possible 
if there was “sufficient information and legal basis to proceed”. Failure to complete an 
action plan was not, in itself, sufficient to trigger a suspension. Under the CPR, any 

22  Regulation (EU) 1303/2013, Article 19(5). 

23  ECA special report 15/2017, paragraphs 61 and 62. 

24  European Commission, Procedure for monitoring and assessing the implementation of 

action plans to fulfil applicable ex ante conditionalities by DG EMPL, updated version for 
annual implementation report 2017, 28 July 2017. 

25  European Commission, ESI funds procedure on suspension of payments due to the failure 
to complete action plans to fulfil ex ante conditionalities, version 3.0 – 26 June 2017, 
Regio DDG.02. 

 
 
                                                      
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discretionary payment suspensions imposed by the Commission had to be 
proportionate, taking into account “the actions to be taken and the funds at risk”26. 

32 Meanwhile, Member States were not obliged to report systematically on the 
intermediate progress of their action plans until the reporting deadline in 2017, nor to 
provide information to allow a systematic and consistent assessment of whether the 
conditions for suspending payments existed. Without a clear and measurable link in 
the CPR between EACs and the achievement of OP specific objectives, it was almost 
impossible for the Commission to justify suspension decisions. Consequently, although 
the burden of proof to justify suspensions was on the Commission, it did not have 
access to the information it needed to do so. 

Commission suspended payments for only two OPs in the 2014-2020 period 

33 During the first three years of the 2014-2020 period, the Commission examined 
the need to suspend payments in relation to 15 out of the 761 action plans covering 
eight Member States (see paragraph 25). However, pre-suspension letters could only 
be issued after Member States had reported by the end of August 2017 on the 
implementation of their actions plans. In late 2017, and following the analysis of the 
progress made by Member States in fulfilling the EACs, the Commission sent pre-
suspension letters for five action plans on five different OPs (in Spain, Italy, and 
Romania). 

34 In April 2018 and February 2019, the Commission decided to suspend payments 
to two of these five OPs (Spain and Italy). The suspension for the Spanish OP was lifted 
in March 2019, whereas payments to the Italian OP remained suspended. 

26  Regulation (EU) 1303/2013, Article 19(5). 

 
 
 
 
                                                      
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Outlook for 2021-2027: ‘enabling conditions’ applicable throughout the 
period and a new ‘rule of law’ conditionality introduced 

35 For the 2021-2027 period, EACs will be replaced by ‘enabling conditions’27.
Overall, there are 20 enabling conditions as compared to 36 EACs. Most of these 
enabling conditions are broadly consistent with former EACs. Moreover, the general 
EACs have been replaced by horizontal enabling conditions. These horizontal 
conditions concern aspects related to public procurement and state aid, as well as the 
EU charter of fundamental rights and the UN convention on the rights of persons with 
disabilities. Figure 1 provides an overview of the 2014-2020 EACs and the 2021-2027 
enabling conditions. 

36 Unlike in 2014-2020, Member States are required to apply enabling conditions
throughout the 2021-2027 period. Moreover, until the end of this period, the 
Commission can suspend payments if Member States stop fulfilling enabling 
conditions28. This represents a significant strengthening of the role the Commission 
can play in how Member States implement the Cohesion policy funds. 

37 However, similarly to the situation in 2014-2020, the CPR does not require the
Commission to inform the European Parliament and the Council about Member States’ 
compliance with enabling conditions in the 2021-2027 period. Such reporting could 
help to underline the importance of fulfilling enabling conditions to ensure the 
effective and efficient spending of EU funds. 

38 On 16 December 2020, the European Parliament and the Council adopted
Regulation 2020/2092 laying down rules to protect the EU budget in cases where 
Member States breach the principles of the rule of law 29. The new ‘rule of law’ 
conditionality supplements the enabling conditions set out under the 2021-2027 CPR 
and other instruments and processes that promote the rule of law and its application. 
In particular for the Cohesion policy funds, the Commission can propose measures only 
in cases where specific procedures under the CPR do not adequately ensure the sound 
financial management of the EU budget or protect the EU’s financial interests.  

27  Regulation (EU) 2021/1060, Annexes III and IV. 

28  Regulation (EU) 2021/1060, Article 15(6). 

29  Regulation (EU, Euratom) 2020/2092 of the EP and of the Council of 16 December 2020 on 

a general regime of conditionality for the protection of the Union budget. 

Figure 1 – 2014-2020 EACs and 2021-2027 enabling conditions 

21 

Note: Ex ante conditionalities are shortened and simplified in comparison to the legal base. 

Source: Regulation (EU) 2021/1060, Annex III Horizontal enabling conditions and Annex IV Thematic 
enabling conditions; Regulation (EU) 1303/2013, Annex XI Ex ante conditionalities. 

 
 
 
Enabling conditions

22 

2021-2027

Good governance of national or regional smart specialisation strategy

Strategic policy framework to support energy efficiency renovation of residential 
and non-residential buildings

Governance of for the energy sector

Effective promotion of the use of renewable energy across sectors and across the EU

Effective disaster risk management framework

Updated planning for required investments in water and wastewater sectors

Updated planning for waste management

Prioritised action framework for the necessary conservation measures 
involving Union co-financing

National or regional broadband plan

Thematic

Comprehensive transport planning at the appropriate level

Strategic policy framework for active labour market policies

National strategic framework for gender equality

Strategic policy framework for the education and training system at all levels

National strategic policy framework for social inclusion and poverty reduction

National Roma Integration Strategy

Strategic policy framework for health

Effective monitoring mechanisms of the public procurement market

Tools and capacity for effective application of State aid rules

Horizontal

Effective application and implementation of the EU Charter of Fundamental Rights

Implementation and application of the United Nations Convention on the rights of 
persons with disabilities in accordance with Council Decision 2010/48/EC

 
 
 
23 

Performance reserve and review 

Setting aside part of the funding for better performing measures 

Release of the performance reserve on the basis of the 2019 performance review 

39 The performance reserve was an attempt to link budgetary decisions to
performance, and particularly outputs. The release of the reserve was conditional on 
meeting relevant milestones for each priority axis by the end of 2018, as determined 
by a performance review30. This performance review was to be carried out in 2019, 
taking account of the performance data reported by Member States for the period 
2014-2018. 

40 In the 2014-2020 OPs, a performance reserve of around 6 % of EU funding (some
€20.2 billion) was built into the allocations under the ‘investment for growth and jobs’ 
goal (excluding the ‘European territorial cooperation’ (ETC) goal), as shown in Figure 2. 

Figure 2 – Cohesion budget (for the last three periods) and the 2014-
2020 performance reserve 

2007
2013

2014
2020

2021
2027

Cohesion Fund (CF)

European Social 
Fund (ESF)

69

76

61

94

48

99

European Regional 
Development Fund 
(ERDF)

190

192

217

Performance 
reserve (6 %)

€348 
billion

335
billion euros 

348

364

Cohesion policy 
funding

Notes: ERDF allocation refers only to the Investment for Growth and Jobs goal (European Territorial 
Cooperation (ETC) goal is excluded). Croatia joined the EU in 2013 and the UK withdrew in 2020. Figures 
for the 2021-2027 period show Cohesion policy allocations (in current prices). 

Source: ECA based on Commission data. 

41 A performance reserve already existed before 2014-2020. In the 2000-2006 
period, it was mandatory, although the criteria for assessing performance did not have 

30  Regulation (EU) 1303/2013, Article 20. 

24 

to be set out in the OPs. In the 2007-2013 period, Member States could apply it 
voluntarily. Compared to previous periods, the key innovations for 2014-2020 were the 
mandatory use of a performance framework derived from the OPs’ intervention logic, 
the breakdown of the reserve at the level of priorities, and the explicit linking of the 
release of the reserve (for each priority axis) to satisfactory performance, measured on 
the basis of milestones set out in the OPs at the time of the performance review. 

A performance review based on a large number of indicators and milestones 

42 In 2019, the Commission carried out its performance review for 300 ERDF/CF and 
ESF OPs with a performance reserve. These performance frameworks comprised a set 
of indicators, milestones and targets for each priority axis of these ERDF/CF and 
ESF OPs31. Overall, the review concerned 1 917 different priority axes within these OPs 
and 5 802 indicators. There were four types of indicators: 

—  Financial (input) indicators to measure spending. Each priority had to have such 

an indicator; 

—  Key implementation steps to complement output indicators where no outputs 

were expected by the end of 2018; 

—  Output indicators (common or programme-specific) to measure the 

implementation of actions; and 

—  Result (common or programme-specific for ESF OPs and programme-specific for 
other funds) indicators to measure achievement of the specific OP objectives 
where appropriate and closely linked to supported policy interventions. 

The use of common indicators enables the Commission to make comparisons between 
programmes and to aggregate indicator values. 

Conditions for the release of the performance reserve 

43 The performance framework for each priority axis had to include at least one 
financial (input) indicator and one output indicator; the use of result indicators and key 
implementation steps was optional. To qualify for the release of the performance 
reserve, indicators had to achieve at least 85 % of their milestone value; where more 
than two indicators were used, the 85 % threshold was reduced to 75 % for one of the 

31  European Commission, Guidance for Member States on performance framework, review 

and reserve, EGESIF_18-0021-01, 19 June 2018, version 2.0. 

 
 
                                                      
25 

indicators32. For priorities that had not achieved their milestone values, Member 
States had three months to propose an OP amendment to re-allocate the reserve to 
those priorities which had achieved the milestones.  

44 The initial rules for ERDF/CF operations stipulated that indicators should only be 
reported once operations had been fully implemented33. Project expenditure, used to 
calculate financial indicators, would only qualify for reporting in the annual 
implementation report if incurred and certified to the Commission by the end of 
201834. 

45 Member States were allowed to revise the original OP milestone values and 
indicators before the performance review in ‘duly justified cases’, such as a significant 
change in economic, environmental and labour market conditions35. In 2014, the 
Commission proposed secondary legislation which allowed incorrect assumptions 
leading to under or over-estimations to be used as justification for revising 
milestones36. 

46 In the 2014-2020 period, the Commission could suspend interim payments in the 
event of ‘serious failure’ to achieve milestones37. To use this option, the Commission 
needed to communicate the underlying implementation weaknesses to the Member 
State concerned and give it the opportunity to take corrective action. 

47 We previously stated that the performance review was unlikely to trigger a 
significant reallocation of Cohesion spending to better-performing programmes and 
priorities38. We also expressed reservations about the suitability of nearly half of the 
milestones specified as criteria for releasing the performance reserve and for 

32  Commission Implementing Regulation (EU) 215/2014 of 7 March 2014 laying down rules for 

implementing Regulation (EU) 1303/2013, Article 6. 

33  Commission Implementing Regulation (EU) 215/2014, Article 5(3). 

34  Commission Implementing Regulation (EU) 2015/207 of 20 January 2015 laying down 

detailed rules implementing Regulation (EU) 1303/2013, Annex V. 

35  Regulation (EU) 1303/2013, Annex II, Article 5. 

36  Commission Implementing Regulation (EU) 215/2014, Article 5(6). 

37  Regulation (EU) 1303/2013, Article 22(6); Commission Implementing Regulation 

(EU) 215/2014, Article 6. 

38  ECA annual report 2013, paragraph 10.56. 

 
 
                                                      
26 

suspending payments for under-performance39. In 2017, the OECD assessed the 
performance reserve as limited in scope and questioned the rigour of its performance-
linkage40. 

48 We also reported on the difficulties encountered by Member States in setting 
targets for common output and result indicators41. This was confirmed by the 
Commission’s own impact assessment in 201842. 

Changes to the rules before the 2019 performance review led to 
additional flexibility for Member States 

Conditions and criteria adjusted from 2014 onwards 

49 The 2014-2020 period started with delays: the European Parliament and the 
Council adopted the legal framework only in December 2013 and it took until 
December 201543 to adopt most OPs. This and further delays in implementing projects 
on the ground meant absorption of funding was slower than initially planned. By the 
end of 2017, i.e. three years after the start of the seven-year period, expenditure 
claimed by the Member States represented only 16 % of available 2014-2020 budget 
allocations44. 

50 From 2014 onwards, the Commission introduced several changes to the rules for 
the 2019 performance review (see Figure 3). These changes led to additional flexibility 

39  ECA special report 15/2017, paragraphs 102-106, 108 and 109. 

40  OECD, Budgeting and performance in the European Union, sections 1.2.2 and 1.2.3. 

41  ECA special report 21/2018 ‘Selection and monitoring for ERDF and ESF projects in the 

2014–2020 period are still mainly outputs-oriented’, paragraphs 61-62; ECA review 5/2018 
‘Simplification in post-2020 delivery of Cohesion Policy’, paragraphs 41 and 59; ECA special 
report 15/2017, paragraphs 78-79. 

42  European Commission, Impact assessment accompanying the document ‘Proposal for a 

Regulation of the European Parliament and the Council on the European Social Fund Plus’, 
SWD(2018) 289 final, 30 May 2018, Annex 3. 

43  ECA special report 2/2017 ‘The Commission’s negotiation of 2014-2020 Partnership 
Agreements and programmes in Cohesion: spending more targeted on Europe 2020 
priorities, but increasingly complex arrangements to measure performance’, paragraph 47. 

44  ECA review 5/2019 ‘Outstanding commitments in the EU budget - A closer look’ (rapid case 

review), paragraph 82. 

 
 
                                                      
27 

for Member States in their reporting on performance. In particular, they made it 
possible for managing authorities to report: 

—  outputs achieved for ERDF/CF operations which were not yet fully implemented 

(in 2018)45; and 

—  expenditure incurred in 2018 but certified to the Commission by 30 June 2019 for 

the purposes of the performance review46. 

51 Furthermore, the Commission clarified in 2017 that, to measure the achievement 
of Member States’ annual spending targets, it would take into account not only 
expenditure incurred and declared by Member States, but also annual pre-financing 
payments made by the Commission47. This meant that Member States that set their 
milestones based on the n+3 decommitment rule could declare less expenditure to 
meet their spending targets. 

45  Commission Implementing Regulation (EU) 2018/276 of 23 February 2018 amending 

Implementing Regulation (EU) 215/2014, Article 1(1). 

46  Commission Implementing Regulation (EU) 2019/256 of 13 February 2019 amending 

Implementing Regulation (EU) 2015/207, Annexes V and VI. 

47  European Commission, Decommitment methodology (n+3) and process in 2014 – 2020 – 

Update, EGESIF_17-0012-2, 23 November 2017. 

 
 
 
                                                      
28 

Figure 3 – Changes to legislation and guidance on conditions and criteria for the 2019 performance review 

Commission Implementing 
Regulation (EU) 215/2014

Review based on indicators linked to 
completed projects for ERDF/CF

Allocation of reserve to performing 
priorities that achieved 75 % or 85 % 
of their milestone values. Re-
allocation of reserve from 
underperforming to performing 
priorities

EGESIF_17-0012-2

Clarification of 
decommitment methodology
established that submitted 
payment claims, not amounts 
certified are considered. 
Member States could declare 
less expenditure to meet their 
spending target

Commission Implementing 
Regulation (EU) 2019/256

Expenditure has to be incurred in 
2018 but can be certified to the 
Commission by 30 June 2019

2013

2014

2015

2017

2018

2019

CPR

Review based on values reported 
in the 2018 annual 
implementation report

Allocation of reserve to 
performing priorities that 
achieved 100 % of their milestone 
values. Re-allocation of reserve 
from underperforming to 
performing priorities

Commission 
Implementing Regulation (EU) 
2015/207

Review based on expenditure 
certified to the Commission by the 
end of 2018

Commission Implementing 
Regulation (EU) 2018/276

Values for output indicators for 
ERDF/CF can be reported if 
related outputs have been 
delivered even if the operation 
has not been completed

September 2019:

PERFORMANCE REVIEW
by the Commission based 
on the 2018 annual 
implementation report

Note: Changes and clarifications to the legal base adopted at the start of the 2014-2020 period are shown in red. 

Source: ECA based on the ESI Funds legislation in the 2014-2020 period. 

 
 
 
 
29 

Member States could report better performance than under the initial legislation as 
a consequence of these changes and clarifications 

52 These changes allowed Member States to report better performance than they 
could have under the initial legislation. Member States took these changes into 
account swiftly when reporting on performance. At the end of 2018, the managing 
authorities for all seven of the ERDF/CF OPs in our sample reported outputs for non-
completed operations and/or expenditure incurred and declared but not yet certified 
by the end of 2018. For all but one of the 14 OPs examined (which include also ESF), 
the outputs were reported even before any related expenditure had been declared to 
the Commission. We also found that 38 of the 57 operations in our sample had not 
been completed by the end of 2018. Yet, for 32 of these ongoing operations, managing 
authorities had already reported on output indicators in their 2018 annual 
implementation reports. Without the changes introduced by the Commission prior to 
the 2019 performance review, these operations could not have been taken into 
account for the allocation of the performance reserve. 

More than half of the indicators/milestones were amended prior to the performance 
review 

53 Initially, the possibility of amending milestones and targets was limited to the 
non-exhaustive list of examples of duly justified cases set out in the CPR. In particular, 
these examples did not include the scenario of the initial targets and milestones set in 
the programmes having been calculated on the basis of wrong assumptions. In 2014, 
to address such situations, the Commission gave Member States the possibility to 
revise milestones and targets if they had been based on incorrect initial assumptions48. 
The Commission also recommended that Member States should request any 
modifications to the performance framework by no later than 30 June 201849. 

54 Between 2014 and 2018, Member States made widespread use of the possibility 
of modifying performance indicators and their values. Our analysis shows that more 

48  Commission Implementing Regulation (EU) 215/2014, Article 5(6). 

49  European Commission, Guidance for Member States on Performance framework, review 
and reserve, p. 15; European Commission, Guidance on the Common approach to the 
revision of milestones and targets in the performance frameworks, 14 June 2018, version 
3.0, pp. 3, 8 and 9. 

 
 
                                                      
30 

than half (55 %) of the 5 802 indicators and/or milestones had been modified between 
OP adoption and the performance review (see Figure 4). In particular, Member States: 

— 

— 

— 

increased the value of milestones for around 7 % of all indicators in the 
performance framework, mainly for financial (input) and programme-specific 
output indicators; 

reduced the value of milestones for around one third of all indicators in the 
performance framework, mainly for financial (input) indicators; and 

introduced 916 new indicators with corresponding milestones, partly replacing 
the initial indicators agreed when adopting the OPs. 

 
 
31 

TOTAL

Figure 4 – Changes to milestones and indicators prior to the 2019 
performance review 

Change in performance framework

No changes to milestones 

New indicators added or indicator changed 

Milestone reduced 

Milestone increased 

Type of indicators:

Output – programme 
specific

Output -
common

Key Implementation 
Step

Input/financial 
indicators

Result

TOTAL

55 % of the 5 802 indicators 
and/or milestones had been modified 
before the performance review

Source: ECA based on Commission data in Launchpad/Infoview (initial version of the adopted OPs vs. 
version applied in the performance review). 

55 Member States reduced values of milestones for around 30 % of all indicators in 
the performance framework. Figure 5 provides a breakdown by Member State of the 
types of changes made to the indicators and/or their milestones. 

 
 
 
Figure 5 – Changes to milestones and indicators prior to the 2019 performance review – by Member State 

No changes to milestones
Milestone reduced
Milestone increased
New indicator added or indicator changed

Countries ordered by descending number of “No changes to milestones”

Member States reduced 
milestones for around 30 %
of all indicators in the 
performance framework

435

350

273

232

182

178

102

93

87

84

78

65

63

60

47

41

39

28

28

27

26

23

18

15

13

11

10

8

205

293

270

97

173

285

19

25

130

87

16

29

40

52

44

54

50

30

8

58

180

60

20

196

135

31

5

4

58

20

10

12

65

22

4

9

43

6

4

19

26

6

3

16

7

1

5

33

3

18

26

7

5

14

1

15

1

3

2

4

6

9

4

1

1

26

8

15

12

2

4

2

8

9

4

11

PL

IT

FR DE

EL

ES

RO HU PT UK

BG CZ

SK

SI

SE

LV

BE

IE

LT

EE MT DK AT

HR

FI

NL

LU CY

Source: ECA based on Commission data in Launchpad/Infoview. 

32 

2 616

1 840

430

916

TOTAL

 
 
 
 
33 

Most Member States justified their adjustments on the basis that initial assumptions 
had been incorrect 

56 In 2018, one year before the performance review, the Commission registered 
148 change requests from 24 Member States concerning indicators/milestones in the 
performance framework for ESF OPs. For 16 of these Member States, the reasons used 
to justify these requests included incorrect initial assumptions having been made when 
setting milestones. We did not receive similar data on amendments for ERDF/CF OPs. 

57 Our own analysis, however, yields a similar finding. We reviewed the changes 
relating to 120 indicators and milestones included in the 14 ERDF/CF and ESF OPs 
examined (see Annex I). We found that 66 had either been reduced, newly introduced 
or modified. Member States justified half of these changes on the basis that incorrect 
assumptions had been made when setting initial milestones. The CPR did not set a 
deadline for amending the performance framework prior to the performance review 
and the Commission accepted such requests from Member State requests until the 
end of 2018, six months after its own recommended deadline (see paragraph 53). For 
one Romanian OP, it even approved five new output indicators in June 2019. 

Adjustments to the milestones resulted in releasing the performance reserve for a 
significantly larger number of priorities 

58 As a result of these adjustments to the performance framework, Member States 
reported more success in meeting milestones for the allocation of the performance 
reserve. Overall, the Commission’s performance review concluded that three quarters 
of the priority axes had met their milestones and, as a consequence, around 82 % of 
the performance reserve was released to these successful priorities (see Figure 6). 

 
 
Figure 6 – Outcome of the 2019 performance review - by Member State 
and fund 

Countries ordered by descending number of performing priorities

34 

65
7
54
74
32
58
27
24
4
2
15
14
7
9
20
28
0
0
0
2
2
4
1
0
7
4
0
12

Number of 
non-performing 
priorities 
(milestones not met)

IT
PL
FR
ES
DE
EL
PT
UK
CZ
BE
HU
SE
BG
SI
SK
RO
LT
LV
MT
EE
NL
IE
CY
FI
HR
AT
LU
DK

Number of 
performing 
priorities 
(milestones met)

234
234
199
199
192
192
170
170
104
104
100
100
76
76
43
43
38
38
36
36
28
28
25
25
23
23
19
19
18
18
17
17
16
16
15
15
15
15
14
14
11
11
9
9
9
9
9
9
8
8
8
8
5
5
4
4

Amount of reserve linked to non performing and performing priorities 
(in million euros)

Total amount of 
performance reserve:
20 201 million euros

18 %

82 %

CF

ERDF

ESF

189

3 608

2 741

8 628

771

4 264

Source: ECA based on Commission data in Launchpad/Infoview. 

Three quarters of the 
priorities (1 445 out of 
1 917 performance 
frameworks) had met 
their milestones and 
the Commission 
released around 82 %
of the performance 
reserve to these 
successful priorities

 
 
 
35 

Figure 7 – Comparison of the outcome of the performance review in 
terms of performing priorities with/without amendments by Member 
State  

Share of performance reserve 
for non-performing priorities, 
if milestones 

were amended

were not amended

50 %

Countries ordered by ascending share of the 
performance reserve for non-performing 
priorities, if milestones were not amended

0 %

FI

100 %

18 %

44 %

EU average

Without amendments, 
the share of the 
performance reserve 
corresponding to priority 
axes for which the 
milestones were not met 
would have more than 
doubled, from 18 %
(€3.7 billion) to 44 %
(€8.9 billion)

Eleven Member States
would have had at least 
half of their performance 
reserve linked to 
non-performing 
priorities

LU

PL

BG

HU

PT

FR

IT

EL

ES

MT

LT

NL

SI

UK

CY

BE

EE

SK

AT

LV

SE

CZ

DE

RO

IE

DK

HR

Source: ECA based on Commission data in Launchpad/Infoview. 

 
 
 
36 

Figure 8 – Comparison of the outcome of the performance review in 
terms of funding released from the reserve with/without amendments 
by Member State  

Amounts in million euros
Countries ordered by ascending amount of the performance reserve that would have not been allocated, 
if milestones were not amended

FI

LU

MT

AT

DK

NL

CY

IE

SE

BE

LV

SI

LT

EE

BG

UK

FR

HR

HU

DE

CZ

PT

EL

SK

RO

PL

IT

ES

Performance reserve 
not allocated for not met milestones

Performance reserve 
would not have been allocated, 
if milestones were not amended

In financial terms, 
the biggest impact was for 
Poland, Italy and Spain, 
together accounting for a 
third of the total reserve 
that would not have been 
released without the 
amendments

0
0
0
0
0
3
11
12
16
17
4
20
8
22
24
31
29
33
8
64
0
75
43
76
0
100
52
134
107
134
70
287
104
386
234
417
259
496
213
513
113
539
180
561
212
583
428
607
535
712
48
894
546
1 015
458
1 220

Source: ECA based on Commission data in Launchpad/Infoview. 

 
 
 
37 

59 Our analysis also showed that, without the adjustment to indicators and/or 
milestones prior to the performance review, the share of the performance reserve 
corresponding to priority axes for which the milestones were not met would have 
more than doubled, from 18 % (€3.7 billion) to 44 % (€8.9 billion), meaning that only 
56 % of the reserve could have been released. Eleven Member States would have had 
at least half of their performance reserve linked to non-performing priorities without 
the amendments (see Figure 7). In financial terms, the biggest impact was for Poland, 
Spain and Italy. These three Member States together accounted for a third of the total 
reserve that would not have been released without the amendments. There were only 
two Member States (Luxembourg and Finland) where amendments had no impact (see 
Figure 8). 

60 Another consequence of the amendments to indicators/milestones, which the 
Commission assessed as duly justified, was that the number of priorities ‘seriously 
failing’ to meet milestones (288) was less than half what it would have been originally 
(605, or around one third of all priorities with a performance reserve). For Croatia, 
Ireland and Denmark, the Commission would have needed to consider suspending 
payments for more than half of the funding allocated under these priorities. 

The Commission did not determine the reliability of all performance data 
used for the performance review 

Reported performance data not fully validated 

61 A meaningful performance review is critically dependent on the reporting of 
reliable performance data. For this reason, the national authorities had to provide 
assurance on the reliability of Member States’ performance data:  

—  managing authorities had to attest, in their management declarations, to the 

reliability of performance data reported in the annual implementation report; and 

—  audit authorities provided additional assurance based on their audit work in the 

annual control report including the audit opinion. 

62 In the Commission’s assurance system for Cohesion policy, managing authorities 
report on performance data in their annual implementation reports for the calendar 

 
 
38 

year50 (from 1 January to 31 December). However, their management declarations51 
and the audit authorities’ annual control reports (including their audit opinions) 
instead cover the accounting year52 (from 1 July to 30 June). As a result, the 
performance data for the second half of 2018 was covered by the 2018-2019 
management declaration and annual control report submitted by audit authorities in 
February 2020. For the performance review in 2019, the Commission had to base its 
assessment on intermediate information reported by managing authorities but not yet 
examined by audit authorities (see Figure 9).

50  Regulation (EU) 1303/2013, Articles 2(30) and 50(1). 

51  Regulation (EU) 1303/2013, Article 125(4)(e); Commission Implementing Regulation 

(EU) 2015/207, Annex VI. 

52  Regulation (EU) 1303/2013, Articles 2(29) and 138(b) and (c). 

 
 
                                                      
Figure 9 – Reporting and validation of performance data by managing and audit authorities 

39 

Source: ECA.

 
 
 
40 

Scope of checks on performance data by managing authorities varied 

63 Our analysis showed that managing authoritiesʹ checks on the reliability of 
performance data varied significantly. In the 14 OPs we examined, managing 
authorities mostly checked performance data reported in the annual implementation 
report against underlying records from beneficiaries. However, the scope of these 
checks differed significantly (see Box 5) and they were not done consistently for all 
indicators. Overall, we found evidence of such checks for 116 (90 %) of the 
129 indicator values we reviewed. 

Box 5 

Checks on performance data reliability by managing authorities 

For the ‘Competitiveness Fund of Funds’ managed by the European Investment 
Fund (EIF) for the Romanian ‘Competitiveness’ OP, the managing authority did not 
check annual monitoring data provided by the EIF before submitting it to the 
Commission in the 2018 annual implementation report. 

For the Italian ‘Enterprises and Competitiveness’ OP and the ‘ESF Federal 
Germany’ OP, the managing authorities mainly relied on automatic checks by the 
IT systems when aggregating data for the annual implementation report. 

For the Polish ‘Smart Growth’ OP, similar checks were complemented by a 
managing authority verification of the quality of the data submitted in the 2018 
annual implementation report. 

For the Romanian ‘Competitiveness’ and ‘Regional’ OPs, the achievement of 
output indicators was checked upon project completion through on-the-spot 
visits. 

Audit work on performance data was at the discretion of audit authorities 

64 In October 2018, the Commission asked audit authorities to report in their 2017-
2018 annual control reports on the readiness of monitoring systems to deliver reliable 
data for the 2019 performance review. The Commission had discussed possible 
approaches to auditing performance data in meetings and workshops with audit 
authorities over the years. In its guidance on audit strategy, the Commission also 
suggested that audit authorities cover performance data reliability in their audits of 
operations, thematic audits or system audits.  

 
 
41 

65 However, until 2018, the type, scope and timing of audits of performance data 
were largely at the discretion of each audit authority. A Commission delegated 
regulation requiring audit authorities to systematically cover performance data 
reliability in their audits of operations entered into force only in May 201953. This was 
too late to have any effect on the 2019 performance review. 

66 Overall, according to the Commission, audit authorities performed some form of 
audit work on performance data reliability for 81 % of all ERDF/CF OPs and 90 % of all 
ESF OPs before the 2019 performance review. They did this either through audits of 
operations, thematic audits or system audits. Overall, audit authorities mostly carried 
out system and thematic audits, followed by audits of operations (see Figure 10). 

Figure 10 – Audit authorities’ checks on performance data 

Multiple types of audit

Thematic audits

System audits

Audits of operations

No audit work

ERDF/CF

ESF

48 %

11 %

6 %

16 %

81 %

189 OPs

19 %

84 OPs

10 %

7 %

90 %

49 %

21 %

13 %

Audit authorities 
performed some form 
of audit work on 
performance data 
reliability for 81 % of all 
ERDF/CF OPs and 90 %
of all ESF OPs before 
the 2019 performance 
review

Note: OPs considered exclude technical assistance OPs, SME initiative OPs, ETC OPs and OPs with no 
expenditure declared in the accounts. 

Source: ECA based on Commission data. 

67 Our own analysis for the four Member States examined in this audit shows that 
the audit authorities for 12 of the 14 OPs reported to the Commission on their audit 
work on performance data reliability before the performance review. However, we 
also found that their checks covered only 6 of the 57 operations reviewed for this 
audit.  

53  Commission Delegated Regulation (EU) 2019/886 of 12 February 2019 as regards the 

provisions on financial instruments, simplified cost options, audit trail, scope and content of 
audits of operations and methodology for the selection of the sample of operations and 
Annex III, Article 1, point (11)(a). 

 
 
 
                                                      
42 

The Commission determined the reliability of performance data for more than seven 
out of ten OPs 

68 In 2019, before carrying out the performance review, the Commission assessed 
the completeness, consistency and plausibility of performance data provided by 
Member States in their 2018 annual implementation reports. The Commission also 
carried out ad-hoc thematic audits in 14 Member States on the 31 programmes which 
it considered most risky. These identified weaknesses in the reliability of the 
performance data and the values reported for indicators in the performance 
framework for eight programmes in Belgium, Germany, Hungary, Italy, Romania and 
Slovakia. 

69 Overall, based on the work of audit authorities and its own additional work, the 
Commission determined the reliability of performance data for 71 % of ERDF/CF OPs54 
and 81 % of ESF OPs before the performance review. 

70 The Commission could suspend interim payments if it became aware of serious 
deficiencies in the quality and reliability of the monitoring system or of the data on 
indicators55. Overall, the Commission assessed 15 OPs in this context, launching pre-
suspension procedures for six OPs in Belgium, Germany, Hungary, Lithuania, Romania 
and Slovenia prior to the performance review in 2019. In the end, however, the 
Commission lifted all pre-suspensions and did not suspend any payments. According to 
the Commission, the Member States concerned provided additional information or 
addressed the deficiencies. 

Most, but not all performance data matched the underlying evidence 

71 In order to form an independent view on performance data quality, we examined 
the values reported for all 120 indicators in the performance frameworks of 20 priority 
axes for the 14 OPs covered by our audit. We also examined 57 projects with 
129 indicators within these 20 priority axes (see Annex I). 

72 Overall, our analysis showed that most, but not all, performance data reported to 
the Commission matched the underlying evidence: 

—  First, we compared data reported to the Commission in the 2018 annual 

implementation reports with project data held by the managing authorities. Our 

54  European Commission, 2019 Annual activity report DG REGIO, p. 39. 

55  Regulation (EU) 1303/2013, Article 142(1)(d). 

 
 
                                                      
43 

analysis showed that the values for 110 of the 120 indicators in the performance 
frameworks (92 %) fully matched; 

—  Second, we checked whether the data held by the managing authorities 

reconciled with the underlying evidence from beneficiaries. Overall, we were able 
to reconcile the values for 115 of the 129 indicators (89 %), relating to 46 of the 
57 projects (81 %) in our sample. 

73 All four Member States had at least one OP for which we were able to reconcile 
all performance data at project level (see Figure 11). 

 
 
44 

Figure 11 – Performance data quality: share of examined indicator values 
at project level which matched the underlying data 

European Social Funds (ESF)

European Regional Development Fund (ERDF)

Cohesion Fund (CF)

Poland

Operational Programmes

% of examined project values reconciled

Regional - Malopolskie Voivodeship

National - Knowledge Education Growth

National - Infrastructure and Environment

National - Smart Growth

Romania

Operational Programmes

% of examined project values reconciled

National - Human Capital

National - Competitiveness

National - Regional Programme

Germany

Operational Programmes

% of examined project values reconciled

National - ESF Federal Germany

Regional - Saxony

Italy

Operational Programmes

% of examined project values reconciled

National - Active Employment Policies

National - Social inclusion

National - Education

National - Enterprises and Competitiveness

Regional - Sicilia

Source: ECA. 

 
 
 
45 

Performance review had only limited impact on the allocation of EU 
funding 

Success in achieving key implementation steps or outputs, and in spending money, 
determined the release of the performance reserve 

74 Our analysis showed that the release of the performance reserve was determined 
predominantly by Member States’ progress in implementation, as reflected by 
achieving key implementation steps or outputs and their success in spending money 
(around one third of all indicators were financial indicators, as shown in Figure 12). For 
example, performance reserves of €195 million and €52 million were released to the 
Polish ‘Smart Growth’ and the Italian ‘Enterprises and Competitiveness’ OPs, 
respectively, because these OPs’ priorities had achieved their milestones for the 
number of enterprises receiving grants or of companies supported, the number of 
operations initiated and the expenditure declared to the Commission. 

75 Only 13 of the 5 802 indicators (or fewer than 1 %) measured programme 
performance in terms of results (see Figure 12). One of the reasons contributing to the 
low number of result indicators was that the timeframe for delivering milestones for 
the performance review was relatively short (maximum of four years) and thus 
insufficient for investments, where results take longer to materialise. 

 
 
 
Figure 12 – Indicators used in the 2019 performance review per fund 

46 

Source: ECA based on Commission data in Launchpad/Infoview. 

76 The Commission’s performance review identified 288 priority axes in 121 OPs 
which ‘seriously failed’ to meet milestones for financial (input) and output indicators. 
In these cases, the Commission had the power to suspend payments. However, we 
found that the Commission had not imposed any payment suspensions. According to 
the Commission, the main reasons were that 80 % of programmes had sufficiently 
addressed their implementation weaknesses and around a third of priorities had been 
re-programmed or were in the process of being re-programmed. When confronted 
with the risk of suspension for serious under-performance, Member States had 
proposed – and the Commission accepted – OP amendments modifying milestones 
(see paragraph 58). 

The release of the performance reserve was offset by the financial impact of other 
budget shifts 

77 We examined all 1 624 priorities, corresponding to 267 of the 300 OPs, for which 
the performance review had been completed by December 2020 to assess how the 

 
 
 
47 

allocation of funds had changed overall since the first version of the approved OPs. We 
looked at the total EU allocation, i.e. the main allocation and the performance reserve. 

78 Where priorities have not achieved their milestones, the corresponding 
performance reserve is re-allocated to those priorities which have. These re-allocations 
were mostly accompanied by other OP modifications. 

79 We also examined whether overall data on changes in budget allocations 
between the start of the 2014-2020 period and the performance review could be 
traced back to Member States’ success in meeting milestones and targets. Our analysis 
showed that the overall allocation of EU funding did not automatically increase or 
decrease depending on whether priorities achieved their milestones in the 
performance review. In particular, we found that 17 % (62 out of 357) of priorities that 
had not achieved their milestones had actually received more EU funding. Likewise, for 
24 % (304 out of 1 267) of priorities that achieved their milestones, overall EU funding 
had actually decreased (see Figure 13). 

Figure 13 – Changes in the allocation of EU funding at priority axis level 
following the performance review and OP re-programming (as of 
April 2020) 

Increased 
EU funding

17 % (62 out of 357) of priorities 
that had not achieved their milestones 
had actually received more EU funding

62 priorities

17 %

289 priorities

6 priorities

Non-performing 
priorities

81 %

2 %

2 % of priorities which 
did not achieve their milestones 
received the same EU funding

Unchanged 
EU funding

37 % of priorities which 
achieved their milestones 
received the same EU funding

Performing 
priorities 

24 %

37 %

304 priorities

474 priorities

39 %

489 priorities

Reduced 
EU funding

For 24 % (304 out of 1 267) of priorities 
that achieved their milestones, 
overall EU funding had actually decreased

Source: ECA based on Commission data from Launchpad/Infoview. 

 
 
 
48 

80 This illustrates that there was only a weak link between programme priorities 
meeting their targets by 2018 and being reallocated resources (between the start of 
the period and 2018). Several factors may have contributed to this situation, including 
the limited performance reserve amounts (accounting for only 6% of overall 
allocations), and changes made to the budget allocations following the adoption of the 
OPs for other reasons, such as the automatic increase of funding due to the technical 
adjustments (as happened in 2017) or the introduction of new priorities. 

Outlook for the 2021-2027 period: more flexible allocation of funds, but 
mandatory performance reserve discontinued 

Mandatory performance reserve discontinued  

81 In 2025, each programme will be subject to a mid-term review to determine the 
allocation of half of the funding for the last two years. The mid-term review will be 
based on, inter alia, progress in achieving milestones, taking into account major 
difficulties encountered in the implementation of the programme56. However, the 
performance review and the mandatory performance reserve have been discontinued. 
So far, the Commission has not yet presented further details on how the mid-term 
review and a subsequent re-programming exercise will be carried out. 

More flexible allocation of funds throughout the 2021-2027 period and the 
introduction of the RRF as an alternative source for financing investments 

82 The context for the mid-term review for the 2021-2027 period will differ in 
comparison to previous periods. Member States will have greater flexibility to re-
programme and re-allocate funds at any point during the programme cycle. In 
particular, Member States have the possibility, within certain ceilings, to transfer funds 
between priorities under the same Fund, programme or in the same category of 
region, without prior approval by the Commission. The 2021-2027 CPR also provides 
the possibility to transfer up to 5 % of the allocation of each Fund to any other 
instrument under direct or indirect management57. 

83 Moreover, in the coming years, the Cohesion policy funds will be implemented 
simultaneously with the RRF. In 2021, Member States focused on the preparation and 
negotiation of their national recovery and resilience plans under the RRF. There are 
already indications that the launch of the 2021-2027 programmes will be even more 

56  Regulation (EU) 2021/1060, Article 18(1)(f). 

57  Regulation (EU) 2021/1060, Articles 24(5) and 26(1). 

 
 
                                                      
49 

delayed than seven years ago. Furthermore, as there is no national co-financing under 
the RRF, many investment projects that would have been implemented through the 
Cohesion policy funds under normal circumstances may now be financed by the RRF. 
As a result, Member States are likely to absorb less of their initially programmed 
financial allocations than anticipated. This, in turn, makes it likely that fewer outputs 
and results will be delivered by the time of the mid-term review.  

Performance-based funding models 

Use of performance-based funding models broadened in the 2014-2020 
period 

Two new funding models: ‘joint action plans’ and ‘financing not linked to costs’ 

84 The 2014-2020 period introduced two new funding models. These based ERDF/CF 
and ESF funding on verified performance, as measured by indicators with milestones 
for outputs and/or results, or the fulfilment of conditions, rather than the eligible costs 
actually incurred, as was traditionally the case. 

85 The first of these funding models was the ‘joint action plan’ (JAP)58, which has 
been available since the start of the 2014-2020 period. Payments to JAPs take the form 
of lump sums or standard scales of unit costs linked to milestones and targets (see 
Box 6). 

58  Regulation (EU) 1303/2013, Article 104. 

 
 
                                                      
50 

Box 6 

Joint action plan 

A JAP is a form of financing that is based on outputs and/or results linked to 
specific OP objectives. JAPs could comprise a project or a group of projects in any 
investment area (except infrastructure) receiving support from one or more OPs 
and one or more of the Cohesion policy funds. 

The use of JAPs was restricted to larger operations with a minimum public 
expenditure threshold of €10 million, or 20 % of the public support from the 
contributing OP(s). Operations supported under the Youth Employment Initiative 
or the first JAP submitted by a Member State59 were exempt from this restriction. 
In 2018, this minimum threshold was reduced to €5 million. 

86 A revision of the Financial Regulation in 2018 introduced the second instrument, 
the ‘financing not linked to costs’ (FNLTC) model60. This is a fundamentally new 
method of EU funding, based on the fulfilment of conditions or on results achieved. 
For the ESI Funds specifically, funding is linked to progress in implementation or the 
achievement of programme objectives61. FNLTC could be used from 2019 onwards for 
ERDF/CF investments in the areas of energy efficiency and energy from renewable 
sources62 (see Box 7). 

59   Regulation (EU) 1303/2013, Article 104(2). 

60  Regulation (EU, Euratom) 2018/1046, Article 125(1)(a). 

61  Regulation (EU) 1303/2013, Article 67(1)(e). 

62  Commission Delegated Regulation (EU) 2019/694 of 15 February 2019 supplementing 

Regulation (EU) 1303/2013 of the European Parliament and of the Council with regard to 
the form of financing which is not linked to costs of the relevant operations. 

 
 
                                                      
51 

Box 7 

Financing not linked to costs 

In 2019, the Commission adopted a delegated regulation63 governing the use of 
the FNLTC model for ERDF/CF investments in the areas of energy efficiency and 
energy from renewable sources. Funding is provided per kWh of energy savings or 
tonne of CO2 emission reductions. 

This illustrates that financing is based on non-financial parameters rather than 
expenditure incurred. The regulation leaves it up to the national/regional 
authorities to determine the amount of funding per unit of energy saved. 

87 Both models offer simplified management and control arrangements, with 
financial management, control and audit aimed at verifying that performance targets 
or the conditions for payment have been fulfilled64. Their use is optional, but JAPs are 
subject to approval by the Commission, while Member States intending to use FNLTC 
only had to inform the Commission. 

Simplified cost options: the traditional method of linking funding to performance 

88 In addition, the CPR provides for three types of simplified cost options (SCOs) for 
reimbursing expenditure calculated using pre-defined methods or off-the-shelf rates65 
rather than actual costs incurred: 

— 

standard scales of unit costs; 

— 

lump sums; 

— 

flat-rate financing. 

89 SCOs were first introduced in the ESF Regulation for the 2007-2013 period and 
their scope has been continuously extended since then, most recently in 2018 with the 
extension of mandatory SCO use for small operations funded by the ERDF, having 

63  Commission Delegated Regulation (EU) 2019/694. 

64  Regulation (EU) 1303/2013, Articles 67(1) and 109(2); Commission Delegated Regulation 

(EU) 2019/694, Annex. 

65  Regulation (EU) 1303/2013, Articles 67(1)(b)-(d), 67(5), 67(5)(a), 68, 68a and 68b. 

 
 
                                                      
52 

previously been introduced for ESF-financed operations66. Since 2015, the Commission 
has adopted EU-level and Member State-specific rates under the ESF Regulation67. 

90 Standard scales of unit costs and lump sums are conducive to performance 
insofar as they link payments to outputs, but not necessarily to results. Flat-rate 
financing, however, is entirely input-based. Nevertheless, according to the 
Commission, SCOs can help shift the focus of managing authorities and beneficiaries 
from inputs to achieving outputs (and results)68. 

91 We have consistently supported the introduction of a more performance-based 
financing in Cohesion policy in previous years. We have recommended: 

— 

since 2012, using SCOs to reduce the administrative burden and the risk of 
errors69; and 

—  as far back as 2017, introducing a performance-based funding model, which links 

payments to fulfilling conditions or achieving results established beforehand70. 

Uncertainty on how to use the new performance-based funding models 
hampered their uptake by Member States 

Little interest in using the new performance-based funding models 

92 In the 2014-2020 period, Member States showed little interest in using the two 
new performance-based funding models. By January 2018, only Poland had submitted 
a JAP proposal. However, in July 2019, following exchanges with the Commission, the 
Polish authorities decided to withdraw their proposal. In April 2018, the Commission 

66  Regulation (EU) 1303/2013, Article 67(2)(a). 

67  Commission Delegated Regulation (EU) 2015/2195 of 9 July 2015 on supplementing 

Regulation (EU) 1304/2013 of the European Parliament and of the Council on the European 
Social Fund, regarding the definition of standard scales of unit costs and lump sums for 
reimbursement of expenditure by the Commission to Member States. 

68  European Commission, Guidance on Simplified Cost Options – European Structural and 

Investment (ESI) Funds, EGESIF_14-0017, September 2014, p. 8. 

69  ECA annual report 2011, paragraph 6.30; ECA annual report 2012, paragraph 6.42; ECA 

annual report 2014, paragraph 6.79. 

70  ECA special report 2/2017, recommendation 6; ECA opinion 1/2017 concerning the 

proposal for a Regulation of the European Parliament and of the Council on the financial 
rules applicable to the general budget of the Union, paragraphs 82 and 84. 

 
 
                                                      
53 

launched a specific call to gather experience and stimulate interest in JAPs and 
selected two pilot projects: “Promoting sustainable and inclusive growth by activating 
the hidden talent of NEETs and Migrants” in the Netherlands and “Training2Work” in 
Portugal. Both projects are currently running under direct management by the 
Commission, with a combined EU contribution of around €1.1 million. 

93 In the 2014-2020 period, only Austria piloted the FNLTC model for one ERDF 
project with an EU contribution of around €36 million (see Box 8). 

Box 8 

Pilot project using FNLTC in Austria 

“Payments not linked to costs”, a project in Austria in the area of energy 
efficiency, was set up in 2019 and covers around 5.4 % of the “Investment in 
Growth and Jobs in Austria 2014-2020” ERDF OP. The project supports 
investments eligible under the Austrian “Environmental Subsidy Scheme”. 

The goal is to reduce CO2 emissions by a total of 143 700 tonnes per year by 2023. 
EU-funding amounts to €35.9 million and was determined using a unit price of 
€250 per tonne of CO2, which was based on a calculation method proposed by the 
Austrian authorities and agreed with the Commission. 

Funding is disbursed in stages linked to the achievement of intermediate funding 
conditions, procedural steps (e.g. project selection) and CO2 reductions achieved. 

Feasibility and potential demand for JAPs and FNLTC not assessed upfront 

94 According to the Commission, the main reasons Member States were reluctant to 
use JAPs were the overly complicated adoption procedure and difficulty determining 
output and result indicators, but also the fact that they considered SCOs more 
efficient71. In response to a Commission survey on FNLTC, Member State 
representatives noted that the reasons for not using FNLTC were the burdensome 
setup, the lack of clarity of their design and potential use, and uncertainty about 
applicable audit arrangements. Generally, Member State experts considered 
performance-based funding models to be burdensome, complicated and time-

71  European Commission, Impact assessment accompanying the document ‘Proposal for a 

Regulation of the European Parliament and the Council on the European Social Fund Plus’, 
SWD(2018) 289, 30 May 2018, p. 22. 

 
 
                                                      
54 

consuming, riskier for beneficiaries and less flexible72. Finally, the uptake of the FNLTC 
model was also hampered by the fact that it could be used only from 2019 onwards, by 
which time the 2014-2020 OPs had already been adopted and committed the bulk of 
their funds. 

95 Our analysis also showed that the Commission had not assessed the feasibility of 
and potential demand for such a funding models through an ex-ante impact 
assessment. We also found limited evidence of widespread consultation within the 
Commission (for example, with the Directorate-General for Energy, which oversees the 
implementation of the Energy Efficiency Directive) or with Member States before the 
legislative proposal. 

96 We identified three main obstacles to using these innovative funding models:  

— 

the late introduction of the FNLTC during the 2014-2020 period; 

—  managing authorities finding it difficult to identify suitable operations; and  

—  Member States’ concerns about their legal certainty in terms of subsequent 

checks and controls, particularly as regards the obligation to comply with state aid 
and procurement rules. 

Member States’ reluctance to use performance-based funding models in 2014-2020 
also attributable to discrepancies in the applicable rules 

97 We know from years of audit experience that managing authorities want legal 
and financial certainty, as they fear the Commission could suspend payments or even 
impose financial corrections if problems occur. This is also confirmed by the 
Commission’s own impact assessments73.  

72  Transnational Network of ERDF/CF SCO practitioners, 6th meeting, presentation of Result-
based approaches, 2 July 2020; European Commission (t33 & SWECO), Use and intended 
use of simplified cost options in ESF, ERDF, CF and EAFRD, 27 March 2018, pp. 13 and 16. 

73  European Commission, Impact assessment accompanying the document ‘Proposal for a 

Regulation of the European Parliament and the Council on the European Social Fund Plus’, 
SWD(2018) 289, 30 May 2018, p. 21; European Commission, Impact assessment 
accompanying the document ‘Proposal for a Regulation of the European Parliament and the 
Council on the European Regional Development Fund and on the Cohesion Fund, 
SWD(2018) 282, 29 May 2018, p. 64. 

 
 
                                                      
55 

98 For SCOs, the Commission had issued guidance at the start of the 2014-2020
period74. In May 2021, the Commission revised these guidelines to clarify that 
management verifications and audits of operations involving SCOs must continue to 
check state aid rules, but not specific public procurement procedures75. 

99 Similar questions arose when the FNLTC model was introduced in 2018, as the
applicable rules on financial control and audit were ambiguous. These discrepancies in 
the applicable rules have contributed to Member States’ reluctance to use this new 
performance-based funding model during the 2014-2020 period. In February 2019, the 
Commission adopted a delegated regulation to provide clarification. Nevertheless, we 
consider that this did not address the underlying issue of how Member States’ audit 
and control would ensure compliance with the basic internal market rules (see Box 9). 

74  European Commission, Guidance on Simplified Cost Options, EGESIF_14-0017, 

September 2014. 

75  Commission notice guidelines on the use of Simplfied Cost Options within the European 
Structural and Investment Funds (ESI) – revised version (2021/C 200/01), 27 May 2021, 
pp. 15 and 41. 

56 

Box 9 

Ambiguous legal provisions for financial control and audit for FNLTC 
in the 2014-2020 period 

As regards the FNLTC model, the CPR and the 2019 delegated regulation stated 
that audits should be limited to verifying the fulfilment of conditions for 
reimbursement76. Regularity of expenditure is not one of these conditions. 

At the same time, and in contradiction to the above, the CPR requires managing 
authorities to verify that all operations are implemented in compliance with 
applicable law, including EU and national public procurement and state aid rules77.  

The delegated regulation also requires a fair, equitable and verifiable method for 
calculating the funding amount. This calculation method is established by the 
authorities that would use the FNLTC, without being subject to Commission 
approval.78  

Performance-based funding in 2014-2020 was disbursed almost 
exclusively through traditional SCOs 

SCOs expected to cover around a third of ESF spending, but focus is not yet on results 

100 SCOs have been the only performance-based funding model widely used in the 
2014-2020 period. During the period, the Commission actively encouraged and 
promoted the use of SCOs to reduce the administrative burden on managing 
authorities and the risk of error. This has contributed to a significant uptake of SCOs 
compared to the previous period. Almost all ESF OPs use SCOs at least to some extent 
(mostly standard scales of unit costs) and some ERDF OPs have also started using SCOs 
(mostly input-based flat rates). The Commission estimates that SCOs will have covered 
33 % of ESF and 4 % of ERDF/CF spending by the end of the 2014-2020 period79. 

76  Regulation (EU) 1303/2013, Article 67(1); Commission Delegated Regulation (EU) 2019/694 

of 15 February 2019, Recital 6 and Annex, point 4(f). 

77  Regulation (EU) 1303/2013, Article 125(4)(a); Regulation (EU) 651/2014 of 17 June 2014 

declaring certain categories of aid compatible with the internal market. 

78  Commission Delegated Regulation (EU) 2019/694 of 15 February 2019, Article 3(2) and 

Annex, points 3(1) and 5. 

79  European Commission, Use and intended use of simplified cost options in ESF, ERDF, CF, 

EARD and EAFRD, 27 March 2018, pp. 42 and 53. 

 
 
                                                      
57 

101 Overall, we estimate that around €22.5 billion, or 8.5 % of the grant-based 
2014-2020 Cohesion spending will have been reimbursed using performance-based 
funding models, almost entirely SCOs. 

Outlook for the 2021-2027 period: successful rollout of FNLTC requires 
further clarification 

Use of FNLTC broadened for 2021-2027 Cohesion spending and made obligatory for 
the RRF 

102 In the coming years, performance-based funding will become the dominant 
form of EU funding in terms of spending covered. This is mainly because FNLTC as 
defined in the Financial Regulation80 will be the only financing model to provide grants 
to Member States under the RRF81. This is a remarkable shift in the EU’s financial 
management.  

103 For the 2021-2027 period, for Cohesion policy funds governed by the CPR, the 
use of the FNLTC model will become an option at two levels: i) for providing the EU’s 
contribution to all (or parts) of a priority and ii) for projects carried out under such 
programmes or priorities, for the grants provided to the beneficiary82. This will make it 
easier for Member States to combine EU funding with national or regional funding 
schemes whose rules may otherwise be difficult to reconcile with EU eligibility rules. 
The FNLTC model will also become mandatory for certain actions designed to reinforce 
Member States’ administrative capacity83. JAPs, however, have been discontinued.  

80  Regulation (EU, Euratom) 2018/1046, Article 125(1)(a). 

81  Regulation (EU) 2021/241, Recital (18), Articles 4(2) and 24(2); ECA opinion 6/2020 

concerning the proposal for a regulation of the European Parliament and of the Council 
establishing a Recovery and Resilience Facility, paragraphs 47, 53-56. 

82  Regulation (EU) 2021/1060, Articles 53(1)(f) and 95(1). 

83  Regulation (EU) 2021/1060, Articles 37 and 95. 

 
 
                                                      
58 

104 In the 2021-2027 period, the Commission is empowered to adopt a delegated 
act to supplement the provisions in the CPR84. This could be a helpful way to offer off-
the-shelf models for FNLTC that clarify, for example, the investment areas, the types of 
activities, measures and operations and conditions to be fulfilled or outputs/results to 
be achieved when using this funding model. 

Arrangements for checking compliance with internal market rules under the FNLTC 
model still not sufficiently clear 

105 Compliance with public procurement and state aid rules is essential for the EU’s 
internal market to function effectively. Member States will still have to ensure that all 
EU spending complies with public procurement and state aid rules85. Finally, it is the 
Commission’s obligation to ensure that EU rules on public procurement and state aid 
are applied correctly and consistently by the Member States. This obligation covers all 
public spending and types of financial support. Therefore, we consider it important to 
clarify from the outset how managing and audit authorities should treat public 
procurement and state aid when using FNLTC models during the 2021-2027 period, not 
least to avoid a situation of legal uncertainty such as the one during the previous 
period. 

106 The 2021-2027 CPR provides that management verifications and audits for the 
parts of a programme where the FNLTC model is used should verify that the conditions 
for reimbursement have been fulfilled or that results have been achieved. They should 
not, however, verify underlying costs, as the Commission provides an ex-ante 
agreement on such amounts86. This is without prejudice to Member States’ obligation 
to ensure compliance with public procurement or state aid rules. Managing and audit 
authorities still have to provide assurance to the Commission that all expenditure 
included in the accounts is regular and compliant with all applicable rules87.  

84  Regulation (EU) 2021/1060, Article 95(4). 

85  Regulation (EU) 1303/2013, Article 125(4)(a); Regulation (EU) 2021/1060, Article 74(1)(a). 

86  Regulation (EU) 2021/1060, Article 95(3) and Recital (34). 

87  Regulation (EU) 2021/1060, Articles 69(2) and 74(1)(a). 

 
 
                                                      
59 

Conclusions and recommendations 

Performance-based financing in Cohesion policy: worthy 
ambitions, but obstacles remained in the 2014-2020 period 

107 During the 2014-2020 period, much has been done to strengthen the 
performance orientation of Cohesion policy and the introduction of the performance 
framework has contributed to a cultural change in the financial management of 
Cohesion policy. However, our audit showed that performance-based financing has not 
yet become a reality. In particular, while the three new instruments led to new 
approaches to implementation, they did not make a noticeable difference to the way 
EU funding was allocated and disbursed.  

108 The process of implementing European Structural and Investment (ESI) Funds 
extends over many years, sometimes beyond the seven-year multiannual financial 
framework period, and there is a considerable time lag before EU investment delivers 
results, and sometimes even outputs. Another concern is the reliability and usefulness 
of performance information based on which financial resources should be allocated. 
One of the key lessons learnt from the well-intended initiatives of 2014-2020 is that 
linking resource allocation to performance is by no means a simple task. 

Were the instruments well designed to incentivise performance and to shift the 
focus to achieving results? 

109 Our audit confirmed that all three instruments had the potential to incentivise 
performance and to shift the focus to achieving results. The instruments were 
complementary, being applicable at different stages and to different aspects of 
programme implementation. However, they all provided a way of linking Cohesion 
funding to performance and results. 

110 Ex-ante conditionalities (EACs) were one of the main innovations of the 2014-
2020 period. They were designed to set the right conditions for effective spending 
from the start of the programmes, following the basic principle that it is better to 
address early, before the EU financing is disbursed, any issues that may limit the 
potential of Member States and regions to achieve the intended results 
(paragraphs 16-20). 

111 The mandatory setting-aside of part of the funding for well performing 
measures in the form of a ‘performance reserve’ was not, in itself, an innovative 

 
 
60 

aspect, as it had already been used in a different form in the 2000-2006 period. The 
innovative element was the assessment of performance within an agreed framework 
comprising a set of milestones for each priority axis and the allocation of the reserve to 
successful priorities. The performance reserve introduced a transparent and rules-
based instrument to make the financing of Cohesion policy more performance-based, 
provided that the performance data reported by managing authorities was reliable and 
the framework was stable and properly enforced. The downside of this instrument was 
the limited amounts at stake, as it represented only 6 % of Member States’ ESI Fund 
allocations (paragraphs 39-41). 

112 The two new funding models, ‘joint action plans’ and ‘financing not linked to 
costs’, made it possible to base the funding of operations either on verified 
performance as measured by output or result indicators or the fulfilment of conditions. 
This was a clear step towards making Cohesion policy more performance-based, 
although their use was optional and limited to specific areas. In addition, simplified 
cost options were made available across all ESI Funds. Two of them (standard scales of 
unit costs and lump sums) explicitly link payments to outputs (paragraphs 84-91). 

Were the Commission and Member States effective in using the instruments to make 
Cohesion funding more performance-based? 

113 Our audit has found that the Commission and Member States were only 
partially effective in using the three instruments to make Cohesion funding more 
performance-based. Overall, our assessment is more positive for EACs than for the 
performance reserve, and least positive for performance-based funding models 
(except simplified cost options). 

Ex-ante conditionalities  

114 The assessment of EACs (and the completion of related action plans) was often 
based on broad criteria set out in the common provisions regulation, which left 
considerable room for interpretation, and often did not refer to specific quantifiable 
targets even where such targets could be derived from EU legislation. In 2014, the 
Commission issued additional guidance on how Member States and its own services 
should assess progress in achieving EACs. Nevertheless, our audit showed that the 
Commission faced difficulties ensuring a harmonised assessment of EACs across 
Member States until the end of the period (paragraph 21-22).  

115 Around a third of thematic EACs remained unfulfilled at the programme 
adoption stage. This figure does not give any indication of the potential impact of 
unfulfilled EACs on Member States’ ability to achieve results. Nevertheless, it 

 
 
61 

illustrates that the issue of unfulfilled EACs was not an isolated one, but rather 
concerned multiple aspects and many Member States. On a positive note, Member 
States completed 98 % of action plans by the reporting deadline by the end of 
August 2017 (paragraphs 23-25). 

116 In the 2014-2020 period, the assessment of EACs was designed as a one-off 
exercise. This made it unclear whether the achievements reported in this process had 
been sustained throughout the entire 2014-2020 period. Moreover, the formal 
fulfilment of an EAC does not necessarily mean, in itself, that the situation on the 
ground has improved and that it has created the conditions for achieving results. 
Failure to fulfil EACs (or to complete action plans) rarely had financial consequences 
for Member States. At the same time, the introduction of EACs may have made an 
indirect contribution as without them the conditions for spending EU funds on the 
ground would have been even more challenging (paragraphs 26-34). 

117 ‘Enabling conditions’ (the successor to EACs) will apply throughout the 2021-
2027 period. However, as was the case in the previous period, the Commission is not 
required to inform the European Parliament and the Council about Member States’ 
compliance with enabling conditions. Finally, we note that the 2021-2027 enabling 
conditions are supplemented by a new ‘rule of law’ conditionality. However, for 
Cohesion policy funds, the Commission can propose measures only in cases where 
specific procedures under the common provisions regulation do not adequately ensure 
the sound financial management of the EU budget or protect the EU’s financial 
interests (paragraphs 35-38). 

Performance reserve 

118 We previously reported on the difficulties Member States had in setting targets 
for common output and result indicators, which were subsequently used for allocating 
the performance reserve (paragraphs 42-48).  

119 From 2014 onwards, the Commission adjusted and clarified the performance 
review conditions and criteria. Following these changes, Member States reported 
better performance than they could have under the initial legislation (paragraphs 49-
52). 

120 Member States amended many of the milestones before the performance 
review. Following these amendments to the performance framework, the Commission 
released around 82 % of the performance reserve in 2019 and 2020. Without these 
amendments, 56 % of the performance reserve would have been released, and around 

 
 
62 

one third of all priorities with a performance reserve would have been considered 
‘seriously failing’ to meet milestones (paragraphs 53-60). 

121 We also found that the Commission did not determine the reliability of all 
performance data used for the performance review. Managing authoritiesʹ 
verifications of the reliability of performance data varied. At the same time, audit 
authorities carried out audit work on the reliability of performance data for most, but 
not all, programmes before the 2019 performance review. Another limiting factor was 
the misalignment of timelines for Member States’ annual implementation reports and 
their respective management declarations and annual control reports.The Commission 
could only partly compensate for these deficiencies through additional checks on the 
performance data reported by Member States. Finally, the Commission did not 
suspend any payments to programmes because of serious deficiencies in the quality 
and reliability of the performance monitoring system or of the data on indicators 
(paragraphs 61-73). 

122 Our analysis showed that the release of the performance reserve was 
determined predominantly by Member States’ progress in implementation, as 
reflected by achieving key implementation steps or outputs and their success in 
spending money (around one third of all indicators were financial indicators). Less than 
1 % of indicators were for results. The Commission did not impose any payment 
suspensions for under-performance (paragraphs 74-76). 

123 We also found only a weak link between programme priorities meeting their 
targets by 2018 and being reallocated resources (between the start of the period and 
2018). Overall, the allocation of the performance reserve had only a limited impact on 
programme budgets (paragraphs 77-80). 

124 The performance review and the performance reserve were discontinued for 
2021-2027. There will be a mid-term review in 2025 for which the Commission has not 
yet clarified how performance will be considered. However, the context for this mid-
term review will be different than in previous periods. One reason for this is that 
Cohesion policy funds will be implemented simultaneously with the Recovery and 
Resilience Facility (RRF). There are already indications that the launch of the 2021-2027 
programmes will be even more delayed than seven years ago. Moreover, as there is no 
national co-financing under the RRF, many investment projects that would have been 
implemented through the Cohesion policy funds under normal circumstances may now 
be financed by the RRF. As a result, Member States are likely to absorb less of their 
initially programmed financial allocations than anticipated. This, in turn, makes it likely 

 
 
63 

that fewer outputs and results will be delivered through Cohesion spending by the 
time of the mid-term review (paragraphs 81-83). 

Performance-based funding models 

125 Member States showed little interest in using the two new performance-based 
funding models in the 2014-2020 period. Only Austria piloted the ‘financing not linked 
to costs’ (FNLTC) model for one project. Moreover, the Commission is piloting the 
‘joint action plan’ model (discontinued for the 2021-2027 period) under its own 
responsibility for two projects. EU funding for these three pilot projects is around 
€37 million (paragraphs 92-93). 

126 Our analysis showed that the Commission’s ex-ante impact assessment for the 
2014-2020 period had not addressed the feasibility of and potential demand for the 
new performance-based financing models. We identified three main obstacles to 
better uptake: 

— 

the late introduction of the FNLTC model during the 2014-2020 period; 

—  managing authorities finding it difficult to identify suitable operations; and  

—  Member States’ concerns about legal certainty, in terms of subsequent checks 
and controls, particularly as regards the obligation to comply with public 
procurement or state aid rules (paragraphs 94-99). 

127 On a positive note, there has been a significant increase in the uptake of 
simplified cost options compared to the previous period, partly as a result of the 
Commission actively encouraging managing authorities to reduce the administrative 
burden and the risk of error. Almost all European Social Fund programmes use 
simplified cost options at least to some extent and some European Regional 
Development Fund programmes have also started using them. However, this concerns 
only a small part of the expenditure: we estimate that around 8.5 % of the 2014-2020 
Cohesion spending will have been reimbursed using performance-based funding 
models, almost entirely simplified cost options (paragraphs 100-101). 

128 The FNLTC model will become the dominant EU funding model in the coming 
years, mainly due to its mandatory use under the RRF. At the same time, it will be 
rolled out as an optional funding model across all areas of Cohesion policy and will be 
the only available model for certain actions to reinforce administrative capacity. In the 
2021-2027 period, the FNLTC model can be used at two levels: i) for the EU’s 
contribution to all (or parts) of a programme priority in the Member States and ii) for 

 
 
64 

projects carried out under such programmes or priorities, for the grants provided to 
the beneficiary. This will make it easier for Member States to combine the EU funding 
with national or regional funding schemes with rules that may otherwise be difficult to 
reconcile with EU eligibility rules. The Commission still needs to clarify specific 
eligibility requirements and off-the-shelf arrangements (such as setting out relevant 
investment areas, fields of activities, measures or operations and conditions to be 
fulfilled or outputs/results to be achieved) for the FNLTC model. There is also a need 
for further clarification as regards the arrangements for providing assurance to the 
Commission on compliance with internal market rules (public procurement and state 
aid) when the FNLTC model is applied (paragraphs 102-106). 

Recommendation 1 – Make the best use of enabling conditions 
in the 2021-2027 period 

The Commission should: 

(a)  systematically monitor Member States’ fulfilment of enabling conditions 

throughout the programming period through its representative in the monitoring 
committee for Cohesion policy programmes; and 

(b)  report to the European Parliament and to the Council on Member States’ 
fulfilment of enabling conditions and its own enforcement activities. 

Timeframe: throughout the 2021-2027 period 

Recommendation 2 – Prepare the ground early for an effective 
mid-term review for the 2021-2027 period 

The Commission should: 

(a) 

inform Member States at an early stage about the approach to be applied for the 
mid-term review, including in relation to the allocation of funding for the 
remainder of the period; and 

(b)  take any relevant findings of the 2024 evaluation of the Member States’ use of 
the RRF into account for its 2025 mid-term reviews for the Cohesion policy fund 
investments in those Member States. 

Timeframe: in 2025 

 
 
65 

Recommendation 3 – Clarify the rules underlying the ‘financing 
not linked to costs’ funding model 

The Commission should: 

(a) 

identify, in close cooperation with Member States, relevant investment areas 
where funding can be based on FNLTC and the conditions to be fulfilled or 
outputs/results to be achieved for the types of activities, measures and 
operations that can use FNLTC; and 

(b)  set out criteria for its assessment of Member States’ reasoned requests for 
amendment of conditions to be fulfilled or outputs/results to be achieved. 

Timeframe: by mid-2023 

Recommendation 4 – Clarify the approach for providing 
assurance on EU funding through the ‘financing not linked to 
costs’ model 

The Commission should clarify how managing and audit authorities in Member States 
should: 

(a)  examine the reliability of Member States’ systems for monitoring and reporting 

on the conditions to be fulfilled or outputs/results to be achieved; and 

(b)  provide assurance on the effective application of the rules governing the internal 

market (public procurement and state aid). 

Timeframe: by mid-2022 

 
 
 
This Report was adopted by Chamber II, headed by Ms Iliana Ivanova, Member of the 
Court of Auditors, in Luxembourg on 30 September 2021. 

66 

For the Court of Auditors 

Klaus-Heiner Lehne 
President 

 
 
 
 
 
 
 
 
67 

Annexes 

Annex I – Operational Programmes covered by the audit 
Our analysis covered 20 priority axes with 120 indicators in the performance framework. Within these 
20 priority axes we examined a sample of 57 projects; these projects together contained 129 values 
relating to the 120 indicators at priority axis level. 

Sample of projects examined for this audit

Operational Programmes

Performance reserve

European Social Funds (ESF)

European Regional Development Fund (ERDF)

Cohesion Fund (CF)

Germany

Operational Programmes

Priority axes

Performance 
reserve

National - ESF Federal Germany

Regional - Saxony

Operational Programmes

Priority axes

Performance 
reserve

Action Plans 
for EACs 

Italy

National - Active Employment Policies

National - Social inclusion

National - Education

National - Enterprises and Competitiveness

Regional - Sicilia

No

Yes (EAC 9.1)

No

Yes (EAC 1.1)

Yes (EAC 4.1)

Source: ECA. 

Poland

Operational Programmes

Priority axes

Performance 
reserve

Action Plans 
for EACs 

Regional - Malopolskie Voivodeship

National - Knowledge Education Growth

National - Infrastructure and Environment

6 and 9

National - Smart Growth

No

No

Yes (EAC 9.1)

Yes (EAC 1.1)

Romania

Operational Programmes

National - Human Capital

National - Competitiveness

National - Regional Programme

Priority axes

2 and 4

1

3 and 10

Performance 
reserve

Action Plans 
for EACs 

Yes (EAC 9.3)

Yes (EAC 1.2)

Yes (EAC 10.1)

 
 
 
 
 
68 

Annex II – Previous reports and opinions 
Special reports 

—  Special report 24/2016 - More efforts needed to raise awareness of and enforce 

compliance with State aid rules in cohesion policy’ 

—  Special report 2/2017 - The Commission’s negotiation of 2014-2020 Partnership 

Agreements and programmes in Cohesion: spending more targeted on Europe 
2020 priorities, but increasingly complex arrangements to measure performance 

—  Special report 15/2017 - Ex-ante conditionalities and performance reserve in 

Cohesion: innovative but not yet effective instruments 

—  Special report 21/2018 - Selection and monitoring for ERDF and ESF projects in 

the 2014–2020 period are still mainly outputs-oriented 

—  Special report 20/2020 - Combating child poverty – Better targeting of 

Commission support required 

Reviews 

—  Review 5/2018 - Simplification in post-2020 delivery of Cohesion Policy 

—  Review 5/2019 - Outstanding commitments in the EU budget - A closer look’ 

(Rapid case review) 

—  Review 8/2019 - Delivering performance in Cohesion (Briefing paper) 

Annual reports 

—  Annual report concerning the financial year 2011, Official Journal 2012/C 344/1, 

chapter 6 

—  Annual report concerning the financial year 2012, Official Journal 2013/C 331/1, 

chapter 6 

—  Annual report concerning the financial year 2013, Official Journal 2014/C 398/1, 

chapter 10 

—  Annual report concerning the financial year 2014, Official Journal 2015/C 373/01, 

chapter 6 

—  Annual report on the implementation of the budget concerning the financial year 

2017, Official Journal 2018/C 357/01, chapter 3 

 
 
69 

—  Annual report on the implementation of the budget concerning the financial year 

2018, Official Journal 2019/C 340/01, chapter 1 

Opinions 

—  Opinion 1/2017 concerning the proposal for a Regulation of the European 

Parliament and of the Council on the financial rules applicable to the general 
budgetof the Union 

—  Opinion 6/2018 concerning the proposal for a Regulation of the European 

Parliament and of the Council laying down common provisions 

—  Opinion 6/2020 concerning the proposal for a regulation of the European 

Parliament and of the Council establishing a Recovery and Resilience Facility 

 
 
 
 
70 

Acronyms and abbreviations 

CF: Cohesion Fund 

CPR: Common provision regulation  

EAC: Ex-ante conditionality  

EAFRD: European Agricultural Fund for Rural Development 

EIF: European Investment Fund 

ERDF: European Regional Development Fund 

ESF: European Social Fund  

ESI Funds: European Structural and Investment Funds 

ETC: European territorial cooperation 

FNLTC: Financing not linked to costs  

JAP: Joint action plan  

MFF: Multiannual financial framework  

NEET: Not in Education, Employment, or Training 

OECD: Organisation for Economic Co-operation and Development 

OP: Operational programme  

RRF: Recovery and Resilience Facility  

SCOs: Simplified cost options  

SME: Small and medium enterprise 

 
 
 
 
71 

Glossary 

Annual control report: Document prepared by a Member State's audit authority and 
submitted to the Commission as part of that country's annual assurance package. 

Annual implementation report: Document prepared by a Member State's managing 
authority, and submitted to the Commission, on its progress in implementing an 
operational programme over the previous financial year. 

Audit authority: An independent national entity responsible for auditing the systems 
and operations of an EU spending programme. 

Cohesion policy: The EU policy which aims to reduce economic and social disparities 
between regions and member states by promoting job creation, business 
competitiveness, economic growth, sustainable development, and cross-border and 
interregional cooperation. 

Cohesion policy funds: The four EU funds supporting economic, social and territorial 
cohesion across the EU in the 2021-2027 period: the European Regional Development 
Fund, the European Social Fund Plus, the Cohesion Fund, and the Just Transition Fund. 

Common provisions regulation: Regulation setting out the rules that apply to all five of 
the European Structural and Investment Funds in the 2014-2020 period. 

Europe 2020 strategy: The EU’s ten-year strategy, launched in 2010, to boost growth 
and create jobs. 

European Structural and Investment Funds: The five main EU funds which together 
support economic development across the EU in the 2014-2020 period: the European 
Regional Development Fund, the European Social Fund, the Cohesion Fund, the 
European Agricultural Fund for Rural Development, and the European Maritime and 
Fisheries Fund. 

Impact: The wider long-term consequences of a completed project or programme, 
such as socio-economic benefits for the population as a whole. 

Input: The financial, human, material, administrative or regulatory means used to 
implement a project or programme. 

Intervention logic: The links between a proposal’s objectives, the planned inputs and 
activities and the intended results and impact. 

 
 
72 

Key implementation step: Intermediate stage, complementing milestones, in progress 
towards the achievement of output targets. 

Lump sum: Type of simplified cost option where payments are made in full, as 
opposed to in instalments, for example to reimburse eligible costs of an operation if 
pre-defined activities and/or outputs are completed. 

Managing authority: The national, regional or local authority (public or private) 
designated by a Member State to manage an EU-funded programme. 

Milestone: Intermediate target on the way to a specific objective, to be achieved by a 
predetermined date. 

Operational programme: The basic framework for implementing EU-funded cohesion 
projects in a set period, reflecting the priorities and objectives laid down in partnership 
agreements between the Commission and individual Member States. 

Output: Something produced or achieved by a project, such as delivery of a training 
course or construction of a road. 

Performance framework: Milestones and targets defined for a set of indicators for 
each priority axis of an operational programme (except for technical assistance). 

Performance reserve: An amount of the budget allocated to European Structural and 
Investment Fund spending which is retained until certain milestones are met. 

Result: The immediate effect of a project or programme upon its completion, such as 
the improved employability of course participants or improved accessibility following 
the construction of a new road. 

Simplified cost options: An approach for determining a grant amount using methods 
such as standard unit costs, flat-rate financing or lump sums rather than the actual 
costs incurred by the beneficiary. Designed to reduce the administrative burden. 

Standard scales of unit costs: A simplified cost option used to calculate an operation’s 
eligible expenditure by multiplying activities, inputs, outputs and results by the pre-
established cost of delivering one unit. 

Target: For the purposes of this report, an output or result to be accomplished, or the 
expenditure to be certified to the Commission, by 31 December 2023. 

Thematic objective: The intended overall result of an investment priority, broken 
down into specific objectives for implementation purposes. 

 
 
 
Replies of the Commission  

73 

https://www.eca.europa.eu/en/Pages/DocItem.aspx?did=59899 

Timeline 

https://www.eca.europa.eu/en/Pages/DocItem.aspx?did=59899 

 
 
 
 
 
 
 
 
 
 
 
 
74 

Audit team 

The ECA’s special reports set out the results of its audits of EU policies and 
programmes, or of management-related topics from specific budgetary areas. The ECA 
selects and designs these audit tasks to be of maximum impact by considering the risks 
to performance or compliance, the level of income or spending involved, forthcoming 
developments and political and public interest. 

This performance audit was carried out by Audit Chamber II Investment for cohesion, 
growth and inclusion spending areas, headed by ECA Member Iliana Ivanova. The 
audit was led by ECA Member Ladislav Balko, supported by Branislav Urbanic, head of 
private office and Zuzana Frankova, private office attaché; Friedemann Zippel, 
principal manager; Bernard Witkos, head of task; Cristina Jianu, deputy head of task; 
Ana Popescu, Annekatrin Langer and Sabine Maur-Helmes, auditors. Michael Pyper 
provided linguistic support. Alexandra Mazilu provided graphic design support. 

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ISBN 978-92-847-6858-5 
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We assessed the use of instruments for a performance-based 
financing of Cohesion policy during the 2014-2020 period. We 
looked at the requirement to meet specific ex-ante 
conditionalities; the mandatory performance reserve; and 
performance-based funding models. Our audit confirmed that all 
three instruments led to new approaches to implementation. 
However, they did not make a noticeable difference in how EU 
funding was allocated and disbursed. We recommend that the 
Commission should make the best use of the enabling conditions 
in the 2021-2027 period; prepare the ground for an effective mid-
term review in 2025 early on; clarify the rules underlying the 
‘financing not linked to costs’ model; and clarify the approach for 
providing assurance on EU funding through the ‘financing not 
linked to costs’ model. 

ECA special report pursuant to Article 287(4), second 
subparagraph, TFEU.